TOLANI P. LTD, MUMBAI V. DCIT CIR 17, MUMBAI

ITSSA 168/MUM/2005

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8192 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 26-05-2011
• Assessment Year: misc
• Appeal Filed On: 13-04-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Assessee Lawyers: S M AGRAWAL
• Keywords: Capital asset; Loose papers; Document seized; Period of limitation; Cost of acquisition; Documents seized
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI, J. SUDHAKAR REDDY, ACCOUNTANT MEMBER A ND SHRI VIJAY PAL RAO, JUDICIAL MEMBER IT(SS)A NO. 168/MUM./2005 (BLOCK PERIOD : 1.4.1995 21.3.2002 ) DATE OF HEARING 26.5.2011 DATE OF DICTA TION : 9.6.2011 M/S. TOLANI PRIVATE LIMITED 10-A, BHAKHTAWAR, NARIMAN POINT MUMBAI 400 021 PAN .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-17, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT IT(SS)A NO. 173/MUM./2005 (BLOCK PERIOD : 1.4.1995 21.3.2002 ) M/S. TOLANI SHIPPING CO. LTD. 10-A, BHAKHTAWAR, NARIMAN POINT MUMBAI 400 021 PANAAACT4127C .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-17, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 2 IT(SS)A NO. 175/MUM./2005 (BLOCK PERIOD : 1.4.1995 21.3.2002 ) ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-17 & 28, AAYAKAR BHAVAN, 101 M.K. ROAD MUMBAI 400 020 .. APPELLANT V/S M/S. TOLANI SHIPPING CO. LTD. 10-A, BHAKHTAWAR, NARIMAN POINT MUMBAI 400 021 PAN AAACT4127C .... RESPONDENT ASSESSEE BY : MR. S.M. AGRAWAL REVENUE BY : MR. GOLI SRINIVAS RAO O R D E R PER J. SUDHAKAR REDDY, A.M. THE APPEAL IN IT(SS)A NO.168/MUM./2005, IS DIRECTE D AGAINST THE IMPUGNED ORDER DATED 3 RD FEBRUARY 2005, PASSED BY THE COMMISSIONER (APPEALS)-IV, MUMBAI, WHEREIN HE CONFIRMED THE ORDE R OF THE ASSESSING OFFICER PASSED UNDER SECTION 158BC OF THE INCOME TA X ACT, 1961 (FOR SHORT THE ACT), FOR THE BLOCK PERIOD FROM 1 ST APRIL 1995 TO 25 TH MARCH 2002. 2. APPEALS IN IT(SS)A NO.173/MUM./2005 AND IT(SS)A NO. 175/MUM./ 2005 ARE CROSS APPEALS AND DIRECTED AGAINST THE IMP UGNED ORDER DATED 3 RD FEBRUARY 2005, PASSED BY THE COMMISSIONER (APPEALS) -IV, MUMBAI, WHERE HE HAS PARTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 158BC OF THE ACT ON 30 TH APRIL 2004, FOR THE BLOCK PERIOD FROM 1 ST APRIL 1995 TO 21 ST MARCH 2002. AS THE ISSUES ARISING IN ALL THESE APP EALS ARE COMMON, FOR THE SAKE OF CONVENIENCE, THEY ARE HEARD TOGETHER AND ARE DISPOSED BY WAY OF THIS CONSOLIDATED ORDER. TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 3 3. BRIEF FACTS OF THE CASE ARE THAT, A SEARCH AND SEIZ ER ACTION UNDER SECTION 132 OF THE ACT WAS CONDUCTED IN THE CASE OF TOLANI GROUP ON 21 ST MARCH 2002. SEARCHES WERE CARRIED OUT AT THE OFFICE PREMISES OF THE GROUP AS WELL AS AT THE RESIDENTIAL PREMISES OF THE DIREC TORS OF THE GROUP. THE FOLLOWING PREMISES WERE COVERED DURING THE SEARCH. M/S. TOLANI SHIPPING PVT. LTD. M/S. TOLANI BULK CARRIERS LTD. M/S. TOLANI LIMITED, 10-A, BHAKTAWAR NARIMAN POINT, MUMBAI 400 021 SHRI N.P. GIDWANI 92/B, EMBASSY APTS. 46, NAPEAN SEA ROAD MUMBAI SHRI ROHET N. TOLANI 306, PRABHU KUNJ PEDDAR ROAD MUMBAI 400 026 4. NOTICE UNDER SECTION 158BC WAS GIVEN AND THE ASSESS EE FILED HIS RETURN OF INCOME FOR THE BLOCK PERIOD IN FORM-2B ON 11 TH OCTOBER 2002, DECLARING NIL UNDISCLOSED INCOME. THE ASSESSING OFFICER, IN THE C ASE OF M/S. TOLANI PRIVATE LIMITED, DETERMINED THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD AT ` 16,62,493. IN THE CASE OF M/S. TOLANI SHIPPING PVT. LTD., UNDISCLOSED INCOME FOR THE BLOCK PERIOD WAS DETERMINED AT ` 3,14,97,933. FIRST, WE TAKE UP ASSESSEES APPEAL IN IT(SS) NO.16 8/MUM./2005. 5. LEARNED COUNSEL, MR. S.M. AGRAWAL, ON BEHALF OF THE ASSESSEE, FILED SUMMARY OF GROUNDS WHICH ARE LISTED AS FOLLOWS:- 1. VALIDITY OF SEARCH ACTION U/S 132(1) THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING TH E SEARCH OPERATION CANNOT BE SAID TO HAVE BEEN VALIDLY INITI ATED AS THERE EXISTED NO MATERIAL WHICH COULD LEAD TO THE FORMATION OF BE LIEF THAT THE CASE FALLS IN ANY OF THE THREE CONDITIONS MENTIONED IN S ECTION 32(1) OF THE ACT AND BEFORE ISSUING NOTICE U/S 158BC, THE A.O. W AS DUTY BOUND TO TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 4 CALL FOR SATISFACTION NOTE RECORDED BY AUTHORITY FO R INITIATING SEARCH PROCEEDINGS. 2. PROCEEDINGS ARE TIME BARRED LEARNED CIT(A) HAS ERRED IN NOT ACCEPTING THE CONT ENTION OF THE APPELLANT COMPANY THAT ASSESSMENT ORDER PASSED U/S 158BC OF THE ACT IS TIME BARRED. 3. DIFFERENT PERSONS CONDUCTED SEARCH PROCEEDINGS A T DIFFERENT TIMES THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE NAMES OF AUTHORIZED PERSONS IN PANCHANAMA DATED 22.3.2002, T HE DATE OF WHICH SEARCH HAD TAKEN PLACE AND THE NAMES OF PERSONS LIF TING THE RESTRAINT ORDER BY VACATING THE SEAL OF CABINS OF DIRECTORS O N 18.4.2002, ARE DIFFERENT AND THEREFORE THE ACTION ON 18 TH APRIL 2002, WAS INVALID AS AUTHORIZATION ORDER HAS NOT BEEN LOOKED INTO AS WHE THER PERSONS ACTED ON 18.4.2002 WERE LEGALLY AUTHORIZED UNDER SECTION 132(1)(C) OF THE ACT. 4. ALTERNATIVELY, WITHOUT PREJUDICE THE LEARNED CIT (A) HAS ERRED IN CONFIRMING ADDITION OF ` 16,62,493 ON ACCOUNT OF PROPERTY PURCHASED FROM M/S. SHARADA ERECTORS PVT. LTD. FOR SUM OF ` 61,37,000 AS PER MEMORANDUM OF PURCHASE DATED 21.3.1998, OVERLOOKING THAT ALL CONSIDERATION FOR PURCHASE OF PROPERTY WAS RECORDED IN THE BOOKS OF ACCOUNT WHICH IS APPEARING IN THE BALANCE SHEET PLA CED TO SEARCH AND CONSIDERED IN REGULAR ASSESSMENT PROCEEDINGS AND T HEREFORE, THE SAME CANNOT BE CONSIDERED IN PROCEEDINGS UNDER SECT ION 158BC. 5. THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE WELL SETTLED LAW THAT ONUS IS ON THE DEPARTMENT TO PROVE THAT AS SESSEE HAS RECEIVED CONSIDERATION MORE THAN THE AMOUNT MENTION ED IN THE SALE DOCUMENTS [K.P. VERGHESE V/S ITO, 131 ITR 597 (SC)] . 6. LEARNED COUNSEL FILED PAPER BOOK AND DREW THE ATTEN TION OF THE BENCH TO THE PANCHANAMA AND POINTED OUT THAT THE WARRANT HAS BEEN ISSUED JOINTLY IN THE NAMES OF M/S. TOLANI SHIPPING PVT. LTD., M/S . TOLANI BULK CARRIERS LTD., AND M/S. TOLANI PVT. LTD. HE RELIED ON THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN CIT V/S SMT. VANDANA VERMA, (2009), 2 27 CTR 388 (ALL.) AND SUBMITTED THAT WHEN THE WARRANT OF AUTHORISATION FO R SEARCH UNDER SECTION 132 WAS ISSUED IN JOINT NAMES, IT IS NOT OPEN FOR T HE ASSESSING OFFICER TO ASSESSEE ANY OF THE PARTIES IN AN INDIVIDUAL CAPACI TY AND THAT THEY CAN BE ONLY ASSESSED JOINTLY AS AN AOP OR BOI. HIS CASE IS THAT, THE ASSESSMENT PASSED INDIVIDUALLY IN THE CASES OF M/S. TOLANI PVT . LTD. AND M/S. TOLANI TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 5 SHIPPING PVT. LTD. ARE BAD-IN-LAW IN VIEW OF THE AB OVE JUDGMENT. HE FURTHER SUBMITS THAT THE ASSESSEE REQUESTED THE REVENUE AUT HORITIES FOR FURNISHING THE REASONS FOR SEARCH AND ARGUED THAT THE ASSESSIN G OFFICER WAS DUTY BOUND TO CALL FOR THE SATISFACTION NOTE RECORDED BY THE A UTHORITY FOR INITIATING SEARCH PROCEEDINGS. HE FURTHER SUBMITS THAT THE ASSESSEE W AS ENTITLED TO KNOW AS TO WHAT MATERIAL EXISTED WHICH COULD HAVE LEAD TO THE FORMATION OF BELIEF THAT THE CASE FALLS IN ANY OF THE THREE CONDITIONS MENTI ONED UNDER SECTION 32(1) OF THE ACT AUTHORISING THE REVENUE TO CONDUCT SEARCH. HE ARGUED THAT NON FURNISHING OF THE SAME IS BAD-IN-LAW. FOLLOWING CAS E LAWS WERE RELIED ON BY THE LEARNED COUNSEL. CIT V/S CHILKA VYEANKATESH SIDRAM, (2010) 1 ITR (TR IB.) 369 (PUNE); AND M.D. OVERSEAS LTD. V/S DIRECTOR GENERAL OF INCOME T AX & ORS., 333 ITR 407 (ALL.). IN M.D. OVERSEAS LTD. (SUPRA), THE COURT HELD THAT THE ASSESSEE IS ENTITLED TO KNOW THE REASONS OF SEARCH. 7. LEARNED COUNSEL FURTHER SUBMITS THAT THE ASSESSMENT IS TIME BARRED AS THE SEARCH WAS INITIATED ON 21 ST MARCH 2002 AND CONCLUDED ON 22 ND MARCH 2002 AT 08:30 PM AND WHEREAS THE SEARCH PARTY PLACE D A PROHIBITORY ORDER (PO) DURING THE COURSE OF SEARCH AND THEREAFTER, TH E PO WAS LIFTED ON 18 TH APRIL 2002 AND THE ASSESSMENT SHOULD HAVE BEEN COMP LETED ON/OR BEFORE 31 ST MARCH 2004 BUT WAS ACTUALLY COMPLETED ON 30 TH APRIL 2004. HE SUBMITS THAT THE PERIOD OF LIMITATION CANNOT BE COUNTED FRO M THE DATE OF LIFTING PO AND THE TIME LIMIT SHOULD BE CALCULATED ONLY FROM 2 2 ND MARCH 2002. ON A QUERY FROM THE BENCH, HE SUBMITS THAT THE TOTAL OF 26 DOCUMENTS IN THE FORM OF LOOSE SHEETS WAS FOUND DURING THE COURSE OF LIFT ING OF PO. 8. FOR THE PROPOSITION THAT TIME LIMIT CANNOT BE RECKO NED FROM THE DATE OF LIFTING OF PO. HE RELIED ON THE FOLLOWING CASE LAWS :- TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 6 CIT V/S MRS. SANDHYA P. NAYAK, 253 ITR 535 (BOM.); NANDLAL GANDHI V/S ACIT, 308 ITR (AT) 314 (MUM.); A ND CIT V/S PLASTIKA ENTERPRISES, 180 TAXMAN 293 (BOM.) 9. ON FACTS, THE LEARNED COUNSEL SUBMITS THAT THE ENTI RE ADDITION ON MERITS, WAS BASED ON A SINGLE SHEET OF PAPER WHICH IS AT PAGE-98 OF THE ASSESSEES PAPER BOOK AND WHICH HAS BEEN DISCUSSED BY THE ASSESSING OFFICER AT PARA-B TO PAGE-6 OF THE ASSESSMENT ORDER AND ARGUED THAT THE ASSESSEE HAD PURCHASED CERTAIN COMMERCIAL PROPERTIE S FROM SHARADA ERECTORS PVT. LTD. AND THE CONSIDERATION PAID WAS D ISCLOSED IN THE BOOKS OF ACCOUNT AND THAT THE PROPERTY HAS BEEN SOLD AT FULL COST TO M/S. TOLANI SHIPPING PVT. LTD. AND THAT M/S. TOLANI SHIPPING PV T. LTD. RECORDED THE FULL VALUE IN ITS BOOKS OF ACCOUNT. HE SUBMITS THAT THER EAFTER, AS THE BUILDING WAS COMPLETED AND THERE WERE CERTAIN DEFICIENCIES, THE BUILDER AGREED TO REDUCE THE COST OF PURCHASE OF THE BUILDING AND THE AMOUNT OF REDUCTION IN PURCHASE COST IN CAPITAL ASSET WAS WRONGLY TAKEN AS UNDISCLO SED INCOME BY THE ASSESSING OFFICER. HE TOOK THIS BENCH THROUGH THE A SSESSMENT ORDER AND EXPLANATION GIVEN TO THE ASSESSING OFFICER, AS WELL AS THE CORRESPONDENCE WITH SHARADA ERECTOR PVT. LTD. TO PROVE THAT THE PU RCHASE PRICE OF THE CAPITAL ASSET WAS IN FACT REDUCED AS CERTAIN CIVIL WORKS AS MARBLE FLOORING, LOFTS, FALSE CEILING, PAINTING, ELECTRICAL DUCTING AND AIR CONDI TIONING, WHICH WERE ORIGINALLY TO BE CARRIED OUT BY THE BUILDER WERE SHIFTED TO TH E ASSESSEE AND, CONSEQUENTLY, THE PURCHASE PRICE WAS REDUCED. LEARN ED COUNSEL SUBMITS THAT THE PURCHASE WAS MADE AS A FIXED ASSET FOR LOCATING OFFICE OF THE COMPANY AND WONDER HOW REDUCTION IN THE PURCHASE PRICE OF A CAPITAL ASSET WOULD RESULT IN INCOME AT ALL. HE READ OUT THE ORDER OF T HE COMMISSIONER (APPEALS) AND SUBMITS THAT THE FIRST APPELLATE AUTHORITY ERRE D IN HOLDING THAT THE REDUCTION IN PURCHASE PRICE OF THE CAPITAL ASSET WO ULD BECOME UNDISCLOSED INCOME. 10. LEARNED DEPARTMENTAL REPRESENTATIVE, MR. GOLI SRINI VAS RAO, ON THE OTHER HAND, SUBMITS THAT ON MERITS, THE FIRST APPEL LATE AUTHORITY AS WELL AS TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 7 THE ASSESSING OFFICER HAVE CLEARLY BROUGHT OUT THAT THE ASSESSEE HAS PURCHASED OFFICE PREMISES ADMEASURING 1,805 SQ.FT. @ ` 3,400 PER SQ.FT. FOR ` 61,37,000 AND FURTHER AN ADDITIONAL AREA OF 42.214 SQ.FT. FOR ` 1,43,527 TOTALING TO ` 62,80,527 FROM SHARADA ERECTOR PVT. LTD. AND THAT SHARADA ERECTOR PVT. LTD. FOR NO VALID REASON REDUCED THE R ATES BY ` 900 PER SQ.FT. FOR THE PROPERTY PURCHASED. HE POINTS OUT THAT THE ARGU MENT OF THE ASSESSEE THAT HE HAD PURCHASED THE PROPERTIES WITH AMENITIES LIKE MARBLE FLOORING, FALSE CEILING, AIR CONDITIONING, ETC., IS NOT BORNE OUT FROM THE RECORD. HE SUBMITS THAT THERE IS NO AGREEMENT BETWEEN THE ASSE SSEE AND THE BUILDER EVIDENCING THESE CLAIMS OF THE ASSESSEE AND ON THE OTHER HAND, THE BROCHURE OF THE BUILDER DOES NOT PROMISE SUCH FACILITIES. HE SUBMITS THAT THE DISCOUNT OF 900 SQ.FT. WORKS OUT TO ` 49,00,000 AND THE CLAIM OF THE ASSESSEE IS NOT ONLY SURPRISING BUT ALSO NOT BORNE OUT BY ANY RECOR D. ON A QUERY FROM THE BENCH, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE BUILDER HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER. 11. ON THE ARGUMENT THAT THE ASSESSMENT IS TIME BARRED. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT A TOTAL 26 LOOSE PAPERS WERE SIZED AT THE TIME OF P.O. AND THAT THE P.O. WAS LIFTED IN LESS THAN A MONTH FROM THE DATE OF INITIATION OF SEARCH AND IN SUCH CIRCUMSTAN CES, THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL ARE NOT APPLICABLE. HE SUBMITS THAT THIS IS NOT A CASE WHERE THE P.O. HAS BEEN ISSUED JUST TO EXTEND THE TIME LIMITS. ON THE ISSUE OF NON-FURNISHING OF REASONS AND SATISFACTION NOTE RESULTING IN THE SEARCH TO THE ASSESSEE, THE LEARNED DEPARTMENTAL RE PRESENTATIVE SUBMITS THAT THE TRIBUNAL IS NOT EMPOWERED TO ADJUDICATE TH E VALIDITY OF A SEARCH. ON THE ISSUE OF WARRANT BEING ISSUED IN JOINT NAMES, T HE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESSMENT CANNOT B E FRAMED AS AN AOP FOR THE REASON THAT THERE IS NO COMMON INTENTION OR MOT IVE TO DO BUSINESS BETWEEN THE THREE ENTITIES. TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 8 12. RIVAL CONTENTIONS WERE HEARD. ON A CAREFUL CONSIDER ATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAPERS ON RECORD, AS WELL AS THE CASE LAWS CITED BEFORE US, WE HOLD AS F OLLOWS:- I) WE FIRST TAKE UP THE ISSUE ON MERITS. THE UNDISPUTE D FACTS IN THIS CASE IS THAT THE ASSESSEE HAS RECORDED THE FULL VALUE OF CONSIDERATION IN ITS BOOKS OF ACCOUNT. THE ASSESSEE HAS FILED A LEDGER ACCOUNT IN THE BOOKS OF M/S. TOLANI PVT. LTD. AND IT CAN BE SEEN THAT THE FIXED ASSETS HAVE BEEN DISCLOSED AT A VALUE OF ` 61,37,000. ` 49,00,000 HAS BEEN PAID TO M/S. SHARADA ERECTORS PVT. LTD. AND AN AMOUNT OF ` 12,37,000 IS SHOWN AS AMOUNT DUE TO M/S. SHARADA ERECTORS PVT. LTD. THE OFFICE PREMISES WERE SOLD TO M/S. TOLANI SHIPPING CO. LTD. FOR THE SAME AMOUNT OF ` 61,37,000 AND THE AMOUNT DUE TO M/S. SHARADA ERECTORS PVT. LTD. WAS ALSO TRANSFE RRED TO M/S. TOLANI SHIPPING CO. LTD. II) WHEN FULL AMOUNT HAS BEEN DISCLOSED IN THE BOOKS OF ACCOUNT, WE DO NOT SEE AS TO HOW IT CAN BE SAID THAT THERE IS UNAC COUNTED AMOUNT WHICH CAN BE BROUGHT TO TAX AS UNDISCLOSED INCOME. III) ANOTHER ASPECT IS THAT WHAT THE ASSESSEE PURCHASED IS FIXED ASSET AND REDUCTION IN THE COST OF FIXED ASSET CAN NEVER RESU LT IN THE INCOME LIABLE TO TAX. IN VIEW OF THE ABOVE, WE HOLD THAT THE COMMISS IONER (APPEALS) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER WHEREI N REDUCTION IN PURCHASE PRICE OF A CAPITAL ASSET WAS HELD AS UNDISCLOSED IN COME. IV) AS WE HAVE DELETED THE ADDITION ON THIS ACCOUNT, WE DO NOT GO INTO THE ISSUE AS TO WHETHER THE ASSESSEE HAS FURNISHED ADEQ UATE EVIDENCE IN SUPPORT OF HIS CONTENTION THAT THE BUILDER HAS REDUCED THE PRICE, AS CERTAIN AMENITIES WHICH THE BUILDER WAS ORIGINALLY REQUIRED TO PROVID E HAS NOT DONE SO. WE OBSERVE THAT THERE IS NO EVIDENCE PRODUCED BY THE A SSESSEE IN SUPPORT OF HIS ARGUMENT. THE REVENUE HAS ALSO FAILED IN THE DUTY T O EXAMINE THE BUILDER. THE CONFIRMATION GIVEN BY THE BUILDER HAS NOT BEEN PUT TO PARTY. BUILDERS ARE NOT GENERALLY KNOWN TO GIVE SUCH HUGE DISCOUNT FOR THE REASONS MENTIONED TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 9 BY THE ASSESSEE. IN ANY EVENT, AS WHAT WAS REDUCED IS THE COST OF FIXED ASSETS, THE QUESTION OF IT BEING A REVENUE RECEIPT AND, CONSEQUENTLY, IT BEING INCOME, DOES NOT ARISE. AS WE HAVE DELETED THE ADDITIONS ON MERITS, WE DO N OT COME INTO THE OTHER ARGUMENTS TECHNICALLY RAISED BY THE ASSESSEE AS IT WOULD BE AN ACADEMIC EXERCISE. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 14. NOW, WE TAKE UP CROSS APPEALS IN ITA NO.173/MUM./20 05 AND 175/MUM./2005. 15. GROUNDS AND ARGUMENTS IN THESE APPEALS ARE IDENTICA L AS FAR AS TECHNICAL ASPECT, VALIDITY OF SEARCH, LIMITATION, E TC. ARE CONCERNED. ON THE ISSUE OF MERITS, FIRST ADDITION IS ON THE REDUCTION OF PURCHASE PRICE OF A CAPITAL ASSET WHICH IS THE SAME AS IN THE CASE OF M /S. TOLANI PVT. LTD. 16. AFTER HEARING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT FOR THE REASONS STATED BY US WHILE DISPOSING THE CASE OF M/ S. TOLANI PVT. LTD., IN ITA NO.168/MUM./2005, WE DELETE THIS ADDITION MADE ON A CCOUNT OF REDUCTION OF PURCHASE PRICE OF A CAPITAL ASSET. 17. FOR OTHER ADDITIONS, THE FACTS ARE BROUGHT OUT BY T HE ASSESSING OFFICER IN HIS ASSESSMENT ORDER AT PAGES-6 TO 8. THE ISSUE IS THAT, CERTAIN LOOSE PAPERS WERE SEIZED DURING THE COURSE OF SEARCH WHER E CALCULATION OF SALARY WAS MADE. THE ASSESSING OFFICER CAME TO A CONCLUSIO N THAT CASH COMPONENT OF SALARY TO EACH EMPLOYEE IS ABOUT 6.03% AND THAT THIS CASH COMPONENT IS NOT RECORDED IN THE BOOKS OF ACCOUNT. HE NOTED DOWN SALARY AND CERTAIN CLAIMS BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT FROM ASSESSMENT YEAR 1995-96 TO THE ASSESSMENT YEAR 2001-02 AND ESTIMATE D 6.03% OF THE TOTAL SALARY AND SERVICES OF THIS PERIOD AMOUNTING TO ` 45,24,44,996 AS CASH COMPONENT PAID BY THE ASSESSEE AS SALARY AND CHARGE S WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 10 18. THE FIRST APPELLATE AUTHORITY REJECTED THE CONTENTI ONS OF THE ASSESSEE THAT THESE LOOSE SHEETS WERE DUMB DOCUMENTS AND THE Y WERE RANDOM NOTINGS WITHOUT ANY EVIDENTIARY VALUE. HE HELD THAT THE DOCUMENTS WERE FOUND AT THE ASSESSEES PREMISES AND THEY RELATE TO THE BUSINESS OF THE ASSESSEE AND THAT THE NAMES OF PERSONS NOTED IN THE SAID DOCUMENTS ARE EMPLOYEES OF THE ASSESSEE AND THE ASSESSEE FAILED T O EXPLAIN THAT THESE PAYMENTS WERE REIMBURSEMENT OF ACTUAL EXPENDITURE A ND THAT THE BASIC SALARY MENTIONED IN THE SHEET TALLIED WITH THE BASI C SALARY RECORDED IN THE BOOKS OF ACCOUNT FOR THE FINANCIAL YEAR 1994-95. HE HELD THAT THE EVIDENCE PERTAINS TO FINANCIAL YEAR 1994-95 AND OUT OF THE E NTIRE LIST OF 32 ENTRIES, ONLY ABOUT 16 HAD APPARENT CASH COMPONENT AND THAT EXTRAPOLATION FIGURES IS BAD-IN-LAW. HE HELD THAT AS PER SEIZED DOCUMENTS, I T IS ESTABLISHED THAT AN AMOUNT OF ` 2,44,392 WAS PAID IN CASH FOR THE YEAR AND ONLY TH IS ADDITION CAN BE MADE FOR EACH YEAR. HE, IN TURN, DECIDED THA T THE UNACCOUNTED SALARY WOULD BE ` 17,10,744 BEWEEN THE PERIOD FROM 1 ST APRIL 1995 TO 31 ST MARCH 2002. AGGRIEVED WITH THIS FINDING, BOTH, THE REVENU E AS WELL THE ASSESSEE FILED CROSS APPEALS. 19. THE ASSESSEES CONTENTION ARE THAT THE NAMES MENTIO NED IN THE ROUGH SHEET SEIZED ARE NOT EMPLOYEES OF THE ASSESSEE AND THAT IT HAS NO EVIDENTIARY VALUE. HE RELIED ON A NUMBER OF CASE LA WS INCLUDING THE DECISION IN ACIT V/S KAMALA PRASAD SINGH, 3 ITR (TRIB.) 533 (PATNA), FOR THE PROPOSITION THAT SEIZED DOCUMENTS NOT CONTAINING SI GNATURE OF THE ASSESSEE, NATURE OF TRANSACTIONS, ETC., CANNOT BE THE BASIS F OR AN ADDITION. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT A PERUSAL OF THE SEIZED DOCUMENTS CLEARLY SHOWS THAT THE ASSESSEE HAS BEEN PAYING A C ASH COMPONENT TO ALL ITS EMPLOYEES WHICH IS NOT RECORDED IN THE BOOKS OF ACC OUNT. HE SUBMITS THAT THE CLAIM OF THE ASSESSEE THAT ONLY FIXED ALLOWANCE PAID TO THE EMPLOYEES BY WAY OF CASH THAT TOO ON PRODUCTION OF EVIDENCE IS N OT BORNE OUT OF THE RECORD. TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 11 20. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT IN TH E SEIZED DOCUMENT, CERTAIN NAMES OF EMPLOYEES ARE MENTIONED. THE DOCUM ENTS CONTAIN FOUR COLUMNS, THE FIRST BEING THE NAME OF EMPLOYEE, SECO ND BEING THE BASIC SALARY, THE THIRD BEING SUPPLEMENTARY AND FOURTH BE ING EFFECTIVE INCREASE. AGAINST A FEW NAMES UNDER THE HEAD EFFECTIVE INCREA SE, CERTAIN AMOUNTS HAVE BEEN MENTIONED AND IT IS STATED AS CASH. THERE IS NO EVIDENCE AS TO WHO HAS PREPARED THESE TWO DOCUMENTS. THE AMOUNTS M ENTIONED AS BASIC SALARY, AS PER THE REVENUE, TALLIED TO THE BASIC SA LARY PAID TO THE EMPLOYEES DURING FINANCIAL YEAR 1994-95. THE LEARNED DEPARTME NTAL REPRESENTATIVE HAS NOT CONTRADICTED THE SUBMISSIONS OF THE ASSESSEE TH AT THE NAMES OF THE PERSONS MENTIONED ARE NOT EMPLOYEES OF THE ASSESSEE CONCERN EXCEPT A FEW. THE EMPLOYEES HAD NOT BEEN EXAMINED. A FEW SCRIBBLI NGS AND CALCULATIONS MADE ON TWO LOOSE SHEETS WITHOUT ANY FURTHER EVIDEN CE OF THE ASSESSEE HAVING MADE UNOFFICIAL CASH PAYMENTS TO EMPLOYEES, IN OUR OPINION, IS NOT SUFFICIENT EVIDENCE TO MAKE AN ADDITION. AS SUBMITT ED BY THE LEARNED COUNSEL, THE LAST COLUMN IN THE SHEET REFLECTS THE EFFECTIVE INCREASE THAT EACH EMPLOYEE GETS. NEITHER THE EMPLOYEES WERE QUESTIONE D NOR ANY ATTEMPT WAS MADE TO FIND OUT THE EVIDENCE OF PAYMENT OF SALARY AND WAGES IN CASH AND NOT RECORDING THE SAME IN THE BOOKS OF ACCOUNT. IN OUR OPINION, ADDITIONS CANNOT BE MADE ON THE BASIS OF THERE DOCUMENTS AS T HEY DO NOT CONCLUSIVELY PROVE THE CASE OF THE ASSESSING OFFICER. THE ADDITI ONS HAVE BEEN MADE ON SURMISES AND CONJECTURES. THUS, WE DELETE THE ADDIT ION AS SUSTAINED BY THE COMMISSIONER (APPEALS). THE FIRST APPELLATE AUTHORI TY, WHILE DELETING THE GENERAL ADDITION @ 6.03% MADE BY THE ASSESSING OFFI CER ON A TOTAL OF ` 45,24,44,996 AS WRONGLY EXTRAPOLATED ` 2,44,392 FOR THE PERIOD OF SEVEN YEARS AND SUSTAINED THE DISALLOWANCE OF ` 17,10,744. THE UNDISPUTED FACT IS THAT, AT BEST, SEIZED DOCUMENT REVEAL CERTAIN CASH PAYMENTS AGGREGATING TO ` 2,44,329, ADDITIONS CANNOT BE MADE BY GUESS WORK A ND EXTRAPOLATION. IN ANY EVENT, AS WE HAVE AGREED WITH THE ARGUMENTS OF THE LEARNED COUNSEL THAT ADDITIONS CANNOT BE MADE ON SUCH A DOCUMENT, W E ALLOW THIS GROUND IN ASSESSEES APPEAL AND DISMISS THIS GROUND IN REVENU ES APPEAL. TOLANI PRIVATE LIMITED TOLANI SHIPPING CO. LTD. 12 21. COMING TO THE ARGUMENT OF THE ASSESSEE ON THE ISSUE OF VALIDITY OF SEARCH, LIMITATION, ETC., AS ALREADY STATED WHILE D ISPOSING OFF THE APPEAL IN ITA NO.168/MUM./2005 M/S. TOLANI PVT. LTD., WE NE ED NOT ADJUDICATE THE SAME FOR THE REASON THAT IT WOULD BE AN ACADEMIC EX ERCISE AS THE APPEAL HAS BEEN ALLOWED ON MERITS. 22. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.173/MUM. /2005 IS ALLOWED AND REVENUES APPEAL IN ITA NO.175/MUM./2005 IS DIS MISSED. 23. TO SUM UP, ASSESSEES APPEALS IN ITA NO.168/MUM./20 05 AND ITA NO.173/MUM./2005 IS ALLOWED AND REVENUES APPEAL IN ITA NO.175/MUM./ 2005 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.6.2011 SD/- VIJAY PAL RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 24.6.2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, H BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI