Shri Kantilal Kataria, Ratlam V. DCIT (Central), Indore

ITSSA 42/Ind/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8842 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 02-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S MANTRI
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Loose papers; Document seized; Bogus loan; Documents seized; Set aside
• Section: 69C; 142(1); 153A; 201; 143(2); 64; 43; 48; 2(A); 73; 72; 13; 22; 69; 132; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE RAJPAL YADAV HON'BLE VICE PRESIDENT AND SHRI MANISH BORAD, ACCOUNTANT MEMBER IT(SS)A NO.42/IND/2018 ASSESSMENT YEAR:2011-12 SHRI KANTILAL KATARIA 63, CHOWMUKHI POOL, RATLAM / VS. DCIT(CENTRAL) INDORE (APPELLANT) (REVENUE ) P.A. NO. ACFPK5786Q ITA NO.259/IND/2018 ASSESSMENT YEAR:2011-12 JCIT(CENTRAL) - 1 INDORE / VS. SHRI KANTILAL KA TARIA 63, CHOWMUKHI POOL, RATLAM (APPELLANT) (RE SPONDENT ) P.A. NO. ACFPK5786Q ITA NO.886/IND/2018 ASSESSMENT YEAR:2012-13 ACIT(CENTRAL) - 1 INDORE / VS. SHRI KANTILAL KATARIA 63, CHOWMUKHI POOL, RATLAM (APPELLANT) (RESPONDENT) P.A. NO. ACFPK5786Q APPELLANT BY S/SHRI ANIL KAMAL GARG & ARPIT GAUR , ARS REVENUE BY SHRI S.S. MANTRI, CIT - DR DATE OF HEARING: 25.05.2021 DATE OF PRONOUNCEMENT: 02.08.2021 KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 2 / O R D E R PER MANISH BORAD: THE ABOVE CAPTIONED CROSS APPEALS FOR AY 2011-12 AND APPEAL FOR AY 2012-13 AT THE INSTANCE OF REVENUE AR E DIRECTED AGAINST THE RESPECTIVE ORDERS OF LD. COMMISSIONER O F INCOME TAX(APPEALS)-II, (IN SHORT CIT(A)), INDORE DATED 15.01.2018 & 29.08.2018 WHICH ARE ARISING OUT OF THE ORDERS OF D CIT (CENTRAL) DATED 28.02.2014. 2. GROUNDS OF APPEAL RAISED BY ASSESSEE FOR AY 2011 -12 IN IT(SS)ANO.42/IND/2019, 1(A). THAT, THE LEARNED CIT (A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN PARTIALLY CONFIRMING THE ADDITION TO THE EX TENT OF RS.1 ,35,36,828/- OUT OF THE TOTAL ADDITION OF RS.7,30,8 9,378/- MADE BY THE AO IN THE APPELLANT'S INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ON ACCOUNT OF ALLEGED PROFIT ON UNRE CORDED SALES OF SCRAPS. 1(B). THAT, IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) GROSSLY ERRED IN NOT ACCEPTING THE CLAIM OF THE APPELLANT THAT THE UNRECORDED SALES OF SCRAP WAS NOT EFFECTED BY T HE APPELLANT ONLY IN ONE PREVIOUS YEAR RELEVANT TO A.Y. 2011-12 BUT FACTUALLY, IT WAS EFFECTED BY HIM IN TWO PREVIOUS YEARS RELEVANT TO A.Y. 2011- 12 AND A.Y. 2012-13. 1(C). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE ES TIMATION OF NET PROFIT @25% ON UNACCOUNTED SALES OFRS.9,41,47,3101- AT RS.1,35,36,828/- MADE BY THE LD. CIT(A) IS QUITE EX CESSIVE AND ARBITRARY. 1(D). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEA RNED CIT(A) GROSSLY ERRED IN NOT GIVING ANY SPECIFIC FINDING IN HIS ORD ER FOR GRANT OF BENEFIT OF TELESCOPING TO THE APPELLANT IN RESPECT OF THE ESTIMATED NET KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 3 PROFIT AGAINST THE UNEXPLAINED INVESTMENTS OFTHE AP PELLANT DETERMINED BY THE LD. CIT(A) HIMSELF. 1(E). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEA RNED CIT(A) GROSSLY ERRED IN NOT GIVING A SPECIFIC FINDING IN HIS ORDER FOR GIVING CREDIT TO THE APPELLANT AT RS.75,31,785/- IN RESPECT OF INCOM E ALREADY OFFERED BY HIM ON ACCOUNT OF NET PROFIT FROM UNACCOUNTED BU SINESS OF SCRAP, IN HIS RETURN OF INCOME, FILED POST SEARCH. 2(A). THAT, THE LEARNED CIT (A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN ESTIMATING THE INVESTMENT OF INITIAL CAPITA L IN THE UNACCOUNTED SCRAP BUSINESS AT RS.55,28,966/- AS AGA INST THE SAME CLAIMED BY THE APPELLANT AT RS.24,68,215/- THEREBY RESULTING INTO CONFIRMATION OF AN ADDITION OFRS.31,11,201/- IN THE APPELLANT'S INCOME ON ACCOUNT OF UNEXPLAINED PURCHASES. 2(B). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE EST IMATION OF INVESTMENT OF INITIAL CAPITAL IN UNACCOUNTED BUSINE SS OF SCRAP AT 50% OF THE UNACCOUNTED PURCHASES, AS MADE BY THE LD . CIT(A), IS QUITE EXCESSIVE AND ARBITRARY WITHOUT CONSIDERING T HE MATERIAL FACT THAT THE APPELLANT HAD BEEN CARRYING OUT HIS UNACCO UNTED BUSINESS IN CYCLIC MANNER AND BARRING INITIAL INVESTMENT OF RS.24,68,215/- FROM THE UNDISCLOSED SOURCES, THE SUBSEQUENT PURCHA SES WERE MADE BY HIM OUT OF UNACCOUNTED SALES. 3(A). THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS.3,00,00,000/- MADE BY THE AO IN THE APPELLANT'S INCOME ON ACCOUNT OF ALLEGED ADV ANCE PAYMENT BY THE APPELLANT TO ONE MR. RAHUL BY INVOKING PROVISIO NS OF S. 69 OF THE INCOME-TAX ACT, 1961 WITHOUT PROPERLY CONSIDERING A ND APPRECIATING THE EXPLANATION OF THE APPELLANT FURNI SHED ALONG WITH DOCUMENTARY EVIDENCES. 3(B). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEA RNED CIT (A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN NOT ACC EPTING THE EXPLANATION OF THE APPELLANT THAT FACTUALLY A SUM O F RS.30,00,000/- ONLY WAS ADVANCED BY HIM TO MR. RAHUL. 3(C). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEA RNED CIT (A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN NOT ALL OWING THE BENEFIT OF TELESCOPING TO THE APPELLANT IN RESPECT OF ADVAN CES MADE TO MR. RAHUL AGAINST THE INCOME DERIVED BY THE APPELLANT F ROM CARRYING OUT UNRECORDED TRADING TRANSACTIONS OF SCRAP AND GRANUL ES. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 4 3(D). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEA RNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN NOT ACCEPTING T HE APPELLANT'S PLEA THAT THE LOAN OF RS.30,00,000/- GIVEN BY HIM TO MR. RAHUL WAS RECEIVED BACK IN THE RELEVANT YEAR ITSELF. 4(A). THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS.9,00,000/- MA DE BY THE AO IN THE APPELLANT'S INCOME MERELY ON GUESS WORK, SURMIS ES AND CONJECTURES ON ACCOUNT OF ALLEGED RECEIPT OF INTERE ST ON ADVANCE TO MR. RAHUL. 4(B). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEA RNED CIT (A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN NOT ACC EPTING THE EXPLANATION OF THE APPELLANT THAT FACTUALLY A SUM O F RS.30,00,000/- ONLY WAS ADVANCED BY THE APPELLANT TO MR. RAHUL AND THEREFORE, THERE WAS NO JUSTIFICATION FOR ASSUMING A HIGHER AM OUNT OF RECEIPT OF INTEREST IN THE HANDS OF THE APPELLANT BY MISCONSTR UING THE FACTS OF THE CASE AND THEREBY ASSUMING A HIGHER AMOUNT OF AD VANCE TO MR. RAHUL. 4(C). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEA RNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN NOT CONSIDERING THE MATERIAL FACT THAT THE ENTIRE UNDISCLOSED INCOME OF THE APPELLANT FOR THE RELEVANT PREVIOUS YEAR WAS DULY COVERED BY WAY OF ADDITIONAL INCOME SHOWN BY THE APPELLANT HIMSELF IN THE RETURN OF INCOME FU RNISHED IN RESPONSE TO NOTICE U/S. 153A AND THEREFORE, THERE W AS NO NECESSITY FOR 5. THAT, WHILE ADJUDICATING THE GROUND NOS. 7 ( A) & 7 (B) OF THE APPELLANT, THE LEARNED CIT (A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN NOT GIVING A FINDING TO THE EFFECT THAT THE APPELLANT HAVING LIQUIDATED THE INVESTMENT MADE IN LAND AT RS.52,00 ,000/- DURING THE RELEVANT YEAR ITSELF WAS HAVING SUCH FUNDS AVAI LABLE FOR EXPLAINING THE SOURCES OF HIS UNEXPLAINED INVESTMEN TS. 6(A). THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN PARTIALLY CONFIRMING THE ADDITION TO THE EX TENT OF RS.36, 1 0,000/- OUT OF THE TOTAL ADDITION OF RS.7,83,60,000 /- MADE BY THE AO IN THE APPELLANT'S INCOME, ON ACCOUNT OF LOANS A ND ADVANCES, BY INVOKING PROVISIONS OF S. 69 OF THE INCOME-TAX ACT, 1961. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 5 6(B). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEA RNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN GIVING SET-OFF TO THE EXTENT OF RS.L,95,40,000/- ONLY OUT OF THE UNEXPLAINED LOANS AND ADVANCES MADE AT RS.2,31,5O,000/- WITHOUT CONSIDERING AND AP PRECIATING THE MATERIAL FACT THAT THE APPELLANT HAD DISCLOSED ADDI TIONAL INCOME TO THE EXTENT OF RS.2,60,00,000/-, OVER AND ABOVE THE ADDITIONAL INCOME OF RS.L,OO,OO,OOO/- SURRENDERED ON ACCOUNT O F UNACCOUNTED BUSINESS OF SCRAP AND INVESTMENT THEREI N, AND THE ENTIRE ADDITIONAL INCOME OF RS.2,60,00,000/- WAS AV AILABLE TO THE APPELLANT FOR EXPLAINING THE SOURCES OF UNEXPLAINED LOANS AND ADVANCES OF RS.2,31,50,000/-. 7(A). THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN GIVING A DIRECTION TO THE AO TO RECALCULATE THE AMOUNT OF INTEREST ON THE CONFIRMED ADDITION OF RS.2,31 ,95,0 00/- ON ACCOUNT OF LOANS AND ADVANCES. 7(B). THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEA RNED CIT(A) GROSSLY ERRED, BOTH ON FACTS AND IN LAW, IN NOT CONSIDERING AND APPRECIATING THE EXPLANATION OF THE APPELLANT THAT A SUBSTANTIAL AMOUNT OF LOANS AND ADVANCES ACTUALLY GIVEN BY THE APPELLANT HAD GO T REFUNDED DURING THE PREVIOUS YEAR ITSELF AND THEREFORE, THER E WAS NO JUSTIFICATION FOR ESTIMATION OF INTEREST INCOME FOR THE WHOLE YEAR. 8.THAT, THE LEARNED CIT(A), WHILE ADJUDICATING THE GROUND NOS. 10(A) TO 10(D) OF THE APPELLANT, GROSSLY ERRED, BOTH ON F ACTS AND IN LAW, IN NOT CONSIDERING THE MATERIAL FACT THAT THE APPELLAN T HAD ALREADY SHOWN AN ADDITIONAL INCOME OFRS.2,60,00,000/IN HIS RETURN OF INCOME FILED, POST SEARCH, FOR THE RELEVANT ASSESSM ENT YEAR, AND ALL THE UNDISCLOSED INCOME, INCLUDING THAT FROM INTERES T ON LOANS AND ADVANCES, WERE DULY COVERED FROM SUCH ADDITIONAL IN COME AND THEREFORE, THERE WAS NO JUSTIFICATION FOR MAKING AN Y SEPARATE ESTIMATION OR ADDITION ON ACCOUNT OF UNRECORDED INT EREST ON LOANS AND ADVANCES. 3. GROUND OF APPEAL RAISED BY REVENUE FOR AY 2011-1 2 IN ITA NO.259/IND/2018 1.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. C/T(APPEALS) ERRED IN RESTRICTING THE ADDITION TO RS. 1,35,36,828/_ BY APPLYING N.P. @ 25% IN PLACE OF ADDITION MADE BY OF RS. 7,30,89,378/_ ON ACCOUNT OF UNACCOUNTED SALE OF SCRAP & GRANULES ON THE BASIS OF INCRIMINATING DOCUMENTS FOUND & SEIZED FROM THE ASSESSEE'S PREMISES . KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 6 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE S, THE LD. C/T(APPEALS) ERRED IN RESTRICTING THE ADDITION TO RS. 31,11,201/_ IN PLACE OF ADDITION MADE BY AO OF RS. 1,10,57,932/_ O N ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C ON THE BASIS OF INC RIMINATING DOCUMENTS FOUND AND SEIZED FROM THE ASSESSEE'S PREMISE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS ES, THE LD. C/T(APPEALS) ERRED IN DELETING THE ADDITION TO RS. 52,00,000/- MADE BY AO ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND ON THE BASIS OF INCRIMINATING DOCUMENTS FOUND & SEIZED FROM THE ASS ESSEES PREMISES . 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE S, THE LD. CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS. 12,60,000/- MADE BY AO ON ACCOUNT OF SALE OF LAND ON THE BASIS OF IN CRIMINATING DOCUMENTS FOUND & SEIZED FROM THE ASSESSEE'S PREMISES. 5.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE S, THE LD. C/T(APPEALS) ERRED IN DELETING THE ADDITION OF RS. 6,90,00,000/_ OUT OF THE ADDITION OF RS. 7,83,60,000/_ MADE BY THE AO ON ACCOUNT OF UNEXPLAINED LOANS & ADVANCED ON THE BASIS OF INCRIMINATING DOCUMENTS FOUND & SEIZED FROM THE ASSESSEE'S PREMISE. 6.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE S, THE LD. C/T(APPEALS) ERRED IN RESTRICTING THE ADDITION OF INTEREST MADE ON ACCOUNT OF UNACCOUNTED LOANS & ADVANCED AND DIRECTING TO RE- CALCULATE UP ON THE ACCOUNT OF RS. 2,31,95,000/_ AS AGAINST RS.10,43,60,000/- 4. GROUND OF APPEAL RAISED BY REVENUE FOR AY 2012-1 3 IN ITA NO.886/IND/2018, 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF INTEREST MADE ON ACCOUNT OF UNACCOUNTED LOANS AND ADVERCES BY DIRECTING TO RECA LCULATE THE SAME UP ON THE AMOUNT OF RS.2,31,95,000/- AS AGAINST RS. 10,43,60,000/- ADDED BY THE ASSESSING OFFICER IN THE A.Y.2011-12. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10,27,036/- MA DE ON ACCOUNT OF DISALLOWANCE OF BUSINESS LOSS IN THE LIGHT OF THE F ACT THAT THE ASSESSEE FAILED TO SUBSTANTIATE SUCH BUSINESS LOSSES WITH AN Y DOCUMENTARY EVIDENCES. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 7 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN ALLOWING THE SET OFF OF CONFIRMED ADDITION OF RS.36,00,000/- & RS.27,83,400/- MADE ON ACCOUNT OF INTEREST ON UNACC OUNTED LOAN TO RAHULJI & INTEREST ON OTHER UNACCOUNTED LOANS AND A DVANCES RESPECTIVELY, AGAINST THE ADDITIONAL INCOME OF RS.2 ,40,00,000/- OFFERED BY THE ASSESSEE IN THE RETURN FOR A.Y.2012-13. WE WILL FIRST TAKE UP THE CROSS APPEALS PERTAINING TO AY 2011-12 5. THE BRIEF FACTS OF THE CASE AS CULLED OUT FROM T HE RECORDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND REGULARLY AS SESSED TO INCOME-TAX FOR LAST MANY YEARS. THE ASSESSEE BELONG S TO KATARIA GROUP OF RATLAM. SOURCE OF INCOME IS FROM SALARY AN D CARRYING OUT BUSINESS OF STEEL WIRES & SCRAP AND PLASTIC GR ANULES & SCRAP UNDER THE NAME AND STYLE OF SOLE PROPRIETORSHIP CON CERN 'M/S. D.P. INDUSTRIES'. SEARCH & SEIZURE OPERATIONS U/S. 132 OF THE INCOME-TAX ACT, 1961 ( IN SHORT THE ACT )WERE CAR RIED OUT AT THE RESIDENTIAL PREMISES OF THE ASSESSEE AND ALSO O N VARIOUS OTHER PREMISES OF THE KATARIA GROUP ON 07-09-2011.D URING THE COURSE OF THE SEARCH VARIOUS DOCUMENTS INCLUDING DI ARIES AND LOOSE PAPERS WERE SEIZED .IN VIEW OF THE SEIZED DIA RIES AND OTHER DISCREPANCIES NOTICED DURING THE COURSE OF THE SEAR CH, THE ASSESSEE, INITIALLY, THROUGH HIS NEPHEW SHRI SUNIL KATARIA, HAD KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 8 MADE A DISCLOSURE OF AN ADDITIONAL INCOME OF RS.8,7 5,00,000/- VIDE A STATEMENT RECORDED UNDER S. 132(4) OF THE IN COME-TAX ACT, 1961. AT THE TIME OF THE SEARCH, SHRI SUNIL KATARIA HAD ADMITTED AN OVERALL ADDITIONAL INCOME OF RS.26 CRORES ON BEH ALF OF THE ENTIRE KATARIA GROUP WHICH WAS INCLUSIVE OF DISCLOS URE OF ADDITIONAL INCOME OF RS.8.75 CRORES MADE ON BEHALF OF THE ASSESSEE. THE SURRENDER WAS MADE SUBJECT TO VERIFIC ATION OF THE SEIZED DOCUMENTS. SUBSEQUENTLY, AFTER OBTAINING THE COPIES OF THE SEIZED MATERIAL, SHRI SUNIL KATARIA, VIDE LETTE R DATED 20-03- 2012, WHILE MAINTAINING THE OVERALL AMOUNT OF SURRE NDER ON BEHALF OF THE GROUP AT RS.26 CRORES, REVISED THE AM OUNT OF SURRENDER ON BEHALF OF THE ASSESSEE, AT RS.6.00 CRO RES (RS.3.60 CR FOR AY 2011-12 AND RS.2.40CR FOR AY 2012-13) VID E LETTER DATED 20-03-2012 6. THEREAFTER, THE ASSESSEE FURNISHED HIS RETURN OF TOTAL INCOME, FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 31-0 3-2012, UNDER S.139(4), DECLARING AN INCOME OF RS.3,79,93,9 30/- DULY INCORPORATING THE UNDISCLOSED INCOME OF RS.3.60CR. THE REMAINING SURRENDERED INCOME OF RS.2.40CR WAS CONSI DERED AND KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 9 SHOWN IN RETURN OF INCOME FOR THE SUBSEQUENT ASSESS MENT YEAR I.E. A.Y. 2012-13.IN RESPONSE TO THE NOTICE U/S. 15 3A, THE ASSESSEE FURNISHED HIS RETURN OF INCOME ON 06-08-20 13 DECLARING THE SAME INCOME AS WAS DECLARED BY HIM IN HIS ORIGINAL RETURN OF INCOME FURNISHED UNDER S.139(4) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICES U/S. 143(2) & 142(1) ALONG WITH QUESTIONNAIRES ISSU ED FROM TIME TO TIME DULY SERVED UPON THE ASSESSEE 7. VARIOUS INFORMATION WERE SEEKED BY THE LD. AO RE GARDING SEIZED MATERIAL AND THE ELEMENT OF INCOME ALLEGED T O HAVE BEEN EARNED BY THE ASSESSEE. DETAILED SUBMISSIONS WERE F ILED ALONG WITH VARIOUS DOCUMENTARY EVIDENCES. AFTER CONSIDERI NG THE SAME THE INCOME OF THE ASSESSEE FOR A.Y. 2011-12 ASSESSE D AT RS. 25,03,84,440/- IN THE FOLLOWING MANNERS: INCOME SHOWN IN THE RETURN RS.3,79,93,930/ - ADD:(1) TRADING PROFIT IN SCRAP AND GRANULES RS.8,30,89,378/- LESS ALREADY OFFERED BY THE ASSESSEE RS.1,00,00,000 AS PER PARA 1.7 RS.7,30,89,378/ - ADD:(2 ) UNEXPLAINED EXPENDITURE U/S 69C AS PER PARA -11.8 RS.1,10,57,932/ - ADD:(3) LOAN ADVANCED TO RAHULJI AS RS.3,00,00,000/ - KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 10 PER PARA - 12.6 ADD:(4) INTEREST ON ABOVE LOANS PER PARA-12.6 RS.9,00,000/ - ADD:(5) UNEXPLAINED INVESTMENT IN LAND AS PER PARA -13.3 RS.52,00,000/ - ADD:(6) PROFIT ON SALE OF ABOVE LAND AS PER PARA-13.3 RS.12,60,000/ - ADD:(7) LOANS AND ADVANCES (AS PER PARA-14.4) RS.10,43,60,000 LESS: ALREADY OFFERED BY THE ASSESSEE RS.2,60,00,000/- RS. 7,83,60,000/ - ADD:(8) INTEREST ON ABOVE AS P ER PARA - 14.5 RS. 1,25,23,200/ - TOTAL ASSESSED INCOME RS. 25,03,84,440/ - ROUNDED OFF RS. 25,03,84,440/ - 8. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD . CIT(A) AND PARTLY SUCCEEDED AND NOW BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE THIS TRIBUNAL. 9. WE WILL FIRST TAKE GROUND NOS. 1(A), 1(B), 1(C), 1(D) & 1(E) OF THE ASSESSEE AND GROUND NO. 1 OF THE DEPARTMENT RELATIN G TO ESTIMATION OF NET PROFIT FROM TRADING IN SCRAPS AND GRANULES 10. THE GROUND NOS. 1(A), 1(B), 1(C), 1(D) & 1(E) O F THE ASSESSEE AND THE GROUND NO. 1 OF THE REVENUE ARE PERTAINING TO THE ACTION OF THE LD. CIT(A) IN PARTIALLY CONFIRMING THE ADDIT ION TO THE EXTENT OF RS.1,35,36,828/- OUT OF THE TOTAL ADDITION OF RS .7,30,89,378/- KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 11 MADE BY THE AO ON ACCOUNT OF ALLEGED PROFIT ON UNRE CORDED SALES OF SCRAPS. 11. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , FROM THE VARIOUS DIARIES INVENTORIZED AS ANNEXURE A-1 TO A-8 OF PANCHNAMA DATED 07-09-2011, LD. AO FOUND THAT THE A SSESSEE HAD CARRIED OUT UNRECORDED BUSINESS TRANSACTIONS OF PURCHASE AND SALE OF SCRAP. DURING THE COURSE OF THE ASSESSM ENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO MAKE HIS EXPLANATION ON THE SEIZED MATERIAL. THE ASSESSEE SUBMITTED THAT THE DIARY MARKED AND INVENTORIZED AS A-8 WAS CONTAINING THE U NRECORDED TRANSACTIONS OF PURCHASES WHEREAS THE REMAINING DIA RIES MARKED AND INVENTORIZED AS A-1 TO A-7 WERE CONTAINING THE UNRECORDED TRANSACTIONS OF SALES CARRIED OUT BY THE ASSESSEE. AS PER THE DIARIES, THE TOTAL UNRECORDED SALES AND UNRECORDED PURCHASES, OF THE ASSESSEE, GOT WORKED OUT RESPECTIVELY AT RS.9,4 1,47,310/- AND RS.1,10,57,932/-. A COPY OF THE WORKING (SUBJEC T TO BE EXTRAPOLATION WITH TWO ZEROS) HAS BEEN SUBMITTED BY THE ASSESSEE IN HIS PAPER BOOK AT PAGE NO. 100 TO 114. UNDISPUTEDLY, THE AO HAS ALSO ACCEPTED THE WORKING OF THE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 12 PURCHASES AND SALES AS SUBMITTED BY THE ASSESSEE BE FORE HIM WITHOUT ANY INTERFERENCE AND RESULTANTLY, WHILE MAK ING THE IMPUGNED ADDITION, THE AO HAS RELIED UPON SUCH WORK ING ONLY. FINALLY, BASED UPON THE JOTTINGS MADE IN THE DIARIE S, THE AO WORKED OUT THE NET PROFIT OF THE ASSESSEE FROM CARR YING OUT THE UNACCOUNTED BUSINESS OF SCRAP AT RS.8,30,89,378/- [ I.E. UNRECORDED SALES OF RS.9,41,47,310 () UNRECORDED P URCHASES OF RS.1,10,57,932]. SINCE, FOR THE ASSESSMENT YEAR UND ER CONSIDERATION, THE ASSESSEE HAD DISCLOSED AN ADDITI ONAL INCOME OF RS.3,60,00,000/-, OUT OF WHICH AN ADDITIONAL INC OME OF RS.1,00,00,000/- WAS DECLARED BY HIM TOWARDS UNDISC LOSED TRADING PROFIT IN SCRAP BUSINESS, LD. AO GRANTED TH E CREDIT SUCH ADDITIONAL INCOME OF RS.1,00,00,000/- AND MADE ADDI TION OF RS.7,30,89,378/- IN THE ASSESSEES INCOME UNDER THE HEAD TRADING PROFIT IN SCRAP AND GRANULES. 12. AGAINST THE AFORESAID ADDITION OF RS.7,30,89,37 8/-, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE KEY SUBMISSION OF THE ASSESSEE WAS THAT THE LD. AO WAS NOT CORRECT IN HIS APPROACH IN PRESUMING THA T AS AGAINST KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 13 THE UNACCOUNTED SALES OF SCRAP AGGREGATING TO RS. 9 ,41,47,310/-, THERE WERE PURCHASES TO THE EXTENT OF RS. 1,10,57,9 32/- ONLY. ACCORDING TO THE ASSESSEE, THE FACTUAL POSITION IS THAT THE AMOUNT OF PURCHASE WAS MUCH HIGHER THAN THAT CONSID ERED BY THE AO FOR THE REASON THAT THE ENTIRE RECORDS OF UN ACCOUNTED PURCHASES WERE NOT FOUND AND SEIZED DURING THE COUR SE OF THE SEARCH AND MAJORITY OF THE RECORDS RELATING TO THE PURCHASES HAD GOT DESTROYED MUCH PRIOR TO THE DATE OF THE SEARCH. IN SUPPORT OF SUCH CONTENTION, DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE ASSESSEE FURNISHED QUANT ITATIVE DETAILS OF THE PURCHASES AND SALES OF SCRAPS AS FOUND JOTTE D DOWN IN ALL THE SEIZED DIARIES INVENTORIZED AS ANNEXURE A-1 TO ANNEXURE A-8. A COPY OF SUCH QUANTITATIVE DETAILS ARE ALSO FURNIS HED BEFORE US. FROM SUCH DETAILS, IT IS DEMONSTRATED THAT AS PER T HE SEIZED RECORDS, THE QUANTITY OF SALES IS OF 23,994.897 M.T . WHEREAS, QUANTITY OF PURCHASES IS ONLY OF 2510.330 M.T. AND THEREFORE, IT CANNOT BE INFERRED THAT THE UNACCOUNTED PURCHASES M ADE BY THE ASSESSEE WAS ONLY TO THE EXTENT OF THE SEIZED RECOR DS. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 14 13. LD. CIT(A), ACCEPTING THE CONTENTION OF THE ASS ESSEE, VIDE PARA (5.5) AT PAGE NO. 48 OF THE IMPUGNED ORDER, HE LD THAT THE ENTIRE UNACCOUNTED PURCHASES WERE NOT FOUND JOTTED DOWN IN THE SEIZED DIARIES. THEREAFTER, THE LD. CIT(A) HELD THA T IN SUCH CASE, THE LD. AO WAS NOT JUSTIFIED IN WORKING OUT THE NET PROFIT OF THE ASSESSEE AT RS.8,30,89,378/- AND LD. AO OUGHT TO HA VE ADOPTED SOME LOGICAL AND REASONABLE APPROACH IN ESTIMATING THE NET PROFIT FROM SALE OF RS.9.41 CRORES. THEREAFTER, BY GRANTING PARTIAL RELIEF TO THE ASSESSEE, THE LD. CIT(A) DETERMINED T HE NET PROFIT ON THE SALE OF SCRAP BY APPLYING A FLAT N.P. RATE OF 2 5%. ACCORDINGLY, ON THE TOTAL UNACCOUNTED SALES OF RS. 9,41,47,310/- , THE LD. CIT(A) DETERMINED THE NET PROFIT OF THE ASSESSEE AT RS. 2,35,36,828/-, @25%, AND THEREAFTER, BY GRANTING TH E CREDIT FOR THE INCOME OF RS. 1,00,00,000/- ALREADY OFFERED BY THE ASSESSEE IN HIS RETURN OF INCOME FURNISHED UNDER S. 153A OF THE ACT, CONFIRMED THE ADDITION TO THE EXTENT OF RS. 1,35,36 ,828/-, WHICH RESULTED INTO A RELIEF TO THE EXTENT OF RS. 5,95,52 ,550/-. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 15 14. AGAINST THE ADDITION CONFIRMED BY LD. CIT(A) TH E ASSESSEE IS IN APPEAL WHEREAS AGAINST THE RELIEF GRANTED, THE R EVENUE IS IN APPEAL. 15. BEFORE US, LEARNED DEPARTMENT REPRESENTATIVE (I N SHORT LD CIT(DR) ) VEHEMENTLY ARGUED SUPPORTING THE OBSERVAT ION OF LEARNED AO AND THE FINDING OF LD.CIT(A) GIVEN IN FA VOR OF REVENUE ON THIS ISSUE OF ESTIMATING PROFIT FROM UNA CCOUNTED SCRAP TRADING BUSINESS. 16. PER CONTRA LEARNED COUNSEL FOR THE ASSESSEE HAS FILED WRITTEN SYNOPSIS. THE RELEVANT PORTION OF SUCH SYNOPSIS IS BEING REPRODUCED AS UNDER: KEY POINTS OF ASSESSEES SUBMISSION AND RELEVANT PAG ES OF PAPER BOOK: S. NO. SUBMISSION IN BRIEF RELEVANT PAGES OF PAPER BOOK REMARKS 1 TRANSACTIONS WERE CARRIED OUT IN TWO PREVIOUS YEARS RELEVANT TO A.Y. 2011-12 AND A.Y. 2012-13 40 [STATEMENT RECORDED DURING THE SEARCH] 100 TO 114 [EXCEL SHEET] I) EVEN BEFORE THE AO [KINDLY REFER PARA (11.4)(3.1) OF AOS ORDER], IT WAS CLAIMED THAT THE UNACCOUNTED TRADING TRANSACTIONS WERE CARRIED OUT IN TWO ASSESSMENT YEARS. II) THE NEPHEW OF THE ASSESSEE NAMELY SHRI SUNIL KATARIA (PB PAGE NO. 40), IN HIS STATEMENT RECORDED U/S. 132(4), CATEGORICALLY STATED SUCH FACT. III) DIARIES INVENTORIZED AS A-1 TO A-8 ALSO DEMONSTRATE CLEARLY THAT THE TRANSACTIONS PERTAIN TO TWO FINANCIAL YEARS. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 16 IV) EXCEL SHEET SUMMARIZING THE TRANSACTIONS OF THE DIARIES PLACED AT PAGE NO. 100 TO 114. ON A PERUSAL OF PAGE NO. 102 OF THE PAPER BOOK, IT SHALL BE OBSERVED THAT IN THE DIARY NO. A-1, TRANSACTIONS ARE BEARING THE DATES SUCH AS 1.04 I.E. 1 ST APRIL AND AGAIN IN THE DIARY NO. PAS-2, AT PAGE NO. 111, THE DATE HAS BEEN MENTIONED AS 1.04 I.E. 1 ST APRIL. IT IS SUBMITTED THAT THE FIRST DATE FALLS IN THE FINANCIAL YEAR 2010-11 WHEREAS THE SECOND DATE FALLS IN THE FINANCIAL YEAR 2011-12. 2 ENTIRE SUPPRESSED SALES CANNOT BE REGARDED AS INCOME. 115 TO 117 [COPY OF THE JUDGMENT OF THE HONBLE MP HIGH COURT] CIT VS. BALCHAND AJIT KUMAR (2003) 263 ITR 610 (MP) 3 SEIZED DIARIES WERE NOT COMPLETE SET OF RECORD OF TRANSACTIONS OF PURCHASES AND SALES OF SCRAP AND GRANULES. ALL TRANSACTIONS OF UNACCOUNTED SALES WERE FOUND IN DIARIES BUT RECORDS OF ALL PURCHASES NOT FOUND. - UNACCOUNTED SALES OF RS.9,41,47,310/- AND UNACCOUNTED PURCHASES OF RS.1,10,57,932/- FOUND IN DIARIES. NET PROFIT OF RS.8,30,89,378/- DETERMINED BY THE AO WHICH IS PATENTLY WRONG, ABSURD AND ARBITRARY. REFER PARA (11.1) ON PG. 11 & PARA (11.7) ON PG. 15 OF AOS ORDER. 4 ON A PERUSAL OF DIARIES A - 1 TO A - 8, QUANTITY OF PURCHASES IN PURCHASE DIARY IS MUCH LESS THAN QUANTITY OF SALES STATED IN VARIOUS SALES DIARIES. AS PER THE SEIZED RECORDS, THE PURCHASE QUANTITY WAS TO THE EXTENT OF 2510.330 M.T. ONLY AS AGAINST THE SALES QUANTITY OF 23994.897 M.T. 193 [SUMMARY OF QUANTITIES OF UNRECORDED PURCHASES AND UNRECORDED SALES] AS PER THE SEIZED MATERIAL, DIARY A-8, THE PURCHASE QUANTITY IS ONLY 2510.330 M.T. WHEREAS AS PER THE OTHER SEIZED DIARIES VIZ. A-1 TO A- 7, THE TOTAL QUANTITY OF SALES IS 23994.897 M.T. WITHOUT PURCHASES, THERE COULD NOT HAVE BEEN ANY SALES. 5 IN A SCRA P BUSINESS, NORMALLY THE RATE OF PROFIT RANGES BETWEEN 5% TO 10%. THE ESTIMATION OF NET PROFIT BY THE AO AND CIT(A) IS ARBITRARY - THE AO HAS ESTIMATED THE NET PROFIT AT 88.25% AND THE CIT(A) HAS ESTIMATED THE SAME AT 25%. THE ASSESSEE HIMSELF HAS SHOWN NET PROFIT OF 12.25% IN TWO YEARS. 6 ON THE AGGREGATE TURNOVER OF RS.9,41,47,310/-, THE ASSESSEE HAS ALREADY OFFERED UNDISCLOSED INCOME OF RS.1,40,00,000/- IN TWO ASSESSMENT YEARS I.E. 68 EVEN IF THE INITIAL CAPITAL INVESTMENT IN UNRECORDED BUSINESS AT RS.24,68,215/- IS EXCLUDED, THERE WOULD REMAIN AN UNDISCLOSED TRADING INCOME OF KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 17 RS.1,00,00,000/ - IN A.Y. 2011 - 12 AND RS.40,00,000/- IN A.Y. 2012- 13. THE UNDISCLOSED INCOME OF RS.1,40,00,000/- INCLUDES THE INITIAL CAPITAL INVESTMENT OF RS.24,68,215/-. RS.1,15, 31,785/ - WHICH WOULD RESULT IN NET PROFIT OF 12.25% SHOWN BY THE ASSESSEE HIMSELF. 17. REFERENCE WAS ALSO MADE TO THE DETAILED SUBMISS ION OF THE ASSESSEE ON THIS ISSUE MADE BEFORE THE CIT(A) WHIC H IS PLACED AT PAGE NO. 7 TO 12 OF THE PAPER BOOK. 18. FOR THE RATIO THAT WHILE ESTIMATING THE NET PROFIT OF THE ASSESSEE ON SUPPRESSED SALES, A REASONABLE NET PROF IT RATE MUST BE MADE RELIANCE PLACED ON FOLLOWING CITATIONS :-. I) CIT VS. BALCHAND AJIT KUMAR (2003) 263 ITR 610 (MP) II) MANMOHAN SADANI VS. CIT (2008) 304 ITR 0052 (MP) III) EAGLE SEEDS & BIOTECH LTD. VS. ACIT (2006) 102 TTJ 1065 (INDORETRIB.) IV) CIT VS. PRESIDENT INDUSTRIES (2002) 258 ITR 654 (GUJHC) V) KULWANT SINGH VS. DCIT (2010) 134 TTJ 129 (DEL.) 19. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE RE CORDS PLACED BEFORE US ,DULY CONSIDERED THE FACTS AND CIRCUMSTAN CES, CAREFULLY GONE THROUGH THE ORDERS OF LOWER AUTHORIT IES AND WRITTEN AND ORAL SUBMISSIONS MADE FROM BOTH THE SID ES. WE FIND THAT UNDISPUTEDLY, DURING THE COURSE OF THE SEARCH AT THE PREMISES OF THE ASSESSEE ON 07-09-2011, CERTAIN DIA RIES KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 18 INVENTORIZED AS A-1 TO A-8 WERE FOUND AND SEIZED BY THE SEARCH PARTY. IT IS ALSO AN UNDISPUTED FACT THAT IN THESE DIARIES VARIOUS TRANSACTIONS OF PURCHASES AND SALES OF SCRAP WERE N OTED DOWN WHICH WERE NOT FOUND RECORDED IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. 20. WE FIND THAT THERE IS NO DIFFERENCE OF VIEW BET WEEN THE ASSESSEE AND THE REVENUE THAT OUT OF THE AFORESAID EIGHT POCKET DIARIES, ONE POCKET DIARY INVENTORIZED AS A-8 WAS C ONTAINING THE TRANSACTIONS RELATING TO UNRECORDED PURCHASES CARRI ED OUT BY THE ASSESSEE, WHEREAS, IN THE REMAINING SEVEN POCKET DI ARIES INVENTORIZED AS A-1 TO A-7, THE TRANSACTIONS OF UNR ECORDED SALES WERE JOTTED DOWN. THE QUANTUM OF PURCHASES AND SALE S AS PER THESE SEIZED DIARIES RESPECTIVELY AT RS. 1,10,57,93 2/- AND RS. 9,41,47,310/- HAVE NOT BEEN DISPUTED BY EITHER OF T HE PARTIES. 21. BEFORE THE CIT(A) AS WELL AS BEFORE US, THE CON TENTION OF THE ASSESSEE WAS THAT THE TRANSACTIONS JOTTED DOWN IN T HESE DIARIES PERTAIN TO TWO FINANCIAL YEARS RELEVANT TO A.Y. 201 1-12 AND A.Y. 2012-13. DURING THE COURSE OF THE HEARING BEFORE US , THE A.R. OF KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 19 THE ASSESSEE, REITERATED HIS ARGUMENTS BY MAKING A REFERENCE OF THE EXCEL SHEETS OF PURCHASES AND SALES PREPARED ON THE BASIS OF THE SEIZED DIARIES. HOWEVER, EVEN BEFORE US, LD. CO UNSEL FOR THE ASSESSEE (IN SHORT LD. AR) FAILED TO DEMONSTRATE WI TH ANY POSITIVE EVIDENCE THAT THE JOTTINGS MADE IN THESE DIARIES PE RTAIN TO TWO FINANCIAL YEARS. SINCE, THE ASSESSEE HIMSELF IS CLA IMING THAT HE HAD COMMENCED THE UNACCOUNTED BUSINESS OF SCRAP TRA DING DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 2011-12 ONLY AND FURTHER SINCE, FROM THE SEIZED DIARIES THE ASSESSEE HAS FAILED TO DEMONSTRATE THAT THESE TRANSACTIONS WERE ALSO CARRI ED OUT BY HIM DURING THE SUBSEQUENT FINANCIAL YEAR TOO, WE FI ND ABSOLUTELY NO INFIRMITY IN THE VIEWS TAKEN BY THE AUTHORITIES BELOW THAT THE TRANSACTIONS OF UNRECORDED TRADING OF SCRAP WERE CA RRIED OUT BY THE ASSESSEE DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 2011-12 ONLY AND CONSEQUENTLY, THE ENTIRE INCOME ARISING FR OM CARRYING OUT SUCH UNRECORDED TRANSACTIONS IS LIABLE TO BE TA XED IN THE HANDS OF THE ASSESSEE FOR THE A.Y. 2011-12 ONLY. AC CORDINGLY, THE GROUND NO. 1(B) OF THE ASSESSEE IS DISMISSED. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 20 22. NOW, COMING TO THE ISSUE OF DETERMINATION OF UN DISCLOSED INCOME FROM THE UNDISCLOSED AND UNRECORDED TRADING TRANSACTIONS IN SCRAP CARRIED OUT BY THE ASSESSEE, WE FIND THAT AS PER THE SEIZED MATERIAL, BEING THE POCKET DIARIES I NVENTORIZED AS A-1 TO A-7, THE UNRECORDED SALES WORKS OUT TO BE A T RS. 9,41,47,310/- ONLY AND AS AGAINST THESE UNRECORDED SALES, THE UNRECORDED PURCHASES AS PER SEIZED DIARY A-8 WORKS OUT TO BE AT RS. 1,10,57,932/-. SO WITH THE APPLICATION OF THE S IMPLE ARITHMETIC, THE TOTAL UNDISCLOSED NET PROFIT FROM T HE TRADING ACTIVITIES WORKS OUT TO BE AT RS. 8,30,89,378/- ONL Y AS WORKED OUT BY THE ASSESSING OFFICER. BUT, BEFORE MAKING SU CH PLAIN ARITHMETICAL EXERCISE, ONE HAS TO SEE THAT WHETHER OR NOT THE UNRECORDED PURCHASES AND UNRECORDED SALES FULLY COR RESPOND WITH EACH OTHER. IN THE INSTANT CASE, WE FIND THAT IT IS NOT SO. 23. WE FIND THAT THE SEIZED PURCHASE RECORDS DEMONS TRATE THE PURCHASE QUANTITY OF ONLY 2510.330 METRIC TON OF SC RAP WHEREAS THE SEIZED SALES RECORDS REVEAL THE SALES QUANTITY OF 23994.897 METRIC TON. THAT THESE WORKING OF THE QUANTITIES OF PURCHASES AND SALES HAVE NOT BEEN DISPUTED BY THE REVENUE. IT IS WELL KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 21 EVIDENT THAT WITH THE PURCHASE OF MEAGER 2510.330 MT, HUGE SALES OF 23994.897 MT CANNOT BE EFFECTED AND THEREF ORE, IT LEADS TO ONLY ONE INFERENCE THAT THE ENTIRE UNRECORDED PU RCHASE RECORDS OF THE ASSESSEE COULD NOT BE FOUND AND SEIZ ED DURING THE COURSE OF THE SEARCH. IN THESE CIRCUMSTANCES, WE FU LLY CONCUR WITH THE FINDINGS OF THE CIT(A) THAT THE ASSESSEES PURCHASE RECORD WERE NOT FULLY RECOVERED AND THEREFORE, IT C OULD NOT BE MADE THE BASIS FOR DETERMINING THE NET PROFIT OF TH E ASSESSEE FROM CARRYING OUT THE UNRECORDED TRADING BUSINESS OF SCRAP. WE FIND FORCE IN THE CONTENTION OF THE LD. AR THAT THE ENTIRE SUPPRESSED SALES CANNOT BE REGARDED AS AN INCOME OF THE ASSESSEE BUT ONLY THE NET PROFIT ELEMENT EMBEDDED I N SUCH SUPPRESSED SALES HAS TO BE ESTIMATED AS UNDISCLOSED INCOME OF THE ASSESSEE. FOR SUCH PROPOSITION, WE PLACE RELIAN CE ON THE JUDGEMENT OF HONBLE HIGH COURT OF MADHYA PRADESH I N THE CASE OF CIT VS. BALCHAND AJIT KUMAR (2003) 263 ITR 0610 (MP) IN WHICH THEIR LORDSHIPS AT PARA (6) WAS PLEASED TO OB SERVE AS UNDER: KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 22 5. ON APPRECIATING THE RIVAL SUBMISSIONS RAISED AT THE BAR, WE HAVE CAREFULLY PERUSED THE ORDER PASSED BY THE COMMISSIO NER OF INCOME-TAX (APPEALS) AND ALSO THAT OF THE TRIBUNAL. IT IS NOT DISPUTED THAT THE UNDISCLOSED INCOME WAS RS. 2,57,000. THE SOLE QUEST ION THAT ARISES FOR CONSIDERATION IS WHETHER THE ENTIRE INCOME HAS TO B E TREATED AS PROFIT OR THERE SHOULD BE ADOPTION OF A METHOD OF NET PROFIT INCOME. IN THE CASE OF CIT V. PRESIDENT INDUSTRIES [2002] 258 ITR 654, THE HIGH COURT OF GUJARAT IN A SIMILAR MATTER CAME TO HOLD AS UNDER ( PAGE 655) : 'HAVING PERUSED THE ASSESSMENT ORDER MADE BY THE AS SESSING OFFICER, THE ORDER MADE BY THE COMMISSIONER OF INCOME-TAX (A PPEALS) AND THE INCOME-TAX APPELLATE TRIBUNAL, WE ARE SATISFIED THA T THE TRIBUNAL WAS JUSTIFIED IN REJECTING THE APPLICATION UNDER SECTION 256(1) . IT CANNOT BE A MATTER OF AN ARGUMENT THAT THE AMOUNT OF SALES BY I TSELF CANNOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAS NOT DI SCLOSED THE SALES. THE SALES ONLY REPRESENTED THE PRICE RECEIVED BY TH E SELLER OF THE GOODS FOR THE ACQUISITION OF WHICH IT HAS ALREADY INCURRE D THE COST. IT IS THE REALISATION OF EXCESS OVER THE COST INCURRED THAT O NLY FORMS PART OF THE PROFIT INCLUDED IN THE CONSIDERATION OF SALES. THER EFORE, UNLESS THERE IS A FINDING TO THE EFFECT THAT INVESTMENT BY WAY OF I NCURRING THE COST IN ACQUIRING THE GOODS WHICH HAVE BEEN SOLD HAS BEEN M ADE BY THE ASSESSEE AND THAT HAS ALSO NOT BEEN DISCLOSED. IN T HE ABSENCE OF SUCH FINDING OF FACT THE QUESTION WHETHER THE ENTIRE SUM OF UNDISCLOSED SALE PROCEEDS CAN BE TREATED AS INCOME OF THE RELEVANT A SSESSMENT YEAR ANSWERS BY ITSELF IN THE NEGATIVE. THE RECORD GOES TO SHOW THAT THERE IS NO FINDING NOR ANY MATERIAL HAS BEEN REFERRED ABOUT THE SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WHICH HAVE BEEN F OUND SUBJECT OF UNDISCLOSED SALES.' 6. WE ARE IN RESPECTFUL AGREEMENT WITH THE AFORESAI D OPINION INASMUCH AS THE TOTAL SALE CANNOT BE REGARDED AS THE PROFIT OF THE ASSESSEE. THE NET PROFIT RATE HAS TO BE ADOPTED AND ONCE A NET PR OFIT RATE IS ADOPTED, IT CANNOT BE SAID THAT THERE IS PERVERSITY OF APPRO ACH. WHETHER THE RATE IS LOW OR HIGH, IT WOULD DEPEND UPON THE FACTS OF E ACH CASE. IN THE PRESENT CASE NET PROFIT RATE OF FIVE PER CENT. HAS BEEN APPLIED. WE DO NOT THINK IT APPROPRIATE THAT THE SAME REQUIRES TO BE ENHANCED. WE ARE ALSO INCLINED TO THINK THAT IT IS HIGH. IN ANY CASE , IT CANNOT BE SAID THAT THERE HAS BEEN PERVERSITY OF APPROACH. 24. THEREFORE IN THE PRESENT SET OF FACTS AND CIRCU MSTANCES, IN OUR CONSIDERED VIEW, THE REVENUE HAS NO OPTION BUT TO ESTIMATE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 23 A REASONABLE NET PROFIT ON THE SUPPRESSED SALES. WE FIND THAT IN THE RETURN OF INCOME FURNISHED FOR THE ASSESSMENT Y EAR UNDER CONSIDERATION, U/S. 153A OF THE ACT, THE ASSESSEE H AS VOLUNTARILY SHOWN AN INCOME OF RS. 1,00,00,000/- ON ACCOUNT OF UNDISCLOSED INCOME FROM SCRAP TRADING AND UNDISCLOS ED INITIAL INVESTMENT IN THE BUSINESS OF SCRAP TRADING RESPECT IVELY AT RS. 75,31,785/- AND RS. 24,68,215/-. THUS, ON SUPPRESSE D SALES OF RS. 9,41,47,310/- THE ASSESSEE HAS DISCLOSED NET PR OFIT OF RS. 75,31,785/- WHICH WORKS OUT TO BE 8% ONLY. AS AGAIN ST SUCH NET PROFIT RATE OF 8%, THE CIT(A) HAS ESTIMATED THE RAT E OF NET PROFIT AT 25%. CONSIDERING THE FACTS THAT THE ASSESSEE HAS CARRIED OUT ONLY A TRADING BUSINESS ON WHOLESALE BASIS WHICH WA S COMMENCED BY HIM ONLY IN THE FINANCIAL YEAR UNDER CONSIDERATION AND FURTHER CONSIDERING THE AMOUNT OF INVESTMENT, RATE OF RETURN ON INVESTMENT ETC. IN OUR VIEW, THE ESTIMATION OF THE NET PROFIT RATE SO MADE BY THE CIT(A) AT 25% IS QUITE AT A HIGHER SIDE. IN ALL THE FAIRNESS TO BOTH THE PARTIE S , WE RESTRICT THE ESTIMATION OF NET PROFIT AT 10% OF THE UNDISCLO SED SALES. BEFORE US, THE ASSESSEE HAS ALSO TAKEN TWO SEPARATE GROUNDS KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 24 BEARING NOS. 1(C) AND 1(D) FOR ALLOWING HIM THE BEN EFIT OF TELESCOPING OF THE TOTAL UNDISCLOSED INCOME SHOWN I N THE RETURN AGAINST THE NET UNDISCLOSED INCOME/INVESTMENT FINAL LY DETERMINED. WE ARE OF THE CONSIDERED VIEW THAT AN A SSESSEE IS ELIGIBLE FOR CLAIM OF SET-OFF OF THE UNDISCLOSED IN COME VOLUNTARILY SHOWN BY HIMSELF IN THE RETURN OF INCOME FILED U/S. 153A AGAINST ANY UNDISCLOSED INCOME/UNDISCLOSED INVESTMENT, FINA LLY DETERMINED. ACCORDINGLY, THE AO IS DIRECTED TO WORK OUT THE NET PROFIT AT THE RATE OF 10% ON THE UNACCOUNTED SALES OF RS. 9,41,47,310/- I.E. AT RS.94,14,731/- AND AFTER GIVI NG DUE BENEFIT OF TELESCOPING OF THE UNDISCLOSED INCOME OF RS. 3,6 0,00,000/- ALREADY SHOWN BY THE ASSESSEE IN HIS RETURN OF INCO ME (OTHER THAN THOSE UNDISCLOSED INCOME FOR WHICH A SEPARATE SPECIFIC CLAIM FOR SET-OFF IS MADE BY THE ASSESSEE), RE-COMP UTE THE TOTAL INCOME OF THE ASSESSEE. ACCORDINGLY, THE GROUND NO. 1 OF THE REVENUE IS DISMISSED AND GROUND NOS. 1(A), 1(C) AND 1(E) OF THE ASSESSEE ARE PARTLY ALLOWED AND GROUND NO. 1(D) OF THE ASSESSEE IS FULLY ALLOWED. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 25 25. GROUND NOS. 2(A)&2(B) OF THE ASSESSEE AND GROUN D NO. 2 OF THE DEPARTMENT UNEXPLAINED EXPENDITURE BEING PURC HASE OF SCRAPS AND GRANUELS RS.1,10,57,932/- 26. THESE GROUNDS ARE INTERCONNECTED WITH THE GROUN D NOS. 1(A) TO 1(E) TAKEN BY THE ASSESSEE AND GROUND NO. 1 TAKE N BY THE REVENUE. DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS, FROM SEIZED DIARY LD. AO FOUND THAT DURING THE RELEVANT YEAR, THE ASSESSEE HAD CARRIED OUT UNRECORDED TRANSACTIONS OF PURCHASES/SALE OF SCRAP. LD. AO TREATED THE DIFFERE NCE BETWEEN THE AFORESAID SALES AND PURCHASES (SALE RS.9,41,47, 310/- LESS PURCHASE RS.1,10,57,932/-) AS THE PROFIT OF THE ASS ESSEE FROM UNACCOUNTED SCRAP BUSINESS AND MADE AN ADDITION OF RS.7,30,89,378/- IN THE ASSESSEES INCOME FOR THE A.Y. 2011-12. FURTHER, THE AO ALSO MADE AN ADDITION TO THE TUNE O F RS.1,10,57,932/- ON ACCOUNT OF AFORESAID UNACCOUNTE D PURCHASES, BY INVOKING THE PROVISIONS OF S.69C OF T HE ACT, TREATING THE SAME AS UNEXPLAINED EXPENDITURE OF THE ASSESSEE FOR THE A.Y. 2011-12. THE AO ALSO HELD THAT IT IS NOT A LLOWABLE AS KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 26 DEDUCTION UNDER ANY HEAD OF INCOME AS PER PROVISO T O SECTION 69C OF THE ACT. 27. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) NOTED THAT THERE IS A CONTRADICTION IN THE APPROACH OF THE AO IN TREATING THE PURCHASES OF RS.1,10,57,932/- AS UNEXPLAINED EXPENDITURE U/S. 6 9C OF THE ACT AND BY ALLOWING A CREDIT THEREOF FROM THE UNACC OUNTED SALES OF RS.9,41,47,310/-. THE LD. CIT(A) FURTHER STATED THAT THE CONTENTION OF THE ASSESSEE IS FOUND REASONABLE TO T HE EFFECT THAT PURCHASES FOUND NOTED IN THE DIARY CAN BE SAID TO B E UNRECORDED BUT THE SOURCES THEREOF CANNOT BE CONSIDERED AS FUL LY UNEXPLAINED. THE LD. CIT(A) ALSO STATED THAT THE EN TIRE PURCHASES HAVE NOT BEEN MADE IN A SINGLE DAY OR SIN GLE INSTANCE BUT THEY ARE FOUND TO BE MADE ON VARIOUS DATES AND IN VARIOUS MONTHS IN A CYCLIC MANNER AND IN SMALL AMOUNTS. THE ASSESSEE HAS BEEN FOUND TO HAVE RECORDED THE CORRESPONDING S ALES IN THE SAME MANNER AS PURCHASES. THE LD. CIT(A) STATED THA T BARRING INITIAL INVESTMENT, THE ASSESSEE WAS NOT REQUIRED T O MAKE INVESTMENT IN SUBSEQUENT PURCHASES. THE LD. CIT(A) FURTHER KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 27 STATED THAT THE ASSESSEE HAS NOT FURNISHED ANY BASI S FOR INITIAL INVESTMENT AND THUS, THE INITIAL INVESTMENT OF RS.2 4,68,215/- ESTIMATED BY THE ASSESSEE WAS FOUND TO BE ON A LOWE R SIDE. ACCORDINGLY, THE LD. CIT(A) ESTIMATED THE INITIAL C APITAL OF THE ASSESSEE AT ONE HALF OF IMPUGNED PURCHASE AMOUNT I. E. AT RS.55,28,966/- AS AGAINST THE SAME SHOWN BY THE ASS ESSEE AT RS.24,68,215/-. FINALLY, THE LD. CIT(A) GRANTED A R ELIEF OF RS.79,46,731/- AND CONFIRMED AN ADDITION OF RS.31,1 1,201/- IN THE ASSESSEES INCOME. 28. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), BOT H THE ASSESSEE AS WELL AS THE REVENUE HAVE PREFERRED CROSS-APPEALS BEFORE THIS TRIBUNAL ON THE ISSUE. 29. BEFORE US, LEARNED DEPARTMENT REPRESENTATIVE (I N SHORT LD CIT(DR) ) VEHEMENTLY ARGUED SUPPORTING THE OBSERVAT ION OF LEARNED AO AND THE FINDING OF LD.CIT(A) GIVEN IN FA VOR OF REVENUE ON THIS ISSUE OF ESTIMATING PROFIT FROM UNA CCOUNTED SCRAP TRADING BUSINESS. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 28 30. LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO FILED ONE WRITTEN SYNOPSIS. THE RELEVANT PORTION OF SUCH SYNOPSIS IS BEING REPRODUCED AS UNDER: KEY POINTS OF ASSESSEES SUBMISSION AND RELEVANT PA GES OF PAPER BOOK: S. NO. SUBMISSION IN BRIEF RELEVANT PAGES OF PAPER BOOK REMARKS 1 ONCE THE ASSESSEE IS FOUND TO HAVE EARNED ANY UNRECORDED REVENUE AND SIMULTANEOUSLY HAS ALSO BEEN FOUND TO HAVE INCURRED ANY UNRECORDED EXPENDITURE TO EARN SUCH UNRECORDED INCOME, THEN, FIRST OF ALL, SUCH UNRECORDED EXPENDITURE CANNOT BE CONSIDERED AS UNEXPLAINED EXPENDITURE UNDER S. 69C AND, SECONDLY, A SET OFF OF SUCH UNRECORDED EXPENDITURE HAS TO BE GIVEN AGAINST THE UNRECORDED REVENUE FOR DETERMINING THE TAXABLE INCOME OF THE ASSESSEE - - 2 THE TRANSACTIONS OF BOTH PURCHASES AS WELL AS SALES WERE MADE BY THE ASSESSEE IN DIFFERENT TRENCHES OF PETTY AMOUNTS AND THAT TOO IN A CYCLIC MANNER. - ALTHOUGH THE TRANSACTIONS OF PURCHASES REMAINED UNRECORDED, BUT THE SOURCES THEREOF WERE VERY WELL EXPLAINED BEFORE THE AO HAVING BEEN MADE OUT OF THE CASH REALIZED FROM UNRECORDED SALES TRANSACTIONS FROM TIME TO TIME. 3 THE ASSESSEE HIMSELF HAD OFFERED AN ADDITIONAL INCOME OF RS.24,68,215/- ON ACCOUNT OF INITIAL CAPITAL INVESTMENT IN THE UNRECORDED BUSINESS. PART-II OF THE SYNOPSIS ABOVE BESIDES OFFERING AN INCOME OF RS.24,68,215/- TOWARDS INITIAL CAPITAL INVESTMENT IN UNRECORDED BUSINESS, THE ASSESSEE HAS ALSO OFFERED INCOME AGGREGATING TO RS.1,15,31,785/- ON ACCOUNT OF NET PROFIT EARNED FROM CARRYING OUT UNRECORDED TRADING BUSINESS. THE INCOME SO EARNED DURING THE YEAR AND DULY OFFERED FOR TAXATION WAS AVAILABLE WITH THE ASSESSEE FOR MAKING INVESTMENT IN PURCHASES. SINCE, THE INCOME SO EARNED FOR TRADING HAS ALREADY BEEN TAXED SEPARATELY, THE CORRESPONDING INVESTMENT MADE OUT OF SUCH INCOME CANNOT AGAIN BE ADDED AS IT WOULD TANTAMOUNT KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 29 TO MAKING OF THE SAME ADDITION TWICE. 4 OVER AND ABOVE THE INCOME OF RS.24,68,215/- AND RS.75,31,785/-, AGGREGATING TO RS.1,00,00,000/-, THE ASSESSEE HAD ALSO OFFERED AN ADDITIONAL INCOME TO THE EXTENT OF RS.2,60,00,000/- IN HIS RETURN OF INCOME FILED UNDER S. 153A. - THE REMAINING ADDITIONAL INCOME OF RS.2,60,00,000/- WHICH WAS UTILIZED BY THE ASSESSEE IN MAKING UNRECORDED INVESTMENT IN LOANS AND ADVANCES WAS ALSO AVAILABLE WITH THE ASSESSEE IN THE INITIAL DAYS OF THE PREVIOUS YEAR FOR MAKING INVESTMENT IN UNRECORDED PURCHASES. 5 THE ASSESSEE IS SQUARELY ELIGIBLE FOR CLAIM OF TELESCOPING BENEFIT IN RESPECT OF THE TOTAL UNDISCLOSED INCOME OF RS.3,60,00,000/- FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ON THE BASIS OF UNDISCLOSED INCOME SHOWN IN THE RETURN AGAINST THE UNEXPLAINED INVESTMENT, IF ANY, FOUND MADE IN MAKING THE SUBJECT PURCHASES AND, THEREFORE, NO SEPARATE ADDITION ON THIS COUNT WAS WARRANTED. - - G. OUR DETAILED SUBMISSIONS BEFORE THE HONBLE BENC H: THE DETAILED SUBMISSION OF THE ASSESSEE ON THE ISSU E, WHICH WAS ALSO MADE BEFORE THE CIT(A) IS PLACED AT PAGE NO. 12 TO 15 OF THE PAPER BOOK. THE SAME HAS ALSO BEEN REPRODUCED BY THE CIT (A) AT PAGE NO. 15 TO 18 OF THE IMPUGNED ORDER WHILE ADJUDICATING T HE GROUND NOS. 4(A), 4(B) & 4(C) RAISED BY THE ASSESSEE. THE ASSES SEE WISH TO PLACE RELIANCE ON SUCH DETAILED WRITTEN SUBMISSION MADE B EFORE THE CIT(A). H. LEGAL AUTHORITIES ON WHICH ASSESSEE WISH TO RELY : RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOU NCEMENTS: (I) CIT (CENTRAL) COCHIN VS. P.D. ABRAHAM @ APPACHA N (2012) 252 CTR (KER) 407 [COPY OF JUDGMENT ENCLOSED AS ANNEXURE A-9.01 (PB PAGE NO. 118 TO 130)] (II) CIT VS. TIPS INDUSTRIES PVT. LTD. (2010) 321 I TR 0154 (BOM.) [COPY OF JUDGMENT ENCLOSED AS ANNEXURE A-9.02 (PB P AGE NO. 131 TO 140)] 31. WE HAVE DULY CONSIDERED THE FACTS AND CIRCUMSTA NCES OF THE CASE AND CAREFULLY GONE THROUGH THE AOS ORDER, THE LD. CIT(A)S KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 30 ORDER, VARIOUS RELEVANT SEIZED DOCUMENTS, WRITTEN A ND ORAL SUBMISSIONS MADE FROM BOTH THE SIDES. 32. WE FIND THAT IN THE INSTANT CASE, THE AO HAS RE GARDED THE ENTIRE PURCHASES AGGREGATING TO A SUM OF RS.1,10,57 ,932/- AS FOUND RECORDED IN ONE OF THE SEIZED DIARIES INVENTO RIZED AS A-8, AS UNEXPLAINED EXPENDITURE OF THE ASSESSEE. WE ALSO FIND THAT EVEN THE LD. CIT(A) WHILE DETERMINING THE QUANTUM O F UNDISCLOSED INVESTMENT IN THE INITIAL CAPITAL OF TH E SCRAP BUSINESS HAS TAKEN INTO CONSIDERATION THE AFORESAID AMOUNT OF PURCHASE ONLY. HOWEVER, WHILE ADJUDICATING THE GROU ND NOS. 1(A) TO 1(E) OF THE ASSESSEE AND GROUND NO. 1 OF THE REV ENUE, WE HAVE ALREADY HELD THAT THE AGGREGATE AMOUNT OF UNDISCLOS ED PURCHASES OF THE ASSESSEE FOR THE YEAR UNDER CONSID ERATION WAS MUCH MORE THAN THAT RECORDED IN THE DIARY INVENTORI ZED AS A-8. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT W OULD NOT BE CORRECT APPROACH TO DETERMINE THE QUANTUM OF INITIA L INVESTMENT IN THE SCRAP BUSINESS OF THE ASSESSEE ONLY ON THE B ASIS OF THE AFORESAID SUM OF RS.1,10,57,932/-. WE FIND THAT BOT H THE AUTHORITIES BELOW HAVE UNDISPUTEDLY DETERMINED THE QUANTUM OF KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 31 UNRECORDED SALES AT RS.9,30,89,378/- TO WHICH THE A SSESSEE HAS ALSO AGREED, THEN IN OUR CONSIDERED VIEW, THE INITI AL CAPITAL INVESTMENT IN THE UNDISCLOSED TRADING BUSINESS OF T HE SCRAP OUGHT TO BE DETERMINED ON THE BASIS OF THE AFORESAI D UNRECORDED ANNUAL SALES OF RS.9,30,89,378/-. FROM THE EXCEL SH EETS, DRAWN BY THE ASSESSEE ON THE BASIS OF THE SEIZED DIARIES WHICH HAVE ALSO BEEN ACCEPTED BY THE AO, WE FIND THAT THE ASSE SSEE HAS MADE BOTH THE PURCHASES AND SALES IN MULTIPLE TRENC HES, THUS, THE CONTENTION OF THE LD. AR IS WORTH ACCEPTING THA T THE UNDISCLOSED TRADING TRANSACTIONS WERE CARRIED OUT B Y HIM NOT IN ONE GO BUT IN A CYCLIC MANNER. ACCORDINGLY, ONLY FO R MAKING THE FIRST FEW PURCHASES, THE ASSESSEE COULD BE SAID TO HAVE MADE INVESTMENT IN HIS BUSINESS AND FOR MAKING THE SUBSE QUENT PURCHASES, THE SALES PROCEEDS REALIZED FROM THE INI TIAL PURCHASES WERE AVAILABLE FOR HIM FOR MAKING FURTHER PURCHASES AND SO ON. CONSIDERING THE ENTIRE FACTS AND THE PATTERN OF PUR CHASE AND SALES AS RECORDED IN THE SEIZED DIARIES, WE ARE OF THE CONSIDERED VIEW THAT IT WOULD BE FAIR AND REASONABLE TO ESTIMA TE THAT THE ASSESSEE HAD MADE INITIAL INVESTMENT FOR CARRYING O UT KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 32 UNDISCLOSED TRADING BUSINESS OF SCRAP EQUIVALENT TO A HALF MONTHS SALES OF THE ENTIRE SALES MADE DURING THE P ERIOD UNDER CONSIDERATION. ACCORDINGLY, IN OUR CONSIDERED VIEW, THE UNDISCLOSED INVESTMENT OF THE ASSESSEE IN THE INITI AL CAPITAL OF THE BUSINESS SHOULD BE COMPUTED AT 1/24 TH OF THE TOTAL ANNUAL SALES OF RS.9,30,89,378/- FOUND RECORDED IN THE SEI ZED DIARIES WHICH WORKS OUT TO BE AT RS.38,78,724/- AS AGAINST THE SAME DETERMINED BY THE LD. CIT(A) AT RS.55,28,966/-. WE ALSO DIRECT THE LD. AO THAT ASSESSEE WOULD BE ELIGIBLE TO SET O FF OF THIS AMOUNT OF RS.38,78,724/- AGAINST THE TOTAL INCOME O F RS.3,60,00,000/- SURRENDERED IN THE RETURN OF INCOM E FURNISHED UNDER S.153A OF THE ACT. HOWEVER, WE WILL DEAL WITH THE TELESCOPING BENEFIT/SET OFF AVAILABLE TO ASSESSEE A GAINST THE SURRENDERED INCOME OF RS.3.60 CR OFFERED IN THE INC OME TAX RETURNS, AVAILABLE TO THE ASSESSEE FOR THE ADDITION S TO BE CONFIRMED IN THE HANDS OF ASSESSEE, AFTER DEALING W ITH REMAINING ISSUES RAISED BEFORE US. ACCORDINGLY, THE GROUND NO S. 2(A) & 2(B) OF THE ASSESSEE ARE PARTLY ALLOWED AND GROUND NO. 2 OF THE REVENUE IS DISMISSED. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 33 GROUND NOS. 3(A), 3(B), 3(C) &3(D) OF THE ASSESSEE LOANS ADVANCED TO MR. RAHUL RS.3,00,00,000/- AND GROUND NOS. 4(A), 4(B) & 4(C) OF THE ASSESSEE ESTIMATED INTER EST ON LOANS TO MR. RAHUL RS.9,00,000/- 33. THE GROUND NOS. 3(A) TO 3(D) OF THE ASSESSEE AR E PERTAINING TO AN ADDITION OF RS.3,00,00,000/- MADE BY THE AO ON A CCOUNT OF ALLEGED ADVANCE PAYMENT BY THE ASSESSEE TO ONE MR. RAHUL BY INVOKING THE PROVISIONS OF S.69 OF THE ACT. FURTHER , THE GROUND NOS. 4(A) TO 4(C) OF THE ASSESSEE ARE CONCERNED WIT H ESTIMATION OF RECEIPT OF INTEREST OF RS.9,00,000/- ON AFORESAID A DVANCE TO MR. RAHUL. 34. THE BRIEF FACTS RELATING TO THE GROUNDS, AS CUL LED OUT FROM THE RECORDS ARE THAT DURING THE COURSE OF SEARCH AND SE IZURE OPERATIONS CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE ASSESSEE I.E. AT 62-63, CHOUMUKHI POOL, RATLAM, CERTAIN LOOS E PAPERS WERE FOUND AND SEIZED VIDE ANNEXURE LPS-12, PAGE NO . 1 TO 52 OF THE PANCHNAMA DATED 07-09-2011. AS PER THE AO, THES E LOOSE PAPERS WERE CORRESPONDENCE BETWEEN THE ASSESSEE AND HIS SON SHRI HEMANT KATARIA IN THEIR OWN RESPECTIVE HANDWRI TINGS. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 34 DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS REQUIRED TO MAKE HIS EXPLANATION ON THE SUBJECT SEIZED MATERIAL. IT WAS SUBMITTED BEFORE THE AO THAT THE L OOSE PAPERS MARKED AND INVENTORIZED AS LPS-12 WERE CONTAINING T HE NOTINGS RELATED TO PLANNING, PROJECTIONS, PURCHASE ORDERS, DETAILS OF MOVABLE AND IMMOVABLE PROPERTIES HELD BY THE FAMILY MEMBERS OF THE ASSESSEE AND OTHER CORRESPONDENCES WHICH IS EVIDENT FROM THE PARA (12.1) OF THE AOS ORDER ITSELF. SUBSEQUEN TLY, THE AO, VIDE QUESTIONNAIRE DATED 25-09-2013, REQUIRED THE A SSESSEE TO EXPLAIN THE CONTENTS OF PAGE NO. 50, LPS-12 CONTAIN ING REFERENCE OF GIVING A LOAN OF RS.300 LAKHS TO SOME SHRI RAHUL JI. IN RESPONSE TO THE SAME, THE ASSESSEE, VIDE HIS COUNSE LS LETTER DATED 25-01-2014, MADE AN EXPLANATION IN RESPECT OF THE SUBJECT LOOSE PAPER. THE REPLY OF THE ASSESSEE ON THE SUBJE CT ISSUE HAS BEEN REPRODUCED BY THE AO AT PARA 12.4 OF THE ASSES SMENT ORDER. 35. ACCORDING TO THE AO, THE CONTENTION OF THE ASSE SSEE WAS NOT ACCEPTABLE AS THE SAME IS CONTRADICTORY WITH HIS EA RLIER SUBMISSION DATED 20.3.2012, FILED BEFORE THE INVEST IGATION WING, KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 35 IN WHICH HE HAD SUBMITTED THAT THIS WAS ONLY A SIMP LE LETTER AND THERE WAS SOME DOUBT BETWEEN TWO BROTHERS BUT NOW, THE ASSESSEE HAS COME WITH A NEW STORY THAT THE AMOUNT WAS ONLY RS.29,90,000/- BUT NOT RS.3,00,00,000/-. LD. AO FUR THER STATED THAT AS PER EVIDENCE AVAILABLE ON RECORD, THE REAL FACT IS THAT RS.3,00,00,000/- WAS GIVEN BY THE ASSESSEE TO SHRI RAHULJI FROM HIS UNDISCLOSED INCOME. LD. AO ALSO NOTED THAT THE SAID LETTER WAS WRITTEN BY SHRI HEMANT KATARIA TO HIS FATHER SH RI KANTILAL KATARIA, I.E. THE ASSESSEE ON 24/12/2010, IT WILL B E ASSUMED THAT THE ASSESSEE HAS ADVANCED THIS AMOUNT ON OR BE FORE 24/12/2010. ACCORDINGLY, THE AO MADE AN ADDITION OF RS.3,00,00,000/- IN THE HANDS OF THE ASSESSEE AS UN EXPLAINED INVESTMENT IN THE FORM OF LOANS AND ADVANCES TO SHR I RAHUL JI BY INVOKING THE PROVISIONS OF SECTION 69 OF THE ACT. T HE AO FURTHER MADE AN OBSERVATION TO THE EFFECT THAT SINCE THE AS SESSEE HAS NOT FURNISHED ANY PROOF REGARDING RECEIVING BACK THE AM OUNT OF RS.3,00,00,000/-, INTEREST WILL ALSO BE ESTIMATED @ 12%. ACCORDINGLY, THE AO ESTIMATED RECEIPT OF INTEREST @ 12% P.A. ON THE AFORESAID UNEXPLAINED INVESTMENT OF RS.3,00,00, 000/- I.E. AT KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 36 RS.9,00,000/- AND RS.36,00,000/- RESPECTIVELY FOR T HE PREVIOUS YEAR RELEVANT TO A.Y. 2011-12 AND A.Y. 2012-13 AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 36. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A), AT PARA (7.3), STATED THAT DURING T HE APPEAL PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO FILE COMP LETE DETAILS OF THE IMPUGNED AMOUNT ADVANCED TO MR. RAHUL AND ALSO TO CORRELATE THE ADVANCING OF LOAN OUT OF UNRECORDED I NCOME EARNED BUT ACCORDING TO LD. CIT(A), THE ASSESSEE COULD NOT FILE ANY DETAIL OR EXPLANATION FOR THE SAME. THE LD. CIT(A) ALSO ST ATED THAT APPARENTLY, THE INCRIMINATING DOCUMENT MAKES REFERE NCE TO THE AMOUNT OF 3 CRORES ADVANCED TO RAHUL JI IN THE PAST WHICH MAY BE DURING EARLIER YEARS ALSO. UNLESS IT IS PROVED O THERWISE BY THE ASSESSEE THROUGH CONCRETE EVIDENCES, THE ASSESSEE C ANNOT BE GIVEN CREDIT OF CURRENT UNDISCLOSED INCOME TO BE SE T-OFF AGAINST THE AMOUNT UNDER CONSIDERATION. THE LD. CIT(A) FURT HER OBSERVED THAT THERE IS NO MATERIAL ON RECORD WHICH SUGGESTS DATES/ MODES/ TRENCHES OF ADVANCES GIVEN BY THE ASSESSEE T O MR. RAHUL AND THEREFORE, IT SHALL BE REASONABLE TO PRESUME TH AT THE AMOUNT KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 37 OF 3 CRORES MUST HAVE BEEN GIVEN TO MR. RAHUL IN EA RLIER YEARS. ACCORDINGLY, THE LD. CIT(A) UPHELD THE ACTION OF TH E AO IN MAKING ADDITION OF RS.3,00,00,000/- AND ESTIMATED I NTEREST IN THE ASSESSEES INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 37. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS AGITATED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.3,00,00,000/- AND ESTIMATION OF INTEREST THEREON BEFORE THIS TRIBUNAL. [ 38. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED ONE WRITTEN SYNOPSIS. THE RELEVANT PORTION OF SUCH SYNO PSIS IS BEING REPRODUCED AS UNDER: KEY POINTS OF ASSESSEES SUBMISSION AND RELEVANT P AGES OF PAPER BOOK: S. NO. SUBMISSION IN BRIEF RELEVANT PAGES OF PAPER BOOK REMARKS 1 PAGE NO. 50 OF LPS-12 ON THE BASIS OF WHICH THE AO HAS MADE ADDITION IS BASICALLY A HANDWRITTEN LETTER WRITTEN BY ONE OF THE THREE SONS OF THE ASSESSEE NAMELY SHRI HEMANT KATARIA ENQUIRING FROM THE ASSESSEE ABOUT AMOUNT OF RS.300L ALLEGEDLY GIVEN TO MR. RAHUL FOR VARIOUS PROJECTS. 141 AT THE RELEVANT TIME, SOME SEVERE FAMILY DISPUTES WERE UNDERGOING IN THE FAMILY OF THE ASSESSEE AND DURING SUCH TIME ONLY, SHRI HEMANT KATARIA GOT SOME MISLEADING INFORMATION THAT A SUM OF RS.300 LAKHS WAS GIVEN FROM THE FAMILY FUNDS TO MR. RAHUL AND UNDER SUCH CONFUSION, HE ASKED THE ASSESSEE FOR KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 38 FURNISHING THE DETAILS. 2 THE ASSESSEE NEVER MADE ANY ADVANCE OF RS.3,00,00,000/- TO MR. RAHUL. THE ASSESSEE ONLY MADE ADVANCES AGGREGATING TO RS.29.90 LAKHS TO MR. RAHUL 149 & 148 KINDLY REFER LPS-12 PAGE NO. 44 WHICH CONTAINS A LIST OF THE LOANS AND ADVANCES GIVEN TO VARIOUS PERSONS. AT S. NO. 8 & 9 OF SUCH LIST, AMOUNTS OF RS.9,90,000/- AND RS.20,00,000/- [EXTRAPOLATED TO 00] HAVE BEEN SHOWN AGAINST RAHUL JI. EVEN, IN THE DECODED FORM, SUCH REFERENCE WAS MADE BY CONCERNING SON IN HIS SUBSEQUENT LETTER TO THE ASSESSEE [KINDLY REFER PB PAGE NO. 148]. 3 FACTUM OF FAMILY DISPUTES IS EVIDENT FROM A COPY OF LETTER ADDRESSED BY THE ASSESSEE ON 01- 12-2009 TO ALL HIS THREE MAJOR SONS. A COPY OF SUCH LETTER WAS ALSO SEIZED AND INVENTORIZED DURING SEARCH AS PAGE NO. 25 TO 29 OF LPS-12 142 TO 146 IN THE SAID LETTER, THE ASSESSEE HAD REQUESTED ALL HIS SONS TO MAINTAIN PEACE AND HARMONY IN THE FAMILY AND TO PUT ALL THE DISPUTES AMONGST THEMSELVES AT REST. 4 THE THEN PREVAILING FAMILY DISPUTE, AS ASSERTED ABOVE, IS ALSO EVIDENT FROM ONE ANOTHER LETTER DATED 27- 12-2010 WRITTEN BY YET ANOTHER SON OF THE ASSESSEE, NAMELY SHRI ARVIND KATARIA, TO THE ASSESSEE. SUCH LETTER WAS ALSO SEIZED AND INVENTORIZED BY THE SEARCH PARTY AS PAGE NO. 45 OF LPS-12. 147 - 5 SHRI HEMANT KATARIA, WHO HAD WRITTEN THE LETTER ASKING FOR THE DETAILS OF RS.300 LAKHS, REALIZED THAT THE TOTAL AMOUNT OF ADVANCE TO MR. RAHUL WAS OF RS.29.90 LAKHS ONLY AND NOT OF RS.300 LAKHS. SUCH FACT IS EVIDENT FROM THE SUBSEQUENT LETTER WRITTEN BY SHRI HEMANT KATARIA WHICH HAS BEEN SEIZED AND INVENTORIZED AS PAGE NO. 51 OF LPS-12 148 ON A PERUSAL OF SUCH LETTER, IT SHALL BE OBSERVED BY YOUR HONOUR THAT ON SUCH PAPER TOO, THERE ARE TWO JOTTINGS OF 20000 AND 9900 UNDER THE NAME OF SHRI RAHUL JI WHICH FULLY COINCIDES WITH THE JOTTINGS FOUND MADE AT ANOTHER LOOSE PAPER SEIZED AND INVENTORIZED AS PAGE NO. 44 OF LPS-12 [KINDLY REFER PB PAGE NO. 149]. THE FIGURES WRITTEN AT LPS- 12, PAGE NO. 44 [PB PAGE NO. 149], HAVE BEEN DECODED BY THE AO HIMSELF BY ADDING TWO ZEROS. ACCORDINGLY, 20000 AND 9900 NEED TO BE INTERPRETED RESPECTIVELY AT RS.20,00,000/- AND RS.9,90,000/- AGGREGATING TO RS.29,90,000/- ONLY. 6 ALL THE AMOUNTS APPEARING AT PAGE NO. 44 OF LPS-12 [PB PAGE NO. 149] HAVE BEEN TAKEN INTO THE SURROUNDING LOOSE PAPERS OF THE SAME LPS-12 I.E. PAGE NO. 44, WHICH HAVE ALSO BEEN RELIED UPON KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 39 CONSIDERATION BY THE AO WHILE MAKING A SEPARATE ADDITION OF RS.7,83,60,000/- ON THIS COUNT IN THE HANDS OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR AND DECODED BY THE AO HIMSELF WHILE MAKING ANOTHER ADDITION OF RS.7,83,60,000/-, ARE STRONG EVIDENCE TO ESTABLISH THE ASSERTION OF THE ASSESSEE THAT HE HAD ADVANCED A SUM OF RS.29,90,000/- ONLY TO MR. RAHUL AND NOT RS.3,00,00,000/- AS WRONGLY PRESUMED BY THE AO 7 EVEN THE CIT(A), AT PARA (7.3), HAS STATED THAT THE AMOUNT OF 3 CRORES TO RAHUL JI MAY HAVE BEEN ADVANCED DURING EARLIER YEARS ALSO. AS PER THE CIT(A) HIMSELF, THERE IS NO MATERIAL ON RECORD WHICH SUGGESTS DATES/ MODES/ TRENCHES OF ADVANCES GIVEN BY THE ASSESSEE TO MR. RAHUL AND THEREFORE, IT SHALL BE REASONABLE TO PRESUME THAT THE AMOUNT OF 3 CRORES MUST HAVE BEEN GIVEN TO MR. RAHUL IN EARLIER YEARS - PARA 7.3, PG. 57 OF CIT(A)S ORDER. IF ACCORDING TO THE CIT(A), THE LOANS WERE GIVEN IN EARLIER YEARS, THEN THE SAME CANNOT BE REGARDED AS INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS A SETTLED LAW THAT ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT CAN BE MADE ONLY IN THAT YEAR IN WHICH THE ASSESSEE WAS FOUND TO HAVE MADE SUCH INVESTMENT. 8 IT IS A SETTLED LAW THAT ALL THE SEIZED MATERIAL, FOUND FROM THE SAME LOCATION, SHOULD BE READ CONJOINTLY AND A LOOSE PAPER CANNOT BE READ INTO ISOLATION BY DISREGARDING THE OTHER LOOSE PAPERS FOUND AND SEIZED IN THE SIMILAR CIRCUMSTANCES. EXCEPT LOOSE PAPER NO. 50 OF LPS-12, ALL OTHER LOOSE PAPERS OF LPS-12 GIVE A CLEAR INDICATION AND RATHER EVIDENCE THAT THE AGREEMENT AMOUNT OF ADVANCES TO MR. RAHUL AGAINST PURCHASE OF PROPERTIES IN TWO PROJECTS WAS AGGREGATING TO RS.29,90,000/- ONLY AND NOT OF RS.300 LAKHS AS PRESUMED BY THE AO TO SUIT HIS OWN CONVENIENCE. 141 THE ASSESSEE HAS DEMONSTRATED THAT EVEN THE CONTENTS OF LOOSE PAPER BEARING PAGE NO. 50 OF LPS- 12 ARE NOT CORRECT AND THEREFORE, THERE CANNOT BE ANY JUSTIFICATION FOR PRESUMING THE AMOUNT OF ADVANCE TO BE AT RS.300 LAKHS AS AGAINST THE ACTUAL AMOUNT OF ADVANCE OF RS.29,90,000/- 9 THE AO, EXCEPT BANKING UPON THE ONLY LOOSE PAPER INVENTORIZED AS PAGE NO. 50 OF LPS-12, HAS NOT CONDUCTED ANY OTHER ENQUIRY AND HAS NOT BROUGHT ON RECORD ANY OTHER TANGIBLE ADVERSE MATERIAL. THE AO HAS NOT CONDUCTED ANY ENQUIRY FROM SHRI HEMANT KATARIA, THE AUTHOR OF THE LETTER. THE AO HAS ALSO NOT ENQUIRED EITHER FROM THE ASSESSEE OR FROM ANYONE ELSE ABOUT THE WHEREABOUTS OF MR. RAHUL. THE AO - THE PRESUMPTION OF THE AO AS REGARD TO MAKING OF ADVANCE OF RS.300 LAKHS BY THE ASSESSEE TO MR. RAHUL IS NOT CORROBORATED FROM ANY OTHER EVIDENCE, NO CREDENCE DESERVES TO BE GIVEN TO SUCH A BALD AND PATENTLY WRONG PRESUMPTION. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 40 HAS ALSO NOT MADE ANY EFFORT FOR CONDUCTING ANY ENQUIRY FROM MR. RAHUL EITHER BY WAY OF ISSUANCE OF SUMMONS UNDER S.131 OR CALLING INFORMATION UNDER S.133(6) OF THE ACT. 10 AS REGARD TO THE SOURCE OF ADVANCE OF RS.29,90,000/-, IT IS SUBMITTED THAT SUCH ADVANCES WERE GIVEN BY THE ASSESSEE IN TWO TRENCHES OF RS.20,00,000/- AND RS.9,90,000/- OUT OF UNACCOUNTED RECEIPTS OF HIS UNACCOUNTED BUSINESS OF SCRAP AND GRANULES. IN RESPECT OF SUCH BUSINESS, THE ASSESSEE HAD ALREADY MADE NECESSARY DISCLOSURE OF INCOME OF RS.1,00,00,000/- IN HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. - OVER AND ABOVE SUCH INCOME OF RS.1,00,00,000/-, THE ASSESSEE HAS FURTHER DISCLOSED AN ADDITIONAL INCOME OF RS.2,60,00,000/- IN HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THUS, IN TOTALITY, TO ASSESSEE, THERE WAS AVAILABILITY OF SUFFICIENT FUNDS AGGREGATING TO RS.3,60,00,000/- AND THEREFORE, OUT OF SUCH FUNDS, THE INVESTMENT OF RS.29,90,000/- CANNOT BE DISBELIEVED. SOURCES ARE COVERED BY THE UNDISCLOSED INCOME SHOWN IN THE RETURN AS IS APPARENT FROM THE TABLE GIVEN AT PART-II ABOVE 39. LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO T HE DETAILED SUBMISSION MADE BEFORE THE LD. CIT(A) (PLACED AT PA GE NO. 15 TO 20 OF THE PAPER BOOK). THE SAME HAS ALSO BEEN REPRO DUCED BY THE LD. CIT(A) AT PAGE NO. 54 TO 56 OF THE IMPUGNED ORDER WHILE ADJUDICATING THE GROUND NOS. 5(A), 5(B), 5(C)&5(D) RAISED BY THE ASSESSEE. REFERENCE WAS ALSO MADE TO FOLLOWING SUBM ISSIONS MADE BEFORE THE LD. CIT(A): KEY POINTS OF ASSESSEES SUBMISSION AND RELEVANT PA GES OF PAPER BOOK: S. NO. SUBMISSION IN BRIEF RELEVANT PAGES OF PAPER BOOK REMARKS 1 NO IOTA OF EVIDENCE FOUND SUGGESTING RECEIPT OF ANY INTEREST BY THE ASSESSEE FROM MR. RAHUL. - - KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 41 2 THE ASSESSEE HAS ONLY GIVEN ADVANCES OF RS.29,90,000/- TO MR. RAHUL AND SUCH ADVANCES WERE NOT GIVEN AS INTEREST BEARING BUT THE SAME WERE GIVEN FOR MAKING INVESTMENT IN SOME PROPERTIES AT KHAJRANA AND SHRINAGAR WHICH IS EVIDENT FROM LPS-12 PAGE NO. 44. 149 - 3 THE ASSESSEE HIMSELF HAD SHOWN AN INCOME OF RS.3,60,00,000/-, IN HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, FROM UNDISCLOSED SOURCES AND THEREFORE, EVEN IF ANY RECEIPT OF INTEREST IS ASSUMED, THE SAME IS VERY WELL COVERED BY THE AFORESAID INCOME AND NO FURTHER ADDITION WAS WARRANTED - - 40. PER CONTRA LD. CIT-DR VEHEMENTLY ARGUED REFERRI NG TO THE FINDING OF BOTH THE LOWER AUTHORITIES AND SEIZED DO CUMENTS. 41. WE HAVE HEARD RIVAL CONTENTIONS, DULY CONSIDERE D THE FACTS AND CIRCUMSTANCES OF THE CASE, CAREFULLY GONE THROU GH THE ORDERS OF BOTH THE LOWER AUTHORITIES, RELEVANT SEIZED DOCU MENTS AND MATERIAL PLACED BEFORE US. WE FIND THAT IN THE INST ANT CASE, LD.AO HAS MADE THE ENTIRE ADDITION OF RS.3,00,00,00 0/- AS UNEXPLAINED INVESTMENT OF THE ASSESSEE UNDER S.69 O F THE ACT ON ACCOUNT OF ADVANCE PAYMENT MADE TO SOME MR. RAHUL O N THE SOLE BASIS OF SOME CORRESPONDENCES EXCHANGED BETWEE N THE ASSESSEE AND HIS SON SHRI HEMANT KATARIA. WE FIND T HAT BOTH THE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 42 AUTHORITIES BELOW HAVE HEAVILY RELIED UPON ONE LETT ER DATED 25.12.2010 PURPORTED TO BE IN THE HANDWRITING OF SH RI HEMANT, (ONE OF THE SONS OF THE ASSESSEE) AND GIVEN TO THE ASSESSEE BY WHICH HE HAS REQUIRED HIS FATHER TO SEEK THE DETAIL S OF THE VARIOUS ADVANCES AGGREGATING TO 300 LACS (WRITTEN A S 300L), FOR VARIOUS PROJECTS. WE FIND THAT EXCEPT THIS LETTER, THERE WAS NO OTHER BASIS EITHER FOR THE AO OR FOR THE CIT(A) TO PRESUME THAT THE ASSESSEE HAD GIVEN SOME ADVANCES AMOUNTING TO R S.300 LACS TO SOME MR. RAHUL. 42. WE NOTICE THAT AT THE RELEVANT TIME, WHEN THE L ETTERS WERE EXCHANGED BETWEEN THE ASSESSEE AND HIS SON, SOME FA MILY DISPUTES WERE GOING ON AND ONE OF THE SONS SHRI HEM ANT KATARIA, WITHOUT HAVING ANY AUTHENTIC INFORMATION, WAS SIMPLY ASSUMING THAT SOME SUM OF RS.300 LACS WAS GIVEN BY THE ASSESSEE TO SHRI RAHUL. HOWEVER, ON THE ANOTHER LOO SE PAPER INVENTORIZED AS PAGE NO. 51 OF LPS-12, AS SEIZED FR OM THE SAME PREMISES ALONG WITH THE ABOVE REFERRED LETTER, AGAI N TWO JOTTINGS WITH FIGURES OF 20000 & 9900 HAVE BEEN FOUND WR ITTEN UNDER THE NAME RAHUL. WE ALSO NOTICE THAT A CLAIM WAS M ADE BY KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 43 ASSESSEE BEFORE BOTH THE AUTHORITIES THAT THE TOTAL AMOUNT OF ADVANCE TO SHRI RAHUL WAS NOT TO THE EXTENT OF RS.3 00 LACS BUT, IT WAS ONLY TO THE EXTENT OF RS.29,90,000/-. IT WAS SUBMITTED THAT MR. RAHUL WAS GIVEN ADVANCES IN TWO PARTS OF RS.20,00,000/- AND RS.9,90,000/- AND SINCE THE ASSE SSEE AND OTHER FAMILY MEMBERS WERE HABITUATE TO WRITE THE FI GURES IN CODED FORM BY OMITTING TWO ZEROS, THE SUM OF RS.20, 00,000/- AND RS.9,90,000/- WERE RESPECTIVELY WRITTEN IN THE CODED FORM AS 20000 AND 9900. WE ALSO FIND THAT IN THE JOTTIN GS FOUND MADE IN YET ANOTHER LOOSE PAPER INVENTORIZED AS PAGE NO. 44 OF LPS-12, WHICH HAS BEEN REPRODUCED BY THE LD. CIT(A) AT PARA (11.3) ON PAGE NO. 71 OF THE IMPUGNED ORDER WHILE ADJUDICATIN G ANOTHER GROUND OF ADDITIONS MADE BY LD. AO. WE FIND THAT BA SED UPON SUCH LOOSE PAPER, THE AO, WHILE MAKING ADDITION ON SOME OTHER ISSUE, FOR WHICH THE ASSESSEE AND REVENUE HAVE RAIS ED SEPARATE GROUNDS AND WHICH HAVE BEEN DISCUSSED IN THE SUBSEQ UENT PARAS, HAS REACHED TO A CONCLUSION THAT THE ASSESSE E HAD GIVEN LOANS/ ADVANCES TO VARIOUS PERSONS FOR THE AMOUNT A S WRITTEN AGAINST THE NAME OF SUCH PERSONS, IN THE CODED FORM , BY KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 44 OMITTING TWO ZEROS. ON A PERUSAL OF THE SEIZED LOOS E PAPER, WE FIND SUFFICIENT FORCE IN THE CONTENTION OF THE ASSE SSEE THAT THE FACTUM OF MAKING ADVANCES AMOUNTING TO RS.20,00,000 /- AND RS.9,90,000/-, IN TWO PARTS ARE ALSO JOTTED DOWN IN SUCH LOOSE PAPER. THUS, WE FIND THAT AS AGAINST THE ONLY ONE M ENTION OF RS.300LACS ON ONE LETTER, ON ALL OTHER LOOSE PAPERS WHICH HAVE ALSO BEEN RELIED UPON BY LD. AO WHILE MAKING ANOTHE R ADDITION, THE AGGREGATE AMOUNT OF ADVANCES GIVEN BY THE ASSES SEE TO MR. RAHUL WORKS OUT TO BE AT RS.29,90,000/- ONLY. 43. WE FIND THAT IN THIS CASE, EXCEPT PLACING RELIA NCE ON SOME JOTTING IN SOME LETTER FROM ONE OF THE SONS OF THE ASSESSEE ADDRESSED TO THE ASSESSEE, LD. AO OR THE LD. CIT(A) WAS NOT HAVING ANY OTHER CORROBORATIVE EVIDENCE ON RECORD. WE NOTICE THAT LD. AO HAS NOT MADE ANY ATTEMPT TO MAKE ANY EN QUIRY EITHER FROM MR. RAHUL OR FROM MR. HEMANT, THE AUTHO R OF THE LETTER. EVEN THE STATEMENT OF THE ASSESSEE ON THIS ISSUE WAS NOT SOUGHT EITHER BY THE INVESTIGATION WING OR BY THE A O. HOWEVER, AS AGAINST SUCH SOLE PIECE OF EVIDENCE IN THE FORM OF LETTER, WITH THE AID OF THE OTHER LOOSE PAPERS, LD. COUNSEL FOR THE ASSESSEE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 45 HAS ESTABLISHED THAT THE AMOUNT OF ADVANCES GIVEN T O MR. RAHUL WAS TO THE EXTENT OF RS.29,90,000/- ONLY. AND ON TH IS DOCUMENT WHICH CONTAIN NAMES OF VARIOUS OTHER PERSON TO WHOM LOANS AND ADVANCES ARE ALLEGED TO HAVE BEEN GIVEN IS ALSO IN DISPUTE BEFORE US AND SHALL BE DEALT WITH IN SUBSEQUENT PARAS. ACC ORDINGLY IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE R EVERSE THE FINDING OF THE LD. CIT(A) GIVEN IN THE IMPUGNED ORD ER ON THE SUBJECT ISSUE. 44. WE FURTHER FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT EVEN IN RESPECT OF SUM OF RS.29,90,000/-, NO SEPARA TE ADDITION WAS CALLED FOR INASMUCH ON THE BASIS OF JOTTINGS OF RS.20,00,000/- AND RS.9,90,000/-, MADE IN THE LOOSE PAPER SEIZED AND INVENTORIZED AS LPS-12, PAGE NO. 44, THE AO HAS ALREADY MADE A SEPARATE ADDITION OF RS.7,83,60,000/ - WHICH WAS PARTLY CONFIRMED BY LD. CIT(A). SINCE, BOTH THE ASSESSEE AND THE REVENUE HAVE TAKEN SEPARATE GROUNDS ON THIS ISS UE, WHICH HAVE BEEN ADJUDICATED BY US IN THE SUBSEQUENT PARAS , AND FURTHER SINCE, WE FIND THAT THE AMOUNT OF RS.29,90, 000/- HAS ALREADY BEEN CONSIDERED BY BOTH THE AUTHORITIES BEL OW WHILE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 46 MAKING/ RESTRICTING THE ADDITION AS AFORESAID, IN O UR CONSIDERED VIEW, NO FURTHER ADDITION IS REQUIRED ON ACCOUNT OF ADVANCES AMOUNTING TO RS.29,90,000/- MADE BY THE ASSESSEE TO MR. RAHUL. IT IS WELL KNOWN MAXIM OF THE LAW THAT THE S AME ADDITION CANNOT BE MADE TWICE. SINCE, WHILE MAKING THE SEPAR ATE ADDITION OF RS.7,83,60,000/-, WHICH INCLUDES THE ADVANCES AM OUNTING TO RS.29,90,000/- GIVEN BY THE ASSESSEE TO MR. RAHUL, THE AO HAS SEPARATELY DETERMINED THE INTEREST AMOUNTING TO RS.1,25,23,200/-, IN OUR CONSIDERED VIEW, NO SEPARA TE ADDITION IS REQUIRED EVEN IN RESPECT OF RECEIPT OF INTEREST ON ADVANCE TO MR. RAHUL. ACCORDINGLY, THE GROUND NOS. 3(A) & 3(B) OF THE ASSESSEE ARE ALLOWED. 45. THROUGH THE GROUND NO. 3(C), THE ASSESSEE HAS A GITATED THE ACTION OF THE LD. CIT(A) IN NOT GRANTING ANY BENEFI T OF TELESCOPING TO THE ASSESSEE IN RESPECT OF ADVANCES GIVEN TO MR. RAHUL AGAINST THE ADDITIONAL INCOME OF RS.3,60,00,000/- SURRENDER ED AND SHOWN BY THE ASSESSEE HIMSELF IN HIS RETURN OF INCO ME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THIS GROUND O F THE ASSESSEE BECOMES INFRUCTIOUS AND ACADEMIC SINCE WE HAVE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 47 ALREADY DELETED THE ADDITION OF RS.3 CR. FOR THE AL LEGED ADVANCE TO MR. RAHUL. HOWEVER WE FIND THAT THE LD. CIT(A) HAS DISLODGED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESS EE FAILED TO DEMONSTRATE THAT THE ADVANCE TO RAHUL WAS GIVEN ONL Y DURING THE YEAR UNDER CONSIDERATION AND NOT IN THE EARLIER YEARS AND THEREFORE, THE BENEFIT OF TELESCOPING OF SUCH ADVAN CES AGAINST THE ADDITIONAL UNDISCLOSED INCOME SHOWN IN THE RETURN F OR THE YEAR UNDER CONSIDERATION CANNOT BE GIVEN. IN OUR CONSIDE RED OPINION, THE LD. CIT(A) IS NOT CORRECT IN HIS APPROACH FOR T HE REASON THAT IF THE ASSESSEE HAD GIVEN THE ADVANCES IN THE EARLIER YEARS THEN, LEGALLY, NO ADDITION ON THIS COUNT COULD HAVE BEEN MADE IN THE ASSESSEES INCOME FOR THE YEAR UNDER CONSIDERATION. ONCE THE CIT(A) HAS CONFIRMED THE ADDITION UNDER S.69 OF THE ACT, IT HAS TO BE NECESSARILY HELD THAT THE ADVANCES WERE GIVEN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ONLY AND NOT IN THE EARLIER YEARS, FOR THE REASON THAT UNDER THE PROVISIONS OF S.69 OF THE ACT, AN ADDITION CAN BE MADE ONLY FOR THE YEAR IN WHICH THE ASSESSEE HAS BEEN FOUND TO HAVE MADE UNDISCLOSED INVESTMENT. IN OUR VIEW, THE LD. CIT(A) WAS NOT CORRECT IN SAILING ON TWO BOATS KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 48 INASMUCH WHILE CONFIRMING THE ADDITION, HE HAS PRES UMINGLY AFFIRMED THAT THE ASSESSEE HAD MADE THE INVESTMENT ONLY DURING THE YEAR UNDER CONSIDERATION BUT, WHILE CONSIDERING THE BENEFIT OF TELESCOPING, THE LD. CIT(A) HAS PRESUMED THAT TH E ASSESSEE MIGHT HAVE MADE SUCH INVESTMENTS BY GIVING ADVANCES TO MR. RAHUL IN EARLIER YEARS. IN OUR CONSIDERED VIEW, SIN CE, WE HAVE FULLY DELETED THE ADDITION OF RS.3,00,00,000/- SO M ADE BY THE AO, AS AFORESAID, THE QUESTION OF TELESCOPING HAS B ECOME ACADEMIC IN NATURE ONLY. ACCORDINGLY, THE GROUND NO . 3(C) OF THE ASSESSEE IS ALLOWED. 46. THROUGH THE GROUND NO. 3(D), THE ASSESSEE HAS C LAIMED THAT THE LD. CIT(A) DID NOT ACCEPT HIS PLEA THAT THE ADV ANCES GIVEN TO MR. RAHUL WERE RECEIVED BACK DURING THE YEAR UNDER CONSIDERATION ONLY. IN OUR VIEW, HAVING GIVEN A FIN DING THAT ON ACCOUNT OF ADVANCE GIVEN TO MR. RAHUL, NO SEPARATE ADDITION IS WARRANTED, THIS GROUND HAS BECOME ACADEMIC IN THE N ATURE ONLY. EVEN OTHERWISE, WE FIND THAT THE ASSESSEE AT NO STA GE COULD SUBSTANTIATE HIS CLAIM OF HAVING RECEIVED BACK THE ADVANCES GIVEN TO MR. RAHUL WITH ANY POSITIVE EVIDENCE, THE CLAIM OF THE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 49 ASSESSEE IS NOT ELIGIBLE FOR ACCEPTANCE. ACCORDINGL Y, GROUND NO. 3(D) OF THE ASSESSEE IS DISMISSED. 47. THROUGH THE GROUND NOS. 4(A), 4(B) & 4(C), THE ASSESSEE HAS AGITATED THE CONFIRMATION OF ADDITION AMOUNTING TO RS.9,00,000/- MADE BY THE AO ON ACCOUNT OF INTEREST ON ADVANCES AMOUNTING TO RS.3,00,00,000/- GIVEN TO MR. RAHUL. SINCE WHILE ADJUDICATING THE GROUND NO. 3(A) & 3(B) , WE HAVE ALREADY GIVEN OUR FINDINGS THAT FIRST OF ALL, THE A MOUNT OF ADVANCE GIVEN TO MR. RAHUL WAS ONLY TO THE EXTENT OF RS.29, 90,000/- AND FURTHER SINCE, WE HAVE ALREADY GIVEN A FINDING THAT IN RESPECT OF SUCH ADVANCES AND INTEREST THEREON, SEPARATE ADDITI ONS HAVE ALREADY BEEN MADE BY THE AO, IN OUR CONSIDERED VIEW , THE ADDITION OF RS.9,00,000/- SO MADE BY THE AO IS NOT SUSTAINABLE. ACCORDINGLY, GROUND NOS. 4(A), 4(B) & 4(C) OF THE A SSESSEE ARE ALLOWED. 48. GROUND NO. 5 OF THE ASSESSEE AND GROUND NO. 3 & 4 OF THE REVENUE UNEXPLAINED INVESTMENT IN LAND U/S. 69 RS.52,00,000/- AND PROFIT ON SALE THEREOF RS.12,6 0,000/- KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 50 49. THE GROUND NO. 5 OF THE ASSESSEE IS AGAINST THE ACTION OF THE LD. CIT(A) IN NOT GIVING A FINDING TO THE EFFECT TH AT THE ASSESSEE HAVING LIQUIDATED THE INVESTMENT MADE IN LAND AT RS.52,00,000/- DURING THE RELEVANT YEAR ITSELF WAS HAVING SUCH FUNDS AVAILABLE FOR EXPLAINING THE SOURCES OF HIS U NEXPLAINED INVESTMENTS. WHEREAS, THE GROUND NOS. 3 & 4 RAISED BY THE REVENUE PERTAINS TO THE ACTION OF THE LD. CIT(A) IN GIVING TELESCOPING BENEFIT OF ADDITION OF RS.52,00,000/- M ADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND AND RS.12,60,000/- ON ACCOUNT OF PROFIT ON SALE OF SUCH LAND, AGAINST THE SURRENDERED INCOME OF RS.3.60 CR. OFFERED DURIN G SEARCH AND DISCLOSED IN INCOME TAX RETURN. 50. THE BRIEF FACTS RELATING TO THE GROUNDS, AS CUL LED OUT FROM THE RECORDS ARE THAT ONE PAGE NO. 47 OF LPS-12 WAS FOUN D AND SEIZED FROM THE PREMISES OF THE ASSESSEE. SUCH LOOSE PAPER WAS IN THE FORM OF A LETTER DATED 12-01-2011 WRITTEN BY SHRI H EMANT KATARIA [ONE OF THE SONS OF THE ASSESSEE] TO THE AS SESSEE ASKING, VIDE Q. NO. 9, FOR DETAILS OF LAND PURCHASED AND SO LD AT INDORE. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 51 BELOW SUCH QUERY, SOME JOTTINGS OF PURCHASE AND SAL E ARE WRITTEN IN THE HANDWRITING OF THE ASSESSEE THAT 650 00 SQ. FT. LAND PURCHASED FOR RS.80/- PER SQ. FT. AND 36000 SQ. FT. LAND SOLD FOR RS.115/- PER SQ. FT.DURING THE COURSE OF THE ASSESS MENT PROCEEDINGS, LD. AO REQUIRED THE ASSESSEE TO FURNI SH THE DETAILS OF PURCHASES AND SALES. THE ASSESSEE, IN RESPONSE, STATED THAT HE HAD MADE AN INVESTMENT OF RS.52,00,000/- FOR PUR CHASE OF LAND BUT THE REGISTRATION OF THE SAME HAD NOT TAKEN PLACE. THE ASSESSEE FURTHER ADDED THAT THE ENTIRE INVESTMENT W AS MADE OUT OF HIS UNDISCLOSED INCOME AND THE SAME WAS COVERED BY THE ADDITIONAL INCOME OF RS.3,60,00,000/- SHOWN BY THE ASSESSEE IN HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YE AR. SINCE AS PER THE ASSESSEE, NO FORMAL DOCUMENTS WERE EXECUTED FOR PURCHASE AND SALE, THE DETAILS OF SELLERS AND BUYER S COULD NOT BE FURNISHED. LD. AO HAS STATED THAT THE ASSESSEE DID NOT FILE ANY DETAILS IN RESPECT OF PURCHASERS AND SELLERS OR COP IES OF AGREEMENTS ETC. LD. AO FURTHER STATED THAT THE PAYM ENT MADE BY THE ASSESSEE WAS NOT RECORDED IN THE BOOKS OF ACCOU NT AND EXPLANATION OFFERED BY THE ASSESSEE REGARDING NATUR E AND SOURCE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 52 OF INVESTMENT WAS FOUND UNSATISFACTORY, LD. AO TREA TED THE INVESTMENT OF RS.52,00,000/- IN PURCHASE OF PROPERT Y AS UNEXPLAINED INVESTMENT U/S. 69 OF THE ACT. AND MADE ADDITION THERETO, AND ALSO MADE AN ADDITION OF RS.12,60,000/ - ON ACCOUNT OF SHORT TERM CAPITAL GAIN ON SALE OF LAND. 51. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) STATED THAT LD. AO WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD PURCHASED 65000 SQ. FT. LAND IN IN DORE @RS.80/- PER SQ. FT. BY MAKING INVESTMENT OF RS.52, 00,000/-. HOWEVER, THE LD. CIT(A) ALSO FOUND THAT THE ASSESSE E HAS DISCLOSED ADDITIONAL INCOME OF RS.2,60,00,000/- IN HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR WHICH IS SU FFICIENT TO COVER THE SUBJECT INVESTMENT IN PURCHASE OF LAND. T HEREFORE, THE LD. CIT(A) DIRECTED LD. AO TO ALLOW CREDIT OF SURRE NDERED AMOUNT AGAINST SUCH INVESTMENT AND HELD THAT NO SEPARATE A DDITION WAS WARRANTED. FURTHER, IN RESPECT OF THE ADDITION OF R S.12,60,000/- ON ACCOUNT OF PROFIT ON SALE OF LAND, THE LD. CIT(A ) HAS STATED THAT THE INCRIMINATING DOCUMENT PAGE NO. 47 OF LPS- 12 EVIDENTLY REFLECTS THE EARNING OF PROFIT @RS.35 PER SQ. FT. O N SALE RATE OF KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 53 RS.115 SQ. FT. AS AGAINST PURCHASE OF RS. 80 PER SQ . FT. THEREFORE, THE ACTION OF LD. AO HAS BEEN JUSTIFIED AND THE ADD ITION REQUIRES TO BE CONFIRMED. HOWEVER, THE LD. CIT(A), CONCURRIN G WITH THE CONTENTION OF THE ASSESSEE, HELD THAT NO SEPARATE A DDITION IS REQUIRED AS THE SAME IS TO BE CONSIDERED AS COVERED IN THE SURRENDERED INCOME OF RS.2.60 CRORES SHOWN BY THE A SSESSEE FROM THE SOURCES OTHER THAN BUSINESS INCOME. ACCORD INGLY, THE LD. CIT(A) DIRECTED LD. AO TO DELETE THE ADDITION. 52. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), BOT H THE ASSESSEE AS WELL AS THE REVENUE HAVE PREFERRED CROSS-APPEALS BEFORE THIS TRIBUNAL ON THIS ISSUE. 53. LD. CIT-DR VEHEMENTLY ARGUED SUPPORTING THE ORD ER OF LD. ASSESSING OFFICER. 54. PER CONTRA LD. SR. LEARNED COUNSEL FOR THE ASSE SSE HAS FILED ONE WRITTEN SYNOPSIS AND THE RELEVANT PORTION OF TH E SOURCE IS BEING REPRODUCED AS UNDER: A ). KEY POINTS OF ASSESSEES SUBMISSION AND RELEVANT PAGES OF PAPER BOOK: S. SUBMISSION IN BRIEF RELEVANT REMARKS KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 54 NO. PAGES OF PAPER BOOK 1 THE INVESTMENT OF RS.52,00,000/- WAS MADE BY THE ASSESSEE OUT OF HIS UNDISCLOSED INCOME ALREADY SURRENDERED AND DISCLOSED IN THE RETURN OF INCOME 68 THE ASSESSEE DISCLOSED AN ADDITIONAL INCOME OF RS.3,60,00,000/- IN HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. THE SAME HAS ALSO BEEN CONSIDERED IN THE TABLE GIVEN AT PART-II ABOVE. 2 IN RESPECT OF THE SUBJECT TRANSACTIONS, NO REGISTRATION OF DOCUMENTS WAS DONE. SINCE NO FORMAL DOCUMENTS REGARDING PURCHASES AND SALES WERE ENTERED INTO, THE SAME COULD NOT BE PRODUCED BEFORE THE LOWER AUTHORITIES AND IN SUCH EVENTUALITY, THE ASSESSEE ALSO COULD NOT FURNISH THE DETAILS OF PURCHASERS AND SELLERS. - B) KEY POINTS OF ASSESSEES SUBMISSION AND RELEVANT PAGES OF PAPER BOOK: S. NO. SUBMISSION IN BRIEF RELEVANT PAGES OF PAPER BOOK REMARKS 1 THE ASSESSEE DISCLOSED AN ADDITIONAL INCOME OF RS.3,60,00,000/- IN HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR WHICH IS INCLUSIVE OF THE PROFIT OF RS.12,60,000/- FROM SALE OF THE SUBJECT LAND AND THEREFORE, NO SEPARATE ADDITION WAS WARRANTED. 68 THE INCOME HAS ALSO BEEN CONSIDERED IN THE TABLE GIVEN AT PART-II ABOVE. 55. RELIANCE ALSO PLACED ON THE SUBMISSION OF THE A SSESSEE MADE BEFORE THE CIT(A) PLACED AT PAGE NO. 23 & 24 OF TH E PAPER BOOK. THE SAME HAS ALSO BEEN REPRODUCED BY THE CIT(A) AT PAGE NO. 63 OF THE IMPUGNED ORDER WHILE ADJUDICATING THE GROUND NOS. 8(A) KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 55 &8(B) RAISED BY THE ASSESSEE. THE ASSESSEE WISH TO PLACE RELIANCE ON SUCH DETAILED WRITTEN SUBMISSION MADE BEFORE THE CIT(A). 56. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACE BEFORE US AND CAREFULLY GONE THROUGH THE ORDE R OF THE LOWER AUTHORITIES AND DOCUMENTS FILED BEFORE US BY BOTH T HE SIDES. WE FIND THAT THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION OF RS.52,00,000/- AND RS.12,60,000/- RESPECTIVELY ON A CCOUNT OF UNEXPLAINED INVESTMENT IN LAND AND PROFIT ON SALE T HEREOF. WE ALSO FIND NO INFIRMITY IN THE ACTION OF THE LD. CIT (A) TO GRANT THE BENEFIT OF TELESCOPING TO THE ASSESSEE IN RESPECT O F THE AFORESAID UNDISCLOSED INVESTMENT AND UNDISCLOSED PROFIT AGAIN ST THE ADDITIONAL UNDISCLOSED INCOME OF RS.2,60,00,000/- V OLUNTARILY SHOWN BY THE ASSESSEE HIMSELF IN HIS RETURN OF INCO ME FURNISHED UNDER S.153A OF THE ACT FOR THE REASON THAT THE INC OME SO SHOWN BY THE ASSESSEE WAS SUFFICIENT TO COVER UP THE AFOR ESAID UNDISCLOSED INVESTMENT IN THE LAND AND AS ALSO, THE UNDISCLOSED PROFIT ON SALE OF LAND. THUS, THE GROUND NOS. 3 & 4 OF THE REVENUE, BEING DEVOID OF ANY MERITS, ARE HEREBY DIS MISSED. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 56 57. THROUGH THE GROUND NO. 5, THE ASSESSEE HAS CLAI MED THAT THE LD. CIT(A) HAS ERRED IN NOT GIVING A FINDING TO THE EFFECT THAT THE SALES PROCEEDS FROM THE SALES OF THE LAND WERE AVAILABLE TO THE ASSESSEE FOR EXPLAINING THE SOURCES OF OTHER UN DISCLOSED INVESTMENTS FOUND MADE BY HIM DURING THE YEAR UNDER CONSIDERATION. 58. BEFORE US, IT HAS BEEN CONTENDED BY LD. COUNSEL FOR THE ASSESSEE THAT FROM THE SEIZED DOCUMENTS VIZ. PAGE N O. 47 OF LPS- 12 CONTAINING LETTER DATED 12.01.2011 PLACED AT PAG E NO. 150 OF THE ASSESSEES PAPER BOOK, IT IS EVIDENT THAT DURIN G THE YEAR UNDER CONSIDERATION ITSELF, THE ASSESSEE HAD MADE A N INVESTMENT OF RS.52,00,000/- FOR PURCHASE OF CERTAIN LANDS ADM EASURING 65000 SQ.FT. AT A RATE OF RS.80/- PER SQ. FT. AND S UCH INVESTMENT IS CLAIMED TO HAVE BEEN MADE OUT OF UNDISCLOSED INC OME AMOUNTING TO RS.2,60,00,000/- IT HAS FURTHER BEEN C ONTENDED THAT FROM THE SAME SEIZED PAPER, IT IS EVIDENT THAT OUT OF THE AFORESAID 65000 SQ.FT. OF LAND, DURING THE YEAR UND ER CONSIDERATION ITSELF, THE ASSESSEE HAD SOLD 36000 S Q.FT. LAND AT A KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 57 RATE OF RS.115/- PER SQ.FT. I.E. FOR RS.40,80,000/- . IT HAS FURTHER BEEN SUBMITTED BY THE ASSESSEE THAT IN RESPECT OF T HE PROFIT ON SALE OF THE 36000 SQ.FT. LAND WHICH WORKS OUT TO BE RS.35/- PER SQ.FT. AT RS.12,60,000/-, A SEPARATE ADDITION HAS D ULY BEEN MADE BY THE AO HIMSELF. IT HAS BEEN CONTENDED THAT THE S ALES PROCEEDS AMOUNTING TO RS.40,80,000/- FROM THE SUBJECT LAND W AS DULY AVAILABLE TO THE ASSESSEE FOR EXPLAINING HIS SOURCE S FOR OTHER UNEXPLAINED AND UNDISCLOSED INVESTMENTS IN LOANS AN D ADVANCES AND AS ALSO, IN THE SCRAP BUSINESS. IT WAS PRAYED T HAT A SUITABLE DIRECTION FOR GRANT OF BENEFIT OF TELESCOPING AGAIN ST SUCH SALE PROCEEDS OF RS.40,80,000/- BE ALLOWED AGAINST OTHER UNEXPLAINED INVESTMENTS FOUND TO HAVE BEEN MADE IN THE SAME YEAR. 59. PER CONTRA, THE LD. CIT(DR) OBJECTED THE ASSESS EES CLAIM ON THE GROUND THAT THE ASSESSEE COULD NOT ESTABLISH NE XUS OF SUCH SALES PROCEEDS WITH OTHER UNEXPLAINED INVESTMENTS. 60. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, SEIZE D DOCUMENTS AND FACTS AND CIRCUMSTANCES OF THE CASE. IN OUR CON SIDERED VIEW, KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 58 HAVING HELD THAT THE ASSESSEE HAD DERIVED INCOME AM OUNTING TO RS.12,60,000/- FROM PARTIAL SALE OF LAND, IT HAS TO BE NECESSARILY HELD THAT THE SALES PROCEEDS OF SUCH LAND AMOUNTING TO RS.40,80,000/- WAS AVAILABLE WITH THE ASSESSEE. WE FIND THAT THE TRANSACTION OF PURCHASE OF LAND HAS ITS NEXUS WITH THE LETTER DATED 12.01.2011. BUSINESS OF TRADING IN SCRAP AND OTHER RELATED ACTIVITIES ARE SINCE THE BEGINNING OF THE YEAR AND ANOTHER SEIZED PAPER SHOWING LOANS AND ADVANCE IS HAVING A DATE OF DECEMBER. THEREFORE THIS PLEA OF THE ASSESSEE THAT SALE PROCE EDS OF LAND WAS USED IN GIVING LOANS AND ADVANCES AND USED IN THE B USINESS OF SCRAP HAS NO MERITS. ACCORDINGLY, THE GROUND NO. 5 OF THE ASSESSEE APPEAL FOR A.Y. 2011-12 IS DISMISSED 61. GROUND NOS. 6(A), 6(B), 7(A), 7(B) & 8 OF THE A SSESSEE AND GROUND NOS. 5 & 6 OF THE REVENUE REGARDING ADDITION FOR UNEXPLAINED LOANS & ADVANCES TO VARIOUS PERSONS U/ S. 69 AND INTEREST EARNED THEREON. 62. THE GROUND NOS. 6(A) & 6(B) OF THE ASSESSEE ARE AGAINST THE ACTION OF THE LD. CIT(A) IN PARTIALLY CONFIRMING TH E ADDITION TO THE EXTENT OF RS.36,10,000/- OUT OF THE TOTAL ADDITION OF KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 59 RS.7,83,60,000/- MADE BY THE AO ON ACCOUNT OF LOANS AND ADVANCES. THE GROUND NOS. 7(A), 7(B) & 8 OF THE ASS ESSEE ARE AGAINST THE ACTION OF THE LD. CIT(A) IN GIVING A DI RECTION TO THE AO TO RECALCULATE THE AMOUNT OF INTEREST ON THE CON FIRMED ADDITION OF RS.2,31,95,000/- ON ACCOUNT OF LOANS AN D ADVANCES. WHEREAS, THE GROUND NO. 5 RAISED BY THE REVENUE PER TAINS TO THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITI ON OF RS.6,90,00,000/- OUT OF THE TOTAL ADDITION OF RS.7, 83,60,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED LOANS AND ADVANCES. FURTHER, THE GROUND NO. 6 OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN RESTRICTING THE ADDITION OF INTER EST MADE ON ACCOUNT OF UNACCOUNTED LOANS & ADVANCES AND DIRECTI NG TO RE- CALCULATE ON THE AMOUNT OF RS.2,31,95,000/- AS AGAI NST RS.10,43,60,000/-. 62. THE BRIEF FACTS RELATING TO THE GROUNDS, AS CUL LED OUT FROM THE RECORDS ARE THAT ON PAGE 44 OF LPS-12, FOUND AND SE IZED FROM THE PREMISES OF THE ASSESSEE, A LIST OF ALL THE INV ESTMENT MADE/ LOANS ADVANCED BY THE ASSESSEE HAD BEEN PREPARED. S UCH LOOSE PAPER HAS ALSO BEEN SCANNED BY THE LD. CIT(A) AT PA GE NO. 71 OF KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 60 THE IMPUGNED ORDER. ON THE BASIS OF THE LOOSE PAPER , THE AO HAS PREPARED ONE TABLE BY DECODING AND SUMMARIZING THE TRANSACTIONS FOUND NOTED ON PAGE NO. 44 OF LPS-12. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO, VIDE HIS QUESTIONNAIRE DATED 25-09-2013, REQUIRED THE ASSESS EE TO EXPLAIN THE CONTENTS OF PAGE NO. 44, LPS-12 PROBAB LY BEARING A DATE 27.12. WHICH CONTAINED REFERENCE OF GIVING L OANS AND ADVANCES AGGREGATING TO RS.10,43,60,000/- TO VARIOU S PERSONS. IN RESPONSE TO THE SAME, THE ASSESSEE, VIDE HIS COU NSELS LETTER DATED 25-01-2014, MADE A DETAILED EXPLANATION IN RE SPECT OF THE SUBJECT LOOSE PAPER AND ALSO DEMONSTRATED THAT THE AGGREGATE AMOUNT OF RS.10,43,60,000/- AS CALCULATED BY HIM WA S SUFFERING FROM SOME FACTUAL ERRORS AND THE TOTAL OF THE ADVAN CES OUGHT TO HAVE BEEN AT RS.2,31,95,000/- ONLY. LD. AO REJECTED THE EXPLANATION AND HELD THAT THE ADVANCE OF RS.10,43,6 0,000/- AS UNEXPLAINED INVESTMENT OF THE ASSESSEE UNDER S.69 O F THE ACT IN THE FORM OF LOANS AND ADVANCES. LD. AO, AFTER GIVIN G A SET-OFF OF THE ADDITIONAL INCOME OF RS.2,60,00,000/- OFFERED B Y THE ASSESSEE FROM SUCH UNDISCLOSED INVESTMENT OF KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 61 RS.10,43,60,000/-, MADE AN ADDITION OF RS.7,83,60, 000/- IN THE HANDS OF THE ASSESSEE AS HIS UNDISCLOSED INCOME. FU RTHER, THE LD.AO ALSO ESTIMATED INTEREST @12% P.A. ON THE AFOR ESAID LOANS & ADVANCES AND MADE A SEPARATE ADDITION OF RS.1,25, 23,200/- IN THE ASSESSEES INCOME FOR THE YEAR UNDER CONSIDERAT ION. 63. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) NOTED THAT LD. AO WAS INCLINED TO DE CODE THE FIGURES NOTED IN THE SAID LOOSE PAPER BY ADDING TWO ZEROS BUT WHILE DECODING AND INTERPRETING THE LOOSE PAPER, LD . AO COMMITTED SOME MISTAKES. THE LD. CIT(A) HAS REPRODU CED THE CHART PREPARED BY THE AO AND GIVEN IN THE ASSESSMEN T ORDER. AT PARA (11.5), THE LD. CIT(A) HAS OBSERVED THE MISTAK E OF DECODING COMMITTED BY THE AO IN RESPECT OF TWO ENTRIES. THE LD. CIT(A) OBSERVED THAT IN RESPECT OF TWO ENTRIES, SERIALIZED AS ITEM NO. (2) & (3), LD. AO COMMITTED MISTAKE INASMUCH INSTEAD OF DECODING THE FIGURE WITH TWO ZEROS, DECODED THE SAME WITH TH REE ZEROS WHICH RESULTED INTO OVER-READING OF THE FIGURES BY A SUM OF RS.1,21,50,000/-. THUS, AT PARA (11.6), THE LD. CIT (A) DIRECTED TO KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 62 DELETE THE ADDITION OF RS.1,21,50,000/- ON ACCOUNT OF MISTAKE OF DECODING. 64. AT PARA (11.7), THE LD. CIT(A) OBSERVED THAT TH E AO HAS MADE ADDITIONS IN RESPECT OF THE FIGURES WRITTEN IN BRAC KETS ON ACCOUNT OF BORANA JAMEEN, KARENI JEEMEN AND 19KM JEEMEN LIS TED AT S. NO. 11, 12 & 13 OF LOOSE PAPER. LD. CIT(A) OBSERVED THAT THE FIGURES WRITTEN IN BRACKETS WERE THE REQUIREMENTS O F FORTHCOMING MONTHS. IN RESPECT OF 19KM HEMANT JEEMEN, THE REQUI REMENT OF 3 CRORES HAS BEEN SHOWN IN THE MONTH OF MAY WHICH M EANS MAY 2011 SINCE THE DATE OF SEARCH IS 07.09.2011 AND THE SAME FALLS IN THE NEXT FINANCIAL YEAR 2011-12. BUT LD. AO MADE ADDITION OF THIS AMOUNT IN F.Y. 2010-11. 65. AT PARA (11.8) OF THE IMPUGNED ORDER, THE LD. C IT(A) CONSIDERED THE PLEA OF THE ASSESSEE THAT NEITHER DU RING THE SEARCH PROCEEDINGS NOR DURING ASSESSMENT PROCEEDING S, THE ASSESSEE WAS EVER CONFRONTED WITH INDIVIDUAL ENTRIE S OF THE DOCUMENT. AT PARA (11.9), THE LD. CIT(A) STATED TO HAVE FORWARDED THE SUBMISSION OF THE ASSESSEE TO THE AO FOR HIS KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 63 REMAND REPORT AND ALSO REPRODUCED THE REMAND REPORT OF LD. AO ON THIS ISSUE. AT PARA (11.10), THE LD. CIT(A) REPR ODUCED THE REJOINDER OF THE ASSESSEE ON THE REMAND REPORT FILE D BY LD. AO. 66. AT PARA (11.11) OF THE IMPUGNED ORDER, THE LD. CIT(A) STATED THAT UNDISPUTEDLY, EVERY ENTRY OF THE PAGE NO. 44 W ERE NEVER CONFRONTED TO SHRI SUNIL KATARIA (AUTHORIZED PERSON ON BEHALF OF THE ASSESSEE) OR TO THE ASSESSEE. THE LD. CIT(A) FU RTHER STATED THAT UNDISPUTEDLY, THE ASSESSEE HAS MADE A SURRENDE R OF RS.2.60 CRORES ON THIS ACCOUNT AS AGAINST THE DETERMINED AM OUNT OF RS.10.43 CRORES. THE LD. CIT(A) ALSO OBSERVED THAT FROM THE ASSESSMENT ORDER AND REMAND REPORT, IT IS EVIDENT T HAT NO ENQUIRIES WERE FOUND CONDUCTED BY THE AO ON THE ISS UE OF BRACKETED FIGURES WHICH WERE SHOWN AS FUTURE REQUIR EMENTS. NO EVIDENCES HAVE BEEN BROUGHT ON RECORD TO PROVE THAT THE FIGURES SHOWN IN BRACKETS WERE ACTUALLY PAID/ ADVANCED. THE LD. CIT(A) FURTHER STATED THAT LD. AO HAS NOT CONDUCTED ANY EN QUIRY TO ASCERTAIN THE DETAILS AND NATURE OF LOANS/ ADVANCES OR INVESTMENT IN LAND OR PROJECTS. ACCORDINGLY, THE LD . CIT(A) DIRECTED LD. AO TO DELETE THE ADDITION TO THE TUNE OF RS.3.90 KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 64 CRORES (FIGURES IN BRACKETS) ON ACCOUNT OF FUTURE P ROJECTIONS FOUND MADE AGAINST ITEMS AT S. NO. 11 TO 13 OF PAGE NO. 44 OF LPS-12. 67. AT PARA 11.12 OF THE IMPUGNED ORDER, THE LD. CI T(A) FURTHER OBSERVED THAT AT S. NO. 14 OF LOOSE PAPER, THERE IS MENTION OF NAME OF ONE ATUL, CA AGAINST WHOM THE REMARK 300 L AKH MARCH PROFIT REQUIRED IS GIVEN. THE LD. CIT(A) STA TED THAT LD. AO HAS MADE ADDITION OF RS.3 CRORES WITHOUT EVEN RAISI NG A SINGLE QUERY. THE LD. CIT(A) FURTHER STATED THAT THE AMOUN T SEEMS SOME FUTURE PLANNING OR REQUIREMENT AS MARCH IS C LEARLY WRITTEN ON THIS INCRIMINATING DOCUMENT DATED 27/12/2010. T HE LD. CIT(A) REFERRED TO THE CONTENTION OF THE ASSESSEE T HAT IT WAS PLANNING TO BRING BACK THE AMOUNT OF PROFIT EARNED IN THE UNDISCLOSED BUSINESS OF SCRAP IN THE BUSINESS THROU GH CA ATUL. THE EXPLANATION OF THE ASSESSEE WAS FOUND REASONABL E AND PLAUSIBLE BY THE LD. CIT(A) AS THE ASSESSEE HAS DEC LARED UNDISCLOSED INCOME OF RS.3.60 CRORES DURING THE YEA R UNDER CONSIDERATION. ACCORDINGLY, THE LD. CIT(A) STATED T HAT THE AO HAS KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 65 NOT BEEN FOUND JUSTIFIED IN MAKING ADDITION OF RS.3 CRORES AND DIRECTED TO DELETE THE SAME. 68. AT PARA 11.13 OF THE IMPUGNED ORDER, THE LD. CI T(A) STATED THAT UNDISPUTEDLY, THE ASSESSEE HAS MADE DISCLOSURE OF RS.2.60 CRORES ON THE BASIS OF ENTRIES IN THE IMPUGNED DOCU MENT AND SINCE THE DISCLOSURE MADE HAS BEEN SET-OFF PARTLY W ITH THE ADDITION OF RS.52,00,000/- (AS PER GROUND 7) AND RS .12,60,000/- (AS PER GROUND 8), THE NET SURRENDERED AMOUNT AVAIL ABLE FOR ADJUSTMENT IS RS.1,95,40,000/- WHICH CAN BE ALLOWED TO BE REDUCED FROM CONFIRMED ADDITIONS OF UNEXPLAINED LOA NS AND ADVANCES. 69. IN RESPECT OF CALCULATION OF INTEREST ON LOANS AND ADVANCES, THE LD. CIT(A), AT PARA (12.3), HAS OBSERVED THAT N O EVIDENCE OR MATERIAL HAS BEEN FOUND DURING SEARCH OR ASSESSMENT PROCEEDINGS TO INFER THAT THE ASSESSEE HAS EARNED A NY INTEREST/ RETURN OUT OF IMPUGNED INVESTMENT BUT AT THE SAME T IME, IT HAS BEEN DULY ADMITTED BY THE ASSESSEE THAT THE ENTRIES IN THE DOCUMENT WERE IN THE NATURE OF LOANS AND ADVANCES A ND KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 66 DISCLOSURE OF 2.60 CRORES HAS ALSO BEEN MADE ON THI S ACCOUNT. ACCORDINGLY, THE LD. CIT(A) DIRECTED THE AO TO RE-C ALCULATE THE INTEREST INCOME ON CONFIRMED AMOUNT OF RS.2,31,95,0 00/-. 70. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), BOT H THE ASSESSEE AS WELL AS THE REVENUE HAVE PREFERRED CROSS-APPEALS BEFORE THIS TRIBUNAL ON THE ISSUE. 71. LD. CIT-DR VEHEMENTLY ARGUED REFERRING TO THE O BSERVATION AND FINDING OF LD. AO. 72. PER CONTRA LEARNED COUNSEL FOR THE ASSESSEE HAS FILED WRITTEN SYNOPSIS AND THE RELEVANT PORTION OF SUCH SYNOPSIS IS BEING REPRODUCED BELOW: KEY POINTS OF ASSESSEES SUBMISSION AND RELEVANT PAGES OF PAPER BOOK: S. NO. SUBMISSION IN BRIEF RELEVANT PAGES OF PAPER BOOK REMARKS 1 THE SUBJECT LOOSE PAPER PAGE NO. 44 OF LPS-12 IS NOT IN THE HANDWRITING OF THE ASSESSEE. FURTHER, IT HAS NOT BEEN PREPARED ON THE INSTRUCTION OR REQUIREMENT OF THE ASSESSEE. 149/151 SUCH LOOSE PAPER WAS PREPARED BY MR. ARVIND KATARIA, ONE OF THREE SONS OF THE ASSESSEE. THE ASSESSEE HAD OWNED SUCH PAPER BEFORE THE SEARCH PARTY AND EVEN BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAD FASTENED HIS LIABILITY ON THE SUBJECT LOOSE PAPER. THUS, IN ANY MANNER, THE ASSESSEE IS NOT DISOWNING THE SUBJECT LOOSE PAPER. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 67 2 THE DATE PUT ON SUCH LOOSE PAPER IS THAT OF 27-12. THUS, IT CAN BE PRESUMED THAT IT WAS PREPARED ON 27-12-2010, A DATE WHICH FALLS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. - PROBABLY, THE PURPOSE AND INTENT OF PREPARING SUCH LOOSE PAPER, BY SHRI ARVIND KATARIA, WAS TO KEEP HIMSELF REMINDED OF CERTAIN THINGS. 3 SUCH LOOSE PAPER IS MIXED IN THE NATURE. IT CONTAINS JOTTINGS OF CERTAIN TRANSACTIONS WHICH HAVE ALREADY TAKEN PLACE. IT ALSO CONTAINS CERTAIN JOTTINGS FOR WORK TO BE DONE. IT WILL BE APPRECIATED THAT IF THE SAID LOOSE PAPER WAS PREPARED ON 27-12-2010, THEN THE NOTINGS WITH THE DESCRIPTION OF JANUARY CLEARLY RELATES TO SOMETHING TO BE DONE IN THE NEXT MONTH. - FOR AN EXAMPLE, AGAINST ITEM NO. 11 OF THE SUBJECT LOOSE PAPER, WHERE THERE IS A MENTION OF 'BORANA JAMEEN', A DESCRIPTION OF (JAN. 30-40 LAC REQUIRE). SIMILAR DESCRIPTION IS ALSO WRITTEN AGAINST ITEM NO. 12, 13 & 14. 4 DURING THE COURSE OF THE ENTIRE SEARCH PROCEEDINGS, STATEMENT OF THE ASSESSEE OR AUTHOR OF THE SUBJECT LOOSE PAPER WAS NOT RECORDED BY THE SEARCH PARTY. - - 5 THE AO HAD RIGHTLY ATTEMPTED TO DECODE THE SUBJECT LOOSE PAPER BY ADDING TWO ZEROS. 151 HOWEVER, PROBABLY UNDER SOME MISTAKE, IN RESPECT OF TWO ITEMS, INSTEAD OF ADDING TWO ZEROS, HE HAS ADDED THREE ZEROS. FOR THE SECOND ITEM OF 8500=00, JOTTED DOWN WITH THE DESCRIPTION OF 'LNDRIJI', THE AO HAS TAKEN THE FIGURE OF RS.85,00,000/- INSTEAD OF CORRECT FIGURE OF RS.8,50,000/- ONLY. LIKEWISE, FOR THE THIRD ITEM OF 5000=00, JOTTED DOWN WITH THE NAME OF ANIL JI, THE AO HAS MISTAKENLY TAKEN THE FIGURE BY ADDING THREE ZEROS AS THAT OF RS.50,00,000/- INSTEAD OF TAKING THE CORRECT FIGURE OF RS.5,00,000/-. THE PAPERS OUGHT TO HAVE BEEN DECODED AT THE FIGURES AS SUBMITTED BEFORE THE CIT(A) AT PARA (2.06) OF OUR WRITTEN SUBMISSION BEFORE HIM WHICH HAS ALSO BEEN REPRODUCED BY THE CIT(A) AT PAGE NOS. 31 & 32 OF HIS ORDER. 6 IN RESPECT OF THE ITEM NO. 11, ATTRIBUTABLE TO 'BORANA JEEMEN', FOR THE FIGURES WRITTEN IN THE SAID 151 IT APPEARS THAT WHILE INTERPRETING THE ITEM NO. 13, THE AO HAS TAKEN INTO CONSIDERATION JOTTINGS MADE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 68 LOOSE PAPER AS 5000=00, INSTEAD OF DECODING IT TO BE RS.5,00,000/-, THE AO HAS DECODED THE SAME TO BE AT RS.45,00,000/- WHICH IS PATENTLY WRONG. LIKEWISE, IN RESPECT OF ITEM NO.12, ATTRIBUTABLE TO 'KARENI JEEMEN', FOR THE FIGURES WRITTEN ON THE LOOSE PAPER AS 600=00, THE AO, WITHOUT ASSIGNING ANY REASON FOR DOING SO, DECODED THE SAME AT RS.50,60,000/-. IN THE SAME FASHION, WITHOUT ASSIGNING ANY REASON, FOR THE ITEM NO. 13, WITH THE DESCRIPTION OF '19 KM HEMENT JEEMEN', THE AO HAS DECODED THE FIGURE OF 6200=00 AS RS.3,06,20,000/- INSTEAD OF THE CORRECT AMOUNT OF RS.6,20,000/-. ADJOINING TO FIGURE OF 6200=00 WITH THE DESCRIPTION OF '6 MAY 300LAC REQ.' AND PROBABLY, UNDER A PATENTLY WRONG NOTION AND MISINTERPRETATION, HE ADDED SOME FUTURE REQUIREMENT WITH THE AMOUNT OF INVESTMENT. IT IS A SETTLED POSITION OF LAW THAT A DOCUMENT HAS TO BE READ IN THE HOLISTIC MANNER AND IN THE SAME MANNER IN WHICH THE AUTHOR OF THE DOCUMENT WAS PURPORTED TO. THE SUBJECT LOOSE PAPER CANNOT BE INTERPRETED IN A MANNER SUITING THE CONVENIENCE OF THE AO. ON A PLAIN READING OF THE DESCRIPTION WRITTEN AGAINST ITEM NO. 13, NO PERSON OF ORDINARY PRUDENCE COULD HAVE REACH TO A CONCLUSION THAT THE ASSESSEE HAD ACTUALLY GIVEN A SUM OF RS.300 LACS TO MR. HEMANT WHICH WAS ONLY SHOWN AS A REQUIREMENT ON THE LOOSE PAPER. 7 THE AO HAS ALSO MISINTERPRETED THE FIGURES ' =00 (300 LAC MARCH PROFIT REQ.)', WRITTEN AGAINST ITEM NO. 14 'ATUL C.A.' AS RS.3,00,00,000/- WITHOUT ASSIGNING ANY REASON. THE FIGURE OF 300 LAC WITH THE NARRATION OF 'MARCH PROFIT REQUIRE' WAS JUST A PLANNING (WHICH COULD NOT MATERIALIZE) AND IT WAS NOT, IN ANY MANNER, REPRESENTING ANY LOAN OR ADVANCE OF RS.300 LACS MADE BY THE ASSESSEE TO ATUL C.A. AS WRONGLY INTERPRETED BY THE AO. 151 DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAD EARNED AN INCOME OF RS.3,60,00,000/- FROM UNDISCLOSED SOURCES. SUCH INCOME WAS EARNED BY THE ASSESSEE FROM CARRYING OUT UNACCOUNTED TRANSACTIONS OF SCRAP TRADING, INTEREST INCOME ON UNACCOUNTED MONEY LENDING AND OTHERS. SUCH INCOME WAS EARNED BY THE ASSESSEE FROM UNDISCLOSED SOURCES AND THERE WAS NO RECORDING OF SUCH INCOME IN HIS REGULAR BOOKS OF ACCOUNT. THE ASSESSEE WANTED TO BRING SUCH INCOME IN HIS REGULAR BOOKS OF ACCOUNT. IN SUCH CIRCUMSTANCES, SHRI ARVIND KATARIA, SON OF THE ASSESSEE, HAD CONTACTED HIS FRIEND AT KOLKATA AND SUCH FRIEND HAD INTIMATED SHRI ARVIND KATARIA THAT SOME C.A. ATUL CAN MANAGE THIS PROFIT FOR HIM. EVENTUALLY, NO SUCH PROFIT COULD BE MANAGED AND THE SAME GOT UNEARTHED DURING THE COURSE OF SEARCH PROCEEDINGS. 8 NO INDEPENDENT ENQUIRY - KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 69 CONDUCTED BY THE AO EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING REMAND REPORT PROCEEDINGS. NO MATERIAL BROUGHT ON RECORD BY THE AO. 9 DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAD GIVEN A SUM OF RS.2,31,95,000/- ONLY BY WAY OF LOANS & ADVANCES AND THE ENTIRE AMOUNT OF LOANS & ADVANCES IS COVERED BY THE TOTAL INCOME OF RS.3,60,00,000/- ALREADY OFFERED BY THE ASSESSEE IN HIS RETURN OF INCOME - THE SOURCES OF INVESTMENTS OF RS.2,31,95,000/- FOR GIVING LOANS AND ADVANCES ARE COVERED BY THE UNDISCLOSED INCOME OF RS.3,60,00,000/- OFFERED BY THE ASSESSEE IN HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION [KINDLY REFER TABLE AT PART-II ABOVE]. 73. REFERENCE WAS ALSO MADE TO THE DETAILED SUBMISS ION MADE BEFORE THE CIT(A) PLACED AT PAGE NO. 24 TO 31 OF T HE PAPER BOOK. THE SAME HAS ALSO BEEN REPRODUCED BY THE CIT(A) AT PAGE NO. 67 TO 70 OF THE IMPUGNED ORDER WHILE ADJUDICATING THE GROUND NOS. 9(A) TO 9(C) RAISED BY THE ASSESSEE. SUPPLEMENTARY WRITTEN SUBMISSION IS ALSO PLACED AT PAGE NO. 152 TO 157 OF THE PAPER BOOK REPRODUCED BELOW: KEY POINTS OF ASSESSEES SUBMISSION AND RELEVANT PA GES OF PAPER BOOK: S. NO. SUBMISSION IN BRIEF RELEVANT PAGES OF PAPER BOOK REMARKS 1 ON A PERUSAL OF THE PAGE NO. 44 OF LPS-12, THE ONLY LOOSE PAPER ON WHICH THE DETAILS OF LOANS AND ADVANCES ARE JOTTED DOWN, IT SHALL BE OBSERVED THAT NOWHERE THERE IS A MENTION OF RECEIPT OF INTEREST OF A SUM OF RS.1,25,23,200/- AS PRESUMED BY THE AO. 151 THE ACTION OF THE AO CAN BE DESCRIBED ONLY A RESULT OF BALD GUESSWORK, SURMISES AND CONJECTURES WITHOUT ANY BASIS. FROM THE SUBJECT LOOSE PAPER, IT CANNOT BE INTERPRETED THAT ALL THE LOANS AND ADVANCES WERE GIVEN AS INTEREST BEARING LOANS. FURTHERMORE, FROM SUCH LOOSE PAPER, IT CANNOT BE INTERPRETED THAT ALL THE LOANS WERE GIVEN ON KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 70 INTEREST ON VERY FIRST DAY OF THE RELEVANT PREVIOUS YEAR SO AS TO YIELD INTEREST INCOME TO THE ASSESSEE FOR THE WHOLE YEAR. 2 THE AO HAS WORKED OUT THE INTEREST @ 12% ON THE ASSUMPTION THAT THE ASSESSEE HAD GIVEN LOANS AND ADVANCES AGGREGATING TO RS.10,43,60,000/-. - THE ACTUAL AGGREGATE AMOUNT OF LOANS AND ADVANCES GIVEN BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR WAS TO THE EXTENT OF RS.2,31,95,000/- ONLY. THE INTEREST BEARING LOANS WERE GIVEN BY THE ASSESSEE, ON VARIOUS DATES, DURING THE RELEVANT PREVIOUS YEAR FROM TIME TO TIME OUT OF UNDISCLOSED INCOME GENERATED BY HIM FROM TIME TO TIME. 3 FROM MAKING THE LOANS AND ADVANCES, THE ASSESSEE HAD EARNED INTEREST INCOME NEARLY RS.15,00,000/- ONLY. THE INTEREST INCOME SO EARNED WAS REDEPLOYED BY THE ASSESSEE FOR MAKING LOANS AND ADVANCES. SINCE THE ASSESSEE HAS ALREADY CONSIDERED THE AGGREGATE AMOUNT OF LOANS AND ADVANCES OF RS.2,31,95,000/-, WHICH INCLUDES THE AMOUNT OF LOANS AND ADVANCES GIVEN FROM THE DEPLOYMENT OF INTEREST, NO SEPARATE ADDITION ON THIS COUNT IS CALLED FOR. - - 4 THE ASSESSEE HIMSELF HAD SHOWN AN INCOME OF RS.3,60,00,000/-, IN HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, FROM UNDISCLOSED SOURCES AND THEREFORE, EVEN IF ANY RECEIPT OF INTEREST IS ASSUMED, THE SAME IS VERY WELL COVERED BY THE AFORESAID INCOME AND NO FURTHER ADDITION WAS WARRANTED - - 74. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD, DULY CONSIDERED THE FACTS AND CI RCUMSTANCES OF THE CASE, ORDERS OF LOWER AUTHORITIES, WRITTEN A ND ORAL SUBMISSIONS MADE FROM BOTH THE SIDES. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 71 75. WE FIND THAT DURING THE COURSE OF THE SEARCH IN THE ASSESSEES PREMISES, ONE LOOSE PAPER INVENTORIZED A S PAGE NO. 44 OF LPS-12 WAS FOUND AND SEIZED SUPPOSEDLY BEING A D ATE ON TOP27/12. FROM THE COPY OF SUCH LOOSE PAPER, AS F URNISHED BY THE ASSESSE IN HIS PAPER BOOK AT PAGE NO. 149 AND A S ALSO, SCANNED BY THE LD. CIT(A) IN HIS ORDER AT PAGE NO. 71, WE FIND THAT SUCH LOOSE PAPER IS IN HANDWRITTEN FORM IN WHI CH AGAINST THE 27 NAMES/ ITEMS, SOME AMOUNTS HAVE BEEN WRITTEN . WE FIND THAT THE AO HAS HELD THAT THE FIGURES WRITTEN ON SU CH PAPER WERE IN CODED FORMS BY OMITTING TWO ZEROS. FURTHER WHILE UNDERTAKING THE EXERCISE OF DECODING THE FIGURES, IN RESPECT OF SOME ITEMS, THE AO HAS RIGHTLY MADE THE DECODING FOR AN EXAMPLE, IN RESPECT OF S. NO.1, AGAINST THE NAME OF SOME PRASHANT JI, THE WRITTEN FIGURES OF 50000=00 HAS RIGHTLY BEEN DECODED BY THE AO TO RS.50,00,000/-. LIKEWISE, AGAINST THE ITEM NO.4,5,6,7,8,9,10,11,15,16,17 & 18, ALL THE FIGURES WRITTEN HAVE BEEN DECODED BY ADDING TWO ZEROS. HOWEVER, WE FIND THAT IN RESPECT OF TWO ITEMS VIZ. THE ITEM NO. 2 & 3 RESPEC TIVELY OF 8500=00 AND 5000=00, HAVE ERRONEOUSLY BEEN DECODED BY THE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 72 AO BY ADDING THREE ZEROS IN THE FIGURES, WHICH RESU LTED IN THE MISINTERPRETATION OF THE AMOUNT RESPECTIVELY AT RS .85,00,000/- AND RS.50,00,000/-. BEFORE US LD. CIT(DR) HAS NOT R EBUTTED SUCH ARITHMETICAL ERROR COMMITTED BY THE AO. ACCORD INGLY, IN OUR CONSIDERED VIEW, THERE IS NO INFIRMITY IN THE CIT(A )S ACTION IN DELETING THE ADDITIONS AMOUNTING TO RS.1,21,50,000/ - PERTAINING TO AFORESAID TWO ITEMS. 76. WE ALSO NOTE THAT IN IMPUGNED LOOSE PAPER PAGE NO. 44 OF LPS-12, AGAINST THREE ITEMS SERIALIZED AT S. NO. 11 , 12 & 13, RESPECTIVELY UNDER THE CAPTIONS BORANA JAMEEN, K ARENI JAMEEN AND 19KM HEMANT JAMEEN, ADJACENT TO THE F IGURES, THERE IS SOME MENTION IN BRACKETS ABOUT SOME REQUIR EMENTS AGAIN IN THE CODED FORMS. WE FIND THAT THE AO WITHO UT CONDUCTING ANY INDEPENDENT ENQUIRY AND MERELY ON T HE BASIS OF THE JOTTINGS OF THE WORD REQUIREMENT, PRESUMED TH AT THE SUM OF FUNDS REQUIRED BY THE ASSESSEE WERE ACTUALLY SO INV ESTED BY THE ASSESSEE DURING THE YEAR ITSELF. WE FIND MERIT IN T HE FINDINGS OF THE CIT(A) THAT THE LOOSE PAPER WAS PREPARED ON 27. 12.2010 AND THEREFORE, ANY MENTIONING REGARDING THE REQUIREMENT OF FUNDS IN KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 73 THE MAY CAN ONLY BE INTERPRETED THAT SUCH FUNDS WER E REQUIRED IN THE MAY 2011 AND NOT IN THE YEAR UNDER CONSIDERA TION. ON SUCH HOLISTIC INTERPRETATION OF THE LOOSE PAPER, IT CANNOT BE SAID THAT THE ASSESSEE WAS REQUIRED TO MAKE ANY INVESTME NT OF RS.300 LACS FOR PURCHASE OF ANY LAND AT 19KM. IN OU R CONSIDERED VIEW, IT IS NOT THE CASE OF THE AO THAT THE DESCRIP TION MENTIONED AGAINST THE AFORESAID THREE ITEMS DENOTES THE AMOUN T ALREADY INVESTED BY THE ASSESSEE PRIOR TO THE SEARCH. IN OU R VIEW, SUCH DESCRIPTION ONLY DENOTES THE REQUIREMENTS OF SOME F URTHER FUNDS IN FUTURE AND THEREFORE, IT CAN ONLY BE TERMED AS P LANNING AND PROJECTIONS AND NOT THE ACTUAL INVESTMENTS MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. WE NOTE THAT A T NO STAGE, THE REVENUE CONDUCTED ANY INDEPENDENT ENQUIRY REGAR DING THE ALLEGED INVESTMENT BY THE ASSESSEE EITHER FROM THE RECORDS OF SUB-REGISTRAR OR ANY OTHER SOURCES. IN SUCH CIRCUMS TANCES, IN OUR CONSIDERED OPINION, MERELY ON THE BASIS OF JOTT INGS WITH THE DESCRIPTION REQUIREMENT AND THE UNDISCLOSED INVES TMENT BY THE ASSESSEE CANNOT BE PRESUMED MERELY ON GUESS WORK, W ITHOUT HAVING ANY CORROBORATIVE EVIDENCE ON RECORD. THUS, WE FIND NO KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 74 INFIRMITY IN THE ACTION OF THE CIT(A) IN DELETING T HE PARTIAL ADDITIONS IN RESPECT OF THE AFORESAID THREE ITEMS. 77. WE ALSO FIND MERIT IN THE CONTENTION OF THE ASS ESSEE, WHICH WAS ALSO ACCEPTED BY THE CIT(A), THAT THE DESCRIPTI ON WITH THE WORDS (300 LAC MARCH PROFIT REQUIRE) AGAINST THE NAME OF SOME ATUL C.A. AS SERIALIZED AT S. NO. 14 OF THE IMPUG NED SEIZED PAPER, IT CANNOT BE INTERPRETED THAT THE ASSESSEE M ADE ANY UNDISCLOSED INVESTMENT. SUCH DESCRIPTION ONLY DENOT ES SOME FUTURE PLANNING. WE FIND THAT THE AO HAS NOT CONDU CTED ANY INDEPENDENT ENQUIRY FROM ATUL CA AND FURTHER BY NO STRETCH OF IMAGINATION, THE DESCRIPTION WRITTEN ON THE LOOSE P APER CAN BE INTERPRETED AS MAKING OF ANY UNDISCLOSED INVESTMENT BY THE ASSESSEE. THUS, WE FIND NO INFIRMITY IN THE ACTION OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE AO ON THE ALLEGAT ION OF ADVANCE TO ATUL CA ON THE BASIS OF JOTTINGS MADE AT S. NO. 14 OF THE SUBJECT LOOSE PAPER. IN NUTSHELL, WE ARE IN COM PLETE AGREEMENT WITH THE FINDINGS GIVEN BY THE LD. CIT(A) THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD MADE INVESTMENT BY WAY OF LOANS AND ADVANCES AGGREGATING TO A SUM O F KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 75 RS.2,31,95,000/- ONLY AND NOT OF RS.10,43,60,000/- AS DETERMINED BY THE AO. HERE, IT WOULD NOT BE OUT OF CONTEXT TO MENTION HERE THAT THE AFORESAID SUM OF RS.2,31,95,0 00/- ALSO INCLUDES THE ADVANCES AMOUNTING TO RS.29,90,000/- G IVEN BY THE ASSESSEE TO MR. RAHUL FOR WHICH WE HAVE GIVEN SEPAR ATE FINDINGS WHILE ADJUDICATING OTHER GROUNDS, SUPRA. ACCORDINGL Y, WE FIND NO MERIT IN THE GROUND NO. 5 RAISED BY THE REVENUE AND THE SAME IS HEREBY DISMISSED. 78. NOW, COMING TO THE GROUND NOS. 6(A) & 6(B) RAIS ED BY THE ASSESSEE, FROM THE CIT(A)S ORDER, WE NOTE THAT AFT ER DETERMINING THE AMOUNT OF UNDISCLOSED INVESTMENT BY WAY OF LOAN S AND ADVANCES AT RS.2,31,95,000/-, LD. CIT(A) VIDE PARA (11.13) OF HIS ORDER, HAS ALSO MADE A DIRECTION TO GIVE THE BENEFI T OF TELESCOPING OF INCOME DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME FILED UNDER S.153A OF THE ACT FOR THE ASSESS MENT YEAR UNDER CONSIDERATION. THE CIT(A) HAS RESTRICTED THE BENEFIT OF TELESCOPING TO THE EXTENT OF RS.1,95,40,000/-. THE CIT(A) WHILE HOLDING THE CLAIM OF THE ASSESSEE FROM RS.2,60,00,0 00/- TO RS.1,95,40,000/-, HAS HELD THAT THE SEPARATE BENEFI T OF KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 76 TELESCOPING HAS ALREADY BEEN GRANTED BY HIM TO THE ASSESSEE IN RESPECT OF UNDISCLOSED INVESTMENT IN PURCHASE OF LA ND AT RS.52,00,000/- AND PROFIT ON SALE OF SUCH LAND AT RS.12,60,000/- AGGREGATING TO A SUM OF RS.64,60,000 /- WHILE ADJUDICATING THE SEPARATE GROUNDS RELATED TO SUCH I SSUES. 79. WE OBSERVE THAT THE ASSESSEE HAS CHALLENGED THE QUANTUM OF TELESCOPING BENEFIT GIVEN BY THE LD. CIT(A) AGAINST THE TOTAL UNDISCLOSED INCOME OF RS.3.60 CR. SURRENDERED DURIN G THE COURSE OF SEARCH AND OFFERED TO TAX IN THE RETURN OF INCOM E. AS OBSERVED EARLIER IN THE PRECEDING PARAS, WE WILL SPECIFICALL Y DEAL WITH THE ISSUE OF TELESCOPING BENEFIT AND SET OFF OF THE ADD ITION SUSTAINED IN THE HANDS OF ASSESSEE AGAINST THE INCOME SURREND ERED AND OFFERED TO TAX, IN THE SUBSEQUENT PARAS. HOWEVER, SINCE WE HAVE DELETED SOME OF THE ADDITIONS SUSTAINED BY LD. CIT( A) THERE WILL BE AN OVERALL CHANGE IN THE TELESCOPING BENEFIT AVA ILABLE TO THE ASSESSEE. THUS, THESE TWO GROUNDS OF THE ASSESSEE A RE PARTLY ALLOWED SUBJECT TO OUR WORKING OF TELESCOPING BENEF IT AVAILABLE TO THE ASSESSEE. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 77 80. NOW, COMING TO THE GROUND NO.7(A) & 7(B) RAISED BY THE ASSESSEE AND GROUND NO. 6 RAISED BY THE REVENUE WH ICH RELATES TO ISSUE OF ADDITION MADE ON ACCOUNT OF INTEREST EA RNED BY THE ASSESSEE ON VARIOUS LOANS AND ADVANCES MADE BY LD . AO. WE NOTE THAT LD. AO MADE ADDITION FOR UNEXPLAINED LOAN S AND ADVANCES AT RS.10,43,60,000/- BASED ON THE SEIZED D OCUMENTS PAGE NO. 44 LPS-12. LD. AO ALSO CALCULATED THE INT EREST INCOME AT RS.1,25,23,200/- WHICH IS COMPUTED @12% INTEREST PER ANNUM ON THE SUM OF LOANS AND ADVANCES. 81. SUBSEQUENTLY WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A), HE AFTER EXAMINING THE FACTS CONFIRMED THE ADDITION OF RS.2,31,95,000/- IN PLACE OF THE ADDITION OF RS.10, 43,60,000/- MADE BY THE LD. AO. AS REGARDS ON INTEREST LD. CIT( A) DIRECTED THE LD. AO TO RECOMPUTE THE INTEREST ON THE REDUCED AMOUNT OF ADDITION. 82. BEFORE US WHEN THIS MATTER OF UNEXPLAINED LOANS AND ADVANCES WAS RAISED BY BOTH SIDES. WE HAVE CONCURRE D WITH THE FINDING OF LD. CIT(A) AND SUSTAINED THE ADDITION OF LOANS AND ADVANCES AT RS.2,31,95,000/-. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 78 83. NOW COMING TO THE PART OF INTEREST COMPUTATION WE FIND THAT LD. AO CALCULATED THE INTEREST @ 12% FOR THE WHOLE YEAR. WE HOWEVER ON PERUSAL OF THE SEIZED DOCUMENT FIND THAT THERE IS A DATE MENTIONED ON THE TOP OF SEIZED DOCUMENTS LPS 1 2 PAGE 44 WHICH IS 27/12. BOTH THE ASSESSEE AND REVENUE HAV E ACCEPTED THAT THE DATE ON THIS DOCUMENT WAS 27/12/2010. THE ADDITION OF LOANS AND ADVANCES HAS BEEN MADE PURELY ON THE BASI S OF THIS LOOSE PAPER. THEREFORE, ALL TYPES OF ADDITION BASED ON SUCH LOOSE PAPER NEEDS TO BE MADE KEEPING IN MIND THIS DATE I. E. 27.12.2010. THUS THE ALLEGED LOANS AND ADVANCES OF RS.2,31,95,000/- NEEDS TO BE PRESUMED TO BE GIVE ON 27.12.2010 AND THEREFORE THE INTEREST INCOME IS TO BE CALCULATED ONLY FROM DECEMBER 2010 TILL MARCH 2011. IN THE INS TANT YEAR UNDER APPEAL BY APPLYING RATE OF 12% ON THE LOANS O F RS.2,31,95,000/-, THE INTEREST FOR 4 MONTHS WILL CO ME TO RS.9,27,800/- ONLY. WE, THEREFORE, SET ASIDE THE FI NDING OF LD. CIT(A) AND CONFIRM THE ADDITION FOR INTEREST AT RS. 9,27,800/-. THUS, GROUND NO. 7(A) & 7(B) OF ASSESSEES APPEAL I S PARTLY ALLOWED AND DISMISSED GROUND NO.6 RAISED BY REVENUE . KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 79 84. NOW WE TAKE UP THE COMMON ISSUE RELATING TO TEL ESCOPING BENEFIT BEING AVAILABLE TO THE ASSESSEE. IN MOST OF THE ADDITIONS CONFIRMED BY LD. AO AND SUBSEQUENTLY CONFIRMED/PART LY CONFIRMED BY LD. CIT(A), THIS ISSUE OF TELESCOPING BENEFIT HAS BEEN DISCUSSED. NOW SINCE WE HAVE DEALT WITH ALL TH E ADDITIONS CHALLENGED BEFORE US BY ASSESSEE AND REVENUE AND HA VE DECIDED THE SAME, IN ORDER TO KEEP CLARITY, WE DEEM IT PROP ER TO DEAL WITH THIS ISSUE KEEPING IN MIND OUR FINDING OF VARIOUS A DDITIONS DEALT BY US IN THE FORGOING DISCUSSIONS. 85. WE FIND THAT THE ASSESSEE WAS SUBJECTED TO SEAR CH U/S 132 OF THE ACT AND IN HIS INDIVIDUAL NAME SURRENDER OF RS .6 CR. WAS MADE WHICH WAS BIFURCATED INTO TWO PARTS. FOR A.Y. 2011-12 RS.3.60 CR. WAS OFFERED TO TAX IN THE INCOME TAX RE TURN AND THE REMAINING SUM OF RS.2.4 CR. WAS DISCLOSED IN THE RE TURN OF INCOME FOR A.Y. 2012-13. THE INSTANT APPEAL RELATES TO A.Y. 2011-12 FOR WHICH RS.3.60 CR. HAVE BEEN OFFERED TO TAX. FIRST WE WILL MENTION THE DETAILS OF ADDITIONS CONF IRMED BY US IN THE HANDS OF ASSESSEE FOR A.Y. 2011-12: I. ESTIMATED NET PROFIT IN SCRAP BUSINESS RS.94,14 ,731/- KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 80 II. UNEXPLAINED INVESTMENT IN SCRAP TRADING BUSINESS RS.38,78,724/- III. UNEXPLAINED INVESTMENT IN PURCHASE OF LAND RS.52,00,000/- IV. UNACCOUNTED PROFIT ON SALE OF LAND RS.12,6 0,000/- V. UNEXPLAINED INVESTMENT IN LOANS AND ADVANCES RS.2,31,95,000/- VI. ESTIMATED INTEREST ON UNEXPLAINED RS.9,2 7,800/- VII. LOANS AND ADVANCES RS.27,50,000/- TOTAL RS.4,38,76,255 86. NOW AGAINST THE ABOVE ADDITIONS LD. COUNSEL FOR THE ASSESSEE HAS REQUESTED TO PROVIDE TELESCOPING BENEFIT OF THE FOLLOWING: 1. UNDISCLOSED INCOME SURRENDERED DURING THE SEARCH AND OFFERED TO TAX RS. 3,60,00,000/- 2. ACCUMULATED NET PROFIT FROM UNACCOUNTED SCRAP BUSINESS EARNED UP TO 30 TH NOVEMBER, 2010 RS.62,76,487/- TOTAL RS.4,22,76,487/- 87. LD. DR OPPOSED TO THE REQUEST OF LD. COUNSEL FO R THE ASSESSEE OF PROVIDING SET OFF OF ACCUMULATED UNACCOUNTED PRO FIT FROM SCRAP BUSINESS TILL 30 TH NOVEMBER 2010. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 81 88. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE RE CORDS PLACED BEFORE US. IN ORDER TO EXAMINE THE ISSUE OF TELESCO PING BENEFIT WE HAVE EXAMINED THE RECORDS AND ALSO CONSIDERED OUR F INDING ADJUDICATING VARIOUS ISSUES RAISED BY BOTH THE SIDE S. SO FAR AS, THE AMOUNT OF ADDITION CONFIRMED BY US THE SAME REM AINS AT RS.4,38,76,255/- (AS STATED ABOVE). AS REGARDS SET OFF OF INCOME IS CONCERNED THERE IS NO DOUBT WITH REGARD TO THE B ENEFIT OF SET OFF OF AVAILABLE TO THE ASSESSEE AGAINST UNDISCLOSE D INCOME OFFERED TO TAX AT RS.3.60 CR. WHICH WAS ADMITTED DU RING THE COURSE OF SEARCH AND SUBSEQUENTLY DISCLOSED IN THE INCOME TAX RETURN. 89. THE ONLY ISSUE REMAINS IS SET OFF OF ACCUMULATE D PROFIT FROM UNACCOUNTED BUSINESS OF TRADING IN SCRAP AND GRANUL ES AT RS.62,76,487/-. AS FAR AS, THE TOTAL ESTIMATED PROF IT IS CONCERNED, WE HAVE ALREADY DECIDED THE ESTIMATED NE T PROFIT TO BE ADDED IN THE HANDS OF ASSESSEE AT RS.94,14,731/- WHICH IS 10% OF THE TOTAL UNRECORDED SALES OF RS.9,41,47,310 /- AND THIS FIGURE OF UNRECORDED SALES IS DERIVED FROM SEIZED D IARIES BEARING ANNEXURE NO. A1 TO A7. ON PERUSAL OF THE SEIZED REC ORD WE FIND KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 82 THAT THE ASSESSEE HAS CARRIED OUT THE TRANSACTIONS OF SALES FROM APRIL 2010 TILL COMPLETION OF YEAR. IN OTHER WORDS THIS UNACCOUNTED BUSINESS OF TRADING IN SCRAP HAS BEEN C ARRIED ROUND THE YEAR AND ONE CANNOT DISPUTE THAT THE ASSE SSEE KEPT ON EARNING INCOME AS AND WHEN SALES WERE MADE. SUCH IN COME FROM SCRAP TRADING BUSINESS KEPT ON ACCUMULATING WI TH THE ASSESSEE. 90. NOW HERE IT WOULD BE RELEVANT TO REFER THE SEIZ ED LOOSE PAPER LPS-12, PAGE 44. WE HAVE ANALYSED THIS SEIZED DOCUM ENT ELABORATELY IN THE PRECEDING PARAS AND HAVE CONFIRM ED THE ADDITION OF RS.2,31,95,000/- AS UNACCOUNTED LOANS A ND ADVANCES GIVEN BY THE ASSESSEE. ON THIS SEIZED LOOS E PAPER A DATE 27.12.2010 IS MENTIONED AND SINCE THE ADDITIO N HAS BEEN MADE PURELY ON THE BASIS OF THIS LOOSE PAPER AND NO OTHER INCRIMINATING MATERIAL HAS NOT BEEN FOUND NOR ANY O THER ENQUIRY CONDUCTED, WE HAVE HELD THAT THE DATE MENTIONED THI S DOCUMENT 27.12.2010 IS TO BE PRESUMED AS THE DATE ON WHICH L OANS AND ADVANCES WERE GIVEN. NOW KEEPING THIS FACT IN MIND WE FIND THAT APART FROM THE INCOME OF RS.3.60 CR. OFFERED TO TAX , THE ASSESSEE KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 83 ALSO POSSESSED THE ACCUMULATED PROFIT FROM UNACCOUN TED BUSINESS OF TRADING IN SCRAP AS ON THE DATE OF A GI VING LOANS AND ADVANCES ON 27.12.2010. THUS IF WE PRESUME THAT AS SESSEE HAD EVENLY EARNED THE INCOME DURING THE YEAR FROM SCRAP TRADING BUSINESS AND THEN THE INCOME FOR 8 MONTHS I.E. FROM 01.04.2010 TO 30.11.2010 BASED ON THE YEARLY ESTIMATED INCOME FROM SCRAP TRADING BUSINESS OF RS.94,14,731/-, WOULD COME AT RS.62,76,487/-. IN OUR CONSIDERED VIEW THIS AMOUNT WAS ALSO AVAILABLE WITH THE ASSESSEE TO GIVE LOANS AND ADVAN CES APPEARING IN THE SEIZED LOOSE PAPER APPEARING NO. LPS-12 PAGE 44. WE, THEREFORE, HOLD THAT THE ASSESSEE WAS HAVING SUM OF RS.4,22,76,487/-( RS.3.60 CR. OFFERED IN THE INCOME TAX RETURN + PROFIT FROM SCRAP TRADING BUSINESS FOR 8 MONTHS RS. 62,76,487/-) AVAILABLE FOR SET OFF AGAINST THE ADDITION SUSTAINE D BY US AT RS.4,38,76,255/-. THUS RS.15,99,768/- REMAINS TO BE TAXED IN THE HANDS OF ASSESSEE. 91. WE, THEREFORE, ARE OF THE VIEW THAT AGAINST TOT AL ADDITION SUSTAINED BY US AFTER PROVIDING THE TELESCOPING BEN EFIT OF AMOUNT AVAILABLE, THERE REMAINS ONLY RS.15,99,768/- TO BE TAXED BY THE LD. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 84 AO FOR A.Y. 2011-12. TO MAKE IT SIMPLE WE DIRECT LD . AO TO TAX THIS AMOUNT UNDER THE HEAD OF UNEXPLAINED LOANS & A DVANCES. 92. IN THE RESULT, THIS ISSUE OF TELESCOPING BENEFI T IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEES AND THAT RAISED BY REVENUE IS DISMISSED. NOW WE TAKE UP THE REVENUES APPEAL FOR A.Y. 2012-1 3. 93. THE FIRST ISSUE RAISED IN GROUND NO.1 RELATES T O THE ADDITION FOR INTEREST ON THE UNACCOUNTED LOANS AND ADVANCES. WE FIND THAT WE HAVE DEALT THIS ISSUE IN THE CROSS APPEALS FOR A.Y. 2011- 12 AND HAVE CONFIRMED THE ADDITION FOR UNACCOUNTED LOANS AND ADVANCES AT RS.2,31,95,000/- AND HAVE ALSO CONFIRME D FOR LEVY OF INTEREST ON SUCH LOANS AND ADVANCES. IN THE INST ANT APPEAL ALSO LD. CIT(A) HAS TAKEN THE CONSISTENT VIEW AND D IRECTED THE LD. AO TO RECALCULATE INTEREST AMOUNT OF RS.2,31,95 ,000/-. WE, THUS FIND NO REASON TO INTERFERE IN THE FINDING OF LD. CIT(A). THUS, THIS GROUND OF REVENUES APPEAL IS DISMISSED. KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 85 94. AS REGARDS GROUND NO.2 RAISED BY REVENUE CHALLE NGING THE FINDING OF LD. CIT(A) ALLOWING THE BUSINESS LOSS OF RS.10,27,036/- MADE BY THE LD. AO, WE FIND THAT THE LD. AO DISALLOWED THE CLAIM OF LOSS OF RS.10,27,036/-. HOW EVER, LD. CIT(A) ON APPRECIATING THE FACT THAT DUE TO SEARCH ASSESSEE COULD NOT CONCENTRATE ON THE BUSINESS. HOWEVER ALL THE TR ANSACTIONS ARE DULY RECORDED AND BOOKS OF ACCOUNT ARE AUDITED AND THUS ALLOWED THE BUSINESS LOSS. WE, ON PERUSAL OF THE RE CORDS, FIND NO REASON TO INTERFERE IN THE FINDING OF LD. CIT(A), S INCE THE LD. AO HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCO UNT BEFORE DISALLOWING THE BUSINESS LOSS OF RS.10,27,036/-. TH E REVENUE FAILS TO SUCCEED IN GROUND NO.2. 95. AS REGARD GROUND NO.3 RAISED BY THE REVENUE PER TAINING TO ISSUE RELATING TO INTEREST ON UNACCOUNTED LOANS TO RAHUL JI WE FIND THAT THE ISSUE OF QUANTUM ADDITION OF RS.3 CR. FOR THE ALLEGED LOANS TO MR. RAHUL JI CAME UP BEFORE US WHILE DEALI NG WITH CROSS APPEAL FOR A.Y. 2011-12. AFTER EXAMINING THE FACTS OF THE CASE AND RELEVANT SEIZED MATERIAL WE HAVE DELETED THE AD DITION OF THE ALLEGED LOAN GIVEN TO RAHUL AT RS.3 CR. SINCE THE V ERY BASIS OF KANTILAL KATARIA,RATLAM ASSTT.YR.2011-12, 2012-13 86 COMPUTING INTEREST CHALLENGED IN THE INSTANT GROUND NO.3 OF REVENUES APPEAL HAS BEEN DELETED BY US, THIS GROUN D OF REVENUE BECOMES INFRUCTUOUS AND DESERVES TO BE DISMISSED. W E ACCORDINGLY, ORDER SO AND DISMISSED GROUND NO.3. 96. ALL THE GROUNDS OF APPEAL RAISED BY THE REVENUE FOR A.Y. 2012-13 ARE DISMISSED. 97. IN THE RESULT, APPEAL BY THE ASSESSEE IN IT(SS ) ANO.42/IND/2018 FOR A.Y. 2011-12 IS PARTLY ALLOWED AND APPEALS BY THE REVENUE IN ITANO.259/IND/2018 FOR A.Y. 2011 -12 & ITANO.886/IND/2018 FOR A.Y. 2012-13 ARE DISMISSED. ORDER WAS PRONOUNCED AS PER RULE 34 OF I.T.A.T., RU LES 1963 ON 02.08.2021. SD/- (RAJPAL YADAV) SD/- (MANISH BORAD) VICE PRESIDENT ACCOUNTANT MEMBER INDORE; DATED :02/08/2021 PATEL/PS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE