Income Tax Appellate Tribunal - Kolkata
Bimal Kumar Singhania vs Deputy Commissioner Of Income Tax ... on 6 January, 2006
Equivalent citations: (2006)100TTJ(KOL)790
ORDER
N.L. Dash, J.M.
1. These three appeals preferred by the aforesaid assessees are directed against the separate orders passed by the CIT(A), Ranchi (Jharkhand). Since facts are identical and some grounds are common, therefore, all these appeals are disposed of by this common order for the sake of convenience.
2. Brief facts relating to these cases are that search and seizure operations were conducted in the residential/business premises of the assessees as well as bank locker with Central Bank of India, Ranchi standing in the joint names of Sri Kamal Kumar Singhania and Smt. Rachana Singhania on 30th Jan., 2002. All these assessees are brothers to each other. Search operations were also conducted at the residential premises of Sri Prahlad Rai Singhania, who is the father, of these assessees, and business premises of M/s Vinimay Leasing Finance (P) Ltd., wherein all the aforesaid assessees were shareholders. In course of said search, the following assets were found and seized by the Department:
Sri Kamal Kumar Singhania and Sri Bimal Kumar Singhania _____________________________________________________________________ Sl. No. Particulars Found Seized _____________________________________________________________________
1. Cash 17,90,000 17,50,000 _____________________________________________________________________
2. Gold 1204. 5 gms. --
_____________________________________________________________________
3. Diamond 28 carats --
_____________________________________________________________________
4. Silver 6,000 gms. --
_____________________________________________________________________
5. Stock from shop 51,707 --
_____________________________________________________________________
6. Stock from godown 9,29,565 --
_____________________________________________________________________
7. Documents HKV/1 to HKV/3 HKV/1 to HKV/3 _____________________________________________________________________ Sri Jai Prakash Singhania _____________________________________________________________________ Sl. No. Assets Found Seized _____________________________________________________________________
1. Cash 2,27,900 1,87,900 _____________________________________________________________________
2. Jewelleries 1,21,500 Nil _____________________________________________________________________
3. KVPs 12,00,000 12,00,000 _____________________________________________________________________
4. Stock at shop-cum 10,74,104 Nil
-office _____________________________________________________________________
5. Documents SIB/1 to SIB/29 SIB/1 to SIB/29 _____________________________________________________________________ 2.1 In response to notices issued under Section 158BC of the Act, the respective assessees filed their block returns on 28th Feb., 2003 showing undisclosed income as under :
Sri Kamal Kumar Singhania Rs. 59,81,630
Sri Jai Prakash Singhania Rs. 36,26,310
Sri Bimal Kumar Singhania Nil
Block assessments under Section 158BC of the Act. were completed by the AO determining undisclosed incomes of the assessees as under:
______________________________________________________________________________ Particulars of additions Kamal Kumar Jai Prakash Bimal Kumar made Singhania (Rs.) Singhania (Rs.) Singhania (Rs.) ______________________________________________________________________________ Unexplained 4,00,000 4,00,000 4,00,000 investment in KVPs ______________________________________________________________________________ Interest on KVP 40,000 80,000 40,000 ______________________________________________________________________________ Undisclosed capital 1,01,12,272 upto 31-3-2001 ______________________________________________________________________________ Alleged undisclosed 71,60,958 net profit ______________________________________________________________________________ Undisclosed investment 77,30,876 in M/s Trade Friends ______________________________________________________________________________ Undisclosed sundry 46,92,027 debtors for asst. yr.
2002-03 ______________________________________________________________________________ Unexplained amount 41,765 receivable from Om Engg. Works ______________________________________________________________________________ Unexplained expenses 1,11,395 on tour ______________________________________________________________________________ Total undisclosed 1,77,13,233 1,29,44,668 5,51,395 income ______________________________________________________________________________
3. The aforesaid additions were contested in appeals before the learned CIT(A) who confirmed most of the additions made by the AO subject to the following exceptions :
(i) Sri Kamal Kumar Singhania--
(a) Addition of Rs. 1,01,12,272 confirmed subject to reduction therefrom of disclosed capital shown in the regular return filed prior to the date of search.
(b) Addition of Rs. 42,000 on account of unexplained tour expenses to be made in the hands of Sri Kamal Kumar Singhania instead of Sri Bimal Kumar Singhania.
(ii) Sri Jai Prakash Singhania--Addition of Rs. 41,765 on account of unexplained amount receivable from Om Engg. Works.
(iii) Sri Bimal Kumar Singhania--Out, of addition of Rs. 1,11,395 on account of unexplained tour expenses, addition of Rs. 69,395 deleted. The balance of Rs. 42,000 directed to be added in the hands of Sri Kamal Kumar Singhania as above.
The assessees have, however, contested the additions confirmed by the CIT(A) before the Tribunal in the present appeals. Item wise additions sustained by the CIT(A) are dealt with as under.
4. The first two common grounds in all these appeals relate to addition on account of unexplained investment in KVPs and interest thereon. The facts in nutshell are that in course of search in the residential premises of Sri Jai Prakash Singhania, KVPs worth Rs. 12,00,000 in the names of the assessees were found and seized as under :
____________________________________________________
(a) Kamal Kr. Singhania (HUF) Rs. 4,00,000 ____________________________________________________
(b) Bimal Kr. Singhania (HUF) Rs. 4,00,000 ____________________________________________________
(c) Jai Prakash Singhania (HUF) Rs. 4,00,000 ____________________________________________________ Total Rs. 12,00,000 ____________________________________________________ The AO added the value of these KVPs in the respective hands of these assessees in their individual capacities summarily on the following reasonings :
(i) The assessees allegedly could not prove that the amounts received from the concerned companies were utilized in purchase of KVPs.
(ii) The returns of the HUFs had been filed after the date of search.
(iii) The fact that KVPs had been acquired out of cash received from M/s Tirupati Fiscal Services (P) Ltd., M/s Surya Commercial Ltd. and M/s Sandeep Salt & Bromine Industries Ltd. was not brought to record at the time of search, nor was it borne from any record seized at the time of search.
5. On appeal, the CIT(A) confirmed the additions made by the AO in the cases of all the three assessees on the following grounds :
(a) On the date of conferring Memorandum of Understanding on 20th Oct., 1999, HUF did not possess the land and land was purchased in September, 2000 only.
(b) Advance of Rs. 4,00,000 as claimed by the assessee, was received in the month of October, 1999 and invested in KVPs on 30th March, 2000.
(c) For the first time HUF filed the return of income, that also after the date of search, for the asst. yrs. 2000-01, 2001-02 and 2002-03 on 26th Feb., 2002. Prior to that, there was no existence of the HUF.
(d) From the computation of income of HUF for the asst. yr. 2001-02, it was seen that the HUF had claimed deduction under Section 54F of capital gains arising on sale of jewellery and diamonds against purchase of land for construction of residential house property. On the other hand, the HUF had entered into MoU to sell the said land before it had been purchased which was allegedly quite contrary to the claim of the assessee.
(e) The assessee had failed to prove the genuineness of transaction of receiving advance of Rs. 4 lakhs and thereafter investing in KVPs.
6. Before us, the assessee's learned Counsel submitted that the said KVPs had been acquired out of regular funds of the respective HUFs of the assessees. Investments in the KVPs were duly disclosed in their respective balance sheets as at 31st March, 2000 filed along with the return of income for the concerned year. Regarding source of funds, it was explained that the impugned amounts of Rs. 4 lakhs in case of each of the aforesaid assessees had been received by their respective HUFs as advance in cash against sale of land which were subsequently invested in KVPs as under :
(i) Kamal Kumar Singhania (HUF) : Advance of Rs. 4 lakhs received from M/s Tirupati Fiscal Services (P) Ltd., P-337, Lake Town, Kolkata.
(ii) Bimal Kumar Singhania (HUF) : Advance of Rs. 4 lakhs received from M/s Surya Commercial Ltd., Kolkata
(iii) Jai Prakash Singhania (HUF) : Advance of Rs. 4 lakhs received from M/s Sandeep Salt & Bromine Industries Ltd., Kolkata.
The assessee's learned Counsel, however, for the sake of transparency clarified that the assessees never claimed that their HUFs owned the land on the date of receipt of advances. It may be noted that even in the MoU, it has been categorically mentioned that as on the date of execution of MoU, the HUF was in the process of negotiating for purchase of the subject land. In support of the legitimacy of the claim of the assessees, the learned Counsel brought to our notice the following documents filed in the paper book, which were, as claimed by him, as well filed before the Revenue authorities :
(i) Returns of income and balance sheets for the asst. yrs. 2000-01 and 2001-02 showing investment in KVPs and advances received from prospective buyers of land in cases of--
(a) Kamal Kumar Singhania (HUF) [in short KKS(HUF)]--pp. 158-165 of the paper book,
(b) Bimal Kumar Singhania (HUF) [BKS (HUF)]--pp. 174-181 of the paper book.
(c) Jai Prakash Singhania (HUF) [JPS (HUF)]--pp. 166-173 of the paper book.
(ii) Memorandum of understanding for receipt of advance and prospective sale of land :
(a) MOU dt. 20th Oct., 1999 entered into between KKS'(HUF) and M/s Tirupati Fiscal Services (P) Ltd.--pp. 221-222 of the paper book.
(b) MoU dt. 20th Oct., 1999 entered into, between BKS (HUF) and M/s Surya Commercial Ltd.--pp. 223-224 of the paper book.
(c) MoU dt. 20th Oct., 1999 entered into between JPS (HUF) and M/s Sandeep Salt & Bromine Industries Ltd.--pp. 225-226 of the paper book, (iii) Letters confirming payment of advance of Rs. 4 lakhs giving full address and PAN of the following prospective buyers :
(a) M/s Tirupati Fiscal Services (P) Ltd.--p. 227 of the paper book.
(b) M/s Surya Commercial Ltd.--p. 228 of the paper book.
(c) M/s Sandeep Salt & Bromine Industries Ltd.--p. 229 of the paper book,
(iv) Returns of income, auditors report, balance sheets (showing advances given to the respective HUFs) and P&L a/cs for asst. yr. 2000-01 filed prior to the date of search in the cases of:
(a) M/s Tirupati Fiscal Services (P) Ltd.--pp, 182-194 of the paper book.
(b) M/s Surya Commercial Ltd.--pp. 195-207 of the paper book.
(c) M/s Sandeep Salt & Bromine Industries Ltd.--pp. 208-220 of the paper book.
On the basis of the aforesaid documents placed in the compilation, the assessees' learned Counsel submitted that HUF is an entity different from the individuals composing it. As such, the investment in KVPs belonging to the HUF and interest thereon cannot be assessed in the hands of the assessee-individual. Regarding identity and existence of the HUFs before the date of search, he contended that the AO has categorically accepted the existence of these HUFs and the respective assessees had submitted the details in support of the claim before the AO in response to notice issued to them. The summary of the contention and evidences produced before the AO in this behalf are as under:
(A) Kamal Kumar Singhania (HUF):
1. Kamal Kumar Singhania (HUF) made a disclosure under Section 68(2) of the Voluntary Disclosure of Income Scheme, 1997 before CIT, Ranchi disclosing certain cash and jewelleries on 31st Dec., 1997 which has been accepted by the CIT, Ranchi.
2. The HUF opened a PPF account and first deposit was made on 24th Jan., 2000.
3. Opened a savings bank account No. 4884 on 13th Jan., 1999 with Central Bank of India, Upper Bazar, Ranchi.
4. The HUF sold jewelleries and diamonds for Rs. 1,01,332 and Rs. 6,40,000, respectively, i.e., Rs. 7,41,332, which was received by cheques and deposited into Central Bank of India, Upper Bazar, Ranchi. The amount has been utilized for the purchase of the following lands :
_______________________________________________________________ Date Cost Stamp duty Total _______________________________________________________________ 12-9-2000 1,01,248 50,016 1,51,264 _______________________________________________________________ 12-9-2000 2,98,120 52,026 3,50,146 _______________________________________________________________ 12-9-2000 1,08,124 18,852 1,26,976 (1/3rd share) _______________________________________________________________ 6,28,386 _______________________________________________________________
5. This HUF took an advance from M/s Tirupati Fiscal Services (P) Ltd., P-337, Lake Town, Calcutta - 89 which has been utilized for the purchase of Kisan Vikas Patra in the year ending 31st March, 2000. The IT return was filed on 26th Feb., 2002.
6. The abovesaid company is a private limited company and balance sheet for asst, yr. 2000-01 is signed on 28th Aug., 2000 and return was filed on 14th Nov., 2000 vide receipt No. 001269.
7. KVP was purchased by Kamal Kumar Singhania (HUF) in the name of Sri Kamal Kumar Singhania and Smt. Rachna Singhania.
8. The assessee has shown interest on KVP Rs. 40,000 in its total income of Rs. 1,09,958. The return for asst. yr. 2001-02 was filed on 26th Feb., 2002.
9. That apart, the return of the HUF for the asst. yr. 2002-03 was filed on 28th Feb., 2003 and has been processed accepting the status of HUF, its income, assets and liabilities and thus there cannot be any doubt regarding the genuineness of the status of HUF.
(B) Similarly, regarding Bimal Kumar Singhania (HUF) and (C) Jaiprakash Singhania (HUF), identical explanations and evidences were filed before the AO to substantiate the claim that the HUFs existed even before the date of search. Referring to pp. 158-181 and 230-245 of the paper book, which are copies of returns of income, VDIS certificates under Section 68(2), bank pass book of the banks, etc., it was submitted that there cannot be any doubt about the existence of the HUF even before the search operation took place. It was thus contended that additions made the hands of the assessee-individuals ' on account of investments in KVPs and interest thereon, being subject-matter of regular assessment of their respective HUFs should be deleted.
7. The learned Departmental Representative, on the other hand, relied on the orders of the Revenue authorities, He further submitted MoU between the alleged HUFs and the alleged buyers was executed in October, 1999 when, in fact, no land was possessed by those alleged HUFs and the said land was admittedly purchased in September, 2000 only. Therefore, no sale of property can be made when the ownership does not vest on the seller. He further submitted that the formation of HUF, as claimed by the assessee, is an afterthought. The so-called HUFs had filed the returns for the three consecutive asst. yrs. 2000-01 to 2002-03 after the date of search and hence it is sufficient to presume that in reality there was no HUF before the date of search. There are several infirmities pointed out by the AO in regard to the genuineness of transaction of receiving the advances and thereafter investing in KVPs. The assessee failed to establish that the sale proceeds of the land were ultimately invested in acquiring KVPs by the HUFs and not by the respective individuals, The learned Departmental Representative further pointed out that no evidence in regard to the purchase of KVPs out of cash received from the so-called intending buyers was found during search and, therefore, had it been actually so, some documents in relation to this must have been found during search at the residential as well as business premises of the assessees. In the above context, he justified the additions made in the hands of the respective individuals.
8. We have heard the rival contentions of the parties and gone through the orders of the Revenue authorities. We have also perused the evidences placed in the paper book filed before us. The dispute is whether the KVPs found during search are undisclosed investments and if so, in whose hands the value of these KVPs and interest thereon should be included as investment out of undisclosed sources. It is an admitted position that in course of search in the residential premises of Sri Jai Prakash Singhania, KVPs worth Rs. 12,00,000 in the names of the assessees (who are all brothers to each other) were found and seized. It was the claim of the assessees that although the names of the individual assessees are appearing on the KVPs of Rs. 4 lakhs each, but these were belonging to their respective HUFs and the source of investment was claimed to be out of advance received from intending buyers of a plot of land and hence the investment of Rs. 4 lakhs in each case was out of disclosed sources of the respective HUFs and not undisclosed investment by the Kartas of those HUFs, as alleged by the Revenue authorities. In the above background, the question to be decided first is about the existence/genuineness of the HUFs. As stated above, search in these cases took place on 30th Jan., 2002. On perusal of pp. 158-181 and 230-245 of the compilation, we find several documents which clearly go to establish the existence of the HUFs even before the search was conducted. In all these cases, situations and nature of supporting documents are of similar nature and thus we take for instance and discussion the case of Jai Prakash Singhania, from whose custody the impugned KVPs were found and seized.
8.1 In response to notice issued by the AO during block assessment proceedings, Jai Prakash Singhania submitted various papers/documents in support of the existence of his HUF before the date of search, such as :
(a) Evidence of disclosure under Section 68(2) of VDIS, 1997. disclosing certain cash and jewelleries on 31st Dec., 1997 by the HUF, which had been accepted by the GIT and certificate issued accordingly.
(b) Savings bank account No. 7440 with Punjab National Bank, Mahavir Chowk, Ranchi which was existing even before 31st March, 1999 in the name of HUF.
(c) HUF of Jai Prakash Singhania was having a PPF account and first such deposit was made on 17th Jan., 2000.
(d) HUF was assessed to tax and submitted returns of income accordingly From the above, it is thus evident that all the aforesaid incidents occurred much before the date of search conducted on 30th Jan., 2002 and the AO has rightly held that the proceeds from sale of jewelleries were invested by the HUFs in purchase of land. Accordingly, it can be said that the investments made in purchase of land were accepted by the AO as part of regular transactions of the HUFs as no addition was made on account of investments in land although the impugned investments were originally proposed to be added in the hands of the respective assessee-individuals by the AO.
8.2 Now coming to the investments made by the respective HUFs in purchasing land, investments in the KVPs were duly disclosed in their balance sheets as at 31st March, 2000 filed along with the returns of income for the concerned year. Regarding source of funds, it was explained to the AO that the impugned amounts of Rs, 4 lakhs each had been received by the assessees' respective HUFs as advance in cash against sale of land which were subsequently invested in KVPs. The precise facts as stated by the assessee and found on record are that the Khemka Group comprising of M/s Tirupati Fiscal Services (P) Ltd., M/s Surya Commercial Ltd. and M/s Sandeep Salt & Bromine Industries Ltd. were interested in acquiring portion of R.S. Plot Nos. 685 and 687 under Khata No. 117 of Kathargonda, Ranchi. The negotiation for the said plots had already been completed jointly by KKS (HUF), BKS (HUP) and JPS (HUP) during financial year 1999-2000 although the final conveyance deeds were executed only in financial year 2000-01. As such, Khemka Group agreed to acquire the said land from the concerned HUFs at a price which was 20 per cent above the amounts paid by the HUFs, Accordingly, they advanced Rs. 4 lakhs each to the concerned HUFs in October, 1999. The formal agreements for purchase of land by the HUFs were duly executed in the subsequent year, i.e. financial year 2000-01 (relevant to asst. yr. 2001-02) and accordingly, the investments in lands were depicted in the returns of income and balance sheets of the concerned HUFs for asst. yr. 2001-02. It may be noted that acquisition of the said plots in the financial year 2000-01 by the HUPs out of regular sources of funds has been accepted by the AO also.
8.3 As stated somewhere above in this order that KKS-HUF, BKS-HUF and JPS-HUF received advance of Rs. 4 lakhs each from M/s Tirupati Fiscal Services (P) Ltd., M/s Surya Commercial Ltd. and M/s Sandeep Salt & Bromine Industries Ltd. These parties have also shown in their balance sheets and returns of income filed much before the date of search these payments to these HUFs as advance. Further, from the documents filed in the paper book and also filed before the AO, it is observed that HUFs had sold jewelleries and diamonds and the considerations were received by cheques and duly accounted for in the respective bank accounts and out of these deposits to the banks, the HUFs utilized the funds for making purchases of the lands. In the aforesaid backdrop, there seems to be no logic behind treating the investments in KVPs shown in the very same returns of the HUFs as undisclosed investments of the respective assessee-individuals merely on the ground that the said returns had been filed after the date of search. When the other investments and transactions shown in the returns and balance sheets of the HUFs were accepted by the AO, the same treatment should have been given to the advances received against prospective sale of land and investments in KVPs shown therein, As discussed earlier, HUF is a distinct and separate entity from the individuals composing it, which has been accepted by the AO himself. As such, when an investment has been made by the HUF, confirmed by the HUF and disclosed in the return filed by it, the same cannot be assessed in the hands of its Karta. Therefore, there is no merit in the argument of the learned Departmental Representative that the income of the HUF of which the assessee was a Karta should also be treated as the income of the assessee-individual for the purpose of block assessment. Any addition, if at all warranted on this count, can only be made in the hands of the concerned HUFs and that too after issuing notices under Section 158BD of the Act. Even in the cases of the HUFs, since KVPs had been acquired out of regular funds and duly disclosed in the returns of income of the HUFs, the details of impugned investments could only be analysed in course of regular assessments of the HUFs. In view of the above, since the impugned advances against prospective sale of land were made and disclosed by the payer-companies in the returns of income filed much before the date of search, the same cannot be conceived as an 'afterthought' as alleged by the learned CIT(A). As such, the learned CIT(A)'s allegation that the appellant had produced a concocted story and manufactured false evidences is not well-founded and a mere imagination without any positive evidence on record. Further, the contention of the CIT(A) that on the date of receipt of advances, the HUFs did not possess the land, is not of much relevance in the block assessment of the assessee-individuals. Since the impugned advances and subsequent purchases of land had been duly disclosed in the regular balance sheets of HUFs, the logic behind receiving such advances prior to completion of purchase of land can only be questioned in course of regular assessments of the HUFs and not in the case of the assessee-individuals.
8.4 We further find that even the AO did not feel the need to conduct any further enquiry into the matter by summoning the representatives of the said payer-companies but simply brushed aside the evidence furnished by the assessee without assigning any plausible reason for the same. As such, the assessee-individuals discharged the onus of proving that the investments in KVPs were not made by them in their individual capacities but by their HUFs out of disclosed sources of funds. The AO however, failed to discharge the said onus. The CIT(A) also on the above facts was not justified in upholding the action of the AO on flimsy grounds and by relying on certain extraneous considerations which are clearly unsustainable in law. For instance, the learned CIT(A) objected to the deduction claimed by the concerned HUFs under Section 54F of the Act in their regular returns. To this we hold that the allowability or otherwise of deduction under Section 54F strictly constitutes a subject-matter of regular assessment of the HUFs and has nothing to do with the block assessments of the assessee-individuals. The fact that the HUFs claimed deduction under Section 54F of capital gains arising on sale of jewellery against investment in the impugned, lands does not in any way prove that the KVPs shown in the' regular balance sheets of the HUFs had been acquired by the assessees in their individual capacities out of undisclosed sources of funds. To conclude, since the assessees produced copies of balance sheets of the HUFs showing advances received and subsequent investments in KVPs, sources of funds acquired by the HUFs being substantiated by several documents/ confirmations, they were neither required nor was it practically possible for them to prove anything further. In view of the discussions, we find no merit in the orders of the Revenue authorities on the addition of Rs. 12,00,000 in respect of investment in KVPs and interest accrued thereon. .The same is directed to be deleted,
9. The next ground in the appeal relating to Kamal Kumar Singhania, being ground Nos. 3 and 4-relate to additions made of Rs. 1,01,12,272 on account of undisclosed capital upto 31st March, 2001 and Rs. 71,60,958 on account of undisclosed net profit and ground No. 3 in respect of appeal of Jai Prakash Singhania relates to undisclosed investment in M/s Trade Friends, totalling to Rs. 2,50,04,106.
9.1 The brief facts are that Sri Kamal Kumar Singhania is engaged in the business of wholesale trade in firecrackers and umbrellas through his proprietary concern, namely, M/s Trade Friends. Sri Jai Prakash Singhania is the proprietor of M/s Trade Wings, dealers in motor parts. During the course of search in the residential premises of Sri Jai Prakash Singhania, certain books of account and loose papers were found and seized. These comprised, inter alia, of books marked SIB-1 and SIB-3 (cash books) and SIB-20 (ledger). In course of search, statement of Sri Jai Prakash Singhania was recorded under Section 132(4) of the Act. When confronted with the said books, Sri Jai Prakash Singhania, in response to question Nos. 15 and 16 stated that it was 2 am. (midnight) and after 18 hours of continuous search, he was tired and exhausted; as such he was not in a position to explain the said books after looking into the same. Copy of the said statement is placed on pp. 272 to 275 of the paper book. Later on, vide various written submissions filed before the AO; Sri Kamal Kumar Singhania and Sri Jai Prakash Singhania explained that the said books were fabricated for production before the banks in order to procure loans from them. It was further explained that a rosy picture had been painted in such accounts solely for the purpose of obtaining a good amount of loan from bank. However, while preparing such accounts, accounted entries were also incorporated therein with a view to give the fabricated books a touch of reality. Further, bank transactions of different family members were reflected in the said accounts with the apprehension that the bank may verify the transactions with their books. The various submissions of the assessees have been reproduced by the AO in the assessment orders of Sri Kamal Kumar Singhania and Sri Jai Prakash Singhania.
9.2 The AO, however, disbelieved the contentions of the assessee and. made the following additions, which are discussed assessee-wise :
(A) Sri Kamal Kumar Singhania :
The AO observed that p. 3 of the seized documents SIB-20 contained an account named 'Kapda Dukan' which he assumed to be the capital account of M/s Trade Friends, proprietary concern of the assessee engaged in the business of trading in firecrackers and umbrellas. The said account showed accumulated capital balance amounting to Rs. 1,01,12,272 as on 1st Sept., 2001. When confronted, Sri Kamal Kumar Singhania reiterated vide letter dt. 16th Sept., 2003 that the said accounts had been prepared based on actual transactions with banks only for the purpose of raising loan from bank. The figures in these accounts were inflated and did not reflect the true position. Being dissatisfied with the explanations of the assessee, the AO added the said balance of Rs. 1,01,12,272 to the undisclosed income of this assessee on account of alleged undisclosed capital upto 31st March, 2001. The AO further observed that the following amounts were credited in the capital account on p. 3 of seized document marked SIB-20 :
_____________________________________________________________ Interest received 4,04,491.00 _____________________________________________________________ Rent received 48,000.00 _____________________________________________________________ Income earned from gardening 9,417.00 _____________________________________________________________ Profit earned from land dealing 25,000.00 _____________________________________________________________ Profit earned from firecrackers business 66,74,050.03 _____________________________________________________________ Total 71,60,958.03 _____________________________________________________________ The AO referred to various pages of goods account (Mal Khata), Jama Bahi, cash book, etc. and concluded that all the items of income had been duly posted in closing and adjustment entries of cash book marked SIB-3. Accordingly, he added Rs. 71,60,958 towards alleged undisclosed profit of Sri Kamal Kumar Singhania.
(B) Sri Jai Pmkash Singhania :
The AO observed that pp. 32 and 33 of SIB-3 reflected the Kuccha trial balance of M/s Trade Friends as at 31st Dec., 2001. The said trial balance is a summary of all the accounts found in the alleged Kuccha ledger marked as SIB-20 Copy of the trial balance (pp. 32 and 33 of SIB-3) is placed on pp. 251 and 252 of the paper book. The credit side of the trial balance shows balance of Rs. 77,30,897 under the head TW which the AO read as M/s Trade Wings--proprietary concern of Sri Jai Prakash Singhania. The said balance as on 31st Dec.,, 2001 is also reflected on p, 167 of seized document marked SIB-20, being the account of M/s Trade Wings in the books of M/s Trade Friends. Accordingly, the AO concluded that this assessee had made an undisclosed investment of Rs. 77,30,876 upto 31st Dec., 2001 in M/s Trade Friends. The same was thus, added to his undisclosed income for asst. yr. 2002-03.
10. When the matter came in appeal before the CIT(A), he upheld the aforesaid additions mainly endorsing the views adopted by the AO.
11. The assesses's learned Counsel submitted that the said books do not portray the real transactions of the Singhania Grouo (except the bank transactions and part of regular transactions), which he has corroborated by mentioning the facts and surrounding circumstances. According to him, in course of search in the office premises of M/s Vinimay Leasing & Finance (P) Ltd., of which various members of the Singhania Group are directors and shareholders, regular books of account maintained in the computer of the said company were seized under identification mark JD-31 as under:
_________________________________________________________________
1. M/s Vinimay Leasing Financial year 1999-2000 & Finance (P) Ltd. to 2001-02 _________________________________________________________________
2. M/s Automative Sales -do-
_________________________________________________________________
3. M/s Trade Friends -do-
_________________________________________________________________
4. M/s Trade Wings -do-
_________________________________________________________________
5. M/s New Trade Wings -do-
_________________________________________________________________ Further, supporting vouchers, sales and purchase bills, invoices, miscellaneous letters and correspondences made with forework dealers, miscellaneous papers of fixed assets, etc. corroborating the various entries in regular books of account were also found and seized vide identification marks JD-1 to JD-29. In support of the aforesaid, copy of Panchnama drawn in the name of M/s Vinimay Leasing & Finance (P) Ltd. has been placed on record at pp. 74-97 of the paper book. However, no incriminating documents supporting the entries made in the impugned fabricated books of account were found in course of search in any of the premises of the Singhania Group. This corroborates the contention of the assessee that the entries in the said books do not represent the real transactions of M/s Trade Friends or any of the members of the Singhania Group except to the extent discussed above. Since all the premises belonging to the Singhania Group were covered under the search operation, if at all the assessee indulged in any unaccounted transaction to the extent apparent from the seized books, at least some evidence in the form of purchase challan, purchase bills, sales challan, sales bills or any correspondence with suppliers would have been found in the course of search. As such, the odds clearly weigh in favour of the assessee's explanations as against the AO's allegations.
11.1 It was further submitted that the stock found and valued on the date of search (30th Jan., 2002) in the shop and godown of M/s Trade Friends was Rs. 8,13,991 whereas the impugned fabricated accounts show an amount of Rs. 60,34,182 as stock-in-trade as on 31st Dec., 2001. The assessee's regular books of account, on the other hand, show closing stock of Rs. 15,42,744.18 comprising of physical stock of Rs. 7,85,026.50 and goods sent on approval of Rs. 7,57,717.68 as on 30th Jan., 2002. The difference of Rs. 28,964.50 between the value of stock found on the date of search and value of physical stock as per regular books of account relates to damaged stock (mainly of sparklers which became ineffective on lapse of time). As such, even the stock found in the course of search coincides with the stock as per regular books of account. This also fortifies the contention, of the assessee that the figures in the. impugned seized books and trial balance were deliberately inflated in order to avail loan from bank. In support of the aforesaid, copy of the inventory prepared by the search party is placed on pp. 23 to 33 of the paper book. Assessee's explanation relating to stock found in course of search has also been reproduced by the AO at p. 17 of the assessment order in case of Sri Kamal Kumar Singhania. Further copies of the regular balance sheet and P&L a/c of M/s Trade Friends for the period ended 30th Jan., 2002 have been filed at pp. 117-120 of the paper book. If the assessee had indulged in unaccounted transactions to the extent apparent from the fabricated books, and trial balance, the value of stock found in course of search would have corresponded approximately to the figures appearing in the fabricated books and not to the stock as per regular books of account, the assessee's learned Counsel contends.
11.2 The learned Counsel of the assessee further submitted that the factum of deliberate inflation of figures in the fabricated books is also evident from the glaringly impracticable results depicted by the said books: Our attention was drawn to the copies of balance sheet and trading and P&L a/c drawn up on the basis of the impugned seized documents marked SIB-1 and SIB-3 (cash books) and SIB-20 (ledger), which are placed on pp. 253 to 255 of the paper book. On a perusal of the same, it would be evident that the fabricated accounts show a gross profit of Rs. 89,28,288.61 and net profit of Rs. 66,74,050.02 against a turnover of Rs. 2,64,12,198. This works out to a GP rate of 33.8 per cent and NP rate of 25.27 per cent. It is pertinent to note that the assessee, Sri Kamal Kumar Singhania is a wholesale dealer in firecrackers and umbrella and in a wholesale trade nobody can imagine a whopping GP rate of 33.8 per cent, more so in the present competitive scenario, The assessee has been earning and disclosing an average GP of 12.25 per cent over the years, which is quite reasonable and practicable. The GP rate as per regular books of account of the assessee varies from 9.99 per cent (asst. yr. 1995-96) to 15.17 per cent (asst. yr. 1997-98). A chart showing the GP rate earned by the assessee over the years has been placed on record in the paper book at p. 256. Further, a rough idea of normal expected profits in case of retailers may be formed from the provisions of Section 44AF of the IT Act, 1961 which provides for assumption (deeming) of profits at the rate of 5 per cent of turnover in cases of retailers subject to the conditions specified in the said section. According to the learned Counsel, it is needless to point out that in case of wholesalers, the expected profits are even lower. As such, the unrealistic results portrayed by the impugned books also strengthen the unswerving stand of the assessee that the said books were fabricated solely for the purpose of presentation before the bank.
12. The learned Departmental Representative, on the other hand, supported the orders of the Revenue authorities. He submitted that the trial balance and other accounts found during search were the end result of the Kuccha cash books (SIB-1 and SIB-3) and ledger (SIB-20) where all the real transactions have been recorded methodically. The draft numbers as well as issuing banks are also mentioned in cash book, Post-search enquiries in the concerned banks in this regard has established the genuineness of cash drafts. Entries in the ledger account of various banks matched with the corresponding deposits and withdrawals found in the respective account statements received from the bank. In the personal account, the entries relating to person's bank transaction exactly matched with the corresponding entries in the respective statements of account received from the bank. Similarly the payments made to Sales-tax Department through cheque mentioned in the provision fund account [p. 79 of SIB-20] find place in the bank account of M/s Trade Friends at Central Bank of India, Ranchi, The assessee has made a disclosure of Rs. 59,81,630 in the block return of income. This is on account of letter filed on 8th May, 2002 before the Jt. DIT (Inv.), Ranchi by assessee and his brother Sri Bimal Kumar Singhania. In the working for this disclosure amounts appearing on the credit side of the document [p. 167 of SIB-20] are taken. The assessee has claimed deduction on account of capital standing in the hands of all family members. However, the deduction cannot be allowed as the assets appearing in the regular books of account are not related by the assessee against the asset in the trial balance which mainly constitutes undisclosed debtors. Therefore, the additions made in this behalf should be upheld.
13. We have heard the rival contentions of the parties and perused the orders of the Revenue authorities. We have also carefully considered the various documents placed on record. The crux of the various reasons assigned by the AO for treating the impugned books and trial balance seized in course of search as genuine is that bank transactions noted therein tallies with the account statements received from banks and the corresponding entries in the regular books of account of the respective assessees. The same should not however, have any deterrent effect on the assessee's case. It may be pointed out that the assessee has been consistently maintaining right from the very inception that the impugned books had been prepared for presentation before the bank in order to raise loans. All the bank transactions were duly incorporated therein with the apprehension that the bank may verify the said transactions. As such, the fact that the bank transactions, recorded in the impugned books were found to be genuine does not automatically lead to the conclusion that all the other transactions recorded therein are also authentic. No incriminating documents supporting the entries made in the impugned fabricated books of account were found in course of search in any of the premises of the Singhania Group. This corroborates the contention of the assessee that the entries in the said books do not represent the real transactions of M/s Trade Friends or any of the members of the Singhania Group except to the extent discussed above. Since all the premises belonging to the Singhania Group were covered under the search operation, if at all the assessee indulged in any unaccounted transaction to the extent apparent from the seized books, at least some evidence in the form of purchase challan, purchase bills, sales challan, sales bills or any correspondence with suppliers would have been found in the course of search. Further, we find substantial force in the contention of the assessee that if the assessee had indulged in unaccounted transactions to the extent apparent from the fabricated books and trial balance, the value of stock found in course of search would have corresponded approximately to the figures appearing in the fabricated books and not to the stock as per regular books of account. As such, the odds clearly weigh in favour of the assessee's explanations as against the AO.'s allegations. It is also an admitted fact that expected rate of profit in case of a wholesaler is generally low. In this case, unrealistic results have been reflected in the seized books and this proves that the profit has been arrived at on the basis of fabricated books said to have been prepared for obtaining loan from the banks. 13.1 The assessee's contention is further corroborated by the fact that the impugned fabricated books were written only upto 31st Dec., 2001 whereas the search was conducted on 30th Jan., 2002. Therefore, presumption can safely be drawn that if the books had been maintained in regular course of business, the same would have been written upto the date of search, i.e., till 29th Jan., 2002. In the alternative, if at all it is assumed for argument sake that the said books had been maintained in the normal course of business, the bills and vouchers pertaining to the undisclosed transactions of the assesses for balance period, i.e., for the month of January, 2002 till the date of search, would have been found in the course of search; which under the circumstances would have been definitely maintained by the assessee so as to enable him to incorporate the same into the alleged Kaccha books. However, admittedly in the present case, although all the bills and vouchers supporting entries in the regular books of account upto the date of search were found and seized, no iota of evidence corroborating the alleged undisclosed transactions for the balance period (supra) was found in the course of search. Furthermore, it is also pertinent to mention that even a trial balance had been drawn up on the basis of entries in such fabricated books as on 31st Dec., 2001. This also fortifies the repeated, contention of the assessee that the fabricated books were prepared only for producing before the bank. If at all the said books had been maintained in normal course of business drawing up of a trial balance in the mid of the financial year could conceivably serve no logical purpose.
13.2 On the above premises, to sum up, the relevant facts reveal that in course of search in the various premises of the Singhania Group, no unaccounted assets or properties were found. Details of assets found and seized in course of search in the premises of Sri Kamal Kumar Singhania, Sri Bimal Kumar Singhania and Sri Jai Prakash Singhania have been mentioned in the assessment order and also recorded above. The cash found in the residential premises of Sri Kamal Kumar Singhania was part of regular cash of M/s Trade Friends and the same was accepted as such by the AO. The jewelleries found at his residence were explained as belonging to Smt. Rachna Singhania and Smt. Minakshi Singhania and duly disclosed in their regular balance sheets. The said explanation was verified and found to be correct by the AO. Similarly, the cash seized from the premises of Sri Jai Prakash Singhania was explained as part of regular cash of M/s Trade Wings. The same was also verified and found to be correct by the AO. Likewise, the jewellery found at his residence was duly disclosed in the balance sheet of Smt. Shanti Devi Singhania. Accordingly, the said jewellery was not seized by the search party. The stocks inventorised in course of search in the premises of M/s Trade Friends and M/s Trade Wings were also found to the part of regular stock of the said concerns. As such, no unaccounted assets or properties were found in course of search in case of Singhania Group.
13.3 That apart, few books were found and seized in course of search in the premises of Sri Jai Prakash Singhania, The assessee explained all along that the said books had been fabricated on the basis of regular bank transactions for the purpose of availing loan from bank. This explanation was corroborated by the fact that no corresponding vouchers or bills supporting the entries recorded :.n the fabricated books were found in course of search although all supporting documents, bills, etc. relating to regular transactions were found and seized in course of search. The stock inventorised by the search party also corresponded to the stock as per regular books of account and did not commensurate with the figures shown in the fabricated books. Further, the fabricated books depicted impracticable financial results which were clearly far from reality and actual state of affairs of assessee's business. The said books were written only upto 31st Dec., 2001 and not upto the date of search, once again indicates that they had not been maintained in the regular course of business. As such, the totality of facts and circumstances of the case highlights the assessee's contention that he had not indulged in any unaccounted transaction and that the said books were fabricated. In view of the above, the assessee has discharged the initial onus of proving that what was apparent from the seized books was not real. It was the duty of the AO to consider the explanation of the assessee vis-a-vis the surrounding circumstances and in the light of assets found in course of search. Since the assessee had discharged the primary onus of proving his stand, it was for the AO to disprove the same by bringing on record some positive material to establish that the impugned books recorded real transactions of the assessee, This was possible only if the AO came across some evidence, in the form of excess physical stocks, unaccounted bills, vouchers etc. supporting the entries in the fabricated books in the course of search. Clearly, in the present case, the AO has failed to discharge the said onus. Under the circumstances, the explanations of the assessee cannot be overlooked without bringing on record some conclusive evidence to the contrary. For our above conclusion, we derive support from the decision of Tribunal, Kolkata Bench in the case of Asstt. CIT v. Sri Radheshyam Poddar (1992) 41 ITD 449 (Cal), which, to quote, is as under:
A reading of Section 132(4A). reveals that the words used therein are "may be presumed". It is thus clear that the drawing of presumption in such cases depends upon particular facts and circumstances of each case. The officer is not justified to draw such presumption in all cases without application of mind judiciously to the facts of a particular case. Even if such presumption is drawn against an. assessee the same is rebuttable and the person against whom such presumption is drawn is free to lead evidence to rebut such presumption and when that is done, the officer or authority shall consider all the evidence and facts judiciously, Now the question is what quantum of evidence is required to rebut such presumption in a given case or set of facts ? In our opinion, no hard or fast rule can be laid down nor has been laid down by any Courts. The evidence for rebutting presumption may be either direct or indirect or may be both. And in some cases perhaps even the statement of the assessee may be enough to rebut such presumption drawn by the officer or authority.. To say so we draw support 'from the "decision of the Rajasthan High Court in the case of Addl CIT v. Thahmyammal Balchand .... Apparently no cause of action can lie between the assessee and Naihati Jute Mills Co. on the basis of such unsigned MoU and, therefore, there is no obligation or liability on the part of the company to pay to the assessee all those amounts mentioned in the unsigned MoU nor the assessee is entitled to claim from the company all those amounts mentioned in that unsigned MoU. We are also inclined to agree with the assessee's counsel that when no income has resulted at all on the basis of unsigned MoU then there is neither accrual nor receipt of income. Under the provisions of the IT Act it is the real income which has to be taxed and not hypothetical income. In this; connection we draw support from the decision of the Hon'ble Supreme Court in CIT v. Shoorji Vallabhdas & Co. . The Supreme Court has also laid down in the case of State Bank of Travancore v. CIT that the concept of real income its certainly applicable in judging whether there has been income or not. The Hon'ble Supreme Court again in the case of K.P. Varghese v. ITO has clearly stated that it would indeed be most harsh and inequitable to tax an assessee on income which has neither arisen to him nor is received by him, Apart from the unsigned MoU the AQ has not led any cogent and reliable evidence to establish that the assessee earned or received the amounts mentioned in the said unsigned MoU. As held by us earlier the assessee has rebutted the presumption by way of ample evidence which is on record.... We are, therefore, of the view that the CIT(A) was perfectly justified in deleting the addition of Rs. 4,93,000 made by the AO on the basis of unsigned MoU, We, therefore, affirm the finding of the CIT(A) in this regard.
13.4 In the instant case also, as stated above, Sri Jai Prakash Singhania has led ample evidence to rebut the presumption under Section 132(4A) of the Act and to prove that what was apparent from the seized books was not true. Our attention was also drawn to the judgment of the Tribunal, Lucknow Bench in the case of Satnam Singh Chhabra v. Dy. CIT (2002) 74 TTJ (Lucknow) 976 wherein it was held as under [at para 30(6) and (7)] :
In any case, the loose paper and entries contained therein do not go to prove that these relate to undisclosed income of the assessee. In view of the peculiar facts of this matter and particularly after the discharge of onus by the assessee which lay upon him to explain the contents of these documents, the AO was under a legal obligation either to corroborate the contents of these documents with transactions of the assessee by independent material or by ocular or documentary testimony or connect this paper with the proprietor of BSC.
(emphasis, italicised in print, supplied) 13.5 In view of our above discussions and deliberations, we hold that the impugned additions being based on uncorroborated entries in the fabricated books in the hands of Sri Kamal Kumar Singhania and Sri Jai Prakash Singhania, the same are directed to be deleted. We order accordingly.
14. The next ground of appeal in respect of appeal concerning Jai Prakash Singhania being ground. No. 4 is against addition on account of undisclosed sundry debtors of Rs. 46,92,027. The impugned addition has been made by the AO on the basis of aggregating balances of ledger cards as found in seized records under identification marks SIB-4, 5, 6, 9 to 14, 16 and 17 seized from the residential premises of Sri Jai Prakash Singhania. The AO alleged that Sri Jai Prakash Singhania had made huge purchases and sales outside the books. He further alleged that unaccounted sales had been effected through, estimates for approval slips in computerised sheets which had been entered in ledger cards as mentioned in seized documents marked as SIB-4 to 6, 9 to 14, 16 and 17. The AO observed that the ledger cards showed the details of goods sent to parties and payments received from them, Accordingly, he concluded that these were not goods sent on approval but were sales which were not recorded in regular books of account. The closing balance as per ledger cards of Rs. 46,92,027 was thus treated as undisclosed sundry debtors and added to the undisclosed income of Sri Jai Prakash Singhania.
15. The CIT(A) after hearing the assessee and considering the AO's observation with reference to seized documents pointed out that the assessee himself admitted that motor parts goods are sent on approval and only on acceptance, the sale accounts are credited and debited to debtors account. According to him, in practice, the payments are made immediately on purchases. Customers never return goods, except some exceptional cases, as they purchase the goods after getting convinced that the goods/products are satisfactory. The conduct of the assessee clearly gives the picture that observation made by the AO is correct and true. According to him, addition was not made on presumption but on the basis of clinching evidence found and seized from the possession of the assessee. He thus confirmed the action of the AO in having sustained the addition of Rs. 46,92,027.
16. Before us, the assessee's learned Counsel submitted that admittedly the book balance of stock-in-trade of M/s Trade Wings on the date of search was Rs. 53,76,940 out of which goods sent on approval were Rs. 41,36,555. In support of the aforesaid, copy of balance sheet and P&L a/c of M/s Trade Wings as on the date of search was placed at pp. 139 to 142 of the paper book. Further, the physical stock at shop and godown as on the date of search as per books (excluding goods sent on approval) was to the tune of Rs. 12,40,385, whereas stock physically found and valued during search was of Rs. 10,74,104. Copy of inventory prepared by the search party was also made available at pp. 66 to 73 of the paper book. As such, there was a shortage of physical stock to the tune of Rs. 1,66,281. This clearly implies that the stock (as per regular books) sent on approval amounting to Rs. 41,36,555 and stock as per regular books found short (i.e., Rs. 1,66,281) aggregating to Rs. 43,02,836 were sold for Rs. 46,92,027. Therefore, amount of Rs. 3,89,191 (i.e., Rs. 46,92,027 - Rs. 43,02,836) being profit on such transaction can at best be taxed as undisclosed income. It was further emphasized that the source of acquisition of the impugned stock costing Rs. 43,02,836 is explained and recorded in the regular books of account. The said stock was sold for Rs. 46,92,027. The entries for the said sales were, however, not recorded in the books of account till the date of search. As such, only the unrecorded profit on sales can be included in the undisclosed income of the assessee. To substantiate the claim of the assessee, the assessee's learned Counsel has filed a trading account of M/s Trade Wings as on 30th Jan., 2002 duly recasted after incorporating the unaccounted sales as under:
Revised Trading account of M/s Trade Wings for the period ended 30th Jan., 2002 _____________________________________________________________________________ Particulars Amount (Rs.) Particulars Amount (Rs.) _____________________________________________________________________________ To opening stock 30,64,634,00 By sales :
(as per books) To purchases less 86,97,679.34 As per books 74,60,519.94 returns To freight inwards 72,246.00 Add : Unaccounted 46,92,027.00 sales (goods sent on approval and stock shortage sold as supra) To gross profit 13,92,091.60 By closing stock (as 10,74,104.00 per inventory prepared by search party) ________________ _______________ 1,32,26,650.94 1,32,26,650.94 _____________________________________________________________________________ GP as per revised trading account Rs. 13,92,091.60 Less : GP as per regular accounts Rs. 10,02,900.60 (p. 140 of the paper book) ________________ Unaccounted profit Rs. 3,89,191.00 Addition made by the AO Rs. 46,92,027.00 ________________ Desired relief Rs. 43,02,836.00 ________________ According to the learned Counsel, the aforesaid manner of recasting the trading account is supported by the judgment of the Hon'ble Tribunal, Pune Bench, in the case of Janta Tiles vs. Asstt. CIT (2000) 66 TTJ (Pune) 695, wherein it was held that:
...in case stock found at the time of search is less than the stock as per books, the difference represented suppressed sales. In such an eventuality, if the trading account is recasted, the sales declared by the assessee will have to the increased by the sum of the stock found, short and the stock declared by the assessee shall be decreased by the same amount. Thus, no addition would be called for on this account. However, it would amount to suppression of GP arising out of the suppressed sales. As such, the only addition called for on this account would be the amount of GP earned on the suppressed sales.
In view of the above, it was submitted that the assessee be given relief to the extent of Rs. 43,02,836.
16.1. The learned Departmental Representative, on the other hand, contended that it was against the general trend of the business the assesse'e does that the goods were primarily sent for approval of the intending customer and on their approval, the sale took place. Seized documents clearly show that the assesses had undertaken huge purchases and sales outside the books and the assesses unsuccessfully tried to corroborate these irregularities by adjusting unaccounted sales on the pretext of approval slips. Further, ledger cards clearly show that the details of goods are sent to parties and payments received from them. Therefore it can safely be said that the goods were not sent for approval but those were actual sales. Therefore, the closing balance as per ledger cards of Rs. 46,92,027 has rightly been treated as undisclosed sundry debtors and the addition was justified. 17. On consideration of the seized documents and the regular books and the assessee's submissions in this regard, we find substantial force in the contentions of the assessee's learned Counsel. On perusal of paper book pp. 66 to 73 and 139 to 142, we find that the stock as per regular books sent on approval amounted to Rs. 41,36,555 and the stock as per regular books found short by Rs. 1,66,281, aggregating to Rs. 43,02,836 which were sold for Rs. 46,92,027. Therefore, as fairly conceded by the assessee's learned Counsel, there was a clear difference of Rs. 3,89,191 being profit on such transaction. This has not been accounted for in the regular books of account and hence undisclosed. The recasted trading account of M/s Trade Wings reproduced above gives a clear picture and this recasting of trading account and adding the difference to the undisclosed income is also supported by the decision of Janta Tiles v. Asstt. CIT (supra). In view of our above discussions, we allow relief to the extent of Rs. 43,02,836 and sustain the addition of Rs. 3,89,191. We order accordingly.
18. The only other ground raised in the appeal of Sri Kamal Kumar Singhania being ground No. 5 pertains to the addition of Rs. 42,000 on account of unexplained tour expenses in the hands of the assessee.
19. The impugned addition was originally made in the hands of Sri Bimal Kumar Singhania. In the assessment order in the case of Sri Bimal Kumar Singhania. The AO has observed that p. 15'of HKV-1 is a hotel bill of Holiday Inn .Resort, Goa drawn in the name of one Rajesh Gopadia for Rs. 34,598 dt. 26th Dee. 2001. Backside of the bill contains rough scribblings aggregating to Rs. 71,395. Copy of the said bill has been placed at pp. 260 and 261 of the paper book. Before the AO, it was explained that the impugned bill was a rough sheet of paper which may have come with packing materials. The bill was drawn in the name of Rajesh Gopadia and the assessee did not know Rajesh Gopadia. Similar explanation was given by Sri Kamal Kumar Singhania in course of his statement recorded under Section 132(4). Copy of the said statement is also placed at pp. 265-267 of the paper book. The AO disbelieved the contention of the assessee and' added the sum of Rs. 1,11,395 (instead of aggregate of Rs., 1,06,993) to the undisclosed income of Sri Bimal Kumar Singhania on account of alleged unexplained expenditure.
20. On appeal, the CIT(A) directed the" AO to make an addition of Rs. 42..000 only In the hands of Sri Kamal Kumar Singhania instead of Sri Bimal Kumar Singhania as the said amount came from M/s Tradee Friends, whose proprietor was Sri Kamal Kumar Singhania. On the basis of seized document placed at pp. 262 and 263 of the paper book, the CIT(A) referred to the following entries in the said seized papers :
Credit Side 32,750 BKS 32,750 Travelling A/c Raju Garodia 5,000 Railway claim 4,000 Expenses 23,750 ________ 32,750 Debit Side 23,750 Travelling Expenses BKS 4,000 Railway 5,000 Raiu Garodia The CIT(A) further observed that this account had been ledgerised under the head "Khata-BKS", He observed that Sri Bimal Kumar Singhania was given cash of Rs. 42,000 on 20th Dec., 2001 which was recorded on 20th Dec., 2001 in SIB-3 showing Rs. 42,000 BKS with a remark--'Ghumane hetu'. The said account was entered in ledger account marked SIB-20. Based on the aforesaid, the CIT(A) concluded that Sri Bimal Kumar Singhania had gone on enjoyment tour and spent Rs. 32,750 and Rs. 9,250 was the balance with him out of Rs. 42,000. The CIT(A) further observed that other expenses mentioned on the impugned bill was related to Rajesh Gopadia and as such could not be added in the hands of Sri Bimal Kumar Singhania. However, since the funds allegedly came from M/s Trade Friends, the CIT(A) directed that Rs. 42,000 should be added in the hands of Sri Kamal Kumar Singhania, proprietor of M/s Trade Friends and not in the hands of Sri Bimal Kumar Singhania. The balance addition of Rs. 69,395 was deleted by the learned CIT(A).
21. The assessee's learned Counsel submitted the impugned bill is drawn in the name of Rajesh Gopadia whereas the entry in the seized documents purportedly linked up with the said bill by the CIT(A) contains the name of Raju Garodia. Clearly, Rajesh Gopadia and Raju Garodia are not one and the same person. Further, the assessee has been consistently reiterating that the impugned seized books referred to by the learned CIT(A) were fabricated solely for the purpose of procuring loans from bank. As such no addition can be made on the basis of entry in the said seized books. Without prejudice, it was submitted that this impugned addition has been made on account of alleged unexplained expenditure. In this connection, it is submitted that the source of the so-called unexplained expenditure has been explained in the seized books itself. As such, even if for argument's sake, the seized documents are taken at face value, no addition can be made on account of expenditure debited in the said books especially considering the fact that separate additions have been made by the AO on account of alleged undisclosed opening capital and on account of alleged undisclosed profit based on the said books. Further, the rough scribblings on the back side of the impugned bill are not in the handwriting of the appellant and do not reveal any definite information. Thus, the addition made by the AO and sustained by the CIT(A) deserves to be quashed on all counts. The learned Departmental Representative, on the other hand, supported order to the CIT(A).
22. We have heard the rival contentions of the parties and perused the material available on record. It is an admitted position that addition was made on the basis of rough scribblings on the back side of the bill and does not give any specific information. It was the presumption of the CIT(A) that the money came from M/s Trade Friends. We find substantial force in the contention of the assessee that separate additions have been made by the AO on account of undisclosed opening capital and undisclosed profit based on the said books. Therefore, there is no scope in making separate addition of this amount on account of expenditure debited in the said books. Therefore, in absence of any positive evidence to substantiate the doubt of the CIT(A), we are unable to uphold his decision in sustaining the addition to the extent of Rs. 42,000 which is hereby directed to be deleted.
23. In the result, IT(SS)A Nos. 70 and 72/Pat/2005 are allowed and IT(SS)A No. 71/Pat/2005 is partly allowed.