M/s. Manilal Prabhudas Patel, Mehsana v. The ACIT., Cent.Circle-2(1),, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI D. C. AGRAWAL ACCOUNTANT MEMBER IT(SS)A NO.136 & 181/AHD/2005 BLOCK PERIOD FROM 1/4/96 TO 6/6/02 DATE OF HEARING:0.1.11 DRAFTED:20.1.11 M/S. MANILAL PRABHUDAS PATEL 23 NEW MARKET YARD UNJHA MEHSANA PAN NO.AACFM9467D ACIT CENTRAL CIRCLE-2(3) AHMEDABAD 3 RD FLOOR AAYKAR BHAVAN ASHRAM ROAD AHMEDABAD V/S . V/S . ACIT CENTRAL CIRCLE- 2(1) AHMEDABAD ROOM NO.333 AAYKAR BHAVAN ASHRAM ROAD AHMEDABAD ACIT CENTRAL CIRCLE- 2(3) AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI S.N. SOPARKAR SR-AR REVENUE BY:- SHRI K.K. VYAWAHARE CIT-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE CROSS-APPEALS BY ASSESSEE AND REVENUE ARE AR ISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-III AHMEDABAD IN APPEAL NO. CIT(A)- III/CC2(1)/57/04-05 DATED 04-03-2005. BLOCK ASSESSM ENT WAS FRAMED BY ACIT CENTRAL CIRCLE-2(1) AHMEDABAD U/S158BC(C) OF THE I NCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE BLOC K PERIOD 01-04-1996 TO 06-06-2002. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IN IT(SS)A NO.136/AHD/2005 IS AS REGARDS TO JUSTIFICATION OF THE ORDER OF BLOCK ASSE SSMENT U/S.158BC OF THE ACT PASSED IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 2 BY ASSESSING OFFICER AND CONFIRMED BY CIT(A). FOR T HIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCE S OF THE APPELLANTS CASE THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE OR DER PASSED BY THE ASSESSING OFFICER U/S.158BC OF THE I.T. ACT WITH TH E PREVIOUS APPROVAL OF THE ADDL. CIT DID NOT SUFFER FROM ANY INFIRMITY WHEN HE OUGHT TO HAVE HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS BAD IN LAW . IN NOT DOING SO HE HAS FAILED TO APPRECIATE THAT THOUGH THERE ARE NO SPECI FIC PROVISIONS IN THE INCOME- TAX LAW FOR AFFORDING AN OPPORTUNITY OF BEING HEARD BEFORE APPROVING THE ORDER OF ASSESSMENT U/S.2158BVC OF THE I.T. ACT WHICH WAS PREJUDICIAL TO THE ITER4EST OF THE APPELLANT EVEN THEN THE OPPORTUNITY OUGHT TO HAVE BEEN GRANTED TO THE APPELLANT AS HELD BY THE MADRAS HIGH COURT I N THE CASE OF INDUSTRIAL RUBBER PRODUCTS V. CIT & OTHERS (1992) 194 ITR 141 (MAD.) WHEN THE APPROVED ORDER WAS ADVERSE TO THE INTEREST OF THE A PPELLANT. THIS HONBLE TRIBUNAL MAY THEREFORE BE PLEASED TO HOLD THAT THERE IS NO JUSTIFICATION I HOLDING THAT THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 158 BC WHEN THE ORDER IS BAD IN LAW WHICH MAY BE DIRECTED TO BE CANCELLED. 3. AT THE OUTSET LD. SR-COUNSEL FOR THE ASSESSEE S HRI S.N.SOPARKAR STATED THAT HE HAS INSTRUCTION FROM ASSESSEE NOT TO PRESS THIS ISSUE. ACCORDINGLY WE DISMISS THE SAME AS NOT PRESSED. 4. THE FIRST EFFECTIVE COMMON ISSUE IN THESE CROSS- APPEALS IS AGAINST THE ORDER OF CIT(A) RESTRICTING THE ADDITION AT RS.9 74 050/- OU T OF TOTAL ADDITION MADE ON ACCOUNT OF UNACCOUNTED PURCHASE OF JEERA AT RS.87 51 246/ -. FOR THIS ASSESSEE HAS RAISED ISSUE REGARDING DELETION OF BALANCE ADDITION AS UND ER:- IT(SS)A NO.136/AHD/2005 BY ASSESSEE. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE THE LEARNED CIT(APPEALS) HAS ERRED IN UPHOLDING ADDITIO N OF RS.3 24 050/- OUT OF THE TOTAL ADDITION OF RS.9 74 050/- MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF TRANSACTIONS IN APMC IN RESPECT OF PURCHASE OF J EERA. 2.1 THE LEARNED CIT(APPEALS) HAS WHILE UPHOLDING TH E ABOVE ADDITION FAILED TO APPRECIATE THE SUBMISSIONS MADE BEFORE THE ASSES SING OFFICER AND WHICH WERE AGAIN REPRODUCED BEFORE HIM WHEREIN IT WAS EXP LAINED THAT THE SAUDAS IN RESPECT OF WHICH THE ADDITION HAS BEEN MADE WERE CA NCELLED AND THAT CONFIRMATION THEREOF FROM RESPECTIVE PARTIES AS ALS O CERTIFICATE OF SUCH CANCELLATION FROM APMC WAS FURNISHED AND THUS THERE WAS NO SUCH PURCHASE BY THE APPELLANT. AS SUCH THE ADDITION WAS NOT JUST IFIED. IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 3 THE LEARNED CIT(APPEALS) HAS FAILED TO APPRECIATE THAT IT WAS THE ALTERNATIVE CLAIM OF THE APPELLANT THAT EVEN IF ANY ADDITION IS TO BE CONSIDERED ON THIS ACCOUNT IT IS COVERED BY THE DISCLOSURE OF RS.20 L ACS MADE BY THE APPELLANT IN THE BLOCK RETURN AND AS SUCH THERE WAS NO JUSTIFICA TION FOR UPHOLDING THE ADDITION TO THE EXTENT OF RS.3 24 050/-. 2.2 HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE THE HONBLE ITAT MAY PLEASE HOLD THAT THE ENTIRE ADDITI ON OF RS.9 74 050/- WAS REQUIRED TO BE DELETED IN SPITE OF REDUCING IT TO R S.3 24 050/-. AND REVENUE HAS RAISED THE GROUND THAT FIRST OF ALL THERE IS TYPOGRAPHICAL ERROR IN THE ORDER AS THE ADDITION SUSTAINED IS AT RS.6 02 667/- AND IF THIS ADDITION WILL BE CONFIRMED BY CIT(A) THE INCOME RETURNED BY ASSESSE E IN THE BLOCK RETURN WILL GO BELOW THE RETURNED INCOME AND THE REVENUE HAS CHALL ENGED THE DELETION OF ADDITION OF RS.87 51 246/- VIDE GROUND NO.1 & 2 :- IT(SS)A NO.181/AHD/2005 BY REVENUE. 1. THE LD. C.I.T.(A) ERRED IN LAW AND ON FACTS IN NOT TAKING THE COMPREHENSIVE VIEW ON THE MATTER AND AS A RESULT MISTAKE HAS CREP T IN. THE CIT(A) CONFIRMED THE ADDITION OF RS.9 74 050/-. IN FACT THERE WAS TY POGRAPHICAL ERROR IN THE ORDER AND SAME SHOULD BE RS.6 02 667/-. IF THAT MISTAKE I S CORRECTED THEN THE ASSESSEES INCOME AFTER GIVING EFFECT OF THE CIT(A) S ORDER WOULD BE RS.19 52 667/- (RS.13 50 000 + RS.6 02 667/-) WHICH IS BELOW THE RETURNED INCOME. NO SEPARATE ADDITION OF THIS AMOUNT WAS MAD E AS IT WAS TELESCOPED WITH THE ADDITION OF RS.87 51 246/- MENTIONED IN GR OUND NO.2. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.87 51 246/- MADE ON ACCOUNT OF UNACCOUNTED PURCH ASES OF JEERA OF 125017.800 KGS. MADE BY THE ASSESSEE WHICH HAD BEEN DETECTED FROM THE PAPERS MAINTAINED BY THE CLEANING AGENT SHRI VINODK UMAR MAGANAL PATEL. FURTHER HE ERRED IN DELETING THE ADDITION OF RS.39 70 003 MADE ON ACCOUNT OF ENTRIES IN ANNEXURE A-24 SEIZED FROM M/S. ASHIRWAD TRADERS IN WHICH SALE MADE BY M/S. ASHSIRWAD TRADERS TO THE ASSESSEE HAS BEEN RECORDED WHEREAS THE ASSESSEE DID NOT RECORD THESE PURCHASES. NO SEP ARATE ADDITION OF THIS AMOUNT WAS MADE AS THE SAME WAS TELESCOPED WITH THE ADDITION OF RS.87 51 246/-. 5. THE BRIEF FACTS LEADING TO THE ABOVE COMMON ISSU E ARE THAT ASSESSEE HAS DECLARED UNDISCLOSED INCOME OF RS.20 LACS IN THE BL OCK RETURN FILED BY THE ASSESSEE IN RESPONSE TO THE NOTICE U/S.158BC OF THE ACT AS THERE WAS A SEARCH IN THE GROUP CASES OF THE ASSESSEE ON 06.06.2002 UNDER SECTION 1 32 OF THE ACT. DURING BLOCK ASSESSMENT PROCEEDINGS THE ASSESSEE EXPLAINED AS TO HOW UNDISCLOSED INCOME OF RS. 20 WAS DECLARED AND UTILIZED. IN THAT PROCESS IT WAS EXPLAINED THAT THE FOLLOWING IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 4 INVESTMENTS MADE BY THE PARTNERS ARE OUT OF SUCH INCOME OF RS.13.50 LACS REFERRED TO BY THE ASSESSING OFFICER AS ABOVE + THE STOCK O F RS.4 .37 LACS + PROBABLE OMISSIONS (IN WORKING OUT THE DISCLOSURE OF RS.2 0 LACS) RS.2.13 LACS. THEREFORE IN VIEW OF THESE FACTS THERE WAS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO PROCEED TO ADD THE AMOUNT OF RS.13.50 LACS AS IS DONE AS THE SAME IS OUT OF THE DISCLOSED INCOME OF RS.20 00 000. THE ASSESSING OFFICER ADD ED A SUM OF RS.87 51 246 FOR THE ALLEGED UNEXPLAINED INVESTMENT IN PURCHASE OF 125017.800 KGS OF JEERA. FOR THIS PURPOSE THE ASSESSING OFFICER ISSUED A SHOW C AUSE NOTICE AS UNDER : AS ALREADY INTIMATED TO YOU IN THE QUESTIONNAI RE AND DURING THE HEARING YOU HAD SENT 143967 KG. OF JEERA FOR CLEARING TO SHRI VINODKUMAR MAGANLAL PATEL ON VARIOUS DATES AS EVIDENT FROM THE SEIZED RECORDS. THIS FACT IS EVIDENT FROM THE BILLS SEIZED FROM SHRI VINODKUMAR COPIES OF WHICH WERE GIVEN TO YOU. HOWEVER YOU HAVE GIVEN THE ONLY EXPLANATION THAT THESE PAPERS DO NOT BELONG TO YOU AND DO NOT LINK YOU. YOUR E XPLANATION CIRCUMVENTS THE VIRTUAL EVIDENCE ON RECORD AND T HE STOCK SENT FOR CLEARING REPRESENTS YOUR PURCHASES. SINCE YOU H AD RECORDED A PURCHASE OF 189409.200 KG. THE BALANCE OF 12501 7.800 KG. VALUED AT RS.87 51 246 REPRESENTS YOU UNDISCLOSE D INVESTMENT. BUT THE ASSESSEE EXPLAINED THE ALLEGED EXCESS STOCK THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS A QUERY WAS RAISED REGARDING THE STATEMENT OF SHRI VINODKUMAR PATEL RECORDED U/S.132(4) AT THE PREMISE S OF SHRI BHANUPRASAD JOSHI AND THE LOOSE PAPERS IDENTIFIED AS ANNEXURES BS-1 T O 3 SEIZED FROM THE DICKEY OF SHRI VINODKUMAR M. PATEL AND ASSESSEE FILED DETAILE D EXPLANATION VIDE LETTER DATED 11.5.2004. ACCORDING TO ASSESSEE THE ASSESSING OFF ICER HAS WORKED OUT UNRECORDED PURCHASES OF 1 25 018 KGS OF JEERA ON THE BASIS OF SOME DUMB PAPERS FOUND AND SEIZED FROM ONE SHRI VINODKUMAR MAGANLAL PATEL OF P ATAN AS THOSE PAPERS WERE FOUND AND SEIZED FROM THE DICKEY OF THE SCOOTER PAR KED OUTSIDE COMPOUND WALL IN FRONT OF IRON GATE OF THE RESIDENTIAL PREMISES OF S HRI BHANUPRASAD S. JOSHI. AT THE TIME OF SEARCH PARTY CAME TO THE RESIDENCE OF SHRI BHANUPRASAD AND SHRI VINODKUMAR HAD JUST ARRIVED AND WAS PARKING HIS SCO OTER OUTSIDE THE PREMISES OF SHRI BHANUPRASAD IN THE OPEN PLOT. SEEING SOME OFF ICERS ALONG WITH THE POLICE ENTERING THE PREMISES OF SHRI BHANUPRASAD SHRI VIN ODKUMAR CHANGED THE IDEA OF GOING TO THE HOUSE OF SHRI BHANUPRASAD AND WAS STAR TING HIS SCOOTER FOR GOING BACK. AT THAT TIME THE SEARCH PARTY STOPPED HIM AND ASKED HIM TO COME IN THE PREMISES IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 5 AND WHEN HE ENTERED THE PREMISES HIS POCKETS WERE SEARCHED AND KEYS WERE TAKEN BY THE SEARCH PARTY AND ENQUIRED ABOUT THE KEYS. A FTER TAKING THE KEYS FROM HIM THEY OPENED THE DICKEY AND TOOK OUT THE DIARIES AND LOOSE PAPERS FROM THE DICKEY AND CAME BACK TO THE HOUSE WHERE HE WAS ASKED TO WA IT. THEREAFTER THE STATEMENT OF SHRI VINODKUMAR MAGANLAL PATEL WAS RECORDED BY T HE AUTHORIZED OFFICERS. IN THE STATEMENT SHRI VINODKUMAR MAGANLAL PATEL QUESTION BY QUESTION NO WHERE STATED THAT THE NAME M.P. REPRESENTS M/S. MANILAL PRABHUDA S. QUESTION NO.1 & 2 ARE THE INTRODUCTORY QUESTIONS. QUESTION NO.3 AND ITS REPL Y READ AS UNDER:- QN.3 WHAT BUSINESS YOU ARE DOING WITH MANILAL PRABH UDAS? AN.3 I AM DOING A CLEANING PROCESS OF JEERA IN MY F ACTORY. MANILAL PRABHUDAS SENDS GOODS FOR CLEANING FROM GANJBAZAAR AND AFTER CLEANING IT I AM RETURNING THE SAME TO HIM. FOR THE PURPOSE HE GIVES ME 20 PAISE PER KG. IN CASH AS CLEANING CHARGES. ACCORDING TO ASSESSEE QUESTION NO.4 HAS NOTHING TO DO WITH MANILAL PRABHUDAS PATEL AND QUESTION 5 IS A LEADING QUESTION INDICATI NG THE NAME OF MANILAL PRABHUDAS IN THE QUESTION ITSELF. IT CAN BE SEEN FR OM THE FOLLOWING:- QN.5 YOUR SCOOTER NO.GJ 2Q 5373 IS LYING IN FRONT O F THE RESIDENCE OF SHRI BHANUPRASAD SHANKERLAL JOSHI PLO T NO.2 RAMNAGAR AND FROM THE DICKEY OF THAT SCOOTER 2 DIA RIES NO.1 & 2 AND 10 PAPERS SHOWING ROUGH BILLS ARE FOUN D. THESE PAPERS SHOWING ROUGH BILLS ARE RELATED TO MAN ILAL PRABHUDAS. IN BOTH THE DIARIES IN ADDITION TO M. P . THE ACCOUNTS OF OTHER FARMERS ARE ALSO WRITTEN. WHAT H AVE YOU TO SAY IN THE MATTER? AN.5 THESE DIARIES AND THE ACCOUNTS IN THE LOOSE PA PERS WERE LYING IN THE DICKEY OF MY SCOOTER. IF THEY REQUIRE REGULAR BILL THEN I HAVE TO PREPARE THE REGULAR BILL AND HENCE R OUGH BILLS ARE KEPT WITH ME. AFTER RECEIPT OF CASH AS PER ROU GH BILLS I USE TO TEAR THEM OFF AFTER 1.1/2 MONTHS. I INCUR E XPENSES FROM THE AMOUNT I RECEIVE AND REMAINING AMOUNT I AM USING FOR HOUSEHOLD PURPOSES. I DO NOT MAINTAIN BOO KS OF ACCOUNT. FURTHER ACCORDING TO ASSESSEE IN THIS REPLY NO WHE RE VINODKUMAR PATEL HAS GIVEN THE NAME OF MANILAL PRABHUDAS NOW COMING TO Q UESTION NO.3 VINODKUMAR PATEL HAS NOT GIVEN THE NAME OF M.P. ON THE CONTRARY THE ITO IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 6 ASKED WHETHER HE IS DOING ANY BUSINESS WITH MANILAL PRABHUDAS AND VINODKUMAR PATEL HAS STATED THAT HE IS DOING THE JO B OF CLEANING OF JEERA AND MANILAL PRABHUDAS SUPPLIES HIM JEERA FROM GANJBAZAA R FOR CLEANING. HE HAS GOT A FACTORY OF CLEANING OF JEERA AND LIKE OTHER M ERCHANTS HE IS ALSO DOING THE JOB OF CLEANING OF JEERA OF VARIOUS FARMERS. IT IS THE GENERAL PRACTICE IN HIS LINE OF BUSINESS. IN REPLY TO QUESTION NO.5 HE HAS NOT STATED THAT THE PAPERS FOUND FROM HIS DICKEY ARE RELATED TO M.P. ON THE CONTRAR Y THE ITO INDUCED HIM TO SAY THAT THOSE PAPERS WHERE M.P. IS WRITTEN BELONGED TO MANILAL PRABHUDAS. BUT ASSESSEE CLAIMED THAT HE HAS NO WHERE STATED THAT THE PAPERS FOUND FROM HIS DICKEY ARE RELATED TO MANILAL PRABHUDAS. ACCORDING TO THE ASSESSEE SEIZED DIARY HAVING 100 PAGES INVENTORISED AS BS1CONTAINS MAINLY THE NAME OF VASANT & RAKESH. VASANT & RAKESH DO NOT APP EAR TO BE THE FARMERS AS INFERRED BY THE ASSESSING OFFICER. IF THEY ARE THE FARMERS BILLS CANNOT BE ISSUED IN THEIR NAMES ALMOST EVERYDAY IN THE MONTH OF APRIL 2002. THE ADIT AND THE AO ARE THEREFORE NOT CORRECT IN PRESUMING THAT VASANT & RAKESH ARE THE FARMERS. ON GOING THROUGH THE DIARY BS2 P AGE NOS.1 2 3 4 5 6 7 8 & 9 SIGNIFY THE NAMES OF EITHER VASANT OR RAKESH . PAGE NOS.10 11 12 CONTAIN THE NAME OF M.P. AGAIN PAGE NO.13 AND 14 CO NTAIN THE NAME OF RAKESH. PAGE NOS.15 16 AND 17 INDICATE THE NAME OF M.P. PAGE NOS.18 19 20 21 AND 23 ARE EITHER IN THE NAME OF VASANT O R RAKESH. PAGE NO.22 IS IN THE NAME OF M.P. PAGE NOS.24 TO 31 ARE ALSO IN THE NAME OF EITHER VASANT OR RAKESH. THUS THE NAMES VASANT & RAKESH APPEA R TO HAVE BEEN USED IN CODE LANGUAGE. IF THEY ARE FARMERS THEY CANNOT HAV E THAT MUCH JEERA SO AS TO BE SENT FOR CLEANING ALMOST EVERYDAY. 6. THE ASSESSEE EXPLAINED DIARY NO.BS3 PAGE NO.2 I S IN THE NAME OF M.P. PAGE NO.5 IS IN THE NAME OF M.P AND ACCORDING TO HI M IN DIARY NO.3 THE NAME OF M.P. APPEARS BUT THE NAMES OF VASANT & RAKESH ARE CONSPICUOUSLY ABSENT. IN ANY CASE THE SAID WORD M.P. CANNOT BE READ AS M ANILAL PRABHUDAS AS THERE ARE MANY SHOPS IN GANJ BAZAAR UNJHA WHERE FIRST NAM E STARTS WITH M AND SECOND NAME STARTS WITH P AND CITED EXAMPLE AS UNDE R:- 1. M/S. MANOJKUMAR PRADIPBHAI 2. M/S. MAFATLAL PRAHALADBHAI & CO. 3. M/S. MANORBHAI PARSOTTAMDAS IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 7 4. M/S. MANUBHAI PARSOTTAMDAS 5. M/S. MIHIRKUMAR PRAKASHBHAI 6. M/S. MAHESHKUMAR PRABHUDAS 7. M/S. M.P. TRADING CO. ACCORDING TO ASSESSEE ALL OF THEM ARE DEALING IN JE ERA AND HAVE THEIR SHOPS IN GANJ BAZAAR. VINODKUMAR MAGANLAL PATEL WHOSE STATE MENT IS ALLEGEDLY RECORDED U/S.132(4) HAS ALSO NO WHERE INDICATED OR IDENTIFIED THAT THE AMOUNTS WRITTEN IN THOSE PAGES ARE CONNECTED WITH ASSESSEE I.E. M/S.MANILAL PRABHUDAS PATEL. THE STATEMENT OF SHRI BHANUPRASAD JOSHI WAS RECORDED U/S.132(4) AND QUESTION NOS.13 14 & 15 ARE IN RESPECT OF SEIZED D IARIES OF VINODKUMAR MAGANLAL PATEL AND IMPORTANT QUESTIONS ARE REPRODUC ED HERE BELOW IN FREE ENGLISH TRANSLATION:- A.13 THOSE DIARIES INVENTORISED AS ANNEXURE BS1 2 & 3 ON 6.6.2002 BELONG TO VINODKUMAR MAGANLAL PATEL JAI DATTATRAYA TRADING CO. C/O. JAIBS AGRO NEAR NORTH GUJARAT SAT ISABGUL HIGHWAY UNJHA. Q.14 I AM SHOWING YOU PAGES 1 TO 10 OF ANNEXURE BS ITEM 3 PLEASE STATE WHETHER THOSE PAPERS ARE RELATED TO AN Y TRADER WITH WHOM YOU ARE CONNECTED? A.14 NO PLEASE. Q.15 IN THE AFORESAID ANN. BS3 ON PAGES 2 TO 10 ON EACH PAPER M.P. IS WRITTEN. PLEASE STATE WHETHER THESE PAPERS ARE RELATED TO M/S. MANILAL PRABHUDAS PATEL 23 NEW MA RKET YARD UNJHA A.15 NO PLEASE. THOSE PAPERS ARE NOT RELATED TO T HE FIRM OF M/S. MANILAL PRABHUDAS. THUS SHRI BHANUPRASAD JOSHI IN A STATEMENT RECORDE D U/S.132(4) HAS CLEARLY DENIED THAT THOSE PAPERS ARE RELATED TO M/S. MANILA L PRABHUDAS PATEL OF 23 NEW MARKET YARD UNJHA. ACCORDING TO ASSESSEE MANY FIRM IN MARKET YARD UNJHA START WITH THE NAME OF M.P AND MAY BE THOSE PAPERS RELATED TO ANY OF THE M.P. AS VINOD PATEL APPEARS TO HAVE BEEN WRITIN G CODED NAMES IN THE BILLS AS HAS BEEN DONE BY HIM BY WRITING THE NAME OF VAS ANT & RAKESH ON MOST OF THE PAPERS. THE ASSESSEE CLAIMED THAT THERE IS NO JUSTIFICATION IN CONNECTING ASSESSEES GROUP WITH THE DUMB PAPERS FOUND FROM TH E SCOOTER OF SHRI VINODKUMAR PATEL IN THE CODED WORDS AND THE ASSESSE E-FIRM DENIED HAVING ANY CONNECTION WITH THE SAID DIARY. IT WAS STATED THAT SHRI BHANUPRASAD JOSHI IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 8 BELONGS TO VILLAGE BHAKHARI TAL. VAV IN BANASKANT HA DISTRICT AND FARMERS FROM THAT AREA COME TO UNJHA TO SELL JEERA. BEFORE PUTTI NG SUCH JEERA TO SALE THEY MAY GET THE JEERA CLEANED SO THAT THEY MAY FETCH GO OD PRICES AND POSSIBILITY THAT THEY MAY BE USING THE NAME M.P. AT THE CLEANIN G FACTORY IS NOT RULED OUT. THE ASSESSEE FURTHER DENIED BY FILING ON 27.5.2004 AN AFFIDAVIT OF SHRI VINODKUMAR M. PATEL WHO HAS GIVEN CLARIFICATIONS AN D EXPLANATIONS REGARDING CERTAIN REPLIES WHICH HAD BEEN GIVEN BY HIM ON THE DATE OF SEARCH. COPY OF THE SAID REPLY IS ALSO REPRODUCED HEREBELOW FOR THE SAK E OF READY REFERENCE:- 2. THE ASSESSEE GROUP VIDE LETTER DATED 11.5.2004 HAVE CLARIFIED IN DETAIL THAT JEERA OF 125018 KGS. OF T HE VALUE OF RS.87 51 260/- ARRIVED AT BY YOU ON THE BASIS OF TH E STATEMENT OF SHRI VINODKUMAR MAGANLAL PATEL IS NOT BASED ON PROP ER APPRECIATION OF FACTS AND THEREFORE IT IS NOT UNA CCOUNTED INVESTMENT WITHIN THE MEANING OF SECTION 158BB OF T HE ACT. THE ASSESSEE HAS STATED THAT SUCH A PRESUMPTION HAS BEE N DRAWN ON THE BASIS OF SOME DUMB PAPERS FOUND FROM SHRI VINOD KUMAR M. PATEL OF PATAN. THE ASSESSEE HAS ALSO POINTED OUT THAT DIRECT & LEADING QUESTIONS WERE ASKED TO SHRI VINODKUMAR M. PATEL. ON THE BASIS OF THE DIARIES AND SOME LOOSE PAPERS FOU ND FROM THE DICKEY OF THE SCOOTER OF SHRI VINODKUMAR IN WHICH S OME CODE WORDS JUST LIKE VASANT RAKESH M.P. WERE WRITTEN. THE AUTHORIZED OFFICERS PRESUMED THAT VASANT AND RAKES H ARE THE FARMERS WHILE M.P. IS MANILAL PRABHUDAS AND RECORDE D THE STATEMENT OF SHRI VINODKUMAR. AFTER THE STATEMENT OF SHRI VINODKUMAR M. PATEL WAS RECORDED IN THE EARLY MORNI NG AT THE RESIDENCE OF SHRI BHANUPRASAD SHANKERLAL JOSHI SHR I BHANUPRASAD WAS CONFRONTED WITH THE SEIZED DIARIES AND PAPERS FOUND FROM THE DICKEY OF SHRI VINODKUMAR M. PATEL A ND THE STATEMENT OF SHRI VINODKUMAR M. PATEL. BUT SHRI BH ANUPRASAD SHANKERLAL JOSHI IN HIS STATEMENT RECORDED AT HIS R ESIDENCE U/S. 132(4) CATEGORICALLY DENIED HAVING ANY CONNECTION W ITH THOSE PAPERS AND DIARIES AND STATEMENT OF SHRI VINODKUMAR AND M/S. MANILAL PRABHUDAS PATEL OF 23 NEW MARKET YARD UNJ HA. THUS ON THE DAY OF SEARCH ITSELF SHRI BHANUPRASAD SHANKE RLAL JOSHI HAS IN VERY CLEAR TERMS STATED ON OATH THAT THOSE PAPERS AS WELL AS THAT THE STATEMENT OF SHRI VINODKUMAR M. PATEL D ID NOT HAVE ANY CONNECTION WITH THE FIRM M/S. MANILAL PRABHUDAS PATEL. 3. DETAILED REPLY FILED IN THAT CONNECTION VIDE LET TER DATED 11.5.2004 MAY KINDLY BE GONE THROUGH. NOW SHRI VIN ODKUMAR M. PATEL HAS HANDED OVER TO THE ASSESSEE THE AFFIDAVIT SWORN IN BY HIM ON 26.5.2004. THE AFFIDAVIT IS SELF-EXPLANATOR Y AND THE COPY OF THE SAME IS SUBMITTED HEREWITH FOR KIND PERUSAL. IN THE AFFIDAVIT SHRI VINODKUMAR HAS GIVEN CLARIFICATIONS AND EXPLA NATIONS IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 9 REGARDING CERTAIN REPLIES WHICH HAVE BEEN AMBIGUOUS LY WORDED IN THE SEARCH PROCEEDINGS. IT APPEARS THAT EITHER SHR I VINODKUMAR M. PATEL HAS NOT GIVEN REPLIES WITH CLARITY TO THE QUESTIONS ASKED TO HIM OR THE INSPECTOR ACCOMPANYING THE AUTHORIZED OFFICERS WHO WROTE DOWN THE STATEMENT OF SHRI VINODKUMAR M. PATE L HAS NOT WRITTEN THE REPLIES WITH FULL CLARITY. IN THE AFFI DAVIT SHRI VINODKUMAR M. PATEL HAS CLARIFIED THAT WHEN HE WAS PARKING TH E SCOOTER OUTSIDE THE GATE OF SHRI BHANUPRASAD SHANKERLAL JOS HIS HOUSE HE SAW SOME GOVERNMENT OFFICERS ALONG WITH THE POLI CE-PARTY ENTERING THE HOUSE OF SHRI BHANUPRASAD SHANKERLAL J OSHI AND HENCE HE DECIDED TO GO BACK AND WAS STARTING HIS S COOTER AND AT THAT TIME ONE OF THE OFFICERS CAUGHT HOLD OF HIM AN D FORCED HIM TO ENTER IN THE HOUSE OF SHRI BHANUPRASAD SHANKERLAL J OSHI AND IMMEDIATELY THEREAFTER THEY SEARCHED THE DICKEY OF THE SCOOTER FOUND OUT SOME PAPERS AND DIARIES AND STARTED INTER ROGATING HIM ABOUT THOSE PAPERS AND DIARIES. SHRI VINODKUMAR M. PATEL HAS FURTHER CLARIFIED THAT HE IS NOT THE OWNER OF ANY C LEANING FACTORY AND THAT THE CLEANING FACTORY NEAR THE SECOND PETRO L PUMP UNJHA HIGHWAY DOES NOT BELONG TO HIM. HE IS NEITHER THE OWNER NOR THE PARTNER OF THE SAID FACTORY BUT HE IS DOING THE CL EANING WORK OF JEERA ON COMMISSION BASIS. HE HAS ALSO CLARIFIED T HAT IN THE REPLY IT IS NOTED THAT HIS YEARLY INCOME IS OF RS.2 LACS IS ALSO NOT CORRECT. SHRI VINODKUMAR M. PATEL HAS FURTHER CLARIFIED THA T IN REPLY TO QUESTION NO.3 IT HAS BEEN NOTED THAT IN HIS FACT ORY HE IS DOING CLEANING OF JEERA AND M/S. MANILAL PRABHUDAS PATEL SENDS HIM THE GOODS I.E. JEERA FROM GANJBAZAAR AND AFTER CLEA NING OF SUCH JEERA THEY ARE GIVING HIM CLEANING CHARGES OF 20 PA ISA PER KG. HE HAS NOW CLARIFIED THAT HE HAS GOT PERSONAL RELAT IONS WITH M/S. MANILAL PRABHUDAS PATEL GROUP AND THAT IN ORDER TO HELP HIM TO EARN HIS LIVELIHOOD THEY ARE SENDING SOME FARMERS C ONNECTED WITH THEM TO HIM FOR CLEANING OF JEERA. IN REPLY TO QUE STION NO.5 HE HAS FURTHER CLARIFIED THAT THE WORD M.P. HAS BEEN W RITTEN IN THE DIARY BECAUSE THOSE FARMERS HAD COME THROUGH M/S. M ANILAL PRABHUDAS PATEL AND THAT THEY MIGHT BE THE FARMERS OR ADATIYAS OF THE OUTSIDE PLACES OR THERE MIGHT BE SOME ANOTHE R M.P. IN THE GANJBAZAAR. HE HAS ALSO CLARIFIED THAT WHAT HAS BE EN WRITTEN IN THE DIARIES IS NOT IN HIS HANDWRITINGS BUT IN THE HANDWRITINGS OF SOME EMPLOYEES OF THE DATTATRAY CLEANING FACTORY. HE HAS FURTHER CLARIFIED THAT THE FACTORY DOES NOT BELONG TO HIM O R THAT HE IS NOT A PARTNER IN ANY FACTORY AND WHATEVER GOODS HE RECEI VED EITHER THROUGH M.P. OR DIRECT WERE ENTERED IN THE DIARIES AND AFTER HIS ACCOUNT OF COMMISSION WITH THE FACTORY OWNERS WAS S ETTLED HE TORN THOSE PAPERS OFF. 4. IN VIEW OF THE AFFIDAVIT SWORN IN BY SHRI VINODK UMAR M. PATEL NO ACTION MAY KINDLY BE TAKEN TO ADD THE VAL UE OF JEERA OF 125018 KGS. IN THE BLOCK ASSESSMENT OF THE ASSESSEE GROUP AND IF ADVERSE INFERENCE IS PROPOSED TO BE TAKEN A FUR THER OPPORTUNITY OF FURNISHING FURTHER CLARIFICATARY REPLY MAY KINDL Y BE GRANTED. IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 10 7. BUT THE ASSESSING OFFICER DESPITE DETAILED EXPLA NATION WORKED OUT UNEXPLAINED PURCHASES OF RS.1 25 017 KG VALUED AT R S.87 51 246/- AND ASSESSED THE SAME AS UNDISCLOSED INCOME FOR THE BLO CK PERIOD. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 8. THE CIT(A) DELETED THE ADDITION BY GIVING FOLLOW ING FINDINGS IN PARA-5.5 OF HIS APPELLATE ORDER:- 5.5 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ABOVE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. I HAVE ALSO PERUSED THE DECISION RELIED UPON BY THE APPELLANT. ON PERUSAL O F THE SAME IT IS SEEN THAT THE ADDITION HAS BEEN MADE ON THE BASIS OF THE DIARY SEIZED FROM ONE SHRI VINODKUKAR PATEL WHO IS NOT IN ANY WAY CO NNECTED WITH THE APPELLANT FIRM EITHER AS A PARTNER R AS AN EMPLOYEE . THUS THE SAID MATERIAL SEIZED FROM THIRD PARTY WAS NOT FOUND FROM THE APPELLANT DURING THE COURSE OF SEARCH. APART FROM THIS THE ASSESSIN G OFFICER HAS ALSO NOT BROUGHT ON RECORD ANY EVIDENCE TO CONCLUSIVELY ESTA BLISH THAT THE WORDS M.P. REPRESENT THE TRANSACTIONS OF THE APPELLANT AND THAT TOO OF THE PURCHASES MADE BY THE APPELLANT. SUCH MATERIAL FOUN D FROM THE THIRD PERSON AND HIS STATEMENT ONLY CANNOT BE THE BASIS F OR MAKING THE ADDITION IN THE HANDS OF THE APPELLANT. THIS IS FUR THER SUPPORTED BY THE FACT THAT VINODKUMAR PATEL WHOSE STATEMENT IS RELIE D UPON HEAVILY BY THE ASSESSING OFFICER HAS NOWHERE STATED THAT THE T RANSACTIONS MENTIONED IN THE DIARY BELONGED TO THE APPELLANT. S ECONDLY THE ASSESSING OFFICER HAS ALSO NOT PROVED THE AFFIDAVIT SUBMITTED BY SHRI VINODKUMAR PATEL AS FALSE. IT IS WELL SETTLED THAT MERE ENTRIES IN THE ACCOUNTS OF A THIRD PARTY IS NOT SUFFICIENT TO PROV E THAT THE APPELLANT HAD MADE SALES OUTSIDE THE BOOKS OF ACCOUNT.. IN THE IN STANT CASE THE INITIAL OF M.P MENTIONED IN THE RECORD OF THE THIRD PARTY HAS NOT BEEN ESTABLISHED TO BE THE NAME OF THE APPELLANT ESPECI ALLY IN VIEW OF THE FACT THAT THERE ARE LARGE NUMBER OF FIRMS IN THE GANJ BA ZAAR UNJHA STARTING WIT THESE INITIALS THE A.O JUMPED TO THE PRESUMPTI ON THAT THE INITIAL OF M.P PERTAINS TO THE APPELLANTS NAME ONLY. THIS I S NOT A SUFFICIENT BASIS FOR SUCH A HUGE ADDITION. I FIND THAT IT WILL NOT B E JUDICIOUS IF THE ADDITION OF RS.87 51 246/- IS SUSTAINED UNDER THE ABOVE FACT S AND CIRCUMSTANCES THEREFORE THE ADDITION OF RS.87 51 246/- IS DIRECT ED TO BE DELETED. AGGRIEVED REVENUE CAME IN APPEAL BEFORE TRIBUNAL O N THE DELETION OF ADDITION OF RS.87 51 246/- AND ASSESSEE CAME ON RETENTION O F ADDITION OF RS.3 24 050/- . 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE CLAIMED THA T DESPITE DETAILED EXPLANATION ASSESSING OFFICER WORKED OUT THE UNEXP LAINED PURCHASES OF IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 11 125017 KGS VALUED AT RS.87 51 246/- ON THE BASIS OF DUMB DIARIES FOUND FROM THE DICKEY OF THE SCOOTER OF SHRI VINODKUMAR PATEL WHO HIMSELF HAS STATED THAT IN THE AFFIDAVIT THAT THE DIARY HAS NOT BEEN WRITTE N IN HIS HANDWRITING BUT IN THE HANDWRITING OF SOME EMPLOYEE OF THE DATTATRAY CLEAN ING FACTORY. WE FIND THAT SHRI VINODKUKUMAR PATEL IS NOT THE OWNER OR PARTNER OF ANY CLEANING FACTORY BUT DEPARTMENT HAD ASSUMED THAT THE DIARY HAS BEEN WRIT TEN BY SHRI VINODKUMAR. AFTER THE AFFIDAVIT DEPARTMENT HAS NOT CALLED SHRI VINODKUMAR NOR HAS IT ASKED THE ASSESSEE TO PRODUCE SHRI VINODKUMAR WHOSE AFFI DAVIT WAS FILED BY THE ASSESSEE. FURTHER FOR HOLDING THAT THE WRITING IN THE DIARY FOUND FROM SOME BODY ELSE FROM OUTSIDE THE ASSESSEES PREMISES AND WRITTEN BY SOME OTHER PERSON IS RELATED TO THE ASSESSEE AND THAT THE PUR CHASES MADE ON THE BASIS OF THOSE WRITINGS ARE OF THE ASSESSEE IS ALLEGATION WHICH DOES NOT CARRY ANY EVIDENTIARY VALUE. SHRI BHANUBHAI JOSHI IN A STATE MENT RECORDED U/S.132(4) DURING SEARCH ITSELF HAS IN REPLY TO QUESTION NOS.1 3 14 & 15 CLEARLY STATED THAT THOSE PAPERS ARE NOT RELATED TO THE FIRM M/S. MANIL AL PRABHUDAS. BURDEN LIES ON THE DEPARTMENT TO PROVE THAT WHAT SHRI BHANUBHAI HAS STATED AFTER THE PAPERS FOUND FROM SHRI VINODKUMAR PATEL WERE SHOWN TO HIM WAS FALSE. WE FIND THAT IN SIMILAR CIRCUMSTANCES HONBLE MADRAS H IGH COURT HAS LAID DOWN THE PRINCIPLE IN THE CASE OF CIT VS. N. SWAMI (2000) 24 1 ITR 363 THAT THE BURDEN CANNOT BE SAID TO BE DISCHARGED BY MERELY REFERRING TO THE STATEMENT GIVEN BY THE ASSESSEE TO A THIRD PARTY IN CONNECTION WITH A TRANSACTION WHICH WAS NOT DIRECTLY RELATED TO THE ASSESSMENT AND MAKING THAT STATEMENT THE SOLE FOUNDATION FOR A FINDING THAT THE ASSESSEE HAS DELI BERATELY SUPPRESSED HIS INCOME. THE BURDEN IS ON THE REVENUE TO PROVE THAT THE INCOME SOUGHT TO BE TAXED IS WITHIN THE TAXING PROVISIONS AND THERE WAS IN FACT INCOME. IN THE PRESENT CASE THE DEPARTMENT SEEKS TO RELY ON THE TH IRD PARTYS STATEMENT WHICH IS DENIED BY THE ASSESSEE AS ALSO BY THE THIRD PART Y BY FILING AN AFFIDAVIT AND WITHOUT PROVING THAT WHAT THE ASSESSEE HAD STATED U /S.132(4) DURING SEARCH WAS FALSE AND WHAT THAT SHRI VINODKUMAR HAS AFFIRME D IN AFFIDAVIT WAS ALSO FALSE WITHOUT BRINGING ANY MATERIAL TO CORROBORATE THE STAND TAKEN BY THE DEPARTMENT. 10. WE FURTHER FIND THAT THERE WAS SEARCH IN THE B USINESS PREMISES AS WELL AS RESIDENTIAL PREMISES OF M/S. MANILAL PRABHUDAS G ROUP. THE PREMISES IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 12 COVERED UNDER SEARCH WERE AS MANY AS 8 PLACES BUT FROM NO PLACE ANY PAPER RELATING TO VINODKUMAR MAGANLAL PATEL HAS BEEN FOUN D. SHRI VINODKUMAR GOES FROM PLACE TO PLACE REQUESTING THE TRADERS THAT IF ANY FARMER COMES TO THEM THEY MAY SEND SUCH FARMER FOR CLEANING JEERA THROUG H HIM SO THAT HE MAY GET THE WORK OF CLEANING CHARGES. FURTHER THE DEPARTME NT HAS PROPOSED TO TAX THE AMOUNT OF RS.87 51 426/- PRESUMABLY U/S.69 OF THE A CT. UNDER SEC.69 THE VALUE OF INVESTMENT MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE IF SUCH INVESTMENTS ARE NOT RECORDED IN THE BOOKS OF ACCOUN T IF ANY MAINTAINED BY HIM FOR ANY SOURCE OF INCOME AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH INVESTMENTS OR THE EXPLAN ATION OFFERED BY HIM IS IN THE OPINION OF THE ASSESSING OFFICER NOT SATISFACTO RY. THE HONBLE SUPREME COURT HAS GIVEN A DETAILED ANALYSIS OF SEC.69 AND H AS ALSO HELD THAT UNEXPLAINED INVESTMENT IS NOT ALWAYS INCOME AND WOR DS MAY IN SECTION 69 CAN NOT BE INTERPRETED TO MEAN SHALL WHILE INTER PRETING THIS SECTION IN THE CASE OF CIT VS. P.K. NOORJAHAN (1999) 237 ITR 570 (SC ) IT IS DISCUSSED AND HELD AS UNDER - IN THE CORRESPONDING CLAUSE OF THE BILL WHICH WAS INTRODUCED IN PARLIAMENT WHILE INSERTING SECTION 69 IN THE INCOM E-TAX ACT 1961 THE WORD SHALL HAD BEEN USED BUT DURING THE COURSE OF CONSIDERATION OF THE BILL AND ON THE RECOMMENDATION OF THE SELECT COMMITTEE THE SAID WORD WAS SUBSTITUTED BY THE WOR D MAY. THIS CLEARLY INDICATES THAT THE INTENTION OF PARLIA MENT IN ENACTING SECTION 69 WAS TO CONFER A DISCRETION ON THE INCOME -TAX OFFICER IN THE MATTER OF TREATING THE SOURCE OF INVESTMENT WHI CH HAS NOT BEEN SATISFACTORILY EXPLAINED BY THE ASSESSEE AS TH E INCOME OF THE ASSESSEE AND THE INCOME-TAX OFFICER IS NOT OBLI GED TO TREAT SUCH SOURCE OF INVESTMENT AS INCOME IN EVERY CASE W HERE THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE NOT SATISFACTORY. THE QUESTION WHETHER THE SOURCE OF T HE INVESTMENT SHOULD BE TREATED AS INCOME OR NOT UNDER SECTION 69 HAS TO BE CONSIDERED IN THE LIGHT OF THE FACTS OF EACH CASE. IN OTHER WORDS A DISCRETION HAS BEEN CONFERRED ON THE INCOME-TAX OFF ICER UNDER SECTION 69 OF THE ACT TO TREAT THE SOURCE OF INVEST MENT AS THE INCOME OF THE ASSESSEE IF THE EXPLANATION OFFERED B Y THE ASSESSEE IS NOT FOUND SATISFACTORY AND THE SAID DIS CRETION HAS TO BE EXERCISED KEEPING IN VIEW THE FACTS AND CIRCUMST ANCES OF THE PARTICULAR CASE. HELD DISMISSING THE APPEAL THAT IN THE INSTANCE CASE THE TRIBUNAL HAD HELD THAT THE DISCRETION HAD NOT BEEN PROPERLY EXERCISED BY THE INCOME-TAX OFFICER AND THE APPELLA TE ASSISTANT COMMISSIONER TAKING INTO ACCOUNT THE CIRCUMSTANCES IN WHICH THE IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 13 ASSESSEE WAS PLACED AND THE TRIBUNAL HAD FOUND THAT THE INVESTMENTS COULD NOT BE TREATED AS INCOME OF THE A SSESSEE. THE HIGH COURT HAD AGREED WITH THE SAID VIEW OF THE TRI BUNAL. THERE WAS NO ERROR IN THE FINDING RECORDED BY THE TRIBUNA L. SECTION 69 COULD NOT BE INVOKED IN RESPECT OF THE INVESTMENTS OF THE ASSESSEE. 11. WE HAVE ALSO GONE THROUGH THE CASE LAW REFERRED BY LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF ASHOKKUMAR RASTOGI VS. CIT (1991) 100 CTR 204 (ALL). IN THAT CASE IT IS HELD THAT ADDITION U/S.69 AS UNE XPLAINED INVESTMENT CANNOT BE MADE WITHOUT REFERENCE TO ANY SUPPORTING EVIDENCE NOTWITHSTANDING SEIZURE OF CERTAIN DOCUMENTS FROM THE ASSESSEE. THERE MUST BE SOMETHING MORE THAN BARE SUSPICION TO SUPPORT THE ASSESSMENT. WE FIND THAT THE PAPER SEIZED FROM THE THIRD PARTY NAMELY SHRI VINODKUMAR PATEL MERELY CONTAINED CERTAIN FIGURES RATE AND CONSEQUENT CALCULATION. IT DID NOT BEAR A NY NAME. THE ASSESSEE CATEGORICALLY EXPLAINED IT DID NOT BELONG TO HIM AN D ALSO EXPLAINED THAT IT WAS NOT IN THE HANDWRITING OF ANY OF THE PARTNERS OR EM PLOYEES OR CONNECTED PERSONS. INITIAL ONUS LYING UPON THE ASSESSEE WAS THUS DISCHARGED. DURING SEARCH OR EVEN THEREAFTER NOTHING WAS ASKED BY THE REVENUE REGARDING SEIZED PAPER. DEPARTMENT THUS COMPLETELY FAILED TO ESTABL ISH THAT ASSESSEE HAD MADE ANY UNEXPLAINED INVESTMENT DURING RELEVANT YEAR. E VEN ON THE BASIS OF ENTRIES IN THE PAPER ADDITION COULD NOT BE MADE U/S.69 OF THE ACT. 12. IN VIEW OF THE ABOVE FACTS LEGAL POSITION GIVE N IN THE ABOVE CASE LAWS WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HEAVI LY RELIED ON THE STATEMENT OF SHRI VINODKUMAR M PATEL WHICH WAS SUBSEQUENTLY RET RACTED BY WAY OF AFFIDAVIT. EVEN OTHERWISE IN THE DIARY THE INITIALS NOTED ARE M.P THAT ALSO BY A THIRD PARTY VINODKUMAR M PATEL IN THEIR RECORDS DOES NOT HELP THE ASSESSING OFFICER BECAUSE PRIMARILY SUCH EVIDENCE CANNOT BE USED AGAI NST THE ASSESSEE WITHOUT CONCLUSIVELY ESTABLISHING THAT THE ASSESSEE HAS EAR NED UNDISCLOSED INCOME OR MADE UNDISCLOSED INVESTMENT DURING THE BLOCK PERIOD . IT IS A FACT THAT THERE ARE LARGE NUMBERS OF FIRMS IN THE GANG BAZAAR WITH THE FIRST NAMES STARTING WITH M AND SECOND NAME WITH P AS NOTED ABOVE. THERE IS N O JUSTIFICATION OR EVIDENCE WITH THE REVENUE TO CONCLUDE THAT M.P NOTED BY TH IRD PARTY IS ASSESSEE AND NOT ANY OTHER PERSONS. EVEN THERE IS NO SHOP IN THE NAME OF M.P TRADING COMPANY. EVEN SHRI BHANUPROSAD JOSHI CATEGORICALLY STATED THAT SEIZED PAPER IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 14 DO NOT RELATES TO THE ASSESSEE AND THE ADDITION WAS BASED ON CONJECTURES AND SURMISES. ACCORDINGLY WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. AS FAR AS THE ISSUE OF THE ASSESSEES APPEAL REGARD ING SUSTAINING OF ADDITION OF RS.3 24 050/- BY THE CIT(A) ON THE TRANSACTION OF A PMC IN THE PURCHASE OF JEERA THE ASSESSEE HAS ALREADY MADE A DISCLOSURE O F RS20 LAKH WHICH INCLUDES A SUM OF RS.2.13 LAKH ON PROBABLE OMISSIONS AND STO CK OF RS.4.37 LAKH WHICH WILL COVER THE ADDITION AND NO SEPARATE ADDITION IS REQUIRED TO BE MADE. ACCORDINGLY WE ALLOW THE TELESCOPING BENEFIT TO TH E ASSESSEE AND THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 13. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IN IT(SS)A NO.181/AHD/2005 IS AS REGARDS TO COMPUTING THE UNRECORDED PROFIT ON SALE OF JEERA OF UNACCOUNTED PURCHASE JEERA 1 25 017.800 KG. FOR THIS REVENUE H AS RAISED THE FOLLOWING GROUND NO.3 :- 3. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.29 37 913/- MADE ON ACCOUNT OF UNRECORDED PROFIT EARNED BY THE ASSESSEE ON SALE OF JEERA OF 125017.800 KGS MENTIONED IN GRO UND NO.2. 14. THE ASSESSING OFFICER HAS ADDED THE INCOME O F RS.29 37 918 FOR THE ALLEGED UNDISCLOSED PROFIT FROM THE SALE OF JEER A. THE ASSESSING OFFICER HAS ADDED THE INCOME OF RS.29 37 918 VIDE PARA 3.4 OF THE ASSESSMENT ORDER WHICH REPRODUCED HEREUNDER : 3.4 DURING THE SEARCH THE ABOVE MENTIONED CLEA NED JEERA WAS NOT FOUND AT THE PREMISES OF THE ASSESSEE. THE ASSESSEE HAS NOT GIVEN ANY PLAUSIBLE EXPLANATION AS TO WHEN AND HOW THE STOCK HAS BEEN DISPOSED OFF. HENCE THE ONLY LOGICAL CONCLUSION IS THAT THE GOO DS HAVE BEEN SOLD OFF. THE GROSS PROFIT ARISING OUT OF THIS UNRECORDED SALE W ARRANTS TAXATION U/S.158BB. THE AVERAGE SALE PRICE RECORDED IN THE BOOKS IS OF RS.93.50 AND THE AVERAGE PURCHASE COST IS RS.70.00. THEREFORE THE PROFIT EARNED IS QUANTIFIED AT RS.23.50 PER KG. I.E. RS.29 37 918 IN THE WHOLE TRANSACTION. THUS RS.29 37 918 IS TAXED U/S.158BB OF THE I.T. ACT B EING THE PROFITS OF THE ASSESSEE ON THE UNRECORDED TURNOVER. IT(SS)A NO.136 & 181/AHD/2005 B.P. 1 /4/96 TO 6/6/02 M/S. MANILAL P PATEL V. ACIT CC-2(1) ABD PAGE 15 15. AT THE OUTSET WE HAVE ALREADY HELD IN THE FIRS T GROUND OF REVENUES APPEAL THAT THE UNACCOUNTED PURCHASE OF JEERA DOES NOT BEL ONG TO THE ASSESSEE THE CONSEQUENTIAL PROFIT ON THE SAME CANNOT BE ADDED. A CCORDINGLY THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAM E. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 16. ONE THING WE WANT TO CLARIFY THAT THE RETURNED INCOME OF THE ASSESSEE WILL NOT GO BELOW OF RS.20 LAKH AS DISCLOSED IN THE RETURNED OF INCOME IN ANY CASE AND THE ASSESSING OFFICER WILL ASSESS THE ASSESSEE AT LEAS T ON RS.20 LAKH. 17. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED AND THAT OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18/02/2011 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 18/02/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-III AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD