The ACIT, 1(1), v. Shri Pradeep Kumar Malani,

ITSSA 193/IND/2007 | misc
Pronouncement Date: 06-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 19322716 RSA 2007
Assessee PAN SEDIN1983A
Bench Indore
Appeal Number ITSSA 193/IND/2007
Duration Of Justice 2 year(s) 10 month(s) 3 day(s)
Appellant The ACIT, 1(1),
Respondent Shri Pradeep Kumar Malani,
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 06-08-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 06-08-2010
Date Of Final Hearing 27-07-2010
Next Hearing Date 27-07-2010
Assessment Year misc
Appeal Filed On 03-10-2007
Judgment Text
- 1 - 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI B.R.KAUSHIK ACCOUNTANT MEMBER PAN NO. : - I.T.(SS)A.NO.193/IND/2007 BLOCK PERIOD : 01.4.1996 TO 13.12.2002 ACIT SHRI PRADEEP KUMAR MALANI 1(1) VS UDAIPURA BHOPAL. RAISEN APPELLANT RESPONDENT APPELLANT BY : SHRI K.K. SINGH CIT DR RESPONDENT BY : S/SHRI H.P.VERMA AND ASHISH GOYAL ADVOCATES O R D E R PER B. R. KAUSHIK A.M. THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAIN ST ORDER DATED 25.07.2007 OF THE LD.CIT(A)-I BHOPAL. 2. GROUNDS OF APPEAL ARE REPRODUCED AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN 1. DIRECTING THE AO THAT FURTHER ADDITION OF RS. 4 LAK HS AS UNDISCLOSED INCOME IS NOT WARRANTED SINCE THE ASSES SEE HAS DISCLOSED THE SAME IN THE BLOCK RETURN FILED THOUG H THE - 2 - 2 UNDISCLOSED INCOME WAS DECLARED BY THE ASSESSEE WIT HOUT EXPLAINING THE BIFURCATION OF THE SOURCES AND ASSES SEE FAILED TO EXPLAIN THE SAME DESPITE OF BEING POINTED OUT SP ECIFIC DEFECTS BY AO. 2. DELETING THE ADDITION OF RS. 43 087/- MADE BY THE A SSESSING OFFICER TREATING THE CASH FOUND AT THE TIME OF SEAR CH AS UNDISCLOSED INCOME. 3. DELETING THE ADDITION OF RS. 12 17 692/- BEING VALU E OF EXCESS FOODGRAINS FOUND WHICH WAS TREATED AS UNEXPL AINED BY THE ASSESSING OFFICER. 4. DELETING THE ADDITION OF RS. 59 44 000/- MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF INVESTMENT IN DALL MILL. 5. DELETING THE ADDITION OF RS. 4 75 000/- ON ACCOUNT OF CONSTRUCTION OF SHOP. 6. DELETING THE ADDITION OF RS. 2 68 000/- BEING RENT FROM MAHESHWARI TRACTORS. 7. DELETING THE ADDITION OF RS. 84 000/- MADE BY THE A SSESSING OFFICER ON ACCOUNT OF VALUE OF JEWELLERY FOUND IN T HE RESIDENTIAL PREMISES DURING THE SEARCH OPERATION. - 3 - 3 8. DELETING THE ADDITION OF RS. 60 000/- BEING UNDISC LOSED INVESTMENT MADE ON THE BASIS OF NSCS AND FDRS FOUND DURING THE SEARCH OPERATION. 9. ALLOWING RELIEF OF RS. 25 62 866/- OUT OF TOTAL ADD ITION OF RS. 33 73 341/- ON ACCOUNT OF GROSS PROFIT AND INITIAL INVESTMENT IN THE BUSINESS OUTSIDE THE ACCOUNTS. 10. DIRECTING TO ALLOW REBATE UNDER CHAPTER VIA OF THE INCOME- TAX ACT 1961. 11. DELETING THE ADDITION OF RS. 3 20 060/- MADE BY THE ASSESSING OFFICER ON THE BASIS OF LOOSE PAPERS. 12. HOLDING THAT CHARGING OF INTEREST UNDER SECTION 158 BFA(1) OF THE INCOME-TAX ACT 1961 IS WRONG AND THUS DELET ED. 3. THE FACTS IN BRIEF ARE THAT THERE WAS A SEARCH A T THE PREMISES OF THE ASSESSEE ON 13 TH DECEMBER 2002 AND 14 TH DECEMBER 2002. THE ASSESSEE FILED RETURN IN FORM NO.2B ON 9 TH NOVEMBER 2004 DECLARING UNDISCLOSED INCOME OF RS. 4 LAKHS FOR THE BLOCK PER IOD FROM 1 ST APRIL 1996 TO 31 ST DECEMBER 2002. THE AO FINALIZED THE ASSESSMENT AS PER ORDER DATED 29 TH DECEMBER 2004 U/S 158BC READ WITH SECTION 143(3) OF THE INCOME-TAX ACT 1961 DETERMINING TOTAL UNDISCLO SED INCOME OF RS. 1 21 85 180/-. THE LD.CIT(A) AS PER IMPUGNED ORDER DATED 25 TH JULY 2007 PARTIALLY ALLOWED THE APPEAL OF THE ASSESSEE HENCE THIS APPEAL. - 4 - 4 4. AS PER FIRST GROUND OF APPEAL THE REVENUE HAS OBJ ECTED TO DELETION OF ADDITION OF RS. 4 LAKHS AS UNDISCLOSED INCOME. 5. THE LD. CIT D.R. SUBMITTED THAT THE ASSESSEE HAS DISCLOSED THE CONCEALED INCOME OF RS. 4 LAKHS IN THE BLOCK RETURN WITHOUT SPECIFYING THE SOURCE OF THE YEAR THEREOF AND THE ADDITION MAD E ON THE BASIS OF THE SEIZED MATERIAL COULD NOT BE REDUCED BY THE UNSPECI FIED UNDISCLOSED INCOME OF RS. 4 LAKHS. THUS THE LD. CIT D.R. RELI ED ON THE ORDER OF THE AO. 6. THE LD. COUNSEL SUPPORTED THE ORDER OF THE LD.CIT(A ). HE SUBMITTED THAT THE SIMILAR ADDITION HAS BEEN DELETE D BY THE I.T.A.T AS PER ITS ORDER DATED 24.10.2008 IN I.T(SS).A.NO. 191/IND /2007 AND THAT THE LD.CIT(A) RIGHTLY HELD THAT THE AO WAS NOT JUSTIFIE D IN MAKING FURTHER ADDITION OF RS. 4 LAKHS AS UNDISCLOSED INCOME BECA USE THE TOTAL UNDISCLOSED INCOME COMPUTED BY THE ASSESSING OFFICE R FOR THE BLOCK PERIOD INCLUDED THE CONCEALED INCOME DECLARED BY TH E ASSESSEE AND FURTHER ADDITION OF RS. 4 LAKHS WAS NOT WARRANTED. 7. SINCE THE I.T.A.T. IN ITS DECISION DATED 24.10.2008 IN THE CASE OF SHIV NARAYAN MALANI ON SIMILAR FACTS HAS HELD THAT EVEN IF THE ASSESSEE HAD NOT SPECIFIED THE YEAR-WISE CONCEALED INCOME T HE TOTAL CONCEALED INCOME OF RS. 4 LAKHS IN THE BLOCK RETURN WOULD NOT BE ADDED AGAIN WHILE DETERMINING THE YEAR-WISE UNDISCLOSED INCOME FOR TH E BLOCK PERIOD. WE - 5 - 5 THEREFORE SEE NO REASON TO INTERFERE WITH THE DECI SION OF THE LD.CIT(A) ON THIS ISSUE. THIS GROUND OF APPEAL IS REJECTED. 8. AS PER SECOND GROUND OF APPEAL THE REVENUE HAS OBJ ECTED TO THE DELETION OF ADDITION OF RS. 43 087/- MADE BY TH E ASSESSING OFFICER CONSIDERING CASH FOUND AT THE TIME OF SEARCH AS UND ISCLOSED INCOME OF THE ASSESSEE. THE AO OBSERVED THAT RS. 1 29 260/- IN CA SH WAS FOUND AT THE BUSINESS PREMISES OF M/S. MAHESHWARI TRADERS AND M/ S. MAHESHWARI GENERAL STORES I.E. THE CONCERNS OF THE GROUP OF WH ICH ASSESSEE IS A MEMBER. RS. 9 55 710/- WERE FOUND AT THE RESIDENCE OF SHRI SHIV NARYANA MALANI AND RS. 87 770/- WERE FOUND FROM THE BED ROO M OF SHRI PREM NARAYAN MALANI. AFTER CONSIDERING THE EXPLANATION G IVEN BY THE ASSESSEES OF THIS GROUP FOR THE TOTAL CASH FOUND F ROM VARIOUS PREMISES THE AO OBSERVED THAT THE BOOKS OF ACCOUNT OF THE AS SESSEE WERE NOT RELIABLE AND THERE WAS DEVIATION FROM THE INITIAL S TATEMENT GIVEN AT THE TIME OF SEARCH. HE ALSO OBSERVED THAT THE ASSESSEE FAILED TO RECONCILE THE BOOKS OF ACCOUNT WITH REFERENCE TO EVIDENCE FOUND D URING THE COURSE OF SEARCH AND THE EXPLANATION OF THE ASSESSEE REGARDIN G THE CASH AVAILABLE WAS LIABLE TO BE REJECTED. AS PER THE DETAILS GIVEN AT PAGE 6 OF THE ORDER THE AO MADE ADDITION OF UNDISCLOSED INCOME ON ACCOU NT OF UNEXPLAINED CASH FOUND DURING THE COURSE OF SEARCH IN THE HANDS OF VARIOUS FAMILY - 6 - 6 MEMBERS OUT OF WHICH RS. 43 087/- WAS ADDED IN THE CASE OF THE ASSESSEE. 9. THE LD. CIT D.R. RELIED ON THE ASSESSMENT ORDER A ND SUBMITTED THAT THE BOOKS OF ACCOUNT WERE WRITTEN SUBSEQUENT T O THE SEARCH AND THE SAME COULD NOT BE RELIED UPON AND THAT THE EXPLANAT ION OF THE ASSESSEE REGARDING CASH FOUND DURING THE COURSE OF SEARCH WA S RIGHTLY REJECTED BY THE ASSESSING OFFICER. 10. THE LD. COUNSEL INVITED OUR ATTENTION TO THE DECIS ION OF THE LD.CIT(A) AT PAGES 4 TO 6 AND SUBMITTED THAT THE EX PLANATION GIVEN BY THE ASSESSEE AND OTHER PERSONS WAS CONSIDERED BY THE L D. CIT(A) FOR THE CASH FOUND AT VARIOUS PREMISES AND THE LD.CIT(A) HAD RIG HTLY HELD THAT NO ACTION WAS REQUIRED TO BE TAKEN IN THE CASE OF THE ASSESSEE FOR THE UNEXPLAINED CASH FOUND BECAUSE CASH FOUND IN THE P OSSESSION OF THE ASSESSEE WAS LESS THAN THE CASH BALANCE AVAILABLE I N THE CASH BOOK ON THE DATE OF SEARCH. HE ALSO POINTED OUT THAT SIMILAR AD DITION IN THE CASED OF SHIV NARAYAN MALANI HAS BEEN DELETED BY THE LD. CIT (A) AND THE DECISION OF THE LD.CIT(A) HAS BEEN UPHELD BY THE I.T.A.T. A S PER ORDER DATED 24.10.2008 (SUPRA). 11. KEEPING IN VIEW THAT THE DECISION OF THE I.T.A.T. AS PER ORDER DATED 24 TH OCTOBER 2008 (SUPRA) IN THE CASE OF SHRI SHIV NA RAYAN MALANI - 7 - 7 ON SIMILAR FACTS WE SEE NO REASON TO INTERFERE WIT H THE DECISION OF THE LD.CIT(A). THIS GROUND OF APPEAL IS THEREFORE REJ ECTED. 12. THIRD GROUND OF APPEAL IS AGAINST THE ADDITION OF R S. 12 17 692/- BEING THE VALUE OF EXCESS FOODGRAINS DURING THE COU RSE OF SEARCH. 13. IT WAS CONTENDED BY THE LD. SENIOR D.R. THAT THE A SSESSEE HAD AGREED TO THE ESTIMATED VALUE OF THE STOCK OF FOODG RAINS IN HIS STATEMENT U/S 132(4) OF THE INCOME-TAX ACT 1961 AND HE HAD N OT CLAIMED THAT THE STOCK BELONGED TO SOME OTHER PARTY AND THEREFORE THE SUBSEQUENT EXPLANATION OFFERED BY THE ASSESSEE ON AN AFTER TH OUGHT AFTER A LAPSE OF TWO YEARS COULD NOT BE CONSIDERED RELIABLE. HE ALS O SUBMITTED THAT THE LD.CIT(A) HAD NOT CONSIDERED THE FINDINGS OF FACT A ND REASONS GIVEN BY THE ASSESSING OFFICER FOR MAKING THE ADDITION IN QU ESTION AND DELETED IT MERELY BY RELYING ON THE WRITTEN SUBMISSIONS OF THE ASSESSEE AS IS CLEAR FROM HIS VERY BRIEF CONCLUSION AT PAGE 11 OF THE IM PUGNED ORDER. 14. THE LD. COUNSEL REITERATED THAT THE INVENTORY OF S TOCK OF WHEAT CHANA CHANA DAL GOODS IN PROCESS AND CATTLE FEED WERE PREPARED ON ESTIMATE BASIS AND THE EXCESS STOCK OF 1109.97 QTLS . WAS NOT CORRECT. HE FURTHER POINTED OUT THAT THE ASSESSEE HAD CLAIMED T HAT 266 QTLS. OF WHEAT BELONGED TO SHRI RAM SINGH CHAUHAN WHO HAD CONFIRM ED THE FACTS AS PER HIS AFFIDAVIT DATED 18 TH DEC. 2004 PLACED AT PAGE 119 OF THE PAPER BOOK. THE LD. COUNSEL ALSO SUBMITTED THAT IN HIS STATEMEN T U/S 132(4) OF THE - 8 - 8 INCOME-TAX ACT 1961 DATED 13 TH DEC. 2002 SHRI PRADEEP MALANI HAD SUBMITTED IN REPLY TO QUESTION 16 THAT EXCESS WHEAT OF 266 QTLS. BELONGED TO SOME FARMER WHOSE NAME HE DID NOT REMEMBER. THE STATEMENT OF SHRI PRADEEP MALANI IS PLACED AT PAGES 108 TO 119 OF THE PAPER BOOK. THE LD. COUNSEL ALSO SUBMITTED THAT EXCESS STOCK OF CHANA 306.50 QTLS WAS ALSO ACCEPTED BY SHRI RAM SINGH CHAUHAN AS HIS GOODS LY ING AT THE PREMISES OF THE ASSESSEE ON THE DATE OF THE SEARCH. THE LD. COUNSEL STATED THAT EXCESS STOCK 11.62 QTLS. CHANA DAL WAS HARDLY 1 % O F THE TOTAL STOCK AND THE EXCESS HAD BEEN WORKED OUT ON THE BASIS OF ESTI MATED CLOSING STOCK AND THEREFORE THE MINOR VARIATION WAS BECAUSE OF ESTIMATION AND NO EXCESS STOCK WAS IN FACT FOUND DURING THE COURSE OF SEARCH. SIMILARLY THE LD. COUNSEL EXPLAINED THAT IT COULD BE SEEN FROM TH E INVENTORY OF STOCK THAT THE HEAPS ON STOCKS WERE KEPT AT DIFFERENT PLACES E .G. NEAR TANK OPEN LUMPS BELOW THE PROCESS MACHINE ETC. THE QUANTITIES OF STOCK WERE TAKEN ON ESTIMATE BASIS WITHOUT MAKING ANY MEASUREMENT BE CAUSE IT WAS NOT POSSIBLE TO TAKE ACTUAL MEASUREMENT WITHIN THE LIMI TED PERIOD AVAILABLE TO THE SEARCH PARTY. THE ASSESSEE ALSO AGREED TO THE A FORESTATED EXCESS STOCK BECAUSE HE DID NOT WANT TO PROLONG THE SEARCH BECAU SE OF STOCK TAKING BUT IN FACT THERE WAS NO EXCESS STOCK. HE FURTHER SUBMITTED THAT CATTLE FEED WAS A WASTE PRODUCT AS CHANA CHHILKA AND ITS W EIGHT WAS TAKEN ON ESTIMATED WEIGHT OF 25 KG. PER BAG WHICH WAS NOT C ORRECT. SIMILARLY - 9 - 9 CHANA CHUNI AND OTHER WASTE PRODUCTS SOLD BY THE AS SESSEE AS CATTLE FEED AT NOMINAL PRICE WAS ALSO TAKEN ON ESTIMATE BASIS A ND THERE WAS NO EXCESS STOCK. 15. THE LD. SENIOR D.R. IN REPLY INVITED OUR ATTENTION TO THE INVENTORY OF STOCK PLACED AT PAGE 101 TO 107 OF THE PAPER BOOK FILED BY THE ASSESSEE AND SUBMITTED THAT THE STOCK WAS TAKEN IN THE PRESENCE OF THE ASSESSEE AND TWO INDEPENDENT WITNESSES AND THE STOC K STATEMENTS WERE DULY SIGNED. HE ALSO SUBMITTED THAT SHRI PRADEEP MA LANI THE PROPRIETOR OF MAHESHWARI MILLS INDUSTRIES IN ANSWER TO QUESTION NO.4 STATED THAT THE STOCK WAS DULY RECORDED INTO THE STOCK REGISTER TH AT IN ANSWER TO QUESTION NOS. 6 & 7 HE ADMITTED THAT THE GOODS OF THE MILL WERE NOT PLACED AT ANY OTHER PLACE; THAT THERE WAS NO GOODS IN THE PREMIS ES FOR WHICH BILLS WERE NOT AVAILABLE THAT WHEN CONFRONTED WITH EXCESS STOC K FOUND DURING THE COURSE OF SEARCH AS PER QUESTION NO.16 HE SUBMITTE D THAT ONLY THE WHEAT RECEIVED FOR GRADING BELONGED TO SOME OTHER FARMER S BUT ALL OTHER GOODS LIKE GRAM DAL GOODS IN PROCESS ETC. BELONGED TO T HE ASSESSEE ONLY. THE LD. CIT DR SUBMITTED THAT SHRI PRADEEP MALANI ALSO SPECIFIED THE RATES OF THE GOODS IN HIS ANSWER TO QUESTION NO.17 AND THUS IT WAS NOT CORRECT TO SAY THAT THE STOCK INVENTORY WAS NOT PROPERLY TAKEN OR THE EXCESS WAS BECAUSE OF WRONG ESTIMATION OF GOODS OR ITS VALUATI ON WAS NOT CORRECT. THE LD. CIT D.R. ALSO POINTED OUT THAT AT THE TIME OF SEARCH SHRI PRADEEP - 10 - 10 MALANI COULD NOT SUBMIT ANY EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE BAGS OF WHEAT OF SOME FARMERS RECEIVED FOR GRADING WERE LYING IN THE MILL PREMISES AT THE TIME OF THE SEARCH. HE COULD N OT ALSO GIVE THE NAMES OF THE FARMERS AND ADMITTED THAT HE WAS UNABLE TO G IVE ANY EVIDENCE IN THIS REGARD. ACCORDING TO THE LD. SENIOR D.R. THE AFFIDAVIT OF SHRI RAM SINGH CHAUHAN WAS SUBMITTED ON 18 TH DECEMBER 2004 I.E. AFTER MORE THAN 2 YEARS OF THE SEARCH AND DURING ALL THIS PERI OD THE ASSESSEE COULD NOT FILE ANY EVIDENCE OR STATE THE NAME OF THE FARM ERS WHOSE WHEAT WAS STATED TO BE RECEIVED FOR GRADING AND WAS LYING IN THE BUSINESS PREMISES OF THE ASSESSEE. HE ALSO INVITED REFERENCE TO THE R ELEVANT PORTION OF THE ASSESSMENT ORDER AND SUBMITTED THAT NOT ONLY THE AF FIDAVIT OF SHRI RAM SINGH CHAUHAN WAS CRYPTIC BUT HE ALSO COULD NOT GI VE THE RELEVANT DETAILS OF KEEPING HIS GOODS IN THE PREMISES OF THE ASSESSE E. THE LD. CIT D.R. THEREFORE REITERATED THAT THE AO HAD CORRECTLY MAD E THE ADDITION BECAUSE THE EXPLANATION GIVEN BY THE ASSESSEE AFTER A PERIO D OF TWO YEARS WAS ON AN AFTER THOUGHT AND THAT THE AFFIDAVIT OF SHRI RAM SINGH WAS NOT RELIABLE IN VIEW OF THE FACT THAT SHRI PRADEEP MALANI HAD CL AIMED DURING HIS STATEMENT U/S 132(4) THAT ONLY WHEAT OF SOME FARMER S WHOSE NAMES HE DID NOT KNOW WAS LYING IN THE BUSINESS PREMISES W HEREAS SHRI RAM SINGH IN HIS AFFIDAVIT FILED AFTER TWO YEARS OF TH E DATE OF SEARCHED HAS CLAIMED THAT NOT ONLY 275 BAGS OF WHEAT BUT 315 BAG S OF CHANA WERE - 11 - 11 ALSO LYING IN THE BUSINESS PREMISES OF THE ASSESSEE WHICH PROVES THAT THE AFFIDAVIT AND STATEMENT OF SHRI RAM SINGH WERE NOT RELIABLE AND ONLY WITH A VIEW TO ACCOMMODATE THE ASSESSEE AND SUPPORT HIS FALSE CLAIM. 16. THE LD. SENIOR D.R. ALSO STATED THAT IT HAS BEEN AD MITTED BY THE ASSESSEE THAT WHEN THE PER BAG WEIGHT OF THE CATTL E FEED WAS STATED TO BE 25 KGS. INSTEAD OF 40 KGS. THE AUTHORIZED OFFICER ADOPTED THE WEIGHTS STATED BY THE ASSESSEE AND THIS SHOWS THAT THE ESTI MATE WAS MADE AS PER THE NARRATION GIVEN BY THE ASSESSEE. 17. WE HAVE CAREFULLY CONSIDERED THE ISSUE IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW MATERIALS PLACED ON RECORD A ND RIVAL SUBMISSIONS. SO FAR AS THE CLAIM OF THE ASSESSEE THAT 266 QTLS O F WHEAT OF SHRI RAM SINGH WAS LYING AT THE PREMISES OF THE ASSESSEE TH E BALANCE OF PROBABILITIES IS NOT IN FAVOUR OF THE ASSESSEE BEC AUSE SHRI PRADEEP MALANI DURING THE COURSE OF SEARCH COULD NOT GIVEN THE NAM ES OF THE FARMERS AND HE HIMSELF ACCEPTED THAT HE WAS UNABLE TO FILE ANY EVIDENCE IN SUPPORT THEREOF. IN ABSENCE OF ANY DOCUMENTARY EVIDENCE OF RECEIVING AND KEEPING THE WHEAT IN THE PREMISES OF THE ASSESSEE F OR GRADING THE AFFIDAVIT OF SHRI RAM SINGH AND HIS STATEMENT CANNO T BE BELIEVED. THE ASSESSEE ALSO COULD NOT FILE THE AFFIDAVIT AND THE RELEVANT INFORMATION WITHIN REASONABLE TIME AFTER THE CONCLUSION OF THE SEARCH. THE LD. CIT DR HAS ALSO RIGHTLY POINTED OUT THAT THE STOCK OTHER T HAN THE STOCK OF WHEAT - 12 - 12 WAS ADMITTED BY THE ASSESSEE AS HIS BUSINESS STOCK BUT SHRI RAM SINGH IN HIS ATTEMPT TO ACCOMMODATE THE ASSESSEE CLAIMED IN HIS AFFIDAVIT THAT 315 BAGS OF CHANA IN ADDITION TO 275 BAGS OF WHEAT WERE LYING IN THE PREMISES OF THE ASSESSEE. THE SUBMISSION OF THE LD. COUNSEL THAT THE STATEMENT OF SHRI RAM SINGH RECORDED BY THE ASSESSING OFFICER WA S NOT MADE AVAILABLE TO THE ASSESSEE CANNOT BE ACCEPTED BECA USE THE AO HAS DULY DISCUSSED THE STATEMENT AT PARA 5 PAGE 15 OF THE AS SESSMENT ORDER AND HAS CLEARLY STATED THAT SHRI RAM SINGH WAS PRODUCED BY THE ASSESSEE BEFORE HIM AT THE BEHEST OF THE AO. THE AO HAS ALSO OBSERV ED THAT SHRI RAM SINGH HAS STATED BEFORE HIM THAT THE STOCK OF CHANA AND WHEAT PLACED IN THE PREMISES OF THE ASSESSEE WAS OUT OF HARVEST OF EARLIER YEAR AND THIS EXPLANATION OF SHRI RAM SINGH WAS CONSIDERED UN-REA LISTIC BY THE ASSESSING OFFICER FOR THE REASON THAT THE ENTIRE ST OCK OF HARVEST OF EARLIER YEAR COULD NOT HAVE BEEN PRESERVED BY THE ASSESSEE FOR ONE YEAR BECAUSE IT WAS EXPOSED TO MONSOON MOISTURE RODENTS FUNGA L INFECTION INSECTS ETC. THE LD. COUNSEL COULD NOT PROVE THAT THE ASSES SEE HAD ASKED FOR THE COPY OF THE STATEMENT OF SHRI RAM SINGH RECORDED BY THE ASSESSING OFFICER ON 23 RD DECEMBER 2004 AND THAT HE WAS NOT PROVIDED WITH THE COPY. THE LD. COUNSEL COULD NOT ALSO SHOW THAT AT T HE TIME OF FIRST APPEAL THE ASSESSEE HAD RAISED THE ISSUE THAT THE STATEMEN T OF SHRI RAM SINGH WAS NOT PROVIDED TO THE ASSESSEE. THUS LOOKING TO THE TOTALITY OF THE FACTS - 13 - 13 AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE W E ARE OF THE CONSIDERED OPINION THAT THE STOCK WAS TAKEN IN THE PRESENCE OF THE ASSESSEE AND TWO WITNESSES DURING THE COURSE OF SEA RCH THE ASSESSEE WAS DULY CONFRONTED WITH THE EXCESS STOCK AT THE TIME O F SEARCH AND ITS VALUATION WAS MADE AS PER THE INFORMATION GIVEN BY THE ASSESSEE. WE ARE ALSO OF THE CONSIDERED OPINION THAT FOR THE REASONS DISCUSSED ABOVE THE STATEMENT OF SHRI RAM SINGH AND HIS AFFIDAVIT CANNO T BE CONSIDERED AS RELIABLE EVIDENCE IN SUPPORT OF HIS CLAIM THAT HIS PRODUCE OF WHEAT AND GRAMS WERE KEPT IN THE PREMISES OF THE ASSESSEE DUR ING THE COURSE OF SEARCH. WE THEREFORE HOLD THAT THE ADDITION ON AC COUNT OF EXCESS STOCK OF 266 QTLS. OF WHEAT DESERVES TO BE CONFIRMED AS THE ADDITION MADE BY THE ASSESSING OFFICER WAS JUSTIFIED. SIMILARLY THE EXP LANATION OF THE ASSESSEE REGARDING 306.5 QTLS. OF CHANA IS ALSO NOT CONSIDER ED CORRECT BECAUSE DURING THE COURSE OF SEARCH THE ASSESSEE HAD ACCEP TED IT AS EXCESS STOCK OF HIS BUSINESS AND THE AFFIDAVIT OF SHRI RAM SINGH AND THE STATEMENTS WERE NOT RELIABLE. THE ADDITION ON ACCOUNT OF EXCES S STOCK OF 306.5 QTLS. OF CHANA MADE BY THE ASSESSING OFFICER IS ALSO CONS IDERED JUSTIFIED. 18. SO FAR AS THE DIFFERENCE OF 11.62 QTLS. OF CHANA D AL IS CONCERNED ADMITTEDLY THE STOCK WAS TAKEN ON ESTIM ATE BASIS AND EVEN IF IT WAS ON THE BASIS OF INFORMATION GIVEN BY THE ASS ESSEE AND ACCEPTED BY THE ASSESSEE DURING THE COURSE OF SEARCH THE DIFFE RENCE BEING ONLY 1% OF - 14 - 14 THE TOTAL STOCK AVAILABLE WITH THE ASSESSEE THE AD DITION WAS NOT WARRANTED BECAUSE THE VARIATION OF 1 % IN THE ESTIMATE COULD NOT BE RULED OUT. 19. THE ADDITION OF 361.4 QTLS. OF GRAM IN PROCESS IS A LSO CONFIRMED BECAUSE THE ASSESSEE FAILED TO GIVE ANY SATISFACTOR Y EXPLANATION AT THE TIME OF SEARCH AND THE SUBSEQUENT EXPLANATION GIVEN DURING THE COURSE OF ASSESSMENT IS ONLY SELF-SERVING IN NATURE BECAUSE THE STOCK TAKEN IN THE PRESENCE OF THE ASSESSEE AND THE WITNESSES COULD NO T BE CHALLENGED ON THE BASIS OF ANY COGENT EVIDENCE. 20. IT IS ALSO OBSERVED THAT CHANA CHILKA BEING THE WAS TE PRODUCT IN THE PROCESS OF MANUFACTURE OF DAL WAS KEPT IN HEAPS IN THE PREMISES AT VARIOUS PLACES. THE STOCK WAS ESTIMATED AT 258.45 Q TLS. AS AGAINST 96 QTLS. DECLARED BY THE ASSESSEE AND THE DIFFERENCE WAS WOR KED OUT AT 162.45 QTLS. LOOKING TO THE NATURE OF THE PRODUCT AND ITS VALUE IT CAN BE CONSIDERED THAT DUE MARGIN SHOULD BE ALLOWED ON ACCOUNT OF EST IMATION OF THE STOCK OF CHANA CHHILKA. WE THEREFORE DIRECT THAT EXCES S STOCK SHOULD BE TAKEN AT 100 QTLS. IN PLACE OF 162.45 QTLS. TAKEN BY THE ASSESSING OFFICER. THE DECISION OF THE LD.CIT(A) TO THE EXTENT THE ADDITIO NS HAVE BEEN CONSIDERED JUSTIFIED BY US AS PER DISCUSSION ABOVE IS REVERSE D. THE AO IS DIRECTED TO RECOMPUTE THE VALUE OF EXCESS STOCK DISCUSSED ABOVE AND MAKE ADDITION TO THE INCOME OF THE ASSESSEE. THIS GROUND OF APPEA L IS PARTLY ALLOWED. - 15 - 15 21. THE NEXT GROUND OF APPEAL IS AGAINST DELETION OF AD DITION OF RS. 59 44 000/- ON ACCOUNT OF INVESTMENT IN DAL MILLS. 22. THE AO OBSERVED THAT THE ASSESSEE HAD UNDERSTATED T HE INVESTMENT IN DAL MILL. HE POINTED OUT THAT AS PER THE DETAILS GIVEN IN LOOSE PAPERS DISCUSSED AT PAGE 20 THE COST OF CONS TRUCTION OF MAHESHWARI DAL MILL THE PROPRIETORY CONCERN OF THE ASSESSEE W AS RS. 11 75 208/- AS PER CERTIFICATE DATED 13 TH DECEMBER 2002 OF ONE SHRI ALOK TOMAR SEIZED FROM THE RESIDENCE OF SHRI SHIV NARAYAN MALANI. HE ALSO OBSERVED THAT AS PER SEIZED DOCUMENTS LPS A/7 PAGES 38 & 39 DURING THE SEARCH OF RESIDENCE AT SAKET BHAWAN UDAIPURA THE VALUATION WAS SHOWN AT RS. 35.81 LAKHS. THE AO ALSO REFERRED TO PAGES 113 TO 1 39 AND 151 TO 159 DATED 14 TH DEC. 2002 OF LS-1 THAT THE INVESTMENT IN CONSTRU CTION OF BUILDING OF MAHESHWARI MILLING INDUSTRY WAS UNDERST ATED BY THE ASSESSEE. HE THEREFORE REFERRED THE MATTER TO THE V.O. WHO VALUED THE COST OF CONSTRUCTION AT RS. 59.44 LAKHS AS AGAINST RS. 17.1 4 LAKHS DECLARED BY THE ASSESSEE. THE AO THEREFORE MADE AN ADDITION OF RS . 59.44 LAKHS TO THE UNDISCLOSED INCOME OF THE ASSESSEE. 23. THE LD. SENIOR D.R. POINTED OUT THAT REFERENCE U/S 131 OF THE INCOME-TAX ACT 1961 WAS MADE TO THE VALUATION OFFI CER IN VIEW OF THE MATERIAL SEIZED DURING THE COURSE OF SEARCH WHICH CLEARLY ESTABLISHED THAT THE ASSESSEE HAD UNDERSTATED THE INVESTMENT IN THE BUILDING OF THE - 16 - 16 MAHESHWARI MILLING INDUSTRY AND THEREFORE ACTION WAS RIGHTLY TAKEN BY THE ASSESSING OFFICER WHILE FINALIZING THE ASSESSME NT U/S 158BC IN THE CASE OF THE ASSESSEE. HE ALSO SUBMITTED THAT THE RE PORT OF THE VALUATION OFFICER WAS AN EXPERT OPINION AND THE LD.CIT(A) HAS SUMMARILY REJECTED THE SAME WITHOUT PROPERLY CONSIDERING THE FACTS DIS CUSSED BY THE ASSESSING OFFICER. HE ALSO SUBMITTED THAT SINCE THE REFERENCE TO THE VALUATION OFFICER WAS MADE ON THE BASIS OF THE MATE RIAL SEIZED DURING THE COURSE OF SEARCH THE CASE LAWS RELIED UPON BY THE LD. COUNSEL AND TAKEN NOTE OF BY THE LD. CIT(A) AT PAGE 16 OF HIS ORDER WERE NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. 24. THE LD. COUNSEL REITERATED THAT THE ASSESSEE HAD DE CLARED THE COST OF CONSTRUCTION IN HIS REGULAR RETURN OF INCOME AND THEREFORE ACTION U/S 158BC OF THE INCOME-TAX ACT 1961 ON THIS ISSUE WAS NOT CALLED FOR. HE ALSO SUBMITTED THAT THE VALUATION WAS A MATTER OF E STIMATE AND THE ADDITION HAS BEEN RIGHTLY DELETED BY THE LD. CIT(A). THE LD. COUNSEL ALSO POINTED OUT THAT THE REFERENCE WAS MADE BY THE ASSESSING OF FICER TO THE VALUATION OFFICER ON 13 TH DECEMBER 2004 AND THE VALUATION REPORT WAS SUBMI TTED BY THE ASSESSING OFFICER ON 24 TH DECEMBER 2004 AND THUS OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE BEFORE FINALIZING THE VALUATION REPORT. THE LD. CIT D.R. IN REPLY POINTED OUT THAT THE ASSESS EE DID NOT ALLOW THE VALUATION OFFICER TO ENTER THE PREMISES FOR INSPECT ION AND THE ASSESSEE - 17 - 17 ALSO DID NOT COOPERATE IN THE PROCEEDINGS FOR DETER MINING THE VALUATION OF THE PROPERTY. HE ALSO POINTED OUT THAT THE REPLY OF THE ASSESSEE HAD BEEN DULY CONSIDERED BY THE ASSESSING OFFICER AND THE LD .CIT(A) HAS DELETED THE ADDITION MERELY ON THE BASIS OF SUBMISSIONS OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE AND THE REASONS GIVEN BY THE ASSESSING OFFICER. 25. WE HAVE CAREFULLY CONSIDERED THE ISSUE IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW MATERIAL PLACED ON RECORD AN D RIVAL SUBMISSIONS. THE DECISIONS CITED BY THE LD. COUNSEL FOR THE ASS ESSEE REGARDING REFERENCE TO THE VALUATION OFFICER ARE OF NO HELP T O THE ASSESSEE BECAUSE THE SEIZED MATERIAL PRIMA FACIE POINT OUT TO UNDE RSTATEMENT OF THE COST OF CONSTRUCTION OF THE BUILDING AND THE ACTION OF THE AO WAS ON THE BASIS OF THE EVIDENCE GATHERED DURING THE COURSE OF SEARCH. IT IS OBSERVED THAT THE DECISION IN THE CASE OF CIT VS. N. SWAMY 125 TAXMA N 233 ( MADRAS ) CIT VS. RELAXO FOOTWEAR 123 TAXMAN 322 (RAJ) ARE TOTALLY ON DIFFERENT FACTS IN SO FAR AS THE ISSUE CONSIDERED IN THE CASE OF N.SWAMY (SUPRA) AND RELAXO FOOTWEAR WAS ABOUT ADDITION ON ACCOUNT OF DI FFERENCE IN CLOSING STOCK AS COMPARED TO THE STOCK DECLARED TO THE BANK S. THE CASE OF CIT VS. KHUSHALCHAND NIRMAL KUMAR 132 TAXMAN 274 (MP) WITH DUE RESPECT IS NOT APPLICABLE TO THE FACTS OF THE CASE BECAUSE NO EVIDENCE HAD BEEN FOUND DURING THE COURSE OF SEARCH IN THAT CASE REGA RDING UNDERSTATEMENT - 18 - 18 OF UNEXPLAINED INVESTMENT IN CONSTRUCTION OF THE PR OPERTY. IN THE CASE OF ADDL. ITO VS. D. C.JAIN 8 ITJ 260 ( TRIB) IT WAS HELD THAT REFERENCE TO THE DVO WITHOUT REJECTING BOOKS OF ACCOUNT AND VOUC HERS OF THE ASSESSEE WAS NOT VALID. WITH DUE RESPECT THE DECI SION IN THIS CASE ALSO IS ON DIFFERENT FACTS. 26. IN OUR CONSIDERED OPINION THE REFERENCE HAS BEEN M ADE BY THE ASSESSING OFFICER ON THE BASIS OF THE SEIZED MATERI AL WHICH PRIMA FACIE POINT OUT TO UNDER-STATEMENT IN THE COST OF CONSTRU CTION OF THE BUSINESS PREMISES OF THE ASSESSEE. THE REFERENCE WAS THEREF ORE MADE ON THE BASIS OF EVIDENCE GATHERED IN THE COURSE OF THE SEARCH AN D THE ISSUE HAS BEEN RIGHTLY CONSIDERED U/S 158BC OF THE INCOME-TAX ACT 1961. SINCE THE EVIDENCE REGARDING UNDISCLOSED INVESTMENT IN PROPER TY WAS GATHERED DURING THE COURSE OF SEARCH THE AO WAS RIGHT IN IN VOKING THE PROVISIOSN OF CHAPTER XIV-B IN VIEW OF THE DECISION IN THE CAS E OF CIT VS. MUKUND RAY K. SHAH (2007) 290 ITR 433 (S.C.) THE AO HAS HOWEVER MADE THE ADDITION WITHOUT REDUCING THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE. THE LD.CIT(A) HAS ALSO DELETED THE ADDITI ON WITHOUT CONSIDERING THE FACTS DISCUSSED BY THE ASSESSING OFFICER AND WI THOUT EXAMINING THE VALUATION OFFICER. THE ASSESSEE HAS ALSO NOT COOPER ATED IN ALLOWING INSPECTION AND HAS FAILED TO FILE RELEVANT DETAILS BEFORE THE VALUATION OFFICER. THUS LOOKING TO THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE - 19 - 19 CASE WE ARE OF THE CONSIDERED OPINION THAT THIS IS SUE IS REQUIRED TO BE RESTORED TO THE FILE OF THE AO WITH THE DIRECTION T HAT HE SHOULD REQUIRE THE DVO TO GIVE PROPER ESTIMATE OF YEAR-WISE COST OF CO NSTRUCTION AFTER INSPECTING THE PREMISES AND GIVING PROPER OPPORTUNI TY TO THE ASSESSEE. THE ASSESSEE IS ALSO REQUIRED TO EXTEND ITS COOPERA TION TO THE AO AND FILE HIS OBJECTIONS IF ANY. THE AO SHOULD ACCORDINGLY DECIDE THE ISSUE AFRESH IN VIEW OF THE FOREGOING DISCUSSION AFTER GIVING PR OPER OPPORTUNITY TO THE ASSESSEE AS PER LAW. THIS GROUND IS THEREFORE TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. 27. THE NEXT GROUND OF APPEAL IS AGAINST DELETION OF AD DITION OF RS. 4.75 LAKHS ON ACCOUNT OF CONSTRUCTION OF SHOP. 28. THE AO ON PERUSAL OF THE SEIZED MATERIAL NOTICED THAT THE ASSESSEE OWNED THE SHOP GIVEN ON RENT TO M/S. MAHES HWARI TRACTORS WHICH WAS VALUED AT RS. 4.75 LAKHS BY SHRI B.S.TRIP ATHI SUB ENGINEER UDAIPURA ON 18 TH MARCH 2002. AS PER THE REPORT THE BUILDING WAS CONSTRUCTED IN FINANCIAL YEAR 1997-98. THE ASSESSEE SUBMITTED THE REPORT FOR AVAILING OF LOAN FROM THE BANK WHICH WAS GRANT ED TO HIM. THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF INVESTMENT IN THE AFORESTATED PROPERTY AND THE AO TREATED THE AMOUNT OF RS. 4 75 000/- AS UNDISCLOSED INVESTMENT OF THE ASSESSEE ON THE BASIS OF VALUATIO N REPORT AND ADDED TO IT THE UNDISCLOSED INCOME OF THE ASSESSEE FOR ASSESSME NT YEAR 1998-99. THE - 20 - 20 LD.CIT(A) DELETED THE ADDITION ON THE BASIS OF SUBM ISSIONS OF THE ASSESSEE THAT THE ASSESSEE WAS NOT THE OWNER OF THE SHOP AND THE BENEFICIAL OWNER OF THE SHOP WAS SMT. KAMLA DEVI MALANI WHO HAD PUR CHASED IT FOR RS. 1 96 000/- AND THAT THE INVESTMENT IN THIS PROPERTY HAS BEEN DECLARED IN THE BALANCE SHEET OF SMT. KAMLA MALANI AS ON 31 ST MARCH 1997. 29. THE LD. SENIOR D.R. POINTED OUT THAT DESPITE SUFFIC IENT OPPORTUNITY GIVEN TO THE ASSESSEE THE ASSESSEE FAI LED TO EXPLAIN THE INVESTMENT AND FRESH CLAIM WAS MADE BEFORE THE LD.C IT(A) THAT THE INVESTMENT OF RS. 1 96 000/- IN THE SHOP IN QUESTIO N WAS MADE BY THE MOTHER OF THE ASSESSEE WHO HAD DECLARED IT IN HER RETURN OF INCOME AS ON 31 ST MARCH 1998 RELEVANT TO ASSESSMENT YEAR 1998-99. THE LD.CIT(A) HAS RELIED ON THE SUBMISSIONS OF THE ASSESSEE AND H AS NOT GIVEN ANY OPPORTUNITY TO THE AO FOR VERIFYING THE CLAIM. THE LD. COUNSEL REITERATED THE SUBMISSIONS TAKEN BEFORE THE LD.CIT(A). 30. WE HAVE CAREFULLY CONSIDERED THE ISSUE IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW MATERIAL PLACED ON RECORD AN D RIVAL SUBMISSIONS. IT IS VERY CLEAR FROM THE DISCUSSION AT PAGE 23 PARA PARA (VIII) OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAD FAILED TO GI VE ANY EXPLANATION IN RESPECT OF PROPERTY IN QUESTION AND THE FACTS WERE ASCERTAINED BY THE ASSESSING OFFICER FROM THE BANK MANAGER OF CENTRAL BANK OF INDIA WHO WAS SUMMONED ON 22 ND DECEMBER 2004. IT IS HOWEVER OBSERVED THAT THE - 21 - 21 ASSESSMENT HAS BEEN FINALIZED ON 29 TH DECEMBER 2004 AND THERE WAS NO TIME FOR GIVING PROPER OPPORTUNITY TO THE ASSESSEE ON THE STATEMENT OF THE BANK MANAGER WHO APPEARED BEFORE THE AO ON 22 ND DECEMBER 2004. BESIDES THE LD.CIT(A) HAS DELETED THE ADDITION WIT HOUT VERIFYING THE SUBMISSIONS OF THE ASSESSEE. WE THEREFORE CONSIDE R IT FAIR AND REASONABLE TO RESTORE THIS ISSUE ALSO TO THE AO WITH THE DIREC TION THAT HE SHOULD GIVE PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE A ND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 31. THE NEXT GROUND OF APPEAL IS AGAINST THE DELETION O F ADDITION OF RS. 2 68 000/- RECEIVED AS RENT FROM MAHESHWARI TRA CTORS IN RESPECT OF THE PROPERTY DISCUSSED IN THE FOREGOING PARAGRAPHS. 32. SINCE THE RENT HAS BEEN RECEIVED FROM THE PROPERTY DISCUSSED ABOVE THIS ISSUE IS ALSO RESTORED TO THE FILE OF A O WITH THE DIRECTION THAT HE SHOULD EXAMINE THE ISSUE AND DECIDE IT AFRESH AF TER GIVING PROPER OPPORTUNITY TO THE ASSESSEE AS PER LAW. THUS GROUN DS NO. 5 & 6 ARE ALLOWED FOR STATISTICAL PURPOSES. 33. GROUND NO. 7 IS AGAINST THE DELETION OF THE ADDITI ON OF RS. 84 000/- ON ACCOUNT OF VALUE OF JEWELLERY FOUND AT THE RESIDENTIAL PREMISES DURING THE COURSE OF SEARCH. 34. THE LD. CIT D.R. RELIED ON THE DISCUSSION IN THE AS SESSMENT ORDER. - 22 - 22 35. THE LD. COUNSEL SUBMITTED THAT THE JEWELLERY FOUND AT THE RESIDENCE COULD NOT BE CONSIDERED AS UNEXPLAINED I N VIEW OF THE FACT THAT 416 GMS. OF THE JEWELLERY WAS CLAIMED BY SMT. GUNJA N MALANI WIFE OF THE ASSESSEE SHRI PRADEEP MALANI AND THE GOLD ORNAMENTS APPROXIMATELY WEIGHING LESS THAN 40 TOLAS SHOULD NOT BE CONSIDERE D UNEXPLAINED LOOKING TO THE STATUS OF THE FAMILY. THE AO HAS ACCEPTED 21 6 GMS. OF JEWELLERY ON THE BASIS OF THE STATEMENTS GIVEN BY THE LADIES OF THE HOUSE AT THE TIME OF SEARCH THAT THEY WERE HAVING APPROXIMATELY 15 TO 20 TOLAS OF GOLD ORNAMENTS. HE THEREFORE MADE AN ADDITION FOR THE VALUE OF 200 GMS. OF JEWELLERY 36. THE LD.CIT(A) DELETED THE ADDITION ON THE BASIS OF THE STATEMENT GIVEN BY THE LD. COUNSEL THAT AS PER INSTRUCTION NO . 1916 DATED 11TH MAY 1994 OF THE C.B.D.T. 500 GMS. JEWELLERY IN THE C ASE OF ONE FEMALE MEMBER AND 100 GMS. IN THE CASE OF ONE MALE MEMBER SHOULD BE CONSIDERED AS EXPLAINED. IT IS OBSERVED THAT THE IN STRUCTION IS ONLY FOR GUIDANCE OF THE SEARCH PARTY FOR EFFECTING THE SEIZ URE OF THE UNEXPLAINED GOLD ORNAMENTS AT THE TIME OF SEARCH. HOWEVER THE I.T.A.T. AS PER ITS ORDER DATED 24 TH OCTOBER 2008 (SUPRA) IN THE CASE OF SHIV NARAYAN MALANI HAS DELETED SIMILAR ADDITION MADE IN HIS CAS E. WE ACCORDINGLY SEE NO REASON TO INTERFERE WITH THE DECISION OF THE LD.CIT(A) ON THIS POINT. THIS GROUND OF APPEAL IS REJECTED. - 23 - 23 37. NEXT GROUND OF APPEAL IS AGAINST THE DELETION OF AD DITION OF RS. 60 000/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN NS C AND FDR FOUND DURING THE COURSE OF SEARCH. 38. THE AO OBSERVED THAT AS PER PANCHNAMA PREPARED DURI NG THE COURSE OF SEARCH NSC/FDR WORTH RS. 3.50 LAKHS OF VA RIOUS FEMALE MEMBERS WERE NOTICED DURING THE COURSE OF SEARCH. T HE ASSESSEE CLAIMED BEFORE THE AO THAT INVESTMENT IN NSC WERE FOR TAX S AVING AND WERE DECLARED IN REGULAR RETURNS OF INCOME. THE AO OBSER VED THAT THE ASSESSEE HAD FAILED TO CORRELATE THE NSCS AND FDRS WITH THE INVESTMENTS SHOWN IN RESPECTIVE RETURNS OF INCOME AND MADE THE ADDITION OF RS. 60 000/- TO THE UNDISCLOSED INCOME OF THE ASSESSEE. 39. THE LD. CIT DR RELIED ON THE ASSESSMENT ORDER. THE LD. COUNSEL SUBMITTED THAT THE INVESTMENT WAS DULY DISCLOSED IN THE RELEVANT RETURNS OF INCOME. IT IS OBSERVED THAT SIMILAR ADDITIONS HA VE BEEN DELETED BY THE I.T.A.T. AS PER ITS ORDER DATED 24 TH OCTOBER 2008 (SUPRA) IN THE CASE OF SHIV NARAYAN MALANI. THE AO HAS ALSO NOT POINTED OU T THE DATES OF INVESTMENT AND MADE NO ATTEMPT TO VERIFY THE SAME F ROM THE RELEVANT RETURNS OF INCOME FILED BY THE ASSESSEE. THE LD.CIT (A) HAS DELETED THE ADDITION AND OBSERVED THAT THE INVESTMENTS HAVE BEE N MADE IN ASSESSMENT YEARS 1998-99 TO 2002-03 AS PER DETAILS GIVEN AT PA GE 21 OF HIS ORDER AND THE SAME WERE VERIFIABLE FROM THE RELEVANT BALANCE SHEETS. NO - 24 - 24 INTERFERENCE IS THEREFORE CONSIDERED NECESSARY W ITH THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. 40. THE NEXT GROUND OF APPEAL IS AGAINST RELIEF OF RS. 25 62 866/- OUT OF TOTAL ADDITION OF RS. 33 73 341/- MADE ON AC COUNT OF GROSS PROFIT AND INITIAL INVESTMENT IN THE BUSINESS OUTSIDE THE BOOKS OF ACCOUNT. 41. THE AO OBSERVED THAT THREE CONCERNS OF MALANI GROU P NAMELY MAHESHWARI TRADERS MAHESHWARI GENERAL STOR ES AND MAHESHWARI MILLING INDUSTRIES WERE OWNED BY SHRI GO VERDHANDAS SHIV NARAYAN MALANI AND SHRI PRADEEP MALANI RESPECTIVELY . BESIDES ONE MORE FIRM IN THE NAME OF GIRIRAJ TRADING COMPANY CARRIED ON ITS BUSINESS FROM THE PREMISES OF M/S. MAHESHWARI GENERAL STORES AND MAHESHWARI TRADERS. THE AFORESTATED GIRIRAJ TRADING COMPANY WA S LATER CLOSED AND THE MAHESHWARI MILLING INDUSTRY WAS STARTED. THESE CONCERNS DEAL IN TRADING OF FOODGRAINS WAREHOUSING AND TRANSPORTING . M/S. MAHESHWARI MILLING INDUSTRIES WAS MANUFACTURING AND TRADING CH ANA DAL. THE DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF SEA RCH REVEALED THAT THE BUSINESS OF AFORESTATED CONCERNS WAS LARGELY OUTSID E THE BOOKS OF ACCOUNT. THE ISSUE HAS BEEN DISCUSSED IN DETAIL AT PAGES 16 TO 19 OF THE BLOCK ASSESSMENT ORDER DATED 29 TH DECEMBER 2004. THE AO DETERMINED THE UNDISCLOSED SALES ON THE BASIS OF SEIZED MATERI AL FOR ALL THE CONCERNS AT RS. 8 18 21 163/- AND DIVIDED IT AMONGST THE THREE CONCERNS IN THE RATIO OF - 25 - 25 THEIR DECLARED TURNOVER FOR THE BLOCK PERIOD. HE T HEREFORE CONSIDERED THAT THE UNDISCLOSED INCOME OF MAHESHWARI MILLING INDUST RY THE PROPRIETORY CONCERN OF THE ASSESSEE WAS RS. 33 73 341/- WHICH HE ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PE RIOD. THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE H ELD THAT UNDISCLOSED INCOME OF RS. 33 73 341/- IN THE CASE OF MAHESHWARI MILLING INDUSTRY ON ACCOUNT OF UNDISCLOSED INVESTMENT AND UNRECORDED TU RNOVER WAS RS. 8 10 475/- AS AGAINST RS. 33 73 341/- DETERMINED BY THE ASSESSING OFFICER. THE LD.CIT(A) RELIED ON THE DECISION OF HI S PREDECESSOR IN THE ORDER DATED 18 TH JULY 2006 IN THE CASE OF SHRI GOVERDHAN DAS MALA NI THE PROPRIETOR OF MAHESHWARI TRADERS WHOSE SALES W ERE INCLUDED IN THE TOTAL SALES OF THREE CONCERNS DISCUSSED ABOVE. THE LD.CIT(A) FURTHER HELD THAT THE UNDISCLOSED INCOME OF RS. 4 LAKHS WAS TO B E ALLOWED AS DEDUCTION AND THE ADDITION OF RS. 8 10 475/- SUSTAINED BY HIM SHOULD BE FURTHER REDUCED BY RS. 4 LAKHS UNDISCLOSED INCOME BY THE AS SESSEE. 42. THE LD. CIT DR REITERATED THAT THE DETERMINATION OF INCOME BY THE AO WAS CORRECT AND FURTHER APPLICATION OF RATE OF PROFIT BY THE LD.CIT(A) ON THE INCOME DETERMINED BY THE ASSESSING OFFICER WAS NOT CORRECT. THE LD. COUNSEL REITERATED THE SUBMISSIONS TAKEN BEFORE THE LOWER AUTHORITIES AND CONTENDED THAT THE NOTING ON THE LO OSE PAPERS DID NOT REPRESENT ANY INCOME AND ESTIMATE OF THE AO WAS ARB ITRARY AND - 26 - 26 UNJUSTIFIED. THE ISSUE HAS BEEN CONSIDERED IN DETAI L BY THE I.T.A.T. AS PER ITS ORDER DATED 24 TH OCTOBER 2008 (SUPRA) WHILE DECIDING THE ISSUE REGARDING SIMILAR ADDITION MADE IN THE CASE OF SHRI SHIV NARAYAN MALANI FOR UNDISCLOSED SALES OF MAHESHWARI GENERAL STORES. IT WAS HELD THAT LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE FACT THAT THE NET PROFIT MARGIN IN SEVERAL YEARS BEFORE SEARCH WAS BE LOW 1 % IN THE CASE OF MAHESHWARI GENERAL STORES THERE WAS NO JUSTIFICATI ON FOR THE AUTHORITIES TO APPLY THE NET PROFIT RATE IN EXCESS OF 1 %. THE I.T.A.T. THEREFORE ADOPTED NET PROFIT @ 1 % AGAINST UNRECORDED SALES O F MAHESHWARI GENERAL STORES FOR DETERMINING THE UNDISCLOSED INCO ME. SIMILARLY THE I.T.A.T. CONSIDERED THAT THE INCOME @ 1% OF THE UND ISCLOSED SALES SHOULD BE CONSIDERED AS UNDISCLOSED INITIAL INVESTMENT IN THE AFORESTATED BUSINESS OUTSIDE THE BOOKS OF ACCOUNT. THE I.T.A.T. THEREFO RE DELETED THE ADDITION FOR THE REASON THAT THE TOTAL UNDISCLOSED INCOME OF RS. 15 LAKHS DECLARED BY THE PROPRIETORS OF THE AFORESTATED THREE CONCER NS FOR THE UNDISCLOSED SALES OF THESE CONCERNS WAS MORE THAN THE INCOME TO BE DETERMINED BY TAKING NET PROFIT @ 1 % AND UNDISCLOSED CAPITAL @ 1 % ON THE TOTAL TURNOVER. THERE SEEMS TO BE SOME CALCULATION MISTA KE IN THE ORDER DATED 24 TH OCTOBER 2004 (SUPRA) IN SO FAR AS THE TOTAL UND ISCLOSED TURNOVER OF THESE CONCERNS WAS DETERMINED AT RS. 8 18 21 163/- AS PER DETAILS GIVEN AT PAGE 19 OF THE BLOCK ASSESSMENT ORDER 2 % OF WHICH COULD BE WORKED OUT - 27 - 27 AT RS. 16 36 422/- AS AGAINST RS. 15 LAKHS DECLARED BY ALL THESE THREE ASSESSEES. IT IS HOWEVER ALSO OBSERVED THAT THE L D.CIT(A) HAS CONFIRMED THE ADDITION OF RS. 8 10 475/- WHICH HAS BEEN ACCE PTED BY THE ASSESSEE AS NO APPEAL HAS BEEN FILED AGAINST THE DECISION OF TH E LD.CIT(A). THUS KEEPING IN VIEW THE DECISION OF THE I.T.A.T. AS PER ORDER DATED 24 TH OCTOBER 2004 (SUPRA) WE SEE NO REASON TO INTERFER E WITH THE DECISION OF THE LD.CIT(A) WHICH IS CONFIRMED. THIS GROUND OF APPEAL IS ALSO REJECTED. 43. GROUND NO.10 IS AGAINST DIRECTION FOR ALLOWING REB ATE UNDER CHAPTER VIA OF THE INCOME-TAX ACT 1961. 44. WHILE DETERMINING THE UNDISCLOSED INCOME FOR THE BL OCK PERIOD THE AO DID NOT ALLOW THE CLAIM OF DEDUCTION UNDER CHAPTER VIA. THE LD.CIT(A) DIRECTED THE AO TO ALLOW THE RELIEF AFTER GIVING NECESSARY OPPORTUNITY. THE LD. DR SUBMITTED THAT THE LD.CIT(A ) HAD EXCEEDED HIS POWERS BECAUSE HE COULD NOT HAVE RESTORED THE ISSUE TO THE AO AS PER AMENDED PROVISIONS OF SECTION 251 OF THE INCOME-TAX ACT 1961. W.E.F. 1.6.2001. THE LD. COUNSEL SUBMITTED THAT THERE WAS NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). IN OUR CONSIDERED OPINION THE SUBMISSION OF THE LD. SENIOR D.R. THAT THE LD.CIT(A) COULD NOT HAVE R ESTORED THE ISSUE TO THE AO AFTER 1 ST JUNE 2001 IS CORRECT. HOWEVER THE AO HAS NOT GI VEN REASONS FOR NOT ALLOWING THE CLAIM UNDER CHAPTER VI A OF THE INCOME-TAX - 28 - 28 ACT 1961. WE THEREFORE DIRECT THE AO TO CONSIDER THE CLAIM OF THE ASSESSEE AND DECIDE THE ISSUE AFRESH AFTER GIVING R EASONABLE OPPORTUNITY TO THE ASSESSEE. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 45. NEXT GROUND OF APPEAL IS AGAINST THE DELETION OF AD DITION OF RS. 3 20 060/- MADE BY THE ASSESSING OFFICER ON THE BAS IS OF LOOSE PAPERS. 46. THE LD. CIT DR RELIED ON THE DISCUSSION AT PAGE 22 OF THE ASSESSMENT ORDER. HE SUBMITTED THAT LOOSE PAPERS AS PER DETAILS GIVEN IN PARA (VII) UNDER THE HEAD LOOSE PAPERS IN THE ASS ESSMENT ORDER WERE SEIZED AND THE ASSESSEE COULD NOT GIVE SATISFACTORY EXPLANATION AS TO THE NATURE OF THE TRANSACTIONS. IT COULD BE SEEN FROM T HE DETAILS THAT THE SEIZED DOCUMENTS LPS A/5 WAS THE SALE DEED DATED 31 ST MARCH 2001 FOR PURCHASE OF AGRICULTURAL LAND FROM RAM SIYA BAI FOR RS. 2 37 330/- AND THE SEIZED DOCUMENTS LPS-4 PAGE 37 TO 46 WAS FOR PU RCHASE OF PLOT NO. 64 FROM K.L. KHATEEK ON 22 ND APRIL 1998 FOR RS. 82 730/-. ACCORDING TO THE LD. CIT D.R. THE TOTAL AMOUNT OF RS. 3 20 060/ - BEING THE INVESTMENT RECORDED IN THESE SEIZED DOCUMENTS WAS RIGHTLY ADDE D TO THE UNDISCLOSED INCOME OF THE ASSESSEE BECAUSE THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN THE INVESTMENTS IN THE AFORESTATED IMMOVABL E PROPERTIES. 47. THE LD. COUNSEL REITERATED THAT THE LOOSE PAPERS L PS A/5 WAS NOT A SALE DEED AND THERE WAS EXCHANGE OF PROPERTY AS PER DETAILS GIVEN AT PAGES 2 14 OF THE PAPER BOOK. HE FURTHER SUBMITTE D THAT THE INITIAL - 29 - 29 OWNER OF THE PROPERTY WAS SMT. KAMLA MALANI THAT TH E PROPERTY WAS PURCHASED IN 1983 AS PER EVIDENCE GIVEN AT PAGES 21 8 & 219 OF THE PAPER BOOK AND THAT SMT. MALANI HAD DISCLOSED THIS INVES TMENT IN HER REGULAR RETURN PRIOR TO SEARCH AS COULD BE SEEN FROM DOCUME NTS PLACED AT PAGES 119 208 AND 192 OF THE PAPER BOOK. IT WAS ALSO CL AIMED THAT SHE HAD BEEN ASSESSED U/S 143(3) FOR ASSESSMENT YEAR 1998-9 9 AS COULD BE SEEN FROM THE DOCUMENTS AT PAGE 195 OF THE PAPER BOOK. S IMILARLY IT WAS CLAIMED THAT THE PURCHASE OF PLOT OF RS. 82 370/- S ITUATED AT NH-12 SHOWN IN LPS/4 PAGES 34-46 WAS DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS COULD BE SEEN FROM THE EVIDENCE PLACED AT PAGE 223 OF THE PAPER BOOK AND IT WAS DISCLOSED IN THE REGULAR RETU RN AS COULD BE SEEN FROM PAGE 26 OF THE PAPER BOOK. 48. THE LD.CIT(A) HAS DELETED THE ADDITION AFTER ACCEPT ING SUBMISSIONS OF THE ASSESSEE. IT IS OBSERVED THAT TH E EXPLANATION WAS NOT GIVEN BY THE ASSESSEE AT THE TIME OF BLOCK ASSESSME NT PROCEEDINGS IN CASE INVESTMENTS HAD BEEN SHOWN IN THE REGULAR RETURNS O F THE ASSESSEE AND HIS WIFE THERE WAS NO REASON THAT THE RELEVANT EVIDENC E COULD NOT HAVE BEEN FILED BEFORE THE AO . THE LD.CIT(A) HAS NOT ALSO RE CORDED REASONS UNDER RULE 46A OF THE INCOME TAX RULES AS TO WHY THE FRES H EVIDENCE WAS REQUIRED TO BE ADMITTED AND THE OPPORTUNITY UNDER R ULE 46A WAS ALSO NOT PROVIDED TO THE AO TO VERIFY THE SUBMISSIONS OF THE ASSESSEE. IN VIEW OF - 30 - 30 THE FOREGOING DISCUSSION WE CONSIDER IT FAIR AND R EASONABLE TO RESTORE THIS ISSUE TO THE FILE OF THE AO WITH THE DIRECTION THAT HE SHOULD EXAMINE THE EVIDENCE AND CONDUCT SUCH ENQUIRY AS MAY BE CONSIDE RED NECESSARY AND DECIDE THE ISSUE AFRESH AFTER GIVING PROPER OPPORTU NITY TO THE ASSESSEE. 49. THE LAST GROUND OF APPEAL IS AGAINST THE DECISION O F THE LD.CIT(A) IN HOLDING THAT CHARGING OF INTEREST U/S 158BFA OF THE ACT WAS WRONG. 50. THE LD.CIT(A) HAS OBSERVED THAT THE AO HAD LEVIED I NTEREST UNDER SECTION 158BFA OF THE ACT WITHOUT SPECIFYING ANY REASON AND THAT THE RETURN WAS FILED BY THE ASSESSEE FOR 9.11.2004 IN PURSUANCE OF LETTER DATED 1 ST NOVEMBER 2004 RECEIVED BY THE ASSESSEE ON 10./11. 2004. THE LD.CIT(A) ALSO OBSERVED THAT THE ASSESSEE DID NOT H AVE ANY INFORMATION BEFORE 10.11.2004 THAT HE WAS REQUIRED TO FILE THE RETURN ON 3 RD NOVEMBER 2004. THE LD.CIT(A) HAS ALSO OBSERVED THAT THE RETU RN WAS FILED ON 9 TH NOVEMBER 2004 BEFORE THE DATE OF RECEIPT OF THIS LETTER DATED 1 ST NOVEMBER 2004 FROM THE AO AND THUS THE RETURN W AS NOT FILED AFTER THE DUE DATE. HE THEREFORE DELETED THE INTEREST U/S 1 58BFA(1) OF THE INCOME- TAX ACT 1961 LEVIED BY THE ASSESSING OFFICER. 51. THE LD. CIT D.R. SUBMITTED THAT THE RETURN WAS LA TE BECAUSE NOTICE U/S 158 BC OF THE INCOME-TAX ACT 1961. WAS I SSUED FOR THE BLOCK PERIOD ON 20 TH SEPTEMBER 2004 AND THE ASSESSEE WAS REQUIRED TO FILE THE - 31 - 31 RETURN OF TOTAL INCOME INCLUDING UNDISCLOSED INCOME FOR THE BLOCK PERIOD IN FORM NO.2-B WITHIN 16 DAYS OF THE RECEIPT OF THE NOTICE BUT THE ASSESSEE FILED THE RETURN ON 9 TH NOV. 2004 AND SINCE THE RETURN WAS LATE INTEREST WAS RIGHTLY CHARGED. 52. THE LD. COUNSEL REITERATED THE SUBMISSIONS GIVEN AT PAGE 224 OF THE PAPER BOOK. IT WAS ADMITTED THAT THE NOTICE WAS ISSUED U/S 158BC OF THE INCOME-TAX ACT 1961 ON 20 TH SEPTEMBER 2004 WHICH WAS RECEIVED ON 11 TH OCT. 2004. ON 15 TH OCTOBER 2004 THE ASSESSEE SUBMITTED THAT HE SHOULD BE ALLOWED FURTHER TIME TO FILE THE RETURN. THE AOS LETTER DIRECTING THE ASSESSEE TO FILE THE RETURN ON 3 RD NOVEMBER 2004 WAS RECEIVED ON 10.11.2004 WHEREAS THE RETURN HAD ALREADY BEEN FIL ED ON 9.11.2004. 53. SINCE THE FOREGOING FACTS ARE NOT DISCUSSED IN THE ASSESSMENT ORDER WE ARE OF THE CONSIDERED OPINION THAT THE FR ESH FACTS HAVE BEEN CONSIDERED BY THE LD. CIT(A) WITHOUT GIVING OPPORTU NITY TO THE AO AS PER THE PROVISIONS OF RULE 46A OF THE INCOME TAX RULES. WE THEREFORE CONSIDER IT FAIR AND REASONABLE TO RESTORE THIS ISS UE TO THE FILE OF AO WITH THE DIRECTION THAT HE SHOULD VERIFY THE FACTS SUBMI TTED BY THE ASSESSEE AND DECIDE THE ISSUE AFRESH AFTER GIVING REASONABLE OPP ORTUNITY TO THE ASSESSEE. THIS GROUND OF APPEAL IS ALSO ALLOWED FO R STATISTICAL PURPOSES. 54. AS A RESULT OF FOREGOING DISCUSSION THE APPEAL OF THE REVENUE IS PARTLY ALLOWED IN THE MANNER DISCUSSED ABOVE. - 32 - 32 THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST 2010. SD/- SD/- (JOGINDER SINGH) (B. R. KAUSHIK) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6 TH AUGUST 2010. CPU* 238