The ACIT, Central Circle-2, Baroda V. Shri Rajesh K. Shah, Baroda

ITSSA 173/AHD/2006

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7759 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-02-2012
• Assessment Year: misc
• Appeal Filed On: 06-07-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA SRDR
• Assessee Lawyers: J P SHAH SRAR
• Keywords: Bogus purchase; Unexplained investment; Period of limitation; Initiation of penalty proceedings; Corroborative evidences; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH BEFORE SHRI G.C.GUPTA, VICE-PRESIDENT (AZ) AND SHRI B.P. JAIN, ACCOUNTANT MEMBER IT(SS)A NO.173 & 178/AHD/2006 BLOCK PERIOD FROM:1/4/96 TO 11/3/03 ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, BARODA RAJESH K SHAH, 8 TH FLOOR, NEPTUNE TOWERS, PRODUCTIVITY ROAD, BARODA PAN NO.ANZOS4960R / V/S . / V/S . SHRI RAJESH K SHAH 8 TH FLOOR, NEPTUNE TOWERS, PRODUCTIVITY ROAD, BARODA-5 ACIT, CENTRAL CIRCLE-2, BARODA / APPELLANT .. / RESPONDENT /ASSESSEE BY SHRI J.P. SHAH, SR-AR /REVENUE BY SHRI S.K.GUPTA, SR-DR / DATE OF HEARING 08-02-2012 !'# / DATE OF PRONOUNCEMENT 17 - 02-2012 $ $ $ $ / // / ORDER PER B.P. JAIN, ACCOUNTANT MEMBER:- THESE CROSS-APPEALS OF THE REVENUE AND THE ASSESSEE ARISE FROM THE ORDER OF LD. COMMISSIONER OF INC-TAX (APPEALS)-IV, AHMEDABAD DATED 31-03-2006 FOR THE BLOCK PERIOD FROM 01-04-1996 TO 11-03-2003. THE ASS ESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 2 IT(SS)A NO.178/AHD/2006 (BY THE ASSESSEE) 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN REJECTING THE CONTENTION OF THE APPELLANT TH AT THE ASSESSING OFFICER HAS ERRED IN FACT AND IN LOWER AUTHORITIES IN INVOKING THE PROVISIONS OF CHAPTER XIV B OF THE INCOME TAX ACT, 1961 (THE ACT) BY VIRTUE OF A NOTICE U/S. 158BC WHICH IS DEFECTIVE IN ITS FORM AND CONTENTS. IT IS MOST RESPECTFULLY SUBMITTED THAT THE NOTICE I SSUED U/S. 158BC OF THE ACT IS DEFECTIVE IN ITS FORM AND CONTENTS AND THEREFORE TH E ENTIRE PROCEEDINGS UNDER CHAPTER XIV B INITIATED BY THE DEFECTIVE NOTICE IS VOID AB INITO AND IT MAY BE SO HELD AND THE ASSESSMENT BE ANNULLED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN REJECTING THE CONTENTION OF THE APPELLANT TH AT THE AO HAD WRONGLY RELIED ON THE STATEMENT U/S. 132(4) FOR THE PURPOSE OF MAK ING ADDITION WHICH WAS TAKEN UNDER COERCION AND THE ADMISSION GIVEN IN THE STATEMENT WAS NEITHER VOLUNTARY NOR SPONTANEOUS BUT WAS GIVEN IN CONSIDER ATION OF REMOVING THE ILLEGAL PROHIBITORY ORDERS PLACED AT VARIOUS PLACES FOR 44 DAYS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN REJECTING THE CONTENTION OF THE APPELLANT TH AT THE ASSESSMENT ORDER IS PASSED BEYOND THE PERIOD OF LIMITATION MENTIONED U/ S.158BE OF THE ACT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN REJECTING THE CONTENTION OF THE APPELLANT TH AT THE AO ERRED IN MAKING ADDITION OF TOTAL INVESTMENTS AND CONSIDERING THE S AME AS UNDISCLOSED INCOME OF THE APPELLANT DESPITE THE FACT THAT HE CONCLUDES IN THE ASSESSMENT ORDER THAT UNDISCLOSED INCOME OF THE APPELLANT ON THE BAS IS OF SEIZED MATERIALS FOR THE BLOCK PERIOD IS MUCH LESSER THAN THE INCOME ASS ESSED. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.74,39,000 MADE BY THE AO ON ACCOUNT OF ALLEGED UNACCOUNTED INVESTMENTS IN RESIDENTIAL HOUS E INVOKING PROVISIONS OF SECTION 69B OF THE INCOME TAX ACT, 1961. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING AN ADDITION OF RS.90,500 MADE BY THE AO ON ACCOUNT OF ALLEGED UNACCOUNTED INVESTMENT IN HOUSEHOLD ARTICLE S / EQUIPMENTS. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.5,93,956 MADE BY THE AO ON ACCOUNT OF ALLEGED UNACCOUNTED INVESTMENT IN FIXED DEPOSITS AL ONG WITH ACCRUED INTEREST THEREON. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.7,03,215 ON AC COUNT OF ALLEGED UNACCOUNTED INVESTMENT IN VARIOUS PROPERTIES / LAND . 9. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.1,00,000 ON AC COUNT OF ALLEGED UNACCOUNTED INVESTMENT IN INDORE FACTORY. IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 3 10. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.52,72,822 OUT OF RS.63,27,386 MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. 11. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN GIVING ON LY PARTIAL RELIEF IN RESPECT OF REALIZATION UNDISCLOSED INCOME OF PERIOD PRIOR TO T HE BLOCK PERIOD REALIZED DURING THE BLOCK PERIOD AND ACCORDINGLY AVAILABLE F OR INVESTMENTS AMOUNTING TO RS.47,16,273. 12. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.60,766 BEING 1 7% ON ACCOUNT OF UNACCOUNTED SALES OF RS.3,57,448 INSTEAD OF 12% DEC LARED BY THE APPELLANT. THE AO HAD ESTIMATED THE GP @ 18% AND HAD MADE AN A DDITION OF RS.64,340. 13. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN CHARGING INTEREST WITHOUT CLEARLY SPECIFYING THE SECTION UNDER WHICH THE INTEREST IS REQUIRED TO BE CHARGED. 14. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN REJECTING THE CONTENTION OF THE APPELLANT TH AT THE INTEREST IS CHARGED DESPITE THE FACT THAT THE DELAY INFILLING THE RETUR N OF INCOME IS PURELY ATTRIBUTABLE TO THE DEPARTMENT BY NOT RELYING ON CO RRECT FACTS. 15. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN INITIATIN G PENALTY PROCEEDINGS U/S. 158BFA(2) OF THE INCOME TAX ACT, 1961. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- IT(SS)A NO.173/AHD/2006 (BY THE REVENUE) 1. THE LD. CIT(APPEALS) ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O TO ADOPT G.P RATE OF 17% INSTEAD OF 18%. 2. THE LD. CIT(APPEALS) ERRED IN LAW AND ON FACTS IN ALLOWING 50% OF BOGUS BILLING MATERIAL CONSUMPTION AND THEREBY PROVIDING RELIEF OF RS.11,54,564/- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER ON T HE ABOVE POINTS. 2. AS REGARDS GROUND NO.1 TO 4 OF THE ASSESSEE WHIC H ARE LEGAL GROUNDS, LD. AR DID NOT SERIOUSLY CONTEST THE SAME AND HENCE WE CON FIRM THE ORDER OF LD. CIT(A). THUS, GROUNDS NO. 1 TO 4 OF THE ASSESSEE ARE DISMIS SED. IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 4 3. AS REGARDS GROUND NO.5, THE BRIEF FACTS ARE THAT DURING THE SEARCH, AS PER PAGES NO.157 AND 158 OF ANNEXURE-A FOUND AND SEIZED FROM THE OFFICE PREMISES AT NEPTUNE TOWER, BARODA, THE ASSESSEE HAS PURCHASED A HOUSE PROPERTY AT 34, HARIBHAKTI COLONY, RACE COURSE CIRCLE, BARODA FROM SHITLANI FAMILY AT A DOCUMENTED PRICE OF RS.32 LAKH JOINTLY WITH HIS WIFE SMT. VARS HA R SHAH. DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF THE ASSESSEE, A VALUATION REPORT WAS FOUND AND SEIZED BY SHRI RAJESH P RAJPARA, GOVERNMENT APPROVE R VALUER. THIS VALUATION REPORT IS DATED 30-09-2002. AS PER THE SAID REPORT, THE RE SIDENTIAL PROPERTY IS VALUED AT RS.1,06,39,000/- AS AGAINST TOTAL DOCUMENTED PRICE OF RS.32 LAKH. THE ASSESSEE IN HIS STATEMENT U/S.132(4) OF THE ACT ADMITTED TO HAV E PAID TO THE SELLER OF THE PROPERTY A SUM OF RS.15 LAKH OVER AND ABOVE DOCUMENTED VALUE OF RS.32 LAKH. COPY OF THE VALUATION REPORT FOUND AND SEIZED IS ENCLOSED IS ON RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO S HOW-CAUSE WHY INVESTMENT OF HOUSE PROPERTY SHALL NOT BE TAKEN AT RS.1,06,39,000 /- AS AGAINST DISCLOSED AT RS.32 LAKH AND WHY THE DIFFERENCE SHOULD NOT BE TREATED A S UNEXPLAINED INVESTMENT IN HOUSE PROPERTY U/S. 69B OF THE ACT. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE OBJECTED TO CONSIDER INVESTMENT AS PER VALUATION RE PORT. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE TREATED THE DIFFERENCE AMOUNT OF RS.74.39 LAKH I.E. RS.1,06,39,000/- - RS.32,00,000/ - AS UNEXPLAINED INVESTMENT AND ADDED TO THE INCOME OF THE ASSESSEE. 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 5. LD. SR-DR ON THE OTHER HAND RELIED UPON THE ORDE RS OF BOTH THE AUTHORITIES BELOW. 6. OUR ATTENTION WAS INVITED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT NO INCRIMINATING DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH AND ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ANY ADDITION IN THE ABS ENCE OF ANY INCRIMINATING DOCUMENTS. THE VALUATION REPORT FOUND AND SEIZED BY A GOVERNMENT APPROVED VALUER DATED 30-09-2002, VALUING THE PROPERTY AT RS.106,39 000 AS AGAINST THE DOCUMENTED PRICE OF RS32 LAKH. THE VALUATION REPORT WAS PREPAR ED FOR THE PURPOSE OF BANK LOAN ONLY AND FOR NO OTHER PURPOSE. IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 5 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT NO INCRIMINATING DOC UMENT HAS BEEN FOUND OR SEIZED DURING THE COURSE OF SEARCH EXCEPT A VALUATION REPO RT DATED 30-09-2002 WHICH, IN FACT, HAS BEEN PREPARED FOR THE PURPOSE OF BANK. TH E ASSESSING OFFICER HAS NOT REFERRED THE MATTER TO THE DVO EVEN TO ASCERTAIN TH E VALUE OF THE SAID PROPERTY. IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE AND IN THE ABSENCE OF ANY INCRIMINATING MATERIAL ON RECORD, THE AO IS NOT JUSTIFIED IN MAKI NG ANY ADDITION ON THIS ACCOUNT EXCEPT RS.15 LAKH WHICH HAVE BEEN ADMITTED BY THE A SSESSEE IN THE STATEMENT MADE U/S 132(4) OF THE ACT. 8. AS REGARDS ADMISSIONS MADE FOR RS.15 LAKH IN THE STATEMENT MADE U/S.132(4), THE ASSESSEE HAS SUBMITTED DURING THE COURSE OF ASS ESSMENT PROCEEDINGS AND ALSO BEFORE THE LD. CIT(A) THAT ASSESSEE HAS RENOVATED A ND SOME INTERIOR WORK HAS BEEN DONE ON WHICH NOT MORE THAN RS.10 LAKH HAVE BEEN SP ENT. THE ASSESSEE HAS GIVEN THE DETAILED EXPLANATION, WHICH IS REPRODUCED AT PA GES 24 TO 31 OF THE ORDER OF LD. CIT(A). ON PERUSAL OF THE SAME, WE ARE OF THE VIEW THAT THE ASSESSEE HAS INCURRED SOME EXPENDITURE ON THE ADDITIONAL CONSTRUCTION / R ENOVATION / INTERIOR WORK COST ON WHICH THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAVE ADMITTED AT RS.10 LAKH WHICH AS A MATTER OF FACT, HAS BEEN ADMI TTED AT RS.15 LAKH IN THE STATEMENT GIVEN U/S.132(4). THE ASSESSEE HAS NOT PR ODUCED ANY EVIDENCE OR HAS NOT SUBMITTED ANY EXPLANATION THAT A SUM OF RS.15 LAKH OR RS.10 LAKH HAVE NOT BEEN PAID, OR SPENT OVER AND ABOVE RS.32 LAKH. IN THE CI RCUMSTANCES AND FACTS OF THE CASE, WE DIRECT THE AO TO SUSTAIN AN ADDITION OF RS .15 LAKH AS ADMITTED IN THE STATEMENT U/S.132(4) OF THE ACT, SINCE THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL TO PROVE THE SAID STATEMENT AS INCORRECT AND DELETE TH E REST OF THE ADDITION. WE ORDER ACCORDINGLY. THUS, GROUND NO.5 OF THE ASSESSEE IS P ARTLY ALLOWED. 9. AS REGARDS GROUND NO.6, THE BRIEF FACTS ARE THAT DURING THE COURSE OF SEARCH, AN INVENTORY OF HOUSEHOLD ARTICLES/EQUIPMENTS AMOUN TING TO RS.1,93,500/- WAS PREPARED. DURING THE COURSE OF ASSESSMENT, THE ASSE SSEE SUBMITTED THE EXPLANATION WITH REGARD TO SOURCE OF INVESTMENT. THE AO WAS SAT ISFIED TO SOME EXTENT AND THEREFORE IN THE ABSENCE OF SOURCE OF HOUSEHOLD ART ICLES/EQUIPMENTS FOR AN AMOUNT OF RS.90,500/- WHICH COULD NOT BE EXPLAINED, THE SA ME WAS TREATED AS UNEXPLAINED AND ACCORDINGLY MADE THE ADDITION TO THE INCOME OF THE ASSESSEE. IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 6 10. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. 11. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BROUGHT ANY CONTRARY MATERIAL TO THE FINDINGS OF THE ASSESSING OFFICER O R NO EXPLANATION WITH REGARD TO ADDITION OF RS.90,500/- HAS BEEN PLACED ON RECORD. THEREFORE, IN CIRCUMSTANCES AND FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE ORDE R OF LD. CIT(A). THUS, GROUND NO.6 OF THE ASSESSEE IS DISMISSED. 12. AS REGARDS GROUND NO.7, THE BRIEF FACTS ARE THA T DURING THE COURSE OF SEARCH, IT WAS FOUND THAT FDRS IN THE NAME OF THE ASSESSEE, H IS WIFE, HIS CHILDREN WERE UNACCOUNTED AND UNDISCLOSED TO THE EXTENT OF RS.7,9 3,706/-. THE EXPLANATION OF THE ASSESSEE WAS THAT PRINCIPAL INVESTMENTS WERE MADE P RIOR TO BLOCK PERIOD AND ON MATURITY THE FDRS WERE RE-ARRANGED AND THERE IS NO UNACCOUNTED INVESTMENT IN FDRS TAXABLE DURING THE BLOCK PERIOD. THE ASSESSEE FURNISHED SUPPORTING EVIDENCES IN RESPECT THEREOF. THE ASSESSING OFFICER ACCEPTED THE CONTENTION OF THE ASSESSEE TO SOME EXTENT BUT ADDED THE INTEREST ACCRUED ON FDRS ALONG WITH CERTAIN UNDISCLOSED INVESTMENT IN FDRS TOTALING TO RS.5,93,956/- TO THE INCOME OF THE ASSESSEE. 13. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE LD. CIT(A) IN HIS ORDER IN PARA-7 AND 7.1 HAVE REPR ODUCED THE ORDER OF ASSESSING OFFICER AND THEREAFTER IN PARA-7.1 HE HAS GIVEN HIS FINDINGS THAT HE DOES NOT SEE ANY INFIRMITY IN THE STAND OF THE AO SO THE ADDITION WA S CONFIRMED. 15. LEARNED AR FOR THE ASSESSEE SUBMITTED AND CONCE DED THAT OUT OF THE TOTAL ADDITION OF RS.5,93,956/- AN AMOUNT OF RS.2,80,891/ - PERTAIN TO THE BLOCK PERIOD AND THEREFORE THE SAME AT THE MOST CAN BE MADE TAXABLE. 16. LD. SR-DR ON THE OTHER HAND DID NOT OBJECT TO T HE ARGUMENTS SO MADE BY LD. AR. 17. ON HEARING THE PARTIES AND ON PERUSAL OF THE FA CTS ON RECORD THE AMOUNT OF RS.2,80,891/- WHICH PERTAINS TO THE BLOCK PERIOD CA N ONLY BE MADE TAXABLE AND IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 7 THEREFORE THE ASSESSING OFFICER IS DIRECTED TO DELE TE THE REST OF THE ADDITION. WE ORDER ACCORDINGLY. THUS, GROUND NO.7 OF THE ASSESSEE IS P ARTLY ALLOWED. 18. AS REGARDS GROUND NO.8, THE BRIEF FACTS ARE THA T THE ASSESSEE DURING THE COURSE OF SEARCH IN THE STATEMENT U/S. 132(4) HAD A DMITTED OF HAVING MADE UNACCOUNTED INVESTMENTS IN OTHER IMMOVABLE PROPERTY . LATER ON IN THE STATEMENT U/S. 132(4) DATED 24-02-2003, THE ASSESSEE HAD ADMITTED OF HAVING INVESTMENT OF RS.10 LAKH IN VASNA LAND AND RS.10 LAKH IN OTHER FLATS/LA ND. DURING THE POST SEARCH INQUIRY, THE ASSESSEE HAD STATED ON 08-06-2003 AND CONFIRME D TO HAVE MADE THE UNACCOUNTED STATEMENT. THE AMOUNT OF RS.2,96,785/- HAS BEEN CONSIDERED AS UNDISCLOSED INVESTMENT OUT OF INCOME OF M/S TIKI TA R INDUSTRIES, BARODA AND BALANCE AMOUNT OF RS.7,02,315/- WAS TREATED AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE AND ACCORDINGLY WAS ADDED TO THE INCOME OF THE ASSESSEE. 19. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEE IN HIS STATEMENT U/S 132(4) DATED 24-04-20 03 AND ALSO POST REPORTS SEARCH INQUIRY IN THE STATEMENT DATED 08-06-2003 HAD ADMIT TED OF HAVING MADE THE SAID INVESTMENTS. NO COGENT EXPLANATION HAS BEEN FURNISH ED OR NO MATERIAL HAS BEEN BROUGHT ON RECORD THAT THE SAID INVESTMENT DOES NOT BELONG TO THE ASSESSEE. IN THE CIRCUMSTANCE AND FACTS OF THE CASE WE FIND NO INFIR MITY IN THE ORDER OF LD. CIT(A). THUS, GROUND NO.8 OF THE ASSESSEE IS DISMISSED. 21 AS REGARDS GROUND NO.9, THE BRIEF FACTS ARE THAT DURING THE COURSE OF SEARCH, THE ASSESSEE IN HIS STATEMENT U/S 132(4) DATED 24-0 4-2003 HAD ACCEPTED THAT HE HAS MADE UNACCOUNTED INVESTMENT OF RS.1 LAKH IN FAC TORY PREMISES OF TIKI ENTERPRISE AT INDORE. THE ASSESSEES EXPLANATION WAS NOT FOUND SATISFACTORY DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 22. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS PER STATEMENT, DURING THE COURSE OF SEARCH U/S 132(4), THE ASSESSEE HAD MADE IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 8 UNEXPLAINED INVESTMENT OF RS.1 LAKH IN THE PURCHASE OF VARIOUS SPARE FOR PLANT AND MACHINERY. THE ASSESSEE HAS NOT SUBMITTED ANY EXPLA NATION OR HAS NOT PROVED THAT THE STATEMENT U/S.132(4) WAS A RESULT OF MISTAKEN B ELIEF OF LAW OR FACTS AND THAT THIS INVESTMENT HAS NOT BEEN MADE OR HAS BEEN MADE BY AN Y OTHER PERSON. THEREFORE IN THE CIRCUMSTANCES AND FACTS OF THE CASE WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF AO. THUS, G ROUND NO.9 OF THE ASSESSEE IS DISMISSED. 24. AS REGARDS GROUND NO.10 OF THE ASSESSEE AND GRO UND NO.2 OF THE REVENUE. THE BRIEF FACTS ARE THAT DURING THE COURSE OF SEARC H AT M/S TIKI ENTERPRISE, INDORE INCRIMINATING PAPERS IN THE FORM OF BLANK LETTER PA DS AND BILLS OF SOME CONCERNS WERE FOUND AND SEIZED WHICH ARE AVAILABLE AT PAGES 6 TO 8 OF AO'S ORDER. IN THE STATEMENT U/S.132(4), SHRI KISHORE PANCHAL, THE PERSON MANAGI NG THE AFFAIRS OF M/S. TIKI ENTERPRISE AT INDORE ADMITTED THAT HE WAS USING THE NAMES AND BILLS OF THIS FIRM TO INFLATE EXPENSES. THE RELEVANT STATEMENT HAS BEEN R EPRODUCED BY AO AT PAGE-8 OF HIS ORDER. IT WAS FURTHER STATED IN HIS STATEMENT D ATED 30-05-2003 U/S. 131(1)A THAT THE LETTER HEAD/BILLS WERE USED ONLY FOR INFLATING THE PURCHASES BUT CASH GENERATED THROUGH THESE BILLS WERE UTILIZED TO MAKE THE PURCH ASES. THE RELEVANT STATEMENT RECORDED IS AVAILABLE AT PAGES 8-9 OF THE AO'S ORDE R. THE ASSESSEE HAD REDUCED THE PROFIT TO THE EXTENT OF RS.1,05,45,643/- DURING THE BLOCK PERIOD AS PER THE DETAILS AVAILABLE AT PAGES 9-10 OF THE ASSESSMENT ORDER. TH E ASSESSEE HAD SUBMITTED THE EXPLANATION WHICH IS AVAILABLE AT PAGES-10-12 OF AO 'S ORDER. IN THE ABSENCE OF ANY DETAILS OR BILLS FOR CASH PURCHASES, IT WAS CLAIMED BY THE ASSESSEE THAT 60% IS UTILIZED FOR CASH PURCHASES WHICH WERE NOT ACCEPTED . SINCE THE ASSESSEE HAD DECLARED THE RESIDUARY PROFIT OF 38%. THE AO ACCORD INGLY TAXED 60% AS TAXABLE PROFIT AND ACCORDINGLY TREATED RS.63,27,386/- AS UNDISCLOS ED INCOME OF THE ASSESSEE. 25. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.52, 72,822/- BY ALLOWING 50% OF EXPENSES AS REDUCTION. 26. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ISSUE BEFORE THE LD. CIT(A) WAS THAT WHETHER 40% O F BOGUS PURCHASES OR 60% OF THE SAME SHOULD BE TAXED. THE ASSESSEE HAD DISCLOSE D THE 40% BUT IN THE ABSENCE OF ANY CONCLUSIVE EVIDENCE, THE AO DID NOT ACCEPT T HE CONTENTION OF THE ASSESSEE IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 9 AND ENHANCED THE TAXABILITY AT 60%. THERE WAS NO EV IDENCE PLACED BY EITHER OF THE PARTIES REGARDING TAXABILITY OF THE BOGUS PURCHASES . IN THE CIRCUMSTANCES AND FACTS OF THE CASE AND ARGUMENTS MADE BY BOTH THE PARTIES, WE DIRECT THE AO TO TAX 45% OF THE BOGUS PURCHASES AND ALLOW THE RELIEF FOR THE BA LANCE. THEREFORE, ORDERS OF BOTH THE AUTHORITIES BELOW ARE MODIFIED ACCORDINGLY. THU S, GROUND NO.10 OF THE ASSESSEE AND GROUND NO.2 OF THE REVENUE ARE PARTLY ALLOWED. 27. AS REGARDS GROUND NO.11, THE BRIEF FACTS ARE TH AT THE ASSESSEE STATED VIDE LETTER DATED 18-04-2005 THAT HE WAS HAVING UNACCOUN TED CASH BALANCE FROM WAS BOGUS PURCHASES OF BILLS INTRODUCED IN THE NAME OF FICTITIOUS PARTIES AT INDORE FACTORY OF M/S. TIKI ENTERPRISES. IT WAS FOUND BY THE ASSES SING OFFICER THAT RS.47,16,273/- WAS AVAILABLE WITH RESPECT TO BOGUS BILLS WERE INTR ODUCED AS BOGUS PURCHASES IN THE YEARS PRIOR TO FINANCIAL YEAR 1996-97. THESE BOGUS PURCHASES ARE BEYOND THE BLOCK PERIOD. THE ASSESSEES CLAIM THAT PROFIT EARNED OUT OF BOGUS PURCHASES WERE AVAILABLE FOR UNACCOUNTED INVESTMENT DURING BLOCK P ERIOD WHICH IS POSSIBLE. THE AO LIMITED THE BOGUS PURCHASES ON PRIOR BLOCK PERIOD A T 60% AS 40% MUST HAVE BEEN SPENT ON CASH PURCHASES. ACCORDINGLY, THE CLAIM OF THE ASSESSEE WAS LIABLE TO THE EXTENT 60% OF RS.47,16,273/- AND NOT THE ENTIRE CLA IM. ACCORDINGLY, INVESTMENT TO THE EXTENT OF RS.28,29,764/- WAS ATTRIBUTABLE TO BE OUT OF CASH PERTAINING TO THE PERIOD BEYOND BLOCK PERIOD AND THEREFORE SAME WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. 28. THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSIN G OFFICER. 29. THE FACTS IN THE PRESENT FACTS ARE IDENTICAL TO THE FACTS IN GROUND NO.10 HEREINABOVE. BUT THE DIFFERENCE IS THAT OF THE PRE- BLOCK PERIOD AND THAT WITHIN THE BLOCK PERIOD. OUR DECISION IN THE BLOCK PERIOD OF H AVING UTILIZED THE CASH AND ACCORDINGLY TAXABILITY OF THE BOGUS PURCHASES WHICH HAS BEEN HELD BY US IN GROUND NO.10 HEREINABOVE, THE SAME RATIO HAS TO BE APPLIED IN T HE PRE-BLOCK PERIOD AND ACCORDINGLY THE ASSESSEE HAS TO BE GRANTED RELIEF. THE ASSESSING OFFICER IS DIRECTED TO ACT ACCORDINGLY. THUS, GROUND NO.11 OF THE ASSES SEE IS PARTLY ALLOWED. 30. AS REGARDS GROUND NO.12 OF THE ASSESSEE AND GRO UND NO.1 OF THE REVENUE, THE BRIEF FACTS ARE THAT DURING THE COURSE OF SEARC H, CERTAIN INCRIMINATING DOCUMENTS IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 10 IN THE OFFICE AND FACTORY PREMISES OF M/S. TIKI ENT ERPRISES, INDORE PROPRIETARY CONCERN OF THE ASSESSEE WERE FOUND. IT WAS OBSERVED THAT AS SESSEE HAD DISPATCHED THE MATERIAL WHICH HAS BEEN NOTED IN THE DIARY MAINTAIN ED BY SHRI KISHOR PANCHAL AND ALSO THE GATEKEEPER BUT NO SALE BILLS HAVE BEEN PRE PARED FOR THAT. IN CERTAIN CASES GOODS HAVE BEEN DISPATCHED IN HIGHER QUANTITY BUT T HE BILLS WERE PREPARED FOR LOWER QUANTITY. THIS WAY DIFFERENTIAL AMOUNT WAS BEING RE CEIVED IN CASH. THE SUMMARY OF THE SEIZED ANNEXURE WHERE UNACCOUNTED SALES COMES T O RS.42,64,529/- HAD BEEN WORKED OUT BY THE AO, WHICH WAS REQUIRED TO BE EXPL AINED BY THE ASSESSEE VIDE OFFICE NOTICE DATED 11-04-2005 AND IS AVAILABLE AT PAGE 4 OF ASSESSING OFFICER'S ORDER. THE ASSESSEE HAD SUBMITTED THE RECONCILIATIO N STATEMENT THAT WHILE WORKING OUT UNACCOUNTED SALES, CERTAIN SALES HAVE BEEN CONS IDERED TWICE, WHICH AMOUNTS TO DUPLICATION AND TALLIED THE UNRECORDED SALES. THE A SSESSEE FURTHER REQUESTED TO APPLY GP RATE OF 12%. THE AO DID NOT ACCEPT THE APP LICABILITY OF RATE OF 12% SINCE THE ASSESSEE, ITSELF, HAD DECLARED GP RATE OF 15% O N UNACCOUNTED SALES. ON THE WORKING OF THE SEIZED ANNEXURE, THE AO TOOK THE GP RATE OF 19% IN RESPECT OF 15% DISCLOSED IN THE BLOCK RETURN AND ADDED RS.64,340/- AS INCOME OF THE ASSESSEE. 31. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. 32. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. SINCE THE ASSESSEE HAD RECONCILED THE UNACCOUNTED SALES A ND HAS SUBMITTED THE EXPLANATION ABOUT DUPLICATION BILLS. IN SUCH CIRCUM STANCES AND FACTS OF THE CASE, THE EXPLANATION OF THE ASSESSEE CANNOT BE DOUBTED AND N O ADDITION IS WARRANTED. THEREFORE AO IS DIRECTED TO DELETE THE ADDITION RET AINED BY LD. CIT(A). THUS, GROUND NO.12 OF THE ASSESSEE AND GROUND NO.1 OF THE REVENU E ARE DISMISSED. 33. AS REGARDS GROUND NO. 13 AND 14 OF THE ASSESSEE REGARDING CHARGING OF INTEREST, ON PERUSAL OF FACTS, WE ARE OF THE VIEW T HAT THE ACTION OF THE ASSESSING OFFICER WITHOUT PASSING A SPEAKING ORDER WITH SPECI FIC REFERENCE WITHOUT SPECIFYING EVEN SECTION UNDER WHICH THE INTEREST IS REQUIRED T O BE CHARGED. THEREFORE THE MATTER IS RESTORED TO THE FILE OF THE LD. CIT(A) TO DECIDE THE ISSUE DE NOVO AND PASS A SPEAKING ORDER BUT BY PROVIDING ADEQUATE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. THUS, GROUNDS NO.13 AND 14 OF THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSES. IT(SS)A NO173 & 178./AHD/2006 B.P. 1/4/96 TO 11/3/ 03 ACIT CC-2 BRD V. SH RAJESH K SHAH PAGE 11 34. AS REGARDS GROUND NO.15 OF THE ASSESSEE, WE CON CUR WITH THE VIEWS OF LD. CIT(A) THAT THE ASSESSEE HAS RAISED THE GROUND BEFO RE HIM AGAINST THE INITIATION OF PENALTY PROCEEDINGS U/S.158BFA(2) AND SINCE THERE L IES NO APPEAL AGAINST SUCH ACTION, THEREFORE THE GROUND OF THE ASSESSEE WAS RE JECTED. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). THUS, GROUND NO.15 OF THE ASSESSEE IS DISMISSED. 35. IN THE RESULT, APPEAL OF ASSESSEE IN IT(SS)A NO.178/AHD/2006 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEAL OF REVE NUE IN IT(SS)A NO.173/AHD/2006 IS PARTLY ALLOWED. % $ !'# &'( 17/02 /201 2 ! , - . / THIS ORDER PRONOUNCED IN OPEN COURT ON 17/02/ 201 2. SD/- SD/- ( G.C.GUPTA ) ( B.P. JAIN ) (VICE PRESIDENT) (ACCOUNTANT MEMBER) &'(- 17/02/2012 1 / DKP* $ $ $ $ 223 223 223 223 43' 43' 43' 43' / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ''27 8 / CONCERNED CIT 4. 8- / CIT (A) 5. 3;. 2227, 27#, 1 / DR, ITAT, AHMEDABAD 6. .>? @% / GUARD FILE. BY ORDER/ $ , /TRUE COPY/ A/1 ' 27#, 1 /