Shri Mohammed Adil Khan, Ahmedabad V. The ACIT., Cent.Circle-2(2), Ahmedabad

ITSSA 219/AHD/2005

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 3099 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-09-2012
• Assessment Year: misc
• Appeal Filed On: 12-08-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Keywords: Unexplained investment; Unexplained expenditure; Rectification of order; Search and seizure; Loose papers; Peak credit; Source of fund; Corroborative evidences; Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER IT(SS)A NOS. 214 & 238/AHD/2003 BLOCK PERIOD :01-04-89 TO 10-06-99 SHRI M.A. KHAN 14, CRYSTAL APARTMENTS, SHRIKUNJ SOCIETY, NR. NID, AHMEDABAD PAN NO. AGIPK9916R ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), AHMEDABAD V/S . V/S . ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), AHMEDABAD SHRI M.A. KHAN 14, CRYSTAL APARTMENTS, SHRIKUNJ SOCIETY, NR. NID, AHMEDABAD (APPELLANT) .. (RESPONDENT) IT(SS)A NO. 219/AHD/2005 BLOCK PERIOD :01-04-89 TO 10-06-99 SHRI M.A. KHAN 14, CRYSTAL APARTMENTS, SHRIKUNJ SOCIETY, NR. NID, AHMEDABAD V/S . ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), AHMEDABAD (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI S.K. GUPTA, CIT. D.R. /BY ASSESSEE SHRI DHIREN SHAH, A.R. /DATE OF HEARING 04.09.2012 /DATE OF PRONOUNCEMENT 19.10.2012 O R D E R IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 2 PER : T.R.MEENA, ACCOUNTANT MEMBER OUT OF THREE APPEALS, TWO APPEALS ARE AT THE BEHEST OF THE ASSESSEE ONE AT THE BEHEST OF REVENUE WHICH HAVE EMANATED FR OM THE ORDER OF CIT(A)- II, AHMEDABAD, DATED 28.03.2003 FOR BLOCK PERIOD 01 -04-89 TO 10-06-99. THE EFFECTIVE GROUNDS OF IT(SS) NO.214/AHD/2003 ARE AS UNDER : I. ADDITION ON ACCOUNT OF CONSULTATION FEE AND PENSION (A.Y. 1992-93 TO 2000-01) RS. 4,23,977/- (AS PER PARA 10 OF THE ORDER). 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS.4,23,977/- AS AGAI NST THE ADDITION OF RS.11,50,000/- MADE BY THE A.O. ON ACCOUNT OF CONSULTATION FEE AND PENSION INCOME FROM M/S. MAHESH CO. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THE A.O. HAS TRE ATED THE APPELLANT AS DUMMY PERSON OF M/S. MAHESH & CO. AND MADE THE DISALLOWANCE ON ACCOUNT OF CONSULTATIO N FEES PAID BY THE FIRM M/S. MAHESH & CO. IN THE HAND S OF THE FIRM, HOWEVER, THE FIRM M/S. MAHESH & CO. HAD F ILED AN APPLICATION BEFORE THE HONBLE SETTLEMENT COMMISSION WHILE INCLUDING THE AMOUNT OF CONSULTATI ON FEES PAID BY THE FIRM TO APPELLANT AND THE HONBLE SETTLEMENT COMMISSION HAS ADMITTED THE PETITION FIL ED BY THE FIRM M/S. MAHESH & CO. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THAT THE A.O. HA S MADE MULTIPLE ADDITION ON ACCOUNT OF CONSULTATION FEE PA ID BY MAHESH & CO. TO THE APPELLANT. IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 3 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THAT THE A.O. HA S MADE THE ADDITION ON ACCOUNT OF CONSULTANCY CHARGES RECEIVED BY THE APPELLANT FROM THE FIRM M/S. MAHESH & CO. ON GROSS VALUE BASIS WITHOUT GIVING THE DEDUCTI ON OF EXPENDITURE FOR EARNING THE SAID INCOME. II. ADDITION ON ACCOUNT OF PURCHASE OF FLAT 5,25,000/- (A.Y.1993-94) 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE GIVING SET OFF OF ABOVE ADDITION AS AGAINST T HE INCOME DECLARED BY THE APPELLANT IN HIS RETURN OF INCOME ON THE OBSERVATION THAT IN VIEW OF THE FACT S NARRATED BY THE APPELLANT, THE ABOVE ADDITIONS IS T REATED AS SET OFF AGAINST INCOME OF THE BLOCK PERIOD. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THAT THE A.O. HA S MADE THE ADDITION IN THE CASE OF APPELLANT WITHOUT CONSI DERING THE EXHAUSTIVE DETAILS FILED BY THE APPELLANT EXPLA INING THE SOURCE OF INVESTMENT IN FLAT VIDE LETTER. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THAT THE A.O. HA S NOT GIVEN THE TELESCOPING EFFECT AGAINST THE PEAK BALAN CE WORKED OUT IN THE ORDER AS THE PAYMENT FOR INVESTME NT IN FLAT WAS OUT OF THE BANK BALANCE AVAILABLE WITH THE APPELLANT IN UNION BANK OF INDIA, ELLISBRIDGE, AHMEDABAD AND THUS THE LEARNED A.O. HAS MADE DOUBLE ADDITION I.E. ONE ON SOURCE OF BASIS WHILE WORKING OUT THE PEAK BALANCE AND AGAIN ON INVESTMENT BASIS. IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 4 III. ADDITION ON ACCOUNT OF RECEIPTS FROM M/S. MAHESH & CO. IN VARIOUS ASSESSMENT YEARS RS. 2,77,000/- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS.2,77,000/- AS AGAI NST THE ADDITION OF RS.41,47,000/- MADE BY THE A.O. ON ACCOUNT OF RECEIPTS FEE FROM M/S. MAHESH & CO. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THE A.O. HAS TRE ATED THE APPELLANT AS DUMMY PERSON OF M/S. MAHESH & CO. AND MADE THE DISALLOWANCE ON ACCOUNT OF CONSULTATIO N FEES PAID BY THE FIRM M/S. MAHESH & CO. IN THE HAND S OF THE FIRM, HOWEVER, THE FIRM M/S. MAHESH & CO. HAD F ILED AN APPLICATION BEFORE THE HONBLE SETTLEMENT COMMISSION WHILE INCLUDING THE AMOUNT OF CONSULTATI ON FEES PAID BY THE FIRM TO APPELLANT AND THE HONBLE SETTLEMENT COMMISSION HAS ADMITTED THE PETITION FIL ED BY THE FIRM M/S. MAHESH & CO. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THAT THE A.O. HA S MADE MULTIPLE ADDITION ON ACCOUNT OF CONSULTATION FEE PA ID BY MAHESH & CO. TO THE APPELLANT. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THAT THE A.O. HA S MADE THE ADDITION ON ACCOUNT OF CONSULTANCY CHARGES RECEIVED BY THE APPELLANT FROM THE FIRM M/S. MAHESH & CO. ON GROSS VALUE BASIS WITHOUT GIVING THE DEDUCTI ON OF EXPENDITURE FOR EARNING THE SAID INCOME. IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 5 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE CONFIRMING THE ADDITION OF RS.2,77,000/- WHIL E ESTIMATING THE NET PROFIT OF 10% WITHOUT ANY BASIS. IV. ADDITION ON ACCOUNT OF NOTINGS ON THE LOOSE PAGE NO. 30 OF ANNEXURE A-4 RS. 1,15,000/- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE GIVING SET OFF OF ADDITION AGAINST THE INCOME DECLARED BY THE APPELLANT I THE BLOCK PERIOD RETURN OF INCOME WHILE MAKING AN OBSERVATION THAT TO BE FAIR AND REASONABLE THE ABOVE ADDITION IS SET OFF AGAINS T INCOME OF THE APPELLANT OF THE BLOCK PERIOD. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE FAILING TO CONSIDER THE FACT THAT THE A.O. HA S MADE THE ADDITION MERELY ON THE BASIS OF SURMISES AND CONJECTURES WHILE RELYING ON THE NOTINGS / JOTTINGS MADE ON THE SEIZED LOOSE PAPER PAGE NO.30 OF ANNEXURE A- 4. THE EFFECTIVE GROUNDS OF IT(SS) NO.214/AHD/2003 ARE AS UNDER : 1. THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.7,26,023/-, MADE ON ACC OUNT OF CONSULTATION & PENSION. 2. THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO SET OFF RS.5,25,000/- AGAINST THE INCO ME OF BLOCK PERIOD, ALTHOUGH THE SAME HAS BEEN UPHELD. 3. THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.37,400/-, MADE ON ACCOU NT OF CASH FOUND FROM RESIDENCE. IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 6 4. THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3,64,500/-, MADE ON ACC OUNT OF MARRIAGE EXPENSES. 5. THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.86,000/-, MADE ON ACCOU NT OF INVESTMENT IN SHARES. 6. THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.5,01,382/-, MADE ON ACC OUNT OF DEPOSITS IN BANK. 7. THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.38,70,000/-, MADE ON ACCOUNT OF RECEIPTS FROM MAHESH & COM. 8. THE LD. C.I.T. (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO CONSIDER TO SET OFF OF RS.1,15,000/-, AGAINST INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD, ALTHOU GH THE LD. C.I.T. (A) HAS UPHELD THE ADDITIONS. 2. GROUND NO.1 OF IT(SS) NO.214/AHD/2003 & GROUND N O.1 OF IT(SS)A NO. 238/AHD/2003 ARE ON THE SAME ADDITION O N ACCOUNT OF CONSULTANCY AND PENSION. THE FACTUAL MATRIX OF THE CASE IS THAT THERE WAS A SEARCH AND SEIZURE OPERATION U/S.132(1) OF THE I.T. ACT AT THE BUSINESS PREMISES AND RESIDENTIAL PREMISES O F THE ASSESSEE ON 10.06.1999. AS PER INCOME TAX LAW, THE BLOCK AS SESSMENT PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE BY THE A.O. A NOTICE U/S.158BC OF THE IT ACT WAS ISSUED ON 05.10. 1999 AND SERVED UPON THE ASSESSEE ON 13.10.1999 REQUIRING TH E UNDISCLOSED INCOME FOR THE BLOCK PERIOD COMPRISING OF PRECEDING TEN PREVIOUS YEARS AND PART OF THE SEARCH YEAR FROM 01.04.1989 TO IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 7 10.06.1999 AS PER THE PROVISIONS OF THE ACT IN FORM NO.2B DULY VERIFIED AND SIGNED WITHIN 16 DAYS FROM THE DATE OF SERVICE OF THE NOTICE. AS THE ASSESSEE DID NOT FILE THE RETURN IN RESPONSE TO NOTICE U/S.158BC AND THEREFORE, A FURTHER NOTICE DA TED 21.12.2000 WAS ISSUED AND SERVED. THEREAFTER, A FURTHER SHOW CAUSE NOTICE DATED 11.04.2001 WAS ISSUED AND SERVED ON 12.04.200 1. IN RESPONSE TO THE SAID NOTICE U/S.158BC AS WELL AS FU RTHER REMINDERS AS STATED ABOVE, ASSESSEE FILED A RETURN OF INCOME FOR THE BLOCK PERIOD ON 01.05.2001 DECLARING TOTAL UNDISCLOSED IN COME AT NIL. THE LD. A.O. ISSUED VARIOUS STATUTORY NOTICES WITH DETAIL QUESTIONNAIRE TO THE APPELLANT. THE APPELLANT DERI VED INCOME FROM SUB-CONTRACTORS WORK AND CONSULTATION PAYMENTS FROM MAHESH & COMPANY. THE APPELLANT WAS ASKED TO EXPLAIN THE SO URCE OF INCOME AS WELL AS INVESTMENT / TOTAL WEALTH STATEME NT DURING THE BLOCK PERIOD WHICH HAD NOT BEEN FURNISHED BEFORE TH E A.O. BY HIM. DURING THE COURSE OF SEARCH, THERE WAS A STATEMENT OF THE APPELLANT IN WHICH HE HAD ADMITTED IN QUESTION NO.2 THAT HE JOINED MAHESH & COMPANY IN 1992. HE USED TO PROVIDE SERVI CES OF CONTRACT CONSULTANCY TO MAHESH & COMPANY AND FOR TH IS SERVICE THEY USED TO MAKE PAYMENT RS.10,000/- AS CONSULTATI ON FEE FOR EARLIER YEARS. THEREAFTER, RS.15,000/- P.M. WAS PA ID DURING LAST TWO YEARS. AFTER SEARCHING HIS HOUSE, THE AUTHORIZ ED OFFICER HAD TAKEN ANOTHER STATEMENT ON CONCLUSION OF SEARCH PRO CEEDING ON IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 8 THE SAME DATE AND HE WAS ASKED FURTHER QUESTION REP EATEDLY REGARDING HIS SOURCE OF INCOME, ANNUAL INCOME AND F ILING OF INCOME TAX RETURN. IN RESPONSE TO THE SAID QUESTIO N HE REPLIED AS UNDER: MY SOURCE OF INCOME IS CONSULTING CHARGES RECEIVED FROM MAHESH & CO., LAST YEAR AMOUNTING TO RS.1,80,000/- APPROXIMATELY AND CENTRAL GOVERNMENT PENSION AMOUNTING TO RS.2400/- PER MONTH. I HAVE N OT FILED INCOME TAX RETURN FOR ANY PREVIOUS YEAR. THE ASSESSEE WAS HAVING TAXABLE INCOME EVEN THEN HE WAS NOT FILING INCOME TAX RETURN AND ALSO NOT DISCLOSED PAR TICULARS OF INCOME EVEN NOTICE WAS GIVEN BY THE A.O. FOR BLOCK ASSESSMENT FOR FILING RETURN. ON THE BASIS OF THIS STATEMENT, THE A.O. CALCULATED THE UNDISCLOSED INCOME OF THE BLOCK PERI OD AS UNDER:- PENSION AND CONSULTATION FEE A.Y. AMOUNT PENSION 2400 + CONSULTATION FEE 92-93 1,48,000/- 10000 PER MONTH I.E. 93-94 1,48,000/- 94-95 1,48,000/- 95-96 1,48,000/- 96-97 1,48,000/- 97-98 1,72,000/- 98-99 2,08,000/- 00-01 3,40,000/- -------------- TOTAL 11,50,000/- --------------- THE LD. A.O. FINALLY CALCULATED THE UNDISCLOSED INC OME FOR THE ASSESSMENT YEARS 1992-93 TO 2000-01 AT RS.11,50,000/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A), WHO HAS ALLOWED THE APPEA L PARTLY BY CONFIRMING THE IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 9 INCOME OF RS.4,23,977/- AND REMAINING AMOUNT HAS BE EN ALLOWED TO BE DELETED. BY OBSERVING THAT THE APPELLANT WAS IN TH E SERVICE OF MAHESH & CO. IN A.Y. 1992-93 AND ADDITIONS WERE MADE ON ESTIMATE BASIS AND ALSO NOT ANALYZING THE BANK ACCOUNT PROPERLY. THE APPELLANT HAS POINTED OUT BEFORE HIM THAT THE ACTUAL PENSION INCOME AFTER STANDARD D EDUCTION WAS AT RS.73,977/- AND CONSULTANCY INCOME WAS AT RS.3,50,0 00/- ONLY. 4. NOW THE MATTER IS BEFORE US. LD. COUNSEL FOR TH E APPELLANT CONTENDED THAT MAHESH & CO. HAS FILED AN APPLICATION BEFORE T HE HONBLE SETTLEMENT COMMISSION ON 10.05.2001 WHEREIN THE FIRM M/S. MAHE SH & CO. HAD OFFERED THE ADDITION IN INCOME BEFORE THE HONBLE SETTLEMEN T COMMISSION AND IN THE SAID ADDITIONAL INCOME OFFERED, IT HAS BEEN TAKEN I NTO CONSIDERATION AND AMOUNT OF RS.10,17,580/- HAVE ACTUALLY PAID AND REC EIVED BACK BY THE M/S. MAHESH & CO. HENCE, THE AMOUNTS OF RS.10,17,580/- WAS NOT THE INCOME OF THE APPELLANT. THESE FACTS WERE NOT SUBMITTED BEFO RE THE A.O. AT THE TIME OF ASSESSMENT PROCEEDING BECAUSE THE PROCEEDING BEFORE THE SETTLEMENT COMMISSION IN CASE OF MAHESH & CO. WAS CONFIDENTIAL . EVEN THESE FACTS WERE NOT BEFORE THE CIT(A) AS HONBLE SETTLEMENT CO MMISSION HAD NOT RENDERED THE ORDER U/S.245 D (1) OF THE IT ACT IN C ASE OF M/S. MAHESH & CO. THE DATE OF ADMISSION OF APPLICATION IS 10.05.2001 AND ORDER U/S.245(B)(1) IS 16.01.2003. HE FURTHER CONTENDED THAT THIS AMOUNT HAD BEEN TAXED TWICE, FIRST IN THE HANDS OF MAHESH & CO. AND THEREAFTER IN THE HANDS OF THE ASSESSEE AND AGAIN IT HAS BEEN TAXED BY ADDING THE PEAK AMOUNT F OR THE BANK ACCOUNT AS WHATEVER CONSULTANCY CHARGE RECEIVED FROM MAHESH & CO. HAD BEEN IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 10 DEPOSITED IN BANK ACCOUNT. THE APPELLANT ALSO DRAW N OUR ATTENTION ON PAGE NO.151 OF THE PAPER BOOK WHEREIN COMPUTATION INCOME OF THE BLOCK PERIOD UNDER THE HEAD PENSION INCOME IN TOTAL RS.73,977/ - AFTER STANDARD DEDUCTION, CONSULTANCY INCOME IN TOTAL RS.3,50,000/- AND ARBIT RATION AND OTHER CONSULTANCY CHARGES AT RS. 10,17,580/- FOR A.Y. 199 5-96 FOR THE BLOCK PERIOD IN TOTAL 14,41,557/- HAD BEEN CALCULATED. OUT OF THIS, M/S. MAHESH & CO. HAD MADE PART OF ITS INCOME OF RS.10,17,580/- BEFORE TH E HONBLE SETTLEMENT COMMISSION, IF THIS AMOUNT IS REDUCED FROM THE INCO ME CALCULATED ON PAGE NO. 151 OF PAPER BOOK. THE REMAINING AMOUNT WOULD BE R S.4,23,977/- FOR THE BLOCK PERIOD. BESIDES THIS, THE ASSESSEE HAD SHOWN SUB-CONTRACT RECEIPTS OF RS.27,17,120/- FOR THE BLOCK PERIOD. THE APPELLANT ALSO FILED A COPY OF THE BLOCK ASSESSMENT IN CASE OF MAHESH & CO. THEREFOR E, THE LD. A.R. OF THE APPELLANT HAS PRAYED TO DELETE THE ADDITION MADE ON ACCOUNT OF CONSULTANCY INCOME, CONFIRMED BY THE CIT(A). AT THE OUTSET, LD . D.R. VEHEMENTLY RELIED ON THE STATEMENT RECORDED BY THE AUTHORIZED OFFICER, O N THAT BASIS, THE LD. A.O. ASSESSED THE INCOME OF THE ASSESSEE. THEREFORE, TH E SAME IS TO BE CONFIRMED. 5. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, HEARD THE ARGUMENTS OF BOTH SIDES AND GONE THROUGH THE PAPER BOOK. THE APPELLANT HIMSELF HAD GIVEN THE CALCULATION OF INCOME AT PAGE NO.151 OF PAPER BOOK AND HAS SHOWN THE PENSION INCOME AS WELL AS CONSULTANCY INCOME. THE LD. CIT(A) HAD RIGHTLY DELETED THE ADDITION ON THE BASIS OF AD DITION MADE ON ESTIMATE BASIS AND NOT CONSIDERED THE COPY OF BANK ACCOUNT. THE LD. A.O. HAS NOT IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 11 BROUGHT ON RECORD ANY EVIDENCE EXCEPT THE STATEMENT RECORDED DURING THE COURSE OF SEARCH DATED 10.06.1999 ONLY. NO INCRIMI NATING DOCUMENTS WERE FOUND EITHER IN CASE OF ASSESSEE OR IN CASE OF FIRM M/S. MAHESH & CO. THEREFORE, WE DO NOT FIND ANY REASON TO INTERVENE I N THE ORDER OF THE CIT(A). THE ASSESSEES APPEAL AND REVENUES APPEAL ON THIS GROUND ARE DISMISSED. 6. GROUND NO.2 OF IT(SS) NO.214/AHD/2003 & GROUND N O.2 OF IT(SS)A NO. 238/AHD/2003 ARE COMMON. THE A.O. MADE ADDITION OF RS.5,25,000/- IN A.Y. 93-94 ON ACCOUNT OF UNEXPLAIN ED INVESTMENT. THE APPELLANT PURCHASED ONE FLAT IN A.Y. 93-94 FROM DIA MOND CORPORATION AS MENTIONED ON PAGE NOS. 43 TO 49 OF THE SEIZED MATER IAL WHICH HAS BEEN ADMITTED BY THE ASSESSEE DURING THE COURSE OF SEARC H PROCEEDING. BUT HE EXPLAINED THE SOURCE OF INVESTMENT AS SALE PROCEEDS OF OLD HOUSE AT RS.1,93,790/- OUT OF WHICH AN AMOUNT OF RS.1,85,000 /- WAS DEPOSITED IN THE STATE BANK OF INDIA. THE ASSESSEE PAID RS.1 LAC TO THE BUILDER DIAMOND CORPORATION, RS.50,000/- OUT OF PERSONAL SAVINGS PA ID IN CASH ON 21.04.1992, RS. 75,000/- WAS PAID ON 24.07.1992. ANOTHER INSTA LMENT OF RS.75,000/- AND RS.50,000/- WERE AGAIN PAID ON 04.06.1992, OUT OF T HE RECEIPTS FROM MAHESH & CO. THROUGH CHEQUE. RS.25,000/- WAS PAID WHICH W AS RECEIVED FROM HIS SON SALIM KHAN AND REMAINING AMOUNT OF RS.50,000/- WAS PAID FROM THE WITHDRAWAL FROM THE BANK. BUT THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE OF SALE OF OLD HOUSE. OTHER EXPLANATION I.E. RECEIPTS FROM MAHESH & CO. AND HIS SON WAS NOT EXPLAINED BEFORE THE A.O. IN ABSENCE O F ANY SUPPORTING IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 12 EVIDENCE, HE MADE ADDITION OF RS.4,75,000/- IN INV ESTMENT OF FLAT & FURNITURE AS UNDISCLOSED SOURCE OF INCOME OF THE ASSESSEE. 7. BEING AGGRIEVED BY THE ACTION OF THE A.O., THE A SSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAD GIVEN SET OFF AGAINST INCOME OF THE BLOCK PERIOD, WHICH IS REPRODUCED AS UNDER: 4. SECOND GROUND IS REGARDING ADDITION OF RS.5,25, 000/- ON ACCOUNT OF INVESTMENT IN THE FLAT. THE ASSESSING O FFICER DID NOT APPRECIATE THE SOURCE OF INVESTMENT WHICH WAS EXPLA INED TO HIM DURING THE BLOCK PROCEEDINGS. THE APPELLANT HAD BA NK BALANCE WITH UNION BANK OF INDIA. IN VIEW OF THE FACTS NAR RATED BY THE APPELLANT THE ABOVE ADDITION IS TREATED AS SET OFF AGAINST INCOME OF THE BLOCK PERIOD. 8. NOW THE MATTER IS BEFORE US. LD. COUNSEL FOR TH E APPELLANT CONTENDED THAT THE SOURCE OF INVESTMENT IN FLAT HAS BEEN EXPL AINED BY HIM VIDE LETTER DATED 22.06.2001 AND THE LD. A.O. HAD NOT GIVEN THE TELESCOPIC EFFECT AGAINST THE PEAK BALANCE WORKED OUT IN THE ORDER AS THE PAY MENT OF INVESTMENT IN FLAT WAS OUT OF BALANCE AVAILABLE WITH THE APPELLANT IN UNION BANK OF INDIA, ELLIS BRIDGE, AHMADABAD AND THUS, THE LD. A.O. HAD MADE D OUBLE ADDITION I.E. ONE OF THE OWN SOURCE ON BASIS WHILE WORKING OUT OF PEA K BALANCE AND ON INVESTMENT BASIS. FROM THE SIDE OF THE REVENUE, LD . D.R. VEHEMENTLY ARGUED THAT NO EVIDENCE OF SALE OF THE OLD HOUSE AS WELL A S VARIOUS PAYMENTS SHOWN AND CLAIMED BEFORE THE A.O. WERE NOT SUPPORTED WITH ANY EVIDENCE. THEREFORE, THE INVESTMENT IN FLAT AND FURNITURE IS UNEXPLAINED AND ADDITION MADE BY THE A.O. IS JUSTIFIED. IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 13 9. WE HAVE GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW AND PAPER BOOK, PARTICULARLY LETTER DATED 22.06.2001(PAGE 93 OF PAP ER BOOK) AND WRITTEN REPLY SUBMITTED BEFORE THE CIT(A) VIDE LETTER DATED 28.03 .2003 (PAGE NOS. 138 TO 141 OF PAPER BOOK). THERE IS NO SPECIFIC MENTIONED IN THE REPLY FILED BEFORE THE A.O. AS WELL AS CIT(A) WITH REFERENCE TO ANY BA NK ACCOUNT WITHDRAWAL AND THE EVIDENCES. THE APPELLANT ALSO HAD NOT FILED AN Y EVIDENCE BEFORE US TO EXPLAIN THE INVESTMENT IN FLAT AND FURNITURE. THER EFORE, WE ALLOW THE REVENUES APPEAL AND DISMISS THE ASSESSEES APPEAL. 10. GROUND NO.3 OF IT(SS) NO.214/AHD/2003 & GROUND NO.7 OF IT(SS)A NO. 238/AHD/2003 ARE AGAINST ADDITION ON AC COUNT OF RECEIPTS FROM M/S. MAHESH & CO. IN VARIOUS YEAR RS. 2,77,000/-. THE A.O. HAD MADE ADDITION ON ACCOUNT OF RECEIPTS F ROM MAHESH & CO. THE FACTUAL MATRIX OF THE CASE IS THAT THE APP ELLANT HAD RECEIVED LARGE SUMS OF MONEY FROM MAHESH & CO. BUT HE DID NOT DISCLOSE ANY INCOME ON THESE RECEIPTS IN THE RETURN . HE WAS NOT ASSESSED TAX AND ALSO HAS NOT FILED ANY RETURN OF I NCOME SINCE 1994-95. TOTAL SUM WAS RECEIVED FROM M/S. MAHESH & CO. WAS RS.41.47 LACS (AS PER ASSESSMENT ORDER). ON SEVERA L PAYMENTS, THE TDS HAD BEEN ISSUED TO SHRI M.A. KHAN TREATING HIM AS SUB- CONTRACTOR WHICH HAS BEEN PRODUCED DURING THE COURS E OF ASSESSMENT PROCEEDING BEFORE THE A.O. THE APPELLAN T DID NOT MAINTAIN AND PRODUCE ANY REGULAR BOOKS OF ACCOUNTS DURING THE COURSE OF ASSESSMENT PROCEEDING. HE FILED COPIES O F BANK ACCOUNT IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 14 ONLY WHICH SHOWS THAT THE ASSESSEE HAS WITHDRAWN CA SH AFTER DEPOSITING CHEQUE OF MAHESH AND CO. OF SIMILAR AMOU NT. THERE WAS NO EVIDENCE WITH THE APPELLANT THAT HE HAD MADE PAYMENT TO SUPPLIER BUT HE HAD ADMITTED U/S. 132(4) OF THE IT ACT BEFORE THE AUTHORIZED OFFICER THAT HE WAS THE CONDUIT OF M/S. MAHESH & CO. FOR MAKING PAYMENT TO THE SUPPLIER OF MATERIALS OR LABOURS. HE CLAIMED THAT HE DID NOT RECEIVE AND EARN ANY INCOME ON IT. THE RELEVANT EXTRACT OF THE STATEMENT RECORDED U/S.132( 4) AS REPRODUCED BY THE A.O. ON PAGE NOS. 18 TO 20 WHICH IS ALSO REPRODUCED AS UNDER: Q.NO.8 DO YOU CARRY OUT ANY CONTRACT WORK ON BEHA LF OF THE COMPANY OR DUE YOU PROVIDE ANY SUB CONTRACT WORK TO MAHESH & CO.? ANS. THERE WERE ONLY ONE/SUBLET CONTRACT WORK WHICH WERE EXECUTED THROUGH ME I.E. CONSTRUCTION OF INTERNAL ROADS ND RETAINING WALL AT INSTITUTE OF PL ASMA RESEARCH, BHAT, GANDHINAGAR. THE CONTRACT WAS AMOUNTING TO RS.28 LACS IN F.Y. 1996-97. Q.NO.9 DID YOU RAISE THE BILLS AND HOW THE EXPENSES IN THAT CONTRACT WAS MET? ALSO EXPLAIN HOW AND WHER E YOU RECEIVED THE PAYMENT? ANS. I DID NOT RAISE THE BILL. THE EXPENSES IN TH AT CONTRACT WORK WAS BORNE BY THE COMPANY (MAHESH & CO.) BUT THE PAYMENT FOR THESE EXPENSES WERE ROUTED THROUGH ME. THE PAYMENT WAS ROUTED THROUGH MY BANK ACCOUNT, UNION BANK OF INDIA A/C. NO. 10851. Q.NO.10 DID YOU HAVE ANY WRITTEN AGREEMENT FOR THE ABOVE STATED ARRANGEMENT? IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 15 ANS. NO. Q.NO.11 DID YOU GIVE ANY ACKNOWLEDGEMENT FOR THE PAYMENT RECEIVED EITHER FOR ABOVE STATED CONTRACT WORK? ANS. I DID NOT GIVEN ANY ACKNOWLEDGEMENT FOR THE CONSULTANCY FEES RECEIVED AND ALSO I DID NOT GIVE T HE SAME FOR THE ABOVE MENTIONED CONTRACT WORK. THE PAYMENT RECEIVED IS THROUGH ACCOUNT PAYEE CHEQUE ONLY. Q.NO.12 I AM SHOWING YOU THE REGISTER ANNEX.A-3 (PAGE 1 TO 14) WHICH HAS BEEN FOUND AND SEIZED FROM YOUR RESIDENCE. GO THROUGH THE PAGES AND EXPLAIN THEM ABOUT THE ENTRIES MENTIONED THEREIN. ANS. THE DETAILS MENTIONED THEREIN FOR THE PERIOD FROM 9/7/90 TO 22/9/90. DURING THESE PERIOD THE SI TE EXPENSES IN RESPECT OF SPORTS AUTHORITY OF INDIA, CONTRACT WORK WERE WRITTEN, DURING THE ABSENCE OF T HE PERSON RESPONSIBLE FOR THE SAME. THE EXPENSES ARE SMALL IN NATURE AND THESE ARE PART OF PETTY CASH REGISTERS OF MAHESH & CO. Q.NO.13 EXPLAIN THE ENTRIES FROM PAGE 31 TO 40 OF ANNEX. A-4 WHICH HAS BEEN FOUND AND SEIZED FROM YOU R RESIDENCE. ANS. PAGE NO.33 AND 34. THESE ARE BANK DEPOSIT SLIPS OF A/C.NO.10851 OF UBI FOR THE CHEQUE ISSUED BY MAHESH & CO. FROM PNB AMBAWADI TOWARDS THE TRANSACTIONS MENTIONED IN ANSWER OF Q.NO.9. IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 16 THE APPELLANT HAD NOT ABLE TO EXPLAIN THE CHEQUES R ECEIPTS FROM MAHESH & CO. AND PAYMENTS MADE TO THE SUPPLIER AND LABOUR WI TH EVIDENCE. THE DETAILS OF RECEIPTS ARE AS UNDER: A.Y. 1995-96 7.12 LACS A.Y. 1996-97 1.07 ,, A.Y. 1997-98 11.5 ,, A.Y. 1998-99 18.35 ,, A.Y. 1999-DT. OF SEARCH 3.43 ,, --------------- 41.47 LACS --------------- WHEN THE APPELLANT HAS NOT ABLE TO EXPLAIN THESE RE CEIPTS WITH EVIDENCE, THE A.O. MADE ADDITION OF RS.41.49 LACS ( IN ASSESSMENT ORDER IT IS 41.47 LACS). 11. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT( A) WHO HAS ALLOWED THE APPEAL PARTLY BY CONFIRMING NET PROFIT INCOME RS.2, 77,000/-. THE OPERATIVE PORTION IS REPRODUCED AS UNDER: 11. NINTH GROUND IS REGARDING A NUMBER OF ADDITION S TOTALING RS.41,47,000/- WHICH HAVE BEEN TREATED AS UNEXPLAIN ED RECEIPTS OF THE APPELLANT FROM MAHESH & CO. THE APPELLANT W AS SUB- CONTRACTOR OF MAHESH & CO., THEREFORE, THE AO SHOUL D NOT HAVE MADE LUMPSUM ADDITION LIKE THAT. IN THIS REGARD TH E APPELLANT HAS BROUGHT ON RECORD THAT ADDITION OF RS.41,47,000/- W AS MADE ON ESTIMATE BASIS ONLY AND THE SAME INCLUDED RS.11,50, 000/- + CONTRACT RECEIPTS ETC. NOW THE APPELLANT STATED THA T INCOME OF RS.10,17,580/- HAS BEEN SHOWED BY MAHESH & CO. UNDE R SECTION 245 D OF THE ACT BEFORE THE ITSC, MUMBAI BECAUSE TH E APPELLANT RECEIVED THE ABOVE AMOUNT AS ARBITRATION ETC. ON BE HALF OF THE COMPANY. THUS THE APPELLANT POINTED OUT THAT ACTUA L CONTRACT RECEIPTS WERE AT RS.27,70,120/- ONLY. LOOKING TO T HE FACTS OF THIS IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 17 CASE BY APPLYING NET PROFIT RATE OF 10% THE INCOME IS ROUNDED OFF TO RS.2,77,00/- AND BALANCE ADDITION IS DELETED . 12. NOW THE ASSESSEE AS WELL AS REVENUE IN APPEAL A RE BEFORE US. FROM THE SIDE OF THE APPELLANT, LD. COUNSEL CONTENDED TH AT THIS INCOME HAS BEEN INCLUDED IN DISCLOSURE MADE BEFORE THE SETTLEMENT C OMMISSION BY M/S. MAHESH & CO. HE HAS DRAWN OUR ATTENTION ON ITSC OR DER DATED 30.10.2004 AND SUBMISSION AT PAGE NOS.40 TO 41 OF BLOCK ASSESS MENT ORDER (IN CASE OF MAHESH & CO.) BEFORE THE SETTLEMENT COMMISSION FOR RS.41.47 LACS AND ALSO CHART OF COMPUTATION OF ADDITIONAL INCOME OFFERED B EFORE THE SETTLEMENT COMMISSION FOR THE BLOCK PERIOD WHICH REVEALS THAT M/S. MAHESH & CO. HAD MADE PART OF THE INCOME WHICH HAS BEEN ASSESSED IN THE NAME OF THE APPELLANT BY THE A.O. AND ADDITION MADE BY THE A.O. OF M/S. MAHESH & CO. IN THE NAME OF M.A. KHAN AT RS. 7.12 LACS IN A.Y. 95-9 6, RS.1.7 LACS IN 96-97, RS.11.5 LACS IN 97-98, 18.35 LACS IN 98-99 AND 2.8 LACS IN 99-00 AND CLAIMED THAT THIS ASPECT HAD BEEN CONSIDERED BY THE HONBLE SETTLEMENT COMMISSION IN DISCLOSURE PETITION AS ALL THE RECEIPTS OF THE F IRM, NAMELY, MAHESH & CO. THEREFORE, NO ADDITION IS TO BE MADE IN CASE OF M.A . KHAN. FROM THE SIDE OF REVENUE, LD. D.R. OPPOSED THE ARGUMENTS OF THE APPE LLANT THAT THERE IS NO CLEAR CUT FINDING IN THE ORDER OF SETTLEMENT COMMIS SION IN THE NAME OF M.A. KHAN. THE WHOLE RECEIPTS OF THE COMPANY HAS BEEN C ONSIDERED FOR A.Y. 90-91 TO 99-00 FROM WHICH NO VERIFICATION CAN BE MADE WHE THER M.A. KHANS RECEIPTS HAD BEEN CONSIDERED IN THE DISCLOSURE PETITION BY T HE SETTLEMENT COMMISSION. IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 18 13. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW AND ALSO GONE THROUGH THE PAPER BOOK SUBMITTED BY THE APPELLANT. PAGE NO.1 TO 76 IS THE COPY OF BLOCK ASSESSMENT ORDER IN CASE OF M/S. MAHE SH & CO. AT PAGE NOS. 40 AND 41 OF THIS ORDER, THE APPELLANT FIRM HAD INCLUD ED WHATEVER PAYMENTSS MADE TO M.A. KHAN IN BLOCK ASSESSMENT OF THE COMPAN Y, WHICH HAS BEEN CONSIDERED BY THE SETTLEMENT COMMISSION IN ITS ORDE R DATED 30.11.2004. THE SETTLEMENT COMMISSION HAS CONSIDERED RULE 9 REPORT OF THE CIT AND MENTIONED THAT SEARCH ACTION HAS REVEALED THREE MOD US OPERANDI ADOPTED BY THE APPLICANT. THESE ARE : (A) ENTRIES WITHOUT SUP PORTING VOUCHERS; (B) PAYMENT TO FAKE PARTIES AND (C) INFLATING EXPENSES AND RECEIVING PART PROCEEDS IN CASH. MR. M.A. KHAN ALSO COVERED BY THE OPERAND I NO. (C) OF THIS ORDER. AT PAGE NO.137 OF THIS PAPER BOOK, THE BLOCK ASSESSMEN T IN CASE OF MAHESH & CO. ORDER DATED 30.06.2001 HAD BEEN CONSIDERED BY I TSC IN WHICH M.A. KHANS RECEIPTS HAD BEEN ADDED. THEREFORE, THERE I S NO JUSTIFICATION FOR ADDING THE SAME INCOME IN THE HANDS OF THE APPELLANT. ACC ORDINGLY, THE ADDITION IS DELETED. THE ASSESSEES GROUND IS ALLOWED AND REVE NUES APPEAL ON THIS GROUND IS DISMISSED. 14. GROUND NO.4 OF IT(SS) NO.214/AHD/2003 & GROUND NO.8 OF IT(SS)A NO. 238/AHD/2003 ARE AGAINST SETTING OFF TH E INCOME OF THE APPELLANT FOR THE BLOCK PERIOD. THE FACTUAL MATRIX OF THE CASE IS THAT THE LD. A.O. FOUND THAT AS PER ANNEXURE A-1 OF PAGE NO.13, THERE WAS DETAIL OF WORKING OFF TRANSACTIONS TOTALING RS.1,15,000/- WHI CH WERE THE TOTAL PAYMENTS AND EXPENDITURE OF DIFFERENT ITEMS WHICH HAS NOT BE EN EXPLAINED BY THE IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 19 ASSESSEE BEFORE THE A.O. THEREFORE, HE MADE THE AD DITION IN BLOCK ASSESSMENT AT RS.1,15,000/-. 15. THE ASSESSEE WAS BEFORE THE CIT(A) WHO HAD ALLO WED THE SET OFF AGAINST THE INCOME OF THE APPELLANT FOR THE BLOCK P ERIOD AS ASSESSEE COULD NOT EXPLAIN PROPERLY THESE ENTRIES. 16. NOW THE ASSESSEE AS WELL AS REVENUE ARE BEFORE US. LD. A.R. CONTENDED THAT THE CIT(A) HAD ERRED WHILE GIVING SE T OFF THE ADDITION AGAINST THE INCOME DECLARED BY THE APPELLANT IN THE RETURN OF INCOME. THE LD. A.O. HAD MADE THE ADDITION MAINLY ON THE BASIS OF SURMISES A ND TRANSACTIONS WHILE RELYING ON THE NOTICES AND SHOW CAUSE MADE ON THE S EIZED LOOSE PAPERS (PAGE NO.30 OF ANNEXURE A-4) WHICH IS REQUIRED TO B E DELETED. FROM THE SIDE OF THE REVENUE, LD. D.R. VEHEMENTLY RELIED ON THE O RDER OF THE A.O. AND ARGUED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ALL OWING SET OFF AGAINST THE INCOME OF THE APPELLANT OF BLOCK PERIOD. 17. AFTER CONSIDERING THE ORDERS OF THE AUTHORITIES BELOW AND ARGUMENTS FROM THE BOTH SIDES. THESE ARE INCRIMINATING DOCUM ENTS SEIZED FROM THE RESIDENCE OF THE ASSESSEE. THE NATURE OF PAYMENTS HAD BEEN MENTIONED ON IT. THE APPELLANT CLAIMED THAT THESE WERE NOT IN T HE HANDWRITING OF HIM AND HE DID NOT HAVE ANY KNOWLEDGE ABOUT THAT. AS PER SECT ION 132 WHATEVER EVIDENCE FOUND DURING THE COURSE OF SEARCH HAS TO B E EXPLAINED BY THE ASSESSEE WITH SUPPORTING EVIDENCE WHICH HAS NOT BEE N DISCHARGED BY THE APPELLANT NEITHER BEFORE THE A.O. AND CIT(A) OR BEF ORE US. THEREFORE, WE CONFIRM THE ADDITION MADE BY THE A.O. THE CIT(A) W AS NOT JUSTIFIED IN ALLOWING IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 20 THE SET OFF AGAINST THE BLOCK INCOME AS THE ASSESSE E HAD NOT SHOWN ANY INCOME IN BLOCK RETURN. THUS, THE REVENUES APPEAL ON THIS GROUND IS ALLOWED AND ASSESSEES GROUND IS DISMISSED. NOW WE ARE TAKING REMAINING GROUNDS OF REVENUES AP PEAL : 18. GROUND NO.3 OF THE REVENUE IS AGAINST DELETING ADDITION OF RS.37,400/- MADE ON ACCOUNT OF CASH FOUND DURING THE COURSE OF SEARCH. THE ASSESSEE DID NOT FILE ANY EXPLANATION BEFORE THE A.O. ABOUT THE SOURCE OF CASH. THEREFORE, HE MADE THE ADDITION OF RS.37,400/-. TH E CIT(A) HAD DELETED THE ADDITION ON THE GROUND THAT THE APPELLANT HAD FILED INCOME TAX RETURN AND WAS LIVING ALONGWITH OTHER MEMBERS OF THE FAMILY. THE LD. A.O. WAS BRUSHED ASIDE THE EXPLANATION OF THE APPELLANT WHILE MAKING THE A DDITION. 19. THE REVENUE CONTENDED BEFORE US THAT THE ASSESS EE DID NOT EXPLAIN THE SOURCE OF THE CASH FOUND DURING THE COURSE OF SEARC H AT RESIDENCE WHEREAS FROM THE SIDE OF THE APPELLANT HE RELIED ON THE ORD ER OF THE CIT(A). AFTER CONSIDERING THE FACTUAL POSITION, THE ASSESSEE WAS HAVING VARIOUS SOURCES OF INCOME AND OTHER FAMILY PERSONS WERE LIVING AT THE RESIDENCE AND HE EXPLAINED THE SOURCE OF THE CASH BEFORE THE A.O. BE ING A SMALL AMOUNT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). THEREFORE, REVENUES APPEAL ON THIS GROUND IS DISMISSED. 20. GROUND NO.4 OF THE REVENUE IS AGAINST DELETING THE ADDITION OF RS.3,64,500/- MADE ON ACCOUNT OF MARRIAGE EXPENSES BY THE A.O. THE A.O. OBSERVED THAT AS PER ANNEXURE A-1 (PAGE NO.1 TO 4) WHICH REVEALS THAT NOTING OF MARRIAGE EXPENSES WAS THERE. AT PAGE NO.3 OF TH IS ANNEXURE, THERE WAS IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 21 ENTRY OF EXPENDITURE OF RS.2,42,500/- ON PAGE NOS. 2 AND 4, THE ANOTHER ENTRY OF RS.40,000/-, RS.10,000/- AND RS. 44,000/- THERE. THE APPELLANT CLAIMED BEFORE THE A.O. THAT THESE ENTRIES WERE NOT IN THE HANDWRITING OF HIM. BUT ADMITTED ONE ENTRY OF RS.25,000/- INCURRED BY HIS S ON FOR MARRIAGE CEREMONY. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF MAR RIAGE EXPENSES AT THE TIME OF ASSESSMENT BUT HE DID NOT FILE ANY EVIDENCE FOR EXPLAINING THE ENTRIES. THEREFORE, HE MADE ADDITION OF RS.3,64,500/- IN A.Y . 00-01. THE IMPUGNED ADDITION WAS CHALLENGED BEFORE THE CIT(A) BY THE AP PELLANT WHO HAS DELETED THE ADDITION. THE OPERATIVE PORTION OF THE ORDER I S AS UNDER: 7. FIFTH GROUND IS REGARDING ADDITION OF RS.3,64,5 00/- ON ACCOUNT OF MARRIAGE EXPENSES. THE ASSESSING OFFICE R HAS ESTIMATED THE ABOVE ON THE BASIS OF ROUGH FITTINGS. THE APPELLANT EXPLAINED THAT WITHDRAWALS FROM THE BANK ACCOUNT AN D CASH FLOW STATEMENT WERE SHOWN TO THE ASSESSING OFFICER TO SU BSTANTIATE REASONABLE EXPENDITURE ON MARRIAGE BUT THE AO PREFE RRED TO MAKE ADDITION EVEN WHILE OBSERVING THAT THE DATES W ERE NOT INTIMATED. UNDER THESE CIRCUMSTANCES THE AO WAS NO T JUSTIFIED IN MAKING SUCH ADDITION WITHOUT MAKING ENQUIRIES OR WI THOUT BRINING ON RECORD SOME UNEXPLAINED EXPENDITURE. IN THE LIG HT OF THESE FACTS THE ABOVE ADDITION IS DELETED. 21. NOW THE MATTER IS BEFORE US. LD. D.R. CONTENDE D THAT THE DETAIL EXPENDITURES WERE MENTIONED IN INCRIMINATING DOCUME NTS ON THAT BASIS, THE LD. A.O. MADE ADDITION, THE SAME SHOULD BE CONFIRMED. HOWEVER, FROM THE SIDE OF THE APPELLANT, LD. COUNSEL FOR THE APPELLANT REL IED ON THE ORDER OF THE CIT(A). AFTER CONSIDERING THE BOTH SIDES AND NOTING IN THE SEIZED MATERIALS AND EXPLANATIONS FILED BY THE APPELLANT ON THE BASIS OF BANK STATEMENT WITHDRAWAL, IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 22 WE ARE IN AGREEMENT WITH THE ORDER OF THE CIT(A) AN D HOLD THE ORDER OF THE CIT(A) AS JUSTIFIABLE. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 22. THE GROUND NO.5 OF THE REVENUE IS DELETING THE ADDITION OF RS.86,010/- MADE ON ACCOUNT OF SHARES. DURING THE COURSE OF SE ARCH, SHARE VALUED RS.86,010/- WAS FOUND AS PER ANNEXURE A-4. THE ASS ESSEE DID NOT FURNISH ANY EXPLANATION BEFORE THE A.O. THEREFORE, HE MADE ADDITION OF RS.86,010/- IN A.Y. 00-01. THE IMPUGNED ADDITION WAS CHALLENGE D BEFORE THE CIT(A) WHO HAS DELETED THE ADDITION BY OBSERVING AS UNDER: 8. SIXTH GROUND IS REGARDING ADDITION OF RS.86,000 /- ON ACCOUNT OF PURCHASE OF SHARES. THE ARGUMENTS REGAR DING OTHER EXPENSES OR INVESTMENTS BY THE APPELLANT IN THE AFO RESAID PARAS ARE NOT REPEATED. THE APPELLANT STATED THAT ADEQUA TE EXPLANATION FILED BEFORE THE ASSESSING OFFICER FOR PURCHASE OF ABOVE SHARES WAS IGNORED. THUS IN VIEW OF THESE FACTS ADDITION OF RS.86,000/- ON ACCOUNT OF PURCHASE OF SHARES IS DELETED. 23. NOW THE REVENUE IS BEFORE US. LD. D.R. CONTEND ED THAT THE APPELLANT HAS NOT FILED ANY EXPLANATION BEFORE THE A.O. AND O N WHAT BASIS THE LD. CIT(A) ALLOWED THE APPEAL IS ALSO NOT CLEAR. THEREFORE, T HE SAME MAY BE CONFIRMED. HOWEVER, FROM THE SIDE OF THE APPELLANT, LD. A.R. C ONTENDED THAT THE DETAILED REPLY WAS FILED VIDE LETTER DATED 22.06.2001 BEFORE THE A.O. AND HE DRAWN OUR ATTENTION ON PAGE NO.100 OF THE PAPER BOOK WHEREIN THE LD. COUNSEL SUBMITTED BEFORE THE A.O. THAT THESE SHARES WERE BELONGED TO PUSHPAK ENTERPRISE NOT OWNED BY THE ASSESSEE WHICH HAD BEEN PLEDGED WITH T HE BANK FOR GETTING LOAN BY THE PUSHPAK ENTERPRISE. THERE IS NO RELATION OF THE APPELLANT WITH IT. THEREFORE, ADDITION UNCALLED FOR. AFTER CONSIDERIN G THE REPLY AT PAGE NO.100 IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 23 AND PAGE NO.172 OF THE PAPER BOOK, IT IS EVIDENT TH AT THESE SHARES WERE BELONGED TO M/S. PUSHPAK ENTERPRISE. THEREFORE, TH E CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE A.O. WE DISMISS T HE APPEAL OF THE REVENUE ON THIS GROUND. 24. REVNUES GROUND NO.6 IS AGAINST DELETING THE AD DITION OF RS.5,01,382/- MADE ON ACCOUNT OF DEPOSIT IN BANK. THE LD. A.O. O BSERVED AT PAGE NO.17 OF THE ASSESSMENT ORDER. THE A.O. NOTICED THAT THE AP PELLANT HAD MAINTAINED FOLLOWING BANK ACCOUNTS: UNEXPLAINED INVESTMENTS IN BANK A/CS. OF M.A.KHAN A ND FAMILY MEMBERS --------------------------------------------------- --------------------------------------------------- ---------- A/C. NO. BANK NAME & BRANCH HOLDERS NAME PEAK BA LANCE DATE CL. DATE BALANCE (RS.) --------------------------------------------------- --------------------------------------------------- ---------- 10851 UNION BANK OF INDIA, ELLISBRIDGE BR., ABAD M.A. KHAN RS.416120/- 19/11/98 320 24/5/98 40064 STATE BANK OF INDIA GUJ. COLLEGE BRANCH, AHMADABAD S.A. KHAN RS.40089 22/4/99 279 25/5/99 40063 STATE BANK OF INDIA GUJ. COLLEGE BRANCH, AHMADABAD Y.A. KHAN RS.45173 22/4/99 353 4/6/99 TOTAL OF BALANCES RS.5,01,382 952 THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME NOR EXPLAINED ENTRIES OF THE BANK ACCOUNT. THEREFORE, PEAK BALANCE OF RS.5,01,3 82/- WAS ADDED IN THE INCOME OF THE ASSESSEE. 25. THE ASSESSEE CARRIED THE MATTER BEFORE CIT(A) W HO HAS DELETED THE ADDITION ON PAGE NO.4 IN PARAGRAPH 10, WHICH IS REP RODUCED AS UNDER: IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 24 10. GROUND NO.8 RELATES TO ADDITION OF RS.501382 I N RESPECT OF DEPOSITS IN BANK ACCOUNT. THE ASSESSING OFFICER HA S MADE ADDITION ON ACCOUNT OF THE BANK ACCOUNTS. THE APPE LLANT STATED THAT HE OWNED ONLY ONE OUT OF THE ABOVE I.E. ACCOUN T NO.10851 AT UNION BANK OF INDIA, ELLISBRIDGE, AHMADABAD FOR WHI CH DETAILED EXPLANATION REGARDING CASH ENTRIES WAS GIVEN. HOWE VER, THE A.O. MADE THE TOTAL ADDITION APPEARING IN THE ACCOUNT. I HAVE CAREFULLY PERUSED THE FACTS AND ACCORDINGLY FEEL THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ABOVE ADDITION. THUS THE S AME IS DELETED. 26. NOW THE REVENUE IS OPPOSING THE DELETION MADE B Y THE CIT(A) THAT NO EXPLANATION WAS FILED BEFORE THE A.O. BY THE APPELL ANT. EVEN THE BANK ACCOUNTS WERE IN THE NAME OF S.A. KHAN AND Y.A. KHA N. FROM THE SIDE OF THE APPELLANT, LD. A.R. VEHEMENTLY RELIED UPON THE ORDE R OF THE CIT(A) AND CLAIMED THAT THE ASSESSEE WAS MAINTAINING ONLY ONE BANK ACC OUNT WITH UNION OF INDIA FOR WHICH THE EXPLANATION HAS BEEN FILED BEFORE THE A.O. THEREFORE, THE ORDER OF THE CIT(A) MAY BE CONFIRMED. AFTER CONSIDERING BOTH THE SIDES AND OTHER ADDITIONS WERE MADE UNDER THE VARIOUS HEADS. THE I NVESTMENT MADE IN FLAT IS OUT OF BANK ACCOUNT AND ALSO TWO BANK ACCOUNTS WERE IN THE NAME OF S.A. KHAN & Y.A. KHAN. THEREFORE, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE REVENUES APPEAL. 27. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E AND THE REVENUE, BOTH ARE PARTLY ALLOWED. IT(SS)A NO. 219/AHD/2005 28. THE EFFECTIVE GROUNDS OF ASSESSEES APPEAL ARE AS UNDER: IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 25 I. CHARGING OF INTEREST U/S. 158BFA(1) OF THE ACT RS. 2,15,400/- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN REJECTING THE RECTIFICATION APPLICATION FILED BY TH E APPELLANT ON THE OBSERVATION THAT APPEAL DOES NOT LIE AGAINST SECTIO N 158BFA(1). 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO CONSIDER THE FACT THAT THE NOTICE U/S. 158BC OF THE ACT WAS ISSUED IN THE CASE OF APPELLANT WITHOUT PROVIDING T HE XEROX COPIES OF SEIZED MATERIAL/RECORDS AND THUS THE DELAY IN FI LING THE BLOCK PERIOD RETURN OF INCOME IS NOT ATTRIBUTABLE TO THE DEFAULT ON THE PART OF THE APPELLANT. 29. THE FACTS OF THE CASE IS THAT THE APPELLANT FIL ED THE RECTIFICATION APPLICATION BEFORE THE CIT(A)-II. AHMADABAD ON 06 TH MAY, 2005 AGAINST THE DEMAND CREATED U/S. 158BFA(1) OF THE I.T. ACT FOR P AYING SIMPLE INTEREST ON UNDISCLOSED INCOME DETERMINED UNDER CLAUSE C OF SEC TION 158BC FOR EVERY MONTH OR PART OF THE MONTH COMPRISED IN THE PERIOD COMMENCING ON THE DATE IMMEDIATELY FOLLOWING EXPIRY OF THE TIME SPECIFIED IN THE NOTICE. THE LD. CIT(A) HAS HELD THAT THE APPEAL CAN BE ENTERTAINED U/S. 15 8BFA(2) OF THE I.T. ACT WHEN PENALTY IS LEVIED AND NOT AGAINST INITIATION O F SUCH PENALTY BY THE ASSESSING OFFICER. THEREFORE, HE REJECTED THE 154 APPLICATION VIDE ITS ORDER DATED 16.06.2005. 30. NOW THE MATTER IS BEFORE US. THE SIMILAR ARGUM ENTS PUT FORTH BY THE LD. A.R. AND CONTENDED THAT THE CIT(A) WAS NOT RIGHT IN REJECTING THE RECTIFICATION APPLICATION U/S.154 OF INTEREST CHARGED U/S. 158BFA (1) OF THE IT ACT RS.2,15,400/-. THE APPELLANT ALSO CLAIMED THAT XER OX COPY OF THE SIZED MATERIAL WAS REASON TO DELAY IN FILING THE BLOCK PE RIOD RETURN OF INCOME, WAS IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 26 NOT ATTRIBUTABLE TO THE DEFAULT ON THE PART OF THE APPELLANT. AT THE OUTSET, LD. D.R. ARGUED THAT IT IS REVEALED FROM THE BLOCK ASSE SSMENT ITSELF THAT THE ASSESSEE HAS GIVEN NOTICE U/S. 158BC ON 05.10.1999 AND SERVED UPON THE ASSESSEE ON 13.10.1999 REQUIRING THE ASSESSEE TO FU RNISH THE RETURN OF INCOME DECLARING TOTAL INCOME INCLUDING THE UNDISCL OSED INCOME FOR THE BLOCK PERIOD COMPRISING OF THE PRECEDING TEN PREVIOUS YEA RS AND PART OF THE SEARCH WAS FROM 01.04.89 TO 10.06.99. THE APPELLANT DID N OT FILE THE RETURN IN RESPONSE TO THE NOTICE U/S. 158BC AND THEREAFTER FU RTHER NOTICE DATED 21.12.00 WAS ISSUED AND SERVED THEREAFTER A FURTHER SHOW CAU SE NOTICE DATED 11.04.01 WAS ISSUED AND SERVED ON 12.04.2001 ON THE ASSESSEE . THE APPELLANT FILED RETURN OF BLOCK PERIOD ON 01.05.01 DECLARING TOTAL UNDISCLOSED INCOME AT NIL. THIS DELAY FOR FILING OF RETURN FROM 13.10.99 TO 01 .05.01 IS ATTRIBUTABLE TO THE APPELLANT AS HE HAS NOT CO-OPERATED THE PROCEEDINGS IN RESPONSE TO FIRST NOTICE OF THE A.O. AS PER THE PROVISION OF THE ACT RETURN IN FORM NO.2B DULY VERIFIED AND SIGNED WAS TO FILE WITHIN 16 DAYS FROM THE DATE OF SERVICE OF THE NOTICE. THEREFORE, LD. A.O. HAD RIGHTLY CALCULATED INTEREST U/S.158BFA(1). 31. WE HAVE PERUSED THE REJECTION OF RECTIFICATION ORDER OF THE CIT(A) AS WELL AS BLOCK ASSESSMENT ORDER. THE NOTICE FOR FIL ING RETURN WAS SERVED ON 13.10.99. THE A.R. OF THE APPELLANT HAS NOT BROUGH T ON RECORD ANY MISTAKE IN THE COMPUTATION OF INTEREST U/S. 158BFA(1) OF THE I T ACT. BUT THIS INTEREST IS AUTOMATICALLY BE RE-CALCULATED ON THE BASIS OF DECI SION DELIVERED BY THIS BENCH IN APPEAL AGAINST THE BLOCK ASSESSMENT FROM AS PER LAW. THUS, THE ASSESSEES APPEAL IS DISMISSED. IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 27 32. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 33. IN THE COMBINED RESULT, ASSESSEES APPEAL IN IT (SS) NO.214/AHD/2003 & REVENUES APPEAL IN IT(SS)A NO. 238/AHD/2003 IS PARTLY ALLOWED AND ASSESSEES APPEA L IN IT(SS)A NO. 219/AHD/2005 IS DISMISSED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 19.10.2012 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. '#$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 01'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 167 89 / GUARD FILE. BY ORDER/ , :/3' )' ' ''' +, 34 * < STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 09, 10 & 11.10.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 12.10.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 19.10.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 19.10.2012 IT(SS)A NOS. 214 & 238/AHD/03 & 219/AHD/05 BLOCK PERIOD :01-04-89 TO 10-06-99 PAGE 28