The ACIT, Central Circle-1(1), Ahmedabad V. M/s. Master Devlopers, Mehsana

ITA 2557/AHD/2004

• Counselvise Citation: 255720514 RSA 2004
• Duration Of Justice: 9 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-12-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 31-08-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C PATWARI; SHANKARLAL MEENA
• Assessee Lawyers: ITA NO; G C PIPARA A R ITSSA NO AHD
• Keywords: Loose papers; Document seized; Block assessment; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER IT(SS)A NO.97/AHD/2004 THE ACIT, CENTRAL CIRCLE 1(2), AHMEDABAD. V/S. MASTER DEVELOPERS, 5-ASHOKNAGAR SOCIETY RADHANPUR ROAD, HIGHWAY MEHSANA PAN: AACFM 6761E (APPELLANT) (RESPONDENT) IT(SS)A NO. 105/AHD/2004 MASTER DEVELOPERS, 5-ASHOKNAGAR SOCIETY RADHANPUR ROAD, HIGHWAY MEHSANA PAN: AACFM 6761E V/S. THE ACIT, CENTRAL CIRCLE 1(2), AHMEDABAD. (APPELLANT) (RESPONDENT) ITA NOS.948/AHD/2007 A.Y.2000-01 THE ACIT, MEHSANA CIRCLE, MEHSANA. V/S. MASTER DEVELOPERS, 5-ASHOKNAGAR SOCIETY RADHANPUR ROAD, MEHSANA PAN: AACFM 6761E (APPELLANT) (RESPONDENT) ITA NOS.2557/AHD/2004 A.Y.2001-02 THE ACIT, MEHSANA CIRCLE, MEHSANA. V/S. MASTER DEVELOPERS, 5-ASHOKNAGAR SOCIETY RADHANPUR ROAD, MEHSANA PAN: AACFM 6761E (APPELLANT) (RESPONDENT) REVENUE BY : S/SHRI D.C. PATWARI AND SHANKARLAL MEENA, D.R. ASSESSEE(S) BY : SHRI G.C. PIPARA, A.R. IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 2 - / DATE OF HEARING : 19/09/2013 / DATE OF PRONOUNCEMENT: 17/12/2013 / O R D E R PER BENCH : ALL THESE FOUR APPEALS ARE CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDER. IN RESPECT OF THE BLOCK PERIO D, CROSS APPEALS HAVE BEEN FILED, HOWEVER, IN RESPECT OF THE REGULAR ASSESSMENTS FOR A.Y. 2000-01 AND A.Y. 2001-02 REVENUE IS IN APPEAL. A. IT(SS)A NO.97/AHD/2004 (REVENUES APPEAL) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTI NG TO DELETE THE ADDITION OF RS.51,28,640/- MADE ON ACCOUNT OF INVES TMENT IN UNACCOUNTED STOCK. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 158BC DATED 30 TH OF OCTOBER, 2002 WERE THAT THE ASSESSEE FIRM IS IN THE BUSINESS OF CONSTRUCTION. A SEARCH U/S. 132 WAS CARRIED ON 20 TH OF OCTOBER, 2000 AND THEREUPON A NOTICE U/S.158 BC WAS SERVED. THE ASSESSEE FIRM IS STATED TO BE THE MAIN ENTITY OF MASTER GROUP AND ENGAGED IN THE DEVELOP MENT OF RESIDENTIAL AND COMMERCIAL COMPLEXES. AT THE TIME O F SEARCH A STATEMENT OF STOCK PREPARED ON 30 TH OF SEPTEMBER, 2000 WAS DETECTED AND THE SAID STATEMENT WAS AS FOLLOWS: PARTICULARS OF GOODS CEMENT RS.15,35,750.00 STEEL (ROUND & CTD BARS) RS.14,84,930.00 SAND RS.68,000.00 BRICKS RS.4,14,000.00 IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 3 - KAPCHI/GRIT RS.2,52,460.00 TILES & STONE RS.3,84,000.00 WOOD/PLYWOOD RS.4,74,850.00 PLUMBING MATERIAL RS.5,14,650.00 TOTAL AMOUNT RS.51,28,640.00 2.1 THE ASSESSEES EXPLANATION OF THE STOCK WAS THA T THE SAME WAS PREPARED TO SUBMIT BEFORE THE BANK FOR THE PURP OSE OF LOAN. ACCORDING TO AO, THE ASSESSEE HAS NOT RECONCILED TH AT ESTIMATED STOCK STATEMENT; HENCE, THE TOTAL OF THE SAID STATE MENT OF RS.51,28,640/- WAS TAXED IN THE HANDS OF THE ASSESS EE. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY. 2.2 AFTER HEARING THE EXPLANATION OF THE ASSESSEE, LEARNED CIT(A) HAS DELETED THE ADDITION IN THE FOLLOWING MA NNER: I HAVE CONSIDERED THE ISSUE CAREFULLY. I FIND THAT ENTIRE ADDITION IS BASED ON THE BANK STOCK STATEMENT, GIVEN TO THE BAN K FOR OBTAINING CREDIT FACILITY. NEITHER ANY STOCK TALLY WAS TAKEN AT THE TIME OF SEARCH NOR ANY ATTEMPT WAS MADE TO WORK OUT AVAILABILITY O F ACTUAL STOCK AS ON 30.9.2000, A DATE WHICH FALLS IN BETWEEN THE BLO CK PERIOD. THUS THERE WAS NO MATERIAL TO SHOW THAT THERE WAS ANY UN DISCLOSED STOCK LYING WITH THE APPELLANT. IF FACTS OF THE EARLIER A DDITION IS CONSIDERED, THEN AS PER THE SEIZED DOCUMENTS AS CONSIDERED ITSE LF FOR THE FIRST ADDITION CLOSING STOCK AS ON 31.3.2000 WAS OF RS.20 ,33,811/-. THEREAFTER, PURCHASES MADE BY THE APPELLANT TILL TH E DATE OF SEARCH WERE OF RS.26,10,318/- AND UPTO 30.9.2000, IT WAS T O THE TUNE OF RS.24,39,431/-. NO SALE TILL THAT DATE WAS MADE BY THE APPELLANT. THUS ACTUAL STOCK (AT COST) ON THE DATE OF SEARCH SHOULD HAVE BEEN OF RS.46,44,129/-, WHICH REPRESENTS THE COST PRICE OF STOCK. HENCE ONLY SLIGHTLY HIGHED VALUE SHOWN TO THE BANK, WHICH MAY REPRESENT ITS MARKET VALUE AND THIS CANNOT BE BASIS FOR MAKING AD DITIONS IN BLOCK ASSESSMENT ESPECIALLY WHEN NO STOCK TALLY WAS TAKEN AT THE TIME OF SEARCH SO THAT DIFFERENCE, IF ANY IN QUANTITY COULD BE WORKED OUT. THIS EXERCISE OF WORKING OUT ACTUAL STOCK AND THE DIFFER ENCE BASED ON ITS VALUE GIVEN TO THE BANK SHOULD BE WORKED OUT ONLY I N REGULAR ASSESSMENT, IF REQUIRED. ON THE FACTS, NO ADDITION CAN BE MADE IN BLOCK ASSESSMENT AND THE SAME IS DELETED. IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 4 - 3. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A S ALSO CONSIDERING THE EXPLANATION OFFERED, WE ARE ALSO OF THE VIEW THAT MERELY ON THE BASIS OF THE SAID STATEMENT THE IMPUG NED ADDITION WAS MADE. AT THE TIME OF SEARCH, IT WAS EXPECTED TO PREPARE THE STOCK TALLY OF THE AVAILABLE STOCK AND THEN THAT WA S TO BE COMPARED WITH THE STOCK AS SHOWN IN THE BOOKS OF ACCOUNTS. T HAT STATEMENT WHICH WAS FOUND AT THE TIME OF SEARCH WAS STATED TO BE FOR THE PURPOSE OF AVAILING LOAN FACILITY. THE ASSESSEE HAS ALSO PLACED BEFORE LEARNED CIT(A), THE EXACT POSITION OF THE ST OCK AS PER THE BOOKS AND THAT WAS NOT CONTROVERTED BEFORE US. UNDE R THESE CIRCUMSTANCES, WE HEREBY CONFIRM THE FACTUAL FINDIN G OF LEARNED CIT(A) AND DISMISS THIS GROUND OF THE REVENUE. 4. GROUND NO.2 IS REPRODUCED BELOW: THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING WITH REGARD TO THE ADDITION OF RS.2,68,640/- MADE ON ACCOUNT OF TH E PROVISIONS OF SECTION 158BB(1)(CA) OF THE IT ACT THAT THE INCOME ON WHICH ADVANCE TAX HAS BEEN PAID OR TAX HAS BEEN DEDUCTED AT SOURC E CANNOT BE TREATED AS UNDISCLOSED INCOME. 5. THE AO HAS HELD THAT THE ASSESSEE HAD NOT FILED THE RETURN OF INCOME FOR A.Y. 2000-01 UPTO THE DATE OF SEARCH, TH EREFORE, IT WAS HELD THAT NO RETURN WAS FILED UPTILL THAT DATE; HEN CE AMOUNT DISCLOSED THEREAFTER AS PER THE RETURN OF RS.2,68,8 20/- WAS HELD AS UNDISCLOSED INCOME FOR A.Y. 2000-01. 5.1 WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY. LEARNED CIT(A) HAS UPHELD THE VIEW OF TH E AO, HOWEVER, HELD THAT IF ANY ADVANCE TAX OR TDS WAS PA ID THEN THE INCOME UPTO THAT EXTENT SHOULD BE TREATED AS DISCLO SED INCOME, AND IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 5 - THEREFORE, OUT OF THE TOTAL UNDISCLOSED INCOME AS A SSESSED BY THE AO THAT AMOUNT STILL IS TO BE REDUCED BY THE AMOUNT COVERED BY ADVANCE TAX AND TDS. 6. AS FAR AS THE CONFIRMATION OF THE UNDISCLOSED IN COME FOR A.Y. 2000-01 OF THE BLOCK PERIOD BEING NO RETURN FI LED; IS HEREBY CONFIRMED. HOWEVER, WE ARE NOT IN AGREEMENT WITH TH E FINDING OF LEARNED CIT(A) THAT OUT OF THE SAID UNDISCLOSED INC OME THE PART OF THE INCOME IS TO BE TREATED AS COVERED BY THE AMOUN T OF ADVANCE TAX AND TDS IF PAID. THIS SECOND LIMB OF THE FINDIN G OF LEARNED CIT(A) IS NOT APPROVED BY US BECAUSE FOR THIS LEGAL QUESTION WE HEREBY PLACE RELIANCE UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. M/S. A. R. ENTERPRISES IN C IVIL APPEAL NO.271 OF 2013, ORDER DATED 14.1.2013, WHEREIN IT H AS BEEN HELD THAT ADVANCE TAX AND TDS PAID/DEDUCTED IS AN ESTIMA TE WHICH DOES NOT GIVE CALCULATION OF EXACT INCOME AS DECLARED IN THE RETURN. AS PER SECTION 158BB(1) IF CURRENT YEARS RETURN HAS N OT FILED BEFORE THE DATE OF SEARCH AND DUE DATE OF RETURN EXPIRED T HEN CURRENT YEARS INCOME IS ALSO PART OF UNDISCLOSED INCOME. R ESULTANTLY, THIS GROUND OF THE REVENUE IS ALLOWED. 7. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWE D. B. IT(SS)A NO.105/AHD/2004 (ASSESSEES APPEAL) 8. GROUND NO.1 IS REPRODUCED BELOW: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DISMISSING THE ADDITIONAL GROUND OF APPEAL CONTENDING THAT THE INC OME FORM FINANCING BUSINESS REQUIRES TO BE CONSIDERED IN THE HANDS OF THE APPELLANT FIRM INSTEAD OF IN CASE OF SHRI JIVRAJBHA I DESAI AS IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 6 - CONSIDERED BY THE AO. IN VIEW OF THE FACTS AND SUBM ISSIONS FILED, THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE INCOME F ORM FINANCING BUSINESS BE CONSIDERED IN THE HANDS OF THE APPELLAN T FIRM AND NOT SHRI JIVRAJBHAI DESAI. 9. THE REVENUES AUTHORITIES HAVE HELD THAT THE ENT RIES NOTED IN THE IMPUGNED DIARY WHICH WAS RECOVERED AT THE TI ME OF SEARCH WERE WRITTEN BY THE ACCOUNTANT, SRI ARVIND SHAH ON THE INSTRUCTION OF SRI JIVRAJ V. DESAI. LEARNED CIT(A) HAS ALSO UPH ELD THE SAID FACTUAL FINDING OF THE REVENUE DEPARTMENT AND HELD THAT THE FINANCE BUSINESS AS WELL AS THE ENTRIES RECORDED IN THE SAID DIARY WERE RELATED TO THE SHARAFI BUSINESS OF SRI JIVRAJ DESAI. AS FAR AS THE TRIBUNAL IS CONCERNED, WHILE DECIDING THE APPEA L OF SRI J.V. DESAI, ITAT C BENCH IN IT(SS)A NO.99 & 106/AHD/20 04, VIDE AN ORDER DATED 13.12.2013 HAS UPHELD THE FINDINGS O F THE REVENUE DEPARTMENT IN RESPECT OF THE FINANCE BUSINESS OF J. V. DESAI AND IN THIS REGARD RELEVANT PARAGRAPH 8.10 OF THAT ORDER O F THE TRIBUNAL IS REPRODUCED BELOW: 8.10 ACCORDING TO OUR HUMBLE UNDERSTANDING OF LAW THE POWER TO INTERROGATE ON OATH IS CONFERRED U/S. 132(4) OF IT ACT. THIS POWER IS NOT FOR THE PURPOSE OF GENERAL INVESTIGATION, BUT T HIS POWER IS FOR THE PURPOSE OF SEEKING AN EXPLANATION AND TO GATHERING INFORMATION IN RESPECT OF THE DOCUMENTS OR THE ARTICLES OR THE ASS ETS FOUND DURING THE SEARCH OPERATION. IN THE PRESENT CASE, WE HAVE NOTE D THAT THE STATEMENT U/S.132(4) OF IT ACT OF THE ASSESSEE WAS RECORDED A FTER SHOWING HIM THE SAID DIARY. A STATEMENT U/S. 132(4) BEING A STA TEMENT ON OATH THUS CAN BE USED AS AN EVIDENCE AGAINST THE PERSON WHO H AD MADE THE STATEMENT. THE ONLY EXCEPTION IS THAT IF THE ASSESS EE WANTS TO CHALLENGE THAT STATEMENT ON OATH THEN HE HAS TO PLACE ON RECO RD A STRONG EVIDENCE IN SUPPORT OF THE REBUTTAL. LAW HAS PERMIT TED TO CHALLENGE AN ADMISSION IF MADE INADVERTENTLY AND THEN IT IS OPEN FOR THE DEPONENT TO SHOW THAT THE SAID ADMISSION WAS NOT FACTUALLY A CO RRECT DEPOSITION. BUT THE SAID DEPONENT IS UNDER STRICT OBLIGATION TO ADDUCE EVIDENCE TO PROOF HIS INADVERTENT ADMISSION. WE ARE OF THE VIEW THAT IT IS INCUMBENT ON THE DEPONENT TO SUBSTANTIATE HIS REBUT TAL WITH STRONG COGENT EVIDENCES. IN THE ABSENCE OF SUCH EVIDENCES THE REBUTTAL IS NOTHING BUT MERELY A VERBOSITY. IN THE PRESENT CASE , WE HAVE NOTED THAT LEARNED CIT(A) HAS OVERLOOKED THE STATEMENT RECORDE D U/S. 132(4) OF IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 7 - IT ACT AND GIVEN UNDUE WEIGHTAGE TO THE STATEMENT R ECORDED U/S. 131 OF IT ACT WHICH WERE OTHERWISE NOT SUPPORTED BY EVI DENCE. AT THIS JUNCTURE WE MAY LIKE TO FURTHER CLARIFY THAT THE EV IDENCES ARE THOSE EVIDENCES WHICH ARE FOUND AT THE TIME OF SEARCH IN SEARCH RELATED MATTERS. THE ENTIRE PROCEEDING REVOLVED AROUND THE EVIDENCES OR DOCUMENTS FOUND IN THE POSSESSION, AND UNEARTHED AT THE TIME OF SEARCH; SO AS TO DEMONSTRATE THAT THE DIARY A-1 WAS BELONGING TO THE ASSESSEE AND NOT TO ANY THIRD PERSON. TO BUTTRESS T HERE WAS A STATEMENT OF THE ACCOUNTANT. ADDITIONALLY; THE NATU RE OF THE TRANSACTIONS RECORDED IN THE SAID DIARY WERE SO EXP LICIT THAT THE REVENUE DEPARTMENT HAD NO DOUBT ABOUT THE PRESENCE OF THE FACTS THAT THE ASSESSEE WAS ACTUALLY ENGAGED IN THE SHARAFI BU SINESS. 9.1 ONCE A VIEW HAS ALREADY BEEN TAKEN BY THE RESPE CTED CO- ORDINATE BENCH, THEREFORE, WE FIND NO FORCE IN THIS GROUND OF THE ASSESSEE; HENCE DISMISSED. 10. GROUND NO.2 IS REPRODUCED BELOW: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.11,37,051/- MADE BY THE AO ON ACCOUN T OF ALLEGED SUPPRESSION OF PROFIT ON THE BASIS OF LOOSE PAPERS. IN VIEW OF THE FACTS AND SUBMISSION FILED AS WELL AS LEGAL POSITION, THE IMPUGNED ADDITION OF RS.11,37,051/- REQUIRES TO BE DELETED. 11. A DOCUMENT WAS SEIZED FROM VISHRUT SOCIETY, WHE REIN PROFIT WAS WORKED OUT AT RS.12,99,998/-, WHEREAS THE PROFI T SHOWN IN THE BOOKS OF ACCOUNT AS ON 31.3.2000 WAS ONLY RS.1,62,9 47/-. THE ASSESSEE WAS CONFRONTED WITH THOSE EVIDENCES, HOWEV ER, IN THE ABSENCE OF ANY RECONCILIATION. IT WAS TAXED BY THE AO AS UNDER: IN VIEW OF THE ABOVE, THE DIFFERENCE BETWEEN THE NE T PROFIT REFLECTED IN ANNEXURE A-66 OF RS.12,99,998 AND THE NET PROFIT AS ON 31.3.2000 REFLECTED IN ACCOUNTS AT THE TIME OF SEARCH IS TAKE N TO BE UNDISCLOSED INCOME OF THE ASSESSEE FIRM EARNED DURING THE BLOCK PERIOD. NET PROFIT AS PER A-66 :RS. 12,99,998/- LESS: NET PROFIT AS PER A-174 :RS. 1,62,947/- RS.11,37,051 (ADDITION: RS.11,37,051) IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 8 - 12. EVEN LEARNED CIT(A) WAS NOT CONVINCED WITH THE ARGUMENT OF THE ASSESSEE AND NOTED THAT THE PROFIT AS SHOWN IN THE SEIZED DOCUMENT AT RS.12,99,998/- APPEARED TO BE CORRECT. CONSIDERING THE TURNOVER OF THE CONSTRUCTION BUSINESS AT RS.1.3 5 CRORES, THE FINDING OF LEARNED CIT(A) ARE REPRODUCED BELOW: I HAVE CONSIDERED THE ISSUE CAREFULLY. FROM THE PER USAL OF THE SEIZED DOCUMENT AND THE FINAL ACCOUNTS PREPARED, I FIND TH AT THE MAIN DIFFERENCE IS ON ACCOUNT OF CLOSING STOCK AND PURCH ASES. IN THE SEIZED ACCOUNT PURCHASES ARE OF 78.22 LAKHS, WHILE IN THE FINAL ACCOUNTS, IT IS 82.93 LAKHS. VALUE OF CLOSING STOCK IN THE SEIZED D OCUMENT IS RS.20.33 LAKHS, WHILE IN THE FINAL ACCOUNTS IT IS ONLY RS.16 .86 LAKHS. THE LEARNED AUTHORIZED REPRESENTATIVE WAS THEREFORE WAS ASKED T O EXPLAIN ON HEARING DT.12/1/04, AS TO HOW EXTRA PURCHASES WERE MADE, WHETHER BY CHEQUE OR CASH AND NOW THE ALLEGED OTHER EXTRA EXPE NDITURE WAS MET. HOWEVER, VIDE REPLY DATED 14/1/04, ONLY COMPARATIVE FIGURES AS PER THE SEIZED DOCUMENTS AND THE FINAL ACCOUNTS WERE FU RNISHED IN A TABULAR FORM. NO DETAILS ABOUT PURCHASES, CLOSING S TOCK OR EXPENSES WERE GIVEN SO THAT IT COULD BE VERIFIED AS TO HOW T HE FIGURES IN FINAL ACCOUNTS WERE MADE, ESPECIALLY WHEN THERE WAS NO CH ANGE IN THE RECEIPT SIDE. FROM NON FURNISHING OF ANY EVIDENCE R EGARDING PURCHASES, STOCK AND EXPENSES, IT IS APPARENT THAT FINAL ACCOUNTS WERE MADE AT A LATER DATE AFTER MAKING ADJUSTMENTS IN TH E FIGURES. IT ALSO SHOWS THAT FIGURES AS PER THE SEIZED DOCUMENTS REPR ESENT THE CORRECT STATE OF AFFAIRS OF BUSINESS OF THE APPELLANT. IT I S SEEN THAT PROFIT SHOWN IN THE SEIZED DOCUMENT AT RS.12,99,998/- APPEARS TO BE CORRECT, CONSIDERING THE TURNOVER OF CONSTRUCTION BUSINESS A T RS.1.35 CRORES. IN ABSENCE OF ANY PLAUSIBLE EXPLANATION, THERE IS NO R EASON TO DISREGARD THE FIGURES OF THE SEIZED DOCUMENTS. HENCE THE ADDI TION MADE BY THE ASSESSING OFFICER IS CONFIRMED. 13. THE REVENUE DEPARTMENT HAD FOUND THE DETAILED W ORKING FROM THE PREMISES OF VISHRUT SOCIETY. CERTAIN PROVI SIONAL BALANCE SHEET AND THE WORKING OF THE PROFIT WERE SEIZED. A WORKING OF THE PROFIT HAS ALSO BEEN FOUND. WE HAVE NOTED THAT LEAR NED CIT(A) HAS COMPARED FIGURES OF PURCHASES ETC., AS NOTED IN THE SEIZED MATERIAL WITH THE FIGURES OF THE FINAL ACCOUNT OF THE ASSESS EE AND THEREUPON HELD THAT IN THE ABSENCE OF ANY SATISFACTORY RECONC ILIATION THE FIGURES SHOWN AS PER THE SEIZED DOCUMENT HAVE REPRE SENTED THE IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 9 - CORRECT STATE OF AFFAIRS AND THE PROFIT OF THE ASSE SSEE. WE HEREBY CONFIRM THOSE FACTUAL FINDING OF LEARNED CIT(A) AND THEREAFTER HEREBY DISMISS THIS GROUND OF THE ASSESSEE. 14. GROUND NO.3 IS REPRODUCED BELOW: THE LEARNED CIT(A) HA ERRED IN ISSUING DIRECTIONS T O THE AO TO THE EFFECT THAT INCOME RELATING TO THE ADVANCE TAX AND TDS IS TO BE CONSIDERED AS REGULAR INCOME AND THE BALANCE AMOUNT IS REQUIRED TO BE CONSIDERED AS UNDISCLOSED INCOME RELEVANT TO A.Y . 2000-01. IN VIEW OF THE FACTS AND LEGAL POSITION, THE ENTIRE AMOUNT FOR A.Y. 2000-01 REQUIRES TO BE CONSIDERED AS REGULAR AND NO ADDITIO N IS REQUIRED TO BE MADE IN THE BLOCK ASSESSMENT. 15. IN THE LIGHT OF THE VIEW ALREADY TAKEN HEREINAB OVE WHILE DECIDING GROUND NO.2 OF THE REVENUE DEPARTMENT AS W ELL AS IN THE LIGHT OF THE STATEMENT OF THE LEARNED AR, SRI G.C. PIPARA, THAT THIS GROUND OF THE ASSESSEE IS NOT TO BE CONTESTED AND N OTED AS NOT PRESSED; HENCE HEREBY DISMISSED. 16. GROUND NO.4 IS REPRODUCED BELOW: THE LEARNED AR HAS ERRED IN LEVYING SURCHARGE ON TH E TAX ON UNDISCLOSED INCOME. IN VIEW OF THE FACTS AND LEGAL POSITION, NO SURCHARGE IS REQUIRED TO BE LEVIED ON TAX ON UNDISC LOSED INCOME AND THEREFORE, THE SURCHARGE LEVIED REQUIRES TO BE CANC ELLED. 17. RESPECTFULLY FOLLOWING THE DECISION OF SURESH N . GUPTA, 297 ITR 322 (SC) WE HEREBY AFFIRM THE LEVY OF SURCHARGE AS PRESCRIBED U/S.113 OF IT ACT. THIS GROUND OF THE ASSESSEE IS, THEREFORE, DISMISSED. 18. IN THE COMBINED RESULT, IN THESE TWO APPEALS, T HE REVENUES APPEAL IS PARTLY ALLOWED HOWEVER THE ASSESSEES APP EAL IS DISMISSD. IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 10 - C. ITA NO.948/AHD/2007 (REVENUES APPEAL) 19. REVENUE IS IN APPEAL AGAINST THE ORDER OF LEARN ED CIT(A)-III, AHMEDABAD, DATED 11.12.2006. THE ONLY GROUND IS REP RODUCED BELOW. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION MADE OF RS.6,42,303/- ON PROTECTIVE BA SIS FOR UNEXPLAINED PAYMENTS TO VARIOUS PERSONS. 20. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDIN G ASSESSMENT ORDER PASSED U/S. 147 OF IT ACT, DATED 21.03.2006 W ERE THAT THIS CASE WAS REOPENED ON ACCOUNT OF THE FACT THAT CERTA IN INFORMATION CAME TO THE NOTICE OF THE AO IN CONSEQUENCE UPON TH E SEARCH IN THE CASE OF SRI J.V. DESAI. AN ADDITION OF RS.18,99 ,303/- WAS MADE IN THE HANDS OF SRI JIVRAJ V. DESAI IN RELATION TO THE UNEXPLAINED EXPENSES INCURRED ON THE PROPERTY OF NIRAT PARK BUN GALOW. HOWEVER, WHILE DECIDING THE APPEAL IN THE CASE OF J .V. DESAI, LEARNED CIT(A) HAS HELD THAT THE EXPENDITURE TO THE EXTENT OF RS.6,42,303/- WAS REQUIRED TO BE CONSIDERED IN REGU LAR ASSESSMENT IN THE CASE OF M/S. MASTER DEVELOPERS. BECAUSE OF T HAT REASON CERTAIN INQUIRIES WERE MADE IN THE HANDS OF THIS AS SESSEE. THE EXPLANATION OF THE ASSESSEE WAS THAT THE SAID AMOUN T WAS PAID TO VARIOUS PERSONS FROM THE BANK ACCOUNT. THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF THE BANK ACCOUNTS AND TO TALL Y THE CLOSING BALANCE OF THE BANK ACCOUNTS WITH THE BALANCE SHEET OF THE ASSESSEE FIRM. THE AO HAS NOTED THAT THE REVENUE DEPARTMENT HAD PREFERRED AN APPEAL AGAINST THAT ORDER OF LEARNED C IT(A) IN THE CASE OF MR. DESAI, THEREFORE TO PROTECT THE INTEREST OF THE REVENUE HE HAD MADE THE ADDITION OF RS.6,42,303/- IN THE HANDS OF THE ASSESSEE. IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 11 - 21. WHEN THE MATTER WAS CARRIED BEFORE LEARNED CIT( A), IT WAS HELD AS UNDER:- THE CONTENTIONS ALONG WITH THE DETAILS ON RECORD WE RE CAREFULLY CONSIDERED. IT IS SEEN THAT THE CIT(A) HAD DELETED THE ENTIRE ADDITION OF RS.18.99 LAKHS IN CASE OF SHRI JIVRAJ V. DESAI, OBS ERVING ALSO THAT PAYMENTS OF RS.6.42 LAKHS HAD BEEN MADE BY CHEQUES BY M/S. MASTER DEVELOPERS AND REQUIRES TO BE CONSIDERED IN THE RE LEVANT REGULAR ASSESSMENT. THE APPELLANT HAS NOT DENIED THE PAYME NT OF THIS AMOUNT OF RS.6.42 LAKHS FROM ITS OWN FUNDS. THESE PAYMENTS HAVE BEEN MADE BY CHEQUES OF ITS BANK ACCOUNTS DISCLOSED IN THE BA LANCE-SHEETS FILED WITH THE RETURN OF INCOME FOR A.Y. 2000-01. THE COP Y OF THE BANK STATEMENTS OF THE BANK ACCOUNT OF THE CONCERNED BAN K ALSO REFLECT THESE PAYMENTS, THE DATE/CHEQUE NUMBER AND THE PART Y, A SUMMARY OF WHICH HAS ALSO BEEN GIVEN. THE AO HAS REJECTED THE EXPLANATION/DETAILS FURNISHED, ONLY FOR THE REASON THAT THE BANK BALANCE AS PER THE BANK STATEMENT DID NOT TALLY WIT H THE BANK BALANCE SHOWN IN THE BALANCE-SHEET. THE AO HOWEVER DID NOT SEEK THE RE- CONCILIATION OF THE BANK BALANCE. THE RE-CONCILIATI ON HAS BEEN OFFERED AND THE PAYMENTS EXPLAINED IN THE SUBMISSIONS FILED BEFORE ME. THE QUANTUM/FACTUM OF THE PAYMENT AND THE SOURCE THEREO F ITSELF HAS NOT BEEN DOUBTED BY THE AO. IN THESE FACTS AND CIRCUMST ANCES, THE PROTECTIVE ADDITION MADE BY HIM WAS NOT JUSTIFIED. IT IS, THEREFORE, DELETED. 22. WE ARE OF THE VIEW THAT ONCE A CATEGORICAL FIND ING HAD BEEN GIVEN THAT THE AMOUNT IN QUESTION WAS DULY REFLECTE D IN THE BANK STATEMENT AND THE SOURCE OF THE EXPENDITURE HAD NOT BEEN DOUBTED BY THE AO, THEREFORE, LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. WE FIND NO FORCE IN THIS GROUND OF THE RE VENUE; HENCE DISMISSED. D. ITA NO.2557/AHD/2004 (REVENUES APPEAL) 23. THIS APPEAL HAS ALSO BEEN FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(A)-I, AHMEDABAD, DATED 10 TH OF JUNE, 2004. GROUND NO.1 IS REPRODUCED BELOW: THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTI NG TO DELETE THE ADDITION OF RS.4,84,511/- MADE ON ACCOUNT OF EXCESS STOCK. IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 12 - 24. FACTS IN BRIEF AS EMERGED FROM THE ASSESSMENT O RDER PASSED U/S.143(3), DATED 31.03.2004 WERE THAT THE ASSESSEE FIRM IS A BUILDER AND DEVELOPER. THERE WAS A DISCREPANCY IN R ESPECT OF STATEMENT OF THE STOCK WHICH WAS SEIZED FROM VISHRU T SOCIETY MARKED AS ANNEXURE A-3 AS UNDER: (RS.) CEMENT 1535750 STEEL (ROUND & CTD BARS) 1484930 SAND 68000 BRICKS 414000 KAPCHI/GRIT 252460 24.1 ON THE BASIS OF THAT INFORMATION, THE AO HAD M ADE AN ADDITION FOR A.Y. 2001-02 AS UNDER: THE ASSESSEE WAS ALSO ASKED TO EXPLAIN THE STOCK PO SITION VIDE ORDER SHEET ENTRY DATED 24.3.2004. THE ASSESSEE SUBMITTED ITS REPLY AND STARTED THAT ITS CONSTRUCTION SITE IS AT SURAT, MAI N OFFICE IS AT MEHSANA AND BRANCH OFFICE IS AT AHMEDABAD. CERTAIN MATERIAL WAS RECEIVED AT SURAT SITE AND THE SAME HAVE BEEN PHYSICALLY GENERA TED TO GIVE STOCK STATEMENT TO THE BANK. THE GOODS HAVE BEEN RECEIVED IN SURAT OFFICE AND THE BILLS HAVE BEEN RECEIVED IN OCTOBER, 2000 A ND STOCK STATEMENT GIVEN TO THE BANK IS ACTUAL STOCK LYING AT THE SITE . THE ASSESSEE ALSO SUBMITTED RECONCILIATION OF THE STATEMENT. THE SUBM ISSION OF THE ASSESSEE IS PERUSED BUT RESPECTFULLY REJECTED AS IT CAN BE SEEN THAT AS PER THE SEIZED DOCUMENTS THE CLOSING STOCK AS ON 31 .3.2000 WAS OF RS.20,33,811/-. THE ASSESSEE THEREAFTER HAS MADE PU RCHASES OF RS.26,10,318/- UPTO 30.9.2000. HENCE, THE ACTUAL CO ST AT STOCK ON THE DATE OF SEARCH IS OF RS.46,44,129/- WHEREAS THE STO CK AS PER THE SEIZED DOCUMENT IS RS.51,28,640. HENCE, THERE IS A DISCREP ANCY OF RS.4,84,511/- WHICH IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. (ADDITION RS.4,84,511/-) 25. IT WAS EXPLAINED TO LEARNED CIT(A) THAT THE OPE NING STOCK AS ON 1.4.2000 WAS RS.16,86,366/- AND THE MATERIAL PUR CHASED UPTO 30 TH SEPTEMBER, 2000 WAS RS.35,96,331/-, THEREFORE, THE CLOSING STOCK AS ON 30 TH SEPTEMBER, 2000 AS PER ASSESSEE WAS RS.52,82,697/-. ACCORDING TO EXPLANATION OF THE ASS ESSEE, THE STOCK IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 13 - AVAILABLE WAS SUFFICIENT WITH THE ASSESSEE, THEREFO RE, THE SAID STATEMENT WHICH WAS PREPARED TO SUBMIT IN THE BANK OF RS.51,28,640/- AS ON 30 TH SEPTEMBER, 2000 WAS NOT AN UNEXPLAINED STOCK. LEARNED CIT(A) HAS GRANTED RELIEF AFTER CONS IDERING THE EVIDENCES. 26. HAVING HEARD THE SUBMISSION OF BOTH THE SIDES A ND IN THE LIGHT OF A DECISION ALREADY TAKEN SUPRA IN THE CASE OF THE ASSESSEE WHILE DECIDING THE BLOCK ASSESSMENT WE HAVE ALREADY CONSIDERED THIS QUESTION AND GRANTED RELIEF. MOREOVER, WE HAVE NOTED THAT THE LEARNED CIT(A) HAS CONSIDERED THE DETAILS OF THE PU RCHASES MADE BY THE ASSESSEE AND THEREUPON ARRIVED AT A CONCLUSI VE FINDING THAT THERE WAS NO DISCREPANCY IN THE POSITION OF THE STO CK, THEREFORE, THOSE FINDINGS ARE HEREBY APPROVED AND THIS GROUND OF THE REVENUE IS DISMISSED. 27. GROUND NO.2 IS REPRODUCED BELOW: THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECT ING TO DELETE ADDITION OF RS.12,23,093/- MADE ON ACCOUNT OF DISAL LOWANCE OF INTEREST U/S. 36(1)(III). 28. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD CL AIMED BANK INTEREST EXPENDITURE OF RS.52,20,134/-, WHEREAS THE ASSESSEE HAD RECEIVED INTEREST INCOME OF RS.39,97,038/-. THE FIN DING OF THE AO WAS THAT THE BORROWINGS WERE MADE AT THE HIGHER RAT E AND INTEREST WAS NOT PAID FOR THE PURPOSE OF THE BUSINESS, THERE FORE, THE DIFFERENCE WAS TAXED AS FOLLOWS: IT CAN BE SEEN THAT THE DIFFERENCE BETWEEN THE INTE REST PAID BY THE ASSESSEE AND THE INTEREST RECEIVED BY THE ASSESSEE IS SUBSTANTIAL, I.E. OF RS.52,20,134/- LESS RS.39,97,038 WHICH COMES TO RS. 12,23,096/-, IT IS IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 14 - CLEAR THAT THE FUNDS ARE BEING BORROWED AT HIGHER R ATE AND INTEREST IS BEING CHARGED AT LOWER RATE AND THE INTEREST EXPENS E IS NOT FOR THE BUSINESS PURPOSE. THUS, THE INTEREST EXPENSE INCURR ED BY THE ASSESSEE, I.E., OF RS.12,23,096/- IS BEING DISALLOWED AND ADD ED TO THE TOTAL INCOME. 28.1 WHEN THE MATTER WAS CARRIED BEFORE LEARNED CIT (A), THE CORRECT POSITION OF THE INTEREST EARNED AND INTERES T PAID WAS BROUGHT TO THE NOTICE AND THEREUPON AFTER EXAMINING THOSE F ACTS LEARNED CIT(A) HAS DELETED THE DISALLOWANCE AS FOLLOWS:- I HAVE CAREFULLY GONE THROUGH THE P&L A/C OF THE A PPELLANT FIRM AND FIND THAT INTEREST OF RS.44,94,295/- HAS BEEN SHOWN IN THE P&L A/C AND THE INTEREST OF RS.20.00 LACS FROM THE 2 SOCIETIES ON ACCOUNT OF OUTSTANDING BALANCE FOR THE CONSTRUCTION CARRIED OU T BY THE FIRM, HAS BEEN SHOWN UNDER THE CONSTRUCTION INCOME. I HAVE GONE THROUGH THE RATES OF INTEREST ALSO AND FIND THAT INTEREST H AS BEEN PAID @ 18% TO OUTSIDE PARTIES WHEREAS ON LOAN BORROWED FROM FAMIL Y MEMBERS, INTEREST HAS BEEN PAID @12%. SIMILARLY, INTEREST RE CEIVED BY THE FIRM IS ALSO @ 12% FROM FAMILY MEMBERS AND ASSOCIATE CON CERNS AND FROM OUTSIDE PARTIES THE INTEREST RECEIVED IS @ 18%. SO FAR AS INTEREST PERTAINING TO PARTNERS IS CONCERNED, INTEREST INCOM E IS HIGHER THAN THE INTEREST PAID, WHEREAS RATE OF INTEREST IN BOTH THE CASES IS 12%. INTEREST PAID TO BANK IS @ 13% AS STATED BY THE AO IN PARA 3.4 OF THE ASSESSMENT ORDER AND THE INTEREST WHICH HAS BEEN RE CEIVED FROM THE HOUSING SOCIETIES ON THE OVERDUE PAYMENT ON ACCOUNT OF CONSTRUCTION ACTIVITIES IS @ 12%. THERE CANNOT BE MATCHING OF TH E AMOUNT OF INTEREST RECEIVED AND PAID IN A BUSINESS TRANSACTIO N AS OVER AND ABOVE THIS INTEREST, APPELLANT IS ALSO RECEIVING INCOME O UT OF CONSTRUCTION RECEIPTS FROM THESE VERY PARTIES AND THEREFORE, THE ACTION OF THE AO IN DISALLOWING THE DIFFERENCE BETWEEN THE INTEREST PAI D AND RECEIVED, IS IMPROPER AND WITHOUT ANY BASIS. NO EVIDENCE HAS BEE N BROUGHT ON RECORD BY THE AO ABOUT THE DIVERSION OF THE FUNDS F OR NON-BUSINESS PURPOSE. THEREFORE, THE DISALLOWANCE MADE BY THE AO OF RS.12,23,096/- IS DELETED. 29. WE HAVE HEARD BOTH THE SIDES. IT IS WORTH TO ME NTION THAT THE AO HAS FAULTED IN EXAMINING THE FACTS IN RESPECT OF THE INTEREST EARNED AND INTEREST PAID AND THEREUPON ARRIVED AT A WRONG CONCLUSION. FURTHER WE HAVE ALSO NOTED THAT ALL THO SE FACTS WERE RIGHTLY APPRECIATED BY LEARNED CIT(A) AND THEREUPON RECTIFIED THAT MISTAKE BY MENTIONING THAT THE CORRECT INTEREST PAI D BY THE ASSESSEE IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 15 - WAS NOT RS.52,20,134/- BUT IT WAS RS.94,81,657/- SI MILARLY AO HAS NOTED THE AMOUNT OF INTEREST RECEIVED AT RS.39,97,0 38/-, WHEREAS THE CORRECT FIGURE OF THE INTEREST RECEIVED WAS RS. 64,94,295/-. ANOTHER FACTUAL FINDING WAS GIVEN BY LEARNED CIT(A) THAT THE RATE OF INTEREST PAID WAS 18% TO OUTSIDE PARTIES, WHEREA S ON THE BORROWINGS FROM THE FAMILY MEMBERS THE INTEREST PAI D WAS @ 12%, THEREFORE, IT WAS INCORRECT ON THE PART OF THE AO T O HOLD THAT THE EXCESSIVE INTEREST WAS PAID TO THE ASSOCIATED PERSO NS AND THAT THE INTEREST WAS NOT INCURRED FOR THE PURPOSE OF BUSINE SS. WE HEREBY HOLD THAT THOSE FINDINGS OF THE AO WERE INCORRECT A ND LEARNED CIT(A) HAS RIGHTLY APPRECIATED THE CORRECT FACTS OF THE CASE, THEREFORE, THE DELETION IS HEREBY CONFIRMED. THIS G ROUND IS DISMISSED. IN THE RESULT, REVENUES APPEAL IS DISMI SSED. 30. TO SUM UP THE RESULT, HEREBY HELD AS UNDER: (I) IT(SS)A NO. 97/AHD/2004 (REVENUES APPEAL) IS PARTLY ALLOWED. (II) IT(SS)A NO.105/AHD/2004 (ASSESSEES APPEAL) IS DISMISSED. (III) ITA NO.948/AHD/2007 (REVENUES APPEAL) IS DISMISSED. (IV) ITA NO.2557/AHD/2004 (REVENUES APPEAL) IS DISMISSED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 17/12/2013 PRABHAT KR. KESARWANI, SR. P.S. TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT IT(SS)A NO.97, 105/AHD/04 AND ITA NO.948/AHD/07, IT A NO.2557/AHD/04 ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD VS. MASTER DEV ELOPERS, - 16 - 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD