MANSUKHBHAI N. PATEL, V. THE DCIT, CIR.-1,

ITSSA 24/RJT/2003

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8165 (ITAT-RAJKOT)
• Duration Of Justice: 8 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-05-2011
• Assessment Year: misc
• Appeal Filed On: 14-05-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M P SARDAC A
• Keywords: Unexplained investment; Unexplained expenditure; Loose papers; Document seized; Principle of natural justice; Block assessment; Onus to prove; Documents seized
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT. BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.(SS)A. NO. 24/RJ T/2003. (BLOCK PERIOD 1986-87 TO 24/25-12-1996). MANSUKHLAL N. PATEL, VS. THE D.C.I.T.,CIRCLE-1, 29, MAHAVIR SOCIETY, SATYA RAJKOT. NIRMALA ROAD, RAJKOT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M. P. SARDA,C.A. DEPARTMENT BY : SHRI J. M. SAHAY, D.R . I.T.(SS)A. NO. 51/RJT/2003. (BLOCK PERIOD 1986-87 TO 24/25-12-1996) M/S. AMBICA REALITIES PVT. LTD., VS. THE D.C. I.T.,CIRCLE-1, 10 TH FLOOR, DHANRAJNI COMPLEX, RAJKOT. D.R. YAGNIK ROAD, RAJKOT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.M. RINDANI, C.A. DEPARTMENT BY : SHRI J. M. SAHAY, D.R. O R D E R PER AL GEHLOT, AM: THESE APPEALS OF DIFFERENT ASSE SSEES ARISE OUT OF THE ORDERS U/S.158BC PASSED BY THE D.C.I.T., CIR CLER-1, RAJKOT BOTH DATED 31-03-2003 FOR THE BLOCK PERIOD 1986-87 TO 24/25-12- 1996. 2. THE GROUND OF APPEAL NO.24/RJT/2003 ARE RE-PRODU CED AS BELOW:- IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 2 (1) THE ASSESSMENT ORDER IN APPEAL IS BAD IN LAW. (2) THE ASSESSMENT NOT HAVING BEEN MADE IN ACCORDA NCE WITH THE DIRECTIONS OF THE HONOURABLE INCOME TAX APPELLATE TRIBUNAL IS RENDERED A NULLITY. (3) THE ASSESSMENT ORDER IS IN VIOLATION OF THE PR INCIPLES OF NATURAL JUSTICE AND IS BAD ON THIS COUNT TOO. (4) THE ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.9,15,000 ON ACCOUNT OF ALL EGED UNEXPLAINED CAPITAL INVESTMENT BY THE APPELLANT. (5) THE ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.2,25,000 ON ACCOUNT OF ALL EGED UNEXPLAINED CAPITAL. (6) THE ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.3,20,000 BEING THE ALLEGED PROFIT. (7) THE ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.5,57,000 ON ACCOUNT OF ALL EGED PROFIT. (8) THE ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.54,000 ON ACCOUNT OF ALLEG ED PROFIT. (9) THE ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.2,16,56,000/- IN THE HANDS OF THE APPELLANT ON ACCOUNT OF ALLEGED PROFIT ON THE BASIS OF SEIZED PAGE 10. (10) THE ASSESSING OFFICER HAS ERRED ON FACTS AND I N LAW IN MAKING AN ADDITION OF RS.10,85,125 ON ACCOUNT OF AL LEGED PROFIT ON THE BASIS OF SEIZED PAGE 8. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 3 (11) THE ASSESSING OFFICER HAS ERRED ON FACTS AND I N LAW IN INITIATING PENALTY PROCEEDINGS U/S.158FA(2). 3. THE GROUND OF APPEAL NO.51/RJT/2003 ARE RE-PRODU CED AS BELOW:- (1) THE LEARNED DY. COMMISSIONER OF INCOME TAX, CI RCLE-1, RAJKOT HAS GRIEVOUSLY ERRED IN PASSING THE ASSESSME NT ORDER FOR THE AFORESAID PERIOD ON 31.3.2003 WITHOU T TAKING INTO ACCOUNT MOST OF THE DIRECTIONS GIVEN BY THE HO NBLE INCOME-TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT IN ITS REMAND ORDER DATED 10.10.2001. (2) THAT THE REVENUE HAVING NOT AVAILED OF THE SECO ND OPPORTUNITY ACCORDED BY THE HONBLE TRIBUNAL WITH A VIEW TO VERIFY THE CORRECT STATE OF AFFAIRS, THE LEARNED D.C.I.T. HAS GRIEVOUSLY ERRED IN PASSING ILLOGICAL AND UNWAR RANTED ORDER IN TERMS OF THE ORDER CONTAINING UNSUSTAINABL E REASONS CULMINATING IN PARAGRAPH 13.6 OF HIS ORDER UNDER APPEAL. (3) IN ANY VIEW OF THE MATTER, THE ORDER AS REQUIRE D UNDER THE STATUTE HAVING BEEN NOT APPROVED BY THE LEARNED COMMISSIONER OF INCOME-TAX, RAJKOT (ON THE CONTRARY DISAPPROVED THE SAME IN TERMS IF DIRECTIONS CONTAIN ED IN HIS ORDER DATED 31.3.2003), HE COULD NOT HAVE PASSE D ANY ORDER AGAINST THE APPELLANT PROTECTIVELY AND MUCH L ESS SUBSTANTIVELY. (4) APART FROM THE VITAL DIRECTIONS OF THE APPELLAT E TRIBUNAL HAVING NOT BEEN COMPLIED, VARIOUS DEFAULTS AND DEFICIENCIES POINTED OUT BY THE LEARNED COMMISSIONE R OF INCOME-TAX IN HIS DIRECTIONS IN CONCLUDING PART OF HIS ADVERSE DIRECTIONS OUGHT TO HAVE TAKEN INTO ACCOUNT AND THE ENTIRE PROCEEDINGS AGAINST THE APPELLANT OUGHT TO HAVE BEEN DROPPED FORTHWITH. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 4 (5) THAT EVEN ON MERITS, WITHOUT PREJUDICE TO THE L EGAL CONTENTIONS RAISED HERETOFORE, THE ASSESSMENT ORDER IS PASSED IN HOT-HASTE WITHOUT ACCORDING REASONABLE AN D SUFFICIENT OPPORTUNITY TO THE APPELLANT TO MEET WIT H THE CASE OF SHRI M. N. PATEL WHO IS NOT PERMITTED TO BE CROSS EXAMINED THOUGH DISTINCTLY DIRECTED BY THE APPELLAT E TRIBUNAL. (6) THE LEARNED ASSESSING OFFICER HAS GRIEVOUSLY ER RED IN TAKING ON HAND THE SET ASIDE ASSESSMENT ORDER AFTER ABOUT 13 MONTHS BY ISSUANCE OF THE FIRST SHOW CAUSE NOTICE DATED 13.12.2002 EVEN THOUGH THE REMAND ORDE R WAS PASSED BY THE TRIBUNAL ON 10.10.2001 WITH INTER -ALIA SPECIFIC DIRECTIONS TO COMPLETE THE MATTER EXPEDITI OUSLY. (7) THE LEARNED ASSESSING OFFICER HAVING NOT FOLLOW ED THE MANDATORY PROVISIONS OF A FAIR TRIAL SUCH AS ISSUAN CE OF SUMMONS, RECORDING OF STATEMENT OF VARIOUS CONNECTE D PERSONS (APART FROM DISTINCT DIRECTION OF THE TRIBU NAL), THE ENTIRE ASSESSMENT ORDER PASSED IN TERMS OF THE LAST EFFECTIVE PARAGRAPH DESERVES TO BE ANNULLED IN TOTO . (8) THAT THE APPELLANT BEGS TO RELY UPON HIS DETAIL ED SUBMISSIONS DATED 29.1.2003 MADE TO THE LEARNED ASSESSING OFFICER BOTH ON LAW AS WELL AS ON FACTS. THE LEARNED ASSESSING OFFICER HAS ERRONEOUSLY REFERRED TO VARIOUS ORDER SHEET ENTRIES, ADJOURNMENTS GRANTED B OTH THE SIDES FOR GOOD REASONS IN SUPPORT OF UNSUSTAINA BLE ORDER DETERMINED TO BE PASSED. THUS, THE ASSESSMENT ORDER IS PREDETERMINED AND PREJUDICIAL AND THEREFOR E DESERVES TO BE ANNULLED. (9) THAT EVEN THOUGH THE ASSESSMENT ORDER WAS NOT G ETTING BARRED BY LIMITATION ON 31.3.2003 IN VIEW OF SECTIO N 153(3) OF THE ACT, THE LEARNED ASSESSING OFFICER HAS ERRED IN PASSING THE ASSESSMENT ORDER UNDER REFERENCE HASTIL Y WHICH WAS RIGHTLY DISAPPROVED AND HENCE NO CONSEQUENTIAL PREJUDICIAL ORDER SUBSTANTIVE OR PROT ECTIVE COULD HAVE BEEN PASSED AGAINST THE APPELLANT. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 5 (10) APART FROM THE VOLUMINOUS EVIDENCE RELIED ON B Y THE APPELLANT REFERRED IN ITS SUBMISSION DATED 29.1.200 3, THE LEARNED ASSESSING OFFICER HAS GRIEVOUSLY ERRED IN N OT TAKING INTO ACCOUNT THE SUBMISSIONS MADE BY THE APPELLANT IN ITS LETTER DATED 28.3.2003 ACCOMPANIED WITH MEDICAL CERTIFICATE OF SHRI DHANRAJ JETHANI, AFFIDA VIT IN COMPLIANCE WITH REQUIREMENT, ETC. (11) LASTLY, IN VIEW OF THE OBJECTIONS DATED 31.3.2 003 RAISED BY THE APPELLANT TO THE COMMISSIONER OF INCOME-TAX I , RAJKOT DULY ENDORSED TO HIM, HE OUGHT TO HAVE TAKEN IN HIS HANDS OF THE ASSESSMENT AND OUGHT TO HAVE COMPL IED WITH THE DIRECTIONS OF THE HONBLE TRIBUNAL AND COM PLETE THE ASSESSMENT ORDER JUDICIOUSLY IN DUE COURSE OF T IME AMPLY AVAILABLE TO HIM. (12) THE APPELLANT SHALL ELABORATE THE VERACITY OF STATEMENT RECORDED OF SHRI M.N. PATEL AS DISTINCTLY POINTED O UT IN HIS OBJECTION VIDE LETTER DATED 31.3.2003 TO THE COMMIS SIONER OF INCOME-TAX I, RAJKOT. (13) THAT THE ENTIRE ASSESSMENT ORDER IS OTHERWISE UNWARRANTED OF FACTS, BAD IN LAW AND THE REVENUE HA VING NOT AVAILED VARIOUS OPPORTUNITIES IN DISCHARGING IT S BURDEN OF PROOF, ETC. THE ASSESSMENT ORDER BE DECLARED NUL L AND VOID SO FAR APPELLANT ASSESSEE IS CONCERNED AND THE APPEAL OF THE APPELLANT BE ALLOWED IN FULL. (14) THE ASSESSMENT ORDER IS PASSED IN A CURSORY MA NNER ON SEVERAL POINTS SUCH AS APPRECIATION OF EVIDENCE INC LUDING OF ISSUANCE OF NOTICE UNDER INAPPLICABLE PROVISIONS OF SECTION 158 BFA (2) OF THE INCOME-TAX ACT, 1961 AND NOTICE OF DEMAND UNDER SECTION 156 OF THE ACT ASKIN G FOR THE PAYMENT OF DEMAND ARISING OUT OF PROTECTIVE ASSESSMENT. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 6 4. SINCE GROUNDS RAISED IN BOTH APPEALS BASED ON I DENTICAL SET OF FACTS THEREFORE FOR THE SAKE OF CONVENIENCE FACTS N OTE BY IN THE CASE OF IT(SS) 24/RJT/ 2003 SHRI M. N. PATEL, HAVE BEEN CONSIDERED TO DECIDE THESE MATTERS. A SEARCH ACTION U/.132 WAS CA RRIED OUT ON RAJANI BUILDERS GROUP INCLUDING BOTH ASSESSEES ON 2 4/25-12- 1996.THE BLOCK ASSESSMENT U/S.158BC WAS FRAMED ON 2 9.12.97 IN THE CASE OF SHRI M.N.PATEL .THE TOTAL INCOME WAS AS SESSED AT RS.50,93,550/-. SHRI M. N. PATEL IS STATED TO BE A SSOCIATED WITH AMBICA REALITIES PVT. LTD. DURING THE COURSE OF THE SEARCH CERTAIN PAPERS WERE SEIZED FROM HIS PREMISES. BLOCK ASSESS MENT ORDER IN THE CASE OF M/S. AMBICA REALITIES PVT. LTD. WAS FRA MED ON 29.01.98 AND THE UNDISCLOSED INCOME DETERMINED AT RS.3,06,90 ,138/-. ADDITIONS IN THE CASE OF M/S. AMBICA REALITIES PVT. LTD. WAS MADE ON THE BASIS OF PAGE NO.8 PAGE NO.10 SEIZED FROM THE R ESIDENCE OF THE ASSESSEE, SHRI M. N. PATEL. HOWEVER, AMBICA REALIT IES PVT. LTD. BEING AGGRIEVED WENT IN APPEAL BEFORE THE INCOME TA X APPELLATE TRIBUNAL AGAINST THE ASSESSMENT ORDER OF THE ASSESS ING OFFICER. THE TRIBUNAL VIDE ORDER DATED 20-06-2000 GAVE CERTAIN A DVERSE FINDINGS AGAINST SHRI M. N. PATEL WHICH IS REPRODUCED AS FOL LOWS:- IT IS MENTIONED BY THE A.O. THAT SUCH NAMES ARE AL SO WRITTEN IN THE PAGES 8 AND 10 SEIZED FROM THE RESIDENT OF SHRI M. N. PAT EL. THE ABOVE NAMES ARE APPEARING IN BOOKS OF THE ASSESSEE BECAUSE THEY MUS T BE HAVING SOME DEALINGS WITH THE COMPANY. THERESE NAMES APPEARING ON THE S EIZED PAPERS DO NOT ESTABLISH ANY NEXUS WITH THE ASSESSEE AND THE SEIZE D PAPERS. SHRI M. N. PATEL IS HAVING HIS INDEPENDENT CONSTRUCTION BUSINESS AND TH E POSSIBILITY OF THESE PERSONS HAVING BUSINESS RELATIONS WITH SHRI M. N. P ATEL ALSO CANNOT BE RULED OUT. THEREFORE, THIS CANNOT BE USED AS AN EVIDENCE AGAIN ST THE ASSESSEE COMPANY. THE A.O. HAS NOT EXAMINED THE PERSONS MENTIONED ABO VE. HE HAS ALSO NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE COMPANY TO RE BUT HIS FINDINGS. WE FAIL TO UNDERSTAND WHY IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 7 THE A.O. HAS NOT EXAMINED THESE PERSONS TO FIND OU T THEIR TRANSACTIONS WITH SHRI M. N. PATEL AND THE ASSESSEE COMPANY. THE A.O. HAS ALSO HELD THAT THE ASSESSEE WAS HAVING BANK ACCOUNT WITH ORIENTAL BANK OF COMMERCE AND THE NAME OF THE BANK IS ALSO APPEARING ON NO.8 AND 10 O F THE SEIZED PAPER IN A SMUCH AS THERE IS AN AMOUNT OF RS.8000/- WRITTEN AG AINST O.B.C. ON THAT PAPER. THIS ALSO CANNOT BE CONSIDERED AS AN EVIDENCE AGAIN ST THE ASSESSEE COMPANY. THE ASSESSEE COMPANY IS HAVING BANK ACCOUNT WITH O RIENTAL BANK OF COMMERCE BUT THE NAME OF O.B.C. ON THE SEIZED PAPER DOES NOT AUTOMATICALLY ESTABLISH THAT THE ACCOUNT PERTAINS TO THE ASSESSEE COMPANY. SHRI M.N.PATEL MIGHT BE HAVING AN ACCOUNT IN THE ORIENTAL BANK OF COMMERCE IN HIS OWN NAME OR IN THE NAME OF SOME OTHER PERSONS HAVING OFFICIAL DEALINGS WITH HI M. THE A.O. HAS MENTIONED IN HIS ORDER THAT AN AMOUNT OF RS.8000/- WAS ALSO MENT IONED AGAINST O.B.C. THE A.O. HAS NOT MADE ANY FURTHER EFFORTS TO FIND OUT W HEN THIS AMOUNT OF RS.8000/- WAS WITHDRAWN FROM THE BANK AND WHAT WAS THE ACCOUN T NUMBER. IF THE A.O. WAS REALLY SINCERE IN HIS EFFORTS, HE SHOULD HAVE CAUSE D INQUIRIES WITH THE ORIENTAL BANK OF COMMERCE TO FIND OUT THE FACTS REGARDING TH E AMOUNT OF RS.8000/- WITHDRAWN OR DEPOSITED WITH THE BANK. THIS WOULD H AVE BEEN CLINCHING EVIDENCE TO PROVE THE NEXUS OF THE SEIZED PAPERS WITH THE AS SESSEE COMPANY OR WITH SHRI M.N. PATEL. THIS HAS NOT BEEN DONE BY THE A.O., TH EREFORE, IT CANNOT BE USED AS AN EVIDENCE AGAINST THE ASSESSEE COMPANY. WE HAVE ALSO GONE THROUGH THE SEIZED PAPERS NOS. 8 & 10. NONE OF THE FIGURES ON PAGE 8 ARE HAVING ANY LINK WITH THE ACCO UNTS OF THE COMPANY. THE RELATION OF THE VARIOUS NAMES MENTIONED IN THIS PAP ER HAS ALSO NOT BEEN ESTABLISHED WITH THE ASSESSEE COMPANY. PAPER 10 BE LONGS TO SHRI M.N. PATEL. THE PROFIT OF RS.3,20,000/- WAS NEVER EARNED BY THE ASSESSEE COMPANY. THE CAPITAL OF RS.9,15,000/- WAS NEVER INTRODUCED IN TH E BUSINESS OF THE ASSESSEE COMPANY. THE PERCENTAGE OF SHARE HOLDING OF SHRI M. N. PATEL IN THE COMPANY WAS ONLY 3.7%, THEREFORE, HE CANNOT HAVE PROFIT OF 6.25% I.E. RS.13,53,500/- MENTIONED IN THE SEIZED PAPER. THE DEPARTMENT HAS ALSO NOT MADE ANY EFFORTS TO REFER THESE PAPERS TO THE HANDWRITING EXPERT TO FIN D OUT IN WHOSE HAND WRITING THESE PAPERS HAVE ACTUALLY BEEN WRITTEN. IN VIEW O F THE DISCUSSION ABOVE, WE ARE OF THE CONSIDERED VIEW THAT BOTH THE SEIZED PAPERS BELONG TO SHRI M.N. PATEL AND THE ENTIRE PROFIT OF RS.10,85,125/- AND RS.2,16,56, 000/- MENTIONED ON SEIZED PAPERS 8 & 10 RESPECTIVELY HAS TO BE ASSESSED IN TH E HANDS OF SHRI M.N. PATEL FROM WHOSE CUSTODY THE PAPERS HAVE BEEN SEIZED. 5. THE ASSESSEE, SHRI M. N.PATEL BEING AGGRIEVED BY THE ABOVE FINDINGS OF THE TRIBUNAL IN THE CASE OF M/S. AMBICA REALITIES PVT. LTD. FILED A PETITION BEFORE THE HONBLE GUJARAT HIGH CO URT. HIS MAIN CONTENTION BEING THAT ADVERSE FINDINGS HAD BEEN GIV EN BY THE TRIBUNAL AGAINST HIM WITHOUT GIVING HIM AN ADEQUATE OPPORTUNITY OF IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 8 BEING HEARD. THE HONBLE GUJARAT HIGH COURT ACCEPTE D THE CONTENTIONS MADE BY SHRI M. N. PATEL BY ITS ORDER D ATED 17.4.2001. THE HONBLE HIGH COURT QUASHED PARAS 21 TO 28 OF TH E ORDER OF THE TRIBUNAL DATED 20.6.2000 AND DIRECTED THE TRIBUNAL TO DECIDE THE MATTER AFRESH. IT FURTHER DIRECTED THAT BOTH THE A PPEALS I.E. THAT OF THE ASSESSEE SHRI M. N. PATEL AND THAT OF AMBICA REALIT IES PVT. LTD. BE HEARD TOGETHER. PURSUANT TO THE DIRECTIONS OF THE HONBLE HIGH COURT, THE INCOME TAX APPELLATE TRIBUNAL HEARD THE APPEAL OF THE ASSESSEE SHRI M. N. PATEL AND THE COMPANY AMBICA REALITIES P VT. LTD. TOGETHER. THE ORDERS WERE PASSED ON 10.10.2001 IN APPEAL NO.I T(SS)A NO. 11/RJT/98 AND IN APPEAL NO. IT(SS)A NO.7/RJT/98 PER TAINING TO THE CASES OF AMBICA REALITIES PVT. LTD AND SHRI MANSUKH LAL N. PATEL RESPECTIVELY. IN THE SAID ORDER THE TRIBUNAL RESTO RED BACK THE ISSUE TO THE ASSESSING OFFICER TO DECIDE THE MATTER AFRESH. THE OBSERVATION OF THE TRIBUNAL IN PARA 27 IS MATERIAL AS IT GIVES DIR ECTIONS TO THE A.O. AND IS REPRODUCED AS FOLLOWS: WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD. AS MENTIONED EARLIER, IN COMPLIANCES WITH THE DIRECTIO NS OF THE HONBLE HIGH COURT, THIS APPEAL HAS BEEN HEARD ALONGWITH THE ISSUE RELA TING TO THE ADDITIONS BASED ON SEIZED PAPERS BEARING NOS. 8 & 10 IN THE CASE OF AM BICA REALITIES PVT. LTD. (IT (SS) A. NO.11/RJT/98). FOR REASONS MENTIONED IN TH E ORDER OF AMBICA REALITIES PVT. LTD.(SUPRA) OF EVEN DATE, WE HAVE SET ASIDE TH IS ISSUE TO THE FILE OF THE A.O. FOR RECONSIDERATION. THE SAME APPLIED IN THIS CASE ALSO. IN FACT, OUR OBSERVATIONS IN PARAS 20 TO 27 IN THAT ORDER BE CONSIDERED AS PA RT OF THIS ORDER AS WELL. THEREFORE, THE ISSUES RELATING TO THE ADDITIONS OF RS.6,92,820/- AND RS.34,25,000/- ARE REMANDED BACK TO THE FILE OF THE A.O. TO DECIDE IT AFRESH IN ACCORDANCE WITH LAW. WHILE DOING SO, THE A.O. SHAL L KEEP IN MIND THE FOLLOWING CONDITIONS: (1) THE AO. SHALL TAKE UP THE MATTERS FOR BOTH THE ASSESSEES TOGETHER; (2) BOTH THE ASSESSEES SHALL BE GIVEN DUE OPPORTUNI TY OF BEING HEARD; (3) BOTH THE ASSESSEES SHALL BE FREE TO ADDUCE FURTHER EVIDENCE, (4) THE A.O. SHALL ENQUIRE ABOUT THE BANK TRANSACTI ONS, PARTICULARLY THOSE MENTIONED ON PAGE 8 BOTH UNDER THE DESCRIPTION BAN K AS WELL AS O.B.C. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 9 (5) THE A.O. SHALL EXAMINE ALL THE PERSONS NAMED IN BOTH THE PAPERS; (6) THE A.O. SHALL PERMIT THE COMPANY TO CROSS EXAM INE SHRI MANSUKHLAL; (7) THE A.O. SHALL PERMIT SHRI MANSUKHLAL TO CROSS EXAMINE THE COMPANY, IN WHICH CASE A.O. SHALL TAKE CARE TO SEE THAT THE COM PANY IS REPRESENTED BY A DULY AUTHORIZED PERSON WHO IS IN THE KNOW OF THE AFFAIRS OF COMPANY AND WHOSE AVERMENTS SHALL BIND THE COMPANY; (8) THE A.O. SHALL EXERCISE HIS DISCRETION JUDICIOU SLY IF EITHER THE COMPANY OR SHRI MANSUKHLAL REQUESTS CROSS EXAMINATION OF ANY O THER PERSON; (9) THE COMPANY, SHRI MANSUKHLAL AND ALL OTHER PERS ONS WHO ARE SUMMONED BY THE A.O. SHALL EXTEND UTMOST COOPERATION TO THE A.O. FAILING WHICH THE A.O. SHALL BE FREE TO TAKE ANY ACTION IN ACCORDANCE WITH LAW; (10) THE A.O. SHALL COPELTE THE MATTER EXPEDITIOUSL Y. 27. IN THE CASE OF SHRI MANSUKHLAL ALSO THIS ISSUE IS BEING REMANDED BACK TO THE A.O. WITH IDENTICAL DIRECTIONS. 6. ACCORDINGLY, SET ASIDE PROCEEDINGS IN THE CASE O F THE ASSESSEE WAS INITIATED. SIMULTANEOUS HEARINGS IN THE CASE O F THE ASSESSEE AND IN THE CASE OF AMBICA REALITIES PVT. LTD. WAS CONDU CTED. A SHOWCASE WAS ISSUED BY THE AO TO THE ASSESSEE VIDE LETTER NO. DCIT. CIR.1/142(1)/02-03 DATED 31.12.2002. THE CON TENTS OF THE SAID LETTER IS REPRODUCED BELOW: 2. PLEASE REFER TO THE APPELLATE ORDER OF THE HONB LE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT IN YOUR CASE HAVING NO.IT(SS) A NO.7/RJT/98 DATED 10.10.01. THE HONBLE ITAT HAS SET ASIDE THE BLOCK ASSESSMENT TO BE DECIDED AFRESH AT THE LEVEL OF ASSESSING OFFICER. IN THIS CONTEXT, YOU ARE HEREBY INFORMED THAT HEARING IN YOUR CASE HAS BEEN FIXED O N 27.12.2002 AT 11.30 AM . 3. THE ISSUES UNDER CONSIDERATIONS ARE: (A) THE ADDITIONS OF RS.6,92,820/- MADE IN THE BLOC K ASSESSMENT ON THE BASIS OF NOTINGS ON PAGE 8 OF ANNEXURE-A SEIZED DURING TH E COURSE OF SEARCH. (B) THE ADDITION OF RS.34,25,000/- MADE IN THE BLOC K ASSESSMENT ON THE BASIS OF THE NOTINGS ON PAGE NO.10 SEIZED DURING THE COUR SE OF THE SEARCH. 4. IN THIS REGARD YOU ARE REQUESTED TO FILE YOUR DE TAILED SUBMISSIONS IN DUPLICATE ALONGWITH ALL DOCUMENTARY EVIDENCE YOU WO ULD LIKE TO PLACE RELIANCE WITH REGARD TO YOUR CONTENTION. IN THIS R EGARD YOU ARE ALSO REQUESTED TO EXPLAIN AS TO WHY THE ABOVE ADDITIONS SHOULD NOT BE MADE IN YOUR CASE. IN CASE YOU WANT TO PRESENT WITNESSES TO SUBSTANTIATE YOUR CONTENTION THEN THE LIST OF SUCH WITNESSES TO BE PR ESENTED FROM YOUR SIDE SHOULD ALSO BE SUBMITTED. LIST OF BANK ACCOUNTS AN D ACCOUNT HOLDERS TO BE EXAMINED WITH REGARDING TO YOUR CONTENTION SHOUL D ALSO BE PROVIDED. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 10 SD/- DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, RAJKOT. COPY TO : 1) AMBICA REALITIES PVT.LTD., RAJKOT WITH A REQUEST TO BE PRESENT FOR HEARING AS DIRECTED BY THE HONBLE ITAT, RAJKOT. FURTHER HE S HOULD FILE SIMILAR SUBMISSIONS AND LIST OF WITNESSES TO EXPLAIN AS TO WHY THE ABOV E PROPOSED ADDITIONS SHOULD NOT BE MADE IN THE COMPANYS CASE. SD/- D.C.I.T. CIR.1, RAJKOT. 7. A COPY OF THE SAID NOTICE WAS ALSO ENDORSED TO A MBICA REALITIES PVT. LTD., SO THAT THEY COULD SUBSTANTIATE THEIR CO NTENTIONS. THE AO NOTED THAT SHRI M. N. PATEL THE ASSESSEE AND SHRI D HANRAJ JETHANI, THE DIRECTOR OF AMBICA REALITIES PVT. LTD. DID NOT APPEAR BEFORE HIM ON 21.3.03 FOR RECORDING OF THEIR STATEMENTS. SHRI PA NDYA APPEARED ON BEHALF OF SHRI M. N. PATEL. HOWEVER, NOBODY APPEAR ED ON BEHALF OF THE ASSESSEE COMPANY AND SO THE CASE COULD NOT BE T AKEN UP ON 21.03.03. IN SPITE OF SEVERAL OPPORTUNITIES SHRI M. N. PATEL HAS NOT APPEARED FOR RECORDING OF HIS STATEMENT. THEREFORE , A FINAL OPPORTUNITY WAS GIVEN TO THE ASSESSEE VIDE THIS OFF ICE LETTER DATED 27.03.2003. IN RESPONSE TO THE SAID NOTICE SHRI MAN SUKH N.PATEL APPEARED BEFORE THE AO ALONG WITH HIS CHARTERED ACC OUNTANT SHRI N. C. PANDYA AND HIS STATEMENT ON OATH WAS RECORDED. T HE AO NOTED IN HIS ORDER THAT TWO ISSUES WERE BEFORE HIM FOR CONSI DERATION WHICH ARE AS FOLLOWS: (A) THE ADDITION OF RS.6,92,820/- MADE IN THE BLOCK ASSESSMENT ORDER DATED 29-12-97 ON THE BASIS OF NOTINGS ON PAG E 8 SEIZED DURING THE COURSE OF SEARCH WHICH HAS BEEN RESTORED BACK T O THE A.O. BY THE HONBLE ITAT VIDE THEIR ORDER DATED 10.10.2001. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 11 (B) THE ADDITION OF RS.34,25,000/- MADE IN THE BLOC K ASSESSMENT ORDER DATED 29-12-97 ON THE BASIS OF NOTINGS ON PAG E 10 SEIZED DURING THE COURSE OF SEARCH WHICH HAS BEEN RESTORED BACK TO THE A.O. BY THE HONBLE ITAT VIDE THEIR ORDER DATED 10.10.20 01. 8. THE A.O. BEFORE DISCUSSING THE EVIDENTIARY VALUE OF THE SEIZED DOCUMENTS PAGE NO.8 & PAGE NO.10 HE REPRODUCE THE F ORM IN ENGLISH OF THE NOTINGS MADE ON THE SAID DOCUMENTS I N GUJARATI AS UNDER: -- - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - -- - - -- - - - PAGE NO.8. B.P. 2,95,375 P.P. 1,25,000 R.S. 39,000 BANK 9,61,000 AMARKUMAR B.P.10/- 90,000 1.5 MONTH 1.25% 18,750 O.B.C. 8,000 -------------- 15,37,125 LESS : D.P. 4,52,000 --------------- 10,85,125 ---------------- M.P. 6,25,000 CAPITAL 67,820 6,92,820 PAGE 10 M. P. 2.25,000 CAPITAL. 3,20,000 PROFIT. 9,15,000 NEW CAPITAL IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 12 13,53,500 PROFIT(6.25%) ------------ 28,14,000 LESS: 10,93,750 ------------- 17,20,250 73/75 5,57,500 ------------- 22,77,750 D.P. 54,000 ------------- 23,31,750 ------------- TO BE C.F. 23,31,750 LESS: AMARKUMAR 90,000 BHUDARBHAI 1,10,000 FLAT 12,85,000 OFFICE 4,95,000 CASH 3,00,000 N.C. 50,000 -------------- 23,30,000 (+) 1,750 --------------- (IN PAGE NO 10 THE AO HAS TAKEN AMOUNT NEW CAPITAL RS 9,15,000/- WHEREAS AS PER OTHER RECORD IT SHOULD BE RS 9,16,00 0/-) 9. THE A.O. NOTED THAT SHRI MANSUKH N. PATEL, THE A SSESSEE DURING THE RELEVANT PERIOD WAS HAVING 6.25% SHARE H OLDING IN AMBICA REALITIES PVT. LTD. ON 24.12.96 A SEARCH WAS CONDU CTED ON THE GROUP CASES OF THE SAID COMPANY. THEREFORE, THE PRE MISES OF SHRI M. N. PATEL WAS ALSO SEARCHED AND PAGE NO.8 & 10 WAS S EIZED FROM HIS PREMISES. IN HIS STATEMENT ON OATH SHRI M. N. PATE L HAS EXPLAINED THE CONTENTS OF THE SAID DOCUMENTS IN DETAIL. THE STATEMENT GIVEN IN IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 13 GUJARATI BY THE ASSESSEE EXPLAINING THE CONTENTS OF PAGE NO.8 & 10 RE REPRODUCED IN ENGLISH BY THE AO IN HIS ORDER AS UNDER: PAGE NO.8 B.P. STANDS FOR BATUKBHAI PATEL WHO HAS PAID INTE REST OF RS.2,95,315/- TO AMBICA REALIEIS PVT. LTD. ON THE SUM RECEIVED AS A LOAN BY HIM FROM THE SAID COMPANY. P.P. STANDS FOR PRAFULBHAI PATEL WHO HAS PAID INT EREST OF RS.1,25,000/- TO AMBICA REALIEIS PVT. LTD. ON THE SUM RECEIVED AS A LOAN BY HIM FROM THE SAID COMPANY. R.S. - STANDS FOR RAJU SHUKLA WHO HAS GIVEN RS. 39,000/- TO AMBICA REALITIES PVT. LTD. ON ACCOUNT OF SETTLEMENT OF DUES. HOWEVER, THE EXAC T NATURE OF TRANSACTION IS NOT KNOWN. BANK - INTEREST INCOME OF RS. 9,61,000/- HAS BEEN RECEIVED FROM R.C.C. BANK. THIS INTEREST INCOME HAS BEEN WITH REFERENCE TO THE DEPO SITS MADE IN THE BANK. THIS INTEREST HAS BEEN EARNED WITH REFERENCE TO DEPOSITS MADE IN THE R.C.C. BANK. THIS MONEY BELONGS TO AMBICA REALITIES PVT. LTD. WHICH DHANRAJBHAI HAS GIVEN TO ME. AMARKUMAR - AMARKUMAR HAD BOOKED A FLAT IN INDRAPR ASTH APARTMENT AND ACCORDINGLY HE GAVE ME CASH OF RS.90,000/- AS BOOKING AMOUNT WH ICH I ACCEPTED IN THE CAPACITY OF THE DIRECTOR OF AMBICA REALITIES PVT. LTD. B.P. - STANDS FOR BATUKBHAI PATEL WHO HAD PAID INTE REST OF RS.18,750/- TO AMBICA REALITIES PVT. LTD. ON THE SUM RECEIVED AS A LOAN B Y HIM FROM THE SAID COMPANY. O.B.C. THE SUM OF RS.8000/- REPRESENTS BANK INTER EST. THIS MONEY IS THE INCOME OF AMBICA REALITIES PVT. LTD. THE TOTAL OF THE ABOVE RECEIPTS OF AMBICA REALITIES PVT. LTD. COMES TO RS.15,37,125/-. LESS: D.P. STANDS FOR DILIP PATEL. THE SUM OF RS. 4,52,000/- HAS BEEN PAID TO SHRI DILIP PATEL BY AMBICA REALITIES PVT. LTD. THE NET PROFIT IS RS.10,85,125/- M.P. - STANDS FOR MANSUKBHAI PATEL RS.6,25,000/- CAPITAL RS. 67,820/- SHARE OF PROFIT (6.25% OF RS.1085125 ) DURING THE PERIOD OF SEARCH I WAS A DIRECTOR IN AMB ICA REALITIES PVT. LTD. PAGE NO.10 M.P. - STANDS FOR MANSUKBHAI PATEL RS.2,25,000/- CAPITAL RS.3,20,000/- PROFIT IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 14 RS.9,15,000/- NEW CAPITAL. RS.13,53,500/- SHARE OF PROFIT (6.25%) RS.28,14,000/- TOTAL THE SUM REPRESENTS THE AMOUNT RECEIVED FROM THE SET TLEMENT OF ACCOUNTS OF AMBICA REALITIES PVT.LTD. RS.28,14,000 RS.10,93,750 (LESS ON ACCOUNT OF NEW FUND CREATED. RS.17,20,250/- SUB TOTAL 73/75 - THIS IS THE SURVEY NO. OF PLOT OF LAND IN FRONT OF GONDHIA HOSPITAL. A PROFIT OF RS.5,57,000/- WAS EARNED IN THE SAID LAND TRANSACTI ON. THE TRANSACTION PERTAINING TO THE ABOVE MENTIONED LAND WAS UNDERTAKEN BY SHRI DHANRAJ BHAI JETHANI IN THE CAPACITY OF THE DIRECTOR OF AMBICA REALITIES PVT. LTD. RS.22,77,750/- SUB TOTAL D.P. - STANDS FOR DILIPHBHAI PATE. IN ONE TRANSAC TION DHANRAJBHAI & MYSELF WERE PARTNERS AND MY SHARE OF PROFIT IN THAT TRANSACTION WAS RS.54,000/-WHICH HAS BEEN CREDITED TO MY ACCOUNT. RS.23,31,750/- SUB TOTAL LESS: AMARKUMAR - THE AMOUNT OF RS.90,000/- WAS GIVEN TO ME BY SHRI AMARKUMAR WITH RESPECT TO BOOKING OF FLAT IN INDRAPRASTH APARTMEN T. ACCORDINGLY, THE SAID AMOUNT HAS BEEN ADJUSTED FROM MY ACCOUNT. BHUDARBHAI HE IS MY COUSIN BROTHER. HE HAD EARLI ER TAKEN RS.1,10,000/- FROM DHANRAJBHAI. THE SAID AMOUNT HAS BEEN DEDUCTED FRO M MY ACCOUNT. FLAT THIS PERTAINS TO THE FLAT IN RAGHUKUL APARTM ENT WHICH IS ON 10 TH FLOOR OF THE 1 ST BLOCK AND IT IS UNDER MY POSSESSION. MY COUSIN BRO THER BHUDARBHAI STAYS IN THAT FLAT. ON ACCOUNT OF POSSESSION OF THIS FLAT A SUM OF RS.12,8 5,000/- HAS BEEN DEDUCTED FROM MY ACCOUNT. THE REGISTRATION OF THE FLAT HAS NOT BEEN DONE AS ON DATE. OFFICE - THIS PERTAINS TO THE OFFICE IN DHANJRAJNI BUILDING ON THE 3 RD FLOOR. THIS OFFICE IS IN MY POSSESSION. ON ACCOUNT OF POSSESSION OF THIS OFFICE A SUM OF RS.4,95,000/- HAS BEEN DEDUCTED FROM MY ACCOUNT. THE REGISTRATION OF THE FLAT HAS NOT BEEN DONE AS ON DATE. CASH - THIS CASH AMOUNT OF RS.300,000/- HAS BEEN G IVEN BY SHRI DHANRAJBHAI TO ME. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 15 N.C. STANDS FOR N.C.PANDYA, SHRI N.C.PANDYA HAD BOO KED AN OFFICE IN DHANRAJNI BUILDING. THE BOOKING AMOUNT OF RS.50,000/- WAS GI VEN TO ME BY HIM. HENCE, THE SAID AMOUNT HAS BEEN DEDUCTED FROM MY ACCOUNT. RS.23,30,000/- TOTAL RS.1,750/- REPRESENTS THE BALANCE AMOUNT WHICH I HA VE RECEIVED IN CASH FROM SHRI DHANRAJBHAI JETHANI. 10. THE A.O. HAS ALSO TAKEN STATEMENT OF SHRI N.C. PANDYA. THE FACTS HIGHLIGHTED BY SHRI N.C. PANDYA IN HIS STATEM ENT WERE DISCUSSED BY THE AO AS BELOW: (I) DURING THE PERIOD OF SEARCH, I WAS SILENT DIRE CTOR IN AMBICA REALITIES PVT. LTD. AND SHRI DHANRAJBHAI JETHANI WAS MANAGING THE AFFAIRS OF THE COMPANY. (II) AMBICA REALITIES HAD MADE THE PROFIT OF RS.1 3,53,500/- (AS DISCUSSED ON PAGE 10) FROM THREE TO FOUR PROJECTS VIZ. YOGINAGAR , INDRAPRASTH AND AMBICA PROJECT. MY SHARE OF PROFIT IS 6.25% (III) SURVEY NO.73/75(AS DISCUSSED ON PAGE 10) HAS BEEN SOLD TO AROUND 50 TO 60 PARTIES PLOTTING THE SAME. THE DETAILS ARE AVAI LABLE IN THE BOOKS OF AMBICA REALITIES PVT. LTD. (IV) THE NEW FUND (AS DISCUSSED ON PAGE 10) WAS CRE ATED FOR THE PURPOSE OF A NEW PROJECT. (V) SHRI RAJUBHAI SHUKLA IS A SHARE HOLDER IN OUR C OMPANY AND ALSO THE INCOME TAX PRACTITIONER. PAGE NO.8 & 10 HAS BEEN W RITTEN BY HIM. (VI) AMARKUMAR JADEJA HAS A SHOP NEXT TO MY SHOP TH AT IS WHY I KNOW HIM. HE HAS BOOKED A FLAT IN THE NAME OF HIS SON IN INDR APRASTH APARTMENT AND ACCORDINGLY HE HAD GIVEN ME RS.90,000/- WHICH HAS B EEN DEDUCTED FROM Y ACCOUNT AS SHOWN ON PAGE 10. (VII) AMBICA REALITIES PVT. LTD. GAVE AMOUNTS BY CH EQUE TO THE DIRECTORS, SHARE HOLDERS AND OTHER KNOWN PERSONS FOR PURCHASE OF LAN D IN SURVEY NO.73/75. THESE CHEQUES WERE DEPOSITED IN THE RESPECTIVE ACCOUNTS O F THE DIRECTORS, SHARE HOLDERS AND THEN SUBSEQUENTLY DRAFTS WERE ISSUED FR OM THESE ACCOUNTS IN FAVOUR OF THE LAND OWNER. THERE AFTER AS AND WHEN THE LAN D WAS SUBSEQUENTLY SOLD THE RECEIPTS OF ACCOUNT OF SALE OF LAND BY THE DIRECTOR S, SHARE HOLDERS ETC. WERE RETURNED TO THE COMPANY BY CHEQUE. THIS PROFIT HAS BEEN SHOWN IN THE BOOKS OF THE COMPANY. 11. THE A.O. HAS ALSO PROVIDE OPPORTUNITY FOR CROS S EXAMINATION TO SHRI RAJUBHAI SHUKLA, ADVOCATE AND COUNSEL FOR AMBI CA REALITIES PVT. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 16 LTD. CROSS EXAMINED SHRI M. N. PATEL AND THE QUESTI ONS ASKED AND THE REPLIES GIVEN DURING THE STAGE OF CROSS EXAMINA TION ARE REPRODUCED IN ENGLISH BY THE AO AS FOLLOWS: Q.1 ON WHAT DATE WAS A SEARCH BY THE INCOME TAX AU THORITIES CONDUCTED AT YOUR PLACE. A. THE SEARCH WAS CONDUCTED ON 24.12.96. Q.2 DURING THE COURSE AND AFTER THE COMPLETION OF T HE SEARCH PROCEEDINGS DID DDIT(INV.)I, RAJKOT ASK YOUR EXPLANATION IN RESPECT OF PAGE NO.8 & 10 FOUND FROM YOUR RESIDENCE. IF YES, WHAT WAS YOUR EXPLANATION GIVEN. A. WITH RESPECT TO PAGE NO.8 & 10, I TOLD DDIT(INV. )I, RAJKOT THAT SHRI DHANRAJBHAI KNOWS ABOUT THE SAID PAPERS. Q.3 OTHER PAPERS ALONGWITH PAGE NO.8 & 10 WERE FOUN D AT YOUR PLACE. WERE ANY QUESTIONS ASKED TO YOU WITH REFERENCE TO PAPERS OTHER THAN PAGE NO.8 & 10. IF YES, WHAT DID YOU REPLY. A. I HAVE GIVEN ADEQUATE REPLY WITH REFERENCE TO OT HER PAPERS. Q.4 I AM SHOWING YOU YOUR STATEMENT DATED 07.02.97 IN WHICH YOU HAVE GIVEN YOUR EXPLANATION W.R.T. PAGE NO. 1 TO 74 OF ANNEXUR E A/4. IN ALL YOUR ANSWERS YOU HAVE STATED THAT ALL THE PAPERS HAVE BEEN GIVEN TO YOU BY DHANRAJBHAI AND HE SHALL EXPLAIN THE SAME. THEREAFTER, HOW DID IT COM E TO YOUR MIND THAT ONLY PAGE NOS. 8 10 WERE GIVEN TO YOU BY DHANRAJBHAI & THE R EST OF THE PAPERS BELONGED TO YOU. A. DURING THE COURSE OF SEARCH PROCEEDINGS, I WAS U NDER THE BELIEF THAT ALL THE PAPERS BELONG TO DHANRAJBHAI AND THAT IS WHY, I REP LIED ACCORDINGLY. Q.5 WERE YOU REQUIRED TO EXPLAIN THESE PAPERS DURIN G THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS. IF YES, WHAT WAS THE EXPLAN ATION GIVEN BY YOU. A. I DO NOT KNOW WHAT IS BLOCK ASSESSMENT. Q.6 DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDIN GS VIDE YOUR LETTER DATED 31.10.97, 09.12.97, 15.12.97 & 22.11.97, YOU HAVE I NFORMED THAT YOU DO NOT EXACTLY KNOW ABOUT PAGE NO.8 & 10 AS IT MIGHT PERTA IN TO AMBICA REALITIES PVT. LTD. OR IT MIGHT PERTAIN TO DHANRAJ BUILDERS PVT. L TD. OR IT MAY PERTAIN TO SHRI DHANRAJBHAI OR IT MAY PERTAIN TO ANY OF THE PERSONS OR THEIR ACCOUNTS WHOSE NAMES HAVE BEEN MENTIONED IN THE SAID PAPERS. TODAY YOU ARE SAYING WITH CONFIDENCE THAT THESE PAPERS RELATE TO THE ACCOUNT OF AMBICA REALITIES PVT. LTD. IN THIS REGARD IF YOU HAVE ANY EVIDENCE THEN THE SA ME MAY BE FURNISHED. A. EARLIER DURING THE COURSE OF ASSESSMENT I DID NO T HAVE COMPLETE INFORMATION THEREAFTER I MADE INQUIRIES AND I CAME TO KNOW THE COMPETE TRUTH AND ACCORDINGLY, I GAVE THE REPLIES. THE DETAILS OF WH ICH ARE AS UNDER: (I) THERE IS A FLAT IN RAGHUKUL APARTMENT FOR WHICH THERE IS THE BILL OF RAJKOT MUNICIPAL CORPORATION. (II) THERE IS AN OFFICE (NO.309) IN DHANRAJNI FOR WHICH THERE IS THE BILL OF RAJKOT MUNICIPAL CORPORATION. (III) COPY OF FLAT PURCHASE DEED MADE BY SHRI AMARK UMAR JADEJA AND COPY OF THE DEMAND DRAFT. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 17 (IV) LIST OF LAND PURCHASE TRANSACTION OF SURVEY NO .73/75. (V) COPY OF THE CHIT DHANRAJBHAI HAS GIVEN TO AMARK UMAR WITH RESPECT TO THE SETTLEMENT OF TRANSACTION. AFTER CONSIDERING THE ABOVE EVIDENCES I CAN SAY WIT H CONFIDENCE THAT THE TRANSACTION (ON PAGE NO.8 & 10) PERTAIN TO AMBICA R EALITIES PVT. LTD. Q.7 YOU HAVE MENTIONED ABOVE THAT PAGE NO.8 & 10 BE ARS DETAILS OF TRANSACTIONS LIKE FLAT, OFFICE, SHRI AMARKUMAR ETC. THEN HOW CAN YOU SAY THAT THE SAID PAPER PERTAINS TO AMBICA REALITIES PVT. LTD. A. IT IS WRITTEN ON PAGE NO.8 & 10 THAT THE SHARE O F MANSUKHBHAI IS 6.25%. TODAY I HAVE FILED MY WRITTEN SUBMISSION IN WHICH I HAVE STATED THAT MY SHARE IS 6.25%. FURTHER, I AM A DIRECTOR IN AMBICA REALITIE S PVT. LTD. AND AS STATED EARLIER I OWN AN OFFICE IN DHANRAJNI BUILDING AND FLAT IN R AGHUKUL BUILDING, THE COST OF WHICH HAS BEEN DEDUCTED FROM MY ACCOUNT AT THE TIME OF SETTLEMENT. THESE DETAILS HAVE BEEN SHOWN ON BOTH THE PAGES. ON THE BASIS OF THE ABOVE, I CAN SAY WITH CONFIDENCE THAT THE ACCOUNTS PERTAIN TO AM BICA REALITIES PVT. LTD. Q.8 YOU HAVE STATED THAT YOUR SHARE BELONG IN THE C OMPANY IS 6.25%.S HOWEVER, IT IS SEEN THAT YOU OWN 300 SHARES IN THE COMPANY AND YOUR SON JITESH OWNS 625 SHARES IN THE COMPANY AND THE TOTAL SHARE HOLDING OF THE COMPANY IS 25000 SHARES. THEREFORE, IT IS SEEN THAT YOU SHARE HOLDING WOULD BE MUCH LESS THAN 6.25% AS YOU CLAIM. A. I HAVE GIVEN MY WRITTEN EXPLANATION IN THIS REGA RD IN WHICH MY SHARE HOLDING IS 6.25%. ( THE ASSESSEE IN HIS SUBMISSIONS DATED 28.03.2003 HAS STATED THE FOLLOWING REGARDING HIS SHARE HOLDING) THE SHARE HOLDING OF MY FAMILY IN THE COMPANY WAS 3 00 SHARES IN MY NAME. 625 SHARES IN THE NAME OF MY SON JITESHKUMAR M. PATEL AND 625 SHARE IN THE NAME OF MY NEPHEW RAVIKETAN, THUS AGGR EGATING TO ABOUT 6.25% OF THE TOTAL SHARES OF THE COMPANY. Q.9 WHAT POST DO YOU HOLD IN RCC BANK. A. I AM A DIRECTOR IN RCC BANK. Q.10 IN YOUR STATEMENT TODAY YOU HAVE STATED THAT RS.9,61,000/- HAS BEEN RECEIVED AS INTEREST INCOME FROM RCC BANK. WHETHER IT IS FDR INTEREST OR SAVINGS INTEREST INCOME. YOU ARE SAYING WITH CONFID ENCE THAT COMPANY HAS RECEIVED INTEREST INCOME. DO YOU HAVE ANY EVIDENCE IN THAT REGARD THEN PLEASE PRODUCE. A. IN THE ABOVE CONTEXT, I DO NO HAVE ANY EVIDENCE RIGHT NOW. I WOULD INQUIRE WITH THE BANK AND LET YOU KNOW. Q.11 YOU HAVE STATED IN YOUR STATEMENT TODAY THAT AMARKUMAR HAS PURCHASED A FLAT IN INDRAPRASTH APARTMENT, HOWEVER AS PER OUR BOOKS OF ACCOUNTS, WE HAVE NOT SOLD ANY FLAT IN INDRAPRASTH. FURTHER, I WOULD LIKE TO BRING TO YOUR ATTENTION THAT BEFORE THE TRIBUNAL YOU HAD STATED THAT SHRI AMARKU MAR HAS PURCHASED A FLAT IN RAGHUKUL PROJECT.S PLEASE RECALL AND STATE AS TO W HERE AMARKUMAR HAS PURCHASED A FLAT AND GIVE EVIDENCE IN THAT REGARD. A. SHRI AMARKUMAR JADEJA HAS PURCHASED A FLAT NO.12 ON 3 RD FLOOR OF INDRAPRASTH APARTMENT, BUT THE DOCUMENT REGARDING T HE FLAT HAS BEEN EXECUTED IN IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 18 THE NAME OF HIS SON SHRI DHARMENDRASINH. BEFORE TH E TRIBUNAL IT WAS MENTIONED BY MISTAKE THAT THE FLAT HAS BEEN PURCHASED IN REGH UKUL APARTMENT. Q.12 YOU HAVE STATED THAT YOU HAVE PURCHASED AN O FFICE IN DHANRAJNI BUILDING, BUT OUR COMPANY AMBICA REALITIES PVT. LTD. HAS NOT DONE ANY PROJECT IN THE NAME OF DHANRAJNI. YOU GIVE YOUR EXPLANATION IN THAT CON TEXT. A. AMBICA REALITIES PVT. LTD. AND DHANRAJNI BUILDER S PVT. LTD. BOTH THE COMPANIES BELONG TO THE SAME GROUP. I AM A DIRECTO R IN AMBICA REALITIES PVT. LTD. AND MY COUSIN SHRI BHUDARBHAI IS WAS A DIRECTO R IN DHANRAJ BUILDERS PVT. LTD. BEING OF THE SAME BUSINESS GROUP SETTLEMENT O F ACCOUNTS OF BOTH OF US HAS BEEN DONE TOGETHER. Q.15 YOU HAVE STATED THAT INTEREST OF RS.8000/- H AS BEEN RECEIVED FROM OBC BANK. IF YOU HAVE INFORMATION REGARDING THE NATURE OF BANK ACCOUNT OF THE COMPANY IN OBC THEN LET US KNOW. A. THERE IS AN ACCOUNT IN THE NAME OF COMPANY IN OB C BANK WHICH HAS BEEN SHOWN IN THE BALANCE SHEET OF THE COMPANY. ON THE BASIS OF WHICH I CAN SAY THAT THIS AMOUNT PERTAINS TO AMBICA REALITIES PVT. LTD. BECAUSE I DO NOT HAVE ANY ACCOUNT WITH OBC BANK IN MY NAME. Q.16 YOU HAVE STATED THAT YOU OWN A FLAT IN RAGHU KUL AND OFFICE IN DHANRAJNI BUILDING AND IN THAT CONTEXT WHATEVER SUM YOU HAVE GIVEN IS SHOWN IN PAGE NO.8 AND 10. IN THAT REGARD YOU PLEASE RECALL AND STATE AS TO WHOM AND WHEN THAT SUM HAS BEEN GIVEN BY YOU. HAVE YOU OBTAINED ANY RECEI PT IN THAT REGARD. A. AS REGARDS THE FLAT AND OFFICE I HAVE TO STATE T HAT THE ABOVE SUM HAS BEEN DEDUCTED FROM THE ACCOUNT DUE TO ME ON ACCOUNT OF M Y SHARE OF PROFIT IN AMBICA REALITIES PVT. LTD. AND THE SUMS GIVEN TO THE SAID COMPANY BY MY FAMILY MEMBERS. AS I AM A DIRECTOR IN AMBICA REALITIES PV T. LTD. GENERALLY NO RECEIPTS WERE OBTAINED FROM EACH OTHER ON ACCOUNT OF ANY GI VE OR TAKE TRANSACTIONS. TRUST IS OF UTMOST IMPORTANCE IN THE BUSINESS. Q.17 YOU HAVE STATED THAT ABOVE SUM HAS BEEN ACCU MULATED FROM THE PROFITS OF THE PROJECTS OF AMBICA REALITIES PVT. LTD. YOU ARE A DIRECTOR IN THE SAID COMPANY THEN PLEASE STATE AS TO FROM WHAT PROJECT T HE SAID PROFIT HAS BEEN RECEIVED. A. SHRI DHANRAJBHAI WAS LOOKING AFTER THE MANAGEMEN T AND ALL AFFAIRS OF AMBICA REALITIES & OTHER PROJECTS. I DO NOT KNOW A NYTHING ABOUT HOW MUCH PROFIT FROM WHAT PROJECT WAS MADE. Q.18 YOU HAVE STATED IN YOU LETTER DATED 24.12.96 THAT MXP MEANS MANHARLAL PATEL AND TODAY YOU HAVE STATED THAT MXP MEANS MANS UKHLAL PATEL. PLEASE GIVE YOUR CLARIFICATION. A. 1997 AND NOW 2003 YEAR IS IN PROGRESS. SIX YEAR S EARLIER I HAD STATED MXP MEANS MANHAR PATEL BUT ACTUALLY MXP MEANS MANSU KHLAL PATEL AND ACCORDINGLY I HAVE STATED THE SAME. Q.19 AS REGARDS 73/75 ON PAGE NO.10 YOU HAVE STAT ED THAT THE SAID SUM IS REGARDING THE TRANSACTIONS OF THE COMPANY. THAT IS WHY IT IS ASKED FROM YOU WHETHER YOU HAVE PURCHASED ANY LAND IN SURVEY NO.73 /75 IN YOU NAME OR IN THE IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 19 NAME OF YOUR FAMILY MEMBERS. IF SO, PLEASE PRODUCE THE DOCUMENTS IN THAT PRETEXT. A. I HAVE NOT PURCHASED ANY PLOT IN SURVEY NO.73/75 IN MY NAME OR IN THE NAME OF ANY OF MY FAMILY MEMBERS FROM MY PERSONAL C APITAL. I HAVE PURCHASED A PLOT IN THE NAME OF MY SON JITESH FROM THE AMOUNT GIVEN BY AMBICA REALITIES PVT. LTD.. AFTER THE SAME OF THE PLOT THE SUM WAS RETURNED BACK TO AMBICA REALITIES PVT. LTD. IN SUPPORT OF WHICH I WILL PRO DUCE COPIES OF ACCOUNT AND COPY OF SALE DEED. 12. THE A.O. NOTED THAT THE MAIN ISSUE HIGHLIGHTED BY THE ADVOCATE OF THE ASSESSEE DURING THE COURSE OF CROSS EXAMINAT ION OF SHRI M. N. PATEL WAS AS TO HOW SHRI PATEL COULD SAY WITH SUREL Y AND CONFIDENCE THAT THE CONTENTS OF PAGE NO.8 & 10 PERTAINED TO TH E TRANSACTIONS OF THE ASSESSEE COMPANY. IN THIS REGARD SHRI M. N. P ATEL IN HIS ANSWER TO Q. NO.6 OF CROSS EXAMINATION (ON PAGE 11 OF HIS STATEMENT DATED 28.03.03) HAS GIVEN THE LIST OF EVIDENCES ON WHICH HE WOULD LIKE TO RELY TO COME TO THE JUDGMENT THAT THE TRANSACTIONS REFLECTED IN THE PAPERS MENTIONED ABOVE PERTAIN TO AMBICA REALITIES PVT. LTD. THIS LIST OF EVIDENCES SUBMITTED BY SHRI M. N. PATEL TO SUBSTANTIATE HIS CONTENTION VIDE HIS LETTER DATED 29.03.03 WHICH IS REPRODUCED BY THE A.O. IN HIS ORDER AS BELOW: (I) XEROX COPY OF RMC BILL OF OFFICE NO.309 SITUA TED AT DHANRAJNI COMPLEX, D.R. YAGNIK ROAD, RAJKOT. THIS OFFICE IS PURCHASED BY ME AND PURCHASE PRICE RS.4,95,000/- HAS BEEN ADJUSTED BY M R. DHANRAJ JETHANI IN MY ACCOUNT AS STATED IN PAGE NO.10. (II) XEROX COPY OF RMC BILL OF FLAT AT RAGHUKUL OCC UPIED BY S/O. MR. PATEL JITESH PATEL. THE PURCHASE PRICE OF THIS FLAT RS.12 ,85,000/- IS ADJUSTED BY DHANRAJ JETHANI IN MY ACCOUNT AS STATE ON PAGE NO.10. (III) COUNTER ACCOUNT OF AMBICA REALITIES FROM THE BOOKS OF JITESH MANSUKHLAL PATEL. THIS ACCOUNT SHOWS THE TRANSACTION OF LAND 73/75 PURCHASED BY AMBICA REALITIES IN THE NAME OF JITESH M. PATEL TO PURCHAS E THE LAND RS.2,50,000/- WAS GIVEN TO JITESH M. PATEL BY CHEQUE AND ON THE SALE OF LAND SALE PRICE OF RS.5,13,500/- WAS RETURN TO THE COMPANY BY CHEQUE. THE XEROX COPY OF BANK STATEMENT OF AMBICA REALITIES PVT. LTD. ARE ALSO AT TACHED HEREWITH. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 20 (IV) LIST OF LAND 73/75 PURCHASED BY AMBICA REALITI ES PVT. LTD. ON THE NAME OF DIRECTOR, SHARE HOLDERS AND RELATIVES. (V) FLAT PURCHASED DEED OF SHRI AMARKUMAR JDEJA IN THE NAME OF HIS SON. THE COPY OF BANK DD AND COPY OF RECEIPT GIVEN BY AM BICA REALITIES PVT. LTD. ARE ATTACHED. (VI) XEROX COPY STATEMENT SHOWING THE ACCOUNTS OF M . N. PATEL IN WHICH SHORT SIGNATURES HAVE BEEN MADE BY MR. DHANRAJBHAI JETHAN I AS A PROOF OF RECEIVING THE AMOUNT BY SHRI M. N. PATEL FROM MR. DHANRAJ JET HANI. 13. THE EVIDENCES SUBMITTED BY THE ASSESSEE.SHRI M. N. PATEL HAS BEEN DISCUSSED BY THE AO AS FOLLOWS: (I) THE DOCUMENT IN SUPPORT OF POSSESSION OF OFFIC E NO.309 IN DHANRAJNI BUILDING SUBMITTED BY SHRI M .N. PATEL IS THE COPY OF THE BILL ISSUED BY RAJKOT MUNICIPAL CORPORATION TOWARDS PROPERTY & EDUCATION TAX FOR THE AMOUNT TOTALING RS,74,112/-. THE SAID BILL HAS BEARS THE NO. 15434 5 DATE 07.09.2002 HAS BEEN ISSUED IN THE NAME OF SHRI M .N. PATEL. (II) THE EVIDENCE REGARDING OCCUPATION OF THE RAGHU KUL FLAT IS THE MUNICIPAL TAXES BILL ISSUED BY RAJKOT MUNICIPAL CORPORATION D ATED 18.02.2000. THE SAID BILL IS FOR THE AMOUNT OF RS.30,283/-. (III) DURING THE COURSE OF CROSS EXAMINATION SHRI M . N. PATEL HAS STATED THAT HE HAS NOT PURCHASED ANY PLOT OF LAND IN SURVEY NO.73/ 75 FROM HIS PERSONAL FUND. HE HAD HOWEVER STATED THAT A PLOT WAS PURCHASED IN THE NAME OF HIS SON SHRI JITESH M. PATEL. IT IS SEEN FROM THE STATEMENT OF BANK ACCOUNT OF AMBICA REALITIES PVT. LTD. BEARING NO.305 WITH THE COOP. B ANK OF RAJKOT LTD. THAT CHEQUE NO.56326 OF RS.2,50,000/- WAS ISSUED TO SHRI JITESH M. PATEL. FURTHER, SHRI M. N. PATEL IN HIS STATEMENT HAS ALREADY STATED THAT THIS MONEY WAS USED TO BUY A PLOT IN SURVEY NO.73/75. LATER THIS PLOT WAS SOLD FOR A CONSIDERATION OF RS.5,13,500/- TO SHRI CHETANKUMAR JAYANTILAL THE SA ID AMOUNT HAS BEEN CREDITED IN THE BANK ACCOUNT OF AMBICA REALITIES PVT. LTD. O N 01.06.1994. (IV) THE LIST OF PERSON IN THE NAME OF WHOM AMBICA REALITIES PVT. LTD. HAS PURCHASED LAND IN SURVEYNO.73/75 HAS ALSO BEEN SUBM ITTED. THE LIST CONTAINS THE NAME OF 34 PARTIES. (V) THE ASSESSEE HAS SUBMITTED A COPY OF THE SALE D EED OF FLAT TO SHRI DHARMENDRASIN AMARKUMAR JADEJA. COPY OF THE BANK P AY ORDER DATED 21.03.95 FOR THE AMOUNT OF RS.1,20,000/- HAS ALSO BEEN ENCLO SED. FURTHER, THE RECEIPT ISSUED BY AMBICA REALITIES PVT. LTD. DATED 25.03.95 FOR THE AMOUNT OF RS.1,20,000/- HAS ALSO BEEN ENCLOSED. THE SALE DEE D HAS BEEN SIGNED ON 23.03.95. (VI) CORROBORATIVE EVIDENCE HAS BEEN SUBMITTED BY S HRI M. N. PATEL IN WHICH SUMS RECEIVED BY HIM IN CASH FROM DHANRAJBHAI HAS B EEN SHOWN. AS STATED BY HIM THE SAID DOCUMENT ALSO BEARD THE INITIAL OF DHA NRAJBHAI. THE SAID DOCUMENT IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 21 IS APPENDED TO THE ORDER AS ANNEXURE A. ON PAGE NO . 8 & 10 OF THE SEIZED DOCUMENT IT IS MENTIONED AS AMARKUMAR RS. 90,000/- ANNEX. A HAS THE HEADING MANSUKHLAL NE MEANING T HEREBY THAT THE SUMS GIVEN TO SHRI MANSUKHBHAI. ON PERUSAL OF ANNEXURE A, IT IS OBSERVED THAT RS.90,000/- HAS BEEN PAID IN FIVE INSTALMENTS AS FOLLOWS: 28.02.95 RS.30,000/- RS.10,000/- RS.15,000/- RS.15,000/- RS.20,000/- THE TOTAL OF THE ABOVE FIVE SUMS COMES TO RS.90,000 /- WHICH IS ALSO REFLECTED ON PAGE 8 & 10 IN FRONT OF THE NAME AMARKUMAR. FURTHER THE SECOND ENTRY ON THIS PAGE IS REGARDING RS.1,20,000/- RECEIVED BY PAY ORDER DATED 21.03.95. THIS CAN BE CO-RELATED WITH THE DATE OF PAY ORDER OF RS.1,20,000/- BEARING NO. 1018 DATED 21.03.95 DRAWN ON COOPERATIVE BANK OF RAJKOT LTD. RECEIVED BY AMBICA REALITIES PVT. LTD. ON ACCOUNT OF THE SALE CONSIDERATION OF FLAT IN INDRAPRASTH APARTMENT SOLD TO SHRI DHARMENDRASINH AMARKUMAR JADEJA. ON PAGE 10 IT IS OBSERVED THAT IT IS MENTIONED CASH RS.3,00,000/-. ALL THE CORRESPONDING ENTRIES TOTALING CASH OF RS.3 LACS IS HIGHLIGHTED IN ANNEXURE A BY THE LETTER B. CASH HAS BEEN RECEIVED BY MANSUKHBHA I FROM SHRI DHANRAJBHAI AS FOLLOWS: 01.06.95 RS. 35,000/- 01.07.95 RS. 15,000/- 02.08.95 RS. 15,000/- 20.09.95 RS. 35,000/- 21.09.95 RS.2,00,000/- THE TOTAL OF ABOVE AMOUNT COMES TO RS.3,00,000/- WH ICH ALSO TALLIES WITH THE NARRATION CASH RS.3,00,000/- GIVEN ON PAGE 10 SEIZE D FROM THE RESIDENCE OF SHRI MANSUKHBHAI. (VI) THE WRITINGS ON THE SEIZED DOCUMENTS PAGE 8 AN D PAGE NO.10 HAVE BEEN MADE BY SHRI RAJUBHAI K. SHUKLA, THE ADVOCATE OF AM BICA REALITIES PVT. LTD. 14. THE A.O. STATED THAT SHRI M. N. PATEL IN HIS ST ATEMENT HAS CONFIRMED THAT HE IS A PARTY TO ALL THE TRANSACTION S SHOWN ON PAGE 8 AND 10 OF ANNEXURE A-4 SEIZED FROM HIS PREMISES IN THE CAPACITY OF BENEFICIAL SHARE HOLDER TO THE EXTEND OF 6.25% OF A MBICA REALITIES PVT. LTD. FURTHER, HE HAS ALSO CONFIRMED THAT HIS T RANSACTIONS WITH THE IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 22 COMPANY AMBICA REALITIES PVT. LTD. HAS BEEN REFLECT ED ON PAGE NOS. 8 & 10. FURTHER, HE HAS ALSO STATED THAT HE HAVING CONTROL AND POSSESSION OF FLAT IN THE RAGHUKUL APARTMENT AND OF FICE IN DHANRAJNI BUILDING IN VIEW OF THE PROFITS THAT HAD ACCRUED TO HIM BECAUSE OF THE ACTIVITIES OF THE COMPANY AMBICA REALITIES PVT. LTD . HE HAS STATED ON OATH THAT ALL THE ACTIVITIES AND TRANSACTIONS REFLE CTED ON THE SEIZED PAPERS BEARING NO.8 & 10 PERTAIN TO AMBICA REALITIE S PVT. LTD. IN WHICH HE HAS BENEFICIAL INTEREST OF 6.25%. THEREFO RE, ALL THE FINANCIAL TRANSACTIONS REFLECTED IN THE SAID PAPER, AS PER HI S STATEMENT, IS CONSIDERED TRUE AND CORRECT. ACCORDINGLY THE SAID UNEXPLAINED TRANSACTIONS ARE BROUGHT TO TAX. AFTER CONSIDERING ALL THE EVIDENCES ON RECORD AND THE STATEMENT GIVEN BY THE ASSESSEE T HE AO OBSERVED AS UNDER:- 11.1 AS PER SEIZED DOCUMENT PAGE 10, THE NEW CAPIT AL OF RS.9,15 LACS WAS CONTRIBUTED BY HIM TOWARDS THE AFFAIRS OF AMBIC A REALITIES PVT. LTD. THE NATURE AND SOURCE HAS NOT BEEN ADEQUATELY EXPLAINED AND THE SAME IS TAXED IN THE HANDS OF THE ASSESSEE. 11.2 AS PER SEIZED DOCUMENT PAGE 10, THE CAPITAL O F RS.2.25 LACS WAS CONTRIBUTED BY HI TOWARDS THE AFFAIRS OF AMBICA REA LITIES PVT. LTD. THE NATURE AND SOURCE HAS NOT BEEN ADEQUATELY EXPLAINED AND THE SA ME IS TAXED IN THE HANDS OF THE ASSESSEE. 11.3 AS PER SEIZED DOCUMENT PAGE 10, THE PROFIT OF RS.3.20 LACS HAS BEEN GENERATED BY THE TRANSACTIONS OF THE ASSESSEE ALONG WITH SHRI DHANRAJBHAI JETHAI OF AMBICA REALITIES PVT. LTD. THE SAID PROF IT HAS BEEN CONFIRMED BY THE ASSESSEE THAT IT HAS ARISEN TO HIM AND ACCORDINGLY THE SAME IS BROUGHT TO TAX. 11.4 PROFIT OF RS.5,57,500/-, AS EVIDENCED FROM TH E SEIZED DOCUMENT PAGE NO.10 HAS ARISEN ON ACCOUNT OF LAND TRANSACTIO N IN SURVEY NO.73/75. THE SAID PROFIT HAS NOT BEEN REFLECTED IN THE REGULAR A CCOUNTS OF THE ASSESSEE. 11.5 PROFIT OF RS,54,000/-, AS EVIDENCED FROM THE SEIZED DOCUMENT PAGE NO.10 HAS ARISEN ON ACCOUNT OF ONE TRANSACTION THE ASSESSEE AND DHANRAJBHAI JETHANI HAD UNDERTAKEN AS PARTNERS. THE ASSESSEE I N HIS STATEMENT HAS CONFIRMED THAT HIS SHARE OF PROFIT WAS RS.54,000/-. THE SAME IS ACCORDINGLY BROUGHT TO TAX. 11.6 AS PER PAGE NO.8 THE TOTAL PROFIT EARNED BY A MBICA REALITIES PVT. LTD. RS.10,85,125/- AND THE SHARE OF PROFIT OF TH E ASSESSEE IS RS.67,820/-. FURTHER AS PER PAGE NO.10 THE SHARE OF PROFIT BEING 6.25% OF THE TOTAL IS BEING RS.13,53,500/-. IN THIS REGARD THE ASSESSEE HAS SU BMITTED THAT THE SAID PROFITS ARE PROFITS OF AMBICA REALITIES PVT. LTD. AND THE C OMPANY HAS NOT DECLARED ANY DIVIDEND TO THE SHARE HOLDERS. IN THE CASE OF A PR IVATE LIMITED COMPANY THE PROFIT CANNOT BE DIRECTLY GIVEN TO THE SHARE HOLDERS BUT I T CAN BE DISTRIBUTED IN THE FORM OF DIVIDEND. IN THIS REGARD IT IS POINTED OUT IN H IS STATEMENT THE ASSESSEE HAS EXPLAINED THAT PAGE NO.10 IS THE DETAILS OF SETTLEM ENT OF HIS TRANSACTIONS WITH AMBICA REALITIES PVT. LTD. HE HAS ALSO CONFIRMED THAT AFTER THE SETTLEMENT OF IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 23 THE TOTAL TRANSACTION THE NET AMOUNT DUE TO HIM OF RS.1750/- WAS PAID TO HIM BY SHRI DHANRAJ JETHANI. THEREFORE, THE DETAILS OF REC EIPTS DUE TO THE ASSESSEE ARE SHOWN ON PAGE 10. PAGE 10 GIVES THE DETAILS OF THE SETTLEMENT OF UNACCOUNTED TRANSACTIONS AND AS IN THE FORM OF COPY OF ACCOUNT OF THE ASSESSEE IN WHICH THE CREDIT AND DEBIT ENTRIES ARE DULY REFLECTED. THE T OTAL OF CREDIT ENTRIES AFTER TRANSFER OF RS.10,93,750/- TO A NEW FUND COMES TO RS.23,31,7 50/-. THE TOTAL OF SIMILARLY DEBIT ENTRIES COMES TO RS.23,30,000/-. FINALLY, THE BALANCE AMOUNT OF RS.1750/- HAS BEEN PAID TO THE ASSESSEE BY SHRI DHANRAJ V. JE THANI IN CASH AND THE ACCOUNT HAS BEEN ADEQUATELY SETTLED. THEREFORE, TH E CONTENTION OF THE ASSESSEE THAT NO DIVIDEND HAS BEEN RECEIVED FROM THE COMPANY IS NOT ACCEPTABLE. THE DETAILS OF CASH OR ASSETS RECEIVED BY THE ASSESSEE FROM THE COMPANY IS ITSELF MENTIONED ON THE SAID PAPER AND SAME IS TREATED AS THE INCOME RECEIVED BY THE ASSESSEE FROM THE COMPANY. THIS SETTLEMENT IS TOTA LLY OUTSIDE THE BOOKS OF ACCOUNTS. ACCORDINGLY THE SHARE OF PROFITS OF RS.1 3,53,500/- AND RS.67,820/- IS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE AS INCO ME RECEIVED FROM THE COMPANY. EVEN OTHERWISE THE SAID TRANSACTIONS ARE N OT ACCOUNTED FOR, THEREFORE, THEY CANNOT BE RECEIVED AS REGULAR DIVIDENDS. 11.7 AS REGARDS THE SHARE CAPITAL OF RS.6.25,000/- EVIDENCED FROM PAGE 8 THE ASSESSEE HAS SUBMITTED AS FOLLOWS:- REGARDING THE CAPITAL OF RS.6,25,000/- I HAVE TO S TATE THAT THE SAID AMOUNT IS GIVEN FROM MY PERSONAL S.A/C. FROM THE FIRM M/S. SA TYA VIJAY SODA FACTORY AND FROM A/C. OF MY SON JITESH PATEL. HOWEVER, WE HAVE NOT SPECIFIED IN OUR BOOKS AS SHARE CAPITAL BUT WE HAVE SHOWN ASS AMOUNT PAID TO AMBICA REALITIES PVT. LTD. AND THEY HAVE BIFURCATED THE SAID AMOUNT AS S HARE CAPITAL AND LOAN DEPOSITS. THE ASSESSEE HAS NOT FURNISHED ANY SUPPORTING EVIDE NCE. THE ASSESSEE HAS NOT FILED ANY DOCUMENT OR COPY OF RETURN TO SHOW THAT T HE NATURE AND SOURCE OF THE SAID CAPITAL OF RS.6.5 LACS HAS BEEN EXPLAINED. FU RTHER, THE DETAILS REGARDING THE NAME OF THE COMPANY IN WHICH THE SAID CAPITAL HAS B EEN INVESTED HAS ALSO NOT BEEN FURNISHED. THE ASSESSEE HIMSELF SAYS THAT THE Y HAVE NOT SPECIFIED THE AMOUNT OF RS.6.25 LACKS AS SHARE CAPITAL IN THEIR B OOKS. IN THE LOOSE PAPER IT IS CLEARLY MENTIONED AS CAPITAL. THEREFORE, THE SAME IS TREATED AS UNEXPLAINED CAPITAL AND TAXED IN THE HANDS OF THE ASSESSEE. THE TWO ISSUES I.E. ADDITION OF RS.6,92,820/- BASED ON PAGE 8 AND ADDITION OF RS.34,25,000/- BASED ON PAGE 10 IS, IN VIEW OF THE FACTS DISCUSSED ABOVE, IS DECIDED AGAINST THE ASSESSEE AND ADDED TO THE TOTAL INCOME. THE SAID ADDITIONS ARE INDIVIDUALLY DISCUSSED IN PARA 11 (11.1 TO 1.7) ABOVE. 15. THE ORDER OF THE A.O. HAS BEEN APPROVED BY C.I. T.I., RAJKOT VIDE HIS DO NO. C.I.T.R.I/HQ/158BC/MNT/2002-03 DATE D 31.03.2003 SUBJECT TO THE DIRECTIONS OF THE ADDL. C.I.T.RR.I, RAJKOT, CONTAINED IN IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 24 HIS LETTER NO.ADDL./C.I.T./RR/SCR.ASSTT/2003-03 DAT ED 31.03.2003. THE CONTENTS OF THE LETTER OF ADDL. C.I.T.RR.I, RAJ KOT OF HIS LETTER DATED 31.03.2003 HAVING NO.ADDL./C.I.T./RR/SCR.ASSTT/2003 -03 IS REPRODUCED BY THE IN HIS ORDER AS FOLLOWS: THIS DRAFT ASSESSMENT ORDER HAS BEEN RECEIVED BY M E TODAY AT 11.00 AM. ORIGINALLY, THOUGH HE HAD GIVEN THE DRAFT ORDE R ON 27.03.2003 WHICH WAS SENT TO THE COMMISSIONER OF INCOME-TAX, R AJKOT. THE COMMISSIONER OF INCOME-TAX, RAJKOT HAD RETURNED BAC K THE SAID FILE AND ASSESSING OFFICER WAS DIRECTED TO CARRY OUT ITA TS DIRECTION IN THIS CASE ASSESSING OFFICER GOT ONLY ONE DAY TO CA RRY OUT HIS DIRECTIONS I.E. ON 28.03.03. IN ONE DAY HE HAD TRI ED TO DO WHAT IS POSSIBLE. THE MAIN ISSUE IN THIS CASE IS SEIZED PAPERS NO.8 & 10 AND ASSESSING OFFICER HAD TO FIND OUT INDEPENDENTLY TO WHOM THESE PAPERS BELONG. HE HAS RECORDED STATEMENT OF SHRI MA NSUKHBHAI PATE AT THOSE PREMISES THESE PAPERS WERE FOUND. HE HAS ALSO RECORDED THE STATEMENT OF SHRI RAJI SHUKLA IN WHOSE HANDWRIT ING THE ABOVE PAPERS WERE WRITTEN. SHRI RAJU SHUKLA IN HIS STATE MENT HAS STATED THAT THE NOTINGS ON PAGE NO.8 & 10 ARE NOT IN RESPE CT OF TRANSACTIONS WITH AMBICA REALITIES LTD. HE HAS ALSO STATED THAT HE IS NOT REMEMBERING ON WHAT CONTEXT THE SAME HAS BEEN WRITT EN. SHRI M.N.PATEL IN HIS STATEMENT HAS CLARIFIED THE WHOLE SEIZED PAPERS WHICH HE HAD NOT DONE DURING THE COURSE OF SEARCH O N 24.12.96. HE HAS STATED THAT HE EARNED PROFIT OF RS.13,53,500/- FROM 3 TO 4 PROJECTS VIZ. YOGINAGAR, INDRAPRASTH AMBICA NAGAR E TC. MANSUKHBHAI PATELS SHARE HOLDING IN THE CO. I.E. AMBICA REALIT IES LTD. IS ONLY 3.7% AS SUCH IT SEEMS THAT HE HAD OTHER PROFITS FROM SOM E OTHER PROJECTS BELONGING TO HIM. THE LOOSE PAPERS IN FILE A-1 FOU ND FROM THE RESIDENCE OF MANSUKHBHAI PATEL SHOWS THAT HE WAS IN THE CONSTRUCTION BUSINESS. ONE OF THE CALCULATION ON P AGE NO.74 SHOWS CALCULATION OF BUILT UP AREA AND RATES OF DIFFERENT FLOORS THE TOTAL OF WHICH COMES TO RS.33796600/-. A.O. HAS NOT INQUIRE D ABOUT THIS PAPER FOUND FROM HIM. ASSESSING OFFICER HAS NOT TAKEN STATEMENT OF ALL TH E PERSONS FOR E.G. AMARKUMAR, BHODARBHAI, N. C. PANDYA, BATUKBHAI PATE L, PRAFULBHAI PATEL ETC. ON OATH AND EXAMINE THEM WHOSE NAMES APP EAR IN THESE SEIZED PAPERS. IN THIS CIRCUMSTANCES, THE ADDITION CAN BE MADE ON IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 25 THE BASIS OF SEIZED PAPERS IN THE HANDS OF BOTH PER SONS I.E. MANSUKHBHAIS HANDS SUBSTANTIALLY AND IN THE HANDS OF AMBICA REALITIES PVT. LTD. PROTECTIVELY. SINCE THE CASE I S GETTING TIME BARRED TODAY I.E. 31.03.2003 AND SINCE YOUR STATUTORY APPR OVAL IS NEEDED IN THIS CASE, THE SAME IS FORWARDED TO YOUR FOR YOUR K IND APPROVAL. 16. THE A.O. NOTED THAT DIRECTIONS OF THE C.I.T. I, RAJKOT AND OF ADDL. C.I.T.R.I., RAJKOT BEING OF STATUTORY AND BIN DING NATURE, THEREFORE, THE TOTAL PROFIT COMES TO RS.2,16,56,000 /- WHICH HAS BEEN TAXED ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASS ESSEE, SHRI M. N. PATEL AS THE RELEVANT DOCUMENTS PAGE NO.8 & NO.10 W ERE SEIZED FROM THE PREMISES OF THE ASSESSEE, SHRI M. N. PATEL . SIMILARLY THE PROFIT OF PAGE NO.8 BEING DERIVED BY THE ASSESSEE, SHRI M. N. PATEL IS RS.10,85,125/- SUBSTANTIVE BASIS. THE ABOVE PROFIT S ARE ACCORDINGLY TAXED IN THE HANDS OF THE ASSESSEE, SHRI M. N. PATE L ON SUBSTANTIVE BASIS AND PROTECTIVE ADDITIONS WERE MADE IN THE HAN DS OF COMPANY, AMBICA REALITIES PVT. LTD 17. SINCE THIS IS A SUBSTANTIVE AND PROTECTIVE ASSE SSMENT ORDER AND THIS IS THE FIRST YEAR OF SHRI MANSUKHLAL N. PATEL. THE LD. A.R. AFTER BRIEFING THE FACTS OF THE CASE, SUBMITTED THAT IN D E NOVO ASSESSMENT, THE ASSESSMENT CANNOT BE MORE THAN ORIGINALLY UNDIS CLOSED INCOME ASSESSED. THE LD. A.R. IN SUPPORT OF HIS CONTENTIO N RELIED UPON THE ORDER OF ITAT IN ITA NO.1941 & 2200/MUM./2004 ORDER DATED 2901201997 AND ITA NO.5371 & 5803/MUM/2005 ORDER DA TED 29-12- 1997. THE LD. A.R. SUBMITTED THAT IN ORIGINAL ASSES SMENT, THE IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 26 ASSESSEE HAS FILED A LETTER DATED 24-12-1997 WHERE THE ASSESSEE HAS EXPLAINED THE EACH AND EVERY NOTING OF THE PAPER IN DETAILS. THE LD. A.R. SUBMITTED THAT THE A.O. HAS FAILED TO CARRY OU T DIRECTIONS NUMBERS 4, 5 AND GIVEN BY THE ITAT IN FIRST ROUND OF LITIGATION. THE LD. A.R. SUBMITTED THAT THE A.O. IS NOT CARRYING OU T THE DIRECTION OF THE ITAT THERFORE, THE ORDER IS BAD IN LAW. HE RELIED UPON THE JUDGMENT OF MADRAS HIGH COURT IN CASE OF 171 ITR 373. IT IS AL SO SUBMISSION OF THE LD. A.R. THAT THE PAPER FOUND FROM THE POSSESSI ON OF THE ASSESSEE AND AS PER THE PROVISIONS, ONUS IS ON THE ASSESSEE TO EXPLAIN THE CONTENTS OF THE PAPER. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS FULLY DISCHARGED HIS ONUS IN THIS REGARD AND FURNIS HED THE NECESSARY DETAILS ALSO WHICH A.O. HAS DISCUSSED AT PAGE 15 OF HIS ORDER. 18. THE LD. A.R. OF AMBICA REALITIES PVT. LTD. SUBM ITTED THAT THE A.O. DID NOT CARRY OUT THE DIRECTION GIVEN BY THE ITAT IN FIRST ROUND OF THE LITIGATION. THE LD. A.R. SUBMITTED THAT NEITHE R IN THE SEIZED PAPER NOR ANY MATERIAL POINTED OUT THE BASIS ON WHICH IT CAN BE SAID THAT THE TRANSACTION OR INCOME PERTAINING TO THE ASSESSEE-CO MPANY. THE LD. A.R. HAS ALSO RAISED OBJECTION THAT THE A.O. DID NO T TAKE APPROVAL OF THE C.I.T. (A) AS REQUIRED U/S. 158BC(A) OF THE ACT BUT LD.D.R. FURNISHED A COPY OF THE APPROVAL OF DRAFT ASSESSMEN T ORDER OF C.I.T. DATED 31-03-2003 WHICH HAS BEEN PLACED ON RECORD. IT IS ALSO SUBMISSION OF THE LD. A.R. THAT THE A.O. ALLEGES TH AT UNDISCLOSED INCOME IS OF ASSESSEE-COMPANY. THE BURDEN OF PROOF IS ON THE DEPARTMENT TO SO PROVE IT. IN THE ABSENCE OF SAME HAVE BEEN SUPPLIED TO THE ASSESSEE THOUGH THE EVIDENCE COULD NOT BE USED IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 27 AGAINST THE ASSESSEE ESPECIALLY WHEN NOTHING IS FOU ND FROM THE ASSESSEE-COMPANY AT THE TIME OF SEARCH. THE LD. A. R. SUBMITTED THAT THE ASSESSEE HAS MADE DETAILED SUBMISSION VIDE SEVE RAL LETTERS AND THE A.O. HIMSELF HAS NOTED THIS FACT IN ORDER SHEET ENTRY DATED 30-01- 2003. THE LD. A.R. SUBMITTED THAT NONE OF THE CONT ENTIONS OF THE ASSESSEE HAVE BEEN DEALT WITH BY THE A.O. AT ALL, M UCH LESS DISCUSSED BY WHICH THE ASSESSEE ANALYZED THE TWO L OOSE PAPERS AND ARGUED THAT S TO HOW THE SAME CANNOT BE LINKED WITH THE ASSESSEE- COMPANY BUT NO COGNIZANCE THEREOF IS TAKEN BY THE A .O. AND HENCE, SUCH ORDER CANNOT BE SUSTAINED IN LAW. THE LD. A.R . SUBMITTED THAT THE ADDITION EVEN ON PROTECTIVE BASIS CANNOT BE MAD E IN THE HANDS OF THE ASSESSEE-COMPANY. THUS, THE BURDEN OF PROOF IS ON REVENUE TO ESTABLISH THAT THE FIGURES IN LOOSE PAPERS CONSTITU TES UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY. THE LD. A.R. SUBMI TTED THAT LOOSE PAPERS BO. 8 & 10 CANNOT BE LINKED WITH THE ASSESSE E-COMPANY FOR DETAILED REASONS STATED IN ASSESSEES SUBMISSION DA TED 29-01-2003. WHILE SUMMING UP THE ARGUMENT, THE LD. A.R. SUBMITT ED THAT THE PAPERS DOES NOT CARRY THE NAME OF THE ASSESSEE-COMP ANY. THERE IS NO SIGNATURE ON BEHALF OF THE ASSESSEE-COMPANY BY M R. DHANRAJ JETHANI, THE DIRECTOR OR ANYONE-ELSE. THERE IS NO REFERENCE TO ANY PROPERTY OR TRANSACTION IN THE ORDINARY COURSE OF B USINESS OF THE COMPANY. EVEN NATURE OF TRANSACTION IS NOT DESCRIB ED ON IT. THE LD. A.R. SUBMITTED THAT IT IS NOT STATED ON THE LOOSE P APERS THAT CAPITAL MEANS CAPITAL OF ASSESSEE-COMPANY. IT COULD BE ANYT HING, EVEN PERSON CAPITAL. THE LD. A.R. SUBMITTED THAT THAT T HE LOOSE PAPERS DOES NOT CARRY ANY DATE. THEREFORE, IT CANNOT EVEN BE INFERRED THAT IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 28 THE FIGURES ARE COVERED BY THE BLOCK PERIOD. THE L D. A.R. SUBMITTED THAT THE SO-CALLED PAGE IS NOT SHOWN TO BE PART OF SEIZED PAPERS AND IT IS INTRODUCED AFTER 7 YEARS FOR THE FIRST TIME. HE NCE, IT SHOULD BE CONSIDERED AS AN AFTERTHOUGHT, NOT CONFRONTED TO TH E COMPANY AT ALL BY THE A.O. AND NO OPPORTUNITY OF REBUTTING THE SAM E, HENCE THE SAID PAGE CANNOT BE USED AGAINST THE COMPANY AND CANNOT BE ADMITTED AS EVIDENCE FORTH-COMING FROM SHRI M.N. PATEL. THE LD. A.R. SUBMITTED THAT THE ASSESSEE-COMPANY DENIES THAT THE SE ARE HAND WRITINGS OR INITIALS OF SHRI DHANRAJ JETHANI AND NO THING OF THE SORT IS INVESTIGATED OR PROVED BY THE A.O. TO USE OF SUCH LOOSE PAPERS AGAINST ANYONE IS COMPLETELY AGAINST TENETS OF NATU RAL JUSTICE OR THAT OF THE SCHEME OF SEARCH AND BLOCK ASSESSMENT AND IT HAS BEEN USED BEHIND THE BACK OF THE COMPANY AND INTERPRETED TO S UIT CONVENIENCE BY READING INTO IT WHAT IS NOT COMING OUT FROM IT. 19. THE LD. D.R. FILED A COPY OF THE APPROVAL OF TH E C.I.T. WHICH HAS BEEN PLACED ON RECORD. THE LD. A.R. WHILE POINTING OUT ASSESSMENT ORDER SUBMITTED THAT HOW A PERSON CAN BE EXAMINED W HEN THE DETAILS WERE NOT FILED IN RESPECT OF NAME, ADDRESS, CONTACT NO. AND OTHERS. THE LD. D.R. SUBMITTED THAT AT THE RELEVANT TIME, M R. M.N. PATEL WAS DIRECTOR OF AMBICA REALITIES PVT. LTD. THE LD. D. R. SUBMITTED THAT THE PAPER WAS FOUND FROM THE PREMISES OF THE PATEL. THE REFORE, IT IS THE DUTY OF MR. PATEL TO PRODUCE MATERIAL AND NECESSARY EXPLANATION. THE LD. D.R. SUBMITTED THAT IN SPITE OF NUMBER OF OPPOR TUNITY, MR. PATEL DID NOT PRODUCE THE MATERIAL. THE LD. D.R. WHILE REFERR ING PAGE-4 OF A.O.S ORDER SUBMITTED THAT RIGHT FROM THE FIRST YEAR, THE A.O. ASKED BOTH THE IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 29 PARTIES TO PRODUCE MATERIAL IN THIS REGARD BUT IN S PITE OF NUMBER OF OPPORTUNITY, NO DETAILS WERE FILED. THE LD. D.R. F URTHER SUBMITTED THAT WHEN NOBODY APPEARED ON BEHALF OF THE ASSESSEE-COMP ANY THEN HOW CROSS EXAMINATION IS TO BE GIVEN. THE LD. D.R. S UBMITTED THAT THE SUBSTANTIVE ADDITION MADE IN THE HANDS OF ASSESSEE M. N. PATEL BECAUSE THE LOOSE PAPERS WERE FOUND IN HIS POSSESSI ON DURING THE COURSE OF SEARCH. HE FURTHER SUBMITTED THAT THE A. O. HAS EXAMINED THE DETAILS AND DOCUMENTS FILED BY THE PARTIES. TH E ORDER OF THE A.O. IS BASED ON THE DOCUMENTS FOUND AT THE TIME OF SEAR CH AND SUBMITTED BY THE PARTIES. 20. IN REJOINDER, LEARNED COUNSEL OF SHRI M. N. PAT EL SUBMITTED THAT THERE ARE NO REASONS FOR MAKING SUBSTANTIVE ADDITIO N IN THE HANDS OF THE ASSESSEE-M. N. PATEL. THE LD. A. R. SUBMITTED THAT THE ASSESSMENT PROCEEDING IS VITIATED AS THE A.O. UP TO PAGE-18 OF HIS ORDER DISCUSSED THE MATTER IN FAVOUR OF THE ASSESSE E-M. N. PATEL AND ONLY IN CONCLUSION, HE TAKEN A DIFFERENT ANGLE OF T HE MATTER. THE LD. A.R. SUBMITTED THAT THE A.O. DID NOT ISSUE SHOW CAU SE NOTICE ASKING ASSESSEE FOR MAKING ASSESSMENT SUBSTANTIVE IN THE H ANDS OF THE ASSESSEE- M. N. PATEL. THE LD. A.R. SUBMITTED THAT THE A.O. DID NOT APPRECIATE DIRECTION OF THE ITAT AND THE RELEVANT F ACTS WERE NOT VERIFIED BY THE A.O. BY EXAMINING EXTERNAL EVIDENCE S RELATING TO THE MATERS. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 30 21. THE LEARNED COUNSEL OF AMBICA REALITIES PVT. LT D. IN REJOINDER SUBMITTED THAT WHATEVER STATED BY MR. PATEL WERE NO T CONFRONTED THE ASSESSEE-COMPANY. 22. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES, RECORD PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT IT IS A SECOND ROUND OF LITIGATION. IN FIRST ROUND OF LITIGATION, THE MATTER HAS BEEN SENT BY THE ITAT TO THE A.O. AFTER MAKING SOME IMPORTANT OBSERVATIONS AND WITH CERTAIN DIRECTIONS WHICH ARE REPRODUCED IN PARA-5 OF HIS ORDER. WHILE SENDING BACK MATTER TO THE FILE OF A.O . THE ITAT IN CASE OF AMBICA REALITIES PVT. LTD. ORDER DATED 10-10-20 01 CLEARLY GIVEN FINDINGS IN PARA-20, PAGE-10 OF THE ORDER THAT IT I S THE PRIMARY DUTY OF THE A.O. TO GO TO THE ROOT OF THE MATTER AND DIG OU T THE TRUTH. THE RELEVANT FINDING OF ITAT IS REPRODUCED FROM THE ORD ER READS AS UNDER:- 20. WE HAVE DULY CONSIDERED THE SUBMISSION OF A LL THE THREE PARTIES AND THE MATERIAL ON RECORD. AT THE OUTSET, IT MAY BE MENTIONED THAT IT IS THE PRIMARY DUTY OF THE A.O. T O GO TO THE ROOT OF THE MATTER, DIG OUT THE TRUTH AND COME TO A FAIR AND REASONABLE CONCLUSION. IT IS HE WHO IS PRIMARILY D ETERMINING AS TO HOW MUCH TAX TO BE LEVIED ON THE TAX PAYER. HE CANNOT COLLECT THAT TAX WHICH IS NOT IN ACCORDANCE WITH LA W. HENCE, THE A.O. IS UNDER AN OBLIGATION TO SEE THAT NO PERSON I S UNDULY BURDENED BY A TAX WHICH HAS NO LEGAL BACKING. THER EFORE, THE BURDEN ON HIM IS QUITE HEAVY TO ASCERTAIN CORRECT F ACTS AND THEN COME TO A REASONABLE CONCLUSION. AT TIMES HE MAY HA VE TO ENCOUNTER EVIDENCE WHICH IS NOT DIRECT. IN SUCH AN EVENT, HE IS PLACE IN A QUASI JUDICIAL POSITION AND HAS TO BE JU DICIOUS IN APPRECIATING THE EVIDENCE BEFORE HIM. LET US EXAMIN E THE CASE BEFORE US IN THIS BACKUP. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 31 22 (1) THE ITAT HAS ALSO REFERRED SECTION 132(4A) AND OBSERVED THAT WHAT IS REQUIREMENT OF THE SECTION IS THAT THE A.O. CANNOT PROCEED SIMPLY ON THE BASIS OF PRESUMPTIONS BUT HAS TO UTILIZE THAT PIECE OF EVIDENCE BY INVESTIGATING DEED INTO I T. THE ITAT PUT QUESTION THEMSELVES - HAS THE A.O. UNDERTAKEN SUCH EXERCISE ? THE ANSWER GIVEN NO. THE ITAT EXAMINED THE CONTENTIONS AND SOME RELATED FACTS AND GAVE GUIDANCE TO A.O. PUTTING A R ELEVANT FACTS ON RECORD E.G. IT WAS CONTENTION OF MR. PATEL THAT PAPERS 8 & 10 WERE NOT IN THE WRITING OF MR. PATEL. THE ITAT OBSERVED THAT UNDER THESE CIRCUMSTANCES THE A.O. SHOULD HAVE CARRIED OUT FURT HER INVESTIGATION TO FIND OUT IN WHOSE HAND THE WRITING ARE. AS REGA RDS CONTENTION MR. PATEL WAS HOLDING AGGREGATE TO 3.75% ONLY IN THE CO MPANY WHEREAS IN LOOSE PAPER, PROFIT RATE IS 6.25% - NO ENQUIRY WITHOUT JUMPING TO ANY CONCLUSION AND NEEDS TO PROBE FURTHER INTO IT. 22(2) THE ITAT IN CASE OF MR PATEL HAS SUMMARIES TH E DISPUTED AMOUNT AT PAGE 5 OF THEIR ORDER WHICH IS REPRODUCED AS UNDER:- THUS, SUMMARISING THE POSITION OF ADDITIONS MADE O N THE BASIS OF SEIZED PAPERS (PAGES 8 & 10), THE FOLLOWING PICTURE EMERGE : ON SUBSTANTIVE BASIS : IN ASSESSEES IN COMPANYS HANDS. RS. HANDS RS. PAGE 8 6,25,000/- 10,85,125/- PAGE 10 20,72,000/- 2,16,56,000/- 26,97,000/- 2,27,41,125/- ON PROTECTIVE BASIS: PAGE 8 67,820/- - - PAGE 10 13,53,500/- ---------- 14,21,320/- -- IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 32 22(3) LET US SEE, HOW THE AO HAS CARRIED OUT/ FRAME D THE ASSESSMENT ORDER AND NOTED DOWN THE FACTS OF THE CASE IN HIS C ONCLUSION. THE A.O. IN HIS ORDER UP TO PAGE-16, PARA-10 REPRODUCED THE SUBMISSIONS AND CONTENTIONS OF THE PARTIES WHAT THEY ARE STATIN G IN RESPECT OF DIFFERENT ENTRIES OF LOOSE PAPERS PAGE-8 AND 10. IN PARA 11 THE AO NOTED ITEM WISE OF THE PAPERS AND STATED THAT THE A SSESSEE FAILED TO EXPLAIN ADEQUATE NATURE AND SOURCE OF THE AMOUNTS T HEREFORE HE MADE ADDITION OF RS 69,820/- AND 34,25,000/-.THE RE LEVANT PARA 11 OF THE AOS ORDER REPRODUCED AS UNDER:- 11. SHRI M. N. PATEL IN HIS STATEMENT BEFORE THE U NDERSIGNED HAS CONFIRMED THAT HE IS A PARTY TO ALL THE TRANSACTIONS SHOWN ON PAGE 8 AND 10 OF ANNEXURE A-4 SEIZED FROM HIS PREMISES IN THE CAPACITY OF BENEFIC IAL SHARE HOLDER TO THE EXTEND OF 6.25% OF AMBICA REALITIES PVT. LTD. FURTHER, HE HAS ALSO CONFIRMED THAT HIS TRANSACTIONS WITH THE COMPANTY AMBICA REALITIES PVT . LTD. HAS BEEN REFLECTED ON PAGE NOS. 8 & 10. FURTHER, HE HAS ALSO STATED THAT HE HAVING CONTROL AND POSSESSION OF FLAT IN THE RAGHUKUL APARTMENT AND OF FICE IN DHANRAJNI BUILDEING IN VIEW OF THE PROFITS THAT HAD ACCRUED TO HIM BECAUSE OF THE ACTIVITIES OF THE COMPANY AMBICA REALITIES PVT. LTD. HE HAS STATED O N OATH THAT ALL THE ACTIVITIES AND TRANSACTIONS REFLECTED ON THE SEIZED PAPERS BEA RING NO.8 & 10 PERTAIN TO AMBICA REALITIES PVT. LTD. IN WHICH HE HAS BENEFICI AL INTEREST OF 6.25%. THEREFORE, ALL THE FINANCIAL TRANSACTIONS REFLECTED IN THE SAID PAPER, AS PER HIS STATEMENT, IS CONSIDERED TRUE AND CORRECT. ACCORDI NGLY THE SAID UNEXPLAINED TRANSACTIONS ARE BROUGHT TO TAX. AFTER CAREFUL CON SIDERATION OF ALL THE EVIDENCES ON RECORD AND THE STATEMENT GIVEN BY THE ASSESSEE M Y OBSERVATIONS ARE AS FOLLOWS: 11.1 AS PER SEIZED DOCUMENT PAGE 10, THE NEW CAPIT AL OF RS.9,15 LACS WAS CONTRIBUTED BY HIM TOWARDS THE AFFAIRS OF AMBIC A REALITIES PVT. LTD. THE NATURE AND SOURCE HAS NOT BEEN ADEQUATELY EXPLAINED AND THE SAME IS TAXED IN THE HANDS OF THE ASSESSEE. 11.2 AS PER SEIZED DOCUMENT PAGE 10, THE CAPITAL O F RS.2.25 LACS WAS CONTRIBUTED BY HI TOWARDS THE AFFAIRS OF AMBICA REA LITIES PVT. LTD. THE NATURE AND SOURCE HAS NOT BEEN ADEQUATELY EXPLAINED AND THE SA ME IS TAXED IN THE HANDS OF THE ASSESSEE. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 33 11.3 AS PER SEIZED DOCUMENT PAGE 10, THE PROFIT OF RS.3.20 LACS HAS BEEN GENERATED BY THE TRANSACTIONS OF THE ASSESSEE ALONG WITH SHRI DHANRAJBHAI JETHAI OF AMBICA REALITIES PVT. LTD. THE SAID PROF IT HAS BEEN CONFIRMED BY THE ASSESSEE THAT IT HAS ARISEN TO HIM AND ACCORDINGLY THE SAME IS BROUGHT TO TAX. 11.4 PROFIT OF RS.5,57,500/-, AS EVIDENCED FROM TH E SEIZED DOCUMENT PAGE NO.10 HAS ARISEN ON ACCOUNT OF LAND TRANSACTIO N IN SURVEY NO.73/75. THE SAID PROFIT HAS NOT BEEN REFLECTED IN THE REGULAR A CCOUNTS OF THE ASSESSEE. 11.5 PROFIT OF RS,54,000/-, AS EVIDENCED FROM THE SEIZED DOCUMENT PAGE NO.10 HAS ARISEN ON ACCOUNT OF ONE TRANSACTION THE ASSESSEE AND DHANRAJBHAI JETHANI HAD UNDERTAKEN AS PARTNERS. THE ASSESSEE I N HIS STATEMENT HAS CONFIRMED THAT HIS SHARE OF PROFIT WAS RS.54,000/-. THE SAME IS ACCORDINGLY BROUGHT TO TAX. 11.6 AS PER PAGE NO.8 THE TOTAL PROFIT EARNED BY A MBICA REALITIES PVT. LTD. RS.10,85,125/- AND THE SHARE OF PROFIT OF TH E ASSESSEE IS RS.67,820/-. FURTHER AS PER PAGE NO.10 THE SHARE OF PROFIT BEING 6.25% OF THE TOTAL IS BEING RS.13,53,500/-. IN THIS REGARD THE ASSESSEE HAS SU BMITTED THAT THE SAID PROFITS ARE PROFITS OF AMBICA REALITIES PVT. LTD. AND THE C OMPANY HAS NOT DECLARED ANY DIVIDEND TO THE SHARE HOLDERS. IN THE CASE OF A PR IVATE LIMITED COMPANY THE PROFIT CANNOT BE DIRECTLY GIVEN TO THE SHARE HOLDERS BUT I T CAN BE DISTRIBUTED IN THE FORM OF DIVIDEND. IN THIS REGARD IT IS POINTED OUT IN H IS STATEMENT THE ASSESSEE HAS EXPLAINED THAT PAGE NO.10 IS THE DETAILS OF SETTLEM ENT OF HIS TRANSACTIONS WITH AMBICA REALITIES PVT. LTD. HE HAS ALSO CONFIRMED THAT AFTER THE SETTLEMENT OF THE TOTAL TRANSACTION THE NET AMOUNT DUE TO HIM OF RS.1750/- WAS PAID TO HIM BY SHRI DHANRAJ JETHANI. THEREFORE, THE DETAILS OF RE CEIPTS DUE TO THE ASSESSEE ARE SHOWN ON PAGE 10. PAGE 10 GIVES THE DETAILS OF THE SETTLEMENT OF UNACCOUNTED TRANSACTIONS AND AS IN THE FORM OF COPY OF ACCOUNT OF THE ASSESSEE IN WHICH THE CREDIT AND DEBIT ENTRIES ARE DULY REFLECTED. THE T OTAL OF CREDIT ENTRIES AFTER TRANSFER OF RS.10,93,750/- TO A NEW FUND COMES TO RS.23,31,7 50/-. THE TOTAL OF SIMILARLY DEBIT ENTRIES COMES TO RS.23,30,000/-. FINALLY, TH E BALANCE AMOUNT OF RS.1750/- HAS BEEN PAID TO THE ASSESSEE BY SHRI DHANRAJ V. JE THANI IN CASH AND THE ACCOUNT HAS BEEN ADEQUATELY SETTLED. THEREFORE, TH E CONTENTION OF THE ASSESSEE THAT NO DIVIDEND HAS BEEN RECEIVED FROM THE COMPANY IS NOT ACCEPTABLE. THE DETAILS OF CASH OR ASSETS RECEIVED BY THE ASSESSEE FROM THE COMPANY IS ITSELF MENTIONED ON THE SAID PAPER AND SAME IS TREATED AS THE INCOME RECEIVED BY THE ASSESSEE FROM THE COMPANY. THIS SETTLEMENT IS TOTA LLY OUTSIDE THE BOOKS OF ACCOUNTS. ACCORDINGLY THE SHARE OF PROFITS OF RS.1 3,53,500/- AND RS.67,820/- IS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE AS INCO ME RECEIVED FROM THE COMPANY. EVEN OTHERWISE THE SAID TRANSACTIONS ARE N OT ACCOUNTED FOR, THEREFORE, THEY CANNOT BE RECEIVED AS REGULAR DIVIDENDS. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 34 11.7 AS REGARDS THE SHARE CAPITAL OF RS.6.25,000/- EVIDENCED FROM PAGE 8 THE ASSESSEE HAS SUBMITTED AS FOLLOWS:- REGARDING THE CAPITAL OF RS.6,25,000/- I HAVE TO S TATE THAT THE SAID AMOUNT IS GIVEN FROM MY PERSONAL S.A/C. FROM THE FIRM M/S. SA TYA VIJAY SODA FACTORY AND FROM A/C. OF MY SON JITESH PATEL. HOWEVER, WE HAVE NOT SPECIFIED IN OUR BOOKS AS SHARE CAPITAL BUT WE HAVE SHOWN ASS AMOUNT PAID TO AMBICA REALITIES PVT. LTD. AND THEY HAVE BIFURCATED THE SAID AMOUNT AS S HARE CAPITAL AND LOAN DEPOSITS. THE ASSESSEE HAS NOT FURNISHED ANY SUPPORTING EVIDE NCE. THE ASSESSEE HAS NOT FILED ANY DOCUMENT OR COPY OF RETURN TO SHOW THAT T HE NATURE AND SOURCE OF THE SAID CAPITAL OF RS.6.5 LACS HAS BEEN EXPLAINED. FU RTHER, THE DETAILS REGARDING THE NAME OF THE COMPANY IN WHICH THE SAID CAPITAL HAS B EEN INVESTED HAS ALSO NOT BEEN FURNISHED. THE ASSESSEE HIMSELF SAYS THAT THE Y HAVE NOT SPECIFIED THE AMOUNT OF RS.6.25 LACKS AS SHARE CAPITAL IN THEIR B OOKS. IN THE LOOSE PAPER IT IS CLEARLY MENTIONED AS CAPITAL. THEREFORE, THE SAME IS TREATED AS UNEXPLAINED CAPITAL AND TAXED IN THE HANDS OF THE ASSESSEE. THE TWO ISSUES I.E. ADDITION OF RS.6,92,820/- BASED ON PAGE 8 AND ADDITION OF RS.34,25,000/- BASED ON PAGE 10 IS, IN VIEW OF THE FACTS DISCUSSED ABOVE, IS DECIDED AGAINST THE ASSESSEE AND ADDED TO THE TOTAL INCOME. THE SAID ADDITIONS ARE INDIVIDUALLY DISCUSSED IN PARA 11 (11.1 TO 1.7) ABOVE. 22(4) THE ORDER OF THE A.O. HAS BEEN APPROVED BY T HE CONCERNED C.I.T. DATED 31-03-2003 SUBJECT TO DIRECTION OF ADD ITIONAL C.I.T., RAJKOT CONTAINED IN THE LETTER DATED 31-03-2003. TH E A.O. REPRODUCED THOSE CONTENTS OF THE LETTER IN HIS ORDER AT PAGE 1 8 AND 19 OF THE ORDER. THE CONTENTS OF THE LETTER OF THE DRAFT ORD ER ARE THAT THE DRAFT ASSESSMENT ORDER RECEIVED ON 27-03-2003 AND SAME WA S SENT TO THE C.I.T. THE C.I.T. RETURNED BACK THE SAID FILE AND A.O. WAS DIRECTED TO CARRY OUT ITATS DIRECTION. THE A.O. GOT ONLY ONE DAY TO CARRY OUT THE DIRECTION I.E. ON 28-03-2003 AND IN ONE DAY HE HAD TRIED TO DO WHAT IS POSSIBLE. IT HAS ALSO BEEN CONTENDED IN THE LETTER THAT THE A.O. HAS NOT TAKEN STATEMENT OF ALL PERSONS AMARKUMAR, BHUDA RBHAI, N. C. PANDYA, BATUKBHAI PATEL, PRAFULBHAI PATEL AND OTHER S THOSE PERSONS IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 35 WHOSE NAMES APPEAR IN THE SEIZED PAPERS. HOWEVER, U NDER THE CIRCUMSTANCES, IT IS STATED THAT THE ADDITION CAN B E MADE ON THE BASIS OF SEIZED PAPERS IN THE HANDS OF BOTH PERSONS I.E. MANSUKHBHAIS HANDS SUBSTANTIALLY AND IN THE HANDS OF AMBICA REAL ITIES PVT. LTD. PROTECTIVELY. SINCE THE CASE IS GETTING TIME BARRE D TODAY I.E. 31-03- 2003, THE A.O. SIMPLY FOLLOWED THE DIRECTION OF C.I .T., RAJKOT AND ADDITIONAL C.I.T. STATING THAT THE DIRECTION WAS BE ING OF STATUTORY AND BINDING NATURE. THE ORDER OF THE ITAT DATED 10-10- 2001 AND THE A.O. WAS TO COMPLETE ASSESSMENT BY SENDING DRAFT ORDER D ATED 27-03- 2003 AT THE END OF THE PERIOD WHEN IT IS GOING TO B E TIME BARRED I.E. 31-03-2003. FINALLY THE AO MADE THE ASSESSMENT AS P ER THE DIRECTION AS UNDER :- 8. SUBJECT TO THE ABOVE, THE TOTAL UNDISCLOSED INC OME IS COMPUTED AS UNDER: UNEXPLAINED CASH AS PER RETURN 50,000 UNEXPLAINED ORNAMENTS AS PER RETURN 60,383 UNEXPLAINED INVESTMENT IN FDR/SHARES AS PER RETURN 25,000 UNEXPLAINED INVESTMENT IN OTHER VALUABLES AS PER 1,13,375 RETURN. UNEXPLAINED EXPENDITURE ON MARRIAGE AS PER RETURN 81,437 UNEXPLAINED NEW CAPITAL AS DISCUSSED IN PARA 11.1 9,15,000 UNEXPLAINED CAPITAL AS DISCUSSED IN PARA 11.2 2,25,000 PROFIT AS DISCUSSED IN PARA 11.3 3, 20,000 PROFIT AS DISCUSSED IN PARA 11.4 5, 57,500 PROFIT AS DISCUSSED IN PARA 11.5 54,000 PROFIT AS PER DIRECTIONS(RS.10,85,125/- AND 2,27,41,125 RS.2,16,56,000/-) UNEXPLAINED CAPITAL AS DISCUSSED IN PARA 11.7 6,25,000 IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 36 --------------- TOTAL UNDISCLOSED INCOME. 2,57,67,820 22(5) ON PERUSAL OF ORDER OF THE AO AND RECORD WE FIND THAT IN RESPECT OF SOME OF THE ENTRIES, CERTAIN COGENT MATE RIAL EVIDENCES COME TO NOTICE OF THE A.O. BUT HE HAS NOT EXTENDED HIS INVESTIGATION AND EXAMINATION TO FIND OUT THE COMPLETE FACTS OF T HOSE ENTRIES. EVEN, THE DRAFT ORDER SENT BY AO TO THE C.I.T. ON 27-03-2003, THE C.I.T RETURNED BACK THE A.O. WITH THE DIRECTION TO CARRY OUT THE DIRECTIONS GIVEN BY THE ITAT. THE SAME COULD NOT B E CARRIED OUT BY THE AO ON THE GROUND THAT TIME LEFT WITH AO WAS ONL Y ONE DAY TO CARRY OUT SUCH DIRECTIONS. WHAT THE AO HAS DONE IS THAT H E SIMPLY RESTRICTED HIS EXAMINATION/ONUS TO ASK MR PATEL REGARDING LOOS E PAPERS AND NOTED THE CONTENTS, WHEREAS THE PROCEDURE SHOULD BE THAT THE AO HAVE TO EXTEND HIS INVESTIGATION AND EXAMINATION TO FIND OUT COMPLETE FACTS. THUS, THE ADMITTED FACTS OF THE CASE ARE THA T THE A.O. FAILED TO CARRY OUT SOME OF THE IMPORTANT NORMAL PROCEDURE OF INVESTIGATION AND DIRECTIONS OF THE ITAT BARRING ON THE ITEMS OF ADDI TIONS. SO, UNDER THE CIRCUMSTANCES, NOW QUESTION AROSE HOW TO DECIDE THE MATTERS AT THIS STAGE WHEN THE A.O. FAILED TO CARRY OUT DIRECTIONS OF THE ITAT AND ALSO FAILED TO PUT THE COMPLETE FACTS ON RECORD AFTER NE CESSARY INVESTIGATION AND EXAMINATION. THE A.O. OVERLOOKED ALL THE CLUES AND HINTS OF M. N. PATEL REGARDING SOME OF THE ENTRIES WHICH REQUIRE FURTHER EXAMINATION AND INVESTIGATION. IN THE APPEL LATE JURISDICTION, THE APPELLATE COURT HAS TO CONSIDER WHETHER THERE IS A JUSTIFICATION OF THE IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 37 ORDER OF THE A.O. AGAINST WHICH THE APPEAL IS FILED . THOUGH, THE ALLEGATION OF THE DEPARTMENT THAT THE ASSESSEE COUL D NOT APPEAR BEFORE THE A.O. IN SPITE OF SEVERAL OPPORTUNITIES G IVEN TO THEM AND AVAILED THEIR OPPORTUNITIES FOR HEARING FOR A LIMIT ED PURPOSE ONLY, THIS CONTENTION OF THE REVENUE CANNOT BE ACCEPTED AT THI S STAGE AS PER THE ABOVE DETAILED DISCUSSIONS PARTICULARLY WHEN THE A. O. DID NOT EXERCISE HIS POWERS UNDER THE ACT INCLUDING THE POW ERS GIVEN U/S. 131 AND 136A OF THE ACT AND OTHERS. WE THEREFORE, NOT OF THE VIEW TO SEND BACK MATTER TO THE FILE OF THE A.O. FOR GIVING ONE MORE INNING OF THE LITIGATION PARTICULARLY CONSIDERING THE PRESENT SCENARIO OF THE LITIGATION AND OLD CASE RELATED TO THE PERIOD 1986- 87 TO 25-12- 1996.UNDER THE CIRCUMSTANCES WE PROCEED TO DECIDE T HE MATTER ON THE BASIS OF MATERIAL AND FACTS AVAILABLE ON RECORD . AS STATED ABOVE THAT WHEN THIS IS A SECOND ROUND OF LITIGATION, OUR SCOP E OF CONSIDERING THE MATTER IS LIMITED IN THE SENSE TO S EE WHETHER THE DIRECTION OF THE ITAT HAS BEEN CARRIED OUT BY THE A .O. OR NOT. WE FIND THAT APART FROM GENERAL DISCUSSION, THE ITAT HAS GI VEN CERTAIN SPECIFIC DIRECTIONS WHICH ARE IN 10 NUMBERS. THE I TAT DIRECTED THAT WHILE DECIDING THE ISSUE AFRESH, THE A.O. WILL KEEP IN MIND THESE DIRECTIONS. 22(6) THE MAIN THRUST OF ARGUMENTS OF LEARNED RE PRESENTATIVES OF BOTH THE PARTIES ARE THAT THE A.O. DID NOT CARRY OU T THE DIRECTION GIVEN BY THE ITAT PARTICULARLY DIRECTION NO.4 AND 5 WHERE IT WAS DIRECTED THAT A.O. SHALL INQUIRE ABOUT THE BANK TRANSACTION PARTICULARLY MENTIONED AT PAGE-8 UNDER THE DESCRIPTION OF BANK A S WELL AS O.B.C. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 38 IT IS ALSO ALLEGATION OF BOTH THE LEARNED REPRESENT ATIVES OF THE PARTIES THAT DIRECTION NO.5 THAT A.O. SHALL EXAMINE ALL PER SONS NAMED IN BOTH THE PAPERS HAVE NOT BEEN CARRIED OUT BY THE A.O. 22(7) FIRST OF ALL, WE SEE THAT WHAT ARE THE AMOUNT IN DISPUTE WHICH HAVE BEEN SENT BY THE ITAT TO THE FILE OF A.O. IN F IRST ROUND OF LITIGATION. AS REGARDS THE AMOUNT IN DISPUTE IN THE HANDS OF C OMPANY, AMBICA REALITIES PVT. LTD.(HEREINAFTER REFERRED TO AS ASS ESSEE-COMPANY) IS RS.2,27,42,125/- ( RS.10,85,125/- ON THE BASIS OF P AGE NO.8 AND RS,2,16,56,000/- ON THE BASIS OF PAGE NO.10) ARE TH E SAME AMOUNT WHICH ARE IN THE ORIGINAL ASSESSMENT AND FRESH ORD ER ON DIRECTION OF ITAT. THE DIFFERENCE ONLY IS THAT, IN ORIGINAL ASS ESSMENT, THE AMOUNT HAS BEEN ADDED ON SUBSTANTIVE BASIS IN THE HAND OF THE ASSESSEE- COMPANY AND IN THE FRESH ASSESSMENT, THE AMOUNT IS TAKEN ON PROTECTIVE BASIS. IN RESPECT OF SHRI M. N. PATEL (HEREINAFTER REFER RED TO AS ASSESSEE) , IN FIRST ROUND OF LITIGATION RS.26,97,000/- (RS.6 ,25,000/- ON THE BASIS OF PAGE NO.8 AND RS.20,72,000/- ON THE BASIS OF PAG E NO.10) HAS BEEN TAKEN IN HIS HANDS ON SUBSTANTIVE BASIS AND RS .14,21,320/- (RS.67,820/- ON THE BASIS OF PAGE NO.8 AND RS.13,53 ,500/- ON THE BASIS OF PAGE NO.10) WAS TAKEN ON PROTECTIVE BASIS. IN FRESH ASSESSMENT, THE A.O. HAS ASSESSED THE FOL LOWING AMOUNT AS SUBSTANTIVE BASIS FROM PAGE NO.10 :- UNEXPLAINED CAPITAL RS. 9,16,000 ( TYPOGRAPHY MISTAKE IN A.O.S ORDER. HE HAS TAKEN RS.9,15,000/-) UNEXPLAINED CAPITAL RS. 2,25,000 IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 39 PROFIT RS. 3,20,000 PROFIT RS. 5,57,500 PROFIT RS . 54,000 TOTAL RS.20,72,500 PROFIT (RS.10,85,825/- PAGE 8 RS.2,16,56,000/- PAGE10) ON PROTECTIVE BASIS . TOTAL RS.2,27,42,125 UNEXPLAINED CAPITAL RS . 6,25,000 22(8) THE CONTENTION OF LD. A.R. OF MR PATEL IS THA T THE A.O. WITHOUT JURISDICTION INCREASED THE AMOUNT OF ADDITION. THE A.O. HIMSELF IN SHOW CAUSE NOTICE STATED THAT THE ISSUES WHICH ARE FOR CONSIDERATION WAS ONLY IN RESPECT OF RS.6,92,820/- AND RS.34,25,0 00/-. WE FIND SUBSTANCE IN THE CONTENTION OF THE LD. A.R. THAT AS PER THE DIRECTION OF THE ITAT WHICH WERE LIMITED TO THE AMOUNT OF RS.6,9 2,820/- (RS.6.25,000/- ORIGINALLY ASSESSED ON THE BASIS OF PAGE NO.8 ON SUBSTANTIVE BASIS AND RS.67,820/- ON PROTECTIVE BAS IS OF PAGE NO.8). THE SECOND AMOUNT OF DISPUTE IS RS.20,72,000/- ON T HE BASIS OF PAGE NO.10 ON SUBSTANTIVE BASIS AND RS.13,53,500/- ON PR OTECTIVE BASIS ON THE BASIS OF PAGE NO.10. THESE WERE THE AMOUNT OF INVESTIGATION AND EXAMINATION BY THE A.O. IN FRESH ASSESSMENT. T HE ITAT DID NOT SENT ENTIRE MATTER RELATED TO PAGE NOS. 8 AND 10 BU T THE DIRECTIONS WERE CLEARLY GIVEN ON PAGE NO.9 OF ITAT ORDER WHICH READS AS THEREFORE, THE ISSUE RELATING TO THE ADDITION OF R S.6,92,820/- AND RS.34,25,000/- ARE REMANDED BACK TO THE FILE OF THE A.O. TO DECIDE IT IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 40 AFRESH IN ACCORDANCE WITH LAW. IN THE LIGHT OF TH E FACT, THE NEW ADDITIONS MADE BY THE A.O. ARE NOT WARRANTED. 22(10) NOW COMING TO THE ITEM WISE WHICH HAS SENT B ACK BY THE ITAT FOR CONSIDERATION BY THE A.O. THESE H ARE AS U NDER :- 22(10) (I) RS.6,92,820/- ON SUBSTANTIVE BASIS OF P AGE NO.8. (THIS AMOUNT INCLUDES TWO ITEMS RS.6,25,000/- AND RS.67,8 20/-).THE ASSESSEE IN HIS STATEMENT RECORDED ON 28-03-2003 BY A.O. STATED THAT M. P. STANDS FOR MANSUKHBHAI PATEL. RS.6,25,0 00/- IS CAPITAL. IN PARA-11.7, THE A.O. NOTED THE FACT THAT THE ASSESSE E HAS SUBMITTED REGARDING CAPITAL OF RS.6,25,000/- READS AS REGARDING CAPITAL OF RS.6,25,000/-, I HAVE TO STATE THAT THE SAID AMOUNT IS GIVEN FROM MY PERSONAL SAVINGS ACCOUNT FROM THE FIRM M/S. SATIYA VIJAY SOD A FACTORY AND ACCOUNT OF MY SON JITESH PATEL. HOWEVER, WE HAVE NOT SPECIFIED I N OUR BOOKS AS SAID CAPITAL BUT WE HAVE SHOWN AS AMOUNT PAID TO AMBICA REALITIE S PVT. LTD. AND THEY HAVE BIFURCATED THE SAID AMOUNT AS SHARE CAPITAL AND LOA N DEPOSITS . THE A.O. HELD THAT THE ASSESSEE FAILED TO FILE ANY DOCUMENT OR CO PY OF RETURN TO SHOW THAT THE NATURE AND SOURCE OF THE SAID CAPITAL OF RS.6,25,000/-. FURTHER, THE DETAILS REGARDING THE NAME OF THE COMP ANY IN WHICH THE SAID CAPITAL HAS BEEN INVESTED HAS ALSO NOT BEEN FU RNISHED. THE ASSESSEE DID NOT SHOW THIS AMOUNT IN HIS/THEIR BOOK S. IN ABSENCE OF PROPER EVIDENCE AND MATERIAL, THE A.O. MADE THE ADD ITION. IN THE LIGHT OF DETAILED DISCUSSION MADE IN THIS ORDER, WE FIND THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE AMOUNT OF CAPITAL IN SPIT E OF ADMITTING BEFORE THE A.O. THAT THE AMOUNT WAS FROM HIS PERSONAL SAVI NGS ACCOUNT AND FROM THE FIRM-SATIYA VIJAY SODA FACTORY AND FROM AC COUNT OF HIS SON JITESH PATEL. IT IS SETTLED PRINCIPLE OF LAW OF EV IDENCE THAT IF THE BEST IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 41 EVIDENCE IS NOT PRODUCED, AN ADVERSE INFERENCE CAN BE TAKEN. SINCE THE ASSESSEE HAS FAILED TO FURNISH THE NECESSARY DE TAILS, WE THEREFORE, THE ADDITION OF RS 6,25,000/- MADE BY A. O. ON SUBSTANTIVE BASIS IS CONFIRMED. 22(10) (II) RS.67,820/- PROFIT ON THE BASIS OF PAGE NO.8 : BEFORE THE A.O. IN THE STATEMENT, THE ASSESSEE STA TED THAT RS.67,820/- IS 6.25% SHARE OF PROFIT OF RS.10,85,12 5/-. THE A.O. IN PARA-11.6 IN RESPECT OF PAGE NO.8 NOTED THAT THE TO TAL PROFIT EARNED BY AMBICA REALITIES PVT. LTD. WAS RS.10,85,125/- AND T HE SHARE OF PROFIT OF ASSESSEE WAS RS.67,820/-. FURTHER, AS PER PAGE NO.10, THE SHARE OF PROFIT BEING 6.25% OF THE TOTAL IS BEING RS.13,5 3,500/-. HE FURTHER NOTED THAT THE ASSESSEE HAS SUBMITTED THAT THE SAID PROFITS ARE PROFIT OF AMBICA REALITIES PVT. LTD. THE PAGE NO.10 AS EX PLAINED BY THE ASSESSEE IS THE DETAILS OF SETTLEMENT OF HIS TRANSA CTION WITH AMBICA REALITIES PVT. LTD. THE ASSESSEE CONFIRMED BEFORE THE A.O. THAT AFTER THE SETTLEMENT OF THE TOTAL TRANSACTION, THE NET AM OUNT DUE TO HIM RS.1750/- PAID TO HIM BY SHRI DHANRAJ JETHANI. THE A.O. HELD THAT SHARE OF PROFIT RS.67,820/- AND RS.13,53,500/- BROU GHT TO THE TAX IN THE HANDS OF ASSESSEE AS INCOME RECEIVED FROM THE C OMPANY. ON PERUSAL OF NOTING OF THE SAID PAGES NO.8 AND 10 AND THE FACTS NOTED BY A.O., WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE RECEIVED SHARE OF PROFIT 6.25% STATED TO BE FROM THE PROFIT OF AMBICA REALITIES PVT. LTD. AS REGARDS THE SHARE OF ASSESSEE 6.25%, THERE IS NO DISPUTE ABOUT THE FACT THAT THIS INCOME PERTAINS TO THE ASSESSEE. THEREFORE, SAME IS LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE. WE THEREFORE, CONFIRM THE ADDITION TO THE EXTENT OF RS.67,820/- NOTED IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 42 IN PAGE NO.8 AND RS.13,53,500/- NOTED IN PAGE NO.10 . ON SUBSTANTIVE BASIS. NOW, THE QUESTION REMAIN TO BE EXAMINED IS THAT WH O IS THE OWNER OF PROFIT OF BALANCE 93.75%. THE CONTENTION OF THE AS SESSEE IS THAT THIS AMOUNT OF PROFIT IS HIS SHARE PROFIT FROM AMBICA RE ALITIES PVT. LTD. DURING THE SEARCH PROCEEDINGS, IT WAS STATED BY THE ASSESSEE THAT THE ASSESSEE WAS HAVING 6.25% SHARE HOLDING AND WAS DIR ECTOR IN AMBICA INDUSTRIES PVT. LTD. THERE IS NO DENIAL OF THE AMBICA REALITIES PVT. LTD. THAT SHRI M. N. PATEL WAS NOT T HE DIRECTOR OF AMBICA REALITIES PVT. LTD. FURTHER, THE ACCOUNT OF PAGE NO.10 HAS BEEN STATED TO BE SETTLED THROUGH DHANRAJ JETHANI W HO IS MANAGING THE BUSINESS OF AMBICA REALITIES PVT. LTD. IN THIS REGARD, ONE OF THE IMPORTANT ADMITTED FACT OF THE ISSUE IS THAT IN SPI TE OF COGENT MATERIAL AND CLUES POINTED OUT BY SHRI M. N. PATEL FROM WHOS E RESIDENCE THESE PAPERS NO. 8 AND 10 WERE FOUND BUT TO SORRY T O STATE THAT THE A.O. DID NOT EXTEND HIS INVESTIGATION TO EXAMINE TH E PERSON OF AMBICA REALITIES PVT. LTD. AND SHRI DHANRAJ V. JETHANI OR OTHER RELEVANT PERSONS AND RECORD. IT IS ADMITTED FACT THAT THERE IS OWNER OF BALANCE AMOUNT OF PROFIT BUT MERELY SAYING BY M. N. PATEL, IT CANNOT BE HELD THAT THE OWNER OF PROFIT OF BALANCE AMOUNT WAS AMBI CA REALITIES PVT. LTD. IN ABSENCE OF PROPER INVESTIGATION AND AFTER VERIFICATION PUTTING THE RELEVANT COMPLETE FACTS BY A.O. AND FAILURE TO CARRY OUT A SPECIFIC DIRECTION OF THE ITAT, THE ISSUE RELATING OWNER OF BALANCE AMOUNT OF PROFIT IS REQUIRED TO BE DECIDED IN FAVOUR OF AMBIC A REALITIES PVT. LTD. IT IS ONUS ON THE REVENUE TO ASSESS THE INCOME IN T HE HAND OF THE REAL OWNER. THE REVENUE IS LACKING IN DISCHARGING THIS ONUS REGARDING THE IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 43 BALANCE PROFIT. THEREFORE, WE ARE OF THE VIEW THAT THIS BALANCE AMOUNT OF PROFIT CANNOT BE ASSESSED IN THE HANDS OF AMBICA REALITIES PVT. LTD. , TO THAT EXTENT THE PROTECTIVE ADDITION FROM THE HANDS OF AMBICA REALITIES PVT. LTD. IS ALSO DELETED. 22(11) SECOND AMOUNT IN DISPUTE IS RS.34,25,000 /-, WHICH IS TOTAL OF TWO AMOUNT, (A) RS.20,72,000/- ON SUBSTANTIVE BASIS AND (B) RS.13,53,500/- ON PROTECTIVE BASIS ( BOTH AMOUNT ON THE BASIS OF PAGE NO.10.) THE AMOUNT OF RS.20,72,000/-IS THE TOTAL AMOUNT OF VARIOUS ADDITIONS OF WHICH IS DISCUSSED AS BELOW :- I) RS.9,15,000/-( RS 9,16,000/-) CAPITAL AS PER PAG E NO.10 II) RS.2,25,000/- CAPITAL AS PER PAGE NO.10 III) RS.3,20,000/- PROFIT PAGE NO.10 IV) RS.5,57,500/- SURVEY NO.73/75 - PAGE NO.10- V) RS.54,000/- PAGE NO.10 22(11) (I) RS.9,15,000/- CAPITAL AS PER PAGE NO.10 :- ( IT APPEARS THAT THERE IS TYPOGRAPHICAL MISTAKE IN FIGURE, IT S HOULD BE RS 9,16,000/-) MR. M. N. PATEL IN HIS STATEMENT IN REPLY TO QUEST ION NO.5 STATED THAT THIS NEW FUND IS MADE BY DHANRAJBH AI FOR NEW PROJECT OF AMBICA REALITIES PVT. LTD. (THE AMOUNT IN QUESTI ON WAS WRONGLY STATED AS RS.10,93,750/- INSTEAD OF RS.9,15,000/-). THE A.O. VIDE PARA-11.1 OF THE ORDER MADE THE ADDITION STATING TH AT THE NATURE AND IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 44 SOURCE HAS NOT BEEN ADEQUATELY EXPLAINED BY THE ASS ESSEE. WE FIND THAT IN SPITE OF THE FACTS POINTED OUT BY THE ASSES SEE THAT THIS NEW FUND IS MADE BY DHANRAJ BHAI FOR NEW PROJECT FOR AM BICA REALITIES PVT. LTD. THE A.O. DID NOT EXTEND HIS INVESTIGATION AND EXAMINATION FURTHER TO FIND THE CORRECT AND COMPLETE FACTS. TH ERE IS NO SUFFICIENT MATERIAL BASIS ON WHICH IT CAN BE SAID THIS AMOUNT IS INVESTED EITHER BY THE COMPANY OR BY THE ASSESSEE, MN PATE. IN LIGH T OF DETAILED DISCUSSION MADE IN DIFFERENT PARA OF THIS ORDER , W E ARE OF THE VIEW THAT THERE IS NO SUFFICIENT MATERIAL ON RECORD TO H ELD THAT THIS IS CAPITAL OF RS.9,15,000/- IS OF THE ASSESSEE OR OF AMBICA REALITIES PVT. LTD. FURTHER, IN SPITE OF THE SPECIFIC CLEAR DIRECTION O F THE ITAT, THE A.O. DID NOT TAKE TROUBLE TO EXAMINE EITHER PERSONS OF A MBICA REALITIES PVT. LTD. OR DHANRAJBHAI. IN ABSENCE OF COMPLETE FACTS ON RECORD, THIS AMOUNT OF RS.9,15,000/- NEITHER CAN BE ADDED IN THE HANDS OF THE ASSESSEE, MN PATEL OR IN THE HANDS OF THE AMBICA R EALITIES PVT. LTD. THEREFORE, WE DELETED THIS ADDITION OF RS.9,15,000/ - FROM THE HANDS OF THE ASSESSEE AND ALSO FROM THE HANDS OF AMBICA REAL ITIES PVT. LTD. MADE ON PROTECTIVE BASIS. 22(11) (II) RS.2,25,000/- CAPITAL AS PER PAGE NO.10 :- THE A.O. VIDE PARA-11.2 OF HIS ORDER ON THE SIMILAR REASON G IVEN ABOVE IN RESPECT OF RS.9,15,000/- MADE THE ADDITION.. THE F ACTS OF THIS AMOUNT FOR RS.2,25,000/- IS SIMILAR AS DISCUSSED ABOVE IN RESPECT OF RS.9,15,000/-. IN THE LIGHT OF THAT DISCUSSION, TH IS ADDITION OF RS.2,25,000/- IS ALSO NEITHER WARRANTED IN THE HAND S OF THE ASSESSEE NOR IN THE HANDS OF AMBICA REALITIES PVT. LTD. ON P ROTECTIVE BASIS. THEREFORE, SAME ARE DELETED. IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 45 22(11) (III) RS.3,20,000/- PROFIT PAGE NO.10 : THE ASSESSEE IN HIS STATEMENT DATED 28-03-2003 IN REPLY TO QUESTION NO. 2 CLEARLY STATED THAT RS.3,20,000/- IS PROFIT. THE A.O. MADE THE AD DITION OF RS.3,20,000/- STATING THAT THIS PROFIT HAS BEEN GEN ERATED BY THE TRANSACTION OF THE ASSESSEE ALONG WITH SHRI DHANRAJ BHAI JETHANI OF AMBICA REALITIES PVT. LTD. THE ASSESSEE HAS CONFIR MED THE SAID PROFIT. THERE IS NO OTHER MATERIAL ON RECORD. KEE PING IN VIEW THE DISCUSSION MADE IN ABOVE PARA, WE FIND THAT THERE I S NO DISPUTE THAT THE AMOUNT OF RS.3,20,000/- IS PROFIT. IN ABSENCE OF THE COMPLETE DETAILED FILED BY THE ASSESSEE, THE ADDITION OF RS. 3,20,000/- IS CONFIRMED IN THE HANDS OF THE ASSESSEE SHRI M. N. P ATEL AS THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF PROFIT . FURTHER, MERELY ON THE BASIS OF ASSESSEES CONTENTION, THE AMOUNT O F RS.3,20,000/- CANNOT BE ADDED IN THE HANDS OF THE COMPANY AMBICA REALITIES PVT. LTD. THEREFORE, THE PROTECTIVE ADDITION TO THE EX TENT OF RS.3,20,000/- IS DELETED. 22(11) (IV ) RS.5,57,500/- SURVEY NO.73/75 : THE ASSESSEE IN HIS STATEMENT IN REPLY TO QUESTION NO.4 STATED THAT SUR VEY NO.73/75 GIVEN ON PAGE NO.10 PERTAINING TO 50-60 PARTIES SOLD THE LAND IN PLOTTING. IN REPLY TO QUESTION NO.2, IT WAS STATED THAT 73/75 IS A SURVEY NO. IS A PLOT LOCATED OPPOSITE GONDHYA HOSPITAL AND AMOUNT R S.5.57,000/- IS OF THE PROFIT. THE SAID TRANSACTIONS WERE CONDUCTE D BY DHANRAJBHAI IN THE CAPACITY OF DIRECTOR OF AMBICA REALITIES. SHRI M. N. PATEL IN CROSS EXAMINE BY N. C. PANDYA, COUSIN OF TO THE ASSESSEE VIDE REPLY TO QUESTION NO.5, STATED THAT TO PURCHASE THE LAND M/S . AMBICA REALITIES RECEIVED A CHEQUE FROM THE DIRECTOR, SHARE HOLDERS AND OTHER KNOWN IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 46 COMPANIES AND THAT AMOUNT WAS GIVEN BY THAT PARTICU LAR PERSON FROM THEIR ACCOUNT BY ISSUING D.D. AND THIS IS GIVEN TO THE OWNER OF THE LAND. THEN, WHEN AFTER THE SALE OF LAND TOOK PLACE THE SELLING AMOUNTS CHEQUES WERE GIVEN TO THE DIRECTORS, SHARE HOLDERS AND OTHERS AND THE PROFIT IS SHOWN IN THE BOOKS OF THE COMPANY. WHILE CROSS EXAMINED BY RAJUBHAI SHUKLA, COUNSEL FOR M/S. AMBICA REALITIES PVT. LTD. IN REPLY TO QUESTION NO.6, IT WAS STATED BY M. N. PATEL THAT THE CALCULATIONS OF THE PAPER ARE RELATE D TO AMBICA REALITIES PVT. LTD. A LIST OF PURCHASE OF LAND 73/ 75 WAS ALSO GIVEN. IN REPLY TO QUESTION NO.19, MR. M. N. PATEL STATED THA T HIS FAMILY OR HE DID NOT PURCHASE ANY PLOT PERSONALLY ON ANY OF NAME S OF HIS FAMILY. BUT THE PLOTS WERE PURCHASED IN THE NAME OF AMBICA REALITIES IN THE NAME OF M. N. PATELS SON JITESH. THE SAME HAS BEEN REPAID TO JITESHBHAI BY AMBICA REALITIES FROM SALE PROCEEDS O F THE PLOT. THE COPIES OF LEDGES AND AGREEMENTS WERE PRESENTED. SH RI M. N. PATEL VIDE HIS LETTER DATED 24-12-1997 ADDRESSED TO THE D Y. COMMISSIONER OF INCOME TAX OF WHICH COPY HAS BEEN PLACED AT PAG E-25 OF THE PAPER BOOK WHEREIN STATED THAT A PLOT WAS PURCHASED IN THE NAME OF HIS SON SHRI JITESH M. PATEL. IT CAN BE SEEN FROM THE BANK ACCOUNT OF AMBICA REALITIES PVT. LTD. BEARING NO.305 WITH THE CO-OP. BANK OF RAJKOT LTD. THAT CHEQUE NO.56326 OF RRS.2,50,000/- WAS ISSUED TO SHRI JITESH M. PATEL. FURTHER, SHRI M. N. PATEL IN HIS STATEMENT HAS STATED THAT THIS MONEY WAS USED TO BUY A PLOT OF SU RVEY NO. 73/75. LATER THIS PLOT WAS SOLD FOR A CONSIDERATION OF RS. 5,13,500/- TO SHRI CHETANKUMAR JAYANTILAL AND THE AMOUNT WAS CREDITED IN THE BANK ACCOUNT OF AMBICA REALITIES PVT. LTD. ON01-06-1994. A LIST OF PERSON IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 47 IN THE NAME OF WHOM AMBICA REALITIES PVT. LTD. HAS PURCHASED THE LAND IN SURVEY NO. 73/75 WAS ALSO SUBMITTED. THE L IST CONTAINS THE NAME OF 34 PARTIES. A COPY OF SALE DEED OF FLAT TO SHRI DHARMENDRASINH AMARKUMAR JADEJA, COPY OF THE BANK PAY ORDER DATED 21-03-1995 FOR THE AMOUNT OF RS.1,20,000/- HA S ALSO BEEN FURNISHED. FURTHER, THE RECEIPT ISSUED BY AMBICA R EALITIES PVT. LTD. DATED 25-03-1995 FOR THE AMOUNT OF RS.1,20,000/- WA S ALSO ENCLOSED. THE SALE DEED WAS SIGNED ON 23-03-1995. RS,5,57,50 0/- WAS ON ACCOUNT OF LAND TRANSACTION IN SURVEY NO.73/75. THE CONTENTION OF LD. A.R. OF AMBICA REALITIES PVT . LTD. IS THAT THE A.O. DID NOT TREAT THIS INCOME IN THE HANDS OF THE COMPANY NEITHER ON PROTECTIVE BASIS NOR ON SUBSTANTIVE BASIS. AFTE R CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, IT IS TRUE THAT THIS AMOUNT HAS BEEN ADDED IN THE HANDS OF M. N. PATEL AND SUCH ADDITION WAS NOT MADE IN THE HANDS OF THE COMPANY EITHER AS SUBSTANTIVE OR P ROTECTIVE BASIS. NOW QUESTION REMAIN TO BE SEEN WHETHER UNDER THE FA CTS AND CIRCUMSTANCES, THIS AMOUNT BE ADDED IN THE HANDS OF M. N PATEL. WE FIND THAT THE A.O. MADE THE ADDITION WITHOUT EXTRAC TING COMPLETE FACTS THOUGH; THERE WAS SUFFICIENT MATERIAL BEFORE THE A. O. FOR HIS FURTHER EXAMINATION AND INVESTIGATION. THE ITAT HAS CLEARL Y DIRECTED THAT THE RELATED PERSONS SHOULD BE EXAMINED BUT WE NOTICED T HAT THE A.O. HAS FAILED ON THIS COUNT. THE AO DID NOT EXAMINE ANY DO CUMENT OR PERSON COME TO NOTICE FROM THE STATEMENT OF MR. PATEL AND OTHER DOCUMENTS AND EXPLANATION FURNISHED. SINCE, THE REVENUE HAS FAILED TO PUT ON RECORD THE COMPLETE FACTS AND SUFFICIENT MATERIAL REGARDING THE OWNER OF THE PROFIT OR INCOME OF THIS AMOUNT, THEREFORE T HIS AMOUNT CANNOT IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 48 BE ADDED IN THE HANDS OF M. N. PATEL MERELY ON THE BASIS THAT THE LOOSE PAPER NO.10 FOUND FROM M. N. PATEL DURING THE COURSE OF SEARCH. THERE IS NO MATERIAL ON RECORD TO HOLD THAT THIS AMOUNT IS SHARE OF PROFIT OF MR. PATEL. THE M. N. PATEL HAS REASONABLY DISCHARGED HIS BURDEN IN THIS REGARD BUT THE REVENU E HAS FAILED TO DISCHARGE ITS BURDEN. UNDER THE CIRCUMSTANCES, THE ADDITION OF RS.5, 57,500/- MADE IN THE HANDS OF M. N. PATEL ON SUBSTA NTIVE BASIS CANNOT BE SUSTAINED THEREFORE SAME IS DELETED. 22(11) (V) RS.54,000/- PAGE NO.10 : SHRI M. N. PATEL IN HIS STATEMENT DATED 28-02-2003 WHILE REPLYING TO QUESTI ON NO.2 HAS SUBMITTED THAT D. P I.E. DILIPBHAI PATEL. IT WAS S TATED THAT HE AND DHANRAJBHAI BEING PARTNER, THIS AMOUNT OF RS.54,000 /- WAS DEPOSITED IN THE ACCOUNT OF M. N. PATEL BY DHANRAJBHAI AS SHA RE OF PROFIT OF SHRI M. N. PATEL. SINCE IT IS A CLEAR CUT ADMISSION BY SHRI M. N. PATEL THAT THIS AMOUNT OF RS.54,000/- IS HIS SHARE OF PROFIT I N ONE OF THE TRANSACTION WITH DHANRAJBHAI AND ASSESSEE WHO WERE PARTNER. THEREFORE, THIS AMOUNT OF PROFIT IS REQUIRED TO BE TAKEN AN INCOME OF THE ASSESSEE M. N. PATEL.THE ADDITION OF RS.54,000/ - IS CONFIRMED IN THE HANDS OF THE ASSESSEE M. N. PATEL. 22(12) RS. 13,53,500/- PAGE NO.10 . NOW COMING TO SECOND AMOUNT WHICH PART OF TOTAL AMOUNT RS 34,25,000/-, WHICH H AS BEEN SENT BACK TO THE FILE OF THE AO BY THE ITAT. SHRI M. N. PATEL WHILE REPLYING TO QUESTION NO. 2 IN HIS STATEMENT DATED 28-03-2003, S TATED THAT RS.13,53,500/- IS 6.25% PROFIT SHARE. THIS IS A SH ARE OF PROFIT OF IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 49 ASSESSEE M. N. PATEL FROM 3-4 PROJECTS OF AMBICA RE ALITIES I.E. YOGINAGAR, INDRAPRASTH, AMBICA PROJECT AND RAIYA RO AD. THE A.O. IN ORIGINAL ASSESSMENT THIS AMOUNT RS.13,53,500/- HAS ASSESSED ON PROTECTIVE BASIS IN THE HANDS OF ASSESSEE M. N. PAT EL, WHEREAS IN FRESH ASSESSMENT ORDER, THE A.O. MADE ADDITION OF R S.2,16,56,000/- BEING 100% SHARE OF PROFIT CALCULATED ON THE BASIS OF RS.13,53,500/- PROFIT SHARE OF 6.25%. IN FRESH ASSESSMENT, THIS E NTIRE 100% AMOUNT HAS BEEN ADDED IN THE HANDS OF M. N. PATEL ON SUBST ANTIVE BASIS. THE A.O. MADE THIS ADDITION IN THE HANDS OF ASSESSE E ON SUBSTANTIVE BASIS. IT APPEARS THAT THE AO ADDED THIS AMOUNT IN COMPLIANCE TO THE DIRECTION OF C.I.T., RAKOT AND ADDL. C.I.T. BY STAT ING THAT THESE DIRECTIONS ARE STATUTORY AND BINDING NATURE. THE TO TAL PROFIT RS.2, 16, 56,000/- WAS TAXED ON SUBSTANTIVE BASIS AS THE RELE VANT PAGE NO.8 AND 10 WERE FOUND AND SEIZED FROM THE PREMISES OF T HE ASSESSEE M. N. PATEL. IT IS ADMITTED FACTS THAT AND AS DISCUSS ED IN VARIOUS PARA OF THIS ORDER THAT IN SPITE OF AVAILABILITY OF THE SUF FICIENT MATERIAL , DOCUMENTS AND EXPLANATION FOR EXAMINATION AND INVE STIGATION BY A.O. TO PUT ON RECORD THE COMPLETE FACTS BUT HE FAI LED TO DO SO. HE HAS ALSO FAILED TO COMPLY WITH THE DIRECTIONS OF TH E ITAT. FURTHER, THIS 100% PROFIT HAS BEEN ADDED BY A.O. IN THE HANDS OF THE ASSESSEE M. N. PATEL ON THE BASIS OF DIRECTION WHICH WERE WITHO UT EXAMINATION OF THE FACTS OF THE CASE. IN ABSENCE OF COMPLETE MATE RIAL FACTS AND IN ABSENCE OF COMPLETE VERIFICATION AND EXAMINATION, T HE 100% AMOUNT CANNOT BE ADDED IN THE HANDS OF ASSESSEE M. N. PATE L. AS REGARDS THE SHARE OF ASSESSEE 6.25% RS.13,53,500/-, THERE I S NO DISPUTE THAT THIS PROFIT BELONGS TO THE ASSESSEE M. N. PATEL AND TO THAT EXTENT, IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 50 ADDITION IS WARRANTED, WE ACCORDINGLY, CONFIRM THE ADDITION TO THE EXTENT OF THE ASSESSEES SHARE IN PROFIT RS.13,53,5 00/- OUT OF THE TOTAL ADDITION RS. RS.2, 16, 56,000/. NOW, THE QUESTION IS TO EXAMINE REGARDING THE OWNER SHIP OF BALANCE AMOUNT OF PROFIT. THOUGH, M. N. PATEL HAS CLEARLY POINTED OUT THAT HIS SHARE OF 6.25% IN VARIOUS PROJECTS OF AMBICA REALIT IES I. E. YOGINAGAR INDRAPRASTH, AMBICA PROJECT AND RAIYA ROAD. THE A. O. MADE SUBSTANTIVE ADDITION OF RS.2,16,56,000/- IN THE HAN DS OF M. N. PATEL AND PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE-C OMPANY AMBICA REALITIES PVT. LTD. IN SPITE OF IMPORTANT FACTS PO INTING OUT BY M. N. PATEL THAT THE SHARES PROFIT 6.25% FROM VARIOUS PRO JECTS OF AMBICA REALITIES BUT THE A.O. HAS NOT EXTENDED THE INVESTI GATION AND EXAMINATION TO FIND OUT THE TRUE FACTS WHAT MR. M. N. PATE HAS SAID. EXCEPT THE CONTENTION OF M. N. PATEL, THERE IS NO M ATERIAL ON RECORD BASIS ON WHICH IT CAN BE SAID THAT THE BALANCE AMOU NT OF PROFIT BELONGS TO AMBICA REALITIES PVT. LTD. IN ABSENCE OF VERIFICATION AND IN ABSENCE OF THE COMPLETE FACTS REGARDING OWNER OF THE BALANCE AMOUNT OF RS.2,16,56,000/- THE ADDITION CANNOT BE MADE IN THE HANDS OF A COMPANY. THEREFORE, SAME IS DELETED. 22 (13) AMBICA REALITIES PVT. LTD NOW COMING TO THE PROTECTIVE ADDITIONS MADE IN THE HANDS OF THE ASSESSEE-COMPANY, AMBICA REALITIES PVT. LTD. THE A .O. MADE TOTAL ADDITION OF RS.2,27,41,125/- IN ORIGINAL ASSESSMENT ON SUBSTANTIVE BASIS IN THE HAND OF THE ASSESSEE-COMPANY AMBICA RE ALITIES PVT. LTD. BUT IN FRESH ASSESSMENT, THE A.O. MADE ADDITIO N OF IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 51 RS.2,27,41,125/- ON PROTECTIVE BASIS. THIS AMOUNT 2 ,27,41,125/- INCLUDES RS.10,85,125/- TOTAL OF PAGE NO.8 AND RS.2 ,16,56,000/- BEING BALANCE AMOUNT OF PROFIT 93.75% CALCULATED ON THE BASIS OF M. N. PATELS PROFIT SHARE 6.25 OF RS.13,53,500/- NOTE D ON PAGE NO.10. A S PER THE DICUSSTION MADE WHILE DECIDING MN PATELS SHARE PROFIT IN ABOVE VARIOUS PARA WE DO NOT FIND ANY JUSTIFICATION OF SUCH ADDITION ON PROTECTIVE BASIS IN THE HANDS OF ASSESSEE-COMPAN Y AMBICA REALITIES PVT. LTD. THEREFORE, SAME ARE DELETED. 22(14) ADDITIONS WHICH WERE NOT SEND BACK BY ITAT IN CASE OF SHRI M. N. PATEL. DURING THE FRESH ASSESSMENT PROCEEDINGS THE AO MADE ADDITION OF RS 2,27,41,125/- ON PROTECTIVE BASIS IN THE HANDS O F THE ASSESSEE , MN PATEL AND SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE COMPANY, AMBICA REALITIES PVT. LTD. AS PER THE DISC USSIONS MADE IN PARA NO22(10) (II)OF THIS ORDER THE ADDITION TO THE EXTENT OF RS 67,820/- ON THE BASIS OF THE PAPER NO8 AND RS 13,53 ,500/- ON THE BASIS OF PAPER 10 SUSTAINED IN THE HANDS THE ASSES SEE, MN PATEL AS HIS SHARE IN PROFIT. THEREFORE, TO THAT EXTENT THE AMOUNT ARE CONFIRMED ON SUBSTANTIVE BASIS FROM PROTECTIVE BASIS AND BALA NCE PROTECTIVE ADDITION ARE DELETED. THE BALANCE ADDITIONS ARE ALS O DELETED ON THE GROUND THAT THIS WAS NOT THE PART OF THE DIRECTION OF THE ITAT. 22(15) SUMMARY OF ADDITION SUSTAINED AND DELETED. THUS, SUMMARIZING THE POSITION OF ADDITIONS CONFIRM ED AND DELETED BY US WHICH WERE MADE ON THE BASIS OF SEIZED PAPERS (P AGES 8 & 10), THE FOLLOWING PICTURE EMERGES: IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 52 (A) IN ASSESSEE M. N. PATELS HANDS. LOOSE PAGE 8-CONFIRMED PARA NO 22(10)(I) RS. 6,25,000 LOOSE PAGE 10 (DETAILED ASUNDER) RS 20,72,500 DELETED PARA NO22(11)(IV) RS 5,57,500 DELETED PARA NO 22(11)(II) RS 2,25,000 DELETED PARA NO 22(11)(I) RS 9,16,000 CONFIRMED PARA NO 22(11)(III) RS 3,20,000 CONFIRMED PARA NO 22(11)(V) RS 54,000 RS 20,72,500. ============ TOTAL RS 26,97,500 LOOSE PAGE 8-CONFIRMED PARA NO 22(10)(II) RS. 67,820 LOOSE PAGE 10- CONFIRMED PARA NO.22(10)(II) AND 22(12). RS. 13,53,500 ======= ===== TOTAL RS. 14,21,320 (B) IN COMPANYSHANDS RS. DELETED PARA NO 22(13) RS. 10,85,125 & 22(10(II) DELETED PARA NO 22(13), RS. 2,16,56,000 22(10(II) AND 22(12) ============= TOTAL RS. 2,27,41,125 IT( SS)A.24 & 51-RJT-2003. BLOCK P ERIOD 1986-87 TO 24/25-12-96. 53 23 IN THE RESULT APPEAL OF MN PATEL IS PARTLY ALLOWED AND THE APPEAL OF THE COMPANY, AMBICA REALITIES PVT. LTD IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29-07-2011. SD/- SD/- (N.R.S. GANESAN) ( A. L. GEHLOT ) JUDICIAL MEMBER. ACCOUNTANT MEMBER. RAJKOT, DT :29-07-2011. NVA/- COPY TO: 1. SHRI MANSUKHLAL N. PATEL, RAJKOT. 2. THE DY. C.I.T., CENTRAL CIRCLE-1, RAJKOT. 3. THE CIT(A)- RAJKOT. 4. THE C.I.T. 5. THE D.R., I.T.A.T., RAJKOT. TRUE COPY. BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT.