ACIT, Chandigarh V. Sh. M.C. Puri, Shimla

ITSSA 15/CHANDI/2003

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0541 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-01-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-01-2015
• Assessment Year: misc
• Appeal Filed On: 25-04-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MANJIT SINGH
• Keywords: Gift; Business income; Business expenditure; Search and seizure; Loose papers; Document seized; Principle of natural justice; Wrong claim; Block assessment; Documents seized
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER IT(SS)A NO. 13/CHD/2003 BLOCK PERIOD 1.4.1990 TO 20.6.2000 SHRI M.C. PURI, VS THE ACIT, CENTRAL CIRCLE, PROP M/S SRM CONSTRUCTIONS, CHANDIGARH SHIMLA PAN NO. ABJPP7094H & IT(SS)A NO. 15/CHD/2003 BLOCK PERIOD 1.4.1990 TO 20.6.2000 THE ACIT, CENTRAL CIRCLE, VS SHRI M.C. PURI, SHIMLA PROP M/S SRM CONSTRUCTIONS, SHIMLA PAN NO. ABJPP7094H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 20.01.2015 DATE OF PRONOUNCEMENT : 28.01.2015 ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE ASSESSEE AND REVENUE ARE IS DIRECTED AGAINST THE ORDER DATED 16.01.2003 OF CIT(A)-1, LUDHIANA. 2. SINCE THE ISSUES INVOLVED ARE COMMON, THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER:- IT(SS) 13/CHD/2003 :- 3. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS:- 2 1. THE NET PROFIT RATE ADOPTED IS ADDITION-HOC AND ARBITRARY AND THE RATE APPLIED I.E.8.5% IS ON THE H IGHER SIDE. 2. THE LD. CIT APPEALS HAS NOT GIVEN AN ORDER AS TO THE APPLICABILITY OF SURCHARGE WHICH SHOULD NOT BE CHAR GED. 3. INTEREST U/S 158 BFA HAS BEEN CHARGED WRONGLY. IT(SS) 15/CHD/2003:- 4. IN THIS APPEAL THE REVENUE HAS TAKEN UP FOLLOWIN G GROUNDS:- (I) THE LD. CIT(A) HAS ERRED BOTH IN LAW AN ON THE FACT S OF THE CASE IN HOLDING THAT APART FORM 29 BIGHAS OF AGRICULTURA L LAND, NO ASSET WAS FOUND TO THE SEARCH PARTY. THE ASSESSEE H AD INVESTED THE EARNED INCOME IN THE SHAPE OF FDRS, MACHINERY, AGRICULTURAL LAND (THE REGISTERED VALUE PLUS ON MONEY PAID BY HI M) AND CARS ETC. WHICH IS EVIDENT FROM THE SEIZED RECORD AND HA D DULY BEEN DISCUSSED IN THE ASSESSMENT ORDER FRAMED BY THE THE N A.O. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACTS OF TH E CASE. (II) THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FAC TS OF THE CASE IN HOLDING THAT THE NET PROFIT RATE OF SECTION 44AD IS TO BE APPLIED OVERLOOKING THEREBY THE FACT THAT ASSESSMEN T IN THIS CASE HAD BEE, FRAMED IN VIEW OF THE PROVISIONS CONTAINED IN CHAPTER XIV-B OF THE ACT AND ON THE BASIS OF SUCH MATERIAL/ DOCUMENTS FOUND DURING THE COURSE OF SEARCH, WHICH HAD DIRECT NEXUS WITH THE UNDISCLOSED INCOME AND THUS THE PROVISIONS OF S ECTION 44AD ARE NOT APPLICABLE IN RESPECT OF BLOCK PERIOD. (III) THE LD. CIT(A) HAS ERRED IN SUO MOTO GIVING DIRECTI ONS TO COMPUTE THE INCOME OF THE ASSESSEE FOR THE BLOCK PE RIOD BY APPLYING NET PROFIT RATE AFTER APPLYING THE PROVISI ONS OF SECTION 44AD WHEREAS THERE WAS NO SUCH GROUND OF APPEAL TAK EN BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME-TAX (APP EALS). (IV) THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FAC TS OF THE CASE IN CONSIDERING THE EVIDENCE I.E. THE AFFIDAVIT AS W ELL AS THE STATEMENTS OF THE ALLEGED CREDITORS NAMELY SH. SANT OSH KUMAR, SH. SATISH KUMAR KAINTHLA AND SH. JATINDER KUMAR GU LERIA RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDING S, WHICH 3 WERE DULY REBUTTED AND PROVED TO BE INCORRECT DURIN G THE COURSE OF ASSESSMENT PROCEEDING AS WELL AS BEFORE THE LD. CIT(APPEALS). THE COMMENTS / REPORT SUBMITTED BY THE ASSESSING O FFICER ON THE WRITTEN SUBMISSIONS MADE BY THE COUNSEL OF THE ASSE SSEE AND SHOWING THEREIN THE FALACITY IN THOSE AFFIDAVITS H AS NOT BEEN CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEA LS). (V) THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FAC TS OF THE CASE IN NOT AFFORDING REASONABLE OPPORTUNITY TO THE ASSE SSING OFFICER BEFORE DISPOSING OFF THE APPEAL AND PUTTING RELIANC E ON THE VARIOUS ORDERS / JUDGMENTS OF THE HONBLE ITAT BENC HES AND HIGH COURTS. (VI) THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FAC TS OF THE CASE IN DIRECTING THE ASSESSING OFFICER TO COMPUTE THE I NCOME BY APPLYING NET PROFIT RATE OF 8.5% WITHOUT CONSIDERIN G THE FACT THAT INCOME WAS COMPUTED BY THE ASSESSING OFFICER BASED ON THE DOCUMENTS FOUND AND SEIZED FROM THE RESIDENCE AND B USINESS PREMISES OF THE ASSESSEE AND HE WAS UNABLE TO PROVE THAT THE EXPENSES CLAIMED OVER AND ABOVE, WHAT HAS BEEN ALLO WED IN COMPUTATION OF INCOME, WERE NOT BOGUS AND FALSE. (VII) IN THE ALTERNATIVE BUT WITHOUT PREJUDICE TO THE DEP ARTMENTS OBJECTION ON THE APPLICABILITY OF SECTION 44AD AND ALSO ON THE ADMISSIBILITY OF THIS GROUND, THE LD. CIT(A) HAS ER RED BOTH IN LAW AND ON THE FACTS OF THE CASE IN IGNORING TO CONSIDE R THE ISSUE OF BOGUS LIABILITIES WHICH CALLED FOR A SEPARATE ADDIT ION U/S 68/69 OF THE I.T. ACT., EVEN IN A CASE WHERE BUSINESS INCOME OF A CONTRACTOR IS TO BE COMPUTED BY APPLYING THE PROVIS IONS OF SECTION 44AD. 5. AFTER HEARING BOTH THE PARTIES WE FIND THAT A SEARCH OPERATION WA S CONDUCTED IN THE BUSINESS AS WELL AS RESIDENTIAL PR EMISES OF THE ASSESSEE. DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT FOR ASSESSMENT YEAR 1995-96 THE DOCUMENT NO.39 OF SR.NO . 48 OF ANNEXURE A WAS SEIZED FROM THE PREMISES OF THE ASSESSEE WHICH IS A TRAIL BALANCE. HE NOTICED THAT THIS TRIAL BALANCE WAS DULY SIGNED BY SHRI M.C . PURI I.E ASSESSEE. FURTHER, 4 THERE WERE DIFFERENCES IN THE EXPENSES SHOWN IN THI S TRIAL BALANCE AND FINAL ACCOUNT SHOWN BY THE ASSESSEE. THE DIFFERENCE HAS BEEN NOTED AS UNDER:- DESCRIPTION OF HEAD OF ACCOUNT LEDGER FOLIO NO. AS PER TRIAL BALANCE AMOUNT AS PER TRIAL BALANCE (IN RS.) AMOUNT AS PER AUDITED TRADING PROFIT AND LOSS ACCOUNT AND BALANCE SHEET TO WAGES 200 586,207 2067264 TO LABOUR WELFARE 91 670 10950 TO CONSUMABLES 72 83,551 314205 TO BUILDING MATERIAL 134 212,755 696130 TO BUSINESS PROMOTION 28 8,843 11545 TO TRAVELING EXPENSES 75 1,603 11650 TO REPAIR & MAINTENANCE 161 2,867 8,867 IN RESPONSE TO THE QUERY IT WAS EXPLAINED THAT IN A SSESSMENT YEAR 1995-96 THE RETURN WAS FILED U/S 44AD BY DECLARING A NET PROFIT OF 8%. IT WAS FURTHER STATED THAT TRIAL BALANCE CONTAINED ONLY PART OF THE EXPEN SES AND DID NOT CONTAIN THE EXPENDITURE WHICH WAS INCURRED FROM THE HEAD OFFICE . FURTHER, THE ASSESSING OFFICER DID NOT ACCEPT THIS EXPLANATION BECAUSE IT WAS FOUND THAT EXPENDITURE LIKE SALARY, TENDER PAPERS, ELECTRICITY, INSURANCE, SECURED LOANS ETC. DID MATCH WITH THE FINAL BALANCE SHEET AND THESE EXPENSES COU LD NOT BE CALLED SITE EXPENSES WHEREAS THE FIGURES OF SITE EXPENSES LIKE WAGES, LA BOR, WELFARE ETC WERE NOT MATCHING. IT WAS ALSO NOTICED THAT A SUM OF RS. 5,8 1,550/- WAS SHOWN AS BRIBE PAID TO THE OFFICIAL WHICH COULD NOT BE ALLOWED. I N THIS BACKGROUND, THE ACTUAL EXPENSES ONLY WERE ALLOWED AND BALANCE AMOUNT OF RS . 22,59,175/- WAS ADDED TO THE INCOME OF THE ASSESSEE. SIMILARLY, IN ASSESSM ENT YEAR 1996-97, THE SUM OF RS. 5,67,844/- WAS ADDED TO THE INCOME OF THE ASSES SEE. 5 6. DURING NEXT ASSESSMENT YEAR 1997-98, IT WAS SUBM ITTED THAT ASSESSEE HAS DISCLOSED INCOME OF RS. 9,69,608/- WHICH GIVES NET PROFIT RATE OF 5.6%. FOR THIS YEAR, NO TRIAL BALANCE WAS FOUND AND ONLY A DAY BOO K WAS FOUND CONTAINING DETAIL OF EXPENSES FORM DAY TO DAY AND EXPENSES WER E DISCLOSED TO THE EXTENT OF RS. 18,35,885/-. THE ASSESSING OFFICER FURTHER NOTE D THAT ASSESSEE HAS INVESTED HEAVILY IN THE FORM OF FDRS, PURCHASE OF L&T MACHIN ERY, TIPPERS, AGRICULTURAL LAND, CAR ETC. AND TO SHOW THIS INVESTMENT HUGE BOG US CREDITOR WERE SHOWN IN THE NAME OF LARGE CONTRACTORS OR SMALL CONTRACTORS. THE SE AMOUNTS WERE NOT PAID OVER A LONG PERIOD OF TIME AND SUNDRY CREDITORS WER E SHOWN AT RS. 1,08,27,476/- AND WAGES PAYABLE AT RS. 61,400/-. ULTIMATELY, HE ALLOWED THE EXPENSES ONLY SHOWN IN THE DAY BOOK AND BALANCE OF THE AMOUNT OF RS. 1,25,15,474/- WAS ADDED TO THE INCOME OF THE ASSESSEE. SIMILARLY, IN ASSESSMENT YEAR 1998-99 AND ASSESSMENT YEAR 1999-2000, A SUM OF RS. 48,40,395/- AND RS. 59,01,854/- WAS ADDED TO THE UNDISCLOSED INCOME. IN ASSESSMENT YEA R 2000-01, AN ADDITION OF RS. 20 LAKHS WAS MADE ON SIMILAR LINES AND FOR THE BROKEN PERIOD I.E. 1.4.2000 TO 20.4.2000 AND ADDITION OF RS. 6 LAKHS WAS MADE TOW ARDS UNDISCLOSED INCOME. 7. ON APPEAL, IT WAS MAINLY CONTENDED THAT BOOKS OF ACCOUNT FROM ASSESSMENT YEARS 1997-98 TO 1999-2000 WERE AUDITED AND, THEREFORE, ADDITIONS COULD NOT BE MADE WITHOUT PIN-POINTING ANY DEFECTS. FOR ASSESSMENT YEAR 1995- 96, THE ASSESSEE HAS HIMSELF FILED RETURN ON PRESUM PTION BASIS U/S 44AD DECLARING INCOME @ 8%. THE ASSESSING OFFICER HAS O NLY FEW FIGURES OF THE TRIAL BALANCE AND COMPARED WITHOUT AUDITED FINAL ST ATEMENT WHICH IS NOT JUSTIFIED. IF THE PROFIT CALCULATED BY THE ASSESSI NG OFFICER IS ACCEPTED THEN NET PROFIT RATE OF 61.45% WOULD BE THERE IN ASSESSMENT YEAR 1995-96 WHICH IS NOT POSSIBLE IN CONSTRUCTION BUSINESS. THE ASSESSING O FFICER HAS NOT FOUND ANY DIFFERENCE IN THE CONTRACT RECEIPTS BY THE ASSESSEE . NO ASSETS AS SUGGESTED BY ASSESSING OFFICER WAS FOUND DURING THE SEARCH. 6 8. THE LD. CIT(A) AFTER CONSIDERING THESE SUBMISSIO NS ULTIMATELY ESTIMATED THE PROFIT AT 8.5% AND ALLOWED PARTIAL RELIEF. 9. BEFORE US LD. DR REFERRED TO THE FINDINGS IN THE ASSESSMENT ORDER AND POINTED OUT THAT FIRST OF ALL NO REGULAR BOOKS OF A CCOUNT WERE FOUND DURING THE SEARCH THAT MEANS THE STORY OF AUDITED BOOKS WERE O NLY AN AFTER THOUGHT. HE ALSO CONTENDED THAT TRIAL BALANCE CONTAIN THE LEDGER FOL IO AND ALSO WERE SIGNED BY THE ASSESSEE WHICH SHOWS THAT THESE WERE ACTUAL DETAILS OF THE EXPENSES. IN RESPECT OF SUNDRY CREDITORS HE POINTED OUT BY REFERRING TO PARA 5 OF THE ASSESSMENT ORDER THAT IN CASE OF THESE CREDITORS VARIOUS CHEQUES WER E SAID TO HAVE BEEN ISSUED BUT THESE CHEQUES HAD NEVER GONE INTO THE BANK ACCOUNT OF THESE PARTIES AND THE AMOUNTS SHOWN IN THE CHEQUES WERE WITHDRAWN THROUGH BEARER CHEQUES. THE ASSESSING OFFICER HAS ALSO NOTICED THAT THERE WAS N O PERSON IN THE NAME OF GULAM MOHIDHEEN. THERE WAS A PERSON BY THE NAME GU LAM MOHAMAD, WHO WAS WORKING AS LABOUR SUPPLY CONTRACTOR. THE CREDIT SH OWS IN THE NAME OF GULAM MOHIDHEEN WERE RS. 14,01,013/-, RS. 13,28,813/-, RS . 17,53,81/-3 AND RS. 14,70,413/- DURING YEAR ENDING 31.3.1997, 31.3.1998 , 31.3.1999 AND 31.3.2000 RESPECTIVELY. IT WAS FURTHER NOTED BY ASSESSING OFF ICER THAT CHEQUES TOTALING RS. 2,83,400/- WERE ISSUED IN FINANCIAL YEAR 1999-2000 TO SQUARE UP THE ACCOUNT OF GULAM MOHIDEEN BUT THE DOCUMENT NO. A-50 SEIZED FRO M THE PREMISES SHOWS THAT THESE CHEQUES WERE TAKEN ON THE RECEIPT PORTIO N OF THE DAY BOOK MARKED AS DOCUMENT NOS. 1 TO 111 OF ANNEXURE A-6. ACCORDING TO HIM THE ASSESSING OFFICER HAS RIGHTLY CONCLUDED THAT ENTRIES IN THE NAME OF GULAM MOHIDHEEN WERE BOGUS. IN FACT THE ASSESSING OFFICER PREPARED THE FOLLOWING CHART IN THE NAME OF GULAM MOHIDHEEN BOGUS CHEQUE IN CREDITORS LEDGER ACCOUNT 1999-2000 AND DATE AMOUNT (IN RS.) AMOUNT INTRODUCED IN DAY BOOK 1999- 2000 VIDE CHEQUE NO. & DATE PG. NO. AMOUNT 7 103314/29.11.99 15,000 103314/29.11.99 74 15,000 103316/2.12.99 10,000 WITHDRAWN THROUGH SELF CHEQUES - 10,000 103335/3.12.99 7,500 NOT MENTIONED 77 7,500 103340/8.12.99 5,400 103340/8.12.99 76 5,400 103341/10.12.99 23,500 103341/10.12.99 78 23,500 103341/11.12.99 25,000 SH. GH. MOHIDHEEN 103345/14.12.99 10,000 - 80 10,000 103346/16.12.99 10,000 103346/16.12.99 80 10,000 103347/20.12.99 10,000 103347/20.12.99 81 10,000 103350/20.12.99 25,000 103350/20.12.99 81 25,000 103359/21.1.2K 10,000 103359/21.1.2K 91 10,000 103364/21.1.2K 7,000 103364/21.1.2K 91 7,000 103360/22.1.2K 10,000 103360/22.1.2K 92 10,000 103361/24.1.2K 10,000 103361/22.1.2K 92 10,000 103362/31.1.2K 5,000 DRAWN SELF CHEQUES 103365/31.1.2K 100,000 DRAWN SELF CHEQUE. AMOUNTS INTRODUCED IN PAGE NO. 93,94 AND 95 IN THE NAME OF FICTITIOUS PERSONS SIMILAR IS THE SITUATION WITH OTHER CREDITORS. HOWE VER, THE ASSESSING OFFICER HAS NOT MADE THE SEPARATE ADDITION BECAUSE HE HAS ALREA DY DISALLOWED THE EXPENSES AND THEREFORE, THE ADDITION ON ACCOUNT OF DISALLOWA NCE OF EXPENSES WAS JUSTIFIED. 10. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT NO EVIDENCE WAS FOUND DURING SEARCH OR OTHERWISE REGAR DING UNDISCLOSED INVESTMENTS IN PURCHASE OF FDRS, MACHINERY, CARS OR AGRICULTURAL LAND AND 8 ASSESSING OFFICER HAS MADE ONLY GENERAL REMARKS IN RESPECT OF THESE ITEMS. THE PURCHASE OF AGRICULTURAL LAND WAS DULY DISCLOSED AN D ASSESSING OFFICER HAS MADE ADDITION ON THE BASIS OF THE STATEMENT FROM TH E SELLER FOR ON MONEY WITHOUT GATHERING FURTHER EVIDENCE. ALL THE STATEME NTS WERE RECORDED BEHIND THE BACK OF THE ASSESSEE WITHOUT PROVIDING ANY ADEQUATE OPPORTUNITY. IN RESPECT OF CREDITORS IT WAS STATED THAT ASSESSEE,S SITES WERE SPREAD OUT AND ASSESSEE HAD ENGAGED VARIOUS SUB-CONTRACTORS WHO WERE GENERALLY HIS FORMER ASSOCIATES. SOME MONEY REMAIN PAYABLE AT THE END OF THE YEAR WHICH H AS BEEN PAID LATER AND THEREFORE, IT CANNOT BE SAID THAT THESE WERE BOGUS CREDITORS. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. THE LD. CIT(A) HAS ADJUDICATED THIS ISSUE VIDE PARAS 2.4 TO 2.6 OF H IS ORDER WHICH ARE AS UNDER:- 2.4 I HAVE CONSIDERED THE RIVAL SUBMISSIONS IN THE MATTER, BUT I AM AFRAID I AM UNABLE TO ACQUIESCE IN THE CONTENTIONS AND HE LINE OF REASONING; THE MANNER OF COMPOUTING PROFITS; THE IN FERENCES DRAWN FROM VARIOUS SEIZED DOCUMENTS; AND, THE NET PROFITS FINALLY COMPUTED AND ASSESSED BY THE A.O. FOR THE FOLLOWING REASONS: (I) THE ASSESSING OFFICER HAS MADE A CLARION CALL T HAT THE APPELLANT HAD EARNED CRORES OF RUPEES AND HAS INVESTED THE SAME IN THE FORM OF FDRS, MACHINERY, LAND, CARS ETC, BUT IT IS STRANGE THAT APART FROM 29 BIGHAS OF AGRICULTURAL L AND, NEITHER THE SEARCH PARTY NOR THE ASSESSING OFFICER COULD FI ND ANY ASSET; IF THE APPELLANT HAD EARNED CRORES OF RUPEES INDEED, WHERE HAS THE MONEY GONE? WHERE ARE THE ASSETS? (II) THE ASSESSING OFFICER, AND LATER, HIS SUCCESSO R ACIT, IN THEIR ENDEAVOUR TO COMPUTE INCOME ON THE BASIS OF T HE SO CALLED EVIDENCE FOUND DURING THE SEARCH HAVE SIMPLY IGNORED THE WELL ENUNCIATED PRINCIPLES OF NATURAL JUSTICE A ND HARMONIOUS CONSTRUCTION. THEY HAVE GONE TO DETERMIN E A NET PROFIT OF 61.45% IN THE CASE OF A CONTRACTOR AT PRO FIT RATIO THAT IS SIMPLY UNHEARD OF, BY ADVOCATING A HYPOTHESIS T HAT NO WORKS WERE EXECUTED AND NO WORK WAS DONE BY THE APP ELLANT, AND HE GOT PAYMENTS FROM PHONEY BILLS FROM NONE OTH ER THAN A JOINT VENTURE OF THE GOVT. OF INDIA AND THE GOVT. O F H.P. CALLED M/S NATHPA JHAKRI POWER CORPORATION LTD., WHERE THE INCOME-TAX ACT, 1961, PRESCRIBES A PROFIT RATE OF 8 % UNDER SECTION 44AD ONLY. 2.5 THE A.O HAS MADE REFERENCE TO THE AUDITED BOOKS OF ACCOUNTS ON SEVERAL OCCASIONS AS UNDER: 9 A) PAGE 3, COMPARISON OF TRIAL BALANCE AND THE AU DITED BOOKS OF ACCOUNTS REVEALS.. B) PAGE 4, THE AUDITED REPORT DOES NOT REFLECT THE T RUE STATE OF AFFAIRS.. C) PAGE 8, THE AUDITED REPORT DOES NOT REFLECT THE TR UE STATE OF BUSINESS AFFAIRS.. D) PAGE 10, THE ASSESSEE IS SHOWING INFLATED AND BOG US EXPENSES IN HIS AUDITED ACCOUNTS.. E) PAGE 12, AS DISCUSSED IN THE PRECEDING PARAGRAPHS THAT AUDITED REPORTS ARE NOT AT ALL RELIABLE F) PAGE 15, AS AUDITED ACCOUNTS DO NOT REFLECT THE T RUE STATE OF BUSINESS AFFAIRS.. G) PAGE 16, IN THE AUDITED ACCOUNTS THE ASSESSEE IS DEBITING EXPENSES UNDER THE HEAD WAGES AND PAYMENT TO SUB-CONTRACTORS TO A HUGE AMOUNT.ON THE PERUSAL OF THE AUDITED ACCOUNTS, AS THE AUDITED ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE. H) PAGE 18, AS CLAIMED BY THE ASSESSEE IN THE AUDITE D ACCOUNTS:.. I) PAGE 20, FOR THIS ASSESSMENT YEAR TWO TYPE OF ACC OUNT BOOKS HAVE BEEN FOUND AND SEIZED.. J) PAGE 21, THESE BOOKS ARE, THEREFORE, NOT RELIED UPON.. K) PAGE 23, DURING THE COURSE OF SEARCH AND SEIZURE, BOOKS OF ACCOUNTS LIKE CASH BOOK & LEDGER WERE SEIZED.. 2.6 THE ABOVE REFERENCE TO THE AUDITED BOOKS OF ACC OUNTS CLEARLY ORDAIN THE CONTENTIONS OF THE LD. COUNSEL THAT THE ASSESSING OFFICER HAS SIMPLY BRUSHED ASIDE THE APPELLANTS BOOKS OF A CCOUNTS, AND HIS OBSERVATION AT PAGE 17 OF THE ORDER THAT THE APPELL ANT HAD TAKEN A PLEA FOR PRODUCING THE BOOKS OF ACCOUNTS VIDE HIS R EPLY DATE 23.05.2002 BUT THE SAME WERE NEVER PRODUCED, DOES N OT SEEM TO BE CORRECT BECAUSE THE ORDER SHEET ENTRY HAD BEEN MADE BY THE A.O. HIMSELF. OBVIOUSLY, THE APPELLANT WOULD NOT CLAIM T O POSSESS BOOKS OF ACCOUNTS IF THEY DID NOT EXIST, ESPECIALLY AS RE TURNS FOR THE ASSESSMENT YEARS 1996-97 TO 1999-2000 WERE FILED ON THE BASIS OF AUDITED ACCOUNTS. THIS FACT IS FURTHER CORROBORATED BY THE NUMEROUS REFERENCES TO THE AUDITED BOOKS OF ACCOUNTS MADE BY THE A.O. HIMSELF AS DETAILED ABOVE. THIS LENDS CREDENCE TO T HE SUBMISSIONS OF THE LEARNED COUNSEL THAT THE ASSESSING OFFICER HAS PICKED UP THE AMOUNTS OF VARIOUS ITEMS OF INCOME AND EXPENDITURE AT HIS WHIMS, BIASED TOTALLY AGAINST THE APPELLANT, AND THAT THE ASSESSING OFFICER HAD CHOSEN ITEMS OF INCOME FROM THE TRIAL BALANCES OR AUDITED FINANCIAL STATEMENTS WHICHEVER SHOWED HIGHER AMOUNT S, AND PICKED UP ITEMS OF EXPENDITURE FROM THE INCOMPLETE TRIAL B ALANCES / ROUGH SCRIBBLING BOOKS OR AUDITED FINANCIAL STATEMENTS WH ICHEVER SHOWED LESSER AMOUNTS. V) THE ASSESSING OFFICER HAS PROCEEDED ON AN ASSUMP TION THAT THE APPELLANT RAISED BOGUS BILLS IN RESPECT OF THE WORK DONE, AND RECEIVED PAYMENTS BY RAISING FICTITIOUS B ILLS SHOWING HYPOTHETICAL WORK DONE/STRUCTURES RAISED. T HIS ASSUMPTION OF THE ASSESSING OFFICER SEEMS QUITE LUD ICROUS BECAUSE THE APPELLANT WAS A CONTRACTOR WORKING FOR A JOINT VENTURE OF THE GOVT. OF INDIA AND THE GOVERNMENT OF HIMACHAL PRADESH, NAMELY, M/S NATHPA JHAKRI POWER CORPORATIO N 10 LIMITED. IT IS WELL KNOWN THAT THERE ARE STANDARD P ROCEDURES IN VOGUE FOR INVITING TENDERS, AWARDING CONTRACTS, AND GETTING THEM EXECUTED AS PER THE TERMS AND CONDITIONS OF TH E AGREEMENTS. THERE ARE RIGOROUS AND STRICT INSPECTIO NS AND CHECKING WITH REGARD TO THE QUALITY OF MATERIAL AND THE WORK DONE BY A TEAM OF EXPERT ENGINEERS. PROPOSING A HYP OTHESIS THAT THE APPELLANT HAS RECEIVED PAYMENTS AGGREGATIN G TO RS. 5 CRORE APPROXIMATELY FROM A RENOWNED JOINT VENTURE L IKE M/S NATHPA JHAKRI POWER CORPORATION LIMITED ON THE STRE NGTH OF BOGUS BILLS, IS TO MY MIND, CARRYING THINGS TO A BI T TOO FAR. THE APPELLANT HAS GOT THESE PAYMENTS IN LIEU OF WOR K ACTUALLY DONE, THE QUALITY WHEREOF WAS DULY TEST CHECKED, AN D CERTIFIED BY THE REQUISITE AUTHORITIES AT APPROPRIATE TIMES, AND IT WAS ONLY AFTER SUCH STRICT CHECKINGS THAT THESE PAYMENT S CAME TO BE MADE TO THE A.O. AS WELL AS HIS SUCCESSOR, HAVE NOT DOUBTED THE VERACIOUSNESS OF THE RECEIPTS WHICH HAVE BEEN A CCEPTED IN TOTO. VI) THE A.O AS WELL AS HIS SUCCESSOR SEEM TO BE OVERWHELMED BY THE GET OF PASSING AN ORDER UNDER SE CTION 158BC. THE EFFORT HAS BEEN TO COMPUTE A CERTAIN FIG URE ON THE BASIS OF THE SO CALLED EVIDENCES FOUND DURING THE S EARCH IN TOTAL DISREGARD OF THE WELL ENUNCIATED PRINCIPLES O F NATURAL JUSTICE AND HARMONIOUS CONSTRUCTION. NO JUDICIOUS P ERSON WILL CONSIDER ASSESSING A CONTRACTOR ON A NET PROFIT RAT E OF 61.45% AS JUST AND REASONABLE. THE ASSESSING OFFICER HAS A RRIVED AT THE NET INCOME @ 61.45% BY REPUDIATING TOTALLY AND IGNORING WHATEVER THE APPELLANT HAD TO SAY IN THE MATTER. TH ERE IS FORCE IN THE CONTENTIONS OF THE LEARNED AUTHORISED REPRES ENTATIVES THAT THE ASSESSMENT UNDER CHAPTER XIV-B HAS TO BE M ADE ONLY OF UNDISCLOSED INCOME BY WAY OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES OR THINGS OR ANY INCOME BAS ED ON ANY ENTRY IN THE BOOKS OF ACCOUNTS OR DOCUMENTS, WHERE SUCH MONEY BULLION, JEWELLERY OR THINGS, ENTRY IN THE BO OKS OF ACCOUNTS ETC. REPRESENTS WHOLLY OR PART INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT. AS HELD IN D.A. PATEL VS. DCIT 70-TTJ- 969 (MUMBAI) , AND T.S. VAKATESAN VS. ACIT 69-TTJ-66 (CAL) AN ASSESSEE CANNOT BE SADDLED WITH TAX LIABILITY M ERELY ON THE BASIS OF LOOSE PAPERS SCRIBBLING BOOKS ETC. THE ONUS OF PROVING THAT THE SAME REPRESENTED INCOME, RESTS ON THE ASSESSING OFFICER. THERE IS FORCE IN THE CONTENTION S OF THE LEARNED COUNSELS THAT IF THE A.O. LOOKS FOR A BLAC K CAT IN A DARK ROOM WHICH MAY NOT BE THERE. HE IS TRANSGRESS ING THE BOUNDARIES OF CHAPTER XIV-B. THERE IS LOGIC IN THE CONTENTIONS OF THE LEARNED COUNSEL THAT THERE HAS TO BE A DIREC T NEXUS OF THE SEARCH WITH THE UNDISCLOSED INCOME. AS HELD IN THE FOLLOWING DECISIONS, IT IS NOT OPEN FOR THE A.O. TO GRAPE IN THE DARK: I) L.R. GUPTA VS. UNION OF INDIA (1992) 194-ITR-32(DEL ) II) SUNDER AGENCIES VS. DY CIT 1997 TTJ 610 III) SMT. SHEELA AGARWAL VS. DCIT 106 TAXMAN 227 (DEL) IV) ESTEEM INTRA PORT SERVICES (P)LTD. VS. ACIT 68 TTJ 103 IN RAINBOW DISTILLERS (P) LTD.VS. DCIT 69-TTJ-713(NAG. ), THE HONBLE ITAT HAS HELD THAT THE DEFINITION OF UN DISCLOSED INCOME REFERS TO ANY INCOME OR PROPERTY AND NOT TO ANY 11 EXPENDITURE ; AND HENCE BUSINESS EXPENSES RECORDED IN THE BOOKS CANNOT BE STRETCH OF IMAGINATION BE CALLED UN DISCLOSED INCOME. AS HELD IN JAGDAMBA RICE MILLS VS. ACIT 67-TTJ- 838 (CHANDIGARH) AND HOTEL VRINDAVAN VS. ACIT 67-TTJ-139 (PUNE) , A BLOCK ASSESSMENT CANNOT BE MADE ON THE BASIS OF CONJECTURES, TABLE ENQUIRIES, SURMISES, ESTIMATES, AND PRESUMPTIONS; IT HAS TO BE SUPPORTED BY AUTHENTIC, CREDIBLE, AND VERIFIABLE INFORMATION. AS HELD IN JAYA SHETTY VS. ACIT 64 TTJ 551 (MUM ), DWELLING ON THE PRESUMPTION OF PROBABILITIES JUDGED BY SELECTIVE HUMAN CONDUCT IS NOT CORRECT. VII) THE ASSESSING OFFICER SEEMS TO BE AN ERROR IN IGNORING THE PROVISIONS OF SECTION 44AD IN RESPECT OF ASSESSMENT YEAR 1995-96, RETURN WHEREOF HAD DULY BEEN FILED BY THE APPELLANT ON A PRESUMPTIVE BASIS UNDER SECTION 44AD. AS HELD IN THE CASE OF BALAJI CONSTRUCTIONS VS. ACIT 72-ITD-559(PUNE ), AND KISHORE MOHAN LAL TELWALA VS. ACIT 64-TTJ-543(AHD .), CHAPER XIV-B PROVIDES FOR COMPUTATION OF TOTAL INCO ME IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER IV WHICH INCLUDES SECTION 44AD. THE HONBLE ITAT CHANDIGARH BENCH , CHANDIGARH HAVE ALSO HELD IN THE CASE OF SATPAL SINGH VS. ACIT 67 TTJ 602 THAT THE PROVISIONS OF CHAPTER IV AND CHAPTER VIA ARE AVAILABLE WHILE FRAMING BLOCK ASSES SMENTS. CHAPTER XIV-B NO WHERE EXCLUDES THE APPLICATION OF SECTION 44AD.THE ASSESSING OFFICERS ACTION IN REJECTING TH E RETURN FILED ON THE BASIS OF SECTION 44AB IS THEREFORE, IN CAPABLE OF BEING SUSTAINED. THEREFORE, I DIRECT THE A.O. TO DE LETE THE ADDITION MADE IN THIS REGARD. VIII) AS REGARDS ESCALATION CHARGES , THE AO'S CONCLUSION THAT THE SAME WERE RECEIVED BY THE APPELLANT AGAINST BOGUS CLAIMS OF WAGES DOES NOT SEEM TO BE CORRECT BECAUSE THE ESCALATION CHARGES AROSE AS A RESULT OF THE REVISION OF DAILY WAGES OF UNSKILLED LABOURERS W.E.F 1.4.1994, IN CONSEQUENCE OF AN ORDER OF THE HONBLE SUPREME COURT. THESE ESCALATION CHAR GES WERE RELEASED BY M/S NATHPA JHAKRI POWER CORPORATION LIM ITED AFTER PROPER VERIFICATION OF MUSTER ROLLS DULY CERTIFIED BY THE LABOUR OFFICER OF THE TEHSIL THAT THE PAYMENT HAS BEEN DISBURSED TO THE CONCERNED LABOURERS. IT APPEARS TH AT THE ASSESSING OFFICER WAS SWAYED BY THE UNOFFICIAL STAT EMENT OF ONE SH. A.K. SINGH WHEREAS THE OFFICIAL CERTIFICATE S FROM M/S NJPC CERTIFIED VERY GOOD QUALITY WORK DONE BY THE A PPELLANT. THEREFORE; THE A.O. WAS NOT RIGHT IN HOLDING THAT T HE ESCALATION AMOUNTS HAD BEEN DISBURSED BLINDLY WITHO UT THERE BEING ANY PAYMENT OF WAGES. IT IS NOT REASONABLE TO EXPECT A LARGE PUBLIC SECTOR UNDERTAKING TO DISBURSE SUCH A LARGESSE IN VIEW OF A SUPREME COURT ORDER WITHOUT PROPER VERIFI CATION, ESPECIALLY WHEN THERE HAS BEEN A LABOUR UNREST CULM INATING IN THE DAILY WAGERS FILING A WRIT PETITION WHICH RESU LTED IN THIS DECISION OF THE APEX COURT. IX) THE ASSESSING OFFICER HAS RELIED HEAVILY ON THE DAY BOOKS AND OTHER SCRIBBLING BOOKS FOUND DURING THE C OURSE OF THE SEARCH AND THESE BOOKS HAVE BEEN MADE THE BASIS FOR MAKING HUGE ADDITIONS IN THE ASSESSMENT YEARS 1996- 97, 1997- 98 AND 1999-2000. THE LEARNED COUNSELS HAVE ALL ALO NG MAINTAINED THAT SUCH BOOKS/RECORDS DID NOT FORM PAR T OF THE 12 PROPER BOOKS OF ACCOUNTS AS THESE WERE ONLY SCRAP B OOKS AND WERE WRITTEN FOR THE TRANSACTIONS UNDERTAKEN AT PAR TICULAR PLACES/SITES BY A SPECIFIC PERSON FOR HIS OWN MEMOR Y AND CONVENIENCE. THE ROUGH SCRIBBLING BOOKS WHICH HAVE BEEN TERMED AS DAY BOOKS BY THE A.O. CAN BY NO MEANS TAN TAMOUNT TO BE A CONCLUSIVE EVIDENCE, THE LEARNED COUNSELS C ONTEND. THERE IS LOGIC IN THEIR ARGUMENT THAT MERE HEARSAY EVIDENCE AND JOTTINGS HAVE NO EVIDENTIARY VALUE, AND CANNOT BE THE BASIS OF ASSESSING UNDISCLOSED INCOME. THEIR RELIAN CE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF V.C. SHUKLA 2 JT SC 172 AND L.K. ADVANI IN CRL. REVISION PETITION NO. 265 OF 1996 AND THE MUCH TALKED ABOUT JAIN HAWALA DIARY CASE IS WELL PLACED. THERE SEEMS BE LOGIC IN THE ASSERTION OF THE LEARNED ARS THAT THE ORIGINAL BOOK S OF ACCOUNTS WERE PRODUCED FOR VERIFICATION AS PER PARA 3 ON PAGE 13 OF THEIR LETTER DATED 11.02.2002 AND PAGE 6 OF T HEIR REPLY DATED 22.02.2002. THE APPELLANT HAS ALL ALONG BEING FILING RETURNS ALONGWITH AUDIT REPORTS, AND ASSESSMENTS FO R THE ASSESSMENT YEAR 1995-96 TO 1998-2000 HAD DULY BEEN FRAMED. THIS DOES PROVE THAT THE BOOKS OF ACCOUNTS BY THE A SSESSING OFFICER IN HIS ASSESSMENT ORDER ONLY CORROBORATE TH IS. THERE IS FORCE IN THE CONTENTIONS OF THE LEARNED LD. COUNSEL FOR THE ASSESSEE THAT THE RELIANCE ON THE TRIAL BALANCE BY THE ASSESSING OFFICER WAS NOT CORRECT AS THE SAME WAS O N INCOMPLETE TRIAL BALANCE. THIS TRIAL BALANCE WAS ST ATED TO BE A DRAFT ON PREPARED BY THE SITE BOOK KEEPER AND NOT B Y THE ACCOUNTANT. THERE IS LOGIC IN THE CONTENTIONS OF TH E LEARNED COUNSEL THAT A TRIAL BALANCE CANNOT BE MADE THE BAS IS OF ARRIVING AT THE REAL PROFITS BECAUSE IF THAT WERE S O, THERE WOULD BE NO NEED TO PREPARE A PROFIT AND LOSS ACCOU NT, OR A BALANCE SHEET. THERE IS FORCE IN THE AVERMENTS OF T HE LEARNED COUNSELS THAT THE ASSESSING OFFICER HAS NOT BEEN CO NSISTENT IN CHOOSING ITEMS OF INCOME AND EXPENDITURE, AS IN THE ASSESSMENT YEAR 1995-96 AND 1999-2000, THE EXPENDIT URE HAS BEEN TAKEN FROM THE SO CALLED TRIAL BALANCE, BUR TH E RECEIPTS HAVE BEEN TAKEN FROM THE AUDITED ACCOUNTS. IN THE A SSESSMENT YEAR 1996-97, THERE HAS BEEN A RAMPANT PICK AND CHO OSE, THE RELIANCE ON A JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF INDORE MALWA UNITED MILLS LTD. VS. STATE OF M.P. 60 - ITR-41(SC ), WHEREIN IT HAS BEEN HELD THAT IT IS NOT OPEN FOR THE ASSESSING OFFICER TO PICK AND CHOOSE ONLY THOSE EVIDENCE WHICH ARE FAVOURABLE TO THE REVENUE BY IGNORING OTH ERS, IS QUITE APT. X) THE ASSESSING OFFICER HAS DILATED QUITE HEAVILY ON CREDITORS WHICH HAVE BEEN HELD TO BE BOGUS BY HIM O N THE STRENGTH OF THE REASONS THAT MANY OF THESE WERE THE APPELLANTS PAID EMPLOYEES, AND MANY OF THE REPAYME NTS TO THESE PERSONS WERE THROUGH BEARER CHEQUES. THERE IS FORCE IN THE CONTENTIONS OF THE LEARNED ARS THAT THESE CREDI TORS WERE VERY MUCH IN EXISTENCE AND WERE GENUINE AND THE ACT UAL PAYMENT PAYABLE TO THEM WAS IN RESPECT OF THE WORKS EXECUTED BY THEM. THE APPELLANT HAS BEEN DISCLOSING THE SUND RY CREDITORS IN HIS ACCOUNTS YEAR AFTER YEAR. THESE LI ABILITIES HAVE ALSO BEEN REFLECTED IN THE BALANCE SHEETS OF T HE EARLIER YEARS FILED BEFORE THE A.O. AS THE FACTUM OF LABOUR PAYMENTS AND ALSO PAYMENTS TO SUB-CONTRACTORS AND THEIR OUTS TANDINGS WERE BEING BROUGHT OUT TO THE NOTICE OF THE ASSESSI NG OFFICER 13 CONSISTENTLY YEAR AFTER YEAR, THERE COULD NOT BE AN Y ELEMENT OF NON-DISCLOSURE ON THE PART OF THE APPELLANT. {(ESSEM INTRA- PORT SERVICES (P) LTD. VS. ACIT 72 ITD 228 (HYD.) S AMRAT BEER BAR VS. ACIT 60TTJ 113(PUNE)} . THE A.O. HAS RELIED UPON THE STATEMENTS OF CERTAIN PERSONS TAKEN BEHIND THE BACK OF THE APPELLANT. NO OPPORTUNITY TO CROSS EXAMINE T HEM WAS AFFORDED. MOST OF THE CREDITORS HAVE FILED AFFIDAVI TS IN WHICH THEY HAVE ACKNOWLEDGED THE PAYMENTS RECEIVED AND DU E TO THEM. MANY OF THE CREDITORS HAVE REPORTEDLY SERVED LEGAL NOTICES FOR RECOVERIES AND EVEN FILED SUITS IN INTE NTION OF THE LEGISLATURE HAS NEVER BEEN TO MAKE A FEAST OF AN AS SESSEE. ALL THIS WAS IGNORED BY THE A.O. AS HELD EARLIER, THE A PPELLANT COULD NOT HAVE EXECUTED WORKS AGGREGATING TO NEARLY RS. 5 CRORE, SPANNING FIVE YEARS WITHOUT ENGAGING SUB-CON TRACTORS AS PER TRADE PRACTICE. THE APPELLANT HAS ALSO BEEN MAKING A FULL DISCLOSURE OF HIS VARIOUS CREDITORS YEAR AFTER YEAR AS PER THE AUDITED STATEMENTS AND RETURNS OF INCOME FILED WITH THE ASSESSING OFFICER, ASSESSMENTS IN RESPECT OF WHICH ALSO STAND COMPLETED. THE APPELLANT COULD NOT BE SADDLED WITH THE ACCUSATION OF NON DISCLOSURE NOW ESPECIALLY AS THE FACTUM OF THE BOOKS OF ACCOUNTS STANDS ADMITTED BY THE ASSESS ING OFFICER BY HIS MYRIAD REFERENCE TO THE BOOKS OF ACCOUNTS IN HIS ASSESSMENT ORDER, AND THE RETURNS AND AUDITED STATE MENTS HAVING BEEN FILED YEAR AFTER YEAR, ASSESSMENTS IN R ESPECT OF WHICH HAVE ALSO BEEN COMPLETED. XI) THE ASSESSING OFFICER HAS GONE ON RECORD WITH H IS ASSERTION THAT THE APPELLANT, USED TO PAY HUGE PAY MENT OF BRIBES. NUMEROUS INSTANCES OF PAYMENTS OF BRIDE IN CASH AND ALSO IN KING (LIKE THE GIFT OF EXPENSIVE JEWELRY OF RS. 85,000/- AND RS. 27,500/- AS FOUND RECORDED IN THE ANNEXURE A-22/43 AND A-2241). THE PAYMENTS IN CASH RUNS IN SEVERAL L ACS. TO MY MIND, JUMPING TO SUCH CONCLUSIONS WITHOUT CARRYING OUT ANY CONCOMITANT ENQUIRY / INVESTIGATIO N SO AS TO REACH A CONCLUSION OF THIS TYPE, CANNOT BE CONSIDER ED A VERY BALANCED APPROACH BECAUSE BY MAKING SUCH ALLEGATION S AGAINST RESPONSIBLE PERSONS, THE A.O. HAS TRIED TO CAST ASPERSIONS ON THEIR INTEGRITY, WITHOUT ANY COGENT E VIDENCE FOR WHICH THE ASSESSING OFFICER COULD HAVE MADE HIMSELF LIABLE FOR DEFAMATION AS THE LEARNED ARS HAVE AVERRED. XII) THE ASSESSING OFFICER HAS GONE ON RECORD WITH HIS CLAIM THAT THE PAYMENT OF OWN MONEY IS RAMPANT IN LAND TRANSACTIONS. BUT HE HAS NOT CORROBORATED HIS CONCL USION WITH ANY EVIDENCE. THE AFFIDAVIT OF THE LAND SELLER HAS BEEN COMPLETELY IGNORED. SO ALSO IS THE FACT THAT THE SA ID PURCHASE PRICE WAS ACCEPTED AS TRUE AND CORRECT BY THE SUB-R EGISTRAR FOR THE PURPOSE OF AFFIXATION AND LEVY OF STAMP DUT Y. THE ASSESSING OFFICER HAS SIMILARLY REACHED A CONCLUSIO N REGARDING THE BOGUS AGRICULTURAL INCOME WITHOUT ON ANY SUFFICIENT DATE/EVIDENCE. I HOLD THAT THESE ADDITIO NS ARE INCAPABLE OF BEING SUSTAINED, AND ACCORDINGLY, I OR DER THE A.O TO DELETE SUCH ADDITIONS. XIII) THE ADDITION FOR THE ASSESSMENT YEAR 2000-01 WAS ESTIMATED AT RS. 20 LACS, WHILE THE INCOME FOR THE PERIOD 1-4- 2000 TO 20-06-2000 WAS ESTIMATED AT RS. 6 LACS. AS HELD IN A 14 NUMBER OF DECISIONS, NAMELY, POOJA BHATT VS. ACIT 73 ITD 205 (MUMBAI), DR. R.M. MEHROTRA VS. ACIT 68 ITD 288 (ALL. ) DAVID DHAWAN VS. ACIT 71 ITD 1 (MUMBAI ), ASSESSMENT OF UNDISCLOSED INCOME UNDER CHAPTER XIV- B CANNOT BE MADE BY APPLYING ANY ARBITRARY FORMULA. SUCH EST IMATION, WITHOUT REFERENCE TO ANY EVIDENCE, IS NOT PERMITTED FOR FRAMING ASSESSMENTS UNDER CHAPTER XIV-B. THE A.O. I S THEREFORE, DIRECTED TO DELETE THE ADDITION MADE IN RESPECT OF THESE TWO PERIODS. XIV) I AM CONSTRAINED TO BRING OUT THE CASUALNESS O F APPROACH BY THE A.O. AS IS APPARENT FROM PAGE 64 O F HIS ASSESSMENT ORDER, WHERE HE HAS MENTIONED THE ASSESS MENT YEARS AS 1995-97, 1996-98, 1997-99, 1998-100, 1999- 2001, 2000-2002 AND 2001-2003. NOT A SINGLE ASSESSMENT YE AR HAS BEEN TYPED OUT CORRECTLY. THIS SOMEHOW CORROBORATES THE APPELLANTS ASSERTION THAT THE A.O. HAS MERELY REPL ICATED THE OBSERVATIONS OF THE INVESTIGATION WING WITHOUT COND UCTING ANY ENQUIRY WORTHWHILE INVESTIGATION IN THE CASE. THE I NCUMBENT OFFICER, WHO APPEARED BEFORE THE UNDERSIGNED, TOO H AS FILED A LONG LETTER, WHICH IS UNSIGNED. NEVERTHELESS, THEIR SUBMISSIONS AND ARGUMENTS HAVE DULY BEEN CONSIDERED IN THIS ORD ER. XV) AS A RESULT OF THE ABOVE FACTS, THE VARIOUS SUB MISSIONS AND AVERMENTS THE LEARNED COUNSELS, AND THE VARIOUS JUDICIAL PRONOUNCEMENTS DISCUSSED AND REFERRED TO ABOVE, I H OLD THAT NO ADDITION WAS CALLED FOR IN RESPECT OF THE ASSESS MENT YEAR 1995-96 AND THE PERIOD FOR 1-4-2000 TO 20-06-2000. SIMILARLY, NO ADDITION WAS NECESSARY IN RESPECT OF A.Y. 1996-9 7 ALSO WHERE THE APPELLANT HAS HIMSELF DECLARED A NET PROF IT RATE OF 8.56%. THE A.O. IS THEREFORE, DIRECTED TO DELETE AL L THE ADDITIONS MADE IN RESPECT OF THESE THREE YEARS. THA T LEAVES US WITH ASSESSMENT YEARS 1997-98 TO 2000-2001. COMING TO THE CRUNCH, AFTER GOING THOUGH THE ENTIRE GAMUT OF THE SEARCH, PORT-SEARCH, ASSESSMENT, AND NOW APPELLATE PROCEEDI NGS, I CONSIDER IT JUST AND FAIR TO DETERMINE THE INCOME O F THE APPELLANT IN RESPECT OF THE ABOVE FOUR A.YS BY APPL YING A NET PROFIT RATE OF 8.5% WHICH IS THE PROFIT RATE SHOWN BY THE APPELLANT HIMSELF IN A.Y. 1996-97, AND WHICH IS CON SIDERED QUITE JUST, TAKING INTO ACCOUNT THE ORDUOUS AND DIF FICULT NATURE OF THE WORKS ERECTED IN REMOTE AREAS. HOWEVER, FOR DOING SO, THE ESCALATION CHARGES, AMOUNTING TO RS. 56,98,175/ -, WOULD BE EXCLUDED IN VIEW OF THE DISCUSSION IN PARA (VIII ) ABOVE. THE GROSS RECEIPTS IN RESPECT OF THE AFORESAID A.YS(199 7-98 TO 2000-01) THEREFORE, COME TO RS. 3,57,29,222/-. INCO ME @ 8.5% ON THESE RECEIPTS WOULD COME TO RS. 30,37,043/-. SI NCE THE APPELLANT HAS ALREADY DECLARED INCOME TO THE TUNE O F RS. 23,12,968/- IN RESPECT OF THESE ASSESSMENT YEARS, T HEREFORE, THE NET ADDITION SUSTAINABLE WOULD COME TO RS. 7,24,075/- ONLY. ALL THE BALANCE ADDITION MADE BY THE ASSESSIN G OFFICER ARE ORDERED TO BE DELETED HEREBY. 13. IN OUR OPINION THE LD. CIT(A) HAS MADE CORRECT OBSERVATIONS THAT IF ASSESSEE HAD EARNED SO MUCH OF PROFIT THEN SOME ASS ETS WOULD HAVE BEEN FOUND 15 DURING THE SEARCH. FURTHER, EVEN THE REVENUES CL AIM WAS THAT ASSESSEE WAS NOT HAVING ANY BOOKS OF ACCOUNT. THEREFORE, IN SUCH A SITUATION THE ONLY COURSE LEFT TO THE LD. CIT(A) WAS ESTIMATION OF PROFIT. 14. HOWEVER, AT THE SAME TIME WE FIND THAT LD. CIT( A) HAS NOT GIVEN DETAILED REASONS FOR NOT FINDING ANY MERIT IN THE FINDING OF ASSESSING OFFICER THAT ASSESSEE HAS SHOWN BOGUS CREDITORS. WE HAVE ALREA DY SEEN THAT IN THE CASE OF GULAM MOHIDHEEN, THE AMOUNTS OF 14,01,013/-, RS. 13 ,28,813/-, RS. 17,53,813/- AND RS. 14,70,413/- DURING YEAR ENDING 31.3.1997, 3 1.3.1998, 31.3.1999 AND 31.3.2000 RESPECTIVELY WERE SHOWN AS SUNDRY CREDITO RS. FIRST OF AL, IT IS NOT POSSIBLE TO BELIEVE THAT A LABOUR CONTRACTOR CAN EX TEND CONTINUOUS CREDIT OF SUCH HUGE AMOUNTS REGULARLY. SECONDLY, WHATEVER CHEQUES WERE ISSUED LATER ON WERE SHOWN AS RECEIPTS WHICH IS QUITE CLEAR WHICH MEANS THAT THIS IS A BOOK ENTRY FOR SUNDRY CREDITORS. SIMILARLY, IN THE CASE OF SHRI MURARI LAL, FROM THE RECEIPT SIDE OF THE DAY BOOK I.E. DOCUMENT NOS. 1 TO 111 OF ANNEXURE A-6 IT WAS FOUND THAT AMOUNT WAS ENTERED AS CASH. THE DETAILS HAVE B EEN NOTED BY THE ASSESSING OFFICER AS UNDER:- BOGUS CHEQUE DEBITED IN CREDITORS LEDGER ACCOUNT 1999-2000 AMOUNT (IN RS.) AMOUNT INTRODUCED IN DAY BOOK 1999-2000 VIDE CHEQUE PAGE NO. AMOUNT NO. & DATE (IN RS.) PG. NO. AMOUNT 261500 DT. 24.12.99 100000 AMOUNT WITHDRAWN THROUGH SELF CHEQUE - - 682802 DT. 24.12.99 15000 682802 DT. 07.12.99 84 15 000 682805 DT. 24.12.99 5000 682805 DT. 27.12.99 84 500 0 682803 DT. 29.12.99 10000 682803 DT. 29.12.99 84 10 000 682804 DT. 31.12.99 5000 682804 DT. 31.12.99 85 500 0 682806 DT. 03.01.2000 5000 682806 DT. 03.01.2000 86 5000 103368 DT. 12.02.2000 10000 103368 DT. 12.02.2000 95 10000 103369 DT. 12.02.2000 10000 103369 DT. 12.02.2000 95 10000 103370 DT. 15.02.2000 10000 103370 DT. 15.02.2000 96 10000 103373 DT. 15.02.2000 5000 103373 DT. 15.02.2000 96 5000 103371 DT. 12.02.2000 10000 103371 DT. 18.02.2000 97 10000 16 103372 DT. 21.02.2000 10000 103372 DT. 21.02.2000 98 10000 103375 DT. 22.02.2000 10000 103375 DT. 22.02.2000 98 10000 103387 DT. 09.03.2000 25000 14.03.2000 102 25000 103383 DT. 14.03.2000 20000 103383 DT. 14.03.2000 102 20000 103384 DT. 18.03.2000 20000 103384 DT. 18.03.2000 105 20000 103385 10000 103385 107 10000 15. THEREFORE, IN OUR OPINION, THE PROFIT SHOULD BE ESTIMATED IN THIS CASE AT A LITTLE HIGHER RATE OR A SEPARATE ADDITION FOR CREDI TORS SHOULD HAVE BEEN MADE. SINCE ASSESSING OFFICER HIMSELF HAS NOT MADE SEPARA TE ADDITION FOR CREDITORS, IN OUR OPINION, CONSIDERING THE PECULIARITY OF THIS CA SE WE ESTIMATE THE PROFIT AT 11%. 16. IN THE RESULT APPEAL OF THE REVENUE IS PARTLY A LLOWED AND APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.01.2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH JANUARY,2015 RKK COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR