SHRI MUKESH SANGLA, Indore V. THE DCIT (CENTRAL), Indore

ITSSA 112/IND/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1749 (ITAT-INDORE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA; RAJEEV VARSHNEY
• Keywords: Unexplained cash credit; Unexplained investment; Presumptive income; Unexplained expenditure; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Peak credit; Source of fund; Question of law; Cost of acquisition; Fair market value; Difference of opinion; Agreed addition; Onus to prove; Retraction; Revised return; Documents seized; Change of opinion; Reassessment proceedings; Ignorance of law
• Section: 40A(3); 143(3); 133A; 153A; 260A; 133(6); 131; 69; 148; 63; 154

Judgement Text

MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER IT(SS)A NOS.111 TO 114 & 401/IND/2015 A.YS.2008-09 TO 2012-13 MUKESH SANGLA INDORE PAN ANAPS 5579F ::: APPELLANT VS DY. COMMR. OF INCOME TAX (CENTRAL), INDORE ::: RESPONDENT IT(SS)A NOS. 207, 208 & 506/IND/2015 A.YS. 2010-11, 2011-12 & 2012-13 DY. COMMR. OF INCOME TAX (CENTRAL)-I, INDORE ::: APPELLANT VS. MUKESH SANGLA INDORE ::: RESPONDENT ASSESSEE BY SHRI GIRDHAR GARG REVENUE BY SHRI RAJEEV VARSHNEY AND SHRI R.A. VERMA DATE OF HEARING 29.12.2015 DATE OF PRONOUNCEMENT 10 . 2 .2016 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 2 O R D E R PER SHRI B.C. MEENA, AM THESE APPEALS FILED BY THE ASSESSEE EMANATE FROM TH E ORDERS OF THE LEARNED CIT(A)-3, BHOPAL, DATED 29.4. 2015. THE FACTS, IN BRIEF, OF THE ASSESSEES CASE ARE THAT TH E ASSESSEE IS AN INDIVIDUAL, HEAD OF SANGLA FAMILY, THE PROMOTER OF SIGNET INDUSTRIES LTD. AND MEMBER/DIRECTOR OF VARIOUS COMPA NIES BELONGING TO SIGNET GROUP. HIS SOURCES OF INCOME CO NSISTS OF INCOME FROM SALARIES, HOUSE PROPERTY, SHARE IN PROF IT/LOSS FROM PARTNERSHIP FIRM, CAPITAL GAINS, DIVIDEND, INTEREST ETC. A SEARCH AND SEIZURE OPERATION U/S.132 WAS CARRIED OUT AT TH E BUSINESS PREMISES OF VARIOUS COMPANIES BELONGING TO SIGNET G ROUP AS WELL AS RESIDENTIAL PREMISES OF THE ASSESSEE ON 03.11.20 11. CONSEQUENTLY, A NOTICE U/S.153A WAS ISSUED. THE STA TUS REGARDING RETURN OF INCOME FURNISHED BY THE ASSESSEE U/S.139( 1) AND 153A OF THE INCOME-TAX ACT, 1961 AND ASSESSMENTS COMPLET ED AS PER ORIGINAL ASSESSMENT U/S.143(3) / 143(1) AS WELL AS U/S.153A ARE AS UNDER : MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 3 A.Y. DATE OF ORIGINAL RETURN FILED RETURNED INCOME U/S.139 (RS.) DATE OF FILING RETURN U/S.153A RETURNED INCOME U/S.153A (RS.) ASSESSED INCOME U/S.153A/ 143(3) RS. *2006 - 07 21.07.2009 49,33,297 25.04.2013 49,95,358 49,95,358 *2007 - 08 21.07.2009 2,02,05,908 25.04.2013 2,02,12,600 2,08,89,235 *2008 - 09 21 .07.2009 1,78,30,901 25.03.2013 1,77,70,290 2,89,20,310 2009 - 10 21.07.2009 6,80,000 25.03.2013 44,83,580 44,83,580 2010 - 11 28.03.2011 16,47,191 25.03.2013 12,38,31,050 34,47,11,770 2011 - 12 01.08.2011 22,28,937 25.03.2013 22,24,320 25,01,48,230 2012 - 13 19.04.2013 40,43,320 - - 16,58,69,300 * RETURNS OF INCOME FOR ASSESSMENT YEARS 2006-07, 2 007-08 AND 2008-09 WERE VOLUNTARILY REVISED AFTER SEARCH BY CENTRAL EX CISE AUTHORITIES 2. THE ASSESSEE FILED APPEALS BEFORE THE LEARNED C. I.T.(A) AGAINST THE ASSESSMENTS COMPLETED U/S.153A WHO PART LY ALLOWED THE ASSESSEES APPEALS. AGAINST THE ORDER PASSED BY THE LEARNED CIT(A), THE ASSESSEE AS WELL AS REVENUE HAVE PREFER RED APPEALS BEFORE THE INCOME-TAX APPELLATE TRIBUNAL. WE HAVE H EARD BOTH THE SIDES ON VARIOUS ISSUES RAISED IN THESE APPEALS . 3. GROUND NO.1.0 & 1.1(A.YS. : 2008-09 TO 2012-13)OF THE ASSESSEES APPEAL: GROUND NO.1.0 & 1.1 OF ASSESSEES APPEAL READS AS U NDER : ASSESSMENT YEARS : 2008-09 TO 2010-11 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME- TAX (APPEALS)-3, BHOPAL, PARTLY CONFIRMING THE ASSE SSMENT ORDER PASSED U/S.153A R.W. SEC. 143(3) OF THE INCOM E-TAX ACT, 1961, IS BOTH BAD-IN-LAW AND BAD-IN-FACTS. IN DOING SO, HE DID NOT APPRECIATE THAT NO ADDITION COULD HAVE B EEN MADE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 4 WHILE COMPLETING ASSESSMENT U/S.153A OF THE INCOME- TAX ACT, 1961 IN CASE OF COMPLETED ASSESSMENTS IF NO UNDISCLOSED INCOME WAS DETERMINABLE FROM THE MATERI AL FOUND AS A RESULT OF SEARCH. ASSESSMENT YEARS : 2011-12& 2012-13 1.0 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS)-3, BHOPAL, PARTLY CONFIRMING THE ASSESSMENT ORDER PASSED U/S.1 53A R.W. SEC. 143(3) OF THE INCOME-TAX ACT, 1961, IS BOTH BAD-IN-LAW AND BAD-IN -FACTS. 4. THE C.I.T.(A) REJECTED THE ASSESSEES CONTENTION. T HE LEARNED CIT(A)S CONTENTIONS CAN BE SUMMARISED AS U NDER THAT WHERE A SEARCH U/S.132 OF THE ACT IS INITIATED AFTE R 31.05.2003 IN CASE OF A PERSON, THE ASSESSING OFFICER HAS NO OPTI ON BUT TO ASSESS OR REASSESS THE TOTAL INCOME FOR EACH OF PRE CEDING SIX ASSESSMENT YEARS. THIS IS CLEAR AND UNAMBIGUOUS FRO M THE PLAIN LANGUAGE OF SEC.153A(1) OF THE ACT AND REITERATION IN THE FIRST PROVISO TO SECTION 153A. THE TERMS TOTAL INCOME AND SCOPE OF TOTAL INCOME ARE DEFINED IN SEC.2(45) AND SEC.5 OF THE INCOME- TAX ACT RESPECTIVELY. THE 'TOTAL INCOME' TO BE ASSE SSED OR REASSESSED IN TERMS OF SEC.153A SHALL INCLUDE BOTH REGULAR AND UNDISCLOSED INCOME IN RESPECT OF EACH ASSESSMENT YE AR FALLING WITHIN SUCH SIX ASSESSMENT YEARS. UNLIKE CHAPTER XIV -B OF THE ACT, WHERE THE DEFINITION OF 'UNDISCLOSED INCOME' W AS SPECIFICALLY PROVIDED IN SECTION 158B(B), NO SEPARATE AND DISTIN CT DEFINITION OF 'TOTAL INCOME' IS PROVIDED IN SECTION 153A IN CONTR ADISTINCTION TO ITS DEFINITION U/S.2(45) OF THE ACT. HAD THE LEGISL ATURE INTENDED TO MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 5 CURTAIL THE SCOPE OF TOTAL INCOME IN RELATION TO SE ARCH AND SEIZURE ASSESSMENTS, IT WOULD HAVE SPECIFICALLY PROVIDED IT UNDER THE RELEVANT PROVISIONS. IN THE ABSENCE OF THE TERM UN DISCLOSED INCOME HAVING BEEN INCORPORATED IN THE SECTION ITS ELF, THE SAME CANNOT BE READ INTO THE SECTION. WHILE SEC.153A PRO VIDES FOR DETERMINATION OF TOTAL INCOME WHICH INCLUDES BOTH T HE DISCLOSED AS WELL AS UNDISCLOSED INCOME, CHAPTER XIV-B PROVIDE D FOR DETERMINATION OF UNDISCLOSED INCOME FOR THE WHOLE B LOCK PERIOD. UNLIKE CHAPTER XIV-B, THERE IS NOTHING IN SEC.153A W HICH REQUIRES COMPLETION OF A SEARCH ASSESSMENT ONLY ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE AO AND RELATABLE TO THE EVIDENCE FOUND. THE AO IS STATUTOR ILY REQUIRED TO MAKE ASSESSMENT U/S.153A FOR ALL SUCH SIX YEARS AND COMPUTE TOTAL INCOME OF THE ASSESSEE INCLUDING UNDISCLOSED INCOME NOTWITHSTANDING THAT RETURNS OF THESE ASSESSMENT YE ARS HAVE ALREADY BEEN PROCESSED U/S 143(1) OR ASSESSED U/S 1 43(3) OF THE ACT. THE SCOPE OF SEC.153A IS SIMILAR TO SEC.143(3) AND IN THAT CONTEXT, THE LEGISLATURE USED THE WORD TOTAL INCOM E. THE FIRST AND SECOND PROVISO TO SEC.153A ARE COMPLEMENTARY TO EACH OTHER AND REQUIRES THE AO TO ASSESS OR RE-ASSESS THE 'TOT AL INCOME' IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS IN ASSESSMENT ORDERS U/S.153A. IN SUPPORT OF HIS CONTENTION, RELIANCE WAS PLACED UPON MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2003 [(2003) 26 0 ITR (ST.) MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 6 191], THE RULE OF CONSTRUCTION LAID DOWN IN HEYDON S CASE FOR INTERPRETATION OF THE LANGUAGE USED IN SEC.153A AND THE FOLLOWING JUDGEMENTS: 1 . C.I.T. VS. RAJ KUMAR ARORA 367 ITR 517 (ALL) 2 . CANARA HOUSING DEVELOPMENT COMPANY VS. D.C.I.T. 49 TAXMAN.COM 98 (KAR) 3 . NANDINI DELUX VS. C.I.T. 37 ITR (TRIB.) 52 (BANG.) 4 . MADUGULAVENU VS. D.I.T. 29 TAXMANN.COM 200 (DEL) 5 . SHIVNATH RAI HARNARAIN (INDIA) LTD. VS. D.C.I.T. 117 ITD 74 (DEL) 6 . MS. SHYAM LATA KAUSHIK VS. A.C.I.T. 306 ITR (A.T.)117 (DEL) 7 . HARVEY HEART HOS PITALS LTD. VS. A.C.I.T. 130 TTJ 700 (CHENNAI) 8 . DR. MANSUKH KANJIBHAI SHAH VS. A.C.I.T. 129 ITD 3 76 (AHD.) 9 . RAJAT TRADECOM INDIA (P.) LTD. VS. D.C.I.T. 120 ITD 48 (INDORE) 10 . INCOME - TAX - VII V. CHETAN DAS LACHMAN DAS 25 TAXMANN.COM 227 (DEL) 11 . C.I.T. VS. ANIL KUMAR BHATIA 24 AXMANN.COM 98 (DEL) 5. BEFORE THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ASSESSMENT U/S.153A IS MADE ONLY IN CASES WHERE A SEARCH IS INITIATED U/S.132 OR BOOKS OF ACCOUNT, OTHER DOCUME NTS OR ANY ASSETS ARE REQUISITIONED U/S.132A AFTER 31.05.2003. THEREFORE, SECTION 153A OF THE ACT CANNOT BE READ IN ISOLATION . THE REQUIREMENT OF ASSESSMENT OR REASSESSMENT OF TOTAL INCOME UNDER THE SAID SECTION HAS TO BE READ IN THE CONTEX T OF SECTIONS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 7 132 OR 132A OF THE ACT. ONCE NOTICE U/S.153A IS ISS UED, THE ASSESSEE IS COMPULSORILY REQUIRED TO FILE RETURN OF INCOME FOR SIX ASSESSMENT YEARS NOTWITHSTANDING DISCOVERY OR OTHER WISE OF ANY INCRIMINATING MATERIAL. ALL THE ASSESSMENT PROCEEDI NGS WHICH ARE PENDING ON THE DATE OF SEARCH ABATE IN TERMS OF SEC OND PROVISO TO SEC.153A. AS A COROLLARY, ALTHOUGH BUT NOT EXPRESSL Y PROVIDED IN SECTION, THE ASSESSMENT PROCEEDINGS WHICH ARE NOT P ENDING DO NOT ABATE. IF NOTHING INCRIMINATING IS FOUND ON ACC OUNT OF SUCH SEARCH OR REQUISITION IN RELATION TO UNABATED ASSES SMENTS I.E. COMPLETED OR CONCLUDED ASSESSMENTS, ONLY ASSESSED I NCOME SHOULD BE REITERATED. THE HARMONIOUS CONSTRUCTION O F ENTIRE PROVISION WOULD LEAD TO AN IRRESISTIBLE CONCLUSION THAT THE TERM ASSESSMENT HAS TO BE READ IN THE CONTEXT OF ABATE D ASSESSMENTS AND THE TERM REASSESSMENT HAS BEEN USED IN THE CO NTEXT OF UNABATED ASSESSMENTS. IN THE CASE OF COMPLETED ASSE SSMENTS, INCOME HAS TO BE RE-ASSESSED IN TERMS OF SEC.153A. THE RE- ASSESSMENT REQUIRES BELIEF OF ASSESSING OFFICER REG ARDING ESCAPEMENT OF INCOME FROM ASSESSMENT. THE BELIEF SH OULD BE FOUNDED ON EXISTENCE OF APPROPRIATE MATERIAL OR INF ORMATION. IT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 8 SHOULD BE RATIONAL BELIEF HELD IN GOOD FAITH AND NO T ARBITRARY, SUBJECTIVE OR A MERE PRETENCE. THE MATERIAL OR INFO RMATION IN HIS POSSESSION SHOULD HAVE DIRECT NEXUS WITH HIS BELIEF REGARDING ESCAPEMENT OF INCOME. THE ABSENCE OF SUCH NEXUS SHA LL RENDER THE RE-ASSESSMENT PROCEEDINGS INVALID. THUS, THE RE -ASSESSMENT OF INCOME U/S.153A CANNOT BE MADE SANS ANY INCRIMIN ATING MATERIAL OR MERELY ON CHANGE OF OPINION IN RELATION TO MATERIAL ALREADY CONSIDERED. [INDIAN & EASTERN NEWSPAPER SOC IETY VS. C.I.T. (119 ITR 996 SC); CALCUTTA DISCOUNT CO. LTD. VS. I.T.O (41 ITR 191 SC)]. THE CONTENTION OF THE REVENUE TO THE EFFECT THAT ONCE A NOTICE UNDER SECTION 153A OF THE ACT IS ISSU ED, THE ASSESSMENTS FOR ALL THE SIX YEARS ARE AT LARGE FOR THE AO HAS NO WARRANT IN LAW. 6. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELI ANCE UPON THE FOLLOWING JUDICIAL PRONOUNCEMENTS :- 1. JAI STEEL (INDIA) VS. A.C.I.T. (2013) 259 CTR 281 (R AJ) THE RELEVANT PARAS ARE REPRODUCED HEREUNDER :- 19. THE UNDERLINE PURPOSE OF MAKING ASSESSMENT OF TOTA L INCOME UNDER SECTION 153A OF THE ACT IS, THEREFORE, TO ASSESS IN COME WHICH WAS NOT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 9 DISCLOSED OR WOULD NOT HAVE BEEN DISCLOSED. THE PUR POSE OF SECOND PROVISO IS ALSO VERY CLEAR, INASMUCH AS, ONCE A ASSESSMENT OR REASSESSMENT IS 'PENDING' ON THE DATE OF INITIATION OF SEARCH OR RE QUISITION AND IN TERMS OF SECTION 153A A RETURN IS FILED AND THE AO IS REQUIR ED TO ASSESS THE SAME, THERE CANNOT BE TWO ASSESSMENT ORDERS DETERMINING T HE TOTAL INCOME OF THE ASSESSEE FOR THE SAID ASSESSMENT YEAR AND, THEREFOR E, THE PROVISO PROVIDES FOR ABATEMENT OF SUCH PENDING ASSESSMENT AND REASSESSME NT PROCEEDINGS AND IT IS ONLY THE ASSESSMENT MADE UNDER SECTION 153A OF T HE ACT WOULD BE THE ASSESSMENT FOR THE SAID YEAR. 20. THE NECESSARY COROLLARY OF THE ABOVE SECOND PROVIS O IS THAT THE ASSESSMENT OR REASSESSMENT PROCEEDINGS, WHICH HAVE ALREADY BEEN 'COMPLETED' AND ASSESSMENT ORDERS HAVE BEEN PASSED DETERMINING THE ASSESSEE'S TOTAL INCOME AND, SUCH ORDERS ARE SUBSIS TING AT THE TIME WHEN THE SEARCH OR THE REQUISITION IS MADE, THERE IS NO QUES TION OF ANY ABATEMENT SINCE NO PROCEEDINGS ARE PENDING. IN SUCH CASES, WHERE TH E ASSESSMENTS ALREADY STANDS COMPLETED, THE AO CAN REOPEN THE ASSESSMENTS OR REASSESSMENTS ALREADY MADE WITHOUT FOLLOWING THE PROVISIONS OF SE CTIONS 147, 148 AND 151 OF THE ACT AND DETERMINE THE TOTAL INCOME OF THE AS SESSEE. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 10 21. THE ARGUMENT RAISED BY THE COUNSEL FOR THE APPELLA NT TO THE EFFECT THAT ONCE A NOTICE UNDER SECTION 153A OF THE ACT IS ISSUED, THE ASSESSMENTS FOR SIX YEARS ARE AT LARGE BOTH FOR THE AO AND ASSE SSEE HAS NO WARRANT IN LAW. 22. IN THE FIRM OPINION OF THIS COURT FROM A PLAIN REA DING OF THE PROVISION ALONG WITH THE PURPOSE AND PURPORT OF THE SAID PROVISION, WHICH IS INTRICATELY LINKED WITH SEARCH AND REQUISITION UNDE R SECTIONS 132 AND 132A OF THE ACT, IT IS APPARENT THAT: (A) THE ASSESSMENTS OR REASSESSMENTS, WHICH STAND ABATE D IN TERMS OF II PROVISO TO SECTION 153A OF THE ACT, THE AO ACTS UNDER HIS ORIGINAL JURISDICTION, FOR WHICH, ASSESSMENTS HAVE TO BE MADE; (B) REGARDING OTHER CASES, THE ADDITION TO THE INCOME T HAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT WILL BE MADE ON THE B ASIS OF INCRIMINATING MATERIAL AND (C) IN ABSE NCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSM ENT OR REASSESSMENT CAN BE MADE. THOUGH SUCH A CLAIM BY THE ASSESSEE FOR THE FIRST TIME UNDER SECTION 153A OF THE ACT IS NOT COMPLETED, THE CASE IN HAND, HAS TO BE CONSIDERED AT BEST SIMILAR TO A CASE WHERE IN SPITE OF A SEARCH A ND/OR REQUISITION, NOTHING INCRIMINATING IS FOUND. IN SUCH A CASE THOUGH SECTI ON 153A OF THE ACT WOULD MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 11 BE TRIGGERED AND ASSESSMENT OR REASSESSMENT TO ASCE RTAIN THE TOTAL INCOME OF THE PERSON IS REQUIRED TO BE DONE, HOWEVER, THE SAM E WOULD IN THAT CASE NOT RESULT IN ANY ADDITION AND THE ASSESSMENTS PASSED E ARLIER MAY HAVE TO BE REITERATED. ............ 26. THE PLEA RAISED ON BEHALF OF THE ASSESSEE THAT AS THE FIRST PROVISO PROVIDES FOR ASSESSMENT OR REASSESSMENT OF THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN THE SIX ASSESSMENT Y EARS, IS MERELY READING THE SAID PROVISION IN ISOLATION AND NOT IN THE CONT EXT OF THE ENTIRE SECTION. THE WORDS 'ASSESS' OR 'REASSESS' HAVE BEEN USED AT MORE THAN ONE PLACE IN THE SECTION AND A HARMONIOUS CONSTRUCTION OF THE ENTIRE PROVISION WOULD LEAD TO AN IRRESISTIBLE CONCLUSION THAT THE WORD 'ASSESS' H AS BEEN USED IN THE CONTEXT OF AN ABATED PROCEEDINGS AND REASSESS HAS BEEN USED FOR COMPLETED ASSESSMENT PROCEEDINGS, WHICH WOULD NOT ABATE AS TH EY ARE NOT PENDING ON THE DATE OF INITIATION OF THE SEARCH OR MAKING OF R EQUISITION AND WHICH WOULD ALSO NECESSARILY SUPPORT THE INTERPRETATION THAT FO R THE COMPLETED ASSESSMENTS, THE SAME CAN BE TINKERED ONLY BASED ON THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH OR REQUI SITION OF DOCUMENTS. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 12 7. RELIANCE WAS ALSO PLACED ON THE DECISION IN THE CASE OF C.I.T. VS. KABUL CHAWLA [I.T.A.NO.707/2014 DT.28.08.2015 ( DEL)(HC)]. THE RELEVANT PARA READS AS UNDER :- 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN T HE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UN DER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUE D TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATE LY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES P LACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO B E COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEAR CH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INC OME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RE SPECT OF EACH OF THE SIX AYS IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSE D INCOME WOULD BE BROUGHT TO TAX. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 13 IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITI ONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE O F THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THA T THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WI TH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS S ECTION ONLY ON THE BASIS OF SEIZED MATERIAL. V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE CO MPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMEN T CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PR OCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSE SS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, T HE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SE CTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY F OR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIA L EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH B Y THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASI S OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR R EQUISITION OF DOCUMENTS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 14 OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 38. THE PRESENT APPEALS CONCERN AYS, 2002-03, 2005- 06 AND 2006-07. ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED . 39. THE QUESTION FRAMED BY THE COURT IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 8. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REL IED UPON THE FOLLOWING CASE LAWS :- 2. C.I.T. VS. MURLI AGRO PRODUCTS LTD. [(2014) 49 TAXM ANN.COM 172 (BOM)] [KINDLY REFER TO PARA 8 TO 10] 3. C.I.T VS. CONTINENTAL WAREHOUSING CORPORATION [58 T AXMANN.COM 78 (BOM)] [KINDLY REFER TO PARA 28 TO 37] 4. ALL CARGO GLOBAL LOGISTICS LTD. VS. D.I.T. [137 ITD 287 (MUM -SB)] [KINDLY REFER TO PARA 48 TO 53; 53 CONCLUDE THE ISS UE] 5. GOVIND AGARWAL [ITA NO.3389 & 3390/M/2011 DT.10.01. 2014 (MUM.TRIB.)] 6. A.C.I.T. VS. PRATIBHA INDUSTRIES LTD. [28 TAXMANN.C OM 246 (MUM. TRIB)] 7. GURINDER SINGH BAWA VS. D.C.I.T.[28 TAXMANN.COM 328 (MUM. TRIB)] 8. DINESH TOBACCO INDUSTRIES VS. D.C.I.T. [148 ITD 118 (JODH. TRIB)] 9. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMIT TED THAT THE JUDGMENTS RELIED UPON BY THE C.I.T. (A), THE SAME W ERE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 15 DISTINGUISHABLE ON FACTS INASMUCH AS RECOVERY OF IN CRIMINATING MATERIAL EITHER DURING SEARCH OR POST SEARCH INQUIR IES. 10. ON THE ISSUE OF ADDITION SANS INCRIMINATING MAT ERIAL, THERE ARE TWO VIEWS OF VARIOUS JUDICIAL AUTHORITIES. IT I S A SETTLED LEGAL POSITION THAT IF TWO VIEWS ARE POSSIBLE ON A PARTIC ULAR ISSUE, THE VIEW WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE FOLLOWED. [C.I.T. VS. VEGETABLE PRODUCTS LTD. 88 ITR 192 (SC) ]. IN THE ASSESSEES CASE, THERE ARE NO INCRIMINATING MATERIA L WHATSOEVER IN RELATION TO INVESTMENT IN SHARES OF ADROIT INDUS TRIES (INDIA) LTD. IN ASSESSMENT YEAR 2007-08, TRANSFER OF THESE S HARES IN ASSESSMENT YEAR 2008-09 AND THEIR REACQUISITION SUB SEQUENTLY IN ASSESSMENT YEAR 2010-11. NO PROCEEDINGS IN RELATION TO ASSESSMENTS FOR THESE ASSESSMENT YEARS WERE PENDING AND THEREFORE NO ADDITION COULD HAVE BEEN MADE IN ASSES SMENT COMPLETED U/S.153A IN THE ABSENCE OF ANY INCRIMINAT ING MATERIAL ON ACCOUNT OF UNEXPLAINED CASH CREDITS IN ASSESSMEN T YEAR 2008- 09 AND UNEXPLAINED INVESTMENT IN ASSESSMENT YEAR 20 10-11. THE ADDITION MADE BY THE ASSESSING OFFICER BY WAY OF RE ASSESSMENT IN RELATION TO IMPUGNED CONCLUDED ASSESSMENTS AMOUNTED TO CHANGE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 16 IN OPINION ON THE SAME SET OF FACTS WHICH IS NOT PE RMISSIBLE U/S.153A . 11. THE LEARNED COUNSEL FOR THE ASSESSEE PLEADED TO ALLOW THESE GROUNDS WHILE THE LEARNED DR PLEADED THAT INCRIMINA TING DOCUMENTS AND UNRECORDED SALES, UNACCOUNTED WEALTH WAS DISCOVERED BY SEARCH, HENCE, THE ASSESSMENTS U/S 15 3A OF THE ACT ARE VALID AND FACTS OF THE ASSESSEES CASE AT V ARIANCE TO THE FACTS OF THE CASES RELIED UPON. 12. WE HAVE HEARD BOTH THE SIDES. WE HO LD THAT THE INCRIMINATING DOCUMENTS PERTAINING TO THE VAR IOUS ASSESSMENT YEARS EVEN FOR YEARS WHERE THE A SSESSMENTS ARE NOT ABATED, WERE FOUND AND SEIZED. THE ASSESSEE HIMSELF HAD ADMITTED BEFORE THE ASSESSING OFFICER THAT SEVERAL LOOSE PAPERS SEIZED AS ANNEXURE LPS 1 TO LPS 5 AND BS-1 TO BS-5 ARE HAVING ENTRIES RELATING TO PERSONAL UNACCOUNTED BUS INESS OF THE ASSESSEE. THE ASSESSEE HIMSELF HAD PREPARED A CASH FLOW STATEMENT OF THESE UNACCOUNTED CASH TRANSACTIONS IN CORPORATING DEBIT AND CREDIT CASH TRANSACTIONS. THE UNRECORDED SALES AND UNACCOUNTED ASSETS WERE ALSO DISCOVERED IN THE SEAR CH OPERATION. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 17 THE ASSESSEE HAS ALSO ADMITTED UNDISCLOSED INCOME O N THE BASIS OF THESE DOCUMENTS AND ASSETS. THEREFORE, THE RATIO LAID DOWN IN CASE LAWS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. CO NSIDERING ALL THESE FACTUAL ASPECTS, WE DISMISS ALL THESE GROUNDS FOR ALL THE ASSESSMENT YEARS RAISED BEFORE US. 13. GROUND NO.2.0 & 2.1 (A.YS. : 2008-09 & 2010-11)OF THE ASSESSEES APPEAL AND GROUN NO.2 (A.YS. : 2010-11)OF REVENUES APPEAL : GROUND NO.2.0 & 2.1(A.YS. : 2008-09 & 2010-11) OF A SSESSEES APPEALS READS AS UNDER: ASSESSMENT YEAR :2008-09 SALE PROCEEDS OF 2,17,750 SHARES OF ADROIT INDUSTRI ES (INDIA) LTD. TREATED AS UNEXPLAINED INCOME : RS.86,16,935/- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE ADDITION OF RS.86,16,935/- MADE IN R ESPECT OF SALE PROCEEDS OF 2,17,750 SHARES OF ADROIT INDUSTRIES (INDIA) LTD. B Y THE ASSESSING OFFICER, AS UNEXPLAINED INCOME OF THE ASSESSEE. 2.1 WHILE CONFIRMING THE ADDITION, THE LEARNED COMMISSI ONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS BY RESTRICTING DED UCTION IN RESPECT OF SHORT TERM CAPITAL GAIN TO THE EXTENT OF RS.2,75,975/- AS AGAI NST SHORT TERM CAPITAL GAINS OF RS.3,05,975/- OFFERED BY THE ASSESSEE IN HIS RETURN OF INCOME. ASSESSMENT YEAR :2010-11 ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN TH E SHARES OF ADROIT INDUSTRIES (INDIA) LTD. : RS.1,22,79,700/- 2.0 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN PARTLY CONFIRMING THE ADDITION OF RS.1,22,79,700 /- MADE BY THE ASSESSING OFFICER MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 18 ON ACCOUNT OF UNEXPLAINED INVESTMENT IN 4,32,075 SH ARES OF ADROIT INDUSTRIES (INDIA) LTD. 3.0 GROUND NO.2 (A.YS. : 2010-11) OF REVENUES APPEALS READS AS UNDER: ASSESSMENT YEAR : 2010-11 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE C.I.T.(A). ERRED IN RESTRICTING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTM ENT IN THE SHARE OF ADROIT INDUSTRIES (INDIA) LTD. TO RS.1,22,79,700/- AS AGAI NST THE ADDITION OF RS.1,86,18,828/- MADE BY THE A.O.. 14. ON THE ISSUE OF SALE PROCEEDS OF SHARES OF ANDR OIT INDUSTRIES, SHORT TERM CAPITAL GAIN THEREUPON AND ALSO ON REACQ UISITION OF SHARES OF ANDROIT INDUSTRIES PVT. LTD. ADDITION MADE FOR UNEXPLAINED INVESTMENT. WE HAVE ALREADY DECIDED THI S ISSUE IN THE CASE OF MUKESH SANGLA HUF AND OTHERS VIDE OUR O RDER DATED 5 TH NOVEMBER, 2015. THE RELEVANT PARAS OF THAT ORDER A RE 45 TO 60 WHICH ARE REPRODUCED HEREUNDER :- 45. THE FACTS IN RELATION TO INVESTMENT AND REACQUISITION OF SHARES OF ADROIT INDUSTRIES (INDIA ) LTD. ARE THAT THE SIGNET GROUP, SANGLA FAMILY AND ITS ASSOCI ATES CONCERNS ACQUIRED MANAGEMENT CONTROL OF ADROIT INDUSTRIES (INDIA) LTD., INDORE, A 100% EXPORT ORIE NTED AUTO ANCILLARY UNIT, FROM ANAND FAMILY OF INDORE IN MARCH 2007. THERE IS NO DISPUTE REGARDING THE PRICE AT W HICH SHARES WERE ACQUIRED FROM ANAND FAMILY AS WELL AS F ROM EMPLOYEES AND OTHER ASSOCIATES AND THE REVENUE DID NOT DISPUTE THE INVESTMENT BY SIGNET GROUP, SANGLA FAMI LY AND ITS ASSOCIATES CONCERNS. THE DETAILS OF SHARES PURCHASED ARE AS FOLLOWS: MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 19 NAME OF THE PARTIES NUMBER OF SHARES PRICE PER SHARES (RS.) TOTAL AMOUNT (RS.) ANAND FAMILY 56,06,750 40.25 22,56,71,688 EMPLOYEES, ETC. 14,750 30.00 4,42,500 56,21,500 22,61,14,188 SHARES NOT ACQUIRED IN MARCH 2007 3,500 TOTAL 56,25,000 IN MAY 2007, VARIOUS ENTITIES OF SIGNET GROUP AND M EMBERS OF SANGLA FAMILY SOLD 22,88,025 SHARES TO SHALIMAR FERROUS METALS PVT. LTD., INDORE, (SHALIMAR) AT VARIOUS R ATES RANGING FROM RS.40.35 TO RS.44.80 PER SHARES. THE RESULTANT SHORT TERM CAPITAL GAIN WAS DULY SHOWN IN THEIR RETURN OF INCOME FILED BEFORE THE INCOME-TAX DEPARTMENT. AT THE END OF MARCH 2009, THE SIGNET GROUP WAS HOLDING ONLY 26.51% OF T HE TOTAL PAID UP SHARE CAPITAL OF ADROIT INDUSTRIES (INDIA) LTD. (14,91,400 SHARES) AND REST OF THE SHARES WERE HELD BY NON- SIGNET GROUP ENTITIES (41,33,600 SHARES). IN AUGUST AND SEPTEMBER 2009, THE SHARES OF ADROIT INDUSTRIES (IN DIA) LTD. HELD BY NON-SIGNET GROUP WERE ACQUIRED BY MEMBERS O F SANGLA FAMILY AND OTHER ASSOCIATE CONCERNS AT AROUN D RS.11.25 TO RS.12.25 PER SHARE. BY MARCH 2010, THE ENTIRE SHARE CAPITAL OF ADROIT INDUSTRIES (INDIA) LTD. I.E . 56,25,000 SHARES OF ADROIT INDUSTRIES (INDIA) LTD. WERE AGAIN HELD BY VARIOUS ENTITIES OF MEMBERS OF SANGLA FAMILY AND AS SOCIATE CONCERNS. THE TOTAL FUNDS PROVIDED DIRECTLY OR INDI RECTLY FROM SIGNET INDUSTRIES LTD. AMOUNTED TO RS.16.47 CRORES APART FROM ITS OWN INVESTMENTS OF RS.6.00 CRORES IN SHARE S OF ADROIT INDUSTRIES (INDIA) LTD. ADROIT INDUSTRIES (INDIA) LTD. INCURRED EXPENSES TOWARDS PUBLIC ISSUE IN THE FINA NCIAL YEAR 2010-11 & 2011-12 DETAILS OF WHICH ARE AS UND ER :- MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 20 FINANCIAL YEAR PUBLIC ISSUE EXPENSES (RS.) 2010-11 69,08,696 2011-12 14,72,210 83,80,906 46. THERE WERE NO EVIDENCES FOUND EITHER DURING SEARCH OR POST SEARCH ENQUIRIES OR DURING ASSESSMENT PROCEEDI NGS WHICH COULD SHOW THAT ANY PAYMENT OF ANY CONSIDERA TION OVER AND ABOVE THE RECORDED CONSIDERATION IN BOOKS OF SANGLA FAMILY AND THEIR ASSOCIATE CONCERNS WERE PAI D OR RECEIVED AS UNACCOUNTED CASH OR OTHERWISE. 47. THE ASSESSING OFFICER HELD THAT NO PROMOTER WILL DIVEST 73.5% OF ITS HOLDING TO THIRD PARTIES AND TH AT TOO AT A VERY NOMINAL PROFIT, PARTICULARLY WHEN THE PROMOTER INTENDED TO GO PUBLIC AND ANTICIPATED SIGNIFICANT VALUE ADDI TION TO ITS INVESTMENT. ADROIT INDUSTRIES (INDIA) LTD. HAS BEEN CONSISTENTLY PERFORMING WELL. EVIDENT FROM THE FOLL OWING TABLE SHOWING YEAR WISE TURNOVER, PROFITABILITY AND EARNINGS PER SHARE: FINANCIAL YEARS TURNOVER PROFIT BEFORE TAX PROFIT AFTER TAX EARNING PER SHARE 31.03.2007 20,53,03,097 3,24,43,605 2,51,24,433 4. 00 31.03.2008 22,11,45,868 2,79,53,727 1,68,66,562 3.00 31.03.2009 24,61,35,713 2,22,92,834 1,45,21,059 2.58 31.03.2010 16,98,84,237 3,13,32,877 2,06,68,119 3.67 31.03.2011 26,16,49,372 6,08,43,868 4,09,00,040 3.89 31.03.2012 23,45,32,888 4,56,79,338 3,20,21,038 3.05 31.03.2013 36,78,86,610 7,13,90,758 4,91,83,297 4.68 THE ASSESSEE HAS NOT GIVEN A SINGLE NAME EITHER OF ANY BROKER OR ANY INVESTOR THROUGH WHOM HE CONTACTED TH E ULTIMATE INVESTOR. ANY PRUDENT BUSINESS GROUP WILL ACQUIRE ANOTHER COMPANY ONLY AFTER HAVING FIRM FINANCIAL TI E UPS. THE DIVESTMENT TO THE TUNE OF 73.5% IMMEDIATELY AFT ER ACQUIRING A COMPANY IS AGAINST ALL HUMAN PROBABILIT IES. THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 21 CONTENTION OF THE ASSESSEE THAT DUE TO BAD CAPITAL MARKET SITUATION, THE GROUP COULD NOT GO PUBLIC AND WAS CO MPELLED TO ACQUIRE SHARES OF ADROIT INDUSTRIES (INDIA) LTD. AT RS.11 TO RS.12.5 PER SHARE IS ALSO NOT JUSTIFIED BECAUSE NO INVESTOR WOULD EVER INVEST IN THE SHARES OF THE UNLISTED COM PANY WITHOUT HAVING PROPER EXIT ROUTE AND WITHOUT ENSURI NG PROPER RETURNS ON HIS INVESTMENT PARTICULARLY WHEN THESE S HARES HAVE CHANGED MANY HANDS BEFORE COMING BACK TO SANGL A GROUP WHICH IS USUALLY NOT POSSIBLE IN CASE OF UNLI STED SHARES. THE ASSESSEE DID NOT BRING ANYTHING ON RECO RD THAT THERE WAS HIGH INTEREST BEARING DEBT TO BE DISCHARG ED OR WAS FACING ANY FINANCIAL LIQUIDITY PROBLEM. FURTHER, NO THING WAS BROUGHT ON RECORD TO SHOW THAT THE SALE PROCEEDS WE RE UTILIZED FOR DISCHARGING ANY INTEREST BEARING LIABI LITY. IF THE ACQUISITION OF ADROIT INDUSTRIES (INDIA) LTD. WAS S O RISKY, WHY THE INVESTMENT IN ADROIT INDUSTRIES (INDIA) LTD . WAS MADE IN THE FIRST PLACE? IT IS NOT POSSIBLE TO ACCE PT THE ASSERTION OF THE ASSESSEE THAT THE DIVESTMENT OF PA RT OF THE INVESTMENT WAS TO REDUCE THE ASSESSEE GROUPS RISK. MERELY BECAUSE THE ENTIRE TRANSACTION WAS THROUGH BANKING CHANNELS WOULD NOT MAKE A SHAM TRANSACTION GENUINE. THE A.O. HELD THAT THESE INVESTOR COMPANIES WERE PAPER COMPANIES HAVING MEAGER PROFITS AND WERE NOT REGULA RLY FILING THEIR RETURN OF INCOME. THE GROUP DID NOT MA KE ANY ATTEMPT TO GO PUBLIC IN F.Y.2007-08 AND 2008-09. IT WAS ONLY AFTER THE SHARES OF ADROIT INDUSTRIES (INDIA) LTD. WERE ACQUIRED IN SEPTEMBER 2009, THAT THE GROUP TRIED FO R ITS PUBLIC ISSUE IN F.Y.2011-12. 48. THEREFORE THE CONTENTION OF THE ASSESSEE THAT THE SHARES WERE REACQUIRED FOR A PRICE RANGING FROM RS. 11.25 TO RS.12.25 PER SHARE DUE TO ITS INABILITY TO BRING OU T PUBLIC ISSUE. THE DIVESTMENT OF SHARES OF ADROIT INDUSTRIE S (INDIA) LTD. WAS A SHAM TRANSACTION AS THESE COMPANIES DID NOT EXIST IN REAL SENSE. IN THEIR STATEMENT RECORDED DU RING THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 22 ASSESSMENT PROCEEDINGS, SHRI PARASRAMPATIDAR AND SH RI VIMAL BANDI (BOTH OF THEM ARE EMPLOYEES OF SIGNET G ROUP) CATEGORICALLY ADMITTED THAT THEY HAD NEITHER ANY ID EA ABOUT THE ACTUAL AFFAIRS OF THE COMPANY NOR ANY INFORMATI ON ABOUT TRANSFER OF SHARES OF ADROIT INDUSTRIES (INDIA) LTD . SHALIMAR FERROUS METAL PVT. LTD. WAS USED AS A CONDUIT TO IN TRODUCE UNACCOUNTED AND UNEXPLAINED INCOME THROUGH BOGUS PA PER COMPANY LIKE LUCKY COMMOTRADE PVT. LTD. OF WHICH THE ULTIMATE BENEFICIARY IS THE ASSESSEE. SINCE THE ASS ESSEE HAS FINALLY RECEIVED THE AMOUNT IN THE GUISE OF SALE PR OCEEDS OF SHARES OF ADROIT INDUSTRIES (INDIA) LTD., THE SAME IS BROUGHT TO TAX AS UNEXPLAINED CASH CREDIT IN ASSESSMENT YEA R 2008- 09. THE REPURCHASE OF SHARES BY THE SIGNET GROUP, S ANGLA FAMILY AND ITS ASSOCIATE CONCERNS IN THE ASSESSMENT YEAR 2010-11 FROM VARIOUS PAPER COMPANIES WAS NOTHING BU T A COLOURABLE DEVICE AND AN ARRANGED AND MANAGED AFFAI R. THEREFORE THE DIFFERENCE BETWEEN THE FAIR MARKET VA LUE PER SHARE I.E. RS.40.25 AND COST OF REACQUISITION IS TR EATED AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. ACCORDINGLY , THE FOLLOWING ADDITIONS ARE MADE: ASSESSMENT YEAR AMOUNT (RS.) REMARKS 2008-09 14,72,800 UNEXPLAINED CASH CREDIT 2010-11 1,02,65,813 UNEXPLAINED INVESTMENTS 49. THE C.I.T.(A) CONFIRMED THE ACTION OF THE A.O. AND REJECTED THE ASSESSEES CONTENTION. AGREEING TO THE FINDINGS OF THE ASSESSING OFFICER, C.I.T.(A) ALSO OBSERVED T HAT THE SANGLA GROUP HAD INTRODUCED CERTAIN MORE LAYERS OF ENTITIES IN WHOSE NAME THE SHARES WERE TRANSFERRED (IN SOME CASES SIX TRANSFERS) AND FINALLY REPURCHASED THE SHARES A T A PRICE OF RS.11.25 TO RS.12.25 PER SHARE. THE FLOW OF SHAR ES OF ADROIT INDUSTRIES (INDIA) LTD. INVOLVING NUMBER OF TRANSFERS IS AS UNDER : MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 23 CHART-I [FLOW OF TRANSFER OF 22,88,075 SHARES ORIGINALLY HE LD BY ANAND FAMILY] NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER 2 ND TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT JAGJIT SINGH ANAND 3,10,550 13.03.07 ORNATE LEASING & FINANCE PVT. LTD. 3,10,550 40.25 1,25,00,000 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 42.60 1,32,29,430 GAJENDRA KAUR ANAND JAGJIT SINGH ANAND 3,10,550 13.03.07 SIGNATE LEASING & FINANCE PVT. LTD. 3,10,550 40.25 1,25,00,000 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 40.35 1,25,30,693 GAJENDRA KAUR ANAND JAGJIT SINGH ANAND 2,00,000 13.03.07 SWAN HOLDING PVT. LTD. 2,00,000 40.20 80,40,625 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 2,00,000 40.40 80,80,000 GAJENDRA KAUR ANAND JAGJIT SINGH ANAND 3,10,550 13.03.07 SIGNET IMPEX PVT. LTD. 3,10,550 40.25 1,25,00,000 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 40.35 1,25,30,693 GAJENDRA KAUR ANAND JAGJIT SINGH ANAND 3,10,550 13.03.07 SWAN PETROCHEMICALS PVT. LTD. 3,10,550 40.25 1,25,00,000 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 40.65 1,26,23,858 GAJENDRA KAUR ANAND VIRENDRA SINGH ANAND 2,84,650 13.03.07 SAURABHSANGLA 2,84,650 40.25 1,14 ,57,163 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 2,84,650 44.20 1,25,81,530 NARINDER KAUR ANAND JAGJIT SINGH ANAND 3,10,550 13.03.07 PRANAY TRADE LINK PVT LTD 3,10,550 40.25 1,24,99,638 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 3,10,550 40.40 1,25,46,220 ISHDEEP SINGH ANAND 3,750 13.03.07 M/S MUKESHSANGLA HUF 3,750 40.25 1,50,938 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 32,875 44.80 14,72,800 RUPINDER SINGH ANAND MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 24 GAMANBHASIN 2,500 13.03.07 M/S MUKESHSANGLA HUF 2,500 40.25 1,00,625 RAJENDRAPAL SINGH BHASIN TARANJOT KAUR CHANDOK 17,875 13.03.07 M/S MUKESHSANGLA HUF 17,875 40.25 7,19,469 RANJEET SINGH CHANDOK RUPINDER SINGH ANAND 2,500 13.03.07 M/S MUKESHSANGLA HUF 2,500 40.25 1,00,625 PARMINDER KAUR ANAND PARMINDER KAUR ANAND 2,500 13.03.07 M/S MUKESHSANGLA HUF 2,500 40.25 1,00,625 RUPINDER SINGH ANAND JASHDEEP SINGH ANAND 3,750 13.03.07 M/S MUKESHSANGLA HUF 3,750 40.25 1,50,938 RUPINDER SINGH ANAND NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER 2 ND TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT KAMAL C. SANGHAVI 1,250 13.03.07 MUKESHSANGLA 1,250 30.00 37,500 10.05.07 SHALIMAR FERROUS METALS PVT. LTD. 217,750 40.85 8,895,088 VIRENDRA SINGH ANAND 103,800 13.03.07 MUKESHSANGLA 103,800 40.24 4,176,912 NARINDER KAUR ANAND JAGJIT SINGH ANAND 99,200 13.03.07 MUKESHSANGLA 99,200 40.32 4,000,000 GAJENDRA KAUR ANAND ISHWERLALBHAVSAR 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 RAMESH SEN 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 RAMESH PAL 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 25 NEELKANTH BADE 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 D.G.KAMBLE 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 SHYAM SHARMA 500 13.03.07 MUKESHSANGLA 50 0 30.00 15,000 JYOTIVALLABHTRIPA THI 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 NARAYAN SURYAVANSHI 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 NAND K. VISHWAKARMA 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 GAJANANDGANGRE 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 TARACHAND JAIN 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 AFSAR ANSARI 500 13.03.07 MUKESHSANGLA 50 0 30.00 15,000 SHARAVAN KUMAR 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 MOHAN SINGH SIDDU 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 ASHOK KUMAR SAHU 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 SHAILESH VYAS 500 13.03.07 MUKESHSANGLA 5 00 30.00 15,000 AJAY GARUD 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 PARVATI BAI BABLE 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 RAMESH NIMBALKAR 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 D.N. VYAS 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 HARI SHANKAR GAUD 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 JAGJIT SINGH PUNJABI 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 ASHOK AWESTHI 500 13.03.07 MUKESHSANGLA 5 00 30.00 15,000 KISHORILAL PATEL 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 RAJESH SETH` 500 13.03.07 MUKESHSANGLA 50 0 30.00 15,000 PAHDURANGPAHALK AR 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 SURENDRA SINGH CHADDA 500 13.03.07 MUKESHSANGLA 500 30.00 15,000 22,88,025 22,88,025 9,19,40,056 22,88,025 9 ,44,90,310 CHART II [FURTHER TRANSFER OF 22,88,025 SHARES OF CHART-I AN D 3,10,550 SHARES ORIGINALLY HELD BY SHRI JAGJIT SINGH ANAND AND GAJENDRA KAUR ANAND = 2 5,98,575 SHARES] NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 2 ND TRANSFER 3 RD TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 26 JAGJIT SINGH ANAND 310,550 13.03.07 SHALIMAR F ERROUS METALS PVT. LTD. 310,550 40.25 12,500,000 10.12.07 LUCKY COMMOTRADEP VT LTD 2,598,575 41.37 107,510,026 GAJENDRA KAUR ANAND 310,550 310,550 12,500,000 2,598,57 5 107,510,026 4 TH TRANSFER 5 TH TRANSFER 6 TH TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT 05.03.08 DOOLDRUM INVESTEMN T& FINANCE PVT LTD 7,20,300 41.46 2,98,63,638 08.09.0 9 SAURAB HSANGLA 2,59,750 11.50 29,87,125 08.09.0 9 MUKESH SANGLA 4,60,550 11.50 52,96,325 7,20,300 82,83,450 12.03.08 OSHIN INVESTMEN T & FINANCE PVT LTD 6,36,075 40.48 2,57,48,316 12.09.0 9 MUKESH SANGLA 1,89,275 12.25 23,18,619 12.09.0 9 SAURAB HSANGLA 1,18,550 12.25 14,52,238 12.09.0 9 SMT. AVANTIK ASANGLA 2,00,000 12.25 24,50,000 12.09.0 9 CAN INDIA OVERSE AS 1,28,250 12.25 15,71,063 22.09.0 9 SIGNET IMPEXP VT LIMITED 1,28,25 0 12.25 15,71,063 6,36,075 77,91,919 1,28,25 0 15,71,063 15.03.08 GYNESHWA R TRADING & CO. LTD 6,21,100 40.95 2,54,34,045 08.09.0 9 SAURAB HSANGLA 2,10,550 12.00 25,26,600 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 27 08.09.0 9 MUKESH SANGLA HUF 2,00,000 12.00 24,00,000 08.09.0 9 MONIKA SANGLA 2,10,550 12.00 25,26,600 6,21,100 74,53,200 28.03.08 SIDH HOUSING DEVELOPM ENT COMPANY LTD 6,21,100 40.90 2,54,02,990 12.09.0 9 MUKESH SANGLA HUF 1,60,550 11.50 18,46,325 12.09.0 9 MONIKA SANGLA 1,60,550 11.50 18,46,325 12.09.0 9 AVANTIK ASANGLA 3,00,000 11.50 34,50,000 6,21,100 71,42,650 25,98,57 5 10,64,48,98 9 25,98,575 3,06,71,2 19 CHART III [FLOW OF TRANSFER OF 12,94,775 SHARES ORIGINALLY HE LD BY MANJEET KAUR ANAND] NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER 2 ND TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT MANMEET KAUR ANAND 1,294,775 13.03.07 LUCKY COMMOTRADE PVT LTD 1,294,775 40.25 52,114,694 10.03.09 ISPAT SHEE TS LTD 397,540 40.55 16,120,247 19.03.09 CLIFTON SECURITIES PVT LTD 272,235 40.50 11,025,518 19.03.09 NOVELTY TRADERS LTD 375,000 40.55 15,206,250 10.03.09 OLMPUS VISION PVT LTD 250,000 40.50 10,125,000 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 28 1,294,775 1,294,775 52,114,694 1,294,775 52,477,015 3 RD TRANSFER 4 TH TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT 0 0 0 25.09.09 SWAN-HOLDING PVT LTD 1,52,500 11.5 0 17,53,750 26.09.09 ORNATE LEASING & FINANCE PVT LTD 2,45,040 11.50 28,17,960 3,97,540 45,71,710 20.03.09 ISPAT SHEET LTD 2,72,235 40.50 1,10,25,518 28.09.09 SHREE BALAJI STARCH & CHEMICALS LTD 2,72,235 11.50 31,30,703 0 0 0 22.09.09 SIGNATE LEASING & FINANCE PVT LTD 1,87,500 11.50 21,56,250 24.09.09 SIGNET IMPEXTPVT LTD 1,87,500 11.50 2 1,56,250 3,75,000 43,12,500 20.03.09 NOVELTY TRADERS PVT LTD 2,50,000 40.50 1,01,25,000 26.09.09 SHREE BALAJI ST ARCH & CHEMICALS LTD 2,50,000 11.50 28,75,000 12,94,775 1,48,89,913 CHART IV [FLOW OF TRANSFER OF 2,37,500 SHARES ORIGINALLY HEL D BY JAGJIT SINGH ANAND& GAJENDRA KAUR ANAND] NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER 2 ND TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT JAGJIT SINGH ANAND 2,37,500 13.03.07 MONIKA SANGLA 2,37,500 40.25 95,59,375 30.10.07 SIDDACHALDEVLO PERS P. LTD. 21,500 46.00 9,89,000 GAJENDRA KAUR ANAND 30.10.07 ANIKANT SHARE & SECURITY 21,500 46.00 9,89,000 30.10.07 SAMYANK SHARE & STOCK BROKERS 21,500 46.00 9,89,000 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 29 30.10.07 SEA ENTERTAINMENT LTD. 21,500 46.00 9,89,000 30.10.07 SKY TOUCH INFRACTURE 28,000 46.00 12,88,000 30.10.07 PALASIA LEASING & FINANCE LTD. 47,500 46.00 21,85,000 30.10.07 UNO INDUSTRIES LTD. 76,000 46.00 34,96,000 2,37,500 2,37,500 95,59,375 2,37,500 1,09,25, 000 3 RD TRANSFER 4 TH TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT DATE NAME NO. OF SHARES RATE AMOUNT 12.08.09 CAN-INDIA OVERSEAS LIMITED 21,500 11.50 2,47,250 21.09.09 ORNATE LEASING PVT LTD 97,000 11.38 11,03,625 13.08.09 CAN-INDIA OVERSEAS LIMITED 21,500 11.25 2,41,875 23.09.09 SIGNATE LEASING PVT LTD 64,500 11.33 7,30,785 13.08.09 CAN-INDIA OVERSEAS LIMITED 21,500 11.50 2,47,250 23.09.09 SWAN-HOLDING PVT LTD 76,000 11.50 8,74,000 14.08.09 CAN-INDIA OVERSEAS LIMITED 21,500 11.25 2,41,875 17.08.09 CAN-INDIA OVERSEAS LIMITED 28,000 11.50 3,22,000 18.08.09 CAN-INDIA OVERSEAS LIMITED 47,500 11.25 5,34,375 19.08.09 CAN-INDIA OVERSEAS LIMITED 76,000 11.50 8,74,000 2,37,500 27,08,625 2,37,500 27,08,410 CHART V MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 30 NAME OF SHAREHOLDER OF ANAND FAMILY NO. OF SHARES HELD 1 ST TRANSFER DATE NAME NO. OF SHARES RATE AMOUNT VIRENDRA SINGH ANAND 1,490,650 13.03.07 SIGNET OV ERSEAS LTD. 1,490,650 40.25 60,000,403 NARINDER KAUR ANAND YOGENDRA BHATIA 750 05.06.08 MUKESHSANG LA 750 30.00 22,500 50. THE REDUCTION IN MARKET VALUE OF ADROIT IN DUSTRIES (INDIA) LTD. FROM RS.40.25 IN FINANCIAL YEAR 2006-0 7 TO RS.11.25 TO RS.12.25 IN FINANCIAL YEAR 2009-10 IS B EYOND COMPREHENSION PARTICULARLY WHEN THE COMPANY IS CONSISTENTLY EARNING HIGHER PROFITS AS OBSERVED BY THE A.O. THE LEARNED CIT(A) ALSO OBSERVED THAT IT IS BEYOND COMPREHENSION THAT THE SIGNET GROUP, SANGLA FAMILY AND ITS ASSOCIATE CONCERNS WOULD DIVEST ABOUT 75% OF THEIR HOLDING TO UNRELATED PARTIES AFTER TAKING OVER THE CONTROL AND MANAGEMENT OF ADROIT INDUSTRIES (INDIA) LTD. THE CO NTENTION OF THE ASSESSEE ABOUT PUBLIC ISSUE OF ADROIT INDUST RIES (INDIA) LTD. IN FUTURE BEING A REASON FOR DIVESTMENT IS ALS O UNCONVINCING. RELYING UPON THE CASE OF C.I.T. VS. RATHI FINLEASE LTD. (2008) 215 CTR 429 (MP) AND INDUSTRIA L FILTERS AND FABRICS PVT. LTD. [APPEAL NO.IT-185/09-10/510 O RDER DT.30.03.2012 PASSED BY C.I.T.(A), INDORE], IT WAS HELD THAT THE INTERMEDIARY COMPANIES LIKE SHRI ANIKET SHARES AND SECURITIES PVT. LTD., UNNO INDUSTRIES LTD., SIDDHAC HAL DEVELOPERS PVT. LTD. AND PALASIA LEASING AND INVEST MENT PVT. LTD. WERE ENTRY PROVIDERS. FURTHER, IN CASE OF SIGNET INDUSTRIES LTD., IT WAS HELD THAT LUCKY COMMOTRADE P VT. LTD. IS A PAPER COMPANY WHICH IS USED BY THE SANGLA GROU P TO INTRODUCE UNSECURED LOAN AND SHARE APPLICATION MONE Y WITHIN THE GROUP CONCERNS. THE TRANSACTION OF TRAN SFER OF SHARES OF ADROIT INDUSTRIES (INDIA) LTD. BY VARIOUS MEMBERS AND CONCERNS OF SANGLA GROUP WERE ONLY ACCOMMODATIO N ENTRIES AND NOT GENUINE TRANSACTIONS AND THEREFORE, THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 31 AMOUNT OF SALE PROCEEDS CREDITED IN THE BOOKS OF VA RIOUS MEMBERS AND CONCERNS OF SANGLA GROUP AMOUNTED TO UNEXPLAINED CASH CREDIT IN THE ASSESSMENT YEAR 2008 -09. HOWEVER, THE SHORT TERM CAPITAL GAIN WHICH WAS OFFE RED FOR TAXATION BY VARIOUS ENTITIES OF THE ASSESSEE GROUP WERE REDUCED FROM SALE PROCEEDS. THE WORKING IN THIS REG ARD IS AS UNDER: NO. OF SHARES SOLD RATE (RS.) SALE PROCEEDS (RS.) SHORT TERM CAPITAL GAIN (RS.) UNEXPLAINED CASH CREDIT (RS.) 32,875 44.80 14,72,800 1,49,580 13,23,220 FOR THE ASSESSMENT YEAR 2010-11, ASSUMING FAIR MARK ET VALUE OF THE SHARES AT RS.40.25 (ORIGINAL COST OF A CQUISITION FROM ANAND FAMILY IN MARCH 2007), THE DIFFERENCE BE TWEEN THE COST OF REACQUISITION AND FAIR MARKET VALUE WAS TREATED AS UNEXPLAINED INVESTMENT. HOWEVER, TO AVOID DOUBLE TAXATION, ADDITION ON ACCOUNT OF UNEXPLAINED INVEST MENT WAS NOT MADE IN RELATION TO SHARES SOLD BY THE GROUP EN TITIES IN ASSESSMENT YEAR 2008-09 AS THEIR SALE PROCEEDS WAS BROUGHT TO TAX U/S.68 AS UNEXPLAINED CASH CREDIT. T HE WORKING IN THIS REGARD IS AS UNDER: NO. OF SHARES ACTUAL RATE PER SHARE (RS.) PURCHASE RATE DECLARED PER SHARE (RS.) DIFFERENCE UNEXPLAINED INVESTMENT A B C D (B C) E (D X A) 1,67,125 (200000- 32875) 40.2 5 12.00 28.25 47,21,281 1,60,550 40.25 11.50 28.75 46,15,813 3,27,675 93,37,094 ACCORDINGLY, THE FOLLOWING ADDITIONS WERE PARTLY CO NFIRMED : MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 32 ASSTT. YEAR AMOUNT (RS.) REMARKS 2008-09 13,23,220 UNEXPLAINED CASH CREDIT 2010-11 93,37,094 UNEXPLAINED INVESTMENTS 51. BEFORE US, IT IS SUBMITTED THAT THE SOURCE OF INVESTMENT BY SIGNET GROUP, MEMBERS OF SANGLA FAMIL Y AND ITS ASSOCIATE CONCERNS IN MARCH 2007 FOR ACQUIRING 56,21,500 SHARES OF ADROIT INDUSTRIES (INDIA) LTD. ALONGWITH ITS CONTROL AND MANAGEMENT WAS NOT DISPUTED BY THE REVENUE AUTHORITIES. THE SOURCE OF INVESTMENT IN TH E SHARES OF ADROIT INDUSTRIES (INDIA) LTD. WAS MAINLY OUT OF LOANS PROVIDED BY SIGNET INDUSTRIES LTD. AND PARTLY BY UN SECURED INTER-CORPORATE LOANS, WHICH WERE ADVANCED TO VARIO US GROUP ENTITIES AND LUCKY COMMOTRADE PVT. LTD. THROUGH SHA LIMAR FERROUS METALS PVT. LTD. (SHALIMAR). THE ASSESSEE HAS SUBMITTED A FUND FLOW CHART IN THIS REGARD. SHALI MAR FERROUS METALS PVT. LTD. (SHALIMAR) WAS INCORPORA TED ON 18.06.1986 UNDER THE PROVISIONS OF THE COMPANIES AC T, 1956, HAVING PAN NO. AAICS 4429G. IT WAS REGULARLY ASSESSED TO TAX. THE ASSESSMENT FOR ASSESSMENT YEAR 2007- 08 WAS COMPLETED U/S.143(3) R.W. SEC.264 OF THE INC OME-TAX ACT, 1961. THE RETURNED INCOME WAS ACCEPTED. DURIN G FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 200 7-08 SHALIMAR FERROUS METAL PVT. LTD. RECEIVED UNSECURED LOAN FROM FOLLOWING ENTITIES :- NAME OF THE COMPANY P.A.NO. AMOUNT (RS.) NALANDA MERCHANT PVT. LTD. (OUT OF LOAN OF RS.3,50,00,000/- GIVEN BY SIGNET OVERSEAS LTD.) AACCN 2446 C 3,50,00,000 RATNAGIRIVINIMAY PVT. LTD. AABCR 1870 R 15,00,000 UTILITY EXIM PVT. LTD. (OUT OF LOAN OF RS.3,50,00,000/- GIVEN BY SIGNET OVERSEAS LTD.) AAACU 8022 B 3,50,00,000 ANUBHAV INFRASTRUCTURE PVT. LTD. AAFCA 5482 40,00,000 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 33 J SNEHSHIL MARKETING PVT. LTD. AAJCS 5894 E 50,00,000 LEKHRAJ STEEL PVT. LTD. AABCL 0866 B 2,05,000 KAMDEEP MARKETING PVT. LTD. AAACK 9556 A 2,30,000 SIGNET OVERSEAS LTD. AABCS 3489 F 5,46,05,407 BANK OVERDRAFT (CHEQUE ISSUED BUT NOT PRESENTED FOR PAYMENT IN THE BANK AND CLEARED IN THE IMMEDIATELY SUCCEEDING YEAR OUT OF LOAN OF RS.3,73,15,000/- RECEIVED FROM SIGNET OVERSEAS LTD.) 3,58,47,845 17,13,88,252 THE UNSECURED LOANS SO RECEIVED WERE ADVANCED TO TH E FOLLOWING PERSONS/ENTITIES FOR ACQUIRING SHARES OF ADROIT INDUSTRIES (INDIA) LTD. :- NAME OF THE COMPANY P.A.NO. AMOUNT (RS.) GROUP COMPANIES ORNATE LEASING & FINANCE PVT. LTD. AABCO 1101 A 14,20,000 SIGNET LEASING & FINANCE PVT. LTD. AAMCS 5841 G 1,2 6,00,000 SWAN HOLDING PVT. LTD. AAHCS 5640 Q 80,50,000 SIGNET IMPEX PVT. LTD. AAICS 5582 Q 1,26,60,000 SWAN PETROCHEMICALS PVT. LTD. AABCR 9592 C 1,24,40, 000 SMT. MONIKA SANGLA ANAPS 5580 Q 1,83,32,399 SHRI SAURABHSANGLA ANBPS3195 G 1,53,41,162 SHRI MUKESHSANGLA ANAPS 5579 F 1,34,62,000 SHRI MUKESHSANGLA HUF AADHM 4930 J 81,947 SMT. AVANTIKASANGLA AEOPG 4774 R 60,000 NON-GROUP COMPANIES LUCKY COMMOTRADE PVT. LTD. AAACL 4501 E 5,21,14,350 PRANAY TRADE LINK PVT. LTD. AADCP 0735 F 1,26,20,00 0 15,91,81,858 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 34 52. THE MEMBERS OF SANGLA FAMILY AND ITS ASSOCIATE CONCERNS SOLD 22,88,025 SHARES OF ADROIT INDUSTRIES (INDIA) LTD. TO SHALIMAR FERROUS METALS PVT. LTD. (SHALIMA R) IN MAY 2007 FOR A CONSIDERATION RANGING FROM RS.40.35 TO R S.44.80 PER SHARE. AS THE MEMBERS OF SANGLA FAMILY AND ITS ASSOCIATE CONCERNS HAD TAKEN LOAN FROM SHALIMAR WHI LE ACQUIRING THE SHARES OF ADROIT INDUSTRIES (INDIA) L TD., THE SALE PROCEEDS OF SHARES WERE ADJUSTED AGAINST OUTSTANDIN G UNSECURED LOANS. 53. LUCKY COMMOTRADE PVT. LTD. IS A CLOSELY HELD NON- BANKING FINANCIAL COMPANY INCORPORATED ON 16.03.199 4 HAVING PAN NO. AAACL 4501 E. IT IS NOT A GROUP CONCE RN OR ASSOCIATE CONCERN OF SIGNET GROUP. IT IS HAVING AN INDEPENDENT BOARD OF DIRECTORS. ITS SHARE CAPITAL AND FREE RESERVES AS ON 31.03.2005, STOOD AT RS.1,28,80,000/ - AND RS.9,34,20,000/- RESPECTIVELY. FOR A.Y.2007-08 THE SHAREHOLDERS FUND STOOD AT RS.10,63,97,734/-. THE ASSESSMENT FOR A.Y.2007-08 WAS COMPLETED U/S.143(3) AND TOTAL INCOME ASSESSED WAS RS.1,23,92,580/-. THE ASSESSMENT FOR A.Y.2005-06 WAS ALSO COMPLETED U/S. 143(3). COPY OF ORDER WAS PLACED BEFORE THE LOWER AUTHORITIES. THE FINANCIAL CAPACITY OF THE COMPANY AND ITS CREDITWORTHINESS STOOD ESTABLISHED FROM THE FOLLOWI NG TABLE SHOWING ITS FINANCIALS AS: ASSESSMENT YEARS PAID-UP SHARE CAPITAL FREE RESERVES PROFIT FOR THE YEAR TAXES PAID 2008 - 09 1,28,80,000 9,35,17,734 1,17,408 44,400 2009 - 10 1,28,80,000 9,40,46,001 6,04,107 75,840 2010 - 11 1,28,80,000 9,63,52,036 34,40,035 11,34,000 2011 - 12 1,28,80,000 9,78,27,075 22,0 3,439 7,28,400 2012 - 13 1,28,80,000 9,85,63,971 11,54,896 4,18,000 ONCE THE INCOME-TAX DEPARTMENT, KOLKATA ASSESSED LU CKY COMMOTRADE PRIVATE LTD. U/S. 143(3) FOR ASSESSMENT YEAR 2005-06 AND ASSESSMENT YEAR 2007-08, INCOME-TAX MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 35 DEPARTMENT, INDORE HAS NO LOCUSSTANDITO TREAT IT AS A BOGUS PAPER COMPANY AND A KNOWN ENTRY PROVIDERPARTICUL ARLY WHEN NO INVESTIGATION WHAT SO EVER WAS CONDUCTED BY IT AND NOT AN IOTA OF EVIDENCE WAS BROUGHT ON RECORDS IN S UPPORT OF SUCH SERIOUS AND BASELESS ALLEGATIONS. IN FACT, DUR ING THE ENTIRE ASSESSMENT PROCEEDINGS U/S.153A/153C OF THE ACT IN RESPECT OF ALMOST ALL THE ASSESSEES OF THE GROUP, T HE AUTHORITIES BELOW DID NOT ISSUE EVEN A SINGLE NOTIC E TO IT U/S.133(6) TO COLLECT INFORMATION OR SUMMON U/S 131 FOR MAKING INVESTIGATION. THEREFORE, THESE CHARGES AGAI NST LUCKY COMMOTRADE PRIVATE LTD. ARE BASELESS, HEARSAY AND MERE CONJECTURES AND SURMISES. IN CASE OF LAL CHAND BHAGATAMBICA RAM VS. C.I.T. 37 ITR 288, HONOURABLE SUPREME COURT STRONGLY DISAPPROVED THE PRACTICE OF MAKING ADDITION IN THE ASSESSMENT ON MERE SUSPICION AND SU RMISES OR TAKING NOTE OF SO CALLED NOTORIOUS PRACTICE PREV AILING IN TRADE CIRCLES. 54. SHALIMAR SOLD ITS SHAREHOLDING IN ADROIT INDUS TRIES (INDIA) LTD. TO LUCKY AND THE PROCEEDS THEREOF WERE UTILIZED FOR REPAYMENT OF INTER-CORPORATE LOAN TO SIGNET IND USTRIES LIMITED. THIS FACT WAS EXPLAINED TO THE LOWER AUTHO RITIES WITH EVIDENCE LIKE BANK STATEMENTS OF SHALIMAR, LUCK Y AND SIGNET, DULY CONFIRMED COPIES OF ACCOUNTS. BUT THE SAME WAS BRUSHED ASIDE BY THEM ON THE PRETEXT THAT LUCKY SOLD ITS HOLDING TO VARIOUS BOGUS PAPER COMPANIES NOTWITHS TANDING THE FACT THAT THESE SO CALLED BOGUS PAPER COMPANIES PRODUCED ALL THE DOCUMENTS AS REQUIRED BY THE A.O. IN TERMS OF NOTICE U/S 133(6) FOR VERIFICATION OF TRANSACTIO N AND ESTABLISHING THEIR IDENTITIES AND CREDITWORTHINESS. SURPRISINGLY, THE LOWER AUTHORITIES DID NOT BOTHER TO EVEN LOOK INTO THEM AND GIVE ANY FINDING IN THIS REGARD. THEREFORE THE TRANSFER OF SHARES BY SIGNET GROUP AND SANGLA F AMILY WAS GENUINE TRANSACTION. IT APPEARS THAT IN THE EYE S OF INCOME-TAX DEPARTMENT, ALL THE FINANCE AND INVESTME NT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 36 COMPANIES OPERATING FROM BOMBAY AND KOLKATA ARE BOG US PAPER COMPANIES. NOTWITHSTANDING PLETHORA OF EVIDEN CE PLACED BEFORE IT TO ESTABLISH IDENTITY AND CREDITWO RTHINESS AND GENUINENESS OF TRANSACTION. 55. THE DIVESTMENT OF SHAREHOLDING OF ADROIT INDUS TRIES (INDIA) LTD. TO THE EXTENT OF 73.5% WAS NECESSITATE D DUE TO PERILOUS FINANCIAL POSITION OF THE ENTIRE GROUP DUE TO HUGE CASH OUTFLOW OF ABOUT RS.22.61 CRORES TO FINANCE TH E ACQUISITION. IT IS NOT UNCOMMON FOR THE PROMOTERS T O DIVEST THEIR INVESTMENT PRIOR TO PUBLIC ISSUE, COLLECT FUN DS TO UNBURDEN THE COMPANY OF ITS FINANCIAL LIABILITIES A ND PROVIDE AN HONOURABLE EXIT TO THE INVESTORS. HOWEVER, DUE T O NEGATIVE STOCK MARKET SENTIMENTS (SENSEX FELL FROM HIGH OF 20,500 IN 2007 TO LOWS OF 8,000 IN 2009), THE PUBLI C ISSUE DID NOT MATERIALIZE DESPITE UTMOST EFFORTS OF THE P ROMOTERS. FURTHER, THE AUTO INDUSTRY GLOBALLY WAS FACING TREM ENDOUS RECESSION AND UNCERTAINTY AS EVIDENT FROM BSE AUTO INDEX WHICH FELL FROM A HIGH OF 5,900 IN 2007 TO LOWS OF 2,350 IN 2009. THE TURNOVER OF ADROIT INDUSTRIES (INDIA) LT D. DECLINED FROM RS.24.61 CRORES IN FINANCIAL YEAR 2008-09 TO R S.16.88 CRORES IN FINANCIAL YEAR 2009-10. ALTHOUGH THE PROF IT SHOWED AN INCREASE FROM RS.2.23 CRORES TO RS.3.13 C RORES BUT IT WAS DUE TO VALUATION OF WORK-IN-PROGRESS WHI CH WAS WRITTEN OFF IN FINANCIAL YEAR 2011-12. ALSO, THE CO MPANY WAS FACING SEVERE LABOUR PROBLEMS WITH THE ARRIVAL OF TRADE UNIONS AND ULTIMATELY THE ENTIRE WORK FORCE WAS LAI D OFF AFTER INCURRING A HUGE SEVERANCE COST. WITH THESE PROBLEM S, THE INVESTORS WANTED AN HONOURABLE EXIT WHICH ARE ULTIM ATELY PROVIDED BY THE PROMOTERS I.E. SIGNET GROUP AFTER P ROTRACTED NEGOTIATIONS BY ACQUIRING SHARES AT A MUTUALLY AGRE EABLE PRICE BAND OF RS.11.25 TO RS.12.25. THE DETAILS OF INVESTORS WERE PLACED ON RECORD AND HAD ALSO BEEN REPRODUCED IN THE ASSESSMENT ORDER. THEREFORE, THE INFERENCE OF THE A SSESSING OFFICER THAT NO INVESTOR WAS NAMED BY THE ASSESSEE IS TOTALLY MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 37 BASELESS. THE MULTIPLE TRANSFERS IN SOME CASES WERE DUE TO REQUIREMENTS AND CONVENIENCE OF INVESTING COMPANIES AND THEIR PROMOTERS. GENERALLY, THE INVESTORS ENTER A COMPANY BEFORE ITS PUBLIC ISSUE WITH THE INTENTION TO EARN SIGNIFICANT GAINS ON LISTING OF SHARES. HOWEVER, SOMETIMES THEI R CALCULATION GO HAYWIRE AND THEY HAVE TO EXIT AT A S IGNIFICANT LOSS PARTICULARLY IN A SITUATION IN WHICH MOST OF T HE PUBLIC ISSUES DEVOLVED ON BANKERS AND GUARANTORS AND THERE WAS NO PUBLIC PARTICIPATION. THE SAME IS EVIDENT FROM T HE FACT THAT MANY IPOS WERE WITHDRAWN OR DEFERRED BY VARIOU S COMPANIES DURING THIS PERIOD AND NO OF IPOS FELL FR OM 108 IN 2007 TO 22 IN 2009. IN THE CASE OF ADROIT INDUSTRIE S (INDIA) LTD., THE PROMOTERS MADE UTMOST EFFORTS TO BRING IP O AND INCURRED SIGNIFICANT COST (ABOUT RS.83.80 LACS) IN THIS PURSUIT BUT THEY COULD NOT ACHIEVE ANY SUCCESS DUE TO NEGAT IVE MARKET CONDITIONS AND SENTIMENTS AS DISCUSSED ABOVE . THE STATEMENT OF DIRECTORS OF SHALIMAR VIZ. SHRI PARAS RAM PATIDAR AND SHRI VIMAL KUMAR BANDI WAS RECORDED AFT ER A LAPSE OF OVER 4 YEARS (ACQUISITION OF SHARES IN MAY 2007 AND THEIR STATEMENT WAS RECORDED IN NOVEMBER 2011). MOR EOVER, THE DAY TO DAY AFFAIRS OF SHALIMAR WERE LOOKED AFTE R BY THE EMPLOYEES OF SIGNET GROUP AND CONTROLLED BY SHRI MU KESH SANGLA AS ITS EXECUTIVE OFFICER. AS THE TRANSACTION S WERE VERIFIABLE FROM BANK STATEMENTS OF RELEVANT ENTITIE S, THE STATEMENTS OF ITS DIRECTORS DO NOT HAVE MUCH SIGNIF ICANCE IN RELATION TO CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS. IF THE TRANSACTION WITH ALLEGED BOGUS PAPER COMPANIES IS HELD TO BE COLOURABLE DEVICE AND ARRAN GE AND MANAGED AFFAIR AS PER THE CONTENTION OF THE REVENUE AUTHORITIES, THE BENEFIT OF LOSS WAS DERIVED BY THE SE INTERMEDIARY COMPANIES AND THE ACTION SHOULD HAVE B EEN TAKEN IN THEIR CASE. AS THE ASSESSEE GROUP DID NOT DERIVE ANY TAX BENEFIT, IT CANNOT BE PENALIZED FOR FAILURE , IF ANY, OF INTERMEDIARY COMPANIES TO JUSTIFY ACQUISITION OF SH ARES AT A MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 38 HIGHER PRICE AS WELL AS THEIR SUBSEQUENT DIVESTMENT AT THE LOWER PRICE. SHRI RAMCHAND KEDIA, THE DIRECTORS OF LUCKY COMMOTRADE PVT. LTD. IS A CLOSE FRIEND OF SHRI MUKE SH SANGLA, HEAD OF SIGNET GROUP AND SANGLA FAMILY. ALS O, THERE WERE REGULAR FINANCIAL TRANSACTIONS BETWEEN LUCKY AN D VARIOUS SIGNET GROUP COMPANIES. TO SAVE COST OF TRA NSFER OF FUNDS, INTEREST COST AND FACILITATING MOVEMENT OF F UNDS, LUCKY OPENED A BANKING ACCOUNT AT INDORE AND SHRI RAMCHAND KEDIA KEPT A SIGNED CHEQUE BOOK WITH SHRI MUKESH SANGLA. THERE WAS A CLEAR UNDERSTANDING BETW EEN THE TWO THAT SHRI MUKESH SANGLA WOULD GIVE COMPLETE ACCOUNT OF TRANSACTION TO LUCKY IMMEDIATELY AND REC ONCILE THE ACCOUNT INTERSE. THEREFORE, THERE WAS NOTHING S USPICIOUS ABOUT CHEQUE BOOK OF LUCKY HAVING BEEN FOUND WITH SH RI MUKESH SANGLA DURING SEARCH PARTICULARLY WHEN ALL T HE TRANSACTIONS WERE AT ARMS LENGTH, RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF RESPECTIVE ENTITIES AND INTERE ST BEARING. THERE WERE NO CASH TRANSACTIONS BETWEEN LUCKY AND SI GNET GROUP ENTITIES. AS REGARD PALASIA LEASING & FINANCE LTD., THE HONOURABLE MADHYA PRADESH HIGH COURT CONFIRMED THE ADDITION OF RS.5 LACS IN THE CASE OF RATHI FINLEASE (215 CTR 429) BECAUSE SUMMON COULD NOT BE SERVED ON IT DURIN G ENQUIRY BY THE ASSESSING OFFICER. THE HIGH COURT NE VER HELD THAT PALASIA LEASING WAS A BOGUS PAPER COMPANY AN D KNOWN ENTRY PROVIDER. IN THE ASSESSEES CASE, THE N OTICE U/S.133(6) WERE DULY SERVED AND THE COPIES OF BANK STATEMENTS AND OTHER REQUISITE DETAILS WERE FILED B EFORE THE ASSESSING OFFICER IN WHICH THE TRANSACTIONS WERE DU LY REFLECTED. THEREFORE, THE INFERENCE OF C.I.T.(A) IS WITHOUT APPRECIATION OF THE JUDGEMENT AS WELL AS THE FACTS PLACED ON RECORD. AS REGARD SHRI ANEKANT SHARES AND SECURITIE S PVT. LTD., UNNO INDUSTRIES LTD., SIDDHACHAL DEVELOPERS P VT. LTD., THE ASSESSEE WAS NOT GIVEN THE COPY OF JUDGEMENT PA SSED BY C.I.T.(A) II, INDORE IN THE CASE OF INDUSTRIAL F ILTERS AND MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 39 FABRICS PVT. LTD. AND THEREFORE, THE SAME CANNOT BE USED FOR ADVERSE INFERENCE AGAINST THE ASSESSEE. MOREOVER, I N COMPLIANCE OF NOTICE ISSUED U/S.133(6), THESE COMPA NIES FURNISHED THE COPIES OF THEIR BANK ACCOUNT, RETURN OF INCOME FILED BY THEM ETC. IN WHICH THE TRANSACTIONS WERE D ULY REFLECTED AND NO DISCREPANCY WHATSOEVER WAS BROUGHT ON RECORD BY THE LOWER AUTHORITY. AS REGARD CAN-INDIA OVERSEAS LTD., IT WAS A COMPANY IN WHICH THE CLOSE RELATIVES OF SHRI MUKESHSANGLA WERE SHAREHOLDERS AND DIRECTORS. THE COMPANY WAS FILING ITS RETURN OF INCOME REGULARLY A ND ALSO ASSESSED TO TAX. ITS PAID UP SHARE CAPITAL WAS RS.3 0 LACS AND FREE RESERVES OF RS.30 LACS. AS AT 31.03.2010, IT HAD A CASH AND BANK BALANCE OF RS.41,79,012/- AND INVESTM ENT OF RS.8,80,000/- IN 2,40,000 SHARES (INCLUDING BONUS S HARES 1,60,000) OF SIGNET INDUSTRIES LTD. UNDER THESE CIRCUMSTANCES, THE CAN-INDIA OVERSEAS LTD. CANNOT B E CALLED A BOGUS PAPER COMPANY. 56. SECTION 69 OF THE ACT IS APPLICABLE ON CUMUL ATIVE SATISFACTION OF THE FOLLOWING CONDITIONS : I. THE ASSESSEE SHOULD HAVE MADE THE INVESTMENTS AND THE SAME ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS; AND II. THE ASSESSEE EITHER OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF INVESTMENT OR THE EXPLANATION OFFERED IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER. III. THE SATISFACTION OF THE ASSESSING OFFICER CANNOT BE ARBITRARY AND SUBJECTIVE BUT HAS TO BE BASED ON THE RELEVANT MATERIAL B) SEC.69B IS APPLICABLE ON CUMULATIVE SATISFACTION OF THE FOLLOWING CONDITIONS: I. THE ASSESSEE SHOULD HAVE MADE THE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLERY OR VALUABLE ARTICLES; MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 40 II. BASED ON THE MATERIAL FACTS, THE ASSESSING OFFICER FINDS THAT THE AMOUNT EXPENDED ON SUCH INVESTMENT ACTUALLY EXCEEDS THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT; AND III. THE ASSESSEE EITHER OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF INVESTMENT OR THE EXPLANATION OFFERED IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER. IV. THE SATISFACTION OF THE ASSESSING OFFICER CANNOT BE ARBITRARY AND SUBJECTIVE BUT HAS TO BE BASED ON THE RELEVANT MATERIAL 57. WHEREVER THE LEGISLATURE DESIRED DETERMINATION OF INCOME IN A SPECIFIC MANNER OR EXISTENCE OF CERTAIN STATE OF AFFAIRS, IT HAS SPECIFICALLY PROVIDED FOR IN RELEVA NT SECTIONS. SEC.69 AND SEC.69B DEALING WITH TAXATION OF UNACCOU NTED INVESTMENTS ARE DEEMING PROVISION AND DOES NOT DEAL WITH PRESUMPTIVE TAXATION OF UNACCOUNTED/UNDER-VALUED INVESTMENTS. IN ABSENCE OF THE CLEAR LEGISLATIVE MA NDATE, THE A.O. CANNOT PRESUME MARKET VALUE/FAIR VALUE OF INVE STMENTS AND MAKE ADDITION UNDER SEC.69 OR SEC.69B OF THE AC T. RELIANCE IS PLACED UPON THE FOLLOWING JUDGEMENTS: (I) C.I.T. VS. NAVEEN GERA 328 ITR 516 (DEL) (II) C.I.T. VS. DINESH JAIN HUF 352 ITR 628 (DEL) (III) RUPEE FINANCE & MANAGEMENT PVT. LTD. VS. A.C.I.T. 119 TTJ 643 (MUM TRIB) 58. IN THE ASSESSEE GROUP CASES,THE ORIGINAL PURCH ASE OF SHARES AT RS.40.25 PER SHARES AS WELL AS REACQU ISITION OF SHARES AT RS.11.25 TO RS.12.25 WERE DULY RECORDED I N THE BOOKS OF ACCOUNTS OF THE RESPECTIVE ASSESSEE. A CHA RT SHOWING SOURCE OF RE-ACQUISITION OF SHARES BY SIGNE T GROUP, MEMBERS OF SANGLA FAMILY AND OTHER ASSOCIATE CONCER NS WAS FILED. THE REVENUE DID NOT BRING ANY EVIDENCE TO SH OW THAT ACTUAL CONSIDERATION PAID BY THE ASSESSEE GROUP EIT HER AT THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 41 TIME OF ORIGINAL ACQUISITION OR AT THE TIME OF REAC QUISITION WAS MORE THAN THE STATED AND RECORDED CONSIDERATION IN THE BOOKS OF RESPECTIVE ASSESSEE. THE A.O. MERELY PRESU MED THE FAIR VALUE OF SHARES AT RS.40.25 PER SHARE (ORIGINA L COST OF ACQUISITION FROM ANAND FAMILY IN MARCH 2007) AND TR EATED THE DIFFERENCE BETWEEN THE COST OF REACQUISITION AN D FAIR VALUE PER SHARE AS UNEXPLAINED INVESTMENT IN THE CA SE OF THE ASSESSEE, WITHOUT BRINGING ANY EVIDENCE ON RECORD. HE SIMPLY REJECTED THE EXPLANATION GIVEN BY THE ASSESS EE GROUP. IN THE ASSESSEES CASE, THERE WERE NO INCRIMINATING MATERIAL WHATSOEVER IN RELATION TO INVESTMENT IN SHARES OF A DROIT INDUSTRIES (INDIA) LTD. IN ASSESSMENT YEAR 2007-08, TRANSFER OF THESE SHARES IN ASSESSMENT YEAR 2008-09 AND THEI R REACQUISITION SUBSEQUENTLY IN ASSESSMENT YEAR 2010- 11. NO PROCEEDINGS IN RELATION TO ASSESSMENTS FOR THESE AS SESSMENT YEARS WERE PENDING AND THEREFORE NO ADDITION COULD HAVE BEEN MADE IN ASSESSMENT COMPLETED U/S.153A/153C OF THE ACT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL ON ACCOUNT OF UNEXPLAINED CASH CREDITS IN ASSESSMENT YEAR 2008 -09 AND UNEXPLAINED INVESTMENT IN ASSESSMENT YEAR 2010- 11. THE ADDITION MADE BY THE ASSESSING OFFICER BY WAY O F REASSESSMENT IN RELATION TO IMPUGNED CONCLUDED ASSESSMENTS AMOUNTED TO CHANGE IN OPINION ON THE SA ME SET OF FACTS WHICH IS NOT PERMISSIBLE IN LAW EVEN U/S.153A/153C OF THE ACT. 59. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND PLEADED THAT NO PROMOTER WOUL D DIVEST MAJORITY OF ALL THE SHAREHOLDINGS AND THAT T OO AT A NOMINAL PROFIT WHEN A PUBLIC ISSUE WAS ANTICIPATED IN NEAR FUTURE. HE ALSO SUBMITTED THAT ADROIT INDUSTRIES ( INDIA) LTD. WAS A PROFIT MAKING COMPANY AND NO PRUDENT BUSINESS MAN WILL DIVEST THE HUGE INVESTMENT. HE ALSO PLEADED TH AT THE ASSESSEES CONTENTION THAT THE ASSESSEE COULD NOT G O FOR PUBLIC ISSUE DUE TO CAPITAL MARKET SITUATION IS ALS O NOT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 42 JUSTIFIED. THESE SHARES HAVE CHANGED MANY HANDS BE FORE COMING SIGNET GROUP WHICH IS USUALLY NOT POSSIBLE I N UNLISTED SHARES. HE ALSO PLEADED THAT THE ASSESSEE HAS NOT B ROUGHT ON RECORD ANYTHING TO SHOW THAT SALE PROCEEDS WERE UTILISED IN DISCHARGING THE INTEREST BEARING LIABILITIES AND HE PLEADED THAT IT IS NOT POSSIBLE TO ACCEPT THE ASSERTIONS OF THE ASSESSEE WITH REGARD TO DISINVESTMENT THAT IT WAS T O REDUCE THE RISK OF THE GROUP. HE PLEADED THAT THE DISINVES TMENT OF SHARES OF ADROIT INDUSTRIES (INDIA) LTD. WAS A SHAM TRANSACTION. HE RELIED UPON THE ORDERS OF THE ASSE SSING OFFICER AND THE LEARNED CIT(A) ON THIS ISSUE. HE AL SO DREW OUR ATTENTION TO VARIOUS CASE LAWS RELIED ON BY HIM . 60. IN EARLIER PART OF THIS ORDER, WE HAVE HEL D THAT THE ASSESSMENTS FRAMED U/S 153A R.W.S. 143(3) OF THE AC T AGAINST THE ASSESSEE ARE NOT AS PER LAW. HOWEVER, W E ARE ALSO DECIDING THE ISSUE ON MERITS OF THE ADDITION M ADE OF RS. 13,23,220/- IN RESPECT OF SALE PROCEEDS OF 32,875 S HARES OF ADROIT INDIA LIMITED IN THE ASSESSMENT YEAR 2008-09 AS UNEXPLAINED INCOME OF THE ASSESSEE AND ALSO ISSUE REGARDING THE ADDITION MADE ON ACCOUNT OF UNEXPLAIN ED INVESTMENT IN SHARES OF ADROIT INDUSTRIES LIMITED O F RS.93,37,094/- IN THE ASSESSMENT YEAR 2010-11. THE SANGLA FAMILY AND ASSOCIATES ACQUIRED MANAGEMENT AND CONTR OLLING RIGHTS IN ADROIT INDUSTRIES LTD. WHICH WAS 100% EXP ORT ORIENTED AUTO ANCILLARY UNIT FROM ANAND FAMILY IN T HE MONTH OF MARCH, 2007. THERE IS NO DISPUTE REGARDING THE P RICE OF SHARES PAID FOR ACQUIRING SHARES FROM ANAND FAMILY AS WELL AS TO OTHER PERSONS. IN MAY, 2007 SOME OF THE SHARE S WERE SOLD BY THE ASSESSEE AND OTHER GROUP PERSONS AND ASSOCIATES. THE RESULTANT SHORT TERM CAPITAL GAIN W AS OFFERED FOR TAXATION IN THE RETURN OF INCOME. THERE WAS NO INCRIMINATING DOCUMENT SEIZED DURING THE SEARCH OPE RATION IN RELATION TO ACQUISITION OF SHARES OF ANAND FAMIL Y AND MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 43 TRANSFER OF SHARES BY THE ASSESSEE. THE ASSESSEE HA S EXPLAINED THE REASON FOR TRANSFER OF SHARES TO RAIS E THE FUNDS. IT IS ALSO ESTABLISHED THAT ADROIT INDUSTRI ES LTD. WAS TO GO FOR PUBLIC ISSUE FOR WHICH EXPENDITURE HAS BE EN DEBITED IN THE FINANCIAL YEARS 2010-11 AND 2011-12. ULTIMAT ELY THIS PUBLIC ISSUE COULD NOT BE MATERIALISED. THE EXPENDI TURE DEBITED IN THE BOOKS OF ADROIT INDUSTRIES LTD. ESTA BLISHES THAT ADROIT IND. LTD. WAS TO GO TO FOR PUBLIC ISSUE . NO EVIDENCE EITHER DURING THE SEARCH OPERATION OR IN T HE POST SEARCH INQUIRIES SHOWING EVEN SUGGESTING THAT ANY CONSIDERATION OVER AND ABOVE RECORDED IN THE BOOKS OF ACCOUNTS OF ANY ASSESSEE OF SIGNAT GROUP WAS REALIS ED IN CASH OR OTHERWISE. EVEN NO POSITIVE EVIDENCE WAS CO LLECTED DURING THE PROCEEDINGS U/S 153A/153C OF THE ACT. TH US, THERE IS NO EVIDENCE REGARDING ANY UNACCOUNTED TRAN SACTION WITH RELATION TO SHARES ACQUIRED, TRANSFERRED AND R E-ACQUIRED BY VARIOUS FAMILY MEMBERS OF SANGLA FAMILY AND ASSO CIATE CONCERNS. THE REVENUES CLAIM THAT NO PROMOTER WOUL D DIVEST WITH SUCH A HUGE HOLDING AT A VERY NOMINAL PROFIT I S WITHOUT ANY BASIS AND ONLY A GUESS WORK. THE ASSESSEES CON TENTION THAT THE PROMOTERS WERE INTENDED TO GO FOR PUBLIC I SSUE IS WELL ESTABLISHED BY THE FACT THAT EXPENDITURE INCUR RED IN THIS REGARD HAS BEEN DEBITED IN THE BOOKS OF ACCOUNTS OF ADROIT INDUSTRIES LTD., THEREFORE, THE REVENUES CONTENTIO N THAT THE PROMOTERS WERE NOT INTENDED TO GO FOR PUBLIC ISSUE IS NOT CORRECT. IN OUR CONSIDERED VIEW, ALL SUCH ALLEGATIO NS ARE WILD AND WITHOUT ANY BASIS. THE REVENUE HAS EVEN FAILED TO BRING ANYTHING ON RECORD TO ESTABLISH THAT ANY UNACCOUNTE D TRANSACTION IN ANY FORM WAS DONE BY ANY OF THE PERS ONS OF THIS GROUP AND ASSOCIATES. THERE IS NO EVIDENCE AGA INST THE ASSESSEE WITH REGARD TO TRANSFER AND REACQUISITION OF SHARES OF ADROIT INDUSTRIES LTD. DURING THE RELEVANT PERIO D TO THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2010-11 RESPECTIVELY. THE REVENUES ALLEGATIONS ARE GENERAL AND NOT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 44 SUPPORTED BY ANY EVIDENCE. IN OUR CONSIDERED VIEW, NO ADDITION COULD BE SUSTAINED ONLY ON THE BASIS OF GU ESS WORK OR IN THE ABSENCE OF ANY POSITIVE EVIDENCE. IN VIEW OF THIS FACTUAL MATRIX, WE FIND NO MERIT IN THE ADDITION MA DE IN THE ASSESSMENT YEAR 2008-09 ON THE TRANSFER OF SHARES O F ADROIT INDUSTRIES LIMITED AND ALSO THE ADDITION MADE FOR UNEXPLAINED INVESTMENT ON ACCOUNT OF REACQUISITION OF SHARES OF ADROIT INDUSTRIES LTD. DURING THE FINANCIAL YEAR 2010-11. WE DIRECT TO DELETE THE SAME. 15. THE FACTS OF THE ASSESSEES CASE ARE THE SAME AS OF THE DECIDED CASES, THEREFORE, IN VIEW OF THAT WE DIRE CT TO DELETE THESE ADDITIONS. GROUND NO.3.0 (A.Y. : 2012-13) OF THE ASSESSEES APPEAL GROUND NO.3.0 (A.Y. : 2012-13) OF ASSESSEES APPEAL READS AS UNDER : ASSESSMENT YEAR : 2012-13 ADDITION ON THE BASIS OF ASSESSEES STATEMENT U/S.1 32(4) : RS.9,43,55,415/- 3.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS, PARTLY CONFIRMING THE ADDITION OF RS.9,43,55,415/- ON ACCOUNT OF UNDISCLOSED INCOME ADMITTED BY THE ASSES SEE IN HIS STATEMENT RECORDED U/S.132(4) OF THE INCOME-TAX ACT, 1961 NOT WITHSTANDING THE FACT SUCH AN ADDITION WAS NOT REPRESENTED BY CORRESPONDI NG UNEXPLAINED ASSETS, UNEXPLAINED INVESTMENT OR UNEXPLAINED TRANSACTIONS IN THE SEIZED MATERIAL ETC.. 16. THE FACTS BRIEFLY STATED ARE THAT IN HIS STATEM ENT RECORDED U/S.132(4) ON 04.11.2011, THE ASSESSEE OFFERED UNDI SCLOSED MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 45 INCOME OF RS.45 CRORES FOR TAXATION, SUBJECT TO VER IFICATION OF THE SEIZED MATERIAL. DURING POST SEARCH PROCEEDINGS, T HE ASSESSEE FILED A LETTER BEFORE THE INVESTIGATION WING ADMITT ING UNDISCLOSED INCOME OF RS.35.04 CRORES FOR VARIOUS ASSESSMENT YE ARS IN HIS OWN CASE AND RS.9.96 CRORES IN THE CASE OF SIGNET I NDUSTRIES LTD. FOR THE ASSESSMENT YEAR 2012-13 ON THE BASIS OF PRO VISIONAL VERIFICATION OF SEIZED MATERIAL AND ASSETS. HOWEVER, FOR THE ASSESSMENT YEAR 2012-13, NO INCOME WAS OFFERED FOR TAXATION BY THE ASSESSEE IN HIS RETURN OF INCOME FILED U/S.153A AS AGAINST UNDISCLOSED INCOME OF RS.12.61 CRORES OFFERED FOR T AXATION AS PER THE LETTER FILED BEFORE THE INVESTIGATION WING. THE A.O. DID NOT MAKE ANY ADDITION ON THE BASIS OF ASSESSEES STATEM ENT BECAUSE THE TOTAL INCOME ASSESSED BY HIM WAS MORE THAN RS.1 2.61 CRORES OFFERED FOR TAXATION IN ASSESSMENT YEAR 2012-13. TH E FIRST APPELLATE AUTHORITY MADE ADDITION OF RS.9,43,55,415 /- ON THE BASIS OF DIFFERENCE BETWEEN UNDISCLOSED INCOME OF R S.12.61 CRORES OFFERED FOR TAXATION BY THE ASSESSEE IN HIS STATEMENT U/S.132(4) R.W. LETTER FILED BEFORE THE INVESTIGATI ON WING AND MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 46 ADDITION OF RS.3,17,44,585/- CONFIRMED BY HIM FOR T HE ASSESSMENT YEAR 2012-13 VIDE HIS ORDER DT.30.04.201 5. 17. THE CONTENTION OF THE C.I.T.(A). IS SUMMARIZED AS U NDER : A) THE STATEMENT OF THE ASSESSEE RECORDED U/S.132(4) W AS A VOLUNTARY STATEMENT MADE WITHOUT ANY INTIMIDATION , DURESS OR COERCION AND WAS SIGNED IN THE PRESENCE O F TWO INDEPENDENT WITNESSES. B) THE ADMISSION OF THE ASSESSEE U/S.132(4) IS AN EVID ENCE TO BE USED AGAINST HIM FOR THE PURPOSE OF DETERMINA TION OF TOTAL INCOME. IT MAY BE NOTED THAT THE TOTAL SEI ZURE BY THE INCOME-TAX DEPARTMENT WAS MORE THAN 30,000 PAGES. C) THE UNDISCLOSED INCOME FOR ASSESSMENT YEAR 2012-13 WAS OFFERED FOR TAXATION AFTER VERIFICATION OF SEIZ ED MATERIAL, THE COPIES OF WHICH HAD ALREADY BEEN PROV IDED TO THE ASSESSEE. D) FOR ASSESSMENT YEAR 2012-13, THE ASSESSEE DECLARED UNDISCLOSED INCOME OF RS.12.61 CRORES ON THE BASIS OF LPS-3 AND OTHER PAPERS SEIZED FROM VARIOUS PREMISES IN HIS STATEMENT U/S.132(4) READ WITH LETTER FURNISHED BEFORE THE A.D.I.T. (INV.), INDORE, BUT DID NOT OFF ER ANY UNDISCLOSED INCOME FOR TAXATION IN THE RETURN OF IN COME FILED PURSUANT TO NOTICE U/S.153A. E) THE UNDISCLOSED INCOME FOR ASSESSMENT YEAR 2012-13, FINALLY DETERMINED BY THE C.I.T.(A) WAS RS.3,17,44, 585/- MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 47 . AS IT FELL SHORT OF RS.12.61 CRORES DECLARED IN T HE STATEMENT U/S.132(4) BY RS.9,43,55,415/- [RS.12,61,00,000/- (-) RS.3,17,44,585/-], THE DIFFE RENCE OF RS.9,43,55,415/- WAS BROUGHT TO TAX ON THE BASIS OF ASSESSEES STATEMENT U/S. 132(4). F) THE RELIANCE WAS PLACED UPON THE FOLLOWING JUDGEMEN TS: I. ISHWARDIN MEWALAL VS. C.I.T.[1986] 169 ITR 584 (MP) II. DR. S.C. GUPTA VS. C.I.T. [2001] 248 ITR 782 (ALL) III. S.S. RATANCHAND BHOLANATH VS. C.I.T. [1984] 210 ITR 682 (MP) IV. HIRA SINGH & CO. VS. C.I.T. [1998] 230 ITR 791 (HP) V. A.C.I.T. VS. HUKUM CHAND JAIN [2011] 337 ITR 238 (CHHATTISGARH) VI. KESRI K. DEBOO VS. A.C.I.T. [2009] 313 ITR 186 (BOM) VII. BHAGIRATH AGGARWAL VS. C.I.T.[2013] 31 TAXMANN.COM 274 (DEL) VIII. RAVINDRA KUMAR VERMA VS. C.I.T. [2013] 30 TAXMANN.COM 367 (ALL) IX. SUDHARSHAN P. AMIN VS. A.C.I.T. [2013] 35 TAXMANN.COM 370 (GUJ) X. C.I.T. VS. O. ABDUL RAZAK [2012] 20 TAXMANN.COM 48 (KER) MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 48 18. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE STATEMENT U/S.132(4) MADE BEFORE THE INCOME TAX AUT HORITIES IS AN IMPORTANT PIECE OF EVIDENCE BUT IT IS NEITHER UN IVERSAL TRUTH NOR CONCLUSIVE. THE STATEMENT IS REBUTTABLE AND THE DEP ONENT CAN ALWAYS SHOW THAT IT WAS INCORRECT. AS THE STATEMEN T U/S.132(4) IS RECORDED UNDER GREAT STRESS, ANXIETY AND TENSION AN D THE DEPONENT DOES NOT HAVE ACCESS TO BOOKS OF ACCOUNTS AND OTHER DOCUMENTS TO VERIFY THE FACTS BEFORE RECORDING IT I N HIS STATEMENT, IT CANNOT BE SAID THAT SUCH A STATEMENT RECORDED D URING SEARCH IS FREE FROM ALL AMBIGUITY AND DOUBTS AND IT IS QUITE LIKELY THAT CERTAIN VITAL FACTS MIGHT BE OMITTED OR IGNORED OR INCORRECTLY STATED. THE STATEMENT U/S.132(4) IS NOT A TEST OF DEPONENTS MEMORY. IF HE HAS STATED SOMETHING IN HIS STATEMENT EITHER OUT OF IGNORANCE OF CERTAIN VITAL FACTS OR NEGLIGENCE O R FOR NON- ACCESSIBILITY TO THE BOOKS OF ACCOUNTS AND OTHER RE LEVANT DOCUMENTS OR FOR ANY OTHER REASON, WHICH IS CONTRAR Y TO THE ESTABLISHED FACTS OF THE CASE, HE CANNOT BE ASSESSE D TO TAX MERELY ON THE BASIS OF SUCH ERRONEOUS STATEMENT. TH E ASSESSING OFFICER BEING A QUASI JUDICIAL OFFICER, SHOULD CONSIDER ALL THE FACTS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 49 AND EVIDENCES LIKE BOOKS OF ACCOUNTS, DOCUMENTS, BI LLS, AGREEMENTS, SEIZED DOCUMENTS ETC. TO ARRIVE AT THE TRUTH AND CORRECT STATUS. THE STATEMENT SHOULD BE CORROBORAT ED WITH THE FACTS FOUND AND DOCUMENTS SEIZED AT THE TIME OF SEA RCH TO ASCERTAIN ITS RELIABILITY. THE DEPONENT CANNOT BE A SSESSED MERELY ON THE BASIS OF STATEMENT U/S 132(4), PARTICULARLY BY BRUSHING ASIDE CERTAIN UNCONTROVERTED FACTS. IF EVIDENCE BRO UGHT ON RECORD BY THE DEPONENT SHOWS HIS ADMISSION TO BE INCORRECT OR CONTRARY TO THE FACTS AND SUCH EVIDENCE REMAIN UNCONTROVERTE D, ADDITION MADE MERELY ON THE BASIS OF ADMISSION CANNOT BE SUS TAINED. THE SURROUNDING CIRCUMSTANCES AND OTHER RELEVANT FACTOR S HAVE TO BE CONSIDERED BEFORE MAKING AN ADDITION SOLELY ON BASI S OF ADMISSION. THE LEARNED COUNSEL FOR THE ASSESSEE PLA CED RELIANCE ON THE FOLLOWING JUDGEMENTS: (I) THE HONOURABLE SUPREME COURT HELD IN THE CASE OF PULLANGODE RUBBER PRODUCTS CO. LTD. VS. STATE OF KERALA & ANR. (91 ITR 18) THAT AN ADMISSION IN STATEMENT RECORDED ON OATH IS AN EXTREMELY IMPORTAN T PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIV E AND IT IS ALWAYS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW T HAT IT IS INCORRECT. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 50 (II) THE HONOURABLE SUPREME COURT HELD IN THE CASE OF KRISHNAN VS. KURUSHETRA UNIVERSITY (AIR 1976 SC 377) THAT MERE ADMISSION CANNOT BE BEDROCK OR FOUNDATION OF AN ASSESSMENT AND IT IS ALWAYS OPEN TO THE ASSES SEE WHO MADE THE ADMISSION TO SHOW THAT WHAT HE ADMITTED WAS NOT CORRECT. THE HONOURABLE SUPREME COURT ALSO OBSERVED THAT THE EFF ECT OF AN ALLEGED ADMISSION DEPENDS UPON THE CIRCUMSTANCES IN WHICH IT WAS MADE. A STATEMENT MADE IN IGNORANCE OF LEGAL RIGHTS OR UNDER DURESS CANNOT BIND THE MAKER OF THE ADMISSION . (III) THE HONOURABLE JHARKHAND HIGH COURT HELD IN THE CASE OF SHREE GANESH TRADING CO. VS. C.I.T. (2013) (30 TAXMANN.COM 170) THAT WE ARE OF THE CONSIDERED OPINION THAT STATEMENT RECORDED UNDER SE CTION 132(4) OF THE INCOME-TAX ACT, 1961 IS EVIDENCE BUT ITS REL IABILITY DEPENDS UPON THE FACTS OF THE CASE AND PARTICULARLY SURROUN DING CIRCUMSTANCES. DRAWING INFERENCE FROM THE FACTS IS A QUESTION OF LAW. HERE IN THIS CASE, ALL THE AUTHORITIES BELOW H AVE MERELY REACHED TO THE CONCLUSION OF ONE CONCLUSION MERELY ON THE BASIS OF ASSUMPTION RESULTING INTO FASTENING OF THE LIABILIT Y UPON THE ASSESSEE. THE STATEMENT ON OATH OF THE ASSESSEE IS A PIECE OF EVIDENCE AS PER SECTION 132(4) OF THE INCOME-TAX AC T AND WHEN THERE IS INCRIMINATING ADMISSION AGAINST HIMSELF, T HEN IT IS REQUIRED TO BE EXAMINED WITH DUE CARE AND CAUTION. IN THE JU DGMENT OF KAILASHBEN MANHARLAL CHOKSHI (SUPRA), THE DIVISION BENCH OF GUJARAT HIGH COURT HAS CONSIDERED THE ISSUE IN THE FACTS OF THAT CASE AND FOUND THE EXPLANATION GIVEN BY THE ASSESSE E TO BE MORE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 51 CONVINCING AND THAT WAS NOT CONSIDERED BY THE AUTHO RITIES BELOW. HERE IN THIS CASE ALSO, NO SPECIFIC REASON HAS BEEN GIVEN FOR REJECTION OF THE ASSESSEES CONTENTION BY WHICH THE ASSESSEE HAS RETRACTED FROM HIS ADMISSION. NONE OF THE AUTHORITI ES GAVE ANY REASON AS TO WHY ASSESSING OFFICER DID NOT PROCEED FURTHER TO ENQUIRE INTO THE UNDISCLOSED INCOME AS ADMITTED BY THE ASSESSEE IN HIS STATEMENT UNDER SECTION 134(2) IN FACT SITUATIO N WHEN DURING THE COURSE OF SEARCH, THERE WAS NO RECOVERY OF ASSE TS OR CASH BY THE DEPARTMENT. THIS FACT ALSO HAS NOT BEEN TAKEN CARE OF AND CONSIDERED BY ANY OF THE AUTHORITIES THAT IN A CASE WHERE THERE WAS SEARCH OPERATION, NO ASSETS OR CASH WAS RECOVERED F ROM THE ASSESSEE, IN THAT SITUATION WHAT HAD PROMPTED THE A SSESSEE TO MAKE DECLARATION OF UNDISCLOSED INCOME OF RS.20 LACS. ME RE READING OF STATEMENT OF ASSESSEE IS NOT THE ASSESSMENT OF EVID ENTIARY VALUE OF THE EVIDENCE WHEN SUCH STATEMENT IS SELF-INCRIMINAT ING. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT IN THE PRESEN T CASE, A WRONG INFERENCE HAD BEEN DRAWN BY THE AUTHORITIES BELOW I N HOLDING THAT THERE WAS UNDISCLOSED INCOME TO THE TUNE OF RS.20 L ACS. (IV) THE HONOURABLE PUNJAB AND HARYANA HIGH COURT HELD IN THE CASE OF KRISHAN LAL SHIVCHAND RAI VS. C.I.T. (88 ITR 293) THAT THE PARTY IS ENTITLED TO SHOW BY PROOF THAT THE ADMISSION MADE BY HIM PREVIOUSLY IS IN FACT NOT CORRECT AND TRUE. (V) THE HONOURABLE RAJASTHAN HIGH COURT HELD IN THE CASE OF C.I.T. VS. BHANWARLAL (225 ITR 870) THAT NO REFERABLE QUESTION OF LAW ARISES WHERE THE INCOM E-TAX APPELLATE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 52 TRIBUNAL DELETED THE ADDITION MADE ON ACCOUNT OF UN EXPLAINED HOUSEHOLD EXPENSES ON THE BASIS OF FACTS THAT IT WA S A CASE WHERE A PROLONGED SEARCH HAD TAKEN PLACE AND THE REVENUE HA S NOT BEEN ABLE TO FIND ANY EVIDENCE EXCEPT THE ASSESSEES OWN STATEMENT GIVEN UNDER STRESS AND STRAIN AND ONLY GIVING AN ES TIMATE ON THE BASIS OF MEMORY REGARDING AN EVENT WHICH OCCURRED A BOUT THREE YEARS BACK. (VI) THE HONOURABLE AHMEDABAD BENCH OF I.T.A.T. HELD IN THE CASE OF A.C.I.T. VS. SUSHILADEVI S. AGARWAL (50 ITD 524) THAT SEARCH OPERATIONS UNDER THE INCOME-TAX ACT IS A LAWFUL INVASION ON THE PRIVACY, LIFE AND PROPERTY OF A CITIZEN WHICH MAY AFFECT HIM/HER MENT ALLY ALSO, BESIDES CAUSING SEVERAL OTHER INCONVENIENCES, HARDS HIPS, EMBARRASSMENT AND HARASSMENT. THERE IS EVERY LIKELI HOOD OF A STATEMENT TENDERED TO OR RECORDED BY THE SEARCHING OFFICERS ON THE SEARCH DAY BEING INCOHERENT OR AT VARIANCE WITH SUB SEQUENT STATEMENTS TENDERED TO OR RECORDED IN ANY FURTHER O R COLLATERAL PROCEEDINGS. BUT TO MAKE ADDITION TO THE RETURNED I NCOME OR TO PUT SUCH PERSON TO SUFFERANCE OR TO ADVERSE CONSEQUENCE S ON SUCH STATEMENT IS NOT JUSTIFIED IN LAW. BY THIS WE ARE N OT SAYING OR LAYING DOWN THAT EVERY STATEMENT RECORDED ON THE SEARCH DA Y HAS TO BE IGNORED AS OF NO CONSEQUENCE OR THAT NO RELIANCE OR CREDENCE SHOULD BE PLACED ON SUCH SEARCH DAY STATEMENT . ALL THAT WE WISH TO SAY BUT WITH LITTLE EMPHASIS, IS THAT ALL T HAT IS STATED BY ANY DEPONENT ON THE SEARCH DAY SHOULD NOT BE TAKEN AS T HE TRUTH, THE WHOLE TRUTH AND NOTHING BUT THE TRUTH. SUCH STATEME NTS INDUBITABLY MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 53 HAVE EVIDENTIARY VALUE AND CREDIBILITY IN LAW, BUT THE SAME SHOULD BE VIEWED WITH GREAT CAUTION PARTICULARLY WHEN THE SAME IS DENIED, VARIED OR RETRACTED OR ESTABLISHED BY THE DEFENDANT TO HAVE BEEN OBTAINED OR GIVEN UNDER MENTAL STRESS, COERCION, UN DER INFLUENCE OR DUE TO ANY OTHER ABNORMAL CONDITION AND CIRCUMST ANCES WHEN SUCH STATEMENT WAS GIVEN. ANY PERSON MAY STATE DIFF ERENT STORIES/VERSIONS TO DIFFERENT PERSONS/AUTHORITIES O N DIFFERENT OCCASIONS ABOUT CERTAIN FACTS. BUT WHEN IT COMES TO BE TESTED OR EXAMINED IN A JUDICIAL OR QUASI-JUDICIAL PROCEEDING S BEFORE ANY COURT, TRIBUNAL OR AUTHORITY, THEN THE QUESTION WHI CH ARISES FOR DETERMINATION IS AS TO WHICH OF THE STORY/STATEMENT IS RIGHT, TRUTHFUL AND/OR RELIABLE AND BELIEVABLE . (VII) THE HONOURABLE PUNE BENCH OF I.T.A.T. HELD IN THE CASE OF KASAT PAPER AND PULP LTD. VS. A.C.I.T. (74 ITD 455) THAT ADDITION CANNOT BE MADE SOLELY ON THE BASIS OF THE STATEMENT OF MANAGING DIRECTOR PARTICU LARLY WHEN EVIDENCE TO THE CONTRARY WERE PLACED ON RECORD BEFO RE THE ASSESSING OFFICER . (VIII) IN THE CASE OF JAGDEESHCHANDRA GUPTA VS. A.C.I.T. 56 TTJ 337 (CHD.) , THE ASSESSEE RETRACTED FROM THE STATEMENTS MADE BEFORE FERA AUTHORITIES AND STA TEMENT MADE U/S.132(4) OF THE INCOME-TAX ACT, 1961 BEFORE THE A .D.I. BY MAKING DETAILED SUBMISSION DURING PROCEEDINGS U/S.132(5) A S WELL AS U/S.143(3) OF THE INCOME-TAX ACT, 1961. EXCEPT THES E CONFESSIONAL STATEMENTS, THERE WAS NO OTHER EVIDENCE WHICH SUPPO RTED THE PAYMENT OF RS.48,00,000/- TO SHRI J.M.PAUL BY THE A SSESSEE. NO MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 54 PAPERS INDICATING ALLEGED PAYMENT OF RS.48 LACS WER E SEIZED EITHER FROM RESIDENCE OF THE ASSESSEE OR FROM SHRI J.M.PAU L. SHRI J.M. PAUL ALSO DENIED THE PAYMENT IN HIS STATEMENT RECOR DED BY ADI. ON THESE FACTS AND CIRCUMSTANCES, THE HONOURABLE IN COME-TAX APPELLATE TRIBUNAL DELETED THE ADDITION OF RS.48,00 ,000/-. (IX) THE HONOURABLE MUMBAI BENCH OF I.T.A.T. HELD IN THE CASE OF MS. AISHWARYA K. RAI VS. D.C.I.T. (104 ITD 166)(TM) THAT THE GENERAL LEGAL PRINCIPLE IS WELL SETTLED THAT A STATEMENT U/S.132(4) IS NOT THE LAST WORD AND IF THE PERSON CONCERNED RETRACTS/CLARIFIES THE SAME SU BSEQUENTLY ON ASCERTAINMENT OF CORRECT STATE OF AFFAIRS AND EXPLA IN THE SAME, IT CAN BE ALLOWED. THE BURDEN TO PROVE THAT THE STATEM ENT WAS GIVEN UNDER MISUNDERSTANDING LIES ON HIM . (X) THE HONOURABLE GUJARAT HIGH COURT HELD IN THE CASE OF KAILASHBEN MANHARLAL CHOKSHI VS. C.I.T. (174 TAXMANN 466) THAT A STATEMENT RECORDED U/S.132(4) AT MIDNIGHT CANNOT BE CONSIDERED A VOLUNTARY STATEM ENT IF IT IS SUBSEQUENTLY RETRACTED BY THE ASSESSEE AND NECESSAR Y EVIDENCE IS LAID CONTRARY TO SUCH ADMISSION. (XI) THE HONOURABLE ALLAHABAD HIGH COURT HELD IN THE CASE OF C.I.T. VS. RADHAKISHAN GOYAL (278 ITR 454) THAT IT IS A MATTER OF COMMON KNOWLEDGE, WHICH CANNOT BE IGNORED THAT THE SEARCH IS BEING CONDUCTED WITH THE COMPLETE TEAM OF THE OFFICERS CONSISTING OF SEVERAL OFFICERS WITH THE POLICE FORCE. USUALLY TELEPHONE AND ALL OTHER CONNECTIONS ARE DIS CONNECTED AND ALL INGRESS AND EGRESS ARE BLOCKED. DURING THE COUR SE OF SEARCH MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 55 PERSON IS SO TORTURED HARASSED AND PUT TO A MENTAL AGONY THAT HE LOSES HIS NORMAL MENTAL STATE OF MIND AND AT THAT S TAGE IT CANNOT BE EXPECTED FROM A PERSON TO PRE-EMPT THE STATEMENT RE QUIRED TO BE GIVEN IN LAW AS A PART OF HIS DEFENSE. (XII) THE HONOURABLE JAIPUR BENCH OF I.T.A.T. HELD IN THE CASE OF CHANDESH KUMAR MAHESHWARI VS. A.C.I.T. (I.T.S.S.A.NO.18/JP/ 1997) THAT WE HAVE EXAMINED THE FACTS AND ARGUMENTS PUT-FORTH BY THE L EARNED A.R. AND ARE OF THE OPINION THAT AN ADMISSION OF FACT MA DE BY A PARTY IS GOOD EVIDENCE AND MAY BE DECISIVE IN THE ABSENCE OF EVIDENCE TO THE CONTRARY. HOWEVER, IT IS NOT A CONCLUSIVE PROO F OF THE MATTER ADMITTED. IT IS OPEN TO THE ASSESSEE WHO MADE ADMI SSION TO SHOW THAT IT IS INCORRECT. [PULLONGODE RUBBER PRODUCE CO . PVT. LTD. VS. STATE OF KERALA (1971) 81 ITR 18 (SC)]. AN ADMISSIO N MADE BY THE ASSESSEE BEFORE THE INCOME-TAX AUTHORITIES IS AN IM PORTANT PIECE OF EVIDENCE BUT HE IS ENTITLED TO SHOW THAT SUCH AN AD MISSION WAS MADE OUT OF IGNORANCE OF LAW OR IT HAS OTHERWISE VI TIATED [G. MURUGESAN & BROS. VS. C.I.T. (1973) 88 ITR 432 (SC) ]. IN OTHER WORDS, THE STATEMENT U/S 132(4) MADE BEFOR E THE INCOME- TAX AUTHORITIES IS AN IMPORTANT PIECE OF EVIDENCE B UT IT IS NOT CONCLUSIVE. IT IS REBUTTABLE AND THE ASSESSEE CAN ALWAYS SHOW THAT IT WAS INCORRECT. THE ADDITION CANNOT BE MADE MERE LY ON THE BASIS OF ADMISSION MADE BEFORE THE INCOME-TAX AUTHORITIES . IF THE ASSESSEE PRODUCES EVIDENCES WHICH PROVES HIS ADMISS ION TO BE INCORRECT OR CONTRARY TO THE FACTS AND SUCH EVIDENC ES REMAIN UNCONTROVERTED, ADDITION MADE IN SUCH CASE MERELY O N THE BASIS OF MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 56 ADMISSION OF THE ASSESSEE CANNOT BE SUSTAINED. THE SURROUNDING CIRCUMSTANCES AND OTHER RELEVANT FACTORS HAVE TO BE CONSIDERED BEFORE MAKING AN ADDITION SOLELY ON THE BASIS OF AD MISSION. RELIANCE WAS PLACED IN THE CASE OF C.I.T. VS. BHANW ARLAL (225 ITR 870). 19. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN HIS STATEMENT RECORDED U/S.132(4) ON 04.11.2011, THE AS SESSEE OFFERED UNDISCLOSED INCOME OF RS.45 CRORES FOR TAXA TION, SUBJECT TO VERIFICATION OF THE SEIZED MATERIAL. SUBSEQUENTL Y, THE ASSESSEE FILED A LETTER BEFORE THE INVESTIGATION WING IN WHI CH HE ADMITTED UNDISCLOSED INCOME OF RS.35 CRORES FOR VARIOUS ASSE SSMENT YEARS IN HIS OWN CASE AND RS.10 CRORES IN THE CASE OF SIG NET INDUSTRIES LTD. FOR THE ASSESSMENT YEAR 2012-13. IN THE SAID LE TTER, COPY OF WHICH IS ENCLOSED HEREWITH AS ANNEXURE C , THE ASSESSEE CLEARLY IDENTIFIED THE SEIZED MATERIAL RELEVANT TO UNDISCLO SED INCOME OFFERED FOR TAXATION AND CATEGORICALLY STATED THAT DECLARATION OF UNDISCLOSED INCOME WAS BASED UPON PROVISIONAL VERIF ICATION OF SEIZED MATERIAL. IN THIS REGARD, ATTENTION OF THE H ONORABLE TRIBUNAL MAY BE BROUGHT TO THE FACT THAT OVER 30,000 PAGES W ERE SEIZED BY THE INCOME-TAX DEPARTMENT ALONG WITH HARD DISCS OF ALL THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 57 COMPUTERS. AS PER THE IMPUGNED LETTER, UNDISCLOSED INCOME OF RS.12.61 CRORES FOR THE ASSESSMENT YEAR 2012-13 WAS BASED ON PROVISIONAL VERIFICATION OF SEIZED MATERIAL VIZ. LPS-3, BS-1 TO BS-3 (RESIDENCE OF THE ASSESSEE), ANNEXURE A-2 (MUMBAI O FFICE OF SIGNET INDUSTRIES LTD.), LPS-1 AND BS-3 (RESIDENCE O F PARAS PATIDAR), UNDISCLOSED SLIVERWARES AND UNMATCHED DIA MOND ORNAMENTS. TO ASCERTAIN UNDISCLOSED INCOME SCIENTIF ICALLY ON A PROPER ANALYSIS OF UNACCOUNTED CASH TRANSACTIONS AS PER SEIZED MATERIAL, THE ASSESSEE PREPARED A CASH BOOK IN WHIC H ALL UNACCOUNTED CASH RECEIPTS AND UNACCOUNTED CASH PAYM ENTS AND INVESTMENT WERE RECORDED DATEWISE IN A CHRONOLOGICA L ORDER AND ON THE BASIS THEREOF, THE ASSESSEE ASCERTAINED THE PEAK CREDIT AND OFFERED THE YEAR-WISE PEAK CREDIT FOR TAXATION. THE RATIONALE BEHIND APPLYING PEAK CREDIT THEORY IS THAT THE SUM OF ALL UNEXPLAINED CREDIT ENTRIES CANNOT BE THE ASSESSEES INCOME WHEN THERE ARE SEVERAL UNEXPLAINED DEBIT ENTRIES ALSO IN THE SEIZED MATERIAL AND THEREFORE, THE EFFECT OF MULTIPLE CRED IT AND DEBIT ENTRIES CAN BE CANCELLED BY ARRANGING THEM IN A CHR ONOLOGICAL ORDER, DETERMINE HIGHEST PEAK CREDIT AND BRING SUCH PEAK CREDIT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 58 TO TAX AS UNDISCLOSED INCOME OF THE ASSESSEE. THE C OPY OF CASH BOOK WAS PLACED BEFORE THE ASSESSING OFFICER, C.I.T .(A). AS WELL AS BEFORE THE HONOURABLE I.T.A.T. ON THE BASIS OF ABOV E SCIENTIFIC ANALYSIS OF SEIZED MATERIAL, IT WAS ASCERTAINED BY THE ASSESSEE THAT NO UNDISCLOSED INCOME WAS DETERMINABLE IN THE ASSESSMENT YEAR 2012-13 BECAUSE THE UNDISCLOSED INCOME DETERMI NED IN EARLIER ASSESSMENT YEARS AND RECOVERY OF CASH ADVAN CED IN EARLIER PERIOD WAS SUFFICIENT FOR EXPLAINING CASH PAYMENTS AND UNDISCLOSED INVESTMENTS DURING THE ASSESSMENT YEAR 2012-13. UNDER THESE FACTS, NO INCOME WAS OFFERED FOR TAXATI ON BY THE ASSESSEE DURING THE YEAR NOTWITHSTANDING THE FACT T HAT THE ASSESSEE EARLIER OFFERED UNDISCLOSED INCOME OF RS.1 2.61 CRORES FOR ASSESSMENT YEAR 2012-13 IN HIS LETTER FILED BEF ORE THE INVESTIGATION WING. THE JUDGMENTS RELIED UPON BY TH E FIRST APPELLATE AUTHORITY WHILE MAKING ADDITION OF RS.9,4 3,55,415/- ON THE BASIS OF ASSESSEES STATEMENT ARE NOT APPLICABL E TO THE FACTS OF THE ASSESSEES CASE IN AS MUCH AS IN ALL THE CAS ES EITHER THE ASSESSEE CLAIMED THE STATEMENTS HAVING BEEN GIVEN U NDER THREAT OR INTIMIDATION WHEREAS IT WAS A VOLUNTARY STATEMEN T OR RETRACTION MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 59 WAS FILED AFTER MANY YEARS OR NO REASONS WERE ASSIG NED FOR RETRACTION OR RETRACTION WAS MADE DESPITE EXISTENCE OF INCRIMINATING MATERIAL. THE FACTS OF THE ASSESSEES CASE ARE TOTALLY DIFFERENT. WHILE OFFERING UNDISCLOSED INCOME FOR TA XATION, THE ASSESSEE CATEGORICALLY STATED THAT THE DECLARATION WAS ON THE BASIS OF PROVISIONAL VERIFICATION OF SEIZED MATERIA L. WHILE FILING RETURN OF INCOME PURSUANT TO NOTICE U/S.153A, THE A SSESSEE SCIENTIFICALLY ANALYSED THE ENTIRE SEIZED MATERIAL AS WELL AS UNDISCLOSED INVESTMENT AND ASSETS, WORKED OUT PEAK CREDIT BY DATEWISE CHRONOLOGICALLY ARRANGING UNACCOUNTED CASH RECEIPTS AND CASH PAYMENTS AND OFFERED THE SAME FOR TAXATION AS UNDISCLOSED INCOME. NO INCOME WAS OFFERED FOR TAXATION FOR ASSE SSMENT YEAR 2012-13 BECAUSE THE UNDISCLOSED INCOME DETERMINED I N EARLIER ASSESSMENT YEARS AND RECOVERY OF CASH ADVANCED IN E ARLIER PERIOD WAS SUFFICIENT FOR EXPLAINING CASH PAYMENTS AND UND ISCLOSED INVESTMENTS DURING THE YEAR. IN VIEW OF THE FACTS A ND LEGAL POSITION DISCUSSED ABOVE, THE ASSESSEE HUMBLY REQUE ST DELETION OF THE ADDITION SUSTAINED BY THE C.I.T.(A) AND DETE RMINE UNDISCLOSED INCOME OFFERED BY THE ASSESSEE ON THE B ASIS OF PEAK MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 60 CREDITS FOR VARIOUS ASSESSMENT YEARS ON THE BASIS O F CASH BOOK PREPARED BY HIM AND PLACED BEFORE THE TRIBUNAL AS W ELL AS THE LOWER AUTHORITIES. 20. THE LEARNED CIT(A) HAS MADE THE ADDITION OF DIFFERENCE BETWEEN THE INCOME OFFERED IN THE STATEMENT RECORDE D U/S 132(4) AND CONFIRMED IN THE LETTER SUBMITTED TO THE INVEST IGATION WING FOR THE ASSESSMENT YEAR 2012-13. THE PEAK CREDIT IN VIEW OF VARIOUS ISSUES DECIDED IN THESE APPEALS INCLUDING A PPEAL IN SIGNET INDUSTRIES LIMITED NEEDS TO BE REWORKED OUT. THE IN COME WORKED OUT OF POLY PRODUCT SOLD OUT OF BOOKS AND UNDER-INV OICED FOR ASSESSMENT YEARS 2006-07, 2007-08 AND 2008-09 HAVE BEEN HELD TO BE TAXED IN THE HANDS OF SIGNET INDUSTRIES INSTEAD OF THE ASSESSEE. PART OF THIS INCOME WAS OFFERED BY THE AS SESSEE IN HIS RETURN OF INCOME FOR THESE YEARS WHICH SHALL BE RED UCED IN VIEW OF THESE FACTS. FURTHER, VARIOUS OTHER ISSUES ARE ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICE R IS ALSO DIRECTED TO REWORK OUT THE PEAK. IN VIEW OF THESE FACTS, TH IS ISSUE IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 61 21. GROUND NO.4.0 (A.Y. : 2008-09) OF THE ASSESSEE S APPEAL : GROUND NO.4.0 (A.Y. : 2008-09)OF ASSESSEES APPEAL READS AS UNDER : ASSESSMENT YEAR : 2008-09 REJECTION OF ASSESSEES CLAIM FOR EXCLUSION / DEDUC TION / ALLOWANCES MADE IN THE RETURN OF INCOME FILED U/S.153A OF THE INCOME-TAX ACT, 1961 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE REJECTION OF THE ASSESSE ES CLAIM FOR THE FOLLOWING EXCLUSIONS/DEDUCTIONS/ALLOWANCES BY THE ASSESSING O FFICER, WHICH WERE MADE IN THE RETURN OF INCOME FILED U/S.153A OF THE INCOM E-TAX ACT, 1961: S. NO PARTICULARS AMOUNT RS. (A) EXCLUSION OF SHORT TERM CAPITAL GAIN ON SALE OF SHARES, WHICH HAD ALREADY BEEN OFFERED FOR TAXATION BY THE ASSESSEE I N ASSESSMENT YEAR 2007-08 29,471/- (B) DEDUCTION OF COST OF ACQUISITION OF SHARES OF A DROIT INDUSTRIES (INDIA) LIMITED, IN COMPUTING SHORT CAPITAL GAIN ON SALE OF SHARES 30,000/- (C) DEDUCTION OF BANK CHARGES 1,629/- (D) DEDUCTION OF INTEREST, BEING DIFFERENCE IN INTE REST PAID (RS.1,60,610/-) AND INTEREST CLAIMED AS DEDUCTION IN THE RETURN OF INCOME (RS.1,60,160/-) 450/- 22. THE FACTS RELATING TO THIS GROUND ARE THAT WHIL E FILING THE RETURN PURSUANT TO THE NOTICE ISSUED U/S.153A THE A SSESSEE CLAIMED THE FOLLOWING DEDUCTIONS: S. NO PARTICULARS AMOUNT RS. (A) EXCLUSION OF SHORT TERM CAPITAL GAIN ON SALE OF SHARES, WHICH HAD ALREADY BEEN OFFERED FOR TAXATION BY THE ASSESSEE I N ASSESSMENT YEAR 2007-08 29,471/- (B) DEDUCTION OF COST OF ACQUISITION OF SHARES OF A DROIT INDUSTRIES (INDIA) 30,000/- MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 62 LIMITED, IN COMPUTING SHORT CAPITAL GAIN ON SALE OF SHARES (C) DEDUCTION OF BANK CHARGES 1,629/- (D) DEDUCTION OF INTEREST, BEING DIFFERENCE IN INTE REST PAID (RS.1,60,610/-) AND INTEREST CLAIMED AS DEDUCTION IN THE RETURN OF INCOME (RS.1,60,160/-) 450/- THE SAID CLAIM WERE NOT MADE WHILE FILING THE RETUR N U/S.139(1)/139(4). 23. THE CONTENTION OF THE A.O. IS THAT THE CONTENT ION OF THE FRESH CLAIM OF DEDUCTIONS OF THE ASSESSEE FOR THE R ETURN FILED U/S.153A IS REJECTED AS THE ASSESSEE CANNOT MAKE TH E FRESH CLAIM FOR DEDUCTION/EXEMPTION IN PROCEEDINGS INITIATED U/ S.153A OF THE ACT. IF THE ASSESSEE FOUND ANY MISTAKE IN HIS ORIGI NAL RETURN OF INCOME, THE CORRECT COURSE WAS TO REVISE THE RETURN WHICH HAS NOT BEEN DONE. 24. THE LEARNED CIT(A) RELYING ON THE JUDGEMENT OF JAI STEEL INDIA VS. A.C.I.T. [36 TAXMAN.COM 523 (RAJ)] AND CHARCHIT AGARWAL VS. A.C.I.T. [34 SOT 348 (ITAT-DEL)], THE C .I.T.(A). HELD THAT WHERE A CLAIM FOR DEDUCTION/EXEMPTION WAS NOT MADE BY THE ASSESSEE IN RETURN OF INCOME FILED UNDER ORIGINAL R ETURN OF INCOME, NO FRESH DEDUCTION OR CLAIM CAN BE MADE BY THE ASSESSEE IN THE RETURN OF INCOME FILED U/S.153A PURSUANT TO A SEARCH U/S.132 OR REQUISITION U/S.132A BECAUSE THE PROCEED INGS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 63 U/S.153A ARE FOR THE BENEFIT OF REVENUE AND NOT FOR THE BENEFIT OF THE ASSESSEE. 25. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CLAIMS/DEDUCTIONS MADE BY THE ASSESSEE WHI LE FILING THE RETURN OF INCOME PURSUANT TO NOTICE U/S.153A WERE S UCH CLAIM/DEDUCTIONS WHICH WERE LEGALLY ALLOWABLE TO TH E ASSESSEE. IN FACT, BECAUSE OF THEIR VERY NATURE, THE ASSESSING O FFICER SHOULD HAVE ALLOWED THESE DEDUCTIONS ON HIS OWN AND HE SHO ULD NOT HAVE TAKEN ADVANTAGE OF ASSESSEES IGNORANCE. IN THIS RE GARD THE RELIANCE IS PLACE ON THE CIRCULAR NO.14(XL-35), DATE D APRIL 11, 1955 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, WHICH READS AS UNDER : (3) OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIE S TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SH OULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WHERE PROCEEDINGS OR OTHER PA RTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH, THEREFORE, THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS RESTS WITH ASSESSEE ON WHOM IT IS IMPOS ED BY LAW, OFFICERS SHOULD- MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 64 (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO W HICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER ; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS TO TH EIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED F OR CLAIMING REFUNDS AND RELIEFS. THE HONOURABLE BOMBAY HIGH COURT HELD IN THE CASE O F SANCHIT SOFTWARE AND SOLUTIONS P. LTD. VS. C.I.T. [2012] (34 9 ITR 404) AS UNDER : IN ANY CIVILIZED SYSTEM, THE ASSESSEE IS BOUND TO P AY THE TAX WHICH HE LIABLE UNDER THE LAW TO THE GOVERNMENT. THE GOVERNMENT ON THE OTHER HAND IS OBLIGED TO COLLECT ONLY THAT AMOUNT OF TAX WHICH IS LEGALLY PAYABLE BY AN ASSESSEE. THE ENTIRE OBJECT OF ADMINISTRATION OF TA X IS TO SECURE THE REVENUE FOR THE DEVELOPMENT OF THE COUNTRY AND NOT TO CHARG E ASSESSEE MORE TAX THAN THAT WHICH IS DUE AND PAYABLE BY THE ASSESSEE. IT IS IN AFORESAID CIRCUMSTANCES THAT AS FAR BACK AS IN 11-4 -1955 THE CENTRAL BOARD OF DIRECT TAX HAD ISSUED A CIRCULAR DIRECTING ASSES SING OFFICER NOT TO TAKE ADVANTAGE OF ASSESSEES IGNORANCE AND/OR MISTAKE. T HEREFORE, THE ABOVE CIRCULAR SHOULD ALWAYS BE BORNE IN MIND BY THE OFFI CERS OF THE RESPONDENT REVENUE WHILE ADMINISTERING THE SAID ACT. [PARA 5] THERE WAS A FUNDAMENTAL ERROR IN THE ORDER OF C.I.T . AS IT PROCEEDS ON THE ERRONEOUS BASIS THAT THE ASSESSEE HAD ADMITTEDLY NO T CLAIMED THE BENEFIT OF SECTIONS 10(34) AND 10(38) IN RESPECT OF ITS DIVIDE ND INCOME AND LONG TERM CAPITAL GAINS ON SALE OF SHARES RESPECTIVELY IN ITS RETURN OF INCOME. IN FACT, IN THE RETURN OF INCOME, THE ASSESSEE HAD ADMITTEDLY S OUGHT TO EXCLUDE ITS DIVIDEND INCOME AND LONG TERM CAPITAL GAINS FROM SA LE OF SHARES UNDER SECTION 1O AS IS EVIDENT FROM THE RETURN OF INCOME. HOWEVER, IN THE RETURN OF INCOME AS FILED ORIGINALLY ON THE ASSESSEE BY MISTA KE, OMITTED TO EXCLUDE THE DIVIDEND INCOME AND INCOME FROM LONG TERM CAPITAL G AINS FROM THE TOTAL INCOME BEING DECLARED BY IT. [PARA 6] MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 65 THE HONOURABLE MADRAS HIGH COURT HELD IN THE CASE O F C.I.T. VS. GEO INDUSTRIES & INSECTICIDES (I) (P.) LTD. (234 ITR 541) AS UNDER : WE ARE OF THE VIEW THAT, WHEN THE ASSESSEE MADE A CLAIM FOR CONSIDERATION OF AN ITEM FOR DEDUCTION DURING THE COURSE OF ASSES SMENT PROCEEDINGS, IT IS THE DUTY OF THE ITO TO EXAMINE THE CLAIM ON THE MER ITS OF THE CLAIM. THE PRESENT CASE IS NOT A CASE WHERE THE ASSESSEE MADE A CLAIM WITH REFERENCE TO A MATTER WHICH WAS CONCLUDED AND HAS BECOME FINAL I N THE ORIGINAL ASSESSMENT PROCEEDINGS. BUT, ON THE OTHER HAND, IT WAS FOUND IN THE SUBSEQUENT YEARS ASSESSMENT PROCEEDINGS THAT THE L IABILITY OF THE ASSESSEE HAD ACCRUED WHEN THE SUIT FOR INJUNCTION FILED BY T HE ASSESSEE WAS DISMISSED BY THE CITY CIVIL COURT, MADRAS AND IN VIEW OF THE SUBSEQUENT EVENT THAT THE DEDUCTION MIGHT RELATE TO THE PRESENT ASSESSMENT YE AR, THE ASSESSEE MADE A CLAIM FOR DEDUCTION OF THE DAMAGES AND WHEN SUCH A CLAIM WAS MADE, THE ITO WAS BOUND TO EXAMINE THE CLAIM ON MERITS AND IT IS NOT OPEN TO HIM TO REJECT THE CLAIM EVEN AT THE THRESHOLD AND REFUSE T O ENTERTAIN THE CLAIM. THE ZEAL OF THE ITO TO CARRY OUT THE DIRECTIONS OF THE HIGHER AUTHORITY MAY BE JUSTIFIED, BUT AT THE SAME TIME IT SHOULD NOT PREVE NT HIM FROM EXAMINING THE CLAIM OF THE ASSESSEE ON MERITS. HIS DUTY TO MAKE A N ASSESSMENT DOES NOT BEGIN AND END WITH THE CARRYING OUT THE DIRECTIONS OF THE COMMISSIONER OF INCOME-TAX AND HIS DUTY IS SOMETHING MORE, THAT IS, TO DETERMINE THE CORRECT TAXABLE INCOME. WE ARE OF THE OPINION, NOTHING PREC LUDES THE ASSESSEE FROM MAKING A CLAIM BEFORE THE ITO AT THE TIME OF FINALI ZATION OF THE ASSESSMENT PROCEEDINGS AND EQUALLY NOTHING PREVENTS THE ITO FR OM EXAMINING THE CLAIM ON MERITS OF THE MATTER. IT IS WELL TO REMEMBER THA T THE ASSESSMENT WAS BEING REDONE BY THE ITO WITHIN FOUR YEARS FROM THE DATE O F THE ORIGINAL ASSESSMENT ORDER AND WHEN HE IS ON THE PROCESS OF THE COMPLETI ON OF THE ASSESSMENT, HE IS BOUND TO CONSIDER EACH AND EVERY CLAIM PREFERRED BY THE ASSESSEE. LET US IMAGINE A CASE OF A CONCLUDED ASSESSMENT AND THERE ARE NO PENDING ASSESSMENT PROCEEDINGS, BUT WHEN THE ASSESSEE MAKES A CLAIM FOR DEDUCTION OF LOSSES, THE ITO CANNOT REFUSE TO ENTERTAIN THE C LAIM AND HE MAY REJECT THE CLAIM ON THE PARAMETERS FOUND IN S. 154 OF THE ACT. IN THE INSTANT CASE, IT IS A STRONGER CASE FOR THE ASSESSEE AS THE ITO WAS DIREC TED TO DETERMINE THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 66 CORRECT TOTAL INCOME OF THE ASSESSEE ACCORDING TO L AW AND DURING THAT PROCEEDINGS WHEN THE ASSESSEE MAKES A CLAIM, THE IT O IS BOUND TO CONSIDER THE CLAIM OF THE ASSESSEE. WE ARE OF THE OPINION TH AT, WHILE CONSIDERING SUCH A CLAIM, THE QUESTION OF FULFILLMENT OF THE CONDITI ONS FOR RECTIFICATION IS NOT A SINE QUA NON AND EVEN THE CONDITIONS TO RECTIFY THE MISTAKES ARE NOT PRESENT, THE ITO, IN OUR OPINION, SHOULD EXAMINE THE CLAIM O F THE ASSESSEE ON MERITS OF THE CASE. THE POWER OF THE ITO TO MAKE THE ASSES SMENT AS OBSERVED BY THIS COURT IN C.I.T. VS. SETH MANICKLAL FOMRA (SUPRA) IS DERIVED FROM THE STATUTORY PROVISIONS OF S.143(3) OF THE ACT. THOUGH THE SUPREME COURT IN THE CASE OF MODI INDUSTRIES LTD. VS. C.I.T. (SUPRA) HAS HELD THAT THE JURISDICTION OF THE ITO IS DERIVED FROM THE ORDER OF THE C.I.T., HI S JURISDICTION TO ALLOW OR DISALLOW THE CARRY FORWARD LOSSES OF THE DEFUNCT BU SINESS WOULD BE DERIVED FROM THE ORDER OF THE C.I.T., BUT IN OTHER RESPECTS AND, FOR COMPLETING THE ASSESSMENT, HIS POWERS WOULD BE TRACEABLE TO S. 143 (3) OF THE ACT. THIS COURT IN FAIZUNNISSA BEGAM VS. ASSTT. CED (SUPRA) HAS IND ICATED SUCH AN APPROACH AND IT WAS HELD THAT IN SO FAR AS OTHER IT EMS NOT CONSIDERED BY THE HIGHER AUTHORITIES ARE CONCERNED, THE POWER OF THE ITO TO REASSESS THE INCOME WOULD BE TRACEABLE TO THE PROVISIONS OF THE STATUTE. THEREFORE, THE REFUSAL OF THE ITO EVEN TO CONSIDER THE CLAIM OF TH E ASSESSEE IS NOT JUSTIFIABLE AND WE ARE OF THE OPINION THAT BOTH THE C.I.T.(A) A ND THE TRIBUNAL WERE RIGHT IN DIRECTING THE ITO TO CONSIDER THE CLAIM OF THE A SSESSEE ON THE MERITS OF THE MATTER. THOUGH WE ARE NOT AGREEING WITH THE VIEW EX PRESSED BY THE TRIBUNAL THAT THE ENTIRE ASSESSMENT ORDER WAS SET ASIDE BY T HE C.I.T., STILL THE POWER OF THE ITO TO CONSIDER THE CLAIM OF THE ASSESSEE IS NE ITHER CURTAILED NOR TAKEN AWAY BY THE ORDER OF THE C.I.T. THE ITO WAS BOUND T O CONSIDER THE CLAIM OF THE ASSESSEE UNDER S. 143(3) OF THE ACT WHEN HE WAS IN FINAL PROCESS OF ASSESSMENT IN THE DETERMINATION OF TOTAL INCOME OF THE ASSESSEE AS THE ASSESSMENT PURSUANT TO THE DIRECTIONS OF THE C.I.T. HAS NOT REACHED THE STAGE OF FINALITY. WE FIND THAT THE CENTRAL BOARD IS MORE LIBERAL IN ITS APPROACH AND DIRECTED THE ITO TO CONSIDER THE CLAIM OF STATUTORY DEDUCTION EVEN WHEN THE ASSESSEE HAS NOT MADE SUCH A CLAIM [VIDE: CIRCULAR NO. 14(XL-35) OF 1955 DT. : 11 TH APRIL, 1955 : CHOKSHI METAL REFINERY VS. C.I.T. (1 977) 107 ITR 63 (GUJ) AT PAGE 71]. WE ARE OF THE OPINION, SUCH AN A TTITUDE OF THE ITO WOULD INSTIL CONFIDENCE IN THE MINDS OF THE TAXPAYER THAT HIS INCOME WOULD BE PROPERLY DETERMINED AND HE IS NOT REQUIRED TO PAY T HE TAX, NEITHER ONE PAISE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 67 MORE NOR ONE PAISE LESS THAN WHAT IS CORRECTLY AND RIGHTLY DUE IN ACCORDANCE WITH AND UNDER THE PROVISIONS OF THE STATUTE. IN TH IS VIEW OF THE MATTER, WE ARE OF THE OPINION THAT THE ORDER OF THE TRIBUNAL IS SU STAINABLE IN LAW, THOUGH FOR DIFFERENT REASONS STATED ABOVE. THE HONOURABLE ALLAHABAD HIGH COURT HELD IN THE CAS E OF RAJ RANI GULATI VS. C.I.T. CENTRAL TILAK,(2012) (346 ITR 543 ) AS UNDER : NEEDLESS TO MENTION THAT PROVISO OF SECTION 112(1) WAS INTRODUCED WITH EFFECT FROM 01.04.2000 BY THE FINANCE ACT, 1999. IN OTHER WORDS, IT WAS INTRODUCED DURING THE ASSESSMENT YEAR UNDER CONSIDE RATION AND ASSESSEE WAS NOT AWARE ABOUT LATEST AMENDMENT INTRODUCED BY THE FINANCE ACT, 1999 W.E.F. 01.04.2000. THOUGH IGNORANCE OF LAW HAS NO E XCUSE, BUT IT CAN BE EXCUSED IN TAX MATTER AS PER THE RATIO LAID DOWN IN THE CASE OF P. V. DEVASSY VS. C.I.T., 84 ITR 502 (KER). IT IS NOT EXPECTED TH AT THE DEPARTMENT SHALL TAKE THE ADVANTAGE OF ASSESSEES IGNORANCE AS PER CB.D. T. CIRCULAR NO.14 (XL 35)1955 DATED 11 APRIL 1955. EVEN UNDER THE BONAFID E BELIEF, THE ASSESSEE HAS SHOWN THE LONG TERM CAPITAL GAIN AT THE RATE OF 20%, BUT IT WAS EXPECTED FROM THE A.O. TO KNOW THE LATEST AMENDMENT. THE MIS TAKE MIGHT HAVE BEEN CORRECTED BY PASSING AN ORDER UNDER SECTION 154 OF THE ACT. IN THE CASE OF C.I.T. VS. MAHALAXMI SUGAR MILLS CO. LTD. (1986) 16 0 ITR 920 (SC), IT WAS OBSERVED THAT: THERE IS A DUTY CAST ON THE INCOME-TAX OFFICER TO APPLY THE RELEVANT PROVISIONS OF THE INDIAN INCOME-TAX ACT FOR THE PUR POSE OF DETERMINING THE TRUE FIGURE OF THE ASSESSEES TAXAB LE INCOME AND THE CONSEQUENTIAL TAX LIABILITY. THUS THE ASSESSEE FAIL S TO CLAIM THE BENEFIT OF A SET-OFF CANNOT RELIEVE THE INCOME-TAX OFFICER OF HIS DUTY TO APPLY SECTION 24 IN AN APPROPRIATE CASE. SIMILAR VIEW WAS TAKEN BY THE HONOURABLE I.T.A.T. I NDORE IN THE CASE OF SUBHADRA DEVI GUPTA VS. A.C.W.T. (WTA NOS.1 TO 6/IND/2012 DT.28.06.2013). MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 68 26. IN THE WAKE OF THE ABOVE SUBMISSIONS, THE LEARN ED COUNSEL FOR THE ASSESSEE PRAYED FOR ALLOWING THE LEGITIMATE CLAIMS/DEDUCTIONS OF THE ASSESSEE NOTWITHSTANDING T HE FACT THAT THESE CLAIMS WERE NOT MADE IN THE ORIGINAL RETURN O F INCOME FILED U/S.139(1) OF THE ACT. 27. WE HAVE HEARD BOTH THE SIDES. WE FIND THAT IN T HE CASE OF MUKESH SANGLE HUF, IT(SS)A NOS. 94 & 95/IND/2015 AN D OTHERS IT(SS) A. NOS. THIS BENCH HAD TAKEN THE FOLLOWING VIEW :- 21. THE ASSESSEE HAS MADE FRESH CLAIM AS STATED IN THE EARLIER PART OF THIS PARA WITH REGARD TO EXCLUSION OF SHORT TERM CAPITAL GAIN ON THE SALE OF SHARES OF 29,471, COST OF ACQUI SITION OF SHARES RS. 30,000/-, DEDUCTION FOR BANK CHARGES RS. 1629/- AND DEDUCTION OF INTEREST DIFFERENCE OF RS. 450/-. WE H AVE HELD THAT WHILE FILING THE RETURN OF INCOME U/S 153A OF THE A CT, THE ASSESSEE CANNOT REDUCE THE TAXABLE INCOME ORIGINALLY DECLARE D. A SIMILAR VIEW WE HAVE TAKEN IN THE CASE OF MUKESH SANGLA HUF . THE RELEVANT PARA IS REPRODUCED AS UNDER :- 65. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND ALSO GONE THROUGH THE CASE LAW RELIED UPON. WHI LE FILING THE RETURN OF INCOME U/S 153A/153C OF THE AC T MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 69 SOME OF THESE ASSESSEE HAVE CLAIMED DEDUCTION U/S 8 0C AND 80D OF THE ACT. NO SUCH CLAIM WAS MADE WHILE FI LING THE RETURN OF INCOME U/S 139(1)/139(4) OF THE ACT. SINCE WE HAVE ALREADY ALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND OF ISSUE OF RECORDING SATISFACTION PRIOR TO ISSUE OF NOTICE U/S 153C OF THE ACT AND ALSO ON THE GROUND THAT NO INCRIMINATING DOCUMENT WAS FOUND AND SEIZED, THEREFORE, THERE IS NO QUESTION OF ALLOWING SUCH DEDUCTION TO THE ASSESSEE. FURTHER WE WOULD ALSO LI KE TO STATE THAT THE PROVISIONS OF SECTION 153A/153C ARE NOT MADE FOR THE BENEFIT OF THE ASSESSEE. RETURN FILED IN RESPONSE TO NOTICE U/S 153A/153C OF THE ACT IS NOT SUBSTITUTE OF REVISED RETURN FOR THE CLAIM OF SUCH BENEFITS. HON'BLE APEX COURT IN THE CASE OF GOETZE (INDIA) LIMITED VS. CIT; 284 ITR 323 RULED OUT THAT A FRESH CLAIM BEFORE THE ASSESSING OFFICER CAN BE MADE ONLY BY FI LING A REVISED RETURN AND NOT OTHERWISE. THEREFORE, WHATE VER CLAIM THE ASSESSEE HAS NOT MADE WHILE FILING THE RE TURN U/S 139(1)/139(4) OF THE ACT, HE CANNOT MAKE FRESH CLAIM BY FILING THE RETURN U/S 153A/153C OF THE ACT AND REDUCE THE TAXABLE INCOME ORIGINALLY DECLARED. SUCH VIEW HAS BEEN UPHELD BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF JAI STEELS (INDIA) VS. ACIT (SUPRA). TH EREFORE, THIS GROUND OF THE ASSESSEES APPEAL STANDS DISMISS ED. 28. KEEPING THESE FACTS IN VIEW, WE DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. GROUND NO.5.0 (A.Y. : 2008-09)OF ASSESSEES APPEAL READS AS UNDER : MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 70 ASSESSMENT YEAR :2008-09 UNDISCLOSED INCOME FROM UNACCOUNTED SALES AND UNDER -INVOICING ASSESSED IN SIGNET INDUSTRIES LIMITED, INCLUDED IN THE ASSESSEES TOTAL INCOME : RS.1,60,00,000/- THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE INCOME ASSESSED BY THE A SSESSING OFFICER AT RS.2,89,20,310/- IGNORING THE VITAL FACTS THAT : (A) IT INCLUDED THE ADDITIONAL INCOME OF RS.1,60,00,000 /- VOLUNTARILY OFFERED FOR TAXATION BY THE ASSESSEE ON ACCOUNT OF UNACCOUNTED SALES AND UNDER- INVOICING, WHICH FORMED PART OF INCOME FROM UNACCOU NTED SALES AND UNDER- INVOICING ASSESSED AT RS.2,13,04,252/- IN THE CASE OF SIGNET INDUSTRIES LTD. AND THEREFORE, IT SHOULD HAVE BEEN EXCLUDED FROM TH E ASSESSED INCOME OF THE ASSESSEE AND (B) THAT THE SAME INCOME CANNOT BE TAXED IN THE HANDS O F TWO ASSESSEES. 29. THE FACTS IN BRIEF ARE THAT DURING SEARCH, PAGE NO.129, 130, 132 TO 137 AND 254 OF LPS-2/14 WERE SEIZED FROM THE OFFICE OF THE SIGNET INDUSTRIES LTD. THESE PAGES REPRESENTED D ETAILED WORKING ON THE BASIS OF WHICH SHRI MUKESH SANGLA RE VISED HIS RETURN OF INCOME FOR A.Y. 2006-07 TO A.Y. 2008-09 O N THE BASIS OF DOCUMENTS FOUND AND SEIZED DURING SEARCH BY CENTRAL EXCISE AUTHORITIES. AFTER SEARCH BY CENTRAL EXCISE AUTHORI TIES 06.12.2007, THE ASSESSEE VOLUNTARILY OFFERED UNDISC LOSED INCOME OF RS.4 CRORES ON ACCOUNT OF CASH PAYMENTS TO SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI, UNDER-INVOICING OF SALES OF LOGIC POLY PRODUCTS, A UNIT OF SIGNET INDUSTRIES LTD. AND UNACC OUNTED SALES MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 71 AND PAID APPLICABLE TAXES THEREON. THE DETAILS OF U NDISCLOSED INCOME VOLUNTARILY OFFERED FOR TAXATION BY THE ASSE SSEE AND TAXES PAID THEREON ARE AS UNDER: ASSTT. YEAR UNDISCLOSED INCOME (RS.) TAXES (RS.) 2006 - 07 45,00,000 20,86,755 2007 - 08 1,95,00,000 86,88,340 2008 - 09 1,60,00,000 65,49,450 4,00,00,000 1,73,24,545 30. THAT THE ASSESSING OFFICER ISSUED NOTICE U/S.14 8 OF THE ACT AND COMPLETED ASSESSMENT U/S.143(3) ACCEPTING THE R ETURNS VOLUNTARILY FILED BY THE ASSESSEE. 31. THAT THE CONTENTION OF THE A.O. CAN BE SUMMA RIZED THAT THE IMPUGNED INCOME WAS RELATED TO SIGNET INDUSTRIE S LTD. AND THE UNDISCLOSED INCOME FROM PAYMENT MADE TO SHRI PA NKAJ KALANI AND SHRI DEEPAK KALANI, UNDER-INVOICING OF SALES OF LOGIC POLY PRODUCTS AND UNACCOUNTED SALES WERE BROUGHT TO TAX IN THE CASE OF SIGNET INDUSTRIES LTD. THAT THE SAME IS TAXABLE I N THE HANDS OF SIGNET INDUSTRIES LTD. AND NOT SHRI MUKESH SANGLA. A CCORDINGLY, FOLLOWING ADDITIONS WERE MADE IN SIGNET INDUSTRIES LTD.: ASSTT. YEAR PAYMENT TO KALANI BROTHERS UNACCOUNTED SALES OF POLYMER BUSINESS UNDER-INVOICING OF POLYMER BUSINESS (*) TOTAL 2006 - 07 - 2,89,97,976 - 2,89,97,976 2007 - 08 2,95,00,000 1,75,60,798 1,34,65,988 6,05,26,786 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 72 2008 - 09 6,32,34,000 93,56,857 1,19,47,395 8,45,38,252 2009 - 10 4,01,35,000 - - - 2011 - 12 7,75,000 - - - 13,36,44,000 5,59,15,631 2,54,13,383 21,49,73,014 * THE A.O. WRONGLY ASSESSED UNDISCLOSED INCOME FROM U NDER- INVOICING IN THE ASSESSMENT YEAR 2006-07 AND 2007-0 8 INSTEAD OF ASSESSMENT YEAR 2007-08 AND 2008-09 WHICH WAS RECTI FIED BY THE C.I.T.(A). WHILE DISPOSING OFF THE ASSESSEES APPEA L. WITHOUT PREJUDICE AND ALTERNATIVELY, HE ALSO APPLIE D SEC.40A(3) BY ASSUMING THAT THE PURCHASES WOULD HAVE BEEN MADE IN CASH OR ALTERNATIVELY APPLIED THE PROVISO TO SEC.69C BY HOL DING THAT UNACCOUNTED PURCHASES WERE MADE IN CASH. 32. THE CONTENTION OF THE C.I.T.(A) CAN BE SUMMARI ZED THAT LOGIC POLY PRODUCTS WAS A UNIT OF SIGNET INDUSTRIES LTD. AND THEREFORE, UNDER INVOICING OF SALES AS WELL AS OUT OF BOOKS SALES OF MANUFACTURE GOODS PERTAINED TO SIGNET INDUSTRIES LTD . AND NOT TO SHRI MUKESH SANGLA. SIGNET INDUSTRIES LTD. FILED SET TLEMENT PETITION BEFORE THE HONOURABLE CUSTOMS AND CENTRAL EXCISE SETTLEMENT COMMISSION IN WHICH SIGNET INDUSTRIES LTD . ADMITTED THAT THE UNACCOUNTED TRANSACTION VIZ. UNDER-INVOICI NG OF SALES AND OUTSIDE BOOK SALES PERTAINED TO IT AND IT AGREED TO PAY EXCISE DUTY MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 73 OF RS.69,58,009/-. THE INCOME SHOULD BE ASSESSED IN THE HANDS OF RIGHT PERSON ONLY AS HELD BY THE HONOURABLE SUPR EME COURT IN THE CASE OF C.I.T. VS. ATCHAIAH (218 ITR 239). ON T HE FACTS, THE RIGHT PERSON WAS THE SIGNET INDUSTRIES LTD. AND NOT SHRI MUKESH SANGLA. THE CONTENTION OF THE ASSESSEE THAT SHRI MU KESH SANGLA VOLUNTARILY DECLARED THE IMPUGNED INCOME IN HIS HAN DS WHICH WAS ACCEPTED BY THE INCOME-TAX DEPARTMENT IS OF NO CONS EQUENCE AND IS IMMATERIAL IN VIEW OF THE APEX COURT JUDGMEN T. AS EXPENSES RELATING TO RAW MATERIAL AND OTHER OVERHEA DS HAD BEEN ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS OF S IGNET INDUSTRIES LTD., THE ENTIRE UNDER-INVOICED AMOUNT AS WELL AS OUT OF BOOK SALES WAS INCOME OF SIGNET INDUSTRIES LTD. A ND THE NET PROFIT RATE CANNOT BE APPLIED. ACCORDINGLY,FOLLOWIN G ADDITIONS ON ACCOUNT OF UNDER INVOICING AND UNACCOUNTED SALES WE RE CONFIRMED : ASSTT. YEAR UNACCOUNTED SALES OF POLYMER BUSINESS UNDER - INVOICING OF POLYMER BUSINESS TOTAL 2006 - 07 2,89,97,976 2,89,97,976 2007 - 08 1,75,60,798 1,34,65,988 3,10,26,786 2008 - 09 93,56,857 1,19,47,395 2,13,04,252 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 74 5,59,15,631 2,54,13,383 8,13,29,014 THE C.I.T.(A). TELESCOPED CASH PAID TO PANKAJ KALAN I AND DEEPAK KALANI, UNSECURED LOANS FROM LUCKY COMMOTRADE PVT. LT D. AND UNDISCLOSED INCOME FROM UNDER-INVOICING AND UNACCOU NTED SALES. HOWEVER, THE UNDISCLOSED INCOME OF RS.2,89,97,976/- OF ASSESSMENT YEAR 2006-07 WHICH WAS AVAILABLE TO THE ASSESSEE FOR CASH PAYMENT OF RS.2,95,00,000/- TO PANKAJ KALANI A ND DEEPAK KALANI WAS NOT ALLOWED TO BE TELESCOPED. ACCORDINGL Y THE FOLLOWING ADDITIONS WERE SUSTAINED : ASSTT. YEAR PAYMENT TO KALANI BROTHERS CONFIRMED BY C.I.T.(A). UNSECURED LOANS FROM LUCKY COMMOTRADE PVT. LTD. UNDISCLOSED INCOME FROM UNDER-INVOICING AND UNACCOUNTED SALES ADDITIONS CONFIRMED W.R.T. UNDER INVOICING AND UNACCOUNTED SALES 2006-07 - - 2,89,97,976 2,89,97,976 2007-08 2,95,00,000 2,35,00,000 3,10,26,786 15,26,7 89 2008-09 6,32,40,000 4,20,99,000 2,13,04,252 - 2009-10 4,01,35,000 3,14,78,000 - - 2011-12 7,75,000 2,50,00,000 - - 13,36,50,000 12,20,77,000 8,13,29,014 3,05,24,765 33. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT PAGE NO. 129, 130, 132 TO 137 AND 254 OF LPS-2/ 14 FOUND AND SEIZED FROM THE PREMISES OF SIGNET INDUSTRIES LT D. REPRESENTED WORKING ON THE BASIS OF WHICH THE RETUR NS OF INCOME MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 75 OF SHRI MUKESH SANGLA FOR ASSESSMENT YEARS 2006-07 AND 2007- 08 WERE VOLUNTARILY REVISED AFTER SEARCH BY CENTRAL EXCISE AUTHORITIES AND RETURN OF INCOME FOR ASSESSMENT YEA R 2008-09 WAS FILED. THE UNDISCLOSED INCOME EMERGING FROM THE SE PAGES CONSISTED OF PAYMENT TO SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI, UNDER INVOICING OF SALES AND UNACCOUNTED SA LES, WHICH WAS OFFERED FOR TAXATION BY THE ASSESSEE VOLUNTARILY IN HIS RETURNS OF INCOME AND THE SAME WAS ASSESSED U/S.143(3) R.W. SE C.147. AS THESE DOCUMENTS HAD BEEN THE SUBJECT MATTER OF ASSE SSMENT PROCEEDINGS IN THE ASSESSEES OWN CASE PRIOR TO SEA RCH AND CONSIDERED BY THE A.O., THERE WAS NOTHING INCRIMINA TING ABOUT THEM. AS NO PROCEEDINGS WERE PENDING IN RELATION TO THE SUBJECT ASSESSMENT YEARS AND THESE ASSESSMENTS WERE NON-ABA TED OR COMPLETED ASSESSMENTS, NO ADDITION COULD HAVE BEEN MADE IN TERMS OF SEC.153A OF THE ACT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL. THEREFORE, THE UNDISCLOSED INCOME EMERGIN G FROM THE IMPUGNED WORKING SHOULD HAVE BEEN CONSIDERED IN THE CASE OF THE ASSESSEE AND NOT SIGNET INDUSTRIES LTD. MOREOVER, TH E INCOME ON ACCOUNT OF CASH PAYMENT TO SHRI DEEPAK KALANI AND S HRI PANKAJ MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 76 KALANI ALONGWITH, UNDER-INVOICING OF SALES AND UNAC COUNTED SALES HAD ALREADY BEEN OFFERED FOR TAXATION IN THE CASE O F SHRI MUKESH SANGLA, THE ADDITION THEREOF IN THE CASE OF SIGNET INDUSTRIES LTD. WOULD AMOUNT TO DOUBLE ADDITION AND DOUBLE TAXATION CAUSING GREAT INJUSTICE TO THE ASSESSEE. 34. WITHOUT PREJUDICE TO THE ABOVE AND ALTERNATIVELY, T HE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF THE HONO URABLE TRIBUNAL CONFIRMS THE ADDITION ON ACCOUNT OF CASH P AYMENT TO SHRI PANKAJ KALANI AND SHRI DEEPAK KALANI, UNDER-INVOICI NG AND UNACCOUNTED SALES IN THE CASE OF SIGNET INDUSTRIES LTD., WE HUMBLY REQUEST THAT THE INCOME VOLUNTARILY OFFERED FOR TAXATION ON THIS GROUND BY SHRI MUKESH SANGLA IN HIS RETURN OF INCOME SHOULD BE REDUCED TO AVOID DOUBLE TAXATION AND THE BENEFIT OF TAXES PAID BY HIM SHOULD BE GIVEN IN THE CASE OF SI GNET INDUSTRIES LTD.. IN SUPPORT OF IT, THE RELIANCE IS PLACED UPON THE JUDGEMENT OF HONORABLE SUPREME COURT IN THE CASE OF ASHISH PL ASTIC INDUSTRIES VS. A.C.I.T. (373 ITR 45) 1. THE APPELLANT-ASSESSEE IS A REGISTERED FIRM ENGAGE D IN THE BUSINESS OF MANUFACTURE OF PVC PIPES OF DIFFERENT VARIETIES AND SIZES. SURVEY OPERATIONS WERE CONDUCTED BY THE INCOME TAX AUTHORITIES UNDER SECTION 133A OF THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 77 INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS A CT) AT THE FACTORY PREMISES OF THE ASSESSEE ON 23.09.1993. DURING THE COURSE OF SURVEY OPERATIONS, THE STOCK AT THE PREMISES WAS PHYSICALL Y VERIFIED BY THE SURVEY PARTY AND TOTAL STOCK OF THE VALUE OF 16,92,420/- W AS FOUND. STATEMENT OF BOTH THE PARTNERS WERE RECORDED UNDER SECTION 131 OF THE ACT. IN THE SAID STATEMENT, IT WAS ADMITTED THAT THE STOCK AS PER BO OKS WAS AROUND RS. 3 LAKHS AND THE EXCESS STOCK OF RS. 13,92,000/- WAS, ACCORD INGLY, ADMITTED. ON THIS BASIS, THE ADDITION WAS MADE AND THE ASSESSMENT ORD ER WAS PASSED BY THE ASSESSING AUTHORITY IN RESPECT OF THE ASSESSMENT 2. BEFORE THE COMMISSIONER (APPEALS), THE APPELLANT A SSESSEE SOUGHT TO EXPLAIN THIS DIFFERENCE BY ALLEGING THAT UP TO 23.0 9.1993, SALES OF 32809 KG. OF FINISHED PRODUCTS WAS MADE BY ONE OF THE SISTER CONCERN OF THE ASSESSEE, NAMELY, M/S ASHISH AGRO PLAST PRIVATE LIMITED, AND THE SAME WAS WRONGLY SHOWN TO BE THAT OF THE ASSESSEE. ON THIS PLEA TAKE N BY THE ASSESSEE, IN SUPPORT OF WHICH SOME DOCUMENTS/MATERIALS WERE ALSO FILED, THE COMMISSIONER (APPEALS) ASKED FOR REMAND REPORT FROM THE ASSESSING AUTHORITY. BEFORE THE ASSESSING AUTHORITY, THE REPR ESENTATIVES OF ASSESSEE WERE ASKED TO PRODUCE THE BOOKS OF ACCOUNTS OF M/S ASHISH AGRO PLAST PRIVATE LIMITED FOR THE ASSESSMENT YEARS 1993-1994 AND 1994-1995. IT WAS FOUND THAT THE SALES OF THE FINISHED PRODUCT OF 328 09 KG. AS SHOWN IN THE SALES REGISTER OF THE SISTER CONCERN TALLIES WITH T HE IMPOUNDED STOCK REGISTER. IT WAS ALSO FOUND THAT THE SALES PROCEEDS WAS RECEI VED BY THE SISTER CONCERN, NAMELY M/S ASHISH AGRO PLAST PRIVATE LIMITED THROUG H ITS BANK ACCOUNT IN BANK OF BARODA, DUDHESHWAR ROAD BRANCH, AHMEDABAD. THE CHEQUES MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 78 RECEIVED AGAINST THOSE SALES WERE CLEARED EVEN PRIO R TO THE DATE OF SURVEY. NOTWITHSTANDING THE AFORESAID FINDING WHICH VINDICA TED THE STAND OF THE ASSESSEE TO THE AFORESAID EXTENT, IT WAS FURTHER FO UND THAT THE SALE OF 33682 KG. OF FINISHED GOODS WAS NOTHING BUT UNACCOUNTED S ALES OUT OF WHICH 32809 KG. SALES WAS MADE TO THE AFORESAID SISTER CONCERN OF THE ASSESSEE. TAKING INTO CONSIDERATION THIS ASPECT, THE COMMISSIONER UP HELD THE ORDER OF THE ASSESSING AUTHORITY JUSTIFYING THE ADDITIONS MADE O N ACCOUNT OF UNACCOUNTED PRODUCTION, SALES AND CLOSING STOCK OF FINISHED PRO DUCTS. THIS ORDER HAS BEEN UPHELD BY THE INCOME TAX APPELLATE TRIBUNAL AS WELL AS THE HIGH COURT. IN FACT, THE HIGH COURT DISMISSED THE APPEAL OF THE AS SESSEE PREFERRED UNDER SECTION 260A OF THE ACT ON THE GROUND THAT NO SUBST ANTIAL QUESTION OF LAW AROSE. 3. NORMALLY, GOING BY THE AFORESAID FACTS NOTED, THE HIGH COURT MAY BE CORRECT IN ITS OBSERVATION THAT NO SUBSTANTIAL QUES TION OF LAW AROSE. HOWEVER, LEARNED COUNSEL FOR THE APPELLANT-ASSESSEE HAS BROU GHT TO OUR NOTICE A DIFFERENT ASPECT WHICH WAS RAISED AT THE TIME OF AD MISSION OF THE PRESENT SPECIAL LEAVE PETITION FILED BY THE APPELLANT. HE D REW OUR ATTENTION TO ORDERS DATED 27.02.2004 WHICH READS AS UNDER: MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 79 LEAVE GRANTED LIMITED TO THE QUESTION AS TO WHETHE R IN RESPECT OF SALES OF 32,809 KG., WHICH ARE SHOWN IN THE STOCK REGISTE R OF M/S. ASHISH AGRO PLAST PRIVATE LIMITED, THERE HAS BEEN DOUBLE TAXATI ON. 4. IT IS CLEAR FROM THE ABOVE THAT LEAVE WAS GRANTED LIMITED TO THE QUESTION AS TO WHETHER THE ADDITION MADE ON ACCOUNT OF AFORESAI D SALE WOULD AMOUNT TO DOUBLE TAXATION. TO PUT IT DIFFERENTLY, THE SUBMISS ION OF THE LEARNED COUNSEL FOR THE APPELLANT IS THAT ON THE AFORESAID SALES, W HICH ARE FOUND IN THE ACCOUNTS OF M/S ASHISH PLASTIC INDUSTRIES, THE RECE IPTS ARE SHOWN AS INCOME ON WHICH TAX HAS BEEN PAID BY M/S ASHISH AGRO PLAST PRIVATE LIMITED. 5. DURING THE HEARING OF THIS APPEAL, LEARNED COUNSEL SUBMITTED THAT HE CAN BRING SATISFACTORY EVIDENCE IN SUPPORT OF THIS PLEA . WE ARE OF THE VIEW THAT THE ORDER OF THE AUTHORITIES BELOW SHOULD BE SUSTAINED BUT IF THE APPELLANT IS ABLE TO PROVE THAT TAX ON THE INCOME GENERATED FROM THE SALE OF THE AFORESAID 32809 KG. OF MATERIAL HAS BEEN PAID BY M/S ASHISH A GRO PLAST PRIVATE LIMITED, BENEFIT THEREOF SHOULD BE EXTENDED TO THE APPELLANT. FOR THIS PURPOSE, THEREFORE, WE REMAND THE CASE BACK TO THE ASSESSING AUTHORITY, WHO SHALL GIVE AN OPPORTUNITY TO THE ASSESSEE TO DEMONS TRATE AS TO WHETHER THE SISTER CONCERN HAS ALREADY PAID THE TAX ON THE AFOR ESAID INCOME FROM THE AFORESAID SALES AND IF THAT IS SHOWN, TO THE EXTENT TAX IS PAID, BENEFIT SHALL BE ACCORDED TO THE APPELLANT. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 80 6. THE APPEAL STANDS DISPOSED OF. 35. IN VIEW OF THE ABOVE, THE LEARNED COUNSEL FOR THE ASSESSEE PRAYED TO REDUCE THE INCOME OF SHRI MUKESH SANGLA FOR ASSTT. YEAR 2006-07, 2007-08 & 2008-09 AND GIVE BENEFIT OF TAXE S PAID BY HIM IN THE CASE OF SIGNET INDUSTRIES LTD. 36. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALREADY D ECIDED THIS ISSUE IN THE CASE OF SIGNET INDUSTRIES LIMITED WHEREI N WE HAVE UPHELD THE ADDITION IN THE HANDS OF SIGNET INDUSTRIES LIMITE D. THE ADDITION UPHELD IN THE HANDS OF SIGNET INDUSTRIES LTD. ON THE BASIS THAT THESE UNACCOUNTED SALES OF POLY PRODUCT AND UNDER-INVOICIN G OF POLY PRODUCT WERE PRODUCT OF LOGIC POLY PRODUCTS WHICH IS A UNIT OF SIGNET INDUSTRIES LTD. FURTHER SIGNET INDUSTRIES LIMITED HAS FILED SETTLE MENT PETITION BEFORE THE CUSTOMS & CENTRAL EXCISE COMMISSION AND A DMITTED IT AS UNACCOUNTED TRANSACTION IN ITS OWN HANDS. WE HAVE SU STAINED THE ADDITION TOTALING TO RS.8,13,29,014/- FOR THREE ASSES SMENT YEARS 2006- 07, 2007-08 AND 2008-09 IN THE HANDS OF SIGNET INDU STRIES LIMITED. WE HAVE ALSO DIRECTED THAT THIS AMOUNT MAY BE REDUCE D IN CASE OF MUKESH SANGLA(ASSESSEE) , THEREFORE, ON THIS ACCOUN T WE ALLOW THIS GROUNDS OF ASSESSEES APPEAL. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 81 37. GROUND NO.3.0 TO 3.4(A.Y. :2008-09 &2010-11), 2 .0 TO 2.1 (A.YS. : 2011-12 & 2012-13) OF THE ASSESSEES APPEAL AND GROUND NO.1 (A.YS. : 2010-11 TO 2012-13) OF REVENUES APPEALS : GROUND NO. 3.0 TO 3.4 (A.Y. : 2008-09 &2010-11) AND 2.0 TO 2.1 (A.YS. : 2011-12 & 2012-13) OF ASSESSEES APPEAL RE ADS AS UNDER : ASSESSMENT YEAR : 2008-09 ADDITION ON ACCOUNT OF LOSE PAPER FOUND AT RESIDENC E OF SHRI MUKESH SANGLA DURING THE SEARCH AND SEIZURE PROCEEDINGS: RS.21,96,498/- 3.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL IN FACTS IN CONFIRMING THE ADDITION OF RS.21,96,498/- MADE BY T HE ASSESSING OFFICER ON THE BASIS OF PAGE 17 OF LPS-4 FOUND AND SEIZED FROM HIS RESIDENCE, NOTWITHSTANDING THE FACT THAT : (A) IT DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION AND (B) IT WAS CONSIDERED BY THE ASSESSEE IN THE YEAR WISE PEAK OF CASH AS PER THE CASH FLOW STATEMENT AND OFFERED FOR TAXATION. ASSESSMENT YEAR : 2010-11 ADDITION ON THE BASIS OF ENTRIES OF CASH PAYMENT RECORDED IN THE MATERIAL FOUND AND SEIZED DURING SE ARCH : RS.23,06,22,104/- 3.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN FACTS AS WELL AS IN LAW IN PARTLY CONFIRMING THE ADDITION TO THE EXTENT OF RS.23,06,22,104/- MADE BY THE ASSESSING OFFICER ON THE BASIS OF ENTRIES OF CASH P AYMENTS AND CASH RECEIPTS RECORDED IN THE MATERIAL FOUND AND SEIZED DURING SE ARCH. 3.1 IN DOING SO, HE ERRED IN LAW AS WELL AS IN FACTS IN : (A) CONFIRMING THE REJECTION OF SCIENTIFICALLY PREPARED DATE-WISE CASH BOOK BY THE ASSESSING OFFICER AND BRINGING HIGHER OF THE SUM OF CASH PAYMENT (RS.23,06,22,104/-) OR SUM OF CASH RECEIPTS (RS.8,1 7,35,166/-) AS UNDISCLOSED INCOME OF THE ASSESSEE, MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 82 (B) NOT CONSIDERING THE PEAK DETERMINED BY THE ASSESSEE ON THE BASIS OF DATE WISE RECORDING OF CASH RECEIPTS AND CASH PAYMENTS AND OF FERED FOR TAXATION, DESPITE HOLDING THAT BOTH THE RECEIPTS AND THE PAYMENTS CAN NOT BE TAXED AND RECEIPTS WERE AVAILABLE FOR MAKING PAYMENTS, AND (C) CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN S ELECTIVELY OVERLOOKING ENTRIES RECORDED IN THE SEIZED MATERIAL [PAGE NO.17 OF LPS 4 (FOUND AND SEIZED FROM THE RESIDENCE OF SHRI MUKESH SANGLA) VIS--VIS BACKSIDE OF PAGE NO.28 ANNEXURE 2/16 (FOUND AND SEIZED FROM OFFICE PREMISES AT DEWAS NAK A), BACKSIDE OF PAGE NO.5 OF LPS 3 AND PAGE NO.17 AND ITS BACKSIDE OF LPS 3] RES ULTING IN MULTIPLE ADDITIONS ADDITION ON THE BASIS OF PAGE 17 OF LPS-4 FOUND AND SEIZED FROM THE RESIDENCE OF SHRI MUKESH SANGLA DURING SEA RCH: RS.22,18,01,800/- 3.2 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE ADDITION OF RS.22,18,01,800/- MAD E BY THE ASSESSING OFFICER ON THE BASIS OF PAGE 17 OF LPS-4 FOUND AND SEIZED FROM THE ASSESSEES RESIDENCE DESPITE THE FACT THAT: (A) IT WAS CONSIDERED BY THE ASSESSEE IN THE YEAR-WISE PEAK OF CASH AS PER THE CASH FLOW STATEMENT AND OFFERED FOR TAXATIO N, (B) IT WAS LINKED WITH BACKSIDE OF PAGE NO.28 OF ANNEXU RE 2/16 FOUND AND SEIZED FROM OFFICE PREMISES AT DEWAS NAKA, (C) IT RESULTED IN DOUBLE ADDITION OF RS.10,99,00,900/- AND (D) IT RESULTED IN OVERLOOKING PROFIT OF RS.1,20,99,100 /- FROM SALE OF GOLD AND ITS EXCLUSION IN DETERMINATION OF PEAK TO BE OFFERED FOR TAXATION. ADDITION ON THE BASIS OF PAGE 16 TO 20 OF LPS-3 FOU ND AND SEIZED FROM THE RESIDENCE OF SHRI MUKESH SANGLA DURING SEARCH : RS.68,28,304/- 3.3 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE ADDITION OF RS.68,20, 304/- MADE BY THE ASSESSING OFFICER ON THE BASIS OF PAGE 16 TO 20 OF LPS-3 FOUND AND SEIZED FROM THE ASSESSEES RESIDENCE DESPITE THE FA CT THAT : MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 83 (A) THE TRANSACTIONS RECORDED THEREIN WERE CONSIDERED B Y THE ASSESSEE WHILE COMPUTING THE YEAR WISE PEAK OF CASH AS PER T HE CASH FLOW STATEMENT AND OFFERED FOR TAXATION (C) SOME OF THE CASH ENTRIES APPEARING ON PAGE NO.17 AN D ITS BACK OF LPS 3 AND BACK SIDE OF PAGE NO.5 OF LPS 3 WERE DUPL ICATE ENTRIES AND SHOULD HAVE BEEN ELIMINATED. (C) RS.15,00,000/- PAID FOR REGISTRATION CHARGES OF LAN D IN PITHAMPUR, WHICH WAS DULY RECORDED IN BOOKS OF ACCOUNTS OF SIG NET INDUSTRIES LIMITED SHOULD NOT HAVE BEEN CONSIDERED IN DETERMIN ATION OF UNDISCLOSED INCOME OF THE ASSESSEE. CASH RECEIPTS RECORDED IN THE MATERIAL FOUND AND SEIZED DURING SEARCH AS UNEXPLAINED CASH RECEIPTS : RS.8,17,35,166/- 3.4 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE ADDITION OF RS.8,17,3 5,166/-, ALTHOUGH SET OFF AGAINST SUM OF ALL THE CASH PAYMENTS, MADE BY T HE ASSESSING OFFICER AS UNEXPLAINED CASH RECEIPTS, AS PER LPS 4 FOUND AN D SEIZED DURING SEARCH. ASSESSMENT YEAR : 2011-12 ADDITION ON THE BASIS OF ENTRIES OF CASH PAYMENT RECORDED IN THE MATERIAL FOUND AND SEIZED DURING SE ARCH : RS.14,27,33,397 /- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN FACTS AS WELL AS IN LAW IN PARTLY CONFIRMING THE ADDITION TO THE EXTENT OF RS.14,27,33,397/- MADE BY THE ASSESSING OFFICER ON THE BASIS OF ENTRIES OF CASH P AYMENTS AND CASH RECEIPTS RECORDED IN LPS 3 & LPS 4 FOUND AND SEIZED DURING S EARCH. 2.1 IN DOING SO, HE ERRED IN LAW AS WELL AS IN FACTS IN : (A) CONFIRMING THE REJECTION OF SCIENTIFICALLY PREPARED DATE-WISE CASH BOOK BY THE ASSESSING OFFICER AND BRINGING HIGHER OF THE SUM OF CASH PAYMENT (RS.14,27,33,397/-) OR SUM OF CASH RECEIPTS (RS.9,1 2,86,409/-) AS UNDISCLOSED INCOME OF THE ASSESSEE, MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 84 (B) NOT CONSIDERING THE PEAK DETERMINED BY THE ASSESSEE ON THE BASIS OF DATE WISE RECORDING OF CASH RECEIPTS AND CASH PAYMENTS AND OF FERED FOR TAXATION, DESPITE HOLDING THAT BOTH THE RECEIPTS AND THE PAYMENTS CAN NOT BE TAXED AND RECEIPTS WERE AVAILABLE FOR MAKING PAYMENTS, AND (C) CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN S ELECTIVELY OVERLOOKING ENTRIES RECORDED IN THE SEIZED MATERIAL RESULTING IN MULTIP LE ADDITIONS CASH RECEIPTS RECORDED IN THE MATERIAL FOUND AND SE IZED DURING SEARCH AS UNEXPLAINED CASH RECEIPTS : RS.9,1 2,86,409/- 2.2 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE ADDITION OF RS.9,12,86,409/-, ALT HOUGH SET OFF AGAINST SUM OF ALL THE CASH PAYMENTS, MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH RECEIPTS AS PER LPS 3 AND LPS 4 FOUND AND SEIZED DURING SEARCH. ASSESSMENT YEAR : 2012-13 ADDITION ON THE BASIS OF ENTRIES OF CASH PAYMENT RECORDED IN THE MATERIAL FOUND AND SEIZED DURING SE ARCH : RS.90,39,800/- 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN FACTS AS WELL AS IN LAW IN PARTLY CONFIRMING THE ADDITION TO THE EXTENT OF RS.90,39,300/- (SIC RS.90,39,800/- ) MADE BY THE ASSESSING OFFICER ON THE BASIS OF ENT RIES OF CASH PAYMENTS AND CASH RECEIPTS RECORDED IN LPS 3 FOUND AND SEIZED DURING SEARCH. 2.1 IN DOING SO, HE ERRED IN LAW AS WELL AS IN FACTS IN : (A) CONFIRMING THE REJECTION OF SCIENTIFICALLY PREPARED DATE-WISE CASH BOOK BY THE ASSESSING OFFICER AND BRINGING HIGHER OF THE SUM OF CASH PAYMENT (RS.90,39,800/-) OR SUM OF CASH RECEIPTS (RS.38,52,470/-) AS UNDISCL OSED INCOME OF THE ASSESSEE, (B) NOT CONSIDERING THE PEAK DETERMINED BY THE ASSESSEE ON THE BASIS OF DATE WISE RECORDING OF CASH RECEIPTS AND CASH PAYMENTS AND OF FERED FOR TAXATION, DESPITE HOLDING THAT BOTH THE RECEIPTS AND THE PAYMENTS CAN NOT BE TAXED AND RECEIPTS WERE AVAILABLE FOR MAKING PAYMENTS, AND (C) CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN S ELECTIVELY OVERLOOKING ENTRIES RECORDED IN THE SEIZED MATERIAL RESULTING IN MULTIP LE ADDITIONS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 85 CASH RECEIPTS RECORDED IN THE MATERIAL FOUND AND SE IZED DURING SEARCH AS UNEXPLAINED CASH RECEIPTS : RS.38, 52,470/- 2.2 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE ADDITION OF RS.38,52,470/-, ALTHO UGH SET OFF AGAINST SUM OF ALL THE CASH PAYMENTS, MADE BY THE ASSESSING OFFICER AS UNE XPLAINED CASH RECEIPTS AS PER LPS 3 FOUND AND SEIZED DURING SEARCH. 7.0 GROUND NO.1 (A.YS. : 2010-11 TO 2012-13) OF REVENU ES APPEALS READS AS UNDER: ASSESSMENT YEAR : 2010-11 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINE D CASH TRANSACTION OF RS.8,17,35,166/-. ASSESSMENT YEAR : 2011-12 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINE D CASH TRANSACTION OF RS.9,12,86,409/-. ASSESSMENT YEAR : 2012-13 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINE D CASH TRANSACTION OF RS.38,52,970/-. 38. THE FACTS, IN BRIEF, ARE THAT DURING SEARCH, AN NEXURE LPS 1 TO 4 AND BS 1- 5 WERE FOUND AND SEIZED FROM THE RESIDE NCE OF SHRI MUKESH SANGLA AT 1-B, GULMOHAR EXTENSION, INDORE. S OME OF THE LOOSE PAPERS FORMING PART OF THE IMPUGNED ANNEXURES SHOWED UNACCOUNTED CASH RECEIPTS, UNACCOUNTED CASH PAYMENT S, MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 86 UNACCOUNTED POLYMER TRADING, UNACCOUNTED PURCHASE A ND SALE OF GOLD, ETC. THE NAME LIKE MUKESH SANGLA, HH SANGLA S IR, ETC. WERE INSCRIBED ON MANY OF THESE LOOSE PAPERS. IN TERMS O F PRESUMPTION U/S.132(4A) AND SEC.292C OF THE ACT READ WITH STATE MENT OF THE ASSESSEE RECORDED U/S.132(4), THE INCOME EMERGING F ROM IMPUGNED PAGES WAS RIGHTLY OFFERED IN THE CASE OF S HRI MUKESH SANGLA. AS THE IMPUGNED SEIZED MATERIAL SHOWED A LA RGE NUMBER OF UNACCOUNTED CASH PAYMENTS AND UNACCOUNTED CASH R ECEIPTS, THE ASSESSEE ARRANGED THEM IN CHRONOLOGICAL ORDER, DETERMINED PEAK CREDIT EVERY YEAR AND OFFERED THE SAME FOR TAX ATION AS HIS UNDISCLOSED INCOME, THE DETAILS OF WHICH ARE AS FOL LOWS: ASSTT. Y EAR UNDISCLOSED INCOME REMARK 2006 - 07 45,00,000 REVISED RETURN VOLUNTARILY FILED AFTER CENTRAL EXCISE SEARCH 2007 - 08 1,95,00,000 2008 - 09 1,60,00,000 2009 - 10 38,00,000 PEAK CREDIT 2010 - 11 11,01,00,000 1,20,99,100 PEAK CREDIT STGC ON SALE OF GOLD 20 11 - 12 50,626 NET PROFIT FROM TRADING IN POLYMER 2012 - 13 21,51,057 16,82,00,783 WHILE RECORDING UNACCOUNTED CASH TRANSACTIONS, THE ASSESSEE ELIMINATED THE DUPLICATE ENTRIES TO AVOID DOUBLE TA XATION. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 87 39. THE A.O. REJECTED THE CASH BOOK PREPARED BY TH E ASSESSEE TO ASCERTAIN PEAK CREDIT AND UNDISCLOSED I NCOME BECAUSE THE ASSESSEE FAILED TO EXPLAIN THE TRUE N ATURE AND SOURCE OF SUCH RECEIPTS, THE NATURE AND PURPOSE OF PAYMENTS MADE, IDENTITY OF PERSONS WHOSE NAMES WERE APPEARIN G IN THE LOOSE PAPERS AND UNDISCLOSED INCOME COULD NOT BE EA RNED ON THE VERY FIRST DAY OF THE YEAR. ACCORDINGLY, HE PROCEED ED TO ADD ALL CASH PAYMENTS AND CASH RECEIPTS AS UNDISCLOSED INCO ME OF EITHER THE ASSESSEE OR SIGNET INDUSTRIES LTD.. WHILE THE CA SH RECEIPTS WERE ADDED U/S.68, THE CASH PAYMENTS WERE ADDED U/S .69C OF THE ACT. HE MADE THE FOLLOWING ADDITIONS: ASSTT YEAR UNDISCLOSED INCOME REMARK 2008 - 09 21,96,498 - 2009 - 10 14,00,000 ON PROTECTIVE BASIS IN SHRI MUKESH SANGLA AND ON SUBSTANTIVE BASIS IN SIGNET INDUSTRIES LTD. 2010 - 11 8,37,35,166 ON PROTECTIVE BASIS IN SHRI MUKESH SANGLA AND ON SUBSTANTIVE BASIS IN SIGNET INDUSTRIES LTD. 22,86,22,104 31,23,57,270 TOTAL 2011 - 12 9,89,26,409 ON PROTECTIVE BASIS IN SHRI MUKESH SANGLA AND ON SUBSTANTIVE BASIS IN SIGNET INDUSTRIES LTD 13,50,93,397 23,40,19,806 TOTAL 2012 - 13 1,28,92,270 40. THE A.O. PARTLY CONSIDERED THE CASH TRANSACTION IN CASE OF SHRI MUKESH SANGLA AND PARTLY IN CASE OF SIGNET IND USTRIES LTD. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 88 THE A.O REJECTED THE ASSESSEES SUBMISSION IN RELAT ION TO ELIMINATION OF DUPLICATE ENTRIES FOR AVOIDING DOUBL E TAXATION. THE A.O. ALSO IGNORED UNACCOUNTED TRANSACTIONS REGARDIN G PURCHASE AND SALE OF GOLD. 41. ON APPEAL, THE LEARNED CIT(A) OBSERVED THAT ON THE BASIS OF FACTS LIKE SEIZED MATERIAL BEING FOUND AT THE RESID ENTIAL PREMISES OF SHRI MUKESH SANGLA AT 1-B, GULMOHAR EXTENSION, I NDORE, MANY LOOSE PAPERS OF THE SEIZED MATERIAL BEARING THE NAM E OF SHRI MUKESH SANGLA, STATEMENT OF SHRI MUKESH SANGLA U/S .132(4) AND PRESUMPTION U/S.132(4A) AND SECTION 292C, THE C.I.T .(A) HELD THAT THE RIGHT PERSON TO BE TAXED IN RESPECT OF UND ISCLOSED INCOME EMERGING FROM THE IMPUGNED SEIZED MATERIAL PARTICUL ARLY LPS-3 AND LPS-4 IS SHRI MUKESH SANGLA AND NOT SIGNET INDUS TRIES LTD. HE RELIED UPON THE APEX COURT JUDGEMENT IN THE CASE OF C.I.T. VS. ATCHIAH (218 ITR 239) . 42. THE LEARNED CIT(A) ALSO OBSERVED THAT BOTH RECE IPTS AND PAYMENTS CANNOT BE TAXED BECAUSE ONCE THE RECEIPTS ARE TREATED AS INCOME, THE SAME IS AVAILABLE FOR MAKING PAYMENT S. THEREFORE, IN THE YEAR IN WHICH RECEIPTS EXCEEDED PAYMENTS, TH E RECEIPTS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 89 SHOULD BE TAXED AND IN THE YEAR WHERE PAYMENTS EXCE EDED THE RECEIPTS, THE PAYMENTS SHOULD BE TAXED. THE UNDERLY ING PRINCIPLE IS THAT THE HIGHER OF THE TWO SHOULD BE BROUGHT TO TAX AND NOT THE SUM OF ALL RECEIPTS AND PAYMENTS. ACCORDINGLY, THE FOLLOWING ADDITIONS WERE SUSTAINED: ASSTT YEAR UNEXPLAINED PAYMENTS UNEXPLAINED RECEIPTS ADDITIONS CONFIRMED (HIGHER OF THE RECEIPTS OR PAYMENTS) RELIEF GIVEN BY THE C.I.T.(A). 2008-09 21,96,498 - 21,96,498 - 2009-10 14,00,000 - 14,00,000 - 2010-11 23,06,22,104 8,17,35,166 23,06,22,104 8,17, 35,166 2011-12 14,27,33,397 9,12,86,409 14,27,33,397 9,12, 86,409 2012-13 90,39,800 38,52,470 90,39,800 38,52,470 43. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT ON PERUSAL OF MATERIAL (ANNEXURE LPS 1 TO 4 AN D BS 1-5) FOUND AND SEIZED FROM THE RESIDENCE OF SHRI MUKESH SANGLA, THE KEY PERSON AND HEAD OF SIGNET GROUP, A PART OF WHIC H HAVE ALSO BEEN REPRODUCED IN THE ASSESSMENT ORDER, IT EMERGED THAT THE IMPUGNED MATERIAL CONTAINED TRANSACTIONS LIKE RECEI PTS FROM VARIOUS SOURCES, PAYMENTS TO VARIOUS PERSONS, PURCH ASE AND SALE OF GOLD, UNACCOUNTED TRADING IN POLYMER, ETC. SHRI MUKESH SANGLA OFFERED THESE UNDISCLOSED INCOME EMERGING FROM THES E LOOSE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 90 PAPERS FOR TAXATION IN HIS PERSONAL HANDS AND NOT I N THE CASE OF SIGNET INDUSTRIES LTD. ON ACCOUNT OF FOLLOWING REASO NS: (A) THE SEIZED MATERIAL WAS RECOVERED FROM THE RESIDENT IAL PREMISES OF SHRI MUKESH SANGLA AT 1-B, GULMOHAR EXTENSION, INDORE; (B) MANY LOOSE PAPERS OF THE SEIZED MATERIAL BEARING TH E NAME OF SHRI MUKESH SANGLA; (C) SHRI MUKESH SANGLA CATEGORICALLY ADMITTED IN HIS STATEMENT RECORDED U/S.132(4) THAT THESE LOOSE PAPE RS WERE RELATED TO HIS UNACCOUNTED POLYMER TRADING BUSINESS AND VARIOUS NAMES APPEARING THEREIN WERE U SED FOR CAMOUFLAGING REAL TRANSACTIONS. (D) THE POLYMER TRADING BUSINESS WAS CARRIED OUT BY SHR I MUKESH SANGLA IN HIS PERSONAL CAPACITY; (E) THE PRESUMPTION IN TERMS OF SEC.132(4A) AND SEC.292 C OF THE ACT CLEARLY NECESSITATED TAXATION OF UNDISCL OSED INCOME IN THE HANDS OF SHRI MUKESH SANGLA. (F) IN VIEW OF THE SUPREME COURT JUDGEMENT IN THE CASE OF C.I.T. VS. ATCHIAH (218 ITR 239) , THE RIGHT PERSON TO MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 91 BE TAXED IN RESPECT OF UNDISCLOSED INCOME EMERGING FROM THE IMPUGNED SEIZED MATERIAL PARTICULARLY LPS-3 AND LPS-4 IS SHRI MUKESH SANGLA AND NOT SIGNET INDUSTRIE S LTD. 44. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SU BMITTED THAT AS THERE WERE A LARGE NUMBER OF CASH RECEIPTS AND C ASH PAYMENTS, INVESTMENT, TRADING IN POLYMERS ETC., IT WAS NOT POSSIBLE TO DETERMINE CORRECT UNDISCLOSED INCOME ME RELY BY ADDITION OF ALL PAYMENTS AND RECEIPTS, AN APPROACH ADOPTED BY THE A.O. IN THE ASSESSMENT ORDER, WHICH HAS BEEN OV ER-RULED BY THE C.I.T.(A). AFTER EXAMINATION OF TRANSACTIONS RE CORDED IN THE CASH BOOK, THE FIRST APPELLATE AUTHORITY ALLOWED TE LESCOPING OF CASH RECEIPTS AGAINST CASH PAYMENTS ALBEIT ON YEARL Y BASIS AND TAXATION OF THE HIGHER OF THE TWO IN EACH ASSESSMEN T YEAR. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON GOING THROUGH THE SEIZED MATERIAL AND MATERIAL COLLECTED DURING S EARCH AND POST SEARCH PROCEEDINGS, IT WAS FOUND THAT THE PAYMENTS WERE MADE TO SOME PARTIES, CASH WAS RECEIVED FROM SOME PARTIE S AND IN SOME CASES, CASH WAS RECOVERED FROM THE PERSONS TO WHOM IT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 92 WAS GIVEN EARLIER. CONSIDERING THEIR VERY NATURE, THESE TRANSACTIONS WERE RECORDED DATE WISE CHRONOLOGICALL Y IN A CASH BOOK AND YEAR-WISE PEAK WAS WORKED OUT AND OFFERED FOR TAXATION BY THE ASSESSEE IN HIS RETURN OF INCOME FILED PURSU ANT TO THE NOTICE ISSUED U/S.153A. THE DETERMINATION OF YEAR-W ISE PEAK WAS THE ONLY BASIS TO LOGICALLY DETERMINE CORRECT UNDIS CLOSED INCOME ON THE BASIS OF SEIZED MATERIAL. EACH AND EVERY TRA NSACTION OF CASH RECEIVED AND PAID, AS APPEARING IN THE NAMES O F VARIOUS PERSONS, WERE TAKEN INTO ACCOUNT IN THE SAID CASH B OOK FOR ASCERTAINING PEAK CREDIT. THE METHOD OF ASCERTAININ G PEAK CREDIT WAS QUITE SCIENTIFIC AND NOT AS PER SWEET WISHES OF THE ASSESSEE. THE MODUS OPERANDI OF DETERMINATION OF UNDISCLOSED INCOME WAS EXPLAINED TO THE ASSESSING OFFICER, IT WAS VERIFIED WITH REFERENCE TO THE SEIZED MATERIAL. THE A.O. DID NOT RAISE ANY QUERY DURING ITS VERIFICATION AND FAILED TO BRING A SINGLE ERROR IN WORKING OF PEAK CREDIT WHICH WAS OFFERED FOR TAXATION BY THE ASSESS EE IN HIS RETURNS OF INCOME. 45. IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT VARIOUS CONTENTIONS OF THE ASSESSING OFFICER L IKE (A) THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 93 ASSESSEE GAVE A BRIEF AND CRYPTIC REPLY THAT ALL TH E TRANSACTIONS ON THESE LOOSE PAPERS WERE RELATED TO PERSONAL UNAC COUNTED BUSINESS OF SHRI MUKESH SANGLA CAMOUFLAGED IN THE N AME OF VARIOUS PERSONS, (B) THE ASSESSEE NEITHER EXPLAINED THE METHOD OF WORKING OF THE PEAK NOR FILED ANY BASIS THEREOF, (C) THE ASSESSEE HAS NOT CORRELATED VARIOUS DEBIT AND CREDI T ENTRIES AND HAS WORKED OUT THE PEAK ACCORDING TO HIS SWEET WISH , (D) THE ASSESSEE HAS PREPARED A CASH BOOK FOR THE PERIOD FR OM 01.04.2008 TO 31.03.2012 AND SIMPLY STATED THE AMOU NT RECEIVED /PAID FROM/TO VARIOUS PERSONS, (E) THE ASSESSEE HAS NOT EXPLAINED THE VARIOUS TRANSACTIONS MENTIONED IN THE NAME OF V ARIOUS PERSONS SUCH AS GANPATY, MAHAVIR CHEMICAL, GLOBE PH ARMA, GHAMBIR JI, ASHOK KHASGIWALA, MEHTA JI AND SO ON, ( F) MUKESH SANGLA HAS SIMPLY PREPARED THE CASH BOOK WITHOUT PR EPARING THE LEDGER ACCOUNTS, (G) NO NARRATION OF TRANSACTIONS, (H) NO EVIDENCE REGARDING CASH SENT TO VARIOUS PERSONS AND RECALLED AND CONFIRMATION FROM THEM, (I) NATURE OF INCOME WAS NO T DESCRIBED, (J) INCOME COULD NOT BE EARNED ON THE VERY FIRST DA Y, ETC., IT IS SUBMITTED THAT ONCE THE ADDITION WAS MADE ON ACCOUN T OF CASH MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 94 RECEIPTS AND PAYMENTS AND OTHER ENTRIES RECORDED IN THE SEIZED MATERIAL AND EACH AND EVERY TRANSACTION WAS CONSIDE RED FOR DETERMINATION OF UNDISCLOSED INCOME BY THE ASSESSEE IN A LOGICAL AND SCIENTIFIC MANNER, THE IDENTITY OF PERSON AND C ONFIRMATION, NATURE AND PURPOSE OF TRANSACTION, NARRATION OF TRA NSACTIONS, EVIDENCE REGARDING CASH PAID AND CASH RECEIVED ETC. LOST THEIR RELEVANCE, PARTICULARLY WHEN THE ASSESSEE CATEGORIC ALLY STATED THAT THE NAMES APPEARING IN THE LOOSE PAPER WERE ME RE CAMOUFLAGE. HE ALSO SUBMITTED THAT THE STATEMENTS OF VARIOUS PERSONS LIKE SHYAM GUPTA, S.S.MEHTA, SIKKAJI, UMESH JI ETC. WERE RECORDED BY THE INVESTIGATION WING DURING POST SEA RCH PROCEEDINGS AND THEY CONFIRMED THE FACTUM OF CASH R ECEIPT FROM SHRI MUKESH SANGLA FOR SAFE CUSTODY AND PAYMENT THE REOF AS AND WHEN RECALLED BY HIM FROM TIME TO TIME. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN A LARGE NUMBER OF UNACCOUNTED TRANSACTIONS IN THE FORM OF CASH RECEIPTS AND CASH PAYMENTS, RECALL OF CASH ADVANCE, UNACCOUNTED TRADING IN POLY MER ETC. WERE RECORDED IN THE SEIZED MATERIAL, THE UNDISCLOSED IN COME COULD BE DETERMINED ONLY ON THE BASIS OF PEAK CREDIT. THE RA TIONALE BEHIND MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 95 APPLYING PEAK CREDIT THEORY IS THAT THE SUM OF ALL UNEXPLAINED CREDIT ENTRIES CANNOT BE THE ASSESSEES INCOME WHEN THERE ARE SEVERAL UNEXPLAINED DEBIT ENTRIES ALSO IN THE SEIZE D MATERIAL AND THEREFORE, THE EFFECT OF MULTIPLE CREDIT AND DEBIT ENTRIES SHOULD BE CANCELLED TO AVOID MULTIPLE ADDITIONS BY ARRANGING THEM IN A CHRONOLOGICAL ORDER, DETERMINE HIGHEST PEAK CREDIT AND BRING SUCH PEAK CREDIT TO TAX AS UNDISCLOSED INCOME OF THE ASS ESSEE. IN FACT, THE PEAK CREDIT WAS NOTHING BUT HIGHEST NEGATIVE CA SH BALANCE ON A PARTICULAR DAY OF THE YEAR. THE LEARNED COUNSEL F OR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSING OFFICER COULD NOT HAVE REJECTED THE PEAK CREDIT WORKED OUT BY THE ASSESSEE WITHOUT BRINGING ANY MATERIAL ON RECORD TO SHOW THAT THE UNEXPLAINED PAY MENTS WERE NOT AVAILABLE WITH THE ASSESSEE FOR RE-INTRODUCTION . THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BASIS O F PREPARING CASH BOOK WAS EXPLAINED TO THE ASSESSING OFFICER AN D EACH AND EVERY TRANSACTION WAS VERIFIED BY HIM WITH RESPECT TO THE SEIZED MATERIAL. THEREFORE, FINDING OF THE A.O. THAT THERE WERE NO BASIS FOR PREPARING CASH BOOK IS ABSOLUTELY INCORRECT AND CONTRARY TO THE FACTS. HAD THE A.O. DEMANDED LEDGER ACCOUNTS, THE A SSESSEE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 96 COULD HAVE GIVEN THEM INSTANTLY BECAUSE THE CASH BO OK WAS PREPARED FROM ACCOUNTING SOFTWARE TALLY WHEREIN T HE LEDGER ACCOUNTS ARE GENERATED AUTOMATICALLY. HE SUBMITTE D THAT THERE IS NOTHING UNDER THE INCOME-TAX ACT, 1961 WHICH PRE VENTS AN ASSESSEE FROM OFFERING UNDISCLOSED INCOME, DETERMIN ED IN A SCIENTIFIC MANNER, FOR TAXATION ON THE FIRST DAY OF THE ASSESSMENT YEAR. SHRI MUKESH SANGLA OFFERED THE PEAK CREDIT AS HIS UNDISCLOSED INCOME AND INTRODUCED SUCH UNDISCLOSED INCOME IN THE CASH BOOK ON THE VERY FIRST DAY OF THE YEAR SO AS TO VERIFY THE PEAK CREDIT DETERMINED BY HIM AND AVAILABILITY OF C ASH THROUGHOUT THE YEAR. AS REGARD CONTENTION OF THE ASSESSING OF FICER THAT FURTHER, IN THE ABSENCE OF ANY EXPLANATION AND IN T HE ABSENCE OF ANY SUPPORTING DOCUMENTS, VARIOUS OTHER RECEIPTS AND PAYMENTS IN T HE NAMES OF DIFFERENT PERSON CANNOT BE ACCEPTED AS PER THE ASSESSEES VERSION. I N RESPECT OF TRANSACTION WITH SHRI ASHOK KHASGIWALA, SHRI MUKESH SANGLA HAS SHOWN THAT HE HAS PURCHASED GOLD ON 01.04.2008 FOR RS.21,96,498/- AND AGAIN ON 01.07.2009 FOR RS.10.77 CRORES. THE ASSESSEE HAS FURTHER CLAIMED THAT THE S AID GOLD WAS SOLD ON 31.01.2010 FOR RS.12.20 CRORES AND HAS STATED THAT AN AMOUNT O F RS.1.21 CORERS HAS BEEN OFFERED BY HIM AS SHORT TERM CAPITAL GAIN ON SALE O F GOLD IN THE RETURN FILED U/S MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 97 153A FOR AY - 2010-11. THE ASSESSEE HAS NOT FILED A NY DETAILS OF THE PERSONS TO WHOM GOLD WAS SOLD IN SUCH HUGE QUANTITY. FURTHER T HE ASSESSEE HAS NOT EXPLAINED THE PURCHASE OF GOLD FROM SHRI ASHOK KHASGIWALA NOR HAS FILED ANY CONFIRMATION TO THIS EFFECT. IN THESE CIRCUMSTANCES THE TRANSACTION S CANNOT BE ACCEPTED AS TRIED TO BE EXPLAINED BY THE ASSESSEE; AS PER THE CASH BOOK PREPARED BY SHRI MUKESH SANGLA, HE CARRIED A HUGE CASH OF MORE THAN RS.11 C ORERS FROM 01.04.2009 TILL 30.06.2009 AND AGAIN CASH BALANCE OF MORE THAN RS.1 2 CORERS FROM 31.01.2010 TILL MID OF 2010. IN THE MID OF 2010 SHRI MUKESH SANGLA HAS SHOWN HUGE PURCHASE OF GOLD STARTING FROM APRIL 2010 FROM ONE MR. KULDEEP JI. THESE PURCHASES CONTINUED TILL JUNE 2010 EVEN AFTER WHICH SHRI MUKESH SANGLA CARRIED CASH IN HAND OF MORE THAN RS.5 CORERS TILL MAY 2011. THESE FACTS PROVE B EYOND DOUBT THAT THE CASH BOOK PREPARED BY SHRI MUKESH SANGLA IS WITHOUT ANY BASIS AS NO PRUDENT PERSON WILL CARRY SUCH HUGE CASH BALANCE FOR SUCH A LONG PERIOD , IT IS SUBMITTED THAT IN THE ASSESSEES CASE, THE UNDISCLOSED INCOME WAS ASS ESSED ON THE BASIS OF TRANSACTIONS RECORDED IN THE SEIZED MATERI AL. FROM THE ASSESSMENT ORDER, IT IS QUITE MANIFEST THAT THE ASS ESSING OFFICER CONSIDERED ALL THESE TRANSACTIONS AS REPRESENTING A SSESSEES UNDISCLOSED INCOME AND BROUGHT THEM TO TAX EITHER U /S.68 OR U/S.69 OF THE INCOME-TAX ACT,1961. HAVING MADE THE ENTRIES IN THE SEIZED MATERIAL AS THE BASIS OF DETERMINING UND ISCLOSED MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 98 INCOME, THE ASSESSING OFFICER COULD NOT BE PERMITTE D TO TAKE A U TURN AND CONTEND AT THE SAME TIME THAT A PART OF IT S CONTENTS WERE NOT ACCEPTABLE TO HIM ON THE GROUND OF PRUDENC E, IMPRACTICABILITY, NON-FILING OF CONFIRMATION BY VAR IOUS PERSONS, NON-VERIFICATION ETC. HE HAD TO ACCEPT THE CONTENTS OF THE SEIZED MATERIAL AS IT IS WHETHER IT WAS HUGE CASH BALANC E OR PURCHASE AND SALE OF GOLD OR RECEIPTS AND PAYMENT IN VARIOUS NAMES. HE COULD NOT BLOW HOT AND COLD AT THE SAME TIME. HE CA NNOT ADOPT A PICK AND CHOOSE APPROACH. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT MOREOVER, THERE WAS NO SINCERE ENDEA VOR ON THE PART OF THE ASSESSING OFFICER OR THE INVESTIGATION WING TO SEEK DETAILS FROM THE ASSESSEE ABOUT VARIOUS NAMES, CONT ENTS OF THE SEIZED MATERIAL ETC. OR MAKE NECESSARY ENQUIRIES FR OM THE PERSONS WHOSE NAMES APPEARED IN THE SEIZED MATERIAL . IN FACT THE STATEMENT OF THE ASSESSEE WAS NEVER RECORDED BY THE INVESTIGATION WING AFTER 04.11.2011 I.E. THE DATE O F CONCLUSION OF SEARCH OR BY THE A.O. DURING ENTIRE ASSESSMENT PROC EEDINGS WHICH CONTINUED FOR OVER SIX MONTHS. THE REVENUE IS NOT PERMITTED TO BLAME THE ASSESSEE FOR ITS OWN FAILURE AND INEPTNESS. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 99 THEREFORE, CONTENTIONS OF THE ASSESSING OFFICER AS STATED ABOVE WERE QUITE IRRELEVANT IN DETERMINATION OF UNDISCLOS ED INCOME OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO PAGE NO. 17 ON WHICH CASH TRANSACTIONS UNDER THE ACCOUNT SHRI ASHOK KHASGIWALA ARE RECORDED AND BAC KSIDE OF PAGE NO. 28 OF ANNEXURE 2/16 FOUND AND SEIZED FROM THE ASSESSEES OFFICE PREMISES AT DEWAS NAKA, INDORE AR E INTERLINKED AS MANIFEST FROM THE FOLLOWING EXTRACT : PAGE NO. 17 OF LPS - 4 OPENING BALANCE 10,99,00,900/ - -------- 31.07.2009 MISC. EX PENSES 10,99,00,900/ - BACKSIDE OF PAGE NO. 28 OF LPS - 2/16 31.07.2009 ASHOK KHASGIWALA A/C 10.99 CR MISC. EXP. GOLD 31.01.2010 SALE G 12.20 46. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ENTRIES ON PAGE NO.17 OF LPS-4 SHOWED THAT OPENING B ALANCE IN THE ACCOUNT OF SHRI ASHOK KHASGIWALA WAS RS.10,99,0 0,900/-. THE SAID BALANCE WAS UTILIZED FOR PURCHASE OF GOLD WHICH IS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 100 EVIDENT FROM ENTRY DT.31.07.2009 ON PAGE 17 AND ENT RIES RECORDED ON THE BACKSIDE OF PAGE NO. 28 OF ANNEXURE LPS-2/16. THE IMPUGNED GOLD WAS SOLD ON 31.01.2010 FOR RS.12. 20 I.E. 12.20 CR. ON THE BASIS OF THESE ENTRIES, THE ASSESS ING OFFICER SHOULD HAVE MADE ADDITION OF RS.10,99,00,900/- FOR INVESTMENT IN GOLD AND NOT RS.21,98,01,800/- MADE AS PER THE A SSESSMENT ORDER. BY IGNORING THE ENTRIES RELATING TO PURCHASE AND SALE OF GOLD AS PER THE SEIZED MATERIAL AS STATED ABOVE, SH OWED THAT THE A.O. ADOPTED A PICK AND CHOOSE APPROACH BY SELECTIN G A FEW ENTRIES FOR THE PURPOSE OF MAKING ADDITION AND IGNO RING A FEW ENTRIES WHICH RESULTED IN DOUBLE ADDITION. AS THE A BOVE MISTAKE IS QUITE OBVIOUS ON THE FACE OF THE SEIZED MATERIAL, W E HUMBLY REQUEST YOUR HONOUR TO REDUCE THE ADDITION ON ACCOU NT OF PAGE NO.17 TO RS.10,99,00,900/- WHILE DETERMINING PEAK C REDIT. IT MAY BE NOTED THAT THE ASSESSEE OFFERED ADDITIONAL INCOM E OF RS.11,00,00,000/- ON ACCOUNT OF IMPUGNED PAYMENT AP PEARING UNDER THE ACCOUNT IN THE NAME OF ASHOK KHASGIWALA A ND ALSO PROFIT ON SALE OF GOLD OF RS.1,20,99,100/- FOR THE ASSESSMENT YEAR 2010-11. HE SUBMITTED THAT MOREOVER, ON PERUSAL OF ENTRIES MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 101 RECORDED ON BACKSIDE OF PAGE NO. 5 OF LPS-3 AND PAGE NO. 17/2 OF LPS-3, IT WAS FOUND THAT THE FOLLOWING PAYMENTS APPE ARING ON BACKSIDE OF PAGE NO. 5 OF LPS 3 WERE ALSO APPEARING ON PAGE NO.17/2 OF LPS 3. IT IS EVIDENT FROM THE FOLLOWING T RANSACTIONS: BACK SIDE OF PAGE NO.5 OF LPS 3 PAGE NO.17/2 OF LPS 3 DATE NAME OF PERSON AMOUNT (RS.) DATE NAME OF PERSON AMOUNT (RS.) 06.08.2010 MISC. EXP. 26,000 06.08.2010 MISC. EXP. 26,000 07.08.2010 SUN CITY DELHI 10,00,000 07.08.2010 SUN CITY DELHI 10,00,000 09.08.2010 SIKKAJI 1,30,000 09.08.2010 SIKKAJI 1,30,000 09.08.2010 KALAJI 24,900 09.08.2010 KALAJI 24,900 09.08.2010 MOHAN SHARMAJI 10,000 09.08.2010 MOHAN SHARMAJI 10,000 28.08.2010 AJAY MEHTA 15,000 28.08.2010 AJAY MEHTA 15 ,000 31.08.2010 UMESHJI 9,000 31.08.2010 UMESHJI 9,000 47. WHILE MAKING ADDITION ON ACCOUNT OF PAGE NO.5 OF LPS 3, THE ASSESSING OFFICER DID NOT REDUCE THE DUPLICATE PAYM ENT WHICH RESULTED IN DOUBLE ADDITION. 40. HE FURTHER SUBMITTED THAT ON PERUSAL PAGE NO.5/ 2 OF LPS-3, A PAYMENT OF RS.15,00,000/- WAS RECORDED ON 10.08.2 010 WITH THE NARRATION PITHAMPUR PLOT REGD. THE IMPUGNED P AYMENT OF STAMP DUTY FOR REGISTRATION OF PLOT OF SIGNET INDUS TRIES LTD. WAS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 102 OUT OF ITS REGULAR CASH WITHDRAWAL AND RECORDED IN THE CASH BOOK OF SIGNET INDUSTRIES LTD. THE RELEVANT EXTRACT WAS P RODUCED BEFORE THE A.O. AND THE C.I.T.(A). AS REGARD ADDIT ION OF CASH RECEIPTS U/S.68 AS UNEXPLAINED CASH CREDIT AND ADDI TION OF CASH PAYMENTS U/S.69C AS UNEXPLAINED EXPENDITURE BY THE ASSESSING OFFICER, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT ALL THE CREDIT ENTRIES AND DEBIT ENTRIES WERE CONSIDERE D BY THE ASSESSEE IN THE CASH BOOK PROVIDED TO THE ASSESSING OFFICER WHICH WAS VERIFIED BY HIM WITH THE SEIZED MATERIAL. HE DI D NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE CASH RECEIPTS W ERE NOT CONSIDERED BY HIM FOR THE PURPOSES OF DETERMINATION OF PEAK CREDIT AND CONSEQUENTLY, NOT OFFERED FOR TAXATION A S HIS UNDISCLOSED INCOME. FURTHER, SEC.68 IS APPLICABLE T O ENTRIES RECORDED IN THE ASSESSEES REGULARLY MAINTAINED BOO KS OF ACCOUNTS AS DEFINED U/S.2(12A) AND NOT CREDITS APPEARING IN THE LOOSE PAPERS FORMING PART OF THE SEIZED MATERIAL BECAUSE SUCH LOOSE PAPERS ARE NOT BOOKS OF ACCOUNTS WITHIN THE MEANING OF SEC.2(12A) OF THE INCOME-TAX ACT, 1961. [ (SHERATON APPARELS VS. C.I.T. 123 TAXMAN 238 (BOM)] [ (CBI VS. V.C SHUKLA MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 103 1998 AIR SC 1406)] . THEREFORE, ADDITION OF SUM OF ALL CREDIT ENTRIES U/S.68, WITHOUT TAKING INTO ACCOUNT THE DEB IT ENTRIES, AMOUNTED TO MULTIPLE ADDITION AND INCORRECT DETERMI NATION OF UNDISCLOSED INCOME. THE LEARNED COUNSEL FOR THE ASS ESSEE SUBMITTED THAT SEC.69C HAS NO APPLICATION WHERE THE ASSESSEE DID NOT CLAIM DEDUCTION OF CASH PAYMENTS AS EXPENDI TURE AND NO MATERIAL WAS BROUGHT ON RECORD BY THE ASSESSING OFF ICER TO SHOW THAT THE CASH PAYMENTS WERE TOWARDS ANY EXPENDITURE OR HE CLAIMED ANY DEDUCTION THEREOF IN DETERMINATION OF H IS UNDISCLOSED INCOME [ C.I.T. VS. HARIRAM BHAMBHANI I.T.A. NO.313 OF 2013 DT. 04.02.2015 (BOM ), C.I.T. VS. ANIL BHALLA 322 ITR 191 (DELHI )]. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT FROM THE ABOVE FACTS DISCUSSED ABOVE IN THE LI GHT OF SEIZED MATERIAL, IT IS QUITE MANIFEST THAT (A) CONSIDERING NATURE OF TRANSACTION I.E. UNACCOUNTED CASH PAYMENT AND UNACCOUNTED CASH RECEIPT, THE PREPARATI ON OF CASH BOOK AND DETERMINATION OF YEARLY PEAK CREDI T ON THE BASIS OF DAY-TO-DAY CASH TRANSACTIONS WAS THE M OST APPROPRIATE METHOD OF DETERMINING UNDISCLOSED INCOM E, MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 104 (B) THE METHODOLOGY ADOPTED BY THE ASSESSING OFFICER BY MAKING ADDITION OF ALL CASH RECEIPTS U/S.68 AND ALL CASH PAYMENTS U/S.69C RESULTED IN MULTIPLE ADDITION AND INCORRECT DETERMINATION OF UNDISCLOSED INCOME AND (C) THE METHODOLOGY ADOPTED BY THE C.I.T.(A). BY PARTLY ALLOWING TELESCOPING ON YEARLY BASIS AND BRINGING H IGHER OF THE YEARLY SUM OF THE RECEIPT OR PAYMENTS TO TAX WAS ERRONEOUS INASMUCH AS HE SHOULD HAVE DETERMINED UNDISCLOSED INCOME ON THE BASIS OF PEAK CREDIT BY ARRANGEMENT OF UNACCOUNTED TRANSACTIONS DATEWISE IN A CHRONOLOGICAL ORDER. 48. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS A SETTLED LAW THAT THE UNDISCLOSED INCOME DECLARED BY THE ASSESSEE AND ASSESSED BY THE LOWER AUTHORITIES OR INTANGIBLE ADDITIONS MADE BY LOWER AUTHORITIES IS ALWAYS AVAILABLE TO TH E ASSESSEE FOR SET OFF AGAINST UNDISCLOSED INVESTMENTS/EXPENSES ET C. IN THE ASSESSEES CASE, HAVING ASSESSED THE YEARLY PEAK AM OUNT AS HIS UNDISCLOSED INCOME, THE ASSESSING OFFICER CANNOT TA KE A STAND THAT SUCH INCOME DID NOT EXIST AND THEREFORE, NOT A VAILABLE WITH MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 105 THE ASSESSEE FOR SET OFF AGAINST UNDISCLOSED CASH, INVESTMENT, LOANS AND ADVANCES, EXPENSES, JEWELLERY ETC. IN THI S REGARD, WE RELY UPON THE FOLLOWING JUDGEMENTS: (A) S. KUPPUSWAMI MUDALIAR VS. C.I.T. [ 51 ITR 757 (MAD)] ADDITIONS ARE NO DOUBT MADE VERY OFTEN ON ESTIMATE BASIS. BUT IT CAN NEVER BE SAID, OR AT ANY RATE THE DEPARTMENT CANNOT CONTEND, THAT THE AMOUNT OF THE ADDITION IS NOT THE REAL INCOME BUT SOMETHING WHICH THE ASSESSEE MAY NOT HAVE EARNED. IT IS WHOLLY ILLOGICAL FOR THE DEPARTMENT T O CONTEND THAT THE ADDITION WAS ONLY FOR PURPOSES OF TAXATION AND THAT IT SHOULD NE VER BE TAKEN AS TRUE INCOME OF THE ASSESSEE.. IN COMING TO THE ABOVE CONCLUSION, THE HONOURABLE H IGH COURT RELIED UPON THE FOLLOWING OBSERVATION OF HONOURABLE A.P. HIGH COURT IN THE CASE OF LAGADAPATI SUBBA RAMAIAH V. COMMISSIONER OF INCOME-TAX [1956] 30 ITR 593 IN THE PRESENT CASE, IT IS SOMEWHAT DIFFICULT TO S AY THAT THERE WERE NO PROFITS OF THE COMPANY OUT OF WHICH A DIVIDEND COULD HAVE BEEN PAI D. WHEN THE REVENUE AUTHORITY LEVIED A TAX OF RS.62,000 ON THE COMPANY, IT PROCEE DED ON THE BASIS THAT THE BOOKS OF THE COMPANY WHICH SHOWED A TOTAL INCOME OF ONLY RS. 34,532 FOR ALL THE FOUR YEARS OF ITS EXISTENCE WERE UNRELIABLE AND THAT THE BULK OF THE COMPANYS PROFITS HAD BEEN KEPT OUTSIDE ITS BOOKS. NOW THOSE SECRET PROFITS LE SS THE INCOME-TAX PAID, THEREFORE, WOULD BE AVAILABLE WITH THE COMPANY FOR DISTRIBUTIO N AS DIVIDENDS. ONCE THE SECRET PROFITS HAD BEEN ASSESSED TO TAX, IT WOULD HAVE BEE N OPEN TO THE COMPANY TO BRING THOSE PROFITS INTO THE BOOKS AND DISTRIBUTE THEM, O R WHAT REMAINED AFTER PAYMENT OF TAX, AS DIVIDENDS.... HAVING ASSESSED THE COMPAN Y ON A LARGE SUM AS ITS UNDISCLOSED INCOME, IT CANNOT, AT THE SAME BREATH, SAY THAT THESE PROFITS DID NOT IN FACT EXIST BECAUSE THEY DID NOT APPEAR FROM THE COM PANYS BOOKS AND COULD NOT, THEREFORE, HAVE BEEN AVAILABLE FOR THE PAYMENT OF D IVIDENDS. AMONG COMMON MEN, SUCH AN ATTITUDE WOULD BE REGARDED AS BLOWING HOT AND COLD OR PLAYING FAST AND LOOSE . (B) ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] IN THE INSTANT CASE, THE TRIBUNAL HAD RELIED ENTIRE LY ON THE BASIS THAT AN INTANGIBLE ADDITION OF RS.2,00,000 HAD BEEN MADE TO THE BOOK P ROFITS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1957-58 AND IT INFERRED THAT AN AMO UNT OF RS.90,000 WAS AVAILABLE FOR BEING PUT TO USE IN THE RELEVANT ASSESSMENT YEA R. NOW IT CAN HARDLY BE DENIED THAT WHEN AN INTANGIBLE ADDITION IS MADE TO THE B OOK PROFITS DURING AN ASSESSMENT PROCEEDING, IT IS ON THE BASIS THAT THE AMOUNT REPRESENTED BY THAT ADDITION CONSTITUTES THE UNDISCLOSED INCOME OF THE ASSESSEE. THAT INCOME, MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 106 ALTHOUGH COMMONLY DESCRIBED AS INTANGIBLE, IS AS MUCH A PART OF HIS REAL INCOME AS THAT DISCLOSED BY HIS ACCOUNT BOOKS. IT HAS THE SAME CONCRETE EXISTENCE. IT COULD BE AVAILABLE TO THE ASSESSEE AS THE BOOK PROFITS CO ULD BE . THERE CAN BE NO ESCAPE FROM THE PROPOSITION THAT TH E SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARLIER ASSESSME NT YEAR MAY CONSTITUTE A FUND, EVEN THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR MEETING EXPENDITURE OR INTRODUCING AMOUNTS IN HIS A CCOUNT BOOKS .... C.I.T. VS. PREM CHAND JAIN [ 189 ITR 320 (P&H)] IN VIEW OF THE DECISIONS IN C.I.T. V. RAM SANEHI GI AN CHAND [1972] 86 ITR 724 AND ANANTHARAM VEERASINGHAIAH & CO. V. C.I.T. [1980] 123 ITR 457 THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE PAST INTANGIBLE ADDITIONS MADE IN THE CASE OF THE FIRM OF WHICH THE ASSESSEE WAS A PARTNER AND ALLOCATED TO T HE ASSESSEES SHARE COULD BE TAKEN INTO ACCOUNT IN CONSIDERING THE UNEXPLAINED I NVESTMENTS OF THE ASSESSEE AND THESE WOULD ALSO BE AVAILABLE FOR SET OFF PURPOSES IN RESPECT OF THE AGREED ADDITIONS FOR LOW HOUSEHOLD EXPENSES MADE IN THE ASSESSEES I NCOME IN THE YEAR UNDER CONSIDERATION AND IN REMITTING THE MATTER TO THE AA C. (C) C.I.T. VS. TYARYAMAL BALCHAND [ 165 ITR 453 (RAJ)] IN THE PRESENT CASE, THE ITO WAS WITHIN HIS RIGHT T O TAX THE AMOUNT OF RS.16,950 AS INCOME FROM UNDISCLOSED SOURCES EVEN THOUGH HE HAD ADDED THE AMOUNT OF RS.18,117 IN ADDITION TO THE PROFITS SHOWN BY THE A SSESSES IN ITS ACCOUNT BOOKS. HOWEVER, THE ASSESSEE WAS WELL WITHIN ITS RIGHT TO PLEAD THAT THE AMOUNT OF RS.16,950 WAS COVERED FROM THE INTANGIBLE INCOME AS SESSED AT RS.18,117, AND ADDED IN THE INCOME OF THE ASSESSEE AND APART FROM THIS, SINCE FOR THE LAST PRECEDING 3 YEARS, SUBSTANTIAL ADDITIONS AMOUNTING TO RS.32,7 97 HAD BEEN ADDED, THE AMOUNT OF RS.16,950 COULD HAVE BEEN TAKEN AS HAVING COME O UT OF SUCH INTANGIBLE ADDITIONS. ACCORDINGLY, THE TRIBUNAL IN THE INSTANT CASE WAS R IGHT IN TREATING THE UNEXPLAINED CASH CREDIT ENTRIES TO THE EXTENT OF RS.16,950 AS C OVERED BY ADDED GROSS PROFIT IN THE SUM OF RS.18,117 ON THE BASIS OF THE ESTIMATE. (D) C.I.T. VS. JAWANMAL GEMAJI GANDHI [151 ITR 353 (BOM )] THE SUPREME COURT HAS CLEARLY STATED IN THE CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] THAT THE SECRET PROFITS OR UNDISCLOSED INCOM E OF AN ASSESSEE EARNED IN AN EARLIER ASSESSMENT YEAR CAN C ONSTITUTE A FUND, THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQU ENTLY. (E) C.I.T. VS. SAHU BROTHERS [115 ITR 438 (M.P.)] A DIVISION BENCH OF THIS COURT IN THAT DECISION HEL D THAT THE ADDITIONS BY THE ITO IN THE ASSESSMENTS OF THE PREVIOUS YEARS OF THE ASSESS EE WERE ON THE BASIS THAT HE HAD EARNED LARGER INCOME THAN WHAT WAS SHOWN AND THAT H E HAD IN FACT EARNED THAT INCOME. THAT AMOUNT WAS, THEREFORE, AVAILABLE TO HI M FOR INVESTMENT IN THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 107 ASSESSMENT YEAR. A SIMILAR QUESTION WAS CONSIDERED BY THE ALLAHABAD HIGH COURT IN THE DECISION IN C.I.T. V. RAM ACHAL RAM SEWAK [1969] 73 ITR 501 AND IT WAS HELD (PAGE 502): THE SHORT QUESTION RAISED IN THE PRESENT APPLICATI ONS IS WHETHER THE DEPOSITS MADE BY THE ASSESSEE IN VARIOUS BANKS FROM YEAR TO YEAR COULD BE SET OFF AGAINST THE EXTRA PROFIT ADDED DURING PREVIOUS YEARS. IN KUPPUSWAMI MUDALIAR V. C.I.T. [1964] 51 ITR 757 , IT WAS HELD BY THE MADRAS HIGH COURT THAT, WHERE THE INCOME-TAX AUTHORITIES MADE AN ADDITION TO THE INCOME OF THE A SSESSEE OVER AND ABOVE THE INCOME AS DISCLOSED BY THE ASSESSEE, ON AN ESTIMATE BASIS, THE AMOUNT SO ADDED MUST BE TREATED AS THE REAL INCOME OF THE ASSESSEE. IT I S NOT OPEN TO THE AUTHORITIES TO TAKE THE VIEW THAT THE ADDITION WAS ONLY FOR PURPOSES OF TAXATION, AND THAT IT SHOULD NOT BE REGARDED AS THE TRUE INCOME OF THE ASSESSEE. APPARENTLY, THEREFORE, IT COULD NOT BE CONTENDED TH AT THIS INCOME WHICH HAD BEEN ADDED UP AS INCOME FROM INTANGIBLE SOURCES IN THE P REVIOUS YEARS, OF ASSESSMENT WAS NOT AVAILABLE TO THE ASSESSEE. ACCORDINGLY, OUR ANSWER TO THE QUESTION IS IN THE AFFIRMATIVE. (F) A.C.I.T. VS. DHARAMCHAND AGRAWAL [144 ITR 143 (M.P. )] THE HONOURABLE HIGH COURT FOLLOWED THE HONOURABLE S UPREME COURT RULING IN CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] AND APPROVED THE TELESCOPING OF UNDISCLOSED INCOME AGAINST UNDISCLOS ED ASSETS. (G) C.I.T. VS. NABADWIP CHANDRA DEY [198 ITR 133 (GAU.) ] THE PRINCIPLES GOVERNING SET OFF OF INTANGIBLE ADDI TIONS MADE IN THE ASSESSMENT AGAINST UNEXPLAINED CASH CREDITS OR UNEXPLAINED INV ESTMENTS ARE NO MORE RES INTEGRA. THE PRINCIPLES THAT EMERGE FROM THE VARIOUS DECISIO NS CAN BE SUMMARIZED AS FOLLOWS: (1) AMOUNTS REPRESENTED BY INTANGIBLE ADDITIONS TO TH E BOOK PROFITS OF AN ASSESSEE DURING AN ASSESSMENT PROCEEDING CONSTITUTE UNDISCLOSED INCOME OF THE ASSESSEE AND ARE AS MUCH A PART OF HIS REAL INC OME AS THOSE DISCLOSED BY HIS ACCOUNT BOOKS. IT HAS THE SAME CONCRETE EXISTEN CE. (2) INCOME FROM INTANGIBLE ADDITIONS IS AVAILABLE TO TH E ASSESSEE FOR MEETING EXPENDITURE OR INTRODUCING AMOUNTS IN HIS ACCOUNT B OOKS. (3) IF ANY UNEXPLAINED CASH DEPOSIT OR CASH CREDIT CAN REASONABLY BE RELATED TO THE AMOUNT COVERED BY THE INTANGIBLE ADDITIONS MADE IN THE PAST OR IN THAT VERY YEAR NECESSARY SET OFF MAY BE GIVEN BY THE AUT HORITIES ON THAT ACCOUNT. (4) IN EACH CASE, THE TRUE NATURE OF THE CASH DEFICIT O R CASH CREDIT MUST BE ASCERTAINED FROM AN OVERALL CONSIDERATION OF THE PA RTICULAR FACTS AND CIRCUMSTANCES OF THE CASE. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 108 APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF T HE INSTANT CASE, THE TRIBUNAL WAS JUSTIFIED IN ALLOWING A SET-OFF ON ACCOUNT OF INTAN GIBLE ADDITIONS MADE IN THE PAST AGAINST UNEXPLAINED CASH DEPOSIT AND INVESTMENT OF THE RELEVANT ASSESSMENT YEARS. 49. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE ABOVE SUBMISSIONS, PEAK CASH BALANCE OBTAINE D FROM THE CASH FLOW STATEMENT PREPARED BY THE ASSESSEE ON THE BASIS OF SEIZED MATERIAL AND OFFERED FOR TAXATION BY THE ASS ESSEE BE ACCEPTED AND DELETE VARIOUS ADDITIONS ON ACCOUNT OF LOOSE PAPERS MADE BY THE ASSESSING OFFICER AND PARTLY CONFIRMED BY C.I.T.(A). 50. WE HAVE HEARD BOTH THE SIDES. THESE ADDITIONS WERE BASED ON CERTAIN INCRIMINATING PAPERS FOUND AND SEIZED DU RING SEARCH OPERATION. THE ASSESSEE CLAIMED THAT HE HAS PREPARE D CASH RECEIPT AND CASH PAYMENTS ACCOUNT ON THE BASIS OF T HESE DOCUMENTSAND THE EXCESS AMOUNT HAS BEEN OFFERED FOR TAXATION WHILE THE REVENUES CLAIM IS THAT THE ASSESSEE HAS NOT GIVEN FULL DETAILS REGARDING THE INCOMING AND OUTGOING OF THE CASH AMOUNTS, THEREFORE, THE ADDITION OF BOTH CASH RECEIPT AND CA SH PAYMENT IS JUSTIFIED. THE LEARNED CIT(A) HAS GIVEN PART RELIEF BY DELETING CERTAIN ADDITIONS. SOME OF THEM WERE DOUBLE ADDITI ONS. IN THE CASE OF SIGNET INDUSTRIES LIMITED WE HAVE UPHELD THE ADDITION MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 109 MADE ON THE BASIS OF LOOSE PAPERS FOUND AND SEIZED BY THE CENTRAL EXCISE & CUSTOMS DEPARTMENT, PART OF WHICH WAS OFFERED AS INCOME IN THE HANDS OF THE ASSESSEE AFTER FILING THE REVISED RETURN. WE HAVE SUSTAINED THE ADDITION IN THE CASE OF SIGNET INDUSTRIES LIMITED WITH REGARD TO POLY PRODUCT SOLD OUT OF BOOKS AND SOLD BY UNDER-INVOICING. THEREFORE, THE SAME AM OUNT SHALL NOT BE AVAILABLE WITH THE ASSESSEE TO EXPLAIN VARIO US ENTRIES FOR THE ASSESSMENT YEARS 2006-07, 2007-08 AND 2008-09 I N THE ASSESSEES HANDS. WE DO AGREE WITH THE PLEADINGS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT ONCE THE INFLOW AND O UTFLOW OF THE CASH PAYMENTS IS SCIENTIFICALLY PREPARED DATEWISE O N THE BASIS OF THE DOCUMENTS SEIZED DURING THE SEARCH OPERATION TH EN THE ADDITION CAN BE SUSTAINED ONLY OF THE PEAK SO ARRIV ED AT. THE REVENUE IS NOT ALLOWED TO SELECTIVELY OVERLOOK THE ENTRIES RECORDED IN THE SEIZED MATERIAL RESULTING IN MULTIP LE ADDITIONS. AFTER CONSIDERING THE COMPLEXITY OF THIS ISSUE AND CONSIDERING THE IMPACT OF THE ISSUE DECIDED IN THE CASE OF SIGNET I NDUSTRIES LIMITED, WE FIND IT APPROPRIATE THAT THE ISSUES RAIS ED IN THE VARIOUS GROUNDS OF THESE APPEALS OF THE ASSESSEE DE SERVE TO THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 110 RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO PREPARE A SCIENTIFIC DATEWISE RECEIPT AND PAYMENT A CCOUNT OF CASH AND WORK OUT THE PEAK FOR THESE YEARS AND THEN MAKE THE ADDITION ACCORDINGLY. 51. SO FAR AS THE ISSUES RAISED IN THE REVENUES AP PEAL ARE CONCERNED, WE FIND NO MERIT AS THE DR WAS UNABLE TO CONTROVERT THE FINDINGS OF THE LEARNED CIT(A). 52. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES AND THE GROUNDS RAISED IN THE REVENUES APPEALS FOR THE ASSESSMENT YEARS 2010-11 TO 2012-13 ARE DISMISSED. 53. GROUND NO.3.0 & 3.1 (A.Y. : 2011-12) AND 4.0 & 4.1 (A.Y. : 2012-13) OF THE ASSESSEES APPEAL : GROUND NO.3.0 & 3.1 AND 4.0 & 4.1 OF ASSESSEES APP EAL READS AS UNDER : ASSESSMENT YEAR : 2011-12 ADDITION ON ACCOUNT OF UNACCOUNTED TRADING IN POLYM ERS: RS.29,24,624/- 3.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN PARTLY CONFIRMING THE ADDITION TO THE EXTE NT OF RS.29,24,624/- MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF UNACCOUNTED PO LYMER TRADING. 3.1 IN DOING SO, HE ERRED IN LAW AS WELL AS IN FACTS IN : MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 111 (A) ESTIMATING INITIAL INVESTMENT OF RS.13,85,348/- IN UNACCOUNTED POLYMER TRADING BUSINESS, (B) ESTIMATING NET PROFIT @ 10% AND (C) ACCORDINGLY, DETERMINING NET PROFIT OF RS.15,39,276 /- FROM TRADING IN POLYMERS. ASSESSMENT YEAR :2012-13 ADDITION ON ACCOUNT OF UNACCOUNTED TRADING IN POLYM ERS: RS.2,27,05,285/- 4.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN PARTLY CONFIRMING THE ADDITION TO THE EXTE NT OF RS.2,27,05,285/- MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF UNACCOUNTED POLYMER TRADING. 4.1 IN DOING SO, HE ERRED IN LAW AS WELL AS IN FACTS IN : (A) ESTIMATING INITIAL INVESTMENT OF RS.1,07,55,135/- I N UNACCOUNTED POLYMER TRADING BUSINESS, (B) ESTIMATING NET PROFIT @ 10% AND (C) ACCORDINGLY, DETERMINING NET PROFIT OF RS.1,19,50,1 50/- FROM TRADING IN POLYMERS. GROUND NO.2 OF REVENUES APPEAL READS AS UNDER : (A .Y.2011-12 & 2012-13) ASSESSMENT YEAR : 2011-12 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF BOGUS PURC HASE OF POLYMERS OF RS.1,09,79,484/-. ASSESSMENT YEAR : 2012-13 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF BOGUS PURC HASE OF POLYMERS OF RS.8,69,97,089/-. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 112 54. THE FACTS RELATING TO THIS GROUND ARE THAT DURI NG SEARCH, LOOSE PAPERS AS PER ANNEXURE B-1, B-2 & B-3 WERE FO UND AND SEIZED FROM THE RESIDENCE OF THE ASSESSEE WHICH POI NTED OUT TOWARDS UNACCOUNTED TRADING IN POLYMERS. AS PER THE IMPUGNED SEIZED MATERIAL, THE UNACCOUNTED PURCHASES FOR THE ASSESSMENT YEARS 2011-12 & 2012-13 WERE RS.1,38,53,482/- AND RS.10,75,51,347/- RESPECTIVELY. THE ASSESSEE EXPLAI NED THAT WHILE THE INITIAL INVESTMENT IN THE POLYMER TRADING BUSINESS WAS MADE OUT OF UNDISCLOSED INCOME OFFERED FOR TAXATION IN EARLIER ASSESSMENT YEARS, THE NET PROFIT THEREON WAS ESTIMA TED AT 2% WHICH WAS BASED ON THE NET PROFIT FROM TRADING BUSI NESS OF SIGNET INDUSTRIES LTD. [P.A.NO. : AABCS 3489 F] (1.5%), VIK AS POLYMERS PROP. SHRI RAJESH AGARWAL [P.A.NO. : ADBPA 8266 C] (1.35%) AND R.K.RESINPLAST PVT. LTD. [P.A.NO.: AADCR 7961 F] (0.85%). THE DETAILED WORKING OF NET PROFIT RATE IS ENCLOSED HEREWITH FOR YOUR KIND PERUSAL. ANNEXURE E . ACCORDINGLY, UNACCOUNTED NET PROFIT OF RS.50,626/- FOR ASSESSMENT YEAR 2011-12 A ND RS.21,51,027/- FOR ASSESSMENT YEAR 2012-13 WAS OFFE RED FOR TAXATION AS HIS UNDISCLOSED INCOME. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 113 55. THE CONTENTION OF THE A.O. IS SUMMARIZED AS UND ER : A) THE A.O. ACCEPTED THE NET PROFIT RATE OF 2% ESTIMAT ED BY THE ASSESSEE. B) THE A.O. PRESUMED THAT THE PAYMENT FOR UNACCOUNTED PURCHASES WAS MADE IN CASH AND THEREFORE, THE DISAL LOWANCE U/S.40A(3) WOULD BE APPLICABLE. ACCORDINGLY, HE DIS ALLOWED THE ENTIRE PURCHASES U/S.40A(3). C) ALTERNATIVELY, HE APPLIED THE PROVISIONS OF SEC.69C BY TREATING THE IMPUGNED PURCHASES AS UNEXPLAINED EXPE NDITURE AND MADE ADDITION THEREOF. D) THE A.O. HELD THAT THE IMPUGNED UNACCOUNTED PURCHAS ES OF SIGNET INDUSTRIES LTD. AND NOT THE ASSESSEE AND THER EFORE, HE MADE ADDITION IN THE CASE OF THE ASSESSEE ON PROTEC TIVE BASIS AND IN THE CASE OF SIGNET INDUSTRIES LTD. ON SUBSTANTIVE BASIS. ACCORDINGLY, THE FOLLOWING ADDITIONS WERE MADE BY H IM ON PROTECTIVE BASIS IN THE ASSESSEES CASE: ASSESSMENT YEAR PURCHASES NET PROFIT @ 2% TOTAL 2011 - 12 1,38,53,482 50,626 1,39,04,1 08 2012 - 13 10,75,51,347 21,51,027 10,97,02,374 12,14,04,829 22,01,653 12,36,06,482 THE CONTENTION OF THE C.I.T.(A). IS SUMMARIZED AS U NDER : A) THE C.I.T.(A). HELD THAT UNACCOUNTED POLYMER BUSINE SS AND PROFIT THEREFROM BELONG TO THE ASSESSEE AND NOT SIGNET INDUSTRIES LTD. BECAUSE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 114 (I) ALL DOCUMENTS WERE FOUND FROM THE RESIDENTIAL PREMISES OF SHRI MUKESH SANGLA AT 1B, GULMOHAR EXTENTION, INDORE (II) MANY DOCUMENTS WERE BEARING THE NAME OF SHRI MUKESH SIR, H.S.SANGLA, ETC. (III) SHRI MUKESH SANGLA ADMITTED THE IMPUGNED TRANSACTIONS TO BE HIS OWN TRANSACTIONS AND OFFERED UNDISCLOSED INCOME EMERGING THEREFROM FOR TAXATION IN HIS PERSONAL HANDS (IV) WHILE ARRIVING AT THE ABOVE CONCLUSION, THE RELIANC E WAS PLACED UPON PRESUMPTION U/S.132(4A), 292C AND THE JUDGEMENT OF THE HONOURABLE SUPREME COURT IN THE CASE OF C.I.T. VS. C.H.ATCHAIAH (218 ITR 239) B) THE C.I.T.(A). REJECTED THE ASSESSEES JUSTIFICATIO N THAT INITIAL INVESTMENT WAS MADE OUT OF UNDISCLOSED INCO ME OF EARLIER YEARS AS PER THE CASH BOOK PRODUCED BY THE ASSESSEE BEFORE HIM AS WELL AS THE A.O.. C) HE ESTIMATED INITIAL INVESTMENT AT 10% OF THE TOTAL PURCHASES AND ACCORDINGLY, THE FOLLOWING ADDITIONS WAS MADE: I. ASSESSMENT YEAR : 2011-12 RS.13,85,348/- II. ASSESSMENT YEAR : 2012-13 RS.1,07,55,135/- MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 115 D) HE ESTIMATED NET PROFIT @ 10% OF SALES AND ACCORDIN GLY MADE THE FOLLOWING ADDITIONS: I. ASSESSMENT YEAR : 2011-12 RS.15,39,276/- II. ASSESSMENT YEAR : 2012-13 RS.1,19,50,150/- E) HE ALSO DELETED THE DISALLOWANCE U/S.40A(3) BY HOLD ING THAT THE IMPUGNED DISALLOWANCE WAS NOT ATTRACTED WH EN INCOME OF THE ASSESSEE WAS ESTIMATED ON THE BASIS O F NET PROFIT RATE FOR WHICH RELIANCE WAS PLACED UPON THE FOLLOWING JUDGEMENTS: 1. C.I.T.( CENTRAL) LUDHIANA VS. GOBIND RAM [2014] 48 TAXMANN.COM 14 (P&H) 2. C.I.T. (CENTRAL), LUDHIANA VS. SMT. SANTOSH JAIN [2007] 159 TAXMAN 392 (P&H) 3. C.I.T. VS. BANWARI LAL BANSHIDHAR [1998] 229 ITR 22 9 (ALL) 4. C.I.T. VS. PURSHOTTAMLAL TAMRAKAR [2004] 270 ITR 31 4 (MP) 5. JAGDISH LAL VS. I.T.O. [2006] 150 TAXMAN 59 (JODH)(MAG) 6. ARMOUR CHEMICALS LTD. VS. J.C.I.T. [2007] 17 SOT 46 7 (MUM) 7. A.C.I.T.VS. PADAM CHAND BHANSALI [2005] 149 TAXMAN 35 (JODH)(MAG) 56. HE ALSO DELETED THE ALTERNATE ADDITION U/S.69C ON ACCOUNT OF UNEXPLAINED EXPENDITURE BY HOLDING THAT IN THE ASSE SSEES CASE, THE PURCHASES WERE UNACCOUNTED AND NOT UNEXPLAINED AS THE SOURCE OF PURCHASES WAS INITIAL INVESTMENT AND UNAC COUNTED SALE OF POLYMER. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 116 ASSESSEES CONTENTION: INITIAL INVESTMENT IN UNACCOUNTED BUSINESS IN POLYM ER 57. THE INITIAL INVESTMENT RELATING TO UNACCOUNTED BUSINESS IN POLYMER WAS MADE OUT OF UNDISCLOSED INCOME OFFERED FOR TAXATION BY THE ASSESSEE IN THE EARLIER ASSESSMENT YEARS WHI CH IS EVIDENT FROM THE CASH BOOK FURNISHED BEFORE THE LOWER AUTHO RITIES AS WELL AS FILED BEFORE THE HONOURABLE I.T.A.T. AS PER THE IMPUGNED CASH BOOK, THE ASSESSEE HAD CASH BALANCE OF RS.3,88,55,8 61/- AS AT 01.02.2011 AND RS.4,79,51,268/- AS AT 01.04.2011 WH ICH WAS SUFFICIENT TO EXPLAIN INITIAL INVESTMENT IN UNACCOU NTED POLYMER BUSINESS OF THE ASSESSEE. THE BASIS FOR INITIAL INV ESTMENT AT 10% OF THE PURCHASE WAS SIMPLY A WILD GUESS AND BASIS, IF AT ALL ANY, WAS ONLY IN HIS MIND. 58. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS A SETTLED LAW THAT THE UNDISCLOSED INCOME DECLARED BY THE ASSESSEE AND ASSESSED BY THE LOWER AUTHORITIES OR INTANGIBLE ADDITIONS MADE BY LOWER AUTHORITIES IS ALWAYS AVAILABLE TO TH E ASSESSEE FOR SET OFF AGAINST UNDISCLOSED INVESTMENTS/EXPENSES ET C. IN THE ASSESSEES CASE, HAVING ASSESSED THE YEARLY PEAK AM OUNT AS HIS UNDISCLOSED INCOME, THE ASSESSING OFFICER CANNOT TA KE A STAND MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 117 THAT SUCH INCOME DID NOT EXIST AND THEREFORE, NOT A VAILABLE WITH THE ASSESSEE FOR SET OFF AGAINST UNDISCLOSED CASH, INVESTMENT, LOANS AND ADVANCES, EXPENSES, JEWELLERY ETC. IN THI S REGARD, WE RELY UPON THE FOLLOWING JUDGEMENTS: (A) S. KUPPUSWAMI MUDALIAR VS. C.I.T. [ 51 ITR 757 (MAD)] ADDITIONS ARE NO DOUBT MADE VERY OFTEN ON ESTIMATE BASIS. BUT IT CAN NEVER BE SAID, OR AT ANY RATE THE DEPARTMENT CANNOT CONTEND, THAT THE AMOUNT OF THE ADDITION IS NOT THE REAL INCOME BUT SOMETHING WHICH THE ASSESSEE MAY NOT HAVE EARNED. IT IS WHOLLY ILLOGICAL FOR THE DEPARTMENT T O CONTEND THAT THE ADDITION WAS ONLY FOR PURPOSES OF TAXATION AND THAT IT SHOULD NE VER BE TAKEN AS TRUE INCOME OF THE ASSESSEE .. IN COMING TO THE ABOVE CONCLUSION, THE HONOURABLE H IGH COURT RELIED UPON THE FOLLOWING OBSERVATION OF HONOURABLE A.P. HIGH COURT IN THE CASE OF LAGADAPATI SUBBA RAMAIAH V. COMMISSIONER OF INCOME-TAX [1956] 30 ITR 593 IN THE PRESENT CASE, IT IS SOMEWHAT DIFFICULT TO S AY THAT THERE WERE NO PROFITS OF THE COMPANY OUT OF WHICH A DIVIDEND COULD HAVE BEEN PAI D. WHEN THE REVENUE AUTHORITY LEVIED A TAX OF RS.62,000 ON THE COMPANY, IT PROCEE DED ON THE BASIS THAT THE BOOKS OF THE COMPANY WHICH SHOWED A TOTAL INCOME OF ONLY RS. 34,532 FOR ALL THE FOUR YEARS OF ITS EXISTENCE WERE UNRELIABLE AND THAT THE BULK OF THE COMPANYS PROFITS HAD BEEN KEPT OUTSIDE ITS BOOKS. NOW THOSE SECRET PROFITS LE SS THE INCOME-TAX PAID, THEREFORE, WOULD BE AVAILABLE WITH THE COMPANY FOR DISTRIBUTIO N AS DIVIDENDS. ONCE THE SECRET PROFITS HAD BEEN ASSESSED TO TAX, IT WOULD HAVE BEE N OPEN TO THE COMPANY TO BRING THOSE PROFITS INTO THE BOOKS AND DISTRIBUTE THEM, O R WHAT REMAINED AFTER PAYMENT OF TAX, AS DIVIDENDS.... HAVING ASSESSED THE COMPAN Y ON A LARGE SUM AS ITS UNDISCLOSED INCOME, IT CANNOT, AT THE SAME BREATH, SAY THAT THESE PROFITS DID NOT IN FACT EXIST BECAUSE THEY DID NOT APPEAR FROM THE COM PANYS BOOKS AND COULD NOT, THEREFORE, HAVE BEEN AVAILABLE FOR THE PAYMENT OF D IVIDENDS. AMONG COMMON MEN, SUCH AN ATTITUDE WOULD BE REGARDED AS BLOWING HOT AND COLD OR PLAYING FAST AND LOOSE . (B) ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] IN THE INSTANT CASE, THE TRIBUNAL HAD RELIED ENTIRE LY ON THE BASIS THAT AN INTANGIBLE ADDITION OF RS.2,00,000 HAD BEEN MADE TO THE BOOK P ROFITS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1957-58 AND IT INFERRED THAT AN AMO UNT OF RS.90,000 WAS AVAILABLE FOR BEING PUT TO USE IN THE RELEVANT ASSESSMENT YEA R. NOW IT CAN HARDLY BE DENIED MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 118 THAT WHEN AN INTANGIBLE ADDITION IS MADE TO THE B OOK PROFITS DURING AN ASSESSMENT PROCEEDING, IT IS ON THE BASIS THAT THE AMOUNT REPRESENTED BY THAT ADDITION CONSTITUTES THE UNDISCLOSED INCOME OF THE ASSESSEE. THAT INCOME, ALTHOUGH COMMONLY DESCRIBED AS INTANGIBLE, IS AS MUCH A PART OF HIS REAL INCOME AS THAT DISCLOSED BY HIS ACCOUNT BOOKS. IT HAS THE SAME CONCRETE EXISTENCE. IT COULD BE AVAILABLE TO THE ASSESSEE AS THE BOOK PROFITS CO ULD BE . THERE CAN BE NO ESCAPE FROM THE PROPOSITION THAT TH E SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARLIER ASSESSME NT YEAR MAY CONSTITUTE A FUND, EVEN THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR MEETING EXPENDITURE OR INTRODUCING AMOUNTS IN HIS A CCOUNT BOOKS .... (C) C.I.T. VS. PREM CHAND JAIN [ 189 ITR 320 (P&H)] IN VIEW OF THE DECISIONS IN C.I.T. V. RAM SANEHI GI AN CHAND [1972] 86 ITR 724 AND ANANTHARAM VEERASINGHAIAH & CO. V. C.I.T. [1980] 123 ITR 457 THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE PAST INTANGIBLE ADDITIONS MADE IN THE CASE OF THE FIRM OF WHICH THE ASSESSEE WAS A PARTNER AND ALLOCATED TO T HE ASSESSEES SHARE COULD BE TAKEN INTO ACCOUNT IN CONSIDERING THE UNEXPLAINED I NVESTMENTS OF THE ASSESSEE AND THESE WOULD ALSO BE AVAILABLE FOR SET OFF PURPOSES IN RESPECT OF THE AGREED ADDITIONS FOR LOW HOUSEHOLD EXPENSES MADE IN THE ASSESSEES I NCOME IN THE YEAR UNDER CONSIDERATION AND IN REMITTING THE MATTER TO THE AA C. (D) C.I.T. VS. TYARYAMAL BALCHAND [ 165 ITR 453 (RAJ)] IN THE PRESENT CASE, THE ITO WAS WITHIN HIS RIGHT T O TAX THE AMOUNT OF RS.16,950 AS INCOME FROM UNDISCLOSED SOURCES EVEN THOUGH HE HAD ADDED THE AMOUNT OF RS.18,117 IN ADDITION TO THE PROFITS SHOWN BY THE A SSESSES IN ITS ACCOUNT BOOKS. HOWEVER, THE ASSESSEE WAS WELL WITHIN ITS RIGHT TO PLEAD THAT THE AMOUNT OF RS.16,950 WAS COVERED FROM THE INTANGIBLE INCOME AS SESSED AT RS.18,117, AND ADDED IN THE INCOME OF THE ASSESSEE AND APART FROM THIS, SINCE FOR THE LAST PRECEDING 3 YEARS, SUBSTANTIAL ADDITIONS AMOUNTING TO RS.32,7 97 HAD BEEN ADDED, THE AMOUNT OF RS.16,950 COULD HAVE BEEN TAKEN AS HAVING COME O UT OF SUCH INTANGIBLE ADDITIONS. ACCORDINGLY, THE TRIBUNAL IN THE INSTANT CASE WAS R IGHT IN TREATING THE UNEXPLAINED CASH CREDIT ENTRIES TO THE EXTENT OF RS.16,950 AS C OVERED BY ADDED GROSS PROFIT IN THE SUM OF RS.18,117 ON THE BASIS OF THE ESTIMATE. (E) C.I.T. VS. JAWANMAL GEMAJI GANDHI [151 ITR 353 (BOM )] THE SUPREME COURT HAS CLEARLY STATED IN THE CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] THAT THE SECRET PROFITS OR UNDISCLOSED INCOM E OF AN ASSESSEE EARNED IN AN EARLIER ASSESSMENT YEAR CAN C ONSTITUTE A FUND, THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQU ENTLY. (F) C.I.T. VS. SAHU BROTHERS [115 ITR 438 (M.P.)] MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 119 A DIVISION BENCH OF THIS COURT IN THAT DECISION HEL D THAT THE ADDITIONS BY THE ITO IN THE ASSESSMENTS OF THE PREVIOUS YEARS OF THE ASSESS EE WERE ON THE BASIS THAT HE HAD EARNED LARGER INCOME THAN WHAT WAS SHOWN AND THAT H E HAD IN FACT EARNED THAT INCOME. THAT AMOUNT WAS, THEREFORE, AVAILABLE TO HI M FOR INVESTMENT IN THE ASSESSMENT YEAR. A SIMILAR QUESTION WAS CONSIDERED BY THE ALLAHABAD HIGH COURT IN THE DECISION IN C.I.T. V. RAM ACHAL RAM SEWAK [1969] 73 ITR 501 AND IT WAS HELD (PAGE 502): THE SHORT QUESTION RAISED IN THE PRESENT APPLICATI ONS IS WHETHER THE DEPOSITS MADE BY THE ASSESSEE IN VARIOUS BANKS FROM YEAR TO YEAR COULD BE SET OFF AGAINST THE EXTRA PROFIT ADDED DURING PREVIOUS YEARS. IN KUPPUSWAMI MUDALIAR V. C.I.T. [1964] 51 ITR 757 , IT WAS HELD BY THE MADRAS HIGH COURT THAT, WHERE THE INCOME-TAX AUTHORITIES MADE AN ADDITION TO THE INCOME OF THE A SSESSEE OVER AND ABOVE THE INCOME AS DISCLOSED BY THE ASSESSEE, ON AN ESTIMATE BASIS, THE AMOUNT SO ADDED MUST BE TREATED AS THE REAL INCOME OF THE ASSESSEE. IT I S NOT OPEN TO THE AUTHORITIES TO TAKE THE VIEW THAT THE ADDITION WAS ONLY FOR PURPOSES OF TAXATION, AND THAT IT SHOULD NOT BE REGARDED AS THE TRUE INCOME OF THE ASSESSEE. APPARENTLY, THEREFORE, IT COULD NOT BE CONTENDED TH AT THIS INCOME WHICH HAD BEEN ADDED UP AS INCOME FROM INTANGIBLE SOURCES IN THE P REVIOUS YEARS, OF ASSESSMENT WAS NOT AVAILABLE TO THE ASSESSEE. ACCORDINGLY, OUR ANSWER TO THE QUESTION IS IN THE AFFIRMATIVE. (G) A.C.I.T. VS. DHARAMCHAND AGRAWAL [144 ITR 143 (M.P. )] THE HONOURABLE HIGH COURT FOLLOWED THE HONOURABLE S UPREME COURT RULING IN CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] AND APPROVED THE TELESCOPING OF UNDISCLOSED INCOME AGAINST UNDISCLOS ED ASSETS. (H) C.I.T. VS. NABADWIP CHANDRA DEY [198 ITR 133 (GAU.) ] THE PRINCIPLES GOVERNING SET OFF OF INTANGIBLE ADDI TIONS MADE IN THE ASSESSMENT AGAINST UNEXPLAINED CASH CREDITS OR UNEXPLAINED INV ESTMENTS ARE NO MORE RES INTEGRA. THE PRINCIPLES THAT EMERGE FROM THE VARIOUS DECISIO NS CAN BE SUMMARIZED AS FOLLOWS: (1) AMOUNTS REPRESENTED BY INTANGIBLE ADDITIONS TO TH E BOOK PROFITS OF AN ASSESSEE DURING AN ASSESSMENT PROCEEDING CONSTITUTE UNDISCLOSED INCOME OF THE ASSESSEE AND ARE AS MUCH A PART OF HIS REAL INC OME AS THOSE DISCLOSED BY HIS ACCOUNT BOOKS. IT HAS THE SAME CONCRETE EXISTEN CE. (2) INCOME FROM INTANGIBLE ADDITIONS IS AVAILABLE TO TH E ASSESSEE FOR MEETING EXPENDITURE OR INTRODUCING AMOUNTS IN HIS ACCOUNT B OOKS. (3) IF ANY UNEXPLAINED CASH DEPOSIT OR CASH CREDIT CAN REASONABLY BE RELATED TO THE AMOUNT COVERED BY THE INTANGIBLE ADDITIONS MADE IN THE PAST OR IN THAT VERY YEAR NECESSARY SET OFF MAY BE GIVEN BY THE AUT HORITIES ON THAT ACCOUNT. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 120 (4) IN EACH CASE, THE TRUE NATURE OF THE CASH DEFICIT O R CASH CREDIT MUST BE ASCERTAINED FROM AN OVERALL CONSIDERATION OF THE PA RTICULAR FACTS AND CIRCUMSTANCES OF THE CASE. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SU BMITTED THAT THE ADDITION CONFIRMED BY THE FIRST APPELLATE AUTHO RITY ON ACCOUNT OF INITIAL INVESTMENT SHOULD BE DELETED OR ELSE IT WILL AMOUNT TO DOUBLE ADDITION. 59. AS REGARD ESTIMATION OF PROFIT RELATING TO UNAC COUNTED POLYMER TRADE OF THE ASSESSEE, THE A.O. ACCEPTED TH E NET PROFIT MARGIN OF 2% BUT MADE ADDITION U/S.40A(3) ON ACCOUN T OF CASH PURCHASES AND ALTERNATIVELY U/S.69C ON ACCOUNT OF U NEXPLAINED EXPENDITURE. C.I.T.(A) DELETED ADDITIONS MADE U/S.4 0A(3) AND ALTERNATIVELY U/S.69C, HE ESTIMATED NET PROFIT @ 10 % BY OBSERVING THAT PROFITABILITY IN ACCOUNTED TRADE IS ALWAYS HIGH BECAUSE THE PARTIES DO NOT PAY RELEVANT TAXES ON UN ACCOUNTED SALES. 60. THE ESTIMATE OF NET PROFIT SHOULD BE A FAIR EST IMATE, HONEST GUESS WORK, REALISTIC AND BASED UPON RULES OF NATUR AL JUSTICE, EQUITY AND GOOD CONSCIENCE. THE ESTIMATE SHOULD BE RATIONAL AND NOT ARBITRARY, DISHONEST AND VINDICTIVE. C.I.T. VS. LAXMINARAYAN MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 121 BADRIDAS [5 ITR 170 (PC) ]. REVENUE AUTHORITIES BEING QUASI- JUDICIAL AUTHORITIES, FAIR ESTIMATE OF NET PROFIT S HOULD BE BASED UPON JUDICIOUS ANALYSIS OF RELEVANT FACTORS LIKE PA ST HISTORY OF THE CASE, COMPARABLE CASES, MARKET CONDITIONS PREVAILIN G THEN, BENEFIT ACCRUING ON ACCOUNT OF NON-PAYMENT OF TAXES BY THE TRANSACTING PARTIES, QUANTUM INVOLVED, ETC. SUCH AN ESTIMATE CANNOT BE MADE IN COMPLETE DISREGARD OF MATERIAL PL ACED ON RECORD. GUNDA SUBAYYA VS. C.I.T. [7 ITR 21 (MAD)]. THE HONOURABLE SUPREME COURT IN THE CASE OF STATE O F ORRISSA VS. MAHARAJA SHRI B. P. SINGH DEO (76 ITR 690) HELD AS UNDER: 4. APART FROM COMING TO THE CONCLUSION THAT THE MA TERIALS PLACED BEFORE HIM BY THE ASSESSEE WERE NOT RELIABLE, THE ASSISTANT COLLECTOR HAS GIVEN NO REASONS FOR ENHANCING THE ASSESSMENT. HIS ORDER DOES NOT DISCLOSE THE BASIS O N WHICH HE HAS ENHANCED THE ASSESSMENT. THE MERE FACT THAT THE MATERIAL PLACED BY THE ASSESSEE BEFORE THE ASSESSING AUTHORITIES IS UNRELIABLE DOES NOT EMPOWER THOSE AU THORITIES TO MAKE AN ARBITRARY ORDER. THE POWER TO LEVY ASSESSMENT ON THE BASIS OF BEST J UDGMENT IS NOT AN ARBITRARY POWER; IT IS AN ASSESSMENT ON THE BASIS OF BEST JUDGMENT. IN OTH ER WORDS, THAT ASSESSMENT MUST BE BASED ON SOME RELEVANT MATERIAL. IT IS NOT A POWER THAT CAN BE EXERCISED UNDER THE SWEET WILL AND PLEASURE OF THE CONCERNED AUTHORITIES. THE SCOPE OF THAT POWER HAS BEEN EXPLAINED OVER AND OVER AGAIN BY THIS COURT. IN THE ASSESSEES CASE, THE NET PROFIT ESTIMATED BY THE C. I.T.(A). WAS WITHOUT ANY BASIS AND IN COMPLETE DISREGARD OF THE MATERIAL BEF ORE HIM. THE BASIS OF NET PROFIT RATE OF 10% ESTIMATED BY HIM WAS SIMPLY A W ILD GUESS AND BASIS, IF AT ALL ANY, WAS ONLY IN HIS MIND. HE DID NOT SITE A SINGLE COMPARABLE CASE. MOREOVER, IN UNACCOUNTED TRADE, BOTH THE PARTIES DO N OT PAY ANY TAXES AND MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 122 THEREFORE NO ONE GETS ANY BENEFIT INASMUCH AS THE BENE FIT OBTAINED BY ONE PARTY FOR NON-PAYMENT OF TAX IS PASSED ON TO THE OTHER PARTY. THEREFORE THE NET-PROFIT RATE CANNOT INCREASE MERELY BECAUSE THE TRANSA CTION WAS NOT RECORDED IN THE BOOKS. THE HONOURABLE SUPREME COURT I N THE CASE OF DAKESHWARI COTTON MILLS VS. C.I.T. (26 ITR 775) HELD AS UNDER: IT IS NOT POSSIBLE TO DEFINE WITH ANY PRECISION TH E LIMITATIONS ON THE EXERCISE OF THE DISCRETIONARY JURISDICTION VESTED IN THE SUPREME CO URT BY THE CONSTITUTIONAL PROVISION MADE IN ARTICLE 136. THE LIMITATIONS, WHATEVER THEY BE, ARE IMPLICIT IN THE NATURE AND CHARACTER OF THE POWER ITSELF. IT BEING AN EXCEPTIO NAL AND OVERRIDING POWER, IT HAS TO BE EXERCISED SPARINGLY AND WITH CAUTION AND ONLY IN SP ECIAL AND EXTRAORDINARY SITUATIONS. BEYOND THAT IT IS NOT POSSIBLE TO FETTER THE EXERCI SE OF THIS POWER BY ANY SET FORMULA OR RULE. ALL THAT CAN BE SAID IS THAT THE CONSTITUTION HAVING TRUSTED THE WISDOM AND GOOD SENSE OF THE JUDGES OF COURT IN THIS MATTER, THAT I TSELF IS A SUFFICIENT SAFEGUARD AND GUARANTEE THE POWER WILL ONLY BE USED TO ADVANCE TH E CAUSE OF JUSTICE, AND THAT ITS EXERCISE WILL BE GOVERNED BY WELL ESTABLISHED PRINCIPLES WHI CH GOVERN THE EXERCISE OF OVERRIDING CONSTITUTIONAL POWERS. HOWEVER, WHEN THE COURT REAC HES THE CONCLUSION THAT A PERSON HAS BEEN DEALT WITH ARBITRARILY OR THAT A COURT OR TRIB UNAL WITHIN THE TERRITORY OF INDIA HAS NOT GIVEN A FAIR DEAL TO A LITIGANT, THEN NO TECHNICAL HURDLES OF ANY KIND LIKE THE FINALITY OF FINDING OF FACTS OR OTHERWISE, CAN STAND IN THE WAY OF THE EXERCISE OF THIS POWER BECAUSE THE WHOLE INTENT AND PURPOSE OF THIS ARTICLE IS THA T IT IS THE DUTY OF THE SUPREME COURT TO SEE THAT INJUSTICE IS NOT PERPETUATED OR PERPETRATE D BY DECISIONS OF COURTS AND TRIBUNALS BECAUSE CERTAIN LAWS HAVE MADE THE DECISIONS OF THE SE COURTS OR TRIBUNALS FINAL AND CONCLUSIVE. AS REGARDS THE SECOND CONTENTION, ALTHOUGH ITO IS N OT FETTERED BY TECHNICAL RULES OF EVIDENCE AND PLEADINGS, AND THAT HE IS ENTITLED TO ACT ON MATERIAL WHICH MAY NOT BE ACCEPTED AS EVIDENCE IN A COURT OF LAW, BUT THERE T HE AGREEMENT ENDS; BECAUSE IT IS EQUALLY CLEAR THAT IN MAKING THE ASSESSMENT UNDER SECTION 2 3(3) HE IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO A NY EVIDENCE OR ANY MATERIAL AT ALL AND THERE MUST BE SOMETHING MORE THAN BARE SUSPICIO N TO SUPPORT THE ASSESSMENT UNDER SECTION 23(3). THE RULE OF LAW ON THIS SUBJECT HAS BEEN FAIRLY AND RIGHTLY STATED BY THE LAHORE HIGH COURT IN THE CASE OF SETH GURMUKH SINGH V. C.I.T. [1944] 12 ITR 393. IN THE INSTANT CASE, THE TRIBUNAL VIOLATED CERTAIN FUNDAME NTAL RULES OF JUSTICE IN REACHING ITS CONCLUSIONS. FIRSTLY, IT DID NOT DISCLOSE TO THE AS SESSEE WHAT INFORMATION HAD BEEN SUPPLIED TO IT BY THE DEPARTMENTAL REPRESENTATIVE. NEXT, IT DID NOT GIVE ANY OPPORTUNITY TO THE ASSESSEE TO REBUT THE MATERIAL FURNISHED TO IT BY HIM, AND LASTLY, IT DECLINED TO TAKE ALL THE MATERIAL THAT THE ASSESSEE WANTED TO PRODUCE IN SUPPORT OF ITS CASE. THE RESULT WAS THAT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 123 THE ASSESSEE HAD NOT HAD A FAIR HEARING. THE ESTIMA TE OF THE GROSS RATE OF PROFIT ON SALES, BOTH BY THE C.I.T. AND THE TRIBUNAL, WAS BASED ON SURMISES, SUSPICION S AND CONJECTURES. THE TRIBUNAL TOOK FROM THE REPRESENTATIVE OF THE DE PARTMENT A STATEMENT OF GROSS PROFIT RATES OF OTHER COTTON MILLS BUT DID NOT SHOW THAT S TATEMENT TO THE ASSESSEE DID NOT GIVE HIM A OPPORTUNITY TO SHOW THAT STATEMENT HAD NO RELEVAN CY WHATSOEVER TO THE CASE OF THE MILL IN QUESTION. IT WAS NOT KNOWN WHETHER THE MILLS WHI CH HAD DISCLOSED THESE RATES WERE SIMILARLY SITUATED AND CIRCUMSTANCED. NOT ONLY DID THE TRIBUNAL NOT SHOW THE INFORMATION GIVEN BY THE REPRESENTATIVE OF THE DEPARTMENT TO TH E ASSESSEE, BUT IT REFUSED EVEN TO LOOK AT BOOKS AND PAPERS WHICH ASSESSEES REPRESENTATIVE PR ODUCED BEFORE THE ACCOUNTANT MEMBER IN HIS CHAMBER. THE ASSESSMENT IN THIS CASE AND IN THE CONNECTED APPEAL, WAS ABOVE THE FIGURE OF RS. 55 LAKHS AND IT WAS JUST AN D PROPER WHEN DEALING WITH A MATTER OF THIS MAGNITUDE NOT TO EMPLOY UNNECESSARY HASTE AND SHOW IMPATIENCE, PARTICULARLY WHEN IT WAS KNOWN TO THE DEPARTMENT THAT THE BOOKS OF TH E ASSESSEE WERE IN THE CUSTODY OF THE SUB-DIVISIONAL OFFICER. THUS BOTH THE C.I.T. AND THE TRIBUNAL IN ESTIMATING THE GROSS PROFIT RATE ON SALES DID NOT ACT ON ANY MATERIAL BU T ACTED ON PURE GUESS AND SUSPICION. IT WAS THUS A FIT CASE FOR THE EXERCISE OF POWER UNDER ARTICLE 136. IN THE RESULT, THE APPEAL WAS TO BE ALLOWED AND THE ORDER OF THE TRIBUNAL WAS TO BE SET ASIDE AND THE CASE WAS TO BE REMANDED TO IT WITH DI RECTION THAT IN ARRIVING AT ITS ESTIMATE OF GROSS PROFITS AND SALES IT SHOULD GIVE FULL OPPO RTUNITY TO THE ASSESSEE TO PLACE ANY RELEVANT MATERIAL ON THE POINT THAT IT HAS BEFORE T HE TRIBUNAL, WHETHER IT IS FOUND IN THE BOOKS OF ACCOUNT OR ELSEWHERE AND IT SHOULD ALSO DI SCLOSE TO THE ASSESSEE THE MATERIAL ON WHICH THE TRIBUNAL IS GOING TO FOUND ITS ESTIMATE A ND THEN AFFORD HIM FULL OPPORTUNITY TO MEET THE SUBSTANCE OF ANY PRIVATE INQUIRIES MADE BY THE ITO IF IT IS INTENDED TO MAKE THE ESTIMATE ON THE FOOT OF THOSE ENQUIRIES. NOTE: THE CASE WAS DECIDED IN FAVOUR OF THE ASSESSE E. 61. AS AGAINST THE WILD GUESS OF THE C.I.T.(A), THE ASSESSEE REFERRED TO PAST HISTORY OF SIGNET INDUSTRIES LTD. ( ROYAL MEDICAL HALL VS. C.I.T. (1962) 46 ITR 748 (AP.) ESTIMATE OF INCOME ON THE BASIS OF MATERIALS AVAILABLE AND THE PAST ASSES SMENT RECORD WAS HELD PROPER) AS WELL AS TWO MORE COMPARABLE CAS ES WHEREIN THE TRADING RESULTS WERE ACCEPTED BY THE INCOME-TAX DEPARTMENT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 124 AND THE NET PROFIT RATE WAS LESS THAN 2 %. THE TAB LE SHOWING THE NET PROFIT RATE IN COMPARABLE CASES IS AS UNDER. R. K. RESIN PLAST PRIVATE LIMITED [P.A.NO.: AADCR 7 961 F] PARTICULARS A.Y. 11-12 A.Y. 12-13 A.Y. 13-14 A.Y. 14-15 TURNOVER 12,39,09,631 155,512,465 286,213,212 348,979,743 GROSS PROFIT 30,11,184 4,186,467 6,720,235 11,776,142 G/P RATIO 2.43% 2.69% 2.35% 3.37% NET PROFIT 1,96,175 1,138,589 5,278,356 2,660,494 N/P RATIO 0.16% 0.73% 1.84% 0.76% VIKAS POLYMERS (PROP. RAJESH AGARWAL) [P.A.NO.: ADB PA 8266 C] PARTICULARS A.Y. 11-12 A.Y. 12-13 A.Y. 13-14 TURNOVER 60,327,183 69,378,951 70,789,660 GROSS PROFIT 3,897,105 4,590,468 4,921,269 G/P RATIO 6.46% 6.62% 6.95% NET PROFIT 837,670 933,699 982,897 N/P RATIO 1.39% 1.35% 1.39% SIGNET INDUSTRIES LIMITED [P.A.NO.: AABCS 3489 F] PARTICULARS A.Y. 11-12 A.Y. 12-13 A.Y. 13-14 A.Y. 14-15 TURNOVER 4,32,02,88,732 5,11,92,53,770 5,63,57,83,317 6,10,80,35,458 GROSS PROFIT 24,99,07,205 53,01,16,534 68,71,62,395 88,23,18,576 G/P RATIO 5.78% 10.36% 12.19% 14.45% NET PROFIT 9,18,14,175 8,05,03,622 17,57,23,076 21,21,88,332 N/P RATIO 2.13% 1.57% 3.12% 3.47% 62. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFOR E, SUBMITTED THAT THE UNACCOUNTED NET PROFIT OF POLYME R BUSINESS SHOULD BE ESTIMATED AT 2% AS EVIDENT FROM THE COMPA RABLE CASES. 63. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE ADDITION MADE ON THE BASIS OF LOOSE PAPERS SEIZED AS ANNEXURES B- 1, B-2 AND B-3 FROM THE RESIDENCE OF THE ASSESSEE, WE HAVE HELD IN THE CASE OF SIGNET INDUSTRIES LIMITED THAT SHRI MUKESH S ANGLE HAS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 125 ADMITTED DOING THE BUSINESS OF TRADING IN POLYMER W HICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. IN VARIOUS LOOSE PAPERS SEIZED THE NAME OF MUKESH SANGLA WAS APPEARING, THEREFORE, THESE INCRIMINATING PAPERS SHALL BE CONSIDERED ONLY IN CA SE OF MUKESH SANGLA FOR MAKING THE ADDITION. 64. THE CONTROVERSY IS REGARDING THE ADDITION OF IN ITIAL INVESTMENT FOR THE PURCHASE OF POLYMER FOR TRADING BUSINESS AND ESTIMATING THE PROFIT @ 10% ON THIS TRADING. THIS ADDITION FOR INITIAL INVESTMENT HAS BEEN MADE AT RS.13,85,349/- FOR THE ASSESSMENT YEARS 2011-12, RS.1,07,55,135/- FOR THE ASSESSMENT YEAR 2011-12. 65. AFTER HEARING BOTH THE SIDES, WE FIND THAT O N THE ISSUE OF INITIAL INVESTMENT WE FIND IT APPROPRIATE TO RES TORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE REASON TH AT WE HAVE DIRECTED TO SUSTAIN THE ADDITION OF PEAK AMOUNT IN EARLIER YEARS. IF SUCH AMOUNT IS AVAILABLE FOR TELESCOPING THE INITIA L INVESTMENT, THIS ADDITION SHALL BE DELETED. ON THE ISSUE OF THE QUANTUM OF ADDITION, WE HOLD THAT IT IS ON HIGHER SIDE AS THE ADDITION IS ALMOST 50% OF THE UNACCOUNTED TRADING. IN VIEW OF THIS MAT TER, WE DIRECT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 126 TO REDUCE THE ADDITION IF FINALLY SUSTAINED TO THE TUNE OF 10% OF THE TOTAL UNACCOUNTED SALES OF POLYMER TRADING. ON THE ISSUE OF ESTIMATING THE NET PROFIT WE HOLD THAT WE HAVE ALRE ADY HELD 4% OF SALES AS REASONABLE PROFIT ON SUCH SALES, THEREFORE , THE ADDITION FOR DETERMINING THE NP SHALL BE WORKED OUT @ 4% OF SUCH SALES. SINCE THE ADDITION HAS BEEN MADE ON ESTIMATED BASIS , THEREFORE, NO ADDITION IS CALLED FOR BY INVOKING THE PROVISION S OF SECTION 40A(3) OF THE ACT. 66. ON THE ISSUE RAISED REGARDING THE BOGUS PURCHAS ES OF POLYMER OF RS. 1,09,79,489/- IN THE ASSESSMENT YEAR 2011-12 AND RS.8,69,97,089/- IN THE ASSESSMENT YEAR 2012-13 , WE UPHOLD THE ADDITION UP TO THE NP RATE OF 4% AFTER CONSIDER ING VARIOUS PLEADINGS AND ASPECTS OF THE CASE. WE DECIDE THESE GROUNDS ACCORDINGLY. 67. GROUND NO.5.0 & 5.1 OF THE ASSESSEES APPEAL AN D GROUND NO.3 OF REVENUES APPEAL A.Y. : 2012-13) 9.0 GROUND NO.5.0 & 5.1 (A.YS. : 2012-13) OF ASSESSEGE S APPEAL READS AS UNDER : ASSESSMENT YEAR : 2012-13 UNEXPLAINED INVESTMENT IN DIAMOND JEWELLERY : RS.74 ,72,863/- 5.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN PARTLY CONFIRMING THE ADDITION TO THE E XTENT OF RS.74,72,863/- MADE BY THE ASSESSING OFFICER ON ACCOUNT UNEXPLAINED INVEST MENT IN DIAMOND JEWELLERY. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 127 TELESCOPING OF UNEXPLAINED INVESTMENT IN DIAMOND JEWELLERY (RS.74,72,863/-) AND SILVERWARES (RS.49,77,460/-) AGAINST UNDISCLOSED INCOME: 5.1 IN DOING SO, HE ERRED IN LAW AS WELL AS IN FACTS IN NOT TELESCOPING THE UNEXPLAINED DIAMOND ORNAMENTS AND UNEXPLAINED SILVE RWARES AGAINST UNDISCLOSED INCOME OFFERED FOR TAXATION BY THE ASSE SSEE. GROUND NO.3 (A.YS. : 2012-13) OF REVENUES APPEALS READS AS UNDER: ASSESSMENT YEAR :2012-13 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE C.I.T.(A). ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINE D INVESTMENT IN JEWELLERY OF RS.2,68,86,366/-. 68. THE FACTS, IN BRIEF ARE THAT THE DETAILS OF GOL D ORNAMENTS, SILVERWARES AND DIAMOND ORNAMENTS FOUND DURING SEAR CH ARE AS UNDER: GOLD ORNAMENTS : PARTICULARS GROSS WEIGHT NET WEIGHT VALUE AS ON THE DATE OF SEARCH GMS. GMS. RS. BEDROOM OF SMT. MONIKA 862.69 615.70 22,15,066 BEDROOM OF SMT. AVANTIKA 3.66 3.20 7,600 LOCKER NO. 357 826.21 811.83 19,33,053 LOCKER NO. 434 201.56 185.55 4,29,938 1,894.12 1,616.28 45,85,657 SILVERWARES : PARTICULARS GROSS WEIGHT NET WEIGHT VALUE AS ON THE DATE OF SEARCH KGS. KGS. RS. BEDROOM OF SMT. MONIKA 175.84 175.84 88,27,764 175.84 175.84 88,27,764 DIAMOND ORNAMENTS : PARTICULARS GOLD DIAMONDS OTHER STONE GROSS WEIGHT NET WEIGHT VALUE (RS.) CTS VALUE (RS.) VALUE (RS.) MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 128 (GMS.) (GMS.) BEDROOM OF SMT. MONIKA 1406.25 1237.27 25,63,885 247.08 1,23,83,950 267.15 13,035 ON PERSONS 18.45 17.95 37,614 2.50 40,000 BEDROOM OF SMT.AVANTIKA 155.61 137.86 2,88,886 8.25 1,03,050 LOCKER NO. 357 363.77 331.25 6,90,407 87.60 39,42,5 00 4,500 LOCKER NO. 434 1278.42 1090.62 22,29,774 388.20 1,8 6,78,274 65,050 3222.50 2814.95 58,10,566 733.63 3,51,47,774 267.15 82,585 A) THE DETAILS OF GOLD ORNAMENTS, SILVERWARES AND DIAM OND ORNAMENTS AS PER WEALTH-TAX RETURNS FILED BY THE AS SESSEE ARE AS UNDER: GOLD ORNAMENTS PARTICULARS GROSS WEIGHT NET WEIGHT VALUE AS AT 31.03.2008 SHRI MUKESH SANGLA 208.18 208.18 2,33,700/- M/S MUKESH SANGLA (HUF) 617.43 613.63 6,91,994/- SHRI SAURABH SANGLA 212.56 193.42 2,00,187/- SMT.MONIKA SANGLA 1,965.95 1,886.45 19,49,438/- 3,004.12 2,901.68 30,75,319 SILVERWARES PARTICULARS GROSS WEIGHT NET WEIGHT VALUE AS AT 31.03.2008 KGS. KGS. RS. SHRI MUKESH SANGLA 25.200 25.200 5,42,505/- M/S.MUKESH SANGLA (HUF) 21.700 21.700 4,67,157/- SMT. AVANTIKA SANGLA 30.353 30.353 4,56,242/- 77.253 77.253 14,65,904/- DIAMOND ORNAMENTS PARTICULARS GOLD DIAMONDS OTHER GROSS WEIGHT (GMS.) NET WEIGHT (GMS.) VALUE (RS.) CTS VALUE (RS.) VALUE (RS.) SHRI MUKESH SANGLA 798.65 736.01 6,69,832 340.50 34,16,048 - - M/S MUKESH SANGLA (HUF) 333.50 301.07 2,73,750 219.15 19,07,650 38.40 400 SHRI SAURABH SANGLA 1319.50 1053.95 9,55,159 270.14 59,07,590 357.568 1,33,616 SMT. MONIKA SANGLA 1367.37 1210.46 11,01,512 371.68 1,07,92,000 319.95 46,000 SMT.AVANTIKA SANGLA 611.40 535.50 1,01,818 181.51 60,82,760 198.00 - 4430.42 3836.99 31,02,071 1382.98 2,81,06,048 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 129 B) ALSO, SUBSTANTIAL JEWELLERY WAS ACQUIRED BY THE ASS ESSEE DURING MARRIAGE OF HIS SON, SHRI SAURABH SANGLA WHI CH WAS DULY SHOWN IN THE BOOKS OF ACCOUNT OF THE FAMILY MEMBER S AND WEALTH-TAX RETURNS FILED BEFORE THE INCOME-TAX DEPA RTMENT. THE DETAILS OF WHICH ARE AS FOLLOWS: NAME OF THE FAMILY MEMBER AMOUNT (RS.) ASSTT. YEAR SHRI MUKESH SANGLA 5,00,000/- 2006-07 5,00,000/- SHRI SAURABH SANGLA 39,48,124/- 2006-07 SHRI SAURABH SANGLA 1,80,891/- 2007-08 41,29,015/- SMT.MONIKA SANGLA 53,32,523/- 2006-07 SMT.MONIKA SANGLA 10,000/- 2007-08 53,43,523/- C) MS. AVANTIKA SANGLA, THE DAUGHTER-IN-LAW OF THE ASS ESSEE ALSO ACQUIRED JEWELLERY OF RS.55,50,570/- AND SILVE R WARES OF 30.353 KGS. WHICH WAS DULY SHOWN IN HER INCOME-TAX RETURNS, THE DETAILS OF WHICH ARE AS FOLLOWS : ASSTT. YEAR JEWELLERY SILVERWARES 2005 - 06 - 1,82,706 2006 - 07 35,99,454 2,73,535 2007 - 08 6,75,070 - 2008 - 09 1,20,071 - 2009 - 10 44,975 - 2011 - 12 11,11,000 - 55,50,570 4,56,242 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 130 D) AS THE GOLD ORNAMENTS AS PER WEALTH-TAX RETURNS FIL ED BY MEMBERS OF SANGLA FAMILY WAS MORE THAN THE GOLD ORN AMENTS FOUND DURING SEARCH, THE ASSESSEE DID NOT OFFER ANY UNDISCLOSED INCOME ON ACCOUNT OF GOLD ORNAMENTS FOUND DURING SE ARCH. GOLD JEWELLERY FOUND DURING SEARCH GOLD JEWELLERY AS PER WEALTH TAX RETURNS PARTICULARS GROSS WEIGHT (GMS.) NET WEIGHT (GMS.) NAME OF THE ASSESSEE GROSS WEIGHT (GMS.) NET WEIGHT (GMS.) BEDROOM OF SMT. MONIKA SANGLA 862.69 615.70 MUKESH SANGLA 208.18 208.18 BEDROOM OF SMT. AVANTIKA SANGLA 3. 66 3.20 MUKESH SANGLA HUF 617.43 613.63 LOCKER NO. 357 826.21 811.83 SAURABH SANGLA 212.56 193.42 LOCKER NO. 434 201.56 185.55 MONIKA SANGLA 1965.95 1886.45 1,894.12 1,616.28 3004.12 2901.68 E) AS THE SILVER WARES FOUND DURING SEARCH WERE MORE T HAN THE SILVERWARES AS PER WEALTH-TAX RETURNS FILED BY THE MEMBERS OF SANGLA FAMILY, THE EXCESS SILVER WARES WEIGHING 98. 587 KGS. AND VALUED AT RS.49,49,402/- WERE OFFERED FOR TAXATION BY THE ASSESSEE AS HIS UNDISCLOSED INCOME. HOWEVER, IMPUGN ED EXCESS SILVERWARES VALUED AT RS.49,49,402/- WERE TELESCOPE D AGAINST THE UNDISCLOSED INCOME DECLARED IN PRECEDING YEARS. F) IN THE CASE OF DIAMOND ORNAMENTS, THE TOTAL WEIGHT OF DIAMONDS (CARAT WISE) AND NET GOLD WEIGHT (GRAMS) W ERE COMPARED WITH THE TOTAL WEIGHT OF DIAMONDS (CARAT W ISE) AND NET GOLD WEIGHT (GRAMS) FOUND DURING SEARCH. AS THE CAR AT WISE WEIGHT OF DIAMONDS AND GRAMS-WISE WEIGHT OF NET GOL D CONTENT AS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 131 PER WEALTH-TAX RETURN WAS MORE AS COMPARED TO THE C ARAT WISE WEIGHT OF DIAMONDS AND GRAMS-WISE WEIGHT OF NET GOL D CONTENT FOUND DURING SEARCH, THE ASSESSEE DID NOT OFFER ANY UNDISCLOSED INCOME ON ACCOUNT OF DIAMOND ORNAMENTS. GOLD JEWELLERY FOUND DURING SEARCH GOLD JEWELLERY AS PER WEALTH TAX RETURNS PARTICULARS GOLD DIAMONDS NAME OF THE ASSESSEE GOLD DIAMONDS G ROSS WEIGHT (GMS.) NET WEIGHT (GMS.) CTS GROSS WEIGHT (GMS.) NET WEIGHT (GMS.) CTS BEDROOM OF SMT. MONIKA SANGLA 1406.25 1237.27 247.08 MUKESH SANGLA 798.65 736.01 340.50 ON PERSONS 18.45 17.95 2.50 MUKESH SANGLA HUF 333.50 301.07 219.15 BEDROOM OF SM T. AVANTIKA SANGLA 155.61 137.86 8.25 SAURABH SANGLA 1319.50 1053.95 270.14 LOCKER NO. 357 363.77 331.25 87.60 MONIKA SANGLA 1367.37 1210.46 371.68 LOCKER NO. 434 1278.42 1090.62 388.20 3222.50 2814.95 733.63 3819.02 3301.49 1201.47 G) THE ASSESSING OFFICER COMPARED JEWELLERY AS PER BAL ANCE SHEETS OF MEMBERS OF SANGLA FAMILY WITH THE VALUE O F JEWELLERY FOUND DURING SEARCH AND BROUGHT THE SAME TO TAX AS UNDISCLOSED INCOME OF THE ASSESSEE. THE BASIS ADOPTED BY THE AS SESSING OFFICER WAS ABSOLUTELY ILLOGICAL BECAUSE IN THE BOO KS OF ACCOUNTS, THE ASSETS ARE STATED AT HISTORICAL COST WHEREAS IN THE WEALTH-TAX RETURN, THE ASSETS ARE STATED AT MARKET RATE ON THE VALUATION DATE. IN FACT, THE COMPARISON HAS TO BE ON THE BASI S OF QUANTITY OF MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 132 JEWELLERY AND SILVER WARES FOUND DURING SEARCH WITH THE QUANTITY OF JEWELLERY AND SILVER WARES AS PER WEALTH-TAX RET URNS. H) HOWEVER, IN THE ALTERNATIVE AND WITHOUT PREJUDICE SUBMISSION , THE ASSESSEE DETERMINED THE VALUE OF UNMATCHED DIAMOND ORNAMENTS AT RS.74,72,863/- AND OFFERED SUC H UNMATCHED DIAMOND ORNAMENTS FOR TAX TO BE TELESCOPE D AGAINST UNDISCLOSED INCOME OF PRECEDING YEARS. HOWEVER, THE ISSUE OF TELESCOPING WAS NOT CONSIDERED BY THE C.I.T.(A). 69. THE ASSESSING OFFICER TREATED THE DIFFERENCE BE TWEEN VALUE OF JEWELLERY AND SILVERWARES FOUND DURING SEARCH AN D VALUE OF JEWELLERY AS PER BALANCE SHEET OF VARIOUS MEMBERS O F SANGLA FAMILY AS UNEXPLAINED JEWELLERY AND MADE ADDITION O F RS.3,92,41,339/- [SILVERWARES : RS.87,82,414/- (+) DIAMOND STUDDED GOLD JEWELLERY : RS.3,04,58,925/-]. THE DET AILED WORKING THEREOF IS AS UNDER: PARTICULARS JEWELLERY SILVERWARES RESIDENCE 1,76,03,086 88,77,764 LOCKER NO.357, UCO BANK, NEW PALASIA BRANCH, INDORE 65,70,460 LOCKER NO.434, UCO BANK, NEW PALASIA BRANCH, INDORE 1,91,08,212 TOTAL 4 ,32,81,758 88,77,764 LESS : JEWELLERY AS PER BALANCE SHEETS SHRI MUKESH SANGLA 9,66,784 28,444 M/S. MUKESH SANGLA (HUF) 18,59,515 66,906 MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 133 SHRI SAURABH SANGLA 43,98,391 SMT. MONICA SANGLA 56,48,143 1,28,72,833 95,350 UNACCOUNTED JEWELLERY 3, 04,08,925 87,82,414 70. THE CONTENTION OF THE C.I.T.(A). IS SUMMARISED AS UNDER.THE BASIS OF DETERMINATION OF UNEXPLAINED JEWELLERY I.E. DIFFERENCE BETWEEN JEWELLERY FOUND DURING SEARCH AND JEWELLERY AS PER BALANCE SHEETS OF MEMBERS OF SANGLA FAMILY WAS TOTALLY ILLOGICAL BECAUSE IN THE BOOKS OF ACCOUNTS, THE ASSETS ARE STATED AT HISTORICAL COST WHEREAS IN THE WEALTH-TAX RETURN, THE ASSETS ARE STATED AT MARKET RATE ON THE VALUATION DATE.THE COMPARISON SHOULD BE ON THE BASIS OF QUANTITY OF JEWELLERY AND SILV ER WARES FOUND DURING SEARCH WITH THE QUANTITY OF JEWELLERY AND SILVER WARES AS PER WEALTH-TAX RETURNS. NO ADDITI ON ON ACCOUNT OF GOLD ORNAMENTS WAS WARRANTED AS GOLD ORNAMENTS AS PER WEALTH-TAX AND INCOME-TAX RETURNS OF MEMBERS OF SANGLA FAMILY WAS MUCH HIGHER THAN THE GOLD ORNAMENTS FOUND DURING SEARCH. NO ADDITION ON ACCOUNT MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 134 OF DIAMOND JEWELLERY WAS WARRANTED AS THE CARAT WISE WEIGHT OF DIAMONDS AND GRAMS-WISE WEIGHT OF NET GOL D CONTENT AS PER WEALTH-TAX RETURN WAS MORE AS COMPARED TO THE C ARAT WISE WEIGHT OF DIAMONDS AND GRAMS-WISE WEIGHT OF NET GOL D CONTENT FOUND DURING SEARCH. THE UNMATCHED DIAMOND ORNAMENT S OF RS.74,72,863/- WERE OFFERED FOR TAXATION BY THE ASS ESSEE AS PER HIS WITHOUT PREJUDICE AND ALTERNATIVE SUBMISSION. T HE UNACCOUNTED SILVER WARES WERE DETERMINED AT RS.49,4 9,402/-, WHICH HAD BEEN OFFERED FOR TAXATION BY THE ASSESSEE IN THE RETURN OF INCOME AND THE ASSESSEE SOUGHT TO TELESCOPE THE SAME AGAINST UNDISCLOSED INCOME OF THE PRECEDING YEARS. THE ASSE SSEES CLAIM FOR TELESCOPING WAS NOT CONSIDERED. 71. THE LEARNED COUNSEL FOR THE ASSESSE E DID NOT OFFER ANY UNDISCLOSED INCOME ON ACCOUNT OF DIAMOND ORNAME NTS BECAUSE THE CARAT WISE WEIGHT OF DIAMONDS AND GRAMS -WISE WEIGHT OF NET GOLD CONTENT AS PER WEALTH-TAX RETURN WAS MORE AS MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 135 COMPARED TO THE CARAT WISE WEIGHT OF DIAMONDS AND G RAMS-WISE WEIGHT OF NET GOLD CONTENT FOUND DURING SEARCH. THE REFORE, NO ADDITION ON ACCOUNT OF UNACCOUNTED DIAMOND ORNAMENT S WAS WARRANTED. THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSEE DETERMINED THE VALUE OF UNMATCHED DIAM OND ORNAMENTS AT RS.74,72,863/- AS REQUIRED BY THE A.O. AND IT IS ONLY AS AN ALTERNATIVE AND WITHOUT PREJUDICE SUBMISSION , OFFERED SUCH UNMATCHED DIAMOND ORNAMENTS FOR TAX TO BE TELESCOPED AGAINST UNDISCLOSED INCOME OF PRECEDING YEARS. IT IS SUBMITTED THAT ADDITION SHOULD NOT HAVE BEEN SUSTAI NED BY THE C.I.T.(A). ON THE BASIS OF SUCH ALTERNATIVE AND WIT HOUT PREJUDICE SUBMISSION, PARTICULARLY WHEN TOTAL DIAMOND ORNAMEN TS FOUND DURING SEARCH WERE LESS THAN THE DIAMOND ORNAMENTS DISCLOSED IN THE WEALTH-TAX RETURNS FILED BY THE MEMBERS OF SANG LA FAMILY. 72. IT WAS SUBMITTED THAT IT IS A SETTLED LAW THAT THE UNDISCLOSED INCOME DECLARED BY THE ASSESSEE AND ASSESSED BY THE LOWER AUTHORITIES OR INTANGIBLE ADDITIONS MADE BY LOWER A UTHORITIES IS ALWAYS AVAILABLE TO THE ASSESSEE FOR SET OFF AGAINS T UNDISCLOSED INVESTMENTS/EXPENSES ETC. IN THE ASSESSEES CASE, H AVING MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 136 ASSESSED THE YEARLY PEAK AMOUNT AS HIS UNDISCLOSED INCOME, THE ASSESSING OFFICER CANNOT TAKE A STAND THAT SUCH INC OME DID NOT EXIST AND THEREFORE, NOT AVAILABLE WITH THE ASSESSE E FOR SET OFF AGAINST UNDISCLOSED CASH, INVESTMENT, LOANS AND ADV ANCES, EXPENSES, JEWELLERY ETC. IN THIS REGARD, WE RELY UP ON THE FOLLOWING JUDGEMENTS: (A) S. KUPPUSWAMI MUDALIAR VS. C.I.T. [ 51 ITR 757 (MAD)] ADDITIONS ARE NO DOUBT MADE VERY OFTEN ON ESTIMATE BASIS. BUT IT CAN NEVER BE SAID, OR AT ANY RATE THE DEPARTMENT CANNOT CONTEND, THAT THE AMOUNT OF THE ADDITION IS NOT THE REAL INCOME BUT SOMETHING WHICH THE ASSESSEE MAY NOT HAVE EARNED. IT IS WHOLLY ILLOGICAL FOR THE DEPARTMENT T O CONTEND THAT THE ADDITION WAS ONLY FOR PURPOSES OF TAXATION AND THAT IT SHOULD NE VER BE TAKEN AS TRUE INCOME OF THE ASSESSEE .. IN COMING TO THE ABOVE CONCLUSION, THE HONOURABLE H IGH COURT RELIED UPON THE FOLLOWING OBSERVATION OF HONOURABLE A.P. HIGH COURT IN THE CASE OF LAGADAPATI SUBBA RAMAIAH V. COMMISSIONER OF INCOME-TAX [1956] 30 ITR 593 'IN THE PRESENT CASE, IT IS SOMEWHAT DIFFICULT TO S AY THAT THERE WERE NO PROFITS OF THE COMPANY OUT OF WHICH A DIVIDEND COULD HAVE BEEN PAI D. WHEN THE REVENUE AUTHORITY LEVIED A TAX OF RS.62,000 ON THE COMPANY, IT PROCEE DED ON THE BASIS THAT THE BOOKS OF THE COMPANY WHICH SHOWED A TOTAL INCOME OF ONLY RS. 34,532 FOR ALL THE FOUR YEARS OF ITS EXISTENCE WERE UNRELIABLE AND THAT THE BULK OF THE COMPANY'S PROFITS HAD BEEN KEPT OUTSIDE ITS BOOKS. NOW THOSE SECRET PROFITS LE SS THE INCOME-TAX PAID, THEREFORE, WOULD BE AVAILABLE WITH THE COMPANY FOR DISTRIBUTIO N AS DIVIDENDS. ONCE THE SECRET PROFITS HAD BEEN ASSESSED TO TAX, IT WOULD HAVE BEE N OPEN TO THE COMPANY TO BRING THOSE PROFITS INTO THE BOOKS AND DISTRIBUTE THEM, O R WHAT REMAINED AFTER PAYMENT OF TAX, AS DIVIDENDS.... HAVING ASSESSED THE COMPAN Y ON A LARGE SUM AS ITS UNDISCLOSED INCOME, IT CANNOT, AT THE SAME BREATH, SAY THAT THESE PROFITS DID NOT IN FACT EXIST BECAUSE THEY DID NOT APPEAR FROM THE COM PANY'S BOOKS AND COULD NOT, THEREFORE, HAVE BEEN AVAILABLE FOR THE PAYMENT OF D IVIDENDS. AMONG COMMON MEN, SUCH AN ATTITUDE WOULD BE REGARDED AS BLOWING HOT AND COLD OR PLAYING FAST AND LOOSE .' MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 137 (B) ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] IN THE INSTANT CASE, THE TRIBUNAL HAD RELIED ENTIRE LY ON THE BASIS THAT AN INTANGIBLE ADDITION OF RS.2,00,000 HAD BEEN MADE TO THE BOOK P ROFITS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1957-58 AND IT INFERRED THAT AN AMO UNT OF RS.90,000 WAS AVAILABLE FOR BEING PUT TO USE IN THE RELEVANT ASSESSMENT YEA R. NOW IT CAN HARDLY BE DENIED THAT WHEN AN 'INTANGIBLE' ADDITION IS MADE TO THE B OOK PROFITS DURING AN ASSESSMENT PROCEEDING, IT IS ON THE BASIS THAT THE AMOUNT REPRESENTED BY THAT ADDITION CONSTITUTES THE UNDISCLOSED INCOME OF THE ASSESSEE. THAT INCOME, ALTHOUGH COMMONLY DESCRIBED AS 'INTANGIBLE', IS AS MUCH A PART OF HIS REAL INCOME AS THAT DISCLOSED BY HIS ACCOUNT BOOKS. IT HAS THE SAME CONCRETE EXISTENCE. IT COULD BE AVAILABLE TO THE ASSESSEE AS THE BOOK PROFITS CO ULD BE . THERE CAN BE NO ESCAPE FROM THE PROPOSITION THAT TH E SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARLIER ASSESSME NT YEAR MAY CONSTITUTE A FUND, EVEN THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR MEETING EXPENDITURE OR INTRODUCING AMOUNTS IN HIS A CCOUNT BOOKS .... (C) C.I.T. VS. PREM CHAND JAIN [ 189 ITR 320 (P&H)] IN VIEW OF THE DECISIONS IN CIT V. RAM SANEHI GIAN CHAND [1972] 86 ITR 724 AND ANANTHARAM VEERASINGHAIAH & CO. V. CIT [1980] 123 ITR 457 THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE PAST INTANGIBLE ADDITIONS MADE IN THE CASE OF THE FIRM OF WHICH THE ASSESSEE WAS A PARTNER AND ALLOCATED TO T HE ASSESSEE'S SHARE COULD BE TAKEN INTO ACCOUNT IN CONSIDERING THE UNEXPLAINED I NVESTMENTS OF THE ASSESSEE AND THESE WOULD ALSO BE AVAILABLE FOR SET OFF PURPOSES IN RESPECT OF THE AGREED ADDITIONS FOR LOW HOUSEHOLD EXPENSES MADE IN THE ASSESSEE'S I NCOME IN THE YEAR UNDER CONSIDERATION AND IN REMITTING THE MATTER TO THE AA C. (D) C.I.T. VS. TYARYAMAL BALCHAND [ 165 ITR 453 (RAJ)] IN THE PRESENT CASE, THE ITO WAS WITHIN HIS RIGHT T O TAX THE AMOUNT OF RS.16,950 AS INCOME FROM UNDISCLOSED SOURCES EVEN THOUGH HE HAD ADDED THE AMOUNT OF RS.18,117 IN ADDITION TO THE PROFITS SHOWN BY THE A SSESSES IN ITS ACCOUNT BOOKS. HOWEVER, THE ASSESSEE WAS WELL WITHIN ITS RIGHT TO PLEAD THAT THE AMOUNT OF RS.16,950 WAS COVERED FROM THE INTANGIBLE INCOME AS SESSED AT RS.18,117, AND ADDED IN THE INCOME OF THE ASSESSEE AND APART FROM THIS, SINCE FOR THE LAST PRECEDING 3 YEARS, SUBSTANTIAL ADDITIONS AMOUNTING TO RS.32,7 97 HAD BEEN ADDED, THE AMOUNT OF RS.16,950 COULD HAVE BEEN TAKEN AS HAVING COME O UT OF SUCH INTANGIBLE ADDITIONS. ACCORDINGLY, THE TRIBUNAL IN THE INSTANT CASE WAS R IGHT IN TREATING THE UNEXPLAINED CASH CREDIT ENTRIES TO THE EXTENT OF RS.16,950 AS C OVERED BY ADDED GROSS PROFIT IN THE SUM OF RS.18,117 ON THE BASIS OF THE ESTIMATE. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 138 (E) C.I.T. VS. JAWANMAL GEMAJI GANDHI [151 ITR 353 (BOM )] THE SUPREME COURT HAS CLEARLY STATED IN THE CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] THAT THE SECRET PROFITS OR UNDISCLOSED INCOM E OF AN ASSESSEE EARNED IN AN EARLIER ASSESSMENT YEAR CAN C ONSTITUTE A FUND, THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQU ENTLY. (F) C.I.T. VS. SAHU BROTHERS [115 ITR 438 (M.P.)] A DIVISION BENCH OF THIS COURT IN THAT DECISION HEL D THAT THE ADDITIONS BY THE ITO IN THE ASSESSMENTS OF THE PREVIOUS YEARS OF THE ASSESS EE WERE ON THE BASIS THAT HE HAD EARNED LARGER INCOME THAN WHAT WAS SHOWN AND THAT H E HAD IN FACT EARNED THAT INCOME. THAT AMOUNT WAS, THEREFORE, AVAILABLE TO HI M FOR INVESTMENT IN THE ASSESSMENT YEAR. A SIMILAR QUESTION WAS CONSIDERED BY THE ALLAHABAD HIGH COURT IN THE DECISION IN CIT V. RAM ACHAL RAM SEWAK [1969] 73 ITR 501 AND IT WAS HELD (PAGE 502): 'THE SHORT QUESTION RAISED IN THE PRESENT APPLICATI ONS IS WHETHER THE DEPOSITS MADE BY THE ASSESSEE IN VARIOUS BANKS FROM YEAR TO YEAR COULD BE SET OFF AGAINST THE EXTRA PROFIT ADDED DURING PREVIOUS YEARS. IN KUPPUSWAMI MUDALIAR V. CIT [1964] 51 ITR 757 , IT WAS HELD BY THE MADRAS HIGH COURT THAT, WHERE THE INCOME-TAX AUTHORITIES MADE AN ADDITION TO THE INCOME OF THE ASSESSEE OVER AND ABOVE THE INCOME AS DISCLOSED BY THE ASSESSEE, ON AN ESTIMATE BASIS, TH E AMOUNT SO ADDED MUST BE TREATED AS THE REAL INCOME OF THE ASSESSEE. IT IS NOT OPEN TO THE AUTHORITIES TO TAKE THE VIEW THAT THE ADDITION WAS ONLY FOR PURPOSES OF TAXATION , AND THAT IT SHOULD NOT BE REGARDED AS THE TRUE INCOME OF THE ASSESSEE.' APPARENTLY, THEREFORE, IT COULD NOT BE CONTENDED TH AT THIS INCOME WHICH HAD BEEN ADDED UP AS INCOME FROM INTANGIBLE SOURCES IN THE P REVIOUS YEARS, OF ASSESSMENT WAS NOT AVAILABLE TO THE ASSESSEE. ACCORDINGLY, OUR ANSWER TO THE QUESTION IS IN THE AFFIRMATIVE. (G) A.C.I.T. VS. DHARAMCHAND AGRAWAL [144 ITR 143 (M.P. )] THE HONOURABLE HIGH COURT FOLLOWED THE HONOURABLE S UPREME COURT RULING IN CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] AND APPROVED THE TELESCOPING OF UNDISCLOSED INCOME AGAINST UNDISCLOS ED ASSETS. (H) C.I.T. VS. NABADWIP CHANDRA DEY [198 ITR 133 (GAU.) ] THE PRINCIPLES GOVERNING SET OFF OF INTANGIBLE ADDI TIONS MADE IN THE ASSESSMENT AGAINST UNEXPLAINED CASH CREDITS OR UNEXPLAINED INV ESTMENTS ARE NO MORE RES INTEGRA. THE PRINCIPLES THAT EMERGE FROM THE VARIOUS DECISIO NS CAN BE SUMMARISED AS FOLLOWS: (1) AMOUNTS REPRESENTED BY 'INTANGIBLE ADDITIONS' TO TH E BOOK PROFITS OF AN ASSESSEE DURING AN ASSESSMENT PROCEEDING CONSTITUTE UNDISCLOSED INCOME OF MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 139 THE ASSESSEE AND ARE AS MUCH A PART OF HIS REAL INC OME AS THOSE DISCLOSED BY HIS ACCOUNT BOOKS. IT HAS THE SAME CONCRETE EXISTENCE. (2) INCOME FROM INTANGIBLE ADDITIONS IS AVAILABLE TO TH E ASSESSEE FOR MEETING EXPENDITURE OR INTRODUCING AMOUNTS IN HIS ACCOUNT BOOKS. (3) IF ANY UNEXPLAINED CASH DEPOSIT OR CASH CREDIT CAN REASONABLY BE RELATED TO THE AMOUNT COVERED BY THE INTANGIBLE ADDITIONS MADE IN THE PAS T OR IN THAT VERY YEAR NECESSARY SET OFF MAY BE GIVEN BY THE AUTHORITIES ON THAT ACCOUNT. (4) IN EACH CASE, THE TRUE NATURE OF THE CASH DEFICIT O R CASH CREDIT MUST BE ASCERTAINED FROM AN OVERALL CONSIDERATION OF THE PARTICULAR FACTS AND C IRCUMSTANCES OF THE CASE. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF T HE INSTANT CASE, THE TRIBUNAL WAS JUSTIFIED IN ALLOWING A SET-OFF ON ACCOUNT OF INTANGIBLE ADDITIO NS MADE IN THE PAST AGAINST UNEXPLAINED CASH DEPOSIT AND INVESTMENT OF THE RELEVANT ASSESSMENT Y EARS. 73. THE LD. AR SUBMITTED ON THE BASIS OF THE ABOVE FACT S AND LEGAL POSITION TO DELETE THE ADDITION ON ACCOUNT OF DIAMOND JEWELLER Y OF RS.74,72,863/-. 74. WE HAVE HEARD BOTH THE SIDES. THE LEARNED CIT(A) HAS PARTLY CONFIRMED ADDITION OF RS.74,72,863/- ON ACCOUNT OF UNEX PLAINED INVESTMENT IN DIAMOND AND JEWELLERY AND SILVER-WARES OF RS.49,77, 460/- IN THE A.Y.2012-13. THE LEARNED CIT(A) HAS DELETED ADDITIO N OF RS. 2,68,86,336/- FOR WHICH REVENUE IS IN APPEAL. THE ASSESSEE HIMSELF OFFER ED UNMATCHED DIAMOND ORNAMENTS OF RS.74,72,863/- FOR TAXATION FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE ALSO OFFERED UNACCOUNTED SI LVER WARES WORTH RS.49,49,402/- FOR TAXATION. 75. WE HAVE GONE THE THROUGH THE VARIOUS DET AILS FILED BEFORE US REGARDING JEWELLERY ITEMS OF VARIOUS FAMILY MEMBERS. WE HAVE ALSO CONSIDERED THE ALTERNATE PLEA OF THE ASSESSEE AND AF TER CONSIDERING ALL THESE ASPECTS, WE FIND NO MERIT IN THE APPEAL OF THE ASSESSEE. THE LEARNED MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 140 CIT(A) HAS RIGHTLY SUSTAINED THE ADDITION UP TO RS. 74,72,863/- ON THE DIAMOND ORNAMENTS. SIMILARLY, THE ADDITION SUS TAINED ON THE SILVER WARES WAS ALSO JUSTIFIED AS THE ASSESSEE WAS HAVING NO EXPLANATION FOR THE SAME. THE ASSESSEE HIMSELF HAS OFFERED THE SILVER WARES OF RS. 49,49,402/- IN HIS RETURN OF IN COME. MOREOVER, THE ASSESSEE HAS DISCLOSED THE UNACCOUNTE D INCOME FOR THE ASSESSMENT YEAR 2012-13 AT RS.12,61,00,000/- IN THE STATEMENT RECORDED U/S 132(4) AND THE LEARNED CIT(A ) HAS MADE FURTHER ADDITION OF RS.9,43,55,415/- ON THE BASIS O F DIFFERENCE BETWEEN THE UNDISCLOSED INCOME DECLARED BY THE ASSE SSEE IN THE STATEMENTS RECORDED U/S 132(4) AND THE ADDITION SUS TAINED OF RS. 3,17,44,585/- FOR THE ASSESSMENT YEAR 2012-13. THER EFORE, WE FIND NO MERIT IN THESE GROUNDS OF THE ASSESSEES AP PEAL. THE SAME ARE DISMISSED. 76. GROUND NO.6.0 (A.YS. : 2008-09 & 2012-13), 2.0 & 2.1 (A.Y. : 2009-10) AND 4.0 (A.Y. : 2010-11 & 2011-12) OF THE ASSESSEES APPEAL : GROUND NO.6.0 (A.YS. : 2008-09 & 2012-13), 2.0 & 2. 1 (A.Y. : 2009-10) AND 4.0 (A.Y. : 2010-11 & 2011-12)OF ASSES SEES APPEAL READS AS UNDER : MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 141 ASSESSMENT YEAR : 2008-09, 2010-11, 2011-12& 2012-1 3 TELESCOPING WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL AN D IN THE EVENT OF VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER ARE CONFIRM ED AT ANY STAGE OF APPELLATE PROCEEDINGS IN ANY OF THE ASSESSEES BELONGING TO SI GNET GROUP AS WELL AS SANGLA FAMILY, THE ASSESSEE MAY BE ALLOWED TO TELESCOPE, T O THE EXTENT POSSIBLE, THE UNDISCLOSED INCOME FINALLY ASSESSED BY THE INCOME-TAX DEPARTMENT AGAINST UNEXPLAINED INVESTMENT IN JEWELLERY, UNEXPLAINED CA SH CREDIT IN THE FORM OF UNSECURED LOANS, SHARE APPLICATION MONEY AND SHARE CAPITAL, UNEXPLAINED CASH, UNEXPLAINED EXPENDITURE, UNEXPLAINED INVESTMENT, UN EXPLAINED STOCK, UNEXPLAINED BANK TRANSACTIONS, UNEXPLAINED BANK ACCOUNTS ETC. B ELONGING TO SIGNET GROUP AS WELL AS SANGLA FAMILY SO AS TO PREVENT ADDITION OF INCOME AS WELL ASSETS, LIABILITIES AND EXPENSES. ASSESSMENT YEAR : 2009-10 TELESCOPING 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE REJECTION OF SCIENTIFICALLY PREPARED DATE-WISE CASH BOOK BY THE ASSESSING OFFICER AND NOT CONSIDERING THE PEAK DETERMINED BY THE ASSESSEE ON THE BASIS OF DATE WISE RECORDING OF CASH RECEIPTS AND CASH PAYMENTS AND OFFERED FOR TAXATION , DESPITE HOLDING AT THE SAME TIME THAT BOTH THE RECEIPTS AND THE PAYMENTS CANNOT BE TAXED AND R ECEIPTS WERE AVAILABLE FOR MAKING PAYMENTS. 2.1 WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL AN D IN THE EVENT OF VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER ARE CONFIRMED AT ANY STAGE OF APPELLATE PROCEEDINGS IN ANY OF THE ASSESSEES BELONGING TO SIGNET GROUP AS WELL AS SANGLA FAMILY, THE ASSESSEE MAY BE ALLOWED TO TELESCOPE, TO THE EXTENT POSSIBLE, THE UNDISCLOSED INCOME FINA LLY ASSESSED BY THE INCOME-TAX DEPARTMENT AGAINST UNEXPLAINED INVESTMENT IN JEWELLERY, UNEXPL AINED CASH CREDIT IN THE FORM OF UNSECURED LOANS, SHARE APPLICATION MONEY AND SHARE CAPITAL, U NEXPLAINED CASH, UNEXPLAINED EXPENDITURE, UNEXPLAINED INVESTMENT, UNEXPLAINED STOCK, UNEXPLAI NED BANK TRANSACTIONS, UNEXPLAINED BANK ACCOUNTS ETC. BELONGING TO SIGNET GROUP AS WELL AS SANGLA FAMILY SO AS TO PREVENT ADDITION OF INCOME AS WELL ASSETS, LIABILITIES AND EXPENSES. THE ASSESSING OFFICER AND THE LEARNED CIT(A) DID NO T DEAL WITH THE ISSUE OF TELESCOPING. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 142 77. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPE AL AND SUBMISSION MADE BY THE ASSESSEE, SHRI MUKESH SANGLA AND OTHER GROUP ENTITIES IN RESPECT OF ADDITIONS MADE ON VARI OUS GROUNDS, IN THE EVENT OF VARIOUS ADDITIONS MADE BY THE ASSESSIN G OFFICER ARE CONFIRMED AT ANY STAGE OF APPELLATE PROCEEDINGS IN ANY OF THE ASSESSEES BELONGING TO SIGNET GROUP AS WELL AS SANG LA FAMILY, THE ASSESSEE MAY BE ALLOWED TO TELESCOPE, TO THE EX TENT POSSIBLE, THE UNDISCLOSED INCOME FINALLY ASSESSED BY THE INCO ME-TAX DEPARTMENT AGAINST UNEXPLAINED INVESTMENT IN JEWELL ERY, UNEXPLAINED CASH CREDIT IN THE FORM OF UNSECURED LO ANS, SHARE APPLICATION MONEY AND SHARE CAPITAL, UNEXPLAINED CA SH, UNEXPLAINED EXPENDITURE, UNEXPLAINED INVESTMENT, UN EXPLAINED STOCK, UNEXPLAINED BANK TRANSACTIONS, UNEXPLAINED B ANK ACCOUNTS ETC. BELONGING TO SIGNET GROUP AS WELL AS SANGLA FA MILY SO AS TO PREVENT ADDITION OF INCOME AS WELL ASSETS, LIABILIT IES AND EXPENSES AT ASSESSEES PERIL. 78. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTRED THA T THE APPLICABILITY OF CONCEPT OF TELESCOPING IS FURTHER STRENGTHENED ON MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 143 PERUSAL OF MATERIAL FOUND AND SEIZED FROM THE RESID ENCE OF SHRI MUKESH SANGLA, WHEREFROM IT EMERGES THAT THE IMPUGN ED MATERIAL CONTAINED TRANSACTIONS LIKE RECEIPTS FROM VARIOUS SOURCES, PAYMENTS TO VARIOUS PERSONS, PURCHASE AND SALE OF GOLD, UNACCOUNTED TRADING IN POLYMER, STOCK OF CHICK PEAS , ETC. AS THERE WERE A LARGE NUMBER OF CASH RECEIPTS AND CASH PAYME NTS, INVESTMENT ETC. TRADING IN POLYMERS ETC., IT WAS NO T POSSIBLE TO DETERMINE CORRECT UNDISCLOSED INCOME MERELY BY ADDI TION OF ALL PAYMENTS AND RECEIPTS. UNDER THESE SHRI MUKESH SANG LA PREPARED A CASH FLOW STATEMENT OR CASH BOOK IN WHIC H ALL THE TRANSACTION APPEARING IN THE IMPUGNED SEIZED MATERI AL WERE RECORDED DATE WISE, YEAR-WISE PEAK WAS WORKED OUT A ND SUCH PEAK AMOUNT WAS OFFERED FOR TAXATION BY SHRI MUKESH SANGLA IN HIS RETURN OF INCOME FILED PURSUANT TO THE NOTICE I SSUED U/S.153A. THE INCOME EMERGING FROM THE IMPUGNED SEIZED MATERI AL WAS OFFERED FOR TAXATION IN SHRI MUKESH SANGLAS HANDS BECAUSE (A) THE SEIZED MATERIAL WAS FOUND AND SEIZED FROM THE H IS RESIDENCE AND (B) THE SEIZED MATERIAL CONTAINED SEVERAL ACCOU NTS AND DOCUMENTS WHICH BEAR HIS NAME, (C) THE IMPUGNED PAG ES WERE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 144 OWNED UP BY HIM IN HIS STATEMENT RECORDED U/S.132(4 ) AND (D) POLYMER BUSINESS WAS CARRIED OUT BY SHRI MUKESH SAN GLA IN HIS PERSONAL CAPACITY . 79. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS A SETTLED LAW THAT THE UNDISCLOSED INCOME DECLARED BY THE ASSESSEE AND ASSESSED BY THE AUTHORITIES BELOW IS AVAILABLE TO THE ASSESSEE FOR SETTING OFF AGAINST UNDISCLOSED INVESTMENTS/EXP ENSES ETC.. HAVING ASSESSED THE YEARLY PEAK AMOUNT AS HIS UNDIS CLOSED INCOME, THE ASSESSING OFFICER CANNOT TAKE A STAND T HAT SUCH INCOME DID NOT EXIST AND THEREFORE, NOT AVAILABLE W ITH THE ASSESSEE FOR SET OFF AGAINST UNDISCLOSED CASH, INVE STMENT, LOANS AND ADVANCES, EXPENSES ETC. IN SUPPORT OF THE ABOVE PROPOSITION, THE RELIANCE IS PLACED UPON THE FOLLOWING JUDGMENTS : S. KUPPUSWAMI MUDALIAR VS. C.I.T. [ 51 ITR 757 (MAD)] ADDITIONS ARE NO DOUBT MADE VERY OFTEN ON ESTIMATE BASIS. BUT IT CAN NEVER BE SAID, OR AT ANY RATE THE DEPARTMENT CANNOT CONTEND, THAT THE AMOUNT OF THE ADDITION IS NOT THE REAL INCOME BUT S OMETHING WHICH THE ASSESSEE MAY NOT HAVE EARNED. IT IS WHOLLY ILLOGICA L FOR THE DEPARTMENT TO CONTEND THAT THE ADDITION WAS ONLY FOR PURPOSES OF TAXATION AND THAT IT SHOULD NEVER BE TAKEN AS TRUE INCOME OF THE ASSE SSEE .. IN COMING TO THE ABOVE CONCLUSION, THE HONOURABLE H IGH COURT RELIED UPON THE FOLLOWING OBSERVATION OF HONOURABLE A.P. H IGH COURT IN THE MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 145 CASE OF LAGADAPATI SUBBA RAMAIAH V. COMMISSIONER OF INCOME- TAX [1956] 30 ITR 593 'IN THE PRESENT CASE, IT IS SOMEWHAT DIFFICULT TO S AY THAT THERE WERE NO PROFITS OF THE COMPANY OUT OF WHICH A DIVIDEND COUL D HAVE BEEN PAID. WHEN THE REVENUE AUTHORITY LEVIED A TAX OF RS.62,00 0 ON THE COMPANY, IT PROCEEDED ON THE BASIS THAT THE BOOKS OF THE COMPAN Y WHICH SHOWED A TOTAL INCOME OF ONLY RS.34,532 FOR ALL THE FOUR YEA RS OF ITS EXISTENCE WERE UNRELIABLE AND THAT THE BULK OF THE COMPANY'S PROFITS HAD BEEN KEPT OUTSIDE ITS BOOKS. NOW THOSE SECRET PROFITS LESS TH E INCOME-TAX PAID, THEREFORE, WOULD BE AVAILABLE WITH THE COMPANY FOR DISTRIBUTION AS DIVIDENDS. ONCE THE SECRET PROFITS HAD BEEN ASSESSED TO TAX, I T WOULD HAVE BEEN OPEN TO THE COMPANY TO BRING THOSE PROFIT S INTO THE BOOKS AND DISTRIBUTE THEM, OR WHAT REMAINED AFTER PAYMENT OF TAX, AS DIVIDENDS.... HAVING ASSESSED THE COMPANY ON A LARG E SUM AS ITS UNDISCLOSED INCOME, IT CANNOT, AT THE SAME BREATH, SAY THAT THESE PROFITS DID NOT IN FACT EXIST BECAUSE THEY DID NOT APPEAR FROM THE COMPANY'S BOOKS AND COULD NOT, THEREFORE, HAVE BEEN AVAILABLE FOR THE PAYMENT OF DIVIDENDS. AMONG COMMON MEN, SUCH AN ATT ITUDE WOULD BE REGARDED AS BLOWING HOT AND COLD OR PLAYING FAST AND LOOSE .' (A) ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [ 123 ITR 457 (SC)] IN THE INSTANT CASE, THE TRIBUNAL HAD RELIED ENTIRE LY ON THE BASIS THAT AN INTANGIBLE ADDITION OF RS.2,00,000 HAD BEEN MADE TO THE BOOK PROFITS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1957-58 AND IT INFERRED THAT AN AMOUNT OF RS.90,000 WAS AVAILABLE FOR BEING PUT TO USE IN THE RELEVANT ASSESSMENT YEAR. NOW IT CAN HARDLY BE DENIED THAT WHEN AN 'INTANGIBLE' ADDITION IS MADE TO THE BOOK PROFITS D URING AN ASSESSMENT PROCEEDING, IT IS ON THE BASIS THAT THE AMOUNT REPR ESENTED BY THAT ADDITION CONSTITUTES THE UNDISCLOSED INCOME OF THE ASSESSEE. THAT INCOME, ALTHOUGH COMMONLY DESCRIBED AS 'INTANGIBLE' , IS AS MUCH A PART OF HIS REAL INCOME AS THAT DISCLOSED BY HIS AC COUNT BOOKS. IT HAS THE SAME CONCRETE EXISTENCE. IT COULD BE AVAILABLE TO THE ASSESSEE AS THE BOOK PROFITS COULD BE . MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 146 THERE CAN BE NO ESCAPE FROM THE PROPOSITION THAT TH E SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARL IER ASSESSMENT YEAR MAY CONSTITUTE A FUND, EVEN THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR MEETING EXPENDIT URE OR INTRODUCING AMOUNTS IN HIS ACCOUNT BOOKS .... (B) C.I.T. VS. PREM CHAND JAIN [ 189 ITR 320 (P&H)] IN VIEW OF THE DECISIONS IN CIT V. RAM SANEHI GIAN CHAND [1972] 86 ITR 724 AND ANANTHARAM VEERASINGHAI AH & CO. V. CIT [1980] 123 ITR 457 THE TRIBUNAL WAS RIGHT IN HO LDING THAT THE PAST INTANGIBLE ADDITIONS MADE IN THE CASE OF THE FIRM O F WHICH THE ASSESSEE WAS A PARTNER AND ALLOCATED TO THE ASSESSEE'S SHARE COULD BE TAKEN INTO ACCOUNT IN CONSIDERING THE UNEXPLAINED INVESTMENTS OF THE ASSESSEE AND THESE WOULD ALSO BE AVAILABLE FOR SET OFF PURPOSES IN RESPECT OF THE AGREED ADDITIONS FOR LOW HOUSEHOLD EXPENSES MADE IN THE ASSESSEE'S INCOME IN THE YEAR UNDER CONSIDERATION AND IN REMIT TING THE MATTER TO THE AAC. (C) C.I.T. VS. TYARYAMAL BALCHAND [ 165 ITR 453 (RAJ)] IN THE PRESENT CASE, THE ITO WAS WITHIN HIS RIGHT T O TAX THE AMOUNT OF RS.16,950 AS INCOME FROM UNDISCLOSED SOURCES EVEN T HOUGH HE HAD ADDED THE AMOUNT OF RS.18,117 IN ADDITION TO THE PR OFITS SHOWN BY THE ASSESSES IN ITS ACCOUNT BOOKS. HOWEVER, THE ASSESSE E WAS WELL WITHIN ITS RIGHT TO PLEAD THAT THE AMOUNT OF RS.16,950 WAS COV ERED FROM THE INTANGIBLE INCOME ASSESSED AT RS.18,117, AND ADDED IN THE INCOME OF THE ASSESSEE AND APART FROM THIS, SINCE FOR THE LAST PR ECEDING 3 YEARS, SUBSTANTIAL ADDITIONS AMOUNTING TO RS.32,797 HAD BE EN ADDED, THE AMOUNT OF RS.16,950 COULD HAVE BEEN TAKEN AS HAVING COME OUT OF SUCH INTANGIBLE ADDITIONS. ACCORDINGLY, THE TRIBUNAL IN THE INSTANT CASE WAS RIGHT IN TREATING THE UNEXPLAINED CASH CREDIT ENTRI ES TO THE EXTENT OF RS.16,950 AS COVERED BY ADDED GROSS PROFIT IN THE S UM OF RS.18,117 ON THE BASIS OF THE ESTIMATE. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 147 (D) C.I.T. VS. JAWANMAL GEMAJI GANDHI [151 ITR 353 (BOM)] THE SUPREME COURT HAS CLEARLY STATED IN THE CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. C.I.T. [123 ITR 457 (SC)] THAT THE SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARLIER ASSESSMENT YEAR CAN CONSTITUTE A FUND, THOUGH CONCE ALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY. (E) C.I.T. VS. SAHU BROTHERS [115 ITR 438 (M.P.)] A DIVISION BENCH OF THIS COURT IN THAT DECISION HEL D THAT THE ADDITIONS BY THE ITO IN THE ASSESSMENTS OF THE PREVIOUS YEARS OF THE ASSESSEE WERE ON THE BASIS THAT HE HAD EARNED LARGER INCOME THAN WHA T WAS SHOWN AND THAT HE HAD IN FACT EARNED THAT INCOME. THAT AMOUNT WAS, THEREFORE, AVAILABLE TO HIM FOR INVESTMENT IN THE ASSESSMENT Y EAR. A SIMILAR QUESTION WAS CONSIDERED BY THE ALLAHABAD HIGH COURT IN THE DECISION IN CIT V. RAM ACHAL RAM SEWAK [1969] 73 ITR 501 AND IT WAS HELD (PAGE 502): 'THE SHORT QUESTION RAISED IN THE PRESENT APPLICATI ONS IS WHETHER THE DEPOSITS MADE BY THE ASSESSEE IN VARIOUS BANKS FROM YEAR TO YEAR COULD BE SET OFF AGAINST THE EXTRA PROFIT ADDED DURING PR EVIOUS YEARS. IN KUPPUSWAMI MUDALIAR V. CIT [1964] 51 ITR 757 , IT WAS HELD BY THE MADRAS HIGH COURT THAT, WHERE THE INCOME-TAX AUTHOR ITIES MADE AN ADDITION TO THE INCOME OF THE ASSESSEE OVER AND ABO VE THE INCOME AS DISCLOSED BY THE ASSESSEE, ON AN ESTIMATE BASIS, TH E AMOUNT SO ADDED MUST BE TREATED AS THE REAL INCOME OF THE ASSESSEE. IT IS NOT OPEN TO THE AUTHORITIES TO TAKE THE VIEW THAT THE ADDITION WAS ONLY FOR PURPOSES OF TAXATION, AND THAT IT SHOULD NOT BE REGARDED AS THE TRUE INCOME OF THE ASSESSEE.' APPARENTLY, THEREFORE, IT COULD NOT BE CONTENDED TH AT THIS INCOME WHICH HAD BEEN ADDED UP AS INCOME FROM INTANGIBLE SOURCES IN THE PREVIOUS YEARS, OF ASSESSMENT WAS NOT AVAILABLE TO THE ASSES SEE. ACCORDINGLY, OUR ANSWER TO THE QUESTION IS IN THE AFFIRMATIVE. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 148 (F) A.C.I.T. VS. DHARAMCHAND AGRAWAL [144 ITR 143 (M.P.)] THE HONOURABLE HIGH COURT FOLLOWED THE HONOURABLE S UPREME COURT RULING IN CASE OF ANANTHARAM VEERASINGHAIAH & CO. V S. C.I.T. [123 ITR 457 (SC)] AND APPROVED THE TELESCOPING OF UNDISCLOS ED INCOME AGAINST UNDISCLOSED ASSETS. (G) C.I.T. VS. NABADWIP CHANDRA DEY [198 ITR 133 (GAU.)] THE PRINCIPLES GOVERNING SET OFF OF INTANGIBLE ADDI TIONS MADE IN THE ASSESSMENT AGAINST UNEXPLAINED CASH CREDITS OR UNEX PLAINED INVESTMENTS ARE NO MORE RES INTEGRA. THE PRINCIPLES THAT EMERGE FROM THE VARIOUS DECISIO NS CAN BE SUMMARISED AS FOLLOWS: (1) AMOUNTS REPRESENTED BY 'INTANGIBLE ADDITIONS' TO TH E BOOK PROFITS OF AN ASSESSEE DURING AN ASSESSMENT PROCEEDING CONSTIT UTE UNDISCLOSED INCOME OF THE ASSESSEE AND ARE AS MUCH A PART OF HIS REAL INCOME AS THOSE DISCLOSED BY HIS ACCOUNT BOOKS . IT HAS THE SAME CONCRETE EXISTENCE. (2) INCOME FROM INTANGIBLE ADDITIONS IS AVAILABLE TO TH E ASSESSEE FOR MEETING EXPENDITURE OR INTRODUCING AMOUNTS IN HIS A CCOUNT BOOKS. (3) IF ANY UNEXPLAINED CASH DEPOSIT OR CASH CREDIT CAN REASONABLY BE RELATED TO THE AMOUNT COVERED BY THE INTANGIBLE ADD ITIONS MADE IN THE PAST OR IN THAT VERY YEAR NECESSARY SET OFF MAY BE GIVEN BY THE AUTHORITIES ON THAT ACCOUNT. (4) IN EACH CASE, THE TRUE NATURE OF THE CASH DEFICIT O R CASH CREDIT MUST BE ASCERTAINED FROM AN OVERALL CONSIDERATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF T HE INSTANT CASE, THE TRIBUNAL WAS JUSTIFIED IN ALLOWING A SET-OFF ON ACC OUNT OF INTANGIBLE ADDITIONS MADE IN THE PAST AGAINST UNEXPLAINED CASH DEPOSIT AND INVESTMENT OF THE RELEVANT ASSESSMENT YEARS. MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 149 80. IN THE ASSESSEES CASE, THE PEAK CREDIT OFFERED FOR TAXATION BY SHRI MUKESH SANGLA AS HIS UNDISCLOSED INCOME AND UNDISCLOSED PROFIT FROM POLYMER TRADING ETC., WAS FUND AVAILABL E WITH HIM FOR EXPLAINING VARIOUS ADDITIONS LIKE SHARE APPLICATION MONEY, SHARE CAPITAL, SILVER WARES, GOLD AND DIAMOND JEWELLERY, UNSECURED LOANS, CASH TRANSACTION WITH SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI, INITIAL INVESTMENT FOR UNDISCLOSED POLYMER TRADING BUSINESS ETC. ON PERUSAL OF AVAILABLE CASH BALANCES FOR THE ENTIRE BLOCK PERIOD AS PER THE CASH FLOW STATEMENT, IT IS QUITE MANIFEST THAT SHRI MUKESH SANGLA HAD SUFFICIENT FUNDS WITH H IM TO SET OFF ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, SHA RE CAPITAL, SILVER WARES, GOLD AND DIAMOND JEWELLERY, UNSECURED LOANS, CASH TRANSACTION WITH SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI, INITIAL INVESTMENT FOR UNDISCLOSED POLYMER TRADING BUSINESS ETC. THEREFORE, THE ADDITION OF PEAK CREDIT AS PER CASH FLOW STATEMENT PREPARED FROM ENTRIES RECORDED IN LOOSE PAPER FOUND AND SEIZED DURING SEARCH IN SHRI MUKESH SANGLAS CASE AS WELL AS ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY, SHARE CAPITAL, SILVER WARES, GOLD AND DIAMOND JEWELLERY, UNSECURED LOANS, CASH T RANSACTION MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 150 WITH SHRI DEEPAK KALANI AND SHRI PANKAJ KALANI, INI TIAL INVESTMENT FOR UNDISCLOSED POLYMER TRADING BUSINESS ETC. IN TH E CASE OF SHRI MUKESH SANGLA AND OTHER GROUP ENTITIES WOULD AMOUNT TO DOUBLE ADDITION. 81. FROM THE SEIZED DOCUMENTS, IT IS CLEAR THAT THE SOURCE OF UNDISCLOSED INCOME IN THE CASE OF SHRI MUKESH SANGL A WAS UNACCOUNTED POLYMER BUSINESS AND OTHER SOURCES. THE UNDISCLOSED INCOME SO GENERATED WAS AVAILABLE WITH HIM TO SET OFF AGAINST ADDITION ON ACCOUNT OF SHARE APPLICATION MO NEY, SHARE CAPITAL, UNSECURED LOANS, CASH TRANSACTIONS WITH SH RI PANKAJ KALANI AND SHRI DEEPAK KALANI ETC. THEREFORE, IT IS HUMBLY SUBMITTED THAT THE ADDITION ON ACCOUNT OF SHARE APP LICATION MONEY, SHARE CAPITAL, UNSECURED LOANS, CASH TRANSAC TIONS WITH SHRI PANKAJ KALANI AND SHRI DEEPAK KALANI ETC. SHOU LD BE SET OFF AGAINST UNDISCLOSED INCOME DETERMINED ON THE BASIS OF SEIZED MATERIAL IN THE CASE OF SHRI MUKESH SANGLA. 82. IN ALL THESE GROUNDS THE ASSESSEE HAS RAISED T HE ISSUE OF TELESCOPING. AFTER HEARING BOTH THE SIDES, WE AR E OF THE VIEW THAT WHEREVER IT IS POSSIBLE TO TELESCOPE THE UNACC OUNTED INCOME MUKESH SANGLA, IND. IT(SS) A. NOS. 111 TO 114/IND/2015, ETC. 151 WITH THE UNXPLAINED INVESTMENT IN ANY OTHER ASSET I NCLUDING THE JEWELLERY, UNEXPLAINED CASH CREDITS, UNEXPLAINED IN VESTMENT OR UNEXPLAINED BANK TRANSACTIONS, ETC. RELATING TO THE ASSESSEE THEN SUCH TELESCOPING SHALL BE JUSTIFIED. FOR THE PURPOS E OF TELESCOPING, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING O FFICER TO DO SO. WE ORDER ACCORDINGLY. 83. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE AND REVENUE STAND PARTLY ALLOWED FOR STATISTICAL PURPOS ES. PRONOUNCED IN OPEN COURT ON 10 TH FEBRUARY, 2016 SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 10 TH FEBRUARY, 2016 DN/-