SHRI KAILASH MARWAH, V. ACIT CENTRAL CIRCLE 34 MUMBAI, MUMBAI

ITSSA 285/MUM/2006

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 7949 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 29-09-2011
• Assessment Year: misc
• Appeal Filed On: 18-12-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBACHAN RAM
• Assessee Lawyers: SANJEEV M SHAH
• Keywords: Unexplained investment; Gift; Business expenditure; Search and seizure; Salary income; Loose papers; Document seized; Source of fund; Retrospective amendment; Additional evidence; Valuation report; Block assessment; Documents seized
• Section: 40A(3); 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI P.M.JAGTAP (A.M) & SHRI N.V.VASUDEVAN (J.M) IT(SS)A NO.285/MUM/2006 (BLOCK PERIOD 1/4/1995 TO 29/1/2002) SHRI KAILASH MARWAH, 1102, EXCELLENCY TOWER, LOKHANDWALA COMPLEX, ANDHERI(W), MUMBAI 400 058 PAN:AAEPM0989 (APPELLANT) VS. THE ACIT, CEN.CIR.34, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (RESPONDENT) IT(SS)A NO. 274/MUM/2006 (BLOCK PERIOD FROM 1/4/1995 TO 29/01/2002) THE DCIT, CEN. CIR.34, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT) VS. SHRI KAILASH MARWAH, 1102, EXCELLENCY TOWER, LOKHANDWALA COMPLEX, ANDHERI(W), MUMBAI 400 058 (RESPONDENT) IT(SS)A NO.284/MUM/2006 (BLOCK PERIOD 1/4/1995 TO 29/1/2002) THE DCIT, CEN.CIR.34, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT) VS. SMT.ACHARA K. MARWAH 1102, EXCELLENCY TOWER, LOKHANDWALA COMPLEX, ANDHERI(W),MUMBAI 400 058 PAN:AJAPM 0066H (RESPONDENT) C.O.NO.65/MUM/2007(ARISING OUT OF IT(SS)A NO.284/M/ 2006) (BLOCK PERIOD 1/4/1995 TO 29/1/2002) SMT.ACHARA K. MARWAH 1102, EXCELLENCY TOWER, LOKHANDWALA COMPLEX, ANDHERI(W), MUMBAI 400 058 (CROSS OBJECTOR) VS. THE DCIT, CEN.CIR.34, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT IN APPEAL) IT(SS)A NO.263/MUM/2006 (BLOCK PERIOD 1/4/1995 TO 29/1/2002) THE DCIT, CEN.CIR.34, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT) VS. SHRI PANKAJ K. MARWAH 1102, EXCELLENCY TOWER, LOKHANDWALA COMPLEX, ANDHERI(W), MUMBAI 400 058 PAN:AALPM 8934E (RESPONDENT) IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 2 C.O.NO.64/MUM/2007(ARISING OUT OF IT(SS)A NO.263/M/ 2006) (BLOCK PERIOD 1/4/1995 TO 29/1/2002) SHRI PANKAJ K. MARWAH 1102, EXCELLENCY TOWER, LOKHANDWALA COMPLEX, ANDHERI(W), MUMBAI 400 058 (CROSS OBJECTOR) VS. THE DCIT, CEN.CIR.34, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT IN APPEAL) ASSESSEES BY : SHRI SANJEEV M. SHAH REVENUE BY : SHRI SUBACHAN RAM DATE OF HEARING : 05/10/2011 DATE OF PRONOUNCEMENT : 14/10/2011 ORDER PER N.V.VASUDEVAN, J.M, IT(SS)285(SS)/M/06 IS AN APPEAL BY THE ASSESSEE. WHILE IT(SS) 274/M/06 IS AN APPEAL BY THE REVENUE. BOTH THESE A PPEALS ARE DIRECTED AGAINST THE ORDER DATED 22/9/2006 OF CIT(A), CENTRA L -6, MUMBAI RELATING TO THE BLOCK PERIOD 1/4/1995 TO 29/1/2002. THE ASSESS EE IN THESE APPEALS IS ONE SHRI KAILASH SIRIRAM MARWAH. 2. ITA NO.284/M/06 IS AN APPEAL BY THE REVENUE AGAI NST THE ORDER DATED 22/9/06 OF CIT(A), CENTRAL 6, MUMBAI RELATING TO BLOCK PERIOD 1/4/1995 TO 29/1/2002. THE ASSESSEE HAS FILED A CROSS OBJECTIO N BEING CO NO.65/M/07 AGAINST THE VERY SAME ORDER OF THE CIT(A). THE ASS ESSEE IN THESE APPEALS IS ONE SMT. ACHARA K.MARWAH, ALSO KNOWN AS SABEENA, WIFE O F SHRI.KAILASH SIRIRAM MARWAH. 3. ITA NO.263/M/06 IS AN APPEAL BY THE REVENUE AGAI NST THE ORDER DATED 26/7/06 OF CIT(A), CENTRAL-6, MUMBAI RELATING TO TH E BLOCK PERIOD 1/4/1995 TO 29/1/2002. THE ASSESSEE HAS FILED C.O NO.64/M/07 A GAINST THE VERY SAME ORDER OF THE CIT(A). THE ASSESSEE IN THESE APPEALS IS ONE MR. PANKAJ K. MARWAH, S/O.SHRI KAILASH SIRIRAM MARWAH. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 3 4. SHRI KAILASH SIRIRAM MARWAH IS AN INDIVIDUAL. H E IS PROPRIETOR OF M/S. SIRIRAM & COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF WIRE PRODUCTS. HE ALSO HAS ANOTH ER PROPRIETORSHIP BUSINESS INVOLVED IN MANUFACTURE OF WIRE PRODUCTS NAMELY SHR INIVAS INDUSTRIES. BESIDES THE ABOVE SHRI KAILASH SIRIRAM MARWAH IS ALSO DIREC TOR OF THREEGEE ENGINEERS PVT. LTD. SMT. ACHARA MARWAH IS THE WIFE OF SHRI K AILASH SIRIRAM MARWAH, MR. PANKAJ K. MARWAH IS SON OF SHRI KAILASH SIRIRAM MAR WAH. THERE WAS A SEARCH AND SEIZURE OPERATION IN THE CASE OF ALL THE ASSESS EES CONDUCTED ON 16/1/2002. THE SEARCH WAS CONDUCTED IN THE BUSINES S PREMISES OF M/S. SIRIRAM & COMPANY, SHRINIVAS INDUSTRIES AND M/S. TH REEGEE ENGINEERS PVT. LTD. BESIDES THE ABOVE THE LOCKER NO.229 &553 IN BANK OF RAJASTHAN, VERSOVA, ANDHERI (W) BRANCH WERE ALSO SEARCHED. WI TH THE AFORESAID BACKGROUND WE WILL NOW TAKE UP FOR CONSIDERATION TH E CASE OF SHRI KAILASH SIRIRAM MARWAH. IT(SS) 285/M/06 ASSESSEES APPEAL: 5. GROUND NO.1,2,3 & 4 RAISED BY THE ASSESSEE IN TH IS APPEAL AND GROUND NO.1 RAISED BY THE REVENUE IN ITS APPEAL CAN BE CON VENIENTLY DECIDED TOGETHER. THESE GROUNDS ARISE OUT OF THE ADDITION MADE BY THE AO ON ACCOUNT OF UNEXPLAINED JEWELLERY FOUND AT THE TIME OF SEARCH. 6. AT THE TIME OF SEARCH FOLLOWING ITEMS OF JEWELLE RY WERE FOUND AND SEIZED AS GIVEN IN THE TABLE BELOW. S.NO. PLACE OF SEIZURE GOLD (WT. IN GMS) DIAMOND (VALUE. FOUND SEIZED FOUND SEIZED 1. LOCKER NO.229, BANK OF RAJASTHAN, BANDRA WEST, MUMBAI. 607.700 GMS NIL 483720 483720 2. LOCKER NO.553, BANK OF RAJASTHAN,LOKHANDWALA COMPLEX, ANDHERI WEST,MUMBAI. 777.20 GMS 431.00 (RS.2,00,018) 37000 NIL IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 4 3. 1102, 2A, EXCELLENCY, 4, SAMARTH X LANE, LOKHANDWALA COMPLEX, ANDHERI WEST, MUMBAI 400 053. 1044.50 GMS NIL 910305 910305 TOTAL 2429.400 431.00 1431025 1394025 THE AO MADE ADDITION OF THE VALUE OF GOLD JEWELLERY AND DIAMONDS SEIZED AT THE TIME OF SEARCH TREATING THEM AS UNEXPLAINED. THE B REAKUP OF THE AMOUNTS OF RS. 15,94,043/- ADDED BY THE AO IS AS FOLLOWS: (A) GOLD JEWELLERY SEIZED 431 GMS. RS. 2,00,018 (B) JEWELLERY BELONGING TO K.SHROFF RS. 89,470 (C) MAKING CHARGES FOR JEWELLERY(P.MARWAH) RS. 2,60,240 (D) JEWELLERY RECEIVED FROM T. BAJAJ BROTHER OF SMT. A. MARWAH, WIFE OF K.MARWAH RS. 3,68,000 (E) JEWELLERY RECEIVED UNDER THE WILL OF K.BAJAJ FATHER OF SMT. A.MARWAH RS. 6,76,315 RS.15,94,043 THE ADDITION ON ACCOUNT OF GOLD JEWELLERY OF 431 GR AMS VALUED AT RS. 2,00,018/- WAS DELETED BY THE CIT(A) AND THE OTHER ADDITIONS WERE CONFIRMED. IN RESPECT OF THE ADDITION DELETED BY THE CIT(A) TH E REVENUE HAS RAISED GROUND NO.1 IN ITS APPEAL. IN RESPECT OF ADDITION SUSTAIN ED BY THE CIT(A) THE ASSESSEE HAS RAISED GROUND NO.1 TO 4 IN ITS APPEAL. GROUND NO.1 TO 4 OF ASESSEES APPEAL IN IT(SS) 285/ M/06: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE APPELLANTS CONTENTION THAT SEIZED IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 5 JEWELLERY AMOUNTING TO RS.89,470/- BELONGED TO MS. KIRAN SHROFF AND NOT TO THE APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE ASSESSING OFFICER IN TREATING A SUM OF RS.2,10, 240/- BEING MAKING CHARGES FOR JEWELLERY PAID BY THE APPELLANTS SON A S UNDISCLOSED JEWELLERY IN HANDS OF THE APPELLANT AND IGNORING THE FACT THA T THE SOURCE OF INVESTMENT WAS FULLY EXPLAINED BY THE APPELLANTS S ON. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE JEWELLERY REC EIVED BY THE APPELLANTS WIFE AMOUNTING TO RS.6,76,31 5/- UNDER A WILL AS UN DISCLOSED INCOME ON THE GROUND THAT THE SAID WILL WAS NOT REGISTERED IN INDIA. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE GIFTS RECEIVE D BY THE APPELLANTS WIFE SMT. A. MARWAH FROM HER BROTHER AMOUNTING TO RS.3,6 8,000/- AS UNDISCLOSED INCOME ON THE GROUND THAT BILLS AND DOC UMENTARY EVIDENCES WERE NOT FURNISHED AT THE TIME OF APPELLATE PROCEED INGS. GROUND NO.1 OF REVENUES APPEAL IN IT(SS) 274/M/06: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) WAS NOT CORRECT IN DELETING RS.1,85,632/- O UT OF ADDITION OF RS. 2,00,018/- ON ACCOUNT OF GOLD JEWELLERY RELYING ON BOARDS CIRCULAR NO.1916 WITHOUT APPRECIATING THE FACT THAT THE SAID CIRCULAR LAYS DOWN THE LIMITS FOR THE AMOUNT OF JEWELLERY WHICH MAY NO T BE SEIZED DURING THE COURSE OF SEARCH PROCEEDINGS, HOWEVER, DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS TO JUSTIFY THE SOURCE OF ALL THE JEWELLERY FOUND EVEN IF IT IS NOT SEIZED. 7. WE WILL NOW DEAL WITH THE INDIVIDUAL ITEMS OF AD DITION. (A) GOLD JEWELLERY SEIZED OF 431 GRMS RS.2,00,01 8/-(GROUND NO.1 IN REVENUES APPEAL): 7.1 AT THE TIME OF SEARCH GOLD WEIGHING 2429.400 GR AMS WERE FOUND IN THE LOCKERS AND THE RESIDENCE. THE ASSESSEE EXPLAINED THE QUANTUM OF GOLD AS BELONGING TO THE FOLLOWING PERSONS: (A) MRS. ACHARA MARWAH (SABEENA) 500.00 (GROSS) (B) MRS. KAVITA P. MARWAH 500.00 (GROSS) (C) LATE MRS. JYOTI MARWAH 500.00 (GROSS) (D) LATE MRS. BIMLA DEVI (MOTHER) 500.00 (GROSS) (E) SHRI KAILASH MARWAH 100.00 (GROSS) IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 6 (F) SHRI PANKAJ MARWAH 100.00 (GROSS) (G) MASTER TANVEER MARWAH 100.00 (GROSS) (H) BABY MALIKA MARWAH 100.00 (GROSS) 2400.00(GROSS) ============ THE ASSESSEE RELIED ON BOARD CIRCULAR NO.1916 WHERE IN IT WAS LAID DOWN THAT CONSIDERING THE FAMILY BACKGROUND AND OTHER SOCIAL STATUS A QUANTITY OF 500 GRAMS IN THE CASE OF FEMALE MEMBERS AND 100 GRAMS G ROSS IN RESPECT OF MINORS AND MALE MEMBERS IN FAMILY CAN BE CONSIDERED AS DUL Y EXPLAINED. THE AO HOWEVER GAVE CREDIT ONLY IN RESPECT OF 2000 GRAMS O F GOLD JEWELLERY. THE AO DID NOT GIVE CREDIT TO 100 GRAMS OF GOLD CLAIMED BY THE ASSESSEE IN RESPECT OF SHRI KAILASH SIRIRAM MARWAH, PANKAJ MARWAH, TANVIR AND M ALLIKA MARWAH. THUS 400 GRAMS GOLD JEWELLERY WAS CONSIDERED AS UNEXPLAI NED AND A SUM OF RS. 2,00,018/- WAS ADDED AS UNDISCLOSED INCOME IN THE HANDS OF SHRI KAILASH SIRIRAM MARWAH. 7.2 BEFORE CIT(A) THE ASSESSEE REITERATED THE SUBMI SSIONS AS WERE MADE BEFORE THE AO AND RELIED ON THE DECISION IN THE CAS E OF SMT. NEENA SYAL VS. ACIT, 70 ITD 62 (CHANDIGARH), WHEREIN IT WAS LAID D OWN THAT THE CBDT INSTRUCTION NO.288/63/93-IT (INVESTIGATION 2) ISSUE D ON 11/4/1994 WAS ALSO RELEVANT IN THE CONTEXT OF SECTION 69A OF THE ACT A ND AS LAID DOWN IN THOSE INSTRUCTION 500 GRAMS OF JEWELLERY IN THE CASE OF M ARRIED LADY AND 250 GRAMS FOR UNMARRIED LADY AND 100 GRAMS FOR MALE MEMBERS O F FAMILY ARE TO BE CONSIDERED AS EXPLAINED HAVING REGARD TO THE STATU S OF THE FAMILY ETC. THE ASSESSEE QUANTIFIED BEFORE THE CIT(A) THAT THE ASSE SSEE WOULD BE ENTITLED TO AN ADDITIONAL CREDIT OF RS. 1,85,632/- BASED ON THE A BOVE SUBMISSIONS AND SUBMITTED THAT THE ADDITION TO THAT EXTENT SHOULD B E DELETED. THE CIT(A) ON THE SUBMISSION HELD AS FOLLOWS: AFTER PERUSAL OF THE SUBMISSIONS MADE BY THE APPEL LANT, THE DECISIONS CITED BY THE AUTHORIZED REPRESENTATIVE, I FIND THAT THE INTENTION BEHIND THE BOARD CIRCULAR AND LOOKING AT CUSTOMS AND TRADI TIONS FOLLOWED IN THE COUNTRY, I AM IN AGREEMENT WITH THE AUTHORIZED REPR ESENTATIVES IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 7 CONTENTION THAT ADDITIONAL CREDIT OF 100 GRAMS PER MALE MEMBER AND CHILDREN SHOULD BE ALLOWED. ACCORDINGLY, I DIRECT THE AO TO ALLOW ADDITIONAL CREDIT OF 400 GMS FOR 2 MALE MEMBERS AND 2 CHILDREN WHICH IS COMPUTED AT RS. 1,85,632/-. THE ADDITION TO THE EX TENT OF RS. 1,85,632/- IS DELETED OUT OF SEIZED GOLD JEWELLERY AMOUNTING TO RS. 2,00,018/-. 7.3 AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE H AS RAISED GROUND NO.1 IN ITS APPEAL BEFORE THE TRIBUNAL. 7.4 WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. D .R REITERATED THE STAND OF THE REVENUE AS REFLECTED IN THE ORDER OF THE AO. T HE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). 7.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERE NCE. IN THE CASE OF NEENA SYAL (SP) THE CHANDIGARH BENCH HAS HELD THAT WHILE MAKIN G REGULAR ASSESSMENT UNDER S. 143(3) R.W.S. 158BC, THE AO IS REQUIRED, B EFORE INVOKING S. 69A, TO REBUT THE EXPLANATION GIVEN BY THE ASSESSEE AND COM E TO A CONCLUSION THAT THE EXPLANATION IS NOT SATISFACTORY. IT WAS FURTHER HE LD THAT CBDT INSTRUCTION NO. 1916 DT. 11TH MAY, 1994, IS ALSO RELEVANT WITH REFE RENCE TO DEEMING PROVISIONS OF S. 69A. IT WAS ALSO HELD THAT KEEPING IN VIEW T HE STATUS OF ASSESSEES FAMILY, AGE OF BOTH THE CHILDREN OF ASSESSEE AND OTHER CIRC UMSTANCES OF THE CASE, IT WOULD BE JUST AND FAIR TO ALLOW CREDIT OF 120 GMS A ND 50 GMS, RESPECTIVELY TO CHILDREN OF ASSESSEE. IN THE PRESENT CASE, CONSIDE RING THE STATUS OF THE ASSESSEES FAMILY, WE ARE OF THE VIEW THAT THE CIT( A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. CONSEQUENTLY GROUND NO.1 RAISED BY THE REVENUE IN ITS APPEAL IS DISMISSED. (B) JEWELLERY BELONGING TO K. SHROFF (GROUND NO.1 IN ASSESSEES APPEAL): 7.6 OUT OF THE DIAMOND JEWELLERY FOUND AND SEIZED A T THE TIME OF SEARCH THE ASSESSEE EXPLAINED THAT ONE NECKLACE OF 103 DIAMOND S AND RED CHOKIES SET IN GOLD BELONGS TO THE SISTER OF ASSESSEES DAUTGHTER IN LAW BY NAME MS. KIRAN RAMESH SHROFF. THE AFFIDAVIT OF KIRAN RAMESH SHROF F WAS ALSO FILED BEFORE THE IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 8 AO. IN THE AFFIDAVIT SO FILED MS. KIRAN EXPLAINED THAT SHE WAS WORKING AS AN AIRHOSTESS IN NEPC AIRLINES FROM FEBRUARY 1996 TO N OVEMBER 1996, FROM JANUARY 1997 TO SEPTEMBER 1998 AS SENIOR BEAUTY CON SULTANT WITH BACCROSE, FROM SEPTEMBER 1998 TO MARCH 99, SHE WAS WORKING AS ASSTT.MANAGER AT PARFUM BOTIQUE & FROM JULY 1999 TO APRIL 2000 AS CO ORDINATOR IN ADVANCE NET. THEREAFTER SHE CONTINUED TO WORK AS MARKET EXECUTIV E AT APTECH (KHAR). WHILE WORKING IN MUMBAI SHE STAYED ALONE AND FOR SAFETY R EASON HAD HANDED OVER THE JEWELLERY TO THE ASSESSEE. THE AO REJECTED THE EXP LANATION OF THE ASSESSEE FOR THE REASON THAT MS. KIRAN HAD NOT EXPLAINED THE SOU RCE OF ACQUISITION OF JEWELLERY, BILLS FOR PURCHASE OF THE JEWELLERY, IT AND WT RETURNS HAVE NOT BEEN FILED. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIR MED THE ORDER OF THE AO. 7.7 AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESS EE HAS RAISED GROUND NO.1 BEFORE THE TRIBUNAL. 7.8 WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE TI ME OF SEARCH OF THE LOCKER IN BANK OF RAJASTHAN, BANDRA (W) ON 21/2/2002, THE STATEMENT OF THE ASSESSEE WAS RECORDED. IN QUESTION NO.3 THE ASSESS EE WAS ASKED TO WHOM JEWELLERY BELONGS TO. THE ASSESSEE EXPLAINED THAT THE JEWELLERY FOUND IN THE LOCKERS BELONGS TO HIS EX-WIFE, HIS MOTHER SMT. VIM LA MARWAH AND HIS WIFE SMT. ACHARA MARWAH, MS. KAVITA MARWAH, ASSESSEES H IMSELF AND PANKAJ MARWAH HIS SON. THE ASSESSEE SPECIFICALLY STATE D AS FOLLOWS: ONE OF THE SETS BELONGS TO MS. KIRAN SHROFF. IN THE COURSE OF ASSESSMENT PROCEEDINGS MS. KIRAN R AMESH SHROFF FILED AN AFFIDAVIT BEFORE THE AO ACCEPTING OWNERSHIP OF THE PARTICULAR ITEM OF JEWELLERY. SHE HAS ALSO GIVEN HER SOURCE OF INCOME OVER THE YE ARS. THE AO DID NOT CROSS EXAMINED MS.KIRAN RAMESH SHROFF BUT PROCEEDED TO DR AW AN ADVERSE INFERENCE ON THE BASIS THAT SHE HAS NOT EXPLAINED HER SOURCE OF INCOME IN THE AFFIDAVIT. AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CA SE OF MEHTA PARIKH & COMPANY, 30 ITR 181 (SC) THE AVERMENTS MADE IN AN AFFIDAVIT CANNOT BE DISREGARDED WITHOUT CROSS EXAMINATION AND SHOWING HOW AVERMENTS ARE FALSE. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 9 SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GLASSLINE EQUIPMENT COMPANY LTD., VS. CIT,253 ITR 4 54(GUJ). IN OUR VIEW THE STATEMENT MADE AT THE TIME OF SEARCH COUPLED WITH T HE FACT THAT MS. KIRAN RAMESH SHROFF ACCEPTED THE OWNERSHIP OF THE JEWELLE RY AND FURTHER FILED AFFIDAVIT BEFORE THE AO IN THIS REGARD WOULD BE SUF FICIENT TO HOLD THAT THE ADDITION MADE IN THE HANDS OF THE ASSESSEE CANNOT B E SUSTAINED. WE, THEREFORE, DIRECT THAT THE ADDITION SUSTAINED IN TH IS REGARD BE DELETED. GROUND NO.1 OF THE ASSESSEE IS ALLOWED. (C) MAKING CHARGES OF JEWELLERY- PANKAJ MARWAH RS. 2,60,240/-(GROUND NO.2 IN ASSESSEES APPEAL): 7.9 OUT OF THE SEIZED DIAMOND JEWELLERY THE ASSESSE E EXPLAINED THAT JEWELLERY OF THE VALUE OF RS. 2,60,240/- BELONGS TO MR. PANKA J MARWAH. AT THE TIME OF SEARCH A DOCUMENT MARKED AS P.88 WAS SEIZED. THIS DOCUMENT EVIDENCED SOME WORKING DONE IN RESPECT OF MAKING CHARGES AND PURCHASE OF ADDITIONAL GOLD FOR REMAKING OF JEWELLERY. THE ASSESSEE EXPL AINED THAT THE DESCRIPTION OF ITEM OF JEWELLERY WAS AS FOLLOWS: S.NO. VALUATION REPORT OF DINESH SALVI DATED ITEM NO. DESCRIPTION PLACE VALUE OF SEIZED ITEMS. 1. 16-01-02 38 1 DIAMOND WHILE GOLD LACE WITH 280 ROUND & 35 CHOKI DIA WITH 48 AND 20 CHOKIS RESIDENCE` 131190/- 2. 16-01-02 40 1 DIA PENDANT WITH 3 DROP SHAPE LATKAN WITH GOLD AND WHILE GOLD CHAIN WITH 136 VILLADI DIA AND 114 ROUND ART DIA WITH CARRING PAIR WITH 68 VILLADI DIA AND 92 ROUND CUT DIA. RESIDENCE 129050/- TOTAL 260240/- IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 10 THERE IS NO DISPUTE THAT THE DESCRIPTION OF THE ITE M OF JEWELLERY AS GIVEN IN THE VALUATION REPORT AFTER SEARCH AND THE DESCRIPTION A S FOUND IN THE SEIZED DOCUMENTS TALLIES. THIS ITEM OF JEWELLERY WAS CLAI MED BY MR. PANKAJ MARWAH THE SON OF THE ASSESSEE AS BELONGING TO HIM. THE A O DID NOT ACCEPT THE EXPLANATION FOR THE REASON THAT SHRI PANKAJ K.MARWA H, THE ASSESSEES SON WAS NOT FILING WT RETURNS AND DID NOT HAVE PROOF OF HAV ING PURCHASED THE JEWELLERY IN QUESTION. BEFORE CIT(A) BALANCE SHEET OF MR. P ANKAJ MARWAH FILED IN THE COURSE OF ASSESSMENT FOR A.Y 1996-97 WAS FILED AND IT WAS POINTED OUT THAT THE ORIGINAL COST OF JEWELLERY AT RS. 50,000/- WAS DULY REFLECTED IN THE SAID BALANCE SHEET. ACCORDING TO THE ASSESSEE THE ITEM OF JEWEL LERY SEIZED AT THE TIME OF SEARCH AND THE ITEM OF JEWELLERY ALREADY DISCLOSED IN THE BALANCE SHEET BY MR. PANKAJ MARWAH IS ONE AND THE SAME. THE ASSESSEE AR GUED THAT AFTER PURCHASING EXTRA GOLD, THE OLD JEWELLERY WAS REMADE BY MR.PANKAJ K.MARWAH AS RECORDED IN THE SEIZED DOCUMENT VIZ., PAGE-88. THE CIT(A) ON THE ABOVE SUBMISSION HELD AS FOLLOWS: I HAVE PERUSED THE SUBMISSIONS MADE BY APPELLANT. I HAVE ALSO GONE THROUGH THE RETURN OF INCOME AND THE RELEVANT PAPER S FILED FOR A.Y. 1996- 97 IN THE CASE OF MR. PANKAJ MARWAH. I FIND THAT IN THE AFORESAID RETURN IT WAS CLEARLY MENTIONED THAT MR. PANKAJ MARWAH HAD AT TACHED TWO DOCUMENTS ALONGWITH PROOF OF PAYMENT OF TAX. THE SA ID DOCUMENTS INCLUDED THE BALANCE SHEET AS ON 31ST MARCH, 1996. THE AO HAS NOT DEMONSTRATED OR GIVEN ANY EVIDENCE THAT THE EXPLANA TION OF THE APPELLANT WAS FALSE OR INCORRECT. JEWELLERY OF RS.50,000 WHIC H HAS BEEN SHOWN IN THE BALANCE SHEET OF MR. PANKAJ MARWAB [OR A.Y.1996 -97 IS TREATED AS DISCLOSED AND ADDITION OF RS.50,000 IN RESPECT OF J EWELLERY BELONGING TO MR. PANKAJ MARWAH IS DELETED. IN RESPECT OF THE BAL ANCE AMOUNT OF RS.2,1O,240, THE AUTHORISED REPRESENTATIVES SUBMIS SIONS THAT IT HAD BEEN FINANCED BY HIS MOTHER AND WIFE ARE HYPOTHETIC AL AND THE CONTENTION OF THE AUTHORISED REPRESENTATIVE THAT SU FFICIENT WITHDRAWAL TO FINANCE SUCH PURCHASE OF JEWELLERY HAS NOT BEEN SUB STANTIATED BY ANY DOCUMENTARY EVIDENCE. IN WHICH YEAR, HOW AND WHEN A LTERATION WAS DONE HAS ALSO NOT BEEN ESTABLISHED FURTHER, NO RECEIPT F ROM THE JEWELLER WHO HAS MADE REPAIR (IF AT ALL IT WAS MADE) HAS BEEN P RODUCED. THE WITHDRAWALS TO THE EXTENT OF 35 LAKHS HAS ALSO NOT BEEN ANALYSED WITH CORROBORATING EVIDENCES ANYWHERE AND NO AUTHORITY S EEMS TO HAVE EXAMINED AND ACCEPTED THAT SOME AMOUNT HAVE BEEN SP ENT FOR REPAIR OF IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 11 JEWELLERY AS SUCH THE PLEA OF THE APPELLANT IS WITH OUT ADEQUATE BASIS AND EVIDENCE AND THE SAME IS NOT ACCEPTABLE IN THE EYES OF LAW, ACCORDINGLY, I CONFIRM THE ADDITION MADE BY THE AO TO THE EXTENT O F RS. 2,10,240/-. 7.10. AGGRIEVED BY THE ORDER OF THE CIT(A) THE AS SESSEE HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. 7.11 WE HAVE HEARD THE RIVAL SUBMISSIONS. PAGE 88 OF THE SEIZED DOCUMENTS EVIDENCES INCURRING OF EXPENSES IN RESPECT OF REMAK ING OF JEWELLERY. THE REMAKING CHARGES AS FOUND IN THE LOOSE SHEET HAS NO T BEEN ADDED AS UNDISCLOSED INCOME BUT THE VALUE OF JEWELLERY HAS B EEN ADDED AS UNDISCLOSED IN. IN THE STATEMENT RECORDED AT THE TIME OF SEARC H THE ASSESSEE HAD TAKEN A STAND THAT SOME OF THE ITEMS OF JEWELLERY FOUND IN THE LOCKER BELONGS TO HIS SON MR. PANKAJ MARWAH. THE LOOSE PAPER EVIDENCES THE F ACT THAT THE JEWELLERY GIVEN FOR REMAKING CONTAINED ONLY 32.00 GMS OF GOLD IN LO CKET WHICH IS 17.700 GMS. WITH 75 PIECES DIAMOND AND 312 PIECE UNCUT. THE FI NISHED ITEM OF JEWELLERY CONTAINED EXTRA GOLD WEIGHING 84.5000 GMS AND 23.00 GMS. BESIDES EXTRA QUANTITY OF DIAMOND. THE VALUE OF GOLD, DIAMOND SO ADDED AND TOGETHER WITH MAKING CHARGES WAS RS.1,30,311/-. THE VALUE OF THE ITEM OF JEWELLERY FOUND AT THE TIME OF SEARCH AS VALUED BY THE VALUER WAS RS.2 ,60,240/-. EXCEPT EXPLAINING RS.50,000 VALUE OF JEWELLERY FOUND AT TH E TIME OF SEARCH, THERE HAS BEEN NO EXPLANATION FROM THE ASSESSEE OR MR.PANKAJ MARWAH ABOUT THE SOURCE OF FUNDS FOR REMAKING THE GOLD JEWELLERY AT RS.1,30 ,311. SINCE THE ITEM OF JEWELLERY WAS FOUND IN THE POSSESSION OF THE ASSESS EE THERE IS EVERY REASON TO HOLD THAT THE VALUE OF IMPROVEMENTS TO THE JEWELLER Y WAS MET BY THE ASSESSEE. THERE IS NO DISPUTE THAT THE ITEM OF JEWELLERY FOUN D IN THE SEARCH AND THAT WHICH WAS CLAIMED AS BELONGING TO MR.PANKAJ MARWAH IS ONE AND THE SAME. MR. PANKAJ MARWAH HAS CLAIMED THAT THE ITEM OF JEWE LLERY BELONGED TO HIM AND IT HAS ALREADY BEEN DISCLOSED IN THE BALANCE SHEET FILED FOR A.Y 1996-97. THE CIT(A) HAS GIVEN CREDIT ONLY TO RS. 50,000/- SHOWN IN THE BALANCE SHEET OF MR. PANKAJ MARWAH. IN OUR VIEW THIS WOULD BE THE VALUE OF JEWELLERY AS ON 31/3/1996. THE VALUATION OF THE SAME JEWELLERY DON E AS ON 16/1/2002 CANNOT BE THE SAME. THE CIT(A) HAVING ACCEPTED THAT THE I TEM OF JEWELLERY IS ONE AND IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 12 THE SAME OUGHT TO HAVE MADE ADDITION OF RS.1,30,31 1 BEING THE VALUE OF IMPROVEMENTS MADE TO THE JEWELLERY IN THE HANDS OF MR.PANKAJ MARWAH. THE ADDITION OF RS.2,60,240 HAS ALSO BEEN MADE IN THE H ANDS OF MR. PANKAJ MARWAH ON A PROTECTIVE BASIS. IN OUR VIEW THE EXPL ANATION GIVEN BY THE ASSESSEE OUGHT TO BE ACCEPTED AND THE ADDITION OF R S. 2,10,240/- MADE ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE SHO ULD BE DELETED. HOWEVER A SUM OF RS.1,30,311 SHOULD BE ADDED ON SUBSTANTIVE B ASIS IN THE CASE OF MR.PANKAJ MARWAH BECAUSE HE HAS CLAIMED OWNERSHIP O F THIS ITEM OF JEWELLERY. MR.PANKAJ MARWAH WAS UNABLE TO EXPLAIN SATISFACTORI LY THE SOURCE OF INCURRING OF EXPENDITURE OF RS.1,30,311 FOR REMAKING THE JEWE LLERY. INSTEAD OF THE ADDITION OF RS.2,10,240 ON A PROTECTIVE BASIS IN TH E HANDS OF MR.PANKAJ MARWAH, THE ADDITION OF RS.1,30,311 IS DIRECTED TO BE MADE ON A SUBSTANTIVE BASIS. THUS THIS GROUND OF APPEAL IS TREATED AS AL LOWED. (D) JEWELLERY RECEIVED FROM T.BAJAJ BROTHER OF SMT. ACHARA MARWA WIFE OF SHRI KAILASH SIRIRAM MARWAH - RS. 3,68,000/- & (E) JEWELLERY RECEIVE D UNDER THE WILL OF SHRI K.BAJAJ, BROTHER OF SMT. AC HARA RS.6,76,315/- - (GROUND NO. 3 & 4 IN ASSESSE3ES APPEAL): 7.12 THE ASSESSEE EXPLAINED THAT THE DIAMOND JEWELL ERY WORTH RS. 3,68,000/- BELONG TO HIS WIFE SMT. ACHARA MARWAH, WHO GOT IT A S GIVE FROM HER BROTHER SHRI T.BAJAJ. ACCORDING TO THE ASSESSEE, IN THE ST ATEMENT RECORDED UNDER SECTION 132(4) THE ASSESSEE HAD MADE THE VERY SAME CLAIM. SHRI T.BAJAJ HAD FILED AN AFFIDAVIT BEFORE THE AO GIVING DETAILS OF THE GIFT THAT HE HAS MADE TO HIS SISTER. THE STATEMENT SHOWING THE TALLY OF THE DE SCRIPTION OF THE JEWELLERY AS MENTIONED IN THE AFFIDAVIT OF SHRI T.BAJAJ AND THE VALUATION REPORT MADE AT THE TIME OF SEARCH HAS BEEN PLACED AT PAGE NO.77 TO 79 OF THE ASSESSEES PAPER BOOK. SIMILARLY THE ASSESSEE EXPLAINED THAT JEWE LLERY WORTH RS. 6,76,315/- WAS GIVEN TO HER BY HER LATE FATHER KESHOLAL BAJAJ UNDER A WILL DATED 10/2/1998 EXECUTED AT BANGKOK, THAILAND. THE DESCR IPTION OF THE JEWELLERY RECEIVED AS GIFT BY THE ASSESSEES WIFE AND THE DES CRIPTION OF THE JEWELLERY AS PER THE VALUATION REPORT PREPARED AFTER THE SEARCH IS GIVEN AT PAGE NO.77 TO 79 IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 13 OF THE ASSESEES PAPER BOOK. THE AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE FOR THE REASON THAT THE WILL WAS NOT VALID AS IT HA S NOT BEEN REGISTERED AND FOR THE REASON THAT ACQUISITION OF JEWELLERY BY KESHOLA L BAJAJ LIKE PURCHASE BILLS WERE NOT PRODUCED. SIMILARLY IN THE CASE OF SHRI T .BAJAJ ALSO THE AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE FOR THE REASON THA T PURCHASE BILLS OF JEWELLERY BY SHRI BAJAJ WAS NOT PRODUCED. FURTHER THE AO WA S OF THE VIEW THAT BOTH THE DONORS WERE NON-RESIDENTS AND THE JEWELLERY HAS NOT BEEN BROUGHT INTO INDIA IN A MANNER KNOWN TO LAW LIKE DECLARATION BEFORE THE R BI OR CUSTOMS. 7.13. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT SMT. ARCHARA MARWAH, AT THE TIME OF RECORDING STATEMENT AT THE TIME OF OPENING OF BANK LOCKER HAD CATEGORICALLY STATED THAT APPROXIMATELY 60 TOLAS OF GOLD AND OTHER DIAMOND JEWELLERY BELONGED TO HER. SHE HAS FURTHER STATED I T IN THE SAID STATEMENT THAT APPROXIMATELY VALUE OF THE SAID JEWELLERY WAS AROUN D RS. 10 LACS. SINCE SMT. ACHARA MARWAH HAS CATEGORICALLY STATED THAT THE SAI D JEWELLERY BELONGS TO HER, NO ADDITION OUGHT TO BE MADE IN THE CASE OF THE ASS ESSEE. IT WAS SUBMITTED THAT COPY OF WILL OF SHRI K. BAJAJ, FATHER OF SMT. A. MARWAH WHEREIN HE HAD WILLED CERTAIN JEWELLERY TO HIS DAUGHTER WAS FILED AND THE DESCRIPTION OF MOST OF THE JEWELLERY WHICH WAS FOUND DURING THE COURSE OF SEARCH MATCHED WITH THE DESCRIPTION OF THE JEWELLERY MENTIONED IN THE WILL. FURTHER, THE ASSESSEE BROUGHT TO THE NOTICE OF THE CIT(A) AN AFFIDAVIT OF SHRI T. BAJAJ, UNCLE OF SMT. A. MARWAH WHEREIN IT HAS BEEN STATED THAT HE WAS IN TH E POSSESSION OF THE JEWELLERY TILL 1998 AND AFTER THE DEATH OF HIS BROT HER SHRI K. BAJAJ, HE HAD HANDED OVER THE JEWELLERY TO HIS NIECE SMT. ACHARA MARWAH AS PER THE WILL OF HIS BROTHER SHRI K. BAJAJ. THE ASSESSEE SUBMITTED T HAT THE SOURCE OF THE JEWELLERY HAS BEEN CLEARLY ESTABLISHED AND THE SAID JEWELLERY CAN NOT BE TREATED AS UNDISCLOSED AND NO ADDITION IN RESPECT THEREOF O UGHT TO BE MADE. IT WAS SUBMITTED THAT WILL DOES NOT REQUIRE REGISTRATION AND DOES NOT REQUIRE A PROBATE FROM A COMPETENT COURT AS IT DOES NOT RELAT E TO ANY IMMOVABLE PROPERTY. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 14 7.14. IN RESPECT OF AFFIDAVIT OF SHRI T. BAJAJ, THE ASSESSEE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NO DETAILS IN RESPECT OF SOURCE OF ACQUISITION OF JEWELLERY BY SHRI T. BAJAJ NOR THE C OPY OF BILLS WERE CALLED FOR. FURTHER, IN RESPECT OF THE OBSERVATION OF THE AO TH AT THE SMT.ACHARA MARWAH HAD NOT DECLARED THE JEWELLERY AT THE TIME OF HER A RRIVAL IN INDIA IN 1992 TO THE CUSTOM AUTHORITIES AND RBI, IT WAS SUBMITTED THAT S INCE THE JEWELLERY WAS PART OF HER PERSONAL BELONGINGS, THE CUSTOM AUTHORITIES HAD NOT MENTIONED THE SAME ON HER PASSPORT. THE ASSESSEE ALSO SUBMITTED THAT M OST OF THE JEWELLERY WHICH WAS FOUND DURING THE SEARCH MATCHES WITH DESCRIPTIO N OF JEWELLERY WHICH WAS HANDED OVER TO HER PURSUANT TO THE WILL OF HER LATE FATHER SHRI K. BAJAJ. THE JEWELLERY RECEIVED BY HER IN ACCORDANCE WITH THE WI LL WAS ALWAYS IN INDIA AND WAS IN THE CUSTODY OF SHRI J. BAJAJ, BROTHER OF LAT E SHRI K. BAJAJ. 7.15. THE CIT(A) DID NOT ACCEPT THE CLAIM OF THE A SSESSEE. THE CIT(A) HELD AS FOLLOWS: (1) THEY WAS NO CORROBORATIVE EVIDENCE FOR GIFT BY SH RI T. BAJAJ. (2) AT THE TIME OF SEARCH NO STATEMENT WAS GIVEN THAT SMT. ACHARA MARWAH RECEIVED GIFT OF JEWELLERY FROM HER MOTHER. (3) THE WILL OF KESHOLAL BAJAJ HAS NOT BEEN ESTABLISHED TO BE TRUE AND GENUINE. 7.16 AGGRIEVED BY THE AFORESAID ACTION OF THE CIT(A ) THE ASSESSEE HAS RAISED GROUND NO.3 & 4 BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNE D COUNSEL FOR THE ASSESSEE REITERATED THE STAND OF THE ASSESSEE AS PU T FORTH BEFORE CIT(A). THE LEARNED D.R. RELIED ON THE ORDER OF THE CIT(A). WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS FAR AS THE ADDITION ON ACCOUNT OF JEWELLERY CLAIMED TO HAVE BEEN RECEIVED UNDER A WILL OF LATE KESHOLAL BAJAJ B Y THE ASSESSEES WIFE AND AS GIFT FROM T.BAJAJ, BY THE ASSESSEES WIFE, ARE CONC ERNED, THEY WERE PARTLY FOUND IN LOCKER NO.229, BANK OF RAJASTHAN, BANDRA WEST, M UMBAI VALUED AT RS.4,83,720 AND PARTLY FOUND IN THE RESIDENCE OF KA ILASH S.MARWAH VALUED AT IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 15 RS.9,10,305. THE EXPLANATION OF THE ASSESSEE REGAR DING JEWELLERY WORTH RS.6,76,315 WAS THAT IT BELONGED TO MRS.ACHARA MARW AH, WIFE OF KAILASH S.MARWAH, HAVING BEEN OBTAINED BY WAY OF INHERITANC E UNDER A WILL DT. 10.2.1998 OF KESHOLAL BAJAJ, THE FATHER OF MRS.ACHA RA MARWAH. THE BROTHER OF LATE KESHOLAL BAJAJ BY NAME MR.JAGDISH CHANDER BAJA J, OF GURGAON (HARYANA), INDIA, HAS FILED AN AFFIDAVIT IN THIS REGARD BEFOR E THE CIT(A). IN HIS AFFIDAVIT HE HAD AFFIRMED THAT HE WAS BROTHER OF LATE KESHOLAL B AJAJ, WHO DIED IN AUGUST, 1998. IT HAS FURTHER BEEN AFFIRMED THAT THE ITEMS OF JEWELLERY GIFTED TO THE ASSESSEES WIFE WERE KEPT WITH HIM IN DELHI FOR USE BY MRS.SANTHOSH BAJAJ , WIFE OF MR.KESHOLAL BAJAJ, WHO WAS A RESIDENT OF BA NGKOK, TO BE WORN WHENEVER MRS.SANTHOSH BAJAJ VISITS DELHI. AFTER THE LIFETIM E OF MRS.SANTHOSH BAJAJ AND KESHOLAL BAJAJ AND AS PER THE WILL OF KESHOLAL BAJA J, HE HANDED OVER THE ITEMS OF JEWELLERY TO MRS.ACHARA MARWAH AFTER THE DEATH O F KESHOLAL BAJAJ. THIS AFFIDAVIT BEARS THE MONTH DECEMBER, 2004 BUT DOES NOT BEAR ANY DATE. THE AFFIDAVIT HAS HOWEVER BEEN ATTESTED BY A NOTARY ON 18.12.2004. THE REVENUE AUTHORITIES DID NOT BELIEVE THE PLEA OF THE ASSESSE E AS ACCORDING TO THEM THE WILL IS NOT VALID IN LAW AND HAS BEEN MADE UP FOR THE OCCASION. WHEN THE JEWELLERY WAS FOUND IN THE RESIDENCE, THE STATEMENT OF THE ASSESSEE WAS RECORDED AND IN ANSWER TO QUESTION NO. 21, HE HAD E XPLAINED THAT SOME OF THE ITEMS OF JEWELLERY BELONGED TO HIS WIFE MRS.ACHARA MARWAH. SIMILARLY AT THE TIME WHEN THE BANK LOCKER WAS OPENED AND SEARCHED, THE STATEMENT OF THE ASSESSEE WAS RECORDED AND IN ANSWER TO QUESTION NO. 3, HE HAS EXPLAINED THAT SOME OF THE ITEMS OF JEWELLERY BELONGED TO MRS.ACHA RA MARWAH. THERE WAS NO SPECIFIC STAND TAKEN THAT SOME OF THE ITEMS OF JEWE LLERY WAS RECEIVED AS GIFT BY THE ASSESSEES WIFE. THE AFFIDAVIT OF JAGDISH CHAN DRA BAJAJ WAS FILED ONLY AS ADDITIONAL EVIDENCE BEFORE CIT(A). THE CIT(A) DIRE CTED THE AO TO CROSS EXAMINE JAGDISH CHANDRA BAJAJ ON HIS AFFIDAVIT AND CALLED F OR A REMAND REPORT FROM THE AO. THE AO IN HIS REMAND REPORT SUBMITTED AS FOLLO WS: 3.2 TO ELICIT THE FACTS FROM THE AFFIDAVIT MADE BY SHRI J.C. BAJJ WAS CROSS EXAMINED BY ME. AFTER CONSIDERING THE SAME IT BECOMES MORE IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 16 EVIDENT THAT THE AFFIDAVIT IS A CAMOUFLAGE AND AFTE R THOUGHT AS DISCUSSED BELOW. A COPY OF STATEMENT RECORDED ON 23-01-2006 I S A/SO ENCLOSED HEREWITH. (A) THE JEWELLERY UNDER CONSIDERATION WAS STATED T O BE IN POSSESSION OF. J C. BAJAJ SOME TIMES SINCE 1976. ACCORDING TO HIM IT WAS KEPT WITH HIM BY PARENT OF SMT. ACHARA MARWAH. (B) THEREAFTER, IN 1981, MOTHER OF SMT. ACHARA MARW AH EXPIRED. (C) IN 1992 SMT ACHARA MARWAH, MARRIED TO SHRI KA ILASH MARWAH, I E. ASSESSEE AND THE KANYADAN WAS DONE BY SHRI.J.C BA JAJ HIMSELF IN DELHI. (D) IN DECEMBER, 1991 SHE BEGOTTEN A SON AND ON THI S OCCASION, IN JANUARY, 1995 HER FATHER AND OTHER RELATIVES WERE P RESENT IN INDIA. (E) IN AUGUST, 1998 MR. KESHO LAL BAJAJ DIED IN MUM BAI: BEFORE HIS DEATH HE WAS IN MUMBAI WITH SMT. ARCHARA MARWAH FOR ABOUT 3 TO 4 MONTHS. (F) THE LAST RITES ON THE DEATH OF KESHO LAL BAJJ WERE PERFORMED IN MUMBAI AND HARIDWAR. THEREAFTER, ACHARA AND HER FAM ILY WITH OTHER RELATIVES HAD BEEN TO SHRI.J. C BAJAJ IN DELHI FOR ABOUT 2 TO 3 DAYS. (G) SHRI. KESHO LAL BAJAJ WAS A DIABETIC. ALSO, HE WAS ON DIALYSIS TREATMENT FOR 3 TO 4 YEARS BEFORE HIS DEATH. (H) ACCORDING TO SHRI. J C. BAJAJ ON SEVERAL OCCASI ONS SHRI. KESHO LAL BAJAJ HAD EXPRESSED HIS STRONG DESIRE THAT THE ALLE GED JEWELLERY SHALL GO TO SMT. ACHARA MARWAH. (I) ALSO, ACCORDING TO SHRI. J.C BAJJ, BOTH SMT. A CHARA MARWAH AND KAILASH MARWALI AS WELL AS OTHER PERSONS FROM THE B AJAJ FAMILY HAD KNOWLEDGE ABOUT THIS JEWELLERY. (J) IN REPLY TO ANSWER TO Q. NO.7, IN HIS STATEMENT RECORDED ON 23-1-2006; SHRI J C BAJAJ HAS STATED THAT HE IS UNAWARE IF THE RE WAS ANY CHANGE IN ANY ITEMS OF THE JEWELLERY UNDER CONSIDERATION. THI S IS STRANGE BECAUSE THE JEWELLERY WAS IN HIS CUSTODY SINCE 1976 TILL TH E END OF 1998 I.E. FOR ABOUT 22 YEARS. AND IN NATURAL CIRCUMSTANCES, IT IS OBVIOUS THAT IT SHALL BE IN HIS KNOWLEDGE ALL SUCH MATTERS RELATED TO THE JEWELLERY. 4. FURTHER, IT COULD HAVE BEEN VERY NATURAL AND OBV IOUS FOR MR. J.C. BAJAJ TO HAND OVER TO SMT. ACHARA MARWAH THE POSSES SION OF THE JEWELLERY AT LEAST IMMEDIATELY AFTER THE DEATH OF H ER MOTHER OR IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 17 IMMEDIATELY THEREAFTER ON ANY OF THE OCCASIONS MENT IONED IN PARA 3.3 ABOVE. BUT, ACCORDING TO MR. J .C BAJAJ, IT HAS NOT HAPPENED EVEN ON THE OCCASION OF HER WEDDING IN 1992 OR ON TILE OCCASION OF THE NAMING CEREMONY OF HER SON IN THE YEAR 1994-96 WHEN HER LA TE FATHER MR. KESHO LAL BAJJ WAS ALSO PRESENT, WHO HAD ACCORDING TO MR . J.C.BAJAJ STRONG DESIRE TO HAND OVER THE SAID JEWELLERY TO HIS DAUG HTER, SMT. ACHARA MARWAH. 5. IT IS NOT TRUE THAT THE QUESTION OF LOCATION OF THE JEWELLERY HAD NOT ARISEN TILL THE ASSESSEE WAS NOT QUESTIONED ABOUT T HE LOCATION OF JEWELLERY. IT IS IMPORTANT TO NOTE THAT HAD THE CO NTENTION ABOUT THE INHERITANCE OF THE JEWELLERY AND THE AFFIRMATION OF J C BAJAJ BEEN TRUE, THE ASSESSEE OR HIS WIFE COULD HAVE STATED THE SAME EITHER DURING THE COURSE OF SEARCH OR DURING THE COURSE OF BLOCK ASS ESSMENT PROCEEDINGS WHEN THIS ISSUE WAS RAISED ON MORE THAN ONE OCCASIO NS. 6. IT IS PERTINENT TO NOTE THAT SMT. ACHARA MARWAH DURNG THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS NOT EVEN REMOTELY REFE RRED TO ANY SUCH JEWELLERY AS CONTENDED TO BE HANDED OVER TO HER BY HER UNCLE J.C. BAJAJ AFTER THE DEATH OF HER FATHER K BAJAJ IN AUGUST, 19 98. IN THIS REGARD, IT IS VERY MUCH ON RECORD THAT IN HIS STATEMENT RECORDED ON 29-1-2002 BY THE INVESTIGATION UNIT THE ASSESSEE LEAD STATED THAT HE WOULD PRODUCE THE SOURCE OF ACQUISITION OF JEWELLERY, WHICH HE NEVER DID. AND ONLY ON 28-3- 2002 THAT IS AFTER CONSIDERABLE LAPS OF TIME, HE FU RNISHED A COPY OF THE ALLEGED GIFT. THUS, THE ACTION OF THE ASSESSEE IS A N AFTER THOUGHT AS MENTIONED ABOVE. 8.1 IN OUR VIEW THE ABOVE DISCREPANCIES POINTED OUT BY THE AO IN THE PLEA OF THE ASSESSEE DESERVES TO BE ACCEPTED. IT IS NO DOU BT TRUE THAT A WILL DOES NOT REQUIRE REGISTRATION FOR ITS VALIDITY. BUT THAT WI LL NOT BE THE BASIS TO ACCEPT THE PLEA OF THE ASSESSEE. PROOF OF WILL IS GENERALLY ACCEPTED ON THE STRENGTH OF THE AFFIDAVIT OF ATTESTING WITNESSES. MR.J.C BAJAJ IS ADMITTEDLY NOT THE ATTESTOR TO THE WILL. APART FROM THE ABOVE, IT IS NOT KNOWN AS TO WHO ARE THE LEGAL HEIRS OF MR.KESHOLAL BAJAJ. FROM A READING OF THE WILL IT A PPEARS THAT MRS.ACHARA MARWAH WAS THE DAUGHTER OF KESHOLAL BAJAJ AND THERE IS A MENTION ABOUT A SON OF MR.KESHOLAL BAJAJ WHO INHERITED ALL OTHER MOVABL ES OF THE DECEASED. THERE IS IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 18 NOTHING TO SHOW AS TO WHETHER THERE WERE OTHER LEGA L HEIRS. AS TO WHETHER THE BROTHER OF MRS.ACHARA MARWAH HAS ACCEPTED THE WILL OR NOT IS NOT KNOWN. AFTER ALL, THE LEGAL HEIRS WHO ARE ENTITLED TO INHERIT TH E ESTATE OF THE DECEASED WILL HAVE A RIGHT TO CONTEST THE TRUTH AND GENUINENESS O F A WILL. IF THEY HAD ALSO ACCEPTED THE WILL THEN WE CAN GIVE SOME WEIGHTAGE T O THE PLEA OF THE ASSESSEE. THESE ARE ADDITIONAL CIRCUMSTANCES WHICH STRENGTH T HE CASE OF THE REVENUE. THE PLEA OF THE ASSESSEE DOES NOT INSPIRE CONFIDENC E AND WE IN THE CIRCUMSTANCES UPHOLD THE ORDER OF THE CIT(A) ON THI S ISSUE. WE ARE ALSO OF THE VIEW THAT THE OTHER CIRCUMSTANCES MENTIONED BY THE AO IN THE ORDER OF ASSESSMENT FOR REJECTING THE PLEA OF THE ASSESSEE I S FOUND TO BE ACCEPTABLE. 8.2 AS FAR AS THE GIFT RECEIVED FROM THE BROTHER T. BAJAJ IS CONCERNED, MR.T.BAJAJ HAS FILED AN AFFIDAVIT BEFORE THE AO, AL LEGEDLY EXECUTED AT BANGKOK, THAILAND, IN WHICH HE HAS CONFIRMED HAVING GIVEN AS GIFT CERTAIN ITEMS OF JEWELLERY. THIS AFFIDAVIT IS NOT DATED AND HAS NOT BEEN SWORN BEFORE A PERSON COMPETENT TO ADMINISTER OATH AND EXECUTED BEFORE A PERSON COMPETENT TO ATTEST AFFIDAVITS. IN OUR VIEW THE CLAIM OF THE ASSESSEE BASED ON SUCH AFFIDAVIT CANNOT BE ACCEPTED. THE ALTERNATE ARGUMENT ON BEHALF OF T HE ASSESSEE WAS THAT THE FAMILY WITHDRAWAL IS MORE THAN RS.35 LACS AND THERE FORE THE SOURCE OF ACQUISITION OF THE JEWELLERY CAN BE TREATED AS EXPL AINED. SUCH GENERAL SUBMISSIONS WITHOUT CORROBORATIVE EVIDENCE CANNOT F ORM THE BASIS ON WHICH THE EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED. ALL FACTS ARE WITHIN THE KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSE E TO GIVEN ACCEPTABLE EXPLANATION. WE ARE OF THE VIEW THAT THE ONUS OF P ROVING SATISFACTORILY THE SOURCE OF FUNDS FOR ACQUISITION OF THE JEWELLERY WA S ON THE ASSESSEE AND IN THE ABSENCE OF PROPER AND SATISFACTORY EXPLANATION THE ADDITION MADE HAS TO BE CONFIRMED. THE ADDITION IS CONFIRMED SUBSTANTIVELY IN THE HANDS OF THE ASSESSEE SINCE THE JEWELLERY WERE FOUND IN HIS POSS ESSION AND CONSEQUENTLY THE PROTECTIVE ASSESSMENT MADE IN THE HANDS OF MRS.ACHA RA MARWAH IS DIRECTED TO BE DELETED. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 19 8.3. FOR THE REASONS GIVEN ABOVE, GR.NO.3 AND 4 RAI SED BY THE ASSESSEE ARE DISMISSED. 9. GR.NO.5 RAISED BY THE ASSESSEE IN HIS APPEAL REA DS AS FOLLOWS: 5.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN AD-HOC ADDITION OF RS.62,000/- ON ACCOUNT OF SILVER ARTICLES. 9.1 AT THE TIME OF SEARCH SILVER ARTICLES WORTH RS. 1,12,000/- WERE FOUND. THE ASSESSEE CLAIMED THAT THE ITEMS OF SILVER ARTICLES WERE RECEIVED AS GIFTS ON VARIOUS OCCASIONS AND SOME OF THE ITEMS WERE PURCHA SED. THE ASSESSEE DID NOT GIVE PARTICULARS OF GIFT. THE ASSESSEE ALSO SUBMIT TED THAT KEEPING IN VIEW THE PERSONAL DRAWINGS OF THE ASSESSEE, THE SILVER ITEMS FOUND MAY BE TREATED AS SATISFACTORILY EXPLAINED. THE AO GAVE CREDIT TO TH E EXTENT OF RS.20,000 BASED ON THE ABOVE SUBMISSIONS. THE CIT(A) WAS OF THE VI EW THAT SILVER ITEMS VALUED TO THE EXTENT OF RS.50,000/- CAN BE CONSIDERED AS S ATISFACTORILY EXPLAINED. BEFORE US THE SAME SUBMISSIONS AS MADE BEFORE THE R EVENUE AUTHORITIES WERE REITERATED. WE ARE OF THE VIEW THAT THE RELIEF GIV EN BY THE REVENUE AUTHORITIES ARE IN ORDER AND THERE ARE NO JUSTIFIABLE FACTS WAR RANTING GRANTING OF FURTHER RELIEF TO THE ASSESSEE. CONSEQUENTLY, GR.NO.5 IS D ISMISSED. 10. GR.NO.6 RAISED BY THE ASSESSEE IN HIS APPEAL RE ADS AS FOLLOWS: 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN UPHOLD ING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS. 6,000/- UNDER SECTION 40A(3) INSPITE OF THE FACT THAT THE SAID EXPENSES W AS RECORDED IN THE BOOKS OF ACCOUNT AND ACCOUNT AND ACCORDINGLY COULD NOT BE TREATED AS UNDISCLOSED INCOME. 10.1 IN THE COURSE OF SEARCH AT THE BUSINESS PREMI SES OF THE ASSESSEE VIZ., SRINIVASA INDUSTRIES AT GOREGOAN, A DOCUMENT EVIDEN CING PAYMENT OF RS.30,000 BY CASH, FOR PURCHASE OF CHEMICALS FROM S HREEJI CHEMICALS WAS FOUND. THE AO INVOKED THE PROVISIONS OF SEC.40-A(3 ) OF THE ACT AND DISALLOWED 20% OF CASH PAYMENTS WHICH ARE CLAIMED AS EXPENDITU RE IN THE BOOKS OF IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 20 ACCOUNTS OF THE ASSESSEE. THE CIT(A) CONFIRMED THE ORDER OF THE AO. WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE AO AND SUSTA INED BY THE CIT(A) DESERVES TO BE DELETED. ADMITTEDLY, THE PAYMENT IN QUESTION WAS DULY RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE BEFORE THE SEARCH. ANY DISALLOWANCE INVOKING SEC.40-A(3) OF THE ACT COULD BE MADE ONLY IN THE REGULAR ASSESSMENT PROCEEDINGS. AN ASSESSMENT UNDER CHAPTER XIV-B OF THE ACT CAN BE MADE ONLY OF UNDISCLOSED INCOME WHICH IS DETECTED AS A R ESULT OF EVIDENCE FOUND IN THE COURSE OF SEARCH. THERE MUST BE TWO FACTORS PR ESENT VIZ., EXISTENCE OF UNDISCLOSED INCOME AND ITS DISCOVERY CONSEQUENT TO SEARCH. IN THE PRESENT CASE, THE PAYMENT IN QUESTION IS ALREADY RECORDED I N THE BOOKS OF ACCOUNTS AND THEREFORE IT CANNOT BE SAID THAT THE SAME WAS NOT D ISCLOSED TO THE DEPARTMENT AND THE SAME WAS FOUND ONLY AS A RESULT OF SEARCH. IT IS NOT THE CASE OF THE REVENUE THAT ANY INCRIMINATING MATERIAL WAS FOUND I N THE SEARCH SHOWING THAT THE PAYMENT WAS NOT GENUINE. IN SUCH CIRCUMSTANCES , WE ARE OF THE VIEW THAT THE ADDITION MADE CANNOT BE SUSTAINED. THE SAME IS DIRECTED TO BE DELETED. GR.NO.6 OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 11. GR.NO.7 RAISED BY THE ASSESSEE READS AS FOLLOWS : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE ASSESSING OFFICER IN TREATING AN AMOUNT OF RS. 1,41,815/- AS UNDISCLOSED INCOME ON ACCOUNT OF RENOVATION EXPENSE S ON THE BASIS OF LOOSE PAPERS FOUND DURING THE SURVEY ACTION AT THE FACTORY PREMISES OF THE APPELLANT. 11.1 THE ABOVE GROUND OF APPEAL CAN BE CONVENIENTLY DECIDED TOGETHER WITH GR.NO.3 OF THE REVENUE, WHICH READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT CORRECT IN DELETING RS. 3,58,185/- O UT OF THE ADDITION OF RS.5,00,000/- ON ACCOUNT OF RENOVATION EXPENSES AN D CONFIRMING ONLY RS.1,41,815/- WITHOUT APPRECIATING THE FACT THAT T HE ADDITION WAS MADE ON THE BASIS OF UNEXPLAINED LOOSE PAPER WHICH THE A SSESSEE HAD ADMITTED AND EVEN COULD NOT ESTABLISH ITS CASE WHEN THE MATT ER WAS REMANDED BEFORE THE AO BY THE LD. CIT(A). IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 21 11.2 ON 16.1.2002 A SURVEY WAS CONDUCTED U/S.133A O F THE ACT IN THE BUSINESS PREMISES OF THE ASSESSEE VIZ., SRINIVAS IN DUSTRIES, GOREGAON, MUMBAI. THIS WAS INDEPENDENT OF THE SEARCH IN THE RESIDENCE OF THE ASSESSEE. IN THE COURSE OF SUCH SURVEY A DOCUMENT MARKED AS PAGE NO. 16 WAS FOUND WHICH SHOWED INCURRING OF EXPENSE TO THE TUNE OF RS.1,41, 815. ACCORDING TO THE ASSESSEE THE SAME WAS ESTIMATE OF RENOVATION EXPENS ES TO BE CARRIED OUT IN THE FACTORY SRINIVAS INDUSTRIES. IT WAS CLAIMED BY THE ASSESSEE THAT DUE TO FINANCIAL CRUNCH THE SAID RENOVATION WAS NEVER CARR IED OUT. ACCORDING TO THE REVENUE, THE NATURE OF THE ENTRIES THEREIN SHOWED T HAT THEY WERE ACTUALLY INCURRED AND NOT ESTIMATES BECAUSE THE FIGURES WERE NOT IN TENS OR HUNDREDS. THE AO FURTHER RELIED ON A STATEMENT IN THE COURSE OF SEARCH RECORDED U/S.132(4) OF THE ACT WHEREIN THE ASSESSEE HAD ADMI TTED THAT RENOVATION OF FLAT HAD BEEN CARRIED OUT BY SPENDING A SUM OF RS.5 LACS . THE RELEVANT QUESTION AND ANSWER IN THIS REGARD WAS AS FOLLOWS: Q.NO.27: DURING THE COURSE OF THE SEARCH, IT IS N OTICED THAT YOUR RESIDENCE IS LAVISHLY FURNISHED WITH EXPENSIVE ELEC TRONIC ITEMS. WHEN YOU HAVE PURCHASED THIS FLAT AND FURNISHED THE FLAT AND AT WHAT COST? ANS: I PURCHASED THE FLAT SOMEWHERE IN 1990 AT THE CONSIDERATION OF 19 LAKHS. RENOVATION WAS DONE IN 1991 AND I HAVE SPEN T APPROX. RS.5 LAKHS. ELECTRONICS ITEMS WERE PURCHASED/GIFTED DUR ING THE YEAR THE AO BASED ON THE STATEMENT AND THE LOOSE PAPER M ADE AN ADDITION OF RS.5 LACS. 11.3 BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT TH E RENOVATION OF THE FLAT WAS DONE IN A.Y.91-92 WHICH WAS BEYOND THE BLOCK PERIOD AND THEREFORE THE ADDITION MADE IN THE BLOCK ASSESSMENT IS NOT VALID. IN THIS REGARD THE ASSESSEE ALSO FILED A LETTER DATED 8.11.1991 FROM THE DEPUTY DIRECTOR (INVESTIGATION) ASKING HIM THE SUBMIT DETAILS OF RENOVATION WORK CA RRIED OUT BY HIM AT THE FLAT AND THE ASSESSEE VIDE LETTER DATED 9.12.1991 INFORM ED THE DETAILS OF THE RENOVATION. THE LETTERS WERE FILED AS ADDITIONAL E VIDENCE BEFORE CIT(A). THE AO DID NOT OBJECT TO THE RECEIPT OF THE ABOVE ADDITION AL EVIDENCE AS ENQUIRY WAS IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 22 CARRIED OUT BY THE REVENUE AS CLAIMED BY THE ASSESE E. THE AO HOWEVER MAINTAINED THAT THE LOOSE PAPER EVIDENCING EXPENSES OF RS.1,41,815 SHOWED THAT THE ASSESSEE INCURRED EXPENSES IN RENOVATION O F FACTORY AND THERE WAS NO SATISFACTORY EXPLANATION REGARDING THE SAME. 11.4 THE CIT(A) AFTER CONSIDERING ALL THE ASPECTS H ELD THAT THE ADDITION OF RS.1,41,815 HAS TO BE SUSTAINED BECAUSE THE ASSESSE E DID NOT GIVE PROPER EXPLANATION REGARDING THE LOOSE PAPER AND THE LOOSE PAPER EVIDENCED ACTUAL INCURRING OF EXPENSES BY THE ASSESSEE AND IT WAS NO T AN ESTIMATE. THE ADDITION BY THE AO TO THE EXTENT OF RS.3,58,185/- WAS DELETE D BY THE CIT(A). AGGRIEVED BY THE ORDER OF THE CIT(A) SUSTAINING ADDITION TO T HE EXTENT OF RS.1,41,815, THE ASSESSEE HAS RAISED GR.NO.7 BEFORE THE TRIBUNAL. A GGRIEVED BY THE ACTION OF CIT(A) DELETING ADDITION TO THE EXTENT OF RS.3,58,1 85/- THE REVENUE HAS RAISED GR.NO.3 BEFORE THE TRIBUNAL. 11.5 WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LOOS E PAPER FOUND AT THE TIME OF SURVEY IS ANNEXED AS ANNEXURE-1 TO THIS ORDER. THE LOOSE PAPER SHOWS LIST OF EXPENSES. IT IS NOT SIGNED OR IT DOES NOT CONTA IN FURTHER WRITING. THERE IS NOTHING TO SHOW THAT THE EXPENDITURE WAS IN FACT IN CURRED. THERE IS NO STATEMENT OF ANY PERSON ACCEPTING THAT THE LOOSE PA PER EVIDENCES INCURRING OF EXPENDITURE FOR RENOVATION OF FACTORY. IN OUR VIEW THE DOCUMENT IS A DUMB DOCUMENT AND ADDITION CANNOT BE MADE ON THE BASIS O F SUCH DUMB DOCUMENT. WE THEREFORE DIRECT THAT THE ADDITION MADE IN THIS REGARD BE DELETED. GR.NO.7 OF THE ASSESSEE IS ALLOWED. AS FAR AS GR.NO.3 RAISED BY THE REVENUE IS CONCERNED, WE ARE OF THE VIEW THAT THE RENOVATION OF THE FLAT OF THE ASSESSEE WAS ADMITTEDLY DONE PRIOR TO THE BLOCK PERIOD AND THE ADDITION MAD E BY THE AO COULD NOT BE SUSTAINED. WE THEREFORE DISMISS GR.NO.3 OF THE REV ENUE. 12. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. IT(SS)A NO.274/MUM/06 (REVENUES APPEAL) 13. GR.NO.1 HAS ALREADY BEEN DECIDED WHILE DECIDING GR.NO.1 TO 4 OF THE ASSESSEE. FOR THE REASONS STATED THEREIN, GR.NO.1 OF THE REVENUE IS DISMISSED. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 23 14. GR.NO.2 RAISED BY THE REVENUE READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT CORRECT IN HOLDING THAT THE ADDITIO N OF RS. 1,50,000/- ON ACCOUNT OF PURCHASE OF SCRAP CANNOT BE MADE ON THE BASIS OF PRESUMPTION, WITHOUT APPRECIATING THE FACT THE SAID ADDITION OF RS.1,50,000/- HAD BEEN MADE ON THE BASIS OF TRANSAC TIONS RECORDED IN THE SEIZED PAGES NO.76,77 AND 84 & 85 AND THE ADMIS SION OF THE ASSESSEE IN THE STATEMENT U/S. 132(4) THAT HE WAS P URCHASING AND SELLING SCRAP IN CASH BOTH OUT OF BOOKS. 14.1 IN THE COURSE OF SEARCH IN THE STATEMENT RECO RDED U/S.132(4) OF THE ACT, THE ASSESSEE ADMITTED THAT HE WAS GENERATING AROUND RS.1 TO 1.5 LACS PER YEAR ON SALE OF SCRAP WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNTS. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE POINTED OUT TH AT THE AMOUNT OF RS.1 TO 1.5 LACS PER YEAR ON SALE OF SCRAP IS THE TURNOVER AND THE PROFIT GENERATED ON SUCH TURNOVER WAS ONLY RS.15,000/- PER YEAR AND THA T THE ASSESSEE HAS ALREADY OFFERED A SUM OF RS.90,000/- AS PROFIT ON U NACCOUNTED SALE OF SCRAP IN THE RETURN OF INCOME FILED FOR THE BLOCK PERIOD AND THEREFORE NO ADDITION IS REQUIRED TO BE MADE. THE AO MADE AN ADDITION OF RS .1.5 LACS HOLDING THAT A SUM OF RS.1.5 LACS WOULD BE REQUIRED AS INITIAL CAP ITAL INVESTMENT TO CARRY ON UNRECORDED BUSINESS OF SALE OF SCRAP. BEFORE CIT(A ), THE ASSESSEE POINTED OUT THAT SCRAP WAS GENERATED IN THE PROCESS OF MANUFACT URING CARRIED ON BY THE ASSESSEE AND NO INITIAL CAPITAL WAS REQUIRED. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE AO HOLDING THAT THERE WAS NO EVIDENCE FOUND OR BROUGHT ON RECO RD TO SHOW ANY SUCH INITIAL INVESTMENT BY THE ASSESSEE. 14.2 WE HAVE HEARD THE SUBMISSION. WE HAVE ALSO SE EN THE RELEVANT PORTION OF THE STATEMENT U/S.132(4) OF THE ACT VIZ., Q.NO. 5 TO 7. THE QUESTIONS RELATED TO LOOSE PAPER NO.76,77, 84 AND 85 FOUND AT THE TIM E OF SEARCH. THESE DOCUMENTS DID NOT RELATE TO SALE OF SCRAP AT ALL. THE ASSESSEE ON HIS OWN OFFERED RS.90,000 FOR THE BLOCK PERIOD AS PROFIT ON SALE OF SCRAP GENERATED IN THE COURSE OF MANUFACTURE OF WIRE MESH. WE ARE OF THE VIEW THAT THE SAME DOES IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 24 NOT REQUIRE ANY INITIAL INVESTMENT AS PRESUMED BY T HE AO. WE ARE OF THE VIEW THAT THE ADDITION HAS BEEN MADE PURELY ON SURMISES AND CONJECTURES AND WAS RIGHTLY DELETED BY THE CIT(A). WE THEREFORE FIND N O INFIRMITY IN THE ORDER OF THE CIT(A). CONSEQUENTLY, GR.NO.2 RAISED BY THE REVENU E IS DISMISSED. 15. GR.NO.3 HAS ALREADY BEEN DECIDED WHILE DECIDING GR.NO.7 RAISED BY THE ASSESSEE. FOR THE REASONS STATED THEREIN GR.NO.3 I S DISMISSED. 16. GR.NO.4 RAISED BY THE REVENUE READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT CORRECT IN DELETING THE ADDITION O F RS. 58,147/- ON ACCOUNT OF UNACCOUNTED SALE OF NIKEL SCRAP OF 147.2 1 KGS. HOLDING THAT THE ADDITION IS DONE MERELY ON ESTIMATION AND REJEC TING THE EXPLANATION OF THE ASSESSEE IS UNWARRANTED, WITHOUT APPRECIATIN G THE FACT THAT THE ADDITION HAD BEEN MADE SINCE 147.21 KGS. OF NICKEL IS FOUND LESS IN THE CLOSING STOCK DURING THE SEARCH U/S. 132 OF THE INC OME TAX ACT. 16.1 THE ASSESSEE CARRIES ON THE BUSINESS OF NICKEL SCREENING IN HIS BUSINESS SRINIVAS INDUSTRIES. IN THE PROCESS OF NICKEL SCRE ENING NICKEL COATING HAS TO BE DONE THROUGH ELECTROPLATING. IN THE PROCESS SO CAR RIED OUT SOME QUANTITY OF NICKEL ALWAYS REMAINS DEPOSITED IN THE TANK CONTAIN ING THE ELECTROPLATING EQUIPMENT AND CHEMICALS. THE SAME IS NOT USABLE AT ALL. IN THE COURSE OF SURVEY, STATEMENT OF AN EMPLOYEE WAS RECORDED AND S HE HAD DEPOSED THAT 40% OF RAW MATERIAL WAS SCRAP AND SOLD OUTSIDE THE BOOK S OF ACCOUNTS. THE SAID STATEMENT WAS HOWEVER RETRACTED BY HER BY FILING AF FIDAVIT BEFORE THE AO. THE AO DID NOT PLACE RELIANCE ON THE STATEMENT BUT HOWE VER TOOK THE VIEW THAT THE VALUE OF NICKEL DEPOSITED IN THE TANK HAS TO BE SHO WN AS CLOSING STOCK AND MADE AN ADDITION OF RS.58,147. THE CIT(A) ACCEPTED THE SUBMISSIONS ON BEHALF OF THE ASSESSEE AND FURTHER HELD THAT THERE WAS NO EVIDENCE TO SHOW SALE OF NICKEL OUTSIDE BOOKS OF ACCOUNTS AND ACCORDINGLY DE LETED THE ADDITION MADE BY THE AO. WE ARE OF THE VIEW THAT THE ORDER OF THE C IT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE. ADMITTEDLY THERE WAS NO EVIDENCE FOR THE CONCLUSION OF THE AO. THE SUBMISSION OF THE ASSESSEE THAT THE NICKEL DEPOSITED IN THE TANK IS WORTHLESS IS ALSO ACCEPTABLE IN THE ABSENCE OF ANY CONTRARY ASSERTION. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 25 WE THEREFORE CONFIRM THE ORDER OF THE CIT(A) AND DI SMISS GR.NO.4 OF THE REVENUE. 17. GR.NO.5 RAISED BY THE REVENUE READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT CORRECT IN DELETING THE ADDITION OF RS.2,80,380/- ON ACCOUNT OF FOREIGN VISITS WITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE WAS FOR THE PLEASURE TRIP TO VISIT PARE NTS AND FAMILY MEMBERS OF THE ASSESSEE AND THE PERQUISITE RELATING TO THIS IS NOT OFFERED BY THE ASSESSEE. FURTHER, THE LEARNED CIT(A) HAS E RRED IN HOLDING THAT THE ENTRIES IN THE BOOK OF ACCOUNT OF THE COMPANY W ERE OF RELEVANCE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS AN ENTITY DIFFERENT FROM THE EMPLOYER COMPANY. 17.1 A CASH MEMO OF COSMOS BON-VOYAGE AND FOREST P VT LTD., FOR THE SALE OF FOREIGN CURRENCY AMOUNTING TO RS.99,733/- TO THE AS SESSEE WAS FOUND AND SEIZED AS PER PAGE NO.22 OF ANNEXURE-A-1 TO PANCHNA MA DATED 16-01-2002 DRAWN AT THE RESIDENCE OF THE ASSESSEE. BESIDES PAS SPORT OF VARIOUS FAMILY MEMBERS WERE ALSO FOUND DURING THE SEARCH. IT WAS S EEN THAT THE ASSESSEE AND HIS WIFE HAD MADE TRIPS TO BANGKOK DETAILS OF WHICH ARC AS UNDER: 01-04-95 5O 31-3-96 EXPENSES OF TICKET PAYMENT MADE FROM 1. TRIP TO BANGKOK (DATE OF ARRIVAL 04-09-95) RS.14,802.00 THREE GEE ENGG. PVT. LTD. CHQ. NO.384815 DATE 13-11-95 01-4-96 TO 31-3-97 (DATE OF ARRIVAL 25-8-1996) BANGKOK TRIP) RS.25,430.00 CHQ.NO.510345 ISSUED TO ASHOKA TRAVELS FROM THREE GEE ENG. 01-04-97 TO 31-3-98 TRIP BANGKOK DATE OF ARRIVAL 17-8-97 RS.36,657.00 CHQ.NO.146610 ASHOKA TRAVELS PAID BY THREE GEE ENG. 01-04-98 TO 31-3-99 01-04-99 TO 31-3-00 TRIP TO TAIWAN & BANGKOK DATE OF ARRIVAL 25-4-1999 RS. NIL RS.42,795.00 RS. NIL PAID FROM SIRIRAM & CO., CHQ. NO.106755 DATED: 03-04-99 RS.41,853.00 PAID FROM THREE GEE ENGINEERS VIDE CHQ. NO.36078 DATE: 20-5-99 RS.41,853.00 PAID BY THREE GEE ENGINEER. 01-04-00 TO 31-3-01 TRIP TO BANGKOK (04-11- 2000) RS.71,805.00 CHEQUE PAID FROM THREE GEE ENG. 01-04-01 TO 31-3-02 BANGKOK(21-12-2001) RS.40,332.00 CHEQUE PAID TO COSMOS BY THREE GEE ENGINEERS. RS.3,15,527.00 IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 26 DETAILS OF FOREIGN EXCHANGE PURCHASED 04-09-95 $ 750 @35/- CASH RS.26,250 .00 24-08-96 $ 550 @35/- CASH RS.19,250 .00 01-08-97 $ 1000 @38/- CASH RS.38,000. 00 23-03-99 $ 1000 @40/- CASH RS.40,000. 00 21-10-00 $ 550 @40/- CASH RS.22,000 .00 18-12-01 $ 2050 @48.65/- CHEQUE RS.99,733.00 CHEQUE PAID BY THREE GEE RS.2,45.233.00 THE ASSESSEE VIDE HIS LETTER DATED 08-01-2004 SUBMI TTED THAT THE ABOVE EXPENSES FOR THE FOREIGN TOURS WERE PAID BY M/S. TH REE GEE ENGINEERS PVT LTD AS LEAVE TRAVEL EXPENSES TO THE DIRECTORS AS PER TH E POLICY OF THE COMPANY. 17.2 THE AO DID NOT ACCEPT THE PLEA OF THE ASSES SEE. HE FOUND THAT THE ABOVE EXPENSES HAVE BEEN DEBITED AS NORMAL BUSINESS EXPENSES IN THE BOOKS OF A/CS OF M/S.THREE GEE ENGINEERS PVT LTD AND HAVE NO T BEEN DEBITED AS THE SALARY AND PERQUISITES TO THE EMPLOYEE/DIRECTORS OF THE COMPANY. ACCORDING TO THE AO, THE ABOVE EXPENSES WERE NOT BUSINESS EXPENS ES OF M/S. THREE GEE ENGINEERS PVT. LTD., AS THE ABOVE FOREIGN TRIPS WER E PLEASURE TRIPS WHICH HAS BEEN MADE BY THE DIRECTORS TO VISITS PARENTS AND FA MILY MEMBERS OF MRS. ACHARA MARWAH. THE AO ALSO FOUND THAT AS PER THE I. T.RETURN FILED BY THE ASSESSEC THE VALUE OF PERQUISITES RECEIVED FROM M/S . THREE GEE ENGINEERS PVT. LTD., WAS NOT DISCLOSED. NOR WAS IT DISCLOSED IN T HE BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFORE, TOTAL AMOUNT OF RS. 5,60,760/ WAS TREATED AS UNACCOUNTED PERQUISITES RECEIVED BY THE DIRECTORS FROM M/S. THR EE GEE ENGINEERS PVT. LTD.,. 5O% OF THE TOTAL AMOUNT ON A./C. OF FOREIGN TRAVEL WAS ADDED IN THE HANDS OF THE ASSESSEE AND BALANCE 50% WAS ADDED IN THE HANDS OF MRS. ACHARA MARWAH AS UNDISCLOSED INCOME. THUS, THE AMOUNT OF RS.2,80, 380/- WAS ADDED IN THE HANDS OF THE ASSESSEE AS UNDISCLOSED INCOME. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 27 17.3 BEFORE CIT(A) IT WAS SUBMITTED THAT THE FOREIG N TOUR EXPENSES WERE ADMITTEDLY RECORDED IN THE BOOKS OF THREE GEE ENGIN EERS (P) LTD. IT WAS ARGUED THAT THE LAW WAS WELL SETTLED THAT AN ADDITI ON MADE UNDER CHAPTER XIVB OF THE ACT AS UNDISCLOSED INCOME IS CONFINED ONLY T O INCOME WHICH HAS NOT BEEN DISCLOSED IN THE BOOKS AND WHICH HAS BEEN DISCOVERE D AS A RESULT OF SEARCH. MANY JUDICIAL PRONOUNCEMENTS WERE RELIED BY THE ASS ESSEE IN THIS REGARD VIZ., CIT VS. RAVIKANT JAIN 250 ITR 141, N.R.PAPERS AND B OARDS LTD 248 ITR 526(GUJ) AND CIT VS. DR.M.K.E.MENON 248 ITR 310 (BO M), CIT VS. V.D.GODAVAT 247 ITR 448 (BOM). THE CIT(A) DELETED THE ADDITION MADE BY THE AO ACCEPTING THE STAND OF THE ASSESSEE. 17.4 BEFORE US THE LEARNED D.R. RELIED ON THE ORDER OF THE AO. WE ARE OF THE VIEW THAT THE ADDITION WAS RIGHTLY DELETED BY THE C IT(A). ONCE THE INCURRING OF FOREIGN TRAVEL EXPENSES ARE RECORDED IN THE BOOKS O F THREE GEE ENGINEERS (P) LTD., THE SAME CANNOT BE CONSIDERED AS UNDISCLOSED. THE FACT THAT THE SAME WOULD CONSTITUTE PERQUISITES IN THE HANDS OF THE DI RECTORS CANNOT BE SUBJECT MATTER OF INVESTIGATION IN BLOCK ASSESSMENT BECAUSE BLOCK ASSESSMENT IS MADE ONLY OF UNDISCLOSED INCOME, I.E., INCOME WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED TO THE DEPARTMENT AND THE SAME BEING DISCOVERED AS A RESULT OF EVIDENCE FOUND IN THE COURSE OF SEARCH. IN THE PRE SENT CASE THERE WAS DISCLOSURE TO THE DEPARTMENT OF THESE EXPENSES BY T HE COMPANY. THAT DISCLOSURE WAS ENOUGH TO TAKE THE EXPENSES INCURRED BY THE COMPANY AS PERQUISITE IN THE HANDS OF ITS DIRECTORS AND TAXING THEM AS UNDISCLOSED INCOME IN BLOCK ASSESSMENT OF THE DIRECTORS. WE THEREFORE AGREE WITH THE CONCLUSION OF THE CIT(A) AND DISMISS GR.NO.5 RAISED BY THE REVENU E. 18. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 28 IT(SS)A.NO.284/MUM/06: MRS. ACHARA MARWAH (REVENUE S APPEAL) 19. GR.NO.1 RAISED BY THE REVENUE READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT CORRECT IN DELETING THE ADDITION UND ISCLOSED INCOME ON ACCOUNT CASH-IN-HAND OF RS.65,000/- FOR A.Y.1998-19 99, WITHOUT APPRECIATING THE FACT THAT IN THE ABSENCE OF ANY EV IDENCE OR EXPLANATION BY THE ASSESSEE, THE A.O. MADE THIS ADDITION OUT OF THE ALLEGED CLOSING BALANCE OF CASH-IN-HAND AS ON 31-3-1998 AS UNDISCLO SED INCOME OF THE YEAR AFTER CONSIDERING THE FAMILY DRAWINGS AND STAT US OF THE FAMILY OF THE ASSESSEE. 19.1 THE AFORESAID GROUND OF APPEAL CAN BE CONVENIE NTLY DECIDED TOGETHER WITH GR.NO.1 RAISED BY THE ASSESSEE IN HER CROSS OBJECTI ON VIZ., C.O.NO.65/MUM/07, WHICH READS AS FOLLOWS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT D ELETING AN ADDITION OF RS.50,000/- TREATED AS UNDISCLOSED INCOME ON ACC OUNT OF FIXED DEPOSIT IN THE BLOCK ASSESSMENT ORDER PASSED UNDER SECTION 158BC. 19.2 AS ALREADY STATED IN THE PREAMBLE OF THIS ORD ER, THE ASSESSEE MRS.ACHARA MARWAH WAS ALSO SEARCHED U/S.132 OF THE ACT ON 16.1 .2002. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED BANK STA TEMENT, CAPITAL A/C. AND BALANCE SHEET. FROM A PERUSAL OF THE SAME, THE AO NOTICED THAT THE ASSESSEE HAD FIXED DEPOSIT OF RS.40,000 AND RS.50,000 RESPEC TIVELY WITH ORIENTAL BANK OF COMMERCE (VERSOVA) AND ORIENTAL BANK A/C. TANVEE R RESPECTIVELY. THE SOURCE OF ACQUISITION OF THE SAME WAS EXPLAINED AS SAVINGS FROM HOUSEHOLD EXPENSES GIVEN TO HER BY HER HUSBAND MR.KAILASH S.M ARWAH. THE AO REJECTED THE PLEA OF THE ASSESSEE FOR THE REASON THAT THE AS SESSEE DID NOT FILE HER IT/WT RETURNS BEFORE SEARCH AND THE RETURN FOR AY 02-03 W AS FILED ONLY AFTER SEARCH. SINCE THESE DEPOSITS WERE NOT SHOWN IN THE IT RETUR NS OR BOOKS OF ACCOUNTS OF KAILASH MARWAH, THE AO ADDED A SUM OF RS.90,000 AS UNDISCLOSED INCOME OF IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 29 THE ASSESSEE FOR AY 98-99. THE AO FURTHER NOTICED FROM THE BALANCE SHEET OF THE ASSESSEE FILED FOR THE PERIOD ENDING 31.3.1998 THAT THERE WAS A CASH BALANCE OF RS.70,000. THE ASSESSEE EXPLAINED THAT THE SAME REPRESENTS HER SAVINGS FROM HOUSEHOLD EXPENSES GIVEN TO HER BY HER HUSBAND. THE AO WAS OF THE VIEW THAT A CREDIT OF RS.5000 CAN ALONE BE GIVE N CONSIDERING THE FAMILY STATUS OF THE ASSESSEE AND HE TREATED THE SUM OF RS .65,000 AS UNDISCLOSED INCOME FOR AY 98-99. 19.3 ON APPEAL BY THE ASSESSEE THE CIT(A) DELETED T HE ADDITION OF RS.40,000 BEING FD WITH ORIENTAL BANK OF COMMERCE (VERSOVA) B ECAUSE THE SAID DEPOSIT HAD BEEN MADE BEFORE THE COMMENCEMENT OF THE BLOCK PERIOD. AS FAR AS RS.50,000 BEING FD WITH ORIENTAL BANK OF COMMERCE A /C. TANVEER IS CONCERNED, THE CIT(A) WAS OF THE VIEW THAT THE ASSE SSEE DID NOT FILE ANY EVIDENCE TO SHOW THAT THE AMOUNT WAS INVESTED PRIOR TO THE BLOCK PERIOD AND THAT THE ASSESSEE HAS BEEN ABLE TO SAVE OUT OF HOUS EHOLD EXPENSES. THE CIT(A) ALSO HELD THAT THE BANK STATEMENT, BALANCE SHEET OF THE ASSESSEE WERE SEIZED DURING SEARCH AND THEREFORE THE ADDITION WAS MADE B ASED ON MATERIAL FOUND IN THE COURSE OF SEARCH. AS FAR AS THE ADDITION OF RS .65,000 OUT OF THE CASH BALANCE FOUND IN THE BALANCE SHEET ENDING 31.3.98 I S CONCERNED, THE CIT(A) HELD THAT THE SAME WAS NOT FOUND AS A RESULT OF SEA RCH BUT WAS BASED ON THE BALANCE SHEET FILED IN THE COURSE OF ASSESSMENT PRO CEEDINGS AND THEREFORE THE ADDITION WAS BEYOND THE SCOPE OF ADDITION THAT CAN BE MADE IN BLOCK ASSESSMENT. AGGRIEVED BY THE ACTION OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS.50,000/- THE ASSESSEE HAS FILED GR.NO.1 IN HIS C .O. AGGRIEVED BY THE ORDER OF CIT(A) DELETING ADDITION OF RS.65,000 THE REVENU E HAS RAISED GR.NO.1 IN ITS APPEAL. 19.4 WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FINDING OF THE CIT(A) T HAT THE BANK STATEMENT AND BALANCE SHEET WAS FOUND IN THE COURSE OF SEARCH IS FACTUALLY INCORRECT. ACCORDING TO HIM THE BALANCE SHEET IN WHICH THE FD OF RS.50,000 WAS SHOWN WAS FILED BY THE ASSESSEE IN THE COURSE OF ASSESSME NT PROCEEDINGS AND IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 30 THEREFORE THE ADDITION WAS MADE BY THE AO NOT ON TH E BASIS OF MATERIAL FOUND IN THE COURSE OF SEARCH AND THEREFORE THE ADDITION SHOULD BE DELETED. WE ARE OF THE VIEW THAT SUCH ASSERTION WITHOUT BRINGING ON RE CORD MATERIAL TO SHOW THAT THE BANK STATEMENTS EVIDENCING FD OF RS.50,000 WERE NOT FOUND IN THE COURSE OF SEARCH CANNOT BE ACCEPTED. APART FROM THE ABOVE , THE GENERAL EXPLANATION REGARDING SOURCE AS SAVINGS OF HOUSEHOLD EXPENSES W ITHOUT ANY FURTHER DETAILS CANNOT ALSO BE ACCEPTED. WE THEREFORE CONFIRM THE ORDER OF THE CIT(A) IN THIS REGARD AND DISMISS GR.NO.1 RAISED IN THE C.O. 19.5 AS FAR AS GR.NO.1 RAISED BY THE REVENUE IS CON CERNED, ADMITTEDLY THE ASSESSMENT IS BASED ON THE BALANCE SHEET FILED IN T HE COURSE OF ASSESSMENT PROCEEDINGS. CONSEQUENTLY THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE SAME CANNOT BE SUBJECT MATTER OF BLOCK ASSESSMENT AS THE RE WAS NO MATERIAL FOUND IN THE COURSE OF SEARCH SHOWING UNDISCLOSED INCOME. CONSEQUENTLY, GR.NO.1 RAISED BY THE REVENUE IN ITS APPEAL IS ALSO DISMISS ED. 20. GR.NO.2 RAISED BY THE REVENUE IN ITS APPEAL REA DS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) WAS NOT CORRECT IN DELETING THE ADDITIONS OF UNDISCLOSED INCOME ON ACCOUNT OF HOUSEHOLD EXPENSES OF RS.13,000 & RS.6,4 85/-, INTEREST ON BANK FIXED DEPOSITS OF RS.131/- & 452/- AND UNDISCL OSED SALARY INCOME OF RS.72,000/- & 78,000/- AND UNDISCLOSED SALARY IN COME OF RS.72,000/- & 78,000/-FOR A.YS. 2000-2001 & 2001-02 RESPECTIVEL Y, WITHOUT APPRECIATING THE FACT THAT THE ACTION OF THE AO WAS CORRECT IN VIEW OF THE PROVISIONS OF SECTION 158BB(L)(C) SINCE THE ASSESSE E HAD NOT FILED HIS RETURNS OF INCOME THOUGH THE SALARY AND OTHER INCOM ES WERE MORE THAN THE TAXABLE LIMITS FOR EACH OF THESE ASSESSMENT YEA RS. 20.1 UNDISCLOSED INCOME OF F.YS. 1999-2000, 2000-01 & 2001-02 FROM THE CAPITAL ACCOUNT FOR THE PERIOD 31-03-1999, 31-03-2000 & 31-03- 2001, FILED BY THE ASSESSSEE, THE AO NOTICED THAT T HE ASSESSEE HAS CREDITED FOLLOWING AMOUNTS: IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 31 F.Y 1999-00 F.Y.2000-01 F.Y.2001 -02 BANK INTEREST ON LOCAL FD RS. 131/- RS.452/- RS. 18,845/- SMALL SAVING RS.18,000/ - RS.11,485/- NIL (MISC RECEIPT) INT. ON FCNRI NIL NIL RS.1,08,980/- SALARY FROM M/S.THREE GEE ENGINEERS RS.72,000/- RS.78,000/- RS,1 ,02,000/- 20.2. THE ASSESSEE VIDE HER LETTER DT. 09-01-2004 SUBMITTED THAT BANK INTEREST RS. 131.00 WAS NOT TAXABLE. THE SMALL SAVI NG OF RS. 18,000/- AND RS.11,485/- PERTAINING TO F.YS.1999-2000 & 2000-01 RESPECTIVELY ARE NOT TAXABLE AS THAT DOES NOT FALL IN THE PREVIEW OF TAX ABLE INCOME AS THE SAID AMOUNT IS SAVED BY HER OUT OF MY HUSBANDS TAXABLE INCOME. REGARDING INTEREST ON FCNRJ OF RS.1,08,980/-, IT WAS STATED B Y THE ASSESSEE THAT THE SAME IS EXEMPT U/S.10(4) (II) OF THE I.T.ACT, 1961. AS REGARDS, SALARY AND OTHER BENEFITS, RECEIVED FROM M/S. THREE GEE ENGINEERS OF RS72,000/-, RS.78,000/- AND RS.1,02,000/- FOR F.Y.1999-2000, 2000-01 & 200 1-02 RESPECTIVELY, THE ASSESSEE SUBMITTED THAT THE SAME WAS BELOW TAXABLE LIMIT AND HENCE THE RETURN WAS NOT FILED BY THE ASSESSEE. 20.3. THE AO DID NOT ACCEPT THE SUBMISSIONS MADE B Y THE ASSESSEE. HE HELD THAT ONLY A CREDIT OF RS.5,000 COULD BE GIVEN FOR S AVINGS OUT OF HOUSEHOLD EXPENSES AND THE BALANCE AMOUNTS OF RS.13,000/-, RS .6,485/- PERTAINING TO F.Y.1999- 2000 & 200 1-02 RESPECTIVELY WAS TAXED AS UNDISCLOSED INCOME OF THE ASSESSEE. AS REGARDS, THE SALARY AND OTHER PER QUISITES RECEIVED FROM M/S.THREE GEE ENGINEERS, THE AO HELD THAT SINCE THE ASSESSEE HAS NOT BEEN FILING HER I.T./W.T. RETURNS THE AMOUNT RECEIVED UN DER VARIOUS HEADS REMAINED UNDISCLOSED TO I.T. DEPARTMENT. AS PER THE COMPUTAT ION OF INCOME FILED BY THE ASSESSEE, THE GROSS TAXABLE INCOME FOR THE PERIOD E NDED 31-03-2000 WAS IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 32 RS.52,000/-, FOR THE PERIOD ENDED 31- 03-2001 WAS R S.53,000/- AND FOR THE PERIOD ENDED 31-03-2002 WAS RS.72,000/-. IN VIEW OF THESE FACTS, THE AO REJECTED THE ARGUMENT OF THE ASSESSEE AND THE AMOUN T OF SALARY RECEIPT FROM M/S.THREE GEE ENGINEERS WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. IN RESPECT OF INTEREST OF FCNRI DEPOSIT THE ARGUMEN T OF THE ASSESSEE THAT SAME IS EXEMPT U/S.10(4)(II) OF THE 1.T.ACT WAS ACCEPTED BY THE AO. THUS THE UNDISCLOSED INCOME FOR THE F.Y.1999-2000, 2000-01 A ND 2001-02 ARE DETERMINED AS UNDER: UNDISCLOSED INCOME OF F.Y. 99-00 RS. 85, 131/- UNDISCLOSED INCOME OF F.Y. 2000-01 RS. 84,93 7/- UNDISCLOSED INCOME OF F.Y. 200102 RS 1,20,8 45/ 20.4 ON APPEAL BY THE ASSESSEE, THE CIT(A) DELETED THE ADDITION MADE BY THE AO HOLDING THAT BY VIRTUE OF THE AMENDMENT, WHICH W AS MADE WITH RETROSPECTIVE EFFECT FROM 1.7.1995 IN SEC.158BB OF THE ACT, IN A CASE WHERE THE UNDISCLOSED INCOME OF ANY YEAR COVERED BY THE BLOCK PERIOD IS BELOW THE TAXABLE LIMIT, THE SAID INCOME HAS TO BE EXCLUDED F ROM THE BLOCK ASSESSMENT. IN DOING SO THE CIT(A) FOLLOWED THE DECISION OF THE HONBLE KERELA HIGH COURT IN THE CASE OF CIT VS. M.M.THOMAS 265 ITR 327 (KER). AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS RAISED GR.NO.2 BEFORE TH E TRIBUNAL. 20.5 WE HAVE HEARD THE SUBMISSION OF THE LEARNED D. R. WHO RELIED ON THE ORDER OF THE AO. A COPY OF THE COMPUTATION OF TOTA L INCOME FOR THE AY 99- 00,2000-01 TO 02-03 IS PLACED AT PAGE-34 OF THE ASS ESSEES PAPER BOOK. THE SAME IS ANNEXED AS ANNEXURE-2 TO THIS ORDER. IT IS CLEAR FROM THE SAME THAT THE INCOME FOR THE AFORESAID ASSESSMENT YEAR, WERE BELO W THE TAXABLE LIMIT. THE DUTY TO FILE A RETURN OF INCOME ARISES ONLY WHEN TH E INCOME IS ABOVE THE LIMIT THAT IS NOT CHARGEABLE TO TAX. THEREFORE THERE WAS NO DUTY TO DISCLOSE INCOME FOR THE AFORESAID AYS. IT IS ONLY WHERE THERE IS A DUTY TO DISCLOSE AND FAILURE TO IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 33 DISCLOSE CAN IT BE SAID THAT INCOME HAS REMAINED UN DISCLOSED. THEREFORE IT CANNOT BE SAID THAT THE INCOME IN QUESTION WAS UNDI SCLOSED INCOME. WE THEREFORE UPHOLD THE ORDER OF THE CIT(A) AND DISMIS S GR.NO.2 RAISED BY THE REVENUE. 21. GR.NO.3 RAISED BY THE REVENUE READS AS FOLLOWS: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE A ND IN LAW, THE LD. CIT(A) WAS NOT CORRECT IN DELETING THE ADDITION OF RS.2,80,380/- ON ACCOUNT OF FOREIGN VISITS WITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE WAS FOR THE PLEASURE TRIP TO VISIT PARE NTS AND FAMILY MEMBERS OF THE ASSESSEE AND THE PERQUISITE RELATING TO THIS IS NOT OFFERED BY THE ASSESSEE. FURTHER, THE LEARNED CIT(A) HAS ER RED IN HOLDING THAT THE ENTRIES IN THE BOOK OF ACCOUNT OF THE COMPANY WERE OF RELEVANCE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS AN ENTI TY DIFFERENT FROM THE EMPLOYER COMPANY. 21.1 THE AFORESAID GROUND OF APPEAL IS IDENTICAL TO GR.NO.5 OF THE REVENUE IN IT(SS)A.NO.274/MUM/07 IN THE CASE OF KAILASH S.MARW AH. FOR THE REASONS STATED WHILE DECIDING THE SAID GROUND, GR.NO.3 OF T HE REVENUE IS DISMISSED. C.O.NO.65/MUM/07. 22. GR.NO.1 OF THE C.O. HAS ALREADY BEEN DECIDED WH ILE DECIDING GR.NO.1 OF THE REVENUE. FOR THE REASONS STATED THEREIN THIS G ROUND OF APPEAL IS DISMISSED. 23. GR.NO.2 RAISED IN THE C.O. READS AS FOLLOWS: 2. IN DOING SO, THE COMMISSIONER OF INCOME-TAX (AP PEALS) FAILED TO APPRECIATE THAT ADDITION WAS MADE ON THE BASIS OF B ANK SUMMARY, BANK STATEMENTS AND BALANCE SHEET FILED DURING THE COURS E OF BLOCK ASSESSMENT PROCEEDINGS BY THE RESPONDENT AND NOT ON THE BASIS OF EVIDENCE FOUND DURING THE SEARCH PROCEEDINGS. 23.1 DURING THE COURSE OF SEARCH AND SEIZURE ACTIO N ON 16.1.2002 AT THE RESIDENCE OF THE ASSESSEE, VARIOUS BILLS AS PER FIL E NO.A-1 SHOWING PURCHASE OF CLOTH WERE FOUND AND SEIZED. THE DETAILS OF PURCHA SE BILLS WERE AS UNDER: IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 34 S.NO. PAGE NO OF SEIZED BILL NAME OF THE PARTY QUANTITY AMOUNT OF BILL & DATE 1 6 M/S.GANGATEX, SURAT 17 PCS 21,273/- DATED 07-12-99 2 7 M/S. GANGATEX, SURAT 17 PCS 11200/- DATED 19-11 -99 3 8 M/S. GANGARAM SYNTHETIC LTD. SURAT 27 PCS AMOUNT IS NOT GIVEN. HOWEVER DELIVERY CHALLAN IS DATED 19-11- 99. 4 9 M/S.GANGARAM SYNTHETICS LTD, SURAT 24 PCS AMOUNT IS NOT GIVEN. HOWEVER DELIVERY CHALLAN IS DATED 19-11- 99. 5. 10 M/S.GANGARAM SYNTHETIC LTD., SURAT 8 PCS. AMOUNT IS NOT GIVEN. HOWEVER DELIVERY CHALLAN IS DATED 19-11- 99. 6 86 M/S. GANGATEX, SURAT PARCEL (VPP) 5013/- DATED 30-11-99 7 87 M/S. RATAN, SURAT PARCEL (VPP) 6848/- DATED 11-12-99 23.2 THE ASSESSEE VIDE HIS LETTER DATED 09-01-2904 CLAIMED THAT SMALL PURCHASES OF RS.32,000/- WERE MADE AND NO SALE WAS EFFECTED. THE AO HELD THAT THE INVESTMENT IN CLOTH AS EVIDENCED BY THE SE IZED DOCUMENT REMAINED UNEXPLAINED AND THE SAME WAS NOT ACCOUNTED IN THE B OOKS OF A/CS. OF THE ASSESSEE. OUT OF THE SEVEN BILLS FOUND DURING THE S EARCH, AMOUNT OF RS.44,334/- WAS REFLECTED IN PURCHASE BILLS IN REM AINING THREE BILLS AMOUNT WAS NOT GIVEN AS SAME WERE DELIVERY CHALLAN AND PUR CHASE BILL IN RESPECT OF THESE CHALLAN WERE NOT FOUND DURING THE SEARCH. CON SIDERING VARIOUS AND FACTS AND CIRCUMSTANCES OF THE CASE UNEXPLAINED INVESTMEN T IN CLOTH BUSINESS WAS ESTIMATED BY THE AO AT RS.75,000/- AND SAME WAS TAX ED AS ASSESSEES UNDISCLOSED INCOME FOR F.Y. 1999-2000. 23.3 ON APPEAL BY THE ASSESSEE THE CIT(A) RESTRICTE D THE ADDITION TO RS.44,334 BEING THE VALUE OF THE PURCHASES EVIDENCED BY BILLS FOUND IN THE COURSE OF SEARCH SINCE THE ASSESSEE COULD NOT EXPLAIN SATISFA CTORILY THE SOURCE OF FUNDS FOR ACQUISITION OF THE SAME. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 35 23.4 BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ADDITION CANNOT BE MADE ON THE BASIS OF ESTIMATES AND IF AT ALL ANY ADDITION IS TO BE IT HAS TO BE THE PROFIT ON SALE OF THE GOODS AND NOT T HE VALUE OF THE GOODS. WE ARE OF THE VIEW THAT THE SUBMISSION MADE ON BEHALF OF T HE ASSESSEE CANNOT BE ACCEPTED. ADMITTEDLY THE VALUE OF THE PURCHASES HA S NOT BEEN SHOWN IN THE BOOKS OF ACCOUNTS NOR WAS THE SAME EXPLAINED SATISF ACTORILY. FACTS WITH REGARD TO PURCHASES AND SALES ARE WITHIN THE EXCLUSIVE KNO WLEDGE OF THE ASSESSEE AND IT IS FOR HER TO HAVE PROVED THE QUANTUM OF PROFIT SHE MADE BY DOING UNACCOUNTED BUSINESS. IN THE ABSENCE OF ANY MATERI AL SUCH GENERAL STATEMENTS CANNOT BE ACCEPTED. WE THEREFORE CONFIR M THE ORDER OF THE CIT(A) AND DISMISS GR.NO.2 OF THE C.O. 24. GR.NO.3 RAISED BY THE ASSESSEE IN ITS C.O. READ S AS FOLLOWS: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE COMMISSIONER OF IN COME- TAX (APPEALS) ERRED IN UPH OLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS.4 4,3341- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN CLOTH BUSINESS. 24.1 THE FACTS AND CIRCUMSTANCES UNDER WHICH THIS A DDITION MADE ON A PROTECTIVE BASIS IN THE CASE OF THIS ASSESSEE AND O N A SUBSTANTIVE BASIS IN THE HANDS OF KAILASH S.MARWAH ARE IDENTICAL. WHILE DEC IDING GR.NO.3 AND 4 OF IT(SS)A.NO.285/MUM/06, WE HAVE ALREADY UPHELD THE A DDITION ON A SUBSTANTIVE BASIS IN THE HANDS OF KAILASH S.MARWAH. THEREFORE THE PROTECTIVE ASSESSMENT MADE IN THE HANDS OF THE ASSESSEE HEREIN IS DIRECTED TO BE DELETED. 25. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED WHILE THE C.O. BY THE ASSESSEE IS PARTLY ALLOWED. IT(SS)A.NO.263/MUM/06 (REVENUES APPEAL) (PANKAJ K. MARWAH) 26. GR.NO.1 RAISED BY THE REVENUE READS AS FOLLOWS : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS NOT CORRECT IN DELETING THE ADDI TIONS OF UNDISCLOSED SALARY INCOME FOR ASSESSMENT YEARS 1997-98, 1998-99 , 1999-2000, 2000-01 AND 2001-02 AMOUNTING TO RS,4,05,000/- WITH OUT APPRECIATING THE FACT THAT THE ACTION OF THE AO WAS CORRECT IN V IEW OF THE PROVISIONS OF IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 36 THE SECTION 158BB(1)(C) SINCE THE ASSESSEE HAD NOT FILED HIS RETURNS OF INCOME THOUGH THE SALARY INCOME WAS MORE THAN THE T AXABLE LIMITS FOR EACH OF THESE ASSESSMENT YEARS. 26.1 THE ASSESSEE HAD RECEIVED SALARY FROM M/S.THRE E GEE ENGINEERS PVT.LTD. (TGE) IN WHICH HE WAS A DIRECTOR. THE SALARY RECEI VED IN AY 97-98 TO 00-01 WAS RS.78,000/- PER ANNUM AND IN AY 01-02 IT WAS RS .92,000/-. IT IS NOT IN DISPUTE THAT THE AFORESAID PAYMENT IS DULY RECORDED IN THE BOOKS OF TGE. THE ASSESSEE HAD NOT FILED RETURNS OF INCOME FOR THE AF ORESAID ASSESSMENT YEARS. THE AO THEREFORE TREATED THE INCOME IN THE FORM OF SALARY FOR THE AFORESAID ASSESSMENT YEARS AS UNDISCLOSED INCOME OF THE ASSES SEE. 26.2 ON APPEAL BY THE ASSESSEE, THE CIT(A) DELETED THE ADDITION MADE BY THE AO HOLDING THAT BY VIRTUE OF THE AMENDMENT, WHICH W AS MADE WITH RETROSPECTIVE EFFECT FROM 1.7.1995 IN SEC.158BB OF THE ACT, IN A CASE WHERE THE UNDISCLOSED INCOME OF ANY YEAR COVERED BY THE BLOCK PERIOD IS BELOW THE TAXABLE LIMIT, THE SAID INCOME HAS TO BE EXCLUDED F ROM THE BLOCK ASSESSMENT. IN DOING SO THE CIT(A) FOLLOWED THE DECISION OF THE HONBLE KERELA HIGH COURT IN THE CASE OF CIT VS. M.M.THOMAS 265 ITR 327 (KER). AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS RAISED GR.NO.1 BEFORE TH E TRIBUNAL. 26.3 WE HAVE HEARD THE SUBMISSION OF THE LEARNED D. R. WHO RELIED ON THE ORDER OF THE AO. A COPY OF THE COMPUTATION OF TOTA L INCOME FOR THE AY 97-98 TO 01-02 IS PLACED AT PAGE-14 OF THE ASSESSEES PAPER BOOK. THE SAME IS ANNEXED AS ANNEXURE-3 TO THIS ORDER. IT IS CLEAR FROM THE SAME THAT THE INCOME FOR THE AFORESAID ASSESSMENT YEAR, WERE BELOW THE TAXABLE L IMIT. THE DUTY TO FILE A RETURN OF INCOME ARISES ONLY WHEN THE INCOME IS ABO VE THE LIMIT THAT IS NOT CHARGEABLE TO TAX. THEREFORE THERE WAS NO DUTY TO DISCLOSE INCOME FOR THE AFORESAID AYS. IT IS ONLY WHERE THERE IS A DUTY TO DISCLOSE AND FAILURE TO DISCLOSE CAN IT BE SAID THAT INCOME HAS REMAINED UNDISCLOSED . THEREFORE IT CANNOT BE SAID THAT THE INCOME IN QUESTION WAS UNDISCLOSED IN COME. WE THEREFORE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS GR.NO.1 RAISED BY THE REVENUE. 27. GR.NO.2 RAISED BY THE REVENUE READS AS FOLLOWS: IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 37 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS NOT CORRECT IN DELETING THE ADDI TION ON ACCOUNT OF UNEXPLAINED JOURNAL ENTRY OF RS.64,916/- IN THE ASS ESSEES CAPITAL ACCOUNT WITHOUT CONSIDERING THE FACT THAT THE ASSES SEE HAD NO EXPLANATION TO OFFER AT THE TIME OF ASSESSMENT PROC EEDINGS AND THE SUBMISSIONS BEFORE CIT(A) WERE AFTER THOUGHT. FURTH ER, THE ENTRIES IN THE BOOKS OF ACCOUNT OF THE COMPANY ARE NOT OF ANY RELE VANCE SO FAR AS THE CASE OF THE ASSESSEE, WHICH IS A DIFFERENT ENTITY, IS CONCERNED. 27.1 IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSEE FILED HIS CAPITAL ACCOUNT AS ON 31.3.1997IN WHICH THERE WAS A CREDIT ENTRY OF RS.64,916 WITH THE DESCRIPTION THREE GEE JV. SINCE THIS CREDIT ENTRY WAS NOT PROPERLY EXPLAINED, THE AO MADE AN ADDITION OF RS.64,916 AS UNDISCLOSED INCOME OF AY 97-98. BEFORE CIT(A) THE ASSESSEE POINTED OUT THAT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1999-2000, THE ASSESSEE HAD DEBITED HIS CAPITAL ACCOUNT AND CREDITED THREE GEE ENGINEERING PVT. LTD . WITH AN AMOUNT OF RS.69,855/-. IT WAS FURTHER SUBMITTED THAT THE AFO RESAID ENTRIES HAVE BEEN CLEARLY SHOWN IN THE CAPITAL ACCOUNTS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AR SUBMITTED THAT THE ASSESSING OF FICER HAS TREATED THE CREDIT IN THE CAPITAL ACCOUNT AS UNDISCLOSED INCOME, THEN, THE DEBIT IN THE CAPITAL ACCOUNT IN THE SUBSEQUENT YEAR HAS TO BE ALLOWED AS A DEDUCTION. THE ASESSING OFFICER HAS ON THE BASIS OF SURMISES AND CONJECTURE S MADE THE AFORESAID ADDITION AND WITHOUT APPRECIATING THE FACT THAT THE SAID ENTRY WAS SHOWN IN THE BOOKS OF ACCOUNT. IT WAS FURTHER SUBMITTED THAT AD DITION CANNOT BE MADE ON THE BASIS OF CAPITAL ACCOUNT FILED DURING ASSESSMEN T PROCEEDINGS. IT WAS ARGUED THAT THE ADDITION CANNOT BE SAID TO BE MADE ON THE BASIS OF MATERIAL FOUND IN THE COURSE OF SEARCH AND SHOULD THEREFORE BE DELETED. THE CIT(A) FOUND FORCE IN THE SUBMISSION OF THE ASSESSEE AND S INCE THE ENTRIES WERE RECORDED IN THE BOOKS OF ACCOUNTS THE ADDITION WAS DIRECTED TO THE DELETED. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE HAS R AISED GR.NO.2 BEFORE THE TRIBUNAL. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 38 27.2 WE HAVE HEARD THE RIVAL SUBMISSIONS. ADMITT EDLY THE ASSESSMENT IS BASED ON THE CAPITAL ACCOUNT FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS. CONSEQUENTLY THE CIT(A) WAS JUSTIFIED IN HOLDING TH AT THE SAME CANNOT BE SUBJECT MATTER OF BLOCK ASSESSMENT AS THERE WAS NO MATERIAL FOUND IN THE COURSE OF SEARCH SHOWING UNDISCLOSED INCOME. CONSE QUENTLY, GR.NO.2 RAISED BY THE REVENUE IN ITS APPEAL IS ALSO DISMISSED. 28. GR.NO.3 RAISED BY THE REVENUE READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS NOT CORRECT IN DELETING THE ADDI TION OF UNDISCLOSED INCOME OF RS.50,000/- ON ACCOUNT OF FOREIGN TRIP OF ASSESSEE TO MAURITIUS, WITHOUT APPRECIATING THE FACT THAT THE E XPENDITURE WAS FOR THE PLEASURE TREAT OF THE DIRECTORS TO VISIT PARENTS AN D FAMILY MEMBERS OF THE WIFE OF THE ASSESSEE AND THE PERQUISITE RELATING TO THIS IS NOT OFFERED BY THE ASSESSEE. FURTHER, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE ENTRIES IN THE BOOKS OF ACCOUNT OF THE COMPANY WERE OF RELEVANCE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS AN ENTI TY DIFFERENT FROM THE EMPLOYER COMPANY. 28.1 THIS GROUND CAN BE CONVENIENTLY DECIDED TOGETH ER WITH GR.NO.1 RAISED BY THE ASSESSEE IN HIS CROSS-OBJECTION WHICH READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN AD-HOC ADDITION OF RS. 1 LAKH ON ACCOUNT OF FOREIGN TRAVEL IN THE BLOCK ASSESSMENT. 28.2 IN THE BLOCK ASSESSMENT UNDER SECTION 158BC, AN ADDITION OF RS. 1,50,000/- WAS MADE ON ACCOUNT OF FOREIGN VISITS. IN RESPECT OF TRIP TO MAURITIUS, UAE AND SINGAPORE AN AD-HOC AMOUNT OF RS .50,000/- WAS TREATED AS UNDISCLOSED INCOME ON THE GROUND THAT THE SAID E XPENSES HAVE BEEN DEBITED AS NORMAL BUSINESS EXPENSES IN THREE GEE ENGINEERIN G PVT. LTD. AND NOT AS PERQUISITES TO DIRECTORS / EMPLOYEES. FURTHER, IT H AS BEEN HELD THAT THE SAID EXPENSES ARE TOWARDS PLEASURE TRIPS TO VISIT PARENT AND FAMILY MEMBERS OF ARCHANA MARWAH. IN RESPECT OF TRIP TO UK, AN AD- HOC AMOUNT OF RS.L,00,000/- WAS ADDED ON THE GROUND THAT THE ASSESSEE HAD NOT F URNISHED THE CONFIRMATION FROM THE RESPECTIVE PARTIES (RELATIVES OF THE ASSES SEE) TO THE EFFECT THAT THEY HAD IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 39 SPONSORED THE TRIP OF THE ASSESSEE. APART FROM THE ABOVE, THE ASSESSEE ALSO FAILED TO PROVE THE SOURCE FROM WHICH THE EXPENSES WERE SPENT. ACCORDINGLY, AN AMOUNT OF RS. 1,00,000/- WAS TREATED AS UNDISCLOSED INCOME ON ACCOUNT OF UNACCOUNTED EXPENSES. 28.3 BEFORE CIT(A), THE ASSESSEE POINTED OUT THAT IN RESPECT OF ADDITION OF RS.50,000/-, THE EXPENSES HAVE BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT OF THREE GEE ENGINEERING PVT. LTD. AND THOSE EXPENSES HAD BEEN INCURRED TO EXPLORE EXPORT POSSIBILITIES. IT WAS SUBMITTED THAT THE AOS OBSERVATION THAT THE ASSESSEE HAD GONE TO VISIT RELATIVES OF HIS MOTHER WAS FACTUALLY INCORRECT SINCE NONE OF THE ASSESSEES MOTHERS RELATIVES WERE STAY ING IN UAE, MAURITIUS AND SINGAPORE. THE ASSESSEE REITERATED THAT EXPENSES ON FOREIGN TRIP WERE DULY ACCOUNTED BY THREE GEE ENGINEERING PVT. LTD. IN THE IR BOOKS OF ACCOUNT. NO EVIDENCE HAS BEEN FOUND DURING THE COURSE OF BLOCK ASSESSMENT THAT THE SAID EXPENSES ARE FALSE. IN RESPECT OF TRIP TO UK, THE ASSESSEE EXPLAINED THAT THE SAID TRIP WAS SPONSORED BY HIS MATERNAL UNCLE AND T HE EXPENSES HAD BEEN PAID BY HIM AND ACCORDINGLY, NO EXPENSES WAS INCURRED BY HIM. IT WAS SUBMITTED THAT THE AO HAS FAILED TO SHOW THAT THE ASSESSEE HA D ACTUALLY INCURRED THE EXPENDITURE ON TRAVEL TO UK. IT WAS SUBMITTED THAT EXCEPT FOR THE COPY OF PASSPORT, NO OTHER DOCUMENTS WERE FOUND IN THE COUR SE OF SEARCH TO SHOW THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON FOREIGN TR AVEL. 28.4 THE CIT(A) HELD AS FOLLOWS: AFTER PERUSAL OF THE SUBMISSIONS MADE BY THE A.R I FIND THAT RS.50,000/- SPENT BY THE APPELLANT FOR TRIP TO UAE, MAURITIUS AND SINGAPORE CANNOT BE TAXED UNDER THE BLOCK ASSESSMEN T AS THE SAME WAS RECORDED IN THE BOOKS OF ACCOUNTS AND IT WAS FOR TH E PURPOSE OF BUSINESS AND THERE IS NO ADEQUATE EVIDENCE TO ESTABLISH THE SAME AS PERSONAL NATURE. ACCORDINGLY, THE ADDITION OF RS.50,000/- IS DELETED. HOWEVER, WITH RESPECT TO THE TRIP TO UK NOT AN IOTA OF EVIDE NCE WAS FILED BY THE A.R OF THE APPELLANT, BEFORE THE A.O OR BEFORE THE APPE AL FORUM. THE SAME WAS UNEARTHED DUE TO SEARCH AND SEIZURE ACTION ALSO . REGARDING ESTIMATED ADDITIONS, NO ALTERNATIVE CALCULATION WAS ALSO PROVIDED BY THE A.R AND THE OBJECTION WAS NEITHER WHOLEHEARTED NOR BASED ON ANY LOGIC IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 40 OR EVIDENCE. EVEN THE MATERNAL UNCLE WHO ACCORDING TO APPELLANT HAD SPONSORED THE TRIP, HE ALSO COULD NOT GIVE A LETTER TO THAT RESPECT. AS SUCH I HAVE NO HESITATION BUT TO CONFIRM THE ADDITION AN D ACCORDINGLY I ORDER FOR THE SAME. 28.5 AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE AS WELL AS THE REVENUE HAS PREFERRED THE AFORESAID GROUNDS IN THEIR APPEAL AND CROSS OBJECTION RESPECTIVELY. WE HAVE HEARD THE RIVAL SUBMISSIONS . AS FAR AS THE GROUND OF APPEAL OF THE REVENUE IS CONCERNED, WE ARE OF THE V IEW THAT THE EXPENSES IN QUESTION WERE DULY RECORDED IN THE BOOKS OF TGE AND THEREFORE IT CANNOT BE SAID TO BE UNDISCLOSED. AS FAR AS GROUND OF APPEAL OF THE ASSESSEE IS CONCERNED, THE STATEMENT OF THE ASSESSEE THAT HIS U NCLE SPONSORED THE TRIP TO U.K. IS A SELF-SERVING STATEMENT WITHOUT ANY CORROB ORATIVE EVIDENCE. THE ALTERNATIVE PLEA THAT THE ADDITION MADE IS EXCESSIV E APPEARS TO BE JUSTIFIED. WE THEREFORE DIRECT THAT THE ADDITION BE RESTRICTED TO RS.60,000/-. THUS GR.NO.3 OF THE REVENUE IS DISMISSED WHILE GR.NO.1 OF THE C.O. IS PARTLY ALLOWED. 29. GROUND NO.2 OF THE C.O. READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT D ELETING THE PROTECTIVE ASSESSMENT MADE IN RESPECT OF ADDITION ON ACCOUNT O F UNDISCLOSED JEWELLERY AMOUNTING TO RS.2,60,240/- 29.1 THE FACTS AND CIRCUMSTANCES UNDER WHICH THIS A DDITION MADE ON A PROTECTIVE BASIS IN THE CASE OF THIS ASSESSEE AND O N A SUBSTANTIVE BASIS IN THE HANDS OF KAILASH S.MARWAH ARE IDENTICAL. WHILE DEC IDING GR.NO.2 OF IT(SS)A.NO.285/MUM/06, WE HAVE ALREADY HELD THAT TH E ADDITION ON A SUBSTANTIVE BASIS IN THE HANDS OF KAILASH S.MARWAH IS UNWARRANTED. THE PROTECTIVE ASSESSMENT MADE IN THE HANDS OF THE ASSE SSEE HEREIN WAS DIRECTED TO BE MADE ON A SUBSTANTIVE BASIS TO THE EXTENT OF RS.1,30,311/-. FOR THE REASONS STATED THEREIN GR.NO.2 OF THE C.O. IS PARTL Y ALLOWED. 29.2 IN THE RESULT, THE C.O. IS PARTLY ALLOWED. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 41 30. IN THE RESULT, ALL THE APPEALS AND THE C.O. ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 14 TH DAY OF OCT. 2011. SD/- SD/- (P.M.JAGTAP ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 14 TH OCT. 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RF BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. IT(SS)A 263,284,274&285/M/06 & CO 64&65/M/07 42 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 7/10-10-11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11/10/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER