The ACIT, Central Circle-1, Baroda V. Shri Harshadray M.Shah, Dahod

ITSSA 183/AHD/2009

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8155 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 11-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KARTAR SINGH
• Keywords: Unexplained investment; Document seized; Documents seized
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) IT (SS) A NO.183 AND 184/AHD/2009 A. Y.: 2001-02 AND 2006-07 THE A. C. I. T., CENT. CIRCLE-4, BARODA, 4 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA VS SHRI HARSHADRAY M. SHAH, 1, AMRUTWADI, YAMUNA NIWAS, STATION ROAD, DAHOD, PA NO. AHNPS 3380 D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI KARTAR SINGH, SR. DR RESPONDENT BY SHRI SAKAR SHARMA, AR O R D E R PER BHAVNESH SAINI: BOTH THE DEPARTMENTAL APPEALS ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LEARNED CI T(A)-IV, AHMEDABAD DATED 30-09-2009, FOR ASSESSMENT YEARS 20 00-01 AND 2006-07. BOTH THE APPEALS ARE DECIDED AS UNDER: IT (SS) A NO.183/AHD/2009 (AY:2001-02) 2. THE REVENUE RAISED ONLY ONE EFFECTIVE GROUND OF APPEAL CHALLENGING DELETION OF ADDITION OF RS.9,42,200/- O N PEAK BASIS ON THE CASH FLOW STATEMENT. 3. THIS ISSUE RELATES TO ADDITION OF RS.9,42,200/- ON PEAK BASIS ON THE BASIS OF CASH FLOW STATEMENT SUBMITTED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. THE AO HAS DISCUSSED THIS I SSUE IN PARA 9 OF THE ASSESSMENT ORDER. ON THE BASIS OF PEAK WORKI NG OF THE IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 2 ASSESSEE SUBMITTED BEFORE THE AO THAT THE INCOME OF RS.79,00,000/- WAS DISCLOSED IN THE ASSESSMENT YEAR 2005-06, THE A O WAS OF THE VIEW THAT PEAK IS TO BE WORKED OUT ON YEARLY BASIS. THE PEAK OF THE YEAR IS SUBTRACTED FROM THE PREVIOUS YEARS PEAK AN D THE BALANCE WOULD BE THE PEAK OF THE SUBSEQUENT YEAR. ON THIS B ASIS, THE AO WORKED OUT THE PEAK FOR THE YEAR UNDER CONSIDERATIO N AT RS.9,42,200/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE FO R THE YEAR UNDER CONSIDERATION. BEFORE THE LEARNED CIT(A) IT WAS SU BMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE WAS HAVING POSITIVE CASH BALANCE OF RS.9,42,000/- OUT OF OPENI NG CASH BALANCE OF RS.10,32,200/- AS ON 01-04-1999 WHICH WAS DULY SUPP ORTED BY EVIDENCES IN SEIZED DOCUMENTS AND NOT DISPUTED BY T HE AO. THIS POSITION WAS CLARIFIED VIDE LETTER DATED 19-11-2008 IN PARA 10 BUT HAS NOT BEEN TAKEN INTO CONSIDERATION BY THE AO WHILE M AKING ASSESSMENT. OUT OF AVAILABLE OPENING FUNDS OF RS.10 ,32,200/- ONLY RS.1,40,000/-(RS.90,000/- + RS.50,000/-) HAD BEEN SPENT AND THEREFORE, THE ASSESSEE HAD POSITIVE EXPLAINED BALA NCE OF RS.9,42,200/- AS ON 01-04-2000. IT WAS SUBMITTED TH AT THIS BEING EXPLAINED CASH BALANCE COULD NOT BE ADDED AS ASSESS EES UNEXPLAINED/UNDISCLOSED INCOME. IT WAS FURTHER SUBM ITTED THAT HAD THIS AMOUNT BEEN NEGATIVE BALANCE ON THAT DATE, CER TAINLY IT COULD BE ADDED AS ASSESSEES UNEXPLAINED INVESTMENT. IT WOUL D BE APPRECIABLE THAT UP TO 17-06-2004, THE ASSESSEE HAD A POSITIVE AND EXPLAINED CASH BALANCE AND AS SUCH NO ADDITION UP T O THAT DATE COULD BE MADE IN ASSESSEES HAND. IN ABSENCE OF ANY UNEXP LAINED FUNDS AS ON 01-04-2000 IN ASSESSEES HANDS, IT WAS SUBMITTED THAT ADDITION HAS BEEN WRONGLY MADE AND THEREFORE BE DELETED. IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 3 4. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE AND THE CASH FLOW STATEMENT DELETED THE AD DITION. HIS FINDINGS IN PARA 8.2 ARE REPRODUCED AS UNDER: 8.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LEARNED COUNSEL AS WELL AS THE FACTS OF THE CASE. I AGREE WITH THE SUBMISSION OF THE LEARNED COUNSEL THAT THE APPELLANT WAS HAVING EXPLAINED CASH BALANCE OF RS.10,32,000/- AS ON 01.04.1999 AND POSITIVE EXPLAI NED BALANCE OF RS.9,42,200/- AS ON 01.04.2000. THE BALA NCES ARE AS PER ENTRIES RECORDED IN THE DIARY AND ON THE BASIS OF THESE ENTRIES, THE APPELLANT HAS DISCLOSED THE I NCOME OF RS.79 LAKHS ON PEAK BASIS. ONCE, ADDITION ON THE BASIS OF PEAK HAS BEEN MADE, NO ADDITION IS REQUIRED TO B E MADE FOR EACH YEAR, IF THE ACCOUNTED ENTRIES ARE FO R LESS THAN THE HIGHEST PEAK. HOWEVER, THE APPELLANT WAS H AVING CASH BALANCE OF RS.10,32,000/- AS ON 01.04.1999 AS PER THE SEIZED DIARY ITSELF, NO FURTHER ADDITION WAS WA RRANTED. THE ASSESSING OFFICER HAS MADE THE ADDITION WITHOUT CONSIDERING THE ABOVE AND THE SAME IS HEREBY DELETE D. 5. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FILED A COPY OF ANNEXURE I ATTACHED WITH THE ASSESSMENT ORDER BY THE AO IN SUP PORT OF THE CONTENTION TO SHOW THAT OPENING CASH BALANCE OF RS. 10,32,200/- AS ON 01-04-1999 WAS AVAILABLE WITH THE ASSESSEE TO EXPLA IN THE ABOVE ADDITION. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO N OT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE LEARNED COUNSEL FOR THE ASSESSEE FILED COPY OF ANNEXURE I TO THE ASSE SSMENT ORDER WHICH IS CASH FLOW STATEMENT PREPARED ON THE BASIS OF THE SEIZED IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 4 MATERIAL. ACCORDING TO THE SAME, THE OPENING CASH B ALANCE OF RS.10,32,200/- IS AVAILABLE AS ON 01-04-1999 WHICH HAS ALSO NOT BEEN DISPUTED BY THE AO AND FIND THE SIGNATURE OF T HE AO. THUS, THE ASSESSEE IS ABLE TO EXPLAIN THE ADDITION IN QUESTIO N. FURTHER, THE ASSESSEE HAD DISCLOSED UNDISCLOSED INCOME OF RS.79 LACS ON PEAK BASIS. ONCE, THE ASSESSEE HAS SHOWN SUBSTANTIAL HIG HER AMOUNT FOR ALL THE ASSESSMENT YEARS UNDER REFERENCE, THERE WAS NO REASON TO MAKE FURTHER ADDITION AGAINST THE ASSESSEE. THE LEA RNED CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY DELETED THE ADDITION. THE LEARNED DR MERELY REPLIED UPON THE OR DER OF THE AO AND HAS NOT POINTED ANY INFIRMITY IN THE ORDER OF T HE LEARNED CIT(A). ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. IT (SS) A NO.184/AHD/2009 (AY: 2006-07) 7. ON GROUND NO.1, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.12.50LACS ON ACCOUNT OF INVESTMENT IN KALINDI BU NGLOW. 8. THIS ISSUE RELATES TO ADDITION OF RS.12.50 LACS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WHILE F URNISHING RETURN OF INCOME THE ASSESSEE CONSIDERED THIS INVESTMENT O F RS. 12,50,000/- WHILE WORKING OUT PEAK ADDITION AND AVAILABLE CASH FUNDS AND IS DULY REFLECTED IN ANNEXURE A/1 ATTACHE D WITH THE ASSESSMENT ORDER REFLECTING TRANSACTIONS ON 19-02-2 006 FOR RS. 4,96,700/-, ON 25-02-2006 FOR RS. 25,968/- AND ON 28-02-2006 FOR RS. 7,27,332/-. MOREOVER, SPECIFIC RECONCILIATION O F SEIZED MATERIAL, BANK ACCOUNTS AND OTHER DETAILS WAS GIVEN IN THE CO URSE OF IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 5 ASSESSMENT PROCEEDINGS BY GIVING DETAILS OF APPLICA TION OF UNDISCLOSED INCOME IN THE FORM OF BALANCE SHEET/CAP ITAL ACCOUNT AND ALSO IN THE FORM OF SPECIFIC CASH FLOW STATEMENT VI DE LETTER DATED 19-11-2008 BUT NOT CONSIDERED BY THE AO AT ALL LEAD ING TO UNWARRANTED ADDITION IN THE HANDS OF THE ASSESSEE. THIS AMOUNT WAS REFLECTED IN THE CAPITAL ACCOUNT SUBMITTED IN THE C OURSE OF ASSESSMENT PROCEEDINGS GENUINENESS OF WHICH HAS NOT BEEN DISPU TED BY THE AO. COPY OF BALANCE SHEETS AS SUBMITTED ARE ENCLOSED HE REWITH FOR READY REFERENCE. WORKING OF UNDISCLOSED INCOME ON THE BAS IS OF CASH FLOW STATEMENT SUBMITTED IN THE COURSE OF ASSESSMENT PRO CEEDINGS WAS ALSO FURNISHED WHICH IS PART OF THE WRITTEN SUBMISS ION. NO DEFICIENCY WHAT SO EVER HAS BEEN POINTED PUT BY THE AO IN THE ABOVE WORKING/ STATEMENT. IN FACT THE AO ON ONE HAND HAS ADDED FUN DS INVOLVED IN FINANCING ACTIVITY EQUIVALENT TO PEAK INVESTMENT AN D INTEREST INCOME AND APPLICATION OF SUCH INCOME ON THE ANOTHER SIDE. THIS HAS RESULTED INTO TAXATION OF SAME INCOME TWICE AND THE SAME IS CONTRARY TO THE FOUR CANONS OF TAXATION LAW. IT WAS THEREFORE, SUBM ITTED THAT ADDITION HAS BEEN MADE WITHOUT APPRECIATING THE FACTUAL POSI TION AND WITHOUT FINDING ANY DEFECT IN THE BALANCE SHEETS SUBMITTED IN THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER, WHILE MAKING THIS ADDITION STATEMENT RECORDED U /S 132(4)/ 131 OF THE ASSESSEE AS WELL AS HIS SON SHRI NIMESH H SHAH HAVE BEEN TOTALLY OVERLOOKED . IN THIS REGARD, THE ASSESSEE REFERRED TO THE FOLLOWING: STATEMENT RECORDED ON 19.09.2006 OF HARSHAD MAGANL AL SHAH U/S 132(4) Q. NO. 19 WOULD YOU LIKE TO SAY ANY THING FURTHER I N THIS STATEMENT? IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 6 ANS NO. 19 YES, I WOULD LIKE TO STATE FURTHER IN TH IS STATEMENT THAT AS INFORMED TO ME AS PER SEIZED DOCUMENTS FROM MY RESIDENCE NUMBER OF TRANSACTIONS ARE NOT RECORDED I N THE BOOKS. LIKEWISE I HAVE COME TO KNOW OF SIMILAR DEFE CTS FROM MY SONS WHO ARE PRESENT AT GODHRA MILL, RESIDENCE AND DAHOD MILLS. BY SEEING ALL THIS AND ALSO ON ACCOUNT OF ST OCK DIFFERENCE IN MILL PREMISES, UNACCOUNTED INVESTMENTS BY OUR FA MILY MEMBERS AND EXPENDITURE/ INVESTMENT IN KALINDI BUNG ALOW WHICH ARE NOT RECORDED IN THE BOOKS AND ALSO ANY OT HER ASSET WHICH IS NOT INCLUDED IN THE ABOVE, I WOULD LIKE TO DISCLOSE RS. 75,00,000/- (RUPEES SEVENTY FIVE LACS). THIS DI SCLOSURE COVERS ALL FAMILY MEMBERS WHICH MAY PLEASE BE RECOR DED/ NOTED. I WILL LET YOU KNOW ASSESSMENT YEAR WISE, AS SESSEE WISE AND AMOUNT WISE WORKING OF DISCLOSURE LATER ON WHIC H MAY PLEASE BE NOTED. I HAVE DISCLOSED THIS AMOUNT OF RS. 75,00,0007- (RUPEES SEVENTY FIVE LACS) BY MY OW N WISH AND WILL AND WITHOUT ANY COERCION OR FORCE. STATEMENT RECORDED ON 05/12/2006 OF HARSHAD M SHAH U/S 131 Q.N. 5 IN YOUR STATEMENT U/S 132(4) YOU HAD MADE DISCLOSURE OF RS. 75 LACS FOR YOUR GROUP. FURNISH DETAILS OF THE SAME. ANS. 5 DURING THE COURSE OF SEARCH CASH OF APPROXIM ATELY RS. 7 LACS WAS SEIZED WHICH I DISCLOSE AS AN UNDISC LOSED INCOME OF CURRENT YEAR. WE HAVE CONSTRUCTED 'KALINDI BUNGALOW' AT STATION ROAD, DAHOD. DISCLOSURE OF RS. 10 LACS IS MADE TOWARDS UNACCOUNTED INVESTMENT IN CONSTRUCTION OF SAME AND TOWARDS HOUSEHOLD VALUABLES FOUND DURING SEARCH. THE BALANCE IS DISCLOSED TOWARDS UNACCOUNTED FINANCE ACTIVITY (UNACCOUNTED ADVANCES AND INTEREST THEREON) AS PER NOTING ON ANNEXURE A/3 AND A/20 SEIZED FROM MY RESIDENCE, DIFFERENCE IN OUR STOCK AT OUR FACTORIES AND OTHER DISCREPANCIES ON THE BASIS OF SEIZED MATERIAL S/ ASSETS AND OTHER EVIDENCES FOUND DURING SEARCH AND SURVEY. WE WILL SUBMIT CASH FLOW OF UNDISCLOSED IN COME IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 7 AFTER RECEIVING PHOTOCOPY OF SEIZED/ IMPOUNDED MATE RIAL. WE ASSURE YOU THAT WE WILL PAY TAX ON DISCLOSURE MA DE. IN VIEW OF THE ABOVE AND ALSO IN VIEW OF DECISION R EPORTED IN 219 ITR 235 (KER) AS REFERRED TO IN THE ASSESSME NT ORDER AS RELIED UPON BY THE ASSESSING OFFICER HOLDI NG THAT ASSESSING OFFICER IS ENTITLE TO RELY ON THE STATEME NT RECORDED U/S 132(4) FOR THE PURPOSE OF MAKING ASSESSMENT UNDER THE PROVISIONS OF THE ACT, IT IS SUBMITTED THAT DISCLOSURE OF RS. 10 LACS TOWARDS KA LINDI BUNGALOW WAS MADE OUT OF TOTAL DISCLOSURE OF RS. 75 LACS ONLY AS COULD BE SEEN FROM THE STATEMENT RECORDED O N 05/12/2006. APPELLANT'S TOTAL DISCLOSURE AS A CONSEQUENCE OF SEARCH WORKS OUT TO RS. 89,50,475/- AS DETAILED IN THE STATEMENT ABOVE. OUT OF THIS DISCLO SED INCOME OF RS. 89,50,475/- I HAVE SPENT RS. 12,50,00 0/- IN KALINDI BUNGLOW WHICH IS OWNED BY MY WIFE SMT. USHA H SHAH. SINCE INCOME OF RS. 89,50,425/- HAS BEEN TAXE D IN MY HANDS APPLICATION OF SAID INCOME CANNOT BE TAXED AGAIN. I, THEREFORE , REQUEST YOUR HONOR TO DELETE THE UNWARRANTED ADDITION OF RS. 12,50,000/- MADE BY THE ASSESSING OFFICER. 9. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE DELETED THE ADDITION. HIS FINDINGS IN PARA 3.2 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 3.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE LEARNED COUNSEL AS WELL AS THE FACTS OF THE CASE. A FTER CAREFULLY CONSIDERING THE SUBMISSION OF THE LEARNED COUNSEL, IT IS CLEAR THAT INVESTMENT OF ABOUT RS. 12,50,000/- IS MADE FROM THE FUNDS FOR WHICH IN COME HAS BEEN DISCLOSED ON PEAK WORKING AND APPLICATION OF THIS INCOME CANNOT BE TAXED AGAIN. THE INVESTMENT O F ABOUT RS.12,50,000/- IS CLEARLY SHOWN IN THE NAME O F KALINDI BANGLOW AND THE DATE OF INVESTMENT IS AFTER THE DATE OF HIGHEST PEAK. THE FUNDS WERE AVAILABLE FROM THE RETURNS OF LOANS AND APPLIED IN THE KALINDI BANGLOW TO THE EXTENT OF ABOUT RS. 12,50,000/-. THE APPELLANT HAS IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 8 ADMITTED THE UNDISCLOSED INVESTMENT IN KALINDI BANG LOW, WHICH THOUGH DOES NOT PERTAIN TO HIM, FOR RS. 10 LA KH ALONGWITH 7 LAKH FOR CASH OUT OF THE TOTAL DISCLOSU RE OF RS. 75 LAKHS. THE DISCLOSURE FOR FINANCING TRANSACTION THUS REMAINED FOR RS. 58 LAKHS (RS. 75 LAKH - RS. 10 L AKH -RS. 7 LAKH) AS AGAINST IT, THE APPELLANT HAS DISCLOSED THE INCOME FROM FINANCING TRANSACTION AT RS. 79 LAKHS A ND FURTHER INTEREST INCOME FROM FINANCING HAS BEEN DIS CLOSED FOR RS. 5.28 LAKHS. THUS THE INCOME DISCLOSED IN TH E RETURN OF INCOME IS FAR EXCESS TO THE DISCLOSURE. T HE FACTUAL MISTAKE OF DISCLOSURE CANNOT BE MADE A BASI S FOR MAKING ADDITION. WHEN THE ENTRIES IN THE DIARY ITSE LF SHOWING THE DETAILS OF EXPENDITURE IN THE NAME OF K ALINDI BANGLOW, NO SEPARATE ADDITION WAS REQUIRED TO BE MA DE ONLY ON ACCOUNT OF THE FACT THAT ASSESSEE HAS MADE DISCLOSURE OF RS. 10 LAKH. THIS BANGLOW IS NOT IN T HE NAME OF THE ASSESSEE, EVEN THEN HE HAS NOT DENIED ABOUT THE INVESTMENT OF RS. 12,50,000/- IN PLACE OF 10 LAKH DISCLOSED. EVEN, THE ASSESSING OFFICER NOT RESTRICT ED THE ADDITION TO THE AMOUNT OF DISCLOSURE WHICH WAS FOR RS. 10 LAKH. THE ASSESSING OFFICER HIMSELF IS NOT CONSISTE NT IN HIS FINDING AS REGARDS THE DISCLOSURE OF INCOME BY THE APPELLANT. THE APPELLANT HAS ADMITTED THE CASH OF R S. 7 LAKH AS UNDISCLOSED INCOME IN HIS STATEMENT DATED 19.09.2006 BUT THE ASSESSING OFFICER HAS MADE THE ADDITION OF THE CASH WHICH WAS IN EXCESS OF 'THE CA SH BALANCES OF THE BUSINESS CONCERNS. THERE, HE HAS NO T APPLIED THE THEORY OF DISCLOSURE AND THE DECISION R EPORTED IN 219 ITR 235 (KER). HOWEVER, IN CASE OF KALINDI BANGLOW, HE HAS MADE THE ADDITION OF RS. 12.50 LAKH S WHICH IS MORE THAN THE DISCLOSURE. IT IS WELL SETTL ED THAT THE EARNING OF INCOME AND THE APPLICATION OF INCOME BOTH CANNOT BE TAXED. THE APPELLANT HAS EARNED AND DISCLOSED INCOME OF RS. 79 LAKHS FROM FINANCING BUSINESS AN D INTEREST OF RS. 5.27 LAKH FROM ITS INTEREST. THE SA ME INCOME HAS BEEN APPLIED AS NOTED IN THE PEAK WORKIN G. THE EXPENDITURE OF RS. 12.50 LAKHS IN KALINDI BANGL OW IS ONLY AN APPLICATION OF INCOME AND CANNOT BE SEPARAT ELY TAXED. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE OPINION THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TAX ING THE IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 9 APPLICATION OF INCOME BY MAKING ADDITION OF RS. 12. 50 LAKHS INVESTED IN KALINDI BANGLOW AND THE SAME IS HEREBY DELETED. THE THIRD GROUND OF APPEAL IS ACCOR DINGLY ALLOWED. 10. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND A LSO REFERRED TO ANNEXURE I ATTACHED TO THE ASSESSMENT ORDER TO SHOW THAT THE ABOVE AMOUNT IS ALREADY INCLUDED IN THE CASH FLOW STATEME NT AND EXPLAINED. HE HAS ALSO REFERRED TO THE ORDER OF THE ITAT AHMED ABAD A BENCH IN THE CASE OF THE SAME ASSESSEE IN ITA NO.3141/AHD /2009 FOR ASSESSMENT YEAR 2007-08 IN WHICH THE SIMILAR CASH F LOW STATEMENT WAS CONSIDERED BY THE TRIBUNAL AND THE APPEAL OF TH E ASSESSEE WAS ALLOWED VIDE ORDER DATED 13-05-2011. COPY OF THE SA ME IS FILED IN WHICH INVESTMENT IN KALINDI BUNGALOW IS SHOWN AND D EDUCTED OUT OF CASH FLOW STATEMENT. 11. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE ASSESSEE IS ABLE TO EXPLAIN THAT THE INVESTMENT IS MADE IN THIS PROPERT Y FROM THE FUNDS FOR WHICH INCOME HAS BEEN DISCLOSED ON PEAK WORKING. TH E INVESTMENT IS SHOWN IN ANNEXURE I ATTACHED WITH THE ASSESSMENT OR DER WHICH SUPPORT THE SUBMISSION OF THE ASSESSEE. FURTHER, TH E ORDER OF THE TRIBUNAL DATED 13-05-2011 IN THE CASE OF THE ASSESS EE (SUPRA) REVEAL THAT THE SAME AMOUNT OF INVESTMENT OF RS.12.50 LACS IS ALREADY CONSIDERED IN ASSESSMENT YEAR 2007-08 AND THE APPEA L OF THE ASSESSEE HAS BEEN ALLOWED. SINCE, THE LEARNED CIT(A ) VERIFIED THE CASH FLOW STATEMENT AND THE SAME HAS ALSO BEEN TAKE N INTO IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 10 CONSIDERATION BY THE TRIBUNAL IN OTHER YEAR REFERRE D TO ABOVE, WOULD CLEARLY REVEAL THAT THE ASSESSEE EXPLAINED THE INVE STMENT IN THE ABOVE PROPERTY THROUGH FUNDS AVAILABLE TO THE ASSES SEE. THE LEARNED DR HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER O F THE LEARNED CIT(A). THEREFORE, WE DO NOT FIND ANY MERIT IN THI S GROUND OF APPEAL OF THE REVENUE. SAME IS ACCORDINGLY DISMISSED. 12. ON GROUND NO.2, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS. 4 LACS ON ACCOUNT OF ADVANCE TO M/S . SARJAN CONSTRUCTION. 13. THIS GROUND RELATES TO ADDITION OF RS.4 LACS IN RESPECT OF ALLEGED ADVANCE TO SARJAN CONSTRUCTION. THE AO HAS DISCUSSE D THIS ISSUE IN PARA-6 OF THE ASSESSMENT ORDER. ON VERIFICATION OF BLANK CHEQUE OF RS. 4,00,000/- ISSUED BY M/S SARJAN CONSTRUCTION AN D THE SLIP OF INTEREST @ 1.25 SEIZED AT PAGE-5 OF A/20, THE AO HA S RECORDED THE FINDING THAT THE TRANSACTION WAS OF MONEY LENDING B USINESS AND NOT RELATING TO BOOKING OF PLOT AS CLAIMED BY THE ASSES SEE. HE ACCORDINGLY MADE THE ADDITION OF RS. 4,00,000/- AS UNDISCLOSED LOAN. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ALL THREE TRANSACTIONS OF RS. 4,00,000/- EACH HAVE BEEN TAKEN INTO CONSIDERATION FOR THE PURPOSE OF COMPUTING TOTAL IN COME AFTER DUE APPRECIATION OF SEIZED DOCUMENTS. THESE TRANSACTION S WERE DULY INCORPORATED WHILE PREPARING CASH FLOW STATEMENT PR EPARED AND SUBMITTED FOR THE PURPOSE OF ARRIVING AND VERIFYING PEAK INVESTMENT IN FINANCING ACTIVITIES WHICH IS ATTACHED WITH ASSESSM ENT ORDER AS ANNEXURE A/1. DETAILED NAME WISE WORKING WAS ALSO F URNISHED IN THE COURSE OF ASSESSMENT PROCEEDINGS TO VERIFY OUTSTAND ING ADVANCES AT IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 11 THE END OF THE YEAR AS STATED IN THE BALANCE SHEET. IT WOULD BE APPRECIATED THAT TRANSACTIONS WITH SARJAN CONSTRUCT ION ARE REFLECTED ON 29-07-2005 FOR RS. 4,00,000/- AND ON 01-08-2005 FOR RS. 8,00,OOO/- (RUPEES FOUR LACS EACH) IN ANNEXURE A/1 ATTACHED WITH THE ASSESSMENT ORDER. THESE DETAILS ARE ALSO R EFLECTED IN SEIZED DOCUMENT AT SERIAL NUMBER 63 TO 65 AND ARE REFLECTE D ON 29-07-2005; 01-08-2005 AND 01-06-2006. NAME WISE WO RKING OF SEIZED DOCUMENTS AS SUBMITTED IN THE COURSE OF ASSE SSMENT PROCEEDINGS IS ENCLOSED FOR READY REFERENCE. SINCE ADDITION HAS ALREADY BEEN CONSIDERED ON PEAK INVESTMENT BASIS IN ASSESSMENT YEAR 2005-06, NO SEPARATE ADDITION IS REQUIRED ON A PPLICATION OF PEAK INVESTMENT AS EXPLAINED WHILE DEALING WITH ADDITION ON ACCOUNT OF INVESTMENT IN KALINDI BUNGALOW. IT WAS, THEREFORE, SUBMITTED THAT THE ADDITION MADE OF RS. 4,00,000/- AMOUNTS TO DOUBLE T AXATION IN THE HANDS OF THE ASSESSEE AND NEED TO BE DELETED. FROM THE PARTY WISE STATEMENT, IT WOULD BE FOUND THAT FIRST TRANSACTIO N OF RS. 4,00,000/- DATED 29-07-2005 WAS SQUARED UP ON 0 1-05-2006 AND REMAINING TWO TRANSACTIONS AMOUNTING TO RS. 4,00,00 0/- EACH (ONE IN THE NAME OF THE ASSESSEE AND ANOTHER IN THE NAME OF HIS SON SHRI NIMESH H SHAH) REMAINED OUTSTANDING AS ON 31-03-200 6 AND THEREFORE FORM PART OF OUTSTANDING ADVANCES AND IT WOULD BE APPRECIATED THAT OUTSTANDING ADVANCES AS ON 31-03- 2006 AS PER SEIZED DOCUMENT WORKS OUT TO RS. 29,50,000/-. AGAINST THIS THE ASSESSEE DISCLOSED OUTSTANDING ADVANCES IN HIS BALA NCE SHEET AT RS. 25,50,000/- AND BALANCE OF RS. 4,00,000/- PERTA INING TO SHRI NIMESH H SHAH WAS DEBITED IN THE CAPITAL ACCOUNT AS CHEQUE AGAINST THIS AMOUNT WAS RECEIVED BY SHRI NIMESH H SHAH IN S UBSEQUENT IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 12 YEAR. CLAIM OF ASSESSEE AS TO WHETHER THIS AMOUNT W AS GIVEN AS BOOKING ADVANCE FOR PROPERTY WAS INVESTIGATED BY TH E AO BY ISSUING SUMMONS TO SARJAN CONSTRUCTION AND TRANSACTION WAS NOT ONLY CONFIRMED BUT WAS FOUND RECORDED IN THEIR BOOKS. IN VIEW OF THIS FACTUAL POSITION IT WAS PRAYED TO DELETE UNWARRANTE D ADDITION OF RS. 4,00,OOO/- MADE BY THE AO. 14. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD DELETED THE ADDITION. HIS FINDINGS IN PARA 4.2 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LEARNED COUNSEL AS WELL AS THE FACTS OF THE CASE. I HAVE ALSO MINUTELY EXAMINED THE COPY OF CHEQUE AND THE C HIT FOUND ENCLOSED WITH IT WHICH ARE SCANNED AT PAGE-4 OF THE ASSESSMENT ORDER. THE BLANK CHEQUE, ISSUED BY STATE BANK OF SAURASTRA, DAHOD, FOR RS. 4,00,000/- IS ISS UED BY M/S SARJAN CONSTRUCTION AND SIGNED BY ITS PARTNER. IT IS THE NORMAL PRACTICE IN UNACCOUNTED FINANCING BUSINESS T O TAKE BLANK CHEQUE FOR SECURITY OF ADVANCE MADE TO BE UTI LIZED IN CASE OF DEFAULT. THE HAND WRITTEN CHIT FOUND ALO NWITH IT AT PAGE-5 OF ANN. A/20 DEMONSTRATE THE AMOUNT OF ADVANCE, RATE OF INTEREST, CHEQUE NUMBER, THE NAME OF BANK, THE DATE OF ADVANCE AND THE DATE ON WHICH THE ADVANCE WILL BE RETURNABLE. THE CHEQUE NUMBER 38389 AND SBS NOTED ON THE CHIT ARE THE NUMBER AND BANK O F BLANK CHEQUE. THE AMOUNT IS RS. 4,00,000/-. RATE OF INTEREST IS 1.25%. DATE OF ADVANCE IS 29.07.2005 AN D DATE OF RETURN OF ADVANCE IS PROBABLY 01.10.2005. IT IS NORMAL PRACTICE IN FINANCING TO ADVANCE NORMALLY FOR THREE MONTHS AND THE DATE IS THEN EXTENDED AS PER NEEDS. IT IS T HUS EVIDENT FROM THE SEIZED DOCUMENTS AND DETAILS THERE ON THAT THEY ARE RELATING TO THE UNACCOUNTED ADVANCE O F RS. 4,00,OOO/- GIVEN TO M/S SARJAN CONSTRUCTION ON IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 13 29.07.05 AT THE INTEREST RATE OF 1.25. FROM THE PEA K WORKING, IT IS EVIDENT THAT THE ADVANCE TO M/S SARJ AN CONSTRUCTION WAS GIVEN AFTER THE HIGHEST PEAK OF RS. 77,56,619/- ON 11.02.2005 AGAINST WHICH THE APPELLANT HAS DISCLOSED INCOME OF RS. 79 LAKH AND T HE SAME INCOME HAS BEEN TAXED IN A.Y. 2005-06. THUS, A NY ADVANCERNENT OUT PF THIS PEAK CANNOT BE TAXED AGAIN . THE ASSESSING OFFICER NO WHERE ESTABLISHED THAT THIS AD VANCE OF RS. 4.00.000/- TO M/S SARJAN CONSTRUCTION IS NOT THE PART OF PEAK WORKING AND THUS WAS NOT CORRECT TO TA X THIS AMOUNT ON APPLICATION BASIS. SINCE ADDITION HAS ALR EADY BEEN CONSIDERED ON PEAK INVESTMENT BASIS IN A.Y. 20 05- 06, NO SEPARATE ADDITION IS REQUIRED ON APPLICATION OF PEAK INVESTMENT. THE ADDITION WAS WRONGLY MADE AND THE SAME IS HEREBY DELETED. 15. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND A LSO REFERRED TO THE ORDER OF THE TRIBUNAL DATED 13-05-2011 (SUPRA) TO SHOW THAT THE CASH FLOW STATEMENT EXPLAINED THE ADDITION OF RS.4 LACS ON THIS ISSUE. 16. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE LEARNED DR MERELY RELIED UPON THE ORDER OF THE AO AND HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). THE ASSESSEE FI LED COPY OF THE ORDER OF THE TRIBUNAL DATED 13-05-2011 IN WHICH THE ADVANCE TO SARJAN CONSTRUCTION IS ALREADY TAKEN CARE OF IN THE CASH FLOW STATEMENT WHICH IS RELIED UPON BY THE TRIBUNAL AND THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 HAS BEEN ALLOW ED, THEREFORE, THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT SU CH ADDITION WHICH IS ALREADY DISCLOSED IN THE PEAK ADDITION CANNOT BE TA XED AGAIN. THIS GROUND HAS NO MERIT. THE SAME IS ACCORDINGLY DISMIS SED. IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 14 17. ON GROUND NO.3, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.15 LACS ON ACCOUNT OF ADVANCE TO SHR I UDAISINGH MALAWAYA. 18. THIS ISSUE RELATES TO ADDITION OF RS.15 LACS IN RESPECT OF ALLEGED ADVANCE TO SHRI UDAY SINGH MALAWAYA IN SPITE OF ACC EPTING HIS AFFIDAVIT IN WHICH HE DENIED TO HAVE ENCASHED THE CHEQUE OF RS. 15,00,000/- GIVEN TO HIM. THE AO HAS DISCUSSED THIS ISSUE IN PARA-7 OF THE ASSESSMENT ORDER. THE AO MADE THE ADD ITION ON THE REASONING THAT SOURCE OF RS. 15,00,000/- GIVEN TO S HRI MALAWAYA WAS NOT PRODUCED. THE EARNED COUNSEL FOR THE ASSESSEE H AS SUBMITTED THAT THIS ADDITION HAS BEEN MADE BY THE AO VIDE PAR A 7 OF ASSESSMENT ORDER RELATION OF NOTING FOUND WITH THE NAME OF SHRI UDAYSINGH MALAWAYA. IN THE ASSESSMENT ORDER THE AO HAS CATEGORICALLY OBSERVED THAT AFFIDAVIT MADE BY SHRI MALAWAVA IS A VALID PIECE OF PAPER AND THEREFORE, NO ADVERSE INFERENCE HAS BEEN DRAWN. IN SPITE OF THIS MUCH CATEGORICAL FINDING, THE AO H AS MADE ADDITION WHICH IS SURPRISING. IT WOULD BE APPRECIATED THAT W HEN AO NOTICED IN PARA 3 OF THE AFFIDAVIT THAT HE HAD NOT DEPOSITED T HE CHEQUE GIVEN TO HIM OF RS. 15,00,000/- BEARING NUMBER 605376 OF THE DAHOD URBAN CO. OP. BANK LTD DATED 15-04-2005, A QUERY WAS RAIS ED IN THE COURSE OF ASSESSMENT PROCEEDINGS AS TO WHICH CONCERN OR FA MILY MEMBER SAID CHEQUE BELONGS. IN RESPONSE THEREON TO IT WAS CLARIFIED THAT THE SAID CHEQUE WAS ISSUED FROM THE BANK ACCOUNT BELONG ING TO SHREE YAMUNA PROTEINS IN WHICH SHRI HEMALBHAI H SHAH IS P ARTNER AND WHO WAS NEGOTIATING PURCHASE OF PROPERTY WITH SHRI MALA WAYA. UPON RECEIPT OF ASSESSEES REPLY DATED. 15-11-2008 THE A O HAD PERSONALLY IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 15 VERIFIED FROM THE BANK STATEMENTS OF SHREE YAMUNA P ROTEINS AS TO WHAT HAS BEEN STATED IS CORRECT OR NOT AND CLAIM OF THE ASSESSEE WAS FOUND CORRECT. UNDER THESE CIRCUMSTANCES, IT WAS SU BMITTED THAT THERE WAS NO ADVANCE OUT OF UNDISCLOSED INCOME TO SHRI MA LAWAYA WHICH NEED TO BE BROUGHT TO TAX. THE ASSESSEE, THEREFORE, REQUESTED TO DELETE THIS UNWARRANTED ADDITION OF RS. 15,00,000/- . 19. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE DELETED THE ADDITION. HIS FINDINGS IN PARA 5.2 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LEARNED COUNSEL AS WELL AS THE FACTS OF THE CASE. O N CONSIDERATION OF THE SUBMISSION OF THE LEARNED COUN SEL, I NOTICED THAT THIS ADDITION HAS BEEN WRONGLY MADE BY THE ASSESSING OFFICER. THE LEARNED COUNSEL HAS SUBMITTE D THAT ON QUERY FROM THE ASSESSING OFFICER, IT WAS CL ARIFIED THAT THE SAID CHEQUE WAS ISSUED FROM THE BANK ACCOU NT BELONGING TO M/S. SHREE YAMUNA PROTEINS IN WHICH SH RI HEMALBHAI H. SHAH IS PARTNER AND WHO WAS NEGOTIATIN G THE PURCHASE OF THE PROPERTY WITH SHRI MALWAYA. UPO N RECEIPT OF APPELLANTS REPLY DATED 15/11/2008, THE ASSESSING OFFICER HAD PERSONALLY VERIFIED FROM THE BANK STATEMENTS OF M/S. SHREE UAMUNA PROTEINS AS TO WHAT HAS BEEN STATED IS CORRECT OR NOT AND CLAIM OF TH4E APPELLANT WAS FOUND CORRECT. IT IS EVIDENT FROM THE RECORD THAT CHEQUE NO.605376 DATED 15/04/2005 OF DAHOD URBAN CO.OP. BANK LTD. FOR RS.15,00,000/- WAS GIVEN TO SHRI MALWAYA FROM THE ACCOUNT OF M/S. SHREE UAMUNA PROTEINS AND IT IS EVIDENT FROM THE AFFIDAVIT OF SH RI MALWAYA THAT THE CHEQUE WAS NOT ENCASHED. UNDER SUC H CIRCUMSTANCES, THE ADDITION WAS NOT WARRANTED EVEN IF THE SOURCE OF ISSUE OF CHEQUE WAS NOT GIVEN. WHEN THE CHEQUE WAS NOT ENCASHED AND THE AFFIDAVIT OF SHRI MALWAYA WAS ACCEPTED, WHAT WAS THE NEED FOR THE IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 16 SOURCE. EVEN OTHERWISE, THE APPELLANT HAS BROUGHT O N RECORD THE SUFFICIENT MATERIAL TO JUSTIFY THAT THE TRANSACTION DID NOT MATERIALIZE AND THE CHEQUE GIVEN WAS NOT ENCASHED. THE ADDITION WAS THUS WRONGLY MADE AND TH E SAME IS HEREBY DELETED. 20. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. THE LEARNED DR HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER OF THE L EARNED CIT(A) IN DELETING THE ADDITION. THE LEARNED CIT(A) SPECIFICA LLY NOTED IN THE APPELLATE ORDER THAT THE AO HAD PERSONALLY VERIFIED FROM THE BANK STATEMENT OF M/S. SHREE YAMUNA PROTEINS AS TO WHAT HAS BEEN STATED IS CORRECT OR NOT AND THE CLAIM OF THE ASSESSEE WAS FOUND CORRECT. ACCORDING TO THE AFFIDAVIT OF SHRI MALAWAYA THE CHE QUE WAS NOT ENCASHED AND EVEN THIS FACT WAS NOT DISPUTED AND TH E AO HAS NOTED IN THE ASSESSMENT ORDER THAT NO ADVERSE INFERENCE H AS BEEN DRAWN. ON THE FACE OF THESE FACTS, THE LEARNED CIT(A) RIGH TLY DELETED THE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE HAS NO MERIT AND IS DISMISSED. 21. NO OTHER ISSUE IS ARGUED OR PRESSED. 22. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. IT (SS) A NOS. 183 AND 184/AHD/2009 ACIT, CENTRAL CIRCLE-1, BARODA VS SHRI HARSHADRAY M . SHAH 17 23. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05-08-2011 SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 05-08-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD