Shri Gangasingh Sohansingh Rajpurohit, Nadiad V. The D.C.I.T., Circle Nadiad, Nadiad

ITA 4205/AHD/2003

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0457 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 29-10-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 27-11-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: P M MEHTA
• Keywords: Income from undisclosed sources; Bonafide belief; Retraction
• Section: 142(1); 133A; 234B; 143(2); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING:29.10.09 DRAFTED ON:30.10.2009 ITA NO.4205/AHD/2003 ASSESSMENT YEAR : 1998-1999 SHRI GANGASINGH SOHANSINGH RAJPUROHIT PROP. KARAMVIR STATIOINER, OPP. CITY CHAMBER, KAPADVANJ ROAD, NADIAD. VS. DCIT CIRCLE, INCOME TAX OFFICE, NADIAD. PAN/GIR NO. : (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI P,M.MEHTA A.R. RESPONDENT BY: SHRI C.K.MISHRA SR. D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD.CIT(APPEALS)-V, BARODA, DATED 30.09.2003. 2. GROUND NO.1 TO 4 OF THE APPEAL READS AS UNDER:- 1. IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANC ES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS ERRED IN U PHOLDING PART OF THE G.P. ADDITION OF RS.15,000/- FROM OUT OF THE TOTAL ADDITION OF RS.37,553 ON AD-HOC BASIS ON PRESUMPTIONS, ASSUMPTI ONS ETC. WHEN HE OUGHT TO HAVE DELETED THE ENTIRE ADDITION. 2. IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS ERRED IN U PHOLDING THE ADDITION OF RS.2,23,814 BEING THE OPENING BALANCE A S ON 1.4.1997 BEING THE CAPITAL TRANSFERRED FROM THE KARAMVIR PEN INDUSTRIES, PROPRIETARY CONCERN OF THE ASSESSEE TO THE ASSESSEE'S BOOKS OF ACCOUNT WHEN HE OUGHT TO HAVE DELETED THE SAID ADDITION AS NO SUCH ADDITION WAS CALLED FOR ON THE FACTS OF THE CASE. ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 2 - 3. IN LAW AND IN THE FACTS AS WELL AS CIRCUMS TANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.1,55,000 BEING THE CASH TRANSFERRED FROM KARAMAV IR PEN INDUSTRIES TO THE ASSESSEE'S BOOKS OF ACCOUNT. 4. IN LAW AND IN THE FACTS AS WELL AS CIRCUMST ANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.47,000 BEING THE CREDIT FOR AGRICULTURE INCOME O F THE HUF WHEN IT OUGHT TO HAVE BEEN DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER INFERRED THAT THE CAPITAL TRANSFERRED BY THE APPELL ANT FROM M/S KARMAVIR PEN INDUSTRIES, HIS PROPRIETARY CONCERN TO M/S KARMAVIR STATIONERS, ANOTHER PROPRIETARY CONCERN, REMAINED UNEXPLAINED AND THERE FORE MADE AN ADDITION OF RS.2,23,814/-. FURTHER, THE CASH STATED TO BE TRANS FERRED FROM M/S KARMAVIR PEN INDUSTRIES OF RS.1,55,000/- HAS ALSO BEEN ADDED BY THE LEARNED ASSESSING OFFICER CONSIDERING THAT SUCH CASH BALANCE WAS GENE RATED TO COVER UP THE INVESTMENTS. THE ADDITION MADE OF RS.47,000/- BEING INCOME OF HUF CREDITED INTO CAPITAL ACCOUNT OF APPELLANT, IS BASED ON THE FINDING THAT THOUGH AGRICULTURAL LAND IS HELD IN CO-OWNERSHIP AT VILLAG E NIMBADA DIST-PALI (RAJ), THE APPELLANT MIGHT NOT BE GETTING HIS SHARE SINCE HE IS NOT STAYING IN NIMBADA SINCE 1968 AND HAS SETTLED AT NADIAD OUT OF HIS HOM E TOWN FOR THE LAST SEVERAL YEARS. BASED ON THESE OBSERVATIONS, THE LEARNED ASS ESSING OFFICER MADE ADDITIONS OF RS.2,23,814/-, RS.1,55,000/- AND RS.47 ,000/- AGGREGATING TO RS.4,25,814/- TREATING THE SAME AS APPELLANTS INCO ME FROM UNDISCLOSED SOURCES. 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HELD AS UNDER :- 5.15 I HAVE CONSIDERED THE SUBMISSIONS MADE AS WEL L AS ARGUMENTS PUT FORTH BY THE APPELLANT. THE REPORT OF THE LEARN ED ASSESSING OFFICER AND ARGUMENTS ARE ALSO CONSIDERED. THE ISSUE INVOLV ED IS DECIDED IN THE FOLLOWING PARAGRAPHS. (I) THE LEARNED ASSESSING OFFICER INFERRED THAT THE CAPITAL TRANSFERRED FROM M/S KARMAVIR PEN INDUSTRIES, A ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 3 - PROPRIETARY CONCERN OF THE APPELLANT TO M/S KARMAVI R STATIONERS, ANOTHER PROPRIETARY CONCERN OF THE APPE LLANT, REMAINED UNEXPLAINED AND THEREFORE, MADE AN ADDITIO N OF RS.2,23,814/-. THE APPELLANT DURING THE COURSE OF S URVEY HAS STATED THAT BOOKS OF ACCOUNTS HAD NOT BEEN MAIN TAINED. THE APPELLANT SUBSEQUENTLY PREPARED BOOKS OF ACCOUN TS AND SUBMITTED COPIES OF CAPITAL ACCOUNTS BEFORE THE LEA RNED ASSESSING OFFICER. THE RETURNS WERE NOT FILED BY TH E APPELLANT STATING THAT THERE WAS NO TAXABLE INCOME IN PRECEDING YEARS. THE APPELLANT IN ALL THESE YEARS H AVE ALSO CREDITED AMOUNT TO CAPITAL ACCOUNTS SHOWING THE SAM E AS AGRICULTURAL INCOME. THE APPELLANT AFTER SURVEY MAN AGED IT SO THAT HE TRIED TO EXPLAIN THE CREDIT ENTRIES ON T HE GROUND THAT CAPITAL HAS BEEN BROUGHT FROM OLD CONCERN. SUC H A PLEA CANNOT BE ACCEPTED SINCE THE APPELLANT HAS NEITHER MAINTAINED PROPER BOOKS NOR ANY QUANTITATIVE RECORD S ARE KEPT. THE LEARNED ASSESSING OFFICER WHILE MAKING IMPUGNED ADDITION HAS GIVEN HIS CLEAR FINDINGS WHIC H ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE APPELLANT HAD SHOWN STOCK AND MACHINERY FOR WHICH NO EVIDENCE IS PRODUCED. THUS FACTS INDICATE THAT THE APPELLANTS CONTENTION OF HAVING CAPITAL TRANSFERRED FROM OLD C ONCERN IS NOT CORRECT. CONSIDERING THE CIRCUMSTANCES OF THE C ASE AND IN THE ABSENCE OF PROPER RECORDS, THE LEARNED ASSES SING OFFICER WAS JUSTIFIED IN MAKING ADDITION AND SAME S TANDS SUSTAINED. (II) REGARDING ADDITION MADE BEING CASH TRANSFERRED OF RS.1,55,000/- FROM KARAMVIR PEN IND. TO PARAMVIR STATIONERS, THE APPELLANTS CONTENTION IS NOT FOUND TO BE PROPER. ON THE ONE SIDE, THE APPELLANT HAD SHOWN CA SH BALANCE OF RS.1,55,000/- AND ON THE OTHER SIDE LOAN IS OBTAINED ON WHICH INTEREST IS ALSO PAID. THIS ITSEL F INDICATES THAT THE APPELLANTS CONDITION OF HAVING TRANSFERRE D CASH FROM OLD CONCERN IS NOT CORRECT. NO EVIDENCE HAS BE EN BROUGHT ON RECORD AS TO HOW THE SAID BALANCE WAS AV AILABLE WHEN THERE WAS A SITUATION OF LOAN. THE LEARNED ASS ESSING OFFICER HAS CORRECTLY TREATED THE SAME AS UNEXPLAIN ED AND I DO NOT SEE ANY REASON TO INTERFERE WITH THE ACTION OF THE LEARNED ASSESSING OFFICER. (III) THE FURTHER AMOUNT OF RS.47,000/- IS STATED TO BE AGRICULTURAL INCOME OF HUF FOR WHICH PROOF OF LAND HOLDING IN THE NAME OF FAMILY MEMBERS AND SALES BILLS OF AGRICULTURAL PRODUCTS HAVE NOW BEEN SUBMITTED. THE ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 4 - APPELLANT FAILED TO SUBMIT THE SAME BEFORE THE LEAR NED ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND THIS IS ONLY AFTER THOUGHT. EVERY YEAR THE APPELLAN T HAD CREDITED SOME AMOUNT AS HUF. MERE THE FACT THAT THE APPELLANT HAS SOME LAND AND ACTIVITIES ARE CARRIED OUT BY HIS BROTHER WOULD NOT JUSTIFY HIS CLAIM OF HUF INCO ME. THE AFFIDAVIT FILED IS ONLY A SELF EVIDENCE AND NOTHING HAS BEEN BROUGHT ON RECORD AS TO HOW THE AMOUNT WAS BROUGHT FROM RAJASTHAN TO NADIAD. THE APPELLANT HAS SETTLED IN N ADIAD SINCE LONG AND THEREFORE IT WOULD BE INCORRECT TO A CCEPT THAT THE INCOME OF HUF HAS BEEN CREDITED OUT OF AGRICULT URAL ACTIVITIES. THE LEARNED ASSESSING OFFICERS INFEREN CE IS THEREFORE FOUND TO BE CORRECT AND THE LEARNED ASSES SING OFFICER IS JUSTIFIED IN CONSIDERING THE SAME AS UNE XPLAINED. THE ADDITION MADE ON THIS COUNT ALSO SUSTAINED. THU S, THE ADDITION IN THE YEAR UNDER CONSIDERATION OF RS.4,28 ,814/- IS SUSTAINED. 5.16 THE NEXT ISSUE IS GROSS PROFIT ADDITION OF RS. 37,553/-. THE HAS DIVIDED GROSS PROFIT IN TWO PART I.E. BEFORE SURVEY AND AFTER SURVEY. ACCORDING TO THE LEARNED ASSESSING OFFICER, THE GRO SS PROFIT BEFORE SURVEY IS 18.55% WHILE GROSS PROFIT AFTER SURVEY IS ONLY 5.67% WHICH HAS BEEN FOUND TO BE VERY LOW. THE APPELLANT SUBMIT TED A COMBINED TRADING AND PROFIT AND LOSS ACCOUNT AND ACCORDINGLY WORKED OUT GROSS PROFIT OF 16.45% WHICH IS STATED TO BE REASONABLE A ND PROPER. HOWEVER, SINCE NO QUANTITATIVE RECORDS HAVE BEEN FU RNISHED BY THE APPELLANT AND BOOKS OF ACCOUNTS ARE NOT MAINTAINED AS STATED DURING THE SURVEY, I DIRECT THE LEARNED ASSESSING OFFICER TO MAKE AD HOC ADDITION OF RS.15,000/- TO MEET THE ENDS OF JUSTICE AND TO COVER UP LEAKAGE OF PROFIT. THE BALANCE ADDITION OF RS.22,55 3/- IS DIRECTED TO BE DELETED. 5. THE ASSESSEE IN THE WRITTEN SUBMISSIONS HAS STA TED AS UNDER : THE APPELLANT INDIVIDUAL IS A VERY SMALL BUSINESSM AN TRYING TO EARN HIS LIVELIHOOD BY CARRYING ON PETTY BUSINESS ACTIVITIES . FROM THE YEAR 1968 TO 1982, HE WAS DOING A JOB IN CHENNAI, FAR AWAY FROM HIS HOME TOWN. IN THE YEAR 1982-83 HE SHIFTED TO NADIAD, GUJARAT AND STAR TED A SMALL BUSINESS OF MANUFACTURING OF PENS FROM HIS HOUSE IN THE NAME OF M/S. KARAMVIR PEN INDUSTRIES. FOR THE ASSESSMENT YEAR 1987-88 AND 198 8-89 THE ASSESSEE FILED RETURNS OF INCOME AND ALSO PAID INCOME-TAX. THEREAF TER, SINCE THE INCOME OF THE ASSESSEE FROM THE AFORESAID BUSINESS ACTIVITY W AS BELOW THE TAXABLE LIMIT, NO RETURNS WERE FILED FOR THE ASSESSMENT YEARS 1989 -90 TO 1995-96. IN THE YEAR 1994, THE ASSESSEE STARTED BUSINESS OF PURCHAS E AND SALE OF SCHOOL TEXT BOOKS, NOTE BOOKS AND STATIONARY IN THE NAME OF KAR AMVIR STATIONERS. A SURVEY U/S.133A WAS CONDUCTED ON 18 TH FEBRUARY 1998 AT THE BUSINESS PLACE ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 5 - OF THE ASSESSEE. SINCE THE ASSESSEE WAS VERY SMALL BUSINESSMAN TRYING TO MAKE BOTH ENDS MEET, DURING THE COURSE OF SURVEY, H E WAS UNDER GREAT MENTAL TENSION AND PRESSURE. SINCE THE ASSESSEE'S BUSINESS WAS VERY SMALL, INSTEAD OF MAINTAINING REGULAR BOOKS OF ACCOUNT, HE MAINTAINED A NOTE BOOK WHEREIN PURCHASES AND SALES ALONG WITH THE VALUE OF OPENING STOCK AND CLOSING STOCK WERE RECORDED ON MONTH-WISE BASIS. DURING THE SURVE Y NO SUCH PURCHASES OR SALES WERE FOUND WHICH WERE NOT RECORDED IN THE NOT E BOOKS. NO MATERIAL OR EVIDENCE WAS FOUND TO SUGGEST THAT ANY STOCK WAS SU PPRESSED BY THE ASSESSEE OR ANY STOCK WAS FOUND IN EXCESS QUANTITY. AT THE T IME OF SURVEY THE VALUE OF THE BUSINESS STOCK AS PER NOTE BOOK WAS RS.4,35,108 /-. HOWEVER, SUCH STOCK WAS VALUED BY THE SURVEY OFFICIALS AT RS.5,10,667/- ON THE BASIS OF THE MRP INDICATED ON VARIOUS ITEMS OF STOCK. THUS THERE WAS A DIFFERENCE OF RS.75,559/-. IN A DISTRESSED STATE OF MIND THE ASSE SSEE MISTAKENLY MADE THE FOLLOWING DISCLOSURE: I) EXCESS STOCK ON THE DATE OF SURVEY RS. 75,559/- II) EXPENDITURE ON RENOVATION OF RESIDENTIAL HOUSE RS. 35,000/- III) PAYMENT FOR PURCHASE OF JEEP RS. 50,000/- TOTAL RS. 1.60.559/- IN THE STATEMENT RECORDED THE ASSESSEE ADMITTED THE AFORESAID UNDISCLOSED INCOME. THE SAID INCOME WAS ALSO DISCLOSED BY THE A SSESSEE IN THE RETURN OF INCOME AND AFTER SURVEY RETURNS OF INCOME WERE FILE D FOR 3 ASSESSMENT YEARS AS UNDER: ASSESSMENT YEAR INCOME DECLARED DATE OF FILING 1996-97 RS. 50,660/- 31-03-1998 1997-98 RS. 49,960/- 31-12-1998 1998-99 RS.2,13,828/- 31-12-1998 THE ASSESSING OFFICER ACCEPTED THE RETURNS OF INCOM E FOR THE ASSESSMENT YEARS FOR THE A.Y. 1996-97 AND 1997-98 U/S. 143(1). THE SE RETURNS WERE ACCOMPANIED BY COPIES OF TRADING ACCOUNT, PROFIT AN D LOSS ACCOUNT AND CAPITAL ACCOUNT. THE CAPITAL ACCOUNT ALSO REFLECTED AGRICULTURAL INCOME FROM HUF LAND. THESE TWO RETURNS WERE PROCESSED U/S. 143 (1) ON 29-1-1999. THE RETURN OF INCOME FOR ASSESSMENT YEAR 1998-99 WAS AL SO SIMULTANEOUSLY PROCESSED U/S.143(1) ON 29-1-1999. SUBSEQUENTLY, TH E ASSESSMENT FOR THE ASSESSMENT YEAR 1998-99 ONLY WAS PICKED UP FOR SCRU TINY AND NOTICES U/S. 142(1) AND U/S. 143(2) WERE ISSUED. THE OPENING CAP ITAL BALANCE FOR THE ASSESSMENT YEAR 1998-99 STOOD AT RS.2,23,814/-ONLY WHICH WAS EXPLAINED TO THE A.O. IN THE FOLLOWING MANNER: F .Y. 1994-95-1995-96 53,000 CAPITAL TRANSFERRED FROM KAMAVIR PEN INDUSTRIES 20,000 WITHDRAWAL 34,128 PROFIT 67,128 CLOSING BALANCE 87,128 87.128 ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 6 - F.Y. 1995-96-1996-97 67,128 OPENING BALANCE 4,187 LIP 26,000 INCOME FROM HUF AGRIL. LAND 20,000 WITHDRAWALS 50,637 PROFIT 1,19,578 CLOSING BALANCE 1,43,765 1,43,767 F. Y. 1996-97 - A.Y. 1997-98 1,19,578 OPENING BALANCE 32,393 WITHDRAWALS 41,250 STOCK OF KARAMVIR PEN INDS. 3,581 LIC 49,000 INCOME FROM HUF AGRIL. LAND 2,23,814 CLOSING BALANCE 21,710 PROFIT 28,250 PROFIT OF KARMAVIR PEN INDS. 2,59,788 2,59,788 THE ASSESSING OFFICER WAS FULLY AWARE OF THE POSITI ON OF CAPITAL IN THE ASSESSMENT YEARS 1995-96 AND 1996-97 BUT HE DID NOT ISSUE ANY NOTICES U/S. 143(2) FOR THESE ASSESSMENT YEARS. AS MENTIONED ABO VE, INITIALLY THE ASSESSEE WAS ASSESSED TO INCOME TAX FOR THE ASSESSMENT YEARS 1987-88 AND 1988-89 AND THE RETURNS OF INCOME FOR THESE YEARS WERE ALSO ACCOMPANIED BY COPIES OF ACCOUNTS INCLUDING CAPITAL ACCOUNTS WHEREIN AGRI CULTURAL INCOME FROM HUF WAS CREDITED. THE EARLIER BUSINESS OF KARAMVI P EN INDUSTRIES WAS ALSO REGISTERED WITH SALES-TAX DEPARTMENT ON 24 TH DECEMBER 1986 AND REGISTRATION CERTIFICATE WAS FILED BEFORE THE LOWER AUTHORITIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO BEFORE TH E LEARNED CIT(APPEALS) THE ACCOUNTING POSITION FOR THE INTERVENING PERIOD OF ASSESSMENT YEARS 1989- 90 TO 1995-96 WAS ALSO FIFED FOR THE ASSESSMENT YEA R 1995-96 THE ASSESSEE HAS EARNED NET PROFIT OF RS.34,128/- IN KARAMVIR ST ATIONERS AS PER THE BALANCE SHEET AS ON 31-3-1995, THE ASSESSEE'S CAPIT AL IN KARAMVIR STATIONERS WAS A SMALL SUM OF RS 67.128/-. THERE WAS A LIABILI TY OF RS.1,91.124/- BEING LOAN FROM NATPUR CO-OPERATIVE BANK AGAINST THE CAPI TAL AND THE LIABILITY AS ABOVE, IN THE BALANCE SHEET THERE WERE SUNDRY CREDI TORS AND THE FOLLOWING ASSETS: (A) FURNITURE RS. 18,006/- (B) CLOSING STOCK RS.1,11,308/- (C) CASH IN HAND RS. 99,551/- AS ON 31 S1 MARCH 1993, AS PER THE BALANCE SHEET, THE ASSESSEE HAD CAPITAL OF RS.5,80,911/- THUS DURING THE PERIOD OF 30 YEARS OF JOB AND OTHER BUSINESS ACTIVITIES THE ASSESSEE WAS ABLE TO BUILD UP CAPITA L OF ONLY RS 5,50,911/- WHICH ALSO INCLUDED ANNUAL AGRICULTURAL INCOME FROM HUF LAND AS ON 1-4- 1996, IN KARAMVIR PEN INDUSTRIES THE ASSESSEE WAS H AVING CAPITAL OF RS 2,68,101/-, MAJOR PART OF WHICH WAS IN THE FORM OF STOCK-IN-TRADE WHICH IS PROVED FROM THE FACT THAT THE ASSESSEE TOOK LOAN FR OM UNITED MERCANTILE CO- ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 7 - OPERATIVE BANK LTD. AGAINST PLEDGING OF STOCK OF TH E VALUE OF RS2,66,088/- BANK CERTIFICATE WAS FILED BEFORE THE LOWER AUTHORI TIES THIS CATEGORICALLY ESTABLISHES THE STOCK POSITION IN THE BUSINESS OF K ARAMVIR PEN INDUSTRIES. IN THE BACKDROP OF THE ABOVE MENTIONED BASIC FACTS, SU BMISSIONS ARE MADE HEREUNDER WITH REGARD TO SPECIFIC GROUNDS OF APPEAL , FOR THE KIND CONSIDERATION OF THE HON'BLE MEMBERS. 1. THE FIRST GROUND OF APPEAL PERTAINS TO UPHOLDING BY THE LEARNED CIT (APPEALS) OF AD HOC G.P. ADDITION OF RS 15,000/-. O N THE DATE OF SURVEY I E ON 18 TH FEBRUARY1998, THE A O ESTIMATED THE VALUE OF CLOSI NG STOCK AT RS.5,10,667/- AS AGAINST THE VALUE OF RS4.35 108/- REFLECTED IN THE NOTE BOOK MAINTAINED BY THE ASSESSEE. BY ESTIMATING SUCH VALU E OF STOCK THE A.O. WORKED OUT THE G.P. RATE OF THE PERIOD UP TO THE DA TE OF SURVEY AT 18.55%. THE SAME VALUE WAS ADOPTED FOR THE OPENING STOCK OF THE REMAINING PERIOD AND ON THAT BASIS THE A.O. WORKED OUT THE G.P. RATE AT 5.66%, WHICH ACCORDING TO HIM WAS VERY LOW. THE A.O. APPLIED THE G.P. RATE OF 16.3% FOR THE WHOLE YEAR, ADOPTING THE AVERAGE OF 14% G.P. FO R THE ASSESSMENT YEAR 1997-98 AND 18.55% FOR THE PERIOD UP TO THE DATE OF SURVEY. IT IS RESPECTFULLY SUBMITTED THAT IF THE POSITION FOR THE ENTIRE YEAR IS CONSIDERED, THE ASSESSEE HIMSELF HAS DISCLOSED A G.P. RATE OF 16.45% ON TOTA L SALE OF RS.21,57,833/- WHICH IS MORE THAN THE G.P. RATE CONSIDERED REASONA BLE BY THE A.O. THE ADDITION HAS BEEN MADE BY THE A.O. BY SPLITTING THE TRADING RESULTS INTO TWO PARTS AND BY ARTIFICIALLY INCREASING THE VALUE OF S TOCK AS ON THE DATE OF SURVEY. IT IS SUBMITTED THAT THE CLOSING STOCK HAS TO BE VALUED ON THE BASIS OF THE FUNDAMENTAL PRINCIPLE OF EITHER COST PRICE OR M ARKET PRICE WHICHEVER IS LESS. THE CLOSING STOCK ON THE DATE OF SURVEY WAS V ALUED AT THE INDICATED MRP WHICH WAS SUBSTANTIALLY MORE THAN THE COST PRIC E. EVEN SOME TIMES THE ASSESSEE IS COMPELLED TO SELL THE GOODS AT A PRICE LOWER THAN THE MRP TO COPE WITH COMPETITION IN THIS LINE OF BUSINESS. THE LEARNED CIT(A) HAS DISCUSSED THIS ISSUE AT PARA 5.16 OF HIS ORDER. EVE N THOUGH HE HAS MENTIONED THAT THE G.P. RATE DISCLOSED BY THE ASSESSEE FOR TH E FULL YEAR COMES TO 16.45%, HE HAS SUSTAINED AD HOC ADDITION OF RS. 15, 000/- TO 'MEET THE ENDS OF JUSTICE AND TO COVER UP LEAKAGE OF PROFIT'. IT I S SUBMITTED THAT THE LEARNED CIT(APPEALS) WAS WHOLLY UNJUSTIFIED IN DOING SO WHE N THE DISCLOSED G.P. RATE WAS MUCH BETTER THAN THE G.P. RATE OF 14% IN T HE PRECEDING ASSESSMENT YEAR AND EVEN BETTER THAN G.P. RATE APPLIED BY THE ASSESSING OFFICER FOR THE SECOND PERIOD. 2. GROUND NO.2 PERTAINS TO CONFIRMATION BY TH E LEARNED CIT(APPEALS) OF THE ADDITION OF RS.2,23,8147- BEING THE CAPITAL TRA NSFERRED FROM KARAMVIR PEN INDUSTRIES AS ON 1-4-1997. IT IS RESPECTFULLY S UBMITTED THAT THE ADDITION HAS BEEN MADE AND SUSTAINED BY THE LEARNED CIT(APPE ALS) ON IRRELEVANT CONSIDERATIONS. THE POSITRON OF CAPITAL IN THE CASE KARAMVIR PEN INDUSTRIES WAS FULLY EXPLAINED BEFORE THE LOWER AUTHORITIES. R ETURNS OF INCOME WERE FILED WAY BACK IN RESPECT OF THE ASSESSMENT YEARS 1 987-88 AND 1988-89 AND THE POSITION DURING ALL THE INTERVENING PERIODS WAS ALSO FULLY EXPLAINED. THE AFORESAID CAPITAL WAS TRANSFERRED FROM KARAMVIR PEN INDUSTRIES TO KARAMVIR STATIONERS IN THE EARLIER ASSESSMENT YEARS AND NOT DURING THE ASSESSMENT YEAR UNDER APPEAL ONLY THE CLOSING BALANCE OF RS 2, 23,814/- WAS BROUGHT ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 8 - FORWARD AS ON 1 ST APRIL 1997 THE RETURNS FOR THE ASSESSMENT YEAR 199 6-97 AND 1997-98 WERE ACCEPTED BY THE A O. AND IF HE WAS NOT SATISFIED HE WAS FREE TO ISSUE NOTICES U/S. 143(2) FOR THESE ASSESSM ENT YEARS. THE CAPITAL WAS BUILT UP OVER A PERIOD OF SEVERAL YEARS MERELY BECA USE THE REGULAR BOOKS OF ACCOUNT WERE NOT MAINTAINED, THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN REJECTING THE CLAIM BECAUSE THE CLAIM WAS SUPPORTED BY OTHER DOCUMENTARY AND CIRCUMSTANTIAL EVIDENCES LIKE PLEDGING OF STOCK TO THE BANK FOR OBTAINING LOAN AS MENTIONED ABOVE IT IS RESPECTFULLY SUBMITTE D THAT THERE IS NO JUSTIFICATION, WHATSOEVER, FOR THIS ADDITION. 3. GROUND NO.3 PERTAINS TO CONFIRMATION BY THE LEAR NED CIT(APPEALS) OF ADDITION OF RS.1,55,000/-, BEING CASH TRANSFERRE D ON VARIOUS DATES FROM KARAMVIR PEN INDUSTRIES. IT IS RESPECTFULLY SUBMITT ED THAT THESE ARE ONLY TRANSFER ENTRIES AND SINCE THE BUSINESS OF KARAMVIR PEN INDUSTRIES WAS ALMOST IN THE STAGE OF DISCONTINUATION, THE ASSETS HAD TO BE TRANSFERRED TO THE NEW BUSINESS THE ONLY BASIS FOR ADDITION IS A PRESU MPTION ON THE PART OF THE A.O. AND LEARNED CIT(APPEALS) THAT SINCE THE ASSESS EE OBTAINED SUBSTANTIAL LOAN FROM THE BANK, AVAILABILITY OF CASH IN KARAMVI R PEN INDUSTRIES CAN NOT BE BELIEVED IT IS RESPECTFULLY SUBMITTED THAT THE L OAN WAS TAKEN FROM THE BANK FOR BUSINESS PURPOSES FOR THE SIMPLE REASON THAT TH E ASSET SIDE OF THE BALANCE SHEET OF KARAMVIR PEN INDUSTRIES MAINLY COMPRISED O F BUSINESS STOCK WHICH IS PROVED FROM THE FACT THE ASSESSEE OBTAINED LOAN BY PLEDGING BUSINESS STOCK OF AROUND RS.2,66,000/-- THIS STOCK WAS SOLD AWAY B Y KARAMVIR PEN INDUSTRIES AT DIFFERENT TIMES DURING THE YEAR AND T HE CASH RECEIVED WAS TRANSFERRED TO KARAMVIR STATIONERS IT IS SUBMITTED THAT THERE IS NO JUSTIFICATION FOR THE ADDITION SUSTAINED. 4. GROUND NO.4 PERTAINS TO CONFIRMATION BY THE CIT( APPEALS) OF ADDITION OF RS.47,000/- ON ACCOUNT OF AGRICULTURAL INCOME OF THE ASSESSEE HUF. THE A.O. HAS ACCEPTED THAT THE ASSESSEE HAS A SHARE IN THE HUF'S AGRICULTURAL LAND. AGRICULTURAL INCOME FROM THIS LA ND IS BEING RECEIVED BY THE ASSESSEE FROM YEAR TO YEAR DURING THE PAST SEVERAL YEARS. THE AGRICULTURAL LAND ADMEASURING 113 BIGHAS WAS AT VILLAGE NIMADA. DIST PALI, RAJASTHAN AFTER THE DEATH OF ASSESSEE'S FATHER IN THE YEAR 19 92, THE NAMES OF THE ASSESSEE AND HIS BROTHER WERE REPLACED IN THE REVEN UE RECORDS THE ASSESSEE AND HIS BROTHER JOINTLY HELD 1/3 RD SHARE IN THE AGRICULTURAL LAND WHICH WAS GIVEN TO SHRI BALVANT SINGH FOR CULTIVATION. THE SA LE BILLS PRODUCED BEFORE THE FEWER AUTHORITIES WERE IN THE NAME OF THE CULTI VATOR SHRI BALVANT SINGH AND THE ASSESSEE WAS REGULARLY GETTING HIS SHARE IT MAY KINDLY BE NOTED THAT THE RECEIPT OF AGRICULTURAL INCOME BY THE ASSESSEE HAS BEEN ACCEPTED BY THE HON'BLE ITAT. SMC BENCH, AHMEDABAD FOR THE ASSESSME NT YEARS 1999-2000 AND 2001-02 VIDE THE ORDER DATED 12 LH SEPTEMBER 2007 IN ITA NOS. 1724 AND 1725/AHD/2006. THUS THE ISSUE IS COVERED BY THE HON 'BLE TRIBUNAL'S ORDER THE ADDITION HAS BEEN MADE MERELY ON ASSUMPTIONS AN D THE SAME DESERVES TO BE DELETED. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 9 - 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, A SURVEY WAS CONDUCTED UNDER SECTION 133A ON 18 TH FEBRUARY 1998. DURING THE COURSE OF SURVEY, THE STOCK FOUND WAS INVENTORISED AT RS.5,10,667/-. FROM THE TRADING ACCOUNT FURNISHED BY THE ASSESSEE, THE OVER ALL GROSS PROFIT OF 16.45% WAS DECLARED BY THE ASSESSEE. THE LEARNED ASSESSING OFFICER IN MAKING SEPARATE TRADING ACCOUNT FOR THE PRE SURVEY PERIOD AND POST SURVEY PERIOD BY ADOPTING STOCK ON THE DATE OF THE SURVEY AT RS.5,10 ,667/- OBSERVED THAT GROSS PROFIT FOR THE PRE SURVEY PERIOD COMES TO 18.55% AN D AGAINST THIS GROSS PROFIT FOR THE POST SURVEY PERIOD COMES TO 5.66% ONLY. THE LEARNED ASSESSING OFFICER THEREFORE, CONSIDERED GROSS PROFIT FOR THE POST SURVEY PERIOD @ 16.30% ON THE BASIS OF THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER AND THEREBY MADE ADDITION OF RS.37,553/- TO THE GROSS P ROFIT OF THE ASSESSEE BEING DIFFERENCE BETWEEN 5.66% AND 16.30% ON THE SALES DU RING THE POST SURVEY PERIOD. THE LEARNED COMMISSIONER OF INCOME TAX(APPE ALS) REDUCED THE ABOVE ADDITION TO RS.15,000/-. THE ASSESSEE IN THE GROUNDS OF APPEAL HAS STATED THAT THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS) HAS RETAINED THE GROSS PROFIT ADDITION OF RS.22,553/- WHICH IS N OT CORRECT. FROM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IT IS OBSERVED THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS RES TRICTED THE ADDITION TO RS.15,000/- AND DELETED THE ADDITION OF RS.22,553/- . THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT WORKI NG OF GROSS PROFIT BY THE LEARNED ASSESSING OFFICER WAS NOT CORRECT AS THE VA LUE OF STOCK ON THE DATE OF SURVEY WAS NOT RS.5,10,667/- BUT WAS RS.4,35,108/-. WE FIND THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE LEARNED AUTHORISED REP RESENTATIVE OF THE ASSESSEE TO SHOW THAT THE VALUE OF STOCK DETERMINED AT RS.5,10,667/- WAS UNDER ANY MISTAKE. IT IS OBSERVED THAT LEARNED COM MISSIONER OF INCOME TAX(APPEALS) WHILE DECIDING THE GROUND OF APPEAL OF THE ASSESSEE RAISED IN RESPECT OF INCOME OF RS.75,559/- ON ACCOUNT OF EXCE SS STOCK HAS OBSERVED THAT ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 10 - THE INCOME IN RESPECT THEREOF WAS DISCLOSED BY THE ASSESSEE NOT ONLY AT THE TIME OF SURVEY BUT ALSO IN THE RETURN OF INCOME FIL ED BY THE ASSESSEE. WE FIND THAT LEARNED AUTHORISED REPRESENTATIVE OF THE ASSES SEE COULD NOT CONTROVERT THE ABOVE FINDING OF THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS). IN THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND THAT LEA RNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS BROUGHT NO MATER IAL BEFORE US TO SHOW THAT GROSS PROFIT DISCLOSED FOR THE POST SURVEY PERIOD W AS NOT LESSER THAN GROSS PROFIT DISCLOSED FOR THE PERIOD BEFORE THE SURVEY. IN THE INSTANT CASE, IT IS AN ADMITTED POSITION THAT DAY TO DAY REGULAR BOOKS OF ACCOUNT WAS NOT MAINTAINED BY THE ASSESSEE. IN THE ABOVE FACTS AND CIRCUMSTANC ES, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) IN SUSTAINING THE TRADING ADDITION OF RS.15,000/-. THUS, THIS GROUND OF APPEAL OF ASSESSEE IS DISMISSED. 8. FURTHER, IN THE INSTANT CASE, THE ASSESSEE HAS SHOWN OPENING CAPITAL INVESTMENT OF RS.2,23,814/- IN THE PROPRIETARY CONC ERN STYLE KARAMVIR STATIONERS. THE LEARNED ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF OPENING CAPITAL OF RS.2,23,81 4/- AND THEREFORE, MADE ADDITION WHICH WAS CONFIRMED BY THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS). BEFORE US THE LEARNED AUTHORISED REPR ESENTATIVE OF THE ASSESSEE SUBMITTED THAT ASSESSEE HAS STARTED PROPRI ETORSHIP BUSINESS UNDER THE NAME AND STYLE OF KARAMVIR STATIONERS IN 1994. IN S UPPORT OF THE ABOVE CONTENTION, THE ASSESSEE SUBMITTED THAT RETURN FOR ASSESSMENT YEAR 1995-96, 1996-97 AND 1997-98 WAS FILED ON 31.03.1998 IN WHIC H INCOME FOR THE AFORESAID PROPRIETARY CONCERN AND INVESTMENT IN THE SAID CONCERN WAS DULY DISCLOSED BY THE ASSESSEE. THE LEARNED AUTHORISED R EPRESENTATIVE OF THE ASSESSEE ALSO CONTENDED THAT THE AFORESAID RETURNS WERE DULY ACCEPTED BY THE DEPARTMENT AND NO PROCEEDINGS IN RESPECT OF THE AFO RESAID RETURNS WERE INITIATED BY THE DEPARTMENT. THE OPENING CAPITAL OF THE YEAR UNDER CONSIDERATION IS EXACTLY THE SAME WHICH WAS SHOWN A S CLOSING CAPITAL ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 11 - INVESTMENT IN THE RETURN FILED FOR THE ASSESSMENT Y EAR 1997-98. WE FIND THAT THE ABOVE SUBMISSIONS AND CONTENTION OF THE ASSESSE E WAS NOT DISPUTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. FURTHER, NO MA TERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE BUSINESS OF KARAMVIR STATIONERS WAS STARTED BY THE ASSESSEE DURING THE YEAR UNDER CONSI DERATION AND THERE WAS NO SUCH BUSINESS DONE BY THE ASSESSEE IN THE EARLIER Y EAR OR NO INCOME WAS DERIVED BY THE ASSESSEE IN THE EARLIER YEAR FROM SU CH BUSINESS OR INVESTMENT OF EVEN A SINGLE RUPEE WAS NOT MADE BY THE ASSESSEE IN SUCH BUSINESS IN THE EARLIER YEAR. IN ABSENCE OF ANY SUCH MATERIAL BROUG HT ON RECORD BY THE REVENUE, IN OUR CONSIDERED OPINION, THE REVENUE WAS NOT JUSTIFIED IN DRAWING AN INFERENCE TO THE EFFECT THAT NO INVESTMENT WAS M ADE BY THE ASSESSEE IN THE PROPRIETARY BUSINESS UNDER CONSIDERATION IN EARLI ER YEAR. FURTHER, WE FIND THAT THE REVENUE COULD NOT BRING ON RECORD ANY MATERIAL TO SHOW THAT THE ASSESSEE HAS NOT DISCLOSED CAPITAL INVESTMENT OF RS.2,23,814 /- IN THE RETURN FILED FOR THE ASSESSMENT YEAR 1997-98 ACCEPTED BY THE DEPARTMENT. THE RETURN FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1997-98 WAS A VALI D RETURN AND WAS NOT MERELY A PIECE OF PAPER. IN OUR CONSIDERED OPINION, THE REVENUE AFTER ACCEPTING THE RETURN OF THE ASSESSMENT YEAR 1997-98 , WHEREIN THE ASSESSEE HAS DULY DISCLOSED HIS CLOSING CAPITAL INVESTMENT O F RS.2,23,814/- IN THE BUSINESS CANNOT DISPUTE SUCH BALANCE IN THE ASSESSM ENT YEAR 1998-99 WHEN THE SAME WAS BROUGHT FORWARD BALANCE ONLY. WE THERE FORE, FIND THAT THE ADDITION OF RS.2,23,814/- IN THE INSTANT CASE, WAS NOT JUSTIFIED AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAVE ERRED IN C ONFIRMING THE SAME MERELY ON THE BASIS OF SUSPICION . WE THEREFORE DEL ETE THE ADDITION OF RS.2,23,814/-. THUS, THIS GROUND OF APPEAL OF THE A SSESSEE IS ALLOWED. 8. FURTHER, THE ASSESSEE IN THE RETURN OF INCOME HA S CLAIMED TO HAVE RECEIVED RS.1,55,000/- IN CASH ON SEVERAL DATES DUR ING THE YEAR UNDER CONSIDERATION IN THE PROPRIETARY CONCERNS STYLE KAR AMVIR STATIONERS FROM ANOTHER PROPRIETARY CONCERN OF THE ASSESSEE NAMELY KARAMVIR PEN INDUSTRIES. ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 12 - THE LEARNED ASSESSING OFFICER OBSERVED THAT NO EVID ENCE OF THIS CREDIT MADE BY THE ASSESSEE IN HIS CAPITAL ACCOUNT WAS SUBMITTE D. THE LEARNED ASSESSING OFFICER ALSO OBSERVED THAT CLOSING CAPITAL INVESTME NT BY THE ASSESSEE IN KARAMVIR PEN INDUSTRIES WAS RS.71,851/- ONLY AS DIS CLOSED BY THE ASSESSEE IN THE RETURN FILED BY THE ASSESSMENT YEAR 1998-99. T HE LEARNED ASSESSING OFFICER THEREFORE, ADDED RS.1,55,000/- TO THE INCOM E OF THE ASSESSEE WHICH WAS ALSO CONFIRMED BY THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS). BEFORE US, THE ASSESSEE CONTENDED THAT RS.1,55,000/ - WAS OUT OF THE SALE PROCEEDS OF STOCK OF KARAMVIR PEN INDUSTRIES AND AS THE ASSESSEE WAS CLOSING THE BUSINESS OF KARAMVIR PEN INDUSTRIES THEREFORE, THIS CAPITAL WAS TRANSFERRED FROM KARAMVIR PEN INDUSTRIES TO KARAMVIR STATIONERS . THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE ALSO CONT ENDED THAT STOCK OF RS.2,66,000/- OF KARAMVIR PEN INDUSTRIES WAS PLEDGE D WITH THE BANK FOR OBTAINING BANK LOAN. WE FIND THAT THE LEARNED AUTHO RISED REPRESENTATIVE OF THE ASSESSEE COULD POINT OUT THE DATE ON WHICH STOC K OF RS.2,66,000/- OF KARAMVIR PEN INDUSTRIES WAS PLEDGED WITH THE BANK. WE FIND THAT THE LEARNED ASSESSING OFFICER HAS STATED THAT CLOSING CAPITAL I NVESTMENT OF THE ASSESSEE IN KARAMVIR PEN INDUSTRIES WAS RS.71,851/- AS PER THE CAPITAL ACCOUNT FILED BY THE ASSESSEE BUT HAS NOT POINTED OUT WHAT WAS THE O PENING CAPITAL INVESTMENT OF THE ASSESSEE IN THE SAID PREPARATORY CONCERNS DU RING THE ASSESSMENT YEAR 1998-99. THE ASSESSEE HAS ALSO NOT FILED ANY MATER IAL BEFORE US TO SHOW WHAT WAS HIS OPENING CAPITAL INVESTMENT IN THE SAID CONC ERNS FROM WHICH HE HAS CLAIMED TO HAVE WITHDRAWN CAPITAL OF RS.1,55,000/-. THE ASSESSEE HAS NOT FILED BEFORE US THE BALANCE SHEET OF SAID PROPRIETARY CON CERN AS ON 31.03.1997 AND AS ON 31.03.1998. FURTHER, NO MATERIAL WAS BROUGHT BEFORE US TO SHOW THAT WHAT WAS THE VALUE OF STOCK PLEDGED WITH THE BANK B Y THE ASSESSEE AS ON 1.04.1997 AND AS ON 31.03.1998 AND THEREBY TO SHOW THAT THE STOCK WAS SUBSTANTIALLY REDUCED WHICH WOULD HAVE ENABLED THE ASSESSEE TO WITHDRAW CAPITAL OF RS.1,55,000/- FROM THE SAID CONCERN. THO UGH IN OUR CONSIDERED OPINION, THE ONUS WAS ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF CREDIT ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 13 - OF RS.1,55,000/- IN THE CAPITAL ACCOUNT OF KARAMVIR STATIONERS IN VIEW OF THE PROVISIONS OF SECTION 68 OF THE ACT WHICH HE HAS NO T FULLY DISCHARGED, BUT AT THE SAME TIME, IT IS OBSERVED THAT CAPITAL ACCOUNT OF KARAMVIR PEN INDUSTRIES WAS FILED BEFORE THE LEARNED ASSESSING OFFICER FOR ASSESSMENT YEAR 1998-99 FROM WHICH THE LEARNED ASSESSING OFFICER ONLY OBSER VED THE CLOSING BALANCE BUT HAS NOT CONSIDERED THE OPENING CAPITAL BALANCE AND INCOME OF THE YEAR UNDER CONSIDERATION. THUS, IN OUR CONSIDERED OPINI ON, THE LOWER AUTHORITIES HAVE ALSO FAILED TO CONSIDER ALL THE MATERIALS WHIC H WERE AVAILABLE BEFORE THEM. IN THE CIRCUMSTANCES, IN OUR CONSIDERED OPINI ON, IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THIS ISSUE BACK TO T HE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER PROPER VERIFIC ATION OF ALL THE MATERIAL IN LIGHT OF THE DISCUSSION MADE HEREINABOVE. WE ORDER ACCORDINGLY. THE LEARNED ASSESSING OFFICER BEFORE ADJUDICATING THE I SSUE AFRESH SHALL ALLOW REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. FURTHER, IT IS OBSERVED THAT THE ASSESSEE HAS AG RICULTURE INCOME OF RS.47,000/- FOR THE YEAR UNDER CONSIDERATION. THE L EARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS CO-OWNER OF AGRICULTU RAL LAND ADMEASURING 113 BIGHAS AT VILLAGE NIMADA, DIST.PALI, RAJASTHAN IN W HICH HIS SHARE IS ONLY 1/6 TH . HE FURTHER OBSERVED THAT IN ABSENCE OF EVIDENCES OF SALE OF AGRICULTURAL PRODUCE ETC. THE LEARNED ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE AND ADDED RS.47,000/- TO THE INCOME OF THE ASSESSEE AS INCOME FROM UNDISCLOSED SOURCES. THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) ALSO CONFIRMED THE ABOVE ACTION OF THE LEARNED ASSE SSING OFFICER. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS EE CONTENDED THAT SIMILAR AGRICULTURE INCOME WAS ACCEPTED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 1999-2000 AND 2001-02. HOWEVER , NO COPY OF SUCH ORDER OF THE TRIBUNAL WAS FILED BEFORE US. FURTHER, IT IS OBSERVED FROM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) THAT THE ASSESSEE FILED EVIDENCE OF SALE OF AGRICULTURE PRODUCE FOR THE FIRST TIME BEFORE HIM ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 14 - WHICH WAS REJECTED BY HIM ALLEGING AS AFTER THOUGHT . IN THE ABOVE FACTS AND CIRCUMSTANCES, IN OUR CONSIDERED OPINION, IT SHALL BE FAIR AND IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE BACK TO THE FILE OF TH E LEARNED ASSESSING OFFICER SO THAT THE FRESH EVIDENCES FILED SUBSEQUENTLY BY THE ASSESSEE COULD BE VERIFIED BY THE LEARNED ASSESSING OFFICER. WE THEREFORE, DIR ECT THE LEARNED ASSESSING OFFICER TO ADJUDICATE THE ISSUE AFRESH AFTER VERIFY ING THE EVIDENCE WHICH THE ASSESSEE MAY FILE IN SUPPORT OF SALE PROCEEDS OF AG RICULTURE PRODUCE AND AFTER EXAMINING ALL THE MATERIALS INCLUDING THE ORDERS OF THE TRIBUNAL PASSED IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2 00 AND 2000-01. NEEDLESS TO MENTION THAT THE LEARNED ASSESSING OFFICER SHALL ALLOW PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE ADJUDICATING THE ISSUE AFRESH. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES. 10. GROUND NO.5 OF THE APPEAL READS AS UNDER : 5. IN LAW AND IN THE FACTS AS WELL AS CIRCU MSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS ERRED IN U PHOLDING THE ADDITION OF RS.75,559 FOR THE ALLEGED EXCESS STOCK FOUND DURING THE COURSE OF SURVEY, ALLEGED RENOVATION EXPENSES OF RS .35,000 FOR THE RESIDENTIAL HOUSE AND THE ALLEGED PURCHASE PRICE OF RS.50,000 FOR JEEP WHEN HE OUGHT TO HAVE DELETED THE SAME. IN NOT DOIN G SO HE HAS FAILED TO APPRECIATE THAT THE DELAY IN RETRACTION OF THE S TATEMENT DURING SURVEY CANNOT BE THE GROUND FOR UPHOLDING THE ADDIT ION. 11. THE BRIEF FACTS OF THE CASE ARE THAT THE LD. LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE LAST ISSUE I S REGARDING RETRACTION OF DISCLOSURE MADE DURING THE COURSE OF SURVEY. THE AP PELLANT HAS MADE DISCLOSURE DURING SURVEY AS UNDER :- - EXCESS STOCK ON THE DATE OF SURVEY RS.75,000 - RENOVATION OF RESIDENTIAL HOUSE RS.35,000 - ADVANCE FOR PURCHASE OF JEEP RS.50,000 THE AUTHORISED REPRESENTATIVE TRIED TO RETRACT THE SAME STATING THAT NO RENOVATION EXPENSES HADE BEEN INCURRED BY THE APPEL LANT AND PAYMENT TOWARDS JEEP WAS THROUGH BANK. IT IS ALSO STATED TH AT THERE WAS NO DIFFERENCE IN ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 15 - STOCK AS ALLEGED BY THE LEARNED ASSESSING OFFICER. THE PLEA TAKEN BY THE APPELLANT IS NOT ACCEPTABLE SINCE THE APPELLANT HAS NEVER PUT FORTH SUCH A CONTENTION EITHER BEFORE THE LEARNED ASSESSING OFFI CER DURING THE ASSESSMENT PROCEEDINGS OR IMMEDIATELY AFTER SURVEY. THE RETRAC TION MADE NOW DURING APPELLATE PROCEEDINGS CANNOT BE ENTERTAINED WHICH A PPEARS TO BE AFTER THOUGHT AS STATED BY THE LEARNED ASSESSING OFFICER IN HIS R EPORT. EVEN THE APPELLANT HAS FAILED TO BRING ON RECORD THE QUANTITATIVE DETA ILS MAINTAINED BY THE APPELLANT AND EVEN NO EFFORTS ARE MADE TO RECONCILE THE DIFFERENCE OBSERVED DURING THE SURVEY IN STOCK. FURTHER, NO EFFORTS HAV E BEEN MADE TO SUBSTANTIATE THAT TRANSACTION OF JEEP WAS REFLECTED PROPERLY. TH E RETRACTION IS ALSO NOT FOUND TO BE UNDER PRESSURE AS THE APPELLANT FAILED TO BRI NG ON RECORD SUCH FACTS IMMEDIATELY AFTER SURVEY BEFORE DEPARTMENTAL AUTHOR ITIES. THE APPELLANT HIMSELF HAS MADE DISCLOSURE ON OATH AND ALSO AGREED TO PAY TAX AND IN FACT THE SAME HAS ALSO BEEN INCLUDED IN THE INCOME WHILE FIL ING RETURN OF INCOME AND THEREFORE, I DO NOT SEE ANY REASON TO ACCEPT SUCH A RETRACTION AFTER A LAPSE OF ALMOST FIVE AND HALF YEARS FROM THE DATE OF SURVEY. THE RETRACTION MADE NOW IS REJECTED. 12. THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS WHER EIN IT HAS BEEN STATED AS UNDER :- THE NEXT GROUND PERTAINS TO REJECTION BY THE LEARN ED CIT(APPEALS) OF RETRACTION BY THE ASSESSEE OF THE DISCLOSURE OF RS.1 60.559/- MADE BY THE ASSESSEE DURING THE COURSE OF SURVEY. AS MENTIONED ABOVE, THE DISCLOSURE COMPRISES OF 3 PARTS. RS.75,559/- PERTAINS TO VALUA TION OF STOCK ON THE DATE OF SURVEY. NO EXCESS STOCK IN QUANTITY WAS FOUND AND T HE STOCK WAS WRONGLY VALUED BY THE SURVEY PARTY AT MRP. THE FACTS HAVE A LREADY BEEN STATED ABOVE. THERE IS NO JUSTIFICATION FOR SUCH ESTIMATIO N OF VALUE OF STOCK-IN-TRADE ON THE DATE OF SURVEY. THERE IS NO MATERIAL OR EVID ENCE TO SUGGEST THAT THE ASSESSEE ACQUIRED ANY UNACCOUNTED STOCK FROM OUT OF UNDISCLOSED INCOME. THE ASSESSEE MISTAKENLY AND UNDER DISTURBED STATE O F MIND MADE THE DISCLOSURE. WHEN THE ASSESSEE BECAME AWARE OF THE C ORRECT FACTUAL POSITION, HE WAS JUSTIFIED IN RETRACTING THE DISCLOSURE WRONG LY MADE BY HIM. THE SECOND PART OF THE DISCLOSURE IS RS.35,000/- ON ACCOUNT OF EXPENDITURE FOR RENOVATION HOUSE DURING THE COURSE OF SURVEY NO PAPER DOCUMENT OR ANY OTHER EVIDENCE WAS FOUND EVEN TO REMOTELY SUGGEST T HAT THE ASSESSEE INCURRED ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 16 - ANY EXPENDITURE ON RENOVATION OF HOUSE NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE A O. TO SHOW THAT ANY SUCH RENOVATION WAS CARRIED OUT. THE THIRD PART OF THE DISCLOSURE IS A SUM OF RS.50, 000/- PAID AGAINST PURCHASE OF JEEP THE ASSESSEE EXPLAINED BEFORE THE LOWER AUTHORITIES SUBSEQUENTLY THAT THE SUM OF RS.50,000/- WAS PAID B Y CHEQUE ON 2 ND JULY 1996 AND COPY OF BANK STATEMENT WAS ALSO FILED. THU S, THE AFORESAID PAYMENT WAS MADE IN PREVIOUS ASSESSMENT YEAR RELEVA NT TO THE ASSESSMENT YEAR 1997-98 AND SINCE THE PAYMENT WAS MADE THROUGH REGULAR BANK CHANNELS THERE IS NO QUESTION OF ANY UNDISCLOSED PA YMENT. THE ASSESSEE WRONGLY MADE THE DISCLOSURE UNDER A MISCONCEPTION. IN VIEW OF THE FACTS EXPLAINED ABOVE, IT IS CLEAR THAT THERE IS NO BASIS FOR ADDING THE DISCLOSED INCOME OF RS.1,60,559/- AND IT IS REQUESTED THAT TH E SAME MAY KINDLY BE DIRECTED TO BE DELETED. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS OBSERVED TH AT THE INCOME IN QUESTION WAS INCLUDED BY THE ASSESSEE IN THE RETURN OF INCOME FILED BY HIM. HE FURTHER OBSERVED THAT RETRACTION WAS MADE BEFORE HIM ONLY AND SUCH RETRACTION WAS BELATED AND NOT PERMISSIBLE. HE THER EFORE, REJECTED THE GROUND OF APPEAL OF THE ASSESSEE. BEFORE US, THE LEARNED A UTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) WAS NOT JUSTIFIED IN UPHOLDING THE ADD ITION OF RS.1,60,559/-. ACCORDING TO THE ASSESSEE, RS.1,60,559/- WAS COMPRI SED OF 3 ELEMENTS NAMELY EXCESS STOCK ON THE DATE OF SURVEY RS.75,000/-, RE NOVATION OF RESIDENTIAL HOUSE RS.35,000/- AND ADVANCE FOR PURCHASE OF JEEP RS.50,000/-. BEFORE US, ASSESSEE COULD NOT CONTROVERT THE FINDINGS OF THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) WHICH WERE FIRSTLY TO THE EFFEC T THAT ASSESSEE HIMSELF INCLUDED THE AFORESAID INCOME IN THE RETURN OF INCO ME AND LEARNED ASSESSING OFFICER HAS NOT MADE ADDITION ON THIS ACCOUNT IN TH E RETURN OF INCOME. SECONDLY, THE ASSESSEE HAS BROUGHT NO MATERIAL TO S HOW THAT INVENTORY OF STOCK OF RS.5,10,667/- PREPARED AT THE TIME OF SURV EY CONTAINED ANY MISTAKES ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 17 - AND NO EFFORT OF RECONCILIATION WAS MADE. WE FURTHE R, FIND THAT NO MATERIAL WAS ALSO BROUGHT BEFORE US TO SHOW THAT STOCK POSSE SSED BY THE ASSESSEE ON THE DATE OF SURVEY WAS NOT RS.5,10,667/-. FURTHER, THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT INCOME OF RS.1,60,559/- WAS NOT I NCLUDED IN THE RETURN OF INCOME AND THE LEARNED ASSESSING OFFICER HAD MADE A NY ADDITION ON ACCOUNT OF THE ABOVE ITEMS IN THE INCOME SHOWN BY THE ASSES SEE IN THE RETURN. FURTHER, THE ASSESSEE HAS ALSO NOT BROUGHT ANY MATERIAL BEFO RE US TO SHOW THAT THE ASSESSEE FILED THE REVISED OR RECTIFIED RETURN OF I NCOME BY WITHDRAWING THE DISCLOSURE MADE IN THE RETURN. FURTHER, NO MATERIA L WAS BROUGHT BEFORE US TO SHOW THAT THE ASSESSEE MADE THE DISCLOSURE UNDER SO ME BONAFIDE BELIEF OF MISTAKE OF EITHER FACT OR LAW. IN THE CIRCUMSTANCES , WE DO NOT FIND ANY ERROR OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WHI CH HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISS ED. 15. THE GROUND NO.6 OF THE APPEAL READS AS UNDER: 6. IN LAW AND IN THE FACTS AS WELL AS CIRCUMS TANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS ERRED IN H OLDING THAT THE LEVY OF INTEREST U/S.234B IS CONSEQUENTIAL WHEN THE ASSE SSEE OBJECTED TO THE VERY LEVY OF SUCH INTEREST WHICH OUGHT TO HAVE BEEN DELETED. 16. IN APPEAL THE LD. LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) OBSERVED THE APPELLANT IN THE NEXT GROUND OF APPEAL HAS OBJECTED TO THE LEVY OF INTEREST U/S 234B OF THE ACT. THE CHARGING OF INTER EST BEING CONSEQUENTIAL, THE LEARNED ASSESSING OFFICERS ACTION IN THIS BEHALF S TANDS CONFIRMED. HOWEVER, THE LEARNED ASSESSING OFFICER IS DIRECTED TO GIVE C ONSEQUENTIAL RELIEF. 17. IN THE WRITTEN SUBMISSION THE ASSESSEE HAS SUBM ITTED AS UNDER : THE LAST GROUND PERTAINS TO LEVY OF INTEREST U/S.2 34B OF THE INCOME- TAX ACT THE LEARNED CIT(APPEALS) HAS DISMISSED THE RELEVANT GROUND MERELY BY OBSERVING THAT CHARGING OF INTEREST IS ON LY CONSEQUENTIAL. IT IS SUBMITTED THAT IN THE ASSESSMENT ORDER THERE ARE NO DIRECTIONS FOR CHARGING OF INTEREST U/S.234B THE A.O IN THE LAST P ARA OF THE ASSESSMENT ORDER HAS MENTIONED ''CHARGE INTEREST U/ S.234' THERE IS ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 18 - NO SUCH SECTION IN THE INCOME-TAX ACT AND THE OLD S ECTION 234 WAS OMITTED WITH EFFECT FROM 1 ST APRIL 1969 CHARGING OF INTEREST IN THE ABSENCE OF ANY DIRECTIONS IS BAD IN LAW AS HELD BY THE HON'BLE PATNA HIGH COURT IN THE CASE OF VIMLA STORES VS CIT 308 I TR 89 SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE ITAT. LUCKNOW BENCH IN THE CASE OF SHADIRAM & SONS 92 ITD 22. 18. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD, WE FIND THAT THE ASSESSEE HAS NOT POINTED OUT ANY MISTAKE IN THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). IN OUR CONSIDE RED OPINION, MERELY MENTIONING OF A WRONG SECTION IN THE ORDER BY THE L EARNED ASSESSING OFFICER WOULD NOT ABSOLVE THE ASSESSEE OF ITS LIABILITY UND ER THE INCOME TAX ACT, 1961. FURTHER, THE DELHI SPECIAL BENCH OF TRIBUNAL IN THE CASE OF MOTOROLA INC. VS. DCIT, 95 ITD 269 (DEL)(SB) HAS HELD THAT C HARGING OF INTEREST IS CONSEQUENTIAL. WE THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE AND THEREFORE, THE SAME IS DISMISSED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED IN THE MANNER INDICATED ABOVE. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13/11/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13/11/2009 PREPARED AND COMPARED BY : PARAS ITA NO.4205 /AHD/2003 M/S. SHRI GANGASINGH SOHANSINGH RAJP UROHIT ASST.YEAR -1998-99 - 19 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-V, BARODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD