Shri Sanjay R. Shah, Surat V. The Income Tax Officer, Ward-3(4), Surat

ITA 492/AHD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0675 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Unexplained investment; Loose papers
• Section: 143(3); 133A; 131; 148; 132; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER ./ ITA.NO.492/AHD/2016 / ASSTT. YEAR: 2009-10 SHRI SANJAY R. SHAH SHOP NO.8, METRO TOWER NR. KINNARY CINEMA RING ROAD, SURAT 395 002. PAN : AFXPS 3512 B VS ITO, WARD-3(4) SURAT. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI RASESH SHAH, AR REVENUE BY : SHRI JAMES KURIAN, SR.DR / DATE OF HEARING : 28/07/2016 / DATE OF PRONOUNCEMENT: 02/09/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST T HE ORDER OF THE LD.CIT(A)-II, SURAT DATED 18.12.2015 PASSED FOR THE ASSTT.YEAR 2000-10. 2. THE ASSESSEE HAS TAKEN FOLLOWING SUBSTANTIAL GRO UNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY RELYING ON THE STATEMENT RECOR DED U/S. 133A IN THE COURSE OF SURVEY CONDUCTED 06.03.2009 AND STATEMENT S RECORDED U/S. 131 THEREAFTER, FOR MAKING VARIOUS ADDITIONS WITHOU T ANY CORROBORATIVE EVIDENCE, MORE PARTICULARLY WHEN STATEMENT RECORDED U/S. 133A ON 06.03.2009 HAS NOT GOT EVIDENTIARY VALUE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ITA NO.492/AHD/2016 2 ASSESSING OFFICER IN MAKING ADDITION OF RS. 217995/ - ON ACCOUNT OF DIFFERENCE IN CHEQUE DISCOUNTING INCOME. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS. 15,08,8 36/- ON ACCOUNT OF NET PROFIT ON TEXTILE TRADING BUSINESS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS. 12,86,8 33/- ON ACCOUNT OF UNEXPLAINED INVESTMENT SHOWN AS RECEIVABLES. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS. 67,75,0 00/- U/S. 68 ON ACCOUNT OF UNEXPLAINED CASH CREDIT. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS. 2,50,00 0/- ON ACCOUNT OF UNEXPLAINED INVESTMENT. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS. 11,40,9 20/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN SHARES. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED ASSESSING OFFICER HAS ERRED IN NOT GIVING THE TELESCOPING BENEFIT FOR OVERLAPPING ADDITION. 3. THOUGH IN GROUND NO.1 NOTHING SUBSTANTIAL WOULD TURN OUT, BUT IN ORDER TO APPRAISE US AS TO HOW STATEMENT RECORDED DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 IS TO BE A PPRECIATED, THE LD.COUNSEL FOR THE ASSESSEE HAS PRESSED THIS GROUND OF APPEAL. THE DISCUSSION ON THIS GROUND WOULD GOAD US HOW TO APPLY EVIDENCES AND ADJ UDICATE OTHER ISSUES. 4. BRIEFLY STATED FACTS ARE THAT A SURVEY OPERATION UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 WAS CARRIED OUT AT THE PRE MISES OF THE ASSESSEE ON 6.3.2009. A NOTICE UNDER SECTION 148 OF THE ACT WA S ISSUED ON 26.12.2011, ITA NO.492/AHD/2016 3 WHICH WAS DULY SERVED UPON THE ASSESSEE. IN RESPON SE TO THE NOTICE, THE ASSESSEE DID NOT FILE RETURN WITHIN TIME PERIOD STI PULATED IN THE NOTICE, BUT FILED RETURN ON 15.3.2013. IT EMERGES OUT FROM THE RECORD THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED ON 6.3.2009. THEREAFTER, HIS STATEMENT WAS RECORDED ON 20.3.2009 AND 30.3.2009. COPY OF THE S TATEMENT RECORDED ON 6.3.2009 IS AVAILABLE AT PAGE NO.34 TO 51 OF THE PA PER BOOK. THE STATEMENT WAS RECORDED ON A PRINTED STATIONERY UNDER THE HEAD ING D.D.I.T.S COPY. THIS STATIONERY CONTAINS HEADING STATEMENT U/S 132 (4)/ 131/133A(3)(III OF THE I.T. ACT 1961. THE OFFICER WHO HAS RECORDE D STATEMENT IS D.M. NIMJE, INCOME TAX OFFICER (INV.), SURAT. HE HAS SC ORED OFF SECTION 132(4) AND 133A(3)(III) OF THE ACT FROM THE HEADING. IN THIS WAY, HE HAS GIVEN A COLOUR TO THE STATEMENT, AS IF IT WAS RECORDED UNDE R SECTION 131 OF THE INCOME TAX ACT. OTHER TWO STATEMENTS WERE RECORDED UNDER SECTION 131 BY THE DEPUTY COMMISSIONER OF INCOME TAX, SURAT. THESE WE RE RECORDED ON OATH. COPIES OF THESE STATEMENTS ARE ALSO AVAILABLE AT PA GE NOS.92 TO 99 OF THE PAPER BOOK-2. THE LD.COUNSEL FOR THE ASSESSEE HAS SUBMIT TED THAT EVIDENTIARY VALUE OF THESE STATEMENTS HAS TO BE INFERRED WHILE DEALIN G WITH VARIOUS ADDITIONS MADE IN THE TOTAL INCOME OF THE ASSESSEE. THE AO H AS MADE REFERENCE TO THE STATEMENT AND RELIED UPON THE STATEMENTS RECORDED D URING THE COURSE OF SURVEY. IN OTHER WORDS, HE HAS GIVEN PREFERENCE TO THE REPLY GIVEN BY THE ASSESSEE ON SOME OF THE ISSUES IN THE STATEMENT REC ORDED DURING THE COURSE OF SURVEY INSTEAD OF REPLIES GIVEN DURING SUBSEQUENT I NQUIRIES CONDUCTED AT THE INCOME TAX OFFICE. ON THE STRENGTH OF THE HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS. S. KHADER KHAN SON, 352 ITR 480 (SC), HONBLE KERALA HIGH COURT DECISION IN THE CASE OF PAUL MATHEWS & S ONS VS. CIT, 263 ITR 101 (KER) AND OF HONBLE MADRAS HIGH COURT DECISION IN THE CASE OF CIT VS. S. KHADARKHAN SON, 300 ITR 157 (MAD.) CONTENDED THA T UNDER SUB-SECTION 3 OF SECTION 133, OFFICER WHO CARRIED OUT THE SURVEY UPON THE PREMISES OF THE ITA NO.492/AHD/2016 4 ASSESSEE WAS NOT AUTHORIZED TO ADMINISTER OATH, AND THEREFORE, THAT STATEMENT WAS TAKEN WITHOUT TAKING ANY OATH FROM THE ASSESSEE . IF THE OFFICER IS NOT EMPOWERED TO ADMINISTER OATH, THEN BY SCORING OFF T HE SECTIONS IN THE HEADS OF THE STATIONERY WOULD NOT AUTHORIZE OFFICER TO ADMIN ISTER OATH AND TAKE STATEMENT UNDER SECTION 131 OF THE INCOME TAX ACT, 1961 DURING THE SURVEY. THEREFORE, THIS STATEMENT IS ONLY A PIECE OF INFORM ATION, AND DOES NOT CARRY ANY EVIDENTIARY VALUE. HE HAS PLACED ON RECORD COP IES OF THESE DECISIONS. 5. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ERS OF THE REVENUE AUTHORITIES. HE POINTED OUT THAT STATEMENT WAS ALL EGEDLY TAKEN UNDER SECTION 131 AND ITS ADMISSIBILITY CANNOT BE CHALLENGED. 6. THE ISSUE REGARDING EVIDENTIARY VALUE OF THE STA TEMENT TAKEN DURING THE COURSE OF SURVEY, HAS FALLEN FOR CONSIDE RATION BEFORE THE HONBLE KERALA HIGH COURT IN THE CASE OF PAUL MATHE WS AND SONS (2003) 263 ITR 101 (KER). ACCORDING TO THE HONBLE KERALA HIGH COURT, DURING THE COURSE OF SURVEY, THE OFFICER COULD RECO RD THE STATEMENT OF A PERSON UNDER SUB-SECTION 3(III) OF SECTION 133A OF THE INCOME TAX ACT. THIS CLAUSE AUTHORIZES THE AUTHORITY TO RECORD A ST ATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR OR RELEVANT TO ANY PROCEEDI NGS UNDER THE ACT. HOWEVER, THE OFFICER IS NOT AUTHORIZED TO RECORD TH E STATEMENT ON OATH, AND HENCE, THE STATEMENT TAKEN DURING THE COURSE OF SURVEY, HAS NO EVIDENTIARY VALUE. IT IS SIMPLY AN INFORMATION, WH ICH CAN BE USED FOR CORROBORATION PURPOSE FOR DECIDING ANY ISSUE IN FAV OUR OR AGAINST THE ASSESSEE. THE OBSERVATIONS MADE BY THE HONBLE KER ALA HIGH COURT ON PAGE NO.108 OF THE JOURNAL ARE WORTH TO NOTE. IT R EADS AS UNDER: ..SECTION 133A(3)(III) ENABLES THE AUTHORITY TO RE CORD THE STATEMENT OF ANY PERSON WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ITA NO.492/AHD/2016 5 ANY PROCEEDING UNDER THE ACT. SECTION 133A, HOWEVER , ENABLES THE INCOME-TAX AUTHORITY ONLY TO RECORD ANY STATEMENT O F ANY PERSON WHICH MAY BE USEFUL, BUT DOES NOT AUTHORISE TAKING ANY SWORN STATEMENT. ON THE OTHER HAND, WE FIND THAT SUCH A P OWER TO EXAMINE A PERSON ON OATH IS SPECIFICALLY CONFERRED ON THE AUTHORISED OFFICER ONLY UNDER SECTION 132 (4) OF TH E INCOME-TAX ACT IN THE COURSE OF ANY SEARCH OR SEIZURE. THUS, THE I NCOME-TAX ACT, WHENEVER IT THOUGHT FIT AND NECESSARY TO CONFER SUC H POWER TO EXAMINE A PERSON OH OATH, THE SAME HAS BEEN EXPRESS LY PROVIDED WHEREAS 'SECTION 133A DOES NOT EMPOWER ANY INCOME-T AX OFFICER TO EXAMINE ANY PERSON ON OATH. THUS, IN CONTRADISTI NCTION TO THE POWER UNDER SECTION 133A, SECTION 132(4) OF THE INC OME-TAX ACT ENABLES THE AUTHORISED OFFICER, TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMI NATION CAN ALSO BE USED IN EVIDENCE UNDER THE INCOME-TAX ACT. ON THE OTHER HAND, WHATEVER STATEMENT IS RECORDED UNDER SECTION 133A OF THE INCOME-TAX ACT IT IS NOT GIVEN ANY EVIDENTIARY VALU E OBVIOUSLY FOR THE REASON THAT THE OFFICER IS NOT AUTHORISED TO AD MINISTER OATH AND TO TAKE ANY SWORN STATEMENT WHICH ALONE HAS EVIDENT IARY VALUE AS CONTEMPLATED UNDER LAW. THEREFORE, THERE IS MUCH FO RCE IN THE ARGUMENT OF LEARNED COUNSEL FOR THE APPELLANT THAT THE STATEMENT ELICITED DURING THE SURVEY OPERATION HAS NO EVIDENT IARY VALUE AND THE INCOME-TAX OFFICER WAS WELL AWARE OF THIS' 7. SIMILARLY, THE HONBLE MADRAS HIGH COURT HAS ALS O CONCLUDED THAT STATEMENT RECORDED DURING THE COURSE OF SURVEY HAS NO EVIDENTIARY VALUE. THE SLP AGAINST THE DECISION OF THE HONBLE MADRAS HIGH COURT HAS ALSO BEEN DISMISSED BY THE HONBLE SUPREME COURT. 8. AS OBSERVED EARLIER, NOTHING SUBSTANTIAL WOULD T URN OUT ON THIS ISSUE. IT IS A PERIPHERAL ISSUE RELATED TO OTHER GROUNDS. WH ILE DEALING WITH THOSE ISSUES, WE WOULD KEEP IN MIND THE CONTENTIONS RAISED BY THE LD.COUNSEL, AND THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F S. KHADARKHAN & SONS 9SUPRA). NOW WE TAKE RESTS OF THE GROUNDS. ITA NO.492/AHD/2016 6 9. IN GROUND NO.2, THE ASSESSEE HAS IMPUGNED ADDITI ON OF RS.2,17,995/-. 10. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE W AS ENGAGED IN THE BUSINESS OF CHEQUE DISCOUNTING. IN THIS LINE OF BUSINESS, H E HAS USED TO RECEIVE CHEQUE FROM DIFFERENT PERSONS AND AFTER CHARGING A NOMINAL COMMISSION, HE HANDED OVER CASH. ACCORDING TO THE AO, THE ASSESSEE HAS EARNED COMMISSION INCOME FROM THIS ACTIVITY AT THE RATE OF 0.1%. THE AO FUR THER OBSERVED THAT THE TURNOVER OF THE ASSESSEE WAS OF RS.36,65,74,855/-. THE AO PROPOSED AN ADDITION OF RS.3,66,575/- AT THE RATE OF 0.1% OF TH E TURNOVER. THE ASSESSEE CONTENDED THAT SEVEN BANK ACCOUNTS REFERRED BY THE AO IN THE SHOW CAUSE NOTICE HAVE DULY BEEN CONSIDERED BY THE ASSESSEE IN HIS BANK ACCOUNTS. HE SUBMITTED PHOTO-COPIES OF BANK STATEMENT ALONG HIS REPLY. THE ASSESSEE CONTENDED THAT BANK ACCOUNT BEARING NO.2737 WITH SU RAT MAHILA NAGARIK CO- WAS CLOSED ON 28.1.2008 AND HE HAS NOT CARRIED OUT ANY ACTIVITY THROUGH THIS ACCOUNT. THE LD.AO WAS NOT SATISFIED. HE OBSERVED THAT THE ASSESSEE HAD TWO BANK ACCOUNTS BEARING NOS.2737 AND 2998 WITH SURAT MAHILA CO-OP. BANK, BOMBAY MARKET, SURAT. THE ASSESSEE HAD TURNOVER IN THESE ACCOUNTS, AND HE DID NOT INCLUDE THE COMMISSION INCOME OF THE TOTAL TURNOVER IN THESE ACCOUNTS AVAILABLE AT RS.28,99,90,086/-. THE AO HAS ESTIMAT ED THE COMMISSION INCOME AT THE RATE OF 0.1% ON THIS TURNOVER AND MAD E ADDITION OF RS.2,89,990/-. THE AO, THEREAFTER, OBSERVED THAT T HE ASSESSEE HAS OFFERED TOTAL DISCOUNTING INCOME AT RS.7,96,562/- FOR TAXAT ION. HE INCLUDED A SUM OF RS.71,995/- AS CHEQUE DISCOUNTING INCOME. AFTER DE BITING THIS AMOUNT FROM RS.2,89,990/- THE AO HAS WORKED OUT THE DIFFERENCE AT RS.2,17,995/- AND ACCORDINGLY MADE ADDITION. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. ITA NO.492/AHD/2016 7 11. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE CONT ENDED THAT THE ASSESSEE HAS CLOSED BANK ACCOUNT WITH SURAT MAHILA CO-OP. BA NK LTD. THE AO HAS GOT SOME INFORMATION FROM THE BANK, BUT THAT INFORMATIO N WAS NEVER SUPPLIED TO THE ASSESSEE. THE AO HAS GIVEN A CD DURING THE REM AND PROCEEDINGS CALLED FOR BY THE CIT(A), BUT THAT CD NEVER OPENED EVEN BE FORE THE AO. ACCORDING TO THE ALLEGATION OF THE DEPARTMENT, THE ASSESSEE W AS PROVIDED BANK STATEMENT IN THE SHAPE OF CD WHICH INDICATED TURNOVER, BUT AC CORDING TO THE LD.COUNSEL FOR THE ASSESSEE, NO SUCH DETAILS EVER SUPPLIED TO THE ASSESSEE. THE ASSESSEE HAS SPECIFICALLY PLEADED THIS ASPECT IN THE WRITTEN SUBMISSIONS FILED BEFORE THE LD.CIT(A) AS WELL AS BEFORE US. 12. ON DUE CONSIDERATION OF RIVAL CONTENTIONS, WE A RE OF THE VIEW THAT UNLESS THE FACTS ARE RECONCILED NO FINDING CAN BE R ECORDED. IT HAS TO BE DECIDED WHETHER TWO BANK ACCOUNTS WITH SURAT MAHILA CO-OP. BANK LTD. WERE CLOSED BY THE ASSESSEE OR NOT. WITHOUT THERE BEING ANY CLINCHING EVIDENCE ON THIS ISSUE, IT WILL BE A SPECULATIVE FINDING AT THE END OF THE TRIBUNAL. THE AO HAS BEEN EMPHASIZING THAT HE CALLED FOR INFORMATION FROM THE BANK DISCLOSING THAT THE ASSESSEE HAS MADE TRANSACTION, BUT THE ASS ESSEE HAS BEEN REFUTING THIS INFORMATION OF THE AO. THE INFORMATION IS NOT AVAI LABLE ON THE RECORD. THE ASSESSEE HAS CHALLENGED THE AO AS WELL AS TOOK A SP ECIFIC PLEA BEFORE THE CIT(A). BUT THE AO IS SILENT IN HIS REMAND REPORT. THEREFORE, WE DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR RE-VERIFICATION AND RE-ADJUDICATION. THE LD.AO SHALL PROVIDE COPY OF T HE BANK STATEMENT EXHIBITING THE TURNOVER BETWEEN JANUARY 2008 TO 30 TH SEPTEMBER, 2008. IF THE TRANSACTION IS THERE, IN THESE ACCOUNTS, THEN HE WI LL BE AT LIBERTY TO MAKE ADDITION OF COMMISSION INCOME AT THE RATE OF 0.1%. BUT IF THERE IS NO TRANSACTION IN THESE ACCOUNTS, AS ALLEGED BY THE AS SESSEE, THEN, THERE WOULD NOT ITA NO.492/AHD/2016 8 BE ANY INCOME ON ACCOUNT OF COMMISSION INCOME EARNE D IN CHEQUE DISCOUNTING ACTIVITY. THIS GROUND OF APPEAL IS ALL OWED. 13. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED ADD ITION OF RS.15,08,836/- 14. BRIEF FACTS OF THE CASE ARE THAT DURING THE COU RSE OF SURVEY TWO SEALS OF M/S.ANJANI TEXTILES AND M/S.AMBICA TEXTILES WERE FO UND FROM THE OFFICE PREMISES OF THE ASSESSEE. ACCORDING TO THE AO, THE RE WERE THREE BANK ACCOUNTS IN THE NAMES OF THESE CONCERNS WITH ADINAT H CO-OP. BANK AND SURAT MAHAILA NAGRIK CO-OP. BANK. THE AO HAS OBSERVED TH AT IN THE ASSTT.YEAR 2007-08, THE ASSESSEE HAS SHOWN PROFIT IN RETAIL TR ADING OF TEXTILE AT THE RATE OF 10.55% OF HIS TURNOVER. HE HAS OFFERED INCOME, BUT IN THIS YEAR, THE ASSESSEE HAS NOT OFFERED ANY INCOME. THUS, THE AO ASSUMED I NCOME IN RETAIL TRADING OF TEXTILE. WHEN THE AO CONFRONTED THE ASSESSEE WI TH REGARD TO THIS SITUATION, THE ASSESSEE CONTENDED THAT HE HAS NOT BEEN INVOLVE D IN THE BUSINESS OF TRADING IN TEXTILE BUSINESS FROM THE F.Y.2008-09. WHATEVER BUSINESS HE HAS DONE EARLIER WAS NOT CONTINUED. THE ASSESSEE IS IN VOLVED ONLY IN CHEQUE DISCOUNTING BUSINESS. THIS TURNOVER HAS DULY BEEN ACCOUNTED IN THE CHEQUE DISCOUNTING BUSINESS. BUT THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE CONTENDED THAT THE PROFIT AT 10.5 5% OF THE TURNOVER AVAILABLE AT THREE BANK ACCOUNTS IN THE NAMES OF M/S.ANJANI T EXTILES AND M/S.AMBICA TEXTILES WITH TWO COOPERATIVE BANKS HAS TO BE ESTIA MTED. THE AO HAS ESTIMATED THE PROFIT AT RS.15,08,836/-. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 15. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THERE IS NO EVIDENCE WITH THE RE VENUE TO CONCLUDE THAT THE ASSESSEE WAS DOING BUSINESS IN TEXTILE. THE AO HAS ASSUMED BUSINESS ONLY ON THE BASIS OF AVAILABILITY OF TWO SEALS. TO OUR MIN D IT IS TOO HYPOTHETICAL. IN ITA NO.492/AHD/2016 9 SPITE OF SURVEY, THE DEPARTMENT WAS NOT ABLE TO LAY ITS HAND ON ANY INCRIMINATING MATERIAL INDICATING THAT ACTIVE BUSIN ESS WAS CONDUCTED BY THE ASSESSEE IN RETAILED TRADING OF TEXTILE ITEMS. THE AO HAS SIMPLY ASSUMED THAT SINCE TWO SEALS ARE AVAILABLE, AND ASSESSEE HAS SHO WN INCOME FOR TWO YEARS EARLIER, THEREFORE, HE SHOULD HAVE INCOME IN THIS Y EAR ALSO. THIS OBSERVATION IS NOT BASED ON ANY MATERIAL. IF THIS TYPE OF THUMP R ULE IS BEING UPHELD, THEN THERE WILL BE NO END, THEREFORE, WE ALLOW THIS GROU ND AND DELETE THE ADDITION. 16. GROUND NO.4. IN THIS GROUND OF APPEAL, THE GRI EVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDI TION OF RS.12,86,833/- ON ACCOUNT OF UNEXPLAINED INVESTMENT SHOWN AS RECEIVAB LE. 17. DURING THE COURSE OF SURVEY CERTAIN LOOSE PAPER S WERE FOUND AND IMPOUNDED BY THE SURVEY TEAM. PAGE NO.12 OF THE AN NEXURE-B INDICATES CERTAIN AMOUNTS AGAINST THE NAMES OF CERTAIN PERSON S. THE AO HAS OBSERVED THAT IN THE STATEMENT RECORDED ON 6.3.2009, THE ASS ESSEE HAS EXPLAINED THAT THESE ARE THE LIST OF PARTIES FROM WHOM THE AMOUNTS WERE RECEIVABLE. THE LD.AO HAS CONFRONTED THE ASSESSEE TO SHOW CAUSE WHY RS.12,86,833/- SHOULD NOT BE CONSIDERED AS UNEXPLAINED INVESTMENT, AND IT SHOULD NOT BE ADDED AS THE INCOME FOR THE YEAR UNDER CONSIDERATION. IN RE SPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE HAS MADE THE FOLLOWING REPLY. YOUR PROPOSED ACTION TO ADD RS. 12,86,833/- BEING THE AMOUNT RECEIVABLE AS EVIDENT FROM PAGE 12 OFB-1: PAGE 12 OF B-L FOUND DURING THE SURVEY PROCEEDINGS SHOWS A LIST OF PERSONS FROM WHOM AMOUNT RECEIVABLE BY THE ASSESSEE . DETAILS REGARDING THE SAME ARE AS FOLLOWS: A) RS. 15,000/- FROM CHIRAG SHAH: IT IS AN OUTSTAN DING AMOUNT RECEIVABLE FROM CHIRAG SHAH SINCE THE AMOUNT WAS GI VEN BY THE ASSESSEE AS A JOAN- (COPY OF LEDGER DULY SIGNED IS ATTACHED). ITA NO.492/AHD/2016 10 B) RS. 2250/- FROM PARMAR: IT IS AN OUTSTANDING AM OUNT RECEIVABLE FROM PARMAR SINCE THE AMOUNT WAS GIVEN BY THE ASSES SEE AS A LOAN. (COPY OF LEDGER DULY SIGNED IS ATTACHED). C) RS. 1000/- FROM MR. G {GANESHBHAI): IT IS AN O UTSTANDING AMOUNT RECEIVABLE FROM MR. G (GANESHBHAI) SINCE THE AMOUNT WAS GIVEN BY THE ASSESSEE AS A LOAN. (COPY OF LEDGER DULY SIGNED IS ATTACHED). D) RS. 5400/- FROM SANJAY SHAH: IT IS AN OUTSTANDI NG AMOUNT RECEIVABLE FROM SANYAY SHAH SINCE THE AMOUNT WAS GIVEN BY THE ASSESSEE AS A LOAN COPY OF LEDGER DULY SIGNED IS ATTACHED). E) RS. 2340/- FROM MANISH DAMANIA: IT IS AN OUTSTA NDING AMOUNT RECEIVABLE FROM MANISH DAMANIA SINCE THE AMOUNT WAS GIVEN BY THE ASSESSEE AS A LOAN, (COPY OF LEDGER DULY SIGNED IS ATTACHED). F) RS. 1000/- FROM M. D. MAMA: IT IS AN OUTSTANDI NG AMOUNT RECEIVABLE FROM M. D. MAMA SINCE THE AMOUNT WAS GIV EN BY THE ASSESSEE AS A LOAN. (COPY OF LEDGER DULY SIGNED IS ATTACHED). G) RS. 7800/-FROM BHARATBHAI: IT IS AN OUTSTANDING AMOUNT RECEIVABLE FROM BHARATBHAI SINCE THE AMOUNT WAS GIVEN BY THE A SSESSEE AS A LOAN. (COPY OF LEDGER DULY SIGNED IS ATTACHED). H) RS. 800 FROM SUNILBHAI: IT IS AN OUTSTANDING AM OUNT RECEIVABLE FROM SUNILBHAI SINCE THE AMOUNT WAS GIVEN BY THE ASSESSE E AS A LOAN. (COPY OF LEDGER DULY SIGNED IS ATTACHED). I) RS. 4550/-FROM NAVINBHAI: IT IS AN OUTSTANDIN G AMOUNT RECEIVABLE FROM NAVINBHAI SINCE THE AMOUNT WAS GIVEN BY THE AS SESSEE AS A LOAN. (COPY OF LEDGER DULY SIGNED IS ATTACHED). J) RS. 2200/-FROM V. R. SHAH: IT IS AN OUTSTANDIN G AMOUNT RECEIVABLE FROM V. R. SHAH SINCE THE AMOUNT WAS GIVEN BY THE A SSESSEE AS A LOAN. (COPY OF LEDGER DULY SIGNED IS ATTACHED). K) RS. 200/- FROM PARESHKUMAR: IT IS AN OUTSTANDI NG AMOUNT RECEIVABLE FROM PARESHKUMAR SINCE THE AMOUNT WAS GI VEN BY THE ASSESSEE AS A LOAN. (COPY OF LEDGER DULY SIGNED IS ATTACHED). ITA NO.492/AHD/2016 11 I) RS. 10,000/- FROM P. C. SHAH: IT IS AN OUTSTA NDING AMOUNT RECEIVABLE FROM P. C. SHAH SINCE THE AMOUNT WAS GIV EN BY THE ASSESSEE AS A LOAN. (COPY OF LEDGER DULY SIGNED IS ATTACHED) . M) RS. 25,000/- FROM TINKUBHAI: IT IS THE AMOUNT RE CEIVABLE OUT OF THIRD PARTY SHROFF CHEQUE DISCOUNTING. COPY OF LEDG ER IS ATTACHED. N) RS. 2,95,30S/- FROM VAJUBHAI: IT IS THE AMOUNT RECEIVABLE OUT OF THIRD PARTY SHROFF, CHEQUE DISCOUNTING. COPY OF LED GER IS ATTACHED. O) RS.L,44,866/-FROM BHARATBHAI: IT IS THE AMOUNT RECEIVABLE OUT OF THIRD PARTY SHROFF CHEQUE DISCOUNTING. COPY LEDGER IS ATTACHED. P) RS. 80,700/-FROM KETANBHAI: IT IS THE AMOUNT RE CEIVABLE OUT OF THIRD PARTY SHROFF CHEQUE DISCOUNTING. COPY OF LEDGER IS ATTACHED. Q) RS. 1,52,319/- FROM NARESHBHAI JHAVERI: IT IS T HE AMOUNT RECEIVABLE AGAINST THEAGREEMENT TO SALE WAGON-R CAR. XEROX CO PY OF THE AGREEMENT TO SALE IS ATTACHED ALONG WITH A COPY OF LEDGER. R) RS. 7,81,100/~ FROM SURESHBHAI - NARESHBHAI: I T IS THE AMOUNT RECEIVABLE AGAINST THE AGREEMENT TO SALE FLAT @ RIV ERA TOWER. XEROX COPY OF THE AGREEMENT TO SALE IS ATTACHED ALONGIWTH A COPY OF LEDGER. FROM THE ABOVE, ITEMS (A) TO (L) WERE REGARDING THE AMOUNT GIVEN TO VARIOUS PERSONS AS TEMPORARY ADVANCE WHICH ARE RECO RDED ON THE IMPOUNDED PAGE ALONGWITH THE NAMES OF RESPECTIVE PE RSONS. ITEM (M) TO (P) WERE RELATED TO THE AMOUNT RECEIVABLE OUT OF TH IRD PARTY SHROFF CH./DD DISCOUNTING. THE ASSESSEE HAS EARNED INCOME FROM SUCH THIRD PARTY CH./DD DISCOUNTING AND THE SAME HAS ALSO BEEN OFFERED FOR TAX IN THE RETURN OF INCOME. THUS FROM THE ABOVE EXPLANATIONS, LEDGER ACCOUNTS & PROOFS, IT IS CLEAR THAT THE ASSESSEE HAD SIMPLY MADE THE TOTAL ESTIMAT ED FUND TO BE RECEIVED FROM VARIOUS PERSONS AGAINST LOANS & ADVAN CES GIVEN TO VARIOUS PERSONS, FROM THE THIRD PARTY SHROFFS & AN ESTIMATED AMOUNT ON SALE OF CAR & FLAT. CONSIDERING THE ABOVE FACTS, THE AMOUNT RECEIVABLE REFLECTED IN THE PAGE 12 OFB-1 IS FULLY EXPLAINED AND HENCE YOUR PRO POSED ACTION TO ADD RS. 12,86,833/- IS NOT JUSTIFIED AND CANNOT BE ADDE D IN THE INCOME. ITA NO.492/AHD/2016 12 18. THE LD.AO WAS NOT SATISFIED WITH THE EXPLANATIO N OF THE ASSESSEE AND OBSERVED THAT THE ASSESSEE HAS FAILED TO PROVE THE SOURCE OF SUCH CASH LOANS ADVANCED BY HIM. ACCORDING TO THE AO, THE ASSESSEE HIMSELF HAS ADMITTED THAT THESE CASH AMOUNTS WERE PAID OUT OF BOOKS, AND THEREFORE, SUM OF RS.12,86,833/- HAS BEEN TREATED BY THE LD.AO HAS UN EXPLAINED INVESTMENT. HE MADE ADDITION. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 19. THE STAND OF THE ASSESSEE IS THAT BOOKS OF ACCO UNTS WERE RECORDED UPTO 31.3.2008. THE ASSESSEE HAS DULY EXPLAINED THAT BO OKS WERE LYING WITH OFFICE OF THE CHARTERED ACCOUNTANT. THESE TRANSACTIONS HA D BEEN MENTIONED IN THE BOOKS AND THEY ARE NOT UNEXPLAINED UNACCOUNTED INVE STMENT. ACCORDING TO THE ASSESSEE, HE HAS ENTERED INTO AN AGREEMENT TO S ELL FLAT AT RIVERA TOWER AND WAS TO RECEIVE RS.7,81,100/-. HOW THAT CAN BE AN U NEXPLAINED INVESTMENT ? THE LD.DR, ON THE OTHER HAND, SUBMITTED THAT WHEN S URVEY WAS CONDUCTED BOOKS WERE NOT AVAILABLE AND WERE NOT COMPLETE, THU S, THE AO HAS RIGHTLY DRAWN INFERENCE THAT THESE ENTRIES WERE NOT REFLECT ED IN THE REGULAR BOOKS OF ACCOUNTS THE ASSESSEE. 20. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. THE COPY OF THE BALANCE SHEET IS AVAILA BLE AT PAGE NO.91 OF THE PAPER BOOK. THE MAJOR AMOUNT IN THIS LOOSE PAPER I S A SUM OF RS.7,81,100/-. ACCORDING TO THE ASSESSEE, THIS AMOUNT WAS RECEIVAB LE FROM ONE SHRI SURESBHAI NARESHBHAI. THE ASSESSEE HAD ENTERED INT O AGREEMENT FOR SALE OF FLAT AT RIVERA TOWERS. COPY OF THE AGREEMENT TO SE LL WAS FILED BEFORE THE AO. THIS FLAT HAS BEEN SHOWN BY THE ASSESSEE IN FIXED A SSETS IN THE BALANCE SHEET. THE LD.AO HAS NEVER TRIED TO VERIFY THE FACTS IN TH IS CONNECTION. IF IT WAS SALE PROCEEDS, WHICH WAS TO BE RECEIVED BY THE ASSESSEE, THEN HOW IT COULD BE AN UNEXPLAINED INVESTMENT AT THE END OF THE ASSESSEE ? THE FLAT WAS WITH THE ITA NO.492/AHD/2016 13 ASSESSEE AND HAS BEEN REFLECTED IN THE BOOKS, WHICH WAS AGREED TO BE SOLD TO SHRI SURESHBHAI AND TOKEN MONEY WAS TAKEN BY THE AS SESSEE. SIMILARLY, THE ASSESSEE HAS EXPLAINED EACH AND EVERY ENTRY AND HOW THESE HAVE DULY BEEN ACCOUNTED IN THE BOOKS. THEY CANNOT BE TREATED AS UNEXPLAINED INVESTMENT AT THE END OF THE ASSESSEE. WE ALLOW THIS GROUND AND DELETE THIS ADDITION. 21. GROUND NO.5. THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.67,75,000/- WITH THE AID OF SECTION 68. AS OBSERVED EARLIER, D URING THE COURSE OF SURVEY, CERTAIN LOOSE PAPERS WERE FOUND WHICH WAS INVENTORI SED AS ANNEXURE-B/1. ON PAGE NO.14 OF THIS ANNEXURE, A NARRATION IN CODE D WORD 67,750 WAS FOUND. THE ASSESSEE HAS EXPLAINED THAT IT WAS AN A MOUNT OF RS.67,75,000/-. IN THE STATEMENT GIVEN ON 6.3.2009, THE ASSESSEE HA S DISCLOSED THAT IT IS A LOAN TAKEN FROM ONE SHRI NAROTTAMBHAI PATEL, RESIDENT OF MAHIDHARPURA HIRA BAZAR, DEALING AS DIAMOND BROKER. BUT LATER ON, IN THE STATEMENT RECORDED ON 20.3.2009 AND 30.3.2009, THE ASSESSEE HAS SUBMITTED THAT IT IS A TRANSACTION NOTED DURING THE COURSE OF CHEQUE DISCOUNTING BUSIN ESS. HE POINTED OUT THAT THE ASSESSEE MUST HAVE RECEIVED CERTAIN CHEQUE FOR DISCOUNTING, BUT SINCE CASH WAS NOT AVAILABLE IN HIS ACCOUNT, THEREFORE, HE TOO K HELP OF OTHER SHROFF AND DISCOUNTED THESE CHEQUES. HE HAS GIVEN COMMISSION TO THESE SHROFF AND HANDED OVER CASH TO CLIENT. THIS EXPLANATION OF TH E ASSESSEE WAS NOT ACCEPTED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE FAI LED TO FURNISH NAME AND ADDRESS OF THE SHROFF FROM WHOM HE CLAIMED TO HAVE TAKEN CASH LOANS. IN HIS INITIAL STATEMENT, HE HAS SUBMITTED THAT IT WAS A L OAN. THE ASSESSEE HAS FURNISHED A DETAILED REPLY OF HIS POSITION FOR THE FIRST TIME ON 22.3.2013 I.E. AT FAG END OF THE ASSESSMENT PROCEEDINGS, AND THE AO C OULD NOT INVESTIGATE THE AUTHENTICITY OF THE CLAIMED BY THE ASSESSEE. ACCOR DINGLY, HE MADE AN ADDITION ITA NO.492/AHD/2016 14 OF RS.67,75,000/- WITH HELP OF SECTION 68 OF THE IN COME TAX ACT. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE . 22. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 68 OF THE INCOME TAX ACT CONTEMPLATES THAT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESS EE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGE D TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. BEFO RE EMBARKING UPON ANY INQUIRY ON THE NATURE OF DISPUTE AND FACTS OF THE P RESENT, WE WOULD LIKE TO MAKE REFERENCE TO VARIOUS ANSWERS GIVEN BY THE ASSE SSEE IN HIS STATEMENT RECORDED ON 20.3.2009 AND 30.3.2009. THESE STATEME NTS WERE GIVEN ON OATH IN THE SUBSEQUENT INQUIRY CONDUCTED BY DY.DIRECTOR OF INCOME TAX (INVESTIGATION). QUESTION NO.4 IN THE STATEMENT RECORDED ON 20.3.20 09 IS THE RELEVANT QUESTION IN THIS CONNECTION. THE QUESTION AND ITS REPLY READ AS UNDER: Q.4 DURING THE SURVEY PROCEEDINGS CONDUCTED AT YOU R PREMISES, IN YOUR ANSWER GIVEN TO QUESTION NO.9 DURING YOUR STAT EMENT TAKEN ON OATH, YOU HAVE STATED THAT YOU HAVE ACCEPTED TOTAL CASH AMOUNT OF RS. 67,75,000 FROM A PERSON KNOWN AS SHRI NAROTTAM PATE L FROM 1-2-2009 TO 24-2-2009 AND OUT OF THE SAME, YOU HAVE RE TURNED RS. 55,50,000. WHAT IS YOUR EXPLANATION ABOUT THIS TRANSACTION AS WELL AS ABOUT THE REST OF THE AMOUNT OF RS. 12,25,000 ? GIVE DETAILS. A.4 THE ABOVE REFERRED AMOUNT OF RS. 67,75,000 HAS BEEN TAKEN BY ME DURING MY CHEQUE DISCOUNTING BUSINESS FROM OTHER SHROFFS BY 'GIVING THIRD PARTY CHEQUES. FROM THE PERIOD OF 1-2-2009 TO 24-2-2009, I HAVE TAKEN TOTAL CASH AMOUNT OF RS.67,75,000 AND TILL TH IS DATE, THE THIRD PARTY CHEQUES OF RS. 55,50,000 OF THE DIFFERENT PAR TIES WERE GIVEN. AS REGARDS THE REST OF THE AMOUNT, THE CHEQUES OF THE PRIOR DAYS WERE GIVEN AFTER 25-2-2009. I DO NOT KNOW THE SHROFFS FROM WHO M I HAD TAKEN THE ITA NO.492/AHD/2016 15 CASH AMOUNTS. OUT OF THE ABOVE REFERRED AMOUNT, I H AVE EARNED THE COMMISSION AMOUNT. IN THIS MANNER, SINCE I DID NOT HAVE CASH AMOUNT WITH ME, I HAVE DONE CHEQUE DISCOUNTING FROM OTHER SHROFFS, OUT OF WHICH I HAVE EARNED AN AMOUNT OF ABOUT RS. 6000 TO RS. 8000 PER MONTH. IDENTICAL QUESTION WAS AGAIN ASKED, THE ASSESSEE G AVE REPLY VIDE QUESTION NSO.2 AND 3 IN THE STATEMENT RECORDED ON 3 0.9.2009. Q.2 ON DATED 20-3-2009, YOUR STATEMENT OF OATH WAS RECORDED AND DURING THE RECORDING OF THIS STATEMENT, IN YOUR ANS WER TO QUESTION NO. 4, YOU HAVE STATED THAT AS PER THE PAPERS IMPOUNDED FROM YOUR OFFICE PREMISES DURING THE SURVEY PROCEEDINGS, YOU HAVE RE CEIVED AN AMOUNT OF RS.TOTAL RS. 67,75,000 FOR THE PERIOD FROM 1-2-2 009 TO 24-2-2009 AND THIS AMOUNT HAS BEEN TAKEN BY YOUR FROM OTHER SHROFFS DURING YOUR CHEQUE DISCOUNTING BUSINESS, AFTER GIVING THI RD PARTY CHEQUES TO THEM. YOU HAVE ALSO STATED THAT IN THIS MANNER, SIN CE YOU DID NOT HAVE CASH AMOUNT WITH YOU, BY GIVING THIRD PARTY CHEQUES TO THE OTHER SHROFFS, YOU HAVE TAKEN CASH AMOUNTS FROM THEM AND IN THIS MANNER, YOU HAVE EARNED A COMMISSION AMOUNT OF RS. 6,000 TO RS. 8,000 EVERY MONTH. HENCE, IN THIS RESPECT, FURNISH THE NAMES AN D OTHER PARTICULARS OF THE SAID SHROFFS FROM WHOM YOU HAVE RECEIVED AN AMOUNT OF RS. 67,75,000 BY GIVING THIRD PARTY CHEQUES TO THEM FRO M THE PERIOD OF 1-2- 2009 TO 24-2-2009. IN THE SAME MANNER, IN CASE IF Y OU HAVE RECEIVED CASH AMOUNTS FROM OTHER SHROFFS ALSO, BY GIVING THE M THIRD PARTY CHEQUES, THEN GIVE THEIR NAME, ADDRESS, ETC. A.2 ONCE AGAIN I CONFESS THAT THE ABOVE REFERRED AM OUNT OF RS. 67,75,000 WAS TAKEN BY ME FROM THE PERIOD OF 1-2-2 009 TO 24-2-2009 ON DIFFERENT DATES FROM OTHER SHROFFS, BY GIVING TH EM THIRD PARTY CHEQUES. IN MY STATEMENT GIVEN DURING 'THE SURVEY P ROCEEDINGS, I HAD TOLD THAT I HAD TAKEN THIS AMOUNT FROM A PERSON WHO IS DOING THE WORK OF DIAMONDS BROKERAGE AT MAHIDHARPURA, DIAMOND MARK ET, PIPLA SHERI, SURAT BUT THIS STATEMENT IS INCORRECT AND I DO NOT KNOW ANY PERSON NAMED NAROTTAMBHAI, DOING THE BUSINESS O F DIAMOND BUSINESS AT MAHIDHARPURA, DIAMOND MARKET, PIPLA SHE RI, SURAT. I HAVE TAKEN THE ABOVE REFERRED AMOUNT FROM ONE SHROFF, BUT I AM NOT IN A POSITION TO DISCLOSE THE NAME AND ADDRESS OF THIS P ERSON BECAUSE IF I DISCLOSE THE NAME AND ADDRESS OF THIS PERSON, THEN MY BUSINESS RELATIONS WITH THIS PERSON SHALL BE BROKEN. I AM RE ADY TO PAY UP THE TAX UPON THE ABOVE REFERRED AMOUNT OF COMMISSION EARNED BY ME. ITA NO.492/AHD/2016 16 Q.3 THE ABOVE REFERRED CASH TRANSACTIONS OF RS. 67,75,00.0 ARE CONNECTED WITH YOUR CHEQUE DISCOUNTING BUSINESS. WH AT IS THE PROOF WITH YOU TO SHOW THAT THIS AMOUNT IS NOT A CASH LOA N TAKEN FROM ANY PERSON ? A.3 I DO NOT HAVE ITS ANY PROOF BUT THESE TYPE OF T RANSACTIONS ARE BEING DONE IN THE BUSINESS OF CHEQUE DISCOUNTING AND WHEN EVER ANY SHROFF DOING CHEQUE DISCOUNTING BUSINESS DOES NOT HAVE ANY CASH AMOUNT WITH HIM, THEN HE TAKES CASH AMOUNT FROM OTHER SHROFFS B Y GIVING THIRD PARTY CHEQUES TO THEM AND THEREBY, EARNS COMMISSION. 23. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE FILED FOLLOWING REPLIES: YOUR PROPOSED ACTION TO ADD RS. 67,75,000/- AS UNE XPLAINED CASH LOAN RECEIVED THE ASSESSEE HAS STATED IN HIS STATEMENTS RECORDED ON 20/03/2009 AND 30/03/2009 THAT DURING THE COURSE OF CHEQUE DISCOUN TING BUSINESS, HE USED TO GET CHEQUES DISCOUNTED THROUGH THIRD PARTY SHROFFS DUE JO UNAVAILABILITY OF CASH WITH THE BANK IN WHICH HE HA D ACCOUNTS. CHEQUES RECEIVED FROM VARIOUS PERSONS FOR DISCOUNTING ARE G IVEN TO THIRD PARTY SHROFF TO BE DEPOSITED IN THAT OTHER SHROFF'S BANK ACCOUNT AND AFTER GETTING THE CHEQUES CLEARED, THAT OTHER SHROFF GIVE S CASH TO THE ASSESSEE WHICH HE HAD TO GIVE TO THE CONCERNED PERSONS FROM WHOM CHEQUES ARE RECEIVED. THIS IS A WELL KNOWN AND ACCEPTED BUSINES S MODUS OPERANDI IN THE CHEQUE DISCOUNTING BUSINESS. TRANSACTION IND ICATED IN THE PAGE 14 OF B-1 WERE ENTERED INTO BY THE ASSESSEE WITH A THIRD PARTY SHROFF MR.SAMIR SHAH, PROPRIETOR OF NISHI CORPORATION HAVI NG HIS REGISTERED OFFICE AT 3024, TRADE HOUSE , RING ROAD , SURAT. HE IS A REGULAR ASSESSEE OF THE INCOME TAX DEPARTMENT FILING HIS RE TURN MORE THAN 10 YEARS. XEROX COPY OF INCOME TAX RETURN FOR A.Y. 200 9-10 ALONGWITH COPIES OF LEDGER FROM THE BOOKS OF MR. SAMIR SHAH D ULY SIGNED BY HIM ARE ATTACHED HEREWITH. THIS SHROFF MR. SAMIR SHAH H AS FILED AN AFFIDAVIT ALSO IN THIS REGARD STATING VERY CLEARLY THAT HE HA D CARRIED OUT THIS THIRD PARTY CH. DISCOUNTING WITH THE ASSESSEE AND EARNED THE THE CH. /DD DISCOUNTING CHARGES & OFFERED FOR TAX THE SAME IN H IS RETURN OF INCOME. XEROX COPY OF THE SAME IS ATTACHED HEREWITH. THUS , IT IS CLEAR THAT TRANSACTION REFLECTED IN THE IMPOUNDED MATERIAL (PA GE 14 OF B-L) WERE RELATED TO THE CHEQUE DISCOUNTING DONE THROUGH THIR D PARTY SHROFF AND ITA NO.492/AHD/2016 17 NOT REGARDING CASH LOAN RECEIVED BY THE ASSESSEE FR OM VARIOUS PERSONS. ASSESSEE HAD ALSO EARNED CHEQUE DISCOUNTING INCOME THROUGH SUCH TYPE OF TRANSACTION DURING THE YEAR AND DURING F.Y. 2007 -08 ALSO TO THE TUNE OFRS. 8,000 P.M. & THE SAME HAD ALSO BEEN OFFERED F OR TAX IN RESPECTIVE YEARS. THE INCOME EARNED FROM SIMILAR TYPE OF TRANS ACTIONS WERE OFFERED FOR TAX IN A. Y. 2008-09 ALSO, WHICH HAS BE EN ACCEPTED BY THE I. TAX DEPARTMENT WHILE ASSESSING THE INCOME U/S 143 ( 3) FOR A. Y. 2008- 09. THUS, RS.67,75,000/- IS NOT A CASH LOAN RECEIVE D BY THE ASSESSEE AS ALLEGED BY YOU BUT ACTUALLY THESE ARE THE TRANSACTI ONS OF THIRD PARTY SHORFF CH./DD DISCOUNTING ON WHICH THE ASSESSEE EAR NED INCOME WHICH WAS OFFERED FOR TAX ALSO. THEREFORE, YOUR PROPOSED ACTION TO ADD RS.67,75,000/- IS NOT TENABLE IN THE EYES OF LAW. 24. IF WE MAKE AN ANALYSIS OF THESE MATERIALS, THEN IT WOULD INDICATE THAT THE AO IS POSSESSING ONE LOOSE PAPER IN WHICH ENTRY 67,750 IN CODED WORD WAS FOUND TO BE RECORDED. THE ASSESSEE WAS SUPPOSE D TO GIVE EXPLANATION ABOUT THIS ENTRY. ACCORDING TO THE ASSESSEE, IT WA S RELATED TO CHEQUE DISCOUNTING BUSINESS. HE MUST HAVE RECEIVED CHEQUE S FROM CLIENTS, WHICH WERE GIVEN TO ONE SHROFF, BECAUSE, ASSESSEE WAS NOT HAVING SUFFICIENT CASH AND IN ORDER TO KEEP A TRAIL, HE HAS NOTED THIS AMOUNT. INFERENCE DRAWN BY THE AO IS THAT DURING THE COURSE OF SURVEY, THE ASSESSEE A DMITTED THIS AMOUNT AS LOAN. THE ASSESSEE FAILED TO FILE CONFIRMATION FROM THE P ERSONS FROM WHOM LOAN HAS BEEN TAKEN. SECOND CIRCUMSTANCES USED BY THE AO IS THAT THE ASSESSEE FAILED TO DISCLOSE NAME AND ADDRESS OF THE SHROFF FROM WHO M HE HAS TAKEN CASH FOR DISCOUNTING CHEQUES. WHILE APPRECIATING THIS FACTU AL BACKGROUND, WE HAVE TO APPRECIATE THE NATURE OF BUSINESS, ASSESSEE WAS CON DUCTING. THE AO HAS NOT DISPUTED THE TURNOVER IN CHEQUE DISCOUNTING BUSINES S ACHIEVED BY THE ASSESSEE. IT WAS MORE THAN RS.36 CRORES. IN HIS R EPLIES GIVEN ON OATH, HE HAS SPECIFICALLY EXPLAINED AS TO HOW THIS ENTRY WAS MAD E. HE HAS REFUSED TO DISCLOSE IDENTITY OF THE PERSONS FROM WHOM HE MIGHT HAVE TAKEN CASH, BECAUSE THAT WILL HAMPER HIS BUSINESS. CAN IT BE ASSUMED T HAT IT WAS LOAN TRANSACTION TAKEN BY THE ASSESSEE ? IN THE ASSESSMENT PROCEEDI NGS, HE HAS SUBMITTED ITA NO.492/AHD/2016 18 DETAILS OF PERSONS FROM WHOM SUCH ENTRY WAS TAKEN. HE HAS FILED CONFIRMATION AND OTHER DETAILS. THE AO COULD HAVE DIG OUT DEFECTS IN HIS EXPLANATION IN THE REMAND PROCEEDINGS. BUT NO SUCH THING HAS BEEN COLLECTED BY THE AO. THE QUESTION IS, WHAT IS EVIDENCE WITH THE REVENUE TO HARBOR A BELIEF THAT IT WAS LOAN TAKEN BY THE ASSESSEE, AND HE FAILED TO EXPLAIN THE SOURCE ? EVIDENCE POSSESSED BY THE REVENUE IS THE LOOSE PAPER IN CODED WORD. AS FAR AS LOOSE PAPER IS CONCERNED, THERE IS NO DISPUTE ABOUT THIS FACT. THE DISPUTE IS, WHAT INFERENCE ONE COULD DRAW FROM THE PAGE. FOR DRAWING INFERENCE, WE HAVE THREE STATEMENTS AND NATURE OF A SSESSEES BUSINESS PLUS EVIDENCE PRODUCED DURING ASSESSMENT I.E. CONFIRMATI ON ETC. AS FAR AS STATEMENT OF THE ASSESSEE DATED 6.3.2009 IS CONCERN ED, IT WAS ONLY A CORROBORATIVE STATEMENT, BECAUSE, IT WAS TAKEN WITH OUT OATH. IN REST OF TWO STATEMENTS, THE ASSESSEE HAS EXPLAINED HIS POSITION WITH MORE CLARITY. IF IT WAS A LOAN, THEN IT MUST HAVE BEEN REFLECTED IN SOME OF THE TRANSACTIONS EITHER AT ASSET SIDE ALONG WITH LIABILITY. NO SUCH THINGS WE RE FOUND. THEREFORE, IN OUR OPINION, THE EXPLANATION GIVEN BY THE ASSESSEE, WHI CH IS AFTER 13 DAYS OF SURVEY IS A PLAUSIBLE ONE, IT CANNOT BE BRUSHED ASI DE WITHOUT GIVING ANY SPECIFIC REASONS. THE AMOUNT CANNOT BE TREATED AS LOAN TAKEN BY THE ASSESSEE. WE ALLOW THIS GROUND OF APPEAL AND DELETE ADDITION. 25. GROUND NO.6. IN THIS GROUND OF APPEAL, THE GRI EVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDI TION OF RS.2,50,000/- WHICH WAS MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAS MADE UNEXPLAINED INVESTMENT. 26. BRIEF FACTS OF THE CASE ARE THAT DURING THE COU RSE OF SURVEY A GREEN COLOURED POCKET DIARY WAS FOUND AND SEIZED. IT WAS INVENTORIED AS B/6. ON PAGE NO.1 OF THIS POCKET DIARY, THERE WERE DIFFEREN T DATES AND AMOUNTS WERE ITA NO.492/AHD/2016 19 FOUND. WHEN THE ASSESSEE WAS CONFRONTED ABOUT NARR ATION OF THIS DIARY ON 6.3.2009, THEN THE ASSESSEE HAS CONTENDED THAT ONE SHRI JANAK PATEL HAS BOOKED A FLAT NO.12A IN AASTHA APARTMENT, PUNA KUMB ARIA, SURAT. HE MADE PAYMENT OF RS.3,92,400/-. THE ASSESSEE HAD PAID A SUM OF RS.2,50,000/- IN CASH TO SHRI JANAK PATEL, AND IN RETURN, HE HAS TAK EN POSSESSION OF THE DIARY AS A GUARANTEE. THE LD.AO HAS CONFRONTED THE ASSESSEE AS TO WHY THE AMOUNT OF RS.2,50,000/- SHOULD NOT BE ADDED AS UNEXPLAINED IN VESTMENT. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS CONTENDED BY THE ASSE SSEE THIS INVESTMENT HAS DULY BEEN DISCLOSED IN THE BOOKS OF ACCOUNTS. IT IS AVAILABLE IN THE BALANCE SHEET. THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH SHRI JANAK PATEL AND THEREFORE, INVESTMENT HAS DULY BEEN DISCLOSED IN IT S BOOK. IT CANNOT BE TREATED AS UNDISCLOSED INVESTMENT. THE LD.AO DID NOT ACCEP T THIS CONTENTION OF THE ASSESSEE. HE OBSERVED THAT AT THE TIME OF SURVEY, BOOKS WERE NOT COMPLETE. ASSESSEE HIMSELF HAS ADMITTED THAT BOOKS HAVE NOT B EEN COMPLETED. AS PER THE AGREEMENT, THE ASSESSEE HAS TO PAY A SUM OF RS. 5,00,000/- WITHIN A PERIOD OF 10 MONTHS STARTING FROM 4.9.2008. THE ASSESSEE HAS PAID RS.2,50,000/- IN CASH UPTO THE DATE OF SURVEY. THUS, THE AO HAS REC ORDED A FINDING THAT SINCE ENTRIES WERE NOT THERE IN THE BOOKS OF ACCOUNTS, ON THE DATE OF SURVEY, IT CANNOT BE TERMED AS EXPLAINED INVESTMENT. THE LD.C OUNSEL FOR THE ASSESSEE TOOK US THROUGH THE SEIZED MATERIAL AVAILABLE AT PA GE NO.53 OF THE PAPER BOOK. HE CONTENDED THAT COPY OF THE BALANCE SHEET IS ON P AGE NO.91 OF THE PAPER BOOK. THE ASSESSEE HAS CAPITAL BALANCE OF RS.30,88 ,195/-. IN THE LIST OF FIXED ASSETS, THE ASSESSEE HAS SHOWN THIS FLAT. THUS, TH E LD.AO HAS ERRED IN MAKING THE ADDITION OF RS.2,50,000/-. THE LD.DR, ON THE O THER HAND, RELIED UPON THE ORDER OF THE AO. 27. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. THE AO DID NOT EXAMINE THE ISSUE WITH T HE ANGLE ASSESSEE HAS ITA NO.492/AHD/2016 20 GIVEN EXPLANATION. ACCORDING TO THE ASSESSEE HE HA S A CAPITAL BALANCE OF RS.30,88,195/-. UNDER THE CURRENT ASSETS, HE HAS S HOWN ADVANCE FOR PROPERTY AT RATAN ASTHA OF RS.2,50,000/-. THE AO HAS TREATE D THIS AMOUNT AS UNEXPLAINED INVESTMENT ON THE GROUND THAT ON THE DA TE OF SURVEY THE ASSESSEE FAILED TO PRODUCE BOOKS AND FAILED TO EXPLAIN THIS INVESTMENT AS ACCOUNTED FOR IN THE BOOKS. THE SURVEY WAS CONDUCTED ON 6.3.2009 . THE ACCOUNT OUGHT TO BE CLOSED ON 31.3.2009. IT WAS NOT NECESSARY FOR T HE ASSESSEE TO COMPLETE ENTRIES UPTO 6.3.2009. THUS, THE AO OUGHT TO HAVE EXAMINED THIS ASPECT FROM THE BOOKS OF ACCOUNTS WHEN THE ASSESSEE HAS PRODUCE D. THE ASSESSEE HAS ALSO POINTED OUT THAT HE IS AN OLD ASSESSEE. EVEN IN TH E ASSTT.YEAR 2007-08 ASSESSMENT WAS FRAMED UNDER SECTION 143(3) R.W.S. 1 47. THIS ASSESSMENT WAS MADE ON 26.12.2011 I.E. AFTER THE SURVEY. THUS, IT CANNOT BE SAID THAT THE INVESTMENT WAS NOT RECORDED IN THE BOOKS, AND THERE FORE, IT IS AN UNEXPLAINED ONE. THE INVESTMENT IS DULY REFLECTED IN THE BALAN CE SHEET. THE AO HAS NOT CONDUCTED THE INQUIRY THAT SOURCE WAS NOT EXPLAINED . HE MADE THE ADDITION BEING NOT RECORDED IN THE BOOKS. ONCE IT IS EXPLAI NED THAT INVESTMENT IS SHOWN IN THE BOOKS, ITS ADDITION CANNOT BE MADE. T HUS, THIS GROUND IS ALLOWED. 28. IN THE NEXT GROUND OF APPEAL, THE ASSESSEE HAS AGITATED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF R S.11,40,920/-. 29. BRIEF FACTS OF THE CASE ARE THAT DURING THE COU RSE OF SURVEY, WRITING PADS WERE FOUND AND IMPOUNDED, WHICH WERE INVENTORISED A S B-13. ON PAGE NO.1 OF B/13 THERE WERE NARRATIONS EXHIBITING INVE STMENT IN SHARES. WHEN THIS FACT WAS CONFRONTED TO THE ASSESSEE DURING THE COURSE OF SURVEY, IT WAS CONTENDED BY HIM THAT THESE ARE THE INVESTMENT RECO RDED IN CODED WORDS. THOUGH THEY REPRESENTS TOTAL INVESTMENT OF RS.11,40 ,920/-. THE ASSESSEE HAD ITA NO.492/AHD/2016 21 MADE INVESTMENT THROUGH OTHER PERSONS, AND IN ORDER TO KEEP A TRACK, HE HAS NOTED DOWN THESE DETAILS. THE AO HAS TREATED THE INVESTMENT AS UNEXPLAINED. HE HAS ASSIGNED SAME REASONS AS WAS GIVEN FOR ADDIT ION OF RS.2,50,000/- I.E. THESE TRANSACTIONS WERE NOT RECORDED IN THE BOOKS O F ACCOUNTS. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 30. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE CONT ENDED THAT THESE INVESTMENTS WERE MADE THROUGH DEMAT ACCOUNT OF OTHER PERSONS. THESE WERE DULY BEING RECORDED IN THE BOOKS OF ACCOUNTS WHICH WERE COMPLETED AT THE CLOSE OF THE YEAR. THE ASSESSEE HAS DULY DISCLOSED THIS INVESTMENT IN THE BALANCE SHEET. COPIES WERE AVAILABLE AT PAGE NO.91 . THE ASSESSEE HAS SHOWN INVESTMENT OF RS.11,41,000/- UNDER THE HEAD OTHER INVESTMENTS ALTERNATIVELY, HE CONTENDED THAT ONCE SHARES WERE N OT FOUND IN PHYSICAL FORM, THEN, NO ASSUMPTION IS TO BE DRAWN OF THE INVESTMEN T, BECAUSE, MERE ENTRIES WOULD NOT BE SUBSTITUTED BY THE INVESTMENT IN SHARE S IN THE ASSESSEES OWN- NAME. THE LD.DR, ON THE OTHER HAND CONTENDED THAT BOOKS WERE WRITTEN UPTO 31.3.2008 ONLY. THE ASSESSEE HAS NOT SHOWN THESE S HARES AS RECORDED IN THE BOOKS AT THE TIME OF SURVEY. 31. WE HAVE DULY CONSIDERED RIVAL CONTENTION AND GO NE THROUGH THE RECORD CAREFULLY. COPY OF THE SEIZED MATERIAL HAS BEEN PL ACED ON PAGE NO.54 OF THE PAPER BOOK. WE HAVE PERUSED THESE SEIZED MATERIA LS. THE AO HAS REPRODUCED THESE DETAILS IN PARA-10 AT PAGE NO.18 O F THE ASSESSMENT ORDER. AS FAR AS THE ALTERNATIVE CONTENTION OF THE ASSESSEE I S CONCERNED, WE DO NOT FIND ANY FORCE IN THAT CONTENTION, BECAUSE, ASSESSEE HIM SELF ADMITTED THAT INVESTMENT WAS MADE IN THE NAME OF OTHER PERSONS. IN SUCH SITUATION, THE SHARES WILL NOT BE AVAILABLE IN PHYSICAL FORM IN TH E NAME OF THE ASSESSEE. HAD THE SHARES WERE AVAILABLE THERE, THEN, THE ASSESSEE COULD HAVE TAKEN PLEA THAT ITA NO.492/AHD/2016 22 THESE ARE NOT IN HIS NAME. THUS, ONCE THE DETAILS OF INVESTMENT WAS FOUND AND THE ASSESSEE HAS ADMITTED THE INVESTMENT THROUG H OTHER PERSONS, THEN HE CANNOT TAKE SUCH TYPE OF PLEA. AS FAR AS ADDITION ON MERIT IS CONCERNED, THE AO HAS MADE ADDITION ON THE GROUND THAT BOOKS WERE WRITTEN UPTO 31.3.2008, AND THEREFORE, THESE INVESTMENTS ARE UNEXPLAINED ON E. THE ASSESSEE HAS CONTENDED THAT HE HAS DULY ACCOUNTED THESE INVESTME NTS. THESE ARE REFLECTED IN THE BALANCE SHEET. HE HAS BEEN FILING REGULAR R ETURN. CONCLUSION DRAWN BY THE AO THAT INVESTMENT WAS MADE OUT OF BOOKS IS NOT SUSTAINABLE. THEREFORE, THE AO WAS NOT JUSTIFIED TO TREAT THE INVESTMENT, W HICH HAS DULY BEEN ACCOUNTED IN THE BOOKS AS OUT OF BOOKS AND EXPLAINE D ONE. ADDITION IS NOT SUSTAINABLE. IT IS DELETED. 32. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 2 ND SEPTEMBER, 2016 AT AHMEDABAD. SD/- SD/- ( ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 02/09/2016