The ACIT, 2(1), V. M/s B.M. G. Culcattawala Jewellars P. Ltd.,

ITSSA 125/IND/2004

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9443 (ITAT-INDORE)
• Duration Of Justice: 5 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-03-2010
• Assessment Year: misc
• Appeal Filed On: 13-12-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Keywords: Unexplained investment; Block assessment
• Section: 154

Judgement Text

PAGE 1 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : N.A. I.T.(SS).A.NO.125/IND/2004 BLOCK PERIOD : 01.04.1995 TO 20.12.2001 ACIT, M/S. B.M.G. CULCUTTAWALA JEWELLERS PVT.LTD., 2(1), VS 15, PRAKASH NAGAR, INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : N.A. C.O.NO. 27/IND/2006 (ARISING OUT OF I.T.(SS)A. NO.125/IND/2004) BLOCK PERIOD : 01.04.1995 TO 20.12.2001 M/S. B.M.G. CULCUTTAWALA JEWELLERS PVT.LTD., ACIT, 15, PRAKASH NAGAR, INDORE. VS 2(1), INDORE. CROSS OBJECTOR RESPONDENT DEPARTMENT BY : SHRI K.K.SINGH, CIT DR ASSESSEE BY : SHRI ANIL KAMAL GARG, C. A. DATE OF HEARING : 18.03.2010 PAGE 2 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE ARISE OUT OF THE ORDER OF LD. CIT(A)-I , INDORE, DATED 8.9.2004, FOR THE BLOCK PERIOD 1.4.1995 TO 20.12.20 01. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST, WE SHALL TAKE UP REVENUES APPEAL IN I.T.(SS ).A.NO. 125/IND/2004. 4. GROUND NO. 1 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN REDUCING THE ADDITION MADE WITH REF ERENCE TO THE GOLD JEWELLERY TO THE EXTENT OF 2340.040 GMS. V ALUING AT RS. 8,81,463/- @ RS. 3,768/- PER 10 GRAMS ON THE BA SIS OF CUSTOMER DEPOSIT REGISTER. 5. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A PRI VATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AN D SALE AND PURCHASE OF GOLD ORNAMENTS, DIAMOND JEWELLERY, DIAM OND AND OTHER PRECIOUS STONES. AS A CONSEQUENCE OF SEARCH, THE A. O. ISSUED NOTICE U/S 158BC TO FURNISH THE RETURN OF UNDISCLOSED INCOME. THE ASSESSEE PAGE 3 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA SUBMITTED SUCH RETURN WHEREIN HE DISCLOSED A SUM OF RS. 9,80,500/-, WHICH WAS MODIFIED TO RS. 10,11,540/- BY THE A.O. T HE CHART, IN THIS REGARD, IS REPRODUCED AS UNDER :- AMOUNT DISCLOSED (RS.) AMOUNT ADOPTED DIFFERENCE 1. PROFIT ON UNACCOUNTED SALES OF GOLD JEWELLERY 5,04,000/- 5,04,000/- - 2. PROFIT ON UNACCOUNTED DIAMOND JEWELLERY 3,67,000/- 3,67,000/- - 3. PROFIT ON UNACCOUNTED SALES OF PEARLS 6,680/- 6,680/- - 4. PROFIT ON UNACCOUNTED SALES OF CHINESE FRESH WATER PEARLS 24,600/- 24,600/- - 5. ESTIMATED PROFIT ON UNACCOUNTED SALES OF GOLD KANTA (NOSE PINS) - 6,135/- 6,135/- 6. UNRECORDED LABOUR RECEIPTS 45,470/- 50,000/- 4, 530/- 7. INTEREST ON VARIOUS ADVANCES MADE BY THE APPELLANT 32,750/- 53,125/- 20,375/- 6. THE A.O. BASED UPON THE INVENTORY MADE PREPARED DUR ING THE COURSE OF SEARCH FOUND THAT THE ASSESSEE WAS HAVING TOTAL JEWELLERY OF 42595.630 GMS. AT DIFFERENT BUSINESS PREMISES AND I N ADDITION TO IT JEWELLERY WEIGHING 438.900 GMS. WAS CLAIMED TO BE W ITH KARIGARGS. THE A.O. COMPARED SUCH PHYSICAL QUANTITY WITH THE QUANT ITY APPEARING IN VARIOUS RECORDS/AS CLAIMED BY THE ASSESSEE AND FOUN D THAT THE TOTAL STOCK, ACCORDINGLY, SHOULD HAVE BEEN 36,998.829 GMS. AND , THUS, THE A.O. PAGE 4 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA WORKED OUT THE EXCESS STOCK AT 6035.701 GMS. AND M ADE AN ADDITION OF RS. 22,73,988/-. IN THIS PROCESS, THE MAIN DISPUTE, CENTERED AROUND THE STOCK CLAIMED BY THE ASSESSEE AS BELONGING TO CUSTO MERS/DIRECTORS AT 9893.50 GMS, WHICH THE ASSESSEE COULD SUBSTANTIATE. THE A.O., HOWEVER, TOOK IT AT 7553.460 GMS. THUS, A DIFFERENCE OF 2340 .040 GMS. EXISTED THEREIN. THE ASSESSEE HAD ALSO ACCEPTED EXCESS UNDI SCLOSED STOCK AT 3695.661 GMS. AND IF THIS FIGURE WAS COMPARED WITH THE TOTAL EXCESS STOCK CONSIDERED EXCESS BY THE ASSESSING OFFICER AT 603.7 01 GMS., THE ULTIMATE DIFFERENCE REMAINED THE SAME I.E. 2340.040 GMS. THE ASSESSEE ALSO PLEADED BEFORE THE A.O. THAT REGISTER OF CUSTOMERS DEPOSIT/KARIGARS DEPOSIT/DIRECTORS DEPOSIT WAS MAINTAINED IN THE REG ULAR COURSE OF BUSINESS, HENCE, THE ENTRIES MADE THEREIN COULD NOT BE CONSIDERED FOR THE PURPOSE OF MAKING AN ADDITION UNDER BLOCK ASSESSMEN T PROCEEDINGS. THE A.O., HOWEVER, HELD THAT IN THE RETURN OF INCOME, T HE ASSESSEE HAD NOT SHOWN THAT STOCK OF CUSTOMERS WAS ALSO AVAILABLE WI TH THE ASSESSEE BESIDES HIS OWN STOCK, THEREFORE, HE REJECTED THIS PLEA OF THE ASSESSEE. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS CONTENDED THAT OUT OF 23 40.040 GMS. JEWELLERY WEIGHING 1284.150 GMS. WAS OF THE EMPLOYEES OF THE ASSESSEE. APART FROM THIS, THE ASSESSEE SUBMITTED THAT IN REGARD TO JEWELLERY OF CUSTOMERS, IN SOME CASES, BOTH STATEMENTS AND AFFIDAVITS HAD B EEN FILED AND IN CASES PAGE 5 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA WHERE THE QUANTITY OF JEWELLERY WAS LESS THAN 50 GM S., NO AFFIDAVIT HAD BEEN FILED. THE ASSESSEE ALSO FILED RECONCILIATION OF STOCKS FOUND IN THE COURSE OF SEARCH PROCEEDINGS, WORKING OF A.O. ETC. APART FORM THIS, THE ASSESSEE ALSO PLEADED THAT JEWELLERY OF THE CUSTOME RS/KARIGARS AS WELL AS OF DIRECTORS WAS A REGULAR PHENOMENA IN THIS LINE O F BUSINESS, HENCE, THIS FACT SAME SHOULD HAVE BEEN CONSIDERED BY THE ASSESS ING OFFICER. THE ASSESSEE ALSO SUBMITTED THAT CUSTOMERS DEPOSIT REGI STER HAD BEEN MAINTAINED IN THE REGULAR COURSE OF ITS BUSINESS, H ENCE, IT COULD NOT BE CONSIDERED IN THE BLOCK ASSESSMENT PROCEEDINGS. THE ASSESSEE ALSO MADE SUBMISSIONS REGARDING OTHER OBSERVATIONS MADE BY TH E ASSESSING OFFICER. THE LD. CIT(A), HOWEVER, DELETED THE ADDITION FOR T HE REASON THAT ENTRIES IN THE CUSTOMERS DEPOSIT REGISTER HAD BEEN MADE BE FORE THE SEARCH AND THE A.O. HAD NOT BROUGHT ANY INSTANCE ON RECORD TO ESTABLISH THAT ENTRY MADE IN SUCH REGISTER/RECEIPT/SALE BILLS WAS NOT PU RPORTED TO BE DISCLOSED BEFORE THE INCOME TAX AUTHORITIES. AGGRIEVED BY THI S, THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. CIT DR, FIRSTLY, NARRATED THE FACTS IN DETA IL BY APPRAISING US THE VARIOUS ISSUES INVOLVED AND, THEREAFTER, CON TENDED THAT DURING THE COURSE OF SEARCH, EXCESS STOCK WAS FOUND AND EVEN T HE ASSESSEE HAD DISCLOSED STOCK NOT RECORDED IN THE BOOKS OF ACCOUN T, HENCE, THE LD. CIT(A) SHOULD HAVE CONSIDERED THIS FACT WHILE HOLDI NG THAT THE A.O. PAGE 6 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA SHOULD HAVE ACCEPTED THE CLAIMS OF THE ASSESSEE AS REGARD TO THE ENTRIES MADE IN THE CUSTOMERS DEPOSIT LEDGER. THE LD. CIT DR FURTHER CONTENDED THAT THE LD. CIT(A) SHOULD HAVE CONSIDERED THE MANN ER IN WHICH THE A.O. APPROACHED THE ISSUE AND THE EXTENSIVE ENQUIRIES MA DE BY HIM BEFORE TAKING A MOST REASONABLE VIEW IN THE MATTER. 8. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT( A) AND PLACED STRONG RELIANCE ON THE ORDER OF LD. CIT(A). ON A QUERY FRO M THE BENCH AS TO WHY THE A.O. COULD NOT EXAMINE THE ENTRIES MADE IN THE CUSTOMERS DEPOSIT REGISTER IN THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS, HE REFERRED TO THE PROVISIONS OF SECTION 158B(B), 158B A(3) AND SECTION 158BB(1)(D). 9. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 10. IT IS ADMITTED FACT THAT IN THE COURSE OF SEARCH, E XCESS STOCK OF GOLD JEWELLERY/ DIAMOND JEWELLERY HAS BEEN FOUND. I T IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS BEEN FOUND TO HAVE INDUL GED IN UNACCOUNTED SALES/PURCHASES. IT IS ALSO NOTED THAT THE ASSESSEE HAS ITSELF ADMITTED UNDISCLOSED EXCESS STOCK TO THE TUNE OF RS. 3695.66 1 GMS. WHICH HAS BEEN TAKEN BY THE ASSESSING OFFICER AS AT 6035.701 GMS. AND IN DOING SO, THE A.O. HAS REJECTED THE CLAIMS OF THE ASSESSEE AS REG ARD TO JEWELLERY PAGE 7 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA BELONGING TO KARIGARS, CUSTOMERS AND DIRECTORS. THU S, THE ASSESSEE HAS ITSELF TRIED TO EXPLAIN THE UNDISCLOSED EXCESS STOC K THROUGH ENTRIES MADE IN THE REGISTER TO THE QUANTITY ESTIMATED BY THE AS SESSING OFFICER AND, THEREFORE, THE ASSESSEE CANNOT PREVENT THE A.O. FOR REJECTING THESE CLAIMS OF THE ASSESSEE IF THE A.O. IS NOT SATISFIED. 11. WE HAVE FURTHER PERUSED THE PROVISIONS OF SECTION 1 58B(B), WHICH INCLUDES JEWELLERY AND MONEY, WHICH HAD NOT B EEN DISCLOSED OR WOULD NOT HAVE BEEN DISCLOSED AND IN THE FACTS OF T HE CASE SUCH EXCESS UNDISCLOSED JEWELLERY ADMITTED BY THE ASSESSEE ITSE LF GIVES JURISDICTION TO THE A.O. TO EXAMINE THE ENTRIES MADE IN CUSTOMERS DEPOSIT REGISTER, SO AS TO ARRIVE AT THE CORRECT QUANTUM OF EXCESS STOCK. I N OUR VIEW, THEREFORE, THE ORDER OF THE LD. CIT(A) IN HOLDING THAT SUCH EN TRIES IN THE CUSTOMERS DEPOSIT REGISTER COULD NOT BE CONSIDERED IN THE BLO CK ASSESSMENT PROCEEDINGS, IS NOT CORRECT IN LAW. WE FURTHER ADD THAT THAT IF THE ASSESSEE WAS HAVING TIME TO FILE THE RETURN ON INCOME, THEN IT SHOULD NOT HAVE DISCLOSED EXCESS STOCK IN THE BLOCK RETURN, AS THE SAME COULD HAVE BEEN DISCLOSED IN THE COURSE OF REGULAR PROCEEDINGS. THU S, THIS GROUND OF THE REVENUE IS ALLOWED. HOWEVER, WE FIND THAT IN GROUND NO.2 OF THE CROSS OBJECTION, THE ASSESSEE HAS ITSELF RAISED THE ISSUE THAT THE LD. CIT(A) SHOULD HAVE DECIDED THIS ISSUE ON MERITS AS THERE W AS SUBSTANTIAL FORCE/STRENGTH IN THE DOCUMENTS/EXPLANATIONS MADE B Y THE ASSESSEE. PAGE 8 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA THEREFORE, WE ACCEPT GROUND NO.2 OF THE CROSS OBJEC TION FILED BY THE ASSESSEE AND DIRECT THE LD. CIT(A) TO DECIDE THIS I SSUE ON MERITS, WHEREIN THE ASSESSEE SHALL BE AT LIBERTY TO FURNISH FURTHER EVIDENCE IN SUPPORT OF ITS CLAIM. 12. IN GROUND NO.2, THE REVENUE IS AGGRIEVED BY THE DEC ISION OF THE LD. CIT(A) IN DIRECTING THE A.O. TO GIVE SET OFF OF RS. 10,50,000/- BEING AMOUNT RECEIVED FROM DEBTORS AGAINST PROMISSORY NOT E OUT OF UNEXPLAINED INVESTMENT/EXPENDITURE. 13. THE FACTS, IN BRIEF, ARE THAT IN THE COURSE OF SEAR CH, AT THE RESIDENTIAL PREMISES OF THE DIRECTOR, SOME PROMISSO RY NOTE DULY ACKNOWLEDGE BY THE BORROWERS WERE FOUND. IN RESPECT OF FOUR OF SUCH DOCUMENTS, THE ASSESSEE COMPANY ADMITTED TO HAVE GI VEN SUCH ADVANCE. THE ASSESSEE FURTHER CONTENDED THAT WHEN THESE ADVA NCES WERE GIVEN, THERE WAS SUFFICIENT CASH IN THE BOOKS OF ACCOUNT. HOWEVER, THESE WERE NOT SHOWN MERELY TO SAVE TAX ON INTEREST INCOME. TH E ASSESSEE HAD SHOWN INTEREST FROM SUCH ACTIVITIES AT RS. 32,750/-, WHIC H WAS ENHANCED BY THE ASSESSING OFFICER TO RS. 53,125/-. THE A.O. ALSO RE JECTED THE CONTENTION OF THE ASSESSEE THAT IF THERE WAS SUFFICIENT CASH B ALANCE IN THE BOOKS OF ACCOUNT, THEN WHY THE ASSESSEE DID NOT DISCLOSE ENT RIES OF ADVANCES IN THE BOOKS OF ACCOUNT. THE A.O. FURTHER HELD THAT THE AS SESSEE WAS HOLDING EXCESS JEWELLERY, HENCE, IT WAS LOGICAL TO INFER TH AT THE ASSESSEE HAD PAGE 9 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA DEPLOYED CASH AVAILABLE WITH HIM IN THE UNACCOUNTED TRADING OF GOLD AND DIAMOND JEWELLERY AND OTHER ARTICLES. ACCORDINGLY, THE A.O. TREATED THE AMOUNT MENTIONED IN THE PROMISSORY NOTES, SO FOUND AS UNEXPLAINED INVESTMENT AND ADDED A SUM OF RS. 12 LAKHS AS UNDIS CLOSED INCOME OF THE ASSESSEE. THE A.O. FURTHER REJECTED THE CONTENTION OF THE ASSESSEE THAT OUT OF FOUR PROMISSORY NOTES, THREE PROMISSORY NOTES HA D MATURED EARLIER, HENCE, A SUM OF RS. 10.50 LAKHS RECEIVED BACK ON TH E DATE OF MATURITY SHOULD HAVE BEEN ACCEPTED AS AVAILABLE WITH THE ASS ESSEE TO ACQUIRE EXCESS STOCK OF GOLD JEWELLERY AND TO INCUR THE SAM E ON THE RENOVATION OF THE SHOW-ROOM. THE ASSESSEE, HOWEVER, DID NOT PRODU CE THE BORROWERS AS REQUIRED BY THE ASSESSING OFFICER. THE A.O. HELD TH AT IF THE DEBT HAD BEEN PAID BY THE BORROWER PRIOR TO THE DATE OF SEARCH, THE ASSESSEE WOULD HAVE SHOWN THE RECEIPT THEREOF IN THE COURSE OF SEARCH. THE A.O., ACCORDINGLY, REJECTED THE PLEA OF THE ASSESSEE TO GIVE SET OFF O F RS. 10.50 LAKHS WITH THE COST OF EXCESS STOCK AND OTHER EXPENDITURE. AGGRIEV ED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHEREIN DETAILED SUBMISSIONS WERE MADE AS REGARD TO THE NATURE OF SU CH DOCUMENTS AND IMPLICATIONS THEREOF, VIS--VIS, ASSESSEES COMPULS ION TO INDULGE IN UNACCOUNTED SALES OF THE JEWELLERY. THE LD. CIT(A), HOWEVER, HELD THAT IT WAS AN ADMITTED FACT THAT NEITHER THE LOAN NOR THE INTEREST WAS DISCLOSED BY THE ASSESSEE IN THE REGULAR BOOKS OF ACCOUNT AND ALSO FAILED TO PAGE 10 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA DISCHARGE ITS ONUS BY GIVING PRIMARY DETAILS SUCH A S CORRESPONDENCES, ADDRESSES OF SUCH BORROWERS. HENCE, THE LD. CIT(A) UPHELD THE ACTION OF THE A.O. IN THIS REGARD. HOWEVER, THE LD. CIT(A) HE LD THAT IN RESPECT OF PROMISSORY NOTE, WHICH HAD MATURED ON THE DATE OF S EARCH. THE A.O. SHOULD HAVE TREATED THE SAME AS DEPLOYED BY THE ASS ESSEE IN THE BUSINESS OF MANUFACTURING AND TRADING OF JEWELLERY ITEMS. AC CORDINGLY, HE DIRECTED THE A.O. TO GIVE CREDIT OF A SUM OF RS. 10.50 LAKHS WHILE COMPUTING THE UNEXPLAINED INVESTMENT/EXPENDITURE FOR THE BLOCK PE RIOD. THE LD. CIT(A) ALSO HELD THAT THE A.O. HAD NOT BROUGHT ANY MATERIA L ON RECORD TO SHOW THAT THE ASSESSEE HAD NOT RECEIVED BACK THE AMOUNT OF LOAN ON THE DUE DATES AS MENTIONED IN SUCH PROMISSORY NOTES, HENCE, THE ACTION OF THE A.O. IN THIS REGARD WAS A CASE OF MERE SUSPICION OR ASSUMPTION. IT WAS ALSO HELD THAT THE A.O. DID NOT BRING ANY EVIDENCE ON RECORD TO SHOW THAT THE AMOUNT RETURNED BACK HAD BEEN INVESTED BY THE A SSESSEE IN SOME OTHER UNDISCLOSED ACTIVITY. 14. AGGRIEVED BY THE CONFIRMATION OF ADDITION OF RS. 12 LAKHS AND ALLOWANCE OF SET-OFF OF RS. 10.50 LAKHS BOTH THE AS SESSEE AND REVENUE ARE BEFORE US. 15. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FA CTS AND TOOK US THROUGH THE VARIOUS OBSERVATIONS MADE BY THE ASS ESSING OFFICER BESIDES PLACING STRONG RELIANCE ON THE ORDER OF A.O . THE LD. CIT(A) PAGE 11 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA PARTICULARLY EMPHASIZED ON THE FACT THAT ONE OF THE PROMISSORY NOTES MATURED ON 18.12.2001 JUST TWO DAYS BEFORE THE DATE OF SEARCH AND CASH FOUND DURING THE COURSE OF SEARCH WAS LESS THAN THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT, THEREFORE, IT WAS LOGICAL TO INFER THAT THE ASSESSEE HAD NOT RECEIVED THE CASH IN RESPECT OF SUCH PROMIS SORY NOTES. HE FURTHER SUBMITTED THAT WHY THE BORROWERS WERE NOT PRODUCED BEFORE THE A.O. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND , MAINLY REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND FURTHER CONTENDED THAT IN CASE THE DEPARTMENTAL GROUND REGARDING SET OFF IS ALLOWED BY THE CIT(A), WAS DISMISSED, THEN GROUND NO.3 OF THE CROS S OBJECTION COULD BE DISMISSED. HE FURTHER CONTENDED THAT THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH HAD TO BE GIVEN EFFECT IN TOTAL I. E. THESE DOCUMENTS WERE RELIED ON TO WORK OUT DISCLOSED INVESTMENT IN MONEY LENDING BUSINESS, THEN, THE RECEIPT BACK OF THE MONEY ON THE DUE DATE AS MENTIONED THEREIN SHOULD HAVE ALSO BEEN ACCEPTED. 16. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 17. IT IS NOT IN DISPUTE THAT FOUR PROMISSORY NOTES HAV E BEEN FOUND DURING THE COURSE OF SEARCH, OUT OF WHICH FOUR PROM ISSORY NOTES HAVE BEEN OWNED UP BY THE ASSESSEE COMPANY. THE TOTAL VA LUE OF SUCH PROMISSORY NOTE IS RS. 12 LAKHS. ONE OF THE PROMIS SORY NOTES HAS PAGE 12 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA MATURED AFTER THE DATE OF SEARCH. IT IS ALSO NOTED THAT SUCH MONEYLENDING TRANSACTION HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. HENCE, IN OUR VIEW, THE ADDITION OF RS. 12 LAKHS HAS RIGHTLY BEEN SUSTAINED BY THE CIT(A). HOWEVER, WE ARE FURTHER OF THE VIEW THAT SU CH PROMISSORY NOTES SHOULD BE ACCEPTED AS A WHOLE AND, THEREFORE, THE L D. CIT(A) HAS RIGHTLY HELD THAT CASH WORTH RS.10.50 LAKHS PERTAINING TO T HREE PROMISSORY NOTES HAVING MATURED DATE BEFORE THE DATE OF SEARCH SHOUL D HAVE BEEN CONSIDERED TO HAVE BEEN DISCHARGED AND MONEY SHOULD HAVE BEEN RECEIVED BY THE ASSESSEE. WE ARE FURTHER OF THE VIE W THAT ONCE IT IS SHOWN, THEN THE LD. CIT(A) HAS RIGHTLY GIVEN SET OFF OF SU CH CASH TOWARDS UNACCOUNTED EXCESS JEWELLERY AND ITEMS OF EXPENDITU RE ONLY INVESTMENT. ACCORDINGLY, WE DISMISS GROUND NO.2 OF THE REVENUE AND GROUND NO.3 OF THE ASSESSEES CROSS OBJECTION. 18. IN GROUND NO.3, THE REVENUE IS AGGRIEVED BY THE D ECISION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.20.37 5/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST IN HUNDI/P ROMISSORY NOTES. IN THIS REGARD, WE FIND THAT THE ASSESSEE HAD DISCLOSE D INCOME BY APPLYING RATE OF INTEREST@ 12%, WHICH WAS ENHANCED BY THE AS SESSING OFFICER TO 18 %. THE LD. CIT(A) DELETED THE IMPUGNED ADDITION FOR THE REASON THAT FOR ADOPTION OF SUCH INTEREST RATE, NO MATERIAL HAD BEEN FOUND IN THE COURSE OF SEARCH. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. PAGE 13 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA 19. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 20. ON DUE CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR VIEW, IN THE ABSENCE OF ANY EVIDENCE FOUND TO I NDICATE THAT THE ASSESSEE HAD CHARGED INTEREST @ 18 % THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. THUS, THIS GROUND OF THE REVENUE IS D ISMISSED. 21. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. 22. NOW, WE SHALL DECIDE THE REMAINING ISSUES OF ASSESS EES CROSS OBJECTION. 23. GROUND NO.1 WAS NOT PRESSED DUE TO SMALLNESS OF AMO UNT INVOLVED THEREIN. 24. IN RESPECT OF GROUND NO.4 RELATING TO LEVY OF SURCH ARGE, THE LEARNED COUNSEL FAIRLY SUBMITTED THAT THIS ISSUE WA S COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF SURESH N. GUPTA AS REPORTED IN 297 ITR 322. HENCE, WE DISMISS THIS GROUND OF THE ASSESSEES CROSS OBJECTION. 25. AS REGARD TO ISSUE RAISED IN GROUND NO.5 REGARDING ESTIMATION OF GROSS PROFIT @ 20% IN RESPECT SHORT STOCK OF DIAMON DS/PEARLS, IT WAS POINTED OUT TO THE ASSESSEE THAT IN THE COURSE OF A PPELLATE PROCEEDINGS, THE ASSESSEE HAD ADMITTED THAT THERE WAS A MISTAKE ON T HE PART OF THE A.O. IN PAGE 14 OF 14 - I.T.(SS)A.NO.125/IND/2004 M/S. B.M.G.CULCUTTAWALA THIS REGARD. HENCE, HE WAS CHALLENGING THIS ISSUE N OW. THE LEARNED COUNSEL SUBMITTED THAT IT WAS CONCEDED UNDER WRONG IMPRESSION, THEN IT WAS POINTED OUT WHY AN APPLICATION U/S 154 WAS NOT MADE TO WHICH THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT GIVE ANY EFFECTIVE REPLY. HE, MERELY SUBMITTED THAT IT WOULD AMOUNT TO DOUBLE ADD ITION, AS THE PROFIT ON UNACCOUNTED SALES OF THIS ITEM HAD ALREADY BEEN SHO WN BY THE ASSESSEE. WE ARE, HOWEVER, OF THE VIEW THAT THE CORRELATION B ETWEEN THE PROFIT SHOWN ON ACCOUNT OF UNACCOUNTED SALES AND SHORTAGE OF THESE ITEMS HAS NOT BEEN PROVED AND IN VIEW OF ASSESSEES OWN CONCE SSION IN THE COURSE OF APPELLATE PROCEEDINGS, THERE IS NO MERIT IN THI S GROUND OF THE ASSESSEE. ACCORDINGLY, WE DISMISS THE SAME. 26. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASS ESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 27. TO SUM UP, THE REVENUES APPEAL STANDS PARTLY ALLOW ED AND ASSESSEES CROSS OBJECTION STANDS PARTLY ALLOWED FO R STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2010. SD/- SD/ - (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22 ND MARCH, 2010. CPU* 18193