M/s. Solanki Marbles & Stones, Valsad V. The Income tax Officer, Ward-4, Valsad

ITA 3612/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5897 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 03-09-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Assessee Lawyers: PRAKUTI R UPADHYAY
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Depreciation; Income from undisclosed sources; Deemed to accrue or arise in india
• Section: 143(3); 133A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND T.K. SHARMA, JUDICIAL MEMBER) ITA.NO.3612/AHD/2007 ASSTT.YEAR : 2005-2006 M/S.SOLANKI MARBLES & STONES NEW CIVIL ROAD, NANAKWADA VALSAD. VS. ITO, WARD-4 VALSAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : MS.PRAKUTI R. UPADHYAY REVENUE BY : SHRI A.K.KHANDELWAL O R D E R PER G.D. AGARWAL, VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT(A), VALSAD DATED 15.06 .2007 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE GROUND NO.1 TO 4 OF THE ASSESSEES APPEAL RE ADS AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND ON FACTS TO UPHOLD THE ADDITION MADE BY THE ITO FOR RS.5,18,738/- IGNORING THE LEGAL POSITION THAT DISC LOSURE TAKEN FROM THE APPELLANT ON OATH DURING THE COURSE OF SURVEY IS CO NTRARY TO THE CBDT CIRCULAR AND SETTLED POSITION OF LAW. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPHO LD THE ADDITION MADE BY THE ITO FOR RS.93,350/- AND RS.1,57,500/- B EING ALLEGED UNACCOUNTED SALES WITHOUT HAVING ANY AUTHENTIC EVID ENCE ON RECORD AND IGNORING THE FACT THAT TWO SALES BILLS DT.7-3-2005 FOR THE SALES OF 22500 SQ.FT. KOTA STONE IS NOT POSSIBLE IN ABSENCE OF AVA ILABILITY OF KOTA STONE ON 7-3-2005 WITH THE APPELLANT. FURTHER, WITHOUT E XAMINING PURCHASERS, SHRI DINESHBHAI AAHIR AND UDAYBHAI RANA OR OBTAININ G THEIR CONFIRMATION ADMITTING FACT OF PURCHASES OF KOTA ST ONE MADE BY THEM FROM THE APPELLANT, ADDITION OF UNACCOUNTED SALES C ANNOT BE MADE ESPECIALLY WHEN SUCH BILLS ARE GOT PREPARED BY SURV EYING PARTY ON LOOSE PAPER, DURING THE COURSE OF SURVEY WHILE REST OF SA LES ARE SUPPORTED BY SERIAL NUMBERED BILLS. ITA.NO.3612/AHD/2007 -2- 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPH OLD THE ADDITION MADE BY THE ITO FOR RS.2,57,552/- TOWARDS ALLEGED D IFFERENCE IN STOCK AS ON THE DATE OF SURVEY THOUGH MISTAKES COMMITTED IN PREPARING INVENTORY WAS POINTED OUT TO HIM. 4 . THE CIT(A)HAS ERRED IN LAW AND ON FACTS TO UPHOLD THE ADDITION MADE BY THE ITO FOR RS.10336/- U/S.69C WITHOUT ANY DOCUMENTARY EVIDENCE OF ANY SPECIFIC EXPENSES FOUND UNACCOUNTED . 3. THE FACTS OF THE CASE ARE THAT THERE WAS A SURVE Y AT THE ASSESSEES BUSINESS PREMISES UNDER SECTION 133A OF THE INCOME TAX ACT ON 7-3-2005. DURING THE COURSE OF SURVEY, FOLLOWING DISCREPANCIE S WERE FOUND BY THE SURVEY PARTY: 1. EXCESS STOCK OF MARBLE AND KOTA STONE RS.2,57, 552/- 2. UNACCOUNTED SALES RS.2,50,850/- 3. SHORT-FALL IN CASH RS. 10,336/- TOTAL RS.5,18,738/- SHRI HARUBHAI SOLANKI, PARTNER OF THE FIRM, PRESENT AT THE TIME OF SURVEY, WAS ASKED TO EXPLAIN THE DISCREPANCY WITH REFERENCE TO THE BOOKS OF ACCOUNTS. HE WAS NOT ABLE TO EXPLAIN THE DISCREPANCY AND VOLUNTA RILY OFFERED THE AMOUNT OF RS.5,18,738/- FOR TAXATION AS ADDITIONAL INCOME OF THE BUSINESS. IN THE TRADING ACCOUNT, THE ASSESSEE CREDITED THE SUM OF RS.5,18,7 38/- AND CONSEQUENTLY, THE NET PROFIT OF THE BUSINESS WAS WORKED OUT AND ALLOC ATED AMONGST THE PARTNERS. THE ASSESSEE FILED THE RETURN OF INCOME AT RS.2,60, 130/- ON 30-3-2006. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AT RS.5, 52,092/-. THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE ASSESSING OFFICER, FILED APPEAL BEFORE THE LEARNED CIT(A), IN WHICH, APART FROM OTHER ADDITION S, THE ASSESSEE CHALLENGED THE DISCLOSURE OF INCOME OF RS.5,18,738/- MADE BY T HE ASSESSEE ITSELF IN THE TRADING ACCOUNT. THE CIT(A) REJECTED THIS GROUND O F THE ASSESSEES APPEAL. ACCORDINGLY, GROUNDS NO.1 TO 4 ARE RAISED BY THE AS SESSEE. ITA.NO.3612/AHD/2007 -3- 4. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE ARGUED AT LENGTH. SHE HAS STATED THAT WHAT IS TAXE D BY THE ASSESSING OFFICER IS NOT THE REAL INCOME OF THE ASSESSEE. THE ASSESSEE IS AN ILLITERATE PERSON AND HE SHOULD NOT BE PENALIZED FOR THE ERRORS/OMISSIONS ON THE PART OF THE SURVEY TEAM OR THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. SHE RELIED UPON THE FOLLOWING DECISIONS TO SUPPORT HER CONTENTION THAT EVEN IF TH E INCOME IS OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME, THE SAME CAN BE C HALLENGED IN THE APPEAL. I) MAYANK PODDAR (HUF) VS. WTO, 181 CTR 362 (CAL.) II) CIT VS. BHASKAR MITTER, 73 TAXMAN 437(CAL); III) SHRI NARENDRA R. DESAI VS. ITO, VAPI, ITA NO.2553/A HD/2007 DATED 27-2-2009. SHE ALSO REFERRED TO THE CBDT CIRCULAR NO.286/2/200 3 DATED 10-3-2003 (A COPY OF WHICH PLACED AT PAGE NO.60 OF THE ASSESSEE S PAPER BOOK). IN VIEW OF THE ABOVE, SHE SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES GROUNDS OF APPEAL IN THIS REGARD. 5. THE LEARNED DR ON THE OTHER HAND, HAS STATED THA T DURING THE COURSE OF SURVEY AT THE ASSESSEES PREMISES, CERTAIN DISCREPA NCIES WERE FOUND AND THE PARTNER OF THE ASSESSEE-FIRM AVAILABLE AT THE BUSIN ESS PREMISES WAS CONFRONTED WITH THOSE DISCREPANCIES. THE PARTNER AGREED THAT HE WAS UNABLE TO EXPLAIN THE DISCREPANCY AND HAS ALSO AGREED TO OFFER THE INCOME . THAT IN THE BOOKS OF ACCOUNTS, THE ASSESSEE CREDITED THE INCOME AND ACCO RDINGLY TRADING ACCOUNT, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WERE PREP ARED. THE NET PROFIT DETERMINED AS PER THE PROFIT AND LOSS ACCOUNT IS CR EDITED TO THE PARTNERS CAPITAL ACCOUNT. THAT THE ASSESSEE HAS FURNISHED THE RETUR N AS PER THE BOOKS OF ACCOUNTS AND NO ADDITION IS MADE BY THE ASSESSING O FFICER IN THIS REGARD. HE THEREFORE SUBMITTED THAT THE ASSESSEE CANNOT HAVE A NY GRIEVANCE WHEN THE INCOME SHOWN IN HIS BOOKS OF ACCOUNTS IS ACCEPTED. HE ALSO STATED THAT THE FACTS IN THE VARIOUS CASE LAWS RELIED UPON BY THE L EARNED COUNSEL ARE ALTOGETHER ITA.NO.3612/AHD/2007 -4- DIFFERENT AND THEREFORE THEY WOULD NOT BE APPLICABL E TO THE CASE UNDER APPEAL BEFORE US. 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. FROM PAGE N OS.1 TO 7 OF THE ASSESSEES PAPER BOOKS, COPY OF COMPUTATION OF INCOME AS WELL AS FINAL ACCOUNTS OF THE ASSESSEE FOR THE YEAR UNDER APPEAL ARE GIVEN. AT P AGE NO.3 OF THE ASSESSEES PB, THERE IS A TRADING ACCOUNT WHERE THE ASSESSEE H AS CREDITED THE INCOME OF RS.5,18,738/- AND ACCORDINGLY, THE GP OF THE YEAR U NDER CONSIDERATION IS WORKED OUT. THE NP OF THE BUSINESS AS PER PROFIT A ND LOSS IS WORKED OUT AFTER CONSIDERING THE GP DETERMINED AS PER THE TRADING AC COUNT. THE NP DETERMINED BY THE PROFIT AND LOSS ACCOUNT IS CREDITED TO THE P ARTNERS CAPITAL ACCOUNT BY WAY OF REMUNERATION AS WELL AS PROFIT. THE BALANCE SHE ET IS PREPARED AFTER CONSIDERING THE CREDIT BALANCE IN THE PARTNERS ACC OUNT. PAGE NO.7 OF THE ASSESSEES PB, THERE IS A BALANCE SHEET IN WHICH TH E LIABILITY SIDE AS WELL AS ASSETS SIDE HAVE BEEN SHOWN. ON THE LIABILITY SIDE , THERE IS A CREDIT BALANCE OF THE PARTNERS CAPITAL ACCOUNT, WHICH IS WORKED OUT AFTER CONSIDERING THE INCOME OF RS.5,18,738/-. SUCH CREDIT BALANCE IS DULY REPR ESENTED BY THE ASSET AT THE OTHER SIDE BECAUSE TOTAL OF THE LIABILITY SIDE OF T HE BALANCE SHEET IS EQUAL TO THE TOTAL OF THE ASSETS SIDE. IN VIEW OF THE ABOVE CON TENTION OF THE ASSESSEE THAT THE ASSESSEE DID NOT HAVE THE REAL INCOME AND THE INCOM E WAS OFFERED UNDER THE IGNORANCE OF THE ASSESSEE OR HIS AUTHORIZED REPRESE NTATIVE, CANNOT BE ACCEPTED. 7. WE MAY ALSO POINT OUT THAT THE FACTS OF VARIOUS CASE LAWS RELIED UPON BY THE LEARNED COUNSEL OF THE ASSESSEE ARE ALTOGETHER DIFFERENT. IN THE CASE OF MAYANK PODDAR (HUF) (SUPRA), THE DISPUTE BEFORE THE CALCUTTA HIGH COURT WAS WHETHER THE ASSESSEE CAN CHALLENGE THE TAXABILITY O F ASSETS TO WEALTH TAX WHEN THE ASSESSEE HAS HIMSELF SHOWN SUCH ASSETS AS TAXAB LE BEFORE THE ASSESSING OFFICER. ON SUCH FACTS, THEIR LORDSHIPS OF CALCUTT A HIGH COURT HELD THAT THERE IS NO ESTOPPEL AGAINST THE STATUTE. SIMILAR WERE THE FACTS IN TH E CASE OF BHASKAR MITTER (SUPRA). HOWEVER, THE FACTS IN THE CASE OF THE ASSESSEE BEFORE US ARE ITA.NO.3612/AHD/2007 -5- ALTOGETHER DIFFERENT. HERE THERE IS NO DISPUTE WIT H REGARD TO LEGALITY OF TAXABILITY OF ANY INCOME. HERE THE DISPUTE IS FACT UAL I.E. WHETHER THERE WAS ANY UNACCOUNTED INCOME OR NOT AND THE ASSESSEE HIMSELF HAS SHOWN SUCH UNACCOUNTED INCOME IN ITS BOOKS OF ACCOUNTS AND SUC H INCOME WAS DULY REPRESENTED BY ASSETS ON THE ASSET SIDE OF THE BALA NCE SHEET. IN THE CASE OF SHRI NARENDRA R. DESAI (SUPRA), THE ISSUE BEFORE THE D BENCH OF THE ITAT WAS WHETHER THE INCOME IS TAXABLE IN THE HANDS OF THE I NDIVIDUAL OR HUF. THUS, THE FACTS IN THE CASE BEFORE THE ITAT WERE ALSO ALTOGET HER DIFFERENT THAN THE FACTS OF THE PRESENT ASSESSEE. THEREFORE, THE DECISIONS REL IED UPON BY THE ASSESSEES LEARNED COUNSEL WILL NOT BE APPLICABLE TO THE CASE UNDER APPEAL BEFORE US. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS POINT. THE SAME IS UPHELD AND G ROUND NO.1 TO 4 OF THE ASSESSEES APPEAL ARE REJECTED. 8. GROUND NOS.5 AND 6 OF THE ASSESSEES APPEAL READ S AS UNDER: 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND ON FACTS NOT TO ALLOW ALTERNATIVE GROUND IN CONNECTION WITH WORKING PARTNERS REMUNERATION OUT OF BOOK PROFIT A S PER PROVISIONS OF IT ACT, 1961 AND AS PER THE TERMS OF PARTNERSHIP DE ED AND ALLEGED INCOME ALL ARISING FROM BUSINESS. 6. THE AO HAS ERRED IN LAW AND ON FACTS TO IGNORE T HE PROVISIONS OF SEC.44AF WHICH IS COMPULSORILY TO BE APPLIED IN CAS E OF RETAIL TRADERS WHOSE TURNOVER IS BELOW 40 LACS. LD.CIT(A) HAS ALS O ERRED IN LAW IN CONFIRMING IN THE ACTION OF THE ASSESSING OFFICER. 9. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE HAS MODIFIED THE ABOVE GROUND NOS.5 AND 6 AS UNDER: 1. THE ASSESSING OFFICER HAS ERRED IN LAW AND ON F ACTS TO ADD RS.84,084/- BEING GP DIFFERENCE ON ESTIMATED BASIS AND RS.3,795/- BEING 20% OF EXPENSES ON AD HOC BASIS IGNORING THE SETTLE D LEGAL POSITION THAT WHEN NP DECLARED IS MORE THAN THE REQUIREMENT OF LA W, THE ASSESSING OFFICER IS NOT AUTHORIZED TO MAKE FURTHER ADDITION FOR THE ITEMS OF EXPENSES COVERED BY SECTION 28 TO 38. THE CIT(A) H AS ALSO ERRED IN CONFIRMING SUCH ADDITION. ITA.NO.3612/AHD/2007 -6- 2. WITHOUT PREJUDICE TO THE GROUND NO.1 TO 4 OF OUR ORIGINAL APPEAL MEMO, FOLLOWING GROUNDS ARE RAISED AS AN ALTERNATE GROUNDS WHICH MAY BE DECIDED IF GROUND NO.1 TO 4 (EITHER ANY OR ALL) IS UPHELD OR DECIDE AGAINST - A) THE LD.AO HAS ERRED IN LAW AND ON FACTS TO DISAL LOW APPELLANTS CLAIM U/S.40(B)(V) OF THE ACT IN RESPEC T OF PARTNERS REMUNERATION ON INCOME DISCLOSED IN SURVE Y WHICH IS NOTHING BUT A BUSINESS INCOME AND PART OF BOOK PROFIT ELIGIBLE FOR DEDUCTION U/S.40(B)(V) OF THE A CT. LD.CIT(A) HAS ALSO ERRED IN SUSTAINING THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER. B) ONLY GP IS TO BE TAXED IN RESPECT OF UNRECORDED SALES IN ABSENCE OF ANY EVIDENCE AS REGARD TO UNRECORDED PURCHASES IN SURVEY. 10. WE FIRST TAKE UP GROUND NO.5 OF THE MODIFIED GR OUNDS OF APPEAL WHICH IS WITH REGARD TO GP ADDITION OF RS.84,084/- AND AL SO DISALLOWANCE OF RS.3,795/- OUT OF EXPENSES. THE FACTS RELATING TO GP ADDITION ARE THAT THE ASSESSEE DERIVES INCOME FROM TRADING OF MARBLES, KOTA STONES ETC. ON THE SALE OF RS.13,08,132/-, THE ASSESSEE DISCLOSED GP OF RS.6,9 6,380/-. THE ASSESSING OFFICER NOTICED THAT THE INCOME OF RS.5,18,738/- IS OFFERED BY THE ASSESSEE DUE TO SURVEY WHICH IS CREDITED IN THE TRADING ACCOUNT. HE THEREFORE EXCLUDED THE SAME AND WORKED OUT THE GP AT RS.1,77,642/- WHICH I S ONLY 13.57%. THE AO REJECTED THE BOOKS OF ACCOUNTS AND APPLIED THE GP R ATE OF 20% WHICH RESULTED IN THE ADDITION OF RS.84,084/- WHICH IS SUSTAINED B Y THE CIT(A) 11. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED BEFORE US. WE FIND THAT THE ADDITIONAL INCOME OFFERED BY THE A SSESSEE WAS ON ACCOUNT OF EXCESS STOCK OF MARBLES AND KOTA STONES, UNACCOUNTED SALES AND SHORTFALL IN CASH. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CON TENDED THAT THE ABOVE ENTIRE INCOME WAS TO BE CONSIDERED AS BUSINESS INCOME WHIL E AS PER THE REVENUE IT SHOULD BE TREATED AS INCOME FROM THE BUSINESS. WE WILL EXAMINE THIS ISSUE IN DETAIL WHILE CONSIDERING THE GROUND NO.6 OF THE ASS ESSEES APPEAL. HOWEVER, ONE OF THE ITEM IN THE INCOME OFFERED BY THE ASSESS EE IS UNACCOUNTED SALES AMOUNTING TO RS.2,50,850/-. IN OUR OPINION, THE IN COME OFFERED BY THE ASSESSEE ITA.NO.3612/AHD/2007 -7- FOR UNACCOUNTED SALES WOULD CERTAINLY FORM PART OF THE TRADING ACCOUNT AND HAS TO BE CONSIDERED WHILE WORKING OUT THE GP. WHEN TH IS UNACCOUNTED SALE OF RS.2,50,850/- IS CONSIDERED, THE GP OF THE ASSESSEE WOULD BE CERTAINLY ABOVE 20% AND THEREFORE IN OUR OPINION NO ADDITION ON ACC OUNT OF GP IS REQUIRED TO BE MADE. THE SAME IS DIRECTED TO BE DELETED. THE AO HAS ALSO DISALLOWED RS.3795/- OUT OF TELEPH ONE EXPENSES AND DEPRECIATION ON MOTOR CYCLE ETC. PERSONAL USER BY THE PARTNERS OR THEIR FAMILY MEMBERS OF THE TELEPHONE AND MOTOR CYCLE CANNOT BE RULED OUT. WE THEREFORE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH REG ARD TO DISALLOWANCE OF RS.3795/- OUT OF EXPENSES. 12. THE FACTS RELATING TO THE REVISED GROUND NO.6 A RE THAT THE ASSESSEE OFFERED THE ADDITIONAL INCOME OF RS.5,18,738/- BY W AY OF CREDIT TO THE TRADING ACCOUNT AND ACCORDINGLY NET PROFIT IS WORKED OUT. THE ASSESSEE HAS ALSO WORKED OUT THE REMUNERATION TO THE PARTNERS ON THE BASIS OF NET PROFIT AS WORKED OUT AFTER CONSIDERING THE INCOME OF RS.5,18,738/-. THE ASSESSING OFFICER CONSIDERED THE SAID INCOME AS INCOME FROM OTHER SOU RCES AND THEREFORE EXCLUDED THE SAME WHILE WORKING OUT THE REMUNERATIO N TO THE PARTNERS. 13. THE LEARNED COUNSEL FOR THE ASSESSEE IN SUPPORT OF HER CONTENTION HAS RELIED UPON THE FOLLOWING DECISIONS OF THE ITAT: I) ROYALE SUNRISE VS. ITO, 11 SOT 13 (BANG.); II) KATHIYAWADI HOTEL VS. ITO, ITA NO.827/AHD/2007. 14. THE LEARNED DR RELIED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN V S. CIT, 247 ITR 290. HE ALSO DISTINGUISHED THE FACTS OF THE CASES RELIED UPON BY LEARNED COUNSEL. HE THEREFORE SUBMITTED THAT THE INCOME OFFERED IN THE SURVEY SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER INCOME FROM BUSINESS. ITA.NO.3612/AHD/2007 -8- 15. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS AND PERUSED THE MATERIAL PLACED BEFORE US. THAT THE ASSESSEE OFFERED THE AD DITIONAL INCOME OF RS.5,18,738/- WHICH IS CONSISTING OF EXCESS STOCK, UNACCOUNTED SALES AS WELL AS EXCESS CASH. SO FAR AS UNACCOUNTED SALE IS CONCERN ED, IN OUR OPINION, THE SAME IS TO BE ACCOUNTED FOR IN THE TRADING ACCOUNT AND W ILL ACCORDINGLY FORM PART OF THE PROFIT OF THE BUSINESS OF THE YEAR UNDER CONSID ERATION. SO FAR AS THE EXCESS STOCK AND EXCESS CASH IS CONCERNED, WE FIND THAT TH IS ISSUE IS COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN (SUPRA) WHEREIN THE HONBLE COURT HELD AS UNDER: ON THE FACTS, THAT IT WAS CLEAR THAT WHEN THE INVES TMENT IN OR ACQUISITION OF GOLD, WHICH WAS RECOVERED FROM THE A SSESSEE WAS NOT RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE O FFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH INV ESTMENT OR ACQUISITION AND THE VALUE OF SUCH GOLD WAS NOT RECO RDED IN THE BOOKS OF ACCOUNT, NOR THE NATURE AND SOURCE OF ITS ACQUISITI ON EXPLAINED, THERE COULD ARISE NO QUESTION OF TREATING THE VALUE OF SU CH GOLD, WHICH WAS DEEMED TO BE THE INCOME OF THE ASSESSEE, AS A DEDUC TIBLE TRADING LOSS ON ITS CONFISCATION, BECAUSE SUCH DEEMED INCOME DID NO T FALL UNDER THE HEAD OF INCOME PROFITS AND GAINS OF BUSINESS OR PR OFESSION. THEREFORE, THE TRIBUNAL WAS PERFECTLY RIGHT IN HOLDING THAT TH E VALUE OF THE GOLD WAS LIABLE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AS THE SOURCE OF INVESTMENT IN THE GOLD OR OF ITS ACQUISITION WAS NO T EXPLAINED AND THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM THAT THE VAL UE OF THE GOLD SHOULD BE ALLOWED AS A DEDUCTION FROM HIS INCOME. FROM THE ABOVE, IT IS EVIDENT THAT THE HONBLE JURI SDICTIONAL HIGH COURT HAS HELD THAT THE ADDITION FOR UNEXPLAINED INVESTMENT D OES NOT FALL UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. RAT IO OF THE ABOVE DECISION WOULD BE SQUARELY APPLICABLE FOR THE EXCESS STOCK A ND EXCESS CASH BECAUSE THE ADDITION FOR SUCH EXCESS STOCK AND EXCESS CASH WOUL D ALSO BE IN THE NATURE OF UNEXPLAINED INVESTMENT. WE THEREFORE DIRECT THE AS SESSING OFFICER TO CONSIDER THE SUM OF RS.2,50,850/- BEING UNACCOUNTED SALE AS BUSINESS INCOME. HOWEVER, HIS ORDER FOR ASSESSMENT OF EXCESS STOCK A ND CASH UNDER THE HEAD INCOME FROM OTHER SOURCES IS UPHELD. THE ASSESSIN G OFFICER WILL WORK OUT ITA.NO.3612/AHD/2007 -9- THE REMUNERATION OF THE PARTNERS AFTER REWORKING OF THE INCOME AS PER THE ABOVE DIRECTION. 16. BEFORE WE PART WITH THE MATTER, WE MAY MENTION THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON TWO DECISION OF TH E ITAT ONE DECISION OF THE ITAT WAS IN THE CASE OF KATHIYAWADI HOTEL (SUPRA). HOWEVER, WE FIND THAT IN THAT CASE THE ASSESSING OFFICER HIMSELF HAS ASSESSE D THE INCOME AS INCOME FROM THE BUSINESS. BUT IN THE CASE UNDER APPEAL BEFORE US, THE ASSESSING OFFICER HAS ASSESSED INCOME DECLARED IN THE SURVEY AS INCOME F ROM OTHER SOURCES. THEREFORE, THE ABOVE DECISION WOULD NOT BE APPLICAB LE. THE DECISION OF THE ITAT, BANGALORE BENCH (SUPRA) IS IN FAVOUR OF THE A SSESSEE. HOWEVER, THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF FAKIR MOHMED HAJI HASAN WOULD BE BINDING ON US AND IS TO BE FOLL OWED IN PREFERENCE TO THE DECISIONS OF THE ITAT. WE HAVE THEREFORE DECIDED T HIS APPEAL FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT. 17. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 18 TH JUNE, 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 18-06-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER AR, ITAT, AHMEDABAD