Nikhanj Brothers Pvt. Ltd., Chandigarh V. DCIT, Chandigarh

ITSSA 21/CHANDI/2008

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1485 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-06-2015
• Assessment Year: misc
• Appeal Filed On: 07-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: GAGAN DEEP SINGH; SSH S K MUKHI
• Keywords: Unexplained cash credit; Unexplained expenditure; Business income; Search and seizure; Document seized; Opportunity of being heard; Documents seized
• Section: 68; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER IT(SS)A NO. 21/CHD/2008 BLOCK PERIOD : 1990-91 TO 27.7.2000 M/S NIKHANJ BROTHERS PVT LTD., VS. THE ACIT, CIRCL E 4(1), CHANDIGARH CHANDIGARH PAN NO. AABCN2306A (APPELLANT) (RESPONDENT) APPELLANT BY : S/SH. S.K.MUKHI & GAGANDEEP SINGH RESPONDENT BY : SH. SUSHIL KUMAR DATE OF HEARING : 08.12.2015 DATE OF PRONOUNCEMENT : 27.01.2016 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OR CIT(A) CHANDIGARH DATED 08.09.2008 RELATING TO BLOCK ASSES SMENT PERIOD (PREVIOUS YEAR 1990-91 TO 1999-2000 AND 1.4.2000 TO 20.7.2000). 2. GROUND NO.1 OF THE APPEAL, READS AS UNDER:- 1. THAT THE ID. COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE A DDITION OF RS.34,306/- AND RS.2,46,589/- ON ACCOUNT OF ALLEGED DIFFERENCE IN FIGURES AS PER BOOKS OF ACCOUNT AND P ROFIT & 2 LOSS ACCOUNT FOR A.Y 1994-95 AND 1998-99 RESPECTIVE LY WHICH IS ARBITRARY AND UNJUSTIFIED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH AND SURVEY OPERATION U/S 132 OF THE INCOME-TAX ACT, 1961 (IN S HORT 'THE ACT') WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE M/S NIKHANJ BRO THERS PRIVATE LIMITED SCO 303-304, SECTOR 35-B CHANDIGARH. THE WARRANTS OF A UTHORIZATION WERE ISSUED BY DIT (INV.), NEW DELHI AND THE SEARCH WAS CARRIED OUT ON 20.7.2000. DURING THE COURSE OF THE SAID OPERATION, BOOKS OF A CCOUNT AND CERTAIN INCRIMINATING MATERIALS WERE FOUND AT THE PREMISES OF THE ASSESSEE, WHICH WAS SEIZED. LATER ON, THE ASSESSING OFFICER ISSUED NOTI CE U/S 158BC OF THE ACT. IN RESPONSE TO THE SAID NOTICE RETURN FOR THE BLOCK PE RIOD WAS FILED BY THE ASSESSEE ON 14.5.2001. NOTICES U/S 143(2) AND 142( 1) ALONG WITH QUESTIONNAIRE WERE ISSUED TO THE ASSESSEE. VIDE PAR A 2 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT THE BOOK S OF ACCOUNT OF THE ASSESSEE RELATING TO PREVIOUS YEARS 1993-94, 1994-9 5 AND 1997-98 ALONG WITH THE BOOKS OF THE OTHER YEARS WERE SEIZED FROM THE P REMISES LOCATED AT 268, SECTOR 9-C CHANDIGARH, RESIDENCE OF SHRI RAMESH NIK HANJ. THE ASSESSEE VIDE ITS LETTER DATED 10.6.2002 SUBMITTED THAT THE RETUR NS WERE BEING FILED ON THE BASIS OF SEIZED BOOKS OF ACCOUNT INCLUDING LEDGER, CASH BOOK ETC. MAINTAINED IN THE REGULAR COURSE OF BUSINESS. THE ASSESSING OF FICER COMPARED THE AMOUNTS AS GIVEN IN THE PROFIT AND LOSS ACCOUNT WIT H THE ENTRIES IN THE BOOKS OF ACCOUNT SEIZED BY THE REVENUE. THE ASSESSING OFF ICER HAS TABULATED THE DISCREPANCIES AT PAGE 2 OF THE ASSESSMENT ORDER. TH E DISCREPANCIES IN RESPECT TO THE PREVIOUS YEAR 1997-98 RELATING TO ASSESSMENT YEAR 1998-99 AND PREVIOUS YEAR 1993-94 RELATING TO ASSESSMENT YEAR 1 994-95 ARE MENTIONED AS UNDER:- 3 PREVIOUS YEAR ITEMS FIGURES IN BOOKS (RS. FIGURES AS PER PROFIT AND LOSS ACCOUNT (RS.) DIFFERENCE (RS.) 1997-98 VEGETABLES MEAT SALARY & WAGES 130134 143589 187320 175134 253589 278909 45000 110000 91589 246589 1994-95 PROVISIONS 566961 620069 53108 1993-94 MEAN PRODUCTS BAKERY & CONFECTIONARY LAUNDRY CHARGES, LINEN & CLOTHES PRINTING STATIONERY 556788 389060 36000 37461 42247 566788 379060 49500 50961 43053 10000 10000 13500 13500 806 47806 THE ASSESSING OFFICER NOTICED THE ABOVE DISCREPANCI ES IN THE BOOKS OF ACCOUNT ONLY AFTER COMPARING THE FIGURES WITH THE PROFIT AN D LOSS ACCOUNT. AFTER FINDING THE ABOVE DISCREPANCIES, THE ASSESSEE WAS AGAIN CON FRONTED BY THE ASSESSING OFFICER. IN REPLY, THE ASSESSEE SUBMITTED THAT FIGU RES IN THE PROFIT AND LOSS ACCOUNT ARE ON THE BASIS OF ACCOUNTS MAINTAINED ON COMPUTER AND WHICH ARE COMPLETE AND CORRECT. THE ASSESSEE FURTHER SUBMITTE D THAT THE MANUAL BOOKS OF ACCOUNT ARE JUST A SORT OF BACK UP AND MAY NOT HAVE COMPLETE ENTRIES. THE ASSESSEE EMPHASIZED THAT THE RETURNS WERE FILED ON THE BASIS OF COMPUTERIZED BOOKS OF ACCOUNT. AS REGARDS THE DISCREPANCIES FOUN D IN THE FINANCIAL YEAR 1993- 94, THE ASSESSEE SUBMITTED THAT THE CHARTERED ACCOU NTANT TOOK INTO ACCOUNT THE OMITTED BILLS AND THAT IS WHY THERE WAS DIFFERENCE IN THE FIGURES. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE FO R THE REASONS STATED IN PARA 2.3 AND 2.4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFI CER ACCEPTED THE EXPLANATION OF THE ASSESSEE FOR THE PREVIOUS YEAR 1994-95 AND H ENCE NO ADDITION HAS BEEN 4 MADE. THE ASSESSING OFFICER MADE THE ADDITION OF RS . 34,306/- AND RS. 2,46,589/- FOR THE PREVIOUS YEAR 1993-94 AND 1997-9 8 RESPECTIVELY AS BEING BOGUS INFLATED AMOUNTS OF EXPENDITURE. HOWEVER, TH E EXPENSES OF RS. 13,500/- SHOWN AS LAUNDRY CHARGES HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND THE LD. CIT( A) UPHELD THE ADDITIONS, OBSERVING AS UNDER:- 10. 1 HAVE CAREFULLY CONSIDERED THE SUBMISSI ONS. 1 FIND THAT THE CONDUCT OF THE ASSESSEE IS NOT BONAFIDE. T HE BOOKS OF ACCOUNTS WERE SEIZED BY THE DEPARTMENT. IN ITS INIT IAL REPLY DATED 10/6/02, THE ASSESSEE SUBMITTED THAT THE RETURNS HA VE BEEN FILED ON THE BASIS OF THE SEIZED BOOKS OF ACCOUNTS. WHEN THE DISCREPANCIES WERE FOUND BY THE ASSESSING OFFIC ER AND CONFRONTED TO THE ASSESSEE, THE ASSESSEE TOOK A CONTRADICTORY STAND THAT ALL THE ENTRIES ARE AVAILA BLE IN THE COMPUTERIZED BOOKS OF ACCOUNTS WERE NOT AVAILABLE DURING THE COURSE OF SEARCH. IT IS JUST AFTER THOUGHT, IF ANY BOOKS OF ACCOUNT ARE PREPARED AFTER THE SEARCH, THEN THE ASSESSEE W OULD LIKE TO INCORPORATE ALL SUCH ENTRIES IN THOSE BOOKS OF ACCO UNTS INCLUDING THE DISCREPANCIES FOUND BY THE ASSESSING OFFICER, S UCH BOOKS OF ACCOUNTS CANNOT BE RELIED UPON. IF THE ASSESSEE IS ALLOWED AN ADVANTAGE OF THESE BOOKS OF ACCOUNTS, THEN ANY INCR IMINATING DOCUMENT FOUND DURING THE COURSE OF SEARCH WOULD HA VE NO VALUE. THIS WILL GO AGAINST THE VERY PRINCIPLE OF MAINTAIN ING REGULAR BOOKS OF ACCOUNTS. THE PRESUMPTION GIVEN U/S 132(4A ) WILL COME TO THE RESCUE OF THE REVENUE. SECTION 132(4A) READS AS UNDER : (4A) WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS, M ONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG ARE OR IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE OF A SEARCH, IT MAY BE PRESUMED- 5 (I) THAT SUCH BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING BELONG OR BELONGS TO SUCH PERSON; (II) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS ARE TRUE; AND (IN) THAT THE SIGNATURE AND EVERY OTHER PART OF SUC H BOOKS OF ACCOUNT AND OTHER DOCUMENTS WHICH PURPORT TO BE IN THE HANDWRITING OF ANY PARTICULAR PERSON O R WHICH MAY REASONABLY BE ASSUMED TO HAVE BEEN SIGNED BY, OR TO BE IN THE HANDWRITING OF, ANY PARTICULAR PERSON, ARE IN THAT PERSON'S HANDWRITING , AND IN THE CASE OF A DOCUMENT STAMPED, EXECUTED OR ATTESTED, THAT IT WAS DULY STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPORTS TO HAVE BEEN SO EXECUTED OR ATTESTED. 11 THE ASSESSEE FAILED TO PRODUCE ALL THE BI LLS AND VOUCHERS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS BROUGHT OUT CLEARLY THE REASONS FOR MAKING ADDITIONS IN HIS FINDING IN PARAS 2.2 & 2.4 OF ITS ORDER, WHICH HAVE BEEN REPRO DUCED ABOVE. 12 SINCE THE ADDITIONS HAVE BEEN MADE AFTER EXAMIN ATION OF SEIZED MATERIAL AND THE ASSESSEE HAS NOT GIVEN ANY PLAUSIBLE EXPLANATION EXCEPT TO SAY THAT ALL THE ENTRIES ARE AVAILABLE IN THE COMPUTERIZED BOOKS OF ACCOUNTS. NO SUCH FACT WAS DI SCLOSED BY THE ASSESSEE DURING THE COURSE OF SEARCH THAT THE R EAL BOOKS OF ACCOUNTS ARE THE COMPUTERIZED BOOKS OF ACCOUNT. IN FACT THE ASSCSSEE HAS SUBMITTED VIDE LETTER DATED 10/6/02 TH AT THE RETURNS HAVE BEEN PREPARED ON THE BASIS OF THE BOOKS OF ACC OUNT WHICH ARE SEIZED BY THE DEPARTMENT. 13 IN VIEW OF THE ABOVE DISCUSSION, THIS GRO UND OF APPEAL OF THE ASSESSEE IS DISMISSED. 6 5.. WE HAVE HEARD SHRI S.K. MUKHI LD. COUNSEL FOR T HE ASSESSEE AND SHRI SUSHIL KUMAR, LD. DR AT LENGTH AND HAVE ALSO PERUSE D THE MATERIALS AVAILABLE ON RECORD. SHRI S.K. MUKHI, LD. COUNSEL FOR THE ASSESS EE VEHEMENTLY ARGUED THAT THE FIGURES IN THE PROFIT AND LOSS ACCOUNT ARE SHOW N ON THE BASIS OF ACCOUNTS MAINTAINED ON COMPUTER AND WHICH ARE COMPLETE AND C ORRECT. HE POINTED OUT THAT THE RETURNS OF INCOME HAVE BEEN FILED ON THE BASIS OF COMPUTERIZED BOOKS OF ACCOUNT. HE FURTHER SUBMITTED THAT THE ASSESSEE IS READY TO PRODUCE THE COMPUTERIZED BOOKS OF ACCOUNT. IN OUR OPINION, THE EXPLANATION GIVEN BY THE ASSESSEE IS AN AFTERTHOUGHT. IN ITS INITIAL REPLY D ATED 10.6.2002, THE ASSESSEE CLAIMED THAT THE RETURNS HAVE BEEN FILED ON THE BAS IS OF SEIZED DOCUMENTS. WHEN THE DISCREPANCIES WERE CONFRONTED TO THE ASSESSEE, THE ASSESSEE TOOK A CONTRADICTORY STAND AND SUBMITTED THAT ALL THE ENTR IES ARE AVAILABLE IN THE COMPUTERIZED BOOKS OF ACCOUNT. HOWEVER, NO COMPUTER IZED BOOKS OF ACCOUNT WERE FOUND DURING THE COURSE OF SEARCH. IN OUR OPI NION, IF ANY BOOKS OF ACCOUNT ARE PREPARED AFTER THE SEARCH, SUCH BOOKS OF ACCOUN T CANNOT BE RELIED UPON BECAUSE THESE BOOKS OF ACCOUNT HAVE NO EVIDENTIARY VALUE. IT IS ALSO APPARENT FROM THE RECORD THAT THE ASSESSEE FAILED TO PRODUCE ALL THE BILLS AND VOUCHERS BEFORE THE LOWER AUTHORITIES. THE ASSESSING OFFICER HAS GIVEN A DETAILED FINDINGS WHILE MAKING THE ADDITION IN PARA 2.2 AND 2.4 OF TH E ASSESSMENT ORDER. IT IS ALSO RELEVANT TO STATE HERE THAT NO SUCH EXPLANATION WAS GIVEN BY THE ASSESSEE DURING THE COURSE OF SEARCH THAT THE REAL BOOKS OF ACCOUNT ARE COMPUTERIZED BOOKS OF ACCOUNT. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT SEE ANY VALID GROUND IN INTERFERING WITH THE ORDER OF CIT(A) ON THIS ISSUE . ACCORDINGLY, WE UPHOLD THE SAME AND DISMISS GROUND NO.1 OF THE APPEAL. 6. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. THAT THE ID. COMMISSIONER OF INCOME TAX(APPEAL S) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS. 1,55 ,000/-, RS.2,00,000/- AND RS.1,57,000/- PERTAINING TO A.YS 1994-95, 7 1996-97 AND 1997-98 BEING SHARE APPLICATION MONEY B UT TREATING THE SAME TO BE UNEXPLAINED CASH CREDITS WH ICH IS ARBITRARY AND UNJUSTIFIED. 7. THE RELEVANT FACTS ARE THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION AT THE RESIDENTIAL PREMISES OF THE DIRECT OR OF ASSESSEES COMPANY, A DIARY WAS SEIZED. AS PER PAGES 33, 39 AND 45 OF TH E DIARY (ANNEXURE A-6) THE DETAILS OF VARIOUS AMOUNTS HAVE BEEN MENTIONED. TH ESE AMOUNTS OF RS. 1,55,000/-, RS. 2 LACS AND RS. 1,57,000/- PERTAINED TO PREVIOUS YEARS 1993-94, 1994-95 AND 1996-97 RESPECTIVELY. THE ASSESSING OFF ICER NOTED THAT THESE AMOUNTS WERE WRITTEN WITH PENCIL, AND HE THEREFORE, DOUBTED THE GENUINENESS OF THESE ENTRIES. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE NATURE OF THESE AMOUNTS AND ALSO ASKED THE ASSESSEE TO RECONCILE WITH THE REGULAR BOOKS OF ACCOUNT. IN RES PONSE TO THE SAID QUERY, THE ASSESSEE SUBMITTED ITS REPLY DATED 10.6.2002 STATIN G THAT ANNEXURE A-6 IS THE PERSONAL DIARY OF THE ACCOUNTANT WHO HAD LEFT THE A SSESSEE AND THESE ARE HIS PERSONAL ENTRIES MADE BY HIM FROM TIME TO TIME EITH ER RELATING TO THE ASSESSEE OR OTHER PARTIES AS HE HAS BEEN DOING ACCOUNT WORK OF OTHER FIRMS ALSO. THE ASSESSEE FURTHER CONTENDED THAT AT PAGE 31, WHICH I S A ENTRY OF 17.2.1987, NO DATE OR BILL NUMBER HAS BEEN MENTIONED. ACCORDINGLY , IT WAS STATED THAT IT IS DIFFICULT TO EXPLAIN THE SAME. THE ASSESSEE FURTHER CONTENDED THAT AGAIN AT PAGES 30, 39 AND 45 OF THE SAME DIARY, NOWHERE THE NAME O F THE ASSESSEE WAS IN EXISTENCE. AFTER ACKNOWLEDGING THE REPLY OF THE ASS ESSEE, THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE STATING THAT AS TO WHY THESE AMOUNTS SHOULD NOT BE TREATED AS UNEXPLAINED CREDIT ENTRIES . THE ASSESSING OFFICER OBSERVED THAT RECEIPTS OF CASH OF RS. 1,55,000/-, R S. 2,00,000/- AND RS. 1,57,000/- THOUGH REPRESENTING BUSINESS RECEIPTS AR E NOT CREDITED OR ACCOUNTED FOR IN THE LEDGER ACCOUNT. HOWEVER, THE ASSESSEE V IDE ITS LETTER DATED 18.7.2002 8 TOOK A STAND THAT THE DISPUTED AMOUNT IS THE SHARE APPLICATION MONEY. THE REPLY SUBMITTED BY THE ASSESSEE READS AS UNDER:- AS REGARDS THE AMOUNTS OF RS. 1,55,000/- AND 2,01,020/- (AND NOT 2 LACS) PERTAINING TO THE FINANCIAL YEAR 1 993-94 AND 1995-96, IT IS SUBMITTED THAT THEY REPRESENTED SHAR E APPLICATION MONEY RECEIVED FROM SH. KAMILINDER GILL AND DEVINDER GILL WHICH WAS RETURNED TO THEM AS THE SHA RES COULD NOT BE ALLOTTED. THEIR CONFIRMATIONS ARE ATTACHED AS ANNEXURE 2 AND 2.1 AS FOR RS. 1,57,000/- - RELATING TO FINANCIAL YEAR 1996-097 THE SAID AMOUNT WAS NOT TAKEN INTO ACCOUNT EITHER ON RE CEIPT OR PAYMENT SIDE IN CASH BOOK, NOR WAS THERE ANY NECESS ITY THEREOF. SINCE IT HAS NOT COME INTO THE BOOKS NOR A NY EXPENDITURE OR INVESTMENT HAS BEEN MADE OUT IT, TH E ENTRIES HAVE BECOME REDUNDANT HAVING NO IMPACT WHATSOEVER. IN FACT THESE ARE DEEMED TO THE NO ENTRIES. UNDER THE CIRCU MSTANCES NO ADVERSE ACTION IS CALLED IN RESPECT OF ANY OF TH E AMOUNTS. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATIO N OF THE ASSESSEE AND CONCLUDED THAT THE RECEIPTS OF CASH AMOUNTS OF RS. 1,55,000/-, RS. 2,00,000/- AND RS. 1,57,000/- RELATING TO PREVIOUS YEARS I.E. 1993-94, 1994-95 AND 1996-97 ARE BUSINESS RECEIPTS OF THE ASSESSEE AND THE ASS ESSEE HAD DELIBERATELY OMITTED FROM INCLUSION IN THE BUSINESS RECEIPTS FOR THE ABO VE YEARS. THEREFORE, THE ABOVE AMOUNTS WERE TREATED AS UNEXPLAINED CASH CREDITS U/ S 68 OF THE ACT AND ADDITIONS WERE MADE ACCORDINGLY. 8. ON APPEAL, THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER, OBSERVING AS UNDER:- 19 1 HAVE CAREFULLY CONSIDERED THE SUBMISSIO NS OF THE ASSESSEE. THE MATTER IS NOT SO SIMPLE AS IS PROJECT ED BY THE LD. COUNSEL OF THE ASSESSE. IN THE NORMAL COURSE, T HE 9 DEPARTMENT VERIFIES THE CONTENTS OF THE AFFIDAVIT. BUT IN THIS CASE, THE ASSESSEE COULD NOT PRODUCE THE PERSONS WH O HAVE SAID TO CONTRIBUTE THE AMOUNTS AS PER SHARE APPLICA TION MONEY. AFTER EXAMINING THE WHOLE MATERIAL ON RECORD , I FIND THAT THE SURROUNDING CIRCUMSTANCES AND ALSO THE ENT RIES IN THE SEIZED BOOKS OF ACCOUNTS ARE AGAINST THE ASSESSEE. IN THIS CONTEXT, THE FOLLOWING POINTS EMERGE: (I) THE CONDUCT OF THE ASSESSEE IS NOT BONAFIDE AS THE ASSESSEE DENIED THAT THE ENTRIES WRITTEN IN THE DIARY OF THE ACCOUNTANT BELONGS TO THE ASSESSEE. IT IS HIGHLY IMPROBABLE TH AT THE ASSESSEE WOULD NOT BE KNOWING THE NATURE OF THESE E NTRIES ESPECIALLY WHEN LATER ON IT IS CLAIMED THAT THIS IS THE SHARE APPLICATION MONEY. CURSORY LOOK ON THE DOCUMENTS FO UND DURING THE COURSE OF SEARCH WOULD HAVE PROMPTED THE ASSESSEE TO DECIPHER THE FIGURES WRITTEN IN THE DIA RY OF THE ACCOUNTANT PARTICULARLY WHEN THESE ARE CLAIMED TO B E SHARE APPLICATION MONEY. THE MATTER OF ISSUANCE OF SHARES TO PERSONS WOULD DEFINITELY BE KNOWN TO THE ASSESSEE A S PER THE CIRCUMSTANCES EXISTING IN THE CASE. BUT THE ASSESSE E TOOK A STAND THAT THE DIARY BELONGS TO THE ACCOUNTANT AND HAS NO CONNECTION WITH THE ASSESSEE. THIS SHOWS THAT THE A SSESSEE HAS NOT GIVEN THE TRUTH TO THE INCOME TAX AUTHORITI ES AND TRIED TO WRIGGLE OUT OF THE SITUATION SAYING THAT T HE DIARY BELONGS TO THE ACCOUNTANT. II) WHEN THE ASSESSING OFFICER EXAMINED ALL THE ENT RIES VIS-A-VIS THE REGULAR OF ACCOUNTS ARID GAVE HIS FIN DING THROUGH HIS SHOW-CAUSE NOTICE DATED 5/7/02, THE ASS ESSEE CAME OUT WITH THE EXPLANATION THAT THESE AMOUN TS ARE THE SHARE APPLICATION MONEY RECEIVED FROM SH. KAMLINDER GILL AND DEVENDER GILL (III) THE SURROUNDING CIRCUMSTANCES LEAD TO A CONCL USION THAT THE EXPLANATION GIVEN BY THE ASSESSEE OF RECEIPT OF SHARE APPLICATION MONEY IS NOT CONVINCING AS IS EVIDENT F ROM THE FOLLOWING FACTS : (A) THE ENTRIES ARE WRITTEN WITH PENCIL. HAD THERE BEEN A GENUINE ACCOUNT OF RECEIPT OF SHARE APPLICAT ION MONEY, THEN THERE WAS NO NEED TO WRITE THESE ENTRIE S 10 WITH PENCIL. THE ASSESSING OFFICER HAS ALREADY GIVE N HIS OBSERVATIONS WHILE GIVING THE SHOW-CAUSE NOTICE DATED 5/7/02 AND THESE OBSERVATIONS HAVE BEEN REPRODUCED IN PA'RA-15 ABOVE. IN THE REGULAR BOOKS OF ACCOUNTS, THERE IS NO NEED OF WRITING THESE ENTRIES WITH PENCIL AND THAT TOO HIVE BEEN WRITTEN IN THREE ASSESSMENT YEARS. B) ALL THESE ENTRIES ARE IN CASH. NO PRUDENT PERSON WILL GIVE THESE AMOUNTS IN CASH AND THAT TOO FOR SU CH A CONTINUOUS PERIOD. THE PERSONS STATED TO BE GIVEN T HIS SHARE APPLICATION MONEY HAVE NOT BEEN ISSUED SHARES . RATHER, IT WAS THE CONTENTION OF THE ASSESSEE THAT THE AMOUNTS HAVE BEEN GIVEN BACK. THIS ITSELF INDICATE S THAT THE ASSESSEE IS TRYING TO GIVE A FALSE EXPLANA TION. HAD THERE BEEN ANY GENUINENESS OF ISSUING OF SHARES , THEN THE ASSESSEE WOULD HAVE ISSUED THE SHARES. TH ERE ARE NO FACTS AVAILABLE WHICH COULD SAY THAT THE ASS ESSEE HAS ASKED FOR SHARE APPLICATION MONEY SO AS TO ISSU E THE SHARES. THE ASSESSEE HAS TRIED TO GIVE SUCH AN EXPLANATION WHICH CANNOT BE VERIFIED BY WAY OF DIRE CT EVIDENCE. FOR EXAMPLE, THERE COULD BE A CORRESPONDENCE AND ALSO THE AMOUNTS WOULD HAVE BEEN RECEIVED BY CHEQUE. C) ANOTHER INTERESTING FEATURE IS THAT THE ASSESSEE IS RECEIVING AMOUNTS ON A MONTHLY BASIS. NORMALLY, TH E SHARE APPLICATION MONEY IS RECEIVED WHEN THE PERSON S ARE ASSURED OF ISSUANCE OF SHARES AND ALSO, THE NUM BER OF SHARES. THE PERUSAL OF APPENDIX II, III & IV OF ASS ORDER WOULD REVEAL THAT ENTRIES HAVE STARTED FROM APRIL'93 TO NOVEMBER'96. THERE ARE 63 ENTRIES AND INTERESTINGLY, ALL AMOUNTS ARE IN THE ROUND FIGURES OF RS.5000/-RS.10000/-. THESE ENTRIES DO NOT APPEAR TO BE A SORT OF APPLICATION MONEY. D) THERE IS NO NARRATION WRITTEN IN THE DIARY OF TH E ACCOUNTANT AS WELL AS SPENDING ENTRIES IN THE CASH BOOK. HAD THERE BEEN GENUINE ENTRIES, ASSESSEE WOUL D HAVE WRITTEN THE NARRATION 'SHARE APPLICATION MONEY ', 11 ASSESSEE HAS NOT MADE THE TOTALS ON A PARTICULAR PA GE OF CASH BOOK INCLUDING THESE AMOUNTS. THE GENUINE ENTRIES DEFINITELY WOULD HAVE COME IN THE TOTAL OF CASH BOOK. E) THE ASSESSEE HAS NOT MADE THE TOTALS ON A PARTIC ULAR PAGE OF CASH BOOK INCLUDING THESE AMOUNTS. THE GENUINE REASONS HAVE BEEN COME IN THE TOTAL OF CASH BOOK. F) NO REASONS HAVE BEEN GIVEN BY THE ASSESSEE FOR N ON- ALLOTMENT OF SHARES AND NO REASONS HAVE BEEN GIVEN BY THE ASSESSEE WHY THE AMOUNTS HAVE BENCH RETURNED. (G) THERE IS NO NAME WRITTEN IN THE DIARY AS WELL A S IN THE CASH BOOK. IT IS DIFFICULT TO REMEMBER WHO HAS CONTRIBUTED AND WHEN AS THE ASSESSEE HAS GIVEN AN EXPRESSION THAT THE MONEY BELONGS TO TWO PERSONS. I N THE NORMAL COURSE, THE ASSESSEE WOULD WRITE THE DAT E AS WELL AS THE NAME OF THAT PARTICULAR PERSON BUT NO N AMES OR ADDRESSES HAVE BEEN GIVEN AGAINST THESE AMOUNT. FOR THE SAKE OF ARGUMENTS, EVEN IF THOSE PERSONS HA VE GIVEN AFFIDAVIT OR ON ENQUIRES GIVEN THE EXPLANATIO N THAT THESE AMOUNTS WERE CONTRIBUTED AS SHARE APPLICATION MONEY, STILL THE MANNER OF THE WRITING OF THE ENTRIES IN THE DIARY AS WELL AS IN THE CASH BOO K SHOW THAT THIS IS THE FALSE EXPLANATION OF THOSE PE RSONS. IT APPEARS THAT THESE TWO PERSONS HAVE COME FORWARD TO SAVE THE ASSESSEE. THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION AS WHAT IS THE DEFINITE SOURCE OF THOSE PERSONS AND WHETHER THOSE PERSONS ARE FILING RETURN OF INCOME. IF THEY ARE FILING THE RETURNS OF INCOME, WHETHER THESE AMOUNTS HAVE BEEN SHOWN IN THEIR BALANCE SHEET. THE ENTRIES COULD HAVE BEEN TREATED AS GENUINE IF THE ASSESSEE COULD HAVE SHOWN THAT THOSE PERSONS HAVE ALREADY DECLARED THESE AMOUNTS IN THEI R RESPECTIVE RETURNS BEFORE THE INCOME TAX AUTHORITIE S PRIOR TO THE DATE OF SEARCH. THE ASSESSEE HAS TAKEN A VERY COMMON PLEA THAT THE WHEREABOUTS OF THE ACCOUNTANT ARE NOT KNOWN WHO HAS LEFT THE SERVICE. 12 20. IN VIEW OF THESE PECULIAR CIRCUMSTANCES / SURRO UNDING CIRCUMSTANCES, I AM INCLINED TO REFER THE MATTER BA CK TO THE ASSESSING OFFICER FOR VERIFICATION OF THE AFFIDAVIT S. HAD THERE BEEN CHEQUE TRANSACTIONS OR THE PERSONS, HAVE SHOWN THES E AMOUNTS IN BALANCE SHEETS, THEN THE MATER COULD HAVE BEEN REFE RRED TO THE OR FURTHER VERIFICATION IN THE INTEREST OF JUSTICE. 21. I HAVE ALREADY STATED THAT IT IS NOT A SIMPLE C ASE OF RECEIPT OF SHARE APPLICATION AND THE ASSESSEE IS GIVING TWO AF FIDAVITS BY WAY OF EVIDENCE. THE MATTER HAS TO BE EXAMINED WITH REF ERENCE TO THE SEIZED BOOKS OF ACCOUNT, THE MANNER OF WRITING OF T HESE ENTRIES WITH PENCIL, THE RECEIPT OF ABOUT 63 ITEMS OF SHARE APPL ICATION MONEY [REFER APPENDIX II, III & IV ATTACHED WITH THE ASSE SSMENT ORDER] THE CORRESPONDING ENTRIES IN THE CASH BOOK, ALL THE AMOUNTS RECEIVED IN CASH, ALL THE AMOUNTS WRITTEN IN THE RO UND FIGURE OF RS. 5000/- &. RS.10000/-. THE ASSESSING OFFICER HAS TO BASE HIS CONCLUSION ON THE BASIS OF THE MATERIAL FOUND DURI NG THE COURSE OF SEARCH AND ALSO THE TEST OF HUMAN PROBABILITIES AND SURROUNDING CIRCUMSTANCES WHICH ARE TO BE APPLIED. IN VIEW OF THE ABOVE, THE CIT(A) HELD THAT THE ASSE SSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION. 9. BEFORE US, LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IN OUR CONSIDERED VIE W, THE CIT(A) HAS CORRECTLY OBSERVED THAT THE CONDUCT OF THE ASSESSEE IS NOT BO NAFIDE AS THE ASSESSEE DENIED THAT THE ENTRIES WRITTEN IN THE DIARY OF THE ACCOUN TANT BELONGED TO THE ASSESSEE. IT IS OBSERVED THAT LATER ON THE ASSESSEE CLAIMED T HAT THE FIGURES MENTIONED IN THE DIARY ARE SHARE APPLICATION MONEY. THUS, IT I S CLEAR THAT THE ASSESSEE HAS NOT DISCLOSED THE TRUTH TO THE INCOME TAX AUTHORITI ES AND TRIED TO WRIGGLE OUT THE SITUATION STATING THAT THE DIARY BELONGED TO THE AC COUNTANT. WHEN THE ASSESSING 13 OFFICER EXAMINED ALL THE ENTRIES VIZ A VIZ THE BOOK S OF ACCOUNT AND ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNTS MENTI ONED IN THE DIARY SHOULD NOT BE ADDED TO ITS TOTAL INCOME, THE ASSESSEE CAME OUT WITH THE EXPLANATION THAT THESE AMOUNTS ARE THE SHARE APPLICATION MONEY RECEI VED FROM S/SH. KAMLINDER GILL AND DEVENDER GILL. THE ASSESSEE FAILED TO PROD UCE THE ABOVE PERSONS BEFORE THE ASSESSING OFFICER. IN OUR OPINION, THE LD. CIT (A) HAS CORRECTLY OBSERVED THAT THE SURROUNDING CIRCUMSTANCES LEAD TO A CONCLU SION THAT THE EXPLANATION GIVEN BY THE ASSESSEE OF RECEIPT OF SHARE APPLICATI ON MONEY IS NOT CONVINCING. THE LD. CIT(A) HAS GIVEN DETAILED REASONS IN THIS REGARD IN PARA 19 OF THE IMPUGNED ORDER. WE FULLY ENDORSE THE REASONS GIVE N BY THE CIT(A) IN REJECTING THE EXPLANATION OF THE ASSESSEE. IN OUR OPINION, TH E ASSESSEE HAS MISERABLY FAILED TO SHOW THAT THE DISPUTED AMOUNTS ARE SHARE APPLICA TION MONEY. THE LD. CIT(A) HAS CORRECTLY OBSERVED THAT THERE WAS NO NARRATION IN THE DIARY OF THE ACCOUNTANT AS WELL AS CORRESPONDING ENTRIES IN THE CASH BOOK. HAD THERE BEEN GENUINE ENTRIES, THE ASSESSEE WOULD HAVE WRITTEN NARRATION SHARE APPLICATION MONEY. IT IS ALSO EVIDENT FROM THE RECORD THAT NO REASONS HAV E BEEN GIVEN FOR NON ALLOTMENT OF SHARES AND NO REASONS HAVE BEEN GIVEN BY THE ASSESSEE AS TO WHY AMOUNTS HAVE BEEN RETURNED. THE LD. CIT(A) HAS CAT EGORICALLY POINTED OUT THAT NO NAME HAS BEEN WRITTEN IN THE DIARY AS WELL AS IN THE CASH BOOK. THUS, IT WAS DIFFICULT TO ASCERTAIN WHO HAD CONTRIBUTED, PARTIC ULARLY WHEN THE ASSESSEE HAD STATED THAT THE MONEY BELONGED TO TWO PERSONS. THE ASSESSEE HAS ALSO FAILED TO GIVE ANY EXPLANATION REGARDING THE DEFINITE SOURCE OF THOSE PERSONS. IT IS ALSO NOT KNOWN WHETHER SUCH PERSONS ARE ASSESSED TO INCO ME TAX OR NOT. THUS, THE ASSESSEE FAILED TO PROVE THE IDENTITY OF THE CREDIT ORS, THE CREDITWORTHINESS OF THE CREDITORS AND LASTLY THE GENUINENESS OF THE TRANSAC TIONS. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE DEC LINE TO INTERFERE WITH THE FINDINGS OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, WE REJECT GROUND NO.2 OF THE APPEAL. 14 10. GROUND NO.3 OF THE APPEAL READS AS UNDER:- 3. THAT THE ID. COMMISSIONER OF INCOME TAX (APPEA LS) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS. 1,48 ,100/- PERTAINING TO A.Y 1994-95 ON ACCOUNT OF UNEXPLAINED EXPENDITURE WHICH IS ARBITRARY AND UNJUSTIFIED. 11. THE ASSESSING OFFICER OBSERVED THAT AT PAGE 31 OF THE ANNEXURE A-6 SEIZED FROM THE RESIDENCE OF SHRI RAMESH NIKHANJ CO NTAINED THE DETAILS OF VARIOUS EXPENSES RELATING TO HOTEL KAPIL WHICH IS R UN BY THE ASSESSEE COMPANY. THIS INCLUDED THE EXPENSES INCURRED ON REPAIR AND M AINTENANCE, PRINTING AND STATIONERY, LAUNDRY, LINEN AND CLOTH, WHITE WASHING , PAINTING, CROCKERY AND UNIFORM EXPENSES, AIR CONDITIONING ETC. THE ASSESS ING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THESE EXPENSES A GGREGATING TO RS. 1,48,100/- AND ALSO TO RECONCILE THE FIGURES WITH REGULAR BO OKS OF ACCOUNT. IN RESPONSE TO THE SAID QUERY THE ASSESSEE SUBMITTED ITS REPLY ON 10.6.2002. THE ASSESSEE REITERATED THAT PAGE 31 OF THE ANNEXURE A-6 IS PERS ONAL DIARY OF THE ACCOUNTANT, WHO HAD LEFT THE ASSESSEE AND THE ENTRIES MADE THER EIN ARE HIS PERSONAL NOTINGS RELATING TO THE ASSESSEE OR OTHER PARTIES. THE ASSE SSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE STATING THAT THE ASSESS EE HAS FAILED TO RECONCILE THE VARIOUS AMOUNTS WHICH RELATED TO THE BUSINESS OF HO TEL ONLY. HE FURTHER OBSERVED THAT LIST OF THE AMOUNTS MENTIONED AT PAGE 31 OF TH E ANNEXURE A-6 WERE PAID IN CASH. THE ASSESSEE FAILED TO RECONCILE THESE AMOUNT WITH REGULAR BOOKS OF ACCOUNT AND, THEREFORE, THE ASSESSING OFFICER ADDED THE AMOUNT OF RS. 1,48,100/- TO THE TOTAL INCOME OF THE ASSESSEE TREATING THE SA ME AS UNEXPLAINED EXPENDITURE FOR THE PREVIOUS YEAR 1993-94. 12. ON APPEAL, THE CIT(A) UPHELD THE ADDITION FOR T HE REASONS STATED IN PARAS 32 TO 35 OF THE IMPUGNED ORDER. 15 13. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE MAIN C ONTENTION OF THE ASSESSEE IS THAT DISPUTED ENTRIES RELATE TO PERSONAL DIARY O F THE ACCOUNTANT. IN OUR OPINION, THE NATURE OF EXPENSES AS MENTIONED AT PAG E 31 OF A-6 RELATE TO HOTEL BUSINESS. WHILE DECIDING GROUND NO.2 OF THE APPEAL, REGARDING SHARE APPLICATION MONEY WE HAVE OBSERVED THAT THE ENTRIE S APPEARING IN THE DIARY ALTHOUGH WRITTEN BY THE ACCOUNTANT BUT THESE ENTRIE S OR TRANSACTIONS BELONGED TO THE ASSESSEE. THE ASSESSEE HAS MISERABLY FAILED TO GIVE ANY PLAUSIBLE EXPLANATION REGARDING THESE ENTRIES. IT IS ALSO AN ADMITTED FA CT THAT THE EXPENSES ARE INCURRED IN CASH. CONSIDERING THE RELEVANT FACTS O F THE PRESENT CASE, WE DECLINE TO INTERFERE WITH THE ORDER OF CIT(A) ON THIS ISSUE . THE FINDINGS OF THE CIT(A) ARE CONFIRMED. CONSEQUENTLY, WE REJECT GROUND NO.3 OF THE APPEAL. 14. GROUND NO.4 OF THE APPEAL READS AS UNDER:- 4. THAT THE ID. COMMISSIONER OF INCOME TAX(APPEAL S) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS.1,00,936/- PE RTAINING TO A.Y 1997-98 BEING PROFIT OF 20% ON ALLEGED PURCHASES OF RS.2,52,344/- MADE OUTSIDE THE BOOKS OF ACCOUNT WHICH GIVE A SALE FIGURE OF RS.5,04,688/- WHICH IS ARBITRARY AND UNJUSTIFIED. 15. THE AO OBSERVED THAT DURING THE COURSE OF SE ARCH A DOCUMENT PAGE 36 OF ANNEXURE A WAS FOUND AND SEIZED FROM THE ASSES SEES PREMISES WHICH REVEALED THE PENDING PAYMENTS RELATING TO HOTEL KAP IL UPTO FEBRUARY, 1997 AMOUNTING TO RS. 34,80,000/-. IN THIS REGARD IT WAS SUBMITTED THAT THESE ARE ROUGH AND APPROXIMATE OUTSTANDING LIABILITIES OF TH E ASSESSEE WHICH HAVE NOT BEEN PAID AND HAVE NO FINANCIAL IMPACT. THE AO CLO SELY EXAMINED THE DOCUMENTS AND COMPARED WITH THE LEDGER AND THE CA SH BOOK OF THE PREVIOUS YEAR 1996-97 AND FOUND THAT THERE WERE NO CORRESPO NDING FIGURES OF OUTSTANDING AMOUNT IN THE LEDGER ACCOUNT. THE DISCREPANCIES HAV E BEEN MENTIONED AT PAGE 13 OF THE ASSESSMENT ORDER. THE AO NOTI CED THAT THERE WERE PURCHASES 16 OF RS. 23,25,244/- WHICH WERE NOT RECORDED IN THE B OOKS OF ACCOUNT. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THESE AMOUNTS SHOULD NOT BE TREATED AS PURCHASES OUTSIDE THE BOOKS OF AC COUNT AND GROSS PROFIT SHOULD NOT BE APPLIED @ 20% OF THE SALES. IN RESPONSE, THE ASSESSEE FILED ITS REPLY VIDE LETTER DATED 18.7.2002 AND THE ASSESSING OFFICER RE JECTED THE SAME FOR THE REASONS STATED IN PARAS 6.3 TO 6.5 OF THE ASSESSMEN T ORDER. ACCORDING TO ASSESSING OFFICER, THE ASSESSEE WAS CHANGING ITS ST AND FROM TIME TO TIME REFLECTING INCONSISTENCY IN ITS ARGUMENTS. HE FURTH ER POINTED OUT THAT THE EXPENSES SO RECORDED IN THE SEIZED DOCUMENTS WERE N OT FOUND RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. SIMILARLY, THE EN TRIES OF PURCHASES OF THE VARIOUS FOOD ITEMS SO RECORDED IN THE PHOTOCOPIES I N THE LEDGER ACCOUNT AS SUBMITTED BY THE ASSESSEE WERE NOT RECORDED IN THE VARIOUS PURCHASE ACCOUNTS MAINTAINED IN THE REGULAR LEDGER. THE ASSESSING OFF ICER AGAIN ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE POINTING OUT THAT THE ABOVE DISCREPANCIES. THE ASSESSEE FILED ITS REPLY ON 29.7.2002 WHICH WAS REJ ECTED BY THE ASSESSING OFFICER AND CONSEQUENTLY, HE DETERMINED THE SALE OF FOOD IT EMS AT RS. 5,04,688/- TREATED THE 50% AS INPUT COST OF FOOD ITEMS AMOUNTING TO RS . 2,52,344/-. THE ASSESSING OFFICER APPLIED GP RATE OF 20% ON THE SALE OF RS. 5 ,04,688/- AND THUS MADE THE ADDITION OF RS. 1,00,936/-. 16. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF ASSE SSING OFFICER, OBSERVING AS UNDER:- 44. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE ASSESSEE AS WELL AS GONE THROUGH THE ORDER OF THE A SSESSING OFFICER. THE ASSESSING OFFICER BROUGHT OUT CLEARLY THE DISCREPANCIES BY REFERRING TO THE BOOKS OF ACCOUNT VIS-A-VIS THE SEIZED DOCUMENTS. THE ASSESSEE GAVE A COPY OF THE LEDGER ACCOUNTS. THE ASSESSING OFFICER HAS GIVEN A FINDING THAT THE EXPENSES SO RECORDED IN THE SEIZED DOCUMENTS WERE N OT FOUND RECORD IN THE REGULAR BOOKS OF ACCOUNTS. THERE AFTE R THE 17 ASSESSEE CAME OUT WITH A NEW PLEA THAT THERE IS A S EPARATE LEDGER FOR TRADE CREDITORS. THE ASSESSING OFFICER D EMOLISHED THE ARGUMENTS OF THE ASSESSEE THAT EVEN THESE ENTRI ES SHOULD HAVE BEEN REFLECTED IN THE REGULAR BOOKS OF ACCOUNT S. IN MY VIEW, THE ASSESSEE COULD NOT EXPLAIN SATISFACTORY W HY THESE AMOUNTS ARE NOT APPEARING IN THE REGULAR BOOKS OF A CCOUNTS WHICH WERE E SEIZED BY THE DEPARTMENT. THE FURNISHI NG OF COPY OF ACCOUNTS WOULD NOT SERVE THE PURPOSE UNTIL OR UNLESS THE ASSESSEE COULD POINT OUT HOW THESE ENTRIES ARE REFLECTED IN THE BOOKS OF ACCOUNTS . SIMPLE STATEMENT THAT TH ESE ARE REFLECTED IN THE BOOKS OF ACCOUNT IS NOT SUFFICIENT . THE ASSESSING OFFICER HAS WORKED OUT IN A RATIONAL MANN ER THE ACCOUNTS WHICH ARE NOT REFLECTED IN THE REGULAR BO OKS OF ACCOUNTS AND DETERMINED A REASONABLE GROSS PROFIT R ATE OF 20%. 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS IT IS C LEAR THAT THE EXPENSES RECORDED IN THE SEIZED DOCUMENTS WERE NOT FOUND REC ORDED IN THE REGULAR BOOKS OF ACCOUNT. THEREAFTER, THE ASSESSEE TOOK A NEW PLE A THAT THERE WAS A SEPARATE LEDGER FOR TRADE CREDITOR. THE ASSESSING OFFICER HA S CATEGORICALLY STATED THAT EVEN THESE ENTRIES SHOULD HAVE BEEN REFLECTED IN TH E REGULAR BOOKS OF ACCOUNTS. THE ASSESSEE FAILED TO GIVE ANY PLAUSIBLE EXPLANATI ON AS TO WHY THESE AMOUNT WERE NOT APPEARING IN THE REGULAR BOOKS OF ACCOUNT WHICH WERE SEIZED BY THE REVENUE. THERE IS NO MATERIAL ON RECORD TO CONTROVE RT THE ABOVE FINDINGS OF THE CIT(A) ON THIS ISSUE. AT THE TIME OF HEARING OF THE APPEAL, SHRI S.K. MUKHI, LD. COUNSEL FOR THE ASSESSEE ALTERNATIVELY SUBMITTED TH AT THE GP RATE OF 20% APPLIED IN THIS CASE IS ON HIGHER SIDE. HE FURTHER POINTED OUT THAT THERE WAS NO BASIS IN APPLYING THE ADHOC RATE OF 20% IN THE FACTS AND CIR CUMSTANCES OF THE PRESENT CASE. THE ASSESSING OFFICER HAS NOT CITED ANY COMP ARABLE CASE OR THE PAST HISTORY OF THE ASSESSEES CASE, THEREFORE, THE GP R ATE ADOPTED IN THIS CASE MAY BE REDUCED, SUBMITTED THE LD. COUNSEL FOR THE ASSESSEE . IN OUR OPINION, THERE IS A SUBSTANCE IN THE ABOVE SUBMISSIONS OF SHRI S.K MUKH I, LD. COUNSEL FOR THE 18 ASSESSEE. CONSIDERING THE NATURE OF ASSESSEES BU SINESS AND ALSO THE PECULIAR FACTS OF THE PRESENT CASE, WE ARE OF THE OPINION TH AT THE GP RATE OF 10% SHOULD BE APPLIED IN THIS CASE. THUS, ASSESSEE GETS A RELI EF OF RS. 50,500/-. THIS GROUND OF APPEAL IS ALLOWED PARTLY. 18. GROUND NO.5 OF THE APPEAL READS AS UNDER:- 5. THAT THE ID. COMMISSIONER OF INCOME TAX(APPEAL S) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS.2,88, 072,'- PERTAINING TO A.Y 1999-00 BEING THE ALLEGED DIFFERE NCE BETWEEN AMOUNT RECORDED IN BOOKS AND THOSE RECORDED IN SEIZED DOCUMENT IS ARBITRARY AND UNJUSTIFIED 19. THE ASSESSING OFFICER OBSERVED THAT DURING THE COURSE OF SEARCH A DOCUMENT A-12 WAS FOUND. THIS DOCUMENT CONTAINED PR OFIT AND LOSS ACCOUNT UP TO JANUARY 1999. THE ASSESSING OFFICER NOTICED THAT CERTAIN AMOUNTS FOUND IN THE SEIZED DOCUMENTS WERE NOT TALLYING WITH THE AMOUNTS IN LEDGER. THE DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER ARE AS UNDER:- S.NO. NATURE OF EXPENSES AMOUNT AMOUNT DIFFERENCE RECANTED IN RECORDED IN (AMOUNT IN THE SEIZED THE LEDGER RS.) DOCUMENT (F. Y. 98-99 PAGE I5/A- 12 UPTO31.1.99) TILL JAN, 1999 1 MEAT PRODUCTS 107094 205423 98329 2 COLD DRINKS & SODA 30213 35673 5460 3 CARRIAGE AND CARTAGE 2335 4363 2028 4 SALARY AND WAGES 116739 1 79534 62795 5 GAS EXPENSES 43430 52430 9000 6 GAS REPAIR AND 3009 13684 10675 19 MAINTENANCE 7 ELECTRICAL REPAIR 58868 106716 47848 8 VEHICLE REPAIR 33945 48845 J4900 9 CROCKERY & UTENSILS 2457 5377 2920 10 CONSUMABLE STORES 67997 102114 34117 TOTAL 288072 THE ASSESSING OFFICER ASKED THE ASSESSEE TO SHOW CA USE AS TO WHY AN AMOUNT OF RS. 2,88,072/- REPRESENTING INFLATED AND BOGUS CLAI M OF VARIOUS EXPENSES SHOULD NOT BE DISALLOWED AND ADDED TO THE INCOME OF THE PR EVIOUS YEAR 1998-99. THE ASSESSING OFFICER DID NOT ACCEPT THE REPLY OF THE A SSESSEE AND MADE THE ADDITION FOR THE REASONS STATED IN PARAS 3.4, 3.5 AND 3.6 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER OBSERVED THAT NO BILLS OR VOUCHER S WERE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM. ON APPEAL, THE CI T(A) UPHELD THE ADDITION, OBSERVING AS UNDER:- 52 I HAVE CAREFULLY CONSIDERED THE SUBMISS ION OF THE ASSESSEE. THE ASSESSING HAS METICULOUSLY WORKED OU T THE DIFFERENCE IN THE AMOUNTS IN THE SEIZED DOCUMENTS V IS--VIS THE LEDGER. IT IS INTERESTING TO SEE THAT CERTAIN E XPENSES WHICH COULD NOT BE INFLATED ARE EXACTLY TALLYING WI TH THE LEDGER, FOR EXAMPLE, ELECTRICITY, TELEPHONE, GRATUI TY, PROVISION, ETC. THE OTHER EXPENSES HAVE BEEN INFLAT ED AS PER THE LEDGER. IT IS TRUE HAT THE ASSESSEE HAS SHOWN T HE HIGHER INCOME OF RENT. THIS WILL NOT DISCHARGE THE RESPONS IBILITY TO EXPLAIN THE EXPENSES CLAIMED IN THE LEDGER TILL JAN UARY 1999. THE ASSESSING OFFICER HAS GIVEN COGENT REASO NS FOR NOT BELIEVING THE REASONS WHICH HAVE BEEN REPRODUCE D ABOVE. THE ASSESSEE HAS FAILED TO PRODUCE THE RELEV ANT VOUCHERS FOR THE PURPOSE OF VERIFICATION. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER WAS JUSTIFIED IN 20 MAKING THE ADDITION AND THIS GROUND OF APPEAL OF TH E ASSESSEE IS ALSO DISMISSED. 20. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). IT IS EVIDENT FROM THE RECORDS THAT THE AMOUNT RECORDED IN THE SEIZED DOCUMENTS AND THE AMOUNT RECORDED IN THE LEDGER IN THE PREVIOUS YEAR 1998-99 DIFFERS BY LARGE SUM AND THE ASSESSEE FAILE D TO PRODUCE BILLS OR VOUCHERS IN SUPPORT OF ITS CLAIM. HOWEVER, CERTAIN EXPENSES WHICH WERE NOT INFLATED ARE EXACTLY TALLYING WITH THE LEDGER I.E. ELECTRICITY, TELEPHONE, GRATUITY PROVISIONS ETC. BOTH THE AUTHORITIES BELOW HAVE CA TEGORICALLY OBSERVED THAT THE OTHER EXPENSES HAVE BEEN INFLATED AS PER THE LEDGER . THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF THE AUTHORITIE S BELOW. IN OUR OPINION, THE AUTHORITIES BELOW WERE FULLY JUSTIFIED IN REJECTING THE REASONS GIVEN BY THE ASSESSEE, WHICH ARE NOT CONVINCING. ACCORDINGLY, W E DO NOT SEE ANY MERIT IN THIS GROUND OF APPEAL AND DISMISS THE SAME. 21. GROUND NO.6 OF THE APPEALS READS AS UNDER:- 6. THAT THE ID. COMMISSIONER OF INCOME TAX (APPEA LS) HAS FURTHER ERRED IN NOT ADJUDICATING ON THE ISSUE OF C HARGING INTEREST U/S 158BFA(2) WHICH IN ANY CASE IS NOT CHA RGEABLE IN THE INSTANT CASE. 22. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS OBSE RVED THAT THE ASSESSEE HAD RAISED THIS GROUND BEFORE THE CIT(A) I.E. GROUND NO . .7 OF THE APPEAL. HOWEVER, THE CIT(A) HAS NOT ADJUDICATED THE ABOVE GROUND FO R THE REASONS BEST KNOWN TO HIM. CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, WE REMAND THIS ISSUE TO THE CIT(A) WITH THE DIRECTION TO DECI DE THE SAME AFRESH IN 21 ACCORDANCE WITH LAW AFTER AFFORDING DUE AND REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 23. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY AND PARTLY FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27.01.2016 SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED 27 TH JANUARY, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR