HARISH KUMAR RAIMALANI, Ajmer V. DCIT, Ajmer

ITA 327/JPR/2011

• Counselvise Citation: 32723114 RSA 2011
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHRI
• Assessee Lawyers: MAHENDRA GARGIEY A
• Keywords: Business income; Income from undisclosed sources; Valuation report; Retraction
• Section: 69; 145; 69C; 143(3); 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.327/ JP/2011 ASSESSMENT YEAR: 2007-08 PAN: AFMPR 6417 H SHRI HARISH KUMAR RAIMALANI VS. THE DCIT PROP. M/S. DETA RAM GOLUMAL CIRCLE- 1 NAYA BAZAR, AJMER AJMER (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI MAHENDRA GARGIEYA DEPARTMENT BY : SHRI VINOD JOHRI DATE OF HEARING: 22-09-2011 DATE OF PRONOUNCEMENT: 30-09-2011 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORD ER OF THE LD. CIT(A), AJMER DATED 28-02-2011 FOR THE ASSESSMENT YEAR 200 7-08. 2.1 THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1.00 LAC ON ACCOUNT OF EXCESS CASH. 2.2 THE ASSESSEE DERIVES INCOME FROM TRADING OF OR NAMENTS AND PAWNING. THE RETURN OF INCOME (ROI) WAS FILED ON 31.10.2007, SHOWING TOTAL INCOME AT RS. 15,19,443/-, WHEREAS ASSESSMENT ORDER WAS PASSED U/S 143(3) ON 30.12.2008 AT TOTAL INCOME OF RS. 76,65,136/- BY MA KING VARIOUS ADDITIONS AND DISALLOWANCES WHICH HAVE BEEN SUSTAINED BY THE LD. CIT(A). 2 2.3 THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY U/S 1 33A WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON DATED 21.03.2007 . DURING THE COURSE OF SURVEY CASH OF `5,09,000/- WAS FOUND, OUT OF WHICH ASSESSEE SURRENDERED `3,09,000/-. THE AO OBSERVED THAT IN ANSWER TO Q.NO .16 (BUT CORRECTLY Q.NO.17) OF THE STATEMENT RECORDED AT THE TIME OF S URVEY, THE ASSESSEE EXPLAINED ABOUT THE CASH WHEREIN HE ADMITTED NO BOO KS OF ACCOUNT WAS MAINTAINED BY HIM. ONLY ON THE BASIS OF LAST YEARS BALANCE SHEET, THE ASSESSEE CLAIMED A DEDUCTION OF RS. 23,396/- AND TH EREAFTER, STRAIGHT AWAY OFFERED RS. `3,09,000/- FOR TAXATION. IN ANSWER TO Q.NO.8 THE ASSESSEE ADMITTED OF HAVING CASH BALANCE OF `90,000/- ON 21. 03.2007 BUT EXPRESSED HIS INABILITY TO GET IT VERIFIED. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASON FOR THE SAME BUT NO EXPLANATION WAS FILED. THE AO O BSERVED THAT IT IS NOT CLEAR FROM THE STATEMENT AS ON WHAT BASIS ASSESSEE WORKED OUT EXCESS CASH OF RS. `3,09,000/- FOR OFFERING TO TAXATION. FEELING D ISSATISFIED WITH THE ANSWER TO Q.NO.17, HE HELD THAT THE CASH IN HAND AS PER BALANCE SHEET AS ON 31.03.2006 WAS RS. 23,396/- AND ON THIS BASIS HE WA S ELIGIBLE TO GET ALLOWANCE OF `23,396/- AND ALSO GET DEDUCTION OF RS . 3,09,000/- WHICH HE OFFERED FOR TAXATION. THUS, THE AO MADE THE ADDITIO N OF RS. 1,76,604/- (RS. 5,09,000/- LESS RS. 23,396/- LESS RS. `3,09,000/-) AS INCOME FROM UNDISCLOSED SOURCES . 3 2.4 IN THE FIRST APPEAL, THE LD. CIT(A) HELD AS UND ER: ARGUMENT OF THE ASSESSEE HAS BEEN CONSIDERED. AS ADMITTED BY ASSESSEE HIMSELF, NO BOOKS OF ACCOUNTS ARE MAINTAINED BY HIM. NO CASH BOOK WAS FOUND MAINTAINE D BY HIM ON DAY TO DAY BASIS. IN SUCH A SITUATION AO ALLOWED CREDIT FOR OPENING CASH BALANCE OF `23,396/- ON THE BASIS OF C ASH IN HAND AS PER BALANCE SHEET ON 31.03.2006. FURTHER CREDIT WAS ALLOWED FOR RS.`3,09,000/-, WHICH WAS THE AMOUNT OFFERED FO R TAXATION DURING THE COURSE OF SURVEY. ADDITION WAS MADE FOR THE REMAINING AMOUNT OF RS.`1,76,604/-. THIS ACTION OF AO IS NOT JUSTIFIED. EVEN IN THE ABSENCE OF BOOKS OF ACCOUNTS , THE ENTIRE SUM CAN NOT BE TREATED AS UNEXPLAINED. IT WILL BE F AIR AND REASONABLE TO GIVE CREDIT FOR PURCHASES AND SALES A RE MADE DURING THE PERIOD OF 11 MONTHS (BECAUSE THE SURVEY WAS CONDUCTED ON 21.03.2007). THE ADDITION ON ACCOUNT O F CASH IS THEREFORE RESTRICTED TO RS.1,00,000 /- AS AGAINST RS. 1,76,604/- MADE BY AO. GROUND NO.1 IS THUS PARTLY ALLOWED. 2.5 BEFORE US, THE LD. AR HAS MADE THE FOLLOWING SU BMISSIONS:- 1. IT IS SUBMITTED THAT THERE IS NO DISPUTE WITH REGAR D TO RS. 3,09,000/- WHICH WAS SURRENDERED DURING THE COU RSE OF SURVEY AND INCLUDED IN THE CASH BOOK. THE LD. CIT(A ) ALSO AGREED IN PRINCIPLE BUT ESTIMATED THE ADDITION AT R S. 1 LAC WITHOUT ANY BASIS. HOWEVER, THE SAME WAS NOT APPREC IATED WHILE MAKING ESTIMATION. 2. FOLLOWING SUBMISSIONS WERE MADE BEFORE THE LD. CIT(A). THE SAME ARE AS UNDER: 1. THAT ON FACTS AND IN LAW THE LEARNED DEPUTY COMMISSIONER HAS WRONGLY ADDED RS.1,76,604/- OUT OF CASH FOUND AT THE TIME OF SURVEY. YOUR HONOUR HERE I WOULD LIKE TO SUBMIT THAT RS.5,09,000/- WERE FOUND AT THE TIME OF THE SURVEY. THERE WERE NO BOOKS AT THE TIME OF SURVEY, THE LEARNED DEPUTY COMMISSIONER CONSIDERED RS.23,396/- AS CASH IN HAND AS ON THE DATE OF THE S URVEY I.E. 21.03.2007. THE LEARNED DEPUTY COMMISSIONER 4 WITHOUT CONSIDERING THE ACCOUNTS BOOKS PREPARED AFT ER SURVEY WHICH WERE DULY AUDITED MADE AN ADDITION OF RS.1,76,604/- (AFTER REDUCING THE AMOUNT OF RS.3,09 ,000/- SURRENDERED AND THE CLOSING BALANCE OF RS.23,396/- AS ON 31.03.2006). THE CASH NEVER REMAINS THE SAME EVERY DAY AND EVEN THERE IS NO BASIS TO CALCULATE THE CASH IN HAND AT RS.23,396/- AS ON 21.03.2007.THE ASSESSMENT WAS BASED ON THE BOOKS OF ACCOUNTS PREPARED AFTERWARDS AND SALES WERE ACCEPTED BY THE ASSESSING OFFICER, HENCE THE CASH SHOULD BE TAKEN AS PER BOOKS AND NOT BY ESTIMA TION BASIS. COPY OF CASH BOOK IS ATTACHED IN THE PAPER B OOK . IN VIEW OF ABOVE MENTIONED FACTS ADDITION OF RS.1,76,604/- IS UNCALLED FOR AND REQUIRES TO BE D ELETED. 3. THERE WAS NO RATIONALE BEHIND CONSIDERING THE LAST BALANCE SHEET STANDING AS ON 31.03.2006 TO CONSIDER THE AVAILABILITY OF CASH. THE SURVEY TOOK PLACE ON 21.03.2007 I.E. ALMOST WHEN A COMPLETE YEAR WAS TO END. BY OWN ADMISSION OF THE AO, TRANSACTIONS OF PURCHAS E AND SALES WERE CARRIED OUT THIS YEAR AND THE RESULT ANT PROFIT THERE FROM HAS BEEN DECLARED/ACCEPTED (AO PG 14) THEREFORE, THE AVAILABILITY OF CASH COULD NOT HAVE BEEN DENIED. THE LD. CIT(A) STATED THAT THERE BEING PURC HASE AND SALES AVAILABILITY OF CASH WAS TO BE ESTIMATED HOWEVER, HE IGNORED THE BOOKS PREPARED AFTER THE SU RVEY AND IN ANY CASE, THE BALANCE SHEET PREPARED AS ON 31.03.2007 WHICH SHOW CASH IN HAND OF RS. 3,12,046/-. 4. IN ANSWER TO Q.NO.8 , THE ASSESSEE STATED HAVING CASH OF RS.90,000/- ON 21.03.2007 HOWEVER, WAS IGNO RED. ONCE Q.NO.16-17 OF THE SAME STATEMENT HAS BEEN RELIED TO ALLEGED ABSENCE OF BOOKS AND THE FACT OF SURREND ER, THE OTHER PART OF THE SAME EVIDENCE COULD NOT HAVE BEEN IGNORED. 5. THERE ARE NO ADVERSE COMMENTS ON THE AUDITED ACCOUNTS PRODUCED NOR THE SAME WERE REJECTED U/S 14 5. U/S 34 OF THE INDIAN EVIDENCE ACT, 1872, IT WAS A ADMISSIBLE EVIDENCE AND COULD NOT BE IGNORED UNLESS 5 DEALT WITH. IN ANY CASE THE SAME WERE TO BE USED AS A VALID MATERIAL FOR MAKING A FAIR ESTIMATION. THE LD. CIT(A) HAS NOT APPLIED HIS MIND ON THIS ASPECT AND WITHOUT ADVERSELY COMMENTING, HE COMPLET ELY IGNORED THESE VITAL FACTS HENCE, HIS FINDING BY PAR TLY CONFIRMING THE ADDITION IS PERVERSE. ALSO THERE IS NO BASIS OF ESTIMATING THE ADDITION AT RS. 1,00,000/-. CONSI DERING THE AMOUNT OF AVAILABLE CASH OF RS.3,12,046/- AND T HE SURRENDER OF RS. 3,09,000/- TOTALING TO RS. 6,21,20 0/-, NO ADDITION AT ALL WAS WARRANTED. THE ADDITION PARTLY SUSTAINED WAS NOT CHALLENGED BY THE REVENUE. HENCE, PLEASE BE DELETED. NO DEFECT WAS FOUND NOR THE ACCO UNTS WERE REJECTED U/S 145. ALSO REPLY TO Q.NO.8 IGNORE D. 2.6 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED AS UNDER:- 1. THERE WAS SURVEY UNDER SECTION 133A OF INCOME TAX A CT 1961 IN THE CASE OF THE ASSESSEE ON 21.03.2007, I.E. AT THE FAG END OF THE FINANCIAL YEAR. NO BOOKS OF ACCOUNT WERE ADMITT EDLY MAINTAINED BY THE ASSESSEE EVEN THOUGH SALES WERE S TATED AT RS. 94 LAKHS WHILE IN EARLIER YEAR, THE SALES WERE STAT ED AT RS. 12 LAKHS. DEPARTMENT COULD NOT HAVE LAID ITS HAND ON T HE ASSESSEE AND HIS UNDISCLOSED INCOME ADMITTED DURING SURVEY, HAD THERE BEEN NO SURVEY. 2. THE ASSESSEE WAS MAINTAINING STOCK OF RS. 52,87,062 /- FOR WHICH NO RECORDS WERE MAINTAINED. 3. THE ASSESSEE WAS ALSO NOT MAINTAINING BOOKS OF ACCO UNT EVEN IN EARLIER ASSESSMENT YEARS AND IS THUS HABITUAL OFFEN DER OF CONCEALING INCOME AND INFRINGEMENT OF PROVISIONS OF SECTION 44AA AND 44AB OF INCOME TAX ACT 1961. 6 4. THE ASSESSEE HAD ADMITTED UNDISCLOSED INCOME AT THE TIME OF SURVEY IN RESPECT OF UNACCOUNTED CASH OF RS. 3,09,0 00/-, UNACCOUNTED STOCK AT RS. 8,00,000/- OUT OF STOCK OF RS. 52,87,062/- FOUND DURING SURVEY, UNDISCLOSED INVEST MENT OF RS. 17,00,000/- IN PROPERTY , INCOME OF RS. 4,65,919/- IN PAWNING BUSINESS AND RS. 30,000/- IN SOME REPAIRS. THERE WA S TOTAL SURRENDER OF RS. 33,04,919/- DURING SURVEY. OUT OF THIS, UNDISCLOSED INVESTMENT IN PROPERTY AND UNDISCLOSED INCOME IN PAWNING BUSINESS WAS STILL NOT SHOWN IN RETURN OF I NCOME AND NO TAX WAS PAID WHILE FILING THE RETURN OF INCOME. 5. IT SHOWS THAT THE ASSESSEE HAD NO INTENTION TO PAY TAX HONESTLY BEFORE SURVEY AS HE WAS FOUND NOT MAINTAINING BOOKS OF ACCOUNT AND HAD NO INTENTION TO PAY TAX HONESTLY EV EN AFTER SURVEY DESPITE HAVING ADMITTED UNDISCLOSED INCOME D URING SURVEY. 6. THUS THE ASSESSEE HAS NOT COME CLEAN BEFORE THE ASS ESSING OFFICER (A) DURING SURVEY (B) WHILE FILING RETURN OF INCOME (B) DURING THE COURSE OF ASSESSMENT PROCEEDINGS (C) BE FORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DURING APPELLATE PROCEEDINGS AND (D) BEFORE LEARNED INCOME TAX APPELLATE TRIBUNAL WHILE STILLS ARGUING EXPLAINED I NVESTMENT IN PROPERTY, EXPLAINED PAWNING BUSINESS, CASH ETC. WIT HOUT ANY COGENT EVIDENCE AND WITHOUT ANY MATERIAL HAVING EVI DENTIARY VALUE UNDER EVIDENCE ACT. 7. DESPITE HOLLOWNESS OF EXPLANATIONS FILED BEFORE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) AND LACK OF AN Y COGENT 7 EVIDENCES AND SUPPORTING MATERIAL, LEARNED CIT (APP EALS) ALLOWED PART RELIEF TO THE ASSESSEE. 8. SUCH ASSESSEE DOES NOT DESERVE ANY RELIEF FROM LEA RNED INCOME TAX APPELLATE TRIBUNAL. GROUND NO. 1 ( LEARNED CIT (APPEALS) UPHOLDING ADDITION OF RS. 1,00,000 ) 9. UNDISCLOSED CASH OF RS. 5,09,000/- WAS FOUND AT THE TIME OF SURVEY, FOR WHICH NO EXPLANATION WAS GIVEN DURING S URVEY. THE ASSESSEE ADMITTED UNEXPLAINED CASH OF RS. 3,09,000/ - ONLY. THE ISSUE WAS EXAMINED BY THE ASSESSING OFFICER DURING ASSESSMENT AND ALLOWED BENEFIT OF CASH IN HAND OF RS. 23,396/- BEING CASH IN HAND AS PER BALANCE SHEET AS ON 31.3.2006. THE B ALANCE CASH WAS NOT EXPLAINED. THE ASSESSING OFFICER MADE ADDIT ION OF RS. 1,76,604/-. LEARNED COMMISSIONER OF INCOME TAX (APP EALS) REDUCED THE ADDITION TO RS. 1,00,000/- CONSIDERING PURCHASES AND SALES DURING 11 MONTHS OF BUSINESS. FOR RELIEF BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS), NO MATERIAL W AS PLACED BEFORE HIM AND IT WAS ONLY BASED ON POSSIBIL ITIES AND PROBABILITIES ONLY. SINCE ONCE RELIEF HAS BEEN ALLO WED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE BASIS OF POSSIBILITIES AND PROBABILITIES, FURTHER RELIEF IS NOT ALLOWABLE TO THE ASSESSEE ON ACCOUNT OF ADDITIONAL POSSIBILIT IES AND PROBABILITIES. 2.7 WE HAVE HEARD BOTH THE PARTIES. BEFORE WE DECID E THE GROUND OF APPEAL, IT WILL BE USEFUL TO DESCRIBE THE FACTS AS NOTICED FROM THE RECORD. 8 (I) SURVEY U/S 133A WAS CONDUCTED ON 21-03-2007 AND DURING SURVEY THE FOLLOWING ITEMS WERE FOUND CASH RS. 5,09,000/- STOCK RS. 52,87,062/- PAWNING RS. 5,67,300/- AS PER SLIPS ATTACHED TO THE PAWNED I TEMS (I) THE ASSESSEE ADMITTED THAT HE IS NOT MAINTAININ G ANY BOOKS OF ACCOUNTS EXCEPT THE SALE BILL BOOK. (III) SALES BILL BOOK FOUND WAS FROM 1-4-2006 TO 05 -01- 2007 AND ASSESSEE ADMITTED THAT HE HAS NOT ISSUED A NY CASH SALES BILLS FROM 05-01-2007 WHILE SURVEY WAS B EING CONDUCTED ON 21-03-07. IT IS NOT THE CONTENTION OF THE ASSESSEE THAT HE HAS NOT MADE ANY CASH SALES FROM 0 5-01- 07 TILL THE DATE OF SURVEY. (IV) THE FIGURES OF OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK HAVE BEEN SHOWN ON ESTIMATE BASIS FOR THE ASSESSMENT YEAR 2004-05, 2005-06 & 2006-07 (V) IN QUESTION NO. 8 OF THE STATEMENT RECORDED AT THE TIME OF SURVEY, THE ASSESSEE STATED THAT CASH IN HA ND MAY BE AROUND RS. 9,000/- (VI NO BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE AO THOUGH THE ASSESSEE ATTACHED THE TAX AUDIT REPOR T IN THE PAPER BOOK. IN THE AUDIT REPORT, THE AUDITOR HA S MENTIONED. SYSTEM GENERATED CASH BOOK, LEDGER, DAY BOOK. (VII) IN THE PAPER BOOK, THE ASSESSEE HAS ATTACHED TRADING ACCOUNT, P & L A/C AND BALANCE SHEET. THE 9 ASSESSEE ALSO ENCLOSED EXTRACT OF CASH BOOK FOR THE MONTH OF MARCH, 2007. 2.8 THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCO UNTS FOR THE REASOS BEST KNOWN TO HIM. IF BOOKS OF ACCOUNTS WERE TO BE PRODUCED THEN THE ASSESSEE MUST HAVE BEEN ASKED TO PROVE THE FOLLOWIN G CREDIT ENTRIES AT THE END OF THE YEAR, BESIDE CREDIT ENTRIES WHICH WERE S QUARED UP DURING THE YEAR. THE CREDIT ENTRIES AT THE END OF THE YEAR ARE AS UN DER:- SUNDRY DEPOSITORS RS. 5,71,745/- SUNDRY CREDITORS RS. 41,53,416/- 2.9 MOREOVER, THE ASSESSEE MIGHT HAVE BEEN ASKED TO ESTABLISH THE GENUINENESS OF PURCHASES. CASH BOOK EXTRACT FOR MAR CH, 2007 HAS BEEN PREPARED TO EXPLAIN THE CASH IN HAND. 2.10 NO CASH PURCHASES DURING THE FOLLOWING DATE FR OM 1-3-2007 TO 31-03- 2007 01-03-2007 TO 15-03-2007, 17-03-2007, 19-03-2007, 2 0- 03-2007, 23-07-2007, 24-03-2007, 26-03-2007 TO 31-0 3- 2007 2.11 CASH PURCHASES AS PER EXTRACTS ARE :- 16-03-2007 RS. 18,584/- 18-03-2007 RS. 17,675 + RS. 18,000/- 21-03-2007 RS. 18,950/- 22-03-2007 RS. 18,685/- 25-03-2007 RS. 14,335 + RS. 17,100/- 10 2.12 NO CASH SALES ON THE FOLLOWING DATES. 1-03-2007 TO 18-03-2007 20-03-2007 TO 31-03-2007 2.13 CASH SALES IN THE MONTH OF MARCH 19-03-2007 RS. 1,495+ RS. 10,500 2.14 HENCE, IT IS EASILY TO INFER THAT ASSESSEE HAS NOT PRODUCED THE SO CALLED BOOKS OF ACCOUNTS BECAUSE THE PRODUCTION OF SUCH BO OKS OF ACCOUNTS COULD HAVE BEEN USED AGAINST HIM. IF THE EVIDENCE WHICH I S IN THE POSSESSION OF THE ASSESSEE AND THE SAME IS NOT PRODUCED THEN IT IS TO BE PRESUMED THAT SUCH EVIDENCE WILL HAVE ADVERSE IMPACT ON THE CASE OF TH E ASSESSEE. 2.15 THE LOWER AUTHORITIES WERE THEREFORE, LEFT WIT H NO ALTERNATIVE BUT TO ESTIMATE THE UNEXPLAINED CASH. AS PER SECTION 69A O F INCOME TAX ACT, THE BURDEN IS ON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF ACQUISITION OF MONEY NOT RECODED IN BOOKS OF ACCOUNTS, IF ANY, MAI NTAINED. THE EXPLANATION IF OFFERED IS NOT SATISFACTORY TO THE O PINION OF THE AO THEN THE AMOUNT IS TO BE ADDED AS UNEXPLAINED INCOME. THE HO N'BLE RAJASTHAN HIGH COURT IN THE CASE OF RAJENDRA PRASAD SUBHASH CHAND VS. UNION OF INDIA, 237 CTR 382 OBSERVED AS UNDER:- 20. CONTENTION THAT THE PROVISIONS OF SECTIONS 69 ,69A, 69B AND 69C COULD NOT BE INVOKED WHERE THE ALLEGED UNEXPLAI NED CASH AND STOCK ARE DULY ACCOUNTED FOR AND EXPLAINED AT THE T IME OF SUBMITTING THE RETURN OF INCOME, WHICH IS DULY SUPP ORTED BY BOOKS 11 OF ACCOUNT THEN PRODUCED, CANNOT BE ACCEPTED FOR TH E SIMPLE REASON BECAUSE THIS WILL BE DEPENDENT ON THE SATISFACTION OF THE AO WHETHER OR NOT HE FINDS THE METHOD OF ACCOUNTING AD OPTED BY THE ASSESSEE UNDER SUB-SECTION (3) OF SECTION 145 THAT HE WAS SATISFIED ABOUT CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS O F THE ASSESSEE ACCORDINGLY NOTIFIED UNDER SUB-SECTION (2) AND HELD SUCH ACCOUNTS HAVING BEEN REGULARLY FOLLOWED BY THE ASSESSEE. IT IS IN THAT BACKGROUND THAT THE AO IS ENTITLED TO MAKE COMPUTAT ION OF INCOME OR LOSS FOR THE PURPOSE OF ASSESSMENT IN THE MANNER ON BEST JUDGEMENT ASSESSMENT BASIS AS PER SECTION 144. IT C ANNOT THEREFORE, BE ACCEPTED THAT INGREDIENTS OF SECTIONS 69, 69A, 6 9B AND 69C WERE NOT SATISFIED IN THE PRESENT CASE BECAUSE IN A LL THESE PROVISIONS WHAT IS PROVIDED IS THAT IF AN ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, JEWELLERY OR ANY OTHER VALUABLE ARTICLES NOT RECORDED IN THE BOOKS OF ACCOUNT AND FAILS TO OFFER ANY EXPLANATION ABOUT NATURE AND SOURCE THEREOF OR IN CASE ANY SUCH EXPLANATION IF OFFERED IS NOT SATISFACTION IN THE OPINION OF THE A O THEN THIS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. 21. ULTIMATELY, THEREFORE, IT WOULD BE DEPENDENT O N THE NATURE OF EXPLANATION SUBMITTED BY THE ASSESSEE AND THE SA TISFACTION OF THE AO ABOUT THE ACCEPTABILITY OF THE SAME WHICH IS IN THE SINE QUA NON FOR INVOKING THE PROVISIONS CONTAINED IN SECTIO NS 69, 69A, 69B AND 69C. IT IS IN THIS CONTEXT THAT THE SATISFA CTION OF THE AO ABOUT THE CORRECTNESS AND COMPLETENESS OF BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AS PER PROVISION CONTAIN ED IN SECTION 145 CO-RELATES WITH THE SATISFACTION OF THE AO ARRI VED AT UNDER SECTION 69, 69A, 69B AND 69C. 2.16 WE HAVE ALSO NOTICED THAT THE ASSESSEE IS INDULGING IN PAWNING BUSINESS. DURING THE COURSE OF SURVEY, THE ASSESSEE WAS ASKED AS TO HOW THE 12 SAME AMOUNT ADVANCED IN PAWNING WAS SHOWN AS ON 31- 03-2005 AND 31-03- 2008. THE ASSESSEE STATED THAT HE HAS DESTROYED THE EARLIER PAWNING REGISTER. HENCE, IT IS CLEAR THAT THE ASSESSEE WAS HAVING EXP LAINED CASH TO MAKE INVESTMENT IN PAWNING BUSINESS. THE ASSESSEE HAS SU RRENDERED RS. 3,09,000/- AS UNDISCLOSED CASH OUT OF RS. 5,09,000/-. THE ASSE SSEE IN HIS STATEMENT BEFORE THE START OF THE SURVEY STATED THAT CASH MAY BE AVAILABLE TO THE EXTENT OF RS. 90,000/-. THE BALANCE UNEXPLAINED CASH IS RS . 1,10,000/-. THE LD. CIT(A) WAS THEREFORE, FAIR AND REASONABLE TO RESTRI CT THE ADDITION TO RS. 1.00 LAC AS AGINST RS. 1,76,604/- MADE BY THE AO. HENCE, GROUND OF APPEAL NO. 1 IS DECIDED AGAINST THE ASSESSEE. 3.1 THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 29,79,970/- ON ACCOUNT OF EXCESS STOCK OF GOLD AND SILVER. 3.2 THE AO OBSERVED THAT THE ASSESSEE WAS NOT MAINT AINING ANY BOOKS OF ACCOUNT SO FAR AND AT THE TIME OF SURVEY, WAS HAVIN G STOCK VALUING RS. 52,87,062/-. THE ASSESSEE'S REPLY OF JUSTIFYING TH E STOCK IN THE RATIO OF SALES WAS WITHOUT ANY BASIS. THE VOLUME OF SALE CANNOT BE MADE THE BASIS OF AVAILABILITY OF UNACCOUNTED STOCK. THE ASSESSEE COU LD NOT EXPLAIN THE SOURCE OF INVESTMENT OF THE EXCESS STOCK FOUND OVER AND AB OVE THE VALUE SHOWN IN THE PRECEDING YEARS I.E. BALANCE SHEET AS ON 31.03. 2006. IN FACT THE ASSESSEE 13 HAS NOT ADDRESSED THE ISSUE AT ALL HENCE, THE PLEA OF THE ASSESSEE LIABLE TO BE REJECTED. THE ASSESSEE SHALL GET THE ALLOWANCE OF THE STOCK SHOWN OF RS. 15,07,092/- IN THE BALANCE SHEET AS ON 31.03.2006. 3.3 FURTHER, REGARDING THE INDEXATION OF THE RATES OF GOLD AND SILVER AS THE STOCK IN EARLIER YEARS WAS VALUED AT A LESSER PRICE , HE STATED AGAIN WITHOUT ANY BASIS AS EVIDENT FROM THE CHART WHEREIN, THE AS SESSEE HAS ALREADY TAKEN THE VALUE OF GOLD @ RS. 1,175/- PER GRAM & SILVER @ RS. 18,750/- PER KG WHICH IS MORE THAN THE RATES REQUESTED TO BE ADOPTE D BY THE A/R OF THE ASSESSEE . 3.4 IN ADDITION TO ABOVE THE ASSESSEE CLAIMED THE A LLOWANCE OF ITEM NAMED GOLD JEWELLERIES STOCK AS INVESTMENT WHICH WAS CLAIMED TO BE THE VALUE OF PAWNED ORNAMENTS. ON VERIFICATION OF RECOR DS IT WAS FOUND THAT AT THE TIME OF SURVEY NO STOCK OF PAWNING WAS INVENTOR ISED, ONLY THE SLIPS ATTACHED TO PAWNED ORNAMENTS WERE TAKEN AND INVENTO RY OF THE AMOUNT ADVANCED WITH THE DATE OF ADVANCE AND INTEREST RATE WAS PREPARED TO WORK OUT THE AMOUNT OF TOTAL ADVANCES MADE BY THE ASSESSEE. THUS, THE CLAIM OF THE ASSESSEE WAS HELD BASELESS AND CONTRARY TO FACTS. 3.5 HE OBSERVED THAT THE ONLY THING TO BE CONSIDERE D HERE WAS THE SOURCE OF THE ACCUMULATION OF THE EXCESS STOCK WHICH REMAI NED UNEXPLAINED. THE STOCK WHATEVER IN EXCESS WAS EITHER PART OF THE ACC UMULATED PROFITS OF THE 14 BUSINESS OF EARLIER YEARS WHEN ASSESSEE AMASSED UNA CCOUNTED MONEY/ WEALTH BY ABUSING THE PROVISIONS OF IT ACT BY DECLARING LO WER PROFITS OR PURCHASE OUT OF INCOME FROM UNDISCLOSED SOURCES. IN ANY CASE IT WAS PART OF UNACCOUNTED INCOME OF THE ASSESSEE. THEREFORE, LIAB LE TO BE TREATED INVESTMENT OUT OF INCOME FORM UNDISCLOSED SOURCES. THIS RESULTED IN ADDITION OF RS. 29,79,970/- (CLOSING STOCK AS ON 31.03.2006 OF RS.15,07,092/- AND RS. 8,00,000/- OFFERED FOR TAXATION AND INCLUDED IN RETURN). 3.6 IN THE FIRST APPEAL, THE LD. CIT(A) HELD AS UND ER: - ARGUMENT OF THE ASSESSEE IS OF GENERAL NATURE AND THEREFORE IS NOT ACCEPTABLE. AS MENTIONED EARLIER, IN THIS CASE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNTS. NO PROOF REGARDING PURCHASE OR SALES MADE BY THE ASSESSEE WA S PRODUCED EITHER BEFORE AO OR THE UNDERSIGNED. IN HI S STATEMENT ASSESSEE ADMITTED THAT HE IS NOT IN POSITION TO VER IFY STOCK FROM HIS BOOKS OF ACCOUNTS. HE ALSO STATED THAT IN THE R ETURNS FILED BY HIM FOR THE EARLY YEARS, FIGURES OF PURCHASE, SALES , OPENING STOCK AND CLOSING STOCK WERE MENTIONED BY HIM ON ES TIMATE BASIS. KEEPING IN VIEW ALL THESE FACTS, ADDITION OF RS. 29,79,970/- IS JUSTIFIED AND THE SAME IS CONFIRMED. GROUND NO.2 IS THUS DISMISSED. 3.7 THE LD. AR SUBMITTED AS UNDER:- 1.1 IT IS NOT DENIED THAT ON THE DAY OF SURVEY NO BOOKS OF ACCOUNT WERE FOUND, AS THE SAME ARE NOT MAINTAINED. IN ABSE NCE THEREOF, THE AO RIGHTLY DID NOT APPLY SEC.145 BUT FOR DETERMINATION OF THE TRUE AND CORRECT FIGURE OF INCOME, WHICH CANNOT BE DETERMINED WITH A MATHEMATICAL 15 PRECISION, HENCE A FAIR ESTIMATION OF INCOME BASED ON THE COGENT MATERIAL IS AN ESSENTIALLY NECESSITATED. THE QUESTION IS WHE THER THE AO COULD HAVE ESTIMATED THE INCOME (THE IMPUGNED ADDITION), THE W AY HE DID. HIS COMPARISON OF THE STOCK FOUND ON THE DAY OF SURVEY I.E. 21.03.2007 OF RS. 52,87,062/- WITH THE STOCK OF RS. 15,07,092/- AS PER BALANCE SHEET AS ON 31.03.2006 AND WORKING OUT THE DIFFERENCE OF RS. 37,79,970/- WAS NOT FAIR IN AS MUCH AS FOR THERE ARE NO BOOKS, THERE CA NNOT BE ANY COMPARISON AND HENCE, THERE CANNOT BE ANY EXCESS OR SHORTAGE. THE AO, IN HIS WISDOM, COMPARED THE LAST TRADING ACCOUNT PREPARED ON 31.03.2006 AT THE SAME TIME HOWEVER, MUCH WATER HAD FLOWN IN AS MUCH AS THE SURVEY TOOK PLACE ALMOST WHEN A COMPLETE YEAR WAS TO END AND BY OWN ADMISSION OF THE AO, TRANSACTIONS OF PURCHASE AND SALES WERE CAR RIED OUT THIS YEAR. THE RESULTANT PROFIT THERE FROM HAS BEEN DECLARED/ACCEP TED THEREFORE, THE AVAILABILITY OF CLOSING STOCK ON 21.03.2007, COULD NOT HAVE BEEN DENIED. THE ASSESSEE THEREFORE, PREPARED A TRADING ACCOUNT UPTO THE DATE OF SURVEY SHOWING CLOSING STOCK OF RS. 40,21,806/-. 1.2 THE AO, ON ONE HAND HAS NOT PROVIDED ANY JUSTIFICA TION TO CONSIDER THE LAST AVAILABLE TRADING ACCOUNT AND THE ONE FOUND ON SURVEY AFTER SUCH A LONG GAP AND IGNORING THE ADMITTED TRA NSACTIONS. ON THE OTHER HAND, HE EVEN IGNORED THE ACCOUNTS PREPARED AFTER T HE SURVEY WITHOUT GIVING ANY JUSTIFIED REASONS. THE PERCEPTION OF THE AUTHORITIES BELOW THAT ONCE COMMITTED IN THE STATEMENT RECORDED IN THE SUR VEY NO ACCOUNTS COULD BE PREPARED WAS A GROSS MISCONCEPTION ON THEIR PART . THE ASSESSEE THEREFORE, RIGHTLY ATTEMPTED TO PREPARE ACCOUNTS AF TER SURVEY CONSIDERING ALL THE AVAILABLE DETAILS WHICH, EVEN WERE GOT AUDI TED. 1.3 SUCH ACCOUNTS, EVEN THOUGH COULD NOT HAVE BEEN ACC EPTED TECHNICALLY YET HOWEVER, CERTAINLY COULD HAVE PROVI DED A VALID BASIS FOR ESTIMATING TRUE AND CORRECT INCOME. TO WORK OUT GP RATE, THE AMOUNTS OF PURCHASE & SALES, THE OPENING/CLOSING STOCK, ALL IT EMS ARE CONSIDERED. THE AMOUNT OF SALES AS DECLARED WAS EVEN ACCEPTED BY TH E AO. ONCE SALES ARE 16 THERE PURCHASES HAVE TO BE ASSUMED. THE AMOUNT OF G P, AS DECLARED WAS NOT DISTURBED. THE AMOUNT OF CLOSING STOCK AS ALLEG ED TO BE FOUND (ASSUMING TO BE CORRECT) WAS ALSO AVAILABLE. WHAT I S NOW IS LEFT ONLY THE FIGURE OF OPENING STOCK AS ON 21.03.2007 WHICH, BEI NG THE BALANCING FIGURE COULD HAVE BEEN ARRIVED AT SO AS TO CORRECTL Y ASCERTAIN THE DIFFERENCE. FOR FAIR ESTIMATION, SUCH EXERCISE WAS OBLIGATORY TO BE MADE BY THE AUTHORITIES BELOW BUT THE SHORT CUT WAS ADOPTED . 1.4 ANOTHER LOGICAL WAY TO ESTIMATE THE AVAILABILITY O F THE STOCK ON THE DAY OF SURVEY IS TO APPLY THE STOCK TO TURNOVER RATIO. KINDLY REFER A CHART WHICH SHOWS THAT THE AVERAGE OF IMMEDIATELY PRECEDING THREE YEARS OF SALE/STOCK STOOD AT RS. 12,86,710/-/ RS. 13,09,4 40/- I.E. 101.76%. THEREFORE, FOR EFFECTING SALES OF RS. 94,05,222/- ( WHICH IS ADMITTED), CLOSING STOCK OF ALMOST SIMILAR AMOUNT WOULD HAVE B EEN REQUIRED HENCE, AVAILABILITY OF THE STOCK OF RS. 52,87,062/- ON THE DAY OF SURVEY, WAS NOT ABNORMAL. 1.5 YET, ANOTHER ASPECT TO BE CONSIDERED IS THAT THE C LOSING STOCK 4021806/- AS ON 31.03.2007 APPEARING IN THE AUDITED BALANCE SHEET, WAS CARRIED OVER TO THE NEXT YEAR I.E. A.Y.08-09 . THE RETURN FILED BASED ON THESE ACCOUNTS, WAS DULY ACCEPTED BY THE DEPARTMENT . 1.6 THE ASSESSEE IN FACT, WAS ALSO IN RECEIPT OF THE S TOCK WORTH RS. 12,91,360/- [I.E. GOLD STOCK OF RS. 10,79,315/- AND SILVER STOCK OF RS. 2,15,045/-) INCLUDED IN THE OTHER ASSETS OF RS. 13 ,98,460/-] SHOWN IN THE BALANCE SHEET WHICH, BELONGED TO ASSESSEES CLIENT AND THE ASSESSEE DID NOT OWN THE SAME. FOR THIS REASON THEREFORE, THE AS SESSEE DID NOT INCLUDE SUCH STOCK OF RS. 12,91,360/- IN ITS TRADING A/C . IN ANY CASE, IF IT IS TO BE INCLUDED IN THE STOCK OF THE ASSESSEE THAN THE PURC HASES HAVE TO BE INCREASED TO THAT EXTENT NOT AFFECTING THE GP/NP FO R THAT REASON. IT IS TO BE CLARIFIED THAT IN THE CLOSING STOCK OF `40,31,806/- SHOWN IN THE AUDITED TRADING A/C, THE SURRENDERED AMOUNT OF STOCK OF RS. 8,00,000/- IS ALSO INCLUDED IN THE TRADING A/C. 17 THE STOCK ON THE DAY OF SURVEY I.E. ON 21.03.2007 STOOD AT RS.52,87,062/- WHICH CONSISTED OF CLOSING STOCK OF RS. 32,56,247/- AS PER AUDITED TRADING A/C , STOCK OF RS. 8,00,000/- SURRENDERED AND CLIENT STOCKS OF RS. 12,30,815/-. HENCE, THERE WAS NO SCOP E OF ANY ADDITION. THE AUTHORITIES BELOW HOWEVER, DID NOT APPLY THEIR MIND ON THIS ASPECT AT ALL PERHAPS FOR THE SIMPLE REASON THAT BO TH OF THEM HAVE COMPLETELY IGNORED THE AUDITED ACCOUNTS THOUGH PROD UCED BEFORE THEM AND NO QUERY AS SUCH WAS MADE ON THAT SCORE. 2. FOLLOWING SUBMISSIONS (PB 2) WERE MADE BEFORE THE LD. CIT(A). THE SAME ARE AS UNDER:- 2. THAT ON FACTS AND IN LAW THE LEARNED DEPUTY COMMISSIONER ERRED IN ADDING RS.29,79,970/- IN THE STOCK OF SILVER AND GOLD ORNAMENTS. YOUR HONOUR HERE I WOULD LIKE T O SUBMIT THAT AT THE TIME OF SURVEY STOCK OF RS.52,87,052/- WAS F OUND. THE STOCK WAS VALUED AT MARKET PRICE AS ON 31.03.2007. COPY O F THE VALUATION REPORT IS ATTACHED IN THE PAPER BOOK. THE ASSESSEE HAS ALREADY SURRENDERED THE AMOUNT OF RS.8,00,000/- AGAINST EXC ESS STOCK AT THE TIME OF SURVEY. HERE AGAIN THE LEARNED DEPUTY COMMI SSIONER MADE AN ADDITION OF RS.29,79,970/- (AFTER REDUCING RS.15 ,07,092/- OF STOCK AS ON 31.03.2006 AND SURRENDER STOCK OF RS.8, 00,000/- ) WITHOUT CONSIDERING THE ACCOUNTS BOOKS. THE AVERAGE SALES OF LAST 3 YEARS WAS OF RS.12,80,710/- WHEREAS THIS YEAR THE T OTAL SALES AROUND OF RS.94,05,222/-, HENCE THE STOCK OF THIS Y EAR SHALL BE MUCH MORE AS COMPARED TO THE LAST YEAR. MOREOVER, T HE ASSESSEE HIMSELF HAS SURRENDERED RS.8,00,000/- AGAINST THE E XCESS STOCK. THAT THE ASSESSMENT HAS BEEN COMPLETED ON THE DECLA RED SALES THEN THE PURCHASES SHOULD ALSO BE CONSIDERED. THERE CANN OT BE SALES WITHOUT PURCHASES. THE LEARNED DEPUTY COMMISSIONER HAS REJECTED THE ACCOUNT BOOKS ON THE PLEA THAT THEY WERE NOT RE ADY AT THE TIME OF SURVEY. IN VIEW OF ABOVE MENTIONED FACTS IT IS C LEAR THAT THE 18 ADDITION OF RS.29,79,970/- FOR EXCESS STOCK IS WITH OUT ANY BASIS AND REQUIRES TO BE DELETED. 3. ALTHOUGH THIS WAY, THERE SHOULD BE NO DIFFERENCE A S SUCH OF THE ALLEGED EXCESS STOCK YET HOWEVER (IF THE BOOKS PROD UCED FOR A.Y.2007-08 ARE NOT RELIABLE), THE ESTIMATION IS AFTER ALL AN E STIMATION AND TO TAKE CARE OF POSSIBLE LEAKAGE OF INCOME, THE ASSESSEE WAS QUITE FAIR AND REASONABLE IN MAKING A SURRENDER OF RS.`8 LACS, WHICH THE DEPARTM ENT MUST HAVE APPRECIATED. THUS, THE ESTIMATION MADE BY THE AO WAS NOT AT ALL FAIR AND HENCE THE ADDITION DESERVES DELETION. 3.8 DURING THE COURSE OF PROCEEDINGS BEFORE US, THE LD. DR SUBMITTED AS UNDER:- 10 DESPITE HAVING ADMITTED SALES OF RS. 94 LAKHS DURING THE YEAR AS COMPARED TO RS. 12 LAKHS IN PREV IOUS YEAR, THE ASSESSEE WAS LEGALLY REQUIRED TO MAINTAIN BOOKS OF ACCOUNT AND STOCK REGISTER. IT IS MORE SO WHEN HE IS DEALIN G IN VERY PRECIOUS GOLD ORNAMENTS. IT SHOWS SUBSTANTIAL CONCE ALMENT OF STOCK. THE STOCK WAS FOUND AT RS. 52,87,062/- OUT O F WHICH UNDISCLOSED INVESTMENT IN STOCK WAS ADMITTED DURING SURVEY AND ALSO SHOWN IN RETURN OF INCOME. THE ASSESSING O FFICER CONSIDERED STOCK OF RS. 15,07,092/- AS PER BALANCE SHEET ON PREVIOUS YEAR AND ALLOWED BENEFIT OF THE SAME. THUS THE ASSESSING OFFICER MADE THE BALANCE ADDITION OF RS. 29,79,970/-. WRITTEN SUBMISSION BEFORE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) WAS BASED ON POSSIBILITIES AND PROBAB ILITIES AND SHALL BE AND MAY BE TYPE ARGUMENTS WHICH DID NO T FIND FAVOUR WITH HIM. CONSEQUENTLY THE GROUND WAS DISMIS SED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS). BEFOR E LEARNED INCOME TAX APPELLATE TRIBUNAL AGAIN, THE AS SESSEE HAS NOT COME WITH ANY MATERIAL WITH EVIDENTIARY VALUE O R COGENT EVIDENCE. THERE IS NO FRESH MATERIAL BEFORE LEARNED INCOME TAX APPELLATE TRIBUNAL. THE ARGUMENT BEFORE LEARNED INC OME TAX 19 APPELLATE TRIBUNAL IS AGAIN BASED ON POSSIBILITIES AND PROBABILITIES AND SHALL BE AND MAY BE TYPE CLAI MS. IT IS PRAYED THAT THE GROUND MAY BE DISMISSED AND T HE ASSESSEE MUST GET STRINGENT PUNISHMENT FOR INFRINGE MENT OF LAW AND MAY NOT BE ALLOWED TO ESCAPE WITH TOKEN TAX LIA BILITY. 3.9 WE HAVE HEARD BOTH THE PARTIES. THE CONTENTION OF THE LD. AR THAT STOCK VERSUS TURNOVER RATIO OF EARLIER YEAR BE CON SIDERED TO ASCERTAIN THE DISCLOSED STOCK. THE ASSESSEE IN HIS STATEMENT MENT IONED THAT HE WAS DISCLOSING ALL THE FOUR ITEMS OF TRADING ACCOUNT ON ESTIMATE BASIS. HENCE, IT IS NOT POSSIBLE TO ACCEPT THE CONTENTION OF THE LD. A R. THE LD. AR HAS NOT SHOWN ANY COMPARABLE CASE TO ASCERTAIN THE STOCK/ T URNOVER RATIO. AS PER SECTION 69A, THE ASSESSEE WAS REQUIRED TO EXPLAIN T HE SOURCE OF ACQUISITION AND ASSESSEE IS SIMPLY RELYING ON STOCK/TURNOVER R ATIO. THE BOOKS OF ACCOUNTS ARE NOT RELIABLE FOR EARLIER YEAR AND BOOK S OF ACCOUNTS CURRENT YEAR HAVE NOT BEEN PRODUCED. IN ASSESSMENT YEAR 2004-05, THE TRADING ACCOUNT RESULTS ARE AS UNDER:- ITEM SALES GROSS PROFIT G. P. RATE CLOSING STOCK SILVER ORNAMENTS 80,640 8,973 11.13% 45,533 GOLD ORNAMENTS 10,46,890 2,36,740 22.61% 10,75,340 DIAMOND JEWELLERY 48,250 4,685 9.71% 99,813 TOTAL 11,75,780 2,50,398 21.3% 12,20,686 20 3.10 TRADING ACCOUNT FOR THE ASSESSMENT YEAR 2005-0 6 HAS NOT BEEN FILED ONLY BALANCE SHEET DETAILS HAS BEEN FILED FROM WHIC H CLOSING STOCK IS AS UNDER:- SILVER ORNAMENTS RS. 39,056/- GOLD ORNAMENTS RS. 11,86,464/- DIAMONDS RS. 1,02,204/- TOTAL RS.13,27,724/- PAGE 21 OF THE PAPER BOOK SHOWS TOTAL SALES AT RS. 12,00,697- 3.11 IN ASSESSMENT YEAR 2006-07, TRADING ACCOUNT HA S NOT BEEN FILED. HOWEVER, P & L A/C, CAPITAL ACCOUNT AND BALANCE SHE ET AS PER PAGE NO 18 AND 20 OF THE PAPER BOOK HAVE BEEN FILED. PAGE 20 O F PAPER BOOK IS THE SAME AS PAGE NO. 18 I.E. CONTAINING CAPITAL ACCOUNT AND BALANCE SHEET. SALES ARE AVAILABLE AT PAGE 21 AND THOSE ARE RS. 14,83,555/-. CL. STOCK GOLD RS. 12,22,628/- SILVER RS. 48,386/- DIAMOND RS. 1,10,896/- TOTAL RS. 15,79,910/- 3.12 IN ASSESSMENT YEAR 2007-08 I.E. YEAR UNDER REF ERENCE, THE ASSESSEE AS PER TAX AUDIT REPORT GAVE THE DETAILS OF SALES WITH OUT BIFURCATION OF SALES OF GOLD JEWELLERY, SILVER JEWELLERY AND DIAMOND JEWELL ERY. SALES RS. 94,05,222/- CLOSING STOCK RS. 40,21,806/- GROSS PROFIT RS. 6,85,151/- GROSS PROFIT RATE 7.23% 21 3.13 IN ASSESSMENT YEAR 2008-09 SALES RS. 35,19,866/- CLOSING STOCK RS. 38,28,172/- GROSS PROFIT RS. 5,41,840/- GROSS PROFIT RATE 15.4% 3.14 WHAT IS CLEARLY INFERRED THAT ASSESSEE HAS NOT GIVEN GROSS PROFIT RATE CHART OF ASSESSMENT YEAR 2005-06 AND 2006-07. THE G ROSS PROFIT RATE IN ASSESSMENT YEAR 2004-05 WAS 21.3% AND IN ASSESSMENT YEAR 2008-09, THE GROSS PROFIT SHOWN IS 15.4%. IN THE YEAR UNDER CONS IDERATION, THE GROSS PROFIT RATE IS ONLY 7.23%. THE PERCENTAGE INCREASE IN SALE S FOR ONE YEAR AS COMPARED TO THE EARLIER YEAR IS AS UNDER:- 2005-06 = 2.12% 2006-07 = 23.56% 2007-08 = 5.34% 2008-09 = (-) 62.6% 3.15 BOOKS OF ACCOUNT HAVE NOT BEEN PRODUCED. SALES HAVE BEEN INFLATED SO AS TO EXPLAIN THE STOCK FOUND DURING SURVEY. THERE IS NO EXPLANATION AS TO WHY THERE IS SUDDEN FALL IN GROSS PROFIT RATE. THE ADDITION OF FALL IN GROSS PROFIT RATE ALSO AFFECTS THE STOCK. THE INCREASE IN STOCK SHOWN FROM THE FINANCIAL YEAR 2004-05 TO 2006-07 IS NOT SUBSTANTIA L. THE INCREASE IN STOCK IN ASSESSMENT YEAR 2005-06 IS RS. 1.07 LACS WHICH IS A ROUND 9% AND IN 22 ASSESSMENT YEAR 2006-07 AS COMPARED TO ASSESSMENT Y EAR 2005-06 IS AROUND 0.6 LAC WHICH MEANS INCREASE OF 4.5%. IF THAT RATIO IS TO BE APPLIED THEN THE DISCLOSED STOCK WILL BE MUCH LESS AS COMPARED TO ST OCK FOUND. WE DO AGREE THAT FOR INCREASED TURNOVER, ONE WILL HAVE TO MAINT AIN THE STOCK ACCORDINGLY. MOREOVER, PROFIT ON SALE IS ALSO SOMETIMES PLOUGHED BACK IN STOCK. CONSIDERING THE QUANTUM OF SALES DURING THE YEAR TO THE EXTENT OF RS. 94,05,222/-, WE FEEL THAT ACCOUNTED STOCK ON THE DA TE OF SURVEY WILL BE TO THE EXTENT OF RS. 25.00 LACS. THE ASSESSEE HIMSELF HAS SURRENDERED EXCESS STOCK OF RS. 8.00 LACS AND HENCE THE DIFFERENCE OF RS. 19 ,87,062/- IS CONFIRMED AGAINST RS. 29,79,970/- CONFIRMED BY THE LD. CIT(A) . WE HAVE ALSO NOTICED THAT ASSESSEE PAID SUBSTANTIAL AMOUNTS FOR PURCHASE OF HOUSE FROM NOV. 2006 TO MARCH 2007 AND HENCE THE SALE PROCEEDS WERE DIVE RTED AND FUNDS WERE SUBSTANTIALLY NOT AVAILABLE FOR KEEPING THE STOCK. 4.1 THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 25,23,200/- ON ACCOUNT OF INVESTMENT IN HOUSE PROPERTY. 4.2 THE AO NOTICED THAT THE ASSESSEE ENTERED INTO AN A GREEMENT FOR PURCHASE OF A HOUSE PROPERTY M 80, REMBUL ROAD, AJM ER FOR RS. 46,11,000/- . SUCH AGREEMENT WAS FOUND DURING SURVEY. IN THIS R ESPECT, ADVANCE PAYMENT OF RS. 27,00,000/- WAS MADE BY HIM TILL THE DATE OF SURVEY. WHEN ASKED THE 23 ASSESSEE TO EXPLAIN THE SOURCE OF INVESTMENT IN TH E SAME, THE ASSESSEE SOUGHT DEDUCTION/CREDIT FOR THE PAYMENTS OF RS. 3,2 0,000/- MADE BY HIS SON, RS. 3,00,000/- FOR THE CHEQUE NOT PRESENTED BY THE SELLER AND RS. 1,76,800/- FOR THE PAYMENT MADE BY HIS DAUGHTER IN LAW OUT OF HER BANK ACCOUNT (OUT OF SALE PROCEED OF CAR RECEIVED AT THE TIME OF HER MAR RIAGE). HOWEVER, THE AO HELD THAT THE ASSESSEE WAS ELIGIBLE TO GET DEDUCTIO N OF RS. 1,76,800/- ONLY. 4.3 REGARDING THE ALLOWANCE OF RS. 3,20,000/- PAID BY THE SON PRADEEP, THE AO ALLEGED THAT THE ASSESSEE IN HIS STATEMENT IN ANSWER TO Q.NO. 18 EXPRESSLY CONFESSED THAT HIS WIFE AND SON HAD NO SO URCE OF INCOME AND SINCE, THEY DID NOT HAVE AVAILABILITY OF CASH THEREFORE, T HE ASSESSEE GOT DEPOSITED CASH IN THE ACCOUNT OF HIS SON AND GOT THE PAYMENTS MADE FOR THE PROPERTY. THE AO FURTHER ALLEGED THAT IN SUPPORT OF THE CLAIM OF THE ASSETS OF HIS WIFE AND SON HAVING THEIR INCOME AND PAYMENT OUT OF THAT NO DOCUMENTARY EVIDENCE WAS FILED. THE ASSESSEES ARGUMENTS WERE R EJECTED BEING WITHOUT ANY BASIS AND PROOF. THE CONTENTION AS REGARDS THE CHEQUE NOT PRESENTED, WAS ALSO REJECTED STATING THAT IT DOES NOT MAKE ANY DIF FERENCE WHETHER THE CHEQUE WAS PRESENTED FOR PAYMENT OR NOT BECAUSE THE AMOUNT TO BE PAID AGAINST THE CHEQUE WAS DEPOSITED BY THE ASSESSEE HIMSELF AS ADM ITTED. THE AO FINALLY MADE THE ADDITION OF RS. 25,23,200/- ( RS.27,00,000 LESS RS.`1,76,800). 4.4 IN THE FIRST APPEAL, THE LD. CIT(A) HELD AS UND ER: 24 AS MENTIONED BY AO ON PAGE 9, 10 & 11 OF THE ASSES SMENT ORDER, THE ASSESSEE MADE TOTAL PAYMENT OF RS. 27,00,000/-. IN RESPONSE TO QUESTION NO.18 OF THIS STATEMENT RECORDED DURING TH E COURSE OF SURVEY, HE ADMITTED THAT HIS WIFE AND SON HAVE NO SEPARATE SOU RCE OF INCOME. CHEQUES OF RS. 10,00,000/- FROM THE ACCOUNT OF HIS WIFE AND HIS SON WERE ISSUED BY DEPOSITING CASH IN THEIR RESPECTIVE ACCOU NTS. ASSESSEE OFFERED SOME OF RS. 17,00,000/- FOR TAXATION ON THIS ACCOUN T DURING THE COURSE OF SURVEY, BUT SUBSEQUENTLY NO SUCH AMOUNT WAS INCLUDE D IN THE RETURN FILED BY HIM FOR THE YEAR. AO ON THE OTHER HAND HAS RIGHT LY CONCLUDED THAT IN THE ABSENCE OF ANY SEPARATE SOURCE OF INCOME OF HIS WIF E AND SON, THE ENTIRE AMOUNT OF INVESTMENT IN THIS HOUSE HAS TO BE CONSID ERED IN THE HANDS OF THE ASSESSEE. ADDITION OF RS. 25,23,200/- IS JUSTIF IED AND THE SAME IS CONFIRMED. GROUND NO.3 IS THUS DISMISSED. 4.5 BEFORE US, THE LD. AR HAS SUBMITTED AS UNDER:- 1. WITH REGARD TO THE ADDITION OF INVESTMENT IN HOUSE IN THE NAME OF WIFE AND SON , THE AO HAS NOT AT ALL CONSIDERED THE SUBMISSION AND FACT THAT A PART OF THE ADVANCE UPTO RS. 10 LACS GIVEN B Y THE ASSESSEE THROUGH CHEQUES FROM THE BANK ACCOUNT NO. 1021785 OF ITS P ROPRIETARY AND SOURCE WAS THE AMOUNTS OF SALES PROCEEDS DEPOSITED THEREI N. FROM THIS BANK A/C NAMELY DETARAM GOLOMAL CHEQUES WERE ISSUED ON FOUR OCCASIONS TO THE WIFE AND SON AND THESE PERSONS IN TURN ISSUED FURTH ER CHEQUES TO THE SELLER OF THE HOUSE. THEREFORE, IF ACCEPTING THE FACT THAT INVESTMENT WAS MADE BY THE HUSBAND, THERE DID EXIST A VALID EXPLAINED SOUR CE OF THE INVESTMENT UPTO RS. 10 LACS. DURING SURVEY ALSO THE SURVEY PAR TY ADMITTED THIS FACT IN THE SENSE THAT OUT OF RS. 27 LACS THE ASSESSEE SURR ENDERED RS. 17 LACS ONLY AND NOT RS. 10 LACS . BUT LATER ON THE AO IN THE ASSESSMENT ORDER HAS COMPLETELY DISBELIEVED SUCH CONTENTION WITHOUT MENT IONING SPECIFICALLY THE REASONS. 2. HOWEVER ONE CHEQUE BEARING NO.381457 DATED 21.03.2 007 OF RS. RS. 3 LACS THOUGH ISSUED TO THE BUYER AND IN TH E DETAILS MENTIONED BEHIND THE AGREEMENT COULD NOT BE ENCASHED IN AS MU CH AS IN THE BANK STATEMENT AFTER 17.03.07, THE ENTRY FOR WITHDRAWAL WAS DIRECTLY MADE ON 24.03.07 ONLY AND THAT TOO `1 LACS ONLY. THUS, THER E APPEARS NO WITHDRAWAL OF RS. 3 LACS ON THE RELEVANT DATE NOR THE SAID CHE QUE NUMBER APPEARS IN THE BANK STATEMENT OF THE ASSESSEE. EVEN ASSUMING THE CHEQUE WAS ISSUE D BY THE WIFE OR THE SON THEN ALSO IN THEIR BANK STAT EMENT THIS CHEQUE NEVER 25 APPEARED TO HAVE BEEN ENCASHED. THUS FACTUALLY, ADV ANCE OF RS. 24 LACS ONLY WAS PAID AS AGAINST RS. 27 LACS CONSIDERED BY THE AO. THE AO CONSIDERED RS. RS. 27 LACS BASED ON THIS VERY AGREE MENT HENCE THE FACT OF MAKING PAYMENT OF RS. 3 LACS WAS NOT CORRECT UNLESS THE CHEQUE IS NOT ENCASHED. THIS CONTENTION WAS REJECTED STATING THAT THE AMOUN T TO BE PAID AGAINST THE CHEQUE WAS DEPOSITED BY THE ASSESSEE HI MSELF AS ADMITTED. FIRSTLY THERE WAS NO DEPOSIT OF RS. 3 LACS BETWEEN 17- 24.03.2007 (PB 29) NOR THERE WAS ANY REQUIREMENT BECAUSE SUFFICIENT BA LANCE AVAILABLE WAS OF RS. 843958/- NOR THE ASSESSEE EVER ADMITTED. 3. THE AO ALSO REJECTED THE PLEA THAT AMOUNT UPTO RS. 3,20,000/- WAS PAID BY PRADEEP FROM HIS OWN SB A/C NO 217841. HIS PASSBOOK SHOWS A RECEIPT OF RS. 2 LACS OUT OF WHICH HE WITHD REW RS. 2,10,000/- IN THE MONTH OF DECEMBER, 2005 AND THEREAFTER RS. 1 LA C ON DATED 13.11.06 WHICH WERE UTILIZED IN MAKING THE ABOVE ADVANCE PAY MENT. 4. THE AGREEMENT WAS ADMITTEDLY, IN THE NAME OF PRADE EP KUMAR AND SMT. SAVITRI DEVI, WHO AGREED TO PURCHASE THE H OUSE PROPERTY AND PAID THE SUBJECTED ADVANCE. THIS IS CLEAR FROM Q.NO.18 ( AO PG 9) ALSO. NOTABLY IN THE QUESTION THE SOURCE IN THE HANDS OF THE TWO WAS ASKED. HENCE, THERE WAS NO REASON WHY THE AO SHOULD HAVE CONSIDERED THI S ISSUE IN THE HANDS OF THE ASSESSEE. 5. SURRENDER MADE DURING SURVEY NOT A GOOD BASIS IN THIS CASE NO ADDITION PERMISSIBLE SOLELY BASED ON STATEMENTS IN THIS CASE. 5.1 THE REPEATED STRESS BY THE AO OVER THE FACT THAT TH E ASSESSEE CONFESSED AND SURRENDERED RS. 17 LACS IN THE SURVEY IS AGAINST THE LEGAL POSITION AND CONTRADICTORY TO HIS OWN STAND. THE PO SSIBILITY OF THE TENSED MOMENTS AND SURCHARGED ATMOSPHERE DURING SURVEY AND SEARCH CAN NOT BE DENIED. THE REPLIES AND SURRENDERED BY THE ASSESSEE ARE AFFECTED BY SUCH CIRCUMSTANCES AS ALSO THE LACK OF NECESSARY RECORDS AND LACK OF TIME. THE ASSESSEE THEREFORE AT THE TIME OF FILLING OF TH E RETURN OF INCOME WHEN EXAMINED IN DETAIL, IT WAS FOUND THAT SOME MIS TAKES WERE COMMITTED AND TO SOME EXTENT A WRONG AMOUNT WAS SURRENDERED. FIRSTLY , IT WAS FOUND THAT ONE CHEQUE OF RS. 3 LACS (PART OF RS. 17 LACS) THOUGH WAS SHOWN AS PAID BUT IN FACT, REMAINED UNPRESENTED AND THUS FAC TUALLY NO PAYMENT AS SUCH WAS MADE. SECONDLY, PAYMENT OF RS. 1,76,800 CA ME FROM THE ACCOUNT OF DAUGHTER IN LAW SMT. CHITRALEKHA AND NOT ABLY THE AO HIMSELF ACCEPTED THIS SOURCE (AND THUS, OTHERWISE SUPPORTIN G THE RETRACTION) THIRDLY, PAYMENT TO THE EXTENT OF RS. 3,20,000/- WA S MADE OUT OF THE WITHDRAWALS MADE BY PRADEEP KUMAR FROM HIS SB ACCOU NT. THE ASSESSEE SIMPLY SAID THAT THERE WAS NO SOURCE OF INCOME OF I NCOME OF PRADEEP KUMAR THAT DOES NOT MEAN THAT PRADEEP KUMAR COULD N OT HAVE RECEIVED 26 SUCH/ANY AMOUNT FROM A THIRD PERSON FOR DIFFERENT P URPOSES. ONCE THE BANK ACCOUNT IS THERE IN HIS NAME AND IT SHOWS THE SUFFI CIENT BALANCE, THE POSSIBILITY OF WITHDRAWAL AND THEN UTILIZATION TOWA RDS THE PAYMENT OF ADVANCE, WAS NOT AGAINST EVEN HUMAN PROBABILITY. TH ESE SUBMISSIONS JUSTIFIED THE LATER RETRACTION ALSO. MOREOVER, IN H IS SB ACCOUNT, NO CASH DEPOSITED WAS MADE BUT IT WAS ON ACCOUNT OF TRANSFE R. AFTER TAKING CARE OF THESE MISTAKES, THE REMAINING AMOUNT OF RS. 9,03,200/- (RS. 27,00,000/- MINUS RS. 10,00,000/- T HROUGH CHEQUE MINUS RS. `3,00,000/- CHEQUE NOT PRESENTED MINUS RS. `3,2 0,000/- CONTRIBUTION BY SON SHRI PRADEEP AND RS. 1,76,800/- CONTRIBUTION BY DAUGHTER IN LAW) WAS SURRENDERED. 5.2 IT HAS BEEN HELD THAT AN ADMISSION, THOUGH A BEST EVIDENCE AGAINST SUCH PERSON, IF SHOWN TO BE OUT OF AMBIGUIT Y, UNDER TENSION OR WAS AGAINST THE FACTS OR MISCONCEPTION OF LAW, CAN BE V ALIDLY RETRACTED. KINDLY REFER 72 TTJ 323 (JD), 73 ITD 434 (CHD) & 63 TTJ 23 6 (DEL). IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN PULLANGODE RU BBER PRODUCE CO. LTD. VS. STATE OF KERALA & OTHERS 91 ITR 18 (SC): SUCH ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIV E. IT IS OPEN TO THE ASSESSEE WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT AND THE ASSESSEE SHOULD BE GIV EN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUN TS DO NOT DISCLOSE THE CORRECT STATE OF FACTS. THIS HONBLE BENCH HAS ALREADY BEEN TAKING THIS VIE W CONSISTENTLY. KINDLY REFER ACIT V/S KANAHIYA LAL CHAUDHARY (2011) 136 TTJ 9 (JP) (UO). 5.3 IT IS SETTLED THAT AN ADMISSION CANNOT BE MADE THE SOLE BASIS OF ASSESSMENT. KINDLY REFER CBDT CIRCULAR NO. 286/2/20 03 DATED 10.03.2003. ALSO R. K. SYNTHETICS 30 TW 228 (JD) AN D ITO VS. SURESH CHANDRA KOOLWAL (2004) 32 TW 23 (JP). CIT V/S SHRI RAMDAS MOTOR TRANSPORT 238 ITR 177(AP). 5.4 NO EVIDENTIARY VALUE OF STATEMENTS DURING SURVE Y: THE STATEMENT RECORDED DURING A SURVEY U/S. 133 A IS NO T AT ALL A GOOD BASIS FOR MAKING THIS ADDITION AS IT HAS GOT NO EVIDENTIARY V ALUE, AS AGAINST THE STATEMENTS RECORDED U/S. 132 (4) DURING THE COURSE OF A SEARCH. S. 132 (4) VERY CLEARLY PROVIDES THAT THE STATEMENTS RECORDED DURING A SEARCH CAN BE USED AS AN EVIDENCE, WHICH IS NOT THE CASE WITH THE STATEMENT RECORDED DURING SURVEY. KINDLY REFER ACIT VS. SATYA NARAYAN AGARWALLA (2002) 255 ITR (AT) 69 (KOL) AND PAUL METHEW AND SONS V/S CIT 263 ITR 101(KER) RECENTLY FOLLOWED) IN DADAM CHAND MOCHI V/ S ITO 36 TW 11(JD) AND DELETED THE ADDITION MADE ON THE SOLE BA SIS OF THE STATEMENT 27 RECORDED DURING SURVEY. RECENT CASE: ITO V/S PRATIB HA GOYAL (2011) 51 DTR 164 (JP). 6. FOLLOWING SUBMISSIONS (PB 2-3) WERE MADE BEFORE THE LD. CIT(A). THE SAME ARE AS UNDER:- 3. THAT ON FACTS AND IN LAW THE LEARNED DEPUTY COMMISSIONER HAS WRONGLY ADDED RS.25,23,200/- OF IN VESTMENT IN THE PURCHASE OF HOUSE PROPERTY. YOUR HONOUR HERE I WOULD LIKE TO SUBMIT THAT THE AGREEMENT (PB 22-25A) FOR PURCHASE OF THE HOUSE WAS IN THE NAME OF SMT. SAVITRI DEVI AND SHRI PRADE EP. SMT. SAVITRI DEVI IS WIFE AND SHRI PRADEEP IS SON OF THE ASSESSEE. COPY OF AGREEMENT IS ATTACHED IN THE PAPER BOOK. THAT TH E PAYMENTS OF RS.10,00,000/- WERE PAID THROUGH CHEQUES BY SMT. SA VITRI DEVI AND SHRI PRADEEP AFTER RECEIVING THE AMOUNT FROM TH E ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES. COPIES OF BANK STATE MENTS OF THE ASSESSEE AND SHRI PRADEEP KUMAR ARE ATTACHED TO THE PAPER BOOK. THE BANK ACCOUNT OF THE ASSESSEE AND SMT. SAVITRI D EVI IS IN JOINT NAME. THIS BANK ACCOUNT HAS DULY BEEN SHOWN IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2006. THE REMAINING PAY MENT OF RS.17,00,000/- (RS.27,00,000/- MINUS RS.10,00,000/- ) WERE SURRENDERED BY THE ASSESSEE AT THE TIME OF SURVEY. WHILE FILLING OF THE RETURN THE ASSESSEE NOTICED THAT ONE CHEQUE OF RS.3,00,000/- DATED 21.03.2007 WAS NOT PRESENTED IN THE BANK AND RS.3,10,000/- WAS PAID BY SHRI PRADEEP AFTER WITHDRAWING THE SAME FROM PASS BOOK. THE LEARNED DEPUTY COMMISSIONER ACCEPTED THE CONTRIBUTION OF RS.1,76,800/- BY SMT. CHITRANSHI AND REJECTING T HE OTHER PAYMENTS ON THE PLEA THAT WIFE AND SON HAS NO INCOM E. THE ASSESSEE HAS RIGHTLY STATED IN HIS STATEMENT THAT B OTH OF THEM HAVE NO INCOME AND THE AMOUNT WAS PAID OUT OF HIS INCOME WHICH IS EVIDENT FROM THE COPY OF PASS BOOK ALREADY ATTACHED . THAT NO ADDITION CAN BE MADE ON THE BASIS OF THE STATEMENTS TAKEN AT THE TIME OF SURVEY WHEN THE ASSESSEE IS ABLE TO EXPLAIN THE DISCREPANCY. I RELY ON THE FOLLOWING RULING:- A. CIT V/S M/S DHINGRA METAL WORKS 328 ITR 328 THE ASSESSEE HAS ALREADY SURRENDERED THE REMAINING AMOUNT OF RS.9,03,200/- AT THE TIME OF ASSESSMENT PROCEEDI NGS (RS.27,00,000/- MINUS RS.10,00,000/- THROUGH CHEQUE MINUS RS.3,00,000/- CHEQUE NOT PRESENTED MINUS RS.3,20,00 0/- CONTRIBUTION BY SON SHRI PRADEEP AND RS.1,76,800/- CONTRIBUTION BY DAUGHTER IN LAW). IN VIEW OF THE ABOVE MENTIONED FACTS THE ADDITION O F RS.25,23,000/- AS AGAINST RS.9,03,200/- BEING UNCAL LED FOR AND REQUIRES TO BE DELETED. 28 HENCE, NO ADDITION COULD HAVE BEEN MADE OF THE ENTI RE `25,23,000/- MERELY ON THE BASIS OF STATEMENT. HENC E, EXCEPT `9,03,000/-, THERE WAS NO WARRANT FOR THE BALANCE ADDITION HENCE KINDLY BE DELETED IN FULL. 4.6 THE LD. DR SUBMITTED AS UNDER:- 11. A HABITUAL OFFENDER OF NON-MAINTENANCE OF BOOKS OF ACCOUNT DESPITE HAVING SALES CLOSE TO RS. 1 CRORE AND AND NON-MAINTENANCE OF STOCK REGISTER EVEN WHIL E POSSESSING STOCK OVER RS. 50 LAKHS, CAN NOT BE EXPE CTED TO EXPLAIN SOURCE OF ANY INVESTMENT WHERE EVERY THI NG IS UN-EXPLAINED. INVESTMENT IN PROPERTY WAS RS. 46,11, 000/- FOR WHICH ADVANCE PAYMENT WAS MADE AT RS. 27,00,000 /-. OUT OF THIS ADVANCE THE ASSESSEE ADMITTED UNDISCLOS ED INVESTMENT OF RS. 17,00,000/- DURING SURVEY BUT DID NOT DISCLOSED IT IN RETURN OF INCOME AND DID NOT PAY TA X ON IT. THERE WAS NO RETRACTION AT ANY STAGE. THE ONLY CHAN GE IN THE STAND OF THE ASSESSEE WAS THAT DURING SURVEY, H IS WIFE AND SON WERE ADMITTED OF HAVING NO SOURCE OF INVESTMENT, HAVING NOT FILED ANY RETURN OF INCOME A ND NO SOURCE TO EXPLAIN. DURING ASSESSMENT, THESE FAMILY MEMBERS EMERGED WITH SOURCES RESULTING INTO NON- DECLARATION OF SUCH UNDISCLOSED INVESTMENT IN RETUR N OF INCOME. THERE WAS NO BASIS OF SUCH FAMILY MEMBERS HAVING ANY SOURCE AND NO EVIDENCE WAS PLACED BEFORE THE ASSESSING OFFICER TO SUBSTANTIATE THEIR SOURCES. TH EY WERE ALSO NOT PRODUCED BEFORE THE ASSESSING OFFICER TO OWN UP THE INVESTMENT. CONSEQUENTLY, THE ASSESSING 29 OFFICER REJECTED THE ARGUMENTS AND MADE THE ADDITIO N OF RS. 25,23,200/- AFTER ALLOWING BENEFIT OF RS. 1,76, 800/- BEING INVESTMENT BY DAUGHTER-IN LAW OF THE ASSESSEE BASED ON ADMISSIBLE EVIDENCE. BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO, NO EVIDENCE WAS PLACED TO EXPLAIN THE SOURCE, THEREFOR E, THIS GROUND OF APPEAL WAS REJECTED. BEFORE LEARNED INCOM E TAX APPELLATE TRIBUNAL, THE ASSESSEE HAS BASED HIS ARGUMENTS ON CERTAIN BANK ACCOUNTS OF FAMILY MEMBER S TO EXPLAIN THEIR SOURCES. BUT SUCH BANK ACCOUNTS EX ISTED DURING SURVEY AND IN SUCH BANK ACCOUNTS, THE ASSESS EE HAD ADMITTED TO HAVE DEPOSITED MONEY OUT OF HIS UNDISCLOSED INCOME. THEREFORE, CHANGE IN ARGUMENTS DURING SURVEY, ASSESSMENT AND APPEAL CAN NOT BE ACC EPTED AS THE SAME IS NOT SUPPORTED BY ANY MATERIAL ADMISS IBLE UNDER EVIDENCE ACT OR ANY COGENT EVIDENCE. THESE AR E ONLY HOLLOW ARGUMENTS. IT IS PRAYED THAT THE GROUND MAY BE DISMISSED AND THE ASSESSEE MUST GET STRINGENT PUNISHMENT FOR INFRINGEMENT OF LAW AND MAY NOT BE ALLOWED TO ESCAP E WITH TOKEN TAX LIABILITY. 4.7 WE HAVE HEARD BOTH THE PARTIES. THE COPY OF BAN K ACCOUNT OF THE ASSESSEE IS AVAILABLE IN PAPER BOOK. THE CHEQUE DAT ED 21-03-07 IS NOT DEBITED IN THE BANK ACCOUNT OF THE ASSESSEE. IT IS SEEN THAT THERE IS NO CASH WITHDRAWAL. HENCE, THE AMOUNT OF RS. 3.00 LACS IS N OT TO BE CONSIDERED. 30 HOWEVER, THE ASSESSEE STATED THAT A SUM OF RS. 5.00 LACS EACH STATED TO BE PAID FROM THE BANK ACCOUNT OF HIS WIFE AND SON HAVE ACTUALLY BEEN EITHER GIVEN BY TRANSFER FROM HIS BANK ACCOUNT OR FROM HIS OWN BANK. THE EXPLANATION OF THE ASSESSEE IS THAT HE HAS MADE PAY MENT OF RS. 5.00 LACS EACH TO HIS SOWN AND WIFE THROUGH BANK ACCOUNT. BOO KS OF ACCOUNTS HAVE NOT BEEN PRODUCED. IF THE AMOUNTS ADVANCED ARE OUT OF E XPLAINED FUNDS THEN IN THE BALANCE SHEET , THE ACCOUNTS OF HIS SON OR WIFE SHOULD HAVE APPEARED AS DEBTOR OR THE AMOUNT SHOULD SAND REDUCED FROM THIS CAPITAL ACCOUNT WHICH IS AVAILABLE AT PAGE 17 OF THE PAPER BOOK. THERE IS NO DEBIT OF THESE SUMS IN THE CAPITAL ACCOUNT. LOANS AND ADVANCES SHOWN LD. AR RS . 9,45,669/-. NO DETAILS FILED BEFORE ANY OF THE AUTHORITIES BELOW. NO DETAI LS TO SHOW THAT HIS SON AND WIFE WERE CREDITORS AND PAYMENTS HAVE BEEN MADE FRO M SUCH CREDIT BALANCE. NO DETAILS FILED EVEN IN THE PAPER BOOK FILED BEFOR E US. THE BALANCE SHEET AS ON 31-03-2006 SHOWS CREDIT BALANCE OF RS. 37,000/- IN THE NAME OF SHRI PRADEEP KUMAR AND NO CREDIT BALANCE IN THE NAME OF SAVITRI DEVI. HENCE, INVESTMENT OF RS. 10.00 LACS HAS BEEN RIGHTLY INCLU DED IN THE INCOME AS UNDISCLOSED SOURCES. THE ASSESSEE HAS EXPLAINED THA T A SUM OF RS. 2.25 LACS WAS RECEIVED FROM HER DAUGHTER-IN-LAW FROM SALE OF CAR. HENCE, THE SUM OF RS. 2.25 LACS IS TO BE TREATED AS EXPLAINED. A SUM OF RS. 1,76,800/- HAS BEEN ACCEPTED BY THE AO. THE ASSESSEE IN HIS REPLY SURRE NDERED RS. 9,03,200/-. 31 TOTAL PAYMENT RS. 27,00,000/- LESS 3 LACS NOT PAID RS. 3,00,000/- RS. 24,00,000 LESS RS. 10 LACS TREATED AS UNEXPLAINED BY OUR FINDING RS. 10,00,000/- RS. 14,00,000/- SURRENDER BY ASSESSEE RS. 9,03,200/- RS. 4,96,800/- ACCEPTED BY AO RS. 1,76,800/- RS. 3,20,000/- SUM OF RS. 3.20 LACS IS STATED TO BE PAID BY SON. SUM OF RS. 2.25 LACS RECEIVED BY THE ASSESSEE FROM HER DAUGHTER-IN-LAW A S SHE SOLD A CAR. WE ARE NOT HAVING THE DETAILS OF DATE ON WHICH SALE PROCEE DS ARE RECEIVED. IF THE SALE PROCEEDS HAVE BEEN DEPOSITED IN BANK ACCOUNT OF THE SON OF THE ASSESSEE OR HAVE BEEN USED FOR PAYMENT IN CASH THEN CREDIT SHOU LD BE GIVEN. BALANCE OF RS. 95,000/- IS TREATED AS UNEXPLAINED. HENCE, THE ADDITION IS RS. 10,00,000 PLUS 95,000 PLUS 9,03,20 = RS. 19,98,200 AND IF THE ASSESSEE HAS INCLUDED RS. 9,03,000/- IN INCOME THEN BALANCE WILL BE ADDED . THE ADDITION TO THE EXTENT OF RS. 9,03,200/- IS CONFIRMED PROVIDED THE SAME IS NOT INCLUDED IN THE COMPUTATION OF INCOME OF THE ASSESSEE. 5.1 THE FOURTH GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 4,65,919/- IN RESPECT OF INVESTMENT IN PAWNING. 32 5.2 DURING THE COURSE OF SURVEY THE ASSESSEE WAS F OUND WITH THE SLIPS OF ADVANCE ATTACHED TO THE ORNAMENTS WHICH ARE MORTGAG ED AGAINST THE AMOUNT ADVANCED TOTALLING TO RS.5,67,300/- WHERE AS THE AM OUNT SHOWN IN THE BALANCE SHEET AS 31.03.06 WAS RS.1,01,831/-. THE MO DUS OPERANDI AS ADMITTED IN ANSWER TO QUESTION 11 AND 12 IS THAT T HE ASSESSEE USED TO MAINTAIN A SMALL DIARY/BAHI SORT OF MEMORY BOOK TO REGISTER ADVANCES MADE TO VARIOUS PERSONS AGAINST PAWNING AND TORE IT OFF AT INTERVALS AND SHOWING INTEREST INCOME ON PAWNING ON ESTIMATED BASIS. AFTE R REFERRING TO QUESTION AND ANSWER NO.11 , THE AO OBSERVED THAT THE PLEA OF CLAIMING ALLOWANCE OF THE STOCK SHOWN IN THE BALANCE SHEET WHILE DISCUSSI NG ISSUE OF STOCK IN PRECEDING PARAS IT HAS ALREADY BEEN POINTED OUT THA T AT THE TIME OF SURVEY NO INVENTORY OF THE PAWNED ORNAMENTS WAS PREPARED AS E VIDENT FROM THE RECORDS. AN INVENTORY OF THE SLIPS ATTACHED TO THE PAWNED ORNAMENTS WAS LISTED FOR THE PURPOSE OF WORKING OUT THE TOTAL AMO UNT OF ADVANCES MADE AGAINST THE ORNAMENTS SO PAWNED/MORTGAGED, WHICH AM OUNTED TO RS. 567300/-. THE AMOUNT OF ADVANCE IN THE BALANCE SHEE T SHOWS RS. 101851/- LEAVING AN EXCESS AMOUNT OF RS. 465449/- ADVANCED O UT OF UNACCOUNTED INCOME. IT WAS THE BASIS THE ASSESSEE OFFERED THE AMOUNT OF DIFFERENCE FOR TAXATION AS WITNESSED BY ANSWER TO QUESTION 19. 33 5.3 WHILE FILING RETURN THE ASSESSEE DID NOT INCLU DE THE AMOUNT IN HIS INCOME FOR THE REASONS BEST KNOWN TO HIM. THE STOCK OF RS. 3,95,900/- AS SHOWN IN THE BALANCE SHEET AS ON 31.03.2006 ALLEGED OF PAWNING ORNAMENT WOULD NOT BE LIABLE TO BE ALLOWED AS NO INVENTORY T HEREOF WAS PREPARED AS THE SAME DID NOT BELONGED TO THE ASSESSEE. THE MATE RIAL THING IN QUESTION WAS THE AMOUNT OF THE ADVANCE WHICH WAS WORKED OUT. IN THE INVENTORY NO SUCH REFERENCE OR INDICATION TO THE EFFECT THAT A P ARTICULAR STOCK OR ITEM WAS IDENTIFIED EITHER BY SURVEY OFFICIALS OR BY THE ASS ESSEE IN HIS STATEMENT OR ANYWHERE IN THE ENTIRE WORKING AS PRACTICE PREVAILS , IDENTIFYING THE ITEMS BELONGING TO THE PAWNED ITEMS COME ON RECORDS. IN V IEW OF ABSENCE OF SUCH DETAILS THE ASSESSEES CLAIM BEING WITHOUT ANY BASI S IS REQUIRED TO BE TURNED DOWN AND THE DIFFERENCE OF RS.4,65,919/- WAS TREATE D AS ASSESSEES INVESTMENT IN ADVANCES OUT OF INCOME FROM UNDISCLOS ED SOURCES. 5.4 IN THE FIRST APPEAL, THE LD. CIT(A) HELD AS UND ER: - AO HAS RIGHTLY CONCLUDED THAT NO CREDIT OF STOCK O F RS. 3,95,900/- AS SHOWN IN THE BALANCE SHEET IN 31.03.2 006 CAN BE ALLOWED TO ASSESSEE. AS MENTIONED BY ASSESSEE HIMSE LF IN HIS STATEMENT DURING THE COURSE OF SURVEY, FIGURES OF O PENING AND CLOSING STOCK ARE MENTIONED BY HIM IN RETURNS OF EA RLIER YEARS ONLY ON ESTIMATION BASIS. THEREFORE NO COGNIZANCE O F THE SAME CAN BE TAKEN. IN THE BALANCE SHEET OF ASSESSEE AS O N 31/03/06, FIGURE RS. 1,01,831/- IS MENTIONED AS LOAN & ADVAN CE AGAINST INTEREST. THE SAME FACT WAS ADMITTED BY ASSESSEE I N HIS STATEMENT IN REPLY TO Q.NO.19 AND ADDITIONAL INCOME OF RS. 4,65,919/- WAS OFFERED FOR TAXATION ON THIS ACCOUNT . ADDITION OF RS. 4,65,919/- IS JUSTIFIED FOR THE REASONS GIVEN B Y AO IN DETAIL 34 IN THE ASSESSMENT ORDER AND THE SAME IS CONFIRMED. GROUND NO.4 OF THE APPEAL IS THUS DISMISSED. 5.5 THE LD. AR HAS SUBMITTED AS UNDER:- 1. FOLLOWING SUBMISSIONS (PB 3) WERE MADE BEFORE THE LD. CIT(A). THE SAME ARE AS UNDER: THAT THE LEARNED DEPUTY COMMISSIONER HAS ERRED IN ADDING RS.4,55,919/- IN THE STOCK OF PAWING WITH OUT GIVING REBATE OF RS.3,95,900/- ALREADY SHOWN IN THE ACCOUNT BOOKS AS ON 31.03.2006. YOUR HONOUR HERE I WOULD LIKE TO SUBMIT THAT THE ASSESSEE HAD ALREADY SHOWN THE STOCK OF PAWING OF RS.3,95,900/- AND RS.1,01,83 1/- IN THE ACCOUNT BOOKS. COPY OF BALANCE SHEET AS ON 31.03.20016 ALREADY ATTACHED IN THE PAPER BOOK. THE LEARNED DEPUTY COMMISSIONER REJECTED THE AMOUNT OF RS.3,95,900/- OUT OF TOTAL AMOUNT OF RS.4,97,731/- ON THE BASIS THAT NO INVENTORY WAS PREPARED BY THE ASSESSE E. ACTUALLY THE STOCK OF PAWING WAS LYING IN THE SHAPE OF BAGS OF DIFFERENT PERSONS AND IN THE BAG THERE WAS SLIP OF EACH PERSON. MOREOVER THE VALUATION OF STOCK OF PAW ING HAS BEEN TAKEN ON MARKET PRICE OF EACH BAG AND NOT ON THE ESTIMATED COST PRICE ON WHICH THE AMOUNT WAS ADVANCED. IN VIEW OF ABOVE MENTIONED FACTS IT IS CL EAR THAT THE ADDITION OF RS.4,65,919/- IS UNCALLED FOR AND REQUIRES TO BE DELETED. 2. IN ANY CASE, THE FACT THAT STOCK OF RS. 3,95,900/- AND RS. 1,01,831/- BOTH (TOTALLING TO RS. 4,97,731/- )W ERE SHOWN IN THE BALANCE SHEET AS ON 31.03.2006 (PB 20). THE SAME WAS FILED WITH THE ROI FOR A.Y.06-07 IN THE REGULAR COURSE PR IOR TO THE SURVEY ITSELF AND REFERRED TO BY THE AO ALSO. THE A SESEEMENT FOR THAT YEAR STOOD COMPLETED BASED ON THE DECLARED INC OME. HENCE, THE CLOSING BALANCES WHICH ARE THE OPENING BALANCE OF PAWNED STOCK THIS YEAR CANNOT BE IGNORED EVEN ASSUMING EAR LIER YEAR BALANCE SHEET WAS PREPARED ON ESTIMATE. IN ANY CASE , THE AO HIMSELF HAVING RELIED UPON THE BALANCE SHEET AS ON 31.03.2006, WAS BOUND TO TAKE THE FIGURES OF PAWNED STOCK FOR T HIS PURPOSE ALSO. 35 3. FURTHER, THE WORKING OF ADVANCES IS OTHERWISE INCO RRECT FOR THE REASON THAT THE AO CONSIDERED THE MARKET PR ICE AS ON THE DAY OF SURVEY WHEREAS THE MARKET PRICE WHEN THESE O RNAMENTS WERE TAKEN FOR THIS PURPOSE, WERE RELEVANT. SECON DLY, NO FINANCER WILL PROVIDE LOAN @ 100% VALUE OF THE MARK ET RATE AND REDUCTION OF 20% DIFFERENCE IS NORMALLY THERE BETWE EN THE SECURITY AND THE AMOUNT OF ADVANCES. THEREFORE, THE DIFFERENCE BETWEEN RS. 5.67 LACS AND RS. 4.97 LACS AS DECLARED IN THE B/S WILL BE COVERED. 4. AGAIN THE STATEMENT DURING SURVEY ARE NOT THE FINA L WORDS. NOTICING THE MISTAKE, THE ASSESSEE HAD ALL T HE RIGHT TO CORRECT THE MISTAKE HENCE, THE AUTHORITIES BELOW WR ONGLY PLACED RELIANCE ON QUES.19. 5.6 THE LD. DR SUPPORTED THE ORDER OF THE AO. 5.7 WE HAVE HEARD BOTH THE PARTIES. DURING THE COUR SE OF SURVEY, SLIPS WERE FOUND WHICH CONTAINED THE DATE AND AMOUNT. IT IS NOT THE CASE OF ASSESSEE THAT DETAILS WERE NOT TAKEN FROM THE SLIPS . THE SLIPS WERE STILL AVAILABLE WITH ASSESSEE. THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT PAWNING ITEMS WERE BELONGING TO EARLIER YEARS. THE BALANCE SHEET SHOWS THE GOLD JEWELLERY STOCK AS INVESTMENT TO THE EXTENT OF RS. 3,75,600/-. LOANS AND ADVANCES AGAINST MORTGAGE ARE SHOWN SEPARATELY TO T HE EXTENT OF RS. 87,831/- . IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 2006 -07, THE GOLD JEWELLERY STOCK AS INVESTMENT IS RS. 3,95,900/-. LOANS AND AD VANCES AGAINST MORTGAGE IS RS. 1,01,831/-. IN THE BALANCE SHEET FOR THE ASS ESSMENT YEAR 2006-07, THE GOLD JEWELLERY STOCK AS INVESTMENT IS AT RS.3,95,90 0/- AND LOAN AND ADVANCES 36 AGAINST INTEREST IS AT RS. 1,01,831/-. THE GOLD JEW ELLERY STOCK SHOWN IN THE BALANCE SHEET IS STATED TO BE REPRESENTING THE MORT GAGED ITEMS. SUCH ITEMS APPEARING IN BALANCE SHEET FROM ASSESSMENT YEAR 200 4-05 IS EITHER TO BE CONSIDERED AGAINST STOCK AND AGAINST MORTGAGE. HENC E, WE FEEL THAT THE ASSESSEE IS JUSTIFIED IN REDUCING THIS FIGURE FROM LOAN AND ADVANCES AGAINST MORTGAGE. HENCE, ADDITION OF RS. 4,97,731/- IS TO B E REDUCED BY RS. 3,95,900/- AND BALANCE ADDITION IS SUSTAINED. 6 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30-09 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 30 /09/2011 *MISHRA COPY FORWARDED TO :- 1. SHRI HARISH KUMAR RAIMALANI, AJMER 2. THE DCIT, CIRCLE- 1, AJMER 3. THE LD. CIT (A) JAIPUR 4. THE LD. CIT BY ORDER 5. THE LD.DR 6. THE GUARD FILE (ITA NO.327/JP /11) A.R, ITAT, JAIPUR FIT FOR PUBLICATION JUDICIAL MEMBER ACCOUNTANT MEMBER 37 38 39