M/s MSK Projects (India) Ltd., Baroda V. The ACIT, Central Circle -1(2), Ahmedabad

ITSSA 229/AHD/2005

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8440 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-04-2011
• Assessment Year: misc
• Appeal Filed On: 19-09-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N S DAYAM
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Search and seizure; Block assessment; Retraction
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 29/4/2011 DRAFTED ON: 19/ 5/2011 1. IT(SS)A NO.229/AHD/2005 2. IT(SS)A NO.238/AHD/2005 BLOCK PERIOD ENDED ON 25/07/2002 1. M/S.MSK PROJECTS (I) LTD. 707-708, STERLING CENTRE R.C.DUTT ROAD BARODA 2. THE ACIT AHMEDABAD VS. 1. THE ACIT CEN.CIR.1(2), AHMEDABAD 2. M/S.MSK PROJECTS (I) LTD., BARODA PAN/GIR NO. : AABCM 4107 C ( APPELLANTS ) .. ( RESPONDENTS ) ASSESSEE BY: SHRI S.N. SOPARKAR REVENUE BY: SHRI N.S. DAYAM, CIT-D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE ARE CROSS APPEALS ARISING FROM THE ORDER OF THE CIT(APPEALS)-II, AHMEDABAD DATED 26.7.2005. BOTH T HE APPEALS OF THE RIVAL SIDES ARE CONSOLIDATED AND HEREBY DECIDED BY THIS SINGLE ORDER. (A) ASSESSEES APPEAL IT(SS)A NO.229/AHD/2005 2. GROUND NO.1 READS AS UNDER:- IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 2 - 1. THE LEARNED CIT(A) HAS ERRED IN LAW IN CONFIRMI NG ADDITIONS WITHOUT ANY MATERIAL/CORROBORATIVE EVIDENCE FOUND A ND SEIZED DURING THE COURSE OF THE SEARCH AND ON THE RECORD T HEREOF. LD. CIT(A) HAS CONFIRMED ADDITIONS WHICH WERE DULY REFL ECTED IN BOOKS OF ACCOUNTS WHICH IS WHOLLY UNJUSTIFIED, PREM ATURE AND BAD IN LAW AS WELL AS WITHOUT JURISDICTION AND AGAI NST THE PROVISIONS OF CHAPTER XIVB, LD. CIT(A) HAS GRAVELY ERRED IN GROSSLY IGNORING THE PROVISIONS OF CHAPTER XIV-B OF THE ACT. 2.1. AT THE OUTSET, THE LD.AR HAS STATED THAT THI S GROUND IS A GENERAL GROUND WITHOUT RAISING ANY SPECIFIC LEGAL I SSUE, HENCE, NOT PRESSED. CONSIDERING THIS SUBMISSION, THIS GROUND IS NOT ADJUDICATED AND DISMISSED BEING NOT PRESSED. 3. GROUND NO.2 READS AS UNDER:- 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF AO IN ADDING RS.75,03,288/- AS ALLEGED CASH CREDIT U/S.68 OF THE ACT WITHOUT APPRECIATING THE EVIDENCES AND DOCUMENTS PLACED ON RECORD. 3.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S.158BC R.W.S. 143(3) OF THE I.T. AC T DATED 26/07/2004 WERE THAT THE ASSESSEE-COMPANY WAS SUB JECTED TO SEARCH AND SEIZURE ACTION U/S.132 ON 25/07/2002. THE ASSESSEE IS STATED TO BE IN THE BUSINESS OF EXECUTION OF GOVERN MENT CONTRACTS. IN COMPLIANCE OF NOTICE U/S.158BC THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE BLOCK PERIOD AND AN UNDISCLOSED I NCOME WAS IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 3 - DECLARED AT RS.1,25,70,000/-. THE SAID RETURN WA S FILED ON 6/5/2003. THE AO HAS ALSO NOTED THE HEADS UNDER W HICH THE SAID DISCLOSED AMOUNT OF RS.1.25 CRORES WAS OFFERED. THE AO HAS ALSO MENTIONED IN THE BEGINNING OF THE IMPUGNED ASSESSME NT ORDER THAT THE ASSESSEE WAS FILING INCOME TAX RETURN IN THE RE GULAR COURSE OF PAST YEARS, FALLING WITHIN THE BLOCK PERIOD PERTAIN ING TO THE AYS 1997-98 TO 2002-03. AT THAT JUNCTURE, IT HAS BEEN INFORMED BY THE LD.AR THAT THE RETURNS UPTO THE AY 2001-02 WERE FIL ED IN THE REGULAR COURSE PRIOR TO THE DATE OF SEARCH. THE RETURN FOR AY 2001-02 WAS FILED ON 31/10/2001, HOWEVER, THE SEARCH WAS CONDUC TED ON 25/07/2002. IT HAS ALSO BEEN INFORMED THAT FOR AY 2002-03 RET URN WAS FILED ON 10/11/2002 DECLARING INCOME OF RS.57,9 6,092/-. 3.2. IN RESPECT OF THIS GROUND, THE OBSERVATION OF THE AO WAS THAT IN THE BOOKS OF ACCOUNT THE ASSESSEE HAS INTRODUCED UNSECURED LOANS. IT WAS ALLEGED THAT THE LOANS HAVE BEEN INTRODUCED IN THE BOOKS OF THE ASSESSEE AND THOSE VERY SET OF PERSONS, THEIR N AMES, SHARE CAPITAL, SHARE APPLICATION MONEY HAVE ALSO BEEN FOUND INTROD UCED IN THE BOOKS OF A SISTER-CONCERN, NAMELY MSKPL AHMEDABAD S TATED TO BE MANAGED BY THE BROTHER OF THE ASSESSEE. THEREAFT ER, THE AO HAS REFERRED CERTAIN TRANSACTIONS WHICH WERE FOUND TO B E TRANSFERRED THROUGH BANK ACCOUNTS OF CERTAIN PERSONS. THE AO H AS ALSO RECORDED THE STATEMENT OF FEW PERSONS AS IS EVIDENT FROM SUB-PARAS 1 AND 2 OF PAGE 27. THE AO HAS ISSUED A SHOW-CAUSE N OTICE AND IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 4 - INFORMED THAT ON PERUSAL OF THE STATEMENT ON OATH, RECORDED OF CERTAIN PARTIES, IT WAS FOUND THAT THOSE DEPOSITORS DID NOT HAVE THE CAPACITY TO MAKE SUCH HUGE INVESTMENT. SO, A SHO W CAUSE WAS ISSUED AS TO WHY THE DEPOSITORS AS PER THE BOOKS OF ACCOUNT BE NOT TREATED AS UNEXPLAINED AND WHY THAT AMOUNT BE NOT B ROUGHT TO TAX IN THE BLOCK PERIOD. THE ASSESSEE HAS FURNISHED THE PARTICULARS OF THE AMOUNT RECEIVED FROM THOSE DEPOSITORS. HOWEVER, I T WAS VEHEMENTLY CONTESTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 1999-2000, THE ASSESSEE HAS FURN ISHED ALL THE DETAILS IN RESPECT OF THOSE DEPOSITORS. IT WAS ALSO VEHEMENTLY CONTESTED THAT THE DEPOSITS HAVE BEEN RECEIVED IN THE NORMAL COURSE OF BUSINESS THROUGH ACCOUNT PAYEE CHEQUES AND AMOUN TS HAVE DULY BEEN REFLECTED IN THE REGULAR BOOKS OF ACCOUNT OF T HE ASSESSEE. IT WAS ALSO STATED THAT THE RETURNS OF INCOME HAVE ALR EADY BEEN FILED. IT WAS CLARIFIED THAT THE ASSESSEE-COMPANY WAS REGU LARLY PAYING INTEREST TO THOSE DEPOSITORS AND DEDUCTING THE TDS AT SOURCE. IT WAS ALSO INFORMED THAT THE APPROPRIATE RETURNS WERE ALSO FILED WITH THE INCOME TAX DEPARTMENT ON YEAR TO YEAR BASIS. A S A PROOF, A COPY OF SUCH RETURN WAS FILED BEFORE THE AO FOR F.Y . 2002-03. THEREFORE, IT WAS CONTESTED THAT ONCE THE ENTIRE TR ANSACTION OF THE DEPOSITORS WERE DULY RECORDED IN THE BOOKS OF A CCOUNT AND WHICH WAS WITHIN THE KNOWLEDGE OF THE INCOME TAX DE PARTMENT, THEN THE SAME COULD NOT BE TREATED AS AN UNDISCLOSE D INCOME. IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 5 - THE RELEVANT PORTION OF THE ASSESSEES EXPLANATION IS WORTH REPRODUCTION. IN THE COURSE OF ASSESSMENT, THE COMPANY HAS FURNI SHED THE DETAILS OF DEPOSITS TAKEN DURING THE FINANCIAL YEAR 1999-2000. ON THE BASIS OF THE PARTICULARS GIVEN, IT APPEARS F ROM THE SHOW CAUSE THAT SUMMONS WERE ISSUED TO THEM AND IN RESPO NSE THEIR STATEMENTS WERE RECORDED U/S.131 OF THE I.T. ACT. BASED ON THE STATEMENTS RECORDED, COPY OF WHICH IS FURNISHED THE AMOUNTS RECEIVED AS DEPOSITS IS PROPOSED TO BE TREATED AS UNDISCLOSED INCOME PRIMARILY FOR THE REASONS RECORD ED IN THE SHOW CAUSE, WHICH IS REPRODUCED AS UNDER: FROM THE PERUSAL OF THE SAID STATEMENTS ON OATH, IT CAN BE SEEN THAT THE DEPOSITORS DO NOT HAVE CAPACITY TO MAKE SU CH HUGE INVESTMENT. PLEASE ALSO FIND ENCLOSED THE COPY OF THE STATEMENT OF BANK ACCOUNT OF PROPRIETOR OF AERO MET AL, SHRI MODARAM AODI AND SHRI AMRUTBHAI PRAJAPATI, PROP. DI VYA JYOTI INVESTORS. IT CAN BE CLEARLY SEEN THAT THE M ONEY IS BEING INTRODUCED IN THEIR BANK ACCOUNT BY WAY OF TRANSFER AND THE SAME IS BEING INVESTED IN YOUR COMPANY. SHOW CAUSE WHY THE ALL ABOVE DEPOSITORS AS PER THE BOOKS OF ACCOUNTS N OT BE TREATED AS UNEXPLAINED AND AS YOUR BENEMIDARS AS TH ERE IS INTRODUCTION OF UNACCOUNTED MONEYS IN THE COMPANY A ND THE SAME BE BROUGHT TO TAX IN THE BLOCK PERIOD. IT IS STATED THAT THE DEPOSITS FROM ALL THE ABOVE P ERSONS ARE RECEIVED IN THE NORMAL COURSE OF BUSINESS AND BY AC COUNT PAYEE CHEQUES ONLY. THESE AMOUNTS ARE REFLECTED AS DEPOSITS RECEIVED IN THE BOOKS OF ACCOUNTS OF THE COMPANY, T HE RETURNS OF INCOME IN RESPECT OF WHICH ARE ALREADY FILED. IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 6 - BESIDES, THE ASSESSEE COMPANY IS REGULARLY PAYING I NTEREST TO THE DEPOSITORS AND ALSO DEDUCTING THE APPLICABLE TA X AT SOURCE IN RESPECT OF WHICH APPROPRIATE RETURNS ARE FILED W ITH THE INCOME TAX DEPARTMENT ON YEAR TO YEAR BASIS. COPY OF RETURN FILED FOR THE FY 2002-03 IS ENCLOSED. THUS, IT IS STATED THAT WHEN THE TRANSACTIONS OF DEPOSITS RECORDED IN THE B OOKS AND ARE WITHIN THE KNOWLEDGE OF THE INCOME TAX DEPARTME NT, THE SAME CANNOT BE TREATED AS FORMING PART OF INCOME, W HICH CAN BE SAID TO BE UNDISCLOSED INCOME. THE ASSESSEE REF ERS YOUR ATTENTION TO THE MEANING OF UNDISCLOSED INCOME AS D EFINED IN SECTION 158B(B) TO READ AS UNDER: FROM THE READING OF THE ABOVE, IT IS EVIDENT THAT F OR INCLUDING ANY INCOME AS PART OF UNDISCLOSED INCOME, ONE WOULD BE REQUIRED TO ESTABLISH THAT THE INCOME BASED ON ANY ENTRY HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE P URPOSE OF THE ACT. IT IS NOT (SIC.) A SETTLED LAW THAT WHAT ASSESSEE HAS ALREADY DISCLOSED IS NOT TO BE TREATED AS UNDISCLOS ED INCOME AND ONCE IT IS DISCLOSED IN THE RETURNS WHICH ARE S UBJECT MATTER OF REGULAR ASSESSMENT, IT OUGHT TO BE ASSESSED IN T HE REGULAR ASSESSMENT. - N.R. PAPER & BOARD LTD. VS. DY.CIT 234 ITR 733 (G UJ.) - CIT VS. VIKRAM DOSHI 256 ITR 129 (BOM) BASED ON THESE PRINCIPLES WHERE A LOAN IN QUESTION HAS BEEN DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS FOUN D DURING THE SEARCH AND HAS BEEN SUBJECT MATTER OF REGULAR A SSESSMENT, IT COULD NOT BE CONSIDERED UNDER THE BLOCK ASSESSME NT AS HELD IN BHAGWATE PRASAD KODIA VS. CIT 248 ITR 562 (CAL.) . 3.3. IN ADDITION TO THE SAID LEGAL GROUND THAT ONCE THE TRANSACTIONS WERE RECORDED IN THE REGULAR BOOKS OF ACCOUNTS AND THE INTEREST THEREON WAS SUBJECT TO TDS RETURNS, THEN SUCH TRANS ACTION WERE IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 7 - OUTSIDE THE PURVIEW OF THE PROVISIONS OF CHAPTER XI V-B AND NOT TO BE TAXED AS UNDISCLOSED INCOME, THE ASSESSEE HAS ALSO DISCUSSED THE MERITS OF EACH DEPOSIT. A PARTY-WISE DETAILS WERE FURNISHED TO THE AO BY FILING THE CONFIRMATIONS, MODE OF PAYMENT AND THE PROOF OF DISCLOSING THE TRANSACTION IN THE RETURNS FILED. THE ASSESSEE HAS PLACED RELIANCE ON ROHINI BUILDERS REPORTED AT 256 ITR 316 (GUJ.). IT WAS AGAIN REITERATED THAT QUOTE CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES AND LAW AS APPLICABLE IN THE ASSE SSEES CASE, IT IS CLEAR THAT THE CREDITS IN QUESTION ARE REGULARLY RE CORDED IN THE BOOKS OF ACCOUNTS, THE RETURNS OF WHICH ARE ALREADY FILED AND NO MATERIAL OR EVIDENCE IS FOUND IN SEARCH OF THE ASSESSEE TO L EAD ONE TO INFER THAT SUCH TRANSACTION REPRESENT UNDISCLOSED INCOME THE TAXING OF SAME AS UNDISCLOSED INCOME IS BEYOND THE PURVIEW OF THE PROVISIONS OF CHAPTER XIV-B. MOREOVER, THE VERIFICATION OF TH E DEPOSITORS ESTABLISHES BEYOND DOUBT THE GENUINENESS OF THE DEP OSITS AND THEREFORE THE TAXATION OF THE DEPOSITS RECORDED IN THE REGULAR BOOKS CANT BE TAXED AS PROPOSED. UNQUOTE. THE ASSESSEE HAS ALSO FURNISHED THE PERMANENT ACCOUNT NUMBERS OF SOME OF THE DEPOSITORS. THE AO WAS NOT CONVINCED AND IN HIS OP INION THOSE VARIOUS DEPOSITORS HAVE ALSO APPEARED AS SHARE-HOLD ERS OR SHARE- APPLICANTS IN AN ANOTHER SISTER-CONCERN, NAMELY MSK ENGINEERING LTD., THEREFORE, ON THE BASIS OF THE STATEMENT RECO RDED OF THOSE DEPOSITORS IT WAS FOUND THAT THEY DID NOT HAVE CAPA CITY OR FINANCIAL STATUS TO INVEST THE SAID AMOUNT. APPLYING THE P ROVISIONS OF IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 8 - SECTION 68 OF THE I.T.ACT, THE SAID AMOUNT WAS ADDE D IN THE BLOCK PERIOD INCOME OF THE ASSESSEE. THE MATTER WAS CAR RIED BEFORE THE FIRST APPELLATE AUTHORITY. 4. BEFORE LD.CIT(A), THE ASSESSEE HAS PLACED RELIAN CE ON N.R.PAPER BOARD LTD. VS. DY.CIT REPORTED AT 234 ITR 733 (GUJ.) . THE ASSESSEE HAS ALSO REITERATED THE MERITS OF DEPOSITS OF ALL THE 19 DEPOSITORS BY REFERRING THEIR CONFIRMATI ONS AND THE SOURCE OF DEPOSIT AS ALSO THE MODE OF TRANSACTION CLAIMED TO BE THROUGH BANKING CHANNEL. IN THIS REGARD, THE ASSESSEE HA S PLACED RELIANCE ON THE DECISION OF HON'BLE MADHYA PRADESH IN THE CA SE OF CIT VS. METACHEM INDUSTRIES REPORTED AT [2000]245 ITR 160 ( M.P.) . HOWEVER, THE CIT(A) WAS NOT CONVINCED AND REJECTED ALL THOSE SUBMISSIONS AS PER THE FOLLOWING OBSERVATION: 15. I HAVE CAREFULLY PERUSED THE FACTS AND CIRCUM STANCES OF THIS CASE. THE APPELLANTS RELIANCE ON VARIOUS JUDI CIAL PRONOUNCEMENTS CANNOT BE APPRECIATED IN THIS CASE S INCE IT IS NOT A NORMAL ASSESSMENT BUT BLOCK ASSESSMENT. TO B E MORE PRECISE IN THIS CASE THE ASSESSING OFFICER, AFTER M AKING NECESSARY INQUIRIES, HAS ESTABLISHED THAT DEPOSITOR S CREDITWORTHINESS IS IN DOUBT. THE INQUIRIES MADE I N THE KHURANA GROUP OF CASES HAVE REVEALED THAT UNACCOUNT ED INCOME HAS BEEN ROUTED THROUGH THE DEPOSITORS IN A PLANNED MANNER. FACTS WITH REGARD TO THE DEPOSITORS INVOL VED ARE THE SAME. WHEN CONFRONTED WITH THE REALTY THE APPELL ANT HAS NOT BEEN IN A POSITION TO GIVE SATISFACTORY EXPLANATION EXCEPT RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS. THE FA CTS AND IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 9 - CIRCUMSTANCES DISCUSSED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, ABSTRACTS OF WHICH HAVE BEEN REPR ODUCED ABOVE, ARE NOT BEING REPEATED HERE. HOWEVER, THE G IST OF ASSESSING OFFICERS FINDINGS IS THAT CREDITWORTHINE SS OF THE DEPOSITORS COULD NOT BE ESTABLISHED DURING THE COUR SE OF BLOCK ASSESSMENT PROCEEDINGS. BEFORE ME ALSO NO FRESH EV IDENCE WITH REGARD TO THE DEPOSITORS HAS BEEN PRODUCED. I AM FULLY CONVINCED WITH THE ARGUMENTS AND FINDINGS OF THE AS SESSING OFFICER THAT DEPOSITORS ALONGWITH INTEREST THEREON IS AN UNDISCLOSED INCOME OF THE APPELLANT WHICH HAS BEEN DETECTED DURING THE COURSE OF SEARCH ACTION. IN THE LIGHT OF THESE FACTS AND CIRCUMSTANCES BOTH THE ADDITIONS OF RS.75,03,28 8/- (DEPOSITS) AND RS.22,18,239/- (INTEREST) ARE SUSTAI NED. THE GROUNDS RAISED BY THE APPELLANT ARE DISMISSED. BEING AGGRIEVED NOW THE ASSESSEE IS IN APPEAL BEFO RE US. 5. FROM THE SIDE OF THE APPELLANT-ASSESSEE, LEARNED AUTHORISED REPRESENTATIVE MR.S.N. SOPARKAR APPEARED AND FROM THE SIDE OF THE REVENUE, DR MR.N.S.DAYAM APPEARED. THE FIRST AND T HE FOREMOST ARGUMENT OF MR.S.N.SOPARKAR LEARNED AUTHORISED REP RESENTATIVE IS THAT THE IMPUGNED ADDITION MADE U/S.68 OF THE AC T WAS OUT OF THE AMBIT OF THE PROCEEDINGS UNDER CHAPTER XIV-B. HE HAS PLEADED THAT NOTHING WAS FOUND IN THE COURSE OF SEARCH THRO UGH WHICH IT COULD BE ESTABLISHED THAT THE IMPUGNED DEPOSITS WER E UNEARTHED OR DETECTED CONSEQUENCE UPON THE SEARCH. ON THE OTH ER HAND, FROM THE SIDE OF THE REVENUE LD.DR HAS PLACED RELIANCE O N THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF VENGAT BAV A VS. CIT REPORTED AT (2009)318 ITR 276(KER.) AND ALSO PLACED RELIANCE ON THE IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 10 - DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF SANDEEP KUMAR (HUF) VS. CIT REPORTED AT (2007)293 ITR 294(DEL.). LD. DR HAS ARGUED THAT THE UNEXPLAINED CASH CREDIT WERE FALLIN G WITHIN THE BLOCK PERIOD, THEREFORE, RIGHTLY TAXED IN THE HANDS OF TH E ASSESSEE PARTICULARLY WHEN THE BLOCK ASSESSMENT PROCEEDINGS AND THE REGULAR ASSESSMENT PROCEEDINGS COULD BE INITIATED SIMULTANE OUSLY. FURTHER, HE HAS ALSO ARGUED THAT THE ASSESSEE WAS UNABLE TO ESTABLISH THE CREDITWORTHINESS OF THE DEPOSITORS, THEREFORE, THE PROVISIONS OF SECTION 68 WERE CORRECTLY INVOKED. 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE CAREFULLY PERUSED THE IMPUGNED ORDERS OF THE AUTHOR ITIES BELOW AS ALSO THE COMPILATION FILED BEFORE US IN THE LIGHT O F THE CASE LAW CITED. DURING THE COURSE OF HEARING, WE HAVE ENQUIRED FROM THE REVENUE DEPARTMENT ON NUMBER OF OCCASIONS TO DEMONSTRATE OR TO FURNISH EVIDENCE GATHERED AT THE TIME OF SEARCH OPERATION I N RESPECT OF THE IMPUGNED UNSECURED LOANS. IN THIS REGARD, ON OUR QUERY, IT WAS AFFIRMED BY BOTH THE SIDES THAT THE ADMITTED FACTUA L POSITION WAS THAT THE AO HAS PROCEEDED TO TAX THE IMPUGNED DEPOSITS U/S.6 8 OF THE ACT ON THE BASIS OF THE ENTRIES FOUND RECORDED IN T HE REGULAR BOOKS OF ACCOUNT. IF IT WAS SO, RATHER IT WAS ESTABLISHED, THAT THE AO HAS INITIATED THE PROCEEDINGS IN RESPECT OF THE LOANS IN QUESTION ONLY ON THE BASIS OF THE ENTRIES FOUND RECORDED IN THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE, THEN THE PRELIMINARY QU ESTION ARISES THAT IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 11 - WHETHER THE A.O. HAD THE JURISDICTION TO ASSESS THE IMPUGNED INCOME IN THE BLOCK PERIOD. FROM THE SIDE OF THE ASSESSEE IT WAS VEHEMENTLY CONTESTED THAT THE PROVISIONS OF CHAPTER XIV-B READ WITH THE DEFINITION OF UNDISCLOSED INCOME , AS DEFINED IN SECTION 158B(B) OF THE ACT, ARE CONFINED TO THE INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH. WE ARE IN AGREEMENT WITH THE SAID PLEA OF THE ASSESSEE BECAUSE THIS ISSUE IS NOW WELL SETTLED BY THE SEVERAL HONBLE COURTS. ONCE IT IS AN ADMITTED FAC TUAL POSITION THAT DURING THE COURSE OF SEARCH ON THIS ASSESSEE NO SUC H INCRIMINATING MATERIAL WAS FOUND TO SHOW THAT THE DEPOSITS WERE B OGUS OR ASSESSEES OWN UNACCOUNTED INCOME WAS INTRODUCED IN THE NAME OF THOSE DEPOSITORS, OR THOSE WERE NOT FOUND RECORDED IN THE REGULAR BOOKS OF ACCOUNTS, THEN IN THE ABSENCE OF ANY SUCH MATERIAL OR EVIDENCE IT WAS UNJUSTIFIED, RATHER ILLEGAL, ON THE PART OF THE AO TO TAX THE IMPUGNED AMOUNT WHILE PASSING THE ORDER U/S .158BC OF THE ACT. THIS CHAPTER IS VERY SPECIFIC THAT FOR THE PU RPOSE OF COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERI OD AS PRESCRIBED U/S.158BB OF THE ACT, THE UNDISCLOSED IN COME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF THE TOTAL IN COME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD TO B E COMPUTED ON THE BASIS OF THE EVIDENCE FOUND AS A RESULT OF SEAR CH AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WIT H THE AO RELATABLE TO SUCH EVIDENCE. THEREFORE, THE EMPHASIS GIVEN A ND THE PROCEDURE PRESCRIBED BY THE LEGISLATURE IS CONFINED TO THE EV IDENCE FOUND AS A IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 12 - RESULT OF SEARCH OR THE INCRIMINATING MATERIAL AVAI LABLE WITH THE AO CONSEQUENCE UPON THE SEARCH. BUT NOWHERE THE LEGIS LATURE HAS SUGGESTED TO TAX AN AMOUNT WHICH HAS OTHERWISE BEEN DISCLOSED IN THE REGULAR BOOKS OF ACCOUNT. THE ASSESSMENT PROCE EDINGS AS PER THE REGULAR BOOKS OF ACCOUNTS ARE INDEPENDENT PROCEEDIN GS AND THE AO IS EMPOWERED TO MAKE ENQUIRY WHILE FINALISING THE A SSESSMENT UNDER THE NORMAL PROCEDURE AS PRESCRIBED UNDER THE STATUT E. THE DECISION OF N.R.PAPER AND BOARD LTD. REPORTED AT 234 ITR 733 (SUPRA) IS ON THE SAME LINES, WHEREIN IT WAS HELD THAT THE SPECIA L PROVISIONS OF CHAPTER XIV-B ARE DEVISED TO OPERATE IN THE SEPARAT E FIELD OF ASSESSMENT OF UNDISCLOSED INCOME AND THAT PROCEDURE IS CLEARLY IN ADDITION TO THE REGULAR ASSESSMENTS. EVEN THE DEC ISION CITED BY THE LD.DR MR.N.S. DAYAM OF VENGAT BAVA 318 ITR 276(KER. )(SUPRA) ALSO SUGGESTS THAT THE SEVERAL ITEMS OF PROPERTIES BEING DETECTED BY THE DEPARTMENT WHEN THE SEARCH WAS CARRIED OUT AT T HE PREMISES OF THE ASSESSEE AND INVESTMENTS WERE FOUND UNRECORDED, THEN IT WAS HELD THAT THE ASSESSMENT WAS CORRECTLY MADE IN TERM S OF THE PROVISIONS OF CHAPTER XIV-B AND THE ADDITION U/S.68 WAS UPHELD. IN THAT DECISION, A CBDT CIRCULAR CITED AS 258 ITR 58 (STATUTE) [2002] WAS ALSO REFERRED, WHEREIN IT WAS STATED T HAT THE AMENDMENT TO SECTION 158BB BY THE FINANCE ACT, 2002 AUTHORIZE S BLOCK ASSESSMENT OF UNDISCLOSED INCOME ONLY BASED ON EVIDENCE FOUND IN THE SEARCH AND THE POST SEARCH ENQUIRIES BE MADE ON THE BASIS OF EVIDENCE FOUND IN THE SEARCH. IN THE LIGHT OF THESE DECISIONS, WE IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 13 - CAN THEREFORE HOLD THAT SINCE THE FACTS OF THE CASE HAVE REVEALED THAT NO SUCH EVIDENCE, SAID TO BE AN INCRIMINATING MATER IAL, WAS UNEARTHED TO INDICATE THAT THE DEPOSITORS WERE EITH ER BOGUS OR NOT GENUINE, THE AO WAS NOT JUSTIFIED TO TAX THE AMOUNT IN QUESTION WHILE FRAMING THE ASSESSMENT U/S.158BC OF THE ACT. UNDER THIS CHAPTER HIGHER RATE OF TAX IS APPLIED ON THE ASSESS ED INCOME, CONTRARY TO THE NORMAL RATE OF TAX AS PER THE REGUL AR PROCEDURE OF ASSESSMENT PRESCRIBED UNDER THE ACT, THEREFORE SUCH AN ASSESSMENT OUGHT TO BE MADE DISTINCTLY. WE HOLD ACCORDINGLY. SINCE THE IMPUGNED ADDITION WAS HELD AS OUT OF THE AMBITS OF THE PROVISIONS OF CHAPTER XIV-B, THEREFORE, AT PRESENT IT IS NOT NECE SSARY TO DEAL WITH THE MERITS OF THE DEPOSITS OR THE CONNECTED CASE LA WS CITED BY EITHER SIDE. WITH THE RESULT, THIS GROUND OF THE ASSESSEE IS AL LOWED. 7. GROUND NO.3 READ AS UNDER 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ACTION OF AO IN DISALLOWING RS.22,1 8,239/- BEING THE INTEREST ON THE ALLEGED CASH CREDIT U/S.68 OF THE ACT. 7.1. THIS GROUND IS CONSEQUENTIAL IN NATURE BECAUSE THE AO HAS MADE THE ADDITION OF THE CASH CREDITORS BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT, HENCE, IN CONSEQUENCE THEREO F DISALLOWED THE INTEREST GRANTED ON SUCH DEPOSITS. ONCE THE ADDITI ON WAS HELD OUT OF THE AMBIT OF THE CHAPTER XIV-B, THEREFORE ON THE SA ME LINES, THE IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 14 - DISALLOWANCE OF INTEREST IS ALSO OUT OF THE AMBITS OF THE PROVISIONS OF CHAPTER XIV-B AND HEREBY DIRECTED TO BE DELETED. T HIS GROUND IS, THEREFORE, ALLOWED. 8. GROUND NO.4 READS AS UNDER: 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ADDITION OF RS.10,00,000/- AS ALLEGED UNDISCLOSED INCOME OF THE APPELLANT INCURRED ON GOT RI HOUSE. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE SUC H ADDITION OUGHT TO HAVE BEEN DELETED BY THE LD. CIT( A). 8.1. THE AO HAS NOTED THAT AT THE TIME OF SEARCH ON 25/07/2002 A STATEMENT WAS RECORDED OF MR.ASHOK KHURANA. IN THE SAID STATEMENT, HE HAS ADMITTED CERTAIN UNDISCLOSED INVE STMENT AND ONE OF THEM WAS SAID TO BE THE INVESTMENT IN PLOTS PURC HASED AT BARODA- GOTRI OF RS.10,00,000/-.THAT STATEMENT WAS LATER ON REVISED AND IT WAS STATED THAT THE INVESTMENT IN GOTRI BUNGALOW HA S FALLEN OUT OF THE BLOCK PERIOD. THE SAID AMOUNT WAS EXCLUDED FRO M THE DISCLOSURE EARLIER MADE. THE ASSESSEE HAD, HOWEVER, FILED TH E RETURN OF THE BLOCK PERIOD AS PER THE REVISED DISCLOSURE MADE. TH E ASSESSEE HAS FURTHER EXPLAINED THE REASON FOR THE SAID REVISION OF THE EARLIER STATEMENT THAT THE RESIDENTIAL HOUSE AT GOTRI WAS CONSTRUCTED IN THE YEAR 1985. CERTAIN RENOVATIONS WERE MADE IN THE YEAR 1993-9 4. IT WAS STATED THAT NO RENOVATION WAS MADE THEREAFTE R. IT WAS ALSO AFFIRMED THROUGH AN AFFIDAVIT THAT NO EXPENDITURE W AS INCURRED OR NO IMPROVEMENT WAS MADE IN THE HOUSE AFTER 1993- 94. THE IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 15 - SAID EXPLANATION OF THE ASSESSEE WAS TURNED DOWN AN D AN ADDITION OF RS.10 LACS WAS MADE. 9. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE LD.CIT(A) HAS AFFIRMED THE VIEW TAKE N BY THE AO AS PER THE FOLLOWING OBSERVATION:- IT WAS SUBMITTED THAT THE ABOVE AMOUNT OF DISCLOSU RE WAS REVISED CONSIDERING CERTAIN FACTUAL ERRORS. IT WAS PLEADED THAT THE REVISED AMOUNT WAS RS.114.00 LACS WHEREIN DISCL OSURE IN RESPECT OF CERTAIN INVESTMENTS IN RELATION TO GOTRI BUILDING, PLOT IN UDAIPUR AND BHARUCH AT SR.NO.2,4,5,6 & 7 IN CLUDED IN THE TOTAL AMOUNT OF RS.104.00 LACS WAS EXCLUDED BEI NG PRIOR TO THE BLOCK PERIOD. HOWEVER, THE ASSESSING OFFICER D ID NOT ACCEPT THE WITHDRAWAL OF DISCLOSURE IN RELATION TO ITEM NO.4,5 & 7 OF THE ITEMS CONTAINED IN THE ABOVE CHART. THE APPELLANT HAS NOW SUBMITTED THAT THE EVIDENCE IN GOTRI BUILDI NG IS MERELY THE STATEMENT AND ITS RETRACTION BY FILING A FFIDAVIT SHOULD BE CONSTRUED AS SUFFICIENT EVIDENCE. THE AP PELLANT RELIED UPON THE CASE OF MEHTA PARIKH & CO. V/S. CI T 30 ITR 181 (SC). IN THIS REGARD I HAVE CONSIDERED THE CO NTENTIONS OF THE APPELLANT. IN MY OPINION THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE EXPLANATION OF THE APPEL LANT DUE TO NON FURNISHING OF ADEQUATE EVIDENCE. IT IS FURTHER NOTED THAT NO FRESH EVIDENCE HAS BEEN FILED BEFORE ME. HAD T HERE AS EVIDENCE OF CONSTRUCTION OR RENOVATION PRIOR TO THE BLOCK PERIOD THE APPELLANT WOULD HAVE FILED THE SAME. IN THE LIGHT OF THESE FACTS AND CIRCUMSTANCES THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION ON THE BASIS OF VE RIFICATION MADE BY HIM DURING THE COURSE OF ASSESSMENT PROCEED INGS. THUS THE ABOVE ADDITION OF RS.10,00,000/- ON ACCOUN T OF INVESTMENT IN THE GOTRI HOUSE IS SUSTAINED. IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 16 - 10. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES . ON PERUSAL OF THE IMPUGNED ORDERS, IT IS EVIDENT THAT THE ADDITION WAS MADE ONLY ON THE BASIS OF A STATEMENT RECORDED U/S.132(4 ) OF THE I.T.ACT, 1961 AT THE TIME OF SEARCH. THE SAID STATEMENT WAS RETRACTED AND THE LIST OF UNDISCLOSED INVESTMENT WA S REVISED. WHICH MEANS THAT THE AO HAS NOT REFERRED ANY INCRIMINATIN G MATERIAL OR EVIDENCE FOUND AT THE TIME OF SEARCH. IT IS NOT THE CASE OF THE REVENUE THAT THE INVESTMENT IN THE BUNGALOW WAS MAD E WITHIN THE BLOCK PERIOD. IT IS ALSO NOT THE CASE OF THE REVEN UE THAT CERTAIN EVIDENCES OF RENOVATION WERE DETECTED AT THE TIME OF SEARCH OPERATION FALLING WITHIN THE BLOCK PERIOD. IN THE ABSENCE OF ANY PROOF OF UNDISCLOSED INVESTMENT, SPECIALLY WHEN THE ASSET IN QUESTION WAS CONSTRUCTED WAY BACK IN THE YEAR 1985, IT WAS NOT JUSTIFIABLE ON THE PART OF THE AO TO MAKE THE ADDIT ION IN THE HANDS OF THE ASSESSEE IN THE SAID BLOCK PERIOD. FROM THE SI DE OF THE ASSESSEE RELIANCE WAS PLACED ON BALAJI WIRE PVT.LTD. REPORTED AT 304 ITR 393 (DEL.) FOR THE PROPOSITION THAT A STATEMENT RECORDED SUBS EQUENT TO THE SEARCH AND THAT STATEMENT WAS ALSO RETRACTED THEN IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH AN ADDITION SHOULD NOT BE MADE UNDER CHAPTER XIV-B. AN ANOTHER CASE LAW WAS CITED FOR THE LEGAL PROPOSITION THAT I F A RETRACTION IS WITHIN A REASONABLE TIME AND IF SUPPORTED BY A COGE NT EVIDENCE, THEN HAS TO BE ACCEPTED. UNDER THE TOTALITY OF CIRCUM STANCES OF THE CASE AND IN THE ABSENCE OF ANY DIRECT EVIDENCE AGAINST T HE ASSESSEE, WE IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 17 - FIND NO REASON TO HOLD THAT THE ASSESSEE HAS MADE A N UNEXPLAINED INVESTMENT IN A RESIDENTIAL HOUSE OF RS.10 LACS WHI CH WAS UNDISPUTEDLY CONSTRUCTED WAY BACK IN THE YEAR 1985. RESULTANTLY, THE ADDITION IS HEREBY DELETED. GROUND ALLOWED. 11. GROUND NOS.5, 6, 7 & 8 ARE EITHER NOT PRESSED O R GENERAL IN NATURE NEED NO INDEPENDENT ADJUDICATION. 12. IN THE RESULT, ASSESSEES APPEAL, IT(SS)A NO.22 9/AHD/2005 IS ALLOWED. (B) REVENUES APPEAL, IT(SS)A NO.238/AHD/2005 13. GROUND NO.1 READS AS UNDER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO DELETE THE ADDITION OF RS.3,52,43,962/- MADE ON ACC OUNT OF UNDISCLOSED AMOUNT OF ARBITRATION AWARDS IGNORING T HE FACT THAT THE AWARDS OF RS.2,58,15,124/- IN THE CASE OF M/S.ATV PROJECTS (INDIA) LTD. AND OF RS.42,84,332/- IN THE CASE OF CICON ENVIRONMENTAL TECHNOLOGIES LTD., BHOPAL GIVEN ON 6.11.1999 AND 11.2.2002 RESPECTIVELY IN FAVOUR OF T HE ASSESSEE-COMPANY CLEARLY FELL IN THE BLOCK PERIOD A ND THAT THE INCOME TO THIS EXTENT HAD ACCRUED TO THE APPELLANT DURING THE BLOCK PERIOD AND FURTHER THAT THE AMOUNT OF SUCH AW ARDS WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE RE LEVANT YEAR(S) AND THEREBY THE SAME WAS LIABLE TO BE ASSES SED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY FOR THE BLOCK PERIOD. IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 18 - 13.1 THE OBSERVATION OF THE AO VIDE ORDER U/S 158 B C DT.26.7.2004 WAS THAT THE ASSESSEE HAS RECEIVED FOR HUGE AMOUNT OF ARBITRATION AWARD THE DETAILS OF WHICH ARE AS PER ANNEXURE A-49 OF THE SEIZED MATERIAL. IN RESPECT OF THE SAID SEIZED MATERIAL A STATEMENT OF MR. ASHOK KHURANA, M.D. WAS RECORDED. IT WAS FOUND BY THE AO THAT THE ASSESSEE HAS RECEIVED AN ARBITRATION AWARD OF RS.94,28,568/- FROM CICON ENVIRONMENT AND TECHNOLO GIES LTD . BHOPAL. IT WAS ALSO FOUND BY THE AO THAT THE AS SESSEE WAS ALSO AWARDED AN ARBITRATION AMOUNT OF RS.2,58,15,12 5/- FROM ATV PROJECTS (INDIA) LTD. AS PER AO SINCE BOTH THE SAID AMOUNTS HAVE BEEN AWARDED TO THE ASSESSEE, THEREFOR E LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE. THE AO HAS ALS O NOTED THAT SINCE THE ASSESSEE HAD MAINTAINED BOOKS OF ACCOUNT ON MER CANTILE BASIS, THEREFORE, THE SAID AMOUNTS WERE TAXABLE IN THE HAN DS OF THE ASSESSEE. AS PER AO, THE ASSESSEE WAS REQUIRED TO BROUGHT TO TAX BOTH THE AMOUNTS AWARDED ON THE ANNOUNCEMENT OF ARB ITRATION AWARD. A DETAILED REPLY WAS FURNISHED FROM THE SID E OF THE ASSESSEE FOR NOT INCLUDING THE ARBITRATION AWARD AND IT WAS EXPLAINED THAT THOSE COMPANIES WERE APPROVED FOR BIFR THEREFORE NO AMOUNT WAS ACTUALLY RECEIVED BY THE ASSESSEE. THE AO WAS NOT CONVINCED AND IN HIS OPINION AS PER THE CONCEPT OF REAL INCOME, AS A LSO FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE IMPUGNED AMOUN T GOT ACCRUED AFTER THE ANNOUNCEMENT OF THE ARBITRATION AWARD, TH EREFORE, TAXABLE ON ACCRUAL AND NOT ON RECEIPT BASIS AND NON-DISCLOS URE WAS SUBJECT IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 19 - TO TAX AS UNACCOUNTED INCOME IN THE HANDS OF THE AS SESSEE. AN ELABORATE DISCUSSION WAS MADE BY THE AO DISCUSSING THE ACCOUNTING POLICIES AND THE SEVERAL CASE LAWS ON THE SUBJECT A ND, THEREAFTER, ARRIVED AT THE CONCLUSION THAT THE TOTAL OF THE TWO , I.E. RS.3,52,43,962/- WAS SUBJECT TO TAX AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. THE MATTER WAS CARRIED BEFORE THE FI RST APPELLATE AUTHORITY. IN SHORT, THE AO HAS SAID THAT : I) THE RECEIPTS WERE NOT DISCLOSED IN THE NOTES OF ACCOUNTS, II) THE RIGHT TO RECEIVE THE ARBITRATION AWARD WAS CRYSTALLIZED IN FAVOUR OF THE ASSESSEE AND III) THAT THE PROVISIONS OF SECTION 22 OF SICK INDUSTRIA L COMPANIES ACT WAS IRRELEVANT ON THE FACTS OF THE CASE. 14. THE FIRST APPELLATE AUTHORITY HAS ALSO DISCUSSE D THE FACTS OF THE CASE IN DETAIL. IT WAS EXPLAINED THAT AS PER THE PR OVISIONS OF SICK INDUSTRIAL COMPANIES ACT( IN SHORT SICA) THE MOMENT THE COMPANY IS REGISTERED AS A SICK COMPANY, IT IS UNDER THE PU RVIEW OF THE BIFR AND THE PROVISIONS OF THE SAID ACT WERE TO BE APPLI ED. IT WAS INFORMED THAT M/S.ATV PROJECT (INDIA) LTD. WAS REGI STERED AS A SICK COMPANY ON 21/05/1999. THE CIT(A) HAS ACCEPTED T HE CONTENTIONS OF THE ASSESSEE AND THEREAFTER ALLOWED THE CLAIM AS PER THE FOLLOWING OBSERVATIONS: 12. I HAVE CAREFULLY CONSIDERED THE CONTENTIONS R AISED BY THE APPELLANT. I HAVE ALSO NOTED THE REASONS GIVEN BY THE ASSESSING OFFICER FOR MAKING THE ABOVE ADDITIONS ON ACCOUNT IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 20 - OF ARBITRATION AWARDS. THE ASSESSING OFFICER HAS M ADE THE ADDITION ON THE GROUND THAT THE SAID AWARDS ARE NOT REFLECTED IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS HELD THAT ARBITRATION AWARD OF RS.2,58,15,124/- IN RESPECT O F M/S.ATV PROJECTS (I) LTD. AND RS.94,24,568/- IN RESPECT OF M/S.CICON ENVIRONMENT AND TECHNOLOGIES PVT.LTD. SHOULD HAVE BEEN TAKEN AS INCOME ON ACCRUAL BASIS. HOWEVER, ON THE OTHER HAND THE APPELLANT PLEADED THAT AMOUNTS OF AWARDS I S STILL DISPUTED AND HENCE INCOME WAS NOT REQUIRED TO BE SH OWN. I HAVE DISCUSSED THE CONTENTIONS RAISED BY THE APPELL ANT VIS-- VIS REASONS GIVEN BY THE ASSESSING OFFICER IN THE A FORESAID PARAS. DETAILED FACTS AND CIRCUMSTANCES ALONGWIT H RELEVANT LAW HAVE BEEN DISCUSSED AT LENGTH IN THE AFORESAID PARAS ALSO. RELIANCE OF THE APPELLANT ON VARIOUS JUDICIAL PRONO UNCEMENTS HAVE BEEN DISCUSSED ALONGWITH BRIEF NOTES AND RATIO S LAID DOWN THEREIN. THE THRUST OF ASSESSING OFFICER IS O N NON- DISCLOSURE OF FACTS OF THE CASE IS NOT OF MUCH SIGN IFICANCE SINCE THE APPELLANT HAS APPENDED AUDIT NOTES IN CLEAR TER MS THAT ONLY ACTUAL RECEIPT OF INCOME IS SHOWN AND THE REVE NUES ARE RECOGNIZED ON THE BASIS OF RECEIPTS DURING THE ACCO UNTING PERIOD. THUS THIS GROUND OF THE ASSESSING OFFICER HAS NO FORCE. THE ASSESSING OFFICER HAS TREATED THAT THE RIGHT TO RECEIVE THE INCOME HAS CRYSTALLIZED ON RECEIPT OF AWARDS WHEREAS THE APPELLANT HAS PLEADED THAT AWARDS ARE S TILL IN DISPUTE HENCE THE RIGHT TO RECEIVE INCOME HAS NOT B ECOME FINAL. THE APPELLANT HAS RATHER PLEADED THAT RECOV ERY OF THE ABOVE AWARDS ARE TO BE RECOVERED. ABOVE ALL, THE F ACT AND REALITY IS THAT SUCH AMOUNTS OF ARBITRATION AWARDS HAVE NOT BEEN RECEIVED TILL DATE AFTER A CONSIDERABLE LAPSE OF TIME. CONTENTIONS RAISED BY THE APPELLANT BOTH ON FACTS AS WELL AS LAW HAVE CONSIDERABLE FORCE. THE RATIO OF MANY JUD ICIAL PRONOUNCEMENTS, AS DISCUSSED IN THE AFORESAID PARAS , SAYS THAT ACTUAL RECEIPT OF ARBITRATION AWARDS CAN BE TR EATED AS INCOME OF THE RELEVANT PERIOD. SINCE BOTH THE AWAR DS ARE IN DISPUTE AND THE APPELLANT HAS NEITHER THE RIGHT TO RECEIVE NOR HAS RECEIVED THE SAME DURING THE PERIOD UNDER CONSI DERATION, IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 21 - THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING B OTH THE ADDITIONS AS DISCUSSED ABOVE. TAKING INTO THE TOTA LITY OF FACTS AND CIRCUMSTANCES AND CLEAR POSITION OF LAW ON THE SUBJECT, ADDITION OF RS.3,52,43,962/- IS DELETED. 15. FROM THE SIDE OF THE REVENUE LD.DR HAS VEHEMENTLY OPPOSED THE VIEW TAKEN BY THE LD.CIT(A). HIS FIRST CONTENTION WAS THAT THE ASSESSEE HAS NOT DISCLOSED THE AMOUNT WHICH WAS AWA RDED IN THE REGULAR BOOKS OF ACCOUNT THEREFORE THE AMOUNT IN QU ESTION WAS RIGHTLY TAXED AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. HI S SECOND LIMB OF ARGUMENT WAS THAT THE INCOME WHICH WAS ACCRUED TO THE ASSESSEE WAS SUBJECT TO TAX AS PER THE THEOR Y OF REAL INCOME. THE ASSESSEE HAS ACQUIRED A RIGHT TO RECEIVE THE AW ARD THEREFORE THE AMOUNT HAD VESTED IN HIM THEREFORE IT WAS SUBJECT T O TAX. IN SUPPORT, LD.DR HAS CITED A DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF BEIRSDORF (INDIA) LTD. & ANR. REPO RTED AT (2010)324 ITR 106(MUM.), IN THE CASE OF MORVI INDUSTRIES LTD. VS. CIT REPORTED AT (1971) 82 ITR 835 (SC), IN THE CASE OF ACIT VS. A.GAJAPATHY NAIDU REPORTED AT (1964) 53 ITR 114(SC) , FOR THE PROPOSITION THAT A SALES TAX REFUND ONCE GRANTED, T HEN THE SAME IS TO BE TREATED AS INCOME NOTWITHSTANDING PENDING OF APPEAL. HE HAS CONCLUDED THAT A CONTRACTUAL RIGHT WAS GRANTED IN F AVOUR OF THE ASSESSEE AND THAT CONTRACTUAL RIGHT WAS TO BE TAXED ON ACCRUAL BASIS THOUGH THE SAID RIGHT COULD BE UNDER DISPUTE. HE HAS PLEADED TO REVERSE THE FINDINGS OF THE LD.CIT(A). IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 22 - 16. FROM THE SIDE OF THE RESPONDENT-ASSESSEE LD.AR MR.S.N.SOPARKAR APPEARED AND SUPPORTED THE ORDER OF THE LD.CIT(A). HE HAS MENTIONED THAT THE AWARD WAS GRANTED ON 6 TH NOVEMBER- 1999. HOWEVER, THE SEARCH WAS CONDUCTED ON 25/07/2 002. HE HAS EMPHASIZES THAT THOUGH THE ASSESSEE WAS AWARE ABOUT THE AWARD BUT HE HAS NOT SHOWN AS INCOME EVEN ON ACCRUAL BASIS BE CAUSE THE PROCEEDINGS OF BIFR WERE COMMENCED ON 07/12/1998. HE HAS ALSO MENTIONED THAT THE OTHER AWARD WAS GRANTED ON 11/02 /2002 BUT THOSE AWARDS WERE UPSET ON 23/01/2004. SINCE THE ASSES SEE HAS NEITHER RECEIVED THOSE AMOUNT NOR THE SAME HAVE ACCRUED BEC AUSE THE COMPANIES WERE UNDER BIFR, THEREFORE NO QUESTION OF DISCLOSURE OF THE SAID INCOME IN THE REGULAR COURSE OF ASSESSMENT . THE AMOUNT WAS NEITHER ACTUALLY DISBURSED NOR IT WAS FINALLY S ETTLED IN FAVOUR OF THE ASSESSEE. CASES WERE CITED IN THE CASE OF ALEMBIC CHEMICAL WORKS VS. DY.CIT REPORTED AT (2004) 266 ITR 47(GUJ. ), IN THE CASE OF CIT VS. ASHWIN VANASPATI INDUSTRIAL PVT.LTD . REPORTED AT (2006) 283 ITR 439(GUJ.) AND IN THE CASE OF FGP LTD. VS. CIT REPORTED AT (2010) 326 ITR 444(MUM.) . HE HAS CONCLUDED THAT SINCE THE COMPANIES IN QUESTION WERE DECLARED SICK UNITS THEREFORE THERE WAS NO POSSIBILITY OF ANY RECOVERY. HE HAS A LSO INFORMED THAT THE MATTER HAD GONE IN THE DISTRICT COURT AND ADDL. DISTRICT JUDGE VIDE AN ORDER DATED 23/01/2004 HAS GIVEN A VERDICT THAT LOOKING TO THE FACTS THE AWARD PASSED BY THE ARBITRATOR WAS CO NTRARY TO THE IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 23 - PROVISIONS OF THE ACT AND AGAINST THE PUBLIC POLICY . IT WAS HELD THAT THE IMPUGNED ORDER WAS LIABLE TO SET ASIDE. ON TH E DATE WHEN THE ASSESSMENT WAS COMPLETED ON 26/07/2004 THERE WAS NO EXISTENCE OF ANY AWARD VIDE ORDER OF THE RESPECTED ADDL. DIST RICT JUDGE ORDER DATED 23/01/2004 THEREFORE THE AO WAS INCORRECT IN TAXING THE AMOUNT AS UNDISCLOSED INCOME IN THE HANDS OF TH E ASSESSEE. HE HAS ALSO CITED A DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BENNY PRASAD SID GOPAL VS. CIT REPORTED A T (1984)148 ITR 760 (ALL.) FOR THE PROPOSITION THAT AS LONG AS THE AMOUNT IS NOT REALIZED THE SAME IS NOT ASSESSABLE IN THE HANDS OF THE ASSESSEE. 17. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE S IDES AND ALSO CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BEL OW IN THE LIGHT OF THE COMPILATION FILED AND THE PRECEDENTS CITED. IN RESPECT OF ATV PROJECT (INDIA) LTD. THE ASSESSEE HAD EXECUTED THE CONTRACT OF CONSTRUCTION OF THEIR PLANT AND ANCILLARY BUILDING AT MAHARASHTRA. THE CONTRACT WAS EXECUTED DURING THE PERIOD 1993 TO 1995. THE CONTRACTEE WAS NOT PAYING THE AMOUNT CLAIMED BY THE ASSESSEE. ON ACCOUNT OF THE NON-PAYMENT, THE DISPUTE WAS REFERRE D TO AN ARBITRATOR. ARBITRATOR GAVE THE AWARD IN FAVOUR OF THE ASSESSEE ON 06/11/1999. THE ASSESSEE WAS NOT IN A POSITION TO RECOVER THE AMOUNT BECAUSE THE SAID CONTRACTEE M/S.ATV PROJECT (INDIA) LTD. WAS REGISTERED AS A SICK COMPANY AND UNDER THE PURV IEW OF BIFR VIDE A SICK REGISTRATION DATED 21/04/1999. IT WAS PLEADED BEFORE IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 24 - US THAT BEFORE THE GRANT OF THE AWARD IN THE MONTH OF NOVEMBER- 1999 THE SAID CONTRACTEE WAS ALREADY DECLARED AS S ICK UNIT IN APRIL- 1999. IN THIS CONNECTION, THE PROVISIONS OF SECTIO N 22 OF SICK INDUSTRIES COMPANIES ACT WAS CITED FOR THE LEGAL PR OPOSITION THAT THE RIGHT OF RECOVERY WAS STAYED BY THE OPERATION OF SA ID LAW AND THE PROCEEDINGS FOR RECOVERY COULD NOT BE ENFORCED SINCE THE SAID COMPANY WAS DECLARED AS SICK. THE SAID SECTION HAS PRESCRIBED THAT THE ENFORCEMENT OF A DECREE COULD NOT BE PROCEEDED EXCEPT WITH THE CONSENT OF BIFR. THE SECOND COMPANY WAS CICON ENVIRONMENT TECHNOLOGIES LTD. BHOPAL WHO HAD ENTERED INTO A CONTRACT FOR THE CONSTRUCTION OF WASTE ENERGY PROJECT AT NAGPUR. TH E PROJECT WAS SCHEDULED TO BE COMPLETED BY DECEMBER-2000. THE W ORK WAS SUSPENDED BECAUSE PAYMENTS WERE NOT RECEIVED FOR TH E WORK DONE BY THE ASSESSEE. THE DISPUTE WAS REFERRED TO AN ARBITRATOR AND VIDE AN ORDER DATED 11/02/2002 T HE SAID AMOUNT WAS AWARDED. THE SAID AWARD WAS NOT ACCEPTED BY M/S.CICON ENVIRONMEN TAL TECHNOLOTIES LTD. BHOPAL AND AN APPEAL WAS FILED. THE ADDL.DISTRICT JUDGE VIDE AN ORDER DATED 23/01/2004 HAD SET ASIDE THE ARBITRATION AWARD. IN THIS REGARD, FROM THE SIDE OF THE ASSESSEE CERTAIN EVIDENCES AND BRIEF HISTORY OF THE ARBITRAT ION WERE NARRATED. IN THE LIGHT OF THE ABOVE BACKGROUND, THE RIVAL PA RTIES HAVE RAISED TWO FUNDAMENTAL QUESTIONS BEFORE US. ONE WAS THAT WHETHER THE AMOUNT IN QUESTION WAS SUBJECT TO TAX UNDER CHAPTER XIVB OF THE IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 25 - ACT? IN RESPECT OF THIS QUESTION, WE HAVE NOTICE D THAT THE REVENUE DEPARTMENT HAD COME ACROSS CERTAIN DOCUMENTS CONSEQ UENCE UPON THE SEARCH. AS PER THE SEIZED MATERIAL, IT WAS FOU ND THAT THOUGH THE ASSESSEE WAS AWARDED SUBSTANTIAL AMOUNT FROM TWO CO MPANIES, BUT THAT AMOUNT WAS NOT DISCLOSED IN THE BOOKS OF ACCOU NT. WE HAVE ALREADY DISCUSSED IN ABOVE PARAS THAT THE PROVISION S OF CHAPTER- XIVB ARE APPLICABLE ON AN INCOME WHICH WAS UNEARTHE D AFTER THE SEARCH OPERATION. THIS IS NOT THE CASE OF THE ASS ESSEE THAT THE AMOUNT OF ARBITRATION AWARD WAS EITHER DISCLOSED IN THE BOOKS OF ACCOUNT OR IT WAS INFORMED TO THE REVENUE DEPARTMEN T. ONCE IT WAS AN ADMITTED POSITION THAT THE AMOUNT IN QUESTION WA S NOT DISCLOSED IN ANY MANNER, THEN THE SAME FALL WITHIN THE PURVIEW OF CHAPTER XIVB OF THE I.T.ACT. THE NEXT QUESTION IS ABOUT ITS ASSESSABILITY IN T HE HANDS OF THE ASSESSEE. IN THIS CONTEXT IT IS WORTH TO COMMENT T HAT EVEN IN CASE OF MERCANTILE SYSTEM OF ACCOUNTING, TAX CAN ONLY BE IM POSED IF THERE IS REAL INCOME OR THE INCOME HAS BEEN RECEIVED BY THE ASSESSEE. IF THE INCOME HAS NOT BEEN CRYSTALLIZED OR THE VERY GENESI S OF THE INCOME IS UNDER CLOUD, THEN THE ACCRUAL WAS NOT FINAL AND THE REFORE ITS ASSESSABILITY WAS QUESTIONABLE. THE HONBLE MUMB AI HIGH COURT IN THE CASE OF FGP LTD.(SUPRA) HAS CONCLUDED IN THA T APPEAL THAT THERE WAS NO REAL ACCRUAL OF INCOME. IN THAT CASE ALSO, THERE WAS A DISPUTE BETWEEN THE PARTIES. A TAX CAN BE IMPOSED ON ARBITRATION PROCEEDINGS WHEN COME TO AN END. AN AWARD IS PASS ED AND INCOME IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 26 - IS RECEIVED. IN THE PRESENT CASE, AN AWARD WAS PAS SED ( DT.6.11.1999) BUT THAT AWARD WAS NOT DELIVERED TO THE ASSESSEE BE CAUSE BEFORE PASSING OF THE AWARD THE CONTRACTEES HAD GONE IN LI QUIDATION ( BIFR DT.7.12.98) . IT HAS ALSO BEEN INFORMED THAT THE AWARDS IN QUESTION WERE CHALLENGED AND SUBSEQUENTLY THE JUDGE OF THE C IVIL COURT HAS SET ASIDE THOSE AWARDS (23.1.2004). THE VERY BASIS OF ACCRUAL OF INCOME GOT UPSET BY THE ORDER OF RESPECTED ADDL. DI STRICT JUDGE. IN VIEW OF THIS, WE HEREBY HOLD THAT PENDENTE-LITE IT WAS LEGITIMATE IN CONCLUDING THAT THE AMOUNT IN QUESTION THOUGH AW ARDED BUT HAVE NOT ACCRUED AS A REAL INCOME IN THE HANDS OF THE AS SESSEE, THEREFORE NOT SUBJECT TO TAX IN ASSESSEES HAND. THIS GROUND OF THE REVENUE IS DISMISSED. 18. GROUND NO.2 READS AS UNDER: 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO DELETE THE ADDITION OF R S.15,00,000/- MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT IN F.D.RS. 18.1 DURING THE COURSE OF SEARCH ONE FDR OF RS.15 L ACS WAS FOUND WHICH WAS DRAWN IN FAVOUR OF SHRI ASHOK KHURANA ACC OUNT M/S.KETI CONSTRUCTION PVT.LTD. ON THAT BASIS IT HA S TAXED IN THE HANDS OF THE ASSESSEE. WHEN THE MATTER WAS PROCEE DED BEFORE THE LD.CIT(A) THE ADDITION WAS DELETED AS PER THE FOLLO WING OBSERVATION:- IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 27 - 17. SIXTH GROUND IS REGARDING ADDITION OF RS.15,0 0,000/- IN RESPECT OF INVESTMENTS IN FDRS HELD TO BE UNDISCLOS ED INCOME. IT IS SUBMITTED THAT DURING THE COURSE OF SEARCH PROCE EDINGS FDS AMOUNTING TO RS.15 LACS WERE FOUND TO BE DRAWN IN T HE FAVOUR OF SHRI ASHOK KHURANA A/C M/S.KETI CONSTRUCTION PVT.L TD. IT WAS EXPLAINED AT THE TIME OF SEARCH IN REPLY TO QUESTIO N 9 RECORDED ON 25.07.2002 AS UNDER: Q.9. DURING THE SEARCH PROCEEDINGS AT YOUR BUSINES S PREMISES, VARIOUS BANK FDRS HAVE BEEN FOUND. THESE ARE INVENTORISED AND NAMED ANNEXURE OL. PLEASE EXPLAIN THE ACCOUNTNESS AND SOURCE OF THESE INVESTMENTS? I AM SHOWING YOUR VARIOUS LEDGE ACCOUNTS AND ALL THE FDRS AND DRAFTS ARE REFLECTED IN LEDGER ACCOUNT EXCEPT THOSE, WHICH ARE SERIALLY NUMBERS. ANS: THESE FDRS ARE NOT RECORDED IN OUR BOOKS OF ACCOUNT, AS THE SAME HAS BEEN NOT PREPARED BY M/S.KETI CONSTRUCTION C. AND HAVE BEEN KEPT BY ME A S SECURITY OF PAYMENT FOR THE WORK DONE BY ME. HOWEVER, I AM PRESENTLY NOT IN A POSITION TO FURNIS H EVIDENCE IN RESPECT OF ITS ACCOUNTNESS IN THE BOOKS OF M/S.KETRI CONSTRUCTION ALSO. THEREFORE, ACCORDINGL Y I HAVE NO OBJECTION IF THE SAME ARE SEIZED. I WOULD SUBMIT THE NECESSARY EVIDENCES LATER ON. THE ABOVE STATEMENT REVEALS THAT THE APPELLANT HAS EXPLAINED THE FDS TO BE DRAWN BY KETI CONSTRUCTION AND IN THE COU RSE OF ASSESSMENT PROCEEDINGS, THE EVIDENCE IN RESPECT OF THE FACT WAS FURNISHED BEFORE THE ASSESSING OFFICER IN THE FORM OF CONFIRMATORY LETTERS ISSUED BY KETI CONSTRUCTION ALONGWITH A CER TIFICATE OF THE BANKERS I.E. STATE BANK OF INDORE CONFIRMING THE FA CT THAT THE DEPOSITS WERE PREPARED BY M/S.KETI CONSTRUCTION OUT OF THEIR ACCOUNT MAINTAINED WITH THEM AT AURANGABAD BRANCH. COPY OF THE SAME IS FILED BEFORE ME. I HAVE CAREFULLY PERUSED THE FACTS AND IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 28 - CIRCUMSTANCES OF THIS CASE. THE APPELLANT HAS PROV ED THE SOURCE OF ABOVE DEPOSITS FOR WHICH NECESSARY DOCUMENTARY EVID ENCE WAS FURNISHED BEFORE THE ASSESSING OFFICER. THE ASSESS ING OFFICER WAS NOT JUSTIFIED IN REJECTING THE ABOVE EVIDENCE ARBIT RARILY. WHEN THE APPELLANT HAS EXPLAINED THE FACTS AND CIRCUMSTNAC3E S BEHIND THE PREPARATION OF ABOVE FDS THE ASSESSING OFFICER CAN NOT DRAW ADVERSE INFERENCE. IN THE LIGHT OF THESE FACTS ABO VE ADDITION OF RS.15 LACS IS DELETED. 18.2. EVEN BEFORE US THE ASSESSEE HAS FURNISHED CONFIRMATION LETTERS THROUGH WHICH IT WAS CERTIFIED THAT THOSE F D AMOUNTS WERE PURCHASED FROM THEIR ACCOUNT AND THE SAID AMOUNT WA S DULY REFLECTED IN THEIR BOOKS OF ACCOUNT. THE AMOUNT IN QUESTION W AS DULY DISCLOSED BY THE SAID OTHER PARTY. CONSIDERING TH E TOTALITY OF THE FACTS OF THE CASE AND THE FINDINGS GIVEN BY THE LD. CIT(A), WE AFFIRM THE VIEW OF THE CIT(A). RESULTANTLY, THIS GROUND I S DISMISSED. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 27/ 5 /2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 27 / 05 /2011 T.C. NAIR, SR. PS IT(SS)A NO.229/AHD/2005 (BY ASSESSEE)& IT(SS)A NO.238/AHD/2005 (BY REVENUE) M/S.MSK PROJECTS (I) LTD. VS. ACIT BLOCK PERIOD ENDED ON 25/07/2002- - 29 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..16/5/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23/5/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S27/5/2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27/5/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER