Shri Satyendra Sahu, Bhopal V. The DCIT- 1(2), Bhopal

ITSSA 376/IND/2012

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0419 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 23-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Assessee Lawyers: H P VERMA; N D PATWA
• Keywords: Bogus purchase; Business income; Search and seizure; Loose papers; Question of law; Initiation of penalty proceedings; Onus to prove; Documents seized
• Section: 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI MUKUL SHRAWAT, HONBLE JUDICIAL MEMBER IT(SS) NO. 37 6 /IND/2012 : (A SST. Y EAR : 200 7 - 0 8 ) SHRI SATYENDRA SAHU 21, BAG DILKUSHA, RAISEN ROAD, BHOPAL (APPELLANT) PAN : AQXPS8253J VS DY . COMMISSIONER OF INCOME TAX - 1(2), BHOPAL ( RESPONDENT ) ASSESSEE BY : H.P. VERMA & N.D. PATWA, ADV. REVENUE BY : LAL CHAND, CIT DR DATE OF HEARING : 08/09/2014 DATE OF PRONOUNCEMENT : 17 / 11 /2014 O R D E R PER P.K. BANSAL 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DT. 26.6.2012 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL. 1. THAT ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN CON FIRMING THE PROCEEDINGS INITIATED U/S 153C AS CORRECT WITHOUT CONSIDERING THE FACT THAT THE B ASIS ADOPTED AND THE REASONS RECORDED FOR ISSUING THE NOTICE U/S 153C ARE NOT SATISFACTORY. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.17,28,61,528/ - BY DISALLOWING THE PURCHASES OF RS.17,22,35,000/ - OF M/S NEPTUNE REMEDIES TREATING THE SAME AS BOG US AND RETURNED INCOME OF THE ASSESSEE OF RS.6,26,528/ - IN THE HANDS OF SHRI ASHOK NANDA ON SUBSTANTIVE BASIS BY DELETING PROTECTIVE ADDITION IN THE HANDS OF THE APPELLANT. IT IS SUBMITTED THAT THE ASSESSEE IS REGULARLY ASSESSED TO TAX AND HAS FILED THE R ETURN SHOWING THE INCOME FROM THE SAID BUSINESS IN WHICH ADDITION WAS MADE AND ALSO HIS 2 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) OWN SALES TAX NUMBER AND DRUG LICENCE NUMBER AND SUPPLY THE MATERIAL OUT OF HIS OWN SOURCES WITHOUT ANY FINANCIAL SUPPORT FROM SHRI ASHOK NANDA. FURTHER, THE ASSESSEE H AS STARTED PAYING INCOME TAX ON THE INCOME ASSESSED IN HIS HAND AND HAS PAID A SUBSTANTIAL AMOUNT OF TAX OUT OF HIS OWN SOURCES. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.17 ,22,35,000/ - BY DISALLOWING THE PURCHASES FROM DIFFERENT PARTIES TREATING THE SAME AS BOGUS OUT OF THE TOTAL SALES OF RS.35,31,54,152/ - . IT IS SUBMITTED THAT IN A TRADING CONCERN AND PARTICULARLY IN A GOVERNMENT SUPPLY BUSINESS WHERE THE SALES IS UNDISPUT ED, ESTIMATION OF GROSS PROFIT @ 49 % IS HIGHLY UNJUSTIFIED, UNWAR RANTED AND ON VERY HIGHER SIDE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE INITIATION OF PENALTY PROCEEDINGS U / S 27L(1)(C). 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM SUPPLY OF GOVERNMENT MATERIAL IN THE NAME AND STYLE OF M/S. NEPTUNE REMEDIES AS PROPRIETOR. A SEARCH WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF SHRI ASHOK NANDA AND DURING THE SEARC H CERTAIN DOCUMENTS/PAPERS BELONGING TO THE ASSESSEE WERE FOUND IN THE PREMISES OF SHRI ASHOK NANDA. THEREFORE, THE AO INITIATED PROCEEDINGS U/S 153C. THE ASSESSEE IN RESPONSE TO THE NOTICE FILED RETURN ON 31.3.2009 WHILE THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE VOLUNTARILY FOR THE IMPUGNED ASSESSMENT YEAR ON 31.10.2007 AT AN INCOME OF RS.6,26,528/ - WHICH INCLUDES INCOME FROM THE SAID BUSINESS. THE ASSESSEE MAINTAINS REGULAR BOOKS WHICH ARE AUDITED U/S 44AB AND IS DULY REGISTERED WITH THE SALES TAX DEPARTMENT, DRUG CONTROL DEPARTMENT AND ALSO GOT DRUG LICENCE FROM M.P GOVERNMENT, DEPT. OF FOOD. THE ASSESSMENT WAS COMPLETED ON 29.12.2008 AT A TOTAL INCOME OF RS.17,28,61,528/ - DISALLOWING THE FOLLOWING PURCHASES : S.NO. NAME OF THE PARTIES AMOUNT (RS .) 1 HARIOM SECURITIES 2,85,30,000 2 BALAJI SECURITIES 2,33,25,000 3 CHIRANJIV LAL AND SONS 1,05,00,000 3 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) 4 JAYSHREEE UDYOG 3,76,55,000 5 DAULAT ENTERPRISES 3,68,40,000 6 JAI CHAND UDYOG 16,00,000 7 MADHUBALA 10,00,000 8 BERA SALE 1,83,65,000 9 SACHI SECURITIES 1,44,20,000 TOTAL (RS.) 17,22,35,000 AS THE ASSESSEE COULD NOT PRODUCE THE BILLS AND CONTENDED THAT THE PURCHASE BILLS ARE MISPLACED AT BETUL DURING THE COURSE OF JOURNEY BETWEEN NAGPUR TO BHOPAL ON 24.10.2007 FOR WHICH AN FIR WAS ALSO LODGED WITH THE RAILWAY POLICE, BHOPAL. THE ASSESSEE ALSO FILED COPY OF THE RAILWAY TICKET, COPY OF FIR BEFORE THE AO ALONGWITH THE ADDRESSES OF ALL THE PARTIES . THE AO DISALLOWED ALL THESE PURCHASES BUT HE ASSESSED THE INCOME PROTECTIVELY IN THE HANDS OF THE ASSESSEE WHILE SUBSTANTIVELY THE INCOME WAS ASSESSED IN THE HANDS OF SHRI ASHOK NANDA. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) PARTLY ALLOWED T HE APPEAL OF THE ASSESSEE. 3. GROUND NO. 1 RELATES TO THE VALIDITY OF THE ISSUE OF NOTICE U/S 153C. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE DO NOT AGREE WITH THE CONTENTION OF THE LD. AR THAT SINCE DURING THE COURSE OF THE SEARCH AND SEIZURE U/S 132 AT THE RESIDENTIAL PREMISES OF SHRI ASHOK NANDA AT 71 - H, SHAKTI NAGAR, BHOPAL LOOSE PAPERS BEING LPS 2, PG. 17 & 18 WHICH ARE LETTER HEAD OF THE PROPRIETARY CONCERN M/S. NEPTUNE REMEDIES WERE FOUND, LOOSE PAPER LPS - 2, PG. 22, ANNEXURE OF MEMORANDUM OF AGREEMENT BETWEEN NEPTUNE REMEDIES AND KARNATAKA ANTIBIOTICS AND PHARMACEUTICALS LTD. WAS ALSO FOUND, THESE PAPERS BELONGED TO THE ASSESSEE. FROM THE READING OF SEC. 153C IT IS APPARENT THAT IF DURING THE CO URSE OF SEARCH ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON IN WHOSE CASE THE SEARCH HAD TAKEN PLACE, THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS 4 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS O R REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A. IT IS NOT DENIED THAT THE LETTER PAD AS WELL AS ANNEXURE OF MEMORANDUM OF AGREEMENT BETWEEN NEPTUNE REMEDIES AND KARNATAKA ANTIBIOTIC AND PHARMACEUTICALS LTD. BELONG ED TO THE ASSESSEE. ONCE THESE DOCUMENTS BELONGED TO THE ASSESSEE, IN OUR OPINION, THE AO HAS JURISDICTION U/S 153C TO INITIATE PROCEEDINGS AGAINST THE PERSON TO WHOM THE DOCUMENT BELONGS. WE, ACCORDINGLY, DISMISS THE GROUND TAKEN BY THE ASSESSEE. 4. GR OUND NOS. 2 & 3 RELATE TO THE DISALLOWANCE OF PURCHASES AND TREATING THEM AS BOGUS AND MAKING ADDITION SUBSTANTIVELY IN THE HANDS OF SHRI ASHOK NANDA AND PROTECTIVELY IN THE HANDS OF THE ASSESSEE. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE MATER IAL ON RECORD, WE NOTED THAT WE HAVE ALREADY DEALT WITH THIS ISSUE WHILE DISPOSING OFF THE APPEAL IN THE CASE OF SHRI ASHOK NANDA IN ITSS NO. 371 TO 375, 383 & 385/IND/2012 FOR A.YS. 2004 - 05 TO 2008 - 09 IN WHICH UNDER PARA 2.4 TO 2.4.16 THIS TRIBUNAL HAS HE LD AS UNDER : 2.4 WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE NOTED THAT IN THIS CASE THERE HAD BEEN A SEARCH IN THE CASE OF THE ASSESSEE WHO IS THE DIRECTOR AND CHAIRMAN OF HIPL WHICH IS ENGAGED IN PHARMACEUTICAL BUSINESS. CERTAIN DOCUMENTS WERE FOUND AS REPRODUCED IN THE SUBMISSION MADE BY THE ASSESSEE FROM THE PREMISES OF THE COMPANY IN WHICH THE ASSESSEE IS THE MANAGING DIRECTOR. IT IS AN UNDISPUTED FACT THAT THESE DOCUMENTS WERE NOT FOUND FROM THE PREMISES OF THE ASSESSEE. WE PERUSED THESE DOCUMENTS AND WE NOTED THAT THESE DOCUMENTS RELATE TO THE VARIOUS CORRESPONDENCES AND THE ORDER AS WELL AS SUPPLY MADE BY THESE CONCERNS TO THE GOVERNMENT AGENCIES BY NETAM INDUSTRIES, CHH ATISGARH PHARMACEUTICALS AND NEPTUNE REMEDIES. SOME OF THESE DOCUMENTS CONSISTS OF SALES BILLS, BANK STATEMENT, BANK SLIPS, EVEN THE DETAILS OF SUPPLY OF MEDICINES TO THE GOVERNMENT AGENCIES, DDS 5 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) TO THESE CONCERNS AND HIPL. IT ALSO CONSISTED OF COPY OF T HE ORDER, LETTER IN RESPECT OF THE PAYMENT AND EVEN THE BLANK LETTER PAD OF NEPTUNE REMEDIES. WE ALSO NOTED THAT THE AO HAS DULY ACCEPTED SALES OF THESE CONCERNS BUT MADE THE ADDITION IN RESPECT OF PURCHASES TREATING THE PURCHASES TO BE BOGUS AND TREATED THE INCOME EARNED AS BELONGING TO ASSESSEE AS IN HIS OPINION THESE CONCERNS ARE BENAMI CONCERNS OF THE ASSESSEE. 2.4.1 BEFORE DECIDING THE ISSUE WHETHER THESE CONCERNS ARE THE BENAMI CONCERNS OF THE ASSESSEE, WE WOULD FIRST LIKE TO DEAL WITH WHETHER ANY ADDITION CAN BE MADE ON ACCOUNT OF BOGUS PURCHASES WHEN THE SALES HAS BEEN DULY ACCEPTED BY THE AO IN RESPECT OF THESE BENAMI CONCERNS. IT IS NOT DISPUTED THAT THESE CONCERNS HAVE MADE SALES TO THE GOVERNMENT UNDERTAKING NAMELY KARNATAKA ANTIBIOTIC PHARM ACEUTICALS AND RAJASTHAN DRUG & PHARMACEUTICALS LTD. FOR SUPPLY OF DRUGS AND MEDICAL INSTRUMENTS. A PERSON CANNOT CARRY ON THE BUSINESS OF SUPPLYING THE DRUGS AND MEDICAL INSTRUMENTS UNTIL AND UNLESS IT IS DULY REGISTERED AND HAVINGA DRUG LICENCE. THE GO VERNMENT UNDERTAKING WILL ALSO NOT MAKE PURCHASES FROM ANY CONCERN UNTIL AND UNLESS IT IS DULY REGISTERED WITH THE SALES TAX AND CENTRAL SALES TAX AUTHORITIES. THE CONCERNS WHICH WERE HELD TO BE BENAMI OF THE ASSESSEE NO DOUBT WERE HAVING DRUG LICENCE, SA LES TAX NUMBER, CST NUMBER FROM VARIOUS GOVERNMENT AGENCIES. THE PROPRIETOR OF CHHATISGARH PHARMACEUTICALS AS WELL AS NETAM INDUSTRIES IS SHOWN TO BE SHRI UMESH KAJVE WHILE THE PROPRIETOR OF NEPTUNE REMEDIES IS REGISTERED BY SHRI SATYENDRA SAHU. THE LICE NCE AS WELL AS REGISTRATION IS GRANTED BY THE GOVERNMENT AUTHORITIES AFTER VERIFYING THE GENUINENESS OF THE FIRMS, ABOUT ITS BUSINESS AS WELL AS ITS OWNERSHIP. IT IS NOT DENIED THAT SHRI UMESH KAJVE AND SHRI SATYENDRA SAHU HAVE DULY FILED INCOME TAX RETUR N. THE ADDRESS SHOWN IN THE INCOME TAX RETURN DOES NOT BELONG TO THE PREMISES BELONGING TO ASSESSEE OR TO THE COMPANY HIPL. THERE HAD BEEN A SEARCH IN THE CASE OF THE ASSESSEE AND IN THE CASE OF HIPL AND DURING THE COURSE OF THE SEARCH AT THE PREMISES OF HIPL CERTAIN DOCUMENTS, LETTER HEAD BELONGING TO THESE CONCERNS WERE FOUND ON THE BASIS OF WHICH THE AO TOOK THE VIEW THAT THESE CONCERNS ARE BENAMI CONCERNS OF THE ASSESSEE. IF THESE LETTER HEADS AND PAPERS WERE FOUND, IN OUR OPINION, THE REVENUE WAS BO UND ATLEAST TO CONDUCT SURVEY AT THE PREMISES OF THESE CONCERNS SO THAT THE REALITY COULD BE ASCERTAINED. IT IS NOT DENIED THAT THESE CONCERNS HAVE SUPPLIED GOODS TO THE GOVERNMENT CONCERNS. EVEN THE LETTER HEADS OF KARNATAKA ANTIBIOTIC 6 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) PHARMACEUTICALS W HICH IS ALSO A GOVERNMENT CONCERN WAS ALSO FOUND BUT THAT CONCERN WAS NOT TREATED AS BOGUS CONCERN OF THE ASSESSEE. IN OUR OPINION, FOR HOLDING THE CONCERNS TO BE BENAMI OF THE ASSESSEE FOLLOWING PROPOSITION OF LAW HAS TO BE FULFILLED : I) THE BURDEN TO PROVE WHETHER THE CONCERNS OF SHRI UMESH KAJVE AND SHRI SATYENDRA SAHU ARE THE BENAMI CONCERNS OF THE ASSESSEE LIES WITH THE REVENUE AND NOT WITH THE ASSESSEE. (KRISHNANAND VS. STATE OF M.P, AIR 1977 SC 797 (SUPRA) II) REVENUE SHOULD PROVE THAT THE ASSESSEE HAD MADE INVESTMENT IN THESE CONCERNS AND SOURCE OF THE CAPITAL IN THESE CONCERNS HAVE ARISEN FROM THE ASSESSEE. III) THE ASSESSEE HAS CONTROL OVER THE BUSINESS. IV) THE ASSESSEE HAS DERIVED BENEFIT FROM SUCH CONCERNS AND THE PROFIT FROM THESE CONCERNS HAS BEEN ENJOYED BY THE ASSESSEE. 2.4.2 ON APPRECIATING THE VARIOUS EVIDENCES WE NOTED THAT THE REVENUE HAS NOT PROVED THAT THE CONCERNS OWNED BY SHRI UMESH KAJVE AND SHRI SATYENDR A SAHU ARE THE BENAMI CONCERNS OF THE ASSESSEE. SHRI UMESH KAJVE AND SHRI SATYENDRA SAHU ARE BEING ASSESSED SEPARATELY UNDER THE INCOME TAX ACT. THE CONCERNS OWNED BY THEM ARE HAVING SEPARATE DRUG LICENCES, SALES TAX REGISTRATION. IN THE REGISTRATION CE RTIFICATE ISSUED BY THE CENTRAL SALES TAX AUTHORITIES IN RESPECT OF CHHATISGARH PHARMACEUTICALS AND NETAM INDUSTRIES, SHRI UMESH KAJVE HAS BEEN SHOWN TO BE THE PROPRIETOR. EVEN IN THE DRUG LICENCE WHICH WAS ISSUED, SHRI UMESH KAJVE HAS BEEN SHOWN TO BE TH E COMPETENT PERSON AS PROPRIETOR OF CHHATISGARH PHARMACEUTICALS AS WELL AS NETAM INDUSTRIES. IN THE TIN NUMBER CERTIFICATE ISSUED BY THE COMMISSIONER, COMMERCIAL TAX, MADHYA PRADESH IN THE NAME OF NETAM INDUSTRIES, SHRI UMESH KAJVE HAS BEEN SHOWN TO BE TH E PROPRIETOR. SHRI UMESH KAJVE HAS FILED RETURN MUCH PRIOR TO THE SEARCH. THE RETURN FOR THE A.Y 2004 - 05 TO 2007 - 08 WERE FILED BY SHRI UMESH KAJVE IN WHICH INCOME IN RESPECT OF NETAM INDUSTRIES AND CHHATISGARH PHARMACEUTICALS WERE SHOWN BY HIM. SIMILARL Y, SHRI SATYENDRA SAHU HAS SHOWN INCOME FROM BUSINESS IN THE RETURN FILED FOR A.Y 2008 - 09 IN RESPECT OF NEPTUNE REMEDIES. SHRI SATYENDRA SAHU HAS BEEN SHOWN AS PROPRIETOR IN THE DRUG LICENCE, SALES TAX REGISTRATION, SHOPS AND ESTABLISHMENT CERTIFICATE. T HE ASSESSEE HAS SUBMITTED DETAILS OF THE SALES AND THE PAYMENTS HAVE BEEN RECEIVED THROUGH CHEQUE 7 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) AND SUPPLY HAS BEEN MADE TO ALL THE GOVERNMENT CONCERNS. THE ASSESSEE HAS ALSO ISSUED CHEQUES IN RESPECT OF VARIOUS PURCHASES, DETAILS OF WHICH ARE GIVEN BEF ORE US IN THE ANNEXURE ATTACHED WITH SYNOPSIS. WE DO NOT FIND ANY INTERLACING, INTERMINGLING OR TRANSFER OF FUNDS TO THESE CONCERNS BY THE ASSESSEE EXCEPT DOCUMENTS WHICH CONSISTS OF COPY OF BILL, LETTER RECEIVED ISSUED, ORDER TO NETAM INDUSTRIES, ORDER ON BEHALF OF NETAM INDUSTRIES, BANK STATEMENT. THESE DOCUMENTS NOWHERE PROVE THAT THEY HAVE BEEN WRITTEN BY THE ASSESSEE OR ON BEHALF OF THE ASSESSEE. MERELY THE DOCUMENTS WERE FOUND IN THE CONCERN IN WHICH THE ASSESSEE IS THE DIRECTOR DOES NOT MEAN THE ASSESSEE IS HAVING CONTROL OR EXERCISES CONTROL OVER THE BUSINESS BELONGING TO THESE CONCERNS. IT IS AN UNDISPUTED FACT THAT THESE DOCUMENTS WERE NOT FOUND FROM THE PREMISES OF THE ASSESSEE. THE PRESUMPTION, AT THE MOST, CAN BE AVAILABLE IN RESPECT OF TH E COMPANY IN WHICH THE ASSESSEE IS DIRECTOR. THERE HAD BEEN SEARCH BUT NO DOCUMENTS RELATING TO THE REGISTRATION WITH THE VARIOUS AUTHORITIES OR LICENCES OBTAINED FROM VARIOUS AUTHORITIES IN RESPECT OF THESE CONCERNS WERE FOUND FROM THE CUSTODY OR POSSESS ION OF THE ASSESSEE. THE ASSESSEE IS ALSO NOT AUTHORISED TO OPERATE THE BANK ACCOUNT OF THESE CONCERNS. EVEN ASSESSEE HAS NOT INTRODUCED THE BANK ACCOUNT. NO PAPER OR DOCUMENT HAS BEEN FOUND THAT THE ASSESSEE WAS HAVING CONTROL OVER THE BUSINESS. THERE HAD BEEN SEARCH BUT REVENUE COULD NOT BRING ANY EVIDENCE WHICH PROVED THAT THE ASSESSEE ENJOYED THE PROFIT OF THESE CONCERNS. ASSESSEE HAS DULY ACCEPTED THAT HE WAS ASSISTING IN THE BUSINESS OF THESE CONCERNS AS THESE CONCERNS WERE BUYING GOODS FROM THE ASSESSEE ALSO IN A FRIENDLY GESTURE AND THEREFORE WHILE REPLYING TO QUESTION NO. 24 HE CATEGORICALLY STATED THAT WHATEVER I RECEIVED FROM THESE CONCERNS I HAVE INCLUDED IT IN MY UNDECLARED INCOME. FINDING REGARDING BENAMI NATURE IS A FINDING OF FACT AND I T MUST BE BASED ON THE RELEVANT MATERIAL ON RECORD. 2.4.3 WE HAVE GONE THROUGH THE DECISIONS AS RELIED BY THE LD. AR. WE NOTED THAT IN THE CASE OF PRAKASH NARAIN VS. CIT, 134 ITR 364 THE HON'BLE ALLAHABAD HIGH COURT HAS HELD AS UNDER : THE BURDEN OF PROOF REGARDING BENAMI IS UPON THE ONE WHO ALLEGES BENAMI. NO ABSOLUTE FORMULA OR ACID TEST, UNIFORMLY APPLICABLE IN ALL SITUATIONS, LAID DOWN; YET, IN WEIGHING THE PROBABILITIES AND FOR GATHERING THE RD INDICIA, THE COURTS ARE USUALLY GUIDED BY THESE CIRC UMSTANCES: (1) THE SOURCE WHICH THE PURCHASE MONEY CAME; (2) THE NATURE AND POSSESSION OF THE PR AFTER THE 8 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) PURCHASE; (2) MOTIVE, IF ANY, FOR GIVING THE TRANSACTION A BENAMI COLOUR; (4) THE POSITION OF THE PARTIES AND THE RELATIONSHIP, IF ANY, BETWEEN CLAIM ANT AND THE ALLEGED BENAMIDAR; (5) THE CUSTODY OF THE TITLE DEEDS AFT SALE; AND (6) THE CONDUCT OF THE PARTIES CONCERNED IN DEALING WITH THE AFTER THE SALE. THE ABOVE INDICIA ARE NOT EXHAUSTIVE AND THEIR EFFICACY ACCORDING TO THE FACTS OF EACH CASE. NEVERT HELESS, THE SOURCE WHENCE THE PURCHASE MONEY CAME IS BY FAR THE MOST IMPORTANT TEST FOR DETERMINING WHETHER THE SALE STANDING IN THE NAME OF ONE PERSON, IS IN REALITY FOR THE BENEFIT OF ANOTHER. THE MERE REJECTION OF AN EXPLANATION WOULD NOT ENTITLE THE DE PARTMENT TO CLAIM THE CONSIDERATION FOR THE PURCHASE OF THE PROPERTY IN THE NAME OF ANOTHER PROVIDED BY THE ASSESSEE. APART FROM THE RELATIONSHIP BETWEEN THE PARTIES, MUST BE SOME EVIDENCE OR MATERIAL TO SUPPORT THE CASE OF THE BENANI NATURE OF THE TRANSAC TION. A FINDING REGARDING BENAMI IS A FINDING OF FACT. WHEN A, FINDING OF FACT IS BASED ON MATERIAL, PARTLY RELEVANT AND PARTLY IRRELEVANT, THEN A FINDING IS VITIATED IN LAW. THE ITO HELD THE FOLLOWING PURCHASES MADE IN THE YEARS 1965 - 66 TO 1968 - 6 9 SO BE BENAMI, (1) A HOUSE IN THE JOINT NAMES OF THE ASSESSES WIFE AND MOTHER - IN - LAW; (II) FOUR SHOPS IN THE NAMES OF THE ASSESSEES WIFE, HIS MOT HER - IN - LAW AND HIS FATHER - IN - LAW; (III) A HOUSE IN THE NAME OF HIS FATHER - IN - LAW; AND (IV) A HOUSE IN THE NAME OF THE ASSESSEES WIFE, WHICH ALONE THE ASSESSEE ADMITTED WAS PURCHASED BY HIM IN HIS WIFES NAME. THE AAC HELD THAT THE TRANSACTIONS WERE NOT BENAMI BUT, ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THE TRANSACTIONS WERE BENAMI FOR THE FOLLOWING REASONS: (I) B , THE FATHER - IN - LAW OF THE ASSESSEE, COI4D NOT BE BELIEVED WHEN HE SAID THAT HE HAD A SUM OF RS. 1,00,000 IN CASH WITH HIM SINCE HE HAD DISCONTINUED HIS BUSINESS IN 1946. (II) B HAD NO SOURCE OF INCOME AND AT THE RELEVANT PERIOD HE ALONG WITH HIS WIFE WAS LIVING WITH HIS SON - IN - LAW AND BOTH OF THEM WERE DEPENDENT ON THE ASSESSEE. (III) THE ASSESSEES WIFE WAS THE ONLY ISSUE OF HER PARENTS, AND (IV) THE ASSESSEE WAS NOT HONEST AS HE L. HAD ADMITTEDLY PURCHASED A HOUSE PROPERTY BENAMI, IN THE NAME OF HIS WI FE. ON A REFERENCE HELD, THAT THE MERE FACT THAT THE STATEMENT OF B THAT HE HAD CASH AMOUNTING TO RS.1,00,000 WAS NOT ACCEPTED BY THE TRIBUNAL, WOULD NOT LEAD TO THE INFERENCE THAT THE PROPERTIES IN QUESTION WERE PURCHASED BENAMI BY THE ASSESSEE HIMSELF. THE ASSESSEES MOTHER - IN - LAW HAD STATED THAT SHE HAD IN HER POSSESSION JEWELLERY WORTH RS.15,000 AND CASH OF RS.5,000. THE TRIBUNAL HAD NOT STATED THAT THIS STATEMENT WAS NOT ACCEPTABLE OR WAS BEING REJECTED AND, UNLESS IT WERE REJECTED, THE TRIBUNAL COULD NOT ENTER A FINDING THAT BOTH THE FATHER - IN - LAW AND MOTHER - IN - LAW OF THE ASSESSEE WERE DEPENDENT ON HIM. THE FACT THAT THE ASSESSEES WIFE WAS THE ONLY CHILD OF HER PARENTS COULD NOT LEAD TO THE CONCLUSION JLHAL THE PURCHASES OF THE PROPERTIES WERE FINANC ED NOT BY HER PARENTS BUT BY THE ASSESSEE. IN INDIA BENAMI TRANSACTIONS WERE NOT CONSIDERED TO BE DISHONEST AND THE TRIBUNAL ERRED IN CONCLUDING THAT THE ASSESSEE WAS 9 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) DISHONEST BECAUSE HE HAD ADMITTEDLY PURCHASED ONE HOUSE BENAMI IN THE NAME OF HIS WIFE. N O MOTIVE HAD BEEN SUGGESTED FOR THE BENAMI PURCHASES BY THE ASSESSEE. THERE WAS NO MATERIAL OR EVIDENCE ON RECORD IN SUPPORT OF THE FINDING OF BENAMI RECORDED BY SHE TRIBUNAL. THE PURCHASES OF THE FIRST THREE ITEMS OF PROPERTIES WERE NOT BENAMI PURCHASES F OR PURPOSES OF INCOME - TAX. THEY COULD NOT BE INCLUDED IN THE TOTAL WEALTH OF THE ASSESSEE. THIS JUDGMENT ALSO IN OUR OPINION SUPPORTS THE CASE OF THE ASSESSEE BECAUSE IN THE CASE BEFORE US ALSO THE AO HAS MERELY REJECTED THE EXPLANATION OF THE ASSESSEE W ITHOUT BRINGING ANY EVIDENCE ON RECORD TO SUPPORT THE CASE OF THE BENAMI NATURE OF THE TRANSACTION. A FINDING REGARDING THE BENAMI NATURE IS A FINDING OF FACT AND IT MUST BE BASED ON THE RELEVANT MATERIAL ON RECORD. NONE OF THE CIRCUMSTANCES AS LAID DOWN U NDER THIS JUDGMENT TO PROVE THE BENAMI NATURE, HAS BEEN ESTABLISHED BY THE REVENUE WHILE TREATING THE CONCERNS BELONGING TO UMESH KAVJE AND SATYENDRA SAHU TO BE THE BENAMI CONCERNS OF THE ASSESSEE. 2.4.4 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF GULZARILAL RAWAT VS. CIT, 259 ITR 176. IN THIS CASE WE NOTED THAT THE INCOME - TAX OFFICER HELD THAT THE INCOME FROM A CERTAIN BUSINESS CONCERN BELONGED TO THE ASSESSEE IN THE ASSESSMENT YEARS 1974 - 75 AN D 1975 - 76. THE ASSESSEE EXPLAINED THAT THE BUSINESS BELONGED TO HIS SON, S, WHO INVESTED RS.8,000 AFTER DISCLOSURE OF THE SAME UNDER THE VOLUNTARY DISCLOSURE SCHEME, IT WAS ALSO EXPLAINED THAT THOUGH S WAS A STUDENT AT THAT POINT OF TIME, HE EMPLOYED HIS M ATERNAL UNCLE WHO LOOKED AFTER THE BUSINESS OF THE CONCERN AN RS.700 PER MONTH HAD BEEN PAID TO HIM. THE INCOME - TAX OFFICER REJECTED EXPLANATION AND HIS DECISION WAS UPHELD BY THE TRIBUNAL. ON A REFERENCE: HELD, THAT CONSIDERING THE FACTS THAT WHEN THE I NVESTMENT IN THE FIRM, HAD BEEN SHOWN AFTER DISCLOSURE OF STATEMENT UNDER THE VOLUNTARY DISCLOSURE SCHEME, THAT THE DEALINGS OF THE CONCERN WERE NOT ONLY WITH THE ASSESSEE BUT IN THE OPEN MARKET WITH OTHER SIMILAR TYPE OF TRADERS, THAT THE CONCERN HAD SALE S TAX REGISTRATION AND WAS ALSO REGISTERED UNDER THE SHOPS AND COMMERCIAL ESTABLISHMENTS ACT, THE BUSINESS INCOME FROM THE CONCERN COULD NOT TAXED IN THE HANDS OF THE ASSESSEE MERELY ON THE GROUND THAT THE PROPRIETOR THE CONCERN WAS THE SON OF THE ASSESSEE . NORMALLY, IN A REFERENCE, THE COURT DOES NOT INTERFERE IN THE FINDING OF THE TRIBUNAL BUT THE FINDING OF THE TRIBUNAL AS TO WHETHER THE CONCERN WAS INDEPENDENT OR BENAMI PROPERTY OF THE ASSESS WAS PERVERSE. IN SUCH CIRCUMSTANCES THE COURT SHOULD INTERFER E. THE INCOME FROM 10 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) BUSINESS OF THE CONCERN IN QUESTION WAS NOT ASSESSABLE IN THE HANDS THE ASSESSEE. THIS DECISION, IN OUR OPINION, IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. MERELY CERTAIN PAPERS WHICH DOES NOT EMPOWER THE ASSESSEE TO C ARRY ON THE BUSINESS WERE FOUND AT THE PREMISES OF THE CONCERN IN WHICH ASSESSEE IS A DIRECTOR CANNOT AUTHORISE THE REVENUE TO REGARD THESE CONCERNS TO BE THE BENAMI CONCERNS OF THE ASSESSEE. S/SHRI UMESH KAJVE & SATYENDRA SAHU ARE BEING ASSESSED SEPARATEL Y TO INCOME - TAX AND THE INCOME OF THESE CONCERNS ARE DULY SHOWN BY THEM. THE INVESTMENT MADE IN THE CONCERN WAS NOT PROVED TO HAVE BEEN MADE BY THE ASSESSEE. THEREFORE, IN OUR OPINION, THESE CONCERNS CANNOT BE REGARDED TO BE THE BENAMI CONCERN OF THE ASSES SEE MERELY ON THE GROUND THAT THE PURCHASER IN THE LETTER HAS CALLED FOR THE KIND ATTENTION OF THE ASSESSEE. 2.4.5 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF DHIRAJLAL GIRDHARILAL VS. CIT, 26 ITR 736 (SC). IN THIS CASE IT WAS HELD THAT THE QUESTION WHETHER A HINDU UNDIVIDED FAMILY IS DOING BUSINESS IN SHARES IS A QUESTION OF FACT; BUT IF THE COURT OF FACT WHOSE DECISION ON A QUESTION OF FACT IS FINAL, ARRIVES AT THE DECISION BY CONSIDERING MATERIAL WHICH IS IRRELEVANT TO THE INQUIRY, OR BY C ONSIDERING MATERIAL WHICH IS PARTLY RELEVANT AND PARTLY IRRELEVANT, OR BASES ITS DECISION PARTLY ON CONJECTURES, SURMISES AND SUSPICIONS, AND PARTLY ON EVIDENCE, THEN IN SUCH A SITUATION CLEARLY AN ISSUE OF LAW ARISES. WHEN A COURT OF FACT ACTS ON MATERIA L, PARTLY RELEVANT AND PARTLY IRRELEVANT, IT IS IMPOSSIBLE TO SAY TO WHAT EXTENT THE MIND OF THE COURT WAS AFFECTED BY THE IRRELEVANT MATERIAL USED BY IT IN ARRIVING AT ITS FINDING. SUCH A FINDING IS VITIATED BECAUSE OF THE USE OF INADMISSIBLE MATERIAL AND THEREBY AN ISSUE OF LAW ARISES. IN THIS CASE ALSO THE HON'BLE SUPREME COURT HAS CATEGORICALLY HELD THAT A FINDING OF FACT IS FINAL IF IT HAS BEEN ARRIVED AT BY CONSIDERING THE RELEVANT MATERIAL OR EVIDENCE. THE FINDING CANNOT BE BASED ON CONJECTURES, SURMISES AND SUSPICION. THEREFORE, THE REVENUE, IN OUR OPINION, CA NNOT HOLD MERELY ON PRESUMPTIONS THAT M/S CHHATISGARH PHARMACEUTICALS, M/S. NETAM INDUSTRIES AND M/S. NEPTUNE REMEDIES ARE BENAMI CONCERNS OF THE ASSESSEE. 11 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) 2.4.6 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF DHAKESWARI COTTON MILLS LTD. VS. CIT, 26 ITR 775 (SC). IN THIS CASE IT WAS HELD THAT - IN THIS CASE WE ARE OF THE OPINION THAT THE TRIBUNAL VIOLATED CERTAIN FUNDAMENTAL RULES OR JUSTICE IN REACHING ITS CONCLUSIONS. FIRSTLY, IT DID NOT DISCLOSE TO THE ASSESSEE WHAT INFORMATION HAD BEEN SUPPL IED TO IT BY THE DEPARTMENTAL REPRESENTATIVE. NEXT, IT DID NOT GIVE ANY OPPORTUNITY TO THE COMPANY TO REBUT THE MATERIAL FURNISHED TO IT BY HIM, AND LASTLY, IT DECLINED TO TAKE ALL THE MATERIAL THAT THE ASSESSEE WANTED TO PRODUCE IN SUPPORT OF ITS CASE. TH E RESULT IS THAT THE ASSESSEE HAD NOT HAD A FAIR HEARING. THE ESTIMATE OF THE GROSS RATE OF PROFIT ON SALES, BOTH BY THE, INCOME - TAX OFFICER AND THE TRIBUNAL, SEEMS TO BE BASED ON SURMISES, SUSPICIONS AND CONJECTURES. IT IS SOMEWHAT SURPRISING THAT THE TRI BUNAL TOOK FROM THE REPRESENTATIVE OF THE DEPARTMENT A STATEMENT OF GROSS PROFIT RATES OF OTHER COTTON MILLS WITHOUT SHOWING THAT STATEMENT TO THE ASSESSEE AND WITHOUT GIVING HIM AN OPPORTUNITY TO SHOW THAT THAT STATEMENT, HAD NO RELEVANCY WHATSOEVER TO T HE CASE OF THE MILL IN QUESTION. IT IS NOT KNOWN WHETHER THE MILLS WHICH HAD DISCLOSED THESE RATES WERE SITUATE IN BENGAL OR ELSEWHERE, AND WHETHER THESE MILLS WERE SIMILARLY SITUATED AND CIRCUMSTANCED. NOT ONLY DID THE TRIBUNAL NOT SHOW THE INFORMATION GI VEN BY THE REPRESENTATIVE OF THE DEPARTMENT TO THE APPELLANT, BUT IT REFUSED EVEN TO LOOK AT THE TRUNK LOAD OF BOOKS AND PAPERS WHICH MR. BANERJEE PRODUCED BEFORE THE ACCOUNTANT MEMBER IN HIS CHAMBER. NO HARM WOULD HAVE BEEN DONE IF AFTER NOTICE TO THE DEP ARTMENT THE TRUNK HAD BEEN OPENED AND SOME TIME DEVOTED TO SEE WHAT IT CONTAINED. THE ASSESSMENT IN THIS CASE AND IN THE CONNECTED APPEAL, WE ARE TOLD, WAS ABOVE THE FIGURE OF RS.55 LAKHS AND IT WAS MEET AND PROPER WHEN DEALING WITH A MATTER OF THIS MAGNIT UDE NOT TO EMPLOY UNNECESSARY HASTE AND SHOW IMPATIENCE, PARTICULARLY WHEN IT WAS KNOWN TO THE DEPARTMENT THAT THE BOOKS OF THE ASSESSEE WERE IN THE CUSTODY OF THE SUB - DIVISIONAL OFFICER, NARAYANGANJ, WE THINK THAT BOTH THE INCOME - TAX OFFICER AND THE TRIBU NAL IN ESTIMATING THE GROSS PROFIT RATE ON SALES DID NOT ACT ON ANY MATERIAL BUT ACTED ON PURE GUESS AND SUSPICION. IT IS THUS A FIT CASE FOR EXERCISE OF OUR POWER UNDER ARTICLE 136. FROM THE PERUSAL OF THIS DECISION ALSO IT IS APPARENT THAT ESTIMATION OF THE GROSS PROFIT OR INCOME CANNOT BE BASED ON SURMISES, CONJECTURES OR SUSPICION. THIS IS A 12 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) WELL SETTLED LAW THAT THE ONUS IS ON THE REVENUE TO PROVE THAT M/S NETAM INDUSTRIES, M/S. C HHATISGARH PHARMACEUTICALS AND M/S NEPTUNE REMEDIES ARE BENAMI CONCERNS OF THE ASSESSEE AND THE ASSESSEE HAS MADE THE INVESTMENTS AS WELL AS ENJOYED THE FRUITS THERE - FROM. THEREFORE, THIS DECISION IS APPLICABLE ONLY TO THE EXTENT THAT THE ADDITION CANNOT B E BASED ON SURMISES, CONJECTURES OR SUSPICION . 2.4.7 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF OMAR SALAY MOHAMED SAIT VS. CIT, 37 ITR 151 (SC). IN THIS CASE IT WAS HELD THAT - THE INCOME - TAX APPELLATE TRIBUNAL IS A FACT FINDING TRIBUNAL AND IF IT ARRIVES AT ITS OWN CONCLUSIONS OF FACT AFTER DUE CONSIDERATION OF THE EVIDENCE BEFORE IT THE COURT WILL NOT INTERFERE. IT IS NECESSARY, HOWEVER, THAT EVERY FACT FOR AND AGAINST THE ASSESSES MUST HAVE BEEN CONSIDERED WITH DUE CARE AND THE TRIBUNAL MUST HAVE GIVEN ITS FINDING IN A MANNER WHICH WOULD CLEARLY INDICATE WHAT WERE THE QUESTIONS WHICH AROSE FOR DETERMINATION, WHAT WAS THE EVIDENCE PRO AND CONTRA IN REGARD TO EACH ONE OF THEM AND WHAT WERE THE FINDINGS REACHED ON THE EVIDENCE ON RECORD BEF ORE IT. THE CONCLUSIONS REACHED BY THE TRIBUNAL SHOULD NOT BE COLOURED BY ANY IRRELEVANT CONSIDERATIONS OR MATTERS OF PREJUDICE AND IF THERE ARE ANY CIRCUMSTANCES WHICH REQUIRE TO BE EXPLAINED BY THE ASSESSEE, THE ASSESSES SHOULD BE GIVEN AN OPPORTUNITY OF DOING SO. ON NO ACCOUNT WHATEVER SHOULD THE TRIBUNAL BASE ITS FINDINGS ON SUSPICIONS, CONJUNCTURES, OR SURMISES; NOR SHOULD IT ACT ON NO EVIDENCE AT ALL OR ON IMPROPER REJECTION OF MATERIAL AND RELEVANT EVIDENCE OR PARTLY ON EVIDENCE AND PARTLY ON SUSPICI ONS, CONJUNCTURES OR SURMISES AND IF IT DOES ANYTHING OF THE SORT, ITS FINDINGS EVEN THOUGH ON QUESTIONS OF FACT WILL BE LIABLE TO BE SET ASIDE BY THE COURT. [THE SUPREME COURT ACCORDINGLY, ON THE FACTS, SET ASIDE THE ORDER OF THE A PP ELLA T E TRIBUNAL IN TH IS CASE AND REMANDED THE MATTER FOR RECONSIDERATION IN ACCORDANCE WITH LAW, ON THE GROUND THAT THE APPELLATE TRIBUNAL HAD IMPROPERLY REJECTED EVIDENCE GATHERED BY THE INCOME - TAX OFFICER AFTER THE PASSING OF THE ASSESSMENT ORDER BUT PENDING AN APPEAL FROM T HE ASSESSMENT ORDER TO THE APPELLATE ASSISTANT COMMISSIONER.] FROM THE PERUSAL OF THE SAID CASE, IT IS APPARENT THAT FINDING HAS TO BE BASED ON THE RELEVANT CONSIDERATION AND THE MATERIAL. NO ADDITION CAN BE SUSTAINED WHICH IS NOT BASED ON THE RELEVANT MATERIAL OR EVIDENCE. 13 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) 2.4.8 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF CIT VS. DAULAT RAM RAWATMULL, 87 ITR 349 (SC). IN THIS CASE IT WAS HELD THAT APPARENT IS REAL. THE ONUS IS ON THE PERSON WHO CLAIMS THAT THE APPARENT IS NOT REAL. M/S NETAM INDUSTRIES, M/S. CHHATISGARH PHARMACEUTICALS ARE THE PROPRIETARY CONCERN OF SHRI UMESH KAJVE AND M/S. NEPTUNE REMEDIES IS THE PROPRIETORSHIP CONCERN OF SHRI SATYENDRA SAHU. EACH OF THEM ARE BEING ASSESSED SEPARATELY. COPY OF THE ASSESSMENT ORDER AND RETUR N FILED WERE FILED BEFORE US IN THE PAPER BOOK. BOTH THE CONCERNS ARE REGISTERED UNDER THE SALES TAX ACT, SALES TAX ASSESSMENT HAS ALSO BEEN DONE. IT IS NOT A CASE WHERE THE SALES IN THE CASE OF THESE CONCERNS HAS NOT BEEN ACCEPTED. THE PROPRIETARY CONCERN OF THESE PERSONS ARE HAVING SEPARATE BANK ACCOUNT AND MAINTAINING REGULAR BOOKS OF ACCOUNTS. IF THE REVENUE WANTS TO TREAT IT TO BE THE BENAMI CONCERN OF THE ASSESSEE, IN OUR OPINION, IN VIEW OF THE DECISION OF THE SUPREME COURT, THE ONUS IS ON THE REVENU E TO PROVE THAT THESE CONCERNS ARE THE BENAMI CONCERNS OF THE ASSESSEE. 2.4.9 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF SHEO NARAIN LAL (L.), 26 ITR 249 (ALL). IN THIS CASE THE QUESTION BEFORE THE COURT WAS WHETHER THERE WAS SUFFICIENT MATER IAL ON THE BASIS OF WHICH THE TRIBUNAL COULD COME TO THE CONCLUSION THAT THE WIFE WAS BENAMIDAR FOR THE HUSBAND. WHILE DECIDING THIS QUESTION THE ALLAHABAD HIGH COURT HAS HELD THAT THERE IS NO DOUBT THAT THE BURDEN OF PROOF WAS ON THE REVENUE TO PROVE THAT THE WIFE WAS A BENAMIDAR FOR HER HUSBAND. THE PRESUMPTION MUST BE THAT WHEN THE HOUSE STOOD IN THE NAME OF WIFE, SHE WAS THE OWNER THEREOF AND IT WAS FOR THE PERSONS ALLEGING THAT SHE WAS MERELY A BENAMIDAR, TO PROVE THE ALLEGATION EITHER BY DIRECT EVIDEN CE OR BY SUBSTANTIAL EVIDENCE. THIS CASE, IN OUR OPINION, WILL SUPPORT THE ASSESSEE OF THE ASSESSEE BECAUSE IN OUR OPINION THE REVENUE HAS NOT BROUGHT ANY EVIDENCE ON RECORD THAT DILIP ENTERPRISE IS BENAMI CONCERN OF THE ASSESSEE. THE ASSESSEE IN HIS STATE MENT, HAS NOT ACCEPTED ABOUT THE INVESTMENTS IN THE CONCERN BEING ARRANGED BY HIM. THE CONCERN IS NOT CONTROLLED AND MANAGED BY THE ASSESSEE. THE ASSESSEE HAS NOT DERIVED THE BENEFIT FROM THE CONCERN. 2.4.10 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF KURELLA PULLAYYA VS. CIT, 45 ITR 364 (AP). IN THIS CASE ALSO THE PROPOSITION OF LAW WAS THAT THE BURDEN OF ESTABLISHING THE BENAMI IS ON THE PARTY WHO ALLEGES SO. IN THIS CASE THE BUSINESS WAS CARRIED ON IN THE NAME OF THE WIFE. BENAMI TRANSACTI ON WAS ALLEGED. IT 14 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) WAS FOUND THE ONUS WAS ON THE AO TO PROVE THAT THE BUSINESS WAS BENAMI IN THE NAME OF THE WIFE OF THE ASSESSEE. IN THE CASE BEFORE US THE REVENUE IN OUR OPINION HAS NOT DISCHARGED THE ONUS THAT THE BUSINESS BELONG TO THE ASSESSEE. THIS C ASE ALSO ON THE FACTS IN OUR OPINION SUPPORT THE CASE OF ASSESSEE. 2.4.11 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF RAMASWAMI NAIDU (V.) VS. CIT, 93 ITR 341 (MAD). IT WAS HELD THAT THE BURDEN OF PROOF WAS ON THE DEPARTMENT TO SHOW THAT THE REAL OWNER WAS THE ASSESSEE AND THE AMOUNT BELONGED TO THE ASSESSEE. SIMILAR THE PROPOSITION OF LAW WAS ALSO LAID DOWN BY THE ALLAHABAD HIGH COURT IN THE CASE OF 98 ITR 0280 CIT VS. DAYA CHAND JAIN AS RELIED ON BY THE LEARNED AR. WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF CIT VS. DAYA CHAND JAIN VAIDYA, 98 ITR 280 (ALL). IN THIS CASE WE NOTED THAT THE ASSESSEE, HIS WIFE, TWO MAJOR AND TWO MINOR SONS WERE THE SHAREHOLDERS OF A PRIVATE COMPANY. THE EXPLANATION GIVEN FOR THE SOURCE OF RS.40,500/ - PAID FOR THE ALLOTMENT OF ADDITIONAL SHARES TO THE WIFE AND HER TWO MAJOR SONS WAS NOT ACCEPTED BY THE ITO WHO TREATED THE AMOUNT AS INCOME FROM UNDISCLOSED SOURCE OF THE ASSESSEE AND ASSESSED THE SAME IN THE HANDS OF THE ASSESSEE. TRIBUNAL REVERSED THE O RDER ON A REFERENCE HONBLE HIGH COURT HELD AGREEING WITH THE TRIBUNAL THAT THE REVENUE COULD SUCCEED ONLY IN CASE THEY HAD BROUGHT ON RECORD MATERIAL FROM WHICH IT COULD BE CONCLUDED THAT THE DEPOSIT MADE BY THE WIFE AND TWO MAJOR SONS WERE IN FACT MADE B Y THE ASSESSEE. THIS DECISION ALSO SUPPORTS THE CASE OF THE ASSESSEE. 2.4.12 WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF SUKHDAYAL RAMBILAS VS. CIT, 136 ITR 414 (BOM) HELD THAT THE FIXED DEPOSIT WAS IN THE NAME OF THE PARTNER, LOAN WAS TAKEN B Y THE FIRM. THE PARTNER WAS NOT ABLE TO SATISFACTORILY EXPLAIN THE SOURCE OF DEPOSIT. IT WAS HELD THAT IT WILL NOT AUTOMATICALLY MEAN THAT THE FIXED DEPOSIT BELONG TO THE ASSESSEE FIRM. 2.4.13 IN VIEW OF THE AFORESAID CASE LAWS, IN OUR OPINION, IT IS SETTLED POSITION OF LAW THAT THE ONUS IS ON THE REVENUE TO PROVE THAT THE CONCERNS BELONGING TO SHRI UMESH KAJVE AND SHRI SATYENDRA SAHU ARE THE BENAMI CONCERNS OF THE ASSESSEE, THAT THE ASSESSEE IS HAVING CONTROL AND POSSESSION OVER THESE CONCERNS, HE IS ENJOYING THE FRUITS OF THESE CONCERNS AND WHATEVER INCOME IS GENERATED, SAME HAS BEEN RECEIVED BY THE ASSESSEE. THE REVENUE, WE NOTED, TO PROVE THESE CONCERNS TO BE THE BENAMI 15 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) CONCERNS OF THE ASS ESSEE MAINLY RELIED ON THE STATEMENT OF THE ASSESSEE RECORDED ON 18.9.2007 - QUESTION NOS. 24 &25 OF THE STATEMENT OF THE ASSESSEE. THESE QUESTIONS AND ANSWERS ARE REPRODUCED AS UNDER : . 24 , FINANCIAL GOVT. SUPPLY CONCERN HIPL ? ? NETAM INDUSTRIES GOVT. ORDER SUPPLY SUPPLY DRUG LICENSE NO. TIN , CST NO. STATEMENT , 2006 DRUG LICENSE, CST MPST . STATEMENT . 25 24 DECISION YEAR WISE, HEAD WISE 5 30 DECLARATION CONCERNS BREAKUP WE NOTED THAT THE AO HAS INCORRECTLY TRANSLATED THE LAST SENTENCE OF ANSWER TO QUESTION NO. 24 STATING WHATEVER BUSINESS HAD BEEN CARRIED OUT IN THESE CONCERNS I HAVE DECLARED ALL THAT AS UNDISCLOSED INCOME IN THE STATEMENT GIVEN AT MY RESIDENCE. THE CO RRECT TRANSLATION COULD BE WHATEVER I HAVE TAKEN FROM THESE CONCERNS THE SAME I HAVE INCLUDED IN THE UNDISCLOSED INCOME AS STATED IN THE STATEMENT GIVEN AT MY RESIDENCE. SIMILARLY, IN RESPECT OF ANSWER TO QUESTION NO. 25, THE AO INTERPRETED THAT THE ASS ESSEE HAS STATED THAT HE WILL GIVE THE BREAK - UP OF THE THREE CONCERNS WHILE THE CORRECT MEANING OF THE ASSESSEE RELATE TO THAT HE WILL GIVE THE BREAK - UP YEAR - WISE, HEAD - WISE AND DETAILS OF TOTAL AMOUNT OF UNDISCLOSED INCOME 16 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) IN THE NEXT 10 DAYS. NO DOUBT, THE STATEMENT RECORDED HAS EVIDENTIARY VALUE BUT IT IS NOT CONCLUSIVE EVIDENCE UNTIL AND UNLESS IT IS CORROBORATED BY CERTAIN EVIDENCES. THERE HAD BEEN SEARCH IN THE CASE OF THE ASSESSEE. IF THE ASSESSEE HAD EARNED INCOME, THE EVIDENCE WOULD HAVE BEEN FO UND. IF THE ASSESSEE HAD EARNED INCOME, HE WOULD HAVE EITHER SPENT IT BY WAY OF CONSUMPTION OR WOULD HAVE CREATED INVESTMENT. NO UNDISCLOSED INVESTMENT TO THE EXTENT OF RS. 5.30 CRORE WAS FOUND FROM THE PREMISES OF THE ASSESSEE. EVEN NO EVIDENCE OR MATE RIAL WAS FOUND WHICH MAY PROVE THAT THE ASSESSEE HAD INCURRED THE EXPENDITURE TO THAT EXTENT. IT IS A SETTLED LAW THAT NO ADDITION CAN BE MADE MERELY ON THE BASIS OF SURMISES, ASSUMPTION OR PRESUMPTION. SUPPOSITION, HOWEVER STRONG IT MAY BE, IT CANNOT TA KE THE PLACE OF ACTUALITY. IT IS A KNOWN FACT THAT DURING THE COURSE OF SEARCH THE REVENUE FORCES THE ASSESSEE TO CONFESS UNDISCLOSED INCOME EVEN IF THE ASSESSEE HAD NOT EARNED SUCH INCOME OR ASSESSEE HAD NO SOURCE OF EARNING INCOME TO THAT EXTENT. THIS FACT HAS BEEN EVEN ADMITTED BY THE CBDT AND THEREFORE THEY HAVE ISSUED INSTRUCTIONS TO THEIR OFFICERS THAT NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION FORCEFULLY. RELEVANT INSTRUCTIONS OF THE BOARD ARE REPRODUCED AS UNDER : INSTRUCTION F. NO. 286/2/20 03 - IT (INV. II), DATED MARCH 10, 2003 'CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATION. INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHERE THE ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEARCH AND SEIZURE AND SURVEY OPERATIONS. SUCH CONFESSIONS, IF NOT BASED ON CREDIBLE EVIDENCE, ARE LATER RETRACTED BY THE CONCERNED ASSESSEES WHILE FILING R ETURNS OF INCOME. IN THESE CIRCUMSTANCES, ON CONFESSIONS DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCO ME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME - TAX DEPARTMENT. SIMILARLY, WHILE RECORDING STATEMENT DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS NO ATTEMPT 17 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) SHOULD BE MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDINGS ALSO, THE ASSESSING OFFICERS SHOULD RELY UPON THE EVIDENCES/MATERIALS GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATIONS OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT ORDERS.' 2.4.14 IN VIEW OF THESE INSTRUCTIONS IT IS APPARENT THAT IT IS A PREVALENT PRACTICE THAT EVEN IF THERE ARE NO CORROBORATIVE EVIDENCE, THE SEARCH TEAM PRESSURIZES THE AS SESSEE TO MAKE DECLARATION IN THE MANNER IN WHICH THEY LIKE AND THEREFORE IN THE ABSENCE OF EVIDENCE THE ADDITIONS MADE ON THE BASIS OF SUCH DECLARATION DOES NOT STAND IN THE EYES OF LAW AS THERE REMAINS DIFFERENCE IN THE REAL INCOME AND THE INCOME DECLARE D IN SUCH FORCEFUL SURRENDER TO THE EXTENT AS THE DIFFERENCE LIES BETWEEN CHALK AND CHEESE. IT IS A FACT THAT INCOME TAX IS LEVIED ON THE REAL INCOME. THIS IS APPARENT FROM THE PROVISION OF SEC. 4 OF THE INCOME TAX ACT. FROM THE READING OF THIS SECTION, IT IS APPARENT THAT IT CONTAINS FIVE COMPONENTS FOR CHARGING AN INCOME. THE FIRST COMPONENT IS THE TAXABLE EVENT WHICH ATTRACTS THE LEVY. THE SECOND IS THE PERSON ON WHOM LEVY IS IMPOSED AND WHO IS OBLIGED TO PAY THE TAX. THE THIRD IS THE ASSESSMENT YE AR IN WHICH CHARGE OF INCOME TAX IS LEVIED. THE FOURTH IS THE TOTAL INCOME OF THE PREVIOUS YEAR AND THE FIFTH IS THE RATE/RATES AT TAX IS TO BE IMPOSED. THE RATES ARE PRESCRIBED IN THE ANNUAL FINANCE ACT. THEREFORE IN OUR VIEW UNTIL AND UNLESS IT IS PROV ED BY THE REVENUE THAT THESE CONCERNS ARE THE BENAMI CONCERNS AND WHATEVER INCOME IS EARNED IN THESE CONCERNS ARE IN FACT RECEIVED OR ACCRUED TO THE ASSESSEE, THIS COMPONENT WILL NOT HAVE ANY VALUE IN DETERMINING THE TOTAL INCOME ON THE BASIS OF THE SEIZED DOCUMENT. THE SEIZED DOCUMENT DOES NOT PROVE THAT THE ASSESSEE HAS MADE THE INVESTMENT, THE ASSESSEE IS MANAGING OR HAVING THE CONTROL OVER THESE FIRMS, THE INCOME EARNED THROUGH THESE FIRMS ARE PASSED OVER TO THE ASSESSEE. OUR AFORESAID VIEW IS SUPPORTE D BY THE DECISIONOF THE HONBLE SUPREME COURT IN GOVIND SARAN GANGA SARAN VS. CST 155 ITR 144 (SC) WHEREIN IT WAS HELD FOR THE PURPOSE OF CHARGING TO TAX THERE SHOULD BE FOUR COMPONENTS TO BE SATISFIED. FOR THE SAKE OF CONVENIENCE WE REPRODUCE THE RELEVAN T HEAD NOTE FROM THE DECISION : 18 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) THE COMPONENT WHICH ENTER INTO THE CONCEPT OF A TAX ARE WELL KNOWN. THE FIRST IS THE CHARACTER OF THE IMPOSITION KNOWN BY ITS NATURE WHICH PRESCRIBES THE TAXABLE EVENT ATTRACTING THE LEVY, THE SECOND IS A CLEAR INDICATION OF THE PERSON ON WHOM THE LEVY IS IMPOSED AND WHO IS OBLIGED TO PAY THE TAX, THE THIRD IS THE RATE AT WHICH THE TAX IS IMPOSED AND THE FOURTH IS THE MEASURE OR VALUE TO WHICH THE RATE WILL BE APPLIED FOR COMPUTING THE TAX LIABILITY. IF THOSE COMPONENTS A RE NOT CLEARLY AND DEFINITELY ASCERTAINABLE, IT IS DIFFICULT TO SAY THAT THE LEVY EXISTS IN POINT OF LAW. ANY UNCERTAINTY OR VAGUENESS IN THE LEGISLATION SCHEME DEFINING ANY OF THOSE COMPONENTS OF THE LEVY WILL BE FATAL TO ITS VALIDITY. MERELY BECAUSE A DOCUMENT IS RECOVERED FROM A PERSON, DOES NOT AUTOMATICALLY LEAD TO THE INFERENCE THAT IT BELONGS TO HIM. IT IS ONLY FOR CERTAIN PURPOSES THAT THE PRESUMPTION U/S 132(4A) HAS BEEN ENACTED AND NOT FOR ALL PURPOSES INCLUDING THE ASSESSMENT. FURTHER THIS P RESUMPTION IS NOT CONCLUSIVE. IT IS REBUTTABLE. WHAT AMOUNT OF EVIDENCE ONE REQUIRES TO REBUT THE EVIDENCE DEPENDS UPON FACTS OF EACH CASE. THERE IS NO RIGID RULE IN THIS BEHALF. SOMETIMES MERE STATEMENT OF THE ASSESSEE MAY BE ENOUGH. HONBLE RAJASTHA N HIGH COURT IN THE CASE OF ADDL. CIT VS. THAHRAYAMAL BALCHAND 124 ITR 111 (RAJ) OBSERVED AS UNDER : THE EVIDENCE WHICH SATISFIES THE TRIBUNAL WAS THE FACTS AND CIRCUMSTANCES OF THE CASE, AS POINTED OUT ABOVE WHAT QUANTUM OF EVIDENCE WOULD REBUT A LEGAL PRESUMPTION IN A GIVEN SET OF FACTS DOES NOT ADMIT OF ANY RIGID RULE. THE EVIDENCE MAY BE DIRECT OR CIRCUMSTANTIAL OR BOTH AND A MERE STATEMENT OF THE ASSESSEE MAY BE ENOUGH IN SOME CASES. IT DOES NOT RAISE A QUESTION OF LAW. ON THE APPRECIATION OF TH E DOCUMENT WHICH WERE FOUND RELATING TO THESE CONCERNS WE ARE OF THE FIRM VIEW THAT IT CANNOT BE SAID THAT THESE ARE THE BENAMI CONCERNS OF THE ASSESSEE AS THESE DOCUMENTS DO NOT SATISFY THE BASIC CONDITIONS ARE ENUMERATED ABOVE FOR ESTABLISHING A CONCERN TO BE THE BENAMI CONCERN OF THE ASSESSEE. UNTIL AND UNLESS AN INCOME IS EARNED BY THE ASSESSEE IT CANNOT BE TAXED. THE ONUS IS ON THE REVENUE TO PROVE THAT THE ASSESSEE HAS EARNED THE INCOME. OUR AFORESAID VIEW IS SUPPORTED BY THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF PARIMISETTI SEETHARAMAMMA VS. CIT, 57 ITR 532. EVEN THIS FACT IS ALSO PROVED FROM THE ANSWER TO QUESTION NO. 12 WHEN THE AO ASKED THE ASSESSEE WHETHER HE HAS DISCLOSED INCOME IN HIS RETURN IN RESPECT OF TRANSACTIONS WITH THE SE COMPANIES. THE ASSESSEE IN REPLY THERETO STATED NO AND THEREFORE HE HAS DECLARED A SUM OF RS. 5.30 CRORE KEEPING IN 19 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) VIEW ALL THE IRREGULARITIES INCLUDING THE TRANSACTION WITH THESE COMPANIES. THE ASSESSEE DID NOT ACCEPT THAT THESE CONCERNS BELONG TO HIM. WE ACCORDINGLY HOLD THAT M/S. CHHATISGARH PHARMACEUTICALS AND NEPTUNE INDUSTRIES BELONG TO SHRI UMESH KAJVE AND SIMILARLY NEPTUNE REMEDIES BELONGS TO SHRI SATYENDRA SAHU AND DOES NOT BELONG TO THE ASSESSEE AND INCOME EARNED BY THESE COMPANIES CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE. 2.4.15 WE ALSO NOTED THAT IN RESPECT OF NETAM INDUSTRIES, THE AO HAS ACCEPTED THE SALES IN EACH OF THE ASSESSMENT YEARS BUT TREATED THE PURCHASES MADE BY THE ASSESSEE BOGUS. THE SALES WERE DULY ACCEPTED. ALL T HE SALES ARE MADE BY THESE CONCERNS TO THE CONSIGNEE AND THE PAYMENT AGAINST THE SUPPLY WERE MADE BY THE GOVERNMENT OR ITS CONCERNED DEPARTMENT. THESE PAYMENT RECEIPTS ARE DULY SHOWN IN THE BANK ACCOUNT OF THESE CONCERNS. NO SALE IS BEING MADE TO ANY THI RD PARTY. A PERSON CANNOT MAKE SALES UNTIL AND UNLESS PURCHASES ARE MADE. IT IS NOT THE CASE OF THE REVENUE THAT THESE CONCERNS WHICH ARE HELD BY THE REVENUE TO BE THE BOGUS CONCERNS OF THE ASSESSEE WERE ENGAGED IN MANUFACTURING OF THE MEDICINES. THESE CONCERNS WERE SIMPLY ENGAGED IN TRADING OF THE DRUG. THE ASSESSEE COULD NOT HAVE MADE SALES WITHOUT MAKING THE PURCHASES. UNDER THE INCOME TAX ACT IT IS ONLY THE PROFIT WHICH CAN BE TREATED TO BE THE INCOME OF THE ASSESSEE. THE DISALLOWANCE OF PURCHASES , IN OUR OPINION, WILL TANTAMOUNT AS IF SALES HAVE BEEN MADE WITHOUT PURCHASES BEING MADE. IT MAY BE A CASE THAT THE ASSESSEE MAY NOT BE ABLE TO PROVE THE PURCHASES ON THE BASIS OF EVIDENCE BUT IT CANNOT BE SAID THAT SALES HAVE BEEN MADE WITHOUT MAKING PU RCHASES. THE DISALLOWANCE OF THE PURCHASES INDIRECTLY PROVES THAT THE CONCERNS WERE NOT CARRYING ON BUSINESS AND HAVE NOT MADE ANY SALES. ONCE THE AO HAS ACCEPTED THE SALES, IN OUR OPINION, THE AO IS BOUND TO ALLOW THE PURCHASES. AT THE MOST, ADDITION C AN BE MADE ONLY IN RESPECT OF THE PROFIT EMBEDDED IN THE PURCHASES. THE WHOLE OF THE PURCHASES CANNOT BE DISALLOWED. OUR AFORESAID VIEW IS DULY COVERED BY THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOLANATH POLY FAB PVT. LTD., 355 ITR 290 WHEREIN THE HON'BLE GUJARAT HIGH COURT HAS HELD AS UNDER : HELD, DISMISSING THE APPEAL, THAT WHETHER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS WAS ESSENTIALLY A QUESTIO N OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSEE DID PURCHASE 20 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) THE CLOTH AND SELL THE FINISHED FABRICS. THEREFORE, AS A NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASES, BUT THE P ROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX. 2.4.16 NO CONTRARY DECISIONS WERE BROUGHT TO OUR KNOWLEDGE. WE, THEREFORE, DELETE THE ADDITION IN RESPECT OF THE PURCHASES, DETAILS OF WHICH HAVE BEEN GIVEN BY THE ASSESSEE IN THE PAPER BOOK. IF T HE AO SO CHOSES, HE CAN MAKE ADDITION IN RESPECT OF PROFIT ON THESE PURCHASES BUT SINCE WE HAVE ALREADY HELD THAT THE INCOME OF THESE CONCERNS CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE AS THESE ARE NOT BOGUS CONCERNS OF THE ASSESSEE, THEREFORE, THIS ISS UE RELATING TO ASSESSMENT OF GROSS PROFIT ON THE PURCHASES DOES NOT ARISE IN THE CASE OF THE ASSESSEE. SINCE THE ASSESSEE HAS ACCEPTED THAT HE WAS ASSISTING THESE CONCERNS IN PROCURING THE ORDER AND THE ASSESSEE HAS GOT INCOME ON THIS ACCOUNT FROM THESE C ONCERNS, WE THEREFORE KEEPING IN VIEW THE SURROUNDING FACTS AND TRADE PRACTISE DIRECT THE AO TO COMPUTE THE COMMISSION @ 2% ON THE SUPPLIES/SALES MADE IN EACH YEAR TO THE GOVERNMENT CONCERNS. SINCE THE ASSESSEE HAS SURRENDERED A SUM OF RS.1,21,80,000/ - IN RESPECT OF THE CASH PAID UNDER AN AGREEMENT FOR THE PURCHASE OF LAND, THE SOURCE OF THIS IN OUR OPINION CAN BE THE COMMISSION INCOME SO EARNED BY THE ASSESSEE IN RESPECT OF THE SERVICE RENDERED TO THESE COMPANIES. IN CASE THE AO FINDS THAT THE COMMISSION SO EARNED DOES NOT EXCEED RS.1,21,80,000/ - NO ADDITION IN THIS REGARD CAN BE SUSTAINED AS THE ASSESSEE WILL GET SET OFF OF COMMISSION INCOME AGAINST THE SURRENDER SO MADE. IN CASE THE AO FINDS THAT THE COMMISSION SO ESTIMATED IN RESPECT OF THESE THREE CON CERNS EXCEEDS IN ALL THESE YEARS RS.1,21,80,000/ - , THE ADDITION TO THAT EXTENT BE SUSTAINED. RESPECTFULLY FOLLOWING OUR AFORESAID ORDER, WE DIRECT THE AO TO ASSESS THE INCOME FROM NEPTUNE REMEDIES SUBSTANTIVELY IN THE HANDS OF THE ASSESSEE ON THE BASIS OF DECISION OF HON'BLE GUJARAT HIGH COURT AS HAS BEEN NOTED ABOVE. WE DIRECT THE AO TO ESTIMATE THE PROFIT ON SUCH PURCHASES OF RS.17,22,35,000/ - @ 10% AS, IN OUR OPINION, THE WHOLE OF THE PURCHASES CANNOT BE DISALLOWED. IT IS AN UNDISPUTED FACT THAT THE SALES MADE BY THE ASSESSEE HAS DULY BEEN ACCEPTED BY THE AO AND ALL THE SALES HAVE BEEN MADE TO M.P GOVERNMENT DEPARTMENT OR GOVERNMENT COMPANIES FROM WHOM THE PAYMENT HAS BEEN RECEIVED THROUGH 21 IT(SS) NO. 376/IND/2012 (A.Y : 2007 - 08) CHEQUE. WITHOUT MAKING PURCHASES, IN OUR OPINI ON, SALES CANNOT BE MADE. IF THE PURCHASES HAVE BEEN MADE WITHOUT BILLS, THE ASSESSEE MAY SAVE ONLY THE TAX THEREON. WE, THEREFORE, DIRECT THE AO TO SUSTAIN THE ADDITION IN THE HANDS OF THE ASSESSEE @ 10% OF RS.17,22,35,000/ - . THUS, GROUND NOS. 2 & 3 ARE PARTLY ALLOWED. 5 . GROUND NO. 4 RELATING TO INITIATION OF PROCEEDINGS U/S 271(1)(C), IN OUR OPINION, IS PREMATURE AS THERE IS NO SUCH PROVISION FOR FILING APPEAL AGAINST THE INITIATION OF PENALTY PROCEEDINGS , THEREFORE, STANDS DISMISSED AS SUCH . 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 7 . ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT INDORE . SD/ - ( MUKUL SHRAWAT ) JUDICIAL MEMBER SD / - (P.K. BANSAL) ACCOUNTANT MEMBER DATED : 17 / 11 /2014 *SSL* COPY TO : (1) ASSESSEE (2) REVENUE (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER