M.Natarajan, CHENNAI V. DCIT, CHENNAI

ITSSA 6/CHNY/2013

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0977 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 01-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PATHLAVETH PRIYA IRS
• Assessee Lawyers: T VASUDEVAN
• Keywords: Unexplained cash credit; Unexplained investment; Capital asset converted into stock in trade; Value adopted by valuation officer; Gift; Business income; Depreciation; Salary income; Document seized; Opportunity of being heard; Source of fund; Additional evidence; Corroborative evidences; Block assessment; Documents seized
• Section: 45(2); 40A(3); 143(3); 142(1); 68; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T(SS)A NO.06/MDS/2013 (BLOCK ASSESSMENT YEAR 1.4.1986 TO 24.09.1996) SHRI. M. NATARAJAN M/S. TAMILARASI PUBLICATION, NO.84, TTK ROAD, CHENNAI 600 018 [PAN: ABCPN 7785J] ( %& /APPELLANT) VS THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II(4), CHENNAI ( '(%& /RESPONDENT) / APPELLANT BY : SHRI. T. VASUDEVAN, ADVOCATE / RESPONDENT BY : SHRI. PATHLAVETH PRIYA, IRS, CIT /DATE OF HEARING : 07.08.2015 /DATE OF PRONOUNCEMENT : 30.09.2015 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE DCIT, CENTRAL CIRCLE II(4) (I/C), CHENNAI DATE D 28.02.2013. I.T(SS) A-06/MDS/2013 :- 2 -: 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- (1) THE LEARNED ASSESSING OFFICER ERRED IN TREATING 85% OF THE SUBSCRIBERS DEPOSITS OF E1,47,86,860/- AS THE ASSE SSEES UNDISCLOSED INCOME. (2) THE LEARNED ASSESSING OFFICER ERRED IN MAKING THE DISALLOWANCES/ADDITIONS WHILE COMPUTING THE TOTAL U NDISCLOSED INCOME OF THE BLOCK PERIOD. 1 PURCHASE OF NEWSPRINT FROM CAPITAL MARKET : 7,50,000/ - 2 ADVANCE TO VIVEK : 1,50,000/ - 3 FD WITH CANARA BANK : 1,65,000/ - 4 DIFFERENCE IN COST OF CONSTRUCTION : 5,19,000/ - 5 PERSONAL EXPENSES : 1,94,000/ - 6 HOUSEHOLD ARTICLES : 2,15,000/ - 7 DEPOSITS WITH CANARA BANK : 28,53,778/ - 8 INVESTMENT IN UTI : 1,00,000/ - 9 GIFT TO MASTER VIVEK/KRISHNAPRIYA : 1,20,000/ - 10 INVESTMENT IN TAMILARASI : 52,500/ - 11 LAND AT THANJAVUR : 2,13,000/ - 12 DEPOSITS IN TAMILARASI : 2,12,310/ - 13 INTEREST SUSPENSE ACCOUNT : 4,23,460/ - 14 UNEXPLAINED CREDITS A. CAPITAL ACCOUNT B. APNA FINANCE C. ASHOK MEHTA D. OMPRAKASH MEHTA E. CHANDRASEKHAR & B. GITANJALI : : : : : 10,00,000/- 7,80,000/- 5,76,000/- 4,16,000/- 6,50,000/- 15 CREDIT CARD PAYMENTS : 3.15,714/ - 16 UNPROVED EXPENDITURE A. ADVERTISEMENT B. ELECTRICITY CHARGES C. TRAVELLING AND CONVEYANCE D. CAR MAINTENANCE E. PRELIMINARY EXPENSES F. DEPRECIATION DISALLOWED G. DONATION H. DISALLOWANCE UNDER SEC. 40A(3) I. SCAN TECH U/S.41(1) : : : : : : : : : 1,60,055/- 33,794/- 1,20,000/- 37,471/- 8,947/- 4,60,000/- 1,500/- 1,33,365/- 67,055/- 17 UNEXPLAINED INVESTMENT IN JEWELLERY : 2,00,000/ - 18 FOREIGN TOUR EXPENSES : 31,42,000/ - (3) THE LEARNED ASSESSING OFFICER ERRED IN TREATING TH E AMOUNTS AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PE RIOD ASST. YEARS 1987-88 TO 1997-98 (UPTO 24.09.1996 ). I.T(SS) A-06/MDS/2013 :- 3 -: FURTHER THE LD. AUTHORISED REPRESENTATIVE FOR ASSES SEE FILED ADDITIONAL GROUNDS BEFORE US AND ALSO PETITION FOR ADMISSION O F ADDITIONAL GROUNDS AS UNDER :- ADDITIONAL GROUNDS OF APPEAL 1. THE ORDER OF THE OFFICER IS NOT IN ACCORDANCE WI TH THE PROVISIONS OF SEC.158BG OF THE ACT AND HENCE ADDITI ONS MADE THEREIN WITHOUT THE APPROVAL OF THE CONCERNED AUTHORITY IS INVALID AND UNSUSTAINABLE IN LAW. 2. THE OFFICER OUGHT TO HAVE APPRECIATED THAT ADDITION S CANNOT BE MADE IN THE BLOCK ASSESSMENT WITHOUT THE PRIOR APPROVAL U/S.158BG OF THE ACT. ADVOCATE F O R ASSESSEE PETITION FOR ADMISSION OF ADDITIONAL GROUNDS THE PETITIONER HAS FILED THE GROUNDS OF APPEAL IN W HICH GROUNDS WERE RAISED ON THE MERITS OF THE ADDITIONS MADE IN THE ASSESSMENT, APART FROM GENERAL GROUND ON LEGALI TY OF ADDITIONS. IN THE COURSE OF PREPARATION OF THE APPE AL, IT WAS NOTICED THAT A SPECIFIC GROUND ON THE ISSUE OF APPR OVAL U/S.158BG FOR THE VARIOUS ADDITIONS MADE IN THE ASS ESSMENT IS ALSO REQUIRED. IT IS SUBMITTED THAT THE SINCE THIS IS A LEGAL ISSU E AND GOES TO THE ROOT OF THE MATTER, THE PETITIONER MAY BE PERMI TTED TO RAISE THIS ISSUE BY WAY OF THE ADDITIONAL GROUNDS. IT IS SUBMITTED THAT THE FAILURE TO RAISE THIS ISSUE IN T HE ORIGINAL GROUNDS IS PURELY DUE TO INADVERTENCE AND UNINTENTI ONAL AND HENCE MAY KINDLY BE CONDONED. THE PETITIONER THEREFORE PRAYS THAT THE HON'BLE TRI BUNAL MAY BE PLEASED TO ADMIT THE ADDITIONAL GROUNDS, TREAT T HIS AS PART OF THE GROUNDS ALREADY FILED, DISPOSE IT OFF ON MER ITS AND THUS I.T(SS) A-06/MDS/2013 :- 4 -: RENDER JUSTICE. DATED THIS THE 27TH DAY OF MAY, 2015 AT CHENNAI. ADVOCATE F O R ASSESSEE 3. FIRST OF ALL, WE DEAL WITH THE ADDITIONAL GROUNDS R AISED BY THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE. AS SEEN FR OM THE ABOVE EXTRACT OF THE ADDITIONAL GROUNDS AND PETITION FOR ADMISSION O F ADDITIONAL GROUNDS, THESE ARE SIGNED BY THE ADVOCATE FOR THE ASSESSEE N AMELY SHRI. T. VASUDEVAN. NOW THE QUESTION BEFORE US, WHETHER THE ADDITIONAL GROUND FILED BY THE LD. AUTHORISED REPRESENTATIVE FOR ASSE SSEE IS MAINTAINABLE OR NOT. WHAT ARE THE PROCEDURES FOR FILING ADDITIONA L GROUND WAS DISCUSSED IN RULE 29 OF INCOME TAX RULES, WHICH IS AS FOLLOW S:- RULE 29:- THE PARTIES TO THE APPEAL SHALL NOT BE ENTITLED TO PRODUCE ADDITIONAL EVIDENCE EITHER ORAL OR DOCUMENTARY BEFO RE THE TRIBUNAL, BUT IF THE TRIBUNAL REQUIRES ANY DOCUMENT TO BE PRODUCED OR ANY WITNESS TO BE EXAMINED OR ANY AFFID AVIT TO BE FILED TO ENABLE IT TO PASS ORDERS OR FOR ANY OTHER SUBSTANTIAL CAUSE, OR , IF THE INCOME TAX AUTHORITI ES HAVE DECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPORTUN ITY TO THE ASSESSEE TO ADDUCE EVIDENCE EITHER ON POINTS SPECIFIED BY THEM OR NOT SPECIFIED BY THEM, THE TRI BUNAL FOR REASONS TO BE RECORDED, MAY ALLOW SUCH DOCUMENT TO BE PRODUCED OR WITNESS TO BE EXAMINED OR AFFIDAVIT TO BE FILED OR MAY ALLOW SUCH EVIDENCE TO BE ADDUCED. FURTHER, WHATEVER RULE IS APPLICABLE FOR FILING THE APPEAL BEFORE THE TRIBUNAL IS ALSO APPLICABLE FOR FILING ADDITIONAL GROUNDS. THUS SEC. 253(6) OF THE ACT I.T(SS) A-06/MDS/2013 :- 5 -: PRESCRIBES THAT APPEAL TO THE TRIBUNAL SHALL BE F ILED IN THE PRESCRIBED FORM AND SHALL BE VERIFIED IN THE PRESCRIBED MANNER AND SHALL, IN THE CASE OF AN APPEAL MADE, ON OR AFTER THE 1 ST DAY OF OCTOBER, 1998 IRRESPECTIVE OF THE DATE OF INITIATION OF THE ASSESSMENT PROCEEDING S RELATING THERETO, BE ACCOMPANIED BY A FEE OF :- A) WHERE THE TOTAL INCOME OF THE ASSESSEE AS COMPUT ED BY THE ASSESSING OFFICER, IN THE CASE TO WHICH THE APPEAL RELATES, IS ONE HUNDRED THOUSAND RUPEES OR LESS, FIVE HUNDRED RUPEE S, (B) WHERE THE TOTAL INCOME OF THE ASSESSEE, COMPUTE D AS AFORESAID, IN THE CASE TO WHICH THE APPEAL RELATES IS MORE THAN ONE HUNDRED THOUSAND RUPEES BUT NOT MORE THAN TWO H UNDRED THOUSAND RUPEES, ONE THOUSAND FIVE HUNDRED RUPEES, (C) WHERE THE TOTAL INCOME OF THE ASSESSEE, COMPUTE D AS AFORESAID, IN THE CASE TO WHICH THE APPEAL RELATES IS MORE THAN TWO HUNDRED THOUSAND RUPEES, ONE PER CENT. OF THE A SSESSED INCOME, SUBJECT TO A MAXIMUM OF TEN THOUSAND RUPEES : (D) WHERE THE SUBJECT MATTER OF AN APPEAL RELATES T O ANY MATTER, OTHER THAN THOSE SPECIFIED IN CLAUSES (A), (B) AND (C), FIVE HUNDRED RUPEES. PROVIDED THAT NO SUCH FEE SHALL BE PAYABLE IN THE C ASE OF AN APPEAL REFERRED TO IN SUB-SECTION (2) OR A MEMORANDUM OF C ROSS- OBJECTIONS REFERRED TO IN SUB-SECTION (4). FURTHER, INCOME TAX RULES, PRESCRIBES IN RULE 47 AS UNDER:- (1) AN APPEAL UNDER SUB-SECTION (1) OR SUB-SECTION (2) OF SECTION 253 TO THE APPELLATE TRIBUNAL SHALL BE MADE IN FORM NO.36( AND WHERE THE APPEAL IS MADE BY THE ASSESSEE , THE FORM OF APPEAL, THE GROUNDS OF APPEAL AND FOR THE F ORM OF VERIFICATION APPENDED THERETO SHALL BE SIGNED BY TH E PERSON SPECIFIED IN SUB-RULE(2) OF RULE 45). (2) A MEMORANDUM OF CROSS-OBJECTIONS UNDER SUB-SECTION (4) OF SECTION 253 TO THE APPELLATE TRIBUNAL SHALL BE MADE IN FORM NO.36A(AND WHERE THE MEMORANDUM OF CROSS-OBJECTION IS MADE BY THE ASSESSEE, THE FORM OF MEMORANDUM OF CRO SS- OBJECTIONS, THE GROUNDS OF CROSS-OBJECTIONS AND THE FORM OF I.T(SS) A-06/MDS/2013 :- 6 -: VERIFICATION APPENDED THERETO SHALL BE SIGNED BY TH E PERSON SPECIFIED IN SUB-RULE (2) OF RULE 45) THE RULE 45(2) READS AS UNDER:- THE FORM OF APPEAL PRESCRIBED BY SUB-RULE (1), THE GROUNDS OF APPEAL AND THE FORM OF VERIFICATION APPENDED THERETO RELATING TO AN ASSESSEE SHALL BE SIGNED AND VERIFIED BY THE PERSON WHO IS AUTHORISED TO SIGN THE RETURN OF INCOME UNDER SECTION 140 OF THE INCOME TAX ACT, 1961 AS APPLICABLE TO THE ASSESSEE. IN THIS CASE, AN ADDITIONAL GROUND FILED BY THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE AND IT IS NOT BY ASSESS EE HIMSELF. IN VIEW OF THE ABOVE PROVISIONS LAID DOWN BY THE LEGISLATURE, WHETHER THIS ADDITIONAL GROUND IS MAINTAINABLE OR NOT. WE CAME ACROSS JUDGM ENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF P. KUTTIKRISHNA NAIR VS. I.T.A.T., MADRAS AND ANOTHER, (34 ITR 540). IN THAT CASE, WHETHER THE TRIBUNAL CAN CONSIDER THE MISCELLANEOUS PETITION SUO MOTU AND THE TRIBUNA L, IN EXERCISE OF ITS OWN POWERS, CAN VERIFY THE MISTAKE WHETHER POINTED OUT BY THE D.R. OR ON ITS OWN. THIS DECISION OF THE JURISDICTIONAL HIGH COURT PERTAINS TO THE OLD INCOME-TAX ACT OF 1922 WHERE RECTIFICATION BY THE T RIBUNAL IS PROVIDED UNDER SECTION 35 OF THE OLD ACT AND IN SECTION 35 O F THE OLD ACT, IT WAS SPECIFICALLY PROVIDED THAT THE WORDS 'IN LIKE MANNE R' APPEARING IN SUB- SECTION (2) OF SECTION 35 IN RELATION TO SUB-SECTIO N (1) OF SECTION 35 ARE NOT SUFFICIENT TO APPREHEND THE AUTHORISED REPRESENTATI VE OF THE INCOME-TAX DEPARTMENT. IT IS NOTED THAT THE LD. AUTHORISED RE PRESENTATIVE FOR I.T(SS) A-06/MDS/2013 :- 7 -: ASSESSEE HAVE NO POWER TO SIGN ANY APPEALS, CO-OBJE CTIONS, GROUNDS AND ADDITIONAL GROUNDS BEFORE THE TRIBUNAL. HE IS AUTHO RIZED ONLY TO ARGUE THE CASE. HE IS NOT COMPETENT TO SIGN THE APPEALS, CO -OBJECTIONS, GROUNDS AND ADDITIONAL GROUNDS BEFORE THE TRIBUNAL AS PER T HE PROVISIONS OF THE ACT. AS PER SECTION 140 OF THE INCOME TAX ACT, THE FOLLO WING PERSON COULD SIGN THE APPEALS, CO-OBJECTIONS, GROUNDS AND ADDITIONAL GROUNDS BEFORE THE TRIBUNAL. A) IN THE CASE OF AN INDIVIDUAL, (I) BY THE INDIVIDUAL HIMSELF; (II) WHERE THE INDIVIDUAL IS ABSENT FROM INDIA, BY THE INDIVIDUAL CONCERNED OR BY SOME PERSON DULY AUTHORI SED BY HIM IN THIS BEHALF; AND WHERE THE INDIVIDUAL IS MEN TALLY INCAPACITATED FROM ATTENDING TO HIS AFFAIRS, BY HIS GUARDIAN OR BY ANY OTHER PERSON COMPETENT TO ACT ON HIS BEHA LF; (III) WHERE HE IS MENTALLY INCAPACITATED FROM ATTEN DING TO HIS AFFAIRS, BY HIS GUARDIAN OR ANY OTHER PERSON CO MPETENT TO ACT ON HIS BEHALF ; AND (IV) WHERE, FOR ANY OTHER REASON, IT IS NOT POSSIBL E FOR THE INDIVIDUAL TO VERIFY THE RETURN, BY ANY PERSON DULY AUTHORISED BY HIM IN THIS BEHALF : PROVIDED THAT IN A CASE REFERRED TO IN SUB-CLAUSE ( II) OR SUB- CLAUSE (IV), THE PERSON VERIFYING THE RETURN HOLDS A VALID POWER OF ATTORNEY FROM THE INDIVIDUAL TO DO SO, WHI CH SHALL BE ATTACHED TO THE RETURN ; (B) IN THE CASE OF A HINDU UNDIVIDED FAMILY, BY THE KARTA, AND, WHERE THE KARTA IS ABSENT FROM INDIA OR IS MENTALLY INCAPACITATED FROM ATTENDING TO HIS AFFAIRS, BY ANY OTHER ADULT M EMBER OF SUCH FAMILY; (C) IN THE CASE OF A COMPANY, BY THE MANAGING DIREC TOR THEREOF, OR WHERE FOR ANY UNAVOIDABLE REASON SUCH MANAGING DIRE CTOR IS NOT ABLE TO VERIFY THE RETURN, OR WHERE THERE IS NO MAN AGING DIRECTOR, BY ANY DIRECTOR THEREOF; I.T(SS) A-06/MDS/2013 :- 8 -: PROVIDED THAT WHERE THE COMPANY IS NOT RESIDENT IN INDIA, THE RETURN MAY BE VERIFIED BY A PERSON WHO HOLDS A VALI D POWER OF ATTORNEY FROM SUCH COMPANY TO DO SO, WHICH SHALL BE ATTACHED TO THE RETURN : PROVIDED FURTHER THAT(A) WHERE THE COMPANY IS BEING WOUND UP, WHETHER UNDER THE ORDERS OF A COURT OR OTHERWISE, O R WHERE ANY PERSON HAS BEEN APPOINTED AS THE RECEIVER OF ANY AS SETS OF THE COMPANY, THE RETURN SHALL BE VERIFIED BY THE LIQUID ATOR REFERRED TO IN SUB-SECTION (1) OF SECTION 178 ;(B) WHERE THE MA NAGEMENT OF THE COMPANY HAS BEEN TAKEN OVER BY THE CENTRAL GOVE RNMENT OR ANY STATE GOVERNMENT UNDER ANY LAW, THE RETURN OF T HE COMPANY SHALL BE VERIFIED BY THE PRINCIPAL OFFICER THEREOF ; (CC) IN THE CASE OF A FIRM, BY THE MANAGING PARTNER THEREOF, OR WHERE FOR ANY UNAVOIDABLE REASON SUCH MANAGING PART NER IS NOT ABLE TO VERIFY THE RETURN, OR WHERE THERE IS NO MAN AGING PARTNER AS SUCH, BY ANY PARTNER THEREOF, NOT BEING A MINOR ; (CD) IN THE CASE OF A LIMITED LIABILITY PARTNERSHIP , BY THE DESIGNATED PARTNER THEREOF, OR WHERE FOR ANY UNAVOI DABLE REASON SUCH DESIGNATED PARTNER IS NOT ABLE TO VERIFY THE R ETURN, OR WHERE THERE IS NO DESIGNATED PARTNER AS SUCH, BY ANY PART NER THEREOF. (D) IN THE CASE OF A LOCAL AUTHORITY, BY THE PRINCI PAL OFFICER THEREOF ; (DD) IN THE CASE OF A POLITICAL PARTY REFERRED TO I N SUB-SECTION (4B) OF SECTION 139, BY THE CHIEF EXECUTIVE OFFICER OF S UCH PARTY (WHETHER SUCH CHIEF EXECUTIVE OFFICER IS KNOWN AS S ECRETARY OR BY ANY OTHER DESIGNATION) ; (E) IN THE CASE OF ANY OTHER ASSOCIATION, BY ANY ME MBER OF THE ASSOCIATION OR THE PRINCIPAL OFFICER THEREOF; AND (F) IN THE CASE OF ANY OTHER PERSON, BY THAT PERSON OR BY SOME PERSON COMPETENT TO ACT ON HIS BEHALF. THE PROCEDURE FOR FILING OF ADDITIONAL GROUNDS IS A T PAR WITH THE FILING OF APPEAL AND THE RULES FRAMED UNDER ITAT RULES FOR FI LING OF APPEAL WILL ALSO APPLY TO ADDITIONAL GROUND ALSO. THE IT RULES, 196 2, PRESCRIBES AN APPEAL SHALL BE IN FORM NO.36 AND THE FORM GIVES THE REQUI RED VERIFICATION PORTION. IT IS ALSO PRESCRIBED IN RULE 47 THAT MEMORANDUM AN D THE GROUNDS OF I.T(SS) A-06/MDS/2013 :- 9 -: APPEAL AS ALSO THE VERIFICATION PORTION SHALL BE SI GNED BY THE ASSESSEE AS PRESCRIBED UNDER RULE 45(2). IF THE ENTIRE PROVIS IONS OF THE IT ACT, 1961, IT RULES, 1962 AND ITAT RULES, 1963, ARE READ TOGET HER IT CLEARLY EMERGES THAT AN APPLICATION FOR ADMISSION OF ADDITION GROUN DS IN THIS CASE CAN BE FILED EITHER BY THE ASSESSEE OR THE ASSESSING OFFIC ER, AS THE CASE MAY BE. IF ADDITIONAL GROUND FILED BEFORE THE TRIBUNAL BY THE ASSESSEE OR THE ASSESSING OFFICER, THE SAME CAN BE CONSIDERED, SUBJ ECT TO THE PROVISIONS OF LAW. THE ONLY INTERESTED PERSONS IN THE RESULT CAN FILE THE ADDITIONAL GROUND AND THE TRIBUNAL HAS TO ACT ON REPRESENTATIO N MADE TO IT BY THE ASSESSEE OR BY THE DEPARTMENT, I.E. THROUGH ASSESS ING OFFICER ONLY WHO IS PARTY TO THE APPEAL. THE ASSESSEE OR THE ASSESSIN G OFFICER HAS A RIGHT JUST LIKE A PARTY TO DRAW THE ATTENTION OF THE TRIBUNAL AND THEY HAVE A FURTHER RIGHT TO INSIST THAT THE TRIBUNAL SHALL EXAMINE THE ADDITIONAL GROUND. IN VIEW OF THE ABOVE LEGAL AND FACTUAL SITUATION, THE AUTHORISED REPRESENTATIVE WHETHER OF THE REVENUE OR OF THE ASS ESSEE STANDS IN THE SAME POSITION AS AN OUTSIDER. THE ONLY PERSON COMP ETENT TO SIGN AND VERIFY AN APPEAL SHOULD SIGN AND VERIFY LIKE MISCEL LANEOUS PETITION, STAY PETITION AND OTHERS LIKE ADDITIONAL GROUND. WHERE THE SIGNATURE AND VERIFICATION ON THE MEMORANDUM OF APPEAL WAS MADE B Y ANY AGENT OF THE ASSESSEE OR FOR THE REVENUE AND NOT BY THE ASSESSEE OR THE ASSESSING OFFICER, IT CANNOT BE HELD THAT THE APPEAL OR ANY A PPLICATION FILED IS A VALID I.T(SS) A-06/MDS/2013 :- 10 -: APPEAL OR APPLICATION. FURTHER, AS PER THE ITAT RU LES, 1963, FILING OF ADDITIONAL GROUNDS EQUATES THE PROCEDURE FOR FILING OF APPEAL WITH THAT OF THESE APPLICATIONS. AS FAR THE ASSESSEE IS CONCERN ED, THE APPEALS ARE TO BE SIGNED BY THE ASSESSEE AND NONE OTHER THAN THE ASSE SSEE. THIS ADDITIONAL GROUND OF THE ASSESSEE FILED BY THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE IS NOT MAINTAINABLE. HENCE, THE ADDITIONA L GROUND IS DISMISSED AS NON-MAINTAINABLE. 4. NOW COMING TO THE MAIN APPEAL, THE FACTS OF THE CA SE RELATING TO THE FIRST GROUND ARE THAT THE ASSESSEE IS THE PROPRIETO R OF M/S.TAMILARASI PUBLICATION. THE BUSINESS OF THIS PROPRIETORY CONC ERN IS PUBLISHING OF TWO MAGAZINES NAMELY, TAMILARASI, A WEEKLY AND PUTHIAPA RVAI, A FORTNIGHTLY. REGULAR BOOKS OF ACCOUNTS ARE MAINTAINED IN RESPECT OF THIS BUSINESS. THIS BUSINESS WAS COMMENCED IN THE ACCOUNTING PERIOD 199 2-93. PRIOR TO THAT UPTO 15.11.1988 HE WAS EMPLOYED WITH TAMIL NADU GOV ERNMENT AS DEPUTY DIRECTOR, INFORMATION DEPARTMENT. DURING THE PREVI OUS YEAR RELEVANT TO ASSESSMENT YEARS 1990-91 TO 1992-93. IT WAS STATED THAT HE DID NOT HAVE ANY MAJOR INCOME EARNING ACTIVITY. THERE WAS A SEARCH IN THE CASE OF THE ASSESSEE ON 24.09.96 U/S 132 OF THE INCOME-TAX ACT, 1961. HIS RESIDENCE IN KALASHETRA COLONY AND THE BUSINESS PRE MISES AT NO. 84, TTK ROAD, WERE SEARCHED. VARIOUS DOCUMENTS AS PER PANCHANAMA I.T(SS) A-06/MDS/2013 :- 11 -: DRAWN UP AT THE TIME OF SEARCH WERE SEIZED IN THE CO URSE OF THE SEARCH. A NOTICE U/S, 158BC DATED 04.11.96 WAS ISSUED TO THE ASSESSEE. SUBSEQUENTLY NOTICES WERE ISSUED U/S. 142(1) OF THE INCOME-TAX ACT CALLING FOR CERTAIN PARTICULARS. ON HIS REQUEST, TH E ASSESSEE WAS ALSO PERMITTED TO TAKE COPIES OF SEIZED MATERIALS. FINAL LY ON 05.09.97, THE ASSESSEE FILED HIS RETURN OF INCOME IN FORM NO. 2B IN COMPLIANCE WITH THE NOTICE U/S. 158 BC. IN THE RETURN HE ADMITTED A TOTAL UNDISCLOSED INCOME OF E3,80,000. SUBSEQUENTLY NOTICE U/S 143(2) WAS ISSUED ON 09.09.1997. IN RESPONSE TO THIS NOTICE U /S.143(2) AND OTHER NOTICES, ASSESSEE'S REPRESENTATIVE APPEARED AND FILED SOME O F THE DETAILS CALLED FOR. AFTER HEARING THE ASSESSEE'S REPRESENTATIVE AN D AFTER GOING THROUGH THE BOOKS OF ACCOUNT, SEIZED DOCUMENTS, STATEMENTS, LETTERS ETC. FILED BY THE ASSESSEE AND ON BEHALF OF THE ASSESSEE AND A LSO RELYING ON THE SPECIAL AUDIT REPORT U/S 142(2A) FURNISHED BY SHRI. K. VENKATARAMAN, FCA OF M/S. MURALI AND ASSOCIATES, TH E TOTAL INCOME FOR THE A.YS.1987-88 TO 1997-98 (UP TO 24.09.1996) COMP RISED IN THE BLOCK PERIOD WAS COMPUTED VIDE ORDER U/S 143(3) R.W. SECTIONS 158BC, PASSED ON 13/03/1998, DETERMINING THE TOTAL UNDISCL OSED INCOME AT E3,77,41,760/-. 4.1 AGAINST THIS ORDER, THE ASSESSEE PREFERRED AN APPEA L TO THE ITAT AND THE ITAT VIDE ITS ORDER DATED 17.06.2005 IN IT(SS)A I.T(SS) A-06/MDS/2013 :- 12 -: NO.91/MDS/98 DISMISSED ASSESSEE'S APPEAL, DECIDING ALL THE ISSU ES IN FAVOUR OF REVENUE. AGAINST THE ITAT ORDER, THE ASSE SSEE PREFERRED FURTHER APPEAL TO THE HIGH COURT AND THE HIGH COURT VIDE ITS ORDER IN TAX CASE APPEAL NO.1172 OF 2005 DATED 19.07.2012 HELD AS UNDER : (I) ON THE MAJOR ADDITION OF PURCHASE OF NEWSPRINTS AMOUNTING, TO E.2,35,30,767 THE HIGH COURT HELD AS UNDER:- 'ASSESSMENT IN RESPECT OF GENUINENESS OF THE NEWSPRINT PURCHASES HAS TO BE EXCLUDED FROM THE BLOCK ASSESSMENT PROCEDURE AND IT CAN ONLY BE CONSIDERED UNDER REGULAR ASSESSMENT.' . (II) IN RESPECT OF OTHER ISSUES, THE HIGH COURT HELD AS UNDER:- 'WE REMAND THE MATTER BACK TO THE ASSESSING OFFICER FOR DECIDING THE MATTER AFRESH AFTER GRANTING SUFFI CIENT OPPORTUNITY TO THE ASSESSEE TO PLACE HIS CASE. THE ASSESSEE SHALL EXTEND FULL COOPERATION SO AS TO ENA BLE THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT WITHIN A PERIOD OF THREE MONTHS FROM THE DATE OF RE CEIPT OF COPY OF THIS ORDER.' 4.2 THIS ORDER OF THE HIGH COURT WAS RECEIVED ON 3 0.11.2012 BY THE ASSESSING OFFICER AND AS PER THE DIRECTIONS OF THE HIGH COURT, FRESH OPPORTUNITY WAS GIVEN TO THE ASSESSEE BY THE ASSESSING OFFICER TO FILE HIS SUBMISSIONS, WITH REFERENCE TO THE BLOCK ASSESSMENT ORDER PASSED ON 13.03.1998, VIDE LETTER DT. 04.12.2012. T HE LETTER WAS ALSO SERVED ON THE ASSESSEE ON 07.12.2012. THE CASE WAS POSTED FOR I.T(SS) A-06/MDS/2013 :- 13 -: HEARING ON DIFFERENT DATES BY ASSESSING OFFICER AND THE ASSESSEE'S REPRESENTATIVE APPEARED BEFORE ASSESSING OFFICER ON THE FOLLOWING DATES VIZ. 14.12.2012, 07.01.2013, 28.01.2013, 05.02 .2013 AND 19.02.2013. DURING THE COURSE OF HEARING BEFORE THE ASSESSING OFFICER THE ASSESSEE FURNISHED VARIOUS DETAILS ON T HE ISSUE OF SUBSCRIBERS' DEPOSITS DISCUSSED ELABORATELY IN PARA 4 OF THE BLOCK ASSESSMENT ORDER DATED 13.03.1998. THE MAJOR ISSUE OF GENUINENESS OF PURCHASE OF NEWSPRINT WAS ANYWAY DEL ETED BY THE HIGH COURT AS ELABORATED ABOVE. IN RESPECT OF OTHER I SSUES FORMING PART OF THE BLOCK ASSESSMENT ORDER, DURING THE COU RSE OF HEARING BEFORE THE ASSESSING OFFICER THE ASSESSEE INFORMED T HAT SINCE THEY ARE ALL MINOR ISSUES AND THAT DUE TO LAPSE OF TIME, THERE ARE NO FURTHER DETAILS AVAILABLE. NO WRITTEN SUBMISSIONS WERE ALSO MADE IN RESPECT OF THOSE ISSUES BEFORE ASSESSING OFFICER. ACCORDINGLY, CONSIDERING THE SUBMISSIONS MADE DURING THE ASSESSM ENT PROCEEDINGS, THE ASSESSMENT ORDER WAS PASSED BY ASS ESSING OFFICER WITHIN THE THREE MONTHS TIME LIMIT FROM THE DATE OF RECEIPT OF THE ORDER BY ASSESSING OFFICER AS DIRECTED BY THE HIGH COURT. DURING THE COURSE OF THIS HIGH COURT REMAND PROCEEDINGS BE FORE ASSESSING OFFICER, THE ASSESSEE FURNISHED FURTHER DETAILS ONL Y ON THE ISSUE OF SUBSCRIBERS DEPOSIT. I.T(SS) A-06/MDS/2013 :- 14 -: 4.3 THE ASSESSEE COMMENCED HIS BUSINESS OF TAMILARA SI PUBLICATION DURING THE PREVIOUS YEAR RELEVANT TO AS SESSMENT YEAR 1993-94. DURING THE PREVIOUS YEAR RELEVANT TO ASSE SSMENT YEAR 1994-95 THERE WAS CREDIT BALANCE IN THE SUBSCRIPTION DEPOSIT ACCOUNT OF E70,32,500/-, WHICH WENT UP TO E1,47,86,860/- FO R THE YEAR ENDING 31.03.1995. IT WAS SET TO BE RECEIVED FROM 6 000 PARTIES RANGING FROM E1,500/- TO E2,500/- FOR WHICH ONE OF T HE MAGAZINES WERE GIVEN FREE OF COST AS ALONG AS DEPOSIT WAS NOT WITHDRAWN, WHO HAS GIVEN E2,500/- TWO MAGAZINES WERE GIVEN FREE OF COST. THIS DEPOSITS WILL NOT BEAR ANY INTERESTED AND THE ASSE SSEE WAS ASKED TO EXPLAIN FROM WHOM IT HAD RECEIVED THE DEPOSITS. FU RTHER, THERE WAS REFERENCE TO THE SPECIAL AUDIT U/S.142(2A) OF THE A CT, AND THE REPORT OF THE SPECIAL AUDITOR IS AS UNDER:- 3.1 THESE DEPOSITS SAID TO HAVE BEEN RECEIVED FROM VARIOUS VASAGAR VATTAMS (APPEARS TO BE KEPT ON A L OCATION WISE (DISTRICT WISE) BASIS. EXCEPT AN ADDITIONAL P LACE VIZ MAYILADUTHURAI ) FOR AMOUNTS TOTALLING E1,47,86,860 /- HAD BEEN RECEIVED IN CASH EXCEPT THE FOLLOWING FOR AMOU NTS TOTALLING E3,50,000/- STATED TO BE RECEIVED BY MEAN S OF DEMANDS DRAFTS. --------------------------------------------------- ----------------- DATE AMOUNT VASANGAR VATTAM REF --------------------------------------------------- ----------------- 23.10.94 50,000/- TIRUNELVELI 23.09.94 1,00,000/- MADURAI 23.12.94 2,00,000/- MADURAI ------------------------------------------------- ------------------------ RELEVANT BANK STATEMENT EVIDENCING THE ABOVE HAD BE EN CHECKED AND VERIFIED. I.T(SS) A-06/MDS/2013 :- 15 -: 3.2 NO BASIC RECORDS SUCH AS (I) INDIVIDUAL RECEIP TS (II) DEPOSITORS REGISTERS (VASAGAR VATTAM) ARE MADE AVAILABLE FOR THE PURPOSE OF CHECKING AND VERIFICATION AND THE PUBLICATION DID N OT APPEAR TO HAVE MAINTAINED ANY DEPOSITOR-WISE SUMMARY AT ALL. 3.3 THIS DEPOSIT CONTROL ACCOUNT IN GENERAL LEDGE H AS NOT BEEN IN AGREEMENT WITH THE BREAKUP OF LOCATION WISE ACCOUNT S MAINTAINED RELATING TO THE FINANCIAL YEARS 1994-95 AND 1995-96, THE DET AILS ARE AS UNDER:- VASAGAR VATTAM DEPOSIT YEAR ENDED ACCOUNTS IN AS PER CONTROL A/C. AS PER LOCATION GENERAL LEDGER GENERAL LEDGER 31.03.1995 1,47,86,860/- 1,45,74,550/- 31.03.1996 1,47,91,310/- 1,30,10,000/- 3.4 FURTHER FOLLOWING AMOUNTS TOTALING E17,74,500/- STATED TO HVE BEEN REFUNDED IN CASH DID NOT HAVE ANY BASIS/CORRES PONDENCE /RECORDS VASAGAR VATTAM REF. AMOUNT REFUNDED E VV2 77,500/- (29.4.95) 1,57,500/- (18.05.95) 1,40,000/- (21.01.96) 3,75,000 VV3 2,10,000/- (13.4.95) 2,10,000 VV4 1,57,700/- (13.4.95) 1,62,500/- (02.6.95) 30,000/- (13.12.95) 3,50,200 VV5 500/- (01.04.95) 500 VV10 3,30,000/-(2.5.95) 1,42,500/- (29.7.95) 1,66,300/-(24.2.96) 2,00,000/-(24.2.96) 8,38,800 -------------------- 17,74,500 -------------------- 3.5 WE UNDERSTAND THAT THESE SUBSCRIBERS (WHO HAVE PAID DEPOSITS FROM VARIOUS LOCATIONS) ARE SENT WITH THE WEEKLY/FORTNIGHTLY COPIES OF TAMILARASI PUTHIAPARV AI BY I.T(SS) A-06/MDS/2013 :- 16 -: MEANS OF LORRIES/ITS OWN VAN ETC. HOWEVER, THIS STA TEMENT COULD NOT BE CORROBORATED BY ANY DOCUMENTS AND NO S UCH DESPATCHES APPEAR TO HAVE TAKEN PLACE AT ALL. THIS IS IN VIEW OF OUR BELOW MENTIONED FINDINGS IN RESPECT OF DESPATCHES OF BOTH TAMILARASI ( WEEKLY) AND PUTHIAP ARVAI (FORTNIGHTLY) TO THE AGENTS/SUBSCRIBERS. KEPT AND MAINTAINED BY THE PUBLICATIONS AS TO DATE. I). THE PUBLICATION HAS BEEN DISPATCHING THE MAGAZINES BOTH BY RAIL AND BOOK POST (DULY EVIDENCED BY THE DESPATCH REGISTER/RAILWAY ACKNOWLEDGEMENTS /POSTAL EXPENSES FOR BOOK POST ETC. II). NONE OF THE VASAGAR VATTAMS APPEAR TO HAVE BEEN INCLUDED IN THE DESPATCH SUMMARY/REGISTER IN EVIDENCE OF DESPATCHES. III). IN THE ABSENCE OF ANY SUPPORTING EVIDENCES FOR DESPATCHES TO VASAGAR VATTAMS (THOUGH STATED TO HAVE BEEN SENT BY LORRIES/THEIR OWN VANS). WE COULD NOT CHECK/VERIFY SUCH DESPATCHES AT ALL. IV). FURTHER, THE MANUSCRIPT COPY (MANUSCRIPT COPY-PLEASE SEE EXHIBIT 11- KEPT HEREWITH OF THE DETAILS OF DESPATCHES FOR NOVEMBER 1997 ALSO DID NOT EVIDENCE THE DESPATCHES TO THE SUBSCRIBERS NASAGAR VATTAMS. 3.6 TO SUMMARISE THE PUBLICATION DID NOT APPEAR TO HAVE FOLLOWED ANY OF THE INTERNAL CONTROL ASPECTS/ MAINTENANCE 6F BASIC RECORDS (AS MENTIONED BELOW) IN ORDER TO CHECK/ASCERTAIN THE GENUINENESS AND VERACITY OF THE SCHEME. 3.6.1 NO RECEIPTS APPEARED TO HAVE BEEN ISSUED TO A NY DEPOSITOR, WHICH SHOULD FORM THE BASIS OF THIS TYPE OF I.T(SS) A-06/MDS/2013 :- 17 -: LONG TERM DEPOSIT. 3.6.2 NO DEPOSITOR-WISE RECORDS ARE MAINTAINED WHIC H FORMS THE VITAL DOCUMENT IN THIS KIND OF LONG-TERM COMMITMENTS (MAGAZINES TO BE SENT FREE OF COST). 3.6.3 NO. DOCUMENTARY EVIDENCE OR OTHERWISE WERE MAINTAINED FOR EVIDENCING THE DESPATCHES BEING MAD E TO THE VAGAGAR VATTAMS. 3.6.4 SUBSTANTIALLY, THE ENTIRE AMOUNT OF DEPOSIT HAS BEEN ACCOUNTED FOR AS RECEIVED IN CASH WHICH DO NOT CONF IRM TO ANY INTERNAL CONTROL NORMS IN SPITE OF THE FACT THA T THE SUBSCRIBERS BEING LOCATED ALL AROUND THE STATE.' 4.4 THE REMARKS QUOTED ABOVE ARE QUITE REVEALING. THE ENTIRE DEPOSITS RUNNING TO MORE THAN E147 LAKHS ARE STATED TO BE RECEIVED IN CASH EXCEPT FOR A NEGLIGIBLE AMOUNT OF E3.5 LAKHS W HICH IS STATED TO BE RECEIVED BY WAY OF DRAFTS FROM THIRUNELVELI AND MAD URAI. THIS IS STRANGE CONSIDERING THE FACT THAT THESE DEPOSITS ARE STATED TO BE RECEIVED FROM ALL OVER TAMIL NADU. THERE ARE NO CORRESPONDENCES F ROM THE SUBSCRIBERS OR THEIR AGENTS FORWARDING THE MONEY TO THE ASSESSEE. IT IS ALSO STRANGE THAT NONE OF THESE DEPOSITORS INSISTED ON A RECEIPT. THE AUDITOR HAS ALSO REPORTED THAT IN RESPECT OF THE DE POSIT NO INDIVIDUAL RECEIPTS HAVE BEEN ISSUED. AS A MATTER OF FACT, NOT ONLY NO INDIVIDUAL RECEIPTS ARE ISSUED BUT NOT EVEN COLLECTIVE RECEIPT S HAVE BEEN ISSUED TO ANYBODY. THE AUDITOR HAS REPORTED THAT THE DEPOSITO RS' REGISTERS WERE NOT MADE AVAILABLE FOR THE PURPOSE OF CHECKING AND VERIFICATION. I.T(SS) A-06/MDS/2013 :- 18 -: ASSESSEE HAS NOT MAINTAINED ANY DEPOSITOR WISE SUMM ARY ALSO. IT IS REPORTED THAT E17,74,500/- HAS BEEN REFUNDED TO VARIOUS DEPOSITORS. THE NAMES AND ADDRESSES OF THE PERSONS TO WHOM IT I S RETURNED IS NOT FURNISHED. RECEIPTS FOR THE REFUNDS STATED TO HAVE BEEN ISSUED HAVE ALSO NOT BEEN PRODUCED EITHER TO THE AUDITOR OF BEF ORE THE AO. IN SHORT ASSESSEE DOES NOT KNOW THE NAMES OR HAVE A RECORD O F THE PERSONS TO WHOM THE DEPOSITS HAVE BEEN RETURNED. THERE IS NO C ORRESPONDENCE ALSO IN THIS REGARD IN THE NATURE OF REQUEST FROM T HE DEPOSITORS FOR RETURN OF THE DEPOSITS. 4.5 THE INFORMATION COLLECTED BY THE AUDITOR WITH REGAR D TO THE DISPATCH OF THE MAGAZINES TO THESE ALLEGED DEPOSITORS IS ALSO QUITE REVEALING. THE SPECIAL AUDITOR HAS REPORTED THAT TH ERE IS ABSOLUTELY NO EVIDENCE FOR DISPATCH OF THE MAGAZINES TO THESE A LLEGED SUBSCRIBERS. HE HAS ENCLOSED THE MANUSCRIPT COPY OF THE DETAILS OF THE DESPATCHES EFFECTED IN NOVEMBER, 1997. AS PER T HIS MANUSCRIPT. 6027 COPIES HAVE BEEN DISPATCHED BUT NONE OF IT IS FOR THE ALLEGED DEPOSITORS. THE DETAILS OF DESPATCHES FURNISHED BY THE SPECIAL AUDITOR ARE AS UNDER: CENTRAL : 1853 EGMORE : 1785 CITY AGENT : 750 H.B. STALL : 215 POSTAL : 377 I.T(SS) A-06/MDS/2013 :- 19 -: FREE COPIES : 100 OFFICE COPIES : 50 SUBSCRIPTION & : 896/- EXTRA ---------------- 6027/- ---------------- 1). SINCE HOW LONG ARE YOU A READER/SUBSCRIBER TO T HE ABOVE MAGAZINE. 2. WHETHER YOU ARE SUBSCRIBING TO BOTH THE MAGAZINE S. 3). MODE OF SUBSCRIPTION BY YOU THAT IS TO SAY WHET HER MONTHLY, ANNUAL OR ANY OTHER MODE 4). IF THE SUBSCRIPTION IS FOR MORE THAN A YEAR, TH E PERIOD FOR WHICH YOU PAID THE SAME AND THE AMOUNT OF SUBSCRIPTION. 5). WHETHER THE SUBSCRIPTION PAID BY YOU WAS BY CAS H OR BY WAY OF CHEQUE/DRAFTS ETC. 6). WHETHER YOU . PAID THE SUBSCRIPTION DIRECTLY TO THE MAGAZINE OFFICE IN CHENNAI OR TO ANY LOCAL AGENT. I F SO, THE NAME AND ADDRESS OF SUCH LOCAL AGENT. 7). WHETHER THE MAGAZINES ARE SUPPLIED TO YOU REGUL ARLY. 8). THE MODE BY WHICH YOU GET THE MAGAZINES IE., DIRECTLY FROM THE MAGAZINE OFFICE BY POST. COURIER SERVICE ETC. OR THROUGH LOCAL AGENTS. 9). WHO CANVASSED FOR THIS SUBSCRIPTION. 4.6 A NUMBER OF THESE LETTERS SENT TO THE ADDRESSES FUR NISHED BY THE ASSESSEE WERE RETURNED UNSERVED BY THE POSTAL AUTHO RITIES FOR THE REASON THAT THERE IS NO SUCH ADDRESSEE. A LIST OF SUCH ADD RESSES WAS ALSO ENCLOSED AS ANNEXURE-I TO THE BLOCK ASSESSMENT ORDER. IT IS A I.T(SS) A-06/MDS/2013 :- 20 -: CLEAR INDICATION THAT THE CLAIM MADE BY THE ASSESSE E THAT THE DEPOSITS HAVE BEEN MADE BY SUCH PERSONS IS INCORRECT. A NUMB ER OF PERSONS WHO RESPONDED TO THE LETTERS REPLIED CATEGORICALLY THAT THEY ARE NEITHER READERS NOR SUBSCRIBERS TO THE MAGAZINES. SOME OF TH EM EXPRESSED THAT THEY HAVE NOT EVEN HEARD OF THE NAMES OF THE M AGAZINES. IT IS REDUNDANT TO STATE THAT THEY DENIED HAVING MADE ANY DEPOSIT WITH THE ASSESSEE FOR SUPPLY OF THE MAGAZINES. SOME OF THOSE WHO REPLIED STATED THAT THEY HAD BEEN ASKED FOR THEIR NAMES AND ADDRESSES BY SOMEBODY WHO PROMISED THAT THEY WOULD GET THESE TWO MAGAZINES FROM THE NEXT MONTH FREE. THEY HAVE ADDED THAT THEY RECEIVED NO MAGAZINES TILL DATE AND ALSO DENIED HAVING MADE ANY DEPOSIT. WHAT IS TO BE REMEMBERED I N THIS CONTEXT IS THAT, THESE LETTERS WERE SPONTANEOUS AND WITHOUT PE RSUASION FROM ANY BODY. (A LIST OF SUCH NAMES WAS ALSO ENCLOSED AS AN NEXURE-II TO THE ORIGINAL BLOCK ASSESSMENT ORDER.) BASED ON THE ABOV E, THE ASSESSING OFFICER OBSERVED THAT THE CLAIM MADE BY THE ASSESS EE REGARDING RECEIPT OF DEPOSITS IS FALSE. 4.7 AT THE TIME OF BLOCK ASSESSMENT PROCEEDINGS, F ROM A LARGE NUMBER OF PERSONS, IDENTICAL PRINTED LETTERS IN IDE NTICALLY ADDRESSED ENVELOPS WERE RECEIVED IN ASSESSING OFFICER IN VARI OUS NAMES CONFIRMING THE DEPOSIT OF E. 2500/- MADE BY THEM TO THE ASSESSEE FOR I.T(SS) A-06/MDS/2013 :- 21 -: THE SUPPLY OF THE 2 MAGAZINES. OBVIOUSLY, THESE LETT ERS WERE FILED AT THE INSTANCE OF THE ASSESSEE, SINCE NO LETTERS HAD BEEN ADDRESSED TO THESE PERSONS BY THIS OFFICE. AGAIN OUT OF THESE LE TTERS A FEW AT RANDOM WERE CHOSEN BY THE THEN ASSESSING OFFICER FOR MAKIN G ENQUIRIES. SINCE THE LETTERS HAVE COME FROM VARIOUS PLACES, LIKE MAD URAI, DINDUGAL, VELLORE, PALANI ETC. THE LOCAL OFFICERS OF INCOME T AX DEPARTMENT IN THESE PLACES WERE REQUESTED TO MAKE ENQUIRIES ABOUT THE GENUINENESS OF THE LETTERS AND ALSO TO ASCERTAIN WHETHER SUCH P ERSONS WERE IN RECEIPT OF THE MAGAZINES. HERE ALSO, THE ENQUIRIES R EVEALED THAT THESE PERSONS IN WHOSE NAMES LETTERS WERE RECEIVED ARE NO T REAL AND GENUINE DEPOSITORS. EVERYONE OF THEM WHO WERE CONTA CTED BY THE OFFICERS OF THE DEPARTMENT DENIED HAVING MADE ANY D EPOSIT. THEY ALSO DENIED KNOWLEDGE ABOUT THE MAGAZINE. ENQUIRIES MADE AT NAMAKKAL REVEALED THAT MR. CHANDRASEKAR WHO IS A LECTURER IN RAMAKRISHNA NALLAMMAI INDUSTRIAL TRAINING INSTITUTE, HAD OBTAIN ED LOT OF LETTERS SIGNED BY STUDENTS OF FIRST YEAR DEGREE COURSES IN HIS COLLEGE. BUT NONE OF THE STUDENTS HAD MADE ANY DEPOSIT. THE NAME S AND ADDRESSES OF THE PERSONS WITH WHOM SUCH ENQUIRIES W ERE MADE, ALONG WITH THE BRIEF OUTCOME OF SUCH ENQUIRIES WERE ALSO ENCLOSED AS ANNEXURE III TO THE BLOCK ASSESSMENT ORDER . 4.8 VIDE HIS LETTER DATED 13.02.98, THE RESULT OF THESE INVESTIGATION I.T(SS) A-06/MDS/2013 :- 22 -: INCLUDING ANNEXURE I TO III MENTIONED ABOVE, WERE M ADE AVAILABLE TO THE ASSESSEE FOR HIS COMMENTS BY THE THEN AO. THE ASSESSEE WAS SPECIFICALLY ASKED BY ASSESSING OFFICER TO PRODUCE NECESSARY PROOF ABOUT THE GENUINENESS OF THE SCHEME. INTER ALIA, HE WAS ASKED TO FURNISH DETAILS AND PROOF REGARDING A) PRINTING OF SUFFICIENT NUMBER OF COPIES OF THE MAGAZINES. B) SATISFACTORY PROOF REGARDING DISTRIBUTION AND DISPA TCH OF THE MAGAZINES TO THE ALLEGED DEPOSITORS. C) DETAILS OF THE EXPENSES DEBITED FOR THE DISTRIBUTIO N OF MAGAZINES TO THESE DEPOSIT HOLDERS. D) COPIES OF INDIVIDUAL RECEIPTS ISSUED TO THESE DEPOS IT HOLDERS. E) COMPLETE LIST OF PERSONS TO WHOM THE DEPOSITS HAVE BEEN RETURNED. THE MODE OF SUCH REPAYMENT. F) RECEIPTS OBTAINED FROM THESE ALLEGED DEPOSITORS TO WHOM REFUNDS HAVE BEEN ISSUED AND. G) BASIC RECORDS, IF ANY, TO PROVE PRINTING, DISPATCH AND DISTRIBUTION OF THE MAGAZINES. 4.9 AS PER THIS LETTER DATED 13.12.1998, IT WAS PROPOSE D BY ASSESSING OFFICER THAT IF NO OBJECTIONS ARE RECEIVE D FROM THE ASSESSEE ON OR BEFORE 26.02.98, IT WOULD BE PRESUMED THAT HE HAS NO OBJECTIONS TO THE PROPOSAL TO TREAT THE AMOUNT OF 1,47,86,860/- AS THE UNDISCLOSED INCOME. 4.10 IN RESPONSE THE ASSESSEE FILED HIS SUBMISS IONS BEFORE I.T(SS) A-06/MDS/2013 :- 23 -: ASSESSING OFFICER ON 10-03-98 RAISING OBJECTIONS LI KE THE LETTERS WOULD HAVE RETURNED BECAUSE THE DEPOSITORS HAVE CHA NGED THEIR ADDRESS, THE DEPOSITORS WERE NOT ASKED SPECIFICALLY AS TO WHETHER THEY HAD DEPOSITED 2500, THE STATEMENTS GIVEN WERE NOT VOLUNTARY ETC. ALL THESE OBJECTIONS WERE COUNTERED IN DETAIL IN THE ASST. ORDER DT. 13-03-1998 BY THE THEN AO, IN PARA NOS.4.11 TO 4.24, THE ASSESSEE'S DUBIOUS METHOD OF INTRODUCING CREDIT AND ALSO CONSIDERING THAT THERE IS NO MATERIAL CHANGE IN THE ASSESSEE'S CONTENTIONS NOW. 4.11. DURING THE COURSE OF REMAND PROCEEDINGS BEFORE ASSE SSING OFFICER THE ASSESSEE REQUESTED FOR THE COPY OF COMP LETE LIST OF ANNEXURES I, II AND III ANNEXED TO THE EARLIER ASSE SSMENT ORDER DATED 13.03.1998 AND ALSO SEIZED MATERIALS SPECIFICALLY T HE SEIZED DOCUMENT NO. RLN/ B & 0/17 & 18 CONTAINING THE STEREO TYPED LETTERS CONFIRMING THE DEPOSIT. ANNEXURE I CONTAINS NAME OF THE PERSON S WHERE LETTERS WERE RETURNED 'UNSERVED'. ANNEXURE II CONTAINS NAMES OF THE PERSONS WHERE DEPOSITS WERE DENIED. ANNEXURE III CONTAINS A MIX OF BOTH TYPES, NAMELY WHERE THE LETTERS COULD NOT BE SERVED AND WHERE THE DEPOSITS WERE DENIED. IN THE REMAND PROCEEDINGS, TH E ASSESSEE CONTENDED THAT LETTERS SENT TO MANY CASES WERE RETU RNED 'UNSERVED' BECAUSE OF INCOMPLETE ADDRESS AND ALSO DUE TO THE FACT THAT MANY OF I.T(SS) A-06/MDS/2013 :- 24 -: THEM HAVE SHIFTED THEIR RESIDENCES. DURING THE COUR SE OF HEARINGS ON DIFFERENT DATES BEFORE ASSESSING OFFICER, THE ASSES SEE FILED THE PRESENT ADDRESS OF SOME OF THESE PERSONS. HE ALSO FILED AFF IDAVITS FROM THESE PERSONS TO THE EFFECT THAT THEY HAVE INDEED SUBSCRI BED TO THE TWO MAGAZINES BY DEPOSITING LIFE-TERM MEMBERSHIP FEE OF E2,500/-. THE ASSESSEE ALSO FILED THE ID. PROOF AND THE ADDRESS P ROOF OF THESE PERSONS. AFTER THESE WERE FILED BY THE ASSESSEE, VI DE OUR LETTER DATED 12.02.2013 BEFORE ASSESSING OFFICER, THE ASSESSEE W AS DIRECTED TO PRODUCE ALL THE PERSONS MENTIONED IN HIS EARLIER LE TTERS, FOR PERSONAL EXAMINATION BY THE UNDERSIGNED ON 19.02.2013. THE A SSESSEE ALSO PRODUCED 9 PERSONS. THE DETAILS OF THE PERSONS PROD UCED ARE AS UNDER: PERSONS PRODUCED BY THE ASSESSEE ON 19.02.2013 NAME OF THE ASSESSEE LIST IN ASST. ORDER REF. NO IN LIST WHETHER INCOME TAX ASSESSEE PAN RETURN COPY BANK STATEMENT COPY MR. SAKTHIVELRAJA ANNX. III NO SUCH PERSON IN THE GIVEN ADDRESS 6 YES NO NOT PRODUCED T. CHANDRAN ANNEX. III DENIED THE DEPOSIT 9 NO NO NOT PRODUCED S. CHINNAN ANNEX. I NOTICE RETURNED 36 NO NO NOT PRODUCED I.T(SS) A-06/MDS/2013 :- 25 -: UNSERVED R. VENKATRAMAN ANNEX. III DENIED THE DEPOSIT 11 NO NO NOT PRODUCED G.SIDDESARAN ANNEX. I NOTICE RETURNED UNSERVED 38 NO NO NOT PRODUCED R. GOVINDRAJAN ANNEX. I NOTICE RETURNED UNSERVED 16 NO NO NOT PRODUCED G. SELVAM ANNEX. II DENIED THE DEPOSITED 2 NO NO NOT PRODUCED K. KUMARAVEL ANNEX. I NOTICE RETURNED UNSERVED 15 NO NO NOT PRODUCED SMT. RAJATHY ANNEX. I NOTICE RETURNED UNSERVED 26 NO NO NOT PRODUCED 4.12 OUT OF THE ABOVE LIST OF PERSONS, 6 OF THEM CONFIRM ED THAT THEY HAVE INDEED SUBSCRIBED TO THE MAGAZINES. 2 PERSONS, NAMELY SHRI.T.CHANDRAN AND SHRI R.VENKATARAMAN CONFIRMED T HEIR EARLIER STATEMENT WHEREIN THEY HAD DENIED HAVING MADE ANY S UCH DEPOSIT. ONE PERSON BY NAME SRI. GOVINDARAJ, KURUGULAM, MELAPPTI , TANJORE DISTRICT, HAS GIVEN A BLATANTLY WRONG STATEMENT ANSWERING IN TWO DIFFERENT PLACES THAT HE IS RECEIVING THE MAGAZINE FROM 1954 ONWARDS WHEREAS THE PUBLICATION ITSELF IS STARTED ONLY IN 1992 OR SO. T HEREFORE HIS STATEMENT IS IGNORED AS NOT RELIABLE EVEN THOUGH HE INSISTED THA T HE IS RECEIVING THE I.T(SS) A-06/MDS/2013 :- 26 -: MAGAZINE. THUS, OUT OF TOTAL 9 PERSONS PRODUCED BY THE ASSESSEE, ONLY 6 HAVE SATISFACTORILY CONFIRMED THAT THEY HAVE INDEED SUBSCRIBED TO THE MAGAZINES. TO SUMMARIZE, OUT OF ABOUT 100 PERSONS T O WHOM LETTERS WERE ISSUED AS BROUGHT OUT IN THE ORIGINAL ASSESSME NT ORDER, AT THAT TIME ONLY 8 PERSONS HAVE CONFIRMED HAVING DEPOSITED THE MONEY AS SEEN FROM IN PARA 4.20 OF THE ASSESSMENT ORDER DATED 1303.199 8. NOW, DURING THE REMAND PROCEEDINGS, A FURTHER 6 PERSONS ONLY HAVE C ONFIRMED HAVING DEPOSITED THE MONEY. IN RESPECT OF OTHERS THE ASSES SEE WAS NEITHER ABLE TO GET THE CURRENT ADDRESS NOR HE COULD PRODUCE THE M FOR PERSONAL VERIFICATION. IN FACT THE ASSESSEE VIDE HIS LETTER DT. 19/02/2013 HAS ADMITTED THAT HE HAS TAKEN COPY OF APPLICATION OF S UBSCRIBER DEPOSIT IN RESPECT OF MORE THAN 1000 PERSONS FROM THE SEIZED M ATERIALS. IN SPITE OF SUCH A HUGE NUMBER, THE ASSESSEE COULD PRODUCE FOR PERSONAL VERIFICATION ONLY 9 OF THEM AND THE CURRENT ADDRESS WAS FURNISHE D ONLY IN RESPECT OF THESE MINISCULE NUMBER OF PERSONS ONLY. THE WHOLE E XERCISE SHOWS THAT EVEN THOUGH ENOUGH TIME WAS GIVEN TO THE ASSESSEE T O PRODUCE ANYONE OUT OF THE 6000 ODD PERSONS FOR PERSONAL EXAMINATIO N, THE GROUND REALITY IS THAT THE ASSESSEE COULD PRODUCE ONLY 9 PERSONS N OW OUT OF WHICH ALSO ONLY 6 HAVE CONFIRMED. UNDER THE CIRCUMSTANCES, AFTER GOING THROUGH THE RECORDS, ON EXAMINING THE DETAILS FILED BY THE ASSE SSEE AND ALSO TAKING INTO ACCOUNT THE ELABORATE FINDINGS OF THE EARLIER ASSESSING OFFICER, AS I.T(SS) A-06/MDS/2013 :- 27 -: EXTRACTED IN PARAGRAPH 4(K) ABOVE, THE ASSESSING OF FICER WAS SATISFIED THAT THE ASSESSEE IS NOT ABLE TO GIVE PROPER EXPLAN ATION IN RESPECT OF DEPOSITS LYING IN HIS ACCOUNT AND THE SOURCE FOR TH E SAME ARE NOT SATISFACTORILY EXPLAINED AN SINCE THE PROVISIONS OF SEC. 68 IS VERY CLEAR THAT IT IS FOR THE ASSESSEE TO OFFER SATISFACTORY EXPLAN ATION IN RESPECT OF CREDITS FOUND IN BOOKS AND AS ELABORATED ABOVE SINCE THE AS SESSEE COULD NOT OFFICER SATISFACTORY EXPLANATION THE AMOUNTS CREDIT ED REPRESENT ASSESSEES OWN UNDISCLOSED INCOME ASSESSABLE U/S.68. HOWEVER, CONSIDERING THAT ABOUT 14 OF THEM HAVE AFFIRMED THE DEPOSITS AND TAK ING INTO ACCOUNT THE OTHER FACTORS, IT WOULD BE REASONABLE TO TREAT A PO RTION OF THESE DEPOSITS AS GENUINE. GOING BY THE SMALL NO. OF PERSONS WHO HAVE CONFIRMED THE DEPOSITS TO THE SATISFACTION OF THE DEPARTMENT, IT WAS CONSIDERED THAT IT WOULD BE FAIR AND PROPER TO TREAT 15% OF THE TOTAL DEPOSITS AS GENUINE AND ACCORDINGLY OUT OF THE TOTAL AMOUNT OF E1,47,86,860 /- AND AMOUNT OF E22,18,029/- IS TREATED AS GENUINE AND THE BALANCE AMOUNT OF E1,25,68,831/- IS TREATED AS UNEXPLAINED CREDIT U/S .68. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAVING ALLOWED 15% OF SUBSCRIBER DEPOSITS AS GENUINE, IT WAS IMPLICIT THAT HE HAD ACCEPTED THE BONAFIDE OF THE S UBSCRIBER DEPOSIT SCHEME OF I.T(SS) A-06/MDS/2013 :- 28 -: THE ASSESSEE. IT LOGICALLY FOLLOWS THAT THERE WAS NO CASE FOR THE ASSESSING OFFICER TO TREAT THE BALANCE OF THE DEPOSITS AS NOT GENUINE. THE ONLY REASON SEEMS TO BE THAT IN THE RANDOM ENQUIRY CONDUCED, SO ME OF THE ADDRESSES RETURNED UNSERVED SINCE THOSE PERSONS HAD SHIFTED THEIR RESIDENCE OR SOME HAD NOT GIVEN ACCEPTED TO HAVE PARTICIPATED IN THE DEPO SIT SCHEME OF ASSESSEE. IT WAS SUBMITTED THAT THE ENQUIRY LAUNCHED AFTER A LAP SE OF TIME WOULD NORMALLY BE AT VARIANCE SINCE MANY DISTANCING THEMSELVES. F URTHER, THE DETAILS OF RESPONSES WERE ALSO NOT AVAILABLE TO ASSESSEE TO CO UNTER THE NEGATIVE STATEMENT OF THOSE PERSONS. THE ASSESSEE HAD IN F ACT FILED CONFIRMATION LETTERS AS TO PARTICIPATION IN THE DEPOSIT SCHEME FROM SUBS TANTIAL NUMBER OF PERSONS AND THE ASSESSING OFFICER HAD NOT GIVEN DUE COGNIZ ANCE TO THEM. THERE WAS NO BASIS FOR THE ASSESSING OFFICER TO REJECT THE OV ERWHELMING EVIDENCE PRODUCED BY THE ASSESSEE AS TO THE PUBLICATION OF THE MAGAZI NES AND DISTRIBUTION TO ITS SUBSCRIBERS AND MERELY RELY ON SOME UNSERVED LETTER S AND SUBJECT TO ADDITION THE MAJORITY OF THE SUBSCRIBER DEPOSITS COLLECTED A S UNEXPLAINED. THE VERY FACT THAT THE ASSESSING OFFICER ALLOWED 15% OF DEPOSITS ONLY REVEALS THAT THE REJECTION OF THE REMAINING DEPOSITS ON AN ESTIMATE D BASIS WAS ONLY ARBITRARY AND BASED ON SURMISES AND CONJECTURES. IN A BLOCK ASSESSMENT, THE ASSESSING OFFICER SHOULD HAVE SEEN THAT THERE IS NO SCOPE OR ESTIMATED ADDITIONS AND DISALLOWANCES. HAVING ACCEPTED THE SCHEME IN IT WAS PERTINENT TO NOTE THAT THE TRIBUNAL IN ITA NOS.1130/MDS/2003, 1151-1154/MDS/20 02, DATED 30.11.2007 I.T(SS) A-06/MDS/2013 :- 29 -: HAD CONSIDERED A SIMILAR DEPOSIT IN A GROUP CASE AN D ACCEPTED THE CLAIM OF THE ASSESSEE. HENCE, IT WAS SUBMITTED THAT THERE WAS N O BASIS FOR THE ASSESSING OFFICER TO HOLD THAT 85% OF THE SUBSCRIBERS DEPOSIT S WERE NOT GENUINE ON AN ESTIMATED BASIS AND HAVING ACCEPTED THE BONAFIDE OF THE DEPOSIT SCHEME RUN BY THE ASSESSEE, NO PART OF THE AMOUNT OF DEPOSITS CAN BE SUBJECT TO ADDITION AS UNEXPLAINED INCOME IN THE HANDS OF THE ASSESSEE. 5.1. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE ASSESSING OFFICER. 5.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE SAID TO HAVE COLLECTED THE IMPUGNED DEPOSITS FROM 6000 PERSONS. THE ASSESSING OFFICER GAVE AMPLE OF OPPOR TUNITY TO GET CONFIRMATION FROM THE PARTIES FROM WHOM THE DEPOSITS WERE COLLEC TED. OUT OF 6000 PERSONS ONLY 14 OF THEM HAVE GIVEN CONFIRMATION SAYING THAT THEY HAVE GIVEN DEPOSIT. HENCE THE ASSESSING OFFICER CONSIDERED 15% DEPOSIT AS GENUINE AND THE BALANCE HE CONSIDERED AS UNEXPLAINED INCOME OF THE ASSESSEE. BEFORE US, THE ASSESSEE SUBMITTED THAT THE ISSUE HAS TO BE DECIDED IN FAVOR OF THE ASSESSEE IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE O F M /S. JAYA PUBLICATIONS VIDE ORDER DATED 30.11.2007 IN ITA NO.1130/MDS/2003 AND OTHERS. IN THAT CASE THE TRIBUNAL IN PARA 5 OBSERVED AS UNDER:- 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE R ECORDS AVAILABLE WITH US INCLUDING THE WRITTEN SUBMISSIONS FILED BY THE LEARNED I.T(SS) A-06/MDS/2013 :- 30 -: COUNSEL FOR THE ASSESSEE. WE HAVE GONE THROUGH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). FROM THE IMPUGNED ORDER IT IS NOT CLEAR AS TO ON WHAT BASIS, THE FIRS T APPELLATE AUTHORITY WORKED OUT THE PERCENTAGE 1.5% TO GIVE RE LIEF TO THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE ASSESSE E HS CLAIMED TO HAVE COLLECTED SCHEME DEPOSITS FROM 2250 PERSONS AN D FILED COMPLETE DETAILS OF THE NAMES AND ADDRESS OF THE D EPOSITORS. WE FIND THAT THAT THE COMMISSIONER OF INCOME TAX (A PPEALS) ACCEPTED THESE DEPOSITS AS GENUINE BECAUSE THE STAT EMENTS WERE OBTAINED BEHIND THE BACK OF THE ASSESSEE WITH OUT GIVING AN OPPORTUNITY OF BEING HEARD. THEREFORE, WE ARE OF T HE VIEW THAT THE MATTER REQUIRES INVESTIGATION AT THE LEVEL OF T HE ASSESSING OFFICER AND WE ARE NOT COMMENTING ON THE MERITS OF THE CASE. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO DECIDED THE ISS UE IN DISPUTE AFTER RE-INVESTIGATION IN RESPECT OF 41 PERSONS ONL Y AND AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD. ACCO RDINGLY, THE ASSESEES APPEALS ON THIS ISSUE IS ALLOWED FOR STAT ISTICAL PURPOSES. SINCE, W HAVE SET ASIDE IDENTICAL ISSUE IN THE ASSESSEES APPEAL. THE REVENUES APPEALS ARE DISMI SSED . IN THE PRESENT CASE, THE ASSESSING OFFICER HAD GIVE N AMPLE OF OPPORTUNITY AT VARIOUS LEVEL TO PROVE THE GENUINENESS OF THE DEPOS ITS. INSPITE OF THIS, THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE DEP OSITS. IN OUR OPINION, NO USEFUL PURPOSE WILL BE SERVED BY REMITTING THE ISS UE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. HENCE, THE ORDER OF THE ASSESSING OFFICER IS CONFIRMED. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 6. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO DISALLOWANCE MADE BY THE ASSESSING OFFICER TREAT ING PURCHASE OF NEWSPRINT FROM CAPITAL MARKET AS UNDISCLOSED INCOME OF THE AS SESSEE . I.T(SS) A-06/MDS/2013 :- 31 -: 6.1 THE FACTS OF THE ASSESSEE ARE THAT F OR THE YEAR ENDED 31.3.1995, THE ASESSEES ACCOUNT FOR PURCHASE OF NEWSPRINT DEBITED THE ACCOUNT OF CAPITAL MARKET WITH A SUM OF E7.5 LAKHS ON 21.7.1994. IN THE SUBSEQUEN T YEAR, ON 26.08.1995, THE ASSESSEES ACCOUNT FOR PURCHASE OF NEWSPRINT HAS B EEN CREDITED BY (E7,50,000/-) TOWARDS NEWS PRINT RETURN BY CAPITAL MARKET. ENQUI RIES WERE MADE WITH CAPITAL MARKET REGARDING THIS TRANSACTION. IN THEIR LETTER DATED 25.2.98 M/S. CAPITAL MARKET WHILE CONFIRMING THE DELIVERY OF NEWSPRINT TO THE ASSESSE E ON 21.7.94 DENIED HAVING RECEIVED BACK THE NEWS PRINT ON 26.8.95. AS PER ENTRIES MADE IN THEIR BOOKS OF ACCOUNTS OF THE ASSESSEE ALONG WITH THEIR LETTER M/S. CAPITAL MARKET HAD SENT TO THE ASSESSING OFFICER COPIES OF THEIR LETTERS DATED 17.11.95, 15.12.95 AN D 28.2.96 ADDRESSED TO TAMILARAS I PUBLICATION. OF THESE LETTERS THE LAST TWO WERE ADD RESSED TO THE ASSESSEE PERSONALLY. IN THESE LETTERS M/S. CAPITAL MARKET HAS MADE CLEAR TH AT THEY HAVE NOT RECEIVED HACK THE NEWS PRINT OR ITS CASH EQUIVALENT OF E7.5 LAKHS. IN THEIR LETTER DATED 25.02.1998 THEY HAVE CATEGORICALLY STATED THAT THEY HAVE NEVER GOT BACK EITHER 24.5TONS OF NEWS PRINT GIVEN TO TAMILARASI PUBLICATION FOR PERFORMING CERT AIN JOB WORK OR THE COST OF THE NEWS PRINT TILL THE DATE OF THE LETTER. ALL THIS INFORM ATION COLLECTED FROM M/S. CAPITAL MARKET ALONG WITH A COPY OF THE LETTER DATED 25.2.98 WAS FURNISHED TO THE ASSESSEE BY ASSESSING OFFICER VIDE LETTER DATED 27.2.98. IN T HIS LETTER, IT WAS PROPOSED THAT SINCE M/S. CAPITAL MARKET HAS DENOTED HAVING RECEIVED BACK THE STOCK THE ENTRY PASSED BY THE ASSESSEE IN HIS BOOKS ON 26.8.95 IT APPEARS THAT TH E ASSESSEE DID NOT PROPOSE TO RETURN THE STOCK BUT AT THE SAME TIME CREATE AN IMPRESSION THAT IT HAS BEEN RETURNED. SINCE I.T(SS) A-06/MDS/2013 :- 32 -: THE STOCK APPEARED TO HAVE BEEN USED BY THE ASSESS EE HIMSELF, OR IT IS LYING IN STOCK WITH HIM, IT IS EVIDENT THAT HE HAD DERIVED BENEFIT FROM THIS BUSINESS. SUCH BENEFIT IS TAXABLE WITHIN THE MEANING OF SECTION 28 (IV) OF IF NOT U/S. 28(IV) OF THE ACT. IT IS LIABLE TO BE ASSESSED U/S 41 (1) ON ACCOUNT OF THE CESSAT ION OF LIABILITY AS EVIDENCED BY THE ASSESSEE OUGHT TO HAVE FILED HIS OBJECTION TO THIS PROPOSAL ON OR BEFORE 3.3.98. SUBSEQUENTLY TIME WAS GRANTED TILL 6.3.98 ON ASSESS EE'S REPRESENTATIVE REQUEST IN THIS REGARD BY ASSESSING OFFICER. THE RESPONSE TO THE LE TTER DATED 27.2.98 ON THIS ISSUE. FINALLY CAME IN A LETTER DTD.07.8.98 TILED ON 09.3. 98. IN THIS LETTER HE HAS STATED THAT THE PAPER WAS RETURNED TO M/S. CAPITAL MARKET THROUGH ONE MR. L. RAJU.L-33. RAJ B HAWAN COLONY, CHECK POST,CHENNAI-42. HE HAS ALSO ENCLOSED COPY OF LETTER DATED 26.8.95 PURPORTED TO BE FROM THE SAID MR. RAJU. HOWEVER IT IS STATED THAT MR.RAJU IS NOT AUTHORIZED BY M/S. CAPITAL MARKET TO RECEIVE THE STOCK ON THEIR BEHALF AND HENCE THE CLAIM MADE BY THE ASSESSEE REGARDING THE RETURN OF STOCK CANNOT BE ACCEPTED AS GENUINE. FURTHER, THE ASSESSEE HAS ALSO NOT PROVED WITH REFERENCE HIS STOCK RECORDS AND OTHER RECORDS (SUCH AS INCIDENTAL EXPENDITURE I NCURRED ETC.) THAT THE STOCK WAS IN FACT RETURNED. ON THE MERIT OF THE ADDITION U/S.28( IV) ASSESSEE'S REPRESENTATIVE STATED THAT BENEFIT OR PERQUISITE PRESUPPOSES CONSENSUS AD IDEM OR IDENTITY OF MIND BETWEEN THE PARTIES AND SINCE THIS IS NOT THERE IN THE GIVE N SITUATION ASSESSEE IS NOT LIABLE FOR BEING TAXED ON THIS. THE ASSESSING OFFICER DO NOT AGREE WITH THIS CONTENTION. FOR TAXING A BENEFIT IT WAS NOT NECESSARY TO HAVE AN AG REEMENT BETWEEN THE PARTIES. WHAT IS TO BE SEEN IS WHETHER THE ASSESSEE HAS RECEIVED A BENEFIT WITH OR WITHOUT THE I.T(SS) A-06/MDS/2013 :- 33 -: AGREEMENT OR CONSENT FROM THE OTHER PARTY. IN THIS CASE IF THE CLAIM REGARDING RETURN OF THE PAPERS IS NOT CORRECT, THE ASSESSEE HAS GAINED A BENEFIT U/S.28(IV). THE AO HAVE CONCLUDED THAT THE CLAIM OF RETURN OF PAPER IN MY V IEW IS NOT GENUINE. HENCE THE SUM OF E7,50,000/- IS TO BE AND IS BEING INCLUDED AS ASSESSEES UNDISCLOSED INCOME CONTAINED IN SECTION 158 B(B), EVEN THOUGH THE RETURN OF INCOME WAS NOT DUE AS ON THE DATE OF SEARCH FOR THIS ASSESSMENT YEAR, NEVER THE LESS THE. INCOME OF E7,50,000/- IS ASSESSABLE AS UNDISCLOSED INCOME. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 6.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASS ESSEE SUBMITTED THAT THE ASSESSING OFFICER UNILATERALLY RELIED ON THE VERSION OF CAPIT AL MARKET. WHEREAS, ONE, RAJU HAD ACTED AS THE MEDIUM THROUGH WHICH THE NEWSPRINT WAS RETURNED AND HE HAD ALSO FILED A CONFIRMATIONS LETTER DATED 26.08.1995 FROM RAJU. STATEMENT OF RAJU WAS REJECTED WITHOUT EVEN EXAMINING HIM. NO CASE FOR ADDITION I N ASSESSEES HANDS AND NO BENEFIT HAD ACCRUED TO ASSESSEE U/S.28(IV) AS STATED BY THE ASSESSING OFFICER. 6.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIE D ON THE ORDERS OF THE ASSESSING OFFICER. 6.4. WE HAVE HEARD BOTH THE PARTIES AND PER USED THE MATERIAL ON RECORD. IN THIS CASE THE ISSUE WAS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER BY JURISDICTIONAL HIGH COURT VIDE JUDGMENT IN T.C.NO.1172/2005, DATED 19.07.2012 FOR THE PURPOSE OF AFFORDING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE TO SUBSTANTIATE THE CLAIM. INSPITE OF GIVING OPPORTUNITY TO THE ASSESSEE ON 14 .12.2012, 07.01.2013, 28.01.2013, I.T(SS) A-06/MDS/2013 :- 34 -: 05.02.2013 AND 19.02.2013, IT WAS RECORDED BY THE A SSESSING OFFICER THAT THE ASSESSEE HAS NOT MADE ANY SUBMISSIONS BEFORE THE AS SESSING OFFICER. THE ASSESSING OFFICER HAVING NO OPTION PASSED THE ASSESSMENT ORDE R ON 28.02.2013. BEFORE US, THE ASSESSEE PLACED RELIANCE CONFIRMATION LETTER FROM M R. RAJU ON 26.08.1995 RETURNING THIS NEWSPRINT. BEING SO, THE FINDINGS OF THE TRIB UNAL OF THE EARLIER OCCASION HOLDS GOOD, WHEREIN IT WAS HELD AS UNDER:- 23. NEXT ISSUE RELATES TO THE ADDITION OF E7,50, 000/- ON ACCOUNT OF PURCHASE OF NEWSPRINT FROM M/S. CAPITAL MARKET. WE HAVE HEARD THE RIVAL SUBMISSIONS. FOR THE YEAR ENDED 31.03.1995 ASSESSE ES ACCOUNT FOR PURCHASE OF NEWSPRINT DEBITED THE ACCOUNT OF M/S. C APITAL MARKET WITH A SUM OF E7,50,000/- ON 21.07.1994. IN THE A SUBSEQUENT YEAR ASSESSEES ACCOUNTS FOR PURCHASE OF NEWSPRINT WAS CREDITED BY E7,50,00/ - TOWARDS NEWSPRINT RETURN BY M/S. CAPITAL MARKET. ENQUIRES WERE MADE WITH M/S. CAPITAL MARKET REGARDING THIS TRANSACTION. IN THEIR LETTER DATED 25.02.1998 M/S. CAPITAL MARKET WHILE CONFIRMING THE DELIVERY OF NEWSPRINT T O THE ASSESSEE ON 21.07.1994 DENIED HAVING RECEIVED BACK THE NEWSPRI NT ON 26.08.1995. IT WAS MADE CLEAR THAT M/S. CAPITAL MARKET DID NOT REC EIVE THE NEWSPRINT OR ITS CASH EQUIVALENT OF E7.5 LAKHS. IT WAS CATEGORICALL Y STATED BY M/S. CAPITAL MARKET THAT THEY HAVE NEVER GOT BACK EITHER 24.5 TO NS OF NEWSPRINT GIVEN TO TAMILARASI PUBLICATION FOR PERFORMING CERTAIN JOB W ORK OR THE COST OF THE NEWSPRINT. FROM THIS THE ASSESSING OFFICER CONCLUD ED THAT THE ASSESSEE DID NOT PROPOSE TO RETURN THE STOCK. SINCE THE STOCK AP PEARED TO HAVE BEEN USED BY THE ASSESSEE HIMSELF OR IT WAS LYING IN STOCK WI TH HIM, THE ASSESSEE DERIVED BENEFIT FROM THIS BUSINESS. SUCH BENEFIT N EEDS TO BE MADE ELIGIBLE TO TAX WITHIN THE MEANING OF SECTION 28(I). ALTERNATI VELY, IT WAS PROPOSED THAT THE ASSESSEE CAN BE ASSESSED UNDER SECTION 41(1) OF THE ACT FOR THE CESSATION OF LIABILITY. THE ASSESSEE DID NOT RESPO ND TO THE PROPOSAL. AS SUCH, THE ASSESSING OFFICER INCLUDED THE SUM AS THE UNDIS CLOSED INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1996-97 IN THE LIG HT OF THE DEFINITION OF UNDISCLOSED INCOME CONTAINED IN SECTION 158B(B) OF THE ACT. NO PARTICULAR ARGUMENT WAS ADVANCED IN HIS REGARD AT THE TIME OF HEARING. ORDER WAS CONTESTED ON THE GROUND OF OPPORTUNITY. HAVING HEA RD BOTH THE PARTIES AND AFTER PERUSING THE RECORDS, WE UPHOLD THE ORDER OF THE ASSESSING OFFICER ON THIS COUNT. BEING SO, THERE IS NO CHANGE OF CIRCUMSTANCES TO TA KE DIFFERENT VIEW. ACCORDINGLY, WE CONFIRM THE ADDITION MADE IN THIS ISSUE. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. I.T(SS) A-06/MDS/2013 :- 35 -: 7. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO E1,50,000/- AS ADVANCE PAID TO MR. VIVEK WHICH WAS TREATED AS UND ISCLOSED INCOME BY THE ASSESSING OFFICER. 7.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE ADV ANCED E1,50,000/- TO VIVEK FOR WHICH THE SOURCE HAS NOT BEEN EXPLAINED. HENCE , THE ASSESSING OFFICER TREATED THE ASSESSEE AS UNDISCLOSED INCOME. 7.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT CONSIDERABLE AGRICULTURAL INCOME FOR THE FAMILY HAS BEEN EXPLAIN ED EARLIER AVAILABLE FOR EXPENSES APART FROM OTHER RECEIPTS REFLECTED IN THE CASH FLO W STATEMENT. 7.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON T HE ORDERS OF THE ASSESSING OFFICER. 7.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE FILED CASH FLOW STATEMENT. WE HAVE GONE T HROUGH THE CASH FLOW STATEMENT. WHICH IS REPRODUCED HEREIN BELOW. I.T(SS) A-06/MDS/2013 :- 36 -: CASH FLOW STATEMENT PARTICULARS 31.3.87 31.3.88 31.3.89 31.3.90 31.3.91 31.3.92 31.3.93 31.3.94 31.3.95 31.3.96 30.9.96 AGRICULTURAL INCOME -FAMILY 1.50 1.80 1.80 2.20 2.20 2.20 2.20 2.20 2.20 2.20 0 .01 AGRICULTURAL INCOME- LEASE 0.20 0.20 0.20 0.25 0.25 0.25 0.25 0.25 0.25 0.25 INTEREST FROM BANKS 0.14 0.16 0.18 0.21 0.23 0.26 0.28 0.30 0.26 0.17 0 .08 RECEIPT FROM TAMILARASI 5.22 1.00 29.55 26.58 2.50 LOANS & ADV. REFUNDED 0.30 1.70 0.20 DIVIDEND-UTI 0.09 0.13 0.13 0.13 0.13 RECEIVED FROM N. SASIKALA 2.50 CANARA BANK DEPOSIT MATURITY 0.87 LAND ADVANCE REFUND 1.50 1.60 2.90 1.50 10.00 SALARY INCOME 0.48 0.50 0.33 RENT RECEIVED 0.12 0.12 0.18 UNSECURED LOANS 2.00 LIC POLICY 1.47 TOTAL RECEIPTS 2.44 2.78 2.69 2.66 4.18 4.70 15.18 4.08 34.76 41.33 4.06 PAYMENTS PARTICULARS 31.3.87 31.3.88 31.3.89 31.3.90 31.3.91 31.3.92 31.3.93 31.3.94 31.3.95 31.3.96 30.9.96 UNITS IN UTI 1.00 IND JOTHI INDIAN BANK 0.10 TRAVELLING EXPENSESS 0.20 0.80 0.80 1.10 1.00 LIP PAID & PF PAID 0.27 0.25 0.24 0.46 0.14 0.51 HOUSE CONSTRUCTION EXPENSES 0.19 25.00 23.50 1.48 ADVANCE FOR LAND 1.00 2.00 1.00 2.00 10.00 1.50 1.50 LOANS AND ADVANCES 2.00 0.20 GIFT GIVEN 0.20 0.20 0.25 0.25 0.30 INVESTMENT IN TAMILARASI 0.53 2.12 0.87 LAND AT THANJAVUR 1.24 0.89 DEPOSIT IN CANARA BANK 0.65 1.00 I.T(SS) A-06/MDS/2013 :- 37 -: PARTICULARS 31.3.87 31.3.88 31.3.89 31.3.90 31.3.91 31.3.92 31.3.93 31.3.94 31.3.95 31.3.96 30.9.96 INTEREST FROM BANK REINVESTED 0.14 0.16 0.18 0.21 0.23 0.26 0.28 0.30 0.26 0.17 0 .09 DRAWINGS 0.30 0.30 0.35 0.40 0.40 0.40 0.40 .050 0. 50 0.50 0.25 N. SASIKALA REPAYMENT 1.00 1.40 HOUSE LOAN REPAID 0.24 0.24 1.20 HOUSEHOLD ARTICLES 0.07 0.10 0.10 1.00 0.50 EXPENSES ALL INDIAN WRITERS ASSN. 0.18 3.51 4.63 1.21 LAND ADVANCE TRF TO TAMILARSI 10.00 TOTAL PAYMENT 2.33 2.70 2.92 2.61 4.10 4.75 15.09 4.07 34.85 41.24 4.04 NET SURPLUS/ DEFICIT FOR THE YEAR 0.11 0.08 (0.23) 0.05 0.08 (0.05) 0.09 0.01 (0.09) 0.09 0.02 OPENING BALANCE CASH ON HAND 0.05 0.16 0.24 0.01 0.06 0.14 0.09 0.18 0.19 0.10 0 .19 CLOSING BALANCE, CASH ON HAND 0.16 0.24 0.01 0.06 0.14 0.09 0.18 0.19 0.10 0.19 0.21 7.5 WE FIND THERE IS NO ENTRY WITH REGARD TO ADVA NCE TO MR. VIVEK IN THE CASH FLOW STATEMENT. BEING SO, WE CONSIDER THIS AMOUNT AS UN DISCLOSED INCOME OF THE ASSESSEE. ACCORDINGLY, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECT ED. 8. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO E 1,65,000/- FIXED DEPOSITS IN CANARA BANK (I.E. E75,000/- FOR THE ASSESSMENT YEAR 1987-88 AND E1,00,000/- FOR THE ASSESSMENT YEAR 1992-93) WH ICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER. I.T(SS) A-06/MDS/2013 :- 38 -: 8.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE HA D INVESTED E75,000/- AND E 1,00,000/- FOR THE ASSESSMENT YEARS 1987-88 AND 199 2-93 RESPECTIVELY BY WAY OF FIXED DEPOSIT IN CANARA BANK. THE SOURCES FOR THIS DEPOSIT HAS NOT BEEN EXPLAINED, THOUGH AS PER ASSESSING OFFICER DATED 2 .7.1997 THE ASSESSEE HAD BEEN SPECIFICALLY ASKED TO FURNISH THE DETAILS REGARDING THE SOURCE OF THESE DEPOSITS. THE ASSESSEE REPLIED VIDE LETTER DATED 2.9.1997 WHI CH WAS IN CONTINUATION OF HIS REPLY DATED 7.8.1997, THE ASSESSEE STATED THAT THIS DEPOSIT WOULD BE EXPLAINED IN THE CASH FLOW STATEMENT WHICH IS BEING SUBMITTED. THE CASH FLOW STATEMENT HAS ALREADY BEEN DISCUSSED AND REJECTED AS UNRELIABLE. IT WAS THEREFORE OBVIOUS THAT THERE WAS EXPLANATION REGARDING THE SOURCE FOR THIS DEPOSIT. THE ASSESSING OFFICER TREATED THIS AMOUNT AS UNDISCLOSED INCOME TO THE AS SESSEE. AGAINST THIS, THE ASSESSEE PREFERRED A APPEAL BEFORE US. 8.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT SOURCES FOR THE FIXED DEPOSITS IS TRACEABLE TO THE CASH FLOW ST ATEMENT FILED BY THE ASSESSEE. THE ASSESSING OFFICERS MERE SUMMARY REJECTION OF I T CANNOT BE A GROUND TO HOLD THAT THE AMOUNT INVESTED IS THE UNDISCLOSED INVEST MENT OF THE ASSESSEE. 8.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON T HE ORDER OF THE ASSESSING OFFICER. 8.4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE CASH FLOW STATEMENT. I.T(SS) A-06/MDS/2013 :- 39 -: THERE ARE ENTRIES FOR E65,000/- FOR THE ASSESSMENT YEAR 1987-88 AND E1,00,000/- FOR THE ASSESSMENT YEAR 1992-93. BEING SO, WE DIRE CT THE ASSESSING OFFICER TO GIVE DUE CREDIT TO THE TUNE OF E1,65,000/- ONLY. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO E5 ,19,000/- BEING THE DIFFERENCE IN COST OF CONSTRUCTION WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER. 9.1 THE FACTS OF THE CASE ARE THAT DURING THE YEAR OF ACCOUNT ASSESSEE HAS PRACTICALLY COMPLETED THE CONSTRUCTIONS OF A BUILDING IN PARISUTHAM NAGAR. TANJORE. FOR ITS CONSTRUCTION ASSESSEE HAS DEBITED AN AMOUNT OF E26.50 LAKHS DURING 31.3.95 AND E18.25 LAKHS DURING THE YEAR END ED 31.3.96. NO BOOKS OF ACCOUNTS ARE MAINTAINED BY THE ASSESSEE IN RESPECT OF THE HOUSE CONSTRUCTION. FOR THE PURPOSE OF EVALUATING THE COST. OF CONSTRUCTION OF THIS PROPERTY, A REFERENCE WAS MADE TO THE VALUATION OFFICER OF THE DEPARTMENT . THE VALUATION OFFICER IN HIS REPORT HAS ESTIMATED THE COST OF CONSTRUCTION AT E4 9.94 LAKHS. THUS BETWEEN THE VALUE ESTIMATED BY THE VALUATION OFFICER AND THE COST ADMITTED THERE I S A DIFFERENCE OF E5.19 LAKHS, THE ASSESSEE WAS ASKED TO OFFER HIS EXPLANATION FOR THE DIFFERENCE IN THIS RESPECT VIDE THIS OFFICE LETTER DATED 04-03-98. A LETTER WAS FILED BY THE ASSESSEE'S REPRESENTATIVE ON 11.03.1998 STATING THAT THE EXPLANATION IS AVAILABLE IN THE CASH FLOW STATEMENT. HOWEVER. THE CASH FLOW STATEMENT HAS I.T(SS) A-06/MDS/2013 :- 40 -: ALREADY BEEN REJECTED AS UNRELIABLE. THE EXPLANATIO N IS REJECTED. THEREFORE THE DIFFERENCE OF E5.19 LAKHS IS TREATED AS ASSESSEES UNDISCLOSED INCOME. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 9.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT REFERENCE TO DVO FOR ESTIMATING THE COST OF CONSTRUCTION IN PROC EEDINGS U/S.158BC IS WRONG. AS PER THE SEC. 158BB, IT WAS HELD THAT THE UNDISCL OSED INCOME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF TI OF THE PREVIOUS YEAR FALLING WITHIN THE BLOCK PERIOD COMPUTED IN ACCORDANCE WITH THE PROVISIONS O F THE ACT, ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS AND SUCH OTHER MATERIAL OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE. T HE REPORT OF DVO IS NOT A MATERIAL FOUND AS A RESULT OF SEARCH AND HENCE CANN OT FORM THE BASIS OF ADDITION IN BLOCK ASSESSMENT. RELIANCE IS ALSO PLACED ON CIT VS. RAVIKANT JAIN 250 ITR 14. THAT APART, THE ESTIMATE OF DVO IS BASED ON CPWD RA TES WHICH IS INCORRECT. THE CONSTRUCTION BEING IN TANGORE, A MOFFUSIL PLACE, TH E STATE PWD RATES HAD TO BE APPLIED. IT WAS JUDICIALLY NOTICED THAT THE DIFFER ENCE IN RATES WOULD BE 15% AND ALSO A MARGIN OF 10% TO BE GIVEN FOR SELF-SUPERVISI ON VIDE ABDUL RAHIM VS ITO 258 ITR 714 (MAD HC), CIT VS. GAJALAKSHMI 331 ITR 216 (MAD. HC) . IF THESE ASPECTS ARE CONSIDERED THEN THE COST OF CONSTRUCTIO N RETURNED BY THE ASSESSEE IS CORRECT AND NEEDS TO BE ACCEPTED. FURTHER, THE BOA RD IN ITS CIRCULAR NO.96 DATED 25.12.1972 WHILE EXPLAINING THE NEWLY INSERTED SEC 55A HAS ACCEPTED THAT 15% I.T(SS) A-06/MDS/2013 :- 41 -: DIFFERENCE IS ACCEPTABLE MARGIN BETWEEN THE COST DE TERMINED BY THE OFFICER AND THAT RETURNED BY THE ASSESSEE. THE CIRCULAR WAS APP LIED BY THE ITAT, IN THE CASE OF RM. CHINNIAH VS. ITO IN ITA NO.2035/2006 VIDE ORDER DATED 8.8.2008 AND DISMISSED THE DEPARTMENT APPEAL. IN THIS CASE, TH E MARGIN OF DIFFERENCE IS 10.4% AND HENCE THE RETURNED COST MAY KINDLY BE ACCEPTED. 9.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE ASSESSING OFFICER. 9.4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ADDITION IS MADE ONLY BASED ON THE DVO REPORT AND THE VARIATION BETWEEN THE AMOUNT SHOWN BY THE ASSESSEE FOR CONSTRUCTION AND T HE DVO REPORT WHICH IS LESS THAN 10.4% AND THERE IS NO SEIZED MATERIAL REFLECTI NG THIS ADDITION. BEING SO, WE ARE INCLINED TO DELETE THE ADDITION. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO E1 ,94,000/- BEING THE PERSONAL EXPENSES WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER. 10.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME FOR THE ASSESSMENT YEARS 1990-91, 1991-92 AND 1992- 93. HOWEVER AS PER BLOCK I.T(SS) A-06/MDS/2013 :- 42 -: RETURN IN FORM NO.2B HE HAD ADMITTED AN INCOME OF E 21,000/-, 16,000/- AND E19,000/- AFTER DEDUCTION U/S 80L OF E7,000/- FOR THE ASSESSMENT YEARS 1990-91, 1991-92 AND 1992-93 RESPECTIVELY. THE ASSESSEE WAS SPECIFICALLY ASKED AS TO HOW HE WAS MEETING HIS PERSONAL EXPENSES, SINCE WITH EF FECT FROM 15.11.88, THE ASSESSEE HAD RESIGNED HIS JOB WITH THE GOVERNMENT O F TAMILNADU AND HE HAD NO OSTENSIBLE SOURCE OF INCOME. THE QUERY STANDS NOT ANSWERED BEFORE THE ASSESSING OFFICER INSPITE OF GIVING A NUMBER OF OPPORTUNITIE S TO DO SO. THE GROSS INCOME OF E21,000/-, ADMITTED BY THE ASSESSEE IN THE BLOCK RE TURN REPRESENTS INTEREST ON FIXED DEPOSITS WITH CANARA BANK FOR THE ASSESSMENT YEAR 1990-91. THIS AMOUNT OF INTEREST HAS NOT BEEN ADMITTED WITHDRAWN. HENCE, E VEN THIS AMOUNTS IS NOT AVAILABLE FOR HIS PERSONAL EXPENSES. THEREFORE, TH E PERSONAL EXPENSES HAS BEEN MET BY THE ASSESSEE OUT OF UNDISCLOSED SOURCES. TH EREFORE, THE ASSESSING OFFICER ESTIMATED E4,000/- PER MONTH I.E E48,000/- AND E21, 000/- INTEREST FROM BANK ADMITTED IN BLOCK RETURN IN FORM 2B AND ASSESSING O FFICER MADE AN ADDITION OF E69,000/- AS UNDISCLOSED INCOME FOR THE ASSESSMENT YEAR 1990-91, FOR THE ASSESSMENT YEARS 1991-1992 AND 1992-93 , THE ASSES SING OFFICER ESTIMATED HIS PERSONAL EXPENSES AT E48,000/- AND E60,000/- RESPEC TIVELY MET BY THE ASSESSEE OUT OF THE UNDISCLOSED SOURCES. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 10.2. THE LD. AUTHORISED REPRESENTATIVE FOR ASSES SEE SUBMITTED THAT THE ASSESSING OFFICER HAS MERELY ESTIMATED THE EXPENSES AND MADE THE ADDITION WITHOUT ANY SEARCH MATERIAL TO THIS EFFECT. IT WAS SETTLED LAW THAT THERE CANNOT BE I.T(SS) A-06/MDS/2013 :- 43 -: ANY ESTIMATE OF UDI UNLESS THERE ARE MATERIAL FOUND IN SEARCH WARRANTING SUCH AN ESTIMATE. THE ASSESSEE HAS SHOWN DRAWINGS IN THE C ASH FLOW AS WELL AS THE YEARS IN WHICH THE REGULAR RETURNS WERE FILED. FURTHER, SOURCE FOR THE PERSONAL EXPENSES IS TRACEABLE IN THE CASH FLOW STATEMENT FILED BY TH E ASSESSEE. A MERE SUMMARY REJECTION OF IT CANNOT BE A GROUND TO HOLD THAT THE AMOUNT INVESTED IS THE UNDISCLOSED INVESTMENT OF THE ASSESSEE. 10.3. THE LD. DEPARTMENTAL REPRESENTATIVE RELI ED ON THE ORDERS OF THE ASSESSING OFFICER. 10.4. WE HAVE HEARD BOTH THE PARTIES AND PERUS ED THE MATERIAL ON RECORD. THE ADDITION IS ONLY BASED ON ESTIMATION AND THERE IS NO SEIZED MATERIAL AVAILABLE ON RECORD TO SUGGEST THE PERSONAL EXPENSES. BE ING SO, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS COUNT. THIS G ROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO PU RCHASE OF E2,15,000/- AS HOUSEHOLD ARTICLES WHICH WAS TREATE D AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER. 11.1 THE FACTS OF THE CASE ARE THAT DURING TH E COURSE OF SEARCH THE ASSESSEE WAS FOUND TO BE IN POSSESSION THE FOLLOWIN G HOUSEHOLD ARTICLES: 1. SONI COLOUR TV26 : 1NO. 2. SONI COLOUR TV24 : 1NO. I.T(SS) A-06/MDS/2013 :- 44 -: 3. SONI COLOUR TV18 : 1NO. 4. PIONEER AUDIO SET : 1 NO. 5. CD-CDS LASER JET : 1 NO. 6. NATIONAL AC 1 TON : 2 NOS. 7. GENERAL SPLIT A/C : 1 NO. 8. GENERAL A.C -1 1/2 TON : 1 NO. 9. FAX MACHINE : 1 NO. THE DEPARTMENT VIDE LETTER DATED 02.07.1997, THE AS SESSEE WAS ASKED TO EXPLAIN THE SOURCE OF ACQUISITION OF THE ABOVE ASSE TS. THE ASSESSEE STATED THAT THE MACHINE IS THE PART OF THE BUSINESS ASSETS IN TAMILARASI PUBLICATION. THE CASH FLOW STATEMENT PROMISED TO BE FILED BY THE ASSESSEE HAS NOT BEEN FIELD BEFORE ASSESSING OFFICER. HENCE , THE ESTIMATED VALUE OF THESE ITEMS OF HOUSEHOLD ARTICLES IS INCLUDED AS THE UNDISCLOSED INCOME OF THE ASSESSEE BY ASSESSING OFFICER FOR THE ASSES SMENT YEAR 1997-98 COMPRISED IN THE BLOCK PERIOD. ESTIMATED VALUE RS 1. SONI COLOUR TV26 : 1NO. 30,000/- 2. SONI COLOUR TV24 : 1NO. 25,000/- 3. SONI COLOUR TV18 : 1NO. 20,000/- 4. PIONEER AUDIO SET : 1 NO. 20,000/- 5. CD-CDS LASER JET : 1 NO. 20,000/- 6. NATIONAL AC 1 TON : 2 NOS. 30,000/- 7. GENERAL SPLIT A/C : 1 NO. 50,000/- 8. GENERAL A.C -1 1/2 TON : 1 NO. 20,000/- --------------------------- TOTAL 2,15,000/- ---------------------------- THUS ASSESSING OFFICER TREATED E2,15,000/- AS UNDIS CLOSED INCOME OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL B EFORE US. 11.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT NO ESTIMATED ADDITION IS POSSIBLE IN BLOCK ASSESSMENT UNLESS IT IS RELATABLE TO I.T(SS) A-06/MDS/2013 :- 45 -: EVIDENCE FOUND IN THE COURSE OF SEARCH AS TO THE UN EXPLAINED NATURE OF EXPENDITURE OR INVESTMENT. THE ASSESSEE HAS SHOWN DRAWINGS IN THE CASH FLOW AS WELL AS THE YEARS IN WHICH THE REGULAR RETU RNS WERE FILED. A MERE SUMMARY REJECTION OF IT CANNOT BE A GROUND TO HOLD THAT THE AMOUNT INVESTED IS THE UNDISCLOSED INVESTMENT OF THE ASSES SEE. 11.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE ASSESSING OFFICER. 11.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THERE IS NO SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH SUGGESTING THIS ADDITION. THE ADDITION IS MADE ONLY ON ESTIMATION B ASIS HOPING THAT THEY WERE PURCHASED DURING THE COURSE OF BLOCK PERIOD. THE A SSESSEE IS BEING A SENIOR PERSON HAVING MEANS TO PURCHASE THESE ARTICLES FROM KNOWN SOURCES AS THERE IS NO EVIDENCE TO SUGGEST THAT IT HAS ACQUIRED FROM UNACC OUNTED INCOME OF THE ASSESSEE. ACCORDINGLY, THIS ADDITION IS DELETED. T HIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 12. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO E2 8,53,778/- DEPOSITS IN CANARA BANK FOR THE ASSESSMENT YEARS 1 991-92, 1992-93, 1993-94, 1994-95, 1995-96 AND 1996-97. I.T(SS) A-06/MDS/2013 :- 46 -: 12.1 THE FACTS OF THE T HE ASSESSEE HAS A SAVINGS BANK ACCOUNTNO.23573 WITH CANARA BANK; ABHIRAMAPURAM BRANCH. IN THIS ACCOUNT DURING THE ASSESSMENT YEARS 1991-92, 1992-93, 1993-94, 1994-95, 1995-96 A ND 1996-97 THE ASSESSEE HAS MADE A TOTAL DEPOSIT OF E2,73,795/-, E2,00,378/ , E14,21,862/-, E1,35,843/-, E1,10,700/-, E7,47,000/- RESPECTIVELY. THE DEPA RTMENT VIDE LETTER DATED 2.7.97, THE ASSESSEE WAS ASKED TO EXPLAIN THE SOUR CE OF FUNDS FOR THE DEPOSITS IN THIS ACCOUNT. THE ASSESSEE STATED THAT THE DEPOSITS IN THE BANK ACCOUNT WILL BE EXPLAINED IN THE CASH FLOW STATEMENT WHICH WAS FILE D 10.03.1998 AND FURTHER THE ASSESSEE SUBMITTED THAT FOR THE ASSESSMENT YEARS 1 992-93 , 1993-94 AND 1994- 95, THE ASSESSEE SUBMITTED E9,800/-,E13,000/- AND E13,000/- RECEIVED FROM UNIT TRUST OF INDIA. THIS CASH FLOW STATEMENT HAS BEEN REJECTED AS NOT RELIABLE. THE ASSESSEE'S REPRESENTATIVE FILED STATEMENT ATTEMPTIN G TO EXPLAIN THE SOURCE OF DEPOSITS IN THE BANK ALC E2,73,795/-, 1,90,578/-, 14,08,862/-, 1,22,843/-, 11,00,700/- AND E7,47,000/-. BUT NONE OF THESE CON FIRMATION LETTERS ARE POSSIBLE FOR VERIFICATION. HENCE THIS EXPLANATION ARE REJEC TED BY ASSESSING OFFICER. THE ASSESSING OFFICER TREATED E28,53,778/- AS UNDISCLO SED INCOME OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 12.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSE SSEE SUBMITTED THAT THE ASSESSEE HAS SHOWN DRAWINGS IN THE CASH FLOW STATEM ENT AS WELL AS THE YEARS IN WHICH THE REGULAR RETURNS WERE FILED. FUR THER, SOURCE FOR THE PERSONAL EXPENSES IS TRACEABLE IN THE CASH FLOW STA TEMENT FILED BY THE I.T(SS) A-06/MDS/2013 :- 47 -: ASSESSEE. THE REASON GIVEN BY THE ASSESSING OFFICE R TO DISCREDIT THE CASH FLOW STATEMENT IS ARBITRARY AND MERELY BASED ON SUR MISES. NO INDEPENDENT ENQUIRY WAS MADE BY THE ASSESSING OFFICER TO FALSIF Y THE SOURCE FOR THE INVESTMENTS GIVEN IN THE CASH FLOW. A MERE SUMMARY REJECTION OF IT CANNOT BE A GROUND TO HOLD THAT THE AMOUNT INVESTED IS THE UNDISCLOSED INVESTMENT OF THE ASSESSEE. FURTHER, THE LOANS WER E SUPPORTED BY CONFIRMATION LETTERS WHICH WERE REJECTED WITHOUT AN Y EXAMINATION. 12.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDERS OF THE ASSESSING OFFICER. 12.4. WE HAVE HEARD BOTH THE PARTIES AND PERUSE D THE MATERIAL ON RECORD. IN THE CASH FLOW STATEMENT THESE DEPOSITS WAS NOT R EFLECTED IN THE RESPECTIVE ASSESSMENTS YEARS. BEING SO, IT IS TREATED AS UNDIS CLOSED INCOME OF THE ASSESSEE. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS DISMIS SED. 13. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO IN VESTMENT OF E1,00,000/- FOR THE ASSESSMENT YEAR 1991-92. 13.1 THE FACTS OF THE ISSUE ARE THAT THE ASSES SEE MADE AN INVESTMENT OF E1 LAKH IN UNIT TRUST OF INDIA DURING THE ASSESSMENT Y EAR 1991-92. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE FOR THE INVESTMENT. THE ASSESSEE SUBMITTED THE CASH I.T(SS) A-06/MDS/2013 :- 48 -: FLOW STATEMENT WHICH HAS BEEN REJECTED BY THE ASSES SING OFFICER. THEREFORE, THE ASSESSING OFFICER TREATED E1,00,000/- AS UNDISCLOSE D INCOME OF THE ASSESSEE. 13.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSE SSEE SUBMITTED THAT THE SOURCE FOR THE UTI INVESTMENT OF E1,00,000/- IS TRA CEABLE IN THE CASH FLOW STATEMENT FILED BY THE ASSESSEE. A MERE SUMMARY REJ ECTION OF IT CANNOT BE A GROUND TO HOLD THAT THE AMOUNT INVESTMENT IS THE UN DISCLOSED INCOME OF THE ASSESSEE. 13.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE ASSESSING OFFICER. 13.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS AMOUNT OF E1,00,000/- WAS REFLECTED I N THE CASH FLOW STATEMENT FOR THE YEAR ENDING 31.03.1991. ACCORDIN GLY, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 14. THE NEXT GROUND RAISED BY THE ASSESSEE IS W ITH REGARD TO GIFT PAYMENT OF E1,20,000/-. 14.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS GIVEN AN GIFT OF E20,000/-, E20,000/-AND E30,000/- TO SHRI. VIVEK, F OR THE ASSESSMENT YEARS 192-93, 1993-94 AND 1996-97, RESPECTIVELY E25 ,000/- TO SHRI. KRISHNAPRIYA FOR THE ASSESSMENT YEAR 1994-95 AND E2 5,000/- TO SHAKILA FOR I.T(SS) A-06/MDS/2013 :- 49 -: THE ASSESSMENT YEAR 1995-96. THE SOURCE FOR THIS GI FT HAS NOT BEEN EXPLAINED. VIDE DEPARTMENT LETTER DATED 02.07.199 7, THE ASSESSEE WAS ASKED TO GIVE THE DETAILS AND SOURCE THEREOF. THE ASSESSEE HAS NOT EXPLAINED THE SOURCE FOR MAKING THIS GIFT NOR HAS G IVEN EXPLANATION. THEREFORE, THE ASSESSING OFFICER TREATED E1,20,000/ - AS UNDISCLOSED INCOME OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 14.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASS ESSEE SUBMITTED THAT EXPLANATION WERE GIVEN REGARDING THE SOURCE AVAILAB LE IN THE CASH FLOW STATEMENT FILED. THE REASON GIVEN BY THE ASSESSING OFFICER TO DISCREDIT THE CASH FLOW STATEMENT IS ARBITRARY AND MERELY BASED O N SURMISES. NO INDEPENDENT ENQUIRY WAS MADE BY THE ASSESSING OFFIC ER TO FALSIFY THE SOURCE FOR THE INVESTMENTS GIVEN IN THE CASH FLOW. A MERE SUMMARY REJECTION OF IT CANNOT BE A GROUND TO HOLD THAT THE AMOUNT INVESTED IS THE UNDISCLOSED INVESTMENT OF THE ASSESSEE. 14.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDERS OF THE ASSESSING OFFICER. 14.4 WE HAVE HEARD BOTH THE PARTIES AND PE RUSED THE MATERIAL ON RECORD. THESE GIFTS ARE REFLECTED IN THE CASH FLOW STATEMENT FOR THE FINANCIAL YEAR ENDING 31.03.1992 FOR E20,000/-, 31. 03.1993 FOR E20,000/-. 31.3.1994 FOR E25,000/-, 31.03.1995 FOR E25,000/- A ND 31.03.1996 FOR I.T(SS) A-06/MDS/2013 :- 50 -: E30,000/-, TOTALING TO E1,20,000/-. BEING SO, WE F IND THAT THE ASSESSEE HAS EXPLAINED THIS EXPENDITURE AND ACCORDINGLY, THIS AD DITION IS DELETED. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 15. THE NEXT GROUND RAISED BY THE ASSESSEE IS WIT H REGARD TO INVESTMENT IN TAMILARASI FOR E52,500/- WHICH WAS TREATED AS UND ISCLOSED INCOME BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1992-93 15.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESS EE COMMENCED HIS PROPREITORY BUSINESS OF M/S. TAMILARASI PUBLICATION S DURING THE YEAR WITH AN ADMITTED CAPITAL INVESTMENT OF E52,500/-. THE ASSE SSEE WAS DIRECTED TO EXPLAIN THE SOURCE OF THIS CAPITAL INVESTMENT VIDE DEPARTMENT LETTERS DATED 02.07.1997 AND 20.02.1998. THE ASSESSEE HAS NOT EX PLAINED THE SOURCE. HENCE, THE ASSESSING OFFICER TREATED E52,500/- AS U NDISCLOSED INCOME OF THE ASSESSEE. 15.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASS ESSEE SUBMITTED THE EXPLANATION IS GIVEN REGARDING SOURCE OF FUND IN TH E CASH FLOW STATEMENT. THE REASON GIVEN BY THE ASSESSING OFFICER TO DISCRE DIT THE CASH FLOW STATEMENT IS ARBITRARY AND MERELY BASED ON SURMISES . 15.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDERS OF THE ASSESSING OFFICER. I.T(SS) A-06/MDS/2013 :- 51 -: 15.4 WE HAVE HEARD BOTH THE PARTIES AND PE RUSED THE MATERIAL ON RECORD. THIS AMOUNT OF E52,500/- WAS REFLECTED IN T HE CASH FLOW STATEMENT FOR THE YEAR ENDED 31.03.1992. BEING SO, THE ADDIT ION CANNOT BE MADE. HENCE, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWE D. 16. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO PURCHASE OF LAND AT THANJAVUR FOR E2,13,000/- WHICH WAS TREAT ED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER. 16.1 THE FACTS OF THE CASE ARE THAT THE ASSE SSEE PURCHASED A LAND ON 10.2.92 AND 10.05.1992 IN PARISUTHAM NAGAR, THANJAV OOR AT AN ADMITTED COST OF E1,24,000/- AND E89,000/- FOR THE ASSESSMENT YEARS 1992-93 AND 1993-94. THE ASSESSEE WAS DIRECTED TO EXPLAIN THE SOURCE OF THIS INVESTMENT VIDE DEPARTMENT LETTER DATED 02.07.1997. HOWEVER, THE ASSESSEE HA S NOT EXPLAINED THE SOURCE, AND HENCE THE ASSESSING OFFICER TREATED E2,13,000/- AS UNDISCLOSED INCOME OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 16.2. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT EXPLANATION GIVEN REGARDING SOURCE AVAILABLE IN THE CASH FLOW STATEMENT. THE REASONS GIVEN BY THE ASSESSING OFFICER TO DISCR EDIT THE CASH FLOW STATEMENT IS ARBITRARY AND MERELY BASED ON SURMISES . I.T(SS) A-06/MDS/2013 :- 52 -: 16.3. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDERS OF THE ASSESSING OFFICER. 16.4 WE HAVE HEARD BOTH THE PARTIES AND PERUS ED THE MATERIAL ON RECORD. THESE AMOUNTS REFLECTED IN THE CASH FLOW ST ATEMENT AT E1,24,000/- AS ON 31.3.1992 AND E89,000/- AS ON 31.03.1993. BE ING SO, THE ADDITIONS ARE DELETED AS THE ASSESSEE HAS EXPLAINED THE INVES TMENTS. THIS GROUND OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. 17. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO DEPOSIT IN TAMILARASI FOR E2,12,310/- WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1993-94. 17.1 THE FACTS OF THE CASE ARE THAT THE ASSES SEES CAPITAL ACCOUNT IS CREDITED WITH A SUM OF E2,12,310/- AND THE SOURCE FOR WHICH WAS NOT EXPLAINED BY THE ASSESSEE INSPITE OF ASKING FOR THE SAME. HENCE, THE ASSESSING OFFICER TREATED E2,12,310/- AS UNDISCLOSED INCOME OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 17.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASS ESSEE SUBMITTED THAT THE EXPLANATION WAS ALREADY GIVEN REGARDING SOURCE AVA ILABLE IN THE CASH FLOW STATEMENT THE RESON GIVEN BY THE ASSESSING OFFICER TO DISCREDIT THE CASH FLOW STATEMENT IS ARBITRARY AND MERELY BASED ON SURMISES . I.T(SS) A-06/MDS/2013 :- 53 -: 17.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELI ED ON THE ORDERS OF THE ASSESSING OFFICER. 17.4 WE HAVE HEARD BOTH THE PARTIES AND PERU SED THE MATERIAL ON RECORD. AN AMOUNT OF E2,12,000/- WAS REFLECTED IN T HE CASH FLOW AS ON 31.03.1993. BEING SO, THE ADDITION CANNOT BE MADE. HENCE, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGL Y, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 18. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO INTEREST SUSPENSE ACCOUNT OF E4,23,460/- FOR THE ASSESSMENT YEAR 1995-96. 18.1 THE FACTS OF THE CASE ARE THAT THERE WAS A CREDIT OF E4,23,460/- UNDER THE HEAD INTEREST SUSPENSE. THE DETAILS IN R ESPECT OF THE SAME WAS NOT FURNISHED BY THE ASSESSEE, THOUGH THE DEPARTMENT HA S CALLED FOR THE SAME VIDE LETTER DATED 25.02.1998. THEREFORE, THE ASSESSING O FFICER TREATED E4,23,460/- AS UNDISCLOSED INCOME OF THE ASSESSEE. AGAINST THIS, T HE ASSESSEE IS IN APPEAL BEFORE US. 18.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASS ESSEE SUBMITTED THAT THERE WAS ACTUALLY A DEBIT BALANCE IN THE BOOKS OF THE AS SESSEE. THE ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF PROPORTIONATE AMOUN T FOR TWO ASSESSMENT YEARS AS I.T(SS) A-06/MDS/2013 :- 54 -: AN EXPENDITURE. THE ASSESSING OFFICER WENT WRONG I N NOT ALLOWING THE DEDUCTION BUT ALSO ERRONEOUSLY TREATED THIS IS AS A CREDIT B ALANCE AND MADE THE ADDITION. 18.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIE D ON THE ORDERS OF THE ASSESSING OFFICER. 18.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSE D THE MATERIAL ON RECORD. THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF THESE EXPENDITURE. IN OUR OPINION, WHENEVER ASSESSEE CLAIMED AN EXPEND ITURE IT SHOULD BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE ABSENCE OF ANY EVIDENCE TO SUBSTANTIATE THIS EXPEND ITURE, WE DECLINE TO APPRECIATE THE ARGUMENT OF THE ASSESSEE COUNSEL. T HIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 19. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO UNEXPLAINED CREDITS WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER. 19.1 THE FACTS OF THE CASE ARE THAT THE ASSESSE ES CAPITAL ACCOUNT HAS BEEN CREDITED WITH AN AMOUNT OF E10,00,000/- DESCRIBED A S ADVANCE FOR THE LAND PAID IN 1992-93 FROM PERSONAL ACCOUNT. THE ASSESSEE WAS ASK ED TO EXPLAIN THIS ENTRY. IN THE BOOKS OF ACCOUNT PERTAINING TO 1992-93 THERE WA S NO SUCH TRANSACTION AS ADVANCE FOR LAND. THE ASSESSEE HAS NOT EXPLAINED T HE SOURCE. THE SPECIAL AUDITOR IN HIS REPORT HAS OBSERVED THAT E10,00,000/- SAID T O BE ADVANCE FOR LAND PURCHASE I.T(SS) A-06/MDS/2013 :- 55 -: WAS FUNDED BY A FRESH CREDIT INTO THE ASSESSEES CA PITAL ACCOUNT FOR WHICH THERE WAS NO SUPPORTING EVIDENCE. HENCE, THE ASSESSING OF FICER TREATED E10,00,000/- AS UNDISCLOSED INCOME OF THE ASSESSEE. FURTHER, THE SP ECIAL AUDITOR HAS REPORTED CREDITS OF E7,80,000/-, E5,70,000/- AND E4,16,050/- IN THE APNA FINANCE, ASHOK MEHTA & COMPANY AND OM PRAKASH MEHTA, AND THE ASSES SEE HAS NOT FURNISHED THE ADDRESS OF THE PARTIES. THE DEPARTMENT VIDE LET TER DATED 25.02.1998, THE ASSESSEE WAS INFORMED THAT IN CASE THE ASSESSEE WIS HED TO PROVE THE GENUINENESS OF THESE CREDITS, THEY SHOULD PRODUCE BOOKS OF ACCO UNTS, BANK ACCOUNTS ETC., SUPPORTING THE TRANSACTION. THE ASSESSEE OUGHT TO HAVE COMPLIED WITH THESE BY 02.03.1998. HOWEVER, AT A VERY LATE STAGE NAMELY O N 9.3.1998 ASSESSEE FILED CERTAIN CONFIRMATION LETTERS FROM THESE PARTIES. HO WEVER, THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNTS, BANK ACCOUNTS ETC., . HENCE, THE ASSESSING OFFICER TREATED E7,80,000/-, E5,76,000/- AND E 4,16 ,000/- AS UNDISCLOSED INCOME OF THE ASSESSEE. FURTHER, IN TAMILARSARI PUBLICATIO N ACCOUNT IS CREDITED WITH E5,00,000/- IN THE NAME OF S.N. CHANDRASEKARAN AND E1,50,000/- IN THE NAME OF MS. GEETHANJALI. EARLIER, THERE WERE DEBIT BALANCE AGAINST THESE NAMES FOR IDENTICAL AMOUNTS. AT A LATER STAGE ON 9.3.1998, T HE ASSESSEE FIELD A LETTER ALONGWITH WITH CONFIRMATION LETTERS FROM S.N. CHAND RASEKARAN AND MS. GEETHANJALI. THE LETTER DOES NOT IN CLEAR TERMS EX PLAINS THE CREDIT WORTHINESS OF THE PERSONS AND THE EXACT SOURCE SUCH AS BANK ACCOU NT ETC FROM WHICH WAS PAID. THESE PERSONS WERE NOT PRODUCED BEFORE THE ASSESSIN G OFFICER. THE CONFIRMATION I.T(SS) A-06/MDS/2013 :- 56 -: LETTERS ARE NOT GIVEN ANY CREDENCE. SINCE, THERE I S NO EVIDENCE REGARDING THE REPAYMENT OF THESE LOANS BY THESE INDIVIDUALS THE C REDITS IN THEIR ACCOUNTS ARE TREATED AS ASSESSEES UNDISCLOSED INCOME. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 19.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASS ESSEE SUBMITTED THAT CONFIRMATIONS LETTERS FROM THESE PARTIES AND THE AS SESSING OFFICER TREATED THESE CREDITS AS NOT GENUINE WITHOUT ANY SORT OF EXAMINAT ION OF THE PARTIES CONCERNED. THE ONUS CAST ON THE ASSESSEE OF PROVING THE CREDIT S WAS DISCHARGED BY WAY OF FILING CONFIRMATION FROM THE PARTIES. IT WAS WITHI N THE POWERS OF THE ASSESSING OFFICER TO SUMMON THEM AND EXAMINE THE CREDITORS WH ICH THE ASSESSING OFFICER DOES NOT CHOSE TO DO. THE PARTIES ARE REGULAR FINAN CIERS AND THE ASSESSING OFFICER COULD HAVE CAUSED THEIR EXAMINATION BEFORE TREATING THE CREDITS AS UNEXPLAINED. UNDER THESE CIRCUMSTANCES, THE REJECTION OF THE EXP LANATION AND ADDITION OF THE AMOUNTS ARE UNEXPLAINED CREDITS MAY BE DELETED. THA T APART, THESE CREDITS FIGURE IN THE BOOKS OF TAMILARASI PUBLICATIONS AND THE EXA MINATION/ADDITION OF THESE CREDITS WOULD FALL FOR CONSIDERATION IN REGULAR ASS ESSMENT AND CANNOT BE CONSIDERED IN BLOCK ASSESSMENT U/S.153BC. 19.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIE D ON THE ORDERS OF THE ASSESSING OFFICER. I.T(SS) A-06/MDS/2013 :- 57 -: 19.4 WE HAVE HEARD BOTH THE PARTIES AND PER USED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS GIVEN AMPLE OF OP PORTUNITIES TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF T HE TRANSACTIONS. WHENEVER ANY AMOUNT FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR, IT IS THE DUTY OF THE ASSESSEE TO PROVE THE ABOVE INGREDIENT OF THE TRANSACTION. SINCE THE ASSESSEE WAS NOT ABLE TO PRODUCE NECESSAR Y EVIDENCE TO PROVE THE TRANSACTION WITH THE SUPPORTING EVIDENCE, WE AR E INCLINED TO CONFIRM THE ADDITION IN RESPECT OF THESE SUBSTANTIVE CREDIT S. HENCE, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 20. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REG ARD TO CREDIT CARD PAYMENTS WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER. 20.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE PAID AN PAYMENT OF E17,766/- FOR THE ASSESSMENT YEAR 1994-95, E,78,634/- FOR TH E ASSESSMENT YEAR 1995-96 AND E24,314/- FOR THE ASSESSMENT YEAR 1996-97. TH E ASSESSEE HAS NOT PRODUCED SOURCE OF INCOME FOR PAYMENT OF E17,766/- AND E24,3 14/- HENCE, THE ASSESSING OFFICER TREATED THE AMOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE VIDE LETTER DATED 7.3.1998 HAS FURNISHED THE SOURCE OF INCOME FOR E2,78,634/- IN RESPECT OF THE CREDIT CARD WITH AMERICAN EXPRESS. OF THIS ONE PAYMENT ON 23.03.1995 OF US $ 5642.00 WAS CLAIMED TO HAVE I.T(SS) A-06/MDS/2013 :- 58 -: BEEN MADE BY MR.THOMAS YIP OF HONGKONG IN CONNECTIO N WITH SOME HOSPITAL EXPENSES INCURRED BY THE ASSESSEE IN LONDON ON HIS BEHALF. EXCEPT FOR A COPY OF LETTER DATED 28.4.1995 FROM THE SAID MR. THOMAS YIP ADDRESSED TO THE ASSESSEE NO PROOF HAS BEEN FURNISHED IN THE RESPECT. THE LETTE R OF THOMAS YIP WAS NOT PRODUCED IT TILL 09.03.1998 WHEN THE MATTER REGARD ING PAYMENTS TO CREDIT CARDS WAS BROUGHT TO THE NOTICE FOR EXPLANATION ON 02.07. 1997 ITSELF. AS REGARDS MERITS, AS PER THE LETTER OF MR. THOMAS YIP, WHO IS FROM HONGKONG, ALLEGEDLY FELL ILL SUDDENLY IN LONDON AND THE ASSESSEE ATTENDED TO HIS MEDICAL NEEDS THE EXPENDITURE FOR WHICH WAS DEBITED TO HIS ACCOUNT WI TH CREDIT CARD. THE BILLS DEBITED TO HIS ACCOUNT ARE AS UNDER:- DATE AMOUNT IN US $ 11.1.1995 3228 13.1.1995 375 16.1.1995 626 18.1.1995 1260 27.1.1995 153.02 THE ASSESSEE HAS NOT ADDUCED ANY EVIDENCE SUCH AS C OPIES OF HOSPITAL BILLS ETC. TO SHOW THAT THE EXPENDITURE WAS INCURRED ON MR. THOMA S YIP AND THAT THE PAYMENT WAS IN FACT MADE BY MR.THOMAS YIP. NO DETAILS OF S OURCE SUCH AS DEBIT TO A BANK ACCOUNT OF MR. THOMAS YIP ETC., HAVE BEEN FURNISHED TO SUBSTANTIATE THE CLAIM THAT THE PAYMENT WAS IN FACT MADE BY THOMAS YIP. NO DETAILS OF SOURCE SUCH AS DEBITS TO A BANK ACCOUNT OF MR.THOMAS YIP ETC HAVE BEEN FURNISHED TO SUBSTANTIVE THE CLAIM THAT MR. YIP MADE THE PAYMENT . FURTHER, IF IT WAS TO BE BELIEVED THAT MR. YIP SUDDENLY FELL ILL AND THE ASS ESSEE HELPED HIM IN I.T(SS) A-06/MDS/2013 :- 59 -: HOSPITALISATION. IT WAS NOT UNDERSTANDABLE A TO WH Y THE AMOUNTS WERE DEBITED TO THE ASSESSEES ACCOUNT AND THAT TOO SPREAD OVER A P ERIOD OF 02 MONTHS OR SO. THE ASSESSING OFFICER NOT SATISFIED THAT THE SOURCE OF THIS PAYMENT FROM THOMAS YIP. THEREFORE, THE PAYMENT OF US$5642/- (EQUIVALENT IND IAN MONEY E1,80,262/-) WAS TREATED AS ASSESSEES EXPENDITURE FROM UNEXPLAINED SOURCES. THE REPRESENTATIVES LETTER WAS SILENT IN RESPECT OF THE FOLLOWING PAYME NTS MADE TO AMERICAN EXPRESS CARD 15.08.1994 : 2,503.71 09.01.1995 : 418.73 ------------- TOTAL : 2,922.44 US$ -------------- THE US $2,924.44 AMOUNT CONVERTED INTO INDIAN CURR ENCY IS E39,372/- WAS ALSO TREATED AS EXPENDITURE FROM UNEXPLAINED SOURCES AND ASSESSED ACCORDINGLY. THUS, THE ASSESSING OFFICER TREATED E2,78,634/- AS UNDIS CLOSED INCOME OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 20.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASS ESSEE SUBMITTED THAT NO PLAUSIBLE REASON WAS GIVEN BY THE ASSESSING OFFICER TO REJECT THE EVIDENCE PRODUCED AS TO THE MEDICAL EXPENSES OF MR. YIP. I N OTHER PAYMENTS, THERE IS SOURCES AVAILABLE IN THE CASH FLOW FILED BY THE ASS ESSEE. 20.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELI ED ON THE ORDERS OF THE ASSESSING OFFICER. I.T(SS) A-06/MDS/2013 :- 60 -: 20.4 WE HAVE HEARD BOTH THE PARTIES AND PERUSE D THE MATERIAL ON RECORD. THESE CREDIT CARD PAYMENTS ARE NOT REFLECT ED IN THE CASH FLOW STATEMENT. IN OUR OPINION, THE CREDIT CARD PAYMENTS CANNOT BE CONSIDERED AS EXPLAINED. BEING SO, THIS ADDITION IS SUSTAINED . THIS GROUND OF THE APPEAL OF THE ASSESSEE IS REJECTED. 21. THE NEXT GROUND RAISED BY THE ASSESSEE FOR THE FOLL OWING UNPROVED EXPENDITURES:- A) ADVERTIS E MENT 1,60,055/ - B) ELECTRICITY CHARGES 33,794/ - C) TRAVELLING & CONVEYANCE 1,20,000/ - D) CAR MAINTENANCE 37,474/ - E) PRELIMINARY EXPENSES 8,947/ - F) DEP. DISALLOWED 4,60,000/ - H) DISALLOWANCE U/S.40A(3) 1,33,365/ - I) SCAN TECH U/S.41(1) 67,055/ - 21.1 WITH REGARD TO ADVERTISEMENT EXPENSES TO THE TUNE OF E1,60,055/- WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER, THE ASSESSEE HAS DEBITED A SUM OF E16,77,646/- BY WAY OF ADMINISTRA TIVE EXPENSES. THE AUDITOR IN HIS SPECIAL AUDIT REPORT HAS STATED THAT THE FOLLOWING ITEMS ARE NOT SUPPORTED BY BILLS/ VOUCHERS (A) MOULIS ADVERTISING : E2,00,000/- (B) C.C. DISPLAY : E45,000/- (C) ADVERTISEMENT EXP. DISPLAY : E18,000/- (D) MOULIS ADVERTISING : E2,26,341/- (E) 2 PUBLICATIONS : E3,00,000/- (F) C C DISPLAY EXPENSES : E45,000/- (G) DHINA THANTHI : E45,000/- (H) EXCELLENT 2 PUBLICITIES : E4,30,642/- ----------------- TOTAL E13,09,983/- I.T(SS) A-06/MDS/2013 :- 61 -: THE DEPARTMENT VIDE LETTER DATED 25.2.1998 THE ASSE SSEE WAS ASKED TO PROVE THESE DETAILS TOWARDS ADVERTISEMENT IN THE LI GHT OF THE OBSERVATIONS MADE BY THE SPECIAL AUDITOR. THE CASE WAS POSTED F OR HEARING FOR THIS PURPOSE ON 02.03.1998 BY ASSESSING OFFICER. THE ASS ESSEE HAS NOT FURNISHED ANY PROOF IN THIS REGARD. M/S. EXCELLENT 2 PUBLICATION. M/S. 2 PUBLICITIES HAVE CONFIRMED THE TRANSACTION WITH THE ASSESSEE AND THE SAME WAS ALLOWED. THE TRANSACTIONS WITH M/S. MOULIS ADV ERTISING ALSO WAS CHECKED UP AND THEY HAVE CONFIRMED THE TRANSACTION. THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE AS PAYMENT TO MOULIS IS E2, 26,341/- ONLY. THE ASSESSEE HAS FILED VOUCHERS FOR PAYMENTS OF CC DISP LAY ALSO. OUT OF TOTAL AMOUNT OF E16,77,646/- A SUM OF E1,08,000/- WHICH I S NOT PROVED BY THE ASSESSEE IS DISALLOWED. FURTHER, SPECIAL AUDITOR HA S REPORTED THAT ADVERTISEMENT EXPENSES TO THE EXTENT OF E52,055/- A RE NOT SUPPORTED BY VOUCHERS /BILLS. IN THE ABSENCE OF ANY EXPLANATION FROM THE ASSESSEE, THE SPECIAL AUDITOR. THE ASSESSING OFFICER TREATED E52 ,055/- AS ASSESSEES UNDISCLOSED INCOME. UNDER THE HEAD ADVERTISEMENT EX PENSES, THE ASSESSING OFFICER TREATED E1,60,055/- AS UNDISCLOSE D INCOME OF THE ASSESSEE. 21.2 W ITH REGARD TO ELECTRICITY CHARGES WHICH WAS TREAT ED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER, THE FACTS OF THE CASE ARE THAT THE SPECIAL AUDITOR I.T(SS) A-06/MDS/2013 :- 62 -: HAS OBSERVED THAT ELECTRICITY EXPENSES DEBITED TO T HE EXTENT OF E33,794/- DOES NOT RELATE TO ASSESSEES BUSINESS. THEREFORE, THE ASSES SING OFFICER TREATED E33,794/- AS UNDISCLOSED INCOME OF THE ASSESSEE. 21.3 WITH REGARD TO TRAVELLING AND CONVEYANCE T O THE TUNE OF E1,20,000/- WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASS ESSING OFFICER, THE FACTS OF THE CASE ARE THAT SPECIAL AUDITOR HAS COMMENTED THA T IN THE ABSENCE OF VOUCHERS AND OTHER RELEVANT PARTICULARS, IT HAS NOT BEEN POS SIBLE TO DETERMINE THE DISALLOWABLE EXPENSES UNDER 6D. IT WAS PROPOSED T HAT A PORTION WILL BE DISALLOWED AS RELATING TO ESTIMATED PERSONAL EXPENS E OF THE ASSESSEE. SINCE, THE ASSESSEE HAS NOT RESPONDED TO THIS LETTER SO FARE, A SUM OF E1,20,000/- WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. 21.4 WITH REGARD TO CAR MAINTENANCE OF E37,474 /- WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER, THE F ACTS OF THE CASE ARE THAT THE ASSESSEE DEBITED A SUM OF E68,256/-E52,399/- E22,2 40/-, BY WAY OF CAR MAINTENANCE, ONE FOURTH OF THIS EXPENDITURE WAS TRE ATED AS PERSONAL IN NATURE I.E E17,064/- E14850/- AND E 5560/- TOTALLING E37,474/-. THE ASSESSING OFFICER TREATED E37,474/- AS UNDISCLOSED INCOME OF THE ASSE SSEE. 21.5 WITH REGARD TO PRELIMINARY EXPENSES OF E8 ,947/- WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER, THE FA CTS OF THE CASE ARE THAT THE ASSESSEE DEBITED E8,947/- AS PRELIMINARY EXPENSES. BY ITS VERY DESCRIPTION THE I.T(SS) A-06/MDS/2013 :- 63 -: ASSESSING OFFICER CONSIDERED THE AMOUNT HAS NOT ALL OWABLE. SO, HE TREATED E8,947/- AS UNDISCLOSED INCOME OF THE ASSESSEE. 21.6 WITH REGARD TO DEPRECIATION DISALLOWED T O THE TUNE OF E4,60,000/- WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASS ESSING OFFICER, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD CLAIMED DEPRECIA TION OF E30,26,551/-. ONE OF THE MACHINERIES VIZ WEB OFFSET PRESS MODEL MARK 62 IS PURCHASED FOR E48,40,956/-. OUT OF THIS CONSIDERATION THE ASSESS EE HAS NOT PAID A SUM OF E2,06,794/- . DURING THE COURSE OF DISCUSSION WITH THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE IT TRANSPIRED THAT THIS LIABILITY IS NOT PROPOSED TO BE PAID OFF. IN VIEW OF THIS, THE AMOUNT OF E2,06,794 /- IS REDUCED FROM THE BLOCK OF ASSETS AND THE DEPRECATION AT 25% IS DISALLOWED, WH ICH WORKS OUT E51,699/-, APART FROM THIS, SALE OF A VAN WAS WRONGLY CREDITED TO SALES A/C. IN THE BOOKS OF TAMILARASI PUBLICATIONS. THIS MISTAKE WAS POINTED OUT BY THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE IN A REVISED COMPUTATIO N OF THE INCOME RETURNED BY THE ASSESSEE IN THE BLOCK RETURN. WHILE DEDUCTING THIS FROM TAXABLE INCOME DEPRECIATION @20%. THE ASSESSING OFFICER TREATED E 68,799/-, E52,454/-, 193,612/- AND E1,45,756/-, TOTALLING E4,60,000/- TR EATED UNDISCLOSED INCOME OF THE ASSESEEE. 21.7 WITH REGARD TO DISALLOWANCE U/S.40A(3) TO T HE TUNE OF E1,33,365/- WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER, THE FACTS OF THE CASE I.T(SS) A-06/MDS/2013 :- 64 -: ARE THAT IN THE SPECIAL AUDIT REPORT THE PAYMENT OF E38,365/- , 48750, 16,250/- AND 30,000/-/- IS MADE IN CASH ON 11.10.1993, 14.06 .1995, 15.06.1995 AND 01.07.1995. THE LD. AUTHORISED REPRESENTATIVE FOR A SSESSEE IN HIS REPLY DATED 9.3.1998 HAS STATED THAT THIS PAYMENT WAS MADE IN C ASH BECAUSE OF THE URGENCY. ACCORDING TO HIM IT IS COVERED BY RULE 6DD. THE ASS ESSEE HOWEVER HAS NOT PROVED THE GENUINESS OF THIS PAYMENT. MOREOVER THE CIRCUM STANCES HAS NOT PROVED THE GENUINESS OF THIS PAYMENT. MOREOVER, THE CIRCUMSTAN CES EXPLAINED FOR MAKING THE CASH PAYMENT WAS ALSO NOT SATISFACTORY. SO THIS AM OUNT IS THEREFORE ADDED TO THE BUSINESS INCOME OF THE ASSESSEE. 21.8 WITH REGARD TO LIABILITY DUE TO SCANTECH FOR E67055/- WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFF ICER, THE FACTS OF THE CASE ARE THAT LIABILITY DUE TO SCANTECH U/S.41(1) AT E67,05 5/- WAS TREATED AS UNDISCLOSED OF THE ASSESSEE BY THE ASSESSING OFFICER. 21.9 THE LD. AUTHORISED REPRESENTATIVE FOR AS SESSEE SUBMITTED THAT ALL THESE ITEMS ARE DEBITED IN THE BOOKS OF M/S. TAMILARASI P UBLICATIONS. TH VERACITY OF THE DEBITS CAN BE EXAMINED ONLY IN THE REGULAR ASSESSME NT. THESE DISALLOWANCES CANNOT BE SUBJECT MATTER OF ADDITION IN BLOCK ASSES SMENT U/S.158BC. HENCE, THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE PRAYED THAT ALL THESE DISALLOWANCE MAY BE DELETED. I.T(SS) A-06/MDS/2013 :- 65 -: 21.10 THE LD. DEPARTMENTAL REPRESENTATIVE RELI ED ON THE ORDERS OF THE ASSESSING OFFICER. 21.11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE IS THAT THESE EXPENDITURES ARE REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS IN M/S. TAMILARASI PUBLICATIONS, IF IT IS ACTUALLY REFLECTED IN THE R EGULAR BOOKS OF ACCOUNTS OF M/S. TAMILARASI PUBLICATIONS THE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. THESE FACTS REQUIRED TO BE EXAMINED BY THE ASSESSIN G OFFICER. HENCE, THESE GROUNDS ARE REMITTED BACK TO THE FILE OF THE ASSES SING OFFICER FOR FRESH CONSIDERATION. THIS GROUNDS OF THE APPEAL OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 22. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO INVESTMENT IN JEWELLERY TO THE TUNE OF E2,00,00/- WHICH WAS TRE ATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER. 22.1 THE FACTS OF THE CASE ARE THAT THE ASSESS EE STATED THAT HE OWNS JEWELLERY WORTH OF E2,00,000/- AS ON 31.12.1995. T HE DEPARTMENT VIDE LETTER DATED 02.07.1997 DIRECTED THE ASSESSEE TO FURNISH A LIST OF JEWELS OWNED BY HIM TOGETHER WITH HIS EXPLANATION REGARDING THE SOURCE OF ITS ACQUISITION. HOWEVER, THE ASSESSEE HAS NOT FURNISHED THE DETAILS TILL DA TE. HENCE, THE ASSESSING OFFICER TREATED E2,00,000/- AS UNEXPLAINED INVESTMENT OF T HE ASSESSEE FOR THE YEAR I.T(SS) A-06/MDS/2013 :- 66 -: ENDING 31.03.1996 AND ACCORDINGLY ASSESSED THE INVE STMENT AS UNDISCLOSED INCOME. 22.2 THE LD. AUTHORISED REPRESENTATIVE FOR AS SESSEE SUBMITTED THAT THE POSSESSION OF JEWELLERY WAS EXPLAINED IN THE NET WE ALTH STATEMENT OF THE ASSESSEE. FURTHER, THE SOURCE IS AVAILABLE IN THE CASH FLOW STATEMENT FILED BY THE ASSESSEE. A SUMMARY REJECTION OF THE CASH FLOW BY T HE ASSESSING OFFICER WILL NOT RENDER THE AMOUNT AS UNEXPLAINED INVESTMENT. 22.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIE D ON THE ORDERS OF THE ASSESSING OFFICER. 22.4 WE HAVE HEARD BOTH THE PARTIES AND PERU SED THE MATERIAL ON RECORD. IN THE CASH FLOW STATEMENT FOR THE YEAR ENDING 31.0 3.1996, THIS AMOUNT OF E2,00,000/- WAS NOT REFLECTED IN THE CASH FLOW STAT EMENT FILED BEFORE US. BEING SO, THE ADDITION OF E2,00,000/- IS SUSTAINED. THI S GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 23. THE NEXT GROUND RAISED BY THE ASSESSEE IS WITH R EGARD TO FOREIGN TRAVEL EXPENSES TO TUNE OF E31,42,000/- WHICH WAS TREATED AS UNDISCLOSED INCOME BY THE ASSESSING OFFICER. I.T(SS) A-06/MDS/2013 :- 67 -: 23.1 THE FACTS OF THE CASE ARE THAT THE ASSESS EE MADE A FOREIGN TRIP TO SINGAPORE, HONGKONG AND PHILLIPNESS. THE DURATIO N OF THE TRIP IS FROM 17.2.1991 TO 18.4.1991. THE EXPENSES ARE SPREAD OVE R TWO PREVIOUS YEAR. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF FUNDS F OR HIS FOREIGN TRIPS. IN THIS LETTER DATED 2.9.1997 THE ASSESSEE STATED THAT THE TRIP WAS FOR HIS BUSINESS FOR ATTENDING PRINTING AND COMPUTER MACHINE EXHIBITION AND THE EXPENDITURE IS ACCOUNTED IN THE BOOKS. THE ASSESSEE HAS NOT PIN P OINTEDLY GIVEN ANY DETAILS INCLUDING THE DEBT IN THE BOOKS. IN THIS REGARD, H E HAD BEEN SPECIALLY ASKED FOR SUCH DETAILS VIDE THE DEPARTMENT LETTER DATED 20.0 2.1998. IN THIS LETTER HE WAS ASKED TO FURNISH DETAILS OF HIS FOREIGN TRIPS, DEST INATION, NUMBER OF DAYS STAYED ABOARD, EXPENSES INVOLVED AND THE PRECISE INFORMATI ON REGARDING THE SOURCES. IF THE EXPENSES ARE MET OUT OF THE BUSINESS INCOME OF M/S. TAMILARSI PUBLICATIONS , THE ASSESSEE WAS REQUESTED TO POINT OUT THE EXACT D EBIT IN THE RELEVANT BOOKS OF ACCOUNT. THE ASSESSEE HAD NOT FURNISHED ANY REPLY IN THIS REGARD. THEREFORE, THE ASSESSING OFFICER ESTIMATED THE EXPENSES FOR 42 DAYS(I.E FROM 17.2.1991 TO 31.3.91) AT E5,000/- PER DAYS , THE EXPENSES COMES TO E2,10,000/- AND THE TICKET EXPENSE FOR ONWARDS JOURNEY ESTIMATED AT E10 ,000/-. THE TOTAL FOREIGN TOUR EXPENSES TAKEN AT E2,20,000/- FOR THE ASSESSME NT YEAR 1991-92. FURTHER FOR THE ASSESSMENT YEAR 1992-93, THE ASSESSEE UNDERTOOK FOREIGN TRIPS I.E FROM 1.4.91 TO 18.04.91, I.E 18 DAYS. THE EXPENSES IN TH IS REGARD IS ESTIMATED AT THE RATE OF E5,000/- PER DAY AND TICKET CHARGED IS ESTI MATED AT E10,000/-. THE I.T(SS) A-06/MDS/2013 :- 68 -: EXPENSES AT TO USA AND SINGAPORE FROM 9.8.91 TO 27 .09.91 FOR 50 DAYS AND 1.10.91 TO 12.10.1991 TO ZURICH, DUBAI AND SINGAPOR E 12DAYS. THE ASSESSING OFFICER ESTIMATED THE EXPENSE FOR 62 DAYS AT 5,000 PER DAYS, THE EXPENSE COMES TO E3,10,000/- AND THE COST OF TICKET FOR TWO TRIPS IS TAKEN AT E2,00,000/-. THE TOTAL FOREIGN TOUR EXPENSES TAKEN AT E6,10,000/-. THE ASSESSEE UNDERTOOK FOREIGN TRIPS TO FRANKFURT, LONDON FROM 23.04.1992 FOR 09 DAYS AND TO SINGAPORE FROM 23.05.92 FOR 5 DAYS, SINGAPORE AND MALAYSIA FR OM 13.11.92 FOR 16 DAYS. THE ASSESSING OFFICER ESTIMATED THE EXPENSE FOR 30 DAYS AT 5,000 PER DAYS, THE EXPENSE COMES TO E1,50,000/- AND THE COST OF TICKET FOR THREE TRIPS IS TAKEN AT E4,00,000/-. THE TOTAL FOREIGN TOUR EXPENSES TAKEN AT E6,10,000/-. FOR THE ASSESSMENT YEARS 1993-94, THE ASSESSEES TOTAL FOR EIGN TOUR EXPENSES IS E5,50,000/- , FOR THE ASSESSMENT YEARS 1995-96, THE ASSESSEES TOTAL FOREIGN TOUR EXPENSES IS E7,52,000/- AND FOR THE ASSESSMENT YEARS 1996-97, THE ASSESSEES TOTAL FOREIGN TOUR EXPENSES IS E10,10,0 00/-. THE ASSESSING OFFICER TREATED THE AMOUNT AS UNDISCLOSED INCOME OF THE ASS ESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 23.2 THE LD. AUTHORISED REPRESENTATIVE FOR ASSE SSEE THAT IN THE SCHEME OF BLOCK ASSESSMENT THERE IS NO SCOPE OF ESTIMATION OF EXPENSES UNLESS IT IS EVIDENCED BY MATERIAL FOUND IN THE COURSE OF SEARCH . IT CAN BE SEEN THAT ALL FOREIGN TRAVEL EXPENSES ARE ESTIMATED BY THE ASSESS ING OFFICER AND HENCE ALL THE I.T(SS) A-06/MDS/2013 :- 69 -: ADDITIONS ARE TO BE DELETED AS NOT EMANATING OUT OF SEARCH AND HENCE CANNOT BE CONSIDERED AS UDI COMPUTED U/S.158BB OF THE ACT. F URTHER, THE AIR TICKET AND EXPENSES IN INDIA ALONE WERE MET BY ASSESSEE AND DU LY REFLECTED IN THE CASH FLOW. ALL EXPENSES RELATING TO STAY, FOOD AND TRAV EL IN ABROAD WERE MET BY HIS BUSINESS HOTELS, FRIENDS, AND WELL WISHERS IN THOS E COUNTRIES. THE EXPLANATION FURNISHED BY ASSESSEE IN THIS REGARD IN THE SOURCE OF ASSESSMENT WAS SUMMARILY REJECTED BY THE ASSESSING OFFICER HAD RESTORED TO A N ESTIMATE OF THE EXPENSE WHICH IS NOT IN CONSONANCE WITH THE SCHEME OF UDI A S CONTEMPLATED IN BLOCK ASSESSMENT. 23.3 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE ASSESSING OFFICER. 23.4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE MATERIAL ON RECORD. THE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE IS THAT ADDITION IS MADE ONLY ON ESTIMATION BASIS IN THE BLOCK ASSESSM ENT. ONE CANNOT ESTIMATE THE EXPENDITURE IN BLOCK ASSESSMENT WITHOUT ANY SEIZED MATERIAL SUGGESTING THE EXPENDITURE. BEING SO, WE ARE REMITTING THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE NEXUS BETWEEN THE SEIZED MAT ERIAL AND THE EXPENDITURE INCURRED AND DECIDE THE ISSUE AFRESH AND IF THERE I S NO SEIZED MATERIAL IN RESPECT OF THIS ADDITION, THE ASSESSING OFFICER CANNOT MAKE AD DITION ON THIS COUNT. THIS ISSUE I.T(SS) A-06/MDS/2013 :- 70 -: IS REMITTED BACK TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT(SS) A-06/MDS/2013 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 30TH DAY OF SEP TEMBER, 2015, AT CHENNAI. SD/- SD/- ( . ! ) V. DURGA RAO ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER /CHENNAI. ! /DATED:30.09.2015. KV !' #$% &% /COPY TO: 1. ' APPELLANT 2. / RESPONDENT 3. ( ( )/CIT(A) 4. ( /CIT 5. %) * ##+, /DR 6. * -. / /GF.