LALIT KUMAR JAGAVAT, MUMBAI V. ASST CIT CEN CIR 35, MUMBAI

ITSSA 51/MUM/2010

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8586 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-11-2012
• Assessment Year: misc
• Appeal Filed On: 02-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Assessee Lawyers: A K SHARA
• Keywords: Income from undisclosed sources
• Section: 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE SHRI B. R. MITTAL, J.M. AND SHRI SANJAY AROR A, A.M. IT(S&S)A NO. 51/MUM/2010 BLOCK PERIOD: 01.04.1996 TO 11.04.2002 LALIT KUMAR JAGAVAT C/O. NAKODA BULLION, 80-B, PATWA CHAWL, 2 ND FLOOR, SHEIKH MENON STREET, ZAVERI BAZAR, MUMBAI-400 002 [PAN NO.: AAKPJ 3271 Q] VS. ACIT, CENTRAL CIRCLE-35, AAYKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. SHARA RESPONDENT BY : SHRI SURINDER JIT SINGH DATE OF HEARING : 20.11.2012 DATE OF PRONOUNCEMENT : 26.12.2012 ORDER PER SANJAY ARORA, A.M. : THIS IS AN APPEAL BY THE ASSESSEE ARISING OUT OF TH E ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-41, MUMBAI (CIT(A) FOR SHORT ) DATED 20.08.2010, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S. 15 8 BC OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE BLOCK PERIOD 01.04. 1996 TO 11.04.2002 VIDE ORDER DATED 29/3/2004. 2.1 THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE, AN INDIVIDUAL TRADING IN RAW GOLD AND SILVER BARS, WAS SUBJECT TO SURVEY U/S.133 A OF THE ACT ON 11.4.2002, DURING WHICH CASH AT RS.23,20,400/- WAS FOUND. THE ASSESSE E BEING APPARENTLY UNABLE TO EXPLAIN THE CASH WITH HIM, WITH THE CASH BOOK FOUND DURING SURVEY BEING WRITTEN ONLY UP TO 06.4.2002 (DISCLOSING A CASH BALANCE AT RS. 4,53,07 4/- IN PENCIL)), WITH THAT AT THE IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 2 BEGINNING OF THE YEAR, I.E., 01.4.2002, BEING AT RS .4,53,765/-, A SEARCH WARRANT WAS ISSUED AND HIS BUSINESS PREMISES SUBJECT TO SEARCH, COMMEN CING 07:15 P.M. ON 11.4.2002 AND CONCLUDING AT 04:35 HRS. ON 12.4.2002. THE ASSESSEE WAS FOUND TO MAINTAIN, BESIDES CASH BOOK, PURCHASE AND SALE REGISTERS AND STOCK NOTE-BO OK. WHILE THE PURCHASE AND SALE REGISTERS WERE AGAIN FOUND TO BE WRITTEN ONLY UP TO 06.4.2002 IN FACT FROM 04.4.2002 TO 06.4.2002, AS AGAINST THE CASH BOOK WHICH WAS FROM 01.4.2002 TO 06.4.2002, THE STOCK NOTE-BOOK WAS FROM 01.4.2002 TO 11.4.2002. THE SAID RECORDS, AND ALSO THE ANOTHER STOCK NOTE-BOOK FOUND (FROM 29.01.2002 TO 28.3.2002), WER E INVENTORIZED BY THE AUTHORIZED OFFICER, BUT NOT SEIZED, AND WERE ONLY LATER IMPOUN DED ON 16.3.2004 DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. NO OTHER RECORDS WERE EITHER FOUND OR PRODUCED, ON BEING CALLED UPON TO DO SO, DURING THE SEARCH. 2.2 THE ASSESSEE WAS QUESTIONED U/S. 132(4) IN RESP ECT OF 36 GOLD BARS AS WELL AS THE CASH FOUND DURING THE SEARCH. THE ASSESSEE, IN ANSW ER TO QUESTION NO. 4, ADMITTED THE PURITY, WEIGHT AND VALUE OF THE GOLD BARS, AS ALSO THE DIFFERENCE IN THEIR NUMBER WITH REFERENCE TO THE STOCK NOTE BOOK AT 7 (SEVEN), WHIC H SURPLUS WAS ACCEPTED BY HIM AS HIS UNACCOUNTED INCOME (IN ANSWER TO Q. #5). IN THE COU RSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SOUGHT TO EXPLAIN BOTH THE CASH AND GO LD BARS FOUND, AS WELL AS THE BANK DEPOSITS FOR RS.21.80 LAKHS, WHICH WERE DISCOVERED LATER ON PERUSAL OF THE BANK STATEMENTS, PRIMARILY WITH REFERENCE TO THE CASH SA LE OF GOLD BARS FROM 01.04.2002 TO 11.04.2002 (AT RS.40.42 LAKHS.). THE A.O. DID NOT F IND THE SAME ACCEPTABLE. THE SALE OF GOLD BARS, WHICH WAS AT 100 FROM 04.4.2002 TO 06.4.2002, JUMPS TO 244 FROM 08.04.2002 TO 11.04.2002, I.E., GETS DOUBLED ON AN AVERAGE BAS IS, WITH THAT ON 10.04.2002 AND 11.04.2002 ALONE BEING AT 159 . WHAT WAS FOUND EQUALLY UNACCEPTABLE WAS THAT 69 OF THESE GOLD BARS, I.E., SOLD ON 10.04.2002 AND 11.04 .2002, WERE IN CASH, WHILE THERE WERE ADMITTEDLY NO CASH SALES PRIOR TO 10.04.2002 . THE CASH SALES WERE CLEARLY MANIPULATED TO EXPLAIN THE CASH IN HAND AND IN BANK. ACCORDINGLY, THE DIFFERENCE IN GOLD BARS, AS WELL AS IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 3 THE CASH-IN-HAND AND THAT DEPOSITED IN BANK, WAS CO NSIDERED AS UNEXPLAINED AND ASSESSED AS INCOME. 2.3 IN APPEAL, THE LD. CIT(A) FOUND THAT THE ASSESS EE HAD FAILED TO GIVE ANY SPECIFIC REPLY WHEN QUESTIONED IN THE MATTER DURING THE SEAR CH, I.E., QUA THE CASH-IN-HAND AND THE DIFFERENCE (7) IN THE STOCK OF GOLD BARS. THE APPEL LANT HAD ALSO FAILED TO RECONCILE THE CASH FOUND WITH THE SALE VOUCHERS FROM 01.04.2002 TO 11. 04.2002. IF THERE WERE CASH SALES DURING THIS PERIOD, AS CONTENDED LATER, THE APPELLA NT WOULD HAVE SHOWN THE VOUCHERS FOR THE SAME DURING SEARCH, RECONCILING OR EXPLAINING T HE CASH FOUND. AS REGARD THE CASH DEPOSITED IN BANK, THE SAME IS AGAIN EXPLAINED ONLY WITH REFERENCE TO THE CASH SALES FOR THE PERIOD 01.4.2002 TO 11.4.2002; RATHER, ONLY FOR TWO DAYS, I.E., 10.4.2002 AND 11.4.2002 , SO THAT THE ASSESSEES EXPLANATION REMAINS ESSENT IALLY THE SAME. THE CASH BOOK WAS WRITTEN ONLY UP TO 06.4.2002, AND NO CASH SALES BILLS WERE FOUND AND SEIZED DURING SEARCH. AS SUCH, THE SAID CASH DEPOSITS CANNOT BE S AID TO BE EXPLAINED WITH REFERENCE TO THE ASSESSEES REGULAR BOOKS OF ACCOUNT, PRECLUDING ITS ASSESSMENT AS INCOME, OR ON THE BASIS THAT THE SAME IS NOT UNDISCLOSED INCOME. RE LIANCE WAS PLACED BY HIM ON THE DECISION IN THE CASE OF CIT VS. AJAY KUMAR SHARMA , 259 ITR 240 (RAJ.) AND CASH CARD FINANCE LTD. V. ASST. CIT , 84 ITD 1 (AHBD.)(TM). THE DIFFERENCE IN GOLD BARS WAS ADMITTED BOTH DURING THE SEARCH AS WELL AS ON EXAMI NATION U/S.131 DATED 17.03.2004 DURING THE ASSESSMENT PROCEEDINGS. THE FACTS OF THE CASE CLEARLY EXHIBIT A DIFFERENCE, WHICH WAS ADMITTED FOR WANT OF EXPLANATION, SO THAT THE ASSESSEE HAD NO CASE. HE, ACCORDINGLY, CONFIRMED ALL THE THREE CONDITIONS, SO THAT THE ASSESSEE IS IN SECOND APPEAL. 3.1 BEFORE US, THE LD. AR PLEADED THE ASSESSEES CA SE WITH REFERENCE TO THE STOCK NOTE BOOK. THE REVENUES ENTIRE CASE IS THAT THE ASSESSE E HAD COOKED UP A STORY, BUILDING UP THE CASH BALANCE ON THE BASIS OF CASH SALES, WITHOU T APPRECIATING THAT THE SAID SALE STOOD ALREADY RECORDED IN THE STOCK NOTE-BOOK, WHICH IS T HE RECORD OF FIRST ENTRY. NO DOUBT THE CASH BOOK, AS WELL AS THE PURCHASE AND SALE REGISTE RS, WAS NOT COMPLETE, BUT WHAT NEEDS TO IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 4 BE BORNE IN MIND IS THAT ALL THE PURCHASE AND SALE VOUCHERS / MEMOS WERE AVAILABLE AND, FURTHER, ENTERED IN THE STOCK NOTE-BOOK. AS REGARDS THE ADMISSION OF SEVEN GOLD BARS FOUND IN EXCESS, ADMITTED AS UNEXPLAINED, THE SAME STAND DULY RECONCILED WITH THE STOCK NOTE-BOOK ITSELF, SO THAT NO CASE FOR ADDITION, DES PITE ADMISSION, WHICH WAS ONLY ON THE BASIS OF THE FACTS AS THEN AVAILABLE AND, IN ANY CA SE, CANNOT BE REGARDED AS CONCLUSIVE, IS MADE OUT. HE WOULD THEN, TO SUBSTANTIATE THE CLAIM OF THE DIFFERENCE BEING EXPLAINED WITH REFERENCE TO THE STOCK NOTE BOOK, TAKE US TO THE SA LE BILL NO. 21 DATED 06/4/2002 (PB PG. 78) FOR SALE OF SILVER PIECES FOR RS. 2,39,068/-, W HICH HE CLAIMED HAD BEEN MISTAKENLY TAKEN AS FOR SEVEN (7) GOLD BARS, AND WHICH IS WHAT LED TO THE DIFFERENCE OF 7 PIECES. 3.2 THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THAT NO RELIANCE COULD BE PLACED ON THE ACCOUNTS BEING NOW PRODUCED, WHICH HAVE BEEN SU ITABLY ADJUSTED BY THE ASSESSEE SUBSEQUENTLY. TOWARD THIS, HE WOULD ADDUCE THE IMPO UNDED ORIGINAL STOCK NOTE-BOOK, WHICH, HE AVERRED, IN FACT COULD NOT BE REGARDED AS A REGULAR RECORD. THE SAME CONTAINS SUPERIMPOSITIONS ON 11/4/2002 IN RESPECT OF 15 ON THE RECEIPT SIDE AND 8 (BEING PER THREE ENTRIES OF 3,2 & 3) ON THE CREDIT (OUTWARD) S IDE, AND WHICH IS CLEARLY TOWARD EXPLAINING THE ADMITTED DIFFERENCE OF 7 (SEVEN) G OLD BARS. ON BEING INQUIRED BY THE BENCH AS TO HOW, THE PURCHASES AND SALES (OTHER THA N THE SAID 15 AND 8 BARS ON 11/4/2002) BEING NOT DISTURBED, COULD THE ASSESSEE S BOOKS BE CONSIDERED AS ADJUSTED OR MANIPULATED QUA CASH SALES, HE REPLIED THAT THOUGH THE SALES FIGUR ES HAD NOT BEEN MODIFIED, THE ASSESSEE, TAKING ADVANTAGE OF THE FAC T THAT HIS BOOKS WERE NOT SEIZED DURING SEARCH, HAS CONVERTED THE CREDIT SALES INTO CASH SA LES. NOBODY NOT KNOWN TO THE ASSESSEE WOULD BE SOLD GOLD BULLION BY HIM, WHILE THE ASSESS EE HAS CLEARLY FAILED TO IDENTIFY THE BUYERS. AS SUCH, WHILE THERE IS NO DIFFERENCE IN TH E STOCK, I.E., APART FROM 7 GOLD BARS, THE ASSESSEE HAS BY SUCH CONVERSION CONVENIENTLY EXPLAI NED THE CASH FOUND WITH HIM AND THAT DEPOSITED IN BANK, AND WHICH ARE THE PRINCIPAL ADDI TIONS SUSTAINED IN THE CASE. IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 5 4. WE HAVE HEARD THE PARTIES, AND PERUSED TH E MATERIAL ON RECORD. 4.1 WE FIRSTLY OBSERVE THAT THE ISSUE INVOLVED IN T HIS APPEAL BY THE ASSESSEE IS ESSENTIALLY AND PRIMARILY FACTUAL, I.E., WHETHER TH E ASSESSEE HAS BEEN ABLE TO EXPLAIN SATISFACTORILY, OR NOT SO, THE ASSETS FOUND IN HIS POSSESSION IN SEARCH, OR OTHERWISE ADMITTEDLY OWNED BY HIM, PART OF WHICH WERE ALSO SE IZED, BEING CASH (RS.21 LAKHS) AND GOLD BARS (7 NOS.). THERE HAS ADMITTEDLY BEEN NO P RIOR ASSESSMENT FOR THE RELEVANT YEAR, I.E. A.Y. 2003-04, FOR WHICH PERIOD THE ASSETS WOUL D, WHERE NOT SATISFACTORILY EXPLAINED, STAND TO BE ASSESSED AS INCOME U/S.69A OF THE ACT. FURTHER, THE A.O. HAVING ALREADY EXPRESSED HIS NON-SATISFACTION IN THE MATTER, WHICH STANDS ENDORSED BY THE FIRST APPELLATE AUTHORITY, OUR PURVIEW IN THE INSTANT PROCEEDINGS W OULD BE DETERMINE WITH REFERENCE TO THE FACTS AS BORNE OUT BY THE RECORD COUPLED WITH T HE ASSESSEES EXPLANATIONS, WHETHER THE SAID NON-SATISFACTION BY THE REVENUE IS REASONABLE, I.E., ONE TO WHICH THE JUDICIAL PROCESS MAY ACCORD APPROVAL. 4.2 COMING TO THE MERITS OF THE EXPLANATION, WE FIN D THAT THE ASSESSEE VIDE HIS PRELIMINARY DEPOSITION U/S.132(4)(AT 7:50 P.M. ON 1 1/04/2002 THE SECOND BEING RECORDED AT 10:30 P.M. ON THE SAME DAY / PB PGS. 1F THRO 1L), ON BEING ENQUIRED ABOUT CASH LYING WITH HIM, STATED IT TO BE TO THE EXTENT OF RS.15-16 LAKHS OBTAINED BY SELLING GOLD BULLION TO DIFFERENT PARTIES. THE RELEVANT QUE STION AND ANSWER ARE AS UNDER (PB PG. 10): PRELIMINARY STATEMENT RECORDED AT 7.50 P.M. O N 11/04/2002) Q.NO.6: HOW MUCH CASH IS LYING HERE AND IT RELATES TO WHAT? ANS. I HAVE APPROXIMATE RS.15 LACKS TO 16 LACKS CA SH LYING HERE AND IT IS OBTAIN BY SELLING OF GOLD TO DIFFERENT PARTIES, WHICH IS ENTE RED IN THE BOOKS OF ACCOUNTS . THIS ANSWER IS EXTREMELY IMPORTANT AND VITAL TO TH E ASSESSEES CASE. THIS IS AS IT IS INCONCEIVABLE THAT A PERSON MANAGING BUSINESS WHICH HAS GENERATED CASH (THROUGH SALES IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 6 AT THE SAME COUNTER FROM WHERE HE OPERATES) FOR OVE R RS.40 LAKHS ON THE SAME DAY AND A DAY EARLIER (I.E., 10.04.2002 AND 11.04.2002), IS N OT AWARE OF THE SOURCE OF THE CASH WITH HIM, AS WELL AS AN APPROXIMATE, IF NOT A CLEAR, IDE A OF ITS QUANTUM. THIS IS ALL THE MORE SO AS A GOOD CHUNK OF THE SAID CASH HAS BEEN DEPOSITED IN BANK ACCOUNT/S (WHICH WOULD ONLY BE ON HIS INSTRUCTIONS) OVER THE SAID TWO DAYS, AS ALSO THAT THESE TRANSACTIONS REPRESENT A SORT OF DEPARTURE INASMUCH AS THERE HAD BEEN NO C ASH SALES OR CASH DEPOSIT IN BANK FOR ABOUT 10 DAYS PRIOR THERETO. ONCE THE ASSESSEE HAS CLARIFIED HIS PRELIMINARY STAND IN THE MATTER THUS WHICH BECOMES THE FULCRUM OF HIS CASE /EXPLANATION ALL THE RECORDS AVAILABLE OR ADDUCED CAN ONLY BE REGARDED AS IN COR ROBORATION OF THE SAME. THIS IS AS A STATEMENT HAS TO BE CORROBORATED WITH SOME MATERIAL S, FOR IT MAY WELL BE FALSE OR INCORRECT, WHICH (MATERIALS) CANNOT IN ANY CASE BE DISREGARDED OR BRUSH ASIDE AS ADJUSTED OR MANIPULATED WITHOUT EXHIBITING THE BASIS FOR S TATING SO. IT IS DEFINITELY AND, RATHER, OBLIGATORY FOR THE REVENUE TO SUBJECT THE SAID MATE RIAL/S TO VERIFICATION AND EXAMINATION, BUT CANNOT BE DISREGARDED WITHOUT ESTABLISHING OR S HOWING IT TO BE FABRICATED OR OTHERWISE UNRELIABLE. HOW ELSE WOULD A STATEMENT, IF INCORRECT OR FALSE IN WHOLE OR IN PART BE DETERMINED ? THE REVENUE, HOWEVER, PROCEEDS ON THE PREMISE THA T ALL THE MATERIAL IS COOKED UP. WITH REGARD TO THE MATERIAL, THE STOCK NOTE-BOOK, THOUGH DEFINITELY NOT A PART OF THE ASSESSEES REGULAR ACCOUNTS, BUT ONLY A DIAR Y OR A PRELIMINARY RECORD, IS AGAIN VERY CRUCIAL, AS IT UNDOUBTEDLY REPRESENTS THE RECORD OF FIRST ENTRY, WHICH IS, AS FOUND OUT, MAINTAINED ON REAL TIME BASIS. THEN THERE ARE THE P URCHASE AND SALE VOUCHERS, REPRESENTING THE PURCHASE AND SALE TRANSACTIONS ENT ERED INTO BY THE ASSESSEE. 4.3 IF THE CASH BOOK IS NOT UP-TO-DATE, BUT WRITTEN UP TO A FEW (FIVE) DAYS PRIOR TO THE DATE OF SEARCH, THAT CANNOT BY ITSELF BE FATAL TO T HE ASSESSEES CASE. ALL THAT WAS REQUIRED TO DO WAS TO DRAW A CASH STATEMENT FROM 07.4.2002 ( I.E., THE DATE IMMEDIATELY SUCCEEDING THE DATE UP TO WHICH IT STOOD WRITTEN) ONWARDS, UP TO 11.04.2002. THE ASSESSEE WOULD ONLY KNOW WHICH OF ITS PURCHASE AND SALE TRANSACTIO NS ARE IN CASH, AND WHICH WOULD, RATHER OUGHT TO, BE INDICATED OR REFLECTED IN THE R ELEVANT BILLS/MEMOS THEMSELVES, AND IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 7 WHICH ASPECT COULD ALSO BE IMMEDIATELY, IF NOT SIMU LTANEOUSLY, VERIFIED FROM THE OTHER (CORRESPONDING) PARTY/S TO THE TRANSACTION, SUBJECT ING THUS THE ASSESSEES CLAIM TO COMPLETE VERIFICATION. THIS IS AS IT IS AGAIN HIGHLY IMPROBABLE THAT THE A SSESSEE WOULD DEAL WITH UNKNOWN PERSONS AND VICE VERSA? WHAT, IF A GOLD BAR IS SUBSEQUENTLY FOUND TO BE NOT OF THE SPECIFIED PURITY? OR THE LEGAL TENDER FURNISHED IN CONSIDERATION SUBSEQUENTLY DISCOVERED TO BE ACTUALLY NOT SO? THE CASH DEPOSITED IN BANK WOULD ALSO HAVE SURFACED UPON SUCH AN EXERCISE. THE ASSESSEE HAVING NOT FURNISHED THE D ETAILS OF THE BUYERS OF THE GOLD BARS SOLD IN CASH, WHICH VOUCHERS BEAR ONLY THEIR NAMES AND BROA D ADDRESSES, THIS DOES REPRESENT, WE ARE ACUTELY AWARE, A WEAK LINK IN HIS EXPLANATION, INASMUCH AS THE SAME CAN NOT BE SUBJECT TO VERIFICATION; BESIDES, AS AFORE-STATED, IT BEING IMPROBABLE THAT THE ASSESSEE DEALS WITH UNKNOWN PARTIES AND VICE VERSA . IN FACT, THE SALE BILLS OUGHT TO CONTAIN THE IDENTIFICATION/CATEGORIZATION AS TO WHETHER IT REPR ESENTS A CREDIT OR A CASH SALE, BEING INTEGRAL AND BASIC TO THE TRANSACTION, AND WHICH RE PRESENTS THE SECOND WEAK LINK IN THE ASSESSEES EXPLANATION. IN ITS ABSENCE, IT WOULD BE OPEN FOR A BUYER ON CREDIT TO SUBSEQUENTLY CLAIM TO HAVE BOUGHT IN CASH! AGAIN, WE FIND NO EXAMINATION OR FINDING QUA THIS ASPECT AT THE TIME OF THE SEARCH. FURTHER, WE MAY CLARIFY THAT THE ASS ESSEES CONTENTION THAT THE CASH DEPOSITED IN BANK ACCOUNTS, BEING DISCLOSED ACCOUNTS, CANNOT BE SUBJECT MATTER OF UNDISCLOSED INCOME, THOUGH IMPRESSIVE, IS NOT ACCEPTABLE. THIS IS FOR T HE REASON THAT WHAT IS BEING CONSIDERED AS UNEXPLAINED IS THE NATURE AND SOURCE OF CASH ADM ITTEDLY AVAILABLE, WHETHER IN HAND OR THAT DEPOSITED IN BANK. THE ASSESSEES REGULAR ACCO UNTS DID NOT REFLECT EITHER THE CASH SALES OR ITS AVAILABILITY, WHEREUPON ONLY IT WOULD BE, OR STAND TO BE, DEPOSITED IN THE BANK ACCOUNT/S. IN OTHER WORDS, IF THE EVIDENCE AS TO C ASH SALES AS FOUND DURING SEARCH, WHICH IS STATED TO BE THE PRINCIPAL SOURCE OF THE CASH-IN -HAND AND THAT DEPOSITED IN BANK ACCOUNTS, IS NOT SATISFACTORY, IT WOULD GO TO IMPUG N THE ASSESSEES EXPLANATION BOTH QUA CASH FOUND DURING SEARCH AND THAT DEPOSITED IN BANK . IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 8 4.4 HOWEVER, NEITHER WAS THIS EXERCISE (I.E., IDENT IFICATION OF CASH SALES) UNDERTAKEN AT THE TIME OF THE SEARCH, NOR ALLOWED TO BE TAKEN TO ITS LOGICAL CONCLUSION (BY THE ASSESSEE) IN THE ASSESSMENT PROCEEDINGS. THE QUESTION BEFORE US, THEREFORE, IS AS TO WHETHER THE REVENUE HAVING CLEARLY FAILED TO UNDERTAKE THE NECE SSARY PRECAUTIONS AND CONDUCT THE REQUIRED VERIFICATION, IS IT OPEN FOR IT TO DISMISS THE ASSESSEES EXPLANATION WITHOUT EXHIBITING IT AS FALSE OR INCORRECT? IT MAY WELL BE CUSTOMARY FOR THE PARTIES TO BUY IN CASH. THERE ARE MANY TRADES IN OUR COUNTRY WHERE WHILE TH E SELLER UNDERTAKES ACCOUNTED TRANSACTIONS, IT IS NOT SO QUA THE BUYER, WHO PAYS ORDINARILY IN CASH. RETAIL TRA DE IS ONE OF SUCH EXAMPLE. WHAT ARE THE GOVERNMENT REGULATIONS IN THIS REGARD? CAN A PERSON SELL BULLION TO ANY TRADER OR IT COULD ONLY BE TO A DEA LER THEREIN? TOWARD THIS, WE FIND THAT THE LICENSE NUMBER IS MENTIONED ONLY IN THE CASE OF PURCHASE BILLS ISSUED BY M/S. BHEERUMAL SHAMANDAS, AND NOT BY OTHERS, VIZ. M/S. H UNDAI EXPORTS, RIDHI SIDDHI BULLION LTD. THE SALE BILLS - CREDIT OR CASH ISSU ED BY THE ASSESSEE ALSO DO NOT MENTION ANY LICENCE NUMBER. IF THE LAW PROHIBITS ONE WHO I S NOT A LICENSED DEALER TO TRADE IN BULLION, THE ASSESSEES STAND IS CLEARLY UNTENABLE, AND HE IS BOUND TO FURNISH THE IDENTIFICATION OF THE BUYERS IN CASH. HE, HAVING DE CLINED TO DO SO, HIS EXPLANATION CANNOT BE REGARDED IN LAW AS SATISFACTORY. AT THE SAME TIM E, IF IT IS NOT SO PROHIBITED, THE ASSESSEES EXPLANATION CANNOT BE DISCOUNTED AS NOT SATISFACTORY ON THAT BASIS ALONE. CONTINUING FURTHER, WE MAY CLARIFY TH AT THE REVENUE CANNOT POSSIBLY DOUBT THE ASSESSEES SALES. THIS IS AS PURCHASES (FROM 01.4.2 0002 TO 11.4.2002), AS WELL AS THE STOCK-IN-HAND (AS ON 11.4.2002), BEING NOT IN DOUBT , AND RATHER DETERMINED, THE SALE OF THE BALANCE GOODS PURCHASED IS EVEN OTHERWISE THE NORMA L, REASONABLE PRESUMPTION. THE ONLY QUESTION, THEREFORE, IS WHETHER THESE ARE, TO THE E XTENT STATED, IN CASH. TOWARD THIS, WE FIND THAT THOUGH THERE ARE NO CASH SALES PRIOR TO 1 0.4.2002, THE TOTAL CASH SALES ON 10.4.2002 AND 11.4.2002 (AT RS.40.42 LAKHS) WORK OU T TO ONLY A FRACTION OF THE TOTAL CASH SALE FOR THE MONTH OF APRIL, 2002 (AT RS.448.53 LAK HS/PB PG. 164), I.E., IN FACT, HIGHER THAN WHAT WOULD OBTAIN ON THE BASIS OF THE AVERAGE FOR THE MONTH, WHILE THAT FOR THE FINANCIAL YEAR 2002-03 IS AT OVER RS. 22 CRORES. TH E CASH SALE FOR APRIL, 2003 AND APRIL, IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 9 2004, IS AT RS.462.17 LAKHS RS.252.72 LAKHS RESPECT IVELY (PB PG. 165, 166). CASH SALES, AND IN SUCH VOLUMES, ARE THUS A NORMAL INCIDENT OF THE ASSESSEES TRADE. THE CASH GENERATED STANDS DEPOSITED BY THE ASSESSEE IN HIS R EGULAR BOOKS OF ACCOUNT, I.E., AS DULY REFLECTED IN HIS REGULAR BOOKS OF ACCOUNT, WHICH AG AIN IS FOUND TO BE A REGULAR PRACTISE (COPY OF THE RELEVANT ACCOUNTS ENCLOSED IN THE PAPE R BOOK). ALL THESE INCIDENTS CORROBORATE AND LEND CREDENCE TO THE ASSESSEES CAS E. NO SUCH PROHIBITION IN LAW, I.E., AS A FORE-STATED, HAS BEEN EITHER REFERRED TO BY THE AUTHORITIES BELOW OR BROUGHT TO OUR NOTICE BY THE R EVENUE, OR OTHERWISE COME TO OUR NOTICE. OUR FOREGOING OBSERVATION IN THIS RESPECT M UST, THEREFORE, BE REGARDED AS QUA AN INCIDENCE, WHICH, IF APPLICABLE, WOULD HAVE A BEARI NG IN THE MATTER. UNDER THE CIRCUMSTANCES, THE REVENUES STAND OF DOUBTING THE ASSESSEES EXPLANATION MERELY ON THE BASIS OF NON-DISCLOSURE OF THE IDENTITY OF CASH BUY ERS IS NOT TENABLE. THE REVENUE, IN FACT, IN ITS ZEALOUSNESS TO FRAME THE ASSESSMENT, NOT ONL Y DID NOT UNDERTAKE THE EXAMINATION, BUT ALSO ADDED THE CASH AS REFLECTED IN THE ASSESSE ES CASH BOOK AS ON 01.4.2002 WITHOUT IMPUGNING THE SAME IN ANY MANNER, ALSO OVERLOOKING THE FACT THAT THE DEPOSIT OF CASH IN HIS BANK ACCOUNTS IS A REGULAR FEATURE/PRACTICE OF THE TRADE, AND NOT LIMITED TO THE TWO DATES UNDER REFERENCE. THE CASH BALANCE AS ON 06/4/ 2002, THOUGH WRITTEN IN PENCIL (AT RS.4,53,074/-), VARIES INSIGNIFICANTLY FROM THE BAL ANCE AS ON 01/4/2002, AND WOULD GO TO EXPLAIN THE CASH DEPOSITED IN BANK OR IN HAND TO TH AT EXTENT. THE SAID TWO ADDITIONS ARE, ACCORDINGLY, DIRECTED FOR DELETION, ALLOWING THE AS SESSEES GROUND NOS. 2 AND 3 BEFORE US. 4.5 WE NEXT CONSIDER THE ASSESSEES GROUND NO. 4, I .E., QUA THE DIFFERENCE IN STOCK OF GOLD BARS (7) FOUND DURING SEARCH. THE EXPLANATION ADVANCED BEFORE US, I.E., WITH REFERENCE TO BILL NO. 21 DATED 06.4.2002 (PB PG. NO . 78) WAS NOT ONLY NOT FURNISHED BEFORE THE A.O., OR EVEN THE FIRST APPELLATE AUTHORITY FOR THAT MATTER, BUT IS ALSO FOUND INCORRECT ON OUR EXAMINATION. THE SAID SALE BILL IS DULY REF LECTED AT PAGES 7 TO 8 OF THE STOCK NOTE- BOOK (PB PG.148), I.E., UNDER THE HEAD SILVER ACCO UNT. IT IS ALSO CORRESPONDINGLY NOT REFLECTED UNDER THE HEAD GOLD ACCOUNT. THE ONLY ERROR, FROM WHICH THE ASSESSEE SEEKS TO IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 10 DRAW LEVERAGE, IS THAT THE BILL NO. 21 MENTIONED IN THE STOCK NOTE-BOOK (REFER PB PG. 144) IS ACTUALLY BILL NO.22, WHICH MISTAKE IN RECORDING THE SERIAL NUMBER OF THE SALE BILLS (I.E., AT THE IMMEDIATELY SUCCEEDING SERIAL NUMBER), CONTI NUES UP TO 11.04.2002, WITH THE LAST BILL NO.74 (DATED 11.04.2002), AS RECORDED IN THE A CCOUNT (REFER PB PG. 147), BEING ACTUALLY BILL NO. 75. THE LD. DR HAS IN FACT ALSO BROUGHT TO OUR NOTICE THE MANNER IN WHICH THE ASSESSEE HAS SOUGHT TO REFLECT THE BALANCE OF 36 GOLD BARS (INSTEAD OF THE BALANCE OF 29 OTHERWISE AVAILABLE IN THE STOCK NOTE-BOOK). RATHER, IF THE BALANCE AS ON 11.4.2002 AS PER THE S TOCK NOTE-BOOK WAS AT 36, WHERE WAS THE QUESTION OF A DIFFERENCE OF 7 AND, CONSEQUENTLY, OF EXPLAINING THE SAME ? A DIFFERENT BALANCE BEING REFLECTED IN THE STOCK NOTE-BOOK AS PRODUCED IN THE ASSESSMENT PROCEEDINGS (WHEREAT IT WAS IMPOUNDED), THUS, CANNOT BE ACCEPTED. WE DO FIND THAT THE ASSESSEE HAS ENCLOSED ITS REGULAR STOCK LEDGER (PB PGS. 122- 128), WHICH REFLECTS A BALANCE OF 36 GOLD BARS AS O N 11.4.2002, I.E., PRIOR TO 7 GOLD BARS SEIZED BY THE REVENUE, WHICH IS REFLECTED AS AN OUT GOING ON 12.04.2002 IN THE SAID REGISTER. HOWEVER, IN THE ABSENCE OF THE ASSESSEE P OINTING OUT ANY VALID DISCREPANCY IN THE STOCK NOTE-BOOK (RECORD OF FIRST ENTRY), WHERE ALL THE PURCHASES AND SALES ARE FIRST ENTERED, WHICH ADMITTEDLY REFLECTED A BALANCE OF 2 9 GOLD BARS AS ON 11.04.2002 AT THE TIME OF SEARCH, THE SAME IS OF NO MOMENT. THE ASSES SEES PLEA OF THE ADMISSION BEING MISTAKEN REMAINS COMPLETELY UNSUBSTANTIATED AND, RA THER, DISPROVED BY THE LD. DR. WE FIND NO MERIT WHATSOEVER IN THE ASSESSEES CASE. IT S GROUND NO. 4 IS, ACCORDINGLY, DISMISSED. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF DECEMBER, 2012 SD/- SD/- ( B. R. MITTAL) ( SANJAY ARORA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATE: 26.12.2012 IT(S&S)A NO.51/MUM/2010 LALIT KUMAR JAGAWAT V. ASST. CIT, MUMBAI 11 COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI