ADDL CIT RG 15(1), MUMBAI V. JAYANTILAL M. SOLANKI, MUMBAI

ITA 8044/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71272 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 05-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 23-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: MANISH SANGHAVI
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Fair market value
• Section: 133A; 131

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL I II I BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . . . ! ! ! ! , ' ' ' ' #$ #$ #$ #$ BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA, AM , AM , AM , AM ./ I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.8044/MUM/2010 8044/MUM/2010 8044/MUM/2010 8044/MUM/2010 ( & ' & ' & ' & ' / ASSESSMENT YEAR :2007-08) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-15(1), ROOM NO. 104, MATRU MANDIR, 1 ST FLOOR, TARDEO RD. MUMBAI-400007 / VS. SHRI JAYANTILAL M SOLANKI PROP. M/S CHAIN PLUS, SHOP NO. 2, GROUND FLOOR, DHANJI STREET, MUMBAI-400003 $( ' ./ ) ./ PAN/GIR NO. :AAEPS4188B ( (* / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( +,(* / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) (* - (* - (* - (* - / APPELLANT BY : SHRI O. P. SINGH +,(* . - +,(* . - +,(* . - +,(* . - /RESPONDENT BY : SHRI MANISH SANGHAVI . /' . /' . /' . /' / DATE OF HEARING : 5 TH SEPTEMBER 2013 01' 01' 01' 01' . .. ./' /' /' /' /DATE OF PRONOUNCEMENT: 27 TH SEPTEMBER 2013 #2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 15.9.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08 . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 01 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS . 1,15,00,000/- MADE BY THE AO TOWARDS UNDISCLOSED INCOME WITHOUT APPRECIATING THE FACT THAT, DURING THE COURSE OF SU RVEY PROCEEDINGS CONDUCTED BY DIT(LNV) COCHIN AT THE PRE MISES OF THE ASSESSEE, NEPHEW OF THE ASSESSEE, SHRI RAMANKUMAR S OLANKI, THE PERSON WHO WAS DEPUTED BY THE ASSESSEE TO LOOK AFTER HIS BUSINESS AND WAS PRESENT AT THE TIME OF SEARCH, HAS VOLUNTARILY OFFERED THIS AMOUNT OF RS.1, 15,00,000/-, THE UNACC OUNTED INCOME, AS ADDITIONAL INCOME IN THE HANDS OF THE AS SESSEE M/S. CHAIN PLUS. ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 2 02 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS .7,41,600/- MADE BY THE ASSESSING OFFICER TOWARDS DESIGN EXPENS ES FOR NON PRODUCTION OF ANY EVIDENCE BY ASSESSEE. THE LD. CIT (A) ALSO ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE MA DE THESE PAYMENTS TO HIS RELATIVES BUT FAILED TO PRODUCE ANY EVIDENCE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, REGARD ING SERVICE PROVIDED BY THESE PERSONS. 3. GROUND NO. 1 REGARDING DELETION OF ADDITION OF R S. 1.15 CRORE MADE BY THE AO TOWARDS UNDISCLOSED INCOME. THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF MANUFACTURER OF GOLD ORN AMENTS IN THE NAME OF M/S CHAIN PLUS. SHRI SANTOSH D JAIN, SHRI BIPUL CHOUHAN AND SHRI NIRAV SHAH, ALL EMPLOYEES OF THE ASSESSEE WERE INTERROGAT ED BY ADIT(INV) AIRPORT UNIT, SANTACRUZ ON 1.11.2006. IN THE SAID A CTION SHRI SANTOSH D JAIN THE EMPLOYEE OF THE ASSESSEE WAS FOUND IN POSSESSIO N OF GOLD BARS OF 12 KG, GOLD ORNAMENTS OF 33. 661 KG AND CASH OF ` 8,26 ,000/-. THE BUSINESS PREMISES OF THE ASSESSEE WAS SURVEYED ON SAME DAY B Y THE ADIT(INV), UNIT 3 RD , MUMBAI. AT THE TIME OF SURVEY THE ASSESSEE WAS NO T PRESENT AT THE BUSINESS PREMISES AS HE WAS OUT OF MUMBAI ON A PILGRIMAGE HOWEVER, ONE SHRI RAMKUMAR SOLANKI THE NEPHEW OF THE ASSESSE E ATTENDED THE SURVEY PROCEEDINGS. IN THE COURSE OF THE SURVEY STA TEMENT OF SHRI RAMKUMAR SOLANKI WAS RECORDED IN WHICH HE DECLARED A SUM OF ` 1.15 CRORE AS ADDITIONAL INCOME. APART FROM SHRI RAMKUMA R SOLANKI THE STATEMENT OF SHRI SANTOSH D JAIN WAS ALSO RECORDED. THERE WAS ANOTHER SURVEY AT THE BUSINESS PREMISES OF THE ASSESSEE ON 13.12.2006 AND STATEMENT OF THE ASSESSEE WAS RECORDED. THE ASSESSE E FILED RETURN OF INCOME ON 13.10.2007 DECLARED TOTAL INCOME AT ` 38, 69,447. THE AO NOTED ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 3 THAT THE ASSESSEE HAS NOT OFFERED THE AMOUNT OF ` 1 .15 CRORE IN THE RETURN OF INCOME WHICH WAS OFFERED DURING THE COURSE OF SU RVEY ON 1.11.2006 ON ACCOUNT OF UNACCOUNTED GOLD BARS AND CASH IN HAND. THE AO MADE AN ADDITION OF ` 1.15 CRORE TO THE INCOME OF THE ASSES SEE ON THE BASIS OF THE STATEMENT OF SHRI RAMKUMAR SOLANKI AND SHRI SANTOSH D JAIN RECORDED DURING THE SURVEY U/S 133A ON 1.11.2006. ON APPEAL, THE CIT(A) HAS DELETED THE ADDITION BY RECORDING THE FACT THAT THE ASSESSEE HAD PRODUCED ALL THE BOOKS OF ACCOUNT AND RECORDS INCLUDING STOC K REGISTER AND APPROVAL REGISTER BEFORE THE AO FOR VERIFICATION AND SAME WA S TEST CHECKED BY THE AO AND NO SIGNIFICANT MISTAKE OR OMISSION IN THESE RECORDS WAS FOUND BY THE AO. THE CIT(A) HAS HELD THAT THE NATURE AND SOU RCE OF THE STOCK-IN- TRADE AND CASH IN HAND FOUND DURING THE SURVEY HAVE BEEN EXPLAINED SATISFACTORILY EXCEPT CASH OF ` 39,052/- FOUND EXCE SS. FURTHER NO INCRIMINATING DOCUMENT WAS FOUND IN THE COURSE OF T HE SURVEY. 4. BEFORE US THE LD. DR HAS SUBMITTED THAT DURING THE COURSE OF SURVEY SHRI SANTOSH D JAIN HAS STATED IN THE STATEMENT THA T HE ALONG WITH SHRI BIPUL CHOUHAN AND NIRAV SHAH VISITED COCHIN ON 27.1 0.2006 FROM MUMBAI FOR DISPLAY OF JEWELLERY TO CUSTOMERS AND TO OBTAIN ORDERS FOR THE BUSINESS OF M/S CHAIN PLUS. HE HAS FURTHER STATED THAT AROUN D 13 KG ON JEWELLERY AND WAS SOLD TO THE COSTUMER AS PER THE TELEPHONIC INSTRUCTION OF THE ASSESSEE AGAINST THE SALE OF 12 KG JEWELLERY THEY R ECEIVED 12 KG GOLD BARS AND CASH OF ` 8 LAKHS. THE LD. DR HAS SUBMITTED TH AT IT WAS STATED BY SHRI SANTOSH D JAIN THAT THEY HAD CARRIED AROUND 45 KG J EWELLERY FROM MUMBAI TO COCHIN OUT OF WHICH 30.5 KG OF GOLD JEWELLERY BE LONGING TO M/S CHAIN ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 4 PLUS AND 15.2 KG OF GOLD JEWELLERY BELONGING TO M/S CHAIN CRAFT. THUS, THESE THREE EMPLOYEES OF THE ASSESSEE CARRIED 30.5 KG OF GOLD JEWELLERY BELONGING TO M/S CHAIN PLUS FROM MUMBAI TO COCHIN A ND 15.22 KG GOLD JEWELLERY BELONGING TO M/S CHAIN CRAFT. OUT OF THIS 45 KG, 13 KG OF GOLD JEWELLERY WAS SOLD AGAINST WHICH THE GOLD BARS OF 1 2 KG AND CASH AMOUNT OF ` 8,26,000/- WAS RECEIVED BY THE EMPLOYEES OF TH E ASSESSEE. SHRI RAMKUMAR SOLANKI HAD DECLARED ` 1.15 CRORE AS ADDIT IONAL INCOME OF M/S CHAIN PLUS. THEREFORE, THE ADDITION HAS BEEN MADE B Y THE AO ON THE BASIS OF THE EVIDENCE BEING THE STOCK OF GOLD FOUND WITH THE EMPLOYEES OF THE ASSESSEE AND THE STATEMENT RECORDED DURING THE SURV EY IN WHICH ` 1.15 CRORE WAS ADMITTED AS AN UNDISCLOSED INCOME. THE AO HAS RECORDED THAT THE FINDING THAT 13 KG OF GOLD JEWELLERY WHICH WAS STATED TO BE SOLD AGAINST 12 KG OF GOLD BARS AND CASH HAS NOT BEEN SH OWN IN THE BOOKS OF ACCOUNT. HE HAS RELIED UPON THE ORDER OF THE AO. 5. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE HA S SUBMITTED THAT THE AO RELIED UPON THE STATEMENT OF THE NEPHEW OF T HE ASSESSEE RECORDED U/S 133A OF THE INCOME TAX ACT. THE LD. AR OF THE A SSESSEE VEHEMENTLY CONTENDED THAT THE NEPHEW OF THE ASSESSEE SHRI RAMK UMAR SOLANKI IS DOING A SEPARATE SIMILAR BUSINESS AND THE STATEMENT RECORDED IN ABSENCE OF THE ASSESSEE CANNOT BE RELIED UPON AGAINST THE A SSESSEE. HE HAS FURTHER SUBMITTED THAT EVEN IN THE STATEMENT RECORD ED U/S 133A ON 1.11.2006 SHRI SANOTSH D JAIN HAS CLEARLY EXPLAINED THE STOCK OF GOLD IN THEIR POSSESSION WHICH WAS DULY RECORDED IN THE BOO KS OF ACCOUNT OF THE ASSESSEE. SINCE, THE ASSESSEE WAS NOT AVAILABLE ON 1.11.2006 WHEN THE ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 5 SURVEY WAS CARRIED OUT THEREFORE, SUBSEQUENTLY THE ASSESSEE WAS SUMMONED BY THE DDIT AND STATEMENT OF THE ASSESSEE WAS RECORDED ON 13.12.2006. DURING THE PROCEEDINGS ON 13.12.2006 TH E ASSESSEE HAD EXPLAINED THE TOTAL STOCK AS PER THE BOOKS OF ACCOU NT AND THE STOCK GIVEN TO THE SALES PERSONS AS WELL AS ISSUED TO THE GOLD SMITH FOR MANUFACTURING OF JEWELLERY. THUS, THE LD. AR HAS SUBMITTED THAT T HE RELEVANT DETAILS, STOCK REGISTER AND BOOKS OF ACCOUNT WERE PRODUCED D URING THE POST SURVEY INQUIRIES WHICH WERE DULY VERIFIED BY THE INVESTIGA TION WING. THE LD. AR HAS REFERRED THE QUESTION NO. 3 AND 4 AND ANSWER GI VEN BY THE ASSESSEE IN THE STATEMENT RECORDED ON 13.12.2006 AND SUBMITTED THAT NO DISCREPANCY WAS FOUND BY THE INVESTIGATION WING IN THE EXPLANAT ION DETAILS AND RECORD PRODUCED. HE HAS RELIED UPON THE DECISION OF HONBL E SUPREME COURT IN CASE OF CIT VS KHADER KHAN 352 ITR 480 AND SUBMITTE D THAT THE HONBLE SUPREME COURT HAS UPHELD THE DECISION OF HONBLE MA DRAS HIGH COURT IN 300 ITR 157 WHEREIN IT WAS HELD THAT SOLELY ON THE BASIS OF STATEMENT GIVEN DURING THE SURVEY U/S 133A DISCLOSING THE INC OME CANNOT BE ASSESSED AS AN INCOME OF THE ASSESSEE. THE LD. AR H AS SUPPORTED THE FINDINGS OF THE CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THOUGH THE GOLD JEWELLERY, GOLD BARS AND CASH OF ` 8 LAKHS WAS FOUND WITH THE EMPLOYEES OF THE ASSESSEE AT THE MUMBAI AIRPORT WHILE COMING FROM COCHIN HOWEVER, THE ASSES SEE HAS PRODUCED THE RELEVANT RECORD TO SHOW THAT THE GOLD WAS GIVEN TO THE EMPLOYEES FOR SALE AND EXHIBITION. THE SURVEY PARTY EVEN ON 1.11.2006 COULD NOT FIND ANY ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 6 DISCREPANCY IN THE STOCK AND BOOKS OF ACCOUNT OF TH E ASSESSEE. THE ONLY DISCREPANCY IS REGARDING THE CASH TO THE EXTENT OF ` 39,052/-. WE FURTHER NOTE THAT THE ASSESSING OFFICER HAS NOT GIVEN THE F INDING THAT THE STOCK FOUND WITH THE EMPLOYEES OF THE ASSESSEE WAS NOT RE CORDED IN THE BOOKS OF ACCOUNT BUT THE AO HAS MADE THE ADDITION SOLELY ON THE BASIS OF THE STATEMENT OF SHRI RAMKUMAR SOLANKI THE NEPHEW OF TH E ASSESSEE. IT IS PERTINENT TO NOTE THAT IT IS NOT THE CASE OF THE RE VENUE THAT SHRI RAMKUMAR SOLANKI WAS EITHER THE PARTNER IN THE BUSINESS OR E MPLOYEE OF THE ASSESSEE. THE ASSESSEE HAS VEHEMENTLY CONTENDED THA T SHRI RAMKUMAR SOLANKI IS DOING HIS OWN BUSINESS THOUGH IN THE SIM ILAR LINE THEREFORE, HE COULD NOT OFFER /SURRENDER ANY INCOME ON BEHALF OF THE ASSESSEE. EVEN OTHERWISE WHEN THE STATEMENT OF THE ASSESSEE WAS RE CORDED ON 13.12.2006 DURING POST SURVEY INQUIRY BY THE DDIT ( INV) THEN THE STATEMENT OF THIRD PARTY CANNOT RELIED UPON FOR THE PURPOSE OF THE ADDITION WHICH IS NOT BASED ON ANY MATERIAL FOUND DURING THE SURVEY OR IN THE COURSE OF INQUIRY. IN THE ABSENCE OF ANY MATERIAL T O SHOW THAT THE GOLD FUND IN THE POSSESSION OF THE EMPLOYEES OF THE ASSE SSEE IS OUT OF BOOKS OF ACCOUNT THE SURRENDER OF ` 1.15 CRORE BY THE NEPHEW OF THE ASSESSEE IN THE STATEMENT MADE U/S 133A CANNOT BE THE SOLE BASI S FOR ADDITION. THE CIT(A) HAS CONSIDERED THIS ISSUE IN PARA 6 TO 6.6 A S UNDER: 6. I HAVE CONSIDERED CAREFULLY THE RELEVANT FACTS OF THE CASE TOGETHER WITH FINDINGS OF THE AO AND THE ARGUMENTS PUT FORWARDED BY THE LD. AR. IT IS SEEN THAT THE AO HAS BASICALLY DOUBTED THE MODUS OPERANDI OF THE BUSINESS CARRIED OUT THROUGH SALESMEN OF THE ASSESSEE. IT WAS EXPLAINED BY THE A SSESSEE THAT THE PEOPLE WHO HAVE VISITED THE SALESMEN OF THE ASS ESSEE AT COCHIN WERE DOING BUSINESS OF GOLD ORNAMENTS IN THE REMOTE INTERIORS AND THE ASSESSEE RECEIVED ENQUIRY ON PHON E FROM THESE ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 7 DEALERS ASKING PROBABLE VISIT OF THE SALESMEN OF TH E ASSESSEE AT COCHIN AND THEY WERE INFORMED ABOUT THE TENTATIVE S CHEDULE OF THE SALESMEN FOR VISIT OF COCHIN. THEREAFTER THESE DEALERS VISITED THE HOTEL FOR SELECTING THE GOLD ORNAMENTS REQUIRED BY THEM. IT WAS EXPLAINED THAT AS A MARKET PRACTICE GENERALLY A DEALER SELECTS CERTAIN DESIGNS WHICH HE WISHED TO PURCHASE AND HANDS OVER GOLD BAR TO THE SALESMEN OF EQUIVALENT QUANTIT Y AND APART FROM GOLD BAR THE ASSESSEE RECEIVES LABOUR CHARGES IN CASH REPRESENTING MAKING CHARGES OF THE GOLD JEWELLERY S INCE DEALERS ARE NOT KNOWN TO THE ASSESSEE. IT IS SEEN THAT THE ASSESSEE HAD PRODUCED ALL THE BOOKS OF ACCOUNT AND RECORDS INCLU DING STOCK REGISTER AND APPROVAL REGISTER BEFORE THE AO FOR VE RIFICATION AND THE SAME WERE TEST CHECKED BY HER AND NO SIGNIFICAN T MISTAKE OR OMISSION IN THESE RECORDS WAS FOUND BY THE AO. WHEN NO DEFECTS OF BOOKS OF ACCOUNTS WITH REGARD TO STOCK-STATEMENT IS FOUND OUT, THERE CANNOT BE ANY SUCH ADDITION ON THE BASIS OF M ERE STATEMENT OF THIRD OR RELATED PARTY. THE ASSESSEE EXPLAINED THE NATURE AND SOURCE OF THE STOCK-IN- TRADE AND CASH ON HAND FOUND ON THE DAY OF SURVEY A S UNDER:- TOTAL STOCK TOTAL STOCK TOTAL STOCK TOTAL STOCK- -- -IN ININ IN- -- -TRADE FOUND IN SURVEY TRADE FOUND IN SURVEY TRADE FOUND IN SURVEY TRADE FOUND IN SURVEY GRAMS GRAMS GRAMS GRAMS STOCK AT SHOP 33,997.320 STOCK AT AIRPORT 45,661.348 LESS: STOCK OF CHAIN CRAFT 15,283.740 30,377.608 TOTAL STOCK INVENTORISED 64,374.928 TOTAL STOCK AS PER BOOKS AS ON THE DAY OF SURVEY TOTAL STOCK AS PER BOOKS AS ON THE DAY OF SURVEY TOTAL STOCK AS PER BOOKS AS ON THE DAY OF SURVEY TOTAL STOCK AS PER BOOKS AS ON THE DAY OF SURVEY AS PER BOOKS AND STOCK REGISTER (INCLUDING 64,687 .412 STOCK ISSUED ON APPROVAL FOR COCHIN FOUND AT AIRPORT) DEFICIT 312.484 CA CACA CASH ON HAND SH ON HAND SH ON HAND SH ON HAND CASH AT SHOP RS.12 1,450 CASH AS PER BOOKS RS. 82,398 CASH AT AIRPORT RS.826,000 (SHOWN AS INCOME BEING LABOUR CHARGES) IT MEANS STOCK-IN-TRADE INVENTORISED IN THE SURVEY IS COVERED BY THE STOCK- IN-TRADE SHOWN IN THE BOOKS OF ACCOUNT B UT CASH FOUND ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 8 WAS EXCESS BY RS.39,052/- IN COMPARISON TO BALANCE IN THE CASH BOOK. IT IS SEEN THAT THE ADDITION IS MADE BASICALLY ON T HE BASIS OF AN ADMISSION MADE BY SHRI RAMANLAL SOLANKI, A NEPHEW O F THE ASSESSEE WHILE RECORDING HIS STATEMENT U/S. 131 ON 1-11-2006 IN THE COURSE OF SURVEY. THE RELEVANT QUESTION AND ANS WER IN WHICH THE ADMISSION WAS MADE IS REPRODUCED HEREUNDER:- Q.7 SINCE YOU DO NOT HAVE ANY DETAILS OF THE PARTI ES TO WHOM THE GOLD ORNAMENTS WERE SOLD AND FROM WHOM THE GOLD BARS ARE RECEIVED, WHY SHOULD THE SAID GOLD BA RS SHOULD NOT BE TREATED AS YOUR UNACCOUNTED INCOME? ANS. AS STATED AND EXPLAINED ABOVE THE ENTIRE STOCK FOUND IN THE POSSESSION OF THE EMPLOYEES IS OUT OF THE STOCK ON HAND OF M/S. CHAIN PLUS AND M/S. CHAIN CRAFT. I AM UNABL E TO GIVE THE DETAILS OF PARTIES TO WHOM THE STOCK IS SOLD AN D GOLD BARS RECEIVED IN LIEU OF SALE OF ORNAMENTS. WITH A VIEW TO AVOID A LONG DRAWN LITIGATION TO BUY PEACE OF MIND I UNDERT AKE TO DECLARE THE VALUE OF SAID GOLD BARS 1,05,06,000/- A ND CASH OF RS.8,26,000I- FOUND IN THE POSSESSION OF THE SAID E MPLOYEES TOTALLING TO RS.1,15,00,000/- AS ADDITIONAL INCOME IN THE HANDS OF M/S. CHAIN PLUS. THE TAX ON THE SAID ADDIT IONAL INCOME SHALL BE IN TWO INSTALMENTS BY 1 5H AND 27TH OF THIS MONTH. 6.2 ON THE FACTS OF THE CASE IT IS SEEN THAT IN THE COURSE OF THE SURVEY ON BEING CONFRONTED BY A QUERY, THE NEPHEW O F THE ASSESSEE OFFERED AN ADDITIONAL INCOME OF RS.1,15,00 ,000/- IN THE HANDS OF THE ASSESSEE IN RESPECT OF GOLD BARS OF RS . 1,05,06,000/- AND CASH OF RS.8,26,000/- FOUND IN THE POSSESSION O F SHRI SANTOSH D JAIN AND OTHERS. IT IS SEEN FROM THE LANGUAGE OF THE ANSWER THAT THE STOCK-IN-TRADE AND CASH WAS OUT OF STOCK-IN-TRA DE AND CASH AVAILABLE IN THE RECORDS BUT THE ADMISSION WAS MADE WITH A VIEW TO AVOID A LONG DRAWN LITIGATION TO BUY PEACE OF MI ND SINCE HE WAS NOT ABLE TO GIVE THE DETAILS OF THE PARTIES TO WHOM STOCK OF GOLD ORNAMENTS WAS SOLD IN EXCHANGE OF GOLD BARS. I T IS ALSO SEEN THAT SHRI SANTOSH D. JAM AND OTHER EMPLOYEES OF THE ASSESSEE WENT TO COCHIN FROM MUMBAI ON 27-10- 2006 WITH GOLD ORNAMENTS OF AROUND 45 KG. FOR DISPLAY, SALE AND TO OBTAIN ORDERS. THESE PERSONS HAD STAYED AT HOTEL ABAD MET RO. THESE PERSONS HAD SOLD GOLD ORNAMENTS AROUND 13 KG. THESE PERSONS HAD RECEIVED GOLD BARS OF AROUND 12 KG. AGAINST SAL E OF GOLD ORNAMENTS OF AROUND 13 KG. AND HAD RECEIVED CASH OF AROUND RS.8,26,000I- ON ACCOUNT OF LABOUR CHARGES. THESE P ERSONS HAD BEEN FOUND TO HAVE POSSESSED 12 KG. OF GOLD BARS, 3 3.661 KG. OF GOLD ORNAMENTS AND CASH OF RS.8,26,000I- AT THE SAN TACRUZ AIRPORT BY THE ITO OF AIRPORT INTELLIGENCE UNIT. IT IS RELEVANT TO NOTE THAT IN RECORDING THE STATEMENT U/S. 131 OF SH RI SANTOSH D. ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 9 JAM ON 1-11-2006 AT THE AIRPORT THE DEPONENT HAS AL SO EXPLAINED THE NATURE AND SOURCE OF THESE VALUABLES AND ALSO P RODUCED DOCUMENTARY EVIDENCES SUCH AS APPROVAL VOUCHERS, BO ARDING PASS, HOTEL BILL, ETC. 6.3 THE LEGAL POSITION REGARDING WHETHER OR NOT AN ASSESSEE WHO MAKES AN OFFER OF ADDITIONAL INCOME DURING THE COUR SE OF AN ENQUIRY BY INCOME-TAX AUTHORITIES IS ENTITLED TO RE TRACT FROM THAT OFFER SUBSEQUENTLY HAS BEEN SUBJECT-MATTER OF A PLE THORA OF TRIBUNAL DECISIONS AND COURT PRONOUNCEMENTS. IN THE CASE OF SURINDER PAL VERMA V/S. ACIT, 89 LTD 129 (CHD.)(TM) IT IS HELD THAT CONFESSIONAL STATEMENTS MADE DURING THE SEARCH ARE OFTEN VULNERABLE AS THE DEPONENTS ARE UNDER A GREAT MENTA L STRESS AND STRAIN AND IN ABSENCE OF AVAILABILITY OF RELEVANT D ETAILS, DOCUMENTS AND BOOKS AT THAT TIME, PRECISE INFORMATI ON CANNOT BE CORRECTLY FURNISHED. IT IS WELL SETTLED THAT THE EF FECT OF AN ALLEGED ADMISSION DEPENDS UPON THE CIRCUMSTANCES IN WHICH I T WAS MADE (PREM EX-SERVICEMEN CO-OP. TENANTS FARMING SOCIETY LTD. V/S. STATE OF HARIYANA, AIR 1974 SC 1121, 1122). IT IS T RUE THAT AN ADMISSION MADE BY A PERSON IS RELEVANT, BUT NOT CON CLUSIVE. IT IS ALWAYS OPEN TO A PERSON, WHO ADMITTED A FACT, TO EX PLAIN OR CLARIFY THAT WHAT WAS STATED WAS UNTRUE (PULLANGODE RUBBER PRODUCE CO. LTD. V/S. STATE OF KERALA 91 ITR 18 SC) . 6.4 IT IS WELL SETTLED BY DECISIONS OF VARIOUS COUR TS ACCORDING TO WHICH IT HAS BEEN HELD THAT THOUGH STATEMENT RECORD ED U/S. 132(4)/13 1 IS A GOOD EVIDENCE BUT THE ASSESSEE HAS A RIGHT TO RETRACT THE SAME PROVIDED HE CAN PROVE THAT THE STA TEMENT SO GIVEN WAS NOT THE CORRECT STATEMENT OR WAS NOT VOLU NTARY STATEMENT, AND THIS PROPOSITION OF LAW IS SUPPORTED BY THE DECISIONS IN THE CASE OF KISHANLAL SHIVCHAND RAI V/ S. CIT 88 ITR 293 (P & H) AND SRI KRISHNA V/S. KURUSHETRA UNIVERS ITY AIR (1976) (SC) 376. IN THE FIRST CASE THE HONBLE PUNJAB AND HARAYANA HIGH COURT HAD HELD THAT EVEN TREATING THE SURRENDER AS ADMISSION OF THE CONCEALMENT OF UNDISCLOSED INCOME, THE ASSESSEE COULD NOT BE DENIED ITS RIGHT TO PROVE THAT THE FACT OF SURRE NDER WAS NOT SUCH ADMISSION AND THAT THE SO-CALLED ADMISSION WAS IN FACT WRONG. IN THE SECOND CASE, SIMILAR PROPOSITION HAS BEEN HELD BY THE APEX COURT. IN THE LETTER DATED 10TH MARCH, 200 3, THE CBDT WROTE TO ALL THE CHIEF COMMISSIONERS/DIRECTOR GENER ALS OF INCOME TAX ((INVESTIGATION) THAT IT HAS COME TO THE KNOWLE DGE OF THE CBDT THAT THE ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF SEARCH AND SEIZURE. THEREFORE, THE OFFICERS HAVE BE EN ADVISED NOT TO OBTAIN CONFESSION AS TO UNDISCLOSED INCOME. IN THESE CIRCUMSTANCES, IT BECOMES ESSENTIAL TO LOOK INTO TH E SURROUNDING CIRCUMSTANCES. IT IS SEEN THAT THE NATURE AND SOURC E OF STOCK-IN- TRADE AND CASH ON HAND FOUND IN THE SURVEY HAVE BEE N EXPLAINED SATISFACTORILY EXCEPT CASH OF RS.39,052/- FOUND EXC ESS. FURTHER, ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 10 NO INCRIMINATING DOCUMENT WAS FOUND IN THE COURSE O F THE SURVEY. THE CORRECT LEGAL POSITION EMERGING FROM VA RIOUS DECISIONS AND JUDGMENTS IS THAT IT IS NOT CORRECT T O STATE THAT AN ASSESSEE IS BOUND BY HIS OFFER OF ADDITIONAL INCOME FOR ALL TIME TO COME. BUT AT THE SAME TIME THE BURDEN CAST UPON AN ASSESSEE WHO CHOOSES TO RETRACT HIS EARLIER STATEMENT IS VER Y HEAVY. IT IS SEEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSEE HAS COMPLETELY EXPLAINED ENTIRE BUSINESS TRANSACTIO NS LEADING UP TO DATE OF SURVEY. THE ASSESSEE HAS PRODUCED THE CO MPARISON OF THE PHYSICAL STOCK AND CASH FOUND AND STOCK AND CAS H AS PER STOCK REGISTER AND BOOKS OF ACCOUNT IN THE ASSESSME NT PROCEEDINGS. ONCE THE NATURE AND SOURCE OF STOCK-IN -TRADE AND CASH HAS BEEN EXPLAINED, NO FURTHER BURDEN REMAINS TO BE DISCHARGED BY THE ASSESSEE UNLESS ANY DISCREPANCY O R IS POINTED OUT IN SUCH COLLATION. THE ASSESSING OFFICER HAS NO T RAISED EVEN A FINGER OF DOUBT AT THIS ACCOUNT STATEMENT FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. THAT BEING SO THE ONLY COURSE OPEN TO THE ASSESSING OFFI CER WAS TO ACCEPT THE DISCLOSED TRADING RESULTS WITHOUT MAKING ANY ADDITION MERELY ON THE BASIS OF AN ADMISSION. AGAIN THE ASSE SSEE WAS NOT PRESENT AT THE TIME OF THE SURVEY SINCE HE WAS OUT OF MUMBAI ON PILGRIMAGE AT THAT TIME NOR THE AO HAS RECORDED ANY STATEMENT OF THE ASSESSEE ON THE ADMISSION OF SHRI RAMANLAL S OLANKI, A NEPHEW OF THE ASSESSEE. 6.5 APART FROM THE ABOVE, THE AO HAS RELIED UPON TH E STATEMENT OF A NEPHEW OF THE ASSESSEE WHO DISCLOSED ADDITIONA L INCOME IN THE HANDS OF THE ASSESSEE, HENCE TECHNICALLY NO COG NIZANCE COULD BE GIVEN TO SUCH STATEMENT IN THE CASE OF THE ASSESSEE, NEVERTHELESS, IT WAS THE RESPONSIBILITY OF THE AO T O POINT OUT DEFECTS OF STOCK-STATEMENT AND TRADING A/C OR RELEV ANT DOCUMENTS IN ASSESSMENT PROCEEDINGS BUT DID NOT DO SO THEREFORE, NO SUCH ADDITIONAL INCOME CAN BE ADDED O N THE STATEMENT OF SUCH PARTY. THE FACTS OF THE CASE OF THE ASSESSEE ARE SIMILAR T O DECISION OF JAM TRADING CO. V. ITO 17 SOT 574 (MUM) GIVEN HEREU NDER: FACTS FACTS FACTS FACTS DURING THE COURSE OF SURVEY UNDER SECTION 133A COND UCTED AT THE BUSINESS PREMISES OF THE ASSESSEE-COMPANY, T HE SURVEY PARTY CONCLUDED THAT THERE WAS UNDER-STATEME NT OF CLOSING STOCK BY THE ASSESSEE. THE ASSESSEE, THEREF ORE, OFFERED AN ADDITIONAL INCOME OF RS.25 LAKHS FOR THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE, HOWEVER, DID NOT DIS CLOSE SUCH INCOME IN THE RETURN OF INCOME FILED. THE ASSE SSEE CONTENDED THAT OFFER OF ADDITIONAL INCOME AS MADE B Y IT AT THE TIME OF SURVEY WAS CONDITIONAL AND CONTINGENT U PON IT NOT BEING ABLE TO ANSWER VARIOUS DISCREPANCIES IN D UE COURSE ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 11 OF TIME BUT SINCE IN THE ASSESSMENT PROCEEDINGS, IT HAD FURNISHED COMPLETE PARTICULARS OF ITS BUSINESS TRAN SACTIONS AND DISCLOSED THE COMPLETE DETAILS OF TRADING RESUL TS, IT WAS NOT BOUND BY THE ADDITIONAL INCOME OFFERED AT THE T IME OF SURVEY. THE ASSESSING OFFICER DID NOT ACCEPT EXPLAN ATION OF THE ASSESSEE AND HELD THAT AFTER HAVING ADMITTED SUPPRESSION OF BUSINESS INCOME TO THE EXTENT OF RS. 25 LAKHS, IT WAS NOT OPEN TO THE ASSESSEE TO RESILE FROM ADDI TIONAL INCOME DECLARED DURING THE SURVEY PROCEEDINGS. HE, THEREFORE, ADDED RS.25 LAKHS TO THE INCOME OF THE A SSESSEE. ON APPEAL, THE COMMISSIONER (APPEALS) UPHELD THE OR DER, OF THE ASSESSING OFFICER. HONBLE JURISDICTIONAL ITAT HELD AS UNDER: AN ASSESSEE WHO MAKES AN OFFER OF ADDITIONAL INCOM E DURING COURSE OF AN ENQUIRY BY INCOME-TAX AUTHORITI ES IS NOT BOUND BY HIS OFFER OF ADDITIONAL INCOME FOR ALL TIM E TO COME. BUT AT THE SAME TIME, THE BURDEN CAST UPON AN ASSES SEE, WHO CHOOSES TO RETRACT HIS EARLIER STATEMENT, IS VE RY HEAVY. IN THE INSTANT CASE, DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSEE HAD COMPLETELY EXPLAINED ENTIRE BUSINESS TRANSACTIONS LEADING UP TO THE DATE OF SUR VEY AND HAD GIVEN THE DETAILS OF ITS TRADING ACTIVITY. THUS , THE ASSESSEE HAD DEMONSTRATED THAT THE RATE OF GROSS PR OFIT VARIED FROM ITEM TO ITEM AND TRANSACTION TO TRANSAC TION AND BY NO MEANS ANY PARTICULAR RATE OF GROSS PROFIT COU LD BE CORRECTLY APPLIED SO AS TO WORK OUT THE VALUE OF CL OSING STOCK AT ANY GIVEN DATE. FURTHER, IN THE ACCOUNT STATEMEN TS, THE ASSESSEE HAD COLLATED EACH ITEM OF PURCHASE WITH CORRESPONDING ITEM OF SALE. ONCE EVERY PURCHASE WAS COLLATED WITH THE SALE THEREOF IN TERMS OF QUANTUM AS WELL AS VALUE, NO FURTHER BURDEN REMAINED TO BE DISCHARGED BY THE ASSESSEE, UNLESS ANY DISCREPANCY OR FALSITY WAS POI NTED OUT IN SUCH COLLATION. THE ASSESSING OFFICER HAD NOT RA ISED EVEN A FINGER OF DOUBT AT THE ACCOUNT STATEMENT FURNISHE D BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. THAT BEING SO, THE ONLY COURSE OPEN TO THE ASSESSING OFF ICER WAS TO ACCEPT THE DISCLOSED TRADING RESULTS. THEREFORE, THE ASSESSEE HAD BEEN ABLE TO DISCHARGE THE HEAVY BURDE N THAT RESTED UPON HIM WHILE RETRACTING FROM OFFER OF ADDI TIONAL INCOME AT THE TIME OF SURVEY. EVEN AT THAT STAGE, T HE CASE OF THE ASSESSEE WAS THAT THE OFFER WAS MADE TO BUY PEA CE AND NOT BECAUSE OF ANY CONCEALMENT OF INCOME OR DISCREP ANCY IN ACCOUNTS DETECTED BY SURVEY PARTY. THEREFORE, THE ADDITION IN QUESTION MADE TO THE INC OME OF THE ASSESSEE WAS NOT JUSTIFIED AND WAS TO BE DELETE D. ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 12 6.6 IN VIEW OF THE ABOVE, IN MY OPINION, THE ADDITI ON MADE BY THE AO IS ILL-FOUNDED EXCEPT TO THE EXTENT OF RS.39,052 /- OF EXCESS CASH. ACCORDINGLY I RESTRICT THE ADDITION TO THE EX TENT OF RS.39,052/- IN RESPECT OF EXCESS CASH. THE APPELLAN T THEREFORE GET RELIEF OF RS. 1,14,00,948/-. 7. IT IS CLEAR FROM THE FINDING OF THE CIT(A) THAT THE TOTAL STOCK INVENTORISED BY THE SURVEY PARTY WAS 64374.928 GMS. WHEREAS THE TOTAL STOCK AS PER THE BOOKS OF ACCOUNT AS ON THE DATE OF SURVEY WAS 64687.412 GMS. THUS, ONLY 312.484 GMS. OF GOLD STOCK WAS FOUN D IN DEFICIT. SIMILARLY, THE CASH FUND IN THE POSSESSION OF THE EMPLOYEES AS WELL AS AT SHOP WAS ALSO DULY RECORDED IN THE BOOKS OF ACCOUNT EXCEPT T HE SUM OF RS. 39.052/- WHICH WAS FOUND IN EXCESS. THE CIT(A) HAS DELETED T HE ADDITION EXCEPT EXCESS CASH OF RS. 39.052/-. WHEN THE ISSUE HAS BEE N DECIDED BY THE CIT(A) ON THE BASIS OF THE FACT AND BOOKS OF ACCOUN T IN WHICH THE ENTIRE STOCK AND CASH WAS FOUND RECORDED EXCEPT MINOR AMO UNT OF CASH AND ADDITION FOR EXCESS CASH HAS BEEN SUSTAINED BY THE CIT(A) THEN WE DO NOT FIND ANY MERIT/SUBSTANCE IN THE APPEAL OF THE REVEN UE QUA THIS ISSUE. EVEN OTHERWISE IN VIEW OF THE DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF CIT VS S. KHADER KHAN 300 ITR 157 WHICH HAS BEEN AF FIRMED BY THE HONBLE SUPREME COURT IN 352 ITR 480 THE ADDITION M ADE SOLELY ON THE BASIS OF STATEMENT RECORDED U/S 133A IS NOT SUSTAIN ABLE. IN THE CASE IN HAND EXCEPT THE STATEMENT OF NEPHEW OF THE ASSESSEE NO OTHER MATERIAL OR EVIDENCE HAS BEEN BROUGHT ON RECORD TO SUPPORT T HE ADDITION IN QUESTION. ACCORDINGLY, WE UPHOLD THE ORDER OF THE C IT(A) QUA THIS ISSUE. 8. GROUND NO. 2 REGARDING DELETION OF ADDITION TOWA RDS DESIGN EXPENSES. DURING THE YEAR UNDER CONSIDERATION THE A SSESSEE INCURRED ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 13 DESIGN EXPENSES OF ` 7,41,600/-. THE AO MADE THE AD DITION BY DISALLOWING THESE EXPENSES ON THE GROUND THAT THE ASSESSEE FAIL ED THE GIVE DETAILS OF SERVICE PROVIDED BY THE FAMILY MEMBERS. ON APPEAL, THE CIT(A) HAS DELETED THE ADDITION BY CONSIDERING THE SECTION 40A (2) OF THE INCOME TAX ACT AND OBSERVED THAT THE PAYMENT TO THE RELATIVES CAN BE DISALLOWED ONLY TO THE EXTENT OF UNREASONABLE. 9. BEFORE US THE LD. DR HAS RELIED UPON THE ORDER O F THE ASSESSING OFFICER AND SUBMITTED THAT WHEN THE ASSESSEE HAS FA ILED TO ESTABLISH THE SERVICE PROVIDED BY THE FAMILY MEMBERS THEN THE CLA IM OF EXPENDITURE IS NOT ALLOWABLE. ON THE OTHER HAND, THE LD. AR HAS SU BMITTED THAT THE ASSESSEE HAS DULY EXPLAINED THAT THE PAYMENT OF DES IGN EXPENSES TO THE RELATIVES ARE ONLY TO THE EXTENT OF ` 1,96,700/- OU T OF THE TOTAL EXPENSES OF ` 7,41,600/-. THE AO HAS DISALLOWED THE ENTIRE EXPE NDITURE ON THE GROUND THAT THE SAME WAS PAID TO THE RELATIVES. HE HAS FUR THER SUBMITTED THAT THE AO HAS NOT GIVEN A FINDING THAT THE PAYMENT TO THE RELATIVES IS EXCESSIVE OR UNREASONABLE. HE HAS RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF VOLTAMP TRANSFORMERS P. LTD. VS CI T 129 ITR 105 AS WELL AS THE DECISION OF THIS TRIBUNAL IN CASE OF S. K. E NGINEERING VS JCIT 103 ITD 97 (BANG). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS BROUGHT OUT TH E FACT THAT OUT OF TOTAL EXPENDITURE OF ` 7,41,600/- ONLY ` 1,96,700/- WAS P AID TO THE RELATIVES. IT IS PERTINENT TO NOTE THAT WHEN THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF JEWELLERY THEN THE DESIGNING EXPEN SES IS INEVITABLE PART ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 14 OF THE BUSINESS OF THE ASSESSEE. THE AO HAS DISALLO WED THE EXPENSES ON THE GROUND THAT THE ASSESSEE FAILED TO PROVE THAT T HE RELATIVE OF THE ASSESSEE HAS RENDERED SERVICE. HOWEVER, THE AO HAS IGNORE THE VITAL FACT THAT ONLY ` 1,96,700/- HAS BEEN PAID TO THE RELATIV ES IN THIS RESPECT. THE AO HAS NOT GIVEN THE FINDING THAT THE PAYMENT TO TH E RELATIVES IS EXCESSIVE OR UNREASONABLE. THE CIT(A) HAS DECIDED T HIS ISSUE IN PARA 9 AS UNDER: 9. I HAVE CONSIDERED CAREFULLY THE RELEVANT FACTS OF THE CASE TOGETHER WITH REASON RECORDED BY THE AO AND THE ARG UMENTS PUT FORWARDED BY THE LD. AR. IT IS SEEN THAT THE AO HAS DISALLOWED DESIGN EXPENSES ON THE BELIEF THAT PAYMENTS ARE MAD E TO RELATIVES OF THE ASSESSEE. IN FACT PAYMENTS OF DESI GN EXPENSES TO THE RELATIVES ARE ONLY FOR RS. 1,96,700/-. SECTION 40A(2) IMPOSES RESTRICTION AND LIMITATION ON DEDUCTIBILITY OF EXPE NSES PAID TO CERTAIN CATEGORIES OF PERSONS. IN THE INSTANT CASE ALL THE DESIGN EXPENSES ARE NOT PAID TO THE RELATIVES. EVEN THE SM ALL PAYMENT OF RS.1,96,700/- CANNOT BE CALLED EXCESSIVE OR UNRE ASONABLE SINCE THE AU COULD NOT ESTABLISH THE SAME. IN OTHER WORDS THE AO HAS REACHED TO A CONCLUSION ON SUSPICION AND GUESS WORK WHICH HAVE NO ROLE TO PLAY IN ASSESSMENT PROCEEDINGS. SO FAR AS THE LEGITIMATE BUSINESS NEEDS OF AN ASSESSEE OR THE BEN EFIT DERIVED BY OR ACCRUING TO THE ASSESSEE FROM GOODS, SERVICES OR FACILITIES, ETC., ARE CONCERNED, THESE ARE NOT TO BE JUDGED FRO M THE VIEWPOINT OF A REVENUE OFFICER BUT FROM THE VIEWPOI NT OF A BUSINESSMAN. THERE IS NOTHING ON RECORD TO SHOW THA T THE DESIGN EXPENSES ARE EXCESSIVE AND UNREASONABLE. IT WOULD B E CLEAR FROM THE CBDTS CIRCULAR NO. 6P(LXXVI-66), DATED 6-7-196 8, THAT THE REASONABLENESS OF THE EXPENDITURE HAS TO BE JUDGED HAVING REGARD TO FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE, THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION AND THE BENEFIT DERIVED BY OR ACCRUIN G TO THE TAXPAYER FROM THE EXPENDITURE. THESE THREE ARE ALTE RNATIVE TESTS AND THE SAME DO NOT NECESSARILY PROHIBIT CONSIDERAT ION OF OTHER CIRCUMSTANCES. UNDER THE PROVISIONS OF SECTION 40A( 2), THE AO CAN DISALLOW ONLY THAT PORTION OF THE TOTAL EXPENDI TURE, WHICH IN HIS OPINION IS EXCESSIVE OR UNREASONABLE VIDE S.K. ENGINEERING V/S. JOINT CIT 103 LTD 97-BANG. THE EXPENSES ARE AL LOWABLE DEDUCTION IF INCURRED WHOLLY AND EXCLUSIVELY FOR PU RPOSES OF THE BUSINESS CARRIED ON BY AN ASSESSEE. ITA NO.8044/M/2010 JAYANTILAL M SOLANKI 15 11. IN VIEW OF THE ABOVE DISCUSSION WHEN ONLY ` 1,9 6,700/- WAS PERTAINING TO THE PAYMENT TO THE RELATIVES TOWARDS DESIGN EXPENSES AND FURTHER NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THE EXCESSIVE OR UNREASONABLENESS OF THE EXPENSES THEN WE DO NOT FIN D ANY REASON TO INTERFERE WITH THE FINDING OF THE CIT(A) QUA THIS I SSUE. ACCORDINGLY THE SAME IS UPHELD. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF SEPTEMBER 2013 SD/- SD/- ( . . ! ) ' #$ (N. K. BILLAIYA) ACCOUNTANT MEMBER ( ) & #$ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 27 TH SEPTEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI