SHRI NARESH PARWAL, Jaipur V. DCIT, Jaipur

ITA 561/JPR/2011

• Counselvise Citation: 56123114 RSA 2011
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 06-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Document seized; Documents seized
• Section: 153A; 131; 68; 69; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.561 TO 565/ JP/2011 ASSESSMENT YEAR: 2002-03 TO 2006- 2007 PAN: AAACR 5290 C SHRI NARESH PARWAL VS. THE ACIT 301, GURUKRIPA BUILDING CENTRAL CIRCLE- 3 TELIPADA, CHOURA RASTA, JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL DEPARTMENT BY : SHRI SUNIL MATHUR DATE OF HEARING: 22-11-2011 DATE OF PRONOUNCEMENT: 22-12-2011 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED APPEALS AGAINST THE RESPEC TIVE ORDERS OF THE LD. CIT(A)-CENTRAL , JAIPUR FOR THE ASSESSMENT YEAR 2002-02 TO 2006-200 7. 2.1 THE BRIEF FACTS WHICH ARE RELEVANT FOR THE ALL ASSESSMENT YEARS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BROKERAGE F OR FINANCIAL AND MONEY TRANSACTIONS IN HIS PROPRIETARY CONCERN M/S PARWAL ASSOCIATES. SEAR CH U/S 132 WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 21-06-07. IN S EARCH, APART FROM CASH OF RS. 63,39,000/-, CERTAIN PAPERS AND DOCUMENTS RELATING TO THE BROKERAGE ACTIVITY OF THE ASSESSEE WERE FOUND. THE ASSESSEE IN HIS STATEMENT U/S 132(4) DATED 21-6-07 EXPLAINED THE NATURE OF ACTIVITIES CARRIED ON BY HIM. IN REPL Y TO Q. 9, HE EXPLAINED THAT HE IS ENGAGED IN FINANCE BROKERAGE, JEWELLERY BROKERAGE & FINANCE CONSULTANCY. THE RATE OF BROKERAGE WAS STATED TO BE RS. 100/- ON TRANSACTION OF RS. 1 LACS. HE ALSO STATED THAT HE GETS DALALI SIMILARLY IN JEWELLERY BROKERAGE AND FINANCIAL CONS ULTANCY. HE FILED HIS REGULAR RETURNS 2 DECLARING BROKERAGE INCOME. DURING SEARCH AFTER INV ENTORISING PHYSICAL CASH OF RS. 63,39,000/-, WHEN THE SOURCE OF THE SAME WAS ASKED, ASSESSEE IN REPLY TO Q. NO. 34 OFFERED CASH OF RS. 63 LACS AS UNDISCLOSED INCOME F ROM HIS BROKERAGE, MONEY LENDING BUSINESS. IN REPLY TO Q. NO. 37, HE FURTHER OFFERED RS. 2.37 CRORE AS UNDISCLOSED INCOME BEING CIRCULATION OF UNACCOUNTED FUNDS. THE STATEME NT OF THE ASSESSEE WAS AGAIN RECORDED U/S 131 ON 16-7-07 BY THE ADIT IN WHICH EXPLANATION WAS ASKED ABOUT VARIOUS ANNEXURE SEIZED IN COURSE OF SEARCH. THE ASSESSEE BEFORE ADI T IN REPLY TO Q NO. 26, SURRENDERED UNDISCLOSED INCOME OF RS. 3.50 CRORE CONSIDERING T HE SEIZED PAPERS AND THE OUTSTANDING DEBTORS IN THE MARKET. THE ASSESSEE AFTER OBTAININ G COPIES OF THE SEIZED DOCUMENTS AND ANALYZING THE SAME FOUND THAT THE PAPERS PERTAIN MA INLY TO THE A.Y. 2006-07 TO 2008-09. HE WORKED OUT THE TURNOVER ON THE BASIS OF THESE PA PERS AND WORKED OUT BROKERAGE INCOME BY APPLYING RATE OF BROKERAGE @ 0.10% ON THE MONEY TURNOVER. THIS INCOME WAS WORKED OUT AT RS. 105.80 LACS. THE ASSESSEE IN HIS STATEMENT DATED 22-6-07 HAS ALSO STATED THAT RS. 20 LACS WAS ADVANCED TO MR. DINESH SAINI O N 1-6-2005. CONSIDERING THIS THE ASSESSEE INCLUDED ADDITIONAL INCOME OF RS. 1.30 CRO RE IN HIS RETURNS FOR A. Y. 2006-07 TO 2008-09 FILED ON 13-11-09 BY OFFERING RS. 25 LACS, 45 LACS AND 60 LACS RESPECTIVELY IN THESE YEARS WITH A REQUEST THAT IF LATER ON DEPARTM ENT ASSESS THE INCOME IN ANY OTHER YEAR, INCOME TO THAT EXTENT BE REDUCED FROM THE INCOME OF FERED BY THE ASSESSEE IN THE RETURN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO CO MPUTED THE INCOME BOTH ON GENERATION BASIS AND ON INVESTMENT BASIS. ON GENERA TION BASIS HE ACCEPTED THE COMMISSION INCOME AT RS. 105,80,000/- AS DECLARED B Y THE ASSESSEE. HE FURTHER WORKED OUT INTEREST ON ALLEGED DEBTORS AT RS. 1,43,17,000/ - (26,67,000 +116,50,000) AND THUS ARRIVED AT THE TOTAL INCOME ON GENERATION BASIS AT RS. 2,48,97,000/-. ON INVESTMENT BASIS ALLEGED UNRECORDED DEBTORS WERE WORKED OUT AT RS. 6 ,72,81,458/- (1,00,00,000 + 3 5,72,81,458) AND CASH OF RS. 63,00,000/- TOTALING T O RS. 7,35,81,458/-. THE SUMMARIZED POSITION OF INCOME SO WORKED OUT IS TABULATED BELOW :- A.Y. BROKERAGE INCOME @ 0.10% INTEREST ON DEBTORS AS PER APPROVAL MEMO INTEREST ON DEBTORS ON THE BASIS OF ANN. A-8 TOTAL INCOME ON GENERATION BASIS UNRECORDED DEBTORS AS PER APPROVAL MEMO / CASH UNRECORDED DEBTORS AS PER ANN. A-8 TOTAL INCOME ON INVESTMENT /ASSETS BASIS INCOME ASSESSED BY THE AO 1 2 3 4 5 (2+3+4) 6 7 8 (6+7) 9 (5+8) 02-03 - 50,000 50,000 10,00,000 10,00,000 10,50,000 03-04 - 120,000 120,000 - 120,000 04-05 - 120,000 120,000 - 120,000 05-06 - 120,000 120,000 - 120,000 06-07 5,42,000 520,000 10,62,000 20,00,000 20,00,000 30 ,62,000 07-08 44,58,000 600,000 58,25,000 108,83,000 - 485,37,833 485,37,833 543,62,833 08-09 55,80,000 11,37,650 58,25,000 125,42,650 70,00,000 + 63,00,000 87,43,625 220,43,625 125,42,650 TOTAL 105,80,000 26,67,650 116,50,000 248,97,000 1, 63,00,000 572,81,458 735,81,458 713,77,483 IN A. Y. 07-08, THE AO DID NOT MADE SEPARATE ADDITI ON FOR BROKERAGE INCOME OF RS. 44.58 LACS AND INTEREST OF RS. 6 LACS BY ALLOWING SET OFF AGAINST INVESTMENT IN DEBTORS OF RS. 485,37,833/-. HOWEVER HE ADDED INTEREST ON DEBTORS OF RS. 58,25,000/-. IN A.Y. 08-09, THE AO ASSESSED TOTAL UNDISCLOSED INCOME ON GENERAT ION BASIS AND DID NOT MAKE SEPARATE ADDITION FOR ALLEGED UNRECORDED DEBTORS/CASH BY ALL OWING THE SET OFF AGAINST RECOVERY OF DEBTORS OF RS. 4,85,37,833/- TAXED IN A. Y. 07-08. THE ITAT JAIPUR BENCH DECIDED THE APPEAL OF THE ASSESSEE AS WELL AS OF THE DEPARTMENT FOR ASSESSMENT YEAR 2007-08 & 2008- 09 VIDE ITA NO. 1314 & 1315/JP/10, 1416 & 1417/JP/1 0 DATED. 22.07.2011 WHEREIN MAJOR ISSUES WERE SET ASIDE TO THE AO FOR RECONSIDE RATION. 3.0 NOW WE WILL TAKE UP THE APPEAL FOR THE ASSESSEE FOR THE ASSESSMENT YEAR 2002-03. 3.1 THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF S 10.00 LACS ON ACCOUNT OF ALLEGED LOAN GIVEN BY THE ASSESSEE ON THE BASIS OF ANNEXURE A-2 AND ALSO CONFIRMING TH E ADDITION OF RS. 50,000/- ON ACCOUNT OF INTEREST ON THE LOAN OF S 10.00 LACS . 3.2 THE FACTS IN BRIEF OF THIS GROUND ARE THAT DURI NG SEARCH CERTAIN APPROVAL MEMOS WERE FOUND WHEREIN THE TRANSACTION OF AMOUNT ADVANC ED WAS RECORDED. ON THESE APPROVAL 4 MEMOS, NAME OF BOTH THE BORROWING AND THE LENDING P ARTIES WERE MENTIONED AND IT WAS SIGNED BY THE BORROWING PARTY. RATE OF INTEREST WAS ALSO MENTIONED ON SOME OF THESE SLIPS. IN THE YEAR UNDER CONSIDERATION, ONLY A SING LE APPROVAL MEMO DT. 30.10.2001 OF RS. 10 LACS (1000 CT.) WAS FOUND . THROUGH SUCH MEMO, SHRI SURESH KUMAR (BORROWER) HA S TAKEN AMOUNT FROM SHRI OM PARKASH JI (LENDER). NO R ATE OF INTEREST IS MENTIONED. THIS APPROVAL MEMO WAS GIVEN BY THE LENDER TO THE ASSESS EE, WHO IS BROKER TO THE TRANSACTION, TO REALIZE THE AMOUNT FROM THE BORROWER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE VIDE LETTER DATED 14-12-09 SUBMITTED THAT HE ACTED AS A BROKER IN RESPECT OF THESE TRANSACTIONS AND THEREFORE THESE SLIPS WERE LYING W ITH HIM. HE ALSO SUBMITTED THAT HE HAS NOT GIVEN ANY ADVANCE TO THESE PARTIES WHICH MAY BE GOT ENQUIRED. HE SUBMITTED THE ADDRESSES OF THE PARTIES. THE AO, HOWEVER, HELD THA T THE APPROVAL MEMOS ARE NOTHING BUT HUNDIES DULY SIGNED BY THE ASSESSEE. THE TRANSACTIO NS RECORDED IN THE APPROVAL MEMO ARE UNRECORDED DEBTORS OF THE ASSESSEE AND THEREFORE HE ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE AO FURTHER CALCULATED INTEREST ON SUCH APPROVAL MEMO AS PER ANNEXURE A OF THE ORDER AND MADE ADDITION FOR THE SAME TO THE INCOME OF THE ASSESSEE. IN MAKING ABOVE ADDITION, AO OBSERVED THAT THE ASSESSE E WAS INDULGING IN MONEY LENDING BUSINESS WITHOUT RECORDING THE SAME IN THE REGULAR BOOKS OF ACCOUNTS & THE ASSESSEE LENDS HIS OWN CAPITAL IN THE MARKET AND EARNS INTER EST INCOME. 3.3 THE LD CIT(A) CONFIRMED THE ADDITION OF RS. 10 LACS ON ACCOUNT OF ALLEGED LOAN GIVEN BY THE ASSESSEE & ADDITION OF RS. 50,000/- ON ACCOUNT OF INTEREST ON THE SAID LOAN OF RS. 10 LACS. 3.4 BEFORE US, THE LD. AR HAS FILED THE FOLLOWING S UBMISSIONS WHICH ARE AS UNDER:- 1. AT THE OUTSET WE MAY POINT OUT THAT THE OBSERVAT ION MADE BY THE AO THAT THE ASSESSEE IS INDULGED IN MONEY LENDING B USINESS IS INCORRECT AND CONTRARY TO SEIZED RECORDS. THE AFORESAID APPRO VAL MEMO CONTAINS THE 5 NAME OF BOTH THE LENDER AND THE BORROWER PARTIES AN D ALSO THE SIGNATURE OF THE BORROWER PARTIES. THE ASSESSEE HAS GIVEN THE NA ME AND ADDRESSES OF THESE PARTIES VIDE LETTER DATED 14-12-09 AND REQUESTED THE AO T O MAKE INDEPENDENT ENQUIRY. HOWEVER THE AO WITHOUT MAKING ANY ENQUIRY HAS HELD THAT THE TRANSACTIONS ARE UNRECORDED DEBTORS O F THE ASSESSEE WHICH IS NEITHER BORN OUT FROM THE STATEMENTS NOR FROM THE S EIZED DOCUMENTS. FURTHER, THE AO CONTRADICTS IN HIS STAND AS ON THE ONE HAND HE HAS ASSESSED BROKERAGE INCOME ON THE TRANSACTIONS OF APPROVAL ME MO AS OFFERED BY THE ASSESSEE IN RETURN AND ON THE OTHER HAND HE TREATED THAT THE ASSESSEE HAS LENT HIS OWN CAPITAL IN THE MARKET. 2. THE ASSESSEE IN HIS PRELIMINARY STATEMENT RECORD ED U/S 132(4) DATED 21-6-07 HAS CATEGORICALLY STATED THAT HE IS A FINANCE BROKER AND ARRANGED THE TRANSACTION BETWEEN THE PARTIES ON WHI CH HE HAD RECEIVED DALALI WHICH IS GENERALLY RS. 100/- P.M. FOR TRANSA CTION OF ONE LACS. IN REPLY TO A SPECIFIC QUESTION Q. NO. 23 AND 24 ABOUT THE APPROVAL MEMO SEIZED VIDE ANNEXURE A-2, ASSESSEE REPLIED THAT HE ACTED AS BROKER AND RECEIVED DALALI IN THE TRANSACTIONS NOTED IN APPROV AL MEMO. THE AMOUNT MENTIONED IN THESE APPROVAL MEMOS DO NOT PERTAIN TO HIM. IT IS OF VARIOUS PARTIES WHOSE NAME ARE MENTIONED ON THE SLIP. THESE APPROVAL MEMOS WERE PENDING TO BE DELIVERED TO THE PARTIES. HE ALS O EXPLAINED THE MANNER IN WHICH SUCH APPROVAL MEMOS ARE WRITTEN. THUS THE ASSESSEE HAS NOWHERE STATED THAT AMOUNT INVOLVED IN THESE APPROVAL MEMOS ARE HIS INVESTMENT AS ALLEGED BY THE AO. 3. THE LOWER AUTHORITIES LINKED ADVANCE GIVEN TO MR . DINESH SAINI OF DUBAI WITH THE APPROVAL MEMO. IT MAY BE MENTIONED T HAT ADVANCE OF RS. 20 LACS GIVEN TO MR. DINESH SAINI ON 1-6-2005 WHICH WAS STATED BY THE ASSESSEE IN HIS STATEMENT IN REPLY TO Q. NO. 17. TH IS AMOUNT IS SPECIFICALLY OFFERED BY THE ASSESSEE IN HIS RETURN BESIDES THE O FFER OF BROKERAGE INCOME AS MENTIONED IN NOTES TO THE RETURN. THERE IS NO AP PROVAL MEMO FOR THIS TRANSACTION. HENCE LINKING THIS TRANSACTION WITH TH E TRANSACTIONS OF APPROVAL MEMOS IS INCORRECT AND ILLOGICAL. APART FR OM THIS THERE IS NO EVIDENCE IN THE SEIZED DOCUMENTS THAT THE TRANSACTI ON OF APPROVAL MEMO PERTAINS TO ASSESSEE. THE AO HAS ALSO NOT BROUGHT A NY EVIDENCE ON RECORD IN SUPPORT OF THE ALLEGATION THAT THE ASSESSEE HAS INVESTED HIS OWN CAPITAL IN THESE APPROVAL MEMOS. HENCE TREATING THE TRANSAC TIONS OF APPROVAL MEMOS AS UNRECORDED DEBTORS OF ASSESSEE IS INCORREC T AND THEREFORE ADDITION MADE BY THE AO IS INCORRECT. 4. HONBLE ITAT IN A SIMILAR ISSUE IN ASSESSEES OW N CASE IN A.Y. 08- 09 (PB 46, PARA 10.2, PAGE 30 OF THE ORDER) HELD AS UNDER: - 10.2 WE HAVE HEARD BOTH THE PARTIES. THE ISSUE AS T O WHETHER THE AMOUNTS RECEIVED AS PER APPROVAL MEMO & AS PER ANNE XURE A-8 FROM OTHER PARTIES BY THE ASSESSEE AS A BROKER & HE ONLY CHARGE THE COMMISSION. THIS ISSUE HAS BEEN RESTORED BACK ON TH E FILE OF THE AO WHILE ADJUDICATING UPON THE GROUND OF APPEAL NO. 1 FOR A. Y 07-08. FOLLOWING 6 OUR FINDINGS FOR A.Y. 07-08, THIS ISSUE IS ALSO RES TORED BACK TO THE FILE OF THE AO. IN A.Y. 07-08, HONBLE ITAT HAS GIVEN THE FOLLOWING FINDINGS (PB 34- 35 IN PARA 2.8):- WE ARE AWARE THAT ON THE BASIS OF SEIZED PAPERS FO UND AT THE PREMISES OF A PERSON CANNOT BE CONCLUSIVELY EVIDENC E FOR HOLDING THAT SUCH AMOUNTS ARE DISCLOSED UNDISCLOSED INCOME OF TH AT PERSON. EVEN IF THE DOCUMENTS ARE CONSIDERED TO BE TRUE, PROVISIONS OF SECTION 68 & 69 MAY BE APPLICABLE IN THE CASE OF THE ASSESSEE. ASSESSEE WI LL BE AT LIBERTY TO ARGUE THAT SUCH PROVISIONS ARE NOT APPLICABLE IN THE CASE OF A BROKER & ASSESSEE WILL HAVE TO ESTABLISH THAT HE IS A BROKER & NOT A MONEY LENDER. HOWEVER, THE CONTENTION OF THE ASSESSEE IS THAT HE WAS SIMPL Y A BROKER & WAS ADVANCING BELONGING TO OTHERS, HAS NOT BEEN DULY CO NSIDERED & INVESTIGATED BY THE AO. HONBLE JURISDICTIONAL HIGH COURT IN CASE OF HUKAM CHAN JAIN VS. ITO 334 ITR 197 HELD THAT ADMIS SION IS AN IMPORTANT PEACE OF EVIDENCE BUT IS NOT CONCLUSIVE. IT IS OPEN TO THE ASSESSEE TO SHOW THAT ADMISSION IS NOT CORRECT. THE ADMISSION MADE BY THE AO HAS TO BE DISLODGED BY HIM. ASSESSEE HAS GIVEN T HE ADDRESSEES OF THE BORROWERS AS WELL AS LENDERS. AO WILL, THEREFORE, H AVE TO VERIFY AS TO WHETHER INTEREST RECEIVED BY THE ASSESSEE IS IN RES PECT OF HIS OWN INVESTMENT OR IT IS FROM THE FUNDS MADE AVAILABLE T O HIM BY EITHER PARTIES. THEREFORE, THE ISSUE OF ADDITION OF RS. 4,85,37,833 /- IS RESTORED BACK ON THE FILE OF THE AO. IN THE PRESENT CASE ALSO, APPROVAL MEMO DT. 30.10.0 1 FOUND DURING SEARCH CONTAINS THE NAME OF BOTH THE LENDER AND THE BORROWER PARTIES AND ALSO THE SIGNATURE OF THE BORROWER PARTIES. THROUGH SUCH MEMO, SHRI SURESH KUMAR HAS TAKEN AMOUNT FROM SHRI OM PARKASH JI. THE ASSESSEE HAS GIVEN THE NAME AND ADDRESSES OF THESE PARTIES VIDE LETTER DATED 14-12- 09 AND REQUESTED THE AO TO MAKE INDEPENDENT ENQUIR Y. HOWEVER THE AO WITHOUT MAKING ANY ENQUIRY HAS HELD THAT THE TRANSA CTIONS ARE UNRECORDED DEBTORS OF THE ASSESSEE WHICH IS NEITHER BORN OUT F ROM THE STATEMENTS NOR FROM THE SEIZED DOCUMENTS. FURTHER, NO RATE OF INTE REST IS MENTIONED ON THE APPROVAL MEMO. THIS APPROVAL MEMO WAS GIVEN BY THE LENDER TO ASSESSEE, WHO IS BROKER TO THE TRANSACTION TO REALIZE AMOUNT FROM THE BORROWER. THE AMOUNT WAS OUTSTANDING FROM LAST 6-7 YEARS AND DOUB TFUL FOR RECOVERY. NEITHER ANY INTEREST WAS RECEIVED FROM THE BORROWER NOR THE PRINCIPAL AMOUNT. HENCE NO INTEREST CAN BE ASSUMED ON IT. ACC ORDINGLY, THE ADDITION FOR PRINCIPAL AMOUNT AND THE INTEREST IS UNCALLED F OR IN THE HANDS OF ASSESSEE. 5. SECTION 292C PROVIDES THAT WHERE ANY BOOKS OF AC COUNTS OR OTHER DOCUMENTS FOUND IN POSSESSION OF ANY PERSON IN COUR SE OF SEARCH U/S 132, THEN IT IS PRESUMED THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNTS AND OTHER DOCUMENTS ARE TRUE. THIS PRESUMPTION IS IN FAVOUR O F ASSESSEE. IN HE PRESENT CASE THE APPROVAL MEMO FOUND IN SEARCH FROM POSSESSION OF 7 ASSESSEE RECORDS THE TRANSACTIONS OF AMOUNT LENT BY ONE PARTY TO ANOTHER PARTY. THE CONTENTS OF SUCH MEMO ARE TO BE PRESUMED TO BE TRUE UNLESS OTHERWISE PROVED. THE AO HAS NOT BROUGHT ANY MATERI AL TO NEGATE THIS PRESUMPTION. THUS AS PER LEGAL PRESUMPTION ALSO ASS ESSEE CANT BE HELD TO BE A MONEY LENDER IN RESPECT OF SUCH TRANSACTION. E VEN IF THE ISSUE IS SET ASIDE, IT WOULD SERVE NO PURPOSE IN AS MUCH AS NEIT HER THE BORROWER NOR THE LENDER WOULD COME FORWARD & ACCEPT SUCH UNRECOR DED TRANSACTION. THEREFORE, THE AUTHENTICITY/REALITY OF THE TRANSACT ION IS TO BE GATHERED FROM THE SURROUNDING CIRCUMSTANCES WHICH CLEARLY POINTS OUT THAT ASSESSEE IS ONLY A BROKER TO THE TRANSACTION OF APPROVAL MEMO. IN VIEW OF ABOVE THE ADDITION FOR UNRECORDED DEBTOR S AND INTEREST THEREON IS INCORRECT & UNJUSTIFIED AND BE DELETED. 3.5 WE HAVE HEARD BOTH THE PARTIES. THE ISSUE BEFOR E US STANDS COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE AS SESSMENT YEAR 2007-08 AND 2008-09. IT WILL BE USEFUL TO REPRODUCE PARA 2.8 FROM THAT ORDE R BEARING ITA NO. 1314/ JP/2010 DATED 22-07-2011. 2.8 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE IN THE NOTE ATTACHED WITH THE RETURN OF INCOME MENTIONED T HAT SURRENDER IN STATEMENT U/S 132(4) WAS MADE ON ESTIM ATE BASIS WITHOUT MAKING ANY WORKING FROM THE SEIZED DOCUMENT S. THE SEARCH WAS CONDUCTED ON 21-06-07 AND THE STATEMENT U/S 132(4) WAS RECORDED ON 21-06-07. DURING POST SEARCH, THE A SSESSEE SURRENDERED RS. 3.50 CRORES ON 20-07-07. HOWEVER, THE RETURN OF INCOME FILED ON 13 TH NOV. 09 SHOWS AN INCOME OF RS. 46,48,580/-. THE ASSESSEE HAS DECLARED UNDISCLOSED INCOME OF RS. 1.30 CRORES FOR THE ASSESSMENT YEARS 2006-07 TO 2008-09 AS AGAINST RS. 3.50 CRORES. THE AO REQUIRED THE ASSESS EE TO EXPLAIN AS TO WHY TO SURRENDER AMOUNT HAS NOT BEEN DISCLOSE D IN THE RETURN OF INCOME. THE ASSESSEE SUBMITTED THAT CERTA IN APPROVAL SLIPS FOUND DURING THE COURSE OF SEARCH CONTAIN THE NAMES OF THE 8 LENDERS AND THE BORROWERS. THE SIGNATURE OF THE BOR ROWERS ARE ALSO AVAILABLE AT THESE APPROVAL SLIPS. THE AMOUNT MENTIONED IN THE APPROVAL SLIPS DO NOT PERTAIN TO HIM. THE ADDR ESSES OF THE PARTIES AS KNOWN TO HIM WERE ENCLOSED. IN THE PAPER BOOK, THE LD. AR OF THE ASSESSEE HAS FILED THE NAMES OF THE B ORROWERS AND THE NAMES OF THE LENDERS. THESE DETAILS ARE AVAILAB LE AT PAGES 71 TO 72 OF THE PAPER BOOK. IN THESE DETAILS, THE ASSE SSEE HAS GIVEN THE EXHIBIT NO., PAGE NO. OF THE EXHIBIT, NAME OF T HE LENDERS, NAME OF THE BORROWERS AND THE INTEREST AMOUNT. EXHI BIT MENTIONED IN THESE PAPERS ARE A-8 AND A-22. THE COP IES OF CERTAIN PAGES OF SOME EXHIBITS HAVE ALSO BEEN ENCLO SED IN THE PAPER BOOK. IN SOME OF THE PAPERS, NAMES OF THE LEN DERS IS ABBREVIATED AND ON THE SAME PAPERS ONLY INITIAL HAS BEEN MENTIONED E.G. SOMEWHERE IT IS MENTIONED AS A, IT MEANS AMAN AND IN SOME PAPER IT IS MENTIONED AS AK AJAY KOOLWAL. THUS THE ASSESSEE HAS GIVEN AN EXPLANATION TO THE AO THAT HE IS A BROKER. THE LD. CIT(A) HAS ACCEPTED TH AT HE IS A BROKER AND IN EARLIER RETURN, THE ASSESSEE HAS BEEN SHOWN BROKERAGE FROM FINANCIAL TRANSACTIONS. WE ARE AWARE THAT ON THE BASIS OF SEIZED PAPERS FOUND AT THE PREMISES OF A P ERSON CANNOT BE CONCLUSIVELY EVIDENCE FOR HOLDING THAT SUCH AMOU NTS ARE DISCLOSED UNDISCLOSED INCOME OF THAT PERSON. EVEN I F THE DOCUMENTS ARE CONSIDERED TO BE TRUE THE PROVISIONS OF SECTION 68 AND 69 MAY BE APPLICABLE IN THE CASE OF THE ASS ESSEE. THE ASSESSEE WILL BE AT LIBERTY TO ARGUE THAT SUCH PROV ISIONS ARE NOT APPLICABLE IN THE CASE OF A BROKER AND ASSESSEE WIL L HAVE TO ESTABLISH THAT HE IS A BROKER AND NOT MONEY LENDER. HOWEVER, 9 THE CONTENTION OF THE ASSESSEE IS THAT THE HE WAS S IMPLY A BROKER AND WAS ADVANCING BELONGING TO OTHERS, HAS NOT BEEN DULY CONSIDERED AND INVESTIGATED BY THE AO. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HUKAM CHAN D JAIN VS. ITO , 334 ITR 197 HELD THAT ADMISSION IS AN IMPORTA NT PEACE OF EVIDENCE BUT IS NOT CONCLUSIVE. IT IS OPEN TO THE A SSESSEE TO SHOW THAT ADMISSION IS NOT CORRECT. THE ADMISSION M ADE BY THE AO HAS TO BE DISLODGED BY HIM. THE ASSESSEE HAS GIV EN THE ADDRESSES OF THE BORROWERS AS WELL AS LENDERS. THE AO WILL THEREFORE, HAVE TO VERIFY AS TO WHETHER INTEREST RE CEIVED BY THE ASSESSEE IS IN RESPECT OF HIS OWN INVESTMENT OR IT IS FROM THE FUNDS MADE AVAILABLE TO HIM BY EITHER PARTIES. THER EFORE, THE ISSUE OF ADDITION OF RS. 4,85,37,833/- IS RESTORED BACK ON THE FILE OF THE AO. 3.6 FOLLOWING OUR ORDER FOR THE ASSESSMENT YEAR 200 7-08 AND 2008-09, WE RESTORE THIS ISSUE TO THE FILE OF THE AO. THE AO WILL DECIDE THE ISSUE AFRESH AFTER PROVIDING OPPORTUNITY TO THE ASSESSEE. 4.1 THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS. 23,1 70/- UNDER THE FOLLOWING HEADS. 1.CONVYEANCE EXPENSES RS. 2,177/- 2. TELEPHONE EXPENSES RS. 12,610/- 3. OFFICE EXPENSES RS. 625/- 4. DEPRECIATION ON CAR RS. 7,758/- 4.2 THE AO OBSERVED THAT FOR SOME EXPENSES MANUAL VOUCHERS HAVE BEEN PREPARED WITHOUT SIGNATURE AND COMPLETE ADDRESSES OF THE REC IPIENTS. THE EXPENSES ARE NOT SUBJECT TO PROPER VERIFICATION. SOME OF THESE EXPENSES ARE OF PERSONAL NATURE AND PERSONAL USE 10 CANNOT BE DENIED. NO DAY-TO-DAY CALL REGISTER FOR T HE TELEPHONE AND MOBILE HAS BEEN KEPT. NO LOG BOOK HAS BEEN MAINTAINED FOR CAR. BUSINESS E XPEDIENCY OF THESE EXPENSES HAS NOT BEEN PROVED. ACCORDINGLY THE AO DISALLOWED 20% OF EXPENSES OF RS. 1,54,464 I.E. RS. . 30,893/-. 4.3 THE LD. CIT(A) RESTRICTED THE SAME TO 15% I.E. RS. 23,170/- AS PER PARA 4.1 OF THE ORDER. 4.4 THE ASSESSEE SUBMITTED AS UNDER IN HIS WRITTEN SUBMISSIONS WHICH ARE REPRODUCED AS UNDER:- 1. CONVEYANCE EXPENSES AND DEPRECIATION ON CAR PERT AINS TO CAR OF ASSESSEE WHICH IS USED FOR THE PURPOSE OF BUSINESS. THE QUANTUM OF EXPENDITURE IS VERY LESS. PERSONAL EXPENSES HAVE NOT BEEN CLAIMED. NEITHER ANY INSTANCE HAS BEEN POINTED OUT BY THE LOWER AUTHORITIES. 2. THE DETAILS OF TELEPHONE EXPENSES IS AT PB 14. THE EXPENSES RELATES TO 4 LAND LINE NUMBERS INSTALLED AT OFFICE, ONE LAN DLINE NUMBER AT RESIDENCE AND ONE MOBILE. THE EXPENDITURE ON THE TELEPHONE INSTAL LED AT RESIDENCE IS RS. 12,130/- ONLY. EVEN THIS TELEPHONE IS USED FOR THE PURPOSE OF BUSINESS & THEREFORE ONLY A TOKEN DISALLOWANCE OUT OF THE SAME CAN BE MA DE. IN A.Y. 08-09, HONBLE ITAT RESTRICTED THE DISALLOWANCE @15% OF THE RESIDE NTIAL TELEPHONE ONLY (PB 47, PARA 11.2). 3. OFFICE EXPENSES CONSIST OF DAY TO DAY EXPENSES I NCURRED ON CLEANING, TEA, COFFEE, REFRESHMENT EXPENSES ETC. TH ESE EXPENSES ARE INCURRED IN NORMAL COURSE OF BUSINESS OF THE ASSESSEE. NONE OF THE EXPENSES ARE OF PERSONAL NATURE. THE AO OBSERVED THAT MANUAL VOUCHERS HAVE B EEN PREPARED WITHOUT SIGNATURE OF RECIPIENT. HOWEVER HE HAS NOT POINTED OUT ANY SPECIFIC INSTANCE OF THE SAME. ALL EXPENSES ARE PROPERLY VOUCHED AND SIGNED. THE QUANTUM OF TOTAL EXPENSES IS ALSO VERY LESS. THE BUSINESS EXPEDIENCY OF THESE EXPENSES IS OTHERWISE PROVED. HENCE THE DISALLOWANCE BE DELETED. 4. WITHOUT PREJUDICE TO ABOVE IT IS SUBMITTED THAT THE AO TOOK THE DEPRECIATION ON CAR AT RS. 51,723/- WHICH IS INCORR ECT. DEPRECIATION ON CAR IS ONLY RS. 21246/- AS PER CHART ENCLOSED (PB 15) . THE AO CONSIDERED THE TOTAL DEPRECIATION INCLUDING DEPRECIATION ON FAX MACHINE & COMPUTER WHICH IS INCORRECT. THUS THE AMOUNT OF DEPRECIATION ON CAR I S TO BE CONSIDERED AT RS. 21,246/- IN PLACE OF RS. 51,723/-. 11 5. IN THE FOLLOWING CASES IT HAS BEEN HELD THAT ASS ESSMENT UNDER SECTION 153A IS TO BE MADE WITH REFERENCE TO THE ARTICLES, THING S OR DOCUMENTS SEIZED DURING THE YEAR IN COURSE OF SEARCH. WHERE NOTHING INCRIMINATI NG IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY YEAR, THE ASSESSMENT FOR SUC H YEAR CANNOT BE DISTURBED. ITEMS OF REGULAR ASSESSMENT CANNOT BE ASSED BACK IN THE PROCEEDINGS U/S 153A/153C WHEN NO INCRIMINATING DOCUMENTS WERE FOUN D IN RESPECT OF SUCH AMOUNTS DISALLOWED IN SEARCH. 1. LMJ INTERNATIONAL LTD. VS. DCIT (KOLKATTA) 14 DTR 540 2. ANIL KUMAR BHATIA & ORS. VS. ACIT (DELHI) 1 ITR 484 3. ANIL P KHIMANI VS. DCIT (MUMBAI) 2010-TIOL-177 IN VIEW OF ABOVE THE DISALLOWANCE MADE BY THE AO & CONFIRMED BY LD CIT(A) BE DELETED. 4.5 WE HAVE HEARD BOTH THE PARTIES. SIMILAR ISSUE H AS BEEN CONSIDERED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 AND 2008-09. IN THAT CASE, WE HAVE HELD THAT LD. CIT(A) WAS FAIR ENOUGH TO RESTRI CT THE DISALLOWANCES TO THE EXTENT OF MENTIONED BY HIM THE IN THE ORDER. IN THE ORDER FOR THE ASSESSMENT YEAR 2007-08. WE HAVE NOTICED THAT DEPRECIATION ON CAR FOR DISALLOWA NCE HAS BEEN TAKEN WRONGLY. THE AO HAS TAKEN 15% OF DEPRECIATION OF ALL THE ASSETS INC LUDING FAX MACHINE AND COMPUTER. THE DEPRECIATION ON CAR IS 21,246/-. HENCE, 15% OF RS. 21,246/- IS TO BE DISALLOWED AS AGAINST RS. 7,758/- CONFIRMED BY THE LD. CIT(A). 5.1 THE FIRST GROUND OF APPEAL IN ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 IS THE SAME WHEREIN THE ASSESSEE IS AGGRIEVED THAT TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1.20 LACS ON ACCOUNT OF ALLEGE D INTEREST ON ALLEGED LOAN OF RS. 10.00 LACS ADDED IN ASSESSMENT YEAR 2002-03. 5.2 WE HAVE HEARD BOTH THE PARTIES. SINCE THE ADDIT ION OF RS. 10.00 LACS HAS BEEN SET ASIDE ON THE FILE OF THE AO, THEREFORE, THE ADDITIO N OF RS. 1.20 LACS AS INTEREST ON THIS AMOUNT IS ALSO RESTORED BACK ON THE FILE OF THE AO. HENCE, THE GROUND OF APPEAL NO.1 FOR ALL THE THREE ASSESSMENT YEARS IS ALLOWED FOR STATI STICAL PURPOSES. 12 6.1 THE GROUND NO. 2 FOR THE ALL THE THREE ASSESSME NT YEARS 2003-04, 2004-05 AND 2005-06 RELATE TO THE DISALLOWANCE OUT OF VARIOUS E XPENSES. 6.2 WE HAVE HEARD BOTH THE PARTIES. IN RESPECT OF T ELEPHONE EXPENSES, IT HAS ALREADY BEEN HELD IN THE CASE OF THE ASSESSEE FOR THE ASSE SSMENT YEAR 2008-09 THAT DISALLOWANCE OF 15% BE RESTRICTED ON RESIDENTIAL TELEPHONE. EXC EPT FOR THIS RELIEF, THE ADDITIONS AS CONFIRMED BY THE LD. CIT(A) ARE UPHELD. ASSESSMENT YEAR 2006-07 7.1 THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1.20 LACS ON ACCOUNT OF ALLEGED INTEREST ON ALLEGED LOAN OF RS. 10.00 LACS ADDED IN ASSESSMENT YEAR 2002-03. 7.2 WE HAVE HEARD BOTH THE PARTIES. SINCE THE ISSUE OF RS. 10.00 LACS IS RESTORED BACK ON THE FILE OF THE AO THEREFORE, THE ADDITION WHICH REPRESENTS INTEREST ON AMOUNT OF RS. 1.20 LACS IS ALSO RESTORED BACK ON THE FILE OF THE AO. 7.3 THE OTHER PART OF THIS GROUND OF APPEAL IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 4.00 LACS ON ACCOUNT OF INTEREST ON ADVANCE OF RS. 20.00 LACS GIVEN TO SHRI DINESH SAINI. 7.4 SIMILAR ADDITION HAS BEEN DELETED BY THE TRIBUN AL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08. FOLLOWING OUR FINDINGS IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08, WE DELETE THE ADDITION OF RS. 4.00 LACS. 8.1 THE SECOND GROUND OF APPEAL FOR THE ASSESSMENT YEAR 2006-07 IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF S 23,703/- UNDER DIFFERENT HEADS. 8.2 WE HAVE HEARD BOTH THE PARTIES. FOLLOWING OUR O RDER FOR THE ASSESSMENT YEAR 2008-09 (SUPRA), WE HOLD THAT THE AO WILL DISALLOW 15% OUT OF THE EXPENSES RELATING TO 13 RESIDENTIAL PHONE. THE OTHER DISALLOWANCES AS CONFI RMED BY THE LD. CIT(A) ARE UPHELD. IN RESPECT OF THE DISALLOWANCE OF DEPRECIATION, THE S AME WILL BE RESTRICTED IN RESPECT OF DEPRECIATION ON MOTOR CAR ONLY. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE P ARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22-12 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 22 /12/2011 *MISHRA COPY FORWARDED TO :- 1. SHRI NARESH PARWAL,JAIPUR 2. THE DCIT, CENTRAL CIRCLE- 3,JAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.561 TO 565/JP /11) A.R, ITAT, JAIPUR 14 15