ACIT, Cochin V. Shri.K.K.Basheer, Cochin

ITSSA 219/COCH/2005

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9166 (ITAT-COCHIN)
• Duration Of Justice: 4 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 12-05-2010
• Assessment Year: misc
• Appeal Filed On: 28-12-2005
• Court: TRIBUNAL
• Assessee Lawyers: R KRISHNA IYER CAAR
• Keywords: Unexplained investment; Unexplained expenditure; Document seized; Additional evidence; Cost of acquisition; Procedural lapse; Assessment record; Onus to prove; Documents seized
• Section: 69C; 143(3); 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL COCHIN BENCH, COC HIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY ARORA, AM I.T.(SS)A NO. 211/COCH/ 200 5 BLOCK PERIOD : 01-04-1995 TO 19-12-2001 SHRI K.K.BASHEER, PROP. AUDIO TECH, JEWS STREET, PULLEPPADY, COCHIN-35 [PAN: AFVPB 3088D] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL, CIRCLE-1, ERNAKULAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI R.KRISHNA IYER, CA-AR REVENUE BY SHRI A.K.THATAI, CIT-DR I.T.(SS)A NO. 219/COCH/ 200 5 BLOCK PERIOD : 01-04-1995 TO 19-12-2001 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL, CIRCLE-1, ERNAKULAM. VS. SHRI K.K.BASHEER, PROP. AUDIO TECH, JEWS STREET, PULLEPPADY, COCHIN-35 (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) REVENUE BY SHRI A.K.THATAI, CIT-DR ASSESSEE BY SHRI R.KRISHNA IYER, CA-AR O R D E R PER SANJAY ARORA, AM: THESE ARE CROSS APPEALS, I.E., BY THE ASSESSEE AND THE REVENUE, ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEAL S)-I, KOCHI (CIT(A) FOR SHORT) DATED 19-9-2005 IN THE ASSESSEES CASE FOR THE BLOC K PERIOD 01-04-1995 TO 19-12-2001, DISPOSING ITS APPEAL PREFERRED AGAINST THE ASSESSME NT U/S. 158BC R.W.S. 143(3) OF THE INCOME TAX ACT, 1961 (THE 'ACT' HEREINAFTER) DATED 31.12.2003. IT(SS)A NOS. 211 & 219/COCH./2005 2 2. THE ASSESSEE IS AN INDIVIDUAL DEALING IN PROFESS IONAL AUDIO AND LIGHT EQUIPMENTS UNDER THE TRADE NAME AUDIO TECH AT JEWS STREET, KOCHI WHICH IS A PROPRIETORY CONCERN. HE WAS SUBJECT TO SEARCH U/S. 132 OF THE ACT ON 19-12-2001 AT BOTH HIS BUSINESS AND RESIDENCE AT KOTEA CANAL ROAD , ERNAKULAM.. THE INSTANT APPEALS CONTEST THE VARIOUS RELIEFS AND SUSTENANCE OF ADDIT IONS MADE IN THE ASSESSMENT OF ITS INCOME FOR THE BLOCK PERIOD AFOREMENTIONED, BY THE LD. CIT(A). 3. WE SHALL TAKE UP THE ASSESSEES APPEAL, BEING SE NIOR, FIRST. THE SECOND GROUND OF APPEAL; THE FIRST BEING GENERAL IN NATURE WARRAN TING NO ADJUDICATION, IS IN RESPECT OF AN ADDITION MADE TOWARDS A RECEIPT FOR RS. 40,000/- FOUND FROM THE RESIDENCE OF SHRI K.K. IQBAL, THE ASSESSEES BROTHER, WHO WAS ALSO SI MULTANEOUSLY SUBJECT TO SEARCH. THE SAME SHOWS PAYMENT OF RS. 40,000/- TO SHRI ARAVIND AND VIKAS SINGHAL ON 29-2-2000 TOWARDS LAND DEVELOPMENT. THE ASSESSEE, VIDE LETTE R DATED 22.12.2003, SUBMITTED THAT HE WAS NOT AWARE OF THE ACTUAL NATURE OF THE PAYMEN T. FURTHER, IT COULD BE TOWARD THE COST OF THREE CENTS OF LAND, BEARING SY. NO. 378/2, PURCHASED ON 12.5.2000 FROM THESE PERSONS FOR RS. 1,50,000/-. IT WAS FURTHER EXPLAIN ED BY THE ASSESSEE THAT THE DATE OF PAYMENT BEING PRIOR TO THE DATE OF PURCHASE, IT COU LD NOT BE TOWARDS DEVELOPMENT OF LAND, POSSESSION OF WHICH WAS OBTAINED ONLY ON PURC HASE 12.5.2000 . THE AO ADDED THE IMPUGNED AMOUNT BY TREATING IT AS THE ASSESSEE S UNEXPLAINED INVESTMENT U/S. 69 OF THE ACT FOR A.Y. 2000-01 VIDE PARA 14 OF HIS ORD ER. THE SAME FOUND FAVOUR WITH THE LD. CIT(A), IN APPEAL BY THE ASSESSEE, ON THE BASIS THAT THE RECEIPT SPECIFICALLY SAYS OF THE PAYMENT BEING FOR LAND DEVELOPMENT AND, FURTHER , THE ASSESSEE BEING UNABLE TO SHOW THAT THE AMOUNT PAID WAS BY WAY OF ADVANCE WHI CH STOOD ADJUSTED SUBSEQUENTLY AGAINST THE PURCHASE COST OF THE LAND. THE ASSESSE E HAD ALSO FAILED TO PRODUCE ANY CONFIRMATION LETTER FROM THE PAYEES. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEES CASE IS THAT THE SAID PAYMENT COULD NOT BE TOWARD L AND DEVELOPMENT, AS THE LAND STOOD ACTUALLY PURCHASED, AND ITS POSSESSION OBTAINED, AL MOST THREE MONTHS LATER. AS SUCH, MAKING A SEPARATE ADDITION FOR RS. 40,000/-, I.E., APART FROM THE ASSESSMENT IN RESPECT IT(SS)A NOS. 211 & 219/COCH./2005 3 OF PURCHASE COST OF LAND FOR RS. 1.5 LAKHS, WOULD A MOUNT TO A DUPLICATION. IN ANY CASE, THE SEIZED DOCUMENTS STOOD FOUND FROM THE RESIDENCE OF SHRI K.K.IQBAL, AND NOT FROM THAT OF THE ASSESSEE. THE REVENUES CASE, ON THE OT HER HAND, IS THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE NATURE AS WELL AS THE SOURCE OF THE INVESTMENT; IT ALSO FAILING TO SHOW THAT THE IMPUGNED AMOUNT STOOD ACTU ALLY ADJUSTED AGAINST THE PURCHASE COST OF LAND. WE FIND MERIT IN THE REVENUES STAND. THE PAYMENT IS NOT DENIED. THAT BEING THE CASE, THE FACT THAT THE RECEIPT STOOD FOU ND FROM THE RESIDENCE OF THE ASSESSEES BROTHER, WOULD BE OF NO CONSEQUENCE. IN FACT, THE ASSESSEES ONLY CASE IS THAT THE SAID IMPUGNED AMOUNT HAVING BEEN PAID PRIO R TO THE DATE OF PURCHASE, WAS NOT TOWARD DEVELOPMENT OF LAND AND, THEREFORE, SHOULD B E CONSIDERED TOWARDS THE PURCHASE COST OF RS. 1,50,000/-. IN THIS REGARD, IT IS ONLY THE ASSESSEE WHO KNOWS THE EXACT PURPOSE FOR WHICH THE ADMITTED PAYMENT STANDS MADE. ONCE HE DOES NOT DISCLOSE THAT, IT IS NOT OPEN FOR IT TO QUESTION THE REVENUE ACTING ON THE EVIDENCE(S) FOUND. FOR APPLYING S. 69, 69B, ETC., THE FACTUM OF PAYMENT OR INVESTMENT IS ITSELF SUFFICIENT, WITHOUT THE REVENUE BEING REQUIRED TO FURTHER ESTAB LISH THE PURPOSE FOR WHICH THE SAME STOOD MADE BY THE ASSESSEE, THAT BEING SOMETHI NG THAT CONCERNS THE ASSESSEE; THE REVENUES SOLE PURVIEW AND PROVINCE BEING TO KNOW T O WHOM THE TRANSACTION BELONGS AND WHETHER IT INVOLVES ANY UNEXPLAINED AMOUNT. IN THE PRESENT CASE, THE GENUINENESS OF THE DOCUMENT STANDS CONFIRMED BY THE PURCHASE OF LAND FROM THE RECIPIENTS. IT IS THEREFORE NOT A DUMB DOCUMENT, AND CONSTITUTES A VA LID PIECE OF EVIDENCE FOUND IN SEARCH. IT MAY WELL BE THAT THE AMOUNT IS NOT TOWAR D LAND DEVELOPMENT, BUT THEN, AS AFORE-STATED, IT IS FOR THE ASSESSEE TO EXPLAIN THE PURPOSE, AND THE ONUS CANNOT BE SHIFTED TO THE REVENUE. IT WAS FOR THE ASSESSEE TO EXPLAIN AS TO WHY, FIRSTLY, THE RECEIPT SPECIFICALLY MENTIONS OF IT BEING TOWARD LAND DEVEL OPMENT, WHEN ITS POSSESSION ITSELF WAS ADMITTEDLY NOT OBTAINED. AND, SECONDLY, TO SHOW THAT THE SAID AMOUNT STOOD ADJUSTED AGAINST THE PURCHASE COST OF RS. 1.5 LAKHS . THE REGISTERED SALE DOCUMENT, AS FOUND BY THE REVENUE, BEARS NO REFERENCE TO ANY PAY MENT EARLIER TO THE DATE OF PURCHASE, WHICH IS A MATTER OF UNDISPUTED FACT. TH E ASSESSEE HAS, THUS, BEEN UNABLE TO EXPLAIN THE NATURE AND SOURCE OF THE IMPUGNED PAYME NT AND, THEREFORE, THE PROVISION IT(SS)A NOS. 211 & 219/COCH./2005 4 OF SECTION 69 IS ATTRACTED. WE, THEREFORE, FIND NO INFIRMITY IN THE REVENUES CASE AND UPHOLD THE SAME. WE DECIDE ACCORDINGLY. 5. THE THIRD GROUND IS IN RESPECT OF AN ADDITIO N ON ACCOUNT OF PROFESSIONAL RECEIPT OF RS. 6000/- EARNED BY THE ASSESSEE AS A SOUND OPERA TOR ON TWO TRIPS TO SINGAPORE UNDERTAKEN BY HIM AS A PART OF A MUSIC TROUPE IN T HE YEAR 1989. THE SAME STOOD ADDED AS UNDISCLOSED INCOME FOR A.Y. 1999-2000. THE ASSESSEES ONLY OBJECTION BEFORE THE LD. CIT(A) WAS THAT HE BE ALLOWED DEDUCT ION IN RESPECT OF PETTY EXPENSES INCURRED BY HIM ON THE TRIPS, WHICH DID NOT FIND HI S FAVOUR IN THE ABSENCE OF ANY EVIDENCE. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. THE ASSESSEES ONLY CASE IS OF BEING ALLOWED A REASONABLE EXPENDIT URE FOR EARNING THE SAID INCOME, THE IMPUGNED AMOUNT REPRESENTING GROSS RECEIPT, AND WHICH STANDS DENIED IN THE ABSENCE OF ANY EVIDENCE. IT MAY WELL BE TRUE THAT THE ASSESSEE HAS INCURRED PETTY EXPENSES IN EARNING THE SAID INCOME, BUT AT THE SAM E TIME, IT SHALL HAVE TO CONCOMITANTLY EXPLAIN THE SOURCE THEREOF, WHICH CAN NOT BE A MATTER OF PRESUMPTION. THE ASSESSEES CASE IS TOTALLY UNSUBSTANTIATED AND NO INTERFERENCE, IN OUR VIEW, IS CALLED FOR. 7. THE FOURTH GROUND IS IN RESPECT OF ADDITION TOWARDS UNEXPLAINED EXPENDITURE ON PURCHASE AS WELL AS TRADING PROFIT. THE ASSESSEE ON BEING QUESTIONED IN RESPECT OF THE SEIZED DOCUMENTS GS/B-2, 8 TO 12, VIDE QUESTION NOS . 22 TO 25 OF STATEMENT DATED 9.12.2003, REPLIED THAT ONLY HIS EMPLOYEE, SHRI ASG ARMEEM, WHO HANDLES THE BUSINESS OF AUDIO TECH FROM THE BEGINNING, WILL BE ABLE TO E XPLAIN THE SAME. SHRI ASGARMEEM WAS EXAMINED IN THE ASSESSEES PRESENCE ON 15.12.20 03. PER THE SAME, AS WELL AS HIS EARLIER STATEMENT ON THE DATE OF SEARCH, IT WAS EXP LAINED THAT THE PURCHASES ARE MADE MOSTLY FROM MUMBAI, DELHI AND MADRAS. THE PURCHASE BILLS ARE ONLY FOR HALF THE ACTUAL PRICE OF THE GOODS, AND ARE RECORDED AS SUCH IN THE BOOKS OF ACCOUNTS. ON EXAMINATION OF THE ASSESSEES DOCUMENTS, THE BILL A MOUNT(S) WERE ADMITTEDLY FOUND TO IT(SS)A NOS. 211 & 219/COCH./2005 5 BE IN FACT EVEN LOWER THAN 50% (OF THE ACTUAL PURCH ASE PRICE/CONSIDERATION). FURTHER, THE PURCHASES AS PER THE SEIZED DOCUMENTS (GS/B-8 T O 12) AMOUNTED TO RS. 12,60,130/-, AS AGAINST THE RECORDED/ACCOUNTED PURC HASE VALUE OF RS. 2,64,047/-. THE AO, THEREFORE, TREATED THE BALANCE UNACCOUNTED PURC HASE FOR RS. 9,96,083/- (I.E., 1260130- 264047) AS THE ASSESSEES UNEXPLAINED INCO ME. FURTHER ON, THE ASSESSEES TRADE MARGIN STOOD ALSO COMPUTED BY TAKING BOTH THE COST PRICE AS WELL AS THE SALE PRICE AT ACTUALS AS REFLECTED IN THE SEIZED DOCUMEN TS, AND WHICH REVEALED FOR THE FEW (SIX) ITEMS LISTED THEREIN TO BE VARYING BETWEEN 67% TO 35%. AS SUCH, IT WAS INFERRED THAT THE ASSESSEES NET PROFIT, I.E., AFTE R EXPENSES ON TRANSPORTATION, COOLIE AND OTHER INCIDENTAL EXPENSES WOULD NOT BE LESS THAN 35 % AND, ACCORDINGLY, ESTIMATED THE SAME ON THE SUPPRESSED SALES AS NOTED IN ONE NOTE-P AD (GS/B-2), I.E., RS. 2,66,609/- (THE RECORDED SALES IN BOOKS BEING FOR RS. 9996/- O NLY), OR AT RS. 93,314/-. IN APPEAL, THE LD. CIT(A), THOUGH REJECTED THE CONTENTION OF THE ASSESSEE THAT THERE WERE ALSO PURCHASE RETURNS, SO THAT THE ENTI RE PURCHASES OUTSIDE THE BOOKS OF ACCOUNTS COULD NOT BE ADDED, FOUND MERIT IN ITS ARG UMENT THAT THE AO HAD ERRED IN ADDING THE TOTAL PURCHASES FOR THE YEAR UP TO THE D ATE OF SEARCH. ADMITTEDLY, THE VALUE OF CLOSING STOCK AS ON THE DATE OF SEARCH WAS AT RS . 4,09,502/-. THE TOTAL PURCHASES, I.E. ACCOUNTED (RS. 9,96,083/-) AND UNACCOUNTED (RS . 2,64,047/-),OR AT A TOTAL OF RS. 12,60,130/- STAND SOLD TO THE EXTENT OF RS.8,50,628 /-, (I.E., RS. 12,60,130 RS. 4,09,502). THUS, ONLY THE PROFIT ON THE SALE OF RS . 8.51 LAKHS COULD BE BROUGHT TO TAX. THE NET PROFIT MARGIN, WORKED OUT BY THE AO AT 35%, WAS CONSIDERED BY HIM AS ON THE HIGHER SIDE IN VIEW OF THE ASSESSEES CLAIM FOR INC IDENTAL EXPENSES, SO THAT THE SAME STOOD ASSESSED BY HIM AT 30% AND, ACCORDINGLY, THE SUPPRESSED PROFIT WORKED OUT AT RS. 2,55,188/- (RS. 8,50,628 X 30%). THE SECOND ADDITION OF RS. 93,314/- STOOD DELETED AS HE HAD ESTIMATED THE PROFIT ONT THE ENTIRE SALES FOR THE YEAR UPTO THE DATE OF SEARCH, SO THAT THE SAME WOULD ALSO INCLUDE SALES FOUND SEPARATELY NOTED ON A NOTING-PA D (ANN. GS/B-2 OF THE SEIZED MATERIAL). AGGRIEVED, THE ASSESSEE IS IN APPEAL. 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. IT(SS)A NOS. 211 & 219/COCH./2005 6 8.1 THE ESTIMATION OF THE NET PROFIT AT 30% OF TH E COST OF THE GOODS SOLD, IT STANDS PLEADED BEFORE US, WAS EXCESSIVE AS THE SAME OBTAIN S WITHIN THE RANGE OF 10% TO 20%, EVEN AS STATED BY THE EMPLOYEE, SHRI ASGARMEEN, WHO IS IN CHARGE OF THE SHOP, AND WHOSE STATEMENT STANDS ALSO RECORDED BY THE ASSESSI NG OFFICER. TAKING INTO ACCOUNT THE COST OF TRANSPORTATION, HANDLING CHARGES, SHOP RUNNING EXPENSES, THE NET PROFIT WOULD IN FACT FALL BELOW 5%. THE ASSESSEE BEING I N RETAIL TRADE, SECTION 44AF WOULD BE APPLICABLE AND, THEREFORE, THE NET PROFIT COULD BE ESTIMATED AT 5% OF THE SALE VALUE, I.E., GROSS PROFIT AT 10% WITH ANOTHER 5% TOWARD IN DIRECT EXPENSES. WE FIND THE ASSESSEES CLAIMS AS UNMAINTAINABLE, EVEN AS THE RE VENUE, WE FIND IS NOT IN APPEAL AGAINST THE SUBSTANTIAL RELIEF ALREADY ALLOWED TO T HE ASSESSEE BY THE LD. CIT(A). NO DOUBT, THE AO HAS COMMITTED AN ERROR IN ADDING THE TOTAL AMOUNT OF PURCHASES UP TO THE DATE OF SEARCH. THOUGH THE PURCHASES CAN ONLY B E ASSUMED TO BE PAID FOR, AND NEITHER HAS THIS WORKING BEEN CONTESTED BY THE ASSE SSEE, IT IS ONLY THE PURCHASES UPTO THE POINT OF REALISATION OF THE SALES, THAT CAN BE CONSIDERED AS UNEXPLAINED. THIS IS AS ONCE MONEY FROM SALES STARTS GETTING REALISED, THE SAME WOULD BE AVAILABLE WITH THE ASSESSEE TO FUND FUTURE/SUBSEQUENT PURCHASES. IN O THER WORDS, THE CAPITAL LOCKED UP IN THE UNACCOUNTED BUSINESS ONLY OUGHT TO BE TAKEN UP AS UNEXPLAINED INVESTMENT OR EXPENDITURE U/S. 69/69B OR S. 69C. THE SAME COULD BE ESTIMATED BY CONSIDERING THE ASSESSEES WORKING CAPITAL CYCLE. THE STOCK FOUND IN SEARCH, I.E., AT RS. 4.10 LAKHS, IS A GOOD INDICATOR OF THE AMOUNT LOCKED UP IN UNSOLD PURCHASES AT ANY GIVEN POINT OF TIME. IN FACT, THE ENTIRE WORKING CAPITAL OR THE ST OCK OF RS. 4.10 LAKHS ITSELF, FOR WHICH NO ADDITIONS STOOD MADE BY THE AO SEPARATELY, WHO A DDED ONLY THE PROFIT ELEMENT OF SALES. 8.2 WITH REGARD TO THE ADDITIONS AS SUSTAINED BY THE LD. CIT(A), THE SAME WERE ESTIMATED AT 30% OF THE COST OF GOODS SOLD OR AT 23 % OF THE SALE VALUE (30% X 100/130). AGAIN, WE FIND THE ASSESSEES CASE WITHOU T MERIT; THE CONTENTIONS BEING BASED ON BALD CONTENTIONS. THE AO HAS COMPUTED THE TRADING MARGIN BY SELECTING THE FEW ITEMS IN RESPECT OF WHICH THE COST AND SALE PRI CE WAS AVAILABLE FROM THE SEIZED MATERIAL, AND WHICH, THEREFORE, EVEN AS CONTESTED B Y THE ASSESSEE, REPRESENTS A RANDOM IT(SS)A NOS. 211 & 219/COCH./2005 7 SELECTION. HOWEVER, HE ADOPTED THE GROSS PROFIT (O N SALES) AT THE MINIMUM DISCLOSED FOR THE SAID ITEMS, WHICH WENT UPTO AS HIGH AS UP T O 67%. IN FACT, THE ASSESSEE HIMSELF ADMITS OF GROSS MARGIN IN SOME ITEMS TO BE AS HIGH AS 20%. NO DOUBT, IT IS ONLY THE WEIGHTED AVERAGE, SPREAD ACROSS ALL ITEMS SOLD DURI NG THE YEAR, THAT WOULD OBTAIN, BUT THEN IT IS FOR THE ASSESSEE TO SUBSTANTIATE ITS CLA IM. THE STAND OF THE REVENUE THUS CAN ONLY BE TAKEN AS REASONABLE. 8.3 WITH REGARD TO THE INCURRING OF OTHER EXPENS ES, VIZ., TRANSPORTATION, HANDLING CHARGES, SHOP RUNNING EXPENSES, THE ASSESSEES CLAI M AGAIN REMAINS UNSUPPORTED. IN FACT, WHAT IS THERE TO SHOW THAT IT HAD INCURRED TH E SAID EXPENDITURE OUTSIDE THE BOOKS, SO THAT THE EXPENDITURE AS BOOKED ONLY SHOULD BE CO NSIDERED AS ADMISSIBLE. SECONDLY, THERE IS NOTHING TO SHOW OF IT HAVING INCURRED THE SAME IN EXCESS OF THAT WHICH STANDS ALLOWED IN THE ASSESSMENT BY THE LD. CIT(A), I.E., AT A MINIMUM OF 12%; HE ESTIMATING THE NET PROFIT AT 23% AGAINST THE MINIMUM GROSS TRA DING PROFIT OF 35%. 8.4 IN VIEW OF THE FOREGOING, WE CONFIRM THE ORD ER OF THE LD. CIT(A) ON THIS GROUND AS WELL. 9.1 WE SHALL NEXT TAKE UP THE REVENUES APPEAL. TH E SECOND GROUND OF THE REVENUES APPEAL; THE FIRST BEING GENERAL IN NATURE , WARRANTING NO ADJUDICATION, RELATES TO THE CANCELLATION OF THE ADDITIONS IN THE SUM OF RS. 12,43,833/- AND RS. 6,91,067/- TOWARDS UNEXPLAINED INVESTMENTS IN IMMOVABLE PROPER TIES AND VEHICLES RESPECTIVELY BY THE ASSESSEE, AND REMISSION OF THE MATTER BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION OF THE ISSUE AFTER CONSIDERING THE CA SH FLOW STATEMENT SUBMITTED AND THE COMMON SOURCE AVAILABLE WITH THE PARTNER-BROTHERS F OR THE PURPOSE. 9.2 THE REVENUES OBJECTION IS THAT THE SAID ORDER IS BAD IN LAW IN-AS-MUCH AS THE PROVISION OF SECTION 251(1)(A) OF THE ACT EXCLUDES OR WITHDRAWS THE POWER TO SET ASIDE THE ORDER UNDER APPEAL BY THE FIRST APPELLATE AUTHO RITY BY THE FINANCE ACT, 2001 WITH EFFECT FROM 1.6.2001. THE ASSESSEE BEFORE US HAS T AKEN A LEGAL ARGUMENT THAT THE SAID IT(SS)A NOS. 211 & 219/COCH./2005 8 AMENDMENT IS SUBSTANTIVE IN NATURE AND IS NOT EXPLA NATORY OR CLARIFICATORY. THE LAW AS IN FORCE FOR EACH ASSESSMENT YEAR ONLY WILL PREVAIL AND, AS SUCH, IT WOULD ONLY APPLY TO INVESTMENTS MADE BY THE ASSESSEE PRIOR TO 1.6.2001. FOR THE PURPOSE, RELIANCE HAS BEEN PLACED ON THE DECISION IN THE CASE OF RELIANCE JUTE INDUSTRIES VS. CIT, AIR 1980 SC 251 (252); CIT VS. ISTHMIAN STEAMSHIP LINES, 20 ITR 572 (SC); CIT VS. KARUMTHARUVI TEA ESTATES LIMITED , 60 ITR 262 (SC); CIT VS. SUSHMA SAXENA, 223 ITR 395 (P&H); SEDCO FOREX INTL. DRILL INC. VS. CIT , 149 TAXMAN 352 (SC). ALTERNATIVELY, IT HAS BEEN HELD THAT EVEN AFTER AME NDMENT, THE FIRST APPELLATE AUTHORITY CONTINUES TO ENJOY THE POWER OF REMAND AND FOR WHIC H RELIANCE IS PLACED ON THE DECISION IN THE CASE OF (2004) (173) E.L.T. 117 (GU J.) AND CCE, AHMEDABAD VS. TEXCHEM CORPORATI ON (2003) (157) E.L.T. 715 (MUM.) (QUA SECTION 35A OF THE CENTRAL EXCISE ACT) WHICH ALSO STOOD AMENDED LIKEWI SE W.E.F. 11.5.2001. FURTHER ON, IT WAS ALSO SUBMITTED THAT THE AO HAS SINCE DELETED BOTH THE ADDITIONS VIDE HIS ORDER DATED 16.11.2005, PLACING A COPY OF THE SAME ON REC ORD. THE LD. DR, ON THE OTHER HAND, HAS RELIED ON THE ASSESSMENT ORDER. 10. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. 10.1 THE REVENUES OBJECTION IS LEGAL IN NATURE A ND, ACCORDINGLY, HAVE TO BE MET BEFORE WE COULD PROCEED TO EXAMINE THE ISSUE ON MER ITS. THAT BEING THE CASE, THE FACT THAT THE AO HAS IN PASSING THE APPEAL-EFFECT GIVING ORDER TO THE CIT(A)S ORDER DELETED THE IMPUGNED ADDITIONS, WOULD BE OF NO CONSEQUENCE. THIS IS AS IF SUCH REMISSION BY THE LD. CIT(A) IS BAD IN LAW, AS POINTED OUT BY THE REVENUE, ANYTHING DONE IN PURSUANCE THERE-TO WOULD ALSO BE INFLICTED WITH THE SAME LEGAL INFIRMITY. SECTION 251 OF THE ACT DELINEATES THE POWERS OF THE COMMISSIONE R OF INCOME-TAX(APPEALS) IN DISPOSING OF THE APPEALS PREFERRED BY THE ASSESSEE BEFORE HIM, AGGRIEVED BY ANY OF THE APPEALABLE ORDERS AS LISTED U/S. 246A OF THE ACT. THEREFORE, IT IS THE LAW AS IN FORCE ON THE DATE ON WHICH THE SAID POWER IS EXERCISED BY TH E CIT(A) THAT WOULD BE RELEVANT OR MATERIAL. THE APPEAL IN THE INSTANT CASE WAS INSTI TUTED ON 30.1.2004 AND DISPOSED OF ON 19.9.2005, BOTH OF WHICH FALL AFTER 1.6.2001. I N ANY CASE, IT IS THE LATER DATE WHICH WOULD BE RELEVANT AND, THUS, THE LD. CIT(A) HAD NO POWER WHATSOEVER IN SETTING ASIDE IT(SS)A NOS. 211 & 219/COCH./2005 9 THE ASSESSMENT AS MADE REQUIRING A FRESH CONSIDERAT ION OF THE MATERIAL BEING RELIED UPON BY THE ASSESSING OFFICER. THERE IS NO QUESTIO N OF THE POWER OF THE FIRST APPELLATE AUTHORITY BEING GUIDED BY THE YEAR TO WHICH THE ADD ITION PERTAINS. IN FACT, IN THE PRESENT CASE, EVEN THE SEARCH STOOD CONDUCTED ON 19 .12.2001, I.E., AFTER THE DATE OF THE IMPUGNED AMENDMENT. THERE IS AS SUCH NO QUESTION O F THE SAID AMENDMENT BEING NOT APPLICABLE IN THE PRESENT CASE. ALL THE DECISIONS STATED BY THE ASSESSEE ARE IN A DIFFERENT CONTEXT AND DO NO RELATE TO THE MATTERS O F PROCEDURE, BUT THOSE IMPACTING THE SUBSTANTIVE RIGHTS AND OBLIGATIONS OF THE ASSESSEE. THERE COULD BE NO VESTED RIGHT IN THE PROCEDURE. IF THE LAW PROHIBITS THE FIRST APPEL LATE AUTHORITY FROM SETTING ASIDE THE ASSESSMENT, HE IS BOUND BY IT AND, ACCORDINGLY, HAS TO DISPOSE OF THE SAME BY EITHER ANNULLING, CONFIRMING, REDUCING OR ENHANCING THE AS SESSMENT AS MADE, I.E., WHAT THE AO IN THE FRESH PROCEEDINGS BEFORE HIM, WOULD IN AN Y CASE BE DOING, SO THAT ALL THAT THE PROCEDURE NOW MANDATES IS THAT THE ADJUDICATION ON MERITS HAS HENCEFORTH (AFTER 1.6.2001) TO BE DONE BY THE FIRST APPELLATE AUTHORI TY HIMSELF; HIS POWERS BEING IN ANY CASE CO-TERMINUS WITH THAT OF THE ASSESSING AUTHORI TY.. OF COURSE, HE IS NOT IN ANY MANNER PRECLUDED FROM REMANDING THE MATTER BACK TO THE FILE OF THE AO WITH SPECIFIC DIRECTIONS, WHICH COULD INCLUDE EXAMINATION OR CONS IDERING OF THE MATERIAL BY THE ASSESSING OFFICER, BUT THEN A DECISION IN THAT CASE HAS FINALLY TO BE TAKEN BY HIM ONLY, WHICH WE HAVE EXPLAINED THE PURPORT OF THE AMENDMEN T AS. IN FACT, EVEN WHERE HE ADMITS ADDITIONAL EVIDENCE, HE IS DUTY BOUND TO REQ UIRE THE AO TO CONSIDER IT FIRST, INCLUDING EXAMINATION OF THE ASSESSEE IN RELATION T HERETO, AND CONFRONTING IT WITH ANY MATERIAL IN REBUTTAL OF ITS CLAIMS, I.E., PRIOR TO RELYING ON THE SAID ADDITIONAL EVIDENCE, IN TERMS OF RULE 46A OF INCOME-TAX RULES, 1962 (TH E RULES HEREINAFTER). TO THIS EXTENT, WE ARE IN AGREEMENT WITH THE ASSESSEES STA ND WHICH STANDS PROJECTED AS THE ALTERNATIVE GROUND. THE INVOCATION OF R. 46A WOULD, HOWEVER, REQUIRE OF THE LD. CIT(A) TO FIRST RECORD HIS SATISFACTION AS TO THE R EASONS FOR ADMISSION OF THE ADDITIONAL EVIDENCE, IN THE ABSENCE OF WHICH THERE COULD BE NO VALID ADMISSION IN THE FIRST PLACE. EVEN BEFORE US, THERE HAS BEEN NO PLEADING TO THAT EFFECT. THE SAME WOULD THEREFORE BE OF NO MOMENT. IT(SS)A NOS. 211 & 219/COCH./2005 10 10.2 COMING TO THE MERITS OF THE CASE, THE ASSESSE E WAS FOUND TO HAVE MADE INVESTMENTS, AGGREGATING TO RS. 12.44 LAKHS IN IMMO VABLE PROPERTIES, I.E., AFTER EXCLUDING THE CREDIT OF RS. 25,000/- ON ACCOUNT OF 1/4 TH SHARE OF RS. 1 LAKH PAID FOR BY M/S. UDAYA SOUNDS, DETAILS OF WHICH IS AS UNDER:- ASSESSMENT YEAR DESCRIPTION AMOUNT RS. 1996-97 6.4 CENTS IN SY. NO. 6/16 SHARE IN 11 CENTS IN SY. NO. 476/1 3.5 CENTS IN SY. NO. 373/3 2.389 CENTS IN KATHRIKADAVU 139000 530000 139000 133000 2001-02 2002-03 3 CENTS IN SY.NO. 378/2 1/6 TH SHARE IN 11 CENTS IN SY.NO. 392/7 SHARE OF RENOVATION IN UDAYA BUILDING TOTAL 150000 116000 33333 1243833 IT WAS EXPLAINED BY THE ASSESSEE THAT IRRESPECTIVE OF THE LEGAL OWNERSHIP OR THE NAME IN WHICH THE PROPERTY STOOD HELD, I.E., WHETHER THE SAME IS HELD BY THE ASSESSEE INDIVIDUALLY OR IN ASSOCIATION, ALL THE FIVE BROTHE RS ARE THE JOINT OWNERS OF ALL THE INVESTMENTS MADE BY THE FAMILY, IN TERMS OF THE WIS HES OF THEIR LATE FATHER, AND MOTHER. ACCORDINGLY, THE JOINT CASH FLOW STATEMENT INCLUDES WITHDRAWALS FROM THE FIRM UDAYA SOUNDS (IN WHICH ALL THE PARTNERS ARE BR OTHERS OF THE ASSESSEE) COMMENCING 1.4.1995, STOOD SUPPORTED. THE SAME CON TAIN WITHDRAWALS BY THE BROTHERS AND RELATIVES FROM THE BANK ACCOUNTS, WHIC H ALSO INCLUDES INFLOW IN THE FORM OF REFUND OF LOANS GIVEN TO VARIOUS PERSONS, BESIDE S AN OPENING CASH BALANCE OF RS. 5 LAKHS AS ON 1.4.1995. THE AO WAS OF THE VIEW THAT UNDER THE INCOME-TAX PROCEEDINGS, IT IS THE LEGAL OWNERSHIP THAT IS RELEVANT AND, ACC ORDINGLY, IT WAS ONLY THE PERSON HOLDING PROPERTY SINGLY OR JOINTLY, WHO COULD BE AS SESSED. HOWEVER, THE WITHDRAWALS FROM THE BANKS WERE NOT PROPERLY EXPLAINED. IT IS ONLY WHERE THE DEPOSITS STAND EXPLAINED IN THE FIRST PLACE, COULD THE WITHDRAWALS BE TAKEN AS EXPLAINED. LIKEWISE, IS THE CASE OF LOANS TO VARIOUS PERSONS AS WELL AS THE OPENING ACCOUNT BALANCE. HE, IT(SS)A NOS. 211 & 219/COCH./2005 11 THEREFORE, ALLOWED CREDIT ONLY IN RESPECT OF RS. 1 LAKH FROM UDAYA SOUNDS TO THE EXTENT OF 1/4 TH, , I.E., TO THE EXTENT OF THE ASSESSEES SHARE IN 1 1 CENTS OF LAND,. (BEARING SY. NO. 476/1) AND A TWO-STOREY BUILDING PURCHASED JOINTLY WITH HIS BROTHERS IN 1996. FOR SIMILAR REASONS, HE ALSO ADDED THE ADMITTED INV ESTMENTS IN VEHICLES, DETAILS OF WHICH ARE AS UNDER:- AY VEHICLE AMOUNT RS. 1998-99 MAHINDRA JEEP 152750 1998-99 MITSUBISHI VAN 61930 1998-99 MAHINDRA JEEP 78100 1998-99 TOYOTA CAR 262065 2000-01 NISSAN CAR 136222 TOTAL 691067 10.3 IN APPEAL, THE LD. CIT(A) CONCURRED WITH THE A O IN-SO-FAR AS THE PERSON IN WHOSE HAND THE ADDITION COULD BE MADE. THIS IS AS T HE ASSESSEES CLAIM OF ALL THE BROTHERS BEING EQUAL OWNERS OF THE IMPUGNED PROPERT Y COULD NOT BE ACCEPTED IN THE ABSENCE OF A VALID DOCUMENT(S), ESTABLISHING THE RI GHTS OF THE OTHER PERSONS, PARTICULARLY IN THE FACE OF REGISTERED DOCUMENTS. FURTHER, THE CASH FLOW STATEMENT AS SUBMITTED BY THE ASSESSEE COULD NOT BE ACCEPTED WI THOUT PROPER EXAMINATION, PARTICULARLY IN A SCENARIO WHERE MANY OF THE PROPER TIES WERE HELD JOINTLY BY MORE THAN TWO BROTHERS. HE, THEREFORE, WAS OF THE VIEW THAT THE MATTER REQUIRES RE-EXAMINATION AND HELD AS UNDER:- 6. I THEREFORE CANCEL THE ADDITION OF RS. 12,43, 833/- ASSESSED AS UNDISCLOSED INVESTMENTS IN IMMOVABLE PROPERTIES AND REMIT THE MATTER BACK TO THE AO FOR FRESH CONSIDERATION OF THE ISSUE CONSIDERING THE C ASH FLOW SUBMITTED AND THE COMMON SOURCE AVAILABLE WITH THE PARTNER-BROTHERS FOR INV ESTMENT IN IMMOVABLE PROPERTIES. 10.4 AS APPARENT FROM THE FOREGOING, THE AO HAS NOT DISR EGARDED THE ASSESSEES EXPLANATION, GIVEN IN THE FORM OF CASH FLOW STATEME NT, BUT ONLY CONSIDERED IT AS OF LITTLE VALUE, BEING UNSUBSTANTIATED. THE ASSESSEE S CONTENTION BEFORE THE LD. CIT(A) AND WHICH FOUND HIS FAVOUR, THAT THE AO WAS DISINCL INED TO VERIFY THE FACTS AS HE DIS- COUNTENANCED THE THEORY OF COMMON POOL OF FUNDS IS NOT BORNE BY THE RECORD; THE IT(SS)A NOS. 211 & 219/COCH./2005 12 AOS OBJECTION BEING SPECIFIC AND OBJECTIVE. THE L D. CIT(A), HOWEVER, TO HIS CREDIT, HAS ONLY ARRIVED AT THE DECISION THAT THE MATTER RE QUIRES FURTHER EXAMINATION. HE COULD AS WELL HAVE DONE SO HIMSELF, REQUIRING A SPECIFIC REPORT FROM THE AO ON EACH OF THE POINTS ON WHICH HE FOUND DEFICIENCY IN THE SCRUTINY BY THE AO, SO THAT THE ASSESSEES CLAIMS STOOD PROPERLY INVESTIGATED AND VERIFIED, OF COURSE ACTING WITHIN THE FRAMEWORK OF THE LAW. AS NOTED EARLIER, SET ASIDE IS NOT PERM ISSIBLE UNDER THE AMENDED LAW AND NEITHER WAS ONE REQUIRED; A SIMPLE REMAND WITH A DI RECTION TO THE ASSESSEE TO COOPERATE WITH THE AO WOULD HAVE SUFFICED. UNDER TH E CIRCUMSTANCES, THEREFORE, VACATING THE FINDINGS OF THE LD. CIT(A), WE RESTORE THIS MATTER BACK TO THE FILE OF THE LD. CIT(A) TO DISPOSE OF THE MATTER IN ACCORDANCE WITH THE LAW, INCLUDING THAT WITH REGARD TO PROCEDURE, PER A SPEAKING ORDER. WE DECIDE ACCOR DINGLY. 10.5 THE SECOND ADDITION FOR RS. 6,91,067/-, I.E., IN RESPECT OF INVESTMENT IN VEHICLES, THE DETAILS OF WHICH ARE AS UNDER, STANDS DEALT WITH BY BOTH THE AUTHORITIES IN THE SAME FASHION:- ASSESSMENT YEAR PARTICULARS OF VEHICLES AMOUNT RS. 1998-99 MAHINDRA JEEP 1,52,750/- 1998-99 MITSUBISHU VAN 61,930/- 1998-99 MAHINDRA JEEP 78,100/- 1998-99 TOYOTA CAR 2,62,065/- 2000-01 NISSAN CAR 1,36,222/- TOTAL 6,91,067/- 10.6 WE WOULD, THUS, BE INCLINED TO TAKE A SIMILAR DECISION IN RESPECT OF OTHER ADDITIONS. WE, HOWEVER, OBSERVE TWO THINGS, WHICH A RE SPECIFIC TO THIS ADDITION, AND WHICH HAVE A BEARING IN THE MATTER. FIRSTLY, THE AO HAS IN FACT MADE AN ADDITION OF RS. 6,91,067/-, AND HIS STATING OF HAVING IN FACT MADE AN ADDITION OF ONLY RS. 4,28,252/- AT PARA 9A, PG. 4 OF HIS ORDER IS CLEARLY AS MISTAKE ( KINDLY REFER PAGE 8 OF THE ASSESSMENT ORDER ). AS SUCH, THE FIGURE STATED BY THE REVENUE IN ITS RESPECT PER ITS GROUND OF APPEAL IS CORRECT. SECONDLY, OUT OF THE SAME, THE ASSESSEE HAS IN FACT DISPUTED ONLY AN ADDITION OF RS. 2,62,065/-, I.E., IN RESPECT OF TOYOTA CAR WHICH STOOD PURCHASED IN IT(SS)A NOS. 211 & 219/COCH./2005 13 CUSTOMS AUCTION ON 31.3.1998, BEFORE THE LD. CIT(A) VIDE ITS GROUND OF APPEAL # 8. EVEN NO CONTENTION STOOD RAISED BY THE ASSESSEE BEF ORE HIM FOR THE BALANCE AMOUNT OF RS. 4,29,002/- (6,91,067 - 2,62,065). AS SUCH, THER E IS NO BASIS FOR THE LD. CIT(A) ASSUMING JURISDICTION OVER THE BALANCE UNDISPUTED S UM OF RS. 4,29,002/- (6,91,067 - 2,62,065), FOR WHICH REFERENCE MAY ALSO BE DRAWN TO THE LAST SUB-PARA OF PARA # 7 ((AT PG. 7) OF HIS ORDER, AND HIS CANCELLATION THEREOF, IS PATENTLY ILLEGAL, THE SAME IS, ACCORDINGLY, DELETED, RESTORING THE ASSESSMENT ORDE R IN ITS RESPECT. 10.7 WITH REGARD TO THE DISPUTED ADDITION OF RS. 2, 62,065/-, THE LD. CIT(A) HAS TAKEN ON RECORD A CONFIRMATION LETTER FROM ONE, SHRI CHER IAN GEORGE MAMPILLY WHO WAS ABROAD AT THE RELEVANT TIME AND CAME BACK TO INDIA ONLY ON 31.12.2003, SO THAT THE SAME COULD NOT BE PRODUCED BEFORE THE AO IN SUPPORT OF HIS EXPLANATION THAT THE SAID CAR STOOD DELIVERED TO THE SAID PERSON ON THE PAYME NT OF RS. 2,94,065/- TO THE ASSESSEE ON 31.3.1998, EVEN AS CONFIRMED BY HIM. THE SAID E VIDENCE BEING NOT BEFORE THE AO, HIS ORDER COULD NOT BE SAID TO BE INFIRM FOR THAT R EASON. AS SUCH, THE LD. CIT(A), ADMITTING THE ADDITIONAL EVIDENCE, OUGHT TO HAVE CO NFRONTED THE AO THEREWITH FOR HIS VERIFICATION, IN TERMS OF RULE 46A, RATHER THAN P ROCEEDING TO CANCEL THE ADDITION, WHICH, AS WE HAVE FOUND, HE DOES EVEN FOR THE AMOUN T WHICH IS NOT CONTESTED BY THE ASSESSEE BEFORE HIM. SECONDLY, WE OBSERVE A CONTRA DICTION IN-AS-MUCH AS IF THE VEHICLE WAS NOT DELIVERED TO THE ASSESSEE, IT COULD ONLY BE WHERE HE HAD NOT REMITTED THE AUCTION AMOUNT TO THE CUSTOMS AUTHORITIES, AND IN WHICH CASE THERE IS NO QUESTION OF THE PAYMENT OF THE PURCHASE AMOUNT BY SHRI CHERI AN GEORGE MAMPILLY TO THE ASSESSEE. IT IS ONLY AFTER THE ASSESSEE OBTAINED THE RIGHTS ON PAYMENT OF THE AUCTION AMOUNT TO THE CUSTOMS AUTHORITIES, COULD HE TRANSFE R THE SAME TO ANOTHER, WHICH HE DOES AT A PREMIUM OF RS. 32,000/-. IT NEEDS TO BE B ORNE IN MIND THAT THE PAYMENT TO THE CUSTOM AUTHORITIES IS TO BE MADE IMMEDIATELY. F URTHER, EVEN ASSUMING FOR A MOMENT THAT THE ASSESSEE HAD NOT MADE THE PAYMENT; THE PAYMENT TO THE ASSESSEE AND THE AUCTION DATE BEING THE SAME, SHRI CHERIAN MAMPI LLY WOULD HAVE DIRECTLY REMITTED THE AUCTION AMOUNT TO THE CUSTOM AUTHORITIES, PAYIN G THE ASSESSEE THE BALANCE, AND IN WHICH CASE, FIRSTLY, WHY WOULD HE PAY A PREMIUM TO THE ASSESSEE. SECONDLY, THE IT(SS)A NOS. 211 & 219/COCH./2005 14 ASSESSEE WOULD ALSO HAVE ISSUED A CERTIFICATE TO SH RI GEORGE MAMPILLY, AS ALSO ENDORSED THE RECEIPT FROM THE CUSTOMS AUTHORITIES I N HIS FAVOUR. THIS IS AS THE CUSTOMS RECEIPT BEING IN THE NAME OF THE ASSESSEE, THE PURC HASER, I.E., SHRI CHERIAN MAMPILLY, WOULD NOT BE ABLE TO SECURE THE REGISTRATION OF THE VEHICLE IN HIS NAME IN THE ABSENCE OF THE SAID ENDORSEMENT AND CERTIFICATE. THE ASSESS EE HAS NOT LED ANY CONTEMPORANEOUS EVIDENCE TO EXHIBIT ITS TRANSACTION IN TOTALITY; ITS CASE BEING BASED ONLY ON THE SAID CONFIRMATION LETTER. THE DATE/TIME WHEN THE APPLICATION FOR REGISTRATION IN HIS NAME OF SHRI MAMPILLY STOOD MAD E WITH THE RTOS OFFICE, COULD ALSO BE A POINTER IN THE MATTER AND A CORROBORATIVE FACTOR. SECONDLY, ANOTHER ASPECT APPEARS TO HAVE ESCAPED THE ATTENTION OF THE LD. CI T(A), I.E., IRRESPECTIVE OF WHETHER THE INITIAL INVESTMENT WAS MADE BY THE ASSESSEE OR NOT, FOR WHICH THE MATTER STANDS REMITTED TO THE AO, THE ASSESSEES EXPLANATION IS A N ADMISSION FOR HAVING EARNED A SUM OF RS. 32,000/- AS A PREMIUM ON SALE OF THE VEH ICLE (OR HIS RIGHTS THEREIN) TO SHRI CHERIAN MAMPILLY, AND WHICH HAS NOT BEEN INCLUDED I N HIS UNDISCLOSED INCOME. WITH THESE OBSERVATIONS, WE, SETTING ASIDE THE IMPUGNED ORDER, CONSIDER IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE LD. CIT( A) FOR A PROPER CONSIDERATION OF ALL THE ISSUES DELINEATED HERE-IN-ABOVE, I.E., QUA THE TRANSACTION(S) IN RESPECT OF THE TOYOTA CAR, PER A SPEAKING ORDER, RECORDING DEFINITE FINDI NGS OF FACT, AND AFTER ALLOWING PROPER OPPORTUNITY TO BOTH THE SIDES. WE DECIDE ACC ORDINGLY. 11. THE THIRD GROUND OF THE REVENUES APPEAL RELATE S TO THE DELETION OF ADDITION IN THE SUM OF RS. 60,069/-, BEING THE ADMITTED PAYMENT S TO ONE, M/S. ATHENA TRAVELS (INDIA) PVT. LTD. IN THE MONTH OF JUNE, 1999, AS RE FLECTED IN THE SEIZED DOCUMENT RRA- 107. THE ASSESSEE EXPLAINED IN THE ASSESSMENT PROC EEDINGS THAT THE EXPENSES WERE MET BY HIS BROTHER-IN-LAW, SHRI SHAMSUDEEN, THOUGH HE FAILED TO PRODUCE HIM FOR EXAMINATION WHEN CALLED TO DO SO BY THE AO (VIDE OR DER SHEET ENTRY DATED 11.12.2003). ON SUBSEQUENT QUESTIONING, THE ASSESS EE MODIFIED HISSTAND (VIDE LETTER DATED 22.12.2003) STATING OF ONLY RS. 15,000/- AS H AVING BEEN PAID BY SHRI SHAMSUDEEN AND RS. 60,000/- HAVING BEEN INFACT HAND ED OVER TO SHRI SHAMSUDEEN BY ONE SHRI K.K.YOUSUF FOR GIVING TO THE ASSESSEE. TH E ASSESSEE FAILING TO SUBSTANTIATE IT(SS)A NOS. 211 & 219/COCH./2005 15 HIS EXPLANATION WITH ANY EVIDENCE, THE AO MADE THE ADDITION U/S. 69C OF THE ACT. IN APPEAL, IT WAS CONTENDED BY THE ASSESSEE THAT HE H AD IN FACT FILED THE CONFIRMATION LETTER FROM SHRI SHAMSUDEEN ALONG WITH HIS REPLY DA TED 22.12.2003, PLACING A COPY OF THE SAME ON RECORD ALONG WITH THE CONFIRMATION LETT ER, BEFORE HIM. THE LD. CIT(A) OBSERVED THAT THE LETTER AT POINT NO. 12, SPECIFICA LLY MENTIONS ABOUT (FURNISHING OF) CONFIRMATION LETTER. IN THIS VIEW OF THE MATTER, H E FOUND THE AOS OBJECTION AS NOT VALID AND, HENCE, DELETED THE ADDITION. AGGRIEVED, THE REVENUE IS IN APPEAL. 12. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. AS APPARENT, THERE IS CONTRADICTION IN FACTS. WHILE THE ASSESSEE MAINTAINS TO HAVE FURNISHED THE CONFIRMATION LETTER FROM SHRI SHAMNSUDEEN, VIDE HIS REPLY DATED 22.12.2003, THE AO STATES, AT PARA 6 OF THE ORDER, THAT NO SUCH CONFIR MATION LETTER STOOD SUBMITTED. UNDER THE CIRCUMSTANCES, IN OUR VIEW, IT WAS INCUMBENT ON THE LD. CIT(A) TO GIVE AN OPPORTUNITY TO THE AO TO STATE HIS CASE. IN FACT, CALLING FOR THE ASSESSMENT RECORD AND INSPECTING THE SAME SHOULD HAVE LARGELY HELPED REVE AL THE TRUTH. THIS WAS ALL THE MORE SO AS THE AO IS EXPLICIT AND CANDID IN STATING THAT THOUGH THE ASSESSEE STATES SO IN HIS REPLY, HE HAS ACTUALLY NOT SUBMITTED THE CONFIRMATI ON LETTER. AS SUCH, THE LD. CIT(A) SHOULD NOT HAVE GONE BY MERELY WHAT IS STATED IN TH E REPLY DATED 22.12.2003. FURTHER, THE AO HAD CALLED THE ASSESSEE TO PRODUCE SHRI SHA MSUDEEN AND THE ASSESSEE NOWHERE EXPLAINS WHY HE COULD NOT DO SO, EVEN AS TH E LETTER SHOWS THAT HE WAS AVAILABLE, AS ONLY IN THAT CASE COULD HE HAVE ISSUE D THE CONFIRMATION LETTER. THE ASSESSEE HAS ALSO NOT EXPLAINED THE REASON FOR HIS CHANGED STAND, WHICH IS ALL THE MORE SURPRISING AS RS. 60,000/- OF THE DISPUTED SUM OF R S. 60,069/- STANDS ASCRIBED TO THE ASSESSEES OWN BROTHER. FURTHER, THE LD. CIT(A) HAS NOT GIVEN COGNIZANCE TO THIS ASPECT OF THE MATTER, I.E., THAT THE CONFIRMATION LETTER O F SHRI SHAMSUDEEN, STANDS SERIOUSLY DILUTED IN VALUE N VIEW OF THE NON-PRODUCTION OF SH RI SHAMSUDEEN AS WELL AS NOT ADVANCING ANY REASON FOR NOT DOING SO, WHEN HE WAS AVAILABLE. IN VIEW THEREOF, THE CONFIRMATION FROM SHRI SHAMSUDEEN, ON WHICH ALONG T HE ASSESSEES CASE IS FOUNDED, LOOSES ALL SIGNIFICANCE. WHY WOULD THE ASSESSEES B ROTHER NOT GIVEN MONEY DIRECTLY TO HIM, BEING ALSO HIS BROTHER, BUT THROUGH HIS BROTHE R-IN-LAW? THERE ARE NO REPORTED IT(SS)A NOS. 211 & 219/COCH./2005 16 DIFFERENCES BETWEEN THE ASSESSEE AND HIS BROTHERS, OR SHRI YOUSUF IN PARTICULAR, AND IN WHICH CASE HE WOULD NOT HELP HIM AT ALL. THE ASSES SEE HAS ALSO NOT EXPLAINED THESE ISSUES BEFORE THE LD. CIT(A), MERELY RELYING ON THE CONFIRMATION LETTER FROM SHRI SHAMSUDEEN. UNDER THE CIRCUMSTANCES, WE FIND NO SU BSTANCE IN THE ASSESSEES CASE OR INFIRMITY IN THE ASSESSMENT ORDER. CONSEQUENTLY, W E SET ASIDE THE IMPUGNED ORDER ON THIS GROUND, AND CONFIRM THE ADDITION FOR THE ADMIT TED EXPENSES INCURRED BY THE ASSESSEE ON FOREIGN TRAVEL (FOR A.Y. 2000-01). WE DECIDE ACCORDINGLY. 13. THE FOURTH GROUND OF THE REVENUE APPEAL IS IN R ELATION TO ADDITION OF RS. 1,53,937/- IN RESPECT OF COST OF THE IMPORTED GOODS (FROM SINGAPORE ON 27.10.2000) AND IMPORT DUTY THEREON. THE ASSESSEE EXPLAINED T HE SOURCE AS SHRI SHAMSUDEEN, HIS BROTHER-IN-LAW, THOUGH FAILED TO EITHER PRODUCE HIM (AS REQUIRED VIDE ORDER SHEET ENTRY DATED 11.12.2003) OR EVEN FURNISH A CERTIFICATE FRO M HIM, EVEN AS HE STATED OF DOING SO, SO THAT THE SAME WAS CONSIDERED AS UNEXPLAINED INCOME U/S. 69 OF THE ACT FOR A.Y. 2001-02. IN APPEAL, THE ASSESSEE FURNISHED A CON FIRMATION LETTER (DATED 17.12.2003) FROM SHRI SHAMSUDEEN (UDAYA SOUND SYSTEM) WHICH STA TED OF THE SAID IMPORT AS HAVING BEEN MADE BY THE ASSESSEE ONLY ON HIS SPECI FIC REQUEST AND STANDS FUNDED BY HIM. IN VIEW THEREOF, THE LD. CIT(A) DELETED THE A DDITION, OBSERVING THE FACTS TO BE SIMILAR TO THE ADDITION FOR RS. 60,069/-. AGGRIEVE D, THE REVENUE IS IN APPEAL. 14. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. THE ASSESSEE DID NOT FURNISH THE CONFIRMATION LETTER FROM SHRI S HAMSUDEEN BEFORE THE ASSESSING OFFICER. THIS IS ALL THE MORE SURPRISING AS THE AO HAD CALLED FOR THE SAME, AND THE CONFIRMATION LETTER WAS AVAILABLE WITH THE ASSESSEE , HAVING BEEN OBTAINED FROM SHRI SHAMSUDEEN ON 17.12.2003. AS SUCH, IT IS NOT COMPR EHENSIBLE AS TO WHY THE SAME DID NOT STAND ADDUCED BEFORE THE AO EVEN AS THE ASSESSE E MENTIONS OF ADDUCING THE SAME, ALBEIT WITHOUT PROOF. THE ASSESSEE HIMSELF ATTENDE D THE HEARING BEFORE THE AO ON 17.12.2003, AND THEN AGAIN ON 22.12.2003. THE LD. C IT(A) HAS ADMITTED THE ADDITIONAL EVIDENCE WITHOUT RECORDING HIS REASONS FOR DOING SO , AS REQUIRED UNDER THE PROVISIONS OF RULE 46A. FURTHER, HE PROCEEDS TO CONSIDER THE SAME WITHOUT CONFRONTING IT TO THE IT(SS)A NOS. 211 & 219/COCH./2005 17 AO, AND SEEKING HIS COMMENTS AS WELL AS AN OPPORTUN ITY FOR EXAMINATION. THE REVENUES INTEREST HAS BEEN, THUS, FOR NO FAULT OF ITS, SQUARELY COMPROMISED. EVEN BEFORE US, THERE IS NO MENTION OF ANY REASON AS TO WHY SHRI SHAMSUDEEN COULD NOT BE PRODUCED AS DESIRED BY THE AO OR WHY HIS CONFIRMATI ON LETTER, OSTENSIBLY AVAILABLE WITH THE ASSESSEE, WAS NOT ADDUCED BEFORE THE ASSES SING OFFICER. THE SAME, THEREFORE, CANNOT BE RELIED UPON. DE HORS THE SAME, THE ASSESSEES CASE IS TOTALLY UNSUBSTAN TIATED. IT IS NOT EXPLAINED AS TO WHAT WAS THE REASON FOR F IRSTLY, THE IMPORT BY SHRI SHAMSUDEEN AND, SECONDLY, DOING SO INDIRECTLY, I.E. , THROUGH THE ASSESSEE. NO CIRCUMSTANTIAL OR CORROBORATIVE EVIDENCE, IN SUPPOR T OF THE CLAIMS, HAS BEEN LED OR POINTED OUT, BESIDES COMPLYING WITH THE DIRECTION F OR HIS PRODUCTION, TO ENABLE THE AO TO ENQUIRE IN THE MATTER, BY SEEKING ALL THE NECESS ARY AND RELEVANT INFORMATION, AND ARRIVE AT HIS INFORMED FINDINGS (ON FACT). NEITHER ANY SUCH INQUIRY STANDS MADE BY THE LD. CIT(A) HIMSELF, WHO ENJOYS CO-TERMINUS POWERS I N THE MATTER. UNDER THE CIRCUMSTANCES, HIS ADMISSION OF ADDITIONAL EVIDENCE WITHOUT RECORDING REASONS, AND CONSIDERING IT WITHOUT FIRST CONFRONTING THE AO THE REWITH, IS NOT A PROCEDURAL LAPSE, WHICH WOULD SUGGEST A REMISSION BACK TO HIS FILE, B UT AN ABORTION OF THE WHOLE AND THE DUE PROCESS OF LAW. AS SUCH, THERE IS NOTHING ON RE CORD TO LEND CREDENCE TO THE ASSESSEES CLAIM ON WHOM THE BURDEN OF PROOF LIES; THE IMPORT OF GOODS AND PAYMENT OF CUSTOMS DUTY THEREON BY HIM BEING AN UNDISPUTED FACT. UNDER THE CIRCUMSTANCES, WE FIND NO INFIRMITY WHATSOEVER IN THE ADDITIONS AS MADE BY THE AO AND CONSEQUENTLY HOLD ITS DELETION BY THE LD. CIT(A) AS LEGALLY UNSU STAINABLE. WE DECIDE ACCORDINGLY. 15. THE FIFTH AND FINAL GROUND OF THE REVENUES APP EAL, IS IN RESPECT OF THE DELETION OF SURCHARGE ON THE INCOME TAX BY THE LD. CIT(A), H OLDING THE AMENDMENT TO SECTION 113 OF THE ACT BY WAY OF PROVISO THERETO, AS BEING EFFECTIVE ONLY FROM 1.6.2002. AGGRIEVED, THE REVENUE IS IN APPEAL. 16. THE ISSUE IS NO LONGER RES INTEGRA, HAVING BEEN SETTLED BY THE HONBLE APEX COURT VIDE ITS DECISIONS IN THE CASE OF CIT VS. SURESH N.GUPTA , 297 ITR 322 (SC) AND CIT VS. RAJIV BHATARA , 310 ITR 105 (SC). THE HONBLE COURT PER ITS SAID DECISIONS HAS IT(SS)A NOS. 211 & 219/COCH./2005 18 CLARIFIED THAT THE PROVISO TO SECTION 113 OF THE ACT BY FINANCE ACT, 2001 IS CLARIFICATORY IN NATURE. AS SUCH, SURCHARGE WOULD BE APPLICABLE EVEN FOR ASSESSMENTS OF UNDISCLOSED INCOME MADE FOR SEARCHES CONDUCTED P RIOR TO 1.6.2002. THE REVENUE SUCCEEDS ON ITS GROUND IN VIEW THEREOF. WE DECIDE ACCORDINGLY. 17. WE MAY, BEFORE PARTING, ALSO CLARIFY THAT AS WE HAVE REMITTED CERTAIN MATTERS ARISING OUT OF THE REVENUES APPEAL BACK TO THE FIL E OF THE FIRST APPELLATE AUTHORITY, FOR WANT OF, IN OUR VIEW, PROPER ADJUDICATION BY HIM, I T MAY WELL BE THAT THE ADDITIONS STAND TO BE DELETED BY HIM ON MERITS. THE REVENUE, THEREFORE, IF AGGRIEVED, SHALL NOT BE BARRED TO PURSUE THE APPELLATE PROCESS BEFORE TH E TRIBUNAL ON JURISDICTION QUA TAX- EFFECT IN THE SECOND ROUND, THE SA ME BEING ESSENTI ALLY A CONTINUATION OF THE PRESENT PROCEEDINGS. 18. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISS ED AND REVENUES APPEAL IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES . S D/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 09 JULY, 2010 GJ COPY TO: 1. SHRI K.K.BASHEER, PROP. AUDIO TECH, JEWS STREET, COCHIN-35 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRA L, CIRCLE-1, ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R./I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR)