SHRI JAYDEEP D. THAKKAR, Ahmedabad V. THE DEPUTY CIT, CEN.CIRCLE-1(2), Ahmedabad

ITSSA 137/AHD/2003

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8448 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-12-2010
• Assessment Year: misc
• Appeal Filed On: 24-04-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHELLY JINDAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Recovery proceedings; Income from undisclosed sources; Loose papers; Document seized; Retrospective amendment; Question of law; Speculation loss; Bad and doubtful debts; Corroborative evidences; Procedural lapse; Block assessment; Documents seized; Provision of bad debts
• Section: 143(3); 131

Judgement Text

IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD . BEFORE SHRI G.D. AGARWAL,V .P. & SHRI MUK UL KUMAR SHRAWAT IT (SS) A. NO.137/AHD /2003 (BLOCK PERIOD 1-4-1988 TO 22-9-1998) SHRI JAYDEEP D. THAKKAR PROP. PARI JAYDEEP KUMAR DHIRAJLAL, 21/2, KABUT ARKHANA, CHOKHABAZAR, KALUPUR, AHMEDABAD. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX, CENT.CIRCLE 1(2) 3 RD FLOOR,AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD. (RESPONDENT) IT (SS) NO.155/AHD/2003. (BLOCK PERIOD 1-4-88 TO 22-9-1998) DEPUTY COMMISSIONER OF INCOME TAX, CENT.CIRCLE 1(2) 3 RD FLOOR,AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD. (APPELLANT) VS. SHRI JAYDEEP D.THAKKAR, PROP. PARI JAYDEEP KUMAR DHIRAJLAL, 21/2, KABUTARKHANA, CHOKHABAZAR, KALUPUR, AHMEDABAD. (RESPONDENT) IT (SS) NO.160/AHD/2003 (BLOCK PERIOD 1-4-88 TO 22-9 -1998) DEPUTY COMMISSIONER OF INCOME TAX, CENT.CIRCLE 1(2) 3 RD FLOOR,AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD. (APPELLANT) VS. SHRI JAYESH D.THAKKAR, 52/2,KABUTAR KHANA, KALUPUR, AHMEDABAD. (RESPONDENT) AND C.O. NO.119/AH D/2004 (IN I.T.(SS) NO.160/AHD /2003.) (BLOCK PERIOD 1-4-88 TO 22-9- 1998) IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 2 SHRI JAYESH D. THAKKAR 52/2,KABUTAR KHANA, KALUPUR, AHMEDABAD. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX, CENT.CIRCLE 1(2) 3 RD FLOOR,AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD. (RESPONDENT) PAN: AAJPT 5500 D APPELLANT BY : SHRI S.N. SOPARKAR, SR. ADV. RESPONDENT BY : SHRI SHELLY JINDAL, CIT(D.R.) ORDER PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER: ALL THESE APPEALS AND CROSS OBJECTIONS ARE IN RESP ECT OF TWO APPELLANTS ARISING FROM TWO SEPARATE ORDERS OF LEARNED CIT (AP PEALS)-I, AHMEDABAD BOTH DATED 3-2-2003. THESE APPEALS ARE CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE AND IN VI EW OF THE SERIATIM OF THE ARGUMENTS BY BOTH THE SIDES WE SHALL FIRST TAKE UP THE APPEALS OF SHRI JAYDEEP P. THAKKAR. (A) IT(SS) A,NO.155/AHD/2003 (REVENUES APPEAL IN T HE CASE OF SHRI JAYDEEP D. THAKKAR.):- THE SUBSTANTIVE GROUND ARGUED BEFORE US IS GROUND NO.1 REPRODUCED BELOW: THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDI NG THAT THE ADDITIONS OF RS.10,84,88,886/- BY WAY OF UNDISCLOSE D INCOME MADE BY THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT ON PROTECTIVE BASIS SHOULD HAVE BEEN MADE IN THE CASE OF THE ASSE SSEE, INSTEAD OF IN THE CASE OF JAYESH D.THAKKAR, ON SUBSTANTIVE BAS IS. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 3 3. THE UNIQUENESS OF THESE CASES IS THAT NO S IGNIFICANT QUESTION OF LAW PLAYS A DECISIVE ROLE BUT THE FACTS OF THESE CASE SHALL ONLY PLAY THE DECISIVE ROLE, HENCE THE FACTS AS EMERGED FROM THE CORRESPONDING ASSESSM ENT ORDER PASSED U/S. 158BC R.W.S. 143(3) DATED 27-06-2001 WERE THAT TH E J.D. SHROFF GROUP WAS SUBJECTED TO SEARCH OPERATION ON 22-9-1998. A NOTICE U/S. 158BC WAS ISSUED ON 23-9-1999 . IN COMPLIANCE A RETURN WAS FILED ON 18.12.2000 DECLARING AN UNDISCLOSED LOSS OF RS.11,90,32,078/-. AS PER THIS RETURN A REFUND OF RS.1,31,000/- WAS CLAIMED. FOR THE SAKE OF COMPLET ENESS THE DETAILS OF THE PREMISES COVERED UNDER SEARCH WERE AS FOLLOWS:- RESIDENTIAL PLACES :- (1) SHRI JAYESH D. THAKKAR AT 9,SURYAJU BUS STAND, AHMEDABAD. (2) SHRI JAYDEEP D. THAKKAR AT SUNBEAM APARTMENT, A HMEDABAD. (3) SHRI SAMIT K.THAKKAR AT CHINTAN PARK SOCIETY,AH MEDABAD. BUSINESS PLACE ;- (1) OFFICE AT 52/2, KALUPUR KABUTARKHANA, AHMEDABAD . (2) OFFICE AT 21/2, KALUPUR KABUTARKHANA, AHMEDABA D. 4. FURTHER, IT HAS ALSO BEEN NOTED BY THE A.O. THAT TWO LOCKERS HAVE ALSO BEEN SEARCHED AS LISTED BELOW:- (1) THE LOCKER NO.638, CENTRAL BANK OF INDIA, AHMED ABAD, WHICH WAS FOUND EMPTY DURING THE COURSE OF SEARCH/OPERATING THE LOC KER ON 1-12-1998. (2) LOCKER NO.20, IN THE NAME OF SHRI JAYDEEP D. TH AKKAR, SHRI SAMIR K. THAKKAR AND SHRI B. B. THAKKAR SITUATED AT SHRI JAN TA SAHAKARI BANK LTD., RADHANPUR WAS ALSO SEARCHED/OPERATED ON 22-3-99. DO CUMENTS AND CASH OF RS.1,31,000/- WERE SEIZED. 5. IN THE BEGINNING ITSELF A.O. HAS ALSO REPORTED T HAT AN INDEPENDENT SEARCH WAS CARRIED ON 22-5-1999 AT JANTA SAHKARI BANK RADH ANPUR . FROM THE SAID BANK CERTAIN DOCUMENTS LEDGER REGISTER, VOUCHER BOO K, RECEIPT OF THE BANK WERE RECOVERED. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 4 6. IN RESPECT OF THE NATURE OF BUSINESS THE A.O. HA S NOTED THAT THREE BROTHERS WERE ENGAGED EITHER IN SARAFI BUSINESS, CHECK DISC OUNTING BUSINESS OR SHARE TRADING OR SHARE BROKERAGE BUSINESS. IT HAS ALSO BE EN NOTED THAT SHRI JAYESH D. THAKKAR ( IN SHORT MR. JAYESH ) IS THE ELDEST BROTH ER. IT IS WORTH TO MENTION THAT THERE WAS A CONTROVERSY ABOUT THE OWNERSHIP OF THE BOOKS OF ACCOUNTS SEIZED WHETHER THEY BELONGED TO MR. JAYDEEP OR MR. JAYESH . IT HAS ALSO BEEN CONTESTED THAT WHETHER THE BUSINESS TRANSACTION; A S PER THE SEIZED BOOKS NAMED AS J.D.SHROFF; BEING CARRIED BY THE ELDEST BROT HER NAMELY SHRI JAYESH D THAKKAR OR BY SHRI JAYDEEP D THAKKAR, RESPONDENT IN THIS APPEAL. AS PER A.O. THE REGULAR BUSINESS IN THE NAME OF J.D.SHROFF WA S CARRIED OUT BY SHRI JAYESH D THAKKAR, ELDER BROTHER, AND THE BUSINESS IN THE NAM E OF M/S. PARI JAYDEEPKUMAR DHIRAJLAL, BUSINESS WAS CARRIED OUT BY SHRI JAYDEEP D. THAKKAR. 7. IN RESPECT OF BOOKS OF ACCOUNTS THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT A COMPLETE SET OF BOOKS OF ACCOUNTS OF UND ISCLOSED BUSINESS OF THE J.D.SHROFF GROUP WAS FOUND FROM THE RESIDENCE OF ONE SHRI SAMIR K. THAKKAR, BROTHER-IN-LAW OF THE ASSESSEE. AS PER A.O. SHRI SAMIR HAS WRITTEN THE BOOKS OF ACCOUNTS OF BOTH THE BROTHERS. IT HAS ALSO BEEN NOTED BY THE A.O. THAT SHRI SAMIR HAS WRITTEN ACCOUNTED AS WELL AS UNACCOU NTED BUSINESS OF THE ASSESSEE. FROM THE SIDE OF THE ASSESSEE IT WAS CLAIMED THAT THE BOOKS AT SR.NO.1,2,8 TO 16 OF ANNEXURE-A BELONGED TO SHRI JA YDEEP WHICH WERE FOUND FROM THE RESIDENCE OF SHRI SAMIR AND IT PERTAINED T O THE UNACCOUNTED BUSINESS. IT IS ALSO WORTH TO MENTION THAT IN LOCKER NO.20 OF JA NTA SAHKARI BANK CERTAIN BOOKS AND ZIP DISC WERE RECOVERED. A REFERENCE WAS MADE TO A SPECIAL AUDITOR FOR SPECIAL AUDIT OF THE SEIZED BOOKS AS PRESCRIBED UND ER SECTION 142(2A). A SPECIAL AUDITOR SHRI G.C.PIPARA, C.A. WAS APPOINTED . THE ASSESSEE WAS DIRECTED TO GET THE BOOKS OF ACCOUNTS AUDITED AND FOR THAT P URPOSE A PERIOD OF 180 DAYS WAS GRANTED. IT IS WORTH TO NOTE, AS ALSO ACCEPTED BY THE A.O., THE AUDIT REPORT WAS TO BE FURNISHED ON BEFORE 24-2-2001 HOWEVER, TH E AUDIT REPORT WAS FURNISHED IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 5 ON 16-4-2001. AFTER RECORDING THESE DATES, THE A.O. MADE AN OBSERVATION THAT HE HAD TO REVERT THE FINDINGS OF THE SPECIAL AUDITOR P ARTICULARLY IN RESPECT OF THE REPORT WHICH WAS BASED UPON THE DOCUMENTS SEIZED FR OM LOCKER NO.20 OF JANTA SAHKARI BANK LTD., RADHANPUR. 8. THERE WAS A DEBATE AND ALSO RAISED A QUESTION MARK ABOUT THE OWNERSHIP AND CORRECTNESS OF THE PERSONS OPERATING THE LOCKER NO.20, JANTA SAHKARI BANK. IN THIS REGARD THE OBSERVATION OF THE A.O. WAS TH AT DURING THE COURSE OF SEARCH A LOCKER KEY WAS FOUND FROM TH E RESIDENCE OF SHRI JAYDEEP . THOUGH A LOCKER KEY WAS FOUND BUT THAT W AS NOT IDENTIFIED HENCE FOR THE PURPOSE OF IDENTIFICATION THE REVENUE DEPARTMEN T HAD WRITTEN LETTERS TO FEW PROBABLE BANKS FOR CONSEQUENTIAL ACTION. IT HAS BE EN NOTED BY THE A.O. THAT AN INFORMATION WAS RECEIVED THAT A LOCKER NO.638 WITH CENTRAL BANK OF INDIA, AHMEDABAD WAS IN THE NAME OF SHRI JAYESH AND PRAVIN DAHYALAL THAKKAR. AFTER TWO MONTHS FROM THE DATE OF SEARCH SHRI JAYDEEP HAS INFORMED THROUGH A LETTER THAT SHRI JAYESH HAD A LOCKER IN CENTRAL BANK OF IN DIA, AHMEDABAD AND HE I.E. MR. JAYDEEP HAD A LOCKER IN JANTA SAHKARI BANK RADH ANPUR. THE A.O .HAS RAISED AN APPREHENSION THAT WHY SHRI JAYDEEP HAD DISCLOSED THE OTHER LOCKER VOLUNTARILY WHICH NORMALLY WOULD NOT HAVE BEEN DONE BY A TAX PA YER. IT HAS ALSO BEEN NOTED THAT LOCKER NO.20 JANTA SAHKARI BANK WAS OPERATED O N 21-9-98, ONE DAY PRIOR TO THE DATE OF SEARCH I.E. ON 22-9-98. REVENUE DEPARTM ENT HAD CERTAIN APPREHENSIONS OF MANIPULATIONS IN THE BANK RECORD O F JANTA SAHKARI BANK, WHICH RESULTED INTO A SEARCH ON THE BANK ON 22-5-99. IT I S WORTH TO MENTION THAT PRIOR TO SEARCH ON BANK; THE REVENUE DEPTT.HAD BROKEN THE LO CKER ON 22/3/99 AND SEIZED THE IMPUGNED INCRIMINATING MATERIAL THEREFROM. THE A.O. HAS LISTED FEW IRREGULARITIES IN RESPECT OF THE RECORDS MAINTAINED BY THE SAID BANK. THOSE DISCREPANCIES IN RESPECT OF THE LOCKER REGISTER AND MAINTENANCE OF LOCKER ACCOUNT SHALL BE DISCUSSED IN THE LATER PART OF THIS JUDGME NT AT THE APPROPRIATE PLACE IF NEED BE. 8.1. AFTER DISCUSSING THE STATEMENT OF THE BANK MAN AGER AND THE OBSERVATION OF CERTAIN IRREGULARITIES IN THE BANK RECORDS, THE A.O. HAS CONCLUDED AND MADE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 6 ALLEGATIONS THAT THE RECORDS WERE MANIPULATED TO SH OW THAT SHRI JAYDEEP IS THE OWNER OF THE LOCKER AND THAT THE LOCKER HAS BEEN OP ERATED AFTER THE SEARCH OPERATION. FURTHER, AS PER A.OS ALLEGATION SHRI J AYDEEP HAD IMPLANTED THE DOCUMENTS AFTER SEARCH. THE CASH BOOK STATED TO BE OF SHRI JAYDEEP WAS FOUND FROM THE LOCKER WRITTEN FOR THE PERIOD 2-4-98 TO 21 -9-1998. THE REQUEST OF THE ASSESSEE I.E. SHRI JAYDEEP TO CONSIDER THOSE DOCUME NTS FOUND FROM LOCKER NO.20 BE HIS DOCUMENTS HAS NOT BEEN ACCEPTED. 9. ASSESSING OFFICER HAS ALSO HELD THAT THE FINDING S OF THE SPECIAL AUDITOR IN RESPECT OF THE OWNERSHIP OF THE DOCUMENTS SEIZED FR OM THE LOCKER NO.20 WERE TO BE IGNORED, RATHER ON PERUSAL IT WAS NOTED THAT THE A.O. HAD TOTALLY IGNORED THE SAID REPORT. AS PER A.O. THE BOOKS WHICH WERE SEIZE D FROM SHRI SAMIR THAKKAR BELONGED TO MR. JAYESH. HOWEVER, THERE IS A REFEREN CE OF A STATEMENT OF SHRI SAMIR AND A LETTER DATED 30-12-1998 THROUGH WHICH H E HAS INTIMATED THAT THOSE BOOKS BELONGED TO SHRI JAYDEEP. IN RESPECT OF THE O WNERSHIP OF THE BOOKS A QUERY HAS AGAIN BEEN RAISED AND IN COMPLIANCE SHRI JAYDEEP, THE APPELLANT, HAS FILED FEW SUBMISSIONS DATED 11 TH AND 12 TH JUNE, 2001. THERE WAS ALSO A REFERENCE OF A STATEMENT RECORDED U/S. 132(4) ON 8-1-99. IT W AS POINTED OUT TO US THAT THE ASSESSEE HAD MADE A STATEMENT IN JANUARY 1999 ABOUT HIS OWNERSHIP ON THE BOOKS OF ACCOUNTS WHICH WAS MUCH BEFORE THE SEARCH OF LOCKER NO.20 CARRIED OUT ON 22-3-1999. IN THE SAID STATEMENT, WHICH WAS RECORDED U/S.132( 4), THE ASSESSEE HAS AFFIRMED THAT HE HAS STARTED THE SHROF F BUSINESS IN THE YEAR 1994 AND RELATED RECORD OF UNACCOUNTED BUSINESS WAS LYIN G IN LOCKER NO.20 OF JANTA SAHKARI BANK. THERE WAS ALSO A REFERENCE OF A STAT EMENT RECORDED U/S131 (1A) DATED 16-12-98 OF SHRI SAMIR WHEREIN HE HAS ALSO AF FIRMED THAT THE BOOKS SEIZED FROM HIS RESIDENCE WERE RELATED TO SHRI JAYDEEP. IT WAS BROUGHT TO THE NOTICE OF THE A.O. THROUGH A LETTER THAT IN ACCORDANCE OF THE AUDIT REPORT GIVEN UNDER SECTION 142(2A) IT WAS ACCEPTED BY THE AUDITOR THAT THE ACCOUNTED CASH OF THE REGULAR BOOKS OF ACCOUNTS OF MR. JAYDEEP WAS AL SO REFLECTED IN THE LIKE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 7 MANNER AS AN OPENING AND CLOSING CASH BALANCE IN TH E UNACCOUNTED SET OF BOOKS OF ACCOUNTS SEIZED FROM MR. SAMIR. THOSE REGULAR BOOKS OF ACCOUNTS WERE IN RESPECT OF THE BUSINESS RUN BY SHRI JAYDEEP IN THE NAME OF PARI JAYDEEPKUMAR DHIRAJLAL. ON THAT BASIS IT WAS TOLD T O THE ASSESSING OFFICER THAT SINCE THE ACCOUNTED CASH BALANCE RELATED TO PARI JA YDEEP THAKKAR THEN IT WAS CLEAR THAT THE UNACCOUNTED CASH AND THE TRANSACTION S AS FOUND RECORDED IN THE SEIZED MATERIAL WERE ALSO RELATED TO SHRI JAYDEEP. THERE IS A REFERENCE OF A ZIP DISC RECOVERED FROM LOCKER, WHICH ADMITTEDLY CONTAIN IDENTICAL DATAS AS RECORDED ON THOSE LOOSE PAPERS AND ROUGH ACCOUNTS F OUND FROM LOCKER NO.20. 10. THE A.O. HAS NOT ACCEPTED THE ABOVE EXPLANATION OF THE ASSESSEE AND HELD THAT THE STATEMENTS MADE COULD NOT BE TAKEN AT THEIR FACE VALUE BECAUSE THOSE STATEMENTS WERE GIVEN BY THE BENEFICIARIES TH EMSELVES. HE HAS ASSIGNED A REASON THAT AS PER CHOPDA PUJAN THE BOOKS BELON GED TO J.D. SHROFF. AS PER A.O. ONLY SHRI JAYESH IS KNOWN AS J.D.SHROFF IN T HE MARKET. MOREOVER, HE HAS ALSO MENTIONED THAT SHRI JAYESH HAD SEVERAL BANK AC COUNTS IN THE NAME OF M/S. J.D.SHROFF PROPRIETOR JAYESH D.THAKKAR. FINALLY HE HAS GIVEN A FINDING THAT THE INCOME WHICH IS TO BE DETERMINED FROM THOSE BOOKS O F ACCOUNTS HAD IN FACT BELONGED TO SHRI JAYESH D.THAKKAR. CONSEQUENTLY THE ASSESSING OFFICER HAS ALSO GIVEN A FINDING THAT THE UNACCOUNTED INCOME CO MPUTED ON THE BASIS OF THE SEIZED MATERIAL AND THE BOOKS WAS TO BE TAXED PROTECTIVELY IN THE HANDS OF THE SHRI JAYDEEP D.THAKKAR AND THE SUBSTANTIVE ADDI TION WAS MADE IN THE HANDS OF SHRI JAYESH D.THAKKAR. T HIS FINDING OF THE A.O. WAS CHALLENGED BEFORE THE LD. C.I.T. (A). 11. LD. C.I.T. (A) HAS DISCUSSED THIS ISSUE AT LENG TH BY NARRATING THE FACTUAL BACKGROUND, STATEMENTS RECORDED AND THE EVIDENCE FO UND DURING THE COURSE OF THE SEARCH. HE HAS EXAMINED THE AUDITORS REMARKS AS PER THE AUDIT REPORT FURNISHED U/S. 142(2A) OF THE ACT. IN THE SAID REPORT DATED 16.4.2001 IT WAS IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 8 MENTIONED THAT THE OPENING AND CLOSING CASH BALANCE S OF THE REGULAR BOOKS OF A/C OF MR. JADEEP HAVE TALLIED WITH THE SEIZED D OCUMENTS/ BOOKS OF A/C. APPLYING THE SAME LOGIC IT WAS COMMENTED THAT THE B OOKS COULD HAVE PERTAINED TO MR. JAYDEEP. LD. C.I.T. (A) HAS FURTHER COMMEN TED THAT NO CONCLUSIVE PROOF WAS GIVEN BY THE REVENUE TO DEMONSTRATE THAT THE AL LEGED BOOKS PERTAINED TO SHRI JAYESH. LD. C.I.T.(A) HAS ALSO MADE A REFEREN CE OF A STATEMENT OF ONE MR. YUNUS CHHIPA WHO HAS AFFIRMED THAT A CASH LOAN OF R S.2 LACS WAS TAKEN FROM MR. JAYESH, HOWEVER THAT LOAN WAS NOT REFLECTED IN THE BOOKS ALLEGED TO BE OF MR. JAYESH FOUND FROM THE RESIDENCE OF MR. SAMIR. THE RE WAS ALSO A REFERENCE OF CERTAIN DISHONOURING OF CHEQUES IN RESPECT OF THE CASES FIL ED U/S. 138 OF NEGOTIABLE INSTRUMENT ACT BY JAYDEEP AGAINST ONE SHRI VIPULBHAI SEVENTILAL ON 20 TH APRIL,1998 AND ALSO A CASE WAS FILED AGAINST SHRI GAURANG SEVENTILAL ON 7-4-1998 I.E. BOTH BEFORE THE DATE OF THE SEARCH. S INCE ALL THOSE CASES HAVE BEEN FILED BY MR. JAYDEEP THEREFORE, IT WAS COMMENTED BY LD. C.I.T.(A) THAT HAD THOSE AMOUNTS AND BOOKS BELONGED TO THE ELDER BROTHER I.E .MR. JAYESH THEN THOSE COURT CASES SHOULD HAVE BEEN FILED BY JAYESH, BUT IN THE CONTRARY, THE FACTS HAVE REVEALED THAT THE CASE HAVE BEEN FILED BY JAYDEEP. AN ANOTHER FACT HAS ALSO BEEN NOTED THAT VIDE LETTER DATED 25 TH JUNE, 2001 IT WAS BROUGHT TO THE NOTICE OF THE A.O. THAT THOSE BOOKS WERE PARTLY WRITTEN BY TH E ASSESSEE I.E. MR. JAYDEEP. ON THE BASIS OF TOTALITY OF THE CIRCUMSTANCES LD. CIT(A) HAS HELD THAT THE SEIZED BOOKS BELONGED TO THE ASSESSEE AND THE ASSES SMENT HAS TO BE MADE ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSES SEE, MR. JAYDEEP D. THAKKAR. THIS FINDING HAS BEEN CHALLENGED BY THE REVENUE. 12. FROM THE SIDE OF THE REVENUE LD. C.I.T.( D.R.) SHRI SHELLY JINDAL HAS VEHEMENTLY OPPOSED THE SAID VIEW OF LD. C.I.T. (A). HE HAS PLEADED THAT THE NAME COMMONLY KNOWN IN THE MARKET WAS J.D. SHROFF WHICH WAS CONTROLLED AND RUN BY THE ELDER BROTHER MR. JAYESH. HE HAS ALSO M ENTIONED THAT ON THE DAY OF SEARCH ONLY MR. JAYESH WAS AVAILABLE AND HIS STATEM ENT WAS RECORDED BUT AT THAT TIME HE HAS NOT SUGGESTED THAT THE BUSINESS WAS BEI NG RUN BY HIS YOUNGER IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 9 BROTHER SHRI JAYDEEP. LD. COMMISSIONER MR. JINDAL HAS ALSO DRAWN OUR ATTENTION ON CERTAIN BANK ACCOUNTS TO DEMONSTRATE THAT THE NA ME J.D. SHROFF WAS CLEARLY LINKED WITH THE NAME OF SHRI JAYESH AS PROPRIETOR, THEREFORE, THE BOOKS OF ACCOUNTS ON WHICH THE NAME MENTIONED WAS J.D. SHRO FF FACTUALLY BELONGED TO MR. JAYESH. HE HAS ALSO STATED THAT THE REMARK OF THE SPECIAL AUDITOR MUST NOT BE RELIED UPON FOR THE PURPOSE OF DECIDING THE ISSU E OF OWNERSHIP OF THE BOOKS OF ACCOUNTS BECAUSE THE SPECIAL AUDITOR WAS NOT APPOIN TED TO DECIDE THE ISSUE OF OWNERSHIP. THE LD. C.I.T. ( DEPARTMENTAL REPRESENTA TIVE) HAS ALSO EMPHASIZED THAT THE OVERALL CONDUCT OF THE APPELLANT WAS NOT F AIR BECAUSE THEY HAVE MANIPULATED ONE OF THE BANK AND PLANTED THE ALLEGED BOOKS OF ACCOUNTS IN THE SAID LOCKER. HE HAS THEREFORE, PLEADED THAT THERE WAS NO JUSTIFICATION ON THE PART OF LD. C.I.T. (A) TO REVERSE THE FINDINGS OF THE A. O. 13. FROM THE SIDE OF THE ASSESSEE LD. A.R. MR. S. N . SOPARKAR APPEARED AND VEHEMENTLY SUPPORTED THE VIEW TAKEN BY LD. C.I.T.(A ) 14. WE HAVE HEARD BOTH THE PARTIES AT CONSIDERABLE LENGTH AND ALSO CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED AND EVIDENCES PLACED ON RECORD. THE QUESTION WHICH IS TO BE ADDRESSED IS THAT WHO IS THE OWNER OF THE BOOKS OF ACCOUNTS SEIZED FROM T HE RESIDENCE OF SHRI SAMEER AND FROM THE LOCKER NO.20 OF JANTA SAHKARI BANK. O N ONE HAND, THE A.O. HAS HELD THAT THE SEIZED BOOKS OF ACCOUNTS BELONGED TO THE ELDER BROTHER MR. JAYESH; THEREFORE, TAXED THE UNDISCLOSED INCOME ON SUBSTANT IVE BASIS IN THE HANDS OF MR. JAYESH. THE A.O. HAS TAXED THAT UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE-APPELLANT MR. JAYDEEP D THAKKAR ON PROTECT IVE BASIS. ON THE OTHER HAND, LD. C.I.T.(A) HAS TAKEN A VIEW, AFTER APPRAIS AL OF THE STATEMENTS AND EVIDENCES RECORDED, THAT THE ASSESSEE MR. JAYDEEP T HAKKAR IS THE OWNER OF THE SEIZED MATERIAL THEREFORE, THE ASSESSMENT WAS DIREC TED TO BE MADE SUBSTANTIVELY IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 10 IN THE HANDS OF MR. JAYDEEP THAKKAR. TO RESOLVE TH IS CONTROVERSY, WE HAVE EXAMINED THE FOLLOWING EVIDENCES AND THE STATEMENTS . (A) AT THE TIME OF SEARCH I.E. ON 22-9-1998 ONLY EL DER BROTHER MR. JAYESH WAS PRESENT. FROM THE ORDERS OF THE AUTHORITIES BELOW I T DID NOT TRANSPIRE THAT ANY SPECIFIC QUESTION ABOUT THE OWNERSHIP OF THE SE IZED MATERIAL WAS RAISED. THEREAFTER, JAYESH WAS SUMMONED BY ADIT BY ISSUING NOTICE U/S.131 AND HIS STATEMENT WAS RECORDED ON 31-12-1998. IT WAS HIGHLIGHTED THAT IN THE SAID STATEMENT MR. JAYESH HAS ACKNOWLEDGED THE FACT THAT THE IMPUGNED UNAACOUNTED BUSINESS WAS BEI NG RUN BY MR.JAYDEEP AND THE ENTRIES IN THOSE UNDISCLOSED BOOKS BELONGED TO HIS YOUNGER BROTHER MR. JAYDEEP. (B) STATEMENT OF THE ACCOUNTANT MR. SAMEER WAS FOUND TO BE VERY RELEVANT. THOUGH HE WAS NOT PRESENT ON THE DATE OF SEARCH BUT LATER ON HE WAS SUMMONED U/S. 131(1A) ON 16-12-1998 BY AD.I. HE HA D SENT A LETTER ON 30-12-1998 ACKNOWLEDGING THE FACT THAT THE SEIZED M ATERIAL BELONGED TO MR. JAYDEEP. THEREAFTER, ON 6-1-1999 HIS STATEMENT WAS RECORDED U/S. 131 WHEREIN HE HAS STATED ABOUT THE NATURE OF THE ENTRY OF RS.5,25,000/- IN THE NAME OF J. D. SHROFF. FURTHER VIDE QUESTIO N NO.8 THE DETAILS OF J D.SHROFF BUSINESS HAVE BEEN ENQUIRED. HE HAS ANSWE RED THAT J.D.SHROFF MEANS JAYDEEP DHIRAJLAL THAKKAR. (C) REGARDING THE STATEMENT OF THE ASSESSEE HIMSELF, SINCE HE WAS NOT PRESENT ON THE DATE OF SEARCH OPERATION, THEREFORE, HE WAS SUMMONED U/S. 131(1A) ON 16-12-1998 AND HE HAS SUBMITTED THE REPL Y ON 30-12-1998. HIS STATEMENTS WAS RECORDED ON 8-1-1999 AND VIDE QUESTION NO.3, QUESTION NO.4 AND QUESTIONNO.20 HE HAS AFFIRMED THA T THE BOOKS WRITTEN BY MR. SAMEER BELONGED TO HIM AND THAT LOCKER NO.20 ALSO BELONGED TO HIM. THIS WAS THE FIRST STATEMENT WHICH WAS RECORDED OF THE ASSESSEE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 11 U/S. 131 AFTER THE DATE OF THE SEARCH. LATER ON, VI DE AN ANOTHER STATEMENT RECORDED ON 19-1-1999 IN REPLY TO QUESTION NO.20 TH E ASSESSEE HAS AGAIN AFFIRMED THOSE FACTS. SUBSEQUENTLY DURING THE COUR SE OF INVESTIGATION VIDE TWO REPLIES DATED 11-6-2001 AND 12-6-2001 THE ASSES SEE HAS AGAIN STATED THAT HE HAPPENED TO BE THE OWNER OF THE SEIZED BOOK S, MARKED AS J.D. SHROFF BUT THE BOOKS BELONGED TO HIM. (D) THERE WAS A REFERENCE OF CASH BALANCE IN THE REGULAR BOOKS OF ACCOUNTS WHICH HAD TALLIED WITH THE LOOSE PAPERS RELATED TO THE UNACCOUNTED BUSINESS. THE CASH BALANCE WHICH WAS ACCOUNTED IN THE BOOKS OF ACCOUNTS OF PARI JAYDEEP THAKKAR DHIRAJLAL (PROP. J AYDEEP THAKKAR) WAS STATED TO HAVE TALLIED WITH THE CASH BALANCE RE CORDED IN THE LOOSE PAPERS RELATED TO THE UNACCOUNTED BUSINESS. (E) THE REMARK OF THE SPECIAL AUDITOR WAS ALSO INDICATIVE THAT THE UNACCOUNTED CASH BOOK HAD REFLECTED THE OPENING AND CLOSING CASH BALANCE WHICH HAD TALLIED WITH THE REGULAR BOOKS OF ACCOUNTS OF THE BUSINESS RUN BY SHRI JAYDEEP IN THE NAME OF PARI J AYDEEPKUMAR DHIRAJLAL. (F) A THIRD PARTY EVIDENCE OF THE DIRECTOR OF ARUNA FINSTOCK PVT. LTD., HAS ALSO BEEN RELIED UPON WHO HAS IDENTIFIED AND CONFIR MED THAT AN UNACCOUNTED TRANSACTION HAD RELATED TO SHRI JAYDEEP . (G) THERE WAS A REFERENCE OF CERTAIN CIVIL SUITS FILED UNDER NEGOTIABLE INSTRUMENT ACT AGAINST FEW DEFAULTED PERSONS AND THOSE SUITS WERE FILED BY SHRI JAYDEEP THAKKAR. THOSE SUITS WERE FILED PRIOR TO THE SEARCH TO WHOM MONEY WAS CLAIMED TO HAVE BEEN ADVANCED OUT O F UNACCOUNTED BUSINESS. NAMES MENTIONED WERE VIPULBHAI SEVENTILA L WHOSE CHEQUE WAS DISHONOURED AND SUIT WAS FILED ON 20-4-1998 AND AN ANOTHER NAME OF IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 12 SHRI GAURANG SEVENTILAL IN WHOSE CASE AS WELL DUE T O DISHONOUR OF CHEQUE A LEGAL ACTION WAS TAKEN ON 7 TH APRIL, 1998. 15. ON THE BASIS OF THE ABOVE SUMMARY OF THE CONNEC TED FACTS IN RESPECT OF THE ISSUE IN HAND, WE HEREBY ALSO ARRIVE AT THE SAM E CONCLUSION THAT THERE WAS NO SUBSTANCE IN THE STAND TAKEN BY THE ASSESSING OF FICER THAT THE BUSINESS IN QUESTION AND THE INCRIMINATING MATERIAL SEIZED DID NOT BELONG TO THE ASSESSEE. THE IMPORTANCE OF A STATEMENT HAS BEEN ADJUDGED BY THE RESPECTED COORDINATE BENCH PUNE IN A CASE OF CHANDER MOHAN ME HTA 71 ITD 245 WHEREIN IT WAS OPINED THAT A STATEMENT OF AN ASSES SEE U/S 131 ADMITTING MONEY-LENDING ACTIVITIES HAS TO BE ACCEPTED IN TOTO AND NOT PARTLY. ONE MORE DECISION WORTH FOR REFERENCE IS ITO VS GHANSHYAMBHAI R.THAKKAR 56 TTJ 460 (AHD.) AND IN THIS DECISION ALSO IT WAS HELD THAT A STATEM ENT HAS TO BE READ IN ITS ENTIRETY. ONCE IT WAS AN ADMITTED FACTUAL POSITION THAT CONSE QUENT UPON THE SEARCH AN UNACCOUNTED MONEY LENDING BUSINESS WAS UN EARTHED THEN A STATEMENT OF A PERSON, WHO IS DIRECTLY DEALING WITH THE SAID UNDISCLOSED BUSINESS OR A PERSON WRITING THE ACCOUNTS OF THE SAID BUSINESS, HAS TO BE GIVEN DUE CREDENCE . THUS THE TOTALITY OF THE CIRCUMSTANCES, STATEMENTS OF THE CONCERNED PERSONS, TALLY OF CASH BALANCE, REPORT OF THE SPECIAL AUDITOR, CIV IL SUITS FILED FOR RECOVERY ETC., THUS LEADS TO A CONCLUSION THAT LD. C.I.T. (A) HAS RIGHTLY HELD THAT THE ASSESSMENT OUGHT TO HAVE BEEN MADE SUBSTANTIVELY IN THE HANDS OF THE ASSESSEE MR. JAYDEEP. WE ALSO HOLD ACCORDINGLY AND CONFIRM THE F INDINGS OF THE FIRST APPELLATE AUTHORITY. RESULTANTLY, THIS GROUND OF THE REVENUE IS HEREBY DISMISSED AND CONSEQUENTLY THIS APPEAL IS DISMISSED. (B) IT(SS) 137/AHD/2003 (ASSESSEES APPEAL) 16. BEFORE WE PROCEED WITH THE GROUNDS OF APPEAL AS PER THE APPEAL MEMO, WE SHALL CONSIDER THE QUESTION OF JURISDICTION WHIC H WAS RAISED THROUGH ADDITIONAL GROUNDS DURING THE COURSE OF HEARING, REPRODUCED BE LOW. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 13 ADDITIONAL GROUND NO.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. ASSESSING OFFICER HAS FAILED TO ISSUE THE MANDATORY NOTICE U/ S. 143(2) IN PURSUANCE OF A VALID RETURN FILED IN RESPONSE TO TH E NOTICE ISSUED U/S. 153BC AND, THEREFORE, THE REQUIREMENT OF NOTICE U/S . 143(2) CANNOT BE DISPENSED WITH AS PER ACIT VS. HOTEL BLUE MOON (201 0) 321 ITR 362 (SC)AND THEREBY ERRED IN ASSUMING A VALID AND PROPE R JURISDICTION TO PASS THE IMPUGNED ASSESSMENT ORDER U/S. 158 BC. ADDITIONAL GROUND NO.2. WITHOUT PREJUDICE TO THE GROUND NO.1 AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, SINCE AS PER ASSESSMENT ORDER THE SPECIAL AUDIT U/S. 142(2)(A) IS IGNORED BY THE ASS ESSING OFFICER THDEN THE TIME LIMIT BEYOND 31-12-2000 ON THE BASIS OF SUCH AUDIT MAY BE HELD AS UNAVAILABLE AND THE ASSESSMENT ORDER DATED 27-6- 2001 IS BARRED BY LIMITATION. ADDITIONAL GROUND NO.3. WITHOUT PREJUDICE TO THE GROUND NO.2 ABOVE IF TH E AUDIT REPORT IS THERE ON THE RECORD THEN THE EFFECT OF SUCH AUDI T REPORT ON THE ADDITIONS MADE BE TAKEN INTO CONSIDERATION, IF GROU ND NO.2 IS REJECTED ON THE GROUND THAT TIME LIMIT WAS RIGHTLY EXTENDED BECAUSE OF THE PRESENCE OF SPECIAL AUDIT AND ITS EXISTENCE CANNOT BE IGNORED THEN ITS EXISTENCE IN TOTALITY HAS TO BE TAKEN INTO ACCOUNT AS NO DEFECT ON THE AUDIT REPORT WAS PINPOINTED BY THE AU THORITIES BELOW. 17. APROPOS ADDITIONAL GROUND NO.1 THE LD. A.R. MR. SOPARKAR HAS TRIED TO DEMONSTRATE THAT NO VALID NOTICE U/S.143 (2) WAS IS SUED THEREFORE, THE SUBSEQUENT PROCEEDINGS U/S. 158BC WERE INVALID. IN THIS REGARD HE HAS PLACED A COPY OF THE ORDER SHEET WHICH WAS FOUND TO BE WRITT EN FROM 1-3-2001. LD. A.R HAS INFORMED THAT THERE WAS NO MENTION OF ISSUANCE OF ANY NOTICE U/S.143(2). FURTHER, IT WAS HIGHLIGHTED THAT A NOTICE U/S. 143( 2) WAS ISSUED DATED 4-8-2000 IN THE NAME OF SHRI JAYDEEP D. THAKKAR, BY DCIT, CENTR AL CIRCLE 1(2) HOWEVER, VIDE AN INTIMATION DATED 15-12-2000 BY DCIT CENTRAL CIRC LE-1(2),AHMEDABAD IT WAS INFORMED TO THE ASSESSEE THAT THE SAID NOTICE U/S.1 43(2) DATED 4-8-2000 WAS WRONGLY ISSUED. IN THE SAID INTIMATION IT WAS REMA RKED THAT THE SAID NOTICE DATED IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 14 4-8-2000 WOULD BE TREATED AB INITIO VOID AND THUS STOOD CANCELLED. THE FACTS RELATING TO THE SAID ALLEGATION OF NON ISSUANCE OF NOTICE U/S. 143(2) AND THE CONTENTION OF LD.A.R. WERE COMMUNICATED DURING THE COURSE OF HEARING TO THE OPPOSITE SIDE. LD. CIT (D.R.) MR. SHELLY JINDAL HAS REQUESTED TO GRANT FEW DAYS TIME TO VERIFY THE CORRECTNESS OF THE SAID ALLEGATI ON. A DATE OF HEARING WAS ACCORDINGLY GRANTED. THEREAFTER, LD. D.R. MR. JINDA L HAS PLACED ON RECORD A NOTICE U/S. 143(2) DATED 15-6-2001 STATED TO BE DUL Y ISSUED IN THE NAME OF SHRI JAYDEEP D. THAKKAR BY DICT CENTRAL CIRCLE 1(2) AHMEDABAD. LD. MR. JINDAL HAS SAID THAT THROUGH THE SAID NOTICE IT WAS CLEARLY INTIMATED THAT CERTAIN POINTS IN CONNECTION WITH THE RETURN OF INCOME, SUB MITTED ON 18-12-2000, WERE TO BE ENQUIRED. LD. MR. JINDAL HAS ALSO PLACED ON REC ORD A DETAILED SHOW CAUSE NOTICE OF DCIT CENTRAL CIRCLE 1(2) AHMEDABAD DATED 14-6-2001 ON THE BASIS OF THESE TWO EVIDENCES/ NOTICES IT WAS VEHEMENTLY OPPO SED THAT THE SAID ADDITIONAL GROUND HAS WRONGLY BEEN RAISED AND TOTALLY AGAINST THE FACTS AS AVAILABLE ON RECORD. IT HAS ALSO BEEN CONTESTED THAT THE RELIANC E PLACED ON THE DECISION OF HOTEL BLUE MOON 321 ITR-362 WAS WRONG BECAUSE THE REQUISITE CONDITION OF ISSUANCE OF NOTICE U/S. 143(2) WITHIN THE TIME PRES CRIBED WAS FULFILLED. SINCE THERE WAS NO PROCEDURAL IRREGULARITY THEREFORE THIS ADDITIONAL GROUND NO 1 DESERVES TO BE DISMISSED. 18. ON APPRECIATION OF THE FACTS WE FIND NO FOR CE IN THE FIRST PLANK OF ARGUMENT OF LD. MR. SOPARKAR, REASON BEING THAT CONSEQUENCE UPON THE SEARCH ( DT. 22.9.98), AND CONSEQUENCE UPON THE STATUTORY NOTICE U/S 158 BC DATED 23.9.99, A RETURN WAS FILED ON 18.12.200 . NATURALLY THE SAID NOTICE U/S 143(2) BEING DATED 4.8.200 WAS OF NO SIGNIFICANCE SINCE BY THAT TIME THE RETURN WAS NOT IN EXISTENCE. IT WAS RIGHTLY DECIDED BY THE REVENUE TO WITHDRAW THE SAME VIDE AN INTIMATION DATED 15.12.200. WE THEREFORE HOLD THAT THE SAID ACTION OF THE REVENUE WAS OF NO CONSEQUENCE SO AS TO ADVERSELY EF FECT THE SUBSEQUENT ACTION AND THE PROCEEDINGS INITIATED AGAINST THE ASSESSEE. THIS PART OF THE ARGUMENT IS THEREFORE REJECTED. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 15 18.1. HAVING HEARD THE SUBMISSIONS OF BOTH SIDES ON THE SECOND PLANK OF THE ARGUMENTS AND ON CAREFUL PERUSAL OF THE EVIDENC ES PLACED ON RECORD WE EVEN FIND NO FORCE IN THIS ADDITIONAL GROUND OF THE ASSE SSEE. RATHER WE HEREBY PREFER TO COMMENT THAT A RESPONSIBLE LITIGANT MUST NOT RAI SE A FRIVOLOUS ISSUE WHICH, ON THE FACE OF IT, DID NOT EXIST ON THE RECORDS. THE SERVICE OF SAID NOTICE OF HEARING U/S 143(2) DT. 15.6.2001 OUGHT TO BE IN THE KNOWLED GE OF THE RECIPIENT AND SO IN SUCH CIRCUMSTANCES, THE ASSESSEE, THEREFORE, IS EXPECTED NOT TO RAISE SUCH AN ISSUE WHICH IS UNDISPUTEDLY IN HIS PERSONAL KNOWLED GE. RATHER WE PLACE ON RECORD A WORD OF APPRECIATION FOR MR. SHELLY JINDAL FOR HIS SINCERE EFFORTS AND PROMPTNESS IN PLACING ON RECORD THE CORRECT EVIDENC E I.E. THE NOTICE U/S. 143(2) DATED 15-6-2001 WHICH WAS DULY FOUND SERVED ON THE ASSESSEE. SINCE IN COMPLIANCE OF A NOTICE U/S 158BC A RETURN WAS FI LED WHICH WAS, THEREAFTER, FOLLOWED BY THE STATUTORY NOTICE U/S 143(2), THEREF ORE, THE A.O. HAD LEGITIMATELY ASSUMED THE JURISDICTION AND IN CONSEQUENCE THEREO F THE ASSESSMENT PROCEEDINGS WERE VALIDLY COMMENCED. THIS ADDITIONAL GROUND IS DISMISSED. 19. APROPOS ADDITIONAL GROUND NO.2 , WE HAVE HEARD BOTH THE SIDES AND ALSO CAREFULLY PERUSED THE ASSESSMENT ORDER. WE ARE NOT IN AGREEMENT WITH THE COMMENT OF LD. A.R. THAT THE SPECIAL AUDIT U/S. 142 (2A) WAS IGNORED IN ITS TOTALITY BY THE A.O. THE REVENUE DEPARTMENT HAD MADE REFERE NCES ON SEVERAL OCCASSIONS OF THE SPECIAL AUDIT THEREFORE, THERE WA S NO LIKELIHOOD OF IGNORING THE SPECIAL AUDIT. WHAT WE HAVE NOTICED IS THAT FEW REM ARKS OR SOME OF THE CONCLUSION ON SOME POINTS OF THE SPECIAL AUDITOR WE RE NOT FOLLOWED BY THE ASSESSING OFFICER, BUT IT WAS NOT THE SITUATION THA T THE SAID SPECIAL AUDIT WAS ALTOGETHER IGNORED IN-TOTO BY THE ASSESSING OFFICER. ONCE WE HAVE TAKEN THIS VIEW, THEREFORE, THE CONSEQUENCE IS THAT THE LIMITATION OF FINALIZAT ION OF ASSESSMENT GOT EXTENDED FOR THE PERIOD DURING WHICH THE SPECIAL AUDITOR SOUGHT TIME FOR THE COMPLETION OF SPECIAL AUDIT. ACCORDING TO US, FOR THIS IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 16 REASON THE IMPUGNED ASSESSMENT ORDER WOULD NOT BE T REATED AS BARRED BY LIMITATION. RESULTANTLY THIS ADDITIONAL GROUND NO.2 IS HEREBY D ISMISSED. 20. APROPOS ADDITIONAL GROUND NO.3 THE SAME APPEARS TO BE CONSEQUENTIAL TO ADDITIONAL GROUND NO.2 BECAUSE THE EXISTENCE OF SPECIAL AUDIT REPORT COULD NOT BE, RATHER SHOULD NOT BE DENIED. THE CONTENTION OF THE ASSESSEE AS RAISED THROUGH THIS ADDITIONAL GROUND IS THAT THE REPORT O F THE AUDITOR MUST BE FOLLOWED IN TOTALITY. ON HEARING BOTH THE SIDES WE ARE ALSO OF THE VIEW THAT THERE OUGHT NOT TO BE TWO OPINIONS THAT THE SUGGESTIONS, REMARKS AND O BSERVATIONS ETC., OF A DULY APPOINTED SPECIAL AUDITOR MUST BE TAKEN INTO ACCOUN T AS FAR AS APTLY APPLICABLE ON THE FACTS OF THE CASE. IN OUR OPINION, THIS GRO UND HAS BEEN ADDITIONALLY RAISED MERELY WITH AN APPREHENSION THAT WHILE DECIDING THE MERITS OF THE CASE THE FINDINGS ON SOME OF THE ISSUES OF THE SPECIAL AUDIT OR MAY LOOSE THE SIGHT OF THE APPELLATE AUTHORITY. THIS APPREHENSION APPEARS TO B E INCORRECT DUE TO THE FUNDAMENTAL REASON THAT A REPORT OF SUCH A QUALIFIE D TECHNICAL PERSON DOES ASSIST IN ARRIVING AT THE CORRECT AND JUST DECISION. SUB JECT TO THESE REMARKS THIS ADDITIONAL GROUND IS THEREFORE, ACCEPTED. 21. MAIN GROUNDS OF APPEAL AS PER THE APPEAL MEMO A RE TO BE DECIDED AS FOLLOWS:- GROUND NO.1 . THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT THE SEIZED MATERIAL FOUND FROM LOCKER NO.20 OF JANTA SAHAKARI BANK LTD. , RADHANPUR NOT AS A PART OF SEARCH AND NOT TO BE BELONGING TO THE APPELLANT. 22. FACTS IN RESPECT OF THE EXISTENCE OF LOCKERS, A S EMERGED FROM THE ASSESSMENT ORDER, WERE THAT DURING THE COURSE OF SE ARCH A LOCKER KEY WAS SEIZED FROM THE RESIDENCE OF MR. JAYDEEP. SINCE THE ASSESS EE WAS NOT AVAILABLE THEREFORE, THE NAME OF THE BANK OF THE LOCKER WAS N OT IDENTIFIED. AS PER A.O, ON INVESTIGATION IT WAS FOUND THAT THERE WAS A LOCKER IN CENTRAL BANK OF INDIA IN THE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 17 NAME OF MR. JAYESH AND AN ANOTHER PERSON SHRI PRAVI N D. THAKKAR. AS PER THE SUBSEQUENT EVENTS, THE ASSESSEE SHRI JAYDEEP WROTE A LETTER TO THE DEPARTMENT ON-26.11.98 , TWO MONTHS AFTER THE SEARCH, THAT ONE LOCKER EXIST ED IN THE NAME OF MR. JAYESH WITH CENTRAL BANK OF INDI A. THE KEY OF THAT LOCKER WAS FOUND AT THE TIME OF SEARCH. VIDE SAID LETTER IT WA S ALSO INFORMED THAT THERE WAS ONE MORE LOCKER EXISTED STATED TO BE OPERATED BY HI M (JAYDEEP) SITUATED IN JANTA SAHKARI BANK, MARKET YARD RADHANPUR. IT WAS INFORM ED THAT THE LOCKER KEY WAS NOT AVAILABLE TO HIM SINCE SEIZED BY THE DEPARTMENT SO HE WAS NOT SURE THAT OUT OF THE TWO LOCKERS WHICH LOCKER KEY WAS SEIZED BY T HE DEPARTMENT. THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT NORMA LLY NO ONE WOULD DISCLOSE THE LOCKER VOLUNTARILY. THE ASSESSING OFFICERS OTHER O BSERVATION WAS THAT THE SAID LOCKER WAS OPERATED ON 21-9-1998, ONE DAY PRIOR TO THE SEARCH, BY THE ASSESSEE. THE ASSESSING OFFICER HAS HELD THAT THE SAID STATE MENT OF SHRI JAYDEEP WAS UNTRUSTWORTHY. IN THE ASSESSMENT ORDER FEW MORE FACTS ABOUT THIS LOCKER HAVE ALSO BEEN REVEALED, THAT THE REVENUE DE PARTMENT HAD CONDUCTED A SEARCH ON 25-5-99 ON THE SAID BANK AT RADHANPUR . THE ASSESSING OFFICER HAS NOTED THAT CERTAIN IRREGULARITIES WERE FOUND IN THE LOCKER RECORD OF THE BANK. IT WAS ALSO ALLEGED THAT CASH VOUCHER IN RESPECT OF LO CKER RENT HAS ALSO BEEN MANIPULATED. IT WAS ALSO ALLEGED THAT THE LOCKER RE CORD WAS MAINTAINED ON LOOSE SHEETS WHICH COULD BE REPLACED EASILY. IT HAS ALSO BEEN ALLEGED THAT IN THE RECORDS OF LOCKER NO.20 THE TWO NAMES I.E. THE NAME OF SHRI JAYDEEP AND THE NAME OF SHRI SAMIR HAVE BEEN ADDED BUT AFTER THE SE ARCH. THAT IT WAS ALSO FOUND THAT AS PER THE RENT RECEIPT OF RS.60/- DATED 5-9-1 997 OF LOCKER NO.20 ONLY ONE NAME WAS APPEARING ORIGINALLY OF ONE SHRI BHAILALB HAI B.THAKKAR, HOWEVER, THE NAME OF SHRI JAYDEEP AND SHRI SAMIR WERE ADDED LAT ER ON; AS IT WAS FOUND TO BE WRITTEN WITH A DIFFERENT CARBON. THEREAFTER, THE AS SESSING OFFICER HAS DISCUSSED THE NORMAL PROCEDURE FOR THE MAINTENANCE OF LOCKER RECORDS AND OPERATION OF LOCKER AS ALSO THE GUIDED INSTRUCTIONS FOR MAINTENA NCE AND OPERATION OF A LOCKER BY A BANK. THE ASSESSING OFFICER HAS CONCLUDED THA T THE BOOKS OF ACCOUNTS ETC., WHICH WERE FOUND FROM LOCKER NO.20 OF JANTA SAHKARI BANK WERE IMPLANTED AFTER IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 18 THE SEARCH. THE ASSESSING OFFICER HAS ALSO DRAWN A CONCLUSION THAT THOSE DOCUMENTS WERE MANIPULATED AND KEPT IN THE LOCKER A FTER THE SEARCH. THE RESULT OF THOSE OBSERVATIONS WAS THAT THE DOCUMENTS WHICH WERE FOUND IN LOCKER NO.20 WERE NOT ACCEPTED BY THE ASSESSING OFFICER . THE SAID FINDING OF THE ASSESSING OFFICER WAS CHALLENGED. 23. BEFORE LD. CIT (A) THIS ISSUE WAS DISCUSSED AT LENGTH. FROM THE SIDE OF THE ASSESSEE IT WAS VEHEMENTLY CONTESTED THAT THERE WAS NO POSSIBILITY OF MANIPULATION IN THE BANK RECORDS AND THE LOCKER NO. 20 WAS JOINTLY HELD BY THE ASSESSEE WITH OTHER TWO PERSONS. IT WAS CLAIMED THA T THE DUPLICATE ACCOUNTS OF THE UNACCOUNTED BUSINESS WERE KEPT BY THE ASSESSEE FOR THE REASONS OF SECRECY. HOWEVER, LD. C.I.T.(A) WAS NOT CONVINCED AND IN HI S OPINION, AS PER THE SEQUENCE OF EVENTS IN RESPECT OF THE BANK LOCKER TH E ASSESSEE HAS MANAGED TO IMPLANT THE DOCUMENTS WITH THE CONNIVANCE OF THE BA NK OFFICIALS. THE LD. C.I.T (A) HAS CONCLUDED AS UNDER:- 6.4. I HAVE CONSIDERED THE ISSUE CAREFULLY. SO FAR AS THIS ISSUE IS CONCERNED, THE SEQUENCE OF EVENTS AND FACTS FOUND D URING THE COURSE OF SEARCH AT BANK LOCKER CLEARLY SUGGEST THA T WITH CONNIVANCE OF THE COOPERATIVE BANK OFFICIALS, THE SHOW OF PUTT ING THE COMPUTERIZED DISC/COPIES WAS STAGE MANAGED. COOPERA TIVE BANKS AT AHMEDABAD HAVE ALREADY EARNED A BAD NAME FOR THEIR DEALINGS AND THIS APPEARS TO BE ONE OF THEM. EVEN THE CONDUCT OF THE APPELLANT WAS DOUBTFUL. JUST ONE DAY PRIOR TO THE DATE OF SEA RCH, THE LOCKER WAS ALLEGEDLY OPERATED AND AS PER THE STATEMENT OF THE BANK EMPLOYEE, THESE NAMES WERE ADDED ON 2-12-1998. IT CLEARLY SH OWS THAT THIS ENTIRE EXERCISE WAS DONE SO THAT THE ALLEGED CLAIM OF BAD DEBTS MAYBE MADE BY WRITING OFF ALL THE ACCOUNTS AS BAD D EBTS. THERE ARE SOME OTHER FACTS ALSO WHICH INDICATE TOWARDS THIS. THE APPELLANT IN SUBMISSION DATED 18-2-2002 STATED THAT IN HIS PRIMA RY BOOKS, BAD DEBT ENTRIES WERE NEVER PASSED AND IF NECESSARY, CA PITAL ACCOUNT WAS DEBITED. IF THAT WAS SO, THEN EVEN IN ACCOUNTS SEIZED FROM SAMIRBHAIS PREMISES, ALL THE BAD DEBT ENTRIES SHOU LD HAVE BEEN WRITTEN OFF TO THE CAPITAL ACCOUNT, BUT THAT IS NOT THE CASE. BESIDES THIS, IT HAS BEEN STATED THAT ALL THE ACCOUNTS INCL UDING THE ACCOUNTS SEIZED FROM SAMIRBHAI WERE MAINTAINED ON ZIP DISC A LSO. HOWEVER, AT THE TIME OF SEARCH, IT WAS STATED THAT THEIR COMPUT ER SYSTEM WAS NOT WORKING FOR THE LAST 3 TO 4 MONTHS .IT CLEARLY SHOW S THAT NO SUCH IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 19 ENTRIES, ALMOST TILL THE DATE OF SEARCH, COULD BE M ADE ON COMPUTER. ALL THIS SHOWS THAT THE PAPER SEIZED FROM BANK LOCK ER WERE PLANTED THEREIN AT A LATER DATE AND HENCE HAVE NO EVIDENTIA RY VALUE. HENCE, THIS GROUND IS DECIDED AGAINST THE APPELLANT. THIS FACTUAL FINDING IS NOW CHALLENGED BEFORE US. 24. FROM THE SIDE OF THE APPELLANT LD. A.R. MR. SOP ARKAR APPEARED AND VEHEMENTLY OPPOSED THE FINDINGS OF THE AUTHORITIES BELOW. HE HAS STRONGLY CONTESTED THE ADVERSE REMARK OF THE ASSESSING OFFIC ER AND LEARNED CIT (APPEALS) MADE AGAINST THE BANK OFFICIALS. HE HAS CHALLENGED THOSE OBSERVATIONS ON THE GROUND THAT THE REVENUE OFFICER HAD NO AUTHORITY TO COMMENT ON THE DAY-TO-DAY FUNCTIONING OF THE BANK O PERATION. AN ELABORATE ARGUMENT WAS RAISED, HOWEVER, THE SALIENT POINTS WE RE THAT THE ASSESSEE HAS INTIMATED THE EXISTENCE OF THE LOCKER AT THE EARLIE ST WHEN OPPORTUNITY WAS GRANTED. HE HAS INFORMED THAT ON THE DATE OF SEARCH SHRI JAYDEEP WAS NOT PRESENT AND EVEN ON THE NEXT DAY OF THE SEARCH I. E. ON 23-9-1998 WHEN THE SEARCH WAS CARRIED OUT AT THE RESIDENCE OF MR.SAMIR , HE WAS NOT AVAILABLE TO TELL ABOUT SUCH FACTS. THEREAFTER, A LETTER WAS ISSUED BY ADIT ON 14-10-1998 WHICH COULD NOT BE DELIVERED DUE TO WRONG ADDRESS HOWEVER , FINALLY IT WAS SERVED ON 23-11-1998 AND THE ASSESSEE HAD GIVEN A REPLY ON 26 -11-1998, REFERRED AS UNDER:- I HAVE RECEIVED A COPY OF ABOVE REFERRED LETTER O N 23RD NOVEMBER, 1998. IN THIS CONNECTION I HAVE TO STATE THAT GODREJ KEY BEARING NO.630 FOUND DURING THE COURSE OF SEARCH E ITHER PERTAINS TO A LOCKER PROVIDED BY CENTRAL BANK OF INDIA, LAL DAR WAJA BRANCH, AHMEDABAD OR JANTA BANK, MARKET YARD BRANCH, RADHAN PUR DISTRICT BANASKANTHA BECAUSE KEY OF ONE OF THE LOCKERS IS LO ST AND I AM NOT SURE THAT THE KEY BEARING NO.630 PERTAINS TO WHICH PARTICULAR LOCKER. THE LOCKER WITH CENTRAL BANK OF INDIA, LALDARWAJA B RANCH, AHMEDABAD IS HELD BY MY BROTHER JAYESH DHIRAJLAL TH AKKAR AND LOCKER WITH JANTA BANK, MARKET YARD BRANCH, RADHANP UR IS JOINTLY HELD BY ME. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 20 25. MR. SOPARKAR HAS ACCEPTED THAT UNDISPUTEDLY THE ASSESSEE HAS INFORMED ABOUT THE SAID LOCKER VOLUNTARILY BUT HE HAD NO ALT ERNATIVE, HOWEVER, IT WAS IN GOOD-FAITH. TO BUTTRESS THIS STATEMENT HE HAS FURTH ER ELABORATED THAT ONE KEY WAS SEIZED BY THE REVENUE AND THE ASSESSEE WAS NOT DEFI NITE TO WHICH BANK IT PERTAINED, THEREFORE THOUGHT IT APPROPRIATE TO TEL L THAT EITHER SEIZED KEY WAS OF CENTRAL BANK LOCKER OR IT PERTAINED TO SAHAKARI BAN K LOCKER. HE HAS THUS PLEADED THAT THERE WAS A CONFUSION ABOUT THE LOCKER KEY SEIZED BY THE REVENUE DEPARTMENT, AS IT WAS EVIDENT FROM THE SAID ENQUIRY LETTER ITSELF, THEREFORE, THE ASSESSEE HAD NO OPTION BUT TO INFORM THAT THE SAID LOCKER WAS EITHER OF CENTRAL BANK OR JANTA SAHKARI BANK. THE ALLEGATION OF ANY MANIPULATION HAS BEEN STRONGLY REFUTED BY LD. A.R. THE LD. AR HAS ALSO ME NTIONED THAT A SEARCH WAS CARRIED OUT AT THE BANK PREMISES BUT NOTHING SPECI FIC WAS FOUND TO DEMONSTRATE THAT THE ASSESSEE HAD ALLEGEDLY IMPLANTED DOCUMENTS IN LOCKER NO.20. HE HAS ALSO CONTESTED ABOUT THE VERACITY OF THE STATEMENT RECORDED OF THE BANK MANAGER VIZ. SHRI PRAVIN VYAS, BUT THAT WAS IMMEDIA TELY RETRACTED VIDE AN AFFIDAVIT, HOWEVER THEREAFTER, THE MANAGER WAS NEVE R CROSS EXAMINED. LD. A.R. HAS ALSO MENTIONED THAT THE BOOKS OF ACCOUNTS WHICH WERE SEIZED FROM THE LOCKER WERE EXAMINED BY THE SPECIAL AUDITOR AND SUG GESTED THAT THOSE BOOKS BELONGED TO SHRI JAYDEEP. THE SAID BANK LOCKER WAS BROKEN AND OPENED AS A PART OF SEARCH OPERATION ON 22-3-1999 BY THE REVE NUE DEPARTMENT. WHEN IT WAS OPENED CERTAIN PAPERS AND A ZIP DISC WAS FOUND AND SEIZED. THE SEIZED MATERIAL HAD INDICATED THAT THE SAME BELONGED TO SH RI JAYDEEP. A CASH OF RS.1,31,000/- WAS ALSO SEIZED FROM THE LOCKER. THE OTHER OWNERS OF LOCKER HAVE ALSO INTIMATED THAT THE CONTENTS OF THE LOCKER BELO NGED TO SHRI JAYDEEP. LD. A. R. HAS THEREFORE, PLEADED THAT THE LOCKER NO.20 AND IT S CONTENTS HAD IN FACT GENUINELY BELONGED TO SHRI JAYDEEP. 26. ON THE OTHER HAND FROM THE SIDE OF THE REVENUE LD. CI.T. ( D R) MR. JINDAL HAD SUPPORTED THE VIEW TAKEN BY BOTH THE LOWER AUTH ORITIES. IT WAS ARGUED BY HIM THAT ON SEARCH AT THE PREMISES OF THE BANK IT WAS F OUND THAT THERE WAS IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 21 MANIPULATION IN THE LOCKER RECORD OF THE BANK. TH E BANK MANAGER AND OTHERS HAVE CONNIVED WITH THE ASSESSEE AND IMPLANTED CERTA IN DOCUMENTS TO GAIN THE UNLAWFUL PRIVILEGE. 27. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AT A CONSIDERABLE LENGTH. IT WAS AN ADMITTED FACTUAL POSITION THAT ON TWO DATES OF SEARCH I.E. ONE AT THE PLACE OF SHRI JAYDEEP ON 22.9.98 AND THE OTHER AT THE RES IDENCE OF MR. SAMIR ON 23.9.98, ON BOTH THE OCCASIONS, MR. JAYDEEP WAS NOT PRESENT. LATER ON, WHEN A NOTICE WAS ISSUED BY ADIT THE ASSESSEE HAD TO PASS ON THE INFORMATION ABOUT THE EXISTENCE OF LOCKERS, STATED TO BE IN TWO BANKS . SEQUENCE OF THE DATES, AS GATHERED FROM THEIR ARGUMENTS , WERE THAT THE SEARC H WAS CONDUCTED ON 22.9.98, A LETTER OF ENQUIRY SERVED ON 14.10.98, THE COMPLIA NCE WAS MADE BY MR. JAYDEEP ON 26.11.98, THE LOCKER WAS BROKEN & OPENED ON 22.3 .99 AND THEREAFTER THE SAID BANK WAS ALSO SEARCHED BY THE DEPTT. ON 25.5.99 OUT OF THE TWO LOCKERS, THE ASSESSEE WAS NOT AWARE ABOUT THE NAME OF THE BANK O F WHICH THE LOCKER KEY WAS SEIZED BY THE REVENUE DEPARTMENT. THEREFORE, HE WA S CLUELESS ABOUT THAT KEY WHICH WAS IN THE POSSESSION OF THE DEPT. HE HAD NO OPTION BUT TO INFORM THE NAMES OF BOTH THE BANKS. TO VERIFY THE ASSESSEES E XPLANATION, REVENUE DEPARTMENT HAS CONDUCTED AN ENQUIRY, PROHIBITED THE OPERATION OF LOCKER NO.20 AND THEN BROKE OPEN THE LOCKER TO SEIZE THE CONTENT S. THEREAFTER ALSO CONDUCTED A SEARCH ON JANTA SAHAKARI BANK ON 22.5.99. AT TH E TIME OF THE SEARCH THE STATEMENTS OF THE BANK OFFICIALS WERE RECORDED. CE RTAIN BANK RECORD IN RESPECT OF LOCKER OPERATION WAS ALSO EXAMINED. AS PER THE STATEMENTS AND THE BANK RECORD ONE CANNOT RULE OUT THE TWO INTERPRETATIONS, ONE, AS INTERPRETED BY THE REVENUE AND THE OTHER AS INTERPRETED BY THE ASSESSE E. A READING OF SEC.132(4A) REVEALS THAT THE WORDS USED THEREIN ARE MAY BE PRESUMED MEANING THEREBY THAT THE DRAWING OF PRESUMPTION IN SUCH CASES DEPENDS UPON THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH CASE. EVEN IF SUCH PRESUMPTION IS DRAWN AGAINST AN ASSESSEE THE SAME I S REBUTTABLE AND THE PERSON AGAINST WHOM SUCH PRESUMPTION IS DRAWN IS FR EE TO LEAD EVIDENCE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 22 TO REBUT SUCH PRESUMPTION AND WHEN THAT IS DONE THE REVENUE AUTHORITY SHALL CONSIDER ALL THOSE EVIDENCES JUDICIOUSLY. A D ECISION CITED IS ACIT VS.SRI RADHEYSHYAM PODDAR 41 ITD 449 (CAL.) AS FAR AS THE ASSESSEE IS CONCERNED, THERE WERE NUMBER OF CORROBORATIVE EVIDE NCES TO INDICATE THAT THERE WAS NO MANIPULATION AND IN THE NORMAL COURSE UNACCO UNTED RECORD AND THE CASH WAS DEPOSITED IN THE LOCKER. THE QUESTION IS WHETHE R THE LOCKER BELONGED TO SHRI JAYDEEP OR NOT? THEREFORE, TO DECIDE WHETHER THE AS SESSEE WAS THE HOLDER OF THE LOCKER THE CRUCIAL TEST IS THE OPERATION OF THE LOC KER. CONSIDERING THE OPERATION OF LOCKER BEING DONE BY THE ASSESSEE AS ALSO BEING ACC EPTED BY OTHERS, EVEN THE BANK OFFICIALS, IT IS DIFFICULT TO GIVE A VERDICT T HAT THE LOCKER DID NOT BELONG TO THE ASSESSEE. THE SPECIAL AUDITOR HAVE ALSO GIVEN THE INDICATION THAT THE DOCUMENTS WHICH WERE RECOVERED FROM THE LOCKER IN FACT BELONG ED TO SHRI JAYDEEP. IN A SITUATION WHERE THE ASSESSEE HAS PLACED CERTAIN STR ONG EVIDENCES TO CORROBORATE THE CLAIM, THEN THE REVENUE DEPARTMENT WAS UNDER ST RICT OBLIGATION, TO PROVE OTHERWISE. AS PER THE SETTLED PRINCIPLE, MERE REJE CTION OF EXPLANATION WOULD NOT ENTITLE THE DEPARTMENT TO HOLD OTHERWISE. THE ONUS WAS VERY AUSTERE ON THE REVENUE TO PROVE WITH THE SUPPORT OF SOME COGENT EV IDENCE THAT THE LOCKER WAS MANIPULATED AND THE DOCUMENTS WERE IMPLANTED. THE I MPUGNED ENQUIRY OF THE REVENUE APPEARED TO BE ONE SIDED ENQUIRY WHICH WAS WITHOUT AFFORDING THE OPPORTUNITY OF CROSS-EXAMINATION OF THE BANK OFFICI ALS. SOME OF THE BANK OFFICIALS HAVE FILED THEIR RESPECTIVE AFFIDAVITS BUT THEY WER E NOT CROSS-EXAMINED BEFORE REFUTING THOSE AFFIDAVITS . IN SUCH CIRCUMSTANCES IT WAS NOT OPEN TO THE REVENUE TO CHALLENGE THE CORRECTNESS OF THOSE AFFID AVITS AS HELD IN THE CASE OF GLASS LINES EQUIPMENT CO. 253 ITR 454 ( GUJ.) PLACING RELIANCE ON A STATEMENT WITHOUT PROVIDING OPPORTUNITY OF CROSS-EX AMINATION IS NOT RECOMMENDED BY HONBLE GUJARAT H.C. IN THE CASE OF CIT VS. CHANDRAVILAS HOTEL 164 ITR 102 OR IN THE ABSENCE OF MATERIAL NOT SUPPLIED TO THE A SSESSEE CAN NOT BE USED AGAINST HIM WAS HELD BY THE HONBLE S.C. IN THE CASE OF KISHANCHAND CHELLARAM 125 ITR 713. RATHER, THE AUDITOR WAS ALSO NOT CONVINCED BY THE SAID THEORY OF THE REVENUE. THIS P ROBABILITY CAN ALSO NOT BE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 23 DENIED THAT SUCH AN ALLEGATION MIGHT HAVE FAR REACH ING EFFECT ON THE DAY TO DAY CONDUCT OF THE BANK OFFICIALS. IF SOMETHING WRONG WAS DETECTED BY THE REVENUE DEPARTMENT THEN THEY WERE FREE TO INFORM THE CONCER NED AUTHORITIES BUT AS PER RECORDS EVEN NO SUCH STEP WAS INITIATED. WE ARE ALS O NOT INCLINED TO TAKE AN ADVERSE VIEW BECAUSE MERITS OF THE CASE CAN OTHERWI SE BE DECIDED INDEPENDENTLY. WITH THESE COMMENTS WE HEREBY REVERS E THE FINDINGS OF THE AUTHORITIES BELOW AND ALLOW THIS GROUND. 28. GROUND NO.2 THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE DISALLOWANCE OF CLAIM OF BAD DEBT AMOUNTING TO RS.9 ,99,88,134/- AGAINST THE INCOME OF FINANCING. 29. THE AO HAD MADE A SUCCINCT DESCRIPTION IN RESP ECT OF THE CLAIM OF BAD DEBT AND FOR THE SAKE OF COMPLETENESS RELEVANT POR TION IS REPRODUCED BELOW VERBATIM:- 18. AS REGARDS BAD DEBT OF RS.9.99 CRORES : THE BAD DEBTS CLAIMED BY SHRI JAYDEEP RELATE TO HI S FINANCE BUSINESS. IN FACT, THIS FINANCE BUSINESS RE LATES TO SHRI JAYESH. THREE ISSUES ARE INVOLVED:- (I) DESPITE BEING ASKED TO PRODUCE BORROWERS, SHRI JAYESH AND SHRI JAYDEEP DID NOT IDENTIFY LET ALONE PRODUCE A SINGLE PERSON. (II) THESE AMOUNTS ARE NOT REFLECTED IN THE BOOKS SEIZED AT SHRI SAMIR K. THAKKAR. (III) SHRI JAYDEEP D. THAKKAR HAS STATED VIDE HIS REPLY DATED 18-6-2001 AS UNDER: IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 24 THE PROVISION OF BAD DEBTS IS APPLIED IN THE CASE OF REGULAR BOOKS MAINTAINED AND ASSESSED TO TAX. THE Q UESTION OF WRITTEN OFF OF DEBT COMES BY THE END OF FINANCIAL Y EAR. THIS SHOWS THAT, THIS PROVISION WILL NOT APPLY IN THIS C ASE, SINCE SEARCH HAS TAKEN PLACE IN THE MIDDLE OF THE FINANCI AL YEAR. IN THE CASE OF ASSESSEE THOUGH HE WANTED TO WRITE OFF BAD DEBTS BY THE END OF MARCH, 1999, BUT THE SEARCH TOOK PLAC E ON 22-9- 98. THE ASSESSEE HAS STATED THAT, IN HIS BUSINESS L OSS ON ACCOUNT OF BAD DEBTS IS BOUND TO TAKE PLACE. HE FUR THER STATED THAT, HE HAD ADVANCED TO SUCH PERSONS FROM WHOM, RE COVERY IN MOST OF THE CASES IS QUITE IMPOSSIBLE AND THEREF ORE, HIS CLAIM MAY BE ALLOWED. THUS, ACCORDING TO THE ASSESSEE, THE BAD DEBTS ARE ALLOWABLE EVEN IF WE DISREGARD THE BOOKS FOUND FROM THE LOCKER. YET THIS IS NOT THE CASE. BY NOT IDENTIFYIN G THE LOANEES WHICH ARE IN THE ASSESSEES PARTICULAR KNOWLEDGE), THE ASSESSEE HAS STALLED ALL INQUIRY. REFERENCE MAY ALSO BE MADE TO THE PROVISIONS OF SECTION 36(1)(VII) AS AMENDED BY FINANCE ACT, 2001. THIS PROVISION, INTRODUCED WITH RETROSPECTIVE EFFECT FRO M 1-4-1989, LAYS DOWN THAT TO BE ALLOWABLE, THE BAD DEBT SHOULD BE WRITTEN OFF IN THE PARTYS ACCOUNT. THIS IS NOT THE CASE HE RE. IN VIEW OF THE ABOVE, THE SO CALLED BAD DEBTS ARE NOT ALLOWABL E. 29.1. FROM THE ORDER OF THE A.O. IT IS EVI DENT THAT CONSEQUENT UPON THE SEARCH CERTAIN LOOSE-SHEETS WERE RECOVERED FROM THE RESIDENCE OF MR. SAMIR. THOSE LOOSE-SHEETS HAVE DEPICTED THE UNACCOUNTED S HROFF BUSINESS OF THE ASSESSEE. AS FAR AS THE CONTROVERSY ABOUT THE OWNER SHIP OF THE BUSINESS AS SHOWN IN THOSE LOOSE-SHEET WAS CONCERNED, WE HAVE A LREADY GIVEN OUR FINDING THAT THE SAME BELONGED TO MR. JAYDEEP. IN ADDITION TO THE SAID INCRIMINATING MATERIAL, THE REVENUE HAS ALSO DETECTED INCRIMINATI NG MATERIAL FROM A LOCKER. THE CONTENTS OF THE LOCKER WERE CERTAIN UNACCOUNTED ACC OUNTS AND A ZIP-DISC. THE SEIZED ACCOUNTS RECOVERED FROM MR. SAMIR DID NOT RE FLECT THE WRITE-OFF OF BAD DEBTS. IT WAS FOUND WRITTEN IN THE INCRIMINATING MA TERIAL RECOVERED FROM THE LOCKER. IN THIS ORDER WE HAVE ALREADY CLEARED THE CONTROVER SY PERTAINING TO THE SAID LOCKER. NOW THE QUESTION IS THAT HOW TO INTERPRET T HOSE INCRIMINATING MATERIALS IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 25 WHICH WERE FOUND AT TWO PLACES. AS FAR AS THE LAW I S CONCERNED, IT IS SETTLED THAT THE INCRIMINATING MATERIAL AS A WHOLE HAS TO BE TAK EN INTO ACCOUNT. IT IS UNEQUIVOCALLY PRONOUNCED BY THE HONBLE COURTS THAT THE REVENUE DEPARTMENT MUST NOT PICK AND CHOOSE SELECTIVELY FROM THE INCRI MINATING MATERIAL. BUT IN THE PRESENT CASE THE A.O. HAD PROCEEDED TO COMPUTE THE UNDISCLOSED INCOME ONLY ON THE BASIS OF THE INCRIMINATING MATERIAL FOUND FR OM MR. SAMIR. SINCE IN THE ACCOUNTS RECOVERED FROM MR. SAMIR DID NOT RECORD TH E CLAIM OF BAD-DEBT THEREFORE THE A.O. HAS ALSO DID NOT ALLOW THE WRITE-OFF OF BA D-DEBT. AS AGAINST THAT, THE VIGOROUS CONTENTION OF THE ASSESSEE SINCE INCEPTION WAS THAT THE WRITE-OFF OF BAD- DEBT AS FOUND RECORDED IN THE ACCOUNTS SEIZED FROM LOCKER SHOULD BE TAKEN INTO ACCOUNT TOGETHER WITH SEIZED DOCUMENT FROM MR. SAMI RS RESIDENCE, BECAUSE THAT WAS ALSO THE PART OF THE TOTAL INCRIMINATING MATERI AL. THE A.O. HAS IGNORED THE INCRIMINATING MATERIAL OF LOCKER AND IN CONSEQUENCE THEREOF THE CLAIM OF BAD-DEBT WAS DISALLOWED. THAT FINDING OF THE A.O. IS CHALLE NGED. 30. BEFORE THE FIRST APPELLATE AUTHORITY IT WAS CON TESTED THAT ALL THOSE PARTIES WERE DIRECTLY CONNECTED WITH THE MONEY LENDING BUSI NESS OF THE ASSESSEE. IT WAS ALSO CONTESTED THAT THE A.O. HAS REJECTED THE CLAIM MERELY ON THE GROUND THAT THE BOOKS OF ACCOUNTS AND THE DOCUMENTS WHICH WERE RECO VERED FROM THE LOCKER NO.20 WERE IMPLANTED THEREFORE, THE ENTRIES PASSED IN THOSE ACCOUNTS WERE NOT TO BE CONSIDERED. IT HAS ALSO BEEN CONTESTED BEFOR E THE LD. C.I.T. (A) THAT THE A.O. HAS ALSO IGNORED THE AUDITORS REPORT IN THIS REGARD. FEW CASE LAWS CITED BEFORE LD. C.I.T.(A) WERE ABDUL RAZAK AND CO., 136 ITR 825,RAMCHAND SHIVNARAYAN 111 ITR 263 (SC) DEVI FILMS 75 ITR 301, MYSORE SUGAR CO. 46 ITR 649, T.L. LALWANI 78 ITR 176 (BOM.) AND NAINITAL BA NK 55 ITR 707 (SC). IN ADDITION TO THE ABOVE CASE LAWS IN SUPPORT OF THE C LAIM OF BAD DEBTS, THE ASSESSEE HAS ALSO SUBMITTED THE LIST OF ALL THE PAR TIES AND THE REASONS FOR CLAIM OF BAD DEBT. THERE WAS ONE LIST OF THE AMOUNT OF BAD DEBT OF RS.5,49,88,97 8/ -, AND ANOTHER LIST OF RS.1,27,13,413/- AND THERE WAS AN ANOTHER ANNEXURE OF CERTAIN PARTIES FOR THE CLAIM OF BAD DEBT OF RS.2,18,62,300/-. FURTHER, BEFORE LD. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 26 CIT (A) AN ANNEXURE NO.4 CONSISTING THE NAMES AND R EASONS HAVE ALSO BEEN FURNISHED. THE LD. C.I.T (A) HAS EXPRESSED THAT TH E CLAIM OF BAD DEBT U/S. 36(1)(VII) CAN BE ALLOWED IF WRITTEN OFF AS IRRECOV ERABLE. ACCORDING TO HIM A DEBT BECOMES A BAD DEBT WHEN CREDITOR HAS NO REASONABLE EXPECTATION OF RECOVERY FROM THE DEBTOR. LD. C.I.T.(A) HAS CITED JADAVJI NA RISDAS 47 ITR 41. IT HAS ALSO BEEN POINTED OUT BY LD. CIT (A) THAT THE DECISION T O WRITE OFF MUST BE AN HONEST DECISION AND NOT A CONVENIENT DECISION, IN SUPPORT CITED COATS INDIA LTD. 232 ITR 329 (CAL). FEW MORE CASE LAWS HAVE BEEN DISCUSSED HOWEVER, THE MAIN REASON FOR DISALLOWANCE OF THE CLAIM WAS THAT IT WAS NOT E NOUGH THAT THE DEBTS HAVE BEEN WRITTEN OFF IN SOME BOOKS OF ACCOUNTS UNLESS AND UN TIL THE DEBT HAVE BEEN WRITTEN OFF IN THE NORMAL COURSE OF BUSINESS AT THE TIME OF FINALIZATION OF ACCOUNTS AT THE END OF THE PREVIOUS YEAR. HE HAS ALSO OPINED THAT W RITING OFF OF BAD DEBT SHOULD BE DONE AT THE TIME OF FINALIZATION OF ACCOUNTS FOR THE PRE VIOUS YEAR IN WHICH THE DEBT HAD BECOME BAD AND THERE CANNOT BE FINALIZ ATION OF ACCOUNTS AT SEVERAL TIMES. ASSIGNING SUCH FEW REASONS IT WAS HELD THAT THE DOCUMENTS SHOWING ALLEGED WRITE OFF WERE NOT GENUINE BECAUSE THOSE DO CUMENTS WERE CREATED AT A LATER DATE. ACCORDING TO HIM THE ALLEGED WRITE OFF WAS MADE IN THE FINANCIAL YEAR 1998-99 ON VARIOUS DATES AND SUCH WRITE OFF WAS NOT PROPER BECAUSE IT WAS NOT DONE AT THE TIME OF FINALIZATION OF ACCOUNTS AT THE CLOSE OF THE PREVIOUS YEAR. LD. CIT (A) HAS ALSO HELD THAT THE ASSESSEE WAS NOT ABL E TO ESTABLISH THAT THOSE WERE ACTUALLY BAD DEBTS. THE CONCLUDING REMARK OF LD. C IT (A) WAS AS UNDER:- 7.10. THE ABOVE FACTS ALONG WITH THE LEGAL POSI TION AS STATED EARLIER CLEARLY SHOWS THAT DOCUMENTS SHOWING ALLEGE D WRITE OFF WERE MADE SUBSEQUENTLY AND THE CLAIM EVEN OTHERWISE WAS NOT GENUINE AND HONEST. THE LD. AUTHORIZED REPRESENTATIVES PLE A THAT THE SAME IS EVEN OTHERWISE ALLOWABLE AS A TRADING LOSS IS AL SO NOT PERMISSIBLE IN VIEW OF THE ABOVE DISCUSSION AS IT CAN NEITHER B E HELD TO BE A GENUINE TRADING LOSS NOR AS A BAD DEBT. AS HELD IN THE CASE OF HOTEL AMBASSADOR 253 ITR 430 (KERALA) AS DISCUSSED EARLIE R, IN CASE OF SUPPRESSED INCOME AND ITS DETECTION, THE ASSESSEE I S NOT ENTITLED TO CONDUCT AN INVESTIGATION INTO THE DEBT. IN VIEW OF THE ABOVE, THE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 27 CLAIM OF ASSESSING OFFICER IN DISALLOWING THE CLAIM OF BAD DEBT IS UPHELD. 31. FROM THE SIDE OF THE APPELLANT LD. SR. COUNSEL HAS MADE ELABORATE SUBMISSIONS IN RESPECT OF THE CLAIM OF BAD DEBTS. H E HAS ARGUED THAT ALL THE POINTS RAISED EITHER BY THE A.O. OR BY LD. C.IT (A) WERE NEITHER CORRECT AS PER LAW NOR AS PER THE FACTS OF THE CASE. HIS FIRST PLANK O F ARGUMENT WAS THAT THE SPECIAL AUDITOR HAS DULY TAKEN INTO ACCOUNT THE EVIDENCES W HICH WERE FOUND IN LOCKER NO.20. THOSE ACCOUNTS WERE NOT MANIPULATED OR PLAN TED IN THE LOCKER. THE ACCOUNTS WERE WRITTEN FOR THE PERIOD WHICH HAD FALL EN PRIOR TO THE DATE OF SEARCH. HE HAS THEREFORE, ARGUED THAT THE INCIDENCE OF BAD RECOVERY IS A NORMAL FEATURE IN SARAFI BUSINESS. HE HAS ALSO REFERRED THE VOLUM INOUS EVIDENCES AND DETAILS IN RESPECT OF EACH OF THE PARTY WHO WERE FOUND UNABLE TO REPAY THE AMOUNT. PLACING RELIANCE ON ALL THOSE EVIDENCES HE HAS ARGU ED THAT EVEN OTHERWISE ONCE THE ASSESSEE IS IN A POSITION TO ESTABLISH THAT A H UGE AMOUNT HAD BECOME BAD THEREFORE, THE ASSESSEE MUST BE GIVEN DUE RELIEF IN RESPECT OF THOSE BAD DEBTS. AT THE END OF HIS ARGUMENT, LD. A.R. HAS ALSO RAISE D AN INTERESTING QUESTION THAT IF THOSE DEBTS HAVE NOT BECOME BAD THEN WHY THE REVENU E DEPARTMENT SO FAR HAS NOT BEEN ABLE TO COLLECT THE TAX DIRECTLY FROM THEM EVEN AFTER THE SERVICE OF NOTICE U/S 226(3) OF THE ACT. HE MADE IT CLEAR THAT AGAI NST THE HUGE OUTSTANDING DEMAND THE ASSESSEE WAS UNABLE TO PAY THE TAX BECAU SE OF HIS PATHETIC FINANCIAL CONDITION. BUT SURPRISINGLY, THE REVENUE DEPARTME NT HAS ALSO NOT RECOVERED THE OUTSTANDING TAX BY INVOKING THE RECOVERY PROVISIONS AS PRESCRIBED U/S 226(3). OF THE I. T. ACT . THE DEPTT COULD HAVE ALSO ATTACHED THEIR ACCOUNTS BUT NO SUCH STEP HAD BEEN TAKEN SO FAR , HE HAS PLEADED. . 32. FROM THE SIDE OF THE REVENUE THE LD. CIT (DR) M R. SHELLY JINDAL HAS VEHEMENTLY SUPPORTED THE FINDINGS OF THE A.O. AND T HE CIT (A). HIS FOREMOST ARGUMENT WAS THAT THE IMPUGNED ACCOUNTS THROUGH WHI CH THE ASSESSEE HAS TRIED TO CLAIM BAD DEBTS WERE IN FACT FOUND FROM THE LOCK ER AND THE SAID ACTION OF THE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 28 ASSESSEE WAS DOUBTFUL SINCE INCEPTION. THOSE WERE NOT THE REGULAR BOOKS OF ACCOUNTS THEREFORE, IT WAS NOT A CASE THAT IN THE B OOKS OF ACCOUNTS DEBTS HAVE BEEN WRITTEN OFF IN THE REGULAR COURSE OF THE BUSIN ESS. MERELY TO GIVE A COLOUR TO THE CLAIM OF BAD DEBT AN EVIDENCE WAS CREATED BY PU TTING CERTAIN LOOSE PAPERS AND ACCOUNTS IN THE LOCKER NO 20 SO AS TO SHOW TH AT THE CLAIM OF BAD DEBT WAS RECORDED PRIOR TO THE DATE OF SEARCH AND IT WAS NOT AN AFTER THOUGHT. AS FAR AS THE MERIT OF THE BAD DEBT WAS CONCERNED MR. JINDAL, D.R . HAS PLEADED THAT NO JUSTIFIABLE REASON WAS ADVANCED BY THE ASSESSEE FOR TREATING THE AMOUNT IN QUESTION AS BAD DEBT. ACCORDING TO HIM THERE WAS N O LIKELIHOOD OF NON RECOVERY OF SUCH HUGE AMOUNT OF DEBTS. EVEN THE ASSESSEE HA S NOT PLACED ON RECORD WHETHER ANY ATTEMPT WAS MADE FOR THE RECOVERY OF OU TSTANDING DUES, HE HAS CONCLUDED. 33. SUBMISSIONS OF BOTH THE SIDES HAVE BEEN HEARD. A VOLUMINOUS COMPILATION HAS ALSO BEEN CAREFULLY PERUSED IN THE LIGHT OF SEVERAL CASE LAWS FURNISHED. AT THE OUTSET, IT IS WORTH TO COMMENT T HAT WE HAVE ALREADY HELD IN ABOVE PARAGRAPHS THAT THE REVENUE AUTHORITIES WERE NOT FAIR IN IGNORING ALTOGETHER THE CONTENTS OF THE DOCUMENTS AND ACCOU NTS RECOVERED FROM LOCKER NO.20 OF JANTA SAHKARI BANK, RADHANPUR. CONSEQUENC E THEREOF, WE HAVE TO EXAMINE WHETHER THE ASSESSEE HAS ACTUALLY WRITTEN O FF THE DEBTS AS NON RECOVERABLE DEBTS IN THOSE ACCOUNTS WHICH WERE UNDI SPUTEDLY DEPICTING THE UNACCOUNTED SARAFI BUSINESS OF THE ASSESSEE. THE A SSESSEE HAS FURNISHED A LONG LIST OF ALL THOSE PARTIES MENTIONING AMOUNT OF BAD DEBT AND THE REASON FOR NON RECOVERY OF ADVANCE GIVEN. IT IS A VERY LENGTHY EXERCISE TO REPRODUCE THE EXPLANATION OF THE ASSESSEE ABOUT THE REASONS FOR C LAIM OF BAD DEBT IN RESPECT OF EACH OF THE PARTIES HOWEVER, SOME OF THEM ARE MENTI ONED HEREIN BELOW, EXTRACTED FROM THE ORDER OF CIT (A).:- 1. HINA TEXTILE: AMOUNT OF BAD DEBT RS.5,52,000/- . IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 29 A. COPY OF CRIMINAL COMPLAIN FILED BY DINESHBHAI PREMCHAND KAMDAR BEFORE THE CHIEF METROPOLITAN MAGISTRATE AH MEDABAD FOR 60,000. (PAGE 1 TO 4). B. COPY OF POLICE COMPLAIN AND SUPPORTING EVIDENCE, (PAGES 5 TO 11). C. COPY OF REGISTRATION CERTIFICATE OF HINA TEXTILE PROP. RAJESHKUMAR VASANTBHAI THAKKAR (PAGE 12). FROM THE ABOVE PAPERS YOUR HONOUR WILL FIND THAT RA JESHKUMAR VASANTBHAI THAKKAR WHO IS THE OWNER OF HINA TEXTILE IS FINANCIALLY WEAK AND NOT MAKING THE PAYMENT, THEREFORE, APPELLANT IS JUSTIFI ED IN CLAIMING THE BAD DEBT OF THE AMOUNT OF RS.5,52,000/- ADVANCED TO HIN A TEXTILE. 2. MUNNABHAI : AMOUNT OF BAD DEBT RS.1,17,58,988/- MUNNABHAI IS A NICK NAME. THE FULL NAME IS DEVENDRA K. SHAH ALIAS MUNNABHAI. FOR THE PROOF OF THE SAME COPY OF ORDER U/S. 132(5) OF THE INCOME TAX ACT, 1961 MADE BY THE ASSISTANT COMMISSI ONER OF INCOME TAX, CIRCLE-2(3), AHMEDABAD IS ENCLOSED. (PAGE NO.1 3). HUGE DEMAND OF INCOME TAX IS OUTSTANDING. COPY OF THE SHOW CAUSE NOTICE ISSUED BY A.C.I.T., CIRCLE 3, NO.AHD/CIR.3/PAY DEMAND/2002-03 DATED 27-9-02 IS ENCLOSED. (PAGE NO.14).THIS SHOWS THAT MUNNA ALIAS DEVENDRA K.SHAH IS FINANCIALLY VERY WEAK PERSON AND APPELLANT IS JUSTIFIED IN CLAIMING BAD DEBT. 3. ANANDJI MORARJI: AMOUNT OF BAD DEBT RS.5,00,000/- COPY OF NOTICE GIVEN BY THE APPELLANT FOR CRIMINAL ACTION U/S. 138B OF THE NEGOTIABLE INSTRUMENT ACT FOR RETURN OF CHEQUE GIVE N BY ANANDJI MORARJI OF RS.10,81,000/- IS ENCLOSED. (PAGE NO.15 AND 16). AP PELLANT HAD CLAIMED BAD DEBT OF RS.5,00,000/- THEREAFTER APPELLANT MADE HEAVY PRESSURE FOR THE RECOVERY OF ABOVE AMOUNT AND INTEREST THEREON. DUE TO THIS SETTLEMENT WAS REACHED BETWEEN APPELLANT AND ANANDJI MORARJI AND THEY HAD GIVEN THE CHEQUE OF RS.10,81,000/- WHICH INCLUDES INTERES T TILL DATE. THUS APPELLANT HAS RIGHTLY CLAIMED BAD DEBT OF RS.5,00,0 00/-. 4. SUPER DOMESTIC: AMOUNT OF BAD DEBT RS.13,16,600/ -. KALUPUR COMMERCIAL COOPERATIVE BANK HAS FILED THE SUIT IN THE BOARD OF NOMINEES COURT AND NOMINEE COURT HAS GIVEN THE STAY ON THE PROPERT Y. COPY OF NOMINEE COURT IS ENCLOSED. (PAGE NO.17). INCOME TAX OFFICER, WARD 7(3) HAS ALSO ISSUED SUMMONS TO TARAL DESAI FO R SUPPER IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 30 DOMESTIC . (COPY ENCLOSED PAGE NO.18) COPY OF NOTICE BY ADVO CATE MAHENDRA G. PATEL DATED 17-12-98 FOR AND BEHALF OF KALUPUR COMMERCIAL COOP. BANK FOR RECOVERY OF AMOUNT OF RS.11,32,912/- AND RS.5,57,608/- IS ENCLOSED (PAGE NO.19 & 20).THUS THIS PART IS ALSO F INANCIALLY VERY WEAK AND NOT ABLE TO PAY THE AMOUNT. THEREFORE, APPELLAN T IS JUSTIFIED IN CLAIMING THE BAD DEBT. 5. N.K. INDUSTRIES AMOUNT OF BAD DEBT RS.3,60,96, 922/- THE ABOVE COMPANY HAS BECOME DEFAULTER AND DEBT RECOVERY TRIBUNAL HAS ISSUED ORDER TO TAKE THE POSSESSION OF ALL THE ASSETS AND APPOINTED JOINT RECEIVER. BANK OF BARODA, DENA BANK, CORPORATION BANK AND UTI BANK HAD FILED A SUIT BEFORE THE DEBT RECOVERY TRIBUNAL FOR THE RECOVERY OF 100 CRORES AND IN RESPONSE TO THE S AME DEBT RECOVERY TRIBUNAL HAS MADE THE ORDER. COPY OF THE PRESS CUTT ING OF EMINENT NEWSPAPER SANDESH DATED 10-11-2001 IS ENCLOSED IN W HICH ABOVE NEWS APPEARED. (PAGE NO.21). SIMILARLY, N. K. INDUSTRIES HAS NOT PAID THE LOAN OF AMOUNT TO VISNAGAR NAGRIK COOP. BANK. COPY OF PR ESS CUTTING OF GUJARAT SAMACHAR DATED 2-12-2002 IN WHICH THE ABOVE NEWS ARE PUBLISHED IS ENCLOSED (PAGE NO.22) . SIMILARLY, VIS NAGAR NAGRIK COOP. BANK HAS ALSO FILED SUIT FOR RECOVERY OF RS. 5,11,1 2,771/- OF N. K. INDUSTRIES. THIS NEWS APPEARS IN EMINENT GUJARATI D AILY GUJARAT SAMACHAR ON 18-9-2002. COPY OF PRESS CUTTING IS ENCLOSED 9PA GE NO.23). THUS THE ABOVE PARTY HAD BECOME FINANCIALLY VERY WEAK AND TH EREFORE, APPELLANT IS JUSTIFIED IN CLAIMING BAD DEBT. 6. C.K. KOTHARI AMOUNT OF BAD DEBT RS.9,88,473/- THERE IS HUGE AMOUNT OUTSTANDING OF INCOME TAX AGAI NST THIS COMPANY, COPY OF RECOVERY NOTICE DATED 12-11-2001 BY INCOME TAX OFFICER,CIRCLE-3, AHMEDABAD IS ENCLOSED (PAGE NO.24 ).THUS THIS PARTY IS ALSO FINANCIALLY VERY WEAK AND THEREFORE, APPELLANT IS JUSTIFIED IN CLAIMING BAD DEBT. 7 . TARAL DESAI AMOUNT OF BAD DEBT RS.16,40,777/- COPY OF RECOVERY NOTICE BY TRO WARD 7 DATED 28-3-20 01 TO TARAL DESAI IS ENCLOSED (PAGE NO.25). COPY OF SECOND NOTICE BY TRO DATED 20-3-2001 IS ENCLOSED (PAGE NO.26). COPY OF THIRD NOTICE BY TRO FOR ATTACHMENT OF PROPERTY IS ENCLOSED (PAGE NO.27 & 28). SUMMONS BY TRO FOR RECOVERY PROCEEDINGS IS ENCLOSED (PAGE NO.29). ONE MORE NOTI CE DATED 10-9-2002 PROHIBITING AND ATTACHING THE PROPERTY OR THE ARREA R DEMAND IS ENCLOSED (PAGE NO.30 & 31).COPY OF ONE MORE NOTICE DATED 28- 8-2002 BY TRO RANGE-9 FOR RECOVERY OF RS.4,61,460/- (PAGE NO.32 & 33). COPY OF IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 31 SUMMONS ISSUED BY BOARD OF NOMINEE COURT FOR THE SU IT FILED BY CHAROTAR NAGRIK BANK FOR THE RECOVERY OF AMOUNT FROM TARAL D ESAI IS ENCLOSED (PAGE 34).THUS THIS PARTY IS ALSO FINANCIALLY VERY WEAK AND NOT ABLE TO PAY THE AMOUNT. THEREFORE, APPELLANT IS JUSTIFIED IN CL AIMING THE BAD DEBT. 8. SONAL COSMETIC AMOUNT OF BAD DEBT RS.6,07 ,078/- COPY OF CRIMINAL COMPLAIN FILED BY KANUBHAI MANILAL THAKKAR AGAINST SONAL COSMETICS UNDER SECTION 138 OF THE NEGOTIABLE INSTRUMENT ACT FOR THE OUTSTANDING AMOUNT OF RS.2,25,000/- IS ENCL OSED. (PAGE NO.35 TO 38). THUS THIS PARTY IS ALSO FINANCIALLY VERY WEAK AND NOT ABLE TO PAY THE AMOUNT. THEREFORE, APPELLANT IS JUSTIFIED IN CLAIMI NG THE BAD DEBT. 9. H.R. PUJANI & CO. C/O. ANAND GROUPS AMOUNT OF BAD DEBT RS.8,49,643/-. ANAND GROUP HAS FAILED TO PAY MORE THAN 106 CRORES TO VISNAGAR NAGRIK COOP. BANK.THESE NEWS WERE PUBLISHED IN GUJA RAT SAMACHAR DATED 16-9 -2002. PRESS CUTTING IS ENCLOSED (PAGE NO.39 & 40). THUS THIS PARTY IS ALSO FINANCIALLY VERY WEAK AND NOT ABLE TO PAY THE AMOUNT. THEREFORE, APPELLANT IS JUSTIFIED IN CLAIMING THE B AD DEBT. 9. BHADRESH SHAH: AMOUNT OF BAD DEBT RS.6,78,000/- IT IS LEARNT THAT HUGE INCOME TAX AMOUNT IS OUTSTANDING. COPY OF PENALTY ORDER U/S. 271(1)(C ) DATED 28-9-1998 ASKED BY THE A.C.I.T. CIRCLE 2(4) LEVYING PENALTY OF RS.18,76,800/- IS ENCLOSED (PAGE NO.41 TO 45). COPY OF NOTICE UNDER SECTION 138 GIVEN TO BHADRESH J.SHAH F OR ABHISHEKH FINLEASE LTD., FOR THE AMOUNT OF RS.7,00,000/- BY A DVOCATE SAPAN M.SHAH IS ENCLOSED. (PAGE NO.46).THIS PROVES THAT BHADRESH SHAH IS NOT ABLE TO PAY ANY AMOUNT. THUS THIS PARTY IS ALSO FINANCIALLY VERY WEAK AND NOT ABLE TO PAY THE AMOUNT.THEREFORE, APPELLANT IS JUSTIFIED IN CLAIMING THE BAD DEBT. 7.4. VIDE SUBMISSION DATED 30-12-2002, IT WAS STATE D AS UNDER :- IN CONTINUATION TO MY EARLIER SUBMISSION DATED 17-1 2-2002 AND AS DISCUSSED AT THE TIME OF APPEAL HEARING I FURTHER S UBMIT AS FOLLOWS: AS PER MY SUBMISSION DATED 17-12-2002 I HAVE SUBMIT TED THE PROOF OF ABOUT 10 PARTIES ABOUT BAD DEBT AND TOTAL COMES TO RS.5,49,88,978/- . I ALSO ENCLOSE FURTHER PROOF OF FOLLOWING SIX PARTI ES. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 32 1. PARKER GENERAL STORES: BAD DEBT AMOUNT RS.25,68, 623/- APPELLANT HAS FILED CRIMINAL CASE IN THE COURT OF METROPOLITAN STATE, COPY OF CRIMINAL CASE NO.835/1999 IS ENCLOSE D (PAGE 1 TO 3).AS THIS PARTY HAD GIVEN THE CHEQUE ON ACCOUNT OF HEAVY PRESSURE BY THE APPELLANT TOWARDS THE OUTSTANDING WHICH WAS BOUNCED AND HENCE APPELLANT WAS ABLE TO MAKE COMPLAIN UNDER SEC . 138. 2 AMEE CORPORATION : BAD DEBT AMOUNT RS.43,38,732/- THE ACCOUNT IN THE BOOK OF THE APPELLANT IS IN THE NAME OF KAMALBHAI C/O. AMEE CORPORATION. HOWEVER, THROUGH M ISTAKE NAME AMEE CORPORATION WAS GIVEN TO THE DEPARTMENT. COPY OF ACCOUNT APPEARED AT PAGE NO.18 ANNEXURE-10 OF SEIZE D MATERIAL IS ENCLOSED TO VERIFY THE MATTER (PAGE NO.4 AND 5).APP ELLANT ENCLOSES THE COPY OF SHOW CAUSE LETTER FROM TRO RGZ DATED 1- 7-2002 FOR THE RECOVERY OF DEMAND OF RS.39,39,528/-.THUS PARTY IS DEFAULTER AND SO FAR APPELLANT KNOWS, IS NOT TRACEABLE AND NO W SETTLED AT USA. 3. DHARNENDRA INDUSTRIES: BAD DEBT AMOUNT RS.25,01,960/-. COPY OF NOTICE GIVEN BY ADVOCATE CHANDRAKANT B. TRI VEDI AND NEWSPAPER CUTTING ABOUT NON-PAYMENT OF PF AMOUNT OF RS.13,83,264/- OF LAST THREE YEARS FOR WHICH POLICE COMPLAIN HAS BEEN FILED BY THE PF DEPARTMENT. (PAGE NO. 6 & 7). 4. SHAKTI VIJAY : BAD DEBT AMOUNT RS.11,77,39 0/-. COPY OF PRESS CUTTING OF SANDESH EMINENT DAILY OF GUJARAT DATED 21-11-2000 IS ENCLOSED . (PAGE NO 8). AS PER THIS PRESS NEWS THIS COMPANY IS NOT ABLE TO PAY HUGE AMOUNT AND HENCE RE COVERY TRIBUNAL HAS APPOINTED MANAGER OF DENA BANK AS A CO URT RECEIVER. APPELLANT HAS ALSO FILED CRIMINAL COMPLAIN IN COURT BEARING NO.23/2000. COPY ENCLOSED (PAGE NO.9 TO 11). 5. SHAH FINANCE BAD DEBT AMOUNT RS.10,00,000/- COPY OF CIVIL SUIT FILED BY ONE INDUMATIBEN RASIKLA L SHAH FOR RECOVERY OF AMOUNT OF RS.10,00,000/- IS ENCLOSED (P AGE NO.12 TO IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 33 19). COPY OF PARTNERSHIP DEED OF SHAH FINANCE IS EN CLOSED. THIS PROVES THAT THE ABOVE PARTY HAS BECOME DEFAULTER. ( PAGE NO.20 TO 25). 6. RAJESH BROKERS BAD DEBT AMOUNT RS.11,26,708/- COPY OF NOTICE BY BHARATKUMAR NAIK, ADVOCATE FOR BOUNCE OF CHEQUE ABOUT RS.50 LAKHS WITH CERTIFICATE OF GOVERNMENT THAT OWNER OF RAJESH BROKER IS MEHTA JAYESH BUDHALAL.THI S PROVES THAT PARTY IS DEFAULTER. (PAGE NO.26 TO 28). TOTAL OF THE ABOVE AMOUNT COMES TO RS.1,27,13,413/ - I ALSO ENCLOSE CHART OF THE BAD DEBT AS UNDER: ANNEXURE-1 NAME AND ADDRESS OF PARTY, BAD DEBT AMOUNT AND PRO OF SUBMITTED AND ALSO PAGE NUMBER OF PAPER BOOK, PAGE NUMBER FOR THE COPY OF ACCOUNT OF THIS PARTY (PAGE NO.29 TO 30). ANNEXURE-2 DETAILS OF BAD DEBT WITH FULL ADDRESS OF PARTY WHER E NO RECOVERY OR PAYMENT IS MADE AFTER THE AMOUNT IS WRITTEN OFF. TH E NUMBER OF SUCH PARTIES COMES TO 44 AND AMOUNT COMES TO RS.2,1 8,62,300/-. (PAGE NO.31 TO 39). ANNEXURE 3 LIST OF PARTIES IN WHOSE CASE APPELLANT WAS ABLE TO RECOVER SOME AMOUNT AFTER AMOUNT IS WRITTEN OFF. THE NUMBER OF S UCH PARTIES IS ONLY SIX. THOUGH APPELLANT HAS WRITTEN OFF THE AMOU NT AS BAD DEBT HE WAS VIGOROUSLY DOING HIS BEST TO RECOVERY THE AM OUNT AND ON ACCOUNT OF THIS HE WAS ABLE TO RECOVER RS. 29,89,80 7/- FROM THE ABOVE PARTIES (PAGE NO.40 TO 41). ANNEXURE 4 THIS CHART SHOWS THAT IN ONLY TWO CASE THE APPELLAN T HAS MADE SOME PAYMENT AFTER AMOUNT IS WRITTEN OFF. THE REAL FACT IS AS FOLLOWS: VASANTBHAI PANDIT IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 34 IN THIS CASE, APPELLANT HAD TAKEN STRONG ACTION TO RECOVER THE AMOUNT AND DUE TO THIS APPELLANT WAS ABLE TO RECOVE R RS.4,02,105/- . HOWEVER, TWO CHEQUES OF RS.22,000/- GIVEN TO THE APPELLANT ON 16-8-1997 AND 26-8-1997 ARE RETURNED BY THE BANK WH ICH APPELLANT HAS DEBITED IN THE ABOVE ACCOUNT. THUS, THIS IS NOT REPAYMENT BUT ONLY CONTRA ENTRY OF THE RETURNED CHEQUES. APPELLANT HAD MADE PAYMENT OF RS.5,000/- ON 11-2-19 98. AS PER THE ENTRY IN THE SEIZED PAPER THIS AMOUNT IS GIVEN TO OPEN THE SAVINGS BANK ACCOUNT. COPY OF SEIZED PAPER IS ENCLO SED FOR YOUR HONOURS PERUSAL. (PAGE NO.43). IN THE SECOND YEAR ALSO THE APPELLANT HAS RECOVERED SOME ACCOUNT AND THERE IS NO REPAYMENT. PARTY IS NOT TRACEABLE. RADHE DEVELOPMENT. IN THIS CASE, ON ACCOUNT OF VIGOROUS EFFORT APPELLA NT WAS ABLE TO RECOVER RS.5,40,0000/- AFTER THE AMOUNT IS WRITTEN OFF. THIS PARTY HAD PAID RS.2 LAKHS ON 6-7-1998 TO THE APPELLANT. O N THE SAME DAY AS PER THE UNDERSTANDING OF THE APPELLANT HAD PAID RS.85,715/- TO ONE SHROFF I.E. PIYUSHBHAI HIMMATBHAI. THUS, THIS I S NOT REPAYMENT DIRECTLY BUT SOME ADJUSTMENT FROM RECOVERY. (PAGE N O.44). THE APPELLANT HAS SUBMITTED IN DETAILS REASONS FOR BAD DEBT BY HIS LETTER DATED 9-6-2001 AT PAPER BOOK PAGE NO.24 TO 2 7 AND ALSO CHART AND DETAILS OF BAD DEBT AT PAGE NO.28 AND 29 AND 60 TO 62. IN VIEW OF THE ABOVE, APPELLANT PRAYS YOUR HONOUR T O ALLOW BAD DEBT AS CLAIMED BY HIM IN THE INTEREST OF JUSTICE AND FA IRNESS. 34. THE ISSUE OF CLAIM OF BAD-DEBTS NEEDS AN ELABOR ATE DISCUSSION SO OUR POINT WISE REASONING IS AS FOLLOWS. IN THE LIGHT OF THE ABOVE DISCUSSION ONCE WE ARE CONVINCED THAT THE UNDISCLOSED ACCOUNTS IN RESP ECT OF THE UNACCOUNTED BUSINESS OF THE ASSESSEE WERE IN EXISTENCE, AS FOUN D AT SAMIRS RESIDENCE AND IN LOCKER NO.20, THEN THE CONSEQUENTIAL OUTCOME IS THA T THE DEBTS WHICH WERE WRITTEN OFF AS BAD DEBTS IN THOSE ACCOUNTS OUGHT TO BE TREATED AS BAD DEBT WRITTEN OFF IN THE BOOKS OF ACCOUNTS AS PRESCRIBED U/S. 36( 1) (VII) OF THE I. T. ACT. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 35 CIRCUMSTANTIAL EVIDENCES, BOOKS OF ACCOUNTS SEIZED FROM SAMIRS RESIDENCE , BOOKS OF ACCOUNTS RECOVERED FROM THE LOCKER, STATEM ENT OF THE APPELLANT, WRITTEN SUBMISSIONS DT. 18.6.2001 OF THE APPELLANT ETC. THU S INDICATE THAT THE ASSESSEE BEING IN THE MONEY LENDING BUSINESS THEREFORE THE O CCURRENCE OF BADDEBT COULD NOT BE RULED OUT. NOW THE LAW IS WELL SETTLED BY T HE PRONOUNCEMENT OF A JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TR F LTD. 323 ITR 397 WHEREIN IT WAS HELD AS UNDER:- AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE INCOME TAX ACT,1961, WITH EFFECT FROM APRIL 1, 1989, IN OR DER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECES SARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS B ECOME IRRECOVERABLE: IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 34.1. ONE OF THE REASONING OF LD.CIT(A) FOR UP HOLDING A.O. ACTION WAS THAT THE DEBT SHOULD BE WRITTEN OFF AT THE FAG END OF THE FI NANCIAL YEAR . HOWEVER WE HAVE NOT FOUND SUCH WORDINGS IN THE STATUTE. THE SECTION SAYS AS FOLLOWS: SECTION 36(1)(VII) - OTHER DEDUCTIONS 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOW ING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREI N, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 . . (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. AS PER THE LANGUAGE OF THIS SECTION THER E IS NO SUCH REQUIREMENT OF PASSING THE ENTRY IN THE BOOKS OF ACCOUNTS AT THE E ND OF THE YEAR . THE LANGUAGE IS THAT DEBT OR PART THEREOF IS TO BE ACCOUNTED AS WRITTEN OFF AS IRRECOVERABLE IN IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 36 THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR . THEREFORE, LD. CIT(A) HAS ON HIS OWN ADDED THE WORD FINALIZATION OF ACCOUNT S OR ADDED THE WORD AT THE END OF THE FINANCIAL YEAR BUT SUCH AN INTERPRETATI ON IS INCORRECT. OUR JOB IS ONLY TO INTERPRET THE SECTION AND MUST NOT ADD, DELETE OR S UBSTITUTE ANY WORD IN THE LANGUAGE OF A STATUTE. 34.2. AS FAR AS THE RELIANCE ON HOTEL AMBASSADOR .253 ITR 430 ( KER.) BY LD.CIT(A) IS CONCERNED, AFTER EXAMINATION THE FACTS OF THAT CASE WE HAVE FOUND THAT THE SAME WAS MISPLACED BECAUSE THE CONTEXT WAS IN RESPECT OF A BELATED CLAIM HAVING NOT MADE IN THE ORIGINAL RETURN FILED. IN ASSESSES CASE THE RETURN WAS FILED ONLY IN COMPLIANCE OF NOTICE U/S 158 BC A ND THE CLAIM OF BAD DEBT WAS MADE THEREIN. FROM THE SIDE OF THE REVENUE, A DECI SION OF HONBLE RAJASTHAN HIGH COURT WAS CITED VIZ. KASHMIR TRADING CO. REPOR TED AT ..291 ITR 228 (RAJ), WHEREIN IT WAS FOUND THAT ASSESSEE HAVING NOT PASSE D ENTRIES FOR WRITING OFF BAD DEBTS IN ITS BOOKS OF ACCOUNT AND ALSO FAILED TO PR OVE THAT THE DEBTS IN QUESTION HAD ACTUALLY BECOME IRRECOVERABLE DURING THE RELEVA NT PREVIOUS YEAR, THE FINDING OF THE TRIBUNAL DISALLOWING THE CLAIM FOR BAD DEBTS IS A FINDING OF FACT, AND NO SUBSTANTIAL QUESTION OF LAW ARISES. FROM THIS DECI SION, THEREFORE, IT IS CLEAR THAT SUCH TYPE OF CASES ARE TO BE DECIDED ON THEIR OWN F ACTS. IN THE SAID PRECEDENT A SEARCH TOOK PLACE ON IN THE MONTH OF JULY-1999. THE BOOKS OF ACCOUNTS HAVE BEEN CLOSED ON 31/03/1999. HENCE, IT WAS NOTED THA T EVEN AFTER ALMOST FOUR MONTHS OF CLOSE OF FINANCIAL YEAR NO ENTRY OF BAD D EBTS HAVE BEEN MADE IN THE BOOKS OF ACCOUNTS. AS AGAINST THAT, IN THE CASE OF THIS APPELLANT, THE ENTRIES IN RESPECT OF BAD DEBTS WERE FOUND RECORDED AS WRITTEN OFF IN THE UNDISCLOSED BOOKS OF ACCOUNTS. THE HONBLE COURT HAS OBSERVED THAT ACCORDING TO THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, ONLY SUCH SUM IS TO BE ALLOWED AS DEDUCTION BY WAY OF BAD DEBT OR DOUBTFUL DEBT WHICH IS WRITTEN OFF I N THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. ON THE OTHER HAND THERE IS A DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ROOPCHAND NAVALCH AND GANDHI 5 DTR 304 WHEREIN ON THE QUESTION OF ALLOWABILITY OF BAD DEBT S IT WAS HELD THAT TRIBUNAL , ON IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 37 EXAMINATION OF EVIDENCE ON RECORD AND LEGAL ASPECT OF THE MATTER HAVING FOUND THAT THE DEBTS REPRESENTING ENTRIES IN THE DIARY WE RE NOT EVIDENCED BY ANY ENFORCEABLE DOCUMENT AND THAT LIMITATION FOR RECOVE RY HAD EXPIRED, WAS JUSTIFIED IN ALLOWING THE SAME AS BAD-DEBT FOR THE PURPOSE OF COMPUTING UNDISCLOSED INCOME IN THE BLOCK ASSESSMENT. HENCE, WE ARE OF THE VIEW THAT THE CITED DECISION DOES NOT HELP MUCH THE DR, RATHE R THE LAW LAID DOWN THEREIN REINFORCE THE PLEA OF THE ASSESSEE. 34.3. AN INTERESTING FEATURE OF THIS APPEAL IN QUESTION IS THAT THE REVENUE DEPARTMENT WAS AWARE ABOUT THE NAMES OF THE ASSESSE ES DEBTORS BUT EVEN THEN NOT TAKEN ANY EFFECTIVE STEP FOR THE RECOVERY OF THE OUTSTANDING DEMAND. THE ACCOUNTS OF THE DEBTORS COULD HAVE BEEN ATTACHED BY THE REVENUE DEPARTMENT AS PRESCRIBED U/S 226(3) OF THE ACT. THE STATUE PRESCRIBES CERTAIN MODES OF RECOVERY. THE AO OR TRO MAY AT ANY TIME OR FROM TI ME TO TIME, BY NOTICE IN WRITING REQUIRE ANY PERSON FROM WHOM MONEY IS DUE O R MAY BECOME DUE TO THE ASSESSEE, TO PAY TO THE AO OR TRO EITHER FORTHWITH UPON THE MONEY BECOMING DUE OR WITHIN THE TIME SPECIFIED IN THE NOTICE. T HIS SECTION FURTHER PRESCRIBES THAT SO MUCH OF THE MONEY AS IS SUFFICIENT IS TO BE PAID TO ADJUST THE AMOUNT DUE BY THE ASSESSEE IN RESPECT OF ARREARS. IF THE REVENUE DEPARTMENT WAS OF THE VIEW THAT THE ADVANCES GIVEN TO VARIOUS PARTIES AS PER T HE LIST AVAILABLE TO AO HAD NOT BECOME IRRECOVERABLE, THEN THE CONSEQUENTIAL REACTI ON SHOULD BE TO ISSUE THE NOTICE U/S.226(3) OF THE ACT TO THOSE PARTIES DIREC TING TO DEPOSIT THE MONEY TO THE AO AND NOT TO THE ASSESSEE. THIS PROCESS OF RECOVERY WAS STATED TO BE NEVER ADOPTED BY THE REVENUE DEPARTMENT. MEANING THEREBY, AS PLEADED BEFORE US, ON ONE HAND, THE REVENUE DEPARTMENT HAS DISALLOWED THE CLAIM OF BAD DEBT BUT, ON THE OTHER HAND, DID NOT TAKE ANY A CTION FOR RECOVERY TANTAMOUNT TO TREATING THOSE ADVANCES AS BAD AND NON-RECOVERAB LE DEBT. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 38 34.4. THE AUDITOR HAS EXAMINED THE BAD DEBTS AS FOUND RECORDED IN THE BOOKS SEIZED FROM THE LOCKER. THE AUDITOR HAS NEV ER COMMENTED THAT THE DEBTS IN QUESTION WERE NOT ADMISSIBLE EITHER BECAUSE NOT FOUND RECORDED IN THE SEIZED MATERIAL OR NOT ADMISSIBLE AS PER THE PROVISIONS OF LAW. A VIEW HAS ALREADY BEEN EXPRESSED THAT THE BOOKS AS PER THE LOCKER AND AS F OUND FROM SAMIRS RESIDENCE HAS TO BE TAKEN INTO CONSIDERATION, THEREFORE THE F INDINGS OF THE SPECIAL AUDITOR IN RESPECT OF THE BAD DEBT DEFINITELY HAS SUBSTANCE. T HE AUDITOR HAS CERTIFIED THE TOTAL BAD DEBT WRITTEN OFF AT RS.7,65,45,068/-(REFE R PAPER BOOK. PG. NO. 126) + RS.2,69,31,456/- (REFER PAPER BOOK PG.NO.138) TOTAL ING TO RS.10,34,76,524/-. THEREFORE, THE BAD DEBT AS DETERMINED BY THE SPECIA L AUDITOR WAS BASED UPON THE MATERIAL SEIZED FROM THE LOCKER AND THAT MUST NOT BE IGNORED WHILE COMPUTING THE TOTAL UNDISCLOSED INCOME OF THE ASSES SEE. 34.5. THOUGH AFTER THE AMENDMENT IN THE STATUTE A ND JUDICIAL PRONOUNCEMENTS ON SEC. 36(1(VII) IT IS NOT NECESSARY TO ESTABLISH THE STEPS TAKEN FOR THE RECOVERY OR THE REASON OF TREATING A DEBT AS BAD DEBT OR AN IRRECOVERABLE DEBT, BUT AS SEEN FROM THE PARTY WISE DETAIL OF THE DEBTORS REPRODUCED ABOVE, THE APPELLANT HAS PLACED SUFFICIENT EVIDENCES TO DEMONSTRATE THAT THE RE WERE ENOUGH REASONS FOR TREATING THOSE DEBTS AS BAD DEBTS. 35. UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANC ES OF THE CASE AS ALSO THE PRECEDENTS DISCUSSED, WE ARE OF CONSCIENTIOUS VI EW THAT CONSIDERING THE NATURE OF BUSINESS; THE ASSESSEE IS ENTITLED FOR THE CLAI M OF BAD DEBT. THIS GROUND IS ALLOWED. 36. GROUND NO.3 THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN E NHANCING THE INCOME OF THE APPELLANT BY RS.1,63,11,241/-. LD. C .I.T. (A) FURTHER ERRED IN MAKING THIS ADDITION ON ENTIRELY DIFFERENT GROUNDS WHICH HAVE NOT BEEN EVEN CONSIDERED BY THE ASSESSING OFFI CER. THUS, THIS ACTION OF LD. C.I.T. (A) HAS RESULTED INTO ASSESSIN G ALTOGETHER NEW IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 39 SOURCE OF INCOME IN THE HANDS OF THE APPELLANT WHIC H IS NOT PERMISSIBLE UNDER THE LAW. 37. ABOUT THE ENHANCEMENT AS PROPOSED BY LD. C.I.T. (A) THE OBSERVATION WAS THAT NO INTEREST WAS ACCOUNTED FOR IN RESPECT OF CE RTAIN AMOUNTS WHICH WERE WRITTEN OFF IN THE CAPITAL ACCOUNT. LD. C.I.T (A) HAS ALSO MENTIONED THAT THOSE ACCOUNTS WERE RELATED TO FATHER AND RELATIVES OF TH E ASSESSEE. IT HAS ALSO BEEN NOTED BY THE LD. C.I.T.(A) THAT THE IMPUGNED AMOUNT S WERE NOT ADVANCED IN THE REGULAR COURSE OF BUSINESS OF MONEY LENDING BEING G IVEN TO THE RELATIVES. FURTHER, AS PER LD. C.I.T.(A) THOSE AMOUNTS HAVE NO T BEEN WRITTEN OFF IN THE P & L ACCOUNT BUT THEY WERE ACCOUNTED FOR IN THE CAPITAL ACCOUNT OF THE ASSESSEE. FOLLOWING A DECISION OF KERALA HIGH COURT IN THE CA SE OF HOTEL AMBASSDOR 253 ITR 430 (KERALA) , LD. C.I.T.(A) HAS DIRECTED TO EN HANCE THE INCOME BY THE SAID SUM OF RS.1,63,11,241/-. 38 HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE HAVE GATHERED THAT THE ASSESSEE HAS NOT BEEN GIVEN PROPER OPPORTUNITY TO EXPLAIN HIS STAND THAT WHY THE AMOUNTS IN QUESTION WERE ACCOUNTED FOR IN THE C APITAL ACCOUNT INSTEAD OF PROFIT AND LOSS ACCOUNT. EVEN THE ASSESSEE WAS NOT CONFRONTED WITH THE AFORESAID DECISION OF HONBLE KERALA HIGH COURT. THE DIFFICUL TY IS THAT ON ONE HAND THE A.O. HAD ALLOWED THE CLAIM AS ARENDA TRADING LOSS IN THE NAME OF FAMILY MEMBERS , HOWEVER ON THE OTHER HAND IN RESPECT OF THOSE VERY ENTRIES LD. CIT(A) HAS TAKEN DIFFERENT VIEW THAT IT WAS A SIMPLE ADVANCE OF PERS ONAL NATURE TO THE FAMILY MEMBERS. THE CONTROVERSY ABOUT A FACT CAN ONLY BE R ESOLVED AFTER AN IN DEPTH INVESTIGATION. THEREFORE IT IS DESIRABLE TO INVES TIGATE THE NATURE OF ADVANCE GIVEN TO THE RELATIVES WHETHER IN THE COURSE OF MONEY LEN DING BUSINESS OR IT WAS A FRIENDLY ADVANCE. THIS INVESTIGATION HAS TO BE MADE BY THE A.O. THEREFORE, IN OUR CONSIDERED OPINION; THIS GROUND SHOULD GO BACK TO A .O. SO THAT THE ISSUE CAN BE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 40 DECIDED AS PER LAW. WITH THESE COMMENTS THIS GROUN D MAY BE TREATED AS ALLOWED ONLY FOR STATISTICAL PURPOSE. 39. GROUND NO.4 THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE SET OFF OF EARLIER YEARS LOSSES AGAINST THE INC OME ASSESSED IN THE HANDS OF THE APPELLANT. 40. THIS GROUND HAS NOT BEEN SERIOUSLY CONTESTED BE FORE US OTHERWISE ALSO THE ASSESSMENT IN QUESTION IS UNDER THE SPECIAL PROVISI ONS OF CHAPTER XIV B OF I.T. ACT, THUS THE ASSESSMENT WAS MADE U/S. 158BC. MEAN ING THEREBY, THE LOSSES IF ANY DETERMINED IN THE PAST DURING REGULAR ASSESSMEN T PROCEEDINGS OF EARLIER ASSESSMENT YEARS, THEN THOSE LOSSES CAN ONLY BE SET OFF AGAINST THE ASSESSMENTS IN NORMAL COURSE BUT NOT IN RESPECT OF AN ASSESSMENT WHICH WAS MADE UNDER A SPECIAL CODE OF THE ACT. THIS GROUND I S THEREFORE DISMISSED. 41. GROUND NO.5 THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF LOSS IN ARENDA BUSINESS AMOUNTI NG TO RS. 84,87,779/- 42. ON PERUSAL OF BOTH THE ORDERS PASSED BY AO AND CIT(A) WE HAVE NOTICED THAT THE DISCUSSION IN RESPECT OF ARENDA BUSINESS L OSS WAS VERY CRYPTIC. ALMOST IN ONE LINE IT WAS HELD THAT SINCE THE LOSS IN ARENDA BUSINESS WAS A SPECULATIVE LOSS THEREFORE, COULD NOT BE ALLOWED AGAINST THE INCOME OF THE YEAR. AN IMPORTANT NOTING HAS ALSO BEEN POINTED OUT TO US BY LD. MR. J INDAL THAT DURING THE COURSE OF HEARING BEFORE THE LD.CIT(A) THE THEN LD.AR HAS ADM ITTED THAT THERE WAS A SPECULATIVE LOSS IN ARENDA BUSINESS. NOW BEFORE US LD. A.R. MR. SOPARKAR HAS VEHEMENTLY OPPOSED THE SAID OBSERVATION OF LD. CIT( A). IT IS PLEADED BEFORE US THAT THE LOSS IN ARENDA BUSINESS WAS SUFFERED IN TH E PAST FEW YEARS, FALLING WITHIN THE BLOCK PERIOD. SINCE THE SAID BUSINESS WAS NOT D ISCLOSED IN THE REGULAR BOOKS IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 41 OF ACCOUNTS THEREFORE, IT WAS ALSO SUBJECT TO ASSES SMENT UNDER CHAPTER XIV-B FOR THE BLOCK PERIOD. ON THE OTHER HAND FROM THE SIDE OF THE REVENUE LD. D.R., HAS OBJECTED THE CHANGE IN THE STAND OF THE ASSESSEE. HOWEVER, AFTER SOME DISCUSSION BOTH THE PARTIES HAVE SUGGESTED THAT THE CORRECT FACTUAL POSITION CAN ONLY BE ASCERTAINED AFTER EXAMINING THE SEIZED MATE RIAL IN RESPECT OF ARENDA BUSINESS. FOR THAT PURPOSE IT IS JUSTIFIABLE TO RE STORE THIS CONTROVERSY BACK TO THE STAGE OF THE AO SO THAT HE CAN VERIFY THAT WHETHER THE LOSS IN ARENDA BUSINESS WAS ACTUALLY A TRADING LOSS OR IT WAS A SPECULATIVE LOSS. AFTER ASCERTAINING THE CORRECT NATURE AND THE QUANTUM OF LOSS, HE IS AT LI BERTY TO ASSESS THE SAME AS PRESCRIBED UNDER LAW. RATHER THE LAW IS CLEAR AS PR ONOUNCED BY THE HONBLE S.C. IN THE CASE OF E K LINGAMURTHY VS. SETTLEMENT COMMI SSION 314 ITR 305 THAT SEC. 158 BBR/W EXPL. (A) MANDATE THAT BROUGHT FORWARD LOSSES OF THE PAST YEA RS UNDER CHAPTER VI ARE TO BE EXCLUDED WHILE AGGREGATI NG THE TOTAL INCOME OR LOSS OF EACH PREVIOUS YEAR IN THE BLOCK PERIOD, AND SET- OF F OF INTER-SE LOSSES IN THE BLOCK PERIOD AGAINST THE INCOME ASSESSED IN THE BLOCK PER IOD OF OTHER YEARS IS NOT PROHIBITED. THE A.O. SHALL CONSEQUENTLY COMPUTE IN THE MANNER AS PRONOUNCED BY THE HONBLE APEX COURT, SO WE ORDER ACCORDINGLY. THIS GROUND OF THE ASSESSEE MAY BE TREATED AS ALLOWED FOR THE STATISTICAL PURPOSE. 43. GROUND NO.6. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ADDITION OF RS.36,54,000/- ON ACCOUNT OF CREDIT BALANCE IN THE NAME OF PRACHI THAKKAR. 43.1. THIS GROUND IS STATED TO BE CONNECTED WITH GR OUND NO.5 BEING IN RESPECT OF ARENDA BUSINESS. IT WAS INFORMED THAT THE ARENDA B USINESS WAS CARRIED OUT IN THE NAME OF PRACHI. THERE WAS A CREDIT BALANCE OF RS.36,54,000/- IN THE ACCOUNT OF PRACHI. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID CREDIT BALANCE SHOULD BE ALLOWED TO SET OFF AGAINST THE LOSS OF AR ENDA BUSINESS. AS PER LD. CIT(A) THE CLAIM WAS THAT THE PROFIT FROM ARENDA BU SINESS BEING CREDITED IN THE IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 42 ACCOUNT OF PRACHI THE SAME WAS ASKED TO BE SET OF F AGAINST LOSS, BUT THE PROFIT BEING SPECULATIVE, THEREFORE HELD AS NOT ALLOWABLE. AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES WE ARE OF THE VIEW THAT THIS GROUND MUST ALSO BE RESTORED BACK AND TO BE DECIDED ALONG WITH GROUND NO.5, SUPRA. THE AO IS DIRECTED TO ASCERTAIN TWO FACTS, ONE, THAT WHETHER THE PROFIT F ROM ARENDA BUSINESS WAS A REGULAR PROFIT OR A SPECULATIVE PROFIT WHICH WAS FO UND CREDITED IN THE ACCOUNT OF PRACHI. SECOND, THE AO HAS TO ASCERTAIN THE NATU RE OF LOSS IN ARENDA BUSINESS AND IF THAT LOSS MATCHES WITH THE PROFIT CREDITED I N PRACHI ACCOUNT THEN CONSEQUENTIAL EFFECT HAS TO BE GRANTED. THIS GROUN D THEREFORE, MAY ALSO BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSE. 44. GROUND NO.7. 7. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.10,00,000/- ON ACCOUNT OF CREDIT BAL ANCE IN THE NAME OF X KHATU. 44.1. THERE IS NO DISPUTE THAT THE IMPUGNED SUM OF R S.10 LACS WAS FOUND CREDITED. THE ONLY ARGUMENT WAS THAT THE SAME SHOULD BE SET OFF AGAINST LOSS OF ARENDA BUSINESS. SINCE WE HAVE ALRE ADY RESTORED THE CONNECTED GROUNDS BACK TO AO THEREFORE, ON THE SAME LINES THIS GROUND IS ALSO TO BE DECIDED AFRESH AS PER LAW AFTER DUE VERIFICATION OF FACTS BY THE AO. THIS GROUND IS ALSO ALLOWED FOR THE STATISTICAL PURPOSE ONLY . 45. GROUND NO.8. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 43 8. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.88,50,000/- BEING AMOUNT WRITTE N OFF IN THE CAPITAL ACCOUNT AS BUSINESS LOSS. 46. AN AMOUNT OF RS.88.50 LACS WAS ADVANCED TO SHRI MANO J VADODARIA AS REFLECTED IN THE CAPITAL ACCOUNT. IN THI S REGARD, THE OBSERVATION OF THE AO WAS AS UNDER: (E) THE BUNGALOW WHERE BROTHER OF ASSESSEE, SHRI JAY ESH STAYS (SURYAJA BUNGALOW) WAS PURCHASED FROM KIRAN AND BHANUB EN VADODARIA FOR AN OSTENSIBLE CONSIDERATION OF RS.30 LAKH S PAID BY CHEQUE. THE DISTRICT VALUATION OFFICER HAS VALUED THE B UNGALOW AT RS.1.04 LAKHS. ANNEXURE A.15 HAS A LEDGER ACCOUNT OF MANOJ VADODARIA WHICH EVIDENCES THE FACT THAT A SUM OF RS.88.5 0 LAKHS WAS ADVANCED TO SHRI VADODARIA WITHOUT INTEREST. THER E IS NO RECOVERY. NO REASONS WERE OFFERED FOR NON-RECOVERY BE YOND SAYING THAT SHRI VADODARIA IS AN ANTI-SOCIAL PERSON. THIS WOULD INDICATE THAT MONEY IS PAID TO SHRI VADODARIA FOR THE HOUSE. FURTHER, THIS PROVES THAT THIS BOOKS OF ACCOUNTS BELONG T O SHRI JAYESH. 46.1 THE LD. CIT (A) HAS MENTIONED THAT THE SAID AD VANCE WAS NOT IN THE REGULAR COURSE OF BUSINESS OF MONEY LENDING BUT THE SAID ADVANCE WAS AN INTEREST FREE ADVANCE TO A FAMILY MEMBER FOR TH E PURPOSE OF PURCHASE OF A PROPERTY. IT WAS HELD THAT SINCE IT DID NO T PERTAIN TO THE MONEY LENDING BUSINESS, THEREFORE, NOT TO BE ALLOWED EITHER AS A BUSINESS LOSS OR AS A BAD DEBT, RELEVANT FINDING IS AS UND ER: 12.1. I FIND THAT THIS AMOUNT WAS NOT ADVANCED ON IN TEREST AND PROBABLY THE SAME WAS ADVANCED AS APPELLANTS FAMILY MEMBERS HAD PURCHASED A PROPERTY FROM CLOSE RELATIVES OF MANOJ VADODARIA 9BORTHER OR MOTHER). NO INTEREST WAS EVER CHARGED OR CONTEMPLATED FORM HM. THUS THIS ADVANCE CANNOT BE SAI D TO BE IN THE COURSE OF BUSINESS OF MONEY LENDING AND IS NOT ALLOWABLE AS A BUSINESS LOSS OR BAD DEBT AS HELD IN THE G ROUND RELATED TO CLAIM OF BAD DEBTS. IT HAS ALSO NOT BEEN W RITTEN OFF IN IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 44 PROFIT AND LOSS ACCOUNT. HENCE, ACTION OF THE ASSESSING OFFICE R IS UPHELD. 46.2. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES A S WELL AS ON PERUSAL OF THE COMMENTS OF THE AUTHORITIES BELOW IN RESP ECT OF THE ABOVE AMOUNT THAT THE AO HAD PRESUMED THAT THE IMPUG NED AMOUNT WOULD HAVE BEEN GIVEN FOR THE HOUSE. HOWEVER, AS FAR AS THE REVENUE IS CONCERNED, THE SAID PRESUMPTION OUGHT TO BE SUPPORTED BY SOME INCRIMINATING MATERIAL WHICH SOMEHOW HAS NOT BEEN MENTI ONED. THE AO HAS ALSO GIVEN A FINDING THAT SINCE IT WAS FOR THE HO USE AND THE HOUSE BELONGED TO SHRI JAYESH, THEREFORE, THE BOOKS OF ACCOUNTS ALSO BELONGED TO SHRI JAYESH. HOWEVER, THIS FINDING IN RESP ECT OF OWNERSHIP OF BOOKS OF ACCOUNTS HAS NO SUBSTANCE AND ALREADY DECIDED ANTE THAT THE BOOKS IN QUESTION WERE CONNECTED WITH THE UNACCOUNTED BUSINESS OF MR. JAYDEEP. IN RESPECT OF THE SAID AMOUNT, LD.CIT (A) HAS USED THE WORDS PROBABLY THE SAME WAS ADVANCED AS APPELLANTS FAMI LY MEMBER. BY USING THE WORD PROBABLY DEPICTS THAT T HE FINDING ON FACT WAS DOUBTFUL. IN SUCH A SITUATION, WHEN ON ONE HA ND, THE REVENUE HAS NOT RELATED THE ADVANCE WITH SOME INCRIMINA TING MATERIAL, HOWEVER, ON THE OTHER HAND, THE ASSESSEE IS CLA IMING THAT THE ADVANCE WAS CONNECTED WITH THE BUSINESS OF THE ASSESSEE, THEREFORE, WE DEEM IT PROPER TO RESTORE THIS GROUND BACK TO THE STAGE OF AO, SO THAT THE EXACT THE NATURE OF THE ADVANCE FIR ST BE DETERMINED THAT WHETHER IT WAS CONNECTED WITH ANY OF THE BUSINESS A CTIVITY OR IT WAS A FAMILY ADVANCE. WE, THEREFORE, DIRECT THAT FIRST ASCERTAIN THE NATURE OF THE ADVANCE AND THEN ONLY IT CAN BE DECIDED THAT WHETHER IT WAS AN UDI OF THE ASSESSEE. THIS GROUND IS, THEREFORE, AL LOWED BUT FOR STATISTICAL PURPOSES. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 45 47. GROUND NOS.9, 10, 11 AND 12 ARE EITHER GENERAL O R CONSEQUENTIAL IN NATURE THEREFORE, NEED NO INDEPENDENT ADJUDICATIO N. THIS APPEAL IS PARTLY ALLOWED. (C) IT(SS) A.160AHD/2003 (JAYESH D. THAKKAR) (REVENUES APPEAL) . 48. GROUND NO.1. 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICT ING THE UNDISCLOSED INCOME OF THE ASSESSEE FROM RS.10,86,88,886/- T O RS.2,00,000/- BY HOLDING THAT THE ADDITIONS MADE IN H IS CASE PERTAINED SUBSTANTIVELY TO THE CASE OF SHRI JAYDEEP THA KKAR WHICH HAVE BEEN CONSIDERED BY HIM (CIT(A) ) WHILE DECID ING THE APPEAL IN THE CASE OF THE LATTER. 49. IN RESPECT OF THE ABOVE GROUND OF THE REVENUE; A VIEW HAS ALREADY BEEN TAKEN HEREINABOVE WHILE DECIDING THE AP PEAL OF SHRI JAYDEEP THAKKAR THAT THE IMPUGNED ADDITIONS ARE TO B E ASSESSED SUBSTANTIVELY IN HIS HAND. IN THIS CASE, THE MAIN CONTEN TION OF THIS ASSESSEE WAS THAT THE BOOKS SEIZED FROM THE RESIDENCE OF MR. SAMIR BELONGED TO ASSESSEES BROTHER SHRI JAYDEEP. IT WAS CONTES TED THAT THE ASSESSEE HAD NO RELATION AT ALL WITH THOSE BOOKS OF ACCOUNT S AND THE BUSINESS RECORDED THEREIN. THE ASSESSEE HAS DENIED THE OWNE RSHIP OF THE BUSINESS AS ALSO THE SEIZED BOOKS OF ACCOUNTS THEREFORE , PLEADED THAT SUBSTANTIVE ADDITION SHOULD BE MADE IN THE HANDS O F HIS BROTHER SHRI JAYDEEP. THE LD. CIT (A) HAS FOLLOWED HIS DECISI ON PASSED IN THE CASE OF SHRI JAYDEEP THAKKAR AND WE HAVE ALSO AFFIRMED ANTE THE SAID VIEW. THEREFORE, IN THE RESULT, THIS GROUND OF THE RE VENUE HAS NO SUBSTANCE, HENCE DISMISSED. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 46 50. GROUND NO.2. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDIN G THAT ADDITION OFRS.88.5 LACS REPRESENTING UNEXPLAINED INVESTM ENT IN SURYAJA BUNGALOW AMOUNTED TO DOUBLE ADDITION AND TH EREFORE THE SAME BE DELETED. 51. THIS GROUND IS CONNECTED WITH ONE OF THE GROUND AL READY DECIDED IN THE CASE OF SHRI JAYDEEP THAKKAR, I.E. GROUND NO.8 . THE AFORESAID SUM WAS STATED TO HAVE BEEN ADVANCED TO SHRI MANOJ VAD ODARIA. WE HAVE ALREADY SET ASIDE THE SAID GROUND TO BE DECIDED DE NOVO BY THE AO . ONCE THE SAID IMPUGNED AMOUNT HAS ALREADY BEEN CONSIDERED IN THE HANDS OF SHRI JAYDEEP THAKKAR, THERE FORE, THE SAME AMOUNT SHOULD NOT BE TAXED IN THE HANDS OF MR.JAYESH WHICH MAY TANTAMOUNT TO DOUBLE ADDITION, THEREFORE, DELETED. RELEVANT PARAGRAPH IS REPRODUCED BELOW: 5.2. I HAVE CAREFULLY CONSIDERED THE ISSUE. I FIND T HAT NO OPPORTUNITY WAS PROVIDED TO THE APPELLANT TO GIVE COM MENTS REGARDING DISTRICT VALUATION OFFICERS REPORT. BESIDES TH IS HE HAS MADE ADDITION OF RS.88.50 LACS BASED ON PAYMENTS RECORDED IN SEIZED DOCUMENTS WHICH HAS ALREADY BEEN CONSIDERED WHILE WORKING OUT UNDISCLOSED INCOME IN THE CASE OF JAYDEEP AN D JAYESH. HENCE, THIS BECOMES ONLY APPLICATION OF THAT MONE Y AND SOURCE STANDS EXPLAINED. BESIDES THIS NO OTHER DOCUMENT ET C., WERE FOUND AT THE TIME OF SEARCH TO SHOW THAT ANY OTHE R AMOUNT WAS PASSED ON. HENCE THIS ADDITION AMOUNT TO DOUBLE ADDIT ION AND IS DELETED. 51.1. IN THE LIGHT OF THE FOREGOING DISCUSSION, WE ARE NOT INCLINED TO INTERFERE WITH THE VIEW TAKEN BY LD. C.I.T (A), HEN CE HEREBY CONFIRM THE SAME AND THIS GROUND OF REVENUE IS DISMISSED. IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 47 52. THE REST OF THE GROUNDS ARE GENERAL IN NATURE, NE ED NO ADJUDICATION. 53. C.O.NO.119/AHD/2004 JAYDEEP THAKKAR. GROUND OF CROSS OBJECTION . 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONF IRMING THE ADDITION OF RS.2,00,000/- ON ACCOUNT OF ALLEGED UN DISCLOSED INCOME OF THE BLOCK PERIOD. AS A MATTER OF FACT THE APP ELLANT HAS NOT KNOWN NOR HAS ADVANCED ANY LOAN TO ANYONE CALLED M R. YUNUS CHIPA, FROM WHOM SUCH AMOUNT WAS SEIZED AT THE TIM E OF THE SEARCH AT THE PREMISES OF THE APPELLANT. THE LD.CIT (A) OUGHT TO HAVE DELETED SUCH UNCALLED ADDITION. 54. WHEN THE SEARCH WAS IN PROGRESS ON 22-9-1998 ONE SHR I YUNUS I CHHIPA CAME TO THE OFFICE OF SHRI JAYESH AT 52/2 KABUT ARKHANA, AHMEDABAD. THE SAID VISITOR WAS ALSO SEARCHED AND A SUM OF RS.2 LACS CASH WAS SEIZED FROM HIM. HE WAS INTERROGATED AND HIS STATE MENT WAS RECORDED. IT WAS CONFESSED THAT A LOAN OF RS.2 LACS WAS TAK EN AND TODAY HE HAD BROUGHT BACK THE SAID AMOUNT TO RETURN T O MR. JAYESH. THOUGH MR. JAYESH HAS DENIED THE SAID FACT BUT CONSIDERI NG THE SITUATION PRESENT AT THAT TIME IT WAS HELD AS UNDISCLO SED MONEY OF THE ASSESSEE AND TAXED ACCORDINGLY. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE ACTION OF THE A.O WAS UPHELD VIDE PARAGRAPH 4.2 REPRODUCED BELOW:- 4.2. I FIND THAT AT THE TIME (SICK) OF SEARCH SHRI YU NUS CHIPA HAD COME TO PAY RS.2 LACS TO THE APPELLANT ON ACCOUNT OF MONEY BORROWED. THE APPELLANT HAD DENIED HAVING KNOWN THE PERSON. SHRI CHIPA WAS AGAIN EXAMINED AND CROSS EXAMINED DURING ASSESSMENT PROCEEDINGS AND HE HAD AGAIN CONFIRMED THE FACT . IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 48 LOAN TO YUNUS CHIPA IS ALSO NOT RECORDED IN SEIZED DOC UMENTS WHICH HAVE BEEN CLAIMED BY JAYDEEP THAKKAR. THE PERSON WAS FPOUND AT THE TIME OF SEARCH AND HAS CATEGORICALLY STATE D THAT HE WAS REPAYING RS.2 LACS ON ACCOUNT OF LOAN TAKEN ON 21-7-1 998, ON INTEREST FROM APPELLANT. HENCE, IT IS APPARENT THAT RS.2 LACS WAS ADVANCE OUT OF UNACCOUNTED INCOME OF THE APPELLANT. THE ADDITION IS, THEREFORE, UPHELD. 55. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES WE FIND NO FORCE IN THIS GROUND OF THE CROSS OBJECTION PRIMARILY BECAUSE OF T HE REASON THAT THE EXISTENCE OF UNACCOUNTED LOAN OF RS.2 LACS TO MR. CHHI PA WAS EVIDENTLY DETECTED AT THE TIME OF SEARCH OPERATION. THE STATEMENT RECORDED AT THAT MOMENT IS A SUFFICIENT PIECE OF EVIDEN CE AND THAT TOO BEING CORROBORATED BY OTHER CIRCUMSTANCES, THUS WARRANTS TO AFFIRM THE FINDINGS OF THE LOWER AUTHORITIES. THIS GROUND IS DISMI SSED. IN THE RESULT, C.O. IS DISMISSED. 56. IN THE RESULT, IT(SS) NO.155/AHD/2003 & IT(SS) NO.160/AHD/2003 (BOTH REVENUES APPEALS) ARE DISMIS SED AND IT(SS) NO.137/AHD/2003 ASSESSEES APPEAL IS PARTLY ALLOWED AND C.O. NO.119/AHD/2004 OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 21 ST APRIL, 2011. SD/- SD/- (G. D. AGARWAL) (MUKUL KUMAR SHRAWAT) VICE PRESIDENT JUDICIAL MEM BER. AHMEDABAD. DATED: 21-04-2011. S.A.PATKI/TC NAIR IT(SS) NO.137/AHD/2003 IT(SS) NO.155/AHD/2003 IT(SS) NO.160/AHD/2003 & C.O. NO.119/AHD/2004 49 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-I, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER //TRUE COPY// DEPUTY/ASSTT.REGISTRAR IT AT,AHMEDABAD. 1.DATE OF DICTATION -2011 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S ./P.S 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DI CTATING MEMBER FOR PRONOUNCEMENT ON -3-2011 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P. S./P.S 21.4.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.4.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REGISTRA R FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..