Mr. Prem Arora, New Delhi V. ACIT, New Delhi

ITA 4524/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52917 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 21-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A D MEHROTRA
• Keywords: Rejection of books of accounts; Income from undisclosed sources; Search and seizure; Loose papers; Retraction
• Section: 153A; 69; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH F DELHI ] BEFORE SHRI R. P. TOLANI, JM AND SHRI K. D. RANJ AN, AM I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 ( DEL) OF 2010. ASSESSMENT YEARS : 2001-02 TO 2003-04 & 2005-06 T O 2007-08. SHRI PREM ARORA, ASSTT. COMMISSIONER OF INCOME-TAX, C/O. VINOD KUMAR BINDAL & CO., CAS.; SHIV SUSHIL BHAWAN, VS. C E N T R A L C I R C L E 25, D 219, VIVEK VIHAR, PHASE : 1, N E W D E L H I 110 095. N E W D E L H I. PAN / GIR NO. AAH BK 9790 L. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI VINOD KUMAR BINDAL, C. A.; & MS. SWEETY KOTHARI, C. A.; DEPARTMENT BY : SHRI A. D. MEHROTRA [CIT] D.R.; O R D E R. PER K. D. RANJAN, AM : THESE APPEALS BY THE ASSESSEE FOR ASSESSMENT YEARS 2001-02 TO 2003-04 AND 2005-06 TO 2007-08 ARISE OUT OF COMMON ORDER OF THE LD. CIT (APPEALS)I, NEW DELHI. THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF, FOR THE S AKE OF CONVENIENCE, BY THIS CONSOLIDATED ORDER. 2 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. I.T.A. NOS. 4520, 4521, 4522, 4523 & 4524 (DEL) OF 2010 : 2. THE COMMON GROUND OF APPEAL [EXCEPT FOR THE AMOU NTS] RAISED BY THE ASSESSEE IN ASSESSMENT YEARS 2001-02 TO 2003-04 & 2005-06 AND 2 006-07 READS AS FOLLOWS :- THE LD. APPELLATE AUTHORITY ERRED IN LAW AN D ON FACTS IN CONFIRMING THE ADDITION OF RS.30,87,121/- / RS.68,53,758/- / RS.96 ,96,394/- / RS.1,33,38,047/- / RS.1,43,60,961/- BY ESTIMATING NOT ONLY THE PROFIT BUT ALSO THE UNDISCLOSED SALES TO EARN SUCH ALL UNDISCLOSED PROFITS BY ALLEGING UN DISCLOSED TRADING ACTIVITY UNDERTAKEN BY THE APPELLANT MERELY ON SURMISES AND CONJECTURES; WHEREAS THE APPELLANT ARRANGED SUCH SALES AND PURCHASES FOR PAR TIES IN THE KHARI BAOLI MARKET ON WHICH THE COMMISSION EARNED WAS DULY DECL ARED IN THE RETURN OF INCOME FILED UNDER SECTION 153-A BY THE APPELLANT; AND ALSO BY IGNORING THE DETAILED EXPLANATIONS OF THE APPELLANT SUBMITTED IN THIS REGARD. THUS, THE ADDITION MADE ON SURMISES AND CONJECTURES MUST BE DELETED. I.T. APPEAL NO. 4525 (DEL) OF 2010 ASSESSMEN T YEAR 2007-08 : 3. THE GROUND OF APPEAL RAISED BY THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 READS AS FOLLOWS:- THE LD. APPELLATE AUTHORITY ERRED IN LAW AN D ON FACTS IN CONFIRMING THE ADDITION OF RS.1,11,45,350/- ON ACCOUNT OF CASH FOU ND AT RESIDENCE DURING THE COURSE OF SEARCH IN AN ARBITRARY MANNER BY IGNO RING THE TELESCOPING OF ADDITIONAL INCOME OFFERED AS THE SOURCE OF CASH FOU ND. THUS, THE ADDITION SO MADE SHOULD BE DELETED. 4. THE ONLY ISSUE, WHICH IS COMMON IN THE APPEALS FOR ASSESSMENT YEARS 2001-02 TO 2003- 04 & 2005-06 AND 2006-07 RELATES TO CONFIRMING THE ADDITION ON ACCOUNT OF PROFIT ESTIMATED ON UNDISCLOSED PURCHASES ON THE BASIS OF NOTING MADE I N A NOTE PAD. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE DURING THE RELEVANT PER IOD WAS ENGAGED IN COMMISSION AGENCY BUSINESS AND WHOLE-SALE TRADING OF KIRANA AND TRADING IN DRY FRUIT ITEMS AT KHARI BAOLI MARKET, NEW DELHI. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED UNDER SECTION 132 OF THE ACT ON 22/11/2006 AT THE RESIDENCIAL AND BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SEARCH AND SEIZURE 3 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. PROCEEDINGS CASH OF RS.1,11,45,350/- AND LOOSE PAPE RS CONTAINING INCRIMINATING MATERIAL MARKED AS ANNEXURE A-1 TO A-9 OF H-6 WERE FOUND AND SEIZ ED. 5. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTIO N 153A OF THE ACT FOR ASSESSMENT YEARS 2001-02 TO 2006-07. THE ASSESSEE FILED RETURNS OF I NCOME ADMITTING UNDISCLOSED INCOME BASED ON THE SEIZED MATERIAL FOUND DURING THE COURSE OF SEAR CH DETAILED AS UNDER :- ASSESSMENT YEAR UNDISCLOSED INCOME ADMITT ED. 2001-02 RS. 31,47,828/- 2002-03 RS. 8,29,565/- 2003-04 ___ 2004-05 RS.1,43,41,002/- 2005-06 RS. 15,91,395/- 2006-07 RS. 47,53,056/- 6. FOR ASSESSMENT YEAR 2007-08 THE ASSESSEE ALSO FI LED RETURN OF INCOME ADMITTING UNDISCLOSED INCOME OF RS.11,19,926/-. THE UNDISCLO SED INCOME ADMITTED IN THE RETURNS OF INCOME RELATED TO BUSINESS CARRIED ON BY THE ASSESS EE IN PARTNERSHIP WITH ONE SHRI VIMAL JEE. THE UNDISCLOSED INCOME COMPUTED BY THE ASSESSEE WAS BASED ON THE CASH-FLOW STATEMENT PREPARED ON THE BASIS OF SEIZED MATERIAL. THE EVID ENCE CONTAINED IN THE SEIZED MATERIAL SHOWED THAT THE ASSESSEE HAD BEEN CARRYING ON UNACCOUNTED TRADING ACTIVITIES AND HAD NOT DISCLOSED PROFIT OF SUCH UNACCOUNTED BUSINESS. THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2007-08 ISSUED NOTICE UNDER SECTION 143(2) OF THE ACT. 7. THE ASSESSING OFFICER ON THE BASIS OF ENTRIES R ECORDED ON NOTE PAD OBSERVED THAT SHRI PREM ARORA WAS HANDLING UNACCOUNTED CASH OF MDH LIM ITED FOR MAKING PURCHASES IN CASH OF VARIOUS RAW MATERIALS SUCH AS SPICES REQUIRED FOR M ANUFACTURING OF VARIOUS PRODUCTS OF MDH LIMITED. IN THIS PROCESS THE ASSESSEE EARNED CERTAI N COMMISSION/INCOME. HE, THEREFORE, DISMISSED 4 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. THE THEORY IN CASH-FLOW STATEMENT THAT THE ASSESSEE EARNED INCOME ONLY TO THE EXTENT OF EVIDENCE SEIZED IN HIS CASE. THE ASSESSING OFFICER ON THE B ASIS OF PAGES 27 OF A-1 / H-6 FOUND THAT THE TURNOVER FOR THE PERIOD 1/04/2003 TO 17/03/2004 WAS OF RS.92, 83,338/- WHICH WAS TOTAL OF SALES TURN-OVER OF 8 BILLS. THE ASSESSING OFFICER ON THE BASIS OF THE ENTRIES RECORDED IN A-1/H-6 WAS OF THE VIEW THAT THE TOTAL TURNOVER OF THE ASSESSEE FO R UNACCOUNTED BUSINESS COULD BE IN THE RANGE OF 10 TO 20 CRORES EVERY YEAR FOR ASSESSMENT YEARS 200 0-01 TO 2007-08. 8. THE ASSESSING OFFICER ALSO EXAMINED THE ENTRIES RECORDED IN ANNEXURE A-6 / H-6 , A NOTE PAD SEIZED FROM THE BUSINESS PREMISES OF NANAK EN TERPRISES OWNED BY SHRI PREM KUMAR ARORA. SHRI PREM KUMAR ARORA DURING THE RELEVANT PERIOD WA S MAIN PURCHASER OF MDH LTD AND PURCHASED ITEMS FROM KHARI BAOLI, DELHI. THE NOTE PAD CONTAINED DETAILS OF DATE WISE PURCHASE OF SPICES AND DRY FRUITS (MAGAZ AND ILIACHI) FOR AP RIL, 2005 TO MAY, 2005. THE ASSESSING OFFICER ALSO NOTED THAT MANY ITEMS OF RAW MATERIAL LIKE ZEE RA, DHANIA, MAGAZ, IMLI, PODINA, AIZVINE REQUIRED IN MANUFACTURING OF SPICES WERE PURCHASED IN LARGE QUANTITY AND COULD BE ONLY FOR A LARGE UNDERTAKING LIKE MDH LTD. THE ENTRIES RECORDE D IN THE SAID NOTE PAD HAS FOUR COLUMNS, THE FIRST COLUMN CONTAINS QUANTITY, SECOND COLUMN DESCR IPTIONS OF THE ITEMS PURCHASED, THE THIRD COLUMN CONTAINS THE RATE OF ITEM AND THE FOURTH COL UMN CONTAINS THE NAME OF THE PARTY IN CODES FROM WHOM THESE ITEMS WERE PURCHASED. THESE PURCHAS ES WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS OF M/S. NANAK ENTERPRISES. THE ASSESSING ON THE BASIS OF ENTRIES RECORDED IN THE NOTE PAD WORKED OUT TURNOVER OF RS.3,35,19,690/- FOR TH E PERIOD FROM 10 TH APRIL TO 31 ST MAY 2005. FROM THESE FIGURES THE ASSESSING CALCULATED THE MON THLY AVERAGE PURCHASES OF RS.1,67,59,845/-. THE ASSESSING OFFICER, THUS, CAME TO THE CONCLUSION THAT THE ASSESSEE WAS NOT ONLY MAKING UNACCOUNTED SALES BUT ALSO MAKING UNACCOUNTED PURCH ASES ON LARGE SCALE. THE ASSESSING OFFICER FURTHER NOTED THAT THESE PURCHASES WERE MADE IN CAS H FOR MDH LTD. THE ENTRIES RECORDED ON NOTE PAD CONTAINED ONLY THE NAME OF THE SUPPLIER SUCH AS , HCS, RJCS ETC. AND NOT THE NAME OF PURCHASER. SINCE SH. PREM KUMAR ARORA WAS EXCLUSIVE LY PURCHASING FOR MDH LTD., THE NAME OF MDH LTD WAS NOT CONSIDERED NECESSARY FOR RECORDING BY SHRI ARORA AND THUS HE CONCLUDED THAT ALL THE PURCHASES WERE MADE ON BEHALF OF MDH LTD. FURTHER AVAILABILITY OF HUGE CASH MORE THAN RS. 1,00,00,000/- ALSO INDICATED THAT SHRI ARORA WA S HANDLING UNACCOUNTED CASH OF MDH LTD., AS 5 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. HE HIMSELF WAS A DEDICATED SUPPLIER OF MDH LTD AND FINANCIAL STANDING DID NOT EXPLAIN THE AVAILABILITY OF HUGE CASH FOUND WITH HIM. 9. THE AO FURTHER NOTED THAT IN THE CASH FLOW STATE MENT THE ASSESSEE HAD OFFERED ONLY 1 PER CENT COMMISSION ON THESE PURCHASES. THE ITEMS PURC HASED WERE MOSTLY MAGAZ AND ILLIACHI. FOR THE SAME ITEMS THE ASSESSEE HAD SHOWN COMMISSION IN COME IN THE RANGE OF ALMOST 10 PER CENT, AS EVIDENCED FROM PAGE 28 OF H-6/A-1 WHICH HAD BEEN AD MITTED BY THE ASSESSEE AS HIS UNDISCLOSED INCOME IN THE CASH FLOW STATEMENT. FURTHER THE ASS ESSEE HAD ADMITTED THAT THE ENTRIES RECORDED ON PAGE 27 OF H-6/A-1 WERE HIS UNACCOUNTED PURCHASES. ANOTHER FEATURE IN THE CASH FLOW STATEMENT NOTED BY THE AO WAS THAT WHATEVER INCOME WAS EARNED BY THE ASSESSEE FROM THE UNACCOUNTED TRANSACTIONS HAD BEEN SHOWN TO BE AVAILABLE IN THE FORM OF CASH. IN THIS MANNER THE CASH BALANCE IN THE HANDS OF THE ASSESSEE HAD BEEN BUILT UP TO R S.2,20,07,726/- AS ON 22/11/2006 FROM A MERE CASH BALANCE OF NIL AS ON 1/04/2000. THE AO, THERE FORE, CONCLUDED THAT THE CASH FLOW STATEMENT WAS A SELF SERVING STATEMENT WHICH HAS BEEN FILED T O USE THE EVIDENCE, WHICH WAS SEIZED AT THE TIME OF SEARCH TO PAINT A PICTURE THAT THE ASSESSEE WAS DOING UNACCOUNTED BUSINESS OFF AND ON AND NOT ON A CONTINUOUS BASIS. THE ASSESSING OFFICER A LSO OBSERVED THAT EVEN AFTER SEARCH THE ASSESSEE HAD FAILED TO COME OUT WITH THE COMPLETE TRUTH AS R EGARDS HIS UNACCOUNTED BUSINESS. 10. THE ASSESSING OFFICER ON THE BASIS OF ENTRIES R ECORDED IN NOTE PAD ESTIMATED TURNOVER FOR ASSESSMENT YEAR 2006-07 AT RS.20,11,18,140/- BY TAK ING AVERAGE MONTHLY PURCHASES OF RS.1,67,59,845/-. THE ASSESSING OFFICER TOOK THE E STIMATED AVERAGE GROWTH OF 20 PER CENT IN THE BUSINESS AND ESTIMATED THE TURNOVER FOR ASSESSMEN T YEARS 2001-02 TO 2006-07 AS UNDER:- ASSESSMENT YEAR TURNOVER 2006-07 RS.20,11,18,140/- 2005-06 RS.16,08,94,512/- 2004-05 RS.12,87,15,609/- 2003-04 RS.10,29,72,487/- 6 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. 2002-03 RS.8,23,77,990/- 2001-02 RS.6,59,02,392/- 11. THE ASSESSING OFFICER ON THE BASIS OF ABOVE MEN TIONED ESTIMATED SALES ESTIMATED PROFIT AT THE RATE OF 10 PER CENT FOR ASSESSMENT YEARS 2001-0 2 TO 2006-07 BASED ON THE EVIDENCE CONTAINED ON PAGE 28 OF H-6/A-1 AS AGAINST 1% COMMISSION INCO ME ADMITTED BY THE ASSESSEE IN THE RETURNS OF INCOME. THE ASSESSING OFFICER ESTIMATED THE UNDI SCLOSED INCOME FROM TRADING IN SPICES/DRY FRUITS AS UNDER:- ASSESSMENT YEAR PROFIT 2006-07 RS. 2,01,11,814/- 2005-06 RS.1,60,89,451/- 2004-05 RS.1,28,71,560/- 2003-04 RS.1,02,97,248/- 2002-03 RS. 82,37,799/- 2001-02 RS .65,90,239/- 12. THE ASSESSING OFFICER FROM THE PROFITS ESTIMATE D AS ABOVE DEDUCTED THE INCOME DISCLOSED IN THE RETURNS OF INCOME FILED UNDER SECTION 153A O F THE ACT AND DETERMINED THE UN-DISCLOSED INCOME FOR ASSESSMENT YEARS 2001-02 TO 2006-07 AS UNDER :- ASSESSMENT ESTIMATED ESTIMATED RETURNED INCOME DIFFERENCE Y E A R. TURN-OVER P R O F I T. UNDER SECTION 153A 2006-07 RS.20,11,18,140/- RS.2,01,11,814/- RS.57,50,853/- RS. 1,43,40,961/- 2005-06 RS.16,08,94,512/- RS.1,60,89,451/- RS. 27,51,404/- RS. 1,33,38,047/- 2004-05 RS.12,87,15,609/- RS.1,28,71,560/- RS.1,43,41,002/- _ 2003-04 RS.10,29,72,487/- RS.1,02,97,248/- RS. 6,03,854/- RS. 92,93,394/- 7 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. 2002-03 RS. 8,23,77,990/- RS. 82,37,799/- RS. 13,84,041/- RS. 68,53,758/- 2001-02 RS. 6,59,02,392/- RS. 6590239/- RS.35,03,118/- RS. 30,87,121/- 13. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT THE ADDITION ON ACCOUNT OF UNDISCLOSED INCOME WAS BASIC ALLY MADE BY THE ASSESSING OFFICER BY MISINTERPRETING THE CONTENTS OF ANNEXURE A-6 (PARTY H-6) TO WORK OUT SOME FIGURE OF UNACCOUNTED TRANSACTIONS AND ALLEGING THE SAME AS PURCHASES MAD E FOR M/S. MAHASHIAN DI HATTI LTD. AND, THEREBY ESTIMATING THE PROFITS FOR ASSESSMENT YEARS 2001-02 TO 2006-07, THOUGH THE FACTS WERE ENTIRELY DIFFERENT AND WERE ALSO EXPLAINED TO THE A O DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BUT WHICH WERE NOT CONSIDERED BY HIM. IT WAS FURTHER SUBMITTED THAT IN THE SAID NOTE PAD SEIZED AS ANNEXURE H-6/A-6 THE ASSESSEE NO TED DOWN THE SUPPLIES/SALES ARRANGED ON COMMISSION BASIS AT THE RATE OF 1% FROM OPEN MARKET AT KHARI BAOLI, DELHI FOR UPCOUNTRY PARTIES AND THE SAME HAD NO CONNECTION WITH M/S. MAHASHIAN DI HATTI LTD. WHATSOEVER IN ANY MANNER. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE ARRANGED SALES TO SUCH UPCOUNTRY PARTIES ON COMMISSION BASIS AND NOTED DOWN DETAILS IN THE SAID DIARY WHIC H CONTAINED FOUR COLUMNS. THE FIRST COLUMN CONTAINED QUANTITY, THE SECOND COLUMN CONTAINED DES CRIPTION OF ITEMS, THIRD COLUMN CONTAINED BATCH NUMBER AS PRINTED ON THE PACKAGE AND THE LOT QUANTITY FOR IDENTIFICATION WHICHEVER APPLICABLE AND THE FOURTH COLUMN CONTAINED THE NAME OF BUYING PARTY/HIS AGENT IN THE ABBREVIATED FORM. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE O BTAINED BATCH WISE SAMPLES FROM THE SUPPLIERS IN ORDER TO OBTAIN THE ORDER FROM BUYERS. THESE SA MPLES WERE SHOWN TO BUYERS FOR APPROVAL OF DIFFERENT SAMPLES FROM DIFFERENT BATCHES / LOTS AND AFTER SETTLEMENT OF THE RATE PLACED THEIR ORDERS AND THE DEAL WAS SETTLED WITH THE SUPPLIERS TO SUPP LY REQUISITE GOODS TO THOSE UPCOUNTRY BUYERS. THE ASSESSEE COLLECTED HIS ONE PER CENT COMMISSION THEREON IN CASH. THESE DETAILS WERE NOTED DOWN IN THE SAID DIARY IN TABULAR FORM. IT WAS ALS O SUBMITTED THAT THE ASSESSEE EXPLAINED THESE FACTS BEFORE THE AO WITH THE REQUISITE EVIDENCES. HOWEVER, THE AO DELIBERATELY CHOSE NOT TO MENTION THE SAME WITH QUANTITIES IN THE ASSESSMENT ORDER, RATHER MISINTERPRETED THE THIRD COLUMN ACCORDING TO HIS OWN WHIMS AND CONSIDERED IT AS THE RATE OF ITEM (INSTEAD OF BATCH NUMBER / LOT QUANTITY AS EXPLAINED). THE AO BY MULTIPLYING THE QUANTITY ARRIVED AT FIGURE OF RS.3,35,19,690/- OF ALLEGED PURCHASES MADE IN JUST TWO MONTHS OF APR IL AND MAY, 2005. THE ASSESSEE WAS NEVER CONFRONTED WITH THE SAID WORKING BY THE AO. IT WA S ALSO SUBMITTED THAT IT WAS NOT UNDERSTOOD AS 8 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. TO HOW THE AO DEEMED THE THIRD COLUMN FIGURES AS TH E RATES OF ITEMS. IT WAS A MATTER OF COMMON KNOWLEDGE THAT ITEMS OF KISHMISH HAD NEVER REACHED THE RATE OF RS.6,955.59 PER KG. AND THAT TOO IN THE WHOLE-SALE MARKET, BUT THE SAME WAS CONSIDER ED AS SUCH BY THE AO. REFERENCE IN THIS REGARD WAS DRAWN TO INTERNAL PAGE NO 5 OF THE ANNEX URE A-6 WHERE IN THE THIRD COLUMN THE ASSESSEE HAD IN FACT NOTED SAID FIGURE AS IN 6955/ 59 TO RECORD BATCH NUMBER / LOT QUANTITY OF KISHMISH FOR THE PURPOSE OF IDENTIFICATION OF CORRE CT LOT OF STOCK SELECTED BY THE BUYER OUT OF WHICH THE ORDERED QUANTITY OF KISHMISH WOULD BE DEL IVERED BY THE SUPPLIER. MOREOVER IN THE PRESENT VALUE OF MONEY, NOWHERE THE RATE CAN BE LIK E 59 PAISE. LIKEWISE, RESPECTIVE BATCH NUMBERS AND THE LOT QUANTITIES WERE NOTED AGAINST V ARIOUS ITEMS IN THE SAID ANNEXURE, BUT WHICH WERE WRONGLY / DELIBERATELY TAKEN AS THE ITEM RATES BY THE ASSESSING AUTHORITY. IF THE ASSESSING AUTHORITY IS TO BE BELIEVED THEN THE RATES OF DRY F RUITS AND KIRYANA ITEMS WERE SOURING AROUND 10 TO 20 TIMES HIGHER THAN NORMAL RATES PREVAILING IN THE WHOLE-SALE MARKET IN APRIL AND MAY, 2005, BUT WHICH IS FACTUALLY INCORRECT. MOREOVER, IT JUS T NEEDS A GLANCE AT THE SAID FIGURES TO UNDERSTAND THAT THE SAME COULD NOT HAVE BEEN THE RATES OF ITEM S, BUT SOMETHING ELSE AND FOR WHICH AN ADEQUATE EXPLANATION WAS DULY GIVEN BY THE ASSESSEE TO THE ASSESSING AUTHORITY, THOUGH COMPLETELY IGNORED BY HIM WITHOUT ASSIGNING ANY REA SON. IT WAS FURTHER SUBMITTED THAT THE SAID TRANSACTIONS HAD BEEN RECORDED IN THE NOTE PAD IN T HE MOST NORMAL WAY AS ANY COMMISSION AGENT WOULD DO AND YET THE AO CHOSE TO DESCRIBE THE SAME CONTAINING PECULIAR FEATURES AND ALSO DELIBERATELY USED THE WORD LIKE CODES TO DESCRIBE T HE PARTY NAME RECORDED IN THE FOURTH COLUMN WHICH WERE ACTUALLY THE PARTY NAME WRITTEN IN ABBRE VIATED FORM DUE TO LACK OF ADEQUATE SPACE TO NOTE DOWN THEIR FULL NAME IN THE SAID SMALL DIARY/N OTE PAD. IT WAS ALSO SUBMITTED THAT THE AO HAD INCORRECTLY STATED THAT ALL ITEMS RECORDED IN ANNEX URE A-6 WERE PRODUCTS REQUIRED IN THE MANUFACTURING PROCESS M/S. MAHASHIAN DI HATTI LTD. HOWEVER, THE LIST OF ITEMS IN THE NOTE/ BOOK WAS IN RELATION TO DRY FRUITS LIKE BADAM, PIST A, KISHMISH, MAGAZ ETC. WHICH COULD NOT BE USED IN THE SPICES MANUFACTURED BY MAHASHIAN DI HAT TI LTD. THEREFORE, EVEN WITHOUT UNDERSTANDING THE BASIC FACT ABOUT THE NATURE OF RA W MATERIAL REQUIRED IN MAKING MASALAS THE AO ASSERTED THE SAME. IT WAS ALSO SUBMITTED THAT THE AO HAD EXTRAPOLATED THE SALES ON THE BASIS OF FIGURES OF PURCHASES OF RS.3,35,19,690/- FOR EARLIE R YEARS. THE ASSESSEE HAD BEEN EARNING COMMISSION AT THE RATE OF 1 PER CENT. HOWEVER, THE AO HAD APPLIED RATE OF 10 PER CENT WHICH IS BASED ON CONJECTURES AND SURMISES FOR THE SAME OF M AKING A HUGE ADDITION OF ADDITIONAL UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE IN RESPECT OF TRANSACTIONS RECORDED IN ANNEXURE 9 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. A-6. IT WAS, THEREFORE, ARGUED THAT BASIC PREMISES OF CONSIDERING 10 PER CENT PROFIT ON THE ALLEGED UNACCOUNTED PURCHASES WAS YET AGAIN A PRESUMPTION O N THE PART OF THE AO AND IT DID NOT BEAR OUT FROM THE FACTS RECORDED IN THE SAID PAGE NO. 28 OF THE SAID ANNEXURE A-1 WHICH WAS FACTUALLY 1 PER CENT AS PER THE SAID PAGE. IN THIS REGARD A PH OTOCOPY OF RELEVANT PAGE 28 OF THE ANNEXURE A-1 WAS FURNISHED IN THE PAPER BOOK BY THE ASSESSEE AND IT WAS EXPLAINED THAT HE HAD DECLARED TOTAL UNACCOUNTED COMMISSION INCOME OF RS.7,93,583/- IN T HE RELEVANT PERIOD FROM 15/9/1993 TO 19/2/1993 RELEVANT TO ASSESSMENT YEARS 2004-05 AND 2005-06 IN THE RETURNS OF INCOME FILED UNDER SECTION 153A DURING WHICH SAID INCOME WAS EARNED AS HAS BEEN MENTIONED ON THE SAID PAGE ITSELF. THE COMPUTATION OF 10 PER CENT PROFIT WAS BASED ON FRIVOLOUS PRESUMPTION WITHOUT ANY FACTS TO SUPPORT IT. 14. THE LD. CIT (APPEALS) CONSIDERED THE SUBMISSION S MADE BY THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE HAD TWO LINES OF ACTIVITIES I.E. TRADING IN THE NAME OF NANAK ENTERPRISES AND PURCHASE AND SALE FOR MDH LTD. IN THE NAME OF PREM KUMAR, COMMISSION AGENT. THE ASSESSEE HAD ADMITTED UNDISCLOSED INCOME DECLARED IN THE RET URNS FILED UNDER SECTION 153A. THE LD. CIT (A) OBSERVED THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE IN SUPPORT OF THE CONTENTION THAT THE ENTRIES RECORDED IN THE NOTE PAD WERE IN RESPEC T OF PARTIES ON WHOSE BEHALF THE PURCHASES WERE MADE. THE BURDEN WAS ON THE ASSESSEE TO IDENT IFY SUCH PARTIES AND PLACE CONFIRMATIONS ON RECORD. ONCE SUCH BURDEN WAS NOT DISCHARGED ADVERS E INFERENCE WAS TO BE DRAWN. HE, THEREFORE, OBSERVED THAT ONE SUCH PERSON WITH WHOM THE ASSESSE E HAD CONDUCTED SUCH ALLEGED BUSINESS WAS NOT KNOWN. IT WAS LOGICAL FOR THE AO TO CONCLUDE TH AT EVEN THE TRANSACTION MENTIONED IN ANNEXURE A-6 I.E. DIARY FOR MDH LTD., WAS THE REGUL AR BUSINESS CONDUCTED WITH THE ASSESSEE. THE PERSON WITH WHOM THE ASSESSEE CARRIED ON SUCH A LLEGED BUSINESS IN PARTNERSHIP HAD NOT BEEN BROUGHT ON RECORD IN SUPPORT OF THE CLAIM OF THE AS SESSEE. ON THE CONTRARY ANNEXURE A-1 CLEARLY SHOWED THAT THE UNACCOUNTED PURCHASES WERE BEING MA DE BY THE ASSESSEE. MOREOVER, IT HAS BEEN ADMITTED BY THE ASSESSEE THAT THE TRANSACTIONS RECO RDED IN ANNEXURE A-1 WERE IN RESPECT OF PURCHASE AND SALE. THE LD. CIT (A), THEREFORE, REJ ECTED THE THEORY OF THE ASSESSEE THAT THE ASSESSEE EARNED COMMISSION @ 1%. DIARY/NOTE PAD MA RKED AS ANNEXURE A-6 REFLECTED TRANSACTION OF UNACCOUNTED PURCHASES MADE BY THE AS SESSEE. NO EVIDENCE HAD BEEN LED TO REBUT 10 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. THE CONCLUSION OF THE AO AND, THEREFORE, THE LD. CI T (A) UPHELD THE ADDITION MADE ON ACCOUNT OF UNACCOUNTED PURCHASES MADE FOR M/S. MAHASHIAN DI HA TTI LTD. 15. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THIRD COLUMN OF ANNEXURE A-6/H-6 WAS BATCH NUMBER / LOT QUANTITY AS AGAINST RATE OF ITEM ADOPTED BY THE AO, LD CIT(A) OBSERVED THAT NO SUPPORTIVE EVIDENCE WAS FILED BY THE ASSESSEE. THE ASSESSEE HAD ALSO NOT EXPLAINED THE CODE REGARDING THE NAMES OF VARIOUS PARTIES TO WHOM UNAC COUNTED PURCHASES WERE MADE AS MENTIONED IN COLUMN NO. 4. AS REGARDS DETERMINATION OF UNACC OUNTED PURCHASES MADE ON AVERAGE BASIS FOR FINANCIAL YEAR 2005-06 AND THE COMMISSION EARNED ON THOSE PURCHASES, THE LD. CIT (A) NOTED THAT ON A REASONABLE BASIS THE AO HAD WORKED OUT THE PUR CHASES BY REDUCING 20 PER CENT OF THE TURNOVER EACH YEAR AND WORKED OUT COMMISSION. THE LD. CIT (A) REFERRING TO PAGE 28 OF H-6/A-1 WHICH HAD BEEN ADMITTED BY THE ASSESSEE AS ITS UNDI SCLOSED INCOME IN CASH-FLOW STATEMENT, THE PROFIT HAS BEEN EARNED IN THE RANGE OF ALMOST 10 PE R CENT. THE MAIN DIFFERENCE BETWEEN THE AOS VIEW AND THE ASSESSEES SUBMISSION WAS THAT THE CON SIDERATION NOTED ON PAGE IGNORING THE FIGURE OF HUNDRED AND ENCIRCLING THE REST OF FIGURES HAS B EEN EXPLAINED BY THE ASSESSEE AS BATCH NUMBER. THE LD. CIT (A) IN PARA 6 OF HIS ORDER HAS TABULATE D CERTAIN PURCHASES ON WHICH COMMISSION RANGING BETWEEN 6.67% TO 18.20% HAS BEEN WORKED OUT . THE AO, HOWEVER, ESTIMATED PROFIT OF 10 PER CENT. THE CONTENTION OF THE ASSESSEE WAS RE JECTED BY THE LD. CIT (A) ON THE GROUND THAT NO EVIDENCE WAS PRODUCED TO SUPPORT ITS CONTENTION THA T PROFIT OF 1 PER CENT WAS EARNED. THE LD. CIT (APPEALS), THEREFORE, UPHELD THE PROFIT EARNED AT T HE RATE OF 10 PER CENT. 16. BEFORE US IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT THE ASSESSING OFFICER HAD WORKED OUT TURNOVER ON THE BASIS OF ENTRIES RECORDE D ON NOTE PAD OF MDH FROM 10/04/2005 TO 31 ST MAY, 2005. THE AO HAD ARRIVED AT THE PURCHASES OF RS.3,35,19,690/-. FROM THE FIGURES SO WORKED OUT FOR THE PERIOD FROM 10/04/2005 TO 31 ST MAY, 2005 THE AO HAD ESTIMATED PURCHASES FOR ASSESSMENT YEAR 2006-07. KEEPING THE GROWTH I N BUSINESS BY 20 PER CENT THE AO DEDUCED THE UNACCOUNTED PURCHASES FOR ASSESSMENT YEARS 2001 -02, 2002-03, 2003-04, AND 2005-06. NO ADDITION HAS BEEN MADE IN ASSESSMENT YEAR 2004-05 O N THE GROUND THAT UNDISCLOSED INCOME DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME W AS HIGHER THAN THE ESTIMATED PROFIT FOR 11 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. ASSESSMENT YEAR 2004-05. THE LD. AR OF THE ASSESSE E FURTHER SUBMITTED THAT THE AO HAD TAKEN THE FIGURES IN COLUMN NUMBER 3 AS THE RATES AS AGAI NST IT WAS EXPLAINED THAT THE FIGURES REPRESENTED BATCH NUMBER/LOT QUANTITY. HE FURTHER SUBMITTED THAT THE ASSESSEE IS A BROKER AS WELL AS TRADER. THE ASSESSEE PURCHASES RAW MATERIAL FOR MDH WHICH IS RECORDED IN THE BOOKS OF ACCOUNTS. THE COMMISSION BUSINESS IS DONE IN THE N AME OF NANAK ENTERPRISES. THE ASSESSEE HAD MADE SURRENDER OF RS.2.57 CRORES IN ASSESSMENT YEAR S 2001-02 TO 2006-07. THE ASSESSEE WAS PURCHASING VARIOUS ITEMS ON BEHALF OF BUYERS, WHO G AVE COMMISSION TO THE ASSESSEE @ 1%. THE ASSESSING OFFICER HAD TREATED THE FIGURES OF BATCH NUMBER/LOT QUANTITY AS RATE OF DIFFERENT ITEMS. IN THE CASE OF MDH THE LD. CIT (APPEALS) HAS NOT UP HELD THE FINDING OF THE AO FOR ESTIMATION OF UNACCOUNTED PURCHASES BASED ON MDH MASALA NOTE PAD BY HOLDING THAT THE DOCUMENTS FOUND FROM THE THIRD PARTY COULD NOT BE APPLIED AGAINST T HE ASSESSEE AND THE BURDEN WAS ON THE DEPARTMENT TO SHOW THAT THE SAME REFLECTED TRANSACT IONS OF THE ASSESSEE. BASED ON THE FINDINGS OF THE CIT (A) ON THE ENTRIES RECORDED ON NOTE PAD, IT AT CAME TO THE CONCLUSION THAT THERE WAS NO MATERIAL WITH THE AO TO ESTIMATE THE UNDISCLOSED PU RCHASES. ITAT, DELHI BENCH IN THE CASE OF MDH LTD. HAS HELD THAT THE FIGURES NOTED UNDER COLU MN NUMBER 3 CANNOT REPRESENT THE RATE OF THE ITEMS. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY TH E AO TO PROVE THE ESTIMATION OF PURCHASES. THE ESTIMATION HAS BEEN BASED ON SURMISES AND CONJE CTURES. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT SINCE ITAT, DELHI BENCH IN THE CASE OF MDH LTD. HAS RECORDED A FINDING OF FACT THAT THERE WAS NO MATERIAL WITH THE ASSESSING OFFIC ER TO ESTIMATE UNDISCLOSED PURCHASES; NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS OF E NTRIES RECORDED ON THE NOTE PAD MAINTAINED BY SHRI PREM KUMAR ARORA. 17. ON THE OTHER HAND, THE LD. CIT(DR) SUBMITTE D THAT THE ASSESSEE CANNOT BE ALLOWED TO TAKE ADVANTAGE OF ITS OWN ILLEGAL ACTS. THE ASSESS EE WAS INVOLVED IN UNACCOUNTED COMMISSION BUSINESS WITH SOMEONE NAMELY VIMALJI AND HAD ADMITT ED A PART OF COMMISSION INCOME IN RETURNS OF INCOME FILED UNDER SECTION 153A OF THE ACT. THE ASSESSEE HAD NOT DISCLOSED FULL INCOME. UNDER THESE CIRCUMSTANCES THE REVENUE CANNOT BE ASK ED TO PROVE THE IMPOSSIBLE WHEN THE INFORMATION RELATING TO THE COMMISSION INCOME WAS I N THE POSSESSION OF THE ASSESSEE. AS REGARDS CONTENTION OF THE ASSESSEE THAT ITAT HAS DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE, THE LD. CIT(DR) SUBMITTED THAT THE FINDING IS IN THE CASE O F MDH AND NOT IN THE CASE OF THE ASSESSEE. 12 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. THEREFORE, THE ISSUE HAS NOT BEEN DECIDED IN THE CA SE OF THE ASSESSEE. DURING THE COURSE OF SEARCH THE ASSESSEE HAD ADMITTED AN INCOME OF RS.5 CRORES, WHICH WAS SURRENDERED. THE SURRENDERED INCOME OF RS.5 CRORES WAS ON ACCOUNT OF SUPPLIES MA DE ON WHICH THE ASSESSEE HAD EARNED COMMISSION. THE CHAIRMAN OF MDH LTD. HAS GIVEN RET RACTION ON 28 TH NOVEMBER, 2006 ON BEHALF OF ALL THE PARTIES, BUT THERE IS NO RETRACTI ON BY SHRI PREM KUMAR ARORA. THE LD. CIT(DR) FURTHER SUBMITTED THAT THE DIARY/NOTE PAD CONTAINS CODES AND THE ASSESSEE WAS NOT WILLING TO DISCLOSE THE SAME. THEREFORE, THE ASSESSEE HAD NOT COME CLEAN IN FILING THE RETURNS OF INCOME. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS : 1. KACHWALA GEMS VS. JT. CIT 288 ITR 10; 2. G. S. NANJEE & SONS VS. CIT 284 ITR 172; 3. FATHUDHINGA RICE MILLS VS. CIT 307 ITR 343: SINCE THE ASSESSEE HAD NOT RETRACTED THE SURRENDER MADE BY HIM, THE AMOUNT OF RS.5 CRORES HAS TO BE ASSESSED. FURTHER, SINCE THE NOTE PAD IS WRITTEN IN CODES, THE AO AS WELL AS THE LD. CIT (A) ARE JUSTIFIED IN ESTIMATING THE PURCHASES FOR VARIOUS Y EARS. THE ESTIMATION MADE IS BASED ON DIARY H- 6/A-6. THEREFORE, THE ASSESSING OFFICER WAS JUSTIF IED IN EXTRAPOLATING THE PURCHASES FOR EARLIER YEARS AND ESTIMATING THE PROFITS AT THE RATE OF 10 PER CENT. 18. IN REPLY THE LD. AR OF THE ASSESSEE SUBMITTED T HAT SHRI PREM ARORA IS RELATIVE OF CHAIRMAN OF MDH LTD. THE CHAIRMAN OF MDH LTD. OFFERED RS.51 CRORES ON BEHALF OF THE GROUP. SUBSEQUENTLY, THE INCOME WAS DETERMINED IN ENTIRE G ROUP INCLUDING THE CASE OF THE ASSESSEE ON THE BASIS OF THE SEIZED MATERIAL AND RETURNS OF INC OME WERE FILED BY THE ASSESSEE ON THE BASIS OF ENTRIES RECORDED IN THE SEIZED MATERIAL. THEREFORE , WHEN RETURNS OF INCOME WERE FILED BASED ON THE SEIZED MATERIAL, THE STATEMENT GIVEN BY THE ASS ESSEE UNDER SECTION 132(4) OF THE ACT SHOULD BE DEEMED TO HAVE BEEN RETRACTED. HE FURTHER SUBMITTE D THAT HOW THE FIGURE OF RS.3,58,85,690/- WAS ESTIMATED FROM 10/04/2005 TO 31 ST MAY, 2005 IS NOT CLEAR. NO DETAILS HAVE BEEN GIVE N. ON WHAT BASIS THIS PURCHASE WAS ESTIMATED IS NOT KNOWN. HE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAVI KANT J AIN [2001] 250 ITR 141 (DEL). THE LD. AR 13 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE ON THE BASIS OF SEIZED MATERIAL PREPARED THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET. NO DEFECTS HAVE BEEN POINTED OUT. THE ASSESSEE HAD MADE FULL DISCLOSURE OF UNACCOUNTED INCOME IN T HE RETURNS OF INCOME FILED U/S 153A OF THE ACT. HENCE FURTHER ADDITION CAN BE MADE AND THAT TO O ON MULTIPLE PRESUMPTION BASIS. 19. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF SEARCH, INCRIMINATING MATERIAL WAS FOUND, ACCORDING TO WHICH THE ASSESSEE WAS FOUND TO BE DEALING IN UNACCOUNTED BUSINESS ON COMMISSION BASIS. THE ASSESSING OFFICER HAD ESTIMATED THE PURCHASES BASED ON ENTRIES FOUND RECO RDED ON NOTE PAD OF MDH MASALA. ON THE BASIS OF THIS DOCUMENT UNACCOUNTED PURCHASES IN THE CASE OF MDH WERE ESTIMATED. THE LD. CIT (A) AS WELL AS THE ITAT, DELHI BENCH HAS NOT UPHELD THE ESTIMATION OF PURCHASES BASED ON THE NOTE PAD. THE MAIN DISPUTE BETWEEN THE ASSESSEE AN D THE REVENUE IS IN RESPECT OF THIRD COLUMN. ACCORDING TO THE ASSESSEE THAT THE ENTRIES RECORDED IN THIRD COLUMN ARE BATCH NUMBER/LOT QUANTITY WHEREAS ACCORDING TO THE AO IT REPRESENTED THE RATE PER KG. IN THE CASE OF MDH LTD., ITAT, DELHI BENCH E IN ORDER DATED 29.10.2010 HAS NOT UPHELD THE CONTENTION OF THE REVENUE THAT THE FIGURES MENTIONED IN THIRD COLUMN REPRESENTED T HE RATE. THE FINDINGS RECORDED BY THE TRIBUNAL IN THE CASE OF MDH ARE REPRODUCED AS UNDER :- 18. AS REGARDS THE UN-ACCOUNTED PURCHASES DETERM INED BY THE ASSESSEE THE LD. CIT (A) HAS NOT UPHELD THE FINDINGS OF THE ASSESSING OFFICE R. HE HAS IN PARA 11.2 AT PAGE NO. 30 OF THE ORDER OBSERVED AS UNDER:- ' I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND, DO NOT FIND JUSTIFICATION IN THE SAME IN AS MUCH AS EVIDENCE FOUND AT THE PRE MISES OF MR. PREM KUMAR ARORA CANNOT BE TAKEN AS ANY BASIS TO HOLD THAT THE ASSESSEE MADE UNACCOUNTED PURCHASES. I HAVE PERUSED THE SEIZED PAPER, THE SAM E DOES NOT CONTAIN ANY NAME OF THE APPELLANT. NEITHER IN THE STATEMENT, MR. PRE RN KUMA ARORA HAS ALLEGED THAT SUCH TRANSACTIONS PERTAINED TO THE APPELLANT. IN FA CT, IN THE AFFIDAVIT FILED BEFORE ME, THE SAME CANNOT BE RELIED UPON. IN FACT, AT THA T TIME, THE PAPER DOES NOT 14 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. PERTAIN TO THE BUSINESS OF THE APPELLANT COMPANY. I T IS WELL SETTLED POSITION OF LAW THAT DOCUMENT FOUND FROM THE THIRD PERSON CANNOT BE APPLIED AGAINST THE APPELLANT AND THE BURDEN LAYS UPON THE DEPARTMENT T O SHOW THAT SAME REFLECTS TRANSACTIONS OF THE APPELLANT COMPANY. RELIANCE IS PLACED ON THE JUDGMENT IN THE CASE OF CIT VS SUKHDAYAL RAMBILAS REPORTED IN 136 I TR 414 WHEREIN IT HAS BEEN HELD THAT WHAT IS APPARENT IS NOT REAL, THE BURDEN TO ESTABLISH THIS IS ON THE PERSON WHO ALLEGES THIS. SIMILAR VIEW HAS BEEN EXPRESSED I N THE CASE OF CIT VS DAULAT RAM RAWATMULL REPORTED IN 87 ITR 349. IN SUCH CIRCU MSTANCES, IN MY OPINION, THE ASSESSING OFFICER INFERENCES ON THE BASIS OF SEIZED NOTE BOOK AND HELD THAT THERE ARC UNDISCLOSED PURCHASES MADE BY THE APPELLANT IS NOT JUSTIFIED.' 19. IN THIS REGARD WE WOULD ALSO LIKE TO RECORD OUR FINDINGS ABOUT THE NOTE PAD MAINTAINED BY SHRI PREM KUMAR ARORA. THE ASSESSING OFFICER HAS ESTIMATED THE UNACCOUNTED PURCHASES ON THE BASIS OF THIRD COLUMN, WHICH ACCORDING TO THE ASSESSING OFFICER IS THE RATE. ON THE OTHER HAND, ACCORDING TO THE ASSESSEE THE THIRD COLUMN REPRESENTS THE LOT NO. ON THE GROUND THAT THE NEW P AISA CANNOT BE IN THREE FIGURES E.G. 7856/260 CANNOT BE READ AS RS.7,856 AND 260 PAISE. LIKEWISE 7898/100 CANNOT BE RS.7,898 AND.100 PAISE. ACCORDING TO THE ASSESSEE IT IS LOT NO. FOR EXAMPLE AT PAGE NO. 139 OF THE PAPER BOOK, THE SALES AS ON 20TH APRIL, 2005 HAS BEEN RECORDED. SOME OF THE ENTRIES ARE AS UNDER: 25K MAGAZ 6191/KDI (SLCS) 25K MAGAZ 50/DL (SLCS) THE ENTRY 25K REPRESENTS SOME UNIT IN FORM OF KATTA OR BAG WHICH IS EVIDENT THE TOTAL MADE AT 100 ITEMS. THEREFORE, IT IS NOT THE WEIGHT IN KGS., BUT QUANTITY IN KATTAS / BAGS. LIKEWISE FOR MAGAZ THE RATE CANNOT BE RS.6191/KDI A ND FOR ANOTHER QUANTITY OF 25 KATTA THE RATE CANNOT BE RS.50/DL. THE FIGURES TAKEN AS SALE PRICE DOES NOT REFLECT THE PRICE, BUT IT COULD BE EITHER LOT NO OR SOMETHING ELSE BEC AUSE NEW PAISA CANNOT BE IN THREE DIGITS AS HAD BEEN MENTIONED AT SEVERAL PLACES. MERELY BE CAUSE THE ENTRIES HAD BEEN RECORDED 15 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. ON NOTE PAD OF 'MDH MASALA' IT CANNOT BE PRESUMED T HAT THE PURCHASES OUTSIDE THE BOOKS OF ACCOUNTS WERE MADE BY THE ASSESSEE. THESE ENTRIES NOWHERE REFLECT THAT UNACCOUNTED PURCHASES WERE MADE. THEREFORE, THE LD . CIT (A) WAS CORRECT IN COMING TO THE CONCLUSION THAT THE ENTRIES RECORDED ON NOTE PA DS / NOTE BOOKS CANNOT REPRESENT THE PURCHASES MADE BY THE ASSESSEE. FROM THE DECISION OF THE LD. CIT (A) IT IS EVIDENT THAT THERE WAS NO MATERIAL WITH THE ASSESSING OFFICER TO ESTIMATE THE UNDISCLOSED PURCHASES. THE REVENUE HAS NOT FILED APPEAL AGAINST THIS FINDI NG OF THE LD. CIT (A). THEREFORE, NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS OF ENTR IES RECORDED ON THE NOTE PAD MAINTAINED BY SHRI PREM KUMAR ARORA. 20. IN THE CASE MDH LTD LD. CIT(A) HAD HELD THAT NO ADDITION COULD BE MADE ON ACCOUNT OF ENTRIES RECORDED IN THE SAME VERY DIARY. THE ITAT H AS RECORDED ITS FINDINGS ON COLUMN 3 THAT THEY DO NOT REPRESENT RATES OF ITEM PURCHASED. HOWE VER IN THE CASE OF ASSESSEE BEFORE US THE SAID NOTE PAD WAS RECOVERED FROM THE POSSESSION OF THE A SSESSEE WHEREIN HE HAS RECORDED ENTRIES IN RESPECT OF VARIOUS DRY FRUITS PURCHASED ON BEHALF O F HIS CUSTOMERS ON COMMISSION BASIS. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ENTRIES RECORDED IN THIS NOTE PAD PERTAIN TO HIS UNDISCLOSED BUSINESS OF COMMISSION AGENCY. LD CIT(A) IN THE CAS E OF MDH LTD HAS HELD THAT THE NOTE PAD DOES NOT RELATE TO BUSINESS OF MDH LTD. HOWEVER, TH E LD CIT(A) IN THE CASE OF ASSESSEE HAS UPHELD THE ESTIMATION OF PURCHASES AND ESTIMATION O F PROFITS THEREON. WE MAY ALSO LIKE TO MENTION SOME OF THE ENTRIES TO DEMONSTRATE THAT THI RD COLUMN DOES NOT REFLECT THE RATE OF A PARTICULAR ITEM/DRY FRUIT. THIS IS BEING DONE AS TH E LD. CIT(DR) HAS ARGUED THAT NO FINDING HAS BEEN GIVEN IN THE CASE OF THE ASSESSEE. THE ENTRIES RECORDED ARE SIMILAR ON ALL THE DAYS. THE DETAILS OF SOME OF SUCH ENTRIES OF COLUMN 3 ARE A S FOLLOWS: PAGE NO.100 (INTERNAL PAGE 6 ) JEERA GREEN 6629 KISHMISH 5966/57 GIRI 7116 16 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. PAGE NO. 101 : (INTERNAL PAGE 8 ) MAGAZ 5153/100 PISTA 15453/451 DAL CHINI 7848/103 PAGE NO. 102 : (INTERNAL PAGE 9 ) SAUGI 6341 MAGAZ 6973/DL PAGE NO. 103 : (INTERNAL PAGE 10 ) KALA ZEERA 6603/48 PISTA 15453/331 FROM ABOVE ENTRIES IT IS CLEAR THAT THE FIGURES MEN TIONED IN 3 RD COLUMN CANNOT BE RATE PER KG. WE ARE AGAIN IN AGREEMENT WITH THE FINDINGS OF THE ITA T IN THE CASE OF MDH LTD. ABOUT THE ENTRIES RECORDED IN 3 RD COLUMN OF THE SAID NOTE PAD/DIARY. THEREFORE, THE ESTIMATION OF UNACCOUNTED PURCHASES FOR THE PREVIOUS YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR 2006-07 BASED ON SUCH ENTRIES CANNOT BE UPHELD. THEREFORE, THE ESTIMATION OF PURCHASES IS NOT BASED ON ANY MATERIAL SEIZED DURING THE COURSE OF SEARCH AND SEIZURE OPER ATION. HENCE, SUCH ESTIMATION OF UNACCOUNTED PURCHASES HAS TO BE TREATED BASED ON SURMISES AND C ONJECTURES. ONCE ESTIMATED PURCHASES FOR ASSESSMENT YEAR 2006-07 IS HELD BASED SURMISES AND CONJECTURES, THE ESTIMATION OF UNACCOUNTED PURCHASES FOR EARLIER YEARS BY EXTRAPOLATING THE FI GURES OF ASSESSMENT YEAR 2006-07 CANNOT BE UPHELD. ONCE THE ESTIMATION OF UNACCOUNTED PURCHASE S IS NOT UPHELD, THE QUESTION OF ESTIMATION OF PROFIT BY APPLYING 10 PER CENT OF PROFIT WOULD N OT ARISE. THE ASSESSEE HAD ADMITTED INCOME FROM COMMISSION BUSINESS BASED ON SEIZED MATERIAL W HICH WAS NOT DISCLOSED. THEREFORE, NO ADDITION CAN BE MADE ON THE BASIS OF ESTIMATION OF UNACCOUNTED PURCHASES. 17 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. 20. AS REGARDS THE CONTENTION OF THE REVENUE THAT A SSESSEE HAD NOT RETRACTED THE SURRENDER OF 5CRORE RUPEE, WE MAY LIKE TO MENTION HERE THAT ASSE SSEE BY NOT DISCLOSING INCOME OF RS 5,00,00,000/- IN RETURNS OF INCOME FILED IN RESPONS E NOTICE U/S 153A HAS RETRACTED FROM THE STATEMENT GIVEN U/S 132(4) AND ASSESSING OFFICER HA S ACCEPTED SUCH RETRACTION AS HE HAS CHOSEN NOT TO MAKE ANY ADDITION BASED ON STATEMENT RECORDE D U/S 132(4) BUT ON THE BASIS OF SEIZED MATERIAL. MOREOVER THE STATEMENT RECORDED DOES NOT GIVE ANY INDICATION OF ANY CONCEALMENT FOUND DURING THE COURSE OF SEARCH WHICH WAS SURREND ERED NOR THE QUESTION PUT TO ASSESSEE SUGGEST THAT THE AUTHORIZED OFFICER HAS QUANTIFIED ANY SPEC IFIC CONCEALMENT BASED ON SEIZED MATERIAL IN RESPECT OF WHICH THE ASSESSEE MADE SURRENDER OF RS 5,00,00,000/-. SUCH A STATEMENT IS REBUTTABLE PRESUMPTION WHICH CAN BE REBUTTED WITH EVIDENCE. SI NCE NO UNDISCLOSED WAS WORKED OUT BY THE AUTHORIZED OFFICER DURING THE COURSE OF SEARCH THE SURRENDER MADE IS NEITHER SUPPORTED BY CONCEALED INCOME NOR BY INVESTMENT OR BY UNDISCLOSE D EXPENDITURE. HENCE NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS OF STATEMENT GIVEN U/S 13 2(4) PARTICULARLY WHEN ASSESSEE HAD OFFERED UNDISCLOSED INCOME BASED ON SEIZED MATERIAL. THIS F ACT IS EVIDENT FROM THE QUESTION AND ANSWER REPRODUCED BELOW: IZU 22 GEUS VKIDS TKS ,USDLJ ,&1 LS ,&9 DS DKXT F N[K, VKSJ MUDK VKIUS CQDL DS LKFK FEYKU UGHA DJK;K GS TCFD MLES DKQH HKKJH JD E DS CKJS ESA FTDZ GS D;KWADH VKI DH CQDL ;GKWA IJ GSA GH UGHA A VKI VHKH CQDL IZKSM~;WL DJKSXS A MRRJ ESA BL LE; VIUS FCTUSL DULUZ DH CGH [KKRS DKS IZLRQR DJUS ESA VLEFKZ GWW D;KSFD ESJK ,DKMAVSAV CKGJ X;K GS VKSJ BLFY, DKXTKSA DK RK YESY UGHA DJOK LDRK GWW VKSJ ESA ;G HKH EKURK GWW FD BUESA DQN ,SLS YSU NSUKSA DK FTDZ GS T KS FD VU&VDKMVSM YSUS NSUS GSA TKS CQDL DS CKGJ GSA VKSJ TKS ESJH V?KKSFKR VK; GSA VKSJ BL IJ ESA EU DH KKFUR DS FY, VSDL DS FY, IZLRQR DJRK GWW BLFTY, ESA VIUS UKE DFEKU VK; FCTU SL ESLLZ UKUD ,AVJIZKBTL] ESLLZ LW;KZ FDJ.K IZKWI0 JH IK:Y EKB LU DS VS~ZFMX VFDV FOVH] LVKWD] DSK BR;KFN DS EN ESA :IK;S 5 DJKSJ IKWAP DJKSM VKSVY VSDL DS FY, IZLRQR DJRK GWW FTLDS FY, ,D DJKSJ NL YK[K 18 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. IWFRL GTKJ :I;S DSK VSDL DS FY, ESA NS JGK GWW VKS J CKDH DS ESA DQN FNUKSA ESA HKJ NWWXK A ;G ESA BL KRZ IJ NS JGK GWW FD ESJS MIJ DKSBZ ISUKYVH IZKWFLD;WKU UGHA YXSXK A ;G LVSV~ESAV ESA LS{KU 132 4 JSM FON ,DLIYSUSKU 5 2 VKWQ LS{KU 27 1 1 LH A 21. NOW WE WOULD LIKE TO DISCUSS THE CASE LAWS RELI ED UPON BY LD CIT(DR). IN KACHWALA GEMS VS. JT. CIT 288 ITR THE AO RESORTED TO BEST J UDGEMENT ON THE GROUNDS THAT THE ASSESSEE HAD NOT MAINTAINED QUANTITATIVE DETAILS / REGISTER; THERE WAS NO EVIDENCE TO VERIFY CLOSING STOCK; THE GENUINENESS OF PURCHASES WAS NOT PROVED WITHOUT ANY DOUBT. THE CIT (A) AND ITAT UPHELD THE REJECTION OF BOOKS OF ACCOUNTS. HONBLE HIGH C OURT REJECTED THE APPEAL OF THE ASSESSEE. ON FURTHER APPEAL AFFIRMING THE DECISION OF HONBLE HI GH COURT, ON THE FACT, THAT THERE WAS NO ARBITRARINESS IN RESORTING TO THE BEST JUDGEMENT AS SESSMENT. IT WAS ASSESSEE HIMSELF WHO WAS TO BE BLAMED AS HE DID NOT SUBMIT PROPER ACCOUNTS. TH E FACTS OF THE CASE BEFORE US DISTINGUISHABLE AND HENCE NOT APPLICABLE. IN G. S. NANJEE & SONS VS . CIT (SUPRA) DURING THE COURSE OF SEARCH BY THE SALES TAX DEPARTMENT AT THE BUSINESS PREMISES O F THE ASSESSEE CERTAIN SLIPS AND KATCHA RECEIPTS WERE FOUND AND SEIZED. BASED ON THE NOTIN GS ON THESE LOOSE PAPERS THE SALES TAX DEPARTMENT ESTIMATED THE CONCEALED SALES OF RS.44,1 06/- FOR ASSESSMENT YEAR 1982-83 PLACING RELIANCE ON THESE FIGURES OF SALES TAX AUTHORITIES, THE AO CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNT OF CONCEALED SALES AT RS.44,10 6/- SHOULD NOT BE ADDED AS SUPPRESSED SALES. AFTER CONSIDERING THE DETAILED WRITTEN SUBMISSIONS SUBMITTED BY THE ASSESSEE THE AO ADDED THE AMOUNT OF RS.44,106/- TOWARDS SUPPRESSED SALES TO T HE TOTAL INCOME AND FRAMED ASSESSMENT. ON APPEAL THE ADDITION WAS SUSTAINED UP TO THE LEVEL O F THE ITAT. PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT WAS ALSO CONFIRMED. ON REFERE NCE HONBLE GUJARAT HIGH COURT UPHELD THE PENALTY AS THE AMOUNT IN QUESTION REPRESENTED THE C ONCEALED INCOME OF THE ASSESSEE. THE RATIO OF THIS DECISION IS NOT ALSO APPLICABLE. THE VERY ESTI MATION OF PURCHASES IS UNDER CHALLENGE. THE FIGURES MENTIONED CANNOT BE TREATED AS RATES OF DRY FRUITS AS THEY ARE 15-20 TIMES OF PREVALENT MARKET RATE. THE ASSESSING OFFICER HAS RESORTED TO ESTIMATION OF PURCHASES AND COMMISSION THEREON WHICH HAS BEEN FOUND TO BE BASED ON SURMISE S AND CONJUNCTURES. IN FATHUDHINGA RICE MILLS VS. CIT (SUPRA) DURING THE SEARCH AND SEIZURE OPERATION AT THE BUSINESS PREMISES CERTAIN 19 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. INCRIMINATING DOCUMENTS WERE FOUND AND THE CASE WAS TAKEN THEREAFTER FOR SCRUTINY AND NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE. ADDI TIONS MADE BASED ON DOCUMENTS FOUND WERE UPHELD UP TO TRIBUNAL. ON APPEAL TO THE HONBLE HI GH COURT, HONBLE PUNJAB & HARYANA HIGH COURT HELD THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE DID NOT REFLECT THE CORRECT TRANSACTIONS OF BUSINESS AND WERE IN CONSISTENT WIT H THE NOTE BOOK AND DIARY SEIZED. HAVING REGARD TO THE TRANSACTIONS FOUND OUTSIDE THE BOOKS OF ACCOUNTS THE ASSESSMENT WAS MADE ON THE BASIS OF ESTIMATE. IN SUCH A SITUATION SOME AMOUNT OF GUESS WORK COULD NOT BE RULED OUT. THE VIEW TAKEN BY THE TRIBUNAL WAS JUSTIFIED. THE RATIO OF THIS DECISION IS ALSO NOT APPLICABLE FOR SAME REASONS AS MENTIONED IN RESPECT OF G. S. NANJEE & S ONS VS. CIT (SUPRA). 22. IN VIEW OF ABOVE DISCUSSION WE HOLD THAT ENTRI ES RECORDED IN THIRD COLUMN OF NOTE PAD ARE NOT RATE OF DRY FRUITS AND HENCE ESTIMATION OF PURC HASES BY EXTRAPOLATION CANNOT BE UPHELD. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ESTIM ATION OF COMMISSION EARNED IN RESPECT OF UNDISCLOSED BUSINESS SOLELY ON THE BASIS OF THE SAI D NOTE PAD. THE ASSESSEE HAS OFFERED HIS UNDISCLOSED INCOME EARNED AMOUNTING TO RS 2.57 CROR ES BASES ON SEIZED MATERIAL. THE ASSESSING OFFICER HAD NOT POINTED OUT ANY ANOMALY IN IT. WE, THEREFORE, DELETE THE ADDITIONS IN ASSESSMENT YEARS 2001-02, 2002-03, 2003-04, 2005-06 AND 2006-0 7. ASSESSMENT YEAR 2007-08 : 23. IN ASSESSMENT YEAR 2007-08, THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS.24,83,530/-. DURING THE COURSE OF SEARCH AT THE RESIDENCE OF THE ASSESSEE CASH OF RS.1,11,45,350/- WAS FOUND OUT OF WHICH RS.1,10,35, 350/- WAS SEIZED. THE ASSESSEE WAS REQUIRED TO RECONCILE THE CASH FOUND DURING THE COU RSE OF SEARCH. THE ASSESSEE ON THE BASIS OF SEIZED MATERIAL FILED CASH-FLOW STATEMENT SHOWING A VAILABILITY OF CASH AT RS.2,20,07,726/- AS ON THE DATE OF SEARCH I.E. ON 22/11/2006. THE ASSESSE E HAD FILED A PARALLEL CASH STATEMENT, BUT ACCORDING TO THE AO IT DID NOT EXPLAIN THE AVAILABI LITY AT THE RESIDENCE ON THE DATE OF SEARCH. THE 20 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. AO NOTED THAT THE EVIDENCE AVAILABLE IN THE FORM OF CASH SHOWS THAT THE ASSESSEE HAD MADE LARGE SCALE PAYMENT IN CASH FOR UNACCOUNTED PURCHASES. T HE AO TREATED THE CASH-FLOW STATEMENT AS SELF-SERVING EVIDENCE. SINCE THE ASSESSEE HAD NOT GIVEN ANY COGENT EXPLANATION FOR AVAILABILITY OF CASH AT THE RESIDENCE, THE AO ADDED BACK THE AMO UNT OF RS.1,11,45,350/- AS UNEXPLAINED CASH UNDER SECTION 69 OF THE ACT. ON APPEAL, IT WAS SUB MITTED BY THE ASSESSEE THAT THE ASSESSEE WAS SOLE PROPRIETOR OF M/S. NANAK ENTERPRISES AND IT WA S THE SOLE DISCRETION AND PREROGATIVE OF THE ASSESSEE TO DECIDE WHERE TO KEEP THE CASH BELONGING TO HIS BUSINESS; AND THE ASSESSEE HAS CHOSEN TO KEEP THE SAME AT HIS RESIDENCE, KEEPING SAFETY A ND SECURITY OF CASH IN MIND. IT WAS ALSO SUBMITTED THAT PLACE WHERE THE CASH WAS STORED AND FOUND WOULD NOT CHANGE THE COLOUR OF ITS SOURCE AND IT REMAINED THE SAME. THE SOURCE OF CAS H WAS EXPLAINED BY WAY OF CASH-FLOW STATEMENT IN WHICH AN INCOME OF RS.2,57,82,772/- AR ISING FROM UNACCOUNTED BUSINESS ACTIVITIES WAS DULY RECORDED FOR THE CHECK PERIOD AND AFTER NET ACCOUNTING FOR CASH OUTFLOWS NET CASH OF RS.2,20,07,726/- AS ON THE DATE OF SEARCH WAS ARRIV ED AT WHICH WAS ALMOST TWICE OF THE AMOUNT OF CASH OF RS.1,11,45,350/- FOUND AS ON THAT DATE WITH THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE ASSESSEES ONLY SOURCE OF INCOME WAS BUSINESS ACTIV ITIES WHETHER DISCLOSED OR NOT TO THE INCOME TAX DEPARTMENT. THE ASSESSEE MAINTAINED BANK ACCOU NT IN RESPECT OF HIS DISCLOSED BUSINESS ACTIVITIES, BUT STRICTLY DEALT IN CASH IN RESPECT O F HIS ALL UNDISCLOSED BUSINESS ACTIVITIES. THEREFO RE, THE BALANCE OF RS.1,11,45,350/- AROSE FROM UNDISCLO SED ACTIVITIES AND WAS LYING WITH HIM AS ON THE DATE OF SEARCH. FURTHER THE FUNDAMENTAL PRINCI PAL OF ACCOUNTANCY AND CARDINAL RULE OF TELESCOPING OF INCOME AGAINST INVESTMENT UNDER THE INCOME TAX PRECEDENCE MUST BE APPLIED. THE AVERMENT OF THE AO THAT CASH FLOW STATEMENT DOE S NOT EXPLAIN CASH FOUND AT THE RESIDENTIAL PREMISES OF THE ASSESSEE IS JUST FRIVOLOUS AND DEVO ID OF MERIT. IN FACT IN HIS STATEMENT RECORDED ON 22/11/2006 THE ASSESSEE ADMITTED THAT IT WAS UNA CCOUNTED MONEY WHICH HE OFFERED TOWARDS PAYMENT OF TAX. THEREFORE, AT THE TIME OF SEARCH T HE ASSESSEE DECLARED SOURCE OF CASH OF RS.1,11,45/350/- AS INCOME FROM UNACCOUNTED BUSINES S. ACCORDINGLY AFTER THE SEARCH THE ASSESSEE ESTIMATED HIS UNRECORDED BUSINESS TRANSACT ION FROM THE SEIZED MATERIAL AND PREPARED A CASH FLOW STATEMENT BY TELESCOPING ALL CASH INFLOWS AND OUTFLOWS FOR THE CHECK PERIOD AND ARRIVED AT THE CLOSING BALANCE OF RS.2,20,07,726/- AS ON THE DATE OF SEARCH. IT WAS FURTHER SUBMITTED THAT TOTAL INCOME OF RS.2,57,82,722/- WAS COMPUTED AS UNDISCLOSED INCOME WHICH WAS OFFERED TO TAX IN THE RETURNS OF INCOME FILED UNDER SECTION 153A OF THE ACT. FOR EARNING THE SAID INCOME ALL PAYMENTS OF PURCHASE OF GOODS HAD ALSO B EEN MADE IN CASH AND RECEIPTS AGAINST SALE 21 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. OF GOODS AND COMMISSION INCOME ALSO AROSE IN CASH T O THE ASSESSEE. THUS CASH FOUND DURING THE COURSE SEARCH GET TELESCOPED INTO CASH AVAILABILITY OF RS.2,20,07,726/-. 24. THE LD. CIT (APPEALS) ON CONSIDERATION OF ABOVE SUBMISSIONS MADE BY THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD ATTEMPTED TO EXPLAIN THE AVAILABILITY OF CASH ON THE BASIS OF CASH FLOW STATEMENT. HOWEVER, NO EVIDENCE HAD BEEN LED THAT SUCH CASH FLOW STATEMENT WHICH PERTAIN TO THE BUSINESS ACTIVITY HAS ANY CONNECTION WITH TH E CASH FOUND FROM BUSINESS OF THE ASSESSEE. THE ASSESSEE AT THE TIME OF SEARCH HAD OFFERED THE SAID SUM AS INCOME. ONCE THE ASSESSEE HAD OFFERED THE SUM FOR TAX IN STATEMENT RECORDED AT TH E TIME OF SEARCH, THERE WAS NO JUSTIFICATION TO CONTEND THAT SUCH CASH WAS EXPLAINED PARTICULARLY W HEN THERE WAS NO UNACCOUNTED BUSINESS IN THE INSTANT YEAR. THEREFORE, THE PLEA OF TELESCOPING T HE CASH FOUND WAS MISCONCEIVED. THE LD. CIT (A), THEREFORE, REJECTED THE CONTENTION OF THE ASSE SSEE AND UPHELD THE ADDITION OF RS.1,11,45,350/-. 25. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD DECLARED RS.2,57,07,726/- AS INCOME FROM UNDISCLOSED BUSINES S. THE ASSESSEE HAD PREPARED THE AVAILABILITY OF CASH ON THE BASIS OF INCOME DISCLOS ED FOR DIFFERENT YEARS. THE CASH FOUND AT THE TIME OF SEARCH HAS COME FROM UNACCOUNTED BUSINESS. AS REGARDS THE SURRENDER OF RS.1,11,45,350/- UNDER SECTION 132(4) OF THE ACT TH E LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD RETRACTED THE STATEMENT WHEN HE FILED RETURN OF INCOME ADMITTING UNDISCLOSED INCOME. THE CASH FOUND HAS COME FROM UNDISCLOSED B USINESS OF THE ASSESSEE, WHICH WAS CARRIED ON IN EARLIER YEARS. THEREFORE, TELESCOPING HAS TO BE ALLOWED. ON THE OTHER HAND, THE LD. CIT(DR) SUBMITTED THAT THE ASSESSEE HAD OFFERED THE CASH FOUND DURING THE COURSE OF SEARCH UNDER SECTION 132(4) OF THE ACT AND, THEREFORE, RET RACTION OF THE SAME CANNOT BEEN PERMITTED. HE, THEREFORE, SUBMITTED THAT THE ORDER PASSED BY THE L D. CIT (APPEALS) UPHOLDING THE ADDITION IS JUSTIFIED. 26. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE IT IS CLEAR THAT THE ASSESSE E HAS UNACCOUNTED BUSINESS AND HAD OFFERED AN 22 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. AMOUNT OF RS.2,57,82,722/- IN ASSESSMENT YEARS 2001 -02 TO 2006-07 IN THE RETURNS OF INCOME FILED UNDER SECTION 153A OF THE ACT. THE ASSESSEE ON THE BASIS OF INCOME SO ADMITTED IN VARIOUS YEARS HAS DRAWN UP CASH FLOW STATEMENT AFTER ACCOUN TING FOR CASH OUT-FLOWS DEPICTING THE NET CASH AVAILABILITY OF RS.2,20,07,726/-. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEE HAD CARRIED OUT THE COMMISSION BUSINESS IN THESE YEARS OUTSIDE THE BOOKS OF ACCOUNTS FOR WHICH NO BOOKS OF ACCOUNTS WERE MAINTAINED. DURING THE COUR SE OF SEARCH NO MATERIAL WAS FOUND INDICATING INVESTMENTS MADE BY THE ASSESSEE. WHATE VER WAS THE CASH OUT-FLOW THAT HAS BEEN CONSIDERED. THEREFORE, LOGICAL CONCLUSION IS THAT CASH FOUND DURING THE COURSE OF SEARCH, IN THE ABSENCE ANY CONTRARY EVIDENCE OF INVESTMENT WILL EM ANATE FROM THE UNDISCLOSED BUSINESS ACTIVITIES OF THE ASSESSEE. THE INCOME DECLARED IN EARLIER YEARS IS MORE THAN THE CASH FOUND AT THE RESIDENTIAL PREMISES DURING THE COURSE OF SEARCH. NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH INDICATING INVESTMENTS OUT OF UNDISCLOSED IN COME OF EARLIER YEARS AND, THEREFORE, TELESCOPING HAS TO BE ALLOWED IN RESPECT OF AMOUNT OF CASH OF RS.1.11,45,350/- AGAINST THE INCOME OFFERED FOR TAX FROM UNDISCLOSED BUSINESS. M ERELY BECAUSE THERE WAS NO UNDISCLOSED BUSINESS IN THE YEAR UNDER CONSIDERATION TELESCOPIN G WILL NOT BE GIVEN CANNOT A CRITERION FOR REJECTION OF THE REQUEST OF THE ASSESSEE FOR SUCH R ELIEF. 27. THE ASSESSEE IN RESPONSE TO QUESTION NO. 20 ADM ITTED THAT THE AMOUNT OF RS.1,11,45,350/- FOUND DURING THE COURSE OF SEARCH WAS HIS UNACCOUNT ED MONEY AND OFFERED THE SAME FOR TAXATION. IN QUESTION NO. 22 THE AUTHORIZED OFFICER ASKED ABO UT ENTRIES RECORDED ON INCRIMINATING MATERIAL WITH REFERENCE TO REGULAR BOOKS OF ACCOUNTS. IT WA S STATED BY HIM THAT HIS ACCOUNTANT HAS GONE OUT AND, THEREFORE, HE WAS UNABLE TO GET VERIFICATI ON DONE. HOWEVER, HE ADMITTED UNACCOUNTED ENTRIES WHICH REPRESENTED HIS UNDISCLOSED INCOME. THE ASSESSEE OFFERED RS. FIVE CRORES TO BUY PEACE SUBJECT TO NO PENALTY UNDER SECTION 271(1)(C) READ WITH EXPLANATION 5(II) OF THE ACT. THE ASSESSEE AT THE TIME OF FILING THE RETURN HAD NOT A DMITTED THE SURRENDER OF RS. FIVE CRORES TOGETHER WITH CASH OF RS 1,11,45,350/-. HOWEVER, HE HAD OFF ERED INCOME BASED ON ENTRIES RECORDED IN THE DOCUMENTS AMOUNTING TO RS.2,57, 82,722/-. THE ASSE SSING OFFICER HAD NOT FOUND ANY MISTAKE IN COMPUTATION OF UNDISCLOSED INCOME BASED ON ENTRIES RECORDED IN THE DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH. THE ASSESSING OFFICER HAD ALSO NOT MADE ADDITION OF RS. FIVE CRORES. HOWEVER, HE HAS CHOSEN TO ESTIMATE THE SALES FOR EA RLIER YEARS AND HAS COMPUTED UNDISCLOSED 23 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. INCOME. NON-ADMISSION OF INCOME OFFERED IN RESPECT OF CASH FOUND AT RS.1,11,45,350/- AMOUNTS TO RETRACTION OF STATEMENT RECORDED UNDER SECTION 1 32(4). THE ASSESSEE HAD OFFERED INCOME OF RS.2,57,82,722/- BASED ON THE INCRIMINATING MATERIA L FOUND DURING THE COURSE OF SEARCH AND ALSO HAD EXPLAINED THAT THE CASH OF RS.1,11,45,350/- HAD ARISEN FROM THE UNDISCLOSED BUSINESS OF THE ASSESSEE. THEREFORE, IN OUR CONSIDERED OPINION, ON CE TELESCOPING OF THE CASH FOUND IS ALLOWED AGAINST THE INCOME OFFERED TO TAX ON THE BASIS OF E NTRIES RECORDED IN THE BOOKS OF ACCOUNTS, NO SEPARATE ADDITION CAN BE MADE UNDER SECTION 132(4) OF THE ACT. THE STATEMENT RECORDED UNDER SECTION 132(4) IS A REBUTTABLE PRESUMPTION WHICH CA N BE REBUTTED ON THE BASIS OF EVIDENCE BROUGHT ON RECORD. IN THE CASE BEFORE US THE ASSES SEE HAD DRAWN UP CASH-FLOW STATEMENT BASED ON THE ENTRIES RECORDED IN THE LOOSE PAPERS/DOCUMENTS, INCOME OFFERED FOR DIFFERENT YEARS, ACCORDING TO WHICH, THE CASH IN HAND AS ON DATE OF SEARCH WAS ARRIVED AT RS.2,20,07,727/-. THIS CASH BALANCE DRAWN ON THE BASIS OF SEIZED MATERIAL IS SU FFICIENT TO PROVE THE AVAILABILITY OF CASH OF RS.1,11,45,350/-. SEPARATE ADDITION MADE WOULD AMO UNT TO DOUBLE ADDITION. THEREFORE, IN OUR CONSIDERED OPINION, THE LD. CIT (A) WAS NOT JUSTIFI ED IN REJECTING THE TELESCOPING OF THE CASH FOUND AGAINST THE INCOME OFFERED FOR TAXATION IN AS SESSMENT YEARS 2001-02 TO 2006-07. THE ADDITION OF RS.1,11,45,350/- IS THEREFORE, DELETED. 28. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 IS ALSO ALLOWED. 29. TO SUM UP THE APPEALS FILED BY THE ASSESSEE A RE ALLOWED FOR ALL THE YEARS. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 30 TH SEPTEMBER, 2011. SD/- SD/- [ R. P. TOLANI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH SEPTEMBER, 2011. *MEHTA * 24 I.T.A. NOS. 4520, 4521, 4522, 4523, 4524 & 4525 (DE L) OF 2010. COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.