Sh. Ajay Gupta, Delhi V. DCIT, New Delhi

ITA 4139/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81693 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-06-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 07-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Rejection of books of accounts; Unexplained investment; Search and seizure; Document seized; Opportunity of being heard; Principle of natural justice; Period of limitation; Question of law; Competent authority; Notional interest; Time period of passing order; Documents seized
• Section: 143(3); 142(1); 133A; 153A; 234B; 131; 68; 145; 132

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI N.K. SAINI , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 4139 & 4140 /DEL/ 2010 (ASSESSMENT YEAR: 2000 - 01 TO 2001 - 02 ) AJAY GUPTA A - 2/14A, MODEL TOWN - I DELHI PAN:AAJPG0481E VS. DCIT CIRCLE - 15 JHANDEWALAN NEW DELHI ITA NO. 3598 /DEL/ 2010 (ASSESSMENT YEAR: 2001 - 02 ) SUNITA GUPTA A - 2/14A, MODEL TOWN - I, DELHI PAN:AAJPG0480F VS. DCIT CENTRAL CIRCLE - 15 JHANDEWALAN NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 1634,1635,1636, 1637 /DEL/ 2010 (ASSESSMENT YEAR: 2000 - 01TO 2004 - 05 ) DAYAWANTI 500, KATRA ISHWAR BHAWAN, KHARI BAOLI NEW DELHI PAN:AADP6869P VS. DCIT CENTRAL CIRCLE - 15 JHANDEWALAN NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 2361 /DEL/ 2010 (ASSESSMENT YEAR: 2001 - 02 ) DAYAWANTI THROUGH SMT. SUNITA GUPTA (LEGAL HEIR), 500, KATRA ISHWAR BHAWAN, KHARI BAOLI, NEW DELHI PAN:AADP6869P VS. DCIT CENTRAL CIRCLE - 15 JHANDEWALAN NEW DELHI (APPELLANT) (RESPONDENT) PAGE NO. 2 ITA NO. 1537, 1538 , 1539, 1540, 2796 /DEL/ 2010 (ASSESSMENT YEAR: 2000 - 01 TO 2004 - 05 ) ACIT CENTRAL CIRCLE - 15 NEW DELHI VS. DAYAWANTI L/H SMT SUNITA GUPTA PROP M/S ASSAM SUPARI TRADERS, A - 2/14, MODEL TOWN, PH - 1, PAN:AADPD6869P (APPELLANT) (RESPONDENT) ITA NO. 3984, 3985 /DEL/ 2010 (ASSESSMENT YEAR: 2000 - 01 TO 2001 - 02 ) DCIT CENTRAL CIRCLE - 15, ROOM NO.344, ARA CENTRE, E - 2, JHANDEWALAN EXT, NEW DELHI VS. AJAY GUPTA, A - 2/14A, MODEL TOWN - 1, DELHI PAN:AAJPG0481E (APPELLANT) (RESPONDENT) ITA NO. 3600 /DEL/ 2010 (ASSESSMENT YEAR: 2001 - 02 ) VARUN GUPTA A - 2/14A, MODEL TOWN - I DELHI PAN:AEPPG7835J VS. DCIT CENTRAL CIRCLE - 15 JHANDEWALAN NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 3649 /DEL/ 2010 (ASSESSMENT YEAR: 2001 - 02 ) DCIT CENTRAL CIRCLE - 15 ROOM NO.354, 3 RD FLOOR, JHANDEWALAN EXTENSION NEW DELHI VS. VARUN GUPTA PROP. M/S. BALAJEE PERFUMES, 3641, MORI GATE, DELHI PAN:AEPPG7835J (APPELLANT) (RESPONDENT) ITA NO. 3599 /DEL/ 2010 (ASSESSMENT YEAR: 2001 - 02 ) ANOOP GUPTA A - 2/14A, MODEL TOWN - I DELHI PAN:AAJPG0479Q VS. DCIT CENTRAL CIRCLE - 15 JHANDEWALAN NEW DELHI (APPELLANT) (RESPONDENT) PAGE NO. 3 ITA NO. 3648 /DEL/ 2010 (ASSESSMENT YEAR: 2001 - 02 ) DCIT CENTRAL CIRCLE - 15, ROOM NO.354 3 RD FLOOR, JHANDEWALAN EXTENSION, NEW DELHI VS. ANOOP GUPTA, A - 2/14A, MODEL TOWN - I, DELHI PAN:AAJPG0479Q (APPELLANT) (RESPONDENT) ITA NO. 3650 /DEL/ 2010 (ASSESSMENT YEAR: 2001 - 02 ) DCIT CENTRAL CIRCLE - 15, ROOM NO.354, 3 RD FLOOR, JHANDEWALAN EXTENSION, NEW DELHI VS. SUNITA GUPTA, H.NO.A - 2/14A, MODEL TOWN - I DELHI PAN:AAJPG0480F (APPELLANT) (RESPONDENT) APPELLANT BY : SALIL KAPOOR, ADV. & VIKASH JAIN, ADV RESPONDENT BY : A MISHARA, CIT DR PER BENCH THESE ARE BATCH OF 20 APPEALS. 10 PREFERRED BY ASSESSEE AND 10 PREFERRED BY REVENUE ARIS ING FROM THE ORDER OF LD CIT(A) - II, NEW DELHI AND RELATES TO ASSESSMENT YEAR 2000 - 01 TO 2004 - 05 IN THE CASE OF DAYAWANTI AND FOR ASSESSMENT YEAR 200 0 - 01 TO 2001 - 02 IN THE CASE O F SHRI AJAY G UPTA AND FOR AY 2001 - 02 IN THE CASE OF OTHER 3 REMAINING ASSESSEES . 2. SINCE THE ISSUE S INVOLVED ARE COMMON, ALL THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY A COMMON ORDER. 3. FIRST OF ALL, W E TAKE UP THE APPEALS IN ITA NO. 1634/DEL/2010 AND ITA NO.1537/DEL/ 2010 CROSS - APPEALS PREFERRED BY ASSESSEE AND REVENUE IN THE CASE OF LATE SMT. DAYAWANTI FOR ASSESSMENT YEAR 2000 - 01 IN ITA NO.1634/DEL/2010. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: - PAGE NO. 4 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(A) II HAS FAILED TO APPRECIATE THAT THE ASSESSMENT ORDER PASSED BY THE LD AO U/S 153A IS BAD IN LAW AND WRONG ON FACTS. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(A) II HAS FAILED TO APPRECIATE THAT THERE WAS NO VALID ACTION U/S 132 OF THE IT ACT CONSEQUENTLY THE ASSESSMENT ORDER PASSED BY THE LD AO U/S 153A IS BAD IN LAW AND WRONG ON FACTS. 3. THAT THE ASSESSMENT FRAMED IS AGAINST T HE SCHEME OF THE ACT WHEREBY THE REASSESSMENT IN SUCH SEARCH CASES IS TO BE CONFINED TO THE ADDITIONS AND DISALLOWANCES CONSEQUENT TO THE MATERIAL FOUND DURING THE COURSE OF THE SEARCH AND THE MATERIAL COLLECTED/ AVAILABLE WITH THE AO AND RELATABLE TO SUCH EVIDENCES AND DOES NOT GIVE POWER TO THE AO TO RE - APPRISE THE ALREADY SETTLED ISSUES AND THE COMPLETED ASSESSMENT. 4. THAT THE LD CIT(A) II HAS FAILED TO APPRECIATE THAT IMPUGNED ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS AGAINST THE PRI NCIPLES OF NATURAL JUSTICE AND HAS BEEN PASSED WITHOUT AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD. 5. THAT THE LD CIT(A) II HAS FAILED TO APPRECIATE THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE VARIOUS OBSERVATIONS AND FINDINGS OF THE LEARNED ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER IS IRRELEVANT AND VITIATED IN THE LAW. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(A) II HAS FAILED TO APPRECIATE THAT THE LD AO HAS ERRED IN RELYING ON A STA TEMENT OF A THIRD PARTY WITHOUT ANY BASIS ENQUIRY AND ALSO WITHOUT ALLOWING ANY CROSS EXAMINATION. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISIONS OF LAW THE LD CIT(A) II HAS FAILED TO APPRECIATE THAT THE LD AO HAS ERRED IN COMPLETIN G THE ASSESSMENT ON THE BASIS OF THIRD PARTY DOCUMENTS, ENQUIRY AND STATEMENTS WITHOUT ANY BASIS, MATERIAL AND EVIDENCE AND ALSO WITHOUT ITS OWN SATISFACTION WITHOUT ANY BASIS, MATERIAL AND EVIDENCE AND ALSO WITHOUT ITS OWN SATISFACTION AND JUSTIFICATION. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(A) II HAS FAILED TO APPRECIATE THAT THE LD AO HAS ERRED IN NOT AGGREGATING WITH THE RETRACTED STATEMENT WITHOUT ANY BASIS MATERIAL AND EVIDENCE AND ALSO WITHOUT PROVING THE SAME AS NOT CORRECT. 9. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(A) II HAS ERRED IN UPHOLDING THE ADDITION OF RS. 1,00,469/ - ON ACCOUNT OF TRADING RESULTS WITHOUT ANY VALID REASON, BASIS AND MATERIAL. 10. T HAT ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(A) II HAS ERRED IN NOT FULLY ACCEPTING THE TRADING RESULTS AND IN UPHOLDING THE ADDITION PARTLY ON ACCOUNT OF GP RATE. 11. THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE ADDITION MADE U/S 41(1) BY THE LD CIT(A) IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. THE ADDITION HAS BEEN DIRECTED WITHOUT ANY NOTICE TO THE APPELLANT AND IT CANNOT BE SUSTAINED. 12. THAT ON THE FACTS AND CI RCUMSTANCES OF THE CASE AND THE PROVISION LAW THE LD CIT(A) II HAS ERRED IN MAKING ADDITION OF RS. 1,24,530/ - U/S 41(1) OF THE ACT. PAGE NO. 5 13. THAT THE LD CIT(A) II HAS FAILED TO APPRECIATE THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD AO HAS ERRED IN LAW IN NOT CONSIDERING THE RELEVANT MATERIAL ON RECORD AND HAS MADE THE ADDITION EVEN WHEN NO ADVERSE MATERIAL IS THERE. 14. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED ASSESSING OFFICER HAS ERRED IN INITIATING THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT 1961. 15. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE INTEREST CHARGED U/S 234A, 234B AND 234C IS EXCESSIVE AND HAS BEEN WRONGLY AND ILLEGALLY CHARGED. 4. AND IN ITA NO.1537/DEL/2010, THE REVENUE HAS RAISED THE FOL LOWING GROUNDS: - 1.(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE OF LD CIT(A) HAS ERRED IN GIVING RELIEF OF RS.11,68,570/ - ON ACCOUNT OF TRADING RESULTS AND BY DIRECTING TO ADOPT THE GP RATE AT 12% ON SALES OF RS.69,28,582/ - INSTEAD OF 20% ON SALES OF RS. 1 CRORES ADOPTE D BY THE ASSESSING OFFICER. 1.)B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE OF THE LD CIT(A) HAS ERRED BY DELETING ADDITION OF RS.1,60,287/ - ON ACCOUNT OF UNEXPLAINED INTEREST PAYMENT AS NO INTEREST HAS BEEN CHARGED FROM VARIOUS DEBTORS. 2. THE O RDER OF THE LD CIT(A) IS ERRONEOUS A ND NO TENABLE IN LAW AND FACTS. 5. TO APPRECIATE THE ISSUES INVOLVED IN THE AFORESAID CROSS - APPEAL, IT WOULD BE APPROPRIATE TO ADUMBRATE THE FACTUAL MATRIX AS EMANATING FROM THE ORDER OF THE AUTHORITIES BELOW. 6. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT ON 22 ND MARCH 2006 IN THE PREMISES OF M/S. BALAJEE PERFUMES GROUP, WHICH IS IN THE TRADE OF MANUFACTURING GUTKA. THE GROUP BELONGS TO THE FAMILY OF LATE SHRI BISHAN SARUP GUPTA, WHO HAS THREE SONS NAMELY SHRI AB HAY GUPTA, SHRI ANOOP GUPTA AND SHI AJAY GUPTA. THE WHOLE BUSINESS OF MANUFACTURING OF GUTKA AND SALE PURCHASE OF ARCANUT IS LOOKED AFTER BY THE SAID THREE BROTHERS, TH R OUGH THE FIRMS M/S BALAJEE PERFUMES AND M /S ASSAM SUPARI TRADERS. 7. M/S. BALAJEE PERF UMES IS A PARTNERSHIP FIRM OF SHRI VARUN GUPTA S/O SHRI ABHAY GUPTA AND SMT. DEEPA GUPTA W /O. SHRI ANOOP GUPTA. THE SECOND CONCERN M/S. ASSAM SUPARI TRADERS IS IN THE NAME OF SMT. DAYAWANTI (ASSESSEE) WHO IS THE MOTHER OF THE THREE AFORESAID BROTHERS. 8. AT THE TIME OF SEARCH, THE ASSESSEE ALONG WITH OTHER FAMILY MEMBERS NAMELY THE AFORESAID THREE BROTHER NAMELY ABHAY GUPTA, ANOOP GUPTA AND AJAY GUPTA AND THEIR WIVES NAMELY DEEPA GUPTA , SUNITA GUPTA AND PREETI GUPTA ALONG WITH VARUN GUPTA, SURRENDERED A S UM OF RS.3.5 CRORES AS ADDITIONAL INCOME IN RESPECT OF BUSINESS CARRIED ON OUTSIDE BOOKS OF ACCOUNTS IN RESPECT OF PRODUCTION AND SALE OF GUTKA. STATEMENT OF PAGE NO. 6 THE ASSESSEE SMT. DAYAWANTI PROPRIETOR OF M/S. ASSAM SUPARI TRADERS WAS ALSO RECORDED IN THE COURS E OF SEARCH. IN THIS STATEMENT SHE HAS STATED THAT SHE HAD NO SOURCE OF INCOME. IT HAS BEEN STATED THAT SHE DOES NOT EVEN OWN ANY BANK ACCOUNT. SHE HAS ALSO STATED, THAT SHE IS NOT ASSESSED TO TAX. IT HAS BEEN STATED THAT SHE IS THE PROPRIETOR ONLY ON RECO RD AND ALL OPERATIONS ARE LOOKED AFTER BY SHRI ANOOP GUPTA ALONG WITH THE HELP OF OTHER FAMILY MEMBERS. NOTICE U/S 153A WAS ISSUED ON 21 ST AUGUST 2006 REQUIRING THE ASSESSEE TO FURNISH RETURN IN PRESCRIBED FORM. IN RESPONSE NO PROPER RETURN U/S 153A HAS BE EN FILED BY THE ASSESSEE, THOUGH ON 22 ND DECEMBER 2007 A PHOTO - COPY OF THE RETURN FILED EARLIER U/S 139(1) ALONG WITH AN AUDIT REPORT HAD BEEN PLACED ON RECORD BEFORE THE AO. IN THE ORIGINAL RETURN THE ASSESSEE DECLARED GROSS PROFIT OF RS.7,30,961/ - ON SAL ES OF RS.69,28,582/ - YIELDING GROSS PROFIT RATE OF 10.55%. THE AO ASKED THE ASSESSEE TO PRODUCE VOUCHERS OF SALE, PURCHASES, AND EXPENSES . HOWEVER, THE ASSESSEE PRODUCED COMPUTERIZED BOOKS OF ACCOUNTS AND DID NOT PRODUCE THE SALE BILLS, PURCHASE BILL TO SU BSTANTIATE THE DECLARED RESULTS. ACCORDING TO THE AO, CONFIRMATION FROM ALL CREDITORS WAS ALSO NOT FURNISHED. FURTHER DISCREPANCY IN RESPECT OF CASH BALANCE AS PER BOOKS AND FINANCIAL RESULTS WAS ALSO NOT EXPLAINED. IN SUCH CIRCUMSTANCES, THE AO REJECTED T HE BOOKS OF ACCOUNTS U/S 145 OF THE ACT AND ESTIMATED THE SALES AT RS. 1 CRORES AND ADOPTED THE G.P. RATIO OF 20% AND THUS MADE AN ADDITION OF RS.12,69,039/ - . APART FROM THE ABOVE, AO MADE THE FOLLOWING ADDITIONS: - A) ADDITION OF RS.23,38,032/ - ON ACCOUN T OF UNEXPLAINED CREDITS OUT OF SUNDRY CREDITS AND HELD IT TO BE NOT GENUINE. SINCE CONFIRMATION FROM CREDITORS WAS NOT FILED. B) ADDITION OF RS.90,700/ - ON ACCOUNT OF LOANS AND LIABILITIES NOT TREATED AS GENUINE. C) ADDITION OF RS.2,24,240/ - ON ACCOUNT OF LOAN FROM M/S. MANISH IMPO EXPO HELD TO BE NOT GENUINE. D) ADDITION OF RS.1,60,287/ - ON ACCOUNT OF DISALLOWANCE OF INTEREST. E) ADDITION OF RS.20,800/ - ON ACCOUNT OF DISALLOWANCE OF SALARY. F) ADDITION OF RS.15,647/ - ON ACC OUNT OF DISALLOWANCE OF EXPENSES. G) ADDITION OF RS.2,30,000/ - ON ACCOUNT OF UNEXPLAINED CREDIT OF SHRI RAMESHWAR DAS. 9. AS SUCH, THE AO, DETERMINED THE INCOME OF THE ASSESSEE AT RS.45,90,799/ - AS AGAINST DECLARED INCOME OF RS.2,42,054/ - . 10 . BEING AGGR IEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A), WHO WAS PLEASED TO UPHOLD THE INITIATION OF 153A PROCEEDINGS AND ALSO THE REJECTION OF BOOKS OF ACCOUNTS. HE HOWEV ER DIRECTED THE AO TO RECOMPUTE THE ADDITION BY ADOPTING THE DECLARED SALES BY AS SESSEE OF RS.69,28,582/ - AND THE GP RATE BE APPLIED @ 12% ON IT. THUS LD CIT(A) ADOPTED THE GP AT RS.8,31,430/ - AS AGAINST RS.7,30,961/ - DECLARED BY THE PAGE NO. 7 ASSESSEE. AS SUCH ADDITION OF RS.1,00,469/ - WAS UPHELD AND ADDITION OF RS.11,68,570/ - WAS DELETED. 11 . OUT OF REMAINING ADDITIONS, THE LD CIT(A) UPHELD ADDITION OF RS.1,24,530/ - AND DELETED THE REMAINING ADDITIONS. 12 . AGGRIEVED BY THE AFORESAID ORDER OF THE LD CIT(A), BOTH THE ASSESSEE AND THE REVENUE ARE IN CROSS - APPEAL BEFORE US. 13 . GROUND 1, 2 AND 3 OF ASSESSEES APPEAL RELATES TO THE VALIDITY OF THE PROCEEDINGS INITIATED U/S 153A OF THE ACT. 14 . AS REGARDS THE LEGALITY OF THE ASSESSMENT FRAMED U/S 153A OF THE ACT THE ASSESSEE SUBMITTED TO THE LD CIT(A) THAT THE SAID ASSESSMENT WAS ILLEGAL AND INVAL ID AND AB - INITIO VOID SINCE T HERE WAS NO SEARCH WARRANT AGAINST THE DECEASED ASSESSEE. THEREFORE THE ASSESSMENT ON MERITS BE QUASHED SINCE THE AO COMPLETED THE SECTION 153 ASSESSMENT W ITHOUT ASSUMING JURISDICTION IN THE ABSENCE OF ANY VALID ACTION U/S 132 OF THE ACT. THE ASSESSEE ALSO SUBMITTED TO THE LD CIT(A) AS UNDER: - I) THERE IS NO SEARCH IN THE NAME OF THE APPELLANT AS IN THE PANACHNAMA DRAWN AT THE RESIDENCE OF THE APPELLANT NAMELY A - 2/14A, MODEL TOWN - I, DELHI, HER NAME IS NOT MENTIONED. II) IN TH E PANCHNAMA DRAWN AT THIS PLACE, NAMES OF HER THREE SONS SH. AJAY GUPTA, SH. ANOOP GUPTA & SH. ABHAY GUPTA, AND THE NAMES OF THE TWO CONCERNS NAMELY M/S BALAJI PERFUMES AND M/S. ASSAM SUPARI TRADERS HAVE ONLY BEEN MENTIONED. THOUGH APPELLANT IS PROPRIETOR OF M/S ASSAM SUPARI TRADERS BUT BASED ON THIS PANCHNAMA, IT CANNOT BE SAID THAT SEARCH HAS TAKEN PLACE IN THE CASE OF M/S ASSAM SUPARI TRADERS AS M/S. ASSAM SUPARI TRADERS IS HAVING NO ACTIVITY AT A - 2/14A, MODEL TOWN - I, DELHI. III) AT A - 2/14A MODEL TOWN - I , DELHI, SHE RESIDES IN HER CAPACITY AS DAYAWANTI, MOTHER OF THREE SONS AND NOT AS PROPRIETOR OF M/S. ASSAM SUPARI TRADERS. IV) THE BUSINESS PREMISES OF M/S ASSAM SUPARI TRADERS IS AT 500, KATRA ISHWAR BHAWAN, KHARI BAOLI DELHI - 6 AND AT THIS PREMISE ONLY SURVEY U/S 133A HAS TAKEN PLACE. 15 . THE LD CIT(A) FORWARDED THE SAID SUBMISSIONS TO THE AO TO FURNISH THE REPLY VIDE DATED 23.0 3.2009. THE LD CIT(A) ALSO ASKED THE COMMENTS OF THE LEGAL HEIRS OF THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS OF THE LEGAL HEIRS OF THE ASSESSEE FRAMED BY THE AO LD CIT(A) OBSERVED THAT VIDE PANCHNAMA DATED 22.03.2006 AT A - 2/14A MODEL TOWN - I, DELHI, NAMELY M/S. ASSAM SUPARI TRADERS HAD CLEARLY BEEN MENTIONED. HE, PAGE NO. 8 THEREFORE, WAS OF THE VIEW THAT THE WARRANT HAD BEEN ISSUED IN THE NAME OF M/S. ASSAM SUPARI TRADERS. THEREFORE NOTICE U/S 153A WAS TO ISSUE D IN THE NAME OF THE PROPRIETOR OF M/S. ASSAM SUPAR I TRADERS I.E. THE ASSESSEE ONLY. THE LD CIT(A) ACCORDINGLY HELD THAT THE AO WAS CORRECT IN ISSUING NOTICE U/S 153A OF THE ACT. THE LD CIT(A) ALSO POINTED OUT THAT AS PER PROVISIONS OF SECTION 132A OF THE ACT, WHERE THE COMPETENT AUTHORITY, IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION, HAS REASONS TO BELIEVE THAT ANY PERSON IS IN POSSESSION OF MONEY/ BULLION/ JEWELLERY OR OTHER VALUABLE ARTICLES OR THING WHICH REPRESENTS EITHER WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS BEEN EARNED BUT IS NOT DISCLOSE D OR WILL NOT BE DISCLOSED OR IS IN POSSESSION OF BOOKS OF ACCOUNTS OR DOCUMENTS WHICH WILL NOT BE PRODUCED IF CALLED FOR TO BE PRODUCED U/S 142(1) OR UNDER SUMMON U/S 131 OF THE ACT, HE MAY AUTHORIZE ANY OFFICER AS DEFINED IN SECTION 132(1)(A) OF THE ACT TO ENTER AND SEARCH ANY BUILDING PLACE, VESSEL, VEHICLE OR AIRCRAFT WHERE HE HAS REASONS TO SUSPECT THAT SUCH BOOKS OF ACCOUNTS, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES OR THING ARE KEPT. THE LD CIT(A) WAS OF THE VIEW THAT THE RE WAS TWO SATISFACTION NECESSARY ; ONE BEING AGAINST THE PERSON WHO IS IN POSSESSION OF ANY MONEY/ BULLION/ JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT AND OTHER BEING THE PLACE WHERE SUCH BOOKS OF ACCOUNTS/ DOCUMENTS OR MONEY/ JEWELLE RY BULLION ETC WERE KEPT. HE WAS ALSO OF THE VIEW THAT THAT AGAINST ONE PERSON , THE COMPETENT AUTHORITY MIG HT HAVE REASONS TO SUSPECT THAT IN MANY PREMISES THE UNDISCLOSED MONEY/ BOOKS OF ACCOUNT ETC. MIGHT HAVE BEEN KEPT AND IT WAS NOT NECESSARY THAT PREM ISES SEARCHED SHOULD BELONG TO THE PERSON AGAINST WHOM THE COMPETENT AUTHORITY HAS REASONS TO BELIEVE OF HAVING UNDISCLOSED MONEY OR UNACCOUNTED BOOKS OF ACCOUNTS/ INCRIMINATING DOCUMENTS. THE LD CIT(A) HELD THAT WARRANT OF AUTHORIZATION IN THE CASE OF M/S . ASSAM SUPARI TRADERS HAD BEEN ISSUED WHICH HAD BEEN EXECUTED ALSO . AND THE ASSESSEE BEING THE PROPRIETOR OF M/S. ASSAM SUPARI TRADERS THEREFORE, THE ASSESSMENT IN CONSEQUENCE OF THE SEARCH IN THE CASE OF M/S. ASSAM SUPARI TRADERS HAD TO BE MADE U/S 153A IN THE CASE OF THE ASSESSEE. ACCORDINGLY, THE LD CIT(A) HELD THAT THE AO WAS FULLY JUSTIFIED IN INITIATING 153A PROCE EDINGS OF THE ACT AND COMPLETION OF THE ASSESSMENT U/S 153A READ WITH SECTION 143(3) OF THE ACT AGAINST THE ASSESSEE. 16 . NOW THE ASSESSEE IS IN APPEAL ON THIS LEGAL ISSUE. THE LD COUNSEL REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT IN THE PRESENT CASE NO INCRIMINATING MATERIAL WAS FOUN D FOR THE ADDITION MADE PURSUANT TO THE SECTION 153A PROCEEDING TO THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION ; AND WHATEVER ADDITION WAS MADE , IT WAS ON ACCOUNT OF REJECTING THE TRADING RESULTS AND ESTIMATING THE TURN OVER ALONG WITH THE GP RATE, AND ON ACCOUNT OF DISALLOWANCE OF INTEREST OF PAGE NO. 9 TRADE DEBTORS AND IT WAS STRENUOUSLY ARGUED THAT NO ADDITION CAN BE FASTENED ON THE ASSESSEE WITHOUT ANY INCRIMINATING MATERIAL BEING UNEARTHED DURING SEARCH AND IN ORDER TO BUTTRESS THE SAID SUBMISSION RELIANCE WAS PLACED ON THE CASE OF AL CARGO GLOBAL LOGISTICS LTD. VS. DCIT , 137 ITD 287 (SB) . 17 . IN HER RIVAL SUBMISSIONS THE LD DR STRENUOUSLY SUPPORTED THE ORDER OF THE LD CIT(A) A ND STATED THAT THE AO DID NOT CONSIDER THE RETURN FILED BY THE ASSESSEE U/S 139(1) BECAUSE NO ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT. SHE, FURTHER, SUBMITTED THAT THE ADDITIONS WERE MADE ON THE BAS IS OF THE STATEMENT OF ASSESSEE ; AND THAT ASSESSE E FAILED TO PRODUCE THE VOUCHERS RELATING TO THE PURCHASE AND SALES, SO THE AO, RIGHTLY REJECTED THE BOOKS OF ACCOUNTS AND MADE ESTIMATION AS P ER LAW WHICH COULD NOT BE FAULTED SINCE IT WAS REASONABLE HOWEVER THE LD CIT(A) ERRED IN PASSING THE IMPUGNED ORDER AND SO SHE PLEADS THAT THE ORDER OF THE LD CIT(A) MAY BE SET - ASIDE AND THE ORDER OF THE AO BE RESTORED. 18 . IN HIS REJOINDER THE LD COUNSE L SUBMITTED THAT THE STATEMENT OF THE SHRI ABHAY GUPTA WAS NOT RELATING TO THIS RELEVANT ASSESSMENT ORDER WHICH IS IN HAND, BECAUSE IT WAS RECORDED AFTER THE SEARCH ON 03.05.2006 WHILE THE SEARCH TOOK PLACE ON 22.03.2006. SO THIS STATEMENT WAS NOT U/S 132( 4) OF THE ACT. SO THE AUTHORITIES BELOW OUGHT NOT TO HAVE TAKEN COGNIZANCE OF THIS STATEMENT WHICH IS NOT ADMISSIBLE EVIDENCE. IT WAS FURTHER STATED THAT THE SAID STATEMENTS WERE NOT PERTAINING TO THE RELEVANT ASSESSMENT YEAR BUT WAS RELATED TO AY 2006 - 07 AND NOT FOR THE YEAR UNDER CONSIDERATION. THEREFORE ACCORDING TO THE LD COUNSEL NO ADDITION CAN BE MADE FOR THE YEAR UNDER CONSIDERATION WITHOUT ANY INCRIMINATING MATERIAL BEING UNEARTH ED RELAT ING TO THIS YEAR. HE FURTHER SUBMITTED THAT THE DEPARTMENT HAS NOT FILED ANY APPEAL AGAINST THE REDUCTION OF THE ADDITION. IT WAS ALSO STATED THAT THE EXCISE DEPARTMENT HAD ACCEPTED THE SALE FOR THE YEAR UNDER CONSIDERATION SO THERE WAS NO OCCASION TO MAKE THE ESTIMATE IN RESPECT OF TURN OVER AND INCREASING THE GP RAT E WITHOUT CITING ANY COMPARABLE CASES. IT WAS FURTHER SUBMITTED THAT NO CESSATION OF LIABILITY AND THE TRADE CREDITORS WHICH WAS APPEARING IN THE BOOKS OF ACCOUNT WERE PAID IN THE SUBSEQUENT YEARS. THEREFORE THE LD CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE ADDITION U/S 41(1) OF THE ACT. IT WAS CONTENDED THAT ON MERITS ALSO THE ADDITION CANNOT BE SUSTAINED AND THE ADDITION MADE BY THE LD CIT(A) DESERVES TO BE DELETED AND ON LEGAL ISSUE THERE WAS NO OCCASION TO MAKE THE ADDITION U/S 153A OF THE ACT WITHOUT ANY INCRIMINATING MATERIAL SO FOUND DURING THE SEARCH . 19 . WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND THE CASE LAWS CITED BEFORE US. IN THE PRESENT CASE THE MAIN GRIEVANCE OF THE LD COUNSEL FOR THE ASSE SSEE IS THAT NEITHER VALID SEARCH TOOK PLACE IN PAGE NO. 10 RESPECT OF THE ASSESSEE NOR ANY INCRIMINATING DOCUMENTS WAS FOUND WHICH COULD SUGGEST THAT THERE WAS ANY UNDISCLOSED INCOME EARNED BY THE ASSESSEE INRESPECT TO THE A.Y UNDER CONSIDERATION , THEREFORE, THE ADDI TION MADE BY THE AO AND SUSTAINED BY THE LD CIT(A) WAS NOT JUSTIFIABLE. 20 . THE LD COUNSEL FOR THE ASSESSEE CONTENDED THAT THERE WAS NO SEARCH IN THE NAME OF THE APPELLANT AS HER NAME IS NOT MENTIONED IN THE PANCHNAMA . ACCORDING TO THE LD COUNSEL THOUGH IT IS AN ADMITTED FACT THAT THE NAME OF THE PROPRIETORSHIP CONCERN OF THE ASSESSEE, M/S. ASSAM SUPARI TRADERS IS MENTIONED IN T HE PANCHANAM, IT WAS SUBMITTED THAT ON THE SAID BASIS IT CANNOT BE HELD THAT A VALID SEARCH HAS TAKEN PLACE ON THE ASSESSEE. IN OUR OPINION THE AFORESAID ARGUMENT CANNOT BE ACCEPTED. A SEARCH HAS BEEN CONDUCTED ON THE ASSESSEE, ONCE THE PROPRIETORSHIP CONCERN OF THE ASSESSEE HAS BEEN SEARCHED. IN ANY CASE THE ASSESSEE WAS THE PROPRIETOR OF THE CONCERN ON WHICH THE SEARCH WAS CARRIE D OUT U/S 132 OF THE ACT. IT IS PERTINENT TO ADD HERE THAT THE PREMISES AT WHICH THE SEARCH WAS CARRIED OUT WAS ON THE BASIS OF WARRANT ISSUED IN THE NAME OF THE PROPRIETORSHIP CONCERN OF THE ASSESSEE AND IT WAS ALSO THE RESIDENTIAL PREMISES OF THE ASSESSE E. THEREFORE WE FIND THAT THERE WAS A VALID SEARCH ON THE ASSESSEE AND AS SUCH, PROVISION U/S 153A OF THE ACT WAS RIGHTLY TRIGGERED AND INVOKED THEREAFTER. 21 . THE LD COUNSEL HAS FURTHER EMPHASIZED IN THE COURSE OF HIS SUBMISSION THAT SINCE ALL THE ADDITI ON MADE IN THE ORDER OF ASSESSMENT WERE NOT BASED ON MATERIAL FOUND AS A RESULT OF SEARCH, THE SAID ADDITIONS, ARE AGAINST THE SCHEME OF THE ACT AND SO IT IS WAS ERRONEOUS . HE SUBMITTED THAT THE ACT DOES NOT GIVE THE POWER TO THE AO TO REAPP RAISE THE ALREADY SETTLED ISSUES AND THE COMPLETED ASSESSMENTS. 22 . IN THE INSTANT CASE WE FIND THAT AO HAD REJECTED THE BOOKS OF ACCOUNTS AND MADE ADDITIONS BY ESTIMATING THE SALES & GP RATES, INTER - ALIA ON THE GROUND THAT IN THE COURSE OF SEARCH, A STATEMENT WAS RECORDED BY SHRI ABHAY GUPTA U/S 132(4) OF THE ACT ON BEHALF OF THE ASSESSE TOO . IN THE SAID STATEMENT DATED 18.04.2006, A COPY OF WHICH HAS BEEN P LACED BEFORE US, IN PAGE 89, 90, 91, 92, 93 & 94 OF THE PB, HE HAS STATED AS UNDER ON BEHALF OF ASSESSE A ND OTHER ASSESSES IN APPEAL BEFORE US WHICH IS EVIDENT FROM HIS OPENING REMARKS AND SIGNATURES OF ASSESSE AND OTHER APPELLENTS APPENDED BELOW THE STATEMENT RECORDED ON OATH U/S 132(4) OF THE ACT. THE RELEVANT ANSWERS TO QUESTIONS LEGIBLE FROM THE HAND WRIT TEN DOCUMENT IS REPRODUCED BELOW FOR CONVENIENCE : - PAGE NO. 11 STATEMENT OF SHRI ABHAY KUMAR GUPTA S/O LATE SHRI BISHAN SARUP GUPTA R/O A - 2/14 - A MODEL TOWN - I, DELHI AGED 58 YEARS OLD RECORDED ON OATH U/S 132(4) OF THE INCOME TAX, 1961 AT THE OFFICE OF ADIT (INVEST IGATION) UNIT IV(3), NEW DELHI IN THE CASE OF M/S. BALAJI PERFUMES AND M/S ASSAM SUPARI TRADERS ON 18.04.2006. SIGN OATH TAKEN OATH ADMINISTERED Q . NO. - PLEASE IDENTIFY YOUR SELF? ANS: I AM ABHAY KUMAR GUPTA S/O LATE SH BISHAN SARUP GUPTA R/0 A - 2/14 - A, MODEL TOWN - I, DELHI AGED 58 YEARS OLD. Q NO.2 - IN WHAT CAPACITY YOU HAVE PRESENTED YOURSELF IN THE CASES OF M/S ASSAM SUPARI TRADERS AND BALAJI PERFUMES? ANS: I AM PRESENT HERE AS DULY AUT HORIZED BY FIVE OF OUR FAMILY CONCERN/ FIRMS NAMELY M/S. ASSAM SUPARI TRADERS AND M/S. BALAJI PERFUMES AS A REPRESENTATIVE ON BEHALF OF ALL OF MY FAMILY MEMBERS INCLUDING SMT DAYAWANTI PROP M/S. ASSAM SUPARI TRADERS AND SHRI VARUN GUPTA PROP M/S. BALAJI PE RFUMES. SMT. DAYAWANTI IS MY MOTHER AND SHRI VARUN GUPTA PROP M/S. BALAJI PERFUMES. SMT. DAYAWANTI IS MY MOTHER AND M/S. VARUN GUPTA IS MY SON. I AM ALSO ANOTHER BY MY BROTHER NAMELY SH AJAY GUPTA, SHRI ANOOP GUPTA AND SMT. SUNITA GUPTA W/O SH AJAY GUPT A, SMT DEEPA GUPTA W/O ANNOP GUPTA AND SMT. PREETI GUPTA W/O VARUN GUPTA TO MAKE STATEMENTS ON ALL OUR FAMILY CONCERN AND OU R FAMILY MEMBERS, AND TO COMMENT ON THEIR BEHEST . Q. NO. 3. Q. NO. 4. Q. NO. 5. Q. NO. 6. Q. NO. 7. PLEASE LET ME KNOW WHETHER ALL THE PURCHASES MADE BY YOUR FAMILY FIRMS NAMELY M/S. ASSAM SUPRARI TRADERS AND M/S. BALAJI PERFUMES IS ENTERED IN YOUR REGULAR BOOKS OF ACCOUNTS AND WHETHER ALL THE PURCHASES, MANUFACTURING AND SALES MADE BY ABOVE TWO FIRMS I S DISCLOSED TO INCOME TAX DEPARTMENT. ANS: - WE AND OUR FAMILY FIRMS NAMELY M/S ASSAM SUPARI TRADERS AND M/S BALAJI PERFUMES GENERALLY TRY TO RECORD THE TRANSACTIONS MADE IN RESPECT OF PURCHASE, MANUFACTURING AND SAL ES IN OUR REGULAR BOOKS OF ACCO UNTS BUT IT IS ALSO FACT THAT SOME TIME DUE TO SOME FACTORS LIKE INABILITY OF ACCOUNTANT, OUR BUSY SCHEDULE AND SOME FAMILY PROBLEMS, VARIOUS PURCHASES AND SALES OF SUPARI, GUTKA AND OTHER ITEMS DEALT BY OUR FIRMS IS NOT ENTERED AND SHOWN IN THE REGULAR BOOKS OF A CCOUNTS MAINTAINED BY OUR FIRMS . PAGE NO. 12 Q. NO. 9 WHAT ARE THE BOOKS OF ACCOUNT MAINTAINED BY YOUR FIRMS? ANS: - TO THE BEST OF MY KNOWLEDGE, BOTH OUR FIRMS MAINTAINED CASH BOOKS, LEDGER, SALES REGISTER, BILLS BOOKS AND OTHER GENERAL BOOKS OF ACCOUNTS. Q,. NO. 10 - I AM SHOWING YOUR ANNEXURE A - 3 (PAGE 60 AND 61) FOUND I SEIZED FROM YOUR RESIDENCE AT A - 2/14 - A, MODEL TOWN - I, DELHI ON 23.03.2006 DURING THE COURSE OF SEARCH, SEIZURE PLEASE EXPLAIN THE NATURE, CONTENTS AND DETAILS OF THESE SMALL HAND WRITTEN PAICHIES. ANS: THESE SMALL HANDWRITTEN ON UNACCOUNTED CASH PURCHASE/ SALES OF VARIOUS ITEMS IN SUPARI WHICH WERE MADE BY FIRM M/S. ASOM SUPARI TRADERS AND M/S. BALAJI PERFUMES. ALSO PURCHASE DATED 19.10 O N PAGE NO. 60 OF THIS ANNEXURE REPRESENTED UNACCOUNTED AND CR EDITED. Q. NO. 11. I AM SHOWING YOUR ANNEXURE A - 2 HAVING PAGE NO. 1 TO 29 FOUND AND SEIZED FORM YOUR RESIDENCE AT A - 2/14 - A, MODEL TOWN - I, DELHI ON 23.03.2006 DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. PLEASE EXPLAIN THE NATURE OF CONTENTS AND DETAI LS OF THESE PAGES. ANS: - I HEREBY ADMIT THAT THESE PAPERS ALSO CONTEND DETAILS OF VARIOUS TRANSACTIONS INCLUDE PURCHASE/ SALES/ MANUFACTURING TRADING OF GUTKHA, SUPARI MADE IN CASH OUT SIDE BOOKS OF ACCOUNTS AND THESE ARE ACTUALLY UNACCOUNTED TRANSACTIONS MADE BY OUR TWO FIRMS NAMELY M/S ASOM TRADING AND M/S. BALAJI PERFUMES. AGREED BY ME 1. AJAY GUPTA SIGN 2. SMT DAYWANTI SIGN 3. ANOOP GUPTA SIGN 4. SMT DEEPTA SIGN 5. VARUN GUPTA SIGN 6. SNITA GUPTA SIGN 7. PREETI GUPTA SIGN 23 . FROM A PERUSAL OF THE AFORESAID STATEMENT ON 18.04.2006 IT IS MANIFEST THAT IT WAS NOT A CASE OF MERE SURRENDER AS CLAIMED BY THE LD COUNSEL. ON THE CONTRARY WE FIND IN PG 60 & 61 , ANNEXURE A3 AND PG 1 TO 29 OF ANNEXUREA - 2 WERE FOUND AND SEIZED FROM THE ASSESSEE. ONCE CONFRONTED WITH THE AFORESAID SEIZED DOCUMENTS IT WAS ADMITTED BY SHRI ABHAY GUPTA THAT THE PROPRIETORSHIP CONCERN OF THE ASSESSEE WAS ENGAGED IN UNACCOUNTED CASH SALES AND PURCHASES AND THEREFORE THERE WAS UNDISCLOSED INCOME. THUS THE NECES SARY LOGICAL FALL OUT OF THE AFORESAID IS THAT THERE WAS MATERIAL FOUND AS A RESULT OF SEARCH ON THE ASSESSEE, SHOWING UNACCOUNTED TRANSACTIONS. IN OUR OPINION, EVEN THE STATEMENT OBTAINED WHEREBY, THE ADDITIONAL INCOME OF RS.3.5 CRORES WAS PAGE NO. 13 OFFERED ALSO CO NSTITUTE S MATERIAL UNEARTHED DURING SEARCH. THE LD COUNSEL HOWEVER HAS SUBMITTED THAT THE SAID STATEMENT WAS NOT OF THE ASSESSEE, AND WAS THAT OF THE SON OF THE ASSESSEE. THIS ARGUMENT TOO DOES NOT COME TO THE RESCUE OF THE ASSESSEE, BECAUSE THE ASSESSEE ALSO HAS SIGNED THE SAID STATEMENT AS NO.2 ABOVE; AND IT HAS BEEN STATED VERY CLEARLY IN THE STATEMENT OF SHRI ABHAY GUPTA TO QUEST ION NO. 2 (SUPRA) THAT HE HAS MADE THE STATEMENT ON BEHALF OF OTHERS U/S 132(4) OF THE ACT INCLUDING THE ASSESSEE . MOREOVER THE AFORESAID STATEMENT DATED 18.04.2006 WAS FOLLOWED BY ANOTHER STATEMENT ON 03.05.2006, WHERE TOO SHRI ABHAY GUPTA REPRESENTED HI MSELF AS THE AUTHORIZED REPRESENTATIVE OF THE PROPRIETORSHIP CONCERN OF THE ASSESSEE AND SISTER CONCERN BA L AJEE PERFUMES. IN THE SAID STATEMENT TOO THE SURRENDER WAS REITERATED. THE AFORESAID SURRENDER NO DOUBT WAS NOT ACTED UPON BY THE ASSESSEE, BUT THE S AID FACT CANNOT LEAD US FROM THE IRRESISTIBLE CONCLUSION THAT INCRIMINATING MATERIAL WAS UNEARTHED DURING SEARCH. NO MATERIAL HAS BEEN PLACED BEFORE US TO NEGATE THE AFORESAID FACTUAL ASPECT AS WELL AS TO SUPPORT THE CLAIMS OF AR THAT THE ADMISSION BEFORE THE REVENUE WAS NOT VALID AND HIT BY DURESS AND COERCION. BEFORE WE CONCLUDE THIS ISSUE, WE CONSIDER IT APPROPRIATE TO NOTE THAT THE LD AR, HAD ALSO STATED THAT NO MATERIAL PER - SE WAS FOUND PERTAINING TO THE YEAR UNDER CONSIDERATION. HOWEVER, THIS ARGUMENT ALSO DOES NOT HOLD ANY WATER BECAUSE ONCE SECTION 153A IS TRIGGERED ON ACCOUNT OF UNEARTHING OF INCRIMINATING MATERIAL DURING SEARCH, THE AO IS EMPOWERED TO COMPUTE THE TOTAL INCOME FOR SIX ASSESSMENT YEAR PRIOR TO THE YEAR OF SEARCH. THERE ARE NO FETTERS OR LIMITATION UNDER THE STATUTE, SO AS TO CURTAIL THE JURISDICTION OF THE AO. WE DERIVE SUPPORT FROM THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ANIL BHATIA 352 ITR 493 (DEL) WHEREIN IT HAS BEEN HELD BY THE HONBLE HIGH COURT AS UNDER : - IN THE LIGHT OF OUR DISCUSSION, WE FIND IT DIFFICULT TO UPHOLD THE VIEW OF THE TRIBUNAL EXPRESSED IN PARAGRAPH 9.6 OF ITS ORDER THAT SINCE THE RETURNS OF INCOME FILED BY THE ASSESSEE FOR ALL THE SIX YEARS UNDER CONSIDERATION BEFORE THE SEARCH TOOK PLACE W ERE PROCESSED UNDER SECTION 143 (1) (A) OF THE ACT, THE PROVISIONS OF SECTION 153A CANNOT BE INVOKED. THE ASSESSING OFFICER HAS THE POWER UNDER SECTION 153A TO MAKE ASSESSMENT FOR ALL THE SIX YEARS AND COMPUTE THE TOTAL INCOME OF THE ASSESSEE, INCLUDING TH E UNDISPUTED INCOME, NOTWITHSTANDING THAT THE ASSESSEE FILED RETURNS BEFORE THE DATE OF SEARCH WHICH STOOD PROCESSED UNDER SECTION 143(1)(A). THE OTHER REASON GIVEN BY THE TRIBUNAL IN THE SAME PARAGRAPH OF ITS ORDER THAT NO MATERIAL WAS FOUND DURING THE SE ARCH IS FACTUALLY UNSUSTAINABLE SINCE THE ENTIRE CASE AND THE ARGUMENTS BEFORE THE DEPARTMENTAL AUTHORITIES AS WELL AS THE TRIBUNAL HAD PROCEEDED ON THE BASIS THAT THE DOCUMENT EMBODYING THE TRANSACTION WITH MOHINI SHARMA WAS RECOVERED FROM THE ASSESSEE. W HILE SUMMARIZING THE CONTENTIONS OF THE ASSESSEE IN PARAGRAPH 5 OF ITS ORDER, THE TRIBUNAL ITSELF HAS REFERRED TO THE CONTENTION THAT NO DOCUMENT MUCH LESS INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH OF THE ASSESSEES PREMISES, EXCEPT ONE UNSIGNED U NDERTAKING FOR LOAN. AGAIN, IN PARAGRAPH 10 OF ITS ORDER, WHILE DEALING WITH THE ASSESSEE'S CONTENTION AGAINST THE ADDITION OF RS. 1,50,000/ - BEING UNEXPLAINED LOAN GIVEN TO MOHINI SHARMA, THE TRIBUNAL HAS STATED THAT IT HAS ANALYZED 'THE SUBJECT DOCUMENT CAREFULLY, RECOVERED FROM PAGE NO. 14 SEARCH' SUGGESTING THAT THE DOCUMENT WAS RECOVERED DURING THE SEARCH FROM THE ASSESSEE. THE TRIBUNAL HAS EVEN PROCEEDED TO DELETE THE ADDITION OF RS. 1,50,000 AS WELL AS THE NOTIONAL INTEREST ON THE MERITS, HOLDING THAT THE DOCUME NT WAS UNSIGNED, THAT MOHINI SHARMA WAS NOT EXAMINED BY THE INCOME - TAX AUTHORITIES AND THERE WAS NO CORROBORATION OF THE UNSIGNED DOCUMENT. IF IT IS NOT IN DISPUTE THAT THE DOCUMENT WAS FOUND IN THE COURSE OF THE SEARCH OF THE ASSESSEE, THEN SECTION 153A I S TRIGGERED. ONCE THE SECTION IS TRIGGERED, IT APPEARS MANDATORY FOR THE ASSESSING OFFICER TO ISSUE NOTICES UNDER SECTION 153A CALLING UPON THE ASSESSEE TO FILE RETURNS FOR THE SIX ASSESSMENT YEARS PRIOR TO THE YEAR IN WHICH THE SEARCH TOOK PLACE. THERE AR E CONTRADICTIONS IN THE ORDER OF THE TRIBUNAL. WE ARE UNABLE TO APPRECIATE HOW THE TRIBUNAL CAN SAY IN PARAGRAPH 9.6 THAT NO MATERIAL WAS FOUND DURING THE SEARCH AND AT THE SAME TIME IN PARAGRAPH 10 DEAL WITH THE MERITS OF THE ADDITIONS BASED ON THE DOCUME NT RECOVERED DURING THE SEARCH WHICH ALLEGEDLY CONTAIN THE LOAN TRANSACTION WITH MOHINI SHARMA. THEREFORE, BOTH THE REASONS GIVEN BY THE TRIBUNAL FOR HOLDING THAT THE ASSESSMENTS MADE UNDER SECTION 153A WERE BAD IN LAW DO NOT COMMEND THEMSELVES TO US. THE RESULT IS THAT THE FIRST SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN THE NEGATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 24 . IN VIEW OF THE AFORESAID CASE LAWS AND REASON STATED ABOVE, WE DISMISS THE GROUND NO 1, 2 & 3 OF THE ASSESSEE. 25 . GROUND NOS. 4 TO 10 OF THE ASSESSEES APPEAL AND GROUND 1(A) OF REVENUES APPEAL ARE INTER - RELATED AND PERTAIN TO ADDITION MADE ON ACCOUNT OF THE REJECTION OF TRADING RESULT AND ADOPTION OF ESTIMATED SALES AND GP RATE. 26 . THE AO HAVE OBSERVED THAT IN THE AUDITED ACCOUNT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE DECLARED SALES OF RS.69,28,582/ - AND GROSS PROFIT OF RS.7,30,961/ - YIELDING GROSS PROFIT RATE OF 10.55% . HE HAS NOTED THAT THE ASSESSEE PRODUCED ONLY COMPUTERIZED BOOKS OF ACCOUNT AND DID N OT PRODUCE SALE - BILLS , PURCHASE BILLS AND VOUCHERS FOR EXPENSES INCURRED BY IT . HE HAS ALSO POINTED OUT THAT THE ASSESSEE HAS NOT FILED CONFIRMATION FROM SUNDRY CREDITORS AND DEBTORS OTHER THA N FIVE CREDIT ORS . HE THEREFORE REJECTED THE BOOKS OF ACCOUNT AND ADOPTED THE SALE AT RS.1 CRORE AND GP RATE AT 20%. HE THUS MADE AN ADDITION O F RS.12,69,039/ - . THE LD CIT(A) AFTER CONSIDERING THE SUBMISSION AND COMMENTS OF THE AO, UPHELD THE REJECTION OF THE BOOKS OF ACCOUNT S. IN THIS REGARD IT HAS BEEN OBSERVED BY HIM AS UNDER: - 11.1.3.1 BUT IT IS A FACT THAT APPELLANT EXCEPT PRODUCING THE BOOKS OF ACCOUNT MAINTAINED, SALES AND PURCHASE BAHIS AND STOCK REGISTER, HAS NOT BEEN ABLE TO SUBSTANTIATE VARIOUS DEBITS MADE IN THE TRADING ACCOUNT AND P&L ACCOUNT BY PRODUCING T HE RELEVANT BILLS AND VOUCHERS. IN THE ABSENCE OF BILLS AND VOUCHERS ENTRIES MADE IN BOOKS/ BAHIS CANNOT BE VERIFIED AND THEREFORE, BOOK RES ULTS CANNOT BE ACCEPTED AS SUCH. 27 . THE LD CIT(A) HAS ALSO REFERRED TO THE STATEMENT OF SHRI ABHAY GUPTA DATED 03.05.2006, WHEREIN THE ASSESSEE ALONG WITH ALL OTHER FAMILY MEMBERS HAVE ADMITTED THAT THEY ARE NOT DISCLOSING CORRECT GROSS - PROFIT RATE IN ALL GROUP CONCERNS. HOWEVER IN PAGE NO. 15 THE EARLIER PART OF THE ORDER, HE HAS OBSERVED THAT SO FAR AS THE INSTANT YEAR IS CONCERNED, THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO POINT OUT DEFECT IN THE BOOKS OF ACCOUNT EXCEPT SAYING THAT SALES AND PURCHASE VOUCHERS WERE NOT PRODUCED. HE ALSO OBSERVES THAT ON VERIFICATION IT IS ASCERTAINED FOR THIS YEA R THAT THERE IS NO STATEMENT EITHER OF THE APPELLANT OR OF ANY OTHER PERSONS TO SUGGEST SALES ARE UNRECORDED. HE ACCORDINGLY HAS CONCLUDED AS UNDER: - I AGREE WITH THE APPELLANT THAT THERE IS NO JUSTIFICATION FOR REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATI NG THE TOTAL AT RS.1 CRORE FOR WHICH NO BASIS WHATSOEVER HAS BEEN GIVEN BY THE AO ESPECIALLY WHEN SEARCH AS WELL AS SURVEY U/S 133A HAS TAKEN PLACE IN THE CASE OF PROPRIETARY CONCERN OF THE APPELLANT. I, THEREFORE, DIRECT THE AO NOT TO DISTURB THE SALES FI GURES AND TO ADOPT THE SALE AT RS.69,28,582/ - ONLY AS SHOWN BY THE APPELLANT. 28 . HE THUS FINALLY HELD THAT DECLARED SALES BY THE ASSESSEE HAS TO BE ADOPTED, BUT G P RATE IS TO BE ADOPTED AT 12% AS AGAINST RATE ADOPTED BY AO OF 20%. THIS RATE WAS ADOPTED BY THE LD CIT(A) ON THE BASIS OF THE GP RATE OF THE ASSESSEE FOR ASSESSMENT YEAR 2006 - 07. ACCORDINGLY, HE COMPUTED THE GP AT RS.7,30,961/ - . THUS ADDITION OF RS.,1,00,469/ - WAS UPHELD AND BALANCE OF RS.11,68,570/ - WAS DELETED. THUS BOTH THE ASSESSEE AND REV ENUE ARE IN APPEAL BEFORE US. 29 . THE LD COUNSEL REITERATED THE CONTENTIONS OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES AND THE REVENUE RELIED UPON THE FINDING OF THE AO. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE TRADING ADDI TION HAS BEEN MADE IN THE INSTANT YEAR BY THE AO ON THE GROUND THAT BOOK RESULTS AS DECLARED BY THE ASSESSEE ARE NOT VERIFIABLE, SINCE SALES BILLS, PURCHASE BILLS AND VOUCHERS FOR EXPENSES HAVE NOT BEEN PRODUCED BY THE APPELLANT BEFORE HIM. WE FIND THAT TH E ASSESSE E EVEN COULD NOT PRODUCE BEFORE THE LD CIT(A) THE SALE BILLS, PURCHASE BILLS AND VOUCHERS FOR THE EXPENSES INCURRED BY HER IN THE RELEVANT AY. EVEN BEFORE US THERE WAS NO MATERIAL LED TO ASSAIL THE AFORESAID FACTUAL POSITION. IN SUCH A SCENARIO WE HAVE NO OTHER ALTERNATE BUT TO UPHOLD THE REJECTION OF BOOKS OF ACCOUNTS AS THERE IS NO MATERIAL TO SUBSTANTIATE THE CORRECTNESS AND COMPLETENESS OF SUCH BO OKS OF ACCOUNTS. WE MAY MENTION HERE THAT THOUGHT T HE LD CIT(A) HAS CORRECTLY HELD AT PG. 11 IN PAR A 11.1.3 .1 (SUPRA) THAT IN THE ABSENCE OF BILLS AND VOUCHERS, ENTRIES MADE IN BOOKS CANNOT BE VERIFIED, THEREFORE BOOK RESULT CANNOT BE ACCEPTED. HOWEVER QUITE STRANGELY HE HAS HELD IN PARA1 11.1.3 OF HIS ORDER THAT THERE IS NO JUSTIFICATION FOR REJECTION OF BOOKS OF ACCOUNT BY OBSERVING THAT AO HAS NOT PLACED ANY MATERIAL ON RECORD TO POINT OUT DEFECTS IN BOOKS. THE AFORESAID FINDING IS CONTRADICTORY TO HIS OWN FINDING REPRODUCED ABOVE IN THIS ORDER AT PARA 26 AND THEREFORE ERRONEOUS. NOW COMING TO THE EST IMATION AS NOTED ABOVE, AO HAD ESTIMATE D SALES AT RS. 1 CRORE AND GP AT 2 0 %. WHEREAS, THE LD CIT(A) HAS ACCEPTED PAGE NO. 16 THE DECLARED SALES AND ESTIMATED GP AT 12% . IN THE INSTANT CASE, IT IS CRYSTAL CLEAR THAT EACH OF THE FIGURES DECLARED, BE IT SALES OR GP ARE U NVERIFI ABLE WITHOUT SUPPORT ING DOCUMENTS. THUS THE QUESTION WHICH REMAINS IS WHETHER THE ESTIMATION MADE BY THE AO IS FAIR AND REASONABLE ON THE FACTS ON THE CASE. WE HAVE ALREADY NOTED ABOVE WHILE DISPOSING OF GROUND NO. 1 TO 3 THAT AS A RESULT OF SEARCH, SHRI AJAY GUPTA ON BEHALF OF ASSESSEE HAS ADMITTED TO UNACCOUNTED TRANSACTIONS OUTSIDE REGULAR BOOKS OF ACCOUNTS. IT IS ALSO TRUE THAT THERE IS NO MATERIAL INDICATING UNACCOUNTED TRANSACTIONS PARTICULARLY FOR THE INSTANT YEAR UNEARTHED DURING SEARCH, BUT IT CANNOT BE DENIED THAT ONCE BOOK RESULTS FOR THE YEAR UNDER CONS IDERATION ARE UNVERIFIABLE IN THE ABSENCE OF SUPPORTING VOUCHERS, BILLS THEN THE FACTUM OF ADMISSION U/S 132(4) OF THE ACT MADE BY SHRI ABHAY GUPTA ON BEHALF OF THE ASSESSEE THAT UNACCOUNTED TRANSACTIONS TOOK PLACE FOR EARLIER YEARS WOULD BE RELEVANT CONSI DERATION FOR ESTIMATION. IN SUCH CIRCUMSTANCES THE BURDEN WAS ON THE ASSESSEE TO SHOW AS TO HOW THE ESTIMATION AS MADE BY THE AO WAS ARBITRARY OR UNREASONABLE . NO MATERIAL HAS BEEN PLACED BEFORE US TO DISCHARGE THE SAID BURDEN. THE AO HAS INCREASED THE SAL ES FROM RS.69 LAKH TO RS. 1 CRORE WHICH ON THE FACTS CANNOT BE SAID TO BE ARBITRARY, WHERE ASSESSEE HAS ADMITTED UNACCOUNTED TRANSACTIONS ALBEIT FOR LATER YEARS. HOWEVER IN RESPECT OF GP RATE, WHILE PERUSING THE GP RATE ESTIMATED BY THE AO FOR SUBSEQUENT A SSESSMENT YEARS. WE FIND THE FOLLOWING ADDITION HAS BEEN MADE BY THE AO AS UNDER: - ASSESSMENT YEAR ASSESSEE AO ADDITION SALES GP% SALES GP 2001 - 02 8,,72,506 8.69% 2 CRORES 15%15 23,47,630 2002 - 03 67,36,523 9.68% 2 CRORES 15% 23,47,630 2003 - 04 79,72,200 9.47% 2 CRORES 15% 22,44,884 2004 - 05 60,65,498 10.73% 2 CRORES 15% 23,49,012 30 . SINCE THE AO FOR SUBSEQUENT ASSESSMENT YEARS HAS ESTIMATED GP RATE OF 15%, WE DO NOT FIND ANY REASON AS TO UPHOLD THE GP RATE OF 20% FOR THIS ASSESSMENT YEAR. SO WE RESTRICT THE GP RATE AT 15% FOR THIS ASSESSMENT YEAR AND DIRECT THE AO TO COMPUTE THE TRAD ING ADDITION BY ADOPTING THE SALES AT 1 CRORE AND GP RATE AT 15% FOR THIS ASSESSMENT YEAR. WE THUS ALLOW THE GROUND RAISED BY THE REVENUE AND REJECT THE GROUND RAISED BY THE ASSESSEE ON THIS BEHALF. 31 . GROUND NO. 11 AND 12 OF ASSESSEES APPEALS PERTAIN T O ADDITION OF RS.1,24,530/ - U/S 41(1) OF THE ACT. 32 . THE AO HAD MADE THE SAID ADDITION ON THE GROUND THAT CONFIRMATION FROM M/S SPICES WAS NOT FILED. THE LD CIT(A) HAS CONFIRMED THE ADDITIONS, ON THE BASIS THAT EVEN PAGE NO. 17 AFTER THE EXPIR Y OF LIMITATION PERIOD CONFIRMATION HAS NOT BEEN FILED. THEREFORE THERE IS CESSATION OF LIABILITY WARRANTING ADDITION. AFTER CONSIDERING THE SUBMISSION MADE BY THE PARTIES, SINCE WE HAVE ALREADY UPHELD THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATED THE INCOME FOR THE INSTANT YE AR, THERE IS NO BASIS TO MAKE ANY FURTHER ADDITION ON THE BASIS OF ENTRIES FOUND IN THE BOOKS OF ACCOUNTS. EVEN OTHERWISE WE MAY ADD HERE THAT THE SAID ADDITION IS CONTRARY TO THE JUDGMENT OF APEX COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS . SUGAULI SUGAR WORKS (P.) LTD. (1999) 236 ITR 518 (SC) WHEREIN, THE HONBLE APEX COURT UPHELD THE HONBLE DELHI HIGH COURTS REASONING ON THE ISSUE AS UNDER: - ' THE TRANSFER OF AN ENTRY IS A UNILATERAL ACT OF THE ASSESSEE, WHO IS A DEBTOR TO ITS EMPLOYEES. WE FAIL TO SEE HOW A DEBTOR, BY HIS OWN UNILATERAL ACT, CAN BRING ABOUT THE CESSATION OR REMISSION OF HIS LIABILITY. REMISSION HAS TO BE GRANTED BY THE CREDITOR . IT IS NOT IN DISPUTE AND IT INDEED CANNOT BE DISPUTED, THAT IT IS NOT A CASE OF REMISSION OF LIABILITY. SIMILARLY, A UNILATERAL ACT ON THE PART OF THE DEBTOR CANNOT BRING ABOUT A CESSATION OF HIS LIABILITY. THE CESSATION OF THE LIABILITY MAY OCCUR EITHER BY REASON OF THE OPERATION OF LAW, THAT IS, ON THE LIABILITY BECOMING UNENFORCEABLE AT LAW BY THE CREDITOR AND THE DEBTOR DECLARING UNEQUIVOCALLY HIS INTENTION NOT TO HONOUR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY THE CREDITOR OR A CONTRACT BETWEEN THE PARTIES, OR BY DISCHARGE OF THE DEBT THE DEBTOR MAKING PAYMENT THEREOF TO HIS CREDITOR. TRANSFER OF AN ENTRY IS NEITHER AN AGREEMENT BETWEEN THE PARTIES NOR PAYMENT OF THE LIABILITY.' 33 . IN SUCH CIRCUMSTANCES, FOLLOWING THE RATIO - LAID ABOVE BY THE APEX C OURT , WE ALLOW THE GROUND OF THE ASSESSEE AND DELETE THE ADDITION OF RS.1,24,530/ - . 34 . GROUND NO. 1(B) OF REVENUES APPEAL RELATES TO ADDITION OF RS.1,60,287/ - OUT OF INTEREST PAYMENT HELD TO BE NOT FOR THE PURPOSE OF BUSINESS. 35 . THE AO NOTED THAT THE APPELLANT HAS PAID INTEREST OF RS.2,32,386/ - AND HAS RECEIVED INTEREST OF RS.72,099/ - . THUS, A NET INTEREST OF RS.1,60,287/ - HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. HE FURTHER NOTED THAT THE ASSESSEE IS HAVING VARIOUS DEBTORS AGAINST WHOM OUTSTAND ING BALANCES ARE THERE BUT FROM THEM INTEREST IS NOT BEING CHARGED. THUS, ACCORDING TO HIM ON ONE HAND APPELLANT IS PAYING INTEREST AND ON OTHER HAND SHE IS NOT CHARGING INTEREST FROM DEBTORS WHICH RELATE OR BELONG TO THE FAMILY OF THE ASSESSEE. THEREFORE, HE DISALLOWED THE ENTIRE INTEREST OF RS.160287/ - DEBITED IN THE P&L ACCOUNT. ON APPEAL BY THE ASSESSEE, THE LD CIT(A) HAS DELETED THE ADDITION BY CONCLUDING AS UNDER: - 11.5.3. I FULLY AGREE WITH THE APPELLANT. IT IS NOT THE CASE OF AO OF DIVERTING INTERE ST BEARING FUND TOWARDS LOAN OR ADVANCES FOR NON INTEREST BEARING PURPOSES OR FOR OTHER THAN BUSINESS CONSIDERATION. JUST BECAUSE INTEREST HAS NOT BEEN CHARGED FROM SOME DEBTORS MAJORITY OF WHOM ARE BUSINESS DEBTORS WHO ARE INCIDENTALLY RELATED TO THE APPELLA NT, ENTIRE INTEREST PAYMENT CAN NOT BE PAGE NO. 18 DISALLOWED. THEREFORE, FOLLOWING THE DECISION OF APEX COURT IN THE CASE OF SA BUILDERS, 197 TAXATION 1 THE DISALLOWANCE OF INTEREST MADE BY THE AO IS DIRECTED TO BE DELETED. RELIEF RS.1,60,287/ - . 36 . WE DISMISS THIS GROUND RAISED BY THE REVENUE AS WE HAVE ALREADY ESTIMATED THE INCOME FOR THE INSTANT YEAR AND THUS NO SEPARATE DISALLOWANCE IS WARRANTED SO THIS GROUND OF REVENUE IS DISMISSED. 37 . IN THE RESULT THE APPEAL FILED BY THE ASSESSEE AND REVENUE ARE PARTL Y ALLOWED FOR AY 2000 - 01. 38 . NOW WE TAKE UP THE REMAINING CROSS - APPEALS IN THE CASE OF THE ASSESSEE (SMT DAYAWANTI) FOR ASSESSMENT YEAR 2001 - 02 TO 2004 - 05. 39 . GROUND NOS. 1, 2 AND 3 IN THE APPEALS FILED BY THE ASSESSEE ARE IDENTICAL TO GROUND N O S. 1, 2 AND 3 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2000 - 01 RELATING TO VALIDITY OF INITIATION OF 153A PROCEEDING AS STATED BY US WHILE DISPOSING OF THE GROUNDS NO. 1, 2 AND 3 FOR 2000 - 01 . SO, WE DISMISS THE SE GROUND S ALSO OF THE ASSESSEE ON THE AFORESAID REASONING . 40 . GROUND NO.4 TO 10 OF THE ASSESSEES APPEAL IN ASSESSMENT YEAR 2001 - 02 TO 2004 - 05 AND GROUND NO. 1(A) OF THE DEPARTMENTS APPEAL ARE IN RESPECT OF ADDITIONS MADE ON ACCOUNT OF REJECTION OF TRADING RESULTS. THE DETAILS OF TH E ADDITIONS MADE AND RELIEF GRANTED BY THE LD CIT(A), AND DISPUTED BY THE REVENUE ON ACCOUNT OF REJECTION OF BOOKS OF ACCOUNT IS AS UNDER: - ASSESSMENT YEAR ASSESSEE AO ADDITION SALES GP% SALES GP 2001 - 02 8,,72,506 8.69% 2 CRORES 15%15 23,47,630 2002 - 03 67,36,523 9.68% 2 CRORES 15% 23,47,630 2003 - 04 79,72,200 9.47% 2 CRORES 15% 22,44,884 2004 - 05 60,65,498 10.73% 2 CRORES 15% 23,49,012 ASSESSMENT YEAR CIT(A) ADDITIONAL SUSTAINED RELIEF GRANTED SALES GP% SALES 2001 - 02 81,22,506 12% 2,69,025 20,25,300 2002 - 03 67,36,523 12% 1,56,013 21,91,617 20003 - 04 79,72,200 12% 2,01,548 20,43,446 2004 - 05 60,65,498 12% 76,872 22,72,140 PAGE NO. 19 41 . WE HAVE ALREADY HELD WHILE ADJUDICATING THE APPEAL FOR ASSESSMENT YEAR 2000 - 01 THAT BOOKS OF ACCOUNTS HAS BEEN RIGHTLY REJECTED ON THE FACTS AND REASONS NARRATED ABOVE. FOLLOWING THE AFORESAID FINDINGS AND THE REASONS STATED THEREIN, WE DIRECT THE AO TO CO MPUTE THE TRADING ADDITIONS BY ADOPTING SALES AT RS. 1 CRORE AND GP RATE OF 15% IN ALL THE FOUR YEAR I.E. 2001 - 02 TO 2004 - 05. AS SUCH, GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED AND THE GROUND RAISED BY THE REVENUE IS PARTLY ALLOWED. 42 . GROUND NO. 11 OF THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2001 - 02 AND GROUND NO.1 (B) OF DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2001 - 02 ARE IN RESPECT OF ADDITION OF RS.19,16,250/ - BEING UNEXPLAINED INVESTMENT IN FARM HOUSE. 43 . DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE ALONG WITH 3 OTHER FAMILY MEMBERS, NAMELY SUNIT A GUPTA, VARUN GUPTA AND ANOOP GUPTA INVESTED A SUM OF RS.3,75,000/ - UNDER AN AGREEMENT TO SALE/ PURCHASE OF AGRICULTURAL LAND AT VILLAGE SINGHOLA AT NARELA. THE AO BASED ON ENQUIRES HAS OBSERVED TH AT ASSESSEE HAS NOT PURCHASED AGRICULTURAL LAND BUT S HE HAS PURCHASED A FARM HOUSE. HE HAS OBSERVED THAT SUCH FARM HOUSE HAS A HUGE BUILT UP AREA AND A SWIMMING POOL. HE ALSO CONDUCTED ENQUIRED FROM THE SELLER, SMT PRIYA WHO CONFIRMED THAT SHE HAS SOLD THE FARM HOUSE FOR RS.15 LAKHS. THE AO HOWEVER WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE AND PROCEEDED TO ESTIMATE THE INVESTMENT IN THE PROPERTY AS UNDER: - COST OF LAND@20 LAKHS PER ACRE :60,00,000 COST OF HOUSE 1200 SQ FT CONSTRUCTED :5,00,000 COST OF CONSTRUCTION OF ADDITION OF SWIMMING POOL :20,00,000 COST OF LANDSCAPING :6,65,000 91,65,000 7.2.1.1 HE APPORTIONED THIS AMOUNT IN FOUR HANDS AS FOUR PERSONS ARE CO - OWNERS OF THIS PROPERTY. SUCH APPORTIONED AMOUNT IS RS.22,91,250/ - . AS EACH MEMBERS HAS SHOWN ONLY RS.3,75,000/ - AS INVESTMENT AGAINST ACQUISITION OF THIS PROPERTY, HE HAS MADE ADDITION OF THE DIFFERENCE OF RS.19,16,250/ - IN THE HANDS OF THE FOUR CO - OWNERS AND ACCORDINGLY ADDITION OF R S. 19,16,250/ - HAS BEEN MADE IN THE HANDS OF THE APPELLANT ALSO. 44 . THE LD CIT(A) PARTLY GRANTED RELIEF TO THE ASSESSEE, BY REDUCING THE INVESTMENT FROM RS.91,65,000/ - TO RS.18,65,000/ - ON THE FOLLOWING BASIS: - I) COST OF LAND FILING AND LAND SCAPING :RS.6,65,000/ - II) COST OF CONSTRUCTION OF SWIMMING POOL :RS.10,00,000/ - III) COST OF IMPROVEMENT AND ALTERATION IN THE EXISTING FARM HOUSE. :RS.2,00,000/ - TOTAL :RS.18,65,000/ - 7.2.3.3 THUS, TOTAL INVESTMENT MADE ADDITIONALLY IN THIS FA RM HOUSE CAN BE ESTIMATED AT RS.18,65,000/ - . AS NONE OF THE CO - OWNERS HAVE SHOWN ANY AMOUNT PAGE NO. 20 TOWARDS THIS IMPROVEMENT/ NEW CONSTRUCTION, 1/4 TH OF THE SAME BEING RS.4,66,250/ - IS LIABLE TO BE ADDED SEPARATELY IN THE HANDS OF EACH OF THE FOUR CO - OWNERS INCLUD ING THE APPELLANT. THE ADDITION HAS TO BE MADE IN THIS YEAR ITSELF BEING THE YEAR OF ACQUISITION OF THE PROPERTY AS SPECIFIC YEARS IN WHICH THESE IMPROVEMENTS TO THIS FARM HOUSE WERE MADE, COULD NOT BE STATED BY THE LD AR OF THE APPELLANT EXCEPT ARGUING TH AT THE ADDITION MIGHT NOT HAVE BEEN DONE IN THE YEAR OF ACQUISITION BUT IN SUBSEQUENT YEARS. THUS, AS AGAINST ADDITION OF RS.19,16,250/ - , THE ADDITION OF RS.4,66,250/ - IS DIRECTED TO BE MADE IN THE HANDS OF THE APPELLANT FOR THE YEAR. THE APPELLANT GETS RE LIEF OF RS.14,50,000/ - ON THIS ACCOUNT. 45 . HE THEREFORE SUSTAINED AN ADDITION OF RS.4,66,200/ - IN THE HANDS OF THE ASSESSEE BEING 1/4 TH SHARE IN THE TOTAL UNEXPLAINED INVESTMENT OF RS.18,65,000/ - AND GRANTED A RELIEF OF RS. 14,50,000/ - . 46 . BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL. HAVING CONSIDERED THE RIVAL SUBMISSION WE FIND THAT THE LD CIT(A) ESTIMATED THE INVESTMENT MADE BY THE ASSESSEE AND FAMILY MEMBERS IN LAND FILING AND LAND SCAPING ON THE BASIS OF THE STATEMENT RECORDED OF SHRI A BHAY GUPTA U/S 132(4) OF THE ACT. WE ARE THEREFORE NOT INCLINED TO INTERFERE WITH THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND SCAPING. HOWEVER, THE REMAINING ADDITION MADE BY THE AO AND LD CIT(A) EITHER ON ACCOUNT OF COST OF LAND OR INVE STMENT IN SWIMMING POOL OR ALTERATION MADE TO THE FARM HOUSE, WE FIND ARE NOT SUPPORTED BY ANY MATERIAL AND IS A PRODUCT OF GUESS WORK , T HOUGH NOMENCLATURIZED AS ESTIMATED COST . AN ESTIMATE NEED TO BE BASED ON SOME MATERIAL TO HOLD THAT AN EXPENDITURE HAS BEEN INCURRED EITHER FOR PURCHASE OF LAND OR FOR CONSTRUCTION OF SWIMMING POOL. HOWEVER, IN THE INSTANT CASE, THERE IS NONE. ON THE CONTRARY, THE DEPOSITION OF THE SELLER CORROBORAT ES THE CLAIM OF THE ASSESSEE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAKUNTLA DEVI 316 ITR 46, HELD THAT WHERE DEPARTMENT HAS FAILED TO COLLECT ANY INFORMATION OR MATERIAL TO SHOW THAT ANY CONSIDERATION ABOVE AND BEYOND THE STATED CONSIDERATION HAS CHANGED HANDS THEN IT WOULD BE LEGALLY IMPERMISSIBLE TO DRAW ADVERS E INTERFERENCE AGAINST THE ASSESSEE. FOLLOWING THE ABOVE POSITION, WE SUSTAIN THE ADDITION OF RS.6,65,000/ - OUT OF TOTAL INVESTMENT ESTIMATED BY THE AO OF RS.91,65,000/ - . AS SUCH ADDITION OF RS.1,41,250/ - IS SUSTAINED IN THE HANDS OF THE ASSESSEE AND THE BALANCE ADDITION AGAINST THE ASSESSEE IS DELETED. THIS GROUND IS PARTLY ALLOWED FOR ASSESSEE AND GROUND OF REVENUE IS DISMISSED. 47 . GROUND NOS. 12 AND 13 OF ASSESSEES APPEAL FOR ASSESSMENT YEAR 2001 - 02 AND 11 TO 13 FOR 2002 - 03, 2003 - 04 & 2004 - 05 RELATE TO ADDITION U/S 41(I) OF THE ACT. THIS ISSUE IS IDENTICAL TO GROUND NO.11 TO 13 FOR ASSESSMENT YEAR 2000 - 01. FOR THE REASON STATED THEREIN, THE SAID GROUNDS OF ASSESSEE IS ALLOWED. PAGE NO. 21 48 . IN THE RESULT THE CROSS APPEALS PREFERRED BY THE ASSESSEES AND REVEN UE FOR AY 2001 - 02 TO 2004 - 05 ARE PARTLY ALLOWED IN THE CASE OF SMT . DAYAWANTI. . 49 . NOW WE TAKE UP CROSS APPEALS IN THE CASES OF SUNITA GUPTA, VARUN GUPTA AND ANOOP GUPT A FOR ASSESSMENT YEAR 20001 - 02 AND CROSS APPEALS IN THE CASE OF SHRI AJAY GUPTA FOR A Y 2000 - 01 AND 2001 - 02. 50 . GROUND NOS 1 TO 3 OF THE AFORESAID APPEALS FILED BY THE ASSESSEE S RELATE TO VALIDITY OF PROCEEDING U/S 153A OF THE ACT. 51 . FOR THE REASONS STATED HEREIN BEFORE WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2000 - 01 IN THE CASE OF LATE SMT. DAYAWATI, WE ARE INCLINED TO REJECT THE AFORESAID GROU ND OF ASSESSEES. 52 . FURTHER IN ASSESSEES APPEALS, GROUND NOS. 4 TO 7 IN THE CASE OF SUNITA GUPTA AND VARUN GUPTA , GROUND NO S . 4 TO 6 IN THE CASE OF ANOOP GUPTA AND GROUND NO.4 OF SHRI AJAY GUPTA ARE GENERAL IN NATURE AND THEREFORE REJECTED. 53 . GROUND NO. 8 IN THE APPEAL OF THE ASSESSEE IN THE CASE OF SUNITA GUPTA AND VARUN GUPTA AND GROUND NO.7 OF ANOOP GUPTA AND GROUND NO.2 OF THE DEPARTMENTS APPEAL IN THE C ASE OF VARUN GUPTA AND GROUND NO. 1 OF THE DEPARTMENTS IN THE CASE OF SUNITA GUPTA AND ANOOP GUPTA RELATED TO ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PROPERTY. (FARM HOUSE) 54 . THIS ISSUE IS IDENTICAL TO GROUND NO.11 IN THE CASE OF LATE SMT DAYAWANTI, FOR ASSESSMENT YEAR 20001 - 02 WHEREBY WE HAVE HELD THAT ADDITION IS SUSTAINED TO THE EXTENT OF RS.1,41,250/ - , THEREFORE THE SAID AMOUNT IS SUSTAINED IN THE HANDS OF EACH OF THREE ASSESSEE. AS SUCH THE GROUND RAISED BY THE REVENUE IS DISMISSED AND THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 55 . IN GROUND NO. 1 OF THE REVENUES APPEAL FOR ASSESSMENT YEAR 2001 - 02, THE REVENUE HAS CHALLENGED THE DELETION OF ESTIMATED ADDITION OF RS.75,000/ - . THE LD CIT(A) HAS DELETED THE ADDITION OBSERVING AS UNDER: - 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE. THE SUBMISSION OF THE APPELLANT HAS ALSO BEEN GONE THROUGH VERY CAREFULLY. I AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE AO HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD TO SHOW THAT WHAT HAS BEEN DECLARED IS I NCORRECT, WRONG OR CANNOT BE BELIEVED. IT MAY BE TRUE THAT THE APPELLANT IS NOT ABLE TO PRODUCE EVIDENCES IN SUPPORT OF THE INCOME DECLARED FROM BUSINESS IN ITS RETURN OF INCOME BUT AO ALSO HAS NOT BROUGHT OUT ANY MATERIAL TO SUGGEST THAT INCOME DECLARED F ROM BUSINESS IS MORE THAN WHAT IS DECLARED BY THE APPELLANT. THEREFORE, INCOME CAN NOT BE ENHANCED ON THE BASIS OF THESE FACTS UNLESS THE FACTS ITSELF PROVE THAT THERE IS AN INCOME WHICH HAS NOT BEEN DECLARED. THIS IS MORE SO WHEN A SEARCH HAS TAKEN PLACE AND NO EVIDENCE CONTRARY TO THE RETURNED INCOME HAS BEEN FOUND. IN PAGE NO. 22 VIEW OF THE ABOVE FACTS, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.75,000/ - MADE ON THIS ACCOUNT. 56 . HAVING CONSIDERED THE SUBMISSION, WE ARE IN AGREEMENT WITH THE CONCLUSION OF THE LD CIT(A) THAT IN ABSENCE OF ANY MATERIAL, ESTIMATED ADDITION IS INCORRECT AND AS SUCH GROUND RAISED BY THE REVENUE IS REJECTED. 57 . GROUND NO. 9 OF THE ASSESSEES APPEAL IN THE CASE OF SUNITA GUPTA IS AGAINST THE ADDITIONS OF RS.21,000/ - ON ACCOUNT OF C ASH DEPOSITED IN BANK ACCOUNT. 58 . THE AO WHILE MAKING THE ADDITION OF RS.55,000/ - HAS OBSERVED AS UNDER: - DURING THIS YEAR, THE ASSESSEE HAS DEPOSITED FOLLOWING AMOUNT IN CASH IN HER CENTRAL BANK OF INDIA ACCOUNT. CASH IN HAND AS ON 01.04.2000 WAS RS.11,294/ - ONLY. FROM ABOVE CHART IT IS CLEAR THAT UP TO AUGUST 2000, SHE HAS DEPOSITED ABOUT RS.48,000/ - IN BANK IN CASH OTHER THAN THE CASH IN HAND AVAILABLE AS ON 01.04.2000. ON ANY DAY, STILL PETTY CASH REMAINS IN HA ND. SO SHE HAS FAILED TO SUBSTANTIATE THE SOURCE OF DEPOSITS OF RS.55,000/ - AS CASH IN HER BANK ACCOUNT ON 16.08.2000. NO EVIDENCE OR EXPLANATION ABOUT ABOVE DEPOSIT HAS BEEN FILED WHICH REMAINS UNEXPLAINED. THE SAME IS ADDED TO RETURNED INCOME OF THE ASSE SSEE AS DEPOSITED OUT OF UNEXPLAINED SOURCES. 59 . THE LD CIT(A) HOWEVER RESTRICTED THE ADDITION TO RS.21,000/ - ON THE FOLLOWING REASONS. : - 4.3. I HAVE CONSIDERED THE FACT OF THE CASE. THE SUBMISSIONS OF THE APPELLANT HAVE ALSO BEEN GONE THROUGH VERY CAR EFULLY. DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAS ALREADY SHOWN RENTAL INCOME OF RS.24,000/ - AND INCOME FROM TUITION AMOUNTING TO RS.70,000/ - WHICH HAS BEEN ACCEPTED ALSO BY THE AO. IT IS ALSO SUBMITTED THAT THESE PAYMENTS HAVE BEEN RECEIVED IN CASH. ACCORDINGLY IF WE TAKE THE ABOVE SAID INCOME ON AVERAGE MONTHLY BASIS THEN THE APPELLANT MUST BE HAVING APPROXIMATELY CASH OF RS.32,000/ - (RS.8,000X4) AS ON 16.08.2000 ON ACCOUNT OF THESE RECEIPTS. IN ADDITION, AS ON 01.04.2000 THERE WAS AN OPENING CASH BALANCE OF RS.11,294/ - WHICH IS MENTIONED BY AO ALSO IN HIS ORDER. THUS TOTAL CASH AVAILABLE UP TO 16.08.2000 IS RS.43,294/ - AND FROM IT, IF WE REDUCE DEPOSIT OF RS.4,000/ - MADE IN THE MONTH OF APRIL AND JUNE, 2000 AND ESTIMATED DRA WINGS OF RS.5,000/ - TILL AUGUST, 2000( SINCE TOTAL DRAWINGS SHOWN FOR THE WHOLE YEAR IS RS.9,000/ - ), THERE WILL BE CASH AVAILABLE ONLY TO THE EXTENT OF RS.34,000/ - APPROXIMATELY. ACCORDINGLY OUT OF DEPOSIT MADE OF RS.55,000/ - ON DATE AMOUNT 26.04.2000 2000 26.06.2000 2000 16.08.200 55000 20.09.2000 2000 25.09.2000 2000 20.10.2000 2000 13.11.2000 20000 19.12.2000 2000 87000 PAGE NO. 23 16.08.2000 WHICH HAS BEEN TREATED BY AO AS UNE XPLAINED, TO THE EXTENT OF RS.34,000/ - SOURCES CAN BE SAID AS EXPLAINED. THE REMAINING RS.21,000/ - HAS TO BE TREATED AS UNEXPLAINED. ACCORDINGLY THE AO IS DIRECTED TO REDUCE THE ADDITION FROM RS.55,000/ - TO RS.21,000. THE APPELLANT GETS RELIEF OF RS.34,000 / - . 60 . THE LD COUNSEL FOR THE ASSESSEE WAS UNABLE TO PERSUADE US TO DEPART FROM THE AFORESAID REASONING ADOPTED BY THE LD CIT(A) WHILE GRANTING RELIEF TO THE EXTENT OF RS.34,000/ - AND SUSTAINING TO THE EXTENT OF RS.21,000/ - WE THEREFORE REJECT THE GROU ND OF APPEAL OF THE ASSESSEE. 61 . GROUND NO. 8 OF THE ASSESSEES APPEAL IN THE CASE OF ANOOP GUPTA, PROJECTS THE GRIEVANCE OF THE ASSESSEE REGARDING ADDITION OF RS.78,000/ - ON ACCOUNT OF HOUSE HOLD EXPENSES. 62 . IN THIS CASE THE AO HAD MADE AN ADDITION O F RS.1,37,224/ - WHICH WAS RESTRICTED BY THE LD CIT(A) TO RS.78,000/ - BY HOLDING AS UNDER: - 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE. I AGREE WITH THE ARGUMENT OF THE LD AR OF THE APPELLANT THAT THE AO HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD EXCEPT MENTIONING THAT APPELLANTS FAMILY CONSISTS OF FOUR MEMBERS. HE HAS NOT CONSIDERED THE FACT WHICH HE IS FULLY AWARE AND HIMSELF HAS MENTIONED N THE ASSESSMENT ORDER IN THE CASE OF SMT. DAYAWANT I FOR ASSESSMENT YEAR 2001 - 02 THAT THE ENTIRE FAMILY RESIDES JOINTLY IN A HOUSE IN MODEL TOWN, DELHI. THEREFORE, ESTIMATING HOUSEHOLD EXPENSES AT RS.15,000/ - PER MONTH IS HIGH IN MY OPINION LOOKING TO THE FACT THAT THIS ESTIMATION IS BEING MADE NOT FOR CUR RENT YEAR BUT FOR FINANCIAL YEAR 1999 - 2000. IN MY OPINION THEREFORE IT WILL BE FAIR AND REASONABLE TO ESTIMATE THE DRAWINGS IN THE HANDS OF THE APPELLANT@ RS.10,000/ - PER MONTH I.E. RS.1,20,000/ - FOR THE YEAR. THIS WILL LEAD TO AN ADDITION OF RS.78,000/ - ( RS.1,20,000 - RS.42,000/ - SHOWN) ON THIS ACCOUNT. THUS, THE ADDITION OF RS.1,37,224/ - IS RESTRICTED TO RS.78,000/ - . THE APPELLANT THUS GETS RELIEF OF RS.59,224/ - ON THIS GROUND. 63 . THE LD CIT(A) HAS ESTIMATE THE DRAWINGS OF THE ASSESSEE AT RS.10,000/ - PE R MONTH. NO MATERIAL WHATSOEVER HAS BEEN LED TO ASSAIL THE FINDING AND ADDITION SUSTAINED BY THE LD CIT(A). THEREFORE THIS GROUND OF THE ASSESSEE IS DISMISSED. 64 . GROUND NO. 5 OF ASSESSEE S APPEAL IN THE CASE OF AJAY GUPTA RELATES TO ADDITION OF RS. 2LAKH ON ACCOUNT OF UNEXPLAINED CASH - CREDIT . F ACTS IN BRIEF ARE THAT AO MADE AN ADDITION OF RS.5,48,000 / - ON ACCOUNT OF UNCONFIRMED LOA N FROM M/S ANAND JUTE COMPANY , SINCE NO CONFIRMATION WAS RECEIVED FROM IT. DURING THE APPELLATE PROCEEDINGS, IN THE REMAN D REPORT , THE AO HAS STATED THAT EVIDENCE FILED AT APPELLATE STAGE WAS INCOMPLETE AND FALSE. AND THAT THE ACCOUNT STATEMENT SIGNED BY AN ACCOUNTANT OF THE SAID FIRM CANNOT BE ACCEPTED AS GENUINE. THE LD CIT(A), HOWEVER RESTRICTED THE ADDITION TO RS. 2 LA KHS AS IT IS WAS THE ONLY SUM RECEIVED DURING THE YEAR FROM M/S ANAND JUTE COMPANY. HE HAS HELD AS UNDER: - PAGE NO. 24 6.3 I HAVE CONSIDERED THE FACTS OF THE CASE. THE SUBMISSION OF THE APPELLANT HAS ALSO BEEN GONE THROUGH VERY CAREFULLY. I HAVE ALSO GONE THROUGH TH E CONFIRMATION AS WELL AS LEDGER ACCOUNT OF THE APPELLANT. ON GOING THROUGH THE SAME THE CONTENTION OF THE APPELLANT IS FOUND CORRECT THAT DURING THE YEAR ONLY RS.2 LAKH HAS BEEN SHOWN AS RECEIVED FROM THIS PARTY. THE REMAINING AMOUNT AS APPEARING IN THE B ALANCE SHEET FOR THE YEAR IS OUT OF OPENING BALANCE. THUS ADDITION IF ANY CAN BE MADE DURING THE YEAR ON ACCOUNT OF UNEXPLAINED CASH CREDIT, IT HAS TO BE ONLY TO THE EXTENT OF RS.2 LAKH. AS REGARD CONFIRMATION AND THE EXPLANATION FILED BY THE LD AR THAT M/ S ANAND JUTE CO. IS A PROPRIETARY CONCERN OF MRS. ALKA BANSAL AND THAT IS WHY HER PAN HAS BEEN QUOTED, NO EVIDENCE COULD NOT PRODUCED BEFORE THE UNDERSIGNED THAT THIS IS A PROPRIETARY CONCERN OF MRS. ALKA BANSAL. IN VIEW OF THE ABOVE FACTS, THE CONFIRMATIO N FILED BY THE APPELLANT DURING APPELLATE PROCEEDINGS, WHICH IS SIGNED BY SOME ACCOUNTANT AND PAN MENTIONED THEREIN IS ALSO NOT VERIFIABLE, IS NOT BEING ACCEPTED. THUS WE HAVE COME TO THE SITUATION THAT THERE IS NO CONFIRMATION/ VALID CONFIRMATION FROM THE SO CALLED CREDITOR. THEREFORE, THE AMOUNT RECEIVED DURING THE YEAR IN THE ABSENCE OF CONFIRMATION HAS TO BE TREATED AS UNEXPLAINED. AS ALREADY DISCUSSED RS.5,48,000/ - HAS BEEN WRONGLY TAKEN BY THE AO AS UNEXPLAINED CASH CREDIT DURING THE YEAR AS DURING TH E YEAR NEW CREDIT IS ONLY FOR RS.2,00,000/ - . THEREFORE ON THE GROUND OF NON FURNISHING OF CONFIRMATION ADDITION DURING THE YEAR CAN BE MADE U/S 68 OF ONLY FOR RS.2 LAKHS. THUS THE ADDITION OF RS.2 LAKH IS UPHELD. THE APPELLANT GETS RELIEF OF RS.3,48,000/ - ON THIS GROUND. 65 . HAVING HEARD BOTH THE SIDES AND AFTER PERUSAL OF THE RECORDS WE FIND NO INFIRMITY IN THE CONCLUSION MADE BY THE LD CIT(A) TO THE EXTENT THAT EVEN THE LD COUNSEL IN THE COURSE OF HEARING COULD NOT DEMONSTRATE THAT THE CREDIT WAS CONFIRM ED BY THE CREDITOR NAMELY MRS. ALKA BANSAL WHO CLAIMED TO BE THE PROPRIETOR OF M/S ANAND JUTE COMPANY. A COPY OF THE ACCOUNT SIGNED BY AN ACCOUNTANT, HAS BEEN ADMITTEDLY PLACED ON RECORD BEFORE US AS WELL AS THE LD CIT(A). WE NOTE THAT THE AMOUNT OF RS.2 L AKH HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQUE AND INTEREST THEREON HAS BEEN PAID TO THE CREDITOR. FURTHER PAN NUMBER OF THE CR EDITOR HAS ALSO BEEN FURNISHED. IN THE SAID CIRCUMSTANCES, WE ARE OF THE OPINION THAT MERE LY BECAUSE CONFIRMATION HAS NOT BEEN FILED SEPARATELY FROM THE CREDITOR ITSELF , WOULD BE AMOUNTING TO DENY THE CLAIM ON HYPER TECHNICAL GROUND, WHEN OTHER FACTS ARE NOT REFUTED BY THE DEPARTMENT EVEN IN THE COURSE OF HEARIN G. IN SUCH CIRCUMSTANCES WE FEEL IT APPROPR IATE TO ALLOW THE CLAIM OF THE ASSESSEE AND DELETE THE ADDITION OF RS. 2 LAKHS. 66 . GROUND N0.5 OF ASSESSEES APPEAL IN THE CASE OF AJAY GUPTA FOR ASSESSMENT YEAR 2001 - 02 RELATES TO ADDITION OF RS.28,559/ - ON ACCOUNT OF UN - EXPLAINED CREDITORS. 67 . THE LD CIT(A) HAS UPHELD THE ADDITION OF RS.28,559/ - REPRESENTING THE BALANCE FROM THE CREDITOR OBSERVING AS UNDER: - 7.3.2 REGARDING SHIVANGI PRINTERS, THOUGH NO CONFIRMATION HAS BEEN FILED, THE COPY OF THE BILL HAS BEEN FILED WHICH WAS FORWARDED TO THE AO AND THE AO HAS NOT DOUBTED THE GENUINENESS OF THIS BILL. THUS NORMALLY THERE IS NO CASE OF DISALLOWANCE DURING THIS YEAR JUST BECAUSE THE BILL AMOUNT HAS NOT BEEN PAID PAGE NO. 25 DURING THE YEAR. HOWEVER, ON GOING THROUGH THE BALANCE SHEET OF THE APPELLANT FOR ASSESSMENT YEAR 2001 - 02 IT IS SEEN THAT THIS AMOUNT REMAINS OUTSTANDING EVEN AS ON 31.03.2002. THUS LIKE ROYAL PACKING, APPELLANT COULD HAVE OFFERED THIS AMOUNT IN ASSESSMENT YEAR 2002 - 03 ON THE GROUND OF CESSATION OF LIABILITY. HOWEVER, ON GOING THROUGH THE RETURN OF ASSESSMENT YEAR 2002 - 03, IT IS SEEN THAT THIS AMOUNT HAS NOT BEEN OFFERED. THEREFORE, THE ADDITION OF THE SAME IN THIS YEAR IS UPHELD THOUGH NOT ON THE GROUND ON WHICH ADDITION HAS BEEN MADE. 68 . THE LD CIT(A) HAS HELD THAT THERE IS CESSATION OF LIABI LITY, ON THE GROUND THAT IN RESPECT OF ANOTHER CREDITOR M/S. ROYAL PACKAGING THE SAID SUM HAS BEEN OFFERED AS INCOME. HOWEVER WE ARE OF THE OPINION THAT THE CESSATION OF LIABILITY IN RESPECT OF ANOTHER CREDITOR CANNOT BE A GROUND OR BASIS TO ASSUME CESSATI ON OF LIABILITY IN RESPECT TO THIS CREDITOR WE THEREFORE DELETE THE ADDITION. 69 . GROUND NO. 1 OF THE REVENUES APPEAL IN THE CASE OF AJAY GUPTA IS RELATING TO DELETION OF ESTIMATED TRADING ADDITION OF RS.12 LAKHS. 70 . THE FACTS AS MENTIONED BY THE LD CI T(A) ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S. BALAJI PRODUCTS. SINCE THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS OR VOUCHERS THE AO ESTIMATED THE INCOME AT RS.1 LAKH PER MONTH FOR BOTH THE ASSESSMENT YEARS. 71 . THE LD CIT(A) HOWEVER DELETED TH E ADDITION IN BOTH THE YEARS BY OBSERVING AS UNDER: - 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE. THE SUBMISSION OF THE APPELLANT HAS ALSO BEEN GONE THROUGH VERY CAREFULLY. ADMITTEDLY THIS IS THE FIRST YEAR OF M/S BALAJEE PRODUCTS, A PROPRIETARY CONCERN O F THE APPELLANT WHICH STARTED FROM 01.05.1999. THOUGH AO HAS MENTIONED THAT THIS PROPRIETARY CONCERN WAS THERE FROM 01.05.1999 TO 25.11.2000 BUT IN THE SAME SENTENCE HE IS SAYING THAT IT IS CONTINUED THEREAFTER ALSO. IT HAS BEEN CLARIFIED BY THE LD AR THAT THE BUSINESS OF THE MANUFACTURING IN THIS CONCERN WAS CLOSED ON 25.11.2000 BUT AFTER THAT HIRE CHARGES ETC HAS BEEN SHOWN IN THIS CONCERN. A SEARCH HAS BEEN CONDUCTED IN THIS GROUP INCLUDING THE APPELLANT. NO MATERIAL, MORE SPECIFICALLY ANY INCRIMINATING MATERIAL HAS BEEN FOUND ABOUT THIS CONCERN. NO EVIDENCE OF SUPPRESSION OF TURNOVER, INFLATION OF PURCHASES OR INFLATION OF EXPENSES DEBITED IN P&L ACCOUNT, HAS BEEN FOUND DURING THE COURSE OF SEARCH OR AT LEAST IT HAS NOT BEEN BROUGHT ON RECORD BY THE AO E ITHER IN ASSESSMENT ORDER OR IN THE REMAND PROCEEDINGS. THOUGHT HE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNT AND BILLS AND VOUCHERS TO SUPPORT THE NET PROFIT AS DECLARED IN P&L A/C AND ALSO IN THE RETURN OF INCOME BUT AT THE SAME TIME IT IS ALSO FACT THAT IN SPITE OF SEARCH BEING CONDUCTED IN THIS CASE NO CONTRARY MATERIAL HAS BEEN FOUND TO SUGGEST THAT THE INCOME SHOWN FROM THIS CONCERN IS SUPPRESSED. FOR A MOMENT EVEN IF IT IS PRESUMED THAT INCOME HAS BEEN OFFERED PURELY ON ESTIMATE BASIS YET AO HAS NO EVIDENCE AS FAR AS THIS CONCERN IS CONCERNED EVEN AFTER CONDUCING SEARCH THAT THE INCOME SO SHOWN BY THE APPELLANT IS SUPPRESSED. THE REFERENCE MADE BY THE AO OF EXCISE EVASION OR UNRECORDED PURCHASES ETC. ARE RELATED TO M/S BALAJI PERFURMES AND M/S AS SAM SUPARI TRADING CO. NO REFERENCE HAS BEEN MADE BY HIM IN THE ASSESSMENT ORDER OF ANY EVIDENCE OF UNDER REPORTING OF INCOME AS FAR PAGE NO. 26 AS THIS PROPRIETARY CONCERN IS CONCERNED. THE REFERENCE OF AO THAT THIS GROUP IS ENGAGED IN TAX EVASION IS NOT RELEVANT FOR THE INCOME - TAX PURPOSES, AS THE ASSESSMENT HAS TO BE MADE OF AN INDIVIDUAL ASSESSEE BASED ON THE MATERIAL IN THE CASE OF THE PARTICULAR ASSESSEE AND NOT BASED ON THE MATERIAL FOUND IN ANY GROUP CONCERN AS GROUP IS NOT AN ASSESSABLE ENTITY FOR THE PURPOSES OF INCOME - TAX ACT. THEREFORE, THE REASONS GIVEN BY THE AO/ REFERENCES MADE BY HIM TOO CONCLUDE THAT INCOME OF THE ASSESSEE FROM THIS CONCERN IS UNDER STATED ALSO DESERVES TO BE ESTIMATED IS NOT CORRECT AND THEREFORE NOT UPHELD. 5.3.1 EVEN OTHERWISE IT IS SEEN THAT THE APPELLANT HAS FILED P&L ACCOUNT OF THIS CONCERN AS PER WHICH TOTAL TURNOVER OF RS.26,52,030/ - HAS BEEN SHOWN ON WHICH THE G P OF RS.6,88,517/ - HAS BEEN SHOWN WHICH IS APPROXIMATELY 26%. SINCE NO EVIDENCE DURING THE COURSE OF SEARCH OF SUPPRES SION OF INCOME OF THIS CONCERN HAS BEEN FOUND AND AT THE SAME TIME GP RATE DECLARED IS @ 26% AND NET PROFIT RATE IS ALSO DECLARED @ 7.68% (WHICH IS BETTER THAN 5% NET PROFIT PRESCRIBED IN THE CASE OF RETAILERS U/S 44AF), THERE IS NO CASE OF ESTIMATION OF I NCOME EVEN IF IT IS HELD THAT SINCE THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNT, BILLS AND VOUCHERS, THE INCOME HAS TO BE ESTIMATED. THIS IS SO AS THE GROSS PROFIT RATE SO OFFERED IS ALMOST THE SAME AS IN THE CASE OF BALAJI PERFUMES ENGAGED IN THE SAME LINE OF BUSINESS WHEREIN 25% GROSS PROFIT RATE HAS BEEN ADOPTED BY THE AO HIMSELF FOR THIS YEAR. THE ESTIMATION OF INCOME AT RS.13 LAKH FROM THE ABOVE CONCERN IS, THEREFORE, DIRECTED TO BE DELETED. THE AO IS DIRECTED TO ADOPT THE INCOME OF RS.2,03,795/ - AS SHOWN BY THE APPELLANT FROM THIS CONCERN. 72 . HAVING CON SIDERED THE RIVAL SUBMISSION, WE FIND THAT DURING THE ASSESSMENT YEARS 2000 - 01 AND 2001 - 02, THE ASSESSEE DECLARED SALES OF RS.26,52,030/ - IN ASSESSMENT YEAR 2000 - 01 AND RS.37,07,020/ - IN ASSESSME NT YEAR 2001 - 02. HE HAS DISCLOSED NET PROFIT OF RS.2,03,795/ - IN ASSESSMENT YEAR 2000 - 01 AND NET PROFIT OF RS.2,13,905/ - IN ASSESSMENT YEAR 2001 - 02. THE AO HAD NOTED THAT IN THIS CASE AS A RESULT OF SEARCH MATERIAL WAS FOUND AGAINST THE ENTIRE GROUP WHEREB Y IT WAS ADMITTED BY THE ASSESSEE THAT THEY WERE ENGAGED IN UNACCOUNTED TRANSACTIONS AS STATED IN DAYAWANTIS CASE (SUPRA) FOR ASSESSMENT YEAR 2000 - 01, WHICH ARE NOT REPEATED FOR THE SAKE OF BREVITY. IN THE SAID CIRCUMSTANCES, AO IS RIGHT IN ESTIMATING THE INCOME WHEN NOTHING HAS BEEN PRODUCED TO SUPPORT THE DECLARED RESULTS. HOWEVER ON A PERUSAL OF THE AOS ORDER WE FIND NO EXERCISE WHAT SO EVER HAS BEEN CONDUCTED BY THE AO TO ARRIVE AT THE ESTIMATED INCOME. THEREFORE WE SET - ASIDE THE IMPUGNED ORDER OF LD CIT(A) AND REM IT THE MATTER BACK TO THE FILE OF AO, TO ESTIMATE AFRESH THE INCOME OF THE ASSESSEE, AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. THE GROUNDS OF REVENUE FOR THE BOTH THE YEARS ARE ALLOWED FOR STATISTICAL PURPOSES. 73 . GROUND NO. 2 OF THE REVENUES APPEAL FOR 200 1 - 02 IN AJAY GUPTAS CASE RELATED TO PROTECTIVE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FARM HOUSE. 74 . ON THIS ISSUE, WE HAVE ALREADY UPHELD THE SUBSTANTIVE ADDITION IN THE HANDS OF SUNITA GUPTA WIFE OF THE ASSESSEE. THEREFORE THE PROTECTIVE ASSESSMENT DOES NOT SURVIVE AND THEREFORE WE CONFIRM THE ORDER OF THE LD CIT(A) AND DISMISS THE REVENUES APPEAL. PAGE NO. 27 75 . GROUND NO.3 TO 6 OF THE REVENUES APPEAL FOR ASSESSMENT YEAR 2001 - 02, IN AJAY GUPTA CASE, RELATES TO ADDITION OF RS.72,000/ - ON ACCOUNT CURRENT LIABILITY HELD AS NON - GENUINE AND ADDITION OF RS.2,61,896 AND RS.6,21,516/ - ON ACCOUNT OF UNSUBSTANTIAL SUNDRY CREDITORS. 76 . HAVING CONSIDERED THE SUBMISSION OF BOTH THE PARTIES, SINCE WE HAVE ALREADY HELD THAT ESTIMATION IS WARRANTED ON THE FACTS OF THE ASSESSEE. AND FOR WHICH PURPOSE WE HAVE RESTORED THE MATTER BACK TO THE FILE OF THE AO. IT WOULD BE THUS IN THE FITNESS OF THINGS THAT THE AFORESAID ISSUES ARE ALSO RESTORED TO THE FIL E OF AO , SO THAT A PROPER ESTIMATE BE A RRIVED AFTER CONSIDERING ALL THE RELEVANT FACTS INCLUDING THE AFORESAID ADDITIONS ON ACCOUNT OF UNSUBSTANTIATED CREDITOR/ NON - GENUINE CURRENT LIABILITY. THEREFORE THE AFORESAID GROUNDS OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. 77 . ALL THE REMAINING GROUND IN THE APPEAL OF THE ASSESSEE IN THE CASE OF LATE DAYAWANTI, SUNITA GUPTA, VARUN GUPTA AND ANOOP GUPTA ARE REGARDING LEVYING OF INTEREST WHICH ARE CONSEQUENTIAL IN NATURE ; AND GROUND REGARDING INITIATION OF PENALTY PROCEEDING S WE F EEL AT THIS STAGE IS PRE - MATURE AND THEREFORE DISMISSED. 78 . IN THE RESULT THE APPEAL FILED BY THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 . 09 .2014. - S D / - - S D / - (N.K. SAINI ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 2 / 09 / 2014 A K KEOT COPY FORWARDED T O 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI