CAMBATA AVIATION P. LTD, MUMBAI V. ACIT CEN CIR 8, NAVI MUMBAI

ITSSA 85/MUM/2009

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8185 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 02-05-2011
• Assessment Year: misc
• Appeal Filed On: 25-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SINHA
• Keywords: Unexplained expenditure; Business expenditure; Search and seizure; Principle of natural justice; Block assessment; Retraction; Reassessment proceedings
• Section: 133A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI, J. SUDHAKAR REDDY, ACCOUNTANT MEMBER A ND SMT. ASHA VIJAYRAGHAVAN, JUDICIAL MEMBER IT(SS)A NO. 85/MUM./2009 (BLOCK PERIOD : 1.4.1991 TO 1.5.2001 ) DATE OF HEARING: 2.5.2011 M/S. CAMBATA AVIATION P. LTD. HANGER NO.3, JUHU AERODROME MUMBAI 400 054 PAN AAACC6450B .. APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-8, MUMBAI .... RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : MR. AJIT KUMAR SINHA O R D E R PER J. SUDHAKAR REDDY, A.M. THE APPEAL PREFERRED BY ASSESSEE, IS DIRECTED AGAIN ST THE IMPUGNED ORDER DATED 9 TH OCTOBER 2009, PASSED BY THE COMMISSIONER (APPEALS) - XXXVII, MUMBAI, WHEREIN HE CONFIRMED THE ORDER PASS ED BY THE ASSESSING OFFICER UNDER SECTION 158BC OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ), FOR THE BLOCK PERIOD FROM 1 ST APRIL 1991 TO 1 ST MAY 2001. 2. BRIEF FACTS OF THE CASE, AS BROUGHT OUT BY THE COMM ISSIONER (APPEALS) VIDE PARAS-1.1.2 TO 1.1.3, READ AS FOLLOWS:- M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 2 1.1.2 THE APPELLANT IS A COMPANY ENGAGED IN THE BUSINESS OF PROVIDING GROUND HANDLING SERVICES TO VARIOUS INTER NATIONAL AIRLINES SUCH AS CATHAY PACIFIC, LUFTHANSA AIRLINES, SWISS A IR, GULF AIR, EVA AIR, ETC. THE APPELLANTS PREMISES WERE COVERED UNDER TH E SEARCH AND SEIZURE PROCEEDINGS UNDER SECTION 132 OF THE ACT ON 1.5.2001, THEREAFTER APPELLANTS NEW DELHI PREMISES WERE ALSO COVERED U/S 133A OF THE ACT. FOR READY REFERENCE, THE CHRONOLOGY OF THE EVENTS TO THE PRESENT DISPUTE MAY BE SUMMARIZED AS UNDER:- SR.NO. DATE PARTICULARS 1. 30.08.2000 FIRST SETTLEMENT PETITION U/S 245C(1) FOR A.Y. 1996-97 TO 2000-01 FILED. 2. 18.12.2000 ADMISSION OF FIRST SETTLEMENT PETITIO N U/S 245D(1) 3. 01.05.2001 SEARCH AND SEIZURE ACTION U/S 132 AT BOMBAY BRANCH 4. 28.03.2002 FORM 2B FILED. 5. 31.07.2002 SECOND SETTLEMENT PETITION U/S 245C(1 ) FOR THE BLOCK PERIOD 1992-93 TO 2001-02 AND 01.04.2001 TO 01.05.2001 FILED. 6. 27.12.2005 ORDER OF THE HON'BLE SUPREME COURT SE TTLEMENT COMMISSION W.R.T. SA DATED 30.08.2000. 7. 31.03.2008 IN VIEW OF AMENDMENT IN S. 245HA(1)(I V) THE SECOND PETITION WAS ABATED AND PROCEEDINGS GOT TRANSFERRED TO THE A.O. 8. 25.03.2009 ORDER U/S 158BC OF THE ACT. 1.1.3 IT IS STATED BY THE LD. ASSESSING OFFICER TH AT THE APPELLANT COMPANY WAS INVOLVED IN THE BUSINESS OF GROUND HAND LING ACTIVITIES, CUSTOM CLEARING AND CARTING SERVICES AT INTERNATION AL AIRPORTS IN INDIA. CERTAIN ENQUIRIES REGARDING REFUNDS CLAIMED BY ONE M/S. RYDHAN TOURS & TRAVELS WERE INITIATED BY THE I.T. DEPARTMENT. ON ENQUIRY, IT WAS DETECTED THAT THE APPELLANT HAD GIVEN WRONG ADDRESS ES ON CERTAIN TDS CERTIFICATES. IT WAS DETECTED THAT THE APPELLANT CO MPANY WAS CLAIMING BOGUS EXPENDITURE BY USING BILLS ISSUED BY NON-EXIS TING CONCERNS. HAVING REGARD TO THE POSSESSION OF THESE EVIDENCES, THE I.T. DEPTT. INITIATED REASSESSMENT PROCEEDINGS AGAINST THE APPE LLANT COMPANY. SOON THEREAFTER, THE APPELLANT FILED A SETTLEMENT A PPLICATION UNDER SECTION 245C(1) BEFORE THE SETTLEMENT COMMISSION ON 30.8.2000 FOR A.Y. 1996-97 TO 2000-01 DECLARING ADDITIONAL UNDISC LOSED INCOME OF ` 6,15,68,000. THE SETTLEMENT APPLICATION DATED 30.8. 2000 WAS ADMITTED ON 18.12.2000 UNDER SECTION 243D(1) BY THE SETTLEMENT COMMISSION AND THE FINAL ORDER U/S 245D(4) WAS PASS ED ON 27.12.2005 BY THE SAID SETTLEMENT COMMISSION. EXTRACT OF ASSESSMENT ORDER PAGE-3 / PARA-5 M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 3 DISCLOSURE OF INCOME U/S 132(4) AT THE TIME OF SEA RCH 5. IT IS NOTICED THAT DURING THE COURSE OF SEARCH P ROCEEDINGS, THE ASSESSEE HAD FILED LETTER DATED 26.6.2001 AND 29.6. 2001 MAKING DECLARATION OF INCOME OF ` 1,74,41,822. HOWEVER, THE ASSESSEE HAD DECLARED A SUM OF ONLY ` 65,81,092 AS UNDISCLOSED INCOME OF THE BLOCK PERIOD 1.4.1991 TO 1.5.2001. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS WHY THE INCOME OF ` 1,74,41,822 SHOULD NOT BE CONSIDERED AS UNDISCLOSED INCOME AS AGAINST THE INCOME OF ` 65,18,092 AND HENCE ADDITION OF ` 1,09,23,730 BE MADE. THE DETAILED BREAK UP OF THE UNDISCLOSED INCOME IN BLOCK RETURN AND THAT DECLARE D U/S 132(4) IS GIVEN BELOW:- PARTICULARS UNDISCLOSED INCOME SHOWN IN RETURN OF BLOCK PERIOD DISCLOSED U/S 132(4) & VIDE LETTER DT. 26.6.2001 & 29.6.2001 AMOUNT NOT DISCLOSED IN THE RETURN OF BLOCK RENT PAID ` 5,90,000 ` 50,09,500 ` 44,19,500 IOU ` 7,80,841 ` 53,10,200 ` 45,29,359 SEIZED PAPER FILE A1 ` 47,32,070 ` 47,32,010 - - EXPENSES OF MR. SAM CAMBATA ` 2,10,181 ` 3,37,052 ` 1,26,871 R.E. MEHARJI VOUCHERS ` 20,000 ` 20,000 - - MR. B. NICHOLSON VOUCHERS ` 35,000 ` 35,000 - - PAYMENT TO MILAN ZATAKIA ` 1,50,000 ` 1,50,000 - - CASH PAYMENT TO SETTLE LITIGATION ` NIL ` 18,48,000 ` 18,48,000 TOTAL: ` 65,18,092 ` 1,74,41,822 1,09,23,730 6. THE ASSESSEE HAS SUBMITTED THAT THE DISCLOSURE M ADE VIDE LETTER DATED 26.6.2001 AND 29.6.2001 CANNOT BE HELD AS BIN DING UPON THE ASSESSEE FOR THE PURPOSE OF CARRYING OUT THE ASSESS MENT PROCEEDINGS. IT WAS ALSO SUBMITTED THAT COGNIZANCE HAS TO BE TAK EN IN RESPECT OF CLARIFICATION ABOUT THE QUANTUM OF UNDISCLOSED INCO ME MADE VIDE LETTER DATED 28.3.2002, FILED ALONG WITH THE RETURN OF INC OME FILED AS WELL AS AFFIDAVIT OF THE DIRECTOR DATED 7.5.2003. THE ASSES SEE SUBMITTED THAT WHEN THE INCOME DECLARED IN THE STATEMENT UNDER SEC TION 132(4) OF THE ACT IS REVISED ON PROPER APPRECIATION OF FACTS, THE ASSESSING OFFICER MUST TAKE COGNIZANCE OF THE SAME UNLESS THERE ARE E VIDENCES FOUND AS A RESULT OF SEARCH TO THE CONTRARY. THE ADDITIONS S HOULD NOT SIMPLY BE MADE ON THE BASIS OF SUCH DECLARATION MORE PARTICUL ARLY WHEN IT WAS EXPLAINED THAT THE SAID STATEMENT WAS MADE ON MIS-C ONCEPTION OF M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 4 FACTS AND ON MISCONCEIVED GROUNDS. THE ASSESSEE HAS ALSO FILED DETAILED EXPLANATION AS REGARDS TO VARIOUS CLAIMS W HICH WERE PERUSED AND PLACED ON RECORDS. 3. THE ASSESSING OFFICER DID NOT ACCEPT THE APPLICATIO N OF THE ASSESSEE WHEREIN HE HAD GIVEN REASONS FOR REDUCTION IN THE A MOUNTS DISCLOSED FROM ` 1,74,41,882 TO 65,18,092 AND COMPUTED THE UNDISCLOS ED INCOME OF ` 1,84,44,179. 4. ON APPEAL, THE FIRST APPELLATE AUTHORITY AGREED WIT H THE ASSESSING OFFICER. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPE AL BEFORE THE TRIBUNAL, RAISING FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT S IN UPHOLDING THE ORDER PASSED BY THE ASSESSING OFFICER U/S 158BC WHI CH WAS ILLEGAL AND BAD IN LAW. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE ORDER PASSED BY THE ASSESSING OFFICER U/S 158BC WIT HOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ASSESSMENT OF A SUM OF ` 50,09,500 BEING THE ALLEGED CASH PAYMENT OF RENT AT NEW DELHI, AS UNDISCLOSED INCOME OF THE APP ELLANT. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN APPROVING THE ASSESSMENT OF A SUM OF ` 53,10,200 PAID TO THE EMPLOYEES ON THE STRENGTH OF IOUS OBTAINED FROM THEM AS THE UNDISCLO SED INCOME OF THE APPELLANT. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONCURRING WITH THE TREATMENT GIVEN BY THE ASSESSING OFFICER TO THE AMOUNT OF ` 7,00,000 PAID TO SHRI DILIP PAREKH AND ITS ASSESSME NTS AS THE UNDISCLOSED INCOME OF THE APPELLANT. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ASSESSMENT OF ` 3,37,052 PAID TO SHRI SAM CAMBATA AS THE UNDISCLOS ED INCOME OF THE APPELLANT. 7. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE ASSESSMENT OF A SUM OF ` 2,71,500 ON AD-HOC BASIS AS THE UNDISCLOSED INCOME OF THE APPELLANT OUT OF TOTAL EXPENDITURE OF ` 13,57,529 INCURRED AND BOOKED UNDER THE HEAD CUSTOM CLEARING EXPENSES . 8. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE ASSESSMENT OF A SUM OF ` 1,16,857 AS THE UNDISCLOSED INCOME WHICH IN M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 5 FACT WAS THE EXPENDITURE INCURRED BY THE APPELLANT THROUGH M/S. LUNAR LUBRICANTS AND M/S. SOLAR OIL COMPANY. 9. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ASSESSMENT OF A SUM OF ` 17,62,000 BEING ALLEGED DIFFERENCE IN CASH, AS THE UNDISCLOSED INCOME OF THE APPELLANT. 5. BEFORE US, LEARNED COUNSEL, MR. VIJAY MEHTA, APPEAR ING ON BEHALF OF THE ASSESSEE, SUBMITS THAT GROUNDS NO.1 AND 2 ARE G ENERAL IN NATURE AND, THEREFORE, HE IS NOT PRESSING THE SAME. CONSEQUENTL Y, WE DISMISS THESE GROUNDS AS NOT PRESSED . 6. GROUND NO.3, IS ON THE ISSUE OF ADDITION ON ACCOUNT OF ALLEGED CASH PAYMENT OF RENT AT NEW DELHI. 7. LEARNED COUNSEL SUBMITS THAT THIS ISSUE HAS BEEN DI SCUSSED BY THE ASSESSING OFFICER AT PAGE-5 / PARA-7 OF THE ASSESSM ENT ORDER AND ALL THAT THE ASSESSEE IS ASKING FOR IS THE TELESCOPING BENEFIT. HE SUBMITS THAT THE ASSESSING OFFICER HAS NOT ACCEPTED THE STAND OF THE ASSESSEE THAT THE PAYMENT OF RENT, AS PER THE SEIZED MATERIAL, HAS BE EN MADE BY THE ASSESSEE OUT OF CASH AVAILABLE WITH THE ASSESSEE FROM BOGUS EXPENDITURE CLAIMED IN THE BOOKS OF ACCOUNT. HE SUBMITS THAT CASH WAS GENE RATED BY THE ASSESSEE BY BOOKING BOGUS EXPENDITURE AND THIS VERY CASH WAS USED TO PAY RENT. HE SUBMITS THAT BOGUS EXPENDITURE HAS ALREADY BEEN DEC LARED IN THE PETITION FILED BEFORE THE HONBLE SETTLEMENT COMMISSION AND THE SAME HAS BEEN ASSESSED ACCORDINGLY. HE SUBMITS THAT CHEQUES WERE GIVEN TO CERTAIN PEOPLE AND BOGUS EXPENDITURE BOOKED AND THESE PERSONS HAD RETURNED THAT MONEY IN CASH AND THIS CASH WAS PAID TO THE LANDLORD TOWA RDS RENT. HE SUBMITS THAT WHATEVER WAS NOT COVERED BY THE DECLARATION MADE BE FORE THE HON'BLE SETTLEMENT COMMISSION, WAS OFFERED TO TAX. HE REFER RED TO PAGE-6 / PARA-9 OF THE ASSESSMENT ORDER AND COMPARED THE OBSERVATIO NS THEREIN TO THE FINDINGS OF THE HONBLE SETTLEMENT COMMISSION AND S UBMITS THAT ALL THAT THE HON'BLE SETTLEMENT COMMISSION HAS SAID IS THAT THE EXPENDITURE IS BOGUS. HE REFERRED TO PARA-11, PAGES-7 AND 8 OF THE ASSESSMEN T ORDER AND EMPHASIZED M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 6 THE FINDINGS IN PARA-37.13 / PAGE-48 OF THE HON'BLE SETTLEMENT COMMISSIONS ORDER WHEREIN IT IS CLEARLY STATED THAT THE ASSESSE E HAS AGREED THAT THE EXPENDITURE IS NOT GENUINE AND THAT THE MONEY IS PA RTLY RECEIVED BACK IN CASH AND HAS BEEN SPENT FOR THE PURPOSE OF FUNDING CERTAIN UNACCOUNTED EXPENDITURE AND ALSO THE FINDING THAT WHAT HAPPENED TO THE UNSPENT CASH HAD NOT BEEN EXPLAINED AND THAT THE DESTINATION OF SUCH CASH REMAINS TO BE DISCLOSED. HE EMPHASIZED THAT DURING THE COURSE OF SEARCH, THE REVENUE HAS NOT FOUND ANY EXCESS CASH OR INVESTMENT. HE ALSO SU BMITS THAT EXCEPT FOR PAYMENT OF THIS UNACCOUNTED RENT, NO OTHER UNACCOUN TED EXPENDITURE WAS FOUND BY THE REVENUE IN THE ENTIRE SEARCH OPERATION S. HE POINTED OUT THAT ALL THE RECEIPTS ARE FROM FOREIGN AIRLINES FOR GROUND H ANDLING SERVICES AND THERE IS NO ALLEGATION THAT THE ASSESSEE HAS RECEIVED CER TAIN UNACCOUNTED MONEY BY WAY OF INCOME. HE REFERRED TO PAGE-18 OF THE COM MISSIONER (APPEALS)S ORDER AND SUBMITS THAT THE COMMISSIONER (APPEALS) H AS CHOSEN TO PICK SELECTED SENTENCES FROM THE ORDER OF THE HON'BLE SE TTLEMENT COMMISSION AND THIS RESULTED IN COMING TO A DISTORTED CONCLUSION O N THE FINDINGS OF THE HON'BLE SETTLEMENT COMMISSION. HE TOOK THIS BENCH T HROUGH THE CONTENTS OF THE SETTLEMENT APPLICATION FILED AS WELL AS THE SUB MISSIONS MADE BY THE ASSESSEE BEFORE THE HON'BLE SETTLEMENT COMMISSION A ND SUBMITS THAT A PERUSAL OF THESE TWO DOCUMENTS WOULD SET AT REST, T HE STAND OF THE ASSESSEE. HE ALSO REFERRED TO THE STATEMENT OF FACTS BEFORE T HE HON'BLE SETTLEMENT COMMISSION AT ASSESSEES PAPER BOOK AT PAGES-21 AND 22. HE REFERRED TO ASSESSEES PAPER BOOK PAGE-30 / PARA-4 AND SUBMITS THAT THE ASSESSEE WANTED TELESCOPING BENEFIT EVEN BEFORE THE HON'BLE SETTLEMENT COMMISSION. 8. LEARNED COUNSEL SUBMITS THAT THE LEARNED CIT(A) ERR ED IN ASKING FOR NEXUS, FOR THE REASON THAT WHEN ONE-TO-ONE NEXUS IS PROVED, THERE IS NO QUESTION OF GRANT OF TELESCOPING. HE SUBMITTED A CH ART TO POINT OUT THAT THE BOGUS EXPENDITURE DECLARED IN EACH OF THE YEAR UNDE R REFERENCE, IS MUCH LARGER THAN THE RENT PAID AND, HENCE, PRAYED THAT T HE BENEFIT OF TELESCOPING MAY BE GRANTED. HE POINTED OUT THAT THE CASH GENERA TED FROM BOGUS EXPENDITURE WAS ` 6,15,71,572 AND THAT THIS AMOUNT WAS ASSESSED TO T AX IN M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 7 THE PROCEEDINGS BEFORE THE HON'BLE SETTLEMENT COMMI SSION IN THE FIRST APPLICATION AND THAT THE AMOUNT OF 44,19,500 ONLY W AS PAID IN CASH FROM OUT OF THE CASH GENERATED FROM BOGUS EXPENDITURE AND TH AT BALANCE ` 5,90,000 FROM TOTAL RENTAL CASH PAYMENT OF ` 50,09,500 WAS DECLARED IN THE BLOCK RETURN. FOR THE PROPOSITION THAT THE TELESCOPING BE NEFIT IS TO BE GRANTED, HE RELIED ON THE FOLLOWING CASE LAWS:- 1. CIT V/S JAWANMAL GEMAJI GANDHI, (1985) 151 ITR 353 (BOM.); 2. BALARAM SAHA V/S CIT, (2011) TIOL-274-HC-KOL-IT (CA L.); 3. CIT V/S K.S.M. GURUSWAMY NADAR & SONS, (1984) 149 I TR 127 (MAD.); & 4. ACIT V/S DHARAMDAS AGARWAL, (1983) 144 ITR 143 9. HE CONTENDS THAT THE ASSESSING OFFICER AS WELL AS T HE COMMISSIONER (APPEALS) HAD CONVENIENTLY CONSIDERED ONLY ONE SIDE OF THE COIN I.E., THE OFFERS MADE BY THE ASSESSEE IN THEIR LETTERS DATED 26 TH JUNE 2001 AND 29 TH JUNE 2001 AND HAVE BRUSHED ASIDE THE CONTENTS OF TH E SUBSEQUENT LETTER DATED 28 TH MARCH 2002, WHICH WAS FILED ALONG WITH THE RETURN OF INCOME TO SUBSTANTIATE THE UNDISCLOSED INCOME DECLARED THEREI N. HE ALSO SUBMITS THAT THE DIRECTOR OF THE ASSESSEE COMPANY HAS FILED AN A FFIDAVIT DATED 7 TH MAY 2003, GIVING THE CORRECT STATE-OF-AFFAIRS AND ALSO BRING OUT THE INACCURATELY IN THE INITIAL OFFER. HE SUBMITS THAT THE CONTENTS OF THE AFFIDAVIT WERE NOT REBUTTED BY THE ASSESSING OFFICER OR THE COMMISSION ER (APPEALS). HE RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN MEH TA PARIKH & CO. V/S CIT, (1956) 30 ITR 181 (SC), FOR THE PROPOSITION OF UNCONTROVERTED AFFIDAVIT IS A VALUABLE PIECE OF EVIDENCE. HE REFERRED TO EXP LANATION-2 TO SECTION 271(1)(C) AND SUBMITS THAT THE LEGISLATURE AS ALSO RECOGNISED THE CONCEPT OF TELESCOPING. 10. REFERRING TO GROUND NO.4, LEARNED COUNSEL SUBMITS T HAT THIS ADDITION WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF IOU PAYMENTS REFLECTED IN THE SEIZED MATERIAL. HE SUBMITS THAT THE ASSESSEE H AS LARGE NUMBER OF EMPLOYEES OPERATING AT DIFFERENT AIRPORTS OF INDIA AND FOR ADMINISTRATIVE REASONS AND ACCOUNTING EVIDENCE, THE ASSESSEE HAS T AKEN A POLICY OF M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 8 ADVANCING CASH TO EMPLOYEES AND REFLECTING THEM UND ER THE HEAD IOU . HE SUBMITS THAT WHEN THE AMOUNTS ARE PAID AS ADVANCE, NO ENTRIES ARE PASSED IN THE CASH BOOK AND, HENCE, THE CASH BALANCE CONTI NUED WITHOUT REDUCTION. ON ACCOUNT OF IOU, HE SUBMITTED THAT THE EFFECTIVE CASH BALANCE WOULD BE THE ACTUAL CASH BALANCE PLUS THE SUM TOTAL OF IOUS. HE SUBMITS THAT WHEN THE EMPLOYEE SUBMITS VOUCHERS AND BILLS, THEN THE A DJUSTMENT IS MADE. HE SUBMITS THAT ON EACH OF THE DAYS, THE CASH BALANCE AS PER BOOKS OF ACCOUNT WAS SUFFICIENT TO COVER THE IOUS AND, HENCE, NO ADD ITION IS REQUIRED TO BE MADE. ALTERNATIVELY, HE SUBMITS THAT BENEFIT OF TEL ESCOPING HAS TO BE GRANTED AND FOR THIS SUBMISSION, HE RELIED ON THE ARGUMENT MADE EARLIER IN GROUND NO.4. 11. GROUND NO.5, IS WITH REGARD TO AN AMOUNT OF ` 7,00,000 BEING THE PAYMENT MADE TO MR. DILIP PARIKH, IN SETTLEMENT OF CERTAIN DISPUTES / LITIGATIONS. THE LEARNED COUNSEL SEEKS TELESCOPING BENEFIT AS IN THE EARLIER GROUNDS. 12. GROUND NO.6, IS AN ADDITION OF ` 3,37,052, MADE ON ACCOUNT OF AMOUNT PAID TO MR. SAM CAMBATA. 13. COUNSEL SUBMITS THAT THE AMOUNT WAS RECORDED IN THE BOOKS OF ACCOUNT AND, HENCE, IT CANNOT BE DISALLOWED IN THE REGULAR ASSESSMENT. 14. LEARNED COUNSEL, REFERRING TO GROUND NO.7, SUBMITS THAT THIS IS AN AD- HOC DISALLOWANCE OF 20% OF THE TOTAL AMOUNT AND THA T NO MATERIAL WAS FOUND MAKING SUCH DISALLOWANCE. HE SUBMITS THAT THE ASSES SING OFFICER HAS WRONGLY STATED THAT ONE OF THE DUTY MANAGERS, MR. SHRIKANT TARIKAR, HAS ACCEPTED THAT 20% OF THE EXPENDITURE HAS BEEN ILLEGALLY MADE . HE VEHEMENTLY CONTENDED THAT THERE ARE NO SUCH AVERMENTS MADE IN THE STATEMENT OF THE SAID EMPLOYEE. 15. INSOFAR AS GROUND NO.8 IS CONCERNED, WHICH IS ON TH E DISALLOWANCE OF EXPENDITURE INCURRED ON LUNAR LUBRICANTS, LEARNED C OUNSEL SUBMITS THAT M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 9 THESE ARE THE CLAIMS IN THE REGULAR BOOKS OF ACCOUN T AND, HENCE, CANNOT BE A MATTER OF ADDITION IN THE BLOCK ASSESSMENT PROCEEDI NGS. 16. COMING TO GROUND NO.10, LEARNED COUNSEL SUBMITS THA T THE CASH FOUND BY THE DEPARTMENT DURING THE COURSE OF SEARCH WAS ` 11,87,000 AND, WHEREAS, THE CASH BALANCE AS PER BOOKS OF ACCOUNT W AS ` 29,49,011. HE SUBMITS THAT THE DIFFERENCE CANNOT BE ADDED AS UNDI SCLOSED INCOME UNDER ANY OF THE PROVISIONS OF THE ACT. HE, ACCORDINGLY, PRAYED FOR RELIEF. 17. LEARNED DEPARTMENTAL REPRESENTATIVE, MR. AJIT KUMAR SINHA, ON THE OTHER HAND, OPPOSED THE CONTENTIONS OF THE ASSESSEE AND SUBMITS THAT THE ASSESSEE HIMSELF WAS NOT SURE ON THE ISSUE WHETHER THE EXPENDITURE IN QUESTION WAS GENUINE OR BOGUS EXPENDITURE. HE SUBMI TS THAT THE ASSESSEE ORIGINALLY CONTENDED BEFORE THE HONBLE SETTLEMENT COMMISSION THAT THE EXPENDITURE WAS GENUINE IN NATURE AND ON THE FACE O F SUCH SUBMISSIONS, IT CANNOT BE SAID THAT CASH WAS RETURNED TO THE ASSESS EE FOR BEING AVAILABLE TO INCUR UNACCOUNTED EXPENDITURE. HE CONTENDS THAT THE DECISION OF HONBLE SETTLEMENT COMMISSION HAS TO BE SEEN IN THE CONTEXT IN WHICH IT IS MADE. HE SUBMITS THAT THE HONBLE SETTLEMENT COMMISSION HAS CONSIDERED THE ISSUE ON FACTS. HE SUBMITS THAT EXPLANATION-2 TO SECTION 158 BA(2), MAKES IT CLEAR THAT REGULAR ASSESSED INCOME CANNOT BE A SUBJECT MATTER OF BLOCK ASSESSMENT AND THUS, ENTRIES OF BOGUS EXPENDITURE IN THE REGULAR B OOKS OF ACCOUNT CANNOT BE TAKEN SHELTER OF IN THE BLOCK ASSESSMENT . 18. HE REFERRED TO PAGE-17 OF THE COMMISSIONER (APPEALS )S ORDER AND SUBMITS THAT AT PAGES-6 AND 7 OF THE HONBLE SETTLE MENT COMMISSION UNDER SECTION 245B(4) IN S.A. NO.15/VI/011/2000-01/IT EXT RACTED THE QUESTIONS AND ANSWERS DURING THE COURSE OF HEARING AND CAME T O A CONCLUSION THAT NO CASH WAS GENERATED AND THE AMOUNT WAS OFFERED BEFOR E THE HONBLE SETTLEMENT COMMISSION IN THE CIRCUMSTANCES OF THE C ASE. HE FURTHER SUBMITS THAT THE HONBLE SETTLEMENT COMMISSION HAS CLEARLY HELD THAT THE MATERIAL FOUND DURING THE COURSE OF SEARCH, CANNOT BE TAKEN INTO CONSIDERATION FOR DETERMINATION OF INCOME IN ITS ORDER AND THAT THE S AME SHOULD BE CONSIDERED M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 10 IN THE BLOCK ASSESSMENT. HE FURTHER POINTED OUT THA T THE ASSESSEE HAS NOT PROVED ANY NEXUS OF THE EXPENDITURE, THE MODE OF PA YMENT OF RENTAL IN CASH VIS--VIS THE INCOME DISCLOSED IN THE REGULAR ASSES SMENT YEARS. HE REFERRED TO THE LETTERS FILED BEFORE THE INVESTIGATING AUTHO RITIES OFFERING THE INCOME AND SUBMITS THAT THE RETRACTION AT THE TIME OF FILI NG OF RETURN OF INCOME WAS BAD-IN-LAW. 19. ON GROUND NO.5, WHICH PERTAINS TO ADDITION ON ACCOU NT OF IOUS, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT TH E ARGUMENTS OF TELESCOPING WAS NEVER TAKEN BEFORE THE COMMISSIONER (APPEALS) AND UNDER SUCH CIRCUMSTANCES, THE ISSUE CANNOT BE ADJUDICATED AT THIS STAGE. HE CONTENDS THAT THE ASSESSEE HAS RAISED AN ENTIRELY D IFFERENT SET OF ARGUMENTS BEFORE THE TRIBUNAL AND THAT, AT BEST, THE ISSUE SH OULD BE SET ASIDE TO THE FILE OF THE COMMISSIONER (APPEALS) FOR CONSIDERING THE I SSUE OF TELESCOPING. 20. ON GROUND NO.6, WHICH PERTAINS TO PAYMENT MADE TO M R. DILIP PARIKH, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THA T THE ISSUE IS OF ILLEGAL PAYMENT AND IT IS NOT A CASE OF TELESCOPING. HE SUB MITS THAT THE EXPENDITURE WAS HELD AS NOT ALLOWABLE AS IT WAS NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. HE POINTS OUT THAT THE ASS ESSEE ITSELF DISALLOWED ` 11,48,000 IN THE RETURN OF INCOME FILED FOR THE ASS ESSMENT YEAR 2001-02 AND ON THE SAME FOOTING, THE BALANCE AMOUNT OF ` 7,00,000 IS TO BE DISALLOWED. 21. ON GROUND NO.7, WHICH PERTAINS TO PAYMENT MADE TO M R. SAM CAMBATA, THE LEARNED DEPARTMENTAL REPRESENTATIVE, R EFERRED TO PAGE-33 TO 36 OF THE COMMISSIONER (APPEALS)S ORDER AND DREW T HE ATTENTION OF THE BENCH TO THE FINDINGS THAT THE PAYMENT WAS NOT MADE FOR THE PURPOSE OF BUSINESS. MR. SAM CAMBATA, IS NEITHER EMPLOYEE NOR THERE WAS ANY CONTRACTUAL OBLIGATION TO PAY HIM. 22. ON GROUND NO.8, WHICH IS ON THE ISSUE OF AD-HOC DIS ALLOWANCE OF 20%, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THA T THE AMOUNT OF 20% M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 11 WAS SPEED MONEY AND THIS WAS BASED ON SEIZED DOCUME NTARY EVIDENCE. HE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 23. GROUND NO.9, WHICH IS PERTAINING TO DISALLOWANCE OF EXPENDITURE INCURRED THROUGH LUNAR LUBRICANTS, LEARNED DEPARTME NTAL REPRESENTATIVE, SUBMITS THAT THE ASSESSEE ITSELF HAD DECLARED EXPEN DITURE IN THE NAME OF SAID PARTIES AS BOGUS AND, HENCE, CANNOT TAKE A DIFFEREN T STAND HERE. 24. ON THE LAST ISSUE OF DIFFERENCE IN CASH BALANCE, TH E LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT IT WAS FOR THE ASSESSEE TO EXPLAIN THE SAME. HE PRAYED THAT THE ORDER OF THE FIRST APP ELLATE AUTHORITY BE UPHELD. 25. JOINING THE ISSUE, THE LEARNED COUNSEL SUBMITS THAT EXPLANATION TO SECTION 158BA(2), PLACES A BAR ON TAXING THE INCOME TWICE. HE SUBMITS THAT THERE IS NO BAR ON THE ISSUE OF TELESCOPING. HE SUB MITS THAT THE ASSESSEE HAS NOT RETRACTED FROM THE STATEMENT IN THIS CASE BUT H AS ONLY EXPLAINED THE SOURCE OF MONEY FOR INCURRING THE UNRECORDED EXPEND ITURE. ON IOUS, HE SUBMITS THAT THE DATEWISE CASH BALANCE CHART HAS BE EN FILED BEFORE THE COMMISSIONER (APPEALS) AND THE COMMISSIONER (APPEAL S) HAS NOT CONSIDERED THE ARGUMENT OF THE ASSESSEE THAT THE DAILY CASH BA LANCE IS OVER AND ABOVE THE DAILY IOUS. ON AD-HOC DISALLOWANCE OF EXPENDITU RE, LEARNED COUNSEL SUBMITS THAT THE EXPENDITURE IN CASH DID NOT EXCEED 10% OF CUSTOM CLEARING EXPENDITURE. UNDER SUCH CIRCUMSTANCES, TO HOLD THAT 20% OF THE EXPENDITURE IS SPEED MONEY IS NOT CORRECT. 26. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF PAPERS O N RECORD AS WELL AS THE CASE LAWS CITED BEFORE US, WE HOLD AS FOLLOWS:- (I) AS ALREADY STATED, GROUNDS NO.1 AND 2 HAVE NOT BEEN PRESSED BY THE LEARNED COUNSEL, THEREFORE, THESE GROUNDS ARE DISMI SSED AS NOT PRESSED . M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 12 (II) GROUND NO.3, THE ISSUE IS OF TELESCOPING. THE HONB LE SETTLEMENT COMMISSION HAS, AFTER CONSIDERING THE PETITION OF T HE ASSESSEE, THE VARIOUS ARGUMENTS FROM BOTH THE PARTIES AND THE MATERIAL IN HAND, HAS FINALLY COME TO THE FOLLOWING CONCLUSION. 12. WE ALSO DO NOT AGREE WITH THE CONTENTION OF TH E APPLICANT THAT THE PAYMENTS WERE GENUINE. IN SPITE OF THE CLAIM OF THE APPLICANT, THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE S TO THOSE PARTIES, UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE NOT SATISFIED THAT THE PAYMENTS WERE GENUINE. 13. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE , THE QUESTION WHICH ARISES IS WHETHER THE APPARENT CAN BE CONSIDE RED AS THE REAL. IT HAS BEEN LAID DOWN BY OUR SUPREME COURT THAT THE AP PARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE RE ASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AU THORITY ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. 14. WE ARE CONVINCED, IN VIEW OF WHAT HAS BEEN DISC USSED ABOVE THAT THE TRANSACTIONS UNDER CONSIDERATION ARE NOT G ENUINE. THE EXPENDITURE UNDER THE VARIOUS HEADS, AS DESCRIBED A BOVE, WAS INFLATED AND BOGUS. THEY WERE NOT INCURRED FOR THE PURPOSE O F THE BUSINESS. AND THE CONTENTION OF THE APPLICANT THAT THEY ARE O FFERING THESE AS INCOME ONLY BECAUSE THEY ARE NOT IN A POSITION TO S UBSTANTIATE THESE PAYMENTS ON ACCOUNT OF REASONS BEYOND ITS CONTROL IS UNACCEPTABLE. (III) THESE FINDINGS HAVE TO BE READ WITH THE AVERMENTS I N THE APPLICATION MADE BY THE ASSESSEE TO THE HONBLE SETTLEMENT COMM ISSION IN FORM NO.34B, WHEREIN AT PARA-6, IT IS STATED AS FOLLOWS: - 6. .. THE APPLICANT SUBMITS THAT THOUGH THE AFO RESAID EXPENDITURE HAD BEEN INCURRED FOR THE PURPOSE OF BU SINESS, IT IS SUBMITTED THAT THE APPLICANT ON ACCOUNT OF REASONS BEYOND ITS CONTROL WILL NOT BE IN A POSITION TO SUBSTANTIATE THE SAME WITH SUPPORTING BILLS / INVOICES. ACCORDINGLY, SINCE THE AFORESAID EXPENDIT URE UNDER THE AFORESAID HEAD OR AS A BOGUS EXPENDITURE, THE APPLI CANT OFFERS THE AFORESAID AMOUNT OF ` 6,16 CRORES AS ADDITIONAL INCOME TO BE ASSESSED OVER AND ABOVE THE INCOME RETURNED FOR THE ASSESSME NT YEAR 1996-97 TO 2000-01 IN THE MANNER AS STATED BELOW:- ASSESSMENT YEAR ADDITIONAL INCOME 1996-97 ` 96,69,000 M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 13 1997-98 ` 2,86,41,000 1998-99 ` 67,05,000 1999-2000 ` 1,06,24,000 2000-01 ` 59,29,000 TOTAL: ` 6,15,68,000 (IV) IN ITS SUBMISSIONS DATED 11 TH DECEMBER 2006, MADE BEFORE THE HONBLE SETTLEMENT COMMISSION, IT WAS STATED AS FOLLOWS:- 40. IT WAS FURTHER SUBMITTED THAT THE ADDITIONAL I NCOME AS HAS BEEN OFFERED HAS BEEN GENERATED FROM THE BUSINESS IN WHI CH THE APPLICANT IS ENGAGED AND WAS TO MEET ITS BUSINESS EXPENDITURE, W HICH SUM SO GENERATED HAS BEEN INCURRED FOR THE UNACCOUNTED EXP ENDITURE OF THE BUSINESS IN THE VERY SAME YEAR OR IN THE SUBSEQUENT YEAR(S) AND NO PORTION OF ANY SUCH UNDISCLOSED INCOME SO GENERATED FOUND ITS PLACE IN THE CREATION OF ANY ASSETS IN THE HANDS OF THE APPL ICANT OR IN THE HANDS OF ITS DIRECTORS. IT WAS SUBMITTED THAT PART OF THE INCOME OFFERED REPRESENTED UNVERIFIABLE EXPENDITURE, WHICH MIGHT H AVE BEEN MANIPULATED BY THE STAFF OF THE APPLICANT COMPANY T O SIGN ADVANTAGE FOR THEMSELVES. IT WAS SUBMITTED THAT IT WAS FOR TH IS REASON WHEN THE APPLICANT FILED THE APPLICATION ON AUGUST 30, 2000, IT MADE NECESSARY VERIFICATION BY DEPUTING THEIR STAFF AND WHEREVER I T WAS FOUND THAT THE PAYEES WERE NOT THEN EXISTING, ALL SUCH AMOUNT WHIC H AGGREGATED TO ` 6,15,71,572 HAD BEEN OFFERED. OBVIOUSLY, THIS SUM I NCLUDED EVEN THE INFLATED EXPENDITURE AS BOGUS BILLS WERE RAISED FRO M PARTIES, WHO WERE OTHERWISE NON-EXISTING I.E., NON-GENUINE. (V) FURTHER AT PARA-28 OF THE ORDER UNDER SECTION 245D( 4), THE HONBLE SETTLEMENT COMMISSION HELD AS FOLLOWS:- 28. FACTS ON RECORD CLEARLY INDICATE THAT APPLICAN T HAS INDULGED IN UNRELIABLE FINANCIAL PRACTICES FOR ALL THE YEARS UN DER CONSIDERATION. THE BOOKS OF ACCOUNT MAINTAINED BY THE APPLICANT CANNOT BE RELIED UPON. BOTH IN THE PROCEEDINGS CONNECTED WITH THE SEARCH A ND IN THE PRESENT PROCEEDINGS THE APPLICANT HAS CATEGORICALLY ACCEPTE D HAVING INCURRED EXPENDITURE NOT RECORDED IN THE BOOKS OF ACCOUNT. T HE APPLICANT HAS ALSO, IN NO UNCERTAIN TERMS, HAS CONCEDED THAT THEY WERE INFLATING EXPENDITURE BY RAISING BOGUS BILLS AND CASH GENERAT ED THEREBY HAVE BEEN UTILIZED FOR FUNDING THOSE UNRECORDED EXPENDIT URE. HOWEVER, THE APPLICANT HAS NOT CLEARLY INDICATED AS TO THE FINAL DESTINATION OF THE ENTIRE CASH GENERATED FROM INFLATION OF EXPENDITURE BY DEBITING BOGUS BILLS. M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 14 (VI) FROM THE READING OF THE ABOVE, IT IS CLEAR THAT THE HONBLE SETTLEMENT COMMISSION HAS CONCLUDED ON FACTS THAT THE PAYMENTS WERE NOT GENUINE. IT HAS GIVEN A CATEGORICAL FINDING THAT THE EXPENDITUR E UNDER VARIOUS HEADS, AS DESCRIBED ABOVE, WAS INFLATED AND BOGUS. IT ALSO OB SERVED THAT THE ASSESSEE HAD CONCEDED THAT CASH WAS GENERATED BY INFLATION O F EXPENDITURE AND THAT SUCH CASH WAS UTILIZED FOR FUNDING CERTAIN UNRECORD ED EXPENDITURE. IN THE LIGHT OF THE FACTUAL FINDINGS OF THE HONBLE SETTLE MENT COMMISSION, WE ARE OF THE CONSIDERED OPINION THAT THE FINDING OF THE ASSE SSING OFFICER AS WELL AS THE LEARNED CIT(A) ARE ERRONEOUS. BOTH THESE AUTHORITIE S HAVE NOT CONSIDERED THE ORDER OF THE HONBLE SETTLEMENT COMMISSION IN I TS PROPER PERSPECTIVE AND HAVE JUST PICKED UP CERTAIN PHRASES & SENTENCES AND CAME TO CONCLUSIONS. THIS IS NOT PROPER. AS THE HONBLE SET TLEMENT COMMISSION FOUND THAT THIS EXPENDITURE IS BOGUS, THE CLAIM OF THE AS SESSEE THAT THE CASH GENERATED BY BOOKING THIS BOGUS EXPENDITURE, HAS BE EN PARTLY UTILIZED TO MEET CERTAIN EXPENDITURE WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT, IS OF POSSIBLE EXPLANATION. THE ADDITIONAL INCOME DECL ARED BY WAY OF BOGUS EXPENDITURE IS ABOUT ` 6,15,00,000 AND WHEREAS THE RENT PAID IN CASH OVER THE PERIOD IS ONLY ` 44,20,000. COMPARED TO THE CASH FLOW BY WAY OF BOG US BOOKING, THIS UNACCOUNTED EXPENDITURE IS SMALL. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT, IN PRINCIPLE, CHALLENGED TH E THEORY OF TELESCOPING. THE HON'BLE BOMBAY HIGH COURT IN JAWANMAL GEMAJI GA NDHI (SUPRA) HAS CONSIDERED THE JUDGMENT OF HON'BLE SUPREME COURT IN ANANTHARAM VEERASINGHAIAH V/S CIT, (1980) 123 ITR 457 (SC), AN D AT PAGE-356, HELD AS FOLLOWS:- THE HONBLE SUPREME COURT HAS CLEARLY STATED THAT T HE SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARL IER ASSESSMENT YEAR CAN CONSTITUTE A FUND, THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY. THAT OBSERVATION IS CLEARLY CONTRARY TO THE FINDING OF THE KERALA HIGH COURT. THE ASSESSEE ACQU IRED THE GOLD DURING THE LATTER HALF FO THE ASSESSMENT YEAR; IT C OULD THEN VERY WELL BE THAT THE UNDISCLOSED INCOME OF ` 10,702 EARNED IN THAT VERY YEAR CONSTITUTED THE FUND FROM WHICH THIS ASSET WAS ACQU IRED. M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 15 APPLYING THIS PROPOSITION, ON FACTS, WE UPHOLD THE CONTENTION OF THE ASSESSEE FOR TELESCOPING. WE HOLD THAT THE UNRECORD ED RENTAL EXPENDITURE CAN BE SAID TO HAVE BEEN FUNDED FROM INFLATED BOGUS EXP ENDITURE AND NO SEPARATE ADDITION IS CALLED FOR. HENCE, WE ALLOW TH IS GROUND OF THE ASSESSEE. (VII) INSOFAR AS GROUND NO.4 IS CONCERNED, FOR THE SAME R EASON GIVEN IN GROUND NO.3, WE ARE OF THE OPINION THAT THE BENEFIT OF TELESCOPING IS TO BE GRANTED AND NO SEPARATE ADDITION IS CALLED FOR ON I OUS FOUND DURING THE COURSE OF SEARCH. WE ALSO FIND THAT THE ASSESSEE HA S FURNISHED A DAILY CASH FLOW STATEMENT BEFORE THE COMMISSIONER (APPEALS) AN D A PERUSAL OF CASH FLOW STATEMENT SHOWS THAT THE CASH BALANCE IN THE B OOKS OF ACCOUNT ON EACH DAY IS OVER AND ABOVE THE IOUS BALANCE OF THAT DAY . LOOKING AT IT FROM ANY ANGLE, THE ADDITION CANNOT BE SUSTAINED. (VIII) COMING TO THE ADDITION OF ` 7,00,000, WE FIND THAT THE TOTAL PAYMENT OF ` 18,48,000, WAS MADE TO ONE MR. DILIP PARIKH. THE A SSESSEE HAD VOLUNTARILY FILED LETTERS DISCLOSING THIS AMOUNT AS UNDISCLOSED INCOME BEFORE THE INVESTIGATION WING. IN THE RETURN OF INCOME FILED F OR ASSESSMENT YEAR 2001- 02, THE ASSESSEE HAS ALREADY DISALLOWED ` 11,48,000 SUO-MOTU. BEFORE THE HON'BLE SETTLEMENT COMMISSION, THE LEARNED COUNSEL BELATEDLY ARGUED THAT THE AMOUNT WAS PAID OUT OF CASH GENERATED FROM INFL ATED EXPENDITURE. IN OUR CONSIDERED OPINION, AS THE ASSESSEE HIMSELF HAS DIS ALLOWED MAJOR PART OF THE EXPENDITURE, A SEPARATE ARGUMENT CANNOT BE RAISED F OR ALLOWING THE SAME. WHAT HOLDS GOOD FOR ` 11,48,000, ALSO HOLDS GOOD FOR THE BALANCE AMOUNT OF ` 7,00,000. THUS, WE DISMISS THIS GROUND. (IX) COMING TO THE ADDITION ON PAYMENT MADE TO MR. SAM C AMBATA, THE PAYMENT WAS MADE TO THE BROTHER OF ONE OF THE DIREC TORS AND THE ASSESSEE HAS NOT FURNISHED ANY DOCUMENT TO DEMONSTRATE THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS. MR. SAM CAMBA TA, WAS NEITHER EMPLOYED WITH THE COMPANY NOR, IN ANY WAY, CONNECTE D WITH THE BUSINESS OF THE COMPANY. FOR LACK OF EVIDENCE, THE AMOUNT WAS A DDED BY THE ASSESSING M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 16 OFFICER. FOR THESE REASONS, WE UPHOLD THAT THE ORDE R OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND. (X) NOW, COMING TO GROUND NO.6, WHICH PERTAINS TO AD-HO C DISALLOWANCE @ 20% OF CUSTOM CLEARING EXPENDITURE, THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE CASH PAYMENT WAS NOT MORE THAN 10%, IS NOT CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. DURING THE COU RSE OF SEARCH AND SEIZURE ACTION, CERTAIN VOUCHERS WERE FOUND SHOWING EXPENDITURE UNDER THE HEAD CUSTOMS CLEARING EXPENDITURE . THESE VOUCHERS CANNOT BE CONSIDERED AS INCRIMINATING DOCUMENTS. THE VOUCHERS WERE DULY RECORDED IN THE BOOKS OF ACCOUNT. IT WAS FACTUALLY INCORRECT ON THE PART OF THE ASSESSING OFFICER TO STATE THAT DUTY MANAGER MR. SHRIKANT TARIKAR HAS ST ATED IN HIS STATEMENT THAT THE ASSESSEE HAS PAID SPEED MONEY. IN VIEW OF THE ABOVE DISCUSSIONS, WE ALLOW THIS GROUND OF THE ASSESSEE. (XI) THE ASSESSEE HAD DECLARED EXPENDITURE INCURRED IN T HE NAME OF TWO PARTIES FOR LUNAR LUBRICANTS AS BOGUS BEFORE THE HO N'BLE SETTLEMENT COMMISSION. THE DOCUMENTS FOUND DURING THE COURSE O F SEARCH ARE CONNECTED WITH THE PAYMENTS MADE THROUGH THESE TWO PARTIES. THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO CONTRADICT THE FIN DINGS OF THE ASSESSING OFFICER THAT THE PAYMENTS MADE TO THESE PARTIES ARE BOGUS AND THAT THE ASSESSEE CANNOT TAKE A DIFFERENT STAND FOR THESE PR OCEEDINGS. THUS, THIS GROUND IS DISMISSED. (XII) THE LAST GROUND IS ON THE ADDITION MADE DUE TO THE DIFFERENCE IN PHYSICAL CASH AND THE BALANCE RECORDED IN THE CASH BOOK. ON THE DATE OF SEARCH, BALANCE IN CASH BOOK WAS ` 29,49,011, AND WHEREAS, THE PHYSICAL CASH FOUND BY THE DEPARTMENT WAS ` 11,87,000. THE ASSESSING OFFICER ADDED THE DIFFERENCE AS UNDISCLOSED INCOME. IN OUR OPINIO N, SUCH AN ADDITION IS NOT CORRECT. THERE IS NO UNDISCLOSED ASSET OR UNRECORDE D EXPENDITURE FOUND DURING THE COURSE OF SEARCH. WHEN THE PHYSICAL CASH BALANCE IS LESSER THAN THE RECORDED CASH BALANCE, NO ADDITION CAN BE MADE UNDER ANY SECTIONS OF M/S. CAMBATA AVIATION P. LTD. IT(SS)A NO.85/MUM./2009 17 THE ACT, AS IT DOES NOT RESULT INTO INCOME OR ANY A SSET. FOR THESE REASONS, WE DELETE THE ADDITION AND ALLOW THE GROUND OF THE ASS ESSEE. 27. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON 24.6.2011 SD/- ASHA VIJAYRAGHAVAN JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 24.6.2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, C BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI