Shri Biren V.Shah, Ahmedabad V. The ACIT., Cent.Circle-1(3), Ahmedabad

ITSSA 54/AHD/2005

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9515 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-08-2009
• Assessment Year: misc
• Appeal Filed On: 09-03-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Unexplained investment; Document seized; Documents seized; Bonafide mistake
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI H. L. KARWA, JM AND A. N. PAHUJA, AM SHRI BIREN V. SHAH, 101, SHANTI TOWERS, NR. TULSI PARTY PLOT, AHMEDABAD. V/S . ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(3) , AHMEDABAD PAN NO.AKVPS6194C (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI DHIREN SHAH, AR REVENUE BY:- SHRI SHELLEY JINDAL, DR O R D E R A. N. PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 28/12/2004 OF THE LD. CIT(A)-I,AHMEDABAD, RAISES THE FOLLOWING GROUNDS : I. ADDITION ON ACCOUNT OF UNACCOUNTED COMMISSION/BROKE RAGE INCOME RS.14,75,141/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN GIVING THE DIRECTION TO THE A.O. THAT HE SHOULD VERIFY THE BILLS OF COLLECTION OF SERVICE TAX WHILE SETTING ASIDE THE ISSUE ON ONE HAND AND ON THE OTHE R HAND THE LD. CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS HOLDING T HAT THE ADDITION TO THE EXTENT COMPUTED AS ABOVE WILL BE UPHELD. II. ADDITION ON ACCOUNT OF IMPROPER MAINTENANCE OF BOOK S OF ACCOUNTS AND ACCOUNTS GENERATED FROM SEIZED COMPUTE R DATE RS.6,31,967/- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN SUSTAINING THE ADDITION OF RS.6,31,967/- AS MADE BY THE A.O. ON AC COUNT OF ALLEGED IMPROPER MAINTENANCE OF BOOKS OF ACCOUNTS GENERATED FROM SEIZED COMPUTER DATA WHILE HOLDING THAT APPELLANT HAS NOT POINTED OUT SPECIFIC INCORRECTNESS IN THE CALCULATED PROFITS BY WAY OF E XCESSIVE RECEIPTS OR LOWLY ALLOWED EXPENSES FOR ALL THESE BUSINESS. III. ADDITION ON ACCOUNT OF CASH TRANSACTIONS RS.2,29,9 39 /- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS.2,29,937/- ON ACCOUNT OF ALLEGED TRANSACTION WHILE HOLDING THAT NO EXPLANATION HAS BEEN GIVEN BY THE APPELLANT FOR THE TRANSACTIONS IT(SS) A NO.54/AHD/2005 BLOCK PERIOD 01.04.1995 TO 26.02.2002 IT(SS) A NO.54/AHD/2005 2 2 BEYOND REPEATING THE ARGUMENTS AND ALSO TO SAY THAT IT IS NOT CLEAR WHETHER PAYMENT BEING CONSIDERED BY A.O. IS BY CHEQ UE OR CASH. IV. ADDITION ON ACCOUNT OF PROMISSORY NOTE RS.50,000/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.5,50,000/- ON ACCOUNT OF PROMISSORY NOTES FOU ND IN SEARCH WHILE HOLDING THAT THE POSSESSION BY APPELLANT CLEARLY RE VEALS THAT MONEY/MONEYS WORTH WOULD BE RECEIVABLE BY APPELLANT OR HIS BENAMIES. V. ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT RS.6 ,00,000/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS.6,00,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT WHILE HOLDING THAT THE APPELLANT HAS NOT BROUGHT ANY EVID ENCE FROM THE PARTIES IN RESPECT OF GIVING ANY SUCH DIRECTIONS. VI. ADDITION OF RS.2,84,175/- ON ACCOUNT OF UNEXPLAINED INVESTMENT 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.2,84,175/- ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT WHILE HOLDING THAT NO EXPLANATION HAS BEEN GIVEN FOR THE ENTRIES REPRESENTING LOANS GIVEN, PURCHASES MADE OR INVESTMENTS MADE AS RECORDED ON THE SEIZED PAPERS. VII. CHARGING OF INTEREST U/S 158BFA(1) OF THE ACT RS.2 ,50,725/- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE INTEREST CHARGED U/S 158BFA(1) OF THE ACT BY THE A.O. WHILE HOLDING THAT THERE WAS DELAY IN FILING THE RETURN OF INCOME. VIII. THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEN D, ALTER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE ON AT THE TIME OF HEARING. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL, F ACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE ASSESSEE IS AN INDIVID UAL CARRYING ON THE BUSINESS OF TRADING IN SHARES AND SECURITIES AS A SUB-BROKER . A SEARCH WAS CONDUCTED U/S 132 OF THE INCOME-TAX ACT,1961[HEREINAFTER REFE RRED TO AS THE ACT] ON 26/2/2002 IN THE RESIDENTIAL PREMISES OF THE ASSESS EE SITUATED AT 101, SHANTI TOWER, VASNA, AHMEDABAD AS WELL AS OFFICE PREMISES SITUATED AT 201, SHYAMAK COMPLEX, B/H PANJARA POLE, AHMEDABAD. DURIN G THE COURSE OF SEARCH, A NUMBER OF DOCUMENTS WERE SEIZED. IN RESP ONSE TO A NOTICE DATED 10/2/2003 U/S 158BC OF THE ACT, RETURN DECLARING UN DISCLOSED INCOME OF IT(SS) A NO.54/AHD/2005 3 3 RS.5,24,095/- WAS FILED ON 5/2/2004. DURING THE COU RSE OF SEARCH, IN REPLY TO QUESTION NO. 7 & 8 OF HIS STATEMENT, THE ASSESSEE R EPLIED AS UNDER:- WHEN PROFIT IS SOLD TO ANY PARTY, CHEQUES EQUALING TO THE AMOUNT OF PROFIT SOLD IS ISSUED TO THE PARTY AND IN LIEU OF T HAT CASH OF EQUAL AMOUNT IS TAKEN BACK FROM THAT PARTY. WHEN ANY SUCH PROFIT IS SOLD, CORRESPONDING LOSS IS FIRST DEBITED INTO THE TRADIN G ACCOUNT. IF ANY PERSON WANTS LOSS, THEN AFTER ENTERING THE TRANSACT ION IN OUR NAME OR AFTER OBTAINING DEAL FROM THE MARKET A BILL SHOWING LOSS IS ISSUED TO THE PARTY./ IN LIEU OF SUCH BILL CHEQUES OF EQUAL AMOUN T IS OBTAINED FROM THE PARTY AND IF DEAL IS / TAKEN FROM THE MARKET THEN P ROFIT OF EQUAL AMOUNT IS CREDITED TO THE TRADING ACCOUNT. 2.1 IT WAS FURTHER ADMITTED IN THE STATEMENT TH AT IN THE FY 2001-02 , THE ASSESSEE SOLD PROFIT TO 29 PARTIES AS DETAILED IN PARA-7.1 OF THE ASSESSMENT ORDER AS UNDER:- SR. NO. NAME OF THE PARTY AMOUNT ACCOUNT CODE NO. 1. B.I. MEHTA 30056.30 B18 2. BHADRESH K DAVE 32600 B023 3. BIPIN B JOSHI HUF 30600 B026 4. DEENA N SHAH 10930 B010 5. BHANUMATI R SONI 39760 B022 6. DHADRES K DAVE 32600 B023 7. DHARMENDRA R DOSHI 139498.94 D027 8. DILIP J BHAVSAR HUF 42000 B029 9. DEVENDRA GANDALAL SHAH HUF 57555 D030 10. GIRISH D SHAH HUF 56289 D008 11. HARESH N THAKAR 313440 H017 12. INDIRA PARDESI 11905 T002 13. I.C. MEHTA HUF 61148.05 I003 14. L.C. MEHTA HUF 32155 IOO5 15. JANAKI P SHAH 37002 J014 16. KALPANA A SUBAH 61661 K014 17. KAMLESH N SHAH HUF 38150 K024 18. KAMLABEN AMBALAL PATEL 99911 K025 19. MEHMOOD SALIM Y SHAIKH 84200 M014 20. MUKESH R BHAVSAR 40633 M020 21. MAHENDRA J BHAVSAR HUF 43150 M023 22. NEENA HARESH BHAVSAR 24000 N013 23. PRABULA N SONI 39760 )032 24. SUMAN RAMANLAL SHAH 25000 S042 25. SAMIR N SHAH HUF 35300 S043 26. SHOBHANABEN J SONI 43611 S045 27. VASANI D SHAH HUF 44202 V015 28. VANITA AMBALAL PATEL 28139 V016 29. VIJAY CHHABRA HUF 135805 V017 IT(SS) A NO.54/AHD/2005 4 4 2.2 HOWEVER, DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, TO A QUERY BY THE AO, THE ASSESSEE VIDE HIS REPLY DATED 26-02-200 4 SUBMITTED THAT THE STATEMENT AT THE TIME OF SEARCH WAS UNDER PRESSURE AND WAS NOT GIVEN TO HIM FOR VERIFICATION. SUBSEQUENTLY, THE ASSESSEE FILED AN AFFIDAVIT DATED 02-11- 2003 ON 05-02-2004, RETRACTING THE AFORESAID STATEM ENT. THE ASSESSEE POINTED OUT THAT THE TRANSACTIONS WITH THE AFORESA ID 29 PARTIES WERE GENUINE AND RECORDED IN THE BOOKS OF ACCOUNT DULY AUDITED. THE ASSESSEE ADDED THAT RETRACTED STATEMENT CAN NOT BE RELIED UPON. HOWEVER , THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT BOOKS OF ACCOUNT MAINTAINED IN THE COMPUTER REVEALED SERVICE TAX C OLLECTIONS OF RS.3,56,591/- SINCE THE ASSESSEE WAS CHARGING SERVICE TAX @1% , T HE AO CONCLUDED THAT THE ASSESSEE EARNED BROKERAGE COMMISSION DURING TH E FY 2000-01 TO THE EXTENT OF RS. 22,91,968/-. THE ASSESSEE HAVING SHOW N BROKERAGE OF RS.8,16,127/-,THE AO ADDED THE REMAINING AMOUNT OF RS.14,75,141/- ( 2291268 816127) BY WAY OF UNDISCLOSED INCOME. 3. ON APPEAL, THE LD. CIT(A) CONCLUDED AS UNDER : - 3.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS MADE. IN VIEW OF THE BILLS FOUND, ASSESSING OFFICER HAS WRONGLY GENERALIZED RECEIPT OF SERVICE TAX OF RS.22,912/- AS BEING 1% O F RECEIPTS AND THUS HAS WRONGLY COMPUTED BROKERAGE RECEIPTS AT 100% THEREOF . BUT INASMUCH AS THE COMPUTER DATA IS ADMITTEDLY SHOWING COMPLETE RECEIP TS FOR SERVICE TAX, IT CANNOT BE HELD TO BE CORRUPTED. MERE ABSENCE OF SOM E ACCOUNTS BEING ENTERED IN THERE WILL NOT MAKE IT CORRUPTED. ASSESS ING OFFICER HAS POINTED OUT THE SIMILARITY IN THE RECEIPTS ENTERED ON PARTICULA R DATES AND I AM OF THE CONSIDERED OPINION THAT THERE WOULD BE NO JUSTIFICA TION TO IGNORE THE COMPUTER DATA OF APPELLANT WHICH CANNOT BE IRRELEVANT. I WOU LD THEREFORE HOLD THAT THE ASSESSING OFFICER SHOULD VERIFY THE BILLS OF COLLEC TION OF SERVICE TAX OF RS.22,912/- BEING AT 1% OR 5% AND THEN CALCULATE TH E CORRECT AMOUNT OF BROKERAGE OVER RS.8,16,127/- DECLARED AND ALLOW REL IEF TO THE APPELLANT ACCORDINGLY. THE ADDITION TO THE EXTENT COMPUTED AS ABOVE WILL BE UPHELD. 3.3 ASSESSING OFFICER WILL THEREAFTER FURTHER ALLOW TELESCOPING OF RS.1 LAKH AS PER INCOME DECLARED AS UNDISCLOSED AS PER NOTES TO THE STATEMENT OF TOTAL INCOME AS UNDER : IDENTIFICATION TO BE MADE ON THE BASIS OF SCRUTINY RS.1,00,000/- OF SEIZED MATERIALS AND OTHER RECORDS AT THE TIME OF ASSESSMENT PROCEEDINGS. IT(SS) A NO.54/AHD/2005 5 5 IT APPEARS THAT ASSESSING OFFICER DID NOT GIVE THIS CLAIMED TELESCOPING EFFECT. HE EXPLAINED IT VIDE REMAND REPORT DATED 3/11/2004 AS ON ACCOUNT OF ASSESSEES INABILITY TO MAKE THE NECESSARY IDENTIFI CATION DURING ASSESSMENT PROCEEDINGS. SUCH IDENTIFICATION HAVING BEEN NOW MA DE IN THE FRAMED ASSESSMENT, SUCH TELESCOPING CAN BE NOW GIVEN. RELI EF OF RS.1 LAC WILL BE ACCORDINGLY ALLOWED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).AT THE OUTSET, THE LD. AR ON BEHALF OF THE ASSESSEE WHILE INVITING OUR ATTENTION TO PAGE 410 OF THE PA PER BOOK SUBMITTED THAT THE AO VIDE HIS ORDER DATED 29-06-2005 HAVING ALLOWED T HE NECESSARY RELIEF IN TERMS OF DIRECTIONS OF THE LD. CIT(A) ,THE ASSESSEE WOULD NOT PRESS THIS GROUND. THE LD. DR DID NOT OPPOSE THIS SUBMISSION O F THE LD. AR. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. SINCE ADMITTEDLY, THE ASSESSEE HAS ALREADY BE EN ALLOWED NECESSARY RELIEF VIDE AFORESAID ORDER 29-06-2005 OF THE AO, GROUND NO. I IN THE APPEAL BECOMES INFRUCTUOUS AND IS ,THEREFORE, DISMISSED. 6. GROUND NO. II RELATES TO ADDITION OF RS.6,31,967 /- ON ACCOUNT OF IMPROPER MAINTENANCE OF BOOKS OF ACCOUNTS AND ACCOU NTS GENERATED FROM SEIZED COMPUTER DATA. THE AO NOTICED THAT FIGURES O F COMMISSION AND INSURANCE MENTIONED IN PRINT OUTS TAKEN FROM THE CO MPUTER FOR THE PERIOD ENDING 30-06-1998 TALLIED WITH THE FIGURES OF RECE IPTS SHOWN IN THE PROFIT & LOSS A/C. FOR THE FINANCIAL YEAR ENDING 31 ST MARCH,1998. THE AO FURTHER NOTICED THAT PRINT OUT PERTAINED TO THREE ACCOUNTS OF SHRI BIREN V SHAH VIZ. BIREN V SHAH HUF, S.B. SHAH & S.B. INVESTMENT. ACC ORDINGLY, THE AO WORKED OUT THE DIFFERENCE OF RS.6,31,967/- AS UND ER:- F.Y 97-98 98-99 99-00 00-01 01 -02 PRINT RETURN PRINT RETURN PRINT RETURN PRINT RET URN PRINT RETURN BIREN SHAH 106750 262636 262753 184299 367386 20550 816127 24897 7164 S.B INVESTMENT 649844 -- -- -- -- -- S.B. SHAH 165210 -- 7428 17 590126 TOTAL 106750 262636 262753 9 99353 367386 763367 816127 615023 PRINT OUT 999353 RETURN 367386 IT(SS) A NO.54/AHD/2005 6 6 DIFFERENCE 631967 AND TREATED THE AFORESAID AMOUNT AS SUPPRESSION OF RECEIPTS . 7. ON APPEAL, THE ASSESSEE CONTENDED THAT THE AO HA D MADE THE ADDITION WITHOUT CONSIDERING THEIR EXPLANATION DATED 26-2-04 WHILE PRINT OUT OF COMPUTER DATA WAS PROVIDED AT THE FAG END OF THE LI MITATION AND THAT TOO WAS INCOMPLETE / CORRUPT AND MERE ROUGH WORKING FOR TH E PERIOD ENDING 30 TH JUNE INSTEAD OF FINANCIAL YEAR. BESIDES THEIR CLAIM FOR TELESCOPING OF RS.1 LAKH HAD NOT BEEN CONSIDERED. IN THE LIGHT OF THESE SUBMISSI ONS, THE LD. CIT(A) CONCLUDED AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE. INASMUCH AS I HAVE HELD THE COMPUTER DATA TO BE ACCEPTABLE FOR C ALCULATION OF THE SERVICE TAX AND COMMISSION INCOME, THE EARNED INCOM E FROM THE ADMITTED BUSINESS IN NAME OF BIREN SHAH, S.B. INVESTMENT AND S.B.SHAH IS ALSO HELD TO BE RIGHTLY CALCULATED. IT IS NOTICEABLE THA T APPELLANT HAS NOT POINTED OUT SPECIFIC INCORRECTNESS IN THE CALCULATE D PROFITS BY WAY OF EXCESSIVE RECEIPTS OR LOWLY ALLOWED EXPENSES FOR AL L THESE BUSINESSES. THE ADDITION MADE IS THEREFORE SUSTAINED. 4.3 SINCE THE CLAIM OF TELESCOPING OF RS.1 LAKH HAS BEEN ALLOWED IN GROUND OF APPEAL NO.II, NO FURTHER BENEFIT IS POSSI BLE. THIS GROUND OF APPEAL IS THUS TREATED AS REJECTED. 8. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR WHILE REITERATING THEIR SUBMISSIONS BEF ORE THE LD. CIT(A) CONTENDED THAT MATTER MAY BE RESTORED TO THE FILE OF THE AO SINCE COMPUTER DATA WAS FOR THE PERIOD ENDING 30 TH JUNE INSTEAD OF THE FINANCIAL YEARS. ON THE OTHER HAND THE LD. DR POINTED OUT THA T THE ASSESSEE DID NOT CO- OPERTED DURING THE ASSESSMENT PROCEEDINGS AND HE MA Y BE DIRECTED TO CO- OPERATE FOR THE NECESSARY RECONCILIATION OF THE DA TA CULLED OUT FROM THE COMPUTER PRINTOUTS. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS AND CIRCUMSTANCES CASE. SINCE BOTH THE PARTIES AGREED BEFORE US THAT THE MATTER REQUIRES RECONCILIATION, WE CONSIDER IT FAIR AND AP PROPRIATE TO VACATE THE IT(SS) A NO.54/AHD/2005 7 7 FINDINGS OF THE LD. CIT(A) AND RESTORE THE MATTER T O THE FILE OF AO WITH THE DIRECTIONS TO ALLOW SUFFICIENT OPPORTUNITY TO THE A SSESSEE FOR RECONCILIATION OF THE DATA GENERATED FROM THE ACCOUNTS IN THE COMPUTE R VIS--VIS BOOKS OF ACCOUNTS AND THEREAFTER, ADJUDICATE THE ISSUE IN A CCORDANCE WITH LAW. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE IN THE PRO CESS OF RECONCILIATION. WITH THESE DIRECTIONS, GROUND NO.2 IS DISPOSED OF. 10. GROUND NO. III RELATES TO ADDITION OF RS.2,29,9 39/- ON ACCOUNT OF CASH TRANSACTIONS. THE AO ASKED THE ASSESSEE TO EXPLAIN THE FOLLOWING TRANSACTIONS IN CASH LOANS AND PURCHASES AS MENTIONED IN PARA 9. 1 OF THE ASSESSMENT ORDER - I) CASH LOAN OF RS.25,000/- FROM SHRI HIMANSHU AND RS.23,375/- FROM SHRI BACHUBHAI PATEL. II) THE ASSESSEE WAS ASKED TO EXPLAIN CASH PAYMENT AGAINST PURCHASES AN EXPENDITURE AS PER ORDER SHEET ENTRY D ATED 23-02- 2004. NAME AMOUNT DATE 1 SHRI ISHWARBHAI PATEL 25,000 02-08-2000 2 -DO- 40,000 30-12-2000 3 KINARI SUTHARIA 27,564 31-03-2001 4 PANKAJ SHAH 50,000 20-08-2001 5 GIRISHBHAI 24,000 20-08-2000 HOWEVER, THE ASSESSEE PLEADED THAT HE WAS UNABLE T O EXPLAIN UNLESS THE RELEVANT SEIZED MATERIAL WAS PROVIDED TO HIM. IN T HESE CIRCUMSTANCES, THE AO ADDED THE AMOUNT HOLDING AS UNDER :- 9.3 I HAVE CONSIDERED THE ASSESSEES SUBMIS SION. ALL THE NAMES, DATED AND EXACT AMOUNT WERE PROVIDED TO THE ASSESSE E. BUT THE ASSESSEE HAS NOT PROVIDED ANY EXPLANATION, THEREFORE THE TRA NSACTIONS MENTIONED ABOVE ARE NOT CONSIDERED AS GENUINE TRANSACTIONS. I HAVE NO ALTERNATIVE BUT TO CONSIDER THE SAME AS NON-GENUINE AND THE ASS ESSEE DID NOT OFFER ANY PROPER EXPLANATION WITH EVIDENCES ALTHOUGH HE W AS OFFERED AN OPPORTUNITY TO DO THE SAME. THE ADDITION MADE ON TH E POINT IS THEREFORE COMES TO RS.48,375/- (RS.25,000/- + RS.23,375) BEIN G UNEXPLAINED CASH ACCEPTANCE AND RS.1,81,564/- BEING UNEXPLAINED CASH EXPENDITURE. AS THE ASSESSEE HAD FAILED TO OFFER ANY EXPLANATION FOR TH IS, THE SAME IS TREATED AS APPLICATION OF INCOME WHICH IS NOT EXPLAINED PRO PERLY AND THEREFORE, ADDED TO THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. IT(SS) A NO.54/AHD/2005 8 8 11. ON APPEAL, THE ASSESSEE SUBMITTED THAT THE ADD ITION HAS BEEN MADE ON SURMISES AND CONJECTURES AND WITHOUT PROVIDING A NY MATERIAL EVIDENCE SOUGHT BY ASSESSEE FROM THE ASSESSING OFFICER AND ON THE BASIS OF WHICH ADDITION WAS PROPOSED TO BE MADE ONLY AT THE FAG EN D OF THE LIMITATION . HOWEVER, THE LD. CIT(A) CONFIRMED THIS ADDITION IN THE FOLLOWING TERMS :- 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE. SINCE APPELLANTS RETURN FOR BLOCK PERIOD WAS FILED ON 5/2/2004, THE SHOW CAUSE NOTICE BY A.O. IS BOUND TO BE LATE AND IS AS SUCH GIVEN ON 23 /2/2004 VIDE ORDER SHEET ENTRY. EVEN IN THESE APPELLATE PROCEEDINGS, N O EXPLANATION HAS BEEN GIVEN BY THE APPELLANT FOR THE TRANSACTIONS BEYOND REPEATING THE ABOVE ARGUMENTS AND ALSO TO SAY THAT IT IS NOT CLEAR WHET HER PAYMENT BEING CONSIDERED BY A.O. IS BY CHEQUE OR CASH. THEREFORE, THERE IS NO BASIS TO DISTURB THE FINDINGS OF THE A.O. WHICH IN ABSENCE O F COGENT EXPLANATION BY APPELLANT ARE CONFIRMED. 5.3 ALSO, THE TELESCOPING EFFECT OF RS.1 LAKH HAVIN G BEEN ALLOWED IN GROUND NO.II, NO FURTHER RELIEF IS NOW POSSIBLE HER E AND THIS GROUND OF APPEAL IS REJECTED. HOWEVER, APPELLANT CAN HAVE NO GRIEVANCE AS A.O. HAS IN FACT MADE NO ADDITION OF THIS AMOUNT BEING HELD TO BE UNDISCLOSED INVESTMENT WHICH IS LESS THAN THE UNDISCLOSED INCOM E FOR THE PERIOD. 12. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR WHILE REITERA TING THEIR SUBMISSIONS BEFORE THE LOWER AUTHORITIES CONTENDED THAT SINCE THE ASSE SSEE HAD NOT BEEN PROVIDED THE RELEVANT SEIZED MATERIAL NOR THE LD. CIT(A) CALLED FOR ANY REPORT FROM THE AO, MATTER REQUIRES RECONSIDERATION BY THE AO. HE SUBMITTED THAT NO SPECIFIC SEIZED MATERIAL WAS PROVIDED TO THE ASSESS EE AGAINST WHICH THE ADDITION ON ACCOUNT OF CASH TRANSACTIONS HAS BEEN M ADE. ON THE OTHER HAND, THE LD. DR RELIED ON THE FINDINGS OF THE LD. CIT(A ) . 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS AND CIRCUMSTANCES CASE. SINCE THERE IS NOTHING TO SU GGEST IN THE IMPUGNED ORDERS AS TO WHETHER OR NOT THE TRANSACTIONS REFERR ED TO BY THE AO WERE MENTIONED IN THE SEIZED DOCUMENTS WHILE THE LD. AR DENIED RECEIPT OF COPY OF ANY SUCH SEIZED DOCUMENT AND THE LD. DR ALSO DID TH ROW ANY LIGHT , WE IT(SS) A NO.54/AHD/2005 9 9 CONSIDER IT FAIR AND APPROPRIATE TO VACATE THE FIND INGS OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF AO WITH THE DIREC TIONS TO ALLOW SUFFICIENT OPPORTUNITY TO THE ASSESSEE AFTER SUPPLYING THE REL EVANT SEIZED DOCUMENTS, FORMING THE BASIS FOR THE AFORESAID ADDITION AND T HEREAFTER, ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE IN THE PROCESS . WITH THESE DIRECTIONS, GROUND NO. III IS DISPOSED OF. 14. NEXT GROUND NO.IV RELATES TO ADDITION OF RS.5 ,50,000/- MADE ON ACCOUNT OF PROMISSORY NOTES SEIZED AS PER LOSSEPAPE R FILE NO. A-31 DURING THE COURSE OF SEARCH. THE RELEVANT DETAILS EXTRACTED I N THE ORDER OF THE AO ARE AS UNDER: 10. PROMISSORY NOTE PAGE NO.A-31 NAME AMOUNT DATE 26 AMIT H SHAH 1,00,000 31 -DO- 50,000 34 -DO- 50,000 21 DINESHBHAI PATEL 1,50,000 15/10/2000 9 -DO- 50,000 17/10/2000 10 -DO- 50,000 14 MAHESH K JANI 25,000 01/08/1999 15. -DO- 25,000 0 1/08/1999 16. -DO- 25,000 01/08/1999 13. NITHIK SHAH 25,000 TO A QUERY BY THE AO VIDE LETTER DATED 13-02-2004, THE ASSESSEE REPLIED VIDE LETTER DATED 25-02-2004 THAT I) IN THE PROMISSORY NOTE NAME OF THE PARTY IS NOT MENTIONED. II) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRAD ING IN SHARES AND SECURITIES AS A SUB-BROKER AND THESE PROMISSORY NOT E AND CHEQUES WERE TAKEN AS ADVANCE TO SAFEGUARD TO THE ASSESSEE S INTEREST. III) MOST OF THE DEALS WERE OVER TELEPHONE AND THER E WERE NOT COMPLETE EVIDENCE ESTABLISHING THAT THERE WAS INFORMATION FR OM THE CLIENTS. IV) NO CASH AMOUNT WAS IN FACT GIVEN. V) NO ADVERSE INFERENCE ON THIS POINT SHOULD BE DRA WN. IT(SS) A NO.54/AHD/2005 10 10 HOWEVER, THE AO DID NOT ACCEPT AFORESAID SUBMISSIO NS OF THE ASSESSEE ON THE GROUND THAT THE PROMISSORY NOTES WERE EXECUTED IN FAVOUR OF THE ASSESSEE AND SEIZED FROM HIS POSSESSION THE DENIAL OF THE ASSESSEE THAT NO CASH WAS, IN FACT, GIVEN WAS WITHOUT ANY EVIDENCE. IN TH E ABSENCE OF ANY COGENT EXPLANATION, THE AO ADDED THE AMOUNT OF RS.5.50 LAK HS AS UNEXPLAINED INVESTMENT OF THE ASSESSEE ON THE FOLLOWING GROUNDS :. (I) ALTHOUGH THE NAME OF THE PERSONS IN WHOSE FAVO UR THE PROMISSORY NOTES ARE EXECUTED IS NOT MENTIONED, IT IS CLEAR TH AT THE PROMISSORY NOTES ARE EXECUTED IN FAVOUR OF THE ASSESSEE ONLY. AS THEY ARE FROM THE POSSESSION OF THE ASSESSEE AND THE FACT IS DENIED A LSO. (II) THE DENIAL BY THE ASSESSEE THAT NO CASH WAS IN FACT GIVEN IS WITHOUT ANY EVIDENCE AND SEEMS TO BE AN ARGUMENT FOR GETTIN G OUT FROM THE SITUATION. (III) THE PROMISSORY NOTES ARE DATED MOSTLY F.Y.200 0-01 AND IF THEY WERE RELATED TO THE SHARE TRANSACTIONS ACTUALLY THEY WOU LD HAVE BEEN DESTROYED AFTER THE TRANSACTIONS ARE OVER AND WOULD NOT HAVE REMAIN IN THE POSSESSION OF THE ASSESSEE EVEN AFTER SUCH A LO NG TIME AFTER THE TRANSACTIONS. 15. ON APPEAL, THE ASSESSEE REITERATED THEIR CONT ENTIONS BEFORE THE AO AND SUBMITTED THAT AO ADDED THE AMOUNT, IGNORING THEIR EXPLANATION IN LETTER DATED 25.2.2004. IT WAS CLAIMED THAT THE BUSINESS IN THE TRADING IN SHARES AND SECURITY AS A SUB-BROKER INVOLVED RISK OF GETTING O RAL DIRECTIONS FOR EXECUTING, WHICH MAY BE DENIED BY THE CLIENTS. WHO MAY INCUR LOSSES. IT WAS ADMITTED BY THE ASSESSEE THAT SUCH BLANK PROMISSORY NOTES WERE TAKEN FOR SECURITY TO PREVENT MALPRACTICES BY CLIENTS. SINCE THESE PROMI SSORY NOTES DID NOT INDICATE THE NAME OF THE PERSON IN WHOSE FAVOUR THE SE WERE EXECUTED, NO FINANCIAL TRANSACTION COULD BE PRESUMED IN THIS REG ARD. THE ASSESSEE ALSO SOUGHT TELESCOPING BENEFIT OF RS.1 LAKH OF UNDISCLO SED INCOME DECLARED THE RETURN. IN THE LIGHT OF THESE SUBMISSIONS THE LD. CIT(A) UPHELD THE ADDITION, HOLDING AS UNDER: 6.2 HAVING CAREFULLY CONSIDERED THE FACTS OF THE C ASE, I AM UNABLE TO ACCEPT THE GIVEN EXPLANATION, IN ABSENCE OF ANY CON FIRMATIONS FROM THE EXECUTORS OF THE PROMISSORY NOTES OF THE CLAIMS OF THE APPELLANT. POSSESSION BY APPELLANT CLEARLY REVEALS THAT MONEY/MONEYS WORT H WOULD BE RECEIVABLE BY APPELLANT OR HIS BENAMIS AND ADDITION IS THEREFORE, CONFIRMED FOR SUCH INVESTMENT BY APPELLANT IN THE TRANSACTION RESULTIN G IN EXECUTION OF THE IT(SS) A NO.54/AHD/2005 11 11 PROMISSORY NOTES. THE ADDITION MADE IS UPHELD. ALSO NO FURTHER DEDUCTION AS TELESCOPING OF RS.1 LAKH CAN BE GIVEN HERE HAVING B EEN ALREADY ALLOWED IN GROUND OF APPEAL NO.I & II. 6.3 HOWEVER, APPELLANT SHOULD HAVE NO GRIEVANCE AS NO ACTUAL ADDITION IS MADE BY A.O. IN SAME MANNER AS FOR ISSUE RAISED IN GROUND OF APPEAL NO.IV ABOVE. 16. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(APPEALS). THE LD. AR O N BEHALF OF THE ASSESSEE WHILE INVITING OUR ATTENTION TO PAGE 220 TO 222 AND PAGE 359 TO 361 OF THE PAPERBOOK CONTENDED THAT COPIES OF PROMISSORY NOTE S AT PAGE 359 MENTIONED THE NAME OF SHRI AMIT H SHAH AND DATE 17-04-2000 IN RESPECT OF PROMISSORY NOTE OF RS.1 LAKH WHILE PROMISSORY NOTES OF RS.50,0 00/- EACH ON PAGE 360 AND 361 DID NOT MENTION THE DATE .REFERRING TO PAGE 221 OF THE PAPER BOOK, THE LD. AR CONTENDED THAT VIDE LETTER DATED 25-02-2 004, SHRI AMIT H SHAH WHO EXECUTED THE PROMISSORY NOTES CONFIRMED HAVING GIVE N THE PROMISSORY NOTES TO SHRI BACHHUBHAI PATEL. DESPITE FILING CONFIRMATI ON BY SHRI AMIT H SHAH, THE ASSESSING OFFICER RESORTED TO THE ADDITION. THERE IS NOTHING TO SUGGEST THAT CASH TRANSACTIONS WERE INVOLVED IN THESE PROMISSORY NOTES. THESE WERE OBTAINED INCOME JUST TO ENSURE THE PAYMENTS IN REL ATION TO SHARE TRANSACTIONS CARRIED ON BEHALF OF THE PERSONS. HE ADDED THAT NE ITHER CASH NOR INTEREST IS MENTIONED ON THESE PROMISSORY NOTES NOR STATEMENT O F ANY PERSON IS REFERRED TO IN THE ASSESSMENT ORDER. ON THE OTHER HAND, LD. DR VEHEMENTLY ARGUED THAT THE ASSESSEE MUST HAVE PAID CASH ON THE STRENG TH OF THESE PROMISSORY NOTES. HE ADDED THAT TRANSACTIONS MENTIONED ON PAG E 363 OF THE PAPERBOOK WERE IN DIFFERENT HANDWRITING.TO A QUERY BY THE BE NCH, THE LD. DR DID NOT REFER US TO ANY SEIZED DOCUMENTS, EVIDENCING THA T PROMISSORY NOTES HAD INDEED BEEN EXECUTED OR THAT CASH HAD BEEN PAID BY THE ASSESSEE IN RELATION TO THESE PROMISSORY NOTES. 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THOUGH THE AO MADE THE ADDITION OF RS.5.50 LAKHS O N ACCOUNT OF AMOUNT MENTIONED IN THE AFORESAID PROMISSORY NOTES, HE HAS NOT BROUGHT ANY MATERIAL ON RECORD SUGGESTING THAT CASH HAD BEEN PAID BY THE ASSESSEE IN RELATION TO THE TRANSACTIONS AS CONTENDED BY THE LD. DR. IN TH E LIGHT OF CONFIRMATION OF IT(SS) A NO.54/AHD/2005 12 12 SHRI AMIT H SHAH THAT PROMISSORY NOTES WERE OBTAIN ED BY THE ASSESSEE SUB- BROKER FOR ENSURING PAYMENTS IN RELATION TO THE TRA NSACTIONS CARRIED ON BEHALF OF THE PERSONS MENTIONED IN THE PROMISSORY NOTES, W E ARE OF THE OPINION THAT ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. C IT(APPEALS) WAS WITHOUT ANY BASIS, THEREBEING BEING NO SEIZED MATERIAL OR THE RELATED EVIDENCE HAVING BEEN BROUGHT TO OUR NOTICE THAT THE CASH HAD INDE ED BEEN PAID BY THE ASSESSEE IN RELATION TO THE TRANSACTIONS MENTIONED IN THE AFORESAID PROMISSORY NOTES. THEREFORE, GROUND NO. IV OF THE APPEAL IS ALLOWED 18. GROUND NO. V RELATES TO ADDITION OF RS.6,00,0 00/- ON ACCOUNT OF UNEXPLAINED INVESTMENT. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT A SEIZED LOOSE PAPER FILE IN ANNEXURE A-3 PAGE NO.25 OF THE FILE CONTAINED A PAPER IN WHICH AT THE TOP 000 WAS MENTIONED AND THERE WERE SEVERAL NAMES UNDER THAT. THE TOTAL AMOUNT WRITTEN AGAINST THIS CAME TO RS.2,00,000/- AND BELOW THIS PAGE, 2 N AMES OF SHRI NYALCHAND B. SHAH & SHAH SATISHKUMAR N. ALONG WITH THE FIGURE OF RS.1,00,000/- & RS.3,00,000/- WERE ALSO MENTIONED. TO A QUERY BY TH E AO, THE ASSESSEE SUBMITTED THAT (I) THE PAPER WAS NOT IN HIS HAND WR ITING, (II) THE PARTY MIGHT HAVE GIVEN THE NAMES WITH THE AMOUNTS WRITTEN AGAIN ST THOSE NAMES TO CONVEY THE LIMIT OF THE SHARE TRANSACTIONS WHICH WE RE TO BE ADHERED TO . THE ASSESSEE, HOWEVER, ADMITTED KNOWING SHRI NYALCHAND B. SHAH & SHRI SATISHKUMAR N. SHAH, ALTHOUGH DENIED HAVING KNOWN A NY PERSON WITH THE SURNAME MEHTA AND THE NAMES GIVEN IN THE CHITS. IN THE LIGHT OF THESE SUBMISSIONS,THE A.O. ADDED THIS AMOUNT HOLDING AS U NDER :- 11.2 I HAVE CONSIDERED THE SUBMISSIONS OF ASSE SSEE, HOWEVER, I AM NOT ABLE TO AGREE WITH THE SAME IN VIEW OF THE FOLLOWIN G- I. THESE PAPERS HAVE BEEN FOUND AND SEIZED FROM THE PREMISES OF THE ASSESSEE AND THEREFORE IT IS FOR THE ASSESSEE TO EX PLAIN THE SAME PROPERLY. THE WAY THE REPLY WAS GIVEN BY THE ASSESS EE, IT IS CLEAR THAT THE ASSESSEE IS TRYING TO SIDETRACK THE ISSUE. II. IT IS NOTICED THAT 000 ARE MENTIONED AT THE T OP OF THE PAPER AND UNDER THIS FIGURES BY 40, 20 ETC. ARE WRITTEN. THIS MEANS THAT THERE IS SOME SIGNIFICANCE AND IT IS NOT MEANINGLESS WRIT ING. IT(SS) A NO.54/AHD/2005 13 13 III. THESE ARE APPARENTLY THE NOTING REGARDING MONE Y GIVEN TO THESE PEOPLE BY THE ASSESSEE AND THIS CAN BE THE LOGICAL EXPLANATION FOR THE SAME. IN VIEW OF THE ABOVE, I HAVE NO ALTERNATIVE, IN THE ABSENCE OF ANY REASONABLE AND LOGICAL EXPLANATION OF THE ASSESSEE, BUT TO CON SIDER THE SAME AS THE INVESTMENT OF THE ASSESSEE FOR WHICH NO EXPLANATION IS OFFERED. THIS AMOUNT IS THEREFORE ADDED TO THE UNDISCLOSED INCOME OF THE BLOCK PERIOD BEING UNEXPLAINED APPLICATION OF THE MONEY. 19. ON APPEAL, THE ASSESSEE REITERATED THEIR ARGUME NTS BEFORE THE AO AND POINTED OUT THAT THE PAPER SEIZED WAS NOT IN ASSESS EES HANDWRITING AND THAT IT MAY HAVE REPRESENTED DIRECTIONS BY CLIENTS FOR M AKING INVESTMENTS AND AGAIN BENEFIT OF TELESCOPING WAS SOUGHT. IN THE LIG HT OF THESE SUBMISSIONS, THE LD.CIT(A) HELD AS UNDER :- 7.2 I FIND, ON A CAREFUL CONSIDERATION OF SUBMISSI ONS THAT EVEN AS ON DATE APPELLANT HAS CHOSEN TO NOT EXPLAIN THE ENTRIES IN ANY MANNER NOR HAS HE BROUGHT ANY EVIDENCE FROM THESE PARTIES OF GIVING O F ANY SUCH DIRECTIONS. AS SUCH NO RELIEF IS POSSIBLE AND ALSO NO FURTHER TELE SCOPING BENEFIT IS AVAILABLE. FINDING OF A.O. IS UPHELD BUT THERE SHOULD BE NO GR IEVANCE TO THE APPELLANT AS NO ACTUAL ADDITION IS MADE. 20. . THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDING OF LD. CIT(APPEALS). THE LD. AUTHORIZED REPRESENTAT IVE ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE AMOUNT MENTIONED IN THE AFORESAID SEIZED PAPER IN THE NAME OF SHRI NAYALCHAND B SHAH AND SHRI SATI SHKUMAR N SHAH WAS FOR THE LIMITS UP TO WHICH INVESTMENT COULD BE MADE BY THE ASSESSEE ON BEHALF OF THE CLIENTS. THE TRANSACTIONS IN THE NAME OF PER SONS WERE DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT. THERE WAS NO CASH TRA NSACTION NOR ANY VERIFICATION WAS MADE BY THE ASSESSING OFFICER. WHI LE INVITING OUR ATTENTION TO PAGE 103 OF THE PAPER BOOK, THE LD. AR CONTENDED TH AT TRANSACTIONS IN THE NAME OF SHRI NAYALCHAND B SHAH AND SHRI SATISHKUMA R N SHAH WERE BELOW THE LIMITS MENTIONED IN THE SEIZED PAPERS. THE AO DID NOT RECORD ANY STATEMENT OF THE AFORESAID TWO PERSONS WHILE IN THE STATEMENT OF THE ASSESSEE NO SUCH REFERENCE TO CASH OR INTEREST WAS MADE. ON THE OTHER HAND, THE LD. DR CONTENDED THAT THE EXPLANATION NOW BEING GIVEN B Y THE ASSESSEE THAT THE AMOUNT MENTIONED IN THE SEIZED PAPERS WERE LESS THA N STIPULATED BY SHRI IT(SS) A NO.54/AHD/2005 14 14 NAYALCHAND B SHAH AND SHRI SATISHKUMAR N SHAH, WERE NOT SUPPORTED BY THE SEIZED PAPERS. WHILE INVITING OUR ATTENTION TO PAGE-363 OF THE PAPER BOOK, THE LD. DR CONTENDED THAT TRANSACTION IN THE NAME O F SHRI NAYALCHAND B SHAH AND SHRI SATISHKUMAR N SHAH WERE IN DIFFERENT HANDW RITING. SINCE THESE DOCUMENTS WERE SEIZED FROM THE POSSESSION OF THE AS SESSEE, THE ONUS LIED ON THE ASSESSEE TO EXPLAIN THE TRANSACTIONS WITH CO GENT EVIDENCE. THIS HAVING NOT BEEN DONE, THE LD. CIT(APPEALS) WAS JUST IFIED IN UPHOLDING THE ADDITION MADE BY THE AO. 21. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE AO MADE THE ADDITION ON THE GROUN D THAT THE ASSESSEE HAD GIVEN MONEY MENTIONED IN THE SEIZED DOCUMENTS TO TH OSE PERSONS. THOUGH THE ASSESSEE ADMITTED THAT SHRI NAYALCHAND B SHAH A ND SHRI SATISHKUMAR N SHAH WERE HIS CLIENTS, THESE PERSONS WERE NEVER PRO DUCED BEFORE THE AO . SINCE THE ASSESSEE DID NOT DISCHARGE THE ONUS LAID DOWN UPON HIM U/S.132(4A) OF THE ACT BEFORE THE AO AND THE LD. CI T(A) NOR EVEN BEFORE US, INTER ALIA, IN TERMS OF PROVISIONS OF SEC. 292C OF THE ACT, IN THE ABSENCE OF ANY MATERIAL BEFORE US , WE ARE NOT INCLINED TO TAKE A DIFFERENT VIEW IN THE MATTER AND THE LD. CIT(APPEALS) WAS JUSTIFIED IN UPHOLDIN G THE ADDITIONS. THUS, GROUND NO. V IS DISMISSED. 22. GROUND NO. VI RELATES TO ADDITION OF RS.2,84,17 5/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT ON THE BASIS OF LOOSE PAPER FILE IN ANNEXURE-A/3 SEIZED FROM THE RESIDENCE OF ASSESSEE. THE ASSESSIN G OFFICER NOTICED THAT THE SAID SEIZED DOCUMENTS UNDER THE HEADAAPAVANA MENTIONED THE DETAILS OF ITEMS OF PURCHASE OF RS.52,000/- BESIDES NAMES OF DEBTORS TOTALING TO RS.1 LAKH AND DETAILS OF AMOUNT OF RS.1,00,000/-,RS. 25, 000/- & RS.7,175/-.TO A QUERY BY THE ASSESSING OFFICER, THE ASSESSEE REPLIE D THAT THE SAID PAPER DID NOT BELONG TO THE ASSESSEE OR HIS FAMILY MEMBERS NO R IT WAS IN THEIR WRITING. THE ANNEXURE-A/3 CONTAINED BUNCH OF PAPERS FOUND FR OM THE SCRAP PAPERS, HAVING NO RELEVANCE TO THE ASSESSEE BUT KEPT AT HOM E. HOWEVER, THE AO DID NOT ACCEPT THESE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT THE PAPER HAVING BEEN SEIZED FROM THE POSSESSION OF THE ASSES SEE, THE ONUS WAS ON IT(SS) A NO.54/AHD/2005 15 15 THE ASSESSEE TO EXPLAIN THE TRANSACTIONS MENTIONED THEREIN. ACCORDINGLY, THE AO CONCLUDED IN THE FOLLOWING TERMS:- 12.2 I HAVE CONSIDERED THE SUBMISSION OF THE ASSES SEE, HOWEVER, I AM NOT ABLE TO AGREE WITH THE SAME IN VIEW OF THE FOLL OWING. I. AS THE PAPER HAS BEEN FOUND FROM THE RESIDENCE O F THE ASSESSEE, IT IS FOR THE ASSESSEE TO EXPLAIN THE SAM E. II. THE CONTENTION OF THE ASSESSEE IS ILLOGICAL THA T THE PAPER IS OF NO SIGNIFICANCE OR IMPORTANCE AND DOES NOT BELONGS TO HIM BUT KEPT AT HIS RESIDENCE SO THAT THE BACK SIDE OF THE PAPER CAN BE USED. III. THE MATTER WRITTEN ON THE PAPER IS VERY CLEAR AND NARRATES IN DETAILS THE AMOUNTS WHICH ARE TO BE TAKEN BY THE AS SESSEE OR WERE GIVEN BY THE ASSESSEE OR INVESTED BY THE ASSES SEE WERE DOES NOT SEEMS TO BE ANY AMBIGUITY ABOUT THE SAME. FOR THIS REASON I HAVE NO ALTERNATIVE, BUT TO TREAT THE AMOUNT AS UNEXPLAINED INCOME / INVESTMENT/ EXPENDITURE OF THE ASSESSEE, WHICH IS TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. THE DETAILS ARE AS UNDER:- RS. 52,000 - PURCHASE MADE RS.1,00,000 - INVESTMENTS MADE (1995-96) RS.1,00,000 - LOAN GIVEN TO PARAS RS. 25,000 - LAN GIVEN TO YOGESHBHAI RS. 7,175 - LOAN GIVEN TO ATULBHAI THESE MEANS AN ADDITION OF RS.2,84,175/- BEING UNEX PLAINED APPLICATION OF INCOME AND IT IS TO BE TREATED AS UN DISCLOSED INVESTMENT FOR THE BLOCK PERIOD. THIS AMOUNT IS THEREFORE ADDE D TO THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD. 23. ON APPEAL, THE ASSESSEE REITERATED THEIR CONTEN TIONS BEFORE THE ASSESSING OFFICER. ACCORDINGLY, LD. CIT(APPEALS) UP HELD THE ADDITION ON THE GROUND THAT NO EXPLANATION WAS GIVEN BY THE ASSESSE E FOR THE ENTRIES REPRESENTING LOANS GIVEN, PURCHASES MADE OR INVESTM ENTS MADE AS RECORDED ON THE SEIZED PAPERS. 24.. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD.CIT(APPEALS). THE LD. AUTHORIZED REPRESEN TATIVE WHILE INVITING OUR ATTENTION TO PAGE-362 , AS ALSO PAGE 48 AND 55 OF T HE PAPER BOOK CONTENDED THE TELESCOPING BENEFIT OF RS.1 LAKH ON ACCOUNT OF UNDISCLOSED INCOME IT(SS) A NO.54/AHD/2005 16 16 RETURNED BY THE ASSESSEE MAY BE GIVEN RESPECT OF T HE SAID ADDITION. ON THE OTHER HAND, LD. DR WHILE INVITING OUR ATTENTION TO THE PAPER BOOK FILED BY THE ASSESSEE CONTENDED THAT THE ASSESSEE DID NOT GIVE A NY EVIDENCE IN RESPECT OF THE TRANSACTIONS MENTIONED IN THE AFORESAID SEIZED DOCUMENTS AND THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN MAKING THE ADDITI ON. 25 WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE FACTS OF THE CASE. SINCE THE AFORESAID SEIZED DOCUMENTS FORMING THE BA SIS FOR THE ADDITION WERE FOUND IN THE POSSESSION OF THE ASSESSEE AND THE ASS ESSEE HAVING FAILED TO DISCHARGE THE ONUS LAID DOWN UPON HIM IN TERMS OF P ROVISIONS OF SEC. 132(4A) AND 292C OF THE ACT BEFORE THE AO/LD. CIT(A) AND E VEN BEFORE US, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDING OF THE LD . CIT(APPEALS). AS REGARDS BENEFIT OF TELESCOPING, THIS HAVING ALREADY BEEN AL LOWED BY THE LD. CIT(A) WHILE ADJUDICATING GROUND NO. II IN THE APPEAL BEF ORE HIM WHILE THERE IS NO MATERIAL BEFORE US NOR THE ASSESSEE ESTABLISHED NE XUS BETWEEN THE TWO ADDITIONS, PLEA ON BEHALF OF THE ASSESSEE IS NOT TE NABLE. UNLESS THERE WAS A CONNECTION BETWEEN THE AMOUNT REFLECTED IN THE RET URN AND THE AFORESAID ADDITION, IT WOULD BE DIFFICULT TO ACCORD SET OFF O F THE TWO FIGURES AS HELD IN THE DECISIONS IN THE CASE OF CIT V. DEVI PRASAD VISWANA TH PRASAD [1969] 72 ITR 194 (SC) AND CIT VS. JHAVERBHAI BIHARILAL & CO.160 ITR 634(PATNA) THUS, THIS PLEA OF THE ASSESSEE IS ALSO NOT TENABLE , NO NEXUS HAVING BEEN ESTABLISHED BETWEEN THE TWO FIGURES. THEREFORE, GRO UND NO.VI IS DISMISSED. 26. GROUND NO.VII RELATES TO LEVY OF INTEREST U/S.158BFA(1) OF THE AC T WHILE COMPUTING TAX PAYABLE ON THE BASIS OF UNDISCL OSED INCOME DETERMINED BY THE AO. THERE IS NO DISCUSSION ON THI S ASPECT IN THE ASSESSMENT ORDER. ON APPEAL, THE ASSESSEE DISPUTED THE LEVY OF SUCH INTEREST ON THE GROUND THAT SEIZED DOCUMENTS WERE M ADE AVAILABLE BELATEDLY THE L.. CIT(APPEALS) UPHELD THE LEVY OF INTEREST ON THE GROUND THAT LEVY OF SUCH INTEREST IS MANDATORY IN THE FOL LOWING TERMS: 9.1 I FIND THE APPELLANTS OWN NON COOPERATION AS NOTED BY A.O HAD LED TO A DELAY IN PROVIDING OF XEROX COPIES OF SEIZED MATERIALS, BUT STILL THERE WAS EVEN FURTHER DELAY A ND RETURN WAS FILED ONLY A FEW DAYS BEFORE THE LIMITATION FOR ASS ESSMENT EXPIRED. IT(SS) A NO.54/AHD/2005 17 17 ALSO CHARGE OF INTEREST BEING MANDATORY, IT IS UPHE LD. BUT AO IS DIRECTED TO RECALCULATE CHARGE ON REDUCED TOTAL INC OME FOR THE BLOCK PERIOD AFTER GIVING EFFECT TO THIS ORDER. 27. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A) THE LD. AR ON BEHALF OF THE ASSES SEE CONTENDED THAT RETURN DECLARED UNDISCLOSED INCOME OF RS. 5,24,095/-WAS FI LED ON 052-2004 AFTER SEIZED DOCUMENTS WERE MADE AVAILABLE IN SEPTEMBER, 2003. TO A QUERY BY BENCH AS TO WHEN SEIZED DOCUMENTS WERE MADE AVAILAB LE TO THE ASSESSEE IN THE MONTH OF SEPTEMBER, 2003 WHY THE ASSESSEE DELAY ED FILING OF RETURN, THE LD. AR CONTENDED THAT SINCE THE ASSESSEE WAS REQUIR ED TO GO THROUGH THESE SEIZED DOCUMENTS, IT TOOK TIME IN FILING THE RETU RN. INTER ALIA, THE LD. AR RELIED UPON FOLLOWING DECISIONS IN THEIR SUPPORT:- I) DCIT V. LATE RATANLAL JAIN (2001) 73 TTJ 364 (PAT) II) NARULA TRANSPORT CO. V. ACIT 127 TAXMAN 163 (AM ST) III) ARUN KUMAR BAGLA V. DCIT 93 TTJ 1027 (2005) 93 ITD 110 IV) JAI KUMA JAIN V. ACIT (2006) 99 TTJ 744 (JP) V) BACHUBHAI S ANTROLIA V. ACIT (2006) 103 TTJ 73 (RJ T) VI) ACIT V. M.M. SALES AGENCIES(2005) 97 TTJ 575 (JP) VII) MESCO AIRLINES LTD. V. ACIT (2008) 24 SOT 384 (DEL) 27.1 ON THE OTHER HAND, LD DR CONTENDED THAT SINC E THESE DOCUMENTS WERE SUPPLIED BY ASSESSING OFFICER BY SEPTEMBER, 20 03 WHILE RETURN WAS FILED ON 05-02-2004 AND THE ASSESSEE CONTINUED NON-CO-OPERATION DURING THE ASSESSMENT PROCEEDINGS, LEVY OF INTERES T ,BEING MANDATORY, WAS JUSTIFIED. 28. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH T HE FACTS OF THE CASE. THE ASSESSEE DISPUTED THE LEVY OF SUCH INTERE ST ON THE GROUND THAT SEIZED DOCUMENTS WERE MADE AVAILABLE ONLY IN SEPTEMBER, 2003. ON THE OTHER HAND, THE CONTENTION OF THE LD. DR IS THAT SUCH LEVY IS MANDATORY IN VIEW OF THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX. VS ANJUM M. H. GHASWALA AND OTHERS,252 ITR 1(SC), AFFIRMED BY HON'BLE APEX COURT IN THE CASE O F CIT V. HINDUSTAN BULK CARRIERS [2003] 259 ITR 449 (SC) AND IN THE CASE OF CIT V. SANT RAM MANGAT RAM JEWELLERS [2003] 264 ITR 564 (SC) ]. THE SAID DECISIONS WERE RENDERED IT(SS) A NO.54/AHD/2005 18 18 IN THE CONTEXT OF LEVY OF INTEREST U/S 234A,234B & 234C OF THE ACT. THE LEVY OF INTEREST FOR DELAY IN FILING OF RETURN HAS BEEN HEL D TO BE COMPENSATORY IN NATURE SINCE THE REVENUE IS DEPRIVED OF THE BENEFIT OF THE TAX FOR THE PERIOD DURING WHICH IT HAS REMAINED UNPAID. THE LEVY OF SUCH INTE REST IS NOT PENAL IN NATURE.[CENTRAL PROVINCES MANGANESE ORE CO. LIMITED .VS COMMISSIONER OF INCOME-TAX,160 ITR 961(SC)]. IN THE CASE UNDER CONS IDERATION, ISSUE IS REGARDING LEVY OF INTEREST U/S 158BFA(1) OF THE ACT DUE TO DELAY IN FILING THE RETURN. THE ASSESSEE COULD NOT FILE THE RETURN SINC E HE WAS NOT IN A POSITION TO DETERMINE UNDISCLOSED INCOME FOR WANT OF COPIES OF SEIZED DOCUMENTS AND HIS REQUEST FOR MAKING AVAILABLE COPIES OF SEIZED DOCUM ENTS WAS PENDING WITH THE AO. APPARENTLY, IT WAS BEYOND THE CONTROL OF THE ASSESSEE TO FILE H IS BLOCK RETURN WITHIN THE TIME-LIMIT ALLOWED BY THE AO, WI THOUT HAVING COPIES OF SEIZED DOCUMENTS. THE DEPARTMENT CANNOT ASK THE ASSESSEE T O DO SOMETHING IMPOSSIBLE, ESPECIALLY WHEN THE DEPARTMENT CONTRIB UTED TOWARDS THE DELAY IN FILING THE RETURN BY THE ASSESSEE. THE PATNA BENCH OF THE ITAT IN THE CASE OF ASSTT. CIT V. RAKESH KUMAR PANDEY [IT (SS) APPEAL N O. 58 (PAT.) OF 2003 DATED 30-1-2004] UPHELD THE DECISION OF THE LD. CI T(A),HOLDING THAT IN CASE THE DELAY IN FURNISHING BLOCK RETURN AFTER ISSUANCE OF NOTICE UNDER SECTION 158BC OF THE ACT WAS ON ACCOUNT OF DELAY IN GRANT O F PHOTOCOPIES OF THE SEIZED DOCUMENTS, THE DELAY IS NOT ATTRIBUTABLE TO THE ASSESSEE BUT TO THE DEPARTMENT AND THUS, INTEREST CHARGED UNDER SECTIO N 158BFA(1) OF THE ACT FOR THAT PERIOD IS NOT JUSTIFIED. SIMILAR VIEW HAS BEEN TAKEN BY THE DIFFERENT BENCHES OF THE ITAT IN THE CASE OF ARUN KUMAR BAGLA VS. DCIT,93 ITD 110(CALCUTTA E BENCH),DCIT VS. LATE RATANLAL JAIN ,73 TTJ364(PATNA) AND BACHUBHAI S ANTROLIA VS. ACIT,103 ITD 66(RAJKOT).CO MING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT IT WAS IMPOSSIBLE TO FI LE THE BLOCK RETURN WITHIN THE TIME STIPULATED UNDER SECTION 158BC OF THE ACT, AS THE ASSESSEE WAS NOT PROVIDED WITH THE COPIES OF THE SEIZED DOCUMENTS AN D WITHOUT WHICH IT WAS NOT POSSIBLE FOR THE ASSESSEE TO SUBMIT A TRUE AND CORR ECT RETURN FOR THE BLOCK PERIOD. IN THESE CIRCUMSTANCES ,THE ASSESSEE WAS N OT IN A POSITION TO PERFORM HIS DUTY UNDER THE LAW; RATHER IT WAS IMPOSSIBLE OF BEING PERFORMED AND THUS, THE PRINCIPLE OF 'LEX NON COGIT AD IMPOSSIBILIA' (T HE LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM) WAS FULLY AP PLICABLE. THE CHARGE OF INTEREST FOR DELAY IN FURNISHING THE BLOCK RETURN, IN THE CIRCUMSTANCES OF THE IT(SS) A NO.54/AHD/2005 19 19 CASE, AMOUNTS TO ACCUSING AN ASSESSEE OF A DEFAULT IN A DUTY, WHICH POSSIBLY SUCH ASSESSEE WAS NOT IN A POSITION TO PERFORM. 28.1 THE MAXIM ACTUS CURIAE NEMINEM GRAVABIT, I.E ., AN ACT OF COURT SHALL PREJUDICE NO MAN IS AN IMPORTANT ONE. THE MAXIM 'IS FOUNDED UPON JUSTICE AND GOOD SENSE; AND AFFORDS A SAFE AND CERTAIN GUID E FOR THE ADMINISTRATION OF THE LAW', SAID CRESSWELL J., IN FREEMAN V. TRANAH ( 12 CB 406). AN UNINTENTIONAL MISTAKE OF THE COURT WHICH MAY PREJUD ICE THE CAUSE OF ANY PARTY MUST AND ALONE COULD BE RECTIFIED. THE MAXIM OF EQU ITY, NAMELY, ACTUS CURIAE NEMINEM GRAVABIT-AN ACT OF COURT SHALL PREJUDICE NO MAN, IS FOUNDED UPON JUSTICE AND GOOD SENSE WHICH SERVES A SAFE AND CERT AIN GUIDE FOR THE ADMINISTRATION OF LAW. THE OTHER RELEVANT MAXIM IS, LEX NON COGIT AD IMPOSSIBILIA-THE LAW DOES NOT COMPEL A MAN TO DO WH AT HE CANNOT POSSIBLY PERFORM. THE LAW ITSELF AND ITS ADMINISTRATION IS U NDERSTOOD TO DISCLAIM AS IT DOES IN ITS GENERAL APHORISMS, ALL INTENTION OF COM PELLING IMPOSSIBILITIES, AND THE ADMINISTRATION OF LAW MUST ADOPT THAT GENERAL E XCEPTION IN THE CONSIDERATION OF PARTICULAR CASES, [SEE U.P.S.R.T.C . V. IMTIAZ HUSSAIN [2006] 1 SCC 380, SHAIKH SALIM HAJI ABDUL KHAYUMSAB V. KUM AR [2006] 1 SCC 46, MOHAMMED GAZI V. STATE OF M.P. [2000] 4 SCC 342 AND GURSHARAN SINGH V. NEW DELHI MUNICIPAL COMMITTEE [1996] 2 SCC 459]. 26.2 IN VIEW OF THE FOREGOING, WE ARE OF THE OPIN ION THAT ALTHOUGH THE PROVISIONS FOR CHARGING INTEREST UNDER S. 158BFA, I N CASE OF DELAYED FILING OF BLOCK RETURN, ARE MANDATORY, IT HAS TO BE CONSIDE RED AS TO WHETHER OR NOT DELAY IS ATTRIBUTABLE TO THE ASSESSEE. SINCE THERE IS NO FINDING ON THIS ASPECT IN THE IMPUGNED ORDERS, WE CONSIDER IT FAIR AND APP ROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE MATTER T O THE FILE OF THE AO WITH THE DIRECTIONS TO FIND OUT WHETHER OR NOT THE DELAY IN FILING OF RETURN COULD BE CONSIDERED TO BE ATTRIBUTABLE TO THE ASSESSEE. IF THE PERIOD OF DELAY IS NOT FOUND TO BE ATTRIBUTABLE TO THE ASSESSEE, THEN THE LEVY OF INTEREST UNDER SEC. 158BFA(1) OF THE ACT CANNOT BE CONSIDERED TO BE MAN DATORY. THEREFORE, THE AO SHALL IDENTIFY THE PERIOD FOR WHICH DELAY IS AT TRIBUTABLE TO THE ASSESSEE IN FILING THE RETURN AND THEREAFTER, RE-COMPUTE THE IN TEREST U/S.158BFA(1) OF THE IT(SS) A NO.54/AHD/2005 20 20 ACT IN ACCORDANCE WITH LAW. WITH THESE OBSERVATIONS , GROUND NO. VII IS DISPOSED OF. 27. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERM S OF THE RESIDUARY GROUND NO.VIII, ACCORDINGLY, THIS GROUND IS DISMISS ED.. 29. IN THE RESULT, APPEAL IS PARTLY ALLOWED, BUT F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 19TH MARCH,2010 SD/- SD/- (H.L. KARWA) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED :19/ 3 /2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRC LE-1(3) , AHMEDABAD . 3. THE CIT(APPEALS)- 1,AHMEDABAD 4. THE CIT CONCERNED. 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD