The ACIT, Circle- 1, RAJKOT-GUJARAT V. Smt. Manishaben N. Mashru, RAJKOT-GUJARAT

ITA 355/RJT/2011

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8914 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-07-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 15-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARGOVIND SINGH
• Assessee Lawyers: MJ RANPURA
• Keywords: Unexplained cash credit; Unexplained investment; Depreciation; Loose papers; Peak credit; Proportionate interest; Additional evidence; Revised return
• Section: 69C; 142(1); 133A; 68; 148; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER SR.NO. ITA NO. APPELLANT RESPONDENT 1-2 958/RJT/2010 WITH CO NO.38/RJT/2010 ASTT.YEAR 2003-04 DCIT, CIR.1 RAJKOT. VS. SMT.MANISHABEN N. MASHRU PROP. OF M/S.SHREE DIVYA TRAVELS 2/16, GALAXY COMMERCIAL CENTRE JAWAHAR ROAD, RAJKOT. 3-4 959/RJT/2010 WITH CO NO.39/RJT/2010 ASSTT.YEAR 2004-05 DCIT, CIR.1 RAJKOT. VS. SMT.MANISHABEN N. MASHRU PROP. OF M/S.SHREE DIVYA TRAVELS 2/16, GALAXY COMMERCIAL CENTRE JAWAHAR ROAD, RAJKOT. 5-6 960/RJT/2010 WITH CO NO.40/RJT/2010 ASSTT.YEAR 2005-06 DCIT, CIR.1 RAJKOT. VS. SMT.MANISHABEN N. MASHRU PROP. OF M/S.SHREE DIVYA TRAVELS 2/16, GALAXY COMMERCIAL CENTRE JAWAHAR ROAD, RAJKOT. 7-8 961/RJT/2010 WITH CO NO.29/RJT/2010 ASSTT.YEAR 2005-06 DCIT, CIR.1 RAJKOT. VS. SHRI NAILESH M. MASHRU PROP. OF DIVYA AIR TRAVELS 24/2, GALAXY COMMERCIAL CENTRE JAWAHAR ROAD, RAJKOT. 9-10 966/RJT/2010 WITH CO NO.37/RJT/2010 ASSTT.YEAR 2004-05 ITO, WARD-1(3) RAJKOT. VS. SHRI NAILESH M. MASHRU PROP. OF DIVYA AIR TRAVELS 24/2, GALAXY COMMERCIAL CENTRE JAWAHAR ROAD, RAJKOT. 11 855/RJT/2010 ASSTT.YEAR 2006-07 SMT.MANISHABEN N. MASHRU PROP. OF M/S.SHREE DIVYA TRAVELS 2/16, GALAXY COMMERCIAL CENTRE JAWAHAR ROAD, RAJKOT. VS. ITO, WARD- 1(3) RAJKOT. 12 953/RJT/2010 ASSTT.YEAR 2006-07 DCIT, CIR.1 RAJKOT. VS. SMT.MANISHABEN N. MASHRU PROP. OF M/S.SHREE DIVYA TRAVELS 2/16, GALAXY COMMERCIAL CENTRE JAWAHAR ROAD, RAJKOT. 13-14 355 AND 386/RJT/2011 ASSTT.YEAR 2004-05 AND 2005-06 ACIT, CIR.1 RAJKOT. VS. SMT.MANISHABEN N. MASHRU PROP. OF M/S.SHREE DIVYA TRAVELS 2/16, GALAXY COMMERCIAL CENTRE JAWAHAR ROAD, RAJKOT. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 2 REVENUE BY : SHRI HARGOVIND SINGH, CIT-DR ASSESSEE BY : SHRI M.J. RANPURA, CA / DATE OF HEARING : 30/10/2017 / DATE OF PRONOUNCEMENT: 04/01/2018 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THIS BUNCH OF APPEALS CONTAINS EIGHT APPEALS BY THE REVENUE, FIVE CROSS-O BJECTIONS BY TWO ASSESSEES VIZ. SMT. MANISHABEN N. MASHRU AND SHRI N AILESH M. MASHRU AND ONE APPEAL FILED BY THE ASSESSEE VIZ. SMT.MANIS HABEN N. MASHRU. ALL THESE APPEALS ARE DIRECTED AGAINST SEPARATE ORD ERS OF THE LD.CIT(A)-I. ASSESSMENT YEARS INVOLVED IN THESE APPEALS ARE FROM A.Y 2003-04 TO 2006-07. 2. OUT OF THIS BUNCH, IN TWO APPEALS VIZ. ITA NO.35 5 AND 386/RJT/2011 REVENUE IMPUGNED THE ORDERS OF THE LD. CIT(A)-I, RAJKOT AGAINST CANCELLATION OF PENALTY IMPOSED BY THE ASSE SSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR T HE ASSESSMENT YEARS 2004-05 AND 2005-06. SINCE IN ALL THESE APPEA LS/CROSS- OBJECTIONS, ISSUES AND FACTS ARE INTERTWINED TO EAC H OTHER, WE PROCEED TO DISPOSE OF ALL BY THIS COMMON ORDER FOR THE SAKE OF BREVITY AND CONVENIENCE. 3. BEFORE ADVERTING THE SPECIFIC GRIEVANCE OF THE P ARTIES IN PARTICULAR ASSESSMENT YEAR, WE WOULD LIKE TO TAKE NOTE OF CERT AIN BASIC COMMON FACTS. 4. ASSESSEE, SMT.MANISABEN N. MASHRU IS AN INDIVIDU AL ENGAGED IN THE BUSINESS OF DOMESTIC AND INTERNATIONAL AIR-TICK ETS BOOKING, INCENTIVE TOURS, HOTEL RESERVATIONS AND VISA FORMALITIES UNDE R THE NAME AND STYLE M/S.DIVYA TRAVELS. A SURVEY UNDER SECTION 133A O F THE INCOME TAX ACT, 1961 WAS CARRIED OUT AT THE PREMISES OF THE AS SESSEE ON DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 3 18.2.2005. DURING THE SURVEY, CERTAIN LOOSE PAPERS , DIARIES, FILES ETC. WERE FOUND AND IMPOUNDED. SIMULTANEOUS SURVEY ACTI ON WAS ALSO CARRIED OUT AT THE PREMISES OF SISTER CONCERN OF TH E ASSESSEE I.E. M/S.DIVYA TOURISM PVT.LTD. IN WHICH SHRI NAILESH MASURA, HUSBAND OF THE ASSESSEE IS MANAGING DIRECTOR, WHO ALSO LOOKS A FTER DAY-TO-DAY AFFAIRS OF THE PROPRIETARY CONCERN OF THE ASSESSEE I.E. M/S.DIVYA TRAVELS. STATEMENT OF SHRI NAILESH MASURA ON OATH WAS RECORDED UNDER SECTION 131(1A) OF THE ACT IN THE CASE OF SURVEY OF M/S.DIVYA TRAVELS. AFTER THE SURVEY, SUMMONS WERE ISSUED TO THE ASSESS EE REQUIRING TO APPEAR AND FURNISH CERTAIN REQUISITE DETAILS, WHICH REMAINED UNATTENDED. HOWEVER, AFTER FILING A REPLY ON 28.2. 2005, THE ASSESSEE AGAIN FILED A REPLY ON 22.3.2005 DISCLOSING AN AMOU NT OF RS.32,20,478/- FOR THE ASSTT.YEAR 2003-04 AND AGREED TO PAY TAX ON THE SAME. 5. IN THE ABOVE BACKGROUND, THE ASSESSING OFFICER I SSUED NOTICE UNDER SECTION 148 OF THE ACT ON 28.12.2007 WHICH WA S SERVED UPON THE ASSESSEE ON 31.12.2007, REQUIRING THE ASSESSEE TO F ILE REVISED RETURN. FOR WHICH THE ASSESSEE REPLIED THAT THE RETURN FILE D VIDE RECEIPT NO.011775 ON 28.12.2007 BE CONSIDERED. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICES ON VARIOUS DATES REQUIRING T HE ASSESSEE TO CLARIFY ITS STAND ON VARIOUS ISSUES AND TO EXPLAIN THE CONT ENTS OF THE IMPOUNDED MATERIAL. THESE NOTICES REMAINED UNANSWE RED. SINCE THE ASSESSMENT WAS GETTING TIME BARRED, AND TO GIVE ANO THER OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS POSITION, A FINAL NOTIC E UNDER SECTION 142(1) AND 143(2) WAS ALSO ISSUED TO THE ASSESSEE, WHICH A LSO REMAINED UNATTENDED. ACCORDING TO THE ASSESSING OFFICER, WH ATEVER DOCUMENTS IMPOUNDED DURING THE SURVEY, COPIES OF WHICH WERE F URNISHED TO THE ASSESSEE, WHENEVER ASKED FOR BY THE ASSESSEE. DESP ITE THAT THE ASSESSEE HAS NOT TURNED UP FOR FINALIZATION OF THE ASSESSMENT. THEREFORE, BASED ON THE MATERIAL AVAILABLE WITH THE DEPARTMENT, THE ASSESSING OFFICER PROCEEDED TO FINALISE THE ASSESSM ENT OF THE ASSESSEE. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 4 6. FIRST WE TAKE APPEALS AND CROSS-OBJECTION FOR TH E ASSTT.YEARS 2003-04 TO 2005-06. IN THE CASE OF SMT.MANISHABEN N. MASHRU FACTS ON ALL VITAL POINTS ARE COMMON EXCEPT VARIATION IN THE QUANTUM. THEREFORE, FOR THE FACILITY OF REFERENCE, WE TAKE U P FACTS MAINLY FROM THE ASSTT.YEAR 2003-04. IT IS PERTINENT TO OBSERVE THA T DURING THE COURSE OF SURVEY CERTAIN LOOSE PAPERS AND DIARIES WERE FOUND. THESE WERE INVENTORISED AS ANNEXURE A/2, A/3, A/4 AND A/8. THE LD.AO HAS COMPILED DETAILS OF NARRATIONS MADE IN THESE ANNEXU RES. HE ALSO TOOK INTO CONSIDERATION CREDIT ENTRIES IN THESE PAGES AN D REPRODUCED THEM ON PAGE NOS.4 TO 11 OF THE ASSESSMENT ORDERS. HE CONF RONTED THE ASSESSEE TO SHOW WHY THESE CREDIT ENTRIES SHOULD NOT BE ADDE D AS UNEXPLAINED CASH CREDIT OF THE ASSESSEE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. ACCORDING TO THE AO, THE ASSESSEE FAILED TO EXPLAIN SOURCE OF CREDIT ENTRIES AND ALSO FAILED TO RECONCILE ENTRIES WITH OTHER MATERIAL. ACCORDINGLY HE TREATED ALLEGED CREDIT ENTRIES AS UN EXPLAINED CASH CREDIT OF THE ASSESSEE AND MADE ADDITION OF RS.5,10,28,350 /- IN THE ASSTT.YEAR 2003-04. SIMILAR ADDITIONS HAVE BEEN MADE IN OTHER TWO ASSESSMENT YEARS. ON APPEAL, THE LD.CIT(A) HAS DELETED THESE ADDITIONS. 7. THE LD.COUNSEL FOR THE ASSESSEE DURING THE COURS E OF HEARING COMPILED DETAILS IN TABULAR FORM AND FILED A SYNOPS IS EXHIBITING ADDITIONS MADE BY THE AO; RELIEF GRANTED BY THE LD.CIT(A) AND ADDITIONS SUSTAINED BY THE LD.CIT(A). COMMON COMPOSITION OF GROUND NO.1 IN THE REVENUES APPEALS FOR ALL THESE THREE YEARS HAS BEEN DEPICTED AS UNDER: THE LD. CIT(A)-I, RAJKOT HAS ERRED IN LAW AND ON FA CTS IN GRANTING RELIEF AS PER COLUMN (3) OF FOLLOWING TABLE OUT OF TOTAL ADDITION MADE AS PER COLUMN (1) ON ACCOUNT OF IMPOUNDED ANNEXURE. A.Y. ADDITION BY AO RELIEF GRANTED BY CIT(A) ADDITION SUSTAINED BY CIT(A) (1) (2) (3) (4) 03-04 5,10,28,350 5,07,28,350 3,00,000 DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 5 04-05 17,92,73,560 17,50,73,560 42,00,000 05-06 90,84,157 51,33,299 * 3,00,000 * FOR AY 2005-06, ADDITION OF RS. 36,50,9781- WAS SUSTAINED BY LD. CIT(A) ON THE BASIS OF APPELLANT'S OWN ADMISSION BEFORE INVESTIGA TION WING ON ACCOUNT OF PEAK CREDIT OF THE ENTRIES IN IMPOUNDED DOCUMENTS. 8. THIS GROUND IN ALL THESE THREE ASSESSMENT YEARS IS INTER-CONNECTED WITH GROUND NO.2 TAKEN BY THE ASSESSEE IN COS. FILE D IN THESE ASSESSMENT YEARS. IN OTHER WORDS, ADDITIONS SUSTAI NED BY THE LD.CIT(A) IN THE ABOVE TABLE ARE BEING CHALLENGED BY THE ASSE SSEE. THUS, WE TAKE ALL THESE GROUNDS TOGETHER. 9. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT IS PERTINENT TO O BSERVE THAT SURVEY WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 18/19. 02.2005. A NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 28.12.20 07 AND AO HAS STARTED INVESTIGATION BY ISSUANCE OF NOTICE UNDER S ECTION 143(2) ON 15.10.2008 I.E. THIS WAS FIRST DAY OF HEARING FIXED IN THESE ASSESSMENT YEARS. THE AO HAS PASSED ASSESSMENT ORDER ON 18.12 .2008. HE OBSERVED THAT THE ASSESSEE FAILED TO SUBMIT REQUISI TE DETAILS EXPLAINING ENTRIES REFLECTED IN THE SEIZED PAPERS. HE ALSO AS SUMED THAT ONLY CASH CREDITED ARE TO BE TAKEN INTO CONSIDERATION AND THE SE TO BE TREATED AS UNEXPLAINED CASH CREDIT. BEFORE THE LD.CIT(A) THE ASSESSEE HAS FILED DETAILS IN THE SHAPE OF ADDITIONAL EVIDENCE, AND TH E LD.CIT(A) HAS CALLED FOR REMAND REPORT. AS FAR AS ADMISSION OF ADDITION AL EVIDENCES IS CONCERNED, REVENUE HAS NOT IMPUGNED THE ORDER OF TH E LD.CIT(A). THE STAND OF THE ASSESSEE HAS BEEN REPRODUCED BY THE LD .CIT(A) IN PARA.4.1, WHICH READS AS UNDER: 4.1 CHALLENGING THE ADDITIONS, THE ID AR SUBMI TTED AS UNDER: '(A) THE AO HAS INVOKED THE PROVISIONS OF SECTION 6 8 OF THE ACT IN RESPECT OF CREDIT ENTRIES APPEARING IN ROUGH NOTE B OOKS IMPOUNDED DURING THE COURSE OF SURVEY U/S 133A OF T HE ACT AND MADE THE FOLLOWING ADDITIONS: DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 6 SR.NO. DESCRIPTION AMOUNT(RS. ) 01 02 03 04 ANNEXURE-A-2 ANNEXURE-A-3 ANNEXURE-A-4 ANNEXURE-A-8 54,30,111 52,26,696 1,41,72,402 2,61,99,141 TOTAL 5,10,28,350 (B) AT THE OUTSET, IT IS RESPECTFULLY SUBMITTE D THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF BOOKING OF DOMESTIC A ND INTERNATIONAL AIR TICKETS FOR AIR INDIA: KINGFISHER JET AIRLINES: INTERNATIONAL AIR LINES ETC. (IN SHORT, PRINCIPALS) IN HER PROPRIETARY CONCERN IN THE NAME & STYLE AS M/S DIVYA TRAVELS. (C) THE APPELLANT IS HAVING WHOLE SALE BUSINESS ON BEHALF OF THE PRINCIPALS AND HER MAJOR BUSINESS IS WITH THE SUB-T RAVEL AGENTS. SHE IS MEMBER OF INTERNATIONAL AIR TRANSPORT ASSOCI ATION (IATA), WHO SECURE GUARANTEE FOR PAYMENTS TO THE PRINCIPALS . (D) THE TURNOVER IN RESPECT OF DOMESTIC & INTERNATI ONAL BOOKING OF AIR TICKETS RUNS IN CORES OF RUPEES AND THE GROSS C OMMISSION RECEIPTS ON SUCH SALES WAS NEARLY RS. 6.90 CRORES, DURING THE YEAR UNDER CONSIDERATION. THE ENTIRE BUSINESS TRANSACTIO NS WITH PRINCIPALS ARE THROUGH THE BANKING CHANNEL. (E) THE APPELLANT IS MAINTAINING REGULAR BOOKS OF A CCOUNT, WHICH ARE DULY SUPPORTED BY BUSINESS RELATED DOCUMENTS. T HE SAME ARE SUBJECT TO AUDIT U/S 44AB OF THE ACT AS WELL. THERE IS NO DISQUALIFICATION IN AUDIT REPORT (COPY OF AUDITED A CCOUNTS AND AUDITOR'S REPORT ATTACHED. (F) THE APPELLANT HAS DEPLOYED NUMBER OF EMPLOYEES FOR BOOKING AND TAKING SCORE OF FINANCIAL TRANSACTIONS. THERE A RE SIZABLE VALUABLE CLIENTS WHO ARE USED TO BOOK THE DOMESTIC AND INTERNATIONAL AIR TICKETS ON ACCOUNT AND PAYMENTS A RE LIQUIDATED ON SUBSEQUENT DATES. (G) AT THIS JUNCTURE, IT IS RESPECTFULLY SUBMITTED THAT THE APPELLANT IS REQUIRED TO MAKE THE PAYMENTS TOWARDS BOOKING OF AIR TICKETS TO THE PRINCIPALS AT A REGULAR INTERVAL TO RESPECT THE SCHEDULED TERMS OF PAYMENTS. THERE HAPPENED INSTANCES, WHERE THE PAYMENTS FROM CLIENTS ARE NOT MATERIALIZED WHERE AS PAYMENTS TO THE PRINCIPALS ARE REQUIRED TO BE MADE ON SCHEDULED DATE. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 7 (H) IN THE CIRCUMSTANCES, THE STAFF EMPLOYED FOR TA KING SCORE OF THE AVAILABLE FUND AND OTHER CONTINGENCIES, USED TO MARK THE AVAILABITY OF FUND AS ALSO EXPECTED COLLECTION FROM CLINETS, BESIDES MAKING ENTRIES IN DEBIT SIDE FOR RE-PAYMENT AND MIS CELLANEOUS EXPENSES ON DEBIT SIDE. (I) THE ENTIRE EXERCISE IS CARRIED OUT BY THE RESPO NSIBLE CLERK IN ROUGH NOTE BOOK, WHERE IN THE HAPPENING OF WITHDRAW ALS FROM BANK: DETAILS OF RECEIPT NUMBER OF PAYMENTS RECEIVE D FROM CLIENTS: TELEPHONE NUMBERS ETC. ARE ALSO MENTIONED. SUCH CONTINGENCIES ARE SUMMARIZED AS UNDER: OPENING CASH BALANCE OF PREVIOUS DAY; THE CASH COLLECTION MATERIALIZED AND CORRESPONDING RECEIPT NUMBERS; THE EXPECTED COLLECTION FROM CLIENTS & CORRESPONDIN G RECEIPTS; THE BANK WITHDRAWALS AND DETAILS RELATED TO BANK BA LANCE; THE TELEPHONE NUMBERS; THE DETAILS RELATED TO DOMINATION OF CASH COLLECTIO N FROM VARIOUS AGENTS; THE DETAILS OF ADVANCE RECEIPTS FROM AGENTS; (J) IN SHORT, THE NOTING IN ROUGH NOTE BOOK IS JUST NOTE BEEN OF FINANCIAL HAPPENINGS, WHICH MAY OR MAY NOT BE HAPPE NED. THE ABBREVIATIONS OR NAMES MARKED IN THE ROUGH NOTE BOO KS ARE NAMES OF CLIENTS WITH WHOM THERE IS REGULAR BUSINES S AND BUSINESS DEALINGS WITH THEM ARE DULY RECORDED IN RE GULAR BOOKS OF ACCOUNT AS ALSO THE FINAL FINANCIAL TRANSACTIONS AS A WHOLE ARE REFLECTED IN REGULAR BOOKS. THE SUMMARY OF EXPLANAT ION OF RELEVANT MATERIAL IMPOUNDED AND MARKED AS ANNEXURES -A-2, A-3, A-4 AND A-8 AND BIFURCATION OF VARIOUS MULTIPLE ADD ITIONS ARE ATTACHED. ' (K) THE AO DID NOT APPRECIATE THE CASUAL NOTING IN ROUGH NOTE BOOK IN RIGHT PERSPECTIVE AND HAS MADE TOTAL OF THE JOTTINGS OF EACH CREDIT ENTRIES MENTIONED IN THE ROUGH NOTE BOO K IGNORING THE DEBIT ENTRIES REFLECTED ON SAME PAGES. IT IS SETTLE D PROPOSITION OF LAW THAT THE DOCUMENT IS TO BE CONSIDERED AS A WHOL E. RELIANCE IS PLACED ON THE DECISION IN THE CASE OF INDORE MALVA UNITED MILLS LTD. VS. STATE OFMADHYA PRADESH (1966) 60 ITR 41 (S C). (I) HON'BLE SUPREME COURT HAS, IN THE CASE OF NATIO NAL THERMAL POWER CO. LTD. VS. CIT (1998) 229 ITR 383, OBSERVED THAT: DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 8 'THE PURPOSE OF AN ASSESSMENT PROCEEDING BEFORE THE TAXING AUTHORITY IS TO ASSESS CORRECTLY THE TAX LIABILITY OF THE ASSESSES IN ACCORDANCE WITH LAW.' (M) THE AO HAS MADE SUM OF THE TOTAL OF THE CREDIT ENTRIES IN IMPOUNDED NOTE BOOKS ON SUBJECTIVE CONSIDERATION. T HERE ARE MULTIPLE ADDITIONS ON REPEATED ENTRIES, BESIDES ADD ITIONS IN RESPECT OF TELEPHONE NUMBERS AND RECEIPT VOUCHER NU MBERS WHICH IDENTIFIED IN SUMMARY AS SATED VIDE PARA (J) ABOVE. (N) IT MAY BE MENTIONED THAT THE EXTENSIVE SURVEY PROCEEDINGS WERE CARRIED OUT AT THE BUSINESS PREMISES OF THE AP PELLANT AND ASSOCIATE CONCERNS SIMULTANEOUSLY ON SAME DATE. THE APPELLANT HAS ALSO FURNISHED NECESSARY EXPLANATIONS DURING TH E COURSE OF POST SURVEY PROCEEDINGS AS ALSO DURING THE COURSE O F ASSESSMENT PROCEEDINGS. NO MATERIAL OR CIRCUMSTANTIAL EVIDENCE WAS NOTICED TO SUGGEST UNRECORDED FINANCIAL TRANSACTIONS OR UNR ECORDED INVESTMENTS. (O) YOUR HONOR WILL APPRECIATE THE FACT THAT, THE N OTING IN ROUGH NOTE BOOK CANNOT BE REGARDED AS BOOKS OF ACCOUNT WI THIN THE MEANING OF SECTION 2(12A) OF THE ACT. THE CASUAL NO TING IN ROUGH DIARY ARE DUMB DOCUMENTS HAVING NO EVIDENTIAL VALUE . THE RELIANCE IS PLACED ON FOLLOWING JUDICIAL PRONOUNCEM ENTS. 10. THE LD.AO HAS SUBMITTED HIS REMAND REPORT ON TH E EXPLANATION OF THE ASSESSEE WITH REGARD TO EACH ENTRY IN THE ANNEX URES CONSIDERED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. T HE LD.CIT(A) HAS REPRODUCED REMAND REPORT OF THE AO AS WELL AS EXPLA NATION OF THE ASSESSEE QUA ENTRIES, THEREAFTER, THE LD.CIT(A) HAS DELETED ADD ITION BY OBSERVING AS UNDER: (A.Y. 2003-04). 4.3 I HAVE PERUSED THE ASSESSMENT ORDER, SUBMI SSIONS OF THE APPELLANT, THE REMAND REPORT AND APPELLANT'S REJOIN DER ON REMAND REPORT CAREFULLY. I HAVE ALSO CONSIDERED THE BUSINE SS MODUS OPERAND!. IT IS NOTICED THAT THE APPELLANT IS ENGAG ED IN THE BUSINESS OF BOOKING OF DOMESTIC AND INTERNATIONAL A IR TICKETS FOR THE AIR INDIA, JET AIRLINES, INTERNATIONAL AIR LINE S ETC, ON WHOLE SALE BASIS BESIDES ALLIED ACTIVITIES IN TOURISM FIE LD. SHE IS HAVING A VOLUMINOUS TURNOVER AND GETTING SIZEABLE COMMISSION THERE FROM. IT IS ALSO NOTICED THAT THE JOTTING IN IMPOUNDED DO CUMENTS ARE MADE BY A CLERK SHOWING THE DETAILS RELATED TO CASH COLLECTION, EXPECTED COLLECTION, WITHDRAWALS FROM THE BANK, TEL EPHONE DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 9 NUMBERS ETC. THE PLEA OF THE APPELLANT THAT THE JOT TING IN ROUGH NOTEBOOK IS JUST NOTE BEEN OF FINANCIAL HAPPENINGS IS FOUND ACCEPTABLE IN PRINCIPAL, SINCE THE APPELLANT IS HAV ING VOLUMINOUS BUSINESS ON BEHALF OF THE PRINCIPALS. SHE RECEIVE S TICKETS FROM PRINCIPALS FOR WHICH PAYMENTS ARE MADE THROUGH BANK , HER COMMISSION RECEIPTS FROM THE PRINCIPALS ARE THROUGH THE BANKING CHANNEL HER SALES TRANSACTIONS TO SUB AGENTS ARE VO LUMINOUS AND CORRESPONDING JOTTING IN ROUGH NOTEBOOK CAN BE CONS IDERED TO BE REFLECTION OF FINANCIAL HAPPENINGS. THE APPELLANT HAS ALSO CONVENIENTLY DEMONSTRATED THE FACT THAT ALMOST ALL THE JOTTING IN IMPOUNDED NOTEBOOKS ARE REFLECTED IN THE REGULAR BO OKS, EXCEPT A FEW TRANSACTIONS AMOUNTING TO RS.1,59,624/- FOR WHI CH NO CONVINCING EXPLANATION OR DOCUMENTS ARE FORTHCOMING . THE PLEA OF THE APPELLANT THAT THE DIARIES ARE NOT REGULAR BOOK S OF ACCOUNT AND ENTRIES IN SUCH DIARIES CANNOT BE A BASE FOR MAKING THE ADDITION U/S 68 OF THE IT ACT IS CORRECT. IT IS PROPOSITION OF LAW THAT THE SCOPE OF THE PROVISION OF SECTION 68 OF THE IT ACT CANNOT BE EXTENDED TO NOTING IN ROUGH NOTEBOOK WHICH IS NOT B OOKS OF ACCOUNT AS DEFINED IN SECTION 2(12A) OF THE IT ACT. THERE WAS NO CASE FOR MAKING THE ADDITION U/S68 OF THE ACT ON TH E BASIS OF JOTTING IN IMPOUNDED DOCUMENTS. FURTHER, THE AO HAS MADE THE ADDITION OF ADMITTED INCOME OF RS.36,50,978/- WHILE FINALIZING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06. THERE W AS NO JUSTIFICATION FOR MAKING SUCH A FRESH ADDITION IN T HE ASSESSMENT YEAR UNDER CONSIDERATION. AS PER THE SETTLED PROPOS ITION OF LAW, THE PURPOSE OF AN ASSESSMENT PROCEEDING BEFORE THE TAXING AUTHORITY IS TO ASSESS CORRECTLY THE TAX LIABILITY OF THE ASSESSEE IN ACCORDANCE WITH LAW. HOWEVER AT THE SAME TIME THE A PPELLANT WAS NOT IN A POSITION TO EXPLAIN TRANSACTIONS TO THE TU NE OF RS. 1,59,624/- RECORDED IN IMPOUNDED DOCUMENTS. THE INS TANCES OF UNRECORDED BUSINESS TRANSACTIONS LEAD TO REASONABLE CONCLUSION THAT THERE ARE BUSINESS TRANSACTIONS WHICH ARE NOT RECORDED IN REGULAR BOOKS OF ACCOUNT CONSIDERING TOTALITY OF FA CTS, I AM CONVINCED THAT THE RATION LAID DOWN IN BY THE.HON'B LE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS P. PRAVIN & CO. (2 005) 274 ITR 534(GUJ) IS APPLICABLE TO THE FACTS OF THIS CASE AN D RESPECTFULLY FOLLOWING THE SAME I AM OF THE CONSIDERED VIEW THAT IT IS REASONABLE TO ESTIMATE THE PROFIT EARNED OUT OF SUC H UNRECORDED FINANCIAL TRANSACTIONS AT RS. 3,00,000/-. IN THE CI RCUMSTANCES, THE ADDITIONS BASED ON ANNX-A2,A3,A4,A8 AMOUNTING TO RS.5,10,28,350/- AND ADDITION OF RS.36,50,978/- TAX ED IN THE ASSESSMENT YEAR 2005-06 ARE HEREBY DELETED AND ESTI MATED ADDITION OF RS.3,00,000/- IS SUSTAINED THE APPELLAN T GETS RELIEF ACCORDINGLY. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 10 11. THE LD.DR HAS RELIED UPON THE ORDER OF THE AO W HEREAS THE LD.COUNSEL FOR THE ASSESSEE RELIED UPON ORDER OF TH E LD.CIT(A) AS WELL AS SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE LD.CIT (A). 12. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE FIN D THAT CASE OF THE ASSESSEE IS THAT THE ASSESSEE AT THE RELEVANT TIME WAS A MEMBER OF INTERNATIONAL AIR TRANSPORT ASSOCIATION (IATA FOR SHORT). SHE USED TO BOOK DOMESTIC AND INTERNATIONAL AIR-TICKET FOR AIR INDIA, KINGFISHER, JET AIRLINE AND OTHER INTERNATIONAL AIRLINES. HER TURN OVER WAS VOLUMINOUS RUNNING INTO CRORES OF RUPEES BECAUSE COMMISSION RE CEIPTS ON SUCH SALES WERE NEARLY RS.6.90 CRORES. SHE HAS DEPLOYED NUMBER OF EMPLOYEES FOR BOOKING AND TAKING SCORES OF FINANCIA L TRANSACTIONS. SHE HAS VALUABLE CLIENTS WHO USED TO BOOK DOMESTIC AND INTERNATIONAL AIR- TICKETS. COMMISSION FROM AIRLINES WAS CREDITED IN HER ACCOUNT THROUGH BANKING CHANNEL. IN OTHER WORDS, THERE WAS NO CONC EPT OF CASH IN THIS LINE OF BUSINESS. SHE HAS BEEN MAINTAINING HER REG ULAR BOOKS OF ACCOUNTS WHICH ARE DULY SUPPORTED BY BUSINESS RELAT ED DOCUMENTS AND AUDITORS HAVE NOT POINTED OUT ANY DISQUALIFICATION TO THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. THUS, THE STA ND OF THE ASSESSEE WAS THAT IN THE LOOSE PAPER CERTAIN NOTINGS, JOTTIN GS HAVE BEEN MADE BY THE EMPLOYEES WITH REGARD TO FINANCIAL HAPPENINGS O F THE ASSESSEE. THESE JOTTINGS CONTAINED CERTAIN RECEIVABLE AMOUNTS , PAYMENTS PROJECTION OF THE BUSINESS ETC. THE LD.AO HAS CONS TRUED THESE PAPERS IN AN ERRONEOUS MANNER. HE HAS SIMPLY TAKEN INTO CONS IDERATION ENTRIES SELECTIVELY VIZ. HE TOOK INTO CONSIDERATION CREDIT ENTRIES ONLY. IN THE REMAND PROCEEDINGS, HE HIMSELF WAS SATISFIED WITH R EGARD TO THE EXPLANATION OF THE ASSESSEE. THE ASSESSEE HAS COMP ILED DETAILS AND SUBMITTED BEFORE THE AO EXHIBITING DISCREPANCIES WO RKED OUT BY THE AO IN ASSESSMENT ORDER WHICH WERE RECONCILED BY HIM IN THE REMAND PROCEEDINGS AND UN-RECONCILED ENTRIES HAVE BEEN EXA MINED BY THE LD.CIT(A). WE DEEM IT APPROPRIATE TO TAKE NOTE OF THESE DETAILS WHICH READ AS UNDER: DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 11 AY DISCREPANCIES WORKED OUT BY AO IN ASSESSMENT ORDER DISCREPANCIES WORKED OUT BY AO IN REMAND REPORT UNRECONCILED ENTRIES AS , ACCEPTED BY LD. CIT(A) RATIO OF DISCREPANCY FINALLY DETERMINED 2003-04 5,10,28,350 1 ,56,29,459 1 ,59,624 0.31% 2004-05 17,92,73,560 9,15,66,115 38,77,759 2.16% 2005-06 90,84,157 27,91,555 61 ,469 0.68% TOTAL 23,93,86,067 10,99,87,129 40,98,852 1.05% 13. AT THIS STAGE, WE WOULD LIKE TO MAKE A REFERENC E TO SECTION 68 OF THE INCOME TAX ACT, WHICH CONTEMPLATES THAT WHERE A NY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NA TURE AND SOURCE THEREOF, OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF THE AO SATISFACTORY, THEN THE SUM SO CREDITED IN THE ACCOUNTS MAY BE TREATED AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 14. THUS, A PERUSAL OF THE ABOVE DETAILS WOULD INDI CATE THAT THE AO HAS COMMITTED AN ERROR BY ASSUMING THAT THESE ARE U NEXPLAINED CASH CREDITS OF THE ASSESSEE. 15. IN THE REMAND PROCEEDINGS THE LD.AO HAS SCALED DOWN THE FIGURES OF DISCREPANCIES. THESE ASPECTS HAVE BEEN FURTHER EXAMINED BY THE LD.CIT(A). THIS EXERCISE WOULD INDICATE THAT IN T HESE PAPERS, NO UNEXPLAINED CREDITS WERE NOTED BY THE ASSESSEE. TH ESE ARE ROUGH PAPERS KEPT BY EMPLOYEES FOR THEIR PERSONAL REFEREN CE. THEREFORE, THERE CANNOT BE ADDITION U/S.68 OF THE INCOME TAX A CT. ASSESSEE HAS EXPLAINED THE NATURE OF TRANSACTION IN THESE PAPERS . THE GROSS VALUE OF TRANSACTIONS IN THESE PAPERS WERE MORE THAN RS.5.00 CRORES, RS.17.00 CRORES AND RS.90 LAKHS IN ASSTT.YEARS 2003-04, 2004 -05 AND 2005-06 RESPECTIVELY. THE DISCREPANCY IN TERMS OF PERCENTA GE OF GROSS VALUE IS 0.31%, 2.16% AND 0.68% IN ASSTT.YEARS 2003-04, 2004 -05 AND 2005- 06. THUS, IN TWO YEARS DISCREPANCY COMES OUT AFTER RECONCILIATION WAS DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 12 LESS THAN 1% OF GROSS VALUE. THIS WAS THE RESULT O F TIME GAP BETWEEN THE RECORDING OF ENTRIES AND EXPLANATION SOUGHT. S OME OF THE EMPLOYEES WHO HAVE NOTED THESE ENTRIES MUST HAVE L EFT THE JOB ALSO. THUS, WE FIND THAT THE LD.CIT(A) HAS RIGHTLY APPREC IATED CONTROVERSY AND RIGHTLY DELETED THE ADDITIONS. WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 16. AS FAR AS GROUNDS RAISED IN THE CO ARE CONCERNE D, WE FIND THAT THE LD.CIT(A) HAS WORKED OUT UN-RECONCILED ENTRIES AT R S.1,59,624/-, RS.38,77,759/- AND RS.61,469/- IN THE ASSTT.YEAR 20 03-04, 2004-05 AND 2005-06. AS OBSERVED EARLIER THAT ENTRIES IN T HESE PAGES WERE RECORDED BY VARIOUS EMPLOYEES FOR THEIR PERSONAL RE FERENCE, THEY ARE RELATED TO THE BUSINESS. THEY CAN BE TREATED AS U NRECORDED TRANSACTION BUT HOW THEY WILL BECOME TAXABLE ON GROSS BASIS ? ONLY ELEMENT OF PROFIT INVOLVED IN THEM IS TO BE TAXED. IN ASSTT.Y EAR 2004-05, THELD.CIT(A) HAS CONFIRMED THE ADDITION OF 42 LACS ON AN ESTIMATION BASIS. BUT EVEN FOR ESTIMATION THERE SHOULD BE SOM E LOGIC FOR WORKING OUT THE QUANTUM. THE LD.CIT(A) HAS TAKEN THE UN-RE CONCILED ENTRIES OF RS.38,77,759/- FOR ESTIMATION OF PROFIT. BUT THIS IS THE GROSS VALUE OF SOME TRANSACTION. CORRESPONDING EXPENSES WERE ALSO THERE IN THOSE ENTRIES. THEREFORE, GROSS ENTRIES CANNOT BE TAKEN AS INCOME OF THE ASSESSEE. THEREFORE, WE MODIFY THE DIRECTION OF TH E LD.CIT(A). THE LD.AO SHALL CALCULATE THE PROFIT AT THE RATE ASSESS EE HAS SHOWN ON THE BASIS OF REGULAR BOOKS IN THESE YEARS AND ACCEPTED BY AO. IN OTHER WORDS ONLY ELEMENT OF PROFIT IS TO BE INCLUDED IN T HE TAXABLE INCOME OUT OF THE UN-RECONCILED ENTRIES WORKED OUT BY THE LD.C IT(A) AND NOT THE GROSS RECEIPT. THE GROUNDS OF CO ARE ALLOWED. 17. GROUND NO.2 IN REVENUES APPEAL FOR THE ASSTT.Y EAR 2003-04. IN THIS GROUND THE REVENUE HAS PLEADED THAT THE LD.CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.36,50,978/- WHICH WAS ADDED BY THE AO ON GROUND THAT THE ASSESSEE HAS VOLUNTARILY ADMITTED THIS DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 13 AMOUNT BEFORE THE DDIT(INVESTIGATION). A PERUSAL O F COMPUTATION OF INCOME FOR ASSTT.YEAR 2003-04 WOULD INDICATE THAT A T SERIAL NO.5, THE LD.AO HAS MADE AN ADDITION OF RS.36,50,978/- UNDER THE HEADING DISCLOSURE MADE BEFORE THE DDIT(INVESTIGATION)-2, RAJKOT.. THE ASSESSEE PLEADED THAT SHE HAS WORKED OUT PEAK BALAN CE OF RS.32,20,478/- ON THE BASIS OF IMPOUNDED DOCUMENTS AND OFFERED THE SAME FOR TAXATION FOR THE ASSTT.YEAR 2005-06. SUBS EQUENTLY, PEAK BALANCE WAS REVISED AT RS.36,50,978/-. THE AO HAS FINALISED THE ASSESSMENT MAKING AN ADDITION OF RS.96,69,920/- IN ASSTT.YEAR 2005- 06. WHEN THE ASSESSEE CHALLENGED THIS ADDITION BEF ORE THE LD.CIT(A) IN THE ASSTT.YEAR 2005-06, THEN THE LD.CIT(A) HAS OBSE RVED THAT PEAK WORKING FOR THE ASSTT.YEAR 2005-06 IS TO BE RESTRIC TED TO RS.39,50,978/- . IT INCLUDES RS.36,50,978/- PLUS RS.3.00 LAKHS. THUS, THE LD.CIT(A) HAS DELETED ADDITION OF RS.51,33,219/- IN ASSTT.YEA R 2005-06 WHICH IS DISCERNIBLE FROM DETAILS FILED BY THE ASSESSEE IN P ARA-5 OF THIS ORDER. THE ASSESSEE HAS IMPUGNED ONLY RETENTION OF ADDITIO N OF RS.3.00 LAKHS BY THE LD.CIT(A) IN THIS ASSESSMENT YEAR. SHE HAS POINTED OUT THAT THIS RS.3.00 LAKHS IS A GROSS INCOME AND ONLY PROFIT ELE MENT OF RS.3.00 LAKHS BE ADDED IN HER INCOME. REVENUE IN THE ASSTT.YEAR 2005-06 HAS IMPUGNED DELETION OF RS.51,33,219/- MEANING THEREBY AN AMOUNT OF RS.36,50,978/- RETAINED BY THE LD.CIT(A) HAS NOT BE EN CHALLENGED BY THE ASSESSEE IN THE ASSTT.YEAR 2005-06. THUS, THIS AMOUNT HAS BEEN ADDED TWICE BY THE AO. IT IS ALSO STAND OF THE ASS ESSEE THAT THIS AMOUNT WAS INCLUDED IN THE PEAK BALANCE FOR THE ASS TT.YEAR 2005-06. IT CANNOT BE ASSESSED IN THE ASSTT.YEAR 2003-04 ALSO. THE LD.CIT(A) HAS RIGHTLY DELETED FROM THE ASSTT.YEAR 2003-04 AND WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS REJECTED. 18. GROUND NO.3, 2, 2 OF REVENUES APPEAL IN THE AS STT.YEAR 2003-04, 2004-05 AND ASSTT.YEAR 2005-06 RESPECTIVELY. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 14 THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF PROPORTIONAT E INTEREST EXPENDITURE FOR THE RESPECTIVE ASSESSMENT YEARS. 19. NEXT COMMON GRIEVANCE OF THE REVENUE PLEADED IN GROUND NO.3 IN ASSTT.YEAR 2003-04 AND GROUND NO.2 IN THE ASSTT.YEA RS 2004-05 AND 2005-06, IS THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITIONS OF RS.88,850/-, RS.7,92,111/- AND RS.3,29 ,757/- IN THE ASSTT.YEARS 2003-04 TO 2005-06 RESPECTIVELY. ACCORD ING TO THE REVENUE, THESE DISALLOWANCES WERE MADE BY THE AO OUT OF INTE REST EXPENSES. 20. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS ADVANCED LOAN OF RS.7,40,410/-, RS.1,31,33,329/- AND RS.21,31,627/- IN THE ASSTT.YEARS 2003-04 TO 2005-06 WITHOUT CHARGING INTEREST. ON T HE OTHER HAND, THE ASSESSEE HAS BORROWED FUNDS FROM BANK AND CLAIMED I NTEREST EXPENDITURE OF RS.4,38,451/-, RS.7,92,111/- AND RS. 9,82,322/- IN THE ASSTT.YEARS 2003-04 TO 2005-06 RESPECTIVELY. 21. THE AO HAS CALCULATED INTEREST AT THE RATE OF 1 2% WHICH OUGHT TO HAVE BEEN CHARGED BY THE ASSESSEE ON THE INTEREST F REE ADVANCE GIVEN BY HER. ACCORDINGLY, HE MADE DISALLOWANCE. 22. ON APPEAL, THE LD.CIT(A)HAS DELETED DISALLOWANC E MADE BY THE AO ON THE GROUND THAT INTEREST FREE FUNDS AVAILABLE WI TH THE ASSESSEE WERE MUCH MORE THAN THE INTEREST FREE ADVANCE GIVEN BY H ER. THE LD.CIT(A) HAS OBSERVED THAT THE ASSESSEE HAD INTEREST FEE FUN DS OF RS.2,63,69,501/- IN THE ASSTT.YEAR 2003-04 AND RS.1 ,95,9,856/- IN ASSTT.YEAR 2004-05 AND 2005-06. 23. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) BECAUSE INTEREST EXPE NDITURE COULD BE DISALLOWED IF INTEREST BEARING FUNDS WERE USED BY T HE ASSESSEE FOR THE PURPOSE OF GRANTING LOAN WITHOUT CHARGING INTEREST. THE ASSESSEE HAS DEMONSTRATED THAT SHE HAS MORE INTEREST FREE FUNDS DURING THE YEAR THAN THE INTEREST FREE ADVANCE, AND THEREFORE THERE COULD NOT BE ANY DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 15 ATTRIBUTION OF INTEREST EXPENDITURE ON SUCH INTERES T FREE LOANS. THESE GROUNDS OF APPEAL ARE REJECTED IN ALL THESE ASSESSM ENT YEARS. 24. GROUND NO.4, 4, 3, 5 OF REVENUES APPEAL IN THE ASSTT.YEAR 2003- 04, 2004-05, 2005-06 AND 2006-07: THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN GRA NTING RELIEF OUT OF DISALLOWANCE MADE FROM ADMINISTRATIVE AND SELLIN G EXPENSES.: 25. GROUND NOS.3, 3, 3 AND 4 OF THE ASSESSEES APPE AL CO IN THE ASSTT.YEAR 2003-04, 2004-05, 2005-06 AND 2006-07 RE SPECTIVELY. THE LD.CIT(A) ERRED ON FACTS AS ALSO IN LAW IN RET AINING DISALLOWANCE OUT OF TOTAL DISALLOWANCE MADE FROM AD MINISTRATIVE AND SELLING EXPENSES. 26. NEXT COMMON ISSUE RAISED BY THE DEPARTMENT AND THE ASSESSEE IS WITH REGARD TO ESTIMATED DISALLOWANCE OF EXPENSES V IZ. (A) OUT OF VEHICLE EXPENSES, (B) TELEPHONE AND (C) TRAVELLING EXPENSES ETC. AT 20% BY THE AO WHICH WERE RESTRICTED BY THE LD.CIT(A) AT 10% OF TOTAL EXPENSES. 27. AFTER GOING THROUGH THE RECORD AND THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES, WE FIND THAT THE AO HAS ESTIMA TED IMPUGNED EXPENDITURES FOR DISALLOWANCE AT 20% FOR WANT OF NE CESSARY SUPPORTING MATERIALS. HOWEVER, THE LD.CIT(A) AFTER CONSIDERIN G THE SIZE OF BUSINESS AND QUANTUM OF TRANSACTIONS CARRIED OUT BY THE ASSE SSEE RESTRICTED DISALLOWANCE TO 10% OF THE TOTAL EXPENSES, WHICH WE FIND TO BE REASONABLE AND JUSTIFIABLE. THEREFORE, WE ARE NOT INCLINED TO DISTURB THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. IT IS CONFIR MED. THE GROUND TAKEN BY BOTH THE SIDES IN APPEALS/CROSS-OBJECTION ARE RE JECTED. 28. NO OTHER GROUND IS RAISED IN THE ASSTT.YEAR 200 3-04. WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. IT I S DISMISSED. SO FAR AS CO OF THE ASSESSEE IN ASSTT.YEAR 2003-04 IS CONCERN ED, IT IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 16 29. NOW, WE TAKE THE REMAINING GROUNDS OF APPEAL RA ISED BY THE REVENUE IN THE ASSTT.YEAR 2004-05. 30. GROUND NO.3: IN THIS GROUND, REVENUE HAS PLEAD ED THAT THE LD.CIT(A) HAS ERRED IN DELETING ADDITION OF RS.2 LA KHS WHICH WAS ADDED BY THE AO WITH THE AID OF SECTION 68 OF THE INCOME TAX ACT. 31. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD THAT A SUM OF RS. 2 LAKHS WAS APPEARED AGAINST THE NAME OF SHRI SURYAKANT MAGANLAL. BUT THIS AMOUNT WAS CARRIED FROM BALANCE OF EARLIER YEARS. AS OBSERVED BY US, SECTION 68 OF THE ACT CONTEMPLAT ES WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINT AINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF, OR THE EXPLANATION OFFERED BY T HE ASSESSEE IS NOT, IN THE OPINION OF THE AO SATISFACTORY, THEN THE SUM SO CREDITED IN THE ACCOUNTS MAY BE TREATED AS INCOME OF THE ASSESSEE O F THAT PREVIOUS YEAR. THIS AMOUNT WAS NOT FOUND TO BE CREDITED IN T HE BOOKS OF THE ASSESSEE FOR THE FIRST TIME, RATHER, IT WAS A CARRI ED FORWARD FROM EARLIER YEAR. EXPLANATION OF THE ASSESSEE COULD BE SOUGHT IN THE YEAR IN WHICH THE AMOUNT WAS FOR THE FIRST TIME SHOWN AS CREDIT B ALANCE. THEREFORE, THE LD.CIT(A) HAS RIGHTLY DELETED THIS ADDITION. 32. GROUND NO.4: IN THIS GROUND OF APPEAL, GRIEVAN CE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING ADDITIO N OF RS.2,36,700/- OUT OF TOTAL ADDITION MADE BY THE AO AT RS.4,71,700/-. 33. BRIEF FACTS OF THE CASE ARE THAT OUT OF ADMINIS TRATIVE EXPENSES DEBITED BY THE ASSESSEE, THE LD.AO HAS MADE AN ADHOC DISALLOWANCE OF RS.4,71,700/- WHICH IS 20% OF THE TOTAL EXPENSES DE BITED BY THE ASSESSEE. ON APPEAL, THE LD.CIT(A)HAS RESTRICTED T HIS DISALLOWANCE TO 10% ON THE GROUND THAT THE ASSESSEE IS AN INDIVIDUA L. SHE HAS HUGE TURNOVER AND EARNED COMMISSION INCOME OF MORE THAN RS.12 CRORES. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 17 WE HAVE CONSIDERED THIS ASPECT WHILE DISPOSING OF G ROUND NO.4 OF THE REVENUES APPEAL IN THE ASSTT.YEAR 2003-04 I.E. IN PARA 27 OF THIS ORDER. WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS AGAIN DISMISSED. 34. GROUND NO.5: IN THIS GROUND OF APPEAL, GRIEVANC E OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING ADDITIO N OF RS.30,089/-. THE ASSESSEE HAS WRITTEN OFF THE ABOVE AMOUNT IN THE BO OKS OF ACCOUNTS AND CLAIMED IT AS BAD DEBT. SHE ALSO ALLEGED THAT THES E WERE EXPENSES WHICH COULD NOT BE RECOVERED, HENCE, SHE HAS WRITTE N OFF THEM. THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GRO UND THAT THE ASSESSEE FAILED TO DEMONSTRATE THE EFFORTS MADE BY HER FOR RECOVERY OF THE OUTSTANDING AMOUNT. ON APPEAL, THE LD.CIT(A) H AS DELETED THE DISALLOWANCE BY FOLLOWING JUDGMENT OF THE HONBLE S UPREME COURT IN THE CASE OF TRF LTD. VS. CIT, 35 DTR (SC) 156. ACCORDI NG TO THE LD.CIT(A) AFTER 1.4.1989 THE ASSESSEE WAS NOT SUPPOSED TO BRI NG DEMONSTRATIVE EVIDENCE ON RECORD TO SHOW THAT DEBTS HAVE ACTUALLY BECOME BAD. IT IS SUFFICIENT IF THESE AMOUNTS HAVE BEEN WRITTEN OFF I N ITS ACCOUNTS. AFTER CONSIDERING THE FINDING OF THE LD.CIT(A) WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS REJECTED. 35. NO OTHER GROUND WAS RAISED BY THE REVENUE IN AS STT.YEAR 2004- 05. 36. GROUND NO.4 IN ASSESSEES CO FOR THE ASSTT.YEAR 2004-05. IT IS INTER-CONNECTED WITH GROUND NO.3 IN ASSESSEES APPE AL FOR THE ASSTT.YEAR 2006-07. 37. GRIEVANCE OF THE ASSESSEE IS THAT THE LD.AO HAS ERRED IN MAKING ESTIMATED ADDITION OF RS.1,20,000/- IN THE ASSTT.YE AR 2004-05 AND RS.50,000/- IN THE ASSTT.YEAR 2006-07 ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWAL SHOWN BY THE ASSESSEE. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 18 38. BRIEF FACTS OF THE CASE ARE THAT SMT.MANISHABEN N. MASHRU HAS SHOWN WITHDRAWAL OF RS.60,000/- IN THE ASSTT.YEAR 2 004-05. HER HUSBAND SHRI NILESH MASHRU SHOWN WITHDRAWAL OF RS.3 6,000/-. THEIR HUF WITHDREW A SUM OF RS.12,000/-. SIMILARLY, IN T HE ASSTT.YEAR 2006- 07, THEY HAVE SHOWN WITHDRAWAL OF RS.1,10,000/-. T HE LD.AO DID NOT FIND THIS WITHDRAWAL SUFFICIENT FOR MEETING HOUSEHO LD EXPENDITURE. HENCE, HE MADE ADDITION OF RS.1,20,000/- IN THE ASS TT.YEAR 2004-05 AND RS.50,000/- FOR THE ASSTT.YEAR 2006-07. 39. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. IT IS QUITE DIFFICUL T TO DETERMINE HOUSEHOLD EXPENDITURE OF ANY INDIVIDUAL. IT IS A VERY SUBJEC TIVE AREA. THE AO MUST HAVE CONSIDERED HIS LOCAL KNOWLEDGE ABOUT THE ASSESSEE AND THEIR STATUS OF LIVING IN THE SOCIETY. THE ASSESSEE HAS BEEN CARRYING OUT VOLUMINOUS BUSINESS IN TICKET BOOKING. SHE HAS EAR NED COMMISSION OF CRORES OF RUPEES. LOOKING INTO THEIR BACKGROUND, I T APPEARS THAT THEY MUST HAVE LIVING A GOOD LIFE AND THE AO MUST HAVE C ONSIDERED THAT ASPECT WHILE ESTIMATING THE HOUSEHOLD EXPENSES. TW O REVENUE AUTHORITIES HAVE EXERCISED THEIR DISCRETION IN ESTI MATING HOUSEHOLD EXPENDITURE. THEREFORE, WITHOUT THERE BEING ANYTHI NG ON RECORD THAT SUCH OPINION WAS FORMED BY THE REVENUE AUTHORITIES FOR EXTRANEOUS REASONS, WE DO NOT WISH TO REPLACE THOSE OPINIONS B Y A THIRD-ONE, WHICH IS ALSO BASED ON ESTIMATION. WE DO NOT FIND ANY ME RIT IN THESE GROUNDS OF APPEAL. THEY ARE REJECTED. 40. GROUND NO.2 IN ASSESSEES APPEAL FOR THE ASSTT. YEAR 2006-07: THE LD.CIT(A) ERRED ON FACTS AS ALSO IN LAW IN CON FIRMING THE DISALLOWANCE MADE IN RESPECT OF DISCOUNT OF RS.82,6 3,965/- U/S.40(A)(IA) OF THE ACT 41. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A MEMBER OF INTERNATIONAL AIR TRANSPORT ASSOCIATION(IATA). S HE USED TO BOOK AIR- TICKETS FOR DOMESTIC AND INTERNATIONAL AIR-TRAVELLE RS FOR AIRINDIA, DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 19 KINGFISHER, JETAIRLINE AND OTHER INTERNATIONAL AIR- LINES. SOME OF TRAVEL AGENTS BOOKED AIR-TICKETS BY USING ASSESSEES MEMBE RSHIP. IN OTHER WORDS, TICKETS WHICH WERE TO BE BOOKED IN THE NAME OF THE ASSESSEE WERE TO BE SOLD TO THE AGENTS AT DISCOUNTED PRICE. THE ALLEGED TRAVEL AGENTS MADE PAYMENT OF CONCESSIONAL PRICE AND ASSUM ED ROLE OF CUSTOMER OF THE ASSESSEE. THE AO TREATED SUCH TRAV EL AGENTS AS AGENTS OF THE ASSESSEE AND OBSERVED THAT THE DISCOUNTED RA TE ON WHICH TICKETS WERE SOLD TO THE CUSTOMERS IS TO BE CONSTRUED AS CO MMISSION PAID. ASSESSEE FAILED TO DEDUCT TDS AND THEREFORE THE ALL EGED CONCESSION IN THE TICKET PRICE IS TO BE DISALLOWED TO THE ASSESSE E. THE CASE OF THE ASSESSEE IS THAT THE ALLEGED TRAVEL AGENTS WERE NOT WORKING FOR THE ASSESSEE AS AGENTS. THEY HAVE BOOKED TICKETS IN TH EIR INDEPENDENT CAPACITY THROUGH THE ASSESSEE. THE ASSESSEE HAS OF FERED THEM A TRADE DISCOUNT, FOR EXAMPLE, A TICKET HAVING VALUE OF RS. 100/- WAS PURCHASED BY THE ASSESSEE AFTER GETTING COMMISSION FROM THE A LLEGED AIRLINE AT RS.80/-. THE ASSESSEE HAS SOLD THAT TICKET AT RS.9 0/-. IN THIS WAY, COMMISSION INCOME FROM THE AIRLINES OUGHT TO BE EAR NED BY THE ASSESSEE AT RS.20/- HAS BEEN REDUCED TO RS.10/-. T RAVEL AGENTS WERE NOT HER AGENTS. SHE HAS ONLY ALLOWED THEM A LITTLE MORE CONCESSION FOR ACHIEVING BETTER BUSINESS. THE AO WAS NOT SATISFIE D WITH THE EXPLANATION OF THE ASSESSEE, AND HE OBSERVED THAT O N THE DISCOUNT TRANSFERRED TO THE TRAVEL AGENTS THE ASSESSEE SHOUL D HAVE DEDUCTED TDS BY TREATING SUCH DISCOUNT AS COMMISSION. 42. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED DISALLOW ANCE. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ISSU E IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE GUJ ARAT HIGH COURT IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION VS. UNION OF INDIA, 257 ITR 202. HE FURTHER POINTED OUT THAT THIS DECI SION HAS BEEN UPHELD BY THE HONBLE SUPREME COURT AND THE JUDGMENT OF TH E HONBLE SUPREME COURT HAS BEEN REPORTED IN CIT VS. AHMEDABA D STAMP VENDORS ASSOCIATION, 25 TAXMANN.COM 201 (SC). HE F URTHER RELIED UPON DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 20 ORDER OF THE ITAT, MUMBAI BENCH IN THE CASE OF ITL TOURS & TRAVELS P.LTD. VS. ITO 44 SOT 277 (MUM). HE ALSO MADE REFE RENCE TO THE ORDER OF THE ITAT, COCHIN BENCH IN THE CASE OF ACIT VS. A I HIND TOURS & TRAVELS P.LTD. 29 TAXMANN.COM 294 (COCHIN-TRIB.) ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDERS OF THE REVENUE AUT HORITIES. 43. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. ADMITTEDLY, THERE IS NO RELATION SHIP OF PRINCIPAL AND AGENT. IN OTHER WORDS, THERE IS NO AGENCY BETWEEN THE ASSESSEE AND THE ALLEGED TRAVEL AGENTS. AGENCY HAS BEEN ASSUMED BY THE AO WITH THE HELP OF SECTION 194H OF THE INCOME TAX ACT, 196 1. THE AO WAS OF THE OPINION THAT SINCE THE ASSESSEE HAS PARTED WITH HER VOLUME OF COMMISSION AMONGST TRAVEL AGENTS, THEN IT SHOULD BE CONSTRUED THAT THOSE AGENTS WERE ACTING ON BEHALF OF THE ASSESSEE WHILE BOOKING INTERNATIONAL AIR-TICKETS. WE FIND THAT THE HONBL E GUJARAT HIGH COURT HAS CONSIDERED ALMOST SIMILAR SITUATION IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION (SUPRA). IT IS PERTINENT TO TAKE NOTE OF THE FOLLOWING FINDING OF THE HONBLE GUJARAT HIGH COURT . .. IT IS ALSO NOT POSSIBLE TO ACCEPT THE CONTENTION OF MR. NAIK FOR THE REVENUE THAT THE DEFINITION OF 'COMMISSION OR BROKERAGE' AS CONTAINED IN THE EXPLANATION TO SECTION 194H IS SO WIDE THAT IT WOULD INCLUDE ANY PAYMENT RECEIVABLE, DIRECTLY OR I NDIRECTLY, FOR SERVICES IN THE COURSE OF BUYING OR SELLING OF 'GOO DS AND THAT, THEREFORE, THE DISCOUNT AVAILED OF BY THE STAMP VEN DORS CONSTITUTES COMMISSION OR BROKERAGE WITHIN THE MEAN ING OF SECTION 194H. IF THIS CONTENTION WERE TO BE ACCE PTED, ALL TRANSACTIONS OF SALE FROM A MANUFACTURER TO A WHOLE SALER OR FROM A WHOLESALER TO A SEMI WHOLESALER OR FROM A SEMI-WH OLESALER TO A RETAILER WOULD BE COVERED BY SECTION 194H. TO FALL WITHIN THE AFORESAID EXPLANATION, THE PAYMENT RECEIVED OR RECE IVABLE, DIRECTLY OR INDIRECTLY, IS BY A PERSON ACTING ON BE HALF OF ANOTHER PERSON (I) FOR SERVICES RENDERED (NOT BEING PROFESS IONAL SERVICES), OR (II) FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS, OR (III) IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING. THE ELEMENT OF AGENCY IS TO BE TH ERE IN CASE OF ALL DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 21 SERVICES OR TRANSACTIONS CONTEMPLATED BY EXPLANATIO N (I) TO SECTION 194H. IF A CAR DEALER PURCHASES CARS FRO M THE MANUFACTURER BY PAYING PRICE LESS DISCOUNT, HE WOUL D BE THE PURCHASER AND NOT THE AGENT OF THE COMPANY, BUT IN THE COURSE OF SELLING CARS, HE MAY ENTER INTO A CONTRACT OF MAINT ENANCE DURING THE WARRANTY PERIOD, WITH THE CUSTOMER (PURCHASER O F THE CAR) ON BEHALF OF THE COMPANY. HOWEVER, SUCH SERVICES RENDE RED BY THE DEALER IN THE COURSE OF SELLING CARS DOES NOT MAKE THE ACTIVITY OF SELLING CARS ITSELF AN ACT OF AGENT OF THE MANUFACT URER WHEN THE DEALINGS BETWEEN THE COMPANY AND THE DEALER IN THE MATTER OF SALE OF CARS ARE ON 'PRINCIPAL TO PRINCIPAL' BASIS. THIS IS JUST AN ILLUSTRATION TO CLARIFY THAT A SERVICE IN THE COURS E OF BUYING OR SELLING OF GOODS HAS TO BE SOMETHING MORE THAN THE ACT OF BUYING OR SELLING OF GOODS. WHEN THE LICENSED STAMP VENDOR S TAKE DELIVERY OF STAMP PAPERS ON PAYMENT OF FULL PRICE L ESS DISCOUNT AND THEY SELL SUCH STAMP PAPERS TO RETAIL CUSTOMERS , NEITHER OF THE TWO ACTIVITIES (BUYING FROM THE GOVERNMENT AND SELLING TO THE CUSTOMERS) CAN BE TERMED AS THE SERVICE IN THE COUR SE OF BUYING OR SELLING OF GOODS. IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE CONT ENTION URGED ON BEHALF OF THE PETITIONER'S ASSOCIATION THA T THE DISCOUNT MADE AVAILABLE TO THE LICENSED STAMP VENDORS UNDER THE PROVISIONS OF THE GUJARAT STAMPS SUPPLY AND SALES R ULES, 1987, DOES NOT FALL WITHIN THE EXPRESSION 'COMMISSION' OR 'BROKERAGE' UNDER SECTION 194H OF THE INCOME-TAX ACT, 1961. THE IMPUGNED COMMUNICATION DATED MARCH 14, 2002, FROM THE INCOME -TAX OFFICER, TDS 4, AHMEDABAD, TO THE SENIOR TREASURY O FFICER, AHMEDABAD, IS, THEREFORE, QUASHED AND SET ASIDE, AN D SO ALSO THE CONSEQUENTIAL INSTRUCTIONS DATED MARCH 19, 2002 (AN NEX-URE 'D' TO THE PETITION), ISSUED BY THE SENIOR TREASURY OFF ICER, AHMEDABAD, TO THE SECRETARY OF THE PETITIONER'S ASS OCIATION ARE QUASHED AND SET ASIDE. 44. IN THE LIGHT OF THE ABOVE INTERPRETATION OF SEC TION 194H IF THE FACTS OF THE PRESENT CASE ARE LOOKED INTO THEN IT WOULD R EVEAL THAT THE ASSESSEE HAS JUST GIVEN A TRADE DISCOUNT OUT OF COM MISSION EARNED BY HER FROM THE AIRLINES. SHE HAS NOT APPOINTED ANY T RAVEL AGENTS FOR ACTING ON HER BEHALF. THUS, THERE WAS NO RELATIONS HIP OF PRINCIPAL AND AGENT. WE FURTHER FIND THAT ALMOST IN AN IDENTICAL CONDITION, ITAT MUMBAI BENCH HAS CONSIDERED THIS ISSUE AND OBSERVED AS UNDER: DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 22 IT WAS CLEAR THAT THE INTERMEDIARIES WERE BOOKING TICKETS FROM THE ASSESSEE. THEREFORE, THE INTERMEDIARIES WERE NO T WORKING AS AGENTS OF THE ASSESSEE FOR DOING THE ASSESSEE'S BUS INESS RATHER THE INTERMEDIARIES WERE BRINGING THE BUSINESS TO TH E ASSESSEE AS RECORDED BY AO AND THE ASSESSEE WAS PASSING OUT SOM E HANDLING CHARGES. THUS, THE ASSESSEE WAS, IN FACT, GIVING SO ME DISCOUNT TO THE INTERMEDIARIES FOR GETTING BUSINESS. IT WAS NOT A TRANSACTION BETWEEN THE PRINCIPAL AND AGENT BUT IT WAS AS TRANS ACTION BETWEEN THE PRINCIPAL AND PRINCIPAL. 45. RESPECTFULLY FOLLOWING JUDGMENT OF THE HONBLE GUJARAT HIGH COURT AND ORDER OF THE ITAT, MUMBAI BENCH, WE ARE OF THE VIEW THAT DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD .CIT(A) WITH HELP OF SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF NON-D EDUCTION OF TDS DESERVES TO BE DELETED. WE ACCORDINGLY DELETE THE DISALLOWANCE. THIS GROUND OF APPEAL IS ALLOWED. 46. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED ADD ITION OF RS.50,000/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS . 47. WE HAVE ALREADY CONSIDERED THIS ISSUE WHILE TAK ING UP APPEAL FOR THE ASSTT.YEAR 2004-05. WE REJECT THIS GROUND OF A PPEAL. 48. GROUND NO.4: IN THIS GROUND, GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN RETAINING DISALLOWANCE O F RS.40,200/- OUT OF TOTAL DISALLOWANCE MADE AT RS.51,226/- REPRESENTING VEHICLE EXPENSES, TRAVEL EXPENSES AND DEPRECIATION ON CARS. WE HAVE CONFIRMED SIMILAR DISALLOWANCE IN THE ASSTT.YEARS 2003-04, 2004-05 AN D 2005-06. POSSIBILITY OF PERSONAL USER OF TELEPHONE, CAR ETC. COULD NOT BE RULED OUT, AND THE LD.CIT(A) HAS RIGHTLY CONFIRMED THE DISALLO WANCE. 49. IN THE ASSESSEES APPEAL, NO OTHER GROUNDS REMA IN TO BE ADJUDICATED, HENCE, WE TREAT THIS APPEAL AS PARTLY ALLOWED. 50. NOW WE TAKE UP REVENUES APPEAL IN THE ASSESSME NT YEAR 2006-07. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 23 51. IN THE FIRST GROUND OF APPEAL, GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3 LAKHS MADE BY THE AO UNDER SECTION 68 OF THE ACT. 52. BRIEF FACTS OF THE CASE ARE THAT ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT UNSECURED LOAN OF RS.3 LAKH S WAS OUTSTANDING IN THE NAME OF SHRI DEVABHAI RATHOD. HE TREATED THE A BOVE UNEXPLAINED LOAN AS UNEXPLAINED CREDIT. ACCORDINGLY, HE MADE A DDITION OF RS.3 LAKHS. BEFORE THE LD.CIT(A), IT WAS CONTENDED BY T HE ASSESSEE THIS LOAN WAS RECEIVED BY HER THROUGH ACCOUNT PAYEE CHEQUE ON 19.10.2005. IT WAS REPAID ON 25.3.2006 THROUGH ACCOUNT PAYEE CHEQU E. DETAILS IN THE SHAPE OF BANK STATEMENT, LEDGER ACCOUNT, CONFIRMATI ONS WERE GIVEN. THE LD.CIT(A) WAS SATISFIED THAT THE ASSESSEE HAS F ULFILLED INGREDIENTS OF SECTION 68 AND DELETED ADDITION. 53. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE DO NOT SEE ANY REASONS TO INTERFERE IN THE ORDER OF THE LD.CIT(A). THE ASSESSEE HAS SUBMITTED SUFFICIENT EVIDENCE DEMONSTRATING IDENTIT Y OF THE CREDITORS, GENUINENESS OF THE TRANSACTION AND CREDIT-WORTHINES S. SHE HAS FILED DETAILS SHOWING RECEIPT AND PAYMENT OF THE AMOUNT T HROUGH BANKING CHANNEL ETC. HENCE, THIS GROUND OF APPEAL IS REJEC TED. 54. GROUND NO.2. IN THIS GROUND GRIEVANCE OF THE R EVENUE IS THAT THE LD.CIT(A) HAS DELETED ADDITION OF RS.3,18,688/- WHI CH WAS ADDED BY THE AO BY MAKING DISALLOWANCE OF PROPORTIONATE INTEREST EXPENDITURE. 55. WITH THE HELP OF LD.REPRESENTATIVES, WE HAVE GO NE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD T HAT THE ASSESSEE HAS ADVANCED RS.21,24,587/- TO FOUR PARTIES WITHOUT CHA RGING INTEREST. THEREFORE, THE LD.AO HAS CALCULATED PROPORTIONATE I NTEREST EXPENDITURE ON SUCH ADVANCES AND MADE DISALLOWANCE. BEFORE THE LD.CIT(A) IT WAS CONTENDED THAT THE ASSESSEE HAS TOTAL INTEREST FREE FUNDS OF DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 24 RS.1,35,24,553/-. THUS, SHE HAS NOT USED INTEREST BEARING FUNDS FOR MAKING INTEREST FREE ADVANCES, THE LD.CIT(A) DELETE D THE DISALLOWANCE. 56. WE HAVE ALREADY HELD THAT THE ASSESSEE WAS ABLE TO DEMONSTRATE THAT IF SHE HAS MORE INTEREST FREE FUNDS THAN THE A DVANCE THEN ON NOTIONAL BASIS INTEREST CANNOT BE COMPUTED FOR DISA LLOWANCE. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A). THIS GROUND IS REJECTED. 57. GROUND NO.3: IN THIS GROUND, GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING AN ADDITION OF RS.1,31,000/-. 58. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS OBTAINED A LOAN FROM MANOJBHAI ANANTRAI AND FROM SHRI ANANTRAI MAGA NBHAI. SHE HAS REPAID THESE LOANS. CREDITORS HAVE SHOWN INTEREST T O THE EXTENT OF RS.50,000/- AND RS.81,000/- RESPECTIVELY. THE AO A SSUMED THAT SINCE CREDITORS HAVE SHOWN INTEREST INCOME IN THEIR ACCOU NTS, THEREFORE, THE ASSESSEE MUST HAVE PAID INTEREST TO THEM WITHOUT DE BITING IN THE BOOKS OF ACCOUNTS. HE ACCORDINGLY MADE ADDITION OF RS.1, 31,000/- UNDER SECTION 69C OF THE ACT. 59. BEFORE THE LD.CIT(A) IT WAS CONTENDED THAT THE ASSESSEE HAS NOT PAID ANY INTEREST TO BOTH CREDITORS. THEY MIGHT HAV E ACCOUNTED IN THEIR BOOKS AS RECEIVABLE, BUT IN FACT THERE WAS NO SUCH PAYMENT. THE AO HAS NOT COLLECTED ANY EVIDENCE SHOWING THAT INTERES T WAS PAID TO THE CREDITORS. THE LD.CIT(A) HAS ACCEPTED THIS CONTENT ION OF THE ASSESSEE AND DELETED ADDITION. 60. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES, WE ARE OF THE VIEW THAT ENTRIES IN THE BOOKS OF THIRD PERSON COULD NOT BE GIVEN WEIGHTAGE OVER AND ABOVE ENTRIES IN THE BOOKS OF TH E ASSESSEE. THE AO OUGHT TO HAVE COLLECTED MORE EVIDENCE FOR ESTABLISH ING THAT THE ALLEGED PAYMENT WAS MADE. HE HAS NOT RECORDED STATEMENT OF THE CREDITORS SHOWING THAT THEY HAVE RECEIVED SUCH PAYMENT. THER EFORE, THE DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 25 LD.CIT(A) HAS RIGHTLY DELETED THE ADDITION, AND THI S GROUND IS ALSO REJECTED. 61. GROUND NO.4: IN THIS GROUND, GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 32,087/-. 62. BRIEF FACTS OF THE CASE ARE THAT ON SCRUTINY OF THE DETAILS, THE LD.AO FOUND THAT THE ASSESSEE HAS CLAIMED TDS OF RS.1,377 /- AND RS.421/- FROM TATA AIG GENERAL INSURANCE CO. BUT SHE HAS NO CORRESPONDING RECEIPTS, THEREFORE, HE ASSUMED THE CORRESPONDING R ECEIPT OF RS.32,087/- AND MADE ADDITION. THE LD.CIT(A) HAS D ELETED THE ADDITION BY OBSERVING THAT A SUM OF RS.22,003/- WAS REFLECTE D UNDER THE HEAD OTHER COMMISSION. SIMILARLY, COMMISSION OF RS.8, 798/- WAS CREDITED IN PERSONAL ACCOUNT. AGGREGATE OF THESE TWO ENTRIE S COMES TO RS.30,800/-. THUS, ACCORDING TO THE LD.CIT(A), COR RESPONDING RECEIPTS HAVE DULY BEEN ACCOUNTED BY THE ASSESSEE. 63. ON DUE CONSIDERATION OF THE FINDING OF THE LD.C IT(A), WE DO NOT SEE ANY REASON TO INTERFERE INTO. THE LD.CIT(A) HA S RECORDED A FINDING OF FACT THAT THE ASSESSEE HAS DULY CREDITED COMMISS ION RECEIPTS ON WHICH TDS DEDUCTED BY THE PAYER AND SHE HAS CLAIMED THE CREDIT OF THE TDS. CONSIDERING THE FINDING OF THE LD.CIT(A), WE DO NOT FIND ANY MERIT IN THIS GROUND. IT IS REJECTED. 64. GROUND NO.5: IN THIS GROUND OF THE APPEAL, GRI EVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN GRANTING RELIEF OF RS.11,026/- OUT OF TOTAL ADDITION OF RS.51,226/-. 65. IT IS PERTINENT TO OBSERVE THAT THE LD.AO HAS M ADE ADHOC DISALLOWANCE OUT OF THE EXPENSES INCURRED TOWARDS T ELEPHONE, VEHICLE ETC. THE LD.CIT(A) HAS PARTLY CONFIRMED THE DISALL OWANCE AND PARTLY DELETED. WHILE CONSIDERING GROUND OF THE ASSESSEE, WHEREBY THE DISALLOWANCE OF RS.42,200- OUT OF TOTAL DISALLOWANC E OF RS.51,226/- WAS DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 26 CONFIRMED, WE OBSERVED THAT THESE ARE ADHOC DISALLOWANCE MADE BY THE AO BY OBSERVING THAT POSSIBILITY OF PERSONAL USER O F CAR AND TELEPHONE CANNOT BE RULED OUT. IT IS AN ESTIMATED DISALLOWAN CE WHICH HAS BEEN SCALED DOWN BY THE LD.CIT(A) MARGINALLY. THEREFORE , WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A). THIS GROUND OF APPEAL IS REJECTED. 66. IN THE RESULT, THE APPEAL OF THE REVENUE FOR TH E ASSTT.YEAR 2006- 07 IS DISMISSED. 67. NOW WE TAKE UP REVENUES APPEAL, ITA NOS.355 AN D 386 /RJT/2011 FOR THE ASSTT.YEAR 2004-05 AND 2005-06. 68. IN THESE APPEALS, GRIEVANCE OF THE REVENUE IS T HAT THE LD.CIT(A) HAS ERRED IN DELETING PENALTY OF RS.13,84,548/- AND RS.13,00,713/- FOR THE ASSTT.YEARS 2004-05 AND 2005-06 RESPECTIVELY. 69. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. FACTS ON ALL VITAL P OINTS ARE COMMON IN BOTH ASSESSMENT YEARS. THEREFORE, FOR THE FACILITY OF REFERENCE, WE TAKE THE FACTS FROM THE ASSTT.YEAR 2004-05. 70. BRIEF FACTS OF THE CASE ARE DURING THE COURSE O F SURVEY, CERTAIN DOCUMENTS WERE FOUND VIZ. ANNEXURE A/1 TO A/18. ON THE STRENGTH OF NARRATION MENTIONED IN THESE DOCUMENTS, THE LD.AO H AS WORKED OUT UNEXPLAINED INCOME IN SHAPE OF UNEXPLAINED CASH CRE DITS AT RS.17,92,73,560/-. THIS WAS ADDED UNDER SECTION 68 OF THE ACT. THE ASSESSEE HAS POINTED OUT TO THE LD.CIT(A) THAT THE AO HAS ERRED IN ASSUMING NARRATIONS MENTIONED IN THESE PAPERS AS RE PRESENTING CASH CREDIT. REMAND REPORT WAS CALLED FOR BY THE LD.CIT (A) AND ULTIMATELY, IT WAS HELD BY THE LD.CIT(A) THAT ROUGH ENTRIES HAVING VALUE OF RS.38,77,759/- COULD NOT RECONCILED BY THE ASSESSEE . THUS, THE LD.CIT(A) HAS CONFIRMED ADDITION OF RS.42 LAKHS ON AN ESTIMATE BASIS. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 27 THE AO HAS VISITED THE ASSESSEE WITH PENALTY ON THI S ESTIMATED PROFIT ON THE GROUND THAT THE ASSESSEE HAS CONCEALED THE INCO ME. SIMILARLY, IN THE ASSTT.YEAR 2005-06, THE ASSESSEE HAS ADMITTED A N INCOME OF RS.36,50,938/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE LD.AO TREATED IT AS A CONCEALED INCOME OF THE ASSES SEE. HE LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT AMOUNTIN G TO RS.13,84,548/- IN THE ASSTT.YEAR 2004-05 AND RS.13,00,713/-IN THE ASSTT.YEAR 2005-06. ON APPEAL, THE LD.CIT(A) HAS DELETED THE PENALTY. 71. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1 961 HAS DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTI NENT TO TAKE NOTE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT , IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHIC H SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMEN T OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FUR NISHING OF INACCURATE PARTICULARS OF SUCH INCOME OR FRINGE BEN EFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 28 (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OR SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 72. A BARE PERUSAL OF THIS SECTION WOULD REVEAL TH AT FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UN DER THIS SECTION CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FE ATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCO ME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HA S CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUT ORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEE MING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATE S TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO T HE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE A SSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE AS SESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEA L); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS, TO PROVE THAT S UCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL T HE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOT AL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAY IF THE ASSESSEE DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 29 FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE T WO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1 )(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWAN CE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SEC TION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 73. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FA CTS OF THE PRESENT CASE, THEN IT WOULD REVEAL THAT THE INCOME OF THE A SSESSEE HAS BEEN DETERMINED ON AN ESTIMATE BASIS. BY WAY OF PRESENT ORDER, WE HAVE CHANGED THAT ESTIMATION. WE HAVE HELD THAT UN-RECO NCILED ENTRIES BE CONSIDERED ONLY FOR WORKING OUT ELEMENT OF PROFIT I NVOLVED IN IT. GROSS RECEIPT CANNOT BE ADDED. SIMILARLY, WE HAVE OBSERV ED THAT PROFIT IS TO BE ESTIMATED IN THESE ASSESSMENT YEARS ACCORDING TO THE RATE OF PROFIT DISCLOSED BY THE ASSESSEE ON THE BASIS OF REGULAR B OOKS OF ACCOUNTS. THUS, THERE CANNOT BE ANY ELEMENT OF CONCEALMENT OF INCOME. THE ASSESSEE HAS EXPLAINED PAPERS FOUND DURING THE COUR SE OF SURVEY. AS OBSERVED IN THE QUANTUM APPEALS, DISCREPANCY IN EXP LAINING THESE PAPERS WAS ULTIMATELY DETERMINED AT 2.6% OF THE GRO SS VALUE OF THE TRANSACTION CONSIDERED BY THE AO ON THE BASIS OF EN TRIES IN THESE PAPERS. IN OTHER WORDS, THE GROSS VALUE OF THE TRA NSACTION WAS DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 30 RS.17.92 CRORES WORKED OUT BY THE AO IN THE ASSTT.Y EAR 2004-05 AND UNRECONCILED ENTRIES WERE OF ONLY RS.38,77,759/-. IT WAS EXPLAINED BY THE ASSESSEE THAT SOME OF THE EMPLOYEES MUST HAVE L EFT JOB AND IT WAS QUITE DIFFICULT TO KEEP TRACK OF ALL ENTRIES NOTED BY THE EMPLOYEES. IN THIS SITUATION, THE LD.CIT(A) HAS RIGHTLY DELETED P ENALTY. WE DO NOT FIND ANY ERROR IN BOTH THE ORDERS OF THE LD.CIT(A). THE Y ARE UPHELD AND BOTH APPEALS OF THE REVENUE ARE DISMISSED. 74. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.961/R JT/2010 AND THE CO OF THE ASSESSEE IN CO NO.37/RJT/2010. 75. IN THE FIRST GROUND OF REVENUES APPEAL, GRIEVA NCE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING ADDITION RS.16,00,6 70/- MADE ON ACCOUNT OF UNEXPLAINED ADVANCES AND PROBABLE INTERE ST THEREON. 76. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASS ESSMENT PROCEEDINGS, THE AO HAS ASSUMED ON THE BASIS OF IMP OUNDED PAPERS THAT A SUM OFRS.13,56,500/- WAS ADVANCED TO VARIOUS PERSONS AND THE SAME WERE NOT RECORDED. THE AO ACCORDINGLY MADE AD DITION OF THIS AMOUNT ALONG WITH AN AMOUNT OF RS.2,44,170/- AS INT EREST. IT WAS CONTENDED BEFORE THE LD.CIT(A) THAT NO ADVANCE WAS GIVEN TO ITS SISTER CONCERN, AND THE AMOUNT REFLECTED IN THE ANNEXURE W AS OWNED BY SMT.MANISHABEN N. MASHRU AND WHILE FINALIZING THE A SSESSMENT OF SMT.MANSIHABEN MASHTRU THIS ADDITION WAS OFFERED FO R TAXATION BY WAY OF PEAK VALUE, AND THEREFORE, THERE CANNOT BE DOUBL E TAXATION. EVEN OTHERWISE, NO ADDITION CAN BE MADE ON THE BASIS OF ROUGH NOTING WITHOUT ANY CORROBORATIVE EVIDENCE. THE LD.CIT(A) CONSIDERED CONTENTIONS OF THE ASSESSEE AND DELETED THE IMPUGNE D ADDITION. 77. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES, AND PERUSAL OF ORDERS OF THE REVENUE AUTHORITIES, WE ARE OF THE VIEW THAT THE LD.CIT(A) HAS RIGHTLY APPRECIATED FACTS AND CIRCUMS TANCES LEADING TO DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 31 ADDITION MADE BY THE AO. THE LD.CIT(A) HAS OBSERV ED THAT SMT. MANSIHABEN MASHRU, DURING THE ASSESSMENT PROCEEDING S HAS ADMITTED AND OWNED UP THE AMOUNT FOUND IN THE PAPERS IMPOUND ED DURING THE SURVEY. SHE ACCORDINGLY OFFERED THE SAME FOR TAXAT ION ON THE BASIS OF PEAK VALUE. EVEN OTHERWISE ALSO, THERE IS NO MATER IAL WITH THE REVENUE TO PROVE THAT THE MONEY WAS IN FACT BELONGING TO TH E ASSESSEE AND TO SUGGEST THAT ANY UNRECORDED ADVANCE WAS MADE TO SMT .MANSIHABEN MASHRU BY THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY ERROR IN FINDING OF THE LD.CIT(A) ON THIS ISSUE, THIS GROUND IS ACCO RDINGLY DISMISSED. 78. NEXT EFFECTIVE GROUND OF APPEAL OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING ADDITION OF RS.85,0 0,900/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN SHARES. 79. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASS ESSMENT PROCEEDINGS, THE AO NOTICED INCREASE OF SHARE CAPIT AL OF THE ASSESSEE FORM RS.24,99,100/- TO RS.1,10,00,000/-. THE AO WA S NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THEREFORE, HE MADE ADDITION OF RS.85,00,900/-. HOWEVER, THE LD.CIT(A) HAS DELETED THIS ADDITION BY OBSERVING THAT THE ADDITION WAS MADE BY THE AO ON T HE BASIS OF SURMISES THOUGH INVESTMENT WAS REFLECTED IN THE BOO KS OF ACCOUNTS AND THAT THE ASSESSEE HAS SUFFICIENT FUNDS IN THE FORM OF BANK BALANCE AND RECEIVABLES FOR MAKING INVESTMENT OF RS.85,00,900/- . 80. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES, WE ARE NOT INCLINED TO INTERFERE IN THE ORDER OF THE LD.CIT(A) , AS THE LD.CIT(A) HAS CONSIDERED MATERIAL FACTS ON RECORD AND OBSERVED TH AT IMPUGNED INVESTMENT WAS RECORDED IN THE BOOKS OF ACCOUNTS AN D THAT SUFFICIENT FUNDS IS AVAILABLE WITH THE ASSESSEE FOR MAKING THE INVESTMENT. THOUGH THE ASSESSEE HAD SUBMITTED BOOKS OF ACCOUNTS DURING THE ASSESSMENT PROCEEDINGS, THE SAME WAS NOT CONSIDERED AT THE END OF THE AO. DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 32 THEREFORE, THERE IS NO MERIT IN THIS GROUND OF APPE AL OF THE REVENUE. IT IS DISMISSED. 81. IN THE RESULT APPEAL OF THE REVENUE FOR THE ASS TT.YEAR 2005-06 IN ITA NO.961/RJT/2010 IS DISMISSED. 82. NOW COMING TO THE CO OF THE ASSESSEE, BEARING N O.29/RJT//2010, ONLY ISSUE IN THIS CO IS WITH REGARD TO ADDITION OF RS.72,000/- ON ACCOUNT OF ALLEGED LOW HOUSEHOLD WITHDRAW. 83. ON CONSIDERING ORDERS OF THE REVENUE AUTHORITIE S, WE DO NOT FIND ANY JUSTIFICATION TO TAKE A DIFFERENT VIEW THAN THE ONE TAKEN BY THE REVENUE AUTHORITIES ON THIS ISSUE. LOOKING TO THE QUANTUM AND SIZE OF THE BUSINESS CARRIED OUT BY THE ASSESSEE AND LIFE T HEIR STYLE BOTH THE AUTHORITIES ESTIMATED LOW HOUSEHOLD WITHDRAWALS. T HERE IS NOTHING ON RECORD TO SHOW THAT ESTIMATION BASED ON SOME OPINIO N MADE BY BOTH THE AUTHORITIES BELOW IS UNJUSTIFIED, AND THEREFORE , WE DO NOT WISH TO REPLACE THE ESTIMATION OF THE REVENUE AUTHORITIES W ITH A THIRD ESTIMATION. WE DO NOT FIND ANY MERIT IN THIS GROUN D OF CO. IT IS DISMISSED. 84. IN THE RESULT CO NO.29/RJT/2010 IS DISMISSED. 85. NOW WE TAKE REVENUES APPEAL IN ITA NO.966/RJT/ 2010 FOR THE ASSTT.YEAR 2004-05. 86. IN FIRST TWO GROUNDS, REVENUE IS CONTESTING DEL ETION OF ADDITION OF RS.33,80,146/- AND INTEREST OF RS.6,08,426/- BY THE LD.CIT(A) ON ACCOUNT OF UNEXPLAINED INVESTMENT/ADVANCES. 87. BRIEF FACTS OF THE CASE IS THAT DURING THE ASSE SSMENT PROCEEDINGS, THE AO FORMED AN OPINION ON THE BASIS OF IMPOUNDED PAPERS THAT A SUM OF RS.13,56,500/- WAS ADVANCED TO VARIOUS PERSONS A ND THE SAME WERE DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 33 NOT RECORDED. THE AO ACCORDINGLY MADE ADDITION OF THIS AMOUNT AS UNEXPLAINED INVESTMENT. IN THE APPEAL BEFORE THE L D.CIT(A), IT WAS CONTENDED THAT NO ADVANCE WAS GIVEN TO ITS SISTER C ONCERN, AND THE AMOUNT REFLECTED IN THE ANNEXURE WAS OWNED BY SMT.M ANISHABEN N. MASHRU AND WHILE FINALIZING THE ASSESSMENT OF SMT.M ANSIHABEN MASHTRU THIS ADDITION WAS OFFERED FOR TAXATION, AND THEREFO RE, THERE CANNOT BE DOUBLE TAXATION. EVEN OTHERWISE, NO ADDITION CAN B E MADE ON THE BASIS OF ROUGH NOTING WITHOUT ANY CORROBORATIVE EVIDENCE. THE LD.CIT(A) CONSIDERED CONTENTIONS OF THE ASSESSEE AND DELETED THE IMPUGNED ADDITION. 88. ON DUE CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE FIND THAT SIMILAR ISSUE WAS RAISED BY THE REVENUE IN ITS APPEAL FOR THE ASSTT.YEAR 2005-06 IN ITA NO.961/RJT/2010, WHEREIN WE HAVE UPHELD THE FINDING OF THE LD.CIT(A) AND DISMISSED T HAT GROUND OF THE REVENUE. IN THE PRESENT CASE ALSO, FACTS AND CIRCU MSTANCES ARE SIMILAR EXCEPT THE QUANTUM, AND THERE IS NOTHING ON RECORD TO FORCE US TO TAKE A DIFFERENT VIEW IN THIS CASE. THEREFORE, WE DO NO T FIND ANY FORCE IN THESE TWO GROUNDS OF APPEAL OF THE REVENUE. THEY A RE DISMISSED. 89. IN THE THIRD GROUND, THE REVENUE CHALLENGES DEL ETION OF ADDITION OF RS.27.00 LAKHS BY THE LD.CIT(A) ON ACCOUNT OF DI SALLOWANCE OF FICTITIOUS LIABILITY. 90. WE HEARD BOTH THE PARTIES AND PERUSED RECORD AN D THE ORDERS OF THE REVENUE AUTHORITIES. DURING THE ASSESSMENT PRO CEEDINGS, ON THE BASIS OF PAPERS FOUND IN THE SURVEY PROCEEDINGS, TH E AO FORMED AN OPINION THAT THE ASSESSEE WAS HAVING CREDIT BALANCE OF RS.8,05,000/- WITH M/S.DIVYA TRAVELS, AND IN THE BOOKS OF THE ASS ESSEE THE ASSESSEE HAS SHOWN LIABILITY OF RS.18,95,000/-. THE AO HELD THE SAME TO BE FICTITIOUS LIABILITY AND TAXED ACCORDINGLY. ASSES SEE CHALLENGED THIS ADDITION BEFORE THE LD.CIT(A) WHO DELETED THE ADDIT ION ON THE GROUND THAT ROUGH PAPERS FOUND FROM THE PREMISES OF WIFE O F THE ASSESSEE WERE DCIT, CIR.1, RAJKOT VS. SMT.MANISHABEN N. MASHRU & ANO THERS (14 APPEALS) 34 MERE NOTEBOOKS AND DIARIES AND NOT BOOKS OF ACCOUNT S OF THE ASSESSEE. BESIDES, HE OBSERVED THAT WIFE OF THE ASSESSEE HAS OWNED UP THE NOTING IN THE ROUGH DIARY AND TAXED ACCORDINGLY. THE LD. CIT(A) HAS ALSO OBSERVED THAT THERE IS NO DOCUMENTS OR MATERIAL EVI DENCE WITH THE REVENUE TO LINK FLOW OF UNRECORDED TRANSACTIONS WIT H THE ASSESSEE. SINCE THERE IS NO CONTRARY MATERIAL BROUGHT BEFORE US BY THE REVENUE TO CONVINCE US TO TAKE A DIFFERENT VIEW, WE DO NOT FIN D ANY MERIT IN THIS GROUND OF APPEAL. IT IS DISMISSED. 91. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 966/RJT/2010 IS DISMISSED. 92. COMING TO THE CO NO.37/RJT/2010 CHALLENGING ADD ITION OF RS.36,000/- MADE ON ACCOUNT OF ALLEGED LOWER HOUSEH OLD WITHDRAWALS, WE FIND THAT BOTH THE AUTHORITIES BASED ON SOME OPI NION HAS ESTIMATED LOW HOUSEHOLD WITHDRAWALS BY THE ASSESSEE. REASONI NG GIVEN BY THE REVENUE AUTHORITIES VIZ. SIZE OF THE BUSINESS AND L IFE STYLE OF THE ASSESSEE FOR ESTIMATING HOUSEHOLD EXPENSES CANNOT B E SAID TO BE BASELESS OR UNJUSTIFIED. THE ASSESSEE HAS ALSO NOT DEMONSTRATED BEFORE US WITH SOME CORROBORATIVE MATERIAL THAT REVENUES FINDING REQUIRES OUR INTERFERENCE AND A THIRD OPINION REQUIRES IN THIS B EHALF. THEREFORE, WE ARE NOT INCLINED TO INTERFERE ON THIS ISSUE, THIS G ROUND OF CO IS DISMISSED. 93. IN THE RESULT, APPEALS OF THE REVENUE AND CROSS OBJECTION OF SHRI NAILESH M. MASHRU ARE DISMISSED, WHEREAS APPEAL AND CROSS OBJECTION OF SMT.MANISHABEN N. MASHRU ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 4 TH JANUARY, 2018 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 04/01/2018