BHAVANJI S. BHADRA, MUMBAI v. ACIT (OSD-I) CEN RG-7, MUMBAI

ITA 6128/MUM/2009 | 2007-2008
Pronouncement Date: 30-11-2011 | Result: Allowed

Appeal Details

RSA Number 612819914 RSA 2009
Assessee PAN AABPB4429M
Bench Mumbai
Appeal Number ITA 6128/MUM/2009
Duration Of Justice 2 year(s) 7 day(s)
Appellant BHAVANJI S. BHADRA, MUMBAI
Respondent ACIT (OSD-I) CEN RG-7, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 30-11-2011
Date Of Final Hearing 22-11-2011
Next Hearing Date 22-11-2011
Assessment Year 2007-2008
Appeal Filed On 23-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI P.M. JAGTAP A.M. AND SHRI V. DURGA RAO J.M. ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 ASSESSMENT YEARS: 2003-04 2004-05 2005-06 2007-0 8 2008-09 BHAGVANJI S. BHADRA APPELLANT 24 SOLAPUR STREET DANA BUNDER MUMBAI 400 009. (PAN - AABPB4429M) VS. THE ASSTT. COMMISSIONER OF INCOME-TAX(OSD-1) RESPONDENT AAYAKR BHAVAN M.K. MARG MUMBAI 400 020. APPELLANT BY : MR. SANJAY PARIKH RESPONDENT BY : MR. PAVAN VED ORDER PER V. DURGA RAO J.M.: ALL THESE APPEALS PERTAIN TO ONE ASSESSEE AND THE SAME ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A)-40 MUMBA I PASSED ON 16/09/2009 FOR THE ASSESSMENT YEARS 2003-04 TO 2008 -09. SINCE IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS WE FIND IT CONVENIENT TO DISPOSE OF THESE APPEALS FOR THE SAKE OF CONVENIENT . ITA NO. 6124/MUM/2009 FOR AY 2003-04 2. THE ONLY GROUND RAISED IN THIS APPEAL IS PERTAIN ING TO DISALLOWANCE OF INTEREST OF RS. 3 54 113/- 3. THE FACTS ARE IN BRIEF ARE THAT A SEARCH AND SEI ZURE ACTION U/S 132(1) WAS CONDUCTED ON THE ASSESSEE AND HIS RELATE D CONCERNS FOR ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 2 BOOKING BOGUS PROFITS UNDER 'LONG TERM CAPITAL GAIN S' ON PURCHASE AND SALE OF SHARES OF PENNY STOCK COMPANIES. IN THE COU RSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE HAD CLA IMED INTEREST OF RS. 3 54 113/- ON UNSECURED LOANS WHICH HAD BEEN EI THER INVESTED IN SHARES OR IN GIVING ADVANCE TO ONE MR. J. RAO. THE AO DISALLOWED THE INTEREST CLAIMED ON THE UNSECURED LOAN AS HE FOUND THAT BORROWED CAPITAL HAD NOT BEEN INVESTED IN THE BUSINESS ACTIV ITIES CARRIED OUT BY THE ASSESSEE. THE AO FOUND THAT THE INVESTMENT MADE IN PURCHASE OF SHARES HAD RESULTED INTO LOSS WHICH HAD BEEN CARRIE D FORWARD BY THE ASSESSEE. FURTHER HE ALSO FOUND THAT NO INTEREST H AD BEEN CHARGED BY THE ASSESSEE ON THE LOAN GIVEN TO MR. J. RAO. THER EFORE THE AO DISALLOWED INTEREST CLAIM OF THE ASSESSEE IN VIEW O F THE FACT THAT THE BORROWED CAPITAL HAD NOT BEEN INVESTED IN BUSINESS ACTIVITIES OF THE ASSESSEE. AGGRIEVED THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A) FUND FLOW STATEMENT WAS SUBMI TTED TO INVITE ATTENTION TO THE FACT THAT FUNDS AVAILABLE WITH THE ASSESSEE HAD NOT ONLY BEEN UTILIZED FOR ACQUIRING SHARES BUT ALSO FO R PURPOSE OF BUSINESS ACTIVITIES OF THE ASSESSEE. AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE THE CIT(A) CONFIRMED THE ACTION OF THE AO OBSERVING AS UNDER:- 2.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. AS I FIND THE APPELL ANT HAS CLAIMED THE INTEREST AGAINST INCOME FROM BANK INTEREST AND DIVIDEND ON SHARES DECLARED AS INCOME FROM OTHER SOURCES. AT TH E SAME TIME I ALSO NOTE THAT APPELLANT HAD NOT BEEN ABLE TO PROVE THAT THE UNSECURED LOANS HAD BEEN INVESTED IN HIS BUSINESS A CTIVITIES. EXAMINED ON THIS BACKDROP IT IS CLEAR THAT INTERES T EXPENSE WAS EITHER INCURRED FOR BANK INTEREST OR DIVIDEND. SO F AR AS THE DIVIDEND IS CONCERNED THE INTEREST EXPENSE WOULD N OT BE ALLOWABLE U/S 14A OF THE ACT WITH DIVIDEND BEING AN EXEMPT INCOME. FURTHER I ALSO NOTE THAT THE AO HAS GIVEN A SPECIFIC ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 3 FINDING THAT THE UNSECURED LOANS WERE ONLY INVESTED IN SHARES OR IN GIVING ADVANCE TO MR. JAI RAO. NO INTEREST HAS B EEN CHARGED FROM MR. RAO. IN THESE CIRCUMSTANCES THE INVESTMEN T IN SHARES HAVING LED TO LOSS AND THERE BEING NO INTERSET CHAR GED FROM MR. RAO INTEREST IS NOT ALLOWABLE FROM THIS STANDPOINT ALSO. ACCORDINGLY THE INTEREST HAS BEEN RIGHTLY DISALLOWE D ON THESE SCORES. SO FAR AS THE INCOME FROM BANK INTEREST IS CONCERNED THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE IN TEREST EXPENSES HAD BEEN INCURRED TOWARDS BANK INTEREST. A S IT IS BANK INTEREST IS A TYPE OF INCOME WHICH DOES NOT NORMALL Y ATTRACT INTEREST EXPENSE. ACCORDINGLY IT WOULD NOT BE ALLO WABLE U/S 57 OF THE ACT. IN LINE WITH THE FOREGOING THE DISALLOWAN CE IS JUSTIFIED. IT IS CONFIRMED AND THE GROUND OF APPEAL IS DISMISSED. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE I S IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LOAN WAS ADVANCED TO ONE MR. J. RAO IS FOR THE PURPOSE O F THE BUSINESS AND TO THIS EFFECT HE INVITED OUR ATTENTION TO PAGE 241 OF THE PAPER BOOK WHICH IS THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE ASSESSEE AND MR. J. RAO. HE THEREFORE SUBMITTED THAT THE INTER EST CLAIMED BY THE ASSESSEE ON THE SAID LOAN ADVANCED TO MR. J. RAO. 7. ON THE OTHER HAND THE LEARNED DR SUBMITTED THAT THE ASSESSEE DID NOT EXPLAIN BEFORE THE AO THAT UNSECURED LOAN W AS GIVEN FOR THE PURPOSE OF BUSINESS. THE ALTERNATE SUBMISSION OF TH E LEARNED DR IS THAT IF AT ALL THE LOAN WAS GIVEN FOR THE DEVELOPME NT OF THE BUSINESS IT IS TO BE CAPITALIZED AND THE INTEREST PAID THEREON IS ALSO TO BE CAPITALIZED. 8. WE HAVE HEARD BOTH THE SIDES PERUSED THE RECORD AN D GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE I SSUE INVOLVED IN THIS GROUND IS RELATING TO WHETHER THE UNSECURED LO ANS TAKEN BY ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 4 ASSESSEE WERE USED FOR THE PURPOSE OF BUSINESS OR N OT. AS POINTED OUT BY THE ASSESSEE FROM THE PAGE 241 OF PAPER BOOK WH ICH IS AGREEMENT ENTERED INTO WITH MR. JAI RAO WE FIND THAT THE ASS ESSEE HAS GIVEN ADVANCES TO ONE MR. JAI RAO FOR THE PURPOSE OF CHEM BUR PROJECT. THE ASSESSEE ALSO FILED STATEMENT OF FACTS WHEREIN HE H AS GIVEN FUND FLOW STATEMENT FOR AY 2002-03. FROM THE ABOVE FUND FLOW STATEMENT IT IS CLEAR THAT UNSECURED LOANS WERE RS. 21 14 026/- AND THE AMOUNT ADVANCED TO MR. JAI RAO WAS RS. 62 47 000/-. THEREF ORE IT CAN BE SAFELY CONCLUDED THAT SINCE THE ADVANCES WERE MUCH MORE THAN THE UNSECURED LOANS THE ASSESSEE HAS USED THE UNSECURE D LOANS FOR THE PURPOSE OF BUSINESS. AFTER CONSIDERING THE PAGE NO. 241 OF PAPER BOOK AND STATEMENT OF FACTS FILED BY THE ASSESSEE BEFORE THE CIT(A) IN OUR CONSIDERED VIEW THE ASSESSEE HAS USED THE UNSECURE D LOANS FOR THE PURPOSE OF BUSINESS. IN VIEW OF THE ABOVE WE REJEC T THE OTHER ARGUMENTS OF THE LEARNED DR. IN SO FAR AS THE INTER EST IS CONCERNED THE ASSESSEE PAID INTEREST IN RESPECT OF THE FUNDS BORROWED FOR THE PURPOSE OF BUSINESS AND THE SAME IS ALLOWABLE U/S 3 6(III) OF THE ACT. SINCE THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD WHEN THE ASSESSEE INCURS INTEREST EXPENSES THE SAME MAY BE INCLUDED IN THE WORK-IN-PROGRESS AND WHEN THE PROJECT IS COMPLETED THE ENTIRE INTEREST EXPENSES ARE ALLOWABLE U/S 36(III) OF THE ACT. IN VIEW OF OUR ABOVE FINDINGS THIS GROUND OF APPEAL IS ALLOWED FO R STATISTICAL PURPOSES. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 5 ITA NO. 6125/MUM/ 09 FOR AY 2004-05 11. GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APP EAL IS SIMILAR TO THAT OF THE GROUND RAISED IN AY 2003-04. THEREFORE FOLLOWING THE CONCLUSIONS DRAWN THEREIN THIS GROUND OF APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO. 2 HAS NOT PRESSED AT THE TIME OF HEA RING BEFORE US THEREFORE THE SAME IS DISMISSED AS NOT PRESSED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 6126/MUM/09 FOR AY 2005-06 14. GROUND NO. A IS PERTAINING TO THE ADDITION OF R S. 4 54 041/- ON ACCOUNT OF SHORT TERM CAPITAL GAINS. 15. ALONG WITH SEARCH AND SEIZURE ACTION U/S 132(1) OF THE ACT A SURVEY ACTION U/S 133A HAD ALSO BEEN CONDUCTED ON T HE OFFICE PREMISES OF THE ASSESSEE'S FIRM ON 13/03/2006. TO T HIS EFFECT THE ASSESSEE FILED REVISED RETURN OF INCOME DECLARING R S. 1 29 57 254/- AS SHORT TERM CAPITAL GAINS AND RS. 97 30 755/- AS LON G TERM CAPITAL GAINS ON SALE OF 67000 SHARES OF BOLTON PROPERTIES LTD. IN HIS STATEMENT RECORDED DURING THE COURSE OF SEARCH THE ASSESSEE ADMITTED THE LONG TERM CAPITAL GAINS INCOME AS FICT ITIOUS. FURTHER THE ASSESSEE WAS ALSO CONFRONTED WITH THE STATEMENT OF ONE MR. MANOJ P. DALAL WHO HAD PROVIDED ACCOMMODATION ENTRY TO THE A SSESSEE ON ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 6 ACCOUNT OF THE BOGUS PURCHASE AND SALE OF THESE SHA RES. THE RELEVANT PORTION OF THE STATEMENT HAD BEEN REPRODUCED BY THE AO IN PARA 2.4 OF THE ASSESSMENT ORDER. DURING THE COURSE OF SEARCH O PERATION THE ASSEESSEE HAD ALSO OFFERED RS. 2.77 CRORES AS HIS A DDITIONAL INCOME OF WHICH RS. 2 27 00 000/- HAD BEEN FOR THE YEAR UNDER CONSIDERATION. IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT THE INCOME WAS HOWEVER OFFERED TO THE EXTENT O F RS. 2 22 45 359/- AS AGAINST RS. 2 27 00 000/- OFFERED U/S 132(4) OF THE ACT. IT WAS THE ASSESSEE'S EXPLANATION THAT THE RE DUCED OFFER WAS BECAUSE OF THE FACT THAT HE HAD REDUCED THE PURCHAS E PRICE OF THE SHARE AMOUNTING TO RS. 5 43 260/- AGAINST THE SALE PRICE OF RS. 98 38 069/-. THE ASSESSEE'S CLAIM WAS FOUND UNTENAB LE BY THE AO AS THE ASSESSEE HAD TAKEN THE CREDIT OF RS. 2 27 00 00 0/- IN HIS CAPITAL ACCOUNT. BESIDES THE AO ALSO HELD THAT BY NOT DISC LOSING THE FULL ADDITIONAL INCOME VOLUNTARILY DECLARED U/S 132(4) O F THE ACT THE ASSESSEE HAD RETRACTED HIS STATEMENT. ACCORDINGLY THE DIFFERENCE OF RS. 4 54 041/- (RS. 2 27 00 000 RS. 2 22 45 359) WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE BY THE AO. AGGRI EVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 16. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT THE ADDITIONAL INCOME OF RS. 2 27 00 000/- INCLUSIVE OF RS. 4 54 042/- STOOD DISCLOSED IN THE REVISED RETURN. IT WAS POINTED OUT THAT THE AO HAD FAILED TO EXAMINE THAT THE ADDITIONAL INCOME OF RS. 4 54 041/- IS ON ACCOUNT OF SHARES SOLD OTHER THAN OF BOLTON PROPERT IES LTD. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CI T(A) CONFIRMED THE ADDITION MADE BY THE AO OBSERVING AS UNDER:- 2.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. IN HIS STATEMENT U/S 132(4) OF THE ACT THE APPELLANT HAD DISCLOSED RS. 2 27 00 000/- FOR THE ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 7 ASSESSMENT YEAR 2005-06. THIS DISCLOSURE WAS VERY S PECIFIC AND CLEARLY ON THE APPELLANT'S TRANSACTIONS IN THE SHAR ES OF BOLTON PROPERTIES LTD. THIS BEING SO THE APPELLANT'S SUBM ISSION THAT RS. 4 54 041/- RELATED TO TRANSACTIONS IN SHARES OTHER THAN OF BOLTON PROPERTIES LTD. IS NOT BORNE OUT BY FACTS. THE APPE LLANT HAS ALSO NOT BEEN ABLE TO SUBSTANTIATE THIS STATEMENT. ACCOR DINGLY THE AO HAS RIGHTLY HELD THE REDUCED DISCLOSURE IN THE RETU RN OF INCOME AS UNSUBSTANTIATED RETRACTION OF THE STATEMENT U/S 132 (4) OF THE ACT. THAT THE SUM OF RS. 4 54 041/- RELATED TO THE TRANS ACTIONS IN SHARES OF BOLTON PROPERTIES LTD. ALSO STANDS ENDORS ED BY THE APPELLANT HIMSELF IN HIS SUBMISSION THAT THE SUM WA S INCLUDED IN THE ADDITIONAL INCOME DECLARED IN THE REVISED RETUR N. THE APPELLANT'S STAND IS CONTRADICTORY. IN LINE WITH FO REGOING THE SHORT DECLARATION OF ADDITIONAL INCOME DOES CONSTIT UTE APPELLANT'S INCOME. THE AO'S ACTION IS ACCORDINGLY CONFIRMED A ND THE GROUND OF APPEAL IS DISMISSED. 17. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE CIT(A). 18. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE REVENUE AUTHORITIES FAILED TO APPRECIATE THAT T HE ASSESSEE HAD SOLD SHARES WHICH HAD RESULTED INTO SHORT TERM CAPITAL G AINS AND LONG TERM CAPITAL GAINS AS THESE SHARES WERE GENUINELY PURCH ASED AND SOLD THEREFORE THE SAME DID NOT CONSTITUTE THE UNDISCLO SED INCOME OF THE ASSESSEE. HE FURTHER CONTENDED THAT THE ADDITIONAL INCOME OF RS. 4 54 041/- IS ON ACCOUNT OF SHARES SOLD OTHER THAN BOLTON PROPERTIES LTD. SUFFERED SECURITIES TRANSACTION TAX AFTER 01/1 0/2004. HE POINTED OUT THAT THE ASSESSEE HAD DISCLOSED THE FULL ADDITI ONAL INCOME OF RS. 2.27 CR. WHICH INCLUDES RS. 4 54 041/- IN REVISED R ETURN OF INCOME. 19. ON THE OTHER HAND THE LEARNED DR PLACED RELIAN CE ON THE ORDERS OF THE AUTHORITIES BELOW. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUS ED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THE AO ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 8 PROCEEDED TO MAKE THE ADDITION IS FOR THE REASON T HAT THE ADDITIONAL INCOME OFFERED TO THE EXTENT OF RS. 2 22 45 359/- I N THE RETURN OF INCOME FILED IN RESPONSE TO THE NOTICE U/S 153A AS AGAINST RS. 2 27 00 000/- OFFERED U/S 132(4) OF THE ACT. IN THI S REGARD THE EXPLANATION OF THE ASSESSEE IS THAT THE REDUCED OFF ER WAS BECAUSE OF THE FACT THAT HE HAD REDUCED THE PURCHASE PRICE OF THE SHARES AMOUNTING TO RS. 5 43 260/- AGAINST THE SALE PRICE OF RS. 98 38 069/- . THE CONTENTION OF THE ASSESSEE IS THAT THE AO FAI LED TO EXAMINE THAT THE ADDITIONAL INCOME OF RS. 4 54 041/- IS ON ACCOU NT OF SHARES SOLD OTHER THAN OF BOLTON PROPERTIES LTD. AFTER CONSIDER ING THE TOTALITY OF THE FACTS OF THE CASE WE RESTORE THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFTER EXAMININ G THE SUBMISSIONS OF THE ASSESSEE WHETHER THE SAME ARE TRUE OR NOT A ND IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY THIS GROUND OF APPEAL IS TR EATED AS ALLOWED AS STATISTICAL PURPOSES. 21. GROUND NO. B RAISED BY THE ASSESSEE IN THIS APP EAL IS SIMILAR TO THAT OF THE GROUND RAISED IN AY 2003-04. THEREFORE FOLLOWING THE CONCLUSIONS DRAWN THEREIN THIS GROUND OF APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 22. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ITA NO. 6127/MUM/2009 -FOR AY 2006-07 . 23. THE ONLY GROUND RAISED IN THIS APPEAL IS PERTAI NING TO THE ADDITION OF RS. 6 06 123/- ON ACCOUNT OF UNEXPLAINE D INVESTMENT. ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 9 24. THE FACTS ARE IN BRIEF THAT DURING THE COURSE O F SEARCH A DOCUMENT MARKED ANNEXURE A-11 WAS SEIZED. PAGES 56 57 82 83 84 95 & 96 OF THE ANNEXURE REVEALED PUR CHASE OF JEWELLERY FOR RS. 6 06 123/- DURING THE YEAR UNDER CONSIDERATION. ON BEING ASKED BY THE AO TO EXPLAIN IT WAS STATED BY THE ASSESSEE THAT THESE PAGES WERE RELEVANT TO ONE SHRI BHARAT BHANUS HALI OF PONDA GOA WHO IS THE COUSIN OF THE ASSESSEE. IT WAS FURT HER STATED THAT SHRI BHARAT BHANUSHALI HAD PERFORMED THE MARRIAGE OF HIS SON AT AHMEDABAD THEREFORE HE HAD PURCHASED NEW JEWELLER Y/GOT REMANUFACTURED OLD JEWELERY AT MUMBAI. IT WAS ALSO STATED THAT THE SAID PERSON STATED WITH THE ASSESSEE AT THE TIME OF PURCHASING THE SAID JEWELERY AT THE RESIDENCE OF THE ASSESSEE AT M UMBAI. IN THIS REGARD THE ASSESSEE HAD ALSO FILED AN AFFIDAVIT DA TED 03/08/06 OF SHRI BHARAT BHANUSHALI WHEREIN BHARAT BHANUSHALI AFFIRM ED THAT THE SAID DOCUMENTS PERTAINED TO HIM. THE ASSESSEE HAD ALSO F ILED A COPY OF RETURN RECEIPTS OF SHRI BHARAT BHANUSHALI INDICATIN G HIS PAN AND NAME OF WARD. HOWEVER THE AO WAS OF THE VIEW THAT SINCE THE ABOVE DOCUMENTS WERE FOUND IN THE POSSESSION OF THE ASSES SEE THE INVESTMENT APPEARING IN THE SAID DOCUMENTS FOR THE VALUE OF RS. 6 06 123/- TREATED THE SAME AS UNEXPLAINED INVESTM ENT AND ADDED TO THE INCOME OF THE ASSESSEE ON PROTECTIVE BASIS. AGG RIEVED BY THE ORDER OF THE AO THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO ON THE GROUND THA T THE ASSESSEE HAS BROUGHT NOTHING ON RECORD TO SHOW THAT THE INVE STMENT REFLECTED IN THE SEIZED DOCUMENT HAS BEEN OFFERED BY MR. BHAR AT BHANUSHALI TO TAX. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEF ORE US. ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 10 25. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO WITHOUT CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THAT SEIZED DOCUMENT MARKED AS 'ANNEXURE-11' FOUND DURING THE C OURSE OF SEARCH BELONGED TO ONE MR. BHARAT BHANUSHALI PONDA GOA WHO IS THE COUSIN OF THE ASSESSEE MADE THE ADDITION BY TREATI NG THE SAID SEIZED DOCUMENT IS PERTAINING TO THE ASSESSEE. HE CONTEND ED THAT THE AO HAS NOT TAKEN INTO CONSIDERATION THE AFFIDAVIT OF T HE SAID BHARAT BHANUSHALI WHEREIN HE AFFIRMED THAT THE SEIZED DOCU MENT PERTAINING TO HIM. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO I NVITED OUR ATTENTION TO PAGES 169 & 170 OF THE PAPER BOOK WHICH ARE THE COPIES OF AFFIDAVIT OF MR. BHARAT BHANUSALI WHEREIN MR. BHAN USALI STATED THAT THE JEWELLERY WAS ON LOOSE PAPER NO. 56 57 82 83 84 95 AND 96 IS PERTAINING TO DIFFERENT MEMBERS OF HIS FAMILY ACQUI RED OUT OF PAST SAVINGS SINCE FIFTY YEARS. THE LEARNED COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO PAGE 205 OF PAPER BOOK WHEREIN THE DETAILS OF AMOUNTS FOR THE MARRIAGE OF MR. MUKESH BHARAT BHANU SALI SON OF MR. BHARAT BHANUSALI TOWARDS EXPENSES AND REMAKING CH ARGES OF JEWELLERY PERTAINING TO MR. BHARAT BHANUSALI TO EST ABLISH THAT THE SEIZED DOCUMENT AND ITS CONTENTS THEREIN PERTAINING TO HIS COUSIN MR. BHARAT BHANUSALI. HE POINTED OUT THAT THE SAID DET AILS WERE FURNISHED BY MR. BHANSALI BEFORE THE AO AT GOA AS REQUIRED BY THE AO AND HE CHOSE NOT TAKE ANY ACTION ON MR. BHANSALI . THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT WHEN THE AS SESSEE HAS EXPLAINED THAT THE ENTRIES IN THE SEIZED DOCUMENT A RE NOT PERTAINING TO HIM AND THE SAME IS BELONGING TO MR. BHANSALI M AKING PROTECTIVE ADDITION IN THE HANDS OF THE ASSESSEE IS NOT PROPER . 26. THE LEARNED DR ON THE OTHER HAND SUBMITTED T HAT WHATEVER IS FOUND IN THE POSSESSION OF THE ASSESSEE IT IS DEEM ED TO BE TREATED ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 11 THAT THE SAME IS BELONGING TO THE ASSESSEE. AS REGA RDS THE AFFIDAVIT FILED BY MR. BHARAT BHANSUALI AT PAGES 169 & 179 IS CONCERNED THE LEARNED DR CONTENDED THAT THERE IS NO PROPER VERIFI CATION OF THE AFFIDAVIT AND THEREFORE IT CANNOT BE CONSIDERED AS PROPER EVIDENCE AND HE REQUESTED THE BENCH THE SAID AFFIDAVIT MAY N OT BE CONSIDERED. THE LEARNED DR PLACED RELIANCE ON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF A.K.K. NAMBIAR VS. UNION OF IN DIA AIR 1970 (SC) 652 WHEREIN THE HONBLE SUPREME COURT HELD THAT IN THE ABSENCE OF PROPER VERIFICATION AFFIDAVITS CANNOT BE ADMITTED IN EVIDENCE. 27. WE HAVE HEARD BOTH THE PARTIES PERUSED THE REC ORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE AO MADE THE ADDITION ON ACCOUNT OF JEWELLERY ON PROTECTIVE BASIS AS UNEX PLAINED INVESTMENT ON THE BASIS OF LOOSE PAPER FOUND IN POSSESSION OF THE ASSESSEE. THE ASSESSEE HAD STATED IN THE COURSE OF ASSESSMENT PRO CEEDINGS THAT LOOSE PAPER BELONGS TO SHRI BHARAT BHANUSHALI OF PO NDA GOA WHO IS THE COUSIN OF THE ASSESSEE. TO THIS EFFECT THE ASS ESSEE HAD FILED AN AFFIDAVIT OF SHRI BHARAT BHANUSHALI WHEREIN SHRI BH ANUSHALI CONFIRMED THAT HE OWNED THE LOOSE PAPERS AND BELONG S TO HIM AS HE HAD PURCHASED THE JEWELLERY AND GOT REMANUFACTURED OLD JEWELLERY AT MUMBAI FOR HIS SON'S MARRIAGE WHEN HE STAYED IN MUM BAI AT ASSESSEE'S HOUSE. THE ASSESSEE ALSO SUBMITTED COPY OF RETURN OF INCOME PAN AND WARD WHERE SHRI BHARAT BHANUSHALI I S ASSESSED TO TAX. THE AO AT GOA HAS NOT MADE ANY ADDITION IN THE HANDS OF MR. BHARAT BHANUSALI IN RESPECT OF THE SAID JEWLLERY PU RCHASED BY MR. BHANUSALI. THE ASSESSEE HAS EXPLAINED BEFORE THE AO THAT THE ENTRIES IN LOOSE PAPER BELONGING TO MR. BHARAT BHANUSALI AN D NOT BELONGED TO THE ASSESSEE AND TO THIS EFFECT THE ASSESSEE HAS BE EN FILED AFFIDAVIT EXECUTED BY MR. BHARAT BHANUSALI AT PAGES 169 & 170 OF THE PAPER ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 12 BOOK WHEREIN MR. BHANSUALI AFFIRMED THAT THE LOOSE PAPER NO. 56 57 82 83 84 95 AND 96 IS PERTAINING TO DIFFERENT ME MBERS OF HIS FAMILY ACQUIRED OUT OF PAST SAVINGS SINCE FIFTY YEARS. WE FIND THAT MR. BHANUSALI ALSO FILED DETAILS BEFORE THE AO AT GOA A ND THE AO AT GOA HAS NOT MADE ANY ADDITION IN RESPECT OF THE CONTENT S IN THE SEIZED DOCUMENT. THEREFORE THE PROTECTIVE ADDITION MADE IN THE HANDS OF THE ASSESSEE BY THE AO CANNOT SURVIVE. AS REGARDS T HE ARGUMENT OF THE LEARNED DR THAT THE AFFIDAVIT FILED BY MR. BHAR AT BHANUSALI IS NOT ACCEPTABLE AS THERE IS NO VERIFICATION BY THE DEPON ENT IN OUR VIEW THIS ARGUMENT OF THE LEARNED DR IS HYPER TECHNICAL WHEN THE CONCERNED AO AT GOA HAS ACCEPTED THE SAME AND NOT MADE ANY ADDITION IN THE HANDS OF MR. BHANUSALI IT ESTABLIS HES THAT THE AFFIDAVIT IS A GENUINE ONE AND PROPER. WE THEREFO RE REJECT THE ARGUMENT OF THE LEARNED DR. AS REGARDS THE ANOTHER ARGUMENT OF THE LEARNED DR THAT WHEN THE SEIZED DOCUMENT IS FOUND W ITH THE ASSESSEE IT IS DEEMED TO BE BELONGING TO THE ASSESSEE WE AG REE THAT IT IS DEEMED TO BE BELONGING TO THE ASSESSEE BUT WHEN T HE ASSESSEE EXPLAINED THAT IT IS NOT BELONG TO HIM AND IT IS BE LONGING TO MR. BHARAT BHANUSALI AND MR. BHANUSALI ACCEPTED THAT THE SEI ZED DOCUMENT BELONGING TO HIM ON OATH. WE ARE OF THE VIEW THAT T HE ASSESSEE HAS DISCHARGED ONUS LIES ON HIM. WE FIND THAT THE AO D ID NOT BRING ANY MATERIAL ON RECORD TO PROVE OR ESTABLISH THAT THE S EIZED DOCUMENT BELONGING TO THE ASSESSEE BY WAY OF ANY ENQUIRY/IN VESTIGATION IN THIS REGARD. THEREFORE MAKING ADDITION WITHOUT PROPER ENQUIRY/INVESTIGATION IS NOT PROPER AND THE SAME DO ES NOT SURVIVE. IN SO FAR AS THE CASE LAW RELIED UPON BY THE LEARNED D R IN THE CASE OF A.K.K. NAMBIAR VS. UNION OF INDIA (SUPRA) THIS CA SE LAW IS NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE . AFTER CAREFUL CONSIDERATION OF THE FACTS OF THE CASE W E ARE OF THE VIEW THAT THE ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 13 REVENUE AUTHORITIES HAVE NOT BROUGHT ANY MATERIAL O N RECORD TO ESTABLISH THAT THE LOOSE PAPERS FOUND IN THE POSSES SION OF THE ASSESSEE BELONGED TO THE ASSESSEE AND WITHOUT APPRE CIATING THE FACTS ON RECORD AND WITHOUT CONSIDERING THE SUBMISSIONS O F THE ASSESSEE THE AO MADE THE ADDITION U/S 69 OF THE ACT AS UNEX PLAINED INVESTMENT OF THE ASSESSEE. WE ARE OF THE VIEW THAT WHEN THE IDENTITY OF THE PERSON TO WHOM THE LOOSE PAPERS BELONGS IS F OUND THERE IS NO NEED TO MAKE ADDITION ON ACCOUNT OF JEWELLWERY ON P ROTECTIVE BASIS. THEREFORE WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION MADE BY THE AO ON ACCOUNT OF JEWELLERY U/S 69 OF TH E ACT AS UNEXPLAINED INVESTMENT. ACCORDINGLY THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 28. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO. 6128/MUM/09 FOR AY 2007-08 29. THE ONLY GROUND RAISED IN THIS APPEAL IS PERTAI NING TO THE ADDITION OF RS. 20 65 235/- AS UNEXPLAINED INVESTME NT IN JEWELLERY. 30. THE FACTS ARE IN BRIEF THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE WAS HAV ING EXCESS JEWELLERY OF 2897.64 GRAMS IN TERMS OF JEWELLERY FO UND AT THE RESIDENCE AND JEWELLERY SHOWN IN THE VALUATION REPO RTS. THE VALUE OF THE SAID JEWELLERY CAME TO RS. 25 15 235/-. ON BEIN G ASKED BY THE AO TO EXPLAIN THE SOURCE OF THIS EXCESS JEWELLERY THE ASSESSEE SUBMITTED DETAILS OF JEWELLERY BELONGING TO DIFFERENT FAMILY MEMBERS WHICH HAD BEEN REPRODUCED BY THE AO IN PARA 6.1 OF PAGE 5 OF ASSESSMENT ORDER. THE ASSESSEE SUBMITTED THE VALUATION REPORTS BALAN CE SHEETS PROOF ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 14 WITH REGARD TO DEPOSIT OF WEALTH TAX AND STATEMENT OF AFFAIRS IN RESPECT OF THE PERSONS FROM SL.1 TO 15 OF THE LIST WERE ALS O SUBMITTED. FROM THE SAID DETAILS THE AO FOUND THAT SO FAR AS THE M EMBERS LISTED AT SL. NO. 1 TO 15 ARE CONCERNED JEWELLERY WEIGHING 7009. 45 GRAMS WERE DISCLOSED TO THE DEPARTMENT. FOR THE PERSONS LISTED AT SL.NO. 16 COPY OF RECEIPT OF RETURN FOR THE ASSESSMENT YEAR 2006-0 7 AND BALANCE SHEET AS ON 31/03/06 WAS SUBMITTED. FOR THE REMAINI NG PERSONS LISTED AT SL.NO. 17 TO 23 OF THE LIST NO EVIDENCE IN SUPPORT OF ACQUISITION OF THE JEWELLERY BY THE RESPECTIVE PERS ONS WAS SUBMITTED. THE AO NOTED THAT THE ASSESSEE COULD NOT SUBMIT SAT ISFACTORY EVIDENCE WITH REGARD TO THE PURCHASE OF JEWELLERY OF RS. 2 80 310/- BY THE PERSON LISTED AT SL.NO. 16. THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THESE PERSONS THAT THE JEWELLERY HAD BEEN OBTAI NED DURING THE MARRIAGES OF THE RESPECTIVE PERSONS BUT DID NOT P RODUCE THE NECESSARY EVIDENCES IN SUPPORT. THE AO THEREFORE HELD THAT THE JEWELLERY LISTED AT SL.NO. 16 TO 23 OF THE LIST PRO DUCED FOUND TO BE EXCESS WEIGHING 2900 GRAMS AND THE SAME WAS FOUND TO BE UNEXPLAINED. THE AO HOWEVER CONSIDERING THE CUSTO M IN HINDU SOCIETY HELD THAT OUT OF THE EXCESS JEWELLERY WOR TH RS. 4 50 000/- COULD HAVE BEEN ACQUIRED DURING MARRIAGES AND ALSO BY UNMARRIED DAUGHTERS ON VARIOUS OCCASIONS. HE FURTHER HELD THA T THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF THE ACQUISITION OF JEWELLERY FOR THE VALUE OF RS. 20 65 235/- AND TREATED THE SAME AS UNEXPLAI NED INVESTMENT IN JEWELLERY U/S 69 OF THE ACT. AGGRIEVED THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 31. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE AO HAD IGNORED THE FACT REGARDING THE STATUS OF THE ASSESSEE'S FAMILY AND MARRIAGE OF HIS TWO SONS. IT WAS ARGUED THAT THE BENEFIT ALLOWED BY THE AO WAS ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 15 NOMINAL. ATTENTION WAS ALSO INVITED TO THE AFFIDAVI T FILED BY THE IN LAWS. REFERENCE WAS MADE TO THE CBDT CIRCULAR ON SE IZURE OF JEWELLERY AND THE CEILINGS SPECIFIED IN THE CIRCULAR FOR PERM ISSIBLE POSSESSION OF JEWELLERY. THE CIT(A) HOWEVER CONFIRMED THE ADDIT ION MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAS BROUGHT NOTHING ON RECORD TO SUBSTANTIATE HIS CLAIM. STILL AGGRIEVED THE ASSESS EE IS IN APPEAL BEFORE US. 32. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS REITERATED SUBMISSIONS AS MADE BEFORE THE CIT(A) AND SUBMITTED THAT THE AO HAS FAILED TO APPRECIATE THAT THE ASSESSEE HAD DULY EXP LAINED THE JEWELLERY FOUND DURING THE COURSE OF SEARCH AND THEREFORE NO ADDITION WAS CALLED FOR ON THAT ACCOUNT. THE ASSESSEE PLACED REL IANCE ON THE CBDT'S CIRCULAR AND TO THIS EFFECT FILED A STATEMEN T WHEREIN MENTIONING THE ALLOWABILITY OF JEWLLERY AS PER THE BOARD'S INSTRUCTION PER FAMILY MEMBER. THE ASSESSEE ALSO PLACED RELIANC E ON THE DECISION IN THE CASE OF IDEAL PLOT PIKRI KENDRA AND OTHERS V S. ACIT 74 ITD 117 WHEREIN IT WAS HELD THAT THE ASSESSEE POSSESSED NOM INAL JEWELLERY WEIGHING 102-425 GRAMS WHICH IS FAR LESS THAN THE LIMIT PRESCRIBED IN CBDT INSTRUCTION NO. 1916 DT. 11 TH MAY 1994 AND SHE HAD DULY EXPLAINED THE SOURCE OF THESE ITEMS IN HER STATEMEN T RECORDED AT THE TIME OF SEARCH THEREFORE THERE WAS NO JUSTIFICATI ON FOR MAKING THE IMPUGNED ADDITION IN RESPECT OF THESE ITEMS ON PROT ECTIVE BASIS. 33. ON THE OTHER HAND THE LEARNED DR STRONGLY RELI ED UPON THE ORDERS OF THE AUTHORITIES BELOW. 34. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES. THE AO MADE THE ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 16 ADDITION ON ACCOUNT OF JEWELLERY ON THE GROUND THAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF JEWELLERY AND THE A SSESSEE DID NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THE JEWELLERY. T HE ASSESSEE HAS PLACED RELIANCE ON THE CBDT CIRCULAR(SUPRA) AND TO THIS EFFECT HE HAS FILED A CHART SHOWING THE ALLOWABILITY OF JEWELLERY FOR THE FAMILY MEMBERS AND IN EXCESS FOUND DURING THE COURSE OF SE ARCH. AFTER CONSIDERING THE FACTS OF THE CASE CBDT INSTRUCTION (SUPRA) AND THE CASE LAW RELIED UPON BY THE ASSESSEE IN THE CASE OF IDEAL PLOT PIKRI KENDRA AND OTHERS (SUPRA) WE RESTORE THE ISSUE TO THE AO FOR A LIMITED PURPOSE AND DIRECT HIM TO VERIFY THE CHART FILED BY THE ASSESSEE AND IF THE JEWELLERY FOUND COVERED BY THE CBDT CIRCULAR TO BE CONSIDERED AS EXPLAINED AND THE JEWELLERY NOT CO VERED BY THE CBDT CIRCULAR TO BE CONSIDERED AS UNEXPLAINED JEWELLERY AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY THIS GROUND OF APPEAL OF THE ASSESSEE IS TREATED AS ALLO WED. 35. IN THE RESULT APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. 36. TO SUM UP ITA NO. 6124/MUM/09 ITA NO. 6126/M UM/09 AND 6128/MUM/09 ARE ALLOWED FOR STATISTICAL PURPOSES ITA NO. 6125/MUM/09 IS PARTLY ALLOWED AND ITA NO. 6127/MUM /09 IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOVEMBER 2011. SD/- SD/- (P.M. JAGTAP) (V. DUR GA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: NOVEMBER 2011 ITA NOS. 6124 6125 6126 6127 6128/MUM/2009 BHAGVANJI S. BHADRA 17 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE G BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI.