Shri Harish R. Sharma, Ahmedabad V. The Dy.CIT., Circle-4, Ahmedabad

ITSSA 20/AHD/2007

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9391 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-07-2013
• Assessment Year: misc
• Appeal Filed On: 29-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M G PATEL
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Search and seizure; Salary income; Document seized; Deemed to accrue or arise in india; Question of law; Documents seized
• Section: 260A; 68; 15

Judgement Text

IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T(SS). A. NO. 20/AHD/2007 (ASSESSMENT YEAR: BL OCK PERIOD 1.04.1985 TO 31.03.1986, 1.04.1994 TO 31.0 3.1995 & 1.04.1995 TO 12.12.1995) SHRI HARISH R. SHARMA B-34 SATELLITE ROAD, JODHPUR ROAD, AHMEDABAD (APPELLANT) VS. THE D.C.I.T, CIRCLE-4 AHMEDABAD (RESPONDENT) PAN: 31-110-PG-9802 APPELLANT BY : SHRI M.G. PATEL A.R. RESPONDENT BY : SHRI SUBHASH BAINS CIT D.R. ( )/ ORDER DATE OF HEARING : 12-07-20 13 DATE OF PRONOUNCEMENT : 13-09-2013 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF DCIT, AHMEDABAD DATED 28.12.2006 FOR BLOCK PERIOD FROM 01.04.1985 T O 31.03.1986, 01.04.1994 TO 31.03.1995 AND 01.04.1995 TO 12.12.19 95. 2. THE FACTS AS CULLED OUT FROM THE ORDER OF LOWER AUTHORITIES ARE AS UNDER: IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 2 3. ASSESSEE IS AN INDIVIDUAL AND DIRECTOR OF ELECTR OTHERM (IND) LTD. HE HAS INCOME FROM DIVIDEND, SALARY AND INTEREST. HE IS AL SO PROPRIETOR OF M/S CRUCIFAB, A CONCERN WHO IS A SUPPLIER OF SPARE PART S TO ELECTROTHERM (IND) LTD. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT AT T HE RESIDENTIAL PREMISES OF THE ASSESSEE ON 12.12.1995 UNDER WARRANT OF AUTHORI ZATION UNDER SECTION 132(1). DURING THE COURSE OF SEARCH OPERATIONS CASH , JEWELLERY AND BOOKS OF ACCOUNTS AND DOCUMENTS PERTAINING TO THE ASSESSEE W ERE FOUND AND SEIZED. NOTICE UNDER SECTION 158BC WAS ISSUED AND SERVED ON ASSESSEE ON 15.04.1996. IN RESPONSE TO THE AFORESAID NOTICE, AS SESSEE FILED HIS RETURN OF INCOME ON 7.11.1996 FOR 10 ASSESSMENT YEARS COMMENC ING FROM A.Y. 1986- 87 TO A.Y. 1995-96 AND THE TOTAL UNDISCLOSED INCOME FOR THE BLOCK PERIOD OF RS. 66,000/- WAS DISCLOSED BY ASSESSEE. ORDER UNDE R SECTION 143 (3) READ WITH SECTION 158BC OF THE ACT WAS PASSED ON 28.12.1 996 AND THE TOTAL UNDISCLOSED INCOME WAS DETERMINED AT RS. 68,61,614/ -. 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASS ESSEE PREFERRED APPEAL BEFORE HON. ITAT. ITAT VIDE ORDER DATED 21.02.2005 SET ASIDE THE ASSESSMENT ORDER AND RESTORED THE MATTER TO THE FIL E OF ASSESSING OFFICER TO DECIDE THE MATTER AFRESH. PURSUANT TO THE DIRECTION S OF TRIBUNAL, ORDER UNDER SECTION 158 BC RWS. 254 OF THE ACT WAS PASSED ON 28 .12.2006 AND THE TOTAL INCOME FOR VARIOUS ASSESSMENT YEARS WAS DETERMINED AT RS. 68,61,614/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESS EE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS. 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN ADDING R S.49,41,074/- TO THE UNDISCLOSED INCOME OF THE APPELLANT ON ACCOUNT OF B OGUS PURCHASES FOR THE BLOCK PERIOD FROM 1987-88 TO 1994-95 WITHOUT SU PPLYING THE DOCUMENTS VIZ. COVERS/ENVELOPES RETURNED UNSERVED, THE COPIES OF BANK ACCOUNTS REFERRED TO IN THE SHOW CAUSE NOTICE FROM WHICH QUANTUM OF BOGUS PURCHASES HAVE BEEN WORKED OUT AND THE WORKIN G IN RESPECT OF BASIS FROM WHICH QUANTUM OF BOGUS PURCHASES HAVE BE EN WORKED OUT THOUGH HON'BLE IT AT DIRECTED TO SUPPLY THE SAME WH ILE RESTORING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER VI DE ITS ORDER DATED 21/02/2005. IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 3 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING A DDITION OF RS.7,57,000/- AS UNDISCLOSED INCOME OF THE APPELLAN T FROM SALE PROCEEDS OF THE HOUSE FOR THE BLOCK YEAR 1993-94. 3. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISALLOW ING THE CLAIM OF DEDUCTION OF INTEREST OF RS.7,90,000/- PAID BY THE APPELLANT IN THE ACCOUNTS OF SHRI PUKHRAJ SHAH AND HIS ASSOCIATES HO LDING THAT THE BORROWINGS IN THIS ACCOUNT ARE NOT GENUINE HAVING B EEN DIVERTED FROM FUNDS GENERATED FROM BOGUS PURCHASES. 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING P ROTECTIVE ADDITION OF RS.21,50,000/- BEING DEPOSITS RECEIVED FROM PUKHRAJ SHAH AND HIS ASSOCIATES AS UNEXPLAINED CASH CREDITS U/S 68 OF TH E ACT. 5. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING P ROTECTIVE ADDITION OF RS.4,52,000/- IN RESPECT OF INVESTMENT IN FDRS AND LOANS MADE BY SHRI REVA RAM SHARMA. THE FATHER OF THE APPELLANT IN THE TOTAL INCOME OF THE APPELLANT. 6. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING P ROTECTIVE ADDITION OF RS.5.72.810 - AS UNEXPLAINED INVESTMENT IN SHARES U S 69 A OF THE ACT. 7. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING P ROTECTIVE ADDITION OF RS.4,23,000/- AS UNEXPLAINED INVESTMENT IN CONSTRUC TION OF HOUSE AT INDORE IN THE BLOCK YEAR 1993-94. 8. THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING P ROTECTIVE ADDITION OF RS.1,19,925/- AS UNEXPLAINED INVESTMENT IN JEWELLER Y MADE BY THE APPELLANT. 9. THE LEARNED ASSESSING OFFICER HAS ERRED IN NOT DEDU CTING RETURNED/ASSESSED INCOME OF RS.1,31,231/- FOR THE B LOCK YEARS 1986-87 AND 1989-90 RELYING ON CLAUSE (C) OF SECTION 158BB OF THE I. T. ACT, 1961. 10. THE LEARNED ASSESSING OFFICER HAS ERRED IN REJECTIN G THE CLAIM FOR DEDUCTION U/S 801 OF THE L.T. ACT, 1961, RELYING ON THE PROVISIONS OF SECTION 15 8B A OF THE ACT . 1 ST GROUND IS WITH RESPECT TO ADDITION OF RS. 49,41,07 4/- ON ACCOUNT OF BOGUS PURCHASES 5. DURING THE COURSE OF SEARCH AND SEIZURE OPERATIO N AT THE RESIDENTIAL PREMISES OF THE DIRECTOR OF M/S ELECTROTHERM (IND) LTD., SHR I SHAILESH BHANDARI AND HIS BUSINESS ASSOCATES. SHRI PUKHRAJ SHAH VARIOUS DOCUM ENTS CONTAINING DETAILS OF BOGUS PURCHASES MADE BY CRUCIFAB, ELECTROTHERM ( IND) LTD. AND ITS BUSINESS ASSOCIATES WERE FOUND AND SEIZED. ON THE BASIS OF STATEMENT RECORDED AND DOCUMENTS SEIZED, FIELD ENQUIRIES WERE MADE. ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE WAS ENGAGED IN MAKING BOGUS IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 4 PURCHASES FROM THE 13 PARTIES LISTED ON PAGE 17 OF HIS ORDER. HE FURTHER CONCLUDED THAT THE CHEQUES WHICH ARE ISSUED FOR BOG US PURCHASE ARE DEPOSITED IN THE BANK ACCOUNT OF THE BOGUS PARTIES AND THEN CASH IS WITHDRAWN. FIELD ENQUIRIES MADE TO LOCATE THE 13 P ARTIES REVEALED THAT THE ADDRESS GIVEN WERE FOUND TO BE FALSE AS NO PERSON W AS KNOWN TO BE RESIDING OR DOING BUSINESS FROM THOSE PLACES. HE ALSO NOTED THAT THE PAYMENT IN RESPECT OF BOGUS PURCHASES WERE MADE TO VARIOUS BOG US PARTIES NAMELY GODAVARI INDUSTRIES, VINAYAK INDUSTRIES, SHARMA STE EL SUPPLIERS, AMBIKA FABRICATORS AND GEETA FABRICATORS AND ALL THESE PAR TIES WERE BEING CONTROLLED BY SHRI PUKHRAJ SHAH. PUKHRAJ SHAH, IN THE STATEME NT RECORDED UNDER SECTION 133(1A) HAD DEPOSED THAT THE ASSESSEE AND I TS SISTER CONCERN HAVE MADE BOGUS PURCHASES. AO ALSO NOTICED THAT THE PAY MENTS MADE FOR BOGUS PURCHASES WERE DEPOSITED IN THE BANK ACCOUNTS OF TH E BOGUS PARTIES FROM WHOM BOGUS PURCHASES WERE MADE AND THEREAFTER MONEY WAS WITHDRAWN FROM THE BANK ACCOUNT AND TRANSFERRED TO K. PUKHRAJ AND CO. HASMUKHLAL AMBALAL AND CO. AND OTHERS. THE AMOUNT WAS TRANSFER RED TO BUSINESS ASSOCIATES OF THE ASSESSEE COMPANY AS SECURED LOAN OR INVESTMENT IN LAND. IN ADDITION, SHRI PUKHRAJ SHAH HAD ALSO GIVEN ACTUA L AMOUNT OF MONEY RECEIVED AGAINST BOGUS PURCHASES WHICH WAS TRANSFER RED BACK TO THE ASSESSEE AND ITS ASSOCIATES AS UNSECURED LOAN OR IN VESTMENT IN LAND. HE THUS CONCLUDED THAT DURING THE BLOCK PERIOD UNDER C ONSIDERATION ASSESSEE HAD MADE BOGUS PURCHASES AGGREGATING TO RS. 49,41,0 74/- FROM 13 PARTIES AND ACCORDINGLY MADE ADDITION OF THE SAME. 6. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASS ESSEE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, THE LEANED A.R. SUBMITTED THAT IDENTI CAL ADDITIONS ON ACCOUNT OF BOGUS PURCHASE WERE ALSO MADE IN THE CASE OF ELECTR O PACK INDIA LIMITED. THE PARTIES INVOLVED IN THAT CASE WERE ALSO SAME PA RTIES FROM WHICH IT HAS BEEN ALLEGED THAT THE ASSESSEE HAD MADE BOGUS PURCH ASES. HE FURTHER IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 5 SUBMITTED THAT ON IDENTICAL FACTS THE HON. TRIBUNAL IN THE CASE OF ELECTRO PACK HAS DELETED THE ADDITION. HE FURTHER SUBMITTED THA T THE EVIDENCE AND PAPER ON WHICH RELIANCE WAS PLACED IN MAKING ADDITION IN THE CASE OF ASSESSEE AND ELECTRO PACK WAS SAME AND IN CASE OF ELECTROPACK, T HE ADDITION WAS DELETED. HE PLACED ON RECORD AT PAGE 100 TO 110 THE COPY OF THE AFORESAID ORDER. HE POINTED OUT TO OPERATIVE PART OF THE ORDER ON PAGE 105 TO 108. HE FURTHER SUBMITTED THAT ON IDENTICAL FACTS AND EVIDENCE IDEN TICAL ADDITIONS WAS ALSO MADE IN THE CASE OF ELECTROTHERM (IND) LIMITED. TH E HON. TRIBUNAL IN ITA NO. 36/A/1997 ORDER DATED 29.12.1998 HAS DELETED THE AD DITION. HE FURTHER SUBMITTED THAT AGAINST THE ORDER OF ITAT, THE MATTE R WAS CARRIED BEFORE THE HIGH COURT BY THE REVENUE. HON. H.C. IN TAX APPEAL NO. 217/A/1999 ORDER DATED 5.07.2000 DISMISSED THE APPEAL OF THE REVENUE BY STATING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES. HE FURTHER SUBM ITTED THAT AGAINST THE AFORESAID ORDER OF H.C., REVENUE PREFERRED SLP BEFO RE HON. SUPREME COURT. HON. S.C. ALSO DISMISSED THE SPECIAL LEAVE PETITION ON 31.08.2001. HE PLACED ON RECORD AT PAGE 176 THE COPY OF THE ORDER OF SUPR EME COURT THE COPY OF ORDER OF HIGH COURT IN THE CASE OF ELECTROTHERM IND IA LTD. WAS PLACED AT PAGE 99 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT IN OTHER CASES ALSO THE MATTER WAS CARRIED UP TO HIGH COURT. HAD SINCE THE ADDITI ON ON IDENTICAL FACTS HAVE BEEN DELETED, THE ADDITION IN THE CASE OF ASSESSEE MAY ALSO BE DELETED. 8. THE LEARNED D.R. ON THE OTHER HAND RELIED ON THE ORDER OF ASSESSING OFFICER. HE FURTHER SUBMITTED THAT THE CASES OF OTHER ASSESS EES NAMELY ELECTROTHERM AND ELECTROPACK AND OTHERS CANNOT BE COMPARED WITH THAT OF ASSESSEE AS IN THOSE CASE, THE BOOKS OF ACCOUNTS WERE MAINTAINED B UT IN THE CASE OF ASSESSEE NO BOOKS OF ACCOUNTS WERE PRODUCED AT ANY STAGE. HE ALSO PLACED RELIANCE IN THE DECISION OF GUJARAT HIGH COURT IN T HE CASE OF CIT VS. HYNOUP FOOD AND OIL INDUSTRIES PVT. LTD. (2007) 290 ITR 70 2. 9. THE LEARNED A.R. IN REJOINDER COUNTERED THE SUBM ISSION OF REVENUE AND SUBMITTED THAT EVEN IN THE CASE OF MAGNATHERM, THE BOOKS OF ACCOUNTS WERE IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 6 NOT AVAILABLE AND THEREFORE THAT THE FACTS OF THAT CASE ARE IDENTICAL TO THAT OF ASSESSEE. HE PLACED ON RECORD AT PAGE 265 TO279, T HE COPY OF ORDER PASSED UNDER SECTION 158BD READ WITH SECTION 158BC IN THE CASE OF MAGNATHERM AND POINTED TO THE RELEVANT FINDING AT PAGE 272 OF THE PAPER BOOK. HE THUS URGED THAT THE ADDITION MADE BE DELETED. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT IN THE CASE OF ASSESSEE ADDITION WAS MADE ON ACCOUNT OF BOGUS PURCHASE AS IT WAS ALLEGED THAT HE HAD MADE PURCHASES FROM VARIOUS PARTIES LISTED BY THE AO IN THE ASSESS MENT ORDER. WE FIND THAT AT THE TIME SEARCH WAS CONDUCTED IN THE CASE OF ASSESS EE, SEARCH OPERATIONS WAS ALSO CONDUCTED IN THE CASE OF ELECTROTHERM AND MAGNATHERM. IN THOSE CASES ALSO ADDITION ON ACCOUNT BOGUS PURCHASES MADE FROM THE SAME PARTIES AS MADE IN THE CASE OF ASSESSEE. WAS MADE THE HON. TRIBUNAL IN BOTH THE CASES DELETED THE ADDITION. THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ELECTRO PACK IT(SS)A NO. 24/AHD/1998 RELYING THE OR DER IN THE CASE OF ELECTROTHERM INDIA DELETED THE ADDITION BY HOLDING AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E ALSO GONE THROUGH THE ORDER PASSED BY THE ASSESSING OFFICER AS WELL A S THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S ELECTRTHERM (INDIA) LTD . REFERRED TO SUPRA. THE TRIBUNAL IN THE AFORESAID DECISION IN PARA AS 13 TO 15 OF ITS ORDER HAS DISCUSSED THE FACTS, SUBMISSIONS OF THE LEARNED D.R . AND HAS GIVEN ITS REASONS FOR DELETING THE ADDITION AS UNDER: EVEN WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE ENTIRE ADDITIONS MADE IN THIS CA SE WERE UNJUSTIFIED AND CONTRARY TO THE EVIDENCES PRODUCED BEFORE THE ASSES SING OFFICER. FIRST LET US STATE THE CASE OF ALLEGED BOGUS PURCHASES. THE F ACTS REGARDING THIS ISSUE HAD BEEN DISCUSSED BY THE ASSESSING OFFICER I N PARAS 8 TO 8.6 IN THIS ORDER. VIDE PARA 8.6 MADE ADDITIONS ON ACCOUN T OF BOGUS PURCHASES IN THE FOLLOWING MANNER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE WITH REFERENCE TO THE PANCHNAMA OF THE SEARCH AND FACTS OF THE CASE WHICH CLEARLY LEAD TO THE FOLLOWING FINDINGS.. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, FACTS AND MATERIALS ON RECORD. IT IS NOT DISPUTED THAT PURCHASES HAD BEEN RECORDED IN THE BOOKS OF ACCOUNTS CLAIMING DEDUCTION. OTHERWISE, T HE SAME COULD NOT HAVE BEEN DISALLOWED AS EXPENDITURE FOR BOGUS P URCHASES. WHEN THE SEARCH WAS CONDUCTED IN FACT EXCESS STOCK WAS FOUND IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 7 THAN RECORDED IN THE BOOKS OF ACCOUNTS. HAD THERE B EEN NO OF ACCOUNTS. ANONYMITY OF THE ACTUAL SELLER WOULD NOT MAKE THE PURCHASES AS NON PURCHASES AT ALL. IN FACT, BOGUS PURCHASES AS WELL AS EXCESS STOCK IS CONTRADICTORY TO EACH OTHER . THE ORDER OF THE ASSESSING OFFICER ON THE POINT OF BOGUS PURCHAS ES IS, THEREFORE FALLACIOUS. THE FACTS OF THE CASES BEFORE US. WE ARE OF THE OPINION THAT IN THESE CIRCUMSTANCES, ADDITION FOR BOGUS PUR CHASES COULD NOT ARISE. WE DELETE THE ADDITION MADE BY THE ASSE SSING OFFICER FOR ALLEGED BOGUS PURCHASES. 8.1 RESPECTFULLY FOLLOWING THE REASONING GIVEN BY THE TRIBUNAL IN THE AFORESAID ORDER, WE DELETE THE ADDITION OF RS. 85,08,522/-. 11. FURTHER WE FIND THAT AGAINST THE ORDER OF TRIBU NAL, REVENUE HAD PREFERRED APPEAL BEFORE HON. GUJARAT HIGH COURT AND WHICH WAS ALSO DISMISSED. IN VIEW OF THE AFORESAID FACTS, WE RESPECTFULLY FOLLOW ING THE ORDER OF THE CO- ORDINATE BENCH IN THE CASE OF ELECTROPACK (SUPRA) D ELETE THE ADDITION MADE IN THE CASE OF ASSESSEE. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 2 ND GROUND IS WITH RESPECT TO ADDITION OF RS. 7,57,000 /- AS UNDISCLOSED INCOME FROM SALE PROCEEDS OF HOUSE. 12. DURING THE COURSE OF SEARCH AND SEIZURE OPERATI ON FROM THE LOOSE PAPER FOUND IT WAS REVEALED THAT ASSESSEE HAD SOLD A HOUSE FOR RS. 7,57,000/- BUT THE SALE PROCEEDS WAS NOT DISCLOSED IN THE RETURN OF IN COME. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASON FOR NON DISCLOSURE OF S ALE PROCEEDS. THE ASSESSEE INTERALIA SUBMITTED THAT THE LAND ON WHICH CONSTRUCTION OF THE HOUSE CARRIED OUT AT INDORE BELONGED TO HIS MOTHER. THE LAND WAS ACQUIRED FROM THE SALE PROCEEDS OF THE HOUSE OF HIS FATHER AND THE CO NSTRUCTION WAS CARRIED OUT FROM THE PROCEEDS OF SALE OF HOUSE AND MATURITY OF FDR. THE LEARNED A.R. FURTHER SUBMITTED THAT THE PAPER SEIZED WAS A ROUGH PAPER ON WHICH A ROUGH CALCULATION OF FUND FLOW WAS MADE FOR PURCHASE OF A NEW HOUSE, ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSIONS MADE BY THE ASSESSEE. HE CONSIDERED THE SAME UNACCOUNTED SALE PROCEEDS AS UNDISCLOSED I NCOME FOR A. Y. 1993- 94 BY HOLDING AS UNDER:- IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 8 8.4 DURING THE PRESENT SET ASIDE ASSESSMENT PROCEED INGS THE ASSESSEE VIDE LELLER DATED 04.09.2006 HAS SUBMITTED THE REPLY WHI CH IS REPRODUCED AS UNDER;'...... 2.2. IT IS SUBMITTED THAT THE ADDITION IS BASED O N PAPER SEIZED FROM THE RESIDENCE OF OUR CLIENT AT PAGE NO.68 OF ANNEXURE A -3 (PLEASE SEE PAGE NO.L17 OF THE PAPER BOOK PART-1). IT IS SUBMITTED T HAT THE SAID HOUSE PROPERTY BELONGED TO SHRI REVARAM SHARMA. FATHER OF OUR CLIE NT AND' THEREFORE' INCOME FROM SALE THEREOF CANNOT BE CONSIDERED AS INCOME IN CASE OF OUR CLIENT. TOTAL AMOUNT OF RS.7,57,000/- NOTED ON THIS SEIZED PAPER HAS BEEN EXPLAINED IN THE STATEMENT SUBMITTED TO THE HON'BLE ITAT (PLEASE SEE PAGE NO. 151 OF THE PAPER BOOK). OUR CLIENT HAS ALSO SUBMITTED FURTHER EVIDENCES IN THIS REGARD SUCH AS COPY OF DOCUMENT FOR SALE OF HOUSE PROPERTY , THE PROOF FOR FIXED DEPOSIT WITH EMPIRE INDUSTRIES LTD, AND THE CERTIFI CATE FROM UNITED WESTERN BANK LTD. FOR FIXED DEPOSIT (PLEASE SEE PAGE NOS. 1 69 TO 181 OF THE PAPER BOOK PART-ILL. 2.3 IT IS SUBMITTED THAT THE ISSUE IS FULLY AND SAT ISFACTORILY EXPLAINED AND THEREFORE NO ADDITION IN THAT RESPECT SHOULD BE MAD E IN THE CASE OF OUR CLIENT......' THE EXPLANATION GIVEN BY THE ASSESSEE HAS BEEN CONS IDERED AND THE SAME IS NOT ACCEPTABLE ON FOLLOWING GROUNDS: (I) IT HAS NOT BEEN EXPLAINED BY THE ASSESSE E WHY THE AMOUNT OF RS.6,15,000/-RECEIVED FROM THE SALE OF HOUSE IS CLU BBED WITH THE AMOUNTS OF FIXED DEPOSITS OF RS.42,000/- WITH EMPIRE INDUSTRIE S LTD. AND RS.75,000/- & RS.25,000/- WITH UNITED WESTERN BANK. (II) THE TRANSACTIONS OF SALE OF HOUSE IS PRO VED TO BE PERTAINED TO DECEMBER 1993, WHEREAS THE FDRS WITH UNITED WESTERN BANK ARE AS UNDER: RS.75.000/-FROM 19.11.1989 TO 19. 12.1990. RS.25,000/- FROM 31.01.1990 TO 30. 04.1990. BOTH THE FIXED DEPOSITS CARRIED INTEREST OF 14% AND THE MATURITY PERIOD OF BOTH GOT EXPIRED ON 19.02.1990 AND 30.04.1990 RESPECTIVE LY. THEREFORE, THE VALUE OF FIXED DEPOSITS SHOULD BE MORE THAN THE AMOUNT DE POSITED. THE FIXED DEPOSIT OF RS. 75,000/- & 25,000/- WERE EN-CASHED O N 03.02.1993 & 25.06.1992 RESPECTIVELY. THE AMOUNTS EN-CASHED MUST HAVE BEEN UTILIZED OR INVESTED ELSEWHERE. THE SAME WOULD NOT HAVE BEEN AV AILABLE TO THE ASSESSEE AFTER SUCH A LONG PERIOD. FURTHER, THE CER TIFICATE OF UNITED WESTERN BANK DOES NOT MENTION THE MATURITY VALUE. THEREFORE THE EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT RELIABLE. REGARDING PAGE 61 OF A-2 SEIZED FROM THE RESIDENCE OF THE ASSESSEE, IT HAS BEEN EXPLAINED BY THE ASSESSEE THAT THE FIXED DEPOS IT OF RS.1,30,000/- WITH THE CENTRAL BANK WAS UTILIZED FOR CONSTRUCTION OF H OUSE AND THE ASSESSEE HAS PRODUCED CERTIFICATE DATED 27.11.1996 FROM THE CENT RAL BANK, INDORE. THIS CERTIFICATE STATES THAT INTEREST OF RS.5,252/- HAS BEEN ACCRUED ON FD OF RS.1,30,000/- WHICH HAS NOT BEEN PAID. THE CERTIFIC ATE DOES NOT SPEAK OF ENCASHMENT OF FD. IT MEANS AS ON THE DALE OF ISSUAN CE OF THE CERTIFICATE I.E. 27.11.1996, THE FD OF RS.1,30,000/- STOOD DEPOSITED WITH THE BANK AND THE IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 9 SAME WAS NOT AVAILABLE WITH THE ASSESSEE IN THE MON TH OF DECEMBER, 1993 FOR CONSTRUCTION OF HOUSE. THE AVAILABILITY OF FD OF RS.42,000/- WITH EMPIRE I NDUSTRIES LTD HAS ALREADY BEEN DISCUSSED ABOVE. THE SAME WAS ALSO NOT AVAILAB LE WITH THE ASSESSEE FOR INCURRING THE CONSTRUCTION EXPENSES. THE ASSESSEE HAS STATED THAT THE EXPENDITURE OF RS. 7,76,000/- WAS MADE FROM THE BALANCE IN SAVING BANK A/C BUT THE ASSESSE E HAS NOT FURNISHED COPY OF BANK ACCOUNT SHOWING THE AVAILABILITY OF BALANCE IN THE ACCOUNT. THUS, IT IS PROVED BEYOND ANY DOUBT THAT ABOVE REFE RRED FDS & BALANCE IN THE BANK ACCOUNT WERE NOT AVAILABLE WITH THE ASSESSEE F OR MAKING EXPENSES IN CONSTRUCTION OF HOUSE. IN VIEW OF THE ABOVE FACTS, THE ASSESSEE'S EXPLANAT ION THAT THE EXPENSES FOR CONSTRUCTION OF HOUSE WAS MADE FROM THE VARIOUS SOU RCE AS DISCUSSED ABOVE IS NOT ACCEPTABLE. THE NOTINGS IN PAGE NO. 68 OF AN NEXURE-A/3 ARE DULY CORROBORATED WITH THE TRANSACTION AS RECORDED AT PA GE NO.61 OF ANNEXURE- A/2. THUS, IT IS PROVED THAT THE EXPENSES INCURRED FOR CONSTRUCTION OF HOUSE HAVE BEEN MADE FROM THE UNACCOUNTED SALE PROCEEDS O F HOUSE. THE ASSESSEE HAS FAILED TO FURNISH ANY REASONABLE EXPLA NATION OR TO PRODUCE EVIDENCES FOR DISCLOSING THE AFORESAID SALE PROCEED S. HENCE, UNACCOUNTED SALE PROCEEDS OF THE HOUSE AMOUNTING TO RS. 7,57,00 0/- ARE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE F.Y. 199 3-94. 13. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE IS NOW IN APPEAL BEFORE US. 14. BEFORE US, THE LEARNED A.R. SUBMITTED THAT THE ADDITION WAS BASED ON THE PAPER SEIZED FROM THE RESIDENCE OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE SAID HOUSE PROPERTY BELONGED TO SHRI REVARAM SH ARMA HIS FATHER AND THEREFORE INCOME FROM THE SALE THEREOF CANNOT BE CO NSIDERED AS INCOME IN THE HANDS OF ASSESSEE. HE FURTHER SUBMITTED THAT THERE WERE TOTAL SEVEN LEGAL HEIRS OF HIS FATHER AND THEREFORE THE ENTIRE SALE P ROCEEDS CANNOT BE TAXED IN HIS HANDS. SINCE THE ASSESSEES SHARE IN THE PROPER TY OF HIS FATHER WAS TO THE EXTENT OF 1/7 TH ONLY 1/7 TH AT THE MOST CAN BE CONSIDERED IN THE HANDS OF THE ASSESSEE. HE PLACED ON RECORD THE COPY OF THE SALE AGREEMENT AT PAGE 169 TO 172 OF THE PAPER BOOK. THE LEARNED D.R. ON THE O THER HANDS SUPPORTED THE ORDER OF ASSESSING OFFICER. IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 10 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE COPY OF THE SALE AGREEMENT PLACED ON RECOR D, IT IS SEEN THAT THE PROPERTY WHICH HAS BEEN SOLD BELONGED TO LATE SHRI REVARAM SHARMA THE FATHER OF ASSESSEE. THE PROPERTY WAS SOLD BY THE LE GAL HEIRS OF SHRI REVARAM SHARMA. . THE ASSESSEE BEING ONE OF THE SEVEN LEGAL HEIRS THE SHARE OF THE ASSESSEE IN THE PROPERTY IS TO THE EXTENT OF 1/7 TH SHARE. BEFORE US, THE REVENUE COULD NOT CONTROVERT THE SUBMISSION OF ASSE SSEE. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT THE ENTIRE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE BUT THE ADDITION CAN ONLY BE MADE TO THE EXTENT OF ASSESSEES SHARE. WE THEREFORE RESTRICT THE ADDITI ON TO RS. 1,08,000/- (ROUNDED OFF BEING 1/7 TH SHARE OF SALE PROCEEDS OF RS. 757000/-). THUS THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 3 RD GROUND IS WITH RESPECT TO DEDUCTION OF INTEREST OF RS. 7,90,000/- 16. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEE DINGS, WHILE EXAMINING THE ISSUE OF BOGUS PURCHASE IN THE HANDS OF THE ASSESSE E AND ITS BUSINESS ASSOCIATES NAMELY ELECTROTHERM INDIA LTD, MAGNATHER M, M/S CONNECTION AND M/S ELECTRO PACK, IT WAS OBSERVED THAT THE FUNDS WH ICH WERE GENERATED FROM BOGUS PURCHASE AND UNACCOUNTED SALE, IN THE CASE OF ELECTROTHERM INDIA LTD. WAS TRANSFERRED TO SHRI PUKHRAJ SHAH AND HIS ASSOCI ATES, K. PUKHRAJ AND CO., HASMUKHLAL AND AMBALAL AND OTHERS WHO IN TURN MADE INVESTMENT IN THE LAND FOR ELECTROTHERM GROUP OR AS UNSECURED LOAN IN THE BOOKS OF THE ACCOUNTS OF THE ASSESSEE. ASSESSING OFFICER ALSO NOTICED THAT ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 36(1)(III) ON THE LOANS WHI CH WERE IN FACT DIVERTED UNACCOUNTED INCOME OF ELECTROTHERM INDIA GROUP INCL UDING ASSESSEE. HE ACCORDINGLY DISALLOWED THE CLAIM OF INTEREST FOR DE DUCTION UNDER SECTION 36(1)(III) ON THE UNSECURED LOANS. 17. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, TH E ASSESSEE IS NOW IN APPEAL BEFORE US. IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 11 18. BEFORE US, THE LEARNED A.R. SUBMITTED THAT ON IDENTICAL FACTS AND ON IDENTICAL CIRCUMSTANCES OF THE CASE, SIMILAR ADDITIONS MADE BY ASSESSING OFFICER IN THE CASE OF SHAILESH BHANDARI WAS DELETED BY HON. TRIBU NAL IN IT(SS)A NO. 35/AHD/1997 ORDER DATED 9.03.2001. HE PLACED ON RE CORD THE COPY OF THE AFORESAID ORDER. FROM THE COPY OF THE AFORESAID ORD ER, HE POINTED OUT TO THE OPERATIVE PART AT PAGE 138 OF THE PAPER BOOK WHERE THE HON. TRIBUNAL RELYING ON THE DECISION IN THE CASE OF MUKESH BHANDARI HAS DELETED THE ADDITION. HE FURTHER SUBMITTED THAT DISPUTE IN THE CASE OF ASSES SEE WAS ALSO COVERED BY THE DECISION OF TRIBUNAL IN THE CASE OF ELECTRO THE RM INDIA LTD. IN ITA NO. 38/AHD/1997 ORDER DATED 29.12.1998. HE THUS URGED T HAT SINCE IDENTICDAL ADDITIONS HAVE BEEN DELETED IN CASE OF OTHER ASSESS EES, THE ADDITION BE DELETED EVEN IN THE HANDS OF ASSESSEE. THE LEARNED D.R. ON THE OTHER HAND RELIED ON THE ORDER OF ASSESSING OFFICER AND CIT(A) . 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ON IDENTICAL FACTS, THE CO-ORDINATE BE NCH OF TRIBUNAL IN THE CASE OF SHRI SHAILESH BHANDARI IT(SS)A NO. 35/AHD/1997 O RDER DATED 9.03.2001 ON THE MATTER RELATING TO INTEREST HAS DELETED THE ADD ITION MADE BY THE ASSESSING OFFICER BY HOLDING AS UNDER: 7. COMING TO GROUND OF APPEAL NO.(4) RELATING TO DI SALLOWANCE OF CLAIM OF INTEREST U/S 36 (1 ) ( I I I ) AMOUNTING TO RS .4, 32,157/, SHRI M.G. PATEL, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE IS COVERED BY THE DECISION OF THE 'TRIBUNAL IN THE CASE OF M / B ELECTROTHERM (INDIA) LIMITED IN ITA NO.38/AHD/1997, ORDER DATED 29-12-1998. IT WAS PLEADED THAT THE APPEAL (TAX APPEAL NO.217 OF 1999, ORDER DATED 29-11-2000) OF THE REVENUE UNDER SECTION 260A FILED AGAINST THE ORDER OF THE TRIBUNA L IN THE CASE OF M/S ELECTROTHERM (INDIA) LIMITED HAS NOT BEEN ADMITTED BY THE HON'BLE GUJARAT HIGH COURT IN TAX APPEAL NO.217 OF 1999 BY HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THE TRIBUNAL'S ORDER. IT WAS SUBMITTED THAT RELYING ON THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S EL ECTROTHERM (INDIA) LIMITED, THE TRIBUNAL IN THE CASE OF SHRI MUKESH BHANDARI IN ITA NO. 33/AHD/1997 ORDER DATED 17.01.2001, HAS DELETED SIMILAR ADDITIO N OF RS. 4,99,909/- ADDED BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST CLA IMED AS A DEDUCTION IN DIFFERENT ASSESSMENT YEARS INCLUDED IN THE BLOCK PE RIOD AS PER THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. ACCORDINGLY, IT WAS SUBMITTED THAT ON IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 12 THE SAME REASONING, THE ADDITION OF RS. 4,42,157/- MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 7.1 THE LEARNED D.R. COULD NOT CONTROVERT THE SUBMI SSIONS MADE BY THE LEARNED A.R. OF THE ASSESSEE BUT PLEADED THAT THE R EVENUE HAS NOT ACCEPTED THE FINDING OF THE TRIBUNAL AS WELL AS THE HON. GUJARAT HIGH COURT IN THE CASE OF M/S ELECTROTHERM (INDIA) LIMIT ED AND SLP HAS BEEN FILED BEFORE THE HON. SUPREME COURT. 7.2 AFTER HEARING THE PARTIES TO THE DISPUTE, WE DELETE THE ADDITION OF RS. 4,32,157/- MADE IN THE CASE OF THE ASSESSEE RELYING UPON OUR RESONING GIVEN IN THE CASE OF SHRI MUKESH BHANDARI IN ITA NO . 33/AHD/1997 AS WELL AS THE REASONING GIVEN IN THE CASE OF M/S ELEC TROTHERM (INDIA) LIMITED IN ITA NO. 38/AHD/1997, ORDER DATED 29.12.1 998. ACCORDINGLY, THIS GROUND IS ALLOWED. 20. BEFORE US, THE LEARNED D.R. COULD NOT CONTROVER T THE SUBMISSIONS MADE BY THE A.R BY BRINGING ANY CONTRARY MATERIAL ON RECORD. IN VIEW OF THE AFORESAID FACTS AND RELYING ON THE DECISION OF THE CO-ORDINATE BENC H IN THE CASE OF SHRI SAILESH BHANDARI (SUPRA) ADDITION IN THE CASE OF AS SESSEE IS DELETED. GROUND NO. 4 IS WITH RESPECT TO ADDIT ION OF RS. 21,50,000/-. 21. ASSESSING OFFICER HAD NOTED THAT THE GENERATION OF UNACCOUNTED INCOME BY THE ASSESSEE THROUGH BOGUS PURCHASE WAS TRANSFERRED BACK TO THE ASSESSEE CONCERN IN THE FORM OF DEPOSIT IN THE NAME OF CONC ERNS NAMELY PUKHRAJ AND CO. AND HASMUKHLAL AMBALAL AND OTHERS CONCERNS CONT ROLLED BY SHRI PUKHRAJ SHAH. FROM THE DETAILS OF DEPOSIT AS APPEARING IN THE BOOKS OF ASSESSEE, HE NOTICED THAT THE TOTAL DEPOSITS OF RS. 21,50,000/- WAS SHOWN IN THE BOOKS IN VARIOUS ASSESSMENT YEARS FROM THE CONCERNS CONTROLL ED BY SHRI PUKHRAJ. THUS DEPOSITS OF RS. 21,50,000/- WAS HELD AS DEEMED INCOME OF THE ASSESSEE UNDER SECTION 68 ON PROTECTIVE BASIS. 22. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE IS NOW IN APPEAL BEFORE US. IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 13 23. THE LEARNED A.R. AT THE OUTSET SUBMITTED THAT T HE FACTS OF THE CASE ARE IDENTICAL TO THAT OF THE CASE OF ELECTROTHERM WHERE THE IDENTICAL ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED BY TRIBUNAL IN ITA NO. 38/AHD/1997. HE PLACED ON RECORD THE COPY OF THE AFORESAID ORDER AN D POINTED OUT TO THE DISCUSSION AND THE DECISION AT PAGE 91 AND 92 OF TH E PAPER BOOK. HE THUS SUBMITTED THAT SINCE THE FACTS IN THE CASE OF ARE I DENTICAL TO THAT OF ELECTROTHERM, THE DECISION FOLLOWED IN THAT CASE BE ALSO FOLLOWED IN THE CASE OF ASSESSEE. THE LEARNED D.R. ON THE OTHER HAND REL IED ON THE ORDER OF ASSESSING OFFICER. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IDENTICAL PROTECTIVE ADDITION WAS MADE IN THE CASE OF ELECTRO THERM INDIA LTD. THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE ELECTROTHERM INDIA LTD. OF ITA NO. 38/AHD/1997 DELETED THE ADDIT ION BY HOLDING AS UNDER: 35 . THE NEXT GROUND OF APPEAL IS IN RESPECT OF PROTEC TIVE ADDITION OF RS. 90,98,306/- ON ACCOUNT OF UNEXPLAINED DEPOSITS IN T HE NAME OF SHRI K. PUKHRAJ AND ASSOCIATES AS UNEXPLAINED CASH CREDIT. ACCORDING TO THE ASSESSING OFFICER, HIS DISCUSSIONS ON GENERATION OF UNACCOUNTED INCOME BY THE ASSESSEE PROVED THAT UNACCOUNTED INCOME SO GENE RATED WAS TRANSFERRED BACK TO THE ASSESSEE GROUP IN FORM OF DEPOSITS IN T HE NAMES OF CONCERNS NAMELY M/S. K. PUKHRAJ AND CO. HASMUKHLAL AMBALAL, BHAVIN TRADERS AND MANOJ TEXTILE WHICH WERE CONTROLLED BY SHRI PUKHRAJ B. SHAH. THE DETAILS OF SUCH DEPOSITS IN THE NAMES OF THE ABOVE CONCERNS AN D THE DIRECTORS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY AMOUNTING TO RS. 90,98,306/- WERE CALLED FOR BY THE ASSESSING OFFICER. ACCORDING TO THE ASSESSING OFFICER, SINCE THESE DEPOSITS WERE PROVED TO HAVE BEEN MADE OUT OF THE UNACCOUNTED INCOME OF THE ASSESSEE AND WERE UNEXPLAINED, THEY W ERE BE HELD AS DEEMED INCOME OF THE ASSESSEE, SHRI MUKESH BHANDARI AND SH RI SHAILESH BHANDARI U/S. 68 OF THE ACT. SINCE THE SOURCE OF DEPOSITS H AD BEEN TAXED SEPARATELY IN HIS ASSESSMENT WAS NECESSARY. HE, HOWEVER, MADE A PROTECTIVE ADDITION OF RS. 90,98,306/- U./S. 68 OF THE ACT IN THE EVENT TH E ADDITIONS ON ACCOUNT OF UNACCOUNTED INCOME FROM UNDER-INVOICING AND BOGUS P URCHASES DO NOT GET APPROVED ON APPEAL . 36. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DEPOSITS RECEIVED FROM SHRI K. PUKHRAJ AND HIS ASSOCIATES WE RE MADE BY ACCOUNT- PAYEE CHEQUES AND WERE ALSO REPAID BY ACCOUNT-PAYEE CHEQUES. THE DEPOSITORS ARE HAVING P.A. NO. AND ARE ASSESSED TO TX. THE ASSESSING OFFICER SHOULD HAVE MADE ENQUIRIES WITH THE DEPOSITORS IN T HE ABSENCE OF WHICH WAS IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 14 NOT JUSTIFIED IN MAKING THE ADDITION ON THE BASIS O F CONJECTURES AND SURMISES. BY PRODUCING THE P.A. NO. OF THE DEPOSITORS, THE AS SESSEE HAD DISCHARGED THE ONUS WHICH LAY ON IT. HE FURTHER SUBMITTED THAT TH E CONFIRMATIONS IN RESPECT OF LOAN FROM THE PARTIES CONCERNED WERE FILED BEFORE T HE ASSESSING OFFICER BEFORE THE SEARCH OPERATION IN THE REGULAR ASSESSME NT PROCEEDINGS. HE FURTHER SUBMITTED THAT THE LOANS TAKEN FROM THE PAR TIES WERE ENGAGED IN THE REGULAR SARAFI BUSINESS. HE THEREFORE, PLEADED THA T THE PROTECTIVE ADDITION OF RS. 90,98,306/- BE DELETED. THE LD. D.R. ON THE OT HER HAND, RELIED ON THE REASONING GIVEN BY THE ASSESSING OFFICER. AND SUBMI TTED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE IMPUGNED ADDIT ION. 37. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, FACTS AND MATERIALS ON RECORD. IT IS NOT DISPUTED THAT THE ASSESSEE HAD FILED CONF IRMATION LETTERS FROM THE PARTIES BEARING P.A. NOS. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT IN THEIR ASSESSMENTS THE DEPOSITS HAD NOT DECLARED. IN VIEW OF THIS WE ARE OF THE OPINION THAT THE ADDITION SHOULD BE DELETED. WE DO SO. 25. BEFORE US, THE LEARNED D.R. COULD NOT CONTROVER T THE SUBMISSIONS MADE BY THE ASSESSEE BY BRINGING ANY CONTRARY MATERIAL ON RECOR D. HE ALSO COULD NOT DISTINGUISH THE FACTS OF THE CASE OF THE ASSESSEE W ITH THAT OF ELECTROTHERM INDIA LTD, ON WHICH THE ASSESSEE RELIED UPON. IN VI EW OF THE AFORESAID FACTS, WE RESPECTFULLY THE FOLLOWING THE ORDER OF CO-ORDIN ATE BENCH OF TRIBUNAL DELETE THE ADDITION MADE BY ASSESSING OFFICER. THUS THIS G ROUND OF ASSESSEE IS ALLOWED. GROUND NO. 5 IS WITH RESPECT TO PROTECTIVE ADDITION ON ACCOUNT OF UNACCOUNTED INVESTMENT IN LOANS OF RS. 4,52,000/-. 26. DURING THE COURSE OF SEARCH AND SEIZURE OPERATI ON, SEIZED DIARY REVEALED INVESTMENTS IN THE FORM OF FDR AND LOAN AMOUNTING O F RS. 1,05,000/- FOR F.Y. 98-99 RS. 3,40,000/- FOR F.Y. 90-91 AND RS. 7,000/ - FOR F.Y. 91-92 . 27. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEE DINGS, ASSESSEE SUBMITTED THAT THE AFORESAID INVESTMENTS BELONGED TO HIS LATE FATHER SHRI REVARAM SHARMA. THE ASSESSEE WAS THEREAFTER ASKED TO PROVE THE CAPACITY OF SHRI REVARAM SHARMA IN RESPONSE TO WHICH THE ASSESSEE FI LED WRITTEN SUBMISSIONS. THE SUBMISSIONS MADE BY THE ASSESSEE W AS NOT FOUND IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 15 ACCEPTABLE TO THE ASSESSING OFFICER FOR THE REASON THAT THE SEIZED DOCUMENTS SHOWED THE DETAILS OF INVESTMENT AND IT ALSO CONTAI NED DETAILS OF VARIOUS HOUSEHOLD EXPENDITURE. ASSESSING OFFICER CONCLUDED THAT THE TRANSACTION AS RECORDED IN THE SEIZED DOCUMENTS WERE RELEVANT TO T HE ASSESSEE AND THE ONUS TO EXPLAIN THE SOURCE OF INVESTMENT LIES SQUAR ELY ON THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE THAT THE INVESTMENTS BEL ONGED TO HIS FATHER WAS REJECTED BY THE ASSESSING OFFICER FOR THE REASON TH AT THE ASSESSEE COULD NOT FURNISH EVIDENCE IN SUPPORT OF HIS CONTENTION, THAT HIS FATHER WAS ASSESSED TO TAX AND AT LATER STAGE HE ACCEPTED THAT SHRI SHARMA WAS NOT ASSESSED TO TAX. FROM THE SALARY CERTIFICATE OF SHRI REVARAM SHARMA SUBMITTED BY THE ASSESSEE, ASSESSING OFFICER NOTICED THAT HE WAS WOR KING WITH EMPIRE INDUSTRIES LTD AND HIS ANNUAL SALARY WAS RS. 15,444 /- ONLY. HE THEREFORE CONCLUDED THAT THE AFORESAID ANNUAL SALARY WAS HARD LY SUFFICIENT TO MEET THE HOUSEHOLD EXPENDITURE AND THEREFORE THE INVESTMENTS OF RS. 4,52,000/- APPEAR TO BE ILLOGICAL. HE THUS REJECTED THE CONTE NTION OF THE ASSESSEE THAT THE INVESTMENTS BELONG TO HIS FATHER AND SINCE THE ASSESSEE HAD FAILED TO DISCHARGE HIS ONUS UNDER SECTION 69 OF THE ACT, THE AMOUNT WAS HELD AT DEEMED INCOME OF THE ASSESSEE ON PROTECTIVE BASIS.I N THE SECOND INNINGS OF THE ASSESSMENT PROCEEDINGS ALSO, ASSESSING OFFICER NOTICED THAT ASSESSEE HAD NOT SUBMITTED ANY NEW SUBMISSION, EXPLANATION O R EVIDENCES BUT HAD ONLY RELIED UPON THE DETAILS AND EXPLANATIONS SUBMI TTED BEFORE THE TRIBUNAL AND THEREFORE HE CONCLUDED THAT THERE WAS NO REASON TO DIFFER FROM THE FINDING GIVEN BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, 28. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER ASS ESSEE IS NOW IN APPEAL BEFORE US. HE REITERATED THE SUBMISSIONS MADE BEFORE ASSES SING OFFICER AND THUS URGED THAT THE ADDITION BE DELETED. THE LEARNED D.R . ON THE OTHER HAND SUPPORTED THE ORDER OF ASSESSING OFFICER. 29. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE MATERIAL SEIZED DURING THE COURSE OF SEARC H AND SEIZURE OPERATION, IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 16 IT WAS NOTICED THAT THERE WERE INVESTMENTS OF RS. 4 ,52,000/-. THE ASSESSEE SUBMITTED THAT THE INVESTMENTS BELONGED TO HIS LATE FATHER SHRI REVARAM SHARMA. FROM THE COPY OF THE SALARY CERTIFICATE, A SSESSING OFFICER NOTICED THAT SHRI REVARAM SHARMA WAS DRAWING ANNUAL SALARY OF RS. 15,444/- ONLY. THE COPY OF THE SALARY CERTIFICATE, IS PLACED ON RE CORD AT PAGE 122 AND 123 OF THE PAPER BOOK. ASSESSING OFFICER CONCLUDED THAT WI TH THE ANNUAL SALARY INCOME OF RS. 15,444/-. THE INVESTMENTS OF RS. 4,5 2,000/- BELONGING TO HIS FATHER DOES NOT SEEMS LOGICAL. ASSESSING OFFICER H AS FURTHER NOTED THAT ASSESSEE COULD NOT SUBSTANTIATE OR BRING ANY MATERI AL ON RECORD TO PROVE THAT THE INVESTMENTS BELONG TO HIS FATHER. BEFORE US, TH E LEARNED A.R. COULD NOT CONTROVERT THE FINDINGS OF ASSESSING OFFICER BY BRI NGING ANY CONTRARY MATERIAL ON RECORD. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF ASSESSING OFFICER AND THUS THIS GROUND OF ASSESSEE IS DISMISSED. 6 TH GROUND IS WITH RESPECT TO ADDITION OF RS. 572810/- U/S 69A. 30. DURING THE COURSE OF SEARCH AND SEIZURE OPERATI ONS, DETAILS OF INVESTMENTS IN SHARES OF RS. 5,72,810/- NOTED IN THE SEIZED DOCUME NTS WAS FOUND. THE ASSESSEE WAS ASKED TO FURNISH TO EXPLAIN THE SOURCE OF INVESTMENT. ON THE BASIS OF WRITTEN SUBMISSION OF THE ASSESSEE, ASSESS ING OFFICER CONCLUDED THAT ASSESSEE HAD FAILED TO FURNISH THE SOURCE OF INVEST MENT IN SHARES OF RS. 35,000/- IN VARIOUS COMPANIES FOUND DURING THE COUR SE OF SEARCH AND SEIZURE OPERATION. ASSESSEE HAD ALSO FAILED TO FURNISH THE SOURCE OF INVESTMENTS IN SHARES OF RS. 5,72,810/- AS NOTED IN THE SEIZED DOC UMENTS. SINCE THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF INVESTMENT S, THE AGGREGATE INVESTMENTS OF RS. 5,72,810/- WAS TREATED AT DEEMED UNDER SECTION 69A OF THE ACT ON PROTECTIVE BASIS. 31. IN THE SECOND INNINGS BEFORE ASSESSING OFFICER, PURSUANT TO THE TRIBUNALS DIRECTIONS, ASSESSING OFFICER NOTICED THAT ASSESSEE HAD EXPLAINED THE SOURCE OF INVESTMENT OF RS. 41,000/- MADE IN SHARES BUT HA D FAILED TO EXPLAIN THE IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 17 SOURCE OF REMAINING INVESTMENT OF RS. 5,31,810/- (5 ,72,810- 41,000/-). HE THUS RETAINED THAT THE ADDITION ON ACCOUNT OF UNACC OUNTED INVESTMENT IN SHARES AMOUNTING TO RS. 5,31,810/- AND RS. 35,000/- ON PROTECTIVE BASIS. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESS EE IS NOW IN APPEAL BEFORE US. 32. BEFORE US, THE LEARNED A.R. SUBMITTED THAT THE ASSESSEE HAD SUBMITTED EXPLANATION OF THE INVESTMENTS WHICH WAS ALSO PLACE D AT PAGE 157 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT THE SAID INV ESTMENTS BELONG TO SHRI REVARAM SHARMA, THE FATHER OF THE ASSESSEE AND THER EFORE NO ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT CAN BE MADE IN TH E HANDS OF THE ASSESSEE. IN THE ALTERNATE, HE SUBMITTED THAT THE PEAK INVESTMENTS WORKS OUT TO RS. 41,000/- AND THEREFORE THE ADDITION BE RESTR ICTED TO THAT AMOUNT. THE LEARNED D.R. ON THE OTHER HAND POINTED OUT TO THE F INDINGS OF THE ASSESSING OFFICER WHEREIN THE ASSESSING OFFICER HAD NOTED THA T THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF INVESTMENTS. HE THUS SUPPO RTED THE ORDER OF ASSESSING OFFICER. 33. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS WORKED OUT THE PEAK INVESTMENT @ RS. 4 1,000/- AND THIS WORKING OF ASSESSEE COULD NOT BE CONTROVERTED ON BE HALF OF REVENUE. IN THESE FACTS THE ADDITION IS RESTRICTED TO RS. 41,00 0/- AND THUS THIS GROUND IS PARTLY ALLOWED. GROUND NO. 7 IS WITH RESPECT TO UNEXPLAINED INVESTM ENT ON HOUSE OF RS. 4,23,000-. 34. ON THE BASIS OF MATERIAL SEIZED FROM THE RESIDE NTIAL PREMISES OF THE ASSESSEE, ASSESSING OFFICER NOTICED THAT ASSESSEE H AD INCURRED EXPENDITURE IN HOUSE CONSTRUCTION OF RS. 4,23,000/- AT INDORE I N F.Y. 93-94. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF INCOME FOR THE CONSTRUCTION OF IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 18 HOUSE. IN THE ABSENCE OF ANY SATISFACTORILY EXPLAN ATION, ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN CONSTRUCTION OF HOUSE AMOUNTING TO RS. 4,23,000/- WAS MADE UNDER SECTION 69 ON PROTECTIVE BASIS. IN THE SECOND GROUND OF HEARING BEFORE ASSESSING OFFICER PURSUANT TO THE DIRECTIONS OF ITAT, ASSESSING OFFICER NOTED THAT ASSESSEE HAS NOT SUBMI TTED ANY NEW SUBMISSIONS OR EVIDENCE BUT HAD ONLY RELIED UPON TH E DETAILS AND EXPLANATION SUBMITTED BEFORE TRIBUNAL. IN THE ABSENCE OF ANY N EW EVIDENCE OR EXPLANATION ASSESSING OFFICER CONFIRMED THE FINDING S OF HIS PREDECESSOR. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE AS SESSEE IS NOW IN APPEAL BEFORE US. 35. BEFORE US, THE LEARNED A.R. SUBMITTED THAT THE EXPENDITURE WAS INCURRED OUT OF THE FUNDS BELONGING TO SHRI REVARAM SHARMA HIS F ATHER, WHO HAD IN TURN RECEIVED THE FUNDS ON SALE OF PROPERTY. HE THUS UR GED THAT SINCE THE SOURCE OF EXPENDITURE HAS BEEN FURNISHED THE THE ADDITION BE DELETED. THE LEARNED D.R. ON THE RELIED ON THE ORDER OF ASSESSING OFFICER. 36. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ASSESSING OFFICER HAS NOTED THAT THE A SSESSEE HAD NOT SUBMITTED ANY NEW EXPLANATION OR EVIDENCE IN SUPPOR T OF HIS CONTENTION THAT THE FUNDS USED FOR CONSTRUCTION OF HOUSE BELONGED T O HIS FATHER. WE FIND THAT THE ASSESSEE HAS FILED AN EXPLANATION BUT THE SAME COULD NOT BE SUBSTANTIATED BY THE ASSESSEE OR CONTROVERTED BY TH E REVENUE WITH EVIDENCE. ACCORDINGLY CONSIDERING THE ENTIRE FACTS OF THE CAS E AND ALLOWING SOME CREDIT FOR THE AMOUNT WHICH MAY HAVE BEEN INCURRED BY THE LATE FATHER OF ASSESSEE, THE ENDS OF JUSTICE SHALL BE MET IF ADDITION IS RES TRICTED TO RS. 2 LACS AND THUS THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. GROUND NO. 8 IS WITH RESPECT TO ADDITION OF RS. 1,1 9,925/- BY WAY OF INVESTMENT IN JEWELLERY. IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 19 37. DURING THE COURSE OF SEARCH AND SEIZURE OPERATI ONS GOLD JEWELLERY WEIGHING 181.90 GRAMS AMOUNTING TO RS. 4,32,070/- AND SILVER UTENSILS OF RS. 17,500/- WERE FOUND. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF INVESTMENT IN JEWELLERY. ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS THAT JEWELLERY OF RS. 4,49,571/-REPRESENTED (STRIDHAN) OF HIS WIFE AND AFTER CONSIDERING THE CBDT CIRCULAR HELD THAT THE ASSESSEE HAS FAILED TO FURNISH THE SOURCE OF ACQUISITION OF BALANCE JEWELLERY WEIGHING 181.90 GR AMS. THE INVESTMENT WAS DETERMINED BY TAKING THE AVERAGE RATE OF JEWELLERY AT RS. 1,19,925/- AND IN THE ABSENCE OF PROPER EXPLANATION ABOUT THE SOURCE OF A CQUISITION, THE INVESTMENT IN JEWELLERY WAS HELD AT DEEMED INCOME UNDER 69A ON PROTECTIVE BASIS. 38. IN THE SECOND ROUND PURSUANT TO THE ORDER OF IT AT ASSESSEE INFORMED THAT THE JEWELLERY BELONGED TO HUF OF SHRI REVARAM SHARMA AN D THE SAME HAS BEEN DULY DISCLOSED IN THE WEALTH TAX RETURN OF THE HUF. ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND ACCORDING LY RETAINED TO THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE IS NOW IN APPEAL BEFORE US. 39. BEFORE US, THE LEARNED A.R. SUBMITTED THAT THE JEWELLERY UNDER CONSIDERATION BELONGED TO THE HUF OF SHRI REVARAM SHARMA, FATHER OF THE ASSESSEE AND THE SAME HAS BEEN DULY DISCLOSED IN THE WEALTH TAX RETURNS OF THE HUF. HE PLACED ON RECORD THE COPY OF HUF RETURNS AT PAGE 12 4 TO 140 OF THE PAPER BOOK. HE THUS SUBMITTED THAT THE JEWELLERY HAS BEE N FULLY EXPLAINED AND THEREFORE NO ADDITION WAS CALLED FOR. THE LEARNED D .R. ON THE OTHER HAND RELIED ON THE ORDER OF ASSESSING OFFICER. 40. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE COPY OF THE STATEMENT OF WEALTH OF SHRI RE VARAM SHARMA HUF, IT IS SEEN THAT THE ASSESSEE HAS DISCLOSED THE GOLD AND S ILVER ARTICLES IN THE WEALTH TAX RETURN AND THE COPY OF THE WEALTH TAX RE TURN HAS ALSO BEEN PLACED ON RECORD. BEFORE US, THE LEARNED D.R. COULD NOT CO NTROVERT THE SUBMISSIONS IT(SS)A NO 20/AHD/2007 . BLOCK PERIOD 1.4.85 TO 31.3.86, 1.4.94 TO 31.3.95 & 1.4.95 TO 12.12.95 20 MADE BY THE ASSESSEE. IN VIEW OF THE AFORESAID FACT S, WE ARE OF THE VIEW THAT SINCE THE JEWELLERY HAS BEEN STATED TO BE BELONGING TO HUF OF THE ASSESSEES FATHER AND SINCE THE SAME IS DISCLOSED IN THE RETUR NS OF WEALTH, NO ADDITION ON ACCOUNT OF UNDISCLOSED INVESTMENT IN JEWELLERY CAN BE MADE IN THE PRESENT CASE. WE THUS DIRECT ITS DELETION. THUS THIS GROUND IS ALLOWED. GROUND NO. 9 AND 10 WERE NOT PRESSED BY THE LD. A.R. AND THEREFORE DISMISSED. 41. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 09 - 2013. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR IT AT,AHMEDABAD