The ACIT, Central Circle-1, Surat V. Shri Prafulbhai @ Rohitbhai J.Shah, Surat

ITA 993/AHD/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60523 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-04-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 07-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Search and seizure; Opportunity of being heard; Notional interest
• Section: 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD AT D BENCH BEFORE: SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI T. R. MEENA, ACCOUNTANT MEMBER SL. NO. ITA/CO NO. A.Y. APPELLANT VS RESPONDENT 1. ITA NO.993/AHD/2007 2003- 04 ACIT- CENTRAL CIRCLE-1, SURAT VS. SHRI PRAFULBHAI @ ROHIT J SHAH, 8/1662, DHRU MOHOLLO, GOPIPURA, SURAT 2. C.O.NO.79/AHD/2007 2003- 04 SHRI PRAFULBHAI @ ROHIT J SHAH, 8/1662, DHRU MOHOLLO, GOPIPURA, SURAT VS. ACIT- CENTRAL CIRCLE-1, SURAT 3. ITA NO.994/AHD/2007 2004- 05 ACIT- CENTRAL CIRCLE-1, SURAT VS. SHRI PRAFULBHAI @ ROHIT J SHAH, 8/1662, DHRU MOHOLLO, GOPIPURA, SURAT 4. ITA NO.868/AHD/2007 2004- 05 SHRI PRAFULBHAI & ROHITBHAI J. SHAH VS. ACIT- CENTRAL CIRCLE-1, SURAT SL.NO. ASSESSEE BY REVENUE BY 1 TO 4 SHREE S.N. SOPARKAR WITH SHRI R.M. UPADHYAY, A.RS. SHREE D.P. GUPTA, CIT-DR ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 2 DATE OF HEARING : 01.06.2012 DATE OF PRONOUNCEMENT : 15.06.2012 / ORDER PER : T.R. MEENA, ACCOUNTANT MEMBER THESE TWO APPEALS OF THE REVENUE AND ONE APPEAL AN D ONE C.O. OF THE ASSESSEE ARISING OUT OF ORDER OF THE LD. CIT(A)-II, AHMEDABAD DATED 22,12,2006 ARE AS PER DETAILS BELOW: - ITA /CO NO. CIT(A) ORDER DA TED A.Y. ITA NO.993/AHD/2007 22.12.2006 2003 - 04 C.O.79/AHD/2007 22.12.2006 2003 - 04 ITA NO. 994/AHD/2007 22.12.2006 2004 - 05 ITA NO.868/AHD/2007 22.12.2006 2004 - 05 2. THIS COMMON ORDER IS PASSED IN ALL THE APPEALS A S ALL THE YEARS HAVE SIMILAR GROUNDS OF APPEAL. 3. I.T.A. NO.993/AHD/2007 (A.Y. 2003-04) EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: ( ASSESSMENT YEAR 2003-04) (I) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO RESTRICT THE ADDITION OF RS.1,12,68,632/- TO RS.23,22,2 62/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH LOAN PAID AG AINST THE SECURITY OF CHEQUES. (II) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DI RECTING TO DELETE THE ADDITION OF RS.13,58,921/- MADE BY THE AS SESSING OFFICER ON ACCOUNT OF INTEREST ACCRUED ON SUCH CASH LOANS PA ID AGAINST SECURITY CHEQUES. 4. C.O. NO.79/AHD/2007(A.Y. 2003-04) EFFECTIVE GROUNDS OF C.O. ARE AS UNDER: (AS SESSMENT YEAR 2003-04) ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 3 (I) AS PER INVENTORY OF SEIZED MATERIAL TOTAL OF CHEQU ES FOUND IS RS.3,65,15,187/- WHILE MATERIAL ACTUAL TOTAL I T COMES TO RS.3,46,92,919/- THIS DIFFERENCE IS SELF EXPLAINED, WHICH CIT(A) ERRED CONSIDER THE SAME. (II) LEARNED A.C. OF I.T. HAS ERRED IN LAW AND ON FACTS TO ADD AN AMOUNT OF RS.1,07,68,632/-(RS.1,12,68,632-5,00,00 0/- ACCEPTED LOAN) AS INCOME FROM UNDISCLOSED SOURCE. LEARNED C IT(A) HAS ALSO ERRED IN SUSTAINING ADDITION OF RS.18,22,262/- WITHOU T ANY EVIDENCE AND ALSO RS.5,00,000/- FOR THE REASON THAT IT IS AS P ER APPELLANTS CONFIRMATION. (III) ADDITION MADE BY LEARNED A.C. OF I.T. AND CON FIRMED BY CIT(A) CONTRARY TO THE HONBLE CBDTS CIRCULAR ON TH E ISSUE OF CONFESSION OR DISCLOSURE AND SUSTAINING SUCH ADDITION BY THE LD. CIT(A) MAY BE HELD WITHOUT JURISDICTION. (IV) LEARNED A.C. HAS ERRED IN LAW AND ON FACTS TO LEVY INTEREST OF RS.19,39,486/- ON NOTIONAL BASIS. LEARNED CIT HAS ALSO ERRED IN GIVING DIRECTION TO A.O. TO CHARGE INTEREST ON AN AMOUNT OF RS.23,22,262/-. 5. I.T.A. NO.994/AHD/2007 (A.Y. 2004-05) EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: ( ASSESSMENT YEAR 2004-05) (I) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO DELETE THE ADDITION OF RS.10,73,550/- MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF INVESTMENT IN JEWELLERY. (II) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DI RECTING TO DELETE THE ADDITION OF RS.1,83,57,195/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH LOAN PAID AGAINST THE SEC URITY OF CHEQUES. (III) THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN D IRECTING TO DELETE THE ADDITION OF RS.51,54,777/- MADE BY THE ASS ESSING OFFICER ON ACCOUNT INTEREST ACCRUED ON SUCH CASH LOANS PAID AGAINST SECURITY CHEQUES. 6. I.T.A. NO.868/AHD/2007 (A.Y. 2004-05) EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: ( ASSESSMENT YEAR 2004-05) (I) LEARNED ACIT HAS ERRED IN LAW AND ON FACTS TO A DD AN AMOUNT OF RS.7,00,000/- CASH TREATED AS UNACCOUNTED. LEARNED CIT(A) HAS ALSO ERRED IN CONFIRMING THE ADDITION WI THOUT ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 4 APPRECIATING THE FACT THAT THIS IS THE AMOUNT WITHDRAW N FROM BANK ACCOUNTS WHICH ARE REFLECTED IN BOOKS OF ACCOUNTS. (II) LEARNED ACIT HAS ERRED IN LAW AND ON FACTS TO ADD AN AMOUNT OF RS.1,06,000/- INVESTMENT IN VALUABLE AS AGAI NST RS.95,000/- SHOWN BY THE APPELLANT AND WHICH IS ALS O COVERED UP BY AMOUNT DISCLOSED BY THE APPELLANT. (III) LEARNED ACIT HAS ERRED IN LAW AND ON FACTS TO ADD AN AMOUNT OF RS.1,16,11,244/- INVESTMENT IN FDS WHICH WE RE MADE FROM AMOUNT DISCLOSED BY THE APPELLANT. LEARNED CIT( A) HAS ALSO ERRED IN CONFIRMING ACITS ACTION. (IV) LEARNED ACIT HAS ERRED IN LAW AND ON FACTS TO ADD AN AMOUNT OF RS.3,24,67,736/- UNDER THE HEAD CASH LOANS . LEARNED CIT(A) HAS ALSO ERRED IN NOT GIVING CLEAR FINDING F OR THE DELETION. (V) LEARNED ACIT HAS ERRED IN LAW AND ON FACTS TO A DD NOTIONAL INTEREST ON ALLEGED CASH LOANS. LEARNED CIT (A) HAS ERRED IN NOT DELETING ADDITION HIMSELF BUT DIRECTING ACIT TO REC ALCULATE SUCH INTEREST. FIRST WE TAKE UP REVENUES APPEAL IN I.T.A. NO.993/AHD/2007 (A.Y. 2003-04) 7. GROUND NUMBER FIRST OF THE REVENUE IS AGAINST R ESTRICTING THE ADDITION OF RS.1,12,68,632/- TO RS.23,22,262/- ON ACCOUNT OF CASH LOAN PAID AGAINST THE SECURITY OF CHEQUES. THE A.O. OBSERVED THAT THE ASSESSEE WAS INVOLVED IN BUSINESS OF CHEQUE DISCOUNTING. THE ASSESSEE HAD ALSO GIVEN LOANS AGAINST THE SECURI TY OF CHEQUES. DURING THE COURSE OF SEARCH F.D.R. AS PER ANNEXURE E AND FD TO THE PANCHANAMA DATED 27 TH APRIL, 2003 VALUED RS.1,25,20,784/- WERE FOUND. THE A.O. HAD GIVEN THE REASONABLE OPPORTUNIT Y DURING THE COURSE OF ASSESSMENT PROCEEDING TO EXPLAIN THE SOURCE OF F..DS. THE ASSESSEE CLAIMED BEFORE THE A.O. THAT THESE F.DS WE RE RECORDED IN THE BOOKS OF ACCOUNT. THE A.O. NOTICED THAT THE A SSESSEE HAS INTRODUCED CASH IN HIS CAPITAL ACCOUNT WITH SAVITA ENTERP RISES TO THE EXTENT OF RS.110526115/- ON VARIOUS DATES. THE INTR ODUCTION OF THIS CASH WAS OFFERED FOR TAXATION IN ORIGINAL RETURN IN A.Y. 2004-05. ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 5 BESIDES THIS, THE ASSESSEE ALSO OFFERED F.D.R. PERTAI NED TO A.Y. 2003-04 OF RS.3,70,548/- AND RS.10,85,129/- FOR A. Y. 2004-05 WHICH WAS PART OF DISCLOSURE OF RS.2,76,00000/- MAD E IN THE RETURN OF INCOME FILED. DURING THE COURSE OF SEARCH A LARG E NUMBER OF CHEQUES, UNDATED AND POST DATED, WERE FOUND VALUED RS.3,65,15,181/-. THE ASSESSEE EXPLAINED THE SOURCE OF THESE CHEQUES BEFORE THE A.O. BUT SAME WERE NOT TENABLE TO THE A.O.. THEREFORE, HE MADE OBSERVATION FROM PAGE 5 TO 20 OF THE ASSESSMENT ORDER AND CONCLUDED AS UNDER:- THE INVESTMENT IN SUCH CASH LOANS GIVEN OUT AS PER THE ANNEXURES D, D-1, F, CQ, CQ-1, CQ-2 FORMING PART OF THIS ORDER AS ENCLOSURE ARE PERTAINING TO F.Y. 2002-03 & F.YM. 2003-04 AS BELOW:- ANNEXURE AMOUNT [RS] A MOUNT PERTAINING TO F.Y. 2002-03 AMOUNT PERTAINING TO F.Y. 2003-04 D 13193873 0 13193873 D - 1 10045304 10045304 0 F 1208698 0 1208698 CQ 9507347 698328 8809019 CQ - 1 7345530 525000 6820530 CQ - 2 2435616 0 2435616 TOTAL 43736368 11268632 32467736 ACCORDINGLY THE SUM OF RS.1,12,68,632/- IS BROUGHT TO TAX IN A.Y. 2003-04 AND RS.3,24,67,736/- IN A.Y. 2004-05 A S INVESTMENT OUT OF UNDISCLOSED SOURCES GIVEN AS CASH LOANS AGAIN ST THE SECURITY OR CHEQUES. 8. BEING AGGRIEVED WITH THE ORDER OF THE AO, THE ASSE SSEE FILED APPEAL BEFORE THE LD. CIT(A)-II, AHMEDABAD WHO HAS THOROUGHLY DISCUSSED THIS ISSUE FROM PAGE NO.4 TO 18 AND ADDITION REDUCED TO RS.23,22,262/-. THE FINDINGS ARE AS UNDE R:- ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 6 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A ND THE ABOVE SUBMISSIONS. IT IS NOTICED THAT THE SEARCH PARTY FOUND VARIOUS CHEQUES FROM THE APPELLANTS PREMISES. IT IS ALSO NOTICED THAT THE APPELLANT IS IN THE BUSINESS OF CHEQUE DISCO UNTING. THE APPELLANT HAS IN THE COURSE OF RECORDING OF STATEMENT P OINTED OUT THAT NO LOAN WAS ADVANCED AGAINST THE CHEQUE OF JITEND RA BHOGILAL SHAH GROUP. THIS WAS VERY FIRST STATEMENT AND THE FACT WAS CONFIRMED BY JITENDRA BHOGILAL SHAH WHEN HE WAS CAL LED UPON U/S 131 BY THE A.O. THIS STATEMENT AND THE CONFIRMATION OF JITENDRA BHOGILAL SAHAH CANNOT BE BRUSHED ASIDE BY THE A.O. THE A.O. HAS SIMPLY RELIED UPON THE EARLIER PART OF THE SAME QUES TION HEREIN THE APPELLANT HAS STATED THAT HE HAD GIVEN MONEY AGAINST T HE CHEQUES FOUND FROM HIM AND THAT SUCH MONEY WAS YET TO BE RECE IVED BACK. THE APPELLANT ALSO REFERRED TO HIS STATEMENT RECORDED ON 26.09.2003 U/S 132(4) WHEREIN HE HAD SPECIFICALLY POINTED OUT I N QUESTION NUMBER 4 THE MODUS OPERANDI OF HIS BUSINESS WHEREIN IT WAS ALSO SPECIFICALLY STATED THAT THE AMOUNTS WERE BEING GIVEN A GAINST CHEQUE DISCOUNTING ONLY AFTER THE CHEQUE WERE REALIZ ED, AFTER DEDUCTING COMMISSION AMOUNT. THIS STATEMENT CANNOT BE OVERLOOKED. KEEPING IN VIEW THIS ASPECT AND KEEPING IN VIEW THE PRESSURE ARISING AT THE TIME OF LONG SEARCH PROCEED INGS, THE A.O. CANNOT SIMPLY RELY ON STATEMENT SO RECORDED. 9. BEFORE US THE LD. D.R. RELIED ON THE ORDER OF TH E A.O. AND REQUESTED TO CONFIRM THE ADDITION. ANOTHER SIDE, TH E LD. A.R. SUBMITTED THE RECONCILIATION WHICH IS REPRODUCED AS UN DER. I AO WANTED EXPLANATIONS FOR FOLLOWING CHEQUES ANNEXURE TOTAL AMT. RS. (PARA 6,10 OF ORDER) AMT. PERTAIN TO F.Y. 2002- 03 RS. AMT. PERTAIN TO F.Y. 2003- 04 RS. SEARCH PARTY PG. 5 AMT. RS. D 1,31,93,873 0 1,31,93,873 1,31,87,454 D - 1 1,00,45,304 1,00,45,304 0 1,01,38,397 F 12,08,698 0 12,08,698 12,08,698 CQ 95,07,347 6,98,328 88,09,019 16,99,576 CQ - 1 73,45,530 5,25,000 68,20,530 73,45,530 CQ - 2 24,35,616 0 24,35,616 24,35,616 SUB TOTAL 3,60,15,181 CHQ. MM 5,00,000 ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 7 BUILDERS TOTAL - A 4,37,36,368 1,12,68,632 3,24,67,736 3,65,15 ,181 II INVENTORY OF CHEQUES PREPARED BY SEARCH PARTY ANNEXURE AMT. TAKEN BY CIT(A) AS PER SEARCH PARTY ANN.PG.5 RS. CORRECT AMT. RS. DIFFERENCE D 1,31,87,454 1,32,09,864 22,410 D - 1 1,01,38,307 1,00,45,314 (92,993) F 12,08,698 12,08,698 0 CQ 16,99,576 12,49,395 (4,50,181) CQ - 1 73,45,530 65,44,530 (8,01,000) CQ - 2 24,35,616 24,35,118 (498) CHA. MM BUILDERS 5,00,000 5,00,000 0 TOTAL - B 3,65,15,181 3,51,92,919 13,22,262 III DISCREPANCIES ANNEXURE NATURE OF DISCREPANCIES D CORRECT TOTAL OF THIS ANNEXU RE IS 1,32,09,864/ - THERE IS TOTALING ERROR ON PG. NO.3,9 AND 11 PREPARE BY SEARCH PARTY, D - 1 CORRECT TOTAL OF THIS ANNEXURE IS 1,00,45,304/ - THERE IS TOTALING ERROR ON PG.NO.1 PREPARE BY SEARCH PART Y F NO DISCREPANCY CQ CORRECT TOTAL OF THIS ANNEXURE I S 12,49,395/ - THERE IS TOTALING ERROR ON OF SR. NO.33 TO 57 PREPARE BY SEAR CH PARTY. CQ - 1 CORRECT AMOUNT OF THIS ANNEXURE IS 65,44,530/ - THERE IS AN ERROR IN WRITING OF FIGURE AT SR. NO.78 & 80 BY SEARCH PARTY. CQ - 2 CORRECT AMOUNT OF THIS ANNEXURE IS 24, 35,118/ - THERE IS AN ERROR IN THIS ANNEXURE BY SEARCH PARTY. RS.13,22,262 TOTAL DISCREPANCIES TOTAL:C IV EXPLANATION FOR ALL CHEQUES:- AMOUNT EXPLANATIONS 77,21,187 BEING DIFFERENCE BETWEEN AOS FIGURE RS.4,37,36,368 ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 8 LESS SEARCH PARTY FIGURE RS.3,60,1 5,181. ALL THESE CHEQUES ARE PRIOR TO SIX MONTHS FROM THE DATE OF SEARCH. SO THESE ARE ACCEPTED BY SEARCH PARTY AS NUL L AND VOID. NO EVIDENCE OF PAYMENT FOUND IN SEARCH AND/OR IN ASSESSMENT PROCEEDINGS. 1,18,57,617 CHEQUE OF JITENDRA BHOGILAL GROUP TO WHO M NO AMOUNT WAS PAID. VERSION OF THE APPELLANT WAS CONFIRMED BY JB U/S 131 BEFORE AO IN ASSESSMENT PROCEEDINGS. 68,30,030 BEING CHEQUES OF CHEQUE DISCOUNTING BUSINESS. THESE CHEQUES ARE DEPOSITED IN CURRENT A/C NO.1562 WITH ADINATH CO-OP BANK PAYMENT OF THESE CHEQUES ARE MADE TO PARTY. 9,36,000 CHEQUES OF MOKXALI PRINTS, ND TEXTILES & SUNNY PRINT S. RETURNED CHEQUES. NO PAYMENT MADE. 4,58,648 CHEQUE OF VIBHUSHAN CORPORATION. DEDUCTION CONSIDERED BY THE AO. 5,00,000 CHQ. OF MM BUILDERS COVERED IN DISCLOSU RE OF A.Y. 2003-04. 1,41,10,541 COVERED IN DISCLOSURE OF A.Y.2004 - 05. 13,22,262 DISCREPANCIES TOTAL C 4,37,36,285 TOTAL - C (TOTAL A=TOTAL : C) 10. WE HAVE GONE THROUGH THE ASSESSMENT ORDER, ORDER OF THE CIT(A) AND DETAIL SUBMITTED BEFORE US AND HEARD BOTH SIDES. THE LD. CIT(A) HAS NOT GIVEN OPPORTUNITY TO THE A.O. B EFORE ACCEPTING THE RECONCILIATION OF THE ASSESSEE. THE RECONCILIATION SUBMITTED BY THE ASSESSEE APPEARS TO BE REASONABLE BU T VERIFICATION IS TO BE MADE BY THE A.O. THEREFORE, THE MATTER IS RE MANDED BACK TO THE A.O. TO RECONSIDER THE RECONCILIATION SUBMITTED BY THE ASSESSEE BEFORE US BY GIVING REASONABLE OPPORTUNITY OF BEING HEARD AND DECIDE THE MATTER ON MERIT. ACCORDINGLY, GROUND NUMBER FIRST OF APPEAL IS SET ASIDE. ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 9 11. GROUND NO.2 OF THE REVENUE IS AGAINST DELETION O F ADDITION OF RS. 13,58,921/- ON ACCOUNT OF INTEREST ACCRUED ON SU CH CASH LOAN. THE BRIEF FACTS AS MENTIONED ABOVE, THE A.O. OBSERVE D ON PAGE NOS. 20 & 21 THAT ASSESSEE HAS ADMITTED INTEREST @ 25% PER A NNUM AND CHARGE THE INTEREST ON LOAN GIVEN OUT. ON SOME CHEQU ES THE DATE WERE NOT MENTIONED. HENCE, THE DATE OF SEARCH WAS T AKEN AS THE DATE OF CHEQUE FOR WORKING OUT THE INTEREST. AFTER CO NSIDERING THE ASSESSEES REPLY, HE WORKED OUT INTEREST FOR A.Y. 03 -04 AT RS. 19,39,486/- AND SAME WAS ADDED IN THE INCOME OF THE A SSESSEE. 12. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE FILED FIRST APPEAL BEFORE CIT (A)-II, AHMEDABAD, WHO HAD P ASSED ORDER ON 22.12.2006 IN PARA NO. 4.2 THE CIT(A) REDUCED THE QU ANTUM ADDITION FROM RS. 1,12,68,832/- TO RS. 23,22,262/-. IN PARA NO.5 OF CIT(A) ORDER, HE DIRECTED TO THE A.O. TO CALCULATE INTER EST ON RS. 23,22,262/- AND ALLOWED THE APPEAL PARTIALLY. 13. NOW REVENUE IS BEFORE US ON THIS ISSUE, THE REV ENUE AS WELL AS ASSESSEE FILED DETAILED REPLY ON THIS ISSUE WHICH IS BEING CONSIDERED IN GROUND NO. 3 FOR A.Y. 04-05 IN SUBSEQ UENT PARAS. ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 10 COMING TO THE ASSESSEES C.O. NO.79/AHD/2007 FOR A. Y.03- 04. 14. THE GROUND NOS. 1 TO 4 OF C.O. ARE REVOLVING AR OUND THE GROUNDS OF APPEAL OF REVENUE IN GROUND NOS.1 & 2 FO R WHICH DETAILED FINDING HAS BEEN GIVEN IN DISPOSING OF REVENUES AP PEAL IN PRECEDING PARAS. THEREFORE, NO SEPARATE FINDINGS ARE BEING G IVEN FOR DISPOSING OF THIS CROSS OBJECTION. NOW, WE TAKE UP REVENUES APPEAL IN I.T.A. NO.994/AHD/2007 FOR AY- 2004-05) 15. THE FIRST GROUND OF APPEAL OF THE REVENUE IS AG AINST ADDITION OF RS.10,73,550/- ON ACCOUNT OF INVESTMENT I N JEWELLERY. THE A.O. OBSERVED THAT DURING THE COURSE OF SEARCH TO TAL JEWELLERY 3920.66 GMS. VALUED RS.2077476/- WERE FOUND BUT 207 0.7 GMS. VALUED RS.18,58,152/- WAS SEIZED. DURING THE COURS E OF ASSESSMENT PROCEEDING THE ASSESSEE WAS GIVEN REASONAB LE OPPORTUNITY TO EXPLAIN THE SOURCE OF THE JEWELLERY. T HE A.O. DISCUSSED THIS ISSUE ON PAGE 5 TO 8 OF ASSESSMENT OR DER. THE FINDING OF THE A.O. IS AS UNDER:- IT IS ALSO A FACT THAT THE LADIES OWN SOME JEWELLERY AS STRUDHAN. THE STRIDHAN IS ALLOWED TO THEEXTENT OF 15 0 GMS PER LADY ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 11 I.E. 300 GMS FOR 2 LAIDES[I.E. MOTHER AND WIFE OF THE ASSESSEE]. THE VALUE OF 300 GMS. JEWELLERY TO THE EXTENT OF RS.1,72 ,500/- IS ALLOWED. SECONDLY THE JEWELLERY TO THE EXTENT OF RS .4,52,542/- HAS BEEN SHOWN IN THE ACCOUNT OF SMT. PRITIBEN PRAFULBHAI SHAH. THE JEWELLERY SHOWN IS SEPARATELY BEING TAXED AS ACQUIRE D OUT OF HER UNDISCLOSED SOURCE OF INCOME. THE CREDIT FOR SAME I S GIVEN IN THE CASE OF THE ASSESSEE. THE REMAINING JEWELLERY VALU ED AT RS.10,73,550/- [1698592 172500 -452542] IS THEREFO RE, TREATED AS INVESTMENT OF THE ASSESSEE OUT OF HIS UNDISCLOSED S OURCE OF INCOME. THE SAME IS THEREFORE, BROUGHT TO TAX AS INV ESTMENT OF THE ASSESSEE OUT OF UNDISCLOSED SOURCE OF INCOME FOR A. Y. 2004-05. PENALTY PROCEEDINGS U/S 271(1) ARE INITIATED ON THIS POINT. 16. BEING AGGRIEVED WITH THE ORDER OF THE A.O. THE A SSESSEE FILED FIRST APPEAL BEFORE CIT(A), AHMEDABAD-II WHO HAS DELETED THE ADDITION. THE DETAIL DISCUSSIONS WERE GIVEN ON PAGE 5 TO 9 AND FINALLY CONCLUDED AS UNDER:- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A ND THE ABOVE SUBMISSIONS. IT IS AN ACCEPTED FACT THAT THER E ARE DIFFERENT LADY MEMBERS IN THE FAMILY WHICH INCLUDES MOTHER AND SPOUSE OF THE APPELLANT, HIS TWO SONS. TOTAL WEIGHT OF THE JEWELLERY FOUND IS 3920.66 GMS. THERE ARE 2 MARRIED LADY MEM BERS. THOUGH THE CIRCULAR IS WITH REFERENCE TO THE SEIZURE OF THE GO LD ORNAMENTS AT THE TIME OF SEARCH, IT IS A FACT THAT THE CBDT HAS AC CEPTED THAT TO THIS EXTENT LADY MEMBERS AND FAMILY MEMBERS ARE EXPEC TED TO HOLD GOLD ORNAMENTS AS STRIDHAN. THUS TO THE EXTENT OF LIMI TS STATED IN CIRCULAR THERE IS NO REASON TO CONSIDER ORNAMENTS AS UNEXPLAINED. THIS VIEW IS SUPPORTED BY VARIOUS DECISIONS REFERRED TO BY THE APPELLANT WHICH INCLUDES DECISION OF ITAT AHMEDABAD IN THECASE OF MANIAL S. DAV. FURTHER APPELLANTS WIFE HAS IN HER BOOKS REFLECTED PURCHASE OF ORNAMENTS OF RS.4,52,542/- WHICH IS APPR ECIATED BY THE A.O. ALSO. IN VIEW OF THIS POSITION FOLLOWING EXPL ANATION OR ORNAMENTS HAS TO BE CONSIDERED: PARTICULARS GRAMS VALUE - RS. JEWELLERY FOUND 3920.66 17,96,826/ - LESS: JEWELLERY TO BE CONSIDERED AS EXPLAINED AS PER BOARD CIRCULAR 1850.00 9,65,400/ - BALANCE 2070.66 8,31,426/ - ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 12 LESS: JEWELLERY PURCHASED REFLECTED IN ACCOUNTS 870.27 4,52,542/ - DIFFERENCE CONSIDERED IN DISCLOSURE 1200.39 3,78,884 IN VIEW OF THE ABOVE POSITION THE ADDITION MADE IS NOT JUSTIFIED AND IS DELETED. 17. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING THE LD. D.R. VEHEM ENTLY SUPPORTED THE ORDER OF THE A.O. AND THE LD. COUNSEL FOR THE ASS ESSEE, ON THE OTHER HAND, RELIED ON THE ORDER OF LD. CIT(A) AND RE ITERATED THE SAME SUBMISSION MADE BEFORE THE LOWER AUTHORITY AND RELIAN CE WAS PLACED ON THE BOARD CIRCULAR ON JEWELLERY. 18. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORDS, THE ASSESSEE HAD MADE DISCLOSURE OF RS.2.76 CRORE FO R THE BLOCK PERIOD FROM 1998-99 TO 2004-05 OUT OF WHICH RS.3.78 LAKH DISCLOSURE WAS PERTAINED ON ACCOUNT OF JEWELLERY FOUN D. THE REMAINING JEWELLERY WAS AS PER THE BOARD CIRCULAR AS WELL AS JEWELLERY REFLECTED IN BOOKS OF ACCOUNTS. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 19. THE SECOND GROUND OF APPEAL OF THE REVENUE IS A GAINST DELETION OF ADDITION OF RS.1,83,57,195/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH LOAN PAID AGAINST SECURI TY OF CHEQUES. THIS ISSUE HAS CORRELATION WITH GROUND NO.1 OF ASSESS MENT YEAR 2003-04 WHICH HAS BEEN DISCUSSED IN PARA NO.7 TO 10 OF THIS ORDER. ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 13 THEREFORE, A.O. IS DIRECTED TO VERIFY THE FACTS AS DIS CUSSED ABOVE. THUS, THIS GROUND OF APPEAL IS SET ASIDE TO THE A.O. 20. GROUND NO.3 OF THE APPEAL OF THE REVENUE IS AG AINST DELETION OF THE ADDITION OF RS.51,54,777/- ON ACCOUN T OF INTEREST ACCRUED ON CASH LOAN PAID AGAINST SECURITY CHEQUES. THE A.O. OBSERVED ON PAGE 29 TO 35 OF ASSESSMENT ORDER THAT TH E ASSESSEE HAD ADMITTED DURING THE COURSE OF SEARCH INTEREST @ 2.1% PER MONTH OR 25% PER ANNUM ON LOAN GIVEN OUT. THE DATE ON SOME CHEQUES HAD NOT BEEN MENTIONED , THEREFORE, THE A.O. H AD CALCULATED INTEREST @ 25% PER ANNUM FROM THE DATE OF SE ARCH ON LOAN OF RS.43822329/- FOR A.Y. 2004-05 AT RS.91,7075 /- . 21. BEING AGGRIEVED BY THIS ORDER OF THE A.O. THE ASS ESSEE FILED FIRST APPEAL BEFORE THE CIT(A). THE CIT(A) AL LOWED APPEAL PARTLY AND HE OBSERVED AS UNDER:- SO FAR AS THE INTEREST ON CASH LOANS IS CONCERNED, AS THE ADDITION ON ACCOUNT OF CASH LOANS IS DELETED, THERE IS NO JUSTIFICATION FOR ADDITION ON ACCOUNT OF INTEREST ON S UCH CASH LOANS. HOWEVER, I OBSERVE THAT THE APPELLANT HAS I TSELF ACCEPTED CASH LOANS OF RS.1,41,10,541/- BY WAY OF DI SCLOSURE IN THE PRESENT YEAR AND HENCE THE A.O. SHOULD RECALCUL ATE THE INTEREST ON SUCH CASH LOANS AND MAKE ADDITION TO TH AT EXTENT. ACCORDINGLY, THE ADDITION MADE AT RS.91,17,075/- MADE WILL BE MODIFIED BY HIM. WITH THIS REMARKS THIS GROUND OF AP PEAL IS PARTLY ALLOWED. 22. NOW THE REVENUE IS BEFORE US. AT THE TIME OF HE ARING THE LD. D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE A.O. AND LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, PARTLY RELIED ON THE ORDER OF THE ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 14 CIT(A) AND ITAT DECISION IN ITA NO.2656/AHD/2009 FO R A.Y. 2006- 07, DATED 28 TH JULY, 2011 IN ASSESSEES OWN CASE ON ADDITION MADE ON ACCOUNT OF NOTIONAL INTEREST. THE HONBLE ITAT DECI DED AS UNDER:- AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT A SEARCH AND SEIZURE OPERATION U NDER SECTION 132 OF THE ACT WAS CARRIED OUT BY THE REVENUE A T THE RESIDENTIAL AND BUSINESS PREMISES OF THE ASSESSEE. DURING THIS SEARCH OPERATION ASSESSEE MADE A DISCLOSURE OF RS.2. 76 CRORES FOR THE BLOCK PERIOD FROM 1998-99 TO 2004-05 OUT OF W HICH AN AMOUNT OF RS.1.41 CRORES PERTAINED TO ASST. YEAR 20 04-05 WHICH IS NOT IN DISPUTE. THIS DISCLOSURE MADE BY TH E ASSESSEE HAS ALSOBEEN ACCEPTED BY THE REVENUE AND THE TAXES DU E HAVE BEEN PAID BY THE ASSESSEE. THE FACT THAT AGAINST THE DISCLOSURE OF RS.1.41 CRORES MADE FOR ASST. YEAR 20 04-05 THE ASSESSEE HAS SHOWN RECOVERY OF RS.51.81 LACS DURING THE YEAR UNDER APPEAL IN RESPECT OF THE BUSINESS CHEQUES FOUN D DURING THE SEARCH AND AGAINST WHICH LOANS WERE ADMITTED TO HA VE BEEN ADVANCED TO VARIOUS PARTIES BY THE ASSESSEE HAS ALSO BEEN ACCEPTED BY THE AO. THE ONLY DISPUTE BEFORE US TH AT ASSESSEE HAS NOT SHOWN ANY INTEREST INCOME AGAINST THE AFORESAID LOANS WHILE THE AO HAS CHARGED @18% ON TH ESE LOANS AND ADDED THE SAME TO THE TOTAL INCOME OF THE AS SESSEE AS NOTIONAL INTEREST INCOME. THE CASE OF THE REVEN UE THAT ADVANCES TO THE TUNE OF RS.1.41 CRORES WERE LYING WITH ASSESSEES CLIENTS AND INTEREST MUST HAVE BEEN CHARGED ON THOSE ADVANCES WAS, HOWEVER, NOT SUBSTANTIATED BY ANY EVIDENCE BROUGHT ON RECORD. IF THE ASSESSEE DECIDE D NOT TO CHARGE INTEREST IN ORDER TO SAFEGUARD THE PRINCIPAL A MOUNT AND ENSURE ITS RECOVERY THEN HIS PRUDENCE AS A BUSINESSM AN CANNOT BE QUESTIONED BY THE AO WITHOUT BRINGING ANY MA TERIAL ON RECORD TO DISPROVE SUCH CONTENTION OR TO ESTABLISH THAT SUCH INTEREST INCOME HAD ACTUALLY ARISEN OR ACCRUED TO TH E ASSESSEE. IN VIEW OF THIS AND IN THE ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD BY THE AO TO SHOW THAT INTEREST INCOME WAS EARN ED BY THE ASSESSEE ON THE SAID ADVANCES I.E. BUSINESS CHE QUES, IN OUR CONSIDERED OPINION THERE WAS NO JUSTIFICATION I N MAKING ANY ADDITION ON ACCOUNT OF NOTIONAL INTEREST @ 18% ON THE SAID ADVANCES. THIS VIEW OF OURS GETS SUPPORT FROM THE C ASE LAWS RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE. THE AD DITION OF ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 15 RS.15,74,828/- MADE ON ACCOUNT OF NOTIONAL INTEREST IN COME WAS RIGHTLY DELETED BY LD. CIT(A). THEREFORE, THE O RDER PASSED BY HIM IS HEREBY UPHELD. THIS GROUND OF REVENUE IS DISMISSED. THE D.R. FILED WRITTEN REPLY ON 04.06.2012 FOR A.Y. 03-04 & 04-05 AND CLAIMED THAT FACTS CONSIDERED BY THE HON BLE ITAT B BENCH IN IT NO.2656/AHD/2009 DATED 27.07.2011 ARE D IFFERENT AND CANNOT BE APPLIED FOR A.Y. 2003-04 AND 2004-05. THE LD. COUNSEL FOR THE ASSESSEE ALSO HAS GIVEN OPPORTUNITY ON REPLY SUBMITTED BY THE D.R. WHO HAS ALSO FILED CROSS REPLY ON 05.06.201 2 AND CONTENDED THAT NO SUCH ADMISSION OF RATE OF INTEREST @ 2.1% PER MONTH OR 25% PER ANNUM HAD BEEN ADMITTED DURING THE CO URSE OF SEARCH U/S 132(4) OF THE I.T. ACT. IF ANY SUCH ADMIS SION WAS THERE, THEN THE DEPARTMENT SHOULD HAVE POINTED OUT SPECIFIC Q UESTION NUMBER OF APPELLANTS STATEMENT U/S 132(4) DATED 24.7 .2003. FURTHER, HE ALSO SUBMITTED THAT IN A.Y. 2006-07 THE RATE OF INTEREST FOR CALCULATION OF NOTIONAL INTEREST WAS TAKEN BY THE A .O. @ 18%. THEREFORE, HE CLAIMED THAT THE NOTIONAL INTEREST ADDITIO N WAS WITHOUT ANY BASIS AND EVIDENCE WHICH IS REQUIRED TO BE DELET ED. 23. WE HAVE CONSIDERED THE ORDER OF THE AUTHORITY B ELOW AND SUBMISSION OF THE ASSESSEE AND ALSO GONE THROUGH THE B BENCH DECISION (SUPRA) IN ASSESSEES CASE FOR A.Y. 2006-0 7. THE A.O. HAD NOT BROUGHT ON RECORD ANY EVIDENCE TO SUBSTANTIATE TH AT THE ASSESSEE HAD CHARGED INTEREST ON CASH LOAN. THERE WAS DISCLOSURE ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 16 ON ACCOUNT OF CASH LOAN BY THE ASSESSEE AT RS.1.41 CRO RE FOR THE BLOCK PERIOD. THE A.O. HAS PRESUMED DATE FOR CALCU LATION OF INTEREST AS DATE OF SEARCH. IT APPEARS THAT THERE WAS NO NOTING ON SEIZED MATERIAL ABOUT CHARGING OF INTEREST AND NO EVIDENCE HAD BEEN GATHERED BY THE A.O. FROM THE LOANEE. IN ABSENCE OF A NY CONCLUSIVE EVIDENCE, THE ADDITION CANNOT BE SUSTAINED. THE A.O. MADE ADDITION ON CONJUNCTURE AND SURMISES. THEREFORE, REVENUES APPEALS IN A.Y. 03-04 & 04-05 ON THIS ISSUE, ARE DISMISSED. NOW WE TAKE UP ASSESSEES APPEAL ITA NO. 868/AHD/20 07 FOR A.Y.2004-05 . 24. THE FIRST GROUND OF THE ASSESSEE WAS ADDITION OF RS.7 LAKHS UNACCOUNTED CASH. THE A.O. OBSERVED THAT DUR ING THE COURSE OF SEARCH TOTAL CASH OF RS.19,71,700/- WAS FOUND OU T OF THIS RS.1650000/- WAS SEIZED. THE ASSESSEE ADMITTED U/S 132(4) OF THE I.T. ACT THAT RS.7 LAKHS WAS UNACCOUNTED. ACCORDIN GLY, THE A.O. MADE ADDITION OF RS.7 LAKHS IN THE INCOME OF THE ASSE SSEE. 25. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE ASS ESSEE FILED FIRST APPEAL BEFORE THE CIT(A)-II, AHMEDABAD WHO CONFIRMED THE ADDITION. THE CIT(A) OBSERVED AS UNDER:- I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ABO VE SUBMISSIONS. ALTHOUGH THE APPELLANT HAS CLAIMED THAT C ASH FOUND ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 17 REPRESENTS CASH BALANCE AS PER CASH BOOK OF DIFFEREN T ENTITIES AND THAT THE CASH BALANCE IS REPRESENTING THE WITHDRAWLS MAD E FORM BANK ACCOUNT OF RESPECTIVE ENTITIES, IN THE COURSE OF SEARCH THE APPELLANT HAD NOT BEEN ABLE TO PRODUCE BOOKS AND WOR K OUT THE CASH BALANCE AS PER THE BOOKS. HENCE THE APPELLANT HIMSE LF HAD ADMITTED THAT CASH TO THE EXTENT OF RS.7 LAKH WAS REPRESENTING U NACCOUNTED CASH. AS SUCH AT THE RELEVANT TIME WHENTHE SEARCH WA S CARRIED OUT THERE WAS NO PROOF AVAILABLE WITH THE APPELLANT TO SATI SFY THAT THE ENTIRE CASH FOUND WAS DULY RECORDED IN THE BOOKS OF ACCOUNT. HENCE, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION OF RS.7 LAKH OUT OF CASH FOUND. THIS GROUND OF APPEAL IS, THEREFORE, DISMISSED. 26. NOW, THE ASSESSEE IS BEFORE US AND CLAIMED THA T THIS UNACCOUNTED CASH OF RS.7 LAKH HAS ALREADY BEEN DISCLOSED BY THE ASSESSEE DURING THE COURSE OF SEARCH U/S 132(4) W HICH IS PART OF DISCLOSURE OF RS.10426230/-. THE LD. D.R. RELIED U PON ORDER OF THE LOWER AUTHORITY AND CLAIMED THAT ADDITION OF RS.7 LAKH UNACCOUNTED CASH MAY BE CONFIRMED. 27. WE HAVE PERUSED THE ASSESSMENT ORDER, ORDER OF LD CIT(A) AND HEARD BOTH THE SIDES. THE ASSESSEE ADMIT TED THE UNACCOUNTED CASH RS.7 LAKH U/S 132(4) AND CLAIMED T HAT THIS IS PART OF DISCLOSURE OF RS.10426230/-, THEREFORE, A.O. IS DIRECTED TO VERIFY THE TOTAL DISCLOSURE MADE BY THE ASSESSEE. IF CONTENTIO N OF THE ASSESSEE IS FOUND CORRECT, THE CREDIT MAY BE GIVEN TO THE ASSESSEE AND NO DOUBLE ADDITION IS TO BE MADE IN THE HANDS OF TH E ASSESSEE. ACCORDINGLY, THE MATTER IS SET ASIDE TO THE A.O. 28. GROUND NUMBER SECOND TO FIFTH HAVE NOT BEEN PRE SSED BY THE A.R. THUS, APPEAL ON THESE GROUNDS IS DISMISSED . ITA NOS.79, 993, 868 & 994 OF 2007 A.Y. 2003-04 & 2004-05 18 29. IN THE COMBINED RESULT, REVENUES APPEAL IN (A) ITA NO. 993 /AHD/2007- IS SET ASIDE ON GROUND NO.1 AND DISMISSE D ON GROUND NO.2 FOR A.Y. 03-04 (B) ASSESSEES CROSS OBJECTION IN. C.O. NO.79/AHD/2007 IS DECIDED AS PER FINDING (A). (C) I TA NO. 994/AHD/2007- GROUND NO.2 IS SET ASIDE AND GROUND N O. 1 & 3 ARE DISMISSED. (D) THE ASSESSEES APPEAL IN ITA NO. 868/A.07- IS SET ASIDE ON GROUND NO.1 AND ARE DISMISSED ON GROUND NO S. 2 TO 5. 15/ 0 6 /2012 THIS ORDER PRONOUNCED IN OPEN COURT ON 15/06/ 2012 . SD/- SD/- (G.C. GUPTA) (T.R. MEENA) (VICE PRESIDENT) (ACCOUNTANT MEMBER) TRUE COPY - 15/06/2012 ! '# ! '# ! '# ! '# $' ! $' ! $' ! $' ! / COPY OF ORDER FORWARDED TO:- 1. #% &' / APPELLANT 2. (&' / RESPONDENT 3. )! * + / CONCERNED CIT 4. * + - #% / CIT (A) 5. ',- % ! ) , * #%% )* , / DR, ITAT, AHMEDABAD 6. ./ 0 / GUARD FILE. BY ORDER/ , 2# / #3% * * #%% )* , STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 05.06.2012 & 06.06.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE YES 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 06.06.2012 4) DATE OF CORRECTION - 5) DATE OF FURTHER CORRECTION - 6) DATE OF INITIAL SIGN BY MEMBERS 15/06/2012 7) ORDER UPLOADED ON 15/06/2012 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE - 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 15/06/2012