PRAKASH SALUNKE, Pune V. DCIT Central Circle,1(2), Pune

ITA 894/PUN/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49791 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 25-08-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Assessee Lawyers: S U PATHAK
• Keywords: Loose papers; Document seized; Onus to prove; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C.SUDHIR, JM AND SHRI G.S.PANNU, AM ITA NO. 801/PN/2006 (BLOCK ASSTT. YEAR 01/04/96 TO 24.10. 2002) M/S. RANKA JEWELLERS, 1142, RAVIVAR PETH, PUNE 411002. PAN AABFRCR1795D APPELLANT VS. ADDL.CIT.CEN. RANGE-I, PUNE . RESPONDENT ITA NO. 820/PN/2006 (BLOCK ASSTT. YEAR 1997-98 TO 2003-04 [PART] ) ACIT.CEN.(CENTRAL) CIR-1(2) PUNE APPELLANT VS. M/S. RANKA JEWELLERS, 1142, RAVIVAR PETH, PUNE 411002. PAN AABFRCR1795D . RESPONDENT ITA NO. 894/PN/2006 (BLOCK ASSTT. YEAR 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE NAKODA CHAMBERS, 4 TH FLOOR, 568 GANESH PETH, PUNE 411 002. PAN ARFPS3476C APPELLANT VS. DCIT.CEN.(CENTRAL) CIR-1(2) PUNE . RESPONDENT APPELLANTS BY : SHRI S.U. PATHAK, RESPONDENT BY : SHRI HARESHWAR SHARMA, CIT DR ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 2 ORDER PER I.C.SUDHIR, JM ITA NO. 801/PN/2006 (BLOCK ASSTT. YEAR 01/04/96 TO 24.10. 2002) THE ASSESSEE HAS QUESTIONED COMMON FIRST APPELLATE ORDER ON FOLLOWING GROUNDS. 1. THE LEARNING CIT(A) ERRED IN LAW AND ON THE FA CTS IN CONFIRMING THE FOLLOWING ADDITIONS TO THE UNDISCLOS ED INCOME OF THE APPELLANT ON ACCOUNT OF ALLEGED UNDISCLOSED PROFIT FROM THE SALE PROCEEDS OF - - SILVER OF RS.4,74,798/- - DIAMONDS OF RS.27,580/- - SILVER ARTICLES OF RS.21,190/- 2. THE LEARNING CIT(A) ERRED IN LAW AND ON THE FAC TS IN CONFIRMING AN ADDITION OF RS.1,22,96,185/- MADE ON ACCOUNT OF EXCESS STOCK OF GOLD ORNAMENTS BY SIMPLY STATING FOR STATISTICAL PURPOSE, THE GROUND TAKEN IS TREATED AS DISMISSED WITHOUT GIVING ANY REASONS OF THE SAME. 3. THE LEARNING CIT(A) ERRED IN LAW AND ON THE FAC TS IN ENHANCING UNDISCLOSED INCOME TO THE EXTENT OF RS.10,00,000/- ON ACCOUNT OF ALLEGED INITIAL INVESTMENT FOR MAKING UNACCOUNTED SALES. ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 3 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF THE ORDERS OF THE LOWER AUTHORIT IES, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3. GROUND NO.1 REGARDING GROUND NO.1 FACTS IN BRIEF ARE THAT THE A SSESSEE WAS SUBJECTED TO SEARCH ACTION WHEREIN ON PHYSICAL VERI FICATION SHORTAGE OF SILVER, DIAMONDS AND SILVER ARTICLES WERE FOUND AS PER THE QUANTITY RECORDED IN THE BOOKS. THE A.O. TREATED THE SHOR TAGE AS ARTICLES SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS. HE ACCORDINGLY TAXED THE PROFIT ON SALE OF THE QUANTITY OUTSIDE THE BOOK S. AN ADDITION OF RS.4,74,798/- WAS MADE ON ACCOUNT OF SHORTAGE OF S ILVER, RS.27,580/- ON ACCOUNT OF DIAMONDS AND RS.21,190/- ON ACCOUNT O F SHORTAGE OF SILVER ARTICLES. THE LEARNED CIT(A) HAS CONFIRMED THESE ADDITIONS WITH THESE OBSERVATIONS THAT THERE WAS A SHORTAGE IN THE PHYSICAL QUANTITY VIS--VIS THE QUANTITY RECORDED IN THE BOOKS AND TH EREFORE A.O. WAS JUSTIFIED IN HOLDING THAT ASSESSEE MUST HAVE SOLD T HE ITEMS OUTSIDE THE BOOKS. 4. LEARNED AR OBJECTED THESE ADDITIONS WITH THE SUB MISSIONS THAT ADMITTEDLY THERE WAS SHORTAGE IN THE QUANTITY OF SI LVER, DIAMONDS AND SILVER ARTICLES. HOWEVER, THERE IS NO EVIDENCE WIT H THE A.O. THAT THE ASSESSEE HAS SOLD THE SHORTAGE ITEMS OUTSIDE THE BO OKS. HE SUBMITTED THAT THE SHORTAGE FOUND IS OF VERY SMALL QUANTITY AND IT IS POSSIBLE THAT CERTAIN VALUABLES MIGHT BE MISPLACED OR THEFT THESE OF MIGHT HAVE TAKEN PLACE. HE SUBMITTED THAT JAMA KHARCHA PANNAS WERE FOUND FOR THE PERIOD 02/11/1999 TO 17/09/2002 . ON THE BASIS OF THE SAID PAPERS, THE A.O. HAS ESTIMATED UNDISCLO SED INCOME FOR THE PERIOD 18/09/2002 TO 23/10/2002. HENCE, THE PROFIT IF ANY EARNED BY THE ASSESSEE ON ACCOUNT OF SHORTAGE OF VALUABLES MA Y HAVE BEEN INCLUDED IN THE UNDISCLOSED INCOME ESTIMATED BY THE A.O. LEARNED A.R. FURTHER SUBMITTED THAT ASSESSEE HAS RETURNED T HE UNDISCLOSED BUSINESS PROFITS OF RS.2.70 CRORES AS AGAINST WHIC H THE UNDISCLOSED ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 4 PROFITS DETERMINED ON THE BASIS OF THE SEIZED PAPER S BY THE A.O., AMOUNTED TO RS.2,2,81,206/- . ACCORDINGLY, EVEN I F THE ADDITION ON ACCOUNT OF SHORTAGE OF STOCK WAS JUSTIFIED, THE ASS ESSEES RETURNED PROFITS BEING MUCH HIGHER THAN THE PROFITS DETERMIN ED BY THE SPECIAL AUDITOR/ A.O. COVERS THE ABOVE ADDITIONS AND HENCE THESE ADDITIONS ARE NOT WARRANTED. 5. THE LEANED DR, ON THE OTHER HAND, TRIED TO JUSTI FY THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE. HE SUBMITTED T HAT THE ADDITIONS HAVE BEEN MADE ON THE BASIS OF PHYSICAL VERIFICATIO N OF ITEMS VIS--VIS THEIR QUANTITY RECORDED IN THE BOOKS. HENCE, ONLY P RESUMPTION WAS THAT THE ASSESSEE HAS SOLD THESE ITEMS OUT OF THE B OOKS OF ACCOUNTS. THE AUTHORITIES BELOW HAVE THUS RIGHTLY MADE THE AD DITIONS ON ACCOUNT OF PROFIT ON SALE OF ITEMS MADE OUTSIDE THE BOOKS. 6. CONSIDERING THE ABOVE SUBMISSIONS WE FIND SUB STANCE IN THE ARGUMENT OF LEARNED AR THAT THE ADDITIONS IN QUESTI ON WERE NOT WARRANTED, ESPECIALLY WHEN THE ASSESSEE HAS SHOWN U NDISCLOSED BUSINESS PROFITS AT RS. 2.70 CRORES IN ITS RETURN O F INCOME AGAINST WHICH THE UNDISCLOSED BUSINESS PROFITS DETERMINED O N THE SEIZED PAPERS BY THE A.O. AMOUNTED TO RS.2,02,81,206/-. T HUS, UNDISPUTEDLY THE ADDITION OF RS.5,23,568/- MADE ON ACCOUNT OF SHORTAGE WAS NOT JUSTIFIED WHEN THE ASSESSEES RETU RNED PROFITS BEING MUCH HIGHER THAN PROFITS DETERMINED BY THE SPECIAL AUDITOR /A.O. IS SUFFICIENT TO COVER THE ABOVE ADDITION OF RS.5,23,5 68/-. WE THUS FIND THAT THERE WAS NO JUSTIFICATION IN MAKING AND SUSTA INING THE ADDITION BY THE AUTHORITIES BELOW. THE SAID ADDITION OF RS.5, 23,568/- MADE ON ACCOUNT OF SHORTAGE OF SILVER, DIAMONDS AND SILVER ARTICLES IS ACCORDINGLY DIRECTED TO BE DELETED. GROUND NO.1 I S THUS ALLOWED. ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 5 7. GROUND NO.2 IN THIS GROUND THE ADDITION OF RS.1,22,96,185 ON A CCOUNT OF THE TRANSACTIONS WITH SHRI. H.KUMAR GEMS INTERNATIONAL HAS BEEN QUESTIONED BY THE ASSESSEE. THE LEARNED AR CONT ENDED THAT THE LEARNED CIT(A) INADVERTENTLY HAS NOT GIVEN ANY RE ASONING EITHER IN SUPPORT OR AGAINST THE ADDITION. HE REFERRED PAGE NO. 69 OF THE FIRST APPELLATE ORDER, WHEREIN THE LEARNED CIT(A) HAS ONL Y STATED THAT THIS POINT IS DISMISSED FOR STASTICAL PURPOSES. THE LE ARNED AR SUBMITTED THAT EXCESS AMOUNT OF GOLD WAS FOUND IN THE STOCK D URING THE COURSE OF SEARCH. H. KUMAR GEMS INTERNATIONAL AND COMPANY CO NFIRMED THE SALES OF THE GOLD TO THE ASSESSEE. THE A.O. HOWEV ER TREATED THE PURCHASE BILL AS AN AFTERTHOUGHT AND MADE ADDITION ON ACCOUNT OF EXCESS STOCK. THE A.O. AS WELL AS THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE PURCHASE BILL WAS SEIZED DURING THE COURSE OF SEARCHED HENCE IT CANNOT BE TREATED AS AFTERTHOUGHT AS ALLEGED. 8. THE LEARNED DR, ON THE OTHER HAND PLACED RELIA NCE ON THE ASSESSMENT ORDER. 9. HAVING GONE THROUGH PAGE NO.69 OF THE FIRST APPE LLATE ORDER, WE FIND THAT THE LEARNED CIT(A) HAS DISCUSSED THE CASE OF THE ASSESSEE IN PARA NO. 15.7 OF THE FIRST APPELLATE ORDER. HE HA S ALSO REFERRED THE DOCUMENTS FILED BY THE ASSESSEE IN SUPPORT OF HIS S UBMISSIONS THAT GOLD WAS RECEIVED PRIOR TO DATE OF SEARCH. ABOUT R ELIANCE OF THE ASSESSEE ON SALES INVOICES AND THE VOUCHERS SEIZED DURING THE COURSE OF SEARCH WHICH WAS REFLECTED IN THE PANCHANAMA, TH E LEARNED CIT(A) HAS ALSO MENTIONED THE SUBMISSIONS OF THE ASSESSEE THAT THE PURCHASES FROM AHMEDABAD PARTY WAS GENUINE AND THE SAME WAS SUPPORTED BY THE SURVEY ACTION AGAINST THE SUPPLIER AND SEIZURE OF RELEVANT DOCUMENTS. HE HAS FURTHER MENTIONED THAT ASSESSEE HAS PRODUCED COPY OF FIRST APPELLATE ORDER IN THE CASE OF AHEMEDNAGAR PARTY IN SUPPORT OF HIS CLAIM. THE LEARNED CIT(A) IN SUCCEEDING PARA NO. 15.8 HAS HOWEVER ABRUPTLY CONCLUDED THE ISSUE AS FOR STATISTICAL ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 6 PURPOSES, THE GROUND TAKEN IS TREATED AS DISMISSED. WE FIND THAT FINDING OF THE LEARNED CIT(A) ON THE ISSUE IS NOT G IVEN BY SPEAKING ORDER SUPPORTED WITH REASONS. WE THUS IN THE INTE REST OF JUSTICE REMAND THE MATTER TO THE FILE OF THE CIT(A) FOR FRE SH ADJUDICATION OF THE ISSUE AFTER AFFORDING AN OPPORTUNITY OF BEING H EARD TO THE PARTIES. THE GROUND NO.2 IS ACCORDINGLY ALLOWED FOR STATISTI CAL PURPOSES. 10. GROUND NO.3 REGARDING GROUND NO.3, THE RELEVANT FACTS ARE THAT THE A.O. ESTIMATED THE TURNOVER FOR VARIOUS YEARS IN BLOCK PERIOD. FOR FINANCIAL YEARS 1996-97 TO 1998-99 , THE TURNOVER HAS BEEN ESTIMATE D ON THE BASIS OF LOOSE PAPERS FOUND FOR FEW DAYS AT RS.50 LAKHS, RS .75 LAKHS AND RS.1 CRORE RESPECTIVELY. AS REGARDS A.Y. 1999-00 TO 20 02-03, THE INCOME HAS BEEN COMPUTED ON THE BASIS OF JAMA KHARACHA P ANAS AS PER AUDITORS REPORT AT RS.2,02,81,206/-. THE A.O. DID N OT MAKE ANY ADDITION ON ACCOUNT OF INITIAL INVESTMENT IN THE AB OVE UNACCOUNTED TRANSACTIONS IN THE ASSESSMENT ORDER. DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS, A.O. REQUESTED THE LEARNED C IT(A) TO ENHANCE THE ASSESSMENT BY MAKING ADDITIONS ON ACCOUNT OF IN ITIAL INVESTMENT IN THE FIRST YEAR I.E. FINANCIAL YEAR 1996-97. THE L EARNED CIT(A) HELD THAT THERE MUST BE SOME INITIAL SEED CAPITAL INVEST ED BY THE ASSESSEE FOR CARRYING OUT THE UNDISCLOSED BUSINESS. HE HEL D THAT FOR FIRST THREE YEARS, THE TURNOVER HAS BEEN ESTIMATED AT RS.50 LAK HS, RS.75 LAKHS, AND RS.1 CRORE. THE LEARNED CIT(A) ACCORDINGLY CON SIDERED THE TURNOVER AS ESTIMATED INITIAL INVESTMENT OF RS.10,0 0,000/- AS REASONABLE FOR THE ABOVE ESTIMATED TURNOVER FOR F. Y. 1996-97 AND HAS ADDED THE AMOUNT IN THE INCOME OF THE ASSESSEE. 11. THE CONTENTION OF THE LEARNED AR REMAINED THAT THE ADDITION MADE AT RS.10 LAKH IS NOT JUSTIFIED. HE SUBMITTED THAT FOR THE FIRST YEAR OF BUSINESS, THE TURNOVER IS ESTIMATED AT RS.5 0 LAKHS. GENERALLY, INITIAL INVESTMENT IS NEEDED FOR AROUND THE FIRST 7 TO 15 DAYS PURCHASES. ON THE BASIS OF ESTIMATION, THE MONTHLY TURNOVER COULD BE ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 7 RS.4 LAKHS AND THE INITIAL INVESTMENT COULD BE MAXI MUM RS.1 LAKH TO RS.2 LAKHS. THEREFORE, ESTIMATION OF RS.10 LAKHS IS ON VERY HIGH SIDE. 12. THE LEARNED DR ON THE OTHER HAND TRIED TO JUSTI FY THE FIRST APPELLATE ORDER ON THE ISSUE, HE ALSO POINTED OUT T HAT THE ADDITIONAL GROUND IN THIS REGARD HAS BEEN RAISE BY THE REVENUE IN ITS CROSS APPEAL FOR THE BLOCK PERIOD IN ITA NO. 820/PN/06. HE SUBMI TTED THAT IN THE SAID ADDITIONAL GROUND THE CONTENTION OF THE REVENU E IS THAT THE LEARNED CIT(A) SHOULD HAVE MADE ENHANCEMENT AT A M UCH HIGHER AMOUNT INSTEAD OF RS.10 LAKHS ONLY, LOOKING TO THE HIGH TURNOVER OF THE ASSESSEE. THE LEARNED DR REQUESTED THAT THE SAID ADDITIONAL GROUND MAY KINDLY BE ALLOWED FOR ADJUDICATION OF THE BENCH , SINCE FOR ADJUDICATION OF THE ISSUE RAISED THEREIN, NO FRESH MATERIAL OUTSIDE THE RECORD IS REQUIRED TO BE CONSIDERED. IN SUPPORT HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F NTPC 229 ITR 383.(SC). THE LEARNED AR OPPOSED THE REQUEST FO R ADJUDICATION OF THE SAID ADDITIONAL GROUND WITH THE SUBMISSIONS THA T THE ISSUE RAISED IN THE ADDITIONAL GROUND IS FACTUAL IN NATURE AND THE TRIBUNAL IN NOT A INVESTIGATING AUTHORITY TO DEAL WITH THE ISSUE AT T HIS STAGE. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION OF THE T RIBUNAL IN THE CASE OF RAJ KUMAR JAIN V. ASSTT. CIT, 208 ITR 22 (3 RD MEMBER). 13. THE LEARNED DR FURTHER SUBMITTED THAT IN THE NO RMAL COURSE OF BUSINESS THE ASSESSEE HAS TO MAINTAIN THE HIGHER AM OUNT OF STOCK AS COMPARED TO THE TURNOVER. THEREFORE, IN THESE UNA CCOUNTED BUSINESS ALSO ASSESSEE MUST HAVE MADE INVESTMENT AT HIGHER A MOUNT. 14. WE FOUND THAT FOR ADJUDICATION OF THE ISSUE R AISED IN THE ADDITIONAL GROUND NO FRESH MATERIAL OUTSIDE THE REC ORD IS REQUIRED TO BE CONSIDERED, HENCE WE ALLOWED THE SAME FOR OUR ADJUD ICATION. WE PREFERRED TO DEAL WITH THIS ADDITIONAL GROUND HERE ITSELF AS THE ISSUE RAISED THEREIN IS CONNECTED WITH THE ISSUE RAISED H EREIN IN GROUND NO.3 ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 8 OF THE PRESENT APPEAL PREFERRED BY THE ASSESSEE. TH E LEARNED DR HAS BASICALLY REFERRED THE HIGH TURNOVER OF RS.50 LAKHS , 75 LAKHS AND 1 CRORE FOR THE FINANCIAL YEARS 1996-97 TO 1998-99 RE SPECTIVELY, AS ESTIMATED BY THE A.O. HE ALSO REFERRED THE COMPUTA TION OF TURNOVER OF RS.2 ,02,81,206/- MADE BY THE AUDITOR IN ITS REPORT FOR ASSESSMENT YEARS 1999-00 TO 2002-03 ON THE BASIS OF JAMA KHA RCHA PANAS . 15. THE LEARNED AR ON THE OTHER HAND HAS RE-ITERATE D HIS SUBMISSION MADE BEFORE THE AUTHORITIES BELOW IN SUPPORT OF GRO UND NO.3 HEREINABOVE. HE SUBMITTED THAT THE ADDITION OF RS. 10 LAKHS IS MORE THAN JUSTIFIED. CONSIDERING THE FACT THAT THE TUR NOVER FOR FIRST YEAR WAS ESTIMATED AT RS.50 LAKHS INITIAL INVESTMENT W AS REQUIRED FOR MAKING PURCHASES FOR FIRST 7 TO 15 DAYS ONLY. THE LEARNED AR SUBMITTED THAT THE INITIAL INVESTMENT SHOULD HAVE B EEN ESTIMATED BY LEARNED CIT(A) AT HARDLY RS.2 LAKHS. HE SUBMITTED THAT EVEN FOR THE PERIOD FROM 02/11/1999 ONWARDS ASSESSEE HAS GIVEN A NALYSIS IN JAMA KHARCHA PANAS FOR THE FIRST 7 DAYS 02/11/99 TO 08/11/1999, WHEREBY IT IS SHOWN THAT SALES WERE MORE THAN PURCH ASES. THE ASSESSEE HAS BEEN RECEIVING ADVANCES FROM THE CUSTO MERS WHICH TOOK CARE OF THE PURCHASES AND THE REQUIREMENTS OF CASH WAS ALSO VERY LITTLE. IT IS REFLECTED FROM THE LOW OPENING CASH BALANCES ON THIS THESE DAYS. 16. REGARDING THE INVESTMENT OF HIGHER AMOUNT AS CO NTENDED BY THE LEARNED DR, THE SUBMISSION OF LD. AR REMAINED T HAT IT IS TOTALLY INCORRECT FOR THE SIMPLE REASON THAT IN THE COURSE OF SEARCH, THE DEPARTMENT WOULD HAVE FOUND THE HIGHER AMOUNT OF TH E UNACCOUNTED STOCK. BUT THE FACT SHOWS THAT CONSIDERING THE P URCHASE BILLS OF H. KUMAR GEMS INTERNATIONAL AND COMPANY THERE WAS NO EXCESSIVE STOCK AT ALL. HENCE, THE CONTENTION OF THE LEARNED DR IS NOT BORNE OUT BY THE FACTS OF THE CASE. ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 9 17. CONSIDERING THE ABOVE SUBMISSIONS ESPECIALLY TH E TURNOVER OF RS.50 LAKHS ESTIMATED IN THE INITIAL F.Y. 1996-97 O N THE BASIS OF LOOSE PAPER FOUND FOR THE FEW DAYS, WE ARE OF THE VIEW TH AT THE LEARNED CIT(A) HAS RIGHTLY ESTIMATED THE INITIAL INVESTMENT AT RS.10 LAKHS KEEPING IN MIND SUBMISSION OF THE ASSESSEE THAT THE INITIAL INVESTM ENT IS REQUIRED FOR AROUND FIRST 7 TO 15 DAYS FOR PURC HASES AND THEIR OTHER SUBMISSIONS. SINCE THE ESTIMATION OF INITIAL INVES TMENT MADE BY THE LEARNED CIT(A) BASED ON APPLICATION OF G.P. RATE O F 12.5 % (GENERALLY SHOWN IN SUCH BUSINESS) IS REASONED ONE WE ARE NOT INCLINED TO INTERFERE THERE WITH IN ABSENCE OF ANY BONAFIDE REA SON SHOWN BY THE REVENUE FOR MAKING HIGHER ADDITION THAN RS.10 LAKHS . THE FIRST APPELLATE ORDER, IN THIS REGARD IS THUS UPHELD. THE GROUND NO.3 IN THE APPEAL OF THE ASSESSEE AND ADDITIONAL GROUND RAISED IN THIS REGARD IN THE APPEAL PREFERRED BY THE REVENUE IS THUS REJECTE D. 18. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ITA NO. 820/PN/2006 (BLOCK ASSTT. YEAR 1997-98 TO 2003-04 [PART] ) 19. THE REVENUE HAS IMPUGNED THE FIRST APPELLATE OR DER MAINLY ON THE FOLLOWING GROUNDS 1 TO 4. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT (A) ERRED IN DELETING THE DISALLOWANCE OF UNPROVED PURCHASES AMOUNTING TO RS.41,07,662/-. ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 10 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT (A) ERRED IN RESTRICTING THE ADDITION ON ACCOUNT OF THE UNDISCLOSED PROFIT WORKED OUT BY THE ASSESSING OFFICER IN PARA 19 FROM RS.57,11,770/- T O 47,41,772/-, BY DIRECTING TO ADOPT LOWER AVERAGE UNDISCLOSED INCOME RESULTING FROM RELIEF GRANTED AT GROUND 1. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT (A) ERRED IN DELETING THE ADDITION OF RS.22,06,664/- MADE ON ACCOUNT OF UNDER VALUATION O F STOCK TREATING THE SAME TO BE OUT OF THE AMBIT OF CHAPTER XIVB OF THE I.T.ACT. THE LD. CIT(A), FAILE D TO APPRECIATE THE FACT THAT THE ADDITION OF UNDISCLOSE D INCOME WAS MADE ON THE BASIS OF EVIDENCES GATHERED IN THE COURSE OF SEARCH WHICH REVEALED THAT THE ASSESSEE SOLD GOODS ON FIFO BASIS AND HENCE VALUATION OF CLOSING STOCK SHOULD HAVE BEEN ON THIS BASIS ALONE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT (A) ERRED IN DELETING THE ADDITION OF RS.2,53,32,635/- MADE ON PROTECTIVE BASIS WHICH HAS BEEN SUBSTANTIVELY ADDED IN THE HANDS OF SHRI PRAKA SH SALUNKE, ONE OF THE TRUSTED PERSON OF THE ASSESSEE. THE LD.CIT(A) HAS FAILED TO APPRECIATE THE FACT THA T THE ISSUE REGARDING OWNERSHIP OF DOCUMENTS/ ASSETS SEIZED ON THE BASIS OF WHICH ADDITION OF RS.2,55,32,035/- WAS MADE IS NOT YET FINALLY SETTLE D. THE LD.CIT (A) OUGHT TO HAVE FOLLOWED THE RATION OF THE JUDGMENT DELIVERED BY THE HONBLE KERALA HIGH COURT IN THE CASE OF T.S. SUJATHA REPORTED IN 238 I TR 599. ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 11 20. BESIDES THE ABOVE AN ADDITIONAL GROUND HAS BEEN RAISED WITH REQUEST TO ALLOW THE SAME WHEREIN THE ISSUE IS AS T O WHETHER LEARNED CIT(A) SHOULD HAVE MADE HIGHER ADDITION INSTEAD OF RS. 10 LAKH MADE ON ACCOUNT OF INITIAL INVESTMENT IN THE BUSINESS. SINCE THE ISSUE RAISED IN THIS ADDITIONAL GROUND WAS CONNECTED TO T HE ISSUE RAISED IN GROUND NO.3 OF THE APPEAL HEREINABOVE PREFERRED BY THE ASSESSEE, WE HAVE ALREADY DEALT WITH THE ISSUE RAISED IN THE AD DITIONAL GROUND WHILE ADJUDICATING GROUND NO.3 IN THE ABOVE SAID APPEAL. THE ADDITIONAL GROUND THEREIN HAS BEEN REJECTED. 21. GROUND NO.1 REGARDING GROUND NO.1 THE RELEVANT FACTS ARE THAT T HE ADDITION OF RS.41,07,662/- ON ACCOUNT OF CERTAIN PURCHASES MADE BY THE A.O. HAS BEEN DELETED BY THE LEARNED CIT(A). IN THE COUR SE OF SEARCH, JAMA KHARCHA PANAS PAPERS WERE FOUND FOR A.YS. 2000-01 TO 2003-04. THESE PAPERS INDICATED THE CASH TRANSACTION OF PURC HASE AND SALES MADE BY THE ASSESSEE FIRM. SINCE THE PAPER WERE V OLUMINOUS SO THE MATTER WAS REFERRED TO THE SPECIAL AUDITOR, WHO CO MPUTED THE INCOME FOR THE ABOVE YEARS AS UNDER : FINANCIAL YEAR ASSESSMENT YEAR PROFIT AS PER P & L ACCOUNT (RS.) DISALLOWANCE OF PURCHASES (RS. TOTAL (RS.) 1999- 00 2000-01 19,30,011/- 24,91,925/- 44,21,936/- 2000- 01 2001-02 89,62,395/- 1,46,669/- 91,09,064/- 2001- 02 2002-03 76,13,730/- 10,96,438/- 87,10,168/- 2002- 03 (PART) 2003-04 (PART) 17,76,070/- 3,72,630/- 21,48,700/- RS.2,02,81,206/- RS.41,07,662/- RS.2,43,89,868/- ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 12 22. THE A.O. NOTED THAT NAMES OF THE VARIOUS PERSON S ARE MENTIONED IN THE SEIZED PAPERS FROM WHOM THE ASSESSEE HAD MA DE THE PURCHASES. THE A.O. ASKED THE ASSESSEE TO FURNISH THE COMPLETE DETAILS OF NAMES AND ADDRESSES OF VARIOUS PERSONS. THE ASSESSEE COULD NOT SUBMITTED ADDRESSES OF THE PERSONS AND AC CORDINGLY THE PURCHASES MADE FROM THOSE PERSONS HAVE BEEN DISALL OWED BY THE A.O. IN THE ABSENCE OF THE RELEVANT DETAILS. THE YEAR- WISE DISALLOWANCE TOTALING TO RS.41,07,662/- MADE BY THE A.O. IS AS U NDER : ASSESSMENT YEAR DISALLOWANCE OF PURCHASES (RS.) 2000-01 24,91,925/- 2001-02 1,46,669/- 2002-03 10,96,438/- 2003-04 3,72,630/- (PART) TOTAL RS.41,07,662/- 23. DURING THE FIRST APPELLATE PROCEEDINGS THE ASSE SSEE EXPLAINED THAT THE ( JAMA KHARCHA PANAS ) PAPERS WERE RECOR D FOR THE UNRECORDED PURCHASES AND THE SALES MADE BY THE ASSE SSEE. HE ALSO MADE OTHER SUBMISSIONS AGAINST THE ADDITION. BEIN G SATISFIED THEREWITH LEARNED CIT(A) HAS DELETED THE ADDITION. AGAINST WHICH REVENUE IS IN APPEAL. 24. IN SUPPORT OF THE GROUND THE LEARNED DR HAS BA SICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE SUBMITTED THA T THE ADDITION IN QUESTION COULD HAVE BEEN DELETED BY THE LEARNED CIT (A) ONLY IF THE AMOUNT ADDED IN THE BLOCK WAS INCLUDED IN THE DECLARED INCOME. ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 13 THE LEARNED DR REFERRED THE CONTENTS OF PARA NO.15 PAGE 7 OF THE ASSESSMENT ORDER. 25. THE LEARNED AR ON THE OTHER HAND TRIED TO JUSTI FY THE FIRST APPELLATE ORDER ON THE ISSUE AND REFERRED PAGE NOS. 5 TO 25 OF THE FIRST APPELLATE ORDER, WHEREIN THE ISSUE HAS BEEN DEALT W ITH. HE SUBMITTED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE HAD EXPLAINED THAT JAMA KHARCHA PANAS PAPERS WERE RE CORDS OF THE UN- RECORDED PURCHASES AND SALES MADE BY THE ASSESSEE. THE ASSESSEE SUBMITTED THAT EVEN IN RESPECT OF NOTINGS OF SALES, COMPLETE DETAILS ARE NOT AVAILABLE STILL THE A.O. CONSIDERED THE SAME AS SALES. THE PURCHASES AMOUNTING TO RS.99 CRORES APPROXIMATELY W ERE ALSO ALLOWED AS DEDUCTION BECAUSE THE PROFIT ON THE SALES WAS TO THE EXTENT OF RS.2.02 CRORES ON THE SALES OF LITTLE OVER RS.100 C RORES. WHEN THE A.O. HAS ALLOWED ALL OTHER PURCHASES WHICH WERE ALS O NOT PROVED BUT WHICH WERE NOTED ON THESE PAPERS, THERE WAS NO REAS ON TO DISALLOW ONLY A FEW PURCHASES OF RS.41.07 LAKHS BY PICK AND CHOOSE METHOD. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS ALSO CLARIFIED THAT THE SPECIAL AUDITOR IN HIS REPORT HAS NOT DISALLOWED TH E ABOVE PURCHASES AND HENCE THERE IS NO REASON FOR THE A.O. TO MAKE T HE ADDITION. HE SUBMITTED THAT WHEN THE NOTINGS ARE MADE ON THE SEI ZED PAPERS, AS PER PRESUMPTION U/S.132 (4A) THE SAME HAS TO BE CON SIDERED AS GENUINE AND CORRECT. WHEN SIMILAR NOTINGS PERTAININ G TO OTHER PURCHASES AND ENTIRE SALES HAVE BEEN ACCEPTED, THE A.O. WAS NOT JUSTIFIED IN DISALLOWING THE PART OF PURCHASES ON T HE BASIS THAT THE ASSESSEE DID NOT SUBMITTED THE COMPLETE DETAILS OF THE VARIOUS PAPERS. IF THE PAPERS ARE NOT CONSIDERED AS TRUE, GENUINE A ND CORRECT DOCUMENTS U/S. 132(4A) THEY HAVE TO BE CONSIDERED W HOLLY AND NOT IN PART. IN THIS REGARD, HE PLACED RELIANCE ON THE FOLLOWING DECISIONS WITH FURTHER SUBMISSIONS THAT SEIZED PAPERS SHOULD BE CONSIDERED AS A WHOLE AND THE PICK AND CHOOSE THEORY SHOULD BE REJE CTED: ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 14 (1) AZIENDE COLORI NAZIONALLI AFFINI [110 ITR 145],(2) CHANDERMOHAN METHA [71 ITD 245], (PUNE) AND (3) RAMANLAL P. CHOR DIA [87 TTJ 713] (PUNE). 26. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND THE DECISIONS RELIED UPON, WE FIND THAT THE LEARNED CIT (A) HAS DELETED THE ADDITION IN QUESTION ON THE BASIS THAT THE SEIZED P APERS SHOULD BE CONSIDERED IN ITS ENTIRETY AND THE PICK AND CHOOSE THEORY SHOULD BE AVOIDED. THE LEARNED CIT(A) HAS HELD FURTHER THA T WHEN THE SEIZED PAPERS HAVE BEEN CONSIDERED FOR MAKING THE ADDITION , THERE IS NO REASON TO DISALLOW CERTAIN PURCHASES ON THE BASIS T HAT THEY ARE BOGUS. WE FULLY AGREE WITH THIS FINDING OF THE LEARNED CIT (A) AS IT IS NOW ESTABLISHED PROPOSITION OF LAW THAT SEIZED DOCUMENT S HAVE TO BE READ AS A WHOLE AND SHOULD BE RELIED UPON OR REJECTED IN ITS ENTIRETY. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF AZIENDE C OLORI NAZIONALLI AFFINI [110 ITR 145], HAS BEEN PLEASED TO HOLD THAT THE DOCUMENT IS TO BE CONSIDERED AS A WHOLE AND THE DEPARTMENT CANNOT HOLD THE FEW ENTRIES ARE CORRECT AND FEW ENTRIES ARE WRONG. SIMILAR VIEW HAS BEEN EXPRESSED BY THE TRIBUNAL OF PUNE BENCH ON THE ABOV E CITED DECISIONS IN THE CASE OF CHANDERMOHAN METHA AND RAMANLAL P. C HORDIA (SUPRA). UNDISPUTEDLY ON THE BASIS OF TH SOME SEIZED PAPERS THE A.O. ACCEPTED THE SALES NOTED ON THOSE PAPERS, THEN THE A.O. SHOU LD HAVE ALSO ACCEPTED THE PURCHASES SHOWN THEREIN AS CORRECT. IT IS ALSO AN UNDISPUTED FACT THAT THE JAMA KHARCHA PAPERS WERE RECORD FOR THE UNRECORDED PURCHASES AND SALES MADE BY THE ASSESSEE . IT IS ALSO NOTED THAT PURCHASES DETAIL AMOUNTING TO RS.99 CROR ES WERE ALSO ALLOWED AS DEDUCTION BECAUSE THE PROFIT ON THAT SAL ES WAS TO THE EXTENT OF RS.2.02 CRORES ON SALES AMOUNTING TO OVER RS.10 0 CRORES. WHEN THE A.O. HAS ALLOWED OTHER PURCHASES NOTED ON THOSE PAPERS, THERE IS NO REASON TO DISALLOW FEW PURCHASES OF RS.41.07 LAK HS OUT OF NOTINGS ON THE SAME PAPERS BY ADOPTING PICK AND CHOOSE METH OD. WE THUS ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDITION AT RS.41,07,662/- MADE ON ACCOUNT OF CERTA IN PURCHASES. ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 15 SINCE THE FIRST APPELLATE ORDER IS COMPREHENSIVE AN D REASONED ONE ON THE ISSUE, WE ARE NOT INCLINED TO INTERFERE THEREWI TH. THE GROUND NO.1 IS ACCORDINGLY REJECTED. 27. GROUND NO.2 THE RELEVANT FACTS ARE THAT DURING THE COURSE OF SE ARCH ON 25.10.2002 JAMA KHARCHA PANAS WERE FOUND FOR THE PERIOD OF 02/11/1999 TO 17/09/2002. SINCE THE EVIDENCE WAS NOT FOUND FO R THE PERIOD 01/04/1999 TO 01/11/1999 AND FROM 18/09/2002 TO 24/ 10/2002, THE INCOME FOR THESE TWO PERIODS WAS ESTIMATED ON THE B ASIS OF PER DAY INCOME GENERATED BY THE ASSESSEE FOR THE PERIOD FO R WHICH THE JAMA KHARCHA PANAS WERE FOUND. THE A.O. WORKED OUT TH E UNDISCLOSED INCOME FOR THE PERIOD OF 02/11/1999 TO 17/09/2002 AT RS. 2,43,89,868/- ( AFTER MAKING THE ABOVE ADDITION OF RS.41,07,662/- MENTIONED IN GROUND NO.1 ) . THUS, PER DAY INCOME WAS WORKED OUT AT RS.27,070/-. THIS AMOUNT WAS CONSIDERED BY THE A.O. FOR WORKING OUT THE DISCLOSED INCOME FOR THE PERIOD 01/04/1999 TO 01/11/1999 AND FROM 18/09/2002 TO 24/10/2002 ( PERIOD FOR WHICH TH E JAMA KHARCHA PANAS WERE NOT FOUND) AND THE TOTAL UNDISCLOSED IN COME WAS ARRIVED AT RS.57,11,770/-. THE LEARNED CIT(A) ACCEPTED T HE SUBMISSIONS OF THE ASSESSEE IN THIS REGARD AND HAS REDUCED THE UND ISCLOSED INCOME FOR THE PERIOD WORKED OUT BY THE A.O. FROM RS.57,11 ,770/- TO RS.47,41,772/- RESULTING INTO RELIEF OF RS.9,69,998 /-, QUESTIONED BY THE REVENUE IN THE GROUND UNDER CONSIDERATION. IN SUP PORT OF THE GROUND, LEARNED DR HAS PLACED RELIANCE ON THE ASSESSMENT OR DER. HE SUBMITTED THAT THE ISSUE RAISED IN GROUND NO. 2 IS CONSEQUENTIAL TO GROUND NO.1. 28. THE LEARNED AR, ON THE OTHER HAND REITERATED TH E SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 16 29. CONSIDERING THE ABOVE SUBMISSIONS WE FIND THAT THE ISSUE RAISED IN GROUND NO.2 UNDER CONSIDERATION IS CONSEQUENTIAL TO THE ISSUE RAISED HEREIN ABOVE IN GROUND NO.1. THE UNDISCLOSED INCOM E FOR THE PERIOD FOR WHICH THE JAMA KHARCHA PANAS WERE NOT FOUND WAS WORKED OUT AT RS.57,11,770. AS DISCUSSED ABOVE, THE A.O. HAD WORKED OUT THE UNDISCLOSED INCOME FOR THE PERIOD 02/11/1999 TO 17/ 09/2002 FOR WHICH JAMA KHARCHA PANAS WAS FOUND AT RS.2,43,89, 868/- AFTER MAKING THE ADDITIONS OF RS.41,07,662/- I.E. SUBJECT MATTER OF GROUND NO.1 HEREINABOVE. THUS THE PER DAY INCOME WAS WORKE D OUT BY HIM AT RS.27,070/-. THIS AMOUNT WAS CONSIDERED BY THE A.O . FOR WORKING OUT THE UNDISCLOSED INCOME FOR THE PERIOD 01/04/1999 TO 01/11/1999 AND FROM 18/09/2002 TO 24/10/2002. THUS IT IS CLEAR T HAT THE TOTAL UNDISCLOSED INCOME WORKED OUT AT RS.2,43,89,868/- W AS ON THE BASIS OF ABOVE MADE ADDITION OF RS.41,07,662/- ON ACCOUNT OF THE PURCHASES FROM A FEW PARTIES WHICH HAS BEEN DELETED IN THE FINDINGS ON GROUND NO. 1 HEREINABOVE. IF THE SAID DELETED ADDITION OF PURCHASES IS DEDUCTED FROM THE TOTAL INCOME FOR THE PERIOD FOR W HICH JAMA KHARCHA PANAS WERE FOUND THE AMOUNT WILL REDUCED TO RS.2, 02,82,206/- AND THE PER DAY INCOME WORKS OUT TO RS.22,510/- AGAINST RS. 27,070/- (WORKED OUT BY THE A.O.). ON THE BASIS OF THESE WO RKINGS, THE LEARNED CIT(A) HELD THAT AFTER DELETION OF ADDITION OF RS.4 1,07,662/- , FROM THE WORKED OUT TOTAL INCOME FOR THE PERIOD, THE PER DAY INCOME IS REDUCED AND HENCE THE ADDITION FOR THE PERIOD IN WH ICH SEIZED PAPERS WERE NOT AVAILABLE SHOULD BE ACCORDINGLY REDUCED. HE THUS REDUCED THE ADDITION FROM RS.57,11,770/- TO RS.47,49,772/- RESULTING IN GRANTING OF RELIEF OF RS.9,69,998/-. IN VIEW OF OU R FINDING ON GROUND NO.1.ABOVE, WHEREBY DELETION OF ADDITION OF RS.41,0 7,662/- BY THE LEARNED CIT(A) HAS BEEN UPHELD, WE DONT FIND IN FIRMITY IN THE FIRST APPELLATE ORDER IN REDUCING THE ADDITION OF RS.57,1 1,770/- TO RS.4,7,49,772/- ON THE BASIS OF SAID DELETION. TH E FIRST APPELLATE ORDER IN THIS REGARD IS THUS AFFIRMED. THE GROUND NO.2 IS ACCORDINGLY REJECTED. ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 17 30. GROUND NO.3 THE RELEVANT FACTS ARE THAT THE ASSESSEE FIRM ENGAG ED IN JEWELLERY BUSINESS AND FOLLOWING AVERAGE COST METHOD FOR VALU ING THE STOCK IN THE BOOKS I.E. IT TAKES AVERAGE OF OPENING STOCK AN D PURCHASES DURING THE YEAR AND VALUES THE CLOSING STOCK AT THAT RATE. THIS METHOD WAS BEING FOLLOWED REGULARLY AND THE SAME WAS BEING ACC EPTED BY THE DEPARTMENT IN THE PAST. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE A.O. HELD THAT THE AVERAGE COST M ETHOD FOLLOWED BY THE ASSESSEE IS NOT CORRECT AND THE ASSESSEE SHOUL D HAVE FOLLOWED THE FIFO METHOD FOR VALUING THE STOCK. THE A.O. WAS T HUS OF THE VIEW THAT THE CLOSING STOCK SHOULD BE VALUED AS PER THE CLOSING PURCHASE RATE IN THE MONTH OF MARCH BY ADOPTING THE FIFO MET HOD. ACCORDINGLY HE HELD THAT THERE WAS UNDER VALUE OF STOCK AS PER BOOKS BY RS.22,06,664/-. ACCEPTING THE MAIN SUBMISSION OF T HE ASSESSEE THAT ADDITION IS MADE BEYOND THE SCOPE OF BLOCK ASSESSME NT, THE LEARNED CIT(A) HAS DELETED THE ADDITION. 31. IN SUPPORT OF THE GROUND THE LEARNED DR HAS P LACED RELIANCE ON THE VIEW TAKEN BY THE A.O. AS DISCUSSED ABOVE. THE LEARNED AR ON THE OTHER HAND TRIED TO JUSTIFY THE FIRST APPELLATE ORDER. HE REITERATED THE SUBMISSIONS MADE BEFORE THE FIRST APPELLATE AUT HORITY. 32. CONSIDERING THE ABOVE SUBMISSIONS WE FIND THAT THE ADDITION MADE BY THE A.O. WAS OBJECTED BY THE ASSESSEE BEFOR E THE LEARNED CIT(A) WITH THIS CONTENTION, THAT THERE WAS NO INCR IMINATING EVIDENCE FOUND DURING THE COURSE SEARCH RELATING TO STOCK VA LUE. HENCE, THE ADDITION SHOULD NOT HAVE BEEN MADE IN THE BLOCK ASS ESSMENT. THE ASSESSEE ALSO CLARIFIED THAT AVERAGE COST METHOD IS ACCEPTED METHOD OF STOCK VALUE AND IT WAS BEING ACCEPTED BY THE DEPART MENT IN ASSESSEES OWN CASE IN THE PAST. IN SUPPORT OF THE SAME, DEC ISIONS WERE CITED WHICH HAVE BEEN REPRODUCED BY THE LEARNED CIT(A) AT PAGE NOS. 32 AND 33 OF THE FIRST APPELLATE ORDER, WHEREIN THE HO NBLE COURTS HAVE ACCEPTED SUCH AVERAGE COST METHOD FOLLOWED BY THE A SSESSEES. ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 18 CONSIDERING THESE SUBMISSIONS LEARNED CIT(A), IN OU R VIEW HAS RIGHTLY COME TO THE CONCLUSION THAT THERE WAS NO REASON TO REJECT THE METHOD OF VALUATION OF STOCK AND THE ADDITION MADE WAS THU S NOT JUSTIFIED. WE ALSO FIND SUBSTANCE IN THE OBSERVATIONS OF THE LEAR NED CIT(A) ON THE ISSUE THAT UNDISCLOSED INCOME HAS TO BE WORKED OUT ON THE BASIS OF SEIZED PAPERS AND SINCE IN THE PRESENT CASE NO SUCH INCRIMINATING EVIDENCE WAS FOUND REGARDING METHOD OF VALUATION OF STOCK AS THE A.O. TRIED TO ADOPT, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE ON THIS ACCOUNT. THE FIRST APPELLATE ORDER I N THIS REGARD IS THUS UPHELD. GROUND NO.3 IS ACCORDINGLY REJECTED. 33. GROUND NO.4 IN THIS GROUND ACTION OF THE LEARNED CIT(A) IN DE LETING THE ADDITION OF RS.2,53,32,635/- MADE ON PROTECTIVE BASIS IN THE HA NDS OF THE ASSESSEE HAS BEEN QUESTIONED. THE RELEVANT FACTS ARE THAT SEARCH WAS CONDUCTED ON ASSESSEES AS WELL AS SHRI PRAKASH SALU NKE. DURING THE COURSE OF SEARCH CERTAIN DOCUMENTS MARKED AS BUNDLE NOS. A-1 TO A- 43 WERE FOUND AT THE PREMISES OF SHRI PRAKASH SALU NKE, WHO WAS ENGAGED IN THE BUSINESS OF REFINING GOLD. SHRI P RAKASH SALUNKE ADMITTED THAT BUNDLE NO. A-7 TO A-9 BELONGED TO HIM AND HE ALSO STATED THAT OTHER BUNDLE FOUND WITH HIM BELONGED TO RANKA JEWELLERS. ASSESSEE ACCEPTED THAT A-12 TO A-34 AND A-36 TO A-4 3 BELONGED TO IT ON THE BASIS OF THESE BUNDLES, THE UNDISCLOSED INCO ME WAS OFFERED TO TAX. THESE WERE THE JAMA KHARCHA PANAS ON THE BASIS OF WHICH INCOME WAS ASSESSED BY THE A.O. THE DISPUTE WAS R EGARDING OWNERSHIP OF DOCUMENT SEIZED AS PER BUNDLE NOS. A-1 TO A-6, A-10, A- 11 AND A-35. SHRI PRAKASH SALUNKE STATED THAT THES E BUNDLES BELONG TO RANKA GROUP. ASSESSEE HAS DENIED THAT PAPERS IN THESE BUNDLES BELONGED TO IT. THE A.O. AFTER VERIFICATION OF VA RIOUS SEIZED PAPERS CAME TO THE CONCLUSION THAT DISPUTED BUNDLES BELONG ED TO SHRI PRAKASH SALUNKE AND ON THAT BASIS ADDITION OF RS.2,53,32,6 35/- WAS MADE ON SUBSTANTIVE IN THE HANDS OF THE SHRI PRAKASH SALUN KE. THE DETAILS OF THE HEADS CONSTITUTING THE ABOVE AMOUNT ARE IN THE NATURE OF SHARES, ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 19 PPF BALANCES, INSURANCE PREMIUM PAID, FDS ETC. ETC. OF SHRI PRAKASH SALUNKE AND HIS FAMILY MEMBERS. THE A.O. WITH A V IEW TO PROTECT THE INTEREST OF THE REVENUE ALSO MADE SAME ADDITION ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE FIRM. THE LEARNED CIT(A ) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND VIEW OF THE A.O . HAS DELETED THE PROTECTIVE ADDITION MADE IN THE HANDS OF THE ASSESS EE. 34. IN SUPPORT OF THE GROUND, LEARNED DR HAS BASICA LLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE SUBMITTED THA T THE SHRI PRAKASH SALUNKE WAS ONE OF THE KARIGARS OF THE ASSESSEE GRO UP. ASSESSEE AND ASSOCIATED WERE SUBJECTED TO THE SEARCH PROCEEDINGS ALONGWITH SHRI PRAKASH SALUNKE. PAPERS RELATED TO ASSESSEE WERE F OUND FROM PREMISES OF SHRI PRAKASH SALUNKE. THESE PAPERS WER E RELATED TO LOAN AND SHARE TRANSACTIONS. IN HIS STATEMENTS, SHRI PR AKASH SALUNKE CONFESSED THAT MONEY CAME FROM SHRI ANIL RANKA FOR INVESTMENT IN LOAN AND SHARES. UNDER THESE BACKGROUND, THE A.O. WAS JUSTIFIED IN MAKING THE ASSESSMENT ON SUBSTANTIVE BASIS IN THE C ASE OF SHRI PRAKASH SALUNKE AND ON PROTECTIVE BASIS IN THE ASSE SSEES HAND IN THE INTEREST OF THE REVENUE. THE LEARNED DR FURTHER SU BMITTED THAT SHRI SHRI PRAKASH SALUNKE IS A MAN OF SMALL MEANS. THE CONFESSIONS MADE BY SHRI SHRI PRAKASH SALUNKE IN HIS INITIAL STATEME NTS CARRIES WEIGHT HENCE THERE WAS SUBSTANTIVE REASON BEFORE THE A.O. TO MAKE THE ASSESSMENT ON PROTECTIVE BASIS IN THE CASE OF THE A SSESSEE ON THE BASIS OF THOSE CONFESSIONS. THE LEARNED DR REFERR ED PARA NOS. 51 TO 55 OF THE ASSESSMENT ORDER. 35. THE LEARNED AR ON THE OTHER HAND TRIED TO JUSTI FY THE FIRST APPELLATE ORDER ON THE ISSUE. HE SUBMITTED THAT A .O. HAS NOT GIVEN ANY PLAUSIBLE REASON IN SUPPORT OF THE ADDITION IN QUESTION MADE ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE. TH E DISPUTED DOCUMENTS SEIZED FROM SHRI PRAKASH SALUNKE INDICATE FINANCIAL AFFAIRS OF SHRI PRAKASH SALUNKE, THESE DOCUMENTS CONTAIN DE TAILS OF INVESTMENTS IN SHARES, MADE IN THE NAME OF THE SHRI PRAKASH SALUNKE, ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 20 DETAILS OF FIXED DEPOSITS IN THE NAME OF SHRI PRAKA SH SALUNKES FAMILY MEMBERS AND ALSO LOANS GIVEN IN THE MARKET, PPF AN D INSURANCE ETC. HAVE BEEN PAID IN HIS CASES ONLY. IN FACT DURING THE COURSE OF SEARCH AND CROSS EXAMINATION ( PAGE NO. 115 TO 150 ), SHR I PRAKASH SALUNKE WAS SPECIFICALLY ASKED TO GIVE THE DETAILS OF THE P ERSONS TO WHOM THE LOANS WERE GIVEN BUT HE COULD NOT GIVE THE DETAILS. THE LEARNED AR SUBMITTED THAT AS ALLEGED THAT DOCUMENTS WERE WRIT TEN BY HIM ON THE BASIS OF INSTRUCTIONS GIVEN BY SHRI ANIL RANKA, PAR TNER OF THE ASSESSEE FIRM HOWEVER, THERE IS NO EVIDENCE TO SUPPORT THIS THEORY OF SHRI PRAKASH SALUNKE. THE LEARNED AR POINTED OUT THAT T HE LEARNED CIT(A) HAS ALSO MENTIONED THAT SHRI PRAKASH SALUNKE TRIED TO DESTROY THE MOST VALUABLE DOCUMENTS FOUND DURING THE SEARCH WHI CH CLEARLY INDICATES THAT THE DOCUMENTS PERTAIN TO HIM ONLY. HE SUBMITTED THAT IT IS ALSO WORTH NOTING THAT THE DOCUMENTS ADMITTED BY THE ASSESSEE THAT THESE ARE PERTAINING TO IT, WERE KEPT SEPARATE LY IN THE SPORTS BAG AND THESE DOCUMENTS WERE NOT IN THE HANDWRITING OF SHRI PRAKASH SALUNKE. THE LEARNED AR FURTHER SUBMITTED THAT TH E ASSESSEE FIRM HAD CROSS-EXAMINED SHRI PRAKASH SALUNKE AND HIS THO SE STATEMENT HAD BEEN MADE AVAILABLE AT PAGE NOS. 115 TO 150 OF THE PAPERBOOK. THE IMPORTANT POINT WHICH ARE TO BE CONSIDERED ARE GIVE N ON PAGE NO. 206 TO 212 OF THE PAPERBOOK. THE LEARNED AR SUBMITTED THAT SHRI PRAKASH SALUNKE IS NOT EMPLOYEE OR KARAGIR OF RANKA JEWELLE RS. HE ENGAGED IN THE BUSINESS OF REFINING OF GOLD AND RANKA JEWELLER S WAS GIVING REFINING OF GOLD JOB TO HIM. ON FEW OCCASIONS THERE ARE SO ME PURCHASE /SALES TRANSACTIONS OF THE ASSESSEE WITH HIM. THE SEIZED DOCUMENTS THAT JAMA KHARCHA PANAS FOR THE PERIOD FROM 02/11/99 T O 17/09/11 DOES NOT HAVE ANY NOTING THAT CASH HAS BEEN GIVEN BY RAN KA JEWELLERS TO SHRI SALUNKE AND GIVEN LOANS AS CLAIMED BY SHRI SAL UNKE. THE NOTINGS OF THE SEIZED PAPERS WHICH WERE OWNED BY THE RANKA JEWELLERS ARE IN THE HANDWRITING OF PARTNERS AND EMPLOYEES OF THE RA NKA JEWELLERS AND THE SEIZED PAPERS IN RESPECT OF TRANSACTIONS OF SHR I SALUNKE ARE WRITTEN BY HIM ONLY. HE SUBMITTED THAT IN THE COURSE OF AS SESSMENT PROCEEDINGS THE ASSESSEE FURNISHED THE AFFIDAVIT O F SHRI ANIL RANKA WHEREIN IT HAS BEEN CATEGORICALLY STATED THAT DISPU TED DOCUMENTS DO ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 21 NOT PERTAIN TO RANKA JEWELLERS AND HE HAS NOT BEEN PROVED WRONG BY THE A.O. OR BY SHRI PRAKASH SALUNKE BY ANY EVIDENC E. THE LEARNED AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: CIT VS. DAULAT RAM RAWATMULL [87 ITR 349 (SC)] SETH RAMNATH DAGA [82 ITR 287 (BOM)] BANK OF INDIA VS. UNION OF INDIA [167 ITR 668(DEL) 36. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE ADDITION IN QUESTION HAS BEEN MADE BY THE A.O. ON PROTECTIVE BA SIS IN THE HANDS OF THE ASSESSEE AND ON SUBSTANTIVE BASIS AGAINST SH RI PRAKASH SALUNKE ON THE BASIS OF SEIZED DOCUMENTS MARKED AS. A-1 TO A-6, A-10, A-11 AND A-35, OWNERSHIP OF WHICH REMAINED IN DISPUTE. SHRI PRAKASH SALUNKE STATED THAT THESE DOCUMENTS BELONGED TO RAN KA GROUP WHEREAS THE ASSESSEE DENIED ITS OWNERSHIP OVER THOS E DOCUMENTS. EXPLANATION OF THE ASSESSEE IN THIS REGARD REMAINED THAT DISPUTED DOCUMENTS WERE SEIZED FROM THE POSSESSION OF SHRI P RAKASH SALUNKE WHICH INDICATES HIS FINANCIAL AFFAIRS. THESE DOC UMENTS INCLUDED INVESTMENT IN SHARES MADE IN THE NAME OF SHRI PRAK ASH SALUNKE, THE DETAILS OF FIXED DEPOSITS IN THE NAME OF SHRI PRAKA SH SALUNKE AND HIS FAMILY MEMBERS AND ALSO LOANS GIVEN IN THE MARKET, PPF AND INSURANCE ETC. ETC. IN HIS CASE. IT WAS ALSO SUBMITTED BY TH E ASSESSEE THAT THE SEIZED DOCUMENTS ADMITTED BY THE ASSESSEE AS PERTAI NING TO IT, WERE KEPT SEPARATELY IN THE SPORT BAGS AND THESE DOCUMEN TS WERE NOT IN THE HANDWRITING OF SHRI PRAKASH SALUNKE. WE ARE OF TH E VIEW THAT WHEN DISPUTED DOCUMENTS ADMITTEDLY FOUND IN THE EXCLUSIV E POSSESSION OF SHRI PRAKASH SALUNKE THEN AS PER PRESUMPTION U/S. 1 32(4A), THE SAID DOCUMENTS UNLESS SUFFICIENTLY REBUTTED, ARE PRESUM ED TO BE BELONGING TO SHRI PRAKASH SALUNKE. SHRI PRAKASH SALUNKE HAS NOT PRODUCED ANY EVIDENCE TO INDICATE THAT THE DISPUTED DOCUMENTS BE LONG TO THE ASSESSEE. THUS IN OUR VIEW SHRI PRAKASH SALUNKE H AS NOT BEEN ABLE TO REBUT THE PRESUMPTION U/S. 132 (4A) AGAINST HIM. T HE A.O. ALSO HAS NOT DISCHARGED HIS ONUS TO PROVE THAT THESE DISPUTE D DOCUMENTS ARE BENAMI INVESTMENTS OF THE ASSESSEE. IT IS ALSO WO RTHNOTING THAT IN ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 22 THE DISPUTED DOCUMENTS NOWHERE NAME OF THE ASSESSEE OR SHRI ANIL RANKA IS APPEARING. IN THESE DOCUMENTS, THERE IS N O MENTION THAT ANY INVESTMENT FOR THE ASSET IS MADE BY THE ASSESSEE OR ANY RETURN FROM THESE ASSETS HAS BEEN MADE TO THE ASSESSEE. WE AR E THUS OF THE VIEW THAT THERE WAS NO REASON BEFORE THE A.O. TO ASSESS THE INCOME ON THE BASIS OF SUCH DOCUMENTS EVEN PROTECTIVELY IN THE HANDS OF THE ASSESSEE. CONSIDERING THESE MATERIALS ASPECTS OF THE ISSUE, WE ARE OF THE VIEW THAT LEARNED CIT(A) HAS RIGHTLY COME TO TH E CONCLUSION THAT THE ADDITION OF RS.2,53,32,635/- MADE ON THE PROTE CTIVE BASIS IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIED AND HE HAS T HUS RIGHTLY DENIED THE ADDITION. WE THUS FIND NO REASON TO INTERFERE W ITH THE FIRST APPELLATE ORDER IN THIS REGARD. THE SAME IS UPHELD , THE GROUND NO.4 IS REJECTED. 37. IN THE RESULT THE APPEAL DISMISSED. ITA NO. 894/PN/2006 (BLOCK ASSTT. YEAR 1/4/1996 TO 24/10/2002) 38. THE ASSESSEE HAS QUESTIONED THE FIRST APPELLAT E ORDER ON THE FOLLOWING GROUND NO. 1 TO 3. 1. THE LEARNED ASSESSING AUTHORITIES BELOW HAD E RRED IN ASSESSING THE INCOME OF THE ASSESSEE AT RS.2,59,50,620/- BY TREATING THE SAME AS UNDISCLOSED INCOME IN PLACE OF RS.43,88,583/-. THE REASONS ASSIGNED FOR MAKING THE ADDITIONS TO TH E RETURNED INCOME OF RS.1,14,66,603/- BY TREATING UNDISCLOSED ASSETS NOT BELONGING TO THE APPELLANT, ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 23 AND RS.95,330/- BY WAY OF ACCRUED INTEREST ARE IMPROPER AND NOT BASED ON THE FACTS PREVAILING IN T HE CASE. THE ADDITIONS SO MADE BE DELETED. 2. ON THE FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AS PER PROVISIONS OF LAW, IT BE HELD THAT, TRANSACT IONS RECORDED IN PAGE NO. 8 OF ANNEXURE NO :1 DO NOT REPRESENT THE TRANSACTIONS OF THE APPELLANT AND IT FURTHER BE HELD THAT ASSESSEE HAS DISCHARGED THE BURDEN OF PRESUMPTION U/S. 132 (4A) OF THE INCOME TAX ACT. THE ADDITIONS MADE ON THE BASIS OF THE SEIZED DOCUMENTS, AND IN PARTICULAR DOCUMENT AT PAG E NO. : 8 OF A-1 AND THE STATEMENT RECORDED FROM TIME TO TIME ARE NOT IN ACCORDANCE WITH THE PROVISIONS O F THE ACT. THE ADDITIONS MADE TO THE RETURNED INCOM E BE DELETED. 3. ON THE FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AS PER PROVISIONS OF LAW, IT BE HELD THAT, ADDITION OF RS.95,330/- ON ACCOUNT OF ACCRUED INTEREST OR KVP AND NSC ARE NOT IN ACCORDANCE WITH THE PROVISIONS O F THE ACT. THE ADDITIONS SO MADE BE DELETED. 39. GROUND NO.1 & 2 IN THESE GROUNDS GRIEVANCE OF THE ASSESSEE IS THAT THE AUTHORITIES BELOW HAVE ERRED IN ASSESSING THE INCOME OF THE ASS ESSEE AT RS.2,59,50,620/- BY TREATING THE SAME AS UNDISCLOSE D INCOME IN PLACE OF RS.43,88,583/-. WE HAVE ALREADY DISCUSSED THE FACTS OF THE CASE HEREINABOVE AS SEARCH ACTION WAS TAKEN PLACE AT THE PREMISES OF THE ASSESSEE AS WELL AS OF RANKA JEWELLERS. FROM THE PREMISES OF THE ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 24 ASSESSEE SEVERAL INCRIMINATING DOCUMENTS WERE FOUND , DETAILS OF WHICH MARKED AS ANNEXURE A TO O2 ARE AS UNDER. DOCUMENTS & VALUABLES FOUND SEIZED ANNEXURE A (BOOKS OF ACCOUNT ETC.) A-1 TO A-13 A-1 TO A-13 ANNEXURE B (CASH) 4,95,610 4,50,000 ANNEXURE C & C1 (JEWELLERY) 19,15,990 + 1,45,953 19,15,990 ANNEXURE E (NSCS) 3,79,000 NIL ANNEXURE F (SILVER BARS) 2,56,583 2,56,583 ANNEXURE H (PAWNED JEWELLERY) 3,46,500 NIL ANNEXURE O (FDRS) 15,83,640 15,83,640 ANNEXURE O1 (FDRS) 19,57,301 19,57,301 ANNEXURE O2 (NSCS, KVPS) 3,19,000 1,84,000 40. OUT OF THESE SEIZED MATERIALS ABOUT WHICH THE M AIN OBJECTION OF THE ASSESSEE REMAINED THAT ALL THE INVESTMENTS WE RE MADE BY HIM AT THE INSTRUCTION OF SHRI ANIL RANKA OF RANKA JEWELL ERS AND IT WAS THEIR MONEY. THE INCRIMINATING DOCUMENTS AND VALUABLES WH ICH WERE KEPT IN A SPORTS BAGS FOUND DURING THE COURSE OF SEARCH AT ASSESSEES PREMISES WERE ACCEPTED BY M/S. RANKA JEWELLERS AS BELONG TO THEM. SO FAR REMAINING ANNEXURES AND THE VALUABLE ATTACHED TO TH EM ARE CONCERN THE A.O. DID NOT ACCEPT THE PLEA OF THE ASSESSEE TH AT THOSE DID NOT BELONG TO HIM SINCE THE ASSESSEE THROUGH OUT THE AS SESSMENT ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 25 PROCEEDINGS COULD NOT PRODUCE ANY EVIDENCE TO ESTAB LISH THAT THOSE WERE ONLY BENAMI AND NOT BELONG TO THE ASSESSEE. SINCE THE ASSESSEE COULD NOT IMPROVE HIS CASE EVEN BEFORE THE CIT(A) T HE LEARNED CIT(A) UPHELD THE ADDITION MADE BY THE A.O. IN THIS REGARD . 41. THE LEARNED AR WHILE REITERATING THE SUBMISSION S BEFORE THE AUTHORITIES BELOW CONTENDED THAT ASSESSEE IS A SMAL L PERSON AND THE ASSESSEE HAD DISCHARGED ITS BURDEN AGAINST THE ADD ITION MADE UNDER PRESUMPTION U/S. 132 (A) OF THE ACT AGAINST HIM. THE ADDITION MADE ON THE BASIS OF SEIZED DOCUMENTS SPECIALLY PAGE 8 ON ANNEXURE A-1 IS NOT JUSTIFIED AS TRANSACTIONS MENTIONED THEREIN DO NOT PERTAIN TO ASSESSEE. HENCE, THE ADDITIONS MADE TO THE RETURN O F INCOME BE DELETED. THE LEARNED AR SUBMITTED THAT THE REASON S ASSIGNED FOR MAKING THE ADDITION TO THE RETURN OF INCOME AT RS.1 ,14,66,603/- BY TREATING UNDISCLOSED ASSETS BELONG TO THE ASSESSEE AND RS.95,330/- BY WAY OF ACCRUED INTEREST ARE IMPROPER. HE REFERR ED CONTENTS OF PAGE NOS. 2 & 3 OF THE FIRST APPELLATE ORDER AS WELL AS THE DOCUMENTS AND VALUABLES FOUND DURING THE SEARCH ARE REPRODUCED AT PAGE NO.2 OF THE FIRST APPELLATE ORDER. REGARDING THE SOURCE OF RS .2,53,32,635/- MENTIONED BY LEARNED CIT(A) IN PARA NO. 2.2. OF TH E FIRST APPELLATE ORDER AS UNDISCLOSED ASSETS, THE LEARNED AR SUBMITT ED THAT NO ASSET OR CASH EXCEPT THE DOCUMENTS WERE FOUND. HE SUBM ITTED THAT THERE IS NO DENIAL ON THE PART OF THE ASSESSEE BUT IN ABS ENCE OF ANY CORROBORATORY EVIDENCE, THE ENTIRE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE IGNORING HIS OBJECTION THAT T HESE DOCUMENTS BELONG TO M/S. RANKA JEWELLERS AND THESE WERE WRIT TEN AT THEIR INSTRUCTION ONLY. 42. THE LEARNED DR ON THE OTHER HAND TRIED TO JUSTI FY THE FIRST APPELLATE ORDER ON THE ISSUE. HE SUBMITTED THAT UN DISPUTEDLY THE INCRIMINATING DOCUMENTS WERE FOUND DURING THE COURS E OF SEARCH FROM THE VERY POSSESSING OF THE ASSESSEE, THUS PRESUMPTI ON OF OWNERSHIP OF THESE INCRIMINATING DOCUMENTS IS AGAINST THE ASSESS EE UNLESS IT IS ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 26 SUCCESSFULLY REBUTTED WITH SUBSTANTIAL EVIDENCE TO WHICH THE ASSESSEE HAS THOROUGHLY FAILED TO. 43. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND T HAT AN IDENTICAL ISSUE WAS RAISED IN BY REVENUE HEREINABOVE IN CASE OF RANKA JEWELLERS. IN THE RELEVANT GROUND NO.4 THEREOF THE ACTION OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF RS.2,53,32,635/- MADE I N THE HANDS OF RANKA JEWELLERS ON THE PROTECTIVE BASIS ON THE BASI S OF SIMILAR DOCUMENTS FOUND WITH SHRI PRAKASH SALUNKE, (THE PRE SENT ASSESSEE) HAS BEEN QUESTIONED. WE HAVE DEALT WITH THE ISSUE AND ADJUDICATED IT WITH THIS FINDING THAT THERE IS NOTING ON RECORD TO SHOW THAT THE AMOUNT IN QUESTION WAS BENAMI OF M/S. RANKA JEWELLE RS TO MAKE ADDITION OF THE SAID AMOUNT AS UNDISCLOSED INCOME O N PROTECTIVE BASIS IN THE HANDS OF M/S. RANKA JEWELLERS. THE ACTION OF THE LEARNED CIT(A) IN THIS REGARD HAS BEEN UPHELD AFTER DISCUSS ING THE CASE IN DETAIL. WE FIND FROM THE ORDERS OF THE AUTHORITIES BELOW THAT OUT OF THE ABOVE STATED SEIZED DOCUMENTS MENTIONED IN THE CHAR T WHICH WERE FOUND FROM POSSESSION OF THE PRESENT ASSESSEE, THE RANKA JEWELLERS ACCEPTED THAT THE DOCUMENTS A-12 TO A -34 AND A-36 TO A-43 PERTAIN TO THEM. THESE INCRIMINATING DOCUMENTS WERE KEPT IN THE SPORTS BAGS BY M/S. RANKA JEWELLERS AND THESE DOCUMENTS WERE NO T WRITTEN BY THE PRESENT ASSESSEE I.E. SHRI PRAKASH SALUNKE WHILE IN CRIMINATING DOCUMENTS FOR WHICH THE OWNERSHIP IS IN DOUBT ARE A DMITTEDLY IN THE HANDWRITING OF SHRI PRAKASH SALUNKE. IT IS ALSO W ORTH NOTING THAT THE ASSESSING OFFICER HAS NOTED CONTRADICTION IN THE ST ATEMENTS GIVEN BY SHRI PRAKASH SALUNKE. THE ASSESSING OFFICER HAS SUM MARIZED THESE STATEMENTS TO SHOW THAT SHRI PRAKASH SALUNKE HAS BE EN SHIFTING HIS STAND ON THE INCRIMINATING DOCUMENTS SEIZED FROM HI S PLACE FOR WHICH OWNERSHIP WAS DISPUTED BY HIM. THOUGH THESE DOCU MENTS HAVE BEEN WRITTEN BY SHRI PRAKASH SALUNKE BUT INITIALLY IT WA S STATED BY HIM THAT THEY WERE WRITTEN AS PER THE INSTRUCTIONS GIVEN BY SHRI ANIL RANKA. HOWEVER, UNDISPUTEDLY NEITHER THE NAME OF SHRI ANIL RANKA OR ANY OTHER PERSON OF RANKA FAMILY APPEARS IN THE SEIZED DOCUMENTS FOR ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 27 WHICH OWNERSHIP WAS IN DISPUTE. IT IS ALSO AN AD MITTED FACT THAT SHRI PRAKASH SALUNKE WAS DEALING WITH SHARE BROKER FOR S ALE AND PURCHASE OF THE SHARES AND THE DEMAT ACCOUNT WAS IN HIS NAME . SHRI PRAKASH SALUNKE ALSO FAILED TO DISCLOSE THE IDENTITY OF THE PERSONS WHOSE NAMES APPEARED IN THE SEIZED MATERIALS. THE ASSESSING O FFICER ON THE OTHER HAND TRIED TO IDENTIFY SOME OF THE NAMES WITH MEMBE RS OF THE FAMILY OF SHRI PRAKASH SALUNKE. THERE WAS NO ANY DOCUMEN TS FOUND DURING THE COURSE OF SEARCH TO SUGGEST THAT INVESTMENT IN THE MARKET AND IN THE SHARES WAS BEING DONE BY THE ASSESSEE ON BEHALF OF THE RANKA GROUP. UNDER THESE CIRCUMSTANCES, WE ARE OF THE V IEW THAT THE LEARNED CIT(A) HAS RIGHTLY COME TO THE FOLLOWING CO NCLUSION AT PAGE NO. 24 OF THE FIRST APPELLATE ORDER AFTER DISCUSSING THE MATTER IN DETAIL; A PERUSAL OF THE PROVISION AS ABOVE CLEARLY INDICA TES THAT THE UNDISCLOSED INCOME HAS TO BE COMPUTED AS PER TH E EVIDENCES FOUND IN THE COURSE OF SEARCH OR INFORMAT ION EMANATING FROM THE SEARCH ACTION. IN THE INSTANCE CASE, THERE HAS BEEN SEIZURE OF DOCUMENTS FROM THE PREMIS ES OF THE APPELLANT WHICH INDICATE INVESTMENTS MADE BY TH E APPELLANT EITHER IN HIS OWN NAME OR IN THE NAME OF HIS FAMILY MEMBERS. THE SEIZED MATERIALS ALSO INDICAT E LOANS GIVEN IN THE MARKET. THE APPELLANT KNOWS THE IDEN TITY OF SUCH PERSONS AND IT IS ADMITTED THAT THE LOANS HAVE BEEN GIVEN THROUGH HIM. HIS CLARIFICATION THAT THE LOA NS ARE AGAINST CASH GIVEN TO HIM BY THE RANKA GROUP IS NOT PROVED BY THE SEARCH ACTION AS NO EVIDENCE HAS BEEN FOUND IN THE COURSE OF SEARCH INDICATING THE SAME. THE ASSESSING OFFICER HAS USED THESE EVIDENCES IN FORM OF SEIZED MATERIALS TO COMPUTE THE UNDISCLOSED INCOME AND THE SAME IS IN ACCORDANCE WITH THE DEFINITION GIVEN OF THE UNDISCLOSED INCOME AND THE SAME IS DULY PERMITTED BY SECTION 158BB(1) OF THE INCOME TAX AC,1961. THE APPELLANT HAS FAILED TO PROVE THE PLEA THAT THE ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 28 INVESTMENTS THOUGH MADE BY HIM ARE ON ACCOUNT OF RA NKA GROUP. THE EVIDENCES SEIZED ARE FROM THE PREMISES OF THE APPELLANT AND THE SEIZED MATERIALS ARE IN HIS HAND WRITING. IN MOST OF THE CASES INVESTMENTS ARE IDENTIFIED AS LINKED WITH THE APPELLANT LIKE INVESTMENT IN SHARES ARE FI XED DEPOSITS. 44. THE FIRST APPELLATE ORDER ON THE ISSUE IS COMPR EHENSIVE AND REASONED ONE, WE THUS ARE NOT INCLINED TO INTERFERE THEREWITH. THE SAME IS THUS UPHELD. THE GROUND NO.1 AND 2 ARE AC CORDINGLY REJECTED. 45. GROUND NO.3 THE RELEVANT FACTS ARE THAT DURING THE COURSE OF SE ARCH ACTION AT THE PREMISES OF THE ASSESSEE, KVP AND NSC WERE FOUND O N THE BASIS OF WHICH A.O. MADE ADDITION OF RS.95,330/- ON ACCOUNT OF ACCRUED INTEREST THEREUPON AS PER PARA 29 OF THE ASSESSMENT ORDER. THE LEARNED CIT(A) HAS UPHELD THE SAME ON THE BASIS THA T THESE WERE INVESTMENT OF THE ASSESSEE ONLY. THE CONTENTION O F THE ASSESSEE REMAINED THAT THE ASSESSEE WAS NOT FOLLOWING MERCAN TILE METHOD OF ACCOUNTING AND THE INTEREST ON THESE INVESTMENTS WO ULD BECOME DUE AND PAYABLE ON MATURITY I.E. AFTER END OF BLOCK PER IOD AND TO BE ASSESSED IN REGULAR ASSESSMENT. 46. AFTER HAVING GONE THROUGH THE ORDERS OF THE AUT HORITIES BELOW. WE FIND THAT THE LEARNED CIT(A) HAS NOT EXAMINED TH E ABOVE CONTENTIONS OF THE ASSESSEE AND HAS DECIDED THE ISS UE ON THE BASIS OF GENERAL APPROACH TOWARDS OTHER ADDITION MADE ON ACC OUNT OF UNDISCLOSED INCOME. WE THUS SET ASIDE THE ISSUE T O THE FILE OF THE LEARNED CIT(A) TO DECIDE IT CONSIDERING THE ABOVE C ONTENTION OF THE ASSESSEE AFTER AFFORDING OPPORTUNITY OF BEING HEAR D TO THE PARTIES. THE GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES . ITA NO. 801/PN/2006 & ITA NO. 820/PN/2006 (BLOCK A.Y. 01/04/96 TO 24.10. 2002), (BLOCK A.Y. 1997-98 TO 2003-04) & M/S. RANKA JEWELLERS & ITA NO. 894/PN/2006 (BLOCK A.Y. 1/4/1996 TO 24/10/2002) SHRI PRAKASH R. SALUNKE 29 47. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 6 TH DAY OF JUNE, 2011. (G.S.PANNU) (I.C.SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 6 TH JUNE, 2011 ASHWINI COPY OF THE ORDER IS FORWARDED TO : 1. TWO ASSESSEES AS MENTIONED IN THE CAUSE TITLE 2. ADDL. CIT, RANGE-I, PUNE, ACIT.CEN.(CENTRAL) CIR-1(2) PUNE & DCIT.CEN.(CENTRAL) CIR-1(2) PUNE 3. CIT (A)-I, PUNE. 4. CIT, CENTRAL, PUNE 5. D.R. ITAT B BENCH, PUNE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE