SHRI MURARILAL MITTAL, Jaipur V. DCIT, Jaipur

ITA 508/JPR/2012

• Counselvise Citation: 50823114 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Keywords: Unexplained investment; Unexplained expenditure; Depreciation; Loose papers; Document seized; Block assessment; Documents seized
• Section: 153A; 68

Judgement Text

1 ITA 508(3)-12 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH : JAIPUR. BEFORE SHRI B.R. JAIN AND SHRI KUL BHARAT ITA NO. 508, 385 & 509 /JP/2012 ASSESSMENT YEAR : 2006-07, 2007-08 & 2008-09. SHRI MURARI LAL MITTAL, VS. ` THE DCIT, CENTRAL CI RCLE-3, B-18, SARDAR PATEL MARG, JAIPUR. CHOMU HOUSE, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY GOYAL RESPONDENT BY : SHRI A.K. KHANDELWAL DATE OF HEARING : 22.08.2013. DATE OF PRONOUNCEMENT : 23.08.2013 ORDER PER BENCH : THESE THREE APPEALS BY THE ASSESSEE ARISE FROM THE ORDERS DATED 27.04.2012 (A.Y. 2006-07 & 2008-09) AND 01.02.2012 (A.Y. 2007-08) OF LD. CIT (A), CENTRAL, JAIPUR BY RAISING GROUNDS IN RESPECTIVE APPEALS AS UNDER :- ITA NO. 508/JP/2012 : ASSESSMENT YEAR 2006-07 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 7,66,12 1/- BY REJECTING THE ASSESSEES CONTENTION THAT THIS AMOUNT REPRESENTS T O UNDISCLOSED PAYMENTS TO VARIOUS PERSONS INCLUDING FAMILY MEMBER S WHICH WAS UTILIZED FOR UNDISCLOSED INVESTMENT/EXPENDITURES SU CH AS CONSTRUCTION OF HOUSE, JEWELER ETC., FOR WHICH SEPARATE ADDITION HA S ALREADY BEEN MADE AND THEREFORE, THE BENEFIT OF RECYCLING/TELESCOPING /ROTATION OF FUNDS SHOULD BE GIVEN. 2 ITA NO. 385/JP/2012 : ASSESSMENT YEAR 2007-08 : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 44,87,630/- BY REJECTING THE ASSESSEES CONTENTION THAT THIS AMOUNT REPRESENTS TO UNDISCLOS ED PAYMENTS TO THE FAMILY MEMBERS WHICH WAS UTILIZED FOR UNDISCLOSED INVESTME NT/EXPENDITURES SUCH AS CONSTRUCTION OF HOUSE, JEWELLERY, MARRIAGE FOR WHIC H SEPARATE ADDITION HAS ALREADY BEEN MADE AND THEREFORE, THE BENEFIT OF REC YCLING/TELESCOPING/ROTATION OF FUNDS SHOULD BE GIVEN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 35,436/-ON ACCOUN T OF RECEIPT OF COMMISSION FROM M/S. HINDUSTAN LATEX LTD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ADDITION MADE ON ACCOUNT OF DISAL LOWANCES MADE OUT OF FOLLOWING EXPENSES:- A. OFFICE EXPENSES. RS. 20,835/- B. TELEPHONE EXPENSES. RS. 10,436/- C. TRAVELLING EXPENSES. RS. 37,596/- D. VEHICLE EXPENSES. RS. 18,220/- E. COURIER EXPENSES. RS. 21,154/- F. DEPRECIATION ON CAR RS. 5,625/- ----------------------- TOTAL. RS. 1,13,866/- ITA NO. 509/JP/2012 : ASSESSMENT YEAR 2008-2009 : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 14,29,652/- BY REJECTING THE ASSESSEES CONTENTION THAT THIS AMOUNT REPRESENTS TO UNDISCLOS ED PAYMENTS TO VARIOUS PERSONS INCLUDING FAMILY MEMBERS WHICH WAS UTILIZED FOR UNDISCLOSED INVESTMENT/EXPENDITURES SUCH AS CONSTRUCTION OF HOU SE, JEWELERY ETC., FOR WHICH SEPARATE ADDITION HAS ALREADY BEEN MADE AND T HEREFORE, THE BENEFIT OF RECYCLING/TELESCOPING/ROTATION OF FUNDS SHOULD BE G IVEN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT (A) ERRED IN CONFIRMING THE ADDITION MADE ON ACCOUNT OF DISAL LOWANCES MADE OUT OF FOLLOWING EXPENSES:- A. OFFICE EXPENSES. RS. 17,896/- B. TELEPHONE EXPENSES. RS. 19,423/- C. TRAVELLING EXPENSES. RS. 29,906/- D. VEHICLE EXPENSES. RS. 16,978/- E. COURIER EXPENSES. RS. 16,145/- F. DEPRECIATION ON CAR RS. 7,707/- G. STAFF WELFARE RS. 5,710/- ---------------------- TOTAL. RS. 1,13,765/- 3 2. SINCE THE LD. CIT (A) RECORDED FINDINGS WITH RES PECT TO THE COMMON ISSUES IN APPEAL FOR A.Y. 2007-08, IT HAS BEEN DECIDED TO TA KE THE SAID APPEAL AS BASE YEAR FOR TAKING DECISION IN ALL THE APPEALS. 3. IN ASSESSMENT YEAR 2007-08 THE GROUND NO. 1 IN A PPEAL, THE ASSESSEE SEEKS TELESCOPING OF THE ADDITIONS SUSTAINED FOR RS. 44,8 7,630/- AS UNEXPLAINED INVESTMENT/EXPENDITURE. 4. BRIEFLY THE FACTS LEADING TO THE ADDITIONS ARE T HAT THE APPELLANT GROUP WAS SEARCHED ON 27.08.2008. DURING THE COURSE OF SEARCH, ASSESSE E SURRENDERED A TOTAL INCOME OF RS. 64,24,838/- FOR ASSESSMENT YEAR 2007-08 OUT OF AGGR EGATE SURRENDER OF RS. 1,51,28,758/- MADE IN DIFFERENT YEARS. THE YEAR-WISE SURRENDER M ADE IS AS UNDER :- ASSTT. YEAR AMOUNT SURRENDERED 2004-05 RS. 4,53,819/- 2005-06 RS. 6,32,259/- 2006-07 RS. 35,70,127/- 2007-08 RS. 64,24,838/- 2008-09 RS. 40,47,535/- THE BREAK UP OF THE YEAR-WISE SURRENDERED AMOUNT DI SCLOSED AS ADDITIONAL INCOME IN THE RETURN OF INCOME FILED IN PURSUANT TO NOTICE UNDER SECTION 153A OF THE IT ACT ARE MENTIONED AT INTERNAL PAGE 2 & 3 OF THE ASSESSMENT ORDER. THE ASSESSING AUTHORITY HAS ACCEPTED THE SURRENDER AS PER DECLARATION MADE BY T HE APPELLANT. HE, HOWEVER, DID NOT ACCEPT THE BREAK UP TO THE EXTENT THAT THE ASSESSEE S CLAIM WAS THAT THERE WERE PAYMENTS WITHDRAWN IN CASH TO THE EXTENT OF RS. 47,90,503/- DURING THE ASSESSMENT YEAR 2007-08 WHICH WERE GIVEN AS ADVANCES/DEBTS STOOD UTILIZED F OR INCURRING EXPENDITURE OR MAKING INVESTMENTS WHICH ARE FORMING PART OF SURRENDERED A MOUNT BROUGHT TO TAX BY THE 4 ASSESSING AUTHORITY. SINCE DETAILS OF DEBTOR FROM W HOM THE CASH REALIZATION WAS MADE WERE NOT MADE AVAILABLE, THE ASSESSEE COULD NOT SUB STANTIATE AS TO HOW THE CASH WAS SPENT FOR MAKING EXPENDITURE AND INVESTMENT. HE, THEREFOR E, REACHED THE CONCLUSION THAT THE TRANSACTION ON DOCUMENTS ON THE BASIS OF WHICH SUCH INCOME WAS OFFERED TO TAX DOES NOT SUPPORT THE CLAIM OF THE ASSESSEE. ACCORDINGLY HE DENIED TO ALLOW THE CLAIM OF TELESCOPING AND THUS MADE SEPARATE ADDITION FOR UNE XPLAINED INVESTMENT/EXPENDITURE AS WELL AS FOR ADVANCES/DEBTS SHOWN TO THE FAMILY MEMB ERS IN THE DOCUMENTS INVENTORISED AS ANNEXURES A-1 AND A-6 INTER ALIA INCLUDING OTHER SEIZED LOOSE PAPERS. 5. BEFORE LD. CIT (A), ASSESSEE TENDERED EXPLANATIO N THAT THE PAYMENTS MADE AND FOUND WRITTEN AS ADVANCE/DEBTS IN THE SEIZED ANNEXU RES WERE TO THE FAMILY MEMBERS, NAMELY S/SHRI MURARI LAL MITTAL, MADAN LAL MITTAL, RADHEY SHYAM MITTAL, MAYANK MITTAL ETC. THESE WERE NOT THE ADVANCE ON INTEREST TO OUTSIDERS BUT THE PAYMENTS MADE TO FAMILY MEMBERS FOR INCURRING EXPENDITURE ON CONSTRU CTION AND OTHER EXPENSES. THE LD. CIT (A) VIDE PARA 2.3 OF THE IMPUGNED ORDER TOOK NO TE OF THE CLAIM OF THE ASSESSEE AND THEREAFTER FOUND THAT ONLY FEW OF THE ENTRIES ARE C O-RELATABLE WITH THE PAYMENTS/ADVANCES SHOWN IN THE ANNEXURE-6 FOR UTILIZATION TOWARDS INV ESTMENT IN CONSTRUCTION AND INCURRING EXPENSES IN VARIOUS ITEMS. HE, THEREFORE, ALLOWED S ET OFF TO THE EXTENT OF RS. 4,28,649/- ONLY AND SUSTAINED THE BALANCE OF THE ADDITION. 6. IN APPEAL, ASSESSEES COUNSEL SHRI GOYAL ORALLY AS WELL AS IN WRITTEN SUBMISSIONS HAS STATED AS UNDER :- DURING THE COURSE OF SEARCH IN THE STATEMENT R ECORDED BY SEARCH PARTY THE ASSESSEE ADMITTED THE UNDISCLOSED INCOME OF RS. 1.10 TO 1.20 CRORE AGAINST WHICH THE ASSESSEE ACTUALLY SURRENDER ED RS. 1.51 CAROR IN DIFFERENT ASSESSMENT YEARS, WHICH IS EXCESS TO ACTU AL SURRENDER MADE BY ASSESSEE DURING THE COURSE OF SEARCH. DURING THE YE AR UNDER CONSIDERATION 5 THE ASSESSEE SURRENDERED ADDITIONAL INCOME OF RS. 6 4,24,838 (AFTER TAKING TELESCOPING BENEFIT OF RS. 47,90,503/-) DETAIL OF W HICH HAS BEEN ABOVE. THE ASSESSEE HAS SURRENDERED RS. 47,90,503/- ON ACCOUNT OF UNACCOUNTED PAYMENTS MADE TO VARIOUS FAMILY MEMBERS (SHRI MURARI LAL MITTAL, SHRI MADAN LAL MITTAL, RADHEY SHYAM MITTAL, MAYANK MITTAL, SURESH ENTERPRISES AND SURESH MITTAL). THE ASSESSEE WORKED OUT THE UNDISCLOSED INCOME ON THE BASIS OF THE PAYMENTS TO THESE PERSONS RECORDED IN THE SEIZED DOCUMENTS. THE COPY OF WORKING OF UND ISCLOSED INCOME IS AT PB PAGE 1-29. THE COPY OF RELEVANT SEIZED RECORDS I S AT PAGE 30-176. THESE PERSONS UTILIZED THE SAID PAYMENT FOR PURCHAS ES OF JEWELLERY, CONSTRUCTION. BESIDES THAT THE SEARCH PARTY FOUND C ERTAIN VOUCHERS AND NOTING OF EXPENSES LIKE FREIGHT ETC. THESE WERE PAR TLY RECORDED AND PARTLY UNRECORDED. THE ASSESSEE UTILIZED UNACCOUNTED PAYME NT RECEIVED FOR UNACCOUNTED EXPENSES. THE LD AO MADE THE DOUBLE ADD ITION (I) ONE FOR THE PAYMENTS TO THESE PERSONS RECORDED IN THE SEIZE D DOCUMENTS (II) SECOND ON ACCOUNT OF INVESTMENT IN JEWELLERY, CONST RUCTION AND UNACCOUNTED EXPENDITURES. THE INCOME EITHER SHOULD BE DETERMINED ON THE BASIS OF PAYMENTS TO THESE PERSONS OR ON THE BA SIS OF UNDISCLOSED INVESTMENT/EXPENDITURE FOUND AS THE RESULT OF THE S EARCH. THE ADDITION FOR BOTH THE HEADS IS TANTAMOUNT TO DOUBLE ADDITION. T HEREFORE, THE BENEFIT OF TELESCOPING/RECYCLING OF FUNDS TO THE EXTENT RS. 47 ,90,503/- SHOULD BE GIVEN AGAINST THE UNDISCLOSED INVESTMENT/EXPENDITUR E AS THE ASSESSEE HAS SURRENDERED MORE THAN THIS AMOUNT ON THE BASIS OF S TATEMENT/ VOUCHERS OR ROUGH NOTING ON OTHER SEIZED DOCUMENTS. (PB PAGE 177 TO 196- VOL II OF PB) THE FINDING OF THE LD. CIT (A) ARE NOT JUSTIFIAB LE FOR HOLDING THAT SET OFF/ TELESCOPING BENEFIT IN RESPECT OF ONLY THO SE AMOUNTS ARE ELIGIBLE ON WHICH THE DETAILS OF UNRECORDED EXPENSES/INVESTMENT OR NARRATION WAS APPEARING. THE LD. CIT FAILED TO APPRECIATE THAT TH E INCRIMINATING DOCUMENTS FOUND DURING THE SEARCH WERE NOT PART OF REGULAR BOOKS OF ACCOUNT MAINTAINED DURING THE COURSE OF REGULAR BUS INESS ACTIVITIES BUT CONTAINED ONLY PART DETAILS OF MEMORANDA OF INCOME/ EXPENDITURE, RECEIPT/PAYMENT, INVESTMENT ETC. HOWEVER IN FEW CAS ES THE DETAILS OF EXPENDITURE IN CONSTRUCTION, PURCHASES OF JEWELRY, MARRIAGE EXPENSES ARE CO-RELATABLE WITH THE UNACCOUNTED PAYMENTS TO ASSES SEE AND HIS FAMILY. THE NARRATION OF THE ENTRIES IN THE SEIZED RECORDS ESTABLISH BEYOND DOUBT THAT THE UTILIZATION OF MONEY IN MARRIAGE, JEWELRY CONSTRUCTION OR OTHER EXPENSES (FOR WHICH THE ASSESSEE SURRENDERED THE IN COME IN THE RETURN) IS OUT OF THE MONEY WITHDRAWN BY THE ASSESSEE OR HIS F AMILY MEMBERS (FOR WHICH SEPARATE ADDITION WAS MADE BY AO.) THE FEW EX AMPLE SHOWING THE NEXUS IN BETWEEN THE WITHDRAWAL OF MONEY WITH EXPEN SES IN CONSTRUCTION, MARRIAGE, JEWELRY MAY BE SEEN BY FOLLOWING CHART:- 6 DATE AMOUNT PB PAGE OF WITHDRAWAL STATEMENT PB PAGE OF SEIZED DOCUMENTS HEAD 15-04-06 13000 2 47 MARRIAGE 24-04-06 7831 2 49 CONSTRUCTION 26-04-06 5000 2 47 MARRIAGE 15-05-06 10000 4 47 MARRIAGE 16-05-06 120600 4 47 MARRIAGE 18-05-06 20000 4 47 MARRIAGE 20-05-06 15000 4 47 MARRIAGE 26-05-06 1500 5 47 MARRIAGE 03-06-06 1370 6 47 CONSTRUCTION 09-06-06 5100 6 48 MARRIAGE 21-06-06 3500 7 48 CONSTRUCTION 13-07-06 4000 9 48 MARRIAGE 13-07-06 50000 9 48 CONSTRUCTION 13-09-06 60000 12 30 JEWELRY 04-10-06 4700 14 31 MARRIAGE 12-10-06 5000 14 31 MARRIAGE 08-01-07 42048 21 32 MARRIAGE 17-01-07 20000 22 32 MARRIAGE 09-03-07 10000 27 34 MARRIAGE 24-03-07 30000 28 34 MARRIAGE THE 100% ENTRIES CANNOT BE CO-RELATABLE BECAUSE WI THDRAWAL ON PARTICULAR DAY MAY BE EXPENDED ON DIFFERENT DATES AND ALSO FOR DIFFERENT AMOUNT AND ITEMS. FOR INSTANCE IF A PERSON WITHDRAW RS. 1,00,0 00/- ON PARTICULAR DAY, IT DOES NOT MEAN THAT THE WHOLE AMOUNT WOULD BE EXPEND ED ON THAT PARTICULAR DAY AND ALSO FOR A PARTICULAR ITEM AND ALSO FOR SAM E AMOUNT. IT IS NATURAL IN THE CONSTRUCTION ACTIVITIES THAT THE WHOLE AMOUNT I S NOT EXPENDED ON THE SAME DAY OF THE WITHDRAWALS OF MONEY BUT EXPENDED A S AND WHEN REQUIRED FOR MATERIAL, OR LABOUR ETC. THE ABOVE NEXUS OF EN TRIES OF PURCHASES OF JEWELRY, CONSTRUCTION EXPENSES AND MARRIAGE EXPENSE S WITH THE UNACCOUNTED PAYMENTS PROVE THAT THE CONTENTION OF T HE ASSESSEE IS CORRECT. FURTHER, THE DEPARTMENT HAS ACCEPTED THE UNACCOUNTE D PAYMENTS TO THE ASSESSEE AND HIS FAMILY MEMBERS AND OTHERWISE USE O F THIS FUND WAS NOT FOUND IN ANY OTHER ASSETS EVEN AFTER THE INTENSIVE SEARCH OPERATIONS. IT IS HIGHLY ILLOGICAL TO SAY THAT THE ASSESSEE HAS MADE INVESTMENT/EXPENDITURE IN JEWELRY, CONSTRUCTION, MARRIAGE OR OTHER EXPENSE S BY UTILIZING THE OTHER UNDISCLOSED INCOME AND THE UNACCOUNTED PAYMENTS REC ORDED IN THE SEIZED DOCUMENTS WERE UTILIZED IN SOME OTHER ASSETS WHICH ARE NOT KNOWN TO THE DEPARTMENT. THE SEIZED MATERIAL ON THE BASIS OF WHI CH THE ASSESSEE SURRENDERED INCOME ON ACCOUNT OF PAYMENT MADE TO VA RIOUS PERSONS DO NOT CONSIST NARRATION IN 100% CASES SHOWING CORRELATION WITH EXPENSE OR INVESTMENT. THEREFORE THE POSSIBLE PURPOSE/UTILIZA TION OF SUCH PAYMENTS SHOULD BE ASCERTAINED ON THE BASIS OF OTHER RELEVAN T MATERIAL AND EVIDENCE 7 GATHERED AS THE RESULT OF SEARCH. DURING THE RESUL T OF SEARCH IT WAS GATHERED THAT THE ASSESSEE MADE UNDISCLOSED EXPENSES ON MARR IAGE, INVESTMENT IN JEWELLERY AND CONSTRUCTION OF HOUSE, AND UNACCOUNTE D EXPENSES, THEREFORE THE PAYMENT MADE TO VARIOUS FAMILY MEMBERS CERTAINL Y MADE/UTILIZED FOR THESE PURPOSE AS THE DEPARTMENT DONT HAVE ANY MATE RIAL TO PROVE THE OTHERWISE UTILIZATION OF THESE FUNDS. IT IS RELEVAN T TO MENTION HERE THAT THE WITHDRAWALS AGAINST HOUSE HOLD EXPENSES OF THE ASSE SSEE AND HIS FAMILY MEMBERS HAS BEEN ACCEPTED BY THE AO AND THERE IS NO FINDING OF THE LD AO THAT THIS AMOUNT WAS UTILIZED IN HOUSEHOLD EXPENSES . FURTHER, NO ANY OTHERWISE UTILIZATION OF THESE PAYMENTS WAS FOUND BY THE LOWER AUTHORITIES . THEREFORE, THE SET OFF OF UNRECORDED PAYMENTS TO ASSESSEE OR HIS FAMILY MEMBERS AGAINST UNRECORDED INVESTMENT/EXPENDITURE C ANNOT BE RESTRICTED TO ONLY FOR THOSE ENTRIES WHERE FULL NARRATION IS A VAILABLE. THE ADDITIONAL UNDISCLOSED INCOME/FUNDS OFFERED FOR TAX WERE AVAIL ABLE WITH THE ASSESSEE IN SOME FORM OR OTHER FOR INVESTMENT IN CONSTRUCTIO N OR JEWELRY OR OTHER UN-RECORDED EXPENSES. IT WOULD BE PERTINENT TO REFER TO THE JUDICIAL P RONOUNCEMENTS IN THIS REGARD. THE ACCEPTED PRINCIPLE IS THAT IF AN INTANG IBLE ADDITION/ SURRENDER OF INCOME HAVE BEEN MADE THE SAME WOULD BE TAKEN TO HA VE COME OUT OF SUCH INTANGIBLE ADDITIONS/SURRENDER OF INCOME. (I) IN THE CASE OF ANANTHARAM VEERASINGHAIAH AND CO. V. CIT (1980) 123 ITR 457 (SC) IT HAS BEEN HELD THAT, 'WHEN AN 'INTANGIBLE' ADDITION IS MADE TO THE BOOK PROFITS DURING AN ASSE SSMENT PROCEEDING, IT IS ON THE BASIS THAT THE AMOUNT REPRESENTED BY THAT AD DITION CONSTITUTES THE UNDISCLOSED INCOME OF THE ASSESSEE. THAT INCOME, AL THOUGH COMMONLY DESCRIBED AS 'INTANGIBLE', IS AS MUCH A PART OF HIS REAL INCOME AS THAT DISCLOSED BY HIS ACCOUNT BOOKS. IT HAS THE SAME CON CRETE EXISTENCE. IT COULD BE AVAILABLE TO THE ASSESSEE AS THE BOOK PROFITS CO ULD BE. (LAGADAPATI SUBBA RAMAIAH V. CIT [1956] 30 ITR 593 (AP) AND S. KUPPUSWAMI MUDALIAR V. CIT [1964] 51 ITR 757 (MAD) WERE APPROV ED). THE SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARLIER ASSESSMENT YEAR MAY CONSTITUTE A FUND, EVEN THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR MEETIN G EXPENDITURE OR INTRODUCING AMOUNTS IN HIS ACCOUNT BOOKS. BUT IT IS QUITE ANOTHER THING TO SAY THAT ANY PART OF THAT FUND MUST NECESSARILY BE REGARDED AS THE SOURCE OF UNEXPLAINED EXPENDITURE INCURRED OR OF CASH CREDITS RECORDED DURING A SUBSEQUENT ASSESSMENT YEAR. IT IS A MATTER FOR CONS IDERATION IN EACH CASE WHETHER THE UNEXPLAINED CASH DEFICITS AND THE CASH CREDITS CAN BE REASONABLY ATTRIBUTED TO A PRE-EXISTING FUND OF CON CEALED PROFITS OR THEY ARE REASONABLY EXPLAINED BY REFERENCE TO CONCEALED INCO ME EARNED IN THAT VERY YEAR. 8 (II) CIT VS TYARYAMAL BAL CHAND [1987] 165 ITR 453 (RAJ. ) HELD THAT THE ASSESSEE CAN CLAIM THE ADDITION UNDER S. 68 AS COVERED BY INTANGIBLE ADDITIONS TO TRADING RESULTSIN THE PRES ENT CASE, FOR LAST SEVERAL YEARS AND ALSO IN THE RELEVANT YEAR INTANGIBLE ADDI TIONS HAD BEEN MADE ASSESSEE, THEREFORE, COULD PLEAD THAT THE AMOUNT OF CASH CREDIT COULD BE TAKEN AS HAVING COME OUT OF SUCH INTANGIBLE ADDITIO NSTRIBUNAL, THEREFORE, JUSTIFIED IN TREATING THE UNEXPLAINED CA SH CREDIT AS COVERED BY ADDED GROSS PROFIT ON THE BASIS OF ESTIMATE. (III) CIT VS JAWANMAL GEMAJI GANDHI 151 ITR 353 (BO M) HELD THAT INTANGIBLE ADDITIONS CONSTITUTE FUND WITH ASSESSEE. ADDITION OF RS. 10,702 MADE ON DETERMINATION ON ESTIMATE BASIS OF TURNOVER RELATING TO THE RELEVANT PREVIOUS YEAR. GOLD VALUED AT RS. 9,37 5 HAD BEEN SEIZED FROM ASSESSEE IN THE LATER PART OF SAME PREVIOUS YEAR. H ELD THAT THE ADDITION MADE ON ACCOUNT OF SEIZED GOLD AS WELL NOT JUSTIFIE D (IV) IN THE CASE OF ARUN KALA VS. ACIT (2005) 98 TT J 1046 (JAIPUR) ITA NOS 267 & 1526/JP/1997 DATED 23/06/2004 IT HAS BEEN HELD THAT; THE ASSESSEE IS MERELY ASKING THE TELESCOPING BENE FIT OF THE INCOME EARNED FROM SATTA BUSINESS AGAINST THE PEAK WHICH W AS SURRENDERED AND DULY ASSESSED BY THE ASSESSING OFFICER. BY CONSIDER ING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, BENEFIT OF TEL ESCOPING OR SET OFF OF SECRET PROFITS OR UNDISCLOSED INCOME OF THE ASSESSE E MAY CONSTITUTE A FUND FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR M EETING THE EXPENDITURE OR MAKING INVESTMENTS. THE ASSESSING OF FICER MAY ALSO ALLOW BENEFIT OF TELESCOPING/SETTING OFF OF INCOME AGAINS T EXPENDITURE/INVESTMENT, EVEN DURING THE CURRENT, AF TER LOOKING INTO THE FACT THAT UNEXPLAINED EXPENDITURE/INVESTMENT COULD BE RE ASONABLY ATTRIBUTED TO THE PRE-EXISTING FUND OF CONCEALED INCOME OR THEY W ERE REASONABLY EXPLAINED BY REFERENCE TO THE CONCEALED INCOME EARN ED IN THE RELEVANT YEAR.' (V) ITAT A BENCH, JAIPUR IN THE CASE OF ACIT, CIRCLE-1, VS. M/S. ROYAL JEWELLERS, JAIPUR ITA NO 438/JP/2011 ORDER DATED 05/08/2011 DOUBLE ADDITION - ONCE ON THE BASIS OF INCOME ON UN ACCOUNTED SALES AND SECOND TIME ON THE BASIS OF INVESTMENT IN UNACCOUNT ED STOCK TREATED AS NOT JUSTIFIED. HONBLE TRIBUNAL HELD THAT T HE LD. CIT (A) HAS NOTED THE FACT THAT ESTIMATED PROFIT ON UNDISCLOSED SALES AT THE DECLAR ED G.P. RATE IS MUCH LESS THAN THE ACCOUNTED STOCK OF RS. 4.1 CRORES DECLARED BY THE ASSESSEE AND, THEREFORE, NO SEPARATE ADDITION ON ACCOUNT OF UNACC OUNTED SALE IS JUSTIFIED. 9 THE ENTIRE ADDITION OF RS. 2.13 CRORES OR ODD ON AC COUNT OF UNACCOUNTED SALES WAS ALREADY EMBEDDED IN THE UNACCOUNTED STOCK SURRENDERED BY THE ASSESSEE. THEREFORE, WE HAVE NO HESITATION IN CONFI RMING THE ORDER OF LD. CIT (A) IN THIS REGARD. (VI) IN THE CASE OF RAMESHWAR LAL SONI VS. ASSISTANT COMMISSIONER OF INCOME TAX (2004) 91 ITD 301 (JODHPUR) (TM), IT WAS OBSERVED- IN THE CASE OF A BLOCK ASSESSMENT WHEREIN THE ASSESSME NT OF THE WHOLE BLOCK PERIOD IS MADE, WHEN ADDITIONS ARE MADE FOR THE BLO CK PERIOD ON THE BASIS OF ALL INVESTMENTS, EXPENDITURES, AND ASSETS FOUND TO HAVE BEEN INCURRED OR ACQUIRED DURING THE BLOCK PERIOD, AND WHICH HAVE RE MAINED UNEXPLAINED IN RESPECT OF THEIR DIRECT SOURCE, THE ASSESSEE MAY JU STIFIABLY CLAIM AND MAY WELL BE TREATED AS DULY ENTITLED TO THE BENEFIT OF TELESCOPY/SET OFF/CREDIT OF ALL SUCH AMOUNTS OF INFLOW WHETHER BY WAY OF RECEIP TS OR BY WAY OF UNDISCLOSED INCOME RESULTING FROM INTANGIBLE ADDITI ONS OF THE BLOCK PERIOD AND THUS BEING AVAILABLE WITH ASSESSEE AND WHICH AM OUNT/INCOME COULD BE UTILIZED BY THE ASSESSEE FOR INCURRING THE EXPENDIT URE OR MAKING THE INVESTMENT OR ACQUIRING THE ASSET FOUND AND REMAINI NG UNEXPLAINED AS ON THE DATE OF SEARCH. THE ASSESSEE WILL BE ENTITLED T O THE ABOVE MENTIONED BENEFIT EVEN THOUGH THE ASSESSEE MAY NOT BE ABLE TO ESTABLISH A DIRECT/LIVE LINK/NEXUS OF THE SAID RESULTANT UNDISCLOSED INCOME WITH THE UNEXPLAINED. IT MAY BE NO LESS FUNNY TO REALIZE THAT WHEN DIRECT LINK OF SOURCE OF AN EXPENDITURE/INVESTMENT/ASSET IS ESTABLISHED, THE SA ME CAN HARDLY BE TREATED AS UNEXPLAINED. OBVIOUSLY, AND UNDERSTANDABLY TOO, THE BENEFIT OF AFORESAID TELESCOPY/SET OFF/CREDIT OF THE SAID RESU LTANT UNDISCLOSED INCOME IS GIVEN ONLY WHEN THE EXPENDITURE/INVESTMENT/ASSET IS FOUND AS UNEXPLAINED DUE TO ANY DIRECT SOURCE OF THE SAME HA VING NOT BEEN ESTABLISHED, SO AS TO AVOID SEPARATE AND INDEPENDEN T ADDITION ON ACCOUNT OF THE SAID EXPENDITURE/INVESTMENT/ASSET, WHICH, THOUG H REMAINS UNEXPLAINED, YET BECAUSE THE ASSESSEE HAS SOME UNDISCLOSED INCOM E AVAILABLE WITH HIM, HAVING RESULTED FROM INTANGIBLE ADDITIONS. FOR ALLO WING THE AFORESAID BENEFIT, IN OUR VIEW, A DIRECT/LIVE LINK/NEXUS, DAT E-WISE, OR OTHERWISE, OF THE RESULTANT UNDISCLOSED INCOME WITH THE UNEXPLAIN ED EXPENDITURE/INVESTMENT/ASSET NEED HARDLY JUSTIFIABL Y BE INSISTED UPON, AND SUFFICE IT TO SHOW THAT THE SAME HAS AN INDIRECT NE XUS OR TO EXPRESS IT, WITH MORE ACCURACY AND BETTER EXACTNESS, THAT THE SAME M AY HAVE A PROBABLE NEXUS, AND THAT THE SAID INTANGIBLE ADDITION PRECED ES THE UNEXPLAINED EXPENDITURE/INVESTMENT/ASSET, FOR WHICH SEPARATE/IN DEPENDENT TANGIBLE ADDITION IS BEING SOUGHT TO BE MADE BY THE DEPARTME NT AND WHICH THE 10 ASSESSEE SEEKS TO AVOID ON THE BASIS OF THE BENEFIT OF TELESCOPY/SET OFF/CREDIT OF INCOME, BEING AVAILABLE WITH ASSESSEE , HAVING RESULTED FROM INTANGIBLE ADDITION.' VII) IN THE CASE OF HARISH CHANDER V/S ITO 35 TW 61, THE JODHPUR BENCH OF ITAT HAS HELD THAT WHERE ASSESSEE HAS ALRE ADY MADE A SURRENDER OF HIGHER AMOUNT, NO FURTHER ADDITION CAN BE MADE S INCE IT STAND AUTOMATICALLY COVERED BY THE SURRENDER AMOUNT. IN THE LIGHT OF THE ABOVE STATED FACTS AND LEGAL FI NDING OF FACT/LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONSIDERING ONL Y THOSE ENTRIES OF INCOME RS. 4,28,649/-WHICH HE FOUND CO-RELATABLE TH ROUGH NARRATION WITH THE PAYMENTS RECORDED ON ONE SET OF SEIZED DOCUMENT S AND EXPENSES/INVESTMENTS RECORDED IN ANOTHER SET OF SEI ZED DOCUMENTS. THE HUMBLE ASSESSEE PRAYS YOUR HONOR THAT SINCE THE OTH ERWISE USE OF ADVANCE/PAYMENT TO FAMILY MEMBERS INCLUDING ASSESSE E COULD NOT BE ESTABLISHED, THEREFORE THE BENEFIT OF TELESCOPING/R OTATION/RECYCLING OF THESE FUNDS SHOULD BE ALLOWED TO THE ASSESSEE AGAINST THE EXPENSES/INVESTMENT IN UNACCOUNTED EXPENSES, MARRIAGE EXPENSES, JEWELRY AN D BUILDING CONSTRUCTION SEPARATELY SURRENDERED BY THE ASSESSE E AT MUCH HIGHER FIGURE THAN THE PAYMENTS RECORDED TO ASSESSEE AND OTHER FA MILY MEMBERS IN THE OTHER SEIZED DOCUMENTS AND THE ADDITION OF RS.44,87 ,630/- CONFIRMED BY CIT(A) MAY KINDLY BE DELETED. 7. ON THE OTHER HAND, THE LD. D/R CONTENDED THAT TH E ASSESSEE HAS NOT CO-RELATED THE RECOVERY OF ADVANCES WITH THE PAYMENTS MADE TOWARDS CONSTRUCTION AND OTHER EXPENSES. THE ASSESSEE HAS MADE ACTUAL WORKING ON THE BASIS O F DOCUMENTS FOUND BUT WHERE THE AMOUNTS ARE SHOWN AS PAID THE PURPOSE THEREOF IS NO T WRITTEN IN ALL SUCH ITEMS NOR ANY NARRATION HAS BEEN GIVEN. WHEREVER THE APPELLANT W AS ABLE TO CO-RELATE THE PAYMENTS FOR A PARTICULAR PURPOSE OF INVESTMENT/EXPENDITURE, THE LD. CIT (A) HAS ACCEPTED THE CLAIM AND ALLOWED TELESCOPING THEREOF TO THAT EXTENT. NO FURTHER RELIEF, THEREFORE, COULD BE GIVEN TO THE APPELLANT IN THE ABSENCE OF ESTABLISHING CO- RELATION. 11 8. IN ASSESSMENT YEARS 2006-07 AND 08-09 THE ASSESS EE CLAIMED TELESCOPING OF RS. 7,66,121/- AND RS. 14,29,652/- RESPECTIVELY ON THE BASIS OF SIMILAR DOCUMENTS FOUND AND SEIZED FOR WHICH A SIMILAR CLAIM OF MAKING ADVANCES TO THE FAMILY MEMBERS AND RECOVERY THEREOF FROM THEM FOR MAKING PAYMENTS TOWARDS CONST RUCTION EXPENSES AND OTHER INVESTMENTS AND EXPENSES ETC. EITHER BY SUCH PERSON S THEMSELVES OR THROUGH VARIOUS OTHER FAMILY MEMBERS HANDLING THE COMMON AFFAIRS OF THE A PPELLANT. BUT THE LD. CIT (A) SUSTAINED THE ADDITION ON THE SIMILAR GROUND AS WER E DONE IN A.Y. 2007-08. 9. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD AND CASE LAWS BROUGHT TO OUR NOTICE. THE APPELLANT IS FOUND TO HAVE MAIN TAINED TWO TYPES OF DOCUMENTS WHICH WERE FOUND AND SEIZED FROM HIS PREMISES. IN ONE OF THE SET OF DOCUMENTS, THE APPELLANT WAS FOUND TO HAVE INCURRED EXPENSES TOWARDS CONSTRU CTION OF HOUSE, PURCHASE OF JEWELLERY AND INCURRING OF VARIOUS EXPENSES SUCH AS MARRIAGE EXPENSES, FREIGHT AND OFFICE EXPENSES ETC. IN ALL THE THREE YEARS IN APPEAL. WH EREAS THE SECOND SET OF DOCUMENTS REVEALED PAYMENTS MADE TO VARIOUS FAMILY MEMBERS WH ICH ARE TREATED AS ADVANCE/DEBTS GIVEN TO THEM FOR MEETING OUT AFORESAID EXPENSES/IN VESTMENT WHICH ARE STATED TO HAVE BEEN RECOVERED FROM THEM/UTILIZED FOR THE AFORESAID PURPOSES. THE APPELLANT HAS GIVEN AN EXPLANATION THAT THE INVESTMENTS AND EXPENSES TO TH E EXTENT OF RS. 47,90,503/-IN A.Y. 2007-08, RS. 6,87,621/- IN A.Y. 2006-07 AND RS. 14, 29,652/- IN A.Y. 2008-09 HAVE BEEN INCURRED OUT OF THE ADVANCES/DEBTS SHOWN TO FAMILY MEMBERS. THUS THE CREATION OF THE INVESTMENT AND EXPENSES SURRENDERED AS UNDISCLOSED INCOME ARE OUT OF THE AFORESAID MONEY THAT HAS SEPARATELY BEEN ASSESSED BY THE ASSE SSING AUTHORITY ON THE BASIS OF APPELLANTS RECORD. THE EXPLANATION OF THE APPELLA NT HAS DULY BEEN CONSIDERED WITH REFERENCE TO THE PHOTO COPIES OF RELEVANT SEIZED AN NEXURES CONTAINED IN THE PAPER BOOK 12 SEPARATELY FILED FOR ALL THE THREE YEARS AND WORKIN G IN THE FORM OF CASH ACCOUNT FILED IN ASSESSEES PAPER BOOK PAGES 1 TO 29 IN A.Y. 2007-08 , PAGES 1 TO 10 IN A.Y. 2006-07 AND PAGES 1 TO 30 IN A.Y. 2008-09 AND SAME HAVE CAREFUL LY BEEN PERUSED WITH REFERENCE TO THE OTHER ANNEXURES LAID ON RECORD. THE CASH FLOW S TATEMENTS SO COMPILED HAVE NOT BEEN REJECTED BY EITHER OF THE AUTHORITIES BELOW. ADMITT EDLY, THE PAYMENTS SHOWN AS ADVANCES ARE NOT TO THE OUTSIDERS BUT TO THE FAMILY MEMBERS FOR SPECIFIC PURPOSES OF MAKING INVESTMENT/INCURRING EXPENSES. THESE PERSONS WERE ALSO ASSESSED TO TAX WITH THE SAME ASSESSING OFFICER. THEY HAVE ALSO TENDERED THE SAME EXPLANATION IN THEIR RESPECTIVE ASSESSMENTS BEFORE THE SAME ASSESSING AUTHORITY WHO COMPLETED ASSESSMENT OF THE APPELLANT BEFORE US. THE DOCUMENTS FOUND AND SEIZE D FROM THEM DID NOT REFLECT SUCH AMOUNT AS ADVANCE OR DEBTS RECEIVED BY THEM FOR ANY OTHER PURPOSE. THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT HAS NOT BROUGHT THESE AMOUNTS TO TAX AS UNEXPLAINED RECEIPTS IN THEIR HANDS WHILE FRAMING THE ASSESSMEN T OF THESE PERSONS IN THE THREE YEARS UNDER CONSIDERATION. AFTER RUMMAGE OF ALL CORNERS OF THE HOUSE AND PREMISES OF ALL SUCH FAMILY MEMBERS AS NAMED HEREIN BEFORE, THE AMOUNT S HOWN AS ADVANCES BY THE APPELLANT TO THEM ARE NOT FOUND UTILIZED FOR ANY OTHER PURPOS ES. WHEREAS THE AMOUNTS SO PAID AS ADVANCES STOOD WITHDRAWN FOR THE PURPOSE OF CREATIN G SUCH INVESTMENT/INCURRING EXPENSES FOR WHICH THESE WERE MADE TO THEM AS SHOWN RECORDED IN SOME ENTRIES BY THE LD. CIT (A) ALSO. THIS BY ITSELF PROVES THE NEXUS AS WELL AS CA SE OF THE APPELLANT. THE ASSESSEE THUS GAVE A REASONABLE EXPLANATION AND MADE A BONAFIDE S URRENDER OF THE UNDISCLOSED INVESTMENT AND EXPENSES WHICH INTER ALIA INCLUDED T HE AMOUNT PAID TO SUCH FAMILY MEMBERS FOR THE CREATION OF SUCH ASSETS/INVESTMENT AND EXPENSES AS STOOD DULY DISCLOSED AND ADMITTED BY THE ASSESSING OFFICER. THE APPELLA NT HAD NOT MAINTAINED ANY SYSTEMIC 13 BOOKS OF ACCOUNT NOR ANY ACCOUNT OF RECEIPT AND PAY MENT BUT HAD MADE THE PAYMENTS TO HIS FAMILY MEMBERS AS THEY WERE ASSISTING IN MANAGI NG THE AFFAIRS OF THE APPELLANT. IT WAS, THEREFORE, NEITHER NECESSARY NOR DESIRABLE FOR THE APPELLANT NOR POSSIBLE FOR HIM TO CO-RELATE EACH AND EVERY PAYMENT STATED AS ADVANCE TO SUCH FAMILY MEMBERS WHEN THE AMOUNT SPENT FOR MAKING INVESTMENT/INCURRING EXPEND ITURE FROM TIME TO TIME DURING THE RELEVANT PERIOD STOOD CRYSTALLIZED INTO VARIOUS INV ESTMENTS OR STOOD SPENT IN EXPENSES THAT WERE SURRENDERED AS HIS ADDITIONAL INCOME AND ADMIT TED BY THE ASSESSING AUTHORITY. THE REVENUE ALSO FOUND NOTHING OUTSTANDING FROM SUCH PE RSON AS AT THE END OF EACH RELEVANT YEAR UNDER CONSIDERATION. THE LD. CIT (A), THEREFO RE, HAS ERRED IN NOT ALLOWING TELESCOPING OF SUCH AMOUNT INCLUDING UNUTILIZED AMO UNT OF RS. 78,500/- FOR ASSESSMENT YEAR 2005-06 TOWARDS CREATION OF ASSETS, INVESTMENT AND EXPENSES IN A.Y. 2006-07. FOR ALL THESE REASONS, WE SET ASIDE HIS ORDERS, AND ALL OW THE GROUND RAISED IN APPEAL IN ALL THE THREE YEARS AND THE ADDITIONS SUSTAINED BY LD. CIT (A) ARE DELETED. 10. IN ASSESSMENT YEAR 2007-08 GROUND NO. 2 IN APPE AL HAS NOT BEEN PRESSED. THE SAME IS DISMISSED AS NOT PRESSED. 11. IN ASSESSMENT YEAR 2007-08 THE GROUND NO. 3 IN APPEAL RELATES TO DISALLOWANCE OF EXPENSES OF RS. 1,13,866/-. SIMILARLY DISALLOWANCE HAS ALSO BEEN MADE IN ASSESSMENT YEAR 2008-09 AT RS. 1,13,765/-. 12. HEARD PARTIES WITH REFERENCE TO MATERIAL ON REC ORD. WE FIND THAT THE ASSESSING AUTHORITY HAS MADE REASONABLE DISALLOWANCE OF EXPEN SES AFTER CONSIDERING RELEVANT MATERIAL AND AFFORDING EFFECTIVE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. FOR MAKING DISALLOWANCE REASONABLE ESTIMATE IS PERMISSIBLE. S UCH A VIEW HAS ALSO BEEN ENTERTAINED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF KANAYA LAL JANGID VS. CIT (2008) 14 217 CTR (RAJ.) 354. FINDING NO MERIT IN THE GROUND RAISED IN APPEAL ON THIS ISSUE IN BOTH THE ASSESSMENT YEARS 2007-08 AND 2008-09, THE SAME STANDS REJECTED. 14. IN THE RESULT, ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-07 STANDS ALLOWED AND BOTH THE APPEALS FOR ASSESSMENT YEARS 2007-08 AND 2 008-09 STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.08.2013. SD/- SD/- ( KUL BHARAT ) ( B. R. JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 23/08/2013. D/- COPY FORWARDED TO :- SHRI MURARI LAL MITTAL, JAIPUR. THE DCIT, CENTRAL CIRCLE-3, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 508(3)/JP/2012) BY ORDER, AR ITAT JAIPUR.