Maheshraj Chemicals Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Cent.Circle-2(1), Ahmedabad

ITSSA 85/AHD/2011

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 2870 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 02-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-10-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 02-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR SI NHA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained investment; Business expenditure; Income from undisclosed sources; Loose papers; Proportionate interest; Cost of acquisition; Documents seized
• Section: 153A; 133(6); 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T(SS).A. NOS.85, 86, 87 & 88/AHD/2011 ( / ASSESSMENT YEARS : 2004-05, 2005-06, 2006-07 & 2007-08 RESPECTIVELY) MAHESHRAJ CHEMICALS PVT.LTD. 141, GIDC, PHASE-IV NARODA, AHMEDABAD / VS. THE DCIT, CC-2(1) AHMEDABAD # ./ ./ PAN/GIR NO. : AABCM 0424 C ( #% / APPELLANT ) .. ( &#% / RESPONDENT ) #%' / APPELLANT BY : SHRI S.N. SOPARKAR, AR &#%(' / RESPONDENT BY : SHRI RAJESHKUMAR SINHA,CIT-DR )*(+ / DATE OF HEARING 20/10/2016 ,-./(+ / DATE OF PRONOUNCEMENT 02/01/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE ABOVE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INC OME TAX (APPEALS)-III, AHMEDABAD [CIT(A) IN SHORT] DATED 11 /11/2010. SINCE IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 2 - THE IDENTICAL ISSUES ARE INVOLVED IN ALL THESE YEAR S IN THE CAPTIONED APPEALS, WE SHALL, FOR CONVENIENCE, TAKE UP IT(SS)A NO.85/AHD/2011 RELEVANT TO ASSESSMENT YEAR (AY) 2004-05 AS A LEAD CASE FOR ADJUDICATION OF THE ISSUES INVOLVED. IT(SS)A/85/AHD./2011- AY 2004-05(ASSESSEE APPEAL) 2. THE ASSESSEE HAS SOUGHT TO ASSAIL THE ORDER OF THE CIT(A) BY RAISING FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN REJECTING THE ASSESSEES GROUND OF APPEAL CHALLENGING THE VALIDITY OF THE PROCEEDINGS INITIAT ED U/S.153A OF THE I.T. ACT, WHEN NOTHING INCRIMINATING WAS FOUND DURI NG THE COURSE OF SEARCH, AND IN SPITE OF THE FACT THAT THIS ISSUE WA S SQUARELY COVERED IN ASSESSEES FAVOUR BY VIRTUE OF VARIOUS DECISIONS OF THE HONBLE TRIBUNAL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ASSESSING OFFICERS FINDING THAT THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE COMPANY TO M.R. CHEMCIALS WHICH IS A PROPRIETARY CONCERN OF ITS DIR ECTOR SHRI MAHESH AGARWAL WERE NOT FOR BUSINESS PURPOSES AND, THEREFORE, TO THE EXTENT INTEREST HEARING BORROWED FUNDS WERE UTI LIZED IN GIVING SUCH LOANS AND ADVANCES, THE INTEREST PAYABLE ON SU CH BORROWED FUNDS IS TO BE DISALLOWED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.60,00 ,000 MADE BY THE ASSESSING OFFICER ON THE ALLEGED AND ASSUMED BASIS THAT THE AFORESAID AMOUNT REPRESENTED UNACCOUNTED INVESTMENT IN SARTHIK-II PROPERTY REFERRING TO A SEIZED PAPER. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN REJECTING THE ASSESSEES GROUND OR APPEAL IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 3 - CHALLENGING LEVY OF INTEREST U/S.234A, U/S.234B AND U/S.234C OF THE I.T. ACT, MERELY MENTIONING THAT THIS IS ONLY CONS EQUENTIAL IN NATURE. 3. IN THE COURSE OF HEARING, THE LD.AR FOR THE ASSE SSEE SUBMITTED THAT THE LEGAL GROUND PERTAINING TO VALIDITY OF SECTION 153A OF THE ACT AS PER GROUND NO.1 OF THE APPEAL MEMO IS NOT UNDER SERIOUS CHALLENGE. WE ALSO SIMULTANEOUSLY NOTICE THAT VARIOUS MATERIALS AND DO CUMENTS WERE ADMITTEDLY FOUND DURING THE COURSE OF SEARCH PROCEE DINGS WHICH GIVE RISE TO REASONABLE APPREHENSION TO POTENTIAL ESCAPEMENT OF INCOME. THUS, GROUND NO.1 OF ASSESSEES APPEAL STANDS DISMISSED. 4. THE RELEVANT FACTS CONCERNING GROUND NO.2 OF THE APPEAL ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AN D TRADING OF DYES AND DYES INTERMEDIATE ACCESSORIES. IN THIS CASE, THE S EARCH WAS CARRIED OUT UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED TO AS 'THE ACT') ON 21/03/2007. A NOTICE UNDER SECTION 1 53A OF THE ACT WAS ISSUED TO THE ASSESSEE ON 18/12/2007. IN COMPLIANC E, THE ASSESSEE FILED RETURN OF INCOME ON 21/10/2008 DECLARING TOTAL INCO ME OF RS.58,36,660/-. THE ASSESSMENT WAS FRAMED AT TOTAL INCOME OF RS.1,2 0,35,670/- AS AGAINST THE RETURNED INCOME OF RS.58,36,660/-. IN THE COURS E OF THE ASSESSMENT, THE ASSESSING OFFICER (AO) INTER ALIA OBSERVED THAT ASSESSEE HAS CLAIMED INTEREST OF RS.21,175/- INCURRED ON LOAN OBTAINED F ROM FINANCIAL INSTITUTIONS AND BANKS. THE AO DISALLOWED THE AFORE SAID INTEREST EXPENDITURE AS NON-BUSINESS EXPENDITURE ON THE GRO UND THAT ASSESSEE HAS IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 4 - SHOWN RS.3,62,54,597/- AS LOANS AND ADVANCES TO M /S. M.R. CHEMICALS IN WHICH SHRI MAHESH AGRAWAL, DIRECTOR OF THE COMPA NY IS THE PROPRIETOR. NO INTEREST HAS BEEN CHARGED BY THE AS SESSEE ON SUCH ADVANCES. THE PROPRIETOR HAS ALLEGEDLY INVESTED TH E AMOUNT RECEIVED FROM THE ASSESSEE IN RBI BONDS AND THUS HAS UTILIZE D THE AMOUNT FOR PERSONAL PURPOSES. THE ASSESSEE-COMPANY, ON THE OT HER HAND, HAS CLAIMED INTEREST EXPENSES ON THE BORROWINGS FROM FI NANCIAL INSTITUTIONS AND BANKS. THE AO ALLEGED THAT THE AMOUNT BORROWED FROM THE FINANCIAL INSTITUTIONS AND BANKS HAVE BEEN UTILIZED BY THE AS SESSEE FOR PURPOSES OTHER THAN BUSINESS PURPOSES. THUS, IN ESSENCE, IT IS THE CASE OF THE AO THAT INTEREST BEARING BORROWED FUNDS HAVE BEEN DIVE RTED FOR NON-BUSINESS PURPOSES. ACCORDINGLY, HE RESORTED TO PROPORTIONAT E DISALLOWANCE OF INTEREST AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. IN THE FIRST APPEAL, THE CIT(A) CONFIRMED THE AC TION OF THE AO. THE RELEVANT FINDING OF THE CIT(A) READS AS UNDER:- 7. THE NEXT GROUND OF APPEAL IN ALL THE THREE AS SESSMENT YEARS IS REGARDING DISALLOWANCE OF INTEREST ON THE GROUND TH AT THE APPELLANT COMPANY HAD SHOWN LOANS AND ADVANCES TO M .R. CHEMICALS, A PROPRIETARY CONCERN OF MAHESH AGRAWAL, ONE OF THE DIRECTORS OF THE APPELLANT, WHO HAVE UTILIZED THE A MOUNT FOR PERSONAL PURPOSES. THE AO OBSERVED THAT ON THE ONE HAND THE APPELLANT HAD GIVEN SUFFICIENT AMOUNT OF ADVANCES T O ITS DIRECTORS SHRI MAHESH AGRAWAL WHO IS A PROPRIETOR OF M.R. CHE MICALS AND SUCH AMOUNTS ARE INVESTED BY THE DIRECTOR IN THE RB I BONDS, ON THE OTHER HAND, THE COMPANY HAS CLAIMED INTEREST EXPENS ES ON THE IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 5 - BORROWING FROM FINANCIAL INSTITUTIONS AND BANKS. T HE AO HELD THAT THE AMOUNT BORROWED FROM FINANCIAL INSTITUTIONS AND BANKS HAVE BEEN UTILIZED BY THE ASSESSEE FOR OTHER THAN BUSINE SS PURPOSES AND ACCORDINGLY PROPORTIONATE DISALLOWANCE OF INTEREST WAS MADE BY HIM AND ADDED THE SAME IN THE TOTAL INCOME OF THE A PPELLANT. THIS ISSUE HAS BEEN ADJUDICATED BY ME IN THE APPELLATE O RDER DATED 1/10/2010 PASSED IN THE CASE OF THE APPELLANT FOR A SSESSMENT YEARS 2001-2002 TO 2003-2004. IN THE SAID ORDER, THE AO IS DIRECTED AS UNDER: --- IF BEFORE THE AO, THE APPELLANT IS ABLE TO PRO VE THAT THE ABOVEMENTIONED CREDITS APPEARING AS ON 11/4/2001, 26/4/2001 & 12/6/2001 AND IN A.Y. 2001-02 ARE THE O WNED FUNDS OF THE APPELLANT THEN NO DISALLOWANCE OF INTE REST WOULD BE MADE BY HIM, OTHERWISE THE ADDITION OF DISALLOWANCE OF INTEREST WOULD STAND CONFIRMED. IN OTHER WORDS, IF THE SOURCE OF LOANS GIVEN TO M.R. CHEMICA LS IS OUT OF THE OWNED FUNDS OF THE APPELLANT THEN NO INTERES T WOULD BE DISALLOWED BY THE AO. BUT IF THE SOURCE OF LOAN IS OUT OF BORROWED FUNDS, THEN THE ACTION OF THE AO IN DISALL OWING INTEREST ON SUCH BORROWED FUNDS WOULD STAND CONFIRM ED. SUBJECT TO THIS, THIS GROUND IS DISPOSED OFF. THE ONUS IS ON THE APPELLANT TO PROVE THE NEXUS. AS THE FACTS OF THE CASE ARE SIMILAR IN THE YEARS U NDER APPEAL, THE AO IS DIRECTED TO FOLLOW THE DIRECTIONS GIVEN BY ME IN ASSESSMENT YEARS 2001-2002 TO 2003-2004. 6. AT THE TIME OF HEARING BEFORE US, WITH REFERENCE TO GROUND NO.2, CONCERNING DISALLOWANCE OF INTEREST, THE LD.AR SUBM ITTED THAT THE ISSUE IS IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 6 - SQUARELY COVERED IN FAVOUR OF ASSESSEE IN ITS OWN C ASE IN IT(SS)A NO.82 84/AHD/2011 FOR AYS 2001-02 TO 2003-04, ORDER DATED 27/11/2013 WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOU R OF ASSESSEE ON THE GROUND THAT OWN CAPITAL TOGETHER WITH RESERVES EXCE EDS THE INTEREST-FREE ADVANCES. THE PROPORTIONATE DISALLOWANCE OF INTERE ST IS THUS NOT CALLED FOR IN THE LIGHT OF DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD., 313 ITR 340 (BOM). THE LD.AR ALSO PLACED RELIANCE ON THE SUBSEQUENT DECISI ON OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF RAGHUVIR SYNTHETI CS, 354 ITR 222 (GUJ.) FOR AFORESAID PROPOSITION. 7. WE NOTE THE CONTENTION OF THE ASSESSEE THAT T HE DIRECT ISSUE AROSE FOR THE CONSIDERATION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS. THE RELEVANT PARAS OF THE ORDER OF THE COORDINATE BENCH OF TRIBUNAL IS REPRODUCED HEREUNDER:- 17. FIFTH COMMON GROUND OF THE APPEAL OF THE ASSES SEE IN ALL THE YEARS IS THAT THE LEARNED CIT(A) ERRED IN LAW AND O N FACTS IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES OF 1,16,227/- IN A.Y.2001-2002, 7,70,343/- IN A.Y.2002-2003 AND 5,05,618/- IN A.Y.2003-2004 BY THE AO HOLDING THAT THE INTEREST B EARING FUNDS WERE UTILIZED FOR ADVANCING INTEREST FREE LOANS TO M.R. CHEMICALS, PROPRIETARY CONCERN OF THE DIRECTOR OF THE ASSESSEE -COMPANY, SHRI MAHESH AGRAWAL. IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 7 - 18. BRIEF FACTS OF THE CASE ARE THAT THE AO OBSERVE D THAT THE ASSESSEE HAS ADVANCED LOAN TO M.R.CHEMICALS IN WHICH SHRI MA HESH AGRAWAL OF THE COMPANY IS PROPRIETOR WITHOUT CHARGING ANY I NTEREST AND DIRECTOR HAS UTILIZED THE AMOUNT FOR INVESTMENT IN PERSONAL CAPACITY, WHILE THE ASSESSEE HAS CLAIMED THE INTEREST PAID TO FINANCIAL INSTITUTIONS AND BANKS AS EXPENDITURE. THUS, THE AM OUNT BORROWED FROM THE FINANCIAL INSTITUTIONS AND BANKS HAVE BEEN UTILIZED BY THE ASSESSEE FOR OTHER THAN BUSINESS PURPOSE, WHICH WAS NOT ADMISSIBLE, HENCE, PROPORTIONATE INTEREST EXPENSES WAS DISALLOW ED AND ADDED TO THE INCOME OF THE ASSESSEE. 19. ON APPEAL, THE LEARNED CIT(A) RESTORED THE MATT ER BACK TO THE FILE OF THE AO TO EXAMINE WHETHER THE SOURCE OF LOAN GIV EN TO M.R. CHEMICALS IS OUT OF OWN FUNDS OF THE ASSESSEE OR OU T OF THE BORROWED FUNDS OF THE ASSESSEE. HE DIRECTED THE AO THAT IF T HE SOURCE OF THE FUNDS ADVANCED WAS OUT OF THE ASSESSEE'S OWN FUNDS, THEN NO DISALLOWANCE OF INTEREST WAS CALLED FOR, OTHERWISE, DISALLOWANCE OF INTEREST HAS TO BE CONFIRMED. 20. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT H ON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIE S & POWER LTD., 313 ITR 340 (BOM) HAS HELD THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AND/OR LOANS TAKEN, THE N A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE IN TEREST-FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INT EREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CA SE THIS PRESUMPTION WAS ESTABLISHED CONSIDERING THE FINDING OF FACT BOT H BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL. THE INTERE ST WAS DEDUCTIBLE. LEARNED AR OF THE ASSESSEE THEN REFERRE D TO PAGES NO.L TO 44 OF THE PAPER BOOK FILED BEFORE US. HE POINTED OU T FROM PAGE 6 OF THE PAPER BOOK, WHEREIN BALANCE SHEET FOR THE YEAR ENDING 31.3.2001 IS FILED, THAT THE SHARE CAPITAL AND RESERVES AND S URPLUS OF THE ASSESSEE WAS 8,76,31,146, WHEREAS ADVANCE GIVEN TO M.R.CHEMICAL WAS 9,98,902/- ONLY. FURTHER, HE REFERRED TO PAGE NO.22 OF THE PAPER BOOK, WHEREIN THE BALANCE SHEET FOR THE YEAR ENDING 31.3.2002 IS IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 8 - FILED, AND POINTED THERE FROM THAT THE SHARE CAPITA L AND RESERVES & SURPLUS OF THE ASSESSEE WAS 10,50,31,583/- AND THE AMOUNT ADVANCED TO M/S.M.R. CHEMICALS WAS 2,75,90,237/-. HE FURTHER REFERRED TO PAGE NO.36 OF THE PAPER BOOK WHEREIN TH E BALANCE SHEET FOR THE YEAR ENDING AS ON 31.3.2003 IS FILED, AND P OINTED THEREFROM THAT THE SHARE CAPITAL AND RESERVES & SURPLUS OF TH E ASSESSEE WAS 11,50,59,299/- AND THE ADVANCE MADE TO M/S.M.R.CHEM CIALS WAS 3,54,13,938/-. THUS, HE SUBMITTED THAT IT IS CLEAR THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO ADVANCE LOAN TO M/S.M.R .CHEMCIALS DURING THE YEAR UNDER CONSIDERATION, AND THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. (SUPRA), NO DISAL LOWANCE OF INTEREST EXPENDITURE WAS CALLED FOR. 21. THE LEARNED DR AGREED WITH THE ABOVE SUBMISS IONS OF THE ASSESSEE. 22. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DIREC T THE AO TO DELETE THE DISALLOWANCE OF INTEREST EXPENDITURE OF 1,16,227/-IN A.Y.2001- 2002, 7,70,343/- IN A.Y.2002-2003 AND 5,05,618/- IN A.Y.2003- 2004. THUS, THIS GROUND OF THE APPEAL OF THE ASSESS EE IS ALLOWED IN ALL THE YEARS UNDER CONSIDERATION. 8. IN THE LIGHT OF THE AFORESAID DECISION OF T HE COORDINATE BENCH, WE ARE DISPOSED TO HOLD THAT NO DISALLOWANCE OF INTERE ST FOR UTILIZATION TOWARDS NON-BUSINESS PURPOSE IS CALLED FOR IN THE F ACTS OF THE CASE. ACCORDINGLY, WE ADJUDICATE GROUND NO.2 OF THE APPE AL IN FAVOUR OF THE ASSESSEE. 9. WE SHALL NOW ADVERT TO GROUND NO.3 OF THE APPEA L. THE AO ALSO INTER-ALIA MADE ADDITIONS OF RS.60 LACS TOWARDS UNACCOUNTED INVESTMENT IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 9 - IN OFFICE PREMISES, NAMELY SARTHIK-II. THE RELEVANT FACTS HAVE BEEN NOTED IN THE EXTRACT OF THE CIT(A) ORDER ABOVE AND THUS N OT INTENDED TO BE REPEATED. BROADLY SPEAKING, IN THE COURSE OF SEARCH PROCEEDINGS OF THE OFFICE PREMISES OF THE ASSESSEE LOCATED AT SARTHIK- II, OPP. RAJPATH CLUB, S.G.ROAD, AHMEDABAD, CERTAIN LOOSE-PAPERS AND DOCUM ENTS FOUND INTER ALIA INCLUDES LOOSE-PAPERS FILED MARKED AS ANNEXURE-AF 1/6 CONTAINING 90 PAGES. THIS LOOSE-PAPER FILE AMONG OTHERS, CONT AINS CERTAIN RECORD OF PAYMENTS MADE TO SELLER IN RESPECT OF PURCHASE OF O FFICE. THE AO ON THE BASIS OF LOOSE-PAPER DETERMINED THE PURCHASE PRICE OF OFFICE PREMISES AT RS.2,06,50,140/- AGAINST THE DECLARED PURCHASE COST S OF RS.1,26,21,240/- PAID BY CHEQUE. THE AO THUS WORKED OUT THAT RS.80 LACS WAS PAID AS ON-MONEY IN CASH OUT OF UNDISCLOSED INCOME WHICH HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS. OUT OF AFORESAID RS.80 LACS, RS.60 LACS WAS ALLEGEDLY ATTRIBUTABLE TO FINANCIAL YEAR 2003-2004, I.E. AY 2004-05 AND BALANCE RS.20 LACS WAS STATED TO BE ATTRIBUTABLE TO FINANCIAL YEAR 2004- 05, I.E. AY 2005-06. THE AO THUS MADE ADDITIONS OF RS.60 LACS TOWARDS UNDISCLOSED INVESTMENTS IN SARTHIK-II IN RELATION T O F.Y. 2003-04 RELEVANT TO AY 2004-05. SIMILARLY, BALANCE RS.20 LACS WERE ADDED AS UNDISCLOSED INVESTMENT FOR PURCHASE OF PROPERTY AT SARTHIK-II I N AY 2005-06. 10. IN THE FIRST APPEAL, THE CIT(A) DECIDED THE ISS UE AGAINST THE ASSESSEE. THE ISSUE INVOLVES FACTUAL ANALYSIS OF S EIZED DOCUMENTS. THE IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 10 - CIT(A) HAS NOTED THE FACTS AND DEALT WITH THE ISSUE OF UNACCOUNTED INVESTMENT IN SARTHIK-II IN FOLLOWING MANNER. 12. THE NEXT GROUND OF APPEAL IS REGARDING UNACCOU NTED INVESTMENT IN SARTHIK-II. THE AO MADE ADDITION OF RS.20 LACS IN ASSESSMENT YE AR 2005-2006 AND RS.80 LACS IN ASSESSMENT YEAR 2006-07 ON THE BASIS OF SEIZED D OCUMENTS SEIZED FROM THE OFFICE PREMISES OF THE APPELLANT. THE RELEVANT DISCUSSION OF THE AO AT PARA-7 TO PARA 8.8 OF THE ASSESSMENT ORDER IS REPRODUCED AS UNDER. IN THE COURSE OF SEARCH PROCEEDINGS AT THE OFFICE P REMISES OF THE ASSESSEE LOCATED AT 301, 311 & 312, THIRD FLOOR SARTHIK-II, OPP. RAJPATH CLUB, ABOVE ICICI BANK, S.G. ROAD, AHMEDABAD LOOSE PAPERS AND D OCUMENTS FOUND AND SEIZED INTERALIA INCLUDES LOOSE PAPER FILE MARKED A S ANNEXURE AF 1/6 CONTAINING 90 PAGES. IT IS SEEN FROM PAGE-4 OF ANNE XURE AF 1/6 THAT IT CONTAINS RECORD OF PAYMENTS MADE TO SAMPRAT CO OP. SOCIETY IN RESPECT OF PURCHASE OF OFFICE. IN THIS CONNECTION VIDE QUESTIO NNAIRE DATED 15/11/2008 ASSESSEE WAS ASKED TO EXPLAIN AS UNDER: . (VII) IT IS SEEN FROM PAGE NO. 4 OF ANNEXURE AF/ 1 /6 SEIZED FROM SARFHAK-LI ON 22/03/2007 THAT IF CONTAINS NOTING OF PAYMENT MA DE IN CODED FORM WHICH ARE DULY ACKNOWLEDGED BY PUTTING SIGNATURE IN-SHORT FORM 'RB' 0.13 24/11/03 0.15 24/12/03 0.15 9/1/04 0.25 16/1/04 0.10 24/2/2004 0.20 9/4/04 IT IS ALSO SEEN FROM PAGE NO.57, 58, 59, 62 OF ANNE XURE AF-1/6 THAT THESE ARE RECEIPTS ISSUED BY NEW SAMPRAT COMMERCIAL CO-OP. SO CIETY LTD. TO MRCPL ON VARIOUS DATE FOR VARIOUS AMOUNT WHICH ARE SIGNED BY ITS SECRETARY IN - SHORT FORM 'RB'. IF IS ALSO SEEN FROM SEIZED PAGE NO. 9, 10,11 THAT OF AF/L/6 THAT THESE ARE COPIES OF LETTER ISSUED BY AUDA TO SECRETARY OF NEW SAMPRAT CO-OP. COMMERCIAL HOUSING SOCIETY LTD. AS PER THESE LETTER S SECRETARY OF THIS SOCIETY IS SMT. PRIYANKA R BHRAHMBHATT. FROM THE ABOVE IF APPEARS THAT THE SIGNATURE PUT ON PAGE NO. 4 IS SECRETARY OF NEW SAMPRAT CO-OP. COMMERCIAL HOUSING SOCIETY LT D. SMT. PRIYANKA R BHRAMBHATT. AS PER PAGE NO.4 THE PAYMENT DETAILS RE CORDED IN CODED FORM IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 11 - COMES TO RS.78 LACS IN F.Y. 2003-04 AND.RS.20 LACS FALLS IN F.Y. 04-05. PLEASE EXPLAIN WHY THE PAYMENT RECORDED AS PER THES E PAGES SHOULD NOT BE TREATED AS CASH PAID TO NEW SAMPRT F COM M ERCIAL CO-OP. HOUSING LTD. FOR THE OFFICE PURCHASES. 6.3. IT IS ADMITTED BY THE ASSESSEE THAT THE ABOVE PAPERS HAVE BEEN SEIZED FROM THE OFFICE PREMISES AT SARTHIK-II DURING THE COURSE OF SEARCH. AS PER SECTION 132 OF THE INCOME TAX ACT, IN RESPECT OF ANY PAPER OR DOCUMENT FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF THE ASSESSEE, IT IS TO BE PRESUMED THAT IT BELONGS TO THE ASSESSEE UNLESS IT IS PROVED BY THE ASSESSEE OTHERW ISE. THE ASSESSEE HAS TRIED TO DISOWN THE RESPONSIBILITY OF THE ABOVE PAPER. HOWEV ER, AS MENTIONED IN THE QUESTIONNAIRE THE PAPER WAS FOUND FROM THE - PREMIS ES BELONGING TO THE ASSESSEE. THE ASSESSEE HIMSELF HAS ADMITTED IN HIS STATEMENT THAT THIS ANNEXURE IS PERTAINING TO THE INVESTMENT IN SARTHIK-II. THIS IS ALSO EVIDENCED FR OM THE REPLY OF SHRI MAHESH D AGRAWAL, DIRECTOR OF THE COMPANY, IN THE STATEMENT RECORDED ON 6/6/2007 BEFORE INVESTIGATION WING, WHICH IS REPRODUCED AS UNDER: Q-14 REFER PAGE 12 TO 32 OF AF-1/6 SEIZED FROM SART HI-II ON 21/03/2007, HOW MANY OFFICES/BUSINESS PREMISES HAVE BEEN PURCHA SED IN SARTHI-II, S G HIGHWAY AND HOW MUCH AMOUNT HAS BEEN PAID. A-14 WE HAVE PAID RS.1.26 CRORES APPROX. AGAINST TH IS OFFICES AND ONE SHOW ROOM IN SARTHI-II. THESE 3 OFFICES ARE AT 3 R FLOOR, 301, 311 & 312 AND SHOW ROOM AT NO. 107 AT FIRST FLOOR. TOTAL OFRS.2 CRORES AMOUNT WAS PAID AND BALANCE AMOUNT I.E. RS. 74 LACS HAS BEEN RETURNED BY NEW SAMPRAT TO US I.E. MA HESHRAJ CHEMICAL P LTD. IN THIS CASE AT THE BEGINNING I HAVE TOLD TO THE SAFAL TO B OOK SOME PREMISES IN MY NAME I.E. MAHESHRA ' CHEMICAL P LTD. A LUMSUM BUILT UP AREA O F 10000 SQ, FT. THOUGH FINALLY COMPANY HAS PURCHASED ONLY 3 OFFICES I.E. 301, 311 & 312 AND A SHOW ROOM AT 107. THUS, FROM THE ABOVE IT IS EVIDENT THAT THE ABOVE S EIZED PAPERS ARE 'PERTAINING TO THE ASSESSEE ONLY. IT IS TO BE NOTED THAT ALL THIS PAYM ENTS ARE ACKNOWLEDGED BY INITIALS AGAINST EACH PAYMENT MENTIONED ON THIS SEIZED PAPER . THE SECRETARY OF NEW SAMPRAT COMM. CO.OP. SOCIETY LTD., IS SMT. PRIYANKA R. BRAH MBHATT. SHE IS WIFE OF SHRI RAJESH BRAHMBHATT WHO IS ONE OF THE MAIN PERSON IN SAFAL GROUP WHO HAS EXECUTED AN MOU WITH THE ASSESSEE FOR SALE OF OFFICE PREMISES AT SARTHIK-II CONSTRUCTED BY NEW SAMPRAT COMMERCIAL CO.OP. SOC LT D. THE INITIAL APPEARING ON THIS PAGE ARE-PUT BY SHRI RAJESH BRAHMBHATT AS R.B. THE PAYMENT DETAILS FIGURING ON THIS PAGE ARE IN CODED FORM IN TERMS OF CRORE RS . AS DESIPHERED IN SUCCEEDING PARA. FOR ALL THESE REASONS ASSESSEE'S CONTENTION T HAT THIS PAGE DOES NOT BELONG TO IT IS NOT ACCEPTED AND ITS FINANCIAL IMPLICATIONS ARE TAKEN INTO CONSIDERATION HEREIN PARA NO.7. IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 12 - 7. ASSESSEE IS OWNER OF OFFICE PREMISES LOCATED AT SARTHIK-II, OPP. RAJPAT CLUB, S.G. ROAD, AHMEDABAD ON FIRST FLOOR AS WELL AS ON THIRD FLOOR. ASSESSEE HAS PURCHASED THIS PROPERTY FROM NEW SAMPRAT COMMERCIAL CO.OP. SOCIETY LTD., AND IT HAS SHOWN ITS PURCHASE PRICE AT RS. 1,26,21,2407-. PAYMENT DETAIL S TOWARDS PURCHASE OF THIS PROPERTY IS SHOWN AS UNDER :- IN F.Y.2003-04 RS.50,71,240 2004-05 RS.1,50,00,000 RS.2,00,71,240 LESS : AMOUNT RECEIVED BACK FROM THE SELLER RS.74 ,50,000 RS.1,26,21,240 IT IS ALSO SEEN FROM THE VARIOUS PAPERS OF ANNEXURE AF-1/6 THAT THE PAYMENT OF RS.2,00,71,240/- WAS MADE BY THE ASSESSEE IN CHEQUE ON VARIOUS DATES AS UNDER:- SR.NO. DATE AMOUNT RS. RECEIPT NO. DATE AS PER RECEIPT NO. SEIZ ED PAGE NOS. 1. 13/9/03 5,11,111 3 44 2. 17/9/03 22,60,129 4 45 27,71,240 3. 22/11/03 5,00,000 27 21/11/03 57 4. 12/1/04 15,00,000 40 9/1/04 52 5. 24/2/04 3,00,000 48 24/2/04 56 23,00,000 6. 10/8/04 50,00,000 15 87 7. 16/8/04 50,00,000 17 16/8/04 63 8. 13/9/04 25,00,000 21 14/9/04 65 9. 16/9/04 25,00,000 22 70 IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 13 - 1,50,00,000 7.2 IN THE COURSE OF SEARCH AT ASSESSEE'S OFFICE PR EMISES LOCATED AT 301, 311 & 312, THIRD FLOOR, SARTHIK-II, OPP. RAJPATH CLUB, ABOVE I CICI BANK, S.G. ROAD, AHMEDABAD, LOOSE PAPERS AND DOCUMENTS FOUND AND SEI ZED, INTER-ALIA INCLUDES LOOSE PAPER FILE MARKED AS ANNEXURE AF-1/6 CONTAINING 90 PAGES. MOST OF PAGES OF THIS FILE ARE IN RELATION TO PURCHASE OF PROPERTY FROM NEW SA MPRAT COMMERCIAL CO.OP. SOCIETY LTD., KNOWN AS SARTHIK-II. 7.3 IT IS SEEN FROM PAGE NO.L OF THIS FILE THAT IT CONTAINS NOTING IN RELATION TO SALE OF OFFICES AT SARTHIK-II. IT CONTAINS SELLING RATE FOR GROUND 'FLOOR AND FIRST FLOOR, AREA OF GROUND FLOOR AND FIRST FLOOR, PAYMENT TERMS, RAT E OF PARKING PER CAR, MAINTENANCE DEPOSIT, RATIO OF BUILT-UP AREA TO CARP ET AREA AS WELL AS POSSESSION PERIOD. THIS PAGE ALSO CONTAINS DATE WHICH IS 12/9/ 2003. ON DEEPER SCRUTINY OF THIS PAGE IT IS SEEN THAT THE RATES FOR GROUND FLOOR IS NOTED AT RS. 2475 PER SQ. FT. AND FOR FIRST FLOOR RATE SHOWN IS RS. 1475 PER SQ.FT. AREA AT GROUND FLOOR IS SHOWN 3386 SQ. FT. AND 3614 SQ. FT. THE AREA AT FIRST FLOOR IS SHOWN AT 6997 SQ.FT. THE MAINTENANCE DEPOSIT IS SHO WN AS 120. THE RATIO OF BUILT-UP TO CARPET AREA IS SHOWN 9%. PAYMENT SCHEDULE IS SHO WN AS 10% AMOUNT AS TOKEN AND 30% WITHIN COMMENCEMENT OF WORK AND 60% IN EQUAL MO NTHLY INSTALLMENTS. PARKING PER CAR IS NOTED AT RS. 15,000/- PER CAR(FOR SIX PA RKING.). ABOVE NOTINGS ARE REFLECTED ON PAGE NO.3 ALSO AS IT IS XEROX COPY OF PAGE NO.L. 7.4 ABOVE FACTS ARE AGAIN REPEATED IN PAGE NO.5 & 6 WHICH CONTAIN COPY OF MOU ENTERED BETWEEN MR. MAHESH AGARWAL - M/S. MAHESHRAJ CHEMICALS PVT. LTD., AS BUYER AND MR. RAJESH BRAHMBHATT OF M/S. SAFAL CONST RUCTIONS PVT. LTD., NAVRANGPURA, AHMEDABAD AS SELLER AND SHRI ARVIND SH AH, CEO - SPACE MANAGEMENT LTD., AHMEDABAD AS INTERMEDIATORS. THIS AGREEMENT IS EXECUTED ON 15/9/2003 IN RELATION TO SHOP NO.L & 2 BUILT UP AT GROUND FLOOR AND SHOP NO.L ON FIRST FLOOR OF SARTHIK-II, - OPP. RAJPATH CLUB, S.G . HIGHWAY, AHMEDABAD. THIS DOCUMENT IS ON THE LETTER PAD OF SPACE MANAGEMENT A ND IT IS SIGNED BY ARVIND SHAH AS CEO - LAND AND PROJECTS. AS PER PARA-1 OF MOU THE RATES FOR GROUND FLOOR (TH E AREA OF SHOP NO.L - 3386 SQ. FT. AND SHOP NO.2 - 3641 SQ. FT. - TOTAL - 7027 SQ. FT.) IS SHOWN @ RS.2475 PER SQ.FT. BUILT-UP. AS PER PARA-1 OF MOU THE RATES FOR FIRST FLOOR (THE AREA OF SHOP NO.L - 6997 SQ. FT.) IS SHOWN @ RS.1475 PER SQ.FT. BUILT-UP. IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 14 - AS PER PARA-2 OF MOU THE MAINTENANCE DEPOSIT @50 PE R SQ. FT., THE AEC CHARGES, AUDA AND LEGAL CHARGES @ 70 PER SQ. FT. AND STAMP D UTY AND REGISTRATION EXPENSES @ RS. 50 PER SQ. FT.(ESTIMATED) SHOWN AS WOULD BE C HARGED EXTRA. AS PER PARA-3 OF MOU PARKING SPACE IN THE BASEMENT IS FOR 6 CARS AND THE CHARGES FOR THE SAME ARE DECIDED @ RS. 15,000/- PER CAR. AS PER PARA-6 OF MOU THE SCHEDULE OF PAYMENT IS DEC IDED. AS PER THIS TOKEN PAYMENT IS DECIDED @ 10% AND FURTHER PAYMENT @30% WAS TO BE MADE WITHIN COMMENCEMENT OF WORK AND BALANCE IN EQUAL MONTHLY INSTALLMENT BA SIS FOR THE PERIOD OF 10 MONTHS. AS PER PARA-6 OF MOU FOR THE PURPOSE OF AREA CALCUL ATION THE DIFFERENCE BETWEEN BUILT-UP TO CARPET AREA IS DECIDED AS 9%. 7.5 ON SCRUTINY OF PAGE NO. 1, 2, 3 AND PAGE NO.5 & 6 IT IS APPARENT THAT ON 12/9/2003 THE DEAL WAS NEGOTIATED AND WAS NOTED DOW N ON PAGE NO.L, AS A SIMPLE JOTING. HOWEVER, IT WAS EXECUTED IN THE FORM OF MOU ON 15/9/03 AS PER PAGE N.O.5 & 6. ON THE BASIS OF THESE PAGES THE AMOUNT PAYABLE C AN BE WORKED OUT AS UNDER :- FLOOR AREA (IN SQ.FT.) RATE (IN RS. PER SQ.FT.) AMOUNT RS. GF 7027 2475 1,73,91,825 FF 6997 1475 1,03,20,575 TOTAL 2,77,12,400 FROM THE ABOVE THE PAYMENT SCHEDULE CAN BE WORKED O UT AS UNDER :- 10% TOKEN WOULD BE RS. 27,71,240 30% RS. 83,13,720 7.6 ON COLLATING DETAILS OF PAYMENT AS NOTED I N SEIZED PAPER NO.4 AND PAYMENT SCHEDULE AS SHOWN IN PARA 7.1 ABOVE IT CAN BE SEEN THAT THE MOU FOR PURCHASE OF SHOPS A SARTHIK-II WAS EXECUTED ON 15/9/2003 AND AR OUND THAT PERIOD THE PAYMENT WAS MADE BY THE ASSESSEE AS UNDER :- SR.NO. DATE AMOUNT RS. BY CHEQUE 1. 13/9/03 5,11,111 BY CHEQUE IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 15 - 2. 17/9/03 22,60,129 BY CHEQUE 27,71,240 FROM THE ABOVE, IT IS SEEN THAT AS PER MOU ASSESSEE WAS REQUIRED TO MAKE TOKEN PAYMENT @ 10% AMOUNTING TO RS. 27,41,240/- AN D THE SAME WAS PAID METICULOUSLY AS MENTIONED ABOVE. THE PAYMENT DATES ARE COINCIDING WITH THE DATE OF MOU. THIS GOES TO SAY THAT THE PROPERTY AT SARTHIK- II WAS PURCHASED BY THE ASSESSEE AS PER TERMS OF AGREEMENT EXECUTED ON 15/9/03. IN THE SAME WAY ON COMMENCEMENT OF WORK ASSESSEE WA S REQUIRED TO MAKE PAYMENT @30% OF TOTAL SALE CONSIDERATION WHICH COME S TO RS. 83,13,720/-. IT IS SEEN FROM THE PARA-7.1 ABOVE THAT AFTER MAKING TOKEN PAY MENT OF RS. 27,71,240/- IN SEPTEMBER, 2003, ASSESSEE HAD MADE PAYMENT OF RS. 2 3,00,000 BY CHEQUE ON VARIOUS DATES I.E. RS. 5 LAC ON 22/11/03, RS. 15 LAC ON 9/1 /04 AND RS. 3 LAC ON 24/2/04. THE BALANCE PAYMENT OF RS. 60 LACS HAS GENESIS IN PAGE NO.4 WHEREIN PAYMENT IS SHOWN AS UNDER:- SR.NO. DATE AMOUNT RS. 1. 24/11/03 0.13 2. 24/12/03 0.15 3. 9/1/04 0.15 4. 16/1/04 0.25 5. 24/2/04 0.10 0.78 6. 9/4/04 0.20 TOTAL 0.98 IT IS WORTHWHILE TO MENTION THAT ON 9/1/04 THE PAYM ENT IS SHOWN AS 0.15. ON CORRELATING THIS FIGURE WITH THE CHEQUE PAYMENT OF RS. 15 LAC MADE ON 9/1/2004 AS MENTIONED IN PARA 7.1 ABOVE IT GOES TO SAY THAT THE AMOUNT NOTED IN SEIZED PAGE NO.4 IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 16 - IS IN CRORES. ON DECODING THE PAYMENT DETAILS RECOR DED IN SEIZED PAGE NO .4 IT INDICATES THAT AS PER THIS PAGE THE AMOUNT PAID WAS RS. 78 LACS IN F.Y.03-04. IT IS ALSO NECESSARY TO MENTION HERE THAT ON 9/1/20 04 PAYMENT OF RS. 15 LACS WAS MADE BY CHEQUE AND AS PER THIS PAPER PAYMENT ON 24/ 2/2004 IS NOTED AS RS. 10 LACS BUT OUT OF THE SAME RS. 3 LAC HAS BEEN PAID BY CHEQ UE, AS NOTED IN PARA-7.1 ABOVE. AFTER SETTING OFF THESE TWO PAYMENTS, THE PAYMENT O THER THAN CHEQUE WOULD COME TO RS, 60 LACS WHICH EXACTLY COINCIDES WITH THE PAYMEN T SCHEDULE MENTIONED IN MOU EXECUTED ON 15/9/03. FROM THE ABOVE, IT IS APPARENT THAT THE PAYMENT DET AIL NOTED IN PAGE NO.4 ARE IN CODED FORM. THE TOTAL PAYMENT AS PER THIS PAGE COME S TO RS. 98 LACS WHICH INCLUDES PAYMENT BY CHEQUE AMOUNTING TO RS. 18 LACS. THUS, T HE TOTAL CASH PAYMENT MADE AS PER THIS PAGE IS RS. 80 LACS. OUT OF THE SAME RS. 6 0 LACS FALLS IN THE FINANCIAL YEAR 2003-04 AND RS. 20 LACS FALLS IN FINANCIAL YEAR 200 4-05. 7.7 IT IS ALSO WORTHWHILE TO MENTION HERE THAT ASSE SSEE HAS SHOWN PAYMENT IN CHEQUE FOR THE PURCHASE OF PROPERTY AT SARTHIK-II AT RS. 1 ,26,21,240/- AND IF THE PAYMENT MADE IN CASH AS PER SEIZED PAPER NO.4 IS ADDED TO I T, THE TOTAL PAYMENT FOR PURCHASE OF THIS PROPERTY WOULD COME TO RS. 2,06,21,240/- WH ICH WOULD COINCIDE WITH THE SALE CONSIDERATION WORKED OUT ON THE BASIS OF MOU. IN PARA 7.4 ABOVE THE TOTAL PAYMENT FOR OFFICE PREM ISES LOCATED AT GROUND FLOOR AND FIRST FLOOR WAS WORKED OUT AT RS. 2,77,12 ,400/-. HOWEVER, AS PER SEIZED PAGES NO.78, 77, 76, 75 & 74 OF ANNEXURE AF-1/6 ASS ESSEE HAS PURCHASED PROPERTY AT 1 ST FLOOR ADMEASURING TO 7009 SQ.FT. AND AT THIRD FLOO R 5738 SQ. FT. AS PER THIS REVISED PURCHASE DETAILS THE VALUE OF THE OFFICES W OULD COME AS UNDER :- FLOOR AREA (IN SQ.FT.) RATE (IN RS. PER SQ.FT.) AMOUNT RS. FIRST FLOOR 7009 1475 1,03,38,275 THIRD FLOOR 5738 1475 84,63,550 1,88,01,825 MAINTENANCE DEPOSIT AS PER MOU 12747 50 6,37,350 AEC CHARGES/AUDA & 12747 70 8,92,290 IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 17 - LEGAL CHARGES AS PER MOD REGISTRATION EXPEN SES AS PER MOU 12747 25 3,18,675 TOTAL 2,06,50,140 7.8 AS DISCUSSED ABOVE, ASSESSEE HAS PAID PURCHASE CONSIDERATION OF OFFICE PREMISES AT SARTHIK-II IN CHEQUE AT RS. 1,26,21,240/- AND HA S ALSO PAID CONSIDERATION IN CASH AT RS. 80 LACS AS WORKED OUT ABOVE. OUT OF THE SAME RS. 60 LACS HAS BEEN PAID IN FINANCIAL YEAR 2003-04 PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY AN AMOUNT OF RS. 60 LACS IS ADDED AS UN DISCLOSED INVESTMENT FOR PURCHASE OF PROPERTY AT SARTHIK-II IN A.Y.2004-05 A ND IN THE SAME WAY RS. 20 LACS WILL BE ADDED AS UNDISCLOSED INVESTMENT FOR PURCHAS E OF THE PROPERTY AT SARTHIK-II IN A.Y.2005-06. PENAL PROCEEDINGS ARE ALSO INITIATED F OR CONCEALING PARTICULARS OF INCOME. 13. THE WRITTEN SUBMISSION OF THE APPELLANT ON THI S ISSUE IS REPRODUCED AS UNDER: 'UNACCOUNTED INVESTMENT IN SARTHIK-II PROPERTY: THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HAS O BSERVED THAT THE APPELLANT HAS INVESTED MORE AMOUNT TOWARDS THE PURCHASE OF SHOWRO OM NO. 101 AND OFFICE PREMISES LOCATED AT 301, 311 AND 312, 3 RD FLOOR, SARTHIK-II, OPP. RAJPATH CLUB, S.G.HIGHWAY, AHMEDABADFROM NEW SAMPART CO. OP. COMM ERCIAL HOUSING SOCIETY COMPARE TO RS. 1.26 CRORE SHOWN IN THE BOOHS OF ACC OUNTS. ACCORDING TO ASSESSING OFFICER, AS PER THE ANNEXURE AF 1/6, SEIZED DURING THE COURSE OF SEARCH CONTAINS CERTAIN DETAILS OF THIS TRANSACTION OF OFFICE PREMI SES PURCHASE AND TOWARDS WHICH THE PAYMENT MADE COMES TO RS. 80 LAKHS IN CASH AND 1.26 CRORE BY CHEQUE. HE HAS COME TO THIS FINDINGS ON THE BASIS OF FOLLOWING GROUNDS: I) THE ASSESSING OFFICER HAS STATED THAT AS THE LOOSE PAPERS CONTAINING THE PAPERS OF INVESTMENT IN THE OFFICES AT SARTHIK-II W ERE FOUND FROM THE PREMISES OF THE APPELLANT, THE INFERENCE IF ANY FROM THIS PA PERS SHOULD ALSO BE DRAWN IN THE HANDS OF THE APPELLANT. FURTHER, HE HAS RELIED ON ANSWER OF QUESTION NO. 14 OF THE DIRECTOR'S STATEMENT RECORDED DURING THE COURSE OF SEARCH. IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 18 - II) FURTHER, HE HAS STATED THAT ALL THE PAYM ENTS IN THE SEIZED PAPER IS ACKNOWLEDGED BY THE INITIALS ON BEHALF OF NEW SAMPA RT CO. OP. COMMERCIAL HOUSING SOCIETY. III) THE ASSESSING OFFICER HAS RELIED ON COPY OF M.O.U. FOUND DURING COURSE OF SEARCH ENTERED BETWEEN APPELLANT M/S. MAHESHRAJ CHE MICALS PRIVATE LIMITED AS BUYER AND MR. RAJESH BRAMBHATT OF M/S. SAFAL CONSTR UCTIONS PRIVATE LIMITED, NAVRANGPURA, AHMEDABAD AS SELLER AND SHRI ARVIND SH AH, CEO- SPACE MANAGEMENT LIMITED, AHMEDABAD AS INTERMEDIATORS. THIS AGREEMEN T WAS EXECUTED ON 15/09/2003 IN RELATION TO SHOP NO. 1 & 2 BUILDUP AT GROUND FLO OR AND SHOP NO. 1 ON THE FIRST FLOOR AT SARTHIK-II, OPP. RAJPATH CLUB, S.G. HIGHWA Y, AHMEDABAD. THIS DOCUMENT IS ON THE LETTER PAD OF SPACE MANAGEMENT LIMITED AND I T IS SIGNED BY ARVIND SHAH AS CEO LAND AND PROJECTS. IV) THE A. O. HAS RELIED ON THE FOLLOWING NOT INGS FOUND DURING THE COURSE OF SEARCH FOR ARRIVING AT FIGURES OFRS. 80 LAKHS. SR. NO. DATE AMOUNT RS. 1. 24/11/2003 0.13 2. 24/12/2003 0.15 3. 09/01/2004 0.15 4. 16/01/2004 0.25 5. 24/02/2004 0.1 0.78 6. 09/04/2004 0.20 TOTAL - - > 0.98 FIRST OF ALL THE ABOVE PAYMENT DETAILS WERE DECODED TO BE IN CRORES BY THE ASSESSING OFFICER. THEN THE CREDIT FOR RS. 15 LAKHS PAID ON 0 9/01/2004 AND RS. 3 LAKHS PAID ON 24/02/2004 BY CHEQUE WAS GIVEN AND REMAINING 80 LAK HS OUT OF TOTAL FIGURE OF 98 LAKHS WAS ASSUMED TO BE PAID IN CASH. OUT OF THE SA ME, RS. 60 LAKHS FALLS IN THE FINANCIAL YEAR 2003-2004 AND RS. 20 LAKHS FALLS IN FINANCIAL YEAR 2004-2005. V) FURTHER THE ASSESSING OFFICER HAS OBSERVED THAT AS PER SEIZED PAGES NO. 78,77,76,75 & 74 OF ANNEXURE AF 1/6 APPELLANT HAS P URCHASED PROPERTY AT 1 ST FLOOR IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 19 - ADMEASURING TO 7009 SQ.FT. AND AT 3 RD FLOOR 5738 SQ.FT. AS PER THIS REVISED PURCHASE DETAILS THE VALUE OF THE OFFICES -WOULD COME AS UND ER: FLOOR AREA [IN SQ.FT.] RATE [IN RS . PER SQ.FT.] AMOUNT RS. FIRST FLOOR 7009 1475 1,03,38,275 SECOND FLOOR 5738 1475 84,63,550 1,88,01,825 MAINTENANCE DEPOSIT AS PER MOU 12747 50 6,37,350 ARC CHARGES/ AUDA & LEGAL CHARGES AS PER MOU 12747 70 8,92,290 REG ISTRATION EXPENSES AS PER MOU 12747 25 3,18,675 TOTAL 2,06,50,140 AS DISCUSSED ABOVE, APPELLANT HAS PAID PURCHASE CON SIDERATION OF OFFICE PREMISES AT SARTHIK-II IN CHEQUE OFRS. 1,26,21,240/- AND HAS AL SO PAID CONSIDERATION IN CASH AT RS. 80 LAKHS AS WORKED OUT ABOVE. OUT OF THE SAME R S. 20 LAKHS HAS BEEN PAID IN FINANCIAL YEAR 2004-05 PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY, AN AMOUNT OFRS. 60 LAKHS IS ADDED AS U NDISCLOSED INVESTMENT FOR PURCHASE OF PROPERTY AT SARTHIK-II IN A. Y. 2004-05 AND IN THE SAME WAY RS. 20 LAKHS IS ADDED AS UNDISCLOSED INVESTMENT FOR PURCHASE OF THE PROPERTY AT SARTHIK-II IN A. Y. 2005-06. VI) AGAINST THE ABOVE STAND OF ASSESSING OFFI CER, THE APPELLANT WOULD LIKE TO SUBMIT THAT THE WHOLE ADDITION HAS BEEN MADE ONLY O N THE BASIS OF LOOSE PAPERS FOUND DURING COURSE OF SEARCH WITHOUT ANY CORRELATED EVID ENCE. THE APPELLANT HAS EXPLAINED THAT THE LOOSE PAPERS WERE ONLY ROUGH NOT ING BEFORE THE FINALIZATION OF PURCHASE OF OFFICE PREMISES AND THE ACTUAL PAYMENT WAS MADE AS PER BOOKS OF ACCOUNTS. VII) THE ASSESSEE COMPANY HAD EXPLAINED THAT I NITIALLY IT HAD DECIDED TO BUY LUMP SUM FOR 10000 SQFT SPACE WHICH WAS ALSO CONFIRMED F ROM THE STATEMENT TAKEN U/S IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 20 - 132(4) GIVEN BY THE DIRECTOR OF THE ASSESSEE COMPAN Y. IT WAS READY TO FINALIZE THE PURCHASE DEAL FOR THE PREMISES AT GROUND, FIRST AND THIRD FLOOR IF IT WOULD GET A GOOD DEAL FOR IT. THEREFORE FOR THE SAFER SIDE THE ASSES SEE COMPANY HAD MADE PAYMENT OFRS.2.01 CRORES FOR THE BOOKING FOR THE GROUND, FI RST AND THE THIRD FLOOR. BUT AFTERWARDS DUE TO LACK OF INTEREST IN PAYING SUCH A HIGH PRICE EVEN AFTER BARGAINING, THE ASSESSEE COMPANY DECIDED TO PURCHASE THE PREMIS ES AT FIRST AND THE THIRD FLOOR OFFICE FOR THEIR BUSINESS PURPOSE. AND FINALLY THE ASSESSEE COMPANY HAD FINALISED THE DEAL FOR FIRST AND THE THIRD FLOOR. AS MENTIONED ABOVE, THE ASSESSEE COMPANY WAS NOT MA KING PAYMENT AS SCHEDULED AS THE ASSESSEE COMPANY WAS WAITING FOR THE NEGOTIATIO N. DEVELOPER OFSARTHIK WAS NOT READY TO BARGAIN FOR THE GROUND FLOOR, BUT WAS READ Y FOR FIRST AND THE THIRD FLOOR. SARTHIK REQUESTED TO CANCEL THE BOOKING FOR THE GRO UND FLOOR. THEREFORE AFTERWARD ASSESSEE HAS FOUND IT PROPER TO CANCEL THE BOOKING FOR GROUND FLOOR AND THE REFUND WAS MADE TO THE ASSESSEE FOR BALANCE RS.74 LAKH AND RS.126 LAC WAS ADJUSTED FOR THE PREMISES AT FIRST AND THIRD FLOOR. FOR THE SCHEDULE PAYMENT THE ASSESSEE WAS MAKING PA YMENT AS AND WHEN THEY COULD ARRANGE FOR THE FUNDS. THE FACT WAS THAT COMPANY WA S IN DILEMMA THAT IT WOULD BE ABLE TO MAKE GOOD DEAL FOR THE GROUND FLOOR. OUT OF PAYMENTS MADE BY THE ASSESSEE, THE AO HAS HAPHAZARDLY CONNECTED WITH SCHEDULED PAY MENT AS PER MOU WHICH WAS THE STANDARD MOU. THE ACTUAL DEAL WAS FOR FIRST AND THE THIRD FLOOR, WHILE THE MOU WAS FOR ONLY FOR GROUND AND FIRST FLOOR AND THAT AL SO BEFORE NEGOTIATION. AO STATED THAT THE ASSESSEE HAD MADE PAYMENT OF RS. 23,00,000 /- BY CHEQUE ON VARIOUS DATES I.E. RS. 5 LACS ON 22/11/03, RS. 15 LACS ON 09/01/0 4 AND RS. 3 LACS ON 24/02/04. AO CORRELATED THIS FIGURES WITH THE CHEQUE PAYMENT OF RS. 15 LACS MADE ON 9/1/2004 WITH THE AMOUNT NOTE IN THE SEIZED MATERIAL ON PAGE - 4 ANNEXURE AF-1/6. APPLYING THE SAME LOGIC AGAIN ALSO THAT PAYMENT MADE ON 24/2/200 4 IS NOTED AS RS. 10 LACS BUT OUT OF THE SAME RS. 3 LACS HAS BEEN PAID BY CHEQUE AO CAN'T ASSUME THAT OUT OF 10 LACS DUE ON 24/02/04, RS. 3 LACS HAS BEEN PAID BY C HEQUE REMAINING IN CASH. AO CAN'T PRESUME BY HIMSELF THAT PART PAYMENT ARE MADE THROU GH CHEQUE AND PART IN CASH. RATES TAKEN BY THE AO WAS BASED ON THE MOU. THE MOU WAS BEFORE NEGOTIATION, IT WAS A STANDARD MOU SAME WAY REG. MAINTENANCE DEPOSI T IT WAS STANDARD FORMAT. THE PRICE WAS STILL PENDING TO BE FINALIZED. VIII) THIS FACT BECOMES MORE JUSTIFIABLE BECAUSE TH E NOTING MADE IN THE LOOSE PAPERS PERTAINS TO GROUND FLOOR AND FIRST FLOOR RATES WHIL E THE ACTUAL DEAL HAS BEEN FOR THE OFFICE PREMISES AT THE FIRST FLOOR AND THIRD FLOOR. AS THE RATE IN THE MOU WAS ONLY FOR THE FIRST FLOOR THE SAME RATE CANNOT BE CONSIDERED FOR THIRD FLOOR BECAUSE THERE IS ALWAYS A TENDENCY THAT PRICES FOR THIRD FLOOR IS LO WER THAN THAT OF FIRST FLOOR. IX) IT IS ALSO WORTHWHILE TO MENTION THAT MOU WAS N OT SIGNED BY THE APPELLANT AND WAS ON THE LETTER HEAD OF THIRD PARTY. (NOT OF APPE LLANT NOR OF THE DEVELOPER). AS SUCH IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 21 - IT AS A PROPOSAL BY THE WRITER OF MOU WHO IS A BROK ER (NAMED AS SPACE MANAGEMENT). AS PER THE KNOWLEDGE OF THE APPELLANT THE BUILDER OF THE PROPERTY OR THE OWNER OF SPACE MANAGEMENT ON WHOSE LETTER HEAD MOU WAS TYPED WERE NEVER QUESTIONED ON THIS ISSUE NOR THE DEPARTMENT HAS ANY PROOF THAT THE SAID PARTIES HAVE AT ANY POINT OF TIME VALIDATED THIS MOU. AS SAID BE FORE THIS MOU WAS ONLY ROUGH ESTIMATE WHICH WAS NEVER EXECUTED. THIS FACT GET MO RE JUSTIFIED WHEN ONE READS AT THE BOTTOM OF MOU WHERE IT HAS BEEN MENTIONED THAT IT S HOULD BE TORN OFF WHEN EXECUTED. AS THE MOU HAS NOT BEEN EXECUTED THE SAME WAS NOT TORN OFF AND SHOULD FOUND AT THE PREMISES DURING SEARCH. X) FURTHER, THE APPELLANT WOULD LIKE TO SUBMIT THAT THE SALE DEED IS REGISTERED AND THE CONSIDERATION PAID HAS BEEN ACCEPTED BY THE STAMP V ALUATION AUTHORITY. NO ADVERSE INFERENCE HAS BEEN DRAWN BY THE SAID AUTHORITY. HEN CE THE APPELLANT WOULD ALSO LIKE TO RELY ON THE AHMEDABAD TRIBUNAL JUDGMENT REPORTED IN 9 DTR 601 WHERE IT HAS HELD THAT IN THE ABSENCE OF ANY MATERIAL SHOWING TH AT THE ASSESSEE HAS RECEIVED HIGHER AMOUNT THAN IN BOOKS OF ACCOUNTS, THE PAYMEN T FIGURE AS PER BOOKS OF ACCOUNTS HAS TO BE ACCEPTED. IN CASE BEFORE HAND TH ERE IS NO EVIDENCE THAT THE APPELLANT HAS PAID MORE THAN THE ACCOUNTED ENTRIES AND THE DEPARTMENT HAS ONLY RELIED ON ROUGH NOTINGS FOUND IN LOOSE PAPER AND UN EXECUTED MOU WHICH AS STATED WAS A PROPOSAL ONLY. THE MOU RELIED UPON BY THE ASS ESSING OFFICER AND OTHER LOOSE PAPERS INAPPRECIABLY CORRELATED TO IT BY THE ASSESS ING OFFICER FOR MAKING THE ADDITION IS NOT JUSTIFIABLE AS THE MOU ITSELF WAS NOT ACCEPT ED BY THE APPELLANT AT ANY STAGE FOR WHICH EXPLANATION HAS ALREADY BEEN GIVEN IN PRECEDI NG PARA. XI) IN THE STATEMENT RECORDED OF THE DIRECTORS OF T HE COMPANY, IT HAS BEEN CLEARLY STATED THAT THE COMPANY HAS PAID RS.1.26 CRORE APPR OX. AGAINST THIS OFFICES AND ONE SHOW ROOM IN SARTHIK-II. THESE 3 OFFICES ARE AT 3 RD FLOOR, 301,311 & 312 AND SHOW ROOM AT NO. 101 AT THE FIRST FLOOR. TOTAL OFRS. 2 C RORES AMOUNT WAS PAID OUT OF WHICH AMOUNT I.E. RS. 74 LACS HAS BEEN RETURNED BY THEM T O THE APPELLANT I.E. MAHESHRAJ CHEMICAL PRIVATE LIMITED. IN R THIS CASE AT THE BEG INNING IT WAS TOLD TO SAFAL TO BOOK SOME PREMISES IN APPELLANT'S NAME I.E. MAHESHRAJ CH EMICAL PRIVATE LIMITED. A LUMP SUM BUILT UP AREA OF 10000 SQ. FT. THOUGH FINALLY C OMPANY HAS PURCHASED ONLY 3 OFFICES I.E. 301,311 & 312 AND A SHOW ROOM AT 1019. THE CALCULATION MADE BY THE ASSESSING OFFICER ON TH E BASIS OF LOOSE PAPERS AS PER ANNEXURE AF 1/6 IS ONLY ON ASSUMPTION AND NO WHERE THE WORD CASH HAS BEEN MENTIONED SO AS TO DRAW THE INFERENCE THAT THE SAID AMOUNT HAS BEEN ACTUALLY PAID IN CASH. AS SAID BEFORE, THESE DOCUMENTS WERE ONLY A R OUGH ESTIMATE BEFORE THE ACTUAL FINALIZATION OF OFFICE PREMISES AND HAS NO NOTING T O DO WITH THE ACTUAL PURCHASE PRICE OF THE OFFICE PREMISES. ' 14. THE APPELLANT MADE FURTHER SUBMISSION ON THE SEIZED PAPERS AS UNDER: 'FURTHER TO WHATEVER HAVE BEEN SUBMITTED, WE HAVE T O SUBMIT AS UNDER. IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 22 - [1] IT IS A FACT THAT THE PREMISES FOR WHICH WE HAD ENTERED INTO PRIMARY UNDERSTANDING WERE CHANGED, SUBSEQUENTLY. [2] IT IS A FACT THAT ON THE DATE OF SEARCH, NO STA TEMENT RELATING TO THE SEIZED PAPER, WHICH IS NOW MADE THE BASIS OF THE ADDITION, HAS BE EN RECORDED. [3] IT IS ALSO A FACT THAT ON THE DATE OF SEARCH, T HE ENTIRE TRANSACTION WAS EXPLAIN IN DETAIL VIDE ANSWER TO QUESTION NO. _____. [4] ON THAT DATE, NO ALLEGATION WAS MADE BY THE SEA RCH PARTY ABOUT THE TRANSACTION OF ON-MONEY. [5] THE JOTTINGS WHICH ARE NOW RELIED UPON BY THE A SSESSING OFFICER ARE NOT AT ALL IN THE HAND WRITING OF THE ASSESSEE. THE JOTTINGS ARE SIMPLE SCRIBBLINGS AND NOT SUGGESTIVE OF ANY TRANSACTION. [6] WHETHER IT IS RECEIPT OR PAYMENT, IT IS NO T AT ALL COMING OUT OF THE SAID JOTTINGS. [7] WHETHER IT IS CHEQUE OR CASH, IT IS ALSO NOT AT ALL IN ANY WAY SUGGESTED BY THE SAID JOTTINGS.. [8] IT IS AN ADMITTED FACT THAT MANY PAYMENTS BY CH EQUES ARE MADE OVER AND ABOVE THE ONE CHEQUE PAYMENT WHICH IS REFERRED TO BY THE ASSESSING OFFICER BEFORE AND AFTER THESE DATES. WHY THESE CHEQUE PAYMENTS HAVE N OT BEEN WRITTEN OR NOTED IN THESE JOTTINGS. IF THE ASSESSING OFFICER'S SUGGESTION IS TO BE ACCEPTED, THEN THESE PAPERS OUGHT TO HAVE CONTAINED DETAILS OF OTHER CHEQUE PAY MENTS. [9] JUST BECAUSE ONE CHEQUE IS OF RS.15 LACS AND TA LLIES WITH ONE OF THE ENTRIES WHICH IS BY WAY OF COINCIDENCE, IT CANNOT BE TAKEN AS THE BASIS FOR ASSUMING THAT THESE ARE RELATED TO IN TERMS OF LAKHS AND THAT TOO, ON-MONEY PAYMENTS. ALL OF THE BASIS ADOPTED BY THE ASSESSING OFFICER ARE BASED ON MERE PRESUMPT IONS AND ASSUMPTIONS. [10] THE DOCUMENTS WHICH ARE NOW RELIED UPON ARE NO T DOCUMENTS WHICH CONTAIN THE FULL DETAILS OF THE TRANSACTION. THE PAYMENT BY CHE QUE WHICH THE ASSESSING OFFICER HAS SUGGESTED IS FOR THE PROPERTY WHICH HAS NEVER B EEN BOUGHT. [11] IT MAY APPRECIATED ON PERUSAL OF REFERRED PAPE R THAT THE PAPER IS WRITTEN AT A STRETCH, AND THIS ITSELF SHOWS THAT THE DIFFERENT A MOUNTS REFERRED TO AND DATE DOES NOT REFLECT ACTUAL PAYMENT. OTHERWISE, THE HANDWRITING AND LETTERS WOULD DIFFER IF IT IS NOTED ON DIFFERENT DATES. AS SUCH PRESUMPTION OF PA YMENTS AS PER SAID PAPER IS NOT CORRECT. [12] FURTHER, TO THE BEST OF INFORMATION AND KNO WLEDGE OF THE APPELLANT, THE A.O. HAD AT THE RELEVANT TIME ISSUED NOTICES U/S. 133(6) TO SARTHIK AND IN REPLY THEY HAVE CONFIRMED THAT NO ON MONEY PAYMENT WAS MADE BY THE APPELLANT' IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 23 - 15. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPE LLANT AND ALSO PERUSED THE ASSESSMENT ORDER. THE MAIN CONTENTION OF THE APPELL ANT IS THAT 1. THE MOU IS NOT SIGNED BY THE APPELLANT. IT IS IN THE LETTER HEAD OF A THIRD PARTY NAMELY M/S SPACE MANAGEMENT, WHO HAD OFFERED RATES FOR THE GROUND AND FIRST FLOORS OF THE SARTHIK-II PREMISES 2. THE APPELLANT HAS NOT PURCHASED THE OFFICE SPACE AT GROUND FLOOR AND FIRST FLOOR AS MENTIONED IN THE MOU BUT ULTIMATELY PURCHASED THE O FFICE AT FIRST AND THIRD FLOOR OF SARTHIK-II. 3. THE APPELLANT HAD PAID TOTAL CONSIDERATION OF RS .2 CRORES FOR THE PURCHASE OF GROUND FLOOR PREMISES BUT SINCE THE OFFICE ACCOMMOD ATION AT GROUND FLOOR WAS NOT AVAILABLE, SARTHIK-II RETURNED RS.74 LACS AND ADJUS TED RS. 1.26 CRORES AGAINST THE PURCHASE OF OFFICE PREMISES AT FIRST AND THIRD FLOO R. 4. THE MOU THEREFORE, SHOULD HAVE NOT BEEN RELIED U PON BY THE AO WHILE MAKING THE ADDITION OF RS. 80 LACS IN RESPECT OF THE PURCHASE OF OFFICE PREMISES IN SARTHIK-II. 15.1 HAD THE ADDITION BEEN MADE BY THE AO ONLY ON T HE BASIS OF THE MOU, PROBABLY, I WOULD HAVE GIVEN THE BENEFIT OF DOUBT TO THE APPE LLANT FOR THE REASON THAT AS PER THE MOU THE FLOORS PROPOSED FOR SALE TO THE APPELLANT I S DIFFERENT THAN WHAT HAS BEEN ULTIMATELY PURCHASED BY THE APPELLANT AND THAT THE MOU IS NOT SIGNED BY THE APPELLANT. BUT IN THIS CASE, THE MAIN EVIDENCE IS F OUND AND SEIZED FROM THE PREMISES OF THE APPELLANT WHICH HAS BEEN DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. AS PER THE LOOSE PAPERS, THE FOLLOWING PAYMENTS HAVE BEEN SHOWN AS MADE TO RB, WHO ACCORDING TO THE AO MEANS RAJESH BRAHMBHATT, A KEY PERSON IN SAFAL GROUP WHO HAS EXECUTED AN MOU WITH THE APPELLANT FOR THE SALE OF OFFICE PREMISES AT SARTHIK-II CONSTRUCTED BY NEW SAMPRAT COMMERCIAL COOPERATIVE S OCIETY LIMITED. SR. NO. DATE AMOUNT RS. 1. 24/11/2003 0.13 2. 24/12/2003 0.15 3. 09/01/2004 0.15 4. 16/01/2004 0.25 5. 24/02/2004 0.1 IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 24 - 0.78 6. 09/04/2004 0.20 TOTAL 0.98 THE FACT OF PAYMENT OF THE ABOVE MENTIONED AMOUNTS IS CORROBORATED BY THE FACT THAT ON 9/1/2004 CHEQUE AMOUNT OF RS.15 LACS(CODED AS 0.15 IN THE SEIZED PAPERS) IS MADE BY THE APPELLANT TO RB. DURING THE PERIOD 24/1 1/2003 TO 24/2 /2004 TOTAL PAYMENT OF RS.78 LACS WAS MADE BY THE APPELLANT AND AS ON 9/4 /2004 FURTHER PAYMENT OF RS.20 LACS WAS MADE. IN OTHER WORDS, ALL THE PAYMENTS SHOWN BY THE APPELLANT TOWARDS THE PURCHASE OF THE OFFICE PREMIS ES DURING THE PERIOD 24/11/2003 TO 9/4/2004, WHETHER BY CASH OR BY CHEQUE, IS REFLE CTED IN THE SEIZED PAPER AS DISCUSSED ABOVE. DURING THIS PERIOD, THE APPELLANT PAID TWO CHEQUES ONE FOR RS.15 LACS ON 9/1/2004 AND ANOTHER FOR RS.3 LACS ON 24/2/ 2004. IN THE LOOSE PAPER, THE ENTRY OF RS.15 LACS IS APPEARING AS ON 9/1/2004 AND ON 24/2/2004 THE ENTRY OF RS.10 LACS IS APPEARING WHICH INDICATED THAT ON 24/2/2004 THE APPELLANT PAID TOTAL AMOUNT OF RS.10 LACS INCLUDING CHEQUE AMOUNT OF RS.3 LACS TO RB. IN OTHER WORDS, OUT OF THE TOTAL PAYMENT OF RS.98 LACS MADE DURING 24/11/20,03 TO 9/4/2004, CHEQUE AMOUNT OF RS.18 LACS ONLY WAS PAID. THE BALANCE AMOUNT OF RS. 80 LACS REPRESENTED THE CASH CONSIDERATION. THE AO HAS SUCCESSFULLY CORROBORATED THIS AMOUNT OF RS.80 LACS WITH THE CONTENTS OF THE MOU. FROM PARAGRAPH 8 TO 8.8 OF THE ASSESSMENT ORDER HE HAS PROVED BEYOND DOUBT THAT THE TOTAL CONSIDERATION PA SSED TOWARDS THE PURCHASE OF OFFICE PREMISES AT FIRST AND THIRD FLOOR WAS RS.2,0 6,50,140/- AS AGAINST RS.1,26,21,240/- SHOWN BY THE APPELLANT. IN FACT, T HE RATE WORKED OUT AS PER MOU WAS FOUND TO BE EXACTLY TALLYING WITH TOTAL CONSIDE RATION OF RS.2,06,50,140/- AFTER CONSIDERING THE MAINTENANCE DEPOSIT, AEC CHARGES AN D REGISTRATION EXPENSES ETC., THEREFORE, THE CONTENTION OF THE APPELLANT THAT MER ELY BECAUSE THE MOU IS NOT SIGNED BY THE APPELLANT, IT SHOULD BE IGNORED CANNOT BE AC CEPTED. THE CONTENTS OF THE MOU ARE INDEPENDENTLY VERIFIABLE FROM THE LOOSE PAPER S EIZED FROM THE PREMISES OF THE APPELLANT. CONTENTION OF THE APPELLANT THAT NOT MUC H OF RELIANCE BE PLACED ON THE SEIZED DOCUMENT AS IT IS NOT IN THE HANDWRITING OF THE APPELLANT OR THE CASH PAYMENT HAS NOT BEEN ACCEPTED EITHER BY THE BROKER SPACE MANAGEMENT OR BY THE DEVELOPER SAFAL CONSTRUCTION CAN NOT BE ACCEPTED AT THIS STAGE. AS THE APPELLANT IS CO, THE PAPER CANNOT BE WRITTEN BY A COMPANY. FURTHER, IT IS VERY UNLIKELY THAT THE OTHER PERSON WOULD CONFIRM THE RECEIPT OF ON MONEY. WHAT IS TO BE SEEN IN SUCH TYPE OF CASES, IS PREPONDERANCE OF PROBABILITY. THE 12 POIN T ADDITIONAL SUBMISSIONS PARTICULARLY THE AUTHENTICITY OF SEIZED PAPERS ON T HE BASIS OF WHICH AO ISSUED SHOW CAUSE TO THE APPELLANT, WERE NEVER RAISED BEFORE TH E AO. AS STATED ABOVE, THE AO HAS BEEN ABLE TO PROVE THAT THE APPELLANT HAS PAID ON M ONEY TO THE TUNE OF RS.80 LACS TO RAJESH BRAHMBHATT, A KEY PERSON OF SAFAL GROUP WHO HAS DEVELOPED THE PROPERTY KNOWN AS SARTHIK-II, THE SAME IS TAXABLE IN THE HAN DS OF THE APPELLANT. SINCE OUT OF THIS, RS.60 LACS PERTAIN TO ASSESSMENT YEAR 2004-20 05 AND RS.20 LACS TO ASSESSMENT IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 25 - YEAR 2005-2006, THE AO WAS JUSTIFIED IN MAKING THE ADDITION OF RS.60 LACS IN ASSESSMENT YEAR 2004-2005 AND OF RS.20 LACS IN ASSE SSMENT YEAR 2005-2006.THIS GROUND IS, THEREFORE, DECIDED AGAINST THE APPELLANT . 11. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE THE TRIBUNAL. 12. DEALING WITH GROUND NO.3 OF THE APPEAL, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) COMMITTED ERROR IN CONFIRMING ADDITION OF RS.60 LACS AS UNACCOUNTED INVESTMENT IN SARTHIK-II PROPERTY REFERRING TO SEIZED PAPER IN AY 2004-05 AND RS.20 L ACS IN AY 2005-06. THE LD.AR BROADLY REITERATED VARIOUS SUBMISSIONS MA DE BEFORE THE AO AND THE CIT(A). THE LD.AR VEHEMENTLY EXHORTED THAT LOOSE-PAPERS FOUND IN THE COURSE OF SEARCH HAVE BEEN MISINTERPRETED AN D WRONGFUL CONCLUSION HAS BEEN DRAWN. THE LD. AR SUBMITTED THAT THE LOOSE PAPER FOUND IN SEARCH DOES NOT PERTAIN TO THE ASSESSEE. IT WAS NEX T CONTENDED ON BEHALF OF THE ASSESSEE THAT THE LOOSE PAPERS WERE ONLY ROU GH NOTINGS BEFORE THE FINALIZATION OF PURCHASE OF OFFICE PREMISES. THE AC TUAL PAYMENTS WERE MADE AS PER BOOKS OF ACCOUNTS. IT WAS SUBMITTED THA T THE ASSESSEE INITIALLY DECIDED TO BUY 10000 SQ. FT. SPACE IN LUM PSUM AS CAN BE SEEN FROM THE STATEMENT OF THE DIRECTOR. THE PAYMENT OF RS. 2.01 CRORES WERE MADE ON SAFER SIDE FOR BOOKING OFFICE AT GROUND FLO OR, FIRST FLOOR AND THIRD FLOOR BEING A GOOD DEAL FROM ASSESSEE PERSPECTIVE. THE ASSESSEE CHANGED ITS STANCE AND PURCHASED FIRST FLOOR SHOWROOM AND THIRD FLOOR OFFICES AND SHUNNED GROUND FLOOR OFFICE/ SHOWROOM OWING TO SUBS EQUENT DILEMMA IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 26 - AND LACK OF INTEREST. REBUTTING THE CONTENT OF THE MOU, IT WAS SUBMITTED THAT THE ACTUAL DEAL WAS FOR FIRST AND THIRD FLOOR WHILE THE MOU WAS FOR GROUND AND FIRST FLOOR. THE LEARNED AR STRONGLY OBJ ECTED TO THE INTERFERENCE DRAWN BY THE AO ON THE LOOSE PAPER. IT WAS SUBMITTED THAT THE FIGURES MENTIONED IN LOOSE PAPER 4 ( PLACED IN PAPER BOOK) ASSUMED TO BE IN CRORES IS WITHOUT ANY PROPER BASIS. IT WAS FURTHER SUBMITTED THAT PAYMENT MADE ON 24/02/2004 IS NOTED AS RS. 10 LAKHS IN THE SAID LOOSE PAPER. THE AO CORRELATED 3 LAKHS TO BE IN CHEQUE AS PER RECEIPT FOUND IN THE SEARCH AND THUS PRESUMED BALANCE RS. 7 LAKHS TO BE CASH AND UNACCOUNTED ON SURMISES. IT WAS CONTENDED THAT AO C ANNOT PRESUME BY HIMSELF THAT PART PAYMENT WAS MADE THROUGH CHEQUE A ND PART IN CASH. IT WAS THEREAFTER SUBMITTED THAT THE RATES TAKEN BY TH E AO WAS BASED ON THE MOU. THE MOU WAS BEFORE NEGOTIATION. THE PRICE IN T HE MOU WAS NOT FINALIZED. THE RATE ADOPTED FOR THIRD FLOOR IS BASE D ON RATES OF FIRST FLOOR WHICH IS ARGUED TO BE IMPROPER AS THERE IS ALWAYS A TENDENCY OF LOWER RATES FOR HIGHER FLOORS. IT WAS CONTENDED THAT THE MOU WAS ONLY A PROPOSAL AND WAS NOT SIGNED BY THE DEVELOPER OR THE ASSESSEE BUT WAS PREPARED ON THE LETTER HEAD OF THE ESTATE AGENT. IT WAS THUS A MERE PROPOSAL AND WAS A MERE ROUGH ESTIMATE. IT WAS NEVE R ACTED UPON. IT WAS NEXT CONTENDED THAT THE SALE DEEDS ARE REGISTERED A ND THE PRICE MENTIONED THEREIN IS THUS REQUIRED TO BE ADOPTED. AS REGARDS LOOSE PAPER 4, IT WAS CONTENDED THAT JOTTING WHICH WERE RELIED UPON BY TH E AO ARE NOT AT ALL IN THE HAND WRITING OF THE ASSESSEE. THE JOTTINGS ARE SIMPLE SCRIBBLINGS AND IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 27 - NOT SUGGESTIVE OF ANY TRANSACTION. THE NATURE OF A MOUNTS BEING A RECEIPT OR A PAYMENT IS NOT COMING OUT OF SUCH LOOSE PAPER. SIMILARLY, WHETHER IT IS CASH OR CHEQUE TRANSACTION IS ALSO NOT KNOWN. TH E LEARNED AR SOUGHT TO ASSAIL THE LOOSE PAPER ON THE GROUND THAT ALL TH E CHEQUE TRANSACTIONS ARE NOT FOUND TO BE RECORDED IN THE LOOSE PAPER. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AND DOCUMENTS RELIED UPON BY THE PARTIES HITHERTO. THE SUBSTANTIVE QUESTION THAT HIN GES IN THE ENTIRE CONTROVERSY IS WHETHER THE LOOSE PAPERS AND OTHER D OCUMENTS SEIZED IN THE PREMISES OF ASSESSEE ARE CAPABLE OF GIVING RISE TO PRESUMPTION OF UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE IN TWO ASSESSMENT YEARS OR NOT. 13.1 THE ASSESSEE IS OWNER OF SHOWROOM AND OFFICE P REMISES AT FIRST AND THIRD FLOOR AT SARTHIK II AHMEDABAD. THE PURCH ASE OF PROPERTY WAS STATED TO BE MADE FROM M/S SAFAL CONSTRUCTIONS PVT. LTD.. IN THE COURSE OF SEARCH PROCEEDINGS OF THE OFFICE PREMISES OF THE ASSESSEE ON 21/03/2007, CERTAIN LOOSE PAPERS AND DOCUMENTS SEIZ ED INCLUDED LOOSE PAPERS FILE MARKED AS ANNEXURE AF 1/6 CONTAINING 90 PAGES. PAGE 4 OF THESE LOOSE PAPERS ALLEGEDLY CONTAINS CERTAIN ENTRI ES OF PAYMENTS TOWARDS PURCHASE OF OFFICES AT SHARTHIK-II COVERING SOME P ERIOD WHEREIN UNACCOUNTED COMPONENT TO THE TUNE OF RS. 80 LACS IS ALLEGEDLY EMBEDDED. IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 28 - IT WAS CLAIMED BY THE AO THAT THE PAYMENTS MADE FOR PURCHASE OF PROPERTY IN THE AFORESAID LOOSE PAPER NO. 4 IS DULY ACKNOWLEDGED BY THE RECIPIENT IN CODED FORM RB. THE CODED WORD RB ALLEGEDLY DENOTES RAJESH BRAHMBHATT. RAJESH BRAHMBHATT ALLEGEDLY HA PPENS TO REPRESENT SAFAL GROUP IN THE AFORESAID DEAL WITH THE ASSESSEE AS PER MOU JOTTED BY THE INTERMEDIATORS I.E. ESTATE CONSULTANT NAMELY S PACE MANAGEMENT. THE PURPORTED MOU WAS ALSO FOUND AND SEIZED IN THE SEARCH PROCEEDINGS. THE SECRETARY OF THE AFORESAID COMMERC IAL PREMISES IS NAMED PRIYANKA R. BRAHMBHATT WHO IS WIFE OF RB. 13.2 THE AGGREGATE OF TRUNCATED PAYMENT MADE AS PER THE AFORESAID LOOSE PAPER NO. 4 ALLEGEDLY WORKS OUT TO RS. 98 LAC S IN CODED FORM WHICH ARE ALLEGEDLY ACKNOWLEDGED BY PUTTING SIGNATURE IN SHORT FORM RB. THIS LOOSE PAPER IS THE AXIS OF THE ENTIRE CONTROVE RSY IN HAND. CERTAIN RECEIPTS AT PAGE NO. 57, 58, 59 AND 62 ISSUED BY TH E SOCIETY OF THE COMMERCIAL PREMISES TO THE ASSESSEE ON VARIOUS DATE S FOR VARIOUS AMOUNTS FOUND IN SEARCH ARE SIGNED BY ITS SECRETARY IN SHORT FORM RB. AS NOTED ABOVE, THE SECRETARY OF THE COMMERCIAL PRE MISES NAMELY NEW SAMPRAT COMM. CO. OP. SOCIETY IS ONE SMT. PRIYANK A R. BRAHMBHATT. SHE IS STATED TO BE WIFE OF ONE SHRI RAJESH BRAHMBH ATT WHO IS ONE OF THE MAIN PERSON IN SAFAL GROUP WHO HAS EXECUTED AN MOU WITH THE ASSESSEE FOR SALE OF OFFICE PREMISES AT SARTHIK II CONSTRUCT ED BY THE AFORESAID SOCIETY. IN THIS CONNECTION, A STATEMENT OF THE ASS ESSEE WAS RECORDED IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 29 - BEFORE INVESTIGATION WING ABOUT 3 MONTHS AFTER SEAR CH ON 6/6/2007 WHEREIN IT WAS ADMITTED THAT 3 OFFICE PREMISES WERE PURCHASED AT 3 RD FLOOR AND ONE SHOW ROOM AT 1 ST FLOOR OF SARTHIK-II. IT WAS DEPOSED BY DIRECTOR SH. MAHESH D. AGRAWAL THEREIN THAT TOTAL OF RS. 2 C RORE WAS INITIALLY PAID BUT BALANCE 74 LACS HAS BEEN EVENTUALLY RETURNED BY THE SELLER AND THUS A NET CONSIDERATION OF RS. 1.26 CR. APPROX. WAS ONLY PAID AGAINST THE PURCHASE OF THESE OFFICES AND SHOW ROOM. IT IS THE CASE OF THE REVENUE THAT THE AFORESAID LOOSE PAPER SHOWING PAYMENTS CLEARLY PERTAINS TO THE ASSESSEE AND ALL THE PAYMENTS MADE BY THE ASSESSEE IS ACKNOWLEDGED BY THE INITIALS RB. THE INITIAL IS DECODED TO READ A S RAJESH BRAHMBHATT. THE PAYMENTS RECORDED IN THE LOOSE PAPER AMOUNTING TO RS. 98 LAKHS ARE NOT TRACEABLE IN THE BOOKS EXCEPT ONE OR TWO INSTAN CES AGGREGATING TO RS. 18 LAKHS. THE BALANCE AMOUNT OF RS. 80 LAKHS WERE T HUS TREATED AS UNDISCLOSED INCOME APPORTIONED AT RS.60 LAKHS AND 20 LAKHS OVER TWO ASSESSMENT YEARS IN APPEAL. 13.3 BASED ON SIMILARITY OF THE ONE INSTANCE OF ENT RY OF RS. 0.15 DATED 12/01/2004 APPEARING IN CODED FORM IN LOOSE PAPER A LSO CORRESPONDINGLY APPEARING IN BOOKS AT RS. 15 LAKHS ON THE SAME DATE , IT WAS FURTHER INFERRED BY THE AO THAT THE PAYMENT DETAILS FIGURIN G IN THE LOOSE PAPER NO. 4 IN CODED FORM ARE IN TERMS OF RS. CRORES. THU S, THE AO DECODED THE FIGURES MENTIONED AS WELL AS RECIPIENT IN THE LOOSE PAPER AND ESTABLISHED THE CONNECTION OF RECIPIENT WITH THE SELLER I.E. SA FAL GROUP. FOR ALL THESE IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 30 - REASONS, THE ASSESSEES CONTENTION THAT THIS LOOSE P APER DOES NOT BELONG TO HIM WAS REJECTED BY THE AO AND ENDORSED BY THE CIT( A). 13.4 THE LD. AR FOR ASSESSEE ON ITS PART ALLEGED BE FORE US THAT THE AO ON THE BASIS OF ROUGH UNSIGNED NOTE (PURPORTED MOU) AND WITH REFERENCE TO SOME UNRELATED / IRRELEVANT FIGURES HAS DETERMIN ED THE PURCHASE COSTS OF OFFICE PREMISES FOR RS. 2,06,50,140/- AGAINST PU RCHASE COSTS OF RS. 1,26,21,240/- ( NET OF AMOUNT RECEIVED BACK FROM SE LLER RS. 74.50 LAKHS) AND ARTIFICIALLY WORKED OUT THAT RS. 80 LAKHS AS PA ID IN CASH OUT OF UNACCOUNTED SOURCE OF INCOME. THE AO BIFURCATED THE ALLEGEDLY UNACCOUNTED INCOME TOWARDS ALLEGED CASH PAYMENTS AT 60 LAKHS RELATABLE TO FY 2003-04 RELEVANT TO AY 2004-05 AND OTHER RS. 20 LAKHS RELATABLE TO FY 2004-05 RELEVANT TO AY 2005-06 BASED ON THE D ATE OF TRANSACTIONS AS RECORDED IN THE LOOSE PAPER NO. 4 SEIZED. 13.5 AT THIS STAGE, REFER FROM THE ASSESSMENT ORD ER THAT THE ASSESSEE CLAIMED TO HAVE PAID RS. 50,71,240/- IN CHEQUE IN F Y 2003-04 AND RS. 1,50,00,000 IN FY 2004-05 FOR WHICH RECEIPTS WERE F OUND IN THE LOOSE PAPERS SEIZED. THUS, THE TOTAL PAYMENTS WERE ADMITT EDLY MADE TO THE TUNE OF RS.2,00,71,240/-. HOWEVER, THE ASSESSEE SIMULTA NEOUSLY CLAIMS TO HAVE RECEIVED BACK RS. 74,50,000/- FROM THE SELLER OF THE OFFICE PREMISES. HOWEVER, WE ARE UNABLE TO FIND ANY CONCRETE DETAILS CONCERNING RETURN OF MONEY VIZ. DATE OF RETURN, MODE OF RETURN OF MONEY AND CIRCUMSTANCES IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 31 - WHICH COMPELLED THE PARTIES TO REVERSE THE PAYMENTS WERE REFERRED. THUS, EXCEPT FOR GENERIC INDICATION IN THIS REGARD, NO OB JECTIVE FACTS ARE AVAILABLE ON RECORD. 13.6 ON THE FACTS AS RECORDED BY THE CIT(A) REPRODU CED IN PARA-10 HEREINABOVE, WE DO NOT FIND ANY REASON TO DIFFER WI TH THE CONCLUSION OF THE AO THAT THE LOOSE PAPER GIVE RISE TO SOUND BASI S FOR DETERMINATION OF UNDISCLOSED INCOME. THERE IS NO REBUTTAL TO THE ASS ERTION OF THE AO THAT THE LOOSE PAPERS INCLUDING PAGE NO. 4 WERE SEIZED F ROM THE PREMISES OF THE ASSESSEE. 13.7 TO ELABORATE, WE FIND THAT BASED ON EVALUATION OF THE LOOSE PAPERS SEIZED, THE AO TABULATED THAT TOTAL PAYMENTS OF RS. 2,00,71,240 [ REPRODUCED IN THE ORDER OF CIT(A) AS EXTRACTED ABOV E]. THE AO THEREAFTER CORRELATED ENTRIES IN LOOSE PAPER IN CODED FORM DUL Y ACKNOWLEDGED BY RB AND CLAIMED THAT IT STANDS FOR RAJESH BRAHMBHA TT WHO HAPPENS TO REPRESENT SELLER NAMELY SAFAL CONSTRUCTIONS PVT. LT D. AND IS ALSO HUSBAND OF THE SECRETARY OF THE SOCIETY MRS. PRIYANKA R. BH AHMBHATT. THE AO NOTED THAT THE NAME OF RAJESH BHRAMBHATT (RB) FIGUR ES IN AN MOU SEIZED AND FORMS PART OF LOOSE PAPERS. THE TERMS OF UNDERSTANDING FOR PURCHASE OF PROPERTY BY WAY OF MOU DATED 15/09/2003 HAS BEEN RECORDED ON THE LETTER HEAD OF THE PURPORTED INTERM EDIARY OR ESTATE BROKER M/S SPACE MANAGEMENT WHEREIN RAJESH BRAHMBHATT WA S RECORDED TO BE IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 32 - REPRESENTATIVE OF SAFAL CONSTRUCTIONS PVT. LTD. TH E AFORESAID MOU ALTHOUGH NOT SIGNED BY THE ASSESSEE AND THE SAME W AS FOUND TO BE FROM THE CUSTODY OF THE ASSESSEE IN THE COURSE OF SEARCH . THE ASSESSING OFFICER TOOK NOTE OF THE RATES AGREED FOR INITIAL NEGOTIATI ON OF GROUND FLOOR AT HIGHER RATE OF 2475 PER SQ. FT AND FIRST FLOOR RATE OF 1475 PER SQ.FT. AND EXTRAPOLATED THE CONCESSIONAL RATE OF RS. 1475 PER SQ. FT. FOR REVISED ACQUISITION OF 3 RD FLOOR OFFICES. 13.8 ONE CAN LOOSE SIGHT OF THE FACT THAT SUCH UN RECORDED ENTRIES ARE GENERALLY CODIFIED. WE FIND THAT THE AO HAS SUCCES SFULLY DECODED THE PAYMENTS MADE AS RECORDED IN ABBREVIATED FORM IN LOOSE PAPER NO. 4 TO BE IN CRORES WITH REFERENCE TO PAYMENT OF RS. 15 L AKHS MADE ON 9/1/2004 AS PER RECEIPT FOUND OF THE SAME DATE FROM THE PREM ISES OF THE ASSESSEE. THUS THE INFERENCE DRAWN BY THE AO THAT ALL OTHER C ODED PAYMENTS WERE SIMILARLY PUT IN CRORES AS PER THE SAME ANALOGY CA NNOT BE SAID TO BE IMPROBABLE. THE RECIPIENT REFERRED TO AS RB HAS ALS O BEEN DECODED. THE AO THUS DECODED THE FIGURE MENTIONED AS WELL AS THE RECIPIENT AS MENTIONED PAGE 4. THE ARGUMENT OF THE ASSESSEE THAT THE LOOSE PAPER FOUND FROM THE CUSTODY OF THE ASSESSEE IS A LIFELES S OR A DUMB DOCUMENT THUS GETS NEUTRALIZED. THE FIGURES MENTIONED IN THE LOOSE PAPER DO NOT REMAIN OBSCURE ANY LONGER ON SUCH CORROBORATION. IT IS COMMON KNOWLEDGE THAT SUCH NOTINGS ARE TYPICALLY MADE IN A BBREVIATED FORM. THE SEVERE LIMITATIONS WITH WHICH THE REVENUE IS BESET WITH CANNOT BE IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 33 - OVERLOOKED. THE INFERENCE DRAWN BY THE AO THUS HAS TO BE SEEN ON THE TOUCHSTONE OF PREPONDERANCE OF PROBABILITIES. THE J OTTINGS FOUND ALONG WITH OTHER PROPERTY DOCUMENTS CANNOT BE INFERRED TO HAVE BEEN WRITTEN AIMLESSLY. THE PRIMARY ONUS LIES ON THE ASSESSEE TO EXPLAIN THE PURPORT OF SUCH NOTINGS. THE ASSESSEE CANNOT SLEEPWALK OVER TH E ONUS OF EXPLANATION IN THIS REGARD. THE ASSESSEE HAS SUMMARILY DISOWNED THE RESPONSIBILITY IN THIS REGARD WITHOUT THROWING ANY LIGHT ON THIS. THE AO ON THE OTHER HAND HAS FOUNDED HIS DECODING BASED ON FIRM DOCUMEN TS. THUS, ON COMPREHENSION OF THE FACTS IN TOTALITY, THE INFEREN CE DRAWN IS LOGICAL AND CANNOT BE SHUNNED AS IRRELEVANT OR EXTRANEOUS PIECE OF PAPER AS ALLEGED. THE NOTINGS IN LOOSE PAPER SEIZED MARKED PAGE 4 IS THUS FOUND CREDIBLE IN THE FACTS CANNOT BE TARRED WITH SKEPTICISM. 13.9 HAVING NOTED THAT THE ASSESSING OFFICER HAS S UCCESSFULLY MAPPED THE TRANSACTIONS RECORDED IN THE LOOSE PAPER AND HA S CORRELATED THE PARTICULARS IN GENERAL, WE OBSERVE THAT THE MOOT PO INT IN QUESTION IS NOT WHETHER SHOWROOM AT GROUND FLOOR WAS EVENTUALLY PUR CHASED OR NOT BUT WHETHER PAYMENTS AS NOTED IN THE LOOSE PAPER WERE F OUND UNRECORDED OR NOT. THE AO HAS DEMONSTRATED THAT BARRING ONE INSTA NCE OF PAYMENT OF RS. 15 LAKHS AND OTHER INSTANCE OF PART PAYMENT TO THE EXTENT OF RS. 3 LAKHS FOUND RECORDED IN THE BOOKS, THE OTHER PAYMEN TS WERE NOT REFLECTED IN THE BOOKS AND WENT UNRECORDED. THE AO HAS NOT ME RELY RELIED ON THE ENTRIES IN THE LOOSE PAPER FOR DETERMINATION OF UND ISCLOSED INCOME IN A IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 34 - SWEEPING MANNER. WE FIND THAT THE AO COULD SUCCESSF ULLY COLLATE THE TERMS OF MOU WITH THE ACTUAL PAYMENTS IN INSTALLMEN TS. THE FIRST INSTALLMENT OF RS. 27,71,240 BEING 10 % OF AGREED A MOUNT DETERMINED AS PER MOU WAS FOUND TO BE EXACTLY TALLIED WITH THE A CTUAL PAYMENTS. SIMILARLY, SECOND INSTALLMENT OF 30% WAS WORKED OUT TO RS. 83,13,720/- OUT OF WHICH 18 LACS OF RECEIPTS FOUND WAS CO-RELAT ABLE TO LOOSE PAPER. THUS, THE BALANCE ACCOUNT OF 60 LACS (FY 2004-05) A S NOTED AND ACKNOWLEDGED IN CODED FORM IN LOOSE PAPER WAS INFER RED TO BE UNACCOUNTED CASH PAYMENT. THIS DIFFERENCE OF 60 LAK HS AS PER LOOSE PAPER WAS NOTED TO COINCIDING WITH THE PAYMENT SCHEDULE A S PER MOU. THUS, THE TERMS OF MOU WERE FOUND TO BE BROADLY MATCHING. THE ACTION OF THE AO IN SUCH FACTS CANNOT THE SAID TO BE MARRED BY CO NJECTURES OR SURMISES. THE TRAIL OF TRANSACTIONS AND CHAIN OF DOCUMENTS AR E BROADLY MATCHING. NEEDLESS TO SAY, THE DOCUMENTS WERE SEIZED FROM THE PREMISES OF THE ASSESSEE. THUS, IT IS THE ASSESSEE WHO IS PRIVY TO THE UNDERLYING FACTS ABOUT THE NOTINGS MADE IN THE LOOSE PAPERS. THE ONU S SQUARELY LIES ON THE ASSESSEE. THE ASSESSEE IS MERELY IN A DENIAL MODE W ITHOUT THROWING ANY LIGHT ON THE CIRCUMSTANCES WHICH LED TO CREATION OF SUCH LARGE NUMBER OF SPEAKING DOCUMENTS. IT IS UNCHARACTERISTIC OF AN AS SESSEE TO SAY THAT A LARGE SUM OF RS. 74.50 LACS IN THE CONTEXT WAS INIT IALLY PAID IN EXCESS AND WAS RETURNED LATER WITHOUT ANY CORROBORATION THEREO F. WHAT CIRCUMSTANCES COMPELLED THE ASSESSEE TO PAY SUCH HUGE AMOUNT HURR IEDLY AND THEREAFTER PURPORTEDLY CALLED BACK IS FOR THE ASSESSEE TO EXPL AIN. THE DATE OF IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 35 - PURPORTED RETURN OF PAYMENT COULD ALSO TRIGGER FURT HER QUERIES. NO INFORMATION WAS BROUGHT ON RECORD BY THE ASSESSEE T O ADDRESS THIS ASPECT. 13.10 THERE IS ANOTHER ASPECT CONCERNING THE ISSUE. THE TALLY OF JOTTING OF 0.15 IN LOOSE PAPER WITH DATE 9/01/2004 QUA THE RECEIPT FOUND IS NOT A MERE COINCIDENCE AS ALLEGED BY THE ASSESSEE. THE TR ANSACTIONS WITH SAFAL GROUP WAS IN PROGRESS FOR THE PURCHASE. THE RECIPIE NT (RB) WAS FOUND REPRESENTING THE SELLER. IN THESE FACTS, THE ONUS I S WRONGLY ATTEMPTED TO BE SHIFTED BY THE ASSESSEE ON THE OTHER SIDE TO ANSWER SOMETHING WHICH IS IN THE KNOWLEDGE OF THE ASSESSEE. IT WAS FOR THE ASSES SEE TO EXPLAIN THE NATURE OF ASSERTIONS MADE IN THE LOOSE PAPER. THE A O, ON THE OTHER HAND, WITH THE HELP OF OTHER DOCUMENTS SEIZED COULD SUBST ANTIALLY CORRELATE THE CHAIN OF TRANSACTIONS AND EVENTS TO COME TO THE CON CLUSION OF INVOLVEMENT OF UNDISCLOSED INCOME. THE PERTINENT P OINT IS NOT WHICH PROPERTY WAS BOUGHT AND WHICH WAS NOT, BUT WHETHER ANY UNRECORDED PAYMENTS WERE MADE AND IF YES, SOURCE OF SUCH PAYME NTS. THE LOOSE PAPER READ WITH OTHER DOCUMENTS SEIZED SUGGESTS SO. IT IS FOR THE ASSESSEE TO REBUT THE CONTENTS OR EXPLAIN THE SOURCE THEREOF . 13.11 WE ARE ALSO ALIVE TO THE PLEA OF THE ASSESSEE ASSAILING THE FINDING OF THE AO ON THE PRETEXT THAT INITIAL NEGOTIATION FOR GROUND FLOOR AND FIRST FLOOR IN TERMS OF PURPORTED MOU DID NOT WORK AND WA S EVENTUALLY MODIFIED. THIS RELOCATION OF FLOOR IN OUR VIEW WOUL D NOT DENT FACT OF IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 36 - PAYMENT AS RECORDED IN LOOSE PAPER. HOW THE CHANGE OF FLOOR POSITION WOULD LEAD TO THIS MISMATCH OR EXCESS PAYMENT WAS F OR THE ASSESSEE TO EXPLAIN. IT IS ALSO FOR THE ASSESSEE TO EXPLAIN THE PURPORT OF ENTRIES WITH DATE AND CODED SIGNATURE FOUND FROM ITS PREMISES. T HIS ASPECT IS COMPLETELY MISSING IN THE RESPONSE OF THE ASSESSEE. 13.12 IN THE ABSENCE OF ANY PLAUSIBLE EXPLANATION F OR NON EXISTENCE OF ENTRIES FOUND RECORDED IN THE LOOSE PAPER TO THE EX TENT OF RS. 80 LAKHS, THE CONTENTION OF THE ASSESEEE THAT THE INITIAL NEGOTIA TION WAS REVISED AND CONSEQUENTLY LOOSE PAPER FOUND IS DUMB IS AN ARGUME NT OF DESPAIR. THE AO HAS ESTABLISHED THE INVOLVEMENT OF UNACCOUNTED M ONEY WITH REFERENCE TO THE COST OF THE OFFICES ACQUIRED. TO R EITERATE, NOTWITHSTANDING CHANGE IN THE POSITIONING OF THE OFFICE PREMISES, T HE LOOSE PAPER HAS UNRAVELED THE FACT OF TRUNCATED PAYMENTS WHICH REMA INS TO BE EXPLAINED TO THE EXTENT OF RS. 80 LAKHS. ANOTHER CONTENTION O F THE ASSESSEE THAT SINCE ALL THE CHEQUE ENTRIES ARE NOT FOUND IN THE L OOSE PAPER RENDERING IT TO BE INCOMPLETE AND EXTRANEOUS PIECE OF PAPER. WE SEE NO WARRANT IN SUCH ARGUMENT. THE JOTTINGS MAY BE FOR A PARTICULAR PERIOD OR FOR SOME TRANSACTION AS IT WAS NOT A REGULAR RECORD. THE INF ERENCE DRAWN BY THE REVENUE HAVING REGARD TO THE TOTALITY OF FACTS NOTE D EMERGES INTELLIGIBLE AND ON A SOUND FOOTING AND THUS CANNOT BE IMPEACHED . IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 37 - 14. IN NUTSHELL, THE ASSESSEE HAS TAKEN MULTIPLE ST ANDS FROM DENIAL OF THE LOOSE PAPER AS BELONGING TO IT AND WERE EXTENDE D TO ITS INCORRECTNESS. EXCEPT FOR DISOWNING THE RESPONSIBILITY OF EXPLAINI NG THE CONTENTS OF LOOSE PAPER FOUND FROM ITS OFFICE PREMISES, THE ASS ESSEE HAS NOT COME FORWARD WITH ANY PLAUSIBLE REASONS. THE LOOSE PAPER WAS FOUND FROM THE PREMISES OF THE ASSESSEE AND THUS OSTENSIBLY BELONG S TO THE ASSESSEE. HENCE, THE PRIMARY ONUS IS ON THE ASSESSEE IN THIS REGARD WHICH IS NOT DISCHARGED AT ALL. THE REVENUE ON THE OTHER HAND, W ITH THE HELP OF SEVERAL DOCUMENTS SEIZED IN THE SEARCH, MADE A DISCERNIBLE CASE THAT CERTAIN UNEXPLAINED ENTRIES FORM CONNECTION WITH THE PURCHA SE TRANSACTION. APART FROM MOU, ANOTHER LOOSE PAPER SHOWING TERMS AND CON DITIONS AT PAGE 1 AS WELL AS PAGE 3 WERE FOUND FROM THE PREMISES OF T HE ASSESSEE WHICH REINFORCES THE EXISTENCE OF UNRECORDED TRANSACTIONS . PERTINENT HERE TO MENTION THAT THE ASSESSEE IS A CORPORATE ENTITY. TH US, ITS MANAGEMENT IS EXPECTED TO RUN PROFESSIONALLY OWING TO FIDUCIARY P OSITION OF THE BOARD. UNRECORDED JOTTINGS DULY ACKNOWLEDGED BY THE OTHER PARTY IS AT THE HEART OF THE MATTER AND NOT THE SUBSTITUTION OF ONE OFFIC E BY ANOTHER. THE PRESUMPTION RAISED AGAINST THE ASSESSEE BY THE REVE NUE IS PLAUSIBLE AND BASED ON THE DOCUMENTS SEIZED AFTER DULY CONFRONTIN G THE ASSESSEE IN THIS REGARD. THE LOOSE PAPER WAS ESTABLISHED TO BE SPEAK ING DOCUMENT. THE FIGURES MENTIONED THEREIN THEREFORE DO NOT LIE. THE HAWKISH EXPLANATION OF THE ASSESSEE WITH REFERENCE TO LOOSE PAPERS SEIZ ED IS NOT ENTITLED TO GREAT WEIGHT. THE INFERENCE DRAWN BY THE REVENUE IS THUS BASED ON IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 38 - OBJECTIVE CONSIDERATION OF FACTS. HENCE, IN THE ABS ENCE OF ANY TANGIBLE MERIT IN THE PLEAS OF THE ASSESSEE, WE DECLINE TO I NTERFERE WITH THE ORDER OF THE CIT(A). GROUND NO. 3 IS THUS DISMISSED. 15. AS A RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. IT(SS)A NO.86/AHD/2011- AY 2005-06 (ASSESSEES APPE AL) 16. THE GROUNDS OF APPEAL RAISED BY THE ASSESSE E ASSAILING THE ORDER OF THE CIT(A) DATED 11/11/2010 READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN REJECTING THE ASSESSEES GROUND OF APPEAL CHALLENGING THE VALIDITY OF THE PROCEEDINGS INITIATED U/S.153A OF T HE I.T. ACT, WHEN NOTHING INCRIMINATING WAS FOUND DURING THE COURSE O F SEARCH, AND IN SPITE OF THE FACT THAT THIS ISSUE WAS SQUARELY COVE RED IN ASSESSEES FAVOUR BY VIRTUE OF VARIOUS DECISIONS OF THE HONBL E TRIBUNAL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ASSESSING OFFICERS FINDING THAT THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE COMPANY TO M.R. CHEM ICALS WHICH IS PROPRIETARY CONCERN OF ITS DIRECTOR SHRI MAHESH AGA RWAL WERE NOT FOR BUSINESS PURPOSES AND THEREFORE, TO THE EXTENT INTE REST BEARING BORROWED FUNDS WERE UTILIZED IN GIVING SUCH LOANS A ND ADVANCES, THE INTEREST PAYABLE ON SUCH BORROWED FUNDS IS TO BE DI SALLOWED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,30, 403 MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE AFORESAID INTEREST INCOME WAS EARNED BY THE ASSESSEE FROM ASIATIC COLOUR CHEMICAL S INDUSTRIES PVT.LTD., ON THE BASIS OF A SEIZED PAPER, ALLEGEDLY NOT ACCOUNTED IN THE BOOKS OF ACCOUNT. IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 39 - 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.20,00,000 MA DE BY THE ASSESSING OFFICER ON THE ALLEGED AND ASSUMED BASIS THAT THE A FORESAID AMOUNT REPRESENTED UNACCOUNTED INVESTMENT IN SARTHIK-II PR OPERTY REFERRING TO A SEIZED PAPER. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN REJECTING THE ASSESSEES GROUND OF APPEAL CHALLENGING LEVY OF INTEREST U/S.234A, U/S.234B AND U/S.234C OF THE I.T . ACT, MERELY MENTIONING THAT THIS IS ONLY CONSEQUENTIAL IN NATU RE. 17. GROUND NO.1 RELATES TO VALIDITY OF JURISDICTION OF PROCEEDINGS INITIATED UNDER SECTION 153A OF THE ACT. 18. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE A FORESAID GROUND IS NOT UNDER SERIOUS CHALLENGE. IN TERMS OF PARA-3 OF THIS ORDER, GROUND NO.1 OF ASSESSEES APPEAL STANDS DISMISSED ON THE S IMILAR FOOTING. 19. GROUND NO.2 CONCERNED DISALLOWANCE OF INTEREST ON BORROWED FUNDS ON THE GROUND THAT CERTAIN FUNDS HAVE BEEN UT ILIZED FOR ADVANCING INTEREST-FREE LOAN TO M/S.M.R. CHEMICALS. IDENTICA L ISSUE WAS RAISED IN THE EARLIER YEAR 2004-05 ALSO. FOLLOWING THE PARIT Y OF REASONING AS PER OUR DECISION RELATING TO AY 2004-05, WE HOLD THAT N O DISALLOWANCE OF INTEREST FOR UTILIZATION OF BORROWED FUNDS FOR THE PURPOSE OF ADVANCE TO M/S.M.R.CHEMICALS IS CALLED FOR. ACCORDINGLY, GROU ND NO.2 OF THE APPEAL IS ADJUDICATED IN FAVOUR OF ASSESSEE. IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 40 - 20. GROUND NO.3 CONCERNS ADDITION OF RS.2,30,403/- MADE BY THE AO ON THE GROUND THAT AFORESAID INTEREST INCOME WAS EA RNED BY THE ASSESSEE FROM M/S.ASIATIC COLOUR CHEMICALS INDUSTRIES PVT.LT D. ON THE BASIS OF SEIZED PAPER ALLEGEDLY NOT ACCOUNTED IN THE BOOKS. 21. THE RELEVANT FACTS CONCERNING THE ISSUE ARE THA T THE ASSESSEE HAS ADVANCED LOAN OF RS.273 LAKHS AND INTEREST OF RS.19 ,09,463/- HAS BEEN ALLEGEDLY RECEIVED FROM ASIATIC COLOUR CHEMICALS IN DUSTRIES PVT.LTD. ACCORDING TO THE ASSESSEE, THE AMOUNT SO RECEIVED I S ON ACCOUNT OF SALES AND IS THUS AN ADJUSTMENT AGAINST SALES. HOWEVER, THE AO HAS TREATED THE SAID AMOUNT AS INTEREST INCOME AND ADDED TO THE TOT AL INCOME ON AMOUNT OF RS.2,30,403/- FOR AY 2005-06 AND RS.16,79,060/- FOR AY 2006-07 ON MERCANTILE BASIS. 22. IN THE FIRST APPEAL, THE CIT(A) HAS CONFIRMED T HE ACTION OF THE AO. THE RELEVANT EXTRACT OF THE ORDER OF THE CIT(A) REA DS AS UNDER:- 11. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. I HAVE SEEN THE COPY OF ACCOUNT OF THE APPELLANT IN THE BOOKS OF AS IATIC COLOUR CHEM INDUSTRIES LTD. AS PER THIS, ASIATIC COLOUR CHEM IN DUSTRIES LTD. HAS RECEIVED A CHEQUE OF RS. 48 LACS OF UNION BANK OF I NDIA, CHEQUE NUMBER 345952 FROM THE APPELLANT. SIMILARLY ON 6/1/ 2006 CHEQUE NUMBER 364416 OF UNION BANK OF INDIA FOR RS.48,78,2 34/- WAS RECEIVED FROM THE APPELLANT. THIS CLEARLY SHOWS THAT BESIDES -MAKING THE SALES TO ASIATIC COLOUR CHEM INDUSTRIES LTD, THE APPELLANT H AS ADVANCED LOANS TO THIS PARTY. ONE OF THE CONTENTIONS TAKEN BY THE AR DURING THE COURSE OF HEARING WAS THAT THE INTEREST WAS CALCULATED ON THE LATE PAYMENT OF SALE PROCEEDS. THIS CONTENTION OF THE APPELLANT IS INCORRECT AS IS EVIDENT IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 41 - FROM THE COPY ACCOUNT OF THE APPELLANT IN THE BOOKS OF ASIATIC COLOUR CHEM INDUSTRIES LTD. THE INTEREST IS NOT CHARGED ON THE LATE PAYMENT OF SALE PROCEEDS BUT ON THE LOANS GIVEN BY THE APPELLA NT TO THAT PARTY. ANOTHER CONTENTION OF THE APPELLANT BEFORE THE AO W AS THAT THE PARTY M/S ASIATIC COLOUR CHEMICAL INDUSTRIES PVT. LTD WAS NOT MAKING PAYMENT IN TIME, THE APPELLANT CALCULATED THE INTER EST AND THE CHEQUE WAS RECEIVED FROM THIS PARTY. HOWEVER, THE PARTY RE QUESTED THE APPELLANT NOT TO CHARGE ANY INTEREST AS THEY HAD AS SURED THE APPELLANT TO MAKE THE PAYMENTS IN TIME IN FUTURE. THIS CONTENTIO N OF THE APPELLANT WAS NOT ACCEPTED BY THE AO ON THE GROUND THAT THE A PPELLANT HAS RECEIVED THE INTEREST AMOUNTING TO RS. 19,09,460/- AS MENTIONED IN THE LETTER DATED 6/1/2006 AT PAGE NUMBER 33 AND THE DET AILS OF AMOUNT OF INTEREST WORKED OUT AT PAGE NUMBER 19 OF ANNEXURE A -13. THE AO FURTHER OBSERVED THAT IN FACT THE AMOUNT OF RS. 19, 09,463/- HAS BEEN CREDITED IN THE BANK ACCOUNT NUMBER 77032 OF UNION BANK OF INDIA, SSI BRANCH, AHMEDABAD, ON 10/4/2006 WHICH IS PAID BY AS IATIC COLOUR CHEMICAL INDUSTRIES LTD. AS THE INTEREST OF RS. 19, 09,463/- RELATED TO ASSESSMENT YEARS 2005-2006 AND 2006-2007, THE AO MA DE ADDITION OF RS.2,30,403/- AND RS.16,79,060/- IN ASSESSMENT YEAR 2005-2006 AND 2006-2007 RESPECTIVELY. IN MY VIEW, THE A O IS JUSTIFIED IN TAXING THE INCOME OF RS.19,09,463/- IN TWO AS SESSMENT YEARS THAT IS RS.2,30,403/- IN ASSESSMENT YEAR 2005-2006 AND RS.1 6,79,060/- IN ASSESSMENT YEAR 2006-2007. THE WORKING OF INTEREST CALCULATION ALONG WITH THE LETTER ADDRESSED TO ASIATIC COLOUR CHEMICA LS INDUSTRIES LTD WAS FOUND AND SEIZED FROM THE PREMISES OF THE APPEL LANT. AS PER THIS LETTER, ASIATIC COLOUR CHEMICAL INDUSTRIES LTD WA S REQUIRED TO PAY INTEREST AMOUNTING TO RS. 19,09,464/- FOR THE PERIO D 13/9/2005 TO 30/9/2005 ON RS.48 LACS AND FOR THE HALF-YEAR ON TH E AMOUNT OF RS. 176,21,766/- AND ALSO FOR THE PERIOD FROM 6/1/ TO 3 1/3/2005 ON RS.48,78,234/-. FURTHER, TDS OF RS.76,408/- IS CALC ULATED ON THE ABOVE MENTIONED AMOUNTS OF INTEREST. ACCORDING TO THE AO, THIS INTEREST OF RS. 19,09,463/- WAS DULY PAID BY ASIATIC COLOUR CHEMICA L INDUSTRIES LTD WHICH IS CREDITED IN THE BANK ACCOUNT OF THE APPELL ANT WITH UNION BANK OF INDIA ON 10/4/2006. THIS CLEARLY SHOWS THAT NOT ONLY THE INTEREST HAD ACCRUED TO THE APPELLANT BUT ALSO IT WAS RECEIVED A ND CREDITED IN THE BANK ACCOUNT OF THE APPELLANT ON 10/4/2006. THE CON TENTION OF THE APPELLANT THAT THIS AMOUNT OF RS.19,09,464/- ADJU STED BY THE APPELLANT IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 42 - AGAINST THE SALE PROCEEDS DUE FROM ASIATIC COLOUR C HEMICALS INDUSTRIES LTD AND THAT NO INTEREST INCOME HAS BEEN RECEIVED F ROM THEM, IS WITHOUT ANY BASIS. ONCE THE APPELLANT HAS CHARGED INTEREST FROM ASIATIC COLOUR CHEMICAL INDUSTRIES LTD AND THE PARTY HAS PAID THE AMOUNT, IN MY OPINION, THE AMOUNT IS TAXABLE AS INTEREST INCOME I RRESPECTIVE OF WHAT TREATMENT HAS BEEN SUBSEQUENTLY GIVEN BY THE APPELL ANT IN HIS BOOKS OF ACCOUNTS. I THEREFORE, HAVE NO HESITATION IN CONFIR MING THE ADDITION OF INTEREST INCOME IN BOTH ASSESSMENT YEARS. 23. ADDRESSING THE ISSUE THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE PARTY NAMELY ASIATIC COLOUR CHEMICALS INDUSTRIES PV T.LTD. WAS NOT MAKING PAYMENT IN TIME AND THE ASSESSEE HAD ADJUSTE D THE RECEIPT OF CHEQUE OF RS.19,09,463/- AGAINST SALES RECEIPT AGAI NST SUM OUTSTANDING FROM THE PARTY. THIS WAS DONE SINCE THE PARTY HAD URGED THE ASSESSEE NOT TO CHARGE INTEREST AS THEY HAVE ASSURED THE ASSESSE E TO MAKE PAYMENT IN TIME IN FUTURE. THE ACTION OF THE ASSESSEE THUS CA NNOT BE ASSAILED. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT ALL THE AMOUN T HAS BEEN RECEIVED BY WAY OF CHEQUE AND HAVE DULY ACCOUNTED FOR IN THE BO OKS OF ACCOUNTS. THERE IS NO ALLEGATION FROM THE REVENUE THAT ANY AM OUNT HAS BEEN RECEIVED OUTSIDE THE BOOKS. THE ACCRUAL OF INTERES T IS THUS FAR FETCHED. 24. THE LD.DR RELIED ON THE ORDER OF THE CIT(A). 25. ON CAREFUL CONSIDERATION OF THE TOTALITY OF THE FACTS OF THE CASE, WE FIND THAT THE AMOUNT OF RS.19,09,463/- WAS RECEIVED BY WAY OF CHEQUE AND DULY ACCOUNTED IN THE BOOKS. THE REVENUE COULD NOT ESTABLISH THAT IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 43 - INTEREST HAD ACCRUED INDEED AND WAS LEGALLY DUE TO THE ASSESSEE. MERE CLAIM OF INTEREST ON OUTSTANDINGS PER SE DOES NOT TANTAMOUNT ITS ACCRUAL. THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT HAS BEEN ADJUSTED AGAINST THE PRINCIPAL AMOUNT OF SALE PROCEEDS TO BE RECEIVE D IS WITHIN THE REALM OF ORDINARY CONDUCT AND THUS CANNOT BE BRUSHED ASID E. REMAINS UNCONTROVERTED. THE SEIZED PAPER GIVING WORKING OF INTEREST DOES NOT GIVE RISE IN THE INFERENCE THAT THE INCOME TOWARDS INTEREST HAD BECOME LEGALLY DUE IN THE CIRCUMSTANCES OF THE CASE. WE T HUS FIND MERIT IN THE ARGUMENTS OF THE ASSESSEE AND ACCORDINGLY ADJUDICAT E THE ISSUE IN FAVOUR OF THE ASSESSEE. GROUND NO.3 IS ACCORDINGLY ADJUDI CATED IN FAVOUR OF THE ASSESSEE. 26. GROUND NO.4 CONCERNS ADDITION OF RS.25 LA KHS ON ACCOUNT OF UNACCOUNTED INVESTMENTS IN SARTHIK-II PROPERTY. TH E ISSUE HAS BEEN DEALT WITH IN DETAIL IN AY 2005-06. FOR THE PARTY OF REA SONING, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) CO NFIRMING THE ADDITION. ACCORDINGLY GROUND NO.4 OF THE APPEAL OF THE ASSESS EE IS WITHOUT ANY MERIT AND THEREFORE DISMISSED. 27. GROUND NO.5 & 6 BEING CONSEQUENTIAL IN GENERAL IN NATURE AND DOES NOT CALL FOR ANY ADJUDICATION. 28. IN THE RESULT, ASSESSEES APPEAL IT(SS)A NO.86/ AHD/2011 FOR AY 2005-06 IS PARTLY ALLOWED. IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 44 - ASSESSEES APPEAL IN IT(SS)A NO.87/AHD/2011 FOR AY 2006-07 29. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A SSAILING THE ORDER OF THE CIT(A) DATED 11/11/2010 READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN REJECTING THE ASSESSEES GROUND OF APPEAL CHALLENGING THE VALIDITY OF THE PROCEEDINGS INITIAT ED U/S.153A OF THE I.T.ACT, WHEN NOTHING INCRIMINATING WAS FOUND DURIN G THE COURSE OF SEARCH, AND IN SPITE OF THE FACT THAT THIS ISSUE WA S SQUARELY COVERED IN ASSESSEES FAVOUR BY VIRTUE OF VARIOUS DECISION OF THE HONBLE TRIBUNAL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.16,79 ,060 MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE AFORESAID INTEREST INCOME WAS EARNED BY THE ASSESSEE FROM ASIATIC COLOUR CHEM ICALS INDUSTRIES PVT.LTD., ON THE BASIS OF A SEIZED PAPER , ALLEGEDLY NOT ACCOUNTED IN THE BOOKS OF ACCOUNT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ASSESSING OFFICERS FINDING THAT THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE COMPANY TO M.R. CHEMICALS WHICH IS A PROPRIETARY CONCERN OF ITS DIR ECTOR SHRI MAHESH AGARWAL WERE NOT FOR BUSINESS PURPOSES AND, THEREFORE, TO THE EXTENT BEARING BORROWED FUNDS WERE UTILIZED IN GIVING SUCH LOANS AND ADVANCES, THE INTEREST PAYABLE ON SUCH BORROWED FUNDS IS TO BE DISALLOWED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN REJECTING THE ASSESSEES GROUND OF APPEAL CHALLENGING LEVY OF INTEREST U/S.234A, U/S.234B AND U/S.234C OF THE I.T.ACT, MERELY MENTIONING THAT THIS IS ONLY CONSE QUENTIAL IN NATURE. 30. GROUND NO.1 OF ASSESSEES APPEAL IS DISMISSED O N THE SIMILAR LINES WITH THAT OF AYS 2004-05 & 2005-06 DEALT WITH (SUPR A). IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 45 - 31. GROUND NO.2 IS IDENTICAL TO GROUND NO.3 OF AY 2 005-06. FOR THE PARTY OF REASONING, GROUND NO.2 STANDS ALLOWED. 32. GROUND NO.3 IS IDENTICAL TO GROUND NO.2 OF AY 2 005-06. FOR THE PARITY OF REASONING, GROUND NO.3 OF THE PRESENT APP EAL STANDS ALLOWED. 33. GROUND NOS.4 & 5 ARE GENERAL IN NATURE AND THER EFORE DOES NOT CALL FOR ANY ADJUDICATION. 34. IN THE RESULT, APPEAL OF THE ASSESSEE FOR AY 20 06-07 IS PARTLY ALLOWED. ASSESSEES APPEAL IN IT(SS)A NO.88/AHD/2011 FOR AY 2006-07 35. THE SUBSTANTIVE GROUND OF APPEAL RAISED BY THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) DATED 11/11/2010 READ AS U NDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ASSESSING OFFICERS FIND THAT THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE COMPANY TO M.R.CHEMICALS WHICH IS A PROPRIETARY CONCERN OF ITS DIRECTOR SHRI MAHESH AGARWAL WERE NOT FOR BUSINESS PURPOSES AND, THEREFORE, TO THE EXTENT INTEREST BEARING BORROWED FUNDS WERE UTI LIZED IN GIVING SUCH LOANS AND ADVANCES, THE INTEREST PAYABLE ON SU CH BORROWED FUNDS IS TO BE DISALLOWED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN REJECTING THE ASSESSEES GROUND OF APPEAL IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 46 - CHALLENGING LEVY OF INTEREST U/S.234A, U/S.234B AND U/S.234C OF THE I.T. ACT, MERELY MENTIONING THAT THIS IS ONLY CONS EQUENTIAL IN NATURE. 37. THE AFORESAID GROUNDS IS IDENTICAL TO THE GROUN D NO.2 IN IT(SS)A 86/AHD/2011 AND GROUND NO.3 IN IT(SS)A NO.87/AHD/20 11. SINCE THE FACTS INVOLVED ARE SIMILAR, THE ISSUE IS DECIDED IN FAVOUR OF ASSESSEE FOR THE PARITY REASONING GIVEN IN EARLIER ASSESSMENT YE ARS. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IN THE CAPTIONED APPE AL IS ALLOWED. 38. IN THE RESULT, APPEALS OF THE ASSESSEE IN IT(S S)A NOS.85, 86 & 87/AHD/2011 ARE PARTLY ALLOWED AND IT(SS)A NO.88/AH D/2011 IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 02 /01/2017 SD/- SD/ - () ( ) (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 02/01/2017 3..),.)../ T.C. NAIR, SR. PS IT(SS)A NOS.85 88 /AHD/2011 MAHESHRAJ CHEMICALS PVT.LTD. VS. DCIT - 47 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &#% / THE RESPONDENT. 3. 456+ 7+ / CONCERNED CIT 4. 7+ ( ) / THE CIT(A)-III, AHMEDABAD 5. 89:+)56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<* / GUARD FILE. / BY ORDER, &8++ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 21.11.16/20.12.16 (DICTATION -PAD 15+ 15PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.11.16/20.12.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.02.01.2017 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 02.01.2017 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER