Shri Sudhir Maheshwari, Indore V. The DCIT 2(1), Indore

ITSSA 2/IND/2012

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8471 (ITAT-INDORE)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 1999-2000
• Appeal Filed On: 06-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: KESHAV SAXENA
• Keywords: Unexplained cash credit; Unexplained expenditure; Gift; Business income; Income from undisclosed sources; Loose papers; Share purchase agreement; Validity of assessment
• Section: 143(3); 153A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AHXPM3325Q I.T.A.NO. 373 /IND/201 1 . A.Y. : 2005 - 06 ACIT, SHRI SUDHIR MAHESHWARI, 2(1), VS INDORE INDORE APPELLA NT RESPONDENT I.T.A.NO. 08 /IND/201 2 . A.Y. : 2005 - 06 SHRI SUDHIR MAHESHWARI, DCIT, INDORE VS 2(1), INDORE APPELLANT RESPONDENT I.T(SS).A.NO. 02/IND/2012. A.Y. : 1999 - 2000 SHRI SUDHIR MAHESHWARI, ACIT, INDORE VS 2(1), INDORE APPELLANT RESPONDENT -: 2: - 2 PAN NO. : ABTPM7994H I .T. (SS) A.NO. 0 4 /IND/2012. A.Y. : 1999 - 2000 SHRI PRAKASHCHAND, MASHEWARI, DCIT, 2(1), INDORE VS INDORE APPELLANT RESPONDENT PAN NO. : ABTPM7996F I.T.(SS)A.NO. 10/IND/2012. A.Y. : 1999 - 2000 SHRI GOPALSHARAN MAHESHWARI, DCIT, 2(1), INDORE VS INDORE APPELLANT RESPONDENT PAN NO. : ABTPM7997E I.T.(SS)A.NO. 06 & 11/IND/2012. A.Y. : 1999 - 2000 & 2005 - 06 SMT.TARADEVI MAHESHWARI, DCIT, 2(1), INDORE VS INDORE APPELLANT RESPONDENT -: 3: - 3 PAN NO. : ABTPM7989E I.T.(SS)A.NO. 11 & 12/IND/2012 AND I.T.A.NO. 12/IND/2012. A.Y. : 1999 - 2000, 2004 - 05 & 2005 - 06 SMT. SNEHALATA MAHESHWARI, DCIT, 2(1), INDORE VS INDORE APPELLANT RESP ONDENT PAN NO. : ABUPM7953K I.T.(SS)A.NO. 09/IND/2012 AND I.T.A.NO. 16/IND/201 2. A.Y. : 1999 - 2000 & 2005 - 06 SHRI DEEPAK MAHESHWARI, DCIT, 2(1), INDORE VS INDORE APPELLANT RESPONDENT PAN NO. : ABTPM7987L I.T.(SS)A.NO. 07/IND/2012 AND I.T.A.NO. 14/IND/201 2. A.Y. : 1999-2000 & 2005-06 SHRI RAJAT MAHESHWARI, DCIT, 2(1), INDORE VS INDORE APPELLANT RESPONDENT -: 4: - 4 PAN NO. : ABOPM6574A I.T.(SS)A.NO. 08/IND/2012. A.Y. : 1999 - 2000 SHRI RADHESHYAM MAHESHWARI, DCIT, 2(1), INDORE VS INDORE APPELLANT RESPONDENT PAN NO. : ABTPM7988F I.T.(SS)A.NO. 03/IND/2012 AND I.T.A.NO. 15/IND/201 2. A.Y. : 2004 - 05 & 2005 - 06 SHRI SAURABH MAHESHWARI, DCIT, 2(1), INDORE VS INDORE APPELLANT RESPONDENT PAN NO. : AHWPM4934E I.T.(SS)A.NO. 05/IND/2012. A.Y. : 1999 - 2000 SHRI KALYAN MAHESHWARI, DCIT, 2(1), INDORE VS INDORE APPELLANT RESPONDENT -: 5: - 5 PAN NO. : ABTPM7995G I.T.A.NO. 13/IND/2012. A.Y. : 2005 - 06 S MT. RADHADEVI MAHESHWARI, DCIT, 2(1), INDO RE VS INDORE APPELLANT RESPONDENT APPELLANT BY : SHRI KESHAV SAXENA, CIT DR RESPONDENT BY : SHRI ANIL KAMAL GARG, C. A. DATE OF HEARING : 1 6 .07.2012 DATE OF PRONOUNCEMENT : 06 . 0 8 .201 2 : : -: 6: - 6 : O R D E R PER R. C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE ASSESSEE AND REV ENUE AGAINST DIFFERENT ORDERS OF CIT(A) FOR THE ASSESSME NT YEARS 1999 TO 2005-06 IN THE MATTER OF ORDER PASSED U/S 1 53A READ WITH SECTION 143(3) OF THE INCOME-TAX ACT, 1961. AS COMMON GROUNDS ARE INVOLVED, ALL THE APPEALS WERE HEARD TO GETHER AND ARE NOW DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THERE WAS SEARCH ON 18.8.2004 AT RAJAT GRO UP OF ASSESSEE. THIS GROUP IS MAINLY ENGAGED IN BUSINESS OF JEWELLERY. DURING THE COURSE OF SEARCH, VARIOUS BOO KS OF ACCOUNT AND DOCUMENTS WERE FOUND BESIDES CASH AMOUN T OF RS. 42 LAKHS WHICH WAS SEIZED FROM VARIOUS PREMISES . THE SEARCH WAS FINALLY CONCLUDED ON 31.8.2004. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO IDENTIFIED TWO MAJOR ISSUES. THE AO OBSERVED THAT DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF THE -: 7: - 7 APPELLANT SOME INCRIMINATING PAPERS WERE FOUND AND SEIZED BY THE DEPARTMENT AS BS-13 INTER-ALIA CONTAINING TWO GIFT DEEDS OF RS.1 LAKH EACH EXECUTED BY SHRI RAJENDRA KUMAR ANDEL AND SMT. ASHA ANDEL IN FAVOUR OF THE ASSESSEE. THE AO FURTHE R OBSERVED THAT DURING THE COURSE OF POST SEARCH ENQUIRY ONE OF THE DONORS HAD GIVEN HIS STATEMENT THAT THE AMOUNT OF GIFT WAS DEPOSITED IN CASH BY TH E DONEE FAMILY MEMBERS IN HIS ACCOUNT AND HIS SIGNATURE WAS OBTAINED ON THE BLANK CHEQUE AND IN CONSIDERATION HE WAS PAID A SUM OF RS. 1500/- . THE AO ALSO OBSERVED THAT STATEMENT OF SHRI KALYAN MAHESHWARI, BROTHER OF THE ASSESSEE WAS ALSO RECORDED ON THE ISSUE AND SHRI KALYAN MAHESHWARI HAD STATED THAT THESE GIFTS WERE MANAGED BY THEIR ONE OF THE EMPLOYEES. THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS REQUIRED THE ASSESSEE TO ESTABLISH THE CAPACITY OF THE DONORS AND AS ALSO GENUINENESS OF THE GIFTS. HOWEVER, THE APPELLANT DI D NOT ESTABLISH THE GENUINENESS OF THE GIFTS OR THE -: 8: - 8 CAPACITY OF THE DONORS TO MAKE THE GIFTS. IN SUCH BACKGROUND, THE AO MADE THE ADDITION OF THE GIFT AMOUNT IN THE ASSESSEES INCOME ON ACCOUNT OF UNEXPLAINED CASH CREDIT. ADDITION WAS ALSO MADE IN RESPECT OF SHORT TERM CAPITAL GAINS SHOWN BY ASSESSEE IN RESPECT OF SHARE TRANSACTION WITH AGRAS EN CORPORATION LIMITED, WHICH WAS FOUND TO BE BOGUS. THE AO FURTHER OBSERVED THAT DURING THE COURSE OF SEARCH, CASH AMOUNTING TO RS.30,55,420/- WAS FOUND FROM THE RESIDENTIAL PREMISES OF THE APPELLANT AND OUT OF WHICH CASH AMOUNTING TO RS. 30,OO,000/- WAS FOUND FROM THE BEDROOM OF THE ASSESSEE, SHRI SUDHIR MAHESHWARI.. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF CASH FOUND. THE ASSESSEE REPLIED THAT OUT OF THE CASH OF RS. 30,00,000/- , CASH AMOUNTING TO RS. 25,250/- WAS ONLY BELONGING TO HIM AND THE REMAINING CASH FOUND I.E. OF RS. 29,74,7850/- WAS BELONGING TO HIS COMPANY NAMELY M/S. RAJAT GEMS & JEWELLERIES PVT. LTD. OF WHOM THE -: 9: - 9 ASSESSEE WAS ONE OF THE WHOLE TIME DIRECTORS. HOWEVER, THE AO DID NOT ACCEPT THIS CONTENTION OF T HE ASSESSEE AND MADE THE ADDITION OF RS. 30,00,000/- IN THE ASSESSEES INCOME AS UNEXPLAINED CASH BY INVOKING PROVISIONS OF SECTION 69A OF THE ACT. 3. BY THE IMPUGNED ORDER, THE LD. CIT(A) UPHELD THE ASSESSMENT FRAMED U/S 153A AND ALSO CONFIRMED ADDIT ION MADE ON ACCOUNT OF SHARE TRANSACTION WITH M/S. AGRA SEN CORPORATION LIMITED. THE CIT(A) ALSO CONFIRMED THE ADDITION MADE ON ACCOUNT OF VARIOUS GIFTS WHICH WERE FOUND T O BE BOGUS. HOWEVER, ADDITION MADE ON ACCOUNT OF CASH FO UND WAS DELETED BY THE LD.CIT(A). 4. THE ADDITION MADE ON ACCOUNT OF CASH FOUND WAS DELETED BY THE LD.CIT(A) AFTER HAVING THE FOLLOWING OBSERVATIONS :- 4.0 THE FACTS AND CIRCUMSTANCES OF THE CASE, FINDINGS OF THE AO, WRITTEN SUBMISSIONS OF THE APPELLANT ALONG WITH THE VARIOUS DOCUMENTS FILED BY THE APPELLANT IN SUPPORT OF HIS CONTENTION ARE CAREFULLY TAKEN INTO -: 10: - 10 CONSIDERATION. 4.1 THE GROUND NO. 1 IS GENERAL IN NATURE, HENCE NO SEPARATE ADJUDICATION IS CONSIDERED NECESSARY. 4.2 THE GROUND NO. 2 IS DIRECTED AGAINST THE AO'S ACTION IN MAKING AN ADDITION OF RS. 30,00,000/- IN THE APPELLANT'S INCOME U/ S. 69A OF THE ACT BY ALLEGING ENTERING CASH OF RS.30,00,000/- FOUND DURING THE COURSE OF SEARCH FROM HIS POSSESSION. ON EXAMINATION OF THE ENTIRE FACTS AND CIRCUMSTANCE AND THE CONTENTION OF THE APPELLANT THE FOLLOWING FACTS CLEARLY EMERGES : I) THE APPELLANT IS ONE OF THE KEY DIRECTORS OF A COMPANY NAMELY M/S. RAJAT GEMS & JEWELLERIES PVT. LTD. [IN SHORT RGJPL]. SIMULTANEOUS SEARCH OPERATIONS U/S 132(1) WERE ALSO CARRIED OUT AT THE -: 11: - 11 BUSINESS PREMISES OF RGJPL ON 18-08- 2004. II) DURING THE COURSE OF SEARCH OPERATIONS CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE APPELLANT, CASH AMOUNTING TO RS.30,55,430/- WAS FOUND AND OUT OF WHICH, CASH AMOUNTING TO RS. 30,00,OOO/- WAS FOUND FROM THE BEDROOM OF THE APPELLANT. AT THE INITIAL STAGE OF THE SEARCH, THE APPELLANT HAD OWNED THE ENTIRE 'CASH AS BELONGING TO HIM. HOWEVER, DURING THE CONTINUATION OF SEARCH ITSELF, THE APPELLANT HAD RETRACTED HIS STATEMENT ON 26-08-2004 BY FILING AN AFFIDAVIT DULY SWORN BEFORE A NOTARY PUBLIC. IN SUCH AFFIDAVIT, THE APPELLANT HAD, INTER-ALIA, STATED THAT OUT. OF CASH OF RS.30,00,000/- FOUND FROM HIS BEDROOM, CASH TO THE EXTENT OF -: 12: - 12 RS.25,250/- ONLY WAS BELONGING TO HIM THE REMAINING CASH OF RS. .29,74,750/- WAS BELONGING TO M/S. RAJAT GEMS & JEWELLERIES PVT. LTD., IN WHICH HE WAS ONE OF THE DIRECTORS. III) THE COMPANY RGJPL HAD ALSO FILED A LETTER BEFORE THE ADIT ON THE VERY SAME DAY I.E, ON 26-08-2004 AND THROUGH SUCH LETTER, THE RGJPL HAD, INTER-ALIA, OWNED-UP CASH AMOUNTING TO RS. 35,69,435/- I.E. CASH OF RS.29,74,750/- FOUND FROM THE POSSESSION OF THE APPELLANT AND RS. 5,94,685/- FROM THE CITY CENTRE SHOWROOM OF THE COMPANY. THE COMPANY HAD STATED THAT THE ENTIRE EXCESS CASH FOUND WAS RESULT OF UNACCOUNTED SALES MADE BY THE COMPANY. THE COMPANY HAD EXPLAINED -: 13: - 13 THAT THE ENTIRE UNACCOUNTED SALES PROCEEDS WERE IN THE POSSESSION AND CONTROL OF THE APPELLANT IN THE CAPACITY OF A DIRECTOR OF THE COMPANY. THE COMPANY THROUGH SUCH LETTER HAD ALSO DECLARED AN UNDISCLOSED INCOME OF RS.15,02,500/- RESULTING FROM UNACCOUNTED BUSINESS ACTIVITIES. IV) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN THE CASE OF THE RGJPL, FOR A.Y. 2005-06, A SPECIFIC QUERY WAS RAISED BY THE AO IN HIS QUESTIONNAIRE DATED 04-10-2006, REQUIRING THE RGJPL TO EXPLAIN THE SOURCE OF EXCESS CASH FOUND DURING THE COURSE OF SEARCH. V) THE COMPANY RGJPL, VIDE ITS COUNSEL'S LETTER DATED 20-12-2006, ACKNOWLEDGED BY THE OFFICE OF THE AO ON 26-12-2006, WHILE EXPLAINING THE -: 14: - 14 VARIATION IN THE CASH HAD VERY CATEGORICALLY STATED THAT OUT OF THE CASH AMOUNTING TO RS. 30,00,000/- FOUND FROM THE POSSESSION OF THE APPELLANT, THE CASH AMOUNTING TO RS. 25,250/- ONLY WAS BELONGING TO THE APPELLANT AND REMAINING CASH BALANCE WAS BELONGING TO THE COMPANY ONLY. THE COMPANY MADE A DETAILED EXPLANATION REGARDING THE SURPLUS CASH OF RS. 36,39,002/- FOUND FROM THE BUSINESS PREMISES AS WELL AS RESIDENTIAL PREMISES OF THE DIRECTORS. VI) THE ASSESSMENT PROCEEDINGS IN THE CASE OF RGJPL FOR A.Y. 2005-06 WAS COMPLETED BY THE AO ON 27-12-2006 BY PASSING AN ORDER U/S. 144/153A AND AT PAGE NO. 9 OF THE ASSESSMENT ORDER, THE COMPANY'S EXPLANATION ON THE ISSUE OF THE CASH HAS BEEN -: 15: - 15 REPRODUCED. THE AO MADE RELIANCE ON THE ADMISSION OF THE COMPANY RGJPL THAT IT HAD EFFECTED UNACCOUNTED SALES AND BASED ON SUCH ADMISSION AND SURROUNDING FACTORS, HE ESTIMATED THE TOTAL SALE OF THE RGJPL AT RS.13 CRORE AS AGAINST THE SAME SHOWN BY THE COMPANY AT RS.667.28 LAKHS. IN THE FIRST APPEAL, THE ESTIMATION OF TOTAL SALES WAS REDUCED TO RS.7.35 CRORE BY THE CIT(A)-I, INDORE. VII) THE HON'BLE ITAT VIDE ITS COMMON ORDER DATED 07-11-2008 IN APPEAL NO. IT(SS)(A). 176 TO 178 & 195 TO 197/IND/2007 AND IT(SS)(A) 180, 181 & 199, 200/IND/2007 PERTAINING TO THE ASSESSMENT YEARS 2000-01 TO 2002-03 AND 2004-05 TO 2005-06 IN THE CASE OF THE RGJPL HAS ALSO CONFIRMED THE ESTIMATION OF THE SALES -: 16: - 16 MADE BY THE CIT(A)-I, INDORE. VIII) DURING THE COURSE OF SEARCH OPERATIONS, PHYSICAL STOCK OF RGJPL VALUED AT RS.73,38,561/- WAS FOUND SHORT IN COMPARISON TO THE STOCK SHOWN BY THE REGULAR BOOKS OF ACCOUNT. THIS FINDING IS EVIDENT FROM THE ABSTRACT OF THE QUESTIONNAIRE ISSUED BY THE AO OF RGJPL AS PRODUCED AT PAGE NO.8 OF THE ASSESSMENT ORDER FOR A.Y. 2005-06 IN THE CASE OF RGJPL. IX) THE AO IN THE CASE OF RGJPL HAS ACCEPTED THE EXPLANATION OF THE COMPANY ON THE ISSUE OF CASH FOUND DURING THE COURSE OF SEARCH. 4.2.1 FROM THE FACTS NARRATED ABOVE, IT IS EVIDENT THAT THE COMPANY RGJPL HAD OWNED CASH AMOUNTING TO RS. 29,74,750/-, OUT OF THE CASH OF -: 17: - 17 RS.30,00,000/- FOUND FROM THE POSSESSION OF THE APPELLANT. THE COMPANY HAD, BEFORE THE CONCLUSION OF THE SEARCH ITSELF, CONFIRMED SUCH FACT BEFORE THE SEARCH PARTY BY THEIR LETTER DATED 26-08-2004. THE APPELLANT HAD ALSO GIVEN AN AFFIDAVIT TO THIS EFFECT BEFORE THE SEARCH PARTY. BOTH THE APPELLANT AND THE COMPANY HAD EXPLAINED THE SOURCES OF CASH FOUND BEING OUT OF UNRECORDED SALES. THE COMPANY WAS FOUND TO HAVE INDULGED INTO UNRECORDED SALES BY THE AO AND THUS WAS ALSO CONFIRMED BY THE APPELLATE AUTHORITIES. THE PHYSICAL STOCK IN THE BUSINESS PREMISES OF THE RGJPL WAS ALSO SHORT FOUND BY RS.73,38,561/-. THERE IS NO FINDING FROM THE END OF AO. THAT ' THE CASH GENERATED OUT OF UNRECORDED SALES WAS -: 18: - 18 UTILIZED BY THE COMPANY FOR SOME OTHER PURPOSES. THE AO HAS DULY CONSIDERED THE ISSUE OF EXCESS CASH WHILE FRAMING THE ASSESSMENT IN THE CASE OF RGJPL. THE AO CONSIDERING THE EXPLANATION ON THE SOURCE OF EXCESS CASH DID NOT DRAW ANY ADVERSE INFERENCE WHILE FRAMING THE ASSESSMENT IN THE CASE OF THE COMPANY RGJPL. 1. 4 .2.2 IN SUCH CIRCUMSTANCES, WHEN CERTAIN CASH FOUND FROM POSSESSION OF APPELLANT IS OWNED BY OTHER CONNECTED ENTITY AND THE ASSESSMENT OF THE OTHER ENTITY OWNING SUCH CASH IS FRAMED BY THE SAME AO AFTER GIVING DUE CONSIDERATION ON THE ISSUE OF EXCESS CASH THERE CAN BE ABSOLUTELY NO BASIS FOR SUSTAINING CASH SO FOUND AS THE UNDISCLOSED INCOME OF THE PERSON FROM -: 19: - 19 WHOSE POSSESSION SUCH CASH WAS FOUND, MORE SO WHEN THE APPELLANT IS A DIRECTOR OF THE COMPANY WHOSE CASH WAS FOUND IN HIS POSSESSION. 4.2.3 ALTHOUGH, THE CASH WAS FOUND FROM THE POSSESSION OF THE APPELLANT AND THEREFORE THE PRESUMPTION CONTEMPLATED U/ S. 292C GOES AGAINST THE APPELLANT BUT AGAIN, IT IS A SETTLED LAW THAT SUCH PRESUMPTION IS ALWAYS REBUTTABLE AND IF IT IS PROVED BY THE FACTS AND CIRCUMSTANCES OF THE CASE THAT CERTAIN ASSETS FOUND IN THE POSSESSION OF ONE PERSON WAS IN FACT BELONGING' TO SOME OTHER PERSON THAN NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE FIRST PERSON. IN THIS CASE, IT HAS TO BE CONCLUDED THAT OUT OF CASH OF RS. 30,00,000/- , CASH OF RS.29,74,750/- WAS BELONGING TO -: 20: - 20 RGJPL AND THE REMAINING CASH OF RS.25,250/-ONLY WAS BELONGING TO THE APPELLANT. FURTHER, SINCE, FOR SOURCE OF REMAINING CASH OF RS.25,250/- BELONGING TO THE APPELLANT, THE APPELLANT HAD GIVEN SATISFACTORY EXPLANATION BEING OUT OF HIS REGULAR AND DECLARED SOURCES, THERE IS ABSOLUTELY NO CASE FOR UPHOLDING ANY ADDITION ON THIS COUNT. ACCORDINGLY, THE ENTIRE ADDITION OF RS. 30,00,000/- MADE BY THE AO IS HEREBY DELETED. IN THE RESULT, THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 5. ADDITION MADE ON ACCOUNT OF BOGUS GIFT WAS CONFIRME D BY THE LD.CIT(A). PRECISE OBSERVATION FOR SUCH CONF IRMATION AS GIVEN BY THE LD.CIT(A) IN CASE OF SUDHIR MAHESHWARI FOR THE ASSESSMENT YEAR 2005-06, READS AS UNDER :- 4.3 THE GROUND NO. 3 IS DIRECTED AGAINST THE -: 21: - 21 AO'S ACTION IN MAKING AN ADDITION OF RS. 2,00,000/- IN THE APPELLANT'S INCOME ON ACCOUNT OF BOGUS GIFT. THE ADMITTED FACTS ON RECORD AS NOTED BY A.O. IN ASSESSMENT ORDER, EMERGING FROM SEARCH & SEIZURE OPERATIONS CARRIED OUT IN THE GROUP CASE, ARE THAT THE APPELLANT RECEIVED TWO CHEQUES OF RS.1 LAKH EACH FROM TWO PERSONS VIZ. SMT. ASHA ANDEL AND SHRI RAJENDRA ANDEL AS PER GIFT DEED DATED 23.04.2004. IN THE STATEMENT RECORDED, SHRI RAJENDRA ANDEL, ONE OF THE DONOR, CATEGORICALLY ADMITTED THAT THE AMOUNT OF GIFT WAS DEPOSITED IN CASH BY DONEE FAMILY MEMBERS IN HIS ACCOUNT AND HIS SIGNATURE WAS OBTAINED ON THE BLANK CHEQUE AND GIFT DEED FOR A CONSIDERATION OF RS.1500/-. THE A.O. HAS ALSO NOTED THE POSITION OF RETURN OF INCOME DECLARED BY SUCH ALLEGED DONOR FOR ASSTT. YEAR 2003-04 BEING OF RS. 54,257/ - IN CASE OF SHRI RAJENDRA ANDEL AND RS,70,800/- IN CASE OF -: 22: - 22 SMT. ASHA ANDEL. FURTHER ONE OF THE KEY PERSON OF SEARCH & SEIZURE GROUP SHRI KALYAN MAHESHWARI IN HIS STATEMENT RECORDED, ADMITTED THAT THE GIFTS WERE MANAGED THROUGH ONE OF HIS EMPLOYEES SHRI SURESH GUPTA. FURTHER, SUCH DONORS APPARENTLY HAD NO RELATION WITH THE DONEES AND THUS, THERE WAS NO ELEMENT OF LOVE AND AFFECTION IN SUCH GIFTS. THOUGH THE APPELLANT HAD CONTENDED THAT HE HAS NOT RECEIVED ANY GIFT FROM ANY PERSON, BUT THIS FACT CANNOT BE DENIED THAT THE APPELLANT RECEIVED THESE AMOUNTS THROUGH CHEQUES AND THE SAME WERE DEPOSITED IN APPELLANT'S BANK ACCOUNTS AND WERE LATER ON TRANSFERRED TO THE GROUP COMPANY RGJPL. IT IS FURTHER ADMITTED IN WRITTEN SUBMISSION FILED THAT HUGE UNACCOUNTED CASH TO THE EXTENT OF RS. 41 LAKHS WAS UTILIZED BY THE SEARCH GROUP IN MANAGING BOGUS GIFTS FROM VARIOUS PERSONS IN THE NAME OF VARIOUS FAMILY MEMBERS OF THE -: 23: - 23 GROUP. 4.3.1 IN THE ABOVE SETTING OF FACTS, THERE IS ABSOLUTELY NO MERIT IN CONTENTIONS ADVANCED BY THE APPELLANT THAT PROVISIONS OF SECTIONS 68,69/69(B) CANNOT BE INVOKED. THE APPELLANT IN WRITTEN SUBMISSION FILED IN COURSE OF APPEAL PROCEEDINGS HAS NOT DENIED THE FACT THAT AGAINST THE CHEQUES RECEIVED FOR SUCH ALLEGED GIFTS THE APPELLANT ISSUED A CHEQUE OF RS. 2 LAKHS TO THE GROUP COMPANY. THE APPELLANT THUS HAS ALLOWED HIS ACCOUNT TO BE USED AS CONDUIT FOR ROUTING UNACCOUNTED FUNDS IN THE BOOKS OF THE COMPANY WHICH WERE ADMITTEDLY EARNED BY SUPPRESSING SALES AND AVOIDING DUE TAX PAYMENT TO THE STATE EX-CHEQUERS. 4.3.2 IN THESE FACTS A USEFUL REFERENCE CAN BE MADE TO THE OBSERVATIONS OF HON'BLE SUPREME COURT IN THE CASE OF BIHARILAL JAISWAL & -: 24: - 24 OTHERS VS. CIT, 217 ITR 746(SC) AS UNDER: - 'REGISTRATION CONFERS A SUBSTANTIAL BENEFIT UPON THE PARTNERSHIP FIRM AND ITS MEMBERS. THERE IS NO REASON WHY SUCH A BENEFIT SHOULD BE EXTENDED TO PERSONS WHO HAVE ENTERED INTO A PARTNERSHIP AGREEMENT PROHIBITED BY LAW. ONE ARM OF LAW CANNOT BE UTILIZED TO DEFEAT THE OTHER ARM OF LAW. DOING SO WOULD BE OPPOSED TO PUBLIC POLICY AND BRING THE LAW INTO RIDICULE. IT WOULD BE WRONG TO THINK THAT WHILE ACTING UNDER THE INCOME-TAX ACT, THE INCOME-TAX OFFICER NEED NOT LOOK TO THE LAW COVERING THE PARTNERSHIP WHICH IS SEEKING REGISTRATION.' (EMPHASIS SUPPLIED) 4.3.3 THUS WHETHER OR NOT THE APPELLANT HAS SHOWN THIS ADDITIONAL AMOUNT OF RS. 2 LAKHS -: 25: - 25 AS, GIFT AND SUBSEQUENTLY LOAN/ADVANCED TO THE GROUP COMPANY RAJAT GEMS & JEWELLERS PVT. LTD. IS OF NO CONSEQUENCE. APPARENTLY SUCH STAND WAS TAKEN AS THE MODUS OPERANDI, ADOPTED TO DEFEAT THE LAW, AS DISCUSSED ABOVE WAS EXPOSED OF SEARCH & SEIZURE CARRIED OUT BY THE DEPARTMENT. HENCE KEEPING IN VIEW THE OBSERVATION OF HON'BLE S.C. AS AFORENOTED, ACCEPTING THE EXPLANATION AND STAND OF THE APPELLANT ON THE ISSUE WOULD AMOUNT TO GRANT OF STATUTORY APPROVAL TO SUCH DUBIOUS MODUS OPERANDI ADOPTED BY VARIOUS MEMBERS OF SEARCH GROUP TO WHICH APPELLANT WAS A CONNIVING PARTY AND WOULD THUS, DEFEAT THE PROVISIONS OF LAW AND WILL BE AGAINST PUBLIC POLICY. 4.3.4 NOW COMING TO LEGAL SUBMISSION MADE, THE APPELLANT HAS TAKEN THE STAND THAT SINCE THE GIFTS OF RS. 2,00,000/- WERE NOT ACTUALLY -: 26: - 26 TAKEN BY HIM HE CANNOT BE BURDENED WITH THE RESPONSIBILITY OF ESTABLISHING SUCH GIFT TRANSACTIONS. THE CONTENTION OF THE APPELLANT IS ABSOLUTELY DEVOID OF ANY MERIT. THE APPELLANT CANNOT GET HIMSELF ABSOLVED FROM THE RESPONSIBILITY OF EXPLAINING THE ENTRIES IN HIS OWN BANK ACCOUNT. IF THE APPELLANT CLAIMS THAT THE BANK DEPOSITS WERE NOT RESULT OF GIFTS THAN IT WAS ABSOLUTELY HIS RESPONSIBILITY TO EXPLAIN THE SOURCE OF SUCH DEPOSITS. THE APPELLANT IS DIRECTOR OF COMPANY RAJAT GEMS & JEWELLERIES PVT. LTD. AND THEREFORE THE OWNING OF THE AMOUNT OF GIFT BY THE COMPANY HAS NEITHER MUCH RELEVANCE NOR ANY CREDENCE. SINCE, THE APPELLANT HAS FAILED TO EXPLAIN THE SOURCE OF DEPOSITS IN HIS BANK ACCOUNT, THE ACTION OF THE AO IN MAKING THE ADDITION OF RS. 2,00,000/- IS FOUND PERFECTLY IN ORDER. ACCORDINGLY, THE ADDITION IS MADE BY THE AO IS CONFIRMED AND THIS GROUND OF APPEAL OF THE -: 27: - 27 APPELLANT IS DISMISSED. ADDITIONS MADE IN RESPECT OF SHORT TERM CAPITAL GAINS IN RESPECT OF SHARES OF AGRASEN CORPORATION LIMITED WAS ALSO CONFIRMED BY CIT(A) AFTER GIVING DETAILED FINDINGS. 6. AGAINST THE ORDER PASSED BY THE LD.CIT(A) IN CASE O F DIFFERENT ASSESSEES BELONGING TO RAJAT GROUP, BOTH ASSESSEES AND REVENUE ARE IN APPEAL BEFORE US. 7. COMMON GROUNDS HAVE BEEN TAKEN BY BOTH ASSESSEES AND REVENUE IN DIFFERENT YEARS IN RESPECT OF THE AS SESSEE INVOLVED THEREIN. 8. FIRST GRIEVANCE OF THE ASSESSEE RELATES TO VALIDITY OF ASSESSMENT PROCEEDINGS U/S 153A. 9. DURING THE COURSE OF HEARING, THE LD. AUTHORIZED REPRESENTATIVE CLEARLY CONCEDED THAT ISSUE IS COVE RED BY THE ORDER OF SPECIAL BENCH IN THE CASE OF M/S. ALL CARG O GLOBAL LOGISTICS LIMITED VS. DCIT IN I.T.A.NOS. 5018 TO 50 22 & 5059/ M/10 DATED 06.07.2012. -: 28: - 28 10. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF I.T.A.T . SPECIAL BENCH, MUMBAI. AT PARA 52, HON'BLE BENCH HA S OBSERVED THAT ONCE SEARCH OR REQUISITION IS INITIAT ED AFTER 31.5.2003, THE ASSESSING OFFICER IS UNDER OBLIGATIO N TO ISSUE NOTICE TO THE PERSONS REQUIRING HIM TO FILE RETURN OF INCOME OF SIX YEARS IMMEDIATELY PRECEDING THE YEAR OF SEARCH. THE WORD USED IS SHALL AND, THUS, THERE IS NO OPTION BUT T O ISSUE SUCH A NOTICE. THEREAFTER HE HAS TO ASSESS OR REASSESS T OTAL INCOME OF THESE SIX ASSESSMENT YEARS. 11. IN VIEW OF THE DECISION OF THE I.T.A.T. SPECIAL BEN CH AS QUOTED ABOVE, GROUND RAISED BY THE ASSESSEE WITH R EGARD TO VALIDITY OF ASSESSMENT PROCEEDINGS U/S 153A IS DISM ISSED IN ALL THE APPEALS UNDER CONSIDERATION. 12. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION MADE ON THE BASIS OF SAID TRANSACTION OF AGRASEN CORPORA TION LIMITED. 13. FACTS IN BRIEF ARE THAT DURING COURSE OF SEARCH, TH E ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD SHOWN SHORT TERM CAPITAL GAIN ON SALE OF SHARES IN AGRASEN CORP ORATION LIMITED. THE ASSESSEE WAS ASKED TO FURNISH DETAIL O F -: 29: - 29 TRANSACTION, NUMBER OF SHARES ALLOTTED, DATE OF ALL OTMENT, DISTINCTIVE NUMBER OF SHARES. ASSESSEE WAS ALSO ASK ED TO PRODUCE BROKER SHRI SANJAY BIYANI THROUGH WHOM TRAN SACTION OF SALE WAS ENTERED TO VERIFY THE DETAIL OF SHARES PURCHASED AND SOLD. THE ASSESSING OFFICER ALSO ISSUED SUMMONS U/S 131 TO THE BROKER, HOWEVER, HE DID NOT ATTEND. BEING NOT S ATISFIED WITH THE GENUINENESS OF TRANSACTION, THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT SHORT TERM CAPITAL GAINS I N RESPECT OF VARIOUS ASSESSEES INVOLVED IN THE APPEAL. 14. BY THE IMPUGNED ORDER PASSED IN THE CASE OF RADHESHYAM MAHESHWARI FOR THE ASSESSMENT YEAR 1999- 2000, THE LD. CIT(A) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- 4.2.3 I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, FINDING OF THE ASSESSIN G OFFICER, DETAILED SUBMISSION OF THE ASSESSEE AND DOCUMENTS FILED BEFORE ME. IN MY CONSIDERED VIEW, T HE TRANSACTIONS SHOWN BY THE APPELLANTS ARE ONLY EYE W ASH TRANSACTIONS FOR TAKING BENEFIT OF SET-OFF OF CARRY FORWARD CAPITAL LOSSES. JUST QUOTE AN EXAMPLE, SMT. TARADEV I -: 30: - 30 [APPEAL NO. IT-501] HAS SHOWN CAPITAL GAIN OF RS. 2,73,597 FROM SALE OF SHARES IN THE ABOVE NAMED COMPANY BUT AFTER CLAIMING SET-OFF OF BROUGHT FORWA RD CAPITAL LOSSES FOR THE EARLIER ASSESSMENT YEAR HAS SHOWN NET CAPITAL GAIN OF RS. 6352/- ONLY. SMT. TARADEVI HAS CLAIMED TO HAVE PURCHASED 4000 SHARES IN ABOVE NAME D COMPANY ON 16.01.1998 FOR A PRICE OF RS. 16.65 PER SHARE AND VERY SURPRISINGLY, WITHIN A PERIOD OF JUST 3-4 MONTHS, SHE COULD BE ABLE TO SALE SUCH SHARES FOR A PRICE O F RS. 85.10 PER SHARE THEREBY EARNING CAPITAL GAIN OF RS. 2,73,597/-. IT IS NOTED THAT THE COMPANY AGRASEN CO RPN. LTD. HAS BEEN A PENNY STOCK COMPANY IN WHICH SHARE TRANSACTION VOLUME IS VERY LOW. IT IS AGAINST ALL H UMAN PROBABILITY THAT MOST OF THE MEMBERS OF THE RAJAT G ROUP MADE INVESTMENT IN THE ABOVE NAMED COMPANY Y AND JU ST WITHIN 3-4 MONTHS THEY COULD BE ABLE TO MULTIPLY TH EIR INVESTMENT BY MORE THAN 5 TIMES. IT APPEARS TO BE A MANAGED TRANSACTION ONLY BY WHICH THESE ASSESSEES H AVE BROUGHT THEIR OWN UNACCOUNTED MONEY INTO THE SYSTEM UNDER THE GARB OF SHARES DEALING. THE APPELLANTS HA VE -: 31: - 31 FURTHER FAILED TO DISCHARGE THEIR ONUS OF PROVING A S REGARD TO THE GENUINENESS OF THE TRANSACTIONS BY PRODUCING THE SHARE BROKER DESPITE CONSTANT INSISTENCE BY THE ASS ESSING OFFICER. MERELY BECAUSE THE TRANSACTIONS HAVE BEEN TAKEN PLACE THROUGH BANKING CHANNEL WOULD NOT AUTOMATICAL LY GIVE SANCTITY TO EACH AND EVERY COLORFUL TRANSACTIO NS. IN SUCH CIRCUMSTANCES, THE ACTION OF THE ASSESSING OFF ICER IN DISREGARDING THE ENTIRE TRANSACTIONS IS HELD TO BE FULLY JUSTIFIED. THE ADDITION ON THIS ACCOUNT MADE BY THE ASSESSING OFFICER STANDS CONFIRMED. 15. IT WAS ARGUED BY LD. AUTHORIZED REPRESENTATIVE THA T NOT A SINGLE DOCUMENT OR LOOSE PAPER RELATING TO TH E SAID TRANSACTION WAS FOUND DURING THE COURSE OF SEARCH, THEREFORE, NO ADDITION WAS WARRANTED IN THE ASSESSMENT MADE U/ S 153A. HE FURTHER SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF I.T.A.T. SPECIAL BENCH IN THE CASE OF M/S. ALL CARGO GLOBAL LOGISTICS LIMITED VS. DCIT (S UPRA). AS PER LD. AUTHORIZED REPRESENTATIVE, THE CASE OF THE ASSESSEE FALLS IN THE CATEGORY B MENTIONED AT PAGE 73 PARA 58 OF THE ORDER. -: 32: - 32 16. HE FURTHER DREW OUR ATTENTION TO VARIOUS DOCUMENTS FILED BEFORE THE LOWER AUTHORITIES TO SUBSTANTIATE THE CLAIM OF CAPITAL GAIN. THE LD. AUTHORIZED REPRESENTATIVE AL SO REFERRED TO VARIOUS JUDICIAL PRONOUNCEMENT, WHEREIN SHARE TRANS ACTION CANNOT BE DISREGARDED MERELY ON GUESS WORK AND SURM ISES. DECISION OF THE COORDINATE BENCH IN THE CASE OF SMT . ARZOO ANAND, 14 ITJ 607, WAS RELIED UPON IN SUPPORT OF TH E PROPOSITION THAT SHARES WERE PURCHASED IN THE LISTE D COMPANY, PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUE, TRANSACTI ONS WERE ENTERED IN SEBI REGISTERED BROKER, COPY OF PUR CHASE BILL, SALE BILL AND BANK STATEMENTS WERE FILED, THEREFORE , NO ADDITION WAS WARRANTED. 17. ON THE OTHER HAND, THE LD. CIT DR HIGHLIGHTED THE FINDINGS RECORDED BY THE LOWER AUTHORITIES WITH REG ARD TO BOGUS SHARE TRANSACTION AND CONTENDED THAT SINCE ORIGINAL ASSESSMENT WAS NOT FRAMED U/S 143(3), THEREFORE, AS PER VERDICT OF THE SPECIAL BENCH IN THE CASE OF M/S. AL L CARGO GLOBAL LOGISTICS LIMITED VS. DCIT, THE ASSESSING OF FICER HAS CORRECTLY ADDED CAPITAL FROM BOGUS TRANSACTION OF S HARES. -: 33: - 33 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. W ITH REGARD TO THE ADDITION MADE U/S 153A, WE FOUND THAT ISSUE IS COVERED AGAINST ASSESSEE AS PER THE OBSERVATIONS GIVEN AT P ARA 58 OF PAGE 73 OF THE ORDER OF THE SPECIAL BENCH, WHEREIN IT WAS CLEARLY OBSERVED THAT ANY ASSESSMENT THAT ARE ABATE D, THE ASSESSING OFFICER RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION COFERRED TO HIM U/S 153A FOR WHICH ASS ESSMENTS HAVE BEEN MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY. SINCE IN THE INSTANT CASE, ORIGINAL ASS ESSMENT ORDERS WERE NOT FRAMED U/S 143(3), THE ASSESSING OF FICER WAS EMPOWERED TO FRAME AN ASSESSMENT AS PER THE POWERS GIVEN U/S 143(3) AND ALSO THE POWERS CONFERRED TO HIM U/S 153A OF THE INCOME-TAX ACT, 1961. 19. NOW COMING TO THE MERIT OF THE ADDITION, WE FOUND T HAT IN RESPECT OF SHARE TRANSACTION IN THE NAME OF AGRA SEN CORPN. LTD., THE ASSESSING OFFICER REQUIRED THE ASSESSEE T O FURNISH DETAIL OF SERIAL NUMBER OF SHARES ALLOTTED, DATE OF ALLOTMENT. IN REPLY TO THE QUERY, THE ASSESSEE FURNISHED PART DET AIL. HOWEVER, THE ASSESSEE HAS NOT FURNISHED THE DISTINCTIVE NUMB ER OF -: 34: - 34 SHARES SO PURCHASED AND SOLD. THE ASSESSEE ALSO FAI LED TO PRODUCE THE BROKER EVEN AFTER ISSUE OF SUMMONS U/S 131. THE ASSESSING OFFICER ALSO FOUND THAT EVEN AFTER LONG P ERIOD THE ALLEGED SHARES PURCHASED BY THE ASSESSEE WERE NOT T RANSFERRED IN THE NAME OF THE ASSESSEE IN THE COMPANYS RECORD S. ON THE BASIS OF THESE FINDINGS, THE ASSESSING OFFICER CONC LUDED THAT THE ENTIRE SALE PROCEED SHOWN BY THE ASSESSEE OUT O F THE SHARE TRANSACTION WAS ITS INCOME FROM UNDISCLOSED SOURCES . 20. CONTENTION OF LD. AUTHORIZED REPRESENTATIVE WAS THA T THE TRANSACTIONS OF SALES AND PURCHASE OF SHARES HA D TAKEN PLACE THROUGH ACCOUNT PAYEE CHEQUES ONLY. IT WAS AL SO CONTENDED THAT THE SHARE TRANSACTIONS WERE DULY SUP PORTED BY THE BROKER NOTES ISSUED BY THE SEBI REGISTERED BROK ER, NAMELY, MR. SANJAY BIYANI. IT WAS FURTHER SUBMITTED THAT AF TER HAVING DELIVERED ORIGINAL SHARE CERTIFICATES ALONG WITH TR ANSFER DEEDS TO THE CONCERNING PURCHASERS THE APPELLANTS DID NOT MAINTAIN THE RECORDS OF THE DISTINCTIVE NUMBERS OF SHARES PU RCHASED AND SOLD. THE COUNSEL ALSO RELIED UPON CERTAIN JUDI CIAL AUTHORITIES IN SUPPORT OF HIS CONTENTION THAT THE T RANSACTIONS -: 35: - 35 SUPPORTED BY THE DOCUMENTS SHOULD HAVE BEEN ACCEPTE D BY THE ASSESSING OFFICER. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT GENUINENESS OF TRANSACTION OF PURC HASE AND SALE COULD NOT BE ESTABLISHED BY THE ASSESSEE IN SO FAR AS DISTINCTIVE NUMBER OF SHARES SO PURCHASED AND SOLD WAS NOT GIVEN BY THE ASSESSEE. THE FACT THAT THE ASSESSEE H AD NOT GOT THESE SHARES TRANSFERRED IN ITS NAME EVEN IN THE CO MPANYS RECORDS, THE GENUINENESS OF TRANSACTION OF PURCHASE AND SALE COULD NOT BE ESTABLISHED. MERELY PAYING THE AMOUNT BY ACCOUNT PAYEE CHEQUE ON ACCOUNT OF ALLEGED PURCHASE S AND RECEIVING CHEQUE ON ACCOUNT OF ALLEGED SALES, WILL NOT GIVE RISE TO THE ASSESSEE A RIGHT TO CLAIM CAPITAL GAIN ON TR ANSACTION OF SHARES, WHICH ARE FOUND TO BE BOGUS FOR NON FURNISH ING OF DISTINCTIVE NUMBER OF SHARES SO TRANSACTED. DETAILE D FINDING RECORDED BY THE LOWER AUTHORITIES COULD NOT BE CONT ROVERTED BY THE LD. AUTHORIZED REPRESENTATIVE BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE CONFIRM THE ACT ION OF CIT(A) FOR APPROVING ACTION OF THE ASSESSING OFFICE R FOR TREATING THE CAPITAL GAIN AS INCOME FROM UNDISCLOSED SOURCES . -: 36: - 36 22. THE ASSESSING OFFICER HAS ALSO MADE ADDITION ON ACCOUNT OF BOGUS GIFTS ALLEGED TO BE RECEIVED BY TH E ASSESSEE AND WHICH WAS IN TURN PASSED ON TO THE COMPANY. REL EVANT OBSERVATION OF ASSESSING OFFICER IN THE CASE OF SUD HIR MAHESHWARI FOR ASSESSMENT YEAR 2005-06, ARE CONTAIN ED AT PARA 1 PAGE OF ASSESSING OFFICERS ORDER, WHICH REA DS AS UNDER :- DURING THE COURSE OF SEARCH AT THE RESIDENCE 2/1,NORTH RAJ MOHALLA, INDORE, SOME INCRIMINATING PAPERS WERE FOUND AND SEIZED BY THE DEPARTMENT AS PER IMPORTANT FILE (HAPPY FILE) BS-13 CONTAININ G GIFT DEEDS, PHOTOCOPIES OF IT RETURN OF DONOR & PHOTOCOPY OF CHEQUES OF GIFTED AMOUNT. IT HAS BEEN FOUND THAT YOU HAVE RECEIVED GIFTS DETAILS ARE AS UNDER :- S. PAGE DONOR DONEE DT.OF GIFT AMOUNT DT OF NO. NO. DEED CHEQUE 1 100 & AASHA ANDEL SHRI SUDHIR MAHESHWARI 23/04/04 RS. 1,00,000/~ 124 DT.24/04/04 2 101 & RAJENDRA SHRI SUDHIR MAHESHWARI 23/04/04 RS. 1,00,000/- 118 S / 0 JANKILAL DT.24/04/04 ANDEL STATEMENT OF SHRI RAJENDRA ANDEL WAS RECORDED BY THE DEPARTMENT ON 20/09/2004. HE HAS STATED IN HIS -: 37: - 37 STATEMENT THAT THE AMOUNT OF GIFT WAS DEPOSITED IN CASH BY THE DONEE FAMILY MEMBERS IN HIS A/C AND HIS SIGNATURE WAS OBTAINED ON THE BLANK CHEQUE AND GIFT DEED FOR A CONSIDERATION OF RS. 1,500/- . PLEASE EXPLAIN? UNDER THESE CIRCUMSTANCES WHY THE AMOUNT OF GIFT RECEIVED BY CHEQUE MAY NOT BE TREATED AS YOUR UNDISCLOSED INCOME. IT IS FURTHER NOTICED THAT THE DONORS HAVE FILED RETURN AS UNDER.- S. NAME OF THE DONOR DONEE GIFT AMOUNT! RETURN INCOME REMARKS NO. DATE /ASSTT.YR. 1. SHRI RAJENDRA KUMAR SHRI SUDHIR RS.L,OO,OOO/- 54,257/- ANDEL MAHESHWARI DT. 23/04/04 2003-04 - 2. SM1, ASHA ANDEL SHRI SUDHIR RS.L,OO,OOO/- 70,800/- MAHESHWARI D1, 23/04/04 2003-04 THE STATEMENT OF SHRI KALYAN MAHESHWARI WAS RECORDED ON THIS ISSUE. HE HAS STATED THAT THESE GIFTS WERE MANAGED THROUGH ONE SHRI SURESH GUPTA WHO WAS AN EMPLOYEE. THESE PERSONS ARE NOT YOUR RELATIVES AND THERE WAS NO ELEMENT OF LAW AND AFFECTION. IN VIEW OF FACTS DISCUSSED ABOVE THAT GIFTS ARE NOT -: 38: - 38 GENUINE. 23. AFTER GIVING DETAILED FINDING AT PARA 4.3 PAGE 13 (AS REPRODUCED HEREINABOVE), THE LD. CIT(A) HAS CONFIRM ED THE ADDITION. 24. IT WAS ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE THAT THE ASSESSEE HAS CLEARLY STATED THAT THEY HAD NOT RECEIVED ANY GIFT AND THEIR ACCOUNTS WERE USED AS CONDUIT BY THE GROUP OF COMPANY AND FUNDS FOR MANAGING GIFTS ALSO PROVID ED BY THE GROUP COMPANIES, HENCE THE SOURCE FOR DEPOSIT IN TH E BANK ACCOUNT SHOULD BE TAKEN AS EXPLAINED IN THE HANDS O F THE ASSESSEES. FURTHER CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE WAS THAT SINCE THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNTS, THEREFORE, PROVI SION OF SECTION 68 COULD NOT BE INVOKED. FURTHER CONTENTION OF LD. AUTHORIZED REPRESENTATIVE WAS THAT EVEN FOR INVOKI NG DEEMING PROVISIONS OF SECTION 69/69B OF INCOME-TAX ACT, 196 1, INVESTMENT BY AN ASSESSEE IS A MANDATORY CONDITION. HE FURTHER CONTENDED THAT THE EXPLANATION OF THE APPE LLANT AS REGARD THE ALLEGED GIFT TRANSACTION IS ALSO CORROBO RATED FROM -: 39: - 39 THE QUESTIONNAIRE OF THE LEARNED ASSESSING OFFICER HIMSELF INASMUCH IN SUCH QUESTIONNAIRE HE HAD AVERTED THE A SSESSEE THAT THE ALLEGED DONOR AS WELL AS SHRI KALYAN MAHES HWARI, REPRESENTING THE COMPANY, CATEGORICALLY STATED THAT THE IMPUGNED TRANSACTION WAS MANAGED BY THE COMPANY THR OUGH ITS ACCOUNTANT. FURTHER SUB MISSION OF LD. AUTHORIZ ED REPRESENTATIVE WAS AS UNDER :- NOW, OUR ABOVE SUBMISSION IS SUMMARIZED AS UNDER : I) PROVISIONS OF S. 68 UNDER WHICH THE IMPUGNED ADDITION HAS BEEN MADE IS NOT APPLICABLE IN THE APPELLANT'S CASE. II) THE APPELLANT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF, HAD DENIED TO HAVE RECEIVED ANY GIFT FROM ANY PERSON DURING THE PREVIOUS YEAR UNDER CONSIDERATION AND, THEREFORE, HE WAS UNDER NO OBLIGATION TO PROVE A NON-EXISTING FACT. III) THE APPELLANT DID NOT MAKE ANY INVESTMENT IN THE COMPANY AND THE ULTIMATE BENEFICIARY OF THE TRANSAC TION WAS THE COMPANY I. E. M/S. RAJAT GEMS AND JEWELLERI ES -: 40: - 40 PVT. LTD. IV) THE MOTIVE OF THE ENTIRE TRANSACTION WAS TO AV AIL CONCESSION IN RATE OF INTEREST BY THE COMPANY FROM ITS BANKERS. V) THE SOURCE OF DEPOSIT IN THE BANK ACCOUNT OF THE APPELLANT WAS CASH REALIZED BY THE COMPANY THROUGH UNRECORDED SALES WHICH WAS ROTATED THROUGH A CHEQUE ISSUED BY THE ALLEGED DONORS IN THE NAME OF THE APP ELLANT. VI) THE FACTUM OF UNRECORDED SALES BY THE ABOVE NAMED COMPANY HAS DULY BEEN ACCEPTED BY THE ASSESSING OFF ICER WHILE FRAMING THE ASSESSMENT IN THE HANDS OF THE AB OVE NAMED COMPANY. VII) THE APPELLANT, BY FURNISHING THE ABOVE EXPLANATION, HAD DISCHARGED HIS INITIAL ONUS OF EXPLAINING THE E NTIRE TRANSACTION AND, IN PARTICULAR, THE SOURCE OF SUBJE CT DEPOSIT OF RS. 2,00,000/- IN HIS BANK ACCOUNT. -: 41: - 41 25. AS PER LD. AUTHORIZED REPRESENTATIVE THE FACT THAT UNACCOUNTED CASH WAS AVAILABLE WITH M/S. RAJAT GEMS AND JEWELLERIES PVT.LTD. HAS DULY BEEN VERIFIED AND ACC EPTED BY THE LD. CIT(A)-II. HE FURTHER SUBMITTED THAT THE EXPLAN ATION OF THE ASSESSEE AS REGARD TO THE SOURCES OF MANAGING GIFTS IS ALSO SUBSTANTIATED BY THE FINDINGS GIVEN IN THE CASE OF RGJPL BY THE ASSESSING OFFICER AS WELL AS THE I.T.A.T. 26. ON THE OTHER HAND, THE LD. CIT DR REITERATED THE FINDINGS RECORDED BY THE LOWER AUTHORITIES TO THE E FFECT THAT ALL THE GIFTS WERE FOUND TO BE BOGUS AND THAT ASSESSEE THEMSELVES HAVE ACCEPTED THE BOGUS NATURE OF TRANSACTION OF GI FTS, WHICH WAS CREDITED IN THEIR BANK ACCOUNTS AND ULTIMATELY USED FOR ADVANCING MONEY TO THE COMPANY. 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF THE ASSESSEE AT 2/1, NORTH RAJ MOHALLA, INDORE, AS WELL AS IN THE BUSINESS PREMISES OF THE GROUP COMPA NIES, NAMELY, RAJAT GEMS AND JEWELLERIES PRIVATE LIMITED, CERTAIN DOCUMENTS IN THE FORM OF GIFT DEEDS WERE FOUND AND SEIZED BY -: 42: - 42 THE SEARCH PARTY. IN THE GIFT DEEDS VARIOUS ASSESSE ES IN THE RAJAT GROUPS SHOWN TO HAVE RECEIVED VARIOUS GIFTS A GGREGATING TO RS. 14 LAKHS FROM VARIOUS STRANGERS, THROUGH ACC OUNT PAYEE CHEQUES. DURING POST SEARCH INVESTIGATION, STATEMEN TS OF ALLEGED DONOR WERE RECORDED BY THE INVESTIGATION WI NG, WHEREIN THEY DENIED TO HAVE GIVEN ANY GIFT. IT WAS ALSO STATED BY THE ALLEGED DONORS THAT THE AMOUNT OF GIFT WAS D EPOSITED IN CASH BY THE DONEE FAMILY MEMBERS IN THEIR ACCOUNTS AND THEIR SIGNATURES WERE OBTAINED ON THE BLANK CHEQUES AND G IFT DEEDS. DURING THE COURSE OF POST SEARCH INVESTIGATION, STA TEMENT OF SHRI KALYAN MAHESHWARI, A KEY PERSON GROUP LOOKING AFTER ENTIRE BUSINESS AFFAIRS OF THE GROUP COMPANIES, WAS ALSO RECORDED AND SHRI KALYAN MAHESHWARI IN HIS STATEME NT ADMITTED THAT GIFTS WERE MANAGED THROUGH HIS EMPLOY EES SHRI SURESH GUPTA. EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO ESTABLISH GENUI NENESS OF GIFT TRANSACTION, THEREFORE, ADDITIONS WERE CORRECT LY MADE BY THE ASSESSING OFFICER U/S 68. THE DETAILED FINDING RECORDED BY THE ASSESSING OFFICER WHICH WAS FURTHER FORTIFIED B Y THE -: 43: - 43 LD.CIT(A) COULD NOT BE CONTROVERTED BY THE LD. AUTH ORIZED REPRESENTATIVE BY BRINGING ANY POSITIVE MATERIAL O N RECORD. 28. IN VIEW OF THE ABOVE, WE CONFIRM THE ACTION OF THE CIT(A) FOR UPHOLDING THE ADDITION MADE BY THE ASSES SING OFFICER IN RESPECT OF DIFFERENT ASSESSEES ON ACCOUN T OF BOGUS GIFTS RECEIVED BY THEM. 29. WITH REGARD TO ADDITION MADE ON ACCOUNT OF CASH FOUND, CONTENTION OF THE LD. AUTHORIZED REPRESENTAT IVE WAS THAT DURING THE COURSE OF SEARCH ITSELF, SHRI SUDHI R MAHESHWARI HAS CATEGORICALLY STATED THAT CASH OF RS . 30.30 LAKHS WAS BELONGING TO M/S. RAJAT GEMS AND JEWELLER IES PVT.LTD. HE FURTHER SUBMITTED THAT M/S. RAJAT GEMS AND JEWELLERIES PVT.LTD. HAS OFFERED UNACCOUNTED SALES THROUGH WHICH CASH WAS GENERATED. AS THE UNACCOUNTED SALES HAS BEEN ACCEPTED IN THE HANDS OF M/S. RAJAT GEMS AND JEWELL ERIES PVT.LTD., ASSESSING OFFICER WAS NOT JUSTIFIED IN MA KING ADDITION OF CASH FOUND IN THE HANDS OF SUDHIR MAHESHWARI. HE INVITED OUR ATTENTION TO THE DETAILED FINDING RECORDED BY T HE LD.CIT(A) TO THIS EFFECT. OUR ATTENTION WAS ALSO INVITED TO T HE ORDER OF I.T.A.T. IN THE CASE OF M/S. RAJAT GEMS AND JEWELLE RIES -: 44: - 44 PVT.LTD. FOR THE ASSESSMENT YEAR 2005-06. HE, THERE FORE, SUBMITTED THAT ONCE THE LD. ASSESSING OFFICER HAD A CCEPTED THE EXPLANATION IN THE HANDS OF M/S. RAJAT GEMS AND JEW ELLERIES PVT.LTD. WHO HAD OWNED THE IMPUGNED CASH, HE WAS N OT JUSTIFIED IN TAKING A DIFFERENT STAND ON THE SAME I SSUE WHILE FRAMING THE ASSESSMENT IN THE HANDS OF DIRECTOR OF RGJPL. 30. ON THE OTHER HAND, THE LD. CIT DR, SHRI KESHAV SAXENA SUBMITTED THAT THEORY OF AVAILABILITY OF CAS H OUT OF UNACCOUNTED SALES FOUND IN THE HANDS OF M/S. RAJAT GEMS AND JEWELLERIES PVT.LTD. CANNOT BE ACCEPTED IN SO FAR A S OUT OF UNACCOUNTED SALE OF RS. 85,30,937/-, THE ASSESSEE H AD ONLY OFFERED UNACCOUNTED SALES OF RS. 33.47 LAKHS IN THE IR RETURNS AND ONLY PROFIT ON IT AMOUNTING TO RS. 45,000/- WAS OFFERED AS INCOME AFTER APPLYING GROSS PROFIT RATE OF 1.26 % AND 1.79 % FOR ASSESSMENT YEAR 2003-04 AND 2004-05 RESPECTIVELY. A S PER LD. CIT DR WHEN THE ENTIRE PURCHASES WERE ALREADY DEBIT ED IN THE BOOKS, THE ENTIRE SALES AMOUNT ON IT SHOULD HAVE BE EN OFFERED BY THE COMPANY IN ITS RETURN, IN ORDER TO EXPLAIN T HIS CASH OF RS. 29.74 LAKHS. HE FURTHER DREW OUR ATTENTION TO T HE ORDER OF I.T.A.T. WHEREIN TRIBUNAL HAS ENHANCED THE INCOME O FFERED BY -: 45: - 45 THE ASSESSEE AT RS. 45,000/- TO AROUND RS. 4.64 LAK HS. SHRI SAXENA FURTHER READ THE ORDER OF CIT(A) AND SUBMITT ED THAT THERE IS GENERAL OBSERVATION OF CIT(A) WITH REGARD TO UNACCOUNTED SALES FOUND DURING COURSE OF SEARCH, WI THOUT RECORDING ANY FINDING REGARDING AMOUNT OF CASH AVAI LABLE WITH RGJPL TO JUSTIFY THE CASH OF RS. 30.30 LAKHS FOUND DURING SEARCH WHICH WAS STATED TO BE BELONGING TO RGJPL. U NDER THESE FACTS AND CIRCUMSTANCES, HE SUBMITTED THAT TH E LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION O N ACCOUNT OF CASH FOUND AT RESIDENCE OF SUDHIR MAHESHWARI BY TRE ATING THE SAME AS EXPLAINED IN THE HANDS OF THE M/S. RAJAT GE MS AND JEWELLERIES PVT.LTD. RELIANCE WAS ALSO PLACED BY TH E LD. CIT DR ON THE DECISIONS REPORTED AT 160 ITR 497 (MP), 228 ITR 113 (MAD), 285 ITR 256 (DEL). 31. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT ADDITION ON ACCOUNT OF CASH FOUND WAS DELETED BY THE LD.CIT(A) BY STATING THAT M/S. RAJAT GEMS AND JEWELLERIES PVT.LTD. HAVE OFFERED THE UNACCOUNTED S ALES IN ITS HANDS AND THROUGH SUCH UNACCOUNTED SALES, SUFFICIEN T CASH -: 46: - 46 WAS AVAILABLE WITH THE COMPANY AND SINCE THE ASSESS EE IS ONE OF THE DIRECTORS OF THE COMPANY, THE SAME CASH WAS FOUND AT THE RESIDENCE OF THE DIRECTOR. ON GOING THROUGH THE MATERIAL PLACED ON RECORD IN THE CASE OF M/S. RAJAT GEMS AND JEWELLERIES PVT.LTD., WE FOUND THAT IN THE ASSESSME NT YEAR 2004-05, AS AGAINST THE TURN OVER OF RS. 5.54 CRORE S IN THE BOOKS OF ACCOUNT, THE ASSESSEE HAS DECLARED SALES O F RS. 5.85 CRORES, AFTER CONSIDERING THE SALES FOUND IN LOOSE PAPERS. THESE SALES WERE FINALLY ENHANCED BY CIT(A) TO RS. 6.45 C RORES. SIMILARLY IN THE ASSESSMENT YEAR 2005-06 AS AGAINST TURN OF RS. 6.67 CRORES IN THE BOOKS OF ACCOUNT, THE ASSESS EE HAS OFFERED THE SAME TURNOVER IN THE BLOCK RETURN, WHIC H WAS FINALLY ENHANCED BY CIT(A) TO RS. 7.35 CRORES. WE FOUND THAT IN CASE OF APPEAL FILED BY RGJPL THE TRIBUNAL HAVE UPHELD THE SALES ESTIMATED BY THE LD.CIT(A) AND DIRECTED TO MA KE ADDITION BY APPLYING AVERAGE RATE OF NET PROFIT OF 2.13 % O N SALES ESTIMATED BY THE LD.CIT(A). THUS, IT IS CLEAR FROM THE ORDER OF THE TRIBUNAL IN CASE OF M/S. RAJAT GEMS AND JEWELLE RIES PVT.LTD. THAT AN ADDITION WAS CONFIRMED ONLY TO THE EXTENT OF PROFIT EARNED ON UNACCOUNTED SALES AT 2.13 %. THUS , TO THE -: 47: - 47 MAXIMUM EXTENT OF THIS PROFIT, ONE CAN CONSIDER THE SAME AS AVAILABLE IN THE HANDS OF THE COMPANY. HOWEVER, IT IS NOT CLEAR AS TO WHETHER SUCH EXCESS CASH IN THE HANDS OF COMP ANY WAS GIVEN SET OFF AGAINST ANY OTHER UNEXPLAINED EXPENDI TURE ETC. IN THE CASE OF M/S. RAJAT GEMS AND JEWELLERIES PVT.LTD . UNDER THESE FACTS, WE FOUND SUBSTANCE IN THE ARGUMENT OF LD. CIT DR, SHRI KESHAVE SAXENA TO THE EFFECT THAT EXTRA CASH W AS AVAILABLE IN THE HANDS OF THE COMPANY ONLY TO THE E XTENT OF ADDITION OF INCOME CONFIRMED ON ACCOUNT OF UNACCOUN TED SALES, AS ESTIMATED BY CIT(A). IN SO FAR AS ENTIRE UNACCOUNTED SALES HAS NOT BEEN ADDED IN ASSESSEES INCOME, NOR THE SAME WAS OFFERED BY THE ASSESSEE VOLUNTARILY IN ITS RETU RN OF INCOME U/S 153A, THE ENTIRE SALE PROCEEDS OF UNACCOUNTED S ALE CANNOT BE TREATED AS AVAILABLE FOR JUSTIFYING THE CASH FOU ND AT THE RESIDENCE OF THE ASSESSEE. FURTHER NO FINDING HAS B EEN RECORDED BY CIT(A) IN RESPECT OF EXTRA CASH AVAILAB LE WITH RGJPL ON ACCOUNT OF UNACCOUNTED SALES AND PROFIT TH EREON AS FOUND DURING COURSE OF SEARCH. WE, THEREFORE, SET- ASIDE THE ORDER OF THE CIT(A) ON THIS GROUND AND THE MATTER I S RESTORED BACK TO THE FILE OF ASSESSING OFFICER WITH A DIRECT ION TO COMPUTE -: 48: - 48 EXTRA CASH GENERATED AND INCOME OFFERED BY M/S. RA JAT GEMS AND JEWELLERIES PVT.LTD. ON ACCOUNT OF UNACCOUNTED SALES TO FIND OUT AVAILABILITY OF EXTRA CASH. IT IS NOT CLEA R FROM RECORD AS TO WHETHER ENTIRE UNACCOUNTED SALES HAD BEEN OFFERE D FOR TAXATION IN THE HANDS OF THE COMPANY. ASSESSEE IS A LSO DIRECTED TO SUBMIT REVISED CASH FLOW STATEMENT DULY INCORPORATING THE CASH AND INCOME GENERATED THROUGH UNACCOUNTED SALES OFFERED BY ASSESSEE. THE ASSESSI NG OFFICER SHOULD ALSO KEEP INTO ACCOUNT ANY OTHER UNEXPLAINED EXPENDITURE ETC. HAVING BEEN GIVEN SET OFF AGAINST SUCH ADDITION OF UNACCOUNTED SALES/INCOME OFFERED BY RGJ PL. ONLY EXCESS BALANCE OF CASH SO FOUND IN THE HANDS OF M/ S. RAJAT GEMS AND JEWELLERIES PVT.LTD. CAN BE ALLOWED AS A S ET OFF AGAINST THE CASH FOUND AT THE RESIDENCE OF THE ASSE SSEE. ASSESSING OFFICER IS DIRECTED TO DECIDE THE MATTER AFRESH IN THE LIGHT OF OUR ABOVE DIRECTION WE DIRECT ACCORDINGLY . -: 49: - 49 32. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSE E ARE DISMISSED, WHEREAS APPEALS FILED BY THE REVENUE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST, 2012. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :6 TH AUGUST, 2012. CPU* 171926