Shri Ssuresh Chand AGarwal, Mathura v. ACIT, Mathura

ITA 475/AGR/2009 | 2003-2004
Pronouncement Date: 20-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 47520314 RSA 2009
Assessee PAN AAVPA3257C
Bench Agra
Appeal Number ITA 475/AGR/2009
Duration Of Justice 9 month(s) 27 day(s)
Appellant Shri Ssuresh Chand AGarwal, Mathura
Respondent ACIT, Mathura
Appeal Type Income Tax Appeal
Pronouncement Date 20-10-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 20-10-2010
Date Of Final Hearing 15-09-2010
Next Hearing Date 15-09-2010
Assessment Year 2003-2004
Appeal Filed On 23-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NO.475/AGR/2009 ASST. YEAR: 2003-04 SHRI SURESH CHAND AGARWAL VS. A.C.I.T.- 3 MA THURA. SHREE GIRRAJ SUPARI TRADERS BHARGAVA STREET GHIA MANDI MATHURA. (PAN : AAVPA 3257 C). ITA NO.05/AGR/2010 ASST. YEAR: 2003-04 A.C.I.T.- 3 MATHURA. VS. SHRI SURESH CHAND AGA RWAL PROP. OF M/S SHREE GIRRAJ SUPARI TRADERS BHARGAVA STREET GHIA MANDI MATHURA. (PAN : AAVPA 3257 C). (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI M.M. AGARWAL C.A. REVENUE BY : SHRI SAMPOORNANAND JR. D.R. ORDER PER P.K. BANSAL A.M.: THESE CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 22.09.2009 FOR THE A.Y. 2003-04. 2. THE ASSESSEE HAS IN ITS APPEAL RAISED THE FOLL OWING GROUNDS OF APPEAL :- 2 1. BECAUSE LEARNED CIT (APPEALS) HAS ERRED IN NOT APPRECIATING THAT THE SEARCH CONDUCTED BY THE OFFICIALS OF INCOME TAX DEPARTMENT AT HIS RESIDENTIAL AND BUSINESS PREMISES ON 10.12.2002 WAS DECLARED ILLEGA L BY HONBLE ALLAHABAD HIGH COURT AND THEREFORE ANY MATERIAL FOUND DURING THE C OURSE OF SEARCH PROCEEDINGS COULD NOT USED FOR THE PURPOSE OF ASSESSMENT PROCEE DINGS. 2. BECAUSE WITHOUT PREJUDICE TO THE GROUND NO.1 L EARNED CIT (APPEALS) ERRED IN NOT APPRECIATING THAT AS THE ENTIRE SEARCH OPERATION ST OOD DECLARED ILLEGAL THERE WAS NO PRESUMPTION IN TERMS OF SECTION 132(4A)/292C OF THE ACT AVAILABLE TO THE AO WHILE MAKING REGULAR ASSESSMENT OF HIS INCOME FOR A SSESSMENT YEAR UNDER CONSIDERATION. 3. BECAUSE ON A DUE CONSIDERATION OF THE FACTS CI RCUMSTANCES AND LEGAL POSITION LEARNED CIT (APPEALS) ERRED IN NOT DELETING THE ENT IRE ADDITION OF RS.1 193 270/- TOWARDS GROSS PROFIT ON ALLEGED UNACCOUNTED SALES O F RS.3 200 000/-. WHILE UPHOLDING PART OF THE ADDITION LEARNED CIT (APPEAL S) ERRED IN NOT APPRECIATING :- (A) THAT THE PAPER NO. 27 TO 57 SEIZED FROM FACTORY PREMISES WERE NEITHER IN THE HANDWRITING OF THE APPELLANT NOR FOUND IN HIS P OSSESSION AND FURTHER AS SEARCH PROCEEDINGS STOOD VITIATED BY THE ORDER OF H ONBLE ALLAHABAD HIGH COURT THE SAID SEIZED PAPERS COULD NOT BE RELIED U PON TO SUSTAIN EVEN PART OF THE ADDITION OF RS.1 193 270. (B) THAT THERE WAS NO EVIDENCE MUCH LESS THE CORRO BORATIVE EVIDENCE OF SALE PURCHASE OR MANUFACTURING OF GOODS OUTSIDE THE BOO KS OF ACCOUNTS. (C) THAT THE AUTHOR OF SEIZED PAPER WAS NEVER EXAMI NED BY THE AO WITH REGARD TO THE VERACITY OF CONTENTS THEREOF. (D) THAT NO MANUFACTURING ACTIVITIES OUTSIDE THE BO OKS OF ACCOUNTS WERE FOUND AT THE TIME OF SEARCH PROCEEDINGS AND FURTHER NO EX CESS STOCK WAS FOUND AT THE TIME OF SEARCH PROCEEDINGS. (E) THAT DURING THE COURSE OF SURVEY CONDUCTED BY S .I.B OF U.P. TRADE TAX ON 05.08.2002 NO DISCREPANCY IN THE STOCK OR MANUFACT URING OUTSIDE BOOKS OF ACCOUNTS WAS FOUND. (F) THAT SURRENDER OF RS.166 057 TO COVER ANY DISCR EPANCY IN STOCK OR OTHER ITEMS IN THE RETURN OF BLOCK ASSESSMENT WAS ON PREC AUTIONARY MEASURE AND COULD NOT BE HELD AS ADMISSION OF THE APPELLANT OF MAKING THE ALLEGED SALES OF RS.3 200 000/- OR PART THEREOF OR MAKING P ROFIT OF RS.1 193 270/- OR PART THEREOF OR OF ENGAGING IN MANUFACTURING ACT IVITIES OUTSIDE THE BOOKS OF ACCOUNTS. 3 (G) THAT THE GROUND NO. 13 RAISED BY THE APPELLANT BEFORE CIT (APPEALS) RELIED BY HER TO SUSTAIN PART OF ADDITION WAS AGAIN RAISED BY WAY OF ABUNDANT CAUTION AND TO AVOID DOUBLE TAXATION AND SAME COULD NOT BE RELIED UPON TO HOLD THE ADMISSION OF APPELLANT. (H) THAT THE ADDITION OF RS.1 193 270/- AS A WHOLE WAS BASED ON CONJECTURES SURMISES AND WAS LIABLE TO BE DELETED IN TOTO. 4. BECAUSE IN THE FACTS AND CIRCUMSTANCES OF THE C ASE LEARNED CIT (APPEALS) ERRED IN CONFIRMING ADDITION OF RS.38 300/- TOWARDS EXPEN DITURE ON PURCHASE OF SAREES WITHOUT PROPERLY APPRECIATING THE CONTENTIONS OF TH E APPELLANT AND MORE PARTICULARLY IN VIEW OF THE FACT :- (A) THAT THE SEIZED PAPER NO.16 OF ANNEXURE A-2 WAS A DUMB PAPER LEFT BY SOME AT THE FACTORY PREMISES AND THE SAME COULD NOT BE RELIED UPON TO MAKE THE IMPUGNED ADDITION. (B) THAT THE SELLER OF THE SAID BILL WAS NEVER EXAM INED WITH REGARD TO THE VERACITY OF FACTS STATED THEREIN. (C) THAT NO CORROBORATIVE EVIDENCE OF PURCHASE OR C ONSUMPTION OF SAREE WAS BROUGHT ON RECORD BY THE AO. (D) THAT THE ADDITION WAS ITSELF STATED TO BE MADE ON POSSIBILITY OF SUCH PURCHASE FOR SALES PROMOTION AND THEREOF BASED ON CONJECTURES AND SURMISES ONLY. 5. BECAUSE IN THE FACTS AND CIRCUMSTANCES OF THE C ASE LEARNED CIT (APPEALS) ERRED IN CONFIRMING ADDITION OF RS.101 209/- TOWARDS THE EXPENDITURE INCURRED ON T- SHIRTS WITHOUT PROPERLY APPRECIATING THE CONTENTION S OF THE APPELLANT MORE PARTICULARLY IN VIEW OF THE FACT :- (A) THAT THE SEIZED PAPER WAS NEITHER IN THE HANDWR ITING OF THE APPELLANT NOR FOUND IN HIS POSSESSION AND NO PRESUMPTION COULD BE DRAWN AGAINST HIM IN LAW ON THE BASIS OF SUCH PAPER. (B) THAT THERE WAS NO CORROBORATIVE EVIDENCE OF INC URRING THE EXPENDITURE STATED IN THE SAID SEIZED PAPER. (C) THAT WHATEVER EXPENDITURE WAS INCURRED BY THE A PPELLANT ON PURCHASE OF T- SHIRTS THE SAME WAS RECORDED IN HIS BOOKS OF ACCOU NTS. (D) THAT THE CORRESPONDING BALANCE T-SHIRTS AS STAT ED IN THE SAID SEIZED PAPER WERE ALSO NOT FOUND DURING THE COURSE OF SEARCH PRO CEEDINGS. 4 (E) THAT THE ADDITION OF RS.101 209/- WAS BASED ON CONJECTURES AND SURMISES AND WAS LIABLE TO BE DELETED. 6. BECAUSE IN THE FACTS AND CIRCUMSTANCES OF THE C ASE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.32 597/- TOW ARDS THE ADDITION MADE BY AO TOWARDS UNDISCLOSED INVESTMENT IN THE SCENTS FOUND AT RESIDENTIAL PREMISES OF THE APPELLANT AS BUSINESS PERQUISITE CHARGEABLE TO TA X UNDER SECTION 28(IV) OF THE ACT WITHOUT APPRECIATING THE FACT :- (A) THAT THE SCENTS FOUND WERE NOT MEANT FOR ANY PE RSONAL USE OF THE APPELLANT WHICH COULD GIVE RISE TO TAXABILITY UNDER SECTION 2 8(IV) OF THE ACT BUT WERE SAMPLES GIVEN BY THE SUPPLIERS OF SCENTS FOR THE PU RPOSE OF THE BUSINESS. (B) THAT PROVISION OF SECTION 28(IV) OF THE ACT WER E NOT APPLICABLE IN THE CASE. (C) THAT THE SCENTS RECEIVED BY THE APPELLANT WERE EITHER USELESS (FOR WHICH NO VALUE COULD BE ASSESSED AS PERQUISITE) OR COULD BE USED FOR THE PURPOSE OF BUSINESS (IN WHICH CASE CORRESPONDING DEDUCTION OU GHT TO HAVE BEEN ALLOWED). (D) THE ADDITION AS A WHOLE WAS LIABLE TO BE DELETE D. 7. BECAUSE ON DUE CONSIDERATION OF FACTS CIRCUMSTA NCES OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE APPELLANT AND THE SUBMISSI ON MADE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION TO THE E XTENT OF RS.700 000/- TOWARDS THE GIFTS RECEIVED BY THE APPELLANT FROM :- (A) SRI ANUJ KUMAR AGARWAL AMOUNTING TO RS.300 000/ - (B) SRI BHIK CHAND AGARWAL AMOUNTING TO RS.200 000/ - (C) SRI HARI BABU AGARWAL AMOUNTING TO RS.200 000/- 8. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS LAW AND PRINCIPLES OF NATURAL JUSTICE. 3. THE REVENUE HAS IN ITS CROSS APPEAL RAISED THE FOLLOWING GROUNDS:- 1. THAT THE CIT(A)-1 AGRA HAS ERRED IN LAW AND ON FACTS AND CIRCUMSTANCE OF THE CASE IN DELETING THE ADDITION OF RS.73 780/- MADE O N ACCOUNT OF UNEXPLAINED EXPENDITURE IGNORING THE FACTS THAT PAYMENT MADE TO 1054 LABOURS @ 70/- PER DAY 5 WAS NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASS ESSES AND THERE WAS NO SUPPORTING EVIDENCE PUT FORTH BY THE ASSESSEE WITH THE GROUND OF APPEAL; 2. THAT THE CIT (A)-1 AGRA HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.14 24 552/- IN RESPECT OF UNEXPLAINED INVESTMENT IN JEWELLERY IGNORING THE FACTS THAT ASS ESSES HAD NOT BEEN ABLE TO FILE ANY EVIDENCE THAT OUT OF JEWELLERY FOUND FROM HIS R OOM HOW MUCH JEWELLERY BELONGS TO OTHERS. HE HAD ALSO NOT BEEN ABLE TO EX PLAIN SATISFACTORY THE SOURCE OF INVESTMENT; 3. THAT THE LD. CIT(A)-1 AGRA HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITIONS OF RS.3 00 00 0/ -MADE ON ACCOUNT OF BOGUS GIFTS RECEIVED BY THE ASSESSEE IGNORING THE FACTS T HAT THE GENUINENESS OF THE GIFT AND THE CREDITWORTHINESS OF THE DONOR HAD NOT BEEN PROVED AND THERE WAS NO OCCASION TO GIVE SUCH SUBSTANTIAL GIFT; 4. THAT THE LD. CIT (A)-1 AGRA HAS ERRED IN LAW AN D ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITIONS OF RS.50 000/ - MADE ON ACCOUNT OF PREMIUM PAID ON GIFTS IGNORING THE FACTS THAT PREMIUM WAS P AID BY THE ASSESSEE ON BOGUS GIFT ENTRIES FOR WHICH GENUINENESS OF THE GIFT AND THE CREDITWORTHINESS OF THE DONORS HAD NOT BEEN PROVED AND OUT OF THE ADDITION MADE ON A/C OF GIFTS OF 10 LAKH ADDITION OF RS.7 00 000/- WAS CONFIRMED BY TH E LD. CIT (A)-1 AGRA HERSELF; 5. THAT THE LD .CIT (A)-1 AGRA HAD ERRED IN LAW AN D ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITIONS OF RS.50 156/ - MADE ON ACCOUNT OF EXCISE DUTY @ 16% OF THE FINISHED GOODS IGNORING THE FACTS THAT THE EXCISE DUTY WAS CHARGEABLE DURING THE YEAR AS ON 31-03-2003. IT HAS NO RELATION WHETHER DUTY WAS PAYABLE IN THE NEXT YEAR OR NOT; 6. THAT THE ORDER OF THE CIT(A)-1 AGRA BEING ERRON EOUS IN LAW AND ON THE FACTS OF THE CASE BE SET ASIDE AND THAT THE ORDER OF THE AO BE RESTORED. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD OR DELETE OR MODIFY OR ALTER ANY ONE OR MORE GROUNDS(S) DURING THE APPEAL PROCEEDINGS. 4. THE BRIEF FACTS OF THE CASE ARE THAT THERE HAD B EEN SEARCH IN THE CASE OF THE ASSESSEE ON 10.12.2002. THE ASSESSEE FILED A WRIT PETITION BEA RING NO.951 OF 2003 BEFORE THE ALLAHABAD HIGH COURT CHALLENGING THE SEARCH AND SEIZURE OPERA TION WHICH WAS HELD TO BE ILLEGAL VIDE HONBLE HIGH COURTS ORDER DATED 19.05.2004 AND THE COURT DIRECTED THE DEPARTMENT TO RELEASE CASH ARTICLE AND DOCUMENTS SEIZED DURING THE COURS E OF SEARCH. IN THE MEANTIME THE ASSESSEE 6 SUBMITTED THE STOCK RETURNED FOR THE BLOCK PERIOD D ECLARING AN UNDISCLOSED INCOME AMOUNTING TO RS.11 91 000/-. THE REGULAR RETURN OF INCOME FOR T HE ASSESSMENT YEAR 2003-04 WAS FILED ON 27.11.2003 AT AN INCOME OF RS.23 46 160/- AND AGRIC ULTURAL INCOME OF RS.59 800/-. THE ASSESSEE REVISED THE SAID RETURN SUBSEQUENTLY ON 13.09.2004 AT RS.32 22 932/- AND AGRICULTURAL INCOME AT RS.59 800/-. THE ASSESSING OFFICER ASSESSED THE IN COME UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 (THE ACT HEREINAFTER) AFTER CONSIDERING THE DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH AT RS.72 30 350/-. THE RETURN OF INCOME REVISED RETURN AND INCOME ASSESSED ARE DETAILED AS UNDER :- SL. NO. PARTICULARS ORIGINAL RETURN REVISED RETURN ASSESSED INCOME 1. INCOME AS PER PROFIT & LOSS ACCOUNT OF PROPRIETORSHIP CONCERN SHREE GIRRAJ SUPARI TRADERS 2 303 267 2 303 766 2 303 766 2. INCOME FROM SHORT TERM CAPITAL GAINS 4 900 4 900 4 900 3. INCOME FROM OTHER SOURCES INTEREST 41 748 DIVIDEND 7 055 GROUND RENT 24 000 72 803 72 083 72 083 4. INVESTMENT IN SHARES IN THE NAME OF MINORS 28 800 CASH FOUND AT RESIDENCE 651 643 EXPENDITURE REFLECTED BY BILL OF GOSWAMI 30 272 INCOME SURRENDERED TO COVER UP ANY DISCREPANCY IN STOCK OR ANY OTHER ITEM DURING WHOLE OF BLOCK PERIOD 166 057 876 772 876 772 5. INCOME FROM UNDISCLOSED SALES 1 193 270 UNEXPLAINED EXP. AS PER PAGE 16 38 300 UNEXPLAINED EXP. AS PER PAGE 20 101 209 UNEXPLAINED EXP. AS PER PAGE 27-57 99 780 7 UNEXPLAINED EXPENDITURE IN SCENT 32 597 UNEXPLAINED CASH AT FACTORY 15 000 UNEXPLAINED INVESTMENT IN JEWELLERY 1 424 552 GIFTS 1 000 000 PREMIUM ON GIFT 50 000 EXCISE DUTY ON CLOSING STOCK 50 156 - - 4 004 864 6 GROSS TOTAL INCOME 2 380 970 3 257 742 7 262 606 7. DEDUCTION UNDER CHAPTER VIA UNDER SECTION 80CCC 9 760 UNDER SECTION 80G 13 050 UNDER SECTION 80L 12 000 34 810 34 810 32 260 8 TOTAL INCOME ROUNDED OFF 2 346 160 2 346 160 3 222 932 3 222 930 7 230 346 7 230 350 5. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) REDUCED THE ASSESSED INCOME AT RS.48 30 070/- PARTLY ALLOWING THE APPEA L OF THE ASSESSEE. 6. THE GROUND NOS.1 & 2 IN ASSESSEES APPEAL SINCE NOT PRESSED STAND DISMISSED AS NOT PRESSED. 7. GROUND NO.3 IN ASSESSEES APPEAL RELATES TO THE SUSTENANCE OF THE PART OF THE ADDITION OUT OF THE ADDITION OF RS.11 93 270/- MADE BY THE ASSES SING OFFICER. 8. THE FACTS RELATING TO THIS ADDITION ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF MANUFACTURING AND SALE OF SCENTED SUPARI IN HIS PROPRIETORSHIP CONCERN M/S. SHREE GIRRAJ SUPARI TRADERS MATHURA. THE ASSESSEE HAS SHOWN GROSS PROFIT @ 37.29%. THE ASSESSING OFFICER ON THE BASIS OF THE BACKSIDE OF THE PAPER NOS.27 TO 57 OF 8 ANNEXURE FOUND FROM THE FACTORY PREMISES TOOK THE VIEW THAT THESE PAPERS CONSIST OF THE QUANTITY OF THE FINISHED GOODS MANUFACTURED AND SOL D BY THE ASSESSEE AND HE WORKED OUT THE VALUE THEREOF AT RS.31 96 975/- AND TOOK THE VIEW T HAT THE ASSESSEE HAS MADE THE SALES OUTSIDE THE BOOKS FOR RS.32 00 000/- AND ON THIS BY APPLYING A GROSS PROFIT RATE @ 37.29% THE ASSESSING OFFICER ADDED A SUM OF RS.11 93 270/- IN THE INCOM E OF THE ASSESSEE. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) ESTIMATED THE UNACCOUNTED TURNOVER AT RS.27 83 725/- AND REDUCED THE GROSS PROFIT AT RS.10 38 051/- BY A PPLYING A GROSS PROFIT RATE @ 37.29% ON RS.27 83 725/-. 9. THE LD. A.R. BEFORE US VEHEMENTLY CONTENDED THAT THE ASSESSEE WHILE REVISING THE RETURN HAS ALREADY SURRENDERED THE INCOME TO THE EXTENT OF RAS.8 76 772/- IN THE FORM OF INVESTMENT CASH & EXPENDITURE DETAILS OF WHICH ARE GIVEN IN T HE REVISED RETURN AT SL. NO.4. IT WAS POINTED OUT THAT THE ASSESSEE EARNED THE UNDISCLOSED INCOME FRO M UNACCOUNTED RETURN. THE INCOME WOULD HAVE EITHER BEEN INVESTED OR SPENT BY THE ASSESSEE. THERE HAD BEEN SEARCH IN THE CASE OF THE ASSESSEE. DURING THE COURSE OF SEARCH THE REVENUE HAS FOUND OUT ALL THE INVESTMENTS MADE BY THE ASSESSEE AS WELL AS THE EXPENSES INCURRED BY THE AS SESSEE. THE INVESTMENTS WERE FOUND IN SHARES IN THE NAME OF CHILDREN TO THE EXTENT OF RS.28 800/ - CASH WAS FOUND TO THE EXTENT OF RS.6 51 643/- EXPENDITURE INCURRED OUTSIDE THE BOO KS WERE RS.30 272/-. IN ADDITION TO THIS THE ASSESSEE HAS ALSO SURRENDERED A SUM OF RS.1 66 057/ - TO COVER UP ANY DISCREPANCY. THE ASSESSING OFFICER EVEN THOUGH REJECTED THE BOOKS OF ACCOUNTS BUT HAS COMPLETED THE ASSESSMENT ON THE BASIS OF THE BOOKS OF ACCOUNTS. THE FACTS O F THE REJECTION OF BOOKS OF ACCOUNTS ARE NOT THERE. THERE WAS NO SHORTAGE OF THE STOCK AS POINT ED OUT BY THE ASSESSING OFFICER ON THE BASIS OF WHICH THE ASSESSING OFFICER TREATED THAT THE ASSESS EE HAS MADE THE SALES OUTSIDE THE BOOKS OF 9 ACCOUNT. THE ASSESSEE MADE SUBMISSIONS BEFORE THE ASSESSING OFFICER FROM TIME TO TIME IN RESPECT OF THE RECONCILIATION OF THE STOCK. THE PA PER ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS ESTIMATED THE SALES ARE IN THE HANDWRITING OF S HRI RAJ KISHORE SHARMA. THIS PAPER ONLY CONTAINS THE NAME OF THE ITEMS BUT DOES NOT HAVE AN Y DESCRIPTION ABOUT THE SALES MADE BY THE ASSESSEE. STATEMENT OF SHRI RAJ KISHORE SHARMA WAS RECORDED AND IN THE STATEMENT SHRI RAJ KISHORE SHARMA HAS CATEGORICALLY STATED THAT HE IS NOT AWARE OF THE CONTENTS OF THE PAPER. IT WAS POINTED OUT THAT SALES TAX ASSESSMENT OF THE ASSESS EE WAS COMPLETED AFTER THE SALES TAX SURVEY TAKEN PLACE IN THE CASE OF THE ASSESSEE BUT NO ADVE RSE MATERIAL WAS POINTED OUT IN THE SALES TAX ASSESSMENT. FOR THIS OUR ATTENTION WAS DRAWN TO T HE SALES TAX ASSESSMENT COPY OF WHICH IS AVAILABLE AT PAGE NO.80 OF THE PAPER BOOK. IT WAS POINTED OUT THAT THE SALES TAX SURVEY HAS TAKEN PLACE PRIOR TO THE SEARCH IN THE CASE OF THE ASSESS EE. ALTERNATELY IT WAS CONTENDED THAT EVEN IF IT IS TAKEN THAT IT REPRESENTS THE STOCK THE CIT(A) H AS WORKED OUT THE MARKET VALUE ON THE BASIS OF THE M.R.P. AT RS.27 83 725/-. NO DOUBT THE ASSESS EE HAS SHOWN THE GROSS PROFIT DURING THE YEAR @ 37.29%. THE GROSS PROFIT EARNED BY THE ASSESSEE CANNOT BE CONSTANT. THERE CANNOT BE ANY THUMB RULE WHICH MAY SPECIFY THAT THE GROSS PROFIT WILL BE DERIVED AT A PARTICULAR RATE. THE ASSESSEE HAS ALREADY SURRENDERED A SUM OF RS.8 76 7 72/- AS ITS INCOME AND THE INCOME SO SURRENDERED COULD HAVE BEEN EARNED ONLY OUT OF SUCH UNACCOUNTED SALES. THE M.R.P. PRINTED ON THE POUCHES AND THE BAGS REPRESENTS ONLY THE RETAIL PRICE AND THE ASSESSEE HAS TO GIVE INCENTIVE DISCOUNT EVEN ON TURNOVER BASIS. THIS IS ESTIMATED BY THE CIT(A) WHICH ALSO AT A HIGHER SIDE. THERE CANNOT BE ANY SEPARATE ADDITION FOR THE ASSET S AND EXPENDITURE ON ONE SIDE AND THE INCOME ON THE OTHER SIDE. IT WILL TANTAMOUNT TO BE A DOUB LE ADDITION. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW. NO DOUBT DURING THE COURSE OF SEARCH CERTAIN PAPERS WERE SEIZED WHICH CONTAINED THE DETAILS OF T HE STOCK. THE ASSESSING OFFICER HAS ESTIMATED THE UNACCOUNTED SALES ON THE BASIS OF THESE SEIZED PAPERS BEING BACK OF PAPER NOS.27 TO 57. THE SEIZED PAPER NOS.27 TO 57 (COPIES OF WHICH ARE AVAI LABLE AT PAGE NOS.23 TO 53 OF THE PAPER BOOK) PERTAINED TO STOCKS. IT CANNOT BE REGARDED TO BE T HE ROUGH NOTING MADE BY ONE SHRI RAJ KISHORE SHARMA. THESE PAPERS CONTAIN DATE-WISE DETAILS IN RESPECT OF DIFFERENT KIND OF SUPARIS ALONG WITH M.R.P. AND THEIR RESPECTIVE PACKET NUMBER. THERE I S A CLEAR CUT FINDING GIVEN BY THE CIT(A) ON THE BASIS OF THE PAGE NOS.27 TO 57 SEIZED THAT THE SE STOCKS DID NOT TALLY AT ALL WITH THE STOCKS AS PER THE REGULAR STOCK REGISTER MAINTAINED BY THE AS SESSEE. THE LD. A.R. EVEN THOUGH VEHEMENTLY ARGUED THAT THIS STOCK DOES NOT REPRESENT THE UNACC OUNTED STOCK OR SALES MADE BY THE ASSESSEE BUT HE COULD NOT FILE ANY COGENT MATERIAL OR EVIDENCE W HICH MAY PROVE THAT THE STOCK SHOWN ON THESE PAPERS ARE DULY ENTERED IN THE REGULAR STOCK REGIST ER MAINTAINED BY THE ASSESSEE. WE ALSO DID NOT FIND ANY FORCE IN THE SUBMISSION OF THE LD. A.R. TH AT SINCE THERE IS NO ADDITION FOR THE UNACCOUNTED SALES IN THE SALES TAX ASSESSMENT WHERE THE SURVEY HAS TAKEN PLACE PRIOR TO THE SEARCH ON 05.08.2002 NO ADDITION CAN BE MADE IN TH E CASE OF THE ASSESSEE ON THE BASIS OF PROFIT EARNED ON UNACCOUNTED SALES. THE PAPERS SEIZED REL ATE FOR THE PERIOD 27.11.2002 TO 05.1.2.2002 I.E. FOR THE PERIOD SUBSEQUENT TO THE DATE OF SURVE Y CONDUCTED UNDER THE SALES TAX ACT. WE THEREFORE REJECT THIS PLEA TAKEN BY THE LD. A.R. IT IS ALSO NOT DENIED THAT SHRI RAJ KISHORE SHARMA WAS THE EMPLOYEE OF THE ASSESSEE DURING THE PERIOD FOR WHICH THE PAPERS RELATE. UNDER THESE FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE FINDING OF THE CIT(A) THAT THE SEIZED PAPER NOS.27 TO 57 PERTAINED TO THE STOCK WHICH IS NOT ENTERED IN THE REGULAR BOOKS OF ACCOUNTS AND IT REPRESENTS THE UN ACCOUNTED SALES MADE BY THE ASSESSEE. THE 11 WORKING OF THIS PAPER IS DULY REPRODUCED AT PAGE NO S.51 & 52 OF THE ASSESSMENT ORDER. WE ALSO NOTED THAT THE ASSESSEE BEFORE THE CIT(A) HAS POI NTED OUT CERTAIN MISTAKES IN THE WORKING OF THE ASSESSING OFFICER WHILE ESTIMATING THE VALUE OF ITS INVENTORY IN THIS STATEMENT AT RS.31 96 975/-. HE HAS DULY VERIFIED AND CAME TO THE CONCLUSION THA T THE ASSESSING OFFICER HAS OMITTED TO CONSIDER CERTAIN ENTRIES ON SEIZED PAPERS NAMELY PA GE NOS. 48 52 53 43 45 27 28 31 37 38 WHICH ARE PART AND PARCEL OF THE SEIZED PAPERS BEIN G NOS.27 TO 57 AND ON THAT BASIS THE ASSESSING OFFICER AFTER CONSIDERING THE FACTS OF THE ENTRIES ON THESE PAGES WHICH WERE LEFT OUT BY THE ASSESSING OFFICER WORKED OUT THE ESTIMATED TURNOVE R AT RS.27 83 725/- INSTEAD OF RAS.31 96 975/-. THE ASSESSING OFFICER ADDED THE I NCOME BY APPLYING A GROSS PROFIT RATE @ 37.29% AMOUNTING TO RS.11 93 270/-. THE CIT(A) DIR ECTED THE ASSESSING OFFICER TO COMPUTE THE GROSS PROFIT ON THE CORRECT UNACCOUNTED TURNOVER OF RS.27 83 725/- @ 37.29% ALTHOUGH HAVE PRESUMED AS IF THE ASSESSEE WOULD HAVE EARNED THE G ROSS PROFIT AT THE SAME RATE ON ALL THE SALES MADE BY THE ASSESSEE. IN OUR OPINION THERE IS NO THUMB RULE THAT THE GROSS PROFIT WILL REMAIN STATIC ON ALL THE SALES. THE GROSS PROFIT IS EFFEC TED NOT ONLY BY THE INPUT COST INVOLVED FOR THE PRODUCT MANUFACTURED AND SOLD BY THE ASSESSEE BUT I T IS ALSO EFFECTED BY THE SALES VALUE OF THE PRODUCT SO REALISED BY THE ASSESSEE. THE SALES VAL UE IS ALWAYS AFFECTED IN A COMPETITIVE MARKET BY THE DISCOUNT AND INCENTIVES GIVEN BY A BUSINESSM AN TO ITS DEALERS AND THE CUSTOMERS. IT IS ALSO A GENERAL PRACTICE THAT WHEN THE SALES ARE MADE OUT SIDE THE BOOKS OF ACCOUNTS THEY ARE MADE AT A LESSER PRICE. THIS IS A SIMPLE ACCOUNTING PRINCIPL E THAT WHATEVER INCOME IS EARNED BY AN ASSESSEE THE SAME IS EITHER CONSUMED OR INVESTED IN SHORT TE RM OR LONG TERM INVESTMENTS. IT IS A FACT THAT THERE HAD BEEN SEARCH IN THE CASE OF THE ASSESSEE. CERTAIN INCRIMINATING DOCUMENTS WERE FOUND. ASSETS WERE ALSO FOUND AND SEIZED. ON THE BASIS OF THE INCRIMINATING DOCUMENTS AND THE PAPERS SEIZED FROM THE POSSESSION OF THE ASSESSEE THE REVE NUE HAS WORKED OUT THE UNDISCLOSED 12 INVESTMENT AS WELL AS THE EXPENDITURE INCURRED BY T HE ASSESSEE. THIS IS A RECOGNIZED PRINCIPLE OF THE ACCOUNTING THAT WHERE THE ASSESSEE IS NOT MAINT AINING THE BOOKS OF ACCOUNTS THE INCOME IS ALWAYS COMPUTED ON THE BASIS OF INCREASE IN THE CA PITAL OF THE ASSESSEE BETWEEN THE STATEMENT OF AFFAIRS PREPARED FOR THE TWO PERIODS ADDED BY DRAWI NG OR THE PERSONAL EXPENSES MADE BY THE ASSESSEE DURING LATER PERIOD. THEREFORE WE ARE OF THE VIEW THAT WHATEVER UNDISCLOSED INCOME IS EARNED BY THE ASSESSEE THE SAME IS EITHER TO BE IN VESTED IN SOME ASSETS BY THE ASSESSEE OR IT HAS TO BE SPENT BY HIM FOR INCURRING THE UNACCOUNTED EX PENDITURE OR FOR MEETING OUT PERSONAL EXPENSES. WE NOTED THAT IN THIS CASE THE ASSESSING OFFICER HAS ADDED IN THE INCOME OF THE ASSESSEE UNACCOUNTED INVESTMENTS UNACCOUNTED EXPE NDITURES AS WELL AS ESTIMATED INCOME ON THE UNDISCLOSED SALES WHICH IN OUR OPINION CANNOT BE SUSTAINED IN LAW. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO SUSTAIN THE ADDITION ONLY TO THE EXTENT OF UNACCOUNTED INVESTMENT UNACCOUNTED ASSETS AND UNAC COUNTED EXPENDITURE FOUND AND SUSTAINED BY US. WE HAVE SUSTAINED THE ADDITION TO THE EXTEN T OF RS.91 617/- OUT OF RS.1 01 209/- TAKEN IN GROUND NO.5. IN ADDITION TO THIS THE ADDITION OF RS.3 600/- HAS ALSO BEEN SUSTAINED BY THE CIT(A) ON WHICH THE ASSESSEE WAS NOT IN APPEAL IN RESPECT OF UNRECORDED SALARY PAID TO SHRI RAJ KISHORE SHARMA. THUS THE TOTAL ADDITION OF RS.95 217/- RE MAINS SUSTAINED OVER AND ABOVE THE SUM OF RS.8 76 772/- SURRENDERED BY THE ASSESSEE BY FILING A REVISED RETURN BY WAY OF UNACCOUNTED EXPENDITURE UNACCOUNTED CASH AND UNACCOUNTED INVES TMENT FOUND. THUS THE INCOME EARNED FROM UNDISCLOSED SALES REMAINS TO BE RS.9 71 989/- (8 76 772 + 95 217/-). THIS INCOME HAS TO BE REDUCED BY THE SUM OF RS.8 76 772/- AS SURRENDERED BY THE ASSESSEE FOR WHICH THE ASSESSEE WILL GET THE SET OFF. ONLY THE SUM OF RS.95 217/- REMAI NS TO BE SUSTAINED OUT OF THE INCOME ON THE UNDISCLOSED SALES. SINCE WE HAVE SEPARATELY SUSTAI NED THE ADDITION OF RS.91 617/- AND RS.3 600/- BY THE CIT(A) IN OUR OPINION THE ASSESSEE WILL AL SO GET SET OFF OF THIS INCOME AGAINST THOSE 13 ADDITIONS AND THERE WILL NOT BE SEPARATE ADDITIONS FOR THIS INCOME IN CASE THE INCOME SURRENDERED IN THE REVISED RETURN OF RS.8 76 772/- AND THE SUM OF RS.1 01 209/- AND RS.3 600/- ARE SEPARATELY ADDED IN THE INCOME ASSESSED. 11. GROUND NO.4 IN ASSESSEES APPEAL RELATES TO THE SUSTENANCE OF ADDITION OF RS.38 300/-. THIS ADDITION HAS BEEN MADE BY THE ASSESSING OFFICE R ON THE BASIS OF PAPER NO.16 OF ANNEXURE A-2 FOUND FROM THE FACTORY PREMISES RELATING TO THE PURCHASE OF 411 SARIS @ RS.80/- PER SARI ON 16.11.2002 FROM M/S. NAVRATAN TEXTILES INDORE. 12. THE LD. A.R. REITERATED THE SUBMISSIONS MADE BE FORE THE ASSESSING OFFICER NAMELY THAT THIS PAPER IS NOT IN THE NAME OF THE ASSESSEE AND DOES NOT CONTAIN THE NAME AND ADDRESS OF THE ASSESSEE AND THE PAPER IS OLD BALANCE OF RS.5 000/- . THE ASSESSEE IS NOT TRADING IN THE SARI. THE QUESTION OF ANY OLD BALANCE DOES NOT ARISE. THE AS SESSEE IS NOT GIVEN ANY GIFT ETC. AND EITHER SUCH GIFT ETC. WERE GIVEN BY THE ASSESSEE IN THE EARLIER YEAR. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER OF THE ASSESSING OFFICER. 13. AFTER CAREFULLY CONSIDERING THE ARRIVAL SUBMISS IONS WE ARE OF THE VIEW THAT THIS PAPER EVEN THOUGH FOUND FROM THE FACTORY PREMISES OF THE ASSESSEE DOES NOT BEAR THE NAME AND ADDRESS OF THE ASSESSEE. THEREFORE IT CANNOT BE REGARDED TO BE BELONGING TO THE ASSESSEE ESPECIALLY WHEN THE ASSESSEE IS NOT TRADING IN SARIS AND THERE IS N O EVIDENCE THAT THE ASSESSEE HAS INCURRED SIMILAR EXPENSES IN THE EARLIER YEAR. THUS THIS ADDITION OF RS.38 800/- STANDS DELETED AND THIS GROUND IS ALLOWED. 14 14. GROUND NO.5 IN ASSESSEES APPEAL RELATES TO THE SUSTENANCE OF ADDITION OF RS.1 01 209/- INCURRED ON THE T-SHIRTS. THIS ADDITION HAS BEEN M ADE BY THE ASSESSING OFFICER ON THE BASIS OF PAPER NO.20 OF ANNEXURE A-2 FOUND FROM THE FACTORY PREMISES OF THE ASSESSEE. 15. THE FACTS RELATING TO THIS ADDITION ARE THAT TH E ASSESSING OFFICER NOTED FROM PAGE NO.20 OF ANNEXURE A-2 COPY OF WHICH IS AVAILABLE AT PAGE NO .55 OF THE PAPER BOOK FOUND FROM THE FACTORY PREMISES OF THE ASSESSEE THAT THIS PAPER CO NTAINS CALCULATION OF THE T-SHIRTS PURCHASED BY THE ASSESSEE. THE ASSESSEE STATED THAT THIS PAPER HAD NOTHING TO DO WITH THE BUSINESS OF THE ASSESSEE. THE PAPER WAS LYING CARELESSLY DOES NOT BEAR THE NAME OF THE ASSESSEE NOT EVEN IN THE HANDWRITING OF THE ASSESSEE OR HIS RELATED PERSONS. THE ASSESSEE HAS NOT MADE ANY INVESTMENT. THE ASSESSING OFFICER NOTED THAT THIS PAPER CONTAIN ED DETAILS OF DISTRIBUTION OF T-SHIRTS FROM 01- 11 TO 20-11 ON LABOUR ETC. DURING DAIWALI AND EVEN PAPER NO.23 OF ANNEXURE A-2 (AVAILABLE AT PAGE NO.56 OF THE PAPER BOOK) ALSO CONTAINS T-SHIRT S MUNNA SE PRINTED ON IT AND DISTRIBUTION OF THE SAME HOW CARRIED OUT IN DIFFERENT CITIES. I T WAS NOTED BY HIM THAT THE ASSESSEE HAS SHOWN PURCHASE OF 500 T-SHIRTS FROM M/S. OSWAL AGENCIES AGRA ON 20.10.2002 FOR RS.23 625/-. THEREFORE THE ASSESSING OFFICER WORKED OUT THE COS T OF ONE T-SHIRT AT RS.47.25. THE ASSESSING OFFICER WORKED OUT THE TOTAL T-SHIRTS AT 2642 AS TH E ASSESSEE HAS SHOWN IN THE BOOKS ONLY THE PURCHASE OF 500 T-SHIRTS. THEREFORE HE WORKED OUT THE COST OF 2142 T-SHIRTS AND ADDED IN THE INCOME OF THE ASSESSEE RS.1 01 209/- BEING THE EXPE NDITURE INCURRED BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS. THE ASSESSEE WENT IN APPEAL BEF ORE THE CIT(A). THE CIT(A) ALSO CONFIRMED THE ADDITION. 15 16. THE LD. A.R. REITERATED THE SUBMISSIONS MADE BE FORE THE ASSESSING OFFICER WHILE THE LD. D.R. RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE SEIZED PAPERS WHICH I S AVAILABLE AT PAGE NOS.55 & 56 OF THE PAPER BOOK. WE NOTED FROM THE SEIZED PAPERS THAT IT CONT AINS TOTAL T-SHIRTS RECEIVED AT 2642 BUT IT INCLUDES 203 T-SHIRTS BEING THE OLD BALANCE AND 401 T-SHIRTS BEING THE BALANCE AS ON 20.11. THE OLD BALANCE IN OUR OPINION CANNOT BE RELATED TO T HE ASSESSMENT YEAR UNDER CONSIDERATION. WE ACCORDINGLY DELETE THE ADDITION OF RS.9 592/- (203 X 47.25) OUT OF THE SUM OF RS.1 01 209/- AND CONFIRM THE BALANCE ADDITION OF RS.91 617/- BEING T HE EXPENDITURE INCURRED BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS AS THE ASSESSEE COULD NOT BE ABLE TO PRODUCE ANY COGENT MATERIAL OR EVIDENCE WHICH MAY PROVE THAT THE EXPENDITURE INCUR RED BY THE ASSESSEE ON THE T-SHIRTS HAS DULY BEEN RECORDED BY HIM IN HIS REGULAR BOOKS OF ACCOUN TS. THE PAGE NO.22 GIVES THE DETAILS HOW THESE T-SHIRTS ARE BEING DISTRIBUTED AND IT HAS ALS O GIVEN THE DESCRIPTION OF DIWALI AS WELL AS SALES TAX. WE THEREFORE CONFIRM THE ADDITION OF RS.91 617/-. 18. GROUND NO.6 IN ASSESSEES APPEAL RELATES TO THE SUSTENANCE OF ADDITION OF RS.32 597/- INCURRED IN SCENT FOUND AT THE RESIDENTIAL PREMISE S OF THE ASSESSEE DURING THE COURSE OF SEARCH. 19. THE FACTS RELATING TO THIS GROUND ARE THAT DURI NG THE COURSE OF SEARCH AT RESIDENTIAL PREMISES OF THE ASSESSEE SOME SCENT WAS INVENTORISE D AS PER ANNEXURE-Z. THE ASSESSEE CONTENDED THAT THE INVENTORY OF THE SCENT WAS TAKEN IN ABSENCE OF ANY RESPONSIBLE PERSON. THE MATERIALS INVENTORISED THEREIN REPRESENT THE FREE S AMPLES SENT BY MANUFACTURERS FOR TESTING AND 16 DEVELOPING VARIOUS FLAVOURS WHICH WERE LYING IN THE RESIDENTIAL OF THE ASSESSEE. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE DID NOT DEN Y THAT THE SCENT RELATES TO HIS BUSINESS. THE VALUE OF SCENT WAS ESTIMATED BY THE ASSESSEE AT RS. 30 915/- WHEREAS THE INSPECTOR OF THE INCOME TAX ASCERTAINED THE VALUE AT RS.34 280/-. THE ASSE SSING OFFICER TOOK OUT THE AVERAGE AND ADDED A SUM OF RS.32 597/- IN THE INCOME OF THE ASSESSEE. WHEN THE MATTER WENT BEFORE THE CIT(A) THE CIT(A) CONFIRMED THE ADDITION UNDER SECTION 28( IV) OF THE ACT. 20. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE ORDERS OF THE AUTHORI TIES BELOW. WE NOTED THAT THE ADDITION IN THIS CASE HAS BEEN MADE MERELY ON THE BASIS OF CERT AIN SCENT BEING FOUND AT THE RESIDENTIAL PREMISES OF THE ASSESSEE WHICH WAS POINTED OUT BY T HE ASSESSEE TO BE THE FREE SAMPLES RECEIVED FROM THE MANUFACTURER. THE ASSESSING OFFICER ADDED THE SAME BY ESTIMATING THE MARKET VALUE IN THE INCOME OF THE ASSESSEE AS IF THE ASSESSEE HAS M ADE THE INVESTMENT. IN OUR OPINION THE ONUS IS ON THE REVENUE TO PROVE THAT THE ASSESSEE HAS MADE THE INVESTMENT. MERELY FREE SAMPLES OF THE SCENT WERE FOUND FROM THE PLACE OF THE ASSESSEE DOE S NOT MEAN THAT THE ASSESSEE HAS ACTUALLY MADE THE INVESTMENTS WHICH ARE NOT IN THE BOOKS OF ACCOUNTS MAINTAINED BY HIM. NO DOUBT THE FREE SAMPLES OF THE SCENT WERE FOUND DURING THE COU RSE OF SEARCH BUT THE SEARCH WAS HELD TO BE ILLEGAL BY THE HONBLE HIGH COURT. IN OUR OPINION ONCE THE SEARCH IS HELD TO BE ILLEGAL THE PRESUMPTION UNDER SECTION 292(C) WILL NOT BE AVAILA BLE TO THE ASSESSEE EVEN THOUGH THE MATERIAL OR THE OTHER VALUABLE ARTICLE FOUND DURING THE COUR SE OF SEARCH MAY BE USED BY THE REVENUE AS EVIDENCE. NO IOTA OF EVIDENCE WAS BROUGHT ON RECOR D WHICH MAY PROVE THAT THE ASSESSEE HAS MADE THE INVESTMENT IN THE FREE SAMPLE OF SCENT REC EIVED BY HIM. THE CIT(A) THEREFORE SUSTAINED THE ADDITION UNDER SECTION 28(IV) NOT UND ER SECTION 69 OF THE ACT. WE HAVE GONE 17 THROUGH THE PROVISIONS OF SECTION 28(IV) OF THE ACT . IN OUR OPINION THE FREE SAMPLES OF THE SCENT RECEIVED BY THE ASSESSEE AND PROCURED FROM THE RESI DENCE OF THE ASSESSEE CANNOT BE REGARDED TO BE THE BENEFIT ARISING FROM THE BUSINESS OR THE EXE RCISE OF THE PROFESSION. THESE SAMPLES WERE EVEN THOUGH LYING AT THE RESIDENCE OF THE ASSESSEE BUT WERE FOR THE PURPOSE OF TESTING AND DEVELOPING VARIOUS FLAVOURS FOR THE PURPOSE OF SUPA RI BUSINESS AND THEY HAVE BEEN GIVEN TO THE ASSESSEE DURING THE COURSE OF HIS ORDINARY BUSINESS . THIS FACT HAS NOT BEEN DENIED BY THE LD. D.R. OR THE AUTHORITIES BELOW. WE THEREFORE DELETE TH E ADDITION OF RS.32 597/-. THUS GROUND NO.6 STANDS ALLOWED. 21. GROUNDS NO.7 IN ASSESSEES APPEAL AND GROUND NO .3 IN REVENUES APPEAL PERTAINS TO THE COMMON ISSUE RELATING TO THE SUSTENANCE OF DELETION OF THE ADDITION OUT OF GIFTS RECEIVED BY THE ASSESSEE. 22. THE BRIEF FACTS RELATING TO THIS ISSUE ARISING OUT OF THE GROUND TAKEN BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE THAT THE ASSESSEE HAS RE CEIVED DURING THE YEAR GIFT OF RS.10 00 000/- FROM VARIOUS PERSONS NAMELY :- 1) SHRI ANUJ KUMAR AGRAWAL RS.3 00 000/- 2) SHRI SANTOSH KUMAR AGRAWAL RS.1 00 000/- 3) SHRI BHIK CHAND AGRAWAL RS.2 00 000/- 4) SMT. SUSHILA DEVI RS.2 00 000/- 5) SHRI HARI BABU AGRAWAL RS.2 00 000/- 23. ALL THESE GIFTS WERE RECEIVED THROUGH ACCOUNT P AYEE CHEQUES. THE ASSESSEE WAS ASKED TO PRODUCE THE DONORS. THE ASSESSEE PRODUCED SOME OF THE DONORS WHO CONFIRMED THAT THEY HAVE GIVEN GIFTS TO THE ASSESSEE. THE ASSESSING OFFICER WAS NOT SATISFIED ABOUT THE GENUINENESS OF THE 18 GIFT AND ACCORDINGLY HE TREATED ALL THE GIFTS TO BE NON-GENUINE AND MADE ADDITION OF RS.10 00 000/-. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) DELETED THE ADDITION OF THE GIFTS SO FAR THE GIFT RECEIVED FROM SHRI SANTOSH KUMAR AGRAWAL AND SMT. SUSHILA DEVI IS CONCERNED AND CONFIRMED THE ADDITION OF RS. 7 00 000/- IN RESPECT OF THE GIFTS RECEIVED FROM SHRI ANUJ KUMAR AGRAWAL SHRI BHIK CHAND AGRAW AL AND SHRI HARI BABU AGRAWAL. THE ASSESSES HAS COME IN APPEAL AGAINST THE SUSTENANCE OF THE ADDITION ON ACCOUNT OF GIFT AND THE REVENUE HAS COME IN APPEAL IN RESPECT OF DELETION O F ADDITION ON ACCOUNT OF GIFT RECEIVED FROM SHRI SANTOSH KUMAR AGRAWAL AND SMT. SUSHILA DEVI. 24. EACH OF THE GIFT IS BEING DEALT WITH AS UNDER : - RS.3 00 000/- FROM SHRI ANUJ KUMAR AGRAWAL . 25. THE SAID GIFT WAS ADDED BY THE ASSESSING OFFICE R HOLDING THE SAME TO BE NON-GENUINE. THE FACTS RELATING TO THIS GROUND WAS THAT THE ASSE SSEE RECEIVED THE GIFT OF RS.3 00 000/- FROM SHRI ANUJ KUMAR AGRAWAL VIDE CHEQUE DATED 14.09.200 2. STATEMENT OF THE DONOR WAS RECORDED ON 04.10.2005 WHO CONFIRMED ABOUT THE GIFT AFTER WI THDRAWING THE MONEY FROM HIS BUSINESS. THE DONOR WAS ASKED TO PRODUCE THE NOTE BOOK MAINTA INED FOR THE BUSINESS BUT HE DID NOT ATTEND. THEREAFTER THE ASSESSING OFFICER OBSERVED THAT THE CAPITAL ACCOUNT/BALANCE SHEET OF THE DONOR SHOWS A BALANCE OF RS.86 441/- ONLY AS ON 31.03.200 3. A LOAN OF RS.53 480/- IS ALSO SHOWN BUT THE ASSESSING OFFICER WAS NOT SATISFIED. THE ASSES SEE WENT IN APPEAL BEFORE THE CIT(A) WHO ALSO CONFIRMED THE ADDITION. 19 26. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. WE NOTED THAT SHRI ANUJ KUMAR AGRAWAL HAS GIVEN A GIFT OF RS.3 00 000/- VIDE ACCOUNT PAYEE CHEQUE NO.835811 DATED 14.09.2002 TO THE ASSESSEE WHICH WA S DULY CONFIRMED BY SHRI ANUJ KUMAR AGRAWAL. SHRI ANUJ KUMAR AGRAWAL IS DULY ASSESSED TO INCOME TAX. HIS STATEMENT WAS ALSO RECORDED BY THE ASSESSING OFFICER IN WHICH HE ACCEP TED THE FACT THAT HE HAS GIVEN GIFT TO THE ASSESSEE. HE ALSO EXPLAINED THAT THE GIFT WAS GIVE N BY WITHDRAWING MONEY OUT OF HIS PAWNING BUSINESS. HE ALSO SUBMITTED COPY OF CAPITAL ACCOUN T AND THE BALANCE SHEET. IN THE CAPITAL ACCOUNT HE HAS SHOWN WITHDRAWAL OF THE AMOUNT OF RS .3 00 000/- FOR THE GIFT. THERE WAS AN OPENING BALANCE IN THE CAPITAL ACCOUNT TO THE EXTEN T OF RS.3 63 074/- AND THE CLOSING BALANCE IN THE CAPITAL ACCOUNT WAS RS.56 442/-. THE ASSESSING OFFICER TREATED THE GIFT TO BE NON-GENUINE OBSERVING THAT THE GIFT IS DOUBTFUL AND THERE WAS N O OCCASION ON WHICH THE ASSESSEE WOULD HAVE RECEIVED SUCH A HUGE GIFT. SECTION 68 OF THE ACT L AYS DOWN THE RULE OF EVIDENCE BY WHICH NO DOUBT THE ONUS IS ON THE ASSESSEE TO PROVE THE IDE NTITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. IF ALL THE THREE INGREDIENTS ARE PROV ED NO ADDITION UNDER SECTION 68 CAN BE MADE. IN THIS CASE WE NOTED THAT THE IDENTITY OF SHRI ANUJ KUMAR AGRAWAL IS NOT DOUBTED AS HE IS AN INCOME TAX ASSESSEE. IT IS ALSO NOT DISPUTED BY TH E REVENUE THAT HE WAS HAVING OPENING BALANCE IN THE CAPITAL ACCOUNT TO THE EXTENT OF RS.3 63 074 /-. THE WITHDRAWAL FOR THE GIFT OF RS.3 00 000/- IS DULY REFLECTED IN THE CAPITAL ACCOUNT OF SHRI AN UJ KUMAR AGRAWAL. HIS STATEMENT WAS RECORDED AND HE HAS DULY CONFIRMED THE FACT OF MAKING THE GI FT TO THE ASSESSEE. THE AMOUNT HAS BEEN GIVEN THROUGH CHEQUE AND TRANSFER FROM THE ACCOUNT OF THE DONORS ACCOUNT TO THE ASSESSEE. THUS IN OUR OPINION THE ASSESSEE HAS DULY DISCHARGED TH E ONUS WHAT HE REQUIRED TO DISCHARGE AS PER PROVISIONS OF SECTION 68 OF THE ACT. THERE IS NO E VIDENCE ON RECORD THAT THE ASSESSEE HAS PAID THE CASH TO SHRI ANUJ KUMAR AGRAWAL WHICH MAY MAKE THE TRANSACTION TO BE NON-GENUINE. ONCE THE 20 ASSESSEE HAS SUBMITTED THE EVIDENCE THE ONUS GETS SHIFTED ON THE REVENUE. IN OUR OPINION THE ASSESSING OFFICER CANNOT TREAT THE GIFT TO BE NON-G ENUINE MERELY ON THE BASIS THAT THERE WAS NO OCCASION FOR THE ASSESSEE TO RECEIVE THE GIFT OR TH E GIFT IS OF HUGE AMOUNT. WE ACCORDINGLY DELETE THE ADDITION OF RS.3 00 000/-. RS.2 00 000/- FROM SHRI BHIK CHAND AGRAWAL 27. IN THIS CASE THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER FOR A SUM OF RS.2 00 000/- AGAINST GIFT RECEIVED BY THE ASSESSEE TREATING THE SAME TO BE NON-GENUINE AND WHICH HAS BEEN CONFIRMED BY THE CIT(A). 28. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTED THAT SHRI BHIK CHAND AGRAWAL HAS GIFTED A SUM OF RS.2 00 000/- TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUE DATED 18.10.2002 WHICH WAS DULY CONFIRMED BY HIM. HE EVEN CONFIRMED DURING THE COURSE OF STATEMENT RECORDED BY THE ASSESSING OFFIC ER THAT HE HAS GIVEN THE GIFT TO THE ASSESSEE. THE IDENTITY OF SHRI BHIK CHAND AGRAWAL IS PROVED. THE AMOUNT HAS DULY BEEN GIVEN THROUGH CHEQUE ALSO PROVES THAT THE MONEY HAS BEEN GIVEN BY SHRI BHIK CHAND AGRAWAL. THE ASSESSING OFFICER HAS TREATED THE GIFT TO BE NON-GENUINE MERE LY DUE TO THE FACT THAT THE DONOR WAS HAVING VERY LOW INVESTMENT AND WAS PUTTING UP IN A RENTED HOUSE AND PAYING A RENT OF RS.100/- PER MONTH. THE DONOR IN HIS STATEMENT HAS STATED A REA SON THAT THE GIFT WAS MADE TO THE ASSESSEE SO THAT THE ASSESSEE MAY SPEND THIS MONEY IN FUNERAL O F THE DONOR AS WELL AS HIS WIFE. HE HAS ALSO EXPLAINED THAT THE ASSESSEE WAS A CLASSMATE AT THE LEVEL OF PRIMARY SCHOOL. THE REVENUE HAS NOT BROUGHT OUT ANY CONTRARY EVIDENCE WHICH MAY PROVE T HAT THE MONEY HAS NOT COME FROM SHRI BHIK 21 CHAND AGARWAL AND THE ASSESSEE HAS HIMSELF DEPOSITE D THE MONEY. IN OUR OPINION THE ASSESSEE HAS DULY DISCHARGED HIS ONUS BY PROVING ALL THE THR EE INGREDIENTS I.E. IDENTITY OF THE DONOR HIS CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TION. WE ACCORDINGLY DELETE THE ADDITION OF RS.2 00 000/-. RS.2 00 000/- FROM LATE SHRI HARI BABU AGRAWAL 29. AFTER HEARING THE RIVAL SUBMISSIONS WE NOTED T HAT IN THIS CASE ALSO THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER TREATING THE GIFT TO BE NON-GENUINE. THE GIFT SO GIVEN BY SHRI HARI BABU AGRAWAL TO THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUE WHICH WAS DULY CONFIRMED BY HIM. THE GIFT CANNOT BE TREATED TO BE NON-GENUINE MERELY DUE TO THE FACT THAT IN THE CONFIRMATION LETTER NO OCCASION IS MENTIONED FOR GIVING THE GIFT. THE ASSESSING OFFICER HAS TREATED THE GIFT TO BE NON-GENUINE AS THERE WAS NO OCCASION FOR RECEIVING THE GIFT. THE IDENTITY OF SHRI HARI BABU AGRAWAL WAS NOT DISPUTED. THE ASSESSEE HAS SUBMITTE D THE GIFT DECLARATION LETTER DATED 16.05.2002 WHICH CONTAINS THE ADDRESS OF THE DONOR. THE DONOR NO DOUBT HAS EXPIRED BUT ALL THE PARTICULARS OF THE DONOR SINCE WERE ON RECORD THE ASSESSING OFFICER WITHOUT VERIFYING ANY OTHER FACT SIMPLY TREATED THE GIFT TO BE NON-GENUINE. T HE ADDITION IN THIS CASE ALSO IN OUR OPINION HAS MERELY BEEN MADE ON THE BASIS OF SUSPICION. IT IS SETTLED LAW THAT NO ADDITION CAN BE MADE MERELY ON THE BASIS OF SUSPICION HOWSOEVER STRONG I T MAY BE. THERE IS NO EVIDENCE ON RECORD WHICH MAY PROVE THAT THE TRANSACTION WAS NOT GENUIN E. IF ANY ADDITION IN OUR OPINION CAN BE MADE ONLY IN THE HANDS OF THE DONOR AS THE ASSESSE E IS NOT REQUIRED TO PROVE THE SOURCE OF THE SOURCES. 22 RS.1 00 000 FROM SHRI SANTOSH KUMAR AGRAWAL AND RS. 2 00 000/- FROM SMT. SUSHILA DEVI. 30. IN RESPECT OF THE DONATION AMOUNTING TO RS.1 00 000/- RECEIVED FROM SHRI SANTOSH KUMAR AGRAWAL AND RS.2 00 000/- FROM SMT. SUSHILA DEVI AL SO WE NOTED THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER MERELY TREATING THE D ONATIONS TO BE NON-GENUINE STATING THAT THE DONOR HAS NOT MENTIONED THE OCCASION FOR MAKING THE GIFTS. BOTH SHRI SANTOSH KUMAR AGRAWAL AS WELL AS SMT. SUSHILA DEVI HAD GIFTED THE AMOUNTS THROUGH ACCOUNT PAYEE CHEQUES. BOTH THE DONORS HAVE CONFIRMED THE GIFTS. BOTH WERE INCOME TAX ASSESSEES. STATEMENT OF SHRI SANTOSH KUMAR AGRAWAL WAS RECORDED ON 20.02.2005 IN WHICH A LSO HE HAS CONFIRMED THE GIFT AND THE CLOSE RELATIONSHIP WITH THE ASSESSEE. EVEN SHRI SA NTOSH KUMAR AGRAWAL HAS GIVEN SOURCE OF THE AMOUNT OUT OF WHICH THE GIFT WAS MADE TO THE ASSESS EE BY STATING THAT HE HAD RECEIVED RS.1 04 000/- FROM LIC ON 18.10.2002 WHILE THE GIFT WAS MADE ON 18.02.2003. SIMILARLY SMT. SUSHILA DEVI ALSO CONFIRMED THE GIFT AND SHE HAD AL SO EXPLAINED THE SOURCE TO BE THE REPAYMENT OF ADVANCES MADE TO DEBTORS NAMELY M/S. RAM DAYAL L AXMI PRASAD MATHURA M/S. MATHURA TRADING MATHURA AND M/S. NATIONAL PROCESS MATHURA . EVEN COPIES OF THE DONORS ACCOUNT IN THE BOOKS OF THE DEBTORS WERE ALSO FURNISHED. THE AMOUNTS FROM THE DEBTORS HAVE ALSO COME THROUGH CLEARING/TRANSFER. THUS IN BOTH THE CASES IN OUR OPINION NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A) DELETING THE GIFT AS THE AS SESSEE HAS PROVED ALL THE THREE INGREDIENTS AS ENVISAGED UNDER SECTION 68 OF THE ACT. THUS GROUN D NO.7 OF ASSESSEES APPEAL IS ALLOWED WHILE GROUND NO.3 IN REVENUES APPEAL STANDS DISMISSED. 31. GROUND NO.1 IN REVENUES APPEAL RELATES TO THE DELETION OF ADDITION OF RS.73 780/- MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE INCURRED BY T HE ASSESSEE ON THE LABOURERS. 23 32. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER MADE AN ADDITION OF RS.99 780/- BASED ON SEIZED PAPER NO.25 TO 52. THE ASSESSING O FFICER WAS OF THE VIEW THAT PAPER NOS.25 TO 52 OF ANNEXURE A-2 CONTAINS THE DAILY WAGE WORKERS AND THE MINIMUM WAGES PAYABLE WAS @ RS.70/- PER DAY. THEREFORE HE MADE AN ADDITION OF RS.73 780/- FOR 1040 LABOURERS AS THE NAMES OF THESE LABOURERS DO NOT FIGURE IN THE WAGES REGIS TER. THE ASSESSEE OBJECTED THAT THESE PAPERS DO NOT RELATE TO THE SUPARI BUSINESS BUT RELATES TO CO NSTRUCTION OF THE BUILDING CARRIED OUT AT SARAI AJMABAD MATHURA AND RESIDENTIAL HOUSE AT DAMPIER N AGAR MATHURA FOR WHICH THE INVESTMENT HAS BEEN SHOWN AT RS.3 56 208/- AND RS.11 29 726/- RESPECTIVELY AND IT CONTAINS THE NAMES OF THE LABOURERS ENGAGED IN THE CONSTRUCTION OF THE HOUSE PROPERTY. FOR THIS AFFIDAVIT OF SHRI RAJ KISHORE SHARMA WAS ALSO FILED BUT THE ASSESSEE COUL D NOT PRODUCE SHRI RAJ KISHORE SHARMA SINCE THE DETAILS IN THE SAME VERY LOOSE PAPERS PERTAININ G TO THE SUPARI BUSINESS WERE ALSO NOTED ON THE REVERSE SIDE IN THE HANDWRITING OF SHRI RAJ KISHORE SHARMA. THEREFORE THE ASSESSING OFFICER TREATED THESE PAPERS BELONGING TO THE SUPARI BUSINE SS. SIMILARLY IT WAS NOTICED THAT THE SALARY OF SHRI RAJ KISHORE SHARMA WAS ALSO NOT RECORDED IN TH E BOOKS OF ACCOUNTS WHO WAS PAID SALARY OF RS.2 000/- PER MONTH. THEREFORE THE ADDITION OF R S.73 780/- + RS.24 000/- WERE MADE TOTALING TO RS.99 780/- (CORRECT FIGURE IS RS.97 780/-). TH E ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) DELETED THIS ADDITION NOT ON MERIT BUT B ECAUSE THE ADDITION FOR THE GROSS PROFIT WAS MADE ON ESTIMATED SALES. THEREFORE HE TOOK THE VI EW THAT NO FURTHER ADDITION COULD BE MADE. 33. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. WE NOTED THAT THE CIT(A) HAS DULY EXAMINED THE STAT EMENT RECORDED DURING THE COURSE OF SEARCH MADE BY SHRI RAJ KISHORE SHARMA AS WELL AS HIS AFFI DAVIT FILED BY THE ASSESSEE. DURING THE COURSE OF HEARING BEFORE THE ASSESSING OFFICER IT W AS FOUND BY HIM THAT SHRI RAJ KISHORE SHARMA 24 WAS LOOKING AFTER BOTH M/S SHREE GIRRAJ SUPARI TRAD ERS AS WELL AS CONSTRUCTION WORK AND IN THE AFFIDAVIT DATED 09.11.2005 SHRI RAJ KISHORE SHARMA HAS CATEGORICALLY STATED THAT HE WAS THE SUPERVISOR FOR THE CONSTRUCTION WORK WHEREAS SHRI G AJENDRA KUMAR AGARWALA WAS THE SUPERVISOR FOR THE SUPARI WORK. THUS HE CAME TO T HE CONCLUSION THAT THERE WAS NO EVIDENCE TO SHOW THAT THE LABOURERS WHOSE NAMES APPEARING IN TH E SEIZED PAPERS WERE WORKING FOR THE SUPARI FACTORY AND NOT FOR THE CONSTRUCTION SITE AND ACCOR DINGLY AN ADDITION OF RS.73 780/- WAS DELETED. BEFORE US EVEN THOUGH THE LD. D.R. HAS VEHEMENTLY RELIED ON THE ORDER OF THE ASSESSING OFFICER BUT WE DO NOT FIND ANY COGENT MATERIAL OR EVIDENCE WHICH MAY SUPPORT THAT THE NAMES OF THE PERSONS AS APPEARING IN THE SEIZED PAPERS WERE WORK ING IN THE SUPARI FACTORY NOT AT THE CONSTRUCTION SITE. THIS IS A FACT ON RECORD WHICH HAS NOT BEEN DENIED BY THE REVENUE THAT THE ASSESSEE WAS CONSTRUCTING THE BUILDING NAMED GREEN VALEY AT SARAI AJMABAD MATHURA AND THE RESIDENTIAL HOUSE AT DAMPIER NAGAR MATHURA AND IN WHICH INVESTMENTS OF RS.3 56 208/- AND RS.11 29 726/- WERE RESPECTIVELY SHOWN BY THE ASSES SEE. THEREFORE WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE CIT(A) IN DELETIN G THE ADDITION OF RS.73 780/-. WE ACCORDINGLY DISMISS THE GROUND NO.1 TAKEN BY THE REVENUE. 34. GROUND NO.2 IN REVENUES APPEAL RELATES TO THE DELETION OF ADDITION OF RS.14 24 552/- IN RESPECT OF UNEXPLAINED INVESTMENT IN JEWELLERY. 35. THE FACTS RELATING TO THIS ADDITION ARE THAT TH E ASSESSING OFFICER NOTED THAT DURING THE COURSE OF SEARCH AS PER ANNEXURE J-3 JEWELLERY FO R A SUM OF RS.14 46 797/- WAS FOUND FROM THE ROOM OF SHRI SURESH CHAND AGRAWAL. THE ASSESSEE SU BMITTED BEFORE THE ASSESSING OFFICER THAT THE JEWELLERY BELONGED TO HIS WIFE AND HAS DULY BEE N SHOWN IN HER WEALTH TAX RETURN. EVEN 25 COPY OF VALUATION REPORT OF THE JEWELLERY MADE BY A PPROVED VALUER AS ENCLOSED WITH THE WEALTH TAX RETURN WAS ALSO FURNISHED. THE ASSESSING OFFIC ER WAS OF THE VIEW THAT NONE OF THE ITEMS OF JEWELLERY OF INVENTORY PREPARED AT THE TIME OF SEAR CH TALLIES WITH THE ITEMS SHOWN IN THE WEALTH TAX RETURN OF SMT. RAJANI AGRAWAL AND ACCORDINGLY H E MADE THE ADDITION OF RS.14 24 552/-. WHEN THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) THE ASSESSEE REFERRED TO THE STATEMENT OF HIS WIFE SMT. RAJANI AGRAWAL GIVEN DURING THE COURSE OF SEARCH ON 11.12.2002 IN WHICH SHE HAS CLEARLY STATED THAT THE JEWELLERY BELONGED TO HER HER HUSBAND AND HER DAUGHTER. EVEN THE VALUATION REPORT IN RESPECT OF JEWELLERY OWNED BY V ARIOUS FAMILY MEMBERS ALONG WITH WEALTH TAX RETURN WAS FILED. IT WAS ALSO POINTED OUT THAT IN THE VALUATION REPORT MADE BY R.K. JEWELLERS MATHURA AT THE TIME OF SEARCH ON 10.12.2002 VARIOU S ITEMS WERE CLUBBED TOGETHER AND THEREFORE IDENTITY OF EACH ITEM CANNOT BE VERIFIED. THE CIT( A) AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE AND GOING THROUGH THE VALUATION REPORT AND THE WEALTH TAX RETURN DELETED THE ADDITION. 36. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. WE NOTED THAT IN THE VALUATION REPORT MADE DURING THE COURSE OF SEAR CH ON 10.12.2002 VARIOUS ITEMS OF JEWELLERY FOUND DURING THE COURSE OF SEARCH WERE TAKEN TOGETH ER AND THEY HAVE NOT INDIVIDUALLY BEEN IDENTIFIED. AS AT SL. NO.1 IT IS WRITTEN AS GOLD ORNAMENTS MISC.570.00 NET WEIGHT. IF THE REVENUE ITSELF HAS NOT MENTIONED THE INDIVIDUAL ITE M OF THE JEWELLERY THE INDIVIDUAL ITEMS OF JEWELLERY CANNOT BE TALLIED. THE ASSESSEE AND HIS WIFE ARE WEALTH TAX ASSESSES. WEALTH TAX RETURNS FOR THE ASSESSMENT YEAR 1998-99 AND ONWARDS WAS REGULARLY FIELD. THE JEWELLERY FOUND DURING THE COURSE OF SEARCH WAS 1997.920 GRAMS BUT THE JEWELLERY DISCLOSED BY THE FAMILY IN THEIR WEALTH TAX RETURN WAS TO THE EXTENT OF 4871.140 GRA MS + 588.900 GRAMS WHICH IS MUCH MORE THAN THE JEWELLERY FOUND DURING THE COURSE OF SEARC H. WE THEREFORE DO NOT FIND ANY ILLEGALITY OR 26 INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION. THUS GROUND NO.2 TAKEN IN REVENUES APPEAL STANDS DISMISSED. 37. GROUND NO.4 IN REVENUES APPEAL WHICH RELATES T O THE DELETION OF ADDITION OF RS.50 000/- MADE ON ACCOUNT OF PREMIUM PAID AN GIFTS. 38. THIS ADDITION HAS BEEN MADE BY THE ASSESSING OF FICER TREATING THE GIFT RECEIVED BY THE ASSESSEE OF RS.10 00 000/- PRESUMING EVEN AS IF THE ASSESSEE HAD BROUGHT THIS GIFT BY BOGUS ENTRIES AND ON WHICH THE ASSESSEE WOULD HAVE GOT TH E COMMISSION WHICH WAS ASSUMED TO BE GIFT OF RS.50 000/-. WHEN THE MATTER WENT BEFORE THE CIT (A) THE CIT(A) DELETED THE ADDITION AS THE ADDITION WAS MADE MERELY ON THE BASIS OF ASSUMPTION . 39. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. WE DO AGREE WITH THE FINDING OF THE CIT(A) THAT NO ADDITION CAN BE MADE MERELY ON THE BASIS OF ASSUMPTION AND PRESUMPTION. IN OUR OPINION IF THE ASSESSING OFFICER IS OF THE OPINION THAT THE ASSESSEE HAS EARNED THE INCOME THE ONUS IS ON THE ASSESSING OFF ICER TO PROVE THAT THE ASSESSEE HAS EARNED THE INCOME OR INCURRED THE EXPENSES OUTSIDE THE BOOKS O F ACCOUNTS. NO IOTA OF EVIDENCE OR MATERIAL IS BROUGHT ON RECORD TO JUSTIFY THIS ADDITION. EVE N OTHERWISE ALSO WE HAVE DELETED THE ADDITION MADE ON ACCOUNT OF GIFTS. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A). THUS THIS GROUND STANDS DISMISSED. 40. GROUND NO.5 TAKEN IN REVENUES APPEAL RELATES T O THE DELETION OF ADDITION OF RS.50 156/- MADE ON ACCOUNT OF EXCISE DUTY. 27 41. THE FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEES CLOSING STOCK FOR FINISHED GOODS AS ON 31.03.2003 A MOUNTED TO RS.3 13 475/-. THE ASSESSEE HAS NOT INCLUDED EXCISE DUTY IN THE CLOSING STOCK. THE REFORE HE ADDED 16% OF THE FINISHED GOODS I.E. RS.50 156/- IN THE INCOME OF THE ASSESSEE. WH EN THE MATTER WENT BEFORE CIT(A) THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER :- I HAVE CONSIDERED THE RIVAL CONTENTIONS. ON PERUS AL OF THE ASSESSMENT ORDER IT IS SEEN THAT THE ASSESSING OFFICER HAS MA DE THE ADDITION ON ACCOUNT OF EXCISE DUTY PAYABLE ON FINISHED GOODS OBSERVING TH AT EXCISE DUTY WAS CHARGEABLE DURING THE YEAR ENDED 31.03.2003. HOWEVER EXCISE DUTY IS INCLUDIBLE IN THE VALUATION OF CLOSING STOCK ONLY IF THE SAME HAS BEE N PAID BY THE APPELLANT AND FORMS PART OF COST OF FINISHED GOODS AND NOT ON THE GROUND THAT THE SAME IS PAYABLE ON THE FINISHED GOODS WHICH IS EVIDENT FROM THE WORDINGS OF THE EXPLANATION OF SECTION 145A IN WHICH IT IS PROVIDED AS UNDER :- 145A EXPLANATION FOR THE PURPOSES OF THIS SECT ION ANY TAX DUTY CESS OR FEE (BY WHATEVER NAME CALLED) UNDER ANY LAW FOR THE TIME BEING IN FORCE SHALL INCLUDE ALL SUCH PAYMENT NOTWITHSTANDI NG ANY RIGHT ARISING AS A CONSEQUENCE TO SUCH PAYMENT. IN VIEW OF THE ABOVE POSITION OF LAW THE ADDITION IS NOT SUSTAINABLE AS THERE IS NO EVIDENCE TO SHOW THAT SUCH EXPENDITURE WAS INCURRED BY THE APPELLANT BUT NOT INCLUDED IN THE VALUATION OF CLOSING STOCK. ACCORDINGLY ADDITION OF RS.50 156/- IS DELETED. 42. AFTER HEARING THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERING THE SAME IN THE ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD BY THE LD. D.R . THAT THE ASSESSEE HAS ACTUALLY INCURRED THE EXPENDITURE BY WAY OF EXCISE DUTY ON THE FINISHED S TOCK WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY THIS GROUND STANDS DISMI SSED. 28 ITA NOS.475/AGR/2009 & 05/AGR/2010 ASST. YEAR: 2003-04 43. IN THE RESULT APPEAL FIELD BY THE ASSESSEE IS PARTLY ALLOWED WHILE THAT OF THE REVENUE STANDS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 20.10.2010) SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 20 TH OCTOBER 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY