Income Tax Appellate Tribunal - Ahmedabad
Atlantic Credit & Capital Ltd.,, ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "D"
Before Shri N.S. SAINI, ACCOUNTANT MEMBER and
Shri MAHAVIR SINGH, JUDICIAL MEMBER
Date of hearing: 08.03.10 Drafted on:09.03.10
IT(SS)A No.83/AHD/2006
Block Period from 1/04/1985 to 21/12/1995
Atlantic Credit and Capital Vs. Dy. Commissioner of Income
Ltd. Sumatinath Complex, Tax (OSD), Range-1,
Pritamnagar 2 n d Slope, Ahmedabad.
Paldi, Ahmedabad.
PAN/GIR No. :31-131- CZ-0617
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri S.N.Divetia and Anil
Kshatriya A.Rs.
Respondent by: Shri B.S.Sandhu CIT.
ORDER
PER N.S.SAINI , ACCOUNTANT MEMBER :-
This is an appeal filed by the Assessee against the order of the order of the Assessing Officer passed under section 158BC read with section 254 of the Income Tax Act, 1961 on 30.03.2006.
2. The brief facts of the case are that search and seizure operation was carried out at the business premises of the assessee along with the other group concerns at IOL House, Ambawadi Bazar, Ahmedabad u/s.132 of the Income Tax Act, 1961 ["the Act" for short] on 21.12.1995. Notice u/s 158BC of the Act was issued and served on the assessee on IT(SS)A No.83/Ahd/2006 -2- 27.08.1996 asking the assessee to furnish the return within 16 days of service of notice. The assessee filed its Block Return on 27.6.1997 declaring an undisclosed income at Rs.NIL. Original block assessment was completed u/s 158BC on 29.06.1997 determining the total income at Rs.46,31,43,672/-. The said assessment was set aside by the ITAT vide order dated 25.08.2004 directing the AO to pass fresh assessment after allowing adequate opportunity to the assessee. In consequence thereof the AO passed the subsequent block assessment vide order dated 30.03.2006 determining the total undisclosed income at Rs.42,54,62,172/- after getting prior approval of the CIT, Ahmedabad vide his letter No.CIT.ABD.1/Approval/ 158BC/2005-06, dated 30.03.2006, by making the flowing additions:-
Para No. of Heading Amount (Rs.)
Assess-
ment order
4.1 Disclosure made by Dr. Amit Shah 5,21,86,400
4.2 Additional undisclosed income of the 71,59,658
assessee not disclosed during the course of
survey
4.3 Unaccounted cash deposit made in the 28,88,000
Bank Account
4.4 Unaccounted sales of shares by the 64,83,110
assessee
4.5 Income from undisclosed share 2,98,64,000
Transactions
4.6 Unaccounted sales of the assessee 2,40,00,000
4.7 Unexplained income of the assessee 45,000
4.8 Unexplained investment of the assessee 44,32,093
4.9 Unexplained income of the assessee 92,650
4.10 Unaccounted Receipts of the assessee 15,00,000
4.11 Unexplained investment of the assessee 36,36,000
4.12 Unaccounted receipts of the assessee 3,20,00,000
IT(SS)A No.83/Ahd/2006
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4.13 Unaccounted Income of the Assessee 7,94,48,703
4.14 Undisclosed investment of the assessee 14,800
4.15 Unaccounted Expenditure of the assessee 13,20,000
4.16 Unaccounted Income of the Assessee 17,00,000
4.17 Unaccounted investment of the assessee 8,25,57,037
4.18 Unexplained Income of the Assessee 79,75,790
4.19 Unaccounted Cash deposits in the Bank 45,49,000
Accounts.
4.20 Unexplained Investment of the assessee 2,68,44,886
4.21 Unaccounted Sales of the Assessee 5,39,55,045
4.22 Additional Income offered by the assessee 28,10,000
Total Income 42,54,62,172
3. The assessee had raised the grounds of appeal in the memo of appeal filed on 26.04.2006. These grounds of appeal were revised by the assessee on 22.01.2009, when the appeal was heard by the then Bench. Thereafter, the appeal was de-heard by the Bench. The appeal again came up for hearing before the present Bench when again the assessee filed another set of revised grounds of appeal on 9.03.2010. In the above circumstances, the Bench asked the ld. CIT DR Shri B.S.Sandhu to verify the three sets of grounds of appeal filed by the assessee and inform the Bench which are the grounds of appeal which should be taken up for hearing. The case was adjourned for 30 minutes on that day and the Bench again reassembled for hearing of the appeal. The ld. CIT DR Shri Sandhu submitted that he has no objection to the assessee taking the revised grounds of appeal filed on 9.03.2010 except the ground No.19.1 of the revised ground of appeal and the same may be heard and decided by the Bench. The ground No.19.1 of the revised grounds of appeal reads as under:-
IT(SS)A No.83/Ahd/2006 -4- "19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
Income treated as income in the hands of assessee company .....Rs.5,21,86,400/-"
The Learned Departmental Representative submitted that this ground of appeal was not raised in the original Memorandum of appeal and even the revised grounds which were filed on 22.01.2009. Now this ground of appeal raised by the assessee was not due to any bonafide omission. The Learned Authorised Representative of the assessee could not show before us that the above additional ground taken in the revised grounds of appeal filed now was due to any bonafide omission. Therefore, we proceed to decide the grounds filed before the Bench on 9.03.2010 except ground no.19.1 which is not admitted after hearing both the parties in respect of those grounds.
4. Ground No.1 of the appeal reads as follows:-
"1. That the Assessing Officer framed the assessment order without mentioning the assessment years, the income attributable to which is mandatory as per Section158BB of the Act and such illegality cannot be cured by an appellate authority."
5. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. The ld. AR pointed out that while framing the block assessment the AO has not made the year-wise computation of undisclosed income. He contended that such computation was mandatory in view of provisions of section 158BB of the Act and violation of the same made the order bad in law liable to be quashed. The Ld. DR argued that the above mistake is a curable mistake and therefore, the order cannot be cancelled. We find that it is not in dispute that the AO had held a valid jurisdiction to compute the undisclosed income of the assessee. The mistake pointed out here is not a mistake in the assumption of jurisdiction. The alleged error was error in excise of jurisdiction i.e. in the manner of computation which is a procedural irregularity. Therefore, in our considered view the order passed by the AO IT(SS)A No.83/Ahd/2006 -5- cannot be quashed on this ground. We, therefore, set aside the order of the AO and direct the AO to recompute the undisclosed income as per the procedure prescribed under section 158BB of the Act by making year-wise computation. Thus, this ground of appeal is allowed as above for statistical purposes.
6. Ground nos.2 and 3 of the appeal reads as follows.
"2. On the facts and circumstances and in law both the AO and Commissioner have erred in not giving any opportunity of being heard before passing the order u/s.142(2A) of the Act dated 11,12.1996 and therefore the observation/findings given on the basis of same may kindly be treated as null and void having no bearing on the case.
3. Without prejudice and in the alternative to the ground No. 2 above, the learned AO has failed to appreciate that the appellant was prevented by a sufficient cause for failure to get accounts audited as directed u/s142(2A) of the Act when the AO himself has failed to supply necessary information and particulars to the auditor as required to be investigated by the auditor for the purpose of carrying out the aforesaid audit."
7. The relevant observation of the AO in this regard is as under:-
"2.0 Direction for Special Audit u/s. 142(2A) of the Act. .
The assessee was directed on 11.12.96 to get its account audited for the previous year relevant to A.Y. 1995-96 and 1996-97 covering the period from 24.11.94 (date of incorporation of company) to 21.12.1995- included in the Block period from Manubhai & Co., C.A, Ahmedabad within two months from the receipt of the letter. The copy of the letter was also served to M/s Manubhai & co. C.A, Ahmedabad for Information and necessary action. This order was issued with the prior approval of the C.I.T. Guj.-l, Ahmedabad. The said direction was served to the assessee on 12.12.96. Vide letter dated 2.1.97 the assessee requested to M/s Manubhai & Co., C.A to inform about as to when and at what time will it be convenient to start the audit. Again vide letter dated 4.2.97 the assessee made the same request. M/s. Manubhai & Co. C.A vide letter dt. 6.2.97 requested the assessee to contact Shri N.A.Japee to arrange the audit program. The assessee vide letter dated 10.2.97 requested to IT(SS)A No.83/Ahd/2006 -6- grant extension for three months as the assessee's chief accountant Shri Mahesh Sharma had left the job from January 97. In absence of the Chief Accountant, Shri Nupoor Kansara had taken over the charge from January, 97. It was further submitted by the assessee that due to some unavoidable circumstances it was not possible to complete the audit within the prescribed time. The request of the assessee for grant of time for further three months was accepted by the A.O. and extension was granted upto 20th April 97. The assessee was requested to intimate the progress of audit work to the A.O. Vide letter dt. 15,4.97 the assessee has further requested to grant extension of two months on the ground that newly appointed Chief Accountant Shri Rajesh Shah still needs some time in becoming conversant with the affairs of the group. The companies' affairs are in good progress however, it will require scrutiny before starting the audit work. The assessee was further informed vide this office letter dt. 20th April 97 about the extension of time upto 20lh June 97 and directed to complete the audit work within the stipulated time and intimate the progress of the audit work on or before 20th May, 97. M/s. Manubhai & Co. once again requested the assessee vide letter dtd.22nd May 97 with a copy to the undersigned to contact them immediately and produce the books of accounts for the period to be covered under the audit. M/s Manubhai & co. further informed the A.O. vide letter dt. 22nd May 97 that pile of their written request and repeated reminders on phone the assessee company not yet approached them with books of account and other relevant records for the purpose of carrying out the audit assigned to them and therefore the audit of the aforesaid company would not be commenced by them. They therefore requested to the A.O. to issue necessary instructions to the assessee to extend their cooperation for the purpose of completion of audit as without their cooperation it will not be possible for them to complete the audit work within the stipulated time. The assessee was further reminded vide this office letter dt. 30.5.97 to submit the audit report by 6.6.97 to take care of the same well within time although extension was granted upto 20th June 97. Suddenly at the fag end of the time granted for audit work the assessee requested vide letter dt. 6.6.97 to the A.O. to provide Xerox copies of the seized materials to get the account of the company audited u/s 142(2A) of the Act. The grounds for request to provide Xerox copies of the materials second time has been given by the assessee that during the course of inquiries by the CBI and SEBI the Xerox copy of the seized materials have been misplaced.
The Xerox copies of the seized materials were given to the assessee long back on 22.11.96. The direction for special audit of the assessee's books of accounts u/s 142(2A) was given to the assessee on 11.12.96 and was received by the assessee on 12.12.96 and subsequently the extension of time has been granted to the assessee till 20th June, 1997 on the request of the assessee, but the audit work could not be completed till the date of order.
IT(SS)A No.83/Ahd/2006 -7- It can be seen that in spite of number of opportunities, assessee never cooperated with the special auditor and ensured that special audit could not be done in its case."
8 We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. The Ld. AR submitted that the order for special audit under section 142(2A) was passed in the instant case on 11.12.1996 without allowing any opportunity of hearing to the assessee. Therefore, as various additions have been made in the order of assessment on this count alone and therefore the order of assessment should be cancelled. On the other hand, the Ld. DR submitted that the assessee had not got done the special audit in pursuance to the order passed in his case and therefore, the assessee could not have any grievance against the said order. We find that the revenue could not show that the assessee was afforded any opportunity of hearing before order for special audit was passed in his case. The Hon'ble Supreme court in the case of Sahara India (Firm) Vs. CIT & Anr. (2008) 300 ITR 403 (SC), held that opportunity of hearing is must and should be granted to the assessee before passing any order under section 142(2A) of the Act. It was further held that in absence of such opportunity being granted to the assessee, the assessee may object to the correctness of the material gathered on the basis of the audit report submitted under section 142(2A) of the Act. Therefore, in our considered opinion, the order passed under section 142(2A) in the instant case without allowing any opportunity of prior hearing to the assessee was not a valid order. However, it is also observed that special audit was not carried out in the case of the assessee and no report of the Special auditor was used in the instant case. Therefore, the assessee could not have any specific grievance in this appeal against the said order. In respect of the various additions made in the order of assessment, the same will be considered on merits of individual items on the basis of reasons recorded in the order of assessment and no adverse view shall be drawn against the assessee merely on the basis of not getting the account audited under section 142(2A) of the Act. Thus, with the above IT(SS)A No.83/Ahd/2006 -8- observation, the grounds of appeal of the assessee are disposed off as above.
9. Ground no.4 of the appeal reads are under:-
"4. The learned AO has failed to appreciate that all the major impugned additions were outside the scope of provisions of Section 158B(b) and other relevant provisions of the Act in as much as the same were already recorded in the books of accounts and other documents found and seized and also maintained in the normal course relating to such previous years, therefore, such transaction or income arising out of it should not have been included in the block period. The appellant submits that in order to hold any item as undisclosed income u/s. 158B(b) of the IT. Act, it is not a condition precedent to have the accounts audited, either tax audit or special audit, so that the AO's contention deserved to be rejected and such addition should be deleted."
10. After hearing the rival submissions, we find that in this ground of appeal, the assessee has not challenged any specific addition made in the order of assessment. This ground is general in nature. The assessee has challenged the various additions by taking separate grounds of appeal which shall be considered and disposed off on merit of each item separately. Therefore, this ground of appeal of the assessee does not require separate adjudication by us and accordingly, dismissed.
11. Ground no.5 of the appeal reads as follows:-
"5. The appellant above named begs to submit that the impugned order passed by AO. is barred by limitation of time in as much as, the time limit prescribed for assessment under Chapter XIV-B in section 158BE is one year from the date of issue of notice uls.158BC of the Act. This provision does not prescribe any other time limit for passing de novo order in consequence to the order setting aside the "original assessment by the appellant authority. In the present case, the original assessment was framed on 29.6.1997 and the same was set aside by ITAT vide its order dated 25.082004. The notice u/s 158BC was issued on 27.8.1996 and hence the block assessment was required to be framed within one year from this date in view of IT(SS)A No.83/Ahd/2006 -9- section 158BE. However, the impugned order has been passed on 30/3/2006 and hence it is barred by limitation.
5.1 Secondly, it is submitted that the provisions of 153 are not applicable to Chapter XIV-B and as such the extended time would not be applicable.. The appellant derives support from the unreported decision of Delhi Bench of ITAT in IT(SS) A No 228/DEL/2004 wherein it was held that block assessment order flamed in consequence of an order u/s 263 but passed after the expiry of period prescribed u/s 158BE is barred by limitation and as such invalid.
5.2 This proposition has now been settled, by the Hon'ble SC as reported on page 334 of 297 ITR where it has held as under
"If there is no conflict between the provisions of chapter XIVB and any other provisions of the 1961 Act then the latter will operate"
5.3 The Hon'ble High Court of Gujarat, following the Supreme Court's decision (supra) in the case of Cargo Clearing Agency (2008) 307 1TR -1 has therefore also held the Same.
5.4 Since there is conflict between the provisions of section 158BE & 153 and Chapter XIV.B being a self contained code, provisions of Chapter XIV-B, so far as limitation is concerned, it is the section 158BE which will be applicable to the present case.
5.5 In view of the above, the ground, without prejudice and in alternative to grounds raised in appeal memo, is raised for kind consideration of the Hon'ble Members:
"The impugned order is barred by limitation as per the time limit provided under the provisions Chapter XIV - B of the Income Tax Act, 1961, which is a self contained code, and the provisions of section 153 are not applicable in this denovo assessment"
12. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. The relevant facts are that search and seizure operation in this case was conducted on 21.12.1995 and in pursuance to the same, assessment for the block period completed under section 158BC on 29.06.1997, which was well within the time prescribed under section 158BE of the Act. Thereafter, the Tribunal vide its order dated 25.08.2004, set aside the said order of Block IT(SS)A No.83/Ahd/2006
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assessment and directed the AO to reframe the assessment afresh. In pursuance to this direction of the Tribunal, the AO reframed the block assessment order on 30.03.2006 which was also within the time limit provided under section 153 of the Act. On the above facts, the contention of the Ld. AR of the assessee is that the assessment for the block period completed on 30.03.2006 being in pursuance to search conducted on 21.12.1995 is beyond the time limit prescribed under section 158BE of the Act. In support of this contention, he placed reliance on the decision of Delhi Bench of the Tribunal in IT(SS)A No.228/Delhi/2004, wherein it was held that order framed in consequence to an order under section 263 but passed after expiry of period prescribed under section 158BE is barred by limitation and as such invalid. The Ld. DR on the other hand, submitted that if the argument of the assessee is accepted as correct then it implies that Tribunal had no jurisdiction on 25.08.2004 to set aside the original assessment order of block assessment and consequently the original order of the block assessment should be treated as final. The ld. AR placed reliance on the decision of the Hon'ble Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) v. Joint CIT (2008) 307 ITR 1 (Guj). We find that in the said decision the High Court was concerned with the applicability of provisions of sec. 147/148 in case of a Block Assessment where assessment is already completed u/s 158BC of the Act and the High Court held that no notice u/s 148 of the Act can be issued in such a case. Thus, the facts of the instant case is quite different and distinguishable in as much as the fresh assessment has not been made by the AO by initiating any fresh proceeding by issuance of notice u/s 148 of the Act but on the other hand passed fresh order in pursuance to the direction of the Tribunal on an appeal against the original order which was within time and the appellate order was in continuation to the original assessment proceedings. We find that the issue is squarely covered by the decision of Madras High Court in the case of Laxmi Jewellary Vs. DCIT (2001) 252 ITR 712(MAD), wherein it was held that:-
"Sec. 158BE only specifies the period within which the AO must complete the assessment. It does not come in the way of the IT(SS)A No.83/Ahd/2006
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appellate authorities, who find the assessment order to be defective for any reason, remanding the matter to the AO for making a proper order in relation to the matters with respect to which the matter is remanded by the appellate authority. The limitation of one year is only for the assessment and it is not a limitation which fetters the discretion of the appellate forum. There can be no dispute and there is none regarding the extent of the power of the appellate authority that it has the power not only to uphold or set aside the assessment order but also has the power to modify or remit. The Tribunal, therefore, was well within its powers in directing the AO to redo the assessment in respect of certain items, after giving a copy of the report that it had relied on, to the assessee. There was no breach of s. 158BE in making that order."
In view of the above decision, we do not find any merit in these grounds of appeal of the assessee. Therefore, these grounds of appeal are dismissed.
13. Grounds nos.7, 12 and 13 reads as under:-
"7. That for the reasons search was conducted being found untenable the assessment made on the basis of search is illegal, unjustified and ultravirous.
12. That it is apparent for several facts that neither the Assessing Officer nor the Commissioner of Income-tax applied their mind in respect of the assessment made in view of the fact in the show cause notice the addition purported to be made of Rs.70,00,000/- but in fact the addition was made at Rs. 17,00,000/- in the assessment order. Again in the show cause notice issued by the Assessing Officer he did not specified proper requirement on the basis of which the assessment is purported to make and he has also ignored several replies by the appellant in the matter of his queries.
13. That the Assessing Officer cannot treat the entries in the bank account would not have been shown by the assessee and treat the entries as undisclosed investment of the appellant."
IT(SS)A No.83/Ahd/2006
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14. At the time of the hearing, the ld.AR submitted that he is not pressing the above three grounds of appeal and hence they are dismissed as not pressed.
15. Ground no.8 of the appeal reads as under:-
"8. That the Assessing Officer exceeded his jurisdiction in adding up following additions which had not been made at the time of original assessment which had been set aside by the learned Income-tax Appellate Tribunal.
i) Rs. 70,00,000/- in respect of page 11(iv)(Reverse page) of Annexure A-6 (para 4.16 of assessment order)
ii) Rs. 9,60,000/- in respect of page 11(viii)(Reverse page) of Annexure A-6 (para 4.17 of assessment order)."
16. At the time of the hearing, it was submitted by both the parties that the above grounds are covered in ground nos.19.16 and 19.17 of the assessee and hence, they will be considered while arguing those grounds and this ground of appeal is not required to be adjudicated separately. Therefore, this ground of appeal is dismissed.
17. Ground nos.6, 10, 11, 14, 15, 16, 17 and 18 of the appeal reads as under:-
"6. The Assessing Officer failed to consider that the place where the search was conducted it was not the Registered Office of the appellant so that the books of accounts would be available at that place and he completely ignored the fact that the books of accounts had been produced before him and also before the ADIT before framing the impugned assessment which is apparent from the assessment order itself noting down the date of transaction which had been considered in the assessment order.
10. That the imaginations of the Assessing Officer that the figures mentioned in the loose papers are in lakhs is without IT(SS)A No.83/Ahd/2006
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any corroborative evidence and on the basis of suspicion and surmises and cannot be accepted.
11. That the Assessing Officer had taken irrelevant consideration that the books of accounts had not been audited u/s. 142(2A) for the purpose of making addition as undisclosed income in spite of the fact that they are recorded in the
14. That the Assessing Officer and the Commissioner of Income-tax erred on facts and in law in assuming that the appellant had suppressed / understated undisclosed income over and above as reflected in the investments, assets, expenditure, etc. found at the time of search, contrary to the provisions contained in sections 158B, 158BA, 158BBand 158BC of the Act though the books of accounts were maintained and found as a result of search.
15. That the Block Assessment order passed by the Dy. Commissioner of Income-tax (OSD) Range-1, Ahmedabad under Section 158BC r.w.s. 254 of the I.T.Act on 30/3/2006 is arbitrary and against the principles of natural justice, based on assumptions, surmises and conjectures, brushing aside all written as well as oral submissions made in the course of assessment proceedings. The said assessment order is, therefore, illegal and bad in law.
16. That the Block Assessment order passed by the Dy. Commissioner of Income-tax (OSD) Range-1, Ahmedabad under Section 158BC r.w.s. 254 of the I.T.Act on 30/3/2006 is arbitrary and against the principles of natural justice inasmuch as that the material used to make the addition of Rs.2,68,44,886/- being alleged purchase from R.K. Investment, Mumbai and Rs.5,39,55,045/- being sales affected by N.V. Shah, Mumbai as per original show cause notice dated 17.6.1997 and notice dated 9.3.2006 issued by the present Assessing Officer was not supplied though specific request were made as per reply dated 10.3.2006, 14.3.2006 and 30.3.2006.
17. That the Block Assessment order passed by the Dy. Commissioner of Income-tax (OSD) Range-1, Ahmedabad under Section 158BC after the previous approval of the Commissioner of Income-tax, Ahmedabad-l, Ahmedabad as provided under section 158BG of the I.T.Act, 1961 is arbitrary and against the principles of natural justice in as much as the said approval has been given by the learned Commissioner of Income-tax acting arbitrarily instead of acting fairly, justly and reasonably, brushing aside and without taking into consideration the oral as well as written submissions made vide letter dated 10.3.2006, 14.3.2006 and 24.3.2006 by the IT(SS)A No.83/Ahd/2006
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appellant before the Assessing Officer and oral as well as written submissions dated 30.3.2006 made at the time of hearing before the Commissioner of Income-tax. However, the learned Commissioner of Income-tax communicated his approval to the Assessing Officer vide his letter No. CIT.ABD.I/Approval/ 158BC/ 2005-06 dated 30/3/2006 post- hate without fully appreciating all the submissions as well as the books of account produce before him. The said assessment order is, therefore, illegal and bad in law.
18. That the Assessing Officer erred on facts and in law in making the following additions by way of undisclosed income arbitrarily, without taking into consideration the detailed written submissions dated 10.3.2006, 14.3.2006, 24.3.2006 and 30,3.2006 duly supported with all the available evidence as well as duly audited books of accounts and the audit report produced before the Assessing Officer as well as the Commissioner of Income-tax at the time of hearing before them."
18. The Ld. AR submitted that the above grounds are the arguments of the assessee against additions made by the AO. The assessee has taken separate grounds for each of the additions also involved in the above grounds of appeal and therefore, separate adjudication of these grounds of appeal are not required and requested to consider the above arguments at the time of disposal of the relevant grounds of appeal. In view of the above submissions of the ld. AR, these grounds of appeal are treated as dismissed.
19. Ground no. 19.2 is as follows:
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"On account of difference of income between disclosed income and income computed by average and FIFO method .......... Rs.71,59,658/-"
IT(SS)A No.83/Ahd/2006
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20. The AO has made the above addition by observing as under:
"4.2. Additional undisclosed income of the assessee not disclosed during the course of Survey;
The assessee company has transacted in scripts of Indo American Optics Ltd as under :-
Purchase Sales
Date Shares Amount Shares Amount
15.4.95 64400 1674400 - -
01.5.95 281000 7306000 - -
01.5.95 100000 2600000 .
01.5.95 45000 1170000 -
05.5.95 100000 2900000 _
10.7.95 36500 1149615 -
14.7.95 17100 420275 5400 167200
14.8.95 17100 455675 51200 1711718
16.8.95 139700 4805359 - -
17.8.95 79200 3341265 25000 1070000
21.8.95 123200 5234400 2000 70200
24,8.95 57400 3089644 10100 455625
25.8.95 106500 6509688 91100 5024082
28.8.95 59700 4055420 361100 20180120
31.8.95 181400 9712160 167300 8528900
01.9.95 189800 11320570 392100 15710235
5.9.95 106800 5396868 - -
6.9.95 4000 188000 - -
8.9.95 14600 783480 14600 775550
8.9.95 150200 6066788 - -
IT(SS)A No.83/Ahd/2006
- 16 -
8.9.95 13500 682425 - -
11.9.95 4400 204922 186900 5377360
12.9.95 10800 590220 - -
13.9.95 200 5350 116100 2929195
14.9.95 250000 6375000 157200 3665826
14.9.95 1000 58750 -
15.9.95 200000 4040000 223300 4556980
15.9.95 100000 2100000 - -
18.9.95 - - 118800 2458680
19.9.95 100 2020 500 10050
22.9.95 2900 136300 83000 2259350
25.9.95 24800 1608225 52600 1133425
26.9.95 - - 32900 835755
27.9.95 - - 75000 1696485
6.10.95 356700 795442 98200 2373200
6.10.95 - - 615000 1549335
23.10.95 1700 34530 55100 1438110
25.10.95 16000 324850 - -
26.10.95 34100 657990 - -
31.10.95 10000 194000 - -
13.11.95 11600 189445 - -
20.11.95 1000 14300 - -
01.12.95 - - 1500 21000
2936000 104248386 2936000 97939381
IT(SS)A No.83/Ahd/2006
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Transactions in script of Indo American Credit Corporation Ltd. by Atlantic Credit and Capital Ltd.
Date Acquisition Sales
Shares Amount Shares Amount
7.6.95 1733800 26454900 .
31.8.95 - - 5000 262925
4.9.95 - - 34800 1599320
5.9.95 - - 24700 1019220
6.9.95 - - 100800 3036565
8.9.95 - - 43400 1178745
11.9.95 - - 17100 497715
13.9.95 - - 16900 437995
18.9.95 . - 78100 1788480
19.9.95 - - 4500 92700
25.9.95 - - 100000 3078225
27.9.95 - - 3000 93765
28.9.95 17000 449600 - -
29.9.95 71700 1520040 156600 3310255
6.10.95 32500 877500 11900 321300
13.10.95 165000 7838000 550900 10257945
16.10.95 700000 11354000 700000 11189025
17.10.95 - - 10000 168500
20.10.95 - - 857600 13778690
23.10.95 - - 231800 3541050
IT(SS)A No.83/Ahd/2006
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25.10.95 6900 126865 - -
26.10.95 - - 25000 384525
27.10.95 - 393975 121100 182710
8.11.95 25000 393975 - -
13.11.95 216400 3083010 - -
2984700 47370890 2984700 56219655
The average purchase rate of Indo American Optics Ltd. comes to Rs. 15.88 and average sale rate Rs. 18.82. thus it can be seen that total 2936000 shares of Indo American Optics Ltd., has been sold by the company for a total consideration of Rs. 97,93,381/- similarly 2984700 shares of Indo American Credit Corporation has been sold by the company for a total consideration of Rs. 5,61,68,654/-. 12900 shares of Gujarat Cotex Ltd., were sold for a total consideration of Rs. 25,98,840/-.
Methods for determination of quantum.
Now, the question arises as what was the sale consideration of shares which had been received by Atlantic Credit & Capital Ltd., from Dr. Amit Shah. As the distinctive numbers of the shares are not available till date so the actual sale of each and every share could not be determined precisely. In this regard one of the two methods is possible:
1. Average methods
2. First in first out method.
Average Method:
The average rate of sale of shares of Indo American Optics Ltd., comes to Rs. 33.36 per share and average rate of shares of Indo American Credit Corporation comes to Rs, 18.82. So the sale consideration received by the assessee (claimed to be Dr, Amit shah) by average method would be as under :
SCRIP QUANTITY RATE AMOUNT
Indo American
Credit Corp.
1754200 33014044
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Indo American 18.82
Optics Ltd.
164400 5484384
Indo American
Optics Ltd., 33.36
Gujarat Cotex Ltd. 6564160
Maxima systems 281000 23.36
Ltd.
141900
12900 11.00
570000
38000 15.00
45774488
So the unaccounted income of Dr. Amit Shah from the shares which are claimed to have been sold through Atlantic Credit and Capital Ltd. Will be Rs.
45774488/- as per average method.
First in First Out Method :
Further, if first in first out method is applied then the sales consideration of first 1733800 shares of Indo American Optics Ltd., can be taken to be the sale consideration of Dr. Amit Shah. By this method the sale consideration will be quite high. Thus the sale Rs. 23062489/- and profit will be Rs. 10404544/-. Similarly for Indo American Credit Corporation Ltd., the sales consideration of 1733800 shares will be Rs. 36283569/- and profit will be Rs. 18945569/- by average method the profit would be Rs. 15292116/- and by first in first out method figure of unaccounted income will be higher by Rs. 13571570/-.
The total income by average method and FIFO method comes to 5,93,46,058/-and actual declaration of income is 5,21,86,400/- thus there is less disclosure of income of Rs. 71,59,658/- would be additional income on substantive basis and total income would be 5,96,46,058/- (Addition of Rs. 71,59,658)"
21 The A.R. firstly relied on the submission dated 30/3/2006 made before the A.O. at paper book page No.421 to 423 as extracted below.
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"At the outset it is submitted that the whole exercise earned out in this regard amounts to estimation of undisclosed income. The undisclosed income has to be computed on the basis of material found as a result of search are not disclosed prior to search or would not have been disclosed. In other words it is usually not recorded in the regular books of accounts and therefore termed as unrecorded transactions. In the instant case all the transactions are duly recorded in the books of accounts maintained in the normal course and seized as such. As submitted during the course of assessment proceedings it was not the choice of the assessee company that which particular books or documents the authorised officer should seize. Thus, it was the authorised officer who opted to seize only limited part and not the entire set though available. The said facts are evident from the non seizure of cash found. In fact, for the purpose of explaining cash found though the books of accounts of following concerns were produced
(i) Asiatic Infrastructure & Shelter Ltd.
(ii) Atlantic Credit & Capital Ltd. (iii) Indo American Optics Ltd. (iv) Cure Spects Leser Ltd. (v) Zillion Pharmachem Ltd.
Being group companies, the books of 3 companies at Sr. (iii) to (v) above were not even inventories as found. What is to be taxed is the actual undisclosed income and not the notional one as proposed. With this background, we reiterate again as under.
The addition of Rs.71,59,658/- was made in the original order on account of profit on sale of shares related to share transaction in Indo Americal Credit Corporation Ltd. The income from transactions of shares is calculated by applying average method and FIFO method at Rs.5,93,46,058/- and actual declaration of income is Rs.5,21,86,400/-. (Rs.5,93,46,058 - Rs.52186400 = Rs.71,59,658/-). It is submitted that the average purchase price at Rs.35.51 was considered and the average sale price taken at Rs.33.36 for the script of Indo American Optics Ltd. The average purchase price is taken at Rs.15.88 and average sale price of Rs.18.82 is adopted for the shares of Indo American Credit & Capital Ltd, IT(SS)A No.83/Ahd/2006
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and accordingly worked out the additional income Rs.4,57,74,488/-. The another method applied, i.e. FIFO method, and on that basis the additional income was worked out at Rs.1,18,57,398/-. The said working is done without going into the detailed facts of the case. As per the present situation the fact remained that the cost of acquisition of the entire quantity of the scrips involved for the alleged addition is covered by the transactions made by it in the regular books of A/c. return of income filed for the block period. As and when the shares were sold in the normal business, profit / loss arising therefrom, had already accounted for in the regular books of accounts of the company. Therefore any subsequent income / loss on account of sales of such shares has been recorded in the books of accounts, therefore application of the average method or FIFO method is not justifiable. Any addition on this account is now unwarranted.
To conclude it is submitted that the survey operation were not carried out in the case of the assessee company as narrated in opening line of para 4.2. Therefore, there is no question of any additional income not disclosed during the course of survey. There appears to be some typographical error in it, which should be clarified. This is just to keep the record straight."
The A.R. further contended that the additions made are not based on account of any survey as no survey material is available or made available, if at all it was there. In fact it is copied out from the order passed by the predecessor A.O. as appearing at page no 534 of paper book where in there is no mention of any survey action which supports the contention of the A.R. The D.R. could not substantiate the survey action by such material. The said working is arrived at from the date wise / scrip wise details recorded in the books of appellant company by applying various methods to make the additions but the same could only be applied in the regular assessment as it could not be subject matter of block assessment as there is no material found as a result of search. The complete details of actual profit on sale of all the shares including the referred scrips in the Para 4.2 of the Assessment order is duly reflected in the book of account produced and also at paper book page no 90 to 94 being balance sheet as on 21.12.1995 IT(SS)A No.83/Ahd/2006
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i.e date of search and also at paper book page no 555 to 566 audited accounts for period ending on 31.3.1996 (which includes the transactions as per assessment order from 15-4-95 to 21.12.95). The books of accounts were produced before A.O. and were verified by him and no defects were found as evident from order sheet at paper book page no 554. Furthermore the A.O. has not dealt with the above submission dated 30-3-2006 appearing at paper book page no 421 to 423 at all, but simply copied it from the original order dated 29-6-97. Therefore the transactions recorded in the regular books of accounts cannot be treated as undisclosed and the actual book result is duly reflected & supported by the verified books of accounts and audit report as aforesaid.
22. We have heard the rival submission and perused the materials available on record. We find that income of Rs.5,21,86,400/- assessed in the hands of the assessee company covers the cost of acquisition of the shares of Indo American Optics Ltd. and Indo American Credit Corporation Ltd. and further addition of Rs.71,59,658/- was made by the Ld. AO on account of profit on sale of such shares. The above profit was arrived at by applying FIFO method. The contention of the assessee is that as the full details of purchase and sale of shares were recorded in the books of account, the Ld. AO was not justified in arbitrarily applying FIFO method and making addition of Rs.71,59,658/- on account of profit on sale of shares. We find that the Ld. AR could not file any details before us to show that the actual profit on sale of such shares were lesser than Rs.71,59,658/-. Further, it is observed that the investment in shares in question were treated as undisclosed income and the ground relating to the same was not admitted as the same was not taken in original memorandum of appeal as well as the revised grounds of appeal taken on 22.01.2009 and the same was found as not a bonafide omission. In view of this, it cannot be accepted that the profit of sale on such shares would not constitute undisclosed income. We therefore, do not find any merit in this ground of appeal of the assessee and the same is dismissed.
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23. Ground no.19.3 of the appeal reads as under:-
"19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
On account of cash deposits made in Bank account ................Rs.28,88,000/-"
24. The AO has made the above addition by observing as under:-
"4.3. Unaccounted Cash deposit made in the Bank Account:
Annexure A-2 seized during the survey is a bank pass maintained by the assessee in Bank of Madurai. On examination of the Bank Pass Book, it is seen there are cash deposits on various dates, the details are as under:
CASH DEPOSIT -Rs. DATE NAME OF THE BANK
1,00,000/- 21.06.95 Bank of Madurai
10,000/- 19.07.95 "
10,000/- 19.07.95 "
13,000/- 20.08.95 "
15,000/- 25.08.95 "
8,000/- 27.07.95 "
5,000/- 28.07.95 "
5,00,000/- 01.08.95 "
9,00,000/- 02.08.95 "
2,000/- 08.08.95 "
2,25,000/- 25.08.95 "
11,00,000/- 13.11.95 "
28,88,000/- Total
Vide final show cause dated 9/3/2006 the assessee was requested to explain as to why the above cash credit amounting to Rs. 28,88,000/- should not be treated as unexplained cash credit. In his IT(SS)A No.83/Ahd/2006
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submission assessee explained that the cash deposits in question as deposits made from the available cash balance in the books of account of the assessee company and produced extract of the cash book and relevant portion of the bank book. According to AO, the extracts of the books produced by the assessee is not reliable as the were not audited u/s 142(2A). He treated that no justified explanation for the above cash deposits could be submitted by the assessee and therefore, added the same to the total income treating the same as unexplained cash credit u/s 68 of the act in the hands of the assessee on substantive basis. (Addition of Rs. 28,88,000)"
25. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. The undisputed facts of the case are that the assessee is maintaining a bank account with Bank of Madhura in which there was cash deposits on various dates within the period 21.06.1995 to 31.11.1995 totaling to Rs.28,88,000/-. Before the AO, the assessee produced extracts of cash book and submitted that the deposits were made out of the funds available with the assessee. The AO was of the view that extracts of cash book produced by the assessee are unreliable and therefore, he treated the entire amount of cash deposits in bank of Madhura as undisclosed income of the assessee amounting to Rs.28,88,000/-. Before us, the LD. AR of the assessee pointed out from page no.436 of the paper book that the bank account maintained with Bank of Madhura was duly reflected in the regular books of account of the assessee. He submitted that during the course of the search, regular book of account of the assessee company for the Financial year 1994-95 was seized and marked as Annexure-A Sr. No.8, containing 74 pages which included ledger account of Bank of Madhura Ltd. Account No.1466. Thus, the Ld. AR contended that the bank account of the assessee maintained with Bank of Madhura was already entered in the regular books of account maintained by the assessee company and therefore, the said Bank account cannot be treated as not disclosed or entries in the said bank account could not be assumed as would not have been disclosed to the department. The above submissions of the assessee could not be controverted by the LD. DR. The Learned Authorised Representative of the assessee also relied on IT(SS)A No.83/Ahd/2006
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the decision of Ahmedabad 'D' Bench in the case of Asiatic Infrastructure & Shelters Ltd. Vs. DCIT in IT(SS)A no.84/Ahd/2006 order dated 9/10/2009. We find that the AO could not bring any material on record to show that the funds available with the assessee company on various dates from regular sources were not sufficient for enabling the assessee to make deposits on the date on which it was made in the bank account maintained with bank of Madhura Ltd. Except stating that the extract of cash book and bank book produced by the assessee is unreliable, no specific defect therein could be pointed out by the Revenue. Further, it is not in dispute that the said bank account was entered into the regular books of account maintained by the assessee company prior to the date of the search as evidenced by the books of account seized during the course of the search for the financial year 1994-95. On the facts and circumstances of the case, as the bank account maintained with Bank of Madhura already entered into the regular books of account, in our considered view, entries made therein cannot be treated as the same would not have been disclosed to the department. Therefore, such entries could not give rise to any undisclosed income within the meaning of section 158B(b) of the Act, and therefore, the addition of Rs.28,88,000/- made by the AO is not sustainable. We accordingly delete the addition of Rs.28,88,000/- allow this ground of appeal of the assessee.
26. Ground no.19.4 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Sale of Shares of world Fin Trade treated as undisclosed income. ..............64,83,110/-"
27. The AO has made the above addition by observing as under:-
"4.4. Unaccounted sales of shares by the Assessee :
Page no. 61 to 70 of Annexure A-5 contains the details of sale of shares of World fin Trade as under:
IT(SS)A No.83/Ahd/2006
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PG. NO. No. of Amount Date Rate Shares of
Shares
70 11,400 2,53,890/- 26.9.95 to Various World fin
29.9.95 rates Trade
69 68,800 14,88,890/- 26.9.95 to Various "
29.9.95 rates
69 11,2000 21,00,000/- 18.9.95 18.75 "
68 3,800 73,720/- 28.8.95 18.40 «
67 5,300 1,03,350/- 15.9.95 19.50 «
66 8,900 1,77,405/- 01.09.95 Various *'
rates
64 13,200 2,79,775/- 14.8.95 " "
to24.8.95
63 34,200 7,53,135/- 07.8.95 " "
To 9.8.95
62 4,200 1,03,110/- 25.7.95 24.65 "
61 40,400 11,49,835/- 24.7.95 to Various "
25.7.95 rates
Total 64,83,110/-
Vide final show-cause notice dated 9/3/06 the assessee was asked to explain as to why the above amount of Rs. 64,83,110/- should no be treated as its income u/s 69 of the Act. The assessee tried to explain the transaction by mentioning that it is a sauda report sent by S.M. Consultancy and they are all reflected in the final bills send by them. Assessee also produced extracts of stock register and bank book. According to AO, the extracts of the books now produced by the assessee is not reliable. In absence of any reliable explanation and evidences in this regard, the amount of Rs. 64,83,110/- is treated as undisclosed income of the assessee by the AO and added to the total income in the hands of the assessee on substantive basis. (Addition of Rs. 64,83,110)"
28. We have heard the rival submissions and perused the materials available on record. The undisputed facts of the case are that the assessee sold shares of World Fin Trade through S.M. Consultancy for Rs.
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64,83,110/-. The AO treated the entire sale proceeds of shares as undisclosed income of the assessee on the ground that the books of account wherein the sale entries are claimed to have been recorded is found to be unreliable. The ld. AR contended that the account of S. M. Consultancy is old and regular account as appearing at paper book page no 512 of seized document as per Annexure A 8 to the panchnama dated 21/12/1995. He also pointed out that the payments in respect of these sale proceeds were received by cheques which were deposited in Bank of Madura, which account was also a recorded bank account appearing in seized documents. He also relied on the decision of CIT Vs. Gurubachhan singh J Juneja (2008) 302 ITR 63 (Guj), Manmohan Sadani V/s.CIT (2008) 304 ITR 52 (MP) and decision of Ahmedabad 'D' Bench in the case of Asiatic Infrastructure & Shelters Ltd. Vs. DCIT in IT(SS)A no.84/Ahd/2006 order dated 9/10/2009. We find that the no specific defect in the books of account produced by the assessee during the course of assessment hearing could be pointed out by the AO. The Revenue could not bring any material before us to show that the transactions with S.M. Consultancy was not recorded by the assessee company in the regulars books of account prior to the date of search or such transaction would not have been disclosed by the assessee but for the search. On the other hands, the fact that sale proceeds were deposited in regular bank account of the assessee shows that these were regular transactions and assumption to the effect that the transactions entered into regular books of account would not have been disclosed is not sustainable. We, therefore, agree with the submission of the assessee that the such sale proceeds of shares or the amount of income embedded in such sale proceeds cannot be treated as undisclosed income within the meaning of section 158B(b) of the Act and they cannot be subjected to assessment under chapter XIV-B of the Act. Moreover, the treatment of entire sale proceeds as income is not sustainable in any view of the matter. In view of the above, we delete the addition of Rs. 64,83,110/- and allow this ground of appeal of the assessee.
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29. Ground No.19.5 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Purchase and sale of shares through S.M.consultancy ....Rs.2,98,64,000/-"
30. The AO has made the above addition by observing as under:-
"4.5. Income from Undisclosed Share Transactions :
Page 72 contains the details of purchase and sale of shares on behalf of the assessee company by S.M. Consultancy Services. The net debit balance is Rs. 2,98,64,000/-. The assessee vide final show cause notice dated 9/3/06 was asked to explain as to why the said amount should not be treated as its income from undisclosed sources. The assessee tried to explain the transaction by mentioning that it is a sauda report sent by S.M. Consultancy and they are all reflected in the final bills send by them. Assessee also produced extracts of stock register and bank book. As discussed earlier the extracts of the books now produced by the assessee is not reliable. In absence of any reliable explanation and evidences in this regard, the amount of Rs. 2,98,64,000/- is treated as undisclosed income of the assessee and added to the total income of the I.T. Act in the hands of the assessee on substantive basis. (Addition of Rs. 2,98,64,000)"
31. We have heard the rival submissions and perused the materials available on record. The ld. AR of the assessee explained that the aforesaid amount of Rs. 2,98,64,000/- represents the difference of purchases and sales of shares made by the assessee through S M Consultancy. The total sales amounted to Rs.3,50,15,000/- and purchase totaled to Rs.51,51,000/-. The ld. AR contended that these purchases and sales were recorded in the regular books of accounts of the assessee company and a print out of the same was also seized as page 17 of Annexure A-8 wherein all the above transactions are reflected in the seized books. He also contended that no cash transaction is involved in the above purchases and sales and all the transactions were settled by cheques or book entries. The bank accounts through which above transactions were settled are recorded in the regular books of account, therefore the IT(SS)A No.83/Ahd/2006
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transactions recorded in the seized books as well as regular books of account cannot be regarded to be the undisclosed income of the assessee. He also relied upon the decisions quoted in para no.28 above. We find that the ld. DR could not controvert the above submissions of the ld. AR of the assessee. The previous year in which transactions were entered into have not ended before the date of the search and the Revenue could not bring any material on record to show the above transactions of shares would not have been disclosed by the assessee in its regular return of income. The contention of the assessee to the effect that the transactions in question were recorded in the regular books of account before the date of the search could not be controverted by the revenue by bringing cogent material on record. In absence of the same, in our considered opinion, the transactions in question are beyond the scope of block assessment under chapter XIV-B of the Act. We, therefore, delete the addition of Rs. 2,98,64,000/- and allow this ground of appeal of the assessee.
32. Ground no.19.6 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Transaction in shares of Zillion Pharma & WFL .. Rs.2,40,00,000/-"
33. The AO has made the above addition by observing as under:-
"4.6. Unaccounted Sales of the Assessee:
Page No. 77 of Annexure A-5 contains the details of sale of 19 lakh shares of Zillion Pharma by S.M. Consultancy Services on behalf of the assessee and an amount of Rs. 1,60,00,000/- has been credited to the assessee. Similarly Page No. 78 contains the details of 12 lakhs shares of World Fin Trade of an amount of Rs. 80 lakhs. Vide final show cause notice dated 9.3.06 the assessee was asked to explain as to why the above transactions totaling to Rs. 2,40,00,000/- should not be treated as unexplained income. The assessee disputed the seized documents and submitted that they are debit entries rather then credit entries and there is no question of any receipts by the assessee. In fact there is no force in the IT(SS)A No.83/Ahd/2006
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argument of the assessee, It is very crystal clear from the seized document that the amount in question is the receipt of the assessee company and the same is hereby added as the unaccounted sales/receipts of the assessee company on substantive basis. (Addition of Rs. 2,40,00,000)"
34. After hearing the rival submissions and perusing the materials available on record, we find that the contention of the ld. AR is that the seized documents marked as page nos. 77 & 78 of Annexure -A5 reflects as under:-
Annexure - A/5 Page No 77 Detail of Cheque Recd. From S.M. Consultancy ____________________________________________________________ Date Particulars Cheque No Bank Amount
------------------------------------------------------------------------------------
25-08-94 To Cheque Paid 738489 BOB 500000.00 27-08-94 To Cheque Paid 738500 BOB 2500000.00 22-09-94 To Cheque Paid 363604 Dena 2500000.00 05-10-94 To Cheque Paid 684870 Dena 2500000.00 05-10-94 To Cheque Paid 684871 Dena 2500000.00 17-10-94 To Cheque Paid 25475 BOB 3000000.00 21.11-94 To Cheque Paid 684779 Dena 2500000.00 ________________________________________________________ Total Amount 16000000.00 ________________________________________________________ IT(SS)A No.83/Ahd/2006
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Annexure - A/5 Page No 78 Detail of Cheque Recd. From S.M. Consultancy ________________________________________________________ Date Particulars Cheque No Bank Amount ________________________________________________________ 13-01-95 To Cheque Paid 764815 SBI 4000000.00 13-01-95 To Cheque Paid 764823 SBI 1000000.00 19-01-95 To Cheque Paid 11990 BOB 3000000.00 ________________________________________________________ Total Amount 8000000.00 ________________________________________________________ Page 77 & Page 78 ( 16000000.00 + 8000000.00) = Rs. 2,40,00,000.00
35. The ld. AR explained that the amount of Rs. 2,40,00,000/- represents the amount received from S.M. Consultancy by the assessee by cheques. It was explained that these receipts were part of sale proceeds of Rs. 3,50,15,000/- which was considered by the AO while making addition of Rs. 2,98,64,000/-. Thus, the addition in question amounts to double addition in respect of same transaction. Further, it was contended that all the cheques were duly recorded in the regular books of account and also the bank accounts in which above cheques of Rs. 2,40,00,000/- were deposited were already found recorded in the regular books of account in the seized documents and thus, the transaction in question could not be a subject matter of block assessment. The ld. DR could not controvert the above submissions of the ld. AR of the assessee. The Learned Authorised Representative of the assessee also relied upon the decisions quoted in para no.28 above. We find that the amount of Rs. 2,40,00,000/- is the amount received by assessee by cheques against sale of shares by it of Rs. 3,50,15,000/- through S.M. Consultancy. After making of addition of Rs. 2,98,64,000/- in respect of above sale of shares, making of separate addition of Rs. 2,40,00,000/- again is clearly unsustainable and bad in law.
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Further, the addition made by the AO of Rs. 2,98,64,000/- in respect of sales of shares of Rs. 3,50,15,000/- have already been deleted by us for reasons mentioned above while deciding the ground of appeal relating to the said amount of Rs. 2,98,64,000/-. For the same reasons, in our considered opinion, the amount in question of Rs. 2,40,00,000/- cannot be subjected to block assessment under chapter XIV-B of the Act. We, therefore, delete the addition of Rs. 2,40,00,000/- and allow this ground of appeal of the assessee.
36. Ground no. 19.7 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Shares received from Jayesh Parikh (portfolio Management) .................Rs. 45,000/-"
37. The AO has made the above addition by observing as under:-
"4.7. Unexplained Income of the Assessee :
Page 79 to 80 of Annexure A-5 contains the details of shares received by the assessee from Dr. Jayesh for portfolio management. The total value comes to Rs. 22,500/-each. The assessee was asked to explain as to why the amount of Rs. 45,000/- should not be treated as its unexplained income. The assessee submitted that the amount in question is duly reflected in his books of accounts and produce extract of bank book in support of his claim. As discussed earlier the extracts of the books now produced by the assessee is not reliable. In absence of any reliable explanation and evidences in this regard, the amount of Rs. 45,000/- is treated as undisclosed income of the assessee and added to the total income of the I.T. Act on substantive basis. (Addition of Rs. 45,000)"
38. We have heard the rival submissions and perused the materials available on record. The ld. A.R. pointed out that page nos. 79 & 80 are two copies of the same account. They are not two separate IT(SS)A No.83/Ahd/2006
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transactions but only one transaction and therefore, the total amount involved was Rs. 22,500/- only and not Rs. 45,000/-. In support the ld. A.R. further relied on the books of account seized at Annexure A 8 to the panchnama dated 21/12/1995 which is at paper book page no 496 wherein the amount received by two cheques of Rs. 5,000/- & Rs. 17,500/- each totaling for Rs. 22,500/- is reflected. He also contended that these entries were recorded in the regular books of account before the date of search and the bank account wherein deposits were made was disclosed bank account already recorded in regular books of account, therefore the deposits made therein cannot be regarded to be the undisclosed income of the assessee. He also relied upon the decisions quoted in para no.28 above. We find that the ld. DR could not bring any material before us to controvert the submissions of the ld. AR. Further, no specific defect in the regular books of account produced before the AO could be pointed out by the AO. In absence of any material brought on record to show that these transactions would not have been disclosed by the assessee in its regular return of income, in our considered opinion, the AO was not justified in treating the same as undisclosed income within the meaning of sec. 158B(b) of the Act. Further, the total transaction was for Rs. 22,500/- and not Rs. 45,000/- as observed in the impugned order of assessment. We, therefore, delete the addition of Rs. 45,000/- and allow this ground of appeal of the assessee.
39. Ground no.19.8 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Transaction in share of Zillion Pharma Treated As undisclosed income ..........................Rs.44,32,093/-"
40. The AO has made the above addition by observing as under:-
IT(SS)A No.83/Ahd/2006
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"4.8. Unexplained Investment of the Assessee:
Page 81 of Annexure A-5 contains the details of purchase and sales of shares of Zillion Pharma by N.V. Shah Broker of Bombay on behalf of the assessee company and the difference is Rs. 17,91,628/-. Page 82 contains the details or purchase and sales of shares of Zillion Pharma by N.V. Shah Broker of Bombay on behalf of the assessee and the difference is Rs. 26,40,465/-. The assessee was vide final show cause notice date 9/3/06 asked to explain as to why the amount should not be treated as its unexplained investment. The assessee argued that all the transaction in question are dully accounted for in the books and produce extracts of bank book. As discussed earlier the extracts of the books now produced by the assessee is not reliable. In absence of any reliable explanation and evidences in this regard, the amount of Rs.17,91,628/- is treated as undisclosed investment of the assessee u/s.69 of the I.T.Act on substantive basis. (Addition of Rs. 44,32,093)"
41. We have heard the rival submissions and perused the materials available on record. The ld. AR of the assessee at the outset explained that the page 81 and 82 of Annexure A5 contains records of transactions of purchase and sale of shares of Zillion Pharma through N.V. Shah Broker of Bombay. He pointed out that shares of Zillion Pharma by N.V. Shah Broker of Bombay page 82 contains cumulative total of page 81 also. Thus, the total of Rs. 26,40,465/- at page 82 also includes Rs. 17,91,628/- contained at page 81. Thus, the AO has erred in treating both the pages as separate and again making addition of Rs. 17,91,628/- after making addition of Rs. 26,40,465/-, i.e., total addition of Rs. 44,32,093/- whereas total of both the pages taken together is Rs. 26,40,465/- only. He further contended that the entries in respect of above transactions were duly recorded in the regular books of account prior to the date of search and also pointed out that the transactions mentioned in the documents in question were settled through bank account which were already recorded and disclosed. In the circumstances, the AO was not justified in arbitrarily treating the transaction as representing undisclosed income of the assessee. He also relied upon the decisions quoted in para no.28 above. We find that the ld. DR could not controvert the above submissions of the ld.
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AR. No specific defect in the books of account produced by the assessee before the AO could be pointed out by the AO. As no material could be brought before us to show that the transactions in question were not recorded in the regular books of account or the transactions were not settled through the regular bank account of the assessee, in our considered opinion, the ld. AO was not justified in treating the same as undisclosed income of the assessee assessable under chapter XIV-B without bringing on record any material to show that these transactions would not have been disclosed by the assessee. We, therefore, delete the entire addition of Rs. 44,32,093/- and allow this ground of appeal of the assessee.
42. Ground no.19.9 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Difference in purchase and sale of shares ............Rs.92,650/-"
43. The AO has made the above addition by observing as under:-
"4.9. Unexplained income of the Assessee ;
Page 83 of Annexure A-5 contains the details of purchase and sales of shares and the difference is Rs. 92,650/-. Vide final show cause notice dated 9/3/06 the assessee was asked to explain as to why the amount should not be treated as its unexplained income. The assessee argued that all the transaction in question are dully accounted for in the books and produce extracts of copy of ledger of N.V.Shah and extract of Stock Registers. As discussed earlier the extracts of the books now produced by the assessee is not reliable. In absence of any reliable explanation and evidences in respect of the above transaction the amount of Rs. 92,650/- is added to the total income of the assessee treating it as the unexplained income of the assessee on substantive basis. (Addition of Rs. 92,650)"
44. We have heard the rival submissions and perused the materials available on records. We find that the contention of the ld. AR that the transactions in question were recorded in the regular of books of IT(SS)A No.83/Ahd/2006
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account and were made through disclosed bank account could not be controverted by the Revenue. In the circumstances, we find that the transaction could not be held as would not have been disclosed by the assessee and consequently, could not be alleged as undisclosed income within the meaning of sec. 158B(b) of the Act. We, therefore, delete the addition of Rs. 92,650/- and allow this ground of appeal of the assessee.
45. Ground no.19.10 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Transactions in purchase and sale of shares ......Rs.15,00,000/-"
46. The AO has made the above addition by observing as under:-
"4.10, Unaccounted Receipts of the Assessee :
As per page 84 of Annexure A-5, a cheque of Rs. 15 lakhs has been paid to the assessee on 31.3.95 by N.V. Shah Broker of Bombay. Vide final show cause notice dated 9/3/06 the assessee was asked to explain as to why the same should not be treated as its unexplained income. The assessee argued that all the transaction in question are dully accounted for in the books and produce extracts of copy of ledger of N.V.Shah and extract of Bank book and pass book. As discussed earlier the extracts of the books now produced by the assessee is not reliable. In absence of any reliable explanation and evidences in this regard the same is added to the total income treating the same as unexplained income of the assessee on substantive basis. (Addition of Rs. 15,00,000)"
47. After hearing the rival submissions, we find that the ld. AR pointed out that the books of account seized at Annexure A 8 to the panchnama dated 21/12/1995 contains the ledger account of N V Shah which is placed at paper book page no 500 of the paper book and contains the entries in question. He further pointed out from page no. 523 of paper book which is ledger account of Vijaya Bank, Bombay where in also the IT(SS)A No.83/Ahd/2006
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entries are recorded. He thus, contended that entries were reflected in the regular books of account and were settled through the bank account duly disclosed and recorded in the regular books of account. He also contended that even otherwise also the cheques were received for sales made and therefore entire receipt cannot be taxed and only profit embedded therein is to be considered which is recorded in the books and thus, cannot form part of undisclosed income. He also relied upon the decisions quoted in para no.28 above. We find that no material could be brought on record by the revenue to controvert the above submissions of the assessee. In our considered opinion, entire sale proceeds cannot be treated as income and only income element embedded in such sale proceeds alone could have been treated as income. Further, as no material could have brought before us to show that the transactions in question were not recorded in regular books of account before the date of search or to show that the transactions would not have been disclosed in the regular return of income, in our considered opinion, the addition made by the AO is unsustainable. We, therefore, delete the addition of Rs. 15,00,000/- and allow this ground of appeal of the assessee.
48. Ground no.19.11. of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Purchase /sales through S.M. consultancy....... Rs.36,36,000/-"
49. The AO has made the above addition by observing as under:-
"4.11. Unexplained Investment of the Assessee :
Page 85 of annexure A-5 contains the details as under - brought from S.M. No. of Shares Amount 80,000 Rs.41,00,350/-
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S.M.
Sale Purchase
WFL 12,00,000@ 10.00 Anand cots 30000 @ 20.20
WFL 1,00,0007- @ 10.00 Fairdeal [email protected]
ZPL l,50,000/-@ 10.00 Umliv Food [email protected]
ZPL 7,50,000/-@ 10.00 Nila [email protected]
On perusal of the details mentioned on page no. 85 it is seen that the assessee has purchase the shares mentioned on the right side of the page and sold shares mentioned at the left side of the page at the rate mentioned therein from and to S.M. Consultancy. It is further seen that purchase of 100000 shares Fair deal at the rate of Rs. 15.15 also appears on the same side of the same number of shares and at the same rate. Therefore, this transaction can be set off.
Vide this office show-cause dated 9/3/06 the assessee was asked why the balance transaction for purchase of Rs.36,36,000/- should not be considered as his unexplained investment u/s.69 of the Act. The assessee argued that all the transactions in question are duly reflected in his books of accounts and it also produced relevant extracts from the books. As discussed earlier the extracts of the books now produced by the assessee is not reliable and has not shown the sale proceeds of shares as his income in the return for concerned assessment year. The balance transaction for purchase amounting to Rs. 36,36,000/- is treated as unexplained investment u/s 69 of the act and added to the income of the assessee on substantive basis. (Addition of Rs. 36,36,000/-)"
50. We have heard the rival submissions and perused the materials available on record. The ld. AR pointed out that the transactions in question were also recorded at page 72 of Annexure A-5 which has already been considered by the AO and he made addition of Rs. 2,98,64,000/- in respect thereof which is agitated at ground no. 19.5 of this appeal. Again making separate addition of Rs. 36,36,000/- in respect of the very same transaction amounts to double addition which is bad in law. We find that page 72 of Annexure A-5 contains as under:-
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Annexure - A/5 Page No 72 Scrip wise Report of S.M. Consultancy for the period 1/04/94 to 31/03/95 Brought from Sold to Value Qty Rate Scrip Name Date Value Qty Rate Anand Cotspins 23/10 606000.00 30000 20.20 Fairdeal Filame 23/10 1515000.00 100000 15.15 1515000.00 100000 15.15 Fairdeal Filament23/10 Kanaiya Foods 22/11 505000.00 25000 20.20 Nila Builders 05/03 1515000.00 100000 15.15 Unilives Foods 22/11 1010000.00 50000 20.20 4000000.00 400000 10.00 World Fin Trade 05/04 4000000.00 400000 10.00 World Fin Trade 05/04 4000000.00 400000 10.00 World Fin Trade 05/04 1000000.00 100000 10.00 World Fin Trade 05/04 5000000.00 500000 10.00 Zillion Pharmac 17/08 5000000.00 500000 10.00 Zillion Pharmac 17/08 3000000.00 150000 20.00 Zillion Pharmac 18/08 7500000.00 750000 10.00 Zillion Pharmac 20/09
-------------------------------------- -------------------------------------
35015000.00 3300000 Client Total 5151000.00 305000 29864000.00 2998000 Client Net
Thus, we find force in the contention of the assessee and as transaction relating to Rs.36,36,000/- formed part of addition Rs. 2,98,64,000/- already considered and decided by us in respect of ground no. 19.5 of this appeal, the separate addition of Rs. 36,36,000/- is bad in law and IT(SS)A No.83/Ahd/2006
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unsustainable. We accordingly, delete the addition of Rs. 36,36,000/- and allow this ground of appeal of the assessee.
51. Ground no.19.12 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Receipt treated as undisclosed income............ Rs.3,20,00,000/-"
52. The AO has made the above addition by observing as under:-
"4.12. Unaccounted Receipts of the Assessee:
Page No. 86( Reverse Side) of Annexure A-5 contains the details of receipt of cheques as under: -
S.M. BOMBAY DATE
10000000/- 764857 04.08.95
5000000/- 764859 24.08.95
6500000/- 764858 24.08.95
21500000/-
Bombay. 21500000/- upto Aug.95
Ahmedabad 1050000/-
3,20,00,000/-
It is seen that the cheque numbers and date are written against the amounts received from S.M, Consultancy upto Aug. 95. Vide these office show-cause dated 9/3/06 the assessee was asked to explain why the receipt in question should not be treated as your unaccounted income. The assessee argued that all the receipts in question are duly reflected in the books of accounts and not a single entry is unaccounted. Since assessee failed to prove the transaction in question satisfactorily the receipt in question is considered as unaccounted receipt of the assessee and the same is hereby added in its income for the year under consideration on substantive basic. (Addition of Rs. 3,20,00,000)"
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53. After hearing the rival submissions and perusing the materials available on record, we find that the ld. AR has explained that the amount in question of Rs. 3,20,00,000/- represents cheques received by the assessee from S.M. Consultancy against sale of shares. He pointed out that the cheques were deposited in Vijaya Bank and Bank of Madura which were also duly recorded in the regular books of account prior to search and also found mentioned in the books of account seized during the course of search and seizure operation. He also contended that cheques were received for sales made therefore the entire receipt cannot be taxed and only profit on it is to be considered which in the eventuality is recorded in the books which cannot form part of undisclosed income. He also relied upon the decisions quoted in para no.28 above. We find that no material could be brought on record by the revenue to controvert the above submissions of the assessee. In our considered opinion, entire sale proceeds cannot be treated as income and only income element embedded in such sale proceeds alone could have been treated as income. We find that the sale proceeds were deposited in bank accounts which were already recorded in regular books of account prior to the date of search. Further, as no material could have brought before us to show that the transactions in question were not recorded in regular books of account before the date of search or to show that the transactions would not have been disclosed in the regular return of income, in our considered opinion, the addition made by the AO is unsustainable. We, therefore, delete the addition of Rs. 3,20,00,000/- and allow this ground of appeal of the assessee.
54. Ground no.19.13 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Receipt treated as unexplained income. ........Rs.7,94,48,703/-"
55. The AO has made the above addition by observing as under:-
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"4.13. Unaccounted Income of the Assessee:
Pages 4, 5,6,7,8 and 10 of Annexure A-6 shows receipt of amounts by the assessee on various days from different parties as under:
Page Dt. of receipt Amount From whom Recvd.
No.
4 24.10.95 1,00,00,000 N.V.Shah, broker of Bombay
5 18.11.95 1,00,00,000
6 12.10.95 20,46,406 "
7 5.12.95 2,00,00,000 "
8 18.11.95 37,42,297 "
10 3.11.95 3,36,60,000 R.K. Invest. Bombay
Total 7,94,48,703/-
Vide final show cause notice dated 9.3.06 the assessee was asked to explain as to why the amount mentioned above should not be treated as its income. The assessee argued that all the receipt in question is duly reflected in the books of accounts and not a single entry is unaccounted. The assessee also produced extract of the books of accounts reflecting the receipts in question. As discussed earlier the extracts of the books now produced by the assessee is not reliable. In absence of any reliable explanation and evidences in respect of the above transactions the entire amount of Rs. 7,94,48,703/- is added to the total income of the assessee as its unexplained income on substantive basis. (Addition of Rs. 7,94,48,703)"
56. After hearing the rival submissions and perusing the materials available on record we find that the ld. AR explained that the transaction in question represents payments received by assessee by cheques from N.V. Shah and R.K. Invest in respect of sale of shares through them. The cheques received were deposited in bank account of the assessee maintained with Vijaya Bank, Mumbai which is recorded in the regular books of account before the date of search. He also relied upon the decisions quoted in para no.28 above. The rest of submissions were same as made in respect of ground no. 19.12 above. We find that the facts and IT(SS)A No.83/Ahd/2006
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circumstances of the case and issue involved are similar to ground no. 19.12 above. We, therefore, for the same reasoning as stated in respect of ground no. 19.12 above, delete the addition of Rs. 7,94,48,703/- and also allow this ground of appeal of the assessee.
57. Ground no.19.14 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Unexplained investment in shares ...........Rs.14,800/-"
58. The AO has made the above addition by observing as under:-
"4.14. Undisclosed Investment of the Assessee :
Page 17 of Annexure A-6 shows investment in shares the market value of which as on 21.12.95 to Rs. 14,800/- the assessee vide final show cause notice dated 9/3/06 was requested to explain as to why the above amount should not be treated as unexplained investment u/s. 69 of the I.T. Act. The assessee argued that these are just notings and no financial transaction of any nature is involved. In fact there is no force in the argument of the assessee and since it has failed to furnish any explanation in 'this regard, the amount of Rs. 14,800/- is added to the total income of the assessee treating it as unexplained investment u/s 69 of the I.T. Act on protective basis. The same addition is made in the case of Dr. Amit Shah Individual on substantive basis. (Addition of Rs. 14,800)
59. We have heard the rival submission. The ld. AR explained that the addition of Rs. 14,800/- was made on the basis of loose paper, page 17 found and seized during the course of search. He explained that the noting on this loose page contains a message which was to be given to Shri Girishbhai Shah (Chacha). No financial transactions were involved. On lower side it is written to bring 1000 shares of Indo American Optics Ltd. and also 200 shares of World Fintrade to be given for transfer. No dates are also mentioned. Therefore, the addition of Rs. 14,800/- made in the order is baseless. We find that similar submissions was made by the IT(SS)A No.83/Ahd/2006
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assessee before the AO. The Learned Authorised Representative of the assessee also placed reliance on the decision in the case of Smt. Farjan. F. Desia Vs. ACIT 119 TTJ (Ahd) 387, Sayaji Iron Engineering 253 ITR 749 (Guj) and in case of Mr. Amit N. Shah Vs. ACIT in IT(SS)A No.87/Ahd/2006 Ahmedabad 'D' Bench dated 10.07.2009. The AO apart from disbelieving the submissions of the assessee could not bring any material on record to show that the explanation given by the assessee was not correct. In our considered view, a plausible explanation given by the assessee could not be rejected by the Revenue whimsically and without bringing on record any relevant material to show that the explanation is untrue or not correct. In absence of any corroborative material found during the course of search to show that actual investment of Rs. 14,800/- was made by the assessee in acquiring the shares mentioned in loose paper in question, in our considered view, the addition of Rs. 14,800/- is bad in law and unsustainable. We, accordingly, delete the addition of Rs. 14,800/- and allow this ground of appeal of the assessee.
60. Ground no.19.15 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Unexplained Expenditure ..............................Rs.13,20,000/-"
61. The AO has made the above addition by observing as under:-
"4.15. Unaccounted Expenditure of the Assessee :
Page number 18 of Annexure A-6 contains the details of amount given on 1.10.94 with date and amount of cheque. The amounts appear to have written in codes. Vide final show cause notice dated 9/3/06, the assessee was requested to furnish explanation as to why the amount Rs. 13,20,000/- should no be treated as unexplained expenditure u/s 69C of the Act. The assessee failed to furnish any justifiable explanation in this regard. Therefore the amount of Rs. 13,20,000/- is added to the total income treating the same as unexplained expenditure u/s 69C of the I,T. Act on protective basis.
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The same addition is made in the case of Dr. Amit Shah Individual on substantive basis. (Addition of Rs. 13,20,000)"
62. We have heard the rival submissions and perused the materials available on record. The ld. AR pointed out from page nos. 435 & 436 of the paper book which contains the reply of the assessee submitted before the AO. The ld. AR reiterated that the addition was made on the basis of loose pager marked page 18 which is not in the handwriting of the persons connected with the group. The said facts were also narrated in the statement recorded on 13.1.1996 vide answer No. 11 on page 5 of that statement. The AO has observed that page 18 contain the details of date and of cheques. However, the AO after going through all the bank statements of the assessee could not point out that even a single cheque was entered therein. The above, conclusively proves the submission of the assessee that the loose paper does not relate to the assessee. The assessee also placed reliance upon the decision quoted in para no.59 above. We find that the according to the AO loose paper marked page no. 18 of annexure A-6 contains details of amount given on 1.10.94 with date and amount of cheque. As per the AO the amounts were written in codes and therefore, he has decoded the same in lacs and arrived at a figure of Rs.13,20,000/-. We find that no material could be brought on record by the AO to controvert the explanation of the assessee filed before him. Apart from rejecting the explanation of the assessee by considering the same as unjustifiable, no reason was given by the AO as to how the above explanation of the assessee was found to be unjustified by him. In absence of any reason mentioned in the impugned order of assessment, in our considered opinion, the order is bad in law and unsustainable. Further, it is observed that no corroborative material could be brought on record by the AO to show that Rs. 13,20,000/- as found by him as mentioned in loose paper marked 18 of annexure A6 was in fact represents any payment made by the assessee and the explanation of the assessee is not correct. According to the AO the payments were made by cheques and therefore, in our considered opinion, IT(SS)A No.83/Ahd/2006
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it would not have been difficult for the AO to bring such material on record after verifying the bank accounts of the assessee had it been the actual payment made by the assessee. We, therefore, delete the addition of Rs. 13,20,000/- and allow this ground of appeal of the assessee.
63. Ground no.19.16 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Unexplained investment ............................Rs.70,00,000/-"
64. The AO has made the above addition by observing as under:-
"4.16. Unaccounted Income of the Assessee :
Page number 11(iv)(reverse page) of Annexure A-6 contains the details of various amounts (in codes) invested. Vide final show cause notice date 17.6.97, the assessee was requested to explain as to why any amount of Rs. 70 lacs should not be treated as unexplained investment u/s 69 of the Act. The assessee failed to furnish any satisfactory explanation in this regard. In absence of any explanation, the said amount of Rs. 70,00,000/- is added to the total income of the assessee as unexplained investment u/s 69 of the I.T. Act on protective basis. The same addition is made in the case of Dr. Amit Shah Individual on substantive basis. (Addition of Rs. 70,00,000)"
65. We have heard the rival submissions and perused the materials available on record. The ld. AR pointed out from page nos. 442 of the paper book which contains the reply of the assessee submitted before the AO in respect of the issue under consideration. The said explanation reads as under:-
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Unaccounted income of assessee - Rs.70,00,000/-
" The notings on this page contains some telephone number besides certain figures which are written as -30 10 15 15
------70
------
Likewise, the same is cancelled as evident from the paper. Nowhere on this page the amount is written in lacs neither the figures represent the amount in Rupees. It appears that as no explanation had been offered and for the alleged voluminous transactions done by us, the figures were in lacs. As regards to explanation for the nothings, we have already narrated the facts hereinabove. The notings are nothing but rough work which might have been written in a routine manner as described hereinabove. No financial transactions are involved therefore, the figures should not be treated as Rs. and be stretched in lacs. Under the circumstances, the same may not be treated as undisclosed income being unexplained investment u/s. 69 of the I.T. Act."
The ld. AR reiterated the same submission before us and the ld. DR relied upon the order of the AO. The assessee also placed reliance upon the decision quoted in para no.59 above. We find that the AO made the addition of Rs. 70 lacs on the basis of wring on loose page number 11(iv)(reverse side) of Annexure A-6 and by treating the figures written therein in codes and by treating the same represents record of some investment actually made by the assessee. We find that no material could be brought on record by the AO to controvert the explanation of the assessee filed before him. Apart from rejecting the explanation of the assessee by considering the same as not satisfactory, no reason was given by the AO as to how the above explanation of the assessee was found to be unsatisfactory by him. In absence of any reason mentioned in the impugned order of assessment, in our considered opinion, the order is bad in law and unsustainable. Further, it is observed that no material to corroborate his inference of the IT(SS)A No.83/Ahd/2006
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writing on loose sheet to the effect that Rs. 70,00,000/- was actually invested by the assessee somewhere could be brought on record by the AO. In our considered opinion, from the above loose sheet alone it could not be concluded that the assessee has in fact made any investment of Rs. 70,00,000/-. We, therefore, delete the addition of Rs. 70,00,000/- and allow this ground of appeal of the assessee.
66. Ground no.19.17 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Unexplained Investment ...............Rs.8,25,57,037/-"
67. The AO has made the above addition by observing as under:-
"4.17. Unaccounted Investment of the Assessee :
Similarly, page 11(v) to 11(xvi) of Annexure A-6 show the details and Investments as under: (except 11(vii) Page No. Details contained Amt. Involved 11 (v) Contains the figure of 750 & 70 written in code words. 82,50,000/-
11 (vi) Contains the details of scrip
and the amount. 2,30,00,000/-
11(vii) Shows investment of Rs. 576000/- 5,76,000/-
11(viii) Shows investment of in different 9,60,000/-
scripts Totaling to Rs. 9,60,000
Contains the names of scrip's
name of some persons,
cheque numbers. 3,00,00,000/-
11 (x) Contains the amount, name of scrip
etc. of investment of Rs. 95,00,000. 95,00,000/-
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11(xi) Contains the name of one Mihir
amount + 5 optics - Rs. 18,000
= Rs. 38,38,774/- 38,38,774/-
11(xii) Contains the name of scripts, quantity
and amount written in
codes. 41,00,000/-
11 (xiii) Contains names of some persons phone
numbers, no. of shares and rates -
Total amount x rate x number of shares
- Rs. 8,93,238 8,93,238/-
11 (xiv) Contains number of shares, rate date total
amount x rate x number of shares
= 7,07,325 7,07,325/-
11 (xv) Contains the names of some persons,
scripts, dates, number of shares and rate
- total amount x rate x number of
shares = Rs. 7,31,700/- 7,31,700/-
1l(xvi) Contains scripts, name and number
of shares - total value @ 27.50 and
Rs. 10 respectively on the date of
search comes to Rs. 7,11,500/- 7,11,500/-
Rs.8,25,57,037/-
The assessee was vide final show cause notice dated 9/3/06. The assessee failed to furnish any reasonable justification in these regards. In absence of any explanation in respect of the above notings, the amount of Rs. 8,23,08,537/- is added to the total income of the assessee as unexplained investment u/s 69 of the I.T. Act on protective basis. The same addition is made in the case of Dr. Amit Shah Individual on substantive basis.(Addition of Rs. 8,25,57,037)"
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68. We have heard the rival submissions and perused the materials available on record. The ld. AR pointed out from page nos. 442 to 447 of the paper book which contains the reply of the assessee dated 30.03.2006 submitted before the AO in respect of the issues under consideration. The said explanation reads as under:-
"Page 11 (v) Contains the figure of 750 & 75 written in code words - Rs.82,50,000/-
The figures written are 750 + 75 = 825 only. Telephone No. 6426967 of Hotel Shalin, Ahmedabad is written on this page besides other figures. Nowhere it is written that the same is investment, receipt or payment for any particular commodity, transaction etc. It is also not written as rupees or lacs. The same is simply some calculations made and no financial transactions are involved therein. There is no base to make the addition. Therefore, the same may not be treated as unexplained investment u/s. 69 of the I.T. Act.
Page 11 (vi) Contain details of scrip and the amount - Rs.2,30,00,000/-
It has been alleged that the page contains the names of the script and the amount is mentioned against that. The contents of the same are to be read hereunder:-
(1) Asian Finstock (Name of the Company)
(2) D.N. Barot (Name of person)
(3) Gaurav (Name of person)
(4) Mamta Thakkar (Name of the person)
The above persons have obtained finance from AFL. As they were advanced money by account payee Cheque out of available fund which is duly debited in the bank pass book and the books of accounts. Balance is met by their other sources. The transactions are not related to company. Under the circumstances, the same remains fully explained therefore, the same may not be treated as unexplained investment u/s. 69 of the Act.
Page 11(vii) Shows investment of Rs.5,76,000/-
These are the notings on the back side of page 7. On the front side of which some telephone numbers are written. Nowhere on the paper it IT(SS)A No.83/Ahd/2006
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is written that it represent the amount in rupees or in lacs. Nowhere it is written that the same is investment or receipt. No such corresponding assets, investment or expenditure have been incurred, was found as a result of search or even till date. Your honour has referred to the discussion mentioned in para 1 of page 11 which appears to be para 21 (1) of page 26. As per the discussion made in para 21(1), you have arrived at a conclusion that the difference of payment or receipt should be treated as unexplained investment and, therefore, as an undisclosed income. Under the circumstances, the same may not be treated as unexplained expenditure u/s. 69 of the I.T. Act.
Page -11(viii) Shows investment of different Script totaling to Rs. 9,60,000/-.
The paper was not found from the possession of the Assessee. It was found from the premises of Indo American Optics Limited. The noting on the paper not show that it pertains to shares transactions. The paper does not contain the name of the assessee. No reference of the assessee is given. It is not in the handwriting of the assessee. The paper cannot be regarded pertaining to the assessee.
Page 11(ix) Contains the names of scrips name of some persons, Cheque numbers - Rs.3,00,00,000/-
The notings on the page represent description of the Name Cheque No. No. of Application To be made
---------- ---------------- -------------
Gaurav Investment 643551 25 Subhangini 643501 25 Asiatic Infrastructure & Shelters Ltd. 8989970 60 Atlantic Credit & Capital Ltd. Bom. 897110 70 Asiatic Infrastructure & Shelters Capital Ltd. 644060 70 Jayesh 489249 25 IT(SS)A No.83/Ahd/2006 - 52 -
Details of cheques which were to be subscribed does not mean that they are presented. Therefore the same cannot be treated as investment made by company. Even otherwise Cheque not presented cannot be treated as investments.
Page 11(x) Contains the amount, name of scrip, etc. of investment - Rs.95,00,000/-
The notings on the page are to be read as under:-
10 - Samplast (Ramaben Patel ) 33 - Atlantic Credit & Capital Ltd.
12 - Asiatic Infrastructure & Shelters ltd.
40 - Pharma Synth 95 Nowhere on this page the name of any scripts is written.
The same is further fortified by the fact that Pharma Synth is the partnership firm therefore no question of shares of that script arise. Ramaben is a name of person. Nowhere on this page, the amount in terms of Rs. is also written that too in lacs. This appears to be some rough notings on a given day in which no financial transactions are involved. Under the circumstances, based on the discussion mentioned in para 1 of page 21 i.e. para 21(1) of page 26 the same should not be treated as my unexplained investment u/s. 69 of the Act. As evident from the paper, the same does not appear to be investment or receipt or transactions and is partially cancelled. Page 11(xi) Contains the name of one Mihir amount - Rs.38,38,774/-
The notings in the page do not indicate that the same represented investment made by the company. Mere writing of a figure does not mean that investment is made. The same is some rough notings only and no financial transactions are involved it.
Page 11(xii) Contains the name of scripts quantity and amount written in codes - Rs.41,00,000/-
The notings on this page are to read as under:-
Unilives Food 50,000 10
IT(SS)A No.83/Ahd/2006
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Fair Deal Filament 1,00,000 20
Anand Scotpin 30,000 6
Kaneniaya Food 25,000 5
41
M/s. Atlantic Credit & Caital Ltd. has intended to purchase the shares of above mentioned companies. Therefore the expected rate for acquiring the same was written on the side. The same were in fact purchased by the company from S.M. Consultancy Services, Ahmedabad. Copy of account from the books of M/s. Atlantic Credit & Capital Ltd. and also contra account from the S.M. Consultancy Services along with copy of bills are enclosed herewith. The transactions are reflected in the accounts at actual rate wherein the one noted on the page were estimated and approximated one. As regards to your interpretation that 41 total is Rs. 41 lacs. I may mention here that it was nothing but a calculation that the average price of the entire lot comes to Rs. 5/- but the company intended to by it at Rs. 4.1 which was written there under. The same is evident from the notings made on the page which is 4.1 and not 41.
Pages 11(xiii) to (xv) - Rs.8,93,238/-, Rs.7,07,325/- and Rs.7,31,700/-
From the notings made on the page it appears that the same contain a daily report noted for some scrip which was not traded by us but which was a gathering of market information only. No financial transactions are involved. We have not bought the shares if any nor we have sold the same. Therefore the same may not be treated as unexplained investment u/s. 69 and to be added as my undisclosed income.
Page 11(xvi) Contains scripts, name and number of shares - Rs.7,11,500/-
The notings on this pages are as under:-
Zillion Pharmachem Ltd. - 24,600
World Fintrade - 35,000
Overnight Express Receipt No. 41766583
Phone Nos. 6133853, 854.
As discussed herein above the same is some rough jottings and courier receipt No. is also written. No financial transactions involved."
IT(SS)A No.83/Ahd/2006
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The A.R. further contended that the papers in question were not found from the premises of the assessee having its register office at Sumathinath complex, Pritamnagar 2nd slope, Paldi, Ahmedabad-380007 but were found from the premises of third party i.e. Indo American Optics Ltd having its register office situated at IOL house, near Swati apartment, Ambawadi bazar, Ambawadi, Ahmedadab-380006. The additions based on the basis of jottings or unnamed and untitled loose papers are illegal and arbitrary as there is no name, mark or there is any finding in the hand writing of the appellant has been made. The loose papers do not contain the name of assessee, nature of any expenditure/investment which could be correlated with assessee. The assessing officer cannot be allowed to interpret the loose papers according to his own whims and fancy without discharge his onus. The loose papers nowhere prove that the assessee had made the investment. The papers so seized are dumb documents and no additions can be made on the basis of this loose paper until and unless revenue proves that the appellant has made investment. That the imaginations of the assessing officer that the figures mentioned in the loose papers are in lakhs is without any corroborative evidence and on the basis of suspicion and surmises and should not be accepted. The loose paper nowhere stated that the assessee has invested and the revenue as not brought any evidence on record which may prove that assessee has invested the sum, mentioned in the additions. The A.R. relied on the order dated 7/6/2010 passed by the ITAT, D-Bench, Ahmedabad in IT(SS)A No.87/Ahd/2006 (block period 01-04-1985 to 21-12-1995) in the case of Dr.Amit N Shah as per paras 23 to 75 wherein the finding on the very same items of additions made on substantive basis was given in favour of the assessee and all the additions made on these loose papers were deleted and therefore all the above additions made on protective basis be deleted. On the other hand the ld. DR relied upon the order of the AO. He also relied on the decisions quoted in para no.59 above. We find that no material could be brought on record by the AO to controvert the explanation of the assessee filed before him. Apart from rejecting the explanation of the assessee by considering IT(SS)A No.83/Ahd/2006
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the same as not reasonable justification, no reason was given by the AO as to how the above explanation of the assessee was found to be not reasonable by him. In absence of any reason mentioned in the impugned order of assessment for not accepting the explanation of the assessee, in our considered opinion, the order is bad in law and unsustainable. Further, it is observed that no material to corroborate his inferences drawn from the writings on loose sheets could be brought on record by the AO. In our considered opinion, from the above loose sheets alone it could not be concluded that the assessee has in fact made any investment of Rs. 8,25,57,037/-. We, therefore, delete the addition of Rs. 8,25,57,037/- and allow this ground of appeal of the assessee.
69. Ground no.19.18 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Cash Credits ...........................Rs.79,75,790/-"
70. The AO has made the above addition by observing as under:-
"4.18. Unexplained Income of the Assessee :
Page 17 to 24 of annexure A-4 contains scrip wise records sent by M/s R.K. Investment co,, Bombay to M/s Asiatic Infrastructure and shelters Ltd. M/s Asiatic infrastructure & shelters Ltd was asked vide this office notice u/s 142(1) dated 6.11.96 to furnish the details and explain the source of purchase of the shares. The .above company vide its letter dated 7.12.96 replied that the transactions pertains to M/s Atlantic Credit and Capital Ltd. In support of this, copies of the bills by M/s R.K. Investment co. And copy of account from the books of accounts of the assessee company has been enclosed. On verification of the above papers it was seen that M/s R.K. Investment has sold shares on behalf of the assessee company. The total sale amount of shares comes to 79,75,790/-. Therefore, vide final show cause notice dated 9/3/06, the assessee was requested to explain as to why the same should not be treated as the income of the assessee. The assessee submitted that all the transaction in question are accounted for and produced extracts of the Stock Register in support of his claim. As discussed earlier the extracts of the books IT(SS)A No.83/Ahd/2006
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now produced by the assessee is not reliable. In absence of any reliable explanation and evidences in respect of the above transactions the entire amount of Rs. 79,75,790/- is added to the total income of the assessee as its unexplained income on substantive basis. (Addition of Rs. 79,75,790)"
71. We have heard the rival submissions and perused the materials available on record. We find that the amount of Rs.79,75,790/- was added in the hands of the assessee on the basis of page numbers 17- 24 of Annexure A-4. It is also observed that on the basis of very same pages addition of exactly identical amount of Rs.79,75,790/- was also made by the AO in the hands of Asiatic Infrastructure & Shelters Ltd. The aforesaid pages contain script-wise record sent by M/s. R.K.Investment Company, Bombay in respect of sale of shares made by them. We find that this issue was decided by the Tribunal vide its order dated 9.10.2009 passed in IT(SS)A No. 84/Ahd/2006 in the case of Asiatic Infrastructure & Shelters Ltd. The relevant decision of the Tribunal are at para Nos. 22 of page 23, para 23 of page 24 and para 25 of page 26. A perusal of the aforesaid order shows that the Tribunal found that out of Rs.79,75,790/-, Rs.2,80,570/- (Rs.1,60,245/- + Rs.1,20,325/-) relates to Asiatic Infrastructure & Shelters Ltd. and the balance amount of Rs.76,95,220/- (Rs.79,75,790/- - Rs.2,60,570/-) relates to Atlantic Credit and Capital Ltd. i.e. the assessee in the instant case. In view of the above, the addition of Rs.2,80,570/- is deleted in the instant case. Further, in respect of balance amount of Rs.76,95,220/-, it is observed that the same comprised of two amounts i.e. Rs.14,18,940/- and Rs.62,76,280/-. We find that at para No. 22 of page 23, the Tribunal observed from the copy of ledger account of M/s. Atlantic Credit and Capital Ltd. in the books of M/s. R.K.Investment Company and copy of ledger account of M/s. R.K. Investment Company in the books of M/s. Atlantic Credit and Capital Ltd. that transaction of Rs.14,18,940/- was recorded therein. Further, in respect of balance amount of Rs.62,76,280/-, the Tribunal observed at para No. 25 of page No. 26 of the order as under:
IT(SS)A No.83/Ahd/2006
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"We have carefully considered the rival submissions and, perused the material on record along with the order of the AO. We noted from the seized papers 21, 22 and 23 of Annexure A-4, the copies of which are available at pages 148, 149 and 150 of the paper book, fresh typed copies were filed by the assessee at pages 593 to 597. On the basis of these pages, the AO made the addition of Rs.62,76,280/- in the hands of the assessee for the sale of the shares. During the course of hearing, we verified that all these sales relate to Bill No. 9515/00140 and 9535/0031 issued by R.K. Investment. The bills are in the name of M/s. Atlantic Credit and Capital Ltd. The entries of sales of these shares are appearing in the copy of account of M/s. Atlantic Credit and Capital Ltd. in the books of R.K. Investment and correspondingly the entries are duly recorded in the books of M/s. Atlantic Credit and Capital Ltd. in the account of R.K. Investment, which were duly verified during the course of hearing in the presence of learned DR to which he did not raise any objection."
Before us the learned Authorized Representative of the assessee contended that since the transaction of Rs.76,95,220/- were only relating to the assessee company and the said transactions were duly recorded in the regular books of accounts of the assessee company and the cheques received were deposited in the regular bank account which were also recorded and disclosed in the regular books of account and therefore the same cannot be treated as undisclosed income of the assessee. He also relied upon the decisions quoted in para no.28 above.
We find that the learned Departmental Representative could not controvert the submissions of the assessee. It is also observed that no defect in the books of account produced before the Learned Assessing Officer could be pointed out by the Ld. Assessing Officer apart from observing that the books are not reliable on account of not getting the special audit done. On the above facts, we find that no specific defects in the books of account maintained by the assessee could be pointed out by the Revenue and no material was brought before us by the Revenue to show that the sale transaction of Rs.76,95,220/- were not recorded in the regular books of account of the assessee or the same would not have been disclosed by the assessee in the regular return of income. In the circumstances, in our IT(SS)A No.83/Ahd/2006
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considered opinion, Rs.76,95,220/- also could not be treated as undisclosed income within the meaning of Section 158B(b) of the Act. We therefore, delete the entire addition of Rs.79,75,790/- comprising of Rs.2,80,570/- and Rs.76,95,220/-. Thus, this ground of appeal of the assessee is allowed.
72. Ground no.19.19 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Cash credits ...............................Rs.45,49,000/-"
73. The AO has made the above addition by observing as under:-
"4.19. Unaccounted Cash deposits in the Bank Accounts:
Verification of the bank a/c shows that there are cash deposits by the assessee company in the following banks on the dates as mentioned bellow :
Name of the Bank Amount Date.
Bank of India, Maninagar
Branch, Ahmedabad 70,000 14.2.95
-do- 25,00,000 17.5.95
Bank of Madurai 19,79,000 On various dates.
Rs. 45,49,000
The assessee vide final show cause notice dated 9/3/06 was requested to explain as to why the above amount should not be treated as cash credit u/s 68 of the I.T. Act. The assessee tried to justify the cash deposits by submitting that all the cash deposits in question are duly reflected in the books of accounts. In absence of any explanation the amount Rs. 45,49,000/- is added to the total income of the assessee as unexplained IT(SS)A No.83/Ahd/2006
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cash credits u/s 68 of the I.T. Act on substantive basis. (Addition of Rs. 45,49,000)"
74. We have heard the rival submissions and perused the materials available on record. The ld. AR pointed out from page no. 448 of the paper book which contains the reply of the assessee dated 30.03.2006 submitted before the AO in respect of the issue under consideration. The said explanation reads as under:-
"As regards to the entry of Rs.70,000/- dated 14.2.1995 with Bank of India, Memnagar Branch and Rs.25,00,000/- on 7.5.1995 with same bank, we have to state that the cash deposited in the said bank account are the one which are as per para 2.2 and 2.3 of submission dated 14.3.2006 as reflected in the seized books of accounts at Annexure A-8. The cash so deposited represents the cash on hand available in the regular books of accounts and recorded as such in it. There is no introduction of cash credit i.e. to say all the credits are by way of cheques only. In support, cash book is produced for verification. As regards to the proposed addition of Rs.19,79,000/- deposited on various dates it is submitted that no such entries are reflected in the bank statement filed and no such details are provided to the assessee and also appears in the said annexure. The same may distinctively with reference to the amount and date and page number be brought to the notice of the assessee for submitting in rebuttal. We invite your Honour even to pin point with the help of material now present in this room to show it accordingly with exact amount and exact date. It appears that the addition proposed is simply repetition of the original order which has no base and therefore, it remained so at present also and thus liable to be dropped at this stage only. "
The ld. AR reiterated the above submission before us and pointed out that even after the above explanation the AO failed to bring on record any material to show that Rs. 19,79,000/- was deposited in cash on various dates in Bank of Madurai. In respect of cash deposit of Rs. 25,75,000/- in Bank of India he submitted that the same was deposited out of cash in hand available in regular cash book and was duly recorded in the regular cash IT(SS)A No.83/Ahd/2006
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book also and on verification of the cash book produced before the AO no specific defect therein could be pointed out by the AO. The Learned Authorised Representative of the assessee also relied on the decision of Ahmedabad 'D' Bench in the case of Asiatic Infrastructure & Shelters Ltd. Vs. DCIT in IT(SS)A no.84/Ahd/2006 order dated 9/10/2009. The ld. DR relied upon the order of the AO. We find that no material could be brought before us or in the order of assessment by the revenue to show that there was cash deposit of Rs. 19,79,000/- in Bank of Madurai on various dates which was denied by the assessee before the AO also. Thus, in absence of such a material the addition on the ground of cash deposit in Bank of Madurai is unsustainable and bad in law. In respect of cash deposit of Rs. 25,75,000/- in Bank of India, we find that the Revenue has brought no material on record to controvert the explanation of the assessee to the effect that they were deposited out of cash available in regular cash book of the assessee and were duly recorded in the cash book of the assessee. We find that no specific defect either in the entry or in the source available as per cash book of the assessee could be pointed out by the revenue. In absence of any specific defect being pointed out, in our considered opinion, the addition so made cannot be sustained. We, therefore, delete the entire addition of Rs. 45,49,000/- and allow this ground of appeal of the assessee.
75. Ground No.19.20. of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Investments (Purchase).........................Rs.2,68,44,886/-"
76. The AO has made the above addition by observing as under:-
IT(SS)A No.83/Ahd/2006
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4.20. Unexplained investment of the Assessee :
Survey u/s 133A was conducted in the office premises of M/s R.K. Investment Company, Bombay. During the survey it has come to the notice that the assessee company has made transaction of shares with R.K. Investment Company from July 1995 onwards upto 16.12.95. This transaction has been to the extent of Rs. 9,00,00,000/-. On going through the details furnished by R.K. Investment Company during the survey action it is seen that the assessee company has purchased various shares worth Rs. 2,68,44,886/-. Therefore, vide final show cause notice dated 9/3/06 the assessee was requested to explain as to why the above amount should not be treated as its unexplained investment. Instead of producing reliable evidences showing the genuineness of the transaction the assessee tried to dispute the matter by submitting that it has not been provided proper opportunity to justify the transaction. The assessee has not furnished any explanation in absence of any explanation, the amount of Rs. 2,68,44,886/- is added to the total income of the assessee as unexplained investment u/s 69 of the I.T. Act on substantive basis. (Addition of Rs. 2,68,44,886)"
77. We have heard the rival submissions and perused the materials available on record. The ld. AR explained that addition of Rs. 2,68,44,886/- was not made on the basis of any document found during the course of search but was made on the basis of document found during the course of some survey u/s 133A of the Act allegedly conducted in the case of R.K. Investment. He pointed out from page nos. 26,27 & 448,449 & 450 of the paper book that the assessee had repeatedly requested the AO to supply copy of document which was gather behind the back of the assessee and on the basis of which the addition in question was proposed. However, even after specific repeated demand by the assessee copy of no such document was supplied to the assessee and therefore, the addition in question is bad in law. The ld. DR relied upon the order of the AO. We find that it is not in dispute that the addition of Rs. 2,68,44,886/- in question is made on the basis of certain document found in the course of survey proceeding u/s 133A of the Act conducted in the premises of R.K. Investment. It is an established position of law that no material gathered IT(SS)A No.83/Ahd/2006
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behind the back of the assessee can be used against the assessee unless the assessee is supplied with the copy of the document which is to be used against him and thereafter he is allowed reasonable opportunity to controvert or rebut the same. In the instant case we find that inspite of specific demand by the assessee, the AO has not supplied the assessee with the copy of survey materials which was used against the assessee by him and which was gathered behind the back of the assessee from the premises of M/s. R.K. Investment. In our considered opinion, justice should not only be done but it should also manifestly be seen to have been done. No material could be brought before us to show that materials which were gathered during the course of survey conducted at the premises of R.K. Investment were supplied to the assessee before using the same against the assessee. In our considered opinion, in absence of such material being supplied to the assessee, the same cannot be legally used against the assessee. Thus, the addition of Rs. 2,68,44,886/- was based only on an inadmissible and unreliable material, the addition so made is bad in law and unsustainable. We, therefore, delete the addition of Rs. 2,68,44,886/- and allow this ground of appeal of the assessee.
78. Ground no.19.21 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Unaccounted income on account of purchase and sale of shares ........................Rs.5,39,55,045/-"
79. The AO has made the above addition by observing as under:-
"4.21. Unaccounted Sales of the Assessee:
On going through the estimated bills furnished by N.V. Shah, Broker of Bombay, for purchase and sale of shares on behalf of the assessee, it was seen that there is sale of Rs. 5,39,55,0457- and purchase of Rs. 4,13,77,322.75/- The assessee was therefore, vide final show cause notice dated IT(SS)A No.83/Ahd/2006
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9/3/06 requested to explain as to why the amount of Rs. 5,39,55,045/- should not be treated as its unexplained income. Instead of producing reliable evidences showing the genuineness of the transaction the assessee tried to dispute the matter by submitting that it has not been provided proper opportunity to justify the transaction. In absence of any explanation, the amount of Rs. 5,39,55,045/- is added to the income of the assessee as unexplained income on substantive basis. (Addition of Rs. 5,39,55,045)"
80. After hearing the rival submissions and perusing the material available on record we find that similar to the facts involved in the ground no. 19.20 above, in respect of the instant issue also the addition of Rs. 5,39,55,045/- was made by the AO on the basis of material gathered from N.V. Shah broker of Bombay without supplying copy of the same to the assessee inspite of the specific request of the assessee. The facts and issue involved are similar as in ground no. 19.20 above and therefore, for the same reasoning as mentioned in respect of ground no. 19.20 above, we delete the addition of Rs. 5,39,55,045/- and also allow this ground of appeal of the assessee.
81. Ground no.19.22 of the appeal reads as under:-
19. The Ld. Learned Assessing Officer has grievously erred in law and or on facts in making following additions.
"Additional Income ................................Rs.28,10,000/-"
82. The AO has made the above addition by observing as under:-
"4.22. Additional Income offered by the Assessee :
Notice u/s. 142(1) of the I.T.Act was issued to the assessee on 15/2/2006. In response to the notice the assessee has filed certain details regarding his undisclosed income. It can be seen that assessee has further offered Rs.28,10,000/- on account of the shares of Indo American Optics Ltd. According IT(SS)A No.83/Ahd/2006
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to the assessee this disclosure does not form part of the original disclosure of Rs.3,64,51,400/- made by the assessee. Accordingly Rs.28,10,000/- is hereby added as the undisclosed income of the assessee substantive basis. (Addition of Rs. 28,10,000)"
83. We find that the ld. AR has not pressed this ground of appeal at the time of hearing of the appeal. Therefore, this ground of appeal of the assessee is dismissed for lack of prosecution.
84. In the result, the appeal filed by the assessee is partly allowed.
Order signed, dated and pronounced in the Court on 07th May, 2010.
Sd/- Sd/-
(MAHAVIR SINGH) ( N.S. SAINI )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; On this 07th May, 2010
Paras
Copy of the Order forwarded to :
1. The Appellant 2. The Respondent
3. The CIT Concerned 4. The ld. CIT(Appeals)-
5. The DR, Ahmedabad Bench 6. The Guard File.
BY ORDER,
स᭜यािपत ᮧित //True Copy//
(Dy./Asstt.Registrar), ITAT, Ahmedabad