ITO, Kurukshetra V. Sh. Nem Kumar Jain, Kurukshetra

ITA 748/CHANDI/2011

• Counselvise Citation: 74821514 RSA 2011
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 18-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: ASHWANI KUMAR
• Keywords: Income from undisclosed sources; Loose papers; Principle of natural justice
• Section: 68; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 748/CHD/2011 ASSESSMENT YEAR : 2007-08 I.T.O., WARD-1, V SHRI NEME KUMAR JAIN, KURUKSHETRA. PROP.M/S MAHAVIR TRADING CO., NGM, KURUKSHETRA. PAN: AAOPJ 4974 C ITA NO. 717/CHD/2011 ASSESSMENT YEAR: 2007-08 SHRI NEME KUMAR JAIN, V I.T.O., WARD-1, PROP. M/S MAHAVIR TRADING COMPANY, KURUKSHETRA. NGM, KURUKSHETRA. PAN : AAOPJ-4974C (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI ASHWANI KUMAR DEPARTMENT BY: SHRI N.K.SAINI DATE OF HEARING : 06.09.2011 DATE OF PRONOUNCEMENT : 28.09.2011 ORDER PER MEHAR SINGH, AM THESE ARE CROSS-APPEALS FILED BY THE REVENUE AND T HE ASSESSEE. BOTH THE APPEALS HAVE BEEN FILED AGAINST THE ORDER DATED 28.03.2011 FOR THE ASSESSMENT YEAR 2007-08 PASSED BY THE CIT(A ) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN REDUCING THE ADDITION OF RS.11,62,215/ - MADE ON ACCOUNT OF SUPPRESSION OF SALE IN PADDY ACCOUNT TO THE EXTENT OF LOSS OF RS.5,47,439/- WITHOUT APPRECIATING THAT AVE RAGE SALE RATE 2 OF PADDY SHOWN BY OTHER DEALERS OF THE LOCALITY AS RELIED UPON BY THE AO WAS HIGHER THAN THAT SHOWN BY THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN REDUCING THE ADDITION OF RS.6,38,241/- TO RS.34,743/- MADE ON ACCOUNT OF SUPPRESSION OF SALE IN RICE ACCOUNT IGNORING THE SALE RATE SHOWN BY THE OTHER D EALERS OF THE LOCALITY RELIED UPON BY THE AO. 3. THE FACTS OF THE CASE ARE THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF TRADING OF PADDY AND RICE AND OF CUSTOM MILLING. A SURVEY ACTION U/S 133A OF THE ACT WAS CARRIED OUT AT THE B USINESS PREMISES OF THE APPELLANT, ON 19.1.2007. DURING, SURVEY OPERATION, STATEMENT OF SHRI RAJIV JINDAL, THE ACCOUNTANT OF THE ASSESSEE WAS RE CORDED. HE STATED THAT FIRMS NAMED ATMA RAM SUSHIL KUMAR, MAHAVIR TRADING CO., ATMA RAM NEME KUMAR AND ATMA RAM DHARMA KUMAR ARE RUNNING TH E BUSINESS FROM THE PREMISES SITUATED, AT 46, NGM, KURUKSHETRA. IT WAS, FURTHER, STATED THAT HE HAS BEEN WORKING WITH THIS GROUP, FOR THE L AST 13-14 YEARS. THE BOOKS OF ACCOUNT OF THE APPELLANT FIRM, FOR THE FIN ANCIAL YEAR 2006-07, WERE STATED TO BE NOT WRITTEN, SINCE AS PER PRACTIC E, BOOKS OF ACCOUNT WERE WRITTEN, AFTER THE CLOSE OF THE FINANCIAL YEAR. H E, FURTHER, STATED THAT CASH OF RS.6500/- WAS AVAILABLE, ON THE DATE OF SURVEY W HICH BELONGED TO M/S ATMA RAM NEME KUMAR AND BESIDE THAT, NO CASH WAS LY ING ANYWHERE ELSE. THE APPELLANT DECLARED ADDITIONAL INCOME OF RS.14 L ACS, FOR THE FINANCIAL YEAR, 2006-07, RELEVANT TO THE ASSESSMENT YEAR 2007 -08, TO COVER UP ALL DISCREPANCIES IN THE BOOKS OF ACCOUNT, LOOSE PAPERS , DOCUMENTS AND OTHER RECORDS. THE ADDITIONAL INCOME SURRENDERED WAS CRE DITED, IN THE PROFIT & LOSS ACCOUNT AND, THEREAFTER, NET PROFIT WAS WORKED OUT AT RS.42,453/- AND RETURN DECLARING INCOME OF RS.48,054/- WAS FILE D, ON 31.10.2007. IF THE INCOME OF RS.14 LACS DECLARED DURING SURVEY OPE RATION WAS EXCLUDED, THERE WAS NET LOSS AMOUNTING TO RS.13,57,547/- AS A GAINST RETURNED INCOME 3 DECLARED IN THE LAST YEAR OF RS.95,771/- . ON, FURTHER, ANALYSIS OF THE PROFIT & LOSS ACCOUNT, IT WAS NOTED THAT THE APPELLANT DEC LARED LOSS IN TRADING OF PADDY AT RS.5,47,439/-, IN RICE TRADING AT RS.2,81, 393/- AND PADDY KUTAI ACCOUNT AT RS.1,66,322/-. THE APPELLANT DOES NOT OW N ANY RICE MILL AND, HENCE, THE ENTIRE MILLING OF RICE OF CUSTOM MILLING OF GOVERNMENT WAS GOT DONE FROM ITS SISTER CONCERN M/S JAIN RICE MILL, TO WHOM LEASE CHARGES OF RS.11,95,255/- WERE PAID. THE APPELLANT, FURTHER, CLAIMED INTEREST OF RS.5,85,769/-, DURING THE YEAR, AS AGAINST RS.3,762 /-, CLAIMED IN THE LAST YEAR; EXPENSES OF RS.3,23,228/- UNDER THE HEAD DFSC WHEREAS NO SUCH EXPENSES WERE CLAIMED, IN THE LAST YEAR. 4. THE FIRST GROUND OF APPEAL FILED BY THE REVENUE PERTAINS TO THE REDUCTION OF ADDITION BY THE CIT(A), WITHOUT APPREC IATING THE AVERAGE SALE RATE OF PADDY SHOWN BY OTHER DEALERS OF THE LOCALIT Y AS RELIED UPON BY THE AO. THE ASSESSEE HAD OPENING STOCK OF PADDY OF 487 9.18 QTLS, WHICH WAS VALUED @ RS.635/- PER QTL. THE SAME WAS CLAIMED TO BE SOLD AT THE AVERAGE SALE RATE OF RS.523/- PER QTL. THE AO NOTED THAT PR EVAILING MARKET RATE OF PADDY DURING THE YEAR WAS AT THE AVERAGE RATE OF RS .761/- PER QTL. ON THE BASIS OF PADDY SOLD BY M/S MITTAL TRADING COMPANY, KURUKSHETRA, M/S GANESH TRADING COMPANY, KURUKSHETRA AND M/S BALA SU NDRI RICE MILLS, INDRI. THE AO, ACCORDINGLY PROPOSED TO VALUE THE SA LE MADE BY THE APPELLANT @ RS.761/- PER QUINTAL WHICH IS OBJECTED TO BY THE APPELLANT ON THE BASIS THAT FROM THE DEEP SCRUTINY AND ENQUIRY C ONDUCTED, GENUINENESS AND CORRECTNESS OF THE TRANSACTIONS HAVE BEEN PROVE D BEYOND ANY DOUBT. THE AO, HOWEVER, REJECTED THE CLAIM OF THE APPELLAN T AND HELD THE SALE OF PADDY @ RS.761/- PER QTL. RESULTING IN AN ADDITION OF RS.11,62,215/- ON THIS ACCOUNT. 4 5. THE LD. CIT(A), DISALLOWED THE LOSS TO THE EXTEN T OF RS.5,47,439/- AFTER DETAILED DISCUSSION IN HIS APPELLATE ORDER. THE FINDINGS OF THE LD. CIT(A) AS CONTAINED IN PARA 1.07 OF THE ORDER ARE R EPRODUCED HEREUNDER : 1.07 FROM THE DETAILS OF SALE GIVEN ABOVE, IT IS NOTED THAT PADDY OF 4329.18 QTLS. OUT OF OPENING STOCK OF PADD Y WEIGHING 4879.18 QTLS. WERE CLAIMED TO BE SOLD SUBSEQUENT TO THE DATE OF SURVEY AT THE AVERAGE SALE RATE OF RS.509/- PER QTL . AND THATS TOO, TO ONE PARTY ONLY. NO JUSTIFICATION OF SALE O F PADDY AT AVERAGE SALE RATE OF RS.509/- PER QTL., AS AGAINST VALUATION OF OPENING STOCK THEREOF @ RS.635/- PER QTL. COULD BE GIVEN. IN THE WRITTEN SUBMISSIONS FILED, ON 21.03.2011, IT IS STATED THAT HE HAD TO TAKE THE DRASTIC STEP OF REALIZING THE MO NEY BY SELLING THE STOCK AT THE MARKET PRICE AVAILABLE AT THAT JUN CTURE, WHICH RESULTED IN HEAVY LOSS BUT NO EVIDENCE THERE OF COU LD BE BROUGHT ON RECORD. THE ONLY INFERENCE WHICH CAN BE DRAWN IS THAT JUST TO SET OFF THE ADDITIONAL INCOME DECLARED , LOSS WAS GENERATED BY UNDER INVOICING THE SALE OF PADDY. TO BE FAIR AND REASONABLE, LOSS OF RS.5,47,439/- CLAIMED ON ACCOUN T OF SALE OF PADDY IS DISALLOWED. 6. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE RIV AL SUBMISSIONS, FACTS OF THE CASE AND PAPER BOOK FILED BY THE ASSESSEE. FROM THE ANALYSIS OF THE CHART FURNISHED BY THE LD. CIT(A), IN PARA 1.06 OF THE IMPUGNED AP PELLATE ORDER, IT IS EVIDENT THAT RATES OF PURCHASE OF PADDY VARIES FROM RS.505/- PER QTL. TO RS.631/- PER QTL. THE ASSESSEE HAS NOT FILED ANY JUSTIFICATION FOR THE SALE OF PADDY A T AN AVERAGE SALE RATE OF RS.509/- PER QTL. AS AGAINST VALUATION OF OPENING STOCK @ RS.635/- PE R QTL. CONSEQUENTLY, THE FINDINGS OF THE LD. CIT(A) ARE HELD AS REASONABLE AND FAIR AND HENCE, THE SAME ARE UPHELD. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. IN GROUND NO. 2, THE REVENUE CONTENDED THAT THE LD. CIT(A) HAS ERRED IN REDUCING THE ADDITION OF RS. 638241/- TO RS. 34,743 /- MADE ON ACCOUNT OF SUPPRESSION OF SALES IN RICE ACCOUNT @ SALE RATE SHOWN BY OTHER DEALERS OF THE LOCALITY RELIED ON BY THE AO. THE AO, AFTER REJECTING THE BOOKS OF ACCOU NT OF THE ASSESSEE U/S 145(3) OF THE 5 ACT, MADE AN ADDITION OF RS. 638241/-. THE RELEVAN T PART OF THE FINDINGS OF I.T.O., IN THE MATTER IS REPRODUCED HEREUNDER:- HENCE, THE CONTENTION OF THE ASSESSEE IS NOT ACCE PTABLE AND ON THIS GROUND ALSO THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED U/S 145(3) OF THE INCOME-TAX ACT AS THE SAME ARE NOT REFLECTING THE TRUE PICTURE OF THE SALE OF RICE. THE SISTER CONCERNS NAMELY M/S JAIN RICE MILLS, KURUKSHETRA HA D HIMSELF PURCHASED 15,103.29 QUINTALS OF RICE VALUING AT RS. 1,56,31,3 75/- GIVING AN AVERAGE RATE OF RS. 1,035/- (DETAILS CHART OF PURCHASE OF RICE FROM DIFFERENT PARTIES IS ENCLOSED AS PER ANNEXURE A) AND THE REPLY FILED BY THE ASSESS EE HAS NO FORCE. HENCE, BY APPLYING AN AVERAGE PURCHASE RATE OF SISTER CONCERN S NAMELY M/S JAIN RICE MILLS, KURUKSHETRA I.E. RS. 1,035/- PER QUINTAL, THE SALE VALUE OF 3,474.33 QUINTALS OF RICE COMES TO RS. 35,94,896/- AS AGAINST OF RS. 29,56,65 5/- AND DIFFERENCE COMES TO RS. 6,38,241/- AND THE SAME ADDED TO THE TAXABLE IN COME OF THE ASSESSEE UNDER THE HEAD SALE OF RICE ON LOWER RATE. 8. THE LD. CIT(A) HELD THAT THE ASSESSEE SOLD THE R ICE @ RS. 861 PER QTL, ON 25/26 DEC 2006 AND ACCORDINGLY THE SALE OF RICE SUBSEQUEN T TO THE DATE OF SURVEY IS HELD TO BE MADE AT THE SAME RATE I.E. RS. 861/- PER QTL AS AGA INST RS. 1,063/-, TAKEN BY THE AO. THE LD. CIT(A), DIRECTED THE AO, TO WORK OUT THE PROFIT ON SALE OF RICE ACCORDINGLY. 9. WE HAVE PERUSED THE FACTS OF THE CASE, RIVAL SUB MISSIONS AND ALSO RELEVANT RECORD. A BARE PERUSAL OF THE SALE RATES PERTAINING TO RICE FROM 25.12.2006 TO 14.3.2007 REVEALS THAT THE SAME VARIED FROM RS. 600 TO RS. 900/-. THE SURVEY ACTION WAS CONDUCTED ON 19.1.2007. THE FINDINGS OF THE LD. CIT(A), ON THE SALE OF RICE SUBSEQUENT TO THE DATE @ RS. 861/- PER QTL AS AGAINST RS. 1,063/- PER QTL AD OPTED BY THE AO, ARE HELD TO BE FAIR AND REASONABLE. THEREFORE, WE DO NOT FIND ANY CONFORMI TY IN THE FINDINGS OF THE ORDER OF THE LD. CIT(A) AND HENCE, THE SAME ARE UPHELD. 6 ITA NO. 717/CHANDI/2011 ASSESSEES APPEAL 10. IN THE APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL : 1. THE ORDER PASSED U/S 250(6) OF THE INCO ME-TAX ACT,1961 IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS THE LD. CIT(A),KARNAL WAS NOT JUSTIFIED TO ARBITRARILY DISA LLOW LOSS OF RS.5,47,439/- ON ACCOUNT OF SALE OF PADDY. 2. THAT HE WAS FURTHER NOT JUSTIFIED TO ARBITRAR ILY HOLD THAT THE RATE OF SALE OF RICE BE ADOPTED AT RS.861/- PER QUINTAL AS AGAINST SALE MADE BY THE APPELLANT AT RS.600/- PER QUINTAL. 3. THAT THE LD. CIT(A) WAS NOT JUSTIFIED TO ARBI TRARILY UPHOLD THE ACTION OF THE LD. AO IN REJECTING THE BO OKS OF ACCOUNT U/S 145(3). 4. THAT THE LD. CIT(A) GRAVELY ERRED IN UPHOLDIN G THE ADDITION OF RS.14,00,000/- WHICH WAS ON ACCOUNT OF CASH INTRODUCED ON DIFFERENT DATES. THE CASH INTRODUCED WAS OUT OF THE AMOUNT SURRENDERED AT RS.14,00,000/- DURING THE COURSE OF SURVEY U/S 133A ON 19.01.2007. 5. THAT HE WAS FURTHER NOT JUSTIFIED TO UPHOLD AR BITRARY DISALLOWANCE OF RS.90,730/- ON ACCOUNT OF DEEMED IN TEREST. 11. THE ASSESSEE IN GROUND NO. 1, CONTENDED THAT TH E LD. CIT(A) ERRED ON FACTS AND LAW IN ARBITRARILY DISALLOWING LOSS OF RS. 547439/- , ON ACCOUNT OF SALE OF PADDY. WE HAVE CONSIDERED AND ADJUDICATED THE ISSUE RAISED IN THIS GROUND OF APPEAL BY THE ASSESSEE WHILE DECIDING THE APPEAL OF THE REVENUE. THEREFORE , HAVING REGARD TO THE ABOVE ADJUDICATION, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 12. IN GROUND NO. 2, THE ASSESSEE CONTENDED THAT TH E LD. CIT(A), WAS NOT JUSTIFIED TO HOLD THE RATE OF SALE OF RICE AT RS. 861 PER QTL, AS AGAINST SALE MADE BY THE ASSESSEE AT RS. 600 PER QTL. THE ISSUE RAISED IN THIS GROUND HAS D ULY BEEN CONSIDERED AND ADJUDICATED WHILE DECIDING THE REVENUES APPEAL. IN THIS CONNE CTION, A REFERENCE IS MADE IN PARA 9 OF 7 THIS ORDER WHERE NECESSARY ADJUDICATION HAS BEEN MA DE BY US. IN VIEW OF THE SAID FINDINGS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALSO DISMISSED. 13. IN GROUND NO. 3, THE ASSESSEE CONTENDED THAT TH E LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT BY THE AO. A SURVEY ACTION U/S 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE A SSESSEE, ON 19.1.2007. IN THE COURSE OF SURVEY OPERATION STATEMENT OF SHRI RAJIV JINDAL, ACCOUNTANT OF THE ASSESSEE WAS RECORDED WHEREIN HE DEPOSED THAT THE BOOKS OF ACCO UNT OF THE ASSESSEE, FOR THE FINANCIAL YEAR 2006-07, WERE TO BE WRITTEN AFTER CLOSE OF FIN ANCIAL YEAR, AS A MATTER OF PRACTICE. THE ASSESSEE DECLARED ADDITIONAL INCOME OF RS. 14.00 LA KHS, FOR THE FINANCIAL YEAR 2006-07, TO COVER OF THE DISCREPANCIES IN THE BOOKS OF ACCOUNT, LOOSE PAPERS, DOCUMENTS, STOCK BY PRODUCTS AND OF OTHER RECORD. THE SAID SURRENDER AM OUNT WAS DISCLOSED IN THE PROFIT AND LOSS ACCOUNT AND THE NET PROFIT WAS WORKED OUT BY T HE ASSESSEE AT RS. 42,543/-. THE ASSESSEE FILED RETURN OF INCOME, ON 31.10.2007, DE CLARING AN INCOME AT RS. 48,054/-. THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT IN THE COURSE OF SURVEY OPERATION AS NO REGULAR BOOKS OF ACCOUNT WERE AVAILABLE AT THE TIME OF SURVEY, AS THE BOOKS OF ACCOUNT WERE PREPARED BY THE ASSESSEE, AT HIS CONVENIENCE AFTER THE CLOSE OF FINANCIAL YEAR. IN THE FACE OF NON-MAINTENANCE OF REGULAR BOOKS OF ACCOUNT , IN THE NORMAL COURSE OF BUSINESS ACTIVITY AND PREPARATION OF THE SAME, ON THE CLOSE OF FINANCIAL YEAR, IS NOTHING BUT AN ABERRATION AND TRUE INCOME CANNOT BE EXPECTED FROM SUCH APPROACH OF THE ASSESSEE. 14. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND VARIATION OF RATES WHILE VALUING THE OPENING STOCK AS ALSO IN RESPECT OF SALE OF RI CE MADE BY THE ASSESSEE. THE AO AFFORDED OPPORTUNITIES TO THE ASSESSEE HIGHLIGHTING SUCH DISCREPANCIES IN THE MAINTENANCE OF BOOKS OF ACCOUNT AS TO WHY THE BOOKS OF ACCOUNT MAY NOT BE REJECTED U/S 145(3) OF THE ACT. AFTER APPRECIATION OF THE SUBMISSION MADE BY T HE ASSESSEE, THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. CIT(A) UP HELD THE FINDINGS OF AO IN THE MATTER OF REJECTION OF BOOKS OF ACCOUNT IN RESPECT OF SUC H DISCREPANCIES. 8 15. HAVING REGARD TO THE FINDINGS OF THE AO WHICH W ERE DULY UPHELD BY THE LD. CIT(A), IN THE MATTER OF THE REJECTION OF BOOKS OF ACCOUNT, THE SAME CANNOT BE ASSAILED. THEREFORE, THE FINDINGS OF THE LD. CIT(A) ARE UPHEL D. 16. IN GROUND NO. 4, THE ASSESSEE CHALLENGED THE UP HOLDING OF ADDITION OF RS. 14 LAKHS BY THE LD. CIT(A). IT IS CONTENDED BY THE APPELLAN T THAT THE CASH INTRODUCED IN THE CASH BOOK WAS OUT OF SURRENDER MADE IN THE COURSE OF SUR VEY OPERATION U/S 133A OF THE ACT, CONDUCTED ON 19.1.2007 AT THE PREMISES OF THE ASSES SEE. IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE AR FOR THE ASSESSEE CO NTENDED THAT THE SOURCE OF CASH INTRODUCED IS TRACEABLE TO THE SURRENDER MADE IN TH E COURSE OF SURVEY OPERATION. IT WAS CONTENDED THAT THE REVENUE HAS FAILED TO BRING ANY MATERIAL, ON RECORD, TO JUSTIFY SUCH ADDITION. THE DR ON THE OTHER HAND, PLACED RELI ANCE ON THE ORDERS OF LOWER AUTHORITIES. 17. THE AO AFTER APPRECIATION OF THE SUBMISSION MAD E BY THE ASSESSEE HELD THAT ON THE DATE OF SURVEY, PHYSICAL CASH WAS FOUND AT RS. 6500/- ONLY. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE SURRENDER OF RS. 14 LACS WAS THE SOURCE OF AMOUNT DEPOSITED, ON VARIOUS DATES WAS NOT TENABLE EXPLANATION. THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO. THE FINDINGS OF LD. CIT(A), ARE REPRODUCED HEREUNDE R FOR THE PURPOSE OF PROPER APPRECIATION OF THE SAME:- 2.01 RELEVANT PARA 5 FROM THE ORDER OF THE AO IS REPRODUCED BELOW: DURING THE ASSESSMENT PROCEEDINGS, IT IS NOTICED T HAT THE AS HAS DEPOSITED OF RS. 10,30,000/- IN CASH ON AS PER DETAILS BELOW:- S NO. DATE OF DEPOSIT AMOUNT 1 17..2.2007 RS. 9,50,000/- 2 19.2.2007 RS. 2,50,000/- 3 24.3.2007 RS. 2,50,000/- 9 4 28.3.2007 RS. 5,00,000/- IN HIS REPLY FILED BY THE ASSESSEE, ON 30.11.2009 AND CONTENDED THAT THE AMOUNT OF CASH DEPOSITED IN CASH OF RS. 14,00,000/- OUT OF CASH DEPOSITED AND REST AMOUNT OF RS. 2,50,000/- PERTAINS TO CASH AVAILABLE IN THE BOOKS. THE ASSESSEE WAS THEREFORE ASKED AS TO HOW THE ABOVE CASH WAS GENERA TED. THE ASSESSEE VIDE HIS REPLY DATED 29.12.2009 AND CO NTENDED THAT THE ASSESSEE HAS SURRENDERED RS. 14 LAKH DURING THE SURVEY ON 19.1.2 007, WHICH WAS CREDITED IN THE BOOKS OF ACCOUNTS IN PIECE MEALS AND HAS BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT SUBMITTED TO YOUR GOOD SELF. THE REPLY FILED BY THE ASSESSEE HAS BEEN CONSIDERED CAREFULLY AND HAS NO FORCE AS THE ASSESSEE HAS NOT FILED ANY SATISFACTORY EXPLANA TION REGARDING CASH DEPOSITS OF RS. 14,00,000/-. AS ON THE DATE OF SURVEY THERE WA S CASH AVAILABLE ONLY RS. 6500/-. HENCE, THE ENTIRE AMOUNT OF CASH DEPOSITS I.E. RS. 14,00,000/- IS TREATING AS INCOME FROM UNDISCLOSED SOURCE U/S 68 OF THE INC OME-TAX ACT. ACCORDINGLY, ADDED TO THE TAXABLE INCOME OF THE ASSESSEE. 2.02 RELEVANT PARA 2 FROM THE WRITTEN SUBMISSIONS F ILED BY THE APPELLANT IS REPRODUCED BELOW: THAT THE AO HAS ALSO ERRED IN MAKING THE ADDITION S OF RS. 14,00,000/- OUT CASH DEPOSITED IN BOOKS U/S 68 OF THE INCOME-TAX AC T. AS ALREADY STATED THAT ON 19.1.2007 THE SURVEY WAS CONDUCTED ON THE ASSESSEE, WHICH WAS CONCLUDED WITH THE SURRENDER OF RS. 14 LAKHS WHICH WAS DULY ACCEPT ED BY THE DEPARTMENT TOO. AFTER THE CONCLUSION OF SURVEY ON DIFFERENT DATES T HE SURRENDERED AMOUNT WAS DEPOSITED BY THE ASSESSEE IN THE BOOKS, WHICH HAS A GAINST BEEN ADDED BY THE AO BY ALLEGING THE INCOME FROM UNDISCLOSED SOURCES, WH ICH HAS ALREADY BEEN DECLARED BY THE ASSESSEE ON 19.1.2007 AND ACCEPTED BY THE DEPARTMENT. 10 AS SUCH THE ADDITION IS TOTALLY AGAINST THE FACTS, LAW AS WELL AS NATURAL JUSTICE, WHICH BE KINDLY DELETLED. 2.03 THE ISSUE IS EXAMINED. IT IS NOTED THAT THE APPELL ANT INTRODUCED CASH IN THE CASH BOOK AS FOLLOWS:- DATE AMOUNT 17.2.2007 RS. 7,00,000 19.2.2007 RS. 2,50,000 24.3.2007 RS. 2,50,000 28.3.2007 RS. 2,00,000 2.04 THE SOURCE OF INTRODUCING THE ABOVE CASH WAS S TATED TO BE OUT OF THE ADDITIONAL INCOME DECLARED DURING SURVEY. AS DISCU SSED ABOVE THAT NO BOOKS OF ACCOUNT WERE FOUND TO BE WRITTEN ON THE DATE OF SURVEY I.E. 19.1.2007 NOR ANY CASH OF THE FIRM WAS FOUND DURING SURVEY. THE ADDITIONAL INCOME DECLARED PER LETTER OF SURRENDER WAS ON ACCOUNT OF TO COVER UP VARIOUS DISCREPANCIES AND NOT ON ACCOUNT OF UNEXPLAINED CAS H AT ALL. THE PLEA OF THE APPELLANT THAT THE CASH INTRODUCED IN THE CASH BOOK WAS OUT OF THE ADDITIONAL INCOME DECLARED DURING SURVEY IS, THEREFORE, NOT TE NABLE. APPARENTLY, THE SAME WAS OUT OF THE UNEXPLAINED INCOME OF THE FIRM AND HENCE THE SAME IS HELD AS UNEXPLAINED CASH AND ADDITION THEREOF MADE BY THE AO IS, HEREBY, CONFIRMED. 18. IT IS PERTINENT TO REFER TO THE TEXT OF SURREND ER LETTER AS ANNEXED AT PAGE 21 OF THE PAPER BOOK FILED BY THE ASSESSEE WITH A VIEW TO APP RECIATING THE ABOVE FINDINGS OF THE LD. CIT(A). THE LETTER IS REPRODUCED HEREUNDER:- 11 TO THE JOINT COMMISSIONER OF INCOME TAX, KURUKSHETRA RANGE, KURUKSHETRA SUBJECT: SURVEY UNDER SECTION 133-A (I) OF INCOME-T AX ACT CONDUCTED AT M/S MAHAVIR TRADING COMPANY, KURUKSHETRA ON 19.1.20 07 RESPECTED MADAM, THIS IS IN RESPONSE TO THE SURVEY CONDUCTED AT THE BUSINESS PREMISES OF M/S MAHAVIR TRADING COMPANY AT KURUKSHETRA ON 19.1. 2007 AND DISCUSSED WITH YOUR GOODSELF. THAT DURING THE COURSE OF SURVEY PROCEEDINGS CERTAI N DISCREPANCIES WERE FOUND IN THE BOOKS OF ACCOUNT, LOOSE PAPERS, STOCK OF VARIOUS PRODUCTS BYPRODUCTS AND VARIOUS OTHER RECORDS AND DOCUMENTS. THAT THE ASSESSEE FIRM VOLUNTARILY SURRENDERS A SUM OF RS. 14.00 LACS (FOURTEEN LACS) AS ADDITIONAL INCOME FOR THE FINANC IAL YEAR 2006-07 RELEVANT TO ASSESSMENT YEAR 2007-08 TO COVER UP ALL ALLEGED DISCREPANCIES IN THE BOOKS OF ACCOUNT, LOOSE PAPERS, DOCUMENTS, STOCK, BYPRODU CTS AND OTHER RECORDS. ON DOCUMENT D-2 OUTSIDE IT IS WRITTEN M/S ATMA RAM SUSHIL KUMAR AND ON DOCUMENT D-6 IT IS WRITTEN M/S JAIN RICE MILL BUT B OTH PERTAIN TO M/S MAHAVIR TRADING COMPANY. THAT THE SURRENDER OF ADDITIONAL INCOME BY THE ASSE SSEE IS SUBJECT TO THE CONDITION THAT NO PENALTY PROCEEDINGS U/S 271(1 )(C) OF THE INCOME-TAX ACT OR UNDER ANY OTHER SECTION OF THE INCOME-TAX ACT/PR OSECUTION PROCEEDINGS SHALL BE INITIATED AGAINST THE ASSESSEE ON ACCOUNT OF ANY DISCREPANCY IN THE BOOKS OF ACCOUNT, LOOSE PAPERS STOCK, BYPRODUCTS, Y IELD OR ANY OTHER DOCUMENTS. NO FURTHER ADDITION OR ENQUIRY SHALL B E MADE ON ACCOUNT OF ANY DISCREPANCY IN BOOKS OF ACCOUNT, LOOSE PAPERS, STOC K, BYPRODUCTS, YIELD AND DOCUMENTS. WE WILL THE TAXES BY DUE DATES. THANKING YOU, YOURS FAITHFULLY, SD/- M/S MAHAVIR TRADING COMPANY KURUKSHETRA 19. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE FA CTS IN ISSUE, RIVAL SUBMISSION AND THE RELEVANT RECORD MADE AVAILABLE BY THE PARTIES. THE ASSESSEE EXPLAINED THE NATURE AND SOURCE OF CASH FOUND RECORDED IN THE CASH BOOK AS T HE AVAILABILITY OF CASH ON ACCOUNT OF SURRENDER OF RS. 14 LACS MADE IN THE COURSE OF SURV EY OPERATION. IT IS UNDISPUTED FACT THAT ON THE DATE OF SURVEY OPERATION ON 19.1.2007, THE P HYSICAL CASH OF RS. 6500/- ONLY WAS FOUND. NO OTHER CASH WAS AVAILABLE WITH THE ASSESS EE. THE BOOKS OF ACCOUNT OF THE 12 ASSESSEE WERE NOT AVAILABLE WITH THE ASSESSEE ON T HE DATE OF SURVEY OPERATION. FURTHER, THE ASSESSEE FAILED TO REBUT THE FACTUM THAT BOOKS OF ACCOUNT WERE PREPARED AFTER THE CLOSE OF RELEVANT FINANCIAL YEAR, AS DISCUSSED ABOVE. TH E CASH WAS INTRODUCED IN THE CASH BOOK FROM 17.2.2007 TO 28.3.2007 BY THE ASSESSEE AFTER T HE DATE OF SURVEY I.E. 19.1.2007. A BARE PERUSAL OF THE LETTER OF SURRENDER, AS REPRODU CED ABOVE, CLEARLY REVEALS THAT NO SURRENDER HAS BEEN MADE BY THE ASSESSEE AGAINST CAS H. THUS, THE IMPUGNED SURRENDER VOLUNTARILY MADE BY THE ASSESSEE CANNOT BE ACCEPTED AS SOURCE OF SUCH DEPOSITS. THE EXPLANATION OF THE ASSESSEE ATTRIBUTING THE SURREND ER AMOUNT AS SOURCE OF SUCH DEPOSITS IS SPECIOUS IN NATURE AND FACTUALLY AND LEGALLY NOT TE NABLE. THEREFORE, WE DONT FIND ANY INFIRMITY IN THE CLEAR FINDINGS OF THE LD. CIT(A) A S REPRODUCED ABOVE. IT IS PERTINENT TO HIGH LIGHT HERE THAT THE ASSESSEE MADE A VOLUNTARY SURRENDER OF RS. 14 LACS AND UNDERTOOK TO PAY DUE TAX ON SUCH ADDITIONAL INCOME DECLARED I N THE COURSE OF SURVEY OPERATION. HOWEVER, THE ASSESSEE CHOOSE TO FILE HIS RETURN OF INCOME FOR THE PERIOD IN QUESTION DISCLOSING TAXABLE INCOME AT RS. 42,543/- AS DISCUS SED IN DETAIL EARLIER. THUS, NO TAX WAS PAID BY THE ASSESSEE ON THE SAID ADDITIONAL INCOME OF RS. 14 LACS DECLARED IN THE COURSE OF SURVEY. ON THE CONTRARY, THE ASSESSEE FINDS SOURCE OF SUCH DEPOSITS, AS THE IMPUGNED SURRENDER. SUCH EXPLANATION OF THE ASSESSEE SQUARE LY FALLS IN THE REALM OF SURMISES AND CONJECTURES. THIS APPROACH OF THE ASSESSEE IS FACT UALLY AND LEGALLY INDEFENSIBLE. IT IS, FURTHER, MENTIONED THAT THE NOTION OF JUSTICE IS CO MPREHENSIBLE EVEN TO AN ORDINARY PERSON. HOWEVER, THE APPROACH OF THE ASSESSEE CANN OT BE JUSTIFIED UNDER ANY RATIONAL FISCAL JURISPRUDENCE. THEREFORE THE FINDINGS OF LD . CIT(A) ARE UPHELD. 20. IN GROUND NO. 5, THE ASSESSEE CHALLENGED THE UP HOLDING OF DISALLOWANCES OF RS. 90,730/-, BY PLACING RELIANCE ON DECISION OF HON'B LE JURISDICTIONAL HIGH COURT, IN THE CASE OF CIT V. ABHISHEK INDUSTRIES LTD (2006) 286 I TR 1 (P & H). 21. IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE CL AIMED INTEREST PAID TO BANK AND OUTSIDERS AT RS. 5,85,769/- (NET). IT WAS, FURTHE R, OBSERVED BY THE AO THAT THE ASSESSEE HAD NOT CHARGED INTEREST FROM SHRI SIKANDAR KUMAR J AIN, DEBTOR AMOUNTING TO RS. 7,56,085/-, WITH WHOM NO BUSINESS TRANSACTION WAS UNDERTAKEN DURING THE YEAR. IT WAS 13 CONTENDED BY THE ASSESSEE BEFORE THE AO THAT THE AD VANCE WAS MADE FOR THE PURCHASE OF PROPERTY BUT THE DEAL COULD NOT BE MATERIALIZED. I T WAS CONTENDED BY THE ASSESSEE THAT THE ASSESSEE HAS NOT PAID ANY INTEREST AGAINST UN-SECUR ED LOAN OF RS. 13,35,000/-. 21 (I) THE LD. CIT(A), UPHELD THE FINDINGS OF AO ON THE GROUND THAT THE ASSESSEE FAILED TO BRING ON RECORD ANY EVIDENCE IN SUPPORT O F HIS CLAIM THAT THE ADVANCE WAS MADE FOR THE PURCHASE OF PROPERTY. HOWEVER, THE DEAL CO ULD NOT BE MATERIALIZED. IT WAS, FURTHER, OBSERVED THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD, TO ESTABLISH THAT PURCHASE OF PROPERTY WAS FOR THE PURPOSE OF BUSINESS. THE A SSESSEE, THUS, FAILED TO ESTABLISH THAT INTEREST FREE ADVANCE WAS MADE FOR THE PURPOSE OF B USINESS. CONSEQUENTLY , IT WAS HELD BY THE LD. CIT(A) THAT THE DECISION OF HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT V. ABHISHEK INDUSTRIES LTD. (SUPRA), HAD BEEN RIGHTLY APPLIED BY THE LD. CIT(A). 21 (II). WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. IT IS EVIDENT THAT THE ASSESSEE HAD CLAIMED INTEREST A T RS. 5,85,769/-. HOWEVER, ON THE OTHER HAND, THE ASSESSEE MADE INTEREST FREE ADVANCE OF RS . 7,56,085/-, TO ONE SHRI SIKANDAR KUMAR JAIN WITH WHOM NO BUSINESS TRANSACTION WAS UN DERTAKEN DURING THE YEAR. IN THE LIGHT OF THE DECISION OF HON'BLE JURISDICTIONAL HIG H COURT IN THE CASE OF CIT V. ABHISHEK INDUSTRIES LTD (SUPRA), IT IS INCUMBENT UPON THE AS SESSEE, TO ESTABLISH HIS CASE OF INTEREST FREE ADVANCES AND ALSO TO ESTABLISH THE NEXUS, IF A NY, THAT SUCH ADVANCE WAS MADE OUT OF SURPLUS FUNDS. THE ASSESSEE HAS FAILED TO FULFILL SUCH REQUIREMENT AS IS EVIDENT FROM THE FINDINGS OF LD. CIT(A) AS RECORDED IN PARA 3.05 OF HIS ORDER. THE FINDINGS OF LD. CIT(A) ARE REPRODUCED HEREUNDER FOR PROPER APPRECIATION OF THE SAME:- 3.05 THE ISSUE IS CONSIDERED. THE APPELLANT HAS N OT BROUGHT ON RECORD ANY EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE ADVANCE W AS MADE FOR PURCHASE OF PROPERTY, THE DEAL OF WHICH COULD NOT BE MATERIALIZ ED. FURTHER NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT PURCHASE O F PROPERTY WAS FOR THE PURPOSE OF BUSINESS. THE APPELLANT AS SUCH HAS NOT BEEN AB LE TO ESTABLISH THAT INTEREST FREE ADVANCE WAS MADE FOR BUSINESS. THE PLEA OF THE APP ELLANT THAT DECISION IN THE CAE OF ABHISHEK INDUSTRIES IS NOT APPLICABLE IN HIS CAS E IS NOT TENABLE SINCE RATIO OF THE DECISION IS TO BE CONSIDERED. THE APPELLANT HAS AL SO NOT BROUGHT ON RECORD THE EXACT SOURCE OF MAKING THE INTEREST FREE ADVANCE. IN VIEW OF THESE FACTS, ACTION OF 14 THE AO IS, HEREBY, CONFIRMED. GROUND OF APPEAL NO. 4 IS REJECTED IN THE LIGHT OF DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT V. ABHISHEK INDUSTRIES LTD (SUPRA). 21 (III) HAVING REGARD TO THE ABOVE LEGAL AND FACTU AL DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF LD. CIT(A) AND, H ENCE, THE SAME ARE UPHELD. 22. IN THE RESULT, APPEAL OF THE REVENUE AND AS ALS O THE APPEAL OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 28 .92011 SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28.9.2011 POONAM/SURESH COPY TO: 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH ASSISTANT REGISTRAR, ITAT, 15