Shri Nikhil V. Jhaveri-HUF, Surat V. The Income tax Officer, Ward-2(1), Surat

ITA 2379/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8740 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-03-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 01-06-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: J P SHAH
• Keywords: Reopening of assessment; Rejection of books of accounts; Unexplained investment; Income from undisclosed sources; Peak credit; Reassessment proceedings
• Section: 40A(3); 145; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, B-BENCH, AHMEDABAD. BEFORE: SHRI G.D. AGARWAL, VICE PRESIDENT, AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.2379/AHD/2007 (ASSESSMENT YEAR 1999-2000) NIKHIL V. JHAVERI HUF PROP.: M/S C.P. TRADERS, SURAT. VERSUS I.T.O. WARD 2(1), SURAT. (APPELLANT) (RESPONDENT) PAN:ABHPJ 0683 J ITA NO.2380/AHD/2007 (ASSESSMENT YEAR 1999-2000) SMT. BHAVNABEN N. JHAVERI PROP.: M/S B.N. STEEL TRADERS, SURAT. VERSUS I.T.O. WARD 2(1), SURAT. (APPELLANT) (RESPONDENT) PAN: ABHPJ 0682K ITA NO.2381/AHD/2007 (ASSESSMENT YEAR 1999-2000) SMT. RUPALBEN JHAVERI PROP: M/S. R.R. STEEL TRADERS, SURAT. VERSUS I.T.O. WARD 2(1), SURAT. (APPELLANT) (RESPONDENT) PAN: ABHPJ 0684 R ITA NO.2383/AHD/2007 (ASSESSMENT YEAR 1999-2000) RAJESH V. JHAVERI HUF PROP.: M/S. R.M. STEEL TRADERS, SURAT. VERSUS I.T.O. WARD 2(1), SURAT. (APPELLANT) (RESPONDENT) PAN:AACHR 5132 A ITA NO.2384/AHD/2007 (ASSESSMENT YEAR 1999-2000) RAJESH VINODCHANDRA JHAVERI PROP.: M/S. RAJESH INDUSTRIAL ENTERPRISE, VERSUS I.T.O. WARD 2(1), SURAT. 2 ITA NO.2379/AHD/2007 AND ORS. SURAT. (APPELLANT) (RESPONDENT) PAN: ABHPJ 0680 M ITA NO.2452/AHD/2007 (ASSESSMENT YEAR 1999-2000) I.T.O. WARD 2(1), SURAT. VERSUS SHRI. RAJESH V. JHAVERI PROP. OF RAJESH INDL. ENTERPRISE, 7/37, JIVAN DARSHAN SOCIETY, SATYANAGAR, UDHNA, SURAT. (APPELLANT) (RESPONDENT) PAN: ABHPJ 0680 M FOR THE ASSESSEES: SHRI J. P. SHAH, AR FOR THE REVENUE SMT NEETA SHAH, SR. DR ORDER PER G.D. AGARWAL, VICE-PRESIDENT: ALL THESE APPEALS FILED BY ASSESSEES AND ONE BY DEPARTMENT, ARE DIRECTED AGAIN ST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT. SIN CE IN ALL THESE APPEALS, COMMON ISSUES ARE INVOLVED, THEY ARE BEING DISPOSED OF ALTOGETHER FOR THE SAKE OF CONVENIENCE. 2. ITA NO. 2384/AHD/2007 ASSESSEES APPEAL RAJESH VINODCHANDRA JHAVERI ITA NO.2452/AHD/2007 DEPARTMENTS APPEAL GROUNDS NO.1 TO 3 OF THE ASSESSEES APPEAL ARE AGAI NST THE VALIDITY OF THE REOPENING OF ASSESSMENT UNDER SECTION 147. HOWEVER , AT THE TIME OF HEARING BEFORE US THE LEARNED COUNSEL FOR THE ASSES SEE DID NOT PRESS THE ABOVE GROUNDS OF THE ASSESSEES APPEAL. THEREFORE, GROUND NO. 1 TO 3 OF THE ASSESSEES APPEAL ARE REJECTED AS NOT PRESSED. 3. GROUND NO.4 OF THE ASSESSEES APPEAL IS REPRODUC ED AS UNDER: 3 ITA NO.2379/AHD/2007 AND ORS. 4) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.4,14,982/- ON ACCOUNT OF ALLEGED INCOME FROM BENAMI ACCOUNTS. GROUND NO. 1 AND 2 OF THE REVENUES APPEAL READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE ADD ITION TO RS.4,14,982/- ON ACCOUNT OF UNACCOUNTED INCOME FROM FOUR BENAMI ACCOUNTS AS AGAINST THE ADDITION OF RS.9,22,813/- M ADE BY THE A.O. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER ON THE ABOVE ISSUES. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERI VES INCOME FROM TRADING IN IRON AND STEEL AND IS ALSO DIRECTOR OF S HRI. VIKAS COOPERATIVE BANK LIMITED, SALAVATPURA, SURAT. FOR THE YEAR UND ER CONSIDERATION THE ASSESSEE HAD FILED THE RETURN DECLARING THE TOTAL I NCOME AT RS.1,97,888/-, WHICH WAS PROCESSED UNDER SECTION 143(1). SUBSEQUE NTLY, THE ASSESSING OFFICER RECEIVED THE INTIMATION FROM THE INVESTIGAT ION WING IN RESPECT OF 4 BANK ACCOUNTS WITH SHRI. VIKAS COOPERATIVE BANK LIM ITED. THE PERSONS IN WHOSE NAME THESE BANK ACCOUNTS WERE OPENED WERE NOT TRACEABLE. THEREAFTER THE ASSESSING OFFICER REOPENED THE CASE OF THE ASSESSEE BY ISSUING NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE HAS INTRODUCED SHRI. ASHOK M. JOBALIYA TO THE BANK FOR OPENING OF BANK ACCOUNT AS A PROPRIETOR OF M/S. NIPI TRADIN G. SUBSEQUENTLY, SHRI. ASHOK M. JOBALIYA INTRODUCED FOLLOWING THREE PERSONS TO OPEN THE ACCOUNT IN SHREE VIKAS COOPERATIVE BANK LIMITED:- 4 ITA NO.2379/AHD/2007 AND ORS. (I) M.R. ENTERPRISE, PROP: SHRI PREM RAJ JAIN A/C. NO.1550 (II) R.N. TRADERS, PROP: SHRI RAKESH M. JAIN A/C. N O.1476 (III) P.C. TEXTILES, PROP: SHRI PREM C. CHOKSI A/C. NO. 1465 5. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER FOUND THE ABOVE 4 PERSONS TO BE NOT AVAILAB LE AT THE ADDRESS GIVEN TO THE BANK. HE ALSO ASKED THE ASSESSEE TO PRODUCE THEM, BUT THEY WERE NOT PRODUCED. THE ASSESSING OFFICER ALSO NOTICED T HAT SEVERAL CHEQUES ISSUED BY THE ASSESSEE AND HIS RELATIVES WERE ENCAS HED THROUGH THE ABOVE FOUR BANK ACCOUNTS. ON THE ABOVE FACTS, THE ASSESS ING OFFICER HELD THAT THE ABOVE FOUR BANK ACCOUNTS WERE BENAMI ACCOUNTS OF THE ASSESSEE. HE WAS OF THE OPINION THAT THESE ACCOUNTS WERE USED FOR CARRYING ON SHARAFI BUSINESS. HE FOUND TOTAL TURNOVER IN THE SE FOUR ACCOUNTS WAS RS.5,07,83,061/- AND HE ESTIMATED 1% PROFIT ON THE ABOVE TURNOVER WHICH WORKED OUT TO RS.5,07,931/-. HE ALSO FOUND THAT TH E TOTAL PEAK CREDIT IN THE ABOVE BANK ACCOUNTS WAS RS.15,06,562/-. THE AS SESSING OFFICER GIVING CREDIT FOR THE CHEQUES TRANSFERRED BY ASSESS EES REGULAR BANK ACCOUNT AMOUNTING TO RS.10,91,580/-, MADE THE ADDI TION OF RS.4,14,982/- FOR UNEXPLAINED PEAK CREDIT. THUS, THE TOTAL ADDIT ION OF RS.9,22,813/- WAS MADE BY THE ASSESSING OFFICER. THE RELEVANT FINDIN G OF THE ASSESSING OFFICER IN THIS REGARD IS REPRODUCED BELOW: THIS TYPE OF BUSINESS CALLED SARAFI BUSINESS. ON INQUIRY, OF THE OTHER PARTIES WHOSE CHEQUES FOUND DEPOSITED IN THES E BENAMI BANK ACCOUNTS, IT IS FOUND THAT THE CHEQUES ISSUED FROM THE BUSINESS OF TEXTILE, STEEL ETC. WERE DEPOSITED IN THESE BENAMI BANKS ACCOUNTS. THE INCOME EARNED THROUGH THESE BUSINESS DEPENDS UP ON THE NEEDS OF THE CUSTOMERS. IF THE CUSTOMER NEEDS MONEY URGE NTLY, HE WILL PAY MORE COMMISSION TO THE SHROFF AND SOME TIME THE Y CHARGED 5 ITA NO.2379/AHD/2007 AND ORS. INTEREST ALSO ON THE EXCESS FUND ADVANCED BY THEM. SOMETIMES, CASH USED TO BE PAID TO THE CUSTOMERS IMMEDIATELY A FTER CHEQUES WERE PRESENTED TO THEM AND SOMETIMES, CASH USED TO BE PAID AFTER CLEARANCE OF THE CHEQUES. GENERALLY, THIS TYPE OF TRANSACTION ACCRUED IN THE BILL DISCOUNTING BUSINESS AND THE MI NIMUM NET RATE OF PROFIT IS AROUND 1% OF THE TURNOVER. IT IS, THE REFORE, 1% OF THE TOTAL TURNOVER HAS BEEN ESTIMATED AS NET PROFIT OF THE BUSINESS. DURING THE YEAR UNDER CONSIDERATION, THE TOTAL TURN OVER I.E. DEPOSIT IN THE BANK STATEMENT FROM 1/4/2003 TO 31/03/2004 I S RS.5,07,83,061/- IN THE BENAMI ACCOUNTS ARE AS UNDE R: SR. NO. NAME OF THE ACCOUNT HOLDER A/C. NO. TURNOVER PEAK BALANCE DATE 1 M.R. ENTERPRISES PROP. SHRI PREM RAJ JAIN 1550 88,02,569 292592 27.10.98 2 R.N. TRADERS PROP. SHRI RAKESH M. JAIN 1476 1,06,28,307 349669 23.01.99 3 P.C. TEXTILES PROP. SHRI PREM C. CHOKSI 1465 1,15,99,898 295319 23.01.99 4 M/S NIPI TRADING PROP. SHRI ASHOK M. JOBALIYA CA 912 1,97,52,287 568982 01.06.98 TOTAL 5,07,83,061 15,06,562 AS STATED IN THE ABOVE TABLE, IT IS CLEAR THAT THER E IS A PEAK BALANCE OF RS.15,06,562/- IN THESE FOUR BANK ACCOUNTS. THE PEAK CREDIT IN THESE BANK ACCOUNTS REPRESENTS NET UNACCOUNTED INVE STMENT OF THE ASSESSEE DURING THE PERIOD. HOWEVER, CONTENTION OF THE ASSESSEE IN RESPECT OF THE PEAK, APPEARS REASONABLE TO THE EXTE NT THE FUND WERE TRANSFERRED FROM HIS REGULAR BOOKS OF ACCOUNTS TO T HESE BENAMI BANK ACCOUNTS AMOUNTING TO RS.10,91,580/-. THIS AM OUNT HAS BEEN DISALLOWED AS UNEXPLAINED/BOGUS EXPENSES IN THE COM ING PARA-7. 6 ITA NO.2379/AHD/2007 AND ORS. IT IS FOUND THAT THE ASSESSEE HAS CLAIMED BOGUS EXP ENSES IN HIS STEEL BUSINESS AND USED THE CASH AMOUNT IN HIS SARAFI BUS INESS. HOWEVER, THE UNACCOUNTED INVESTMENT REFLECTED IN TH E FORM OF PEAK IS STILL UNEXPLAINED TO THE EXTENT OF RS. (RS.15,06 ,562 RS.10,91,580) RS.4,14,982/-. IT IS, THEREFORE, THE UNEXPLAINED PEAK BALANCE OF RS.4,14,982/- IS HEREBY ADDED TO THE TOT AL INCOME OF THE ASSESSEE AS HIS UNEXPLAINED INVESTMENT. THE TOTAL TURNOVER OF THE BENAMI FIRMS AS MENTIONED IN THE ABOVE TABLE IS RS. 5,07,83,061/- AND APPLYING 1% RATE OF PROFIT THE INCOME WORKED OU T TO RS.5,07,831/- IS ADDED TO THE TOTAL INCOME OF THE A SSESSEE. TOTAL UNACCOUNTED INCOME FROM OPERATION OF BENAMI BANK AC COUNTS IS WORKED OUT TO RS.9,22,813/- {4,14,982/- + 507831} A ND THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)(C) IS INITIATED FOR FURNISHING INACCURATE PA RTICULARS OF THE INCOME AND THEREBY CONCEALMENT OF INCOME. ON APPEAL, THE LD. COMMISSIONER OF INCOME TAX(APPEA LS) SUSTAINED THE ADDITION AT RS.4,14,982/- WITH THE FOLLOWING FINDIN G. 10.3 TAKING INTO ACCOUNT THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED V IEW THAT THE AO WAS FULLY JUSTIFIED IN TREATING THE FOUR ACC OUNTS WITH THE SHREE VIKAS CO.OP. BANK AS THE BENAMI ACCOUNTS OF THE ASSESSEE. HOWEVER, I AM NOT IN AGREEMENT WITH HIS ACTION OF WORKING OUT THE PEAK CREDIT ON ONE HAND, AND ON THE OTHER, APPLYING THE RATE OF 1% TO THE TOTAL TURNOVER OF TH E ACCOUNTS TO WORK OUT THE PROFIT FROM THE SAME. HE COULD EIT HER RELY ON THE PEAK CREDIT OR WORK OUT THE PROFIT FROM THE TUR NOVER. HE WAS NOT JUSTIFIED IN DOING BOTH. EVEN THOUGH, FROM THE 7 ITA NO.2379/AHD/2007 AND ORS. MANNER OF THE TRANSACTIONS, IT COULD APPEAR THAT SU CH TRANSACTIONS HAD BEEN ENTERED INTO BY A SHROFF YET, THERE WAS NO EVIDENCE TO SHOW THAT THE ASSESSEE WAS ACTUALLY ENGAGED IN SUCH A BUSINESS. IN FACT, HE WAS ENGAGED IN STE EL BUSINESS WHICH WAS THE REGULAR BUSINESS. THEREFORE, I AM OF THE VIEW THAT ONLY THE PEAK OF THE FOUR BANK ACCOUNTS COULD BE ADOPTED TO WORK OUT THE ASSESSEES INCOME FROM SUCH BENAMI ACCOUNTS. THE AO WORKED OUT THE PEAK AT RS.15,06,5 62 AND REDUCED THE CHEQUES DEPOSITED BY THE ASSESSEE HIMSE LF, OF RS.10,91,580. THE ADDITION OF THE BALANCE SUM OF RS.4,14,982/- IS THEREFORE, CONFIRMED. CONSEQUENTL Y, OUT OF THE BALANCE SUM OF RS.4,14,982/- IS THEREFORE, CONF IRMED. CONSEQUENTLY, OUT OF THE ADDITION OF RS.9,22,813/- THE ASSESSEE WOULD GET A RELIEF OF RS.5,07,831/-. 6. THE ASSESSEE AGGRIEVED WITH THE ADDITION SUSTAIN ED AT RS.4,14,982/- IS IN APPEAL BEFORE US BY GROUND NO. 4 OF THE ASSES SEES APPEAL AND THE REVENUE ALSO AGGRIEVED WITH THE RELIEF OF RS.5,07,8 31/- ALLOWED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS) IS IN APPEA L BEFORE US. 7. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT IT IS A WELL SETTLED PRINCIPLE OF LAW THAT THE ONUS OF PROVING THE BENAMI IS UPON THE PERSON WHO ALLEGES SO. IN THIS CASE IT IS THE ALLEGATION OF THE DEPARTMENT THAT THE FOUR BANK ACC OUNTS IN THE NAME OF FOUR DIFFERENT PERSONS ARE THE BENAMI ACCOUNTS OF THE ASSESSEE. THEREFORE, ONUS OF PROVING THOSE BANK ACCOUNTS AS BENAMI ACCOUNTS IS UPON THE REVENUE. THAT THE ONLY CONNECTION OF THE ASSESSEE WITH THOSE BANK ACCOUNTS IS THAT THE ASSESSEE INTRODUCED ONE O F THOSE BANK ACCOUNT HOLDERS. MERELY BECAUSE THE ASSESSEE INTRODUCED A PERSON TO OPEN THE 8 ITA NO.2379/AHD/2007 AND ORS. BANK ACCOUNT IT CANNOT BE PRESUMED THAT THE ASSESSE E IS THE OWNER OF THAT BANK ACCOUNT. IT IS NOT THE CASE OF THE REVENUE TH AT THE BANK ACCOUNT WAS OPERATED BY THE ASSESSEE AND THE MONEY IN THESE BAN K ACCOUNT WAS UTILIZED BY THE ASSESSEE. HE ALSO SUBMITTED THAT M ERELY BECAUSE A PERSON IS NOT AVAILABLE AT THE ADDRESS GIVEN AFTER SEVERAL YEARS OF OPENING OF BANK ACCOUNT DOES NOT MEAN THAT THE PERSON WAS NOT EXIST ING WHEN THE BANK ACCOUNT WAS OPENED. HE ALSO SUBMITTED THAT THE LAW RELATING TO BENAMI IS THE SAME FOR INCOME TAX PURPOSES AND FOR CIVIL P URPOSES. IF ASSESSEE GOES TO THE CIVIL COURT AND CLAIMS THAT THE BANK AC COUNT IN THE NAME OF FOUR PERSONS SHOULD BE DECLARED AS BELONGING TO THE ASSESSEE ON THE GROUND THAT HE INTRODUCED THE BANK ACCOUNT OF ONE O F THEM AND THE SAID ONE PERSON INTRODUCED THE ACCOUNT OF ALL OTHER WERE PERSONS. WHETHER CIVIL COURT WILL DECLARE THE ASSESSEE AS OWNER OF T HOSE BANK ACCOUNTS EVEN IF THE ABOVE PERSONS ARE NOT AVAILABLE AT THEI R GIVEN ADDRESS. IF THE REPLY IS NO, THOSE FOUR BANK ACCOUNTS CANNOT BE SAI D AS BENAMI ACCOUNTS FOR THE PURPOSE OF INCOME TAX ALSO. IN SUPPORT OF THE ABOVE CONTENTION, THE LEARNED CO UNSEL RELIED UPON THE FOLLOWING DECISIONS: CIT VS. DAULATRAM ROWATMULL 87 ITR 349 (SC) MADURA KNITTING COMPANY VS. CIT 30 ITR 764 (MAD) 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SHE STA TED THAT THE ASSESSEE IS A DIRECTOR IN SHRI. VIKAS COOPERATIVE BANK LIMITED, SALABATPURA, SURAT. ALL THE ABOVE FOUR BANK ACCOUNTS WERE OPENED IN THE SAME BANK IN WHICH THE ASSESSEE IS A DIRECTOR. THOUGH, THE ASSESSEE I NTRODUCED THE BANK ACCOUNT OF SHRI. ASHOK M. JOBALIYA BUT IN TURN SHRI . JOBALIYA INTRODUCED OTHER THREE BANK ACCOUNTS. IN ALL THE ABOVE 4 BANK ACCOUNTS THERE WERE 9 ITA NO.2379/AHD/2007 AND ORS. HUGE SHARAFI TRANSACTIONS. WHEN THE INVESTIGATION WAS CARRIED OUT, NONE OF THE ABOVE PERSONS WERE FOUND AVAILABLE AT THE AD DRESS GIVEN. THE ASSESSEE DESPITE ALLOWING OF SEVERAL OPPORTUNITIES DID NOT PRODUCE ANY OF THEM. THE ASSESSEE ALSO STATED THAT HE DOES NOT KN OW MR. JABALIA PERSONALLY AND HE HAD INTRODUCED MR. JABALIA AT SOM E OTHER PERSONS REQUEST. SHE STATED THAT A DIRECTOR OF A BANK IS N OT SUPPOSED TO INTRODUCE A PERSON UNLESS HE KNOWS HIM PERSONALLY. SHE, THER EFORE, SUBMITTED THAT CONSIDERING THE TOTALITY OF THE FACTS, THE ASSESSIN G OFFICER WAS FULLY JUSTIFIED IN HOLDING THE ABOVE FOUR BANK ACCOUNTS A S BENAMI ACCOUNTS OF THE ASSESSEE. SHE, THEREFORE SUBMITTED THAT THE LD . COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN ALLOWING THE RELIEF OF RS.5,07,831/-. THE SAME SHOULD BE REVERSED AND THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER SHOULD BE SUSTAINED. 9. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSING THE MATERIAL PLACED BEFORE US. HON'BLE AP EX COURT IN THE CASE OF DAULAT RAM RAWATMULL HELD AS UNDER: THAT THE ONUS OF PROVING THAT THE APPARENT WAS NOT THE REAL WAS ON THE PARTY WHO CLAIMED IT TO BE SO. AS IT WAS TH E DEPARTMENT WHICH CLAIMED THAT THE AMOUNT OF FIXED DEPOSIT RECE IPT BELONGED TO THE RESPONDENT-FIRM EVEN THOUGH THE RECEIPT HAD BEE N ISSUED IN THE NAME OF B, THE BURDEN LAY ON THE DEPARTMENT TO PROV E THAT THE RESPONDENT WAS THE OWNER OF THE AMOUNT DESPITE THE FACT THAT THE RECEIPT WAS IN THE NAME OF B. HON'BLE MADRAS HIGH COURT IN THE CASE OF MADURA KNI TTING CO. (SUPRA) HELD AS UNDER: 10 ITA NO.2379/AHD/2007 AND ORS. HELD, (I) THAT, WHETHER THE PLEA WAS ONE OF BENAMI OR OF SHAM, THE BURDEN WAS NOT ON THE ASSESSEE BUT ON THE DEPARTMEN T TO PROVE THAT WHAT WAS APPARENT WAS NOT REAL; 10. FROM THE ABOVE DECISIONS, THE LEGAL POSITION WH ICH EMERGES IS THAT THE ONUS OF PROVING THAT THE FOUR BANK ACCOUNTS IN THE NAME OF FOUR DIFFERENT PERSONS WERE BELONGING TO THE ASSESSEE IS UPON THE DEPARTMENT. THE REVENUE HAS HELD THE FOUR BANK ACCOUNTS TO BE BENAMI ACCOUNTS OF THE ASSESSEE ON THE BASIS OF FOLLOWING FACTS. I. THAT THE ASSESSEE INTRODUCED SHRI. ASHOK M. JOBA LIYA TO THE BANK FOR OPENING THE BANK ACCOUNT AND SUBSEQUENTLY SHRI. ASHOK M. JOBALIYA HAS INTRODUCED THREE MORE PERSONS TO OPEN THE ACCOUNT. II. THAT THE ASSESSEE IS THE DIRECTOR OF THE BANK I N WHICH ACCOUNTS WERE OPENED. III. THOSE FOUR PERSONS WERE NOT FOUND AVAILABLE WH EN INQUIRY WAS CONDUCTED BY THE DEPARTMENT, AND THE ASSESSEE A LSO FAILED TO PRODUCE THEM BEFORE ASSESSING OFFICER. 11. IN OUR OPINION, THE ABOVE FACTS ARE NOT SUFFICI ENT TO HOLD THE ABOVE FOUR BANK ACCOUNTS AS BENAMI ACCOUNTS OF THE ASSE SSEE. MERELY BECAUSE SOME PERSONS ARE NOT FOUND AT THE ADDRESS GIVEN TO THE BANK, IT DOES NOT BY ITSELF LEAD TO THE CONCLUSION THAT THE ABOVE BAN K ACCOUNTS ARE BENAMI ACCOUNTS. IT IS NOT THE CASE OF THE REVENUE THAT T HE ABOVE BANK ACCOUNTS WERE OPERATED BY THE ASSESSEE. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE MONEY IN THE BANK ACCOUNT WAS UTILIZED BY THE A SSESSEE. IN THE ABOVE CIRCUMSTANCES, MERELY BECAUSE THE ASSESSEE HAS INTR ODUCED SHRI. ASHOK M. JOBALIYA FOR OPENING HIS ACCOUNT IN THE BANK WI LL NOT LEAD TO THE INFERENCE THAT SHRI. ASHOK M. JOBALIYA WAS THE BE NAMIDAR OF THE 11 ITA NO.2379/AHD/2007 AND ORS. ASSESSEE. THE ACCOUNT OF THE ABOVE THREE PERSONS W ERE NOT EVEN INTRODUCED BY THE ASSESSEE AND THEREFORE THE ASSESS EE HAS NO LINK AT ALL WITH THE ABOVE THREE PERSONS. AS PER REVENUE THOSE BANK ACCOUNTS WERE UTILIZED FOR THE PURPOSE OF CARRYING THE SHARAFA BU SINESS. NO EVIDENCE IS BROUGHT ON RECORD BY THE REVENUE THAT THIS SHARAFI BUSINESS WAS CARRIED ON BY THE ASSESSEE. THE BUSINESS OF THE ASSESSEE I S OF TRADING IN IRON AND STEEL. IN ADDITION TO TRADING IN IRON AND STEEL HE IS ALSO DIRECTOR IN THE BANK. HOWEVER, NO IOTA OF EVIDENCE IS BROUGHT ON R ECORD BY THE REVENUE TO ESTABLISH THAT THE ASSESSEE CARRIED ON THE SHARA FI BUSINESS. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAD THE POWER OF ATTORNEY TO OPERATE THESE BANK ACCOUNTS OR THE MONEY IN THESE BANK ACCO UNTS WAS UTILIZED BY THE ASSESSEE. THE TOTAL TRANSACTION OF THE ASSESSE E WITH THOSE BANK ACCOUNTS WAS RS.10.91 LACS, WHILE THE TOTAL TURNOVE R AS MENTIONED BY THE ASSESSING OFFICER THROUGH THESE BANK ACCOUNTS WAS R S.507.83 LACS. 12. CONSIDERING THE TOTALITY OF THE ABOVE FACTS, WE ARE OF THE OPINION THAT THE REVENUE HAS NOT BEEN ABLE TO DISCHARGE THE ONUS OF PROVING THAT THE BANK ACCOUNTS IN THE NAME OF FOUR DIFFERENT PER SONS WERE BENAMI ACCOUNTS OF THE ASSESSEE. WE, THEREFORE, DELETE TH E ADDITION OF RS.4,14,982/- SUSTAINED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS) IN THIS REGARD. ACCORDINGLY, THE GROU ND RAISED IN THE REVENUES APPEAL IS REJECTED WHILE GROUND NO. 4 OF THE ASSESSEES APPEAL IS ALLOWED. 13. GROUND NO.5 OF THE ASSESSEES APPEAL READS AS U NDER: THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) H AS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION TO THE TUNE OF RS.10,91,580/- ON ACCOUNT OF ALLEGED BOGUS EXPENSES . 14. THE FACTS OF THE CASE ARE THAT DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD 12 ITA NO.2379/AHD/2007 AND ORS. TRANSACTIONS WITH THE FOUR BANK ACCOUNTS THROUGH WH ICH SHARAFI BUSINESS WAS CARRIED ON. THE DETAILS OF SUCH TRANSACTIONS A RE AS UNDER: I] TRANSACTIONS WITH THE ACCOUNT NO.1465 OF M/S P. C. TEXTILES 20.07.08 175319 20.07.98 100000 10.09.98 70000 19.09.98 40000 20.09.98 75000 TOTAL 460319 II] TRANSACTIONS WITH THE ACCOUNT NO.1550 OF M/S M.R.ENTERPRISES 08.09.98 75000 TOTAL 75000 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE TRANSACTI ONS WITH THE ABOVE BANK ACCOUNTS. IT WAS CLAIMED BY THE ASSESSEE THAT HIS BOOKS OF ACCOUNTS WERE DESTROYED IN THE FLOOD IN SURAT IN THE YEAR 2006 AN D THEREFORE THE ASSESSEE DOES NOT HAVE THE RELEVANT DETAILS. HOWEVER, THE A SSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CLAIM ON THE GROUND THAT THE PREMISES WHERE THE BOOKS OF ACCOUNTS WERE CLAIMED TO BE KEPT WAS NOT O WNED BY THE ASSESSEE OR HIS RELATIVE, NEITHER IT WAS A BUSINESS PLACE NO R RESIDENTIAL PLACE OF THE ASSESSEE OR HIS FAMILY MEMBER BUT IT WAS THE PREMIS ES OF THE ACCOUNTANT. THE ASSESSING OFFICER FURTHER HELD THAT THE ONUS IS UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE EXPENDITURE AND THE AS SESSEE FAILED TO PRODUCE ANY EVIDENCE IN SUPPORT OF THE EXPENDITURE DEBITED IN THE BOOKS OF ACCOUNTS BY CHEQUES WHICH ARE ENCASHED THROUGH T HE ABOVE BANK ACCOUNTS WHICH WERE HELD TO BE BENAMI ACCOUNTS OF T HE ASSESSEE. HE, THEREFORE, DISALLOWED THE TOTAL AMOUNT OF RS.10,91, 580/- AS BOGUS 13 ITA NO.2379/AHD/2007 AND ORS. EXPENSES. THE SAME IS UPHELD BY THE LD. COMMISSION ER OF INCOME TAX(APPEALS). 16. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITT ED BY THE LEARNED COUNSEL THAT THE ASSESSEE HAD MAINTAINED THE REGULA R BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED. SUCH AUDITED STATEMENTS W ERE FURNISHED ALONGWITH THE RETURN OF INCOME. THAT, DURING THE C OURSE OF ASSESSMENT PROCEEDINGS WHICH TOOK PLACE AFTER SEVERAL YEARS OF THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNTS BECAUSE THE SAME WAS DESTROYED BY FLOOD IN SURAT. IN SUPPORT OF THE DESTRUCTION OF THE BOOKS, THE ASSESSEE HAD FILED AF FIDAVIT OF HIMSELF AS WELL AS OF ACCOUNTANT SHRI. INDUBHAI MODI IN WHOSE PREMISES THE BOOKS WERE KEPT. HE STATED THAT IT MAY BE QUITE POSSIBLE THAT FOR THE SUPPLY OF GOODS, THE ASSESSEE MIGHT HAVE ISSUED A CROSS CHEQU E TO THE SUPPLIER WHO MIGHT HAVE ENCASHED THE SAME THROUGH THE ABOVE PERS ONS WHO WERE CARRYING ON THE SHARAFA BUSINESS. HE FURTHER STATE D THAT THE DISALLOWANCE OF EXPENDITURE IS PURELY ON THE BASIS OF PRESUMPTIO N AND SUSPICION. THE SAME SHOULD BE DELETED. 17. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS LD. COMMISSIONER OF INCOME TAX(APPEALS). SHE POINTED OUT THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE ISSUED CERTAIN CHEQUES TO THE SUPPLIER WHI CH WERE NOT ACCOUNT PAYEE, WHICH WERE ENCASHED THROUGH THE PERSONS CARR YING ON SHARAFA BUSINESS. THAT, IN THE CASE OF AN EXPENDITURE, ONU S IS UPON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE EXPENDITURE AS WEL L AS THE FACT THAT SUCH EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THIS CASE, THE ASSESSEE DID NOT FURNI SH ANY DETAIL ABOUT SUCH EXPENDITURE. THEREFORE, THE DISALLOWANCE OF THE SA ME BY THE ASSESSING OFFICER WAS FULLY JUSTIFIED. SHE FURTHER SUBMITTED THAT THE ASSESSEE 14 ITA NO.2379/AHD/2007 AND ORS. CLAIMED TO HAVE DESTROYED THE BOOKS IN THE FLOOD IN THE YEAR 2006. THAT, THE PREMISES WHERE THE BOOKS WERE KEPT IS CLAIMED T O BE BELONGING TO THE ACCOUNTANT. THE ASSESSMENT YEAR UNDER CONSIDERATIO N IS ASSESSMENT YEAR 1999-2000 WHILE THE FLOOD IN SURAT CAME IN THE YEAR 2006. WHY THE BOOKS OF THE ASSESSEE OF THIS PARTICULAR YEAR WERE KEPT WITH THE ACCOUNTANT FOR A PERIOD OF MORE THAN 7 YEARS IS NOT EXPLAINED BY THE ASSESSEE. MOREOVER, THERE IS NO EVIDENCE BROUGHT ON RECORD FO R DESTRUCTION OF THE BOOKS IN THE FORM OF FIR OR ANY OTHER DOCUMENT. IN THE ABOVE CIRCUMSTANCES, THE ASSESSING OFFICER RIGHTLY REJECT ED THE ASSESSEES CLAIM OF DESTRUCTION OF THE BOOKS AND HAS RIGHTLY DISALLO WED THE EXPENDITURE BEING UNPROVED. 18. WE HAVE CAREFULLY CONSIDERED THE ARGUMENT OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. IT IS A SET TLED LAW THAT THE ONUS IS UPON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF T HE EXPENDITURE AND ALSO THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF BUSINESS. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE ISSUE TOTAL CHEQUE OF RS.10,91,580/- WHICH ARE DEBITED IN THE B OOKS OF ACCOUNT. THESE, CHEQUES WERE ENCASHED THROUGH THE PERSONS WH O WERE CARRYING ON SHARAFI BUSINESS. WHILE ADJUDICATING GROUND NO.4 O F THE ASSESSEES APPEAL, WE HAVE HELD THAT THE FOUR BANK ACCOUNTS IN THE NAME OF DIFFERENT PERSONS WERE NOT BENAMI ACCOUNTS OF THE ASSESSEE. HOWEVER, IT IS NOT IN DISPUTE THAT THE ABOVE BANK ACCOUNTS WERE IN RESPEC T OF SARAFI BUNINESS. IN THIS LINE OF BUSINESS, THE PERSON CA RRYING ON SARAFI BUSINESS DEPOSIT THE CHEQUE/DEMAND DRAFT ISSUED IN THE NAME OF OTHER PERSONS AND PAYS CASH AFTER DEDUCTING HIS COMMISSION. THE PERS ON WHO ENCASHED THEIR CHEQUE/DEMAND DRAFT ARE THE PERSONS WHO DOES NOT WANT TO DISCLOSE THE TRANSACTION IN THEIR BANK ACCOUNT. HOWEVER, A CHEQUE/D.D. CAN BE ENCASHED THROUGH OTHERS BANK ACCOUNT ONLY IF IT IS NOT ACCOUNT PAYEE. AS PER SECTION 40A(3) ASSESSEE IS BOUND TO ISSUE CH EQUE/DD EXCEEDING 15 ITA NO.2379/AHD/2007 AND ORS. RS.20,000/- WHICH IS ACCOUNT PAYEE. IN THIS CASE A SSESSEE ADMITTEDLY ISSUED CHEQUE/DD EXCEEDING RS.20,000/- WHICH WAS NO T ACCOUNT PAYEE, OTHERWISE IT COULD NOT HAVE BEEN DEPOSITED IN THE A CCOUNT OF PERSONS CARRYING ON SARAFI BUSINESS. THE ASSESSEE HAS NOT FURNISHED ANY DETAIL WITH REGARD TO ISSUANCE OF THE ABOVE CHEQUE/DD. HO WEVER, IT IS CLAIMED THAT SUCH CHEQUES MIGHT HAVE BEEN ISSUED TO THE SUP PLIERS OF THE GOODS TO THE ASSESSEE. THE ASSESSEE DID NOT FURNISH THE EXA CT DETAILS ON THE GROUND THAT THE BOOKS OF THE ASSESSEE WERE DESTROYED IN TH E FLOOD. IN OUR OPINION, THE CLAIM OF THE ASSESSEE OF THE DESTRUCTION OF THE BOOKS IN THE FLOOD CANNOT BE ACCEPTED FOR THE FOLLOWING REASONS: I. THE BOOKS WERE CLAIMED TO HAVE BEEN KEPT AT THE PREMISES OF THE ACCOUNTANT SHRI. INDUBHAI MODI. THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION IS 1998- 1999. FLOOD CAME IN THE YEAR 2006. NO SATISFACTOR Y EXPLANATION IS GIVEN BY THE ASSESSEE WHY THE BOOKS OF THIS PARTICULAR YEAR WERE KEPT AT THE PREMISES OF THE AC COUNTANT THAT TOO AFTER SEVEN YEARS OF THE END OF THE RELEVA NT ACCOUNTING YEAR. II. NO DOCUMENTARY EVIDENCE IS PRODUCED IN RESPECT OF THE DESTRUCTION OF THE BOOKS. 19. IN VIEW OF THE ABOVE, WE AGREE WITH THE LOWER A UTHORITIES THAT THE CLAIM OF THE ASSESSEE FOR DESTRUCTION OF THE BOOKS IN THE FLOOD CANNOT BE ACCEPTED. THE ONUS IS UPON THE ASSESSEE TO ESTABLI SH THE GENUINENESS OF THE EXPENDITURE. IN THIS CASE, THE ASSESSEE HAS NO T PRODUCED ANY EVIDENCE TO DISCHARGE SUCH ONUS. THE FACT THAT PAYMENT EXCE EDING RS.20,000/- WAS MADE OTHERWISE THEN BY ACCOUNT PAYEE CHE QUE/DEMAND DRAFT ALSO RAISES SUSPICION AGAINST THE GENUINENESS OF EXPENDITURE. IN THE ABOVE CIRCUMSTANCES IT WAS THE DUTY OF THE ASSESSEE TO 16 ITA NO.2379/AHD/2007 AND ORS. PRODUCE NECESSARY EVIDENCES TO ESTABLISH GENUINENES S OF THE EXPENDITURE. HOWEVER, THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE WITH REGARD TO ABOVE PAYMENTS. IN VIEW OF ABOVE, AFTER CONSIDERING THE TOTALITY OF THE FACTS AND ARGUMENTS OF BOTH THE SIDES, WE AGREE WITH THE FIND ING OF THE LOWER AUTHORITIES IN THIS REGARD AND ACCORDINGLY, GROUND NO.5 OF THE ASSESSEES APPEAL IS REJECTED. 20. GROUND NOS. 6,7 AND 8 OF THE ASSESSEES APPEAL READS AS UNDER: 6) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.16,277/- ON ACCOUNT OF DISALLOWANCE TO T HE TUNE OF 20% OUT OF TELEPHONE EXPENSES. 7) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.4,255/- ON ACCOUNT OF DISALLOWANCE TO TH E TUNE OF 20% OUT OF VEHICLE EXPENSES. 8) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.23,471/- ON ACCOUNT OF DISALLOWANCE TO T HE TUNE OF 20% OUT OF VARIOUS EXPENSES. 21. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSEE IS THE PROPRIETOR OF THE B USINESS AND PERSONAL USE OF THE TELEPHONE OR VEHICLE CANNOT BE RULED OUT. T HE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS AND THEREFORE THE GE NUINENESS OF THE VARIOUS EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNTS CANNOT BE VERIFIED. CONSIDERING THE FACTS OF THE CASE, 20% D ISALLOWANCE OUT OF TELEPHONE EXPENSES, VEHICLE EXPENSES AND OTHER EXPE NDITURE CANNOT BE SAID TO BE UNREASONABLE OR EXCESSIVE. THE SAME IS SUSTAINED AND GROUND NO.6,7 AND 8 OF THE ASSESSEES APPEAL ARE REJECTED. 17 ITA NO.2379/AHD/2007 AND ORS. ITA NO.2379/AHD/2007 ASSESSEES APPEAL NIKHIL B. JHAVERI 22. GROUNDS NO.1 TO 3 OF THE ASSESSEES APPEAL ARE AGAINST THE VALIDITY OF THE REOPENING OF ASSESSMENT UNDER SECTION 147. HOWEVER, AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE A SSESSEE DID NOT PRESS THE ABOVE GROUNDS OF THE ASSESSEES APPEAL. THEREF ORE, GROUND NO. 1 TO 3 OF THE ASSESSEES APPEAL ARE REJECTED AS NOT PRESSE D. 23. GROUNDS NO.4 TO 6 OF THE ASSESSEES APPEAL READ S AS UNDER: 4) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.5,58,090/- ON ACCOUNT OF ALLEGED BOGUS EXPENDITURE. 5) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.96,883/- ON ACCOUNT OF ALLEGED LOW G.P. 6) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.27,209/- ON ACCOUNT OF DISALLOWANCE TO T HE TUNE OF 20% OUT OF VARIOUS EXPENSES. 24. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITT ED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT IN THE CASE OF THE AS SESSEE, THE FACTS IS SLIGHTLY DIFFERENT THEN IN THE CASE OF RAJESH V. JH AVERI ITA NO. 2384/AHD/2007. THAT, IN THE CASE OF THE ASSESSEE T HE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS AND DETERMINED T HE PROFIT BY APPLYING GP RATE. ONCE THE BOOKS OF ACCOUNTS ARE REJECTED A ND GP RATE IS APPLIED, THERE CANNOT BE ANY OTHER ADDITION BY WAY OF DISALL OWANCE OF EXPENDITURE. HE HAS NOT RAISED ANY SERIOUS OBJECTION WITH REGARD TO THE REJECTION OF THE BOOKS OF ACCOUNTS AND APPLICATION OF GP RATE. HE T HEREFORE SUBMITTED 18 ITA NO.2379/AHD/2007 AND ORS. THAT THE ADDITION BY WAY OF DISALLOWANCE OF EXPENDI TURE MAY BE DELETED. IN SUPPORT OF THIS CONTENTION HE RELIED UPON THE FO LLOWING DECISIONS: 232 ITR 776 INDWELL CONSTRUCTIONS V. CIT 229 ITR 229 CIT VS. BANWARI LAL BANSHIDHAR ITO VS. KENARAM SAHA & SUBHASH SAHA 116 ITD 1 (SB) 25. THE LEARNED DR ON THE OTHER HAND RELIED UPON TH E ORDER OF THE AUTHORITIES BELOW. SHE STATED THAT THE FACTS OF TH E ASSESSEES CASE ARE ALMOST IDENTICAL TO THE FACTS IN THE CASE OF RAJESH V. JHAVERI AND THEREFORE HER ARGUMENT IN THE CASE OF RAJESH V. JHAVERI WILL HOLD GOOD IN THE CASE OF THE ASSESSEE. 26. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. IN THE CASE OF INDWELL CONSTRUCTIONS, HON'BLE ANDHRA PRADESH HIGH COURT HE LD AS UNDER: THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDE R SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOKS ARE NOT CORRECT OR COMPLETE, THE IN COME-TAX OFFICER MAY REJECT THOSE BOOKS AND ESTIMATE THE INCOME TO T HE BEST OF HIS JUDGMENT. WHEN SUCH AN ESTIMATE IS MADE, IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED UNDER SECTION 29. IN OTHER WORDS ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER SECT ION 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLA CED IN SECTION 40 IS ALSO TAKEN INTO ACCOUNT. IN THE CASE OF BANWARI LAL BANSHIDHAR, HON'BLE ALLA HABAD HIGH COURT HELD AS UNDER: HELD, AFFIRMING THE DECISION OF THE TRIBUNAL, THAT NO DISALLOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS OF SECTION 40A(3) READ WITH RULE 6DD(J) OF THE INCOME TAX RULES, 1962, AS NO DE DUCTION WAS 19 ITA NO.2379/AHD/2007 AND ORS. ALLOWED TO AND CLAIMED BY THE ASSESSEE. WHEN THE G ROSS PROFIT RATE WAS APPLIED, THAT WOULD TAKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AMOUNT INCURRED ON THE PURCHASES MADE BY THE ASSESSEE. 27. RATIO OF ABOVE DECISION WOULD BE SQUARELY APPLI CABLE IN THE APPEAL BEFORE US BECAUSE IN THIS CASE ALSO THE ASSESSING O FFICER REJECTED THE BOOKS OF ACCOUNTS AND DETERMINED THE PROFIT BY APPL YING GP RATE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT CHALLENGED THE REJECTION OF BOOKS OF ACCOUNTS AND THE APPLICATION OF GP RATE. EVEN O THERWISE, WE FIND THAT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS ON THE GROUND THAT THE SAME WERE DESTROYED IN THE FLOOD. WE HAVE ALRE ADY CONSIDERED THIS ISSUE IN DETAIL IN THE CASE OF RAJESH VINODCHANDRA JHAVERI (SUPRA) AND HAVE COME TO THE CONCLUSION THAT THE CLAIM OF THE A SSESSEE THAT THE BOOKS WERE DESTROYED IN THE FLOOD CANNOT BE ACCEPTED. IN VIEW OF ABOVE, WE UPHOLD THE REJECTION OF BOOKS OF ACCOUNTS AND THE E STIMATION OF GP BY THE ASSESSING OFFICER. ACCORDINGLY, GROUND NO. 5 OF TH E ASSESSEES APPEAL IS REJECTED. HOWEVER, ONCE THE BOOKS OF ACCOUNTS IS R EJECTED AND A GP RATE IS APPLIED, FURTHER DISALLOWANCE OF EXPENDITURE CAN NOT BE MADE. AS HELD BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF BANWARI LAL BANSHIDHAR (SUPRA) AND HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE INDWELL CONSTRUCTIONS (SUPRA) AND ALSO ITAT SB IN T HE CASE OF KENARAM SAHA (SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER BY WAY OF DISALLOWANC E OF EXPENDITURE. ACCORDINGLY, GROUND NO. 4 AS WELL AS 6 OF THE ASSES SEES APPEAL ARE ALLOWED. ITA NO. 2380/AHD/2007 ASSESSEES APPEAL SMT. BHAVNABEN N. JHAVERI 28. IN THIS APPEAL BY THE ASSESSEE, FOLLOWING GROUN DS ARE RAISED. 20 ITA NO.2379/AHD/2007 AND ORS. 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS INITI ATED U/S. 147 OF THE ACT. 2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS WHEN THE COPY OF RECORDED REASONS WAS NOT GIVEN TO THE APPELLANT DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS THOUGH REQU ESTED BY THE APPELLANT. THE LD. CIT(A) THUS, ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS WHICH WERE INITIATED AND COMPLETED IN COMPLETE DEFIANCE OF THE BINDING JUDGMENTS OF THE HON'BLE SUPREME COURT AND OF THE H ON'BLE JURISDICTIONAL GUJARAT HIGH COURT. 3) THE LD. CIT(A) ERRED IN STATING IN PARA 6.3 OF T HE APPELLATE ORDER THAT THE CLAIM OF THE A.R. TO THE EFFECT THAT THE RECORDED REASONS FOR ISSUE OF REOPENING NOTICE WERE NOT COMMUNICATED TO THE APPELLANT BEFORE COMMENCEMENT O F RE- ASSESSMENT PROCEEDINGS IS NOT CORRECT WHEN THE EVID ENCES CONFIRMING THE FACT THAT THE COPY OF RECORDED REASO NS WAS NOT GIVEN TO THE APPELLANT BEFORE COMPLETION OF RE- ASSESSMENT PROCEEDINGS, WERE SUBMITTED BEFORE THE L D. CIT(A). 4) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.74,014/- ON ACCOUNT OF ALLEGED LOW G.P. 5) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.13,228/- ON ACCOUNT OF DISALLOWANCE TO T HE TUNE OF 20% OUT OF VARIOUS EXPENSES. 21 ITA NO.2379/AHD/2007 AND ORS. 29. GROUND NOS. 1 TO 3 OF THE ASSESSEES APPEAL, WH ICH ARE AGAINST THE RE-OPENING OF ASSESSMENT, WERE NOT PREPARED BY THE LEARNED COUNSEL AT THE TIME OF HEARING. ACCORDINGLY THESE GROUNDS ARE REJECTED. GROUND NO. 4 OF THE ASSESSEES APPEAL IS SIMILAR TO THE GROUND NO. 5 IN ITA NO. 2379/AHD/2007. FOR THE DETAILED DISCUSSION THEREIN , GROUND NO. 4 OF THE ASSESSEES APPEAL IS REJECTED. GROUND NO. 5 OF THE ASSESSEES APPEAL IS SIMILAR TO GROUND NO. 6 OF THE ASSESSEES APPEAL IN ITA NO. 2379/AHD/2007 FOR THE DETAILED DISCUSSION THEREIN, GROUND NO. 5 OF THE ASSESSEES APPEAL IS ALLOWED. ITA NO. 2381/AHD/2007 ASSESSEES APPEAL SMT. RUPALBEN R. JHAVERI 30. IN THIS APPEAL BY THE ASSESSEE, FOLLOWING GROUN DS ARE RAISED. 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS INITI ATED U/S. 147 OF THE ACT. 2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS WHEN THE COPY OF RECORDED REASONS WAS NOT GIVEN TO THE APPELLANT DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS THOUGH REQU ESTED BY THE APPELLANT. THE LD. CIT(A) THUS, ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS WHICH WERE INITIATED AND COMPLETED IN COMPLETE DEFIANCE OF THE BINDING JUDGMENTS OF THE HON'BLE SUPREME COURT AND OF THE H ON'BLE JURISDICTIONAL GUJARAT HIGH COURT. 3) THE LD. CIT(A) ERRED IN STATING IN PARA 6.3 OF T HE APPELLATE ORDER THAT THE CLAIM OF THE A.R. TO THE EFFECT THAT THE RECORDED REASONS FOR ISSUE OF REOPENING NOTICE WERE NOT COMMUNICATED TO THE APPELLANT BEFORE COMMENCEMENT O F RE- 22 ITA NO.2379/AHD/2007 AND ORS. ASSESSMENT PROCEEDINGS IS NOT CORRECT WHEN THE EVID ENCES CONFIRMING THE FACT THAT THE COPY OF RECORDED REASO NS WAS NOT GIVEN TO THE APPELLANT BEFORE COMPLETION OF RE- ASSESSMENT PROCEEDINGS, WERE SUBMITTED BEFORE THE L D. CIT(A). 4) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.85,153/- ON ACCOUNT OF ALLEGED LOW G.P. 5) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.14,140 /- ON ACCOUNT OF DISALLOWANCE TO THE TUNE OF 20% OUT OF VARIOUS EXPENSES. GROUND NOS. 1 TO 3 OF THE ASSESSEES APPEAL, WHICH ARE AGAINST THE RE- OPENING OF ASSESSMENT, WERE NOT PREPARED BY THE LEA RNED COUNSEL AT THE TIME OF HEARING. ACCORDINGLY THESE GROUNDS ARE REJ ECTED. GROUND NO. 4 OF THE ASSESSEES APPEAL IS SIMILAR TO THE GROUND NO. 4 IN ITA NO. 2380/AHD/2007. FOR THE DETAILED DISCUSSION THEREIN , GROUND NO. 4 OF THE ASSESSEES APPEAL IS REJECTED. GROUND NO. 5 OF THE ASSESSEES APPEAL IS SIMILAR TO GROUND NO. 5 OF THE ASSESSEES APPEAL IN ITA NO. 2380/AHD/2007 FOR THE DETAILED DISCUSSION THEREIN, GROUND NO. 5 OF THE ASSESSEES APPEAL IS ALLOWED. ITA NO. 2383/AHD/2007 ASSESSEES APPEAL RAJESH V. JHAVERI-HUF PROP:M/S. R.M. STEEL TRADERS 31. IN THIS APPEAL BY THE ASSESSEE, FOLLOWING GROUN DS ARE RAISED. 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS INITI ATED U/S. 147 OF THE ACT. 23 ITA NO.2379/AHD/2007 AND ORS. 2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS WHEN THE COPY OF RECORDED REASONS WAS NOT GIVEN TO THE APPELLANT DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS THOUGH REQU ESTED BY THE APPELLANT. THE LD. CIT(A) THUS, ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS WHICH WERE INITIATED AND COMPLETED IN COMPLETE DEFIANCE OF THE BINDING JUDGMENTS OF THE HON'BLE SUPREME COURT AND OF THE H ON'BLE JURISDICTIONAL GUJARAT HIGH COURT. 3) THE LD. CIT(A) ERRED IN STATING IN PARA 6.3 OF T HE APPELLATE ORDER THAT THE CLAIM OF THE A.R. TO THE EFFECT THAT THE RECORDED REASONS FOR ISSUE OF REOPENING NOTICE WERE NOT COMMUNICATED TO THE APPELLANT BEFORE COMMENCEMENT O F RE- ASSESSMENT PROCEEDINGS IS NOT CORRECT WHEN THE EVID ENCES CONFIRMING THE FACT THAT THE COPY OF RECORDED REASO NS WAS NOT GIVEN TO THE APPELLANT BEFORE COMPLETION OF RE- ASSESSMENT PROCEEDINGS, WERE SUBMITTED BEFORE THE L D. CIT(A). 4) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.1,23,046/- ON ACCOUNT OF ALLEGED LOW G.P . 5) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITIO N TO THE TUNE OF RS.45,669 /- ON ACCOUNT OF DISALLOWANCE TO THE TUNE OF 20% OUT OF VARIOUS EXPENSES. GROUND NOS. 1 TO 3 OF THE ASSESSEES APPEAL, WHICH ARE AGAINST THE RE- OPENING OF ASSESSMENT, WERE NOT PREPARED BY THE LEA RNED COUNSEL AT THE 24 ITA NO.2379/AHD/2007 AND ORS. TIME OF HEARING. ACCORDINGLY THESE GROUNDS ARE REJ ECTED. GROUND NO. 4 OF THE ASSESSEES APPEAL IS SIMILAR TO THE GROUND N O. 4 IN ITA NO. 2380/AHD/2007. FOR THE DETAILED DISCUSSION THEREIN , GROUND NO. 4 OF THE ASSESSEES APPEAL IS REJECTED. GROUND NO. 5 OF THE ASSESSEES APPEAL IS SIMILAR TO GROUND NO. 5 OF THE ASSESSEES APPEAL IN ITA NO. 2380/AHD/2007 FOR THE DETAILED DISCUSSION THEREIN, GROUND NO. 5 OF THE ASSESSEES APPEAL IS ALLOWED. 32. AS A RESULT, ASSESSEES APPEALS ARE PARTLY ALLO WED, WHILE REVENUES APPEAL IS DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 31 ST MARCH, 2010. SD/- SD/- (MAHAVIR SINGH) (G.D. AGARWAL) JUDICIAL MEMBER VIC E PRESIDENT AHMEDABAD; DATED: 31/03/2010 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.