Income Tax Appellate Tribunal - Ahmedabad
Satyanarayan J.Kabra,, Ahmedabad vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "C" AHMEDABAD
Before Shri P.K.BANSAL, ACCOUNTANT MEMBER and
Shri MAHAVIR SINGH, JUDICIAL MEMBER
IT(SS) A No.59/ Ah d/2005
Block period : 1.4.1995 to 12.7.2001
Date of hearing:26.8.09 Drafted:5.10.09
DCIT, Central Circle- V/s. Shri Sat yanarayan J
1(4), Ahm edabad Kabra, Prop. Poonam
Corporation, T-4-A,
Shantinagar Society,
Usmanpura, Ahmedabad
PAN No. ADGPK2858M
(Appellant) .. (Respondent)
IT(SS) A No.71/ Ah d/2005
Block period : 1.4.1995 to 12.7.2001
Shri Sat yanarayan J V/s. ACIT, Central Circle-
Kabra, Prop. Poonam 1(4), Ahm edabad
Corporation, T-4-A,
Shantinagar Society,
Usmanpura, Ahmedabad
PAN No. ADGPK2858M
(Appellant) .. (Respondent)
Assessee by :- Shri Dhiran Shah &
Shri Bhavesh Shah
Revenue by:- Shri Shelly Singhal, CIT, DR
IT(SS) A No.175/ Ah d/2004
Block period : 1.4.1995 to 12.7.2001
ACIT, Central Circle- V/s. Mayadevi Kabra, Prop.
1(4), Room No. 305, 3 r d Ganesh Trading Co. 3-4.
Floor, Aaykar Bhavan, Rajesh Apartm ent B/h.
Ashram Road, Navgujarat College,
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004
Block period 1.4.95 to 12.7.01
DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 2
Ahmedabad Ashram Road,
Ahmedabad
PAN No. ADIPK7306A
(Appellant) .. (Respondent)
IT(SS) A No.176/ Ah d/2004
Block period : 1.4.1995 to 12.7.2001
ACIT, Central Circle- V/s. Gulabdevi J Kabra,
1(4), Room No. 305, 3 r d Prop. Gujarat Sales
Floor, Aaykar Bhavan, Agenc y,3-4. Rajesh
Ashram Road, Appartment, B/h.
Ahmedabad Navgujarat College,
Ashram Road,
Ahmedabad
PAN No. ACKPK8619F
(Appellant) .. (Respondent)
IT(SS) A No.177/ Ah d/2004
Block period : 1.4.1995 to 12.7.2001
ACIT, Central Circle- V/s. Sarojdevi S Kabra,
1(4), Room No. 305, 3 r d Prop.Laxmi Trading
Floor, Aaykar Bhavan, Co.,3 Rajesh Apartment,
Ashram Road, B/h. Navgujarat College,
Ahmedabad Ashram Road,
Ahmedabad
PAN No. AVGOJ6018L
(Appellant) .. (Respondent)
IT(SS) A No.306/ Ah d/2004
Block period : 1.4.1995 to 12.7.2001
DCIT, Central Circle- V/s. Satyanara yan J Kobra
1(4), Room No. 305, 3 r d (HUF), Prop. S.S.
Floor, Aaykar Bhavan, Enterprises, 3 Rajesh
Ashram Road, Apartment, Behind.
Ahmedabad Navgujarat College,
Ashram Road,
Ahmedabad
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004
Block period 1.4.95 to 12.7.01
DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 3
PAN No. AAGHS7704H
(Appellant) .. (Respondent)
IT(SS) A No.245/ Ah d/2004
Block period : 1.4.1995 to 12.7.2001
DCIT, Central Circle- V/s. Krishavatar J Kobra
1(4), Room No. 305, 3 r d Prop. K.K. Investments
Floor, Aaykar Bhavan, & Omprakash Coal Co.3
Ashram Road, Rajesh Apartm ent, B/h
Ahmedabad Navgujarat College,
Ashram Road,
Ahmedabad
PAN No. AGDPK5563D
(Appellant) .. (Respondent)
Assessee by :- Shri Dhiran Shah
Revenue by:- Shri Shelly Singhal, CIT, DR
ORDER
PER Mahavir Singh Judicial Member:-
These are group of seven appeals out of it, two are cross appeals and remaining are appeals by the Revenue against the different orders of the CIT(A)-I Ahmedabad.
2. First, we will deal with the cross appeals i.e. the assessee's appeal in IT(SS)A 71/Ahd/2005 and Revenue's appeal in IT(SS)A 59/Ahd/2005 in the case of Shri Satyanarayan J.Kabra. The block assessment was framed by the ACIT, Central Circle-1(4) Ahmedabad u/s 158BC r.w.s 143(3) of the Income Tax Act, 1961 (herein referred to as 'the Act) for the block period 1.4.1995 to 12.7.2001 vide order dt 28.11.2003. These cross appeals are emanating out of the order of the order of CIT (A) 1, Ahmedabad in appeal No. CIT(A) -1/CC.1(4)/31/03-04 dated 29.12.2004. IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 4
3. The first issue in this appeal of the assessee is as regards to the order of CIT(A) confirming the addition of Rs.28,89,200/- on account of unaccounted shares assessed as undisclosed income by the Assessing Officer during the course of block assessment proceedings. For this, the assessee has raised the following ground No.1 :-
Addition of account of unaccounted shares:
The learned CIT(A) has erred in law and on facts in directing the Assessing Officer to verify the claim made in respect of addition having wrongly been made to the extent of Rs. 28.89,200/- and if the claim is found to be justified, to delete the addition to that extent and grant necessary relief to the appellant in the background of the observation made by the learned CIT(A) in the appellate order that "the Assessing Officer had himself observed in para 2.4.1 of the assessment order that they were accounted for in other group cases and hence were being taken out of the purview of additions made in the case of assessee and to that extent the Assessing Officer did not intend to make much addition for shares standing in the names of four persons of the family members". The Ld CIT(A) ought to have deleted the addition on this basis of the observation made by her in the order.
4. During the course of block assessment proceedings, the Assessing Officer required the assessee to explain the cumulative face value of shares found at Rs. 3,99,99,410/-. According to the Assessing Officer out of these, some of the shares are in the name of family members of the assessee which were considered in their respective hands. The assessee was required by show cause notice dated 23.6.2003 and 17.4.2003 as under:-
"During the course of search shares having face value of Rs. 21,02,100/- seized as per Annexure `O' to the Panchnama dated 7-11- 2001 drawn for the depository account having client ID 10090009 in IIT Corporate Services Ltd. in the name of S.N. Kabra.
You are requested to reconcile the acquisition of above shares in your books of accounts with necessary supporting documentary evidences.
As well, during the search shares having face value of Rs. 2,02,91,460/- as per Annexure - O to the panchnama dtd. 5.10.2001, drawn at the office premises and shares having face value of Rs. 47,98,000/- were seized as per Annexure - O to the panchnama dated 7.11.2001 drawn at the premises from where you are mainly carrying IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 5 on your above business together with the financing business with your other family members.
It is stated that all these shares are found in your possession and in this connection, attention is invited to provision of Section 132(4A) which reads as under:-
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) ..............
In this background of fact you are requested to explain the source of acquisition of all the above mentioned shares together with necessary supporting documentary evidences. In absence of which a adverse inference will be drawn and market value of the shares will be considered as undisclosed income of the block period......"
"..........It is also to be stated that shares of Arihant Avenues & Credit Ltd. were seized during the search vide Annexure `O' to the Panchnama dtd. 7.11.2001. The total value of these shares is Rs. 47,98,000/- (as against that of Rs.45,69,000) wrongly in the panchnama). Although the shares stands in different names, however, since the seizure is effected at your premises and in absence of any satisfactory explanation during the search the value of above shares is to be considered as unexplained investment..............".
The assessee replied that the shares belonging to the family members are as under:-
1. Smt.Sarojdevi Kabra (Letter dtd. 11.06.2003) Arihand Ernosol 18900 Rs. 189000 Minaxi Textile 163900 Rs. 1639000 [Letter dtde. 16.4.2003] Stanrose Maftlal 120 Rs. 1200 Rs. 1829200
2. Mayadevi Kabra (Letter dtd.11.6.2003) Advance Bio 18500 Rs. 185000 Arihant Ternsosol 19400 Rs. 194000 IDBI 2300 Rs. 23000 Rs. 402000
3. Gulabdevi Kabra (Letter dtd. 11.6.2003) IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 6 Arihant Ternosol 19000 Rs. 190000 Minaxi Textiles 100 Rs. 1000 IDBI 2200 Rs. 22000 Rs. 213000
4. Jagannath Kabra (Letter dtd.20.06.2003) Arihant Ternosol 42500 Rs. 425000 IDBI 2000 RS. 20000 Total 2889200
5. The Assessing Officer after considering the contentions of the assessee made addition to the undisclosed income of the assessee. Aggrieved the assessee preferred appeal before the CIT(A). The CIT(A) after considering the reply of the assessee that the several shares found in the physical form of the face value Rs.
28,89,200/- relates to Smt. Sarojadevi Kabra, Smt. Mayadevi Kabra, Smt. Gulabdevi Kabra and Shri Jagannath Kabra for which the explanation had already been submitted in their respective block assessments. The CIT(A) sent the matter back to the file of the Assessing Officer with a direction to verify whether these shares are accounted for in their respective hands as claimed by the assessee and in case these are accounted for, no addition is called for. In case, these are not accounted for, the same can be added in their respective hands of the above mentioned assessee. The CIT(A) has given following findings in para 3.3.1 (b) as under:-
"(b) As regards shares found in physical form and stated to be belonging to related persons Smt.Sarojdevi Kabra, Smt.Mayadevi, Smt.Gulabdevi and Shri Jagannath Kabra and of the total value of Rs.28,89,200/-, it is seen that the A.O. had himself observed in para 2.4.1 of the asstt. order that they were accounted for in other group cases and hence were being taken out of the purview of additions being made in the case of the assessee. Therefore, obviously the A.O. did not intend to make any addition on this account. It has however,been brought to notice that erroneously this addition has been made which amounts to a double addition. To the extent that A.O. did not intend to make such an addition for shares standing in the names of these 4 persons, A.O. is directed to verify the claim made of addition having wrongly been made to the extent of Rs.28,89,200/-, and if the claim is found to be justified, to delete the addition to this extent and grant necessary relief to the appellant. "
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 7
6. Aggrieved against this findings of the CIT(A), the assessee preferred second appeal before us on this issue. At the outset, the Ld counsel for the assessee as well as the learned DR fairly agreed that, since the CIT(A) has sent back the matter for verification, no interference is required. In view of the above facts and circumstances, we feel that the CIT(A) has rightly directed the Assessing Officer to verify whether the shares are accounted for or not and in whose hands these are to be added, in case the addition is to be made. Accordingly, we are not interfering in the findings of CIT(A) and this issue of the assessee's appeal is dismissed.
7. The second issue in this appeal of the assessee is as regards to the order of CIT(A) directing the Assessing Officer to verify the date of acquisition of shares in respect of shares worth Rs.5,23,330/-. For this the assessee raised the relevant ground No.2 as under:-
"The learned CIT(A) has erred in law and on facts in directing the Assessing Officer to verify the date of acquisition of shares in respect of shares worth Rs. 5,23,330/- which were inventorised at the time of search proceedings as per inventory of Panchnama prepared at the time of search which contains the date of acquisition of shares and accordingly the learned CIT(A) ought to have deleted the addition of Rs. 5,23,330/- on account of acquisition of said shares not falling in the block period."
8. At the outset, the Ld counsel for the assessee filed copy of order giving effect to CIT(A)'s order r.w.s. 155 of the Act, and stated that the Assessing Officer himself has deleted the addition on this issue at Rs.4,49,875./- vide order dated 31.3.2009 after verifying the details as directed by the CIT(A). We find that the CIT(A) has directed the Assessing Officer vide para 3.3.1 (c) as under:-
"(c) The appellant had claimed that shares worth Rs.5,23,330/- were purchased prior to the block period, and hence no addition to that extent was justified. I find that the A.O. has not discussed this claim anywhere in the return despite the appellant having made this claim vide letter dated 24th Oct., 2003 giving specific details of these shares worth Rs.5,23,330/-. The date of acquisition of these shares had been indicated but the A.O. has not commented on the same. Prima facie the claim of the appellant appears to be justified. The A.O. is therefore, directed to verify the date of acquisition of shares as given in the said letter dated 24th Oct., 2003 in assessment proceedings, and if the date of acquisition of these shares is confirmed, to IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 8 delete the addition of Rs.5,23,330/- being on account of shares not falling within the block period."
9. In view of the above, the learned counsel for the assessee has not pressed this issue for the balance amount.
10. In view of the above, the learned DR fairly stated that, since the Assessing Officer has allowed the relief after verifying the facts, and the assessee has not contested for the balance amount, he need not to argue further. In view of these facts, we want to state that the Assessing Officer after verifying the facts has already allowed the relief of Rs.4,49,875/- and for the balance amount the assessee has not pressed this issue. Accordingly, this issue of the assessee's appeal is partly allowed as above.
11. The next issue in this appeal of the assessee is as regards to the order of CIT(A) directing the Assessing Officer to verify the shares worth Rs. 14.51 lakhs and for this the assessee has raised the following ground No.3:-
"3. The learned CIT(A) has erred in law and on facts in setting aside and directing the Assessing Officer to verify in respect of shares worth Rs. 14,51,000/- which were stated to have been acquired from the market in Assessment Year 1995-96 & 1996-97 and recorded in the books of accounts and sold in subsequent years, but received back for request TD and hence found in search proceedings. The learned CIT(A) ought to have heard that the said shares worth Rs. 14,51,000/- have been received back by the pp for request TD and the learned CIT(A) should have deleted the addition on account of the same."
12. At the outset, the Ld counsel for the assessee filed copy of order of the giving effect to CIT(A)'s order r.w.s. 155 of the Act, and stated that the Assessing Officer himself has deleted the addition on this issue at Rs.14,51,000/- vide order dated 31.3.2009 after verifying the details as directed by the CIT(A). We find that the CIT(A) has directed the Assessing Officer vide para 3.3.1 (d) as under:-
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 9 "(d) Regarding shares worth Rs.14,51,000/- which were stated to have been acquired from the market in F.Y.1995-96 and recorded in the books of accounts, this claim is found to have been likewise made in the same letter dtd. 24th Oct., 2003 before the A.O. where shares of Advance Biocol, Arihant Turnisol and IDBI and Satyam Cement were stated to be entered in regular books of account for A.Y.1996-97 and sold in subsequent years but received back for request T.D. and hence found in the premises. During the course of appeal proceedings, photo copies of the balance sheet and audited accounts for A.Y.1996-97 have been given along with closing stock statement showing shares of these 4 companies as duly purchased and included in the books of accounts. I find substance in the arguments advanced and accordingly, would direct the A.O. to verify from the stock statements of subsequent years, the date of actual sale of these shares and documentary evidence regarding receipt back of the shares as claimed by the appellant. In case such documentary evidence of receipt back of shares is available, the addition made to the extent of Rs.14,51,000/- would be deleted as pertaining to shares accounted for in the regular books of accounts."
13. In view of the above, the learned DR fairly stated that, since the Assessing Officer has allowed the relief after verifying the facts, In view of these facts, we want to state that the Assessing Officer after verifying the facts has already allowed the relief of Rs.14,51,000/-. Accordingly, this issue of the assessee's appeal is allowed as above.
14. The next issue in this appeal of the assessee is as regards to the order of CIT(A) directing the Assessing Officer to rectify the arithmetical error amounting to Rs.1,52,230/- and for this the assessee has raised the following ground No.1(4):-
"The learned CIT(A) has erred in law and on facts in directing the A.O to verify the arithmetical error pointed by appellant for an amount of Rs.1,52,230/-- and grant necessary relief to the appellant. The learned CIT(A) ought to have held that the said ad being deleted on account of arithmetical mistake."
15. At the outset, the Ld. Counsel for the assessee as well as the Ld. DR fairly agreed that the CIT(A) has already directed the AO to verify the arithmetical error vide para-3.3.1(e) as under:-
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 10 "(e) Regarding the claim that there is an arithmetical mistake in seized Annexure-O for amount of Rs.1,52,230/-, which claim was also made in the same letter dtd. 24th Oct., 2003, the A.O. has given no finding on the issue.
The A.O. is directed to verify the said error pointed out by the appellant and if found justified, to reduce the addition by said amount of Rs.1,52,230/- and grant necessary relief to the appellant. "
In view of the above directions by CIT(A), we are of the view that once the CIT(A) has already directed to verify the arithmetical mistake in seized Annexure-O for the amount of Rs.1,52,230/- and allow the appropriate relief to the assessee, nothing remains to be challenged. Accordingly, we also direct the Assessing Officer to verify the mistake and allow appropriate relief to the assessee as per law. This issue of assessee's appeal is infructuous.
16. The next issue in this appeal of the assessee is against the order of CIT(A) in confirming the addition of Rs.1,60,36,160/- on account of share received by the assessee as security. For this, the assessee has raised the following ground No.II(1):-
"1. That the learned CIT(A) has erred in law and on facts by confirming the addition of Rs.1,60,36,160/- on account of the shares received by the appellant as security on the observation that explanation give vide letter dated 24/10/2004 in assessment proceedings and reiterated in the appeal proceedings is not acceptable and is not considered to be genuine."
17. During the course of block assessment proceedings, the Assessing Officer noticed from the search material that during the course of search proceedings at the business & residential premises of the Kabra Group, shares in physical form in cumulative face-value of Rs.3,99,99,410/- was found and out of which the following shares were seized:-
• Shares having face value of Rs. 2,02,91,460/- seized from office premises. • Shares of Arihant Avenue & Credit Limited having face value of Rs. 47,98,000/- seized from office premises.
• Shares having face value of Rs. 21,02,100/- seized from depository account having client ID 10090009 in IIT Corporate Services Ltd. in the name of S.N. Kabra.
According to the Assessing Officer out of the above shares, some are in the names of the family members of the assessee which were considered in respective hands. IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 11 The Assessing Officer required the assessee to explain vide show cause notices dated 23-06-2003 and 17-04-2003, the above shares. The assessee filed explanation and the relevant replies explaining the shares have been reproduced in the assessment order, is being again reproduce for the sake of clarity as under:-
1. Smt.Sarojdevi Kabra (Letter dtd. 11.06.2003) Arihand Ernosol 18900 Rs. 189000 Minaxi Textile 163900 Rs. 1639000 [Letter dtde. 16.4.2003] Stanrose Maftlal 120 Rs. 1200 Rs. 1829200
2. Mayadevi Kabra (Letter dtd.11.6.2003) Advance Bio 18500 Rs. 185000 Arihant Ternsosol 19400 Rs. 194000 IDBI 2300 Rs. 23000 Rs. 402000
3. Gulabdevi Kabra (Letter dtd. 11.6.2003) Arihant Ternosol 19000 Rs. 190000 Minaxi Textiles 100 Rs. 1000 IDBI 2200 Rs. 22000 Rs. 213000
4. Jagannath Kabra (Letter dtd.20.06.2003) Arihant Ternosol 42500 Rs. 425000 IDBI 2000 RS. 20000 Total 2889200 Shares before block period ( i.e. 01.04.95) That from perusal of the seized Annexure "O" dated 5.10.2001, there are number of entries pertaining to share for which the date of acquisition is prior to the block periods and accordingly the investment in said shares are outside the purview of block period assessment proceedings and beyond the jurisdiction for assessment by the Assessing Authority as per the provisions of the Income Tax Act, 1961. The particulars of shares which falls beyond the block period [ ie Earlier to block period 1.4.95] are ...... of amount Rs.
523330.
...........It is submitted that I am in the business of financing and during the course of financing activity, I have provided finance to various parties in the market for which the security of shares were pledged with me as security against the finance provided to the parties. During the course of search proceedings, the shares of third parties which were pledged with me as a security against the finance provided to them were found and seized by the Income Tax authorities. It is also to be taken note of that during the course of search proceedings, the explanation was also offered by the assessee that IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 12 the said shares are lying with me by way of security for the finance provided to third parties are Rs. 16036160.
It is to be taken note of that in respect of Moon Drugs Ltd., I could not place on record the confirmation of the said party for the reason that the moment he is not co-operative to us and therefore, your honour is requested to make the necessary inquiry from the said party by exercising the powers and jurisdiction u/s. 131 of the Act. The address of Moon Drugs Limited is as under :-
Moon Drugs Limited 5, Satellite Cooperative Housing Society Opp Sundravan, Satellite Road Ahmedabad Shares found and seized which were received for request T.D. The following shares were originally acquired from market during F.Y.95-96 and the same have been accounted for in the books of accounts.
Advance Boicoal
Total Quantity found 30700
Less: Explained in case of Smt.Mayadevi Kabra 18500
------- 12200 122000 Arihant Ternosol Total Quantity found 168700 Less: Explained in the case of -
Sarojdevi Kabra 18900
Mayadevi Kabra 19400
Gulabdevi Kabra 19000
Jagannath Kabra 42500
Before Block Period 24400
-------- 44500 445000
IDBI
Total quantity found 48500
Less: Explained in the case of -
Mayadevi Kabra 2300
Gulabdevi Kabra 2200
Jagannath Kabra 2000
------- 42000 420000
Satyam Cement 46400 46400 46400
---------
1451000
It is to be taken note of that in subsequent financial year, the said shares have been sold by me and delivered in the market. The said shares were received IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 13 by me for request TD, therefore, the said shares were found in the search from my premises........."
18. The Assessing Officer considered the reply of the assessee and found that the same is an afterthought to explain the unexplainable and no contemporary evidences were filed to show the ownership vests in the claimed entities particularly when the shares were lying with the assessee without any legal documents. According the AO treated the market value of the shares as unexplained investment of the assessee, as physically found. The AO finally decided the issue by giving following findings:-
"Annexure 1 is the working of the shares showing market value of Rs. 3,02,98,562 which have been identified as the shares of the assessee in the benami name. List of these shares was given to the assessee for providing plausible explanation. The total value of the shares has been worked out taking market value as far as possible on the dates of acquisition. The values have been taken from the NSE/BSE web sites and from a leading shares broking firm. Where the values were not available because the shares were delisted, the values were taken as on nearest dates on which the price quotes were available. In case, where the values of the shares are being quoted below the face value, the value is taken at Rs.10, which is the minimum investment. Thus, addition of Rs. 3,02,98,562/- is made on this issue.
2.4.2. As regards the shares of Arihant Avenues & Credit Ltd seized during the search vide Annexure `O' to the panchnama dtd. 7.11.2001, the total value of these shares is Rs. 47,98,000/- (as against that of Rs. 45,69,000) wrongly in the panchnama), it is to be contended that • The process of the demutualization involves the physical shares to be sent to the designated banks or the DPs who are authorized to do that job. The assessee was not supposed to have the shares for the demutualization in his custody. The assessee's explanation to this effect is without any basis.
• It is also not out of place to mention here that these shares were transferred as far back as on 1.6.99 and 20.8.2000. The assessee was not able to furnish any satisfactory explanation as to why these shares had still been kept after recording the transfer of shares.
• It is interesting to see that HUFs have been created as Bankatlal Badrinarayan and Badrinaryan Bankatlal Babra, which shows that the same are bogus or benamis for the assessee.
In view of the above detailed discussion, it can be seen that the assessee has failed to discharge the onus cast on him to explain the shares found. Hence, IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 14 the amount of Rs.47,98,000 is added to the total undisclosed income of the assessee.
2.4.3. As regards the shares in the depository account having client ID 10090009 in IIT Corporate Services Ltd. in the name of S.N. Kabra, no explanation till date has been provided by the assessee, in spite of the specific opportunities provided to him as above. In view of the same, it is assumed that the assessee has nothing specific to say in the matter. The amount of the shares seized in the depository account of the assessee are taken at the market value on 12.07.2001. The same works out to be Rs. 50,07,806 which is added to the total undisclosed income of the assessee being unexplained investment in shares.
Annexure - 2 attached with the assessment order gives the working of the shares of Rs. 50,07,806 in the demat a/c. of Shri S.N Kabra. During the course of search shares having face value of Rs. 21,02,100/- seized as per Annexure `O' to the Pan chnama dtd. 7.11.2001 drawn for the depository account having client ID 10090009 in IIT Corporate Services Ltd. The share value of Rs. 50,07,805 is worked out by taking the market value of the shares on the date of the search i.e. 12/07/2001. The values of the shares which are quoting below Rs. 10 is taken at the face value of Rs. 10.
2.4.4. As regards the list of the shares physically available on hand but not recorded in the books as the assessee has not submitted any plausible explanation the sum of Rs. 83,171 is added to the total undisclosed income of the assessee.
Annexure 3 is the working of the shares of value Rs. 83,171, which are not recorded in the list but available physically. Obviously these shares are unaccounted and not recorded in the books of account. The total value of the shares has been worked out taking them as far as possible on the dates of acquisition. The values have been taken from the NSE/BSE web sites and from a leading shares broking firm. Where the values were not available because of the shares were delisted, the values were taken as on nearest dates on which the quotes were available. In case, where the values of the shares are being quoted below the face value, the value is taken at Rs10 which is the minimum investment.
Based on the above, total addition on account of unexplained investment in shares is made as [Rs3,02,98,562 + Rs47,98,000 + Rs50,07,805 + 83,171]."
19. Aggrieved against the additions the assessee preferred appeal before CIT(A) and the CIT(A) confirmed the addition of Rs.1,60,36,160/- on account of shares received from third party as security in the business of finance carried on by the assessee, by giving following findings in para-3.3.1(f):-
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 15 "(f) As regard the claim that shares worth Rs.1,60,36,160/- had been received from third parties as security in the business of finance carried on by the assessee, such third parties being Dinesh O. Pitolwala, Mrs.Dipal Shah from M/s. Dindayal Associates, of M/s.Gurukrupa Enterprises and of M/s. Hemant Automobiles and Moon drugs Ltd., I do not find the arguments given to be acceptable and find myself in agreement with the various observations made by the A.O. in this regard, There is no believable evidence that these shares found in physical form were not owned by the appellant or his benami persons. The A.O. has specifically pointed out the fact that all these shares were found entered in the diary seized as Annexure A-1 from residence and reflected therein in the names of various family members, leading to the inevitable conclusion that these shares belonging to family members who were possibly the benamidars of the appellant himself. There is no evidence given that the value of these shares standing in the names of these relatives was admitted and included in their individual hands in any assessment proceedings. The documentary evidence in the form of letters from Dinesh O.Pitolwala dtd.25.9.2001 or from Mrs.Dipal Shah dtd.15th Jan.2001 or from Gurukrupa Enterprises dtd.14.8.2000 or Hemant Automobiles dtd.16th Aug.2000 are not believable as contemporary evidences, since they were not found in search proceedings and they were not found along with other business documents of the appellant connected with any of these parties. It is obvious from the contents of these letters that appellant has attempted to include some explanation for the reason why the securities alleged owned by these persons were transferred in his own account either in dematerialized form or shown in his own name or in names of family members if in physical form, which contents of letters also raise doubts about their genuineness. There is no precedent in business transactions where property given as security would be transferred in the name of the person to whom it was given a security or treated as owned by that person (refer to Ann. A-1 seized from residence), unless and until the same had been forfeited on account of closure of the transactions or in any other manner. It is also seen by me that in the case of Mukesh D.Shah, Prop. M/s. Dindayal Associates as per my decision given in appeal No.CIT[A]-I/CW-1(1)/11/04-05 for Assessment Year 2001-02, that no genuine business concern in the name of M/s.Dindayal Associates was being run as allegedly claimed by Shri Mukesh D.Shah. Therefore, evidentiary value of letter given by Mrs. Dipal Shah on the letter head of M/s.Dindayal Associates which letter is itself counter signed by Shri Mukesh D.Shah, does not have good evidentiary value. Therefore, the explanation given vide letter dtd. 24th Oct., 2003 in assessment proceedings and reiterated in these appeal proceedings based on these 4 letters, is not acceptable and is not considered to be genuine. The finding given by the A.O. regarding shares of value of Rs.1,60,36,160/- is therefore, held to be justified and the addition made on their account is upheld. "
Aggrieved, the assessee preferred second appeal before us.
20. Before us the Ld. Counsel for the assessee, Shri Dhiren Shah argued that the assessee is in the business of financing and during the course of financing IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 16 activity the assessee had provided finance to various parties in the market for which the security of shares were also taken and the said shares were pledged with the assessee as security against the finances provided to the parties. During the course of search proceedings, the shares of third parties which were pledged with the assessee as a security against the finance provided to various parties were found and seized by the Income-tad Authorities. It was explained that during the course of search proceedings, the explanation was also offered by the assessee that the said shares are lying with the assessee by way of security for the finance provided to third parties. Thereafter also as and when the explanation was called for by the Income- tax Authorities again the explanation was offered that the said shares were lying with the assessee by way of security pledged by third party against the finance provided to them. The Ld. Counsel for the assessee drawn out attention to the letter dated 18-09-2001 written to the Dy. Director of Income-tax (Inv.) Unit 1(3), and the statement and supporting evidences as regards to the confirmation of parties that the said shares lying with the assessee are in the form of security provided by third parties and with this background the particulars of shares accepted as security from third parties are stated hereunder:-
"CJ SHARES RECEIVED AS SECURITY FROM THIRD PARTIES.
Name Share Name
1. Gurukrupa Enterprises
- Ambeshwar Paper 17760 177600
- Shri Hariraj Paper 32990 329900 507500
2. Moon Drugs Ltd.
Moon Drugs Ltd. 37000 370000 370000
3. Dinesh D Pitowala
- Rajhans Food Ltd. 326466 3264660 3264660
4. Dipal D Shah
- Ocean Software 808700 8087000
- S. Kumar Power 76300 763000
- Indus Entertech 122700 1227000
- Suprem Tele 153300 1533000
- Zenith Info 400 4000
- Zenith Info 13400 134000
- Melstar Info 11200 112000
- Geometric Soft 1850 18500 11878500
4.Hemant Automobilies
- Glenmark Pharma 1550 15500 15500 16036160
I have to submit that in support of my explanation that the aforesaid shares were received by me as security from the aforesaid parties and the same were found and IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 17 seized during the course of search proceedings has been substantiated by way of supporting evidences I the form of confirmation of the parties. It is to be taken note of that in record the confirmation of said party for the reason that at the moment he is not co-operative to us and therefore, your honour is requested to make the necessary inquiry r the said party by exercising the powers and jurisdiction u/s. 131 of the Act. The address of Moon Drugs Limited is as under:-
Moon Drugs Limited 5, Satellite Co.Op. Housing Society, Opp: Sundravan, Satellite Road, Ahmedabad"
The Ld. Counsel for the assessee stated that the observation made by the AO that no contemporary evidences were filed to show that the ownership of the said shares vest with said entities / persons particularly when shares were lying with assessee without any legal documents, the said observation of the AO is totally false and he stated the factual aspect that out of the total shares of Rs.2,23,93,560/- the AO has already called for the explanation in the case of Smt. Sarojdevi Kabra, MayadeviKabra, Gulabdevi Kabra and Jagannath Kabra having total value of Rs.28,89,200/- and already assessed in their cases. According to him, considering the same once again in the case of assessee is wholly unjustified and bad in law and leads to double addition of same shares in the hands of different assessee. That apart, the assessee in the present issue, has already submitted the confirmation of Shri Dinesh O Pitolwala, Managing Director of Rajhans Foods Limited, Chokha Bazar, Kalupur, Ahmedabad. In the said confirmation, Mr. Dinesh O pitolwala has confirmed that he had given following shares to the assessee as a security towards the finance provided by the assessee:-
Dinesh D Pitolwala 30,000 shares
Deepak O Pitolwala 40,000 shares
Ghanshyam O Pitolwala 50,000 shares
Harshad O. Modhia 1,00,000 shares
Kishorare O Modhia 1,00,000 shares
Puja D. pitolwala 10,000 shares
The Ld. Counsel stated that Mr. Dinesh Pitolwala has also explained the source of purchase of above shares and given his PA No. The assessee has also submitted the duly signed acceptance on the letter head of M/s. Dindayal Associates dated 01- 01-2001 of Mrs. Dipal D Shah for the release of loan of Rs.52 lakhs and against which she has provided shares of different companies and copy of said letter has been filed by the assessee along with assessee's letter dated 24-10-2003. The Ld. IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 18 Counsel further stated that the assessee has vide letter dated 24-10-2003 submitted a letter of M/s. Gurukripa Enterprises dated 14-08-2000 showing the deals of shares given by that party against the finance provided by assessee. The assessee has also submitted the letter of M/s. Hemant Automobiles dated 16-02-2000 addressed to assessee giving 1500 shares of Glenmark phara as a security towards their due to the assessee. However, the AO without considering all the aforesaid evidences placed before him and without carrying out necessary inquiry with the concerned party proceeded to say that the assessee has not filed any contemporary evidences. In the present case, assessee has squarely established the ownership of the various shares vest with various entities / persons which were found from the possession of assessee. As regards to the observation made by the Assessing Officer as well as the CIT(A) that no hard evidence like the return filed or the books of account etc. provided to back the explanation, he stated that the books of account, tax audit reports and returns of income of the assessee are already in seizure with the Department and therefore the observation of the AO is merely misleading and the assessee has already provided adequate material evidences to the AO in the block assessment proceedings. As regards the observation of the AO that no evidences regarding the shares being sent for the transfer to the company provided by the entities or the recipient, it was submitted before us that the assessee has already provided the name of party, address, PAN No., number of shares held by respective party to the AO vide letter dated 09-09-2003. However, till the date of passing the assessment order, neither the AO has made any inquiry with the concerned parties, nor called for any further details from the assessee. According to the Ld. Counsel for the assessee the AO has totally failed to discharge his onus and made the arbitrary addition without any basis. As regards the observation of AO that no contemporary evidences justifying the custody of shares with the assessee were produced in respect of parties namely Shri Dinesh O. Pitolwala, Shri Hitesh Mittal, Shri J.C. Nagar who were produced before the AO, and stated that the said observation of the AO is an after-thought and without verifying the details and the explanation provided to the AO which is self-explanatory. However, after submission of the reply and confirmation of the party by the assessee, the AO has not called for any details and / or explanation from the assessee. As regards the observation of the AO that the argument of the assessee that the shares were given to provide the comfort level to the assessee does not survive in view of the fact that the assessee should have had IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 19 formal agreements with the said parties for giving finance. He further stated that the said observation of the AO is without verification of the facts available on record as the assessee has already obtained the necessary formal written letters from the parties for the finance provided to them and also as security / guarantee of finance provided to various parties, the parties have given the shares of various companies to assessee, which is quite adequate and comfortable to secure the funds given by the assessee. Therefore the observation of the AO is not based on a sound footing. As regards the observation made by the AO that most of scripts which were seized from the office premises of the Kabra Group and depository account 10090009 have been listed in the above note book which clearly indicates that these shares, in reality, belong to the members of this group and they do not belong to the persons, he stated that the said observation of the AO is totally baseless and without any cogent material evidence brought on record in the assessment proceedings.
21. The Ld. Counsel for the assessee further stated that the assessee vide his letter dated 24-10-2003 filed with the office of AO duly explained the shares seized of Rs.2,23,93,560/- while placing before him the confirmation letters of various parties, persons to whom, the said shares belong, nature of transaction. The Ld. Counsel for the assessee further stated that had the AO verified the details and explanation submitted by the assessee, he would not have made such additions. The Ld. Counsel for the assessee stated that although the AO has conducted almost eighteen (18) hearings in the case of assessee for the block assessment and even the AO has recorded the statement of assessee till 27-11-2003 i.e. just one day before passing the block assessment order which fact itself established on record the arbitrariness. He further stated that in the block assessment proceedings, the AO has not brought on record the outcome of the cross-examination done by him. As regards to the observation made by the AO that the assessee has squarely failed to discharge his onus u/s 132(4A) of the Act and various case laws relied upon by AO, the assessee stated in the present case, the assessee has already provided each and every details along with supporting evidences as and when called for by the AO. As regards the observation made by the AO that on page No.39 of the assessment order that this Note Book contains a list of shares with certain remarks. According to the Assessing Officer, some of the scripts like Zenith Infotech Ltd. Shilp Gravures Ltd. Shree Hariraj paper Mills Ltd., Share Ambeshwar paper Mills Ltd., M/s. Oceana IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 20 Software Solutions Ltd. were seized from the office premises of Kabra Goup as well as from the depository account 10090009 during the course of search proceedings and this also indicates that these shares, in reality, belong to the Members of the Kabra Group and they do not belong to other person as had contended in the written submissions, the assessee stated that the observation of the AO is without verification of the details and explanation provided by the assessee vide letter dated 24-10-2003. Along with the said letter, the confirmation / acceptance of Mrs. Dipal Shah has also been submitted from where it can be evident that the shares of Zenith Infotech Ltd., Oceana Software Solutions Ltd., were received by the assessee as security of finance provided to her. Whereas the shares of Ambeshwar Paper and Shri Hariraj paper were received by the assessee from M/s. Gurukripa Enterprises vide their letter dated 14-08-2000 was also submitted before the AO along with assessee's letter dated 24-11-2003. Therefore, according to the assessee the observation made by the Assessing Officer is totally baseless. Therefore, according to the assessee the observation of the AO is contrary to the facts of the case. As regards the 37000 shares of M/s. Moon Drugs Ltd., the assessee has explained vide his letter dated 24-10-2003 and requested the Assessing Officer to carry out the necessary inquiry and investigation with the said party as the said party is not co- operative and also provided the address of the said party. However, it is seen from Annexure-1 attached with the order that the AO has made the addition of Rs.9,37,500/- while taking into consideration the value 37000 shares which is wholly unjustified and bad in law and on a wrong footing. The AO as an Assessing Officer, has never taken any pain or bothered to carry out any inquiry and investigation wherever necessary prior to making the arbitrary additions and AO carried out any inquiry / investigation at the given address of M/s. Moon Drugs Ltd., as Assessing Authority while exercising the power conferred on him, the addition of Rs.9,37,500/- on account of shares of Moon Drugs Ltd., would have been avoided from the assessee's case.
22. On the other hand, the Ld. CIT DR, Shri Shelly Jindal argued on behalf of the Department and stated that the claim of the assessee is that these shares worth Rs.1,60,36,160/- had been received from third party as security in the business of finance from Shri Dinesh O Pitolwala, Mrs. Dipal Shah from M/s. Dindayal Associates, M/s. Gurukrupa Enterprises and M/s. Hemant Automobiles and Moon IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 21 Drugs Ltd. cannot be accepted as the assessee has not filed any evidence that these shares belongs to the above stated persons. According to him, there is no believable evidence that these shares found in physical form from the possession of the assessee do not belong to him. He stated that the AO and CIT(A) has specifically pointed out the fact that all the shares were found entered in the diary seized as Annexure-A/1 from residence and reflected therein in the names of various family members lading to the inevitable conclusion that these shares belong to family members who were possible the benamindars of the assessee himself. He categorically stated that the CIT(A) has not accepted the evidences in the form of letters from Dinesh O Pitolwala dated 25-09-2001 or from Mrs Dipal Shah date 15- 01-2001 or from Gurukrupa Enterprises dated 14-0802000 or Hemant Automobiles dated 16-08-2000, not believing as contemporary evidences. Accordingly, he supported the orders of the lower authorities on this issue.
23. We have heard the rival contentions and gone through the facts and circumstances of the case. We have also perused the case records including the block assessment order, the order of CIT(A) and the paper books filed by the assessee. We find from the facts that the assessee has already submitted the confirmations of Shri Dinesh O Pitolwala, Managing Director of Rajhans Foods Limited, Chokha Bazar, Kalupur, Ahmedabad and in the said confirmation Mr. Dinesh O pitolwala has confirmed that he had given following shares to the assessee as a security towards the finance provided by the assessee:-
Dinesh D Pitolwala 30,000 shares
Deepak O Pitolwala 40,000 shares
Ghanshyam O Pitolwala 50,000 shares
Harshad O. Modhia 1,00,000 shares
Kishorare O Modhia 1,00,000 shares
Puja D. pitolwala 10,000 shares
It was also explained before us that Shri Dinesh O Pitolwala has explained the source of purchase of above shares and given his PA No. We find that the assessee has also submitted the duly signed acceptance on the letter head of M/s. Dindayal Associates dated 01-01-2001 of Mrs. Dipal D Shah for the release of loan of Rs.52 lakhs and against which she has provided shares of different companies and copy of said letter has been filed by the assessee along with assessee's letter dated 24-10- 2003. We further find that the assessee has vide letter dated 24-10-2003 submitted IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 22 a letter of M/s. Gurukripa Enterprises dated 14-08-2000 showing the details of shares given by that party against the finance provided by assessee and also the assessee submitted the letter of M/s. Hemant Automobiles dated 16-02-2000 addressed to assessee giving 1500 shares of Glenmark phara as a security towards their due to the assessee. We find that the lower authorities including the CIT(A) as well as the AO without considering all the aforesaid evidences placed before them and without carrying out necessary inquiry with the concerned party proceeded to say that the assessee has not filed any contemporary evidences. In the present case, assessee has squarely established the ownership of the various shares vest with various entities / persons which were found from the possession of assessee. As regards to the observation made by the Assessing Officer as well as the CIT(A) that no hard evidence like the return filed or the books of account etc. provided to back the explanation, he stated that the books of account, tax audit reports and returns of income of the assessee are already in seizure with the Department and therefore the observation of the AO is merely misleading and the assessee has already provided adequate material evidences to the AO in the block assessment proceedings. We find that the assessee in the Paper Book filed before us has filed the name of party, address, PAN No., number of shares held by respective party, which have already been filed before the AO vide letter dated 09-09-2003. We find that till date of the passing of the block assessment order and the appellate order, neither the AO nor CIT(A) has made any inquiry with the concerned parties, nor called for any further details from the assessee. We find that the assessee the AO has totally failed to discharge his onus and made the arbitrary addition without any basis. As regards the observation of AO that no contemporary evidences justifying the custody of shares with the assessee were produced in respect of parties namely Shri Dinesh O. Pitolwala, Shri Hitesh Mittal, Shri J.C. Nagar who were produced before the AO, we are of the view that the said observation of the AO is an after- thought and without verifying the details and the explanation provided to the AO which is self-explanatory. However, after submission of the reply and confirmation of the party by the assessee, the AO has not called for any details and / or explanation from the assessee. Further, we are of the view that the said observation of the AO is without verification of the facts available on record as the assessee has already obtained the necessary formal written letters from the parties for the finance provided to them and also as security / guarantee of finance provided to various parties, the IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 23 parties have given the shares of various companies to assessee, which is quite adequate and comfortable to secure the funds given by the assessee. Therefore the observation of the AO is not based on a sound footing. As regards the observation made by the AO that most of scripts which were seized from the office premises of the Kabra Group and depository account 10090009 have been listed in the above note book which clearly indicates that these shares, in reality, belong to the members of this group and they do not belong to the persons, we are of the view that the said observation of the AO is totally baseless and without any cogent material evidence brought on record in the assessment proceedings. We find that the assessee vide letter dated 24-10-2003 filed with the office of AO duly explained the shares seized of Rs.2,23,93,560/- while placing before him the confirmation letters of various parties, persons to whom, the said shares belong, nature of transaction. We are of the further view that in the block assessment proceedings, the AO has not brought on record the outcome of the cross-examination done by him. As regards to the observation made by the AO that the assessee has squarely failed to discharge his onus u/s 132(4A) of the Act and various case laws relied upon by AO, the assessee stated in the present case, that the assessee has already provided each and every details along with supporting evidences as and when called for by the AO. As regards the observation made by the AO that on page No.39 of the assessment order that this Note Book contains a list of shares with certain remarks. According to the Assessing Officer, some of the scripts like Zenith Infotech Ltd. Shilp Gravures Ltd. Shree Hariraj paper Mills Ltd., Share Ambeshwar paper Mills Ltd., M/s. Oceana Software Solutions Ltd. were seized from the office premises of Kabra Goup as well as from the depository account 10090009 during the course of search proceedings and this also indicates that these shares, in reality, belong to the Members of the Kabra Group and they do not belong to other person as had contended in the written submissions, the assessee stated that the observation of the AO is without verification of the details and explanation provided by the assessee vide letter dated 24-10-2003. We find that along with the said letter, the confirmation / acceptance of Mrs. Dipal Shah has also been submitted from where it can be evident that the shares of Zenith Infotech Ltd., Oceana Software Solutions Ltd., were received by the assessee as security of finance provided to her. Whereas the shares of Ambeshwar Paper and Shri Hariraj paper were received by the assessee from M/s. Gurukripa Enterprises vide their letter dated 14-08-2000 was also submitted before the AO IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 24 along with assessee's letter dated 24-11-2003. Therefore, the observation made by the Assessing Officer is totally baseless. Therefore, the observation of the AO is contrary to the facts of the case. As regards the 37000 shares of M/s. Moon Drugs Ltd., we find that the assessee has explained vide his letter dated 24-10-2003 and requested the Assessing Officer to carry out the necessary inquiry and investigation with the said party as the said party is not co-operative and also provided the address of the said party. However, it is seen from Annexure-1 attached with the order that the AO has made the addition of Rs.9,37,500/- while taking into consideration the value 37000 shares which is wholly unjustified and bad in law and on a wrong footing. The AO as an Assessing Officer, has never carry out any inquiry and investigation wherever necessary prior to making the additions and had the AO carried out any inquiry / investigation at the given address of M/s. Moon Drugs Ltd., as Assessing Authority while exercising the power conferred on him, the addition of Rs.9,37,500/- on account of shares of Moon Drugs Ltd., would have been avoided from the assessee's case.
24. In view of the above facts and circumstances, we are of the view that the shares belonging to the Third Parties were available with the assessee as a Collateral security for the financial transactions with the said third parties for providing loan funds to the said parties and during the course of block period assessment proceedings, the assessee has already placed before the A.O the confirmations of four parties out 5 parties which have been compiled at Page No. 98 to 102 of the paper book I. We further find from confirmations of the Parties placed before the A.O that the same have not been negated by the A.O while examining the Third Parties or bringing on record any independent clinching material and evidences. Once the confirmations submitted by the Third Parties have not been negated by the A.O, the addition cannot be made for the shares which were available with the assessee belonging to Third Parties as a security. We find that the assessee could not place the confirmation only in respect of one party namely Moon Drugs Ltd. as the said party was not co-operating with the assessee for submitting the confirmation and therefore, the name and address of the company was given to the A.O to carry out enquiry u/s. 131 of the Act with the said company in respect of assessee's claim that the shares belonging to Moon Drugs Ltd are lying with the IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 25 assessee as security but the A.O did not carry out any enquiry with the said company. In the given facts and circumstances, we are of the view that the additions cannot be sustained and this issue of the assessee's appeal is allowed.
25. The next issue in this appeal of the assessee is as regards to the order of CIT(A) confirming the addition of Rs.16,47,100/- being the shares acquired out of funds available in the fund flow statement of the assessee. For this, the assessee has raised the following ground No.II (2):-
"II. 2. The learned CIT(A) has erred in law and on facts in confirming the addition of Rs.16,47,100/- being the shares acquired out of funds available with appellant and shown in fund flow statement on the observation that there is no evidence in support of this claim which is not proved."
26. At the outset, the Ld. Counsel for the assessee requested for the telescoping the addition against the funds shown in fund flow statement as declared and now filed at pages No.208 and 209 of the assessee's paper book No.1. The Ld. CIT DR on the other hand stated that the CIT(A) has already considered the issue in para- 3.3.1. (g) & (h) as under:-
"(g) As regards the claim that the A.O. has wrongly taken contradictory stand in valuation of shares where any shares that were lowly priced in the market, face value has been adopted, while shares that were highly priced in the market, market price has been adopted, the argument given is found to be justified. When the A.O. does not have evidences that shares were originally allotted to the appellant at their face value, then unless and until date of acquisition of shares is verified, it is the market value as on date of seizure which could be alone adopted for the purpose of valuation of shares. Since cost of acquisition of shares cannot be verified in the absence of their entry in the books of accounts in any systematic manner, it is considered appropriate to hold that the market value of shares will alone be included in order to make addition for valuation of these shares as held on the date of seizure.
Therefore, wherever the market value of shares was less than Rs.10/-, the A.O. is directed to adopt the market value and not the face value of Rs.10/- unless the shares has been allotted in the name of the appellant or his family members at face value. The A.O. will calculate relief to the appellant.
(h) Regarding the claim that shares worth Rs.16,47,100/- for which admittedly no explanation was available that they too should be treated as explained out of cash flow of funds and at their cost of acquisition i.e. at Rs.8,16,342/- only, there is no evidence in support of this claim which is not proved. The addition made to this extent of Rs.16,47,100/- is confirmed with the rider that A.O. may ensure their valuation to be taken as directed in point
(g) above. "
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 26 In view of the above, the Ld. Counsel for the assessee fairly stated that if the shares are acquired out of funds shown in the fund flow statement, the same can be allowed against telescoping. He claimed that the telescoping effect against the shares identified in the cash flow statement which has been compiled at Page No. 208 & 209 of the paper book - I has already been duly considered by the assessee while filing the block period return of income and as the shares shown to have been acquired out of the cash flow statement for the block period prepared and submitted to the A.O on Page No. 208 & 209, the telescoping effect for the same is required to be given after verification by the Assessing Officer. In view of the above plea, we are of the view that the AO can verify whether the shares are acquired out of fund shown in the fund flow statement and the same can be allowed can be allowed against telescoping. In terms of the above, this issue is set aside to the file of the AO and allowed for statistical purposes.
27. The next issue in this appeal of the assessee is against the addition of unexplained investment in shares of Rs.83,171/-. For this, the assessee has raised the following ground No. II(3):-
"II.3 The Learned CIT(A) has erred in law and on facts in confirming addition of Rs.83,171/- on account of alleged unexplained investment shares on the observation that the documents found indicating shares worth this amount have not been explained by the appellant I any satisfactory manner."
28. At the outset, Ld. Counsel for the assessee has not pressed this issue, accordingly, we dismiss this issue as not pressed.
29. The next issue in this appeal of the assessee is against the addition of Rs.21,61,329/- on account of shares explained to the Search Party at the time of search. For this, the assessee has raised the following ground No. II(4):-
"II (4) The learned CIT(A) has erred in law and on facts in confirming the addition of Rs.21,61,329/- on account of shares which were already duly explained to the search party at the time of search proceedings on the observation that seizure by the search party is merely on prima facie evidence but the same needs to be examined in depth by the A.O."
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 27
30. At the outset, the Ld. Counsel for the assessee fairly stated that this addition is already included in above ground at para-17 of this order, where the addition of Rs.2,23,93,560/- is dealt with and the CIT(A) has deleted this addition by stating that this addition of Rs.50,07,805/- is double addition. For this, the CIT(A) has given finding in para-3.3.1(j) as under:-
"(j) As regards the addition made at Rs.50,07,805/- on account of the shares in the demat account, it is obvious from the explanation given vide letter dtd. 24th Oct., 2003 that the explanation was being given in toto for the total value of shares of Rs.2,23,93,560/- comprising of the value of Rs.2,02,91,460/- seized from office + of Rs.21,02,100/- which were found in the demat account. Therefore, the addition made of Rs.50,07,805/- taking market value of shares in the demat account which were of the face value of Rs.21,02,100/- only is obviously a double addition. The explanation given vide letter dtd. 24th Oct., 2003 which has been reiterated in assessment proceedings, has been considered by me in toto and evidences given on each issue contained therein and each explanation offered in my points (a) to (j) above. This addition is therefore, directed to be deleted being only a double addition."
The Ld. Counsel for the assessee as well as Ld, CIT DR fairly agreed that this addition has already been deleted by the CIT(A) being a double addition, the assessee should not have any grouse on this issue. Accordingly, this issue of the assessee has become infructuous.
31. The next issue in this appeal of the assessee is as regards to the addition of Rs.2,07,400/- made on account of cash found during the course of search by the Assessing Officer during the course of block assessment proceedings and confirmed by the CIT(A). For this, the assessee has raised the following ground No. III (1):-
"III.(1) The learned CIT(A) is erred in law and on facts in confirming the addition of Rs.2,07,400/- on account of cash found during the course of search proceedings on the observation that there is no proof that cash of the entire group was available in the hands of the appellant."
32. After hearing rival contentions and going through the case records, we find that as on the date of search, the cash found was at Rs.2,19,485/- and the assessee before the Assessing Officer during the course of block assessment proceedings stated that cash-in-hand as on 11-07-2001 was more than rs.2,07,400/- as per the extract of cash book of Shri Satyanarayan J Kabra (HUF), proprietor of M/s. S.S. Enterprises. The contention of the assessee before the A.O during the course of IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 28 block period assessment proceedings that the cash on hand as on 11/7/2001 was more than Rs.2,07,400/- and in support of the said contention the assessee stated before the A.O the Extract of cash book of Satyanarayan J. Kabra (HUF) Prop: S.S. Enterprises and the said extract has been compiled by the assessee at Page No. 36 of the paper book No. I filed before us now. Before us now it was stated that all the cash payments and receipts are through bank only and in support of the said contention, the assessee has also submitted the bank statement for verification, which has been compiled at Page No. 38 to 56 of the paper book No. I. The alternative contention of the assessee is that, in case, this contention is not accepted, then the cash found is to be given telescoping effect against the peak addition as declared by the assessee at Rs.31,70,985/-. We find that the CIT(A) has confirmed the addition without verifying the facts. As these facts were filed for the first time before the CIT(A), the assessee is directed to take these evidences before the Assessing Officer and the AO will verify the availability of cash as on the date of search in the books of account and will allow consequential relief. As regards to the telescoping against the peak addition of this cash, the AO will verify, whether the cash declared in the peak addition, the same has not been utilized. In case there is availability of cash in the peak addition, the AO will allow the relief consequently. Accordingly, this issue of the assessee's appeal is allowed for statistical purposes.
33. The next issue in this appeal of assessee is against the order of CIT(A) in confirming the addition on account of unexplained investment in FDRs amounting to Rs.2,09,500/- + Rs.35,000/- and consequential interest amounting to Rs.5,825/-. For this, the assessee has raised the following Ground No.IV 1 & 2:-
"IV. 1. The learned CIT(A) has erred in law and on facts in sustaining / confirming the addition of Rs.2,09,500/- and Rs.35,000/- on account of alleged unexplained FDRs and interest thereof on the findings that there is no proof from the cash flow statement or from Sangita Taparia in support of claim made.
2. The learned CIT(A) has also erred in law and on facts in sustaining / confirming the addition of Rs.5,824/- on account of interest calculated on FDR of Rs.35,000/- in the name of Sangita J Taparia."
34. After hearing the rival contentions and going through the case records, we find that the CIT(A) has already set aside this issue for verification by the Assessing Officer vide his appellate order para-5.3 & 5.4 as under:-
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 29 "5.3 I have considered the facts of the case and as regards FDRs of Rs.2,09,500/- & Rs.35,000/-, I do not find the arguments given to be acceptable. There is no proof from the cash flow statement or from Sangita Taparia in support of claim made and so these additions are sustained.
However, as regards remainder addition of Rs.1,74,500/-, in view of the submissions made, the A.O. is directed to verify the specific FDRs totaling Rs.1,74,500/- vis-à-vis the FDRs listed at item Nos.11 to 20 on pages 166 to 169 of Annexure A-7, and if they are found to be the same, then addition made is directed to be deleted. In as much as no other explanation is offered in regard to the addition made is directed to be deleted. In as much as no other explanation is offered in regard to the addition made by the A.O., in the event these FDRs do not match the FDRs listed at Sr.Nos.11 to 20 of annexure A-7 identified above, then the addition made would be sustained.
5.4 The interest calculated at Rs.5,824/- on FDR in the name of Sangita J.Taparia is sustained whereas interest of Rs.29,037/- to the extent it is relatable to FDRs of Rs.1,74,500/- will be deleted/sustained as per findings consequential to verification made by the A.O. as directed above. "
In view of the above facts, the Ld. Counsel for the assessee fairly stated that the CIT(A) has already set aside this issue to the file Assessing Officer and he has no grievance against the same. Accordingly, this ground of the assessee's appeal is dismissed as infructuous.
35. The next issue in this appeal of the assessee is against the order of CIT(A) confirming the addition of Rs.1,55,29,620/-. For this, the assessee has raised the following Ground V.1:-
"V.1 The learned CIT(A) has erred in law and on facts in confirming / sustaining the addition of Rs.1,55,29,620/- on account of cash available with the appellant in cash flow statements as per A.O on the observation that the appellant has no explained the individual transaction."
36. The briefly stated facts leading to the above issue are that the Assessing Officer during the course of block assessment proceedings noticed that during the course of search certain loose papers were seized and which indicated huge cash received and payments by the assessee. The following are seized documents:-
i) Annexure A-4 seized from residence of the assessee - pages 171 to 177
ii) Annexure A 7 seized from the residence -pages 144 to 150 (Except 147)
iii) Annexure A -17 seized from the office premises of the assessee - pages 68 & 69 IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 30 The Assessing Officer discussed the above seized papers which contains the details of cash received and paid by the assessee on various dates. Actual transcript of pages from annexure A-7 and discussed in the block assessment order as under:-
Annexure Page Date Description Cash Description Cash No. No. Receipt paid A-7(Res) 144 10/07/ Op.Balance 5100 Swati 100 DAT 800 Pan etc. 20 SBT Vapi CL Bank 100000 Any other 100 B.P Soni 650000 CL bank DOR A/c. 100000 Rakesh AFC 650000 145 10/7/ SXR 1000000 CBL 1000000 BTC 30000 Vapi BTC 690000 FDR's 695942 SNK old 5100 FDR's 5942 OLD RD 800 11/7/ BD(1235) 3705 SXR 1000000 (1) Day 700 Ex.. SNK 10 (3) Days 535 Pan etc. 20 do 535 BD Patel 1235000 do 535 SDK-MNA 11250 SNK Pocket 200 VNJ 253250 SXR 1235000 AFC.BP Soni 4900 MND 11250 Alpesh 253250 146 9/7/ Cash in hand - Agrawal/Rakesh 120000 7/7 6000 Self S.S SR Commission Ent.(BOR) 700000 B.B 500 Do 600000 SR/Rakesh 400000 Patel Do 200000 Vijaybhai Than 300000 Self Rakesh S.S Enterprise Patel Classic Slip 1500000 400000 Self Classic IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 31 (outside party) 600000 BTC Slip Classic 112000 AFC/KR 500000 BTC Slip 100000 SNK 112000 do 900000 SNK Classic FDR's 900984 do 2000 Self Poonam N/L Ashwin 600000 Corporation.1505
SNK Classic 311 MRP
Alpesh-Classic 32000
KJK 64000 FDR's
8000
Rakesh/AFC 30000 Vinay
35000
SNK 1000
148 10/7/ Cash in Hand 6300 Classic Bank 100000
A/c.
Self Classic 100000 KJK 100000
(BOR)
Self BTC 100000 BTC Slip 300000
(Classic) Classic
Telikaka - 125000 VKM/KJK 3500
Sarojben
Telikaka - 87500 BTC Slip 690000
Gulabben
Telikaka ( 8240 Rajesh Mehta, 1500000
Interest ) Slip
AFC/KR 300000 SNK Bank 30000
Self BTC ( 30000 Manubhai 150000
Classic ) Gurjar
do 1500000 Vinod Jain 253250
(50650 X 5)
SNK/FDR 690000 Cash in hand 10740
(Classic)
N/L Ashvinbhai 100000
NSC-RR 60450
Kabra (HUF)-
20, JS Kabra
HUF-10
SNK Pakit 30000
149 11.07. Bank Self 62000 J.K HUF 20150
OPC - 10/7 40300
150 11.07. Cash in hand 10740 S.S Enterprise, 1235000
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 32 (S.S.Enterprise Slip Classic BOR Self 1235000 SR BBY - Besto 1235000 Rakesh Patel 1235000 SR Commission 1545 ( Classic ) Self BTC 62000 SR Commission 1250 Self BTC 5000 JH Kabra HUF, 20150 NSC Slip Classic R.R Kabra HUF 40300 NSC Slip Classic SNK Bank 1550 Rakesh Patel 5000 Slip Cash in hand 7945
37. The Assessing Officer also discussed annexure A 4, and after confronting the same to the assessee, the figures were decoded, as appearing on page 171 to 177 are quoted below. These pages upto 174 contain cash flow from 01.05.2001 to 26.05.2001.
Annexure Page Date Description Cash Cash Paid No. No. Receipts A-4 171 01.05.01 Refund 500 (Residence) Rly... 40 Varun for Vapi 500 02.05.01 -- 9100 Gangotri 660000 SNK 67000 Ice cream 100 Kailash 400 Poonam 50 Gita Hurmi 300000 Manubhai 100000 JNK 12500 GDK 4000 Zen Petrol 500 Alpesh 12050 03.05.01 N.B.H 250 S.N.K 100000 04.05.01 Expenses 1200 SNK 100000 Expenses 60 05.05.01 Chunilal 100000 Vrindavan 500000 SNK 4985
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 33 SNK- Mukesh 5000 S.K. Shah 100 Deepak - KCO 100000 Mandir 100 Exp 50 SNK 400000 172 06.05.01 .... 500000 Bai 100000 .... Fees Expenses 1000 Vishal Expenses 1600 Mandir 100 07.05.01 GPIKCO Vapi MB 157130 Accountant 200000 Mandir 50 Harshad KK 3500 Poonam 100 08.05.01 Alpesh 140000 09.05.01 Alpesh 12700 S...C... 800 10.05.01 Locker Kye 910 11.05.01 Vapi SBT 200000 SNK 28000 R.K.. OCC 126735 Exps..6/5 31000 MRP 31850 Ticket..KP 2130 Raman Ring 2500 Exp. 1000 12.05.01 Vapi 3900 GDK 36100 Shailesh 1000 Expenses 115 13.05.01 Exp... 3400 173 14.05.01 Cash 3380 Vapi - Jayesh 220000 Matreshree 40000 Vapi SBT 100000 Ticket Vapi 2100 Pandit 3000 Expns. 6500 AA CL A/c. BOR 5000 15.05.01 GDK 36100 Arsi.. 93000 Do 130000 MGTL 50000 SDK 31000 SNK 93000 SNK 130000 Pandit 300 Medicine 50 IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 34 SNK AG 200000 16.05.01 Rachna Petrol 500 17.05.01 Vapi 867 Rachna Vapi 500 Vapi T... 430 18/19.5.01 SNK 15460 Sodameji 32010 Vapi 1110 Rajubhai 225000 Rajubhai 92000 Petrol 300 Swati vapi 300 Karvja & Lipi Sterling 216 Deepak KCO 150000 do 30 Exps... 1000 174 21.05.01 Deepak - KCO 150000 .... 64680 Chandla Rajesh 200 22.05.01 .... 64680 SNK 100000 SNK 50000 Deepak - KCO 100000 23.05.01 .... 14480 SNK 25000 Mani 150 Petrol 500 26.05.01 SNK 20000 Kailash/Shailesh 2000 175 13.06.01 Sachin 30000 Shreeji 50000 Vrindavan 35000 Sterling 40000 Vapi 10000 V.Prakash 120000 176 08.07.01 ... 5325 Vijay Pan 64000 177 19.02. .... 800000 26.02. .... 1000000 07.12 .... 1500000 14.03 ... 1500000 The Assessing Officer also Tran scripted pages on annexure A 17 are as under
Annexure Page Date Description Cash Cash Paid No. No. Receipts A-17 68 Opening 13186 (Office) 17.04.00 10000 IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 35 01.05.00 10000 03.06.00 10000 29.06.00 10000 22.07.00 10000 16.08.00 10000 01.09.00 10000 20.09.00 10000 11.10.00 10000 24.10.00 10000 13.11.00 10000 01.12.00 10000
15.12.01 5000 01.01.01 10000 15.01.01 5000 30.01.01 10000 08.02.01 10000 15.02.01 5000 01.03.01 10000 16.03.01 10000 Total cash 198186 Total expenses 191554 Closing Balance 6632 69 09.07.01 Self SS Ent.(BOR) 700000 Self SS Ent.(BOR) 600000 Self Rakesh Patel/SS 400000 Ent.
Self OPC -25, LTC- 300000
10,KK-25, PC-10+D8
KR-5,KA-25,BTC-200
Self SS Ent.(BOR) 200000
Self AFC/KR 500000
Self BTC Classic 300000
SR Commission 500
SR Rakesh Patel/SS 400000
Harubhai Ticket 2500
Than Account - 300000
Angadia
SS Enterprise (Classic) 1500000
slip
Classic Bank 10000
38. From the above the AO noted that it is very clear that assessee was receiving huge cash and giving the same to various parties whose names are mentioned against the amount. Most of the names are not written full. Considering the above, assessee was issued a show cause notice on 3.7.2003, 29.10.03 and 19.11.2003 to IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 36 explain these cash transaction and to show where these were reflection in the books of accounts of the assessee. The assessee accepted rough jottings and payments and receipts but requested that the principle of peak theory can be applied for determination of income by the Assessing authority and to provide the peak working to the assessee. After considering the complete seized material or the records, assessee worked out cash balance of about Rs.18 lakhs - Rs.19 lakhs and stated that peak would be approximately Rs.18 lakhs to Rs.19 lakhs and therefore no undisclosed income need to be determined. But the assessee has not given identity of persons who received/paid cash and the nature of such receipts. The AO considered the submission given by the assessee but stated that for peak working of cash investment which according to the assessee should not be more than Rs.18 to 19 lakhs for which assessee prepared unaccounted cash balance for the block period at Rs.18.72 lakhs. The AO has not accepted the working of peak of the assessee by giving following reasons as brought out in the bock assessment order :-
• "Assessee is systematically involved in unaccounted cash financing business that can be seen from the seized loose papers in annexure A 7. On 09.07.2001 , cash transaction were morethan Rs.41 lakhs. On 10.07.2001, it was Rs.31 lakhs. On 11.07.2001 it was more than Rs.25 lakhs. The notings for even these three days shows huge unaccounted cash transactions by the assessee. For the block period it can be very huge.
• The seized papers are not for the entire block period where cash transaction have been undertaken by the assessee. The papers are for less than a month that to for May,2001, one day in June,2001 and four days in July, 2001. Unless transactions details are available for continuous period with opening position of unaccounted fund/loans,peak theory cannot work. Peak is worked out were continuous accounts are available showing cash inflow and outflow. Here, only about 30 days transaction details are available for a block period of 6 years. In view of this, the working of peak cannot be applied to the isolated cash transaction of the assessee as pr seized papers.
• Assessee has been involved in cash financing/sharaffi business for the entire block period. This has been found during the search in the case of Agarwal group where more than 1.35 crores cash advancing was evidenced by the assessee to Agrawal group. The same was considered in the block assessment u/s.158BD in the case of the assessee passed in November, 2002. This is mentioned just to demonstrate the huge unaccounted cash sharaffi business undertaken by the assessee during the block period.
• Instead of identifying the parties from whom cash was received and to whom the cash was given, assessee as putting onus on the department that department has not made specific query. Admittedly all these seized papers have been given to the assessee for his reply and explanation. Even when IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 37 specific queries were made later and also in statements recorded, assessee did not give the required details.
• Instead of explaining the contents of these documents, assessee chooses to prepare the cash balance statement starting from A.Y.95-96 without any basis. Assessee kept on adding the unaccounted cash disclosed for tax in various years without giving details of utilization of such cash receipts. It is impossible to believe that cash available during 95-96 or 99-2000 was not spent or used in making payments in 2001. The whole exercise given by the assessee is without any logic or basis.
• Cash receipts as reflected in seized documents are from various persons not accounted for by the assessee and the other person. Such receipts can be of two types - revenue or capital. If the receipts are of revenue nature then without any further discussion, these are taxable in the hands of the assessee. If the receipts are by way of repayment of earlier cash loan given by the assessee then also such receipts reflect unaccounted cash loan given by the assessee and hence the same are taxable, as undisclosed income for the block period.
• The only receipt from the bank accounts of the assessee or his family members can be considered as explained since the source of such cash receipts is bank account of the assessee group.
• During the course of search, several blank signed cheques from various parties was found and seized in annexure A 56. Some of these parties are Agrawal Finance Corporation(AFC), B J Associates, Rakesh Patel, Larsen Color Chem, Balaji Traders< Arcare Developers, Dharmendra Patel and Dinesh Modi, Milan Patel, Sukh Electromech, Falcon Electronics, H J Modi, S Y P Agro Food Ltd., etc. These blank signed cheques are generally taken for such kind of cash financing. Some of the names appearing in these papers such as A F C , Rakesh, B T C and Bestow are appearing in the cash flow statement also which means the blank signed cheques are received by the assessee against the security of the unaccounted cash loans.
• From the above, it is very clear that the seized documents referred earlier are reflecting unaccounted cash transactions by the assessee and the total unaccounted investment in cash loan/receipts cannot be worked out by peak method. Further, assessee's un disclosed cash income for the block period also cannot be considered against the cash receipts details as per available in the seized papers for less than one month. Considering this, the assessee's submission is found to be unacceptable and repayment of cash loan and cash receipts reflected in these papers are considered as undisclosed income of the assessee for the block period which is worked out in the next para.
5.8. The working of Undisclosed income from cash loan/cash flow:-
In working out the income, the following factors have been taken into account. IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 38 • Cash payments are generally out of cash receipts and as such their sources are explained out of cash receipts therefore no separate additions of cash payments are being made except one discussed in next para.
• Wherever cash receipts are from the withdrawal of assessee's bank account or from the bank account of the assessee's family members, source is explained at the hands of the assessee and no addition for the same is made.
• Para 69 of annexure A-17 contains entries similar to those are on page 146 of annexure A-7 therefore, the same are not again considered.
Based on the above criteria, the unaccounted income as reflected in various papers are worked out as under :-
Annexure Page Date Description Cash receipt
No. No. description
A-7(Res) 144 10.07. Bank 100000
B P Soni 650000
145 10.07. SXR 1000000
BTC 30000
FDR's 695942
FDR's 5942
11.07 BD(1235) 3705
SXR 1235000
MND 11250
Alpesh 253250
146 09.07. Patel 400000
Self Classic (Several 600000
outside parties)
AFC?KR 500000
Rakesh/AFC 30000
148 10.07. Self BTC(Classic) 100000
Telikaka-Sarojben 125000
Telikaka-Gulabben 87500
Telikaka (Interest) 8240
AFC/KR 300000
Self BTC (Classic) 30000
-do- 1500000
N/L 100000
150 11.07. Self Rakesh Patel 1235000
(Classic)
Self BTC 62000
Self BTC 5000
A-4(Res) 171 02.05. Gangotri 660000
05.05 Chunilal 100000
Vridavan 500000
172 06.05. - 500000
11.05 Vapi SBT 200000
173 14.05. Vapi - Jayesh 220000
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 39 18/19.05. Sodameji 32010 Vapi 1110 Rajubhai 225000 Rajubhai 92000 174 22.05. ---- 64680 23.05. ---- 14480 175 13.06. Sachin 30000 Shreeji 50000 Vrindavan 35000 Sterling 40000 Vapi 10000 V.Prakash 120000 176 08.07. ---- 5325 Vijay Pan 64000 177 19.02. ---- 800000 26.02. ---- 1000000 A-17 68 17.04 to Cash received 198186 16.03.01 Total 14029620 Accordingly, the Assessing Officer stated that the payment is not explained by cash receipt and therefore separate addition is made for this unaccounted payment of Rs. 15 Lakh apart from the main addition of Rs.1,40,29,620/-. Aggrieved, the assessee preferred appeal before CIT(A).
39. But the CIT(A) also rejected the plea of the assessee by giving following findings in para-6.3 of his appellate order:-
"6.3 I have carefully considered the facts of the case and the submissions made. I find that the A.O. had given specific show cause to the appellant to explain the nature of the various entries and had at one time proposed addition based on peak theory method. However, the appellant obviously found the same to be favourable and therefore, chose to give no explanation as is patently clear from the assessment order as well as the statement of the facts, on the alleged reason that specific enquiries had not been raised. It is not for the A.O. to identify each item from the various pages that have been given to the appellant for them to be explained in assessment proceedings, but it is for the appellant to explain the nature of the entries. I also find myself in agreement with the finding of the A.O. that cash flow statement given by the appellant is not reliable nor is it at all based on any logic since it only takes into accounts receipts without accounting for the expenditures over the time period. I also find myself in agreement with the A.O.'s finding that the solitary transactions identified on seized sheets and which are themselves of very substantial amounts, that for them, unless and until there is a sufficient time period to justify consideration of rotation of funds, the separate transactions will have to be taken individually into consideration and without any satisfactory explanation regarding the source thereof, the addition made by IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 40 the A.O. would be justified. It has not been proved with evidence by the appellant that there is any manner of multiple counting of the same sums. This would be proved only if appellant explained the individual transactions but no such attempt has been made and it is obvious from the appellant's dealing in shares that there are large sums of money which are unaccounted and which are being invested in several manners of financial transactions. Therefore, the various case laws cited by the appellant are not of much assistance to the appellant as the facts in present case are distinguishable in that they reflect some solitary transactions and not a situation where funds are being rotated over a length of time. The A.O. has separately explained his reason for making addition of Rs.15 lacs over and above Rs.1,40,29,620/- being the single transaction of expenditure not explained by the available cash. The appellant has not explained this individual transaction also. In short, I do not find any justification to disturb the finding of the A.O. which is sustained and ground of appeal no.4 is rejected. "
40. Aggrieved against the action of the CIT(A) confirming the addition, the assessee came in second appeal before us. Before us, the Ld. Counsel for the assessee submitted that the A.O as well as the CIT(A) has not applied the peak theory only for the reason that the particulars for the entire block period were not available and its only for the limited period which cannot be the ground for not applying the peak theory. According to him, the judicial pronouncements of the Hon'ble Supreme Court and various High Courts clearly recognized the principle of peak theory and whenever there is a rotation of cash funds, the peak theory principles should be applied and in the present case, the reason given by the A.O for not applying the peak theory is not at all justified. Now before us the Ld. Counsel for the assessee placed on record the working as per the peak theory and as per the said peak theory working. We confronted the working of peak as computed by the assessee to the Ld. CIT DR. He requested that let this be examined by the Assessing Officer. He agreed in principle that to the rotational transaction of cash, peak theory can be applied. On this, the Ld. Counsel for the assessee suggested that let this peak working be verified by an independent Chartered Accountant as appointed by the Bench. Subsequently referred the matter to Shah Kantilal & Co., Chartered Accountant, who verified the peak addition and certified from the loose papers as referred in the block assessment order, the relevant peak addition as certified reads as under:-
[G SHAH KANTILAL CHARTERED ACCOUNTANTS 804, SARAP Opp. Navjivan Press, Nr. Gujarat Vidhyapith. Ashram Ahmedabad-380 014.
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 41 Tele 27543499, 30082644 Fax (079) 27541469 email: [email protected] [email protected] TO WHOMSOVER IT MAY CONCERN
1. I have verified the following documents of Satyanaryan J. Kabra residing at T-4A, Shantinagar Society, Usmanpura, Ahmedabad:(i). Loose Paper Page No. 171 to 177 of Annexure A14 and Page 144 to 150 (Except Page No. 147 ) of Annexure A/7 found and seized by the Income tax department during the course of search proceedings u/s. 132 of the Income Tax Act, 1961 on 12-7-2001 from the residential premises of Shri Satyanaryan J. Kabra.
(ii). Assessment order passed by ACIT, Central Circle 1(4), Ahmedabad u/s. 158BC of the l.T.Act, 1961 dated 28-11-2003 for the Block period 1.4.1995 to 12.7.2001 in the case of Shri Satyanaryan J. Kabra.
2. This is to certify that peak balance on the basis of aforesaid loose papers comes to Rs. 3170985/- and working of which is attached herewith as per Exhibit-I. The aforesaid certificate is given on the basis of aforesaid seized loose papers produced before me for my verification, assessment order passed by the ACIT, Central Circle 1(4), Ahmedabad dated 28-11-2003 produced before me as well as other explanations given to me. There are certain figures which are in coded form which are taken as explained by Shri Satyanaryan J. Kabra. For, M/s. Shah Kantilal & Co., Chartered Accountants, Place: Ahmedabad.
Date : 25-08-2009 'sh K. Shah) Partner End: As above.
EXHIBIT-I SATYANARAYAN J KABRA (Block period 1-4-95 to 12-7-2001) Peak Balance of Page No.171 to 177 of Annexure A-4 and Page No.144 To 150 (Except Page 147) of Annexure A-7 DATE PARTICULAR OPENING RECEIPTS PAYMENTS CLOSING Rs. Rs. Rs. Rs.
07/12/2000 PAGE NO 177 0 15000 -15000 19/02/2001 PAGE NO 177 -15000 800000 0 785000 26/02/2001 PAGE NO 177 1785000 0 15000 1770000 01/05/2001 PAGE NO 171 1770000 0 500 40 500 1770000 0 1040 1768960 02/05/2001 PAGE NO 171 1768960 9100 100 660000 400 67000 50 300000 100000 12500 4000 500 12050 TOTAL 1768960 736100 429600 2075460
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 42 03/05/2001 PAGE NO 171 2075460 0 250 100000 TOTAL 2075460 0 100250 1975210 04/05/2001 PAGE NO.171 1975210 0 1200 100000 60 TOTAL 1975210 0 101260 1873950 05/05/2001 PAGE NO.171 1873950 100000 5000 500000 100 4985 100000 400000 100 50 TOTAL 1873950 1004985 105250 2773685 06/08/2001 PAGE NO.172 2773685 500000 100000 1000 1600 100 TOTAL 2773685 500000 102700 3170985 07/05/2001 PAGE NO.172 3170985 0 157130 200000 50 3500 100 TOTAL 3170985 0 360780 2810205 08/05/2001 PAGE NO.172 2810205 0 140000 TOTAL 2810205 0 140000 2670205 09/05/2001 PAGE NO. 172 2670205 12700 0 800 TOTAL 2670205 12700 800 2672105 10/05/2001 PAGE NO. 172 2682105 0 910 TOTAL 2682105 0 910 2681195 11/05/2001 PAGE NO. 172 2681195 200000 126735 28000 31000 2130 2500 1000 TOTAL 2681185 228000 195215 2713980 12/05/2001 PAGE NO.172 2713980 0 3900 36100 1000 115 TOTAL 2713980 0 41115 2672865 13/05/2001 PAGE NO.172 2672865 0 3400 TOTAL 2672865 0 3400 2669465 14/05/2001 PAGE NO.173 2669465 3380 100000 220000 2100 40000 3000 6500 5000 TOTAL 2669465 263380 116600 2816245 IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 43 15/05/2001 PADGE NO.173 2816245 36100 31000 93000 93000 130000 130000 300 50 200000 TOTAL 2816245 309100 454350 2670995 16/05/2001 PAGE NO.173 2670995 0 500 TOTAL 2670995 0 500 2670495 17/05/2001 PAGE NO.173 2670495 867 500 TOTAL 2670495 867 930 2670432 18/05/2001 PAGE NO.173 267432 15460 300 19/05/2001 32010 300 1110 216 225000 150000 92000 30 1000 TOTAL 2670432 365580 151846 2884166 21/05/2001 PAGE NO.174 2884166 0 150000 64680 200 TOTAL 2884166 0 214880 2669286 22/05/2001 PAGE NO.174 2669286 64480 50000 100000 100000 TOTAL 2669286 164480 150000 2683766 23/05/2001 PAGE NO.174 2683766 14480 150 25000 500 TOTAL 2683766 39480 650 2722596 26/05/2001 PAGE NO.174 2722596 20000 2000 TOTAL 2722596 20000 2000 740596 13/06/2001 PAGE NO.175 2740596 30000 50000 35000 40000 10000 120000 TOTAL 2740596 285000 0 302556 08/07/2001 PAGE NO.176 305596 5325 0 64000 TOTAL 3025596 69325 0 309491 09/07/2001 146 3094921 6000 120000 700000 500 600000 400000 200000 300000 400000 1500000 IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 44 600000 112000 112000 900000 900984 2000 1505 600000 311 32000 64000 8000 30000 35000 1000 TOTAL 3094921 4115800 4109500 310121 10/07/2001 PAGE NO.144 3101221 800 100 100000 0 650000 20 100 100000 650000 10/07/2001PAGE NO.145 1000000 1000000 30000 690000 695942 5100 5942 800 10/07/2001 PAGE NO.148 6300 100000 100000 100000 100000 300000 125000 3500 87500 690000 8240 1500000 300000 30000 30000 150000 1500000 25350 690000 100000 60450 30000 TOTAL 3101221 5626074 5566970 3160325 11/07/2001 PAGE NO.145 3160325 3705 1000000 700 10 535 20 535 1235000 535 11250 200 253250 1235000 4900 IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 45 11250 2535000 11/07/2001 PAGE NO.149 62000 20150 40300 11/07/001 PAGE NO.150 1235000 1235000 1235000 135000 5000 1545 1260 20150 40300 1550 5000 7945 TOTAL 3160325 4042710 5112620 2090415 PEAK 3170985 When this certification of peak credit was referred to Ld. CIT DR, he again requested that let it be verified by the Assessing Officer and in principle, he has agreed for the peak credit. We find that this peak has been verified by an Independent Chartered Accountant from the loose papers Page No.171 to 177 of Annexure A/4 and page No.144 to 150 of Annexure A/7 found and seized by the Department during the course of search from the residential and business premises of the assessee Group. As the request made by the Ld. CIT DR, that this peak credit be verified by the Assessing Officer, at this stage, this plea cannot be accepted as the peak credit has been verified by an independent Chartered Accountant and also certified. However, in case, the Revenue feels that there is mistake in the peak credit, the same can be brought to the notice of the Bench by way of rectification application. In view of this, this issue of the assessee's appeal is partly allowed.
41. The next issue in this appeal of the assessee is against the order of CIT(A) confirming the addition made by the Assessing Officer on account of transaction with Milan Patel and Shivganga Builders Pvt. Ltd. on protective basis at Rs.1 crore. For this, the assessee has raised the following ground No.VI 1:-
"VI 1. The learned CIT(A) has erred in law and on facts in confirming / sustaining the addition of Rs.1,00,00,000/- as made by the learned A.O. on protective basis on account of transaction with Shri Milan Patel and Shivganga Builders Pvt. Ltd. on the observation that the addition made in the hands of Milan S. Patel would not explain the unrecorded transaction in appellant's case and confirming the addition in the case of appellant on substantive basis."
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 46
42. The brief facts leading to the above issue are that the Assessing Officer noticed that in the bank account of M/s. S.S. Enterprise and M/s. Krishna Corporation, there were deposits of more than Rs. 1 crore which had been received from Shri Milan S. Patel who was also the director of M/s. Shivganga Builders Pvt. Ltd which has its bank account in the Classic Co-Op. Bank Ltd. The AO further noted from the bank account of M/s.Shivganga Builders Pvt. Ltd. that an amount of Rs.60 lacs had been deposited in cash on 22-2-2001 and Rs.40 lacs had been deposited in cash on 10-5-2001 and these deposits were transferred to other concerns of Shri Milan S. Patel from where these funds transferred to the bank accounts of M/s. S.S. Enterprise and M/s. Krishna Corporation. The AO made inquire into the sources of the above cash deposits in the bank account of M/s. Shivganga Builders Pvt. Ltd and also summoned Shri Milan S. Patel and his statement u/s. 131(1A) was recorded on 13-8-2001. In this statement, Shri Milan S Patel stated that Shri Satyanarayan J. Kabra had given the above cash of Rs. 60 lacs and Rs.40 lacs which had been deposited in the bank account of Shivganga Builders Pvt. Ltd and after routing these funds through his bank accounts, cheques totaling Rs. 1 crore were given to Shri Satyanaryan J Kabra in the names of his concerns. In the above issue, the AO noted that the substantive addition has already been made in the case of Shivganga Builders Pvt. Ltd. The AO also reproduced the relevant extract from the order in the case Shivganga Builders Pvt. Ltd. Accordingly the AO made protective addition in the case of the assessee on the basis of statement of Shri Milan S Patel. Aggrieved, the assessee preferred appeal before CIT(A).
43. The CIT(A) also confirmed the action of the Assessing Officer in para-7.2 of his appellate order as under:-
"7.2 I have carefully considered the facts of the case and the submissions made. I find that the appellant has not denied the fact that the cheques to the extent of Rs.1 crore from Shivganga Builders Pvt. Ltd. had been received in his bank account. The nature of these transactions has not been explained and there is no ostensible reason why the builder would give this amount of money to the appellant unless it was to return funds taken earlier. The appellant has not made record of any such transactions in his books of accounts and therefore, his transaction with Shivganga Builders P. Ltd. to this extent has been kept outside the books of accounts. The substance of the statement of Shri Milan S. Patel regarding receipt in cash from the appellant is only a secondary issue. The main issue relates to the unrecorded transaction IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 47 for which the payment by cheques worth Rs.1 crore were received by the appellant. Hence, purpose of that transaction being not established, the A.O.'s finding support from statement of Milan S. Patel is found to be apparently justified. The addition made in hands of Milan S. Patel would not explain the unrecorded transaction in appellant's case. The addition made here is therefore held to be in order and is sustained on substantive basis and ground of appeal No.5 is rejected. "
44. Aggrieved, the assessee came in second appeal before us. Before us the Ld. Counsel for the assessee stated that the AO has already recorded the statement of Shri Milan S Patel, Director of Shivganga Builders Pvt. Ltd. wherein he has stated that the cash deposited in the bank a/c. is out the cash balance available with him as per books of account and the AO without considering the reply given by Shri Milan S Patel in his statement recorded u/s.131 of the Act made the addition of Rs.1 lakh and in spite of repeated requests by the assessee vide his letter dated 11-04-2003 and 25-08-2003 to provide the copy of statement recorded of Shri Milan S Patel to the assessee and the opportunity of cross-examination of Shri Milan S Patel, however, the AO without granting the copy of statement of Shri Milan S Patel as well as the opportunity of cross-examination of Shri Milan S Patel whose statement has been used against the assessee made the addition of Rs.1 crore on protective basis in the case of assessee which is wholly unjustified, bad in law. On the other hand, the Ld. CIT DR relied on the orders of the lower authorities.
45. We have heard the rival contentions and gone through the case records. First of all, we find that the facts of the issue as observed by the A.O. in the block assessment order that M/s. Shivganga Builders Pvt. Ltd., has its bank account in Classic Co-Op. Bank Ltd. and in the said bank account, an amount of Rs.60 Lacs was deposited in cash on 22-2-2001 and Rs.40 Lacs in cash was deposited on 10-5- 2001. We find that the A.O has also observed in the block assessment order in the case of the assessee that substantive addition has already been made in the case of Shivganga Builders Pvt. Ltd. and the relevant extract of the order of Shivganga Builders Pvt. Ltd. has also been quoted by the A.O in the block assessment order of the assessee. We find that the A.O for making the protective assessment in the case of the assessee relied upon the statement of Milan Patel which was recorded at the time of search proceedings in the case of Shivganga Builders Pvt. Ltd. and in the case of Milan S Patel, in the said statement stated that S.N. Kabra provided him IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 48 cash of Rs. 60 lacs and 40 lacs on different occasions which was deposited in the bank account of Shivganga Builders Pvt. Ltd. and the observations of the A.O in the block assessment order of the said Company stated that as the cash amount has been deposited in the bank account of Shivganga Builders Pvt. Ltd., the provisions of section 68 is applicable in the case of Shivganga Builders Pvt. Ltd. and once the brother of the assessee Shri Krishnavatar Kabra was interrogated on this issue by the A.O, he denied to have given any cash amount to Shivganga Builders Pvt. Ltd. and the said fact has also been observed by the A.O in the block assessment order and therefore, merely on the basis of oral statement of Milan Patel, no protective or substantive addition can be made in the case of the assessee. Once the cash has been deposited in the bank account of Shivganga Builders Pvt.Ltd, the provisions of section 68 of the Act is applicable in the case of Shivganga Builders Pvt.Ltd and the burden is on Shivganga Builders Pvt.Ltd to prove the genuineness of the transactions as per provisions of section 68 of the Act and once Shivganga Builders Pvt. Ltd and Milan Patel is not in a position to produce the confirmation of the appellant, the burden cast upon Shivganga Builders Pvt. Ltd as per provisions of section 68 has not been discharged by the assessee Shivganga Builders Pvt. Ltd and accordingly the addition can only be made in the case of Shivganga Builders Pvt. Ltd. We further find that the assessee demanded the copy of statement of Milan Patel at the time of block assessment proceedings which was not provided by the A.O and even the cross examination of Milan Patel was also demanded before the A.O as well as before the CIT (A), but the same has not been granted and therefore, no addition can be made in the case of the assessee on the basis of oral statement of Milan Patel which has not been tested by cross examination. We further find that in the search proceedings in the case of the assessee no incriminating material were found as regards to any cash amount given by the assessee to Milan Patel as alleged by him as well as the A.O has also not identified any incriminating material found in the search proceedings in the case of Shiv Ganga Builders Pvt.Ltd. except the oral statement of Shri Milan Patel which he has modified in the block assessment proceedings of the company and during the course of block assessment proceedings in the case of Shiv Ganga Builders Pvt.Ltd., Milan Patel, director of the company has given the explanation that the said cash deposited in the bank account of the company was out of cash funds available in the books of accounts of the company and the aforesaid submission made by Shiv Ganga Builders Pvt.Ltd. in their block IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 49 assessment proceedings has also been reproduced by the A.O in the block assessment of the assessee. In view of the aforesaid facts, we are of the view that no addition can be made in the case of the assessee in respect of cash amount deposited in the bank account of Shiv Ganga Builders Pvt. Ltd either on substantive or protective basis. This issue of the assessee's appeal is allowed.
46. The next issue in this appeal of assessee is against the order of CIT(A) in confirming the addition of Rs.75 lakhs on account of transaction with M/s. Swarshilp Properties. For this, the assessee has raised the following Ground No.VII 1:-
"VII. 1. The learned CIT(A) has erred in law and on facts in sustaining / confirming the addition of Rs.75,00,000/- as made by the learned A.O on account of transaction with M/s. Swarshilp Properties on the observation that it is clear that appellant has given such loan which is not recorded in the books of account."
47. The briefly stated facts leading to the above issue are that the Assessing Officer during the course of block assessment proceedings noted from the page No.1-53 of the loose papers filed Annexure/30 that the allotment certificates, possession letters and no due certificate issued by Swar Ship Properties Ltd. in favour of Satyanarayan Kabra for the following flats as on 25-01-2001:-
"Nandanvan II:- A-94, A-103, A-104, B-93, B-103 (6 flats) Nandanvan IV:- I-51 to I-56, I-58, I-61 to I-69, I-71 to I-79 (25 flats)"
He further noted that possession letter clearly stated that as per no due certificate issued by Swar Ship Properties Ltd., the assessee have received full cost of above flats from the members and nothing is outstanding against construction of the above flats. Accordingly, the Assessing Officer after considering the reply of the assessee in response to sow cause notice issued, made addition by giving following finding in para-7.4 of his block assessment order:-
"7.4. I have considered the submissions of the assessee and also the statement of Shri Sanjay Shah. I do not agree with them in view of the following :-
• It can be seen from the statement of Shri Sanjay Shah, that there are infirmities in them. On the statement recorded on oath on 12-10-2001, he has stated that these papers had been submitted to Shri Satyanaryan J. Kabra to IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 50 get finance to the tune of Rs. 75 lacs. However, the proposal did not materialize and also the documents were not taken back in time. This is at variance with the fact that n oath on 21.11.2003 it has been stated by Sanjay Shah that these documents were kept with Shri Satyanaryan Kabra, to obtain sharafi finances and that the regular transactions are going on.
• It can also seen that if the people had been living in these flats since 1999 as contended by Sanjay Shah Director, Swarshilp Properties, then the security is not out of the stock in trade of flats.
• In such kind of sarafi loan transactions documents narrated above are handed over by the person taking finance to the financer and loan amount is taken. Here giving security papers is established from seized papers but the other side of transaction is not on record, which means that the finance given against security papers is not accounted for in books. In short the unaccounted loan has been exchanged. The amount is Rs. 75 lakhs as admitted by both sides.
• It is impossible to presume that borrower has given security and not obtained loan. Even after this he allowed security by way of documents with the financer. The only presumption u/s. 132(4A) can be that the other side of transaction is also complete but not recorded in books of accounts.
• From the statement of Shri Sanjay Shah, it can be seen that he was so desperate for getting finance from S.N. Kabra that he even signed the documents fro properties not owned by him. He knows that he committed forgery by doing this. If transaction had not materialized, he would have immediately taken such papers back, which could have harsh criminal liability on him.
• Vide submission on 9.9.2003 and 24.11.2003, the assessee had tried to camouflage the transaction by saying that the finance of Rs. 75 lacs was taken in the month of January, 2001. However, it is very interesting to note that the transaction has got squared up in the month of March, 2001 itself. In view of the above discussion where it has been pointed out that Shri Sanjay Shah has himself admitted that criminal liability has been fastened on him for giving the legal documents like allotment letter, possession certificate and no due certificate, then it is unlikely that a person would keep the said paper with Shri Satyanarayan Kabra for more than four months after the transactions have been squared up. In fact, knowing fully well that this is a forgery, Shri Sanjay Shah would have immediately taken back such important legal documents from Shri Satyanarayan Kabra.
• It should be mentioned here that the said amount is also not of Rs. 75 lacs but two cheques of Rs. 33,00,000/- & 42.30 lacs have been drawn on different dates i.e. 8.1.2001 & 9.1.2001 respectively. The loans taken from the S.S. IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 51 Enterprises were admittedly not against the 31 properties document prepared in the name of the S.N. Kabra as per the statement of Shri Sanjay Shah.
• The argument of the assessee also does not survive as Shri Sanjay Shah during his statements has maintained consistently that no finance was taken on the said Nandanvan-II & IV flats. On the basis of Shri Sanjay Shah's statement how can assessee link the loans given by the S.S. Enterprises in Jan 2001 with these properties. The loan transaction against these properties was all together different and the assessee had not accounted for the same in the books.
• The contention of the assessee that the loans are reflected in the books of S.S. Enterprise, Proprietor S.N. Kabra, HUF is a ruse to divert attention from the fact that unaccounted transaction has been taken place between the assessee and Swarshilp properties Ltd. From perusal of the possession letter, no due certificate and allotment letters, it is very clear that loan transaction has actually taken place between assessee and Swarshilp. It is very difficult to understand the fact that the loan was given by S.S. Enterprise then why would the papers would be in the name of Shri Satyanarayan Kabra. If the transactions had taken place as explained, then the documents would be in the name of S.S. Enterprise only. This directly corroborate the fact that unaccounted transaction outside the books had taken place, which would not have been possible for the revenue to find out unless these documents were seized in action u/s. 132.
• All in all it can be seen from the corroborative evidences which could have only come through the action u/s. 132 that there is an out of books loan transaction to the tune of Rs. 75.00 lacs. Assessee does not have explained source for such cash loan. Both the side of the transaction have not accounted for this.
In view of the same an amount of Rs. 75.00 Lacs is added to the total undisclosed income of the assessee.
[Addition Rs. 75,00,000]"
Aggrieved, the assessee preferred appeal before CIT(A). The CIT(A) also confirmed the addition by giving following finding in para-8.2 of his appellate order:-
"8.2 I have carefully considered the above facts, I find that in these appeal proceedings, the appellant has not stressed the claim made before A.O. that the loan of Rs.75 lacs was only at proposed stage. In as much as other arguments given now are the same as given before A.O., and since transaction is not denied, it is clear that appellant has given such a loan which is not recorded in the books of accounts. The addition made is therefore, justified and is sustained. The ground of appeal is therefore rejected. "
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 52
48. Aggrieved, assessee came in second appeal before us. Before us the Ld. Counsel for the assessee argued on this issue, that the assessee vide his letter dated 09-09-2003 has already provided the copy of account of Swar Ship Properties Ltd. from the books of S.S. Enterprises, Props. S.J. Kabra (HUF) and it was stated by him that the assessee has provided the loan of Rs.75 lakhs in the month of January, 2001 and against which as a security of the loan amount was demanded from the party in the shape of allotment letters, possession letters and no due certificates. Accordingly, the Ld. Counsel for the assessee stated that even when the papers of Nandanvan II & IV were handed over to the assessee, the construction of said flats were not completed and the same was completed in the year 2002 and this fact has also been admitted by Shri Sanjay Shah in his statement recorded on 20- 11-2003 by the Assessing Officer. That the fact of allotment letters, possession letters, as well as no due certificates were a negative lien / charge, keeping in view the fact that in the event of failure on the part of M/s. SwarShilp Properties Ltd. to repay the loan amount to assessee, the assessee can use the said papers for taking criminal action against Swarshilp Properties Ltd. in judicial court. He further stated that the entire statement of Shri Sanjay Shah, Director of Swarshilp properties Ltd. dated 20-11-2003 is in favour of the assessee. The AO and the CIT(A) both failed to grant opportunity to cross-examine the borrower, Shri Sanjay Shah, Director of Sharshilp Properties Ltd., whose statement has been relied upon for making addition of undisclosed income in the block assessment. In view of these arguments, the Ld. Counsel for the assessee urged the Bench to delete the addition. On the other hand, the Ld. CIT, DR relied on the orders of the lower authorities.
49. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the papers as regards to Flats in Nandanvan - I & Nandanvan - IV Schemes developed by Swarshilp Properties Ltd which were lying with the assessee as a security for the loan funds given to the said company by account payee cheques and duly reflected in the books of account. We further find that the assessee gave two cheques of Rs.33 Lacs and Rs. 42.30 lacs for giving loan funds on different dates respectively and as regards to the loan given by cheque from the bank account has also been accepted by the A.O in the block assessment order as he has also narrated that two cheques were given by M/s. S.S. Enterprises, a proprietary concern belonging to the assessee. We find that Shri IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 53 Sanjay Shah, Director of Swarshilp Properties Ltd in his statement no where admitted that any cash loan has been received by the company from the assessee and has also not accepted the cash loan funds of Rs. 75 lacs has been given to Swarshilp Properties Ltd. and no incriminating material as regards to alleged cash loan funds given to Swarshilp Properties Ltd. was found in the search proceedings. We further find that during the course of block assessment proceedings, the assessee demanded the cross examination of Shri Sanjay Shah whose statement was relied upon by the A.O, but the opportunity of cross examination has not been granted and in the appellate proceedings, the assessee requested the CIT(A) for the opportunity of cross examination of Shri Sanjay Shah, but the same has not been provided to. We find from the records that a letter dated 24-11-2003 addressed to the A.O which has been compiled in the Paper Book at Page No.189 and the relevant page is at Page No. 202 wherein the assessee has requested the A.O for granting the opportunity of cross examination of Sanjay Shah which has not been provided by the A.O. Similarly, the opportunity of cross examination of Shri Sanjay Shah was also demanded before the CIT (A) in the appellate proceedings and our attention was invited to the assessee's submission before the CIT (A) which has been compiled at Page No. 344 of Paper Book No. III and the relevant Page No. 345 in which the request to the CIT (A) to provide the opportunity of cross examination of Shri Sanjay Shah Director of Swar Shilp Properties Ltd. The opportunity of cross examination has not been provided by the A.O as well as by the CIT (A). In view of the above facts, we are of the view that the assessee has explained that these entries have been recorded in the books of account and no incriminating materials as regards to cash loan given to Swar Shilp Properties Ltd. was found in the search, the addition made and confirmed is to be deleted. Accordingly, this issue of the assessee's appeal is allowed.
50. The next issue in this appeal of assessee is against the order of CIT(A) in confirming the addition of Rs.22,13,400/- and Rs.4,13,310/- on account of interest of alleged unacounted sharafi transaction with Shri Bipin Soni. For this, the assessee has raised the following Ground No.VIII 1:-
"VIII.1. The learned CIT(A) has erred in law and on facts in sustaining / confirming the addition of Rs.22,13,400/- and Rs.4,13,310/- being interest thereon on account of alleged unaccounted sharafi transaction with Shri Bipin IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 54 Soni as made by the learned A.O on the observation that the appellant has not discharged the onus u/s.132(4A)."
51. The briefly stated facts leading to the above issue are that the Assessing Officer during the course of block assessment proceedings noticed from the page No.152 of Annexure-A/7 seized from the office premises, which contains the notings of advances of Rs.22,13,400/- and its repayments. The AO noted the transcript of the said pages in the block assessment order and the same is being reproduced as it is:-
21 1/12/2000 113400 28/2/2001 2213400
-1500000 7/4/2001 713400 --
49150 Interest
150000 Interest
150000 Bank
Hawala
1062550
65160 7/7/2001
1127710
Bipin Soni
The Assessing Officer required the assessee to explain the contents of the same vide show cause notice issued dated 17.04.2003. The submission of the assessee was considered by the Assessing Officer and did not agree by giving the following findings:-
• "The assessee has squarely failed to discharge his onus u/s. 132(4A). The assessee was supposed to give adequate explanation with a contemporary evidences that the said entries do not belong to him and the consequence of not discharging the onus u/s. 132(4A) and the legal position thereof have been discussed in preceding additions.
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 55 • It should be noted here that during the hearing the assessee has accepted that the page belongs to Shri Bipin Soni and it was seized from his premises because it was left behind by the said person. However, from the account of Udbhav Builders & Developers Pvt.Ltd in Classic Co.Op. Bank No. 4 submitted by the assessee shows that Rs. 15 lakhs have been received as transfer by the said party. Other entries noted on paper are not reflected in the bank account mentioned by the assessee.
• In the said transaction it was submitted by the assessee that Shri Bipin Soni has received a loan of Rs. 22.13 lakhs and this is the payment schedule. This is not correct as either in the account of Bipin Soni or Vaibhav Builders & Developers, there are no entries which would reflect either deposit of the said sum in account of Shri Bipin Soni or the entries regarding the interest transaction and the hawala which are in the seized paper.
• The assessee is trying to explain the unexplainable by saying that these are independent transaction and he had no role in the same. However, the assertion of the assessee falls flat as it is very clear that this paper reflects unaccounted loan transaction of assessee with Shri Bipin Soni. It will be here safe to presume that the money has been advanced to Shri Bipin Soni and the entry in the seized paper reflect the repayment of the said money to Shri Satyanarayan Kabra.
• The corroboration of the fact that the transaction is unaccounted out of the books can be done by perusal of page 144 of Annexure A-7 seized from residence. The assessee during hearing was asked to explain the said name. Assessee orally replied that Rs. 6.5 lakhs have been received from Shri Bipin Soni. This points to the fact that these have been regular out of the books transactions with Shri S.N. Kabra.
• It should be noted that in addition to the loan which has been extended to Shri Bipin Soni out of books by Shri Satyanarayan Kabra the receipt of interest has also not been accounted for. As the receipt of interest is also not accounted for, same is being added to the undisclosed income of the assessee."
In view of the above discussion, it is very clear that the sum of Rs. 22,13,400 and interest of Rs. 4,14,310/- is unaccounted for and the same is added to the total undisclosed income of the assessee. Aggrieved against the addition, the assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of the Assessing Officer by giving following finding in para-9.2 of his appellate order:-
"9.2 I have carefully considered the facts of the case and the submissions made. I have particularly noted the fact that A.O. had pointed out with reference to page 144 of Annexure A-7, that appellant has explained Rs.6.5 lacs as received from Bipin Soni and that Rs.22.13 lacs was similarly IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 56 explained by appellant as the payment schedule of loan taken by Shri Bipin Soni. There is also no confirmation from Shri Bipin Soni to support these claims now made in appeal proceedings. Also onus u/s.132(4A) does not lie on A.O. but is to be discharged by appellant and it cannot be accepted that it has been so discharged. The bank transaction of Shri Bipin Soni is also noted as being a transfer entry and taken together with these other points, it leads to the conclusion as arrived by the A.O. that appellant had advanced loan to Shri Bipin Soni which loan was not noted in the books of accounts.
The arguments given are not weighty to lead to a different conclusion. The additions made for loan and interest are therefore, upheld and this ground of appeal is rejected. "
52. Aggrieved, against the order of CIT(A), the assessee came in second appeal before us. Before us the Ld. Counsel for the assessee stated that the assessee offered explanation vide letter dated 30-04-2003 along with necessary supporting in the form of Bank statement of M/s. Udbhave Builders & Developers Pvt. Ltd. with Classic Co-operative Bank Ltd. He further stated that the said seized paper Page No.152 of Annexure A/7 is not relating to any transaction connected with the assessee and in fact, the assessee used go to Classic Co-Op. Bank Ltd. for their work regularly and used to take interest in helping the matters of others also as a friend and in connections with bank's development, the assessee persuaded various parties to maintain balance with bank in connection with advances. According to the Ld. Counsel, the Assessing Officer as well as the CIT(A) failed to carry out any inquiry with M/s. Udbhave Builders & Developers Pvt. Ltd. to determine the real factual aspects of the case, which are that in the Xerox copy of bank statement of M/s. Udbhave Builders & Developers Pvt. Ltd. provided by the assessee to Assessing Officer. It can be evident that the said party had deposited Rs.15 lakhs on 07-04-2001 and the noting of the same is available on seized page No.152 of Annexure-A/7 and it is a fact that the handwriting appearing on seized paper is of Shri Bipin Soni. In view of these arguments, the Ld. Counsel for the assessee urged the Bench to delete the addition. On the other hand, the Ld. CIT DR relied on the orders of the lower authorities.
53. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the A.O has made the addition on the basis of Page No. 35 of Annexure A/7 and the contents of which have been reproduced by the A.O in the block assessment order in Para 8.1 on Page 32. We find from the IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 57 records that the assessee has submitted the explanation to the A.O during the course of block period assessment proceedings vide letter dated 30-4-2003 which has been complied at Page No. 35 of the paper book No. I wherein the assessee has submitted that the said page belongs to one Bipin Soni, Director of M/s. Udhbhav Builders & Developers Pvt.Ltd and the address of the said company was also provided to the A.O and in support of the contention of the assessee that the said notings are related to the company M/s. Udhbhav Builders & Developers Pvt.Ltd. and also placed before the A.O the bank statement of the said company which has been compiled at Page No. 58 & 59 of the paper book and the seized annexure Page No. 152 has been compiled at Page No. 57 of Paper Book No. I. We find that the A.O has not carried out any enquiry with the said company and its directors Bipin Soni to negate the contention of the assessee and therefore, the addition made by the A.O in the case of the assessee is merely on surmises and conjectures and the same deserves to be deleted. Accordingly, we delete the addition and this issue of the assessee's appeal is allowed.
54. The next issue in this appeal of assessee is against the order of CIT(A) in confirming the addition of Rs.75,80,000/- on account of claim of 400 applications made by Mr. Gandhi. For this, the assessee has raised the following Ground No.IX 1:-
"IX. 1. The learned CIT(A) has erred in law and on facts in sustaining / confirming the addition of Rs.75,80.,000/- as made by the learned A.O on the findings / observation that the claim of Mr. Gandhi that he made 400 applications will not disprove the actual transactions in 200 accounts."
55. The brief facts leading to the above issue are that the Assessing Officer during the course of block assessment proceedings noticed that the Classic Co.Op. Bank had financed multiple share applications in various names in public issue of Cinevesta Ltd. and it was detected that a total of 290 share applications of total value Rs. 39.15 crores were financed by the Bank. Out of these 290 share applications, 200 share applications were worth Rs. 14.7 crores each application was for 2450 number of shares of value Rs. 7,35,000 (Each share of Cinevista Ltd. has offered at face value of Rs. 10 along with a premium of Rs. 290 i.e. each share was available for Rs. 300. Thus, cost of 2450 shares was 2450 x 300 = Rs. 7,35,000/-). All these 200 share applications were made in fictitious names through accounts opened in IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 58 Classic Co.Op. Bank on the same date. For each application for 2450 shares of Cinevista Ltd., the Bank gave a loan of Rs. 7,35,000/-. Each benamidar had to deposit margin money of Rs. 36,750/- plus interest on Rs. 7,35,000 and processing charges for each application. In view of these facts, the AO issued show cause notice to the assessee stating that the total amount was transferred in the a/c. No. CD-1850 in the Classic Co-Op. Bank of M/s. Dindayal Associates amounting to Rs.1,01,48,000/- i.e. 200 share applications x 50740. The relevant show cause notice is reproduced from the block assessment order as under:-
"9.4 The assessee was show caused vide notice u/s 142(1) dated. 31.01.2003 and21.11.2003 regarding the IPO finance in the issue of the Cinevista Ltd. As follows:-
".................Inquiries conducted with the Classic Co-op Bank Ltd. Revealed that M/s.Classic Co-op. Bank had financed public issue of Cinevista Ltd. I was detected that a total of 290 share applications of total value Rs.39.15 crores were financed by the bank. Out of these 290 share applications, 200 share applications were worth Rs.14.7 crores. Each application was for 2450 number of shares of value Rs.735000/-. (Each share of cinevista Ltd. Has offered at face value of Rs.10 along with a premium of Rs.290 i.e. each share was available for Rs.300/-. Thus cost of 2450 shares was 2450*300=Rs.735000/-) From investigation, it appears that all these 200 share applications were made in fictitious names. For each application for 2450 shares of Cinevista Ltd., the bank gave a loan of Rs.735000/-. Each benamidar had to deposit margin money of Rs.36750/- plus interest on Rs.735000/- and processing charges for each application.
All the 200 bank accounts for share applications were opened on the same date. In all margin money of Rs.36750/- was deposited. After that, the bank gave a loan of Rs735000/- for each share application. All the share applications are in the same handwriting and have been made on the same date. In many cases, shares were allotted. At the end, in all 200 bank accounts, cash of Rs.13990/- was deposited in these bank accounts and in cases where shares were allotted, the value of shares was deposited in the account. After the bank recovered the loan amount, the net credit balance left at the end of transition in all these 200 bank accounts was Rs.50740/-each. In March 2000 Rs.50740/- each was transferred from them to the account no. CD-1850 in the Classic Co-op Bank of M/s. Dindayal Associates of whom you are the proprietor. The total amount transferred to above account No. is 200*50740=Rs.10148000/-.
Since M/s.Dindayal Associates is your proprietary concern, therefore, you are requested to show me the cause that why the above unaccounted income of Rs.10148000/- should not be included in the total income of the block period...................."
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 59
56. Accordingly, after considering the reply of the assessee the Assessing Officer made addition by giving following findings in para-9.6 and 9.7 of the block assessment order:-
"9.6 The submission of the assessee is carefully perused and I do not agree with the same as • All the said applications are in benami names and are obviously reflect unaccounted investment made in the names of several benami persons. I • t is interesting to note that all the bank accounts were opened on the same date in the Classic Co.op.Bank Ltd. It would not have been possible for Shri Mahesh Gandhi to undertake such huge transaction by himself. He was specifically asked how was he able to open such bank accounts in benami names on the same day without connivance and assistance from someone who had access to the bank's operation and had say in the day to day transactions. It is to be noted that assessee's brother was a director in the bank and assessee had access to all bank employees for such out of the way activities.
• It can be seen from the above transactions that Shri S.N. Kabra was in fact the person who had undertaken the transaction and Shri Mahesh Gandhi is just a ruse to divert the attention.
• Shri Mukesh Gandhi has not maintained any records of the sale of the shares. In fact Shri Gandhi has admitted that no return for the A.Y. 2000-01 onwards has been filed. In view of the same no independent verification can be made.
• The agreement produced has no legal sanctity as the same is not notarized and no cross verification independently to affirm the truth and correctness can be made. Further, the said agreement was not found/seized in search as other assessments with Mayur N. Desai were seized from assessee. Thus contemporariness of the agreement is doubtful. It is a common knowledge that old stamp papers are used by people to back date the transaction and the same cannot be ruled out here also.
• Shri Mahesh Gandhi or Shri Satyanarayan Kabra could not produce even a shred of evidence to prove that the said transactions have been taken up independently by Shri Mahesh Gandhi.
• Further, the assessee has misunderstood the concept of the examination and cross examination and the shifting of the onus to explain the evidences etc. Shri Mahesh Gandhi was produced by the assessee as his own witness. It must be made clear hear that even the latest where abouts of Shri Mahesh Gandhi were provided by Shri S.N. Kabra. Shri Gandhi was produced by the assessee as his own witness in the assessment proceeding in consequence to the query was made regarding the investments in the IPO of the Cinevista Ltd. It has to be emphasized here that the Shri Gandhi was the witness of the IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 60 assessee. The right of the cross examination rested with the revenue which was exercised and it can be clearly proved from the statement recorded of Shri Mahesh Gandhi that he is nothing but a front being used by the assessee for illegal activities of multiple share applications.
• The assertion of the assessee that there is submission from the Shri Mahesh Gandhi on the date 4th November, 2003 is quite startling. One wonders how the assessee has come to know that there has been submissions on that date along with the enclosures from Shri Mahesh Gandhi. This shows that assessee is in cahoots with the witness and in all probability the submissions and the copies of allotment letters etc have been prepared by the assessee.
From the above discussion and also on the basis of statement of Shri Gandhi recorded on 20.11.2003 (copy given to the assessee) it can be seen that assessee has done everything from opening benami accounts in bank, providing finance to them getting the money back from them and depositing Cash in that accounts, Shri Mahesh Gandhi was not able to show any evidence to link him with the whole episode of benami investment in IPO. Source of margin money and bank loans are explained, however, cash deposit in benami bank accounts and profit on sale of shares allotted in multiple application remained undisclosed. The same are considered undisclosed income of the assessee as per calculation in next para.
9.7.The undisclosed income from the above transaction is calculated as follows :-
Amount in Rs.
Unexplained Cash 52 x 43990 = 22,87,480/- 4330020
Deposited in the benami 146 x 13990 = 20,42,540/-
Bank accounts
Profit made by selling the 6500 shares * 500 per share 3250000
Shares (800-300)
Total 7580020
In view of the above detailed discussion, the above amount is added to the total undisclosed income of the assessee.
[Addition 75,80,020]"
57. Aggrieved, against the action of the Assessing Officer, the assessee preferred appeal before CIT(A). The CIT(A) confirmed the action of the AO vide para-10.2 of his appellate order as under:-
"10.2 On a very detailed and careful consideration of the facts of the case and finding of A.O. and objections of appellant, both above claims are found to be not acceptable. It is a moot point that A.O.'s findings on page 39 of assessment order that all 200 bank accounts were closed in March 2000 and Rs.50,740/- in each i.e. a total of Rs.1,01,48,000/- was transferred from them to A/c. No.CD 1850 in the Classic Co.Op.Bank Ltd. in the name of Dindayal IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 61 Associates which is admitted to be the proprietorship concern of the appellant. This fact has not been denied nor explained by appellant. It would be a totally different matter if a loan given for financing a deal is repaid, but here the remainder profits in each bank account at Rs.50,740/- have individually been transferred to appellants proprietorship concern's bank account. This shows that appellant had direct link with these 200 bank accounts. In as much as the appellant accepts to have financed Mr.Gandhi only, then these 200 accounts are of non genuine persons and taking money from them on transfer, show the appellant to be in the full knowledge of those dubious deals. Also as the beneficiary from those accounts, the deposit made in cash there earlier can also be obviously put at door of appellant himself unless disproved with evidences which are not forthcoming. The claim that Mr.Gandhi made 400 applications will not disprove the actual transactions in these 200 accounts. "
58. Aggrieved, against the confirmation of the CIT(A), the assessee preferred second appeal before us. Before us, Ld. Counsel for the assessee argued that as per the written submissions dated 23-09-2003 along with copy of agreement with Shri Mahesh Gandhi, is dealing and trading in shares and securities, public issues etc. for making the applications in public issue of Cinevista Communications Ltd. and the applications in the public issue of Cinevista Communications Ltd. were made by Shri Mahesh P Gandhi and the assessee has only provided the finance to him, who considered / took cognizance of the contents of agreement entered into between the assessee and Shri Mahesh P Gandhi. He further stated that this fact of the funds which were provided as finance to Shri Mahesh P Gandhi for making the applications in public issue of Cinevista Communications Ltd. have been returned by Shri Mahesh P Gandhi and the interest charged on the said funds have already been offered for taxation in returns filed by assessee for assessment year 2000-01 and this fact in the statement of Shri Mahesh P Gandhi, who has already admitted that he is in the business of share transaction as well as making applications in primary issue and public issue maintained since long for which he has also subject to block assessment proceedings by the Department. That fact is to be considered but the same has not been considered in spite of the fact that Shri Mahesh P Gandhi, in answer to question No.15 he has also given the details of shares allotted to him against the applications made I Cinevesta Communications Ltd. which has been subsequently sold out in grey market and while failing to consider the fact that in reply to question No.17. Shri Mahesh P Gandhi has already stated that he is having the bank statements with his bank a/c. from where the applications in Cinevesta IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 62 Communications Ltd. were made. The fact that in reply to question No.2 of statement recorded of Shri Mahsh P Gandhi, he has admitted that 200 different parties accounts have been opened in Classic Co-Op. Bank Ltd. as per his instruction which provides the copy of statement of Shri Mahesh P.Gandhi details placed by him before the Assessing Officer and also cross-examined him by the AO has already used the statement of Shri Mahesh P Gandhi against the assessee in the block assessment order for making the huge capricious addition and in calculating the profit made by selling the 6500 shares of Rs.500 per share at Rs.32,50,000 which is wholly unjustified and bad in law. In view of these arguments, the Ld. Counsel for the assessee urged the Bench to delete the addition. On the other hand, the Ld. CIT DR relied on the orders of the lower authorities.
59. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that assessee has not made any share applications in the public issue of Cine Vista Communication Ltd and during the course of search proceedings in the case of assessee no material as regards to the investment in public issue of Cine Vista Communication Ltd was found but the A.O during the course of block period assessment proceedings noticed from the bank account of the assessee that the margin money of Rs. 36750/- deposited in 200 bank accounts by transferring cheque from assessee's bank account. The A.O called for an explanation from the assessee and it was stated that the margin money loan was given to Mr. Mahesh P Gandhi as the said party wanted to make application in the public issue of Cine Vista Communication Ltd and for which specific agreement was entered into between the assessee and Mahesh P Gandhi and the same was placed before the A.O in the block assessment proceedings. The assessee was asked to produce Mr. Mahesh Gandahi for examination by the A.O and the appellant has produced Mr. Mahesh Gandhi before the A.O and the A.O has recorded his statement and in the statement, Mr. Mahesh Gandhi has admitted that he has made multiple applications in the public issue of Cine Vista Communication Ltd. from the 200 Bank accounts with the Classic Co-Op. Bank Ltd and for which the margin money funds were procured from the assessee and for which he has agreed to pay interest and agreement was entered into with the assessee. Mr. Mahesh Gandhi has also admitted that in all 400 applications in the public issue of Cine Vista Communications Ltd were made for which he obtained the loan from Classic Co-Op. IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 63 Bank Ltd. and Manek Chowk Co.Op. Bank Ltd. for depositing the margin money loan taken from Satyanarayan J. Kabra. Mr. Mahesh Gandhi also admitted in his statement that 200 different parties accounts were opened with The Classic Co.Op.Bank Ltd. as per his instruction and Mr. Mahesh S Gandhi also produced before the A.O the bank accounts, counterfoils and allotment letters in respect of public issue of Cine Vista Communication Ltd. The Ld. counsel took us through the question / answers of Mahesh Gandhi. We further find that the funds for the margin money deposit which were provided as loan to Mahesh Gandhi was already reflected in the regular bank account of the assessee for the financial year 1999- 2000 relevant to A.Y. 2000-01 and the assessee has already received back the said loan funds given to Mahesh Gandhi and also interest charged thereon has already been shown as income in the return of income for A.Y. 2000-01 which was already filed by the before the date of search and therefore, the contention taken before the A.O during the course of block period assessment proceedings is not an after thought and providing the loan funds to Mahesh Gandhi and charging interest thereon was duly reflected in the regular books of accounts of the assessee prior to the date of search. We further find that in the search proceedings in the case of assessee, no counter foils of any of the alleged applications in public issue of Cine Vista Communications Ltd., no allotment letters, no counterfoils of refund orders and even no share certificates of Cine Vista Communication Ltd against the alleged share applications were found at the time of search. In view of the aforesaid facts and merits of the case, we are of the view that the addition made by the A.O in the block period order is merely on surmises and conjectures while brushing aside the material evidences, but one fact is that the assessee has financed the multiple applications for shares and the margin money of Rs.36,750/- was financed at Rs.13,390/- to the extent of 200 applications. That means, the assessee has not disclosed the investment of Rs.13.39 lakhs, which is unexplained investment of the assessee for the block period. Accordingly, the Assessing Officer is directed to make addition of Rs.13.39 lakhs as unexplained investment in the finance of multiple applications to Shri Mahesh P Gandhi by the assessee. Accordingly, this issue of the assessee's appeal is partly.
60. The next issue in this appeal of the assessee is against the order of CIT(A) in upholding the charging of interest u/s.158BFA(1) of the Act. At the outset, Ld. IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 64 Counsel for the assessee aw well as Ld. CIT DR fairly agreed that the interest u/s.158BFA(1) can be charged from the date on which the Xerox copy of seized materials were provided to the assessee, which lead to filing of the block return. Accordingly, Assessing Officer is directed charge interest from the date on which the xerox copies were provided to the assessee, after verification of the date. This issue of the assessee's appeal is allowed as indicated above. Now coming to Revenue's appeal in IT(SS)A No.59/Ahd/2005.
61. The first issue in this appeal of the Revenue is against the order of CIT(A) in directing to Assessing Officer to delete the addition of Rs.47.98 lakhs made on account of unaccounted investment in shares.
62. After hearing the rival contentions and gong through the case records, we find that the CIT(A) has deleted the addition by stating that shares admittedly transferred in the name of family members as far back as 1st June, 1999 and 20th August, 2000 and mere finding these shares of the assessee who is in the business of dealing of shares, cannot be interpreted adversely to hold that these belong to the assessee. For this, the CIT(A) has given his findings in para-3.3.1(a) as under:-
"(a) Regarding the shares of Arihant Avenue & Credit Ltd. of Rs.47,98,000/-
and standing in the name of Shri Ramavatar Kabra, Shri Bankatlal Badrinarayan Kabra HUF, Shri Satyamsunder Badrinarayan Kabra HUF and Shri Badrinarayan Bankatlal Kabra HUF,(all the HUFs having the same office address as 3,Rajesh Appartments,Nr.Ajanta Comm.Centre, Ashram Road, Ahmedabad), the only reason given by the A.O. for making this addition is that these HUFs are either bogus or benami. There is in fact no evidence brought on record by the A.O. to support such a claim. On the contrary, it is the argument of the appellant that these HUFs have been in existence for past several years and so they exist on the records of the I.T.Deptt. also and therefore, there is no justification for the A.O.'s finding that shares standing in their names are to be included in the hands of the appellant, treating them as unexplained investment. Since the shares are admittedly transferred in the names of these persons as far back as 1st June, 1999 and 20th August, 2000, mere finding of these shares with the appellant who is a family member and relative of the various members of these HUFs and who is in the business of dealing with shares and securities, cannot be interpreted adversely to hold these as belonging to the appellant. Accordingly therefore, I do not find there to be justification in the A.O.'s queries as to why shares for dematerialization were lying in the appellant's custody or the finding that these HUFs were bogus or benami for the assessee. The addition made is therefore, directed to be deleted. "
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 65 Factually, the Revenue could not controvert the findings of CIT(A), we find no infirmity in the order and the same is upheld. This issue of the Revenue's appeal is dismissed.
63. The second issue in this appeal of the Revenue is against the order of CIT(A) in directing to Assessing Officer to delete the addition of Rs.50,07,806/- made on account of unaccounted investment in shares.
64. After hearing the rival contentions and going through the case records, we find that we have already dealt with this issue in the assessee's appeal at paras-18 to 25 of this order, where the CIT(A) has already deleted the addition by treating this addition as double addition in the total addition of Rs.2,02,91,460/-. As the issue has already been allowed in favour of the assessee, this issue of the Revenue's appeal is dismissed.
65. The next issue in this appeal of the Revenue is against the order of CIT(A) in directing the Assessing Officer to verify the claim of the assessee that the addition of Rs.28,89,200/- on account of unaccounted investment in shares was wrongly made as the AO had after due verification made the aforesaid addition in the block assessment order.
66. At the outset, the Ld. CIT DR fairly stated that the CIT(A) has already set aside this issue for verification of the Assessing Officer, hence, this issue will be examined by the AO and he has no grievance for the same. Accordingly, this issue of the Revenue's appeal is dismissed.
67. The next issue in this appeal of the Revenue is against the deletion of levy of surcharge u/s.113 of the Act. by holding that surcharge is not leviable in respect of searches conducted prior to 01-06-2002 though the proviso of Section 113 of the Act specifically provided that surcharge is leviable in the searched initiated on or after 01-04-1999.
68. At the outset, Ld. Counsel for the assessee as well as Ld. CIT DR fairly stated that the issue is squarely covered in favour of the Revenue and against the IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 66 assessee by the decision of Hon'ble Apex court in the case of CIT v. Sureshs N Gupta (2008) 297 ITR 322 (SC). Respectfully following the decision of Hon'ble Apex court, we allow this issue of the Revenue's appeal.
Coming to Revenue's appeal in IT(SS)A 306/Ahd/2004.
69. The only issue in this appeal of Revenue is against the order of CIT(A) in directing the Assessing Officer to delete the addition of Rs.38,23,606/- made on account of difference in the trial balance under the Head cheque / DD issuing and discounting charges.
70. The brief facts leading to the above issue are that the Assessing Officer during the course of block assessment proceedings notice from Page No.85-92 of Annexure A/47 seized from the office premises of assessee which contains the trial balance of the assessee as on 31-03-2001 and also further relied upon the same seized Annexure Page No.100-108 cheque / DD issuing and discounting charges account for financial year 2000-01 relevant to assessment year 2001-02 showing net credit balance of Rs.1,24,08,,462/-. The AO has compared the said pages with the ledger account on the basis of which the figures were taken to return of income and the AO has stated that there are may entries which were missing in the return filed by assessee for assessment year 2001-02 and some of the missing entries quoted by the AO are as under:-
Date Name of party Amount no shown in (Rs)
31.3.2001 Agrawal Finance Corpn. 1084900
17.9.200 H. Kumar Gems 769575
23.3.2001 Swarshilp Properties Ltd. 742120
Total 2596595
==========
The AO stated that there was a huge difference of Rs.38,23,606/- under the head of cheque / DD issuing and discounting charges and treated an amount of Rs.38,23,606/- being the difference of Rs.1,24,08,462/- - Rs.85,84,856 shown as unaccounted and added to the total undisclosed income of the assessee. For this, the Assessing Officer gave following findings in his block assessment order:-
3.3 The contentions of the assessee was perused and the same were not found acceptable because -
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 67 • The onus is on the assessee to reconcile the entries made in the books of accounts maintained in the normal course of business. As per section 158BB(1)(d), which states that where the PREVIOUS YEAR has not ended or the date of the filing of the return of income under sub section (1) of section 139 has not expired, on the basis of the entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of search or requisition relating to such PREVIOUS YEARs. The onus was totally on the assessee to explain the entries in the books of the accounts as elucidated above and/or variation thereof.
• It can be seen that a print out of the books of the accounts have been taken out from the electronic media as taken on the date of the search. The entries therein clearly suggest that the assessee has deliberately reduced the amounts in the final trial balance as submitted before the revenue department avoid paying the due taxes. On perusal of the receipts in the case of both the accounts, it is noticed that there are significant amounts, which have been altered downwards and the total amount was Rs.38,23,606.
• The defense of the assessee that there are certain entries which were done later on, does not hold good as any change has to have valid explanation supported by facts and documentary evidences.
• The only conclusion on the evidences can be that the assessee has reduced its income offered for the taxation in the return of Income for the AY 2001-02. This is relatable to the cash flow which has been worked out in the case of the Karta of assessee Shri S.N. Kabra. The assessee has in fact entered into unaccounted transactions out of book, and has received income which is unaccounted. This is pointed to the fact that the assessee has in collusion with some of its clients (which are mentioned in preceding paragraphs) doctored his accounts to avoid paying taxes. This clear from he fact that the assessee himself has submitted that accounts are finalized after DUE DISCUSSION with the clients.
• It can be seen that the individual accounts of the parties from whom the less receipts have been shown are also reduced considerably. This is clear pointer to the fact that the assessee has infact removed certain entries from the final balance with a clear motive to avoid paying taxes.
• It must also be noted that it would have been impossible to find out this evasion of income by the assessee unless an action u/s.132 was carried out.
• Entries ran over 9 pages in the account and their number is more than 300.
Such contemporary and complete entries of income cannot be ignores by just preparing another account in which some of the major entries are remove.
• Entries in seized discounting charges account have been systematically and meticulously made with minute calculations. Most of the figures are not rounded off to Tens or hundred. This clearly shows that assessee has earned IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 68 income as mentioned in the seized account. Subsequently removal of entries or change in figures can lead to the only conclusion that the balance is settled in cash out of books.
In view of the above, an amount of Rs.38,23,606 is treated unaccounted and same is added to the total undisclosed income of the assessee.
[Addition Rs. 38,23,606]
71. Aggrieved, the assessee preferred appeal before CIT(A). The CIT(A) allowed the claim of the assessee by giving following findings in para-8.4 of his appellate order:-
"8.4. I have carefully considered the observation of the Assessing Officer in the assessment order as well as the observation made in the remand report. I have also considered the appellant's contention in the statement of facts, synopsis of arguments submitted alongwith paper book and appellant's rebuttal to remand report of Assessing Officer. The supporting evidences placed in the paper book have also been verified by me with various annexures and with evidences. From verification and perusal of the details compiled in the paper book and in various Exhibits, it is evident that the A.O has mainly relied upon the figures of Rs. 1,24,08,462/- found to be noted in Annexure A-47 Page 85 to 92, which is stated to be a trial balance seized from the office premises of the appellant during the search action. The appellant has brought to my notice that the papers seized in Annexure A-47 Page 85-92, 100-102 are containing the provisional trial balance and that the cheque issuing and discounting charges account for the period 1/4/2000 to 31/3/2001 taken in April was subject to finalization. Subsequently, after the negotiation with four major parties namely (i) M/s. Agarwal Finance Corporation, (ii) H. Kumar Gems International, (iii) M/s. Swarshilp Properties Pvt.Ltd., and (iv) Woodcraft Ltd., the appellant has finalized and worked out the cheque issuing and discounting charges of Rs. 85,84,856/- and reflected the same in the balance sheet and profit and loss account for the period 1/4/2000 to 31/3/2001 which reflects the correct and true picture of cheque / DD issuing and discounting charges and to substantiate this contention, appellant has also submitted the copy of accounts from the books of the mentioned parties in the appeal hearing and pointed out that the same are tallied:-
i] M/s. Agarwal Finance Corporation, Prop: N.J. Agrawal, HUF for the period 1/4/2000 to 31/3/2001.
ii] M/s. H. Kumar Gems International (Jewellery Division) for the period 1/4/2000 to 31/3/2001.
iii] M/s. Swarshilp Properties Ltd for the period 1/4/2000 to 31/3/2001. IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 69 Similarly, alongwith the said accounts, the appellant has also furnished the copy of account of aforesaid parties from the books of appellant and in order to verify the correctness of the contention of appellant, I have cross verified the contra accounts submitted by the appellant and found it to be tallied. The appellant has also brought to my notice that the final cheque / DD issuing and discounting charges worked out by the appellant of Rs. 85,84,856/- and duly reflected in final balance sheet and profit and loss account for the period 01-04-2000 to 31-03-2001 was also found in the Computer Floppies at the time of search and the same were seized by the search party as well as the printout of the said accounts were taken by the A.O at the time of assessment proceedings and compared with the contra account of the appellant from the clients books of accounts. However, the Assessing Officer has not made any comments about the seized computer floppies containing the account of cheque / DD issuing and discounting charges. That apart it is also noticed that the Assessing Officer has not carried out any investigation or inquiry with the parties aforementioned by calling the accounts of appellant from their books of accounts to give justification to the findings given in the assessment order. The appellant has correctly relied upon the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Bharat Petroleum Corporation Ltd. (Cal.) 202 ITR 492 wherein it has been held that "An amount can accrue or arise to the appellant if the appellant acquires a legal right to receive the amount or, conversely, the said amount has become legally due to the appellant from appellant's debtor. Mere raising of a claim or bill does not create any legally enforceable right to receive the same". The Hon'ble Bombay High Court in the case of CIT vs. Nadiad Electricity Supply Co. Ltd. Bombay 80 ITR 650 held that "Sending Bills amounted merely to making a claim for the amounts mentioned in the bill, the mere sending of bills did not create a legal enforceable right in the appellant nor a corresponding legal enforceable obligation on the debtor". Similarly, the Hon'ble Delhi High Court in the case of CIT vs. Modi Rubber Ltd. 230 ITR 817 held that mere unilateral act of the appellant debiting the books of account with the amount of interest, the liability for payment whereof was not accepted or agreed to by the debtor, did not amount to accrual of income to the appellant. Having regard to the facts and circumstances of this case, I am of the view that the income did not accrue to the appellant could not be included in the hands of appellant and therefore, the addition of Rs. 38,23,606/- on account of difference in the account of cheque / DD issuing and discounting charges is deleted. "
72. After hearing the rival contentions and going through the case records, we find that the CIT(A) has given a categorical finding after going through the evidences like paper seized as Annexure-A/47 pages 85-92 and 100-102 containing the provisional trial balance, cheque issuing and discounting charges for the period 01- 04-2000 to 31-03-2001 subject to finalization. The CIT(A) noted that after negotiation with four major parties, i.e. (i) M/s. Agrwal Finance Corporation, (ii) H.Kumar Gems International (iii) M/s. Swarshulp Properties Pvt. Ltd. and (iv) Woodcraft Ltd., the assessee finalized the cheque issuing and discounting charges IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 70 at Rs.85,84,56/- and declared the same in the balance-sheet and profit and loss a/c. for the relevant period. The CIT(A) also noted that he has crossed verified the contra accounts and found tallied. Before him, the assessee brought that the cheque issuing and discounting charges for the relevant period was found in the computer floppies at the time of search and the same was seized by the search party. The print out of the said account was taken out by the AO at the time of the block assessment proceedings and compared with the contra a/c. of the assessee that with the cliental books of account. The CIT(A) noted that the AO has not made any comments of these documents and accordingly deleted the addition. The Revenue could not bring out anything against the findings of CIT(A). Accordingly, we uphold the findings of CIT(A) deleting the addition. This issue of the Revenue's appeal is dismissed.
Coming to Revenue's appeal in IT(SS)A 245/Ahd/2004.
73. The first issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of Rs.42,84,086/- made on account of undisclosed investment in shares.
74. After hearing the rival contentions and gone through the facts and circumstances of the case. We find that the CIT(A) after discussing the facts of the case has deleted the addition vide para-5 of his appellate order as under:-
"5. I have carefully considered the findings and observation of the Assessing Officer in the assessment order and the details compiled in the paper book and thereafter alongwith Synopsis of Arguments. On perusal and verification of these papers, it is seen that appellant's Proprietary concern M/s. K.K. Investments, is a sub-broker of M/s. Parklight Investments Pvt.Ltd. and M/s. H. Nyalchand Financial Services Limited and had operated one Demat Account No. 10072799 with IIT Corporate Services Ltd. for purchase and sale of shares on behalf of clients and also on his own behalf. It is also evident that during the course of search proceedings, in this Demat Account No., transactions in the name of Parties as well as on behalf of the appellant was found. From verification of details compiled in the paper book, being the letter dated 11/10/2001 sent by the Dy.DIT (Invn.) Unit 1(3), Ahmedabad, attached with synopsis of arguments dated 10/5/2004, it is seen that the DDIT in Para (1) confronted the appellant as under:-
"With respect to Demat A/c. No. 10072799 held in the name of Krishnavatar Kabra, it has been stated by you that these account is maintained for the business of sub-broking conducted by M/s. K.K. Investment of which you are IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 71 Proprietor. However, you have not furnished the names and addresses of persons whose shares are held in the demat account on the date of search (12/7/2001). The same is required to be furnished immediately"
In response to the said letter, Kabra Group vide their letter dated 18/11/2001, copy of which has been submitted alongwith synopsis of arguments, provided to the DDIT (Invn.) Unit 1(3), Ahmedabad, the name and address of persons and party code whose shares were held by the appellant. To verify the veracity and correctness of the reply of the appellant, the DDIT had issued summons u/s. 131 dtd. 20/10/2001 to one party M/s. Shree Jawalaji Securities Ltd., whose shares aggregating to Rs. 27 lacs of M/s. Vats Corporation Ltd were found during the course of search in the Demat Account. In this context, the synopsis of arguments, appellant has enclosed another letter dated 6-11- 2001 addressed to the DDIT alongwith copy of statement of Shri Vijay Prakash Goyal, Director of Shree Jawalaji Securities Pvt.Ltd. It is also evident from verification of details compiled in the paper book, which is a letter of appellant dated 13/11/2003 alongwith enclosures, that all these details were available with the Assessing Officer in the course of block period assessment proceedings. The Assessing Officer has not made any reference to the inquiry conducted by the DDIT (Invn.) Unit 1(3), Ahmedabad. Thus, I am of the view that various findings given by the Assessing Officer in the assessment order that none was produced as witness has no merit and totally distinguishable from the facts available on record. It is evident from perusal of details compiled that the appellant had also submitted before the A.O the details of shares held for and on behalf of various clients in the Demat Account No. 10072799 with IIT Corporate Services Limited, showing name of script, quantity, party code, name and address of clients, Settlement No. The contention of the appellant that the share trading transactions carried out through the principle broker M/s. Parklight Services Private Limited and M/s. H. Nyalchand Financial Services were carried out in Demat Account No. 10072799 with IIT Corporate Services Ltd. for clients as well as on behalf of appellant and all the transactions were duly reflected in the regular bank account and books of the appellant is found to be correct and is tallied from verification of contra account of principle broker M/s. Parklight Investments Pvt. Ltd from the books of account of appellant and K.K. Investments account from the books of M/s. Parklight Investments Pvt .Ltd. compiled by the appellant. It is also seen that the appellant had settled the accounts of Smt. Daxaben Sunilkumar Patel and Smt. Shilpaben P.Phophalia after the search and necessary supportings in the form of correspondence between the said parties were submitted in the paper book. It is further noticed that the appellant had also made payment of Rs33,554/- vide cheque No. 621827 and Rs13,336/- vide cheque No. 640832 dtd. 30/3/2001 respectively and thus the contention of appellant that demat account No. 10072799 with Corporate Services Ltd has been duly accounted for in the books of accounts is found to be correct and convincing. Thus, this issue is totally beyond the scope of block assessment. I have also gone through the alternate plea taken by the appellant in the submission dated 10-05-2004 and it is obvious that in a situation when the Assessing Officer proceeds to treat the shares lying in the Demat Account No. 10072799 with IIT Corporate Services Ltd., as belonging to appellant, there would be further loss required to be allowed in the case of IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 72 appellant. In the present case, keeping in view the totality of evidences and facts available on record, I hold that the Assessing Officer is not justified in making the addition by alleging that the appellant has failed to discharge the onus cast on him to explain the shares found in his demat account, hence the addition of Rs.42,84,086/- on account of unaccounted shares in Demat Account No. 10072799 with IIT Corporate Service Ltd. is deleted from block assessment."
75. We find that the assessee before the Assessing Officer stated that the assessee's proprietary concern M/s. K.K. Investments is a sub-broker of Parklight Investments Pvt. Ltd. and H. Nyalchand Financial Services Ltd. The assessee has operated one Demat A/c.No.10072799 with IIT Corporate Services Ltd. for purchase & sale of shares on behalf of the clients as well as for himself. It is evident that this Demat A/c. No. found during the course of search, wherein transaction in the name of various parties including the assessee-himself was recorded. We further find that during the course of search, the complete names and addresses of the persons and party code No., in whose name the shares were held was found. It is also a fact that one party M/s. Shree Jawalaji Securities Ltd. whose shares aggregating to Rs.27 lakhs of M/s. Vats Corporations Ltd. were found during the course of search in the Demat Account and in this context, it is gathered from the arguments that the assessee has enclosed a letter dated 06-11-2001 addressed to the DDIT along with copy of statement of Shri Vijay Prakash Goyal, Director of Shree Jawalaji Securities Pvt. Ltd. and the account of K.K. Investments from he books of Shree Jawalaji Securities Pvt. Ltd. We find from the records that these details were available at the time of framing of block assessment proceedings. We are in full agreement with the contentions of the assessee that shares trading transactions carried out through the principle broker Prklight Services Pvt. Ld. and H. Nyalchand Financial Services were carried out in Demat A/c. No.10072799 with IIT Corporate Services Lt. for clients as well as on behalf of assessee and all the transactions were duly reflected in the regular bank a/c. and books of account of the assessee, which is found to be correct and is tallied from verification of contra account of principle broker Parklight Investments Pvt. Ltd. from the books of account of assessee and K.K. Investments a/c. from the books of Parklight Investments Pvt. Ltd. compiled by the assessee. We further find that the assessee had settled the account of Smt. Daxaben Sunilkumar Patel and Smt. Shilpaben P Phophalia after the search and necessary supporting in the form of correspondence between the said parties were submitted in the paper IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 73 book and also made payment of Rs.33,554/- vide cheque No.621827 and Rs.13,336/- vid cheque No.640832 dated 30-03-2001 respectively and thus the contention of assessee that Demat account No.10072799 with IIT Corporate Services Ltd. has been duly accounted for in the books of account is correct. Accordingly, the entries recorded in the books of account cannot be the subject- matter of block assessment and the CIT(A) has rightly deleted the addition. We confirm the deletion and this issue in Revenue's appeal is dismissed.
76. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of Rs.15,44,656/- made on account of disallowance of excess loss claimed by the assessee.
77. We have heard the rival contentions and gone through the facts and circumstances of the case. The brief facts leading to the above issue are that the Assessing Officer disallowed the trading loss on shares by holding that the assessee has not explained the excess claim of trading loss and the assessee has deliberately claimed the excess loss and even the previous year has not ended or the date of filing of return for the assessment year 2001-02 has not expired and on the basis of the entries relating to such income are recorded in the books of account and other documents maintained in normal course. We find that the CIT(A) has deleted the addition by giving following findings in para-9 of his appellate order:-
"9. I have carefully considered the facts of the case, observation of the Assessing Officer and submissions of the appellant. On verification of data compiled in the paper book being trail balance of M/s. K.K. Investments [said page was seized by search party as per Page No. 62 of Annexure A-47] as well as the trading account of Television 18 Script compiled in the synopsis , it is seen that in fact the 4000 shares of Television 18 were purchased by K.K. Investments from share broker Parklight Investment Pvt.Ltd and the Xerox copy of bill of Parklight Investment Ltd. dated 17-11-2000 was also submitted by the appellant in the appeal hearing. During the appellate proceedings, the appellant has also submitted contra account of Principal Broker Parklight from the books of appellant and appellants account from the books of Parklight and the same are also in agreement. That apart these transactions are also duly reflected in the regular books of M/s. K.K. Investments. From verification of stock price list of BSE Stock Exchange, Mumbai submitted by the appellant, it is seen that the price of Television Eighteen share was Rs. 125.25 on 30th March, 2001. Thus it is ample clear that there was substantial reduction in the price of shares Television Eighteen subsequent to the purchase made by M/s. K.K. Investments. It is also seen that the appellant has also sold the shares of Television Eighteen in April, 2001 prior to the search date of and even this IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 74 entry is reflected in regular books of accounts. I have also verified the trading account of Meena S. Kathuria after removing the share transaction of Television Eighteen prepared by the appellant alongwith necessary supporting evidences and the same is in agreement with the arguments put forth by the appellant. It is thus apparent that all the relevant transactions have been recorded in regular books of accounts and prior to the date of search and the entries in trial balance have been entered in the proper form in the regular books of accounts. This fact is also proved by the fact that these shares were sold in the next assessment year and even the entry of sale is recorded in regular books of accounts and that too before the date of search. Thus, this aspect, if at all required examined, should have been examined in regular assessment only. So far as block assessment is concerned, the addition can not be sustained and is deleted."
78. After hearing the rival contentions and going through the case records, we find that the CIT(A) has categorically recorded the finding that the assessee has recorded the entire transactions in the books of account and this is the subject- matter of regular assessment and deleted the addition. We find no infirmity in the order of CIT(A) and this issue of the Revenue's appeal is dismissed. Coming to Revenue's appeal in IT(SS)A 177/Ahd/2004.
79. The first issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of Rs.2,31,400/- made on account of unexplained investment in jewellery.
80. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the Assessing Officer has made the addition of jewellery only on the basis that in the purchase vouchers produced at the block assessment stage was not matching with the description given in the seizure memo. and even the weight of jewellery was 49.2 gms., whereas in the purchase bill it was at 40 gms. As regard to number of diamonds as per the bill it was nil, whereas in the seizure memo. it was 160. In view of the discrepancies, the AO made addition. Aggrieved, the assessee preferred appeal before CIT(A). The CIT(A) deleted the addition by giving following findings in para-4.2 of his appellate order:-
"4.2 I have carefully considered the observation of the A.O. as well as the contention of the appellant in the statement of facts along with various supporting evidences submitted in paper book. From verification of the original Panchnama Annexure JF, Page No. 3, dated 12-07-2001,at item at Sr. No. 37, it is seen that this item has been mentioned as "Single Line Diamond Bangel-2, Dia 160, CTS 11, and gross weight 40.200 has been IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 75 stated. The said Panchnama Inventory has been cross verified with Page No.27of the Paper Book which is the sale Bill of Goldfinch Jewellary Ltd., wherein also Carets of Diamonds has been stated at 11.52 whereas the gross weight has been stated at 40.37. A copy of the bill which was placed before the A.O. which has been certified by the seller M/s. Goldfinch Jewellary Ltd. With the No. of Diamonds i.e. 160. Therefore, from verification of the sale bill of M/s. Goldfinch Jewellary Ltd. And inventory of Annexure to Panchnama, both items tallies and therefore , I am of the view that the Jewellary item stated in the sale bill of M/s. Goldfinch Jewellary Ltd. And inventorised in Annexure to the Panchnama is the same, which have been found during the course of search proceedings and inventorised in Panchnama at Sr. No. 37 dated 12-07-2001. Payment for the same has been made by account payee cheque. The A.O. has also not made any inquiry with M/s. Goldfinch Jewellary Ltd. to neglect the contention of the appellant. Therefore, the addition made by the Assessing Officer is not based on a sound footing, in absence of any material evidence being brought on record. In view of the facts stated above and evidences brought on record by the appellant, addition of Rs. 2, 31,400/- is deleted."
81. We find that the CIT(A) has verified the original panchnama Annexure JF, Page No. 3, dated 12-07-2001,at item at Sr. No. 37, and held that this item has been mentioned as "Single Line Diamond Bangel-2, Dia 160, CTS 11, and gross weight 40.200 has been stated. The CIT(A) further held that Panchnama Inventory has been cross verified with Page No.27of the Paper Book which is the sale Bill of Goldfinch Jewellary Ltd., wherein also Carets of Diamonds has been stated at 11.52 whereas the gross weight has been stated at 40.37. He also noted that the copy of the bill which was placed before the A.O. which has been certified by the seller M/s. Goldfinch Jewellary Ltd. With the No. of Diamonds i.e. 160 is factually correct. We find no infirmity in this finding of the CIT(A) and this issue of the Revenue's appeal is dismissed.
82. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of Rs.5.56 lakhs made on account of unexplained investment by way of fixed deposits in bank.
83. We have heard the rival contentions and gone through the facts and circumstances of the case. The brief facts leading to the above issue are that the Assessing Officer noted that during the course of search, certain loose papers filed marked Annexure A-7 was found from the residence at 7/4A Shantinagar Society Usmanpura and the details of such FDC is found on page 166 to 169 where in the IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 76 name of various persons are mentioned against there deposits. Assessee's name is mentioned "SDK" against their deposit as holder making these FDs as assessee's investment. Before the AO the assessee contended that these FDRs are out of sale of diamonds, which are declared under VDIS, 1997. The AO has not accepted the contentions of the assessee and made addition. Aggrieved, the assessee preferred appeal before CIT(A). The CIT(A) allowed the claim of the assessee by giving following findings in para-5-5 of his appellate order:-
"5.5. After carefully considering the observation made by the A.O in assessment order as well as in the remand report and the detailed submission advanced by the appellant in the synopsis of arguments and the rebuttal submission to remand report and evidences compiled in the paper Book, I am not in agreement with the observation made by the Assessing Officer that the investment in FDs in various benami names and non-existent person cannot be made in cash out of the sales proceeds of Diamonds declared in VDIS. The A.O has already assessed the long term capital gain offered by the appellant in the block period return of income while admitting the sales proceeds of Diamonds as declared by appellant and therefore, the A.O himself has admitted that the appellant has received the sales proceeds of Diamonds which were declared in the VDIS. At the same time, the A.O has not brought on record any material evidence that the cash funds avail able with the appellant from sales proceeds of Diamonds have been utilized for incurring any other expenditure. Therefore, I agree with the contention of the appellant that the cash funds available from sale proceeds of Diamonds have been utilized for making FDs with the bank in different persons names. The principles and ratio laid down by the judicial pronouncements by the Hon'ble Supreme Court and various High Courts relied upon by the appellant also justifies the view that the said cash funds available from sales proceeds of Diamonds are required to be given set off by telescoping effect with the cash funds deposited in FDs in the name of various persons by the appellant. From verification of copy of sale bill of M/s. Mahendra & Co , Bullion Merchant & Commission Agent, through whom the appellant has sold Diamonds, it is seen that the said Bullion Merchant and Commission Agent is also having Sales Tax No. dated 20/1/77 and Central Sales Tax No. dated 4/6/82 and in absence of any material evidence being brought on record by the A.O to establish that the said firm was no in existence, genuineness and existence of the said party cannot be doubted. I also agree with the contention of the appellant that no adverse inference can be drawn on the basis of the statement of wife of Late Shri Mahendrabhai Soni, Prop.of M/s. Mahendra & Co. as she had only stated that she is unable to produce any documents because of her husband's death. Thus, the addition made by the Assessing Officer is not based on any evidence and the addition of Rs. 5,56,000/- deleted."
84. We find that the CIT(A) has verified and noted that the Assessing Officer has already assessed the long term capital gains offered by the assessee in the block IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 77 assessment proceedings return of income while admitting the sales proceeds of diamonds as declared by assessee and therefore the A.O himself ha admitted that the assessee has received the sales proceeds of diamonds which were declared under VDIS, 1997. We further find that the CIT(A) has categorically recorded the factual position that the cash funds available from sale process of diamonds have been utilized for making FDRs with the bank in different persons names. Accordingly, we find no infirmity in the order of CIT(A) and this issue of Revenue's appeal is dismissed.
85. The next issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition of Rs.1.56 lakhs made on account of notings on loose papers in files marked as Annexure-4 & Annexure-7.
86. After hearing the rival contentions and gone through the facts and circumstances of the case, we find that the CIT(A) has deleted the addition by stating that in the block assessment order of Shri Satyanarayan J Kabra on page No.13 the AO has considered an amount of Rs.1.25 lakhs against the name of assessee in the case of Shri Satyanarayan J Kabra for addition in his case. Similarly, on page No.16 of the bock assessment order of Shri Satyanarayan J Kabra, as per seized page No.173 of Annexure-4 against the notings of "SDK" an amount of Rs.31,000/- is also appearing. In view of these facts, the CIT(A) deleted the addition by giving following finding in para-6.3 of his appellate order:-
"6.3. I have carefully considered the observations of the Assessing Officer in the assessment order and the contention of the appellant in the statement of facts as well as in the synopsis of arguments dated 8/1/2004. From verification of the copy of block assessment order of Shri Satyanarayan J. Kabra, on Page No. 13, it is seen that the Assessing Officer, has considered an amount of Rs. 1,25,000/- against the name of appellant in the case of Shri Satyanarayan J. Kabra for addition in his case. Similarly on Page No. 16 of the assessment order of Shri Satyanarayan J. Kabra as per seized Page No. 173 of A-4, against the notings `SDK' an amount of Rs. 31000/- is also appearing. Therefore, the contention of the appellant that the Assessing Officer has already considered the notings found to be noted in seized File A- 7 and A-4 is to be found correct. As I have already held in earlier ground of appeal that the fixed deposits placed by the appellant in different names are out of explained cash funds against the sales proceeds of Diamonds declared in VDIS-, the funds available with the appellant on maturity of FDRs also are explained and therefore, cash entries found to be noted on the seized loose paper, which have been treated by the A.O. as belonging to appellant is also IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 78 required to be treated as explained as the said notings are for the period subsequent to the maturity of the FDRs. In view of the above facts, I agree with the alternate arguments of the learned A.R. and the A.O. is directed to deleted the addition of Rs. 1,56,000/-."
We find no infirmity in the order of CIT(A) and we uphold the same. This issue of the Revenue's appeal is dismissed.
87. The next issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition of Rs.16.39 lakhs made on unexplained shares.
88. After hearing the rival contentions and gone through the facts and circumstances of the case. We find that the CIT(A) after discussing the facts of the case has deleted the addition vide para-7.4 of his appellate order as under:-
"7.4. I have carefully considered the observation of the Assessing Officer in the assessment order and in the remand report submitted through the office of Additional Commissioner of Income-tax, CR-1,Ahmedabad as well as the document compiled by the appellant in the Paper Book, arguments advanced in the synopsis of arguments dated 8/1/2004 and the rebuttal to remand report dated 16/3/2004. From scrutiny of the various documents submitted by the appellant in the paper book and along with submissions, it is seen that appellant was allotted 4987500 shares in the public issue of Minaxi Textiles Ltd. as per Allotment Advice-cum-Allotment Money note dated 13/1/1996 which bears the Distinctive Nos. from 4192101 to 4690600. With regard to the verification of the veracity of the contention of appellant that subsequently she had sold 498500 Nos. of partly paid shares of Rs. 5/- each @ Rs. 5.55 on 18/1/1996, I find that in the course of block assessment proceedings, the appellant had already provided the A.O. the Share Brokers Bill through whom she had sold out the shares and a copy of which has been compiled in the paper book also. That apart, from the sale of shares of Minaxi Textiles Ltd., the appellant has earned the profit of Rs. 2,74,175/-. and the said profit has already been considered by the appellant in computing the profit of share transaction carried out in whole year and offered in the return of income. Another fact which emerges for debate in the present case is whether the inventory prepared for the 498500 shares found during the course of search and 163900 share mentioned in the Allotment letter is one and same; From comparison of the inventory prepared for the shares found with the allotment Letter of Minaxi Textiles Ltd. compiled by the appellant, the contention of the appellant is found correct as the distinctive Nos. of shares appearing in the inventory in respect of shares of Minaxi Textiles Ltd. and the details of shares mentioned in the allotment letter of Minaxi Textiles Ltd. are matching. In the course of appeal hearing, the appellants has provided the Confirmation-cum- Declaration of Shri Hasmukh N. Shah, Prop: of Hem Enterprises, a share broker vide confirmation dated 22/1/2004. Along with the rebuttal to A.O.'s remand report, the appellant has submitted a duly sworn-in affidavit of Shri IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 79 Hasmukh N. Shah, Prop: M/s. Hem Enterprises, through whom the appellant had sold the shares of Minaxi Textiles Ltd. confirming and affirming the fact that the date on which the summons were issued to him, he was out of station and could not attend before the Assessing Officer and this fact was intimated to the Assessing Officer. He has once again affirmed in the duly sworn-in affidavit that the appellant had sold 498500 shares of Minaxi Textiles Ltd., out of which 163900 were sent back to the appellant for revalidation alongwith share transfer form and thus the said shares were lying with appellant. Besides the aforesaid facts, the value of the shares of M/s. Minaxi Textiles Ltd. as on the date of search, on the basis of details collected and submitted by the appellant from the Bombay Stock Exchange Website, is Nil. Therefore, only because Shri Hasmukh N. Shah, Prop: of Hem Enterprises, a share broker could not turn out for recording his statement as stated by the A.O. in the remand report is not a valid reason for sustaining the addition.
In view of the facts as stated above and various evidences brought on record by the appellant, I find no justification for the addition of Rs 16,39,000/- and the same is deleted."
89. We find that the assessee has filed explanation with regard to the shares vide letter dated 10-06-2003 stated that the shares of Minaxi Textiles were allotted on 13- 01-1996 and sold out the same on 18-01-1996 and the payment was made by cheque and received by cheque and also the profit on that transactions was duly reflected in return. The photo copy of allotment letter and sale bill were provided to the Assessing Officer. The reason for seizing the said shares during the course of search is due to the fact that the broker to whom the assessee had sold the shares sent back the shares to the assessee for requesting the Transfer Deeds and meanwhile the search took place where shares were found. The above share transactions have been duly reflected in the regular books of account of the assessee and in support of the same, the assessee has provided to AO a statement of shares portfolio for financial year 1995-96 for which the above transactions can be verified and the profit on sale of the said shares can also be verified from the profit & loss a/c. and balance-sheet as well as income-tax returns for assessment year 1996-
97. We further find that the CIT(A) on the same reasoning has deleted the addition, which we confirm. This issue of the Revenue's appeal is dismissed. Coming to Revenue's appeal in IT(SS)A 176/Ahd/2004. IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 80
90. The first issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of Rs.30,540/- made on account of unexplained investment in jewellery to Rs.1,100/-.
91. We have heard the rival contentions and gone through the facts and circumstances of the case, we find that the CIT(A) has deleted the addition by giving following findings in para-4.2 of his appellate order:-
"4.2 I have carefully considered the observations of the A.O as well as the contention of the appellant in the statement of facts along with various supporting evidences submitted in the paper book. From verification of the paper compiled in the Paper Book at Page No.8, being a list of jewellery identified as unaccounted by the I.T. Department. It is seen that jewellery as per I.T. Ref. JF/ISR9(GDK)& JF/ISR 12 (GDK) are being made new from old diamond and gold in May 2001 as per the bill of Khudiramdas Babu compiled at page 9 of the Paper Book for which appellant had paid labor charges of Rs.1100/-. The appellant has also compiled in the Paper Book necessary supporting evidences to establish that the appellant and her husband were having old jewellery I their possession which could be used for remarking new jewellery and the A.O has not made out a case while bringing on record any material / evidences to establish that the appellant was not having old jewellery as claimed by the appellant and the same was not covered by jewellery and diamonds declared under VDIS in the Wealth tax returns. It is also noticed hat during the course of block assessment proceedings, this explanation was already given to the A.O vide letter dated 19/6/2003 & 13/6/2003 along with Bill of Khudiram Babu. However, the A.O has not carried out any inquiry with Khudiram Babu with regard to the genuineness of appellant's contention. It is also noticed that appellant was having old ornaments and diamonds as claimed by her on the basis of VDIS declaration made by her and her husband. Thus, I do not find any substance in the observation of the A.O that at the time of search appellant ha snot given any such explanation. At the same time, the appellant has also not produced any supporting materials / evidences to establish that the labour charges of Rs.1100/- paid to Khudiramdas Babu are duly accounted for. Therefore, I held that the labour charges paid by the appellant of Rs.1100/- is undisclosed and the same is to be treated as unexplained expenditure being undisclosed income. Accordingly, the A.O is directed to make the addition of Rs.1100/- for labour charges only and the balance add is deleted."
In view of the above facts discussed by the CIT(A), we find no infirmity in the same and we confirm the deletion. This issue of the Revenue's appeal is dismissed.
92. The next issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition of Rs.93,180/- made on account of unexplained investment in jewellery.
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 81
93. We have heard the rival contentions and gone through the facts and circumstances of the case, we find that the CIT(A) has deleted the addition by giving following findings in para-5.2 of his appellate order:-
"5.2 I have carefully considered the observations of the A.O as well as the 1contention of the appellant in the statement of facts along with various supporting evidences submitted in the paper book. From verification of details compiled in the Paper Book at page No.26 and 29, it is seen that in the Wealth-tax return of Smt. Anehidevi R Kabra the item being Diamond Nose Clip CS 0.5 has already been mentioned I her Valuation Report date 25/1/94, at item 2. Similarly, with regard to the addition made by the A.O in respect of Sr. No.4 I.T. Ref. JF/2SR21, it is noticed that the observation made by the A.O that the weight of items is of Rs.11.4 grams is found correct as in the inventor of jewellary found as per Annexure JF, Page, at item No.21, the Gross weight of Dia Ear Tops 2 with Sares Dia 16 has been mentioned at 11.4. The said Panchnma inventory has been cross verified with Page No.10 of the Paper Book which is the sale Bill of Goldfinch Jewellary Ltd. Bill No. 712 dated 17/12/2000, wherein also Carets of Diamonds has been stated along with labour at 6.140 grms. It is obvious that the difference is on account of labour of 6.140 which the A.O has not taken into consideration. Therefore, from verification of the sale bill of M/s. Goldfinch Jewellary Ltd. and inventory of Annexure to the Panchnama, I am of the view that the Jewellary item stated in the sale bill of M/s. Goldfinech Jewellary Ltd. and inventorised in Annexurre to the Panchnama is the same, which have been found during the course of search proceedings and inventorised in Panchnam at Sr. No.21 dated 12-07- 2001. The A.O has also not made any inquiry with M/s. Goldfinch Jewellary Ltd. to negate the contention of the appellant the assessment proceedings. Even payment for this jewellery has been made by account payee cheque. Therefore, the addition made by the Assessing Officer is not based on sound footings. In view of the facts stated above and evidences brought on record by the appellant, addition of Rs.93,180/- is deleted."
In view of the above facts discussed by the CIT(A), we find no infirmity in the same and we confirm the deletion. This issue of the Revenue's appeal is dismissed.
94. The next issue in this appeal of the Revenue is against the order of CIT(A) in deleting the addition of Rs.91,500/- made on account of notigs on loose papers seized during the course of search as Annexure-4 and Annexure-7.
95. We have heard the rival contentions and gone through the facts and circumstances of the case, we find that the CIT(A) has deleted the addition by giving following findings in para-6.2 of his appellate order:-
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 82 "6.2 I have carefully considered the issue. From verification of bock assessment order of Shri Satyanarayan J Kabra, I find that the Assessing Officer has considered an amount of Rs.87,500/- against the name of appellant in the case of Shri Satyanarayan J Kabra on substantive basis.
Similarl on Page No.14 of the assessment order of Shri Satyanarayan Kabra, against the notings 'GDK' an amount of Rs.4,000/- is also appearing. Therefore, the contention of the appellant that the Assessing Officer has already considered the notings in that case is correct. Besides this, the funds available wit the appellant on maturity of FDRs also becomes explained funds with the appellant and therefore, the cash entries found to be noted on the seized loose paper, which have been treated by the A.O belonging to appellant is also required to be treated as explained as the said notings on the seized loose papers are for a period subsequent to the maturity of the FDRs. In view of the above facts, I agree with the alternate arguments of the learned A.R. also and the A.O is directed to delete the addition of Rs.91.500/-."
In view of the above facts discussed by the CIT(A), we find no infirmity in the same and we confirm the deletion. This issue of the Revenue's appeal is dismissed.
96. The next issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition of Rs.1,000/- made on account of unexplained investment in shares.
97. After hearing the rival contentions and gone through the facts and circumstances of the case, we find that the CIT(A) after discussing the facts of the case has deleted the addition vide para-7 of his appellate order as under:-
"7. Fourth ground of appeal relates to addition on account of investment in 1shares of Rs.1,000/- of Minaxi Textiles Ltd. The basis of this addition, arguments of the appellant, remand report of the Assessing Officer and all other facts are identical to the facts of group case Smt. Sarojdevi Kabra. In that case in appeal No. CIT(A) /Central Circle.1(4)/17/2003-04 dated 22/3/04, a detailed order has been passed. Everthing being identical, following the said order, addition of Rs.1,000/- is deleted."
In view of the above facts discussed by the CIT(A), we find no infirmity in the same and we confirm the deletion. This issue of the Revenue's appeal is dismissed.
98. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of Rs.1.29 lakhs made on account of unexplained investment by way of fixed deposits in bank.
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 83
99. We have heard the rival contentions and gone through the facts and circumstances of the case. The brief facts leading to this issue are that the Assessing Officer during the course of block assessment proceedings noted from the loose papers filed marked as Annexure-A-7 that the details of FDRs found on page No.166 to 169, wherein the name of various persons are mentioned against the deposits and assessee's name is mentioned as "GDK" against their deposit as holder making these FDRs as assessee's investment. Aggrieved, against the block assessment on this issue, the assessee preferred appeal before CIT(A). The CIT(A) deleted the addition by giving following findings in para-8 of his appellate order:-
"8. Fifth ground of appeal relates to addition on account of investment in bank fixed deposits of Rs.1,29,000/-. Acts of this addition, arguments of the ld. Authorized representative, remand report of the Assessing Officer are all identical to that of the group case Smt. Sarojdevi Kabra. In that case, it was held that once profit on sale of jewellery was taxed by the Assessing Officer in his block assessment order, funds to that extent would be available for investment in FDRs. A detailed order has been passed in that case in appeal No. CIT(A)-I/CC.1(4)/17/2003-04 dated 22/3/04. As everything is identical, following that order, addition of Rs.1,29,000/- is deleted."
We find that similar issue of FDRs has already been dealt with in IT(SS)A 177/Ahd/2004 in paras-83 to 85 of this order. The facts being exactly identical, taking a consistent view, we confirm the order of CIT(A) deleting the addition. This issue of the Revenue's appeal is dismissed.
Coming to Revenue's appeal in IT(SS)A 175/Ahd/2004.
100. The first issue in this appeal of Revenue is against the order of CIT(A) deleting the addition of Rs.3,13,520/- made on account of unexplained investment in jewellery to Rs.6,750/-.
101. We have heard the rival contentions and gone through the facts and circumstances of the case. The brief facts leading to this issue are that the Assessing Officer noted that during the course of search, the search party found gold and diamond jewellery of Rs.49,79,105/- out of which seizure of Rs.8.63 lakhs was effected in the entire group. The AO asked the assessee to explain the source of acquisition with necessary documentary evidence of following items which claimed to be belonging to the assessee during the course of search as under:-
Sr. I.T. Ref. Ref. Details of items Piece Gross Net Value IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 84 No. wt. wt.
__ ___ ____ __________ _____ ___ ___ ____
1. JF/4SR MDK diamond bangles 2 52 -- 160500
57 Dia 156, cts. 8
2. JF/4SR MDK Earning 2 in 2 -- -- 9100
3. JF/4SR KDK single in 1 9.8 8 5250
62 diamond pendant
one in gold chain
dia. 6 CTS 0.1
4. Locker MDK diamond necklace 1 -- 55.3 53 138670
Jhumka 2 ring 1
JF/2SR Dia 33, CTS 1
17
The Assessing Officer made the addition by following observation in his order as under:-
" The assessee' above contentions have been verified carefully by me together with the facts and evidence produced to above effect and on the basis of which it is mentioned that:-
I] During the course of search proceedings no evidence in respect of the above purchase was found. Therefore, whatever the bill or voucher produce at the assessment stage is a secondary evidence. Ii] Not only of evidence, but even no claim to the effect was made that these specific items are of remarks and therefore assessee's claim at this stage is unconvincing.
In view of above, it is to be stated that in absence of any material evidence, the assessee's claim goes unsubstanted and not considered here and the investment in the acquisition of the above jewellery is therefore considered unexplained and the value as on the date of the search is included in the income of block period."
We find that the assessee vide letter dated 13-06-2003 and 18-06-2003 along with chart showing explanation of each and every items of jewellery identified by the AO that the ornaments referred at Sl. No. 1 to 4 as above were made out from old ornaments and in support of the same, the assessee had already provided by the AO for necessary labour bills of remark's item. However, the AO without considering the valid explanation offered by assessee made the addition of Rs.3,13,520/- in the case of assessee The Assessing Officer has made the addition on account of jewellery on the observation that during the course of search proceedings, no evidence in respect of the above purchase was found. We find further that the search party have not come across the vouchers / bills submitted by the assessee in respect of remarks items of jewellery. In view of these facts, the CIT(A) deleted the addition by giving following findings in para-4.2 of his appellate order:-
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 85 "4.2 I have carefully considered the observations of the A.O. as well as the contention of the appellant in the statement of facts along with various supporting evidences submitted in paper book. From verification of details compiled by the appellant in the paper book at Page No.6, it is seen that the appellant has duly explained each and every item mentioned at Sr. No.1 to 5 of the assessment order along with necessary supporting bills. In respect of jewellery items mentioned at Sr. No.1, FT RefJF/4SR/57, 4, IT Ref JF/4SR/62, 4 Locker 301 & 5, IT Ref JF/2SR/17 were being made new from Old Diamond and gold in April / Ma 2001 as per the Bills of Khudiram Babu compiled at Page No.7, 8 & 9 of Paper Book. As regards the item mentioned at Sr. No.2 IT Ref. JF/4SR 58, the contention of the appellant that the said item was already declared in VDIS is found to be correct. The appellant has also compiled in the Paper Book necessary supporting evidences in the Form of Certificate U/s. 68(2) of the Voluntary Disclosure of Income Scheme, 1977 dated 13/1/1997 issued by the Commissioner of Income-tax, Gujarat-III, Ahmedabad. Valuation Report of Gold Ornaments and jewellery of appellant, wealth-tax order of appellant for A.Y. 1992-93, Xerox copy of duly paid challan of Wealth-tax as well as the wealth-tax returns and Valuation returns of family members purchase of bills of various gold ornaments and jewellery, copy of ledger for the block period to establish that the appellant and her family members were having old jewellery and diamond in their possession which cold be used for remaking new jewellery and the A.O has not made out any case while bringing on record any material evidence to establish that the appellant was no having old jewellery as claimed by the appellant. It is also noticed that during the course of block assessment proceedings, this explanation was already given to the A.O vide letter dated 13/6/2003 and 18/6/2003 along with Bills of Khudiram Babu. However, the A.O has not carried out any inquiry with Khudiram Babu with regard to the genuineness of appellant's contention. Thus I do not find any substance in the observation of the A.O that at the time of search, no evidence in respect of above jewellery was found and whatever bill or voucher produced at the time of assessment stage is a secondary evidence. Therefore, the A.O is directed to delete the addition because gold diamond part of jewellery is fully covered by item declared in VDIS and wealth tax return. At the same time the appellant has also not produced any supporting material evidences to establish that the labour charges of Rs.6750/- paid to Khudiramdas Babu are accounted for.
Therefore, I hold that the labour charges paid by appellant of Rs.6750.- is undisclosed and the same is to be treated as unexplained expenditure on jewellery being undisclosed income. Accordingly, the A.O is directed to make the addition of Rs.6750/- for labour charges only."
In view of the above facts discussed by the CIT(A), we find no infirmity in the same and we confirm the deletion. This issue of the Revenue's appeal is dismissed.
102. The next issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition of Rs.2,89,500/- made on account of unexplained investment by way of fixed deposits in bank.
IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 86
103. We have heard the rival contentions and gone through the facts and circumstances of the case, we find that the CIT(A) has deleted the addition by giving following findings in para-5 of his appellate order:-
"5. Second ground of appeal relates to addition on account of investment in bank fixed deposits of Rs.2,89,500/-. The Assessing Officer has discussed this issue in para-2 on page 3 to 6 of the order. The Assessing Officer has relied upon certain loose papers file marked as Annexure A-7 found from the residence during the course of search. In the said loose paper file, details of FDR is found on Page 166 to 169 wherein name of various persons are mentioned against their deposits. Appellant's name is mentioned "MDK"
against the deposit as holder. The appellant was asked to explain the nature and source of deposits which are identified in the name of the appellant. The Assessing Officer has also given the details of FDRs in a table on Page 4 & 5 of his order and made addition on similar basis s in the group case Sarojdevi Kabra. The explanation of the appellant, the evidences given by the appellant regarding source of funds being sale of jewellery, remand report of Assessing Officer and all other facts are identical to that case. Hence, following the appellate order in the case of Smt. Sarojdevi Kabra, this addition is deleted as the facts are identical."
We find that similar issue of FDRs has already been dealt with in IT(SS)A 177/Ahd/2004 in paras-83 to 85 of this order. The facts being exactly identical, taking a consistent view, we confirm the order of CIT(A) deleting the addition. This issue of the Revenue's appeal is dismissed.
104. The next issue in this appeal of Revenue is against the order of CIT(A) directed the Assessing Officer to delete the addition of Rs.16,900/- made on account of noting on loose paper in file marked as Annexure A-4.
105. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the CIT(A) has deleted the addition by giving following findings in para-6.3 of his appellate order:-
"6.3. I have carefully considered the issue. From verification of said seized loose paper page 175, it is noticed that on the right side of said page, below the name "Maya" some figures like 15,47, 62, 7, 69 are mentioned against which cross mark [x] has also been made. Therefore, it is not known s to whether any transaction was taken place or not keeping view the fact that there is no date, cheque No. or name and address of any party on the said page. It is also evident that the A.O has not brought on record any evidence to substantiate his action. Even if any addition is to made on the basis of seized loose page No.175, the same has to be made in the case of Shri IT(SS)A No.59, 71/Ahd/2005 & 175-177/Ahd/2004 & 306 & 245/Ahd/2004 Block period 1.4.95 to 12.7.01 DCIT & ACIT CC -1(4) Ahd v. Kabra Group Page 87 Satyanarayan Kabra and not in the case of appellant. However, funds available with the appellant on maturity of FDRs als becomes were available with the appellant and therefore, the cash entries found to be noted on the seized loose paper, which have been treated by the A.O belonging to appellant is required to be treated as explained as notings on the seized loose papers are for a period subsequent to the maturity of the FDRs. In view of the above facts, I incline to agree with the alternate arguments of the learned A.R of the appellant and the A.O is directed to delete the addition of Rs.16,900/-."
We find from the above facts narrated by the CIT(A) that it is not known as to whether any transactions has taken place or not. The fact that there is no date, cheque No. or name and address of any party on page No.175 of the seized papers and even the Revenue could not controvert the findings of CIT(A) cited above, we find no infirmity in the order of CIT(A) and we uphold the same. This issue of the Revenue's appeal is dismissed.
106. In the result, assessee's appeal IT(SS)A. No.71/Ahd/2005 and Revenue's Appeal in IT(SS)A No.59/Ahd/2005 are allowed partly and Revenue's Appeals No.IT(SS)A.No.175 to 177/Ahd/2004 and IT(SS)A No.245 and 306/Ahd/2004 are dismissed.
Order pronounced in Open Court on /10/2009
(P.K.Bansal) (Mahavir Singh)
Accountant Member Judicial Member
Ahmedabad,
Dated : / /2009
*Dkp
Copy of the Order forwarded to :
1. The Appellant.
2. The Respondent.
3. The CIT(Appeals)- I, Ahmedabad
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Ahmedabad