M/S. ACIT CEN CIR-41, MUMBAI V. THE ASHAPURA GARMENTS LTD, MUMBAI

ITSSA 49/MUM/2008

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7434 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 27-03-2012
• Assessment Year: misc
• Appeal Filed On: 06-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained investment; Business income; Search and seizure; Loose papers; Document seized; Retrospective amendment; Block assessment; Documents seized
• Section: 133A; 131; 68; 132

Judgement Text

IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 1 OF 33 IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER IT(SS) NO.41/MUM/2008 (BLOCK PERIOD: 1.4.1996 TO 12.12.2002) ASHAPURA GARMENTS (P) LTD 301, NAVYUG INDUSTRIAL ESTATE T.J. ROAD, SEWRI VS ACIT CENTRAL CIRCLE 41 AAYAKAR BHAVAN MK ROAD, MUMBAI 400020 MUMBAI 400015 PAN AABCA 4027 H (APPELLANT) (RESPONDENT) IT(SS) NO.49/MUM/2008 (BLOCK PERIOD: 1.4.1996 TO 12.12.2002) ACIT CENTRAL CIRCLE 41 AAYAKAR BHAVAN MK ROAD, MUMBAI 400020 VS ASHAPURA GARMENTS (P) LTD 301, NAVYUG INDUSTRIAL ESTATE T.J. ROAD, SEWRI, MUMBAI 400015 PAN AABCA 4027 H (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI VIJAY MEHTA DEPARTMENT BY: SHRI GOLI SRINIVAS RAO, CIT-DR DATE OF HEARING: 27/03/2012 DATE OF PRONOUNCEMENT: 04/05/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE AGA INST THE ORDERS OF THE CIT (A) CENTRAL-III, MUMBAI DATED 14- 02-2008. MOST OF THE ISSUES ARE COMMON AND ARISES OUT OF PROCEEDINGS UNDER SECTION 132 AND 133A ON THE GROUP CONCERNS AND THE ASSESSME NT ORDER PASSED UNDER SECTION 158BC OF INCOME TAX ACT. IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 2 OF 33 2. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED DEPARTMENTAL REPRESENTATIVE IN DETAIL. ASSESSEE ALS O PLACED PAPER BOOK IN TWO VOLUMES RUNNING INTO PAGE NOS. 1 TO 253 EVIDENCING VARIOUS TRANSACTIONS AND CONTENTIONS. AFTER CONSIDE RING THE DETAILS ON RECORD, THE ISSUES ARE CONSIDERED GROUND-WISE: IT(SS) NO.41/MUM/2008 3. ASSESSEE HAS RAISED VARIOUS GROUNDS WITH REFERENCE TO THE ADDITIONS MADE UNDER SECTION 158BC CONSEQUENT TO TH E SEARCH/SURVEY PROCEEDINGS. ASSESSEE ALSO FILED AN A DDITIONAL GROUND WHICH IS A LEGAL GROUND WITH REFERENCE TO BENEFIT O F TELESCOPING IN RESPECT OF ADDITIONS MADE ON INCOME BASIS VIS--VIS ADDITIONS MADE ON EXPENDITURE/INVESTMENT BASIS. SINCE THIS IS A LE GAL ISSUE AND DOES NOT REQUIRE ANY EXAMINATION OF FACTS, THE ADDI TIONAL GROUND AFTER DISCUSSION WITH THE DEPARTMENTAL REPRESENTATI VE AND CONSIDERING HIS OBJECTIONS WAS ALLOWED FOLLOWING TH E PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF NA TIONAL THERMAL POWER CORPORATION LTD VS. CIT, 229 ITR 383. 4. GROUND NO.1 IS AS UNDER: THE LEARNED CIT (A) CENTRAL-III MUMBAI ERRED IN CONFIRMING THE ADDITION OF ` .1,50,25,864/- TO THE INCOME OF THE APPELLANT ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT WITH HMA GROUP. 5. THIS GROUND RELATES TO TREATMENT OF ` .1,50,25,864/- AS UNEXPLAINED INVESTMENT. THE RELATED FACTS IN BRIEF ARE THAT ASSESSEE IS A MANUFACTURER OF DENIM JEANS AND WAS COVERED BY SEARCH AND SEIZURE ACTION ON 12.12.2002. DURING THE COURSE OF SEARCH CERTAIN BILLS RELATING TO THE HMA GROUP WERE FOUND WITH THE ASSESSEE AND HENCE THE HMA GROUP WAS COVERED BY A SURVEY U/S. 13 3A. THE HMA GROUP COMPRISING M/S. HMA INTERLININGS PVT. LTD., M /S. HMA INTERNATIONAL AND M/S. SUPER GARMENT ACCESSORIES, I S ENGAGED IN IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 3 OF 33 MAKING LININGS FOR JEANS AS WELL AS SUPPLYING ZIPPE RS FOR JEANS. DURING THE COURSE OF SURVEY, THREE INVOICES IN THE NAMES OF THE ASSESSEE WERE FOUND WITH M/S.HMA INTERLINING PVT. L TD., REFLECTING TRANSACTIONS TOTALING ` 1,19,94,864/-, WHICH WERE NEITHER RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE NOR IN THE BOOKS OF ACCOUNT OF THE RESPECTIVE PARTIES. DURING THE SEARCH, THE D IRECTOR OF M/S. HMA INTERLINING PVT. LTD., SHRI MANOHAR AHUJA WAS Q UESTIONED ON THESE TRANSACTIONS AND IT WAS STATED BY HIM THAT TH E BILLS DID NOT REPRESENT REAL TRANSACTIONS BUT WERE MERELY ACCOMMO DATION BILLS, PREPARED SOLELY FOR THE PURPOSE OF DISCOUNTING THE L/CS WITH BANK AND CLEARING OUTSTANDING DUES. AS SUCH, THE RELATAB LE SALES HAD BEEN ENTERED EARLIER AND HENCE THERE WAS NO FRESH E NTRY IN HIS BOOKS. DURING THE COURSE OF BLOCK ASSESSMENT PROCEE DINGS, THE ASSESSEE WAS ALSO QUESTIONED BY THE AO ON THIS POIN T, IN RESPONSE TO WHICH IT WAS SUBMITTED THAT THESE BILLS PERTAINE D TO SUPPLIES MADE EARLIER AGAINST WHICH, THOUGH DELIVERY WAS TAK EN, PAYMENTS HAD NOT BEEN MADE. IT WAS HENCE, ONLY IN ORDER TO C LEAR THE OUTSTANDING PAYMENT THAT THE BILLS WERE PREPARED AG AIN FOR DISCOUNTING WITH THE BANK. DURING THE COURSE OF BLO CK ASSESSMENT PROCEEDINGS, THE AO ALSO FOUND THAT FURTHER PURCHAS ES OF ` 30,31,000/- FROM M/S. HMA INTERLINING PVT. LTD. WER E NEITHER RECORDED IN ITS BOOKS NOR IN THE BOOKS OF THE ASSES SEE. SIMILAR EXPLANATION WAS GIVEN IN RESPECT OF TRANSACTIONS OF ` 30,31,000/- TOO. THE AO REJECTED THE ABOVE CONTENTION OF THE AS SESSEE ON THE FOLLOWING GROUND, VIZ, WHILE ALL OTHER BILLS WERE F OUND TO BE ENTERED IN THE BOOKS OF ACCOUNT OF ASSESSEE AS WELL AS M/S HMA INTERLINING PVT. LTD., IT WAS ONLY THE BILLS IN QUESTION, WHICH WERE UNACCOUNTED. AO ALSO FOUND THIS TO BE SOLITARY INSTANCE OF SUCH KIND. THE AO ALSO FOUND THAT THE LEDGER ACCOUNT OF THE PARTIES HAD BE EN DEBITED BY IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 4 OF 33 ASSESSEE BY WAY OF LC ISSUED AGAINST THE SAME AMOUN T APPEARING IN THE BILLS OF HMA GROUP. 6. THE AO HAS, THEREFORE, OBSERVED IN THE ASSESSMENT O RDER AS UNDER: IMPORTANTLY, THE SAID PARTY IS ABLE TO GET THIS BI LL DISCOUNTED WITH ABHYUDAYA CO-OP BANK. HAD IT BEEN N OT THE CASE THAT SALES HAD NOT BEEN EFFECTED, THEN THE ASSESSEE WOULD NOT HAVE BEEN ABLE TO ISSUE THE LC A ND THE PARTY WOULD NOT HAVE BEEN IN A POSITION TO GET IT DISCOUNTED. THIS HAS TO BE A REAL SALE SUPPORTED WI TH DELIVERY CHALLANS BUT ONLY NOT REFLECTED IN THE BOO KS OF ACCOUNTS OF THE PARTIES. 7. HE, THEREFORE, MADE THE ADDITION OF ` 1,19,94,864/- AND ` 30,31,000/-, AGAINST WHICH ASSESSEE PREFERRED APPEA L BEFORE CIT(A). 8. DURING THE COURSE OF APPEAL PROCEEDINGS BEFORE CIT( A), THE CONFIRMATION OF M/S. HM INTERLINING PVT. LTD. TOGET HER WITH AN AFFIDAVIT OF SHRI MANOHAR AHUJA WAS FILED TO SUBSTA NTIATE THAT NO ACTUAL SALES WERE MADE BY THE HMA GROUP TO ASSESSEE EITHER ON 13.04.1999 OR ON 09.12.2000 AND THAT THE BILLS IN Q UESTION HAD BEEN MERE ACCOMMODATION BILLS. AS THESE DOCUMENTS H AD NOT BEEN FILED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREFORE CONSTITUTED FRESH EVIDENCE, THE MATTE R WAS SENT IN REMAND TO THE AO. IN THE REMAND REPORT AFTER EXAMI NATION OF THE DOCUMENTS AS ABOVE, THE AO HAS CONCLUDED THAT MERE SUBMISSION OF AFFIDAVIT IS NOT SUFFICIENT TO DENOUNCE THE FACTS GATHERED DURING THE SEARCH. THE DELIVERY CHALLANS HAVE BEEN SIGNED THE ASSESSEE GIV ING SUFFICIENT PROOF FOR THE PURCHASE OF THE GOODS. THE LETTER OF CREDIT IS ALSO VERY CONCRETE EVIDENCE PROVING TH E PAYMENT MALE TO THE FIRMS INVOLVED IN THE TRANSACTI ONS. TO SAY THAT, L.C. (LETTER OF CREDIT) WAS PRODUCED T O THE BANK FOR OBTAINING THE LOAN, ONLY INDICATES SOME UNLAWFUL ACTIVITY, WHICH ARE NOT POSSIBLE IN NORMAL CIRCUMSTANCES BECAUSE THE BANK MAKES NECESSARY IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 5 OF 33 VERIFICATION BEFORE GRANTING THE LOAN. IN VIEW OF T HESE CIRCUMSTANCES, THE STATEMENT/AFFIDAVIT OF MR. AHUJA IS AN AFTER THOUGHT, MEANT ONLY FOR ACCOMMODATING ASSESSEE. 9. WHEN CONFRONTED WITH THE ABOVE FINDINGS IN THE REMA ND REPORT, IT WAS SUBMITTED THAT THE AOS OBSERVATION IN FACT WAS CONFIRMING THE CONTENTION OF THE ASSESSEE THAT THOU GH THE PURCHASES WERE NOT RECORDED, LCS DISCOUNTED WERE R ECORDED IN THE BOOKS OF ACCOUNT AGAINST THE OLD OUTSTANDING. THE L EDGER ACCOUNTS OF THE PARTIES CONCERNED TOGETHER WITH THE RELATABL E BILLS WERE FILED TO SUBSTANTIATE THAT AS ON 13.04.1999 AND 09.02.200 THE OUTSTANDING BALANCES WERE AS UNDER: A) ON 01.02.2000 OUTSTANDING WITH M/S HMA INTERLINING PVT. LTD OF ` .50,38,186/- AGAINST WHICH LCS OF ` .45,20,821/- WAS ADJUSTED. B) ON 01.02.2000 OUTSTANDING WITH M/S SUPER GARMENT ACCESSORIES OF ` .47,46,704/- AGAINST WHICH LCS OF ` .56,39,479/- WAS ADJUSTED. C) ON 01.04.1999 OUTSTANDING WITH M/S HMA INTERLINING OF ` .19,59,579/- AGAINST WHICH LCS OF ` .18,34,564/- WAS ADJUSTED. D) WITH REGARD BILLS FOUND DURING THE COURSE OF ASSESS MENT PROCEEDINGS RELATING TO M/S HMA INTERLINING PVT LTD , IT WAS POINTED OUT THAT AS ON 01.04.1999 THERE WAS AN OUTSTANDING OF ` .1,15,05,157/- AGAINST WHICH LCS OF ` .30,31,000/- WAS DISCOUNTED. FURTHER, A COPY OF THE BANK STATEMENT OF ASSESSEE C OMPANY WITH ABHYUDAYA COOP. BANK WAS FILED TO SUBSTANTIATE THAT THE LCS DISCOUNTED WERE ALSO REPAID WELL BEFORE THE DATE OF SEARCH AND WERE ALSO ACCOUNTED FOR IN THE BOOKS OF ASSESSEE. IT IS, THEREFORE, IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 6 OF 33 SUBMITTED THAT BOTH THE BOOKS OF ACCOUNT OF ASSESSE E WAS WELL AS THAT OF THE PARTIES CONCERNED CONFIRMED THAT THE BI LLS IN QUESTION WERE MERELY ACCOMMODATION BILLS. IT WAS FURTHER SUB MITTED THAT ASSESSEE HAD A RUNNING BUSINESS WITH THE THREE PART IES IN QUESTION, A FACT WHICH WAS NOT DISPUTED BY AO ALSO. THE VERY FACT THAT THERE WERE OUTSTANDING AS ON 13.4.1999 AND 09.02.2000 SUB STANTIATED THE CONTENTION OF ASSESSEE THAT PURCHASES FROM THES E PARTIES HAD BEEN ENTERED INTO BOOKS OF ACCOUNT EARLIER AND THE SAID BILLS WERE ACCOMMODATION BILLS PREPARED IN ORDER TO MAKE PAYME NT AGAINST THE OUTSTANDING. HOWEVER, IT WAS SUBMITTED THAT THE BIL L TO BILL CORRELATION WAS NOT POSSIBLE AS THE OUTSTANDING COM PRISED A LARGE NUMBER OF SMALL BILLS. IT WAS ALSO POINTED OUT THAT BOTH ASSESSEE COMPANY AND PARTIES CONCERNED HAD CONFIRMED THAT TH E BILLS IN QUESTION WERE ACCOMMODATION BILLS DURING THE COURSE OF SEARCH ITSELF. MOREOVER, THE CONTENTION OF AO THAT THE BIL LS WERE REFLECTING UNACCOUNTED PURCHASES AS ABOVE WAS NOT SUBSTANTIATE D BY EVIDENCE FOUND DURING THE SEARCH AS NO EXCESS STOCK OF INTER LININGS WAS FOUND, AND NEITHER ANY EVIDENCE OF CASH SALES OF IN TERLININGS NOR ANY EXCESS CASH FOUND. IT WAS FURTHER POINTED OUT T HAT THE BILL IN QUESTION WERE DATED 13.04.1999 AND 09.02.2000 AND O N THE DATE OF SEARCH, I.E., ON 12.12.2002, THE BOOKS OF ACCOUNT O F BOTH PARTIES WERE CLOSED AND AUDITED, AND THE RETURN OF INCOME H AD ALSO BEEN FILED. THEREFORE, IT WAS POINTED OUT THAT THE BILLS COULD NOT HAVE BEEN THE ACTUAL BILLS FOR PURCHASES, BUT WERE ACCOMMODAT ION BILLS. IT WAS ALSO SUBMITTED THAT THE TRANSACTIONS OF PURCHASER H AD NEVER BEEN DENIED BY THE ASSESSEE. THE ONLY DIFFERENCE WAS THA T THE TRANSACTIONS HAD TAKEN PLACE ON EARLIER DATES AND T HE BILLS IN QUESTION MERELY REPRESENTED EARLIER TRANSACTIONS AG AINST WHICH NO PAYMENTS WERE MADE. THE CONTENTION THEREFORE, WAS T HAT BILLS IN IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 7 OF 33 QUESTION FOUND WITH MIS. HMA INTERLINING HAD BEEN P REPARED ONLY AS ACCOMMODATION BILLS AND THEREFORE NO ADDITION WA S WARRANTED. 10. AFTER THAT THE LEARNED CIT (A) HOWEVER, CONFIRMED A OS ACTION BY HOLDING AS UNDER: 2.4. I HAVE PERUSED THE FACTS, AND CONSIDERED THE CONTENTION OF THE APPELLANT. THE UNDISPUTED FACTS ARE THAT ADD ITION HAS BEEN MADE ON THE BASIS OF THE FOLLOWING FOUR BILLS :- A) PURCHASES FROM: M/S HMA INTERLINING PVT.LTD. ` 45,20,821/- ON 09.102.2000 M/S SUPERGARMENTS ACCESSORIES ` 56,39,479/- ON 09.02.2000 M/S HMA INTERLINING ` .18,34,564/- ON 09.02.2000 ----------------- TOTAL ` .1,19,94,864/- =========== M/S HMA INTERLINING PVT LTD. ` .30,31,000 ON 13.04.1999. THESE BILLS WERE NEITHER ENTERED IN THE BOOKS OF AC COUNT OF APPELLANT NOR IN THE BOOKS OF THE RESPECTIVE PARTIE S. ANOTHER UNDISPUTED FACT IS THAT THOUGH THE BILLS AS ABOVE W ERE NOT RECORDED, PAYMENTS AGAINST THESE BILLS WERE RECORDE D IN THE BOOKS OF ASSESSEE AS WELL AS THE PARTIES CONCERNED. BOTH THE AO AND THE APPELLANT DO NOT DENY THE FACT THAT ACTU AL PURCHASE OF INTERLININGS AID ZIPPERS WAS MADE AND DELIVERY T AKEN. THE DISPUTE IS REGARDING THE DATE OF PURCHASE/ DELIVERY . THE AO IS RELYING ON THE FOUR BILLS AS ABOVE DATED 13.04. 199 9 AND 09.02.2000 AS WELL AS L/CS DISCOUNTED TO STRESS THA T PURCHASE, DELIVERY AND PAYMENT TOOK PLACE ON THE RE SPECTIVE DATES AND HAS MADE THE ADDITION AS THEY WERE NOT EN TERED IN THE BOOKS OF THE APPELLANT. THE APPELLANT CONTENTI ON IS THAT THE PURCHASES HAD BEEN RECORDED EARLIER AND THE BILLS I N QUESTION REPRESENTED ACCOMMODATION BILLS IN ORDER TO FACILIT ATE THE REPAYMENT OF OUTSTANDING BY DISCOUNTING LCS AND THE REFORE WERE NOT RECORDED ON THE DATES MENTIONED IN THE BIL LS. 2.5. DURING THE APPEAL PROCEEDINGS, THE APPELLANT W AS REQUIRED TO CO-RELATE THE PURCHASES REFLECTED IN THE BILLS F OUND AND SEIZED WITH PURCHASES ALREADY ENTERED IN THE BOOKS OF ACCOUNT. HOWEVER, ON THE PRETEXT THAT THE OUTSTANDING PAYMEN TS TO BE MADE TO THE HMA GROUP COMPRISED NUMEROUS BILLS OF S MALL AMOUNTS, THE APPELLANT SUBMITTED THAT NO SUCH CO-RE LATION WAS POSSIBLE. THE FAILURE OF THE APPELLANT IN MAKING TH E CO-RELATION THUS CLEARLY ESTABLISHES THE FACT THAT ITS CONTENTI ON THAT PURCHASES OF ` .1.50 CRORES WERE RECORDED ON EARLIER DATES, IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 8 OF 33 REMAINS UNPROVED. THE BILLS CONFIRM THE FACT THAT A CTUAL PURCHASES WERE MADE AND THE LOAN FROM THE BANK FURT HER CONFIRMS THE FACT THAT THE TRANSACTIONS WERE ACTUAL , GENUINE TRANSACTIONS, WHERE DELIVERY OF GOODS WAS ALSO TAKE N AND THIS FACT ACKNOWLEDGED EVEN BEFORE A THIRD PARTY, I.E. T HE BANK. THE ONUS IS THEREFORE, DEFINITELY ON THE APPELLANT TO P ROVE THAT THE TRANSACTIONS WERE NOT REAL AS CLAIMED BY IT BECAUSE THE SEIZED BILLS IN QUESTION CLEARLY ESTABLISH THE CONTRARY OF PURCHASE MADE AND DELIVERY TAKEN OF GOODS WORTH ` .1.50 CRORES. THE APPELLANTS FAILURE AND INABILITY TO ESTABLISH A NE XUS BETWEEN PURCHASES AS PER PURPORTED ACCOMMODATION BILLS AND THE RECORDED PURCHASES CAN ONLY LEAD TO ONE LOGICAL CON CLUSION NAMELY THAT THE PURCHASES ARE OUT OF BOOK PURCHASES AND HENCE REPRESENT UNEXPLAINED INVESTMENT. IT IS THE A PPELLANTS CASE THAT THE ENTRY IN ITS BOOKS OF THE L/CS DISCO UNTED AGAINST OUTSTANDING AS WELL AS THE ENTRY OF REPAYMENT, BOTH BEFORE THE DATE OF SEARCH, PROVED THAT THE BILLS IN QUESTION W ERE MERELY ACCOMMODATION BILLS AND DID NOT REFLECT ANY REAL TR ANSACTIONS AS NO PRUDENT PERSON WOULD RECORD PAYMENTS AGAINST PURCHASES WITHOUT RECORDING PURCHASES. THE APPELLAN TS CONTENTION IS ABSOLUTELY BASELESS BECAUSE UNRECORDE D PURCHASES IS ONE THING AND BOGUS PURCHASES ABSOLUTE LY ANOTHER. EVIDENCES DURING SEARCH ESTABLISHED UNRECO RDED PURCHASES OF ` .1.50 CRORES. THE APPELLANT RAISED LOANS ON SUCH UNRECORDED PURCHASES ACTUALLY MADE, ISSUING L/CS AG AINST BILLS OF ` .1.50 CRORES IN FAVOUR OF THE HMA GROUP, WHO DISCOUNTED AND ADJUSTED THE SAME AGAINST OUTSTANDIN G ARISING OUT OF REGULAR, RECORDED SALES TO THE APPELLANT. BU T BEFORE THE SEARCH, THIS INGENIOUS MANNER OF SIMULTANEOUSLY RED UCING PROFIT AND MAKING AVAILABLE LIQUIDITY WOULD NOT HAVE BEEN DETECTED. AS THE LOAN SO RAISED WAS UTILIZED FOR PAYMENT OF R ECORDED OUTSTANDING, THE ENTRY HAD TO BE MADE IN THE REGULA R BOOKS OF ACCOUNT. THEREFORE, THE ENTRIES PER SE OF DISCOUNTI NG AND SUBSEQUENT REPAYMENT, IN THE ABSENCE OF CO-RELATION OF UNRECORDED PURCHASES WITH RECORDED PURCHASES IN NO WAY ESTABLISHES THAT THE PURCHASES REFLECTED IN THE BIL LS IN QUESTION WERE ENTERED IN THE REGULAR BOOKS. FOR THESE REASON S, THERE IS THEREFORE, NO MERIT IN THE APPELLANTS CONTENTION T HAT ` .1.50 CRORES IS BOGUS PURCHASES AND NOT UNRECORDED PURCHA SES. THE ACTION OF AO IN TREATING ` .1.50 CRORES AS UNEXPLAINED INVESTMENT ON ACCOUNT OF UNRECORDED PURCHASES IS TH EREFORE UPHELD. 11. REFERRING TO THE ABOVE ORDER OF THE CIT (A) AND VAR IOUS BILLS PLACED ON RECORD IN SUPPORT OF THE CONTENTIONS OF A SSESSEE, IT WAS IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 9 OF 33 THE SUBMISSION OF THE LEARNED COUNSEL THAT ASSESSEE HOLD LOT OF AMOUNTS TO THE RESPECTIVE PARTIES AND COULD NOT ARR ANGE FUNDS AND SO ON THE BILLS ISSUED, THE SAID PARTIES OBTAINED B ANK LOANS BY OPENING LCS AND THESE AMOUNTS WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. HE ALSO DREW OUR ATTENTION TO THE STATEMEN T GIVEN BY MR. MANOHAR AHUJA REITERATING THE FACTS NOT ONLY IN THE COURSE OF SEARCH PROCEEDINGS, BUT ALSO SUBSEQUENTLY BY WAY OF AFFIDA VIT. IT WAS THE SUBMISSION THAT AS AGAINST THE OUTSTANDING AMOUNT P AYABLE TO M/S HMA INTERLINING (P) LTD, SUPER GARMENTS, ASSESSEE H AD TO PROVIDE ACCOMMODATION BILLS IN ORDER TO OPEN THE LCS. HE TH EREFORE, SUBMITTED THAT NEITHER AO NOR THE CIT (A) DISPUTED THE FACTS THAT THE AMOUNTS RECEIVED BY THE SAID COMPANIES AND ADJU STED WERE IN FACT RECORDED IN THE BOOKS OF ACCOUNT. IT WAS THE S UBMISSION THAT THERE ARE NO UNACCOUNTED PURCHASES AND NOTHING WAS FOUND IN THE COURSE OF SEARCH ALSO EXCEPT THESE THREE BILLS. IT WAS FURTHER SUBMITTED THAT THE TRANSACTIONS WERE COMPLETED BY T HE END OF 2000 AND TRANSACTIONS WERE ALSO RECORDED AND AMOUNTS WER E SETTLED, BY THE TIME SEARCH ACTION WAS TAKEN WHICH INDICATES TH AT THESE ARE ONLY ACCOMMODATION BILLS AND NOT UNACCOUNTED PURCHA SES. FURTHER IT WAS CONTENDED THAT CORRELATION BILL TO BILL WAS NOT FEASIBLE AS EXPLAINED BEFORE THE AUTHORITIES AS ASSESSEE HAD TO UNDERTAKE DISCOUNTING OF BILLS TO THE EXTENT OF AMOUNT OUTSTA NDING. CONSOLIDATED BILLS WERE GIVEN WITHOUT THERE BEING A NY PURCHASE OF GOODS. THEREFORE, ADDITION ON THIS ACCOUNT IS NOT W ARRANTED. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER, RE ITERATED THE CONTENTION OF THE REVENUE AND PARTICULARLY THE FINDINGS OF THE CIT (A) THAT IN THE ABSENCE OF CORRELATION OF UNREC ORDED PURCHASES WITH REGARD TO PURCHASES, NO WAY ESTABLISHES THAT P URCHASES REFLECTED IN THE BILLS ARE ENTERED IN THE REGULAR B OOKS OF ACCOUNT. IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 10 OF 33 13. WE HAVE CONSIDERED THE ISSUE. AS CAN BE SEEN FROM T HE FACTS STATED ABOVE, THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT THESE TRANSACTIONS HAVE OCCURRED IN 1999-2000 AND T HE SO CALLED BILLS WERE DISCOUNTED BY THE BANK AND PROCEEDS THER EON WERE ADJUSTED WITH THE EXISTING OUTSTANDING AMOUNTS IN B OOKS WITHOUT THERE BEING ANY DEBIT OR CREDIT TOWARDS THE PURCHAS E OR SALE. THIS SUPPORTS ASSESSEES CONTENTIONS THAT THESE ARE ONLY ACCOMMODATION BILLS AFTER OBTAINING LC FACILITY. IT IS ALSO SUPPO RTED BY THE STATEMENT OF SHRI MANOHAR AHUJA NOT ONLY IN THE COURSE OF SEA RCH BUT ALSO BY WAY OF AFFIDAVIT SUBSEQUENTLY FILED. THE EVIDENCE O N RECORD DOES INDICATE THAT THESE ARE ONLY ACCOMMODATION BILLS FO R OBTAINING THE LOANS AND NOT UNACCOUNTED PURCHASES. JUST BECAUSE T HERE ARE CERTAIN BILLS AVAILABLE, IT CANNOT BE CONSIDERED AS UNACCOUNTED PURCHASES UNLESS THERE IS EVIDENCE THAT ASSESSEE PU RCHASED THE GOODS IN QUESTION AND PAID THE AMOUNT OUTSIDE THE B OOKS OF ACCOUNT. AS CONTENDED BY ASSESSEE, THE AMOUNTS WER E SETTLED BY WAY OF LC PROCEEDS AND THESE WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THERE IS A DIRECT CORRELATION OF PAYMENT W ITH REFERENCE TO THESE AMOUNTS OF BILLS PROVIDED BY ASSESSEE WHICH A RE DISCOUNTED BY THE OTHER PARTY AND SINCE THESE TRANSACTIONS ARE RECORDED IN THE BOOKS OF ACCOUNT, WE ARE UNABLE TO UNDERSTAND HOW T HE PAYMENTS MADE THROUGH BANK ACCOUNT AND RECORDED IN THE BOOKS OF ACCOUNT CAN BE CONSIDERED AS UNACCOUNTED PURCHASES. THESE T RANSACTIONS IN A WAY ARE RECORDED PURCHASES. THE REVENUE IS NOT DISPUTING THE PURCHASES MADE EARLIER WHICH WERE OUTSTANDING FOR W HICH THESE AMOUNTS WERE ADJUSTED. THE MODE OF ACCOUNTING AND M ETHODOLOGY ADOPTED CERTAINLY DO INDICATE THAT THESE ARE ACCOMM ODATION BILLS FOR OBTAINING LC FACILITY FROM THE BANK SO AS TO ADJUST THE OUTSTANDING AMOUNT BETWEEN THE PARTIES. SINCE THESE AMOUNTS WER E ALREADY RECORDED IN THE BOOKS OF ACCOUNT AND IN THE COURSE OF SEARCH ITSELF, IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 11 OF 33 THESE FACTS ARE ADMITTED BY THE PARTIES INVOLVED TH EREIN, THE TRUTH THEREIN HAS TO BE ACCEPTED AS SUCH. IT IS NOT POSSI BLE TO CORRELATE ONE TO ONE PURCHASES WHEN ASSESSEE PURCHASED LARGE NUMBER OF GOODS EARLIER AND THERE WAS OUTSTANDING AMOUNT PAYA BLE TO THE PARTIES FOR WHICH THESE ACCOMMODATION BILLS WERE PR OVIDED. IN THE ABSENCE OF ANY ACTUAL PURCHASE AND THE FACT THAT TH E BILLS WERE DISCOUNTED IN THE BAN, WHICH WERE ACCOUNTED IN THE BOOKS OF ACCOUNT TAKES IT OUT OF THE UNACCOUNTED PURCHASE PR OVISIONS OF THE I.T. ACT. THEREFORE, WE ARE OF THE VIEW THAT ADDITI ON OF ` .1,50,25,864/- ON THE SO CALLED ACCOMMODATION BILLS AS UNEXPLAINED PURCHASES CANNOT BE SUSTAINED. FOR THES E REASONS WE DELETE THE ADDITIONS SO MADE. GROUND, IS THEREFORE, ALLOWED. 14. GROUND NO.2 IS AS UNDER: THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITI ON OF ` .29,58,697/- (OUT OF ` .52,95,960/-) MADE ON ACCOUNT OF ALLEGED UNACCOUNTED SALES TO M/S. LIBERTY MARKETERS 15. GROUND NO.2 RELATES TO THE ADDITION OF ` 52,95,960/- AS UNACCOUNTED SALES TO M/S. LIBERTY MARKETERS. THE RE LATED FACTS IN BRIEF ARE THAT DURING THE COURSE OF SEARCH, CORRESP ONDENCES BETWEEN ASSESSEE AND M/S. LIBERTY MARKETERS AND SIYAZ & ZUL FIKAR INDICATED SALES MADE BY ASSESSEE TO THE TWO PARTIES, WHICH AR E CONSIDERED AS UNACCOUNTED. AO MADE THE ADDITION OF RS.52,95,760/- RELYING ON THE FOLLOWING SEIZED DOCUMENTS: SEIZED DOCUMENT AMOUNT( ` `` ` .) PARTY PAGES 87 TO 92 OF A-1 23,37,203 SIYAZ & ZULFIKAR PAGE 80 OF A-1 4,72,477 SIYAZ & ZULFIKAR PAGES 70 TO 72 OF A-1 1,72,565 LIBERTY MARKETERS PAGES 75 TO 79 OF A-1 20,13,803 LIBERTY MARKETERS IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 12 OF 33 16. THE ABOVE SEIZED DOCUMENTS, APART FROM OTHER LOOSE PAPERS, ALSO CONTAIN LEDGER ACCOUNTS OF ASSESSEE AS APPEARI NG IN THE BOOKS OF M/S. LIBERTY MARKETERS AND SIYAZ & ZULFIKAR AND SOME OF THEM BEAR THE CAPTION UNACCOUNTED ASHAPURA. THIS LED T HE AC TO PRIMA-FACIE CONCLUSION THAT THE TRANSACTIONS WERE U NRECORDED. ASSESSEE DENIED ANY TRANSACTIONS WITH SIYAZ AND ZUL FIKAR, AND CONFIRMED THAT IT ONLY TRANSACTED WITH M/S. LIBERTY MARKETERS. PHOTO COPIES OF THE SALE BILLS TOGETHER WITH THE LE DGER ACCOUNT OF M/S. LIBERTY MARKETERS AS WELL AS THE BANK STATEMEN T WAS SUBMITTED AS WAS A RECONCILIATION STATEMENT OF THE BALANCES IN THE LEDGER ACCOUNTS OF M/S. LIBERTY MARKETERS. THE AO, AFTER EXAMINATION OF THE DOCUMENTS, CONCLUDED THAT THE SE IZED DOCUMENTS DESCRIBED THE TRANSACTIONS AS UNACCOUNTE D ASHAPURA AND AS THEY HAD BEEN SEIZED FROM THE PREM ISES OF THE ASSESSEE, THE ONUS WAS ON THE ASSESSEE TO PROVE OTH ERWISE, WHICH HAD NOT BEEN DISCHARGED SATISFACTORILY. HE THEREFOR E MADE THE ADDITION AS ABOVE. 17. DURING THE COURSE OF APPEAL PROCEEDINGS BEFORE CIT( A), IT WAS SUBMITTED THAT OUT OF ` 52,95,965/-, TRANSACTIONS WORTH ` 23,37,263/- WERE REFLECTED IN THE REGULAR BOOKS OF ACCOUNT OF ASSESSEE RELATING TO M/S. LIBERTY MARKETERS AND REL EVANT LEDGER ACCOUNT TOGETHER WITH THE BANK STATEMENT WERE FILED IN SUBSTANTIATION. IT WAS FURTHER STATED THAT M/S. LIB ERTY MARKETERS WAS ONE OF THE DISTRIBUTORS OF ASSESSEE AND SIYAZ Z ULFIKAR WAS THE PROPRIETOR OF M/. LIBERTY MARKETERS. WHEREAS ASSESS EE WAS BOOKING THE TRANSACTIONS WITH M/S. LIBERTY MARKETERS IN THE NAME OF M/S. LIBERTY MARKETERS, THE LATTER WAS BOOKING THE TRANS ACTIONS WITH ASSESSEE BOTH IN THE NAME OF SIYAZ ZULFIKAR AND ALS O M/S. LIBERTY MARKETERS. HENCE, THERE WAS AN INTERMINGLING OF BIL LS BY M/S. LIBERTY MARKETERS. AS THIS CONTENTION HAD NOT BEEN RAISED BEFORE THE IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 13 OF 33 AO AND THEREFORE NOT EXAMINED BY HIM, THE MATTER WA S SENT IN REMAND. IN THE REMAND REPORT THE AO HAS MADE THE FO LLOWING OBSERVATION AFTER EXAMINATION OF ASSESSEE CONTENTIO N AS WELL AS THE RELATABLE SUBSTANTIATING DOCUMENTS: IN THIS CONTEXT, IT IS OBSERVED THAT THE PAPER SEI ZED AT THE TIME OF SEARCH RELATES TO SIYAZ & ZULFIKAR. IN CONT RADICTION TO THE FACTS ON THE SEIZED MATERIALS, THE ASSESSEE CLAIMS THAT THESE ENTRIES ARE RECORDED IN THE REGULAR BOOK S OF ACCOUNTS IN RESPECT OF SALES TO M/S. LIBERTY MARKET ERS. ON INTERROGATION TO EXPLAIN THE ANOMALY, THERE IS NO EXPLANATION FORTHCOMING. 18. WHEN CONFRONTED WITH THE ABOVE FINDINGS IN THE REMA ND REPORT, IT WAS SUBMITTED THAT THE AO HAD WRONGLY NO T ACCEPTED ASSESSEES CONTENTION THAT M/S. LIBERTY MARKETERS A ND SIYAZ & ZULFIKAR WERE ONE AND THE SAME PARTY AND THAT SIYAZ & ZULFIKAR WAS THE PROPRIETOR OF M/S. LIBERTY MARKETERS. IT WAS PO INTED OUT THAT ASSESSEE HAD NO TRANSACTIONS WITH SIYAZ & ZULFIKAR BUT ONLY WITH M/S. LIBERTY MARKETERS AND THEREFORE THE NAME OF SI YAZ & ZULFIKAR DID NOT APPEAR IN THE BOOKS OF ACCOUNT OF ASSESSEE AT ALL. THIS WAS SUBSTANTIATED BY THE FACT THAT NO BILLS RAISED BY S IYAZ & ZULFIKAR WERE FOUND WITH THE ASSESSEE COMPANY DURING THE SEA RCH. IT WAS EMPHASIZED THAT IT WAS M/S. LIBERTY MARKETERS, WHIC H WAS ACCOUNTING THE TRANSACTIONS WITH M/S. ASHAPURA GARM ENT IN TWO NAMES NAMELY M/S. LIBERTY MARKETERS AND SIYAZ & ZUL FIKAR, AS BORNE OUT WAS THAT BILLS NUMBERS RECORDED IN THE N AME OF SIYAZ & ZULFIKAR BY M/S LIBERTY MARKETERS IN THE SEIZED DOC UMENTS WERE THE SAME AS THOSE RECORDED BY ASSESSEE IN ITS BOOKS IN THE NAME OF M/S. LIBERTY MARKETERS AND THE CHEQUE NUMBERS NOTED AGAINST THESE BILLS WERE ALSO MATCHING WITH THE CHEQUE NUMB ERS RECORDED AGAINST BILLS ENTERED BY M/S. LIBERTY MARKETERS IN THE NAME OF SIYAZ & ZULFIKAR. IT WAS POINTED OUT THAT PURCHASES TO TH E EXTENT OF RS 23,37,203/- WERE COVERED BY SIMILAR ENTRIES, WHICH HAD BEEN IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 14 OF 33 BOOKED BY M/S LIBERTY MARKETERS IN THE NAME OF SIYA Z & ZULFIKAR BUT HAD BEEN BOOKED BY ASSESSEE IN THE NAME OF M/S . LIBERTY MARKETERS. 19. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE CIT (A) EXAMINED THE TRANSACTIONS IN DETAIL AND NOTICED THA T THE TRANSACTIONS OF ` .23,37,263/- WERE REFLECTED IN THE REGULAR BOOKS OF ACCOUNT AND ACCORDINGLY HE DIRECTED AO TO DELETE TH E AMOUNT AFTER VERIFICATION. LIKEWISE, AN AMOUNT OF ` .1,75,565/- WHICH WAS THE CLOSING BALANCE WAS ALSO EXAMINED AND DIRECTED TO B E DELETED. THIS ASPECT WAS ALSO ACCEPTED BY THE REVENUE. HOWEVER, T HE CIT (A) CONFIRMED AN AMOUNT OF ` .4,72,477/- AND ` .20,13,803/-. THE BALANCE AMOUNT WAS CONFIRMED ON THE REASON THAT THE TRANSACTIONS WERE NOT REFLECTED IN ASSESSEES BOOKS OF ACCOUNT W HICH WERE CLEARLY STATED AS UNACCOUNTED PURCHASES IN THE DOCUMENTS SE IZED DURING THE COURSE OF SEARCH. THIS PART OF ADDITION IS IN C ONTENTION NOW. 20. IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT T HERE ARE DISPUTES BETWEEN M/S LIBERTY MARKETERS AND ASSESSEE AND REFERRED TO THE CORRESPONDENCE PLACED ON RECORD. IT WAS HIS SUBMISSION THAT THOSE PARTIES DEMANDED THE ABOVE AMOUNT FROM THE AS SESSEE COMPANY BY FURNISHING ACCOUNTS IN THE NAME OF LIBER TY MARKETERS AND SALES IN THE INDIVIDUAL NAME WHO IS THE PROPRIE TOR OF LIBERTY MARKETERS AND THESE MATTERS WERE DISPUTED. IT WAS H IS CONTENTION THAT THE SAID PARTIES MAY BE ALLOWED TO BE CROSS EX AMINED SO AS TO BRING OUT THE TRUTH ABOUT ACTUAL PURCHASES AND SALE S OR THE TRANSACTIONS. IT WAS FURTHER SUBMITTED AS EXPLAINED BEFORE THE CIT (A), MOST OF THE TRANSACTIONS ARE ACCOUNTED TRANSAC TIONS AND THEREFORE, THERE IS NO QUESTION OF UNACCOUNTED SALE S BY THE COMPANY SO AS TO CONSIDER AS AN ADDITION. WITHOUT PREJUDICE TO THE ABOVE, IT WAS FURTHER SUBMITTED THAT ONLY PROFIT CAN BE BROUG HT TO THE TAX AND NOT THE ENTIRE SALES PROCEEDS. THE LEARNED DEPARTME NTAL IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 15 OF 33 REPRESENTATIVE HOWEVER, RELIED ON THE ORDERS OF THE CIT (A) WHO WHILE DELETING THE AMOUNTS WHICH ARE ACCOUNTED FOR AND CORRELATED, CONFIRMED ONLY TO THE EXTENT THE TRANSACTIONS ARE N OT CORRELATED. 21. WE HAVE CONSIDERED THE ISSUE AND PERUSED RECORDS. T HERE IS NO DOUBT THAT THE PAPERS WERE SEIZED FROM ASSESSEE S PREMISES WHICH PERTAIN TO ONE OF THE DEALERS OF ASSESSEES P RODUCTS IN KERALA. THERE IS ALSO NO DOUBT THAT SOME TRANSACTIONS ARE A CCOUNTED IN VARIOUS SEIZED PAPERS UNDER THE HEAD LIBERTY MARKET ERS AND ALSO SALES IN THE NAME OF SIYAZ & ZULFIKAR. IT WAS THE S UBMISSION THAT THERE WAS DISPUTE IN SETTLING THE ACCOUNTS AND THAT IS WHY THOSE PARTIES PRODUCED ACCOUNTS FOR DEMANDING ADDITIONAL AMOUNT FROM THE COMPANY AND THOSE PAPERS WERE AVAILABLE WITH AS SESSEE. AS THE MATTERS WERE DISPUTED AND CONTENTIONS WERE NOT ACCE PTED, CONSIDERING THAT NO INQUIRY WAS MADE WITH THE LIBER TY MARKETERS AND FURTHER NO EXAMINATION OF THE ACTUAL DETAILS WE RE UNDERTAKEN BY AO, WE ARE OF THE OPINION THAT THE ADDITION CANN OT BE SUSTAINED WITHOUT EXAMINING THE FACTS OF TRANSACTIONS BETWEEN THE PARTIES. THEREFORE, ACCEPTING THE PRAYER OF ASSESSEE, WE SET ASIDE THE MATTER TO THE FILE OF AO TO MAKE NECESSARY INQUIRIES WITH M/S LIBERTY MARKETERS AND GIVE AN OPPORTUNITY TO ASSESSEE TO CR OSS EXAMINE, IF REQUIRED. IN CASE ANY OF THE TRANSACTIONS ARE FOUND TO BE UNACCOUNTED CONSEQUENT TO THE INQUIRY, AO MAY CONSI DER THE ASSESSEE ALTERNATE SUBMISSION OF BRINGING IT TO TAX THE PROFIT ELEMENT INVOLVED IN THE SALES, AS THE ENTIRE SALES PROCEEDS CANNOT BE TAKEN AS INCOME FOLLOWING THE DECISION IN THE CASE CIT VS PRESIDENT INDUSTRIES 258 ITR 654( GUJ). WITH THESE DIRECTIONS , THE ISSUE IN GROUND NO.2 IS RESTORED TO THE FILE OF AO FOR FURTH ER EXAMINATION OF THE AMOUNTS TO THE EXTENT CONFIRMED BY THE CIT (A). IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 16 OF 33 22. GROUND NO.3 IS AS UNDER: THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITI ON OF ` .78,16,200/- BEING ALLEGED UNDISCLOSED INTEREST PAYMENT TO THAKKAR GROUP 23. GROUND NO.3 RELATES TO ADDITION OF ` .78,16,200/- BY AO AS UNDISCLOSED INCOME ON ACCOUNT OF INTEREST PAID IN C ASH AND RELATABLE LOAN TAKEN AND REPAID IN CASH. THE CIT (A ) CONFIRMED ONLY THE INTEREST PORTION OF ` .78,16,200/- WHICH WAS CONTESTED IN GROUND NO.3. THE REVENUE IS CONTESTING IN GROUND NO .1 DELETION OF ` .1.40 CRORES WHICH WILL BE DEALT WITH IN REVENUE AP PEAL. THE RELATED FACTS IN BRIEF ARE THAT DURING THE COURSE O F SEARCH, DATA RELATING TO INT PAID TO THAKKAR GROUP IN CASH WAS FOUND IN ONE OF THE FILES ON THE COMPUTER. THE THAKKAR GROU P REFERRED TO LATE SHRI AJAY THAKKAR AND HIS FAMILY MEMBERS. AS S HRI AJAY THAKKAR HAD BEEN MURDERED BEFORE THE SEARCH, HIS WI FE, SMT. BHAVANA THAKKAR WAS SHOWN THE DETAILS. DURING THE C OURSE OF STATEMENT RECORDED U/S. 131, SHE CONFIRMED THAT ` 70,51,963/- HAD BEEN RECEIVED FROM ASSESSEE BY HER LATE HUSBAND AGA INST AMOUNTS ADVANCED TO ASSESSEE. SHE HOWEVER CLAIMED IGNORANCE OF THE PRINCIPAL AMOUNT WHICH WAS GIVEN TO ASSESSEE BY HER HUSBAND. ON THE BASIS OF THE STATEMENT DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, ASSESSEE WAS REQUIRED TO SUBSTANTIATE WHETHER THE PAYMENT OF INTEREST WAS RECORDED FOR IN THE BOOKS O F ACCOUNT AND FURTHER, WHETHER THE LOAN ON WHICH INTEREST WAS PAI D WAS ALSO ACCOUNTED FOR. AO HAS REPRODUCED THE ENTIRE EXPLANA TION OF ASSESSEE IN TWO PAGES THAT : (A) ASSESSEE MAY BE GIVEN AN OPPORTUNITY TO CROSS-E XAMINE SMT. BHAVANA THAKKAR AS ACCORDING TO ASSESSEE SHE WAS NO T AWARE OF THE RELATED TRANSACTION AS SHE WAS HOUSE WIFE AND I T IS ONLY LATE SHRI AJAY THAKKAR, WHO DEALT WITH ASSESSEE. IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 17 OF 33 (B) IN ANY CASE THE LOAN COULD NOT BE TREATED AS IN COME OF ASSESSEE. (C) IT WAS POINTED OUT TO AO THAT ALL THE TRANSACT ION OF LATE SHRI AJAY THAKKAR HAD BEEN SCRUTINIZED BY MUMBAI POLICE, CRIM E BRANCH, CRAWFORD MARKET, MUMBAI IN CONNECTION WITH THE MURD ER OF LATE SHRI AJAY THAKKAR. (D) ATTENTION WAS ALSO DRAWN THAT ASSESSEES NAME D ID NOT APPEAR IN TILE LIST OF CASH TRANSACTION UNDERTAKEN BY LATE SH RI AJAY THAKKAR AND HENCE BOTH THE RECEIPTS OF LOAN IN CASH AND THE PAYMENT RELATABLE INTEREST IN CASH WAS DENIED. 24. THE AO, HOWEVER, REJECTED THE ABOVE CONTENTIONS OF ASSESSEE ON THE REASON THAT ACCORDING TO THE AO IF THERE WAS NO LOAN TAKEN, THEN THERE WAS ABSOLUTELY NO NEED OF MAINTAINING TH E DETAILED ACCOUNTING OF INTEREST PAID IN THE COMPUTER. THE UN DISPUTED FACT WAS THAT ASSESSEE WAS REGULARLY TAKING LOANS FROM L ATE SHRI AJAY THAKKAR GROUP BY CHEQUE, WHICH WERE REFLECTED IN TH E BOOKS OF ACCOUNT AND THEREFORE IT COULD BE RULED OUT, IN VIE W OF THE DOCUMENTARY EVIDENCES RELATING TO PAYMENT OF INTERE ST IN CASH FOUND DURING THE SEARCH, THAT CASH LOANS ALSO WERE NOT TAKEN. 25. THE AO HAS THEREFORE CONCLUDED AS UNDER :- THE LOANS WHICH WERE TAKEN IN CHEQUE FROM THE SAID GROUP WAS PAID BACK BY CHEQUE. IMPORTANTLY, THE INTEREST THEREON WAS ALSO PAID BY CHEQUE ONLY AND T DS WAS ALSO SEEN TO HAVE BEEN DEDUCTED. THEREFORE, IT LOGICALLY FOLLOWS THAT THE INTEREST PAID IN CASH WA S FOR LOANS TAKEN IN CASH ONLY. HERE IT MAY BE OBSERVED T HAT SMT. BHAVANA THAKKAR HAS ALSO ADMITTED IN HER STATEMENT OF HAVING GIVEN CASH LOAN TO THE ASSESSEE . THEREFORE, IT IS LOGICALLY CONCLUSIVE THAT INTEREST WHICH WAS PAID IN CASH WAS FOR THE CASH LOANS TAKEN BY TH E ASSESSEE. IT IS ALSO WELL KNOWN FACT IN THE MARKET THAT SHRI AJAY A. THAKKAR USED TO GIVE CASH LOANS TO VAR IOUS PARTIES IN THE MARKET. THEREFORE, IT IS NOT OUT OF PLACE THAT THE ASSESSEE HAD TAKEN CASH LOAN FROM TIE SAID PARTY. IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 18 OF 33 26. HE THEREFORE, MADE THE ADDITION OF ` 70,51,963/- AS INTEREST AND ` 1.40 CRORES AS THE PRINCIPAL AMOUNT REPAID BY WORKI NG BACKWARDS. 27. DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFO RE CIT(A), IT WAS SUBMITTED THAT APART FROM SEIZED DOCUMENTS F OUND DURING THE COURSE OF SEARCH SHOWING PAYMENT OF INTEREST IN CASH, AO HAD ALSO RELIED UPON THE STATEMENT OF SMT. BHAVANA THAK KAR FOR MAKING THE ADDITION AS ABOVE. HOWEVER, ASSESSEE HAD NOT BE EN GIVEN AN OPPORTUNITY TO CROSS-EXAMINE SMT. BHAVANA THAKKAR. THE MATTER WAS THEREFORE REMANDED TO THE AO WITH SPECIFIC DIRE CTIONS OF GIVING ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE SMT. BHAVA NA THAKKAR. FURTHER, HE WAS ALSO DIRECTED TO MAKE NECESSARY VER IFICATION WITH THE MUMBAI POLICE, CRIME BRANCH IN RESPECT OF ASSES SEES CONTENTION THAT ASSESSEES NAME DID NOT APPEAR IN T HE LIST OF PERSONS WITH WHOM SHRI AJAY THAKKAR HAD CASH TRANSA CTIONS. IN THE REMAND REPORT DATED 24.08.2007, THE AO HAS STATED T HAT DESPITE VALID SERVICE OF NOTICE U/S. 131 ON SMT. BHAVANA TH AKKAR, THERE WAS NO COMPLIANCE AND HENCE CROSS EXAMINATION COULD NOT BE GIVEN. THE AO HAS FURTHER OBSERVED IN THE REMAND REPORT AS UNDER :- I WOULD LIKE TO REITERATE THAT DATE-WISE ENTRIES O F PAYMENTS OF INTEREST IN CASH ON COMPUTER OF THE ASSESSEE ARE EVIDENCES BEYOND DOUBT. IN FACT, THE O NUS TO PROVE OTHERWISE IS CAST ON THE ASSESSEE. ONUS IS NOT ON THE DEPARTMENT TO PROVE THAT SUCH TRANSACTIONS A RE NON-GENUINE. SUCH METICULOUS ENTRIES WITH DEFINITE AMOUNT AND DATE CAN NOT BE BOGUS. THE INVESTIGATION CARRIED OUT BY THE MUMBAI POLICE CRIME BRANCH IS NOTHING BUT CORROBORATING EVIDENCE. I WILL HUMBLY S UBMIT THAT ONLY ASSESSEE SHOULD BE ASKED TO PROVE THAT WHATEVER HE HAS ENTERED ON THE COMPUTER IS BOGUS BECAUSE ONUS IS CAST ON THE ASSESSEE ONLY. THEREFOR E, THE ADDITION MADE BY THE ASSESSING OFFICER MAY BE TREATED AS CORRECT. IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 19 OF 33 28. IT WAS AOS CASE THEREFORE THAT THE ONUS WAS ON ASS ESSEE TO PROVE THAT THE ENTRIES AS ABOVE WERE BOGUS ENTRIES, WHICH IT HAD FAILED TO DISCHARGE, AND HENCE THE ADDITIONS HAD BE EN RIGHTLY MADE. 29. WHEN CONFRONTED WITH THE ABOVE, IT WAS SUBMITTED TH AT IT WAS PRACTICE WITH THE THAKKAR GROUP THAT THE INTEREST W AS TAKEN UPFRONT I.E. THE INTEREST WOULD BE DEDUCTED FROM TH E PRINCIPAL AMOUNT AT THE TIME OF ADVANCING THE LOAN ITSELF. IT WAS FOR THIS REASON THAT THE SEIZED DOCUMENT DESCRIBED THE UP-FR ONT INTEREST AS INTEREST IN CASH AS CONTRASTED WITH THE USUAL PRA CTICE OF PAYMENT OF INTEREST AT THE END OF THE YEAR. IT WAS THE CONT ENTION THAT THE DOCUMENT IN QUESTION FOUND ON THE COMPUTER WAS NOTH ING BUT A WORKING OF THE PROBABLE LOANS TO BE TAKEN AND UP-FR ONT INTEREST CALCULATED THEREON. IT WAS FURTHER SUBMITTED THAT A ROUND THE SAME DATES, LOANS OF DIFFERENT AMOUNTS HAD BEEN TAKEN ON WHICH UP-FRONT INTEREST WAS PAID TO LATE SHRI AJAY THAKKAR, WHICH WAS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. A CHART WAS FILED GIVING DATE WISE DETAILS OF THE ACTUAL LOANS TAKEN, UP-FRONT IN TEREST PAID THEREON AS AGAINST THE WORKING OF INTEREST FOUND AS PER SEI ZED DOCUMENTS AS ABOVE. FURTHER, ATTENTION WAS ALSO DRAWN TO THE FAC T THE OUTSTANDING PRINCIPLE AND INTEREST AMOUNT AS APPEARING IN THE B OOKS OF ACCOUNT OF ASSESSEE WAS ` 3,77,17,172/- WHICH HIGHER THAN ` .3,41,82,125/- WORKED OUT BY THE MUMBAI POLICE AFTER EXAMINING THE BOOKS OF ACCOUNT OF LATE SHRI AJAY THAKKAR AS WELL AS OTHER DOCUMENTS FOUND WITH HIM. THEREFORE, IT WAS STATED THAT NO ADDITION CALLED FOR. IT WAS FURTHER STATED WITH REGARD TO THE ADDITION OF RS.1, 40,83,714/- MADE ON ACCOUNT OF REPAYMENT OF CASH LOAN, THAT NO DOCUM ENTS WHATSOEVER WERE FOUND DURING THE COURSE OF SEARCH I NDICATING REPAYMENT OF LOAN IN CASH AND EVEN SMT. BHAVANA THA KKAR HAD SHOWN HER INABILITY TO GIVE THE DETAILS OF CASH LOA NS TAKEN. IT WAS THEREFORE, THE CONTENTION THAT NO ADDITION OF THE R EPAYMENT OF IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 20 OF 33 PRINCIPAL AMOUNT WAS CALLED FOR ON THE BASIS OF THE DETAILS OF INTEREST PAID FOUND ON THE COMPUTER. ATTENTION WAS DRAWN TO THE FACT THAT EVEN AS ON DATE, THE PRINCIPAL AMOUNT WAS OUTSTANDING. 30. AFTER CONSIDERING THE ABOVE SUBMISSIONS THE LEARNED CIT (A) CONFIRMED THE INTEREST AND DELETED THE PRINCIPLE AM OUNT BY STATING AS UNDER: 4.4 I HAVE EXAMINED THE FACTS AND CONSIDERED THE SUBMISSION MADE. IN SO FAR AS THE ADDITION OF ` .70,51,963/- IS CONCERNED, BEING INTEREST AS PER TH E SEIZED DOCUMENT REFERRED TO ABOVE, THE ASSESSEE HAD FILED A CHART IN SUBSTANTIATION OF ITS CONTENTION T HAT THE SEIZED DOCUMENT IN QUESTION MERELY REFLECTED CALCUL ATION OF PROBABLE INTEREST TO BE PAID ON LOANS TO BE TAKE N WHICH IS OVERLEAF. DATE AS PER SEIZED MATERIALS NAME AMOUNT AS PER SEIZED MATERIALS AMOUNT AS PER OUT BOOKS CHEQUE NO. LOAN TAKEN & INTEREST PAID AS PER OUR BOOKS LOAN AMOUNT 18.8.98 BHAVANA A. THAKKAR 82,600 173,250 085588 18.8.98 20,00,000 26.10.98 BHAVANA A. THAKKAR 31,038 72,183 086516 23.10.98 7,50,000 19.9.98 AJAY A.THAKKAR 144,675 144,375 86301 7.9.98 15,00,000 4.5.99 AL THAKKAR 526,000 42,000 94763 28.5.99 25,00,000 2.6.99 AJAY A.THAKKAR 8,500 - - - - 7.6.99 AJAY A.THAKKAR 580,000 - - - - 9.7.99 AJAY A.THAKKAR 16,000 72,000 09746 10.7.99 1,500,000 13.7.99 AJAY A.THAKKAR 150,000 42,000 094840 15.7.99 1,500,000 21.9.99 AJAY A.THAKKAR 166,000 264,000 097921 22.9.99 3,000,000 11.10.99 AJAY A.THAKKAR 165,000 264,000 125527 9.10.99 3,000,000 18.10.99 AJAY A.THAKKAR 165,500 42,000 094843 15.10.99 1,500,000 8.11.99 BHAVANA A.THAKKAR 193,000 308,000 125704 13.11.99 3,500,000 22.12.99 AJAY A.THAKKAR 193,000 190,400 125928 21.12.99 1,400,000 17.1.00 BHAVANA A. THAKKAR 165,500 264,000 12759 18.01.00 3,000,000 10.2.00 AJAY A.THAKKAR 165,500 264,000 127701 8.2.00 3,000,000 22.2.00 AJAY A.THAKKAR 165,500 264,000 127787 22.2.00 3,000,000 IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 21 OF 33 24.2.00 BHAVANA A.THAKKAR 110,500 176,000 127803 23.2.00 2,000,000 6.3.00 AJAY A.THAKKAR 276,000 220,000 127894 3.3.00 2,500,000 26.4.00 BHAVANA A.THAKKAR 275,500 440,000 102287 26.4.00 5,000,000 5.5.00 BHAVANA A.THAKKAR 275,500 440,000 102329 3.5.00 5,000,000 11.5.00 BHAVANA A.THAKKAR 28,000 44,000 102362 10.5.00 500,000 1.8.00 BHAVANA A.THAKKAR 275,500 440,000 105360 2.8.00 5,000,000 5.8.00 AJAY A THAKAR 275,500 440,000 105384 4.8.00 5,000,000 12.8.00 AJAY A THAKAR 275,500 440,000 105415 8.8.00 5,000,000 18.8.00 AJAY A THAKAR 275,500 440,000 105435 14.8.00 5,000,000 2.9.00 AJAY A THAKAR 275,500 440,000 105518 31.8.00 5,000,000 7.9.00 AJAY A THAKAR 165,300 264,000 107001 6.9.00 3,000,000 9.9.00 BHAVANA A. THAKKAR 110,200 176,000 107017 7.9.00 2,000,000 13.9.00 AJAY A THAKAR 330,500 528,000 107033 8.9.00 6,000,000 13.9.00 AJAY A THAKAR 82,650 42,000 94854 15.9.00 1,500,000 20.12.00 AJAY A THAKAR 551,000 440,000 130289 22.12.00 5,000,000 4.1.01 AJAY A THAKAR 551,000 440,000 130332 26.12.00 5,000,000 7,051,963 7,816,208 IT IS ASSESSEES CONTENTION THAT AS AGAINST INTERES T PAID AT ` 82,600/- (AS PER SEIZED DOCUMENTS) ON 18.08.1998, THE ACTUAL INTEREST PAID AS PER BOOKS ON THE LOAN O F ` 2 LACS WAS ` .1,73,250/-. SIMILARLY, ON OR NEAR ABOUT THE DATES MENTIONED IN THE SEIZED DOCUMENTS, LOANS OF DIFFERENT AMOUNT HAD BEEN TAKEN AGAINST WHICH UP-FR ONT INTEREST WAS PAID BY CHEQUE TO THE THAKKAR GROUP. HENCE THE INTEREST ACTUALLY PAID WAS ` 78,16,200/- WHICH WAS ACCOUNTED FOR IN THE BOOKS AND HE SEIZED DOCUMENT, REFLECTING PAYMENT OF INTEREST OF ` .70,51,963/- WAS ONLY A WORKING OF PROBABLE INTEREST TO BE PAID. I HAVE EXAMINED THE CHART AS WELL AS THE CONTENTIONS OF ASSESSEE AS ALSO THE COPY OF THE SEIZED DOCUMENT. T HE SEIZED DOCUMENT CLEARLY MENTIONS INTEREST PAID IN CASH. AS BECAUSE THE SEIZED DOCUMENT WAS FOUND ON ASSESSEES COMPUTER, THE ONUS IS THEREFORE SQUARELY ON ASSESSEE TO PROVE THAT NO INTEREST IN CASH WAS PAID . WHEN THE INTEREST DEBITED IN THE BOOKS HAS BEEN PAI D BY CHEQUE, THERE IS NO REASON WHY IT SHOULD BE DESCRIB ED IN THE SEIZED DOCUMENTS AS INTEREST PAID IN CASH AS CONTENDED BY THE APPELLANT ONLY BECAUSE IT IS PAID UP- FRONT, I.E. AT THE TIME OF TAKING THE LOAN ITSELF. THIS IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 22 OF 33 COUPLED WITH THE FACT THAT SMT. BHAVANA THAKKAR IN HER STATEMENT CONFIRMED THAT CASH LOANS WERE ALSO GIVEN , LEADS TO THE CONCLUSION THAT ASSESSEES CONTENTION MERITS NO CONSIDERATION. THE ADDITION OF ` .78,16,200/- IS THEREFORE CONFIRMED. IN SO FAR AS THE ADDITION OF RS.1.40 CRORES IS CONC ERNED, BEING THE ADDITION ON ACCOUNT OF REPAYMENT OF THE PRINCIPAL AMOUNT, IT IS CLEAR FROM THE ASSESSMENT O RDER THAT THE AO HAS MADE A BACK CALCULATION FROM THE AMOUNT OF INTEREST TO ARRIVE AT THE FIGURE OF RS.1. 40 CRORES. IT IS NOT THE AOS CASE THEREFORE THAT ANY DOCUMENTS WERE FOUND DURING THE SEARCH INDICATING REPAYMENT OF LOAN IN CASH. ON THE CONTRARY, THE LED GER ACCOUNT OF THE THAKKAR GROUP AS APPEARING IN THE BO OKS OF ACCOUNT THE APPELLANT SHOWS THE OUTSTANDING LOAN AMOUNT AT ` 3.77 CRORES, WHICH BEING SUBJUDICE, IS OUTSTANDING EVEN AS ON DATE. IT IS SETTLED LAW THAT ADDITIONS IN SEARCH ASSESSMENTS HAVE TO BE LIMITED TO DOCUMENTS FOUND DURING THE SEARCH AND STATEMENTS RECORDED. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENC E SUBSTANTIATING REPAYMENT IN CASH OF THE LOAN OF ` 1.40 CRORES, AND ON THE BASIS OF THE FACT THAT THE AO HA S MADE THE ADDITION OF THIS AMOUNT ON THE BASIS OF SURMISES, THE ADDITION OF RS.1.40 CRORES IS DELETED . 31. THE LEARNED COUNSEL REFERRING TO THE TABLE CONSIDER ED BY THE CIT (A) SUBMITTED THAT EVEN THOUGH THERE WERE AMOUN TS SAID TO BE PAID IN CASH WHAT EXACTLY HAPPENED WAS THAT THE SAI D PARTY DEDUCTS AMOUNT UPFRONT BUT, ALL TRANSACTIONS WERE BY CHEQUE ONLY. THERE ARE NO CASH LOANS, NOR THERE ARE ANY PAYMENTS IN CA SH. WHAT THE DOCUMENTS SEIZED FROM ASSESSEES COMPUTER WAS ONLY CALCULATIONS OF UP-FRONT INTEREST ON THE LOAN AMOUNT. IT WAS STA TED THAT ASSESSEE HAD BORROWED FUNDS FROM THE SAID PARTY AND WAS PAYI NG AMOUNTS BY WAY OF CHEQUES TO THE SAID PARTY AND THERE IS NO CASH TRANSACTIONS AT ALL. IT WAS FURTHER SUBMITTED THAT CRIME BRANCH HAS MADE INQUIRY AND THE MATTER WAS SUB-JUDICE. THEREFO RE, ADDITION OF AMOUNTS WITHOUT ANY FINDINGS CANNOT BE SUSTAINED. I T WAS FURTHER IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 23 OF 33 SUBMITTED THAT THE CROSS EXAMINATION WAS NOT ALLOWE D AND BOOKS OF ACCOUNT OF MR.AJAY THAKKAR WERE NOT VERIFIED BY AO. IT WAS SUBMITTED THAT SOME OF THE LOANS WERE TAKEN FROM SM T. BHAVANA THAKKAR AS PER THE SEIZED DOCUMENTS, AMOUNTS SUPPOS ED TO HAVE BEEN RECEIVED BY HER. EVEN INQUIRY FROM HER HAS NOT BEEN MADE. THEREFORE, IT WAS SUBMITTED THAT THE MATTER MAY BE RE-EXAMINED BY AO. 32. AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATI VE, WE ARE OF THE OPINION THAT THIS ISSUE REQUIRES RE-EXAM INATION. AS FAR AS THE AMOUNTS OF LOAN TAKEN, THEY ARE TALLYING WITH T HE DATES AND THESE AMOUNTS ARE TAKEN BY WAY OF CHEQUES. THERE WA S ALSO INTEREST AMOUNT PAID THROUGH BOOKS BY WAY OF CHEQUES TO THE EXTENT OF ` .78,16,208/-. IN ORDER TO EXAMINE WHETHER THERE WAS ANY UNACCOUNTED INTEREST PAID IN CASH OVER AND ABOVE TH E ACCOUNTED PORTION, AN ATTEMPT WAS MADE BY US TO EXAMINE THE R ATIOS, WHICH ARE NOT TALLYING AT ALL. IN CASE UNACCOUNTED INTERE ST IF AT ALL WAS DEMANDED, IT WILL BE IN PARTICULAR RATIO OF OR ON E TIME OR TWO TIME OF THE INTEREST ADMITTED. FOR EXAMPLE, IF THE INTE REST WAS TO BE ACCOUNTED AT 12% AND THE AMOUNTS WERE BORROWED AT 1 8%, THEN THE INTEREST ACCOUNTED FOR IN THE BOOKS WILL BE 12% AND THE AMOUNTS THAT WILL BE PAID IN CASH WAS TO BE AT 6%. LIKE WIS E, IT CAN BE 1:1 RATIO, IF THE INTEREST IS AT 24% OF RATE OF INTERES T (12:12 OR 18:06). HOWEVER, THERE IS NO SUCH CORRELATION AVAILABLE WIT H PAYMENTS AS EXAMINED FROM THE TABLE. THEREFORE, IT CANNOT BE ST ATED THAT THERE WAS UNACCOUNTED PAYMENT OF INTEREST IN CASH OVER AN D ABOVE THE AMOUNTS ALREADY ACCOUNTED IN THE BOOKS. THERE SEEMS TO BE PLAUSIBLE EXPLANATION OF UPFRONT DEDUCTION OF INTER EST WHICH COULD HAVE BEEN ADJUSTED IN THE SUBSEQUENT PAYMENT OF INT EREST BY WAY OF CHEQUES. HOWEVER, THIS ASPECT CANNOT BE DECIDED IN THE ABSENCE OF VERIFICATION FROM THE RECORDS AVAILABLE WITH MR. AJ AY THAKKAR OR IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 24 OF 33 SMT. BHAVANA THAKKAR. SINCE THE MATTERS ARE INVESTI GATED BY THE CRIME DEPARTMENT, THEY ALSO MIGHT BE HAVING CERTAIN DOCUMENTS EVIDENCING THE PAYMENTS IN CASH. THEREFORE, IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION THAT THIS ASPECT REQ UIRE FURTHER EXAMINATION AND CORRELATION WITH THE RECORDS AVAILA BLE WITH THE CRIME BRANCH AND THE INCOME TAX RECORDS OF THE ABOV E TWO PERSONS. AO IS DIRECTED TO DO THE NEEDFUL INQUIRY A ND DECIDE THE ISSUE AFTER GIVING AN OPPORTUNITY TO ASSESSEE. WITH THESE DIRECTIONS THE ISSUE WAS RESTORED TO THE FILE OF AO FOR FRESH EXAMINATION AS DIRECTED ABOVE. GROUND NO.3 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 33. GROUND NO.4 IS AS UNDER: THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITI ON OF ` .63,46,000/- BEING THE ALLEGED UNACCOUNTED SALES RELATING TO HYDERABAD DEPOT. 34. THE RELATED FACTS IN BRIEF ARE THAT DURING THE COUR SE OF SEARCH, THE BACKUP OF THE COMPUTER WAS TAKEN FROM HYDERABAD DEPOT OF ASSESSEE, WHICH CONTAINED A STATEMENT GIVING QUANTI TATIVE DETAILS OF SALES AND SALES RETURNS, AS WELL AS THE BALANCE OF STOCK AT THE HYDERABAD DEPOT OF ASSESSEE. ON ANALYSIS, AO FOUND THAT SALES OF 6346 PAIRS OF JEANS AS PER THE STATEMENT, WAS NOT R ECORDED IN THE BOOKS OF ASSESSEE. THE AO HAS REPRODUCED THE REPLY OF ASSESSEE IN RESPONSE TO THE SHOW CAUSE AS TO WHY ADDITION NOT B E MADE ON ACCOUNT UNACCOUNTED SALE IN THE ASSESSMENT ORDER, T HE GIST OF IT BEING AS UNDER :- (A) THE STATEMENT IN QUESTION WAS MERELY REFLECTING STOCK TRANSFER TO MUMBAI TO HYDERABAD AND NOT ACTUAL SALES. COPIES OF CHALLANS SHOWING THAT 6346 PAIRS OF JEANS HAD BEEN SENT AS S AMPLES FROM MUMBAI TO HYDERABAD WERE FILED IN SUBSTANTIATION. IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 25 OF 33 (B) IT WAS EXPLAINED THAT IT WAS IN ORDER TO CAPTUR E THE MARKET IN HYDERABAD THAT SUCH A LARGE NUMBER AS 6246 PAIRS OF JEANS HAD BEEN SENT AS SAMPLES. (C) A WITHOUT PREJUDICE CONTENTION WAS ALSO MADE NA MELY THAT EVEN IF THE SAMPLES SENT WERE TO BE TREATED AS SALES, TH E STATEMENT SHOWED SALES ONLY OF 269S PIECES OUT OF 6246 PIECES . FURTHER COPIES OF RANDOM SALES BILLS WERE FILED TO SUBSTANTIATE TH AT THE AVERAGE SALE PRICE PER PAIR OF JEANS AS NOT ` 1,000/- AS ESTIMATED BY THE AO, BUT ONLY ` 500/- PER PAIR. 35. THE CIT (A) DECIDED THE ISSUE AS UNDER: 5.3 I HAVE GONE THROUGH THE FACTS AS WELL AS THE CONTENTIONS. IT IS SEEN THAT THE SEIZED DOCUMENT IN QUESTION, WHICH HAS ALSO BEEN REPRODUCED IN THE ASSESSMENT ORDER ON PAGE-19 DESCRIBES THE STATEMENT AS DETAILS OF SALES, PURCHASE AND STOCK FROM OCTOBER 03. TO JULY 02. IT IS ALSO CORRECT THAT THE SAID STATEMEN T NOWHERE MENTIONS THE JEANS TO HAVE BEEN RECEIVED AS SAMPLES. ON THE CONTRARY, THE STATEMENT GIVES BILL- WISE AND CHALLAN-WISE DETAILS OF PURCHASES, SALES AND TH E BALANCE STOCK. EVEN IN THE STATEMENT TALLYING THE S TOCK, THERE IS NO MENTION OF WORD SAMPLE. THEREFORE, TH E CONTENTION THAT THE GOODS REPRESENTED SAMPLE DOES N OT MERIT CONSIDERATION. IT IS ALSO AN DISPUTED FACT TH ERE IS NO ENTRY IN THE BOOKS OF THE APPELLANT EVEN OF THE PUR PORTED TRANSFER OF STOCK AS SAMPLES TO THE HYDERABAD DEPOT . THE AO THEREFORE HAS RIGHTLY OBSERVED IN THE ORDER AS U NDER :- ONCE THE GOODS ARE TRANSFERRED WITHOUT DULY ACCOUNTING IN THE BOOKS OF ACCOUNTS OF M/S. ASHAPURA GARMENTS PVT. LTD., IN MUMBAI OFFICE THE WHOLE QUANTITY BECOMES UNACCOUNTED SALES OF THE ASSESSEE COMPANY IRRESPECTIVE OF THE FACT WHETHER OR NOT THE WHOLE QUANTITY HAS BEEN SOLD OR NOT FROM THE HYDERABAD DEPOT. IT IS ALSO A FACT THAT THE RETAIL PRICE PER PAIR OF JEANS IS ` .1,000/-THEREFORE, ON FACTS, THE ADDITION OF ` .63,46,000/- AS UNACCOUNTED SALES IS CONFIRMED. IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 26 OF 33 36. DRAWING OUR ATTENTION TO PAGE 120 OF THE STATEMENT OF ASSESSEE IN THE COURSE OF SEARCH PROCEEDINGS AND AL SO THE ORDER OF AO, IT WAS SUBMITTED THAT ASSESSEE HAS PROVIDED NEC ESSARY CHALLANS IN SUPPORT OF TRANSFER OF GOODS FROM MUMBAI TO HYDE RABAD AND THESE WERE AVAILABLE IN THE STOCK OF THE BRANCH. SI NCE IT IS ONLY A STOCK TRANSFER FROM HEAD OF OFFICE TO THE BRANCH OF FICE, THE SAME CANNOT BE CONSIDERED AS UNACCOUNTED SALES. IT WAS F URTHER SUBMITTED THAT THE SAME STATEMENT ALSO HAS RECONCIL IATION STATEMENT WITH DIFFERENCE OF STOCK OF ONE ITEM. IT WAS ASSESSEES CONTENTION THAT THE BRANCH WAS OPENED IN OCTOBER, 2 001 AND IN ORDER TO CAPTURE THE MARKET, LARGE NUMBER OF GOODS WERE SENT AS SAMPLES FOR DISPLAY IN VARIOUS SHOW ROOMS, WHICH WA S NOT TAKEN AS SALES. LEARNED COUNSEL DREW OUR ATTENTION TO THE SA LES STATEMENT MADE THEREIN TO SUBMIT THAT OUT OF 6346 NO. OF ITEM S TRANSFERRED TO BRANCH THE BRANCH ACCOUNTED SALES OF 2698 NOS. ONLY WITH 1102 RETURNED. THERE WAS ALSO PURCHASE RETURN FROM THE B RANCH TO HEAD OFFICE. EVEN THIS ASPECT WAS ALSO NOT TAKEN INTO CO NSIDERATION BY AO. IT WAS HIS SUBMISSION THAT TRANSFER TO BRANCH C ANNOT BE CONSIDERED AS UNACCOUNTED SALES. HOWEVER, WITHOUT P REJUDICE IT WAS SUBMITTED THAT IF AT ALL ANY ADDITION IS TO BE CONS IDERED THAT CAN ONLY BE CONSIDERED ON THE ITEMS SHOWN AS SALES THAT IS 2698 NOS., THE COST OF WHICH AT THE COMPANY PRICE IS ONLY ` .500/- AND NOT ` .1000/- AS ADOPTED BY AO AS A RETAIL PRICE. IT WAS SUBMITTED THAT THE ADDITION CAN BE RESTRICTED TO THE ABOVE AMOUNT AS ADMITTED BY ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDING S. IT WAS ALSO FURTHER SUBMITTED THAT ONLY PROFIT CAN BE BROUGHT T O TAX AND NOT THE ENTIRE SALES PROCEEDINGS. 37. WE HAVE CONSIDERED THE ISSUE. THE DISPUTE IS WITH R EFERENCE TO THE GOODS SENT TO BRANCH CONSIDERED AS UNACCOUNTED SALES OF THE HO ON THE BASIS OF THE STATEMENT OBTAINED FROM THE BRANCH OFFICE. IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 27 OF 33 AS PER THE STATEMENT ITSELF, ASSESSEE HAS TRANSFERR ED 6346 NOS. TO THE BRANCH WHICH WAS ADMITTED TO BE THE SAMPLES SEN T BY WAY OF CHALLANS SO THAT THERE IS NO SALES TAX ON THE ABOVE GOODS. THE SAID STATEMENT ITSELF INDICATE RETURN OF GOODS OF 330 AN D NET PURCHASES AT 24,830. AGAINST THE SALES COLUMN THERE ARE TOTAL SALES OF 17,738, RETURNS OF 1102 WHICH INCLUDE SALES OF CHALLANED IT EMS AT 2698. THERE IS A STOCK RECONCILIATION OF THE ITEMS OF 709 2 NOS. AVAILABLE WITH THE BRANCH. SO IT CANNOT BE CONSIDERED THAT TH E ENTIRE GOODS SENT FROM THE HO TO THE BRANCH WERE UNACCOUNTED SAL ES. SO AO AND THE CIT (A) CONSIDERED WRONGLY 6346 NOS. AS GOODS S OLD WHICH WERE TRANSFERS INTRA-COMPANY FROM HO TO BRANCH OFFICE. T HEREFORE, ADDITION OF THE AMOUNT ON THE ABOVE NOS. IS NOT COR RECT. WHAT THE STATEMENT DOES CONFIRM WAS THE SALES, OUT OF THE CH ALLANED ITEMS, AT 2698. TO THAT EXTENT EVEN ASSESSEE ADMITTED THAT TH IS AMOUNT CAN BE CONSIDERED AS SALES IN THE COURSE OF THE ASSESSM ENT PROCEEDINGS ITSELF. WITH REFERENCE TO THE COST OF THE ITEMS THE RE IS NO INDIVIDUAL COST OF ITEMS MENTIONED AND IT WAS THE CONTENTION O F ASSESSEE THAT THE AVERAGE PRICE OF PER PIECE WOULD BE AROUND ` .500/- AND THE PRICE TAKEN BY AO WAS THE RETAIL PRICE WHICH HAS A MARGIN FOR THE RETAILER ALSO. THEREFORE, CONSIDERING THE AVERAGE P RICE OF ` .500/- PER PIECE ON 2698 PIECES CONSIDERED TO HAVE BEEN SOLD, WE CONFIRM THE ADDITION TO THAT EXTENT AND DELETE THE BALANCE. IT WAS ASSESSEES CONTENTION THAT ONLY PROFIT CAN BE BROUGHT TO TAX A ND NOT THE ENTIRE SALE PROCEEDS. THESE ARGUMENTS CANNOT BE ACCEPTED A S TRANSFER OF GOODS WAS OUT OF THE EXISTING STOCK MANUFACTURED IN THE ROUTINE COURSE THAT WERE ACCOUNTED FOR. IT IS ADMITTEDLY TH E SALES, OUT OF GOODS SENT THROUGH CHALLANS, WHICH WERE NOT ACCOUNT ED FOR. SO THE ENTIRE SALES PROCEEDS BECOME INCOME OF ASSESSEE. IN VIEW OF THIS WE CONFIRM THE ADDITION ON 2698 PIECES AT ` .500/- PER PIECE AT IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 28 OF 33 ` .13,49,000/- . AO IS DIRECTED TO MAKE ONLY THAT MUC H ADDITION AND DELETE THE BALANCE. THIS GROUND IS PARTLY ALLOWED. 38. GROUND NO.5 RAISED BY ASSESSEE IS AS UNDER: THE LEARNED.CIT (A) ERRED IN CONFIRMING THE ADDITI ON OF ` .5,01,000/- BEING THE ALLEGED UNACCOUNTED STOCK AT HYDERABAD DEPOT . 39. THIS GROUND PERTAINS TO ADDITION OF ` .5,01,000/- BEING ALLEGEDLY UNACCOUNTED STOCK AT HYDERABAD DEPOT RELA TING TO M/S PREM TRADING CO. THE RELATED FACTS IN BRIEF ARE THA T DURING THE PROCEEDINGS, EXCESS STOCK OF 501 PAIRS OF JEANS WAS FOUND AT THE HYDERABAD DEPOT WHICH IN THE NAME OF M/S. PREM TRAD ING CO. AND UNACCOUNTED IN ASSESSEES BOOKS. IT WAS ASSESSEES CONTENTION THAT THE STOCK FOUND DID NOT RELATE TO ASSESSEE BUT WAS COUNTERFEIT BEING SOLD BY ONE OF THE STAFF AT HYDERABAD, USING THE BR AND NAME OF THE COMPANY AND THE COMPANY HAD REGISTERED A LEGAL COMP LAINT WITH THE TRADE & REGISTRY DEPARTMENT MUCH BEFORE THE DATE OF SEARCH. AS THIS FACT WAS NOT BROUGHT OUT BEFORE THE AO, THE MA TTER WAS SENT IN REMAND BEFORE THE AO. IN THE REMAND REPORT THE AO H AS STATED THAT AS THE STOCK WAS FOUND IN THE PREMISES OF THE ASSES SEE AND THE SAME WAS NOT RECORDED IN THE BOOKS OF ACCOUNT, THER E WAS NO MERIT IN THE CONTENTION OF ASSESSEE. THE CIT (A) CONFIRME D THE SAME. 40. IT WAS SUBMITTED BY THE LEARNED COUNSEL THAT IN THE TRANSACTIONS WITH THE SAID PREM TRADING COMPANY WAS CONSIDERED BY AO AS UNACCOUNTED. THE ONLY ADDITION IS MADE ON ACCOUNT OF EXCESS STOCK FOUND IN THE COURSE OF SURVEY ON 13/03 /2003 WHEREAS THE SEARCH IN THE PREMISES OCCURRED ON 12/12/2002 A ND THE BLOCK PERIOD ENDS ON 12/12/2002. IT WAS THE PRELIMINARY O BJECTION OF THE LEARNED COUNSEL THAT THE STOCK FOUND CONSEQUENT TO THE SURVEY ON 12/03/2003 CANNOT BE CONSIDERED AS UNACCOUNTED STOC K OF THE COMPANY IN THE BLOCK PERIOD. FURTHER IT WAS SUBMITT ED THAT IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 29 OF 33 ASSESSEE HAD ALREADY FILED A COMPLAINT AGAINST UNKN OWN PERSONS BEFORE THE COURT OF METROPOLITAN MAGISTRATE VIDE CO MPLAINT DATED 31/5/2002 I.E. BEFORE THE SEARCH AND CONTENDED BEFO RE AO THAT SOME OF THE EMPLOYEES MIGHT BE INDULGING IN COUNTER FEIT SALES AND SO THE ASSESSEE COMPANY CANNOT BE HELD RESPONSIBLE. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER, RELIED ON THE ORDERS OF AO AND THE CIT (A). 41. AFTER CONSIDERING THE RIVAL ARGUMENTS, WE ARE OF TH E OPINION THAT THE ADDITION CANNOT BE SUSTAINED. FIRST OF ALL EVEN THOUGH THERE ARE CERTAIN ALLEGED SEIZED DOCUMENTS PERTAINING TO PREM TRADING CO NO ADDITION WAS MADE IN THE ASSESSMENT ORDER NOR TH ERE WAS ANY DISCUSSION ABOUT UNACCOUNTED TRANSACTIONS WITH THE SAID PERSON. SO JUST BECAUSE THERE ARE CERTAIN PAPERS, SEIZED IN THE COURSE OF SEARCH IT DOES NOT AUTOMATICALLY LEAD TO ANY ADDITI ON. IT IS A FACT THAT UNACCOUNTED STOCK WAS FOUND IN THE COURSE OF S URVEY ON 13/03/2003 AND THE BLOCK PERIOD U/S 158BC ENDS ON 1 2-12-2002. THEREFORE, UNACCOUNTED STOCK FOUND SUBSEQUENT TO TH E DATE OF SEARCH CANNOT BE CONSIDERED IN THE BLOCK ASSESSMENT PROCEEDINGS AND MAY HAVE TO BE CONSIDERED UNDER THE REGULAR ASS ESSMENT PROCEEDINGS. AS ALREADY STATED SINCE SEIZED DOCUMEN TS DID NOT LEAD TO ANY ADDITION SEPARATELY WITH REFERENCE TO PREM T RADING CO., THE ADDITION OF THE UNACCOUNTED STOCK OF 501 PIECES AT ` .1000/- CANNOT BE MADE AS AN ADDITION IN THE BLOCK ASSESSMENT. FOR THESE REASONS THE AMOUNT WAS DELETED. ASSESSEES GROUND IS ALLOWE D. 42. GROUND NO.6. ASSESSEE RAISED THE FOLLOWING GROUND: THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITI ON OF ` .5,00,000/- AND ` .5,00,000/- BEING THE ALLEGED UNEXPLAINED CASH CREDIT IN THE NAME OF M/S MANISHA TRADING COMPANY AND M/S ASHOK TEXTILES RESPECTIVELY . 43. AO HAS ASKED ASSESSEE TO FURNISH EVIDENCES WITH REF ERENCE TO UNSECURED LOANS OBTAINED BY THE ASSESSEE COMPANY TO AN EXTENT OF IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 30 OF 33 ` .29.50 LAKHS. CONFIRMATIONS WERE FILED BY THE PARTI ES. AO NOTICED THAT THERE WERE CASH DEPOSITS IN THEIR ACCOUNTS BEF ORE THE ADVANCES WERE MADE TO ASSESSEE AND IN THE ABSENCE OF GENUINE NESS OF THE LOAN, HE BROUGHT TO TAX AN AMOUNT OF ` .29.50 LAKHS AS UNDISCLOSED INCOME OF ASSESSEE. CONSEQUENT TO THE FURTHER EVIDE NCES FILED, REMAND REPORT WAS ASKED FROM AO AND AFTER CONSIDERI NG THE REMAND REPORT AND DOCUMENTS FILED, THE CIT (A) CONSIDERED THAT CREDITS FROM M/S MEHTA ENGINEERING COMPANY AND M/S JUDICIAL MEMB ER MEHTA (HUF), M/S ARIHANT ENTERPRISES WERE ACCEPTED AS GEN UINE WHEREAS THE LOANS RECEIVED FROM M/S MANISHA TRADING CO. AND M/S ASHOK TEXTILES WERE NOT ACCEPTED. TO THAT EXTENT THE CASH CREDITS WERE CONFIRMED. 44. IT WAS THE CONTENTION OF ASSESSEES COUNSEL THAT AL L THESE CASH CREDITS WERE AVAILABLE IN THE BOOKS OF ACCOUNT AND THERE WAS NO INCRIMINATING MATERIAL FOUND DURING SEARCH AND ASSE SSEE HAD FURNISHED THE NECESSARY DETAILS BEFORE AO. THE OBJE CTION RAISED BY THE LEARNED COUNSEL IS THAT SINCE THERE IS NO INCRI MINATING MATERIAL, THE ADDITION CANNOT BE MADE IN THE BLOCK ASSESSMENT . HE RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS. VIKARAM JOSHI, 256 ITR 129. THE DEPARTMENTAL RE PRESENTATIVE HOWEVER, RELIED ON THE ORDERS OF THE CIT (A). 45. WE HAVE CONSIDERED THE ISSUE. AS FAR AS THE EXAMINA TION OF CREDITS ARE CONCERNED, THESE CREDITS ARE FOUND IN T HE BOOKS OF ACCOUNT AND IS A SUBJECT MATTER OF INQUIRY IN THE R EGULAR ASSESSMENTS. IN THE CASE OF CIT VS. VIKRAM JOSHI (S UPRA), THE HON'BLE BOMBAY HIGH COURT HAS WHILE DISMISSING THE REVENUE QUESTION, HELD THAT OTHER QUESTIONS RAISED BY THE R EVENUE ARE BASED ON TRANSACTIONS WHICH COULD NOT BE SAID TO BE UNDIS CLOSED TRANSACTIONS FALLING UNDER SECTION 158BC OF THE I.T . ACT BECAUSE THE TRANSACTIONS IN QUESTION WERE DISCLOSED IN RETURNS WHICH WERE IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 31 OF 33 SUBJECT MATTER OF REGULAR ASSESSMENT. THEY ARE TO B E ASSESSED IN THE REGULAR ASSESSMENT AND NOT IN THE BLOCK ASSESSMENT. RESPECTFULLY FOLLOWING THE SAME, SINCE CREDITS IN QUESTION WERE ACCOUNTED IN THE BOOKS OF ACCOUNT, WE ARE OF THE OPINION THAT IN THE ABSENCE OF INCRIMINATING MATERIAL IN THE COURSE OF SEARCH, THE SE CANNOT BE EXAMINED IN THE PROCEEDINGS UNDER SECTION 158BC. TH EREFORE, ASSESSEES GROUND ON THIS ISSUE IS UPHELD. AO IS FR EE TO TAKE NECESSARY ACTION IN THE REGULAR ASSESSMENT AS PER L AW. GROUND NO.6 IS ALLOWED. 46. GROUND NO.7 (ADDITIONAL GROUND) IS WITH REFERENCE T O GIVING BENEFIT OF TELESCOPING IN RESPECT OF ADDITIONS MADE ON INCOME BASIS VIS--VIS ADDITION MADE ON EXPENDITURE/INVESTMENT B ASIS. THIS ISSUE ARISES AS ASSESSEE HAS NOT ADMITTED ANY UNDIS CLOSED INCOME IN THE BLOCK. BUT AO MADE AN ADDITION OF ` .5,26,74,490/- IN THE ASSESSMENT ORDER. SOME OF THE ISSUES WHICH MAY GIVE RISE TO ADDITION MAY PERTAIN TO INCOME/ EXPENDITURE. IT WAS THE CONTENTION THAT THE BENEFIT OF TELESCOPING SHOULD BE GIVEN IN THE BLOCK ASSESSMENT. THIS ASPECT REQUIRES EXAMINATION OF THE ULTIMATE ADDITION SUSTAINED AFTER THE ORDERS OF THE APPELLAT E AUTHORITIES. SINCE GROUND NOS. 2 AND 3 ARE RESTORED TO THE FILE OF AO FOR FRESH EXAMINATION AND GROUND NO.4 WAS PARTLY CONFIRMED, U LTIMATE EXAMINATION OF TELESCOPING BENEFIT HAS TO BE DONE B Y AO AFTER DECIDING THE ISSUES AFRESH. THEREFORE, AO IS DIRECT ED TO CONSIDER THIS ASPECT AT THE TIME OF GIVING EFFECT TO THE ORDER/RE -ASSESSMENT ORDERS. ACCORDINGLY, THE GROUND IS ALLOWED FOR STATISTICAL PURPOSES. IT(SS) NO.49/MUM/08 : 47. THE REVENUE RAISED THE FOLLOWING THREE GROUNDS: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN IGNORING T HE PROVISIONS OF SECTION 158BB(1) INSERTED BY THE FINA NCE IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 32 OF 33 ACT, 2002 WITH RETROSPECTIVE EFFECT FROM 01.07.1995 WHICH PROVIDE THAT: THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEAR FALLING WITHIN THE BLOCK PERIOD COMPUTED (IN ACCORDANCE WIT H THE PROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENCE FO UND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOU NT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMA TION AS ARE AVAILABLE WITH AO AND RELATABLE TO SUCH EVIDENCE) (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN DELETING T HE ADDITION OF ` .1,40,83,713/- MADE ON ACCOUNT OF REPAYMENT OF PRINCIPAL COMPONENT OF LOAN IN CASH. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) HAS ERRED IN DELETIN G THE ADDITION MADE BY AO UNDER SECTION 68 ON ACCOUNT OF UNEXPLAINED CASH CREDIT (AND INTEREST THEREON) FROM M/S MEHTA ENGG. CO., M/S J.M. MEHTA, HUF AND M/S ARIHAN T ENTERPRISES WITHOUT APPRECIATING THE FACT THAT THE ONUS CAST ON ASSESSEE TO PROVE THE CREDIT WORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS W AS NOT DISCHARGED BY ASSESSEE AT ANY STAGE OF THE PROCEEDINGS BEFORE AO. 48. GROUND NO.(I) IS GENERAL IN NATURE. 49. GROUND NO.(II) PERTAINS TO THE DELETION OF ` .1,40,83,713/- MADE ON ACCOUNT OF REPAYMENT OF PRINCIPAL COMPONENT OF LOAN IN CASH. THIS ASPECT WAS DISCUSSED VIDE GROUND NO.3 IN ASSESSEES APPEAL. SINCE THERE IS NO INCRIMINATING MATERIAL TH AT ANY LOAN WAS OBTAINED IN CASH, THE ORDER OF THE CIT (A) DOES NOT REQUIRE ANY INTERFERENCE. THEREFORE, THE GROUND IS REJECTED. HO WEVER, WE MAKE IT CLEAR THAT IN CASE AO COMES TO KNOW OF ANY LOANS OB TAINED IN CASH CONSEQUENT TO HIS INQUIRY DIRECTED IN GROUND NO.3, HE CAN CONSIDER THE SAME WHILE COMPLETING THE RE-ASSESSMENT. WITH T HESE DIRECTIONS THE REVENUE GROUND IS REJECTED. 50. GROUND NO.(III) PERTAIN TO DELETION OF ADDITION MAD E UNDER SECTION 68 ON ACCOUNT OF UNEXPLAINED CASH CREDITS F ROM M/S MEHTA IT(SS) NO.41 & 49 OF 2008 ASHAPURA GARMENTS MUMBAI PAGE 33 OF 33 ENGG. CO. J.M. MEHTA (HUF) AND M/S ARIHANT ENTERPRI SES. THE CIT (A) HAS ALREADY EXAMINED THIS ISSUE AND DELETED THE AMOUNTS. SINCE THERE IS NO INCRIMINATING MATERIALS INVOLVED WITH R EFERENCE TO CASH CREDITS AND SINCE THESE CREDITS ARE AVAILABLE IN TH E BOOKS OF ACCOUNT RECORDED BY THE TIME SEARCH TOOK PLACE, THE ADDITIO NS PER SE CANNOT BE CONSIDERED IN THE BLOCK ASSESSMENT. ON THESE REA SONS, THE AMOUNTS CONFIRMED BY THE CIT (A) ALSO STANDS DELETE D IN GROUND NO.6 IN ASSESSEE APPEAL. THEREFORE, THERE IS NO NEE D TO CONSIDER THE REVENUE GROUND AS BOTH LEGALLY AND FACTUALLY THE AM OUNTS CANNOT BE CONSIDERED IN BLOCK ASSESSMENT. THEREFORE, THE G ROUND IS REJECTED. 51. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED AND THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MAY, 2012. SD/- SD/- (D.K.AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 4 TH MAY, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBA