Sri C.A.Abdulkhader, Perumbavoor V. ACIT, Ernakulam

ITA 518/COCH/2010

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2929 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 01-03-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 15-09-2010
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Document seized; Share purchase agreement; Opportunity of being heard; Peak credit; Additional evidence; Valuation report; Assessment record; Retraction; Documents seized
• Section: 40A(3); 142(1); 27

Judgement Text

I.T.A. NOS. 516-522/COCH/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI B P JAIN, AM & GEORGE GEORGE.K, JM I.TA,. NOS.516-522/COCH/2013 (ASST YEARS: 2001-02 TO 2007-08) C.A. ABDUL KHADER, CHIRYAILAN SABNA COTTAGE, ALLAPRA P.O., PERUMBAVOOR THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. (ASSESSEE -APPELLANT) VS (REVENUE -RESPONDENT) PAN NO. AGRPA 0963H] ASSESSEE BY SHRI MATHEW JOSEPH, CA REVENUE BY SHRI SHANTAM BOSE, CIT(DR) DATE OF HEARING 02/03/2016 DATE OF PRONOUNCEMENT 22/03/2016 ORDER PER BENCH: THESE SEVEN APPEALS BY THE ASSESSEE ARISE FRO M DIFFERENT ORDERS OF THE LD. CIT(A)-I, KOCHI AS PER FOLLOWING DETAILS: SL. NO. I.T.A. NO. A.Y. DATE OF CIT(A)-I, KOCHI ORDER 1. 516/COCH/2010 2001-02 18/06/2010 2. 517/COCH/2010 2002-03 18/06/2010 3. 518/COCH/2010 2003-04 15/06/2010 4. 519/COCH/2010 2004-05 18/06/2010 5. 520/COCH/2010 2005-06 18/06/2010 6. 521/COCH/2010 2006-07 18/06/2010 7. 522/COCH/2010 2007-08 18/06/2010 I.T.A. NOS. 516-522/COCH/2010 2 2. SINCE THE ISSUES IN ALL THE APPEALS ARE ALMOS T IDENTICAL, THEREFORE, ALL THE APPEALS ARE BEING TAKEN UP BY THIS CONSOLIDATED ORD ER. 3. FIRST WE SHALL TAKE UP THE APPEAL OF THE ASSES SEE FOR THE ASSESSMENT YEAR 2001-02 IN I.T.A. NO. 516/COCH/2010 AS UNDER: I.T.A. NO. 516/COCH/2010 : A.Y. 2001-02 4. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1) THE ASSESSING OFFICER HAS ADDED RS.29,08,700/- B EING THE TOTAL OF THE CREDITS IN THE DAY BOOK. THE COMMISSIONER OF INCOM E TAX (APPEALS) HAS RESTRICTED TO THIS TO THE PEAK CREDIT. THE ASSESSIN G OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) HAS IGNORED THAT SOME OF TH ESE ARE BUSINESS TRANSACTIONS AND NOT TO BE ADDED BACK. 2) THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN DISALLOWING THE CREDIT IN THE NAME OF THE ASSESSEE AS UNEXPLAINED, THE ASSESSEE HAD FOR THE EARLIER YEARS FILED HIS RETURN OF INCOME AND HAD ENOUGH SOURCE FOR THIS AMOUNT. 3) THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN DISALLOWING THE CREDIT OF RS.1,25,000/- RECEIVED FR OM MAS MOVIES BY ACCOUNT PAYEE CHEQUE ON 09.01.2001 AND WHICH WAS RE PAID BY CHEQUE ON 01.02.2001 I.E., DURING THE SAME FINANCIAL YEAR. 4) THE VALUE OF SHARES AMOUNTING TO RS.1,96,340/- I N THE NAME OF RELATIVES HAS BEEN WRONGLY ASSESSED AS THE UNEXPLAINED INVEST MENT OF THE ASSESSEE. 5) THE ASSESSING OFFICER AND CIT(APPEALS) DISALLOWE D THE AGRICULTURAL INCOME TO THE EXTENT OF RS.1,40,000/- WITHOUT CONSI DERING THE EXTENT OF LAND AND ITEMS CULTIVATED. I.T.A. NOS. 516-522/COCH/2010 3 5. AS REGARDS GROUND NO. 1, THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED HEREI NBELOW: 4. A DAY BOOK OF THE ASSESSEES PROPRIETORY BUSINES S SUVARNA METALS WAS IMPOUNDED DURING THE SURVEY OF THE OFFICE OF SUVARNA METALS AT KANDANTHARA, PERUMBAVOOR. THE DAY BOOK WAS FOR THE FINANCIAL YEAR 2 000-01 RELEVANT TO ASSESSMENT YEAR 2001-02. THIS DAY BOOK WAS MARKED TC- 1(1). 4.1 DURING THE COURSE OF SCRUTINY OF THIS BOOK, IT WAS NOTIC ED THAT THE ASSESSEE HAD TAKEN LOANS FROM 13 PERSONS ON ONE HUNDRED AND FIVE OCCA SIONS. THE TOTAL AMOUNT OF LOAN TAKEN WAS RS.29,08,700/-. VIDE Q.NO. 2 TO ANNE XURE TO THE 142(1) DATED 11 TH SEPTEMBER, 2008, THE ASSESSEE WAS ASKED TO FILE CONFI RMATION LETTERS FROM THESE PERSONS. THE CONFIRMATION LETTERS WERE TO CONTAIN DETAIL S TO PROVE:- (A) THE IDENTITY OF THE LOAN CREDITORS. (B) CAPACITY OF LOAN CREDITORS TO LEND MONE Y AND (C) GENUINENESS OF THE TRANSACTIONS. 4.2 THE ASSESSEES REPLY TO THIS QUESTION AND OTHER QU ESTIONS IN THE ANNEXURE TO 142(1) WERE FILED ON 06.10.2008. THOUGH THE ASSESSEE A SSURED TO PRODUCE THE CONFIRMATION LETTERS, THESE WERE NEVER PRODUCED. AS THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION ABOUT THE NATURE AND SOURCE OF THE SUM O F RS.29,08,700/- FOUND CREDITED IN THE BOOKS OF SUVARNA METALS THESE SUMS C REDITED IS CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEA R 2000-01 RELEVANT TO THE ASSESSMENT YEAR 2001-02. 6 . BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED THAT LOANS AMOUNTING TO RS.12,29,586/- HAS BEEN RETURNED TO THE VARIOUS PER SONS AND THE ASSESSING OFFICER HAS NOT TAKEN INTO ACCOUNT OF THE SAME. THE LD. CI T(A) GAVE CREDIT TO THE SAID AMOUNT OF RS.12,,29,586/- AND RETAINED THE ADDITION OF RS.18,61,874/- WHICH IN FACT WAS THE WORKING GIVEN BY THE ASSESSEE AND THE SAME WORKING IS IN FACT THE PEAK CREDIT FROM THE SEIZED BOOKS AS ADMITTED BY T HE ASSESSEE. I.T.A. NOS. 516-522/COCH/2010 4 7. THE LD. COUNSEL FOR THE ASSESSEE, SHRI MATHEW JOSEPH ARGUED THAT THE AMOUNTS ARE LESS THAN RS.20,000/- EXCEPT FOR RS.9,3 2,000/- WHICH WAS RECEIVED IN CASH AND THE REPAYMENTS HAVE BEEN DONE TO THE EXTEN T OF RS.12,29,586/-DURING THE YEAR ITSELF. IN ANY CASE, THE ASSESSEE HAS NOT BROUGHT ON RECORD THE IDENTITY OF THE CREDITORS AND THEREFORE, THE GENUINENESS OF THE TRANSACTIONS COULD NOT BE PROVED. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCE S OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RI GHTLY RETAINED THE PEAK CREDIT OF RS.18,61,814/- AFTER CONSIDERING THE REPAYMENTS MAD E. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. THUS GR OUND NO. 1 OF THE ASSESSEE IS DISMISSED. 8. AS REGARDS GROUND NO. 2, THE ASSESSING OFFICE R MADE AN ADDITION OF RS.6,25,054/- AND THE FINDINGS OF THE ASSESSING OFF ICER ARE REPRODUCED HEREINBELOW:- 4.3 VIDE QUESTION NO. 3 OF ANNEXURE TO 142(1), THE ASSESSEE WAS REQUIRED TO PRODUCE THE LEDGER FOR THE FINANCIAL YEAR 2000-01 R ELEVANT TO THE ASSESSMENT YEAR 2001-02. THE ASSESSEES REPLY, VIDE HIS LETTER RECEIVED IN THIS OFFICE ON 06.10.2008 WAS THAT NO SEPARATE LEDGER WAS PREPARED FOR THE FINANCIAL YEAR 2000-01. IN THE DAY BOOK TC-1(1), MONEY WAS INTROD UCED IN VARIOUS DATES IN THE NAME OF THE ASSESSEE. TOTAL OF THESE CREDITS W AS RS.6,25,054/-. THE ASSESSEES EXPLANATION FOR THESE CREDITS WAS THAT P URCHASE OF SCRAP DIRECTLY BY THE ASSESSEE BY WITHDRAWING CASH FROM BANK ON VA RIOUS DATES. BUT NO BANK BOOK WAS PRODUCED BY THE ASSESSEE TO VERIFY TH IS CLAIM. AS THE ASSESSEES EXPLANATION IS NOT SATISFACTORY, THE SUM S OF RS.6,25,054/- CREDITED IN THE DAY BOOK ARE CHARGED TO TAX AS THE INCOME OF TH E ASSESSEE OF THE PREVIOUS YEAR 2000-01 RELEVANT TO THE ASSESSMENT YE AR 2001-02. I.T.A. NOS. 516-522/COCH/2010 5 9. THE LD. CIT(A) WORKED OUT THE PEAK CREDIT AT RS.4,31,140/- AND TO THAT EXTENT, HE ADDED RS. 1 LAKH AS THE WITHDRAWAL FOR HOUSEHOLD EXPENSES AND ACCORDINGLY, SUSTAINED THE ADDITION OF RS.6,25,054/-. 10. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSING OFFICER HAS TAKEN THE CREDITS IN THE NAME OF THE ASSESSEE IN THE IMPO UNDED BOOKS AMOUNTING TO RS.6,25,054/- WITHOUT CONSIDERING THE DEBITS. IN FA CT THE PEAK CREDIT COMES AT RS.3,87,420/- AFTER CONSIDERING THE WITHDRAWALS AGA INST THE CREDITS. 11. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. ON A PERUSAL OF THE WORKING OF THE CREDITS GIVEN BY TH E ASSESSEE, THE PEAK CREDIT IS AT RS.3,87,420/- AND IN THE ABSENCE OF UTILIZATION OF THE WITHDRAWALS ELSEWHERE BROUGHT ON RECORD EITHER BY THE ASSESSING OFFICER O R THE LD. CIT(A), THE PEAK CREDIT OF RS.3,87,420/- APPEARS TO BE CORRECT AND T HEREFORE, THE ASSESSING OFFICER IS DIRECTED TO CONFIRM THE SAME AND DELETE THE BALA NCE OF THE ADDITION. THUS GROUND NO. 2 OF THE ASSESSEE IS PARTLY ALLOWED. I.T.A. NOS. 516-522/COCH/2010 6 13. AS REGARDS GROUND NO. 3 RELATING TO THE ADDITI ON OF RS.1,25,000/-, THE ASSESSING OFFICERS FINDINGS ARE REPRODUCED HEREINB ELOW: 4.4 IN THE DAY BOOK MARKED TC-1(1), A SUM OF RS. 1,25,000/- WAS FOUND CREDITED ON 09.01.2001, IN THE NAME OF MAS MOVIES . THE MONEY WAS FOUND DEBITED IN THE NAME OF MAS MOVIES ON 01.02.2001. AS EXPLANATION, THE ASSESSEE REPLIED THAT TOWARDS SUPPLY OF SHEETS FOR FILM SHOOTING, THE AMOUNT OF RS.1,25,000/- WAS RECEIVED AS ADVANCE FROM MAS MOVIES ON 09.01.2001 AND WHERE THE ASSESSEE WAS NOT ABLE TO SUPPLY THE I TEMS, THE MONEY WAS RETURNED TO THEM ON 01.02.2001. OTHER THAN THIS RE PLY, NO OTHER EVIDENCE WAS PRODUCED BY THE ASSESSEE TO SUBSTANTIATE THIS CLAIM . NO ADDRESS WAS ALSO GIVEN FOR FURTHER VERIFICATION. AS THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY, THE SUM OF RS.1,25,000/- CREDITED IN THE NAME OF MAS MOVIES IS CHARGED TO TAX AS THE INCOME OF THE ASSESSEE FOR TH E PREVIOUS YEAR 2000-01 RELEVANT TO THE ASSESSMENT YEAR 2001-02. 14. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AS SESSING OFFICER. 15. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT T HE AMOUNT OF RS.1,25,000/- WAS RECEIVED AS ADVANCE FROM MAS MOVIES ON 09/01/ 2001 TOWARDS SUPPLY OF SHEETS AND THE ASSESSEE WAS NOT ABLE TO SUPPLY THE SAME AND ACCORDINGLY, THE MONEY WAS REFUNDED ON 01/02/2001 THROUGH DEMAND DRA FT WHICH IS A MATTER OF RECORD IN THE SEIZED DOCUMENT TC-1(1), PG. 172. TH EREFORE, THE ASSESSING OFFICER HAS TO READ THE DOCUMENT AS A WHOLE, I.E., CREDIT A S WELL AS THE DEBIT OF THE SEIZED DOCUMENTS AND IN SUCH CIRCUMSTANCES, NO ADDI TION IS WARRANTED. I.T.A. NOS. 516-522/COCH/2010 7 16. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. IT IS UNDISPUTED THAT THE ASSESSEE HAS RECEIVED RS.1,25,0 00/- FROM MAS MOVIES ON 09.01.2001 FOR SUPPLY OF SHEETS WHICH THE ASSESSEE WAS NOT ABLE TO SUPPLY FOR THE FILM SHOOTING AND CONSEQUENTLY, THE SHOOTING DID NO T TAKE PLACE AND THE AMOUNT WAS REPAID BY DEMAND DRAFT ON 01.02.2001 WHI CH IS A MATTER OF RECORD IN THE CASH BOOK TC-1, PAGES 157 & 172. THE ASSES SING OFFICER HAS NOT READ THE DOCUMENT AS A WHOLE WHICH HAS BEEN SEIZED DURING TH E COURSE OF SEARCH, WHICH IN FACT SHOULD HAVE BEEN READ AS A WHOLE AND REPAYM ENTS SHOULD HAVE BEEN TAKEN INTO CONSIDERATION. IN SUCH CIRCUMSTANCES, EV EN IF THE IDENTITY OF THE CREDITOR IS NOT PROVED, THE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF THE SEIZED DOCUMENTS WHICH HAS BEEN READ HALF WAY WHICH IN FACT HAS TO BE READ AS A WHOLE. THEREFORE, AS PER THE SEIZED DOCUMENTS REFERRED HEREINABOVE, THE ASSESSEE HAS MADE THE REPAYMENTS THROUGH DEMAND DRA FT AND ACCORDINGLY, NO ADDITION CAN BE MADE ON SUCH AMOUNT AND THE ADDITIO N SO MADE IS DIRECTED TO BE DELETED AND ACCORDINGLY, THE ORDER OF THE LD. CI T(A) IS REVERSED. THUS GROUND NO. 3 OF THE ASSESSEE IS ALLOWED. 18. AS REGARDS GROUND NO. 4, THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED H EREINBELOW:- I.T.A. NOS. 516-522/COCH/2010 8 4.5 IN REPLY TO QUESTIONNAIRE ISSUED ON 13.05.20 08, THE ASSESSEE HAD STATED IN HIS REPLY DATED 30.05.2008, THAT HIS INVESTMENT IN COCHIN KAGAZ LTD. IN THE ASSESSMENT YEAR 2001-02 WAS RS.2,96,340/- AND THE S OURCE WAS FROM SUVARNA METALS. IN THE CASH FLOW STATEMENT FILED ALONG WI TH THIS REPLY, THE CASH IN FLOW FROM SUVARNA METALS IS ONLY RS.1,01,984/- AND IN THE BALANCE SHEET FILED ON 06.10.2008, THE DRAWING FROM SUVARNA METALS IS ON LY RS.1,00,000/-. THE ASSESSEES REPLY TO THE SECOND QUESTIONNAIRE ISSUED ON 11.09.2008 WAS THAT THE DETAILS OF INVESTMENT MADE BY HIM AND RELATIVE S WERE ATTACHED SEPARATELY. BUT NO EXPLANATION WAS GIVEN FOR THE S OURCE OF INVESTMENT IN COCHIN KAGAZ LTD. IN THE ABSENCE OF SATISFACTORY EXPLANATION, THE UNEXPLAINED INVESTMENT OF RS.1,96,340/- IS DEEMED A S THE ASSESSEES UNEXPLAINED INCOME OF THE PREVIOUS YEAR 2000-01 REL EVANT TO THE ASSESSMENT YEAR 2001-02. 19. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER. 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AS PLACED ON RECORD THE CASH FLOW STATEMENT WHEREIN THE INVESTMENT OF RS. 2,96,3 40/- HAS BEEN DECLARED OUT OF WHICH THE ASSESSING OFFICER HAS DISALLOWED RS.1, 96,340/- BUT THE ASSESSING OFFICER HAS NOT TAKEN INTO ACCOUNT THE WITHDRAWALS MADE FROM THE BANK AND OTHER SOURCES. IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, WHEN THE ENTIRE INVESTMENT IS SUPPORTED BY THE CASH FLOW STATEMENT, THE ASSESSING OFFICER SHOULD TAKE INTO CONSIDERATION OF THE WITHDRAWALS MADE FRO M THE BANK AND OTHER SOURCES DEPICTED IN THE CASH FLOW STATEMENT WHICH H AS NOT BEEN EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, THE MATTER IS REMITTED TO THE FILE OF THE ASSESSING OFFICER WHO WILL EXAMINE THE ISSUE AND DE CIDE THE ISSUE DE NOVO AS DIRECTED HEREINABOVE BUT BY PROVIDING AN ADEQUATE O PPORTUNITY OF BEING I.T.A. NOS. 516-522/COCH/2010 9 HEARD TO THE ASSESSEE. THUS GROUND NO. 4 OF THE ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 21. AS REGARDS GROUND NO. 5, THE ASSESSING OFFI CER MADE AN ADDITION OF RS. 1,40,000/- AND HIS OBSERVATIONS ARE REPRODUCED HERE INBELOW:- 4.6 IN HIS STATEMENT GIVEN AT THE TIME OF SEARCH , IN REPLY TO Q. NO.16, THE ASSESSEE HAD STATED THAT HE OWNED AGRICULTURAL LAND S TO THE EXTENT OF 3.5 ACRES. AS IT WAS MOSTLY WATER LOGGED OCCASIONAL CUL TIVATION BY HIS MOTHER YIELDED A NET INCOME OF RS.40,000/-. BUT IN THE RE TURN OF INCOME FILED, THE ASSESSEE HAD OFFERED RS.2,00,000/- AS AGRICULTURAL INCOME. THE ASSESSEE THEN ASKED TO EXPLAIN HOW HE COULD GET SO MUCH INCOME WH EN THE LAND WAS MOSTLY WATER-LOGGED, THE ASSESSEES REPLY WAS THAT AT THE TIME OF GIVING THE SWORN STATEMENT TAKEN AT THE TIME OF SEARCH, HE WAS IN A PERPLEXED MIND. THE ASSESSEES RETRACTION WOULD HAVE BEEN JUSTIFIED HAD IT BEEN DONE AS EARLY AS POSSIBLE, BUT NOT AFTER A GAP OF ALMOST 24 MONTHS. HOWEVER THE INSPECTOR OF THIS OFFICE WAS ASKED TO MAKE SPOT VISIT AND REPORT THE EXTENT OF AGRICULTURAL OPERATION. AFTER THE VISIT, THE INSPECTOR REPORTED THAT THE ASSESSEE WAS CULTIVATING PLANTAIN AND PINE-APPLE AND THE INCOME WOULD BE AROUND RS.1,00,000/- DURING THE YEAR ONLY. CONSIDERING TH E INSPECTORS REPORT, THE ASSESSEES AGRICULTURAL INCOME FOR THIS YEAR IS DET ERMINED AT RS.60,000/- AND THE REMAINING RS.1,40,000/- IS BROUGHT TO TAX AS THE AS SESSEES CASH FLOW UNEXPLAINED SOURCES. 22. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER. 23. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT WHEN THE INSPECTOR HAD VISITED AND MADE ON THE SPOT INSPECTION OF THE PLOT AND HAS COME OUT WITH THE REPORT I.T.A. NOS. 516-522/COCH/2010 10 THAT THE AGRICULTURAL INCOME WOULD BE AROUND RS.1 L AKH, HOW THE LD. CIT(A) AND THE ASSESSING OFFICER COULD RESTRICT THE SAME TO RS .60,000/-. 24. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 25. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE FACTS OF THE CASE. THE FACTS UNDISPUTED ON THE ISSUE ARE THAT THE ASSE SSEE IS HAVING AGRICULTURAL LANDS TO THE EXTENT OF 3.5 ACRES AND THE INSPECTOR OF THE INCOME TAX HAS MADE ON THE SPOT INSPECTION AND AFTER TAKING THE REPORTS , ESTIMATED THE AGRICULTURAL INCOME AT RS. 1 LAKH, WHICH IN FACT, IN THE CIRCUMS TANCES AND FACTS OF THE PRESENT CASE, CANNOT BE IGNORED. BOTH THE LD. CIT(A) AND T HE ASSESSING OFFICER HAVE NOT GIVEN ANY LOGICAL REASONING FOR RESTRICTING THE AGR ICULTURAL INCOME AT RS.60,000/-. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE DIRE CT THE ASSESSING OFFICER TO ESTIMATE THE AGRICULTURAL INCOME AT RS.1 LAKH. ACC ORDINGLY, GROUND NO. 5 OF THE ASSESSEE IS ALLOWED. THUS, THE APPEAL OF THE ASSES SEE IN I.T.A. NO. 516/COCH/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 26. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSES SEE IN I.T.A. NO. 517/COCH/2010 FOR THE ASSESSMENT YEAR 2002-03 AS UN DER: I.T.A. NOS. 516-522/COCH/2010 11 I.T.A. NO. 517/COCH/2010 : A.Y. 2002-03 27. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ASSESSING OFFICER HAS TREATED THE SHARES I N THE NAME OF RELATIVES AMOUNTING TO RS.10,33,690/- AS UNEXPLAINED INVESTME NT OF THE ASSESSEE. THE CIT(APPEALS) HAS GIVEN A MARGINAL RELIEF AND HA S NOT CONSIDERED DRAWINGS OF RS.9,75,000/- AS PER SEIZED BOOK TC 1(2 ). 2. THE CIT(APPEALS) HAS CONFIRMED THE ADDITION OF RS.3,47,000/- BEING CREDITS IN THE SEIZED BOOKS OF SUVARNA METALS WITHO UT CONSIDERING THE FACTS. THE ASSESSEE HAD A SURPLUS OF MORE THAN 4 L AKHS OUT OF THE 9.75 LAKHS WITHDRAWAL IN THE SEIZED RECORDS AND THIS WAS IGNORED. 3. THE CIT(APPEALS) HAS CONFIRMED THE ADDITION OF RS.6,17,499/- BEING CREDITORS IN THE BALANCE SHEET FILED. THE ASSESSING OFFICER AND CIT(APPEALS) IGNORED THE FACT THAT MOST OF THESE CR EDITS ARE AGAINST PURCHASES REFLECTED IN THE BOOKS. 4. THE ASSESSING OFFICER AND CIT(APPEALS) HAS IG NORED THE CONFIRMATION STATEMENT OF C.M. ASRAF AND SRI MUHAMMED ALI AND AD DED THE AMOUNT OF RS.2,30,950/- AS UNEXPLAINED. 28. AS REGARDS GROUND NO. 1, THE BRIEF FACTS O F THE CASE AS EMANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED H EREINBELOW:- 4. AS PER THE POST SEARCH ENQUIRIES MADE BY THE D EPUTY DIRECTOR OF INCOME TAX(INV.)-I, ERNAKULAM, INVESTMENT MADE BY T HE ASSESSEE IN COCHIN KAGAZ LTD. DURING THE FINANCIAL YEAR 2001 -02 WAS RS.12,55,510/-. BUT AS PER CASH FLOW STATEMENT FILED, THE INVESTMEN T IN THE COMPANY WAS ONLY RS.2,21,820/-. A QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE ON 04.06.2008, TO EXPLAIN THE DIFFERENCE. AS REPLY THE ASSESSEE SUBMITTED THAT THE INVESTMENTS MADE BY HIS FRIENDS AND RELAT IVES WERE TAKEN AS HIS INVESTMENT BY THE INVESTIGATING OFFICER. THE SHARE S WERE INVESTED BY THE CONCERNED PERSONS ONLY AND TO PROVE HIS MAJORITY FO R HOLDING THE DIRECTORSHIP, THESE SHARES WERE COLLECTED IN HIS HO USE. DETAILED I.T.A. NOS. 516-522/COCH/2010 12 STATEMENT OF COCHIN KAGAZ LTD. AND CONFIRMATION F ROM FRIENDS AND RELATIVES WOULD BE FILED. THOUGH THE REPLY WAS PRI OR TO THE SECOND 142(1) NOTICE ISSUED ON 11.09.2008, TILL THE COMPLETION OF ASSESSMENT NO CONFIRMATION HAS BEEN FILED. THE SHARE CERTIFICATE WERE FOUND AND SEIZED FROM THE RESIDENCE OF THE ASSESSEE DURING THE COURS E OF SEARCH U/S. 132. THESE WERE MARKED AS VJJA (19) TO VJJA(41). 4.1 THE PRESUMPTION U/S. 132A(4) PROVIDES THAT T HE BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES SEIZED FROM THE POSSESSION OF THE ASSESSEE SHALL BE PRESUMED TO BELONG TO THE PERSON IN WHOSE POSSESSION OR CONTROL THEY A RE FOUND IN THE COURSE OF SEARCH. A SIMILAR PRESUMPTION IS ALSO ENACTED A S TO THE TRUTH OF THE CONTENTS OF THE BOOKS OF ACCOUNTS SO FOUND. SO ALS O, THE SIGNATURE AND EVERY OTHER PART OF THE BOOKS OF ACCOUNT MAY BE PRE SUMED TO BE IN THE HAND WRITING OF THE PERSON BY WHOM IT IS PURPORTED TO HAVE BEEN WRITTEN. IF THEY ARE STAMPED, EXECUTED OR ATTESTED, THEY WIL L BE PRESUMED TO BE STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY W HOM IT PURPORTS TO HAVE BEEN EXECUTED OR ATTESTED. 4.3 NO EVIDENCES WERE FILED TO SHOW THAT THE SHA RE CERTIFICATE ACTUALLY BELONGED TO THE PERSONS IN WHOSE NAME THE CERTIFICA TES WERE ISSUED. THE SOURCES OF THESE PERSONS IN WHOSE NAME, THE INVESTM ENTS IN SHARES OF COCHIN KAGAZ LTD. HAVE NOT BEEN PROVED AT ALL. TH E GENUINENESS OF THESE INVESTMENTS HAVE NOT BEEN ESTABLISHED. HENCE THE INVESTMENTS IN SHARE CERTIFICATES FOUND AND SEIZED FROM THE ASSESS EES RESIDENCE ARE PRESUMED TO BE MADE BY THE ASSESSEE. AGAINST ACTUAL INVESTMENT OF RS.12,55,510/- MADE DURING THE YEAR, THE CASH AVAIL ABLE AND USED FOR INVESTMENT AS PER CASH FLOW STATEMENT IS ONLY RS.2, 21,820/-. HENCE THE DIFFERENCE OF RS.10,33,690/- IS TREATED AS THE ASSE SSEES UNEXPLAINED INVESTMENT IN COCHIN KAGAZ LTD.AND BROUGHT TO TAX AS THE ASSESSEES INCOME OF THE PREVIOUS YEAR 2001-02 RELEVANT TO THE ASSESSMENT YEAR 2002-03. 29. THE CIT(A) CONFIRMED THE ADDITION OF RS.4,8 0,850/- BEING THE SHARES HELD BY THE ASSESSEES RELATIVES AND DELETED THE ADDITION O F THE SHARES HELD BY THE ASSESSEE HIMSELF AND BY THE WIFE AND CHILDREN OF TH E ASSESSEE. I.T.A. NOS. 516-522/COCH/2010 13 30. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT NOTHING HAS BEEN BROUGHT ON RECORD BY EITHER OF THE AUTHORITIES BELOW THAT THE SHARES AMOUNTING TO RS.4,80,850/- HAVE BEEN PURCHASED BY THE ASSESSEE A ND IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, THE ADDITION SO MADE IS PRAY ED TO BE DELETED. 31. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 32. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THE UNDISPUTED FACTS IN THE PRESENT CASE ARE THAT T HE SHARES BELONGED TO THE ASSESSEE, WIFE AND CHILDREN AND THAT OF THE RELATIV ES WERE FOUND DURING THE COURSE OF SEARCH IN THE PREMISES OF THE ASSESSEE. THE ASSESSEE HAS SUBMITTED THE EXPLANATION THAT THE SHARE CERTIFICATES OF SELF, WI FE AND CHILDREN AND THOSE OF THE RELATIVES WERE KEPT BY HIM ONLY FOR VOTING PURPOSES IN THE REPUTED COMPANY, I.E., COCHIN KAGAZ LTD. THE FACT THAT THE INVESTMENTS BY THE RELATIVES HAVE BEEN MADE BY THE RELATIVES THEMSELVES, HAS NOT BEEN DISP UTED BY EITHER OF THE AUTHORITIES BELOW. THEREFORE, IN THE CIRCUMSTANCE S AND FACTS OF THE CASE, THE PRESUMPTION MADE BY THE ASSESSING OFFICER AND THE L D. CIT(A) THAT THE SHARE CERTIFICATES FOUND AT THE PREMISES OF THE ASSESSEE BELONGED TO THE ASSESSEE HIMSELF, IS WITHOUT ANY MATERIAL BROUGHT ON RECORD AGAINST THE ASSESSEE. THE I.T.A. NOS. 516-522/COCH/2010 14 ASSESSING OFFICER DID NOT EVEN MAKE ENQUIRIES FROM THE RELATIVES OF THE ASSESSEE INDEPENDENTLY. IN THE CIRCUMSTANCES AND FACTS OF T HE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN RETAINING THE ADDITION OF RS.4,80,850/ -, BEING THE SHARES HELD BY THE RELATIVES OF THE ASSESSEE AND THE SAME IS DIRECTED TO BE DELETED. ACCORDINGLY, GROUND NO. 1 OF THE ASSESSEE IS ALLOWED. 33. AS REGARDS GROUND NO. 2, THE ASSESSING OFFIC ER MADE THE ADDITION OF RS.3,47,000/- AND HIS FINDINGS ARE REPRODUCED HEREI NBELOW:- 4.7 IMPOUNDED DAY BOOK TC-1(2) IS THE DAY BOOK OF SUVARNA METALS FOR THE PERIOD FROM 01.04.2001 TO 07.06.2001. IN THIS DAY BOOK, DURING THE TWO MONTHS AND 7 DAYS PERIOD, THE ASSESSEE HAD RECEIVED LOANS OF RS.3.47 LAKHS FROM TWELVE PEOPLE. CASH INTRODUCED BY THE ASSESSE E IN HIS NAME WAS RS.1,00,000/-. VIDE HIS REPLY DATED 06.10.2008, TH E ASSESSEE UNDERTOOK TO FILE CONFIRMATIONS HAVE NOT BEEN FILED YET. AS SOURCE F OR CAPITAL ADDITION THE ASSESSEE EXPLAINS THE WITHDRAWALS MADE ON 01.02.20 01 AND 08.02.2001 WHICH IS FOUND PROXIMATE TO THE DATE OF CAPITAL INTRODUCT ION. HENCE THE UNEXPLAINED LOAN CREDITS OF RS.3.47 LAKHS IS ASSESS ED TO TAX AS THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR 2001-02 RELEVANT TO THE ASSESSMENT YEAR 2002-03. 34. THE LD. CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF PEAK CREDIT OF RS.2,55,000/-. 35. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THA T IN THE SAME SEIZED BOOK, THE ASSESSEE HAS SHOWN DRAWINGS AGAINST NET OF RS.8,75 ,000/-, BEING THE WITHDRAWALS I.T.A. NOS. 516-522/COCH/2010 15 MADE WHICH HAS NOT BEEN TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER. IF THE SAME IS TAKEN INTO CONSIDERATION, THEN NO ADDIT ION CAN BE MADE. 36. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 37. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE FACTS OF THE CASE. THERE IS NO DISPUTE THAT THE IMPOUNDED DAY BOOK IS HAVING ANOTHER ACCOUNT IN WHICH THE ASSESSEE HAS SHOWN THE FOLLOWING WITHDRAW ALS OF RS.9,75,000/-:- DATE AMOUNT IN RS. 11.05.2001 1,50,000/- 17.05.2001 1,50,000/- 24.05.2001 75,000/- 25.05.2001 50,000/- 31.05.2001 2,50,000/- 01.06.2001 1,00,000/- 06.06.2001 2,00,000/- TOTAL: 9,75,000/ - OUT OF WHICH RS.1,00,000/- HAS BEEN PAID ON 26.04.2 001 AND ALL THE TRANSACTIONS OF THE WITHDRAWALS AND PAYMENT ARE IN CASH IS A MAT TER OF RECORD IN THE IMPOUNDED DAY BOOK WITH THE DEPARTMENT WHICH HAS NO T BEEN TAKEN INTO CONSIDERATION. IF THE SAME IS TAKEN INTO CONSIDERA TION, EVEN THE PEAK CREDIT OF RS.2,55,000/- CANNOT BE MADE. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE LD. CIT(A) HAS WRONGLY WORKED OUT THE PEAK CREDIT O F RS.2,55,000/- IN THE I.T.A. NOS. 516-522/COCH/2010 16 ABSENCE OF TAKING INTO ACCOUNT THE WITHDRAWALS OF R S.8,75,000/- AND ACCORDINGLY, THE SAID ADDITION OF RS. 2,55,000/- IS DIRECTED TO BE DELETED AND THUS, THE ORDER OF THE CIT(A) IS REVERSED. THUS, G ROUND NO. 2 OF THE ASSESSEE IS ALLOWED. 38. AS REGARDS GROUND NO. 3, THE ASSESSING OFFI CER HAS MADE THE ADDITION OF RS.6,17,499/- AND HIS FINDINGS ARE REPRODUCED HERE INBELOW:- 4.8 LIKEWISE, AS PER THE BALANCE SHEET OF M/S. S UVARNA METALS, FILED BEFORE THE ADIT(INV.), ERNAKULAM DURING THE COURSE OF POST SURVEY ASSESSMENT. THE SUNDRY CREDITORS AS ON 31.03.2002 IS RS.6,17,499/-. VIDE LETTER DATED 01.06.2008, THE ASSESSEE WAS ASKED TO FILE CONFIRMATION LETTER FROM THE CREDITORS WHICH HAS NOT BEEN FILED SO FAR. THEREFORE AMOUNT OF RS.6,17 ,499/- ARE TO BE ALSO ADDED TO THE TOTAL INCOME AS UNEXPLAINED CASH CREDITS FOR THE REASONS STATED ABOVE. THE ASSESSEE HAS NOT PRODUCED ANY DETAILS TO SHOW T HAT THE LOANS FOUND IN DAY BOOK TC-1(2) WERE INCLUDED IN THE BALANCE SHEET. T HE AMOUNT OF RS.6,17,499/- IS CHARGED TO TAX SEPARATELY. 39. THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE A SSESSING OFFICER. 40. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSING OFFICER ADDED THE SUNDRY CREDITORS FROM WHOM THE PURCHASES HAVE B EEN MADE. A SUM OF RS.5,29,491/- WAS PAID OFF DURING THE SUBSEQUENT YE AR AS UNDER:- 1. ABDUL REHMAN MUDICKAL RS. 30,000 2. HASSAINAR ALUVA RS. 30,286 3. K.M. KIMU PONJASSERY RS. 11,036 4. RAJU PERUMBAVOOR RS.1,84,896 5. SAIDU MOHAMMED RS. 88,875 6. TAHIR PERUMBAVOOR RS.1,84,398 TOTAL RS.5,29,491 I.T.A. NOS. 516-522/COCH/2010 17 IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE T HAT THESE ARE CREDITORS WHICH CAN BE VERIFIED DIRECTLY BY THE ASSESSING OFFICER A ND CONFIRMATIONS CAN ALSO BE GIVEN. 41. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 42. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. IT IS UNDISPUTED THAT WHEN THE PURCHASES HAVE BEEN ACCEPT ED, THE CREDITORS CANNOT BE ADDED AND TREATED AS INCOME OF THE ASSESS EE AND ESPECIALLY WHEN THEY HAVE BEEN PAID OFF DURING THE YEAR OR IN THE S UBSEQUENT YEAR. IN THE PRESENT CASE, RS.5,29,491/- HAS BEEN PAID IN THE SU BSEQUENT YEAR AND THEREFORE, THIS FACT HAS TO BE EXAMINED BY THE ASSESSING OFFIC ER AND ALSO FOR THE REMAINING CREDITORS AND ACCORDINGLY, THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WHO WILL EXAMINE THE ISSUE AS DIRECTED HERE INABOVE AND IF THE PAYMENTS HAVE BEEN MADE TO THE SAID SUNDRY CREDITORS, NO AD DITION MAY BE MADE IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICER IS DI RECTED ACCORDINGLY WHO SHOULD ACT UPON AND DECIDE THE ISSUE DE NOVO BUT BY AFFORD ING AN ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS GROUND NO. 3 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS. 516-522/COCH/2010 18 43. AS REGARDS GROUND NO. 4, THE LD. COUNSEL FO R THE ASSESSEE DID NOT PRESS THE SAID GROUND AND WITHDREW THE SAME AND ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. THUS THE APPEAL OF THE ASSESSEE IN I .T.A. NO. 517/COCH/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 44. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E IN I.T.A. NO. 518/COCH/2010 FOR THE ASSESSMENT YEAR 2003-04 AS UNDER: I.T.A. NO. 518/COCH/2010 : A.Y. 2003-04 45. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE CIT(APPEALS) WENT WRONG IN CONFIRMING THE AD DITION OF RS.4,20,457/- AS UNEXPLAINED INVESTMENT IN COCHIN KAGAZ WITHOUT CONS IDERING THE ACTUAL FACTS. 2. THE CIT(APPEALS) ALSO CONFIRMED THE ADDITION ON ACCOUNT OF LOAN OBTAINED FROM C.M. MOHAMMED AND C.M. ASHRAF WITHOUT CONSIDER ING THE ACTUAL FACTS. 3. THE ASSESSING OFFICER AND CIT(APPEALS) HAS TAKEN THE TRANSFER ENTRY RECORDED IN THE CAPITAL ACCOUNT OF THE ASSESSEE AMOUNTING TO RS.45,85,643/- AS UNEXPLAINED INVESTMENT. THE FACT THAT THIS ENTRY WA S A MISTAKE AND THIS WAS NOT CONSIDERED IN THE BALANCE SHEET FILED WAS IGNORED B Y ASSESSING OFFICER AND CIT(APPEALS). 4. THE CREDITS IN THE BOOKS AMOUNTING TO RS.10,73, 123/- WAS DISALLOWED AS UNEXPLAINED WITHOUT CONSIDERING THE FACTS AND CIRCU MSTANCES. 5. ANY OTHER GROUNDS THAT MAY BE ALLOWED AT THE TIME OF HEARING. 46. AS REGARDS GROUND NO. 1, THE ASSESSING OFFICE R HAS MADE THE ADDITION OF RS.4,20,457/- AND HIS FINDINGS ARE REPRODUCED HEREI NBELOW:- I.T.A. NOS. 516-522/COCH/2010 19 4. DURING THE COURSE OF POST SEARCH ENQUIRIES BY THE DEPUTY DIRECTOR OF INCOME TAX (INV.)-I, ERNAKULAM, BALANCE SHEETS RELA TING SUVARNA METALS WERE FILED. AS PER THE BALANCE SHEET AS ON 31.03.2002, DEPOSIT/ADVANCE IN COCHIN KAGAZ LTD. WAS 7,07,660/-. THIS MEANS, THERE WAS AN INVESTMENT OF RS.4,95,840/- DURING THE YEAR. IN THE BALANCE SHEET , THE DRAWING FROM SUVARNA METAL IS ONLY RS.75,383/-. BUT IN THE CASH FLOW A ND REPLY FILED ON 30-05-2008, DRAWING OF RS.4,85,840/- IS SHOWN AS SOURCE OF INVE STMENT IN COCHIN KAGAZ LTD. . BUT NO EVIDENCE IS FILED FOR THE EXTRA DRA WING OF RS.4,20,457/- MADE FROM SUVARNA METALS. HENCE THIS AMOUNT IS TREATED AS T HE UNEXPLAINED INVESTMENT OF THE ASSESSEE NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNT AND THIS EXCESS AMOUNT IS BROUGHT TO TAX AS THE INCOME OF THE ASSES SEE FOR THE PREVIOUS YEAR 2002-03 RELEVANT TO THE ASSESSMENT YEAR 2003-04. 47 . THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OF FICER. 48. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT T HE ASSESSING OFFICER HAS MADE THE DISALLOWANCE WITHOUT UNDERSTANDING THE FAC TS. THE INVESTMENT IN COCHIN KAGAZ LTD. AS PER BALANCE SHEET AS ON L31.03 .2002 IS RS.2,11,820/- AND AS PER THE BALANCE SHEET AS ON 31.03.2003 IS RS.7,07,6 60/-. THUS THERE IS AN INCREASE OF RS.4,95,840/-. THE INVESTMENT OF RS.4,85,840/- W AS MADE DIRECTLY FROM SILVER STAR STEELS WHICH IS REFLECTED IN THE CASH FLOW STATEMEN T. IN THE CASH FLOW STATEMENT, THE INVESTMENT IN COCHIN KAGAZ LTD. IS SHOWN AS AN OUTFLOW AT RS.4,85,840/-, THEREBY, THERE IS A SHORTAGE OF ONLY RS.10,000/- ON LY AND THIS IS A MISTAKE AS THE INVESTMENT AS PER BALANCE SHEET IS RS.4,95,840/-. I.T.A. NOS. 516-522/COCH/2010 20 49. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 50. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE INVESTMENT HAS BEEN MADE DIRECTLY FROM SILVER STAR STEELS AMOUNTING TO RS.4,85,840/- WHICH REQUIRES VERIFICATION AND EXAMINATION OF THE ISSUE BY THE AS SESSEE WHICH HAS NOT BEEN DONE BY THE AUTHORITIES BELOW. IN THE CIRCUMSTANCE S AND FACTS OF THE CASE, THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OF FICER WHO WILL EXAMINE THE ISSUE AND DECIDE THE ISSUE DE NOVO AFTER VERIFYING WHETHE R THE INVESTMENT HAS BEEN MADE DIRECTLY FROM SILVER STAR STEELS ON BEHALF OF THE ASSESSEE BUT BY AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . THUS GROUND NO. 1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 51. AS REGARDS GROUND NO. 2, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THE SAID GROUND AND WITHDREW THE SAME. ACCORDINGLY, GROUND NO. 2 OF THE ASSESSEE IS DISMISSED AS WITHDRAWN. 52. AS REGARDS GROUND NO. 3, THE BRIEF FACTS AS E MANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED HEREINBELOW: I.T.A. NOS. 516-522/COCH/2010 21 4.2 IN THE FIRST PAGE OF THE LEDGER FOR THE PERIO D 01.04.2002 TO 31.03.2003, IMPOUNDED BY THE DDIT, THE ASSESSEE CAPITAL ACCOUNT APPEARS. ON 01.04.2002, TWO CREDITS TOTALING RS.5085643/- WAS F OUND. THESE AMOUNTS ARE MENTIONED AS TRANSFER FROM BHAST & DIAMON. F URTHER CREDITS OF RS.3 LAKHS ON 31.03.2002 AND ANOTHER CREDIT OF RS.2 LAKH S IN CASH ON 30.06.2002 WAS FOUND. VIDE THE QUESTIONNAIRE ANNEXED TO THE 14 2(1) NOTICE ISSUED ON 24.09.2008, THE ASSESSEE WAS REQUIRED TO EXPLAIN TH E SOURCES. ON 10.10.2008, THE ASSESSEES REPLY WAS FILED, WHICH I S REPRODUCED BELOW. IT IS SUBMITTED THAT THERE WERE TWO FIRMS DIAMOND STEEL AND BHARAT STEEL, RELATES TO VERY OLD BALANCES WHICH WERE TRANSFERRED TO THE CAPITAL ACCOUNT. SUVARNA METALS WERE HAVING PURCHASES FROM THESE TWO FIRMS BEFORE 2000-01. THESE FIRMS WERE TAKEN OVER BY SUVA RNA METALS AND THE BALANCES OUTSTANDING WERE TRANSFERRED TO CAPITAL AC COUNT. ALL THESE TRANSACTIONS WERE PRIOR TO 2000-01. BUT NO EVIDENCE WAS FILED EVIDENCING THE EXISTENCE OF THESE FIRMS AND THEIR TAKING OVER BY THE ASSESSEE. HENCE, THESE ARE TREATED AS UNEXPLAINED CREDITS IN THE CAP ITAL OF THE ASSESSEE. LIKEWISE SOURCES FOR THE CASH CREDITS OF RS.5 LAKHS HAVE NOT BEEN EXPLAINED. HENCE, THE UNEXPLAINED CASH CREDIT OF R S.4585643/- IN THE BOOKS OF THE ASSESSEE IS CHARGED TO TAX AS THE INCO ME OF THE ASSESSEE OF THE PREVIOUS YEAR 2002-03 RELEVANT TO ASSESSMENT YE AR 2003-04.I 53. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AS SESSING OFFICER. 54. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BE FORE THE AUTHORITIES BELOW AND ESPECIALLY BEFORE THE LD. CIT(A) AND WHOSE SUBM ISSIONS ARE RECORDED IN PARA 13 AT PAGE 6 THAT THIS IS ONLY A TRANSFER ENTR Y AND NO ADDITION CAN BE MADE ON THIS COUNT. BUT THE LD. CIT(A) HAS NOT TAK EN COGNIZANCE OF THE SAME AND PROCEEDED TO CONFIRM THE ADDITION. I.T.A. NOS. 516-522/COCH/2010 22 55. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 56. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE T HAT THE ASSESSEE DURING THE EARLIER YEARS DID BUSINESS IN THE NAME OF BHARATH S TEEL AND DIAMOND STEEL WHICH WAS SUBSEQUENTLY CLOSED DURING THE YEAR 1998. SINCE BOTH THE FIRMS BELONGED TO THE ASSESSEE THE BALANCE IS TRANSFERRED TO THE BOOKS OF THE ASSESSEE AS ON 01.04.2001. THE TOTAL AMOUNT OF 40, 85,643 AND NOT 50,85,643 TAKEN BY THE ASSESSING OFFICER. THESE ARE ENTRIES PRIOR TO 1.04.2001 IN THE BOOKS. AS BOTH THESE FIRMS BELONG TO THE ASSESSEE A ND THE BALANCE IN THAT FIRMS ACCOUNT DURING THE YEAR 1998 WAS TRANSFERRED TO THI S ACCOUNT AS ON 1.4.2001 AND LATER ON BY A JOURNAL ENTRY TRANSFERRED TO HIS CAPITAL ACCOUNT, THIS IS NOT TAXABLE. IT MAY NOT BE NOTED THAT THE ASSESSEE HAD DECLARED 18 LAKHS CASH DURING THE ASSESSMENT YEAR 1998-99 UNDER VDIS FOR W HICH CREDIT WAS NOT TAKEN ANYWHERE. THE ASSESSING OFFICER HAS MADE AN ADDITI ON OF RS.45,85,643/- STATING THAT THE CREDIT SHOWN IN THE IMPOUNDED LEDG ER TC-I(16)IS NOT EXPLAINED. THE IMPOUNDED BOOK WAS PREPARED FOR BANK PURPOSES TO SHOW AN ENHANCED CAPITAL TO MATCH THE BANK LOAN OF AROUND R S.20 LAKHS. BUT IN THE BALANCE SHEET SUBMITTED TO THE DEPARTMENT THE ASSES SEE HAS NOT CLAIMED THIS AMOUNT I.E., WHILE FINALIZING THE BALANCE SHEET FOR TAX PURPOSES THESE TRANSFER I.T.A. NOS. 516-522/COCH/2010 23 ENTRIES WERE ELIMINATED. THE ASSESSMENT FOR THE A Y 2002-03 AND 2003-04 WAS BASED ON THE BALANCE SHEET AS ON 31.03.2003 THE OPE NING CAPITAL BROUGHT FORWARD IS THE CLOSING BALANCE AS PER THE BALANCE S HEET AS ON 31.03.2002. COPIES OF THESE BALANCE SHEETS WERE PLACED ON RECOR D. OUT OF THIS DISALLOWANCE A SUM OF RS.20,85,644/- IS AGAIN ADDED AS UNEXPLAINED CREDITS IN CAPITAL ACCOUNT IN THE ASSESSMENT YEAR 2006-07. BO TH THESE YEARS ASSESSMENT WAS BASED ON THE ABOVE BALANCE SHEETS IN WHICH THE ASSESSEE HAS NOT CLAIMED THESE CREDITS IN THE CAPITAI ACCOUNT AND HE NCE THE ADDITION OF THIS AMOUNT IS AGAINST LAW AND FACTS. IN THE CIRCUMSTAN CES AND FACTS OF THE CASE, IT IS EVIDENT THAT IT IS SIMPLY A TRANSFER ENTRY FROM ONE BUSINESS WHICH HAS BEEN CLOSED TO THE PRESENT BUSINESS AND THEREFORE, THERE CANNOT BE ANY ADDITION OR ANY IOTA OF INCOME WHICH CAN BE THE SUBJECT MATTER OF ADDITION. ACCORDINGLY, THE ADDITION SO MADE BY THE LD. CIT(A) IS DIRECTED TO BE DELETED. THUS GROUND NO. 3 OF THE ASSESSEE IS ALLOWED. 57. AS REGARDS GROUND NO. 4, THE ASSESSING OFFICE R HAS MADE THE ADDITION OF RS.10,73,123/- AND HIS FINDINGS ARE REPRODUCED HERE INBELOW: 4.3 IN THE BALANCE SHEET OF SUVARNA METALS FILE D WITH DDIT, DURING POST- SURVEY ENQUIRIES, THE SUNDRY CREDITS DURING THE YEA R WAS RS.10,73,123/-. LIKEWISE AS PER THE BALANCE SHEET OF SUVARNA P.P. PRODUCTS IMPOUNDED AS TC-I(63), LOANS FROM FRIENDS AND RELATIVES WAS RS.3 ,75,500/-. VIDE NOTICE U/S. 142(1) DATED 04.06.2008 AND 24.09.2008, THE ASSESSE E WAS REQUIRED TO FURNISH THE DETAILS OF THESE CREDITORS AND FILE CON FIRMATION OF THE SAME. NO DETAILS NOR CONFIRMATION HAVE BEEN FILED. HENCE, T HESE ARE TREATED AS UNEXPLAINED CREDITS IN THE BOOKS OF THE ASSESSEE AN D CHARGED TO TAX AS THE I.T.A. NOS. 516-522/COCH/2010 24 INCOME OF THE PREVIOUS YEAR 2002-03 RELEVANT TO THE ASSESSMENT YEAR 2003- 04. 58. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER. 59. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE THE LD. CIT(A). 60. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 61. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE W HICH IN FACT HAS NOT BEEN TAKEN COGNIZANCE OF BY THE LD. CIT(A) THAT THE ENTI TY HAS NOT DONE ANY BUSINESS. THE PROJECTED PROFIT AND LOSS ACCOUNT, IT IS CLEARLY WRITTEN PROJECTED PROFIT AND LOSS ACCOUNT. THIS IS ALSO NOT REGISTE RED WITH SALES TAX AUTHORITIES AND NO PURCHASE OR SALE IS EFFECTED. THE ASSETS SH OWN IN THE BALANCE SHEET LIKE LAND AND BUILDING ARE NOT IN EXISTENCE AND THE SUNDRY CREDITORS ARE ALL SHOWN TO AVAIL THE BANK OVERDRAFT. THE VERIFICATION OF THE OVERDRAFT ACCOUNT ALSO SHOWS THAT THERE ARE NO CREDITS BY WAY OF SALE S OR OTHERS. THE ASSESSEE IS NOT AN EDUCATED PERSON AND HE HAS WRONGLY STATED TH AT THE BALANCE SHEET IS CORRECT WHICH WAS LATER DENIED BY LETTER. DURING T HE SEARCH NO OTHER EVIDENCES WERE FOUND FOR THE EXISTENCE OF THIS FIRM OTHER THAN THE PROJECTED I.T.A. NOS. 516-522/COCH/2010 25 PROFIT AND LOSS ACCOUNT AND BALANCE SHEET AND THE P ROJECT REPORT ALSO IS AVAILABLE WITH THE SEIZED RECORDS. THE LD. COUNSEL SUBMITTED THAT THE FIGURES IS SHOWN IN THE BALANCE SHEET ON THE ASSET SIDE AND TH E BALANCE SHEET AND PROFIT AND LOSS ACCOUNT ARE NOT SIGNED BY ANYBODY AND NO N AME ALSO IS TYPED IN IT. IN THE COVER PAGE OF THE FILE IT IS WRITTEN BANK B ALANCE SHEET WHICH CLEARLY SHOWS THAT THIS WAS PREPARED ONLY TO AVAIL THE OVER DRAFT FACILITY AND HENCE THE ADDITION ON THIS ACCOUNT MAY BE DELETED. AS EXPLAI NED DURING THE PREVIOUS YEAR, THE BALANCE SHEET WAS PREPARED ONLY FOR THE P URPOSE OF RENEWING THE LOAN FACILITY. THE ASSESSEE HAS NOT DONE ANY BUSI NESS IN THIS NAME DURING THE YEAR. FOR THIS YEAR, THE ASSESSING OFFICER HAS TAK EN THE BALANCE SHEET HAVING THE LOAN FROM RELATIVES OF RS.3,75,000/-. THIS WAS SHOWN TO RENEW AND AVAIL A LIMIT OF RS.5,00,00/- FROM INDIAN OVERSEAS BANK, PE RUMBAVOOR. THE OPENING CAPITAL BALANCE IN THE BALANCE SHEET IS 8.61 LAKHS WHEREAS THE BALANCE SHEET FOR 31.03.2002 TAKEN BY THE ASSESSING OFFICER HAS A CLOSING CAPITAL OF ONLY RS.4,36,400/-. THERE IS ANOTHER BALANCE SHEET IN T HE SEIZED RECORDS FOR THE SAME YEAR WHICH SHOWS THE LOAN FROM RELATIVES OF RS.22,9 0,000/- AND ANOTHER ONE SHOWING THE LOAN OF RS.15,90,700/-. ALL THESE BALA NCES WERE PREPARED ONLY FOR BANK PURPOSES. THE FIRM SUVARNA PP PRODUCTS WAS ON LY A PAPER CONCERN FORMED TO OBTAIN A BANK FACILITY AND THERE WAS NO R EAL CONCERN IN THIS NAME. THE SEARCH ALSO COULD NOT FIND ANY BOOKS OF ACCOUNT S OTHER THAN THE BALANCE SHEETS IN A FILE WHICH WAS NAMED AS BANK BALANCE SH EETS (TCI-63). THE ASSESSEE HAS NOT DISCLOSED ANY PROFIT FROM THIS CON CERN IN THE ORIGINAL RETURN I.T.A. NOS. 516-522/COCH/2010 26 FILED. THE INCOME SHOWN IN THE A.Y. 2002-03 IS THE PROFIT AS PER THE PROJECTED BALANCE SHEET. THIS INCOME WAS DECLARED ONLY TO BU Y PEACE OF MIND AND AS INSISTED BY THE INVESTIGATING OFFICER. THE PROJECT REPORT PREPARED FOR THE LOAN WAS ALSO FILED WITH THE DEPARTMENT AND THE BALANCE SHEET SHOWS THE SAME FIGURES IN THE PROJECT REPORT IN RESPECT OF ASSETS AND LIABILITY TOWARDS BANK. NONE OF THESE ASSETS CAME INTO EXISTENCE AND THE FA CT THAT ALL THESE FIGURES ARE ROUNDED TO THOUSANDS ITSELF SUBSTANTIATES THAT THESE ARE PROJECTIONS ONLY. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED I N MAKING THE ADDITION BASED ON PROJECTED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WHICH ARE MOSTLY IN ROUND FIGURES. THEREFORE, THE ADDITION IS ARBITRARY . ACCORDINGLY, IN THE CIRCUMSTANCES AND FACTS OF THE CASE AND THE SUBMISS IONS MADE BEFORE THE LD. CIT(A) AND BEFORE US, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ADDITION ON THE BASIS OF PROJECTED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET AT RS.3,75,000/-. 62. AS REGARDS THE CREDITORS TO THE EXTENT OF RS .7,74,619/-, WHICH ARE AGAINST THE PURCHASES MADE AND WHICH HAVE BEEN ADMITTED, IT IS NOT IN DISPUTE. IT WAS SUBMITTED THAT THE SAME HAS BEEN REPAID DURING THE SUBSEQUENT YEARS. ACCORDINGLY, THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WHO WILL EXAMINE THE ISSUE WHETHER THE CREDITORS TO THE EXTE NT OF RS.7,74,619/- HAVE BEEN PAID IN THE SUBSEQUENT YEAR AND IF FOUND CORRE CT, THEN DELETE THE I.T.A. NOS. 516-522/COCH/2010 27 ADDITION SO MADE AND DECIDE THE ISSUE DE NOVO BUT A FTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 63. THE ASSESSING OFFICER IS DIRECTED TO DELETE T HE ADDITION OF RS.3,75,000/- WHICH HAS BEEN MADE ON THE BASIS OF PROJECTED PROFI T AND LOSS AND BALANCE SHEET. ACCORDINGLY, GROUND NO. 4 OF THE ASSESSEE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. THUS THE APPEAL OF THE ASSESS EE IN I.T.A. NO. 518/COCH/2010 IS ALLOWED FOR STATISTICAL PURPOSES. 64. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E IN I.T.A. NO. 519/COCH/2010 FOR THE ASSESSMENT YEAR 2004-05 AS UN DER: I.T.A. NO. 519/COCH/2010 : A.Y. 2004-05 65. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL:- 1. THE CIT(APPEALS) WENT WRONG IN CONFIRMING THE ADDITION OF RS.6,93,706/- PAID TOWARDS AUCTION BY A CARTEL. 2. THE LEARNED CIT(APPEALS) HAS CONFIRMED THE DISAL LOWANCE OF RS.29,22,502/-. SUNDRY CREDITORS IN THE BOOKS OF S UVARNA METALS WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES. 3. THE LOAN FROM FRIENDS AMOUNTING TO RS.3,46,801 /- WAS TREATED AS UNEXPLAINED IGNORING THE DETAILS FILED. I.T.A. NOS. 516-522/COCH/2010 28 4. THE NATURE OF TRADE COMPELLED THE ASSESSEE TO M AKE PAYMENTS ABOVE RS.20,000/-. THE ASSESSING OFFICER AND CIT(APPEALS ) HAS IGNORED THIS. 5. THE DISALLOWANCE OF THE SUBSCRIPTION AMOUNT OF RS.4,12,000/- ALSO WAS WITHOUT CONSIDERING THE FACTS OF THE CASE. 6. THE FACT THAT THE FULL PAYMENT FOR THE CAR WAS NOT MADE AND THE SELLER HAS SUBSEQUENTLY TOOK BACK THE CAR WAS IGNORED BY T HE CIT(APPEALS). 7. ANY OTHER GROUND THAT MAY BE ALLOWED AT THE TIM E OF HEARING. 66. AS REGARDS GROUND NO.1, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THE SAID GROUND AND ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 67. AS REGARDS GROUND NO. 2, THE AO HAS MADE THE ADDITION OF RS.37,28,718/- AND HIS FINDINGS ARE REPRODUCED HEREINBELOW:- 4.1 TC-I(63) IS A FILE IMPOUNDED FROM BUSINESS PRE MISES OF SUVARNA METALS. IT CONTAINS P&L ACCOUNT AND BALANCE SHEET OF SUVARNA P.P. PRODUCTS. AS PER THE BALANCE SHEET AS ON 31.03.2004, LOANS FROM FRIE NDS AND RELATIVES WAS RS.2,25,000/-. SUNDRY CREDITORS WAS FOR RS.5,81,21 6/-. DETAILS OF LOAN CREDITORS AND SUNDRY CREDITORS AND CONFIRMATION WAS SOUGHT FR OM THE ASSESSEE VIDE THIS OFFICE NOTICE U/S. 142(1) DATED 24.09.2008. AS PER BALANCE SHEET OF SUVARNA METALS DATED 31.03. 2004, FILED BEFORE THE DDI(INV.)-I, ERNAKULAM, AT THE TIME OF POST SEARCH ENQUIRIES, SUNDRY CREDITORS DURING THE YEAR WAS RS.29,22,502/-. VIDE 142(1) DA TED 04.06.2008, THE ASSESSEE WAS ASKED TO FILE CONFIRMATION FROM SUNDRY CREDITORS. NO CONFIRMATION HAS BEEN FILED YET. I.T.A. NOS. 516-522/COCH/2010 29 THE REPLY OF THE ASSESSEE REGARDING THE LOANS IN S UVARNA P.P. PRODUCTS IS REPRODUCED BELOW: - THE BALANCE SHEET AS ON 31 ST MARCH, 2004 WAS PREPARED EXCLUSIVELY FOR RENEWING FINANCIAL ASSISTANCE ALREADY AVAILED FROM BANK. THE SUNDRY CREDITORS, LOANS FROM FRIENDS AND RELATIVES SHOWN I N BALANCE SHEET WAS ONLY TO SHOW THE CREDIT WORTHINESS. I HAVE INCLUDED THE NET PROFIT OF RS.35,129.00 EARNED IN CASH FLOW STATEMENT SUBMITTED. EVEN THOUG H THE INCOME AND EXPENDITURE WERE RECORDED SEPARATELY NO BALANCE SHE ET ITEMS WERE CONSIDERED. IN THE CASE OF LOANS CREDITS AND SUNDRY CREDITS OF SUVARNA METALS AS ON 31.03.2004, NO EXPLANATION HAS BEEN OFFERED BY THE ASSESSEE. IN THE CASE OF SUVARNA P.P. PRODUCTS, THE EXPLANATION OFFERED IS N OT SATISFACTORY. HENCE, THE CREDITS TOTALING RS.37,28,718/- ARE TREATED AS UNEX PLAINED CREDITS IN THE BOOKS OF THE ASSESSEE AND THESE SUMS SO CREDITED ARE CHAR GED TO TAX AS THE INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR 2003-0 4 RELEVANT TO THE ASSESSMENT YEAR 2004-05. 68. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.2 9,22,502/-. 69. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THESE ARE ALL RUNNING PURCHASE CREDITS WHICH HAVE BEEN PAID OFF IN THE SU BSEQUENT YEARS. THE COPY OF THE LEDGER ACCOUNT HAS ALSO BEEN PLACED ON RECOR D BEFORE THE BENCH WITH REGARD TO THE SUNDRY CREDITORS OF RS.26,16,912/-. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT SUCH SUNDRY CREDITORS ARE VERIFIABLE BU T NO COGNIZANCE OF THE SAME WAS TAKEN BY THE LD. CIT(A). I.T.A. NOS. 516-522/COCH/2010 30 70. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 71. WE HAVE HEARD THE RIVAL CONTENTION AND PERUS ED THE FACT OF THE CASE. IT IS UNDISPUTED THAT THE SAID AMOUNT OF RS. 29,22,502 /- IS RUNNING CREDITS AGAINST THE PURCHASES MADE WHICH HAVE BEEN ADMITTED. IT HA S BEEN CLAIMED THAT ALL THE SUNDRY CREDITORS HAVE BEEN PAID IN THE FOLLOWIN G YEARS AND THE ASSESSEE HAS SUBMITTED THE COPIES OF THE LEDGER ACCOUNT TO T HE EXTENT OF THE AMOUNT OF RS.26,16,912/- PAID IN THE SUBSEQUENT YEARS AND TH EREFORE, MAKING THE ADDITION OF SUNDRY CREDITORS WILL TANTAMOUNT TO DOU BLE ADDITION WHICH IS NOT PERMITTED IN LAW. IN THE SAID CIRCUMSTANCES AND FA CTS OF THE CASE, AND IN THE INTEREST OF JUSTICE, THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WHO WILL EXAMINE THE ISSUE WHETHER THE SAID CREDITORS H AVE BEEN PAID IN THE SUBSEQUENT YEARS AND IF FOUND SO, THEN NO ADDITION ON THIS COUNT CAN BE MADE. ACCORDINGLY, THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE IN ACCORDANCE WITH OUR DIRECTIONS HEREINABOVE BUT AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. THUS GROUND NO. 2 OF THE ASSESSEE IS PARTLY ALLOWED FOR STATIS TICAL PURPOSES. 72. AS REGARDS GROUND NO. 3, THE LD. COUNSEL FO R THE ASSESSEE HAS WITHDRAWN THE SAID GROUND AND ACCORDINGLY, THE SAME IS DISMIS SED AS WITHDRAWN. I.T.A. NOS. 516-522/COCH/2010 31 73. AS REGARDS GROUND NO. 4, THE BRIEF FACTS AS EMANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED HEREINBELOW:- 4.3 AS PER THE LEDGER OF SUVARNA METALS THE ASSE SSEE HAD MADE PURCHASES BY PAYING IN EXCESS OF RS.20,000/-. TOTAL OF SUCH PURCHASES WAS RS.9,40,754/-. VIDE THE 142(1) NOTICE DATED 24.09.2008, THE ASSESS EE WAS ASKED TO SHOW CAUSE WHY DISALLOWANCE U/S. 40A(3) MADE ON THESE PA YMENTS. THE ASSESSEES REPLY TO THIS SHOW CAUSE IS GIVEN BELOW: - I AM DOING THE SCRAP BUSINESS WHICH IS BASICALLY R ELATED TO AN UNORGANIZED BUSINESS. ACCORDING TO THE NATURE OF BUSINESS LOCAL PURCHASES FROM PERSONS WHO ARE COLLECTING SCRAP FROM DIFFERENT PLACES LIKE HOUSES, STREETS, WORKSHOPS ETC. ARE AN INTEGRAL PART. THEY MAY NOT HAVE ANY RE GISTRATION UNDER ANY LOCAL LAWS. THESE SUPPLIERS ARE UNEDUCATED AND MAY NOT HA VE ANY BANK ACCOUNT IN THEIR NAMES. IN ORDER TO MAKE PURCHASES FROM TH EM THEY INSIST FOR CASH PAYMENTS. SINCE I AM FORCED TO ACCEPT THE LOCAL PU RCHASES FROM THESE PEOPLE I CANNOT INSIST FOR CHEQE/DD PAYMENTS, WHICH OTHERWISE WILL AFFECT MY BUSINESS. LOCAL PURCHASES PLAY AN IMPORTANT ROLE I N MY BUSINESS OF SCRAP AND HENCE I HAVE PAY CASH FOR THESE PURCHASES. IT IS EV IDENT FROM THE LEDGER ACCOUNT THAT THE TOTAL AMOUNT OF RS.9,40,754/- COMP RISED OF ONLY 29 PURCHASES OF VARIOUS DATES FOR THE WHOLE YEAR. IN THESE CIRCUMSTANCE CONSIDERING THE NATURE OF BUSINESS AND NUMBER OF TR ANSACTIONS AS A WHOLE FOR THE YEAR YOUR GOODSELVES MAY KINDLY ACCEPT THE PURC HASES FROM LOCAL UNREGISTERED DEALERS FOR RS.9,40,754/- AND DISALLOW ANCE U/S. 40A(3) IN THIS REGARD MAY BE DROPPED. THE REPLY OF THE ASSESSEE IS CONSIDERED. THE EXCEP TION AS PER RULE 6DD IS NOT APPLICABLE TO THE ASSESSEES CASE. HENCE, 20% OF CA SH PAYMENT OF RS.9,40,754/- IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 74. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AS SESSING OFFICER. I.T.A. NOS. 516-522/COCH/2010 32 75. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE ASSESSEE HAS ADMITTEDLY MADE THE PAYMENTS IN CONTRAVENTION OF THE PROVISION S OF SECTION 40A(3) AND THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENC E TO ESTABLISH THAT THE SPECIFIC PAYMENTS TO THE SPECIFIC PARTIES WERE FALL ING UNDER EXCEPTIONS AS PROVIDED IN RULE 6DD OF I.T. RULES. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY CONFIRM ED THE ACTION OF THE ASSESSING OFFICER. THUS GROUND NO. 4 OF THE ASSESS EE IS DISMISSED. 76. GROUND NO. 5 OF THE ASSESSEE WAS NOT PRESSED AND THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 77. AS REGARDS GROUND NO. 6, THE ASSESSING OFFICE R HAS MADE THE ADDITION OF RS.6,60,000/- AND HIS FINDINGS ARE REPRODUCED HERE INBELOW:- 4.5 VJJA-45 IS A DOCUMENT SEIZED FROM THE RESIDENC E OF THE ASSESSEE. THIS IS AN AGREEMENT DATED 25.07.03, SHOWING THE PURCHAS E OF A BENZ CAR FOR RS.10,10,000/-. AS PER THE CASH FLOW STATEMENT FILE D, AN AMOUNT OF RS.1,00,000/- AND RS.2,50,000/- WERE PAID AS ADVANC E ON 25.07.2003 AND 28.07.2003 RESPECTIVELY. IN THE CASH FLOW STATEMENT FILED FOR THE SUBSEQUENT YEARS, NO FURTHER PAYMENT HAS BEEN SHOWN TOWARDS THE PURCHASE OF BENZ CAR. NO SATISFACTORY REPLY HAS BE EN GIVEN BY THE ASSESSEE AS TO WHEN THE BALANCE AMOUNT WAS PAID TOW ARDS THIS PURCHASE. PREPONDERANCE OF PROBABILITY IS THAT THE ASSESSEE MADE THE PAYMENT IMMEDIATELY AND THIS WAS NOT RECORDED IN HI S BOOKS. HENCE THE PAYMENT OF RS.6,60,000/- IS CHARGED TO TAX AS THE UNEXPLAINED INVESTMENT I.T.A. NOS. 516-522/COCH/2010 33 IN PURCHASE OF BENZ CAR FOR THE PREVIOUS YEAR 2003- 04 RELEVANT TO ASSESSMENT YEAR 2004-05. 78. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASS ESSING OFFICER. 79. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT T HE ASSESSEE HAS PAID RS.1 LAKH AND RS.2,50,000/- TOTALING TO RS.3,50,000/- AS ADVANCE ON 25-07-2003 AND 28-07-2003 RESPECTIVELY AND BALANCE OF RS.6,60,000/ - WAS NOT PAID. THE CAR DEVELOPED MECHANICAL COMPLAINT AND THE SAME WAS RET URNED BACK TO THE OWNER. THE CAR WAS NEVER REGISTERED IN THE NAME OF THE ASSESSEE AND IT WAS JUST AN AGREEMENT WHICH WAS SEIZED FROM THE RESIDEN CE OF THE ASSESSEE. THEREFORE, THE ADDITION SO MADE IS PRAYED TO BE DEL ETED. 80. THE LD. DR ON THE OTHER HAND RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 81. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. IT IS UNDISPUTED THAT THE ASSESSEE HAS MADE PAYMENTS T OTALING TO RS.3,50,000/- ON TWO OCCASIONS AND RS.6,60,000/- HAS NEVER BEEN PAID AS ADMITTED BY BOTH THE AUTHORITIES BELOW. IT IS ONLY ON THE BASIS OF THE DOCUMENT WHICH IS AN AGREEMENT DATED 25/07/2003 WHERE THE ASSESSEE WAS R EQUIRED TO MAKE PAYMENT OF RS.10,10,000/-. THE EXPLANATION HAS BEE N SUBMITTED BEFORE THE I.T.A. NOS. 516-522/COCH/2010 34 AUTHORITIES BELOW THAT THE CAR DEVELOPED A MECHANIC AL DEFECT AND ACCORDINGLY, THE CAR WAS NOT PURCHASED AND WAS RETU RNED BACK TO THE PROPOSED SELLER AND THE BALANCE PAYMENT OF RS.6,60, 000/- WAS NEVER PAID. THERE IS NOTHING ON RECORD WITH EITHER OF THE AUTHO RITIES BELOW THAT THE ASSESSEE HAS MADE PAYMENT OF RS.6,60,000/- AND IN SUCH CIRCU MSTANCES AND FACTS OF THE CASE, NO ADDITION ON THIS COUNT CAN BE MADE AND THE ADDITION SO MADE IS DIRECTED TO BE DELETED AND ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS REVERSED. THUS GROUND NO. 6 OF THE ASSESSEE IS ALLO WED. 82. GROUND NO. 7 IS GENERAL IN NATURE AND THEREFO RE, DO NOT REQUIRE ANY ADJUDICATION. THUS THE APPEAL OF THE ASSESSEE IN I. T.A. NO. 519/COCH/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. . 83. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESS EE IN I.T.A. NO. 520/COCH/2010 FOR THE ASSESSMENT YEAR 2005-06 AS UN DER: I.T.A. NO. 520/COCH/2010 : A.Y. 2005-06 84. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE CIT(APPEALS) HAS CONFIRMED THE ADDITION OF RS.6,50,000/- CREDITS IN THE BOOKS OF SUVARNA METALS AS UNEXPLAINED CASH CREDITS WITHOUT CONSIDERING THE FACTS. I.T.A. NOS. 516-522/COCH/2010 35 2. THE DISALLOWANCE OF THE CASH INFLOW FROM THAHIRA AMOUNTING TO RS.10,50,000/- WAS ALSO CONFIRMED BY THE CIT(APPEAL S) IGNORING THE SOURCE OF THE CREDITOR. 3. THE AUCTION DEPOSIT MONEY PAID AS A CARTEL IS A SSESSED IN THE HANDS OF THE ASSESSEE IGNORING THE EVIDENCES PRODUCED. 4. THE ADDITION OF RS.37,84,368/- BASED ON THE VA LUATION OF THE DEPARTMENT VALUER IS AGAINST LAW AND FACTS. THE VALUATION WAS BASED ON CPWD RATES AND NOT THE PWD RATE. THE WORK DONE BY THE LESSEE IN TH E BUILDING ALSO WAS TAKEN IN THE VALUATION. 5. ANY OTHER GROUNDS THAT MAY BE ALLOWED AT THE T IME OF HEARING. 85. THE ASSESSEE DID NOT PRESS GROUND NO. 1,2 AND 3 AND ACCORDINGLY, THE SAME ARE DISMISSED AS NOT PRESSED.. 86. GROUND NO. 5 IS GENERAL IN NATURE AND THEREFORE , DO NOT REQUIRE ANY ADJUDICATION. 87. AS REGARDS GROUND NO. 4, THE BRIEF FACTS AS EM ANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED HEREINBELOW:- 4.5 DURING THE FINANCIAL YEAR 2004-05, THE ASSESSE E STARTED CONSTRUCTION OF A BUILDING AT M.C. ROAD, PERUMBAVOOR. THE CONSTRUCTI ON WAS COMPLETED IN THE ASSESSMENT YEAR 2006-07. LATER IN THE ASSESSMENT Y EAR 2006-07, A LODGING BUSINESS BY NAME SUVARNA PALACE WAS STARTED BY TH E ASSESSEE IN PARTNERSHIP WITH HIS WIFE. IN THE ASSESSMENT OF SUVARNA PALACE FOR THE ASSES SMENT YEAR 2006-07, IN ORDER TO ESTIMATE THE VALUE OF INVESTMENT IN THE PROPERTY SUVARNA PALACE, THE I.T.A. NOS. 516-522/COCH/2010 36 DISTRICT VALUATION OFFICER, VALUATION CELL, INCOME TAX DEPARTMENT, CHENNAI-6 WAS REQUIRED ON 22.01.2008 U/S. 142A OF THE INCOME TAX ACT, TO MAKE AN ESTIMATE OF SUCH VALUE AND REPORT THE SAME. THE RE PORT WAS RECEIVED IN THIS OFFICE ON 1 ST DECEMBER, 2008. IN THIS REPORT, THE DVO HAD ESTIM ATED THE VALUE OF INVESTMENT IN THE PROPERTY AT RS.1,32,54,000/- A S AGAINST THE DECLARED VALUE OF RS.56,85,263/-. IN THE SCHEDULE OF BLOCK OF ASSETS FILED IN THE RET URN OF INCOME OF SUVARNA PALACE FOR THE ASSESSMENT YEAR 2006-07, THE CONSTRU CTION AS ON 01.04.2005 IS SHOWN AT RS.56,85,263/-, EVEN THOUGH AS PER THE BOO KS OF THE ASSESSEE IN SUVARNA METALS AND IN SUVARNA PALACE, CONSTRUCTION WAS CONTINUEDUPTO THE END OF 31.03.2006. HENCE, THE PERIOD OF CONSTRUCTI ON AS EVIDENCED BY THE BOOKS AND ASSESSEES ADMISSION IN HIS LETTER DATED 20.06.2008 (IN THE ASSESSMENT RECORD OF SUVARNA PALACE ASSESSMENT YEAR (2006-07) IS FINANCIAL YEAR 2004-05 AND 05-06. A COPY OF THE REPORT WAS SENT TO THE ASSESSEE ON 01 .12.2008. THE ASSESSEE WAS GIVEN AN OPPORTUNITY OF BEING HEARD BEFORE MY ADOPT ING THE VALUE OF INVESTMENT AS ESTIMATED BY THE DVO. IN THE LETTER S ENT ALONG WITH THE VALUATION REPORT, THE VALUE ADOPTED BY THE VALUATION WAS WRON GLY MENTIONED AS RS.1,36,61,491/- AS AGAINST THE CORRECT VALUE OF RS .1,32,54,000/-. THE COST OF CONSTRUCTION OF THE ASSESSEE WAS ALSO GIVEN AS RS.5 4,01,000/- AS AGAINST THE ADMITTED VALUE OF RS.56,85,263/-. THE ASSESSEE WAS ASKED TO FILE HIS REPLY ON OR BEFORE 09.12.2008. THE ASSESSEES REPRESENTATIVE S OUGHT 15 DAYS TIME AS THE ASSESSEE HAVE NOT RETURNED FROM HIS HAJ PILGRIMAGE . THE ASSESSEE FILED HIS REPLY ON 29.12.2008. THE ASS ESSEE REPLY HAS BEEN FILED WITHOUT ANY EVIDENCE TO SUBSTANTIATE THE VARIOUS CL AIMS MADE IN THE REPLY. NO BOOKS OF ACCOUNTS RELATING TO THE CONSTRUCTION WAS PRODUCED DURING THE HEARING OF SUVARNA PALACE. HENCE THE ASSESSEES OBJECTION WAS NOT CONSIDERED AND FOR THE FOLLOWING REASONS THE UNEXPL AINED INVESTMENT WAS CHARGED TO TAX IN THE HANDS OF THE FIRM ON A PROTEC TIVE BASIS. 1) AS EVIDENCED BY THE PARTNERSHIP DEED, THE FIRM C AME INTO EXISTENCE ONLY ON 16.12.2005. 2) THE LEDGER ACCOUNT OF SRI ABDUL KHADER IN THE B OOKS OF THE FIRM AND SUVARNA METALS SHOW THAT ALL THE INVESTMENTS IN T HE CONSTRUCTION HAS COME ONLY FROM HIS ACCOUNT. I.T.A. NOS. 516-522/COCH/2010 37 3) SMT. THAHIRA ABDUL KHADER, THE ASSESSEES WIFE D ID NOT HAVE INDEPENDENT SOURCES OF HER OWN. 4) IN JAG MOHAN RAM RAM CHANDRA VS. CIT (2005) 274 ITR 405(ALL), IT WAS DECIDED THAT THERE WAS NO HARD AND FAST RULE THAT S UCH AMOUNTS HAVE TO BE ADDED ONLY IN THE PARTNERS CASES OR THAT IT IS LIA BLE TO BE TAXED ONLY IN THE FIRMS CASE. 5) THE SUBSTANTIAL AMOUNT CONTRIBUTED AS CAPITAL HA D SURFACED BEFORE THE COMMENCEMENT OF THE PARTNERSHIP. HENCE THE UNEXPLA INED INVESTMENT IN CONSTRUCTION IS TO BE ASSESSABLE ONLY IN THE BOOKS OF THE PARTNER. AS PER THE BOOKS OF SUVARNA METALS AND SUVARNA P ALACE AND AS PER ASSESSEES ADMISSION THE ACCOUNTED INVESTMENT IN CO NSTRUCTION OF SUVARNA PALACE WAS AS FOLLOWS: ASSESSMENT YEAR 2005-06 RS.2 8,74,221 ASSESSMENT YEAR 2006-07 RS.2 8,11,042 THE UNACCOUNTED INVESTMENT IN CONSTRUCTION WORKS OU T TO RS.75,68,737/-. OUT OF THIS 50% IS TAKEN AS THE UNEXPLAINED PORTION OF INVESTMENT MADE DURING THE FINANCIAL YEAR 2004-05 AND IS CHARGED TO TAX ACCORD INGLY. 88. THE LD. CIT(A) RESTRICTED THE ADDITION TO RS. 1,75,000/- IN EACH ASSESSMENT YEAR 2005-06 AND 2006-07 AND REJECTED THE OTHER CLA IMS OF THE ASSESSEE AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 89. IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSES SEE THAT THE ORIGINAL ADDITION IN RESPECT OF CONSTRUCTION OF THE BUILDING WAS DONE IN THE ASSESSMENT OF SUVARNA PALACE FOR THE AY 2006-07. THE FIRM WAS RUNNING T HE BUSINESS UNDER THE NAME SUVARNA PALACE. THE ASSESSING OFFICER HA S ACCEPTE D THE BOOKS OF ACCOUNTS OF SUVARNA PALACE AND COMPLETED THE ASSESSMENT BY ADDI NG 75.68 LAKHS TOWARDS I.T.A. NOS. 516-522/COCH/2010 38 ESTIMATED COST OF CONSTRUCTION BASED ON THE VALUATI ON REPORT. THE ESTIMATE PREPARED FOR THE CONSTRUCTION OF SUVARNA PALACE AN D THE VALUATION REPORT BY A REGISTERED VALUER AFTER COMPLETION OF THE CONSTRUCT ION WAS AVAILABLE WITH THE SEIZED RECORDS. THE ASSESSEE A DEALER IN SCRAP HAS USED SECOND HAND MATERIALS FOR CONSTRUCTION AND HAS SUPERVISED ON HIS OWN. TH E DETAILS OF THE CONSTRUCTION WORK INCLUDING PURCHASE DETAILS OF STEEL, CEMENT AN D THE DETAILS OF WAGES PAID ETC. WERE ALSO SEIZED BY THE DEPARTMENT. THE ASSE SSING OFFICER HAS INITIATED THE DEPARTMENT VALUATION WITHOUT ASKING ANY QUESTIONS T O THE ASSESSEE. IN THE ORDER ITSELF THE ASSESSING OFFICER SAYS IN ORDER TO ESTI MATE THE VALUE OF THE PROPERTY THE VALUATION WAS MADE. THE ASSESSING OFFICER HAS ACCE PTED THE BOOKS OF THE FIRM SUVARNA PALACE AND ALSO THE BOOKS OF THE ASSESSEE S ILVER STAR STEELS AND THE ASSESSMENTS WERE MADE BASED ON THE BOOKS. IN THE A SSESSMENT ORDER THE ASSESSING OFFICER HAS NOT GIVEN ANY REASONS FOR THE DEPARTMENT VALUATION. THE ONLY ADDITION OTHER THAN THAT FROM THE BOOKS IS UNE XPLAINED CREDITS. THE ASSESSING OFFICER HAS NEITHER REJECTED THE BOOKS OF ACCOUNT NOR RECORDED THE REASON FOR VALUATION. THE VALUATION OFFICER AND TH E CIT(A) HAS NOT CONSIDERED THE WORK DONE BY THE TENANT IN THE TWO FLOORS WHICH HAS BEEN INCLUDED IN THE VALUATION REPORT. THE ASSESSING OFFICER HAS NOT FO UND ANY INCRIMINATING DOCUMENTS SUGGESTING THAT THERE IS UNACCOUNTED EXPE NDITURE IN THE CONSTRUCTION OF THE BUILDING. THE BOOKS OF ACCOUNTS WERE ACCEPTED AND ASSESSMENT WAS COMPLETED ON THAT BASIS. HENCE THE OFFICER HAS NO RIGHT TO HAVE THE DEPARTMENT VALUATION. THE ASSESSEE RELIED ON T HE FOLLOWING JUDGMENTS:- I.T.A. NOS. 516-522/COCH/2010 39 1. SARGAM CINEMA VS. CIT 328 ITR 513 (SC) 2. ACIT VS. DHARIYA CONSTRUCTION CO. 328 ITR 515 ( SC). 3. CIT VS. SURAJ DEVI 328 ITR 604 (DELHI). 4. CIT VS. SHRI BAJRANG LAL BANSAL 335 ITR 572 (DE LHI) 5. FAMILY OF SP SS SP SUBRAMANIAN CHETTIAR VS. ITO , (MADRAS) 2015. 90. THE LD. DR RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 91. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE FACTS OF THE CASE. IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE VALUATION REPORT BY THE REGISTERED VALUER AFTER THE COMPLETION OF THE CONST RUCTION WAS AVAILABLE WITH THE SEIZED RECORDS. THE ASSESSEE, A DEALER IN SCRA P HAS MATERIALS FOR CONSTRUCTION AND HAS SUPERVISED ON HIS OWN. THE DETAILS OF THE CONSTRUCTION WORK INCLUDING PURCHASE DETAILS OF STEEL, CEMENT AND THE DETAILS O F WAGES PAID ETC. WERE ALSO SEIZED BY THE DEPARTMENT. IT IS UNDISPUTED THAT TH E ASSESSING OFFICER HAS ACCEPTED THE BOOKS OF ACCOUNT AND THEY HAVE NEVER B EEN REJECTED. IN SUCH A CASE, IT IS ILLEGAL TO REFER THE MATTER TO THE VALU ATION OFFICER WITHOUT REJECTION OF THE BOOKS OF ACCOUNTS. THE LD. COUNSEL FOR THE ASS ESSEE HAS RELIED UPON THE DECISIONS OF VARIOUS COURTS OF LAW, INCLUDING THE D ECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT (SUPRA) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUR AJ DEVI (SUPRA) WHEREIN THE OFFICER OF THE DEPARTMENT AND THE LD. CIT(A) HAS NO T CONSIDERED THE WORK DONE BY THE WHICH IN FACT HAS BEEN INCLUDED IN THE VALU ATION REPORT AS IF THE WORK HAS I.T.A. NOS. 516-522/COCH/2010 40 BEEN DONE BY THE ASSESSEE. NO INCRIMINATING DOCUMEN TS HAVE BEEN FOUND DURING THE COURSE OF SEARCH TO SUGGEST THAT THERE I S UNACCOUNTED EXPENDITURE MADE BY THE ASSESSEE IN THE CONSTRUCTION OF THE BUI LDING. IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, N O ADDITION CAN BE MADE AND THE ADDITION SO MADE IS DIRECTED TO BE DELETED AND THE ORDER OF THE LD. CIT (A) IS REVERSED. ACCORDINGLY, GROUND NO. 4 OF THE ASSESSEE IS ALLOWED. THUS THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 520/COCH/2010 IS PARTLY ALLOWED. 92. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E IN I.T.A. NO. 521/COCH/2010 FOR THE ASSESSMENT YEAR 2006-07 AS UNDER: I.T.A. NO. 521/COCH/2010 : A.Y. 2006-07 93. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL:- 1. THE CIT(APPEALS) HAS CONFIRMED THE ADDITION OF T HE CREDITORS RS.15,50,000/- IN THE BALANCE SHEET FILED WITHOUT CONSIDERING THE FACTS OF THE CASE. 2. THE ENTIRE COMPENSATION RECEIVED RS.1,84,480/- FOR ROAD ACQUISITION WAS TAKEN AS INCOME WITHOUT GIVING THE AVAILABLE BENEFI TS. 3. THE CIT(APPEALS) HAS CONFIRMED THE ADDITION O F RS.3,00,000/- ON ACCOUNT OF THE MARRIAGE OF THE DAUGHTER IGNORING THE AMOUNT S ALREADY DISCLOSED. 4. THE LOAN CREDITS IN THE NAME OF WIFE AND SON AMOUNTING TO RS.3,25,000/- WAS DISALLOWED WITHOUT CONSIDERING THE EVIDENCE AVA ILABLE. I.T.A. NOS. 516-522/COCH/2010 41 5. THE ADDITION OF RS.37,84,368/- ON ACCOUNT OF B UILDING CONSTRUCTION IS AGAINST ALL NORMS OF JUSTICE. THE VALUATION WAS MAD E AS PER CPWD RATE IGNORING THE AMOUNT INVESTED BY THE LESSER. 94. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUND NOS. 1, 2, 3 & 4 AND ACCORDINGLY, THE SAME ARE DISMISSED AS NOT PRESSED. 95. GROUND NO.5 IS IDENTICAL TO GROUND NO. 4 IN I.T.A. NO. 520/COCH/2010 FOR THE ASSESSMENT YEAR 2005-06 DECIDED BY US HEREINABO VE AND ACCORDINGLY, OUR ORDER IN I.T.A. NO. 520/COCH/2010 IS IDENTICALLY AP PLICABLE IN THE PRESENT CASE. ACCORDINGLY, GROUND NO. 5 OF THE ASSESSEE IS ALLOWE D. THUS THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 521/COCH/2010 IS PARTLY ALLO WED. 96. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESS EE IN I.T.A. NO. 522/COCH/2010 FOR THE ASSESSMENT YEAR 2007-08 AS UN DER: I.T.A. NO. 522/COCH/2010 : A.Y. 2007-08 97. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL:- 1. THE CIT(APPEALS) HAS CONFIRMED THE DISALLOWANCE OF THE TWO CREDITS AMOUNTING TO RS.4,66,470/- IGNORING THE CONFIRMATIO N AND BANK DETAILS FILED. 2. ANY OTHER GROUNDS THAT MAY BE ALLOWED AT THE TIME OF HEARING. I.T.A. NOS. 516-522/COCH/2010 42 98. GROUND NO. 2 OF THE ASSESSEE IS GENERAL IN NA TURE AND THEREFORE, DO NOT REQUIRE ANY ADJUDICATION. 99. AS REGARDS GROUND NO. 1, THE ASSESSING OFFICE R HAS MADE THE ADDITION OF RS.4,66,470/- BY MAKING AN OBSERVATION AS UNDER:- 4. DURING THE YEAR, TWO FRESH CREDITS IN THE NAME OF SHRI SABIR ALI, S/O THE ASSESSEE (RS.2,54,000/-) AND SMT. K.B. AISHA, PROP. IRFA POLYMERS (RS.2,12,470/-) ARE FOUND IN THE BOOKS OF SUVARNA METALS . AS DI SCUSSED IN THE ASSESSMENT OF EARLIER YEARS, SRI SABIR ALI DOES NOT HAVE INDEP ENDENT SOURCES OF HIS OWN. IN THE CASE OF MRS. AISHA, NO EVIDENCE HAS BEEN FILED TO PROVE THIS CREDIT. HENCE, THESE ARE TREATED AS UNEXPLAINED CREDITS IN THE BOOKS OF THE ASSESSEE AND CHARGED TO TAX AS THE INCOME OF THE ASSESSEE OF THE FINANCIAL YEAR 2006- 07. 100. THE ASSESSEE FILED THE ADDITIONAL EVIDENCE B EFORE THE LD. CIT(A) WHICH HAS NOT BEEN ADMITTED BY THE LD. CIT(A). ACCORDINGLY, HE CONFIRMED THE ADDITION SO MADE BY THE ASSESSING OFFICER. 101. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT HE COULD NOT PRODUCE THE EVIDENCES, CONFIRMATIONS ETC. BEFORE THE ASSESSING OFFICER BECAUSE THEY COULD NOT BE PROCURED. DURING THE APPELLATE PROCEEDINGS, THE SAME WERE PROCURED AND WERE SUBMITTED BEFORE THE LD. CIT(A) AS ADDITIO NAL EVIDENCE WHICH WAS NOT ADMITTED. ACCORDINGLY, HE PRAYED THAT THE MATTER I S SET ASIDE TO THE FILE OF THE I.T.A. NOS. 516-522/COCH/2010 43 LD. CIT(A) OR THE ASSESSING OFFICER TO ADMIT THE AD DITIONAL EVIDENCE AND DECIDE THE ISSUE DE NOVO. . 102. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 103. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE C OULD NOT PROCURE THE CONFIRMATIONS DURING THE COURSE OF ASSESSMENT PROCE EDINGS WHICH IN FACT WERE PROCURED DURING THE APPELLATE PROCEEDINGS AND THEY WERE SUBMITTED BEFORE THE LD. CIT(A) AS ADDITIONAL EVIDENCE WHICH WAS NOT ADMITTED BY THE LD. CIT(A). IT WILL BE IN THE INTEREST OF JUSTICE IF THE SAID A DDITIONAL EVIDENCE IS ADMITTED AND ACCORDINGLY, THE MATTER IS TO BE SET ASIDE TO THE F ILE OF THE ASSESSING OFFICER SINCE THE EXAMINATION AND VERIFICATION OF THE ISSUE HAS T O BE MADE BY THE ASSESSING OFFICER ONLY AND THEREFORE, THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WHO WILL EXAMINE THE ISSUE AFTER ADMITTING THE ADDITIONAL EVIDENCE OR ANY OTHER EVIDENCE FURNISHED BY THE ASSESSEE AND DE CIDE THE ISSUE DE NOVO BUT AFTER AFFORDING AN ADEQUATE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. ACCORDINGLY, THE ONLY GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THUS, THE APPEAL OF THE ASSESSEE IN I.T. A. NO. 522/COCH/2010 IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS. 516-522/COCH/2010 44 104. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN I.T.A. NOS. 516-519/COCH/2010 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES, THE AP PEAL OF THE ASSESSEE IN I.T.A. NOS. 520&521/COCH/2010 ARE PARTLY ALLOWED AND THE A PPEAL OF THE ASSESSEE IN I.T.A. NO. 522/COCH/2010 IS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON 22 -03-2016 SD/- SD/- ( GEORGE GEORGE.K) (B P JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : COCHIN DATED: 22 ND MARCH, 2016 GJ COPY TO: 1. C.A. ABDUL KHADER, CHIRYAILAN SABNA COTTAGE, AL LAPRA P.O., PERUMBAVOOR . 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRA LCIRCLE-1, ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)I, KOCHI. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. DR/ITAT, COCHIN 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN I.T.A. NOS. 516-522/COCH/2010 45 1. DATE OF DICTATION : 15/03/2016 2.DATE ON WHICH THE TYPED DRAFT IS PLACED 21/03/2016 BEFORE THE DICTATING MEMBER OTHER MEMBER: 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . PS/PS: 22/03/2016 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER : /03/2016 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. PS/PS : 22 /03/2016 6. DATE ON WHICH THE FILE GOES TO BENCH CLERK: 22/0 3/2016 7. DATE ON WHICH THE FILE GOES TO HEAD CLERK: 8. DATE ON WHICH THE FILE GOES TO ASSISTANT REGISTR AR 9. DATE OF DISPATCH OF THE ORDER: