SHRI RAVINDER AGGARWAL, JAMMU V. DEPUTY COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE, JAMMU

ITA 408/ASR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4971 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-03-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 26-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANDEEP CHAUHAN
• Keywords: Unexplained investment
• Section: 153A; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NO. 408/(ASR)/2018 ASSE SSMENT YEAR: 2013-14 RAVINDER AGGARWAL, 116, JULLAKHA MOHALLA, JAIN BAZAR, JAMMU [PAN: AMXPA 7889C] VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SURINDER MAHAJAN (C.A.) RESPONDENT BY: SH. SANDEEP CHAUHAN, CIT-DR DATE OF HEARING: 05.03.2019 DATE OF PRONOUNCEMENT: 20.05.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-5, LUDHIANA ( CIT(A) FOR SHORT) DATED 11.05.2018, DISMISSING THE ASSESSEES APPEAL CONTES TING HIS ASSESSMENT UNDER SECTION 153A OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 09.03.2016 FOR ASSESSMENT YEAR (AY) 2013-14. 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE, IN JEWELLERY BUSINESS, AND HIS FAMILY MEMBERS WERE SUBJECT TO SEARCH PROCEEDIN GS U/S. 132(1) OF THE ACT AT THEIR RESIDENCE ON 04.09.2013. INCRIMINATING MATERI AL, DISCLOSING UNDISCLOSED TRANSACTIONS OF PURCHASE AND SALE OF GOLD AND SILVE R, WAS FOUND AND SEIZED, AND STATEMENT/S U/S. 132(4) RECORDED. ON THE BASIS OF T HE WORKING MADE FROM THE SEIZED ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 2 MATERIAL, PROFIT WAS WORKED OUT. THE SAME, TOGETHER WITH THE UNEXPLAINED STOCK AND CASH, WAS SURRENDERED AS INCOME IN THE HANDS OF THE DIFFERENT FAMILY MEMBERS, INCLUDING THE ASSESSEE, AT AN AGGREGATE OF RS.1025 LACS FOR THE RELEVANT ASSESSMENT YEAR, I.E., AY 2014-15. THE ASSESSEES SHARE IN THE DISCLOSURE, MADE THUS, WAS AT RS 615 LACS, I.E., RS. 310.72 LACS BY WAY OF PROFIT AN D RS. 304.28 LACS BY WAY OF UNEXPLAINED ASSETS (PB PG. 28). THE ASSESSEE AND TH E OTHER FAMILY MEMBERS HONORED THE DISCLOSURE, ALSO PAYING TAX DUE THEREON . AS, HOWEVER, SOME OF THE SEIZED MATERIAL PERTAINED TO THE CURRENT YEAR, THE IMMEDIATELY PRECEDING YEAR, NOTICE U/S. 153A WAS ISSUED TO THE ASSESSEE ON 23.0 1.2014 . THE ASSESSEE REPLIED ON 16.12.2014, STATING THAT THE RETURN FILED ON 23.01. 2014 BE TREATED AS THE RETURN FILED IN RESPONSE TO THE NOTICE U/S. 153A. THE QUESTION T HEREFORE AROSE AS TO HIS UNDISCLOSED INCOME (AS PER THE SEIZED MATERIAL) PER TAINING TO THE CURRENT YEAR. THE ASSESSEE, FAILING TO OBTAIN THE MANNER OF WORKING O F THE UNDISCLOSED INCOME, I.E., AS PER THE SEIZED MATERIAL INCLUDING THAT FOR THE CU RRENT YEAR, FROM THE ASSESSING OFFICER (AO), I.E., EVEN AFTER REPEATED REQUESTS, A TTEMPTED THE SAID WORKING HIMSELF. THE SAME COULD ONLY BE OF THE PROFIT (LOSS ) FROM THE TRANSACTIONS OF PURCHASE AND SALE RECORDED IN THE LOOSE SHEETS, DIA RIES, ETC., FORMING DIFFERENT ANNEXURES OF THE SEIZED MATERIAL. THIS IS AS THE AS SETS FOUND ARE ONLY AT THE TIME OF SEARCH, RELATING THEREFORE TO AY 2014-15. THE SAID WORKING (PB PGS. 91,92) REVEALED A LOSS OF RS. 16,90,788. THE AO, HOWEVER, DID NOT ACCEPT THE SAME, AND PROCEEDED TO ASSESS THE PROFIT THERE-FROM AT 2% OF THE UNDISCLOSED TURNOVER OF RS.5500 LACS, I.E., AT RS.110 LACS. ANOTHER RS.50 L ACS WAS ADDED TOWARD UNEXPLAINED INVESTMENT IN THE SAID UNDISCLOSED BUSI NESS. THE ASSESSEE FAILING TO IMPRESS THE LD. CIT(A), SO THAT HIS APPEAL BEFORE H IM STOOD DISMISSED, IS IN SECOND APPEAL. ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 3 THE ISSUE 3. THE ISSUE, THUS, ARISING FOR ADJUDICATION IN THE INSTANT CASE IS THE INCOME ASSESSABLE AND, THUS, THE TAX IMPACT, IF ANY, FOR T HE CURRENT YEAR, ON THE BASIS OF THE SEIZED MATERIAL RELATING TO THE SAID YEAR. THE COLL ATERAL ISSUE THAT ARISES IS IF THE INCOME ASSESSABLE FOR THIS YEAR WOULD STAND TO BE T ELESCOPED AGAINST THE INCOME ASSESSED FOR THE FOLLOWING YEAR (I.E., AY 2014-15) IN-AS-MUCH AS THE SAME IS, AGAIN, BASED ON THE ENTIRE SEIZED MATERIAL, INCLUDI NG THAT FOR THE CURRENT YEAR. THE ARGUMENTS 4. AS REGARDS THE PRINCIPAL ISSUE, THE ASSESSEES C ASE IS THAT IT HAS WORKED OUT THE INCOME ON THE BASIS OF THE RELEVANT SEIZED MATE RIAL, WHICH RESULTS IN A TRADING LOSS FOR THE CURRENT YEAR, AS UNDER (PB PG. 91, 92): - GOLD (147209 GMS) : RS. 14,14,265 (ON A TURNOV ER OF RS. 45.70 CR.) - SILVER (3,40,395 GMS) : RS. 2,76,523 (ON A TURN OVER OF RS.1.939 CR.) THE AO, WITHOUT POINTING OUT ANY DEFECT THEREIN, CH OSE TO IGNORE THE SAME. HOW COULD THAT BE ? THE MATCHING OF THE QUANTITY OF BOTH THE PURCHASE S (DEBIT) AND SALES (CREDIT) EXHIBITS THE COMPLETENESS OF THE SAID WORK ING. ITS VERACITY IS FURTHER CONFIRMED BY THE FACT THAT THE SAME, EXTENDED UP TO THE DATE OF SEARCH, ALSO AGREES WITH THE CASH FOUND DURING SEARCH (EXCEPT FOR A MIN OR DIFFERENT OF RS. 2,850 / PB PGS. 139-140). THIS IS SO AS BOTH THE PURCHASES AND SALES ARE IN CASH. THE REVENUE AUTHORITIES HAVE, AGAIN, WITHOUT COMMENTING ADVERSE LY ON THE SAID WORKING BY THE ASSESSEE, SUMMARILY DISMISSED THE SAME, APPLYING A PROFIT RATE OF 2%, I.E., AS OBTAINING IN ANOTHER CASE (NISCHAL GROUP), ALSO STA TED TO BE SUBJECT TO SEARCH PROCEEDINGS. IN-AS-MUCH AS THE PROFITS TRANSLATE INTO CASH, WHI CH HAS BEEN TAKEN INTO ACCOUNT WHILE ASSESSING THE UNDISCLOSED (UNEXPLAINE D) INCOME FOR AY 2014-15, TO THE EXTENT TAXED FOR AY 2013-14 (CURRENT YEAR), SHO ULD BE DEDUCTED FROM THE ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 4 INCOME ASSESSED FOR THAT YEAR (AY 2014-15) BY GIVIN G A SUITABLE DIRECTION. IN OTHER WORDS, AS FAR AS THE ASSESSEE IS CONCERNED, IT IS A ZERO-SUM GAME, I.E., WHEN BOTH THE YEARS ARE TAKEN TOGETHER. DISCUSSION & FINDINGS 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 5.1 OUR FIRST OBSERVATION IN THE MATTER IS THAT EAC H YEAR IS A SEPARATE AND INDEPENDENT UNIT OF ASSESSMENT, AND INCOME FOR A PA RTICULAR YEAR IS TO BE ASSESSED FOR THAT YEAR ONLY ( CIT VS. ISTHMIAN STEAMSHIP LINES REPORTED AT [1981] 20 ITR 572 (SC); KARIMTHARUVI TEA ESTATE LTD. V. STATE OF KERALA [1966] 60 ITR 262 (SC); RELIANCE JUTE & INDUSTRIES LTD. V. CIT [1979] 120 ITR 921 (SC)) . THE LAW IN THE MATTER IS TRITE AND INCOME ASSESSED IN THE HANDS OF ANOTHER, OR FOR ANOTHER YEAR, IS NO GROUND FOR IT BEING NOT ASSESSED IN THE HANDS OF THE RIGHT PERSON AND/OR FOR THE RIGHT YEAR [ ITO V. CH. ATCHAIAH [1996] 218 ITR 239 (SC); CIT V. BRITISH PAINTS INDIA LTD . [1991] 188 ITR 44 (SC); JAMNAPRASAD KANHAIYALAL V. CIT [1981] 130 ITR 244 (SC); RADHE SHYAM TIBREWAL V. CIT [1984] 145 ITR 186 (SC)). THAT, RATHER, AS EXPLAINED IN THE DECISIONS AFORE-CITED, IS THE PREMISE OF THE INCOME-TAX LAW, PROVIDING FOR A CHARGE OF TAX, AN ANNUAL LEVY, ON THE INCOME ASSESSABLE FOR THAT YEAR; THE PROVISIONS OF LAW AS WELL AS THE RAT ES OF TAX ITSELF LIABLE TO CHANGE FROM YEAR TO YEAR. THIS, OF COURSE, IS SUBJECT TO T HE SPECIFIC PROVISIONS OF LAW AS, FOR EXAMPLE, PROVISO TO SEC. 4(1). THERE IS, AS SUCH, NOTHING WRONG O R AMISS IN THE REVENUE, DESPITE THE ASSESSEE OFFERING INCOME TO TA X ON THE BASIS OF THE SEIZED MATERIAL FOR AY 2014-15, WHICH, AS STATED, INCLUDES THAT PERTAINING TO THE CURRENT YEAR AS WELL, TO BRING THE SAME TO TAX FOR THE CURR ENT YEAR. THE ASSESSEES PLEA THAT, EVEN SO, IT WOULD STAND TO BE ALLOWED TELESCOPING B ENEFIT IS, IN PRINCIPLE, EQUALLY VALID IN-AS-MUCH AS THERE CAN BE NO DOUBLE TAX, I.E ., ON THE SAME INCOME FOR THE CURRENT YEAR AS WELL AS THE FOLLOWING YEAR. A DECIS ION THEREON, INCLUDING THE EXTENT ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 5 THEREOF, WOULD THOUGH DEPEND ON THE NATURE OF THE I NCOME AND THE APPLICABLE PROVISIONS OF LAW. AS SUCH, IT IS NOT, AND THE MATTER CANNOT BE VIEWE D IN THE PARADIGM OF A ZERO- SUM GAME, EVEN AS, WHERE AND TO THE EXTENT APPLICAB LE, TELESCOPING BENEFIT IS TO BE ALLOWED (REFER: VEERASINGHAIAH & CO. V. CIT [1980] 123 ITR 457 (SC)). INCOME CAN BE ASSESSED EITHER ON THE BASIS OF PROFIT ARISI NG TO THE ASSESSEE (FOR THE RELEVANT PERIOD), WHICH WE MAY, FOR REFERENCE, CALL THE SOU RCE-BASED INCOME, OR ON THE BASIS OF THE ACCRETION TO ASSETS (AVENUES OF INVEST MENT), WHEREIN THE SAID PROFIT GETS APPLIED OR MANIFESTED IN, I.E., THE APPLICATION-BA SED INCOME. CORRECTLY COMPUTED, THE TWO MUST AGREE, REPRESENT AS THEY DO, THE TWO S IDES OF THE SAME COIN, I.E., THE DEBIT AND THE CREDIT SIDES OF A BALANCE-SHEET. THIS IS PRECISELY WHAT THE ASSESSEE SEEKS TO EMPHASIZE BY REFERRING TO ITS WORKING OF PROFIT AND THE CASH GENERATED. IT IS THIS THAT FORMS THE BASIS OF THE CONCEPT OF TELE SCOPING . AS, HOWEVER, FULL DATA MAY NOT BE AVAILABLE, AND EVEN AS THERE ARE ATTEMPT S TO COMPUTE INCOME FOLLOWING BOTH THE METHODS, THE INCOME AS PER THE T WO METHODS MAY NOT MATCH. IT IS, IN THAT CASE, THE HIGHER OF THE TWO, I.E., THE PROFIT OR THE ASSETS, WHICH WOULD STAND TO BE ADOPTED, EVEN AS ADMITTED TO BY THE LD. COUNSEL FOR THE ASSESSEE, SH. MAHAJAN, DURING HEARING. IN FACT, IMPLICIT IN THIS IS THE TELESCOPING OF THE LOWER AMOUNT AGAINST THE HIGHER AMOUNT . FOR EXAMPLE, IF PROFIT AND ASSET-BASED INCOME IS AT RS.10 LACS AND RS.8 LACS RESPECTIVELY, IT IS THE FORMER (RS.10 LACS) THAT SHALL PREVAIL, WHILE THE LATTER WOULD IF IT EXCEEDS RS.10 LACS, AS (SAY) RS.12 LACS. NO ASSETS HAVE BEEN FOUND FOR THE CURRENT YEAR (PERIOD 1) IN THE INSTANT CASE, SO THAT PROFIT BECOMES THE ONLY BASIS OF INCOME DETERMINATI ON. NOW, IF THE UNDISCLOSED INCOME FOR THE FOLLOWING YEAR (P2) IS ASSET-BASED, BEING HIGHER THAN THE PROFIT WORKED OUT FOR THAT YEAR, TELESCOPING SHALL APPLY. IF, HOWEVER, IT IS, AGAIN, THE PROFIT WHICH IS THE BASIS OF INCOME FOR THAT YEAR, TELESCO PING MAY NOT HAVE APPLICATION. ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 6 5.2 WE, NEXT, PROCEED TO EXAMINE THE ASSESSEES WOR KING (PB PGS. 91, 92, 139- 140), BASED AS IT IS ON THE SEIZED MATERIAL. THIS A SSUMES RELEVANCE FOR TWO REASONS. FIRST, THE NATURE OF THE TRANSACTIONS AND, TWO, THE QUANTIFICATION OF INCOME. AS REGARDS THE FORMER, WHILE THE ASSESSEE CLAIMS THEM TO BE RATE CUT TRANSACTIONS, I.E., WHERE THE PURCHASE IS SETTLED AGAINST SALE, SO THAT ONLY THE RATE DIFFERENCE OBTAINS, THE REVENUE CLAIMS IT TO BE PURCHASE AND SALE TRANS ACTIONS, ALBEIT WHOLESALE IN NATURE (PARA 2.8 OF THE ASSESSMENT ORDER). ONE MAY ARGUE THAT IN-AS-MUCH AS IT IS ONLY THE DIFFERENCE BETWEEN THE PURCHASE AND SALE W HICH, IN EITHER CASE, IS RELEVANT, THE NATURE OF PURCHASE AND SALE, OR THE MANNER IN WHICH THESE TRANSACTIONS ARE CONDUCTED AND SETTLED, MAY NOT BE OF MUCH CONSEQUEN CE. WHERE THE TRANSACTIONS DO NOT INVOLVE ANY PHYSICAL DELIVERY, THE SAME ARE SPECULATIVE BY DEFINITION (SECTION 43(5)). DELIVERY IS EVEN OTHERWISE AN ESSE NTIAL INGREDIENT OF TRANSFER OF MOVABLY PROPERTY. FURTHER, WHERE THE TRANSACTIONS C ONSTITUTE A BUSINESS, AS IN THE INSTANT CASE, THE SAME IS TO BE REGARDED AS A SEPAR ATE BUSINESS ( EXPLANATION 2 TO SECTION 28). IT IS FOR THIS REASON THAT THIS ARGUME NT, EVEN IF ASSUMED, IS MISPLACED, AND THE NATURE OF THE TRANSACTIONS ASSUMES SIGNIFIC ANCE. 5.3 THE NATURE OF THE TRANSACTIONS, SUBJECT AS THEY ARE TO CONTRARY CLAIMS, SHALL THEREFORE HAVE TO BE EXAMINED. THIS IS THOUGH SURPR ISING AS THE SAME ARE BASED ON THE SAME SEIZED MATERIAL, WHICH, SURPRISINGLY AGAIN , IS NOT BROUGHT ON RECORD NOR, CONSEQUENTLY, REFERRED TO DURING HEARING. THE ASSES SEES CLAIM HAS NOT BEEN ACCEPTED BY THE REVENUE FOR , PRINCIPALLY, TWO REASONS. ONE, THAT THE ASSESSEE ADMITS THE SAME (VIDE LETTER DATED 09.12.2015 REF ERRED TO AT PARA 2.3 AND PARA 3.2 (PG. 30) OF THE ASSESSMENT AND APPELLATE ORDER IS R ESPECTIVELY) TO BE PURCHASE AND SALE TRANSACTIONS. TWO, THE RATE CUT DOES NOT INVOL VE ANY PURITY (OF METAL), BEING SUPPOSED TO BE OF 24 CARAT GOLD, WHILE THERE IS INV ARIABLY REFERENCE TO THE PURITY OF THE METAL IN THE SEIZED MATERIAL (VARYING FROM 88% TO 100%). THE THIRD REASON ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 7 STATED IS THAT SOME SEIZED MATERIAL (AS ANN. 30) CO NTAINS SLIPS FOR SALE OF SMALL QUANTITIES TO VARIOUS PERSONS, PRESUMABLY RETAILERS (REFER PARAS 2.4, 2.6 OF THE ASSESSMENT ORDER, AND PARA 3.2 (PG. 30) OF THE APPE LLATE ORDER). GIVING OUR CAREFUL CONSIDERATION TO THE MATTER, WE ARE INCLINED TO ACCEPT THE ASSESSEES CLAIM, I.E., IN PREFERENCE TO THAT OF TH E REVENUE. THIS IS, AGAIN, FOR MORE THAN ONE REASON. TO BEGIN WITH, THE AO HIMSELF ADMI TS THAT THESE TRANSACTIONS CANNOT BE REGARDED AS REGULAR TRANSACTIONS OF PURCH ASE AND SALE, I.E., IN THE RETAIL MARKET, UNDERTAKEN BY THE ASSESSEE IN THE REGULAR C OURSE OF HIS BUSINESS, IN VIEW OF THE ORDER SIZE, VOLUME AND TURNOVER, JUSTIFYING O N THAT BASIS, HIS NOT APPLYING THE ASSESSEES NORMAL PROFIT RATE ON THE RELEVANT TURNO VER. THEN, THE ASSESSEES WORKING SHOWS A COMPLETE MATCHING (BOTH FOR GOLD AND SILVER ) OF THE QUANTITY PURCHASED AND SOLD DURING THE FINANCIAL YEAR, INVOLVING A VOL UME OF NEARLY RS. 48 CRORES OVER A PERIOD OF A YEAR. THIS IN FACT OBTAINS FOR THE SU CCEEDING YEAR AS WELL. NOW, IT IS HIGHLY IMPROBABLE, NAY, ALMOST IMPOSSIBLE, IN THE R EGULAR COURSE OF BUSINESS, THAT THE PURCHASE AND SALE QUANTITIES MATCH, WHICH IS ON LY AN INCIDENCE OF A SPECULATIVE TRADE, I.E., WHERE THE DEAL IS CUT BEFORE THE CLOSE OF THE DAY. IN FACT, THE ASSESSEE HAS IN THIS REGARD CLEARLY STATED (VIDE LETTER DATED 25 /2/2016) THAT THE PURCHASE AND SALE RATES AGREE, AND ACCORDINGLY MAY BE VERIFIED, WITH THE PUBLISHED RATES OF THE STOCK EXCHANGE (MCX), I.E., WHERE THE COMMODITIES ARE TRA DED IN; THE RELEVANT PART OF THE LETTER IN FACT FINDING REPRODUCTION AT PARA 2.1 OF THE ASSESSMENT ORDER. COUPLE THIS WITH THE FACT THAT NO MATERIAL QUA SALE RECEIVABLES (I.E., THE AMOUNTS DUE FROM CUSTOMERS AGAINST SALES) WAS FOUND DURING SEARCH. T HE NON-ACCEPTANCE OF THE ASSESSEES CLAIMS, I.E., AS TO THE NATURE OF THE TR ANSACTIONS, AS WELL AS THE RESULTS THEREOF, BECOMES QUIZZICAL; THE REVENUE ADMITTEDLY NOT POINTING OUT ANY DEFECT THEREIN. THE ASSESSEE IN FACT NOWHERE ADMITS THESE TRANSACTIONS TO BE REGULAR PURCHASE AND SALE TRANSACTIONS. IN FACT, EVEN IF HE DID, THAT WOULD BE OF NO CONSEQUENCE IN VIEW OF THE SAID WORKING, BASED ON S EIZED MATERIAL, SHOWING ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 8 COMPLETE DETAILS OF THE TRANSACTIONS, AS WELL AS TH E MANNER OF THEIR EXECUTION, I.E., AS EXPLAINED, INCLUDING BEFORE US. RATHER, THE AO, THOUGH REGARDS THE SAME AS PURCHASE AND SALE TRANSACTIONS, YET ADMITS THEM TO BE OF WHOLE-SALE NATURE, I.E., DIFFERENT FROM THE REGULAR SALES, IN VIEW OF THE QU ANTITIES INVOLVED, JUSTIFYING HIS NON-APPLICATION OF THE PROFIT RATE OBTAINING ON THE REGULAR SALES TO THE UNDISCLOSED TURNOVER. HE, IN FACT, ADMITS TO, ALBEIT A PART, OF THE TRANSACTIONS AS BEING SPECULATIVE (PARA 2.5 OF THE ASSESSMENT ORDER). THE RE IS ALSO NO MENTION OF THE PARTIES TO WHOM THE SALES, OR FROM WHOM THE PURCHAS ES, ARE MADE, NOR ANY EVIDENCE OF ANY AMOUNT/S OUTSTANDING, I.E., RECEIVA BLE OR, AS THE CASE MAY BE, PAYABLE, QUA THESE SALE AND PURCHASE TRANSACTIONS RESPECTIVELY, WHICH IS AGAIN INCOMPREHENSIBLE IF THE SAME ARE REGARDED AS REGULA R TRANSACTIONS OF PURCHASE AND SALE, PARTICULARLY CONSIDERING THE LARGE VOLUMES. IN OUR VIEW, THEREFORE, THE REVENUE HAS WRONGLY NO T ACCEPTED THE ASSESSEES CLAIM WITH REGARD TO THE NATURE OF THE TRANSACTIONS AS WELL AS THE MANNER IN WHICH THE SAME ARE EXECUTED AND SETTLED, RECEIVING OR, AS THE CASE MAY BE, PAYING, THE NET DIFFERENCE, REJECTING THE WORKING MADE ON THE BASIS OF, AND EVIDENCED BY, THE SEIZED MATERIAL, WHICH THOUGH OUGHT TO HAVE BEEN PL ACED ON RECORD BY EITHER SIDE. 5.4 THE NEXT ISSUE, THEN, IS THE RATE OF PROFIT OR, RATHER, THE PROFIT OR, AS THE CASE MAY BE, LOSS, ARISING TO THE ASSESSEE ON THESE TRAN SACTIONS. THE ASSESSEE CLAIMS, ON THE BASIS OF HIS WORKING (PB PGS. 91,92), OF HAVING INCURRED A LOSS OF RS. 16.91 LACS. THE REVENUE HAS AT NO STAGE, INCLUDING BEFORE US, POINTED OUT ANY DEFECT IN THE SAID WORKING, STATED TO BE BASED ON THE SEIZED MATERIAL. WHAT, AGAIN, IS THERE THEN TO DOUBT THE SAID WORKING ? IN FACT, AS POINTED OUT DURING HEARING BY SHRI MAHAJAN, THE TURNOVER(S) ADOPTED BY THE AO ARE ON T HE BASIS OF THIS WORKING, THOUGH STANDS INCORRECTLY READ BY HIM ( QUA SILVER) AT RS. 19.39 CR. (AS AGAINST RS. 1.939 CR.). SO MUCH SO, THE TRANSACTIONS (BOTH DEBI T AND CREDIT) BEING IN CASH, SH. ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 9 MAHAJAN WOULD SHOW THAT THE SAID WORKING, FOR THE P ERIOD UP TO 03/9/2013, I.E., IMMEDIATELY PRIOR TO THE DATE OF SEARCH, AGREES, SA VE FOR A MINOR DIFFERENCE OF RS. 2850, WITH THE UNACCOUNTED CASH FOUND DURING SEARCH , I.E., RS. 49.58 LACS (PB PGS. 139-140), ESTABLISHING THE VERACITY OF THE SAID WOR KING. WHAT BETTER PROOF, THEN, COULD THE ASSESSEE FURNISH, BOTH AS TO THE NATURE O F THE TRANSACTIONS AS WELL AS THE INCOME (LOSS) ARISING THEREFROM ? ON THE BENCH MAKING AN INQUIRY WITH SH. MAHAJAN IN THIS REGARD, AS THERE IS NO MENTION OF T HE SAID WORKING, EITHER IN THE ASSESSMENT OR THE APPELLATE ORDER, HE WOULD MAKE A CATEGORICAL SUBMISSION THAT THE SAME FORMS PART OF THE ASSESSMENT AND THE APPELLATE RECORD, TOWARD WHICH IN FACT CERTIFICATION (IN TERMS OF INCOME TAX (APPELLATE TR IBUNAL) RULES, 1963) STANDS MADE BY HIM. WE, ACCORDINGLY, HAVE NO HESITATION IN ACCEPTING THE ASSESSEES CLAIM OF HAVING IN FACT INCURRED A TRADING LOSS OF RS. 16.91 LACS ON THE UNDISCLOSED TURNOVER OF GOLD (RS. 4570 LACS) AND SILVER (RS. 19 4 LACS). 5.5 THE NEXT ISSUE IS THE ADJUSTMENT, IF ANY, THAT WOULD ENSUE TO THE ASSESSEES RETURNED INCOME ON ACCOUNT OF THE SAID UNDISCLOSED TRANSACTIONS. THE ASSESSEE HAS ADMITTEDLY SUFFERED A LOSS OF RS. 16.91 LACS THEREI N. THE SAME, HOWEVER, BEING IN SPECULATIVE TRADE, I.E., YIELDING SPECULATIVE INCOM E (LOSS), WOULD NOT STAND TO BE SET OFF AGAINST OTHER INCOME, BUSINESS OR OTHERWISE (SE C. 73). THE SAME WOULD ALSO NOT STAND TO BE CARRY FORWARD (TO BE SET OFF AGAINST TH E ASSESSEES INCOME FROM SPECULATIVE BUSINESS FOR THE SUBSEQUENT YEARS WHI CH IN FACT OBTAINS FOR AY 2014- 15, AS THE SAME HAS NOT BEEN RETURNED PER A RETURN OF INCOME U/S. 139(1) (SEC. 80 R/W S. 139 (3)). IN FACT, NOT EVEN PER THE RETURN F ILED IN RESPONSE TO THE NOTICE U/S. 153A, WHICH IS THAT FURNISHED U/S. 139(4). SH. MAHA JAN WOULD CLARIFY THAT THE ASSESSEE DOES NOT PRESS FOR THIS LOSS. WE YET CONSI DER IT PROPER TO MAKE A MENTION OF THIS AS THERE IS NO ESTOPPEL AGAINST LAW. IT IS THE CORRECT LEGAL POSITION THAT IS RELEVANT, AND NOT THE VIEW THAT THE PARTIES MAY TAK E OF THEIR RIGHTS IN THE MATTER ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 10 ( CIT V. C. PARAKH & CO. (INDIA) LTD . [1956] 29 ITR 661 (SC); KEDARNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363 (SC)). THE TRANSACTIONS BEING IN CASH, A LOSS OF RS. 16.91 LACS WOULD, HOWEVER, IMPLY A CASH DEPLETION TO THAT EXTENT. AS THE CASH BALANCE CAN BE, IN THE LEAST, NIL, I.E., CANNO T BE NEGATIVE, THE ASSESSEE THEREFORE HAS EITHER AN OPENING CASH BALANCE (AS AT 01/4/2012 ) OR OTHERWISE UNACCOUNTED CASH TO THAT EXTENT, I.E., RS. 16.91 LACS, TO FILL THE CASH DEFICIENCY TO THAT EXTENT. AND WHICH IS THEREFORE LIABLE TO BE ADDED AS DEEMED INC OME UNDER SECTION 69A. SH. MAHAJAN, ON BEING SO ENQUIRED DURING HEARING, COULD NOT FURNISH ANY ANSWER, MUCH LESS SATISFACTORY. HIS REPLY THAT IT IS THE CASH PO SITION AS ON THE DATE OF SEARCH THAT ONLY IS RELEVANT, MISSES THE POINT IN THAT IT NO WA Y EXPLAINS A NEGATIVE CASH BALANCE AS PER THE ASSESSEES OWN WORKING, AS AT 31/3/201 3. RATHER, THE WORKING UP TO THE SEARCH DATE (03/9/2013), IF ANYTHING, CONFIRMS THE CASH DEPLETION TO THAT EXTENT (AS ON 31/3/2013), AS IT IS THIS WORKING, WHEN COMPLETE D UP TO 03/9/2013, EXPLAINS THE EXCESS CASH OF RS. 49.58 LACS, I.E., AS FOUND IN SE ARCH. FURTHER, WHY SHOULD IT, THEN, NOT RESULT IN A FURTHER ADDITIONAL CASH OF RS. 16.9 1 LACS (AS ON 03/9/2013), IS SOMETHING THAT ONLY THE ASSESSEE CAN EXPLAIN. IF TH E ASSESSEE CAN INTRODUCE CASH (TO THAT EXTENT) ON 31/3/2013, HE COULD ALSO, ON TH E TRANSACTIONS YIELDING PROFIT (WHICH IS IN CASH) IN THE FOLLOWING YEAR, WITHDRAW THE SAME. FURTHER, IT CANNOT BE PRESUMED THAT THE CASH DEPLETION IS MET BY THE CASH AVAILABLE, I.E., TO THE EXTENT IT IS, FROM THE ASSESSEES REGULAR (DISCLOSED) BUSINES S. THIS, APART FROM BEING WITHOUT EVIDENCE, WOULD AMOUNT TO FALSIFYING THE ASSESSEES REGULAR BOOKS OF ACCOUNT. THUS, WHILE THE ASSESSEE IS NOT ENTITLED TO SET OFF THE ADMITTED LOSS OF RS. 16.91 LACS WHICH IS ON ACCOUNT OF IT BEING OF A SPECULATIVE BUSINESS AS WELL AS NOT RETURNING THE SAME, AN ADDITION TO THAT EXTENT ON ACCOUNT OF UNEXPLAINED CASH BALANCE, WHICH IS PROVED BY HIS OWN WORKING FOR THE RELEVANT YEAR, ARISES. WE HOLD SO. AT THE SAME TIME, THE ADDITIONAL PROFIT OF RS. 110 LACS ON THE UNDISCLOSED TURNOVER, AS ESTIMATED BY THE REVENUE, IS DELETED. WE DECIDE ACCORDINGLY. (ALSO REFER PARA 5.6) ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 11 5.6 THE NEXT ISSUE IS OF THE ADDITION OF RS. 50 LAK HS ON ACCOUNT OF THE ESTIMATED INVESTMENT INVOLVED IN THE UNDISCLOSED BUSINESS. TH E SAME WOULD BE, AS FOUND BY US, IN CASH IN-AS-MUCH AS THE DIFFERENCE BETWEEN TH E PURCHASE AND SALE IS CLOSED AND SETTLED THE SAME DAY, RECEIVING OR, AS THE CASE MAY BE, PAYING, CASH. LIQUID CAPITAL TO SOME EXTENT WOULD BE REQUIRED, AS WHERE THE TRANSACTIONS RESULT IN A LOSS. THIS IN FACT GETS EXHIBITED BY THE ASSESSEES WORKI NG, PUT PAYING HIS CLAIM THAT NO CAPITAL IS REQUIRED OR OTHERWISE INVOLVED. WEVE AL READY FOUND THE ASSESSEE TO HAVE UNDISCLOSED CASH OF RS. 16.91 LACS. THE SAME, IN TH E ABSENCE OF ANY MATERIAL SUGGESTING OTHERWISE, IS REGARDED ADEQUATE FOR THE PURPOSE. THIS ADEQUACY, THOUGH, WITHOUT DOUBT, CANNOT BE ASSESSED TO THE LAST RUPEE , AND CAN ONLY BE TAKEN AS BROADLY INDICATIVE. IN FACT, IT MAY WELL BE THAT TH E LOSS, AT RS. 16.91 LACS UP TO 31/3/2013, WORKS TO A HIGHER SUM FOR THE INTERVENIN G PERIOD UP TO 28/2/2013 (SAY) RESULTING IN A LARGER SHORTFALL IN CASH, AN D STANDS REDUCED ON ACCOUNT OF SUBSEQUENT PROFIT. IT IS EVEN OTHERWISE INCONCEIVAB LE THAT A CONCERN FOUND WITH AN EXCESS (UNACCOUNTED) CASH OF NEARLY RS. 50 LACS (AS ON 04/9/2013), I.E., OTHER THAN CASH REFLECTED IN ITS REGULAR BOOKS OF ACCOUNT, HA S NIL CASH BALANCE AT ANY TIME. THE SAME IS ACCORDINGLY TAKEN AT RS. 3.09 LACS, I.E ., BY ASSESSING THE UNACCOUNTED CASH AT A TOTAL OF RS. 20 LACS, OF WHICH RS. 16.91 LACS STANDS DEPLETED AS ON 31/3/2013 ON ACCOUNT OF LOSS, SO THAT THE BALANCE RS. 3.09 WAS AVAILABLE . THIS IS PARTICULARLY SO AS THE CASH WITH THE ASSESSEE, FOR WHICH ADDITION STANDS CONFIRMED, MAY, FOR ALL WE KNOW, OBTAIN FROM THE BEGINNING OF THE YEAR. THE ADDITION OF RS. 50 LAKHS IS ACCORDINGLY RESTRICTED TO RS. 20 LACS, I.E., INCLUDING RS. 16.91 LACS ALREADY CONFIRMED, SO THAT NO SEPARATE ADDITION TO THAT EXTENT SHALL ARISE. THE IMPORT OF WHAT IS BEING SAID IS THAT THE ADDITION F OR CAPITAL OF THE UNDISCLOSED BUSINESS IS RESTRICTED TO RS. 20 LACS, OF WHICH RS. 16.91 LACS IN FACT GETS PROVED. THE ASSESSEE, NEEDLESS TO ADD, SHALL BE ENTITLED TO TELESCOPING OF THIS ADDITION TO ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 12 THE EXTENT OF RS. 3.09 LACS, AGAINST THE ASSET-BASE D ADDITIONS FOR THE FOLLOWING YEAR. WE DECIDE ACCORDINGLY. (ALSO REFER PARA 5.7) 5.7 FINALLY, IS THE QUESTION OF TELESCOPING OF THE ADDITION OF RS. 20 LACS, I.E., AS SUSTAINED BY US. THE ASSESSEES CASE IS THAT THE PR OFIT FOR THE CURRENT YEAR FORMS PART OF THE TOTAL PROFIT OF RS. 310.72 LACS, ESTIMATED O N THE BASIS OF THE SEIZED MATERIAL. AS SUCH, THE ADDITION ON ACCOUNT OF PROFIT FOR THE FOLLOWING YEAR WOULD STAND REDUCED TO THAT EXTENT. THE ARGUMENT, VALID IN PRIN CIPLE, WOULD APPLY IN CASE OF A PROFIT FOR THE CURRENT YEAR. FOR EXAMPLE, IF THERE IS A PROFIT OF RS. 100 FOR THE ENTIRE PERIOD (SPANNING TWO YEARS, UP TO THE DATE OF SEARC H), A FINDING OF A PROFIT OF RS. 20 (SAY) FOR THE FIRST (CURRENT) YEAR, WOULD IMPLY A P ROFIT OF RS. 80 IN THE FOLLOWING YEAR (UP TO THE DATE OF SEARCH). A LOSS OF RS. 20 F OR THE CURRENT YEAR WOULD, ON THE CONTRARY, IMPLY A PROFIT OF RS. 120 FOR THE FOLLOWI NG YEAR. THAT IS, THE PROFIT FOR THE FOLLOWING YEAR WOULD IN FACT STAND TO INCREASE BY T HE AMOUNT OF LOSS ADMITTEDLY INCURRED FOR THE CURRENT YEAR IN-AS-MUCH AS THAT ON LY WOULD RESULT IN THE TOTAL PROFIT FOR THE ENTIRE PERIOD AMOUNTING TO THAT DETERMINED AND ASSESSED (RS. 100 IN OUR EXAMPLE). TRUE, THE LOSS FOR THE CURRENT YEAR DOES NOT LEAD TO, AS FOUND, A REDUCTION IN THE CASH BALANCE TO THAT EXTENT. THAT, HOWEVER, IS AS THERE CAN BE NO NEGATIVE CASH BALANCE, SO THAT CASH TO THAT EXTENT IS OTHERW ISE AVAILABLE TO THE ASSESSEE, AND NOT BECAUSE THERE IS NO CASH DEPLETION TO THAT EXTE NT, WHICH RATHER WOULD BE A CONTRADICTION IN TERMS. THE SAME OUGHT NOT TO BE CO NFUSED WITH THE PROFIT FROM TRADING OPERATIONS. AS SUCH, RATHER THAN A REDUCTIO N IN PROFIT FOR THE FOLLOWING YEAR AS ASSESSED, THE SAME STANDS TO BE INCREASED BY THE AMOUNT OF LOSS INCURRED IN THE CURRENT YEAR (RS. 16.91 LACS). NO TELESCOPING BENEF IT QUA THE ADDITION SUSTAINED, WHICH IS THUS ON ACCOUNT OF UNEXPLAINED CASH, AND N OT ON ACCOUNT OF PROFIT WHICH ONLY WOULD TRANSLATE INTO ASSET/S, WOULD STAND TO A RISE. WE DECIDE ACCORDINGLY. ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 13 5.8 WE MAY, BEFORE PARTING WITH THIS ORDER, ALSO MA KE REFERENCE TO THE ABUNDANT MATERIAL PLACED ON THE FILE BY THE ASSESSEE, I.E., IN THE FORM OF PAPER-BOOK AND CASE LAW COMPILATION. FIRSTLY, IT IS ONLY THE DOCUMENTS REFERRED TO DURING HEARING (DULY NOTED IN THE LOG-BOOK) THAT SHALL FORM A PART OF TH E RECORD IN TERMS OF R. 18(6) OF THE RULES. THE MATTER, AS A PERUSAL OF THE ORDER WOULD REVEAL, IS PRINCIPALLY FACTUAL, WHICH STANDS DECIDED BY US BY ISSUING DEFINITE FIND INGS OF FACT ON THE BASIS THE MATERIAL ON RECORD. QUA CASE LAW, THE ASSESSEES CASE, AGREED TO IN PRINCIP LE ON WHICH THERE CAN IN FACT BE NO QUARREL, IS THAT NO T AX CAN BE LEVIED EXCEPT UNDER THE AUTHORITY OF LAW (ART. 265 OF THE CONSTITUTION OF I NDIA). EVEN IF THEREFORE INCOME STANDS INADVERTENTLY RETURNED BY THE ASSESSEE, IT D OES NOT AUTHORIZE THE CHARGE OF TAX ( R. NATRAJAN V. ASST. CIT [2012] 79 DTR 249 (CH.) (TM)). THE PRINCIPLE IS WELL-SETTLED, FOR WHICH ONE ONLY NEEDS TO REFER TO SECTIONS 3 TO 5 OF THE ACT. AS EXPLAINED IN CIT V. SHELLY PRODUCTS [2003] 261 ITR 367 (SC), EXPLAINING THE SCOPE OF ARTICLE 265, THE ASSESSEE THEREFORE SHALL NOT BE ENTITLED TO A REFUND OF THE TAX PAID ON ADMITTED INCOME EVEN IF THE ASSESSMENT FAIL S FOR SOME REASON, AS, FOR EXAMPLE, BECOMES BARRED BY TIME; THE TAX BECOMING C HARGEABLE ON THE EARNING OF THE INCOME AND IS NOT DEPENDENT ON ITS ASSESSMENT F OLLOWING THE MACHINERY PROVISIONS OF THE ACT. THE QUESTION THEREFORE THAT WOULD ARISE AND NEED TO BE ADDRESSED IN EACH CASE IS OF THE APPLICATION OF THI S PRINCIPLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER, IN ASSESSING IN COME BOTH INCOME THEORY AND INVESTMENT AND EXPENDITURE THEORY CANNOT BE APPLI ED SIMULTANEOUSLY ( ASST. CIT V. BADRI RAM CHOUDHARY [2008] 13 DTR 177 (JODH.)). AS AFORE-EXPLAINED, TE RMING THE TWO THEORIES, THUS REFERRED, AS SOURCE-BASED AND ASSET-BASED APPROACHES TO INCOME DETERMINATION, THE SAME, EVEN IF ATTEMPTED T OGETHER, IT IS ONLY THE HIGHER OF THE TWO THAT WOULD SURVIVE OR COULD BE APPLIED. IN FACT, NOT DOING SO WOULD LEAD TO A MATHEMATICAL ABSURDITY. REGARD HAS ALSO BEEN MADE TO THE OTHER CASE LAW NOT REFERRED TO DURING HEARING, TO FIND NOTHING HEREIN AS INCONSISTENT THEREWITH. THE ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 14 ALLOWANCE OF THE BENEFIT OF TELESCOPING, A WELL ACC EPTED PRINCIPLE, IS AGAIN TO BE ON THE BASIS OF FACTS, AS EXPLAINED IN VEERASINGHAIAH & CO. (SUPRA). WHERE, FOR EXAMPLE, AN ADDITION HAS BEEN MADE ON THE BASIS OF INVESTMENT, THE TRIBUNALS REFUSAL TO ALLOW THE BENEFIT OF TELESCOPING WAS UPH ELD BY THE HONBLE COURT IN P.C. MOONDRA V. CIT [2004] 191 CTR 213 (RAJ), A DECISION RELIED UPON B Y THE ASSESSEE. 6. IN THE RESULT, THE ASSESSEE APPEAL IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH , 20 19 SEPARATE ORDER SD/- 08/4/2019 (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER 1. I HAVE GONE THROUGH THE ORDER PASSED BY HON'BLE A.M ., WHEREIN LD. BROTHER PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. I AM IN AGREEMENT WITH THE CONCLUSION OF APPEAL, HOWEVER AS THE HON'BLE A.M. ALSO DECIDED TH E ISSUE QUA ADJUSTMENT IF ANY, WHICH WAS NEITHER RAISED OR PRESSED BY THE ASSESSEE NOR IN ISSUE OR GROUNDS OF APPEAL OF THE INSTANT CASE, HENCE I DO NOT ENDORSE THE SAME. (KINDLY REFER PARA 5.5 PAGE 9 TO 10 OF THE ORDER PASSED BY HON'BLE A.M.) HOWEVER, IN MY VIEW, NON-CONCURRENCE TO THE DECISIO N ON ISSUE QUA ADJUSTMENT IF ANY, DOES NOT IMPACT THE CONCLUSION/R ESULT, BECAUSE IN PRINCIPLE, I AM IN AGREEMENT WITH THE CONCLUSION/RESULT OF THE APPE AL. 2. IN THE RESULT, THE ASSESSEE'S APPEAL IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF MAY 2019. SD/- (N. K. CHOUDHRY) JUDICIAL MEMBER ITA NO. 408/ASR/2018 (AY 2013-14) RAVINDER AGGARWAL V. DY. CIT 15 DATE: /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: RAVINDER AGGARWAL, 116, JULL AKHA MOHALLA, JAIN BAZAR, JAMMU (2) THE RESPONDENT: DEPUTY COMMISSIONER OF INCO ME TAX, CENTRAL CIRCLE, JAMMU (3) THE CIT(APPEALS)-5, LUDHIANA (4) THE CIT CONCERNED TRUE COPY (5) THE SR. DR, I.T.A.T. BY ORDER