Shri Surendra Singh Bhatia, Indore V. The Addl. CIT Range-3, Indore

ITSSA 26/IND/2012

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2414 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 11-05-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 01-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHNEY; R A VERMA DRS
• Assessee Lawyers: ARPIT GAUR CAS
• Keywords: Unexplained cash credit; Gift; Business income; Business expenditure; Opportunity of being heard; Earning of tax free income; Question of law; Corroborative evidences; Accommodation entries; Block assessment; Onus to prove
• Section: 143(3); 153A; 14A; 131; 68; 139

Judgement Text

SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER IT(SS)A NOS.17 TO 23/IND/2012 A.YS. 2002-03 TO 2008-09 ADDL. CIT, RANGE-3, INDORE :: ASSESSEE VS SURENDRA SINGH BHATIA, INDORE PAN ABHPB 5246 R :: RESPONDENT IT(SS)A NOS.26 TO 29/IND/2012 A.YS. 2002-03, 03-04, 05-06 & 2006-07 SURENDRA SINGH BHATIA, INDORE PAN ABHPB 5246 R :: ASSESSEE VS ADDL. CIT, RANGE-3, INDORE :: RESPONDENT CROSS-OBJECTION NO14 & 15/IND/2012 ARISING OUT OF IT(SS)A NOS.19 & 22/IND/2012 A.YS. 2004-05 & 2007-08 SURENDRA SINGH BHATIA, INDORE PAN ABHPB 5246 R :: ASSESSEE VS ADDL. CIT, RANGE-3, INDORE :: RESPONDENT SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 2 ASSESSEE BY SHRI ANIL KAMAL GARG AND SHRI ARPIT GAUR, CAS RESPONDENT BY SHRI RAJEEV VARSHNEY AND SHRI R.A. VERMA, DRS DATE OF HEARING 18.5.2016 DATE OF PRONOUNCEMENT 18.5.2016 O R D E R PER SHRI D.T. GARASIA, JM THE ABOVE APPEALS FILED BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF LD. CIT(A) -I, INDORE, DATED 30.11.2011. SINCE IDENTICAL FACTS AND CIRCUMSTANCES ARE INVOLVED IN THE PRESENT APPEALS, WE ARE TAKING FACTS FROM THE A.YS. 2002-03 ON IDENTICAL ISSUES. GROUND NOS. (1.1 & 1.2), (1, 2.1 & 2.2), (1.1, 1.2 & 1.3), (1.1 & 1.2), (1.1 & 1.2) AND (1.1, 1.2 & 1.3) INVOLVED IN ASSESSEES IT(SS)A NOS .26 & 27, CO 14, (SS) 28 & 29 AND CO 15/IND/2012 FOR THE AYS 2002-03 TO 2007-08 2. THESE GROUNDS OF THE ABOVE APPEALS/COS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE AOS ACTION OF MAKING ADDITION S U/S 153A OF THE I.T. ACT ON THOSE ISSUES IN RESPECT OF WHICH NO INCRIMIN ATING MATERIAL WAS FOUND OR SEIZED DURING THE COURSE OF SEARCH. 3. SHORT FACTS OF THE CASE ARE THAT SEARCH AND SEIZ URE OPERATIONS U/S. 132(1) OF THE INCOME-TAX ACT, 1961 WERE CARRIED OUT BY THE ASSISTANT DIRECTOR OF INCOME-TAX (INV.)-II, INDORE, ON 25-09- 2007, IN THE BUSINESS PREMISES OF THE ASSESSEE AND VARIOUS COMPANIES OF T HE BCC GROUP AND AS ALSO IN THE RESIDENTIAL PREMISES OF THEIR DIRECT ORS. DURING THE COURSE OF THE SEARCH, THE BHATIA GROUP HAD ADMITTED ADDITIONA L INCOME AGGREGATING TO RS.26,15,24,529/- AND AS AGAINST SUC H ADMITTED INCOME OF RS.26,15,24,529/-, THE GROUP, AS A WHOLE, HAD SH OWN AN ADDITIONAL INCOME OF RS.27,33,73,087/- IN THE RETURNS OF INCOM E FURNISHED UNDER SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 3 S.153A OF THE ACT. THE ASSESSEE HAS ADMITTED AN ADD ITIONAL INCOME OF RS.24,89,76,375/- DURING THE COURSE OF SEARCH AGAIN ST WHICH THE ASSESSEE HAD MADE A DISCLOSURE OF NEARLY THE SIMILA R AMOUNT OF RS.24,89,26,375/- IN HIS RETURN OF INCOME FOR A.Y. 2008-09 FILED POST SEARCH. DURING THE COURSE OF THE SEARCH, NO UNDISCL OSED OR UNEXPLAINED MONEY, BULLION, JEWELLERY, VALUABLE ARTICLES OR THI NGS PERTAINING TO THE ASSESSEE WAS FOUND OR SEIZED EITHER FROM THE PREMIS ES OF THE ASSESSEE OR OF ANY OTHER PERSON IN WHOSE CASE SEARCH UNDER S .132 WAS INITIATED. THE ASSESSEE FURNISHED HIS ORIGINAL RETURN OF INCOM E PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION U/S. 139(1) OF THE I.T. ACT, 1961 ON 29-10-2002 WITH THE JCIT-3, INDORE DECLARING AN INC OME OF RS.68,15,220/-. IT IS UNDISPUTED THAT ON THE DATE O F SEARCH UNDER S. 132(1), I.E. ON 25-09-2007, NO PROCEEDINGS RELATED TO THE ASSESSMENT YEAR UNDER CONSIDER WAS PENDING AND, FURTHER, THE T IME LIMIT FOR ISSUANCE OF ANY NOTICE UNDER S. 143(2) HAD ALSO GOT EXPIRED MUCH PRIOR TO THE DATE OF SEARCH. IN PURSUANCE OF THE SEARCH, A NOTICE U/S . 153A DATED 03-03- 2008 WAS ISSUED TO THE ASSESSEE TO FURNISH HIS RETU RN OF INCOME. IN RESPONSE TO THE NOTICE U/S. 153A, THE ASSESSEE FURN ISHED HIS RETURN OF INCOME ON 09-06-2008 DECLARING THE SAME TOTAL INCOM E OF RS.68,15,220/- AS WAS DECLARED BY HIM IN THE ORIGIN AL RETURN FURNISHED U/S. 139(1). AS AGAINST SUCH RETURNED INCOME, THE A SSESSMENT HAS BEEN FRAMED BY THE AO UNDER S. 153A R.W.S. 143(3) OF THE ACT BY DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.10,97,60,204 /-. THE ADDITIONS OF RS.10,29,44,985/- HAS BEEN MADE IN THE ASSESSEES I NCOME ON ACCOUNT OF ADHOC DISALLOWANCE OF FREIGHT, DISALLOWANCE OF L OSS OF SHORT TERM CAPITAL GAIN, LONG TERM CAPITAL GAIN TREATED AS INC OME FROM OTHER SOURCES ETC. 4. MATTER CARRIED TO LEARNED CIT(A), WHO AFTER CONS IDERING THE SUBMISSION OF THE ASSESSEE, UPHELD THE ACTION OF TH E AO BY GIVING HIS SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 4 FINDINGS AT PARA 5.1, P. 70 OF HIS ORDER. THE LD. C IT(A) HAS HELD THAT THE ADDITIONS AND DISALLOWANCES IN RESPECT OF VARIOUS I TEMS DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND DULY DISCLOSED BEF ORE THE DEPARTMENT CAN ALSO BE MADE EVEN WHEN NO INCRIMINATING DOCUMEN T WAS FOUND OR SEIZED DURING THE COURSE OF THE SEARCH. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN WHILE ADJUDICATING THE APPEAL IN THE CASE OF ONE OF THE GROUP ASSESSEES NAMELY, SHRI AMANDEEP SINGH BHA TIA, FOR A.Y. 2002-03. 5. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WEL L AS WRITTEN SUBMISSION AS UNDER: IT IS SUBMITTED THAT IN THE INSTANT CASE, ALL THE ADDITIONS MADE BY THE AO PERTAINS TO THOSE TRANSACTIONS WHICH WERE DULY DISC LOSED BY HIM IN HIS REGULAR BOOKS OF ACCOUNT MUCH PRIOR TO THE DATE OF SEARCH. IT IS SUBMITTED THAT THE ASSESSMENT YEAR UNDER CONSIDERATION IS NOT AN ASSES SMENT YEAR IN RESPECT OF WHICH ANY ASSESSMENT PROCEEDING WAS PENDING ON THE DATE OF INITIATION OF THE SEARCH AS CONTEMPLATED UNDER THE SECOND PROVISO TO SECTION 153A OF THE ACT. IN THIS REGARD, WE WISH TO RELY UPON THE SUBMISSION MADE IN THE CASE OF APPEAL OF ONE OTHER GROUP ASSESSEE NAMELY OF SHRI AMANDEEP SINGH BHATIA IN APPEAL NO. IT(SS)A-112/IND/2011 FOR A.Y. 2002-03. IT IS SUBMITTED THAT THE ISSUES RAISED THROUGH THE ABOVE GROUNDS IN THE CASE OF THE PRESENT APPEAL ARE THE SAME WITH THAT OF APPEAL IN THE CASE OF SHRI AMANDEEP SINGH BHATIA IN APPEAL NO. IT(SS)A-112/IND /2011 FOR A.Y. 2002-03 FILED BEFORE THIS HONBLE BENCH. IT IS SUBMITTED TH AT IN THE CASES OF THE NON- ABATED ASSESSMENT YEARS, NO ADDITION CAN BE MADE WI THOUT HAVING ANY RECOURSE TO ANY INCRIMINATING MATERIAL OR DOCUMENT. IN THE PRESENT CASE TOO, THE BASIS OF MAKING THE ADDITIONS BY THE AO, WERE THE A UDITED FINANCIAL STATEMENTS OF THE ASSESSEE WHICH WERE AVAILABLE IN THE ORIGINA L RETURN ITSELF AND NOT ANY OTHER INCRIMINATING DOCUMENT OR MATERIAL. THE AO HA S MADE THE ADDITIONS ON THE BASIS OF ENTRIES MADE IN THE BOOKS OF ACCOUNT. THE AO HAS NOT MADE ANY REFERENCE OF ANY INCRIMINATING DOCUMENT AND THEREFO RE, IN VIEW OF OUR DETAILED SUBMISSIONS AND JUDICIAL AUTHORITIES RELIED UPON IN THE CASE OF SHRI AMANDEEP SINGH BHATIA, THE PRESENT GROUNDS OF THE ASSESSEE D ESERVE TO BE ALLOWED. 6. LD. DRS HAVE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT OUR ARGUMENTS ADVANCED IN THE CASE O F AMANDEEP SINGH BHATIA ON IDENTICAL FACTS MAY BE TAKEN INTO CONSIDE RATION. 7. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE CASE OF SHRI AMANDEEP SINGH B HATIA. WE FIND THAT SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 5 THIS ISSUE HAS ALREADY BEEN DEALT WITH BY US IN THE CASE OF ONE OF THE GROUP ASSESSEES NAMELY, AMANDEEP SINGH BHATIA IN AP PEAL NO. IT(SS)A NO.112/IND/2011 FOR A.Y. 2002-03, WHEREIN W E HAVE HELD THAT IN ABSENCE OF ANY INCRIMINATING DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH, THE ASSESSING OFFICER IS NOT JUST IFIED IN MAKING THE ADDITIONS IN NON-ABATED ASSESSMENT ORDERS WHILE PAS SING THE ORDERS U/S 153A R.W.S. 143(3) OF THE ACT. THUS, WE QUASH THE ASSESSMENT ORDERS FOR THE A.YS. 2002-03 TO 2004-05 BEING NON-ABATED. ACCORDINGLY, THIS ISSUE OF INCRIMINATING MATERIAL IN THE ASSESSEES A PPEALS/CO FOR THE AYS 2002-03 TO 2004-05 IS ALLOWED. HOWEVER, SINCE THE A SSESSMENTS FOR THE A.YS. 2005-07 TO 2007-08 ARE ABATED, THE PRESENT IS SUE IN ASSESSEES APPEALS/CO FOR THE A.YS. 2005-06 TO 2007-08 WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE DURING THE COURSE OF HEARI NG, THEREFORE, SAME ARE DISMISSED BEING NOT PRESSED. GROUND NOS.2, 3, 2 & 2 INVOLVED IN THE ASSESSEES A PPEALS IT(SS)A NOS.26 TO 29/ND/2012 A.YS. 2002-03, 03-04, 05-06 & 2006-07 8. THIS GROUND IS DIRECTED AGAINST THE CIT(A)S FIN DING OF UPHOLDING AOS ACTION OF PASSING THE ASSESSMENT ORDER ARBITRA RILY WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE CIT(A) HAS DEALT WITH THIS GROUND AT PARA 5.2 OF PAGE NO. 12 OF HIS ORDER. ACCORDING TO THE CIT(A), THE ASSESSEE WAS GIVEN DUE OPPORTUNITY BY T HE AO. BEFORE US, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GRO UND. THEREFORE, SAME IS DISMISSED IN ALL THE APPEALS OF THE PRESENT ASSE SSEE BEING NOT PRESSED. GROUND NOS.3.1 & 3.2 IN ASSESSEES APPEAL IT(SS)A N O.26/IND/2012 AY 2002-03 GROUND NOS.4.1 & 4.2 IN ASSESSEES APPEAL IT(SS)A N O.27/IND/2012 AY 2003-04 GROUND NOS.3.1 & 3.2 IN ASSESSEES APPEAL IT(SS)A N O.28/IND/2012 AY 2005-06 GROUND NO. 2 IN DEPARTMENTAL APPEAL IT(SS)A NO.20/I ND/2012 AY 2005-06 GROUND NOS.3.1 & 3.2 IN ASSESSEES APPEAL IT(SS)A N O.29/IND/2012 AY 2006-07 SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 6 GROUND NO. 2 IN DEPARTMENTAL APPEAL IT(SS)A NO.21/I ND/2012 AY 2006-07 GROUND NO.2 IN DEPARTMENTAL APPEAL IT(SS)A NO.22/IN D/2012 AY 2007-08 9. THESE GROUNDS TAKEN BY THE ASSESSEE/REVENUE ARE RELATING TO THE AOS ACTION OF TREATING THE LONG-TERM CAPITAL GAINS /SHORT TERM CAPITAL GAINS OF RS.87,81,238/- FOR AY 2002-03, RS.2,08,63, 318/- FOR THE AY 2003-04, RS.3,15,22,065/-, RS.31,18,075/-, RS.10,06 ,877/- & RS.92,430/- FOR THE AY 2005-06, RS.1,38,66,222/-, R S.9,91,711/-, RS.1,02,395/- & RS.20,14,911/- FOR THE AY 2006-07 A ND RS.97,303 & RS.17,23,558/- FOR THE AY 2007-08, AS UNACCOUNTED C ASH CREDITS UNDER S.68 OF THE ACT. BOTH THE PARTIES SUBMITTED THAT ID ENTICAL FACTS AND CIRCUMSTANCES ARE INVOLVED IN THE ABOVE APPEALS, TH EREFORE, WE ARE TAKING FACTS FROM THE AY 2002-03 ON IDENTICAL ISSUE . 10. SHORT FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAD DULY DISCLOSED THE FACTS OF DERIVING INCOME FROM LONG-TERM CAPITAL GAINS IN THE ORIGINAL RETURN FURNISHED MUCH PRIOR TO THE DATE OF SEARCH. ON A PERUSAL OF THE STATEMENT OF LONG-TERM CAPITAL GAIN, FORMING PART O F THE COMPUTATION OF INCOME ITSELF, IT CAN BE OBSERVED THAT WHILE FURNIS HING THE ORIGINAL RETURN, THE ASSESSEE HAD GIVEN THE COMPLETE DETAILS AS REGA RD TO THE LONG-TERM CAPITAL GAINS. THE ASSESSEE HAD DULY FURNISHED THE NAME OF THE COMPANIES, NUMBER OF SHARES PURCHASED AND SOLD, AMO UNT OF PURCHASES AND SALES, DATE OF PURCHASES AND SALES AND AMOUNT O F LONG-TERM CAPITAL GAIN. IT WAS SUBMITTED THAT THE ORIGINAL RETURN UND ER S.139 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS FILED BY TH E ASSESSEE MANUALLY AND ALONG WITH THE MANUAL RETURN, THE ASSE SSEE HAD NOT ONLY FURNISHED THE DETAILS AS AFORESAID, BUT HAD ALSO FI LED THE NECESSARY DOCUMENTARY EVIDENCES IN SUPPORT OF DERIVING OF SUC H GAINS FROM SALE OF SHARES. DURING THE COURSE OF THE ASSESSMENT PROCEED INGS CARRIED OUT IN THE CASE OF THE ASSESSEE POST SEARCH, THE AO ISSUED A SHOW-CAUSE NOTICE TO THE ASSESSEE ON 07-12-2009. IN TERMS OF T HE SHOW-CAUSE SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 7 NOTICE, THE ASSESSEE WAS REQUIRED BY THE AO AS TO S HOW-CAUSE THAT (I) WHY THE STCG/LTCG SHOWN IN THE RETURNS SHOULD NOT B E TREATED AS ACCOMMODATION ENTRIES WITHOUT ANY REAL PROFIT UNDER S.68; (II) WHY THESE TRANSACTIONS SHOULD NOT BE TREATED AS TRADING IN TH E NATURE OF BUSINESS CONSIDERING THE MAGNITUDE OF THE SHARE DEALINGS; AN D (III) TO EXPLAIN ON WHAT BASIS, SHARES WERE PURCHASED AND SOLD BY THE A SSESSEE OF CERTAIN COMPANIES WHICH ACCORDING TO THE AO WERE NOT WORTH INVESTING. IN RESPONSE TO SHOW-CAUSE NOTICE DATED 07-12-2009, THE ASSESSEE, THROUGH HIS LETTER DATED 09-12-2009, FURNISHED A DE TAILED WRITTEN SUBMISSION BEFORE THE AO IN RESPECT OF EACH AND EVE RY QUERY RAISED BY THE AO IN THE AFORESAID SHOW-CAUSE NOTICE. MEANWHIL E, THE AO ISSUED A SUMMONS UNDER S.131 OF THE ACT TO THE ASSESSEE. THE RELEVANT PORTION OF THE STATEMENT OF THE ASSESSEE RECORDED BY THE AO IN PURSUANCE OF SUMMONS UNDER S. 131 IS ALSO REPRODUCED BY THE AO H IMSELF AT PAGE NO. 48 & 49 OF THE ASSESSMENT ORDER. ON A PERUSAL OF SU CH STATEMENT, IT IS SEEN THAT ALL THE QUESTIONS RAISED BY THE AO IN RES PECT OF SHARE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WERE DULY A NSWERED BY THE ASSESSEE AND THE AO COULD NOT EXPRESS ANY DISSATISF ACTION OR FIND ANY ADVERSITY IN ANY OF THE ANSWERS GIVEN BY THE ASSESS EE. FINALLY, THE AO DISCARDED THE ENTIRE EXPLANATION OF THE ASSESSEE AN D BY DEVELOPING HIS OWN WHIMSICAL STORY OF MONEY LAUNDERING AND FURTHER , RELYING UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F MCDOWELL & COMPANY LTD., HELD THE CAPITAL GAIN AS UNEXPLAINED CASH CREDIT OF THE ASSESSEE UNDER S.68 OF THE ACT. ALTERNATIVELY, THE AO ALSO HELD THAT CONSIDERING THE MAGNITUDE OF TRANSACTIONS, THE ENTI RE GAIN SHOULD BE TAXED AS BUSINESS INCOME OF THE ASSESSEE. 11. MATTER CARRIED TO LEARNED CIT(A), WHO HAS DEALT WITH THE ISSUE AT PARA 2.4.1, PAGE NO. 9 OF THE ORDER. THE CIT(A) CO NFIRMED THE ADDITION BEING THE RE-CHARACTERIZATION OF LONG-TERM CAPITAL GAIN AS UNEXPLAINED SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 8 CASH CREDIT UNDER S.68, FOLLOWING HIS OWN FINDINGS GIVEN IN THE CASE OF SHRI AMANDEEP SINGH BHATIA IN APPEAL NO. IT-227/09- 10 FOR A.Y. 2006- 07. 12. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: AS REGARD THIS GROUND TAKEN BY THE ASSESSEE IN THE PRESENT APPEAL, IT IS SUBMITTED THAT SIMILAR GROUNDS FOR THE ASSESSMEN T YEAR 2006-07 HAS BEEN TAKEN IN THE CASE OF SHRI AMANDEEP SINGH BHATIA IN APPEAL NO. IT(SS)A 115/IND/2011. THE FACTS OF THE GROUNDS OF THE ASSES SEE IN THE PRESENT APPEAL ARE IDENTICAL WITH THAT OF THE GROUNDS OF SHRI AMAN DEEP SINGH BHATIA FOR A.Y. 2006-07. THEREFORE, IN ORDER TO AVOID REPETITION, W E WISH TO PLACE OUR RELIANCE ON OUR SYNOPSIS MADE ON THE RESPECTIVE GROUNDS MADE IN RESPECT OF SHRI AMANDEEP SINGH BHATIA FOR A.Y. 2006-07 IN APPEAL NO . IT(SS)A 115/IND/2011. 13. LD. DRS HAVE RELIED ON THE ORDERS OF THE REVENU E AUTHORITIES AND SUBMITTED THAT OUR ARGUMENTS ADVANCED IN THE CASE O F AMANDEEP SINGH BHATIA ON IDENTICAL FACTS MAY BE TAKEN INTO CONSIDE RATION. 14. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE CASE OF SHRI AMANDEEP SINGH B HATIA. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DEALT WITH BY US IN THE CASE OF ONE OF THE GROUP ASSESSEES NAMELY, AMANDEEP SINGH BHATIA IN AP PEAL NO. IT(SS)A NO.115/IND/2011 FOR A.Y. 2006-07, WHEREIN W E HAVE HELD AS UNDER: IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, VARIOUS DOCUMENTARY EVIDENCES PLACED ON RECORD AND IN THE L IGHT OF THE VARIOUS JUDICIAL PRONOUNCEMENTS, WE ARE OF THE CONSIDERED V IEW THAT THERE WAS ABSOLUTELY NO JUSTIFICATION FOR BOTH THE AUTHORITIE S BELOW IN DISBELIEVING THE GENUINENESS OF THE LONG TERM CAPITAL GAIN AND S HORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE IN HIS RETURN OF INCOME, MERE LY ON GUESSWORK, CONJECTURES AND SURMISES. ACCORDINGLY, THESE ADDITI ONS ARE DIRECTED TO BE DELETED. CONSEQUENTLY, GROUND NOS. 3.1 TO 3.3 ON THE ISSUE OF GENUINENESS OF LONG TERM CAPITAL GAIN/SHORT TERM CA PITAL GAIN ARE ALLOWED. SINCE COMMON ISSUE ON SIMILAR SET OF FACTS AND CIRCUMSTANCES ARE INVOLVED IN THE ASSESSMENT YEAR 2005-06, WE, FO LLOWING OUR ABOVE DECISION GIVEN IN THE ASSESSMENT YEAR 2006-07, ALLO W THE GROUND NOS.3.1 & 3.2 ON THE ISSUE OF LONG TERM CAPITAL GAI N/SHORT TERM CAPITAL SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 9 GAIN FOR THE ASSESSMENT YEAR 2005-06 TOO IN ASSESSE ES APPEAL IT(SS)A NO.114/IND/2014 . 15. THUS, BY FOLLOWING OUR ABOVE ORDER ON THE IDENT ICAL ISSUE ON SIMILAR SET OF FACTS, WE ALLOW THE PRESENT GROUNDS IN RESPE CT OF LTCG/STCG IN THE PRESENT RESPECTIVE ABOVE APPEALS FILED BY THE A SSESSEE AND DISMISS IN THE PRESENT RESPECTIVE ABOVE APPEALS FILED BY TH E REVENUE. GROUND NO.2 INVOLVED IN DEPARTMENTAL APPEAL IT(SS)A NO.19/IND/2012 AY 2004-05 16. THE REVENUE HAS TAKEN THIS GROUND CHALLENGING T HE DELETION OF ADDITION OF RS.1,67,40,653/- ON ACCOUNT OF RESURGEN T BOND. 17. SHORT FACTS OF THE CASE ARE THAT AS PER ASSESSE E, RIBS WERE RECEIVED IN THE AYS 2000-01 & 2001-02. HOWEVER, THE ASSESSING OFFICER ADDED THE ENTIRE AMOUNT IN THE YEAR OF MATURITY IN AY 2004-05. THE LD. CIT(A) WHILE ADJUDICATING THE SAME ISSUE IN THE CAS E OF AMANDEEP SINGH BHATIA IN IT-223/09-10 FOR THE AY 2002-03 HAS UPHELD THE ADDITIONS ON SUBSTANTIVE BASIS IN THE YEAR OF RECEI PTS ITSELF. LD. CIT(A), CONSIDERING THE DOCUMENTS FILED BY THE ASSESSEE TO THE EFFECT THAT RIBS WERE RECEIVED BY THE ASSESSEE IN THE YEAR 2001-02, DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 18. LD. DRS HAVE RELIED ON THE ORDER OF THE ASSESSI NG OFFICER WHEREAS, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A). BOTH THE SIDES SUBMITTED THAT OUR ARGUMENTS ADVANCED IN THE CASE OF AMANDEEP SINGH BHATIA ON IDENTICAL FACTS MA Y BE TAKEN INTO CONSIDERATION. 19. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE CASE OF SHRI AMANDEEP SINGH B HATIA. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DEALT WITH BY US IN THE CASE OF ONE OF THE SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 10 GROUP ASSESSEES NAMELY, AMANDEEP SINGH BHATIA IN AP PEAL NO. IT(SS)A NO.112/IND/2011 FOR A.Y. 2002-03, WHEREIN W E HAVE HELD AS UNDER: WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LOOKING TO THE FA CTS AND CIRCUMSTANCES, WE FIND THAT ASSESSEE HAS FILED ORIG INAL RETURN OF INCOME U/S 139 OF THE I.T. ACT, 1961 ON 25.1.2003. ALONG W ITH THE RETURN, THE ASSESSEE HAS FURNISHED THE COPY OF CAPITAL ACCOUNT, F.Y. ENDED ON 31.3.2002 IN WHICH THE RECEIPT OF RIB OF VALUE AT R S.70,29,000 WAS CLEARLY REFLECTED IN THE STATEMENT OF AFFAIRS FILED ALONG WITH THE ORIGINAL RETURN. ASSESSEE HAS SHOWN SUCH RIB BOND OF RS.70,2 9,000/-. WE FIND THAT ASSESSING OFFICER HAS MADE THE ADDITION BY INV OKING PROVISIONS OF SEC. 68 OF THE ACT WHICH SAYS THAT ADDITION IS BASE D ON ENTRIES FOUND IN REGULAR BOOKS OF ACCOUNTS. THE ASSESSING OFFICER DI D NOT REFER ANY SEIZED MATERIAL OR ANY INCRIMINATING MATERIAL WHILE MAKING THIS ADDITION. WHILE MAKING THE ADDITION U/S 153A, THE ADDITION CA N BE MADE IN RESPECT OF NON-ABATED ASSESSMENTS ONLY IF ANY SEIZE D MATERIAL IS FOUND DURING THE COURSE OF SEARCH. THE ADDITION IS BASED ONLY ON THE MATERIAL WHICH WAS SUBMITTED BY THE ASSESSEE DURING THE ORIG INAL ASSESSMENT ORDER. THEREFORE, NO ADDITION CAN BE MADE IN ABSENC E OF ANY INCRIMINATING MATERIAL AS HELD BY HONBLE DELHI HIG H COURT IN THE CASE OF KABUL CHAWLA (SUPRA). THE ASSESSEE HAS FURNISHED ALL THE NECESSARY DOCUM ENTS SUCH AS, COPY OF RIB, COPY OF TRANSFER LETTERS, COPY OF LETTER ISSUED BY SBI SHOWING TRANSFER BOND IN FAVOUR OF THE ASSESSEE THR OUGH MODE OF GIFT. WE FIND THAT THE ONLY OBJECTION BY THE REVENUE THAT THE ASSESSEE HAS PURCHASED THIS BOND BY HIS OWN MONEY BY PAYING CASH TO THE DONOR. HOWEVER, WE FIND THAT DURING THE COURSE OF SEARCH, NO SUCH DOCUMENTS OR EVIDENCES ESTABLISH ANY PAYMENT OF CASH BY THE A SSESSEE TO THE DONOR. WE ALSO FIND THAT ON MERIT, THIS ISSUE IS CO VERED BY THE DECISION OF THIS BENCH IN THE CASE OF ACIT VS. PHOOLCHAND AG RAWAL IN ITA NO.381/IND/2006 RELYING UPON THE DECISION OF THE HO NBLE ALLAHABAD HIGH COURT IN THE CASE OF KANCHAN SINGH VS. CIT (20 09) 221 CTR 456 (ALL) HAS HELD THAT GIFTS OF RIBS RECEIVED BY AN AS SESSEE FROM ONE NRI CANNOT BE TREATED AS INCOME OF THE ASSESSEE. WE ALS O FIND SUBSTANCE IN THE CONTENTION OF THE LD. AR OF THE ASSESSEE THA T IN VIEW OF THE DECISION OF THE ITAT, JODHPUR BENCH IN THE CASE OF DCIT VS. RAMDEV KUMAR CHYITLANGIA (2004) 89 TTJ (JD.) 346, THE BLOO D RELATIONSHIP IS NO CONDITION PRECEDENT FOR MAKING A VALID GIFT. IN VIE W OF THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT E VEN ON MERITS OF THE CASE, THE ADDITION MADE BY THE ASSESSING OFFICE R U/S 68 OF THE ACT ON ACCOUNT OF RIB GIFT AT RS.70,29,000/- AND SUBSEQ UENTLY, ENHANCED BY THE LEARNED CIT(A) TO RS.1,00,44,348/- IS NOT SU STAINABLE. THUS, EVEN ON MERITS, GROUND NOS. 3.1 & 3.2 OF THE ASSESS EE ARE ALLOWED. SINCE COMMON ISSUE ON IDENTICAL SET OF FACTS IS INV OLVED IN BOTH THE APPEALS OF THE ASSESSEE, THE IDENTICAL ISSUE OF RES URGENT INDIA BONDS SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 11 (RIB) IS ALSO ALLOWED FOR THE ASSESSMENT YEAR 2003- 04 ON THE SAME REASONING. ACCORDINGLY, THIS GROUND OF GENUINENESS OF RIB IS ALLOWED IN BOTH THE PRESENT RESPECTIVE APPEALS OF THE ASSESSEE . 20. THUS, BY FOLLOWING THE OUR ABOVE REASONING GIVE N IN THE IDENTICAL ISSUE ON SIMILAR SET OF FACTS, WE DISMISS THIS GROU ND IN THE PRESENT APPEAL FILED BY THE REVENUE I.E. IT(SS)A NO.19/IND/ 2012 FOR THE A.Y. 2004-05. GROUND NO.1 INVOLVED IN DEPARTMENTAL APPEALS IT(SS) A NOS.17 TO 22/IND/2012 A.YS. 2002-03 TO 2007-08 21. THESE GROUNDS OF ABOVE APPEALS OF REVENUE ARE D IRECTED AGAINST THE CIT(A)S ACTION OF DELETING THE ADDITIONS MADE BY THE AO BY MAKING 15% AD-HOC DISALLOWANCE OUT OF THE FREIGHT PAYMENT CLAIMED BY THE ASSESSEE. BOTH THE SIDES SUBMITTED THAT IDENTICAL F ACTS AND CIRCUMSTANCES ARE INVOLVED, THEREFORE, WE ARE TAKIN G FACTS FROM THE AY 2002-03 ON IDENTICAL ISSUE. 22. SHORT FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT M/S. ASSOCIATE TRANSPORT COMPANY IS A PROPRIETARY C ONCERN OF THE ASSESSEE IN WHICH THE ASSESSEE HAS SHOWN HUGE FREIG HT LIABILITIES AS WELL AS PAYMENT RELATED TO FREIGHT. THE AO ALSO FOU ND THAT ALL LIABILITIES/ PAYMENTS HAVE BEEN SHOWN IN CASH OF LESS THAN RS.20 ,000/- MOSTLY WHERE THE PROVISION OF TDS IS NOT APPLICABLE. DURIN G THE ASSESSMENT PROCEEDINGS, THE AO TOOK NOTE OF HUGE UNPAID FREIGH T LIABILITIES SHOWN IN THE BALANCE-SHEET YEAR AFTER YEAR DURING THE ASSESS MENT YEARS 2002-03 TO 2007-08, THE OPENING BALANCE OF THE LIABILITY AS ON 01.04.2001 WAS RS.52.30 CRORES. THIS UNPAID LIABILITY HAS RISEN TO RS.162.11 CRORES AS ON 31.03.2005. BY THE END OF FY. 2006-07 AND 2007-08, IT HAS GOT REDUCED TO RS.145.98 CRORES AND RS.71.25 CRORES. THE AO ALS O TOOK NOTE THAT DURING THE SEARCH PROCEEDINGS, THE ASSESSEE HAS SUR RENDERED RS.23 CRORES OUT OF SUCH UNPAID LIABILITIES. THE ADDITION AL INCOME SO SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 12 SURRENDERED WAS OFFERED TO TAX IN THE AY. 2008-09. THE AO ALSO CONCLUDED THAT THE UNACCOUNTED CASH GENERATED BY DE BITING BOGUS FREIGHT LIABILITIES WAS UTILISED BY THE GROUP IN IN TRODUCTION OF SHARE CAPITAL IN ITS VARIOUS SISTER CONCERNS AND IN ARRANGING NRI / RIB GIFTS AND BOGUS STCG / LTCG IN THE NAME OF FAMILY MEMBERS. IT WAS N OTED THAT THE INTRODUCTION OF MONEY IN THIS MANNER DURING THE REL EVANT PERIOD AMOUNTED OVER RS. 80 CRORES. ACCORDING TO THE AO, D URING THE POST SEARCH PROCEEDINGS, THE ASSESSEE COULD FURNISH THE LIST OF UNPAID FREIGHT LIABILITIES FOR THE F.Y. 2004-05 ONLY AND ON EXAMIN ATION OF THAT LIST, A SAMPLE OF 100 TRUCKS WERE SELECTED BY THE INVESTIGA TION WING. ON VERIFICATION FROM THE DATA BANK OF MP TRANSPORT DEP ARTMENT, IT WAS NOTICED THAT OUT OF 100 VEHICLES, 23 VEHICLES WERE EITHER MARUTI CAR, MOPED OR MOTORCYCLE. THIS FACT WAS CONFRONTED TO TH E ASSESSEE DURING THE POST SEARCH INQUIRIES ITSELF; THE ASSESSEE HAD THEN PRODUCED THE LIST OF VOUCHERS HAVING SAME NUMBER OF TRUCKS WITH SLIGH T CHANGES OF ONE DIGIT( ALPHABET) SAY AS AGAINST CORRECT TRUCK NO. MP 09 KC-2232, THE ENTRY IN ASSESSEES RECORDS / VOUCHERS WAS MP 09 -2 232; AND AS AGAINST CORRECT TRUCK NUMBER MP-09 KC-6800, THE ENTRY WAS M P 09 KC- 68 ETC. AND ON THAT BASIS, IT WAS EXPLAINED THAT THE VEHICL ES USED FOR TRANSPORTATION WERE INDEED TRUCKS ONLY. THE ASSESS EE WAS THEN ASKED TO PROVIDE THE VOUCHER FOR A PARTICULAR TRANSACTIO N FOR WHICH THE UNPAID FREIGHT WAS SHOWN. THE ASSESSEE COULD NOT PROVIDE S UCH DOCUMENT ON THIS BASIS, THE AO CONCLUDED THAT NO SUCH VOUCHER W AS IN EXISTENCE AND THE ASSESSEE, IN ORDER TO MISGUIDE THE DEPARTMENT, HAD FURNISHED THE LIST OF THE TRUCKS TO PROVE ITS STAND. THE AO ALSO TOOK NOTE OF CERTAIN CORRESPONDENCE (BS-45) WHICH WERE SEIZED DURING THE SEARCH ON 26.10.2007, WHEREBY MR. SERVER(AN EMPLOYEE) HAD REQ UESTED (ON BEHALF OF MR. .JK. JAIN, ONE OF THE DIRECTORS OF THE GROUP ) VARIOUS PARTIES TO VERIFY THE LIST OF TRUCKS AND INQUIRED THE NAME AN D ADDRESSES OF THE SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 13 OWNER AND OBSERVED THAT IF THE ASSESSEE WAS ACTUALL Y TRANSPORTING THE GOODS, THEN WHAT WAS THE NECESSITY OF MAKING THAT T YPE OF INQUIRY FROM OTHER PARTIES, ON THAT BASIS TOO, THE AO INFERRED T HAT THE ASSESSEE WAS CLAIMING BOGUS EXPENSES ON ACCOUNT OF TRANSPORTATIO N OF GOODS FROM BOGUS TRUCKS AND THUS CREDITING BOGUS LIABILITIES A ND THAT THE MONEY (BY WAY OF DEBITING BOGUS EXPENSES) WAS THEN TRANSFERRE D TO OTHER BRANCHES AS WAS SEEN (DURING THE SEARCH) IN THE CASE OF SURA T BRANCH OF THE ASSESSEE WHEREIN THE FUND WAS TRANSFERRED TO OTHER BRANCH ON ACCOUNT OF CAMP MAGDALLA THROUGH ANGADIA AND HANDED OVER TO SHRI DS. BHATIA, ONE OF THE RELATIVES OF BHATIA FAMILY- TAKING LEAD FROM THE INVESTIGATIONS MADE BY THE INVESTIGATION WING, THE AO DURING ASSES SMENT PROCEEDINGS REQUIRED THE ASSESSEE TO SUBMIT THE SYSTEM OF ACCOU NTING AS REGARD TO THE FREIGHT. THE REPLY FURNISHED BY THE ASSESSEE ON THE ISSUE FINDS PLACE IN THE ASSESSMENT ORDER FROM PAGE NO.4 TO PAGE NO8. IT HAS BEEN EXPLAINED THEREIN BY THE ASSESSEE THAT THE TRANSPOR TATION BUSINESS WAS BEING DONE BY HIM UNDER THE NAME AND STYLE OF M/S, ASSOCIATED TRANSPORT COMPANY (IN SHORT ATC) THAT IT WAS MAINL Y TRANSPORTING COAL FOR THE CUSTOMERS OF ITS GROUP CONCERN BHATIA INTE RNATIONAL LTD (IN SHORT BIL) AND ALSO TO SOME EXTENT FOR BIL; THAT KEEPING IN VIEW THE QUOTA SYSTEM AND CERTAIN REGULATIONS ON LIFTING OF COAL F ROM THE COLLIERIES (AS REGARDS TO INDIAN COAL), THE ASSESSEE HAD BEEN TRAN SPORTING COAL FROM THE SITE OF COLLIERIES TO ITS NEARBY OPEN AREA OF L AND (CALLED AS PLOTS) AND THEN FROM PLOTS TO THE CUSTOMERS; AND FOR THAT PURP OSE THE LOCAL TRANSPORTERS WERE ARRANGED MANY TIMES THROUGH LOCAL BROKERS AND SOMETIMES DIRECTLY; THAT THE ATC PAYS PART ADVANCE TO THESE TRANSPORTERS OUT OF TOTAL AGREED FREIGHT AND THE BA LANCE (FINAL AMOUNT) WAS BEING PAID WHEN THE BILTY ( PAHUNCH ) WAS BROUGHT IN BY THAT TRANSPORTER; THAT ATC, BEING IN THIS BUSINESS SINCE LONG AND HAVING A VERY GOOD REPUTATION IN THE MARKET, BOTH FOR PAYMEN T AND CAPACITY TO SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 14 GIVE BULK BUSINESS CONTINUOUSLY, ENJOYS CREDIT FACI LITY FROM THESE TRANSPORTERS - SIMILAR EXPLANATION WAS GIVEN AS REG ARDS TO THE TRANSPORTATION OF IMPORTED COAL, WHEREIN THE COAL H AS TO BE LIFTED IN THE STIPULATED TIME FROM JETTY (WHERE SHIPS ARE PARKED) . IN ORDER TO PROVE ITS POINT, THE ASSESSEE PLACED AN EXAMPLE BEFORE THE AO , ON SAMPLE BASIS, GIVING COMPLETE DETAILS OF THE BUSINESS PROCESS ON THE TRANSPORTATION MADE FOR M/S. J.K. POWER (J.K. CEMENT LTD.) IN REFE RENCE TO THE CONTRACT NUMBER HO/JKP/CM-1/BO/ 12286 DATED 02.02.2005, IT W AS EXPLAINED THEREIN THAT WHILE GIVING OFFER TO THE CUSTOMERS, T HE BIL DID MENTION THAT THE TRANSPORTATION WAS TO BE DONE BY THE ATC THE FR EIGHT INVOICES TO THE CUSTOMERS WERE ISSUED BY THE ATC DIRECTLY. IN THE P ROCESS, THE ATC HAD TO LILT THE COAL FROM THE COLLIERY AND THE FINAL DE STINATION WAS THEIR PLANT AT JK POWER AT NIMBAHERA (RAJ.) FOR WHICH THE TRANSPOR TATION WAS MADE FIRST FROM COLLIERY TO ITS PLOT AT KATNI AND THEN F ROM KATNI TO THE PREMISES OF J.K POWER. IT WAS EXPLAINED THAT THE DUMPING FRO M COLLIERY TO KATNI WAS DUE TO THE CONDITION IN THE DO OF COLLIERY TO J K POWER FOR LIFTING THE ENTIRE QUANTITY WITHIN 45 DAYS. IN THE CONTEXT OF T RANSPORTATION FROM KATNI TO NIMBAHERA, IT WAS FURTHER EXPLAINED THAT THE ASS ESSEE FURTHER PREFERRED TO TRANSPORT THE COAL FROM KATNI TO INDOR E AND THEN FROM INDORE TO NIMBAHERA FOR THE REASONS THAT THE TRANSPORTER C OULD EASILY GET THE RETURN BOOKING FROM NIMBAHERA TO INDORE AND SO THEY COULD BE NEGOTIATED FOR THE TRANSPORTATION AT RELATIVELY LOW ER RATE. THE SUBMISSION SO MADE HOWEVER WAS NOR ACCEPTABLE TO THE AO FROM T HE POINT OF VIEW OF CONTROL OVER THE PAYMENTS. IN THE CONTEXT, THE AO O BSERVED THAT IN SUCH CIRCUMSTANCES IF SOMEBODY BRINGS A FORGED DOCUMENT THEN HOW THE ASSESSEE WAS GOING TO DETECT THAT. THE AO ALSO NOTE D THE FACT THAT IN THE LINE OF TRANSPORTATION, IF THE PAYMENT IS NOT MADE PROMPTLY, THEN HOW THE SMALL TRUCK OWNERS WOULD SURVIVE. THE AO HAS FURTHE R NOTED THAT THE ASSESSEE SUBMITTED THE DETAILS OF UNPAID FREIGHT FO R THE A.YS,2005-06, SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 15 2006-07, 2007-08 AND 2008-09 ON 09.11.2009 AND THAT FOR A.Y.2002-03, 2003-04 AND 2004-05 ON 21.12.2009 AND THAT SUCH DET AILS WERE TRUCK- WISE WITHOUT REFERENCE TO THE OWNERS NAME. IN THE C ONTEXT, THEREFORE, THE AO REQUIRED THE ASSESSEE TO FURNISH THE NAME AND AD DRESSES OF ALL PERSON RELATED TO FREIGHT UNPAID; TO PRODUCE ALL PE RSON RELATED TO FREIGHT UNPAID; TO FURNISH ALL SUPPORTING DOCUMENTS RELATED TO PAYMENT OF FREIGHT IF ALREADY PAID (ON SAMPLE BASIS); TO PRODUCE ALL S UPPORTING DOCUMENTS RELATED TO FREIGHT OUTSTANDING (ON SAMPLE BASIS). I N RESPONSE THEREOF, THE ASSESSEE PRODUCED FOUR PERSONS FROM GUJARAT AND SUB MITTED THEIR AFFIDAVITS. THE AO NOTED THAT THOSE WERE SMALL TRAN SPORTERS WHO COULD NOT HAVE WAITED UPTO 4-5 YEARS FOR PAYMENT. THE ASS ESSEE ALSO COULD NOT FURNISH THE LIST OR TRUCK OWNERS IN REFERENCE T O UNPAID FREIGHT LIABILITIES, THIS LED THE AO TO FORM AN OPINION THA T THE LIABILITIES ITSELF WERE BOGUS. HE DID NOT ACCEPT THE ASSESSEES CLAIM OF FR EIGHT LIABILITIES AS GENUINE SAYING THAT THE GENUINENESS OF THE LIABILIT IES COULD NOT BE ESTABLISHED MERELY BY PROVIDING TRUCK NUMBERS BECAU SE THE EXPENSES WERE DEBITED ON THE BASIS OF SELF-RAISED VOUCHERS A ND THERE WERE NO THIRD PARTY DOCUMENTS TO CORROBORATE AND PROVE THE STAND OF THE ASSESSEE. FURTHER, ON THE BASIS OF VERIFICATION, OF THE SEIZED MATERIAL, THE AO ALSO NOTED THAT MOST OF THE FREIGHT VOUCHERS ARE PREPARED AND SIGNED BY PERSONS HAVING SIMILAR HANDWRITINGS; THAT SOME O F THE VOUCHERS ARE NOT SIGNED BY THE RECIPIENT; THAT THOSE VOUCHERS WE RE NOT SUBJECTED TO ROUTINE CHECK AS FOLLOWED IN RESPECT OF OTHER VOUCH ERS; THAT IN THE POST- SEARCH INQUIRY, THE ADIT HAD FOUND THAT SOME OF THE VEHICLES WERE REGISTERED AS TEMPO AND PRIVATE CARS. THE AO ALSO N OTED THE DISCREPANCIES IN THE FREIGHT VOUCHERS WITH REFERENC E TO DATE OF PAYMENT AS NO TRUCK OWNER WOULD WAIT FOR SUCH A LONG TIME. IN THE CONTEXT, THE AO ISSUED A SHOW CAUSE NOTICE TO EXPLAIN WHY THE LIABI LITIES WHICH WERE THREE YEARS OLD SHOULD NOT BE TREATED AS INCOME U/S .41 (L) AS NO SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 16 CORROBORATIVE EVIDENCE WERE FILED TO PROVE THAT THO SE LIABILITIES WERE ACTUALLY PAYABLE; TO EXPLAIN THE REGARDS TO PAYMENT S OF FREIGHT ON THE BASIS OF SELF RAISED VOUCHERS AS TO WHY THE SAME SH OULD BE CONSIDERED AS GENUINE PAYMENT. IN RESPONSE THEREOF, THE DETAIL ED SUBMISSION WAS FILED WHICH ALSO FINDS PLACE IN THE ASSESSMENT ORDE R IN PAGE NUMBER 10 TO 17. IT WAS EXPLAINED THEREIN THAT THE ASSESSEE H AD NOT WRITTEN BACK ANY LIABILITIES IN ITS BOOKS OF ACCOUNTS AND THAT T HE AMOUNT OF OUTSTANDING LIABILITIES RATHER WAS BEING PAID OFF FROM YEAR TO YEAR AND THEREFORE SUCH LIABILITIES, THOUGH THREE YEARS OLD, CANNOT BE TAX ED AS INCOME OF THE ASSESSEE. AS REGARDS TO THE SELF GENERATED VOUCHERS OF FREIGHT PAYMENT, IT WAS CLARIFIED THAT OWNERS OF THE TRUCK WERE NOT HAVING ANY PRINTED INVOICES OF THEIR OWN. THEREFORE, AT THE TIME OF PA YMENT OF FREIGHT IN PART A PAYMENT ADVICE WAS PREPARED BY THE ASSESSEE WHERE IN COMPLETE DETAILS ABOUT THE FREIGHT, TRUCK NUMBER, ADVANCE PA ID AGAINST FREIGHT AND BALANCE DUE TO THE TRUCK OWNER WAS PROPERLY RECORDE D; AND THAT THE BALANCE AMOUNT DUE TO THE TRUCK OWNER WAS PAID AS A ND WHEN RECEIPT OF GOODS DELIVERED TO THE DESTINATION THE CUSTOMERS WA S SHOW BY THE TRUCK OWNER. IT WAS FURTHER SUBMITTED THAT DEDUCTION IN R ESPECT OF FREIGHT CLAIMED BY THE ASSESSEE AGAINST THE SELF GENERATED VOUCHERS OR ON THE BASIS OF PRINTED MATERIAL IS NOT THE CRITERIA BUT W HAT IS IMPORTANT TO CHECK IS THAT CORRESPONDING INCOME HAS ALSO BEEN BOOKED B Y THE ASSESSEE THAT THE AMOUNT OF FREIGHT AS CHARGED BY THE ASSESS EE WAS AT THE PREVAILING MARKET RATE FROM HIS CUSTOMERS AND CORRE SPONDING EXPENSES WERE CLAIMED ALSO AT THE PREVAILING MARKET RATE, TH E ASSESSEE HAD ALSO FURNISHED A CHART THAT THE MARGIN IN THE BUSINESS O F THE ASSESSEE HAS INCREASED YEAR AFTER YEAR. THE NET PROFIT WAS 3.68% IN A.Y.2003-04 WHICH HAD INCREASED TO 919% IN A.Y,2008-09. IT WAS ALSO SUBMITTED THAT REGULAR ASSESSMENT FOR A.Y. 2003-04 AND 2004-05 WER E MADE U/S.143(3) THAT NET PROFIT FOR THOSE YEARS WAS 3.68% AND 3.93% RESPECTIVELY AND SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 17 THAT IN A.Y. 2003-04, THE BUSINESS RESULTS WERE ACC EPTED BY THE AO BY MAKING ADDITION OF RS,5 LAKES ON ADHOC BASIS, WHERE AS, THAT FOR A.Y. 2004-05 WAS ACCEPTED AS DECLARED BY THE ASSESSEE. I T WAS ALSO SUBMITTED THAT THE STOCK REGISTER AS MAINTAINED BY THE ASSESSEE CONTAINS COMPLETE DETAILS IN TERMS OF QUANTITY AND AMOUNT IN RESPECT OF FREIGHT RECEIVED AND FREIGHT PAID. LATER ON DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED THE LIST OF NAME AND ADDRESSES FOR THE OUTSTANDING AMOUNT OF RS.39 CRORE S AS ON 30.09.2009 FOR WHICH THE AO REQUIRED THE ASSESSEE TO EXPLAIN T HE BASIS ON WHICH NAMES AND ADDRESSES OF THE TRUCK OWNERS WERE GIVEN IN THE SAID LIST AND ALSO TO EXPLAIN WHY IT WAS NOT SUBMITTED EARLIER. I N RESPONSE THEREOF, THE ASSESSEE SUBMITTED THAT SINCE COMMENCEMENT OF ITS B USINESS THE DETAILS OF FREIGHT UNPAID WERE MAINTAINED TRUCK-WIS E ONLY; THAT THIS PRACTICE WAS NOT BY INTENTION TUT BY FORCE AS IN TH IS NATURE OF UNORGANIZED BUSINESS, WHERE TRUCKS ARE HIRED ON DAY-TO-DAY BASI S AND DAY-TO-DAY MARKET RATES FROM NUMBER OF LOCATIONS ACROSS THE CO UNTRY BY DEPLOYING NUMBER OF EMPLOYEES, THE TRUCK NUMBER WAS THE EASIE ST WAY TO KEEP TRACK (AS IT IS NOT PRACTICALLY POSSIBLE FOR THE AS SESSEE TO KEEP NAMES AND ADDRESSES OF EACH AND EVERY TRUCK OWNER) IN ASS ESSES BOOKS. IT WAS ALSO SUBMITTED THAT ASSESSEES CASE WAS SELECTED FO R SCRUTINY ALMOST EVERY YEAR EVEN BEFORE THE SEARCH AND ORDERS WERE P ASSED U/S. 143(3) BY ACCEPTING THE LIST OF FREIGHT UNPAID TRUCK-,WISE ONLY. IT WAS ALSO POINTED OUT THAT IN THE BLOCK ASSESSMENTS U/S.143(3 )/158BC FOR THE PERIOD AY. 1986-87 TO 1996-97, NO ADVERSE REMARKS A BOUT THE FREIGHT PAID WAS MADE. IT WAS ALSO SUBMITTED THAT ALL ALONG IN VARIOUS ASSESSMENT PROCEEDINGS, THE DEPARTMENT HAD NEVER OB JECTED AND HAD NEVER MADE ANY ADVERSE REMARK ON SUCH PRACTICE (OF RECORDING FREIGHT EXPENSES ON THE BASIS OF TRUCK NUMBER AND NOT IN TH E NAME OF THE OWNER) FOLLOWED BY THE ASSESSEE; AND THAT GAVE THE ASSESSEE A SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 18 CONFIDENCE AS WELL AS COMFORT THAT HIS SYSTEM OF AC COUNTING AND RECORD KEEPING IS GOOD AND ACCEPTED TO THE DEPARTMENT AS R EGARDS TO THE SYSTEM OF FREIGHT PAYMENT, IT WAS SUBMITTED THAT TH E ASSESSEE MAKES PAYMENTS ON THE BASIS OF BILTY AND FREIGHT ADVICE/P AHUNCH RECEIVED BY HIM BY THE TRUCK OWNER OR ANY OF HIS REPRESENTATIVE INCLUDING DRIVER / CLERK / OWNER. THE ASSESSEE HAD ALSO GIVEN A WRITE- UP ON THE SOFTWARE BEING USED BY THE ASSESSEE DURING THE YEAR 2000-01 AND ONWARDS AND CHANGES MADE THEREON BASED ON NUMBER OF PLATFORMS / COMPUTER LANGUAGES. AS DETAILED IN THAT WRITE-UP, IN THE BEG INNING, IT WAS BASED ON FOXPRO AND CLIPPER IN DOS, SINGLE USER ENROLMENT WH ICH LATER ON WAS CONVERTED PARTIALLY TO MULTI USER ENVIRONMENT; DEVE LOPMENT WAS IN PHASE MANNER AND TECHNICAL STAFF CHANGED FREQUENTLY CAUSI NG LOT OF PROBLEMS IN THE DEVELOPMENT OF THE ARE. FROM ACCOUNTING YEAR 2 005-06, A NEW SOFTWARE IN ORACLE WAS DEVELOPED, HOWEVER, THE DEVE LOPMENT TEAM LEFT THE COMPANY AND DELETED THE SOURCE CODE; FOR F OLLOWING THAT THE NEW TEAM WAS APPOINTED WHICH DECIDED TO DEVELOP A SOFTW ARE IN VISUAL BASIC-6 AND SQL SERVER BECAUSE THEY WERE NOT CONVER SANT WITH THE ORACLE. IT HAS BEEN POINTED OUT THAT THE NEW SOFTWA RE TOO HAD A LOT OF PROBLEMS AND WAS IMPLEMENTED IN THE HEAD OFFICE AND SOME OF THE BRANCHES WHILE AT OTHER PLACES CONTINUED WITH THE O LD SOFTWARE ON FOXPRO CLIPPER. THE DELAY IN FURNISHING THE REQUIRE D REPORTS HAS BEEN ATTRIBUTED TO THEIR DIFFICULTIES FACED IN THE DEVEL OPMENT OF THE SOFTWARE'S AND FREQUENTLY CHANGING EDP STAFF. IT WAS ALSO POIN TED OUT BY THE ASSESSEE THAT AN UNFORTUNATE PART OF THE ASSESSEE B USINESS IS THAT ASSESSEES CUSTOMERS (FROM WHOM FREIGHT IS RECEIVED ) ARE THE MOST ORGANIZED SECTOR OF BUSINESS IN INDIA AND THE TRANS PORTER OPERATORS (TO WHOM FREIGHT IS PAID) ARE THE MOST UNORGANIZED AND ILLITERATE SECTOR OF BUSINESS IN INDIA. AS REGARDS TO THE ASSESSING OFFI CER QUERY FOR THE BASIS ON WHICH NAMES AND ADDRESSES OF THE TRACK OWNERS IN RESPECT OF UNPAID SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 19 FREIGHT AS ON 30.09.2009 WAS PREPARED, THE ASSESSEE HAD REPLIED TO THE AO SAYING THAT HE HAD TRIED VERY HARD TO COLLECT TH E ADDRESSES OUT OF THE LIST OF TRUCK OWNERS BASED ON A CUT-OFF DATE OF 30. 09.2009 (ON WHICH DATE THE FREIGHT PAYABLE WAS RS.39 CRORES), IN SOME CASE S BY PANG STATUTORY FEES TO RTO FOR COLLECTING THE NAMES AND ADDRESSES OF THE TRUCK OWNERS. AS REGARDS TO PRODUCING THE PERSONS RELATED TO FREI GHT UNPAID, THE ASSESSEE HAD REPLIED TO THE AO SAYING THAT HE HAD C ONTACTED THOSE PERSONS BUT AS THE DISTANCE FROM INDORE TO THE PLAC ES OF THESE TRANSPORTERS ARE VERY FAR, AND THEY THEMSELVES BEIN G ILLITERATE, IT WAS VERY DIFFICULT FOR HIM TO CONVINCE THEM TO VISIT INDORE AND GIVE THEIR STATEMENT. THE AO, AFTER CONSIDERING THE FACTS AND THE DETAILE D REPLIES OF THE ASSESSEE DID NOT ACCEPT THE EXPLANATION GIVEN BY TH E ASSESSEE AS REGARDS TO THE GENUINENESS OF THE FREIGHT EXPENSES. THE AO HAS ALSO GIVEN THE DETAILED REASONS AS TO WHY HE DID NOT AGR EE WITH THE ASSESSEES PLEA OF EXPLANATION IN THIS REGARD. THES E REASONS FINDS PLACE IN THE ASSESSMENT ORDER AT PAGE NO.35 TO 37. FOR RE ADY REFERENCE, THESE REASONS AS NOTED BY THE AO ARE REPRODUCED HEREUNDER : (I) IT IS VERY CLEAR TILL DALE THAT THE ASSESSEE H AS NEVER MAINTAINED THE FRIGHT LIABILITIES ON NAME AND ADDRESS BASIS WHICH CLEARLY PROVE THAT MANY OF THESE LIABILITIES ARE BOGUS. (II) IT IS THE ONUS OF THE ASSESSEE TO MAINTAIN THE BOOKS OF ACCOUNTS IN A MANLIER WHICH MAY ARRIVE THE CORRECT TAXABLE INCOME. (III) EVEN THE PRESENT SUBMISSION OF THE ASSESSEE O F NAME END ADDRESSES OF FREIGHT LIABILITIES AS ON 30.09.09, IS NOT BASED ON ACTUAL BASIS, FROM THE REPLY OF THE ASSESSEE IT IS AMPLY CLEAR THAT NAME AND ADDRES SES HAVE BEEN OBTAINED TRAM THE RTO OFFICE BUT I AM NOT ABLE TO UNDERSTAND HOW THIS IS GOING TO PROVE THAT THESE ARE ACTUAL FREIGHT ABILITIES. (IV) DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN LAST 1 1/2 YEARS, ONLY 7 PERSONS HAVE BEEN PRODUCED WITH THEIR AFFIDAVITS OU T OF SUCH HUGE LIABILITIES. EVEN IF FOR A MOMENT IF THESE LIABILITIES ARE GENUI NE THEN ALSO HOW FEW THOUSAND SUBSTANTIAL THE CRORES OF AMOUNT AS LIABILITIES OF FREIGHT IN MY CONSIDERED VIEW OF THE MATTER, THE ASSESSEE HAS MISERABLY FAILED TO PR ODUCE POSITIVE EVIDENCES TO PROVE THE LIABILITIES OFF FREIGHT UNPAID. (V) THE AR OF THE ASSESSEE HAS SUBMITTED IN PARA 3. 2.1 THAT SINCE THE FREIGHT UNPAID IS REDUCING FROM RS.1.46 CRORES TO RS.39 CRO RES AS ON 30.09.09, THEREFORE SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 20 THERE IS NO REASON TO DOUBT HE GENUINENESS OF THE A MOUNT IS NOTHING BUT A SELF SERVING RECITATION. THE DEPT IS QUESTIONING THAT ON LY. ONLY SAYING WITHOUT ANY CORROBORATIVE EVIDENCES HAS NO BASIS IN DIE EYES O LAW. (VI) IN PAN 3.2.4.2, THE AR HAS SUBMITTED IN THE P AGES 86 TO 107 COPY OF CONFIRMATION LETTERS IS RECEIVED FROM THOSE PERSONS CONFIRMING THE AMOUNT OF UNPAID FREIGHT HAVE BEEN VERIFIED. AS MENTIONED EAR LIER THESE AFFIDAVITS FROM FEW PERSONS HAVE NO BASIS. IT IS VERY INTERESTING TO NO TE THAT FORMAT AND LANGUAGES OF ALL AFFIDAVITS ARE SAME WHICH PROVE BEYOND DOUBT TH AT THE ASSESSES IS PROMPTING THEM TO FILE AFFIDAVITS IT A DESIRED FORMAT. IN FAC T DURING THE COURSE OF SEARCH PROCEEDINGS EVIDENCE TO THE EFFECT THAT THAT THE AS SESSEE WAS ASKING DIFFERENT PARTIES (BS-45 SEIZED FROM B CC HOUSE ON 26.10.07) TO VERIFY , THE LIST OF TRUCK S AS PER ENCLOSURE AND ALSO ASK THEM TO STALE THE NAM E AND ADDRESS OF THE OWNER HAVE BEEN FOUND. IF THE ASSESSEE IS ACTUALLY TRANSP ORTING DIE GOODS THEN WHAT IS I LIE NECESSITY OF MAKING THIS TYPE OF EQUITY FROM OT HER PARTIES. THIS PROVE BEYOND REASONABLE DOUBT THAT THE ASSESSEE IS CLAIMING BOGU S EXPENSES ON ACCOUNT OF TRANSPORTATION THE GOODS FROM BOGUS TRUCKS AND THU S CREDITING BOGUS LIABILITY. (VII) THE SUBMISSION OF THE ASSESSEE THAT EXCEPT FO R THE A.Y. 05-06, THE AGE OF THE UNPAID FREIGHT CREDITORS IS BELOW 3 YEARS IS NO T CORRECT BECAUSE AS PER THE SUBMISSION OF THE ASSESSEE ITSELF IN THE YEAR A.Y. 03-04, 04-05 THE UNPAID FRIGHT ARE MORE THAN YEARS WHICH ARC AS UNDER: A.Y. AGE 3 YEARS FRIGHT UNPAID 03-04 38395969 (A.Y. 2001-02) 04-05 10804949 (A.Y. 2001-02) (VIII) THE INTERRELATION OF THE AR REGARDING S 41(1 ) IS DAILY MISGUIDED BECAUSE OF THE ACT THAT IN CASE OF BOGUS LIABILITIES, ONUS IS ON THE ASSESSEE TO PROVE THAT IT IS GENUINE OTHERWISE ONLY THROUGH WORDS, GENUINENESS C ANNOT BE PROVED. (IX) THE AR HAS ALSO SUBMITTED THAT THE BALANCE AMO UNT DUE TO THE TRUCK OWNER IS TO BE PAID AS AND WHEN RECEIPT OF GOODS DELIVERE D TO THE DESTINATION OF THE CUSTOMERS IS SHOW BY THE FROCK OWNER. NORMALLY WITH 3-4 DAYS GOODS REACH ANYWHERE IN INDIA THEN HOW COME THESE LIABILITIES A RE OUTSTANDING YEAR AFTER YEAR. THE ONUS IS ON THE ASSESSEE TO PROVE THIS THROUGH P OSITIVE EVIDENCES, ONLY SAYING THE BECAUSE OF RESOURCES CRUNCH III A.Y.0S-0 6, HE PAYMENT WAS NOT MADE IS NOT SUFFICE. WHEN THE BUSINESS WAS GETTING ENOUG H MONEY, WHY AND HOW THERE WAS RESOURCE CRUNCH HAS TO BE PROVED THROUGH EVIDEN CES. (X) IT IS IMPORTANT TO NOTE HERE THAT WHAT THE HON' BLE GUJARAT HIGH COURT HAS HELD IN LIE CASE OF SELF PREPARED VOUCHERS. CIT, CHANDRA VILAS HOTEL 164 ITR 102 GUJARAT) 'MERE PRODUCTION OF VOUCHERS IN SUPPORT OF THE CLAI M FOR DEDUCTION OF EXPENDITURE BY WAY OF COMMISSIONS WOULD NOT PROVE T HE CLAIM OF THE ASSESSEE. IT WAS THE DUTY OF THE ASSESSEE TO PROVE THE PAYMENT TO ESPECIALLY WHEN THE INCOME TAX OFFICER DOUBTED THE GENUINENESS OF IT. (XI) THE AR HAS SUBMITTED THE COMPARATIVE CHART OF FRIGHT RECEIPT AND NET PROFIT WHICH CLEARLY SPEAK THE TRUTH, THE % OF NET PROFIT ARE AS UNDER, YEAR ENDING %NET PROFIT SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 21 31.03.03 3.68% 31.03.04 3.93% 31.03.05 3.97% 31.03.06 4.85% 31.03.07 8.04% 31.03.08 9.19% THE CHART ABOVE CLEARLY SPEAK THE WITH BECAUSE THE NET PROFIT WAS QUITE LOW IN THE YEAR ENDING31.03.03,31.03.04, 31.03.05 AND 31.03.06 WHEN THE LIABILITIES HAVE BEEN SHOWN ABNORMAL. AFTER ALL THE EXPENSES BOOKED IN THE P/L ACCOUNT IS THE FIGURE SHOWN AS LIABILITY AND THUS REDUCED THE PROF IT TO THAT EXTENT. MOREOVER, THIS FACT CAN BE ESTABLISHED IN A DIFFERENT MANNER, THE LIABILITY SHOWN FOR THE YEAR AFTER 3103.05 IS AS UNDER: YEAR ENDING AMOUNT (R.S) 31.03.2006 63,776,826 31.03.2007 1,932,788 31.03.2008 2,401,329 THIS CLEARLY SHOWS THAT THE ASSESSEE HAS SHOWN BOGU S LIABILITIES IN THE F.Y. 0L- 02, 02-03, 03-04, 04-05 AND 05-06. (XII) THE MAIN BASIS OF SEARCH IN THE ASSESSEE CASE WAS ABNORMAL FREIGHT LIABILITIES WHICH GOT VINDICATED BY THE DISCLOSER M ADE BY THE ASSESSEE ON FREIGHT UNPAID ACCOUNT THEREFORE THE ASSESSMENT U/S143(3) B EFORE SEARCH HAS NOT A BASIS FOR GENUINENESS. THE PROVISIONS OF SECTION153 A/C OF THE IT. ACT. 1961, EMPOWERS THE AO TO REASSESS THE ASSESSED INCOME. (XIII) THE AR OF THE ASSESSEE HAS REPLIED THAT SINC E THE AMOUNT OF LIABILITIES HAVE SUBSTANTIALLY REDUCED FROM YEAR TO YEAR, HENCE IT I S PROVED THAT THE SAID LIABILITIES ARE GENUINE IN NATURE. THIS REPLY OF THE ASSESSEE I S A SELF RECITAL WITHOUT ANY DOCUMENTARY EVIDENCES, IT HAS TO BE EMPHASIZED HERE THAT SUBSEQUENT PAYMENT RAISES FURTHER QUESTION OF GENUINENESS. 23. FINALLY, THE AO DISALLOWED 15% OF THE FREIGHT D EBITED TO THE P&L ACCOUNT OF THE PROPRIETARY CONCERN, M/S. ASSOCIATED TRANSPORT COMPANY, TREATING THE SAME AS BOGUS PAYMENT. THE AO MADE SIM ILAR ADDITION IN OTHER ASSESSMENT YEARS IN WHICH ALSO THE DEPARTMENT IS IN APPEAL. THE TOTAL ADDITION MADE BY THE AO ON THIS COUNT IN VARI OUS ASSESSMENT YEARS ARE GIVEN IN THE TABULAR FORM AS UNDER: SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 22 S.NO. DEPARTMENTAL APPEAL NO. ASSESSMENT YEAR AMOUNT OF FREIGHT DEBITED TO THE P&L ACCOUNT AMOUNT OF ADDITION (15% OF THE FREIGHT DISALLOWED) 1 IT(SS) 17/IND/2012 2002-03 609,537,669 91,430,650 2 IT(SS) 18/IND/2012 2003-04 794,183,591 119,127,538 3 IT(SS) 19/IND/2012 2004-05 1,044,339,688 156,650,953 4 IT(SS) 20/IND/2012 2005-06 1,446,618,512 216,992,723 5 IT(SS) 21/IND/2012 2006-07 1,040,666,397 156,099,960 6 IT(SS) 22/IND/2012 2007-08 1,065,388,066 159,808,210 TOTAL 90 , 01 , 10,034 24. MATTER CARRIED TO LEARNED CIT(A), WHO HAS DEALT WITH THIS ISSUE FROM PARA 4.3 AT PAGE NO. 55 TO PARA 4.3.6 AT PAGE NO.69 OF HIS ORDER. THE CIT(A) AFTER CONSIDERING THE FACTS AND CIRCUMSTANCE S OF THE CASE, ASSESSMENT ORDERS AND THE ASSESSEES SUBMISSIONS, H AS GIVEN HIS OPERATIVE FINDING AT PARA 4.3.6, PAGE NO. 67 TO PAG E NO. 69. THE RELEVANT FINDING OF THE CIT(A) IS REPRODUCED AS UND ER : 4.3.6 I HAVE CONSIDERED THE FACTS AS DETAILED IN T HE ASSESSMENT ORDER AND ALSO THE AOS POINT OF VIEW IN DISREGARDING THE ASSESEES CLAIM (FOR GENUINENESS OF THE FREIGHT EXPENSES) AS WELL AS THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AO THE UNDERSIGNED AS WELL AS THE FINDINGS AS CONTAINED IN PARA 4.3.5 ABOVE. MY OBSER VATIONS ARE AS UNDER: (I) THE TRUCK NUMBERS ARE REGISTERED WITH THE RTO A ND AS SUCH THE NAMES AND ADDRESSES OF THE TRUCK OWNERS CAN BE ASCERTAINE D FROM THE RTO OFFICE. MERELY BECAUSE THE FREIGHT LIABILITIES ARE NOT MAINTAINED ON THE BASIS OF NAME AND ADDRESS, THE FREIGHT LIABILITIES OR PART THEREOF CANNOT BE TERMED TO BE BOGUS. (II) THE ASSESSEE HAS FOLLOWED THE CONSISTENT ACCOU NTING SYSTEM YEAR AFTER YEAS IN WHICH FREIGHT EXPENSES ARE RECORDED W ITH REFERENCE TO TRUCK NUMBERS AND THE DEPARTMENT NEVER OBJECTED TO IT OR FORMED ANY ADVERSE VIEW IN ANY OF THE EARLIER ASSESSMENT PROCEEDINGS. SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 23 III THE ASSESSEE HAS REPEATEDLY MENTIONED THAT FREI GHT EXPENSES WERE BOOKED WITH REFERENCE TO TRUCK NUMBERS AND NOT ON T HE BASIS OF THE NAMES OF TRUCK OWNERS; AND IN THE LIST OF FREIGHT L IABILITIES AS ON 30-09-2009 WHICH WAS FURNISHED BEFORE THE AO. THE NAME AND ADD RESS OF THE TRUCK OWNERS WERE MENTIONED AFTER ASCERTAINING THE SAME F ROM RTO OFFICE OR ASSESSEE BRANCH OFFICES. THIS EXERCISE OF ASCERTAIN ING THE NAMES AND ADDRESSES WAS DONE BY THE ASSESSEE AS PER REQUIREME NT OF THY AO ONLY, (IV) THE ASSESSEE HAD PRODUCED ONLY SEVEN PERSONS (TRUCK OWNERS) BEFORE THE AO. THE ASSESSEE DID EXPLAIN THE REASONS FOR NON-PRODUCTION OF ALL OTHER BUCK OWNERS IN REFERENCE TO FREIGHT UN PAID) SAYING THAT ASSESSEE HAD CONTACTED THOSE PERSONS THROUGH HIS SO URCES BUT AS THE DISTANCE FROM INDORE TO THE PLACE OF THOSE TRANSPOR TERS ARE VERY FAR AND THEY (TRUCK OWNERS) BEING ILLITERATE, IT WAS DIFFIC ULT FOR THE ASSESSEE TO CONVINCE THEM TO VISIT INDORE AND GIVE THEIR STATEM ENT- NEVERTHELESS, THE ASSESSEE COULD PRODUCE FEW TRUCK OWNERS. THE EXPLAN ATION GIVEN BY THE ASSESSEE IN THIS REGARD APPEARS TO BE REASONABLE CA USE OF ASSESSEES FAILURE OF NON-PRODUCTION OF ALL THE TRUCK OWNERS W HICH INDEED WAS IN LARGE NUMBERS. (V) THE AO HAD TAKEN A NOTE OF CERTAIN CORRESPONDEN CE (BS-45), WHICH WAS SEIZED DURING THE SEARCH ON 26.10.2007 WHEREBY LETTERS WERE ISSUED BY THE ASSESSEE TO VARIOUS DIFFERENT PARTIES ASKING THEM TO VERIFY THE LIST OF TRUCKS AND ALSO TO STATE THE NAME AND ADDRESS OF TH E OWNER. ON THE BASIS OF THESE DOCUMENTS THE AO QUESTIONED THE NECESSITY FOR ISSUING SUCH LETTERS AND TOOK IT AS A PROOF TO INFER THAT ASSESS EE WAS CLAIMING BOGUS FREIGHT EXPENSES. IN OTHER WORDS, THE AO ASSUMED TH AT THROUGH SUCH CORRESPONDENCES, ASSESSEE WAS TRYING TO ASCERTAIN T HE PARTICULARS OF CERTAIN TRUCKS FOR THE PURPOSE OF BOOKING THE BOGUS EXPENSES AGAINST THOSE TRUCK NUMBERS WITHOUT ACTUALLY USING THEM FOR THE TRANSPORTATION. HOWEVER, I FIND THAT THE INFERENCE SO MADE BY THE A O IS MISPLACED. THE SEARCH HAD STARTED ON 25.09.2007 AND IN THE PROCESS THE ASSESSEE WAS ASKED TO FURNISH THE LIST OF OUTSTANDING FREIGHT LI ABILITIES WITH REFERENCE TO THE NAME AND ADDRESS OF THE TRUCK OWNERS. THE CORRE SPONDENCE REFERRED AS BS-45 WAS SEIZED ALTER A MONTH (FROM THE START O F THE SEARCH) ON SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 24 26.10.2007 FROM BCC HOUSE, THE REFERRED CORRESPONDE NCE WAS WRITTEN BY THE ASSESSEE FOR ASCERTAINING THE NAME OF TRUCK OWNER IN RESPECT OF CERTAIN TRUCK NUMBERS, THE EXERCISE OF THE ASSESSEE APPEARS TO HAVE BEEN UNDERTAKEN IN THE CONTEXT AE REQUIREMENT OF TH E INVESTIGATION TEAM DURING THE PERIOD WHICH TOO WAS FINALLY SEIZED ON 2 6.10.2007. THE AO HAS NOT TAKEN INTO ACCOUNT THIS ASPECT OF REQUIREMENT. (VI) THE AO HAS ALSO NOTED THE CONSISTENT INCREASE OF PERCENTAGE NET PROFIT YEAR AFTER YEAR IN CONCLUDING THAT IN THE EA RLIER YEARS WHERE NET PROFIT RATE WAS LOWER, ASSESSEE HAD CLAIMED BOGUS EXPENSES . THE AO HAD ALSO DISREGARDED THE FACT OF SUBSTANTIAL REDUCTION IN TH E FREIGHT LIABILITIES AFTER 31.03.2005 WHICH WAS TAKEN AS A PLEA BY THE ASSESSE E IN SUPPORT OF HIS CLAIM OF BOOKING GENUINE FREIGHT EXPENSES. FINALLY. THE AO CONSIDERED 15% OF THE FREIGHT DEBITED AS APPROPRIATE BOGUS FRE IGHT PAYMENTS IN EACH OF THE ASSESSMENT YEARS 2002-03 TO 2007-08 AND MADE THE ADDITIONS ON THIS ACCOUNT AS MENTIONED IN TABLE NO5 ABOVE. THE A O HAS NOT COME OUT WITH ANY POSITIVE EVIDENCES EXCEPT BASING HIS DECIS ION ON THE GENERAL OBSERVATIONS (AS REFERRED IN PARA 4,3,4). THE FIGUR E OF 15% ADOPTED BY THE AO TO ESTIMATE THE BOGUS FREIGHT EXPENSES IS PURELY ON ADHOC BASIS. (VII) THE AOS INFERENCE THAT ASSESSEE DID NOT HAVE ANY CONTROL AT THE TIME OF PAYMENT OF FREIGHT EXPENSES ON THE BASIS OF TRUC K NUMBERS IS ALSO MISPLACED . THIS IS A SEARCH CASE. ADDITION / DISALLOWANCES ARE TO BE BACKED / SUPPORTED BY POSITIVE EVIDENCES. TO CONCLUDE DO NOT FIND THE DISALLOWANCES SO MADE BY THE AO ADOPTING AN ADHOC R ATE OF 15%, AS JUSTIFIED. IN THE CIRCUMSTANCES, THE ENTIRE AMOUNT OF ADDITION BY WAY OF SUCH DISALLOWANCES OUT OF FREIGHT EXPENSES IN TH E 2002-03 TO 2007- 08 IS DELETED. 25. LD. DR HAVE RELIED ON THE ORDERS OF THE ASSESSI NG OFFICER AND SUBMITTED AS UNDER: AO HAS MADE THE ADDITION 15% OF TOTAL FREIGHT EXPE NSES CLAIMED IN P & L ACCOUNT ON ADHOC BASIS BUT CIT(A) DELETED THE SAME. REVENUE IS BEFORE ITAT. M/S ASSOCIATE TRANSPORT COMPANY IS A PROPRIET ARY CONCERN OF SHRI S.S. BHATIA IN WHICH THE ASSESSEE HAS SHOWN HUGE FR EIGHT LIABILITIES AS WELL AS PAYMENT RELATED TO FREIGHT. IT IS PERTINENT TO NOTE THAT THESE ALL SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 25 LIABILITIES/PAYMENT HAVE BEEN SHOWN IN CASH OF LESS THAN RS. 20,000/- MOSTLY WHERE THE PROVISIONS OF TDS ARE NOT APPLICAB LE. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE YEAR WISE BREAKUP OF THE FREIGHT DEBITED TO P/L ACCOUNT, FREIGHT UNPA ID AND FREIGHT PAID DURING THE YEAR HAS BEEN PREPARED WHICH IS AS UNDER:- A.Y. OP BAL FRG UNP PROV DURING THE YEAR PAID DURING THE YEAR CLOSING BAL AS PER B/S 2001-2002 523038593 319901590 273859567 569080616 2002-2003 569080616 442820378 185705098 826195896 2003-2004 826195896 732516347 352630540 1206081703 2004-2005 1206081703 964036276 548926185 1621191794 2005-2006 1621191794 108404380 182726329 1546869845 2006-2007 1546869845 69826977 156876871 1459819951 2007-2008 1459819951 2311125 749549325 712581751 2008-2009 712581751 2421060 209508507 503073244 2009-2010 503073244 0 61319402 441753842 THE TOTAL FREIGHT PAID DURING EACH ASSESSMENT:- ASSESSMENT YEAR AMOUNT DEBITED IN THE P/L A/C AS FREIGHT PAID IN (RS.) 2002-03 609537669/- 2003-04 794183591/- 2004-05 1044339688/- 2005-06 1446618152/- 2006-07 1040666397/- 2007-08 1065388066/- 2008-09 1134579546/- DURING THE COURSE OF SEARCH AND POST SEARCH PROCEED INGS THE INVESTIGATION WING OF THE DEPARTMENT HAS MADE VARIO US ENQUIRIES RELATED TO THE FREIGHT ISSUE. DURING THE COURSE OF SEARCH T HE LIST OF UNPAID FREIGHT WAS ASKED FROM THE ASSESSEE. DESPITE BEST OPPORTUNI TIES GIVEN, THE ASSESSEE COULD NOT PROVIDE ANY LIST EXCEPT FOR THE FY 04-05. THE ASSESSEE WAS ASKED TO SEE WHETHER THE LIST OF UNPAI D FREIGHT WAS IN HIS COMPUTER, THE ASSESSEE COULD NOT PROVIDE ANY SUCH L IST EITHER FROM ITS COMPUTER OR ITS HARD COPY. ON EXAMINATION OF THE LI ST FOR THE FY 04-05 A SAMPLE OF 100 TRUCKS WAS SELECTED. THE SAME WERE EX AMINED FROM THE DATA BANK OF MP TRANSPORT DEPTT., SURPRISINGLY IT W AS FOUND THAT OUT OF 100 VEHICLES, 23 VEHICLES ARE EITHER MARUTI CAR OR MOPE D OR MOTOR CYCLE. THIS FACT WAS CONFRONTED TO THE ASSESSEE DURING TH E POST SEARCH OPERATION. HE THEN PRODUCED THE LIST OF VOUCHERS HA VING SAME NUMBER OF TRUCKS WITH SLIGHT CHANGES OF ONE DIGIT. THE ASSESS EE WAS THEN ASKED TO PROVIDE THE VOUCHER FOR A PARTICULAR TRANSACTION FO R WHICH THE UNPAID FREIGHT WAS SHOWN. THE ASSESSEE COULD NOT PROVIDE S UCH DOCUMENTS BECAUSE NO SUCH VOUCHER WAS IN EXISTENCE AND JUST T O MISGUIDE THE DEPARTMENT THE ASSESSEE HAS FURNISHED THE LIST OF T HE TRUCKS TO PROVE ITS STAND. FURTHER THE IMPOUNDED PAPERS CONTAIN ONE VER IFIABLE DOCUMENTS TERMED AS BS-45 SEIZED FROM BCC HOUSE. INDORE ON 26 .10.2007, WHEREIN SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 26 MR. SERVER WHO IS ENTERING THE RECORD IN COMPUTER H AS MADE LETTERS TO DIFFERENT PARTIES ON BEHALF OF SHRI J.K. JAIN REQUE STING TO VERIFY THE LIST OF TRUCKS ENCLOSED WITH THE LETTER AND ALSO STATE THE NAME AND ADDRESS OF THE OWNER. IF THE ASSESSEE IS ACTUALLY TRANSPORTING THE GOODS THEN WHAT IS THE NECESSITY OF MAKING THIS TYPE OF ENQUIRY FROM OTHER PARTIES. THIS PROVES BEYOND REASONABLE DOUBT THAT THE ASSESSEE IS CLAIMI NG BOGUS EXPENSES ON ACCOUNT OF TRANSPORTATION OF GOODS FROM BOGUS TR UCKS AND THUS CREDITING BOGUS LIABILITY. THIS MONEY IS THEN TRANS FERRED TO OTHER BRANCHES AS HAS BEEN SEEN IN THE CASE OF SURAT WHEREIN THE F UND TRANSFERRED ON ACCOUNT OF CAMP MAGDALLA THROUGH ANGADIA AND HANDIN G OVER TO SHRI D.S. BHATIA. ONE OF THE RELATIVES OF BHATIA FAMILY. THUS UNACCOUNTED CASH IS GENERATED WHICH HAS BEEN UTILIZED BY THE COMPANY IN BRINGING ITS OWN MONEY THROUGH THE INTRODUCTION OF SHARE CAPITAL IN ITS VARIOUS SISTER CONCERNS AND NRI/RIB GIFTS AND STCG/LTCG IN THE NAM E OF FOUR PROMOTERS. AO'S FINDINGS- (1) ASSESSEE NOT MAINTAINED THE FRIGHT LIABILITIES/ EXPENSES AS PER NAME AND ADDRESS. NAME AND ADDRESS TO WHOM FRIGHT EXPENS ES PAID WERE NOT AVAILABLE. (2) ASSESSEE HAS TO MAINTAIN THE BOOKS IN A MANNER WHICH MAY ARRIVE THE CORRECT TAXABLE INCOME. (3) SELF SERVING VOUCHER ARE MAINTAINED. NO THIRD P ARTY EVIDENCE IN SUPPORT OF CLAIM. (4) OUT OF 100 ONLY 7 PERSONS WERE PRODUCED FOR VER IFICATION WITH THE AFFIDAVITS. THE UNPAID FOREIGN LIABILITIES WAS OUTS TANDING SINCE MORE THAN 3 YEARS. (5) ASSESSEE HAS MADE DISCLOSER DURING THE SEARCH O N ACCOUNT OF BOGUS FREIGHT LIABILITIES/EXPENSES. (6) ASSESSEE ONLY FURNISHED LIST OF TRUCKS. CONSIDERING ABOVE DISCREPANCIES THE FREIGHT EXPENS ES AT 15% OF THE TOTAL WAS DISALLOWED BY THE AO. THE CIT(A) DISCUSS THIS ISSUE IN PARA 4.3 ON PAGE 55 ONWARDS AND GIVING CONCLUDING FINDINGS IN PARA 4.3.6 ON PAGE 67 OF HIS ORDER. FROM THESE FINDINGS IT IS CLEAR THAT HE COMPLETELY IGNOR ED THE FINDINGS GIVING BY THE AO WHILE HE DECIDED THE ISSUE ON DIFFERENT FOOT INGS. HE MENTIONED THAT NAME AND ADDRESS CAN BE VERIFIED FROM RTO BECA USE ASSESSEE MAINTAINED FREIGHT LIABILITIES ON THE BASIS OF TRUC K NUMBER AND THIS SYSTEM HAS BEEN FOLLOWED CONSISTENTLY YEAR AFTER YEAR AND DEPARTMENT NEVER OBJECTED. HE FURTHER MENTIONED THAT THE PRODUCTION OF ALL TRUCK OWNER WERE NOT PRACTICABLE FOR ASSESSEE DUE TO DISTANCE, ILLIT ERACY, UNABLE TO CONVINCE TO THEM. THESE FINDING OF CIT(A) ARE GENERAL/ ROUTI NE AND NOT COGENT AND RELEVANT. THE ISSUE IN QUESTION IS ACTUALLY OF NON VERIFICATION OF EXPENSES/ LIABILITIES CLAIMED BY ASSESSEE IN P & L ACCOUNT AN D ASSESSEE COULD NOT DISCHARGE HIS BURDEN OF PROOF BY PRODUCING SUPPORTI NG EVIDENCES. SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 27 ASSESSEE PAID THE EXPENSES IN CASH, HAVING NO NAME AND ADDRESS TO WHOM THOSE WERE PAID, NOT ABLE TO PRODUCE THOSE TRU CK OWNERS FOR VERIFICATION AND MAINTAINED ONLY SELF SERVICING VOU CHERS, ARE CLEARLY SHOWING THAT FREIGHT EXPENSES CLAIMED BY ASSESSEE A RE NOT VERIFIABLE AND THUS, INGENUINE AND THAT FACT HAS BEEN COMPLETELY F ORGONE BY CIT(A) AND THEREFORE, CIT(A) IS FINDINGS ARE PERVERSE WHICH MA Y KINDLY BE SET-ASIDE. I RELIED UPON SOME DECISIONS AS UNDER:- (1) HON'BLE RAJASTHAN HIGH COURT IN CASE OF KANHAIA LAL JANGID REPORTED IN 217 CTR 354 IN WHICH IT HAS BEEN HELD- 'SINCE IT IS A CASE IN WHICH THE VERIFICATION OF EX PENSES ACTUALLY INCURRED WAS NOT AVAILABLE AND THE DISALLOWANCE OF THE CLAIM LED BY THE ASSESSEE WAS MADE ON THE ESTIMATED BASIS BECAUSE OF THE WANT OF RELEVANT MATERIAL TO SUSTAIN ACTUAL EXPENDITURE INCURRED, IT DOES NOT GIVE RISE TO ANY QUESTION OF LAW MUCH LESS SUBSTANTIAL QUESTION OF LAW. IN TH E ABSENCE OF VERIFICATION OF MATERIAL EXPENSES CLAIMED AS DEDUCTION AS EXPENS ES ACTUALLY INCURRED OR LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ASSESSEE, THE REASONABLE ESTIMATION IS PERMISSIBLE IN LAW AND SOM E GUESSWORK IS INHERENTLY INVOKED IN SUCH ESTIMATION. HENCE THE EX TENT TO WHICH CLAIM OF THE ASSESSEE HAS BEEN SUSTAINED REMAINS ORDINARILY A FINDING OF FACT. IN THE FACTS AND CIRCUMSTANCES WHERE IN THE ABSENCE OF PROPER MATERIAL IF THE AO HAS RESORTED TO ESTIMATE AND ON ESTIMATED BASIS THE TRIBUNAL HAS SUSTAINED THE CERTAIN AMOUNT OF CLAIM ONLY, IT CANN OT BE SAID TO BE THAT DISALLOWANCE OF THE CLAIM IS FOUNDED ON NO MATERIAL OR IRRELEVANT CONSIDERATION. THEREFORE, THE FINDING ON THAT ACCOU NT DOES NOT CALL FOR INTERFERENCE.' (2) HIGH COURT OF GUJRAT IN CASE OF CHANDRAVILAS HO TAL REPORTED 164 ITR 102 - 'BUSINESS EXPENDITURE-ALLOWABILITY-DEDUCTION CLAIME D FOR ALLEGED COMMISSION PAID TO R FOR GETTING SMALL COINS-SIGNED VOUCHERS OF R PRODUCED-ON EXAMINATION BY ITO, R THOUGH ACCEPTED H IS SIGNATURES, DENIED HAVING RECEIVED ANY COMMISSION FROM ASSESSEE ASSESSEE REFUSED TO CROSS-EXAMINE R UNLESS R'S STATEMENTS WERE RECORDED IN ASSESSEE'S PRESENCECLAIM FOR DEDUCTION DISALLOWED BY ITO- JUSTIFIED REFUSAL OF ASSESSEE TO CROSS-EXAMINE R LED THE R'S STATEMENTS GOING UNCHALLENGED, WHICH CANNOT THEREFORE BE DISCARDEDS TATEMENT OF R IF DISCARDED OR DISBELIEVED, THERE IS NO EVIDENCE TO E STABLISH PAYMENT OF COMMISSIONMERE PRODUCTION OF VOUCHERS IN SUPPORT O F THE CLAIM WOULD NOT PROVE THE CLAIM MADE BY ASSESSEE.' (3) HIGH COURT OF RAJASTHAN IN CASE OF NARENDRA MOHAN P ALIWAL REPORTED IN 271 ITR 347 - WHEN THE BILLS AND VOUCHERS FOR THE EXPENSES CLAIM ED ARE NOT PRODUCED, THE ONLY COURSE LEFT TO THE AO IS TO ESTIMATE THE D ISALLOWANCE. HE HAS ESTIMATED THE DISALLOWANCE ON 25 PER CENT OF THE TO TAL EXPENSES CLAIMED. THAT HAS BEEN AFFIRMED BY CIT(A). TRIBUNAL HAS NOT GIVEN ANY JUSTIFICATION SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 28 WHY THIS SHOULD BE REDUCED. IT IS TRUE THAT IT IS E STIMATE AGAINST ESTIMATE, BUT EVEN THEN THERE SHOULD BE SOME JUSTIFICATION WH EN TWO AUTHORITIES HAVE TAKEN THE SAME VIEW FOR DISALLOWANCE OF THE EX PENSES. TRIBUNAL HAS COMMITTED ERROR IN REDUCING THIS AMOUNT OF DISALLOW ANCE WITHOUT ANY JUSTIFICATION. IN VIEW OF THE ABOVE, THE ADDITIONS ON ACCOUNT OF T HE ISSUE OF FREIGHT MAY BE CONFIRMED AS MADE BY THE ASSESSING OFFICER. 26. ON THE OTHER HAND, THE LD. AR FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND RELIED O N THE ORDERS OF THE LD. CIT(A). 27. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THE I NSTANT CASE, THE ENTIRE ADDITION HAS BEEN MADE BY THE AO ON AD-HOC BASIS BY MAKING FLAT 15% DISALLOWANCE OF FREIGHT CLAIMED AND DULY RECORDED I N THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE MUCH BEFORE THE DATE OF SEA RCH. THE ASSESSEE HAD ALREADY FURNISHED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION UNDER S.139(1) OF THE ACT ON 29 -10-2002 AND WHILE COMPUTING THE INCOME FOR SUCH ASSESSMENT YEAR, THE ASSESSEE HAD MADE THE CLAIM OF THE SAME FREIGHT WHICH HAS BEEN A GITATED BY THE AO. IN THE ASSESSEES CASE, THE ASSESSMENT PROCEEDINGS FOR SOME OF THE ASSESSMENT YEARS EG. A.Y. 2003-04 AND A.Y. 2004-05 WERE DULY COMPLETED AFTER INDEPTH SCRUTINY UNDER S.143(3) OF THE ACT AND DURING THE COURSE OF SUCH DETAILED SCRUTINY PROCEEDINGS, NO CA SE OF ANY BOGUS FREIGHT OR FREIGHT LIABILITY WAS FOUND. WE FIND THA T THE AO HAS NOT MADE DISALLOWANCE ON THE BASIS OF ANY INCRIMINATING MATE RIAL FOUND DURING THE COURSE OF SEARCH BUT HE HAS MERELY MADE THE ADDITIO N BY MAKING AN AD- HOC DISALLOWANCE. THE ASSESSMENT YEAR UNDER CONSIDE RATION IS NOT AN ASSESSMENT YEAR IN RESPECT OF WHICH ANY ASSESSMENT PROCEEDING WAS PENDING ON THE DATE OF INITIATION OF THE SEARCH AS CONTEMPLATED UNDER THE SECOND PROVISO TO SECTION 153A OF THE ACT. IN THIS REGARD, WE PLACE SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 29 RELIANCE UPON THE SUBMISSION MADE IN THE CASE OF AP PEAL OF ONE OTHER GROUP ASSESSEE NAMELY, AMANDEEP SINGH BHATIA IN APP EAL IT(SS)A NO.112/IND/2011 FOR A.Y. 2002-03. THUS, WE HOLD THA T FOR A.Y. 2002-03, A.Y. 2003-04 AND A.Y. 2004-05 IN RESPECT OF WHICH N O PROCEEDINGS WERE PENDING ON THE DATE OF SEARCH, AND BEING THE NON-AB ATED ASSESSMENT YEARS, THE ENTIRE ADDITIONS MADE BY THE AO ON ACCOU NT OF ADHOC DISALLOWANCE OF FREIGHT DESERVE TO BE DELETED ON TH IS GROUND ALONE. 28. WE ALSO FIND THAT CONSIDERING HIS INABILITY TO ESTABLISH THE FREIGHT LIABILITY WITH FULL DOCUMENTARY EVIDENCES ACCEPTABL E TO THE DEPARTMENT, THE ASSESSEE HIMSELF HAS COME FORWARD TO MAKE A DIS CLOSURE OF RS.23 CRORES IN HIS STATEMENT UNDER S.132(4) OF THE ACT. THE INCOME SO OFFERED WAS DULY DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME FURNISHED POST SEARCH FOR A.Y. 2008-09. THE AO HAS NOT BROUGH T ON RECORD ANY PARTICULAR INSTANCE OF FREIGHT LIABILITY WHICH WAS FOUND NON-GENUINE OR BOGUS. 29. WE ALSO FIND THAT DURING THE COURSE OF THE ASSE SSMENT PROCEEDINGS ITSELF, THE ASSESSEE HAD DISPELLED THE DISCREPANCY POINTED OUT BY THE INVESTIGATION WING AS REGARD TO THE CERTAIN REGISTR ATION NUMBERS FOUND TO BE OF MARUTI CAR OR MOPED OR MOTORCYCLE. EVEN THE A O AT THE LAST PARA OF PAGE NO. 3 OF HIS ORDER HAS ADMITTED THAT THE ASSES SEE HAD PROVIDED THE CORRECTED DETAILS IN RESPECT OF THE REGISTRATION NU MBER OF VEHICLES. THE DETAILS FURNISHED BY THE ASSESSEE HAD NOT BEEN CONT RAVENED BY THE AO. THE CORRECTED DETAILS FILED BY THE ASSESSEE BEFORE THE AO HAVE BEEN REPRODUCED BY THE CIT(A) HIMSELF AT PAGE NO. 25 TO 28 OF HIS ORDER. WE FIND THAT THE ASSESSEE HAS CONSISTENTLY FOLLOWED TH E ACCOUNTING SYSTEM OF RECORDING THE FREIGHT EXPENSES ON THE BASIS OF T RUCK NUMBERS AND SUCH SYSTEM HAS NOT BEEN OBJECTED BY THE DEPARTMENT EVEN IN THE ASSESSMENT PROCEEDINGS CARRIED OUT UNDER S.143(3) O F THE ACT EARLIER FOR A.Y. 2003-04 AND A.Y. 2004-05. SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 30 30. FURTHER, WE FIND THAT FOR ITS PROPER CONTROL AN D MANAGEMENT, THE ASSESSEE ALSO MAINTAINED THE STOCK REGISTERS AT ITS VARIOUS PLOTS WHEREIN GOODS TRANSPORTED FROM COLLIERY TO PLOTS ARE RECORD ED AS INWARD AND AS AND WHEN THE GOODS ARE TRANSPORTED FROM PLOT TO THE DESTINATION OF THE CUSTOMER, THE QUANTITY ARE RECORDED AS OUTWARD. THE CORRESPONDING FREIGHT TOO IS RECORDED IN THIS STOCK REGISTER. A C OPY OF SUCH REGISTER WAS ALSO FILED BEFORE THE AO. NO DISCREPANCY HAS BEEN B ROUGHT ON RECORD ON THE BASIS OF ENTRIES (IN AND OUT) IN THOSE REGISTER S. THUS, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY OBSERVED THAT IN CASE BOGUS EXPENSES ARE BOOKED AGAINST THE TRUCK NUMBERS WITHO UT ANY ACTUAL TRANSPORT OF GOODS, THEN THE DISCREPANCY IS BOUND T O BE THERE AND THE OPENING STOCK, IN AND OUT AND CLOSING STOCK AS PER THE RECEPTIVE STOCK REGISTERS FOR ANY PLOT WOULD NOT RECONCILE. THEREFO RE, LD. CIT(A) HAS ALSO RIGHTLY HELD THAT THE AO HAS NOT COME UP WITH ANY D ISCREPANCY OF THIS SORT. FURTHER, AS AGAINST THE ACTUAL TRANSPORT OF G OODS, THE BOGUS EXPENSES BY INFLATING THE FREIGHT EXPENSES PAYABLE HAS ALSO NOT BEEN EVIDENCED ON THE BASIS OF PREVAILING MARKET RATE. T HE ASSESSEE HAS MAINTAINED ALL THE NECESSARY DETAILS SUCH AS RECEIP T NUMBER AND DATE OF ISSUANCE OF RECEIPT (IN RESPECT OF TRANSPORTATION O F INDIGENOUS COAL) AND STATEMENT NUMBER IN RESPECT OF TRANSPORTATION OF IM PORTED COAL, TRUCK NUMBER, PLACE OF TRANSPORTATION ETC. THE COMPLETE D ETAILS SUCH AS INWARD NUMBER, INWARD DATE, COLLIERY NAME, BRANCH NAME, TR UCK NUMBER, DELIVERY WEIGHT, FREIGHT RATE FREIGHT AMOUNT, PART ADVANCE RATE, PAST ADVANCE AMOUNT-I, TDS, FREIGHT UNPAID AMOUNT-II, PA RT ADVANCE VOUCHER NUMBER, PART ADVANCE, VOUCHER DATE, UNPAID FREIGHT VOUCHER NUMBER, UNPAID FREIGHT DATE, BALANCE AMOUNT ETC. WERE FULLY PRODUCED BEFORE THE AO AS WELL AS BEFORE THE CIT(A). THUS, WE FIND SUBS TANCE IN THE CONTENTION OF THE ASSESSEE THAT DUE TO UNIQUE FEATU RE OF THEIR TRADE /SYSTEM, THE SUBSTANTIAL AMOUNT OF FREIGHT UNPAID A S REFLECTED IN THE SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 31 BOOKS OF ACCOUNTS RELATES TO THE INTERNAL TRANSPORT ATION OF GOODS FROM COLLIERIES TO PLOTS AND FROM JETTY TO PORT PLOT; AN D THAT FOR OUTWARD TRANSPORTATION FROM PLOT TO THE CUSTOMERS PREMISES , THE ASSESSED HAD GIVEN PRIORITY TO THOSE TRANSPORTERS WHO HAD PROVID ED THEIR SERVICES FOR INWARD TRANSPORTATION I.E FROM COLLIERIES TO PLOT O R FROM JETTY TO PORT PLOT SO THAT SUCH TRANSPORTERS COULD GET THEIR BULK BUSINES S AND RECEIVED THEIR MAJOR PAYMENTS ON OUTWARD TRANSPORTATIONS ON TO PA Y BASIS. 31. WE FIND THAT THE ASSESSEE HAD NOT MADE SURRENDE R ON ACCOUNT OF BOGUS FREIGHT CLAIM BUT IT HAD MADE SURRENDER MEREL Y FOR THE REASON OF HIS INABILITY TO ESTABLISH THE GENUINENESS OF THE F REIGHT LIABILITIES IN RESPECT OF VARIOUS TRUCK OWNERS WHO WERE SCATTERED ACROSS THE COUNTRY. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSEE HAD ALSO PRODUCED SOME TRANSPORTERS BEFORE THE AO AND F URTHER, AFFIDAVITS OF SOME OF THE TRANSPORTERS WERE ALSO FILED. THE DELAY IN MAKING THE PAYMENT OF FREIGHT ATTRIBUTES FOR THE REASON THAT M ANY A TIMES, A TRANSPORTER AFTER COMPLETING THE ASSIGNMENT, GOES O N SOME OTHER ROUTE AND DOES NOT CONTACT THE ASSESSEE FOR PAYMENT. 32. WE ALSO FIND THAT THE GP OF THE ASSESSEE FROM Y EAR TO YEAR HAS GOT INCREASED FROM 3.68% IN AY 2003-04 TO 9.19% IN AY 2 008-09 AS PER THE COMPARATIVE CHART REPRODUCED AT PAGE NO. 16 OF THE CIT(A)S ORDER. 33. FURTHER, WE FIND THAT THE ASSESSEE HAS MADE NEC ESSARY TDS IN ALL APPLICABLE CASES AND HAS ALSO DEPOSITED THE SAME TO THE TREASURY OF THE CENTRAL GOVERNMENT. IN THE INSTANT CASE, THE AO HA S MADE THE AD-HOC DISALLOWANCE OF HUGE AMOUNT BUT HE HAS NOT REJECTED BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 1 45(3) OF THE ACT. 34. WE FIND THAT THE RELIANCE PLACED BY THE AO ON O NE CORRESPONDENCE INVENTORIZED AS BS-45 IS NOT JUSTIFIED FOR THE REAS ON THAT IN THE CASE OF THE ASSESSEE, THE SEARCH WAS STARTED ON 25-09-2007 AND THE SAID CORRESPONDENCE WAS MADE BY AN EMPLOYEE OF THE ASSES SEE AFTER SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 32 COMMENCEMENT OF SEARCH AND IT WAS SEIZED ON 26-10-2 010 AND SUCH CORRESPONDENCE WAS WRITTEN BY THE ASSESSEE MERELY F OR ASCERTAINING THE NAME OF TRUCK OWNERS AGAINST THE TRUCK NUMBERS AS E XPLAINED BY THE ASSESSEE. 35. SO FAR AS THE RELIANCE UPON THE JUDICIAL PRONOU NCEMENTS (SUPRA) BY THE LD. DRS IS CONCERNED, WE FIND THAT IT WILL NOT HELP THE CASE OF THE REVENUE AS SAME ARE NOT APPLICABLE TO THE PRESENT C ASE BEING DISTINGUISHABLE ON FACTS AND EVEN OTHERWISE, LD. DR S COULD NOT CONTROVERT THE FACTUAL FINDING RECORDED BY THE LD. CIT(A) BY BRINGING ANY CONTRARY MATERIAL ON RECORD. 36. ON CONSIDERATION OF ABOVE FACTS, SUBMISSIONS AN D DISCUSSION, WE FIND THAT THE ENTIRE ACTION OF THE AO IS BASED ON E XTRANEOUS CONSIDERATION, GUESS WORK AND PRESUMPTION. THUS, TH E ORDERS OF THE LD. CIT(A) IS CONFIRMED ON THIS ISSUE. ACCORDINGLY, ABO VE RESPECTIVE DEPARTMENTAL APPEALS ARE DISMISSED ON THIS GROUND. DEPARTMENTAL GROUND NO. 2 INVOLVED IN IT(SS)A NOS.1 7 & 18/IND/2012 A.YS. 2002-03 & 2003-04 37. THIS GROUND OF THE BOTH THE APPEALS OF THE DEPA RTMENT IS DIRECTED AGAINST THE ACTION OF THE LD. CIT(A) IN ALLOWING CA RRY FORWARD OF STCG LOSS AT RS.74,88,156/- AND RS.20,39,373/-, RESPECTI VELY, TREATING IT AS GENUINE WITHOUT GIVING ANY INDEPENDENT FINDING. 38. SHORT FACTS OF THE CASE ARE THAT DURING THE COU RSE OF THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSES SEE HAD SHOWN SHORT-TERM CAPITAL LOSS ON SALE OF SHARES OF CERTAI N COMPANIES SUCH AS SSI LTD., SAIL, SATYAM COMPUTERS LTD., GLOBAL TELES YSTEMS LTD. ETC. THE AO FOUND THAT THE TRANSACTIONS AND CONSEQUENT L OSS SHOWN BY THE ASSESSEE ON THE TRANSACTIONS IN ABOVE NAMED COMPANI ES ARE NOT GENUINE AND THEREFORE, HE DISALLOWED THE CLAIM OF T HE SHORT-TERM CAPITAL LOSS OF RS.74,88,155/- MADE BY THE ASSESSEE IN HIS RETURN OF INCOME. SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 33 39. MATTER CARRIED TO LEARNED CIT(A), WHO HAS RELIE D UPON HIS FINDINGS GIVEN IN THE CASE OF ONE OTHER GROUP ASSESSEE I.E. OF SHRI AMANDEEP SINGH BHATIA FOR A.Y. 2006-07 IN APPEAL NO. IT-227/ 09-10. THE CIT(A) IN THE AFORESAID APPEAL HAS HELD THAT HE HAD MADE NECE SSARY ENQUIRIES FROM THE SEBIS WEBSITE AND HE COULD NOT FOUND ANY ADVERSE OF THE SEBI IN RESPECT OF THE SCRIPS MENTIONED IN TABLE NO. 6 G IVEN IN THE SUBJECT APPELLATE ORDER OF SHRI AMANDEEP SINGH BHATIA. AS P ER THIS TABLE, THE CIT(A) FOUND THAT THE TRANSACTIONS IN RESPECT OF SH ARES OF SSI LTD., SAIL, SATYAM COMPUTERS LTD., GLOBAL SYSTEMS LTD. CARRIED OUT BY THE ASSESSEE DURING THE A.Y. 2002-03 WERE FOUND TO BE G ENUINE BY HIM. ACCORDINGLY, THE CIT(A) DIRECTED TO ALLOW CARRY FOR WARD AND SET-OFF OF SUCH SHORT-TERM CAPITAL LOSS IN THE SUBSEQUENT YEAR S. 40. LD. DRS HAVE RELIED ON THE ORDERS OF THE ASSESS ING OFFICER AND SUBMITTED THAT OUR ARGUMENTS ADVANCED IN THE CASE O F AMANDEEP SINGH BHATIA ON IDENTICAL FACTS MAY BE TAKEN INTO CONSIDE RATION. 41. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: IN THIS CONTEXT, IT IS SUBMITTED THAT THIS GROUND OF APPEAL IS SIMILAR TO THAT OF GROUND NO. 3.1 TO 3.3 TAKEN BY SHRI AMAN DEEP SINGH BHATIA, A GROUP ASSESSEE, IN HIS APPEAL FOR A.Y. 2006-07 (A PPEAL NO. IT(SS)(A)-115/IND/2011) AND THEREFORE, OUR SUBMISSI ON MADE IN RESPECT OF THE AFORESAID GROUND MAY KINDLY BE TAKEN INTO CONSIDERATION WHILE ADJUDICATING THE PRESENT GROUND OF APPEAL. 42. BOTH THE PARTIED SUBMITTED THAT ON PRINCIPLE, T HIS ISSUE OF APPEALS IS SIMILAR TO THAT OF ISSUE TAKEN IN THE CASE OF AMAND EEP SINGH BHATIA, A GROUP ASSESSEE, IN HIS APPEAL FOR A.Y. 2006-07 IT(S S)(A) NO.115/IND/2011. 43. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS RELIED UPON HIS OWN FINDINGS GIVEN IN THE CASE OF SHRI AMANDEEP SINGH B HATIA. WE FIND THAT SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 34 THIS ISSUE HAS ALREADY BEEN DEALT WITH BY US IN THE CASE OF ONE OF THE GROUP ASSESSEES NAMELY, AMANDEEP SINGH BHATIA IN AP PEAL NO. IT(SS)A NO.115/IND/2011 FOR A.Y. 2006-07, WHEREIN W E HAVE HELD AS UNDER: IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, VARIOUS DOCUMENTARY EVIDENCES PLACED ON RECORD AND IN THE L IGHT OF THE VARIOUS JUDICIAL PRONOUNCEMENTS, WE ARE OF THE CONSIDERED V IEW THAT THERE WAS ABSOLUTELY NO JUSTIFICATION FOR BOTH THE AUTHORITIE S BELOW IN DISBELIEVING THE GENUINENESS OF THE LONG TERM CAPITAL GAIN AND S HORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE IN HIS RETURN OF INCOME, MERE LY ON GUESSWORK, CONJECTURES AND SURMISES. ACCORDINGLY, THESE ADDITI ONS ARE DIRECTED TO BE DELETED. CONSEQUENTLY, GROUND NOS. 3.1 TO 3.3 ON THE ISSUE OF GENUINENESS OF LONG TERM CAPITAL GAIN/SHORT TERM CA PITAL GAIN ARE ALLOWED. SINCE COMMON ISSUE ON SIMILAR SET OF FACTS AND CIRCUMSTANCES ARE INVOLVED IN THE ASSESSMENT YEAR 2005-06, WE, FO LLOWING OUR ABOVE DECISION GIVEN IN THE ASSESSMENT YEAR 2006-07, ALLO W THE GROUND NOS.3.1 & 3.2 ON THE ISSUE OF LONG TERM CAPITAL GAI N/SHORT TERM CAPITAL GAIN FOR THE ASSESSMENT YEAR 2005-06 TOO IN ASSESSE ES APPEAL IT(SS)A NO.114/IND/2014 . 44. THUS, BY FOLLOWING OUR ABOVE ORDER ON THE IDENT ICAL ISSUE ON SIMILAR SET OF FACTS, WE DISMISS THE PRESENT GROUNDS IN RES PECT OF SHORT TERM LOSS IN THE PRESENT RESPECTIVE ABOVE APPEALS FILED BY TH E REVENUE. DEPARTMENTAL GROUND NOS. 3, 3, 3, 3, 3 & 1 IN DEPAR TMENTAL APPEALS IT(SS)A NOS. 17, 19, 20, 21, 22 & 23/IND/20 12 FOR THE AYS 2002-03, 04-05, 05-06, 06-07, 07-08 & 2008-09 45. THIS GROUND OF THE ABOVE APPEALS OF THE DEPARTM ENT IS DIRECTED AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING AD DITIONS OF RS.275/-, 24,968/-, 17,366/-, 63,586/-, 13,018/- & 8,83,383/- , RESPECTIVELY, MADE BY THE AO U/S. 14A R.W. RULE 8D. BOTH THE PARTIES S UBMITTED THAT IDENTICAL FACTS AND CIRCUMSTANCES ARE INVOLVED, THE REFORE, WE ARE TAKING THE FACTS FROM THE AY 2002-03 ON IDENTICAL ISSUE. 46. SHORT FACTS OF THE ISSUE ARE THAT DURING THE CO URSE OF THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSES SEE HAD EARNED DIVIDEND INCOME OF RS.275/- WHICH HAS BEEN CLAIMED AS EXEMPTED. THE AO COMPUTED THE DISALLOWABLE EXPENSES BY INVOKING P ROVISIONS OF SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 35 SECTION 14A R.W. RULE 8D AT RS.1,80,930/- BUT RESTR ICTED THE ADDITION TO THE EXTENT OF EXEMPTION CLAIMED AND MADE THE ADDITI ON. 47. MATTER CARRIED TO LEARNED CIT(A), WHO HELD THAT WHEN THE AO HAS NOTED THAT NO EXPENDITURE WERE CLAIMED FOR EARNING SUCH DIVIDEND INCOME, THERE WAS NO JUSTIFICATION FOR DISALLOWANCE . 48. LD. DRS HAVE RELIED ON THE ORDERS OF THE ASSESS ING OFFICER. 49. THE LD. AR FOR THE ASSESSEE RELYING UPON THE OR DERS OF THE LD. CIT(A) SUBMITTED THAT THE ASSESSEE HAS NOT MADE ANY CLAIM OF ANY EXPENSES FOR EARNING OF THE DIVIDEND INCOME AND THE REFORE, NO DISALLOWANCE IS WARRANTED. 50. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE U/S 14A OF RS.1,80,930/- APPLYING RULE 8D AND NOTED THAT NO EXPENSES WERE CLAIMED FOR EARNING SUCH DIVIDEND AND ACCORDIN GLY, HE RESTRICTED THE DISALLOWANCE TO THE EXTENT OF DIVIDEND INCOME I .S. RS.275/-. HOWEVER, WE FIND THAT THE ASSESSING OFFICER COULD NOT APPREC IATE THE FACT THAT WHEN NO EXPENSES WERE CLAIMED BY THE ASSESSEE FOR E ARNING THE EXEMPT INCOME, THEN DISALLOWANCE U/S 14A IS NOT JUS TIFIED. EVEN, NO CONTRARY MATERIAL TO CONTROVERT THE FINDINGS OF THE LD. CIT(A) WAS BROUGHT ON RECORD BY THE REVENUE. THUS, WE CONFIRM THE ORDE RS OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, ALL THE ABOVE RESPECTIV E APPEALS FILED BY THE REVENUE ON THIS ISSUE ARE DISMISSED AS THE SAME ARE ON IDENTICAL FACTS AND CIRCUMSTANCES. DEPARTMENTAL GROUND NOS. 4, 3, 4, 4, 4, 4 & 2 INVOL VED IN THE IT(SS)A NOS.17 TO 23/IND/2012 AYS. 2002-03 TO 2008- 09 51. THIS GROUND OF THE ABOVE APPEALS OF THE DEPARTM ENT IS DIRECTED AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING TH E ADDITIONS OF SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 36 RS.5,65,130/-, RS.4,78,263/-, RS.5,83,012/-, RS.7,7 0,210/-, RS.12,65,356/-, RS.7,58,965/- & RS.6,18,746/-, RESP ECTIVELY, MADE BY THE AO ON ACCOUNT OF PERSONAL ELEMENT ON AD-HOC BAS IS. BOTH THE PARTIES SUBMITTED THAT IDENTICAL FACTS AND CIRCUMST ANCES ARE INVOLVED, THEREFORE, WE ARE TAKING THE FACTS FROM THE AY 2002 -03 ON IDENTICAL ISSUE. 52. SHORT FACTS OF THE CASE ARE THAT DURING THE COU RSE OF THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSES SEE HAD DEBITED A SUM OF RS.9,28,490/- RELATED TO CONVEYANCE, RS.99,8 79/- RELATED TO VEHICLE, RS.25,31,878/- RELATED TO TELEPHONE, RS.1, 46,705/- RELATED TO OFFICE EXPENSES AND RS.19,44,351/- RELATED TO TRAVE LLING EXPENSES. THE AO HELD THAT THE ASSESSEE IS AN INDIVIDUAL AND THER EFORE, PERSONAL ELEMENT FROM THE ABOVEMENTIONED EXPENSES CANNOT BE RULED OUT. ACCORDINGLY, THE AO MADE AN AD-HOC DISALLOWANCE OF 10% AND MADE AN ADDITION OF RS.5,65,130/- IN THE ASSESSEES INCOME. 53. MATTER CARRIED TO LEARNED CIT(A), WHO CONSIDERI NG THE WRITTEN SUBMISSION OF THE ASSESSEE, AS REPRODUCED AT PAGE N O. 52 & 53 OF THE ORDER HELD THAT SUCH ADDITION HAS BEEN MADE PURELY ON AD-HOC BASIS. THE CIT(A) HELD THAT THERE IS NO RATIONAL FOR SUCH AD-HOC DISALLOWANCE AND ACCORDINGLY, DELETED THE ENTIRE ADDITION. 54. LD. DRS HAVE RELIED ON THE ORDERS OF THE ASSESS ING OFFICER. 55. THE LD. AR FOR THE ASSESSEE HAS, RELYING UPON T HE ORDERS OF THE LD. CIT(A), REITERATED THE SUBMISSIONS MADE BEFORE REVE NUE AUTHORITIES. 56. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THE I NSTANT CASE, THE ASSESSMENT HAS BEEN FRAMED IN PURSUANCE OF A SEARCH CARRIED OUT UNDER S.132 OF THE ACT AND NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH FROM WHICH IT COULD HAVE BEEN WHIS PERED THAT THE ASSESSEE CLAIMED ANY PERSONAL EXPENDITURE AS BUSINE SS EXPENDITURE. SURENDRA SINGH BHATIA (SS)17/IND/2012 AND OTHERS 37 WE FIND THAT THE ASSESSEE HIMSELF HAS MADE A DISALL OWANCE OF RS.2,00,000/- WHILE FILING HIS RETURN AND THEREFORE , THERE WAS NO JUSTIFICATION FOR MAKING FURTHER DISALLOWANCE. WE A LSO FIND THAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNT WHI CH ARE DULY AUDITED AND NO SPECIFIC INSTANCE OF PERSONAL ELEMEN T WAS POINTED OUT BY THE AO. IN SUCH SITUATION, NO ADDITION WAS WARRANTE D. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE THE ACTIO N OF THE LD. CIT(A). WE CONFIRM THE ORDERS OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, DEPARTMENTAL APPEALS ON THIS ISSUE ARE DISMISSED. 57. IN THE RESULT, ASSESSEES APPEALS ARE PARTLY AL LOWED WHEREAS DEPARTMENTAL APPEALS ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18.5.201 6. SD/- (B.C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T. GARASIA) JUDICIAL MEMBER DATED : 17.8.2016 COPY TO: ASSESSEE/RESPONDENT/CIT(A)/CIT/DR, INDORE