Income Tax Appellate Tribunal - Ahmedabad
Asiatic Infrastructure & Of Shelters ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH ""
(BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH)
IT(SS)A No.84/Ahd/2006
[Block Period: 01-04-1985 to 21-12-1995]
Asiatic Infrastructure & V/s The Deputy Commissioner
Shelters Ltd., Sumatinath of Income-tax (OSD)
Complex, Pritamnagar 2 n d Range-1,
Slope, Paldi, Ahmedabad Ahmedabad
(Appellant) (Respondent)
Appellant by :- Shri S N Devetia
Respondent by:- Shri B S Sandhu
ORDER
Per P K Bansal (Accountant Member): This appeal has been filed by the assessee against the Assessment Order dated 30-03- 2006 passed by the Assessing Officer (AO) [DCIT (OSD) Range- 1, Ahmedabad], by taking the following effective grounds of appeal:-
(1) That for the reasons search was conducted being found untenable the assessment made on the basis of search is illegal, unjustified and ultravires.
(2) That the Assessing Officer framed the assessment order without mentioning the assessment years, the income attributable to which is mandatory as per section 158BB of the Act and such illegality cannot be cured by an appellate authority.
(3) That the Assessing Officer exceeded his jurisdiction in adding up a sum of Rs.1,40,725/- on account of purchase of shares which had not been made at the time of original assessment which had been set aside by the learned Income-tax Appellate Tribunal.1
(4) That the Assessing Officer had taken irrelevant consideration that the books of accounts had not been audited u/s 142(2) for which there was no fault on the part of the appellant, for the purpose of making addition as undisclosed income inspite of the fact that they are recorded in the books of accounts which were before him.
(5) The Assessing Officer and the Commissioner of Income-tax erred on facts and in law in assuming that the appellant had suppressed / understated undisclosed income over and above as reflected in the investments, assets, expenditure, etc., found at the time of search, contrary to the provisions contained in sections 158B, 158BA, 158BB and 158BC of the Act though the return of income for the AY 1995-96 was filed on 30-11-1995 i.e. prior to search and books of accounts were maintained and found as a result of search also.
(6) The Block Assessment order passed by the Dy. Commissioner of Income-tax (OSD) Range-1. Ahmedabad under section 158BC r.w.s. 254 of the I.T. Act on 30/3/2006 is arbitrary and against the principles of natural justice, based on assumptions, surmises and conjectures, brushing aside all written as well as oral submissions made in the course of assessment proceedings. The said assessment order is, therefore, illegal and bad in law.
(7) The Block Assessment order passed by the Dy. Commissioner of Income-tax (OSD) Range-1, Ahmedabad under section 158BC r.w.s. 254 of the I.T. Act on 30/3/2006 is arbitrary and against the principles of natural justice and also provisions of Chapter XIV-B inasmuch as that the details of purchase of Rs.8,05,98,535/- added back as unexplained investment in shares were furnished by the appellant as per paragraph 18 of submission dated 7-12-1996 in support of its books of accounts and the books are rejected and addition is made though the material is not found as a result of search, the order is therefore bad in law and perverse which is liable to be quashed and set aside.
(8) The Block Assessment order passed by the Dy. Commissioner of Income-tax (OSD) Range-1, Ahmedabad under section 158BC after the previous approval of the Commissioner of Income-tax, Ahmedabad-I, Ahmedabad as provided under section 158BG of the I.T. Act, 1961 is arbitrary and against the principles of natural justice in as much as the said approval has been given by the learned Commissioner of Income-tax acting arbitrarily instead of acting fairly, justly and reasonably, brushing aside and without 2 taking into consideration the oral as well as written submissions made vide letter dated 9-3-2006, 20-3-2006 and 24-3-2006 by the appellant before the AO and oral as well as written submissions dated 30-3-2006 made at the time of hearing before the Commissioner of Income-tax. However, the learned Commissioner of Income-tax communicated his approval to the AO vide his letter No. CIT. Ahmedabad.I/Approval/158BC/2005-06 dated 30-3-2006 post-hate without fully appreciating all the submissions as well as the books of account produce before him. The said assessment order is, therefore, illegal and bad in law.
(9) The AO erred on facts and in law in making the following additions by way of undisclosed income arbitrarily, without taking into consideration the detailed written submissions dated 9-3-2006, 20-3-2006, 24-3-2006 and 30-3-2006 duly supported with all the available evidence as well as duty audited books of accounts and the audit report produced before the AO as well as the Commissioner of Income-tax at the time of hearing before them:-
1. Cash found as per para 3.1 of AO Rs. 3,19,360/-
2. Cash deposits in bank A/c as per para 3.2 of AO Rs. 47,54,500/-
3. Unexplained investments in shares as per para 3.3 of AO Rs. 51,18,078/-
4 Shares transactions R K Investment
Co. as per para 3.4 of AO Rs. 92,52,580/-
5. Unexplained Deposits as per para
3.5 of AO Rs.2,37,24,147/-
6. Unexplained investment in shares
as per para 3.6 of AO Rs.8,05,98,535/-
(10) It is prayed that all the above additions considered by the AO as the appellant's undisclosed income for the block period are arbitrary and unjustified additions as all of these have been fully and conclusively explained duly supported with necessary evidence in the course of assessment proceedings, which have been brushed aside and, therefore, the same may be fully deleted.3
2 The brief facts of the case are that search and seizure operation was carried out at the business premises of the assessee along with the other group concerns at IOL House, Ambawadi Bazar, Ahmedabad u/s 132 of the Income-tax Act, 1961 ["the Act" for short]. Notice u/s 158BC of the Act was issued and served on the assessee on 4-3-96 asking the assessee to furnish the return within 16 days of service of notice. The assessee furnished its block return on 27-6-97 declaring an undisclosed income at Nil. Original block assessment was completed u/s 158BC on 28-6-1997 determining the total income at Rs.22,16,59,062/-. The said assessment was set aside by the ITAT vide order dated 25-8-2004 directing the AO to pass fresh assessment after allowing adequate opportunity to the assessee. In consequence thereof the AO passed the subsequent block assessment vide order dated 30-3-06 determining the total undisclosed income at Rs.12,37,67,199/- after getting prior approval of the CIT, Ahmedabad vide his letter No. CIT.ABD.1/Approval/158BC/2005-06, dated 30-3-06, by making the following additions:
i) Unaccounted cash found
during the search Rs. 3,19,359
ii) Unaccounted cash deposit
in the bank account Rs. 47,54,500
iii) Unaccounted purchase of
shares from R K Investment Rs. 51,18,078
iv) Unaccounted sale of shares
by the assessee Rs. 92,52,580
v) Unexplained deposits in
the bank Rs.2,37,24,147
4
vi) Unexplained investment in
shares by the assessee Rs.8,05,98,535
3 The assessee has come in appeal before us by taking
the aforesaid grounds of appeal.
4 Subsequently the assessee vide letter dated 12-1-09
filed on 23-1-09 took the additional ground that the fresh assessment framed was barred by limitation u/s 153 of the Act. The said application was heard. At the time of hearing, on the counter questioning of the Bench, the learned AR was fair enough to withdraw the additional ground. The additional ground, therefore, stands dismissed, as withdrawn.
5 The first ground relates to the addition of Rs.3,19,359/- as the cash found as per Annexure-M to the Panchnama dated 21-12-95 by observing as under by the assessing officer:-
"3.1.Unaccounted cash found during the search:
During the course of search, cash of Rs. 3,19,360/- was found as per Annexure M to the Panchnama dated 22.12.95. Assessee was asked to explain source of the same. In compliance to the above, assessee submitted that the position of the cash balance appearing in the books as on 23.3.95 is as under:
Asiatic Infrastructure & Shelters Ltd. 1,67,030/-
Atlantic Credit and Capital Ltd. 74,330/-
Indo American Optics Ltd. 45,564/-
Cure Specs Laser Ltd. 11,000/-
Zillion Pharma Chem Ltd. 21,435/-
It has been submitted by the assessee vide letter dated 20/3/06 that the cash of Rs. 3,19,360/- belongs to the group concerns and reflected in the books of accounts.5
The assessee has produced extracts of cash book of these companies in his submission. It is pertinent to mention here that since the books of accounts were not prepared by the assessee and not handed over to the designated auditor for Special Audit the submission of the assessee produced now cannot be relied upon. Since the source of cash found during the search action is not fully explained the cash of Rs. 3,19,359/- is treated as income of the assessee and added back to the total income.
(Addition of Rs. 3,19,359)"
The learned AR contended that copy of the Panchnama is at pages 1 to 5 of the paper book. The assessee has submitted the income tax return for the AY 1995-96 on 30-11-95 with the ACIT, Circle 7(4), Ahmedabad vide acknowledgement No.001018. For this, our attention was invited to pages 18 to 32 of the paper book. It was pointed out that the assessee is a regular assessee. At the time of search various books along with the trial balance found were seized. Copy of the seized trial balance and the ledger account are available at pages 449 to 509 of the paper book which duly contain the signature of the Revenue authority dated 22-12-95. In the trial balance of the assessee a sum of Rs.1,67,030/- is shown, the cash balance as on 21-12-95 as per the books of the assessee. Since this cash was as per the regular books of account, therefore, it cannot be regarded to be the undisclosed income of the assessee. The sum of Rs.74,330/- is the cash balance as per the cash book of Atlantic Credit & Capital Ltd. as on 21-12-95. For this, attention was drawn towards pages 104 to 105 which contain the copy of cash account of Atlantic Credit & Capital Ltd. It was further pointed out that this fact was mentioned by Shri Girish D Shah in his statement recorded on 21-12-95 during the course of search in reply to question No.21. Thus, it was contended that this is an admitted fact that the office of Atlantic Credit & Capital Ltd.
6was also at the same premises. If any addition has to be made for the same, that has to be made in the hands of Atlantic Credit & Capital Ltd., and not in the case of the assessee. The sum of Rs.45,546/- belonged to Indo American Optics Ltd. and this was the balance as per their books of account. Copy of their account and acknowledgement of the return are available at pages 91 to 96, 98 to 99 of the paper book. This fact was also mentioned by Shri Girish D Shah, President of the Group when his statement was recorded during the course of search. The sum of Rs.21,436/- belonged to Zillion Pharma Ltd. having office at IOL House, Ambawadi, Ahmedabad and was also subject to search. This fact was mentioned by Shri Girish D Shah even during the course of search. Our attention was drawn to pages 90 & 100 showing the copy of account of Zillion Pharma Ltd. for the cash balance and acknowledgement of the return to prove that it is a regular assessee. The sum of Rs.11,000/- relates to Cure Spects Ledger Ltd., another group concern. This fact was mentioned by Shri Girish D Shah during the course of his statement recorded. Copy of cash account and acknowledgement of the return of Cure Spects Ledger Ltd. is available at pages 89 to 97 of the paper book. Thus, it was contended that the addition of Rs.3,19,359/- as unaccounted cash found during the course of search is totally unjustified. These facts although available on record were totally ignored by the AO, even though the assessee has duly mentioned in his letter dated 20-3-06 that the cash belongs to the group concerns and was duly reflected in their respective books of accounts regularly maintained by them.
6 The learned DR, on the other hand, relied on the order of the AO.
77 We have carefully considered the rival submissions and, perused the material on record along with the order of the AO. We noted that the assessee has submitted his income-tax return for the AY 1995-96 on 30-11-1995 i.e. prior to the date of the search. The premises searched was having the office of various concerns relating to the same group. In the case of the assessee the trial balance and other books were seized. Photo copies of the relevant ledgers, trial balance are available at pages 449 to 509 which contain the signature of the Revenue authority along with the date 22-12-95. As per page 449, the cash in hand as appeared in the trial balance of the assessee seized is shown at Rs.1,67,030/- at Item No.3. Therefore this amount, in our opinion, cannot be regarded to be the undisclosed income of the assessee as it was duly entered in the regular books of account of the assessee. 'Undisclosed Income' is defined u/s 158B(b) of the Act. Computation of the undisclosed income has to be carried out as per the provisions of section 158BB. Computation provision cannot override the charging provision until and unless the income is regarded to be the undisclosed income within the definition given u/s 158B(b). It cannot be added in the undisclosed income of the assessee while computing the undisclosed income as per the provisions of section 158BB. We, therefore, delete the addition of Rs.1,67,030/-.
8 For the sums of Rs.74,330/-, Rs.45,564/-, Rs.21,436/- and Rs.11,000/-, we have gone through the statement of Shri Girish D Shah recorded on 21-12-95 during the course of search. The relevant question and answer in respect of cash in hand are reproduced as under:-
8"Q. 21 During the course of search cash of Rs.3,19,360/- has been found from the premises at IOL House, Ambawadi. Please explain the source of this.
A. 21 As per books of a/c of various companies the cash balance as on 21-12-95 is as under:
1) AIFL - 1,67,030
2) ACCL - 76,089
3) IOL - 45,564
4) Zillion - 21,436
5) Cure Spects - 11,000
-------------
Total - 3,21,119
The cash found represent this balance only."
The answer of Shri Girish D Shah clearly states that the cash balance belonged to various concerns which were operating from the said premises not denied by the ld. DR. The assessee has submitted the copies of accounts of the cash in hand as per the books of accounts of these various concerns available in the paper book which we have perused. From these copies of accounts it is apparently clear that the sum of Rs.74,330/- belonged to M/s Atlantic Credit & Capital Ltd., the sum of Rs.45,564/- belonged to Indo American Optics Ltd., the sum of Rs.21436/- belonged to Zillion Pharmaceuticals Ltd., and the sum of Rs.11,000/- belonged to Cure Spects Ledger Ltd. Except M/s Atlantic Credit & Capital Ltd., all other concerns are regular assessees and summary of the cash accounts, the copies of which are available in the paper book, show the respective cash in hand by the respective companies as on 21-12-95. There had been search in the case of M/s Atlantic Credit & Capital Ltd. If any addition was to be made, that could have been made in the hands 9 of each of the companies provided the cash in hand was the undisclosed income of each of the companies. We accordingly delete the additions of Rs.74,330/-, Rs.45,564/-, Rs.21,436/- and Rs.11,000/- also. Thus, the addition of Rs.3,19,359/- stands deleted.
9 The next issue relates to the addition of Rs.47,54,500/-. The AO noted that the assessee has made various cash deposits in the bank accounts on various dates which were maintained with Bank of India and Bank of Madura detailed as under:-
Name of the Bank Date Amount (Rs.)
--------------------- ------------ ----------------
Bank of India, Maninagar Br. 17.05.95 24,50,000/-
Bank of Madura 13.11.95 6,00,000/-
Bank of Madura on various dates 17,04,500/-
----------------
Total 47,54,500/-
In the original assessment which was set aside, the addition of Rs.35,00,000/- was made but in the set-aside assessment, the additions were made in respect of these deposits amounting to Rs.47,54,500/- rejecting the contention of the assessee that the said cash deposits were duly reflected in the regular books of account and therefore are outside the scope of Chapter XIVB of the Income Tax Act. In the set aside assessment, the addition has been made by observing as under:-
"3.2. Unaccounted Cash deposited made in the Bank Accounts:
It is seen that the assessee has made following cash deposits in its bank accounts with Bank of India and Bank of Madura.
NAME OF THE BANK DATE AMOUNT Rs.
10
Bank of India, Maninagar Br. 17.05.95 24,50,000/-
Bank of Madura 13.11.95 6,00,000/-
Bank of Madura on various dates 17,04,500/-
---------------------
TOTAL 47,54,500/-
Having being asked as to why the same should not be treated as unexplained cash credit, the assessee has submitted that the above entries of cash deposits have dully reflected in regular books of accounts. Assessee produced extract of Cash book in his submission.
It is seen that as far as the cash deposit of R&. 24,50,000/- is concerned, in the cash book seized as Annx. A-1 the description of the cash deposited is "cash deposited from SB account of G.U.Shah" where as in his submission the assessee has explained the cash in question as the cash was lying as cash on hand and the same was withdrawn from the group company namely Atlantic Credit and Capital Ltd.
It can be seen for the seized material that the cash in question is in fact withdrawn from some bank account of one G.V. Shah and the assessee is trying to explain it as cash belong to group concern. In the similar fashion the assessee is not in a position to explain the remaining two cash deposits in a satisfactory manner. Assessee is submitting that both the remaining cash deposit in question are very much reflected in the books however the assessee is not in a position to prove the source of the cash deposit in a satisfactory manner.
It is pertinent to mention here that since the books of accounts were not prepared by the assessee and not handed over to the designated auditor for Special Audit the submission of the assessee produced now cannot be relied upon. Since the source of cash deposit is not fully explained the cash deposit of Rs. 47,54,500/-belonging to the assessee company is treated as undisclosed income of the assessee and added back to the total income.
(Addition of Rs, 47,54,500)"
10 The learned AR before us vehemently contended that the assessee company was incorporated on 24-11-1994. The audited balance-sheet for the year ended on 31-03-95 was duly drawn. Both the bank accounts were duly reflected in the balance-sheet so drawn and audited. The income-tax return for the AY 1995-96 i.e. for the period ending on 31-03-95 was filed 11 before the date of the search i.e. on 30-11-95. Our attention was drawn to pages 18 to 38 of the paper book. Attention was also drawn towards page 449 which contains of the trial balance of the regular books and consists of the names of both the banks i.e. Bank of India and Bank of Madura, for the submission that the bank accounts were duly disclosed. Attention was also drawn towards pages 455, 456, 466, 469, 463, 461, 458 and 457 of the paper book to prove that all the amounts of cash deposits in the banks are duly reflected in the regular books of accounts. Since both the bank accounts were duly disclosed, therefore the deposits made therein cannot be regarded to be the undisclosed income of the assessee. The learned DR, on the other hand, relied on the order of the AO.
11 We have carefully considered the rival submissions and, perused the material on record along with the order of the AO. We noted that at the time of search the assessee's trial balance as well as the ledger accounts were seized which are available at pages 449 to 509 and duly signed by the Revenue authorities by putting the date 22-12-95. In the trial balance, the balances of both the accounts with Bank of India and Bank of Madura are appearing. The respective ledger accounts of these banks are appearing in the subsequent pages. The sum of Rs.47,54,500/- which were added by the AO consists of the following deposits made by the assessee with these banks:-
Date Amount (Rs.) Name of Bank
---------- ---------------- -----------------
17-05-95 24,50,000 Bank of India
13-11-95 6,00,000 Bank of Madura
11-09-95 25,000 "
12
01-08-95 5,00,000 "
01-08-95 9,00,000 "
31-05-95 50,000 "
15-04-95 5,000 "
15-05-95 4,50,000 "
The respective entries in respect of these deposits are available in the seized book at pages 453, 466, 463, 461, 462, 458, 456 and
457. The assessee company was incorporated on 24-11-94 and the first return for the period ending on 31-03-95 was filed before the Income-tax department on 30-11-95 along with the copy of audited balance-sheet and P&L Account which consists of balance as on 31 s t March with Bank of India as well as Bank of Madura. Thus, both the accounts which the company was having with Bank of India and Bank of Madura were duly disclosed to the Revenue. These accounts cannot be regarded to the undisclosed accounts. The entries of the cash deposits with these banks are duly available in the cash book as maintained by the assessee and seized as well as in the bank accounts. Section 158B(b) stipulates as under:-
158B. In this Chapter, unless the context otherwise requires, - -
-----
(b) "undisclosed income" includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false."13
If we analyze the aforesaid definition, it provides that undisclosed income includes: -
(i) Any money, bullion, jewellery or other valuable article or thing or,
(ii) Any income based on any entry in the books of account or other documents or transactions;
(iii) Such money, bullion, jewellery, valuable article, thing, entry in the books of account or other documents or transactions represents wholly or partly income or property;
Which has not been or would not have been disclosed for the purposes of this Act.
(iv) or any expense, deduction or allowance claimed under this Act which is found to be false.
From the aforesaid analysis of the definition, it clearly emerges that if any asset or any income as recorded in the books or documents has been disclosed or intended to be disclosed to the income tax authorities, this would be outside the pale of undisclosed income as defined under clause (b) as above. In view of the said definition of the undisclosed income we are of the view that the amounts deposited in the respective banks which were duly reflected by the assessee in the regular books of account cannot be regarded to be the undisclosed income of the assessee. We accordingly delete the addition of Rs.47,54,500/-. Thus, this ground stands allowed.
12 The third ground relates to the addition of Rs.51,18,078/- made by the AO for the purchase of shares through R K Investment. This addition has been made by the AO on the basis of pages-1 to 6 of Annexure A-4 which contains the details of the bills of R K Investment. The AO observed that the assessee has purchased the share scripts from R K Investment for the sum of Rs.1,20,000/-, Rs.33,000/-, Rs.1,29,000/-, 14 Rs.16,72,860/-, Rs.23,28,375/- and Rs.6,94,213/- totaling to Rs.49,77,353/-. It was further observed that pages 25and 26 of the same Annexure contain the details of purchase of various shares from R K Investment amounting to Rs.1,40,725/-. The AO treated the total of both, amounting to Rs.51,18,078/- as unexplained investment ignoring the contention of the assessee that all these bills/purchases were duly reflected in the regular books of account of the assessee.
13 The learned AR before us vehemently contended that the assessee was regularly purchasing and selling the shares through R K Investment. Our attention was drawn to pages 488 and 489 of the paper book which contain the ledger account of R K Investment in the books seized from the office of the assessee. It was pointed out that the assessee is a regular assessee and the return for the AY 1995-96 was filed prior to the date of search. The payments were made through cheques out of the bank account which was duly reflected in the balance-sheet as audited. It is not a case where the assessee has purchased the shares from R K Investment outside the books of account. The learned DR, on the other hand, relied on the order of the AO.
14 We have carefully considered the rival submissions and, perused the material on record along with the order of the AO. We noted that the assessee is a regular assessee. The return for the AY 1995-96 was furnished prior to the filing of the return. The account of R K Investment is duly shown in the regular books of account maintained by the assessee. In fact, the details of bills which were seized are duly reflected in the books of account of the assessee. The entries are duly appeared in the 15 account of R K Investment. The bills which are entered in the account of R K Investment cannot be regarded to be the undisclosed income of the assessee in view of the definition of the undisclosed income given u/s 158B(b) as referred to by us in the preceding para. This addition, in our opinion, is outside the scope of Chapter XIV-B of the Act in view of our earlier observations in the preceding paragraphs regarding the addition made for the cash deposits in the bank accounts. We accordingly delete the addition of Rs.51,18,078/-.
15 The next issue relates to the addition of Rs.92,52,580/- added by the AO on account of unaccounted sales of shares by the assessee. This addition consists of two additions, one of Rs.12,76,790/- on the basis of pages-17 to 20 and Rs.79,75,790/- made on the basis of pages-21 to 24. The AO observed that these pages contain the details of the sales of shares sold by the assessee through R K Investment.
16 The learned AR contended that the addition of Rs.12,76,790/- consists of two items - Rs.11,92,835/- and Rs.83,955/-. It was pointed out that this addition was made on the basis of page-20 of Annexure A-4, which is available at page 154 of the paper book. The certified typed copy was filed at pages-606 to 607. It was pointed out that the sum of Rs.11,92,835/- consists of three items of RS.937385/-, Rs.128650/- and Rs.126800/-. The sum of Rs.937385/- represents the scripts sold by Atlantic Credit & Capital Ltd. belonging to Indo American Credit carried out through R K Investment. These sales have duly been shown in the regular books of account of Atlantic Credit & Capital Ltd. This transaction does not relate to 16 the assessee. This fact is verifiable from Bill No.9515/140 which was also seized during the course of search. For this our attention was drawn to page 157 of the paper book. The bill is of R K Investment. Attention was also drawn to page 144 of the paper book which contains the copy of ledger account of R K Investment in the books of Atlantic Credit & Capital Ltd. Attention was also drawn to page 146 which contains the copy of account of Atlantic Credit & Capital Ltd. in the books of R K Investment. The assessee has not made any investment. The scrips have been purchased by that company. Copy of the bills were submitted but the assessing officer without verifying the same went on adding the amount in the hands of the assessee. The addition is made merely on surmises and conjectures without bringing any evidence on record that the assessee made the investment or purchased these shares. The assessee has discharged his onus what he is supposed to do. Thus, it was contended that the sum of Rs.9,37,385/- since duly recorded in the books of account of Atlantic Credit & Capital Ltd. and relating to the scripts sold by them, it cannot be treated as the undisclosed income of the assessee. In respect of sum of Rs.1,28,650/- it was pointed out that the AO has wrongly added the same treating the undisclosed income of the assessee. This in fact is the purchase made by the assessee from R K Investment. For this attention was drawn towards Bill No.9514/00082 issued by R K Investment, the copy of which is available at page 165. It was pointed out that this purchase is duly reflected in the books of the assessee. For this attention was drawn to page 137 of the paper book which represents the copy of ledger account of R K Investment in the books of the assessee and page 143 which represents the contra account of the assessee in the books of R K 17 Investment. The AO has wrongly treated it to be the purchases / sales of the shares by the assessee not recorded in the books of account and added as undisclosed income. These purchases are duly recorded in the regular books of account of the assessee. Therefore, it cannot be added to be the undisclosed income of the assessee as the provision of section 69 will not apply. For the sum of Rs.1,26,800/- it was pointed out that this represents to Zillion Pharmaceuticals Ltd.'s scripts held by Dr. Amit N Shah. The order for the sale was placed but it was not executed. The same is held as stock by Dr. Amit N Shah even on the date of the search for which the stock register was duly submitted before the assessing officer. Attention was drawn towards page 444 and page 285. It was also submitted that this consists of two transactions, order for the sale of 2000 and 1000 scripts of Zillion Pharmaceuticals Ltd. at the rate of Rs.42.35 and Rs.42.10 amounting to Rs.84,700/- and Rs.42,100/-. No basis for the addition of Rs.83955/- has been explained even no such figure appear in the seized paper. This is bound to be deleted.
The learned DR, on the other hand, relied on the order of the AO.
17 We have carefully considered the rival submissions and, perused the material on record along with the order of the AO. We have also gone through the paper book as referred to before us. We have also perused the copies of pages 17 to 20 of Annexure A-4 on the basis of which the addition of Rs.12,76,790/- has been made. On these pages we do not find anywhere the figure of Rs.83,955/-. Thus, the addition of Rs.83,955/-stands deleted.
1818 So far as the addition of Rs.11,92,835/- out of the sum of Rs.12,76,790/- is concerned, the AO made this addition by observing that pages 17 to 20 consist of the details of shares sold by the assessee through R K Investment. These pages are available at pages 152 to 155 of the paper book. On the top of it, R K Investment is mentioned and after that it is mentioned "script-wise report" for the period 28-8-95 to 8-9-95. Columns mentioned on all pages are "script code", "name", "date", "Your sales" (quantity, rate), "Your purchase" (quantity, rate), value. It also contains the title of "Souda Transaction". Under the column "name", the name of the assessee is mentioned and subsequently the name of the script "Indo American Sea" and "Zillion Pharma" is mentioned. The contention of the assessee is that these transactions have been entered into by Atlantic Credit & Capital Ltd. and has been recorded in their books of account. The assessee has divided the transactions in three parts consisting of Rs.9,37,385/-, Rs.1,28,650/- and Rs.1,26,800/- and for this, reliance was placed on page 154 which contains in handwriting the name of Atlantic Credit & Capital Ltd. as well as the Bill No.BC/9515/140. We have also perused the Bill Number as well as the copy of account of the assessee in the books of R K Investment. We noted that the following entries of the date 13-3-95 in respect of Indo American Credit Script for the sale and purchase are not reconcilable:
No. of Shares Amount
---------------- -----------
1500 Rs.36,125
1000 Rs.25,000
1400 Rs.35,700
700 Rs.17,500
19
200 Rs. 5,000
2600 Rs.65,000
500 Rs.12,500
200 Rs. 4,920
--------------
Rs.2,02,745
We have even given an opportunity to the assessee to reconcile the sales of these scripts with the entries in the ledger account and with bill at page 157 of the paper book in the name of Atlantic Credit & Capital Ltd. Except this, the rest of the scripts out of the sum of Rs.9,37,385/- are reconcilable with the bill in the name of Atlantic Credit & Capital Ltd. In our opinion, since the bill for the rest of the scripts sold is in the name of Atlantic Credit & Capital Ltd., the addition for the same cannot be made in the hands of the assessee. These scrips have been sold by Atlantic Credit and Capital Ltd not by the assessee, therefore no addition for those scrips except the sum of Rs..2,02,745/- can be made in the hands of the assessee. These papers were seized from the possession of the assessee, the onus is on the assessee to prove that the contents therein do not belong to the assessee. The assessee in our opinion could not be able to discharge its onus so far it relates to the scripts sold for RS.202745/-. Are concerned. Even the assessee could not prove that these sales are out of the purchases duly recorded in its regular books of account. Therefore the sales proceeds from these shares consists of the profit and the undisclosed investment made by the assessee and accordingly we sustain the addition to the extent of Rs.202745/- out of the sum of Rs.9,37,385/-.
19 Coming to the sum of Rs.1,28,650/-, we noted from Annexure A-4 page 20 which is available at page 154 of the 20 paper book, that it is clearly mentioned "Client's purchase"
against the sum of Rs.1,28,650/-. This, therefore, does not represents the sale and it cannot be added as unaccounted sale of the shares made by the assessee. This purchase has been made on 13-3-95 as is apparent from the said page which consists of 4800 scripts of Indo American at the rate of Rs.25.75 equal to Rs.1,23,600/- and again on 13-3-95, 200 scripts at the rate of Rs.25.25 for Rs.5050/-. We, therefore, delete the addition of Rs.1,28,650/- out of the sum of Rs.12,92,835/-.
20 The last item included in the addition of Rs.11,92,935/- is Rs.1,26,800/-. It represents the sale of two scripts of Zillion Pharmaceuticals, 2000 and 1000 for a sum of Rs.84,700/- and Rs.42,100/-. The onus is on the assessee that these scripts represent the scripts held in a stock by Dr. Amit N Shah and the order for the sale although placed was not executed. The assessee could not get it verified from the records belong to Dr. Amit Shah, even though the due opportunity was given by the bench. Thus the assessee failed to rebut the presumption available to the revenue under section 132(4A) of the Income Tax Act, 1961. We, therefore, sustain the addition for the same, as the script-wise report is in the name of the assessee, natural inference will be that the assessee has sold these scripts. Thus, the addition to the extent of Rs.3,29,545/- [202745 + 126800] is sustained out of the addition of Rs.12,76,790/- and the balance additions of Rs.9,47,245/- stands deleted.
21 The next addition which is included in the addition of Rs.92,52,580/- is the sum of Rs.79,75,790/-. The learned AR pointed out that this addition has been made by the AO on the 21 basis of pages 21 to 24 of Annexure-A-4. Page 150 of the paper book represents page 21 of Annexure A-4 while pages 148, 149 and 151 represent pages 22, 23 and 24 of Annexure A-4. Typed copies of these pages were also placed on record at pages 593 to
599. It was pointed out that it consists of two figures - Rs.16,99,510/- and Rs.62,76,280/-. For the sum of Rs.16,99,510/-, it was pointed out by referring to pages 598 and 599 that it is cumulative figure of page 151 of the paper book i.e. page 24 of Annexure A-4. This sum of Rs.16,99,510/- also consists of two figures i.e. Rs.15,79,185/- and Rs.1,20,325/-. The sum of Rs.15,79,185/- does not pertain to the assessee but to Atlantic Credit & Capital Ltd. which is duly recorded in the books as well as in the books of R K Investment in the name of Atlantic Credit and Capital Ltd.. This fact can be verified from page 157 (copy of bill No. BC/9515/00140 issued by R K Investment). Attention was drawn to pages 144 and 146 of the paper book. It was pointed out that page 144 consists of the ledger account of R K Investment in the books of Atlantic Credit & Capital Ltd. and page 146 consists of ledger account of Atlantic Credit & Capital Ltd. in the books of R K Investment. Thus, it was contended that since the transactions belonged to Atlantic Credit & Capital Ltd., therefore, it cannot be added in the hands of the assessee. For the sum of Rs.1,20,325/- it was pointed out that this is the sale made by the assessee through bill No.9514/0082 as verifiable from page 165 of the paper book. The transaction is duly recorded in the regular books of account of the assessee. For this, attention was drawn to page 137 consisting of the copy of account of R K Investment in the books of the assessee and that of page 142 assessee's copy of account in the books of R K investment. Since the transaction was 22 recorded in the regular books of account, it cannot be added in the hands of the assessee. The learned DR, on the other hand, relied on the order of the AO.
22 We have carefully considered the rival submissions and, perused the material on record along with the order of the AO. We have also perused pages 21 to 24 of the seized Annexure A-4, copies of which are available at pages 148 to 151 of the paper book and typed copies thereof are available at pages 593 to
599. The sum of Rs.16,99,510/- as included in the sum of Rs.79,75,790/- being part of the addition of Rs.92,52,580/- consists of two figures - Rs.15,79,185/- and Rs.1,20,325/-. Copy of the Bill No.BC/9515/00140 is available at page 157 and the copy of ledger account of Atlantic Credit & Capital Ltd. in the books of R K Investment and that of R K Investment in the books of Atlantic Credit & Capital Ltd.. From these, it is apparent that these transactions relate to Atlantic Credit & Capital Ltd. except the following transactions which we could not find place on the assessee's copy of account in the books of R K investment:-
13-3-95 1500 37125
" 1500 37700
" 700 17500
" 2600 65000
" 200 4920
160245/-
We, therefore, reduce the addition to Rs.1,60,245/- as the onus is on the assessee to prove that these transactions do not belong to him and in our opinion the assessee failed to rebut the presumption available to the revenue under section 132(4A) of the Income Tax ACt.
2323 For the sum of Rs.1,20,325/-, since the transaction is duly reflected in the regular books of account of the assessee it cannot be regarded to be the undisclosed income of the assessee within the definition of undisclosed income as given under Section 158B(b) of the Income Tax Act as pointed out by us in the earlier paragraphs while disposing of the earlier ground, therefore, no addition can be made for the same and we delete the addition for the sum of Rs.1,20,325/-.
24 Now coming to the sum of Rs.62,76,280/- included on the basis of pages 21 to 23 of Annexure A-4, the learned AR contended that these does not pertain to the assessee. In fact these paper represent the sale of the scrips made by Atlantic Credit and Capital Ltd as per sale bill no.BC/9515/00140 issued by R K Investments. Copies of seized pages 21, 22 and 23 of Annexure A-4 are available at pages 148, 149 and 150 of the paper book. Referring to page-150 it was pointed out that it contains the summary from pages 2 to 4 mentioning as under:
Shares Sale Amount Page No.
-------- --------------- ----------
59600 2412540/- 148
141900 4870735/- 149
193400 6276280/- 150
Pages 2 to 4 represent pages 148, 149 and 150 of the paper book. Page-148 consists of shares quantity 59600 and an amount of Rs.24,12,540/- while page-149 consists the share Nos.141900 and an amount of Rs.48,70,735/- which includes the shares of 59600 and an amount of Rs.24,12,540/- as brought forward. Page-150 shows the total 193400 shares and the total amount of 24 Rs.62,76,280/-. It has an opening balance of 141900 shares and an amount of Rs.48,70,725/-. It was pointed out that this represents the sale of shares of Indo American Credit Corporation by Atlantic Credit & Capital Ltd., vide Bill No.9515/00140 and 9535/0031 issued by R K Investment. It was pointed out that the copies of the bills are available at pages 156 to 164. He reconciled the scripts appearing at pages 21, 22 and 23 of Annexure A-4 with the respective pages of Bill No.9515/00140, dated 16-10-95 and that of Bill No.9535/0031, the copy of which is available at pages 223 and the fair copy which was brought to our knowledge at page 610 of the paper book, which were duly verified during the course of hearing. Our attention was also drawn towards the copy of ledger account of R K Investment in the books of Atlantic Credit & Capital Ltd., the copy of which is available at page 144 and also on the copy of account of Atlantic Credit & Capital Ltd. in the books of R K Investment, which is available at page 146 of the paper book. Thus, it was pointed out that the shares belonged to Atlantic Credit & Capital Ltd. and they have sold these shares. They are duly entered in its books of account. This fact is also verifiable from R K Investment through whom the shares were purchased. These scripts since did not belong to the assessee; and merely on the basis of the loose paper seized from the assessee, this cannot be added to the income of the assessee. Alternatively it was contended that the total consideration received cannot be added in view of the decision of the Hon'ble Gujarat High Court in the case of CIT v Gurubachhan Singh J Juneja 302 ITR 63 (Guj). If any addition was to be made, that should be in the hands of Atlantic Credit & Capital Ltd. The learned DR, on the other hand, relied on the order of the AO.
2525 We have carefully considered the rival submissions and, perused the material on record along with the order of the AO. We noted from the seized papers 21, 22 and 23 of Annexure A-4, the copies of which are available at pages 148, 149 and 150 of the paper book, fresh typed copies were filed by the assessee at pages 593 to 597. On the basis of these pages, the AO made the addition of Rs.62,76,280/- in the hands of the assessee for the sale of the shares. During the course of hearing we verified that all these sales relate to Bill No.9515/00140 and 9535/0031 issued by R K Investment. The bills are in the name of Atlantic Credit & Capital Ltd. The entries of sales of these shares are appearing in the copy of account of Atlantic Credit & Capital Ltd. in the books of R K Investment and correspondingly the entries are duly recorded in the books of Atlantic Credit & Capital Ltd. in the account of R K Investment, which were duly verified during the course of hearing in the presence of learned DR to which he did not raise any objection. In our opinion, the assessee has duly discharged its burden to prove that the sale of scripts of Indo American Credit Corporation does not belong to the assessee but to Atlantic Credit & Capital Ltd., by submitting the necessary evidence to which the AO did not apply his mind but made the addition, simply on the basis that since the books of account were not prepared by the assessee and not handed over to the designated auditor for a special audit, the submissions of the assessee produced cannot be relied upon. Once the assessee has given explanation coupled with the necessary evidence to show that the sale transaction does not belong to the assessee, in our opinion, the onus gets shifted on the AO to bring evidence on record to prove that the explanation of the assessee is not 26 correct, until and unless the AO proves that the transaction belongs to the assessee, the addition so made cannot be sustained. No doubt the presumption is available to the revenue under section 132(4A), but the presumption so available is not conclusive and is rebut table, the assessee in our opinion has duly rebutted the presumption by adducing the necessary evidence that the transaction does not belong to it. We accordingly delete the addition of Rs.62,76,280/-.
26 Thus, the ground relating to the addition of Rs.79,75,790/- is partly allowed and addition to the extent of Rs.1,60,245/- is sustained and balance to the extent of Rs.78,15,545/- is deleted.
27 The next issue relates to the addition of Rs.2,37,24,147/-. The brief facts relating to this addition are that the AO noted that pages 2 and 3 of Annexure A-6 contain the deposits of Rs.3,47,25,000/-. The AO did not agree with the assessee that these deposits are reflected in the books of account of the assessee but made the addition as unexplained income in the original assessment. In the subsequent assessment, the AO added the sum of Rs.2,37,24,147/- by observing as under:-
" 3.5. Unexplained deposits in the Bank Accounts:
Page 2 & 3 of Annexure A-6 contains deposit of Rs, 3,47,25,000/-. Having being asked as to why the same should not be treated as unexplained income. The assesses has submitted that these deposits are reflected in the books of the accounts of the assessee company As the assessee has not furnished any satisfactory explanation in respect of source of deposits, the assessee's contention cannot be accepted. Mere entry in the books is not a sufficient proof. It is also important to furnish details as to from where and from whom the money has come. The confirmation from the depositors are also necessary to be furnished to claim the deposit as 27 genuine. Since the assessee has not done this job the amount of Rs. 3,47,25,000/- is treated as unexplained income.
At the time of framing original assessment order, this matter was discussed by the CIT Guj.-I, Ahmedabad during hearing fixed on 26.6.97 at 3.00 P.M. The Ld. CIT has directed to produce the addition separately made on account of sales if proceeds of such sale are credited to the same account. Further only the peak of the bank credit will have to be taken into account The peak of the deposits is worked out at Rs. 2,37,24,147/- in the original assessment order and since there is no change in the fact the same is hereby added as the unaccounted receipts of the assessee.
(Addition of Rs. 2,37,24,147)"
28 The learned AR pointed out that these additions are made by the AO in respect of deposits made by the assessee in United Western Bank Ltd. The assessee submitted the return for the AY 1995-96 on 30-11-95 along with the audited balance- sheet and Profit & Loss Account. The account of United Western Bank Ltd. is appearing at page 28 of the paper book under Schedule-D and shows a balance of Rs.3,01,402/-. This account is duly disclosed to the Income-tax department and whatever deposits are made cannot be regarded to be the undisclosed income as per Chapter XIV-B of the Act. Attention was also drawn towards page 449 which is the trial balance as on 21-12- 95 and is part of Annexure A-9. It was pointed out that the account of United Western Bank Ltd. is duly appearing in the trial balance and the balance as per the trial balance is Rs.49,54,462/-. He carried us to page 456 which is also part of the seized Annexure A-9 and pointed out that this page consists of ledger account of United Western Bank Ltd. The sum of Rs.1 Crore represented three cheques of Rs.10 lacs and Rs.45 lacs each received from R K Investment on 4-11-95. This fact is verifiable with page 137-Reverse which contains the copy of 28 account of the assessee in the books of R K Investment. Similarly the copy of account of the assessee in the books of R K Investment also contains the said entries. Attention was drawn to the bank statement which is available at page 179. Similarly for the sum of Rs.40 lacs deposited in the same account on 9-11-95 it was pointed out that the amount was received from R K investment and for this also attention was drawn to page 137- Reverse, 143 and 179. It was also pointed out that the sum of Rs.2,25,000/- appearing in the account was received from Mohan Investment, Mumbai on 9-11-95 but except the copy of bank account and seized trial balance, no other evidence was brought to our knowledge. Similarly for the sum of Rs.25 lacs and Rs.20 lacs it was pointed out that both these amounts were received from Multimedia Software, Mumbai on 12-11-95. For this also, attention was drawn to the bank statement but no other evidence was filed. Lastly, for the sum of Rs.50 lacs deposited on 22-11- 95 by way of two entries of Rs.25 lacs each, it was pointed out that these amounts were received from R K Investment and for this attention was drawn to page 137-Reverse, copy of account of the assessee in R K Investment at page 143 - bank statement. Thus, it was contended that the addition has been made without looking into the evidence as filed by the assessee and also ignoring the fact that these deposits made are duly entered into regular books of account maintained by the assessee. The learned DR, on the other hand, relied on the order of the AO.
29 We have carefully considered the rival submissions and, perused the material on record along with the order of the AO. We noted that this addition has been made by the AO on the basis of various deposits made by the assessee in the United 29 Western Bank Ltd. It is a part of the seized paper. This is an admitted fact that the assessee has submitted the return for the AY 1995-96 prior to the date of search along with the audited balance-sheet and Profit & Loss Account. The account of the assessee with United Western Bank Ltd. is duly disclosed under Schedule-D of the audited balance-sheet. Thus, this account is duly disclosed to the Income-tax department. Various deposits made by the assessee in this account are also appearing in the bank statement. Now the question before us is whether these deposits can be regarded to be the undisclosed income of the assessee within the purview of chapter XIVB of the Income tax Act. The scheme of block assessment enacted under this chapter lays down procedure for the block assessment proceedings is intended by the legislature to operate simultaneously with the normal and regular scheme of assessment indicate under chapter XIV of the I. Tax Act. Both the tax schemes are independent of each other and they are not mutually exclusive. Block assessment under chapter XIV B is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to material unearthed during search. Therefore if the search action does not disclose undisclosed income belonging to the assessee, the question of any assessment being framed under that chapter is simply improper and outside the purview of that chapter. Clause (b) of Section 158B contains inclusive definition of undisclosed income and reads as under:-
'(b) 'Undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable articles, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been 30 disclosed for the purposes of this Act (or any expense, deduction or allowance claimed under this Act which is found to be false)".
If we analyze the aforesaid definition, it provides that undisclosed income includes: -
(i) Any money, bullion, jewellery or other valuable article or thing or,
(ii) Any income based on any entry in the books of account or other documents or transactions;
(iii) Such money, bullion, jewellery, valuable article, thing, entry in the books of account or other documents or transactions represents wholly or partly income or property;
Which has not been or would not have been disclosed for the purposes of this Act.
(iv) or any expense, deduction or allowance claimed under this Act which is found to be false From the aforesaid analysis of the definition, it is apparently clear that if any asset or any income as recorded in the books or documents has been disclosed or intended to be disclosed to the income tax authorities, this would be outside the pale of undisclosed income as defined under clause (b) as above. Since these deposits relating to the bank account which is duly disclosed to the Revenue, therefore, the AO was not competent to make an addition in an assessment framed under Chapter XIV-B of the Act. Similar view has been taken by various High Courts and the Tribunal in the following cases:
- 283 ITR 326 (Delhi)
- 246 ITR 671 (Bom)
- 248 ITR 562 (Cal)
- 270 ITR 160 (Cal
- 287 ITR 287 (Delhi)
- 234 ITR 733 (Guj)
- 237 ITR 70 (Ker)
- 245 ITR 488 (Guj) 31
- 92 TTJ 1027 (Bom)
- 250 ITR 141 (Delhi)
- 80 ITD 429 (Mad)
- 70 TTJ 122
- 84 ITD 320 (Mum)
- 104 ITD 166 ™ We accordingly delete the addition of Rs.2,37,24,147/-. Thus, this ground is allowed.
30 The next issue relates to the addition of Rs.8,05,98,535/-. The brief facts relating to this ground are that during the course of hearing, the AO has asked for the script- wise and date-wise details of purchases and sales of shares through Shri N V Shah and R K Investment. The assessee submitted these details as available at pages 327 to 373 before the AO by way of a stock register which is being regularly maintained by him for the purchase and sale of shares. The AO on the basis of this register worked out the total of the purchases at Rs.8,05,98,535/- purchases by the assessee through R K Investment and added the same as unexplained investment made by the assessee ignoring the contention of the assessee that all these shares are duly reflected in the regular books of account maintained by the assessee by observing as under:-
" 3.6. Unexplained Investment in Shares by the Assessee:
The assessee has submitted scrip wise and date wise details of the purchase and sales of shares through N.V.Shah and R.K, Investment, On perusal of the details it is seen that total purchase through R.K .Investment Co. comes to Rs. 8,05,98,535/-. When the assesses was asked as to why the same should not be treated as unexplained investment, the assessee submitted that all the shares are duly reflected in the books of accounts.
However the assessee has not submitted the contract note, delivery memo, distinctive number of the shares, source of funds which are very vital evidences to prove the genuineness of the 32 transaction. Moreover the books submitted by the assessee are not reliable. In view of above facts Rs. 8,05t98,535/- is hereby added as the unexplained investment of the assessee.
(Addition of Rs. 8,05,98,535)
31 The learned AR before us vehemently contended that the AO was not correct in adding the total purchases made through R K Investment as undisclosed income of the assessee. This addition has been made on the basis of the stock register submitted by the assessee during the course of the assessment proceeding not on the basis of the material seized. The total of all these purchases as worked out by the AO is not correct and for this he submitted the Certificate from a Chartered Accountant, viz., M/s Sakar Sharma & Co., CAs, who reconciled the figures of the purchases as per the stock register. Referring to the Certificate issued by M/s Sakar Sharma & Co., CAs, dated 11-05-2009 it was pointed out that the total of the purchases appearing in the stock register works out to Rs.7,19,04,874/- and for the break-up of these purchases Annexure-A was attached which gives the following details:-
Particulars Purchases made Purchases made Total of through R K through other Purchases made Investments parties Purchases made Rs. Rs. Rs.
upto 20/12/1995
i.e. upto the
period day prior
to the date of
search
Purchase made 42024529 27669775 69694304
on 21/12/1995 or
thereafter i.e.
during period
subsequent to
search
Total 2210570 0 2210570
33
44235099 27669775 71904874
Attention was also drawn towards reconciliation appearing at page-2 of the Certificate with the purchases appearing in the stock register which reads as under:-
"Purchases as per assessment order Rs.8,05,98,535/-
Less: Purchase made through R K Investment
Purchases made upto
20/12/1995 i.e. upto the
period day prior to the
date of search 42024529
Purchase made on
21/12/1995 or
thereafter i.e. during
period subsequent to
search 2210570
Rs.4,42,35,099/-
--------------------
Rs.3.63,63,436/-
Less: Purchase made through other parties Rs.2,76,69,775/-
--------------------
Balance not reflected in stock register but taken in assessment order Rs.0,86,93,661/-"
On the basis of this Certificate it was pointed out that the correct total of the purchases made through R K Investments as appearing in the stock register is Rs.4,42,35,099/-, and not Rs.8,05,98,535/- and for this, attention was drawn to pages 327 to 373 of the paper book (being the photocopies of the stock register) on the basis of which the AO made the addition of Rs.8,05,98,535/-. It was also pointed out that as per the stock register the total of the sales of shares carried out by the assessee is Rs.7,83,50,524/-. By pointing out the reconciliation 34 of the purchases, it was contended that the purchases made through R K Investments were Rs.4,42,35,099/- and it includes the purchases of Rs.22,10,570/- for the period subsequent to the search. Thus, the purchases made upto 20-12-1995 are only Rs.4,20,24,529/- for the shares through R K Investments. The purchases made by the assessee through other parties have also been treated as if these were made through R K Investments. Such purchases are to the tune of Rs.2,76,69,775/-. It was thus pointed out that all these purchases are verifiable from the copy of account of R K Investment in the books of the assessee and that of assessee's copy of account in the books of R K Investments and for this, attention was drawn to pages 137, 139, 142 and 143. Since these purchases were duly disclosed in the regular books of account, these cannot be regarded to be the undisclosed income of the assessee. The learned DR, on the other hand, supported the order of the AO.
32 We have carefully considered the rival submissions and, perused the material on record along with the order of the AO. This is un-controverted fact that the addition in respect of purchases through R K Investments has been made on the basis of the stock register submitted by the assessee during the course of assessment proceedings. The stock register has been regularly maintained by the assessee for the purchase and sale of the shares along with the financial books. The purchases and sales of the shares on the basis of bills are entered in the regular books of account. The AO has worked out the total of the purchases through R K Investment as per this register at Rs.8,05,98,535/- but in fact the purchases through R K Investments was only Rs.4,42,35,099/-. Even the learned DR was fair enough to 35 concede during the course of hearing that the figure of Rs.8,05,98,535/- does not arrive on the basis of the stock register. We, therefore, asked the assessee to get these figures verified from the Chartered Accountant and accordingly the assessee has submitted the Certificate reconciling the figures as per the stock register and as has been taken by the AO in the assessment order, vide letter dated 11/05/09 which is reproduced as under:-
"SAKAR SHARMA & Co., Third Floor, VISHWA,
Chartered Accounants Opp. Jain Derasar,
Near Navrangpura Bus Stand
Navrangpura,
Ahmedabad-380 009
Phone:26424075
Mobile: 9824003876
Email:[email protected]
May 11, 2009
To,
Asiatic Infrastructure & Shelters Ltd.,
Basement, Sumatinath Complex,
Pritamnagar 2 n d Slope,
Pritamnagar, Ellisbridge,
Ahmedabad-380 006
Sub: Verification of purchase appearing in stock register appearing at Pages 327 to 373 of Paper Book submitted to ITAT - regarding Ref: Your letter dtd. 08-05-2009 Sir, In terms of appointment made vide above referred letter we have verified the purchases as recorded in stock register vide pages 327 to 373 of Paper Book being submitted to the ITAT. We certify and confirm that total of purchases appearing in stock register as stated hereinabove works out to Rs.7,19,04,874/- (Rupees Seven Crore Ninteen Lac Four Thousand Eight Hundred and Sevent y Four Onl y) as per Annexure-B (Pages 6 to 12) of this certificate. We further certify that breakup of purchases made of Rs.7,19,04,874/- (Rupees Seven Crore Ninteen Lac Four Thousand Eight Hundred and Seventy Four Onl y) during the period prior to search and 36 during post search period is as under as per Annexure-A (Pages 1 to 5) of this certificate:
Particulars Purchases made Purchases made Total of through R K through other Purchases made Investments parties Purchases made Rs. Rs. Rs.
upto 20/12/1995
i.e. upto the
period day prior
to the date of
search
Purchase made 42024529 27669775 69694304
on 21/12/1995 or
thereafter i.e.
during period
subsequent to
search
Total 2210570 0 2210570
44235099 27669775 71904874
We further certify that reconciliation of purchases of Rs.8,05,98,535/- (Rupees Eight Crore Five Lac Nint y Eight Thousand Five Hundred Thirt y Five onl y) as stated in para 3.6 of assessment order passed u/s 156BC dtd. 30/03/2006 with the purchases appearing in stock register vide pages 327 to 373 of Paper Book submitted to the ITAT is as under:
"Purchases as per assessment order Rs.8,05,98,535/-
Less: Purchase made through R K Investment
Purchases made upto
20/12/1995 i.e. upto the
period day prior to the
date of search 42024529
Purchase made on
21/12/1995 or
thereafter i.e. during
period subsequent to
search 2210570
Rs.4,42,35,099/-
--------------------
Rs.3.63,63,436/-
Less: Purchase made through other parties Rs.2,76,69,775/-
--------------------
37
Balance not reflected in stock register but taken in assessment order Rs.0,86,93,661/-"
We further certify that total of purchases through R K Investment as per stock register referred hereinabove works out to Rs.4,42,35,099/- (Rupees Four Crore Fort y Two Lac Thirt y Five Thousand and Ninty Nine onl y) against Rs.8,05,98,535/- (Rupees Eight Crore Five Lac Nint y Eight Thousand Five Hundred Thirt y Five onl y) taken in assessment order passed u/s 158BC dtd. 30/03/2006.
We also enclose herewith Annexure-C (Pages 13 to 26) indicating sales executed of Rs.7,83,50,524/- (Rupees Seven Crore Eight y Three Lac Fift y Thousand and five Hundred Twent y Four onl y) as per stock register vide pages 327 to 373 of Paper Book submitted to ITAT.
For, SAKAR SHARMA & Co.
Chartered Accountants Sd/-
(CA Sakar Sharma)
Place: Ahmedabad M N 44763
Date: May 11, 2009."
On the basis of the Certificate of the Chartered Accountant, we noted that the purchases through R K Investments were Rs.4,42,35,099/- which includes the purchases made subsequent to the search amounting to Rs.22,10,570/-. Thus, the purchases made upto 20-12-1995 i.e. upto the date of search were only Rs.4,20,24,529/-. This is a fact that all these purchases are entered in the regular books of account of the assessee which is also verifiable from the copy of account of the assessee in the books of R K Investments as well as that of R K Investment in the books of the assessee. These copies are available in the paper book at pages 137, 138, 143 and 144. The assessee is a regular assessee. The return for the AY 1995-96 was filed prior to the completion of the assessment. We have already held that in a block assessment addition can be made of the undisclosed income as defined under section 158B(b) of the Income Tax Act. The transaction if duly entered in the regular books of account cannot be regarded to be the undisclosed income of the assessee.
38This is an admitted fact that the assessee was maintaining the regular books of accounts of the purchases and sales of the shares in the ordinary course of the business. When during the course of assessment proceedings, the AO asked for the details , the assessee has duly produced the stock register which has been made the basis by the assessing officer to make the addition in the case of the assessee. The assessing officer totaled up all the purchases and treated the same to be the purchases made through R K Investment. Even there are mistake in the totaling which has been duly verified by a chartered accountant when we are convinced during the course of the hearing that there are apparent mistake. All the purchases are duly recorded in the regular books which are verifiable from the copy of account of RK investment in the books of the assessee and correspondingly the assessee's copy of account in the books of the R K Investment. These purchases cannot be regarded to be the undisclosed income as they are duly recorded in the books of the assessee regularly maintained and are therefore outside the scope of the Chapter XIVB of the Income Tax Act. We accordingly delete the addition of Rs.8,05,98,535/-.
33 In the result, the appeal is partly allowed.
Order pronounced in the open court on 09-10-2009 Sd/- Sd/-
(MAHAVIR SINGH) (P K BANSAL)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date : 09-10-2009
Copy of the order forwarded to :
1. Asiatic Infrastructure & Shelters Ltd., Sumatinath Complex, Pritamnagar 2 n d Slope, Paldi, Ahmedabad 39
2. The DCIT (OSD) Range-1, Ahmedabad
3. The CIT concerned
4. The CIT(A)
5. The DR, ITAT, Ahmedabad
6. Guard File BY ORDER DY.R/AR, ITAT, AHMEDABAD 40