M/s. Suyog Jain Ashapuri Developers,, Pune v. Deputy Commissioner of Income-tax,,

ITA 1426/PUN/2014 | 2007-2008
Pronouncement Date: 30-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 142624514 RSA 2014
Assessee PAN AASPJ7135D
Bench Pune
Appeal Number ITA 1426/PUN/2014
Duration Of Justice 3 year(s) 4 month(s) 21 day(s)
Appellant M/s. Suyog Jain Ashapuri Developers,, Pune
Respondent Deputy Commissioner of Income-tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 30-11-2017
Date Of Final Hearing 23-05-2017
Next Hearing Date 23-05-2017
First Hearing Date 23-05-2017
Assessment Year 2007-2008
Appeal Filed On 09-07-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE MS. SUSHMA CHOWLA JM AND SHRI ANIL CHATURVEDI AM SL. NO. ITA NO S . NAME OF APPELLANT NAME OF RESPONDENT ASST. YEAR 1 - 5 1418/PUN/2014 TO 1422/PUN/2014 M/S. BHARAT B. JAIN (PROP. OF R.B. CONSTRUCTION) FLAT NO.5 KUMAR RACHANA NEAR ANAND SOCIETY PUNE 411037 PAN: AASPJ7135D THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2003 - 04 TO 2007 - 08 6 - 9 1389/PUN/2014 TO 1392/PUN/2014 M/S. GADRE AND ASSOCIATES EAST STREET GALLERIA CAMP PUNE 411001 PAN: AADFG2071G THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2004 - 05 TO 2007 - 08 10 - 13 1408/PUN/2014 TO 1411/PUN/2014 M/S. K.B. CONSTRUCTION EAST STREET GALLERIA CAMP PUNE 411001 PAN: AABFK6612P THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2003 - 04 TO 2006 - 07 14 - 15 1423/PUN/2014 & 1424/PUN/2014 M/S. BHARAT B. JAIN HUF (PROP. OF RITESH DEVELOPERS) EAST STREET GALLERIA CAMP PUNE 411001 PAN: AACHJ3184N THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2003 - 04 & 2004 - 05 1 6 - 1 7 1425/PUN/2014 & 1426/PUN/2014 M/S. SUYOG JAIN ASHAPURI DEVELOPERS PARSHWA BUILDING OFFICER NO.27 SUJAY GARDEN MUKUND NAGAR PUNE 411037 PAN:ABHFS1563M THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2006 - 07 & 2007 - 08 18 - 20 1393/PUN/2014 TO 1395/PUN/2014 JAIN ASHAPURI BUILDERS & DEVELOPERS EAST STREET GALLERIA CAMP PUNE 411001 PAN: AADFG2071G THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2005 - 06 TO 2007 - 08 21 - 22 1396/PUN/2014 & 1397/PUN/2014 JAIN ASHAPURI DEVELOPERS 185 GURUWAR PETH PUNE 411042 PAN: AAEFJ8235E THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2005 - 06 & 2006 - 07 23 - 25 1398/PUN/2014 TO 1400/PUN/2014 JAIN ASHAPURI ESTATE 82 - A EAST STREET GALLERIA CAMP PUNE 411001 PAN: AAEFJ4270H THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2005 - 06 TO 2007 - 08 26 - 28 1401/PUN/2014 TO 1403/PUN/2014 JAIN ASHAPURI PROMOTERS & BUILDERS EAST STREET GALLERIA CAMP PUNE 411001 THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2005 - 06 TO 2007 - 08 2 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. PAN: AAEFJ4022D 1(1) PUNE 29 - 30 1404/PUN/2014 & 1405/PUN/2014 JAIN ASHAPURI SHINDE ASSOCIATES 82 - A EAST STREET GALLERIA CAMP PUNE 411001 PAN: AA F FJ0872Q THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2006 - 07 & 2007 - 08 31 - 32 1406/PUN/2014 & 1407/PUN/2014 M/S. JAIN PROMOTERS BUILDERS EAST STREET GALLERIA CAMP PUNE 411001 PAN: AADFJ8056G THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2003 - 04 & 2006 - 07 33 - 35 1412/PUN/2014 TO 1414/PUN/2014 M/S. NAMO DEVELOPERS & BUILDERS EAST STREET GALLERIA CAMP PUNE 411001 PAN: AAFFN4601H THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2005 - 06 TO 2007 - 08 36 - 38 1415/PUN/2014 TO 1417/PUN/2014 M/S. NAMO DEVELOPERS EAST STREET GALLERIA CAMP PUNE 411001 PAN: AAFFN4600G THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2005 - 06 TO 2007 - 08 39 - 41 1427/PUN/2014 TO 1429/PUN/2014 M/S. VASTU ESTATE EAST STREET GALLERIA CAMP PUNE 411001 PAN: AAEFV5918N THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2004 - 05 TO 2006 - 07 42 - 43 1430/PUN/2014 & 1431/PUN/2014 M/S. VASTU PROMOTERS & DEVELOPERS EAST STREET GALLERIA CAMP PUNE 411001 PAN: AAEFV0823C THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) PUNE 2003 - 04 & 2004 - 05 / APPELLANT BY : SHRI SANJAY N. KAPADIAA / RESPONDENT BY : SHRI RAJEEV KUMAR CIT / ORDER PER SUSHMA CHOWLA JM: THIS BUNCH OF APPEALS FILED BY DIFFERENT ASSESSEE ARE AGAINST RESPECTIVE ORDERS OF CIT(A) RELATING TO DIFFERENT ASSESSMENT YEARS AGAINST RESPECTIVE ORDERS / DATE OF HEARING : 30 . 1 0 .201 7 / DATE OF PRONOUNCEMENT: 30 . 1 1 . 201 7 3 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. PASSED UNDER SECTION 143(3) R.W.S. 153A / 143(3) R.W.S. 147 / 143(3) / 143(3) R.W.S. 153C OF THE INCO ME - TAX ACT 1961 (I N SHORT THE ACT) . 2. THIS BU NCH OF PRESENT APPEALS RELATING TO DIFFERENT ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AS THE ISSUE RAISED IN ALL THESE APPEALS I S SIMILAR . 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DURING THE COURSE OF HEARING FURNISHED ABRIDGED ISSUES RAISED IN THE BUNCH OF APPEALS VIS - - VIS DIFFERENT GROUNDS OF APPEAL. THE FIRST PRINCIPAL ISSUE WHICH ARISES IN THE PRESENT BUNCH OF APPEALS IS A GAINST THE ORDER OF CIT(A) IN CONFIRMING THAT THE DIARIES WHICH WERE SEIZED DURING THE COURSE OF SEARCH PROCEEDINGS WERE BOOKS OF ACCOUNT. THE SECOND PRINCIPAL ISSUE RAISED IN THE PRESENT BUNCH OF APPEALS IS AGAINST THE ORDER OF CIT(A) IN NOT APPRECIATING THE FACTS THAT THE REFERENCE FOR SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT WAS TO AUDIT THE ACCOUNTS AND NOT TO PREPARE THE BOOKS OF ACCOUNT AND DETERMINE THE UNDISCLOSED INCOME. THE THIRD PRINCIPAL ISSUE WHICH IS RAISED AGAIN IN THE BUNCH OF APPEAL S IS AGAINST THE ORDER OF CIT(A) IN NOT RESTRICTING THE COMPUTATION OF INCOME TO REAL INCOME IN CONCURRENCE WITH THE APPROACH OF THE ASSESSEE. AN ALTERNATE GROUND WHICH HAS BEEN RAISED IN THE BUNCH OF APPEALS IS AGAINST THE ORDER OF CIT(A) IN SUSTAINING T HE ADDITION / DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3)/40(A)(IA)/68 OF THE ACT. THE LAST ISSUE WHICH IS RAISED IN THE APPEALS IS AGAINST THE ORDER OF CIT(A) IN NOT DELETING THE ADDITION MADE ON PROTECTIVE BASIS MADE BY THE ASSESSING OFFICER WHERE THE SAME SHOULD BE ASSESSED IN THE HANDS OF RESPECTIVE IDENTIFIED ASSESSEE. IN GROUP CONCERN CASES THE ASSESSEE IS ALSO AGGRIEVED BY THE ORDER OF CIT(A) IN SUSTAINING THE DISALLOWANCE OF CERTAIN EXPENSES I.E. LAND COST / TDR PURCHASED REF LECTED IN THE SEIZED DIARIES FOR WANT 4 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. OF EVIDENCE ON THE GROUND THAT THERE WAS NO EVIDENCE OF ANY NOTINGS IN THE SAID DIARIES. FURTHER THE ASSESSEE IN THE CASE OF JAIN ASHAPURI DEVELOPERS IN ITA NOS.1396/PUN/2014 AND 1397/PUN/2014 VIDE GROUNDS OF APPEAL NO.10 AND 11 RESPECTIVELY HAS RAISED THE ISSUE OF ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. IN ORDER TO ADJUDICATE THE ISSUE WE MAKE REFERENCE TO THE FACTS AND ISSUES IN ITA NO.1422/PUN/2014 RELATING TO ASSESSMENT YEAR 2007 - 08 I.E. T HE YEAR OF SEARCH IN THE CASE OF BHARAT B. JAIN . 4. THE ASSESSEE IN ITA NO.14 22 /PUN/2014 RELATING TO ASSESSMENT YEAR 2007 - 08 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN CO NFIRMING THE DECISION OF THE AO THAT THE DIARIES AND DOCUMENTS SEIZED FROM THE RESIDENCE AND OFFICE OF SHRI BHARAT JAIN AT THE TIME OF SEARCH PROCEEDINGS ARE BOOKS OF ACCOUNTS WITHOUT APPRECIATING THE FACT THAT THE SAID DIARIES ARE NOT BOOKS OF ACCOUNTS AN D ARE JUST PRIVATE RECORDS MAINTAINED BY SHRI BHARAT JAIN TO JUST TO HAVE AN IDEA OF INFLOW AND OUTFLOW OF THE FUNDS OF THE GROUP CONCERNS AS A WHOLE. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN REJECTING THE CONTENTIO N OF THE APPELLANT THAT - - ONLY REAL INCOME SHOULD BE TAXED IN THE HANDS OF THE APPELLANT BY APPLYING REASONABLE RATE OF PROFIT ON THE TOTAL RECEIPTS WORKED OUT FROM THE DIARIES SEIZED DURING THE COURSE OF SEARCH PROCEEDINGS AND - THE DISCLOSURE SHOULD BE IN CONCURRENCE WITH THE VALUE OF ASSETS FOUND OUTSIDE THE BOOKS OF ACCOUNTS DURING THE COURSE OF SEARCH PROCEEDINGS. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE CONTENTION OF THE APPELLANT THAT - EVEN IF ALL THE ENTRIES IN THE DIARIES SEIZED ARE CONSIDERED AS UNEXPLAINED THEN ALSO THE HIGHEST PEAK IF WORKED OUT FROM THE DIARIES OF ALL THE CONCERN AS A WHOLE WOULD NOT EXCEED RS.5.28 CRORES AND THEREFORE THE ADDITION IN TOTALITY CANNOT EXCEED THIS AMOUNT. - THE NET SURPLUS DERIVED AFTER REDUCING TOTAL PAYMENTS OF RS.23.69 CRS FROM TOTAL RECEIPTS OF RS.28.15 CRS WORKED OUT FROM THE DIARIES OF ALL THE CONCERN AS A WHOLE WOULD NOT EXCEED RS.4.46 CRS. - THE DIARIES SEIZED DURING THE COURSE OF SEARCH PROC EEDINGS FROM THE RESIDENCE AND OFFICE OF SHRI BHARAT JAIN ARE NOT COMPLETE SET OF 5 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. ACCOUNTS FROM WHEREIN PROFIT AND LOSS ACCOUNT AND BALANCE SHEET CAN BE PREPARED REFLECTING TRUE AND REAL INCOME AND FAIR VIEW OF THE ASSETS AND LIABILITIES OF THE APPELLANT AND ACCORDINGLY SHOULDN'T HAVE BEEN SUBJECTED FOR SPECIAL AUDIT U/S. 142(2A) OF THE ACT. 4. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE MADE BY THE AO OF RS. 26 000 / - U/S.40A(3) OF THE I.T. ACT - - WITHOUT DISPUTING THE GENUINENESS OF THE EXPENSES INCURRED FOR THE BUSINESS PURPOSE - WITHOUT CONSIDERING THE FACT THAT THE SAID TRANSACTIONS WERE DONE OUTSIDE THE BOOKS OF ACCOUNTS AND HENCE IT WAS NOT POSSIBLE FOR THE APPELLANT TO MAKE PAYMENTS BY ACCOU NT PAYEE CHEQUES AND ACCORDINGLY THE SAME IS CONSIDERED AS AN EXCEPTIONAL CIRCUMSTANCE COVERED UNDER INCOME TAX RULE 6DD. 5. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED C1T(A) HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE AO OF RS.5 65 000/ - AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE I.T. ACT - - WITHOUT APPRECIATING THE FACT THAT THE SAID TRANSACTIONS ARE PURELY BUSINESS RECEIPTS AND NOT TRANSACTIONS IN THE NATURE OF LOAN - WITHOUT APPRECIATING THE FACT THAT THE SAID TRANSACTIONS HAVE TAKEN PLACE OUTSIDE THE KITTY OF THE APPELLANT / OUTSIDE THE REGULAR BOOKS OF ACCOUNTS OF THE APPELLANT AND ACCORDINGLY PROVISIONS OF SECTION 68 OF THE ACT CANNOT BE INVOKED. 6. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED I N DIRECTING THE AO TO MAKE STATUTORY DISALLOWANCES U/S. 40A(3) AND 40(A)(I A ) OF THE ACT IN RESPECT OF 'DEBIT FOR EXPENSES (PAN NOT AVAILABLE)' DULY ALLOWED AS EXPENDITURE BY THE CIT(A) TO ARRIVE AT THE REAL INCOME. 7. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED C I T(A) HAS ERRED IN CONFIRMING THE PROTECTIVE ADDITION OF RS.1 36 96 264/ - MADE BY THE AO OF OTHER GROUP CONCERNS WITHOUT APPRECIATING THE FACT THAT NO SUBSTANTIVE ADDITIONS HAS BEEN MADE BY THE AO IN THE CASE OF RESPECTIVE GROUP CONC ERNS. WITHOUT PREJUDICE TO THE SAME THE LEARNED CIT(A) WHILE CONFIRMING THE SAID PROTECTIVE ADDITIONS OF RS.1 36 96 264 / - AS MADE BY THE AO HAS ALSO ERRED IN NOT DELETING THE ADDITIONS FORMING PART OF THE PROTECTIVE ADDITIONS WHICH OTHERWISE HAVE BEEN DEL ETED BY THE LEARNED CIT(A) IN THE CASES WHEREIN SIMILAR ADDITIONS HAVE BEEN MADE BY THE AO ON SUBSTANTIVE BASIS. 8 . ALL THE AFORESAID GROUNDS ARE INDEPENDENT TO EACH OTHER REQUIRING SEPARATE ADJUDICATION. 9. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER SUBSTITUTE MODIFY THE ABOVE GROUNDS OF APPEAL IF NECESSARY ON THE BASIS OF WRITTEN SUBMISSIONS AND PERSONAL PRESENTATION TO BE MADE AT THE TIME OF HEARING. 6 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. 5 . BRIEF FACTS RELATING TO THE CASE ARE THAT SEARCH ACTION UNDER SECTION 132 OF THE ACT WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE SITUATED AT FLAT NO.5 KUMAR RACHANA NEAR ANAND SOCIETY PUNE ON 10.08.2006. SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON THE OFFICE PREMISES OF THE ASSESSEE SITUATED AT 82A 2421 EAST STREE T GALLERIA CAMP PUNE SIMULTANEOUSLY. DURING THE COURSE OF SEARCH AND SURVEY ACTION SEVERAL DOCUMENTS WERE FOUND AND SEIZED. THE ASSESSEE WAS IN THE BUSINESS OF EXECUTING CIVIL CONSTRUCTION CONTRACTS AND WAS ALSO THE PROMOTER AND BUILDER. M/S. R.B. C ONSTRUCTION WAS THE PROPRIETARY CONCERN OF THE ASSESSEE AND FURTHER HE WAS THE PARTNER IN VARIOUS CONCERNS. THE NATURE OF BUSINESS IN RESPECT OF ALL THE CONCERNS WAS SIMILAR. DURING THE COURSE OF SEARCH IN HIS STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT THE ASSESSEE DISCLOSED ADDITIONAL INCOME OF RS.50 LAKHS IN HIS CASE AND THE CASES WHEREIN HE WAS PARTNER. HOWEVER NO SPECIFIC NAME OF THE FIRM WAS DISCLOSED IN THE SAID STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. THE ASSESSEE IN RESPON SE TO NOTICE ISSUED UNDER SECTION 153A OF THE ACT DISCLOSED ADDITIONAL INCOME TOTALING RS. 34 50 000/ - AS PER THE BIFURCATION TABULATED UNDER PARA 4 AT PAGE 2 OF THE ASSESSMENT ORDER. DURING THE COURSE OF SEARCH EIGHT LOOSE PAPER BUNDLES INCLUDING SEVEN DIARIES IDENTIFIED AS A1 TO A7 WERE SEIZED FROM THE RESIDENCE OF ASSESSEE. BUNDLE 1 TO 7 WERE THE DIARIES AS SAMVAT YEAR I.E. DIWALI TO DIWALI (NOVEMBER TO NOVEMBER) OF EACH YEAR. T HE DIARIES WERE FROM THE YEAR 2002 TO 2006. THE ASSESSEE ADMITTED THAT THE DIARIES WERE WRITTEN IN HIS OWN HANDWRITING AND CONTA INED THE DETAILS OF TRANSACTIONS BY HIS VARIOUS BUSINESS CONCERNS. THE ASSESSING OFFICER ON PERUSAL OF DIARIES NOTED THAT IT C ONTAINS DETAILS OF ALL UNACCOUNTED TRANSACTIONS CARRIED ON BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY AS WELL AS IN THE CAPAC ITY AS PARTNER IN VARIOUS FIRMS. THE NARRATIONS IN THE SAID DIARIES WERE WRITTEN IN CODED MANNER. THE FIGUR E S WERE 7 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. ALSO WRITTEN I N CODED MANNER. THE ASSESSING OFFICER DE - CODED THE SAME AND OBSERVED THAT ENTRY OF RS.1 LAKH WAS WRITTEN AS 1.00 IN DIARY AND IN SOME INSTANCES ENTRY OF RS.5 55 000/ - WAS WRITTEN AS 555. THE ASSESSEE AGREED TO THE SAID DE - CODING IN HIS STATEMENT GIVEN U NDER SECTION 131(1)(B) OF THE ACT ON 06.10.2006. CONSIDERING THE MAGNITUDE OF NUMBER OF ENTRIES VARIOUS YEARS AND VARIOUS ENTITIES INVOLVED COUPLED WITH COMPLEXITIES OF THE DECODING OF ENTRIES IN THE SEIZED DIARIES THE COMMISSIONER CENTRAL PUNE RECOMM ENDED SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT IN THE CASE OF ASSESSEE. THE TERMS OF REFERENCE TO THE SAID SPECIAL AUDITOR ARE REPRODUCED UNDER PARA 7 AT PAGES 3 AND 4 OF THE ASSESSMENT ORDER. WE SHALL MAKE REFERENCE TO THE SAID TERMS OF REFERENCE WHILE DECIDING THE APPEAL IN THE PARAS HEREINAFTER. THE ASSESSING OFFICER RECEIVED THE REPORT OF THE AUDITOR ON 22.05.2009 . THE SAID AUDITOR SEGREGATED ALL THE ENTRIES CONCER N - WISE AND PREPARED THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR VARIOUS CO NCERNS. HOWEVER THE ASSESSING OFFICER ON PERUSAL OF SPECIAL AUDITORS REPORT NOTED THAT CERTAIN EXPENSES WERE ALLOWED BY HIM WHILE COMPUTING THE INCOME IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER MADE A REFERENCE TO THE DECISION OF THE HONBLE HIGH COURT OF ANDHRA PRADESH IN S. VENKAT SUBBARAO VS. CIT REPORTED IN 173 ITR 340 (AP) AND OBSERVED THAT WHETHER STATUTORY DISALLOWANCES WERE TO BE DONE WHILE COMPUTING THE UNDISCLOSED INCOME OR NOT. RELYING ON THE SAID DECISION THE ASSESSING OFFICER WAS OF THE VIEW THAT WHILE COMPUTING THE UNDISCLOSED INCOME ALSO STATUTORY DISALLOWANCES AS PER PROVISIONS OF THE INCOME TAX ACT WERE REQUIRED TO BE DONE TO ARRIVE AT THE CORRECT INCOME FIGURE. ACCORDIN GLY THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE PROPOSING TO MAKE CERTAIN DISALLOWANCES IN ADDITION TO THE PROFIT COMPUTED BY THE SPECIAL AUDITOR FOR COMPUTATION OF THE TOTAL INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT 8 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. YEAR S . TH E PROPOSED ADDITIONS WERE ON ACCOUNT OF DISALLOWANCES UNDER SECTION 40A(3) / 40(A)(IA) OF THE ACT AND UNDER SECTION 68 / 69 OF THE ACT. 6. ANOTHER ADDITION WHICH WAS PROPOSED WAS ON ACCOUNT OF CASH INTRODUCED BY THE PARTNERS TO BE ADDED UNDER SECTION 68 OF THE ACT AND THE ADDITION ON ACCOUNT OF NEGATIVE CASH BALANCE TO BE ADDED AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT. FURTHER ADDITIONS WERE ALSO PROPOSED ON ACCOUNT OF FLATS HAVING BEEN SHOWN TO HAVE BEEN ALLOTTED TO DIFFERENT PERSONS AN D THE AMOUNTS RECEIVED THEREFROM WERE GROUPED AS ADVANCE FROM OTHERS . THE SAID ADVANCES FROM OTHERS I.E. NON - FLAT HOLDERS WERE PROPOSED TO BE ADDED UNDER SECTION 68 OF THE ACT AS UNEXPLAINED CASH CREDIT. THE NEXT ADDITION WHICH WAS PROPOSED WAS ON ACCO UNT OF REPAYMENT OF LOAN GREATER THAN LOAN TAKEN. THE ASSESSEE HAD ALSO BOOKED CERTAIN EXPENDITURE ON ACCOUNT OF PURCHASE OF LAND / TDR WHICH WAS ALLOTTED BUT IN THE ABSENCE OF DOCUMENTARY EVIDENCE THE SAME WAS PROPOSED TO BE DISALLOWED. FURTHER CERTA IN ADDITIONS ON ACCOUNT OF UNACCOUNTED RECEIPTS IN THE FORM OF CASH LOANS / CASH RECEIPTS WAS ALSO PROPOSED IN THE SAID SHOW CAUSE NOTICE. 7. THE ASSESSEE IN REPLY POINTED OUT THAT SEIZED DIARIES WERE PRIVATE RECORDS MAINTAINED IN ORDER TO HAVE AN IDEA OF INFLOW/RECEIPT AND OUTFLOW/PAYMENT OF FUNDS OF THE GROUP CONCERN BUT THE SAME DOES NOT FALL WITHIN DEFINITION OF BOOKS OF ACCOUNT. HE FURTHER POINTED OUT THAT SURPLUS CASH IN ONE CONCERN WAS UTILIZED IN ANOTHER CONCERN. THE NEXT PLEA RAISED WAS THAT THE FIGURE OF DISCLOSURE SHOULD BE IN CONCURRENCE WITH THE VALUE OF ASSETS FOUND OUTSIDE THE BOOKS. THE ASSESSING OFFICER FIRST REJECTED THE AFORESAID GENERAL CONTENTIONS RAISED BY THE ASSESSEE. HE OBSERVED THAT THE DIARIES COULD NOT BE CONSIDERED AS PRIVATE RECORDS AS CLAIMED BY THE ASSESSEE WHERE THE SAME 9 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. WERE MAINTAINED IN REFINED AND SYSTEMATIC MANNER CONTEMPORANEOUSLY BY USING CODES FOR WRITING AMOUNTS AND NARRATION OF AMOUNTS. THE ASSESSIN G OFFICER ALSO POINTED OUT THAT THE DIARIES HAD MOST OF THE CHARACTERISTICS WHICH IN SET OF BOOKS OF ACCOUNT SHOULD HAVE I.E. IT HAD PAGE REFERENCE DETAILS OF DATES ETC. AND THE AMOUNTS WITH REFERENCE TO THE PAGES ON WHICH INTEREST WAS PAID LEDGER ACCOU NTS ETC. THUS HE WAS OF THE VIEW THAT THE ASSESSEE HAD METICULOUSLY MAINTAINED PARALLEL BOOKS OF ACCOUNT IN THE FORM OF DIARIES FOR HIS GROUP CONCERNS AND THE ENTRIES IN THE SEIZED DIARIES WERE RECORD OF TRANSACTIONS OUTSIDE THE REGULAR BOOKS OF ACCOUNT . THEREFORE THE SAME HAD TO BE CONSIDERED AS SET OF BOOKS CONTAINING THE TRANSACTIONS OUTSIDE THE REGULAR BOOKS OF ACCOUNT OF ASSESSEE AND HIS GROUP CONCERN. THE SECOND CONTENTION OF THE ASSESSEE THAT SURPLUS CASH IN ONE CONCERN WAS UTILIZED IN ANOTHER CONCERN WAS ALSO NOT ACCEPTED BY THE ASSESSING OFFICER SINCE THE ASSESSEE HAD RECORDED THE TRANSACTIONS IN THE DIARY AT THE INSTANCE OF RESPECTIVE PERSONS. THE THIRD CONTENTION OF ASSESSEE THAT UNDISCLOSED INCOME SHOULD MATCH THE ASSETS FOUND DURING THE C OURSE OF SEARCH WAS ALSO NOT ACCEPTED ON THE GROUND THAT THE DIARIES WERE PARALLEL BOOKS OF ACCOUNT CONTAINING UNACCOUNTED TRANSACTIONS OF THE ASSESSEE AND OTHER PERSONS OF THE GROUP. THE ASSESSING OFFICER FURTHER STATED THAT THE SPECIAL AUDITOR PREPARED THE FINAL STATEMENT OF AFFAIRS FOR EACH YEAR ON THE BASIS OF ENTRIES RECORDED IN THE DIARIES AND AFTER CONSIDERING VARIOUS CONTENTIONS RAISED BY THE ASSESSEE. THUS THE STATEMENT CLEARLY INDICATE THE MATCHING ASSETS IN THE FORM OF WORK - IN - PROGRESS WITHDR AWAL BY THE PERSONS OF THE GROUP PAYMENT OF ON - MONEY FOR PURCHASE OF LAND INTRODUCTION OF CAPITAL BY THE PARTNERS UNEXPLAINED DEBITS ETC. THE ASSESSING OFFICER FURTHER WAS OF THE VIEW THAT WHERE THE ASSESSEE HAD INCURRED EXPENSES IN CASH ABOVE THE LIM IT OF RS.20 000/ - THEN 20% OF SUCH EXPENSES IS TO BE DISALLOWED UNDER SECTION 40A(3) OF THE ACT. THE EXPLANATION OF ASSESSEE IN THIS REGARD WAS THAT WHERE 10 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. THE RECORDS WHICH WERE SUBJECTED TO SPECIAL AUDIT WERE NOT BOOKS OF ACCOUNT BUT WERE PRIVATE RECOR DS THEREFORE THE RELEVANT PROVISIONS AS PROVIDED IN THE ACT SHOULD NOT BE OVERLOOKED. FURTHER IT WAS POINTED OUT THAT THE SALE RETURNS WAS NOT AN ELIGIBLE EXPENDITURE FOR APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ASSESSING OFFICER REJEC TED THE PLEA OF ASSESSEE SINCE IT HAS ALREADY BEEN HELD BY HIM THAT SEIZED DIARIES WERE NOT MERELY PRIVATE RECORDS BUT PARALLEL SET OF BOOKS OF ACCOUNT. THE NEXT PLEA OF THE ASSESSEE OF SALE RETURN WAS OBSERVED TO BE AN ELIGIBLE EXPENDITURE CLAIMED AS DED UCTION UNDER SECTIONS 30 TO 37 OF THE ACT. HENCE IT WAS HELD THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT WERE APPLI CABLE . THE ASSESSING OFFICER FURTHER NOTED FROM THE SEIZED DIARIES THAT THE ASSESSEE WAS IN RECEIPT OF MONEY WHICH WAS TREATED AS UNACCOUNTED CASH LOANS BY THE AUDITORS ; BESIDE THERE WAS SOME CREDIT ENTRIES IN THE DIARIES FOR WHICH THE ASSESSEE DID NOT HAVE ANY EXPLANATION WHICH FACT WAS ALSO CONFIRMED BY THE SPECIAL AUDITOR. IN VIEW THEREOF THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE UNEXPLAINED CREDITS SHOULD NOT BE TREATED AS ITS INCOME FROM OTHER SOURCES UNDER SECTION 68 OF THE ACT. IN RESPONSE THE ASSESSEE EXPLAINED THAT BULK INVESTORS SCHEME WAS PROPOSED BY THE ASSESSEE INVITING DIFFERENT INVESTORS TO INVEST IN A PARTICULA R PROJECT. THE CASH LOANS AND UNEXPLAINED CREDITS WERE CLASSIFIED BY THE SPECIAL AUDITOR AS THE AMOUNTS RECEIVED FROM BULK INVESTORS AND THE SAME WERE TO BE TREATED AS ITS BUSINESS RECEIPTS. THE ASSESSING OFFICER REJECTING THE EXPLANATION OF ASSESSEE OF BULK INVESTORS TREATED THE SAME AS INCOME OF ASSESSEE. THE ASSESSING OFFICER ALSO NOTED THAT IN SOME CASES INTEREST WAS PAID FROM DAY ONE OF ADVANCEMENT OF MONEY AND IN SOME CASES THOUGH THE ASSESSEE CLAIMS THAT IT HAD REPAID THE AMOUNT TO SUCH INVESTO RS BUT THE REPAYMENTS ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. THE CLAIM OF ASSESSEE WAS HELD TO BE AN AFTERTHOUGHT AND WITHOUT ANY MERIT SINCE THE ASSESSEE HAS FAILED TO ESTABLISH THE IDENTITY OF THE PARTIES 11 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. CONCERNED AND GENUINENESS OF THE TRANSACTIONS . HENCE THE SAME WERE TREATED AS ADDITION UNDER SECTION 68 OF THE ACT. THE ASSESSING OFFICER ALSO NOTED THAT THERE WERE CERTAIN DEBIT ENTRIES IN THE SEIZED DIARIES FOR WHICH THE ASSESSEE DID NOT HAVE ANY EXPLANATION AND THE SPECIAL AUDITOR HAD ALSO CLAS SIFIED THE SAME AS UNEXPLAINED DEBITS AND DEBITS FOR EXPENSES WHERE PAN WAS NOT AVAILABLE. THE ASSESSEE FIRST POINTED OUT THAT IT WAS NOT BOOKS OF ACCOUNT AND HENCE NO MERIT IN MAKING ANY ADDITION. THE SECOND PLEA WAS THAT ONCE INFLOW OF FUNDS WAS TAXE D THEN APPLICATION OF FUNDS COULD NOT BE TAXED AGAIN. THE ASSESSING OFFICER REJECTED BOTH THE PLEAS OF THE ASSESSEE HOLDING THAT SOURCE OF PAYMENT REMAINED UNEXPLAINED. 8 . THE NEXT ASPECT WHICH WAS NOTED BY THE ASSESSING OFFICER WAS NEGATIVE CASH BALA NCE. THE NEGATIVE CASH WAS WORKED OUT ON PEAK BASIS . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAME WAS NOTHING BUT PAYMENTS MADE FOR WHICH SOURCES WERE NOT EXPLAINED AND THE ASSESSEE WAS ASKED AS TO WHY ADDITION SHOULD NOT BE MADE UNDER SECTION 69C OF THE ACT. THE ASSESSEE EXPLAINED THAT CASH WAS MAINTAINED IN COMMON POOL AND SURPLUS CASH IN O NE FIRM WAS UTILIZED IN ANOTHER CONCERN AS AND WHEN REQUIRED AND THE SPECIAL AUDITOR DID NOT CONSIDER THE SAID ASPECT AND NECESSARY ENTRIES WERE NOT PASSED BY HIM IN THE BOOKS PREPARED BY HIM. THE ASSESSING OFFICER OBSERVED THAT THE PLEA OF ASSESSEE OF CO MMON POOL OF CASH WAS ALREADY REJECTED AND ALSO THE SPECIAL AUDITOR DID NOT CONSIDER THE ISSUE OF INTER FIRM TRANSFER OF FUNDS AND NECESSARY ENTRIES WERE NOT PASSED BY HIM IN THE BOOKS PREPARED BY HIM AND HENCE NO MERIT IN THE PLEA OF ASSESSEE ACCORDINGL Y. 9 . ANOTHER ADDITION WHICH WAS MADE IN THE HANDS OF ASSESSEE WAS ON ACCOUNT OF EXTRA FINANCE TRANSACTIONS. THE SPECIAL AUDITOR REPORTED THAT 12 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. GENERALLY IN THE DIARIES OR RECORDS WHAT IS MENTIONED AT 20 000.00 WOULD NORMALLY MEAN THAT RS.20 000/ - . HOW EVER IN THE CASE OF EXTRA FINANCE IT MEANS THAT RS.20 LAKHS WAS LOAN TAKEN IN THE REGULAR BOOKS AND RS.20 000/ - WAS THE CASH BROKERAGE PAID ON THE SAME. NUMEROUS INSTANCES OF SUCH ENTRIES WERE NOTED. HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT THE TH EORY OF EXTRA FINANCE AND SINCE THE ASSESSEE HAD NOT ESTABLISHED THE IDENTITY OF THE CONCERNED PARTIES NOR FILED CONFIRMATION FROM THE SAME T HE AMOUNT OF CASH LOAN TAKEN BY THE ASSESSEE CONSIDERED BY SPECIAL AUDITOR AS EF TRANSACTIONS WERE ADDED AS UNEXP LAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. FURTHER THE SPECIAL AUDITOR HAD CLASSIFIED CERTAIN ENTRIES AS BC TRANSACTIONS WHICH WERE NOT DECODED. THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION IN THIS REGARD AND THE SAME WAS ADDED AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 OF THE ACT. 10 . THE NEXT ADDITION WHICH WAS MADE WAS ON ACCOUNT OF HOUSEHOLD EXPENSES. LOOKING AT THE STATUS OF THE ASSESSEE THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE WOULD BE SUBSTANTIAL EXPENDITURE ON ACCOUNT OF GROCE RIES ELECTRICITY TELEPHONE CLOTHING MAIDS IN THE HOUSE ETC. THE ASSESSEE HAD NOT GIVEN BREAKUP OF EXPENSES TO JUSTIFY THE HOUSEHOLD EXPENSES. ACCORDINGLY WITHDRAWAL SHOWN BY THE ASSESSEE WAS HELD TO BE ON THE LOWER SIDE AND ESTIMATED ADDITION WAS M ADE IN THE HANDS OF ASSESSEE ON ACCOUNT OF HOUSEHOLD EXPENSES. 1 1 . THE LAST ISSUE WHICH WAS ADDRESSED BY THE ASSESSING OFFICER WAS THE ENTRIES RELATING TO THE ASSESSEE AND HIS RELATED CONCERNS. THE SPECIAL AUDITOR HAD BIFURCATED THE ENTRIES IN THE DIAR IES AS BELONGING TO DIFFERENT CONCERNS WHERE THE ASSESSEE WAS PROPRIETOR OR PARTNER AND HAD COMPUTED THE INCOME OF CONCERNS YEAR - WISE. THE VARIOUS ADDITIONS ON ACCOUNT OF UNDISCLOSED INCOME 13 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. WERE PROPOSED IN THE HANDS OF RESPECTIVE CONCERNS SINCE THE DIARIES WERE WRITTEN IN HANDWRITING OF ASSESSEE AND WERE FOUND IN HIS CUSTODY THEREFORE PROPOSED ADDITIO NS IN THE RESPECTIVE CONCERNS AS PER THE ASSESSING OFFICER WERE REQUIRED TO BE DONE ON PROTECTIVE BASIS IN THE HANDS OF ASSESSEE TO SAFEGUARD THE INTEREST OF REVENUE. ACCORDINGLY SUM OF RS. 4 74 51 951/ - I.E. THE ADDITION PROPOSED IN THE RELATED CONCERNS OF THE ASSESSEE FOR RELEVANT ASSESSMENT YEARS WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON PROTECTIVE BASIS. THE ASSESSING OFF ICER IN THE FINAL ANALYSIS COMPUTED THE INCOME OF THE ASSESSEE AS UNDER: - INCOME AS PER ORIGINAL RETURN OF INCOME RS. 2 66 310 ADD: PROFIT FOR THE PERIOD FOR WHICH DIARIES WERE MAINTAINED RS. 47 994 ADD: DISALLOWANCE U/S 40A(3) OF THE I - T ACT AS DISCUSSED IN PARA 11 ABOVE RS. 47 994 ADD: UNEXPLAINED CASH CREDIT U/S 68 OF THE I - T ACT ON ACCOUNT OF CASH LOAN RECEIPTS & UNEXPLAINED CREDITS AS DISCUSSED IN PARA 12 ABOVE RS. 5 65 000 ADD: ON ACCOUNT OF UNEXPLAINED DEBITS U/S 69C OF THE I - T ACT AS DISCUSSED IN PARA 13 ABOVE RS. 16 66 116 ADD: UNEXPLAINED EXPENDITURE U/S 69C OF THE I - T ACT AS DISCUSSED IN PARA 14 ABOVE RS. 17 82 188 ADD: UNEXPLAINED CASH CREDIT U/S 68 OF THE I - T ACT ON ACCOUNT OF CASH INTRODUCED BY PARTNERS AS DISCUSSED IN PARA 1 5 ABOVE RS. 1 05 000 ADD: UNEXPLAINED CASH CREDIT U/S 68 OF THE I - T ACT IN RESPECT OF ALLEGED BC TRANSACTIONS AS DISCUSSED IN PARA 16 ABOVE RS. 15 000 ADD: ON ACCOUNT OF INADEQUATE HOUSEHOLD EXPENSES AS DISCUSSED IN PARA 17 ABOVE RS. 1 80 000 ADD: ADDITION ON ACCOUNT OF RELATED CONCERNS (ON PROTECTIVE BASIS) AS DISCUSSED IN PARA 18 ABOVE RS. 1 22 41 081 TOTAL INCOME RS. 1 62 42 617 14 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. 1 2 . BEFORE THE CIT(A) THE FIRST ISSUE WHICH WAS RAISED BY THE ASSESSEE WAS THAT THE DIARIES SEIZED DURING THE COURSE OF SEARCH WERE PRIVATE RECORDS CONTAINING NOTINGS AND SCRIBBLING OF CERTAIN AMOUNTS RECEIVED AND PAID. IT WAS FURTHER POINTED OUT THAT THE DIARIES AS SUCH WERE NOT COMPLETE CODE IN ITSELF OF THE BUSINESS AFFAIRS OF THE WHOLE GROUP. THE ASSESSEE CONTENDED THAT SEIZED DIARIES WERE NEITHER LEDGER ACCOUNT NOR CASH BOOK AS THERE WAS NO OPENING OR CLOSING BALANCES AND T HEY WERE ROUGH CALCULATI ONS BANK TRANSACTIONS WHICH WERE RECORDED IN THE REGULAR BOOKS OF ACCOUNT WERE RECORDED IN THE DIARIES AND CONTAINS CERTAIN DUPLICATE ENTRIES. 1 3 . THE NEXT PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE SAID DIARIES DID NOT REFLECT TRUE AND REAL I NCOME IN THE HANDS OF ASSESSEE NOR DID IT REFLECTS THE ASSETS AND LIABILITIES WHICH WAS EVIDENT FROM THE PROFIT AND LOSS ACCOUNT PREPARED BY THE AUDITOR. THE ASSESSEE THUS CONTENDED THAT SINCE THE DIARIES WERE NOT BOOKS OF ACCOUNT HENCE THE STATUTORY PR OVISIONS OF SECTIONS 40A(3) 40(A)(IA) 68 AND 69C OF THE ACT COULD NOT BE APPLIED. IT WAS FURTHER EXPLAINED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE DIARIES WERE HIS PRIVATE RECORD NOT MEANT FOR THE PURPOSE OF THE ACT MAINTAINED WITH SPECIFIC INTENTIO N OF MANAGING INFLOW AND OUTFLOW FUNDS OF THE GROUP AS A WHOLE. REFERENCE WAS MADE TO QUESTION NO.52 OF THE STATEMENT RECORDED WHEREIN IT WAS STATED THAT THE DIARIES ALSO REFLECTED TRANSACTIONS AND CHEQUES WHICH WERE RECORDED IN THE REGULAR BOOKS OF ACCO UNT AND ALSO THE TRANSACTIONS IN CASH WHICH WERE NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. IT WAS FURTHER EXPLAINED THAT THE ABBREVIATION CH WAS USED FOR TRANSACTIONS MADE THROUGH CHEQUES AND CA WAS USED FOR TRANSACTIONS IN CASH. THE ASSESSEE BE FORE THE CIT(A) ADMITTED TO THE FACT THAT THE SEIZED DIARY WAS WRITTEN BY HIM AND WAS FOUND FROM HIS POSSESSION AND THE PRESUMPTION DRAWN UNDER SECTION 132(4A) OF THE ACT THAT THE DIARY WRITTEN BY 15 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. HIM BELONGED TO HIM ALL THE CONTENTS OF DIARY ARE TRUE AND THE DIARY SHOULD BE READ AS A WHOLE AND IT WAS NOT JUSTIFIED IN TAKING THE VIEW THAT ONLY PART OF THE CONTENTS WERE CORRECT AND REMAINING PART INCORRECT. HE REFERRED TO THE ORDER OF THE ASSESSING OFFICER AND POINTED OUT THAT THE ASSESSING OFFICER HAD CON SIDERED CERTAIN ENTRIES AS TRUE AND CERTAIN AS UNEXPLAINED INVOKING THE DEEMING PROVISIONS WITHOUT BRINGING ANY MATERIAL OR CLINCHING EVIDENCE ON RECORD. THE EXPLANATION OF THE ASSESSEE THAT THE AMOUNT RECEIVED WAS BUSINESS RECEIPTS OF DIFFERENT P ROJECTS RECEIVED FROM CUSTOMERS INVESTORS DIRECTLY OR THROUGH EMPLOYEES OR PARTNERS OF THE GROUP CONCERN AND THE AMOUNTS PAID WERE TOWARDS PROJECT EXPENSES OF VARIOUS PROJECTS OR AMOUNT RETURNED TO INVESTORS EITHER DIRECTLY OR INDIRECTLY WAS NOT ACCEPTED. 1 4 . T HE NEXT PLEA OF THE ASSESSEE THAT DIARIES CONTAINED A COMMON POOL FROM WHERE FUNDS OF DIFFERENT CONCERNS WERE MANAGED AND THE SURPLUS FUNDS OF ONE CONCERN WERE USED IN ANOTHER CONCERN AS AND WHEN REQUIRED WAS ALSO NOT ACCEPTED. HE STRESSED THAT ONCE THE PRESUMPTION UNDER SECTION 132(4) OF THE ACT WAS DRAWN DEEMING PROVISIONS UNDER SECTIONS 68 AND 69C OF THE ACT COULD NOT BE INVOKED WITHOUT DISCHARGING THE ONUS LYING ON THE DEPARTMENT. THE ASSESSEE ALSO STRESSED THAT THE PROVISIONS OF SECTION 68 OF THE A CT COULD BE INVOKED ONLY WHEN THE CASH WAS PASSED THROUGH BOOKS OF ACCOUNT . H ENCE SINCE THE DIARIES WERE NOT BOOKS FOR THE PURPOSE OF CASH CREDIT AND CASH TRANSACTIONS HAD TO BE OUTSIDE THE BOOKS OF ACCOUNT DEEMING PROVISIONS UNDER SECTION 68 OF THE ACT COULD NOT BE INVOKED WHERE THE RECEIPTS HAD BEEN CONSIDERED AS BUSINESS EXPE NSES. 1 5 . THE NEXT PLEA RAISED BY THE ASSESSEE BEFORE THE CIT(A) WAS THE PLEA OF TAXING REAL INCOME I.E. ACTUAL PROFIT EARNED ON TOTAL RECEIPTS AND ALSO THE 16 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. DISCLOSURE SHOULD BE IN CONCURRENCE WITH THE VALUE OF ASSETS FOUND OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESSEE POINTED OUT THAT WHILE WORKING OUT THE AMOUNT OF DISCLOSURE WHILE FILING THE RETURN OF INCOME PROFIT RATE OF 8% ON TOTAL RECEIPTS DERIVED FROM THE DIARIES WAS APPLIED AND THE SAME WAS IN CONSONANCE WITH THE PROFIT RATES NORMALLY EARNED IN T HE SAME BUSINESS. IT WAS STRESSED BY THE ASSESSEE THAT WHERE THE DIARIES MAINTAINED FOR RECORDING UNACCOUNTED TRANSACTIONS IT WOULD NOT CONTAIN THE FIGURES OF PROFITS BUT UNACCOUNTED RECEIPTS AND PAYMENTS INCURRED AND UNDER NO CIRCUMSTANCES ONE COULD TA X MORE THAN REAL INCOME / PROFIT REALIZED BY THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED THE WORKING OF AMOUNT OF DISCLOSURE BY APPLYING THE RATE OF PROFIT ON THE TOTAL RECEIPTS AND WORKING OF THE SAME CONCERN - WISE AND YEAR - WISE AND RELIANCE WAS PLACED ON NUMBER OF JUDICIAL PRONOUNCEMENTS WHEREIN IT WAS HELD THAT ONLY PROFIT SHOULD BE TAXED IN THE HANDS OF ASSESSEE. IT WAS STRESSED BY HIM THAT DURING THE COURSE OF SEARCH OR THEREAFTER THE DEPARTMENT HAD NOT FOUND ANY CASH JEWELLERY ASSET S VALUABLE INVESTMENTS ETC. MATCHING WITH THE AMOUNT OF UNDISCLOSED INCOME WORKED OUT BY THE ASSESSING OFFICER FROM ALL THE DIARIES FOR ALL THE CONCERNS AND THUS STRESSED THAT ONLY REAL INCOME SHOULD BE TAXED. 1 6 . THE NEXT PLEA RAISED BY THE ASSESSEE WAS THAT TE LESCOPING OF THE SOURCE AND APPLICATION HAD TO BE GIVEN IN THE GROUP OF ASSESSEES. IT WAS FURTHER POINTED OUT BY THE ASSESSEE THAT THE HIGHER PEAK IF WORKED OUT OF ALL THE CONCERNS AS A WHOLE WOULD NOT EXCEED RS.5.28 CORES. IT WAS STRESSED BY THE ASSESSE E BEFORE THE CIT(A) THAT THE DIARIES HAD TO BE READ AS A WHOLE AND THE REVENUE WAS NOT JUSTIFIED IN TAKING A VIEW THAT ONLY PART OF THE CONTENTS WERE CORRECT AND REMAINING WAS INCORRECT. IT WAS FURTHER CONTENDED THAT THE DIARIES SHOULD BE TREATED AS CORRE CT OR REJECTED AS A WHOLE. 17 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. 1 7 . THE NEXT OBJECTION RAISED WAS AGAINST THE REFERENCE MADE FOR SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT ON THE GROUND THAT THE SEIZED MATERIAL WHICH WAS SUBJECT TO AUDIT WAS NOT COMPLETE SET OF RECORDS FROM WHICH PROF IT AND LOSS ACCOUNT AND BALANCE SHEET COULD NOT BE DERIVED. 18. THE CIT(A) VIDE PARA 3.9 ONWARDS CONSIDERED THE FACTUAL ASPECTS OF THE CASE AND SUBMISSIONS OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AND BEFORE HIM AND THE ORDER OF ASSESSING OFFICER AN D OBSERVED THAT IN VIEW OF MAGNITUDE OF ENTRIES AND THE COMPLEXITIES OF DECODING OF ENTRIES AND THE FIGURES CONTAINED THEREIN SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT HAD TO BE RECOMMENDED. HE FURTHER OBSERVED THAT THE SPECIAL AUDITOR TOOK TIME TO PREPARE THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF VARIOUS CONCERNS INCLUDING THAT OF THE ASSESSEE ONLY AFTER DECODING AND SCRIBBLING THE ENTRIES CONCERN - WISE. THE CIT(A) HELD THAT NOTINGS CONTAINED IN THE DIARIES WERE METICULOUSLY MAINTAINED AND WERE PARALLEL TO THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHOSE ENTRIES DID NOT FIND PLACE IN THE REGULAR SET OF BOOKS AND HENCE REJECTED THE CONTENTION OF ASSESSEE THAT THE SAID DIARIES CONTAINED ONLY PRIVATE RECORD. FURTHER OBSERVATION OF THE C IT(A) WAS THAT EVEN THE AUDITOR IN THE REPORT HAD CATEGORICALLY MENTIONED THAT THE DIARIES WERE NOT MERELY SCRIBBLINGS AND NOTINGS IN PRIVATE RECORDS BUT WERE SET OF BOOKS OF ACCOUNT OF TRANSACTIONS RECORDED OUTSIDE THE REGULAR BOOKS OF ACCOUNT OF THE ASSE SSEE AND HIS CONCERNS. SINCE THE ASSESSEE HIMSELF HAD AGREED TO NET CASH GENERATED AS A RESULT OF CASH RECEIVED AND PAID DETAILS OF WHICH HAD BEEN NOTED IN THE DIAR Y THE CIT(A) HELD THAT THE DIAR Y COULD NOT BE CONSIDERED MERELY AS PRIVATE RECORD SINCE IT CLEARLY REFLECTED THE TRUE AND REAL INCOME IN THE HANDS OF ASSESSEE. THE CIT(A) THUS HELD THAT WHERE THE ASSESSEE HIMSELF HAD ADMITTED IN CLEAR TERMS THAT THE DOCUMENT WAS IN HIS OWN HANDWRITING AND WHERE THE ASSESSEE WAS ALSO ONE OF 18 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. THE PARTIES TO THE TRANSACTIONS THEN THE SAID DOCUMENT WAS OF GREAT EVIDENTIARY VALUE AND THE ASSESSING OFFICER HAD RIGHTLY MADE IT AS BASIS FOR MAKING THE ADDITION DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH WAS SUPPLEMENT ED BY THE REPORT PREPARED BY THE SPECIAL AUDITOR. THE CIT(A) THEN REFERRED TO THE DEFINITION OF BOOKS OR BOOKS OF ACCOUNT AS INTRODUCED BY THE FINANCE ACT 2001 W.E.F. 01.06.2000 . THE CIT(A) WAS OF THE VIEW THAT IN VIEW OF THE DEFINITION IN SECTION 2(12 A) OF THE ACT THE DIARIES SEIZED DURING THE COURSE OF SEARCH COULD BE CONSIDERED AS BOOKS OF ACCOUNT SINCE THE SEIZED DOCUMENT CONTAIN DETAILS OF ENTIRE UNACCOUNTED TRANSACTIONS OF THE ASSESSEE AND IT ALSO REVEALED DETAILED AND MINUTE NOTINGS OF THE SAID UNACCOUNTED TRANSACTIONS. THE ASSESSEE HAVING ADMITTED TO HAVE WRITTEN THE SAME IN HIS OWN HANDWRITING AS PER THE CIT(A) LENT CREDIBILITY TO THE SEIZED DOCUMENT AND WAS NOT DUMB DOCUMENT. SINCE THE ASSESSING OFFICER HAD BASED THE ASSESSMENT ON THE MATE RIAL FOUND DURING THE COURSE OF SEARCH ACTION WHICH WAS ADMITTED BY THE ASSESSEE TO BE IN HIS WRITING THEREFORE THE ENTRIES IN THE DIARIES AND THE CONSIDERATION RECEIVED WAS APPARENT AND THE SAME COULD BE THE BASIS FOR MAKING THE ADDITION IN THE HANDS OF ASSESSEE. FURTHER THE CIT(A) ALSO STATED THAT THE SPECIAL AUDITOR HAD EXAMINED EACH AND EVERY ENTRY CONTAINED IN THE DIARY AND HAD DECODED THE FIGURES AND HAD COMPUTED THE PROFITS OF RELATED CONCERNS AND ALSO THAT OF ASSESSEE WHEREIN THE EXPENSES WERE ALSO ALLOWED AGAINST THE RECEIPTS. THE PROFIT SO COMPUTED BY THE AUDITOR WAS ACCEPTED BY THE ASSESSING OFFICER WHICH CLEARLY LEAD TO THE INFERENCE THAT THE ENTIRE SEIZED DOCUMENT HAS BEEN READ AS A WHOLE AND NOT IN PART. THE CONTENTION OF ASSESSEE AGAIN ST THE SAME WAS THUS REJECTED BY THE CIT(A). FURTHER THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE OBSERVED TO BE IN RESPECT OF ENTRIES IN THE DIARY FOR WHICH NO REPLY OR EXPLANATION OR DETAILS WERE SUBMITTED BY THE ASSESSEE EITHER BEFORE THE SPECIA L AUDITOR OR BEFORE THE ASSESSING OFFICER 19 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HENCE THE SAME HAD TO BE MADE IN THE HANDS OF ASSESSEE. FURTHER THE CONTENTION OF ASSESSEE THAT ADDITION UNDER SECTION 68 OF THE ACT COULD BE INVOKED ONLY WHEN CASH WAS PASSED THROUGH THE BOOKS OF ACCOUNT AND DIARIES MAINTAINED BY THE ASSESSEE WERE HELD TO BE BOOKS OF ACCOUNT AS PER SECTION 2(12A) OF THE ACT. THE CIT(A) IN THIS REGARD OBSERVED THAT THE ASSESSMENT PROCEEDINGS UNDERTAKEN UNDER SECTION 153A OF THE ACT WERE LIKE REGULAR ASSESSMENT PROCEEDINGS AND ASSESSMENT / RE - ASSESSMENT WAS TO BE FRAMED IN ACCORDANCE WITH NORMAL PROVISIONS OF THE ACT WHICH INCLUDED THE APPLICATION OF DEEMING PROVISIONS. RELIANCE WAS PLACED ON DIFFERENT DECISIONS OF VARIOUS HIGH COUR T THAT WHERE THE ASSESSEE FAILED TO REBUT THE PRESUMPTION UNDER SECTION 292C OF THE ACT ADDITION UNDER SECTION 69 OF THE ACT ON THE BASIS OF DOCUMENT SEIZED FROM THE POSSESSION OF THE ASSESSEE WAS RIGHTLY MADE. RELIANCE WAS PLACED ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN SURENDRA M. KHANDAR VS. ACIT (2010) 321 ITR 254 (BOM) AND OTHER DECISIONS. THE CONTENTION OF THE ASSESSEE THAT REAL INCOME OUGHT TO BE TAXED AND ALSO THAT 8% OF TOTAL RECEIPTS BE APPLIED WAS ALSO REJECTED BY THE CIT(A) ON THE GROU ND THAT THE AUDITOR AFTER SPECIAL AUDIT HAD ALREADY DRAWN THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE AND HIS RELATED CONCERNS FROM WHICH THE ACTUAL INCOME COULD BE WORKED OUT. HE FURTHER HELD THAT RELIANCE UPON BY THE ASSESSEE ON VARIO US JUDICIAL DECISIONS WHEREIN THE SEIZED DOCUMENTS WERE NOT SUBJECTED TO SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT AND NET PROFIT RATE WAS APPLIED WAS AT VARIANCE WITH THE CASE OF THE ASSESSEE WHERE SPECIAL AUDIT HAD BEEN CARRIED OUT. 1 9 . THE NEXT CONTENTION OF ASSESSEE THAT THE ADDITION IN TOTALITY COULD NOT EXCEED THE HIGHEST PEAK WORKED OUT FROM THE DIARIES OF ALL CONCERNS I.E. RS.5.28 20 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. CRORES WAS ALSO REJECTED BY THE CIT(A) BEING NOT CORRECT AND TRUE WHERE THE DECODING HAD BEEN CARRIED OUT AND CONCERN - WISE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET HAD BEEN PREPARED BY THE AUDITOR FOR THE ASSESSEE AND HIS RELATED CONCERNS. FURTHER THE ADDITIONS WERE MADE ON ACCOUNT OF STATUTORY DISALLOWANCES AS PER THE PROVISIONS OF THE ACT TO ARRIVE AT THE CORRECT AND REAL INCOME. THE CIT(A) FURTHER HELD THAT SINCE THE SEIZED MATERIALS WERE HELD TO BE BOOKS OF ACCOUNT TO WHICH THE DEEMING PROVISIONS AS WELL AS SECTION 40A(3) / 40(A)(IA) OF THE ACT WERE APPLICABLE. REFERENCE WAS MADE TO THE PROVISIONS OF SECTION 142(2A) OF THE ACT AND POINTED OUT THAT BECAUSE OF COMPLEXITIES OF ACCOUNTS OF THE ASSESSEE THE ASSESSING OFFICER IS EMPOWERED TO DIRECT THE ASSESSEE TO GET THE ACCOUNTS AUDITED AND THE ASSESSING OFFICER HAD FOLLOWED THE PROCEDURE WHICH WAS BY MAKING PROPOSAL FOR REFERENCE TO SPECIAL AUDIT WHICH WAS DULY APPROVED BY THE CIT CENTRAL PUNE THEN SAME SHOULD NOT BE AGITATED AS GROUND BEFORE THE CIT(A). HE FURTHER HELD THAT THE REFERENCE MADE FOR SPECIAL AUDIT BY THE ASSESSING OFFICER WAS IN ACC ORDANCE WITH THE PROVISIONS OF THE ACT. IN VIEW THEREOF THE PLEA OF ASSESSEE AGAINST SPECIAL AUDIT AND THE COMPUTATION OF INCOME ON THE BASIS OF SPECIAL AUDIT WAS REJECTED BY THE CIT(A). THE SECOND PLEA AGAINST THE DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT ACCORDINGLY WAS REJECTED SINCE THE ENTRIES IN THE SEIZED DIARIES WERE HELD TO BE ENTRIES IN BOOKS OF ACCOUNT. 20 . THE CIT(A) THEREAFTER ALSO DEALT WITH THE INDIVIDUAL ADDITIONS MADE UNDER SECTION 68 / 69C OF THE ACT AND FOLLOWING THE SAME LINE OF REASONING UPHELD THE ORDER OF ASSESSING OFFICER VIDE PARA 7 OF THE APPELLATE ORDER. 2 1. THE NEXT PLEA OF THE ASSESSEE AGAINST NEGATIVE CASH BALANCE WHICH WAS WORKED OUT ON CASH PEAK BASIS WAS CONSIDERED BY THE CIT(A) AND IT WAS NOTED 21 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. THAT THE ASSESSING OFFICER HAD MADE THE ADDITION OF HIGHEST PEAK OF NEGATIVE CASH BALANCE CONCERN - WISE AND THE SAID FIGURE HAD NOT BEEN ADOP TED FROM THE REPORT OF SPECIAL AUDITOR. THE PLEA OF ASSESSEE THAT THE FUNDS WERE UTILIZED INTERSE WAS ACCEPTED WHEREIN HE OBSERVED THAT THE ASSESSEE HAD DEMONSTRATED THAT POSITIVE BALANCE OF ONE CONCERN WAS UTILIZED IN OTHER CONCERNS WHERE THERE WAS NEG ATIVE BALANCE IN CAS H INFLOW AND OUTFLOW OF THE FUNDS OF GROUP WAS TAKEN AS A WHOLE. THE ASSESSEE HAD POINTED OUT THAT MAXIMUM CASH DEFICIT WAS WORKED OUT TO RS.98.63 LAKHS AND THE YEAR - WISE AMOUNT WAS OFFERED AS UNDISCLOSED INCOME IN HIS HANDS. THE CIT (A) ACCEPTING THE PLEA OF ASSESSEE HELD THAT THE SAID CASH DEFICIT OF RS.98.63 LAKHS IS TO BE ASSESSED IN ASSESSMENT YEAR 2003 - 04 AT RS.12 02 816/ - IN ASSESSMENT YEAR 2004 - 05 AT RS.38 027/ - AND IN ASSESSMENT YEAR 2005 - 06 AT RS.86 22 715/ - . THE CIT(A) FUR THER HELD THAT NO SEPARATE ADDITION WAS WARRANTED IN OTHER GROUP CONCERNS ON STANDALONE BASIS ON ACCOUNT OF NEGATIVE CASH BALANCE UNDER SECTION 69C OF THE ACT AND HE HELD THAT THE ADDITION THEREIN WOULD HAVE TO BE DELETED. THE CIT(A) ALSO DELETED THE ADDI TION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXTRA FINANCE I.E. EF UNDER SECTION 68 OF THE ACT OF RS.33 69 322/ - . THE CIT(A) HELD THAT THE ASSESSING OFFICER HAD NOT CARRIED OUT ANY VERIFICATION WITH RESPECT TO OBSERVATIONS OF AUDITOR OF THE AFORESAID LOANS TREATED AS EXTRA FINANCE BY THE AUDITORS. HE NOTED THAT THE AUDITOR HAD ALREADY CONSIDERED CASES WHE RE LOANS COULD NOT BE IDENTIFIED AND THOSE SHOWN IN THE AUDITED BOOKS OF ACCOUNT. THE CIT(A) WAS OF THE VIEW THAT WHERE THE ISSUE HAS BEEN EXAMINED BY THE SPECIAL AUDITOR THERE IS NO MERIT IN MAKING ANY OTHER ADDITION AND THE SAME WAS DELETED ; BUT THE ADDITION MADE ON ACCOUNT OF BC TRANSACTION TO BE BUSINESS RECEIPTS WAS UPHELD BY THE CIT(A). 22 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. 2 2 . THE CIT(A) IN RESPECT OF ADDITION MADE ON ACCOUNT OF HOUSEHOLD WITHDRAWALS HELD THAT THE OBSERVATIONS MADE BY THE ASSESSING OFFICER WERE GENERAL IN NATURE AND THE ASSESSING OFFICER HAD FAILED TO BRING ANY MATERIAL OR EVIDENCE EITHER DIRECT OR SUBSTANTIAL S UGGESTING INCURRING OF UNRECORDED EXPENDITURE ON HOUSEHOLD. HE FURTHER OBSERVED THAT THE ADDITION COULD BE MADE ONLY ON THE BASIS OF INCRIMINATING EVIDENCE WITH DIRECT OR SUBSTANTIAL EVIDENCE FOUND IN THE COURSE OF SEARCH AND IN THE ABSENCE OF THE SAME T HERE WA S NO MERIT IN MAKING ANY SUCH ADDITION AND THE SAME WAS CANCELLED. 2 3 . THE NEXT ADDITION MADE IN THE HANDS OF ASSESSEE WAS THE PROTECTIVE ADDITION I.E. ADDITION OF RS.4.74 CRORES WHICH RELATED TO THE OTHER GROUP CONCERNS. THE PLEA OF ASSESSEE T HAT THE SAME NEEDS TO BE DELETED IN THE HANDS OF ASSESSEE SINCE SUBSTANTIVE ADDITION HAS BEEN ASSESSED IN THE HANDS OF RESPECTIVE HANDS BY THE ASSESSING OFFICER WAS ACCEPTED BY THE CIT(A) AND HE OBSERVED THAT WHERE SPECIFIC ASSESSEES HAD BEEN LOCATED BY T HE ASSESSING OFFICER AND THE SPECIAL AUDITOR STATED THAT THERE WAS NO NEED FOR PROTECTIVE ADDITION. HOWEVER BALANCE ADDITION IS TO BE CONFIRMED ON SUBSTANTIVE BASIS AS DETAILS HAD NOT BEEN SUBMITTED BY THE ASSESSEE. THE CIT(A) NOTED FROM THE DETAILS OF TOTAL ADDITION MADE IN THE CASE OF GROUP CONCERNS THAT SUM OF RS.3 37 55 687/ - WAS MADE IN THE HANDS OF GROUP CONCERNS WHEREAS THE ASSESSING OFFICER ON PROTECTIVE BASIS HAD ADDED SUM OF RS.4 74 51 951/ - . THE CIT(A) WAS OF THE VIEW THAT THE DIFFERENCE OF RS.1 36 96 264/ - WHICH THE ASSESSEE CLAIMS TO RELATE TO JAIN ASHAPURI DEVELOPERS AND M/S. VASTU PROMOTERS & BUILDERS FOR ASSESSMENT YEAR 2007 - 08 NEEDED VERIFICATION BY THE ASSESSING OFFICER. AS PER THE ASSESSING OFFICER NO SUBSTANTIVE ADDITION WAS MAD E IN THOSE HANDS. HOWEVER PROTECTIVE ADDITION WAS MADE IN THE HANDS OF ASSESSEE. THE CIT(A) HELD THAT PROTECTIVE ADDITION TO THE EXTENT OF RS.3.37 23 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. CRORES IS TO BE VACATED IN THE HANDS OF ASSESSEE. HOWEVER FOR THE REMAINING AMOUNT I.E. RS.1.36 CRORES PROTECTIVE ADDITION WAS LIABLE TO BE UPHELD ON SUBSTANTIVE BASIS SUBJECT TO VERIFICATION OF TOTAL ADDITION IN THE CASE OF JAIN ASHAPURI DEVELOPERS AND M/S. VASTU PROMOTERS & BUILDERS FOR ASSESSMENT YEAR 2007 - 08. 2 4 . THE ASSESSEE IS IN APPEAL AGAINST THE O RDER OF CIT(A). 2 5 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT CONSEQUENT TO SEARCH AT THE RESIDENCE OF ASSESSEE DIARIES MARKED AS A1 TO A7 WERE RECOVERED. THE OTHER DIARIES WERE RECOVERED FROM THE OFFICE PREMISES OF ASSESSE E UNDER SURVEY PROCEEDINGS AND TOTAL OF 16 DIARIES WERE RECOVERED. HE REFERRED TO THE SAMPLE COPIES OF DIARIES WHICH ARE PLACED AT PAGES 1 TO 20 OF THE PAPER BOOK AND POINTED OUT THAT ENTRIES WERE IN CODED FORM I.E. CA REPRESENTED CASH GIVEN AND CHH REPRE SENTED CHECK RECEIVED. HE ALSO POINTED OUT THAT FIGURES WERE IN CODED FORM AND THE ASSESSEE HAS ACCEPTED THE DECODING MADE BY THE AUTHORITIES BELOW. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT CH I.E. CHEQUE ENTRIES WE RE IN THE BOOKS OF ACCOUNT AND THE PAYMENTS WHICH WERE MADE BY THE ASSESSEE WERE BOTH IN CASH/CHEQUE HE FURTHER REFERRED TO THE ENTRIES IN THE DIARIES AND STRESSED THAT THE DIARIES WERE INCOMPLETE NOTINGS OF INFLOW AND OUTFLOW. HE STRESSED THAT THE FIRS T OBJECTION OF ASSESSEE IN THIS REGARD WAS THAT THESE WERE NOT BOOKS OF ACCOUNT AND HENCE FROM THE SAID DIARIES THE INCOME AND EXPENDITURE COULD NOT BE WORKED OUT. HE FURTHER REFERRED TO THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT OF BHARAT J AIN AT PAGE 43 OF THE PAPER BOOK WHEREIN DISCLOSURE OF RS.50 LAKHS WAS MADE IN THE HANDS OF VARIOUS CONCERNS FROM OCTOBER 2003 TO OCTOBER 2006. HE FURTHER POINTED OUT THAT ADDITIONAL INCOME 24 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. WAS OFFERED IN THE HANDS OF ASSESSEE IN VARIOUS YEARS BUT IN T HE RETURN OF INCOME THE ASSESSEE CHANGED ITS STAND AND OFFERED ONLY ADDITIONAL INCOME OF RS.34 50 000/ - . OUR ATTENTION WAS DRAWN TO THE CHART PLACED AT PAGE 48 OF THE PAPER BOOK AND IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSE SSEE THAT THE SAME WAS ON ACCOUNT OF LOSSES IN THE RESPECTIVE YEARS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THEREAFTER REFERRED TO THE SUMMARY OF ADDITIONS WHICH ARE PLACED AT PAGE 77 OF THE PAPER BOOK AND ALSO YEAR - WISE BIFURCATION OF RE CEIPTS WHICH IS PLACED AT PAGE 78 OF THE PAPER BOOK. HE FURTHER POINTED OUT THAT THERE WAS NO DISPUTE WITH RESPECT TO RECEIPTS WORKED OUT AT RS.28.13 CRORES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE SPECIAL AUDIT UNDER SECTI ON 142(2A) OF THE ACT AND POINTED OUT THAT THE SAME WAS CONDUCTED IN THREE CASES ONLY I.E. JAIN ASHAPURI DEVELOPERS JAIN ASHAPURI ESTATE AND BHARAT B. JAIN I.E. ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT VIDE LETTER PLACED AT PAGES 57 AND 58 OF THE PAPER BOOK THE AUDITOR WAS ASKED TO PREPARE THE BOOKS OF ACCOUNT . THE RESULT OF SPECIAL AUDIT WAS WORKING OF RECEIPTS AND PAYMENTS WHICH WORKED OUT TO LOSS. HE FURTHER POINTED OUT THAT THE MAIN ADDITION WAS UNDER SECTION 40A(3) / 40(A)(IA) AND 68 OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERR ED TO THE ORDER OF ASSESSING OFFICER AT PAGE 10 WHEREIN EXPLANATION OF ASSESSEE OF BULK INVESTMENTS WAS REJECTED AND THE AMOUNT WAS ADDED UNDER SECTION 68 OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HERE POINTED OUT THAT BIFURCATIO N OF RECEIPTS PERSON - WISE WAS NOT DISPUTED. I N THE PROCEEDINGS WHICH CONTINUED ON THE NEXT DATE OF HEARING THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT THE SEIZED DIARIES WERE NOT BOOKS OF ACCOUNT. THE LEARNED AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE HEREIN REFERRED TO THE OBSERVATIONS OF THE CIT(A) AT PAGES 72 TO 74 AND POINTED OUT THAT THE ADDITION ON ACCOUNT OF 25 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. CASH PEAK BASIS WAS NOT APPEALED AGAINST BY THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE S TRESSED THAT REFERENCE MADE TO THE AUDITOR WAS BAD WHEREIN THE ASSESSING OFFICER ASKED THE AUDITOR TO PREPARE BOOKS OF ACCOUNT THEN CARR Y OUT THE AUDIT. HE STRESSED THAT THE SPE CIAL AUDITOR CANNOT DO BOTH I.E. PREPARING THE BOOKS OF ACCOUNT AND AUDITING THE SAME. HE REFERRED TO THE ORDER OF CIT(A) AND POINTED OUT THAT BEFORE THE CIT(A) THE PLEA OF ASSESSEE WAS THAT DIARIES WERE NOT BOOKS OF ACCOUNT SINCE THEY WERE NOT COMPLETE AND THERE WERE NO OPENING AND CLOSING BALANCES AVAILABLE AND THE DIARIES COU LD NOT DETERMINE THE PROFITS YEARLY BUT ONLY HAD THE ENTRIES OF INFLOW AND OUTFLOW OF FUNDS. HE REFERRED TO THE OBSERVATIONS OF CIT(A) AND POINTED OUT THAT THERE WAS NO MERIT IN THE STAND OF CIT(A) IN THIS REGARD. 26. WITH REGARD TO THE ADDITIONS MADE UNDER SECTION 40A(3) 40(A)(IA) 68 AND 69C OF THE ACT HE POINTED OUT THAT THE SAID PROVISIONS WERE APPLIED TO PAYMENTS WHICH WERE ADMITTEDLY OUTSIDE THE BOOKS OF ACCOUNT . HE STRESSED THAT DIFFERENT PROVISIONS OF THE ACT COULD NOT BE SUBJECTED TO SUCH E NTRIES WHICH WERE NOT PART OF BOOKS OF ACCOUNT. HE FURTHER REFERRED TO THE TDR PAYMENTS WHICH WERE NOT ALLOWED IN THE HANDS OF ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THUS POINTED OUT THAT IN VIEW OF COMPLEXITY OF ENTRIES IT WA S IMPRESSED UPON THE AUTHORITIES THAT REASONABLE APPROACH IS TO BE APPLIED AND INCOME BE ESTIMATED IN THE HANDS OF ASSESSEE. HE STRESSED THAT BY APPLYING THE PEAK THEORY TOTAL RECEIPTS WHICH WERE WORKED OUT IN THE HANDS OF ASSESSEE WERE RS.5.93 CRORES AN D REASONABLE PERCENTAGE OF GP BE APPLIED ON THE SAME. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO REFERRED TO THE ORDER IN THE CASE OF ONE OF THE GROUP CONCERNS M/S. NAMO PROMOTERS & DEVELOPERS WHERE THE ADDITION WAS MADE BY APPLYING GP R ATE OF 20% AND THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT WAS ALSO ALLOWED. HOWEVER NEITHER 26 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. THE ASSESSEE NOR THE REVENUE IS IN APPEAL AGAINST THE SAME. ANOTHER POINT WHICH WAS POINTED OUT BY THE ASSESSEE WAS ADDITION UNDER SECTION 68 OF THE ACT AT RS.10.53 CRORES . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HEREIN POINTED OUT THAT IN THE RETURN OF INCOME THE ASSESSEE HAD APPLIED PROFIT OF RS.12.83 CRORES. HE ALSO POINTED OUT THAT THE ASSESSEE HAS NOT RAISED ANY ISSUE IN THE GROUNDS OF APPEAL AGAINST THE ADDITION OF NEGATIVE CASH IN THE HANDS OF ASSESSEE. 2 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REFERRING TO THE ORDERS OF AUTHORITIES BELOW POINTED OUT THAT THE CONTENTION OF ASSESSEE OVERALL HAS BEEN THAT SEIZED DIARIES WERE NOT ACTUA L BOOKS OF ACCOUNT. THE SECOND CONTENTION OF ASSESSEE WAS THAT THE ASSESSING OFFICER HAD ERRED IN MAKING REFERENCE TO SPECIAL AUDITOR ON THE BASIS OF INCOMPLETE ENTRIES. FURTHER THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAD RELIED ON THE OR DER OF CIT(A) IN THE CASE OF M/S. NAMO PROMOTERS & DEVELOPERS BY THE CIT(A) . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE PLEA OF ASSESSEE WAS THAT AS AGAINST TOTAL RECEIPTS OF RS.28 CRORES TOTAL INCOME HAS BEEN ASSESSED B Y THE ASSESSING OFFICER AT RS.75 CRORES APPROXIMATELY. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO POINTED OUT THAT NO UNRECORDED CASH AND JEWELLERY WAS FOUND. IN REPLY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REFERRED TO THE OBSERVATIONS OF THE CIT(A) WHEREIN IT HAS BEEN ESTABLISHED THAT SEIZED DOCUMENTS WERE BOOKS OF ACCOUNT AND NOT PRIVATE RECORDS. HE REFERRED TO PAGE 55 OF THE PAPER BOOK WHEREIN IN THE SUBMISSIONS MADE BEFORE THE CIT(A) THE ASSESSEE CLAIMS THAT HE H AD COOPERATED TO THE SPECIAL AUDIT. HE FURTHER STATED THAT DIARIES WERE NOTHING BUT FORMAL SET OF BOOKS OF ACCOUNT WHICH WERE RECORDING THE ENTRIES OUTSIDE THE BOOKS OF ACCOUNT. HENCE THE PRESUMPTION UNDER SECTION 132(4A) OF THE ACT 2 7 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. WAS TO BE APPLIED TH AT THE DIARIES FOUND FROM THE ASSESSEE BELONGED TO THE ASSESSEE. THEN TAKING THE SECOND ISSUE WHETHER REFERENCE WAS CORRECT OR NOT THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE RELYING ON THE OBSERVATIONS OF THE CIT(A) IN PARA 3.16 AT PAGE 51 OF THE APPELLATE ORDER RELIED ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF CALCUTTA IN JCIT VS. ITC LTD. (1999) 239 ITR 921 (CAL). HE FURTHER REFERRED TO THE PAGE 55 OF PAPER BOOK - I AND POINTED OUT THAT WHERE THE ASSESSEE HAD ACCEPTED TO THE SPECI AL AUDIT THEN NO OBJECTION COULD BE RAISED TO THE SPECIAL AUDIT. HE FURTHER POINTED OUT THAT THE PRACTICE WAS THAT THE AUDITOR WOULD DETERMINE THE PROFIT ON THE BASIS OF ENTRIES IN THE SEIZED MATERIAL AND THE SAME HAD TO BE APPLIED TO THE PERSON FROM WH OSE POSSESSION THE DOCUMENT WAS FOUND. REFERRING TO THE ORDER OF CIT(A) IN THE CASE OF M/S. NAMO PROMOTERS AND BUILDERS WHERE THE PROFIT ON INCOME AT 20% WAS APPLIED THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE SAME WAS D ONE WHEN THERE WERE NO OTHER ADDITIONS UNDER SECTION 68 40A(3) AND 40(A)(IA) OF THE ACT. WITH REGARD TO APPLICATION OF PROVISIONS OF SECTION 68 AND 69C OF THE ACT THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT WHEN THE PRESUMPT ION UNDER SECTION 132(4A) OF THE ACT WAS APPLIED THEN THE SAID PROVISIONS COULD BE INVOKED. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN DAYA C HAN D VS. CIT (2001) 250 ITR 327 (DEL). HE REFERRED TO THE PROVISIONS OF SECTION 153A OF THE ACT AND POINTED OUT THAT SECTION ITSELF PROVIDED THAT SO OTHERWISE ALL OTHER PROVISIONS OF THE ACT WOULD APPLY TO IT. HE STRESSED THAT THE ASSESSMENT PROCEEDINGS UNDER SECTION 153A OF THE ACT WERE LI KE REGULAR ASSESSMENT PROCEEDINGS. HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN SURENDRA M. KHANDAR VS. ACIT (SUPRA) REFERRED BY THE CIT(A) DAYA CHAND VS. CIT (SUPRA) AND THE HONBLE HIGH COURT OF GUJARAT IN UHSAKANT N. P ATEL VS. CIT (2006) 282 ITR 553 (GUJ). THE NEXT 28 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. REASONING OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE WAS IN RESPECT OF WHAT CONSTITUTE BOOKS OF ACCOUNT. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FURTHER POINTED OUT THAT WHER E THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS ACCEPTED THE WORKING OF RS.28.13 CRORES I.E. AT PAGE 77 OF THE PAPER BOOK THEN RS.7.74 CRORES SHOULD BE ADDED UNDER SECTION 68 OF THE ACT. 2 8 . COMING TO THE NEXT ISSUE OF CASH INTRODUCED BY T HE PARTNERS. HE POINTED OUT THAT THERE IS NO MERIT IN THE PLEA OF ASSESSEE THAT THE SAME HAS BEEN OFFERED TO TAX BY THE OTHER PARTNER I.E. HASMUKH JAIN . OUR ATTENTION WAS DRAWN TO PAGE 326 OF THE PAPER BOOK I.E. ASSESSMENT ORDER IN THE CASE OF HASMUKH JA IN AND POINTED OUT THAT THE ADDITION WAS MADE ON THE BASIS OF FOUR SMALL POCKET DIARIES FOUND DURING THE COURSE OF SEARCH WHEREIN HE DECLARED ADDITIONAL INCOME OF RS.2 CRORES. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT HE WA S BROTHER OF ASSESSEE BUT WHAT WAS DECLARED BY HIM WAS INDEPENDENT OF SEIZED MATERIAL IN THE CASE OF ASSESSEE. 29 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN REJOINDER STRESSED THAT AGAINST CERTAIN SMALL ADDITIONS NO GROUNDS OF APPEAL HA VE BEEN RAISED BY THE ASSESSEE. HOWEVER THE ASSESSEE HAS STRESSED THAT THERE IS NO BASIS FOR MAKING THE ADDITION AS NO ASSETS WERE FOUND IN RESPECT OF ASSESSMENT YEARS 2003 - 04 TO 2007 - 08. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OU T THAT THERE IS NO MERIT IN MAKING ANY ADDITION ON ACCOUNT OF PROTECTIVE BASIS IN THE HANDS OF ASSESSEE SINCE SUBSTANTIVE ADDITION HAS TO BE ADDED IN THE RESPECTIVE HANDS. THEREAFTER HE WENT THROUGH THE GROUNDS OF APPEAL OF EACH OF THE CONCERNS EXCEPT FO R THE GROUND OF APPEAL OF 80IB(10) OF THE ACT IN THE CASE OF JAIN ASHAPURI DEVELOPERS. THE LEARNED AUTHORIZED 29 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUES WERE SAME EXCEPT IN THE CASE OF BHARAT B. JAIN HUF WHO WAS THE PROPRIETOR OF RITESH DEVELOPERS WHEREIN PROTECTIVE ADDITION WAS MADE IN ASSESSMENT YEARS 2003 - 04 AND 2004 - 05 BUT IN SOME OF THE CASES THE ADDITIONS WERE ALSO MADE ON ACCOUNT OF TD R EXPENSES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS ALSO FILED A LETTER WITHDRAWING THE GROUND OF APPEAL WITH REGARD TO ALLOWANCE OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT IN THE CASE OF JAIN ASHAPURI DEVELOPERS IN ITA NOS.1396/PUN/ 2014 & 1397/PUN/2014 FOR ASSESSMENT YEARS 2005 - 06 & 2006 - 07 . 3 0 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE FACTS OF THE PRESENT CASE SEARCH AND SEIZURE OPERATIONS AND SURVEY PROCEEDINGS WERE CARRIED OUT AT THE PREMISES OF ASSES SEE AND HIS CONNECTED ENTITIES ON 10.08.2006. DURING THE COURSE OF SEARCH AND SURVEY ACTION VARIOUS LOOSE DOCUMENTS WERE FOUND AND SEIZED. FURTHER DIARIES IN BUNDLE NOS.1 - 7 FOLLOWING SAMVAT YEAR I.E. DIWALI TO DIWALI (NOVEMBER TO NOVEMBER) OF EACH YEAR WERE FOUND AND SEIZED. THE SAID DIARIES HAD NOTINGS FROM THE YEAR 2002 TO 2006. THE ASSESSEE DURING THE COURSE OF RECORDING OF STATEMENT UNDER SECTION 132(4) OF THE ACT ADMITTED THAT THE SAME WERE WRITTEN IN HIS OWN HAND WRITING. IT WAS FURTHER POINTED OUT BY HIM THAT THE DIARIES CONTAINED THE DETAILS OF TRANSACTIONS OF VARIOUS CONCERNS. THE SAID DIARIES WERE WRITTEN IN CODED MANNER WHEREIN FIGURES WERE WRITTEN IN CODED MANNER ALSO NOTINGS IN DIARIES HAD NARRATION BOTH OF ENTRIES THROUGH CHEQUE AND C ASH. IN RESPECT OF CHEQUE ENTRIES CH WAS WRITTEN AND IN RESPECT OF CASH ENTRIES CA WAS WRITTEN. THE ASSESSEE AGREED TO DECODING OF SAID FIGURES IN THE STATEMENT GIVEN UNDER SECTION 131(1)(B) OF THE ACT ON 06.10.2006. THE PLEA OF ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT SEIZED DIARIES WERE HIS PRIVATE RECORDS WHICH WERE MAINTAINED IN ORDER TO HAVE 30 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. AN IDEA OF INFLOW / RECEIPT AND OUTFLOW / PAYMENT OF THE FUNDS OF GROUP CONCERNS. IT MAY BE POINTED OUT HEREIN ITSELF THAT THE SAID NOTINGS IN THE S AID DIARIES RELATED NOT ONLY TO THE ASSESSEE BUT ALSO TO VARIOUS CONCERNS IN WHICH HE WAS PARTNER. THE ASSESSEE DECLARED SUM OF RS.50 LAKHS AS ADDITIONAL INCOME DURING THE COURSE OF SEARCH IN HIS HANDS BUT WHILE FILING THE RETURN OF INCOME IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT THE ASSESSEE DECLARED ADDITIONAL INCOME OF RS.34 50 000/ - IN HIS HANDS IN DIFFERENT ASSESSMENT YEARS. THERE IS NO DISPUTE TO THE SAID DECLARATION BY THE ASSESSEE IN HIS HANDS. THE ASSESSING OFFICER ON THE OTHER HAND WAS OF THE VIEW THAT THE SAID DIARIES HAD MOST OF CHARACTERISTICS OF SET OF BOOKS OF ACCOUNT WHEREIN THE ENTRIES HAD REFERENCE TO DIFFERENT PAGES DETAILS WITH DATES AND THE AMOUNT WITH REFERENCE TO PAGE NUMBERS. AS PER THE ASSESSING OFFICER THE ASSESS EE HAD METICULOUSLY MAINTAINED PARALLEL BOOKS OF ACCOUNT IN THE FORM OF DIARIES FOR GROUP CONCERNS WHEREIN THE ENTRIES WERE RECORDED OF TRANSACTIONS WHICH WERE OUTSIDE THE REGULAR BOOKS OF ACCOUNT. IN VIEW OF THE MAGNITUDE OF NUMBER OF ENTRIES OF VARIOUS YEARS AND VARIOUS ENTITIES INVOLVED COUPLED WITH COMPLEXITY OF DECODING OF ENTRIES IN THE SEIZED DIARIES RECOMMENDATION FOR SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT WAS MADE IN THE CASE OF ASSESSEE. THE TERMS OF REFERENCE TO SPECIAL AUDITOR WERE A S UNDER: - TERMS OF REFERENCE 1 . TO OBTAIN AN EXPLANATION FOR EACH AND EVERY ENTRY RECORDED IN THE SEIZED RECORD (COPY OF WHICH IS MADE AVAILABLE) AND TO SEGREGATE THEM ENTITY WISE AND YEAR WISE AND TO SEE WHETHER THE SAME IS RECORDED IN THE REGULAR BOOKS. 2 . PREPARE BOOKS OF ACCOUNTS OF THE ENTITIES INCORPORATING THE ENTRIES IN THE SEIZED RECORDS. 3 . TO SEE WHETHER THE RECEIPT RECORDED IN THE SEIZED RECORD IS A TAXABLE RECEIPT. 4 . TO SEE WHETHER THE PAYMENT RECORDED IN THE SEIZED RECORD IS AN ALLOWABLE EXPENDITURE . 31 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. 5 . PREPARE A PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR EACH YEAR TAKING INTO CONSIDERATION THE ENTRIES RECORDED IN THE SEIZED RECORDS. 6 . PREPARE A YEAR WISE CASH FLOW STATEMENT PERTAINING TO EACH ENTITY AND TO SEE WHETHER THERE IS ANY SHORTAGE OF CASH O N ANY PARTICULAR DATE. 7 . TO SEE WHETHER THERE WAS ANY INTRODUCTION OF UNDISCLOSED INCOME BY THE PARTNERS IN THE FIRMS TO CARRY OUT THE CASH TRANSACTIONS RECORDED IN THE SEIZED RECORDS AND NOT RECORDED IN THE REGULAR BOOKS. 8 . TO IDENTIFY CASH LOANS AND REPAYM ENT OF CASH LOANS IF ANY. 9 . TO IDENTIFY AND QUANTIFY INCOME CHARGEABLE TO TAX U /S. 68/69 OF THE I.T. ACT 1961. 10 . PREPARE A TAX AUDIT REPORT IN PRESCRIBED PROFORMA FOR EACH YEAR SEPARATELY QUANTIFYING THE DISALLOWANCE AS SPECIFIED IN THE AUDIT REPORT AS 40( IA) 40A(3) AND 40A(2)(B) ETC. AND IDENTIFYING VIOLATIONS SUCH AS TDS VIOLATIONS VIOLATIONS OF PROVISIONS OF SECTION 269SS 269T ETC. IF ANY. 3 1 . THE FIRST ISSUE RAISED BY THE ASSESSEE BEFORE US IS IN RELATION TO THE AFORESAID REFERENCE MADE BY THE ASS ESSING OFFICER FOR SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT. IT IS THE CASE OF ASSESSEE BEFORE US THAT THE ASSESSING OFFICER HAS NOT MADE REFERENCE FOR SPECIAL AUDIT BUT HAS ON THE OTHER HAND DIRECTED THE SPECIAL AUDITOR TO PREPARE THE BOOKS OF ACC OUNT OF ENTITIES AND PREPARE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR EACH YEAR AND THEREAFTER PREPARE AUDIT REPORT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS VEHEMENTLY ARGUED THAT THE SAID REFERENCE MADE BY THE ASSESSING OFFICER I S BEYOND THE SCOPE OF SECTION 142(2A) OF THE ACT WHEREIN IT IS PROVIDED THAT IN VIEW OF THE COMPLEXITY OF ENTRIES IN THE BOOKS OF ACCOUNT THE ASSESSING OFFICER IN GIVEN CIRCUMSTANCES MAY MAKE REFERENCE FOR CONDUCTING SPECIAL AUDIT OF THE SAID BOOKS OF ACCOUNT. THE NEXT CONTENTION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD IS THAT THE DIARIES SEIZED FROM THE ASSESSEE WERE NOT BOOKS OF ACCOUNT SINCE IT DID NOT HAVE ANY OPENING AND CLOSING BALANCE ; IT WAS MERE RECORDING OF TRANSACTIONS OF VARIOUS ENTITIES VIS - - VIS INFLOW AND OUTFLOW OF CASH AND THE CHEQUE ENTRIES AND HE ADMITTED THAT THE SAID DIARIES WERE MAINTAINED FOR THE YEARS 2002 TO 2006. 32 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. BUT THE PERUSAL OF THE SA ME WOULD REFLECT THAT ON NONE OF THE DATES CASH OR CHEQUE BALANCE WAS DRAWN IN ORDER TO CALL IT EVEN A DAY BOOK. HE FURTHER HA D STRESSED THAT THE AUDITOR WHO WAS DIRECTED TO IDENTIFY THE ENTRIES AND SEGREGATE THEM ENTITY WISE AND PREPARE THE BOOKS OF ACCO UNT AND THEREAFTER PREPARE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET CANNOT BE ASKED TO EVEN TAX AUDIT THE SAME. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND EVEN BEFORE US HAS POINTED OUT THAT THE PEAK WAS WORK ED OUT FROM THE ENTRIES IN DIARIES OF ALL CONCERNS AT RS.5.28 CRORES AND THE SAME WAS NOT ACCEPTED. 3 2 . ANOTHER ASPECT WHICH WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT REFERENCE FOR SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT WAS MADE IN THREE CASES ONLY I.E. JAIN ASHAPURI DEVELOPERS JAIN ASHAPURI ESTATES AND BHARA T B. JAIN I.E. ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS ALSO DRAWN OUR ATTENTION TO THE RESULTS OF SPECIAL AUDIT OF WORKING OF RECEIPTS AND PAYMENTS WHICH WORKED OUT TO LOSS. THE ASSESSING OFFICER ON THE OTHER HAND HAD MADE A DDITION UNDER SECTION 40A(3) / 40(IA) AND 68 / 69C OF THE ACT AGAINST WHICH THE ASSESSEE IS AGGRIEVED. THE CIT(A) HAS UPHELD THE REFERENCE MADE BY THE ASSESSING OFFICER AND THE SPECIAL AUDIT CARRIED OUT BY THE AUDITOR. 3 3 . THE ISSUE ARISING IN THE PRESE NT APPEAL IS IN RELATION TO THE PROVISIONS OF SECTION 142(2A) OF THE ACT I.E. LOOKING AT THE NATURE AND COMPLEXITY OF THE ACCOUNTS AND VOLUME AND MULTIPLICITY OF TRANSACTIONS AND INTEREST OF REVENUE THEN THE PROCEDURE TO BE FOLLOWED BY THE ASSESSING OFFIC ER IN MAKING REFERENCE FOR SPECIAL AUDIT AND APPLYING THE REPORT OF SPECIAL AUDITOR FOR CARRYING OUT THE 33 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. ASSESSMENT IN THE CASE OF CONCERNED ASSESSEE. SECTION 142(2A) OF THE ACT READS AS UNDER: - 142.. (2A) IF AT ANY STAGE OF THE PROCEEDINGS BEFORE HIM THE ASSESSING OFFICER HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE AND THE INTERESTS OF THE REVENUE IS OF THE OPINION THAT IT IS NECESSARY SO TO DO HE MAY WITH THE PREVIOUS APPROVAL OF THE CHIEF COMMISSIONER OR COMMIS SIONER DIRECT THE ASSESSEE TO GET THE ACCOUNTS AUDITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB - SECTION (2) OF SECTION 288 NOMINATED BY THE CHIEF COMMISSIONER OR COMMISSIONER IN THIS BEHALF AND TO FURNISH A REPORT OF SUCH AUDIT IN THE PRE SCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED AND SUCH OTHER PARTICULARS AS THE ASSESSING OFFICER MAY REQUIRE : PROVIDED THAT THE ASSESSING OFFICER SHALL NOT DIRECT THE ASSESSEE TO GET THE ACCOUNTS SO AUDITED UNLESS THE ASSESSEE HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD . 3 4 . AS PER PROVISIONS OF SAID SECTION IF AT ANY STAGE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER IN VIEW OF THE NATURE AND COMPLEXITY OF THE ACCOUNTS ITS VOLUME DOUBTS ABOUT CORRECTNESS OF THE ACCOUNTS MULTIPLICITY OF TRANSACTIONS IN THE ACCOUNTS OR SPECIALIZED NATURE OF BUSINESS ACTIVITY OF ASSESSEE AND THE INTERESTS OF REVENUE IS OF THE OPINION THAT IT IS NECESSARY TO DO SO HE MAY WITH PREVIOUS APPROVAL OF PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER AS THE CASE MAY BE DIRECT THE ASSESSEE TO GET THE ACCOUNTS AUDITED BY AN ACCOUNTANT AND TO FURNISH A REPORT OF SUCH DATA IN THE PRESC RIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED AND SUCH OTHER PARTICULARS AS MAY BE REQUIRED. THE PROVISO THEREUNDER STIPULATES THAT THE ASSESSING OFFICER SHALL NOT DIRECT THE ASSESSEE TO GET TH E ACCOUNTS SO AUDITED UNLESS THE ASSESSEE HAS BEEN GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. 3 5 . SUB - SECTION (2B) THEREUNDER PROVIDES THAT THE PROVISIONS OF SUB - SECTION (2A) SHALL HAVE EFFECT NOTWITHSTANDING THAT THE ACCOUNTS OF THE ASSESSEE HAVE BEEN AUDITED UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE. SUB - SECTION (2C) 34 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. PROVIDES THE TIME LIMIT I.E. EVERY REPORT UNDER SUB - SECTION (2A) SHALL BE FURNISHED BY THE ASSESSEE TO THE ASSESSING OFFICER WITHIN SUCH PERIOD AS MAY BE SPECIFIED BY THE ASSESSING OFFICER. THE PROVISO UNDER SECTION 142 (2C) OF THE ACT READS AS UNDER: - PROVIDED THAT THE ASSESSING OFFICER MAY SUO MOTU OR ON AN APPLICATION MADE IN THIS BEHALF BY THE ASSESSEE AND FOR ANY GOOD AND SUFFICIENT REASON EXTEND THE SAID PERIOD BY SUCH FUR THER PERIOD OR PERIODS AS HE THINKS FIT ; SO HOWEVER THAT THE AGGREGATE OF THE PERIOD ORIGINALLY FIXED AND THE PERIOD OR PERIODS SO EXTENDED SHALL NOT IN ANY CASE EXCEED ONE HUNDRED AND EIGHTY DAYS FROM THE DATE ON WHICH THE DIRECTION UNDER SUB - SECTION (2A) IS RECEIVED BY THE ASSESSEE. 3 6 . THE APEX COURT IN RAJESH KUMAR AND OTHERS VS. DCIT (2006) 287 ITR 91 (SC) HAS LAID DOWN THE PROPOSITION THAT DIRECTION ISSUED UNDER SECTION 142(2A) OF THE ACT FOR SPECIAL AUDIT OF THE ACCOUNTS OF ASSESSEE WAS NOT ADMINISTRATIVE IN NATURE BUT WAS QUASI - JUDICIAL ORDER. REFERRING TO THE EXPRESSION HAVING REGARD TO IN SECTION 142(2A) OF THE ACT THE APEX COURT HELD THAT THE SAME WAS SIGNIFICANT AND THE OPINION MUST BE FORMED STRICTLY IN TERMS OF FACTORS ENUMERATED THEREIN . THE APEX COURT HELD THAT WHERE ONCE IT IS HELD THAT THE ASSESSEE SUFFERS CIVIL CONSEQUENCES AND ANY ORDER PASSED WOULD BE PR EJUDICIAL TO HIM THEN THE PRINCIPLES NATURAL JUSTICE MUST BE HELD TO BE IMPLICIT WHICH WAS REQUIRED TO BE APPLIED INTER - ALIA TO MINIMIZE ARBITRARINESS. IT WAS OBSERVED BY THE APEX COURT THAT IF THE ASSESSEE IS PUT TO NOTICE HE COULD SHOW THAT THE NATURE OF ACCOUNTS WAS NOT SUCH AS WOULD REQUIRE APPOINTMENT OF SPECIAL AUDITOR. HE COULD ALSO SHOW THAT WHAT THE ASSESSING OFFICER CONSIDERS COMPLEX IS IN FACT NOT SO. IT WAS FURTHER HELD THAT FORMATION OF OPINION UNDER SECTION 142(2A) OF THE ACT THAT THE ACC OUNTS OF ASSESSEE REQUIRES AN EXPERT AUDIT SHOULD INDISPUTABLY BE BASED ON OBJECTIVE CONSIDERATIONS AND NO ORDER CAN BE PASSED ON WHIMS OR CAPRICE. 35 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. 3 7 . THE HONBLE SUPREME COURT FURTHER HELD AS UNDER: - 60... WHILE EXERCISING ITS POWER THE ASSESSING OF FICER HAS TO FORM AN OPINION. IT IS FINAL SO FAR AS HE IS CONCERNED ALBEIT SUBJECT TO APPROVAL OF THE CHIEF COMMISSIONER OR THE COMMISSIONER AS THE CASE MAY BE. IT IS ONLY AT THAT STAGE HE IS REQUIRED TO CONSIDER THE MATTER AND NOT AT A SUBSEQUENT STAGE VIZ. AFTER THE APPROVAL IS GIVEN. 61 62. WHEREAS THE ORDER OF ASSESSMENT CAN BE THE SUBJECT MATTER OF AN APPEAL A DIRECTION ISSUED UNDER SECTION 142(2A) OF THE ACT IS NOT. NO INTERNAL REMEDY IS PRESCRIBED. JUDICIAL REVIEW CANNOT BE SAID TO BE AN APPR OPRIATE REMEDY IN THIS BEHALF. THE APPELLATE POWER UNDER THE ACT DOES NOT CONTAIN ANY PROVISION LIKE SECTION 105 OF THE CODE OF CIVIL PROCEDURE. THE POWER OF JUDICIAL REVIEW IS LIMITED. IT IS DISCRETIONARY. THE COURT MAY NOT INTERFERE WITH A STATUTORY POWE R. 3 8 . THE THREE JUDGE BENCH OF THE HON'BLE SUPREME COURT IN SAHARA INDIA (FIRM) V. CIT CENTRAL - I (2008) 300 ITR 403 (SC) WHILE TAKING NOTE OF PROVISIONS OF SECTION 142(2A) TO (2D) OF THE ACT AND SECTION 142(3) OF THE ACT HAD OBSERVED THAT TWIN CONDITIONS OF THE NATURE AND COMPLEXITY OF ACCOUNTS AND INTEREST OF REVENUE WERE THE PRE - REQUISITE FOR EXERCISE OF POWER UNDER SECTION 142(2A) OF THE ACT. IT WAS FURTHER OBSERVED THE WORD COMPLEXITY USED IN SECTION 142(2A) OF THE ACT WAS NOT DEFINED OR EXPLAINED IN THE ACT BUT WHAT MAY BE COMPLEX TO ONE MAY NOT BE COMPLEX AS FAR AS THE UNDERSTANDING OF OTHER. SO THERE HAS TO BE GENUINE AND HONEST ATTEMPT ON THE PART OF ASSESSING OFFICER TO UNDERSTAND THE ACCOUNTS MAINTAINED BY THE ASSESSEE ENTRIES AN D IN THE EVENT OF ANY DOUBT SEEK EXPLANATION FROM THE ASSESSEE. BUT OPINION REQUIRED TO BE FORMED BY THE ASSESSING OFFICER FOR EXERCISE OF POWER UNDER THE SAID PROVISION MUST BE BASED ON OBJECTIVE CRITERIA AND NOT ON THE BASIS OF SUBJECTIVE SATISFACTION. THE HON'BLE SUPREME COURT FURTHER HELD THAT BEFORE GRANTING THE APPROVAL THE CHIEF COMMISSIONER OR COMMISSIONER AS THE CASE MAY MUST HAVE BEFORE HIM THE MATERIAL ON THE BASIS WHEREOF AN OPINION IN THIS BEHALF HAS BEEN FORMED BY THE ASSESSING OFFICER AN D THE APPROVAL MUST REFLECT THE APPLICATION OF MIND TO THE FACTS OF THE CASE. 36 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. 39 . IN VIEW OF THE ABOVE SAID PROPOSITION LAID DOWN BY THE APEX COURT IN DIFFERENT DECISIONS LET US LOOK AT THE TERMS OF REFERENCE FOR SPECIAL AUDIT IN THE PRESENT SET OF FACTS. THE ASSESSING OFFICER ASKED THE SPECIAL AUDITOR TO OBTAIN AN EXPLANATION FOR EACH AND EVERY ENTRY RECORDED IN THE SEIZED DOCUMENTS AND THEREAFTER TO SEGREGATE THEM ENTITY WISE AND YEAR WISE AND TO SEE WHETHER THE SAME IS RECORDED IN REGULAR BOOKS OF ACCO UNT. HE FURTHER ASKED THE AUDITOR TO PREPARE THE BOOKS OF ACCOUNT OF ENTITIES INCORPORATING THE ENTRIES IN SEIZED RECORDS AND ALSO TO SEE WHETHER IT IS TAXABLE RECEIPT. THE NEXT STEP WAS TO SEE WHETHER PAYMENTS RECORDED IN SEIZED RECORD WAS AN ALLOWABLE EXPENDITURE. VIDE PARA 5 THE AUDITOR WAS ASKED TO PREPARE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR EACH YEAR TAKING INTO CONSIDERATION THE ENTRIES RECORDED IN SEIZED DOCUMENTS. THE AUDITOR VIDE PARA 6 WAS ASKED TO PREPARE YEAR WISE CASH FLOW STATEM ENT OF EACH ENTITIES AND TO SEE WHETHER THERE WAS SHORTAGE OF CASH ON ANY PARTICULAR DATE. HE WAS ALSO ASKED TO IDENTIFY CASH LOANS AND REPAYMENT OF CASH LOANS IF ANY AND WHETHER THERE WAS ANY INTRODUCTION OF UNDISCLOSED INCOME BY THE PARTNERS TO CARRY OUT THE CASH TRANSACTIONS. THE AUDITOR WAS ALSO ASKED TO IDENTIFY AND QUANTIFY INCOME CHARGEABLE TO TAX UNDER SECTION 68 / 69 OF THE ACT. VIDE PARA 10 THE AUDITOR WAS ASKED TO PREPARE TAX AUDIT REPORT IN THE PRESCRIBED FORM FOR EACH YEAR SEPARATELY QUANTIFYING THE DISALLOWANCE AS SPECIFIED IN THE AUDIT REPORT UNDER SEC TION 40(IA) 40A(3) AND 40A(2)(B) OF THE ACT ETC. HE WAS ALSO ASKED TO IDENTIFY THE VIOLATIONS OF TDS AND PROVISIONS OF SECTION 269SS AND 269T OF THE ACT ETC. IF ANY. IF WE CONSIDER THE TERMS OF REFERENCE IN TOTALITY THE FIRST ASPECT OF THE ISSUE IS THE UNDERSTANDING OF ASSESSING OFFICER ITSELF THAT THE ENTRIES RECORDED IN THE SEIZED DOCUMENTS BELONGED TO DIFFERENT PERSONS AND THE AUDITOR IN THIS REGARD WAS ASKED TO SEGREGATE THEM ENTITY WISE AND YEAR WISE. HE WAS THEN ASKED TO PREPARE BOOKS OF ACCOU NT OF ENTITIES INCORPORATING THE SAID ENTRIES IN THE SEIZED 37 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. MATERIAL. THE ASSESSEE BHARAT B. JAIN HAD WRITTEN THE ENTRIES IN SEIZED DIARY IN HIS OWN HAND WRITING AND IT RELATED TO VARIOUS ENTITIES OF WHICH APPEALS ARE FIXED BEFORE US. IN THE BUNCH OF AP PEALS AS IS APPARENT FROM THE CAUSE TITLE ITSELF THE ENTITIES BESIDE THE ASSESSEE NUMBERED 13 AND THE HUF OF ASSESSEE AND TASK OF THE SPECIAL AUDITOR WAS TO SEGREGATE THE TRANSACTIONS ENTITY WISE AND YEAR WISE. IN THE FIRST INSTANCE REFERENCE FOR SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT WAS MADE BY THE ASSESSING OFFICER ONLY WITH REGARD TO THREE OF THE ENTITIES I.E. ASSESSEE JAIN ASHAPURI DEVELOPERS AND JAIN ASHAPURI ESTATES. IN RESPECT OF BALANCE ENTITIES NO SUCH REFERENCE WAS MADE UNDER SECTION 142(2A) OF THE ACT. HOWEVER THE INCOME IN THE HANDS OF EACH OF THE ENTITIES YEAR WISE HAS BEEN COMPUTED ON THE REPORT OF SPECIAL AUDITOR. THE DIARY CONTAINS THE ENTRIES WHICH RELATED TO THE ASSESSEE AND OTHER ENTITIES AND THE SAME IS UNDISPUTED. ONCE THE ASSESSING OFFICER WAS AWARE OF THE SAID FACT THAT THE ENTRIES RELATED TO DIFFERENT ENTITIES FOR DIFFERENT YEARS THEN IN THE FIRST STEP HE SHOULD HAVE MADE REFERENCE IN RESPECT OF CONCERNS OTHERWISE THE QUESTION IS HOW THE REPORT OF SPECIAL AUDITOR I N RESPECT OF DIFFERENT ENTITIES CAN BE UPHELD FOR LACK OF REFERENCE. 4 0 . THE LANGUAGE OF SECTION 142(2A) OF THE ACT REFERS TO COMPLEXITY OF ACCOUNTS OF ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE TIME AND AGAIN STRESSED THAT THE SEI ZED DIARIES WERE NOT BOOKS OF ACCOUNT SINCE IT DID NOT HAVE ANY OPENING OR CLOSING BALANCE. HE ALSO MADE REFERENCE TO THE DEFINITION OF BOOKS OF ACCOUNT AS IN SECTION 2(12A) OF THE ACT. HOWEVER WE FIND THAT WHEREAS SECTION 44A OF THE ACT USES EXPRESSION BOOKS OF ACCOUNT IN CONTRADISTINCTION TO SECTION 142(2A) OF THE ACT WHICH USES THE WORD ACCOUNTS. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CENTRAL WAREHOUSING CORPORATION VS. SECRETARY DEPARTMENT OF REVENUE (2005) 277 ITR 452 (DEL) HAD HELD T HAT EXPRESSION ACCOUNTS COULD NOT BE GIVEN LIMITED INTERPRETATION SO AS TO RESTRICT IT 38 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. TO THE LEDGER OR CASH BOOK OF THE CORPORATION BUT IT WOULD ESSENTIALLY INCLUDE ALL OTHER RECORDS WHICH ARE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. INTERPRETING THE WORD ACCOUNTS WHICH HAS BEEN SO HELD THAT THE ACCOUNTS WOULD INCLUDE ENTIRE MATERIAL BEFORE THE ASSESSING OFFICER AND WOULD ALSO INCLUDE THE DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH WHICH ARE RELEVANT FOR TH E PURPOSE OF MAKING ASSESSMENT IN THE HANDS OF ASSESSEE. 4 1 . IN THE FACTS OF PRESENT CASE BEFORE US THE ASSESSEE HAD MAINTAINED BOOKS OF ACCOUNT REGULARLY FROM YEAR TO YEAR BUT THE SAID BOOKS OF ACCOUNT WERE INCOMPLETE SINCE THE CASH TRANSACTIONS IN RE SPECT OF VARIOUS PROPERTY TRANSACTIONS WERE NOT INCLUDED IN REGULAR BOOKS OF ACCOUNT. THE ASSESSING OFFICER IN SUCH CIRCUMSTANCES THOUGHT IT NECESSARY TO GET THE ACCOUNTS OF ASSESSEE AUDITED BY THE SPECIAL AUDITOR UNDER SECTION 142(2A) OF THE ACT. NOTE N O.1 OF TERMS OF REFERENCE IN THIS REGARD WAS TO OBTAIN AN EXPLANATION FOR EACH AND EVERY ENTRY RECORDED IN THE SEIZED RECORD AND TO SEGREGATE THE SAME ENTITY WISE AND YEAR WISE AND TO SEE WHETHER THE SAME IS RECORDED IN REGULAR BOOKS. HOWEVER WHILE GIVING DIRECTIONS TO THE SPECIAL AUDITOR THE ASSESSING OFFICER ENLARGED THE SCOPE OF SPECIAL AUDIT BY ASKING THE AUDITOR TO PREPARE BOOKS OF ACCOUNT OF ENTITIES INCORPORATING THE ENTRIES IN SEIZED RECORDS ; THEN VIDE NOTE NO.5 TO PREPARE PROFIT AND LOSS AC COUNT AND BALANCE SHEET FOR EACH YEAR TAKING INTO CONSIDERATION THE ENTRIES RECORDED IN THE SEIZED RECORDS. IN COMMON ACCOUNTANCY PRINCIPLES ALSO WHERE IT IS THE REQUIREMENT OF THE ACT TO GET THE ACCOUNTS AUDITED THEN AN AUDITOR AUDITING THE ACCOUNTS IS SEPARATE AND DISTINCT FROM A PERSON WHO IS FINALIZING THE ACCOUNTS . T HE SCOPE OF SECTION 142(2A) OF THE ACT IS TO DIRECT THE AUDITOR TO CARRY OUT SPECIAL AUDIT AND FURNISH REPORT OF THE ENTRIES IN BOOKS OF ACCOUNT AFTER CORRELATING WITH THE SAME WITH SEI ZED 39 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. DOCUMENTS / DIARIES ETC. IN THE GARB OF SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT AUDITOR CANNOT BE ASKED TO PREPARE THE BOOKS OF ACCOUNT ON THE BASIS OF ENTRIES IN THE SEIZED RECORDS AND THEREAFTER PREPARE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR EACH YEAR. THE ASSESSING OFFICER BY GIVING SUCH DIRECTIONS HAS GONE BEYOND THE SCOPE OF SECTION 142(2A) OF THE ACT AND THE SAME IS UNWARRANTED. THE DIRECTION OF THE ASSESSING OFFICER IN THE PRESENT CASE TO THE SPECIAL AUDITOR WAS TO PREPARE BOO KS OF ACCOUNT OF ENTITIES AFTER INCORPORATING THE ENTRIES IN THE SEIZED RECORDS AND THEREAFTER PREPARE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR EACH YEAR TAKING INTO CONSIDERATION THE ENTRIES RECORDED IN SEIZED RECORDS. SUCH DIRECTION BY THE ASSESSI NG OFFICER IS NOT ENVISAGED UNDER THE PROVISIONS OF THE ACT. 4 2 . WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF RAJASTHAN IN CIT VS. BAJRANG TEXTILES (2007) 294 ITR 561 (RAJ). IN THE FACTS OF THE CASE BEFORE THE HONBLE HIGH COURT THE ASSESSING OFFICER DIRECTED THE ASSESSEE TO HAVE THE ACCOUNTS SUBJECT TO SPECIAL AUDIT IN TERMS OF SECTION 142(2A) OF THE ACT. THE TRIBUNAL IN THE SAID CASE NOTED THAT THE ASSESSING OFFICER HAD NOT MERELY REFERRED THE ACCOUNTS TO BE AUDITED UNDER SPECIAL AUDIT BY AN AUDITOR BUT HE HAD ALSO DIRECTED THE SPECIAL AUDIT OR TO PREPARE THE BOOKS OF ACCOUNT IN THE FORM OF CASH BOOK / LEDGER ON THE BASIS OF DOCUMENTS / PAPERS SEIZED DURING THE COURSE OF SEARCH AS PER HIS DIRECTIONS. THE AUDITOR WAS ALSO REQUIRED TO PREPARE TRADING PROFIT AND LOSS ACCOUNT WHICH WERE RECORDE D IN REGULAR BOOKS OF ACCOUNT AND FURTHER TO DETERMINE UNDISCLOSED INCOME FOR BLOCK PERIOD. THE TRIBUNAL AFTER CONSIDERING THE SAME HELD THAT REFERENCE TO SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT WAS NOT FOR THE PURPOSE FOR WHICH PROVISION WAS ENACT ED. THE HONBLE HIGH COURT AFTER TAKING NOTE OF THE ORDER OF 40 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. TRIBUNAL AND DIRECTIONS OF THE ASSESSING OFFICER FOR SPECIAL AUDIT OBSERVED AS UNDER: - 5. APPARENTLY THE ORDER WAS FOR PREPARING FRESH BOOKS RATHER THEN TO CONDUCT A SPECIAL AUDIT. THIS WAS ON THE FACE OF IT BEYOND THE SCOPE OF PROVISIONS OF S. 142(2A) OF THE IT ACT. NO AUTHORITY HAS BEEN GIVEN TO THE AO TO DIRECT THE PREPARATION OF FRESH BOOKS BY REFERRING THE MATTER TO AN AUDITOR UNDER SPECIAL AUDIT. AUDIT IS FOR THE PURPOSE OF SATISFYING ONE ABOUT AUTHENTICITY AND CREDIBILITY OF ACCOUNTS PREPARED BY THE ASSESSEE BUT NOT FOR PREPARING NEW ACCOUNT BOOKS AS PER DIRECTIONS OF AOS. APPARENTLY THE TRIBUNAL FOUND THAT IT WAS ABUSE OF PROCESS BY THE AO. THE FINDINGS GIVEN BY THE TRIBUNAL ARE FINDING S OF FACT BASED UPON THE RELEVANT MATERIAL. 4 3 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED ON THE PROPOSITION LAID DOWN BY THE JODHPUR BENCH OF TRIBUNAL IN THE CASE OF BAJRANG VS. DCIT (2004) 3 SOT 115 (JODHPU R - TRIB) WHEREIN THE TRIBUNAL HELD THAT THE ASSESSING OFFICER COULD NOT MAKE REFERENCE TO AUDITOR TO PREPARE BOOKS OF ACCOUNT TRADING AND PROFIT AND LOSS ACCOUNT ON THE BASIS OF SEIZED RECORDS OR TO COMPUTE UNDISCLOSED INCOME OF DIFFERENT YEARS. IT WAS FU RTHER HELD BY THE TRIBUNAL THAT INTENTION OF THE ASSESSING OFFICER TO MAKE REFERENCE FOR SPECIAL AUDIT WAS TO GAIN MORE TIME UNDER THE GUISE OF SPECIAL AUDIT BECAUSE REFERENCE WAS MADE ON LAST BUT ONE DAY OF COMPLETING BLOCK ASSESSMENT. THE TRIBUNAL THUS HELD THE ASSESSMENT ORDER TO BE TIME BARRED SINCE THE SPECIAL AUDIT REPORT OBTAINED COULD NOT BE GROUND TO EXTEND THE PERIOD OF LIMITATION FOR COMPLETING THE ASSESSMENT. 44. APPLYING THE SAID PRINCIPLE TO THE FACTS OF THE PRESENT CASE WE HOLD THAT WHE RE THE ASSESSING OFFICER HAD MADE REFERENCE FOR SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT AND AS PER THE TERMS OF REFERENCE SPECIAL AUDITOR WAS DIRECTED TO PREPARE THE BOOKS OF ACCOUNT OF ENTITIES ( EVEN THE ENTITIES FOR WHICH SPECIAL AUDIT WAS NOT DI RECTED ) INCORPORATING THE ENTRIES IN SEIZED MATERIAL AND THEREAFTER PREPARE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR EACH YEAR TAKING INTO CONSIDERATION THE ENTRIES RECORDED IN THE SEIZED RECORD THE ASSESSING OFFICER HAS EXCEEDED HIS JURISDICTION A ND REFERENCE SO MADE IS 41 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. INVALID. AS PER NOTE 10 OF THE TERMS OF REFERENCE THOUGH THE AUDITOR WAS DIRECTED TO PREPARE TAX AUDIT IN THE PRESCRIBED PROFORMA FOR EACH YEAR QUANTIFYING THE DISALLOWANCE UNDER VARIOUS SECTIONS AND IDENTIFY THE VIOLATIONS UNDER O THER SECTION IF ANY DOES NOT OVERRIDE THE FIRST DIRECTION OF THE ASSESSING OFFICER DIRECTING THE SPECIAL AUDITOR TO PREPARE THE BOOKS OF ACCOUNT INCORPORATING ENTRIES IN THE SEIZED MATERIAL AND ALSO TO PREPARE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET ON THE BASIS OF SUCH ENTRIES RECORDED IN THE SEIZED MATERIAL. ACCORDINGLY WE HOLD THAT REFERENCE TO SPECIAL AUDIT WAS ILLEGAL AND CONSEQUENT STEP IS WHETHER THE ASSESSMENT ORDER WOULD BE BARRED BY TIME. 45. THE LEARNED AUTHORIZED REPRESENTATIVE FOR TH E ASSESSEE THOUGH HAS CHALLENGED THE REFERENCE TO SPECIAL AUDITOR WITH SPECIAL EMPHASIS ON THE TERMS OF REFERENCE TO PREPARE BOOKS OF ACCOUNT AND CONSEQUENT PROFIT AND LOSS ACCOUNT AND BALANCE SHEET BUT IS NOT AGGRIEVED BY THE ASSESSMENT ORDER PASSED CONSE QUENT TO THE PROCEEDINGS BEFORE THE SPECIAL AUDITOR. ON THE OTHER HAND THE PERUSAL OF ORDER OF CIT(A) REFLECTS CERTAIN ADDITIONS BEING MADE BY HIM WHICH HAVE NOT BEEN CHALLENGED BEFORE US. IN THE ABOVE CIRCUMSTANCES THE NEXT STEP WHICH HAS TO BE TAKEN IN THE FACTS OF THE PRESENT CASE IS THE DETERMINATION OF INCOME IN THE HANDS OF EACH OF THE ENTITY FOR DIFFERENT ASSESSMENT YEARS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS NOT DISPUTED THE QUANTUM OF RECEIPTS WHICH HAS BEEN WORKED OUT FR OM THE SEIZED DOCUMENTS THOUGH HE IS AGGRIEVED BY THE ORDER OF ASSESSING OFFICER IN NOT ACCEPTING THE LOSS YEAR WISE WHICH WAS WORKED OUT BY THE SPECIAL AUDITOR AND IS ALSO AGGRIEVED BY THE ORDER OF ASSESSING OFFICER IN MAKING DISALLOWANCE UNDER SECTION 40 A(3) 40(A)(IA) OF THE ACT AND ADDITION MADE UNDER SECTION 68/69C OF THE ACT. WE PROCEED TO DECIDE THE ISSUES ONE BY ONE IN THE HANDS OF ASSESSEE. 42 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. 4 6 . UNDOUBTEDLY DURING THE COURSE OF SEARCH LOOSE DOCUMENTS / DIARIES WERE FOUND AND SEIZED FROM THE PREMISES OF ASSESSEE. THE TOTAL DIARIES FOUND WERE 16 FROM THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE WHICH WERE WRITTEN BY THE ASSESSEE IN HIS O WN HAND WRITING. THE ENTRIES IN THE SAID DIARIES BELONGED TO DIFFERENT ENTITIES AND DID NOT TOTALLY BELONG TO THE ASSESSEE. THE SPECIAL AUDITOR HAS WORKED OUT BIFURCATION OF RECEIPTS IN THE HANDS OF DIFFERENT ENTITIES YEAR WISE AND TOTAL RECEIPTS WORKED OUT TO RS.29.30 CRORES. IN VIEW OF THE EVIDENCES FOUND THE NEXT STEP IS TO DETERMINE THE INCOME IN THE HANDS OF RESPECTIVE ENTITIES IN THE RESPECTIVE ASSESSMENT YEARS. SINCE THE ASSESSEE HAS INDULGED IN VARIOUS CASH TRANSACTIONS OUTSIDE REGULAR BOOKS O F ACCOUNT THEN THE RESULTS SHOWN IN REGULAR BOOKS OF ACCOUNT CANNOT BE ACCEPTED AS SACROSANCT IN THE HANDS OF ASSESSEE. IN THE ABSENCE OF THE SAME THE ONLY RECOURSE AVAILABLE IS TO ESTIMATE THE INCOME IN THE HANDS OF ASSESSEE ON THE BASIS OF TOTAL CASH RECEIPTS RECORDED IN SEIZED DIARIES WHICH HAVE BEEN CALCULATED IN THE CASE OF ASSESSEE AND VARIOUS ENTITIES YEAR WISE. IT MAY BE POINTED OUT HEREIN ITSELF THAT IN CASE OF ONE OF ENTITIES OF THE GROUP I.E. NAMO PROMOTERS & DEVELOPERS ON WHOM ALSO SEARCH AND SEIZURE PROCEEDINGS HAD BEEN UNDERTAKEN AND ENTRIES RELATING TO IT WERE FOUND IN THE SEIZED DIARY T HE ASSESSEE HAD OFFERED ADDITIONAL INCOME IN HIS HANDS BY ESTIMATING THE SAME @ 20% OF GROSS RECEIPTS WHICH HAS BEEN ACCEPTED BY THE CIT(A) AND NO APPEA L HAS BEEN FILED BY THE REVENUE. IN VIEW OF THE SAME WE ARE OF THE VIEW THAT ESTIMATION OF PROFITS @ 30% ON GROSS RECEIPTS WOULD MEET THE ENDS OF JUSTICE ESPECIALLY WHERE THE ASSESSEE HAD CARRIED ON HIS BUSINESS AND HAD INDULGED IN VARIOUS UNRECORDED TR ANSACTIONS. THE RECORDED TRANSACTIONS WERE PART OF REGULAR BOOKS OF ACCOUNT AND THE UNRECORDED TRANSACTIONS IN CASH WERE METICULOUSLY MAINTAINED IN SEIZED DIARY RELATING TO DIFFERENT ENTITIES FOR DIFFERENT YEARS BUT THE SAME WERE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO 43 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. COMPUTE THE INCOME IN THE HANDS OF ASSESSEE AND IN THE HANDS OF VARIOUS ENTITIES ON THE BASIS OF BIFURCATION OF GROSS RECEIPTS IN THE INDIVIDUAL HANDS AND DETERMINE THE ADDITIONAL INCOME @ 30% WHICH WOULD BE ADDED AS ADDITIONAL INCOME IN THE HANDS OF ASSESSEE . THE ASSESSING OFFICER HAS ACCEPTED INCOME DECLARED AS PER BOOKS. HENCE THE SAME NOT TO BE DISTURBED. THE RATE AT 30% IS TO BE APPLIED TO CASH RECEIPTS TO DETERMINE UNDISCLOSED AD DITIONAL INCOME IN THE HANDS OF ASSESSEE. HERE IT MAY ALSO BE POINTED OUT THAT THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS.32.50 LAKHS IN HIS RETURN OF INCOME CONSEQUENT TO SEARCH PROCEEDINGS. SIMILARLY JAIN ASHAPURI DEVELOPERS HAD OFFERED ADDITI ONAL INCOME ON ACCOUNT OF SEARCH UNDER SECTION 132 OF THE ACT AT RS.1.92 CRORES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS CLARIFIED BEFORE US THAT THE ASSESSEE AS AGAINST THE DECLARATION OF RS.50 LAKHS DURING THE COURSE OF SEARCH HAD INC LUDED SUM OF RS.38.50 LAKHS AS HIS ADDITIONAL INCOME IN THE YEAR OF SEARCH AND OTHER ENTITIES HAD MADE DECLARATION TOTALING RS.2.62 CRORES OVER AND ABOVE THEIR NORMAL INCOME. THE CREDIT FOR SAME IS TO BE ALLOWED IN THE RESPECTIVE HANDS IN WHICH ADDITIONAL INCOME IS DECLARED. 4 7 . AS COROLLARY TO ESTIMATION OF INCOME IN THE HANDS OF ASSESSEE ON REJECTION OF ALLEGED BOOKS OF ACCOUNT PREPARED BY SPECIAL AUDITOR THE ADDITIONS MADE UNDER SECTION 40(A)(IA) / 40A(3) OF THE ACT WOULD NOT STAND AND CONSEQUENTLY NO FURTHER DISALLOWANCE UNDER SECTION UNDER SECTION 40(A)(IA) / 40A(3) OF THE ACT IS MERITED. 4 8 . THE NEXT SET OF DISALLOWANCES ARE UNDER SECTION 68/69 OF THE ACT AND THE BASIS FOR MAKING SAID ADDITIONS ARE ALSO THE ENTRIES IN SEIZED DIARIES AND THE LOOSE DOCUMENTS FOUND FROM THE ASSESSEE DURING THE COURSE OF SEARCH WHICH COULD NOT BE EXPLAINED BY THE ASSESSEE THOUGH THE ASSESSEE CLAIMED THAT THE 44 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. SAID REPR ESENT THE ADVANCES RECEIVED AGAINST BOOKING OF FLATS BUT IN THE ABSENCE OF COMPLETE DETAILS BEING AVAILABLE THE SAME WERE TREATED AS UNEXPLAINED CREDITORS UNDER SECTION 68 OF THE ACT. 4 9 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS REFERRE D TO THE FINDINGS OF AUDITOR AND HAS POINTED OUT THAT TOTAL RECEIPTS AS CERTIFIED BY THE SPECIAL AUDITOR FOR ALL THE ENTITIES FOR ALL THE YEARS WAS TOTALED TO RS.28 13 67 856/ - AGAINST WHICH THE TOTAL PAYMENTS WHICH ARE CERTIFIED BY THE SPECIAL AUDITOR FRO M SEIZED DOCUMENTS AND THE REGULAR BOOKS OF ACCOUNT WAS RS.23 67 91 629/ - . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE PROFIT WHICH WAS WORKED OUT BY THE SPECIAL AUDITOR ON THE BASIS OF ENTRIES WAS RS.88 75 450/ - . HOWEVER DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) OF THE ACT AT RS.1.61 CRORES UNDER SECTION 40(A)(IA) OF THE ACT AT RS.70.25 LAKHS UNDER SECTION 68 OF THE ACT AT RS.14.66 CRORES AND UNDER SECTION 69C OF THE ACT AT RS.5.12 CRORES AND OTHER ADDITIONS WERE ON ACCOUNT OF NEGATIVE CASH BALANCE OF RS.5.30 CRORES CASH INTRODUCED BY PARTNERS AT RS.3.46 CRORES DISALLOWANCE OF TDR BROKERAGE AT RS.4.06 CRORES AND OTHER DISALLOWANCES ON ACCOUNT OF PERSONAL WITHDRAWALS. FURTHER ADDITION HAS BEEN MADE IN THE HANDS OF ASSESSEE BHARAT B. JAIN ON PROTECTIVE BASIS AT RS.37.96 CRORES. HE HAS FILED SUMMARY OF ADDITIONS GIVING NATURE AND AMOUNT OF ADDITIONS WHICH WERE MADE BY THE ASSESSING OFFICER WHICH TOTALS TO RS.73 89 77 030/ - . HE HAS FURTHER R EFERRED TO ADDITIONS SUSTAINED BY THE CIT(A) AND DELETIONS MADE BY HIM. WITH REGARD TO ADDITION UNDER SECTION 69C OF THE ACT AND ADDITIONS REDUCED ON PROTECTIVE BASIS TO RS.2.96 CRORES AS AGAINST RS.37.96 CRORES MADE BY THE ASSESSING OFFICER ; HE HAS POINT ED OUT THAT ADDITIONS SUSTAINED BY THE CIT(A) TOTALED RS.25 32 88 625/ - . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HERE HAS POINTED OUT THAT THE 45 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. REVENUE IS NOT IN APPEAL AGAINST THE ORDER OF CIT(A) HENCE THE RELIEF GIVEN BY THE CIT(A) REMAIN SUSTAINED. THE ASSESSEE HAS FILED YEAR WISE ENTITY WISE SUMMARY SHEET OF ADDITIONS MADE BY THE ASSESSING OFFICER AT PAGE 75 OF THE PAPER BOOK - 1. THEREAFTER HE FILED YEAR WISE APPELLANT WISE SUMMARY SHEET OF ADDITIONS WHICH ARE SUSTAINED BY THE CIT(A) AT PAGE 76 OF PAPER BOOK - 1. THEN HE HAS FILED SUMMARY OF ADDITIONS ENTITY WISE YEAR WISE GIVING NATURE AND AMOUNT AT PAGE 77 OF THE PAPER BOOK - 1. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD POINTS OUT THAT IN CASE THE HIGHEST PEAK IS WORKED OUT FROM THE ENTRIES IN SEIZED DIARY THEN THE SAME WORKS OUT TO RS.5.23 CRORES. HE HAS FAIRLY ADMITTED THAT THE TOTAL CASH RECEIPTS IN SEIZED DOCUMENTS IS RS.28 13 67 956/ - . THE RECONCILIATION OF SAID TOTAL CASH RECEIPTS OF RS.28.13 CRORE S IS AS UNDER: - PARTICULARS CONTRACT RECEIPT FROM FLATHOLDERS/PL OT HOLDERS FROM PARTIES AGAINST WHOSE NAME FLAT NO. NOT MENTIONED IN THE DIARIES (INVESTOR NAMO PROMOTERS AND BUILDERS AMOUNT RECEIVED BACK FROM THE SUPPLIER / CREDITORS FOR MISC REASONS CAPITAL INTRODUCED BY PARTNERS MISC. INCOME TOTAL CASH RECEIPT NATURE OF ADDITIONS AS PER EACH HEAD AS SUBMITTED ON PAGE NO.2 OF PAPER BOOK NO - 3 70 64 545 13 12 73 626 7 74 25 813 93 27 425 88 42 981 4 69 62 030 4 71 536 28 13 67 956 50 . THE FIRST ITEM TO BE CONSIDERED IS THE RECEIPTS RELATING TO NAMO PROMOTERS AND BUILDERS. THE ASSESSEE CLAIMS THE SAME TO BE AT RS.93 27 425/ - . WE HAVE ALREADY REFERRED TO THE ORDER OF CIT(A) IN THE SAID CASE WHEREIN HE HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOME IN THE HANDS OF ASSESSEE BY APPLYING RATE OF 20% ON BOTH RECORDED AND UNRECORDED RECEIPTS. ONCE THE SAID RECEIPTS HAS BEEN ADDED IN THE HANDS OF SAID ENTITY THEN THE SAME MERITS TO BE EXCLUDED FROM TOTAL CASH RECEIPTS IN THE HANDS OF BALANCE ENTITIES. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO VERIFY THE AMOUNT OF RECEIPT WHICH HAS BEEN 46 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. ADDED AS UNACCOUNTED RECEIPT IN THE HANDS OF NAMO PROMOTERS AND DEVELOPERS AND SUBTRACT THE SAME FROM TOTAL CASH RECEIPTS. 5 1 . NOW COMING TO THE BALANCE RECEIPTS IN THE HANDS OF ASSESSEE. THE FIRST ITEM IS THE CONTRACT RECEIPT PERSE AT RS.70.64 LAKHS ON WHICH RATE HAS TO BE APPLIED TO DETERMINE THE INCOME IN THE HANDS OF ASSESSEE. ACCORDINGLY WE DIRECT SO. 5 2 . THE SECOND IT EM IS THE RECEIPTS WHICH HAVE BEEN IDENTIFIED TO HAVE BEEN RECEIVED FROM THE FLAT HOLDERS OR THE POWER OF ATTORNEY HOLDER S TOTALING RS.13.12 CRORES . T HE AMOUNT WHICH HAS BEEN RECEIVED FROM THE FLAT HOLDERS OR THEIR POWER OF ATTORNEY HOLDERS IS PART OF BUS INESS RECEIPTS OF THE ASSESSEE AND THE SAME ARE TO BE SO INCLUDED ON WHICH THE RATE HAS TO BE APPLIED TO WORK OUT ADDITIONAL INCOME . 5 3 . THE NEXT ITEM IS THE ALLEGED AMOUNT RECEIVED ON ACCOUNT OF BULK BOOKINGS FROM DIFFERENT PARTIES AGAINST WHOSE NAME THE FLAT NUMBERS WERE NOT MENTIONED IN THE DIARIES TOTALING RS.7.74 CRORES . THE PLEA OF ASSESSEE IN THIS REGARD WAS THAT THE SAID PARTIES WERE INVESTORS AND THE RECEIPTS ARE TO BE ADDED AS BUSINESS RECEIPTS IN THE HANDS OF ASSESSEE. HOWEVER THE SCHEME O F BULK INVESTORS WAS NOT ACCEPTED BY THE ASSESSING OFFICER IN THE ABSENCE OF PROPER EVIDENCE AND THE SAME WERE HELD TO BE UNEXPLAINED CASH LOANS ; THE SAME WERE ADDED UNDER SECTION 68 OF THE ACT. THE SECOND PLEA OF ASSESSEE THAT THE SAID INVESTORS HAVE BEE N REPAID BEFORE THE DATE OF SEARCH IN ACCORDANCE WITH TERMS OF SCHEME WAS ALSO NOT ACCEPTED IN VIEW OF CERTAIN EVIDENCES FOUND DURING THE COURSE OF SEARCH. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US HAS PLEADED TIME AND AGAIN THAT T HE SAID RECEIPTS ARE BUSINESS RECEIPTS OF THE ASSESSEE. HE WAS ASKED TO GIVE THE DETAILS OF FLAT NUMBERS. HE 47 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. POINTED OUT THAT IN BULK BOOKINGS FLAT NUMBERS CANNOT BE CORRELATED. SECOND PLEA IN THIS REGARD WAS THAT THESE ADVANCES HAVE BEEN REPAID IN LAT ER YEARS FOR WHICH CERTAIN EVIDENCES WERE FOUND DURING THE SEARCH. HE ARGUED THAT THE FLATS WERE ALLOTTED TO ULTIMATE BUYERS AND THOSE RECEIPTS HAVE ALREADY BEEN INCLUDED IN THE HANDS OF ASSESSEE AND OFFERED TO TAX. ADDITION UNDER SECTION 68 OF THE ACT ON SUCH RECEIPTS WOULD THUS AMOUNT TO DOUBLE ADDITION. THE PLEA OF ASSESSEE BEFORE US IS THAT EXCEPT FOR THE AMOUNT RECEIVED AGAINST FLAT BOOKINGS OR THE CONTRACT RECEIPTS IT HAS NOT RAISED ANY LOANS FROM ANY PARTY WHATSOEVER. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES WE FIND MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD AND HOLD THAT THE SAID RECEIPTS ARE BUSINESS RECEIPTS OF THE ASSESSEE ON WHICH RATE IS TO BE APPLIED TO DETERMINE THE INCOME IN THE HANDS OF AS SESSEE. THE PLEA OF ASSESSEE OF DOUBLE ADDITION IS NOT SUPPORTED BY ANY EVIDENCE HENCE WE HOLD THAT AMOUNT OF RS.7.74 CRORES IS TO BE CONSIDERED AS CONTRACT RECEIPTS AND ADDITIONAL INCOME @ 30% IS TO BE ADDED IN THE HANDS OF RESPECTIVE ENTITIES. THE BIF URCATION ENTITY WISE HAS BEEN FILED BY ASSESSEE BEFORE US WHICH WOULD BE SUBMITTED BEFORE THE ASSESSING OFFICER FOR ENTITY WISE YEAR WISE ADDITION. 5 4 . THE NEXT ITEM IS THE AMOUNT RECEIVED BACK FROM SUPPLIER / CREDITORS OF RS.88 42 981/ - . THE SAID RECE IPTS ARE PART OF CONTRACT RECEIPTS ON WHICH RATE NEEDS TO BE APPLIED. 5 5 . THE NEXT ITEM IS THE CAPITAL INTRODUCED BY THE PARTNERS AT RS.4.69 CRORES. THE AUTHORITIES BELOW HAVE ADDED THE CAPITAL INTRODUCED BY THE PARTNERS AS THE INCOME IN THE HANDS OF R ESPECTIVE PARTNERS. THE NAMES OF PARTNERS ARE AVAILABLE. IN THIS REGARD THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT THAT HIS BROTHER HASMUKH JAIN HAS ALREADY DECLARED SUM OF RS.2. 0 0 CRORES. THE LEARNED DEPARTMENTAL REPRESENTA TIVE FOR THE 48 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. REVENUE ON THE OTHER HAND STRESSED THAT THE DECLARATION MADE BY HASMUKH JAIN WAS ON THE BASIS OF DIARIES FOUND FROM HIS POSSESSION AND WAS NOT PART OF DIARIES FOUND FROM THE POSSESSION OF ASSESSEE. FIRST OF ALL WE HOLD THAT THE CAPITAL INTR ODUCED BY THE PARTNERS IS TO BE ASSESSED IN THE HANDS OF RESPECTIVE ENTITIES AS UNEXPLAINED INCOME. THE NAMES OF ENTITIES ARE AVAILABLE ON RECORDS AND THE ASSESSING OFFICER SHALL ACCORDINGLY MAKE THE ADDITIONS IN THE HANDS OF ENTITIES. IN RESPECT OF CLA IM OF RS.2. 0 0 CRORES BEING OFFERED IN THE HANDS OF HASMUKH JAIN THE ASSESSING OFFICER IN THIS REGARD IS DIRECTED TO VERIFY THE STAND OF LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE BEFORE US AND IN CASE THE BASIS OF SAID RS.2. 0 0 CRORES IS DIARIES FOUND FROM HIS POSSESSION THEN NO CREDIT IS TO BE ALLOWED. THE ASSESSING OFFICER SHALL CARRY OUT THE NECESSARY VERIFICATION AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE IN THIS REGARD. THE TOTAL OF RS.4.69 CRORES THUS HAS TO BE RED UCED FROM TOTAL CASH RECEIPTS FOR COMPUTING THE BALANCE CONTRACT RECEIPTS ON WHICH RATE HAS TO BE APPLIED. 5 6 . THE NEXT ADDITION IN THE HANDS OF ASSESSEE ON ACCOUNT OF MISCELLANEOUS INCOME OF RS.4 71 536/ - SHALL HA VE TO BE MADE IN THE HANDS OF ENTITIES IN FULL AND HENCE THE SAME IS ALSO TO BE EXCLUDED FROM TOTAL CASH RECEIPTS. THE ASSESSING OFFICER THUS SHALL GIVE REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND APPLY RATE OF 30% ON BALANCE CONTRACT RECEIPTS AND OTHER RECEIPTS WHICH ARE HELD AS PAR T OF CONTRACT RECEIPTS ENTITY WISE AND YEAR WISE AND COMPUTE THE ADDITIONAL INCOME IN THE HANDS OF RESPECTIVE PARTIES. 5 7 . THE ASSESSING OFFICER WHILE COMPUTING RESPECTIVE INCOME IN THE HANDS OF VARIOUS PERSONS HAD MADE CERTAIN ADDITIONS ON ACCOUNT OF REP AYMENT TO INVESTING PARTY BEING HIGHER THAN INVESTMENT MADE OF RS.25 LAKHS; MISCELLANEOUS TRANSACTIONS NOT IDENTIFIED OF RS.22 11 550/ - AND UN - RECONCILED 49 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. AMOUNTS TOTALING RS.1 02 890/ - . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FAIRLY ADM ITTED THAT THE SAID RECEIPTS DO NOT FORM PART OF TOTAL CASH RECEIPTS OF RS.28.13 CRORES. ACCORDINGLY WE HOLD THAT THE SAID ITEMS ARE TO BE ADDED IN THE RESPECTIVE HANDS AS ADDITIONAL INCOME. THE ASSESSEE BEFORE US HAS FURNISHED THE DETAILS PARTY - WISE WH ICH SHALL BE VERIFIED BY THE ASSESSING OFFICER AND ADDITION BE MADE IN THE RESPECTIVE HANDS. 5 8 . ANOTHER ITEM WHICH IS TO BE INCLUDED IN THE HANDS OF ASSESSEE IS THE ADDITION ON ACCOUNT OF NEGATIVE CASH BALANCE OF RS.98 63 558/ - . THE SAID ADDITION HAS BE EN UPHELD BY THE CIT(A) AND HAS NOT BEEN AGITATED BY THE ASSESSEE AND HENCE THE SAME NEEDS TO BE ADDED IN THE RESPECTIVE HANDS . 59. THE ASSESSEE IS FURTHER AGGRIEVED BY THE UPHOLDING OF PROTECTIVE ADDITION IN HIS HANDS THOUGH ON SUBSTANTIVE BASIS THE ADD ITION HAS BEEN MADE IN THE HANDS OF RESPECTIVE HANDS. THE CIT(A) HAD DELETED THE ADDITION TO THE EXTENT OF RS.3.37 CRORES SINCE THE SAME WAS UPHELD IN THE HANDS OF DIFFERENT ENTITIES. HOWEVER FOR BALANCE SUM OF RS.1.36 CRORES VIDE PARA 23 OF THE APPELLA TE ORDER THE CIT(A) HAS REMITTED THE ISSUE TO THE ASSESSING OFFICER FOR VERIFICATION OF CLAIM OF ASSESSEE THAT THE SAME HAS ALREADY BEEN ADDED IN THE RESPECTIVE HANDS. ACCORDINGLY WE UPHOLD THE ORDER OF CIT(A) AND HOLD THAT O NCE THE SUBSTANTIVE ADDITION HAS BEEN MADE IN THE HANDS OF RESPECTIVE PARTIES THEN THERE IS NO QUESTION OF MAKING ANY PROTECTIVE ADDITION IN THE HANDS OF ASSESSEE. THE REVENUE IS NOT IN APPEAL AGAINST DELETION OF ADDITION BY THE CIT(A). ACCORDINGLY WE HOLD SO. 60. IN RESPECT OF ITA NOS.1423/PUN/2014 & 1424/PUN/2014 THE PLEA OF ASSESSEE BEFORE US WAS THAT THE ADDITION HAS BEEN MADE ON PROTECTIVE BASIS IN THE HANDS OF HUF AND SUBSTANTIVE ADDITIONS HAVE ALREADY BEEN MADE IN THE HANDS OF RESPECTIVE ENTITI ES. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE 50 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. CLAIM OF ASSESSEE IN THIS REGARD AND ONCE THE ADDITION HAS BEEN SUBSTANTIALLY MADE IN THE HANDS OF OTHER ENTITIES THERE IS NO MERIT IN PROTECTIVE ADDITION IN THE HANDS OF ASSESSEE. 6 1 . ANOTHER ADDITION WHICH WAS MADE BY THE ASSESSING OFFICER WAS ON ACCOUNT OF DISALLOWANCE OF CERTAIN EXPENSES I.E. LAND COST COST OF TDR PURCHASED AND OTHER EXPENSES. SINCE WE HAVE ESTIMATED THE INCOME IN THE HANDS OF RESPECTIVE ENTITIES THERE IS NO MERIT IN THE AFORESA ID DISALLOWANCES OF EXPENDITURE . 6 2 . THE LAST ITEM IS THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT BY THE ENTITY JAIN ASHAPURI DEVELOPERS. THE SAID CLAIM HAS BEEN WITHDRAWN BY THE ASSESSEE VIDE ITS LETTER DATED 16.06.2017 AND HENCE THE SAME IS DISMISSED AS WITHDRAWN. 6 3 . THE ASSESSING OFFICER THUS IS DIRECTED TO COMPUTE ADDITIONAL INCOME IN THE HANDS OF EACH OF THE ENTITIES YEAR WISE IN LINE WITH OUR DIRECTIONS IN THE PARAS HEREINABOVE. HE IS FURTHER DIRECTED TO ALLOW CREDIT OF ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN THE RESPECTIVE HANDS OF ENTITIES IN THE RESPECTIVE YEARS. THE ASSESSING OFFICER SHALL AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE FOR COMPUTING ADDITIONAL INCOME IN THE HANDS OF ENTITIES YEAR WISE. 6 4 . IN THE RESULT ALL THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED. ORDER PRO NOUNCED ON THIS 30 TH DAY OF NOVEMBER 201 7 SD/ - SD/ - ( ANIL CHATURVEDI ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 30 TH NOVEM BER 201 7 . GCVSR 51 ITA NOS.1418 TO 1422/PUN/2014 & ORS. M/S. BHARAT B. JAIN & ORS. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - II PUNE ; 4. / THE CIT (CENTRAL) PUNE ; 5. / DR A ITAT PUNE; 6. / GUARD FILE . / BY ORDER // TRUE COPY // / SR. PRIVATE SECRETARY / ITAT PUNE