Income Tax Appellate Tribunal - Chandigarh
Sh. Chander Deep Jain, Chandigarh vs Department Of Income Tax on 18 September, 2013
THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'B', CHANDIGARH
BEFORE SHR I T.R.SOOD, ACCOUNTANT MEMBER
AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
IT(SS)A No.20 /Chd/2009
Block Period 1.4.1988 to 30.9.1998
Sh.Chander Deep Jain, Vs. The A.C.I.T.,
H.No.3169, Sector 21-D, Circle 2(1),
Chandigarh. Chandigarh.
PAN:
And
IT(SS)A No.18 /Chd/2009
Block Period 1.4.1988 to 30.9.1998
The A.C.I.T., Vs. Sh.Chander Deep Jain,
Circle 2(1), H.No.3169, Sector 21-D,
Chandigarh. Chandigarh.
PAN:
(Appellant) (Respondent)
Assessee by : Shri Ashwani Kumar
Department by : Shri Manjit Singh, DR
Date of hearing : 18.09.2013
Date of Pronouncement : 06.12.2013
O R D E R
Per SUSHMA CHOWLA, J.M. :
The cross appeals filed by the assessee and the Revenue are against the order of the Commissioner of Income-tax (Appeals), Chandigarh dated 31.3.2009 relating to block period 1.4.1988 to 30.9.1998 against the order passed under section 250(6)/143(3) of the Income Tax Act, 1961.
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2. The cross appeals filed by the assessee and Revenue were heard together and are being disposed off by this consolidated order for the sake of convenience.
IT(SS)A No.20/Chd/2008 :: Assessee's Appeal
3. The assessee has raised the following grounds of appeal:
"1. That the order passed u/s 250(6) by the Ld.CIT(APPEALS), Chandigarh is against law and facts on the file in as much he was not justified to uphold that the notice issued u/s 158BC dated 11.06.1999 was valid in law.
2. That the Ld. CIT(APPEALS) further gravely erred in upholding the action of the Ld. Assessing Officer in making the following additions.
(a) A sum of Rs.35.000/- on account of cash found at the time of search
(b) Rs. 65,000/- out of total addition of Rs.1,15,000/- made on account of alleged investment in household goods
(c) Rs. 16,500/- on account of investment in shares of ACC Ltd. in the name of Wife Smt. Dolly Jain
(d) A sum of Rs. 4,07,000/- on account of alleged investment made in the purchase of SCO-7, Sector-5, Panchkula
(e) A sum of Rs.3,21,500/- (being 50% of Rs.6,43,000/-) made on account of alleged investment in Lima Engineering P. Ltd.
(f) A sum of Rs. 5,94,433/- on account of alleged investment in Jasmine Enterprises P. Ltd.
(g) A sum of Rs. 6,50,000/- on account of alleged investment in property situated at 259, Industrial Area, Chandigarh whereas even the Power of Attorney was in the name of appellant's brother Sh. Vipin Kumar.
(h) A sum of Rs. 4,80,000/- (being 50% of Rs. 9,60,000/-) on account of alleged investment in Suraj Theatre
3. That the Ld. CIT(Appeals) was further not justified to uphold an addition of Rs.
8,10,000/-out of total addition of Rs. 16,20,000/- made on account of alleged low household expenses.
4. That the Ld. CIT (A) was not justified to arbitrarily uphold an addition of Rs.l,59,72,599/- on account of credits in the bank accounts and a sum of Rs.13.35,000/- on account of alleged investment in FDRs by simply ignoring the explanations furnished.
5. That the Ld. CIT (A) was not further justified to uphold the disallowance of interest paid on loans raised for purchase of property.
6. That the Ld. CIT (A) was further not justified to uphold the action of the Ld. Assessing Officer in treating the income of A/Y 1998-99 as undisclosed income. 3
7. That the Ld. CIT(APPEALS) further erred in passing the order by ignoring all principles of natural justice in as much as the cash flow statement filed by the appellant was arbitrarily rejected and the remand report sent by the Ld. Assessing Officer on the directions of his predecessor was simply ignored." IT(SS)A No.18/Chd/2009 :: Revenue's Appeal
4. The Revenue has raised the following grounds of appeal:
"On the facts and the circumstances of the case and in law, the Ld. C.I.T.(Appeals) in Appeal No.502/P/06-07, through order dated 31.03.2009, has erred in deleting the following additions:-
1. The Ld. CIT(APPEALS) has erred in allowing relief of Rs.50,000/- by deleting the addition on account of house-
hold goods.
2. The Ld. CIT(APPEALS) has erred in restricting the addition on account of low house hold expenses to Rs.8,10,000/-.
3. The Ld. CIT(APPEALS) has erred in deleting the addition of Rs.19,35,158/- out of the total addition of Rs.1,79,07,757/- made on account of deposits in bank accounts.
4. The Ld. CIT(APPEALS) has deleted the addition of Rs.9,71,388/- made by the AO on account of Rental income."
5. The assessee has raised additional ground of appeal, which reads as under :
"That assessment framed under section 158BC read with section 143(3) of the Income Tax Act, 1961 is barred by limitation as per provisions of section 158BE in as much as the original assessment was framed vide order dated 31.10.2000 whereas the search in the case of the appellant had concluded on 30.09.1998."
6. The ld. AR for the assessee stressed for the admission of the additional ground of appeal. However, it was admitted that this plea was not earlier raised. The ld. DR for the revenue pointed out that the said plea of the assessment being barred by limitation cannot be raised for the first time before the Tribunal i.e. after the matter was first set aside by the CIT(Appeals) and the present appeal is filed against the second round of appellate proceedings. Reliance was placed on Aravali Engineers (P) Ltd. Vs CIT 335 ITR 508 (P&H).
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7. We find no merit in the stand of the assessee in view of the fact that no such plea was raised in any earlier proceedings and also because of the ratio laid down by the jurisdictional High Court in Aravali Engineers (P) Ltd. Vs CIT (supra), wherein it has been held as under :
"No doubt that an appellate authority can allow a question to be raised for the first time even if such a question was not raised at a lower forum but the discretion to do so has to be exercised in the interest of justice in the facts and circumstances and not mechanically. Normally a question of fact may not be allowed to be raised for the first time as it may prejudice the other side. If such question is raised at the earliest opportunity, the other side can lead evidence which it may not be able to do if such a question is raised for the first time before the appellate authority. Of course, there can be no total bar on such question being allowed, if interest of justice so requires. Question of validity of notice may not be allowed to be raised for the first time in appeal. Subsequent legislative amendment adding s. 292BB supports this principle. The question has, thus, to be answered against the assessee.--CIT vs. Premium Capital Market & Investment Ltd. (2005) 198 CTR (MP) 680 : (2005) 275 ITR 260 (MP) relied on. (Underline provided by us) The additional ground of appeal raised by the assessee is thus, dismissed.
8. The ld. AR for the assessee did not address the issue raised vide ground No. 1 and hence, the same is dismissed.
9. The assessee is aggrieved by various additions made by the Assessing Officer and has raised ground Nos. 2(a) to 2(h) in respect of the said additions. The issue in ground No. 2(a) is in relation to the addition of Rs. 35,000/- on account of cash found at the time of search.
10. The brief facts relating to the case are that search at the premises of the assessee was carried out on 30.09.1998. The assessee filed return of income for the block period declaring total income of Rs. 1,50,000/- on 12.10.2000. The block assessment in the case was completed on 31.10.2000 which was set aside b y CIT(Appeals) vide order dated 19.03.2001. In the set aside proceedings, the assessee sought adjournment on one pretext or the other and only on 17.03.2003, the assessee filed the reply containing evidences/documents which were 5 not filed at the time of original assessment. The assessee had also disputed the assessment proceedings being bad in law.
11. T h e A s s e s s i n g O f f i c e r n o t e s t h a t t h e H o n ' b l e P u n j a b & H a r ya n a High Court had in assessee's own case, set aside the assessment on the writ petition filed by the assessee. The revenue filed an appeal before the Hon'ble Supreme Court and vide order dated 23.1.2003, in appeal No. 1093 of 2002, the operation of the judgement of the Hon'ble Punjab & H a r y a n a H i g h C o u r t w a s s t a ye d . The objection of the assessee before the Hon'ble Courts was that the assessment was being framed by the same person who had conducted the search on the premises of the assessee. But as the said Assessing Officer had been transferred, the objection of the assessee was found to be infructuous and the case of the assessee was decided on the merits and as per the directions of the CIT(Appeals), Chandigarh.
12. During the course of search, cash of Rs. 3,51,600/- was found from the residence of the assessee out of which, cash of Rs. 3 lacs was seized. In the statement recorded during the course of search, the assessee explained that the source of the said cash was out of Rs. 3 lacs withdrawn from State Bank of Patiala, Sector 17-C, Chandigarh from the current account of his wife Smt. Dolly J ain and balance was claimed to be out of small cash kept at home. The purpose for withdrawal of the said Rs. 3 lacs from the Bank was also explained by the assessee, which is enumerated at page 3 of the assessment order. The Assessing Officer accepted the explanation of source of cash of Rs. 3 lacs and also of Rs. 15,600/- being paid by wife of the assessee. The balance amount which was held to be income from other sources in the hand of the assessee was Rs. 35,000/-.
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13. The CIT(Appeals), vide para 50 to 53 at pages 40 to 43 of the appellate order, on consideration of the submissions of the assessee with regard to the cash flow statement, rejected the same and upheld the addition of Rs. 35,000/-.
14. The ld. AR for the assessee pointed out that the source of the said cash of Rs. 35,000/- is explainable and duly reflected in the cash flow statement prepared by the assessee. Our attention was drawn to the cash flow statement placed at pages 346 to 355 of the Paper Book. The ld. AR for the assessee was confronted as to whether any books of account were being maintained by the assessee and the reply of the assessee in this regard was that no such books of account were being maintained and the said cash flow statement has been prepared on a later date to explain the source of various entries.
15. The ld. DR for the revenue placed reliance on the order of the CIT(Appeals) and pointed out that the attitude of the assessee was totally non-cooperative. The assessee failed to furnish the requisite information during the assessment proceedings or even before the CIT(Appeals) and now wants to rely on the alleged cash flow statement to explain the entries in respect of various credits and also various expenditures incurred by the assessee.
16. We have heard the rival contentions and perused the record. Before adjudicating the merits of the issue, it is necessary to refer to certain facts which have been referred to by the CIT(Appeals) in paras 3 to 20 at pages 6 to 22 of the appellate order. The relevant facts and circumstances of the case and the proceedings before 7 the Assessing Officer the CIT(Appeals) were as under :
a) Search under section 132(1) of the Act was carried out at the premises of the assessee on 30.09.1998. Simultaneously, search was also carried out on the premises of his brother Shri Vipin Jain and both the assessee and his brother were partners in M/s S . K . & C o m p a n y.
b) Notice under section 158BC of the Act was issued on 11.6.1999 asking the assessee to file return of income for the block period.
However, no return of income for the block period was filed by the assessee and another show cause notice was issued on 16.7.1999 as to why prosecution proceedings under section 276CC should not be initiated against the assessee for failure to file the return of income. But no reply to the same was received by the Assessing Officer. A questionnaire was sent to the assessee on 22.5.2000 and then on 4/6.10.2000. Return of income was filed on 12.10.2000 and the original assessment in the case was completed on 30.10.2000. The CIT(Appeals) vide order dated 19.3.2001 set aside the assessment and restored the matter back to the file of Assessing Officer with directions to decide the same denovo after investigating the additional evidence filed by the assessee at the time of appellate proceedings.
The CIT(Appeals) also, in the first round of appeal, addressed the issue of validity of assessment, lack of opportunity and denial of principle of natural justice and vide para 5 held that the proceedings initiated in the search case were 8 validly initiated and the Assessing Officer was directed to frame the assessment.
c) The assessment in the case was framed by Assessing Officer vide order dated 31.3.2003 against which the assessee filed an appeal and filed written submissions before the CIT(Appeals) vide letter dated 23.4.2005. The assessee again challenged the validity of the assessment and also stressed that adequate opportunity was not afforded.
d) The CIT(Appeals) noted that the assessee had failed to give complete facts before the CIT(Appeals) in the first round of appeal and hence, the finding of CIT(Appeals) that adequate opportunity was not afforded to the assessee was incorrect. The CIT(Appeals) in the second round of appeal, vide para 14 of the appellate order, on the perusal of the assessment record found t h a t t h e A s s e s s i n g O f f i c e r h a d g i v e n a t l e a s t 2 ye a r s t i m e t o t h e assessee to explain its case whereas the assessee simply remained silent on the questionnaire issued by the Assessing Officer. The CIT(Appeals) further observed that "The Assessing Officer in his order at page 2 has clearly given finding that assessee was given photo copies of the seized documents by the ADIT (Investigation) as early as 15.11.1998, 24.11.1998, 25.11.1998 and 27.11.1998 whereas the plea of the assessee before the CIT(Appeals) in the first round of appellate proceedings was that the photo copies of the seized documents were given in October,2000." The CIT(Appeals) further noted that the assessee never made a request for taking the photo copies of the seized documents till 28.09.2000, which in turn were again given to him in October,2000. The CIT(Appeals) under para 15 at pages 10 to 21 9 of the appellate order has tabulated the sequence of events and details of opportunities afforded to the assessee alongwith the narration/remarks on proceedings of each date, starting from the date of conduct of search at the premises of the assessee, both during the original assessment proceedings and also during the assessment proceedings, restored to the file of Assessing Officer b y the CIT(Appeals). The perusal of the said tabulated details reflect that the assessee failed to furnish information before the Assessing Officer even in the second round of assessment proceedings and the case of the assessee was taken up from date to date and the assessee on one pretext or the other, sought adjournments or furnished insufficient evidence before the Assessing Officer. The assessment order was framed on 31.3.2003 and the assessee only furnished part information in the month of March,2003 whereas said proceedings were started on 19.09.2001.
e) The assessee, thereafter appealed against the said assessment order dated 31.3.2003 and even before the CIT(Appeals), sought adjournments on one pretext or the other. The assessee was asked to give reasons for withdrawal of cash and reasons for re- depositing the same in the bank account and also furnishing the details of source of investment. The CIT(Appeals) vide entry dated 14.08.2008 notes that the assessee sought permission to produce books of account which admittedly were prepared after the search, for the period prior to search. The assessee was again directed to explain source of investment and in reply the simple statement of withdrawal from the bank was filed, which as per CIT(Appeals) was not sufficient to explain the credit in the bank 10 account. E v e n i n t h e c a s e o f t r a n s f e r o f b a n k e n t r y, t h e CIT(Appeals) observed that the assessee had to explain the source of the amount transferred from one bank to the other. The CIT(Appeals) vide para 20, gives the finding that where it is f o u n d t h a t t h e e v i d e n c e h a d b e e n u n n e c e s s a r i l y d e l a ye d , t h e n t h e Assessing Officer would be justified in ignoring these evidences which have been given in March,2003 even though the assessee was asked to attend the hearing right from September, 2001. The CIT(Appeals) vide para 21 at page 23 of the appellate order, o b s e r v e d t h a t t h e a s s e s s e e w a s t r yi n g t o p r o v e e v e r yt h i n g t h r o u g h affidavits, which were self-serving documents " until and unless they are corroborated by corresponding evidence on the contents of the affidavit and also the investigation is to be done by the Assessing Officer." Mere filing of affidavit is not a sufficient proof. The CIT(Appeals) noted that there were various cash credits found in the bank account of the assessee and by way of an affidavit produced in the month of March,2003, the assessee claims to have explained the source of the said cash credit. The CIT(Appeals) further notes that there was no such content of the affidavit, which would show that the same could not be produced during the original assessment proceedings and the production of the affidavits in the month of March,2003 could not be accepted in the absence of the assessee having failed to explain the circumstances for not producing the same earlier. Vide para 22 at pages 23 to 25 of the appellate order, the CIT(Appeals) thereafter took note of the various evidences filed by the assessee in March,2003 and observed that all said documents explaining the entries, could very well have been produced by the assessee in 11 the original assessment proceedings itself as the same were copies of bank account or affidavits of various persons with regard to investment in different concerns and their production at such a late stage prevented cross verification by the Assessing Officer and hence, the same could not be admitted at the late stage.
f) The CIT(Appeals), before addressing the issue on merits of each of the grounds of appeal, first addressed the legal issues, which we shall address at the appropriate time, and thereafter noted that the assessee had failed to produce the books of account during the course of original assessment proceedings and it is an admitted position that no balance sheets were filed alongwith the return of income. However, during the course of appellate proceedings, assessee prepared cash flow statement and the assessee sought to explain the various investments through the said cash flow statement and various affidavits. The said cash flow statement, for the first time was placed before the CIT(Appeals) in the month of April,2005 to explain various investments by way of introduction of the amounts in cash, which in-turn were not supported by any evidence. The relevant findings of the CIT(Appeals) vide paras 38- 39 of the appellate order are as under :
"38 The assessee has made cash flow statement as a panacea for explaining all kinds of investments. The scrutiny of cash flow statement reveals that the assessee in order to explain the various investments is attempting to introduce the amounts that too in cash and unsupported by any evidence. It may be remembered that the said cash flow statement is never produced before the Assessing Officer for verification. This has been placed before the CIT(APPEALS) that too in April, 2005. The Assessing Officer never had a chance to make verification of the entries or to make further investigation. The entries given in the cash flow statement are relating to the cash receipts from various sources. For example, on Page 385, the assessee has shown receipts from M/s S.K. & Company, Chanderdeep Jain (HUF), Chanderdeep Jain (FfUF, Sale of Trees). There is 12 no documentary evidence which could be believed that the assessee was really in receipt of cash on account of sale of trees. The receipts from M/s S.K. & Company are also not verifiable. The perusal of capital account of the assessee in M/s S.K. & Company shows that there is cash deposit of Rs.26000/-on 6/5/93. The genuineness of these cash amounts in the capital account of M/s S.K. & Company could not be verified as the assessee failed to give all such information before the Assessing Officer. Therefore, the reliance of the assessee on the cash flow statement is without any merit. There is no cogent material to explain the source. The cash flow statement prepared by the assessee is a self-serving document. It is seen that the assessee has prepared a list of different investments on various dates and then attempted to show various receipts that too in cash corresponding to these dates. At such a late stage i.e. in 2005, such documents cannot be in principle admitted. It was the duty of the assessee to place all material at the proper time before the Assessing Officer. In its approach to delay the investigation, the assessee chose a way not to place any material before the Assessing Officer even though the assessee could have done. The assessee has failed to prove his bonafides.
39 It is also pointed out that the assessee is not maintaining regular books of accounts. There is no day-to-day cash book and the ledger or any other corresponding book. This cash flow statement is just prepared by the assessee taking the same dates where there was need to explain the source of investments in the various properties or to explain the cash amounts deposited in various banks. If we accept the theory propounded by the assessee on cash flow statement, then there is no need for any person to maintain regular books of accounts. The assessee would wait till the Department take some action, then come out with a theory of cash flow statement which abounds in all kinds of cash receipts without any corroborative evidence. In other words, the assessee could not prove the source of cash receipts with documentary evidence. To repeat, the assessee has shown the receipts on account of sale of trees in the account of Chanderdeep Jain (HUF) at such a late stage. Had the assessee furnished this information before the Assessing Officer, the Assessing Officer would have made the necessary enquiry at that point of time to find out the veracity of the statement. In this case, the assessee is playing smart to put up the information at such a late stage and making submissions in such a manner as if everything is explained. The other source which is generally shown by the assessee is withdrawal from M/s S.K. & Company. The assessee failed to give any evidence of deposits in M/s S.K. & Company. The assessee wants the Department to believe that if some entries have been written as withdrawal from M/s S.K. & Company, the same should be treated as explained. The said arguments of the assessee are erroneous as the assessee has to fulfill all the ingredients of section 68 i.e. identity, capacity and creditworthiness. The books of accounts maintained by M/s S.K. & Company have been rejected by the Assessing Officer. The assessee failed to produce books of account. The Assessing Officer in the assessment of M/s S.K. & Company has rejected the books of accounts maintained by Ms S.K. : & Company.B y rejection of books of accounts, any receipt stated to be received from M/s. S.K. & Company cannot be treated to be explained. The assessee in order to explain the source of investment is emphasizing time and again on the cash flow statement. Even in cases where the assessees are maintaining regular books of account and the Assessing Officer find certain discrepancies, the books of account are rejected. The case of the assessee is worse where there is just consolidation of many entries on the receipt and payment sides ignoring all the principles of accountancy of maintenance of day-to-day books of account.13
The assessee is attempting to give the status of this cash flow statement as the regular books of account. Therefore, any reliance by the assessee on the cash flow statement is without any merit. "
g) The CIT(Appeals) vide para 40 held that cash flow statement filed by the assessee was an after thought and as the assessee had failed to produce the evidence before the Assessing Officer, and even during the second round of assessment proceedings, the investigations or confirmations of the pleas raised by the assessee could not be carried on by the Assessing Officer and in view thereof, the consequences had to be borne by the assessee under the provisions of the Act. The CIT(Appeals) vide para 43 clearly observed that it is an obligation on the department to allow fair opportunities to the assessee. In the present case, sufficient opportunity was allowed to the assessee. However, the assessee produced the material only in October,2000 or March,2003 so that no time was left with the Assessing Officer to make any further enquiries and in such circumstances, the case had to be decided based on the said peculiar facts.
h) The assessee was found to be maintaining ten bank accounts and majority of the transactions were in cash. The CIT(Appeals) vide para 47 held that such state of affairs does not inspire confidence and circumstantial evidence was against the assessee. Further, the assessee had failed to show any income in his personal returns to explain the large amount of capital in M/s S.K. & Company and though the assessee was producing various documents i.e. withdrawals from bank accounts etc., but the facts revealed that ultimately the origin was out of cash introduced by the assessee which in-turn was without any 14 explanation. Even when some explanation was given, it was as of cash generation by sale of trees or unproved loans and the requirements of section 68 being not satisfied, the said amounts were to be treated as income of the assessee under the provisions of section 68 of the Act.
i) The CIT(Appeals) thereafter individually referred to the various additions made by the Assessing Officer and the explanation of the assessee in order to adjudicate the issue on merits of the addition.
17. We have heard the rival contentions and perused the record. Search under section 132(1) of the Act was conducted at the residential premises of the assessee on 30.09.1998 alongwith search conducted simultaneously at the premises of his brother Shri Vipin Jain. Both the a s s e s s e e a n d S h r i V i p i n J a i n w e r e p a r t n e r s i n M / s S . K . & C o m p a n y, 9 0 , Industrial Area, Chandigarh. During the course of search, various documents were found and seized including documents relating to various investments made by the assessee during the block period. Notice under section 158BC(a) of the Income Tax Act was issued to the assessee on 11.6.1999 and served upon the assessee on 18.06.1999. The assessee failed to furnish the return of income for the block period before the Assessing Officer despite show cause notices issued to him and it was eventually filed on 12.10.2000. It is to be noted that the original assessment was getting time barred on 30.10.2000 and the assessee had furnished the return for the block period on 12.10.2000. The original assessment completed in the case was set aside by the CIT(Appeals) with the direction to the Assessing Officer to frame the assessment denovo after investigating the additional evidence filed by the assessee during the appellate proceedings. In the second round of 15 assessment proceedings also the assessee sought adjournments on one pretext or the other and in the reply dated 11.03.2003 the assessee disputed that the assessment proceedings were bad in law. Then on 17.03.2003, the assessee furnished the reply containing evidence/documents which were not filed at the time of original assessment. The initial objection of the assessee vis-à-vis the jurisdiction of the officer completing the assessment were rejected by the Assessing Officer and thereafter, the assessment was completed on the basis of the documents available vide order dated 31.03.2003, under which the undisclosed income of the assessee under different heads for d i f f e r e n t f i n a n c i a l ye a r s w a s c o m p u t e d , r e s u l t i n g i n a d d i t i o n o f R s . 1 , 8 9 , 1 9 , 1 2 4 / - . T h e ye a r - w i s e u n d i s c l o s e d i n c o m e o f t h e a s s e s s e e f o r t h e block period i.e. from 01.04.1988 to 30.09.1988 is tabulated at page 15 of the assessment order dated
18. The C IT(Appeals) at pages 14 to 17 of the appellate order has date-wise tabulated the proceedings before the Assessing Officer and the matter was restored back to the Assessing Officer by the CIT(Appeals) wherein the assessee time and again had sought adjournment on one pretext or the other. On 17.03.2003, the Assessing Officer asked the assessee to produce certain evidence and also to produce certain persons and some of the persons were produced on 17.03.2003. Thereafter, the assessment order was passed on 31.03.2003.
19. During the appellate proceedings before the CIT(Appeals), in the second round of appeal, the appeal was fixed from October,2003 onwards and vide para 16, the CIT(Appeals) notes that his predecessors had given as many as 25 opportunities and the assessee had asked for repeated adjournments. Further, the appeal was again fixed by the incumbent 16 CIT(Appeals) and the details of opportunities and the remarks as per the noting-sheet are tabulated date-wise under para 17 at pages 18 to 21 of the appellate order. The assessee was asked to give the details of the total investment year-wise and their sources and also explain with the conditions laid down under Rule 46A of IT Rules vis-à-vis the additional evidences produced and also a chart mentioning the details of evidences filed to explain the source of each item i.e. confirmation of loan, affidavit etc. The assessee on 14.08.2008 filed a chart of investments and during the course of hearing on the said date, it was admitted by the ld. AR for the assessee that the books of account were stated to be prepared, were made after the search. The plea of the assessee before C I T ( A p p e a l s ) w a s t h a t i t w a s n o t g i v e n s u f f i c i e n t o p p o r t u n i t y, w a s n o t accepted b y the CIT(Appeals) in view of the issue summarized under para 19 of the appellate order. It has been noted b y the CIT(Appeals) that during the course of original assessment proceedings, assessee did not furnish any information till October,2000 and the case was getting time barred in October,2000. Further, after the appellate proceedings were completed in March,2001 and assessment proceedings were getting time barred on 31.03.2003, the assessee furnished the details in March,2003. The delay on behalf of the assessee was found to be unnecessary and the CIT(Appeals) held that the Assessing Officer, in such circumstances, would be justified in ignoring the evidences, which were given in March,2003 even when the assessee was asked to attend the proceedings right from September,2001. The assessee failed to produce the books of account during the course of original assessment proceedings, no balance-sheets were filed alongwith the return of income filed for the block period. The assessee, though gave an explanation about some of the investments/inventories but complete information was 17 not filed before the Assessing Officer in the original assessment proceedings or even during the set aside appellate proceedings. The assessee, however furnished cash flow statement during the course of appellate proceedings in the second round vide which the assessee sought to explain various investments through the said cash flow statements and affidavits. The CIT(Appeals) vide para 38 and 39, after deliberating upon the documents submitted by the assessee, vide para 40 to 43 at page 36 of the appellate order held as under :
40 The cash flow statement is an after thought. The assessee could have given this information during the course of original assessment proceedings which is the right stage as per provisions of income tax Act. It is not the sweet will of the assessee to produce information whenever it wants to do. It is important to delineate the scheme of the Act.
41. The Assessing Officer issues notices u/s 143(2)/142(1). As per notice u/s 143(2), an opportunity is given to the assessee to produce or cause to be produced any evidence on which the assessee may rely in support of the return. As per notice u/s 142(1), the Assessing Officer may :
(a) Ask for filing the return.
(b) Ask to produce books of account, documents, etc.
(c) Ask for information on certain points.
42. The point to be emphasized is that the Assessing Officer cannot go ahead without this compliance. If the assessee has succeeded in not allowing the Assessing Officer to proceed further, then the consequences has to be borne by the assessee as per provisions of the Act.
43. The only obligation of the Department is to allow fair opportunity to the assessee. The assessee should also understand the working of the Department in as much as the Assessing Officer has to give fair opportunity to each assessee whose cases are being scrutinized. For that purpose, slots of time are filled up for various assessees and other works related to office. It is quite possible that assessee takes adjournment and the matter has to be adjourned. Then the assessee cannot take as a matter of right to fill the slot allotted to other work or allotted to some other assessees. The assessee has made attempts to encroach upon the time allotted to other assessees. If the Assessing Officer does so, then natural justice would be denied to other assessees of his jurisdiction. In other words, for the smooth functioning of the office, the assessee cannot ask the Assessing Officer to devote time as per his sweet will. If such a state of affair is allowed to happen, then no assessing authority, no CIT(APPEALS), or Hon'ble ITAT or Hon'ble courts can function properly. The Assessing Officer had to dispose of many other cases apart from the cases of this assessee. Such performance of functions is inherent in the system.
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20. In view of the conduct of the assessee in not furnishing the information in time during the course of assessment proceedings and r e l yi n g u p o n t h e c a s h f l o w s t a t e m e n t w h i c h h a d m a n y l a t c h e s , t h e CIT(Appeals) decided the appeal after rejecting the same.
21. The ld. AR for the assessee, during the course of hearing vehementl y placed reliance on the said cash flow statement placed at pages 346 onwards. The perusal of the cash flow statement reflects that there is an opening cash of Rs.68,500/- as on 01.04.1988 and the assessee has failed to produce any evidence in respect thereof. Thereafter, the assessee has, on various dates shown introduction of various amounts from the partnership concern S.K. & Company and loans received in cash on various dates from various persons. The assessee claims that it has furnished on record the affidavits of all such persons w h o h a v e g i v e n t h e a m o u n t i n c a s h t o t h e a s s e s s e e a n d c o n s e q u e n t l y, t h e same should have been accepted. Another source of cash introduction is out of sale of trees by the HUF of the assessee for which the assessee has failed to produce any evidence. On 15.03.1995 the assessee has shown a sum of Rs. 85,000/- as income from other sources. The assessee, on the other hand, has also tabulated his payments made on various dates i.e. explaining the source of cash deposits in the various bank accounts maintained by the assessee and also amounts utilized in investment in various properties and the amounts advanced to the partnership concern M/s S.K. & Co. The assessee has also purchased a car in cash on 22.04.1993 for Rs.1,82,000/- out of the said cash flow and also invested a sum of Rs. 6,00,000/- in plot No. 7/5 on 24.03.1995 besides investing various amounts in different bank accounts maintained by the assessee.
19
22. During the course of hearing, ld. AR for the assessee was asked to reconcile the amounts shown in the cash flow statement with the affidavits filed by the assessee and also with the entries in the bank account in respect of the source of deposits in the said bank accounts. The assessee had shown to have received Rs. 18,000/- in cash from one Ms. Nisha Jain on 06.02.1989 and the affidavit of Ms. Nisha Jain was referred at page 405 of the Paper Book. The perusal of the said affidavit reflects that the same is not prepared on stamp paper and is filed on plain paper and is un-dated and the name of the place of issue is also missing. There is no attestation of the said affidavit and the same being a blank document, cannot be accepted as an evidence of having accepted the amount in cash. In the said affidavit, the assessee claims to have received Rs.18,000/- in cash on 06.02.1989, Rs. 10,000/- on 04.01.1990 and Rs. 8,000/- on 29.03.1990, in addition to Rs. 1,94,000/- received by cheque on 25.10.1989.
23. The assessee has further claimed to have received various amounts in cash as loan from one Ms. Nirmal Jain and the affidavit of Smt. Nirmal Jain is placed at pages 403-404 of the Paper Book. The said affidavit is executed on a stamp paper and is also attested. In the said affidavit, Smt. Nirmal Jain states to have given Rs.18,000/- in cash on 08.02.1989 and Rs. 8,000/- in cash on 15.07.1989. In addition, a loan of Rs.1,94,000/-, paid vide cheque on 25.10.1989. In the said affidavit, Smt. Nirmal Jain has also stated to have received back a sum of Rs. 75,000/- on 26.10.1989 and Rs. 2,70,000/- on 22.06.1996 i.e. on account of principal and interest of Rs. 144,453/- till 31.03.1997. It further states that a sum of Rs. 19,453/- was still outstanding. The perusal of the cash flow statement reflects that in addition to receiving Rs. 18,000/- in cash on 8.2.1989 and Rs. 8000/- on 15.07.1989, the assessee 20 has also shown receipt of Rs. 8000/- in cash on 29.03.1990 which has not been admitted to have been paid by the said Smt.Nirmal Jain.The assessee has failed to reconcile the said receipt of Rs. 8,000/- in cash on 29.03.1990 from Smt. Nirmal Jain.
24. Another affidavit referred to by the ld. AR for the assessee is placed at page 401 of the Paper Book which is executed by Shri Virender Kumar J ain on behalf of the his daughter Ms. Shikha J ain who had advanced a loan of Rs. 55,000/- vide two different cheques. The said affidavit is dated 06.03.2001 and the source of the said amount is not explained.
25. The entries in the cash flow statement furnished by the assessee were also test checked with the entries in the bank accounts, copies of which are placed by the assessee in the Paper Book at pages 420 onwards. The assessee at page 432 has placed on record copy of bank account of State Bank of Patiala, High Court Branch, Chandigarh in which there are various cash entries. The ld. AR for the assessee was asked to reconcile the entries and it was pointed out by the ld. AR for the assessee that on 25.10.1989, there was a withdrawal of Rs. 5,82,000/- which was reflected in the cash flow statement out of which Rs. 75,000/- was re-deposited on 26.10.1989. The ld. AR for the assessee further pointed out that on 12.06.1991, there was a cash withdrawal of Rs. 70,000/- and there was re-deposit on 13.06.1991 of Rs.70,000/- which were reflected in the cash flow statement. Further reference was made to two cheque withdrawals which were actually cash withdrawals of Rs. 75,000/- each on 11.11.1991 which were reflected both in the bank statement and cash flow statement. During the course of hearing, it was pointed out to the ld. AR for the assessee that further there was a self-withdrawal of Rs. 65,000/- on 28.03.1992 which is not 21 reflected in the cash flow statement. The ld. AR for the assessee sought time to reconcile but on the next date of hearing also, no reconciliation of the said cash withdrawal of Rs. 65,000/- being not reflected in the cash flow statement could be filed by the assessee.
26. The assessee further claims to have received loan from his HUF on account of sale of trees, but the assessee has failed to furnish on record any evidence to prove the factum of sale of trees and in the absence of the same, the explanation of the assessee cannot be accepted. In an y case, the assessee in his individual capacity received cash loans from his HUF and the same is in violation of provisions of the Act, which prohibits both acceptance and repayment of cash loans of Rs. 20,000/- and above. The assessee having furnished the explanation after such a long gap of time, which first is without any corroborative evidence and if accepted at face value, in turn, would not be open for further i n v e s t i g a t i o n b y t h e A s s e s s i n g O f f i c e r a n d a l s o v i o l a t i o n s , i f a n y, o f t h e provisions of the Act cannot be booked, because of lapse of time.
27. Another bank account maintained by the assessee was with the Union Bank of India, Sector 9-C, Chandigarh, copy of which is placed at pages 450 onwards of the Paper Book. The assessee has shown introduction of cash of Rs. 40,000/- on 27.07.1994 from the said bank account i.e. by way of cash withdrawal. However, the perusal of the bank statement placed at page 451 reflects that the entry on 27.7.1994 in respect of cheque No. 838 is not of cash withdrawal, as another entry on the said page No. 451 of the Paper Book i.e. on 26.04.1995 reflects a cash introduction of Rs.4,50,000/-, cash withdrawal of Rs. 33,000/- on 18.03.1996 and the entries made by the bank were by cash/to cash r e s p e c t i v e l y. However, in respect of the entry in 27/07/1994 i.e. Rs. 40,000/-, there is no mention of cash withdrawal of Rs.40,000/-. 22
28. The ld. AR for the assessee during the course of hearing was confronted with the said narrations in the bank statement filed by the assessee and no plausible explanation could be filed in this respect.
29. Another entry in the cash flow statement is of income from other sources of Rs. 85,000/- as on 15.03.1995 and the ld. AR for the assessee was time and again asked to explain how the said amount has been declared by the assessee, in the return of income filed for the block period. The perusal of the assessment order reflect that for the financial year 1994-95, the total returned income was Rs. 59,990/- whereas the income from other sources has been reflected in the cash flow statement of Rs. 85,000/- which has not been declared by the assessee. The said cash flow statement has admittedly been filed by the assessee during the course of appellate proceedings in the month of April, 2005 after gap of s e v e r a l ye a r s i.e. on the date when no enquiries could be conducted by the Assessing Officer, either during the original assessment proceedings or even during the set aside assessment proceedings.
30. In the totalit y of the abovesaid facts and circumstances, the said cash flow statement filed by the assessee during the assessment proceedings is clearly an after thought and cannot be relied upon. We find no merit in the stand of the assessee that investment made by it in various assets including the cash deposits in the bank stands explained in view of the entries of the cash flow statement. As observed earlier, if cash flow statement is accepted at face value, no enquiries are feasible a f t e r 1 5 ye a r s a s t h e s e a r c h w a s f o r t h e B l o c k P e r i o d 0 1 . 0 4 . 1 9 8 8 t o 30.09.1998 and the said cash flow statement was filed for the first time in April, 2005. Admittedly the books of account have been prepared after the date of search and even after completion of original assessment proceedings, therefore, in our opinion, the same have no sanctity and 23 cannot be relied upon to corroborate the fund flow. Further the cash flow admittedl y filed before the CIT(APPEALS) in April, 2005 suffers from several defects and the assessee has failed to prove his bonafides. The withdrawals from capital account with S.K. & Co. cannot be accepted at face value as books of account of S.K. & Co. have been rejected and hence any receipt received therefore cannot be held to be explained. In the abovesaid facts and circumstances, there is no merit in the contention that the matter should be set aside for examination of cash flow statement, which suffers from many defects as pointed out by us in paras herein above, as well as limitation of revenue for taking corresponding actions/verifications, for example, no action can be taken now for violation of section 269SS & 269T of the Act, where cash loans are accepted. Accordingly we find no merit in the reliance placed upon the cash flow statement to explain the source of investment in various assets and the bank accounts and we reject the cash flow statement filed by assessee. However, we proceed to decide the issue on merits in the paras herein after.
31. The assessee vide ground No. 2(a) has raised the issue against addition of Rs. 35,000/-. During the course of search at the premises of the assessee, total cash of Rs. 3,51,600/- was found and the authorities below had accepted the explanation in respect of the balance cash available with the assessee except to the extent of Rs. 35,000/-. The plea of the assessee in respect of the said balance cash in hand is withdrawals made out of the firm M/s S.K. & Company which in-turn are part of the cash flow statement prepared by the assessee. In view of our decision in the paras herein above, we find no merit in the stand of the assessee in placing reliance on the cash flow statement however it can be ruled out that any person would not having savings of Rs. 35,000/-. Thus 24 we delete the addition of Rs. 35,000/-. Ground No. 2(a) raised by the assessee is, thus allowed.
32. The issue in Ground No. 2(b) is against the addition of Rs. 65,000/- made on account of alleged investment in household goods. The Assessing Officer noted that during the course of search operation at the premises of the assessee, various valuable assets were found at the r e s i d e n c e o f t h e a s s e s s e e . T h e l i s t o f t h e i t e m s a l o n g w i t h t h e ye a r o f make are tabulated under para 2 at page 4 of the assessment order. The Assessing Officer estimated the value of the said assets on the basis of m a r k e t v a l u e o f t h e a r t i c l e s i n t h e ye a r o f m a k e / p u r c h a s e . The assessee failed to furnish any evidence to justify its claim of having acquired the said assets on various functions/ceremonies. The second contention of the assessee that certain undisclosed incomes had been declared in the block assessment, should be accepted to have been utilized for the purchase of the said asset, was also not accepted by the Assessing O f f i c e r a s t h e d e c l a r e d i n c o m e r e l a t e d t o f i n a n c i a l ye a r 1 9 9 7 - 9 8 f o r which the assessee had not filed any return of income whereas the assets w e r e p u r c h a s e d i n t h e e a r l i e r f i n a n c i a l ye a r s . The Assessing Officer made an addition of Rs. 1,15,000/- as undisclosed income of the assessee.
33. The CIT(Appeals) vide paras 54 to 58 at pages 43 to 45 of the appellate order deliberated upon the said issue and noted that the value of the assets adopted by the Assessing Officer were very reasonable and in the absence of any explanation of the assessee, fair estimate had to be made by the Assessing Officer. Further, the assessee having failed to furnish any proof of having received the said items at the time of various ceremonies/marriage, explanation in this regard could not be accepted. Further the CIT(Appeals) noted that the household withdrawals of the 25 assessee were very low and in the absence of any material, fair estimate of the value of the assets had to be made. The CIT(Appeals) was of the view that advantage on estimate of goods worth Rs. 50,000/- should be allowed to the assessee, hence the addition of Rs. 65,000/- was confirmed b y the CIT(Appeals).
34. The ld. AR for the assessee before us has reiterated the earlier submission but has failed to produce any evidence to establish its claim of having received the said items on occasion of his marriage or various ceremonies. In the absence of the same and keeping in mind the order of CIT(Appeals) in reducing the addition to Rs. 65,000/- as against Rs.1,15,000/- made by the Assessing Officer, we find no merit in the ground No. 2(b) raised by the assessee. Upholding the addition of Rs. 65,000/-, we dismiss the ground No. 2(b) raised by the assessee.
35. The ground No. 2(c) raised by the assessee is against addition of Rs. 16,500/- on account of investment in shares of M/s A.C.C. Ltd. The Assessing Officer vide para 4 at page 7 of the assessment order has noted the explanation of the assessee that value of 6 shares of M/s A.C.C. Ltd. were purchased for Rs. 16,500/- each by the assessee and his wife Mrs. Dolly Jain on 15.08.1993. The assessee claimed that the said shares belong to Mrs. Dolly Jain. However, his share of investment was made out of sale proceeds of trees on land belonging to his HUF. The Assessing Officer made an addition of Rs. 16,500/- in the hands of the assessee as addition of Rs. 16,500/- had already been made in the hands of Mrs. Dolly Jain.
36. The CIT(Appeals) vide para 68 to 70 at pages 49 to 50 upheld the addition of Rs. 16,500/- as the assessee had attempted to explain the source of investment by reference to the cash flow statement. As the 26 concept of cash flow statement has been rejected by us in the paras herein above, we are in conformit y with the order of the CIT(Appeals) in upholding the addition of Rs. 16,500/-. We find no merit in the ground of appeal raised by the assessee in this regard wherein it has been alleged that the said investment in shares of M/s A.C.C.Ltd. was in the name of his wife, in view of the explanation of the assessee before the Assessing Officer that investment of Rs. 16,500/- each has been made by the assessee and his wife and only addition of Rs. 16,500/- has been made in the hands of the assessee. Thus, the ground No. 2(c) raised by the assessee is dismissed.
37. The issue in ground No. 2(d) raised by the assessee is against the addition of Rs. 4,07,000/- being investment made for the purchase of SCO 7, Sector 5, Panchkula.
38. The brief facts relating to the issue are that the assessee alongwith his brother Shri Vipin Kumar Jain purchased the property No. 7, Sector 5, Panchkula in open auction on 24.03.1995. The assessee paid Rs. 6,25,000/- being 10% of the bid money in cash and balance sum of Rs. 9,37,500/- was deposited on 26.04.1995. The Assessing Officer vide para 5 at page 7 of the assessment order considered the explanation of the assessee and observed that amount of Rs. 9,37,500/- spent by the assessee had already been accepted in the original assessment and investment of Rs. 10,30,000/- is reduced by sum of Rs. 5,30,000/- withdrawn from the banks. The balance investment was explained to be made out of sale of car and withdrawal from M/s S.K. & Co., and Rs. 80,000/- out of undisclosed income declared by the assessee. The addition in the case was restricted to Rs. 4,07,000/-. 27
39. The CIT(Appeals) observed that out of investment of Rs. 15,62,500/-, Rs. 5,32,500/- was paid by Shri Vipin Jain and Rs. 10,30,000/- was paid by the assessee. Before the CIT(Appeals), the assessee explained that out of total investment of Rs. 10,30,000/-, sum of Rs. 6,00,000/- was reflected in the balance sheet ending on 31.3.1995 and the same was duly explained in the cash flow statement. As regards t h e b a l a n c e p a ym e n t o f R s . 4 , 3 0 , 0 0 0 / - , t h e a s s e s s e e e x p l a i n e d t h a t t h e same was made by way of bank draft from UBI Saving Bank Account No. 5092 on 26.04.1995. The CIT(Appeals) rejected the explanation of the assessee with regard to the investment through cash flow statement. In respect of the car claimed to be sold b y the assessee, the assessee failed to furnish any evidence of ownership of car and further, the said car was sold on 15.10.1994 whereas the investment was made by the assessee on 23.04.2005. In respect of the withdrawal from the Central Bank of India and from the capital account by way of entries through the cash flow statement, both were rejected b y the CIT(Appeals) and addition of Rs. 4,07,000/- was upheld.
40. The assessee is in appeal against the said addition and the explanation of the assessee was as before the authorities below. However, the assessee has failed to furnish on record any evidence to rebut the findings of CIT(Appeals) in this regard. The CIT(Appeals) vide para 78 at pages 52 and 53 has observed as under :
78. I have carefully considered the submissions, me assessee has attempted to explain the investment through cash flow statement. My observations on other evidences are given below :
• Delivery receipt / undertaking dated 15/10/94 from Sh. Harpal Singh. House No. 1035, Sector 44-B, Chandigarh regarding sale of Ambassador Car. However, the assessee explained it for Rs.257000/- as per his submissions dated 23/4/05.28
Remarks : The delivery receipt/undertaking is dated 15/10/94. The assessee could have produced the receipt during the course of assessment proceedings as the receipt is dated 15/10/94. The amount said to be received in cash. No verification is possible in March, 2003, Even if it was possible, the matter is old and no enquiry could be taken against Sh, Harpal Singh regarding his source of money, The explanation is for Rs.257000/- whereas the receipt of sale of car is Rs.237000/-. There is a difference of Rs.20000/-. No corresponding evidence is given as how Sh. Harpal Singh shows the car in his return of income. • Affidavit of Sh. Chanderdeep Jain which is undated regarding no objection for sale of car to Sh. Harpal Singh.
Remarks : No evidence filed in return of income regarding ownership of car by the assessee.
• Withdrawal from Central Bank, section 18, Chandigarh Account No. 1567.
Remarks : There is credit on 17/10/94. What is the explanation of this credit. No explanation regarding credit of Rs. 1 lac was given. Hence source is unexplained. • Withdrawal of Rs.150000/- from capital account of M/s S.K, & Company Remarks : Why there is a gap in payment i.e. from October' 94 to March' 95. To find out the authenticity of the credited amount in M/s S.K. & Company. What is the source of credit in M/s S.K. & Company. The credit shown as on 1/4/94 is Rs. 572747/- whereas the income shown in the return of income for all the years is about Rs.150000/-. What is the source of credit of M/s S.K. & Company. Books of account of M/s S.K. & Company not produced before the Assessing Officer in the block assessment proceedings of M/s S.K. & Company.
• Vide explanation dated 23/3/95, no evidence of Rs.8000/- was given. • Bank statement in respect of account No. 5092 with Oman Bank, withdrawal of Rs. 430000/- on 26/4/95.
Remarks : There is a credit of Rs.430000/- by cash on 26/4/95. No explanation of source of credit is given.
In my opinion, the assessee is unable to explain the source and thus this ground is dismissed.
41. The assessee having failed to controvert the findings of CIT(Appeals) vis-à-vis the source of investment in the purchase of the said SCO No. 7 Sector 5, Panchkula, we find no merit in the plea of the assessee and the addition of Rs. 4,07,000/- is upheld.
42. The ground No. 2(e) is against addition of Rs. 3,21,500/- being 50% share in alleged investment in M/s Lima Engineering Pvt. Ltd. The brief facts relating to the issue are that the assessee purchased shares of M/s Lima Engineering Pvt.Ltd. alongwith his brother Shri Vipin Kumar 29 Jain and Mrs. Kashmir Dhillon and sum of Rs. 3,00,000/- each was claimed to have been paid. However, an addition of Rs. 3,21,500/- was made while completing the original assessment. During the said assessment, the assessee was asked to furnish the evidence in respect of the same and the ex planation of the assessee was that the amount was paid by cheque for Rs. 1,50,000/-. Further, as per the seized document No. 22 Annexure A-2, the assessee had failed to justify the entries of Rs.1,80,000/- paid to Mr. Gurpreet and addition of Rs. 3,21,500/- i.e. 50% of sum of Rs. 6,43,000/- was made by the Assessing Officer. The CIT(Appeals) noted that Shri Kuljeet Singh had sold the company for Rs. 8,92,000/- to Shri Chanderdeep Jain and Shri Vipin Kumar Jain and the Assessing Officer had made an addition of Rs. 3,21,500/- being 50% of Rs. 6,43,000/- held as undisclosed income of the assessee.
43. Before the CIT(Appeals), the assessee placed reliance on the affidavits filed which was rejected by the C IT(Appeals) as the assessee had failed to furnish the same at appropriate time before the Assessing Officer. With regard to the narrations and document No. 22 of Annexure A-2, the CIT(Appeals) noted that assessee and Shri Gurpreet Singh had a link with the transaction and consequently the addition was upheld in the hands of the assessee.
44. The ld. AR for the assessee drew our attention to the document placed at page 226 of the Paper Book and pointed out that the perusal of the same would reflect it to be a dumb document. Further, it was pointed out by the ld. AR for the assessee that the statement of Mr. Kuljeet S i n g h i . e . t h e p e r s o n w h o h a d s o l d t h e c o m p a n y, h a d c a t e g o r i c a l l y g i v e n a s t a t e m e n t t h a t n o c a s h p a ym e n t w a s e v e r m a d e t o h i m o v e r a n d a b o v e the amount of Rs. 7,92,000/-. The copy of the statement of Shri Kuljeet Singh is placed at pages 240 to 242 of the Paper Book. Without prejudice 30 to the abovesaid submission, ld. AR for the assessee further submitted that 1/3rd investment was made by Mrs. Kashmir Dhillon and her investment should be excluded. He made a reference to the affidavit of Mrs.Kashmir Dhillon placed at page 179 of the Paper Book. Further, our attention was drawn to the affidavit of Mr. Gurpreet Singh placed at page 173 of the Paper Book in which he stated that he had not received any commission for sale/transfer of shares of M/s Lima Engineering Pvt. Ltd. from assessee or from Shri Vipin Kumar Jain.
45. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the alleged investment made in the purchase of shares of M/s Lima Engineering Pvt. Ltd. and also commission paid for the said transaction. The assessee alongwith his brother and one Mrs. Kashmir Dhillon claims to have invested sum of Rs. 3,00,000/- each in the purchase of shares of M/s Lima Engineering Pvt. Ltd. In addition, as per the notings on document No. 22 of Annexure A-2 seized during the course of search, further addition of Rs. 3,51,000/- has been made in the hands of the assessee being on account of the commission paid for the said transaction. The total investment in the purchase of shares of M/s Lima Engineering Pvt. Ltd. is Rs. 9,00,000/- out of which, Rs. 3,00,000/- is claimed by Mrs.Kashmir Dhillon to have been paid vide cheque drawn on her bank account. Necessary affidavit in this regard is placed at page 179 of the Paper Book. In view of the amount having been paid vide cheque, which in turn was deposited in the current account with Times Bank, C h a n d i g a r h o f t h e s a i d c o m p a n y, t h e r e i s n o m e r i t i n t r e a t i n g s a i d investment as the investment made by the assessee. The balance investment made by the assessee and his brother Shri Vipin Kumar Jain is Rs. 6,00,000/-.
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46. The Assessing Officer had presumed the consideration of the property at Rs. 12,43,000/- i.e. Rs. 7,92,000/- + Rs. 1,00,000/- + Rs. 3,51,000/-. The evidence for sources of Rs. 6,00,000/- were accepted as having been made by the assessee and his brother Shri Vipin Kumar Jain and the balance sum of Rs. 6,43,000/- was added as income of the assessee and his brother Shri Vipin Kumar Jain. However, we find no merit in the addition made by the authorities below on the basis of the noting allegedly on document No. 22 of annexure A-2 which are scribbles of different denominations and at best, the said paper could be said to be a rough calculation onl y.In view of our allowing relief on account of the investment made by Mrs. Kashmir Dhillon and also no addition to be made on account of the notings on the loose paper, there is no merit in the addition made by the Assessing Officer and the same is directed to be deleted. Ground No. 2(e) raised by the assessee is thus, allowed.
47. The issue in ground No. 2(f) raised by the assessee is in respect of the alleged investment in M/s Jasmine Enterprises Pvt. Ltd. amounting to Rs. 5,94,433/-.
48. The brief facts relating to the issue are that during the course of search & seizure operation, document at page No. 23 to 26 of D-2 were seized, copies of which are placed at pages 227 to 230 of the Paper Book. The explanation of the assessee before the Assessing Officer was that the assessee had sought to purchase the said plot of M/s Jasmine Enterprises Pvt. Ltd. but certain differences arose between the parties and the deal could not materialize. Regarding the notings at page No. 23 t o 2 6 o f D - 2 , i t w a s e x p l a i n e d b y t h e a s s e s s e e t h a t c e r t a i n p a ym e n t s h a d been mentioned on the said pages without any specific details. However, if co-relation is made between page Nos. 23 to 26, then the entries on 32 page 26 was the summary of all the entries appearing on the first three pages and the total amount of investment as per the said pages works out to Rs. 900,370/- and not Rs. 19,00,795/- as computed in the first assessment order. Further explanation of the assessee was that out of the said investment of Rs. 900,370/-, sum of Rs. 709,922/- was paid by Shri Vipin Kumar Jain and balance was paid by the assessee. The sources of the said amount paid by both the brothers was explained and the sources of investment as claimed by the assessee are tabulated at page 9 of the assessment order. The Assessing Officer on the verification of the documents observed that there was no variation and rejecting the explanation of the assessee, held that undisclosed income of the assessee was rightly determined at Rs.19,00,795/- as against Rs.900,370/- worked out by the assessee. The sources explained by the assessee were found to be not relatable to the amounts withdrawn earlier and in view thereof, the addition made of Rs. 594,433/- was again made in the hands of the assessee.
49. The CIT(Appeals) vide paras 87 to 92 at pages 56 to 58 of the appellate order considered the issue and upheld the addition observing that there were number of entries at pages 23 to 26 of D-2 and the Assessing Officer as per the annexure annexed to the assessment order, had excluded the entries which were occurring twice to co-relate, and the date-wise details of the addition totaled to Rs. 19,00,795/- as worked out by the Assessing Officer and were held to be correct and the addition was upheld.
50. The ld. AR for the assessee pointed out that 50% shares of investment was added in the hands of the assessee though on identical points, no addition was made in the hands of his brother Shri Vipin Kumar Jain. It was further contended b y the ld. AR for the assessee that 33 entry of Rs. 4,00,000/- at page 24 relatable to entry of Rs. 2.5 lacs and Rs.1.5 lac on page 26 and the same should be excluded. The ld. AR fairly admitted that the benefit allowable in the hands of the assessee was only Rs. 2 lacs on this account.
51. The ld. DR for the revenue placed reliance on the orders of the authorities below.
52. We have heard the rival contentions and perused the record. The contention of the assessee that CIT(Appeals) in the case of his brother Sh. Vipin Jain vide para 175-176 at pages 106-107 of appellate order has deleted the addition is correct. The addition was made as the assessee had failed to explain source of investment.
53. The plea of the assessee was that the amount was paid vide cheques from Bank account. The CIT(Appeals) in the case of Sh. Vipin J ain thus held that as cash deposited in the Bank has been added in the hands of the assessee, there was no merit in further addition. Thus ground No. 2(f) raised by the assessee is allowed.
54. The issue in ground No. 2(g) is against the addition of Rs. 6,50,000/- for investment in property No. 259, Industrial Area, Chandigarh.
55. The brief facts relating to the abovesaid issue are that during the course of search, Power of Attorney in favour of the assessee in respect of property No. 259, Industrial Area, Phase-I, Chandigarh was found. The said property was purchased for a total consideration of Rs. 13,00,000/-. The explanation of the assessee was that he was only a G e n e r a l P o w e r o f A t t o r n e y h o l d e r a n d n o t t h e o w n e r o f t h e p r o p e r t y. However, in the absence of any evidence filed by the assessee to 34 confirm that the property was not transacted by him and his brother, 50% of the said investment of Rs.6,50,000/- was added as undisclosed income of the assessee. The Assessing Officer deliberated upon this issue at page 10 of the assessment order.
56. The CIT(Appeals) vide para 93 to 95 at pages 58 & 59 of the appellate order have considered the issue and held that the onus was upon the assessee to prove that even though he was holding the Power o f A t t o r n e y, y e t t h e o w n e r s h i p v e s t s w i t h s o m e o t h e r p e r s o n a n d i n t h e absence of any material being brought on record, the addition was upheld in the hands of the assessee.
57. The ld. AR for the assessee pointed out that the agreement to sell was between one Shri Harinder Goyal and Shri Pritam Dass and the Power of Attorney was in the name of Shri Vipin Jain which is placed at pages 183 to 185 of the Paper Book. It was further pointed out that t h e r e w a s n o e v i d e n c e o f t h e p a ym e n t b e i n g m a d e b y t h e a s s e s s e e a n d hence, no merit in the aforesaid addition. Further it was pointed out by the ld. AR for the assessee that the total investment was Rs.13,00,000/-
58. The ld. DR for the revenue placed reliance on the order of the Assessing Officer.
59. We have heard the rival contentions and perused the record. During the course of search, document marked as D-13 to 18 was found and seized from the possession of the assessee which is the Power of A t t o r n e y e x e c u t e d b y o n e S h r i N a r i n d e r K u m a r G o ya l i n f a v o u r o f S h r i Vipin Kumar Jain as his Power of Attorney holder. Copy of the said document is placed at pages 232 to 239 of the Paper Book. Perusal of the said Power of Attorney reflects that as per clause-2 of the Power of A t t o r n e y, t h e a t t o r n e y h o l d e r h a s t o p a y t h e b a l a n c e p r i c e / i n s t a l m e n t s , 35 if any of the said industrial share to the government and obtain receipt thereof and as per clause-5, power is given to sell/transfer/gift/exchange/mortgage the said build-up industrial shed t o S h r i P r i t a m D a s s K a n s a l a n d S h r i V i j a y K u m a r . A d m i t t e d l y, t h e s a i d Power of Attorney is executed by a third person i.e. Shri Narinder K u m a r G o ya l i n f a v o u r o f S h r i V i p i n K u m a r J a i n w h o i s t h e b r o t h e r o f the assessee and the specific recitation in para 5 is for the specific purpose to sell/transfer/gift/exchange/mortgage the said build-up industrial shed to Shri Pritam Dass Kansal and Shri Vijay Kumar.
60. During the course of search operations, various other documents reflecting the alleged investment made by the assessee and/or his brother was found and in the absence of the same and merely because of Power of Attorney has been executed in favour of the brother of the assessee and that also for a specific purpose, does not establish the factum of investment by the assessee for the purchase of the said industrial shed. Further the assessee has also filed on record the copy of suit filed by Mr. Pritam Kansal and Mr. Vijay Kansal against Shri N a r i n d e r K u m a r G o ya l f o r t r a n s f e r o f t h e s a i d p r o p e r t y i n t h e i r f a v o u r , copy of which is placed at pages 188 and 192 of the Paper Book. In view of the abovesaid facts and circumstances, we do not find any merit in the addition of Rs. 6,50,000/- on account of alleged investment in industrial shed at 259, Industrial Area, Phase-I Chandigarh, in the hands of the assessee and/or his brother. A c c o r d i n g l y, w e d i r e c t t h e A s s e s s i n g O f f i c e r t o d e l e t e t h e a d d i t i o n o f Rs.6,50,000/-. Ground No. 2(g) raised by the assessee is thus, allowed.
61. The issue in ground No. 2(h) raised by the assessee is against the addition of Rs. 4,80,000/- being 50% of investment in Suraj Theatre. In the facts of the issue raised, the assessee had made investment in the 36 purchase of Suraj Theatre and also amount spent on renovation of the said theatre. During the course of search, various documents were seized which reflected the said investment. The documents found during the course of search reflected the details of renovation, on the basis of which amount of Rs. 4,60,000/- was determined as total renovation and the copy of the said document is enclosed as Annexure-C of the assessment order. The assessee partly explained the source of investment in the purchase of the said property to the extent of Rs. 10 lacs and balance Rs. 5 lacs was treated as unexplained. However, assessee has failed to explain the source of renovation of Rs.4,60,000/- made by the assessee and his brother Shri Vipin Kumar Jain. Consequently, the sum of Rs. 4,80,000/- being 50% of the total investment in Suraj Theatre was treated as income of the assessee. The Assessing Officer deliberated upon this issue at page 10 of the assessment order. The CIT(Appeals) vide paras 96 to 99 at pages 59 and 60 observed that the assessee had failed to explain the source of the said investment and the reliance on the cash flow statement was rejected and the addition made by the Assessing Officer was upheld by CIT(Appeals). The assessee is in appeal against the said addition.
62. The ld. AR for the assessee pointed out that the total investment in the purchase of the said asset was Rs. 15 lacs and the Assessing Officer in the original assessment proceedings had accepted the investment of Rs.10 lacs. However, in respect of cash payment of Rs. 5 lacs and further renovation to the extent ofRs.4.6 lacs made by the assessee and his brother Shri Vipin Jain, though the assessee furnished the cash flow statement but the same was rejected in the absence of any d a t e o f c a s h p a ym e n t .
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63. The ld. DR for the revenue placed reliance on the orders of the authorities below.
64. We have heard the rival contentions and perused the record. The assessee had made a total investment of Rs. 15 lacs for the purchase of Suraj Theatre and thereafter, has admittedly incurred Rs.4.6 lacs on the renovation of the said theatre. The total investment thus, is Rs.19.60 lacs. Investment of Rs. 10 lacs has been accepted in the hands of the ae and the issue arising vide present ground of appeal in respect of the balance investment of Rs. 9.60 lacs being made by the assessee and his brother Shri Vipin Jain. The source of investment in the said asset is claimed to be made out of cash flow statement. No credence can be given to the said cash flow statement in view of our comments in the paras herein above and in view thereof, we find no merit in the plea of the assessee and in the absence of any evidence of source of having invested the said amount, for the purchase of Suraj Theatre, we uphold the addition of Rs. 4.80 lacs being half share in Rs.9.60 lacs. Ground No. 2(h) raised by the assessee is, thus dismissed.
65. The ground No. 3 raised by the assessee is against the addition made on account of low household withdrawals totaling Rs. 8.10,000/-. The Assessing Officer vide para 3 at pages 5 & 6 noted that both the assessee and his wife had drawn different amounts for household expenses as tabulated at para 3 page 5 of the assessment order. The plea of the assessee was that the household expenses have been estimated by the Assessing Officer in the first round of assessment proceedings whereas no addition could be made during block assessment without bringing any evidence on record to prove that the household expenses shown by the assessee were less than the amount actually spent. The Assessing Officer notes that during the course of 38 search, document No. D-5 page 14 details of household expenses for September,1998, were found in which monthly expenses on vegetables, fruits and other grocery items, medicines, gifts etc. were noted and the expenditure shown by the assessee was on the lower side. Further documents were also found during the course of search which indicated h i g h s t yl e o f l i v i n g o f t h e a s s e s s e e i . e . p a g e 1 1 o f D - 5 g a v e d e t a i l s o f purchase of certain gift items and page 12, 13 were rates of gift items, page 22 of D-7 was a bill from Chandigarh Club and page 18 of D-5 gave details of certain cash expenses i.e. gift on marriage of Rs. 10,000/-, gift of jewellery on marriage of Rs.10,000/-, amount for Tirupati Balaji of Rs. 13,000/- and cash for T.E. for Rs. 16,000/-. Further, there were cash receipts found which are placed at page 15 & 16 of D-5 for purchase of two compressors for Rs. 9,200/- each. In view of the standard of living of the assessee and the various assets found installed at the residence of the assessee which were tabulated by the Assessing Officer, the annual household expenses of the assessee were estimated at Rs. 3,00,000/- i.e. @ Rs.25,000/- per month. However, for the period 1.4.1988 to 31.3.1993, the Assessing Officer was of the view that the expenses would be on the lower side as c o m p a r e d t o t h e l a t e r ye a r s b e c a u s e o f f i r s t i n f l a t i o n f a c t o r a n d a l s o because of the joint kitchen with his brother Shri Vipin Jain and an estimated addition of Rs.16,20,000/- was made during the block period, after taking into account the withdrawals made by the assessee for household expenses. The total withdrawals by the assessee varied b e t w e e n R s . 2 5 , 0 0 0 / - t o R s . 4 0 , 0 0 0 / - p e r ye a r .
66. The CIT(Appeals) vide para 59 to 67 considered the submissions of the assessee elaborately and also the earlier two orders of the Assessing Officer dated 31.10.2000 and 31.3.2003 and noted that the 39 additions were made in the hands of the assessee on the basis of material found during the course of search. The Assessing Officer in the assessment order had referred to various items and it was observed b y the CIT(Appeals) that the assessee was having attribution of high s t yl e o f l i v i n g b e c a u s e o f t h e f o l l o w i n g :
(i) The assessee is having the luxury of ACs, exercisers, cell-
phones, etc. Withdrawls shown by the assessee cannot support even the day-to-day kitchen expenses. The expenses are dependent upon the personal liking of the assessee also.
(ii) The assessee is having a rented house, indulges in gambling, maintains vehicles and gives costly gifts. The seized documents revealed that exchange of gifts on marriage or to friends is even upto Rs.lOOOO/- each. As against the withdrawal shown by the assessee ranging from Rs.25000/- to Rs.50000/- for the whole year in different Financial Years, the withdrawals come on an average of Rs.3500/- per month. The electric bills on account of running ACs would come around Rs.3000/- to 4000/- per month.
(iii) Higher amounts of gifts exchanged between friends indicate the high style of leaving. With such style of leaving which is evidenced by the costly items found during the course of search and also the notings found in the seized documents gives enough proof for higher household expenses. This fact is further established by the detailed notes found in one of the seized document No. D-5 (Page-14) ; which gives the details of expenses.
67. The conclusion of the CIT(Appeals) vide para 64 was that the estimations were made on the basis of seized documents and also on the basis of assets found during the course of search and there was no merit in the contention of the assessee that the addition has been made without an y evidence. Further vide para 65, the CIT(Appeals) observed that in view of the amendment in section 158BC(b) of the Act with retrospective effect from 01.04.1995, the statute provides that the Assessing Officer can make estimated additions. The relevant paras read as under :
"64. The Assessing Officer has based his estimates on the basis of the seized documents and also on the assets found during the course of search. There is no merit in the contention of the assessee that the addition has been made without any evidence. The Assessing Officer is duty bound to give a fair estimate based 40 on the material on record. The only requirement is that the estimation should be fair having nexus with the material found during the course of search. All the facts which have been narrated by the Assessing Officer do reveal that withdrawals shown by the assessee are very low. In fact, there are withdrawals of cash in various Bank accounts of the assessee on different dates. The assessee would have utilized these withdrawals of cash to support that high scale of living although the assessee submitted that these withdrawals of cash are reinvested subsequently on different dates in different banks.
65 The Ld. Counsel has also taken an objection that in the books of accounts, there is no scope of estimation. It may be pointed out that there is an amendment in section 158BC(b) with retrospective effect from 1/7/95 wherein the statute has provided that the Assessing Officer can make an estimate. It is the duty of the Assessing Ollleer to make a lair estimate where no evidence is provided by the assessee. In this case, the Assessing Officer has fairly made an estimation of house hold expenses after giving valid reasons. There is always an element of estimation in these circumstances [Refer Ved Parkash vs. cit, 265 ITR 642 (P&H)].
68. The CIT(Appeals) vide para 67, however estimated the household expenses at Rs. 8,10,000/- i.e. 50% of the addition made by the Assessing Officer and gave a relief of Rs. 8,10,000/-. The assessee is in appeal against the aforesaid addition. In the totalit y of the facts and circumstances of the case and also various seized documents found during the course of search and also the provisions of section 158BC(b) of the Act, fair estimate of expenditure is to be made in the hands of the assessee. However, we restrict the addition to Rs. 4,00,000/-. Thus, the ground No. 3 raised by the assessee is partly allowed.
69. The issue in ground No. 4 raised by the assessee is against the addition of Rs. 1,59,72,599/- on account of credits in the bank account and sum of Rs. 13,35,000/- on account of alleged investment in FDRs. The Assessing Officer vide page 11 of the assessment order has considered the issue and has observed that large number of bank accounts were maintained by the assessee, copies of which were found and seized during the course of search. There were large number of cash deposits in the said bank accounts and the assessee was unable to 41 reconcile the said cash deposits. C o n s e q u e n t l y, a d d i t i o n o f t h e s a i d deposits was made in the hands of the assessee after giving reliefs on account of certain items of receipts.
70. Before the CIT(Appeals), ld. AR for the assessee placed reliance on the cash flow statement and the books of account which admittedly were prepared after the search action and were produced only for the first time before the CIT(Appeals). The CIT(Appeals) observed that during the course of search, incriminating material was found and even if the assessee was maintaining regular books of account, the same were liable to be rejected. However in the facts of the case, the assessee was not maintaining regular books of account and any document prepared after the search was held to have no evidentiary value. The reliance of the assessee upon the cash flow statement was also rejected as the same could not be equated with the regular books of account and therefore, the same cannot be relied upon. The relevant observations of the CIT(Appeals) are vide paras 100 to 107 at pages 61 to 70 of the appellate order. The CIT(Appeals), however further noted that certain material was produced before the Assessing Officer at the fag end of the assessment proceedings and also statements of some persons were recorded on 27.03.2003. As there was no time left to make investigations, the Assessing Officer rejected the same. The plea of the assessee before the CIT(Appeals) was that the same should be considered. The CIT(Appeals) after deliberating upon the issue at length allowed certain reliefs on account of income shown by the assessee and on account of sale of agriculture land to the extent of Rs. 19,35,158/- and the balance addition was confirmed in the hands of the assessee. The assessee is in appeal against the order of the CIT(Appeals).
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71. The ld. AR for the assessee vehemently placed reliance on the cash flow statement submitted by the assessee to explain each and every entry in the Saving Bank accounts. The ld. AR for the assessee pointed out that the details were furnished before the Assessing Officer which are placed at pages 627 of the Paper Book and thereafter remand report was sent by the Assessing Officer which has not been considered b y t h e C I T ( A p p e a l s ) a n d t h e a d d i t i o n h a s b e e n u p h e l d i n t o t a l i t y. Our attention was drawn to the explanation at page 309 and also at page 83 of the Paper Book to point out that certain entries in the details prepared by the Assessing Officer were incorrect. Our attention was also drawn to the details of Fixed Deposits placed at page 225 of the Paper Book.
72. The ld. DR for the revenue placed reliance on the order of the CIT(Appeals).
73. We have heard the rival contentions and perused the record. The issue arising vide present ground of appeal No. 4 is against the addition made on account of non-explanation of the bank credits. The assessee was maintaining various bank accounts in which there were both cash and cheque deposits. The cash deposits in the various bank accounts were explained through the theory of cash flow statement. Before the CIT(Appeals), the assessee also placed reliance on the books of account prepared by it, admittedly after the date of search. However, the said reliance placed by the assessee both on the books of account and cash flow statements were rejected b y the CIT(Appeals). We find that the assessee had not furnished any balance sheet alongwith the return of income and the balance sheets were prepared only during the course of second round of appellate proceedings. The books of account were also prepared after the search action and were 43 produced for the first time during the second round of appellate proceedings. In our view, the said books of account and the balance sheets cannot be relied upon as the same were prepared after search action and were not produced before the Assessing Officer during two rounds of assessment proceedings but were only produced before the CIT(Appeals) during the second round of assessment proceedings. In any case, during the course of search, incriminating material was found from the possession of the assessee which has been seized and on the basis of which we have already upheld the additions on various accounts. Reliance of the assessee on the said balance sheet or the books of account is thus, rejected.
74. Further in the paras above, we have already at length addressed the issue of admissibility of the cash flow statement because of the defects referred to by us in the said cash flow statement prepared in the assessee. In view thereof, no reliance can be placed upon the said cash flow statement and as such the cash deposits in the bank accounts of the assessee which the assessee explained to be through the cash flow statement, are to be added as income from undisclosed sources in the hands of the assessee. The assessee has also in the cash flow statement, reflected cash received on sale of trees from the HUF account. The assessee has failed to produce any evidence of sale of trees though. The assessee, time and again has produced the evidence of land holding by the HUF of the assessee, the land being ancestral land. Such plea of the assessee, at such late stage cannot be accepted as the assessee has failed to produce the evidence at the relevant time of assessment proceedings and it is difficult to make further investigation because of lapse of time. No benefit can be allowed to the assessee on account of the alleged receipts in cash received on account 44 of sale of trees. This point has also been adjudicated by us in the paras above while dismissing the reliance of the assessee on the cash flow statement.
75. The second aspect of the bank entries in the various bank accounts of the assessee are the credit entries which are claimed to have been received through cheques. During the course of assessment proceedings, the assessee was asked to furnish complete information in respect of the loans received by the assessee during the block period. The Assessing Officer also directed the assessee to produce the persons from whom such loans were received. At the fag end of the assessment proceedings i.e. on 27.03.2002, statements of certain persons produced by the assessee were recorded but as there was no time to make further investigations, the Assessing Officer rejected the said statements and confirmed the addition in the hands of the assessee. The Courts have t i m e a n d a g a i n h e l d t h a t m e r e p a ym e n t o f c h e q u e o r t h r o u g h b a n k i n g channel is not sufficient to discharge the onus where the assessee claims that it had received the credits by way of loan from various persons. First onus is upon the assessee to establish the identity and credit worthiness of the loan creditor and also to establish the genuineness of the loan. In case the information is filed by the assessee to establish its claim then the Assessing Officer has to make investigation in respect of source of various credit entries in the bank accounts. In the facts of the present case before us and as pointed out by us in the paras again and again, there was total non-cooperation by the assessee during the two rounds of assessment proceedings and the information before the CIT(Appeals) in the second round of appellate proceedings was also filed in piecemeal. The CIT(Appeals) has recorded the explanation of the assessee observing, "The Assessing 45 Officer has also to verify whether that creditor is showing its incomes in his return of income or not. The assessee is expected to furnish the information at the proper time so that there is enough room to make necessary enquiries and investigations. It is an established law that onus is on the assessee to prove the credits with cogent evidence. Mere furnishing of affidavit is not sufficient to discharge the onus." The CIT(Appeals) at page 63 of the appellate order observed that though there was sufficient time available with the assessee from the date of search to the date of original assessment to furnish all the documents, but the assessee for the first time filed the return of income only in October,2000 and after filing the return, the assessee failed to appear before the Assessing Officer in the first round and the matter was set aside. The material which was placed before the CIT(Appeals) as additional evidence was not filed before the Assessing Officer. The CIT(Appeals), thus held that on the basis of the documents i.e. the affidavits furnished at the fag end of the assessment proceedings, it was not possible to give relief. We are in conformity with the observations of the CIT(Appeals) in this regard that because of the inefficiency of the assessee in furnishing the information in time which in-turn would have enabled the Assessing Officer to carry out the requisite investigations, the information/evidences filed at a later date when the same could not be put to test of evidence because of lapse of time or further investigations, no reliance can be placed on the said documents/evidences filed by the assessee before the Assessing Officer at the fag end of the assessment proceedings or even before the CIT(Appeals) during the second round of appellate proceedings.
76. The ld. AR for the assessee has vehemently pointed out before us that the order of the CIT(Appeals) suffers from a legal error as various 46 remand reports requisitioned during the pendency of appellate proceedings have not been considered b y the CIT(Appeals) before adjudicating the issue vis-à-vis the addition made on account of the bank credits. The ld. AR for the assessee referred to the remand report filed by the Assessing Officer placed at pages 627 to 631 dated 02.09.2005 of the Paper Book in which verification of the depositors/creditors was carried out by the Assessing Officer and the Assessing Officer has reported in respect of certain depositors that the loan appears to be genuine and in respect of others, it has been reported that the credit entries may be treated on merits. In the said report further, there is submission that the agriculture land is ancestral property and the HUF credits may be considered on merits. Thereafter, another remand report dated 16.11.2005 was submitted by the Assessing Officer in which there is explanation in respect of credit entries to the extent of Rs. 45,81,251/-. The third remand report was filed by the ld. AR for the assessee during the resumed hearing, which in turn is placed at pages 672 to 674 of the Paper Book in which there is bifurcation of the cash deposits and entries treated as cash by the Assessing Officer but in actual, which were entries of clearance of cheques. As per the ld. AR for the assessee, the Assessing Officer has reported that the assessee had sufficient cash in hand in his books of account on the dates when cash was deposited in the bank account and as such, has accepted the explanation in respect of that entries.
77. Further contention of the ld. AR for the assessee was that the CIT(Appeals) has not taken cognizance of the said remand reports while adjudicating the issue against the assessee. 47
78. We find no merit in the said stand of the assessee. Reference is made to para 107 at page 68 of the appellate order wherein it has been held as under :
"107 As regards other entries, the Assessing Officer never had any occasion during the course of assessment proceedings to verify, examine and investigate those documents. Any evidence or statement recorded by the Assessing Officer in pursuance of the letters issued by CIT(APPEALS) are not being considered except where it is felt that the evidence is such that clinches the issue. It may be pointed out that the CIT(APPEALS) forwarded the submissions of the assessee to the Assessing Officer. Sometimes, a direction is given to verify those entries. This should not be construed that the CIT(APPEALS) has taken a decision to entertain such documents which were never produced before the Assessing Officer. The CIT(APPEALS) has perhaps done so only to be aware of the facts of the case in a better manner. This is also the reason that the assessee has been given relief in respect of certain entries. The assessee has been given relief on account of rental income received; receipts on account of sale of agricultural land and in turn received loan from the persons who got the money by way of sale of agricultural land; profits from M/s S,K. & Company credited in the capital account of the assessee; interest income; salary; It may be pointed out that the Assessing Officer :.n Para-8 of the original assessment order has mentioned that the entries relating to transfer of entries from one account to another account have been excluded in Annexure X-6 of the original assessment order. In result, this ground is partly allowed.
79. The CIT(Appeals) has given a finding that where the submissions of the assessee have been forwarded to the Assessing Officer for verification of the entries, should not be construed that the CIT(Appeals) had taken a decision to entertain such documents which were never produced before the Assessing Officer. The CIT(Appeals) further observes that such exercise was to be better aware of the facts. Further certain relief was given b y the CIT(Appeals) on account of rental income received, receipts on account of sale of agriculture land and loan received from the persons who got the money by way of sale o f a g r i c u l t u r e l a n d , p r o f i t s f r o m S . K . & C o m p a n y, i n t e r e s t i n c o m e a n d s a l a r y. I n v i e w t h e r e o f , w e f i n d n o m e r i t i n t h e s t a n d o f t h e l d . A R f o r the assessee that the remand reports have not been considered by the CIT(Appeals) before adjudicating the issue. However, in order to be fair and to adjudicate the issue further, we consider the abovesaid 48 remand reports submitted by the Assessing Officer. Annexure X-6 attached to the original assessment order tabulates the entries in the bank accounts which the assessee had failed to explain and addition was made in the hands of the assessee on the basis of the aforesaid annexure X-6 to the original assessment order. The ld. AR for the assessee has time and again pointed out that the Assessing Officer had failed to give credit of the entries relating to transfer of entries from bank account to the other bank account. However, vide para 8 of the original assessment order, the Assessing Officer has clearly mentioned that the entries relating to transfer of entries from one account to another account, have been excluded in annexure X-6 of the original assessment order. Further in the absence of assessee having explained source of amount transferred from one bank account to another, addition of the same is merited in the hands of assessee.
80. Now coming to the contents of the various remand reports delivered by the Assessing Officer, we proceed to deal with the findings of the Assessing Officer in each one of the said report. The first remand report is annexure-1 placed at pages 627 to 631 is dated 02.09.2005 in which there is verification of various creditors and the Assessing Officer has reported that some of the said loans were to be treated as genuine and in respect of others, there is report that the s a m e m a yb e c o n s i d e r e d o n m e r i t s . In view of ex ercise carried out by the assessee, we are of the view that the credits reported by Assessing O f f i c e r t o b e t r e a t e d a s g e n u i n e , t o t a l i n g R s . 2 5 , 6 5 , 0 0 0 / - m a yb e accepted in the hands of the assessee. However, the other credits which total to Rs. 12,21,200/- as per the details furnished by the assessee in this regard, have been accepted vide cheques and majority of the same are claimed to be repaid during the block period, but the 49 assessee has failed to completely discharge his onus of establishing the identity and credit worthiness of the said creditors and in the absence of same, such credits cannot be accepted as genuine.
81. The third credits are on account of the amounts received on account of share of agriculture land sold by the assessee alongwith other family members, credit of which has already been allowed by the CIT(Appeals). Further, the income from sale proceeds of trees received in cash cannot be accepted in the hands of the assessee in view of our observations with regard to the cash flow statement.
82. The next remand report is placed at pages 635 and 636 of the Paper Book which have been placed on record by the assessee. The first issue arising in the said remand report is in respect of the refund received of Rs. 76,500/- which may be allowed to the assessee. The amount received from family members as per annexure-B of Rs. 32,64,000/- has alread y been considered b y the CIT(Appeals) and relief has been allowed on account of transfer of entries on sale of land. In view thereof, we find no merit in further allowing any relief on this account.
83. The next issue is on account of rent of house No. 52 Sector 8-A, Chandigarh which had been received as per the Supreme Court order and the credit for the same has already been allowed by the CIT(Appeals) and no further relief on this account is merited.
84. The last item is in respect of the transfer from one account to others and such bank transfers totaling Rs. 7,46,656/-. The CIT(Appeals) has given a finding that Annexure X-6 did not contain any of such amounts of inter-bank transfers and the assessee having failed to controvert the said findings of CIT(Appeals), we find no merit 50 in the claim of the assessee and the same is rejected. In view thereof, the assessee gets further relief of Rs. 76,500/- on account of remand report dated 16.11.2005.
85. The last remand report placed at pages 672 to 674 is dated 1.5.2006 in respect of cash available with the assessee and in view of our deliberation on the issue, we find no merit in the stand of the ld. AR for the assessee on placing reliance on the same, as pointed out by the CIT(Appeals). Further, we find that the CIT(Appeals) has at pages 64 to 66 considered another aspect of the facts of the present case wherein as compared to the income of Rs. 11,58,158/- declared by the assessee during the block period vis-a-vis the properties acquired by the assessee during block period. The explanation of the assessee in this regard did not match in view of non-availability of the funds. The claim of the assessee that it had raised loans from several persons has been addressed by the CIT(Appeals) at page 65 of the appellate order and rejected. In view thereof, no credit can be allowed on the so called cash flow statement.
86. Another issue raised is against alleged investment in FDRs. During the course of search, document was seized, on which certain notings had been made. The plea of the assessee was that these were rough jottings of sources of funds/advances. The Assessing Officer made the above addition, which was confirmed b y CIT(Appeals). However, no evidence of investment in FDRs was found during the course of search and in the absence of same, no addition is warranted. The ground No. 4 raised by assessee is thus partly allowed.
87. The ground No. 5 raised by the assessee is not pressed, hence the same is dismissed.
51
88. The issue in ground No. 6 raised by the assessee is against the t r e a t m e n t o f i n c o m e o f a s s e s s m e n t ye a r 1 9 9 8 - 9 9 a s u n d i s c l o s e d i n c o m e of block period. The plea of the ld. AR for the assessee was that the return of income was not due till 31.10.1998. The search in the case was conducted on 30.09.1998 and admittedly till then the return of i n c o m e r e l a t i n g t o a s s e s s m e n t ye a r 1 9 9 8 - 9 9 w a s n o t f i l e d a n d i n t h e absence of the same, the income relating to such period, falling within block period is to be included as income from undisclosed sources. The ground No. 6 is thus, dismissed.
89. The issue raised vide ground No. 7 is against the rejection of cash flow statement and Remand Report does not stand in view of our observations being preliminary issue and in respect of ground No. 4 and hence, same is rejected.
ITSS No. 18/Chd/2009 : Revenue's Appeal
90. The ground No. 1 raised by revenue is linked to ground No. 2(b) raised by the assessee and in view of our order in relation to it, this ground of appeal is dismissed.
91. The ground No. 2 raised by revenue is linked to ground No. 3 raised by the assessee and in view of our order in relation to it, this ground of appeal is dismissed.
92. The ground No. 3 raised by revenue is linked to ground No. 4 raised by the assessee and in view of our order in relation to it, this ground of appeal is dismissed.
52
93. The issue in ground No. 4 is against the estimation of rental v a l u e f o r a l l t h e a s s e s s m e n t ye a r s a t R s . 9 7 0 , 4 4 3 / - . The Assessing Officer had estimated the ALV at Rs. 129,283/- and made the addition. The addition was deleted by C IT(Appeals) as the rent was fixed b y settlement at the Hon'ble Supreme Court level and the assessee was in litigation. We are in conformity with the orders of CIT(Appeals) that no addition of rental value can be made on estimate basis. The ground No. 4 raised by the revenue is dismissed.
94. In the result, appeal of the assessee is partl y allowed and that of the revenue is dismissed.
Order pronounced in the open court on this 6th day of December, 2013.
Sd/- Sd/-
( T .R.SOOD) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 6 t h December, 2013
Poonam
Copy to: The Appellant/The Respondent/The CIT(APPEALS)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh