The DCITBharuch Circle, Bharuch V. M/s. Mansi Motels Pvt.Ltd., Ankleshwar

ITSSA 15/AHD/2009

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 7906 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-12-2011
• Assessment Year: misc
• Appeal Filed On: 02-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S PARIDA
• Assessee Lawyers: KETAN H SHAH
• Keywords: Unexplained cash credit; Unexplained expenditure; Document seized; Opportunity of being heard; Source of fund; Assessment record; Block assessment; Documents seized
• Section: 44AD; 69C; 142(1); 131; 132; 144

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI G C GUPTA VICE-PRESIDENT & SHRI B P JAIN ACCOUNTANT MEMBER IT(SS)A NO.15/AHD/2009 WITH C O NO.9/AHD/2010 BLOCK PERIOD:-01-04-1990 TO 20-10-2000 THE DEPUTY COMMISSIONER OF INCOME- TAX, BHARUCH CIRCLE, BHARUCH V/S M/S MANSI MOTELS PVT. LTD., C/O KETAN H SHAH, ADVOCATE, 903, SAPPHIRE COMPLEX, C G ROAD, NAVRANGURA, AHMEDABAD PAN: AAECM 6580 E [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI S S PARIDA, CIT DR ASSESSEE BY:- SHRI KETAN H SHAH, AR DATE OF HEARING:- 26-12-2011 DATE OF PRONOUNCEMENT:- 30-12-2011 O R D E R PER B P JAIN (AM) :- THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF THE LEARNED CIT(A)-VI, BARODA, DATED 2 8-11-2008 FOR THE BLOCK PERIOD FROM 01-04-1990 TO 20-10-2000. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- [1] ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.20,00,000/ - BEING LOAN FROM JIVABHAI MASTER. [2] ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.63,27,017/ - BY CAPITALIZING ONLY RS.17,47,971/- OUT OF TOTAL ADDIT ION OF RS.80,74,988/-. 2 2 THE ASSESSEE IN ITS CROSS OBJECTION HAS RAISED TH E FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A S WELL AS LAW; THE LEARNED ASSESSING OFFICER / CIT(A) HAS ERRED; [1] IN NOT APPRECIATING THE FACTS AND/OR LAW AS ARG UED BEFORE THE CIT(A) AS PER HIS APPEAL ORDER PAGES 9 TO 13 VIDE P ARA 4.2 TO 4.2.3 WHEREIN OUR ARGUMENT HAS BEEN REPRODUCED BY T HE CIT(A). HOWEVER, THE LEARNED CIT(A) HAS TOTALLY ERRED IN NO T APPRECIATING THE CONTENTION OF THE ASSESSEE THAT TH E ASSESSMENT FRAMED IS BASICALLY VOID AB-INITIO, ILLEGAL AND LIA BLE TO BE QUASHED AS PER VARIOUS GROUNDS OF APPEAL RAISED BEF ORE HIM AS PER HIS APPEAL ORDER PAGE 3 TO 5 I.E. GROUND NO.1 T O 6. IT IS PRAYED THAT THE ASSESSMENT IS VOID AB-INITIO AND LI ABLE TO BE QUASHED. [2] IN NOT APPRECIATING THE FACTS AND/OR LAW THEREB Y ERRED IN CONFIRMING THE ADDITION OF RS.24,00,000/-. HE HAS A LSO ERRED IN NOT PROPERLY APPRECIATING THE SUBMISSION MADE BEFOR E HIM AS PER APPEAL ORDER PAGE 18 TO 22 PARA 5.2 I.E. A TO G . IT IS SUBMITTED THAT THE C.I.T.(APPEALS) HAS ERRED IN NOT APPRECIATING THE WRITTEN SUBMISSIONS AND ARGUMENTS THEREBY ERRED IN GIVING FINDING CONTRARY TO THE ASSESSEE AS PER APPEAL ORDE R PAGE 22 PARA 5.3. IT IS PRAYED THAT THE WHOLE ADDITION OF RS.24, 00,000/- IS REQUIRED TO BE DELETED. [3] IN NOT APPRECIATING THE FACTS AND SUBMISSION IN REFERENCE TO THE ADDITION OF RS.53,00,000/- INTER ALIA ERRED IN GIVI NG PARTIAL RELIEF OF RS.21,81,000/-. HE HAS ALSO ERRED IN NOT APPRECI ATING THE WRITTEN SUBMISSION MADE BEFORE HIM AS PER HIS APPEA L ORDER PAGE 23 TO 27 PARA 6.2 TO 6.2.1 AS WELL AS ERRED IN GIVING THE FINDING CONTRARY TO THE ASSESSEE'S SUBMISSION AS PE R HIS APPEAL ORDER PAGE 29 TO 30, PARA 6.3 TO 6.3.1. IT IS PRAYE D THAT HE OUGHT TO HAVE DELETED THE ADDITION OF RS.53,00,000/-. [4] IN NOT APPRECIATING THE CONTENTION OF THE ASSES SEE THAT THE WHOLE ADDITION OF RS.80,74,988/- IS REQUIRED TO BE DELETE D AS AGAINST PARTIAL RELIEF GIVEN OF RS.63,27,017/-. HE HAS A SO ERRED IN NOT CONSIDERING THE PROPER SUBMISSION AS MADE BEFORE HI M AS PER APPEAL ORDER PAGE 31 TO 36 PARA 7.2.1 TO 7.2.9 AS W ELL AS THE 3 FINDING OF THE C. IT. (APPEALS) IS AS PER PAGE 36 P ARA 7.3. IT IS PRAYED THAT HE OUGHT TO HAVE DELETED THE ADDITION O F RS.80,74,988/-. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER T HE AFORESAID GROUND OF APPEAL AT THE TIME OF HEARING, IF THE NEED ARISE . 3 FIRST OF ALL WE TAKE UP GROUND NO.1 OF THE CROSS OBJECTION RAISED BY THE ASSESSEE WHICH IS LEGAL GROUND. THE LEARNED COUNSEL FOR THE ASSESSEE, MR. KETAN H SHAH, ADVOCAT E PRAYED FOR SUBMISSION OF AMENDED GROUNDS IN THE CROSS OBJECTIO N. THE SAME WERE PLACED BEFORE THE BENCH. ON PERUSAL OF T HE SAME, IT WAS FOUND THAT THE ASSESSEE HAS REPRODUCED GROUND N OS.1 TO 6 APPEARING ON PAGES 3 TO 5 OF THE CIT(A)S ORDER AND THERE WERE NOTHING NEW IN THE AMENDED GROUNDS. THEREFORE, THE SAME WERE NOT ADMITTED. 4 THE BRIEF FACTS IN GROUND NO.1 OF THE CROSS OBJEC TION OF THE ASSESSEE ARE THAT A SEARCH U/S. 132 OF THE INCOME-T AX ACT WAS CARRIED OUT IN THE MASTER GROUP OF CASES OF MEHSANA ON 20-10- 2000. ON PERUSAL OF THE DOCUMENT SEIZED, IT WAS FOU ND THAT CERTAIN DOCUMENTS WERE RELATED TO THE ASSESSEE. THI S FACT WAS ADMITTED BY ONE OF THE DIRECTORS SHRI ABDUL RASHID GULAM AHMED IN HIS STATEMENT RECORDED ON OATH ON 24/09/02 AND 16/10/02. ACCORDINGLY, PROCEEDINGS U/S 158BC R.W.S 158BD WERE INITIATED FOR THE BLOCK PERIOD 01/04/90 TO 20/10/20 00. THE RETURN WAS FILED ON 28/02/03 FOR THE BLOCK PERIOD DECLARIN G NIL UNDISCLOSED INCOME. THE BLOCK ASSESSMENT WAS COMPLE TED ON 10/12/04 DETERMINING THE UNDISCLOSED INCOME AT RS.1 5774988/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL AND VIDE ORDER DATED 4 10/03/06, THE CIT(A)-XIX, AHMEDABAD DISMISSED THE A PPEAL. AGAINST THIS ORDER, THE MATTER WAS PURSUED WITH ITA T AND ITAT BENCH B AHMEDABAD VIDE ORDER DATED 06/12/06 DIRECTE D AS UNDER: 'HAVING HEARD BOTH THE PARTIES AND PERUSING THE MAT ERIAL ON RECORD, WE FIND THAT THE NOTICES ISSUED BOTH BY THE A.O. AS WELL AS THE CIT(A) HAVE BEEN SENT TO VARUCH IN THE NAME OF THE FORMER DIRECTOR SHRI AMIR GULAM NABI THARADARA, WHEREAS THE PRESENT DIRECTORS ARE STAYING AT THE VILLAGE NEAR PALANPUR. THIS IS THE REASON THAT THE ASSESSEE COULD NOT BE ABLE TO ENTER APPEARANCE BEFORE EITHER OF THE AU THORITIES BELOW. FURTHER, WE FIND THAT THE RELEVANT INFORMATION INCL UDING THE STATEMENT OF SHRI ABDUL RASHID GULAM AHMED (FORMER DIRECTOR) BEING THE BASIS OF ASSESSMENT HAS NOT BEEN MADE AVAILABLE TO THE AS SESSEE BEFORE COMPLETION OF ASSESSMENT. THEREFORE, CONSIDERING TH E FACTS AND CIRCUMSTANCES OF THE CASE THAT THE ASSESSEE HAS NOT BEEN PROVIDED WITH OPPORTUNITY OF BEING HEARD EITHER AT THE ASSESSMENT STAGE OR APPELLATE STAGE, FOR THE ENDS OF JUSTICE AND FAIR PLAY, WE TH INK IT JUST AND PROPER TO SET ASIDE THE IMPUGNED ORDER OF THE AUTHORITIES BELOW AND TO DIRECT THE A.O. FOR MAKING THE ASSESSMENT DE NOVO, AFTER M AKING AVAILABLE TO THE ASSESSEE THE INFORMATION AND THE STATEMENT OF S HRI ABDUL RASHID GULAM AHMEDABAD (FORMER DIRECTOR), WHICH IS THE BAS IS OF ASSESSMENT AND ALLOWING OPPORTUNITY TO THE ASSESSEE BEING HEAR D. 5 M/S MANSI MOTEL PVT. LTD. WAS INCORPORATED ON 05/ 05/93 WITH A VIEW TO CONDUCT HOTEL BUSINESS. FOR THAT PUR POSE, ASSESSEE ACQUIRED LAND AND CONSTRUCTED HOTEL AT ANKLESHWAR I N THE NAME & STYLE OF 'HOTEL GUJARAT INTERNATIONAL' PROP. M/S. M ANSI MOTELS PVT. LTD. I.E. THE APPELLANT. OUT OF THE TOTAL BUIL DUP AREA OF HOTEL GUJARAT INTERNATIONAL', ASSESSEE SOLD 18 SHOPS AT G ROUND FLOOR TO DIFFERENT PARTIES FOR APPROXIMATELY RS.24,00,000/- AND ALSO SOLD RECEPTION COUNTER ON GROUND FLOOR (65 SQUARE METER) AND FIRST FLOOR (1108 SQ. METER) TO M/S. HOTEL HERO THROUGH F IVE SALE DEEDS BEING EXECUTED IN THE MONTH OF MARCH, 2000. P RIOR TO THIS ASSESSEE ENTERED INTO AN AGREEMENT TO SALE (BAHAKHA T) ON 5 6.3.2000 WITH M/S HOTEL HERO TO SELL ENTIRE IMMOVAB LE PROPERTY (TOGETHER WITH FURNITURE & FIXTURES) ON WHICH 'HOTE L GUJARAT INTERNATIONAL' WAS BEING RUN BY THE ASSESSEE. THE M ANAGEMENT OF 'HOTEL GUJARAT INTERNATIONAL' WAS HANDED OVER TO M/ S HOTEL HERO W.E.F. 1.4.2000. M/S. MANSI MOTELS PVT. LTD. HAD AP PLIED FOR HOTEL LICENSE ON 8.3.1999 AND LICENSE WAS ISSUED ON 30.9.1999 BY SUB DIVISIONAL MAGISTRATE AND HOTEL BUSINESS WAS STARTED IN THIS BUILDING IN THE NAME AND STYLE 'HOTEL GUJARAT INTERNATIONAL' PROP. M/S. MANSI MOTELS PVT. LTD., AFTER 30.9.1999. SOME SPACE ON GROUND FLOOR IS USED AS RECEPTION HALL. THE AREA AND NUMBER OF ROOMS OF HOTEL GUJARAT INTERNATIONAL ARE AS UNDE R: 1. GROUND FLOOR 65 SQ. METERS RECEPTION COUNTER 2. FIRST FLOOR 1108 SQ. METERS 22 ROOMS 3. SECOND FLOOR 1108 SQ. METERS 16 ROOMS & HALL 6 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, STAT EMENT OF SHRI ABDUL RASID GULAM RASHUL WHO IS THE MAIN DIREC TOR OF M/S. MANSI MOTELS PVT. LTD. WAS RECORDED U/S. 131 ON THE I.T. ACT ON 22.9.2002 AND 16.10.2002 AND ON BEING ASKED ABOUT I NVESTMENT MADE IN GALAXY ARCADE BUILDING HE STATED THAT THE A PPROXIMATE INVESTMENT OF RS.1,50,00,000 HAD BEEN MADE FROM THE FOLLOWING SOURCES: SHARE CAPITAL OF DIRECTORS RS.11,00,000/- LOAN FROM JIVAJBHAI MASTER MEHSANA RS.20,00,000/- LOAN FROM PRECONE PVT.LTD., ANKLESHWAR RS.46,00,000/- 6 ANKLESHWAR NAGRIK SAHAKARI BANK LTD; (LOAN FOR FURNITURE HPV - 0012 A/C.) RS.20,00,000/- ANKLESHWAR NAGRIK SAHAKARI BANK LTD. (TERM LOAN LTV - 1693 A/C.) RS.6,00,000/- CREDITORS RS.23, 00,000/- SALE CONSIDERATION FROM SALE OF 18 SHOPS RS.24,00,000/- TOTAL RS.1,50,00,000/- HE HAS FURTHER STATED THAT COST OF CONSTRUCTION OF PORTION OF HOTEL BUILDING IS APPROXIMATELY RS.62,00,000/- TO RS.63,0 0,000/- AND INVESTMENT IN FURNITURE, FIXTURES, TV, ETC. OF RS.4 1,00,000/- TO RS.42, 00,000/- IN ADDITION TO COST OF LAND. 7 THE MANAGEMENT OF M/S. MANSI MOTELS PVT. LTD. ENT ERED INTO A SALE AGREEMENT (BANAKHAT) ON 6.3.2000 WITH S HRI HIRALAL K. MODI OF M/S. HOTEL HERO OF ANKLESHWAR TO SELL TH E RUNNING BUSINESS OF HOTEL ALONGWITH ASSETS OF THE HOTEL. TH E VALUE OF SALES CONSIDERATION HAS BEEN SHOWN IN THE AGREEMENT AT RS.1,05,00,000/- AND POSSESSION OF HOTEL HAS BEEN H ANDED OVER TO M/S HOTEL HERO ON 1.4.2000. A REGISTERED DOCUMENT W AS EXECUTED IN THE MONTH OF MARCH, 2000 FOR THE RECEPTION COUNT ER AND FIRST FLOOR (BUILT UP AREA OF 1173 SQ. MTR.) FOR RS.22,95 ,998/-. 8 DURING THE COURSE OF ORIGINAL BLOCK ASSESSMENT PR OCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT DURING THE CO URSE OF SEARCH, EXCEPT FOR A DIARY, NO OTHER RECORDS WERE FOUND FRO M ASSESSEE'S PREMISES. THEREFORE, THE PROVISIONS OF SECTION 158B TO 158BH ARE NOT APPLICABLE TO THE ASSESSEE. FURTHER, A NOTICE U /S 158BD HAD 7 BEEN ISSUED ON 30/12/02 WHICH WAS BEYOND THE TIME P RESCRIBED UNDER THE ACT. 9 THE A.O. ON THE OTHER HAND WAS OF THE VIEW THAT T HE REQUIREMENT OF SECTION 158BD IS ONLY A PRIMA-FACIE SATISFACTION BY THE A.O. THAT THE MATERIAL FOUND DURING SEARCH R EFLECTED UNDISCLOSED INCOME OF THE PERSON OTHER THAN ONE WHO IS SEARCHED. IT IS ALSO MENTIONED THAT IN SECTION 158BD, THERE I S NO REQUIREMENT THAT SUCH ACTION CAN ONLY BE INITIATED DURING THE PENDENCY OF ASSESSMENT PROCEEDINGS U/S 158BC. THE D ECISIONS IN THE CASE PRIYA BLUE INDUSTRIES VS JCIT 251 ITR 613 (GUJ) AND THE OBSERVATION FROM HON'BLE ITAT, AHMEDABAD IN ITA (SS) NO.265 & 268/AHD/2002 WERE RELIED UPON BY A.O. 10 DURING THE APPELLATE PROCEEDING BEFORE CIT(A), N UMBER OF OPPORTUNITIES WERE PROVIDED ON 15/03/05, 19/08/05, 12/09/05 AND FINALLY ON 02/01/06. THE LAST NOTICE DATED 15/12/05 (FOR HEARING ON 02/01/06) WAS SERVED BY ACIT, BHARUCH CIRCLE AND IN RESPONSE THERETO, AN ADJOURNMENT LETTER DATED 29/12 /05 WAS RECEIVED SEEKING ADJOURNMENT ON THE GROUND THAT THE AUTHORIZED REPRESENTATIVE WAS OUT OF TOWN. FURTHER OPPORTUNITI ES WERE GIVEN ON 19/01/06, 25/01/06, 01/03/06 AND 10/03/06 BUT NO NE ATTENDED BEFORE CIT(A) XIX, AHMEDABAD AND THE ORDER WAS PASS ED BY CIT(A) U/S 144 R.W.S. 158BD DISMISSING THE APPEAL. 11 IN THE SET-ASIDE PROCEEDING IT IS STATED BY THE A.O. THAT NOTICES U/S 143(2) AND 142(1) DATED 02/11/07 WERE I SSUED FIXING THE HEARING ON 16/11/07 BUT NOBODY ATTENDED. ANOTHE R NOTICE DATED 03/12/07 WAS ISSUED BUT IT WAS REPORTED BY TH E NOTICE 8 SERVER THAT ASSESSEE WAS NOT AVAILABLE AT THE GIVEN ADDRESS. THEREAFTER, THE NOTICE WAS SERVED THROUGH AFFIXTURE ALONGWITH THE COPY OF STATEMENT OF SHRI ABDUL RASHEED GULAM RASUL ON 06/12/07 BY INSPECTOR. IT IS MENTIONED BY THE A.O. THAT THE ASSESSEE FAILED TO COMPLY WITH THE NOTICES ISSUED A ND THAT THE BLOCK ASSESSMENT WAS FINALIZED ON THE BASIS OF MATE RIAL AVAILABLE U/S 144 OF THE ACT. IT IS ALSO MENTIONED THAT DURIN G THE ORIGINAL BLOCK PROCEEDINGS ALSO THE ASSESSEE WAS NON-COOPERA TIVE AND THAT ORDER WAS ALSO COMPLETED EX-PARTE. 12 THE ASSESSEE MADE VARIOUS SUBMISSIONS BEFORE THE LEARNED CIT(A) WHICH WERE SENT TO THE AO FOR COMMENTS. ON RECEIPT OF THE COMMENTS / REMAND REPORT DATED 29-08-2008 WHICH WAS SUBMITTED TO THE ASSESSEE, AFTER CONSIDERING THE RE PLY OF THE FACTS ON RECORD, THE LEARNED CIT(A) OBSERVED THAT THE INS PECTOR SHRI A M SHAH OF INCOME-TAX OFFICE, BHARUCH HAD SERVED THE NOTICE AND COPY OF THE STATEMENT OF SHRI ABDUL RASID OF 06-12- 2007 BY AFFIXTURE AT THE PREMISES OF MANSI MOTELS P. LTD. THE ASSESSMENT RECORD ALONG WITH THE DEMAND NOTICE WAS ALSO SERVED BY AFFIXTURE AT THE PREMISES OF MANSI MOTELS P. LTD. O N 31-12-2007. THESE FACTS ARE AVAILABLE IN THE ORDER OF THE LEARN ED CIT(A) VIDE PARA 4.3.1. IT WAS OBSERVED BY THE LEARNED CIT(A) THAT THE DIRECTORS OF THE ASSESSEE COMPANY WERE FULLY AWARE AND CONVERSANT WITH THE PROCEEDINGS BUT CONVENIENTLY CH OSE TO BE NON-COOPERATIVE IN THE ASSESSMENT AS WELL AS IN THE ORIGINAL APPELLATE PROCEEDINGS. IT IS ONLY IN THE SECOND ROU ND OF APPELLATE PROCEEDINGS, LEGAL GROUNDS WERE RAISED. SUFFICIENT OPPORTUNITIES WERE PROVIDED TO THE ASSESSEE AND IN THE ABSENCE OF PROPER 9 REPRESENTATION AND NON-COOPERATION BY THE ASSESSEE, THE AO HAD NO OPTION BUT TO COMPLETE THE ASSESSMENT EX-PARTE. THE DECISION IN THE CASE OF MANOJ AGRAWAL RELIED UPON BY THE LD. AR IS NOT APPLICABLE AS IT RELATES TO THE ORIGINAL ASSESSMENT PROCEEDINGS WHEREAS THE ISSUE AT HAND PERTAINS TO THE SET-ASIDE PROCEEDINGS. IT WAS FURTHER OBSERVED BY THE LEARNED CIT(A) VIDE PARA 4.3.4 AND 4.3.5 THAT IT IS NOT TRUE THAT THE ASSESSMENT HAS B EEN COMPLETED ONLY ON THE STATEMENT OF EX-DIRECTOR BUT THERE WERE DIARIES WHICH WERE SEIZED REFLECTING THE INCOME FROM HOTEL OPERAT ION. THE LEARNED CIT(A) WAS NOT AGREEMENT WITH THE ASSESSEE THAT THE SAME AMOUNT OF RS.1.05 CRORE WAS TAXED FIRST SUBSTA NTIVELY IN THE CASE OF HERO HOTELS AND THEN IN THE CASE OF THE ASS ESSEE. IN THE CASE OF HERO HOTELS IT WAS HELD BY THE LEARNED CIT( A) THAT THE ACTUAL CONSIDERATION PAID BY HERO HOTELS WAS RS.1.0 5 CRORE THOUGH THE DECLARED CONSIDERATION WAS AROUND RS.27 LACS. IN THE CASE OF ASSESSEE WHAT IS SOUGHT TO BE TAXED IS UN-D ECLARED SOURCE OF INVESTMENT IN CONSTRUCTION OF HOTEL BUILDING [SH OPS AS WELL AS 1 ST & 2 ND FLOORS]. THE LEARNED CIT(A) ACCORDINGLY DISMISSED GROUND NOS.1 TO 7 OF THE ASSESSEE RAISED BEFORE HIM ON THE ISSUE BEFORE US. 13 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE LEARNED COUNSEL FOR THE ASSESSEE R EPEATED THE SIMILAR ARGUMENTS AS MADE BEFORE THE LEARNED CIT(A) . THE SAME WERE TAKEN INTO CONSIDERATION. 14 THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE LEARNED CIT(A). 10 15 WE CONCUR WITH THE VIEWS OF THE LEARNED CIT(A) W HO HAS ALSO CALLED FOR THE ASSESSMENT RECORDS AND EXAMINED THEM BY USING THE CONCURRENT JURISDICTION. FOR THE SAKE OF CLARITY, WE REPRODUCE THE ORDER OF THE LEARNED CIT(A) WHICH APP EARS TO BE REASONED ONE AND WE FIND NO ERROR IN HIS ORDER IN P ARAS 4.3. TO 4.3.6, AS UNDER:- 4.3 I HAVE CAREFULLY CONSIDERED THE ORIGINAL BLOCK ASSESSMENT ORDER, THE ORDER OF THE HON'BLE ITAT, SUBMISSIONS OF THE A PPELLANT AND THE REMAND REPORT. I HAVE ALSO CALLED FOR THE ASSESSMEN T RECORDS AND EXAMINED THEM. IT IS NOTICED THAT THE BLOCK RETURN WAS FILED ON 28/03/03 AND IN THE BLOCK RETURN, THE ADDRESS FOR C OMMUNICATION WAS INDICATED AS 'GALAXY ARCADE, OLD NH NO.8 GIDC, ANK ELESHWAR'. IT IS ALSO NOTICED FROM THE ASSESSMENT RECORDS THAT TH E ORIGINAL BLOCK ASSESSMENT ORDER, DEMAND NOTICE AND THE PENALTY NOT ICE 158BFA(2) WERE RECEIVED BY SHRI AMIR, GULAM NABI , DIRECTOR O F MANSI MOTEL PVT. LTD. ON 28/12/041 IT IS ALSO NOTICED THAT ALL THE TAX RECOVERY COMMUNICATIONS WERE ADDRESSED TO THE DIRECTORS AT T AL.PALANPUR, BANASKANTHA. IT IS ALSO NOTICED THAT DURING THE COU RSE OF ORIGINAL APPELLATE PROCEEDINGS, NOTICE DATED 15/12/05 WAS IS SUED FIXING HEARING ON 02/01/06, IN RESPONSE THERETO ADJOURNMENT LETTER DATED 29/12/05 WAS FILED. FURTHER, NOTICE DATED 19/01/06 WAS SERVE D ON THE DIRECTOR AMIR GULAM NABI ON 24/01/06 BUT NONE ATTENDED BEFOR E CIT(A) XIX AHMEDABAD. AS PER ASSESSMENT RECORD, SHRI AMIR GULA M NABI WAS THE DIRECTOR OF THE MANSI MOTELS PVT. LTD. FROM 20/ 06/96. THERE IS NO COMMUNICATION IN THE ASSESSMENT RECORD THAT SHRI AM IR GULAM NABI WAS NO LONGER THE DIRECTOR OR WHO WERE THE PRESENT DIRECTORS. 4.3.1. IT IS ALSO OBSERVED FROM THE ASSESSMENT RECO RDS THAT INSPECTOR SHRI A.M. SHAH OF IT OFFICE, BHARUCH HAD SERVED THE NOTICE AND THE COPY OF STATEMENT OF SHRI ABDUL RASHID ON 06/12/07 SERVICED BY AFFIXTURE AT THE PREMISES OF MANSI MOTELS PVT. LTD. FURTHER, IT IS ALSO SEEN THAT THE ASSESSMENT RECORD ALONGWITH THE DEMAN D NOTICE WAS SERVICED BY AFFIXTURE AT THE PREMISES OF MANSI MOTE LS PVT. LTD. ON 31/12/07. 4.3.2. FROM THE AFORESAID FACTS AS WELL THE FACT TH AT CERTAIN NOTICES AND THE ORIGINAL BLOCK ASSESSMENT ORDER WERE RECEIVED B Y SHRI AMIR GULAM NABI AS LATE AS 2006 WITHOUT POINTING OUT THA T HE WAS NO LONGER 11 THE DIRECTOR, IT IS APPARENT THAT THE DIRECTORS OF THE APPELLANT COMPANY WERE FULLY AWARE AND CONVERSANT WITH THE PROCEEDING S BUT CONVENIENTLY CHOSE TO BE NON-COOPERATIVE IN ASSESSM ENT AS WELL AS IN THE ORIGINAL APPELLATE PROCEEDINGS. ONLY IN THE SEC OND ROUND OF APPELLATE PROCEEDING, THE LEGAL GROUNDS HAVE BEEN R AISED. UNDER THESE CIRCUMSTANCES, I AM OF THE HUMBLE OPINION THAT SUFF ICIENT OPPORTUNITIES WERE PROVIDED TO THE APPELLANT AND THAT THE APPELLA NT WAS ALL ALONG IN THE KNOW OF THE BLOCK ASSESSMENT PROCEEDINGS AND IN THE ABSENCE OF PROPER REPRESENTATION AND NON CO-OPERATION BY THE V APPELLANT, THE A.O, HAD NO OPTION BUT TO COMPLETE THE ASSESSMENT E X-PARTE. 4.3.3. THE DECISION IN THE CASE OF MANOJ AGRAWAL IS NOT APPLICABLE AS IT RELATES TO THE ORIGINAL BLOCK ASSESSMENT PROCEED INGS WHEREAS THE ISSUE AT HAND PERTAINS TO SET-ASIDE PROCEEDINGS. 4.3.4. IT IS ALSO NOT TRUE THAT THE ASS ESSMENT HAS BEEN COMPLETED ONLY ON THE STATEMENT OF EX DIRECTOR (WHI CH IN ANY CASE AS DETAILED IN SUBSEQUENT GROUNDS WAS FOUND TO BE CRED IBLE) BUT THERE WERE DIARIES WHICH WERE SEIZED REFLECTING THE INCOM E FROM HOTEL OPERATIONS. _, ; 4.3.5. I AM NOT IN AGREEMENT WITH THE APPELLANT THA T THE SAME AMOUNT OF RS.1.05 CRORE WAS TAXED FIRST SUBSTANTIVELY IN T HE CASE OF M/S HERO HOTEL AND THEN IN THE CASE OF THE APPELLANT. IN THE CASE OF M/S HERO HOTEL, IT WAS HELD BY THE CIT(A)| THAT THE ACTUAL C ONSIDERATION PAID BY M/S HERO HOTEL WAS RS.1.05 CRORE THOUGH THE DECLARE D CONSIDERATION WAS AROUND 27 LAKHS. IRI CASE OF APPELLANT, WHAT IS SOUGHT TO BE TAXED IN THE HANDS OF THE APPELLANT IS UNDECLARED SOURCE OF INVESTMENT IN CONSTRUCTION OF HOTEL BUILDING (SHOPS AS WELL AS FI RST AND SECOND FLOOR). 4.3.6 IN VIEW OF ABOVE, GROUNDS NO. 1 TO 7 ARE DIS MISSED. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE ORDER OF THE LEARNED CIT(A) IS REASONED ON E AND THEREFORE IN THE CIRCUMSTANCES AND FACTS OF THE CAS E, GROUND NO.1 OF CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 12 16 NOW WE TAKE UP GROUND NO.2 OF CROSS OBJECTION OF THE ASSESSEE IN WHICH FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S HOTEL HERO STATEMENT OF THE MAIN DIRECTOR SHRI ABDUL RASHID WAS RECORDED ON OATH WHE REIN IT WAS MENTIONED THAT IN GALAXY ARCADE THERE ARE 18 SHOPS ON GROUND FLOOR ALONGWITH HOTEL RECEPTION COUNTER AND 20 ROOM S ON FIRST FLOOR AND 16 ROOMS AND A HALL ON SECOND FLOOR WHICH WAS CONSTRUCTED DURING 1996-98 AND THAT THE INVESTMENT IN SUCH BUILDING AS ON 3.1/03/2000 WAS OF RS.1,49,00,000/- WHICH ALSO INCLUDED THE SALE CONSIDERATION OF 18 SHOPS OF RS.2 4,00,000/-. IN OTHER WORDS, IT WAS CLAIMED THAT 24,00'000/- RECEIV ED FROM THE SALE PROCEEDS WERE UTILIZED FOR CONSTRUCTION OF GAL AXY ARCADE. THE SAME WAS ADDED AS UNDISCLOSED INCOME OF THE ASS ESSEE. 17 THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE A O. 18 THE LEARNED COUNSEL FOR THE ASSESSEE MADE SIMILA R ARGUMENTS BEFORE US AS MADE BEFORE THE LEARNED CIT( A). 19 ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDER OF THE LEARNED CIT(A). 20 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEW OF THE LEARNED CIT(A) THAT SHOPS ON THE GROUND FLOOR OF GALAXY ARCADE WERE CON STRUCTED FIRST AND THESE WERE THEN SOLD AND SALE PROCEEDS WA S UTILIZED TOWARDS CONSTRUCTION OF FIRST AND SECOND FLOOR OF T HE HOTEL BUILDING. NO DETAILS WERE FURNISHED BEFORE THE A.O. REGARDING THE SOURCE AND THE COST OF CONSTRUCTION OF 18 SHOPS. TH EREFORE, THE ENTIRE SALE PROCEEDS OF RS.24,00,000/- WAS TAXED BY THE AO., 13 WHEREAS, THE LEARNED CIT(A) WAS IN AGREEMENT WITH T HE ASSESSEE THAT THE INCOME GENERATED FROM THE SALE OF SHOPS SH OULD BE BROUGHT TO TAX AND IN THE ABSENCE OF DETAILS 8% PRO FIT ON SUCH SALE IS REASONABLE. WHAT IS ALSO TO BE TAXED IS THE INITIAL INVESTMENT ON THE CONSTRUCTION OF THE SHOPS. IT IS TRUE THAT INITIAL INVESTMENT COULD BE RAISED FROM DECLARED SELF OR OU TSIDE SOURCES. BUT SUCH DETAILS WERE NOT FURNISHED IN ASSESSMENT O R APPELLATE PROCEEDINGS. IN THE ABSENCE OF DETAILS THEREFORE TH E INITIAL INVESTMENT WHICH IS SALES MINUS THE PROFIT ELEMENT IS ALSO TO BE TAXED. 22 IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE F IND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THUS, GROUND NO.2 OF CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 23 NOW WE TAKE UP GROUND NO.1 OF THE REVENUES APPE AL AND GROUND NO.3 OF THE CROSS OBJECTION OF THE ASSESSEE WHERE THE FACTS OF THE CASE ARE THAT IN RESPECT OF THE FOLLOW ING CASH CREDITS / SOURCE OF FUND, NO EXPLANATION WAS SUBMITTED:- SHARE CAPITAL RS.11 LAKH LOAN FROM JIVRAJBHAI OF MEHSANA RS.20 LAKH CREDITORS RS.22 LAKHS -------------- TOTAL RS.53 LAKHS ACCORDINGLY, THE AFORESAID AMOUNT OF RS.53 LAKHS WA S TREATED AS UNEXPLAINED CASH CREDIT. ALTERNATIVELY, IT WAS ALSO INDICATED BY THE AO THAT THE AFORESAID AMOUNT WAS INCURRED ON CO NSTRUCTION OF HOTEL BUILDING, SO THE AMOUNT OF RS.52 LAKHS CAN BE TREATED AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. 14 24 BEFORE THE LEARNED CIT(A), THE ASSESSEE MADE SUB MISSIONS WHICH WERE SENT TO THE AO FOR COMMENTS. ON RECEIPT OF THE REMAND REPORT AND THE SUBMISSIONS OF THE ASSESSEE T HEREAFTER, THE LEARNED CIT(A) VIDE PARA 6.3 OF HIS ORDER OBSERVED THAT THE ASSESSEE HAD SUBMITTED THE EXPLANATION WITH REGARD TO THE SOURCES OF RS.20 LACS. WITH REGARD TO THE BALANCE AMOUNT OF RS.10,64,100/-, SOURCES OF RS.9,00,000/- AND RS.19, 000/- FROM NAZIR IBRAHIM IS NOT EXPLAINED. IN REGARD TO THE TR ADE CREDITORS, IT IS NOT SHOWN HOW THE AMOUNT AVAILABLE FOR INVESTMEN T IN THE HOTEL BUILDING. THEREFORE, THE LEARNED CIT(A) SUSTA INED THE ADDITION TO THE EXTENT OF RS.22,00,000 + RS.9,19,00 0 I.E. RS.31,19,000. IN FACT, THE ADDITION OF RS.53,00,00 0 WAS REDUCED TO RS.31,19,000/- WHICH IS STILL HIGHER THEN RS.18, 43,000/- DEPICTED IN THE SEIZED DOCUMENTS. 25 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LEARNE D CIT(A) THAT FROM THE BALANCE SHEET OF MANSI MOTEL THAT AS ON 31 /3/97 THE SHARE CAPITAL WAS SHOWN AS RS.10,64,100/- WHEREAS A S ON 31/1/99 IT IS DECLARED AT RS.30,64,700/-. THE LEARNED CIT(A ) WAS RIGHTLY IN AGREEMENT WITH THE ASSESSING OFFICER THAT FOR TH E BLOCK PERIOD THE SOURCES OF SHARE APPLICATION MONEY HAS TO BE EX PLAINED IN ENTIRETY. IN APPEAL IT WAS EXPLAINED THAT OUT OF RS .30,64,700/-, RS.20,00,000/- IS RAISED FROM RAMESHBHAI, GANGABEN AND JIVRAJBHAI. THEIR PAN NO. AND COPIES OF THEIR LEDGE R ACCOUNT WERE FURNISHED. THE TRADE CREDITORS AS ON 31/3/01 W ERE RS.26,95,998. ALSO THE TERM LOAN FROM ANKLESHWAR BA NK WAS SHOWN AS RS.30,21,257/-,FURTHER THE LOAN OF RS.46,0 0,000/- FROM 15 PRECONE PRIVATE LIMITED AND RS.30,00,000/- FROM ANK LESHWAR SAHAKARI NAGARIK BANK IS ALSO REFLECTED AS ON 31/3/ 99. IN OTHER WORDS THE SOURCES OF FINANCE FOR INVESTMENT IN THE HOTEL BUILDING AS STATED DURING THE COURSE OF SEARCH OPERATION BY THE EX-DIRECTOR IN SEPTEMBER-OCTOBER 2002 MORE OR LESS TALLY WITH T HE FIGURES SHOWN IN THE VARIOUS BALANCE SHEETS OF THE COMPANY DURING 1999- 2001. IN OTHER WORDS THE STATEMENT OF SHRI ABDUL RA SID GULAM RASHUL IS NOT ONLY MATERIAL AND RELEVANT BUT IS ALS O CORROBORATED BY THE DOCUMENTS AVAILABLE AND IS THEREFORE CREDIBL E. THE AUTHORIZED CAPITAL OF THE ASSESSEE COMPANY IS RS.10 ,00,000/- WHEREAS SHARE APPLICATION MONEY AS ON 31/3/99 IS SH OWN AS UNDER: 60 EQUITY SHARES OF RS.10 EACH IN CASH RS. 600 SHARE APPLICATION MONEY RS. 30, 64,100 TOTAL RS. 30,64,700 IN RESPECT OF SHARE APPLICATION MONEY OF. RS.306410 0 DETAILS OF SHARES APPLIED FOR ETC. ARE NOT INDICATED. FURTHERM ORE IN THE LEDGER ACCOUNTS RAMESHBHAI, GANGABEN AND JIVRAJBHAI HUF HAD SHOWN INTEREST RECEIVABLE FROM THEIR INVESTMENT WIT H THE ASSESSEE COMPANY WHEREAS THE ASSESSEE HAD SHOWN THE AMOUNT F ROM THESE PERSONS AS SHARE APPLICATION MONEY. IT SEEMS FROM T HESE DOCUMENTS THAT LOAN OUT OF RS.20,00,000/- WAS WRONG LY SHOWN AS SHARE APPLICATION MONEY. IN VIEW OF THE FACT THAT I N RESPECT OF RS.20,00,000/- THE PAN DETAILS, AND THE LEDGER ACCO UNTS WERE FURNISHED, THE SOURCE OF RS,20,00,000/- STANDS EXPL AINED. IN 16 RESPECT OF THE BALANCE AMOUNT OF RS.1064100/-, THE SOURCES OF RS.9,19,000/-(RS.9,00,000/- FROM IBRAHIM AND RS.19, 000/- FROM NAZIR IBRAHIM), IS NOT EXPLAINED. FURTHERMORE IN RE GARD TO THE TRADE CREDITORS, IT IS NOT SHOWN HOW THE AMOUNT WAS AVAILABLE FOR INVESTMENT IN THE HOTEL BUILDING. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CA SE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THUS, GROUND NO.1 OF THE REVENUES APPEAL AND GROUND NO.3 OF THE CROS S OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. 26 NOW WE TAKE UP GROUND NO.2 OF THE REVENUES APPE AL AND GROUND NO.4 OF CROSS OBJECTION OF THE ASSESSEE. THE BRIEF FACTS IN THESE GROUNDS ARE THAT IN THE CASE OF M/S HOTEL HERO, BLOCK ASSESSMENT ORDER DATED 31-10-02, THE VALUE OF HOTEL BUILDING ALONG WITH FURNITURE AND FIXTURE IS DETERMINED AT R S.1,60,66,066/- AND THE COST INCURRED ON SUCH BUILDING WAS RS.1,32, 91,018/-. HOWEVER, OUT OF THE ABOVE COST, EXPENDITURE OF 53 L AKHS NOT ALLOWED U/S 69C. THEREFORE, THE UNDISCLOSED INCOME ON SALE OF HOTEL BUILDING WAS DETERMINED AT RS.80,74,988/- (1, 60,66,066 1,32,91,018 53,00,000). 29 THE LEARNED CIT(A) VIDE PARA 7.3 TO 7.3.1 ALLOWE D THE PART RELIEF. 30 IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) AS WE LL AS BEFORE US THAT - 17 THE AO HAS CONSIDERED SALE PROCEEDS OF HOTEL TO BE AT RS.1,60,66,066/- TAKING COGNIZANCE OF ASSESSMENT OR DER PASSED IN THE CASE OF M/S HOTEL HERO BASED ON THE REPORT OF D VO. WHEREAS, IN THE CASE OF HOTEL HERO THE LEARNED CIT(A) WHILE ADJUDICATING APPEAL HAS SUBSTITUTED SALE CONSIDERATION AT RS.1,0 5,00,000/- INSTEAD RS.1,60,63,066/- VIDE PARA 4.2.2 TO PARA 4. 2.7 OF THE APPELLATE ORDER. IT WAS SUBMITTED THAT WITH REGARD TO ADMISSIBLE COST TO BE DEDUCTED FOR THE PURPOSE OF DETERMINING INCOME ARISEN ON ACCOUNT OF SALE OF HOTEL, AS PER ASSESSMENT ORDE R ADMISSIBLE COST WORKS TO RS.1,32,91,078/-, THE ASSESSING OFFIC ER HOWEVER HAS REDUCED RS.53,00,000/- FROM THIS AMOUNT INVOKIN G PROVISIONS OF SECTION 69C OF IT. ACT AND, THEREFORE, HAS ADOPT ED ADMISSIBLE COST TO BE AT RS.79,91,078/- VIDE PAGE 18 OF THE AS SESSMENT ORDER. IT WAS ARGUED THAT FOR THE REASONS STATED IN EARLIER GROUND OF APPEAL PROVISIONS OF SECTION 69C CANNOT BE INVOK ED IN THE CASE OF YOUR APPELLANT AND THEREFORE ADMISSIBLE |CO STS HAS TO BE ADOPTED AT RS.L,32,91,078/- ONLY AND IN SUCH CIRCUM STANCES THE INCOME FROM SALE OF HOTEL IN THE CASE OF APPELLANT WORKS OUT TO BE IN NEGATIVE DETAILS OF WHICH ARE AS UNDER: SALE CONSIDERATION CONSIDERED IN THE CASE OF M/S. HOTEL HERO RS.1,05,00,000/- LESS: ADMISSIBLE COST RS.1,32,91,078/- -------------------- LOSS ARISING ON SALE OF HOTEL BUILDING RS. 27,91,0 78/- WITHOUT PREJUDICE TO THE COMPUTATION MADE ABOVE IT WAS STATED THAT THE ASSESSABLE INCOME NEEDS TO BE COMPUTED AT RS. NIL IN VIEW OF THE FACT THAT ASSESSMENT HAS BEEN MADE AFTE R TIME BARRING DATE AND U/S. 158BD OF THE ACT THAT TOO ON PROTECTI VE BASIS AS IS 18 EVIDENT FROM THE SATISFACTION RECORDED IN THE CASE OF M/S. HOTEL HERO IN THEIR ASSESSMENT .ORDER. SINCE, SECTION 158 BD WAS INVOKED WITHOUT JURISDICTION, ASSESSMENT SO MADE FA ILS BOTH ON ACCOUNT OF LIMITATION AS WELL AS ON ACCOUNT WRONG A SSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER WITHIN THE ME ANING OF INCOME-TAX ACT, 1961. IT WAS CONTENDED THAT EVEN IT IS ASSUMED THAT THE ASSESSMENT TO MADE IS VALID IGNORING THE L EGAL GROUNDS STILL THE ASSESSABLE INCOME UNDER THE PROVISIONS1 O F THE ACT REMAINS EITHER IN NEGATIVE OR AT THE MOST AT NIL, B REAKUP OF ASSESSABLE INCOME AS PER THE UNDERSTANDING OF THE A PPELLANT WITHOUT PREJUDICE TO THE EXPLANATIONS AND SUBMISSIO NS MADE AGAINST EACH OF THE GROUND OF APPEAL IS AS UNDER WH ICH THE ASSESSING OFFICER COULD HAVE DETERMINED TAKING EVER YTHING AGAINST THE ASSESSEE WHILE INVOKING PROVISIONS OF S ECTION 144 OF THE ACT: 1. INCOME AS PER FORM NO. 2B DECLARED BY THE APPELLANT RS. NIL 2. UNDISCLOSED INCOME ON SALE OF SHOPS BY INVOKING PROVISIONS OF SECTION 44AD OF THE ACT RS.1,92,000/- 3. UNDISCLOSED CASH CREDITS NOT TAKEN BY A/C PAYEE CHEQUES AND NOT DISCLOSED IN THE RETURNS FILED PRIOR TO THE DATE OF SEARCH I.E. CREDITORS AS PER STATEMENT OF EX-DIRECTOR RS.22,00,000/- 4. INCOME ON SALE OF HOTEL (-) RS.27,91,078/- ------------------------- ASSESSABLE INCOME (STAGE-I) (-) RS. 3,99,078/- 19 AS A FURTHER ALTERNATE IT WAS SUBMITTED THAT EVEN A FTER CONSIDERING RECEIPTS RECORDED IN SEIZED DOCUMENTS AT ANNEXURE B S-1 & BS-2, MAXIMUM ADDITION THAT COULD BE MADE BASED ON SEIZED MATERIAL WORKS OUT TO RS. 30,0007- AS PER ANNEXURE-BS/1, RS. 94,040/- (I.E. RS.1,47,520/- LESS RS.50,450/-) AND RS.5,69,9 76/- AS PER ANNEXURE BS-2. IF THESE AMOUNTS ARE TAKEN INTO CONS IDERATION THEN AN AMOUNT OF RS.6,94,016/- IS REQUIRED TO BE A DDED TO THE TOTAL INCOME BEING NOT DISCLOSED IN THE RETURN OF I NCOME. SIMILARLY, INCREASE IN SHARE CAPITAL OF RS.38,333/- SUBSEQUENT TO THE FILING OF LAST RETURN PRIOR TO THE DATE OF SEAR CH COULD BE ADDED AS UNDISCLOSED INCOME U/S 144. HOWEVER, AT THE SAME TIME EXPENSES INCURRED BY WAY OF INTEREST ON THE MONIES BORROWED AND ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND DISCLOSE D IN THE RETURNS OF INCOME FILED PRIOR TO THE DATE OF SEARCH NEED TO BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF COMPUTI NG INCOME UNDER THE PROVISIONS OF THE ACT AS ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. THE DETAILS OF INTEREST DEDUC TIBLE ARE AS UNDER: INTEREST DUE ON THE FUNDS BORROWED FROM RAMESHBHAI JIVRAJBHAI DESAI FROM 9/3/1998 TO 30/9/2000 ON RS. 5,00,000/- @ 12% INTEREST CALCULATED IN THE COPIES OF ACCOUNTS MADE AVAILABLE TO YOUR APPELLANT RS. 1,74,092 INTEREST DUE ON THE FUNDS BORROWED FROM GANGABEN JIVRAJBHAI DESAI FROM 9/3/1998 TO 30/9/2000 ON RS. 10/00, OOO/- @'12% INTEREST CALCULATED IN THE COPIES OF ACCOUNTS MADE AVAILABLE TO YOUR APPELLANT RS. 3,50,084 20 INTEREST DUE ON THE FUNDS BORROWED FROM JIVRAJBHAI V. DESAI HUF FROM 9/3/1998 TO 30/9/2000 ON RS. 5,00,000/- @ 12% INTEREST CALCULATED IN THE COPIES OF ACCOUNTS MADE AVAILABLE TO YOUR APPELLANT RS. 1,71,658 RS. 6,95,834 IT WAS THEREFORE SUBMITTED THAT EVEN IF AO MAKES AN ASSESSMENT BY INVOKING PROVISIONS OF SECTION 144 ASSUMING THAT IN ALL PROBABILITY EVEN IF VALID NOTICES HAD BEEN SERVED, IN SUCH A SCENARIO, HE OUGHT TO HAVE MADE ASSESSMENT IN THE F OLLOWING MANNER:- 1. INCOME AS PER FORM NO.2B DECLARED BY THE ASSESSEE RS. NIL 2. UNDISCLOSED INCOME ON SALE OF SHOPS BY INVOKING PROVISIONS OF SECTION 44AD OF THE ACT. RS.1,92,000/- 3. UNDISCLOSED CASH CREDITS NOT TAKEN BY A/C. PAYEE CHEQUES AND NOT DISCLOSED IN THE RETURNS FILED PRIOR TO THE DATE OF SEARCH I.E. CREDITORS RS.22,00,00 0/- 4. INCOME ON SALE OF HOTEL RS.27,91,078/- 5. UNDISCLOSED INCOME AS PER SEIZED AS PER SEIZED MATERIAL RS. 6,94,016/- 6. UNDISCLOSED SHARE CAPITAL RS. 38,333/- 7. INTEREST EXPENSE ON THE DISCLOSED BORROWED CAPITAL BUT NOT TAKEN INTO CONSIDERATION FOR COMPUTING ASSESSABLE INCOME RS. 6,95,834/- 21 ----------------- ASSESSABLE INCOME (STAGE II) (-) RS. 3,62,563/- THE ASSESSABLE INCOME OF THE ASSESSEE THUS REMAINS IN NEGATIVE EITHER IN A SITUATION WHEN INCOME IS COMPUTED BASED ON THE MATERIAL AVAILABLE IN THE FORM OF ASSESSMENT ORDER OF M/S HOTEL HERO I.E. THE LEAD CASE IN WHICH ASSESSMENT U/S 158 BC WAS MADE AND ASSESSMENT ORDER IN THE CASE OF ASSESSEE U/S 15 8BD OR IN A SITUATION WHEN ALL THE RELEVANT ISSUES WHETHER CONS IDERED BY THE ASSESSING OFFICER OR NOT BUT OUGHT TO HAVE BEEN CON SIDERED WHILE MAKING AN ASSESSMENT U/S 144 OF THE ACT AND THEREFO RE, THE ASSESSING OFFICER OUGHT NOT TO HAVE MADE ASSESSMENT ON A POSITIVE INCOME LEADING TO IMPOSITION OF UNWARRANTE D TAX LIABILITY ON ASSESSEE. 31 THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AO. 32 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LEARNE D CIT(A) THAT THE SALE CONSIDERATION OF HERO HOTELS WAS TAKEN AT RS.1.05 CRORES AND THEREFORE THE SAME SALE PRICE HAS TO BE ADOPTED . THESE PLEADINGS OF THE LEARNED COUNSEL FOR THE ASSESSEE B EFORE THE CIT(A) AS WELL AS BEFORE US APPEAR TO BE QUITE REAS ONED ONE AND WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN APPRECIATING SUCH CONTENTIONS OF THE LEARNED AR APPEARING FOR TH E ASSESSEE. AS REGARDS THE STATEMENT RECORDED ON OATH ON 22-09- 2002 OF SHRI ABDUL RASID IF FROM THE COST OF RS.109,60,029/-, TH E COST OF CONSTRUCTION OF SHOPS IS DEDUCTED, THEN THE CONSTRU CTION COST OF 22 THE HOTEL BUILDING HAS RIGHTLY BEEN WORKED OUT AT R S.87,52,029/- BY THE CIT(A) AND THE PROFIT FROM THE SALE OF HOTEL BUILDING HAS RIGHTLY BEEN WORKED OUT AT RS.17,47,971/-. IN THE C IRCUMSTANCES AND FACTS OF THE CASE, WE FIND NO ERROR IN THE ORDE R OF THE LEARNED CIT(A), WHICH IN THE CIRCUMSTANCES AND FACTS OF THE CASE, APPEARS TO BE REASONED ONE. THEREFORE, ACCEPTING THE ORDER OF THE LEARNED CIT(A), WE DISMISS THE GROUNDS RAISED BY THE REVENU E AS WELL AS THE GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS OBJ ECTION ON THE ISSUE HEREINABOVE. THUS, GROUND NO.2 OF THE REVENUE S APPEAL AND GROUND NO.4 OF THE CROSS OBJECTION OF THE ASSES SEE ARE DISMISSED. 23 IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.15 AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 30-12-2011 SD/- SD/- (G C GUPTA) VICE-PRESIDENT (B P JAIN) ACCOUNTANT MEMBER DATE : 30-12-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S MANSI MOTELS PVT. LTD., C/O KETAN H SHAH, ADVOCATE, 903, SAPPHIRE COMPLEX, C G ROAD, NAVRANGURA, AHMEDABAD 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, BHARUCH CIRCLE, BHARUCH 3. CIT CONCERNED 23 4. CIT(A)-VI, BARODA 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD