M.S. Hostel, Baroda V. The ACIT., Cent.Circle-2, Baroda

ITSSA 216/AHD/2004

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8606 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-12-2010
• Assessment Year: misc
• Appeal Filed On: 22-07-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: U S BHATI
• Keywords: Depreciation; Search and seizure; Document seized; Opportunity of being heard; Block assessment; Documents seized
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 10/12/2010 DRAFTED ON: 03 /1/2011 IT(SS)A NO.216/AHD/2004 BLOCK PERIOD ENDING ON 20/09/2001 M.S. HOSTEL NEW SAMA SAVLI ROAD BARODA VS. THE ACIT CENTRAL CIRCLE-2 BARODA PAN/GIR NO. : AACFM 4056 C ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI U.S. BHATI, A.R. RESPONDENT BY: SHRI ANIL KUMAR, CIT-DR O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS) -II, AHMEDABAD DATED 20/05/2004. 2. THERE WAS SOME TYPOGRAPHICAL DEFECT IN THE GROUN DS RAISED BY THE ASSESSEE, THEREFORE, THE CORRECTED VERSION WAS REFE RRED BEFORE US AS REPRODUCED BELOW:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN FACT AND IN LAW IN REJECTING THE CONTENTION OF T HE APPELLANT THAT THE ASSESSING OFFICER HAS ERRED IN FACT AND IN LAW IN INVOKING THE PROVISIONS OF CHAPTER XIV B OF THE INC OME TAX IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 2 - ACT, 1961 (THE ACT) BY VIRTUE OF A NOTICE U/S.158 BC WHICH IS DEFECTIVE IN ITS FORM AND CONTENTS. IT IS MOST RESPECTFULLY SUBMITTED THAT THE NOTICE I SSUED U/S.158BC OF THE ACT IS DEFECTIVE IN ITS FORM AND C ONTENTS AND THEREFORE THE ENTIRE PROCEEDINGS UNDER CHAPTER XIV B INITIATED BY THE DEFECTIVE NOTICE IS VOID AB INITIO AND IT MAY BE SO HELD AND THE ASSESSMENT BE ANNULLED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN REJECTING THE CONTENTION OF THE APPELLANT THAT THE AO HAD FRAMED THE ASSESSMENT AND HAD MADE ADDITIONS WITHOUT GIVING PROPER OPPORTUNITY OF BEIN G HEARD TO THE APPELLANT. THE AO HAD MADE THE ADDITIONS WI THOUT GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT AND DENYING THE BASIC PRINCIPLES OF NATUR E JUSTICE TO THE APPELLANT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN FACT AND IN LAW IN REJECTING THE ABOVE CONTENTION O F THE APPELLANT WITHOUT APPRECIATING THE FACT THAT THE AO HAD ISSUED THE NOTICE U/S.158BC WITHOUT SPECIFYING THE STATUS OF THE APPELLANT AND THE ASSESSMENT HAS BEEN MADE IN T HE STATUS OF TRUST DESPITE THE FACT THAT THE APPELLA NT IS A FIRM. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN FACT AND IN LAW IN NOT APPRECIATING THE FACT THAT T HE AO HAD MADE THE ADDITIONS TO THE UNDISCLOSED INCOME OF THE APPELLANT WITHOUT VERIFYING WHETHER THE INCOME SOUG HT TO BE ADDED IS INCLUDED AND IS PART OF THE BOOKS OF ACCOU NTS MAINTAINED IN NORMAL COURSE OF BUSINESS AND NO EVID ENCE WAS DETECTED DURING THE COURSE OF SEARCH TO POINT O UT ANY DISCREPANCY IN THE SAME. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.40 ,000 MADE IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 3 - BY THE AO ON GROUND OF LOANS NOT RECORDED IN THE B OOKS OF ACCOUNTS. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.36 ,79,049 FOR AY 2000-01 AND RS.29,24,585 FOR AY 2001-02 MA DE BY THE AO BY REJECTING THE BOOKS OF ACCOUNTS OF THE A PPELLANT AND BY ESTIMATING THE INCOME OF THE APPELLANT BASED ON ROUGH WORKING IN ANNEXURE A-11 PAGE NO.83 FOUND DUR ING THE COURSE OF SEARCH. IT IS SUBMITTED THAT NO INDEPENDENT EVIDENCE IS BEI NG BROUGHT ON RECORD BY THE AO FOR COMING TO THE CONC LUSION THAT THERE IS SUPPRESSION OF INCOME AND HENCE IT IS MOST RESPECTFULLY SUBMITTED THAT THE ADDITION MADE ON TH IS GROUND IS REQUIRED TO BE DELETED. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN LEVYING INTEREST U/S.158BFA(1) OF THE INCOME TAX ACT, 1961. 8. YOUR ASSESSEE CRAVES A RIGHT TO ADD TO OR AMEND, ALTER, SUBSTITUTE, DELETE OR WITHDRAW ALL OR ANY OF THE GR OUNDS OF APPEAL. 3. AT THE OUTSET, THE LEARNED AUTHORISED REPRESENTA TIVE OF THE ASSESSEE MR.U.S. BHATI HAS STATED NOT TO PRESS GROU ND NOS.1 TO 3, HENCE HEREBY DISMISSED BEING NOT PRESSED. 4. APROPOS GROUND NO.4, THE SAME APPEARS TO BE GENE RAL IN NATURE AND THE ARGUMENTS AS RAISED IN THAT CONTEXT ARE BEI NG COVERED WHILE ARGUING GROUND NO.6, TO BE DECIDED ACORDINGLY HEREI NBELOW. 5. GROUND NO.5 IS NOT SERIOUSLY CONTESTED AND HEREB Y DISMISSED. IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 4 - 6. APROPOS GROUND NO.6, FACTS IN BRIEF AS EMERGED F ROM THE CORRESPONDING BLOCK ASSESSMENT ORDER PASSED U/S.158 BC R.W.S. 158BG OF THE I.T.ACT WERE THAT THE ASSESSEE WAS SUBJECTED TO SEARCH OPERATION AS PRESCRIBED U/S.132 OF THE I.T.ACT ON 20/09/2001. THEREUPON, A NOTICE U/S.158BC OF THE I.T.ACT WAS ISSUED AND IN COMPLIAN CE A BLOCK RETURN WAS FILED, HOWEVER, UNDISCLOSED INCOME WAS DECLARED AT RS. NIL. THE ISSUE REVOLVED AROUND A FILE WHICH WAS SEIZED DURI NG THE COURSE OF SEARCH OPERATION MARKED AS ANNEXURE A-11. IN THAT DOCUMENT THERE WAS A WORKING OF ALLEGED PROFIT OF RS.36,79,049/- FOR THE FINANCIAL YEAR 1999-2000 RELEVANT FOR THE ASSESSMENT YEAR 2000-01. THE SAI D CALCULATION WAS WRITTEN IN PEN- INK AND JUST THEREINBELOW THERE WERE CERTAIN FIGURES STATED TO BE WRITTEN IN PENCIL . THE ALLEGATION OF THE REVENUE DEPT IS THAT THE PROFIT HAS BEEN REDUCED BY THOSE FIGURES WHICH WERE WRITTEN IN PENCIL. AN EXPLANATION WAS CALLED FOR TO FURNISH THE VERACITY OF THE PROFIT SO COMPUTED IN THE SAID SEIZ ED PAPER. IT HAS ALSO BEEN ASKED TO PLACE ON RECORD THE EVIDENCES IN RES PECT OF THOSE ENTRIES WRITTEN IN PENCIL. IN COMPLIANCE, THE ASSESSEE HAS SUBMITTED AS FOLLOWS: 1. VIDE PARA 5 OF YOUR LETTER YOU HAVE POINTED OUT THAT THERE IS WORKING OF PROFIT FOR THE YEAR OF RS.36.79 LACS. F URTHER THERE ARE ENTRIES RECORDED THEREIN FOR REDUCING THE PROFIT. WE HAVE TO SUBMIT THAT THE SAID STATEMENT PERTAINS TO THE PROVISIONAL WORKING (SOM E DAYS PRIOR TO THE END OF THE ACCOUNTING YEAR) FOR P LANNING THE TAX PAYMENT (ADVANCE TAX). WHILE MAKING THE ROUGH ESTIMATE , THE ACCOUNTANT NORMALLY INFORMS THE PARTNERS ABOUT THE ENTRIES WHICH HAVE NOT YET BEEN PASSED FOR WANT OF THE BILLS IN T HIS REGARD. YOU WOULD APPRECIATE THAT EVEN THE DEPRECIATION ACCOUNTED FOR THERE IS ON A APPROXIMATE BASIS . SINCE CLOSING ENTRIES AND PROVISION FOR IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 5 - VARIOUS EXPENSES ARE NOT MADE, THE SAID ACCOUNT IS EXTRACT OF PROVISIONAL FIGURES AND THE AUDITED ACCOUNTS THEREAFTER IS THE FINAL ACCOUNT. IF YOU PROPOSE TO CHECK THE VERACITY OF A NY OF THE EXPENSES, PLEASE DO LET US KNOW AND WE SHALL SUBMIT COMPLETE DETAILS THEREOF. 6.1. THE MAIN CONTENTION OF THE ASSESSEE WAS THAT T HE SAID WORKING WAS NOTHING BUT A PROVISIONAL WORKING WHICH WAS MADE FEW DAYS PRIOR TO THE END OF THE ACCOUNTING YEAR SIMPLY TO PLAN THE PAYMENT OF ADVANCE TAX. IT WAS A ROUGH ESTIMATE THEREFORE ONLY PROVISIONA L FIGURES WERE TAKEN BY THE ACCOUNTANT. THE ACCOUNTS WERE FINALIZ ED AS ALSO AUDITED THEREAFTER. THE SAID EXPLANATION WAS DISMISSED BY THE ASSESSING OFFICER ON THE GROUND THAT THE PROFIT DECLARED IN THE RETU RN HAS TO BE CONNECTED WITH THE PROFIT RECORDED IN THE SAID PAPER AND THAT THE REPLY BEING GENERAL IN NATURE, HENCE, COULD NOT BE RELIED UPON. HE HA S ALSO MENTIONED THAT THERE WERE WITHDRAWALS THROUGH BEARER CHEQUES, HENC E, EXPENSES WERE INFLATED AND SO, ACCORDING TO HIM, THERE WAS SUPPRE SSION OF PROFIT DUE TO WHICH THE BOOKS OF ACCOUNT AS WELL HAVE BEEN REJEC TED. THEREAFTER, IN THE SUCCEEDING PARAGRAPHS OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS CONCLUDED THAT IT WAS A CASE OF SUPPRESSION OF PRO FIT, AND THAT A PROFIT WAS COMPUTED IN THE SEIZED DOCUMENT AS PER ASSESSE ES OWN CALCULATION, THEREFORE, HELD AS UNDISCLOSED INCOME FOR ASSESSME NT YEAR 2000-01. WITH THE RESULT, AN AMOUNT OF RS.36,79,049/- WAS TA XED AS UNDISCLOSED INCOME FOR ASSESSMENT YEAR 2000-01 IN THE BLOCK PER IOD. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST A PPELLATE AUTHORITY. 7. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESS EE HAS RAISED FEW OBJECTIONS AGAINST THE SAID ADDITION; AS REPRODUCED BELOW:- IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 6 - (I) THE ASSESSING OFFICER HAS NOT SHOWN ANY INCORR ECTNESS IN THE BOOKS OF ACCOUNT. (II) PROFIT OF RS.35 LAKHS FOR ASSESSMENT YEAR 2000 -01 AND 2002- 03 ESTIMATED BY THE ASSESSING OFFICER IS AFTER REJE CTION OF THE BOOKS OF ACCOUNT UNDER SECTION 145 OF THE ACT. (III) BOOKS OF ACCOUNT HAVE BEEN AUDITED UNDER SECT ION 44AB OF THE ACT AND THE AUDITORS WERE SATISFIED ABOUT THE C ORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNT. (IV) THE ASSESSING OFFICER HAS RELIED UPON THE PROFIT WO RKING SHOWN ON PAGE 83 OF ANNEXURE A-11 ONLY TO THE EXTEN T BE FOUND THE SAME FAVOURABLE TO HIM. THE ASSESSING OF FICER HAS NOT CONSIDERED THE EXPENSES WRITTEN BELOW RS.36,79,049.85. (V) THE ASSESSING OFFICER HAS WORKED OUT THE PROFIT ON THE BASIS OF SAID TRIAL BALANCE AT RS.19,74,457/- FOR SIX MON THS AND EXTRAPOLATED THE SAME TO RS.39,48,914/- FOR THE WHO LE YEAR. (VI) THE ASSESSING OFFICER HAS ERRED IN NOT REDUCING THE PROFIT OF RS.5,23,000/- SHOWN AS INCOME FOR ASSESSMENT YEAR 2 000-01 OUT OF RS.36.79 LAKHS. 7.1. THE LEARNED CIT(APPEALS) HAS PASSED A CRYPTIC AND SHORT JUDGEMENT IN RESPECT OF THE IMPUGNED ADDITION. IT IS WORTH TO MENTION THAT THERE WAS AN ANOTHER ADDITION OF RS.29,24,585/ - WHICH WE SHALL DISCUSS IN THE FOLLOWING PARAGRAPHS, HOWEVER, THE L EARNED CIT(APPEALS) HAS CLUBBED BOTH THE ISSUES AND THEREUPON HELD IN O NE PARAGRAPH AS FOLLOWS: IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 7 - THE ASSESSING OFFICER HAS WORKED OUT THE PROFIT OF FINANCIAL YEAR 2001-02 AT RS.39,48,914/- ON THE BASIS OF SIX MONTH S PROFIT OF RS.19,74,457/-. THE ASSESSING OFFICER HAS APPLIE D THE RATIO OF 15.8% FOR ARRIVING AT PROFIT OF ASSESSMENT YEAR 200 2-03. THE GROSS RECEIPT OF ASSESSMENT YEAR 2001-02 IS DECLARE D AT RS.2,33,16,900/-, THEREFORE, PROFIT @ 15% WOULD BE RS.34,97,535/- . THUS PROFIT TO THE EXTENT OF RS.29,24,585/- (I.E . RS.34,97,534/- - RS.5,72,950/-) IS ADDED AS UNDISCLOSED INCOME OF TH E BLOCK PERIOD. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THIS CASE AND OBSERVATIONS OF THE ASSESSING OFFICER THE ADDITIONS ARE JUSTIFIABLE. THE ASSESSING OFFICER HAS LOOKED IN TO THE ARGUMENT S RAISED BY THE APPELLANT AND I DO AGREE TO THE SAME. IN VIEW OF T HESE FACTS BOTH THE AFORESAID ADDITIONS ARE SUSTAINED. 7.1 SINCE THE ADDITIONS WERE CONFIRMED, THEREFORE, NOW THE ASSESSEE IS FURTHER IN APPEAL. 8. FROM THE SIDE OF THE APPELLANT, LEARNED AUTHORIS ED REPRESENTATIVE MR.U.S. BHATTI APPEARED AND HIS VEHEMENT CONTENTION WAS THAT BY THE VERY NATURE OF THE DOCUMENT WHICH WAS SEIZED BY THE REVENUE DEPARTMENT IT WAS EVIDENT THAT THERE WAS SOME NOTIN G BY THE ACCOUNTANT OF THE ASSESSEE WHO HAD MADE A ROUGH COMPUTATION F OR THE PURPOSE OF CALCULATION OF ADVANCE TAX. HIS ANOTHER OBJECTION WAS THAT THE ASSESSING OFFICER HAD NOT MADE ANY ATTEMPT TO TALLY THE FIGUR ES EITHER ON THE CREDIT SIDE OR ON DEBIT SIDE, AS MENTIONED IN THE SEIZED P APER, WITH THE FIGURES FINALLY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASS ESSEE. IF THAT EXERCISE WOULD HAVE BEEN MADE, THEN THERE OUGHT TO BE NO QUE STION OF TREATING THE PROFIT CALCULATED THEREIN AS AN UNDISCLOSED PROFIT. RATHER, ALL THOSE RELEVANT FIGURES OF THE SAID SEIZED DOCUMENT HAVE DULY BEEN INCORPORATED IN THE REGULAR BOOKS OF ACCOUNT DULY FINALIZED AND ALSO DULY AUDITED. IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 8 - HE HAS ALSO POINTED OUT THAT SOME OF THE AMOUNTS ME NTIONED IN THE SAID PAPER ON RECEIPT SIDE WERE TOWARDS LOWER SIDE THAN THE RECEIPTS AS ACTUALLY SHOWN IN THE BOOKS OF ACCOUNT. FOR EXAMPL E, FEES INCOME SHOWN AS PER THE SEIZED DOCUMENT WAS AT RS.2,65,03, 300/-, HOWEVER, WHEN THE BOOKS GOT FINALIZED, THE TOTAL FEES WAS DI SCLOSED AT RS.2.91 CRORES UNDER TWO HEADS; VIZ. RS.2.21 CORERS FEES IN COME AND RS.70 LACS ADVANCE FEES. HE HAS ALSO POINTED OUT THAT THE SAI D ROUGH CALCULATION WHICH WAS AN ESTIMATED CALCULATION ONLY FOR THE PUR POSE OF PAYMENT OF ADVANCE TAX, THEREFORE, THE DEPRECIATION WAS MENTIO NED IN ROUND FIGURE AT RS.14 LACS. HOWEVER, THE CORRECT DEPRECIATION WAS FINALLY DEBITED AS PER THE AUDITED BOOKS OF ACCOUNT. LIKEWISE, PROVISION FOR EXPENSES HAVE BEEN MADE AND IN SOME PLACES ON THE SAID SEIZED DOC UMENT IT WAS SPECIFICALLY MENTIONED THAT FEW OF THE EXPENSES WER E RELATED TO THE MONTH OF MARCH AND DUE TO THE SAID REASON AN APPROXIMATE FIGURE WAS TAKEN MERELY FOR THE PURPOSE OF AN ESTIMATED CALCULATION OF THE PROFIT TO PAY THE ADVANCE-TAX THEREON. 8.1. A LEGAL ARGUMENT HAS ALSO BEEN RAISED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT IF THE ASSESSING OFFICER IS REA DING THE SAID SEIZED PAPER, THEN HE SHOULD HAVE READ THE ENTIRE PAPER AS A WHOLE. THE AO MUST NOT HAVE IGNORED THE FIGURES EVE IF WRITTEN IN PENCIL ONLY. THOSE FIGURES WERE RELATED TO THE EXPENDITURE WHICH WERE YET TO BE RECORDED FOR THE REMAINING PERIOD, SUCH AS, LAUNDRY EXPENSES, CO LD DRINK EXPENSES, VEGETABLES, MISC. EXPENSES OR OTHER EXPENSES AND FO R WHICH BILLS WERE YET TO BE RECEIVED AT THAT POINT OF TIME. IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 9 - 8.2. LD. AR HAS THUS CONCLUDED THE ARGUMENTS THAT I T WAS UNJUST ON THE PART OF THE ASSESSING OFFICER TO TAKE INTO ACCOUNT THE FIGURES WHICH WERE SUITABLE TO THE REVENUE DEPARTMENT AND IGNORED THOS E FIGURES WHICH WERE OTHERWISE FOUND WRITTEN ON THE SAME SEIZED PA PER. MERELY BY WRITING IN PENCIL DID NOT LIABLE TO BE IGNORED. BY REFERRING THE PROVISIONS OF SECTION 132(4A) OF THE I.T.ACT HE HAS ARGUED THA T THE DOCUMENT FOUND IN POSSESSION HAS TO BE TREATED AS A TRUE DOCUMENT, THEREFORE, NO PART OF IT SHOULD HAVE BEEN OVER-LOOKED. 10. FROM THE SIDE OF THE REVENUE, LEARNED DEPARTMEN TAL REPRESENTATIVE MR.ANIL KUMAR, CIT(DR) HAS PLACED RE LIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. HE HAS EMPHASIZED THAT THE PROFIT AS COMPUTED IN THE SEIZED PAPER WAS OVER AND ABOVE THE PROFIT WHICH WAS DISCLOSED IN THE BOOKS OF ACCOUNT. HE HAS ARGUED THAT THE CORRECTNESS OF THE FIGURES WRITTEN IN THAT SEIZED PAPER HAS NOT BE EN CHALLENGED BY THE ASSESSEE. IF THE ASSESSEE WANTED TO CHALLENGE THE CORRECTNESS OF THE SAID PAPER, THEN THE ASSESSEE HAD SUFFICIENT OPPORTUNITY TO EXPLAIN THE FIGURES MENTIONED IN THE SAID SEIZED PAPER. MR. KUMAR HAS T HUS COMMENTED THAT THE ASSESSEE HAS NOT EVEN ATTEMPTED TO FILE A RECON CILIATION OF THOSE FIGURES WRITTEN ON THE SEIZED PAPER. INSTEAD OF PI NPOINTING THE DEFECTS, THE ASSESSEE HAS CHOSEN TO FILE A GENERAL REPLY THA T THE SAID PAPER WAS NOTHING BUT A ROUGH COMPUTATION OF CALCULATION OF P ROFIT FOR THE PURPOSE OF PAYMENT OF ADVANCE TAX. HE HAS PLACED RELIANCE ON THE DECISION IN FOLLOWING CASES:- SL.NO(S) DECISION IN THE CASE OF REPORTED IN IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 10 - 1. CIT VS. DR. M.K.E. MEMON [2001] 248 ITR 310 (BOM.) 2. RAJNIK & CO. VS. ASST.CIT [2001] 251 ITR 561 (A.P.) 3. RAJENDRA KUMAR LAHOTY VS. DCIT [2004] 266 ITR 621 (RAJ.) 10.1. LD. CIT (DR) HAS CONCLUDED THAT SINCE THE DOC UMENT IN QUESTION WAS AN INCRIMINATING MATERIAL WHICH WAS UNEARTHED A S A RESULT OF SEARCH, HENCE, RIGHTLY MADE THE BASIS FOR THE COMPUTATION O F UNDISCLOSED INCOME OF THE BLOCK PERIOD. 11. WE HAVE HEARD BOTH THE SIDES AT LENGTH AND ALS O CAREFULLY PERUSED THE MATERIAL PLACED BEFORE US AS ALSO THE ORDERS OF THE AUTHORITIES BELOW. AN UNDISPUTED FACT IS THAT A DOCUMENT MARKED AS ANN EXURE A-11 WAS FOUND DURING THE COURSE OF SEARCH OPERATION. THE GR OUND IN QUESTION REVOLVES AROUND THE NOTINGS RECORDED ON THE SAID SE IZED DOCUMENT. AT THIS JUNCTURE IT IS ALSO WORTH TO CLARIFY THAT APAR T FROM THIS DOCUMENT THERE WAS NO REFERENCE IN THE ASSESSMENT ORDER OF ANY OTHER UNDISCLOSED ASSET OR INCRIMINATING MATERIAL , WHETHER ANY DETECTED DURING THE SEARCH . AS A RESULT, THE IMPUGNED ADDITION HAS BEEN MADE ONLY ON THE BASIS OF SAID DOCUMENT. AN ANOTHER FACT IS ALSO NOT IN DISPUTE T HAT THIS DOCUMENT WAS WRITTEN BY AN ACCOUNTANT OF THE ASSESSEE. FURTHER THIS FACT HAS NOT BEEN DENIED BY EITHER SIDE , SPECIALLY THE APPELLANT, TH AT THE ACCOUNTANT HAS SYSTEMATICALLY WRITTEN THE INCOMINGS AND THE OUT-GO INGS ON THAT PAPER . ON THE BASIS OF THE DEBIT AND CREDIT ENTRIES A PR OFIT HAS BEEN COMPUTED THEREIN. THAT ALLEGED PROFIT WAS AN AMOUNT OF RS.3 6,79,049/-. WHETHER IT WAS THE FINAL FIGURE OF THE PROFIT, SUPPOSED TO HAV E BEEN COMPUTED BY THE IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 11 - SAID ACCOUNTANT, REMAINED UNDER DISPUTE THROUGH OUT . FURTHER, THE CORE REASON FOR THE EXISTENCE OF THE CONTROVERSY WAS THA T JUST BELOW THE IMPUGNED CALCULATION OF PROFIT IT WAS FOUND THAT CE RTAIN FIGURES OF THE EXPENDITURE WERE WRITTEN NOT IN INK BUT IN FACT WRITTEN BY PENCIL. ON ONE HAND THE REVENUE DEPARTMENT HAS IGNORED THOSE F IGURES WRITTEN BY PENCIL WHILE CALCULATING THE UNDISCLOSED INCOME , HOWEVER, ON THE OTHER HAND THE ASSESSEE HAS INSISTED UPON TO CONSIDER TH E SAID DOCUMENT AS A WHOLE WITHOUT IGNORING ANY OF THE FIGURES WRITTEN O N THE SAID PAPER EITHER BY INK OR BY PENCIL. REASON FOR THE SAID INSISTENCE WAS THAT IF ALL THE INCOMINGS AND THE OUT GOINGS, AS DEPICTED ON THE SA ID PAPER, WERE TO BE TAKEN INTO ACCOUNT THEN THERE WAS HARDLY ANY PROFIT FOR TAXING AS U.D.I. IN THE HANDS OF THE ASSESSEE. AN ENGLISH VERSION OF TH E SAID DOCUMENT IS PLACED BEFORE US. IT WAS NOTICED THAT THE SAID DOCU MENT WAS FOR THE FINANCIAL YEAR 1999-2000. THERE WERE THREE COLUMNS ON THAT PAPER, FIRST COLUMN DEPICTED HEADS OF THE PARTICULARS, SECOND AAVAK I.E. INCOME AND THE THIRD COLUMN WAS KHARCH I.E. EXPENDITURE. SINCE IT IS WRITTEN BY AN ACCOUNTANT, HENCE, THE FIGURES NOTED THEREIN WERE NEATLY WRITTEN IN ONE COLUMN AS INCOME AND IN THE OTHER COLUMN AS EXPENSES. SEVERAL HEADS OF PARTICULARS WERE SERIALLY WRITTEN, NAMELY FEE INCOME, FOOD EXPENSES, SALARY EXPENSES, BUILDING REPAIR (HOS TEL), STUDENT WELFARE EXPENSE, ELECTRIC EXPENSES (BOTH INCOME AND EXPENDITURE) AND SO-ON, RUNNING UPTO THIRTY-THREE NUMBERS. AS P ER THE DESCRIPTION OF THE PAPER, CERTAIN AMOUNTS IN ROUND FIGURES WRITTEN WERE HOSTEL BUILDING RENT( RS.36,00,000/-); RESERVE FEES( RS.28,00,000/ -) AND FOOD INCOME (RS.29,00,300/-) BY THE SAID ACCOUNTANT. THERE WAS A MENTION OF AUDITOR FEES( 12,000/-) AND LIABILITY OF BANK INTER EST ON OVER DRAFT IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 12 - (RS.50,000/-) ETC. IT IS ALSO TRUE THAT DEPRECIAT ION WAS ACCOUNTED FOR IN ROUND FIGURE OF RS.14 LACS AND HAS BEEN MENTIONED U NDER THE COLUMN EXPENSES. THEREAFTER, JUST BELOW, CERTAIN PROVIS IONS FOR EXPENSES HAVE BEEN MADE, SUCH AS, PROVISION FOR SALARY( 3,00,000 /-), PROVISION FOR TELEPHONE EXPENSES( RS. 35,000/-), PROVISION FOR E LECTRICITY (RS.3,00,000/-), ETC. THERE WAS A SPECIFIC MENTION OF APPROXIMATE EXPENSES FOR THE MONTH OF MARCH OF RS.10 LACS, THA T TOO WAS IN ROUND FIGURE. UPTO THIS LEVEL, A PROFIT HAS BEEN COMPUTE D OF RS.36,79,049/-. THE ASSESSING OFFICER HAS LIFTED THIS FIGURE FROM S EIZED DOCUMENT AND MADE THE BASIS OF ASSESSMENT FOR THE PURPOSE OF UND ISCLOSED INCOME FOR THE SAID BLOCK PERIOD. AN ANOTHER UNDISPUTED FACT IS THAT JUST BELOW THE SAID COMPUTATION OF PROFIT, THE SAID ACCOUNTANT HAS WRITTEN CERTAIN FIGURES IN PENCIL. THOSE FIGURES WERE IN ROUND AMOUNTS W HICH WERE NOT TAKEN INTO ACCOUNT BY THE ASSESSING OFFICER. SO THE STR ONG OBJECTION AND VEHEMENT CONTENTION IS THAT IF CERTAIN FIGURES WERE FOUND MENTIONED IN A SEIZED MATERIAL, THEN IT WAS UNFAIR ON THE PART OF THE ASSESSING OFFICER TO CONSIDER ONE SEGMENT OF THE DOCUMENT AND OVERLOO K THE OTHER SEGMENT. IT WAS CONTESTED THAT A PORTION WAS ASSESSED AND R EST OF THE FIGURES WERE IGNORED WITHOUT ASSIGNING ANY COGENT BASIS. THE FIGURES WRITTEN IN PENCIL ARE NAMELY PROVISION (RS.7,54,0 00/,) BUMIYADIARY (RS.5,00,000/) HIMATDALPAT(RS.6,00,000/) LAUNDRY (RS.3,00,000/-), ETC. IN PENCIL. IT HAS ALSO BEEN MENTIONED THAT CER TAIN BILLS WERE ALSO RECEIVABLE AT THAT TIME AND THAT WAS BEING THE FAG END OF THE FINANCIAL YEAR THEREFORE THOSE EXPENSES WERE NOTED IN ROUND F IGURE BY THE ACCOUNTANT BUT LATER ON AT THE TIME OF FINALIZATION OF ACCOUNTS THE ACCURATE FIGURES AS PER THE BILLS WERE INCORPORATED. IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 13 - 12. IN THE LIGHT OF THE ABOVE BACKGROUND AND THE EX PLANATION TENDERED BEFORE US, AS ALSO CONSIDERING THE OBSERVATIONS OF THE REVENUE DEPARTMENT, WE CAN FORM AN OPINION THAT SINCE THE D OCUMENT IN QUESTION HAS REFLECTED PART OF THE FIGURES ABSOLUTELY ACCURA TE WHICH WERE LATER ON RECORDED IN THE REGULAR BOOKS OF ACCOUNTS AND PART OF THE FIGURES WERE IN ROUND FIGURES, WHICH WERE ALSO RECORDED ON ACTUAL F IGURES ON FINALIZATION OF THE ACCOUNTS ON RECEIVING THE BILLS, THEREFORE T HAT PAPER WAS NOTHING BUT IN THE NATURE OF PROJECTION OF FIGURES MEANT FO R THE PURPOSE OF COMPUTATION OF ESTIMATED PROFIT FOR THE FINANCIAL Y EAR IN QUESTION, STATED TO BE FOR THE PURPOSE OF PAYMENT OF ADVANCE TAX. I T CANNOT BE RULED OUT, BEING A COMMON PRACTICE, THAT GENERALLY AN ACCOUNTA NT OF AN INSTITUTION PUT IN WRITING THE ESTIMATED FIGURES BEFORE THE CLO SE OF THE ACCOUNTING PERIOD AND THOSE PROJECTED FIGURES ARE PLACED BEFOR E THE DIRECTORS/ PARTNERS/ OWNERS TO TAKE NECESSARY ACTION FOR THE PURPOSE OF PAYMENT OF ADVANCE TAX. THIS COMMON PRACTICE CANNOT BE BRUSH ED ASIDE IN THIS CASE MERELY BECAUSE OF THE REASON THAT THIS ASSESSEE WAS SUBJECTED TO SEARCH AND SEIZURE ACTION. A VERY STRANGE ATTITUDE HAS BE EN NOTED BY US THAT THERE WAS NO SPECIFIC STATEMENT RECORDED DURING THE COURSE OF SEARCH IN RESPECT OF THE SAID DOCUMENT BY THE REVENUE DEPARTM ENT. WE HAVE PERUSED THE ASSESSMENT ORDER AS ALSO THE COMPILATIO N FILED BEFORE US AND HAVE NOTICED THAT THE REVENUE DEPARTMENT HAD NOT TA KEN AN UTTER NORMAL PROCEDURE OF RECORDING A STATEMENT OF ANY OF THE DI RECTOR TO ASCERTAIN THE EXACT NATURE OF THE DOCUMENT AND THE PURPOSE FOR WH ICH IT WAS WRITTEN BY THE SAID ACCOUNTANT. EVEN BEFORE US, THE STATEMENT OF THE ACCOUNTANT IS NOT ON RECORD. A STATEMENT RECORDED AT THE TIME OF SEARCH OPERATION IS AN IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 14 - IMPORTANT MATERIAL WHICH LATER ON GIVES A CORRECT P ICTURE OF THE SEIZED MATERIAL. NOW THE TIME HAD GONE, THEREFORE, WE HAV E TO RELY UPON THE EXPLANATION OF THE ASSESSEE TENDERED DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. AS PER THE WRITTEN SUBMISSIONS BEFORE THE ASSESSING OFFICER AND LEARNED CIT(APPEALS), IT WAS CATEGORICA LLY MENTIONED THAT THE SAID SEIZED DOCUMENT WAS NOTHING BUT THE PROVIS IONS OR PROJECTIONS FOR THE PURPOSE OF PAYMENT OF ADVANCE TAX. IT IS ALSO WORTH TO NOTE THAT ALONG WITH THE SAID DOCUMENT, THE REVENUE DEPARTMEN T HAS ALSO FOUND TWO OTHER TRIAL BALANCES AND THOSE WERE BY AND LARG E ACCEPTED. IN THE RESULT, CONSIDERING THE TOTALITY OF THE CIRCUMSTANC ES UNDER WHICH THE ALLEGED DOCUMENT WAS RECOVERED AND THE OTHER DOCUME NTS RECOVERED, IT CAN BE HELD THAT THE DOCUMENT WAS IN THE NATURE OF PROJECT ION OR ESTIMATION WRITTEN BY THE ACCOUNTANT OF THE INSTITU TION MEANT FOR THE PURPOSE OF PAYMENT OF ADVANCE TAX. NOW THE QUESTI ON IS THAT EVEN IF IT WAS SO, THEN THE FIGURES MENTIONED THEREIN CAN HAVE A BEARING ON THE COMPUTATION OF UNDISCLOSED INCOME AS PRESCRIBED UND ER CHAPTER XIV-B OF THE I.T.ACT. IT IS TRUE THAT FOR THE PURPOSE OF COMPUTATION OF UNDISCLOSED INCOME THE ORIGIN SHOULD BE THE EVIDE NCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTH ER DOCUMENT OR INFORMATION COLLECTED BY THE SEARCH PARTY. THE LAW IS VERY CLEAR THAT SUBSEQUENT TO THE SEIZURE, IT IS MANDATORY ON THE P ART OF THE REVENUE DEPARTMENT TO INVESTIGATE THE NATURE OF THE DOCUMEN T SO THAT THE CORRECT UNDISCLOSED INCOME CAN BE DETERMINED. UNDISPUTEDLY , THE PRIMARY ONUS IS ON THE ASSESSEE TO EXPLAIN THE NATURE OF THE ENT RIES RECORDED ON ANY SEIZED MATERIAL. BUT IF THE REVENUE DEPARTMENT IS NOT CONVINCED WITH THE SAID EXPLANATION, THEN IT IS EXPECTED TO INVEST IGATE THE SAME. IN THE IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 15 - PRESENT CASE THIS APPROACH OF THE DEPARTMENT IS WAN TING. IT COULD HAVE BEEN JUSTIFIABLE IF THE CORRECTNESS OF THE FIGURES NOTED IN THE DOCUMENT WERE EXAMINED AND VERIFIED FROM THE REGULAR BOOKS O F ACCOUNTS. RATHER IT IS NOBODYS CASE THAT NONE OF THE FIGURES HAVE TALL IED WITH THE REGULAR BOOKS. FACTS HAVE REVEALED THAT MOST OF THE INCOMIN GS AND OUTGOINGS WERE MADE THE PART OF THE REGULAR BOOKS. IT IS ALSO NOT THE CASE OF THE REVENUE THAT DUPLICATE SET OF BOOKS OF ACCOUNTS WER E DETECTED. ALSO IT IS NOT THE CASE OF THE REVENUE THAT AN UNDISCLOSED BUS INESS WAS UNEARTHED CONSEQUENCE UPON THE SEARCH OPERATION. RATHER A SIM PLE EXERCISE COULD HAVE BEEN DONE THAT ALL THOSE AMOUNTS WHICH GOT TA LLIED WITH THE AMOUNTS RECORDED IN THE REGULAR BOOKS COULD HAVE BE EN ACCEPTED BEING ALREADY MADE THE PART OF THE REGULAR BOOKS AND IN R ESPECT OF THE REST OF THE AMOUNTS IT COULD HAVE BEEN ASCERTAINED WHETHER THEY HAVE BEEN ACTUALLY INCURRED OR WHAT PORTION HAD BEEN ACCOUNTED FOR IN THE REGULAR BOOKS. BY DOING THIS EXERCISE ONE COULD HAVE ARRIVED AT THE F IGURE OF AN UNDISCLOSED INCOME OR ALTERNATIVELY INFLATED FIGURE OF EXPENSES , IF ANY. CONTRARY TO THIS, THE A.O. HAS JUST LIFTED ONE FIGURE OF PROFIT FROM THE MIDDLE OF THE DOCUMENT AND TREATED THE SAME AS UNDISCLOSED INCOME INSTEAD OF WEIGHING THE CORRECTNESS OF THE WHOLE PAPER. 12.1 BEFORE WE ARRIVE AT ANY CONCLUSION IT IS WORTH WHILE TO FIRST ENQUIRE ABOUT THE CASE LAWS CITED FROM THE SIDE OF THE REVE NUE BY THE LEARNED CT-DR, MR. ANIL KUMAR. HE HAS CITED A DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF IN COME-TAX VS DR. M.K.E. MEMON, 249 ITR 310. ON CAREFUL READING OF T HIS JUDGMENT, IN OUR OPINION, THE VIEW TAKEN THEREIN SUPPORTS THE CA SE OF THE ASSESSEE. THE IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 16 - HONBLE COURT HAS CATEGORICALLY OPINED THAT EXERCIS E UNDER SECTION 143(3) FOR REGULAR ASSESSMENT STANDS ON A DIFFERENT FOOTING IN CONTRAST TO THE EXERCISE UNDERTAKEN BY THE AO UNDER CHAPTER-XIV -B WHEREBY THE AO HAS TO ASSESS ONLY THE UNDISCLOSED INCOME. THE COURT HAS STATED THAT THE SCOPE OF REGULAR ASSESSMENT IS QUITE DIFFERENT FROM THE SCOPE OF THE ASSESSMENT UNDER CHAPTER-XIV-B. THE REGULAR ASSESS MENT IS TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAD NOT COMPUTED EXCESSIVE LOSS OR HAD NOT UNDERPAID TAX IN ANY MANN ER WHEREAS WHAT IS ASSESSED UNDER CHAPTER XIV-B IS ONLY THE UNDISCLOSE D INCOME FOR THE BLOCK PERIOD. WHILE ESTIMATING THE UNDISCLOSED INC OME UNDER CHAPTER- XIV-B, THE AO CANNOT APPLY A RULE OF THUMB. THE AO CANNOT ESTIMATE THE UNDISCLOSED INCOME ON AN ARBITRARY BASIS, THE HONBLE COURT HAS GIVEN ITS FINDING. LIKEIWSE IN THE PRESENT CASE, W E HAVE ALSO EXPRESSED SIMILAR VIEW AND THEREFORE IT GOES IN FAVOUR OF THE ASSESSEE. THE LEARNED CIT-DR HAS PLACED RELIANCE ON RAJNIK & CO. VS. ACIT, 251 ITR 561 (AP), HOWEVER, WE HAVE NOTICED THAT A PARTN ER OF THE FIRM HAD ADMITTED THE PRACTICE OF SUPPRESSION OF SALES. AN ESTIMATION WAS MADE ON THE BASIS OF THE MATERIAL ON RECORD AND STATEMEN T OF THE PARTNER. WHEN THE ISSUE WAS BEFORE THE TRIBUNAL, THE SUPPRESSION OF TURNOVER AS WELL AS PROPORTIONATE UNDISCLOSED INCOME WAS RE-DETERMINED ON CONSIDERATION OF THE MATERIAL AND THAT WAS UPHELD BY THE HONBLE HIG H COURT. CONTRARY TO THIS, THERE IS NO QUESTION OF EXTRAPOLATION IN THE PRESENT APPEAL, AS BEFORE US AND MOREOVER, THE PAPER IN QUESTION HAS NOT BEEN TAKEN INTO ACCOUNT IN ITS TOTALITY. THE CASE LAW AS REFERRED BY THE LEAR NED CIT-DR WAS RATHER IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 17 - ON ITS OWN FACTS, THEREFORE, CANNOT BE SAID TO BE A PPLIED IN ANY MANNER ON THE PRESENT SET OF FACTS OF THIS APPEAL. FINALLY, RELIANCE WAS ALSO PLACED BY THE CIT-DR ON RAJENDRA KUMAR LAHOTY VS DEPUTY COMMISSIONER OF INCOME-TAX, 266 IT R 621 (RAJ) WHEREIN THE EXPENDITURE INCURRED ON CERTAIN SPECIAL OCCASIONS SUCH AS GRAHA PRAVESH , DEATH OF FATHER OF ASSESSEE AND BIRTH OF GRAND-DA UGHTER WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. ON APP RECIATION OF THE RELEVANT FACTS OF THE CASE AND ON THE BASIS OF THE EVIDENCE DETECTED, THOSE ADDITIONS HAVE BEEN MADE ON APPRECIATION OF THE FAC TS AND CIRCUMSTANCES OF THE CASE. BECAUSE THE SAID DECISION WAS BASED U PON THE FACTS OF THAT CASE, THEREFORE, CANNOT BE SAID TO BE APPLIED ON TH E APPEAL BEFORE US. 12.2 WE HAVE COME ACROSS A DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SMS INVESTMENT CORPORATION, 20 7 ITR 364 (RAJ) WHEREIN THE HONBLE COURT OPINED THAT IN ACCORDANCE WITH THE PROVISION OF SECTION 132(4A), IF ANY DOCUMENT IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE OF SEARCH, IT MAY BE PR ESUMED THAT SUCH DOCUMENTS BELONG TO SUCH PERSON AND THAT THE CONTEN TS ARE TRUE. THE COURT HAS ALSO STATED THAT SUCH PRESUMPTION IS HOWE VER REBUTTABLE. LIKEWISE, IN THE CASE OF USHAKANT N. PATEL VS COMM ISSIONER OF INCOME- TAX , 282 ITR 553 (GUJ), THE COURT HAS STATED THAT THE MATERIAL SEIZED CONSEQUENCE UPON THE SEARCH HAS CONTENTS, WHICH ARE TRUE AS DEFINED IN SECTION 132(4A), PRESUMPTION IS THAT THE TRANSACTIO N AS REFLECTED IN THE SEIZED DOCUMENTS ARE WRITTEN TRUTHFULLY AND THE CON TENTS HAS TO BE RELIED UPON. IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 18 - 12.3 WE HAVE ALSO COME ACROSS A DECISION OF ITAT, P UNE BENCH IN THE CASE OF DHANVARSHA BUILDERS & DEVELOPERS (P.) LTD. VS DCIT, 102 ITD 375 (PUNE) WHEREIN IT WAS HELD THAT A DOCUMENT WHIC H WAS FOUND CONSEQUENCE UPON A SEARCH SHOULD BE READ AS A WHOLE . THE RELEVANT PART OF THE DECISION IS REPRODUCED BELOW: SO FAR AS THE ARGUMENT OF THE ASSESSEE THAT THE IM PUGNED PAPERS NOT ONLY SHOWED THE RECEIPTS BUT ALSO THE EXPENDITU RE AND, THEREFORE, THE DOCUMENT SHOULD BE READ AS A WHOLE A ND DEDUCTION FOR THE EXPENDITURE INCURRED SHOULD BE GIVEN TO THE ASSESSEE WHILE COMPUTING UNDISCLOSED INCOME WAS CONCERNED, THE SEI ZED DOCUMENT SHOULD BE READ AS A WHOLE IF IT HA SOT BE RELIED UPON. IT CANNOT BE READ ONLY TO THE EXTENT IT IS ADVANTAGEOU S TO BE REVENUE AND NOT READ WHEN IT BECOME DISADVANTAGEOUS TO THE REVENUE. IT IS AN ACCEPTED PRINCIPLE OF INTERPRETATION OF DOCUMENT THAT THEY SHOULD BE READ AS A WHOLE, AS PERSONS OF COMMON PRU DENCE WILL READ THEM. THEY CANNOT BE READ IN BITS AND PARTS TO SUIT THE CONVENIENCE OF ONE PARTY OR THE OTHER. THEREFORE, THE EXPENDITURE WOULD ALSO HAVE TO BE READ ON PROPER APPRECIATION O F THE DOCUMENTS. 12.4. IT IS ALSO EQUALLY IMPORTANT TO READ A DOCUME NT AS IT WAS FOUND DURING THE COURSE OF SEARCH. THE PROVISIONS OF SE CTION 132(4A) OF THE I.T.ACT IS WORTH TO MENTION BECAUSE WHERE ANY BOOKS OF ACCOUNT, ETC. ARE FOUND IN THE POSSESSION OR IN CONTROL OF ANY PERSON IN THE COURSE OF SEARCH, IT MAY BE PRESUMED THAT SUCH BOOKS OF ACCOU NT OR OTHER DOCUMENT, ETC. I) BELONG TO SUCH PERSON AND II) THE CONTENTS OF THE DOCUMENT ARE TRUE. NATURALLY, WHEN A PERSON IS WRI TING A DOCUMENT FOR HIS OWN CONSUMPTION OR READING, THEN WHATEVER STATE D THEREIN HAS TO BE TRUE AND CORRECT. A DOCUMENT IS NOT WRITTEN WITH THE APPREHENSION THAT THE SAME MAY BE SUBJECT TO SEARCH OPERATION IN FUTU RE. PARTICULARLY WHEN IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 19 - THE REVENUE IS MAKING AN ALLEGATION THAT THE DOCUME NT IS QUESTION WAS A SECRET DOCUMENT TO RECORD THE UNACCOUNTED RECEIPTS AND EXPENDITURE THEN CONSIDERING THIS ALLEGATION IT HAS TO BE BELIEVED T HAT THE ENTIRE DOCUMENT WAS MEANT FOR THE PERSONAL READING OF THE WRITER AN D NOT FOR THE PUBLIC CONSUMPTION. HENCE WHATSOEVER WRITTEN WAS WITH THE MOTIVE TO HIDE THE CONTENTS FROM THE PUBLIC. THEREFORE, THE PRESUMPTIO N IS THAT THE DOCUMENT SEIZED DURING THE COURSE BELONGS TO THE PERSON IN W HOSE POSSESSION IT WAS FOUND AND THE CONTENTS ARE TRULY STATED IN THE SEIZ ED DOCUMENT. NUMBER OF CASE LAWS FOR THIS LEGAL PROPOSITION CAN BE QUOT ED, HOWEVER, KEEPING BREVITY IN MIND ONCE THE LAW IS SETTLED, THEN ALL T HOSE DECISIONS ARE NOT TO BE REPEATED. THE ONLY EXERCISE WHICH IS A MUST AND IN EVERY CASE HAS TO BE UNDERTAKEN IS THAT THE DOCUMENT MUST GO THROUGH THE TEST OF INVESTIGATION. THE ASSESSEE IS DUTY BOUND TO TEND ER HIS EXPLANATION BY NARRATING EACH AND EVERY ENTRY AND IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THAT EXPLANATION OR CONSIDER NECESSA RY TO INVESTIGATE THE CORRECTNESS OF THE EXPLANATION, THEN HE IS EMPOWERE D TO EXERCISE SUCH POWERS BY ISSUING SUMMONS, ETC. IN THE PRESENT CAS E, CERTAIN FIGURES WERE NOTED IN A DOCUMENT WHICH WAS ALLEGED TO BE TH E ESTIMATED FIGURES FOR ADVANCE TAX PURPOSE, BUT THE ASSESSING OFFICER WAS EXPECTED TO TALLY THOSE FIGURES WITH THE REGULAR BOOKS OF ACCOUNT. I F THOSE FIGURES WERE TALLYING WITH THE BOOKS OF ACCOUNT, THEN NATURALLY THOSE WERE NOTHING BUT ALREADY DISCLOSED IN THE REGULAR COURSE, HENCE, DEF INITELY OUT OF THE AMBITS OF THE CLUTCHES OF CHAPTER XIVB OF THE I.T.ACT. IT IS ALSO EXPECTED TO JUDGE THE ESTIMATED FIGURES IN THE LIGHT OF THE FIG URES ALREADY RECORDED IN THE REGULAR BOOKS OF ACCOUNT. THE RECEIPTS, AS ALS O THE EXPENDITURE, SHOULD HAVE BEEN SUPPORTED BY COGENT EVIDENCE VIZ. BILLS, VOUCHERS, OR IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 20 - BANK ENTRIES, ETC. ON THE OTHER HAND, FIGURES NOTE D ON ESTIMATED BASIS MAY OR MAY NOT HAVE SUCH CIRCUMSTANTIAL EVIDENCES B UT THE FACT REMAINS THAT THOSE PROJECTIONS OR ESTIMATIONS OUGHT TO BE P ART AND PARCEL OF THE REGULAR BOOKS OF ACCOUNT. NOW AT THIS STAGE THAT FA ILURE OR FALLACY OF THE REVENUE DEPARTMENT CAN NOT BE CURED. THE ONLY OPTIO N LEFT IS TO DIRECT THE REVENUE TO RECALCULATE THE UNDISCLOSED PROFIT B Y TAKING INTO ACCOUNT ALL THE ENTRIES NOTED IN THE SAID SEIZED DOCUMENT. BY DIRECTING SO WE HEREBY ADHERE TO THE FUNDAMENTAL RULE, AS LAID DOWN IN THE STATUTE ITSELF AND CONFIRMED IN SEVERAL DECISIONS, THAT THE REVENU E MUST NOT PICK AND CHOOSE FROM A SEIZED DOCUMENT BUT MUST TAKE INTO AC COUNT THE DOCUMENT IN ITS ENTIRETY. ONCE THIS EXERCISE HAS NOT BEEN DONE BY THE REVENUE AUTHORITIES, THEN IT IS INCUMBENT TO RESTORE THIS P ART OF THE GROUND BACK TO THE STAGE OF THE ASSESSING OFFICER TO FURTHER INVES TIGATE THE NATURE OF THE ENTRIES RECORDED IN THE SAID SEIZED MATERIAL AND IF ALREADY FOUND RECORDED IN THE BOOKS OF ACCOUNT, THEN THOSE FIGURES SHOULD BE EXCLUDED FOR THE PURPOSE OF COMPUTATION OF UNDISCLOSED INCOME. WE ORDER ACCORDINGLY. 13. GROUND NO.6 HAS ANOTHER SEGMENT OF ADDITION OF RS.29,24,585/- FOR ASSESSMENT YEAR 2001-02. THERE WAS A PIECE OF EVIDENCE MARKED AS ANNEXURE A-12 WHICH WAS STATED TO BE A TRIAL BALA NCE FOR THE PERIOD OF 01/04/2001 TO 19/09/2001. IT WAS A PROJECTION FOR SIX MONTHS AND ON THAT BASIS, THE ASSESSING OFFICER HAS FOUND THAT THE PRO FIT PERCENTAGE WAS ABOUT 15%. THE ASSESSING OFFICER HAS TAKEN A HOLI STIC VIEW THAT IF THE PERCENTAGE OF PROFIT WAS 15% FOR THE PERIOD 01/04/2 001 TO 19/09/2001, THEN THE SAME OUGHT TO BE FOR YEAR 2001-02. FOR AS SESSMENT YEAR 2001- 02, THE GROSS RECEIPTS WERE AT THE FIGURE OF RS.2,3 3,16,900/- OVER WHICH IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 21 - THE PROFIT ESTIMATED AT 15% TO ARRIVE AT A FIGURE O F RS.34,97,534/-. HOWEVER, AS PER BOOKS, THE PROFIT DECLARED WAS RS.5 ,72,950/-, THEREFORE, THE REST OF THE AMOUNT, I.E. RS.29,24,585/- WAS TA XED AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. RELEVANT POR TION OF THE ASSESSING OFFICERS ORDER IS REPRODUCED BELOW:- IN VIEW OF THE CLEAR EVIDENCES OF GLARING DEFECTS IN BOOKS OF ACCOUNTS AS HAS BEEN DISCUSSED IN PARA 5 AND DUE TO THE FACT THAT PROFITS OF A.Y. 2000-01 AND 2002-03 ARE FOUND ACTUA LLY TO BE MORE RS.35 LACS, THE ASSESSEES BOOKS OF ACCOUNTS FOR A. Y. 2001-02 ARE LIABLE FOR REJECTION U/S.145. THE HONOURABLE SUPR EME COURT IN THE CASE OF CST VS H.M. ESUFALI H.M. ABDUALI (1973) REPORTED IN 90 ITR 271 HAS UPHELD THIS VIEW. AS HARD EVIDENCES ARE FOND FOR BOTH THE YEARS PRECEDING AND SUCCEEDING A.Y. 2001-0 2, FROM THE SEIZED MATERIAL, THERE IS A CASE OF INVOLVING PROVI SIONS OF SECTION 145 AND ACCORDINGLY, PROFIT FO A.Y. 2001-02 IS COMP UTED AS UNDER:- A.Y. CROSS RECEIPT PROFIT % OF TURNOVER 2002-03 2,49,41,890/- 39,48,814/- 15.8% THE GROSS RECEIPT OF A.Y. 2001-02 IS DECLARED AT RS .233,16,900/-. THEREFORE, PROFIT @ 15% WILL COME TO RS.34,97,534/- . AS AGAINST THE DECLARED PROFIT HAS BEEN RS.5,72,950/-. THEREF ORE THE PROFIT TO THE EXTENT OF RS.29,24,585/- (I.E. 34,97,534/- - 5 ,72,950/-) HAS BEEN SUPPRESSED AND IN ALL CIRCUMSTANTIAL EVIDENCES FOUND IN THE SEARCH THE SAID AMOUNT OF RS.29,24,585/- IS ADDED A S UNDISCLOSED INCOME OF THE BLOCK PERIOD FOR A.Y. 2001-2002. 14. WE HAVE ALREADY NOTED HEREINABOVE, THE LEARNED CIT(APPEALS) HAS PASSED A VERY CRYPTIC JUDGEMENT WITHOUT GOING I NTO THE DETAILS OF THE NATURE OF THE ADDITION AS WELL AS THE BASIS ON WHIC H THE ASSESSING OFFICER HAS ESTIMATED THE PROFIT OF THE ASSESSEE FOR BLOCK ASSESSMENT, THEREFORE THERE IS NOTHING MUCH TO REFER ABOUT THE SAID JUDGE MENT. IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 22 - 15. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED T HE MATERIAL PLACED BEFORE US. A FUNDAMENTAL OBJECTION IS RAISE D BEFORE US THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOR THE YEAR 01-02 OF THE BLOCK PERIOD WHETHER IT WAS JUSTIFIABLE TO ADOPT AN ESTIM ATED FIGURE OF PERCENTAGE OF PROFIT AS UNDISCLOSED INCOME DEFINE D U/S 158B(B) OF THE ACT. AS FAR AS THE BLOCK PERIOD ASSESSMENT IS CONC ERNED, AN ASSESSMENT HAS TO BE CONFINED WITH THE SEIZED MATERIAL RECOVER ED DURING THE COURSE OF SEARCH. AS FAR AS THE ADDITION IN QUESTION IS C ONCERNED, THE SAME IS NOT BASED UPON ANY COGENT OR DIRECT EVIDENCE ON THE BAS IS OF WHICH IT COULD BE SAID WITH AUTHENTICITY THAT THE PROFIT FOR THE Y EAR IN QUESTION WAS DEFINITELY EARNED BY THE ASSESSEE AT 15% WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED IN THE REGULAR COURSE. WE MAY LIKE TO POINT OUT AT THIS JUNCTURE THAT THE PROCEEDINGS AS PER CHAPTER X IVB OF THE I.T.ACT ARE NOT THE ASSESSMENT PROCEEDINGS AS PER THE REGULAR A SSESSMENT PROCEDURE PRESCRIBED IN THE IT ACT. CHAPTER XIV B HAS LAID DO WN A SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES THERE AR E CERTAIN SPECIFIC ASSESSMENT PROCEEDINGS THROUGH WHICH ASSESSEE IS SU BJECTED TO 60% OF RATE OF INCOME TAX. THEREFORE, THE ASSESSING OFFIC ER IS EXPECTED TO CONFINE THE ASSESSMENT WITHIN THE SEIZED DOCUMENT A ND THE MATERIAL RECOVERED. HENCE, THERE IS NO SCOPE OF AN ESTIMATI ON OR PRESUMPTION, AS HELD IN THE CASE OF DR. M.K.E. MEMON (SUPRA) 15.1 IN THE LIGHT OF THE ABOVE DISCUSSION AND ON AN ALYSIS OF THE CASE LAWS REFERRED, IT CAN BE SUMMARISED THAT THE CRITER IA DEFINED FOR MAKING AN ASSESSMENT UNDER CHAPTER XIV-B OF THE ACT ARE TH AT THE ASSESSMENT IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 23 - MUST REVOLVE AROUND THE SEIZED MATERIAL; THAT THE C OMPUTATION OF UNDISCLOSED INCOME AS DEFINED UNDER SECTION 158B( B) MUST BE BASED UPON INCRIMINATING MATERIAL; THAT UNDISCLOSED INCO ME SHOULD HAVE DIRECT AND LIVE LINK WITH THE SUPPRESSED FACTS MAY BE SALES, INVESTMENT, PURCHASES, SO AND SO FORTH; THAT THE UNDISCLOSED I NCOME WAS TO BE THAT AMOUNT WHICH HAS NOT BEEN BROUGHT TO THE ACCOUNTS O F THE ASSESSEE IN THE REGULAR COURSE OF THE BUSINESS; THAT THE UNDISCLO SED INCOME IS UNACCOUNTED CASH, JEWELLERY, VALUABLE ARTICLES, ASS ETS AND/OR ANY UNACCOUNTED TRANSACTION; THAT THE UNDISCLOSED INCO ME IS ALSO TO BE BASED UPON AN ADMISSION OR AN OFFER MADE DURING THE SEARCH OPERATION BY ANY SUCH PERSON BASED UPON THE MATERIAL FOUND IN HI S POSSESSION. THESE ARE FEW POINTS FOR DETERMINATION OF UNDISCLOSED INC OME WHICH CAN BE CONSIDERED FOR AN ASSESSMENT UNDER CHAPTER-XIV-B BU T THESE ARE ONLY SUGGESTIVE AND NOT EXHAUSTIVE, THEREFORE, OTHER LIK E NATURE POINTS CAN ALSO BE ADDED. HOWEVER, THE AOS ACTION DO NOT COME WIT HIN THE PURVIEW OF THESE ITEMS HENCE THE SAID ACTION IS HEREBY REVERSE D. WE, THEREFORE, HOLD THAT ONCE THERE WAS NO SPECIFIC EVIDENCE IN THE POSSESSION OF THE REVENUE DEPARTMENT THAT THE ASSES SEE HAD ACTUALLY EARNED THAT RATE OF PROFIT FOR THE YEAR UNDER CONSI DERATION, WHICH WAS ACTUALLY MORE THAN THE PROFIT DISCLOSED BY THE ASSE SSEE, THEN SUCH AN ADDITION HAD NO BASIS TO TREAT AN ESTIMATED INCOME AS AN UNDISCLOSED INCOME FOR THE BLOCK PERIOD. WE HOLD ACCORDINGLY AND THE ADDITION OF RS.29,24,585/- IS, HEREBY CANCELLED. THIS PART OF THE GROUND IS ALLOWED. IT(SS)A NO.216/ AHD/2004 M.S. HOSTEL VS. ACIT BLOCK PERIOD ENDING ON 20/09/2001 - 24 - 16. GROUND NO.7 IN RESPECT OF LEVY OF INTEREST U/S. 158BFA(1) OF THE I.T.ACT IS CONSEQUENTIAL IN NATURE. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSE. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 11/02/2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 11 / 02 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD