Income Tax Appellate Tribunal - Ahmedabad
Narendra G. Somani, Ahmedabad vs Department Of Income Tax on 1 November, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
"A" BENCH, AHMEDABAD
Before Shri A. K. GARODIA, ACCOUNTANT MEMBER
and Shri KUL BHARAT, JUDICIAL MEMBER
I.T.(SS)A. No.200 / Ahd/2003
(Block period 01.04.1989 to 31.03.1999
& 01.04.1999 to 15.02.2000)
Satbirsingh H Bhusari, Vs. DCIT, CC-1(2),
21/487, Satyagrah Chhavani, Ahmedabad
Satellite Road,
Ahmedabad-380015
PAN/GIR No. : AFVPB3970Q
Assessee by : Shri M K Patel, AR
Department by: Shri Shelley Jindal, CIT DR
I.T.(SS)A. No. 234/Ahd/2003
(Block period 01.04.1989 to 15.02.2000)
DCIT, CC-1(2), Vs. Shri Satbirsingh H Bhusari,
AHMEDABAD 21/487, Satyagrah Chhavni
Satellite Road, Ahmedabad-
3800015
Assessee by: Shri M K Patel, AR
Department by: Shri Shelley Jindal, CIT DR
I.T. (SS) A. No. 233/Ahd/2003
(Block period 01.04.1989 to 15.02.2000)
DCIT, CC-1(2), Vs. Shri Narendra G Somani,
Ahmedabad 73, White House, Panchwati,
Ahmedabad-380006
PAN: AGSPS6052Q
Department by: Mr. Shelley Jindal, CIT DR
Assessee by: Shri S N Devatia, AR
2 I.T.A.No.200,233,234 /Ahd/2003
I.T.A.No. 3151/Ahd/2004
I.T.A.No. 3151/Ahd/2004
(Assessment year 2001-02)
DCIT, CC-1(2), Vs. Bhagwati Banquets & Hotels Ltd.
Ahmedabad 73, White House, Panchwati,
Ahmedabad
PAN No.AABCB6178L
Department By: Shri Rahul Kumar, DR
Assessee by: Shri S N Devatia, AR
(APPELLANT) .. (RESPONDENT)
Date of hearing: 01.11.2012
Date of pronouncement: 22.01.2013
ORDER
PER SHRI A. K. GARODIA, AM:-
Out of this bunch of four appeals, two cross appeal are filed by the assessee and the revenue in the case of Shri Satbirsingh H Bhusari for the block period 01.04.1989 to 15.02.2000 and these appeals are directed against the order of Ld. CIT(A) I, Ahmedabad dated 12.03.2003 as per I.T.(SS)A.No. 200/Ahd/2003 (assessee's appeal) and I.T. (SS) A. No. 234/Ahd/2003 (revenue's appeal). The 3rd appeal in I.T. (SS) A.No. 233/Ahd/2003 is revenue's appeal filed in the case of Shri Narendra G Somani for the same block period and this is also directed against the order of Ld. CIT (A) I, Ahmedabad dated 28.03.2003. The remaining one appeal i.e. I.T.A.3151/Ahd/2004 is revenue's appeal in the case of M/s. Bhagwati Banquets and Hotels Ltd., which is directed against the order of Ld. CIT (A) I, Ahmedabad, dated 05.08.2004 for the assessment year 2001-02. Since connected issues are involved in all these appeals, all these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
3 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/20042. First, we take up the appeal in I.T.A.No. 200/Ahd/2003 in the case of Shri Satbirsingh H Bhusani. Grounds No.1-8 are interconnected, which are as under:
"1. The learned CIT (A) has erred in law 'and on facts in rejecting the ground of appeal challenging the assessment order as bad in law in view of the fact that the A.O. had not confronted the appellant with the outcome of the enquiries carried out by him and cross examination of the parties "whose statements were recorded and relied upon by him, the Ld. CIT(A) ought to have quashed the assessment order as bad in law as well as in gross violation of the principles of natural justice and equity.
2. The learned CIT (A) has erred in law and on facts in confirming the findings of the A.O. that the appellant had contributed 50% of total investment in land of Bhagwati Banquet Pvt. Ltd. In view of the fact hat the appellant was neither a 50% partner nor having contributed to the extent of 50% of investment in land at point of time as wrongly presumed by the A.O., the findings of the A.O. based on such presumption and confirmation of the same by the Ld. CIT (A) required to be quashed.
3. The Ld. CIT (A) has erred in law and on facts in relying upon the statements of the 2 arbitrators as recorded by him during the course of appeal proceedings for arriving at the conclusion that the appellant was a 50% partner and had contributed an amount equal to 50% of the investment in land. In view of the fact that the arbitration agreement itself having nothing to do with either the investment in land of Bhagwati Banquet Pvt. Ltd. or the source of such investment, the reliance placed by the Ld. CIT (A) on the statements of the arbitrators who have claimed ignorance about the basis of determination or the purpose of the amount, receivable by the appellant is highly misplaced and ought to have been' ignored as irrelevant.
4. The learned CIT (A) has also erred in law and on facts in not granting cross examination of the arbitrators whose statements have, been heavily relied upon by him for arriving at the conclusion that the appellant was a 50% partner and-had contributed an amount equal to 50% of the investment in land. Thus, in absence of any, cross examination having been granted, even otherwise the statement of the arbitrators requires to be ignored as having no evidentiary value in the eyes of law.
5. The learned CIT (A) has erred in law and on facts in confirming the addition of Rs.1,09,58,250/- made by the AO. on account of alleged investment in land of Bhagwati Pvt Ltd. In view of the facts and elaborate submissions filed coupled with the fact that no evidence has been found and seized from the possession of the appellant as a search leading to any such investment, the actual investment made and offered by the appellant requires to be accepted.4 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004
6. The learned CTT(A) has further erred in law and on facts in enhancing the addition on account of Investment In land as made by the A.O. by a further amount of Rs.10,00,000/- without proper consideration and appreciation of the facts and submission placed before him. In view of tine facts and submissions made, the same also requires to be deleted.
7. The learned CTT(A) has erred in law in confirming additions without any material/corroborative evidence found and seized during the course of search and on the record thereof Ld. CIT(A) has confirmed the additions which were duly reflected in books of account which is wholly unjustified, premature and bad in law as well as without jurisdiction and against the provisions of Chapter XIVB. Ld, CIT(A) has gravely erred in grossly ignoring the provisions of chapter XIV-B of the Act.
8. Both the lower authorities have erred in law and on facts in not giving proper opportunity to the appellant to place on record various explanations, submissions and evidences and further erred in law in not considering explanation placed on record. This action of both the lower authorities is clear breach of Principles of Natural justice and therefore deserves to be quashed."
2.1 It was submitted by the Ld. A.R. that ground No.9 regarding confirmation of addition of Rs.15,000/- on account of purchase of music system is not pressed. Regarding ground No.10, it was submitted that this ground is now covered against the assessee regarding levy of surcharge and regarding ground No.11, which is regarding charging of interest u/s 158BFA, it was submitted that the same is consequential. Accordingly, ground No.9 is rejected as not pressed and ground No.10 is also rejected because it is now covered against the assessee and ground No.11 is also rejected as being consequential in nature. 2.2 Regarding grounds No.1 to 8, brief facts of this issue till the assessment stage are noted by Ld. CIT(A) in para 5 (pages 3-14) of his order, which reads as under:
"5. The second ground of appeal pertains to addition of Rs. 1,09,58,250/- on account of investment in land of Bhagwati Banquet Pvt. Ltd. The issue has been discussed by the A.O. on pages 9 lo 39 of the assessment order wherein interalia, the A.O. has largely reproduced the findings and observations arrived at by him in the case of Shri Narendra Somani, the main promoter of the company Bhagwati Banquet Pvt. Ltd. and who is 5 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 also assessed by him. The observations of the A.O. are summarised as under:-
a)The promoters of the company namely Bhagwati Banquet Pvt. Ltd. in respect of which the investment in land has been made are Shri Narendra Somani mid Shri Satbirsingh Bhusari. The estimated cost of the land is Rs. 3.20 crores.
b}The A.O. while relying upon the statements of Shri Narendra Somani recorded u/s. 132(4) of the Act has observed that the land originally belonging to Shri Ramesh Patel and Harshad Pate I and the same had been decided to be purchased by Shri Narendra Somani jointly with the appellant i.e. Shri Satbirsingh Bhusari.
c) on the basis of memorandum of understanding seized in the case of the appellant as per Atmexure-A-20, both the promoters have to invest in the ratio of 50:50.
d) That both Shri Narendra Somani and Shri Satbirsingh Bhusari have stated in their statements that the noting on page-20 to 23 of Armexure- A-10 seized from Shri Narendra Somani pertains to estimate of project and that the figure 239.165 is Rs.2,39,16,500/-.
e} That for the purpose of investment in purchase of land for the company BBPL, "Bhagwati Group " means Shri Narendra Somani and Shri Satbirsingh Bhusari i.e. promoters of the said company.
f) That the actual payment till the date of search as per notings on page-20 to 23 of seized Annexure-A-10 is Rs.2.30 crores towards land plus Rs.0.0916 crores for expenses i.e. total Rs.2,39,16,500/- and that Shri Narendra Somani and Shri Satbirsingh Bhusari were jointly behind this investment .
g) That page-20 of Annexure-A-l0 seized from Shri Narendra Somani confirms the payment of Rs.2,39, I6,500/-. This page also contains the signature of Shri Satbirsingh Bhusari and thus, proven his agreement and involvement for this extent of payment.
h) It is clear that the total investment in land purchased (ill (he date of search is Rs.2,39, 16,500.'-. As against it, Shri Narendra Somani had accepted in his statement u/s. 132(4) that the amount paid for purchase of land was to the extent of Rs.115 lacs. Shri Satbirsingh Bhusari accepted in his statement u/s. 132(4) that he had invested Rs.8.00 lacs in cash towards purchase of this land.
i) It is clear that statements of both are far away from truth and the truth is clearly reflected in the seized papers according to which the total investment in land is Rs.2.39 crores which is inclusive of payment of payment of Rs.20 lacs by cheque. Thus, Rs.2,19,16,500/- is the amount of cask/unaccounted investment in the purchase of land because no accounted source for this extent of funds has been explained either by Shri Narendra Somani or Shri Satbirsingh Bhusari or both. As both Shri 6 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 Narendra Somani and Shri Satbirsingh are the 2 promoters of the project and had the arrangement of 50:50 investment m the concerned project, it can be inferred that both had made unaccounted investment in the land for RRPL project to the extent of Rs.1,09,58,250/- each (half of Rs.2,19,16,500/-).
j) Annexure-A-10 page-20 which contains the signature of Shri Satbirsingh Bhusari read with memorandum of understanding seized from the residence of Shri Satbirsingh Bhusari shows that funds (cash loans) raised and noted on page- 1 to 19 of the said Annexure are raised by both Shri Narendra Somani and Shri Satbirsingh Bhusari.
k) That the diary in the form of Annexure-A-10 contains particulars of cash loans raised and the payments made to owners for the purchase of land. The said diary is written in code in the handwriting of Shri Narendra Somani and the correct figures are to be read by adding "000".
l) The unexplained cash credit as per seized Amiexure-A-l0, A-13 & A-16 amounting to Rs.132 crores are taxable u/s. 68 in the hands of both the promoters i.e. Shri Narendra Somani & Shri Satbirsingh Bhusari. However, separate addition of Rs.1.32 crores on the basis of deeming income provision is not required because, the addition of Rs.2.19 crores on the basis of unexplained investment •will caver the annual required to be added w/.v. 68 considering that the unexplained loans have been used for investment in purchase of land.
m) The funds for investment in land came originally from unaccounted cash income generated and contributed by Shri Narendra Somani from catering activities (Rs.58.00 lacs), from cash loans received by both promoters (Rs. 124.00 lacs) and unaccounted funds generated and contributed by Shri. Satbirsingh Bhusari (Rs.8.00lacs).
n) Shri Satbirsingh Bhusari is also involved in unaccounted sales and earned huge unaccounted income. That during the course of search in case of Shri Satbirsingh Bhusari Annexure-A-16, A-17 & A-18 containing octroi receipts showing amount of purchase of Auto Parts and the payment of octroi on the same were found and seized. The appellant offered income at 5% GP on such purchases 'which comes to Rs.4,29,786/-. Since the appellant's unaccounted investment is high, the undisclosed income is determined on the basis of unaccounted investment and no separate addition is made on the basis of unaccounted sales because by considering even 10% G.P., the income will be much less than the amount of unexplained investment of Rs.1.09 crores in land for BEPL project.
o) That both Shri Narendra Somani & Shri Satbirsingh Bhusari have not spoken the truth. Shri Narendra Somani in his statement u/s. 132 (4) admits to have paid Rs.95.00 lacs in cash towards purchase of land out of total of Rs.115 lacs and that Rs.2,39,16,500/- is the rough estimate of 7 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 total cost of land. Shri Satbirsingh Bhusari has also not accepted the extent of his involvement in the BBPL project although seized papers do indicate his share investment as being 50%.
On the basis of the above observation, the A.O. has observed that actual payment till date of search is Rs.230 lacs. He has further observed that expenses incurred for the land transaction arc Rs.9.165 lacs and accordingly, A.Q. has observed that total amount paid for the said land is Rs.2,39,16,500/-. As against this, Shri Narendra Somani has admitted in his statement u/s.l32(4) an amount of Rs.115 lacs and Shri Satbirsingh has admitted an investment of Rs.8 lacs, and A.O. has further observed that the said statements are not correct and as per the seized documents, the total investment in the land is Rs.2,39,16,500/-. Considering the payment of Rs.20 lacs made by cheque, balance amount of Rs.2,19,16,500/-has been considered as unaccounted investment in the purchases of land and this investment has been considered by the A.O. in the hands of appellant and Narendra Somani in equal ratio and accordingly, half of the amount being Rs.1,09,58,250/- has been added in the hands of appellant. Besides this amount added in the hands of the appellant was also added in the hands of Shri N. G. Somani on protective basis as under-
"
Addition of Rs. 1,09,58,250/- in hands of Shri Satbirsingh Bhusari on substantive basis and in the hands of Shri Narendra Somani on protective basis:-
The following important fuels and factors are important for deciding the share of additions in the hands of the two promoters:
have not spoken truth. Shri Narendra Somani has accepted the entries of cash loans taken but does not admit the entire extent of funds raised by way of cash loans. Shri Narendra Somani, in his statement u/s. 132(4), admits to have paid Rs. 95 lacs in cash towards purchases of land and a total of Rs. 1.15 crores. He tries to describe the figures ofRs.2,39,16,500/" as being the rough estimate of total cost of land, while it Ls clear from the seized material itself that estimated cost of land isRs.3.20 crores, out of which actual payments made nil date of the search is Rs.2.39 crores. On the other hand, even Shri Satbirsingh does not accept the extent of his true involvement as being 50%.
b) The incriminating documents Annexure A-10, on which entries of cash loans raised from market are found, have been seized from the possession of Shri Narendra Somani. The entries are in his handwriting also. But neither he has correctly stated the true extent of loans raised, nor he has unequivocally stated that Shri Satbirsingh is/mil be contributory towards cost of land to the extent of 50%.
c)Although the fund have been managed and raised by Shri Narendra G. Somani; the involvement of Shri Satbirsingh is well indicated by his 8 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 signature on the crucial page-20 of Annexure-A 10 where total investment till the date of the search is worked out.
It is in the backdrop of all the above facts that the scope of protective assessment comes into picture.
Justification of applying protective assessment The view on this issue are available in recognized commentary on I.T. Law in Chaturvedi & Pithisaria. It is mentioned that-
"though there is no provision in the Act authorising the levy of income-tax on a person other than "the assessee ", i.e. the person by whom the income-tax is payable, etc., it is open to the income-lax authorities to make a protective or alternative assessment where, owing to litigation between the parties concerned in Civil Court or for other reasons, the person who is realty liable to pay the tax cannot be finally determined by the Income-tax authority. (Jagannath Hanumanbux v. ITO (1957) 311TR 603 (Cal).
In cases where it appears to the income-tax authority that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-tax authority to determine the said question by taking appropriate proceedings both against A and B [Lalit Haridas v. ITO (1961) 43 ITR 387, 392 (SC). Also see, G. Topi Saheb v. CIT(19S8) 170 ITR IS I (AP).
Explaining the aforesaid two decisions the Supreme Court in ITO v. Bachu Lal Kapoor (1966) 60 ITR 74] observed at pages 82-3 thus :- "In the former, the validity of protective assessment was approved; and in the latter, this court, though the question of assessment was raised did not express its final opinion thereon. This court held that when there wax a doubt us to which person among two was liable to be assessed, parallel proceedings might he started against both and it also laid down an equitable procedure to be followed in that situation." Recently also in the case of T.S.Sujatha v. Union India (1999) 238 1TR 599 (Ker), such a protective assessment was held to be valid by the Kerala High Court.
In the said Kerala case, during the search of the petitioner's husband, large bank deposits amounting to Rs.1,15,23,005/- was found in the name of the wife (petitioner). The petitioner's husband Shri Thankachan could not explain the sources of the batik deposits in the name of petitioner and minor children. However, it was treated as the undisclosed income of the husband and assessment completed in the light of the specific stand of the Department that the imputed deposits are out of (husband) Thankachan's undisclosed income. The petitioner's contention was that notice under 9 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 section 158BD could not have been issued against the petitioner. As the deposits were in the name of the petitioner. The department apparently issued notice under section 158BD to make a protective assessment. Since the husband had not accepted the deposits and the department's stand was that it was his income the matter went on appeal. On a court petition the High Court which approved of such a protective assessment and upheld the notice it's. 158RD on the petitioner in the light of general practice of the department approved in the decision of the Supreme Court in 1TO v. Bachulal Kapoor (1966) 60 1TR 74 (SC). 'flie Division Bench accordingly upheld the decision of the Single Judge reported in (1999) 239 JTR 488 (Ker.) "
Applicability in this case :
In this case during the course of search, Diary Afmexji-10 was seized from the residence of Shri Narendra G. Somani. On Page No. 20 of this diary shows the total payment for the purchase of land. On this page, Shri Satbirsingh H. Bhusari, the partner of the assessee and Co-promoter of BBPL has also signed. This diary is written by Shri Narendra G. Sotnani. It is observed from this page, Shri Narendra G. Somani and Shri Satbirsingh H. Bhusari had made the payments of Rs.2.39 crores for the purchases of land at Bodakdev. It is worthwhile to mention here that Shri Narendra G. Somani and Shri Satbirsingh are equal partners i.e., in the ratio of 50:50 in investment of this project and his signature on this page also proves this. This statement recorded during the course of search and u/s.131 recorded in the assessment proceedings on 12.2.2002 & 27.2.2002 also proves this fact where both have assessed to the share of 50:50 for the investment of this project. It is to be also noted that the memorandum of understanding seized along with 7/12 utara, Namuno 6 IIakk Pairak Annex.A-20, Page-42 to 85 seized from the residence of Shri Satbirsingh II. Bhusari at Annex.A-20 Page. 75 to 79 also admittedly proves the same. As for point No .C of the M.O.U. found from the residence of Shri Satbirsingh, it is very clear that the investment in the project was to be made in the ration of 50:50. On close perusal of Page. I to 19 of Amiex.A-10 indicates that the noting on Page. 20 is nothing but the summary of the affairs noted on Page. 1 to 19. It is also observed that Page, I to 19 is the fund raised by the both persons, for making remaining payments, since their own fund is ofRs.115 Lacs and Shri Satbirsingh has signed on Page. 20 shows that he knows the correct fact and he was equally involved and agreed for the transaction recorded on these pages.
From the above facts, it is well established that Shri Satbirsingh's contribution was also to the extent of 50%."
10 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/20042.3 Being aggrieved, the assessee carried the matter in appeal before ld. CIT(A) but Ld. CIT(A) did not find any merit in the contention raised by the assessee before him and he had not only confirmed the addition of Rs.1,09,58,250/- made by the A.O. but in fact, he has enhanced the addition by Rs.10 lacs. Since the addition of Rs.1,09,58,250/- was made by the A.O. on substantive basis in the ands of this assessee and on protective basis in the hands of Shri N G Somani, Ld. CIT(A) also vacated this addition of Rs.1,09,58,250/- made by the A.O. on protective basis in the hands of Shri N G Somani. Now, this assessee is in appeal before us against the confirmation of addition by Ld. CIT(A) of Rs.1,09,58,250/- and also for enhancement made by Ld. CIT(A) of Rs.10 lacs.
2.4 It was submitted by the Ld. A.R. of Mr. Satbirsingh H Bhusari that this issue was decided by Ld. CIT(A) as per para 5.5 of his order from pages 63-74 of his order. He also submitted that much reliance has been placed on loose pages No.97-99 of Annexure A-1 and loose pages No.20-23 of Annexure A-10. It is also submitted that as per the noting on page 97 of Annexure A-1, it was noted that total amount payable to Mr. Harshadbhai was Rs.125 lacs but payment made was of Rs.30 lacs only and there is proposed schedule of payment of the balance amount of Rs.95 lacs. He further submitted that similarly on page 98, it is shown that an amount of Rs.195 lacs was payable to Ashishbhai out of which Rs.85 lacs was paid and there is a schedule of proposed payment of the balance amount of Rs.110 lacs as proposed by Mr. Somani and also as proposed by Ashishbhai and hence, as per these two pages, the actual payment was made of R.115 lacs only and not more than this. He also submitted that on page 99 of Annexure A-1, is the combined proposed schedule of payment to Mr. Ashishbhai of Rs.110 lacs and Harshadbhai of Rs.95 lacs. He further submitted that on page 79 of disputed paper book is the copy of unsigned MOU but this is a dumb document because it is not signed by any of the parties and hence, no reliance can be placed on this MOU. He also 11 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 submitted that the original balance sheet of M/s. Bhagwati Banquets Pvt. Ltd. as on 31.03.2000 is available on page 88 of the paper book filed by Shri N G Somani of Bhagwati Banquets Pvt. Ltd. and as per the same, the paid up capital of the company was Rs.2000 only as on 31.03.2000 i.e. much after the date of search as on 15.02.2000. He also submitted that on page 81 of the paper book is the relevant page of Memorandum of Articles and Association of this company i.e. Bhagwati Banquets Pvt. Ltd. and as per the same, 100 shares were taken by Shri N G Somani and balance 100 shares were taken by this assessee i.e. Shri Satbirsingh H Bhusari, who were the directors of this company at the relevant point of time. It was also submitted that on pages 172-178 of the paper book submitted by Shri N G Somani is the copy of the arbitration agreement dated 03.09.2002 between the company M/s. Bhagwati Banquets Pvt. Ltd. and this assessee Shri Satbirsingh H. Bhusari and as per this agreement, it was agreed that an amount of Rs.140 lacs was to be paid by the company of Mr. Somani to this assessee i.e. Mr. Satbirsingh H. Bhusari on account of resigning from the directorship of the company as well as for transfer of shares held by Mr. Satbirsingh H Bhusari to Mr. Somani and his family members. It was also submitted that this money was given on account of Bungalow of this assessee which was mortgaged to Gujarat State Financial Corporation towards security for a loan of Rs.490 lacs sanctioned by it to the company M/s. Bhagwati Banquets and Hotels Ltd. The Bench asked the Ld. A.R. to furnish the details and evidences regarding the date and amount received by Mr. Bhusari as per this arbitration agreement and how the same was accounted for by Mr. Bhusari and if the assessee can show that no payment was in fact made by Mr. Bhusari then, the same is required to be declared as income on receipt but in spite of a long wait by the bench, no such detail or evidence was furnished by the Ld. A.R. and it has only furnished a letter dated 20.09.2001 of Gujarat State Financial Corporation written to the chairman/Secretary, Satyagrah Chhavni Cooperative Society intimating about this fact to the society that Shri 12 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 Satbirsingh H Bhusari has mortgaged his bungalow in Lane No.21 Plot 47 of the society against the loan of Rs.490 lacs sanctioned by them to M/s. Bhagwati Banquets and Hotels Ltd. Reliance was placed on the judgement of Hon'ble Gujarat High Court rendered in the case of Legal Heirs of Late Laxmanbhai S Patel Vs CIT as reported in 12 DTR 108 (Guj.).
2.5 In reply, it was submited by the Ld. D.R. that the figure of Rs.239 lacs is correct and it is the actual payment and not schedule of payment. Regarding 50:50 ratio as per MOU, it was submitted that the same ratio is as per Memorandum & Articles of the Company and till the date of search, shareholding of Mr. Bhusari and Mr. Somani was equal and the payment noted in the seized documents are after company's incorporation and hence, there is no reason to suggest that 50% payment was not made by Mr. Bhusari. At this stage, the Ld. A.R. of Mr. N G Somani also intervened and he submitted that although the MOU was unsigned but the same was found at the residence of Mr. Bhusari and, therefore, he was to explain this unsigned MOU. He also submitted that MOU is dated 18.10.1999 and the Memorandum of Association of the company is of a subsequent date i.e. 22.10.1999. He also submitted that his own residential bungalow was mortgaged by Mr. Bhusari to GSFC in respect of loan of Rs.490 lacs sanctioned by GSFC to the company M/s. Bhagwati Banquets and Hotels Ltd. and this also goes to show that Mr. Bhusari was having 50% interest in the company as per the MOU and MOA because if a person is not having any interest in the affairs of the company, why he will mortgage his own residential house to bank or financial institution. In reply, it was submitted by the Ld. A.R. of Mr. Bhusari that this unsigned MOU is a dumb document because it is unsigned and it is also submitted that in block assessment proceedings, no other evidence except the seized paper is relevant. He also submitted that on page 176 of the paper book filed by Mr. Bhusari is arbitration award as per which Shri N G Somani has to release Mr. Bhusari's all 13 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 bank guarantee in six months from the date of this agreement dated 03.09.2002. He also submitted that there is no mention of 50% share in the statement of Mr. Somani.
2.5 We have considered the submissions of both the sides and also the submissions of the Ld. A.R. of Mr. Somani because the issue involved is interconnected. We find that the issue in dispute is regarding on money payment in respect of land purchased for the company M/s. Bhagwati Banquets Pvt. Ltd., which was incorporated on 01.11.1999 and thereafter ,the company was renamed as Bhagwati Banquets and Hotel Ltd. on 13.04.2000. The promoter of this company were Shri N G Somani and Shri Satbirsingh H Bhusari and as per two sets of seized papers, it is noted by the A.O. in the assessment order that as per pages 97-99 of Annexure A-1, it comes out that the total payment of Rs.320 lacs was to be made in respect of this land purchased out of which an amount of Rs.115 lacs was already paid and there is a schedule for payment of balance amount between December 1999 to March 2000. It is noted by the A.O. on page 16 of the assessment order that against this schedule of payment proposed by Shri N G Somani and Harshadbhai and Ashishbhai, the entire payment was made except Rs.15 lacs because against one scheduled payment of Rs.20 lacs, this amount is bracketed and 5 was written which means that against scheduled payment of Rs.20 lacs, payment of Rs.5 lacs was made. On this basis, he also worked out that total actual payment was Rs.230 lacs (i.e.Rs.90+155-15 lacs). He has also noted that this finding got confirmed by entry in seized material as per Annexure A-10 on page 20-23. He also reproduced the contents of these pages on pages 17-18 of the assessment order. On page 20, 150 is noted against payment to Ashishbhai and 80 is noted against payment to Harshadbhai which is tallying with the noting on page 99 (Rs.90+155-15=230 lacs). Four other amounts are also noted on page 20 of Annexure A-10 against various different names and the total has been noted at Rs.239.165 lacs on page 21 and date is written 31.12.1999 and below this date, 14 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 two amounts are noted i.e. 64.50 lacs and 94.66 lacs total Rs.159.16 lacs and apart from this, there are various amounts noted on various dates i.e. 10.1.2000, 13.1/2000, 14.1.2000, 27.1.2000 and 4.2.2000. These notings along with dates show that the A.O.'s finding that total payment was of R.239.165 lacs is not on the basis of only 3 pages i.e. pages 97-99 of Annexure A-1 but when these pages are considered along with pages 20-23 of Annexure A-10, it becomes clear that payment was made as per Schedule and the actual payment was correctly worked out by the A.O. Hence, on this aspect, we do not find any merit in the contention raised by the Ld. A.R. of the assessee Mr. Bhusari that till the date of search, total payment was only Rs.115 lacs and not of Rs.239.165 lacs. It is also noted by the A.O. that out of total payment of Rs.239 lacs, payment of Rs.20 lacs is by way of cheque and hence, the balance payment of Rs.219.165 lacs is the amount of cash/ unaccounted investment for the purchase of land. We also find that in fact, Mr. N G Somani has accepted the payment of 50% of this amount and has tried to explain the source thereof also. The A.O. has also accepted such explanation abut source in his case to the extent of Rs.50 lacs and Rs.8 lacs being unaccounted income from Bhagwati Catering, Bhagwati Chaat and Ice Cream Parlors. Rs.20 lacs was paid by cheque and hence, accepted as explained. Balance amount of Rs.27 lacs was explained by Shri Somani out of withdrawal from Bhagwati Marketing. Be as it may but it comes out that the payment o Rs.239.165 lacs on account of purchase of land including cheque payment of Rs.20 lacs was obviously accepted by Mr. Somani and although Mr. Bhusari has not accepted the same but in the light of the seized material, it comes out that the A.O. was justified in coming to the conclusion that the total unaccounted payment for purchase of land was made to the extent of Rs.219.165 lacs.
2.6 Now, the question is, as to whether the entire such cash payment was made by Mr. Somani or he had made only 50% payment and 50% payment was made by Mr. Bhusari. The contention of the Ld. A.R. of the assessee Mr. 15 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 Bhusari is this that no payment was made by his client Mr. Bhusari and the entire payment was made, even if made, by Mr. Somani only. Regarding the unsigned MOU, it is the submissions of the Ld. A.R. of Mr. Bhusari that since the MOU is unsigned, it is a dumb document. Even if we accept this contention, we find that this fact is not supported by this MOU only that both these persons; Mr. Bhusari and Mr. Somani were having 50% shares of the company M/s. Bhagwati Banquets and Hotels Ltd. because as per the MOA of this company, these two persons are the only directors of this company and they were holding equal shares in this company at the time of formation of the company and even on 31.03.2000, the paid up capital was only Rs.2000 i.e. 200 shares of Rs.10 each which were subscribed by Mr. Bhusari and Mr. Somani equally being 100 shares each. As per the copy of Annual Return dated 28.09.2000 filed with Registrar of Companies on27.12.2000, copy available on pages 102 to 114 of the paper book, even on 28.09.2000, these two persons were equally holding 100 shares each of the company Bhagwati banquets Private Limited. Hence, it is clear that even on the date of the search Mr. Bhusari was holding 50% shares of the company. Hence, even if the MOU was unsigned, it was found from the residence of Mr. Bhusari and moreover, subsequent event and evidence establish that even this unsigned MOU was accepted upon by forming the company in which these two persons were only directors and they were holding 50% shares each of this company and even on the date of search, the position remained same. Other evidences also support this view because this is an admitted position of fact that Mr. Bhusari has mortgaged his residential house in Satyagrah Chhavni Cooperative Housing Society in Lane NO.21, Plot nO.87 to GSFC against a loan of Rs.490 lacs sanctioned by GSFC to the company M/s. Bhagwati Banquet & Hotels Ltd. If Mr. Bhusari was not having 50% interest in the company, it doe not stand to logic that he will mortgage his own residential house to GSFC against the loan for the company. Hence, when we consider these facts which could not be 16 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 controverted or disputed by the Ld. A.R. of Mr. Bhusari, it comes out that Mr. Bhusari was having 50% share in the company M/s. Bhagwati Banquets and Hotels Ltd. till the date of search and this is also logical that if some unaccounted cash payment is made for a company, the same is to be accepted as have been made by various persons in the ratio of their shareholdings in that company. Since in the present case, the ratio of shareholding in the company M/s. Bhagwati Banquets and Hotels Ltd. by Mr. Bhjusari and Mr. Somani was equal till the date of search from the date of incorporation, it has to be accepted that both have made these cash payments in equal proportion because no evidence has been brought out on record by the Ld. A.R. of M. Bhusari to support his argument that no investment was made by his client Mr. Bhusari. We, therefore, do not find any merit in these contentions of the Ld. A.R. of Mr. Bhusari that actual cash payment was only of Rs.115 lacs and no investment was made by Mr. Bhusari in respect of cash payment on this account. Hence, grounds No.1-5 of this appeal of the assessee are rejected. 2.7 Regarding ground No.6, i.e. regarding enhancement made by Ld. CIT(A) of Rs.10 lacs in the hands of Mr. Bhusari, we find that this enhancement was made by him on his basis that total payment was of Rs.239.165 lacs and 50% of the same comes out to Rs.1,19,58,250/- and addition made by the A.O. was only Rs.1,09,58,250/- and therefore, he made enhancement of Rs.10 lacs. We do not find any infirmity in this enhancement made by Ld. CIT(A) because admittedly, out of total payment of Rs.239.165 lacs, payment of Rs.20 lacs was made by way of cheque by Mr. Somany and hence, the share of Mr. Bhusari and Mr. Somany has to be worked out on the basis of total payment and then from the 50% share of Mr. Somany, Rs. 20 Lacs is to be reduced being payment made by him by cheque to work out his cash payment and the cash payment by Mr. Bhusari is the 50 % amount in full because no cheque payment is made by Mr. Bhusari. Such 50% of total payment works out to Rs.1,19,58,250/-. Since the A.O. had made addition of only Rs. 109,58,250/- in the hands of Mr. Bhusari, 17 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 this enhancement of Rs.10 lacs made by Ld. CIT(A) is also justified and the same is confirmed. Ground No.6 is also rejected.
2.8 Regarding other grounds i.e. grounds No.7-8 alleging violation of principles of natural justice and not giving proper opportunity etc, we find that the addition is made on the basis of seized documents and other related evidences such as holding of 50% shares by Mr. Bhusari in the company Bhagwati Banquets and Hotels Ltd. and mortgage of his own residential house and even before us, nothing could be produced by the Ld. A.R. of Mr. Bhusari to make out any case in favour of the assessee and hence, these grounds No.7 & 8 are also rejected.
2.9 Regarding reliance placed by the Ld. A.R. of the assessee on the judgment rendered in the case of Heirs and Lrs of Late Laxmanbhai S Patel Vs CIT as reported in 12 DTR 108 (Guj.), we find that this judgement is not applicable in the present case because the ratio of this judgement is this that legal effect of the statement recorded behind the back of the assessee without furnishing a copy thereof to the assessee without giving opportunity of cross examination, is that if the addition is made, the same is required to be deleted on the ground of violation of principles of natural justice. In the present case, we have confirmed the addition in the case of Shri Satbirsingh H Bhusari on the basis of seized documents and addition in both the cases was made by the A.O. on the basis of seized documents and in none of the cases, addition is on the basis of the statement recorded behind the back of the assessee and therefore, this judgement of Hon'ble Gujarat High Court is not relevant in the present case.
2.10 In the result, this appeal of the assessee is dismissed.
3. Now, we take up the revenue's appeal in I.T.A.No. 234/Ahd/2003 in the case of Mr. Satbirsingh H Bhusari. The grounds raised by the revenue in this appeal are as under:
18 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004"1. The CIT (A) has erred in law and on facts in deleting addition of Rs.l,84,000/- made on account of unexplained investment in stolen jewellery.
2. The CIT (A) has erred in law and on facts in deleting addition of Rs.1,98,220/- made on account of unexplained investment in jewellery. 3: The CIT (A) has erred in facts and on facts in deleting addition of Rs. 61, 680/- made on account of unexplained investment in house hold articles.
4. The CIT (A) has erred in law and on facts in deleting addition of Rs.25,000/- made on account of unexplained tour expenses.
5. The CIT (A) has erred in law and on facts in deleting addition of Rs. 66, 000/- on account of unexplained investment made in bunglow.
6. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer.
7. It is, therefore, prayed that the order of the CIT (A) be set aside and that of the AO be restored to the above extent."
3.1 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A) in respect of the issues raised in this appeal of the revenue.
3.1.1 We have considered the rival submissions and have gone through the orders of authorities below. Regarding ground No.1, of the revenue's appeal, we find that this issue was decided by Ld. CIT(A) as per para 6.2 of his order which is available on page 76 and the same is reproduced below:
"6.2. I have considered the issue at length. The evidences placed by the appellant before the A.O., the copies of which have been filed before me with the written submissions have also been perused. I find that the observations of the A.O. are very general in nature and he has not commented upon the submissions and evidences filed by the appellant before him during the course of the assessment proceedings in form of Balance sheet of appellant's HUF and the explanation for the source of acquisition of the said jewellery. It. is not the case of the A.O. that the jeweller}' reflected in the balance sheet is not correct. It is also not the case of the A.O. that the claim of theft is incorrect Rather, the reason given by the A.O. for making the impugned addition is that the same is not shown in the working of the jewellery. However, on perusal of the details and explanation filed by the appellant before the A.O.., I find that it was clearly stated that the jewellery in question was reflected in the balance sheet of appellant's HUF and that the claim received from the 19 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 insurance company has also been credited in the books of accounts. On the facts of the case, I find that the addition is unwarranted more particularly since the facts stated by the appellant have not been controverted by the A.O. The addition of Rs. 1,84,000/- is hence deleted."
3.1.2 From the above para of the order of Ld. CIT(A), we find that his addition was deleted by Ld. CIT(A) on this basis that jewellery in question was reflected in the balance sheet of the assessee's HUF. This finding of Ld. CIT(A) could not be controverted by he Ld. D.R. and hence, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue. Accordingly, ground No.1 of the revenue's appeal is rejected.
3.2 Regarding ground No.2, we find that this issue was decided by Ld. CIT(A) as per para 7.2 of his order which is available on pages 80-81 of his order. This para is also reproduced below for the sake of ready reference:
"7.2 I have carefully considered the facts of the case, A.O.'s observations and the arguments and submissions of the appellant along with evidences in support thereof filed before the A.O., the copies of which forms part of the written submissions. It is an undisputed fact that the person wise jewellery claimed in the chart furnished to the A.U. have been duly reflected in the balance sheet of the respective person filed with the income-tax arid/or wealth-tax returns and the A.O. has not disputed the said fact in the assessment order. This being the case., 1 agree with the arguments of the appellant that the A.O, was not justified in treating the jewellery of appellant's HUF as appellant's jewellery in individual capacity for the purpose of determining the excess jewellery, keeping in view the fact that the A.O. at no stage of assessment proceedings has either established that the appellant's HUF is not genuine or that the jewellery reflected in the balance sheet of appellant's IIU11' is unexplained. Further, on comparison of the total gold ornaments and jewellery shown in the balance sheet of all the family members vis-a-vis the gold ornaments and jewellery found during the course of search, it is seen that as against total jewellery found weighing 2301.850 gms. total jewellery reflected in the balance sheets of the family members weigh 2295.980 gms. Thus, there is a small discrepancy of 5.870 gms. which is explained to be on account of receipt by children on auspicious occasions. On perusal of the block return, it is found that the disclosure of Rs. 2.00 lacs was an overall disclosure on account of jewellery 20 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 remaking, purchase of jewellery and certain expenditure and it is nowhere admitted that it is on account of discrepancy in jewellery found vis-a-vis reflected in the balance sheets. Keeping in view the facts in totality, 1 find no justification for making the addition on account of unexplained investment in jewellery in the manner worked out by the A.O. The said addition is accordingly deleted and this ground of appeal is hence allowed."
3.2.1 From the above para of the order of Ld. CIT(A), we find that this is noted by Ld. CIT(A) that when the total jewellery found in the course of search and the total jewellery reflected in the balance sheet and family members of the assessee is compared, there is a small discrepancy of 5.870 gms only. It is also noted by him that there is an explanation in this regard that these were received by children on various auspicious occasions. He also noted that on perusal of facts, it is found that the disclosure of Rs.2 lacs was an overall disclosure on account of jewellery remaking, purchase of jewellery and expenditure and it is nowhere admitted that it is on account of discrepancy in jewellery found. This finding of Ld. CIT(A) could not be controverted by the Ld. D.R. and hence, on this issue also, we find no reason to interfere in the order of Ld. CIT(A). This ground of the revenue is also rejected.
3.3 Regarding ground No.3 of the Revenue's appeal, we find that this issue was decided by Ld. CIT(A) as per para 8.2 of his order on page 84 of his order and the same is also reproduced below for the sake of ready reference:
"8.2. 1 have considered the rival contentions and I have also perused the evidences and explanation filed before the A.O. in respect of household valuables. It is seen that the items held by the A.O. as unexplained have been duly reflected in the personal balance sheet of appellant's wife and his daughter as claimed in the detailed chart submitted vide letter dated 8/2/02, explaining the source of each household valuables found during the course of search. The A.O. has also not brought on record any evidence to establish that the investment in the said items has been made by the appellant and not the person to whom the same belongs to. In view of the above facts, the addition of Rs.61,680/- is deleted."21 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004
3.3.1 From the above para of the order of Ld. CIT(A) we find that a clear finding is given by him that all the items held by the A.O. as unexplained have been duly reflected in the personal balance sheet of the assessee's wife and his daughter. This finding of Ld. CIT(A) could not be controverted by the Ld. D.R. and hence, on this issue also ,we do not find any reason to interfere in he order of Ld. CIT(A). Ground No.3 is also rejected.
3.4 Regarding ground No.4, we find that this issue was decided by Ld. CIT(A) in para 9.2 of his order on pages 87-88 of the order of Ld. CIT(A) and the same is also reproduced herein below for the sake of ready reference:
"9.2. 1 have carefully considered the findings of the A.O and the arguments and the submissions of the appellant. On perusal of year-wise details of house hold withdrawals furnished by the appellant vide biter dated 8/2/2002 filed before the A.O. The claim of the appellant that the expenditure on Essel World tour was only Rs.10,000/- to Rs.12,000/- since the total expenditure of Rs.63,390/- was pertaining to a group of about 15 persons including his family and other friends appears to be reasonable. Nevertheless, keeping in view the year-wise household withdrawals, I disagree with the argument that the said expenditure was met out of the same. However, 1 agree with the claim of the appellant that the said expenditure requires to be treated as made out of the amount of Rs.2 lacs disclosed in the block return. Accordingly, no separate addition is warranted and hence, the estimated addition to the extent of Rs.25,000/- made by the A.O. on account of Essel World tour is deleted. In so far as the addition of Rs.15,000/- on account of music system brought by appellant's son from Singapore during his school tour is concerned, the same is confirmed as the observation of the A.O. could not be controverted by the appellant. Accordingly, addition to the extent of Rs.15,000/- is confirmed and the balance is deleted."
3.4.1 From the above para of the order of Ld. CIT(A), we find that this addition was deleted by Ld. CIT(A) on this basis that the said expenditure were met out of Rs.2 lacs disclosed by the assessee in the block return. This finding of fact given by Ld. CIT(A) could not be controverted by the Ld. D.R. and hence, we decline to interfere in the order of Ld. CIT(A) on this issue also. Ground No.4 is rejected.
22 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/20043.5 Regarding ground No.5, we find that this issue was decided by Ld. CIT(A) as per par 10.2 on page 89 of his order which is reproduced below:
"I have considered the facts and the rival contentions and find that complete accounts regarding construction expenditure of bungalow were found noted in seized Annexure A-9 to A-11 and the amount of Rs.66,000/- was a temporary advance give to labour contractor Jasubhai for daily payment and in the final amount shown in the books of accounts this amount of Rs.66,000/- is included. Hence, this addition of Rs.66,000/- is deleted."
3.5.1 From the above para of the order of Ld. CIT(A) we find that this noting was regarding temporary advance given to labour contractor Jasubhai for daily payment and in the final amount shown in the books of accounts, this amount of Rs.66,000/- is also included and, therefore, no addition is justified. Considering the facts of the present case, we do not find any good reason to interfere in the order of Ld. CIT(A) on this issue also and hence, this ground of the revenue's appeal is also rejected.
3.6 In the result, this appeal of the revenue in I.T.A.No. 234/Ahd/2003 is dismissed.
4. Now, we take up the appeal of the revenue in the case of Shri N G Somani in I.T.A.No. 233/Ahd/2003.
4.1 Ground No.1 is as under:
"1. The CIT (A) has erred in law and on facts in restricting addition of Rs.51,58,250/- made oil account of unexplained investment in land for the hotel project to Rs.14,58,250/-."
4.1.1 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A).
4.1.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that Shri Somani's total unaccounted investment in land was worked out by the A.O. at Rs.1,09,58,250/-, out of which he has accepted explanation of the assessee 23 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 regarding source of this investment to the extent of Rs.58 lacs being income from M/s. Bhagwati Caterers and Bhagwati Foods. He made addition of the balance amount of Rs.51,58,250/- by rejecting the assessee's explanation regarding sources of balance investment. Ld. CIT(A) has deleted this addition as per Para 5.4 of his order on page 7 and the same is reproduced below for the sake of ready reference:
"Perusal of case records or regular assessment .show that unsecured loans of over Rs.82 lakhs are appearing in the balance sheet And these loans were deposited in the bank account from where the withdrawals were made. As all such loans and the bank account are appearing in the balance shoot of regular return on which assessment up to assessment year 1999- 2000 has been completed, this issue is beyond the purview of block assessment as the assessing officer has nowhere questioned the genuineness of deposits in she bank account. Appellant has withdrawn a sum of Rs.27,00,000/- out of these bank withdrawals on various dates. Hence, there is no reason for not accepting these withdrawals in block assessment, when it is apparent that the cash balances have been built up by withdrawing various amounts in cash from the bank account. Hence, assessing officer's action in not accepting the sum of Rs.27,00 .000/- is not correct. In view of this, appellant's explanation of: investment of Rs.1,05,00,000/- is explained. However, for the remaining amount no explanation at all could be furnished by the appellant. Hence out of the addition of Rs.52,58,250/-, addition ofrs.14,58,250/- is confirmed and the balance amount is deleted"
4.1.3 From the above para of the order of Ld. CIT(A), we find that he has given good and cogent reasons for accepting the claim of the assessee towards explanation of the source of this cash payment for purchase of land to the extent of Rs.27 lacs. because the same is out of withdrawal from the bank account in which unsecured loan of over Rs.82 lacs was deposited and the same is appearing in the balance sheet being part of regular return of assessment year 1999-2000 and, therefore, it was held that this issue is beyond the purview of block assessment. He has also allowed relief of Rs.10 lacs being 50% amount of Rs.20 lacs paid by cheque in respect of this transaction of land purchase and confirmed the balance addition ofRs.14.58.250/-. We find that the total 24 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 unaccounted investment in land being share of Mr. N G Somani was worked out by the A.O. also at Rs.1,09,58,250/-. Out of this, A.O. has accepted the explanation to the extent of Rs.58 lacs and Rs.27 lac is explained out of cash withdrawal form bank and hence, the total comes out to Rs.85 lacs leaving a balance of Rs.24,58,250/-. In working out the total cash payment by Mr. Somani, the A.O. has first reduced the amount of Cheque Payment of Rs. 20 lacs from total payment and only of the balance amount, he added 50% in the hands of Mr. Bhusari and Mr. Somani each. But this cheque payment of Rs. 20 Lacs was not made by these two persons in equal ration but the entire cheque payment was made by Mr. Somany. Hence, the amount of Cash payment by Mr. Somani is not Rs.1,09,58,250/- but only Rs.99,58,250/- ( 50% of Rs. 239,16,500/- = Rs. 119,58,250/- minus Rs. 20,00,000/-). Out of this amount of cash payment of Rs. 99,58,250/-, the assessee has explained the source of Rs. 85 lacs and hence the addition confirmed by learned CIT (A) of only Rs. 14,58,250/- is correct and hence we find no infirmity in the order of learned CIT (A) for granting relief of Rs.37 lacs as has been done by Ld. CIT(A). Ground No.1 of the Revenue's appeal is rejected.
4.2 Ground No.2 is as under:
"2. The CIT (A) has erred in law and on facts in deleting addition of Rs.3,40,000/- made-on account of unexplained cash found at the time of search."
4.2.1 Regarding this ground also, Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A). We find that this issue was decided by Ld. CIT(A) as per para 7.2 of his order which is reproduced below for the sake of ready reference.
"7.2 After the consideration, I find that at the time of search, it was stated by the appellant that cash was of M/s. Bhagwati Marketing. The build up of cash balance of M/s. Bhagwati Marketing has already been discussed earlier in this order. Besides this, A.O.'s finding that it was not disclosed in statement is also not correct. Hence, there is no justification of this addition and the same is deleted."25 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004
4.2.2 From the above para of Ld. CIT(A)'s order, we find that he has deleted this addition on this basis that at the time of search itself, it was stated by the assessee that the cash found was of M/s. Bhagwati Marketing and buildup of cash balance of Bhagwati Marketing is already discussed by Ld. CIT(A) and the Ld. D.R. could not point out any defect in these findings of Ld. CIT(A) and hence, we decline to interfere in the order of Ld. CIT(A) on this issue also. Ground No.2 is also rejected.
4.3 Ground No.3 is as under:
"3. The CIT (A) has erred in law and on facts in deleting addition of Rs.4.00.000/- made on account of the unexplained amount paid by the assessee for Vishi account."
4.3.1 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A).
4.3.2 We have considered the rival submissions and we find that this issue was decided by Ld. CIT(A) as per para 8.2 of his order which is reproduced below:
"I have carefully considered the issue, arguments of the Ld. A.R. appears to reason that from time to time investment was made in vishi out o amount disclosed and finally on closure of vishi account, the entire amount was utilized towards the land deal. Hence, this amount is clearly covered out of disclosure in the case of M/s. Bhagwati Chat and no separate addition is required to be made. This addition is, therefore, deleted."
4.3.2 From the above para of the order of Ld. CIT(A), we find that this addition was deleted by Ld. CIT(A) on this basis that investment in vishi was made from time to time and out of the amount disclosed and finally on closure of vishi account, the entire amount was utilized towards the land deal. This finding of Ld. CIT(A) could not be controverted by the Ld. D.R. by showing that vishi account was closed after the payments made by the assessee for land deal. He also could not show that the amount paid for vishi account was not out of 26 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 various amounts disclosed and hence, on this issue also, we do not find any reason to interfere in the order of Ld. CIT(A). This ground is also rejected. 4.4 Ground No.4 is as under:
"4. The CIT (A) has erred in law and on facts in deleting addition of Rs.58,428/- made on account of unexplained investment in diamond jewellery."
4.4.1 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A).
4.4.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that this issue was decided by Ld. CIT(A) as per par 9.1 of his order which is reproduced below:
"I find merit in the submission. I also find that the A.O. has not discussed how and why this amount was treated as unexplained, when the A.O. has himself accepted that diamond ring worth over Rs.1 lac belonging to the appellant was explained, there was no reason to hold that diamond jewellery worth Rs.58,428/- only could not belong to other lady members of the house. It is also seen that at the time of search, it was stated that jewellery kept in locker belonged to lady family members. Hence, this addition is not at all justified and is deleted."
4.4.3 From the above para of the order of Ld. CIT(A) we find that this addition was deleted by Ld. CIT(A) on this basis that when the A.O. has accepted that diamond ring of Rs.1 lac belonging to the assessee was explained, there was no reason to hold that diamond jewellery worth Rs.58,428/- only could not belong to other lady member of the house. He has also given a finding that at the time of search, it was stated that jewellery kept in locker belonged to lady family members. We do not find any infirmity in the order of Ld. CIT(A) on this issue and hence, we decline to interfere in his order on this issue. Ground No.4 is also rejected.
4.5 Ground No.5 is as under:
27 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004"5. The CIT (A) has erred in law and on facts in deleting addition of Rs.5,88,840/- on account of unaccounted payment of interest."
4.5.1 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A).
4.5.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that this issue was decided by Ld. CIT(A) as per Para 10.2 of his order which is reproduced below:
"I have carefully considered the issue and I have also gone through the copies of seized papers, submissions of the appellant were examined vis- à-vis copies of accounts of various creditors. It was also seen that in regular return for assessment year 2000-01, unsecured loans over Rs.82 lacs are appearing in the balance sheet and it is seen that amount of interest is recorded in regular books of accounts. The A.O. has not been able to rebut appellant's submissions that working of interest pertained to loan taken form Shri B D Chavla, Rekha Wadhwani, Mukesh Textiles and others as stated in the submissions. All these loans and interest are recorded in regular books of accounts. Besides this, from the seized documents it cannot be said that interest has actually been paid and unless the amount is actually paid, and which is not recoded in regular books of accounts, no addition can be made. Perusal of seized page 152, 151 etc. also shows that interest has been worked out up to 31.03.2000, i.e. for the posts search period. This also proves appellant's assertion that the documents show only calculations of interest and not actual payment. In view of this, I find no justification for addition of Rs.58,88,340/- and the same is deleted."
4.5.3 From the above Para of the order of Ld. CIT(A), we find that this finding is given by Ld. CIT(A) that all these loans and interest are recorded in regular books of accounts and from the seized documents ,it does not come out that interest has actually been paid and unless the amount has actually been paid and not recorded in the regular books of accounts, no addition could be made. We also noted that perusal of seized pages 152 and 151 etc. show that interest has been worked out up to 31.03.2000 i.e. for the posts search period and hence, there is force in the assessee's assertion that the documents show only 28 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 calculation of interest and not actual payment. These findings of Ld. CIT(A) could not be controverted by the Ld. D.R. and hence, we decline to interfere in the order of Ld. CIT(A) on this issue also. Ground No.5 of revenue's appeal is rejected.
4.5.4 In the result, appeal of the revenue in I.T.A.No. 233/Ahd/2003 is dismissed.
5. Now, we take up the appeal of the revenue in the case of M/s. Bhagwati Banquets and Hotels Ltd. in I.T.A.No. 3151/Ahd/2004. The ground raised by the revenue is as under:
"1. The CIT(A) ha erred in law and on facts in directing to delete the addition of Rs.34,00,000/- made on account of on money paid for the purchase of land. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. It is therefore, prayed that the order of CIT(A) be set aside and that of the A.O. be restored to the above extent."
5.1 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT(A).
5.2 We find that this issue was decided by Ld. CIT(A) on pages 10-11 of his order and the relevant paras from his order are reproduced below:
"I have carefully considered the submissions of the Id. Authorized representative and I have also gone through the block assessment order in the case of the appellant's company and its directors Shri N G Somani and Shri Satbirsingh Bhusari. Perusal of these orders shows that the seized documents indicated that whatever 'on money' was paid, was in (act paid by the directors and not by the appellant company for the same reason in appellant's case block assessment was completed al Nil, income and entire additions on account of 'on money' payment was made in the hands of the two directors Such action has also been confirmed by the CIT(A). Even during the course of appellate proceedings in the case of directors it was slated Dial the payments were made by the directors individually. In such circumstances there was no reason to add this amount in the hands of the company especially when no business activity had started. Even the seized paper extracts to which has been reproduced at pages 1 to 5 of the assessment order clearly shows that schedule of payments indicates amounts proposed to be paid by Narendrabhai 29 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/2004 who happens to be the director The seized documents nowhere indicate that any payment has been paid by the appellant company. In view of these lads and the findings given in the block assessment orders in the case of directors I find no reason for making this addition in the hands of the company now.
Apart from this the Assessing Officer has made additions for payments winch have been allegedly made during the period 16/2/2000 to 1/7/2000. This j period falls during, assessment years 2000-01 and 2001-
02. As the period is I overlapping without any enquiry is not known how Assessing Officer carne lo I the conclusion that the payments pertain lo A Y 2001-02 only In view of these j facts and the finding in the block assessment order as well as in appellate orders against block assessment it is very much clear that if at all any additions are required to be made The same would pertains to the directors arid not lo the appellant company The addition is therefore deleted."
5.3 From the above paras of the order of Ld. CIT(A), we find that this addition was deleted by Ld. CIT(A) on this basis that in the course of appellate proceedings in the case of a director, it was stated that payment was made by the director individually and, therefore, there is no reason to hold this amount in the hands of the company. We have already seen that 50% addition on account of on payment for purchase of land has been made in the hands of one of the directors Shri Satbirsingh H Bhusari and we have already confirmed that addition and out of balance50% amount, addition of Rs.51,58,250/- was made in the hands of Mr. N G Somani by the A. O. by accepting the explanation of the assessee regarding the source of investment of Rs.58 lacs. Out of this addition of Rs.51,58,250/-, Ld. CIT(A) had allowed relief of Rs.37 lacs which had been confirmed by us while deciding the appeal of the revenue in the case of Shri N G Somani and hence, we find that entire cash payment for purchase of this land has been either explained or addition was made in the hands of the directors and, therefore, no separate addition in the hands of the company is justified for the same cash payment. We, therefore, decline to interfere in the order of Ld. CIT(A).
5.4 In the result, this appeal of the revenue is dismissed.
30 I.T.A.No.200,233,234 /Ahd/2003 I.T.A.No. 3151/Ahd/20046. In the combined result, the assessee's appeal in the case of Shri Satbirsingh H Bhusari in I.T.A.No. 200/Ahd/2003 is dismissed and all three appeals of the revenue in the case of Shri Bhusari, Shri N G Somani and the company M/s. Bhagwati Banquets and Hotels Ltd. are also dismissed.
7. Order pronounced in the open court on the date mentioned hereinabove.
Sd./- Sd./-
(KUL BHARAT) (A. K. GARODIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Sp
Copy of the Order forwarded to:
1. The applicant
2. The Respondent
3. The CIT Concerned
4. The Ld. CIT (Appeals)
5. The DR, Ahmedabad By order
6. The Guard File
AR,ITAT,Ahmedabad
1. Date of dictation...01/01/2013
2. Date on which the typed draft is placed before the
Dictating Member...04-01-2013.Other Member ............
3. Date on which the approved draft comes to the Sr. P.S./P.S.
4. Date on which the fair order is placed before the Dictating Member for pronouncement ......22/01/2013
5. Date on which the fair order comes back to the Sr. P.S./P.S.22/1
6. Date on which the file goes to the Bench Clerk ...22/01/2013
7. Date on which the file goes to the Head Clerk .......................
8. The date on which the file goes to the Assistant Registrar for signature on the order .........................
9. Date of Despatch of the order. ......................