ACIT, Central Circle-25, V. Vineet Kumar Babbar,

ITSSA 227/DEL/2005

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 9267 (ITAT-DELHI)
• Duration Of Justice: 18 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-01-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-01-2024
• Assessment Year: misc
• Appeal Filed On: 01-05-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.N BARNWAL
• Assessee Lawyers: SAMP ATH
• Keywords: Gift; Business income; Document seized; Initiation of penalty proceedings; Corroborative evidences; Competent authority; Block assessment; Right to appeal; Reason to believe; Documents seized
• Section: 131; 63; 132; 250; 201; 251; 191; 192; 64; 158BC(c); 158BC; 48; 73; 72; 158BFA; 153; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI Before Shri Challa Nagendra Prasad, Judicial Member & Dr. B. R. R. Kumar, Accountant Member IT (SS)A No. 227/Del/2005 Asstt. Year: 01.04.1996 to 17.10.2002 The ACIT, Central Circle -25, New Delhi Vs Vineet Kumar Babbar, Prop. M/s JMD Trading Co. 528, Katra Ishwar Bhawan, Khari Baoli, Delhi (ASSESSEE) (RESPONDENT) PAN No. AAGPK 5983 K Assessee by : Sh. Sampath, Adv. Sh. V Rajakumar, Adv. Revenue by : Sh. P.N Barnwal, CIT-DR Date of Hearing: 02.01.2024 Date of Pronouncement: 04.01.2024 ORDER Per Dr. B. R. R. Kumar:- The present appeal has been filed by the assessee against the order of ld.CIT(A)-XXV dated 25.02.2005 for the A.Y. 01.04.1996 to 17.10.2002 2. The Revenue has raised the following grounds of appeal are as under:- 1. On the facts and in the circumstances of the cse, the ld. CIT(A) has erred in deleting the addition of Rs. 89,96,000/- and Rs. 1,43,54,571/- made on account of undisclosed profit from purchase activities and undisclosed investment in undisclosed business activities. IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 2 2. On the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs. 30,36,101/- made on account of undisclosed investment in jewellery. 3. On the facts and circumstances of the case, the ld. CIT(A) has erred in deleting addition of Rs. 1,93,122/- made on account of peak balance of undisclosed bank account. 4. On the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs. 2,00,000/- made on account of profit on forward transaction. 3. The AO determined undisclosed income at Rs. 371,02,611/- against the undisclosed income declared by the assessee of Rs. 103,21,617/-. The additions made by the AO as under: 1. Profit from purchase activities Rs. 89,96,900 2. Undisclosed investment Rs. 1,43,54,571 3. Investment in Jewellery Rs. 30,36,101 4. Undisclosed Bank Account Rs. 1,93,422 5. Seized material Rs. 2,00,000 4. Aggrieved, the assessee filed appeal before the ld. CIT(A) who deleted the additions made on all the above accounts. 5. Aggrieved, the assessee filed appeal before the ITAT. 6. Before us, the ld. DR argued extensively quoting the Assessment Order and the ld. AR supported the order of the ld. CIT(A). 7. Heard the arguments of both the parties and perused the material available on record. IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 3 For the sake of ready reference the entire order of the ld. CIT(A) is reproduced as under: 2. The material facts may be briefly recalled so as to appreciate the points at issue. A search was conducted on 17/10/2002 at the business premises of M/s. J.M.D. TRADING CO., a proprietorship concern of the at 528, Katra Ishwar Bhawan, Khari Baoli, Delhi and the residential premises bearing No. 25/6, Tilak Nagar, New Delhi under occupation of the assessee as well as the family members of the assessee. The ground floor of the said residential house was occupied by the assessee, his wife (Smt. Poonam Babbar), his minor daughter (Diksha) and his minor son (Gautam), while the first floor of the said residential Block house was occupied by the assessee's brother (Shri Subhash Chand Babbar) and his family. -During the course of search of the residential premises, certain cash and jewellery had been found and seized, as per the details mentioned below: Valuable Found Seized Jewellery at Gr. Flr Rs. 31,30,101/- Rs. 26,96,634/- Cash at gr. Floor Rs. 20,23,890/- Rs. 19,96,634/- Cash at 1 st Floor Rs. 5,80,500/- Rs. 5,50,000/- Jewellery valued at Rs. 5,27.580/- was also found from the locker of Smt. Poonam Babbar (wife of the assessee) and the whole of it was seized by the authorised officers taking search. 2.1 The assessee had been carrying on the business of trading in cashew nuts mainly on whole sale basis. The assessee, besides his own trading, had also been effecting sales on consignment basis. It was revealed during the search that apart from what was disclosed in his income-tax returns, the assessee had also done undisclosed purchases and sales on a much larger scale under two benami concern, which were not disclosed originally. It is an admitted position that the undisclosed purchases made by the assessee aggregated to Rs. IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 4 11.08 crores, (for the A.Y. 02-03) and Rs. 17.44 crores (for the period from 1/4/02 to 16/10/02). It was found that the assessee had been maintaining two sets of accounts- one for the sake of just filing his income tax returns where figures of sales, purchases, expenses & stocks were adopted by choice to arrive at a desired net profit figure (which may be called as the "MADE UP ACCOUNTS ") and another for actual working, where everything i.e.. sales, purchases, expenses & stocks were meticulously and genuinely recorded (which may be called as the "REAL ACCOUNTS"). Both sets of account, as were maintained by the assessee, had been found and they were seized during the search. 2.2. The ld. A.O. had issued a notice u/s. 158BC of Income Tax Act, 1961 dated 20.05.2003 in the name of the assessee, to furnish the return of total income including undisclosed income for the block period 01.04.1997 to 17.10.2002 (as against the correct block period from 01/4/1996 to 17/10/02). On being brought to his notice by the assessee, the defect in the mention of the block period was corrected by the Id. A.O. by way of his letter dated 9/10/03 addressed to the assessee. The assessee filed his return for the block period in the prescribed Form No. 2B on 03/02/2004 declaring an undisclosed income of Rs. 1,03,21,617. The aforesaid undisclosed income was declared by the assessee in the following manner:- AY Gross Total Undisclosed Income Admiss ible Deduct ion Total Undisclo sed Income Profits & Gains Busine ss or profes sion Inco me from othe r sour ces Gross total incom e 1997- 98 2,00,0 00 1,10 0 2,01,1 00 1,100 2,00,00 0 1998- 99 3,00,0 00 5,58 7 3,05,5 87 5,587 3,00,00 0 1999- 00 3,00,0 00 9,84 9 3,09,8 49 9,849 3,00,00 0 2000- 01 5,00,0 00 21,5 87 5,21,5 87 2,186 5,19,40 1 2001- 02 17,00, 000 3,73 1 17,03, 731 1,515 17,02,2 16 2002- 03 28,00, 000 2,41 0 28,02, 410 2,410 28,00,0 00 2003- 04 45,00, 000 2,30 0 45,02, 300 2,300 45,00,0 00 (upto IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 5 17.10. 02) 1,03,21, 617 2.3 While framing the presently impugned order, the ld A.O. chose to proceed from undisclosed the income which had been declared by the assessee and he thereafter made the following additions while computing the assessee's undisclosed income at Rs.3,71,02,611/- Amount (Rs.) Undisclosed income declared by the 'A' 1,03,21,617 Add: Undisclosed profit from purchase activities 89,96,900 Undisclosed investment in the said purchases 1,43,54,571 Undisclosed purchases investment in jewellery 30,36,101 On a/c of an undisclosed bank account 1,93,422 On a/c of difference of Lena Dena Baki as per 2,00,000 computerised loose sheets in the name of M/s Arjan Dass Subhash Chander(defunct since 1988) Total undisclosed income assessed 3,71,02,611 Being aggrieved by all the aforesaid additions, the assessee has come up in the present appeal. 3. Ground numbered 1 raises a preliminary objection that the ld. AO had erred in not examining and deciding upon the question whether the authority who authorised the search upon the assessee group had really any reason to believe that any of the circumstances enumerated in clauses (a), (b),or (c) of section 132(1) did exist in the present case. It is argued by the ld. A.Rs. S/Shri B.D. Sharma, Ashish Saraswat and Arun Jain, that, in fact, no such circumstances had existed in so far as the assessee group is concerned and the assessment impugned deserves to be quashed on that short premise. It is pointed out that the investigation wing of the department had issued summons u/s. 131 of the Income Tax Act, 1961 and gathered information about the businesses carried on by the assessee as well as his assets, not before the date of signing/ issuing the warrant of authorisation for search by the competent authority, but much after the conclusion of search & seizure operations. It is urged that the very fact that the investigation wing had issued summons under section 131 after the search & seizure operations under section 132 showed that there was neither any specific reason to believe nor material, on the basis of IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 6 which a warrant of authorization of search under section 132 could have been issued. The lARs. have submitted that the expression "has reason to believe" in subsection based (1) of section 132 means the bona-fide belief on some reasonable or credible information and not on the information which may be imaginary. It is urged that the impugned assessment is rendered the AO had illegal and invalid because not examined the validity of the search itself. 3.1 I have carefully considered the issue. The plea, if accepted, would set the hierarchical scheme of the Act on its very head and I have much to say on the matter out to the rather obvious including pointing fact, that the A.O. acquires his very jurisdiction u/s 158BA post search u/s 132 of the Act. However, for the sake of brevity, it would be to what sufficient to advert the Jurisdictional Tribunal had to say vis-a-vis such pleadings which were before it in the matter of Virender tendered Bhatia Vs. DCIT 79 ITD 340 (Del). The Hon'ble Tribunal exposited the correct principle thus: Quote "We have given careful consideration to the rival submissions and the materials on the file including the written submissions and paper book etc. As regards the grounds challenging the validity of the search we are of the considered opinion that the power of the Tribunal in this regard is limited. As rightly submitted by the ld. Sr. counsel for the revenue the Tribunal can only consider whether the Assessing Officer had validly and legally assumed jurisdiction under section 158BA/ 158BC. For assuming jurisdiction and issuing noticeunder section 158BA/ 158BC, the Assessing Officer is required to see whether search was initiated in the case. He has no power to go into the validity of search. Similarly, in appeal the Tribunal can consider whether the search was initiated in the case and thereby the Assessing Officer had assumed jurisdictiono issue notice under section 158BA/158BC. This power arises because the impugned assessment is based on the assumption of jurisdiction and the issue of notice and the issue of notice is based on the initiation of search in the case. Thus the question of validity of search is beyond the pale of power of the Assessing Officer and the Tribunal so far as the making of assessment and adjudication appeal thereon are concerned. Every authority must act within his powers and jurisdiction. There is no appeal provided in the Act against the power under section 132. If at all, the validity IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 7 of search has to be challenged it can be challenged in a writ before the High Court". Unquote The pleadings tendered by the ld. ARs. on the point of jurisdiction are without merit and they are rejected. 4. Grounds numbered 2 to 5 can be taken up together for the sake of convenience. The, ground which is numbered 2 urges that the ld. A.O. ought to have followed the "asset found" basis for computing the assessee's undisclosed income for the block period. The other three grounds from 3 to 5 assail the additions of Rs. 89,96,900/- and Rs. 1,43,54,571/- which have been made by the-ld. AO for reasons mentioned in paragraphs 1 and 2 of the impugned assessment order. Briefly put, the Id. A.O. has applied the G.P. rate of 4.5 % (on the basis of trading results reflected in the "made up accounts" which were otherwise rejected by him) and has then also refused to allow the expenses incurred by the assessee as per the "real accounts" with the following remarks:- "The entire G.P rate calculated above needs to be taxed, as undisclosed income, since the expenses in the nature of overheads are already debited and claimed in the regular books of account of the assessee. The assessee has not produced any evidence in support of its claim administrative overheads nature against the profit from undisclosed sale/purchase activity. Hence addition of Rs.89,96,900/- is made to the undisclosed income of the assessee." The ld. A.O. has made the other addition of Rs. 1,43,54,571/- on account of alleged investment required for purchase/sale activities by presuming a 30 days holding period for stock of cashew nuts, which estimation was again based by him on the "made up accounts" which were otherwise held as not reflecting the true trading activities of the assessee. 4.1 The ARs. have emphasised upon the fact that the entire affairs of the assessee are before the department since both the "real accounts" and the "made up accounts" have been seized during the course of search. It is strongly argued that under the facts and circumstances of the case, the only logical method to assess the undisclosed income of the assessee for the block period, would be on the "assets found" basis. It is submitted that the ld. A.O. should have found out the personal expenses (covering the assessee's household expenses as well as the valuables goods like jewellery purchased, if any) of the IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 8 assessee out of the seized records. Further the learned A.O. should have also taken into consideration the assets acquired by the assessee either prior to the block period or by way of borrowed funds/ gifts/ inheritance etc. It is contended that only after keeping into consideration all these factors, the Id. A.O. should have assessed the undisclosed income of the assessee for the block period. The ld. ARs. have advanced the following net accretion to assets analysis in support of their aforesaid contentions:- A) Assets found during the search I. Cash found at ground floor of residence Rs.20,23,890/- II. Cash found at 1st floor of residence Rs. 5,80,500/- III. Amount recoverable by the assessee from his brother Sh. Subhash Babbar as reflected in the seized record Rs. 3, 19,500/- IV. Balance in the undisclosed account with State Bank of Mysore, Janakpuri Branch Rs. 1,74,383/ - V. Stock of Cashwe nuts actually found as per Panchnama Rs. 11,43,108/- B) Personal expenses as found recorded in seized book marked as annexure A-13 Rs. 13,86,210/- Rs. 13,86,210/- C) Total assets found as a consequence of search (A+B) Rs. 56,27,591/- D) Undisclosed income declared in the block return Rs. 1,03,21,617/- E) Excess still available for investment in undisclosed Rs. 46,94,026/- business or even otherwise (D-C) The assessee is aggrieved that this logical method to assess the undisclosed income for the block period has not been followed by the ld. A.O., while it is a well accented/ approved method. 4.2. The ARs. have pointed out that both sets of account, as were maintained by the assessee, had been found & seized by the Income Tax Department. The relevant extracts for the period commencing on 6/5/02 and up-till the day prior to the date of search i.e. 16/10/02 as per both sets of accounts are reflected by the ld. ARs. in charts which are placed at pages numbered 21 and 22 of the paper book These show that during IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 9 the said period, the purchases as per the made up accounts were declared at a mere Rs. 1,07,51,236/- whereas they were really at Rs. 16,62,21,526/- as per the real accounts which had meticulously been maintained by the assessee. Similarly, the sales as per the made up accounts were declared at only Rs.1,40,12,364/- as against the-true figure of Rs. 17,48 95,540/ as per the real accounts. 4.3 The ARs. have submitted that the Id. A.O. has grossly erred in applying an ad-hoc G.P. rate of 4.5 % as undisclosed income without allowing the deduction on account of expenses incurred by the assessee under various heads, which were correctly recorded in the real accounts. It is contended that the observation of the Id. A.O that such expenses are already debited and claimed in the regular books of accounts (i.e. the made up accounts) is factually incorrect. It is pointed out that Annexure A-13 was found the assessee's residential premises which clearly reflect the real expenditure incurred by the assessee. It is submitted that the expenditure (both direct and indirect) incurred by the assessee during the period from 6/5/02 to 16/10/02 in the sum of Rs. 72,33,581/- stands recorded in the real accounts and as such the correctness of the said expenditure can never be in dispute. It is submitted that the N.P rate works out to 1.48% for the aforesaid period when the figures in the real accounts are taken. It is urged that the Ld. A.O must dither accept the entire seized material in its totality or he must reject whole of the said seized material, but the cannot pick and choose as to what expenditure would be allowed while computing the assessee's undisclosed income. It is submitted that the expenditure incurred under various heads as recorded in Annexure A-11, A-13 & A-15 should have been allowed in toto. Reliance is placed by the ARs on the judgements in Aggarwal Motors vs ACIT 68 ITD 407 and CIT vs. Bhagwati Developers private Limited (2003) 261 ITR 658 (Cal). 4.4 In order to buttress their aforesaid submissions, the ld. ARs. have further pointed out that the entries relating to the sales made by the assessee, as recorded in his made up accounts (as reflected in seized Annexure A-16 from the shop) were also recorded in his real accounts as reflected in seized Annexures numbered A-15 to A-19 from residence). It is submitted that this position is verifiable from the seized records and a chart is placed by the Id. ARs at pages numbered 22 to 29 of the paper book. It is argued that such practice of the assessee makes it amply clear that the real accounts maintained by the assessee reflect the true results and IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 10 consequently all the entries recorded in these sets of account (i.e. the real accounts) should have been relied upon and made the basis of assessment. 4.5 In so far as the investment in the subject-undisclosed/ purchases is concerned, the Id. ARs. have firstly drawn my attention to paragraph 2.3 of the assessment order wherein it is mentioned that the assessee had stated before the DDIT (Investigation) that Cashew nut is a perishable commodity and therefore it was never stored beyond 5-6 days. It is pointed out that the A.O. has further qualified his observation by mentioning that- "The reliability of this part of the statement needs to be tested against actual position depicted by the audited financial statement of the assessee itself'. The assessee is aggrieved that as in the matter of application of G.P. rate, so in taking the inventory holding period, the Id, A.O. has blindly relied upon the made up accounts although the very same accounts were otherwise rejected by him as not reflecting the true trading results of the assessee. It is urged that relying on stock holding comparison based on the made up accounts is bound to give a distorted picture both with regards to G.P. rate and inventory holding period. It is submitted that the ld. A.O. has correctly stated that the storage period needs to be tested against actual position, but he has thereafter failed to distinguish between the real affairs vis-a-vis the managed affairs. It is reiterated that the closing stock figure had been adopted by choice in the made up accounts to suit the assessee's requirement of net profit figure which was to be disclosed to the Income-tax department in his regular returns of income. On the other hand, the other set of accounts, or the real accounts, depicted the real affairs of the assessee. 4.6 The ARs. have submitted that it is evident that the ld. A.O. has wrongly adopted 30 days as the inventory holding period. It is argued that it is beyond any doubt that the assessee had been carrying on the purchase/sale of cashew nuts on wholesale basis at a very fast speed. The period of holding of stock for 30 days is against the trade usage and practice prevalent in the market. By way of additional explanatory evidence, a copy of the certificate bearing no. QUL/ISP/1/91/1430 dated 11.02.2005 issued by the Principal Scientist of C.E.P.C. Laboratory & Technical Division (the Cashew Export Promotion Council of India sponsored by Govt. of India) is placed at page 32 of the paper book. The Principal Scientist has certified that (i) Kaju/Cashew Nuts/Cashew Kernels are perishable food products, which are vulnerable to IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 11 bacteria and other micro biological organisms present in the atmosphere, (ii) unfavourable temperatures and high humidity may have an adverse impact on the product, which may include infestation, discoloration, powdering etc., and (i) certain lower grades, which are popular in the domestic market, are especially susceptible is pointed out by the Id. ARs. that in the instant case the assessee had no arrangement to store the Cashew nuts in the controlled temperature / humidity. 4.7 The ARs. have submitted that the present search took place on 17/10/02 i.e. in the peak trading season of Cashew nuts. Attention is drawn to the fact that only 410 Pettis (or containers) of Cashew nuts of different qualities worth Rs. 11,43,108/- were found as per the stock inventory prepared on the date of search. It is pointed out that during that period the average daily sales worked out at Rs. 24 lakhs and if the inventory holding period is worked out while taking into consideration such actual details, the resultant inventory holding period comes to ½ day, as under:- Closing Stock as on 17/10/2002 (morning) 11,43,108 Average daily sale (approx.) 24,00,000 Inventory holding period 1143108/2400000 0.48days Or say ½ day The ARs. Have contended that viewed from whatever angle, the inventory holding period in the case of the assessee could not have been of 30 days as has been so erroneously presumed by the Ld. A.O. from the made up accounts. 4.8 The ARs. Have drawn attention to the fact that the Ld. A.O. has tried to compute the undisclosed investment in purchase/sale activities by applying the following formula: Undisclosed investment = Cost of goods sold X Inventory holding p[period ................................................................................. No. of working days It is submitted that if the real data for the period relevant to the A. Y 202-03 is put on the aforementioned formula, the likely investment/ working capital required in the purchase/ sale activities would out as under: Undisclosed investment = 11,07,92,588 X ½ ....................... = 1,84,654/ 300 IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 12 Similarly, if the real data for the period relevant to the A.Y 203-04 is put on the aforementioned formula, the likely investment/working capital required in purchase/ sale activities would work out at Rs. 2,93, 139/- only. 4.8 The ARs. have strongly urged that the Ld. A.O has wrongly drawn an inference that the assessee had admitted his undisclosed income solely on account of undisclosed investment. It is contended that, in fact, the assessee had admitted his undisclosed income of Rs.1,03,21,617/- on account of business profits/ investment covering the block period. It is also urged that the Ld. A.O is factually incorrect in saying that the assessee had commenced his business in AY 2002-03, in as much as the assessee had admitted his undisclosed income from his business activities from A.Y. 1999- 2000 onwards. The undisclosed income admitted by the assessee is summarised by the ARs. as in here in below: A.Y Undisclosed Income admitted as per block return (Rs.) Cumulative Total (Rs.) 1997- 98 2,00,000 2,00,000 1998- 99 3,00,000 5,00,000 1999- 00 3,00,000 8,00,000 2000- 01 5,19,401 13,19,401 2001- 02 17,02,216 30,21,617 2002- 03 28,00,000 52,21,617 2003- 04 45,00,000 1,03,21,617 Total 1,03,21,617 It is submitted that from the above details, it stands established, that the assessee had sufficient funds to meet out his business requirements by way of working capital and hence no addition on account of undisclosed investment was called for. It is explained by the Id. ARs. that the year-wise profit IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 13 earned and undisclosed investment commencing from A.Y. 1997-98 to 2002-03 remained deployed in the business of purchase & sale done outside the books of accounts and there is no reason why profits/interest income and peak of undisclosed investment with bank declared by the assessee should not be considered for the purpose of working capital required. The ld. ARs. have urged that the impugned additions of Rs. 89,96,900/- and Rs. 1,43,54,571/- are not merited from any angle and they deserve to be fully deleted. 4.9. I have carefully considered the rival positions and facts on record. I find that the assessee owns two shops at 528. Katra Ishwar Bhawan, Khari Baoli, Delhi. The big shop measures 25'5" X 8'2". There is also a small "parchatti" admeasuring 8'4" X 12'3" X 5' constructed inside the big shop. The assessee maintains his "Gaddi" in this shop. One small-shop is just opposite facing the big shop. This shop measures 10'9" X 7'5". In the small shop the Sale Assistant sits with a set of table and chair. I also notice that one Cashew petti or case contains two boxes and each box admeasures 19" X 14" which demonstrates that it would be physically impossible for the assessee to hold a stock of 30 days as has been presumed by the Id. A.O. while making his estimations. The Panchnama also records that even during the peak trading season, only 410 pettis of Cashew nuts collectively valued at Rs 11,43,108/- were found at the assessee's premises. I also find that the expenditure incurred under various heads in consolidated form stands recorded in the seized Annexures A- 11, A-13 & A-15. The relevant extracts from the seized Annexures classifying the expenses incurred under various heads have been filed. The examination of the seized Annexure A-15 shows that cash expenditure was incurred out of the cash balance on each day and therefore it is on record that the assessee had enough cash on those particular days when the expenses were incurred. To my mind, the ld. A.O. has erred in estimating a stock holding period by partly believing what have been otherwise held as completely unreliable made up accounts. Similarly, in my opinion, the Id. A.O. could not have denied the benefit of expenditure which was meticulously found recorded in the real accounts of the assessee. 4.10. The definition of 'undisclosed income' in section 158 B(b) includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 14 money, bullion, jewellery, valuable article, things, entry in the books of accounts or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act or any expense, deduction or allowance claimed under the Act which is found to be false. It, therefore, follows that what the assessee had already disclosed or would have disclosed is not be treated as undisclosed income [N.R. Paper and Board Limited Vs. Dy CIT (1998) 234 ITR 733, 741 (Guj); CIT vs. Vinod Danchand Ghodawat (2000) 163 CTR (Bom) 432 and CIT vs. Ravi Kant Jain (2001) 250 ITR 141(Del)]. It may be recalled that sub-section (1) of section 158BA starts with a non obstante clause. With effect from July 1, 1995, the said section has overriding effect over other provisions of the Aq Clause (a) of the Explanation to section 158BA(2) postulates that assessment made under Chapter XIV-B shall be in addition to the regular assessment in respect of each previous year included in the block period. Clause (b) of the Explanation further clarifies the position that the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of the related treating any income assessed under the "block block period. Clause assessment" so as to form part of regular assessment of any previous year included in the "block period". Thus, the special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. As the statutory provisions go to show, it is not intended to be a the total income of the relevant previous years on the basis the evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the A.O. The evidence gathered by the authorised officer under section 132 along with the other material seized, marked or inventoried is available before the A.O. when he exercises his power to assess the undisclosed income. This evidence found and material available should be the basis for computing the undisclosed income. Thus in the very scheme of a block assessment, any guess work or estimate is excluded from reckoning. The position would however be different, if there is inherent evidence in the seized, material itself to show that the seized material is not the complete record of unaccounted transactions or where there are indications to show that the assessee had certain other record of unaccounted transactions which was not IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 15 unearthed in the course of the search. The very purpose of a search is to take the assessee by surprise and to assess his income on the basis of the evidence and materials found during the search. Once the rationale behind the search is kept in view, it would be clear that the law presumes that the assets or materials found in the course of the search are exhaustive of the undisclosed income of the assessee. The Assessing Officer is no doubt empowered to estimate the undisclosed income earned by the assessee, but the estimate is possible only when there is material or evidence found during the search to unmistakably show that such income has been earned. The A.O. cannot presume that there must be some other material or evidence which is not found during the search and the assessee must have derived undisclosed income therefrom. For example, if documents relating to purchase of a property by the assessee in Connaught Place, which has not been disclosed to the department are found during the search, the A.O. is undoubtedly empowered to estimate the investment made in the purchase of the said property, if the pre figure of investment is not available. However, he cannot presume that the assessee must have similarly purchased properties in Karol Bagh or Lajpat Nagar merely because one property in Connaught Place was purchased by the assessee without disclosing the investment to the income-tax authorities. That would be possible if, for instance, there is a noting in the same document or there is some substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. 4.11. A block assessment is very much different from a regular assessment under the normal provisions of the Income-tax Act and this position has also been clarified by the Finance Act, 1998, by inserting an Explanation below subsection (2) of section 158BA. Accordingly, a block assessment has to necessarily be framed on the basis of the evidence found during the search and nothing beyond that, as otherwise, it will frustrate the very object of introducing special provisions for assessment in search cases. Though the A.O. is empowered to estimate the income for the purpose of quantifying the same, it can be done only on the basis of the evidence actually found during the search and it is not open to the A.O. to assume that the assessee must have earned more income over and above what has been shown by the seized material. In other words, if the A.O. finds material or evidence to show suppression of income, he can estimate the income on the basis of such IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 16 evidence or material in the absence of any indication as to the exact amount of income earned, but it is not open to the A.O. even in the absence of any evidence or material found in the course of search, to guess or presume that there must be further suppression and the assessee must have earned income there from. If there are materials or evidence, the income can be estimated; but if there are no materials or evidence, such material or evidence cannot be imagined or presumed to exist and the income cannot be presumed or suspected to have been earned therefrom. This legal position is well settled and one can advert with advantage to the principles exposited in the orders of the Tribunal reported in D.N. Kamani (HUF) Vs. Dy. CIT [1999] 70 ITD 77 (Pat.)(TM) and Samrat Beer Bar Vs. ACIT (2001) 251 ITR (AT) 1(Pune). 4.12. It is settled that a block assessment is wholly different from a regular assessment and the yardsticks which are to be applied to regular assessments while estimating the assessee's income cannot be automatically incorporated into the provisions dealing with a block assessment. Under section 158BB, for computing the undisclosed income of the block period, the A.O. has to compute material or evidence to the effect that the assessee had made an investment in a property also in Karol Bagh or Lajpat Nagar. That noting or material would constitute evidence on the basis of which the A.O. would be empowered to estimate the investment. 4.13 The principles governing the question of telescoping are also no more res integra. As observed by the Supreme Court in Anantharam Veerasinghaiah and Co. v. CIT [1980] 123 ITR 457, 462:- "Now it can hardly be denied that when an 'intangible' addition is made to the book profits during an assessment proceeding, it is on the basis that the amount represented by that addition constitutes the undisclosed income of the assessee. That income, although commonly described as "intangible' is as much a part of his real income as that disclosed by the account books. It has the same concrete existence. It could be available to the assessee as the book profits could be." The nature of intangible additions and the question of their availability for application by the assessce first came up for consideration before the Andhra High Court in Lagadapati Subba Ramaiah v. CIT [1956] 30 ITR 593, where it was observed (p. 599): IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 17 "Once the secret profit had been assessed to tax, it would has been open to the company to bring those profits into the books and distribute them, or what remained after payment of tax, as dividends... Subject to the provisions of the Act, the Revenue Authority has to act in a fair and consistent manner. Having assessed the company on a large sum as its undisclosed income, it cannot in the same breath, say that these profits did not in fact exist because they did not appear from the company's books and could not therefore have been available for the payment of dividends. Among common men, such an attitude would be regarded as blowing hot and cold or playing fast and loose." This interpretation was followed by the Madras High Court in S. Kuppuswami Mudahan v. CIT [1964] 51 ITR 757. It was observed (at page 762 of the report): "Additions are no doubt made very often on estimate basis. But it can never be said, or at any rate the Department cannot contend, that the amount of the addition is not the real income but something which the assessee may not have earned. It is wholly-illogical for the Department to contend that the addition was only for purpose of taxation and that it should never be taken as true income of the assessee." The Supreme Court, in Anantharam Veerasinghaiah and Co. Vs. CIT (1980) 123 ITR 457, referred to the aforesaid decisions and laid down the proposition of law in regard to intangible additions in the following words "There can be no scape from the proposition that the secret profit or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books." In this connection, one may also refer tot eh decision of the Supreme Court in CIT Vs. S. Nelliappan 1967] 66 ITR 722, where, despite the finding that there was no direct evidence of any connection between the cash credit entries and the income withheld from the books of account by the assessees, the Tribunal inferred that there was a connection between the profits withheld from the books and the cash credit entries, it was held : "..... it cannot be said that the conclusion is based upon speculation". IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 18 Quite clearly, in the present matter, the benefit of telescoping would in any case have to be allowed to the assessee. The impugned additions of Rs. 89,96,900/- and Rs. 1,3,54,571/- are ordered to be deleted and I find further support for this view from the decision in S.R Venkataratnam Vs. CIT 127 ITR 807 (Kar.). Grounds numbered 2 to 5 are disposed of thus. 5. Ground numbered 6 challenges the addition of Rs. 30,36, 101/- which has been held as the assessee's undisclosed investment in jewellery. The reasons for making the addition are set down by the Ld. AO in paragraphs 3 of the impugned assessment order. The short facts are that during the assessment proceedings it was explained on behalf of the assessee that the jewellery found, belonged either to the assessee's wife Smt. Poonam Babbar or to the assessee's mother Smt. Sushila Devi (since deceased). The source of acquisition of jewellery were sought to be proved before the Ld. AO through the affidavits from the persons who had either given/gifted the subject jewellery or had some interest in the said jewellery. The supporting evidences which were submitted during the course of assessment proceedings may be listed as below:- i) Affidavit of the assessee's wife alongwith item-wise list of jewellery (valued at Rs. 14,62,696/-.) ii) Affidavit of the assessee's father-in-law Shri Dharam Vir Kapoor. iii) Affidavit of the assessee's brother Shri Subhash Chand Babbar. iv) Affidavit of the assessee's brother Shri Lalit Kumar Babbar. V) Affidavit of the assessee. vi) Joint affidavit of assessee and his two brothers namely Shri Subhash Chand Babbar and Shri Lalit Kumar Babbar alongwith item-wise list of jewellery (valued at Rs. 21,94,712/- ) left behind by their mother late Smt. Sushila Devi (pending its distribution). The AO, however, remained unconvince by the averments made by the abovesaid deponents and he proceeded to add the impugned sum of Rs. 30,36,101/- in the hands of the assessee after giving only a small credit per CBDT's instruction No. 1916 dated 11.05.1994 which was issued by the Board with reference to the quantum of jewellery which is not required to be seized by the authorized officers taking search. IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 19 5.1 The AO Rs. Sh. B.D Sharma, Ashish Sarawat and Arun Jain, are aggrieved that the Ld. AO had not at all considered it necessary to examine the persons, who had deposed certain facts apropos of jewellery found at the residence of the assessee and in the bank locker, through their affidavits. It is urged that if the Ld. AO was not convinced with the contents of the affidavits, he was legally bound to have called the persons for examination before rejecting their affidavits. In this regard reliance is placed on the Supreme Court's decision in the case of Mehta Parekh & Co. 30 ITR 181 wherein their Lordships have held that without asking the assessee to produce other evidence, if the department was not satisfied with the truth of statements made in the affidavit, such affidavit could not be rejected. Copies of all the subject affidavits are placed at pages numbered 34 to 42 of the paper book and it is urged by the Ld. AO. That the conduct of the Ld. AO showed that he had found the contents of the affidavits as true and acceptable in view of the law laid down by the highest Court of this land. 5.2 The ARs. have also assailed the so called discrepancies which have been pointed out by the Ld. AO in paragraph 3.12 of the assessment order. it is submitted that the assessee was never required to produce any bill for remodelling or redesigning of jewellery during the assessment proceedings. It is similarly pointed out that the assessee was never required to establish whether the financial standing of Sh. Dharamvir Kapoor is commensurate with the value of jewellery claimed to have been gifted by him. The Ld. Ars. have submitted that the assessee's father-in-law Sh. Dharamvir Kapoor has been assessed to Income-tax for the last 25 years and he has also been assessed to Wealth-tax for the A.Ys 1987-88 to 1992-93. It is urged that the financial capacity of Sh. Dharamvir Kapoor is amply proved and his sworn affidavit about presenting of jewellery at the time of marriage of his daughter Smt. Poonam Babbar in the year 1991 merits acceptance in totality. The Ld. ARs have submitted that during the assessment proceedings, the assessee was never asked to clarify whether Smt. Sushila Devi (who died intestate) had left her will behind or not. It is urged that all the alleged discrepancies and infirmities pointed out by the Ld. AO are based on nothing more than his mere ipse dixit. 5.3 The ARs have argued that while relying on CBDT's instruction No. 1916 dated 11.05.1994, the Ld. AO has wrongly presumed that the assessee could own jewellery weighing 100 gms only and his minor children could own jewellery weighing IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 20 50 gms each only. It is submitted that the Ld. AO has failed to appreciate that the said instructions were with reference to jewellery not required to be seized during the course of a search and they cannot be determinative of the present issue. It is argued that the Ld. AO has failed to justify as to why (i) the entire jewellery found lying at the residence (after giving a small credit per CBDT's instruction No. 1916) has been treated to have been acquired by the assessee, and (ii) as to why the entire jewellery found lying in the bank locker has been treated to have been acquired by the said Smt. Poonam Babbar after allowing benefit of 500 gms, and an addition of Rs. 2,92,580/- had been made in the hands of the said Smt. Poonam Babbar. It is submitted that undoubtedly the assessee's wife had been staying with the assessee and it is a general phenomenon that the ladies keep the jewellery at home for daily use and also while attending different functions. It is urged by the Ld. ARs. that no addition on account of jewellery found was called for, more particularly when no document or entry suggesting investment made by the assessee in jewellery had been found during the search. 5.4 I have considered the issue. It is a matter of common knowledge that there is a custom prevailing in the Hindu families of receiving gifts from close relatives on various ceremonial and festive occasions. Normally, no record is kept when such gifts are given on taken. The Hon'ble jurisdictional Tribunal in the case of D.C Rastogi (HUF) Vs. ACIT reported in 1996(1) Indian Tax Report at page 461 has held that receipt at the time of birthday cannot be considered as unexplained income of the assessee. To my mind, and considering the economic strata to which the present assessee belongs, it would be reasonable to hold that his wife and deceased mother could very well have received the subject jewellery form their close relative on various occasions. This view also finds support from the decisions in Atul Kumar Jain Vs. DCIT (1999) 64 TTJ (Del) 786 and Pioneer Publicity Corporation Vs. DCIT (2000) 67 TTJ (Del) 527. 5.5 In my opinion, one must always remember the legal maxim- lex non cojit ad impossibilia- which means 'the law does not compel a man to do that which he cannot possibly perform'. In this regard, reference may be made to Cochin State Power & Light Corporation Ltd. Vs. State of Kerala [AIR 1965 SC 1688, 1691]; Vinod Krishna Kaul Vs. Union of Inida [JT 1995 (9) SC 205, 208]; Attiq-Ur-Rehman Vs, Municipal Corporation of Delhi IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 21 [JT 1996 (2) SC 670, 678); Manohar JHoshi Vs. Nittin Bhaurao Patil [1996) 1 SCC 169, 179]; Life Insurance Corporation of India Vs. CIT [1996) 219 ITR 410, 418 (SC)]. It is well settled that where the identity of the third party is established by the assessee, the initial burden which is lies upon him can be said to have been discharged by him. It will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained the money or jewellery how or why he came to make a gift of the same to the assessee or his wife. The burden will shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the jewellery, though purporting to be sourced from a third party still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, however, the department has to be in possession of sufficient and adequate material [CIT Vs. Mrs. Sunita Vachani 184 ITR 121 (Del0, Roopchand Manojkumar Vs. CIT 235 ITR 461 (Gau), DC Jain Vs. ITO 32 ITJ (Del) 442, Nek Kumar Vs. ACIT 191 CTR (Raj) 207] It is also trite that in holding a particular item as income from undisclosed source, the fate of the assessee could not be decided by the revenue on the basis of surmises, suspicions or probabilities. This reality has been recognised by the Apex Court in CIT Vs. Daulat Ram Ravat Mal (1973) 87 ITR 349 (SC). The Department, in the felicitous language of Hidyatulla J. in Sree lekha Banerjce Vs. CIT 49 ITR 112 (SC) by merely rejecting unreasonably a good explanation cannot "covert good proof into no proof." It is also settled law that contents of affidavits are presumed to be true unless rebutted by reliable proof to the contrary CIT VS. Orissa Corporation (Pvt) Ltd (1986) 159 ITR 78(SC). The Hon'ble M.P. High Court has also reiterated this trite position in law in the case of Smt. Gunwanti bai Rattilal Vs. CIT 146 ITR 140 at page 144 while explaining the decision of the Hon'ble Supreme Court in Mehta Parikh and Company Vs. CIT 30 ITR 181 in the following words:- "If there is no material whatsoever on record for doubting the veracity of the statement made in the affidavits and if the deponents have also not been subjected to cross examination for bringing out the falsity of their statements, then the Tribunal would not be justified in doubting the correctness of the statements made by the deponents in affidavits. The finding arrived at in such a case would according to the IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 22 Supreme Court be a finding based on pure surmise, having no basis in evidence." It has also to be remembered that there is no presumption that a witness tendering evidence supporting the assessee has come forward to give false evidence to oblige the assessee [Sheo Narayan Duli Chand Vs. CIT 72 ITR 766 (A11)] 5.6. Then, as discussed in paragraph 4.1 suprd, there is also the excess of Rs.56.27,591/- which is available to the assessee for being telescoped. It is a fundamental rule of the law of taxation that, unless otherwise expressly provided, income cannot be taxed twice [Laxmipat Singhania CIT (1969) 72 ITR 291 (SC); RamanlalMadanlal vs. CIT (1979) 116 ITR 657 (Cal) and Bhim Sen Khosla vs CIT (1982) 133 ITR 667 (Del)]. This view which accords with ordinary common-sense, may be taken to have been approved by the Apex Court in ITO vs. Bachu Lal Kapoor [ (1966) 60 ITR 74,80 (SC)], wherein it was observed that "the Act does not envisage taxation of the same income twice over......". To my mind, it cannot be anybody's case that an income can be doubly taxed, first as income per se and then also when it is applied in acquisition of assets. In my opinion, the jewellery found at the residence of the assessee and in the bank locker has been sufficiently explained as to its source. The addition of Rs. 30,36,101/- cannot be sustained in the circumstances of the present matter and the same is deleted. Ground numbered 6 is allowed. 6. Ground numbered 7 is raised against the addition of Rs. 1,93,422/ being the alleged difference in the peak balance available in the undisclosed account with the State Bank of Mysore, Janakpuri Branch, New Delhi. The ARs. have submitted that the ld. A.O. has prima facie erred in adopting the maximum balance appearing in the bank account as on 26/5/1997 at Rs. 4,29,517/ without excluding the opening balance as on 01/04/1997 of Rs. 1,96,937 . It is pointed out that the correct amount of peak works out at Rs. 2,36,795/- which was duly surrendered by the assessee in his block return and no further addition is warranted on this count. A chart depicting the correct working of the peak is placed at page no. 43 of the paper book. 6.1 I agree with the assessee's contention. In my view and applying the principles governing the benefit of telescoping to the facts of the present case, it would have to be held that the subject bank account would have to be considered in IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 23 continuation and two separate additions on peak basis should not have been made in respect of the same bank account. The impugned addition of Rs. 1,93,422/- is deleted and ground numbered 7, thus, succeeds. 7. Ground numbered 8 assails the estimated addition of Rs. 2,00,000/-which has been made by the ld. A.O. on the basis of the amount of Rs. 1,71,231/- shown payable in a LENA DENA account reflected on two seized computer print-out sheets bearing the name of M/s Arjun Das Subhash Chander. The Id. A.O. has made this addition for reasons mentioned inparagraph 8 of the assessment order and by holding that the difference of LENA DENA baki could be added in the hands of the assessee as cessation of trading liability. 7.1. The ARs. have submitted that the ld. A.O. has made the addition of Rs. 2,00,000/- utterly on erroneous considerations. It is pleaded that the subject loose papers are nothing but dumb documents being computer printouts with the caption M/s Arjun Das Subhash Chander but bearing no other name or signature etc. It is pointed out that the firm M/s Arjun Das Subhash Chander had been dissolved long back on 18/12/1988 and thereafter there was complete cessation of the business activities. It is urged that in the case of this defunct firm which stood dissolved way back on 18/12/1988, there can be no ground for invoking the provisions of section 41(1) and thereby bringing the amount to tax and that too in the hands of the assessee. 7.2 The ARs. have drawn attention to the fact that these two loose sheets show that some typing had been done. It is explained that the typing in-fact was a hypothetical exercise for calculation of interest at a given rate of interest on certain adhoc amounts, is urged that these two loose papers being dumb documents have no evidentiary value and no addition on this basis could be made. The presumption that these two loose sheets represent the income of the assessee is impermissible even after section 132(4A) of the Act is stretched to its maximum limits. The Id. ARs. have submitted that the casual manner in which the subject addition has been made by the ld. A.O. is evident from the fact that he has added the sum of Rs. 2,00,000/-, while the alleged difference of LENA BAKI and DENA BAKI is shown as Rs. 1,71,231/- on the computer print- outs. It is contended that the addition of Rs. 2,00,000/- has no legs to stand upon and it deserves to be deleted in entirety. IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 24 7.3 1 have considered the issue. The law as regards to onus probandi is enunciated in the well-known Roman dictum: a) INCUINBIT PROBATIO QUI DICIT NON QUI NEGAT b) AFFIRMANTI NON NEGANTI INCUMBIT PROBATIO. The underlying idea embodied in the dictum is that the burden lies upon one who alleges and not one who denies the existence of the state of fact. It is well settled that no addition can be made on the basis of loose papers which are also sometimes referred to as "dumb documents") without any corroborative evidence-to-substantiate what is scribed thereon. The principles laid down in the following authorities can be adverted to in this connection:- i) Ashwani Kumar vs ITO 39 ITD 183 (Del) ii) KishanchandSobhrajmal vs ACIT 41 ITD 97 (Jpr) iii) Kantilal& Brothers vs ACIT 52 ITD 412 (Pune) iv) Silver and Arts Palace ve ACIT 52 ITD 493 (Jaipur) V) ACIT vs Sailesh S. Shah 63 ITD 153 (Mum) vi) ITO vs M.A. Chidambaram 63 ITD 203 (Chennai) vii) Aggarwal igreve ACIT 68 ITD 407 (Jab) viii) D.A. Pvs DCIT 72 KPD 340 (Mum) ix) Elite Developers vs DCIT 73 ITD 379 (Nag) x) T.S. Venkatesan vs ACIT 74 ITD 298 (Cal) xi) Samrat Beer Bar vs ACIT 75 ITD 19 (Pune) (TM) xii) BrijlalRupchand vs ITO 40 TTJ 668 (Ind) xili) Dhan Raj Restaurant vs ACIT 5S TTJ 390 (Mum) xiv) Amar Natwarlal vs ACIT 57 TTJ 454 (Ahd) xv) S.K.Gupta vs DCIT 63 TTJ 532 (Del) xvi) Atul Kumar Jain vs DCIT 64 TTJ 786 (Del) xvii) Chander Mohan Mehta vs ACIT 65 TTJ 327 (Pune) xvii) Shradha Constructions vs ACIT 66 TTJ 334 (Pune) xix) CIT vs C.J. Shah & Co. 246 ITR 671 (Bom) xx) CBI vs V.C.Shukla 3 (1998) SCC 410 7.4. It has also to be remembered, that in order that an amount may be deemed to be income under section 41(1) of the Act, there must be remission or cessation of the liability in respect of the amount in question: Remission flows from an overt act on the claim against the debtor, it being a positive conduct on the part of the creditor, but cessation may result C even from outside, for instance where an assessee is absolved of a liability by a judicial pronouncement, the liability can be said to have ceased. It is settled that even the expiry of the period of limitation within which the creditor could sue the assessee does not constitute a cessation of liability of the assessee as it cannot be said that expiry of the period of IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 25 limitation extinguishes the debtor's liability to pay under the substantive law. In my considered opinion, the Id. A.O. has erred in firstly presuming that the subject seized computer print-outs reflected the affairs of the assessee and then going still further and presuming that they evidenced a cessation of trading liability. The addition of Rs. 2,00,000/- is clearly unwarranted and the same is deleted. I am further fortified in this view by the principles exposited in CIT vs. Pranlal P. Doshi (1993) 201 ITR 756 (Guj); CIT vs. Combined Transport Co. (P)Ltd. (1988) 174 ITR 528 (MP); CIT vs. Autopins (India) (1991) 192 ITR 161 (Del); CIT vs Sea Pearl Industries (1995) 211 ITR 508 (Ker) and CIT vs. Sadul Textiles Ltd (1987) 167 ITR 634 (Raj. 8. Ground numbered 9 is raised against the charging of interest u/s 158BFA(1) of the Act. The ld. ARs. have argued that the subject interest has been levied without proper "application of mind in as much as in the opening part of the assessment order, the ld. A.O. talks of the invalid and defective, notice under section 158BC of the Income Tax Act, 1961 dated 12/5/2003 instead of modified notice dated 9/10/2003 issued subsequently at the behest of the assessee. It is submitted that the ld. A.O. had charged interest u/s. 158BFA(1) for the period Juno, 2003 to February, 2004 at Rs. 26,29,647/ - on the basis of first notice issued in May 2003, which was defective, thus illegal. It is pleaded that after receipt of modified notice under 158 BC dated 09/10/2003, the assessee had furnished his return of income on 3/2/2004 and it is urged that, thus, the interest under section 158 BFA (1) was lovinble for a period of four months only. 8.1. I have carefully considered the issue. Section 158BFA was inserted in the Act w.e.f. 1.1.1997. Its sub-section (1), contemplates a situation where the return of total income including undisclosed income for the block period, as required by a notice u/s 158BC(a) is furnished after the expiry of period specified in such notice, or is not furnished. In such a situation, the assessee has been made liable to pay interest for a period commencing on the day immediately following the expiry of the time specified in the notice, and where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return. Where no return has been furnished, the period is to be reckoned as ending on the date of completion of assessment u/s 158BC(c) of the Act. It is evident that the provisions of section 158BFA(1) are on the lines of the provisions contained in section 234A(1) of the Act. IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 26 8.2. It is now well settled that levy of such interest constitutes a mandatory and consequential charge of compensation, which the Legislature has thought fit not even to make specifically appealable under the Act. It is trite that the right of appeal inheres in no one and, therefore, an appeal for its maintainability must have the clear authority of law. That explains why the right of appeal is described as a creature of statute. It is to be specifically conferred by the statute providing for an appeal and it cannot be claimed as a matter of right. It is open to the Legislature to give or not to give a right of appeal against decisions made by the authorities under the Act [Smt. Ganga Bai vs. Vijay Kumar AIR 1974 SC 1126; CIT vs. Syed Jaffar and Sons (1992) 194 ITR 645 (SC; Deen Dayal Goyal vs. ITAT (1986) 158 ITR 391 (Del) and CIT vs. Garware Nylons Ltd. (1995) 212 ITR 242 (Bom)]. Ground numbered 9 is repelled as being incompetent and I am fortified in this view by the principles exposited in CIT-VS.A.M.H. Ghaswala and Ors (2001)252 ITR 1 (SC). 9. The last ground which is taken in this appeal is numbered 10 and it assails the initiation of penalty proceedings u/s 158BFA(2) of the Act. The initiation of penalty proceedings has also not been made appealable under the Act and this ground, which in any case has been taken prematurely, is rejected on the point of maintainability. 8. The relevant facts are that the assessee is the proprietor of M/s. JMD Trading Company. There was a search u/s 132 on 17th October, 2002 consequent to which block assessment order for the period from 01.04.1996 to 17.10.2002, was passed on 28th September, 2004, wherein an addition of Rs.2,67,80,994/ - was made to the undisclosed income shown by the assessee at Rs.1,03,21,617/- . The two main additions are in respect of profit from undisclosed purchases/ sales and undisclosed investments in the corresponding inventory. IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 27 9. During the course of search, evidence of unaccounted purchases and sales was found and seized. The evidence for undisclosed purchases was for the period from 02.04.2001 to 16.10.2002 while the evidence for undisclosed sales was for the period from 06.05.2002 to 16.10.2002. There is no dispute that undisclosed purchases and sales were made by the assessee. As mentioned on page 04 of the assessment order, the assessee admitted undisclosed purchases of Rs.11.08 crores for AY 2002- 03 and Rs.17.44 crores for the part period of AY 2003-04 till the date of search. On page 05 of the assessment order, the assessee's reply is reproduced, wherein he claimed that the undisclosed purchases included goods received on consignment basis. However, the assessee admitted that this fact is not verifiable from seized records. The assessee also submitted that on estimate basis self trading may be 15 to 20 per cent of total purchases. At the outset, this fact is not correct as in the regular books of accounts consignment purchases are only 18.9% of total purchases and consignment sales are only 17.2 per cent of the total sales in AY 2002-03 (Ref: Page 31 of the paper book). The gross profit for AY 2002-03 in regular books is 8%. On page 06 of the assessment order, another reply of the assessee is reproduced which admits that all the unaccounted purchases have been sold and no records of the same are maintained. 10. The assessee's theory of consignment sales was rejected by the AO for the reasons given on page 08 and 09 of the assessment " order. The assessee's reliance on sale patti and F- IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 28 Form in seized' materials was rejected as F-Form can be issued only for / disclosed sales and, therefore, the sale patti/F-Forms in seized documents pertain to the consignment sales disclosed in the books of accounts. As regards, unaccounted purchases and sales, the assessee failed to produce any person confirming consignment sales through assessee (Ref: Page 10 of the Assessment Order). Assessee also admitted that from the seized records no bifurcation of self trading or consignment sales is possible. On page 11, the AO also observed that it is not possible that assessee does not know the whereabouts of consignment parties (if assessee's claim is true) as no consigner would send its goods to assessee without knowing the assessee personally. On page 12 of the assessment order, the AO has also / mentioned details of payments in respect of purchases by benami concern of the assessee [undisputed fact as per para 1.2 of CIT (A) order]. The evidence of advance payment for purchase establishes that these were the purchases and not goods received on consignment basis else no such advance payments would have been made. The consignment sales result in only earning of commission and not profit. On page 15 of the assessment order, the AO referred to the assessee's letter dated / 28.06.2004 reflecting average GP of 4.5 per cent for the 6 Financial Years in the block period. The Assessing Officer has applied to same rate for estimation of profit from unaccounted purchases and sales and held that the question of any indirect expenses does not arise in case of unaccounted business as such expenses are always claimed in the regular books of accounts (page 16 of AO). Moreover, no evidence of such IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 29 expenses was / furnished. As per the block return of the assessee, the undisclosed business profit for AY 2002-03 and 2003-04 were / Rs.45,11,400/- (Approx. 2.5% GP). The AO gave set off of the same and made addition of the remaining amount totaling Rs.89,96,900/- (Ref: page 16 and 21 of the assessment order). 11. The AO then noticed from the regular books that the average inventory is from 1.4 months to 3 months and not 5 to 6 days claimed by the assessee. On this basis, the AO estimated inventory holding the period of 30 days on page 17-18 of his order and estimated the corresponding investment on page 20 of the assessment order. The addition made has been worked out on page 25 of the assessment order at Rs.1,43,54,571/- for AY 2003-04. For estimating the said investment, the Assessing Officer gave a set off of undisclosed investment reflected in block return and tabulated on page 21 of the assessment order for AY 2003-04 besides undisclosed profit of AY 2002-03 declared and tabulated on page 16 of AO and undisclosed investment declared till AY 2002-03 (Ref: Page 21 of AO). On page 23, the Assessing Officer held that the set off of profit earned during the year cannot be given in that year as the profit is earned on the last date of the previous year. Therefore, in AY 2003-04, the set off of undisclosed profit of AY 2002-03 was given as mentioned on page 24 of the assessment order. 12. For addition of jewellery, the AO has given his findings on page 35 of the assessment order while the reasoning and facts IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 30 have been discussed from page 26 onwards. The addition of Rs.30,36,101/- has been made (21,94,712 + 9,35,389 - 94,000). The addition for deposits in undisclosed bank account has been discussed on page 38 of the order, while the addition for undisclosed profit on account of cessation of trading liability of Rs.2 lakhs has been discussed on page 44 of the Assessment Order. 13. In Para 4.9, the CIT (A) has mentioned the sizes of shops and has held that it is not possible for the assessee to keep 30 days stock in those shops. However, the figures mentioned in the said para do not establish the same. As per the CIT (A), the big shop measures 25'5" X 8'2" which translates into 29890 Sq. inches. The Parchatti measures 8'4 X 12'3" translating into 14,700 Sq. inches. The small shop area is 10'9" X 75" translating to 11,481 Sq. inches. The total area comes to 56,071 Sq. inches. The area of one petti, as per CIT (A) is 532 Sq. inches which means that the total area of shop can accommodate one layer of 105 pettis. Since the stock estimated by the AO to be present in the premises is highly disproportionate to the area owned by the assessee we decline to interfere order of the ld. CIT(A) on this issue. 14. In the regular books of accounts, the assessee has shown consignment sales as well as own trading. From the accounts of A.Y. 1997-98 to 2001-02 available from page 34 to 48 of the paper book, it is noticed that the consignment purchases and sales are shown separately and do not affect the G.P. working. IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 31 Since the consignment sales are against Form F, the question of undisclosed consignment sales does not arise. Hence we decline to interfere order of the ld. CIT(A) on this issue. 15. As regards addition for jewellery, contested in ground no.2, the AO has discussed the corresponding issue from page 26 onwards while the CIT (A) has discussed this issue on page 20. The AO made an addition of Rs.30,36,101/ - which excludes the jewellery of Rs.5,27,580/- found from the locker of assessee's wife and mentioned on page 35 of the assessment order. The Assessing Officer did not accept the explanation of jewellery of Rs.21,94,712/ - claimed to have been left behind by Smt. Sushila Devi who expired in 1995. Though the said jewellery was above the Wealth Tax limit, no evidence of Wealth Tax return was filed as mentioned on page 33 of the assessment order. The AO held that, it is also strange that from October, 1995 to the date of search, seven years had elapsed, still the jewellery was lying undistributed. The claim of jewellery of Rs.9,35,389/- belonging to Poonam Babbar was also not accepted, as the evidence of acquisition was not furnished. Therefore, the total unexplained jewellery comes to Rs.31,30,100/- (Rs.21,94,712 + Rs.9,35,389). Against this, the AO gave deduction of allowance as per CBDT Instruction No.1916, on page 36 of assessment order and added the remaining amount. 16. The CIT (A) in Para 5.6 of the appellate order just mentions that the benefit of telescoping is to be allowed. On IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 32 page 19, the CIT (A) also observed that as per custom jewellery is received from relatives and family members. But, he failed to appreciate that CBDT Instruction No.1916 takes that into account. On page 19, the CIT (A) also observed in the last para that once the identity of third party is established, onus shifts to the Revenue. Hence we decline to interfere order of the ld. CIT(A) on this issue. 17. As regards ground no.3, the AO has discussed the issue from page 38 to 44. The CIT (A) deals with these issues from page 21 and 22. The CIT (A) has deleted the addition on the basis of his findings from page 21 to 23 of the appellate order, wherein he has given the telescopic benefit and has accepted assessee's claim of unspecified documents. Since the order of the ld. CIT(A) is rational and logical and seized the firm namely M/s. Arjan Das Subhash Chandar to which the seized paper allegedly belongs stands dissolved, we affirm the order of the ld. CIT(A) in deleting the addition made of Rs. 2,00,000/- on account of seized material found during the search. 18. In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 04/01/2024. Sd/- Sd/- (C.N Prasad) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 04/01/2024 *NV, Sr. PS* IT(SS) A No. 227/Del/2005 Vineet Kumar Babbar 33 Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, DELHI