Appeal Details
Counselvise Citation
[2018] 125 COUNSELVISE.COM (IT) 6346 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 9 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-07-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Assessment Year
misc
Appeal Filed On
25-10-2016
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 919/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2007-08 PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. CUKE VS. A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 932/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2007-08 A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. CUKE VS. PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 920/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2008-09 PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. CUKE VS. A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 933/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2008-09 A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. CUKE VS. PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 2 VK;DJ VIHY LA-@ ITA NO. 921/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2009-10 PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. CUKE VS. A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 934/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2009-10 A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. CUKE VS. PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VK;DJ VIHY LA-@ ITA NO. 922/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2010-11 PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. CUKE VS. A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 935/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2010-11 A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. CUKE VS. PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 3 VK;DJ VIHY LA-@ ITA NO. 923/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2011-12 PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. CUKE VS. A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 936/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2011-12 A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. CUKE VS. PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VK;DJ VIHY LA-@ ITA NO. 924/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2012-13 PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. CUKE VS. A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 937/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2012-13 A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. CUKE VS. PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 4 VK;DJ VIHY LA-@ ITA NO. 938/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. CUKE VS. PRAKASH CHAND SHARMA, C-42, GOKUL PATH, VAISHALI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS 2776 H FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROLEE AGARWAL (CIT-DR) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 25/05/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 30/07/2018 VKNS'K@ ORDER PER: BENCH THESE ARE SET OF SIX CROSS APPEALS FILED BY THE ASS ESSEE AND THE REVENUE FOR THE A.YS. 2007-08 TO 2012-13 AND AN APP EAL FILED BY THE REVENUE FOR THE A.Y. 2013-14 DIRECTED AGAINST THE R ESPECTIVE ORDERS OF THE LD. CIT(A) ARISING FROM THE ASSESSMENT FRAMED U/S 14 3(3), READ WITH SECTION 153A AND 153B(1)(B) OF THE INCOME TAX ACT, 1 961 (IN SHORT THE ACT) PURSUANT TO THE SEARCH U/S 132 OF THE ACT. 2. ALL THESE APPEALS ARE BEING HEARD TOGETHER AND F OR THE SAKE OF CONVENIENCE AND BREVITY, A COMMON ORDER IS BEING PA SSED. 3. THE BRIEF FACTS LEADING TO THE CONTROVERSY IN THE SE CROSS APPEALS ARE THAT THE ASSESSEE IS INDIVIDUAL AND ENGAGED IN THE BUSINESS OF FINANCING. HE IS ALSO A DIRECTOR IN TWO FINANCE COMPANIES NAMEL Y SHUBHDEEP FINANCE ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 5 CO. PVT. LTD. AND PRAKASH DEEP FINANCE CO. LTD. A S EARCH AND SEIZURE OPERATION WAS CARRIED OUT U/S 132 OF THE ACT IN THE CASE OF ASSESSEE AND GROUP CONCERNS/ASSOCIATES ON 31 ST JULY, 2012. DURING THE COURSE OF SEARCH AND SEIZURE ACTION, CASH, JEWELLERY, BOOKS OF ACCOUN T AND OTHER INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED. THE DO CUMENTS FOUND AND SEIZED INCLUDES THE DOCUMENTS RELATING TO FINAN CE ACTIVITIES KNOWN AS 100 DAYS SCHEME CONTAINING THE TRANSACTIONS FROM 01/6/2009 THOUGH THE ASSESSEE WAS ENGAGED IN THIS ACTIVITY SINCE LONG TIME. IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT DATED 31 ST JULY, 2012, THE ASSESSEE DISCLOSED AND SURRENDERED AN INCOME OF RS. 10.00 CRORES ON ACCOUNT OF CASH, INVESTMENT AND OTHER DOCUMENTS FOU ND AND SEIZED IN THE SEARCH AND SEIZURE ACTION. SUBSEQUENTLY, THE A.O. I SSUED NOTICED U/S 153A OF THE ACT FOR THE A.Y. 2007-08 TO 2012-13 ON 10/03/2013. IN RESPONSE TO WHICH THE ASSESSEE FILED RETURN OF INCO ME FOR THESE FIVE YEARS DECLARING INCOME OF RS. 8,46,57,240/- DIVIDED INTO FIVE YEARS. THE ASSESSEE ALSO FILED RETURN OF INCOME FOR THE A.Y. 2 013-14 ON 29/7/2013 DECLARING TOTAL INCOME OF RS. 14,87,160/-. THE ASSE SSING OFFICER WHILE COMPLETING THE ASSESSMENT U/S 143(3) READ WITH SECTI ON 153A/153B(1)(B) OF THE ACT HAS MADE VARIOUS ADDITIONS IN THE RETURN ED INCOME. THE DETAILS OF THE INCOME DECLARED BY THE ASSESSEE, ADDITION MA DE BY THE ASSESSING OFFICER, WHICH WAS REDUCED/DELETED BY THE LD. CIT(A) A RE AS UNDER: ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 6 AY INCOME DECLARED ADDITION MADE BY THE AO ADDITION SUSTAINED BY THE CIT(A) 2007-08 17,29,650 46,63,770 26,63,770 2008-09 17,69,250 1,07,78,700 + 13,26,600 37,78,700 + 13,26,600 2009-10 45,40,510 1,32,75,966 + 8,32,800 22,75,060 + 8,32,800 2010-11 1,30,94,390 26,84,725 + 29,75,859 11,84,725 + 29,75,859 2011-12 3,20,29,420 82,59,551 82,59,551 2012-13 3,00,06,860 69,54,913 69,54,913 2013-14 14,87,160 2,16,92,730 NIL SINCE THE LD. CIT(A) HAS ALLOWED PART RELIEF TO THE A SSESSEE, THEREFORE, BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE AGGRIEV ED BY THE IMPUGNED ORDERS OF THE LD. CIT(A) AND FILED CROSS APPEALS FO R THE A.YS. 2007-08 TO 2012-13. FOR THE A.Y. 2013-14, THE LD. CIT(A) HAS DE LETED THE ADDITION MADE BY THE ASSESSING OFFICER, THEREFORE, THE REVEN UE HAS FILED THE APPEAL AGAINST THE IMPUGNED ORDER OF THE LD. CIT(A). 4. IN THE APPEALS FOR A.Y. 2007-08, THE ASSESSEE AS WELL AS THE REVENUE HAVE RAISED FOLLOWING GROUNDS IN THE CROSS A PPEALS: GROUNDS OF ASSESSEES APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N ESTIMATING THE UNDISCLOSED INTEREST INCOME AT RS. 40,00,000/- AS A GAINST RS. 13,24,230/- DECLARED BY THE ASSESSEE THEREBY CONFIR MING AN ADDITION OF RS. 26,63,770/-. 2. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 7 3. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. GROUNDS OF REVENUES APPEAL: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE ID CIT(A), WAS RIGHT IN RESTRICTING THE ADDITION FROM RS 46,63 ,770/- TO RS 26,63,770/- MADE ON ACCOUNT OF UNDISCLOSED INTEREST INCOME WITHOUT APPRECIATING THE FACT THAT BASED ON SEIZED MATERIAL AND STATEMENTS GIVEN BY THE ASSESSEE DURING THE COURSE OF SEARCH/POST SEARCH, THE OPENING BALANCE OF RS 8 CRORE IS TAKEN AS ON 01.04.2006 AND ON SUCH CAPITAL THE ASSESSEE EARNED INTEREST IN COME BY SCHEME FLOATED IN ALL THE YEARS. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE ID CIT(A) WAS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE WI THOUT APPRECIATING THE FACTS THAT AMOUNT LYING IN THE PD ACCOUNT HAS TO BE ADJUSTED AGAINST THE EXISTING LIABILITY OF THE ASSE SSEE BUT AS PER EXPLANATION-2 OF THE SECTION 132B OF THE I.T. ACT 1 961, IT HAS BEEN CLARIFIED THAT THE EXISTING LIABILITY DOES NOT IN CLUDE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART-C OF CHAPTER XVII. 3. THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR ADD TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 5. GROUND NO. 1 OF THE ASSESSEES APPEAL AS WELL AS THE GROUNDS OF REVENUES APPEAL ARE COMMON REGARDING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF UNDISCLOSED INTERES T INCOME ON ESTIMATE BASIS OF RS. 46,63,770/- WAS RESTRICTED BY THE LD. C IT(A) TO RS. 26,63,770/-. FROM THE SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FLOATED A FINANCE SCHEME WHICH CONSISTS OF 100 DAYS DURATION AND MEMBERS OF THE SCHEME ARE REQUIRED TO PAY OFF A FIX ED SUM OF AMOUNT FOR CONTINUOUS 100 DAYS, THEREFORE, THE AMOUNT GIVEN ON LOAN WAS TO BE ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 8 REPAID BY THE MEMBERS ALONGWITH PRINCIPAL AND INTERE ST WITHIN A PERIOD OF 100 DAYS ON DAILY BASIS. THE ASSESSING OFFICER HAS C ITED AN ILLUSTRATION THAT IF A MEMBER TOOK A LOAN OF RS. 10,000/- FROM T HE ASSESSEE, HE IS REQUIRED TO REPAY PRINCIPAL ALONGWITH INTEREST TOTAL AMOUNTING TO RS. 12,000/- IN 100 EQUAL INSTALLMENTS OF RS. 120/- EAC H. LIKEWISE FOR A LOAN OF RS. 20,000/-, THERE WILL BE 100 EQUAL INSTALLMENT S OF RS. 240/- EACH TOTAL AMOUNTING TO RS. 24,000/-. THUS, THE ASSESSIN G OFFICER ESTIMATED THE INCOME FROM INTEREST RANGES FROM 60% TO 72% AS IT WA S ALSO DISCLOSED BY ONE OF THE ASSESSEES EMPLOYEE SHRI MAHAVEER PRASAD SHARMA IN HIS STATEMENT RECORDED U/S 132(4) OF THE ACT ON 31/7/20 12. SINCE THE SEIZED RECORD CONTAINS THE ENTRIES OF FINANCE ACTIVITY W.E. F. 19/6/2009 THEREFORE, PRIOR TO THE SAID DATE, THERE WAS NO MATE RIAL DISCLOSING ANY INCOME ON THIS ACTIVITY. THE ASSESSING OFFICER TOOK THE BALANCE SHEET AS ON 30/09/2009 SHOWING CAPITAL OF RS. 8,72,54,810/- A ND ESTIMATED THE UNDISCLOSED INCOME FOR THE PERIOD 01/4/2006 TO 17/0 6/2009. THE ASSESSEE IN THE RETURN OF INCOME, DECLARED THE INCO ME FROM THE FINANCE SCHEME ON ESTIMATED BASIS WHICH WAS NOT ACCEPTED BY T HE ASSESSING OFFICER AND FOUND TO BE ON LOWER SIDE CONSIDERING TH E FUND INVOLVED IN THE FINANCING BUSINESS PRIOR TO 01/4/2006. THE AS SESSING OFFICER ACCORDINGLY TOOK OPENING BALANCE OF RS. 8.0 0 CRORES AS ON 01/4/2006 AND ON SAID CAPITAL, THE ASSESSING OFFICE R ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 9 ESTIMATED INTEREST INCOME FOR THE A.Y. 2007-08 AT R S. 60.00 LACS. SINCE THE ASSESSEE DECLARED THE INTEREST INCOME OF RS. 13 ,26,230/-, ACCORDINGLY, THE ADDITION OF RS. 46,63,770/- WAS MADE BY THE ASSE SSING OFFICER ON ACCOUNT OF UNDISCLOSED INTEREST INCOME. 6. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSI NG OFFICER BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE WAS S UFFERING FROM TUBERCULOSIS (TB) DURING THESE YEARS AND THEREFORE,, THE ASSESSEE COULD NOT DO ANY BUSINESS OF FINANCING DUE TO ILL HEALTH. THIS FACT WAS NOT DISPUTED BY THE ASSESSING OFFICER. CONSIDERING THES E FACTS, THE LD. CIT(A) ESTIMATED THE INTEREST INCOME FOR THE A.Y. 2007-08 AT RS. 40.00 LACS AS AGAINST RS. 60.00 LACS ESTIMATED BY THE ASSESSING O FFICER AND CONSEQUENTLY A RELIEF OF RS. 20.00 LACS WAS GRANTED TO THE ASSESSEE ON THIS ACCOUNT. 7. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT DUR ING THE SEARCH AND SEIZURE ACTION, NO EVIDENCE WAS FOUND OR SEIZED RELATING TO THE QUANTUM OF FUNDS ADVANCED OR INTEREST INCOME EARNED BY THE ASSESSEE PRIOR TO 01/04/2006. THE LD AR HAS POINTED OUT THAT THE ASSESSING OFFICER HAD ADMITTED THIS FACT THAT THERE WAS NO RECORD AVAI LABLE FOR THE PERIOD COVERED BY THE THREE ASSESSMENT YEARS I.E. 2007-08, 2008-09 AND 2009- 10 AND PART PERIOD OF A.Y. 2010-11. THE ASSESSING OF FICER HAS NOT GIVEN ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 10 ANY REASONABLE BASIS FOR ESTIMATION OF INTEREST INC OME BUT AN AD HOC ESTIMATION HAS BEEN MADE BY THE ASSESSING OFFICER, WHICH WAS SUSTAINED BY THE LD. CIT(A) ON AD HOC BASIS WITHOUT HAVING ANY MATERIAL TO SUPPORT THE ADDITION MADE BY THE ASSESSING OFFICER AND SUST AINED BY THE LD. CIT(A). HE HAS FURTHER CONTENDED THAT THERE IS NO SC IENTIFIC BASIS OR SOUND REASONING FOR ESTIMATION OF INCOME AS THE ASSESSING OFFICER MADE ESTIMATION OF INTEREST INCOME FOR THREE YEARS AT RS . 60.00 LACS, 1.20 CRORES AND 1.70 CRORES, WHICH IS VERY INCONSISTENT AND ARBI TRARY. THE LD AR HAS POINTED OUT THAT THE ASSESSEE HAS ESTIMATED INCOME ON ACTUAL EARNINGS WHICH IS SUPPORTED BY THE APPLICATION OF INCOME DURI NG THE PERIOD W.E.F. ASSESSMENT YEAR 2007-08 TO 2009-10. THE DETAILS OF SUCH INVESTMENT IS VERIFIABLE FROM THE INFLOW AND OUTFLOW STATEMENT PROD UCED BY THE ASSESSING OFFICER AND IS ALSO ENCLOSED WITH THE IMPU GNED ORDER OF THE LD. CIT(A). THE ASSESSEE HAS DECLARED TOTAL INTEREST IN COME OF RS. 82,82,470/- FOR THESE ASSESSMENT YEARS, WHICH IS MAT CHING WITH THE APPLICATION OF INCOME DURING THE SAID PERIOD. THUS, THE INCOME DECLARED IS MORE THAN THE INVESTMENT FOUND FOR THESE PERIODS . HENCE, THE LD AR HAS SUBMITTED THAT THE ASSESSEE HAS GIVEN ALL RELEV ANT DETAILS SUPPORTING THE CLAIM OF THE ASSESSEE ALONGWITH THE FUND FLOW STA TEMENT THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINE D BY THE LD. CIT(A) ON ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 11 ESTIMATION BASIS WITHOUT ANY TANGIBLE MATERIAL IS NO T JUSTIFIED AND THE SAME MAY BE DELETED. 8. ON THE OTHER HAND, THE LD CIT DR HAS SUBMITTED TH AT THE OPENING BALANCE OF RS. 8.00 CRORES AS ON 01/4/2006 IS NOT I N DISPUTE AND THEREFORE, THE ASSESSING OFFICER HAS ESTIMATED THE INTEREST INCOME BY CONSIDERING THE SAID AMOUNT BY TAKING A BACKWARD CAL CULATION OF FUND AVAILABLE WITH THE ASSESSEE DEPLOYED UNDER 100 DAYS SCHEME. THE ASSESSING OFFICER HAS DULY GIVEN REBATED ON ACCOUNT OF ILL HEALTH OF ASSESSEE DURING THE PERIOD AND THEREFORE, ESTIMATIO N MADE BY THE ASSESSING OFFICER IS NOT WITHOUT ANY BASIS BUT IT IS VERY WELL PASSED ON THE SCIENTIFIC METHOD OF COMPUTING THE INCOME BY TAKING THE OPENING BALANCE OF RS. 8.00 CRORES AS ON 01/4/2006 AND THEN COMPUTI NG THE BACKWARD ESTIMATION OF INCOME FROM THAT DATE DOWNWARDS, THERE FORE, THE ASSESSING OFFICER HAS ESTIMATED ONLY RS. 60.00 LACS FOR THE A .Y. 2007-08, WHICH WAS ENHANCED TO RS. 1.20 CRORES IN THE NEXT SUBSEQUENT YEARS. THE MARGIN ON THE SCHEME IS SO HIGH THAT THE AMOUNT ESTIMATED BY THE ASSESSING OFFICER ON THE CAPITAL OF RS. 8.00 CRORES AS VERY REASONABL E AND RATHER CONSERVATIVE. THE LD CIT DR HAS FURTHER CONTENDED THA T AS PER THE SEIZED MATERIAL OUTSTANDING BALANCES WERE FOUND WHICH SHOWS THAT AN OUTSTANDING ADVANCE UP TO 31/3/2016 WAS RS. 23.00 L ACS COMPARING THE ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 12 SAID AMOUNT OF OUTSTANDING ADVANCE WITH THE DATA AVA ILABLE IN THE SEIZED MATERIAL THE ESTIMATION OF INCOME MADE BY THE ASSES SING OFFICER IS PROPER AND JUSTIFIED. THE LD CIT DR HAS THUS SUBMITTED THAT THE LD. CIT(A) HAS GRANTED THE RELIEF TO THE ASSESSEE WITHOUT ANY BASIS AND THE INCOME ESTIMATED BY THE ASSESSING OFFICER MAY BE RESTORED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT PRIOR T O 19/6/2009, NO EVIDENCE WAS FOUND DURING THE SEARCH AND SEIZURE ACT ION REGARDING ANY INCOME ON ACCOUNT OF INTEREST FROM 100 DAYS FINANCE SCHEME. THOUGH, THE ASSESSEE HAS NOT DISPUTED THE FACT THAT THE ASS ESSEE HAS BEEN CARRYING OUT THIS ACTIVITY SINCE LONG TIME AND ALSO SHOWN THE INCOME IN THE BOOKS OF ACCOUNT, HOWEVER, THE INCOME SHOWN IN THE BO OKS OF ACCOUNT IS NOT MATCHING WITH THE ENTRIES FOUND IN THE SEIZED MA TERIAL. THE ASSESSING OFFICER HAS ESTIMATED THE INCOME BY TAKING THE OPEN ING BALANCE OF CAPITAL AT RS. 8.00 CRORES AS ON 01/4/2006, WHICH WAS NOT DI SPUTED BY THE ASSESSEE. HOWEVER, THE ASSESSEE CONTENDED THAT DUE T O ILL HEALTH OF THE ASSESSEE DURING THE SAID PERIOD, AS THE ASSESSEE WAS SUFFERING FROM TUBERCULOSIS AND THEREFORE, WAS NOT ABLE TO DO ANY BU SINESS ACTIVITY. HENCE, THE ASSESSEES CLAIM THAT THE INCOME DECLARE D BY THE ASSESSEE OF RS. 13,36,237/- FOR THE YEAR UNDER CONSIDERATION IS JUSTIFIED AND EVEN ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 13 THE TOTAL INCOME DECLARED BY THE ASSESSEE FOR THE T HREE ASSESSMENT YEARS I.E. A.Y. 2007-08 TO 2009-10 AND PART OF THE A.Y. 2 010-11 UP TO 17/6/2009 IS MATCHING WITH THE APPLICATION OF INCOME . THE ASSESSEE HAS PRODUCED FUND FLOW STATEMENT SHOWING THE INCOME AND APPLICATION OF INCOME FOR ALL THESE YEARS. THE LD. CIT(A) HAS ANNEXE D THE FUND FLOW CHART TO THE IMPUGNED ORDER. IT IS PERTINENT TO NOT E THAT THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER U/S 143(3) READ WITH SECTION 153A FOR THE A.Y. 2007-08 TO 2009-10 ARE FALLING IN THE CATEGORY OF REASSESSMENT AS ORIGINAL ASSESSMENT AS ON THE DATE OF SEARCH WERE NO T PENDING AND THEREFORE, IN ABSENCE OF ABETMENT OF ASSESSMENTS TH E ORDERS PASSED BY THE ASSESSING OFFICER ARE IN THE NATURE OF REASSESS MENT PURSUANT TO THE SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT. IT IS SETTLED PROPOSITION OF LAW THAT IN THE REASSESSMENT PROCEEDINGS U/S 153A OF THE ACT, THE ASSESSING OFFICER CAN ASSESSEE AN INCOME BASED ON S EIZED MATERIAL. IN ABSENCE OF ANY SEIZED MATERIAL REGARDING THE INTERE ST INCOME FOR THE YEAR UNDER CONSIDERATION, NO ADDITION CAN BE MADE ON EST IMATED BASIS. IT IS AN UNDISPUTED FACT THAT THE MATERIAL FOUND DURING THE SEARCH AND SEIZURE ACTION CONTAINS THE ENTRIES W.E.F. 19/6/2009 AND THE REFORE, PRIOR TO THE SAID PERIOD, NO RECORD OR MATERIAL WAS FOUND TO DISC LOSE OR INDICATE ANY INCOME ON ACCOUNT OF INTEREST ON THE SCHEME. ONLY F ACT WHICH CAN BE ASCERTAINED FROM THE DOCUMENTS IS THAT THE ASSESSEE WAS ENGAGED IN THE ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 14 BUSINESS ACTIVITY OF FINANCE UNDER THE SCHEME KNOWN AS 100 DAYS SCHEME. HOWEVER, IN ABSENCE OF ANY SEIZED MATERIAL, THE ASSE SSING OFFICER CANNOT MAKE AN ADDITION ON ESTIMATE BASIS. THE ASSESSEE ALR EADY DECLARED AND SURRENDERED AN AMOUNT OF RS. 10 CRORES ON ACCOUNT O F CASH, INVESTMENT AND INTEREST INCOME. HENCE, HAVING REGARD TO THE FA CTS AND CIRCUMSTANCES OF THE CASE WHEN THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAS ACCEPTED THE FACT THAT THE ASSESSEE WAS SUFFERING FR OM THE AILMENT AND WAS UNDERGOING THE TREATMENT OF TUBERCULOSIS DURING T HE PERIOD UNDER CONSIDERATION THEN THE ESTIMATION MADE BY THE ASSES SING OFFICER AS WELL AS THE CONFIRMED BY THE LD. CIT(A) WITHOUT ANY PROPE R AND REASONABLE BASIS AND PARTICULARLY IN THE REASSESSMENT PROCEEDI NGS U/S 153A IS NOT PERMITTED. EVEN THE ASSESSING OFFICER HAS NOT WORKED OUT THE INCOME ON BASIS OF THE FUNDS AVAILABLE WITH THE ASSESSEE AND E MPLOYED IN THE BUSINESS ACTIVITY BY CONSIDERING THE CORRESPONDING APPLICATION OF INCOME WHICH WAS FOUND DURING THE COURSE OF SEARCH AND SEIZU RE ACTION AS WELL AS RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. T HEREFORE, WHEN THE ASSESSING OFFICER HAS NOT FOUND ANY SIGNIFICANT DIS CREPANCY IN THE INCOME OFFERED BY THE ASSESSEE AND CORRESPONDING APPLICATI ON OF INCOME THEN THERE IS NO REASON FOR NOT ACCEPTING THE INCOME OFF ERED BY THE ASSESSEE. ACCORDINGLY, IN FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE ADDITION WAS MADE BY THE ASSESSING OFFICER PURELY ON AD HOC ESTI MATION AND WITHOUT ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 15 ANY TANGIBLE MATERIAL, THE SAME IS NOT SUSTAINABLE AND CONSEQUENTLY IS LIABLE TO BE DELETED. HENCE WE DELETE THE ADDITION M ADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) ON THIS ACC OUNT. ACCORDINGLY, GROUND NO. 1 OF THE ASSESSEES APPEAL IS ALLOWED AND GROUND NO. 1 OF THE REVENUES APPEAL IS DISMISSED. 10. GROUND NO. 2 OF THE REVENUES APPEAL IS REGARDI NG RELIEF GRANTED TO THE ASSESSEE BY THE LD. CIT(A) IN RESPECT OF INTERE ST U/S 234B OF THE ACT. DURING THE SEARCH AND SEIZURE ACTION, THE CASH OF R S. 6.11 CRORES BELONGING TO THE ASSESSEE WAS SEIZED. THE ASSESSEE FI LED APPLICATIONS ON 21/3/2013, 27/5/2013, 3/7/2013 AND 17/9/2013 FOR AD JUSTMENT OF THE ABOVE SEIZED CASH AGAINST THE TAX LIABILITY. THE ASS ESSING OFFICER THOUGH ADJUSTED THE SAID AMOUNT BUT AGAINST THE FINAL TAX LIABILITY AFTER LEVY OF INTEREST U/S 234B OF THE ACT. 11. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESS ING OFFICER BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER CONSIDERING THE V ARIOUS DECISIONS ON THIS ISSUE DIRECTED THE ASSESSING OFFICER TO RECOMP UTED THE INTEREST CHARGEABLE U/S 234B OF THE ACT AFTER GIVING THE CRE DIT OF THE AMOUNT IN THE PD ACCOUNT. 12. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE R EVENUE HAS RAISED THIS ISSUE BEFORE THE ITAT. THE LD CIT-DR HAD SUBMITT ED THAT AS PER ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 16 EXPLANATION-2 TO SECTION 234B OF THE ACT, NO ADJUST MENT IS ALLOWED OF SEIZED CASH AGAINST THE TAX LIABILITY, THEREFORE, T HE LD. CIT(A) HAS COMMITTED ERROR IN ALLOWING THE RELIEF ON ACCOUNT OF INTEREST CHARGEABLE U/S 234B OF THE ACT. 13. ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE LD. CIT(A) HAS DECIDED THIS ISSUE BY FOLLOWING VA RIOUS DECISIONS ON THIS POINT. THE EXPLANATION-2 TO SECTION 132B OF THE ACT HAS BEEN INTRODUCED IN THE STATUTE BY THE FINANCE ACT, 2013 W.E.F. 01/6/ 2013, THEREFORE, THE SAID EXPLANATION IS APPLICABLE PROSPECTIVELY AND IS NOT APPLICATION FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LD AR HAS ALSO REFERRED TO THE CBDT CIRCULAR NO. 20/2017 DATED 12/06/2017 AND SUBMI TTED THAT THE CBDT HAS CLARIFIED THAT PRIOR TO 01/6/2013, THE SEIZ ED/REQUISITIONED CASH CAN BE ADJUSTED AGAINST THE ADVANCE TAX LIABILITY A S HELD BY THE VARIOUS COURTS AND THE DEPARTMENT HAS ACCEPTED THE JUDGMENT S INCLUDING THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SPAZE TOWERS PVT. LTD. DATED 17/11/2016. HENCE, THE LD AR H AS SUBMITTED THAT WHEN THE EXPLANATION IS APPLICABLE ONLY PROSPECTIVEL Y AND NOT APPLICABLE IN THE CASE PRIOR TO 01/6/2013 THEN THE LD. CIT(A) IS J USTIFIED IN ALLOWING THE ADJUSTMENT OF THE SEIZED CASH AGAINST THE ADVANCE T AX LIABILITY. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 17 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AS WELL AS R ELEVANT MATERIAL ON RECORD. THE ONLY DISPUTE IS REGARDING CASH SEIZED DU RING THE SEARCH AND SEIZURE ACTION IS AVAILABLE FOR ADJUSTMENT AGAINST THE ADVANCE TAX LIABILITY AND CONSEQUENTLY CHARGEABILITY OF INTEREST U/S 234B OF THE ACT. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE IN PARA 3.2.3 AS UN DER: 3.2.3 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AND AL SO CAREFULLY GONE THROUGH THE ASSESSMENT ORDER. I HAVE ALSO TAKEN A N OTE OF FACTUAL MATRIX OF THE CASE AS WELL AS APPLICABLE CASE LAWS RELIED UPON. IN THIS REGARD, AR CONTENDS THAT AS PER THE LAW AS APPLICABLE AT THAT TIME, SECTION 132 B (L) OF THE ACT PROVIDES FOR ADJUSTMENT OF ASSETS SEIZED AGAINST ANY EXISTING LIABILITY. FURTHER, AR HAS ALSO RELIED UPON THE DEC ISION OF HON'BLE ITAT JAIPUR BENCH IN CASE OF SH. JOHRI LAL SODHANI IN AY 2010-11 IN ITA NO 145/JP/2013 & CO NO 09/JP/2013 AND RAJAN JHIRIWAL V S DCIT ITA NO. 73/JP/2013. NOW, IN VIEW OF FOLLOWING JUDICIAL PRONOUNCEMENTS, THE LIABILITY TO PAY ADVANCE TAX IS AN EXISTING LIABILITY AND CASH SEIZE D DURING THE SEARCH OPERATION IS ADJUSTABLE AGAINST THE EXISTING LIABIL ITY: * KESAR KIMAM KARYALAYA ( HIGH COURT DELHI) * KANISHKA PRINTS PVT LTD (ITATAHMADABAD) * SUDHAR MSHETTY (ITATMUMBAI) * NIKKA MAI BABU RAM (SOT CHANDIGARH) IN CASE OF NIKKA MAI BABU, HONBLE ITAT CHANDIGARH HAS OBSERVED INTER ALIA AS UNDER: '8. QUITE CLEARLY, IT PRESCRIBES THAT THE ASSETS SEIZED UNDER S. 132 CAN BE ADJUSTED (A) AGAINST THE AMOUNT OF ANY EXISTING LIA BILITY UNDER THIS ACT; (B) AGAINST THE AMOUNT OF LIABILITY DETERMINED ON COMPL ETION OF ASSESSMENT UNDER S. 153A; (C) AGAINST THE AMOUNT OF LIABILITY DETERMINED ON COMPLETION OF ASSESSMENT UNDER CHAPTER XIV-B FOR TH E BLOCK PERIOD; AND (D) AGAINST ANY PENALTY LEVIED OR INTEREST PAYABLE IN CONNECTION WITH SUCH ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 18 ASSESSMENT. IN OTHER WORDS, S. 132B(1)(I) OF THE AC T EMPOWERS THE AO TO RECOVER THE PRESCRIBED LIABILITIES OUT OF THE ASSET S SEIZED UNDER S. 132 OF THE ACT. AS PER THE CIT(A) AND WHICH HAS BEEN SUPPO RTED BY LEARNED DEPARTMENTAL REPRESENTATIVE, THE LIABILITY TOWARDS ADVANCE TAX DOES NOT FORM A PART OF THE EXPRESSION 'EXISTING LIABILITY' APPEARING IN S. 132B(L)(I) OF THE ACT. IN OUR CONSIDERED OPINION, EVEN LIABILI TY TO PAY ADVANCE TAX IS PER THE STATUTORY PROVISIONS AND WE FIND NO PLAUSIB LE REASON TO ASCRIBE A RESTRICTED MEANING TO THE EXPRESSION 'EXISTING LIAB ILITY' APPEARING IN S. 132B(1)(I) OF THE ACT, AS BEING CONTENDED BY THE RE VENUE. THE ARGUMENT SET UP BY THE REVENUE IS THAT THE EXPRESSION 'EXIST ING LIABILITY' IS REFERRED IN THE CONTEXT OF THE IT ACT, 1961. THE WT ACT, 195 7, THE EXPENDITURE TAX ACT, 1987, THE GT ACT, 1958, AND THE INTEREST-TAX A CT, 1974, AND SINCE IN THE OTHER STATUTES, THERE IS NO CONCEPT OF ADVANCE TAX, THEREFORE THE EXPRESSION 'EXISTING LIABILITY' USED IN S. 132B(1)( I) CANNOT BE UNDERSTOOD TO MEAN ADVANCE TAX LIABILITY UNDER THE IT ACT, 1961. IN OUR CONSIDERED OPINION, INTERPRETATION PLACED BY THE REVENUE IS MI SPLACED AND WOULD LEAD TO ABSURD RESULTS. 9. IT IS WELL UNDERSTOOD THAT AS PER S. 4 OF THE A CT, AN ASSESSEE IS CHARGEABLE TO INCOME-TAX IN RESPECT OF HIS TOTAL INCOME. SUB-S . (2) OF S. 4 PRESCRIBES THAT THE INCOME-TAX SO CHARGEABLE SHALL BE DEDUCTED AT SOURCE OR PAID IN ADVANCE, WHERE IT IS SO DEDUCTIBLE OR PAYABLE UNDER ANY PROVISION OF THE ACT. WE HAVE OBSERVED EARLIER THAT ADVANCE TAX LIAB ILITY IS GOVERNED BY SS. 208 TO 210 OF THE ACT. SIMILARLY, S. 140A PROVIDES FOR PAYMENT OF SELF- ASSESSMENT TAX ON THE BASIS OF ANY RETURN OF INCOME REQUIRED TO BE FILED BY THE ASSESSEE. THE RELEVANT PROVISIONS ALSO PRESC RIBE THE DATES AND THE AMOUNT OF TAX REQUIRED TO BE PAID BY AN ASSESSEE. T HEREFORE, THE EXPRESSION 'EXISTING LIABILITY IN S. 132B(1)(I) CAN NOT BE READ TO EXCLUDE A PARTICULAR TAX LIABILITY, IF IT CAN BE SHOWN TO HAV E EXISTED ON A PARTICULAR DATE. IF THE LIABILITY TO PAY ADVANCE TAX HAD ARISE N, IT WOULD CERTAINLY CONSTITUTE A PART OF THE 'EXISTING LIABILITY' USED IN S. 132B(1)(I) OF THE ACT. 10. IN OUR CONSIDERED OPINION, THE DOCTRINE OF PUR POSIVE CONSTRUCTION HAS TO PREVAIL IN THIS SITUATION. IN THE PRESENT SITUATION , IT IS EVIDENT THAT CASH WAS SEIZED FROM THE ASSESSEE DURING SEARCH OPERATIO N AND, ASSESSEE REQUESTED THE DEPARTMENT TO ADJUST A PART OF SUCH C ASH RECEIPTS AGAINST THE LIABILITY OF ADVANCE TAX WHICH AROSE ON ACCOUNT OF TE INCOME SURRENDERED DURING THE SEARCH OPERATION. THE DEPART MENT DOES NOT DENY POSSESSION OF THE CASH SINCE THE TIME OF SEARCH. TH US, WE FIND NO JUSTIFICATION FOR THE REVENUE TO INTERPRET THE EXPR ESSION 'EXISTING LIABILITY' IN S. 132B(1)(I) AS NOT REFERRING TO LIABILITY OF A DVANCE TAX. UNDER THE IT ACT, LIABILITY TOWARDS ADVANCE TAX IS A PART OF THE SCHEME OF RECOVERY OF ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 19 TAXES AND SUCH LIABILITY DEFINITELY FALLS IN THE EX PRESSION 'EXISTING LIABILITY' USED IN S. 132B(L)(I) IN THE FACTS AND CIRCUMSTANCE S OF THE CASE. THE RELIANCE PLEADED BY THE CIT(A) ON THE JUDGMENT OF T HE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF RAMJILAL JAGANNAT H & ORS. VS. ASSTT. CIT (1999) 156 CTR (MP) 49: (2000) 241 ITR 758 (MP) IS QUITE MISPLACED. AS PER THE REVENUE, IN TERMS OF THE SAID JUDGMENT, THE SEIZED CASH CANNOT BE ADJUSTED TOWARDS ADVANCE TAX LIABILITY. WE HAVE CAR EFULLY PERUSED THE SAID JUDGMENT AND FIND THAT THE SAME DOES NOT PROHI BIT ADJUSTMENT OF SEIZED ASSETS TOWARDS LIABILITY TO PAY ADVANCE TAX. IN ANY CASE, WE FIND THAT JUDGMENT OF THE HON'BLE MADHYA PRADESH HIGH CO URT IS RELEVANT IN A SITUATION WHEN S. 132(5) WAS ON THE STATUTE, WHICH HAS SINCE BEEN DELETED BY THE FINANCE ACT, 2002 W. E.F. 1ST JUNE, 2002. SE C. 132(5) OF THE ACT REQUIRED THE AO TO MAKE AN ENQUIRY AND THEREAFTER M AKE AN ORDER TO DEAL WITH THE SEIZED ASSETS. SEC. 132(5) OF THE ACT AUTH ORIZES THE AO TO RETAIN IN HIS CUSTODY SUCH ASSETS AS IN HIS OPINION WERE S UFFICIENT TO SATISFY THE AGGREGATE AMOUNTS REFERRED TO IN CLS. (II), (IIA) A ND (III) OF S. 132(5) AND OBLIGATED HIM TO RELEASE THE REMAINING SEIZED ASSET S. IN THIS BACKGROUND, THE HON'BLE HIGH COURT, ON THE FACTS OF THE CASE BE FORE IT, HELD THAT UNLESS AN ORDER UNDER S. 132(5) OF THE ACT IS PASSED, THE AO COULD NOT DIRECT THAT THE ASSETS SEIZED BE ADJUSTED TOWARDS ADVANCE TAX L IABILITY. THE HON'BLE HIGH COURT SPECIFICALLY NOTED THAT IT IS ONLY AFTER AN ORDER UNDER S. 132(5) IS PASSED THAT THE ASSESSEE CAN MAKE A REQUEST THAT THE SEIZED AMOUNT WHICH IS SOUGHT TO BE RELEASED IN HIS FAVOUR BE ADJ USTED OR APPROPRIATED TOWARDS THE LIABILITY TO PAY ADVANCE TAX. THOUGH, I N THE CONTEXT OF THE PRESENT ASSESSMENT YEAR BEFORE US, THE PROVISIONS O F S. 132(5) ARE NOT APPLICABLE AND THEREFORE, STRICTLY SPEAKING, THE RA TIO OF THE JUDGMENT OF THE HON'BLE MADHYA PRADESH HIGH COURT DOES NOT APPL Y, SO HOWEVER IT IS PERTINENT TO OBSERVE THAT THE HON'BLE HIGH COURT HA S NOT READ ANY BLANKET PROHIBITION IN THE ACT AGAINST ADJUSTING THE SEIZED ASSETS AGAINST LIABILITY FOR PAYMENT OF ADVANCE TAX. THEREFORE, THERE IS NO JUSTIFICATION FOR THE CIT(A) TO RELY UPON THE ORDER OF THE MADHYA PRADESH HIGH COURT IN THE CASE OF RAMJILAL JAGANNATH (SUPRA) AND DENY THE CLA IM OF THE ASSESSEE.. IN CASE OF ACIT CENTRAL CIRCLE-23 NEW DELHI VS. SH ARUN KUMAR GUPTA, HON'BLE ITAT NEW DELHI IN ITA NO 4108/DEL/2010 BY RESPECTFULLY FOLLOWING THE DECISION OF NIKKA MAI BABU(SUPRA) AND K K MARKETING ( DELHI HIGH COURT 278 ITR 596 ) HAS UPHELD THE DECISION OF CIT(A) AND FINALLY DIRECTED THE AO TO RE-COMPUTE THE INTEREST CHARGEABLE U/S 234 B & ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 20 234C OF THE ACT ACCORDINGLY AFTER GIVING CREDIT OF AMOUNT SEIZED AGAINST THE ADVANCE TAX LIABILITY FALLEN DUE ON 15 TH MARCH 2009. IN CASE OF ACIT VS HANS RAJ GANDHI REPORTED IN 37 I TR 418, HON'BLE ITAT CHANDIGARH HAS HELD THAT ASSESSEE WAS ENTITLED TO ADJUSTMENT OF SEIZED CASH AGAINS T ADVANCE TAX LIABILITY AND THEREFORE NO INTEREST C OULD BE CHARGED U/S 234A & 234B IN THE EVENT OF DEPARTMENT NOT RESPONDING TO ASSESSEE'S REQUEST FOR ADJUSTMENT OF CASH SEIZED AGAINST ADVANCE TAX LIABILITY . HERE I WOULD LIKE TO REFER DECISION OF HON ITAT AGR A BENCH IN CASE OF ACIT VS. SUNIL C GUPTA [ITA NO 290/AGRA/2013 DT OF PRONO UNCEMENT 28/02/2014] WHEREIN HONBLE ITAT AGRA HAS HELD THAT CASH SEIZED TO BE ADJUSTED AGAINST ADVANCE TAX LIABILITY AS EXPLANATI ON-2 TO SECTION 132B OF THE ACT IS ENACTED WITH EFFECT FROM 1ST JUNE 2013. IN THIS CASE, HONBLE ITAT HAS UPHELD THE OBSERVATIONS OF ID CIT(A) WHICH ARE AS UNDER - I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A S WELL AS THE WRITTEN SUBMISSION OF THE APPELLANT, REMAND REPORT AND THE REJOINDER ON THIS ISSUE REMAND REPORT AND THE REJOINDER, IN THIS CASE SEARC H AND SEIZURE OPERATION WAS CARRIED OUT IN THE PREMISES OF SHRI SUNIL CHAND GUPTA ON 10.03.2010 WHEREIN CASH AMOUNTING TO RS.4,31,36,000/- WAS SEIZ ED FROM THE RESIDENCE AND LOCKER AND WAS DEPOSITED BY THE DEPARTMENT IN T HE PD ACCOUNT ON 10.03.2010 AND 19.03.2010. DURING THE COURSE OF SEA RCH THE ASSESSEES STATEMENT WAS RECORDED U/S 134 OF THE I.T. ACT WHER EIN THE ASSESSEE OFFERED TO PAY TAX ON AN INCOME OF RS.10 CRORE FOR THE F.Y. 2009-2010. THE ESTIMATED TAX LIABILITY ON AN INCOME OF RS.10 CRORE WORKED OUT TO ABOUT RS.3 CRORE APPROX. SINCE THE LIABILITY TO PAY TAX HAD AR ISEN AND THE CASH BEING SEIZED BY THE DEPARTMENT, THE APPELLANT REQUESTED T HE DEPARTMENT TO ADJUST RS.3 CRORE OUT OF THE RS.4,31,36,000/- SEIZE D AND DEPOSITED IN THE PD ACCOUNT, IT IS SEEN THAT THE ASSESSEE MADE A WRITTE N REQUEST ON 29.03.2010 TO THE CHIEF COMMISSIONER OF INCOME TAX WHICH WAS D ULY RECEIVED AND ALSO TO THE ADDITIONAL DIRECTOR OF INCOME TAX INVESTIGAT ION, AGRA, IT ALSO SEEN THAT SIMILAR REQUEST FOR ADJUSTMENT LETTERS WERE WR ITTEN TO THE DCIT CIRCLE- 1, AGRA ON 29.03.2010 WHICH WAS DULY RECEIVED IN TH E OFFICE ON THE SAME DAY. FURTHER, ANOTHER LETTER WAS WRITTEN TO THE CIT -1 ON 21.03.2010. LETTER DATED 05/07/2010 WAS ALSO WRITTEN TO THE DC IT CENT RAL CIRCLE STATING THAT ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 21 RETURN OF INCOME FOR A.Y. 2010-11 HAD BEEN FILED ON 30/6/10 WITH TAX PAYABLE OF RS.2,92,25,240/- AND THEREFORE REQUESTIN G THE AO ONCE AGAIN FOR ADJUSTMENT OF TAX LIABILITY WITH THE CASH LYING IN THE PD ACCOUNT, IN THE CIRCUMSTANCES, THE ASSESSEE HAD DONE ALL IT COULD D O SO AS TO ENSURE THAT CASH TYING IN THE PD ACCOUNT WOULD BE ADJUSTED TOWA RDS THE ADVANCE TAX LIABILITY. HOWEVER, IT SEEN THAT NO ACTION WAS TAKE N ON THE ASSESSEES PETITION BY ANY OF THE AUTHORITIES BEFORE WHOM THE ASSESSEE HAS FILED THE PETITION. TO MY MIND, IT IS AN APPARENT INJUSTICE T O THE APPELLANT TO HOLD ON THE CASH BELONGING IN THE ASSESSEE IN THE GOVERNMEN T ACCOUNT AND AT THE SAME TIME CHARGE INTEREST FOR NON-PAYMENT OF ADVANC E TAX ON THE DUE DATES, IT IS DEAR THAT THE APPELLANTS APPLICATION FOR ADJUSTMENT HAS BEEN SUBMITTED BEFORE THE VARIOUS AUTHORITIES, THE SEIZE D CASH SHOULD HAVE BEEN EITHER BEEN ADJUSTED AS REQUESTED BY THE ASSESSEE T O MEET THE ADVANCE TAX OBLIGATIONS OR THE ASSESSEE SHOULD HAVE BEEN INFORM ED THE REASONS WHY THE REQUEST MADE BY THE ASSESSEE CANNOT BE ACCEDED TO. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHRI JYOTINDRA B. MODI IN ORDER DATED 21.09.2011 HAS CLEARLY HELD THAT ONCE THE ASSESSEE OFFERS TO TAX THE UNDISCLOSED INCOME INCLUDING THE AMOUNT SEIZED DURI NG SEARCH, THEN THE LIABILITY TO PAY ADVANCE TAX IN RESPECT OF THAT AMO UNT ARISES EVEN BEFORE COMPLETION OF THE ASSESSMENT. THE HONBLE HIGH COUR T FURTHER HELD THAT SECTION 132B(1) OF THE ACT, THUS NOT PROHIBIT THE U TILIZATION OF AMOUNT SEIZED DURING THE COURSE OF SEARCH TOWARDS THE ADVANCE TAX LIABILITY. THE HON'BIE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT V S. ASHOK KUMAR REPORTED IN 334 ITR 355 HAS ALSO HELD ON SIMILAR FA CTS THAT THE ASSESSEE WAS ENTITLED TO ADJUSTMENT OF SEIZED CASH AGAINST ADVAN CE TAX LIABILITY AND THEREFORE, NO INTEREST COULD BE CHARGED U/S 234A & 234B IN THE EVENT OF THE DEPARTMENT NO RESPONDING TO ASSESSEES REQUEST FOR ADJUSTMENT OF CASH SEIZED AGAINST ADVANCE TAX LIABILITY, IN VIEW OF TH E FOLLOWING JUDGMENTS, THE ACTION OF THE AO IN CHARGING INTEREST UNDER 234A, 2 34B & 234C IS NOT JUSTIFIED AND HENCE, DIRECTED TO BE DELETED... IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE AS D ISCUSSED ABOVE AND RESPECTFULLY FOLLOWING THE DECISIONS OF AFOREMENTIO NED JUDICIAL PRONOUNCEMENTS, AO IS DIRECTED TO RE-COMPUTE THE IN TEREST CHARGEABLE U/S 234 B ACCORDINGLY AFTER GIVING CREDIT OF AMOUNT OF RS. 7,77,400/= BEING CLAIM MADE BY THE ASSESSEE IN THE COMPUTATION APPENDED WITH THE RETURN (OUT OF SEIZED CASH LYING IN PD A/C DATE OF SEARCH 31/07/2012) AGAINST THE TAX LIABILITY. ASSESSEE'S APPEAL STANDS ALLOWED. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 22 WE FURTHER NOTE THAT THE CBDT VIDE CIRCULAR NO. 20/2 017 DATED 12/6/2017 HAS EXPLAINED THE APPLICABILITY OF THE EXPLANATION- 2 TO SECTION 132B OF THE ACT IN PARA 2 TO 4, WHICH IS REPRODUCED AS UNDER: 2. DISPUTE AROSE BETWEEN THE DEPARTMENT AND THE AS SESSEES WITH REGARD TO ADJUSTMENT OF SUCH SEIZED/REQUISITIONED CASH AGAINS T ADVANCE TAX LIABILITY ETC. SEVERAL COURTS HELD THAT ON AN APPLICATION MADE BY THE ASSESSEE, THE SEIZED MONEY IS TO BE ADJUSTED AGAINST THE ADVANCE TAX LIA BILITY OF THE ASSESSEE. SUBSEQUENTLY, EXPLANATION 2 TO SECTION 132B OF THE ACT WAS INSERTED BY THE FINANCE ACT, 2013 W.E.F. 01-06-2013, CLARIFYING THA T 'EXISTING LIABILITY' DOES NOT INCLUDE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART C OF CHAPTER XVII OF THE ACT. HOWEVER, THE DISPUTE CONTI NUED ON THE ISSUE AS TO WHETHER THE AMENDMENT WAS CLARIFICATORY IN NATURE H AVING RETROSPECTIVE APPLICABILITY OR IT HAS ONLY PROSPECTIVE APPLICABIL ITY. 3. SEVERAL COURTS HAVE HELD THAT THE INSERTION OF E XPLANATION 2 TO SECTION 1328 OF THE ACT, IS PROSPECTIVE IN NATURE AND NOT APPLICABL E TO CASES PRIOR TO 01.06.2013.THE SLPS FILED BY THE DEPARTMENT AGAINST THE JUDGEMENT OF THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F COSMOS BUILDERS AND PROMOTERS LTD. 1 AND THE HON'BLE ALLAHABAD HIGH COU RT IN THE CASE OF SUNIL CHANDRA GUPTA2 , HAVE BEEN DISMISSED. SUBSEQUENTLY, THE CBDT HAS ALSO ACCEPTED THE JUDGMENT OF THE HON'BLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF SPAZE TOWERS PVT. LTD. 3 DATED 17.11.2016, WHERE IN IT WAS HELD THAT THE EXPLANATION 2 TO SECTION 132B OF THE ACT IS PROSPEC TIVE IN NATURE. 4. ACCORDINGLY, IT HAS NOW BEEN SETTLED THAT INSERT ION OF EXPLANATION 2 TO SECTION 132B OF THE ACT SHALL HAVE A PROSPECTIVE APPLICATIO N AND SO, APPEALS MAY NOT BE FILED BY THE DEPARTMENT ON THIS ISSUE FOR THE CASES PRIOR TO 01.06.2013 AND THOSE ALREADY FILED MAY BE WITHDRAWN/ NOT PRESSED UPON. ACCORDINGLY IN VIEW OF THE BINDING PRECEDENTS AS WEL L AS THE CBDT CIRCULAR, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER QUA THIS ISSUE. HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 15. GROUNDS NO. 2 AND 3 OF THE ASSESSEES APPEAL AN D GROUND NO. 3 OF THE REVENUES APPEAL ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 23 16. NOW WE TAKE THE CROSS APPEALS FOR THE A.Y. 2008-0 9. IN THESE APPEALS THE ASSESSEE AS WELL AS THE REVENUE HAVE RAI SED FOLLOWING GROUNDS OF APPEAL: GROUNDS OF ASSESSEES APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N ESTIMATING THE UNDISCLOSED INTEREST INCOME AT RS. 50,00,000/- AS A GAINST RS. 12,21,300/- DECLARED BY THE ASSESSEE THEREBY CONFIR MING AN ADDITION OF RS. 37,78,700/-. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE FINDINGS OF A.O. THAT CASH DEPOSIT IN THE BANK ACCO UNT OF SH. RAJENDRA JAIN RS. 1,10,000/-, SH. ASHOK SHARMA RS. 5,65,400/- AND SHRI MAHAVEER PRASAD SHARMA RS. 6,51,200/- IS OUT O F UNDISCLOSED INCOME OF ASSESSEE. 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. GROUNDS OF REVENUES APPEAL: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE ID CIT(A), WAS RIGHT IN RESTRICTING THE ADDITION FROM RS 1,07, 78,700/- TO RS. 37,78,700/- MADE ON ACCOUNT OF UNDISCLOSED INTEREST INCOME WITHOUT APPRECIATING THE FACT THAT BASED ON SEIZED MATERIAL AND STATEMENTS GIVEN BY THE ASSESSEE DURING THE COURSE OF SEARCH/POST SEARCH, THE OPENING BALANCE OF RS 8 CRORE IS TAKEN AS ON 01.04.2006 AND ON SUCH CAPITAL THE ASSESSEE EARNED INTEREST IN COME BY SCHEME FLOATED IN ALL THE YEARS. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE ID CIT(A) WAS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE WI THOUT APPRECIATING THE FACTS THAT AMOUNT LYING IN THE PD ACCOUNT HAS TO BE ADJUSTED AGAINST THE EXISTING LIABILITY OF THE ASSE SSEE BUT AS PER EXPLANATION-2 OF THE SECTION 132B OF THE I.T. ACT 1 961, IT HAS BEEN CLARIFIED THAT THE EXISTING LIABILITY DOES NOT IN CLUDE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART-C OF CHAPTER XVII. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 24 3. THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR ADD TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 17. GROUND NO. 1 OF THE ASSESSEES APPEAL AND GROUN D NO. 1 OF THE REVENUES APPEAL ARE COMMON AND IDENTICAL TO THE GR OUND NO. 1 INVOLVED IN THE CROSS APPEAL FILED FOR THE A.Y. 2007-08, THE REFORE, IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE A.Y. 2007-08, GROUND NO. 1 OF THE ASSESSEES APPEAL STANDS ALLOWED AND GROUND NO. 1 OF THE REVENU ES APPEAL STANDS DISMISSED. 18. THE GROUND NO. 2 OF THE REVENUES APPEAL IS ALSO COMMON TO GROUND NO. 2 OF THE REVENUES APPEAL FOR THE A.Y. 2 007-08, THEREFORE, IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE A.Y. 2007- 08, GROUND NO. 2 OF THE REVENUES APPEAL STANDS DISMISSED. 19. GROUND NO. 2 OF THE ASSESSEES APPEAL IS REGARD ING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH DE POSITS IN THE BANK ACCOUNT OF EMPLOYEES OF THE ASSESSEE. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT DURIN G THE SEARCH AND SEIZURE ACTION, SIGNED CHEQUE BOOKS OF THE VARIOUS PERSONS WERE FOUND. THE ASSESSING OFFICER NOTED THAT THERE IS A DEPOSIT OF RS. 1.87 CRORES ON DIFFERENT DATES IN THEIR BANK ACCOUNTS. THE ASSESSEE FILED EXPLANATION IN RESPECT OF DEPOSITS IN THE BANK ACCOUNT OF THESE PE RSONS. THE ASSESSING OFFICER FINALLY MADE THE ADDITION OF RS. 1.10 LACS ON ACCOUNT OF DEPOSIT IN ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 25 THE BANK ACCOUNT OF SHRI RAJENDRA JAIN, RS. 5,65,40 0/- ON ACCOUNT OF DEPOSIT IN THE BANK ACCOUNT OF SHRI ASHOK SHARMA AN D RS. 6,51,200/- ON ACCOUNT OF DEPOSIT IN THE BANK ACCOUNT OF SHRI MAHA VEER PRASAD SHARMA TOTAL AMOUNTING TO RS. 12,36,600/-. THE ASSESSEE CHA LLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A), BUT COU LD NOT SUCCEED. 20. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT ALL THESE THREE PERSONS ARE WORKING WITH THE ASSESSEE AND SINC E THEY ARE DEALING THE FINANCIAL MATTERS AND CASH, THEREFORE, IN ORDER TO PROTECT AND SECURE THE INTEREST OF THE ASSESSEE, THE ASSESSEE HAS TAKE N THE CHEQUES FROM THESE PERSONS AS A SECURITY FOR ANY MISAPPROPRIATIO N OF FUND BY THESE PERSONS. MERELY BECAUSE CHEQUE BOOKS OF THESE PERSO NS WERE FOUND WITH THE ASSESSEE, CANNOT BE A REASON TO CONSIDER THE CA SH DEPOSIT IN THESE ACCOUNTS AS UNDISCLOSED INCOME OF THE ASSESSEE. THE LD AR HAS FURTHER CONTENDED THAT THE STATEMENT OF SHRI MAHAVEER PRASA D SHARMA WAS RECORDED U/S 132(4) OF THE ACT AT THE TIME OF SEARC H, HOWEVER, NO SUCH QUESTION WAS ASKED OR ANY STATEMENT WAS MADE IN THIS RESPECT. THERE IS NO DISPUTE THAT THESE BANK ACCOUNTS BELONGING TO TH E RESPECTIVE PERSONS. THE ASSESSING OFFICER HAS ACCEPTED ALL OTHER ENTRIES IN THESE BANK ACCOUNTS AS BELONGING TO THE RESPECTIVE PERSONS EXC EPT FOR THOSE DEPOSITS MADE IN CASH. THESE PERSONS ARE ASSESSED TO TAX AND DEPOSITS IN THE BANK ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 26 ACCOUNT IS A SUBJECT MATTER OF ASSESSMENT IN THEIR HANDS. THE LD AR HAS REFERRED TO THE RETURN OF INCOME FILED BY THESE PER SONS AND SUBMITTED THAT THEY HAVE DECLARED THE INCOME WHICH IS SUFFICIENT TO COVER THE CASH DEPOSIT MADE BY THESE PERSONS IN THE BANK ACCOUNTS. RETURN OF INCOME WAS FILED PRIOR TO SEARCH AND THEREFORE, THE SAME CA NNOT BE DOUBTED BY THE DEPARTMENT. HE HAS FURTHER CONTENDED THAT THE A SSESSEE HAD PRODUCED ALL RELEVANT RECORDS AS SOURCE OF INCOME A ND DEPOSITS MADE IN THE BANK ACCOUNTS OF THESE PERSONS. THUS, MERELY BEC AUSE, THE CHEQUE BOOKS FOUND AT THE PLACE OF THE ASSESSEE, THE DEPOS ITS MADE IN THESE BANK ACCOUNTS CANNOT BE TREATED AS UNDISCLOSED INCO ME OF THE ASSESSEE. 21. ON THE OTHER HAND, THE LD CIT-DR HAS SUBMITTED THAT IT IS NOT A SIMPLE CASE OF CHEQUE BOOK FOUND WITH THE ASSESSEE B UT THE CHEQUE BOOKS WERE DULY SIGNED BY THESE PERSONS, THEREFORE, THE ASSESSEE WAS OPERATING THE BANK ACCOUNTS OF THESE PERSONS FOR TH E PURPOSE OF DEPOSITING CASH. HE HAS RELIED UPON THE ORDERS OF T HE AUTHORITIES BELOW. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE A DDITION OF RS. 13,26,600/- ON ACCOUNT OF CASH DEPOSITS IN THE BANK ACCOUNT OF THREE PERSONS NAMELY SHRI RAJENDRA JAIN, SHRI ASHOK SHARM A AND SHRI MAHAVEER PRASAD SHARMA. THE ASSESSING OFFICER TREATED THE DE POSITS MADE IN THE ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 27 BANK ACCOUNTS OF THESE PERSONS AS UNDISCLOSED INCOM E OF THE ASSESSEE ON THE BASIS OF SIGNED CHEQUES OF THESE PERSONS WERE FO UND DURING THE SEARCH AND SEIZURE ACTION AT THE PLACE OF THE ASSES SEE. THOUGH, THE SIGNED CHEQUE BOOK FOUND WITH THE ASSESSEE CAN BE A GROUND FOR FURTHER INVESTIGATION AND INQUIRY REGARDING ANY UNDISCLOSED INCOME OF THE ASSESSEE BY USING THE ACCOUNTS OF THESE PERSONS, HO WEVER, THE CHEQUE BOOK ITSELF CANNOT BE CONSIDERED AS AN EVIDENCE FOR UNDISCLOSED INCOME. THE ASSESSING OFFICER HAS PICKED UP THE ENTRIES IN T HE BANK ACCOUNTS OF THESE PERSONS WHERE THE CASH WAS DEPOSITED. ALL OTHE R ENTRIES IN THESE BANK ACCOUNTS WERE ACCEPTED BY THE ASSESSING OFFICER AS CARRIED OUT BY THESE PERSONS AND NOT BY THE ASSESSEE, THEREFORE, I T IS NOT A CASE OF THE ASSESSING OFFICER THAT THESE ACCOUNTS WERE FULLY OPE RATED BY THE ASSESSEE. THE ASSESSEE HAS CONTENDED THAT THE CHEQUE BOOKS WERE TAKEN FROM THESE PERSONS TO PROTECT THE ASSESSEES INTERE ST AS THESE PERSONS WERE WORKING WITH THE ASSESSEE AND HANDLING THE CASH A ND THEREFORE, IN ORDER TO PROTECT ANY LOSS DUE TO MISAPPROPRIATION O F FUND BY THESE PERSONS, THE ASSESSEE HAS TAKEN SIGNED CHEQUES OF T HESE PERSONS. WE FURTHER NOTE THAT THE ASSESSEE PRODUCED RETURN OF I NCOME OF ALL THESE THREE PERSONS WHEREIN THE INCOMES WERE DECLARED FOR THE A.Y. 2007-08 AND 2008-09. THE LD. CIT(A) WHILE REJECTING THE CONTEN TION OF THE ASSESSEE HAS OBSERVED THAT THE INCOME DECLARED BY T HESE PERSONS IS ONLY ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 28 EQUAL TO THE AMOUNT DEPOSIT IN THE BANK AND THEREFO RE, IT CANNOT BE ACCEPTED THAT THOSE DEPOSITS WERE MADE FROM THE DECL ARED INCOME OF THESE PERSONS AS THERE MUST BE SOME HOUSEHOLD EXPEN SES BY THESE PERSONS. THUS, THE EXPLANATION AND SUPPORTING EVIDE NCE PRODUCED BY THE ASSESSEE WAS NOT ACCEPTED BY THE AUTHORITIES BELOW ON THE GROUND THAT THE INCOME DECLARED BY THESE PERSONS IN THEIR RETUR N OF INCOME IS ONLY MATCHING WITH THE DEPOSITS AND THEREFORE, THE ENTIRE SOURCE OF DEPOSIT IS NOT EXPLAINED. IT IS PERTINENT TO NOTE THAT THE ASS ESSMENT UNDER CONSIDERATION IS REASSESSMENT U/S 153A OF THE ACT A ND THEREFORE, THE ADDITION OF INCOME CAN BE MADE ONLY ON THE BASIS OF SEIZED MATERIAL. THE CHEQUE BOOKS FOUND DURING THE SEARCH AND SEIZURE AC TION IS NOT AN EVIDENCE TO DISCLOSE ANY UNDISCLOSED INCOME OF THE ASSESSEE IN THE FORM OF DEPOSITS OF CASH IN THE BANK ACCOUNTS OF THESE P ERSONS. ONLY INFERENCE WHICH CAN BE DRAWN FROM THE AVAILABILITY OF CHEQUE B OOKS WITH THE ASSESSEE IS THAT THE ASSESSEE MIGHT HAVE USED THE B ANK ACCOUNTS OF THESE PERSONS. HOWEVER, IN ABSENCE OF ANY DOCUMENTARY EVID ENCE OF OPERATING OF THE BANK ACCOUNTS BY THE ASSESSEE, THE MERE AVAI LABILITY OF CHEQUE BOOKS WITH THE ASSESSEE CANNOT BE AN EVIDENCE FOR MA KING ADDITION OF THE CASH DEPOSITS IN THE ACCOUNTS OF THESE PERSONS SPEC IFICALLY WHEN ALL THESE PERSONS ARE REGULARLY ASSESSED TO INCOME TAX. THE A SSESSEE FILED THE RETURN OF INCOME IN SUPPORT OF EXPLANATION. FURTHER THE STATEMENT OF ONE ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 29 OF THESE PERSONS NAMELY SHRI MAHAVEER PRASAD SHARMA WAS RECORDED BY THE SEARCH PARTY U/S 132(4) OF THE ACT AND NO SUCH QUESTION WAS ASKED FROM THE SAID PERSON REGARDING THE DEPOSITS IN THE BANK ACCOUNT. THEREFORE, WHEN THE ASSESSEE HAS DISCHARGED ITS ONUS BY PRODUCING THE RETURN OF INCOME OF THESE PERSONS WHEREIN THE DECLA RED INCOME WAS SUFFICIENT TO COVER THE DEPOSITS MADE IN THE BANK A CCOUNTS, THEN IN THE ABSENCE OF ANY DIRECT EVIDENCE OR TANGIBLE MATERIAL TO DISCLOSE THE FACT THAT THE CASH DEPOSIT IN THE BANK ACCOUNTS OF THESE PERSONS BELONGS TO THE ASSESSEE, THE ADDITION MADE BY A.O. IS NOT SUST AINABLE. THE SAID DEPOSIT IS SUBJECT MATTER OF ASSESSMENT IN THE HAND S OF THESE PERSONS, ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCO UNT. 23. GROUNDS NO. 3 AND 4 OF THE ASSESSEES APPEAL AN D GROUND NO. 3 OF THE REVENUES APPEAL ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 24. NOW WE TAKE THE CROSS APPEALS FOR THE A.Y. 2009-1 0. IN THESE APPEALS THE ASSESSEE AS WELL AS THE REVENUE HAVE RAI SED FOLLOWING GROUNDS OF APPEAL: GROUNDS OF ASSESSEES APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N ESTIMATING THE UNDISCLOSED INTEREST INCOME AT RS. 60,00,000/- AS A GAINST RS. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 30 37,24,940/- DECLARED BY THE ASSESSEE THEREBY CONFIR MING AN ADDITION OF RS. 22,75,060/-. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE FINDINGS OF A.O. THAT CASH DEPOSIT IN THE BANK ACCO UNT OF SH. RAJENDRA JAIN RS. 13,200/-, SH. ASHOK SHARMA RS. 5, 02,400/- , SHRI MAHAVEER PRASAD SHARMA RS. 2,50,000/-, SH. SANJAY G OEL RS. 50,400/- AND SH. AJIT SINGH SHEKHAWAT RS. 16,800/- IS OUT OF UNDISCLOSED INCOME OF ASSESSEE. 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. GROUNDS OF REVENUES APPEAL: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE ID CIT(A), WAS RIGHT IN RESTRICTING THE ADDITION FROM RS 1,32, 75,966/- TO RS. 22,75,966/- MADE ON ACCOUNT OF UNDISCLOSED INTEREST INCOME WITHOUT APPRECIATING THE FACT THAT BASED ON SEIZED MATERIAL AND STATEMENTS GIVEN BY THE ASSESSEE DURING THE COURSE OF SEARCH/POST SEARCH, THE OPENING BALANCE OF RS 8 CRORE IS TAKEN AS ON 01.04.2006 AND ON SUCH CAPITAL THE ASSESSEE EARNED INTEREST IN COME BY SCHEME FLOATED IN ALL THE YEARS. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE ID CIT(A) WAS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE WI THOUT APPRECIATING THE FACTS THAT AMOUNT LYING IN THE PD ACCOUNT HAS TO BE ADJUSTED AGAINST THE EXISTING LIABILITY OF THE ASSE SSEE BUT AS PER EXPLANATION-2 OF THE SECTION 132B OF THE I.T. ACT 1 961, IT HAS BEEN CLARIFIED THAT THE EXISTING LIABILITY DOES NOT IN CLUDE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART-C OF CHAPTER XVII. 3. THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR ADD TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 25. GROUND NO. 1 OF THE ASSESSEES APPEAL AND GROUN D NO. 1 OF THE REVENUES APPEAL ARE COMMON AND IDENTICAL TO THE IS SUED RAISED IN GROUND ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 31 NO. 1 IN THE CROSS APPEAL FILED FOR THE A.Y. 2007-0 8, THEREFORE, IN VIEW OF OUR FINDING ON THE ISSUE FOR THE A.Y. 2007-08, GROU ND NO. 1 OF THE ASSESSEES APPEAL STANDS ALLOWED AND GROUND NO. 1 OF THE REVENUES APPEAL STANDS DISMISSED. 26. THE GROUND NO. 2 OF THE REVENUES APPEAL IS ALSO COMMON TO GROUND NO. 2 OF THE REVENUES APPEAL FOR THE A.Y. 2 007-08, THEREFORE, IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE A.Y. 2007- 08, GROUND NO. 2 OF THE REVENUES APPEAL STANDS DISMISSED. 27. THE GROUND NO. 2 OF THE ASSESSEES APPEAL IS REG ARDING THE ADDITION MADE ON ACCOUNT OF CASH DEPOSIT IN BANK ACCOUNTS OF VARIOUS PERSONS. THE IDENTICAL ISSUE WAS INVOLVED IN THE GROUND NO. 2 OF THE ASSESSEES APPEAL FOR THE A.Y. 2008-09. THE FACTS AND CIRCUMSTA NCES ARE IDENTICAL FOR BOTH THE ASSESSMENT YEARS. THE ASSESSEE HAS PRODUCED THE EVIDENCE IN SUPPORT OF THE SOURCE OF CASH DEPOSIT IN THE BANK B EING RETURN OF INCOME OF THESE PERSONS, IN WHOSE BANK ACCOUNTS, CASH WAS FO UND DEPOSITED. ACCORDINGLY, IN VIEW OF OUR FINDING ON THIS ISSUE FO R THE A.Y. 2008-09, THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. HENCE GROUND NO. 2 OF THE ASSESSEES APPEAL STANDS ALLOWED. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 32 28. GROUNDS NO. 3 AND 4 OF THE ASSESSEES APPEAL AN D GROUND NO. 3 OF THE REVENUES APPEAL ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 29. NOW WE TAKE THE CROSS APPEALS FOR THE A.Y. 2010-1 1. IN THESE APPEALS THE ASSESSEE AS WELL AS THE REVENUE HAVE RAI SED FOLLOWING GROUNDS OF APPEAL: GROUNDS OF ASSESSEES APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N ESTIMATING THE UNDISCLOSED INTEREST INCOME FOR THE PERIOD 01/4/200 9 TO 19/06/2009 AT RS. 25,00,000/- AS AGAINST RS. 13,15,275/- DECLA RED BY THE ASSESSEE THEREBY CONFIRMING AN ADDITION OF RS. 11,8 4,725/-. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF A.O. IN NOT ALLOWING THE EXPENSES OF RS. 29,75,8 59/- FOUND RECORDED IN SEARCH WHICH IS CLAIMED BY THE ASSESSEE IN EARNING THE INTEREST INCOME BY HOLDING THAT THE SAME IS RECORDE D IN THE REGULAR BOOKS OF ACCOUNT. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE FINDINGS OF A.O. THAT THE SALE OF JEWELLERY BY SMT. SARASWATI DEVI, MOTHER IN LAW OF ASSESSEE FOR RS. 2,06,32,278/- IS THE UNDISCLOSED INCOME OF THE ASSESSEE AS THE ASSESSEE IS UNABLE TO PROVE THE SOURCE OF SUCH JEWELLERY. 4. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 5. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. GROUNDS OF REVENUES APPEAL: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE ID CIT(A), WAS RIGHT IN RESTRICTING THE ADDITION FROM RS 40,00 ,000/- TO RS. 25,00,000/- MADE ON ACCOUNT OF UNDISCLOSED INTEREST INCOME ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 33 WITHOUT APPRECIATING THE FACT THAT BASED ON SEIZED MATERIAL AND STATEMENTS GIVEN BY THE ASSESSEE DURING THE COURSE OF SEARCH/POST SEARCH, THE OPENING BALANCE OF RS 8 CRORE IS TAKEN AS ON 01.04.2006 AND ON SUCH CAPITAL THE ASSESSEE EARNED INTEREST IN COME BY SCHEME FLOATED IN ALL THE YEARS. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE ID CIT(A) WAS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE WI THOUT APPRECIATING THE FACTS THAT AMOUNT LYING IN THE PD ACCOUNT HAS TO BE ADJUSTED AGAINST THE EXISTING LIABILITY OF THE ASSE SSEE BUT AS PER EXPLANATION-2 OF THE SECTION 132B OF THE I.T. ACT 1 961, IT HAS BEEN CLARIFIED THAT THE EXISTING LIABILITY DOES NOT IN CLUDE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART-C OF CHAPTER XVII. 3. THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR ADD TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 30. GROUND NO. 1 OF THE ASSESSEES APPEAL AND GROUN D NO. 1 OF THE REVENUES APPEAL ARE COMMON AND IDENTICAL TO THE IS SUED RAISED IN GROUND NO. 1 IN THE CROSS APPEAL FILED FOR THE A.Y. 2007-0 8, THEREFORE, IN VIEW OF OUR FINDING ON THE ISSUE FOR THE A.Y. 2007-08, GROU ND NO. 1 OF THE ASSESSEES APPEAL STANDS ALLOWED AND GROUND NO. 1 OF THE REVENUES APPEAL STANDS DISMISSED. 31. THE GROUND NO. 2 OF THE REVENUES APPEAL IS ALSO COMMON TO GROUND NO. 2 OF THE REVENUES APPEAL FOR THE A.Y. 2 007-08, THEREFORE, IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE A.Y. 2007- 08, GROUND NO. 2 OF THE REVENUES APPEAL STANDS DISMISSED. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 34 32. GROUND NO. 2 OF THE ASSESSEES APPEAL IS REGARD ING DISALLOWANCE OF EXPENSES FOUND RECODED IN THE SEIZED MATERIAL. THIS GROUND IS COMMON FOR A.Y. 2010-11, 2011-12 AND 2012-13. DURING THE C OURSE OF SEARCH AND SEIZURE ACTION, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND CONTAINING THE ENTRIES OF TRANSACTION OF 100 DAYS FINANCE SCHEME. THE SEIZED MATERIAL ALSO CONTAINS THE ENTRIES OF EXPENDITURE PERTAINING TO A.Y. 2010-11, 2011- 12 AND 2012-13 OF RS. 29,75,859/-, RS. 82,59,551/- AND RS. 69,54,914/- RESPECTIVELY. THE ASSESSEE IN THE RETURN OF INCOME H AS CLAIMED THESE EXPENSES AGAINST THE UNDISCLOSED INCOME OFFERED TO TAX. THE ASSESSING OFFICER DISALLOWED CLAIM OF ASSESSEE ON THE GROUND T HAT THESE EXPENSES ARE ALREADY RECORDED IN THE REGULAR BOOKS OF ACCOUN T. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFO RE THE LD. CIT(A), BUT COULD NOT SUCCEED. 33. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT THERE IS NO DISPUTE AS TO THE FACT THAT THESE EXPENSES ARE FOUN D RECORDED IN THE SEIZED DOCUMENTS. THE AO HAS SIMPLY MENTIONED THAT T HE SAME ARE RECORDED IN THE REGULAR BOOKS BUT HAS NOT SPECIFIED HOW THESE EXPENSES ARE RECORDED IN THE REGULAR BOOKS. IN FACT, THESE A RE THE EXPENDITURE OTHER THAN THOSE RECORDED IN THE REGULAR BOOKS. THE LD. CI T(A) HAS ALSO INCORRECTLY MENTIONED THAT ASSESSEE HAS NOT FILED A NY CORRELATION CHART ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 35 INDICATING THAT THESE EXPENSES ARE NOT CLAIMED IN T HE REGULAR BOOKS IGNORING THAT WHEN THESE EXPENDITURE ARE NOT RECORDE D IN THE REGULAR BOOKS, HOW ANY CORRELATION CHART CAN BE FILED BY THE ASSESSEE. AS PER SECTION 292C WHERE ANY DOCUMENT IS FOUND IN SEARCH T HEN IT IS TO BE PRESUMED THAT THE CONTENTS OF SUCH DOCUMENTS ARE TR UE. THUS, WHEN EXPENSES ARE FOUND RECORDED IN THE SEIZED MATERIAL, THE SAME HAS TO BE ALLOWED FOR COMPUTING THE UNDISCLOSED INCOME. IT IS SUBMITTED THAT NEITHER THE AO NOR THE LD. CIT(A) REQUIRED THE ASSE SSEE TO FURNISH ANY CORRELATION CHART OF THE EXPENSES RECORDED IN THE R EGULAR BOOKS OF ACCOUNTS OF THE TWO COMPANIES VIS-A-VIS THAT RECORD ED IN THE SEIZED MATERIAL. HOWEVER, BOTH THE RECORDS WERE AVAILABLE BE FORE THE AO FROM WHICH HE COULD HAVE ASCERTAINED WHETHER THE EXPENSES RECORDED IN THE REGULAR BOOKS OF ACCOUNTS ALSO FIND PLACE IN THE SE IZED DOCUMENTS. THEREFORE, SUCH CORRELATION CHART OF THE EXPENSES AS RECORDED IN THE SEIZED DOCUMENTS VIS-A-VIS THAT RECORDED IN THE REG ULAR BOOKS OF ACCOUNTS OF THESE TWO COMPANIES IS ENCLOSED FOR FYS 2009-10 T O 2011-12. FROM THIS CHART, IT CAN BE NOTED THAT NONE OF THE EXPENSES NO TED IN THE SEIZED RECORD TALLY WITH THAT RECORDED IN THE BOOKS OF ACCO UNTS. IN FACT, VARIOUS EXPENSES MENTIONED IN THE SEIZED RECORDS ARE NOT AT ALL RECORDED IN THE REGULAR BOOKS OF ACCOUNTS AND THE EXPENSES WHICH AR E RECORDED IN THE SEIZED RECORD HAS WIDE VARIATION WITH THE SIMILAR NAT URE OF EXPENSES ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 36 RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. THIS PROV ES THAT THE EXPENSES AS PER THE SEIZED RECORDS ARE ALTOGETHER DIFFERENT THAN THAT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF THESE TWO COMPANIE S. 34. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE, WHICH IS FOUND TO BE ALREAD Y RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER AS WELL AS LD . CIT(A) HAS GIVEN THE FINDING OF FACT THAT THESE EXPENSES ARE ALREADY RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND CLAIMED AGAINST THE INCOME REC ORDED IN THE BOOKS OF ACCOUNT. THEREFORE, THE CLAIM OF THE ASSESSEE WOU LD BE A DOUBLE DEDUCTION OF THE SAME EXPENDITURE ONE AGAINST THE I NCOME RECODED IN THE BOOKS AND AGAIN AGAINST THE UNDISCLOSED INCOME FOUN D DURING THE SEARCH AND SEIZURE ACTION. HE HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 35. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON THE RECORD. THERE IS NO DISPUT E THAT THE AMOUNT OF EXPENDITURE AS CLAIMED BY THE ASSESSEE AGAINST THE UNDISCLOSED INCOME FOR THESE THREE ASSESSMENT YEARS I.E. 2010-11 TO 20 12-13 WERE FOUND RECORDED IN THE SEIZED MATERIAL. THE UNDISCLOSED INC OME OFFERED BY THE ASSESSEE IS ALSO BASED ON THE SAME SEIZED MATERIAL AND THEREFORE, ONCE THE INCOME AND EXPENDITURE BOTH ARE RECORDED IN THE SAME MATERIAL, WHICH IS FOUND AND SEIZED DURING THE COURSE OF SEARC H AND SEIZURE ACTION ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 37 THEN THE ENTIRE RECORD AND ENTRIES FOUND IN THE SEI ZED MATERIAL HAS TO BE TAKEN INTO CONSIDERATION AND NOT A PART OF THE SEIZ ED MATERIAL IS ACCEPTED AND PART CAN BE REJECTED. THUS, THE SEIZED MATERIAL CANNOT BE CONSIDERED OR ACCEPTED IN PIECEMEAL BUT THE EVIDENCE WHICH IS T HE BASIS OF UNDISCLOSED INCOME HAS TO BE CONSIDERED AS A WHOLE. HOWEVER, THE QUESTION ARISES WHETHER THE EXPENSES FOUND RECORDED IN THE SEIZED MATERIAL IS ALREADY TAKEN INTO ACCOUNT AS PART OF T HE EXPENSES RECORDED IN THE BOOKS OF ACCOUNT OR NOT. NEITHER THE ASSESSING OFFICER NOR THE LD. CIT(A) HAS EXAMINED THE RELEVANT RECORD AND DETAILS TO FIND OUT THIS FACT THAT THE EXPENDITURE WHICH IS FOUND RECORDED IN THE SEIZED MATERIAL IS ALSO PART OF THE EXPENDITURE CLAIMED IN THE REGULAR BOOK S OF ACCOUNT. ON THE DIRECTION OF THE BENCH, THE ASSESSEE HAS FILED A CO MPLETE AND COMPARATIVE DETAILS OF ALL THE EXPENDITURE FOUND RECORDED IN TH E BOOKS OF ACCOUNT AS WELL AS THE EXPENDITURE WHICH IS RECORDED IN THE SEIZ ED MATERIAL. THE YEAR WISE COMPARATIVE STATEMENT SHOWS THAT THE SOME OF TH E EXPENDITURE FOUND RECORDED UNDER COMMON HEAD IN BOTH I.E. THE B OOKS OF ACCOUNT AS WELL AS SEIZED MATERIAL. HOWEVER, MANY ITEMS WHICH WERE RECORDED IN THE SEIZED MATERIAL ARE NOT CLAIMED IN REGULAR BOOKS OF ACCOUNT. THEREFORE, IT IS EVIDENT FROM THE COMPARATIVE DETAILS OF THE EXPE NDITURE THAT THE ENTIRE EXPENDITURE WHICH IS RECORDED IN THE SEIZED MATERIAL HAS NOT BEEN CLAIMED IN THE BOOKS OF ACCOUNT. WE FIND THAT ABOUT 50% OF THE ITEMS WHICH ARE ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 38 RECORDED IN THE SEIZED MATERIALS ARE NOT RECORDED I N THE BOOKS OF ACCOUNT. HOWEVER, THE REMAINING ITEMS WHICH ARE RECORDED IN BO TH SEIZED MATERIAL AS WELL AS BOOKS OF ACCOUNT ARE UNDER COMMON HEADS, THEREFORE IT REQUIRES THE VERIFICATION AND EXAMINATION OF FURTHE R DETAILS OF EACH AND EVERY SUB-HEAD OF EXPENDITURE UNDER A PARTICULAR HE AD. HENCE, WE FIND THAT THE DISALLOWANCE OF THE ENTIRE CLAIM OF THE EXP ENDITURE BY THE AUTHORITIES BELOW IS CONTRARY TO THE RECORD AND THE REFORE UNCALLED FOR, THOUGH THE POSSIBILITY OF SOME OF THE EXPENDITURE F OUND IN THE SEIZED MATERIAL MAY ALSO BE CLAIMED IN THE REGULAR BOOKS O F ACCOUNT CANNOT BE RULED OUT. THEREFORE, TO THE EXTENT OF THE EXPENDITU RE, WHICH IS NOT CLAIMED IN THE BOOKS OF ACCOUNT AND FOUND RECORDED IN THE SEIZED MATERIAL, THE SAME IS AN ALLOWABLE CLAIM AND CANNOT BE DENIED. REMAINING CLAIM OF EXPENDITURE WHICH IS RECORDED UNDER COMMON HEADS IS REQUIRED FURTHER EXAMINATION AND VERIFICATION. ACCORDINGLY I N THE FACTS AND CIRCUMSTANCES, WE SET ASIDE THIS ISSUE TO THE RECORD OF ASSESSING OFFICER FOR CONDUCTING A PROPER ENQUIRY OF THE DETAILS OF T HE EXPENDITURE AND TO FIND OUT WHETHER ANY PART OF THE EXPENDITURE WHICH IS FOUND IN THE SEIZED MATERIAL HAS BEEN CLAIMED IN THE BOOKS OF ACCOUNT A ND THEN ONLY TO THAT EXTENT THE CLAIM OF THE ASSESSEE CAN BE DISALLOWED. NEEDLESS TO SAY THAT THE ASSESSEE TO BE GIVEN AN APPROPRIATE OPPORTUNITY OF HEARING BEFORE DECIDING THIS ISSUE. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 39 36. GROUND NO. 3 OF THE ASSESSEES APPEAL IS REGARD ING THE ADDITION MADE ON ACCOUNT OF SALE OF JEWELLERY BY MOTHER-IN-LA W OF THE ASSESSEE TREATING THE SAME AS UNDISCLOSED INCOME. DURING THE COURSE OF SEARCH AND SEIZURE ACTION, THE BILLS RELATING TO SALE OF JEWELL ERY WAS FOUND AND SEIZED AS ANNEXURE AS-39. IN THE STATEMENT U/S 132(4) OF T HE ACT, THE ASSESSEE EXPLAINED THESE BILLS PERTAINS TO SALE OF JEWELLERY BY SMT. SARASWATI DEVI SHARMA, MOTHER IN LAW OF THE ASSESSEE. IN THE POST S EARCH STATEMENT DATED 19/10/2012, THE ASSESSEE FURTHER EXPLAINED TH AT BECAUSE OF ILL HEALTH, HIS MOTHER IN LAW SMT. SARASWATI DEVI SHARMA WAS RESIDING WITH HIM AND SHE KEPT HER VALUABLES AND PAPERS AT HIS RE SIDENCE. THUS, THE ASSESSEE CLAIMED THAT SHE HAD SOLD THE JEWELLERY FRO M TIME TO TIME AND THE SALE PROCEEDS WERE RECEIVED BY CHEQUE AND CREDIT ED IN HER BANK ACCOUNT. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAS ROUTED HIS UNDISCLOSED INCOME THROUGH SALE OF JEWELLERY OF HIS MOTHER IN LAW. THE ASSESSING OFFICER HAS OBSERVED THAT SMT. SARASWATI D EVI SHARMA NEVER FILED HER RETURN OF INCOME OR NET WEALTH. THE ASSESSE E HAS NOT PRODUCED ANY EVIDENCE OF HER HOLDINGS OF SUCH HUGE QUANTITY OF JEWELLERY. FURTHER SHE HAD FOUR DAUGHTER AND ONE SON AND THEREFORE, TH E ASSESSING OFFICER WAS OF THE VIEW THAT IT IS BEYOND HUMAN PROBABILITY THAT SHE WOULD NOT GIVEN ANYTHING TO HER OTHER DAUGHTERS AND SON. HER SIGNED CHEQUE BOOK ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 40 WAS FOUND WITH THE ASSESSEE, WHICH SHOWS THAT THE ASSES SEE CHANNELZED HIS UNDISCLOSED INCOME THROUGH SALE OF JEFWELLERY AN D GIFT TO HIS FAMILY MEMBERS. THE SUMMONS ISSUED TO THE PURCHASER OF THE JEWELLERY COULD NOT BE SERVED AND RETURNED BACK BY THE POSTAL AUTHO RITIES. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFO RE THE LD. CIT(A) BUT COULD NOT SUCCEED. 37. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT THAT BOTH THE LOWER AUTHORITIES HAVE NOT APPRECIATED THE FOLL OWING FACTS WHICH ESTABLISH THE AVAILABILITY OF THE JEWELLERY IN THE HANDS OF SMT. SARASWATI DEVI SHARMA AND SALE OF THE SAME BY HER:- (I) SMT. SARASWATI DEVI SHARMA IS MOTHER-IN-LAW OF ASSE SSEE. SHE HAILED FROM A REPUTED AGRICULTURAL-CUM-BUSINESS FAMILY OF FATEHPUR, DISTRICT CHURU, RAJASTHAN. ON THE OCCASION OF HER MARRIAGE A ND SUBSEQUENTLY FROM TIME TO TIME ON VARIOUS SOCIAL OCCASIONS, SHE RECEIVED GOLD JEWELLERY FROM HER PARENTAL SIDE AND ALSO FROM IN-L AWS SIDE. FURTHER, SHE ALSO RECEIVED GOLD ORNAMENTS TOWARDS HER SHARE ON SALE OF CERTAIN PARENTAL PROPERTIES. (II) SMT. SARASWATI DEVI WAS MARRIED TO SHRI HANUMAN PRA SAD SHARMA IN THE YEAR 1958. SHRI H.P. SHARMA DID HIS DIPLOMA IN MECHANICAL ENGINEERING AND QUALIFIED AS AN INSTRUCTOR FROM CEN TRAL TRAINING INSTITUTE OF INSTRUCTORS, CALCUTTA. HE RETIRED IN T HE YEAR 1997 AS INSTRUCTOR FROM INDUSTRIAL TRAINING INSTITUTE (ITI) , GOVT. OF RAJASTHAN, JAIPUR. IN COURSE OF HER MARRIED LIFE, SMT. SARASWA TI DEVI ALSO ACQUIRED CERTAIN JEWELLERY OUT OF HER SAVINGS AND STRIDHAN. (III) SMT. SARASWATI DEVI ALONG WITH HER HUSBAND AND ONLY SON WAS RESIDING AT SHASTRI NAGAR, JAIPUR. HOWEVER DUE TO HER ILL HE ALTH, IN THE LAST TWO YEARS BEFORE HER DEATH ON 18.08.2009 SHE WAS RESIDI NG WITH HER ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 41 DAUGHTER SMT. KALAWATI SHARMA, WIFE OF ASSESSEE AT VAISHALI NAGAR. SMT. KALAWATI SHARMA AND THE ASSESSEE WERE TAKING C ARE OF HER AS SHE WAS SUFFERING FROM HEART AND KIDNEY PROBLEM. IN THE SE CIRCUMSTANCES, SMT. SARASWATI DEVI HAD BROUGHT WITH HER ALL THE JE WELLERY AND VALUABLES TO THE RESIDENCE OF ASSESSEE AND DEVELOPE D A CLOSE AFFECTION TOWARDS HER DAUGHTER AND HER GRANDCHILDREN. (IV) DUE TO HER FALLING HEALTH, SHE DECIDED TO DISPOSE O FF HER JEWELLERY AND VALUABLES AND ACCORDINGLY, SOLD MOST OF HER JEWELLE RY/VALUABLES THROUGH THE ASSESSEE IN THE MONTH OF APRIL AND MAY 2009 AND DEPOSITED THE SAME IN HER BANK ACCOUNT WITH CENTRAL BANK OF INDIA, VAISHALI NAGAR, JAIPUR. THE ASSESSEES WIFE SMT. KA LAWATI SHARMA WAS NOMINEE IN THIS BANK ACCOUNT. IN THIS BANK ACCOUNT WHICH WAS OPENED ON 15.09.2008 SHE DEPOSITED HER SAVINGS AND ALSO TH E SALE PROCEEDS OF THE JEWELLERY. THIS AMOUNT REMAINED IN HER BANK ACC OUNT FOR FOUR MONTHS. THEREAFTER, FROM THIS BANK ACCOUNT SHE ISSU ED CHEQUE OF RS. 1 CRORE IN THE NAME OF HER DAUGHTER SMT. KALAWATI SHA RMA, RS. 35 LAKHS EACH IN THE NAME OF SAURABH SHARMA AND HIMANSHU SHA RMA, TWO SONS OF KALAWATI SHARMA AND RS. 40 LAKHS IN THE NAME OF SHRUTI SHARMA, DAUGHTER OF KALAWATI SHARMA ON 12.08.2009 AS GIFT F ROM HER. IN THE MEANWHILE, HER HEALTH DETERIORATED AND SHE WAS HOSP ITALISED IN SONI HOSPITAL, SIKAR ROAD, JAIPUR AND THEREFORE NEITHER THE CHEQUES COULD BE DEPOSITED IN THE BANK ACCOUNT OF DONEE NOR THE G IFT DEED COULD BE PREPARED THOUGH THE STAMP PAPER FOR GIFT DECLARATIO N WAS PURCHASED IN HER NAME. SHE ULTIMATELY EXPIRED ON 18.08.2009 AND THEREFORE, CHEQUES WERE DEPOSITED BY THE DONEE IN THEIR BANK A CCOUNT ON 19.08.2009. THESE FACTS WERE ALSO STATED BY THE ASS ESSEE IN REPLY TO QUESTION NO. 1 OF HIS STATEMENT U/S 131 DATED 19.10 .2012 RECORDED BY ADIT (INV.) - II, JAIPUR. THUS, IT IS EVIDENT THAT GIFT OF RS. 2.10 CRORES WAS GENUINELY RECEIVED BY THE FAMILY MEMBERS OF THE ASSESSEE FROM SMT. SARASWATI DEVI. (V) IT MAY BE NOTED THAT THE BILLS OF SALE OF JEWELLERY AND VALUABLES BY SMT. SARASWATI DEVI WERE ALSO FOUND AND SEIZED AT A NNEXURE-39 PAGES 9-62 FROM THE RESIDENCE. AS PER THESE BILLS, THE JE WELLERY AND VALUABLES HAS BEEN SOLD TO 5 PARTIES, NAMELY M/S KARNI ENTERP RISES (PROP. SHRI. ABHAY BUM), M/S PANKAJ JEWELS (PROP. PANKAJ YADAV), M/S SAI KRIPA GEM STONES (PROP. UMA SHANKAR SHARMA), M/S M. R. EN TERPRISES (PROP. JITENDRA KUMAR DAGA) AND M/S SHRI JEE JEWELS & ARTS (PROP. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 42 AKHIL BUM). IT IS POSSIBLE THAT THESE PARTIES MAY H AVE SHIFTED TO OTHER PLACE AND THEREFORE SUMMONS COULD NOT BE SERVED. (VI) THOUGH SMT. SARASWATI DEVI HAD FOUR DAUGHTERS AND A SON, SHE GIFTED THE AMOUNT RECEIVED FROM SALE OF JEWELLERY TO SMT. KALAWATI SHARMA AND HER THREE CHILDREN AS THEY WERE LOOKING AFTER H ER IN THE LAST TWO YEARS DURING HER ILLNESS AND THUS, SHE DEVELOPED A CLOSE AFFECTION WITH THE FAMILY OF ASSESSEE. IT IS FOR THIS REASON THAT EVEN IN THE BANK ACCOUNT ONLY SMT. KALAWATI SHARMA IS MADE NOMINEE. THEREFORE, ONLY BECAUSE SHE HAS NOT GIVEN ANY PART OF THE SALE PROC EEDS OF THE JEWELLERY TO HER OTHER THREE DAUGHTERS AND SON CANN OT BE VIEWED ADVERSELY. (VII) SMT. SARASWATI DEVI SHARMA HAS NOT FILED ANY RETURN OF INCOME BUT THE FACT REMAINS THAT SHE OWNED SUBSTANTIAL JEWELLERY W HICH WAS SOLD BY HER FOR WHICH EVIDENCE WAS ALSO FOUND IN SEARCH. IN VIEW OF ABOVE, THE SALE OF JEWELLERY BY SMT. SAR ASWATI DEVI AND THE SUBSEQUENT GIFT MADE BY HER TO THE FAMILY MEMBERS O F THE ASSESSEE IS FULLY VERIFIABLE. THE ORDER OF LOWER AUTHORITIES HOLDING THAT GIFT SO MADE BY SMT. SARASWATI DEVI IS AN APPLICATION OF UNDISCLOSED INC OME OF ASSESSEE IS THUS ERRONEOUS AND ON SURMISES AND CONJECTURES. HENCE, T HE SAME BE DIRECTED TO BE EXCLUDED FROM APPLICATION OF INCOME IN THE FUND INFLOW / OUTFLOW STATEMENT. 38. ON THE OTHER HAND, THE LD CIT DR HAS RELIED ON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING O FFICER HAS RAISED CERTAIN QUESTIONS SUCH AS SMT. SARASWATI DEVI SHARMA NEVER FILED RETURN OF INCOME OR NET WEALTH AND IN ABSENCE OF ANY EVIDEN CE TO SHOW HER ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 43 HOLDINGS SUCH A HUGE QUANTITY OF JEWELLERY, THE CLAI M OF THE ASSESSEE CANNOT BE ACCEPTED. SHE HAD FOUR DAUGHTERS AND ONE SON AND THEREFORE, IT IS BEYOND HUMAN PROBABILITY THAT A MOTHER WOULD GIVE ENTIRE BELONGINGS AND WEALTH ONLY TO ONE DAUGHTER EXCLUDING OTHER THRE E DAUGHTERS AND ONE SON. SIGNED CHEQUE BOOK FOUND WITH THE ASSESSEE CLEA RLY SHOWS THAT THE ASSESSEE HAS MANIPULATED AND HAS CHANNELIZED HIS UN DISCLOSED INCOME THROUGH SALE OF JEWELLERY. 39. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE SA LE BILLS OF JEWELLERY WAS FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTIO N AND SEIZED AS ANNEXURE-AS-39, THEREFORE, IT IS A SEIZED MATERIAL AND CANNOT BE HELD AS A BOGUS CLAIM OR DOCUMENT MANIPULATED OR MANUFACTURED BY THE ASSESSEE BEING AFTERTHOUGHT COOKED STORY. THEREFORE, WHEN THE SALE OF JEWELLERY IS FOUND AS PER THE BILLS SEIZED DURING THE SEARCH THE N THE TRANSACTION OF SALE CANNOT BE DISPUTED BY THE DEPARTMENT. THE SALE PROC EEDS OF THE JEWELLERY WAS ALSO UNDISPUTEDLY RECEIVED BY CHEQUE AND CREDITE D IN THE BANK ACCOUNT OF MOTHER IN LAW OF THE ASSESSEE. THE ONLY DO UBT WHICH IS RAISED BY THE ASSESSING OFFICER IS THAT IT IS BEYOND HUMAN PROBABILITY THAT SHE WOULD NOT GIVE ANYTHING TO OTHER DAUGHTERS AND SON A ND HAD GIVEN ENTIRE HER BELONGINGS TO THE ASSESSEE. EVEN IF, THIS APPRE HENSION OF THE ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 44 ASSESSING OFFICER IS TURNED OUT TO BE CORRECT THE I SSUE IS ONLY WHETHER THE ASSESSEE HAS MISCHIEVOUSLY TAKEN THE ENTIRE AMOUNT OF HIS MOTHER IN LAW FROM THE BANK ACCOUNT BY USING THE SIGNED CHEQUE BO OK WITH THE ASSESSEE. THUS, THIS ITSELF WILL NOT CHANGE THE CHAR ACTER OF INCOME AND SOURCE OF THAT AMOUNT WHICH WAS FOUND CREDITED IN THE BANK ACCOUNT OF MOTHER IN LAW AS A SALE PROCEEDS OF JEWELLERY. THE MOT HER IN LAW OF THE ASSESSEE ALREADY EXPIRED ON 18/8/2009 AND EVEN IF S HE HAD NEVER FILED RETURN OF INCOME OR WEALTH TAX, THE SAME WOULD NOT IM PUTE THE TAX LIABILITY IN THE HANDS OF THE ASSESSEE WHEN THIS IS NOT THE INCOME OF THE ASSESSEE BUT ONLY THE AMOUNT WHICH WAS TRANSFERRED FR OM THE BANK ACCOUNT OF THE MOTHER IN LAW TO THE ACCOUNT OF THE A SSESSEE. THE NON- SHARING OF THIS AMOUNT WITH OTHER DAUGHTERS AND SON CAN BE A FAMILY DISPUTE AND CAN BE SETTLED MUTUALLY BETWEEN THEMSELV ES AND HAS NO BEARING ON THE TAXABILITY OF THE INCOME IN THE HAND S OF THE RECIPIENTS. THEREFORE, ONCE THE AMOUNT WAS FOUND DULY CREDITED IN THE BANK ACCOUNT OF SMT. SARASWATI DEVI SHARMA AND SUBSEQUENTLY IT WAS TRANSFERRED IN THE ACCOUNT OF THE ASSESSEE THEN THE TRANSACTION CANNOT BE DOUBTED. EVEN THE SOURCE OF CREDIT IN THE ACCOUNT OF MOTHER IN LAW IS FOUND DURING THE SEARCH AND SEIZURE ACTION. THE ASSESSEE EXPLAINED THAT DURI NG THE LAST DAYS OF HER LIFE, SHE WAS RESIDING WITH THE ASSESSEE AND HER DAUGHTER SMT. KALAWATI SHARMA, WIFE OF ASSESSEE AND THUS IT IS NAT URAL THAT ALL HER ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 45 BELONGINGS AND VALUABLES WOULD BE AT THE PLACE OF AS SESSEE. ACCORDINGLY, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT WHEN THE SEIZED MATERIAL ITS ELF SHOWS THE SOURCE OF AMOUNT DEPOSITED IN THE BANK ACCOUNT OF SMT. SAR ASWATI DEVI SHARMA BY CHEQUE AND SUBSEQUENT TRANSFER FROM HER ACCOUNT TO THE ACCOUNT OF ASSESSEE, THE SAME CANNOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. ACCORDINLGY, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. 40. GROUNDS NO. 4 AND 5 OF THE ASSESSEES APPEAL AN D GROUND NO. 3 OF THE REVENUES APPEAL ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 41. NOW WE TAKE THE CROSS APPEALS FOR THE A.Y. 2011-1 2. IN THESE APPEALS THE ASSESSEE AS WELL AS THE REVENUE HAVE RAI SED FOLLOWING GROUNDS OF APPEAL: GROUNDS OF ASSESSEES APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF A.O. IS NOT ALLOWING THE EXPENSES OF RS. 82,59,5 51/- CLAIMED BY THE ASSESSEE IN EARNING THE INTEREST INCOME OF RS. 3,86,42,943/- BY HOLDING THAT THE SAME IS RECORDED IN THE REGULAR BO OKS OF ACCOUNT. 2. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 3. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. GROUNDS OF REVENUES APPEAL: ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 46 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE ID CIT(A) WAS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE WI THOUT APPRECIATING THE FACTS THAT AMOUNT LYING IN THE PD ACCOUNT HAS TO BE ADJUSTED AGAINST THE EXISTING LIABILITY OF THE ASSE SSEE BUT AS PER EXPLANATION-2 OF THE SECTION 132B OF THE I.T. ACT 1 961, IT HAS BEEN CLARIFIED THAT THE EXISTING LIABILITY DOES NOT IN CLUDE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART-C OF CHAPTER XVII. 2. THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR ADD TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 42. GROUND NO. 1 OF THE ASSESSEES APPEAL IS COMMON AND IDENTICAL TO THE ISSUED RAISED IN GROUND NO. 2 IN THE APPEAL FIL ED BY THE ASSESSEE FOR THE A.Y. 2010-11, THEREFORE, IN VIEW OF OUR FINDING ON THE ISSUE FOR THE A.Y. 2010-11, THIS GROUND OF ASSESSEES APPEAL STAN DS DISPOSED OF AND SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER FOR TH E SAME TERMS. 43. THE SOLITARY GROUND RAISED BY THE REVENUE IS REG ARDING THE ADJUSTMENT OF SEIZED CASH AGAINST THE TAX LIABILITY . THIS GROUND OF REVENUES APPEAL IS ALSO COMMON TO GROUND NO. 2 OF THE REVENUES APPEAL FOR THE A.Y. 2007-08, THEREFORE, IN VIEW OF OUR FIND ING ON THIS ISSUE FOR THE A.Y. 2007-08, GROUND NO. 1 OF THE REVENUES APPEAL STANDS DISMISSED. 44. GROUNDS NO. 2 AND 3 OF THE ASSESSEES APPEAL AN D GROUND NO. 2 OF THE REVENUES APPEAL ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 47 45. NOW WE TAKE THE CROSS APPEALS FOR THE A.Y. 2012-1 3. IN THESE APPEALS THE ASSESSEE AS WELL AS THE REVENUE HAVE RAI SED FOLLOWING GROUNDS OF APPEAL: GROUNDS OF ASSESSEES APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF A.O. IS NOT ALLOWING THE EXPENSES OF RS. 69,54,9 13/- CLAIMED BY THE ASSESSEE IN EARNING THE INTEREST INCOME OF RS. 3,54,04,242/- BY HOLDING THAT THE SAME IS RECORDED IN THE REGULAR BO OKS OF ACCOUNT. 2. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 3. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. GROUNDS OF REVENUES APPEAL: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE ID CIT(A) WAS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE WI THOUT APPRECIATING THE FACTS THAT AMOUNT LYING IN THE PD ACCOUNT HAS TO BE ADJUSTED AGAINST THE EXISTING LIABILITY OF THE ASSE SSEE BUT AS PER EXPLANATION-2 OF THE SECTION 132B OF THE I.T. ACT 1 961, IT HAS BEEN CLARIFIED THAT THE EXISTING LIABILITY DOES NOT IN CLUDE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART-C OF CHAPTER XVII. 2. THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR ADD TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 46. GROUND NO. 1 OF THE ASSESSEES APPEAL IS COMMON AND IDENTICAL TO THE ISSUED RAISED IN GROUND NO. 2 IN THE CROSS APPE AL FILED BY THE ASSESSEE FOR THE A.Y. 2010-11, THEREFORE, IN VIEW OF OUR FIN DING ON THE ISSUE FOR THE A.Y. 2010-11, THIS GROUND OF ASSESSEES APPEAL STAN DS DISPOSED OF AND SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER FOR TH E SAME TERMS. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 48 47. THE MAIN SOLITARY GROUND RAISED BY THE REVENUE I S REGARDING THE ADJUSTMENT OF SEIZED CASH AGAINST THE TAX LIABILITY . THIS GROUND OF REVENUES APPEAL IS ALSO COMMON TO GROUND NO. 2 OF THE REVENUES APPEAL FOR THE A.Y. 2007-08, THEREFORE, IN VIEW OF OUR FIND ING ON THIS ISSUE FOR THE A.Y. 2007-08, GROUND NO. 1 OF THE REVENUES APPEAL STANDS DISMISSED. 48. GROUNDS NO. 2 AND 3 OF THE ASSESSEES APPEAL AN D GROUND NO. 2 OF THE REVENUES APPEAL ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 49. NOW WE TAKE THE REVENUES APPEAL FOR THE A.Y. 201 3-14, WHEREIN THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE ID CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2,16,92,7 26/- MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT EXCESS OVER THE I NCOME WITHOUT APPRECIATING THE FACTS AND A DETAILED CASH FLOW STA TEMENT FOR THE RELEVANT PERIOD WAS PREPARED WHICH CLEARLY SHOWS TH AT THERE WAS UNDISCLOSED INVESTMENT EXCESS OVER THE INCOME. 2. WITHOUT APPRECIATING THE FACT THAT WHILE PREPARI NG THE REVISED FLOW STATEMENT, LD CIT(A) HAS REDUCED THE ADDITIONS DELE TED BY HIM IN A.Y. 2007-07 TO 2012-13, WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND CHALLENGED IN FURTHER APPEAL. 3. THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR ADD TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 50. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER MADE ADDITION OF RS. 2,16,92,726/- ON ACCOUNT OF UN DISCLOSED INVESTMENT ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 49 BEING EXCESS AMOUNT OF INVESTMENT OVER THE UNDISCLO SED INCOME FOR THE YEAR UNDER CONSIDERATION AS ESTIMATED BY THE ASSESS ING OFFICER. THE ASSESSING OFFICER AS PER THE REVISED FUND FLOW STATE MENT PREPARED AFTER CONSIDERING VARIOUS ADDITIONS FOR ALL THE YEARS WORK OUT THE OPENING BALANCE AS ON 01/4/2012 AT RS. 22,25,416/- AS AGAIN ST THE APPLICATION OF INCOME FOR THE YEAR IS RS. 2,39,18,142/- RESULTING A SHORT FALL OF RS. 2,16,92,726/-. 51. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESS ING OFFICER BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER CONSIDERING THE CERTAIN ADDITIONS WHICH WERE RECASTED THE UNDISCLOSED INCOME AND APPLICATION STATEMENT AND ACCORDINGLY DELETED THE ADDITION MADE BY THE ASSESS ING OFFICER. 52. BEFORE US, THE LD CIT DR HAS RELIED UPON THE OR DER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS AN OUTCOME OF THE ASSESSMENT FRAMED FOR THE EARLIER FIVE ASSESSMENT YEARS AND THEREFORE, THIS ADDITION IS DIRECT CONSEQ UENCE OF THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE EARLIER YEAR. 53. ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE LD. CIT(A) HAS DELETED THE APPLICATION OF UNDISC LOSED INCOME ON ACCOUNT OF SALE OF JEWELLERY OF RS. 1,99,49,786/- AN D ON ACCOUNT OF INVESTMENT IN SHARES OF RS. 2,42,29,675/- FOR THE A .Y. 2009-10 AND 2010- ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 50 11 RESPECTIVELY. THE DELETION MADE BY THE LD. CIT(A) HAVE NOT BEEN CHALLENGED BY THE REVENUE, THEREFORE, AFTER DELETIO N OF THESE AMOUNTS, THE ALLEGED EXCESS INVESTMENT COMPUTED BY THE ASSESSING OFFICER WILL NOT SURVIVE. 54. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ASSESSING OFFI CER HAS MADE THIS ADDITION ON THE BASIS OF A REVISED FUND FLOW STATEME NT PREPARED AFTER CONSIDERING THE VARIOUS ADDITIONS MADE IN THE EARLI ER YEARS AND THEREBY THE ASSESSING OFFICER ARRIVED TO THE AMOUNT OF RS. 22,25,416/- AS AN OPENING CASH BALANCE ON 01/4/2012. IT IS PERTINENT TO NOTE THAT THIS OPENING CASH BALANCE WAS WORKED OUT BY THE ASSESSING OFFICER BY CONSIDERING THE INVESTMENT BY THE ASSESSEE AS APPLI CATION OF UNDISCLOSED INCOME ON ACCOUNT OF SALE OF JEWELLERY AND INVESTMEN T IN SHARES AS WELL AS OTHER ITEMS OF ADDITION MADE BY THE ASSESSING OF FICER. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE IN PARA 3.1.2 AS UNDER: 3.1.2 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AND CA REFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALSO TAKEN A NOTE OF FACTU AL MATRIX OF THE CASE AS WELL AS APPLICABLE CASE LAWS RELIED UPON. THE ON LY ISSUE IN THIS GROUND IS THAT IF THERE IS ANY SHORTFALL AFTER CONSIDERING THE OUTCOME OF APPEALS ON VARIOUS ADDITIONS / APPLICATION OF INCOME MADE I N AY 2007-08 TO 2012-13, THEN THE SAME IS TO BE ADDED. IN THIS CASE , I HAVE DECIDED APPEALS FOR AY 2007-08 TO 2012-13 WHEREIN CERTAIN A DDITIONS HAVE BEEN ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 51 DELETED. AFTER CONSIDERING THESE, U A REVISED CASH FLOW CHART IS PREPARED AND ANNEXED HEREWITH AS PER ANNEXURE-A. FOR THE SAKE OF CLARITY, RELEVANT EXTRACTS OF REVISED CASH FLOW STATEMENT IS REPRODUCED HERE AS UNDER: ASSESSMENT YEAR 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011 - 12 2012 - 13 2013 - 14 AO'S CASH FLOW CHART: ESTIMATED OP CASH CAPITAL AS ON 01.04.06 8,00,00,000 8,58,50,000 9,35,83,400 8,16,68,227 4,22,08,139 7,37,62,067 15,53,049 ADD : INCOME AS ABOVE 60,00,000 1,20,00,000 1,70,00,000 1,72,99,094 3,86,42,943 3,54,04,242 0 TOTAL 8,60,00,000 9,7850,000 11,05,83,400 9,89,67,321 8,08,51,082 10,91,66,309 15,53,049 LESS: DRAWINGS 1,50,000 2,40,000 3,00,000 4,80,240 14,41,583 6,72,367 0 LESS: APPLICATION OF INCOME AS ABOVE 0 40,26,600 2,86,15,173 5,62,78,942 56,47,432 10,69,40,893 2,39,18,142 CLOSING BALANCE 8,58,50,000 9,35,83,400 8,16,68,227 4,22,08,139 7,37,62,067 15,53,049 - 22365093 REVISED CASH FLO W CHART ESTIMATED OP CASH CAPITAL AS ON 01.04.06 80000000 83850000 84583400 81618013 64887600 96441528 24232510 ADD : INCOME AS ABOVE 6000000 12000000 17000000 17299094 38642943 35404242 0 LESS: RELIEF ALLOWED IN ESTIMATED INCOME -2000000 -7000000 -11000000 -1500000 0 0 0 TOTAL 84000000 88850000 90583400 97417107 103530543 131845770 24232510 LESS: DRAWINGS - 150000 - 240000 - 300000 - 480240 - 1441583 - 672367 0 LESS: APPLICATION OF INCOME AS ABOVE 0 -4026600 -28615173 -56278942 -5647432 -106940893 -23918142 ADD: RELIEF ALLOWED IN APPLICATION OF INCOME 0 0 19949786 24229675 0 0 0 CLOSING BALANCE 8,38,50,000 8,45,83,400 8,16,18,013 6,48,87,600 9,64,41,528 2,42,32,510 3,14,368 ON THE BASIS OF THIS CASH FLOW CHART, THERE IS NO S HORTFALL IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE ADDITION OF RS. 2,16, 92,726/- MADE BY THE AO ON ACCOUNT OF NEGATIVE BALANCE IS HEREBY DELETED . ASSESSEES APPEAL ON THIS GROUND IS ALLOWED. THEREFORE, THE LD. CIT(A) HAS RECASTED CASH FLOW STATE MENT AND FOUND THAT THERE IS NO SHORT FALL OF FUND AS PER THE REVI SED FUND FLOW STATEMENT. MOREOVER WHEN WE HAVE ALREADY DECIDED THE ISSUE OF JE WELLERY IN FAVOUR OF THE ASSESSEE, THEN THE QUESTION OF DISALLOWANCE O N ACCOUNT OF SHORT FALL OF FUND AND MAKING EXCESS INVESTMENT DOES NOT ARISE . ACCORDINGLY, IN ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 52 VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE D O NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A ). HENCE, THE GROUNDS NO. 1 AND 2 RAISED IN THE REVENUES APPEAL IS DISMI SSED. 55. GROUND NO. 3 OF THE REVENUES APPEAL IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 56. IN THE RESULT ASSESSEES APPEAL BEING ITA NO. 9 19, 920 AND 921/JP/2016 ARE ALLOWED AND REVENUES APPEAL BEING I TA NO. 932, 933 AND 934/JP/2016 ARE DISMISSED. ASSESSEES APPEAL BE ING ITA NO. 922/JP/2016 IS PARTLY ALLOWED AND REVENUES APPEAL B EING ITA NO. 935/JP/2016 IS DISMISSED. ASSESSEES APPEAL BEING I TA NO. 923 & 924/JP/2016 ARE ALLOWED FOR STATISTICAL PURPOSES ONL Y AND REVENUES APPEAL BEING ITA NO. 936 & 937/JP/2016 ARE DISMISSE D AND THE REVENUES APPEAL BEING ITA NO. 938/JP/2016 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/07/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 TH JULY, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI PRAKASH CHAND SHARMA, JAIPUR. ITA 919 TO 924/JP/2016 & 932 TO 938/JP/2016 PRAKASH CHAND SHARMA VS ACIT 53 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CENTRAL CIRCLE-2, JAIPU R. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 919 TO 924/JP/2016 & 932 TO 938/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR
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