M/s Mahesh Niranjan Jut P. Ltd, v. The ACIT 3 (1),

ITSSA 20/IND/2006 | misc
Pronouncement Date: 29-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 2022716 RSA 2006
Assessee PAN ALEOF2694B
Bench Indore
Appeal Number ITSSA 20/IND/2006
Duration Of Justice 5 year(s) 8 month(s) 22 day(s)
Appellant M/s Mahesh Niranjan Jut P. Ltd,
Respondent The ACIT 3 (1),
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 29-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 29-11-2011
Date Of Final Hearing 07-04-2011
Next Hearing Date 07-04-2011
Assessment Year misc
Appeal Filed On 08-03-2006
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER IT(SS)A NO. 92/IND/2006 BLOCK PERIOD 1.4.1996 TO 13.11.2002 ACIT-3(1) INDORE APPELLANT VS KAILASH CHAND AGRAWAL INDORE GIR NO. K-717 ... RESPONDENT IT(SS)A NO.94/IND/2006 BLOCK PERIOD 1.4.1996 TO 13.11.2002 KAILASH CHAND AGRAWAL INDORE ... APPELLANT VS ACIT-3(1) INDORE ... RESPONDENT IT(SS)A NO.27/IND/2006 BLOCK PERIOD 1.4.1996 TO 13.11.2002 ACIT 3(1) INDORE ... APPELLANT VS NIRANJAN AGRAWAL INDORE GIR NO. N-709 ... RESPONDENT 2 IT(SS)A NO.63/IND/2006 BLOCK PERIOD 1.4.1996 TO 13.11.2002 NIRANJAN AGRAWAL INDORE ... APPELLANT VS ACIT 3(1) INDORE ... RESPONDENT IT(SS)A NO.21/IND/2006 BLOCK PERIOD 1.4.1996 TO 13.11.2002 ACIT 3(1) INDORE ... APPELLANT VS MAHESH NIRANJAN JUTE PVT.LTD. INDORE RESPONDENT IT(SS)A NO.20/IND/2006 BLOCK PERIOD 1.4.1996 TO 13.11.2002 M/S MAHESH NIRANJAN JUTE PVT. LTD. INDORE APPELLANT VS ASSTT. COMMR. OF INCOME TAX 3(1) INDORE RESPONDENT ASSESSEE BY : SHRI KAMLESH JAIN REVENUE BY : SHRI KESHAV SAXENA DATE OF HEARING : 19.9.2011 DATE OF PRONOUNCEMENT : 29.11.2011 3 O R D E R PER BENCH THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) IN RESPECT OF BLOCK ASSESSM ENT ORDER PASSED BY THE ASSESSING OFFICER FOR THE PERIO D 1.4.1996 TO 13.11.2002 ON THE FOLLOWING GROUNDS :- IT(SS) A NO. 92/IND/2006 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE/ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF I. UNRECORDED SALE ON 12.11.2002 TO THE TUNE OF RS. 18 48 967.00 II. UNEXPLAINED PAYMENT MADE TO M/S VIMAL INDUSTRIES CALCUTTA OF RS.13 33 000.00 III. UNRECORDED CONSIGNMENT NOTE DATED 02.11.2002 IN THE BOOKS OF A/C TO THE TUNE OF RS. 1 90 290.00 IV. UNRECORDED SUPPLY ON 15.10.02 TO THE PARTIES INVOLVED TO THE TUNE OF RS.73150/- 4 V. UNRECORDED 3 BANK DRAFT OF RS. 2 43 675/- VI. UNEXPLAINED INVESTMENT IN PURCHASING OF LAND OF RS. 23 79 893/- VII. UNEXPLAINED SUPPLY OF GOODS TO THE TUNE OF RS.66 944/-. VIII. UNEXPLAINED PURCHASE OF BARDANA OF RS. 82 500/-. IX. UNRECORDED SALES OF CONTRACT NOTES OF RS.4 87 500/- . X. UNEXPLAINED CONTRACT NOTE OF DALAL SHRI SURESH J. MITTAL OF RS. 13 05 000/-. XI. UNRECORDED PURCHASE AND SALE OF MACHINES OF RS. 8 25 561/-. XII. UNEXPLAINED BILLS OF PURCHASES MADE FROM DIFFERENT PARTIES TO THE TUNE OF RS. 1 00 75 010/-. XIII. UNRECORDED SALE IN THE NAME OF M/S DEVSHREE CORPORATION INDORE TO THE TUNE OF RS. 2 61 77 419/-. XIV. UNEXPLAINED INVESTMENT IN GODOWN AT RD UDHYOG NAGAR INDORE OF RS. 7 20 197/-. XV. UNEXPLAINED INVESTMENT IN PURCHASE OF HOUSE AT 5/2 KALANI MOHALLA INDORE OF RS. 1 46 250/-. 5 XVI. UNEXPLAINED INVESTMENT IN PURCHASE OF ANOTHER HOUSE OF RS. 5 50 000/-. XVII. UNRECORDED PURCHASE AND INVESTMENT OF RS.10 49 47 500/-. XVIII. UNEXPLAINED INVESTMENT IN LAND SITUATED AT DEVGURADIA OF RS.9 60 000/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN I. ADMITTING THE FRESH EVIDENCE BROUGHT BY THE ASSESSEE AT THE APPELLATE STAGE WHEREAS BEFORE A.O. THE ASSESSEE HAD FAILED TO RESPOND. II CALLING THE REMAND REPORT FROM A.O. WITHOUT ALLOWING ADEQUATE OPPORTUNITY TO MAKE ENQUIRY IN THIS REGARD WHEREAS THE ASSESSEE DID NOT RESPOND AT THE TIME OF REMAND REPORT ENQUIRIES ALSO. III. DELETING THE ADDITION ON THE BASIS OF REMAND REPORT WHICH IS FOUND INADEQUATE AND LACK OF ENQUIRY CONDUCTED BY A.O. 6 IV. NOT MAKING HIMSELF THE NECESSARY ENQUIRIES WHICH HE FINDS TO BE LACKING ON THE PART OF A.O. SINCE THE CIT(A) HAS THE POWERS TO DO SO U/S 250(4) OF IT ACT AND HAS THEREFORE FAILED TO PASS A CORRECT ORDER BASED ON PROPER AND COMPLETE ENQUIRIES. IT(SS) A NO. 27/IND/06 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN 1.(A) IN DELETING THE ADDITION OF RS.60 16 081/- ON ACCOUNT OF UNRECORDED INVESTMENT IN LAND. (B) IN DELETING THE ADDITION MADE ON PROTECTIVE BASIS AMOUNTING TO RS. 43 85 305/-. 2. THE ORDER OF LD. CIT(A) IS ERRONEOUS ON FACTS AS WELL AS ON LAW. THEREFORE IT IS PRAYED THAT ORDER OF LD. CIT(A) MAY KINDLY BE SET ASIDE AND ORDER OF A.O. MAY BE RESTORED. 7 IT(SS) A NO. 94/IND/2006 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN NOT ANNULLING THE ASSESSMENT ORDER MADE U/S 158BC/143(3) OF THE I.T. ACT WHICH WAS ILLEGAL WITHOUT PROPER JURISDICTION AND THE SEARCH HAVING BEEN CONDUCTED WITHOUT VALID AUTHORIZATION TO SEARCH. 2. FOR THAT THE LEARNED AUTHORITIES BELOW HAVE ERRED I N NOT CONSIDERING AND APPRECIATING THE FACTS OF THE CASE AND HAVE ERRED IN MAKING VARIOUS ADDITIONS ON SUBSTANTIVE BASIS. 3. FOR THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING AND MAINTAINING THE FOLLOWING ADDITIONS :- A. RS. 6 09 001/- AS ALLEGED UNRECORDED SALES ON 12.11.02 B. RS. 2 66 100 AS UNRECORDED SALES OF 19 BUNGLES. C. RS. 1 99 714/- AS ALLEGED UNEXPLAINED PAYMENTS D. RS. 32 328/- AS ALLEGED UNEXPLAINED SALES OF RS.26948 8 E. RS. 5 53 360/- AS ALLEGED UNEXPLAINED INVESTMENT IN LAND. F. RS.16 97 440/- AS ALLEGED UNACCOUNTED PURCHASE OF MATERIAL. G. RS. 1 25 305/- AS ALLEGED BOGUS PURCHASES OF MILK AND LOAN & INTEREST H. RS. 5 00 000/- AS ALLEGED UNEXPLAINED INVESTMENT IN SURYA FARM HOUSE. I. RS.1 52 070/- AS ALLEGED PROFIT ON SALE OF STOCK FOUND SHORT IN SURVEY J. RS.1 00 000/- ON ACCOUNT OF UNEXPLAINED CASH FOUND DURING SEARCH K. RS.1 50 000/- ON ACCOUNT OF UNEXPLAINED CASH RECEIPTS. 4. FOR THAT THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT PART OF THE LAND STANDING IN THE NAMES OF SANJAYKUMAR RAJKUMAR AND SMT. SANGITA BELONGS TO THE APPELLANT AND THE INVESTMENT IN THE HANDS OF THE ASSESSEE IS TO BE VALUED SAT RS. 100/- PER SQ.F T. AND INCLUDED IN THE INCOME OF THE ASSESSEE. 9 5. FOR THAT THE VARIOUS OBSERVATIONS MADE BY THE LEARNED CIT IN RESPECT OF VARIOUS ADDITIONS AS CONFIRMED ARE ARBITRARY WITHOUT PROPER BASIS AND BASED ON PERSONAL OPINION RATHER THAN THE FACTS OF THE CASE MATERIAL ON RECORD. 6. FOR THAT THE AUTHORITIES BELOW HAVE ERRED IN CHARGING SURCHARGE & INTEREST U/S 158BFA WHICH ARE ARBITRARY AND EXCESSIVE. IT(SS) A NO. 63/IND/2006 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSMENT MADE U/S 158BD/143(3) OF THE ACT IS ILLEGAL WITHOUT JURISDICTION ARBITRARY AND DESERVES TO BE ANNULLED. 2. FOR THAT IN THE FACTS & CIRCUMSTANCES OF THE FASE THE SEARCH CONDUCTED UNDER A WARRANT OF AUTHORIZATION JOINTLY ISSUED IN RESPECT OF SEVERAL SEPARATE INDIVIDUAL ASSESSEES IS ILLEGAL THE SEARC H WAS BAD IN LAW AND HENCE THE NOTICE ISSUED U/S 158BC WAS ILLEGAL AND WITHOUT JURISDICTION AND THUS THE ASSTT. ORDER IS ALSO BAD IN LAW AND DESERVES TO BE ANNULLED. 10 3. FOR THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIAT E AND CONSIDER THE CORRECT STATE OF AFFAIRS AND HAS ERRED IN DETERMINING THE INVESTMENT IN LAND MEASURING 15667 SQ. FT. AT RS. 5 00 000/- WHEREAS THE ABOVE LAND WAS PURCHASED PRIOR TO THE BLOCK PERIOD AND HENCE THE TOTAL ADDITION OF RS. 28 98 395/- SHOULD HAVE BEEN DELETED. 4. FOR THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 4 50 000/- TOWARDS ALLEGED INVESTMENT IN LAND MEASURING 13457 SQ.FT. WHICH WAS PURCHASED PRIOR TO THE BLOCK PERIOD AND HAS FURTHER ERRED IN NOT DELETING THE TOTAL ADDITION OF RS. 24 89 545/-. 5. FOR THAT IN THE FACTS & CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-I HAS FAILED TO APPRECIATE THE STATE OF AFFAIRS AVAILABILITY OF FUNDS AND ERRED IN CONFIRMING THE ADDITIONS MADE BY THE A.O. AS PER BANK STATEMENT AS UNDER :- RS. 11 000/- DEPOSITED ON 26.2.2001 RS.11 500/- 18.1.2002 11 RS.18 500/- IN VYAPARIK AUODHIK SAH.BANK RS.2 50 000 IN UCO BANK. 6. FOR THAT THE CIT(A) HAS ERRED IN NOT CONSIDERING TH E ADDITION OF RS.7 20 197/- MADE TOWARDS ALLEGED UNEXPLAINED INVESTMENT IN CONSTRUCTION OF GODOWN AND IN NOT DECIDING THE ISSUE. 7. FOR THAT THE AUTHORITIES BLOW HAVE ERRED IN DETERMINING THE TOTAL INCOME AS PER THE APPEAL EFFECT U/S 250 OF THE ACT. 8. FOR THAT THE INTEREST CHARGED U/S 158BFA ARE ILLEGAL ARBITRARY AND EXCESSIVE. IT(SS) A NO. 20/IND/2006 1. FOR THAT THE ASSESSMENT MADE U/S 158BC/143(3) OF THE IT ACT IS ILLEGAL WITHOUT JURISDICTION ARBITR ARY AND WITHOUT ANY BASIS AND HENCE DESERVES TO BE ANNULLED . 2. FOR THAT THE LEARNED CIT APPEAL HAS ERRED IN NOT ANNULLING THE ASSESSMENT ORDER WHICH WAS WITHOUT JURISDICTION AS THERE WAS NO VALID SEARCH CONDUCTED IN RESPECT OF THE ASSESSEE COMPANY WHICH CEASED TO EXI ST ON THE DATE OF ALLEGED SURVEY/SEARCH. 12 3. ALLEGED ACTION OF SEARCH ON THE AUTHORITY OF A JOI NT AUTHORIZATION TO SEARCH IS ILLEGAL AND CONSEQUENTLY THE NOTICE U/S 158BC WAS WITHOUT JURISDICTION AND ALL CONSEQUENTIAL ACTIONS ARE BAD IN LAW. 4. FOR THAT THE AUTHORITIES BELOW HAVE FAILED TO BRIN G ON RECORD THAT AS A RESULT OF ALLEGED SEARCH IN THE AB OVE GROUP OF CASES SUCH OTHER MATERIAL WERE FOUND AS A RESULT OF WHICH POST SEARCH ENQUIRIES WERE CONDUCTE D AND THUS THE DETERMINATION OF UNDISCLOSED INCOME BASED ON SUCH ENQUIRIES IS ILLEGAL. 5. FOR THAT THE LEARNED CIT HAS ERRED IN NOT DELETING FULLY THE FOLLOWING ADDITIONS :- A. RS.12 10 87 500/- ON ACCOUNT OF ALLEGED UNRECORDED PURCHASES & RS.4 03 62 500/- AS ALLEGED UNEXPLAINED INVESTMENTS BASED ON POST SEARCH ENQUIRY. B. RS.4 01 58 250/- AS ALLEGED UNRECORDED SALES/PURCHASES. C. RS.5 51 92 536/- AS ALLEGED UNRECORDED CONSIGNMENT SALES AND IN DIRECTING THE A.O. TO WORK OUT THE ALLEGED UNDISCLOSED INCOME IN RESPECT OF THESE 13 TRANSACTIONS ON ESTIMATE BASIS. 6. FOR THAT THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THE FACTS OF THE CASE MATERIAL ON RECOR D AND THE LEGAL POSITION THAT IN BLOCK ASSTT. CASES T HE UNDISCLOSED INCOME HAS TO BE DETERMINED ONLY TO THE EXTENT OF UNDISCLOSED INCOME FOUND DURING THE COURS E OF SEARCH AND NOT ON THE BASIS OF ESTIMATE ASSUMPTIONS OR PRESUMPTIONS. 7. FOR THAT THE INTEREST CHARGED U/S 158BFA IS ILLEGAL AND ARBITRARY. IT(SS) A. NO. 21/IND/2006 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED 1. IN DIRECTING THE A.O. TO TREAT THE INCOME WORKED OU T ON THE BASIS OF PURCHASES RECORDED FOR A PERIOD OF 31.5 MONTHS ONLY AS FOUND IN THE RECORDS OF M/S INT ER STATE ROAD CARRIERS AS UNDISCLOSED INCOME IN PLACE OF THE INCOME WORKED OUT BY THE A.O. FOR THE REMAINING PERIOD OF 48 MONTHS. 14 2. WHILE COMING TO THE ABOVE CONCLUSION THE LD. CIT(A ) HAS NOT APPRECIATED THE FACT THAT THE DEPARTMENT HA S DOCUMENTS IN POSSESSION REGARDING UNRECORDED PURCHASES/SALES FOR F.Y. 1999-2000 (PARA 5.2 OF CIT(A)S ORDER) AND FOR F.Y. 1998-99 (PARA 9(2) OF CIT(A)S ORDER. 3. THE LD. CIT(A) HAS ALSO NOT APPRECIATED THE FACT TH AT SECTION 158BC(B) HAS BEEN AMENDED FOR THE FINANCE ACT 2002 W.E.F. 01.07.1995. HENCE INCOME COULD BE WORKED OUT FOR THE TOTAL BLOCK PERIOD. 4. IN DIRECTING THE A.O. THAT HE SHOULD APPLY THE G.P./N.P. RATE TO THE SALES AND WORK OUT INVESTMENT IN SUCH PURCHASES ON THE BASIS OF PEAK METHOD. THE TOTAL SUM OF THESE AMOUNTS WOULD REPRESENT THE UNDISCLOSED INCOME AND THE ADDITION IS RESTRICTED T O THE EXTENT WHILE COMING TO THE ABOVE CONCLUSION LD. CIT(A) HAS NOT APPRECIATED THE FACT THAT THE INVESTIGATION REPORT OF COMMERCIAL TAX DEPARTMENT I S (SEARCH MATERIAL) AS THE SAME WAS SEIZED DURING SEARCH. THE IMPLICATIONS OF THE FACTS RECORDED ON THIS 15 DOCUMENT HAVE TO BE CONSIDERED INDEPENDENTLY IN ACCORDANCE WITH THE PROVISION THE IT ACT. 5. IN DIRECTING THE A.O. TO DELETE ADDITION OFRS. 11 02 750/- MADE ON THE BASIS OF LETTER OF KAMARTHY CO. LTD. WHILE COMING TO THE ABOVE CONCLUSION THE L D. CIT(A) HAS NOT APPRECIATED THE FACT THAT COPY OF LE TTER WAS ENDORSED TO THE ASSESSEE AND THE ASSESSEE FAILE D TO EXPLAIN BEFORE A.O. WHY THE COPY WAS ENDORSED T O THE ASSESSEE. 6. IN DIRECTING THE A.O. TO WORK OUT THE PROFIT AS PE R GROSS PROFIT RATE OR COMMISSION RATE SHOWN AND LETT ER THE HIGHER OF TWO FIGURES AS UNDISCLOSED INCOME OF THE APPELLANT FOR THE RELEVANT PERIOD IN PLACE OF TOTAL SALES RS. 5 51 92 536/- ADDED BY THE A.O. 7. IN DELETING THE ADDITION OF RS.1 00 000/- MADE BY T HE A.O. ON ACCOUNT OF D.D. SATPURA TAPI PARISHAD. 8. THE ORDER OF LD. CIT(A) IS THUS ERRONEOUS IN LAW AS WELL AS ON FACTS OF THE CASE. 9. THUS IT IS PRAYED THAT THE ORDER OF CIT(A) BE SET A SIDE AND THE ORDER OF A.O. BE RESTORED. 16 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. BRIEF FACTS ARE THAT THE SEARCH AND SEIZUR E OPERATIONS WERE CARRIED OUT U/S 132 OF IT ACT AT TH E RESIDENTIAL AS WELL AS BUSINESS PREMISES OF MAHESH NIRANJAN GROUP OF INDORE. THE OPERATIONS WERE COMME NCED ON 13/11/02 AND THEREAFTER CONCLUDED ON 15/11/02. SIMULTANEOUSLY THE SURVEY U/S 133A OF IT ACT WERE A LSO CARRIED OUT AT THE GODOWNS OF THE ASSESSEE AT PALDA INDORE. THE DETAILS OF PREMISES SEARCHED AND SURVEYED ARE A S UNDER:- S.N O. PREMISES OCCUPIED BY ACTIO N U/S COMMENC ED CONCLUD ED ON 1 147/47 BHAGWANDE EN NAGAR INDORE SHRI KAILASHCHAND AGRAWAL SHRI MAHESH AGRAWAL SHRI MUKESH AGRAWAL SHRI NIRANJAN AGRAWAL & OTHERS 132 OF IT ACT 1961 13/11/20 02 14/11 /2 002 2 8/2 NEW ANAJ MANDI INDORE M/S AGRAWAL JUTE BAG IND. M/S KAILASH TRADERS M/S KAILASHCHANDRA & CO. M/S AGRAWAL ASSOCIATES MAHESH NIRANJAN JUTE P. LTD. 132 OF IT ACT 1961 13/11/20 02 15/11/2 002 3 NEMAWAR ROAD NEAR M/S AGRAWAL JU TE BAG IND. 133A OF IT 13/11/20 02 15/11/2 002 17 TISCO DEPOT PALDA M/S KAILASH TRADERS M/S KAILASHCHANDRA & CO. M/S AGRAWAL ASSOCIATES MAHESH NIRANJAN JUTE P. LTD. ACT 1961 IN THE CASE OF KAILASH CHAND AGRAWAL THE ASSESSMEN T WAS COMPLETED AT THE TOTAL UNDISCLOSED INCOME OF RS. 5 44 02 029/- ON SUBSTANTIVE BASIS AND RS. 10 63 53 750/- ON PROTECTIVE BASIS. AS THE TOTAL UNDISCLOSED INCO ME ALSO WAS ERRONEOUSLY MENTIONED AT RS. 10 63 53 450/- TH E SAME WAS SUBSEQUENTLY REVISED VIDE ORDER U/S 154 DA TED 3.2.2005 TO RS. 16 07 55 779/-. AS PER THE RECORD O F LOWER AUTHORITIES THE SEQUENCE OF EVENTS AFTER SEARCH WA S AS UNDER :- SEARCH COMMENCED ON 13.11.2002 SEARCH CONCLUDED ON 14.11.2002 158BC ISSUED ON 26.02.2002 158BC SERVED ON 27.02.2004 TIME LIMIT FOR FILING THE RETURN 30.03.2004 REQUEST FOR EXTENSION OF TIME MADE 22.03.2004 TIME ALLOWED UPTO 28.04.2004 18 RETURNS FILED ON 12.04.2004 NOTICE U/S 142(1) ISSUED ON 13.09.2004 DATE OF HEARING FIXED ON 21.09.2004 IST QUESTIONNAIRE ISSUED ON 24.10.2004 DATE OF COMPLIANCE 06.11.2004 ORDER U/S 158BC PASSED ON 30.11.2004 IT IS CLEAR FROM THE ABOVE DATES THAT THE NOTICE U/ S 158BC WAS ISSUED AFTER NEARLY 15-1/2 MONTHS OF SEARCH AND THE ASSESSMENT PROCEEDINGS WERE TAKEN UP AFTER 5 MONTHS OF FILING THE RETURN AND THEN CONCLUDED WITHIN A PERIO D OF ABOUT 2 MONTHS. THE APPELLANT WAS AS SUCH NOT PROV IDED AMPLE OPPORTUNITY TO COMPLY WITH THE REQUIREMENTS A S PER QUESTIONNAIRE WHICH BECAME EVEN MORE DIFFICULT AS T HE SEIZED RECORD ON THE BASIS OF WHICH THE ASSESSMENT WAS MADE WERE IN THE CUSTODY OF THE DEPARTMENTS. AS A M ATTER OF FACT THE HARD DISC IN THE COMPUTER CONTAINING TH E WHOLE DATA REGARDING THE BUSINESS OF THE ASSESSEE WAS COR RUPTED DUE TO MISHANDLING BY THE DEPARTMENTAL OFFICIALS AN D THE RELIABILITY OF THE CD PROVIDED TO THE ASSESSEE BY T HE 19 DEPARTMENT EARLIER WAS DOUBTED BY THE A.O. THESE F ACTS CAUSED THE DELAY IN FURNISHING OF THE REQUIRED DETAILS/DOCUMENTS. THE APPELLANT FILED THE DETAILS AND DOCUMENTS DURING THE APPELLATE PROCEEDINGS BEFORE T HE CIT(A) WHICH WERE FORWARDED TO THE ASSESSING OFFICE R FOR EXAMINATION AND HIS REMAND REPORT AFTER GIVING ADEQ UATE OPPORTUNITY TO THE APPELLANT. THE ASSESSING OFFICE R SENT HIS REMAND REPORT DATED 00.11.2005 WHICH READS AS U NDER :- POINTS IN DISPUTE CHALLENGING THE LEGALITY OF ISSUE OF NOTICE U/S 158BC AND THE CONSEQUENTIAL ASSESSMENT ORDER AS MENTIONED IN THE ASSESSMENT ORDER AS WELL AS IN PANCHNAMA DRAWN A SEARCH WAS CONCLUDED AT THE PREMISES 147/47 BHAGWANDEEN NAGAR INDORE AND 8/3 NAI ANAJ MANDI INDORE IN PURSUANCE OF WARRANT OF AUTHORIZATION ISSUED IN RESPECT OF AFORESAID TWO PREMISES. THEREFORE THERE IS 20 NO DISCREPANCY IN THE FINDING RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE RELEVANT PANCHNAMA FOLDERS ALONG WITH APPRAISAL REPORT WERE ALSO PRODUCED BEFORE YOU DURING THE APPELLATE PROCEEDINGS ON 16.11.2005. HOWEVER RELEVANT EXCERPTS FROM THE APPRAISAL REPORT AND PANCHNAMA FILES ARE ENCLOSED AS ANNEXURE C AND ANNEXURE D. DISPUTE ON ADDITIONS MADE THESE ADDITIONS ARE CHALLENGED OR DISPUTED BY THE ASSESSEE PRIMARILY ON THE GROUND THAT NO SEARCH WAS CONDUCTED IN THIS CASE AND ISSUE WERE DECIDED IN AN ARBITRARY MANNER WITHOUT APPRECIATING THE FACTS OF THE CASE. IN THIS REGARD IT IS SUBMITTED THAT THE FACT OF A SEARCH IN THE CASE OF THE COMPANY ALONE MAKE ALL THESE SUBMISSIONS OF THE ASSESSEE IRRELEVANT AND INFRUCTUOUS. NOTICE U/S 21 158BC WAS VALIDLY ISSUED AND BLOCK ASSESSMENT WAS RIGHTLY COMPLETED IN PURSUANCE OF NOTICE SO ISSUED BY CONSIDERING THE MATERIAL AND INFORMATION AVAILABLE. IT WILL BE APPROPRIATE TO MENTION HERE THAT IN THE CIRCUMSTANCES OF THE CASE RAISING THE ISSUE OF MANNER AND PROCEEDING USED (I.E. BY WAY OF SEARCH/SURVEY) OR POST ASSESSMENT INQUIRIES) TO COLLECT THE INFORMATION/MATERIAL FOR THE PURPOSES OF MAKING THE ASSESSMENT IN A SEARCH CASE IMMATERIAL. FURTHER THE ASSESSEE ALSO APPEARS TO HAVE ADDUCED ADDITIONAL EVIDENCE IN RESPECT OF SOME OF THE ABOVE MENTIONED ADDITION DURING THE APPELLATE PROCEEDINGS WHICH WERE NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. THE SAME CANNOT BE PRODUCED NOW BEFORE THE APPELLATE AUTHORITY IN VIEW OF THE EXPRESS PROVISION CONTAINED IN RULE 46A AND RELEVANT DIRECT DECISIONS ON THE POINT. THE SPECIFIC PROVISION AS AFORESAID ARE THOSE 22 CONTAINED IN RULE 46A(1)(A) TO (D). THE RELEVANT COURT DECISIONS ARE AS UNDER : 1. CIT V. VALIMOHMED AHMED BHAI (1982) 134 ITR 214 (GUJ). 2. RAJKUMAR SHRIMAL VS. CIT (1976) 102 ITR 525 (CAL) ; 3. RAM PRASAD SHARMA VS. CIT (1979) 119 ITR 867 (ALL) 4. C.UNNI KRISHNAN VS. CIT (1997) 140 CTR (KER) 552. THESE ADDITIONAL EVIDENCES ARE ALL SELF-SERVING WITHIN THE MEANING OF SUPREME COURT JUDGEMENT IN TH E CASE OF DURGA PRASAD MORE 82 ITR 540 (S.C.) AT 545 AND ARE NOT ACCEPTABLE. AS REGARDS THE ASSESSEES OBJECTIONS AND OTHER ALLEGATIONS IN RESPECT OF ADDITIONS (ENUMERATED AS ABOVE) I WOULD SOLICIT YOUR KIND PERMISSION TO SUB MIT AS UNDER : THE ASSESSMENT FRAMED IS PROCEDURALLY FACTUALLY AND LEGALLY CORRECT AND IN CONFORMS TO THE CONCEPT OF 23 NATURAL JUSTICE. IT IS A SPEAKING ORDER IN WHICH EA CH AND EVERY SUBMISSION OF THE ASSESSEE IS EXAMINED BY THE ASSESSING OFFICER AND INFERENCES AND CONCLUSION ARE DRAWN IN THE ASSESSMENT ORDER ACCORDINGLY. THE CONCLUSION ARE BASED ONLY ON THE FACTS AND REASONIN G GIVEN IN THE ASSESSMENT ORDER AND NOT ON EXTRANEOUS FACTORS. THE ADDITIONS WERE MADE ON THE BASIS OF OBSERVATION OF A DETAILED NATURE WITH DISCUSSION ON MERITS WHETHER THE ADDITION ARE CALLED FOR. FURTHER MATERIAL OR INFORMATION IF ANY COLLECTED BEHIND THE ASSESSEES BACK WAS BROUGHT TO THE NOTIC E OF THE ASSESSEE AND OPPORTUNITIES TO REBUT THE SAME WAS ALLOWED TO HIM AND HIS EXPLANATION WERE CONSIDERED WHILE FRAMING THE ASSESSMENT. DURING THE APPELLATE PROCEEDINGS ON 16.11.2005 AND 17.11.2005 THE AO WAS DIRECTED TO MAKE SOME VERIFICATION WITH REFERENCE TO THE CONTENTIONS GIV EN IN PAPER BOOKS SUBMITTED BY THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS. THE FOLLOW UP ACTION WAS TAKEN IN THE PRESENCE OF SHRI MAHESH AGRAWAL SHR I SHYAM SUNDER MAHESHWARI ACCOUNTANT OF THE 24 ASSESSEE AND SHRI JAI PRAKASH COMPUTER OPERATOR OF THE ASSESSEE BY RUNNING THE RELEVANT CD. THE REPORT IS AS UNDER :- AOS ORDER PARA NO. & PAGE NO. REFERENCE PAGE OF PAPER BOOK GIVEN BY THE ASSESSEE DIRECTIONS OF THE APPELLATE AUTHORITY TO THE AO REPORT PARA 1 AT PAGE 4 OF THE ASSESSMENT ORDER PAGE 31 OF PAPER BOOK NO.1 ADDITION OF RS. 17 131/- TO VERIFY THE POSITION FROM SEIZED BOOKS. THE ENTRIES AS CLAIMED ARE NOT FOUND RECORDED IN THE SEIZED BOOKS OF ACCOUNT MAINTAINED ON THE COMPUTER MEDIA. THE VERIFICATION PROCESS AS ATTENDED BY THE ACCOUNTANT OF THE ASSESSEE. COMPUTER OPERATOR OF THE ASSESSEE AND SHRI MAHESH AGRAWAL PARA 2 AT PAGE 5 OF THE ASSESSMENT ORDER PAGE 1 2 3 & 4 OF PAPER BOOK NO.1 ADDITION OF RS. 24 67 968/- TO VERIFY THE POSITION FROM SEIZED BOOKS. THE ENTRIES AS CLAIMED ARE NOT FOUND RECORDED IN THE SEIZED BOOKS OF ACCOUNT MAINTAINED ON THE COMPUTER MEDIA. THE VERIFICATION PROCESS AS ATTENDED BY THE ACCOUNTANT OF THE ASSESSEE. COMPUTER OPERATOR OF THE ASSESSEE AND SHRI MAHESH AGRAWAL PARA 5 AT PAGE 5 OF THE PAGE 37 OF PAPER BOOK ADDITION OF RS.73 150/- TO VERIFY THE ENTRIES AS CLAIMED ARE NOT 25 ASSESSMENT ORDER NO.1 THE POSITION FROM SEIZED BOOKS. FOUND RECORDED IN THE SEIZED BOOKS OF ACCOUNT MAINTAINED ON THE COMPUTER MEDIA. THE VERIFICATION PROCESS AS ATTENDED BY THE ACCOUNTANT OF THE ASSESSEE. COMPUTER OPERATOR OF THE ASSESSEE AND SHRI MAHESH AGRAWAL PARA 6 AT PAGE 5 OF THE ASSESSMENT ORDER PAGE 50 OF PAPER BOOK NO.1 ADDITION OF RS. 2 66 100/-TO VERIFY THE POSITION FROM SEIZED BOOKS. THE ENTRIES AS CLAIMED ARE NOT FOUND RECORDED IN THE SEIZED BOOKS OF ACCOUNT MAINTAINED ON THE COMPUTER MEDIA. THE VERIFICATION PROCESS AS ATTENDED BY THE ACCOUNTANT OF THE ASSESSEE. COMPUTER OPERATOR OF THE ASSESSEE AND SHRI MAHESH AGRAWAL PARA 9 AT PAGE 5 OF THE ASSESSMENT ORDER PAGE 59 OF PAPER BOOK NO.1 ADDITION OF RS. 2 43 675/-TO VERIFY THE POSITION FROM SEIZED BOOKS. NO SUCH EVIDENCES WERE FURNISHED DURING ASSESSMENT. PARA 12 AT PAGE 6 OF THE ASSESSMENT ORDER 63 ADDITION OF RS. 66 944/-TO VERIFY THE POSITION FROM SEIZED BOOKS. THE FOLLOWING LEDGER A/C EXIST IN THE BOOKS OF ACCOUNT PART OF THE CPU SEIZED 1)M/S.SUMIT PULS PVT.LTD. 2) GANESH TRADING CO. 3) LAXMI NARAYAN TRADERS; 4)ASHOK KUMR 26 PADAM KUMAR 5) DILIP DALL MILL 6) ROYAL PULSES 7)KAKANI BROTHRES 8)I.K.ENTERPRISES. THE TRANSACTIONS REFERRED TO IN THE PAPER BOOK FROM PAGE NO.64 TO 79 ARE FOUND REFLECTED IN THESE LEDGER A/CS. HOWEVER THE TOTAL AMOUNT INVOLVED IN THE TRANSACTION WORKS OUT TO RS. 76 204/- INSTEAD OF RS. 66 944/- ADDED IN THE ASSESSMENT. PARA 13 AT PAGE 6 OF THE ASSESSMENT ORDER 63 ADDITION OF RS. 82 500/-.TO VERIFY THE CONTENT OF THE LETTER DATED 19.7.02 WHOSE PHOTOCOPY PRODUCED IN THE APPELLATE PROCEEDINGS IS NOT CLEAR. THE LETTER DATED 19.7.02 READS AS UNDER : (THIS LETTER HAS BEEN WRITTEN IN HINDI BY THE APPELLANT ADDRESSED TO BARDANA MERCHANTS ASSOCIATION INDORE REQUESTING IT TO HELP HIM IN GETTING THE CLAIM OF DAMAGES OF RS. 9 750/- FROM VIMAL INDUSTRIES LALGAON.) PARA 18 AT PAGE 7 OF THE ASSESSMENT ORDER 113 ADDITION OF RS. 8 25 561/-TO ASCERTAIN THE POSITION FROM SEIZED BOOKS. THE EXISTENCE OF RELEVANT LEDGER ACCOUNT COULD NOT BE TRACED OUT BY THE ASSESSEE FROM THE DATA ON CD OF 27 BOOKS OF ACCOUNT MAINTAINED ON COMPUTER SEIZED. THE VERIFICATION PROCESS AS ATTENDED BY THE ACCOUNTANT OF THE ASSESSEE COMPUTER OPERATOR OF THE ASSESSEE AND SHRI MAHESH AGRAWAL. PARA 19 AT PAGE 7 OF THE ASSESSMENT ORDER 145 TO 150 ADDITION OF RS. 1 00 75 010/- ON ACCOUNT OF BOGUS PURCHASES FROM AMIT ENTERPRISES BALAGHAT. GIVE THE REPORT ON BANK ACCOUNT. A COPY OF LEDGER A/C WHICH EXIST IN THE NAME OF AMIT ENTERPRISES WITH ADDRESS AS SHAYMA PRASAD MUKHERJEE COMPLEX BALAGHAT IN THE COMPUTER MEDIA ENCLOSED (ENCLOSED AS ANNEXURE A). IT MAY BE MENTIONED HERE THAT IN THE ASSESSMENT ORDER THE FIRM AMIT ENTERPRISES WAS FOUND TO BE A BOGUS FIRM. THE FACTS ARE DISCUSSED IN THE ASSESSMENT ORDER IN WHICH INTER ALIA IT WAS ALSO MENTIONED THAT THE ASSESSEE HAD HIMSELF DENIED THE TRANSACTIONS TO THE TUNE OF SO MUCH AMOUNT WITH THE SAID FIRM. IN VIEW OF THIS THE 28 SUBMISSION NOW MADE BY THE ASSESSEE I THE PAPER BOOK IS NOTHING BUT AN AFTER THOUGHT. PARA 3 AT PAGE 10 TO PAGE 14 OF THE ASSESSMENT ORDER 322 ADDITION OF RS.10 49 47 500/- ON PROTECTIVE BASIS TO CHECK AND REPORT WHETHER ADDITION ON SUBSTANTIVE BASIS WAS MADE IN THE CASE OF MAHESH NIRANJAN JUTE PVT.LTD. ADDITION ON SUBSTANTIVE BASIS IS MADE ON THIS ISSUE IN THE CASE OF M/S. MAHESH NIRANJAN JUTE PVT.LTD. PARA 24 AT PAGE 9 OF THE ASSESSMENT ORDER 333 ADDITION OF RS. 2 61 77 419/- AS UNRECORDED SALES IN THE NAME OF DEVSHRI CORPORATION FOR COMMENTS. THE ISSUE WAS NOT EXPLAINED DURING THE ASSESSMENT STAGE. THE REASON GIVEN IN THE PAPER BOOK IS ONLY AN AFTER THOUGHT. AS MENTIONED ABOVE THE VERIFICATION PROCEEDINGS WERE CARRIED OUT IN THE PRESENCE OF THE ASSESSEE HOWEVER IN RESPECT OF UNVERIFIED ISSUES A COPY OF SUBMISSIONS MADE AT VIDE HIS LETTER DATED 23.11.200 5 IS ENCLOSED (AS ANNEXUREB) FOR YOUR KIND PERUSAL. 3. DURING THE COURSE OF ASSESSMENT FOLLOWING ADDIT IONS WERE MADE BY THE ASSESSING OFFICER ON SUBSTANTIVE B ASIS :- 29 1. UNRECO RDED SALES OF 12.11.2002 24 67 968 2. UNRECORDED/PAYMENTS INCURRED ON 13.11.2002 17 131 3. UNRECORDED PAYMENTS - VIMAL INDUSTRIES 13 33 000 4. UNRECORDED CONSIGNMENT NOTE 1 90 290 5. UNRECORDED SUPPLIES MADE ON 15.10.2022 73 150 6. UNRECORDED SALE OF 1 9 BUNDLES 2 66 100 7. UNRECORDED PAYMENTS 2 20 024 8. UNRECORDED SALE OF 2694 BAGS 52 000 10. UNRECORDED THREE BANK DRAFTS 2 43 675/ - 11. UNEXPLAINED LAND HOLDINGS IN SELF NAME 15 80 080/ - 12. UNEXPLAINED LAND HOLDINGS IN OTHER NAMES 37 60 000/ - 13. UNRECORDED SUPPLIES OF GOODS 66 944/ - 14. UNRECORDED PURCHASES INDORE BARDANA MERCHANT ASS. 82 500/ - 15. UNEXPLAINED DIVIDEND WARRANT/INVESTMENT 6 250/ - 16. UNRECORDE D SALES CONTRACT NOTE 4 87 500/ - 17. UNRECORDED CONTRACT NOTE OF BROKER SHRI SURESH 13 05 000/ - 18. UNRECORDED PURCHASE OF MATERIALS 16 97 440/ - 19. UNRECORDED MACHINE PURCHASE & SALES 8 25 561/ - 20. BOGUS PURCHASES AMIT ENTERPRISES 1 00 75 010/ - 30 21. UNRECORDED MILK PURCHASES LOAN & INTEREST 1 25 305/ - 22. UNEXPLAINED INVESTMENT IN SURYA FARM HOUSE 5 00 000/ - 23. UNEXPLAINED STOCK DISCREPANCY 20 27 605/ - 24. UNEXPLAINED CASH BALANCE DISCREPANCY 1 00 000/ - 25. UNRECORDED SALES - DEVSHRI CORPN. 2 61 77 419/ - 26. UNEXPLAINED INVESTMENT IN THE GODOWONS 7 20 197/ - TOTAL (A) 5 44 02 029/ - HOWEVER ON PROTECTIVE BASIS FOLLOWING ADDITIONS WE RE MADE BY THE ASSESSING OFFICER :- 1. UNRECORDED PURCHASE OF HOUSE AT KALALI MOHALLA 1 46 250/ - 2 . UNEXPLAINED CASH RECEIPT ON SALE OF HOUSE AT KALALI MOHALLA 3 00 000/ - 3. UNRECORDED PURCHASES & INVESTMENT INTER STATE CARRIER 10 49 47 500/ - 4. UNRECORDED INVESTMENT IN LAND 9 60 000/ - TOTAL 9B0 10 63 53 750/ - 4. AGAINST THE ABOVE ORDER OF THE ASSESSING OFFICER THE ASSESSEE APPROACHED THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS). AFTER CONSIDERING THE ASSESSING OFF ICERS REMAND REPORT THE LEARNED COMMISSIONER OF INCOME T AX 31 (APPEALS) OBSERVED THAT INSTEAD OF GIVING ANY SPECI FIC COMMENTS AFTER CAREFUL EXAMINATION OF THE CONTENTIO N OF THE ASSESSEE AND THE EVIDENCES FURNISHED HE CHOSE TO QUESTION THE LEGALITY OF ADMITTING THE ADDITIONAL E VIDENCE BY MAKING TECHNICAL OBJECTIONS THAT SUCH EVIDENCE COUL D NOT BE ENTERTAINED IN APPEAL AS THE ASSESSEE DID NOT FI LE THE SAME IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) THEREFORE EX AMINED THE ISSUE OF LEGALITY OF CONSIDERATION OF ADDITIONA L EVIDENCE U/R 46A WHICH WAS DISCUSSED WITH THE AO ALSO DURING THE APPELLATE PROCEEDINGS WHEN HE WAS PRESENT. ALL THE SUBMISSIONS ALONGWITH DOCUMENTS WERE SENT BY THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) TO THE AO FOR EXAMINATION AND REMAND REPORT AS THE SAME COULD NOT BE FURNISHED BEFORE HIM AT THE TIME OF ASSESSMENT PROC EEDINGS DUE TO SHORTAGE OF TIME ALLOWED TO THE APPELLANT FO R COMPLIANCE. THIS IS EVIDENT FROM THE FACT THAT THE ASSESSEE HAD TO APPROACH THE CIT VIDE HIS LETTER DATED 15.10 .2004 TO DIRECT THE AO TO EXPEDITE THE SUPPLY OF PHOTOCOPIES OF THE SEIZED DOCUMENTS ETC. TO THE ASSESSEE. THE AO WAS EXPECTED TO GIVE REASONABLE OPPORTUNITY TO THE ASSE SSEE IN 32 THIS REGARD AND THEN SEND HIS REPORT ON THE BASIS O F OBJECTIVE APPRAISAL OF THE FACTS. BUT IN HIS REPORT HE QUESTIONED THE ADMISSION OF ADDITIONAL EVIDENCE AND REITERATING THE OBSERVATION MADE IN THE ASSESSMENT ORDER. RELYING ON SEVERAL CASE-LAWS HE RENDERED THE ADDIT IONAL EVIDENCE AS SELF-SERVING AND BEYOND THE PROVISION S OF RULE 46A(1)(A) TO (D) OF THE INCOME-TAX RULES. AS SUCH THE REMAND REPORT SERVES NO PURPOSE IN SO FAR THE ASSIS TANCE IN THE ADJUDICATION OF THE APPEAL IS CONCERNED. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT FROM A READING OF THE ASSESSM ENT ORDER IT IS CLEAR THAT THE ASSESSEE WAS PUT THE QU ERIES ON NUMEROUS POINTS REGARDING THE SEIZED MATERIAL FIRST TIME FOR COMPLIANCE ON 24.09.2004 AND TILL 15.10.2004 WHEN T HE ASSESSEE WROTE THE ABOVE SAID LETTER TO THE CIT TH E COPIES OF SEIZED MATERIAL HAD NOT BEEN SUPPLIED TO THE ASS ESSEE. THE ASSESSMENT ORDER WAS PASSED ON 30.11.2004. THUS IT IS SEEN THAT OPPORTUNITY PROVIDED TO THE ASSESSEE W AS NOT ADEQUATE. THE ASSESSEE COULD NOT HAVE BEEN EXPECTED TO COMPLY WITH SUCH A LARGE NUMBER OF QUERIES IN A BLO CK ASSESSMENT AFTER VERIFICATION FROM VOLUMINOUS SEIZE D 33 RECORDS IN SUCH A SHORT PERIOD ALLOWED TO HIM. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE AO COULD HAVE REALIZED THAT CLAUSES (B) TO (D) OF R ULE 46A(1) ARE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE AND HE OUGHT TO HAVE EXAMINED THE ADDITIONAL EVIDENCE NOW FURNISHED BEFORE HIM BEFORE SENDING THE SUMMARY REM AND REPORT. HOWEVER WHILE AGAIN ASKING THE AO TO SEND A COMPREHENSIVE REPORT AFTER EXAMINING THE DOCUMENTS AND INFORMATION FILED BY THE ASSESSEE THE COPY OF THIS REMAND REPORT WAS HANDED OVER TO THE COUNSEL OF THE ASSESS EE ON 05.12.2005 FOR HIS COUNTER COMMENTS. THE REPLY OF T HE ASSESSEE WAS RECEIVED ON 3.1.2006 WHICH READS AS UN DER :- 1. THERE IS NO DISPUTE ABOUT THE FACTS THAT THE ASSESSEE GROUP MAINTAINED ITS ACCOUNT IN COMPUTER WHICH WAS SEIZED DURING THE COURSE OF SURVEY/SEARCH. THE DEPARTMENT MADE EFFORTS TO LOG INTO THE COMPUTER AND IN THE PROCESS DID NOT SUCCEED. THEREAFTER THE ASSESSEE APPEARED BEFORE THE ADI ALONGWITH HIS COMPUTER OPERATOR AND ALL THE DATA FOUND IN THE HARD DISK WERE COPIES INTO A CD AND A COPY OF THE SAME WAS GIVEN TO THE ASSESSEE. 2. THEREAFTER IT APPEARS THAT DURING THE PERIOD WHEN THE DISK WAS IN POSSESSION OF THE DEPARTMENT IT WAS HANDLED BY SOME OFFICIALS AS A RESULT OF WHICH THE FILES GOT DISRUPTED/LOST. THE ASSESSEE ALONGWITH HIS COMPUTER OPERATOR WHEN ATTENDED THE OFFICE OF THE AO FOR VERIFICATION OF THE VARIOUS SUBMISSIONS RELATING 34 TO ACCOUNT RECENTLY AFTER YOUR DIRECTIONS IT WAS FOUND THAT DUE TO MISHANDLING THE DATA/FILES WERE SCATTERED AND HENCE IT WAS INFORMED THAT IT MAY TAKE ABOUT TWO MONTHS TO PUT THE INFORMATION IN COMPUTER IN ORDER. 3. IT WAS SUBMITTED BY THE ASSESSEE TO THE LD. ACIT THAT VERIFICATION OF THE TRANSACTIONS MAY BE MADE FROM THE CD COPIES BY THE DEPARTMENT EARLIER AND GIVEN TO THE ASSESSEE. HOWEVER THIS WAS NOT ACCEPTED AND A REPORT HAS BEEN PREPARED AND SENT TO YOUR HONOUR IN THE REMAND REPORT THAT ENTRIES AS CLAIMED ARE NOT FOUND RECORDED IN THE SEIZED BOOKS OF ACCOUNT MAINTAINED ON COMPUTER. THIS IN FACT IS DENIAL OF JUSTICE TO THE ASSESSEE. THE CD WHICH WAS GIVEN BY THE DEPARTMENT AT INVESTIGATION STAGE AND IS IN POSSESSION OF THE ASSESSEE CONTAINS ALL THE REQUIRED INFORMATION AND THERE IS NO REASON EVEN TO THINK THAT IT CANNOT BE RELIED UPON. IF WHILE GIVING A COPY OF ACCOUNT IN CD BY THE ADI THE AUTHORITY FAILED TO PUT ANY IDENTIFICATION THEREON THE ASSESSEE CANNOT BE PENALIZED. 4. IT IS FURTHER SUBMITTED THAT THE VERIFICATION OF VARIOUS TRANSACTIONS COULD HAVE BEEN DONE WITH THE HELP OF BANK STATEMENT. THE BANK STATEMENTS OF HDFC BANK FOR THE RELEVANT PERIOD ARE BEING ENCLOSED HEREWITH. 5. KIND ATTENTION IS INVITED TO THE SUBMISSIONS ON PAGE 1 IN RESPECT OF ADDITION OF RS. 24 67 968/- AS ALLEGED UNRECORDED SALES ON 12.10.2002 AND A SUBSEQUENT PAGES 2 TO 30 OF THE PAPER BOOK. ON PAGES 7 TO 30 THE PHOTOCOPIES OF SALES BILL ARE THERE. FOR MOST OF THE SALES PAYMENT HAS BEEN RECEIVED BY THE CHEQUES WHICH HAS BEEN DEPOSITED IN THE BANK. THE ASSESSEE HAS MARKED THE RELEVANT INVOICE APPEARING AT DIFFERENT PAGES ON PAPER BOOK IN THE BANK STATEMENT FOR EASY VERIFICATION. 6. IT IS SUBMITTED THAT ALL THE SALES OR THE TRANSACTIONS ARE RECORDED AND CAN BE VERIFIED FROM THE BANK STATEMENTS. 35 7. AS REGARDS ADDITION OF RS. 1 00 75 010/- WHICH HAS BEEN TREATED AS BOGUS PURCHASE FORM AMIT ENTERPRISES BALAGHAT. ALL THESE TRANSACTIONS APPEARED IN THE BOOKS OF ACCOUNT AND THERE IS NO REASON TO TREAT THEM AS BOGUS. THE AO HIMSELF HAS SUBMITTED BEFORE YOUR HONOR THE PRINT OUT OF THE ACCOUNT TAKEN FROM HARD DISK IN POSSESSION OF THE DEPARTMENT. WHAT IS RECORDED IN THE BOOKS ACCOUNT CANNOT BE TREATED AS UNRECORDED OR BOGUS. 8. SO FAR AS THE COMMENTS OF THE AO FOR ADDITION OF RS. 2 61 77 419/- AS UNRECORDED SALES IN THE NAME OF DEVSHRI CORPN. ARE CONCERNED THE AO HAS IN A SUMMARY MANNER OBSERVED THAT THE ISSUE WAS NOT EXPLAINED DURING THE ASSESSMENT STAGE AND THE REASONS GIVEN IN THE PAPER BOOKS IS AN AFTER THOUGHT. IN THIS RESPECT IT IS SUFFICIENT TO SAY THAT SINCE NO OPPORTUNITY WAS GIVEN DURING ASSESSMENT PROCEEDINGS AND THE ASSESSMENT WAS COMPLETED IN HOT-HASTE WITHIN A PERIOD OF 2 MONTHS. APPRECIATING THE FACT THAT NO REASONABLE AND PROPER OPPORTUNITY WAS GIVEN YOUR HONOUR DIRECTED THE AO TO VERIFY AND SUBMIT COMMENTS. 9. IT IS RESPECTFULLY SUBMITTED THAT ASSESSEE HAS SUBMITTED DETAILED OBJECTIONS ALONGWITH ALL THE RELEVANT PAPERS IN RESPECT OF EACH & EVERY ADDITION MADE AS UNDISCLOSED INCOME. AND EVERY THING CAN BE VERIFIED. EVEN AT THIS STAGE THE DEPARTMENTAL AUTHORITY ARE NOT PREPARED TO MAKE EFFORTS TO ASCERTAIN THE CORRECT POSITION ONLY BECAUSE IT IS A SEARCH CASE. KIND ATTENTION IS INVITED TO ANNEXURE B (COPY OF LETTER SUBMITTED TO THE AO ABOUT MISHANDLING OF HARD DISK AND THE REQUEST FOR CORRECTLY PREPARING THE PROGRAMME FILE FOR VERIFICATION OF TRANSACTIONS OF 01-02). TO SUM UP ALL THE TRANSACTIONS ENTRIES ARE RECORDED AND EXPLAINED. THE REMAND REPORT HAS BEEN PREPARED AND SUBMITTED IN HASTE IN A HURRY AND IS NON-SPEAKING. 36 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE REPLY OF THE ASSESSEE AND THE SAME W AS DISCUSSED WITH THE ASSESSEE IN THE PRESENCE OF SHRI HIMANSHU PANDEY ACIT 3(1) THE AO ON 3.1.2006 AND THE LETTER WAS ASKED TO GET THE DOCUMENTS VERIFIED VIS- -VIS THE BANK STATEMENT AND INVOICES. HIS REPORT DATED 18.01 .2006 AS RECEIVED IN THE OFFICE OF CIT(A) ON 23.1.2006 RE ADS AS UNDER :- KINDLY REFER TO THE APPELLATE PROCEEDINGS IN THE ABOVE CASE ON 5.1.2006 DURING WHICH YOUR HONOUR HAS GIVEN DIRECTIONS TO THE ASSESSEES COUNSEL SRI KAMLESH JAIN TO FURNISH SOME DOCUMENTS BEFORE THE AO FOR EXAMINATION AT AOS END. IN PURSUANCE SRI KAMLESH JAIN LEARNED COUNSEL FOR THE ASSESSEE APPEARED IN MY OFFICE AND HE MARKED CERTAIN DOCUMENTS OF THE PAPER BOOKS AND ALL THE DOCUMENTS SO MARKED BY HIM HAVE BEEN CONSIDERED IN THIS REPORT. THE ASSESSEE COUNSEL HAS MARKED OUT ONLY THE DOCUMENTS MENTIONED IN THE PAPER BOOK SUBMITTED BEFORE THE CIT(A) WITH REGARD TO THE ADDITION OF RS. 24 67 968/- MADE ON ACCOUNT OF UNRECORDED SALES. IT MAY BE MENTIONED HERE THAT THESE DOCUMENTS ARE EITHER CANCELLATION LETTERS OR ARE BILLS DRAWN BY THEM ASSESSEE AFTER THE DATE OF SEARCH ON THE BASIS OF WHICH HE HAS CONTENDED THAT TRANSACTIONS RECORDED ON THE LP-1 CANNOT BE TREATED AS UNRECORDED SALES AS THE RELEVANT TRANSACTIONS WERE EITHER CANCELLED OR MATERIALIZED SUBSEQUENTLY AND PAYMENTS RECEIVED ARE 37 REFLECTED IN THE BANK ACCOUNT. MY REPORT IS AS UNDER :- TRANSACTIONS STATED TO BE CANCELLED : IN RESPECT OF 6 PARTIES AT SL.NO. 1 9 11 21 23 AND 26 (PARA 1 PAGE 4 OF THE ASSESSMENT ORDER) TRANSACTIONS APPEARING IN ARE STATED TO HAVE BEEN CANCELLED LATER ON. THE CANCELLATION OF ORDER IS CLAIMED ON THE BASIS OF FOLLOWING LETTERS. S.NO. PARTY NAME REFERENCE OF CANCELLATION LETTER REMARK 1. ATUL SALES UNNUMBERED LETTER DATED 30.11.02 OF M/S. ANKUR ENTERPRISES (PAGE NO.6 OF PAPER BOOK) LETTER IS OF ANKUR ENTERPRISES AND NOT OF ATUL SALES 9. BHASKAR X OIL UNNUMBERED & UNDATED LETTER OF DALAL RAMESH MITTAL (PARA 14 OF PAPER BOOK) FROM THE DETAILS GIVEN IN THE LP-1 IT IS SEEN THAT GOODS WERE DELIVERED TO THE PARTY BY TRUCK NO. 4353KB . 11 & 26 SATISH JAIN SANAWAD UNNUMBERED & UNDATED LETTER OF AGRAWAL JUTE INDUSTRIES ADDRESSED TO ITO (PAGE 16 AND 17 OF PAPER BOOK) SELF MADE AND SELF SERVING IN NATURE. 21 RAJ RAJESWAR COTTON UNNUMBERED & UNDATED THE DATE OF CANCELLATION OF 38 CORPORATION LETTER OF THE PARTY (PAGE 26 OF THE PAPER BOOK. ORDER IS MISSING IN THE DOCUMENT THESE LETTERS ARE ONLY SELF SERVING IN NATURE. FURTHER THESE TRANSACTION MIGHT BE INSTANCES OF UNRECORDED PURCHASES BY THE CONCERNED PARTIES FROM THE ASSESSEE AS WELL AND ALSO THERE IS LIKELIHOOD OF THEIR BEING COLLUSIVE IN NATURE FOR EXAMPLE IN THE CASE OF M/S. BHASKAR OIL INDUSTRIES THERE IS CLEAR INDICATION OF DISPATCH OF GOODS BY TRUCK. THESE LETTERS DO NOT CARRY ANY EVIDENTIARY VALUE TO SUPPORT THE CLAIM OF THE ASSESSEE IN THIS REGARD. FURTHER ONE OF THESE LETTERS THOUGH BEARS THE DATE NEAR AFTER THE DATE OF SEARCH BUT THE SAME WAS NOT PRODUCED IN THE ASSESSMENT PROCEEDINGS. TRANSACTIONS STATED TO BE COMPLETED: IN RESPECT OF TRANSACTIONS OTHER THAN THOSE MENTIONED AT SL.NO.1 9 11 23& 26 (PARA 1 PAGE 4 OF THE ASSESSMENT ORDER); DOCUMENTS WHICH ARE IN THE FORM OF BILLS DRAWN BY THE ASSESSEE AFTER SEARCH ARE MARKED FOR COMMENTS : DOCUMENTS AT PAGE NUMBER 7 8 9 10 11 12 13 19 20 22 23 24 25 27 AND 28 OF THE PAPER BOOK. THE ASSESSEE CONTENDS THAT AMOUNTS RAISED BY THESE BILLS ARE DULY REFLECTED IN CERTAIN BANK ENTRIES. A PERUSAL OF THESE BILLS SHOWS THAT THESE BILLS CARRY CERTAIN DISCREPANCIES AND THERE IS NO UNIFORMITY IN THE MANNER OF THEIR PREPARATION AS WELL AS IN MENTIONING ALL NECESSARY PARTICULARS THERE IN WHICH LEADS TOWARDS DRAWING AN INFERENCE THAT THESE ARE MADE UP BILLS AND PARTICULARS RATE OF BARDANA AND AMOUNTS MENTIONED IN THE BILLS ARE SO ADJUSTED SO AS TO MAKE THEM MATCH WITH THE CERTAIN BANK ENTRIES 39 PURPORTED TO BE USED FOR EXPLAINING THE CONTENTION OF THE ASSESSEE. THESE ARE DETAILED BELOW : 1. WHILE IN LP-1 SIZE OF BARDANA IS MENTIONED BUT IN THE BILL NO DESCRIPTION OF SIZE IS MENTIONED. HOWEVER IN SOME INSTANCES THOUGH THERE IS NO DESCRIPTION OF THE SIZE OF THE BARDANA IN THE LP-1 COMPLETED DETAILS OF SIZE OF BARDANA ARE MENTIONED IN THE BILLS. 2. DIFFERENT RATES ARE CHARGED FOR ONE TYPE OF BARDANA IN DIFFERENT BILLS (BILLS AT PAGE NO. 7 8 AND 12 OF THE PAPER BOOK MAY BE REFERRED TO). 3. IN SOME BILLS FREIGHT AND HAMMALI CHARGES APPEAR TO HAVE BEEN INCORPORATED FOR THE PURPOSE TO ARRIVE AT THE DESIRED AMOUNT MENTIONED. FURTHER DETAILS IN RESPECT OF EACH BILLS ARE AS UNDER : VIJAYKUMAR PHOOLCHAND KHATEGAON (PAGE NOS. 18 & 19 OF PAPER BOOK ): AS PER THE LETTER DATED 1.9.05 ONLY ONE NAG OF BAG SAMPLE OF BARDANA WAS SENT TO VIJAY KUMAR PHOOLCHAND KHARGONE. IT APPEARS UNUSUAL THAT ANY SELLER WOULD MAKE AN ENTRY OF ONE PIECE OF BARDANA SENT AS SAMPLE. SHRI VIJAY KUMAR PHOOLCHAND IS ALSO A DALALA AND THERE IS LIKELIHOOD THAT HE MIGHT HAVE TRANSACTED ON BEHALF OF SOME OTHER PARTY (OTHER THAN MOOLCHAND GOPIKISHAN GARG ) OR FOR HIMSELF. JYOTI TRADING CO. (PAGE NUMBER 11 AND LETTER DATED 17.11.2002 PLACED IN PAPER BOOK ) : IT IS STATED IN THE LETTER DATED 17.11.2002 OF M/S. JYOTI TRADING CO. THAT ORDER FOR ONE GADI KATTA WAS CANCELLED DUE TO INFERIOR QUALITY OF MATERIAL AND ONLY TRANSACTION IN RESPECT OF BARDANA SENT AS SAMPLE WAS COMPLETED. THE ADMITTED COMPLETED 40 TRANSACTION IS REFLECTED IN THE LP-1 AFTER PARTICULARS OF TRANSACTIONS CLAIMED TO HAVE BEEN CANCELLED. THIS MIGHT BE SUCH CASE OF A COLLUSIVE TRANSACTIONS WHERE MAJOR PART OF TRANSACTION WAS NOT RECORDED IN THE BOOKS OF BOTH PARTIES. BHARAT PASU AAHAR (PAGE NO.28 OF THE PAPER BOOK ) THE BILL NO.1102 DATED 13.11.02 IS DRAWN IN THE NAME OF BHARAT AGRO PRODUCT WHILE LP-1 SHOWS THE NAME OF PARTY AS BHARAT PASU AAHAR. THE OTHER DETAILS ALSO DO NOT MATCH. THE PAYMENT IS ALSO CLAIMED TO BE RECEIVED IN TWO PARTS. RIDDHI SIDDHI FOOD PRODUCTS INDORE ( PAGE NO. 7 OF THE PAPER BOOK ) IN THE CASE OF RIDDHI SIDDHI FOOD PRODUCT THE HAMMALI OF RS. 0.25 ONLY CHARGED IN THE BILL AND THERE IS ALSO A DIFFERENCE OF 25 NAGS. IT APPEARS THAT BOTH THESE ENTRIES ARE INSERTED IN THIS MADE UP BILL IN ORDER TO GET THE FIGURES OF THE BILL MATCHED WITH A PARTICULARS BANK ENTRY. THIS ALSO APPEARS TO BE IN INSTANCE WHERE RATE OF BARDANA ARE ALSO ADJUSTED TO SUIT THE REQUIREMENTS OF THE ASSESSEE. THERE IS ANOTHER BILL NO. 1115 DATED 16.11.02 (PLACED AT PAGE NO.8 ) WHERE IN THE RATE OF BARDANA CHARGED IN RS. 13.75 FOR THE SAME TYPE OF BARDANA. RARHAKISHAN MATHURALAL KHARGONE ( PAGE NO.9 OF PAPER BOOK ) : THERE IS A DIFFERENCE OF RS. 270/- IN THE BILL AMOUNT AND AMOUNT SHOWN IN BANK ENTRY. THE DIFFERENCE OF RS. 270/- SHOWS THAT IT IS MADE UP BILL. IT MAY ALSO BE MENTIONED THAT AMOUNT OF RS. 100/- IS INCLUDED IN THE BILL AS 41 FREIGHT WHILE NO SUCH AMOUNT IN RESPECT OF FREIGHT IS FOUND MENTIONED IN ANY OTHER BILL. RAJESHKUMAR OMPRAKASH NAI ANAJ MANDI . INDORE ( PAGE NO.10 OF PAPER BOOK ) : THE BILL NO.1379 DATED 14.12.2002 DO NOT SUGGEST ANY RELATION OF THIS BILL OR EXPLAIN THE TRANSACTION AS PARTICULARS OF ENTRY MADE IN THE LP-1 AND THOSE IN THE BILL DO NOT TALLY. M/S. SURESH KUMAR MOOLCHAND GWALIOR (PAGE NO.12 OF PAPER BOOK ) : IN THE BILL NO.1121 DATED 16.11.02 THE RATE CHARGED IS RS. 13.11 PER BAG AND FREIGHT IS ALSO CHARGED AT RS. 160/- WHICH SHOWS THAT THIS IS MADE UP BILL AND RATE APPLIED AND FREIGHT SHOWN IS SO ADJUSTED SO AS TO MATCH IT WITH BANK ENTRY. M/S. H.H. KHARODAWALA DAOUD ( PAGE NO.13 OF THE PAPER BOOK ) : THERE IS A DIFFERENCE OF RS. 733/- BETWEEN THE BILL AMOUNT AND AMOUNT OF BANK ENTRY. THE DIFFERENCE IS SHOWN IN THE LEDGER ACCOUNT AS RATE DIFFERENCE. THE BOOKING WAS FOR 10 BUNGLES ( 500 BAGS) WHILE THE BILL SHOWS 40 BUNDLES (2000 BAGS). THIS DISCREPANCY SHOWS THAT IT IS A MADE UP BILL. NARAIN BROTHERS AKOLA ( PAGE NO.22 OF THE PAPER BOOK ) : THERE IS A DIFFERENCE OF RS. 1050/- BETWEEN BILL AMOUNT AND BANK ENTRY. THE DIFFERENCE IS EXPLAINED AS RATE DIFFERENCE. IN THE LEDGER ACCOUNT PREPARED WHICH SHOWS THAT THIS IS A MADE UP BILL. R.L. INDUSTRIES ITARSI ( PAGE N.25 OF THE PAPER BOOK ): 42 THERE IS A VARIATION OF RS. 47 575/- BETWEEN THE BILL AMOUNT AND BANK ENTRY. THE DIFFERENCE IS EXPLAINED AS HAVING BEEN SETTLED BY PURCHASE OF OLD BARDANA FROM SAID PARTY. IN THIS BILL HAMMALI IS ALSO CHARGED AT RS. 50/- IN THE BILL. FROM THE ABOVE EXPLAINED POSITION IT IS NOT POSSIBLE TO DRAW ANY INFERENCE WITH REGARD TO ANY CORRELATION AND NEXUS OF THESE MADE UP BILLS WITH THE BANK ACCOUNT ENTRIES AS SOUGHT TO BE ESTABLISHED BY THE ASSESSEE. ALL THE TRANSACTIONS ARE STATED TO BE RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AFTER THE DATE OF SEARCH AND THESE BILLS BEAR THE DATES OF NOVEMBER 2002 BUT THE SAME WERE NOT PRODUCED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS WHICH WERE COMPLETED IN NOVEMBER 2004 EVEN THOUGH THESE DOCUMENTS IF GENUINE AND BOOKS SHOULD HAVE BEEN READILY AVAILABLE WITH THE ASSESSEE AT THAT POINT OF TIME. MENTION OF TRUCK NUMBER IN THE SEIZED DOCUMENTS IS A CLEAR POINTER TO THE FACT THE DETAILS ON THE LP-1 ARE ACTUAL DELIVERIES NOT ENTERED AT THAT POINT OF TIME AND NOT ORDERS BOOKED AS CLAIMED BY THE ASSESSEE. IN VIEW OF THE ABOVE STATED POSITION THE VIEW TAKEN BY THE ASSESSING OFFICER TREATING THESE TRANSACTIONS AS UNRECORDED SALES IS TOTALLY JUSTIFIED. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFRONTED THE SECOND REPORT OF THE ASSESSING OFFIC ER AND THE COPY OF THE SAME WAS GIVEN TO THE ASSESSEE FOR HIS COMMENTS. VIDE HIS LETTER FILED ON 27.04.2004 THE A SSESSEE HAS CONTESTED THE FINDING OF THE AO AS UNDER : 43 1. THE AO HAS MADE VERY GENERAL OBSERVATION POINTING OUT SOME MINOR DISCREPANCIES SUCH AS THE LETTERS ARE UNNUMBERED AND UNDATED AND THE SUBMISSIONS MADE ARE SELF SERVING IN NATURE. FOR TH E SAKE OF CLARITY KIND ATTENTION IS INVITED TO PAGE 3 & 4 OF THE PAPER BOOKS (SEIZED PAPER) WHICH CONTAIN S NOTING OF THE VARIOUS ORDERS RECEIVED ON PHONE / THROUGH BROKER AND DESPATCH DETAILS AS REQUESTED BY THE PERSON BOOKING THE BORDER. ON PAGE 5 A STATEMENT GIVING THE DETAILS OF BILL RAISED AND THE AMOUNT OF SALES IN R ESPECT OF THESE TRANSACTIONS WHICH STANDS RECORDED IN THE BOOKS OF ASSESSEE HAS BEEN GIVEN. 2. IN THE EARLIER REMAND REPORT DATED 28.11.2005 T HE AO AGAIN MADE NO EFFORTS TO VERIFY THE TRANSACTION FROM THE SEIZED BOOKS OF A/C. AND GAVE GENERAL OBSERVATIONS. DURING THE COURSE OF HEARING IN THE PRESENCE OF THE A 0 IT WAS SUBMITTED THAT THE TRANSACTIONS RELATES TO AT LEAST 6 PARTIES WHO ARE BASED IN INDORE AND CROSS VERIFICATION CAN BE DONE THROUG H THE DEPARTMENTAL AUTHORITY. UNFORTUNATELY IT APPEA RS THAT NO SUCH EFFORT HAS BEEN MADE. 3 . SO FAR AS THE TRANSACTIONS WHICH HAVE BEEN CANCELLED IT IS APPARENT THAT THE A 0 HAS BRUSHED ASIDE THE SUBMISSIONS THAT THE LETTERS ARE UNNUMBER ED AND UNDATED. THE MENTION OF TRUCK NUMBER IN SEIZED DOCUMENTS IS ON THE INSTRUCTIONS OF THE PARTY THAT THE GOODS ARE TO BE SENT BY THAT TRUCK. THERE IS NO EFF ORTS MADE BY THE DEPARTMENT FOR CROSS CHECKING AND NO EFFORTS HAS BEEN MADE THAT ANY SALES WERE EFFECTED IN RESPECT OF THESE TRANSACTIONS. 4. SO FAR AS THE TRANSACTIONS WHICH HAVE BEEN COMPLETED AND RECORDED IN THE BOOKS OF ACCOUNT AS PER THE STATEMENT IN PAPER BOOKS AT PAGE 5 THE OBSERVATIONS OF THE AO ARE VAGUE AND GENERAL. THERE ARE DIFFERENT TYPES OF BARDANA HAVING DIFFERENT SIZ ES QUALITY ETC. AND THE RATES WILL ALWAYS DIFFER. THER E MAY BE INSTANCES WHERE THE FULL QUANTITY MAY NOT BE SUPPLIED AND HENCE THERE IS BOUND TO BE A DIFFERENC E. THE LD. AO HAS MULTIPLIED THE ORDERED QUANTITY BY RATE AND CAME TO THE CONCLUSION THAT TOTAL UNRECORD ED TRANSACTION OF 12.10. 2E02 AMOUNTING TO RS.24 67 968/- WHERE AS THE ACTUAL SALES BASED ON 44 THESE ORDERS WERE FOR RS. 7 77 696/- WHICH WERE RECORDED IN THE BOOKS OF ACCOUNT. THE A 0 HAS MADE THE VERIFICATION OF THE FACTS FROM THE BANK STATEME NTS. 5. KIND ATTENTION IS FURTHER INVITED TO THE REPORT OF THE AO IN RESPECT OF VARIOUS BILLS. IN SOME CASE TH E AO OBSERVES THAT THERE IS A DIFFERENCE IN NAME SUCH AS IN ORDER NOTED THE NAME OF BHARAT PASHU AAHAR AND THE BILL HAS BEEN PREPARED IN THE NAME OF BHARAT AGRO PRODUCTS. THIS IS A PARTY FROM INDORE AND VERIFICAT ION FROM THE BUYER COULD HAVE BEEN DONE. 7 . IF ALL THESE OBSERVATIONS OF THE LD. A 0 ARE TAKEN INTO CONSIDERATION IT WILL BE OBSERVED THAT IT IS ADMITT ED THAT THESE TRANSACTIONS ARE RECORDED IN THE BOOKS OF A/C . AND VERIFIED FROM THE BANK STATEMENT. SMALL DIFFERENCES IN AMOUNT OR RECEIVING THE PAYMENTS IN TWO PARTS OR ALLOWING A DISCOUNT IN A CASH DO NOT RENDE R THE TRANSACTIONS AS UNRECORDED. TO SUM UP IT IS PRAYED THAT IF ALL THE MATERIAL AR E CONSIDER IN AN OBJECTIVE MANNER AND KEEPING IN MIND THE PRACTICAL ASPECTS OF BUSINESS SUCH MINOR DIFFERENCES ARE COMMON AND BOUND TO HAPPEN. THE ADDITION OF RS.24 67 968/- IS WITHOUT ANY BASIS AND DESERVES TO BE DELETED. 8. THEREAFTER CONSIDERING THE ORDER OF THE ASSESSING OFFICER TWO REMAND REPORTS OF THE ASSESS ING OFFICER AND THE ASSESSEES COMMENTS THEREON THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) PROCEEDED TO D ECIDE THE ISSUE AS UNDER. 9. THE COMMON GRIEVANCE OF THE REVENUE IN ALL THE YEARS RELATES TO ADMITTING OF FRESH EVIDENCE BROUGH T BY THE ASSESSEE AT THE APPELLATE STAGE WHEREAS BEFORE THE 45 ASSESSING OFFICER THE ASSESSEE HAS FAILED TO RESPON D AND POWER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) IN CALLING THE REMAND REPORT FROM THE ASSESSING OFF ICER WITHOUT ALLOWING ADEQUATE OPPORTUNITY TO MAKE INQUI RY IN THIS REGARD. THE REVENUE IS ALSO AGGRIEVED FOR DEL ETING THE ADDITION ON THE BASIS OF REMAND REPORT WHICH IS FOU ND INADEQUATE AND LACK OF INQUIRY CONDUCTED BY THE ASS ESSING OFFICER. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR NOT MAKING HIMSELF NECESSARY INQU IRY WAS ALSO ALLEGED SINCE THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) HAS POWER TO DO SO U/S 250(4) OF THE ACT. IN THIS RESPECT A DETAILED ARGUMENT WAS PUT BY THE LEARNED CIT DR AND IT WAS CONTENDED THAT POWERS CONFERRED ON AAC U /S 250(4) BEING A QUASI JUDICIAL POWER IT IS INCUMBEN T ON HIM TO EXERCISE THE SAME IF THE FACTS AND CIRCUMSTANCES JUSTIFY. IF THE AAC FAILS TO EXERCISE HIS DISCRETION JUDICIO USLY AND ARBITRARILY REFUSES TO MAKE INQUIRIES IN A CASE WHE RE THE FACTS AND CIRCUMSTANCES SO DEMAND HIS ACTION WOULD BE OPEN FOR CORRECTION BY THE HIGHER AUTHORITIES. FOR THIS PURPOSE RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF SMT. PRABHAVATI S. SHAH; 231 ITR 1 KESHAV MILLS LI MITED; 46 56 ITR 365. HE SUBMITTED THAT THE POWERS OF THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE CO-TERMINU S WITH THE ASSESSING OFFICER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES. A COMMON ISSUE HAS BEEN RAISED BY THE REVE NUE IN ALL THESE YEARS IN THE CASES OF ALL THE ASSESSEES T O THE EFFECT THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) WAS NOT JUSTIFIED IN ADMITTING EVIDENCE DURING THE COUR SE OF APPELLATE PROCEEDINGS AND THEREBY SENDING THE SAME TO THE ASSESSING OFFICER FOR REMAND REPORT AND AFTER CONSI DERING THE SAME DECIDING THE ISSUE AT HIS OWN. AS PER OUR CONSIDERED VIEW WHEN THE ASSESSEE DOES NOT GET PRO PER OPPORTUNITY BEFORE THE ASSESSING OFFICER THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) CAN ALLOW THE ASSESSEE TO FURNISH THE EVIDENCE WHICH HE COULD NOT PRODUCE BEFORE THE ASSESSING OFFICER BECAUSE OF LAC K OF OPPORTUNITY. HOWEVER AFTER ACCEPTING THE SAME TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS UND ER OBLIGATION TO SEND ALL THESE DOCUMENTS TO THE ASSES SING OFFICER FOR HIS ENQUIRY AND COMMENTS THEREON. UNDER RULE 46A ONLY AFTER GIVING OPPORTUNITY TO THE ASSESSING OFFICER 47 AND ASKING FOR HIS COMMENTS THEREON THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CAN CONSIDER T HE ADDITIONAL EVIDENCE FILED BEFORE HIM WHILE DECIDING THE ISSUE UNDER APPEAL. IF THE ASSESSING OFFICER IN SP ITE OF THESE DOCUMENTS BEING MADE AVAILABLE TO HIM DOES NO T MAKE ANY INQUIRY THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) IS COMPETENT ENOUGH TO CONSIDER THESE EVI DENCES AT HIS END AND TO DECIDE THE ISSUE ON MERIT. MEREL Y BY SAYING THAT ASSESSING OFFICER HAS NOT MADE ANY INQU IRY OR HAS NOT COMMENTED THEREON THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CANNOT BE ABSOLVED FROM HIS DU TY FROM COMMENTING ON SUCH EVIDENCE AND TAKING DECISIO N THEREON. AS THE POWER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR RESTORING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER HAS ALREADY BEEN TAKE N AWAY BY THE STATUTES AND NOW THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IS TO DECIDE THE ISSUE AT HIS OWN END HE IS COMPETENT ENOUGH TO EXAMINE THE ADDITIONAL EVIDENCE AND DECIDE THE ISSUE AT HIS OWN NOTWITHSTANDING THE FAC T THAT ASSESSING OFFICER HAS NOT COMMENTED ON THE DOCUMENT S SENT TO HIM FOR HIS REMAND REPORT. AFTER CONSIDERI NG THE 48 DOCUMENTS SO FILED THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) CAN DECIDE THE ISSUE ON MERIT. IN TH E INSTANT CASE BEFORE US FIRST QUESTIONNAIRE WAS SENT TO THE ASSESSEE ON 24.10.2004 AND THE DATE OF COMPLIANCE WAS 6.11.2 004. THE ASSESSMENT ORDER WAS PASSED ON 30.11.2004. THU S IT IS CLEAR THAT THE ASSESSEE HAS NOT BEEN PROVIDED PR OPER AND ADEQUATE OPPORTUNITY TO FURNISH DETAILED INFORMATIO N AND EVIDENCES AS DESIRED BY THE ASSESSING OFFICER. THE ASSESSEE COULD NOT HAVE BEEN EXPECTED TO COMPLY WITH SUCH A LARGE NUMBER OF QUERIES IN A BLOCK ASSESSMENT AFTER VERIF ICATION FROM VOLUMINOUS SEIZED RECORDS IN SUCH A SHORT PERI OD ALLOWED TO HIM. UNDER THESE CIRCUMSTANCES UNDER C LAUSES (B) TO (D) OF RULE 46A(1) THE ASSESSING OFFICER SHO ULD NOT HAVE DENIED THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)S ACTION IN ACCEPTING THE ADDITIONAL EVID ENCE WHICH WERE SENT TO HIM FOR REMAND REPORT. AS THE AS SESSING OFFICER HAS NOT GIVEN COMPREHENSIVE REPORT AFTER EX AMINING THE DOCUMENTS AND INFORMATION SO SENT BY THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) FOR HIS COMMEN TS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AF TER CALLING FOR COUNTER REPLY OF THE ASSESSEE ON THE RE MAND 49 REPORT OF THE ASSESSING OFFICER FORMED HIS OWN OPI NION AND DECIDED THE ISSUE AT HIS END RATHER THAN RESTORING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WH ICH IS NOT PERMISSIBLE UNDER LAW. AS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DECIDED THE ISSUE ONLY AFT ER GIVING PROPER OPPORTUNITY TO THE ASSESSING OFFICER AND CONSIDERING THE DOCUMENTS AT HIS OWN END WE DO NOT FIND ANY VIOLATION OF RULE 46A BY THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS). ACCORDINGLY THE GROUND TAK EN BY THE REVENUE IN THIS REGARD IN ALL THE APPEALS ARE H EREBY DISMISSED. 11. WITH RESPECT TO ADDITION ON ACCOUNT OF URECORD ED SALES ON 12.11.2002 AMOUNTING TO RS. 24 67 968/- TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERV ED THAT DURING THE ASSESSMENT PROCEEDING THE AO NOTIC ED THAT AS PER SEIZED DOCUMENT PAGES 2 & 3 OF LPS-1 FOUND A T 8/2 NEW ANAJ MANDI INDORE THE UNRECORDED SALES OF RS.24 67 968/- ON 12.11.2002 MADE TO VARIOUS PARTIE S WERE NOTED. AS THE ASSESSEE COULD NOT FURNISH ANY EXPLANATION THE SAME WERE TREATED AS UNDISCLOSED I NCOME AND ADDED TO THE INCOME OF THE ASSESSEE. 50 12. AFTER CONSIDERING THE ASSESSEES REPLY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE ADDITION OF RS. 18 48 967/- WHEREAS UPHELD THE ADDI TION OF RS. 6 09 100/- AFTER HAVING MADE THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. A BARE READING OF THE ASSESSMENT ORDER INDICATES THAT THE APPELLANT WAS N OT PROVIDED WITH ADEQUATE OPPORTUNITY BY THE AO DUE TO PAUCITY OF TIME AS THE ASSESSMENT WAS GETTING BARRED BY TIME. THERE FORE KEEPING IN VIEW THE PRINCIPLE OF NATURAL JUSTICE T HE SUBMISSIONS AND DOCUMENTS FILED BY THE APPELLANT WE RE SENT TO THE AO VIDE THIS OFFICE LETTER DATED 09.11.2005 WITH DIRECTION TO EXAMINIE SAME AFTER GIVING OPPORTUNIT Y TO THE APPELLANT TO EXPLAIN HIS POSITION AND THEN SEND REM AND REPORT. THE AO'S REMAND REPORT WAS RECEIVED ON 30.11.2005. SINCE THAT REPORT WAS NOT COMPREHENSIVE AND RATHER IRRELE VANTLY CHALLENGED THE CIT(A)'S AUTHORITY IN REMANDING THE ADDITIONAL EVIDENCE FILED BY THE APPELLANT AT THE STAGE OF APP ELLATE PROCEEDINGS TO THE AO UNDER RULE 46A THE MATTER WAS AGAIN REMANDED TO THE AO WHO WAS PRESENT AT THE TIME OF H EARING DURING THE APPELLATE PROCEEDINGS FOR EXAMINING THE TOTAL EVIDENCE AFTER GIVING PROPER OPPORTUNITY TO THE APP ELLANT AND MAKING NECESSARY ENQUIRIES. HE WAS EXPLAINED HOW TH E MATTER WAS COVERED U/R 46A AND THE SPECIFIC POINTS OF EXAMINATION. CONSEQUENTLY HE SENT THE REMAND REPOR T DATED 18.01.2006 AS REPRODUCED ABOVE WHICH IS TAKEN INTO CONSIDERATION. AS REGARDS THE GROUND OF APPEAL UNDE R DISCUSSION IT HAS BEEN STATED BY THE AO THAT IN RESPECT OF 6 PARTIES APPEARING AT SR. NO. 1 9 11 21 23 AND 2 6 OF PARA 1 ON PAGE 4 OF THE ASSESSMENT ORDER THE TRANSACTIONS ARE STATED TO HAVE BEEN CANCELLED LATER ON. HE CONTENDED THAT THE LETTERS VIDE WHICH CANCELLATION OF ORDERS IS STATED TO HAVE BEEN MADE APPEARED TO BE ONLY SELF SERVING IN NATURE. FURTHER THESE TRANSACTIONS MIGHT BE INSTANCES OF UNRECORDED PURCH ASES BY THE CONCERNED PARTIES FROM THE ASSESSEE AS WELL AND ALSO THERE IS LIKELIHOOD OF THEIR BEING COLLUSIVE IN NATURE. H E HAS GIVEN 51 EXAMPLE OF M/S BHASKAR OIL INDUSTRIES WHERE GOODS APPEAR TO HAVE BEEN DESPATCHED BY TRUCK. THE AO OBSERVED THAT THESE BILLS ALSO CARRY CERTAIN DISCREPANCIES AND THE SAME APPEAR TO HAVE BEEN PREPARED SO AS TO MAKE THEM MATCH WITH TH E CERTAIN BANK ENTRIES PURPORTED TO BE USED FOR EXPLAINING TH E CONTENTION OF THE ASSESSEE. THE AO HAS POINTED OUT SUCH DISCREPANCIES IN HIS REMAND REPORT AND HELD THAT AL L THE TRANSACTION ARE STATED TO BE RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AFTER THE DATE OF SEARCH AND THESE BILLS BEAR THE DATES OF NOVEMBER 2002 BUT THE SAME WERE NOT PRODUC ED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS WHICH WERE COMPLETED IN NOVEMBER 2004 E VEN THOUGH THESE DOCUMENTS IF GENUINE AND BOOKS SHOUL D HAVE BEEN READILY AVAILABLE WITH THE ASSESSEE AT THAT PO INT OF TIME. IN HIS COUNTER COMMENTS ON THE REMAND REPORT THE LD. A.R. SUBMITTED THAT THE AO HAS MADE VERY GENERAL OBSERVATIONS POINTING OUT SOME MINOR DISCREPANCIES SUCH AS THAT THE LETTERS ARE UNNUMBERED AND UNDATED AND THE SUBMISSIONS MADE ARE SELF SERVING IN NATURE. HE PRO DUCED THE COPY OF THE TRANSACTIONS RECORDED IN THE REGULAR BO OKS OF ACCOUNT OF M/S. AGRAWAL JUTE BAG INDUSTRIES AS PER PAPER BOOK PAGE 5 TO PROVE THAT THE ORDERS RECEIVED AS PE R PAGES 3 & 4 OF THE PAPER BOOKS I.E. SEIZED PAPERS WERE DULY RECORDED. HE CONTENDED THAT LIKE IN THE EARLIER REMAND REPORT THIS TIME ALSO THE AO MADE NO EFFORTS TO VERIFY THE TRANSACT ION FROM THE SEIZED BOOKS OF A/C AND INSTEAD GAVE GENERAL OB SERVATIONS. AS REGARDS DIFFERENCE IN THE COST OF BARDANA IT IS BOUND TO BE THERE AS THE COST DEPENDED ON THE QUALITY AND RATE OR VARIOUS TYPES OF BARDANA. THE AO WRONGLY MULTIPLIED THE ORD ERED QUANTITY BY RATE AND CAME TO THE CONCLUSION THAT TO TAL UNRECORDED TRANSACTION OF 12.10.2002 AMOUNTED TO RS .24 67 968/- WHEREAS THE ACTUAL SALES BASED ON THESE ORDE RS WERE FOR RS.7 77 696/- WHICH WERE RECEDED IN THE BOOKS OF AC COUNT. THE AO HIMSELF MADE THE VERIFICATION OF THESE FACTS FROM THE BANK STATEMENTS. AS REGARDS THE DIFFERENCE IN THE N AME MENTIONED IN TH E ORDER AS BHARAT PASHU AAHAR AND THE ACTUAL BILL PREPARED IN THE NAME OF BHARAT AGRO PRODUCT THIS PARTY BELONGED TO INDORE AND VERIFICATION FROM THE BUYER COULD HAVE BEEN MADE BY THE AO. AFTER GOING INTO THE LETT ERS OF CANCELLATION PRODUCED BY THE APPELLANT AS OBTAINED FROM VARIOUS PARTIES IT IS SEEN THAT ALL THESE LETTERS HAVE BEEN ISSUED AFTER THE DATE OF SEARCH. AFTER CAREFUL CONSIDERATION OF ALL THE 52 FACTS THE AO'S REPORTS AND THE APPELLANT'S COUNTER COMMENTS IT IS FOUND THAT THE LETTERS OF CANCELLATION AS PRO DUCED BY THE APPELLANT CANNOT BE CONSIDERED TO BE RELIABLE AS TH ESE WERE PROCURED AFTER THE DATE OF SEARCH AND ARE SELF SERV ING DOCUMENTS PREPARED AS AN AFTERTHOUGHT. THEREFORE T HE TRANSACTIONS AT SR. NO.1 9 11 21 23 AND 26 OF T HE PARTIES GIVEN IN PARA 1 OF PAGE 4 OF THE ASSESSMENT ORDER A RE HELD TO BE UNACCOUNTED FOR AND THE ADDITION OF RS.6 09001/- ON ACCOUNT OF THESE PARTIES IS UPHELD. AS REGARDS OTHER PARTIES THE AO HAS NOT BEEN ABLE TO ESTABLISH WITH CONVICTION THAT THESE WERE NOT ACCOU NTED FOR IN THE BOOKS OF ACCOUNT. HE HAS TRIED TO REBUT THE CON TENTION OF THE APPELLANT ON THE BASIS OF RATE AND QUALITY OF G OODS WHICH IS NOT SUPPORTED BY MATERIAL ON RECORD. THE APPELLA NT ACTUALLY WORKED OUT THE TOTAL OF SUCH TRANSACTIONS AT RS. 7 77 696/- ON THE BASIS OF QUALITY AND RATES AS AG AINST RS.18 48 967/- (24 67 968/- MINUS 6 09 001/-). IT IS ALSO A FACT T HAT THE BOOKS OF ACCOUNT AS FED INTO THE COMPUTER BY THE APPELLAN T WERE CORRUPTED BECAUSE OF MISHANDLING BY THE DEPARTMENT AND THE HARD COPIES PRODUCED BY THE APPELLANT ON THE BASIS OF CD EARLIER SUPPLIED BY THE DEPARTMENT TO HIM WERE NOT BELIEVED BY THE AO. UNDER THE CIRCUMSTANCES THE ADDITION TO THE EXTENT OF RS.18 48 967/- IS DELETED. 13. AGAINST THE ABOVE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BOTH THE ASSE SSEE AND THE REVENUE ARE IN APPEAL BEFORE US. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND FIND THAT DURING THE COURSE OF SEARCH SEIZED DO CUMENTS PAGES 2 AND 3 OF LPS-1 INDICATED UNRECORDED SALES O F RS. 24 67 968/- MADE TO VARIOUS PARTIES. BEFORE THE AS SESSING OFFICER THE ASSESSEE COULD NOT EXPLAIN THE SAME BEC AUSE 53 THE TIME PROVIDED TO THE ASSESSEE WAS VERY SHORT. A S DISCUSSED ABOVE WE FOUND THAT FIRST QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE ON 24.10.2004 WHEREIN HE WAS ASKED TO COMPLY WITH THE SAME ON 6.11.2004. THE OR DER WAS PASSED BY THE ASSESSING OFFICER ON 30 TH NOVEMBER 2004. THUS IT IS CLEAR THAT THE ASSESSEE WAS NOT GIVEN DUE OPPORTUNITY BY THE ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THEREFORE ALLO WED THE ASSESSEE TO FILE DETAILED EXPLANATION ALONG WIT H DOCUMENTARY EVIDENCE WHICH WAS SENT BY HIM TO THE ASSESSING OFFICER FOR HIS INQUIRY AND COMMENTS THER EON. THE ASSESSING OFFICER SENT HIS REMAND REPORT WHEREI N HE FIRSTLY ALLEGED THE CIT (A)S POWERS FOR ACCEPTING THE EVIDENCE BUT DID NOT MAKE ANY FRUITFUL COMMENTS ON THE DOCUMENTS SENT BY THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS). THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AGAIN CALLED FOR THE REMAND REPORT WITH T HE DIRECTION TO THE ASSESSING OFFICER TO MAKE INQUIRY AND STATE HIS OBSERVATION WITH REGARD TO THE ALLEGED TRANSACT ION OF UNRECORDED SALE. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING IN DETAIL THE DOCUMENTS FILED BY 54 THE ASSESSEE WITH REGARD TO SALES EFFECTED TO VARIO US PARTIES AND CONSIDERING THE REMAND REPORT SENT BY THE ASSES SING OFFICER REACHED TO THE CONCLUSION THAT IN RESPECT O F SIX PARTIES APPEARING AT SERIAL NOS. 1 9 11 21 23 AND 26 OF PARA 1 PAGE 4 OF THE ASSESSMENT ORDER EVEN THOUGH T HE ASSESSEE HAS FILED LETTER OF CANCELLATION OF THE OR DER AS FILED BY RESPECTIVE PARTIES BEFORE THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS BUT THE SAME WAS NOT FOUND TO BE GENUINE AND MERELY AN AFTERTHOUGHT OF THE ASSESSEE. ACCORDINGLY LETTERS OF CANCELLATION AS PRODUCED BY THE ASSESSEE WERE NOT CONSIDERED TO BE RELIABLE AS THE SAME WERE PROCURED AFTER THE DATE OF SEARCH AND WERE MER ELY SELF-SERVING DOCUMENTS PREPARED AS AN AFTERTHOUGHT. IT WAS THEREFORE HELD BY THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) THAT THE TRANSACTIONS AT SERIAL NOS. 1 9 11 23 AND 26 WERE UNACCOUNTED. ACCORDINGLY THE ADDITION OF RS.6 09 001/- WAS CONFIRMED BY THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS). WITH REGARD TO OTHER TRAN SACTIONS FOUND RECORDED ON THE SEIZED PAPERS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT INS PITE OF GIVING OPPORTUNITY TO THE ASSESSING OFFICER DURING THE 55 REMAND PROCEEDINGS THE ASSESSING OFFICER COULD NOT ESTABLISH WITH CONVICTION THAT THESE WERE NOT ACCOU NTED FOR IN THE BOOKS OF ACCOUNTS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT THE ASSE SSING OFFICER HAS TRIED TO REBUT THE CONTENTION OF THE AS SESSEE ON THE BASIS OF RATE AND QUALITY OF GOODS WHICH WAS NO T SUPPORTED BY THE MATERIAL ON RECORD. THE TOTAL OF S UCH TRANSACTION WAS WORKED OUT AT RS. 7 77 696/- ON THE BASIS OF QUALITY AND RATES AS AGAINST RS. 18 48 967/- (RS.24 67 968 (-) RS.6 09 001). IT WAS ALSO OBSERV ED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT T HE BOOKS OF ACCOUNTS AS FED INTO COMPUTED BY THE ASSES SEE WERE CORRUPTED BECAUSE OF MISHANDLING BY THE DEPART MENT AND THE HARD COPY PRODUCED BY THE ASSESSEE ON THE B ASIS OF CD EARLIER SUPPLIED BY THE DEPARTMENT TO HIM WAS NO T BELIEVED BY THE ASSESSING OFFICER. ACCORDINGLY TH E ADDITION TO THE EXTENT OF RS.18 48 967/- WAS DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). NOTHING AS T HE SALES BILLS OF THESE TRANSACTIONS HAVE BEEN ISSUED AND THEY WERE ENTERED IN THE REGULAR BOOKS OF ACCOUNTS COUL D BE BROUGHT ON RECORD EITHER BY THE REVENUE OR BY THE A SSESSEE 56 TO CONTROVERT THE FINDINGS RECORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). WE THEREFORE CONFIRM THE ACTION OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) IN DELETING THE ADDITION OF RS.18 48 967/- WHILE CONFIRMING THE ADDITION OF RS.6 09 001/- IN R ESPECT OF SALES FOUND RECORDED AT PAGES 2 AND 3 OF LPS-1. 15 IN THE RESULT THE GROUND TAKEN BOTH BY THE ASSE SSEE AND THE REVENUE ARE DISMISSED. 16. IN RESPECT OF THE ADDITION OF RS. 13 33 000/- ON ACCOUNT OF UNEXPLAINED PAYMENT TO VIMAL INDUSTRIES THE ASSESSING OFFICER FOUND THAT LOOSE PAPER AT PAGE NO S. 7 & 8 OF LPS-L CONTAINED PAYMENTS AMOUNTING TO RS. 13 33 000/- MAD TO VIMAL INDUSTRIES THROUGH VARIOUS BANK DRAFTS FOR WHICH NO EXPLANATION WAS OFFERED BY THE ASSESSEE. HE THERE MADE THE ADDITION OF THIS AMOUNT AS UNDISCLO SED INCOME OF THE ASSESSEE. 17. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS V IS- -VIS THE REMAND REPORT OF THE ASSESSING OFFICER TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- 57 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT. THE ONLY GROUND ON WHICH THE AO MADE THE ADDITION WAS THAT THE APPELLANT COULD NOT OFFER ANY EXPLANATION DURING THE ASSESSMENT PROCEEDINGS. IT H AS ALREADY BEEN HELD THAT THE APPELLANT WAS NOT PROVID ED WITH ADEQUATE OPPORTUNITY AND ACCORDINGLY REMAND REPORT FROM THE AO WAS CALLED FOR AFTER EXAMINATION OF INFORMAT ION AND DOCUMENTS FILED DURING APPELLATE PROCEEDINGS. THE A O HOWEVER HAS OFFERED NO COMMENT ON THIS ISSUE IN EI THER OF HIS REMAND REPORTS. HE SHOULD HAVE ACTUALLY MADE ENQUIRIES WITH THE CONCERNED PARTIES AND THE BANKS TO VERIFY THE FACTS. AS THE PAYMENTS WERE MADE THROUGH BANK DRAFTS IT COULD HAVE BEEN EASILY MADE OUT AS TO WH O PURCHASED THOSE DRAFTS ON BEHALF OF WHOM. AS PER TH E APPARENT FACTS THE CONTENTION OF THE APPELLANT APP EARS TO BE CORRECT AS THE PAYEE HAS GIVEN NECESSARY CERTIFI CATE TO ESTABLISH THE FACTS AS PUT FORTH BY THE APPELLANT. ACCORDINGLY THESE AMOUNTS ARE HELD TO BE GENUINE A ND EXPLAINED AND THE ADDITION IS DELETED. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND FIND THAT THE ADDITION OF RS. 13 .33 000/- WAS MADE ON THE BASIS OF NOTINGS AT PAGES 7 AND 8 OF LPS-1 WHIC H CONTAINED PAYMENTS MADE TO M/S VIMAL INDUSTRIES THR OUGH VARIOUS BANK DRAFTS. AS THE ASSESSEE COULD NOT EXP LAIN BEFORE THE ASSESSING OFFICER THE ADDITION WAS MADE BY HIM. AS DISCUSSED ABOVE THE ASSESSEE WAS NOT GIVEN DUE OPPORTUNITY. THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ACCEPTED THE EXPLANATION AND DOCUMENTS FI LED BY THE ASSESSEE AND ASKED THE ASSESSING OFFICER TO MAK E NECESSARY INQUIRY AND SEND HIS REMAND REPORT AFTER GIVING 58 DUE OPPORTUNITY TO THE ASSESSEE. THE ASSESSING OFF ICER WAS SPECIFICALLY ASKED FOR EXAMINATION OF INFORMATION A ND DOCUMENTS FILED DURING THE APPELLATE PROCEEDINGS WH ICH WERE SENT TO HIM. HOWEVER DURING EARLIER PROCEEDI NGS THE ASSESSING OFFICER HAS NOT COMMENTED NOR MADE ANY IN QUIRY WITH THE CONCERNED PARTIES AND THE BANKS TO VERIFY THE FACTS. IN THESE CIRCUMSTANCES AFTER VERIFYING THE DOCUMENTS PLACED ON RECORD THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) OBSERVED THAT THE PAYMENTS WER E MADE THROUGH BANK DRAFTS AND THE PAYEES HAVE GIVEN NECESSARY CERTIFICATES TO ESTABLISH THE FACTS AS PU T-FORTH BY THE ASSESSEE AND AS SUCH NO ADDITION WAS WARRANTED. IN VIEW OF THE DOCUMENTS PLACED ON RECORD AND THE FIND INGS RECORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN DEL ETING THE ADDITION MADE ON ACCOUNT OF PAYMENT MADE THROUG H BANK DRAFTS TO M/S VIMAL INDUSTRIES. 19. IN THE RESULT THE GROUND TAKEN BY THE REVENUE IS DISMISSED. 59 20. IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF UNRECORDED CONSIGNMENT TO SWASTIK JUTE MILLS AMOUNT ING TO RS.1 90 290/- WE FOUND THAT THE AO MADE ADDITION OF RS.1 90 290/- ON THE BASIS OF AN UNRECORDED CONSIGN MENT NOTE DATED 02.11.2002 AS PER SEIZED INCRIMINATING P APERS AT 9-11 OF LPS-1 SENT BY M/ S. SWASTIK JUTE MILLS PVT. LTD. THROUGH NEPAL BHARAT TRANSPORT. IN THE ABSENCE OF A NY EXPLANATION THE AMOUNT WAS ADDED BY THE ASSESSING OFFICER IN THE ASSESSEES INCOME. HOWEVER THE AO HAS OFFERED NO COMMENTS IN HIS REMAND REPORT ON THIS IS SUE. 21. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE SA ME AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE RELEVANT PAPER. THE PAPERS CARRY TH E DETAILS OF GOODS VALUE COMMISSION FREIGHT AND TRU CK ADVANCE. THESE PAPERS ALSO MENTION THE NAMES OF THE CONSIGNOR AND THE CONSIGNEE AND AS PER THE APPELLAN T THE NECESSARY ENTRIES REGARDING THE SAME WERE MADE IN T HE BOOKS OF ACCOUNT. AS THE AO HAS OFFERED NO COMMENTS ON THE VERACITY OF THE SAME EVEN IN HIS REMAND REPORT IT IS BELIEVED THAT THE VERSION OF THE APPELLANT IS CORRE CT. THE ADDITION MADE IS THEREFORE DELETED. 22. WE FIND THAT THE ADDITION WAS MADE ON THE BASI S OF CONSIGNMENT NOTE DATED 2.11.2002 AS MENTIONED AT 60 PAGES 9 TO 11 OF LPS-1 SENT BY M/S SWASTIK JUTE PRI VATE LIMITED THROUGH NEPAL BHARAT TRANSPORT COMPANY. AF TER CONSIDERING THE RELEVANT MATERIAL PLACED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE PAPERS SUBMITTED BY THE ASSESSEE CARRIED DETAILS OF GOODS VALUE COMMISSION FREIGHT AND TRUCK ADVANCE. THE DOCUMENTS ALSO MENTIONED THE NAMES OF THE CONSIGNOR AND THE CONSIGNEE AND ENTRIES FOR THESE WERE ALREADY MA DE IN THE REGULAR BOOKS OF ACCOUNTS. IN VIEW OF THESE FI NDINGS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DE LETED THE ADDITION OF RS. 1 90 290/-. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS). 23. IN RESPECT OF THE ADDITION ON ACCOUNT OF UNRECORDED SUPPLIES ON 15.10.2002 AMOUNTING TO RS.73 150/- WE FIND THAT ADDITION WAS BASED ON LOOS E PAPERS 1 5 & 16 OF LPS-1 AS UNRECORDED SUPPLIES ON 15.10.2002 AS NO EXPLANATION WAS OFFERED BY THE ASS ESSEE DURING THE ASSESSMENT PROCEEDING. 61 24. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. THE DOCUMENTS CONTAINS THE ORDER FOR SUP PLY BY 5 DAL MILLS LISTED ON THE BACK SIDE OF PAGE 15. THE ENTRIES HAVE BEEN MADE ON 15.10.2002 AND IT HAS ALS O BEEN SPECIFICALLY MENTIONED THAT THE DELIVERY HAD T O TAKE PLACE AFTER THE 1 ST OF THE MONTH. APPARENTLY IT IS 1 ST THE NEXT MONTH I.E. NOVEMBER 2002. IN THE CIRCUMSTANCES OF THE CASE THERE COULD BE POSSIBILITY OF CANCELLATIO N OF THE ORDERS. THE APPELLANT FURNISHED CERTIFICATES FROM T HE PARTIES TO THE EFFECT THAT BECAUSE THE APPELLANT HA D ASKED FOR AN ADVANCE OF RS.1 00 000/- THE SUPPLY O RDERS WERE CANCELLED. THE AO HAS MADE NO ATTEMPT TO VERIF Y THE FACTS FROM THOSE PARTIES. HENCE HIS ACTION CONT RARY TO THE CONTENTION OF THE APPELLANT CANNOT BE UPHELD. T HIS ADDITION OF RS. 73 150/- IS THEREFORE DELETED. 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE ADDITION OF RS. 73 150/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNRECORDED SUPPLIE S ON 15.10.2002 AT PAGES 15 AND 16 OF LPS-1. THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THESE DOCUMENTS CONTAINED ORDERS FOR SUPPLY TO THE PARTIE S LISTED AT BACK SIDE OF PAGE 15. THE ENTRIES HAVE BEEN MADE ON 15.10.2002. THE ASSESSEE HAS ALSO FURNISHED A LETT ER TO THE EFFECT THAT BECAUSE OF NON-PAYMENT OF ADVANCE THE SUPPLY 62 ORDER WAS CANCELLED. THE LETTER SO FURNISHED FOR CA NCELLATION OF ORDER IS AFTERTHOUGHT AND THE SAME IS NOT SUPPOR TED BY PROPER CONFIRMATION OF OTHER PARTY. WE THEREFORE DIRECT THE ASSESSING OFFICER TO MAKE ADDITION BY COMPUTING 2.5% GROSS PROFIT ON THE SALES OF RS. 73 150/-. WE DIRE CT ACCORDINGLY. WE HAVE DISCUSSED THE REASONS FOR ADOP TING GROSS PROFIT RATE OF 2.5% HEREINAFTER. 26. IN THE RESULT THIS GROUND OF THE REVENUES AP PEAL IS ALLOWED IN PART. 27. IN RESPECT OF THE ADDITION ON ACCOUNT OF UNRECORDED SALES OF 19 BUNDLES AMOUNTING TO RS.2 66 100/- WE FIND THAT INCRIMINATING PAPER AT P AGE 16 OF LPS- 1 CONTAINED A MEMO FOR SALE OF 19 BUNDLES OF GOODS AMOUNTING TO RS.2 66 100/-. IN THE ABSENCE OF EXPLANATION THE AO TREATED THE SAME AS UNRECORDED SALES AND MAD E THE ADDITION AS UNDISCLOSED INCOME. IN THE REMAND REPORT HE STATED THAT THE ENTRIES OF THESE SUPPLIES WERE NOT RECORDED IN THE SEIZED BOOKS OF ACCOUNT AS PER COMPUTER MEDIA. 28. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION AFTER OBSERVING AS UNDER :- 63 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. ALTHOUGH THE APPELLANT HAS DENIED HAVING SUPPLIED ANY GOODS TO THOSE PARTIES UNLIKE THE FAC TS OF THE PRECEDING GROUND HE HAS MADE NO ENTRY REGARDIN G THE TIME BY WHICH THE GOODS WERE TO BE SUPPLIED. NO R ANY MENTION OF CANCELLATION OF ORDERS HAS BEEN MADE . THE CERTIFICATES OBTAINED DURING THE APPELLATE PROCEEDINGS APPEAR TO BE AN AFTERTHOUGHT. FROM THE PAPER IT APPEARS THAT THE SUPPLIES HAD BEEN ACTUAL LY MADE. UNDER THE CIRCUMSTANCES THE ADDITION MADE IS CONFIRMED. 29. THE ADDITION OF RS. 2 66 100/- WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF PAGE 16 OF LPS-1 WHICH CONTAINED MEMO OF SALES OF 19 BUNDLES OF GOODS AMOU NTING TO RS. 2 66 100/-. IN THE REMAND REPORT THE ASSES SING OFFICER OBSERVED THAT THE ENTRIES OF THESE SUPPLIES WERE NOT RECORDED IN THE SEIZED BOOKS OF ACCOUNTS AS PER COM PUTER MEDIA. THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS CONFIRMED THE ADDITION BY OBSERVING THAT THE SU PPLIES HAVE ACTUALLY BEEN MADE BY THE ASSESSEE AND SINCE T HE SAME HAS NOT BEEN RECORDED IN THE REGULAR BOOKS OF ACCOUNTS THE ADDITION WAS CORRECTLY MADE BY THE AS SESSING OFFICER. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 30. IN THE RESULT GROUND TAKEN BY THE ASSESSEE IS DISMISSED. 64 31. IN RESPECT OF THE ADDITION ON ACCOUNT OF UNEXPLAINED PAYMENT MADE TO VARIOUS PARTIES AMOUNTI NG TO RS. 2 20 024/- THE ASSESSING OFFICER OBSERVED TH AT THE ADDITION WAS MADE ON THE BASIS OF SEIZED INCRIMINAT ING PAPERS AT PAGES 58 AND 59 WHICH INDICATED PAYMENT O F RS. 2 20 024/- TO VARIOUS PARTIES AS THE ASSESSEE DID NOT FURNISH ANY EXPLANATION THE AO TREATED THE SAME UNDISCLOSED INCOME OF THE ASSESSEE. 32. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION OF RS. 1 99 741/- AND DELETED THE ADDITION OF RS.20 310/- AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. AS THE SALES WORTH RS.20 310/- HAVE BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND THE AO HAS OFFERED NO COMMENT IN HIS REMAND REPORT THE ADDITION TO THIS EXTENT IS DELETED. HOWEVER REGARDING THE SALES OF RS.1 99 714/- STILL NO EXPLANATION HAS BEEN OFFERE D BY THE APPELLANT. HIS CONTENTION THAT LOOSE PAPERS HAS NO EVIDENTIARY VALUE CANNOT BE ACCEPTED IN VIEW OF THE FACT THAT WHEN ALL OTHER PAPERS IN LPS-1 HAVE BEEN FOUND TO BE RELATING TO THE APPELLANT NO EXCEPTION COULD BE MADE IN RESPECT OF A SINGLE PAPER. AS THE PAPER HAS BEEN FOUND AT THE PREMISES OF THE APPELLA NT IT HAS TO BE BELIEVED TO BE BELONGING TO THE APPELL ANT UNTIL IT IS PROVED TO THE CONTRARY. THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT ARE DISTINGUISHABLE ON FACTS. AS THE APPELLANT HAS NOT BEEN ABLE TO GIVE ANY CONVINCING EXPLANATION REGARDING 65 THESE FIGURES IT IS HELD THAT THE SAME BELONGED TO HIM. ACCORDINGLY TREATING THE SAME AS UNEXPLAINED THE ADDITION MADE TO THE EXTENT OF RS. 1 99 714/- AS UNDISCLOSED INCOME OF THE APPELLANT IS CONFIRMED. IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSE E THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S NOT FULLY APPRECIATED THE FACTS THAT ON LOOSE PAPER 59 SOME FIGURES HAVE BEEN NOTED AGAINST THE NAME OF SOME PE RSONS AMOUNTING TO RS. 1 99 714/-. IT IS AN UNDATED PAPER WHICH DOES NOT SPEAK OF ANY THING AND WITH THE LAPSE OF T IME THE ASSESSEE IS NOT IN A POSITION TO EXPLAIIN IT. IT H AS NO EVIDENTIARY VALUE AND THE ADDITION DESERVES TO BE D ELERTED IN VIEW OF THE DECISION OF THE DELHI ITAT REPORTED IN 87 ITJ PAGE 151. 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE ADDITION OF RS. 2 20 024/- WAS MADE B Y THE ASSESSING OFFICER ON THE BASIS OF PAGES 58 AND 59 CONTAINING PAYMENTS MADE TO VARIOUS PARTIES. THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE SALES WORTH RS. 20 310/- HAVE BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND THE ASSESSING OFFICER HAS NOT OFFERED ANY COMMENT IN HIS REMAND REPORT AND AS SUCH NO ADD ITION 66 IS WARRANTED TO THE EXTENT OF RS. 20 130/-. IN RES PECT OF THE REMAINING SALES OF RS. 1 99 714/- NO EXPLANATIO N WAS FURNISHED BY THE ASSESSEE THEREFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT PAGE 59 IS A DUMB DO CUMENT HAS NO MERIT INSOFAR AS ALL THE PAGES IN LPS-1 WERE BELONGING TO THE ASSESSEE THEREFORE ONUS WAS ON T HE ASSESSEE TO PROVE THE CONTENTS OF THIS PAGE WHICH H E FAILED EVEN BEFORE US. WE THEREFORE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR TREATING THE SAME AS SALES OUT OF BO OKS. HOWEVER WE MODIFY THE ORDERS OF BOTH THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO RES TRICT THE ADDITION BY TAKING GROSS PROFIT @ 2.5% ON SUCH SALE S. THE ENTIRE AMOUNT OF SALES CANNOT BE INCOME OF THE ASSE SSEE. WE DIRECT ACCORDINGLY. IN THE RESULT THE GROUND TA KEN BY THE ASSESSEE IS ALLOWED IN PART. 34. IN RESPECT OF THE ADDITION ON ACCOUNT OF UNEXPLAINED SALE OF 2694 BAGS AMOUNTING TO RS. 53 8 80/- THE AO FOUND THAT INCRIMINATING PAPER AT PAGE 60 SH OWED 67 SALES OF 2694 BAGS THE VALUE OF WHICH WHEN ESTIMAT ED AT THE RATE OF RS.20/- PER BAG AND WORK OUT TO BE RS.53 880/-. AS NO EXPLANATION WAS FILED HE TREATED THE SAME UNEXPLAINED SALES AND MADE THE ADDITION OF THAT AMO UNT TO THE INCOME OF THE ASSESSEE. 35. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION TO THE EXTENT OF RS. 32 328/- WHEREAS DELE TED THE ADDITION OF RS. 21 552/- AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT BUT DO NOT FIND MERIT IN THE SAME. ALTHOUGH THE PAP ER IS WRITTEN IN GUJARATI PROBABLY BY ANY GUJARATI ACCOUNTANT OF THE APPELLANT THE SAME MENTIONS ABOU T THE TRANSACTION OF BARDANA OR JUTE BAGS WHICH IS STOCK- IN-TRADE OF THE BUSINESS OF THE APPELLANT. AS HELD IN THE PRECEDING GROUND OF APPEAL THE ONUS IS ON THE APPELLANT TO PROVE TO THE CONTRARY IF HE CLAIMS THA T THE LOOSE PAPER DOES NOT BELONG TO HIM. HOWEVER THE RA TE APPLIED AT RS.20 PER BAG APPEARS TO BE A LITTLE ON THE HIGHER SIDE. IT WILL MEET THE ENDS OF JUSTICE IF TH E SAME IS RESTRICTED TO RS.12/- PER BAG. THUS THE ADDITION TO THE EXTENT OF RS.32 328/- IS CONFIRMED. THE APPELLANT GETS A RELIEF OF RS.21 552/-. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ABO VE ADDITION AND IT WAS SUBMITTED BY THE LD. COUNSEL FO R THE ASSESSEE THAT THE ADDITION MADE IS BASED ON LOOSE P APERS 68 FOUND DURING THE SEARCH A COPY OF WHICH IS AVAILABL E AT PAGE 58 OF THE PAPER BOOK. BASED ON THIS THE A.O. MADE AN ADDITION OF RS. 53 880/- ASPER PARA 8 OF THE ASSESS MENT ORDER BY MULTIPLYING THE FIGURE OF 2694 BAGS BY EST IMATED PRICE OF RS. 20/- PER BAG. THE THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) HAS DISCUSSED THE MATTER IN PARA 5.8 AT PAGE 23. IT IS RESPECTFULLY SUBMITTED THAT PERUSAL OF THE LOOSE PAPERS AT PAGE 58 DOES NOT SHOW WHETHER T HE ASSESSEE PURCHASED THE QUANTITY OF BARDANA MENTIONE D OR SOLD IT. IT IS IN THE NAME OF MAHESH KUMAR NIRANJA N BHAI IN GUJRATI AND IS A DUMB DOCUMENT. AS SUBMITTED EA RLIER ADDITION IN SEARCH CAASE CANNOT BE MADE ON THE BASI S OF SUCH DOCUMENTS AND THE SAME DESERVES TO BE DELETED. 36. WITH REGARD TO THE ADDITION OF RS. 53 880/- WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT THE ADDITION WAS MADE ON THE BASIS OF PAGE 60 WHICH SHOWED SALES OF 2694 BAGS. THE ASSESSING OFFICER HAS ESTIMATED THE VALUE OF IT BY APPLYING R ATE OF RS. 20/- PER BAG. ACCORDINGLY AN ADDITION OF RS . 53 880/ WAS MADE. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOUND 69 THAT THE ADDITION WAS CORRECTLY MADE BY THE ASSESSI NG OFFICER BUT THE RATE APPLIED BY THE ASSESSING OFFIC ER AT RS. 20/- PER BAG WAS ON THE HIGHER SIDE. HE THEREFORE DIRECTED THE ASSESSING OFFICER TO RESTRI CT THE ADDITION BY APPLYING THE RATE OF RS. 12/- PER BAG. IN THE RESULT THE ADDITION OF RS. 32 328/- WAS CONFIRMED AND THE RELIEF OF RS. 21 552/- WAS GRANTE D. NOTHING WAS BROUGHT TO OUR NOTICE TO PERSUADE US TO DEVIATE FROM THE FINDINGS RECORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY WE CONFIRM THE ACTION OF THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) IN RETAINING ADDITION OF RS. 32 328/-. ACCORDINGLY THE GROUND TAKEN BY THE ASSESSEE IS DISMISSED. 37. AN ADDITION OF RS. 2 43 675/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THREE BANK DRAFTS A FTER OBSERVING THAT INCRIMINATING PAPER AT PAGE 18 OF L PS-2 CONTAINED DETAILS OF BANK DRAFTS VALUING RS.2 43 675/-. WHEN CALLED UPON BY THE AO TO EXPLAIN THE SOURCE FO R THE PREPARATION OF THESE DRAFTS THE ASSESSEE COULD NOT FILE ANY SATISFACTORY REPLY. THE AO THEREFORE MADE THE ADD ITION OF 70 THIS AMOUNT TO THE UNDISCLOSED INCOME OF THE ASSESS EE. 38. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION AFTER CONSIDERING THE ASSESSEES CONTENTION. FOLLO WING WAS THE PRECISE OBSERVATION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT . THESE TRANSACTIONS HAVE BEEN MADE THROUGH BANKING CHANNELS. THE PAYEES OF THE DRAFTS HAVE CONFIRMED T HE RECEIPT OF THE DRAFTS AND HAVE ALSO GIVEN CERTIFICA TE TO THE EFFECT THAT THESE DID NOT CONCERN THE APPELLANT OR HIS GROUP. IN HIS REMAND REPORT THE AO HAS ONLY STATED THAT SINCE THE DOCUMENTS WERE NOT PRODUCED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS THESE COULD NOT BE ACCEPTED. HE HAS MADE NO ATTEMPT TO VERIFY THE FACT S REGARDING THESE BANK DRAFTS. AS THE AO HAS BROUGHT NOTHING ON RECORD TO ESTABLISH THAT THE BANK DRAFTS WERE ACTUALLY PURCHASED BY THE APPELLANT HE WAS NOT JUS TIFIED IN MAKING THE ADDITION ON THIS ACCOUNT. THE ADDITIO N OF RS.2 43 675/- IS THEREFORE DELETED. 39. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE ADDITION OF RS.2 43 675/- WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF NOTINGS AT PAGE 1 8 OF LPS- 2 WHICH CONTAINED DETAILS OF BANK DRAFTS. THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION BY OBSERVING THAT THESE TRANSACTIONS HAVE BEEN MADE 71 THROUGH BANKING CHANNELS AND THE PAYEES OF THE DRAF TS HAVE ALSO CONFIRMED THE RECEIPT OF THE DRAFTS AND H AVE ALSO GIVEN CERTIFICATE TO THE EFFECT THAT THESE DRAFTS D ID NOT CONCERN THE ASSESSEE OR HIS GROUP. ALL THE DOCUMENT S FURNISHED BY THE ASSESSEE WERE SENT BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO THE ASSESSI NG OFFICER FOR REMAND REPORT BUT THE ASSESSING OFFICER HAS ONLY STATED THAT SINCE THE DOCUMENTS WERE NOT PRODUCED B EFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEED INGS THESE COULD NOT BE ACCEPTED. HOWEVER NO ATTEMPT WA S MADE BY THE ASSESSING OFFICER TO VERIFY THE FACT RE GARDING THESE BANK DRAFTS. HOWEVER THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) BY CONSIDERING THE DOCUMENTS F ILED BY THE ASSESSEE DELETED THE ADDITION WHICH DOES NOT RE QUIRE ANY INTERFERENCE. IN THE RESULT THE GROUND TAKEN B Y THE REVENUE IS DISMISSED. 40. DURING THE COURSE OF BLOCK ASSESSMENT AN ADDITION OF RS. 29 33 253/- WAS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND. THE AO FOUND THAT T HE LOOSE PAPERS AT PAGES 7 & 8 OF LPS-3 CONTAINED DETA ILS OF LAND REVENUE/DIVERSION TAX FOR THE LANDS SITUATED A T 72 LASUDIA MORI/PALDA. ACCORDING TO THESE DOCUMENTS T HE TOTAL LAND PURCHASED BY THE ASSESSEE WAS 19751 SQ. FT. (4084 + 15667). WHEN CALLED UPON TO EXPLAIN THE SOU RCE OF INVESTMENT IN THESE LANDS THE ASSESSEE COULD FILE N O REPLY ABOUT THE COST OR SOURCE. HENCE THE AO APPLYING THE RATE OF RS.185/- PER SQ. FT. FOR THE LAND MEASURING 15667 S Q. FT. SITUATED AT PALDA AND RS.139/- PER SQ. F T. FOR THE LAND MEASURING 4084 SQ. FT. SITUATED AT LASUDIA MORI WOR KED OUT THE TOTAL COST AT RS.29 33 253/- AND TREATING THE S AME AS UNDISCLOSED INCOME OF THE ASSESSEE MADE THE ADDITIO N TO THAT EXTENT . 41. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION OF RS. 23 79 893/- WHEREAS SUSTAINED THE ADDITION T O THE EXTENT OF RS. 5 53 360/- AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLAN T AND PERUSED THE SALES DEEDS FURNISHED BEFORE ME. AS REGARDS LAND MEASURING 15667 SQ. FT. AT PALDA THE DOCUMENT FOR EXAMINATION BEFORE THE AO RELATED TO KHASRA NO. 336/4 WHEREAS THE SALE DEED ON THE BASIS OF WHICH THE APPELLANT CLAIMED THAT THE SAME WAS ACCOUNTED FOR RELATES TO KHASRA NO. 336/1. APPARENT LY THE SALE DEED PRODUCED DOES NOT RELATE TO THE LAND IN QUESTION. KHASRA NO. 336/4 APPEARS TO HAVE BEEN 73 PURCHASED BY THE APPELLANT IN ADDITION TO KHASRA NO . 336/1 BUT WHEREAS LAND BEARING KHASRA NO. 336/1 WAS ACCOUNTED FOR BY THE APPELLANT KHASRA NO. 336/4 WA S NOT. UNDER THE CIRCUMSTANCES THE AO RIGHTLY HELD T HIS LAND AT PALDA AS UNACCOUNTED F OR. AS IT IS NOT PROVED THAT THIS LAND WAS PURCHASED PRIOR TO THE BLOCK PER IOD THIS HAS TO BE CONSIDERED AS PURCHASED IN THE BLOCK PERIOD. HOWEVER THE RATE OF LAND AS APPLIED BY THE AO APPEARS TO BE ON THE HIGHER SIDE. THE AO HAS GIVEN NO BASIS FOR APPLYING THAT RATE NOR HAS ANY COMPARATIV E CASE BEEN REFERRED TO. THE REGD. SALE DEED THAT THE APPELLANT HAS FILED RELATES TO LAND AT KHASRA NO. 336/1 OF THE SAME DIMENSIONS AND ADJACENT TO THE LAND UNDER CONSIDERATION AND IT SHOWS THE TOTAL CONSIDERATION AT RS.1 80 000/- PLUS STAMP DUTY OF RS. 1 6 000/-. THEREFORE THERE WOULD ONLY BE MARGINAL DIFFERENCE IN THE PRICE OF THIS LAND. THE INVESTMEN T IN PLOT I.E. 336/1 WAS MADE AT A TOTAL OF RS.1 96 000/- IN THE YEAR 1995 AND IF AN ESTIMATE ON THAT BASIS IS M ADE THE INVESTMENT MADE IN SUBSEQUENT YEARS DURING THE BLOCK PERIOD CAN AT THE MOST BE TAKEN AT RS.5 00 00 0/- FOR THIS LAND MEASURING ABOUT 15 667 SQ. FT. ACCORDINGLY THE UNACCOUNTED FOR INVESTMENT MADE BY THE APPELLANT IN THIS PLOT AT KHASRA NO. 336/4 AT PALDA IS ESTIMATED A RS.5 00 000/-. THE ADDITION ON THIS ACCOUNT IS THEREFORE RESTRICTED TO RS.5 00 000/-. AS REGARDS LAND AT KHASRA NO. 264/3 AT LASUDIA MORI THE APPELLANT HAS FILED THE COPY OF THE SALE DEED D ATED 3.12.1999 SHOWING THE TOTAL COST OF THIS LAND AT RS.49 000/- PLUS RS.4 360/- AS STAMP DUTY ETC. THE APPELLANT CLAIMED TO HAVE PAID RS.44 000/- THROUGH CHEQUE ON 1.04.1997 AND 28.06.1997 AND THE BALANCE AMOUNT REMAINED TO BE PAID WHICH SUBSEQUENTLY PAID IN CASH ON DIFFERENT DATES. IT HAS NOT BEEN CLARIFIED AS WHAT WAS THE AMOUNT OF EACH CHEQUE GIVEN ON TWO DIFFERENT DATES. SIMILARLY IT HAS NOT BEEN STATED AS TO ON WHICH DATE THE REMAINING AMOUNT OF RS.5 000/- WAS PAID. IT IS INTERESTING TO NOTE THAT REGARDING THE PAYMENT O F RS.44 000/- THE REGD. SALE DEED STATES AS UNDER: ' THE 74 SELLER RECEIVED RS.44 000/- ONLY FROM THE PURCHASER ON DIFFERENT DATES IN DIFFERENT MODES AND IN DIFFERENT AMOUNTS.' THIS PROVES THAT THE APPELLANT'S CLAIM OF PAYMENT BY CHEQUE ONLY IS A MADE-UP AFFAIR FAR FROM TRUTH. AS SUCH THE AO'S ACTION IN TREATING THE INVESTMENT IN THIS LAND AS UNACCOUNTED FOR IS JUSTIFIED. HOWEVER AS THE REGD. SALE DEED ITSELF SHOWS THE COST OF THIS LAND AT RS.53 360/- (49000 + 4360) ANY ADDITION BEYOND THI S AMOUNT WOULD BE UNJUSTIFIED. THE ADDITION IS THEREFORE RESTRIC TED TO RS.53 360/- ON ACCOUNT OF UNACCOUNTED FOR INVESTMENT IN LAND AT LASUDIA MORI. ON THE WHOLE OUT OF TOTAL ADDITION ON ACCOUNT OF INVESTMENT IN THE ABOVE LANDS THE APPELLANT THUS GETS A RELIEF OF RS 23 79 893/- (29 33 253/- - 5 53 360 ). IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSE E THAT THE ADDITION IS BASED ON SEIZED PAPER AVAILABLE AT PAGE 280 OF THE PAPER BOOK WHICH IS A NOTICE OF DEMAND FOR R ECOVERY OF LAND REVENUE IN RESPECT OF LAND MEASAURING 15 66 7 SQ.FT. AT KHASRA NO. 336/4 AT PALDA. THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) HAS DISCUSSED THE ISSUE IN PARA 3.10 AT PAGE 24 OF THE APPELLATE ORDER AND GRANTED A RELIEF OF RS. 23 79 893/- AND CONFIRMED THE ADDITION OF RS . 5 53 360-/-. THE LD. COUNSEL FOR THE ASSESSEE CONTE NDED THAT IN RESPECT OF THE LAND AT 336/4 AT PALDA THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT BELIEV ED THE REGD. SALE DEED BY WHICH THIS LAND WAS PURCHASED BY THE 75 ASSESSEE ALONG WITH MUKESH MAHESH NIRANJAN & SMT. SANGEETA REGD. SALE DEED DATED 29.6.1995 FOR A SUM OFRS. 1 80 000/-. 42. IT WAS FURTHER SUBMITTED THAT FIRST OF ALL THE SE LAND WAS PURCHASED PRIOR TO BLOCK PERIOD I.E. BEFOR E 1.4.1996. BESIDES THE CONTENTS OF THE SALE DEED HA VE NOT BEEN PROPERLY APPRECIATED. THE ASSESSEE HAS IN FACT PURCHASED ONLY PART OF THE LAND OF SURVEY NO. 336/1 WHICH WAS MEASURING 2.654 HECTARES AND THE PROPOSITION PURCHASAED IS ONLY 0.728 HECTARE. KIND ATTENTION K S INVITED TO PAGES 2 3 AND 4 OF THE REGD. SALE DEED (PAGE 287) FROM WHICH THE ABOVE FACTS CLEARLY EMERGE THAT THE LAND PURCHASED AND BIFURCATED AS 336/4 IS PART OF 336/1. THUS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN PRESUMING THAT ANOTHER LAND WAS PURCHASED AND DETERMINED THE INVESTMENT AT RS. 5 00 000/-. SINCE THE FACTS ARE CLEAR AND THERE IS NO OTHER MATERIAL BROU GHT ON RECORD BY THE ASSESSING OFFICER EXCEPT THE LAND REV ENUE DEMAND NOTICE THE ADDITION OF RS. 5.00 LACS DESERVE S TO BE DELETED. 76 43. AS REGARDS THE BALANCE ADDITION OFRS. 53 360/- IN RESPECT OF LAND AT KHASRA NO. 264(3) ATLASUDIA M ORI KIND ATTENTION IS INVITED TO PAGE 293 OF THE PAPER BOOK WHICH IS A DEMAND NOTICE AND THE REGD. SALE DEED DATED 8.12. 1990 AVAILABLE AT PAGE 294 TO 304 OF THE PAPER BOOK. THE ABOVE LANDS WERE PURCHASED FOR RS. 49 000/- AND STAMP DUT Y OF RS. 4360/- AND HENCE THE ADDITION OF RS. 53 360/- I N RESPECT OF THIS LAND HAS BEEN CONFIRMED. 44. OUR ATTENTION WAS ALSO INVITED THAT THE SUM OF RS.44 000/- WAS PAID BY THE ASSESSEE ON DIFFERENT D ATES THROUGH CHEQUES ON 1.4.1997 AND 28.6.1997. THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) HAS BEEN MORE INFLUENCED BY THE FACT THAT IT WAS NOT STATED ON WH ICH DATE THE REMAINING AMOUNT OF RS. 5000/- WAS TO BE PAID. THE COPY OF THE ACCOUNT OF THE ASSESSEE AS WELL AS THE BANK STATEMENT GIVING THE DETAILS OF PAYMENT BY CHEQUE I S BEING ENCLOSED AND IT IS SUBMITTED THAT THE ADDITION DESE RVES TO BE DELETED BEING WITHOUT PROPER BASIS. 45. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT AN ADDITION OF RS. 29 33 253/- WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF LOOSE PAPERS AT P AGES 7 77 AND 8 OF LPS-3 WHICH CONTAINED DETAILS OF LAND REVENUE/DIVERSION TAX IN RESPECT OF THE LAND SITUAT ED AT LASUDIA MORI/PALDA. IT WAS FOUND THAT THE TOTAL LAN D PURCHASED BY THE ASSESSEE WAS 19 751 SQ.FT. AS THE ASSESSEE DID NOT GIVE SATISFACTORY REPLY THE ASSES SING OFFICER AFTER APPLYING THE RATE OF RS. 185/- PER SQ .FT. FOR THE LAND ADMEASURING 50 667 SQ.FT. SITUATED AT PALDA AN D BY APPLYING THE RATE OF RS. 139/- PER SQ. FT. FOR THE LAND ADMEASURING 4000 SQ. FT. SITUATED AT LASUDIA MORI W ORKED OUT THE TOTAL ADDITION OF RS. 29 33 253/-. DURING T HE APPELLATE PROCEEDINGS THE ASSESSEE FILED EXPLANATIO N ALONG WITH DOCUMENTARY EVIDENCE FOR THE LAND SO PURCHASED . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT SALE DEED PRODUCED DID NOT RELATE TO THE LAND IN QU ESTION INSOFAR AS THE DOCUMENTS WERE RELATED TO KHASRA NO. 336/1 WHEREAS DOCUMENT FOUND DURING THE COURSE OF SEARCH RELATED TO KHASRA NO.336/4. IT WAS ALSO OBSERVED T HAT KHASRA NO. 336/4 WAS PURCHASED BY THE ASSESSEE IN ADDITION TO KHASRA NO. 336/1. NECESSARY ENTRY WITH REGARD TO THE LAND AT KHASRA NO. 336/1 WAS ACCOUNTED FOR B Y THE ASSESSEE IN THE REGULAR BOOKS OF ACCOUNTS WHEREAS N O ENTRY 78 WAS PASSED IN RESPECT OF THE LAND SITUATED IN KHASR A NO. 336/4. IN THESE CIRCUMSTANCES THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER WITH REGARD TO THE LAND AT PALDA AS UNACCOUNTED. THE CONTENTION OF THE ASSESSEE THAT TH E LAND WAS PURCHASED PRIOR TO BLOCK PERIOD WAS NOT ACCEPTE D BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AS NO DOCUMENTARY EVIDENCE WAS PLACED ON RECORD TO PROVE THE SAME. HOWEVER THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) FOUND THAT THE RATE APPLIED BY THE ASSESS ING OFFICER WAS ON HIGHER SIDE AS NO COMPARATIVE CASE H AS BEEN REFERRED TO BY THE ASSESSING OFFICER. IT WAS FOUND THAT THE TOTAL INVESTMENT IN PLOT AT KHASRA NO. 336/1 WAS RS . 1 96 000/- IN THE YEAR 1995 AND IF AN ESTIMATE ON T HAT BASIS IS MADE THE INVESTMENT MADE IN THE SUBSEQUEN T YEAR IN KHASRA NO. 336/4 AT THE MOST BE TAKEN AT RS. 5 LACS FOR THE LAND ADMEASURING 15 667 SQ. FT. ACCORDINGLY A N ADDITION OF RS. 5 LACS WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN RESPECT OF THE INVESTMENT IN KHASRA NO. 336/4. 79 46. IN REGARD TO THE LAND AT KHASRA NO. 336/3 AT LASUDIA MORI THE ASSESSEE FILED COPY OF SALE DEED DATED 3.12.1999 WHEREIN TOTAL COST OF LAND WAS SHOWN AT R S. 49 000+RS. 4360 FOR STAMP DUTY. THE PAYMENT OF RS. 44 000/- WAS MADE THROUGH CHEQUE ON 1.4.1997 AND 28.6.1997 AND THE BALANCE AMOUNT REMAINED TO BE PAI D WHICH WAS SUBSEQUENTLY PAID IN CASH. IN THIS REGAR D THE CONTENTION OF THE ASSESSEE WAS NOT FOUND CORRECT BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SINCE THE REGISTERED SALE DEED PRODUCED BEFORE HIM CLEARLY ST ATED THAT THE SELLER RECEIVED RS. 44 000/- ONLY FROM THE PURC HASER ON DIFFERENT DATES IN DIFFERENT MODES AND IN DIFFERENT AMOUNTS. SINCE THE SALE DEED DID NOT MENTION ANY PAYMENT BY CHEQUE THE CONTENTION OF THE ASSESSEE WAS NOT ACCE PTED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY HE CONFIRMED THE ACTION OF THE ASSESSI NG OFFICER. HOWEVER THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) FOUND THAT SINCE THE REGISTERED SALE DEED SHOWS THE COST OF THIS LAND AT RS.53 360/- (49 000+4360) NO ADDITION BEYOND THIS AMOUNT WOULD BE JUSTIFIED. ACCORDINGLY THE ADDITION WAS RESTRICTED TO RS. 53 360/- ON 80 ACCOUNT OF INVESTMENT IN LAND AT LASUDIA MORI. THUS IN TOTALITY OUT OF THE TOTAL ADDITION OF RS.29 33 253/ - THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SUSTAI NED THE ADDITION OF RS.5 53 360/- AND DELETED THE ADDIT ION OF RS.23 79 893/- ON THE BASIS OF DOCUMENTS PLACED ON RECORD AND THE FINDING RECORDED BY THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) WHICH HAS NOT BEEN CONTROVERTE D BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) 47. IN THE RESULT THE GROUND TAKEN BOTH BY THE REVENUE AND THE ASSESSEE ARE DISMISSED. 48. AN ADDITION OF RS. 52 17 000/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTM ENT IN LAND. THE ASSESSING OFFICER HAS DEALT WITH THE ISSU E AS PER PARA 11 OF HIS ORDER WHEREIN HE STATED THAT THIS A DDITION HAS BEEN WORKED OUT TO RS.52 17 000/- BUT APPEARS TO BE INADV ERTENTLY MENTIONED AS RS. 3 7 60 000/- IN THE COMPUTATION OF INCOME AT THE END OF ASSESSME NT ORDER. THIS ADDITION HAS BEEN MADE A/C OF UNEXPLAINED LAND HOLDING IN NAMES OF SANJAY KUMAR RAJKUMAR AND SMT. SANGEETA AT MUSAKHE DI 81 ON THE BASIS OF SEIZED LOOSE PAPERS 46 TO 58 OF LPS -3 WHICH CONTAINED THE DETAILS OF LAND SUCH AS KHASRA NO. AR EA ETC. IN THESE NAMES FOR LAND MEASURING APPROXIMATELY 470 00 SQ. FT. AT VILLAGE MUSAKHEDI. THE ASSESSING OFFICER TREATED THESE LANDS AS BENAMI OF THE APPELLANT AND APPLYING A RATE OF RS.111/- PER SQ. FT. WORKED OUT THE TOTAL UNACCO UNTED FOR INVESTMENT AT RS.52 17 000/- 49. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) PARTLY CONFIRM ED THE ADDITION BY HOLDING THAT 1/3 RD OF KASRA NO. 353/2 WAS BELONGING TO OTHER TWO CO-OWNERS VIZ. SMT. SANGITA AND VANDANA AGRAWAL. ACCORDINGLY THE ADDITION WAS SUBSTANTIVELY MADE IN THEIR HANDS. HOWEVER IN RES PECT OF 1/3 RD OF THE LAND ADDITION WAS CONFIRMED IN THE HANDS OF THE ASSESSEE. 50. IN RESPECT OF KHASRA NOS. 354/10 354/17 AND 353/2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HELD THAT THE LAND WAS BELONGING TO THE ASSESSEE. ACCORDINGLY THE ADDITION WAS CONFIRMED IN HIS HANDS . 82 51. SIMILARLY IN RESPECT OF THE LAND AT KHASRA NO . 353/1 354/9 AND 384/18 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT 1/3 RD PORTION BELONGS TO THE ASSESSEE AND THE BALANCE 2/3 RD BELONGS TO SMT. SANGITA AND SMT. VANDANA. ACCORDINGLY ON SUBSTANTIVE BASIS 1/3 RD ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE. WIT H RESPECT TO THE RATE OF LAND APPLIED BY THE ASSESSIN G OFFICER AT RS. 111/- PER SQ FT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE BASIS OF LOCATION OF THE PROPE RTIES AND THE MARKET VALUE OF THE SAME AROUND THE EYARS 1999 TO 2001 HELD THAT RS. 100/- PER SQ FT IN MUSAKHEDI WOU LD BE REASONABLE AND JUSTIFIED. FOLLOWING WAS THE PRECIS E OBSERVATION OF THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) :- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND PERUSED THE DOCUMENTS FILED. I DO NOT FULLY AGREE WITH THE CONTENTION OF THE APPELLANT. THE REV ENUE RECORDS FILED SHOW THAT THE LAND STANDING IN THE NA ME OF SANJAY KUMAR AT KHATA/KHASRA NO. 354/10 354/17 AND 353/2 STANDS TRANSFERRED AS ON 28.05.2001 AS UNDER: KHASRA NO. TRANSFERRED TO 354/10 KAILASHCHAND 354/17 KAILASHCHAND 353/2 I. KAILASHCHAND S/O SH. MADANLAL II. SANGEETA W/O MAHESH KUMAR 83 III. VANDANA W/O NIRANJAN KUMAR AGRAWAL FROM THE BLOCK ASSESSMENT ORDERS PASSED IN RESPECT OF SMT. SANGEETA AGRAWAL AND SMT. VANDANA AGRAWAL IT IS FOUND THAT THE ADDITION OF THE WHOLE AMOUNT OF RS.52 17 000/- HAS BEEN MADE IN THEIR HANDS ON PROTECTIVE BASIS WHEREAS THEY HOLD ONLY 1/3 RD OF THE LAND AT KHASRA NO. 353/2. THUS IN RESPECT OF LAND IN THE NAME OF SANJAY KUMAR AS PER THE SEIZED DOCUMENTS THE LAND AT KHASRA NO. 353/10 KHASRA NO. 354/17 AND ONE THIRD OF KHASRA NO. 353/2 ARE TREATED AS BELONGING TO THE APPELLANT AS UNACCOUNTED FOR LAND. ONE THIRD EACH OF KHASRA NO. 353/2 WILL BE HELD AS BELONGING TO THE OTHER TW O CO-OWNERS NAMELY SMT. SANGEETA AGRAWAL AND SMT. VANDANA AGRAWAL ON SUBSTANTIVE BASIS. AS REGARDS LAND AS PER KHASRA NO. 354/10 354/17 AND 353/2 HELD IN THE NAME OF RAJKUMAR THE APPELLANT HAS FILED NO DOCUMENTS PROCURED FROM THE PANCHAYAT OR REVENUE AUTHORITIES. GOING BY THE INSTANCE OF LAND HELD IN THE NAME OF SANJAY KUMAR WHICH IS FOUND TO HAVE BEEN SUBSEQUENTLY TRANSFERRED TO THE APPELLANT OR HIS FAMILY MEMBERS IN THE ABSENCE OF ANY DOCUMENTS TO THE CONTRARY THE SAME IS HELD TO BE BELONGING TO THE APPELLANT BUT NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. SO FAR AS THE LAND AS PER KHASRA NO.353/1 354/9 AND 384/18 HELD IN THE NAME OF SMT. SANGEETA W/O GOPALDAS FROM THE REVENUE DOCUMENT TILED IT IS SEEN THAT THE SAME HAS BEEN TRANSFERRED TO KAILASH S/O MADANLAL SMT. SANGEETA W/O MAHESH KUMAR AND SMT. VANDANA W/O NIRANJAN AGRAWAL AS ON 28.05.2001. AS HAS BEEN HELD IN THE CASE OF SANJAY KUMAR. ABOVE THIS LAND ALSO IS TREATED TO BE BELONGING JOINTLY IN THE NAME S OF THREE PERSONS. ACCORDINGLY 1/3 RD INVESTMENT EACH WILL BE TREATED IN THEIR CASES ON SUBSTANTIVE BASIS AS UNACCOUNTED FOR INVESTMENT IN LAND. NOW COMING TO THE RATE TO BE APPLIED TO DETERMINE THE AMOUNT OF UNACCOUNTED INVESTMENT THE AO HAS APPLIED A RATE OF RS.111 PER SQ. IT. TO ARRIVE AT THE TOTAL COST OF RS.52 17 000/-. BUT HE HAS GIVEN NO BASIS FOR ADOPTING THIS RATE. NO COMPARABLE CASE HAS BEEN REFERRED TO. AFTER 84 CONSIDERING THE LOCATION OF THE PROPERTIES AND THE MARKET VALUE OF THE SAME AROUND THE YEARS 1999 TO 2001 IT IS HELD THAT THE RATE OF RS.100/. P ER SQ. FT. IN MUSAKHEDI WOULD BE REASONABLE AND JUSTIFIED. ACCORDINGLY THE AO IS DIRECTED TO WORK OUT THE COS T OF THESE LANDS AT THAT RATE AND ASSESS THE SAME I.E . THE WHOLE OF KHASRA NOS. 354/10 AND 354/17 AND ONE THIRD OF KHASRA NO. 353/2 IN THE HANDS OF THE APPELLANT AS UNACCOUNTED INVESTMENT IN LAND. 52. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE ADDITION OF RS. 52 17 000/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INVESTMENT IN LAND IN THE NAME OF SANJAY KUMAR RAJKUMAR AND SMT. SANGEETA AT MUSAKHEDI. NECESSARY NOTHING WAS ON SEIZED LOOSE P APER 46 TO 58 OF LPS-3. BY OBSERVING THAT THESE LANDS A RE BENAMI OF THE ASSESSEE THE ADDITION WAS MADE IN TH E ASSESSEES HANDS BY APPLYING RATE AT RS. 111/- PER SQ.FT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S CONSIDERED INVESTMENT IN EACH LAND KHASRAWISE AND I T WAS FOUND THAT THE ADDITION HAS BEEN MADE IN THE RESPEC TIVE HANDS OF THE PERSONS IN WHOSE NAMES LAND STANDS ON PROTECTIVE BASIS. THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) HAS CONSIDERED IN DETAILS VARIOUS LANDS S ITUATED AT KHASRA NO.353/2 353/10 353/17 AND THEIR RESPEC TIVE 85 HOLDINGS BY DIFFERENT FAMILY MEMBERS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO VERIF IED THE COPY OF REVENUE RECORDS FILED BEFORE HIM INDICATING THAT THE LAND SITUATED AT KHASRA NOS. 353/1 353/9 AND 384/1 8 HELD IN THE NAME OF SMT. SANGITA HAS BEEN TRANSFERR ED TO KAILASH SMT. SANGEETA AND SMT. VANDANA ON 25.8.20 01. ACCORDINGLY THIS LAND WAS ALSO FOUND TO BE BELONGI NG JOINTLY IN THE NAME OF THREE PERSONS. IT WAS THERE FORE HELD BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT 1/3 RD INVESTMENT IN EACH IS TO BE TREATED IN THEIR CASES ON SUBSTANTIVE BASIS AS UNACCOUNTED INVESTMENT IN LAND . WITH RESPECT TO THE RATE OF RS. 111/- PER SQ.FT. AS APPL IED BY THE ASSESSING OFFICER THE SAME WAS FOUND TO BE EXCESSI VE. AFTER CONSIDERING THE LOCATION OF THE PROPERTIES AN D THE MARKET VALUE OF THE SAME DURING THE YEARS 1999 TO 2 001 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FO UND THAT THE RATE OF RS. 100/- PER SQ.FT. IN MUSAKHEDI WOULD BE REASONABLE AND JUSTIFIED. ACCORDINGLY THE ASSESSI NG OFFICER WAS DIRECTED TO WORK OUT THE COST OF THESE LANDS AT THAT RATE AND ASSESS THE SAME I.E. THE WHOLE OF KHASRA NO. 35 4/10 AND 354/17 AND 1/3 RD OF KHASRA NO. 353/2 IN THE HANDS OF 86 THE ASSESSEE. THE DETAILED FINDINGS RECORDED BY TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD HAVE NOT BEEN CONTROVERTED BY BRINGING ANY POSITIVE MATE RIAL ON RECORD. ACCORDINGLY WE DO NOT FIND ANY REASON TO I NTERFERE WITH THE SAME. 53. IN RESPECT OF THE ADDITION OF RS.66 944/- ON ACCOUNT OF UNEXPLAINED SUPPLIES THE AO FOUND THAT T HE INCRIMINATING PAPERS SEIZED AT PAGES 61 TO 69 OF LP S-3 CONTAINED CERTAIN LETTERS WRITTEN BY THE ASSESSEE T O VARIOUS PARTIES TOWARDS RECOVERY OF DEMAND MADE AGAINST SUP PLY OF GOODS FOR RS.66 944/-. AS NO EXPLANATION FOR THE SAME WAS FILED THE AO TREATED THE SAME AS UNDISCLOSED INCOM E OF THE ASSESSEE. 54. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION BY OBSERVING AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. IN HIS REMAND REPORT REGARDING THESE PAPERS THE AO HAS OBSERVED AS UNDER: THE TRANSACTIONS REFERRED TO IN THE PAPER BOOK FRO M PAGE NO.64 TO 70 ARE FOUND REFLECTED IN THESE LEDGE R A/CS HOWEVER THE TOTAL AMOUNT INVOLVED IN THE 87 TRANSACTION WORKS OUT TO RS.76 204/- INSTEAD OF RS. 66 944/- ADDED TO ASSESSMENT. THUS THE AO HAS HIMSELF FOUND THAT THESE PAPERS RELATED TO TRANSACTIONS ENTERED IN THE BOOKS OF ACCOUNT AFTER DUE VERIFICATION. THE ADDITION BEING UNJUSTIFIED IS DELETED. 55. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT AN ADDITION OF RS. 66 944/- WAS MADE BY T HE ASSESSING OFFICER ON THE BASIS OF SEIZED PAGES 61 T O 69 OF LPS-3. THESE PAGES CONTAINED THE LETTERS WRITTEN BY THE ASSESSEE TO VARIOUS PARTIES TOWARDS RECOVERY OF DEM AND AGAINST THE SUPPLY OF GOODS WORTH RS. 66 944/-. BY OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION THE ASSESSING OFFICER MADE THE ADDITIO N OF RS. 66 944/-. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE TOTAL OF THESE TRANSACT IONS WAS RS.76 204/- INSTEAD OF RS.66 944/-. THE CIT(A) FOUN D THAT TRANSACTIONS RELATED TO THESE PAPERS WERE ENTERED IN THE BOOKS OF ACCOUNTS. SINCE THE TRANSACTIONS WERE ALR EADY FOUND RECORDED IN THE REGULAR BOOKS OF ACCOUNTS TH E ADDITION DELETED BY THE LEARNED COMMISSIONER OF INC OME 88 TAX (APPEALS) WAS PERFECTLY IN ORDER AND DOES NOT R EQUIRE ANY INTERFERENCE. 56. IN RESPECT OF THE ADDITION OF RS. 82 500/- ON ACCOUNT OF UNEXPLAINED PURCHASES THE AO FOUND THAT SEIZED PAPER AT PAGE 18 OF LPS-7 CONTAINED A LETTER TO IND ORE BARDANA MERCHANTS ASSOCIATION MAKING MENTION OF PURCHASE OF 15000 BAGS @ 550 PER 100 BAGS. AS NO EXPLANATION WAS FILED THE AO MADE THE ADDITION OF RS.82 500/-. 57. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT . IN THE REMAND REPORT THE AO HAS NOT CONTROVERTED T HE VERSION OF THE APPELLANT. THE PAPERS PRODUCED BY TH E APPELLANT PROVE THE CONTENTION OF THE APPELLANT THA T VIDE THE LETTER IN QUESTION HE HAD MADE A COMPLAINT TO T HE ASSOCIATION. THE ADDITION MADE IS THEREFORE DELETE D. 58. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE ADDITION OF RS. 82 500/- WAS MADE BY THE ASSESSING OFFICER AS PER NOTINGS AT PAGE 18 OF LPS- 7 WHICH CONTAINED A LETTER TO INDORE BARDANA MERCHANT ASSOC IATION. 89 THESE PAPERS CLEARLY PROVE THE CONTENTION OF THE AS SESSEE THAT IT WAS MERELY A COMPLAINT TO THE ASSOCIATION. IN THE REMAND REPORT THE ASSESSING OFFICER HAS NOT CONTROV ERTED THIS VERSION OF THE ASSESSEE THEREFORE THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION. SINCE THERE WAS NO TRANSACTION OF RS. 82 500/- WAS ENTERED BY THE ASSESSEE AND IT WAS MERELY A COMPLAINT TO T HE BARDANA MERCHANT ASSOCIATION THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN DELETING T HE ADDITION SO MADE. 59. AN ADDITION OF RS. 4 87 500/- WAS ALSO MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNRECORDED SALE S ON CONTRACT NOTES. IN THIS RESPECT THE ASSESSING OFFI CER OBSERVED THAT THE SEIZED DOCUMENTS AT PAGES 109 & 110 OF LPS-7 CONTAINED CONTRACT NOTE OF DALAL ASHISH SHYAM SUKHA IN WHICH PURCHASES OF GOODS TOTALING 250 BALES AMOU NTING TO RS.4 87 500/- (97500+390000). THE AO RECORDED TH E STATEMENT OF THE DALAL WHO STATED THAT THE MATERIAL MENTIONED IN THE CONTRACT NOTE PERTAINED TO THE ASS ESSEE AS THEY WERE THE REAL SELLERS AND THE NAME OF KAUSHAL LAMINATORS WAS WRITTEN ON THE ADVICE OF THE ASSESSE E. 90 WHEN CONFRONTED THE ASSESSEE COULD NOT FILE ANY EXPLANATION. THEREFORE THE AO MADE THE ADDITION OF RS.4 87 500/- TO THE UNDISCLOSED INCOME OF THE ASSE SSEE. 60. BY THE IMPUGNED ORDER AFTER RECORDING THE FOLLOWING FINDINGS THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) DELETED THE ADDITION :- I HAVE CONSIDERED THE SUBMISSIONS MADE. THE PERUSAL OF THE STATEMENT OF THE SH. ASHISH SHYAMSUK HA REVEALS THAT HE APPROACHED THE SUPPLIER I.E.KAUSHAL LAMINATORS THROUGH THE APPELLANT FOR SUPPLY OF GOOD S TO M/S. PARAM INDUSTRIES LTD. AND MIS. RUCHI SOYA INDUSTRIES LTD. AS HE HIMSELF DID NOT KNOW THE SUPPLIERS. THE APPELLANT MIGHT HAVE PLACED THE ORDE R FOR PURCHASES ON BEHALF OF THESE PARTIES AND THE SUPPLIES WERE MADE DIRECTLY TO THOSE PARTIES ON RECEIPT OF WHICH AT THE INSTANCE OF THE DALAL THE PURCHASERS SENT THE FORM NO. 75 OBTAINED FROM COMMERCIAL TAX AUTHORITIES TO THE SUPPLIER. THUS VERSIONS OF BOTH THE PARTIES I.E. THE APPELLANT AND THE BROKER STAND PROVED. THE AO WAS MISLED BY THE STATEMENT ONLY BECAUSE THE APPELLANT WAS NOT GIVEN OPPORTUNITY TO CROSS EXAMINE THE DALAL AND CLARIFY THE POSITION. THE DOCUMENTS FILED PROVE THE FACT THAT T HE ACTUAL SUPPLIERS WERE KAUSHAL LAMINATORS AND THE LETTERS OF ASHISH SHYAMSUKHA ADDRESSED TO PARAM INDUSTRIES AND RUCHI SOYA INDS. CONFIRMING THE FACT THAT HE PURCHASED GOODS FROM M/S. KAUSHAL LAMINATORS. UNDER THE CIRCUMSTANCES NO ADDITION COULD HAVE BEEN MADE ON SURMISES AND PRESUMPTIONS. THE ADDITION OF RS.4 87 500/- IS THEREFORE DELETED. 61. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND 91 FIND THAT THE ADDITION OF RS.4 87 500/- WAS MADE ON THE BASIS OF SEIZED DOCUMENTS PAGES 109 AND 110 OF LPS- 7 CONTAINING CONTRACT NOTE OF DALAL ASHISH SHYAM SAKH A. THIS DOCUMENT INDICATED PURCHASE OF GOODS TOTALING 250 BAGS AMOUNTING TO RS.4 87 500/-. DURING THE ASSESSM ENT PROCEEDINGS THE ASSESSING OFFICER RECORDED STATEMEN T OF DALAL WHEREIN HE STATED THAT THE MATERIAL MENTIONED IN THE CONTRACT NOTE PERTAINED TO THE ASSESSEE AS THEY WER E THE REAL SELLERS AND THE NAME OF KAUSHAL LAMINATORS WAS WRITTEN ON THE ADVICE OF THE ASSESSEE. IT WAS OBSER VED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TH AT IN TERMS OF THE STATEMENT OF DALAL HE APPROACHED TO T HE SUPPLIER M/S KAUSHAL LAMINATORS THROUGH THE ASSESSE E FOR SUPPLY OF GOODS TO M/S PARAM INDUSTRIES LIMITED AND RUCHI SOYA INDUSTRIES LIMITED AS HE HIMSELF DID NOT KNOW THE SUPPLIERS. IT WAS ALSO FOUND THAT THE PURCHASE RS HAVE DIRECTLY SENT FORM NO. 79 OBTAINED FROM THE COMMERC IAL TAX AUTHORITIES TO THE SUPPLIERS. THUS THE VERSION OF BOTH THE ASSESSEE AND THE BROKER STANDS PROVED. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO OBSERVED THAT THE DOCUMENTS SO FILED PROVED THE FACT THAT THE ACT UAL 92 SUPPLIERS WERE M/S KAUSHAL LAMINATORS AND THE LETTE RS OF ASHISH SHYAMSUKHA ADDRESSED TO PARAM INDUSTRIES AND RUCHI SOYA INDUSTRIES CONFIRMING THE FACT THAT HE PURCHASED GOODS FROM M/S KAUSHAL LAMINATORS. ON TH E BASIS OF THESE DOCUMENTS AND THE STATEMENT OF DALAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE ADDITION. THE FINDING SO RECORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT BEEN CONTROVERTED BY BRINGING ANY POSITIVE MATERIAL ON R ECORD. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME RESULTING INTO DELETION OF ADDITION OF RS.4 87 500/-. 62. AN ADDITION OF RS. 13 05 000/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CONTRACT NOTE OF DA LAL SHRI SURESH J. MITTAL. IN THIS RESPECT THE OBSERVATION O F THE ASSESSING OFFICER WAS THAT THE SEIZED DOCUMENTS AT PAGES 111 TO 113 OF LPS-7 CONTAINED CONTRACT NOTE OF BROK ER SH. SURESH J. MITTAL IN RESPECT OF PURCHASE BY THE ASSE SSEE OF RS.13 05 000/-. AS THE ASSESSEE COULD NOT EXPLAIN T HE SAME THE AO MADE THE ADDITION OF THE SAME AMOUNT T O THE UNDISCLOSED INCOME OF THE ASSESSEE. 93 63. AFTER CONSIDERING THE CONTENTS OF THE SEIZED DOCUMENTS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION AFTER HAVING THE FOL LOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND PERUSED THE DOCUMENTS FILED AS WELL AS THE SEIZED DOCUMENTS. SO FAR AS THE SEIZED DOCUMENTS AT PAGES 111 AND 112 ARE CONCERNED THESE APPARENTLY INDICATE TOWARDS SUPPLY ORDER OF 100000 EACH GUNNY BAGS @RS.540/- PER 100 BAGS BETWEEN ITC AND M/S. AGRAWAL JUTE BAG INDUSTRIES. AS REGARDS PAGE 113 THIS APPARENTLY IS A CONTRACT FOR SUPPLY OF 10000 GUNNY BAGS @375/- PER 100 BAGS BETWEEN ITC LTD. AND M/S. PANKAJ TRADERS. IT IS NOT CLEAR AS TO HOW THE AO WORKED OUT THE TOTAL ADDITION AT RS.13 O5 000/-. SO FAR AS PAGE NO. 113 IS CONCERNED THERE IS NO MENTION OF THE NAME OF THE APPELLANT OR HIS PROPRIETARY CONCERN ON THE CONTRACT FORM. SH. MAHESHBHAI APPEARS TO HAVE ONLY FACILITATED THE DEAL. AS THE APPELLANT HAD NOTHING TO DO WITH THIS CONTRACT NO ADDITION IN HIS HAND WAS JUSTIFIED. AS REGARDS PAGE NOS. 111 & 112 THE APPELLANT HAS FILED THE COPY OF ACCOUNT OF ITC LTD. SHOWING 4 CONSIGNMENTS OF GOODS WORTH RS.64 200/- EACH DATED 12.10.2002 AND ENTERED ON 16.10.2002 AND ANOTHER 4 CONSIGNMENTS OF THE SAME AMOUNT EACH DATED 15.10.2002 AND ENTERED ON 18.10.2002. THE TOTAL PAYMENT OF RS.5 13 600/- HAS BEEN MADE TO THAT PARTY DURING THE YEAR ITSELF SQUARING THE ACCOUNT. THE AO HAS MADE NO ATTEMPT TO DISPROVE THE VERSION OF THE APPELLANT REGARDING THESE TRANSACTIONS NOR DID HE CALL FOR ANY INFORMATION FOR VERIFICATION FROM ITC LTD. ITC IS A VERY LARGE COMPANY AND ITS COLLUSION WITH THE APPELLANT CANNOT BE EASILY DOUBTED WITHOUT ANY COGENT MATERIAL TO THE CONTRARY. AS THERE IS NO EVIDENCE AGAINST THE CONTENTION OF THE APPELLANT 94 THE SAME IS ACCEPTED AND THE TOTAL ADDITION MADE AT RS.13 05 OOO/- IS DELETED. 64. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE ADDITION OF RS.13 05 000/- WAS MADE O N THE BASIS OF PAGES 111 TO 113 OF LPS-7 WHICH CONTAINED CONTRACT NOTE OF BROKER SHRI SURESH J. MITTAL IN RE SPECT OF PURCHASES MADE BY THE ASSESSEE AMOUNTING TO RS. 13 05 000/-. BY OBSERVING THAT THE ASSESSEE COULD NOT FURNISH SATISFACTORY EXPLANATION AN ADDITION WAS M ADE BY THE ASSESSING OFFICER. DURING THE APPELLATE PROCEED INGS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERV ED THAT THE SEIZED PAGES 111 AND 112 INDICATE SUPPLY O RDER OF 1 LAC EACH GUNNY BAG @ RS. 540/- PER 100 BAGS BETWE EN ITC AND M/S AGRAWAL JUTE INDUSTRIES. IT WAS ALSO O BSERVED THAT PAGE 112 IS A CONTRACT FOR SUPPLY OF 10 000 GU NNY BAGS @ RS. 375/- PER 100 BAGS BETWEEN ITC LIMITED A ND PANKAJ TRADERS. WITH REGARD TO PAGES 111 AND 112 T HE ASSESSEE HAS FILED COPY OF BANK ACCOUNT OF ITC LIMI TED SHOWING FOUR CONSIGNMENTS OF GOODS WORTH RS. 64 200 /- EACH DATED 12.10.2002 AND ANOTHER FOUR CONSIGNMENTS OF THE SAME AMOUNT EACH DATED 15.10.2002 WHICH WERE 95 ENTERED ON 18.10.2002. THUS THE TOTAL PAYMENT OF RS.5 13 600/- WAS MADE TO THAT PARTY DURING THE YEA R ITSELF WHICH SQUARED UP THE ACCOUNT OF THE PARTY. BY OBSE RVING THAT THE ASSESSING OFFICER HAS NOT MADE ANY ATTEMPT TO DISPROVE THE VERSION OF THE ASSESSEE REGARDING THES E TRANSACTIONS NOR DID HE CALL FOR ANY INFORMATION FO R VERIFICATION FROM ITC LIMITED THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO OBSERVED THAT ITC IS A VERY LARGE COMPANY AND ITS COLLUSION WITH THE ASSESSEE CANNOT BE DOUBTED WITHOUT ANY COGENT MATER IAL TO THE CONTRARY. AS THERE WAS NO EVIDENCE AGAINST TH E CONTENTION OF THE ASSESSEE AND THE DOCUMENTARY EVID ENCE PLACED ON RECORD THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) DELETED THE ADDITION. THE FINDING RECORD ED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS NO T BEEN CONTROVERTED. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. 65. AN ADDITION OF RS.16 97 440/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNCOUNTED PURCHASE OF MATERIALS. THE ASSESSING OFFICER OBSERVED THAT AS PER 96 SEIZED PAPER AT PAGE NO. 2 OF LPS-8 PURCHASES OF J UTE CLOTH BAGS AND SUTLI AMOUNTING TO RS.16 97 440/- HAVE BEEN MADE BY THE ASSESSEE. AS THE SAME COULD NOT BE EXPL AINED THE AO MADE THE ADDITION OF THIS AMOUNT. 66. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT BUT DO NOT FIND MERIT IN THE SAME. FIRST OF ALL TH E ONLY EVIDENCE THAT THE APPELLANT HAS FILED IS THE COPIES OF COMPUTER GENERATED BILLS RAISED IN RESPECT OF SALES TO M/S. AGRAWAL ASSOCIATES. THERE IS NO AUTHENTICITY REGARDING THE ISSUANCE OF THESE BILLS AS THESE WERE NOT SEIZED DURING THE SEARCH OPERATION AND THESE COULD BE EASILY GENERATED POST SEARCH JUST TO EXPLAIN THE TRANSACTIONS. SECONDLY THE TITLE GIVEN TO THE DETA ILS IN THE SAID PAPER IS 'PURCHASES LIST' AND THE PARTY'S NAME IS WRITTEN AS AGRAWAL JUTE BAGS INDUSTRIES INDORE TH E PROPRIETORY CONCERN OF THE APPELLANT. THIS FACT CL EARLY INDICATES THAT THESE WERE THE PURCHASES OF THE APPE LLANT. THIRDLY THERE IS NO MENTION OF THE NAME OF AGRAWAL ASSOCIATES EITHER AS PURCHASER OR AS SELLER WHEREAS THE NAME OF THE APPELLANT ONLY FIGURES. IN VIEW OF THES E FACTS IT IS PROVED THAT THESE WERE THE UNACCOUNTED PURCHA SES OF THE APPELLANT AND THE AO HAS RIGHTLY REACHED THI S CONCLUSION. THE ADDITION OF RS.16 97 440/- IS THEREFORE CONFORMED. IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSE E THAT THE SEIZED PAPER IS IN FACT A STATEMENT OF SALE EFF ECTED BY THE ASSESSEE TO ANOTHER INDEPENDENT BUSINESS IN THE GROUP 97 KNOWN AS AGRAWAL ASSOCIATES. ALL THESE TRANSACTION S ARE RECORDED IN THE BOOK OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE COPY OF SEIZED PAPER IS AT PAGE 88 WH ILE THE PHOTO COPY OF 6 BILLS ISSUED BNY THE ASSESSEE ARE A VAILABLE AT PAGES 89 TO 106 OF THE PAPER BOOK. IT IS FURTHE R SUBMITTED THAT BY MISTAKE 3 COPIES OF EACH OF THESE BILLS HAVE BEEN INCLUDED IN THE PAPER BOOK AND THE SAME I S REGRETTED. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS HELD THAT THESE ARE THE PURCHASES OF THE APPELLANT AND THERE IS NO MENTION OF AGRAWAL ASSOCI ATE EITHER AS PURCHASER OR SELLER ON SEIZED PAPER AND ACCORDINGLY TREATED THE AMOUNT AS UNACCOUNTED PURCH ASES. 67. IT WAS FURTHER SUBMITTED THAT ALL THE PAPERS SUBMITTED IN THE PAPER BOOK WERE SENT TO BY THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) TO THE ASSESSI NG OFFICER WHO WAS ALSO THE ASSESSING OFFICER OF AGRAW AL ASSOCIATES OWNED BY SHRI MUKESH AGRAWASL IN WHOSE C ASE ALSO ASSESSMENT U/S 158BC HAS BEEN MADE. THE ASSESS ING OFFICER DID NOT MAKE ANY EFFORT TO VERIFY THE SAME AT THE REMAND REPORT STAGE. SIMILARLY THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) COULD HAVE ASKED THE ASSESS ING 98 OFFICER TO VERIFY WHILE GIVING APPEAL EFFECT WHICH HAS NOT BEEN DONE RESULTING IN DENIAL OF JUSTICE. THUS THE ADDITION BEING WITHOUT PROPER BASIS NEEDS TO BE DELETED OR C AN BE VERIFIED BY THE ASSESSING OFFICER AFTER ISSUE OF DI RECTION BY THE HONBLE BENCH. 68. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT AN ADDITION OF RS. 16 97 440/- WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF INCRIMINATING DOC UMENTS MARKED AS LPS-8 FOUND AT 8/2 NEW ANAJ MANDI WHICH CONTAINS DETAILS OF PURCHASE OF JUTE CLOTH AND SUTL I BY THE ASSESSEE. THE ASSESSEE WAS ASKED TO VERIFY FROM TH E BOOKS OF ACCOUNTS BUT THE ASSESSEE FAILED TO DO THE SAME. EVEN DURING THE APPELLATE PROCEEDINGS THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE TH AT THE PURCHASES SO FOUND WERE ENTERED IN THE REGULAR BOOK S OF ACCOUNTS. EVEN THE PRINT OUT OF THE SALE BILL TO M/ S AGRAWAL ASSOCIATES ALLEGED TO BE ISSUED BY THE ASSESSEE WAS NOT FOUND TO BE GENUINE AND THESE WERE ALSO NOT SEIZED DURING THE COURSE OF SEARCH OPERATION. BY OBSERVING THAT THE DOCUMENT SO FOUND CLEARLY INDICATE UNACCOUNTED PURCH ASES BY M/S AGRAWAL JUTE INDUSTRIES THE LEARNED COMMISS IONER 99 OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION. NO THING WAS BROUGHT ON RECORD BY THE LD. COUNSEL FOR THE AS SESSEE BEFORE US TO PERSUADE US TO DEVIATE FROM THE FINDIN GS RECORDED BY THE LOWER AUTHORITIES FOR MAKING THE AD DITION ON ACCOUNT OF UNEXPLAINED PURCHASES OF RS. 16 97 44 0/- WHICH WAS AS PER PAGE 2 OF LPS-8. ACCORDINGLY THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONFIRMED. 69. AN ADDITION OF RS.8 25 561/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNRECORDED PURCHASE S AND SALE OF MACHINES. IN THIS REGARD THE OBSERVATION O F THE ASSESSING OFFICER WAS THAT THE SEIZED DOCUMENTS AT PAGES NO.3 & 4 OF LPS-8 CONTAINED HAND WRITTEN LIST OF PU RCHASES AND SALES OF RS.4 63 000/- AND 3 62 561/- RESPECTIV ELY. AS NO EXPLANATION WAS FILED BY THE ASSESSEE THE AO AD DED THESE AMOUNTS TO THE UNDISCLOSED INCOME OF THE ASSE SSEE. 70. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLAN T AND FIND MERIT IN THE SAME. THE DOCUMENTS CLEARLY INDIC ATE THAT 100 THE MACHINES HAVE BEEN SUPPLIED TO M/S. AGRAWAL ASSOCIATES AS THE BILLS HAVE BEEN RAISED IN THAT NA ME. THE APPELLANT HAD NOTHING TO DO WITH THESE TRANSACTIONS . THE AO DOES NOT APPEAR TO HAVE APPLIED MIND TO THE FACTS A ND DOCUMENTS FURNISHED BY THE APPELLANT. AS THE PURCHA SES ARE BORNE OUT BY THE ACCOUNT BOOKS NO ADDITION WAS JUS TIFIED. THE ADDITION OF RS.4 63 000/- IS THEREFORE DELETE D. AS REGARDS SALES THE APPELLANT FILED THE PHOTOSTAT COPY OF THE RELEVANT SEIZED PAPERS AND CONTENDED TH AT THE CORRECT TOTAL OF THE TRANSACTIONS IS RS.3 78 591/- AND NOT RS.3 62 561 /- AS MENTIONED BY THE A.O. IT IS SUBMITTED THAT THE ASSESSEE HAD NO RELATION WITH THESE TRANSACTION S. THE SALES IN FACT WERE EFFECTED BY M/S. AGARWAL ASSOCIATES ANOTHER REGULAR ASSESSEE IN THE GROUP WHOSE PROPRIE TOR IS SHRI MUKESH AGARWAL. A CERTIFICATE ALONG WITH A STA TEMENT AND COPY OF THE RELEVANT IN VOICES RAISED BY M/S. AGARWAL ASSOCIATES IN FAVOUR OF DIFFERENT PARTIES AS MENTIO NED IN THE SEIZED DOCUMENTS HAS BEEN FILED. SINCE ALL THESE TRANSACTIONS WERE EXECUTED BY M/S. AGARWAL ASSOCIATES AND ADMITTED BY THEM THERE WAS NO BASIS OR JUSTIFICATIO N FOR THEIR INCLUSION AS UNRECORDED SALES IN THE HANDS OF THE ASSESSEE. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE DOCUMENTS FILED. THE AO HAS SUMMARI LY REJECTED THE CONTENTION OF THE APPELLANT. IF HE HAD ANY DOUBT REGARDING THESE TRANSACTIONS HE COULD HAVE M ADE ENQUIRIES WITH THE PURCHASERS OF THE MACHINERY. HE ALSO COULD HAVE CONSIDERED THE SAME IN THE HANDS OF SH. MUKESH KUMAR THE PROPRIETOR OF M/S. AGRAWAL ASSOCIATES WHOSE BLOCK ASSESSMENT WAS ALSO COMPLETED BY HIM. THIS ADDITION BEING WITHOUT ANY BASIS THE SAME IS DELETED. 71. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT AN ADDITION OF RS. 8 25 561/- WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF PAGES 3 AND 4 OF LPS-8 WHICH CONTAINED LIST OF PURCHASES AND SALES OF RS. 101 4 63 000/- AND RS. 3 62 561/- RESPECTIVELY. DURIN G THE COURSE OF APPELLATE PROCEEDINGS THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) SENT THE DOCUMENTARY EVIDEN CE FILED BY THE ASSESSEE WHICH INDICATED THAT THESE HA VE BEEN SUPPLIED TO AGRAWAL ASSOCIATES AS THE BILLS HAVE BE EN RAISED IN THAT NAME. THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) SENT THESE DOCUMENTS TO THE ASSESSING OFF ICER FOR VERIFICATION AND REPORT THEREON. HOWEVER NO ADVER SE COMMENT WAS MADE BY THE ASSESSING OFFICER. THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT DURING THE REMAND PROCEEDINGS THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THE FACTS AND DOCUMENTS FUR NISHED BY THE ASSESSEE. BY OBSERVING THAT THESE PURCHASES WERE DULY RECORDED IN THE ACCOUNT BOOKS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT NO ADDITION WAS JUSTIFIED. ACCORDINGLY THE ADDITION OF RS.4 63 000/- ON ACCOUNT OF SUPPLY OF MACHINES TO M/S AGRAWAL ASSOCIATES WAS DELETED. 72. WITH REGARD TO THE TRANSACTION OF RS.3 62 561/ - THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE CORRECT TOTAL OF THE TRANSACTIONS WORKED 102 OUT TO BE RS.3 78 591/-. IT WAS A TRANSACTION OF S ALES EFFECTED BY M/S AGRAWAL ASSOCIATES WHICH IS A REGUL AR ASSESSEE IN THE GROUP WHOSE PROPRIETOR IS SHRI MUKE SH AGRAWAL. A CERTIFICATE ALONG WITH STATEMENT AND CO PY OF RELEVANT INVOICE RAISED BY M/S ASSOCIATES IN THE NA ME OF DIFFERENT PARTIES AS MENTIONED IN THE SEIZED DOCUME NTS WERE FILED. BY OBSERVING THAT THESE TRANSACTIONS W ERE EXECUTED BY M/S AGRAWAL ASSOCIATES AND ADMITTED BY THEM THERE WAS NO BASIS OR JUSTIFICATION FOR THEIR INCLU SION AS UNRECORDED SALES IN THE HANDS OF THE ASSESSEE. IN T HESE CIRCUMSTANCES THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) DELETED THE ADDITION BY OBSERVING THAT TH E ASSESSING OFFICER HAS NOT MADE ANY INQUIRY TO FIND THE CORRECTNESS OF THE DOCUMENTS FILED DURING THE COURS E OF SEARCH AND EVEN IF ANY ADDITION IS TO BE CONSIDERED THE SAME IS TO BE IN THE HANDS OF MUKESH KUMAR PROPRIE TOR OF M/S AGRAWAL ASSOCIATES WHOSE BLOCK ASSESSMENT WAS A LSO COMPLETED BY THE SAME ASSESSING OFFICER. THUS THE ADDITION MADE IN THE HANDS OF THE ASSESSEE WAS DELE TED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THE DETAILED FINDINGS RECORDED BY THE LEARNED COMMISSIO NER OF 103 INCOME TAX (APPEALS) AS NARRATED ABOVE HAVE NOT BEE N CONTROVERTED BY BRINGING ANY POSITIVE MATERIAL ON R ECORD. ACCORDINGLY THE ACTION OF THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) IS CONFIRMED. 73. AN ADDITION OF RS. 1 00 75 010/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASES . IN THIS REGARD THE OBSERVATION OF THE ASSESSING OFFICE R WAS THAT INCRIMINATING LOOSE PAPERS SEIZED DURING THE S EARCH PROCEEDINGS AS PER PAGES 2 TO 102 OF LPS-5 CONTAINE D BILLS OF PURCHASES MADE FROM M/S. AMIT ENTERPRISES SHYAM PRASAD MUKHERJEE COMPLEX BALAGHAT (MP) FOR THE PERIOD 02.04.2002 TO 30.04.2002 AMOUNTING TO RS.1 00 75 01 0/ -. ALONGWITH THESE BILLS TRANSPORT BILTIES OF M/S. THAKAR GOODS CARRIER NEAR HOTEL ANAND BALAGHAT AND FORWA RDING LETTER OF M/S. AMIT ENTERPRISES WAS FOUND. THE AO OBSERVED IN THE ASSESSMENT ORDER THAT AFTER MAKING ENQUIRY W ITH ITO BALAGHAT FOLLOWING FACTS EMERGED: A. NO CONCERN IN THE NAME OF M/S. AMIT ENTERPRISES EXISTED AT THE SAID ADDRESS. HOWEVER ONE SHOP HAD BEEN TAKEN ON RENT BY ONE SH. AMAR ISRANI. A FIRM I N THE NAME OF M/S. AMIT ENTERPRISES WAS REGISTERED WITH MP COMMERCIAL TAX OFFICE BALAGHAT WHOSE PROPRIETOR'S NAME WAS SH. AMAR ISRANI BUT ITS BUSINESS WAS SHOWN AS TRADING IN ATTA MAIDA AND 104 SUJI. B.NO CONCERN BY THE NAME THAKAR GOODS CARRIER EVER EXISTED AT THE GIVEN ADDRESS . THE AO CONFRONTED THE ASSESSEE WITH THIS INFORMATIO N AND ASKED HIM TO EXPLAIN THESE PURCHASES. THE ASSESSEE REPLIED THAT NO SUCH TRANSACTIONS TO THE TUNE OF THIS MUCH AMOUNT WERE CARRIED OUT BY HIM WITH AMIT ENTERPRISES. AS T HE DOCUMENTS WERE FOUND AT THE PREMISES OF THE ASSESSE E THE AO TREATED THESE TRANSACTIONS AS THE BOGUS PURCHASE S OF THE ASSESSEE AND MADE THE ADDITION OF RS.1 00 75 010/- TO HIS UNDISCLOSED INCOME. 74. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS V IS- -VIS THE ASSESSING OFFICERS ORDER AND THE REMAND REPORT THEREON THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBS ERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE DETAILS AND DOCUMENTS FURNISHED. THE AO HAS OBSERVED IN THE ASSESSMENT ORDER THAT TH E APPELLANT DENIED ANY TRANSACTIONS WITH M/S. AMIT ENTERPRISES AND SINCE THE DOCUMENTS WERE FOUND AT HIS PREMISES AND AS SUCH THE SAME BELONGED TO HIM HE WAS TREATING THE SAME AS RELATING TO HIS BOGUS PURCHASES. BUT THE APPELLANT HAS FILED THE COPIES O F ACCOUNT OF THE CONCERNED PARTY AND CONFIRMED THE TRANSACTIONS AS HIS OWN. THE AO APPEARS TO HAVE 105 PROCEEDED ON HALF BAKED INFORMATION. TO ENTER INTO THESE KINDS OF TRANSACTIONS ONE DOES NOT NEED AN ELABORATE OFFICE BUILDING UNLESS ONE IS A MANUFACTU RER HIMSELF. IF HE HAS TO RECEIVE ORDERS AND ARRANGE FO R THE SUPPLIES FROM A MANUFACTURER THAT CAN BE DONE EVEN FROM HIS RESIDENCE. IT STOOD CONFIRMED THAT A SHOP AT THE GIVEN ADDRESS WAS TAKEN ON RENT BY SH. AMAR ISRANI THE PROPRIETOR OF M/S. AMIT ENTERPRISES AND THE LATTER WAS REGISTERED WITH MP COMMERCIAL TAX DEPARTMENT. THE AO SHOULD HAVE MADE ENQUIRIES WITH CT DEPARTMENT TO VERIFY THE EXTENT OF SALES MADE BY THAT CONCERN. HE FAILED TO DO SO EVEN IN REMAND PROCEEDINGS. HE ALSO DENIED NATURAL JUSTICE TO THE APPELLANT BY NOT GIVING HIM OPPORTUNITY TO REBU T THE FINDINGS OF ITO BALAGHAT. IT IS A CASE OF PURCH ASE OF GOODS FOR WHICH PAYMENT HAS BEEN MADE BY DRAFTS/CHEQUES TO ESTABLISH THAT THE TRANSACTIONS WERE GENUINE. THE A.O. SHOULD HAVE MADE PROPER ENQUIRIES AND ESTABLISHED THAT BY RECORDING THE STATEMENT OF THE SELLER IN THE PRESENCE OF THE ASSE SSEE WITH AN OPPORTUNITY TO CROSS EXAMINE. IN THIS CASE THE STATEMENT OF THE PROPRIETOR SH. AMAR ISRANI SHOULD ALSO HAVE BEEN RECORDED BY ITO BALNGHAT OR THE AO T O VERIFY THE FACTS. THE ALSO IGNORED THE FACTS THAT T HESE PAPERS ALSO CONTAINED BILLS OF PURCHASES FROM OTHER PARTIES AND THROUGH DIFFERENT TRANSPORTERS BUT HE TREATED THE SAME AS GENUINE WITHOUT MAKING ANY ENQUIRIES. HE HAS NOT TRIED TO GO DEEPER IN INVESTIGATION AND TREATED THE PURCHASES OF SUCH A HUGE AMOUNT IN CASUAL MANNER. EVEN DURING THE APPELLATE PROCEEDINGS AFTER HE WAS ASKED TO EXAMINE THE ISSUE AFRESH BY MAKING PROPER ENQUIRIES AND GIVING THE APPELLANT OPPORTUNITY OF BEING HEARD HE DISPOSED OFF THIS ISSUE BY MERELY STATING THAT SINC E M/S. AMIT ENTERPRISES WAS HELD AS A BOGUS FIRM AND THE ASSESSEE HAD DENIED ANY DEALING WITH THAT CONCERN THE ADDITION MADE WAS JUSTIFIED. IN THE PROCESS HE FORGOT THAT THE MATTER HAD BEEN REMANDED TO HIM ONLY BECAUSE SUBSTANTIVE EVIDENCE HAD BEEN FURNISHED BY THE APPELLANT. IT WAS THE DUTY 106 OF THE AO TO SEND THE REMAND REPORT AFTER MAKING COMPREHENSIVE ENQUIRIES OTHERWISE THE VERY PURPOSE OF THE REMAND REPORT GETS DEFEATED. HE MADE NO ATTEMPT AT VERIFYING AND RECONCILING FIGURES IN THE ACCOUNT OF AMIT ENTERPRISES VIS-A-VIS THE BANK STATEMENTS. WHEN SOLID DOCUMENTARY EVIDENCE REGARDING A CONTENTION WAS AVAILABLE BEFORE HIM HOW COULD THE AO DUB THE SAME AS AN AFTERTHOUGHT? IN TH E FACTS AND CIRCUMSTANCES OF THE CASE IT IS HELD THAT THERE WAS NO MATERIAL AT ALL ON RECORD FOR THE A.O. TO DRAW A CONCLUSIVE PROOF THAT THE TRANSACTIONS IN QUESTION WERE TRANSACTIONS OF BOGUS PURCHASES. NO EVIDENCE OR ANY COGENT MATERIAL HAS BEEN BROUGHT ON RECORD BY THE A.O. TO SUGGEST THAT THE ASSESSEE HAD MADE ANY PAYMENT OUTSIDE THE BOOKS OR A/C AS THE TRANSACTION WERE RECORDED AND THE PAYMENTS HAD BEEN MADE THROUGH BANKING CHANNELS. IN VIEW OF THE ABOVE DISCUSSION THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES OF RS.1 00 75 010/- IS DELETED. 75. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE ADDITION OF RS.1 00 75 010/- WAS MADE BY THE ASSESSING OFFICER AS PER PAGES 2 TO 102 OF LPS-5 WH ICH CONTAINED BILLS OF PURCHASES MADE FROM M/S AMIT ENTERPRISES SHYAMAPRASAD MUKHERJEE COMPLEX BALAGH AT FOR THE PERIOD 2.4.2002 TO 30.4.2002 AMOUNTING TO RS.1 00 75 010/-. WE FIND THAT ALONG WITH THESE BI LLS TRANSPORT BILTIES OF M/S THAKKAR GOODS CARRIER AND FORWARDING LETTER OF M/S AMIT ENTERPRISES WAS ALSO FOUND. 107 BY OBSERVING THAT THE ASSESSEE HAS DENIED ANY TRANS ACTION WITH M/S AMIT ENTERPRISES AND SINCE THE DOCUMENTS W ERE FOUND AT HIS PREMISES THE SAME BELONGED TO HIM TH E SAME WAS TREATED BY THE ASSESSING OFFICER AS BELONGING T O THE ASSESSEE INDICATING BOGUS PURCHASES. WE FOUND THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FILED C OPIES OF ACCOUNT OF THE CONCERNED PARTY AND CONFIRMED THE TRANSACTION AS HIS OWN. DURING THE APPELLATE PROCE EDINGS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA D ALSO FOUND THAT THE SHOP AT THE GIVEN ADDRESS WAS TAKEN ON RENT BY AMAR ISRANI PROPRIETOR OF M/S AMIT ENTERPRISES A ND THE FIRM WAS ALSO REGISTERED WITH M.P. COMMERCIAL TAX DEPARTMENT. EVEN DURING THE REMAND PROCEEDINGS THE ASSESSING OFFICER HAS FAILED TO MAKE ANY INQUIRY FR OM THE COMMERCIAL TAX DEPARTMENT NOR WAS ANY OPPORTUNITY G IVEN TO THE ASSESSEE TO REBUT THE FINDINGS OF ITO BALAG HAT ACCORDING TO WHICH NO CONCERN IN THE NAME OF AMIT ENTERPRISES EXISTED AT SUCH ADDRESS. IN THESE CIRCUMSTANCES THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) OBSERVED THAT IT IS A CASE OF PURCHASE OF GOODS FOR WHICH PAYMENTS HAVE BEEN MADE BY DRAFTS/CHEQUES TO 108 ESTABLISH THAT THE TRANSACTIONS WERE GENUINE. THE ASSESSING OFFICER SHOULD HAVE MADE PROPER INQUIRIES AND SHOULD HAVE ALLOWED THE ASSESSEE TO CROSS-EXAMINE T HE STATEMENT OF THE SELLER. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE STATEMENT OF TH E PURCHASER AMAR ISRANI WAS ALSO FOUND RECORDED BY TH E ITO BALAGHAT. IT WAS ALSO FOUND THAT THE ASSESSING OFF ICER HAS IGNORED THE FACTS THAT THESE PAPERS ALSO CONTAINED THE BILLS OF PURCHASES FROM OTHER PARTIES THROUGH DIFFERENT TRANSPORTERS. EVEN DURING THE REMAND PROCEEDINGS TH E ASSESSING OFFICER WAS ASKED TO MAKE INQUIRY AFRESH AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD B UT THE ASSESSING OFFICER FAILED TO DO SO. UNDER THESE CIRCUMSTANCES REMANDING THE MATTER BACK TO THE ASSESSING OFFICER WILL AMOUNT TO PUTTING THE ASSESS EE AGAIN ON HARD ROCK. THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) HAD ALREADY GIVEN OPPORTUNITY TO THE ASSE SSING OFFICER TO MAKE INQUIRY AND SUBMIT HIS DETAILED REM AND REPORT. THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) STATED THAT THE ASSESSING OFFICER HAS MADE NO ATTEM PT FOR VERIFYING AND RECONCILING FIGURES IN THE ACCOUNT OF AMIT 109 ENTERPRISES VIS--VIS BANK STATEMENTS. BY OBSERVING THAT THE ASSESSEE HAS MADE PAYMENT THROUGH REGULAR BOOKS OF ACCOUNTS AS THE TRANSACTIONS WERE RECORDED AND THE PAYMENTS HAD BEEN MADE THROUGH BANKING CHANNELS TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE ADDITION. NOTHING WAS BROUGHT ON RECORD TO CONTROV ERT THIS FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). WE THEREFORE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS). ACCORDINGLY THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION MADE ON ACCOUNT OF PURCHASES IS CONFIRMED. 76. AN ADDITION OF RS. 1 25 305/- WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS PURCHASE OF M ILK AND LOANS AND INTEREST THEREON. IN THIS REGARD THE AS SESSING OFFICER OBSERVED THAT PAGE 25 OF SEIZED DOCUMENT AS PER LPS-3 CONTAINED DETAILS OF MILK PURCHASES OF RS.16 055/- FROM 18.07.2002 TO 01.08.2002 LOAN GIVEN OF RS.95 000/- AND INTEREST OF RS.14 250/- RECEIVED THEREON. IN THE ABSENCE OF NO REPLY FROM THE ASSESSEE THE AO ADDED THESE AMOUNTS TOTALING RS.1 25 305/- TO THE UNDISCLOSED INCOME. 110 77. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLAN T. THE DOCUMENT IN QUESTION CANNOT BE TERMED AS DEAF AND DUMB DOCUMENT. IT CLEARLY INDICATES THAT A N AMOUNT OF RS.95 000/- WAS ADVANCED AS LOAN FOR 6 MONTHS. THE AMOUNT OF RS.14 250/- HAS BEEN WORKED OUT FOR 6 MONTHS @RS.2 375/- PER MONTH. AT THE BOTTOM OF THE DOCUMENT THE CALCULATION OF RS.2 375/- HAS BEEN GIVEN AS 950 + 950 + 475 = 2375. IT PROBABLY IMPLIES THAT THE INTEREST WAS CHARGED AT DIFFERENT RATES FOR DIFFERE NT PERIODS. SIMILARLY THE CALCULATION OF MILK CHARGES CANNOT BE BRUSHED ASIDE AS UNCLEAR IN VIEW OF THE FACT THA T MILK IS COMPULSORILY USED IN EVERY HOUSEHOLD. THE APPELLANT BEING THE HEAD OF THE FAMILY AND ALSO AS THE DOCUME NT HAS BEEN TREATED TO BE BELONGING TO HIM THIS ADDIT ION HAS ALSO BEEN RIGHTLY MADE. ACCORDINGLY THE TOTAL ADDITION OF RS.1 25 305/- IS CON FIRMED. 78. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE ASSESSING OFFICER MADE THE ADDITION OF RS.1 25 305/- ON ACCOUNT OF PURCHASE OF MILK LOAN S AND INTEREST THEREON. THE ASSESSING OFFICER FOUND THAT PAGES 25 OF THE SEIZED DOCUMENT LPS-3 CONTAINED DETAILS OF M ILK PURCHASE OF RS. 16 055/- AND AN ENTRY OF LOAN OF RS . 95 000/- AND INTEREST OF RS. 14 250/- RECEIVED THER EON. AS THE ASSESSEE COULD NOT SATISFACTORILY REPLY THE DOC UMENT THE ASSESSING OFFICER MADE THE ADDITION OF RS.1 25 305/- 111 UNDER THE HEAD UNDISCLOSED INCOME OF THE ASSESSEE . A PERUSAL OF THE SAID DOCUMENT REVEALED THAT AN AMOUN T OF RS.95 000/- WAS ADVANCED AS LOANS FOR SIX MONTHS I NTEREST WAS WORKED OUT THEREON AT RS.14 250/- @ RS. 2375/- PER MONTH. THE DOCUMENT ALSO CONTAINED CALCULATION OF THE AMOUNT OF INTEREST. IT CLEARLY INDICATES THAT THE ASSESSEE HAS ADVANCED A LOAN AND ALSO CHARGED INTEREST THERE ON FOR DIFFERENT PERIODS. SIMILARLY ENTRY REGARDING MILK PURCHASES INDICATES THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE MILK. AS NOTHING COULD BE POINTED OUT BY THE ASSESSEE TO INDICATE THE SOURCE OF FUND THE AD DITION MADE WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). EVEN BEFORE US THE ASSESSEE COULD NOT BRING ON RECORD ANY DOCUMENT TO SUGGEST THE SOU RCE OF FUNDS INVESTED AS PER SEIZED PAGE 25 OF LPS-3. WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS). 79. IN THE RESULT GROUND TAKEN BY THE ASSESSEE IS DISMISSED. 80. AN ADDITION OF RS. 5 LACS WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTM ENT IN 112 SURYA FARM HOUSE. THE A.O. MADE THIS ADDITION ON TH E BASIS OF LOOSE PAPERS AT PAGE NUMBERS 26 & 27 OF SEIZED DOCUMENTS AS LPS-3. PAGE 27 MENTIONS THE TRANSACTIO N RELATED TO SURYA FARM AMOUNTING TO RS.10.61 LAKHS. OUT OF THIS AMOUNT RS.50 000/- WERE PAID BY CHEQUE AND RS.50 000/- IN CASH ON 13.02.1997 WHILE ANOTHER AMOUNT OR RS.50 000/- WAS PAID BY CHEQUE AND RS.1 OO OOOI- IN CASH ON 18.02.1997. SIMILARLY ON PAGE 26 U NDER THE HEAD 'RAMA' IT IS MENTIONED THAT THE DEAL WAS MADE ON 05.05.97 OUT OF WHICH RS.1 LAKH + RS.1 LAKH WERE PAID BY CHEQUE AND RS.3.5 LAKHS IN CASH. DURING THE SEARCH PROCEEDINGS IN HIS STATEMENT RECORDED ON 14.11.200 2 SH. MUKESH AGRAWAL STATED THAT THE DOCUMENTS WERE WRITTEN BY SH. KAILASH AGRAWAL AND RELATED TO THE PURCHASE OF SURYA FARM ON KHANDWA ROAD INDORE BY THE AGRAWAL FAMILY. HE ALSO STATED THAT THE DETAILS OF PAYMENTS WERE KNOWN TO SH. KAILASH A GRAWAL. DURING THE ASSESSMENT PROCEEDINGS NO EXPLANATION REGARDING THESE DOCUMENTS WAS FILED. THEREFORE THE AO TREATED THE AMOUNT OF RS.5 00 000 /- AS UNDISCLOSED INCOME OF THE ASSESSEE. 113 81. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLAN T. HE HAS STRAIGHTWAY DENIED ANY TRANSACTION AS PER THE N OTINGS ON THE SEIZED DOCUMENTS. HE HAS TRIED TO TENTATIVEL Y EXPLAIN THAT THESE MIGHT DENOTE SOME POSSIBLE DEAL OF A BIG GER PLOT WHICH DID NOT COME THROUGH. BUT HE HAS NOT BEEN ABL E TO EXPLAIN SPECIFICALLY AS TO WHICH WAS THE LAND IN QU ESTION. DURING THE SEARCH PROCEEDINGS SH. MUKESH EXPRESSLY ADMITTED THAT THE DOCUMENTS RELATED TO PAYMENTS MAD E BY AGRAWAL FAMILY TOWARDS PURCHASE OF SURYA FARM AND THAT THE DOCUMENTS WERE WRITTEN BY THE APPELLANT WHO KNEW THE DETAILS OF PAYMENTS. THE APPELLANT DID NOT APPEAR B EFORE THE INVESTIGATION WING DURING THE POST SEARCH PROCEEDIN GS TO EXPLAIN THESE PAPERS. HE ALSO DID NOT EXPLAIN THE S AME BEFORE THE AO ALSO. EVEN DURING THE APPELLATE PROCE EDINGS HE HAS GIVEN NO SPECIFIC DETAILS SO THAT THE AO COU LD EXAMINE THE SAME DURING REMAND PROCEEDINGS. THE EXPLANATION THAT THESE DOCUMENTS RELATED TO THE PUR CHASE OF LAND BY THE TWO LADIES OF THE FAMILY AS MENTIONED A BOVE APPEARS TO MISGUIDE AND DISTRACT THE DEPARTMENT. AS THE APPELLANT HAS NOT BEEN ABLE TO CONVINCINGLY EXPLAIN THE NATURE OF THESE DOCUMENTS I HAVE NO ALTERNATIVE BUT TO ACCEPT THE CONTENTION OF THE AO AND UPHOLD HIS ACTI ON. ACCORDINGLY ADDITION OF RS.5 00 000/- IS CONFIRMED. IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSE E THAT DURING THE COURSE OF SEARCH AT THE RESIDENCE TWO LO OSE PAPERS AVAILABLE AT PAGES 253 AND 254 OF THE PAPER BOOK WERE FOUND. BASED ON CERTAIN FIGURES MENTIONED IN THESE PAPERS THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS. 5 LACS AS PER DISCUSSION IN PARA 21 OF THE ASSESSING OFFICER. 114 THE SUBMISSIONS OF THE ASSESSEE ARE AT PAGE 252 OF THE PAPER BOOK. THE FACTS ARE THAT THE ASSESSEE HAS NO T PURCHASED AND MADE ANY INVESTMENT IN SURYA FARM IN FACT SMT. VANDANA W/O NIRANJAN ANDSMT. SANGEETA W/O MAHESH AGRAWAL HAS PURCHASED A PART OF LAND VIDE RE GD. SALE DEED DATED 20.5.1997 FOR A SUM OF RS. 2 LACS. THE PAYMENT HAS BEEN MADE BY THEM BY CHEQUE WHICH FACT IS CLEAR FROM THE REGD. SALE DEED AVAILABLE IN THE PAP ER BOOK AT PAGE 225 TO 261. SINCE THE ASSESSEE HAS NOT INVE STED ANY AMOUNT IN RESPECT OF THE ABOVE PROPERTY THE ADD ITION DESERVES TO BE DELETED. HE FURTHER CONTENDED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DISCUSSED THE ADDITIONS IN PARA 3.21 AT PAGES 39 AN D 40 AND CONFORMED THE ADDITION BASED ON THE ABOVE PAPER WHICH HAS NO EVIDENCE VALUE. THE NOTHING HAVE BEEN MADE FOR THE LAND PURCHASED BY THE TWO LADY MEMBERS OF T HE FAMILY. IT HAS BEEN HELD BY THE HONBLE RAJASTHAN HIGH COURT IN 298 ITR PAGE 98 THAT NO ADDITION CAN BE MA DE ON PRESUMPTION ASSUMPTION AND INFERENCES. IN 87 ITJ P AGE 151 IT HAS BEEN HELD THAT FOR MAKING ANY ADDITION T HERE SHOULD BE POSITIVE CORROBORATIVE EVIDENCE. 115 82. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. AN ADDITION OF RS.5 LACS WAS MADE ON THE B ASIS OF SEIZED PAGE NOS. 26 AND 27 OF LPS-3 WHICH CONTAINED TRANSACTIONS RELATING TO SURYA FARM AMOUNTING TO RS .10.6 LACS. THE DOCUMENTS ALSO INDICATED THAT AN AMOUNT O F RS.50 000/- WAS PAID BY CHEQUE AND RS. 50 000/- IN CASH ON 13.2.1997. THE DOCUMENT ALSO CONTAINED FURTHER D ETAILS REGARDING CHEQUE PAYMENT OF RS. 50 000/- AND CASH PAYMENT ON 18.2.1997. DURING THE COURSE OF SEARCH STATEMENT OF SHRI MUKESH AGRAWAL WAS RECORDED ON 14.11.2002 WHEREIN HE STATED THAT THE SAID DOCUMENT S WERE WRITTEN BY SHRI KAILASH AGRAWAL AND RELATED TO SURYA FARM OF KHANDWA ROAD INDORE. AS THE ASSESSEE COUL D NOT EXPLAIN THE SOURCE OF FUND THE ASSESSING OFFICER M ADE THE ADDITION OF RS. 5 LACS. 83. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION BY OBSERVING THAT THE ASSESSEE COULD NOT EXPLAIN THE ENTRY NOR APPEARED B EFORE THE INVESTIGATION WING EVEN DURING POST SEARCH PROCEEDINGS. EVEN DURING THE APPELLATE PROCEEDINGS NO SPECIFIC DETAILS WERE FURNISHED SO AS TO ENABLE THE 116 ASSESSING OFFICER TO EXAMINE THE SAME DURING THE RE MAND PROCEEDINGS. AS NEITHER THE ENTRY IN THE LOOSE PAP ERS 26 AND 27 NOR THE SOURCE OF FUNDS COULD BE EXPLAINED B Y THE ASSESSEE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ADDITION OF RS. 5 00 000/-. 84. DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND UNEXPLAINED STOCK DISCREPANCY OF RS.20 27 605/-. THE TOTAL STOCK OF M/S. AGRAWAL ASSOCIATES AND M/S. AGRAWAL JUTE BAG INDUSTRIES AS PER INVENTORY MADE WAS FOUND AT RS.62 72 735/- AS AGAINST 83 00 340/- AS PER BOOKS OF ACCOUNT. THUS THERE WAS DIFFERENCE OF RS.20 27 605/I-. THIS POSIT ION REGARDING THE INVENTORY PREPARED AT THE TIME OF SEA RCH WAS ACCEPTED AS CORRECT BY SH. MAHESH AGRAWAL AND SH. MUKESH AGRAWAL SO FAR AS QUANTITY QUALITY AND VALU ATION OF STOCK WERE CONCERNED. DURING THE ASSESSMENT PROCEEDINGS WHEN THE AO ASKED THE ASSESSEE TO EXPL AIN THE POSITION NO SATISFACTORY EXPLANATION WAS FURNI SHED. THE STOCK OF THE TWO CONCERNS WAS SO MIXED UP THAT IT WAS NOT POSSIBLE TO ACCURATELY ASCERTAIN THE STOCK OF EACH 117 CONCERN. THEREFORE TREATING THIS DIFFERENCE AS SAL ES OF THE APPELLANT MADE OUTSIDE BOOKS OF ACCOUNT THE AO APP LIED A GROSS PROFIT RATE OF 7.5% AND WORKED OUT THE UNDECL ARED PROFIT AT RS.1 52 070/-. 85. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT . IT IS APPARENT THAT DUE TO THE FACT THAT THE STOCK OF TWO CONCERNS WAS INTRICATELY MIXED UP SO AS TO MAKE IT IMPOSSIBLE TO SEGREGATE THE SAME EACH CONCERN- WISE. THIS FACT HAS BEEN ADMITTED BY THE APPELLANT HIMSELF. THEREFORE THE NATURE OF BUSINESS BEING TH E SAME THE ADDITION IN THE HANDS OF THE APPELLANT IS UPHELD. THE APPELLANT CONTESTED THE APPLICATION OF GROSS PROFIT RATE OF 7.5% AND SUGGESTED THE APPLICATION OF A RATE OF 1%. BUT HE HAS NOT CLARIFI ED AS TO HOW THE RATE OF 1 % WAS JUSTIFIED. THE RATE WAS APPLIED WHILE PREPARING THE TRADING ACCOUNT DURING THE SEARCH. THEREFORE THE APPLICATION OF RATE OF 7 .5% IS ALSO UPHELD. BUT IT IS ALSO CORRECT THAT THE AO WORKED OUT RS.1 52 070/- AS UNDISCLOSED PROFIT BUT HE ACTUALLY ADDED THE TOTAL AMOUNT OF THE DIFFERENC E IN STOCK. HE IS DIRECTED TO CORRECT THE POSITION. ACCORDINGLY THE ADDITION OF RS.1 52 070/- IS CONFIRMED. 86. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE ADDITION OF RS. 1 52 070/- WAS MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF PROFIT ATTRIBUTABLE TO DISCREPANCY IN STOCK FOUND DURING THE COURSE OF SEA RCH. 118 DURING THE SEARCH PHYSICAL INVENTORY WAS TAKEN ACC ORDING TO WHICH THERE WAS TOTAL STOCK OF RS. 62 72 735/- A S AGAINST STOCK OF RS.83 00 340/- AS PER THE BOOKS OF ACCOUNTS. THE DIFFERENCE OF RS. 20 27 605/- WAS FO UND TO BE SHORT. THE ASSESSING OFFICER AFTER APPLYING THE GROSS PROFIT RATE OF 7.5% WORKED OUT PROFIT ON SHORTAGE O F STOCK WHICH WORKED OUT TO BE AT RS. 1 52 070/-. THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR CONFIRMING THE ADDITION BY APPLYING GROSS PROFIT RATE ON THE SHORTAGE OF STOCK FOUND DURING THE COURSE OF SEARCH. IN VIEW OF OUR DISCUSS ION HEREINAFTER WITH REGARD TO THE GROSS PROFIT RATE PR EVAILING IN THIS WHOLESALE TRADE AND ALSO ACCEPTED BY AUDITOR O F GROUP CONCERN OF THE ASSESSEE WE DIRECT THE ASSESSING OF FICER TO APPLY THE GROSS PROFIT RATE OF 2.5% INSTEAD OF 7.5% ON SUCH SHORTAGE OF STOCK TREATING THE SAME AS SOLD OUTSIDE THE BOOKS OF ACCOUNTS. 87. IN THE RESULT THE GROUND TAKEN BY THE ASSESSE E IS ALLOWED IN PART. 119 88. AN ADDITION OF RS. 1 LAC WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH BA LANCE. IN THIS REGARD THE OBSERVATION OF THE ASSESSING OFF ICER WAS THAT DURING THE SEARCH PROCEEDINGS AT THE BUSINESS PREMISES OF THE APPELLANT THE CASH WAS FOUND AT RS.2 80 440/- AS AGAINST RS.2 1 0 641/- AS PER COMPUTERIZED CASH BOOK. SOME PAYMENTS MADE BY THE ASSESSEE ON 13.11.2002 REMAINED TO BE POSTED. AS TH E ASSESSEE COULD NOT FILE ANY EXPLANATION REGARDING T HE DISCREPANCY THE A 0 ADDED AN AMOUNT OF RS.1 00 000/- TO THE UNDISCLOSED INCOME OF THE ASSESSEE. 89. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT BUT DO NOT FIND FORCE IN THE SAME. FIRST OF ALL THE CONTENTION OF THE APPELLANT THAT THIS ISSUE COULD NOT BE CONSIDERED IN A BLOCK ASSESSMENT AS IT WAS ONLY DURING A SURVEY OPERATION THAT THE CASH WAS FOUND IN EXCESS CANNOT BE ACCEPTED AS THE SURVEY WAS CONDUCTED AS A PART OF THE SEARCH PROCEEDINGS SIMULTANEOUSLY. ANY INFORMATION COLLECTED AT THAT TIME COULD BE CONSIDERED IN BLOCK ASSESSMENT PROCEEDINGS. SECONDLY THE CONTENTION OF THE APPELLANT THAT HE COULD NOT EXPLAIN THE POSITION AS HIS STATEMENT WAS NOT 120 RECORDED DURING THE SEARCH PROCEEDINGS CARRIES NO WEIGHT AS HE COULD HAVE CLEARED THE POSITION IN THE POST SEARCH PROCEEDINGS BEFORE THE INVESTIGATION WING OR DURING THE ASSESSMENT PROCEEDINGS. INSTEAD HE CHOSE NOT TO ATTEND THE PROCEEDINGS BEFORE ANY AUTHORITY OF THE I.T. DEPARTMENT. THE PLEA NOW TAKEN IS APPARENTLY AN AFTERTHOGHT WHICH CANNOT BE BELIEVED AS THERE IS NO EVIDENCE TO PROVE THAT RS.1 00 000/- WERE ACTUALLY TAKEN OUT OF RS.1 50 000/- RECEIVED ABOUT A MONTH BACK. IN MY VIEW THE ADDITION HAS BEEN RIGHTLY MADE AND THE SAME IS CONFIRMED. 90. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM RECORD WE FIND THAT THE ADDITION OF RS.1 LAC WAS MADE ON ACCOUNT OF UNEXPLAINED CASH BALANCE. D URING THE COURSE OF SEARCH CASH FOUND AT BUSINESS PREMISE S WAS RS.2 80 440/- AS AGAINST THE CASH OF RS.2 10 641/- AS PER THE COMPUTERS CASH BOOK. AFTER TAKING INTO CONSID ERATION THE FACT THAT SOME OF THE PAYMENTS MADE BY THE ASSE SSEE ON 13.11.2002 REMAINED TO BE POSTED IN THE BOOKS OF ACCOUNTS THE ASSESSING OFFICER MADE AN ADDITION OF RS. 1 LAC ON ACCOUNT OF EXCESS CASH FOUND DURING SEARCH. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFF ICER. IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE T HAT THE ASSESSEE HAD SUBMITTED A COPY OF THE REGISTERED SAL E DEED 121 FOR SALE OF A HOUSE OWNED BY HIM JOINTLY WITH HIS S ON MUKESH ON 6.3.2003 FOR4 A SUM OF RS. 20 31 000/-. T HE COPY OF THE SALE DEED IS AVAILABLE AT PAGES 264 TO 276 OF THE PAPER BOOK. IT WAS SUBMITTED THAT AS PER RECITAL I N THE SALE DEED AT PAGE 266 THE SELLER I.E. ASSESSEE AND HIS S ON MUKESH RECEIVED RS. 3 LACS IN CASH ON 15.10.2002 WH ICH THEY DIVIDED AMONGST THEMSELVES. OUT OF THE SHARE OF THE ASSESSEE OF RS. 1.50 LACS RS. 1 00 000/- WAS KEPT A T THE BUSINESS WHICH WAS FOUND ON THE DATE OF SEARCH I.E. 13.11.2002 AND THUS IT WAS AN EXPLAINED AMOUNT WHIC H WAS RECEIVED BY VIRTUE OF THE SALE DEED IN CASH. 91. IT WAS SUBMITTED THAT AT THE TIME OF THE SEARC H THE ASSESSEE WAS NOT AVAILABLE NEITHER HIS STATEMEN T COULD BE RECORDED AND HENCE THE CORRECT SITUATION AND THE ABOVE FACTS CANNOT BE EXPLAINED. OUR ATTENTION WAS ALSO INVITED TO STATEMENT OF SHRI MUKESH AGRAWAL WHICH WAS RECOR DED AND IN ANSWER TO QUESTION ABOUT EXCESS AVAILABILITY OF RS.1 LAC IT HAS BEEN STATED THAT IT WILL BE EXPLAINED LA TER. 92. IN VIEW OF THE ABOVE FACTS AND AVAILABILITY OF EXPLAINED CASH IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE 122 ASSESSEE THAT THE ADDITION OF RS. 1 00 000/- DESERV ES TO BE DELETED. 93. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FIND FROM THE RECORD THAT THE ASSESSEE WAS IN RECEIPT OF CASH ON ACCOUNT OF SALE OF HIS HOUSE PROPERTY. REGISTERED SALE DEED WAS ALSO PLACEDS AT PAGES 264 TO 276 OF THE PAPER B OOK. WE THEREFORE DIRECT THE ASSESSING OFFICER TO VERI FY THE AVAILABILITY OF CASH. SINCE IT WAS NOT RELATED TO BUSINESS TRANSACTION SAME MAY NOT HAVE BEEN ENTERED IN REGU LAR BOOKS MAINTAINED FOR BUSINESS PURPOSES. IF THE ASS ESSING OFFICER FINDS THAT SUCH CASH WAS UTILIZED ANYWHERE ELSE SAME MAY BE CONSIDERED AS AVAILABLE WITH THE ASSESS EE. IT IS PERTINENT TO MENTION HERE THAT AN ADDITION OF RS .3 LACS HAS ALREADY BEEN MADE BY THE ASSESSING OFFICER SEPA RATELY OUT OF WHICH AN ADDITION OF RS. 1 50 000/- BEING AS SESSEES SHARE IN SALE OF HOUSE OUT OF TOTAL CASH OF RS. 3 L ACS IS RECEIVED HAVE BEEN CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND WE HAVE AL SO CONFIRMED THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ADDITION OF RS. 1 50 0 00/- MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF HI S SHARE 123 OF CASH RECEIVED ON SALE OF HOUSE PROPERTY SITUATED AT 5/2 KALALI MOHALLA INDORE (RELEVANT DOCUMENTS FOR SALE OF HOUSE AND RECEIPT OF CASH IS PLACED AT PAGE 62 TO 6 5 OF LPS- 2). THE ASSESSING OFFICER IS TO DECIDE THE MATTER AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 94. THE NEXT GRIEVANCE OF THE REVENUE RELATES TO DELETION OF ADDITION WHICH WAS MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF UNRECORDED SALES IN THE NAME OF DEVSHREE CORPORATION. 95. AN ADDITION OF RS.2 61 77 419/- WAS MADE ON ACCOUNT OF UNRECORDED SALES. FROM RECORD WE FIND T HAT DURING SEARCH UNRECORDED SALES IN THE NAME OF DEVSH RI CORPORATION WAS FOUND BY THE AO ON THE BASIS OF A PRINT OUT TAKEN FROM THE CPU OF THE SEIZED COMPUTER OF TH E ASSESSEE. THIS CONCERN WAS AN OUTSIDE PARTY AND THE AO WONDERED AS TO WHY THE ASSESSEE HAD MAINTAINED ITS SALES REGISTER IN HIS COMPUTER FOR THE PERIOD 03.04.2002 TO 29.04.2002. AS THE ASSESSEE DID NOT FURNISH ANY EXPLANATION THE AO TREATED THESE SALES AS UNACCOUN TED SALES OF THE ASSESSEE AND MADE AN ADDITION OF RS.2 61 77 419/- 124 96. IN THIS REGARD THE SUBMISSION OF THE ASSESSEE AND THE OBSERVATION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS AS UNDER :- THE ID. A.R. SUBMITTED THAT THE FACT IS THAT M/S. DEVSHRI CORPORATION LOCATED AT 11/1 PEERGALI INDORE IS AN INDEPENDENT DEALER OF OLD AND NEW BARDANA THAT PARTY COMMENCED BUSINESS W.E.F. 1.4.2002 AND THE SAME WAS REGISTERED UNDER THE COMMERCIAL TAX ACT. THE PHOTOCOPY OF THE REGISTRATION CERTIFICATE ISSUED TO THE ABOVE PARTY HAS BEEN FURNISHED BEFORE ME. THE ASSESSEE FURTHER EXPLAINED THAT ONE SHRI JAIPRAKASH KAMYU IS A COMPUTER OPERATOR WHO WAS WORKING WITH T HE ASSESSEE GROUP SINCE LAST 6 YEARS AND DEVOTED 5-6 HOURS FOR A DAY FOR RECORDING THE BUSINESS TRANSACT IONS OF THE ASSESSEE AND OTHER BUSINESS CONCERNS IN THIS GROUP. THE COMPUTER OPERATOR ALSO WORKED FOR 2-3 OT HER PARTIES. WHEN DEVSHRI CORPORATION STARTED THEIR BUS INESS W.E.F. 1.4.2002 THEY ALSO HIRED JAIPRAKASH TO ENTER AND PREPARE A SALES REGISTER FOR THEIR SALES FOR THE PE RIOD 3.4.2002 ONWARDS FOR WHICH SHRI JAIPRAKASH MADE A F ILE IN THE COMPUTER OF THE ASSESSEE AND RECORDED THESE TRANSACTIONS TILL 29.4.2002. THE ASSESSEE WAS NOT A T ALL AWARE THAT THE COMPUTER OPERATOR HAD PREPARED A SAL ES REGISTER OF THE SALES EFFECTED BY M/S. DEVSHRI CORPORATION WHICH CAME TO HIS KNOWLEDGE ONLY AFTER THE CPU WAS OPERATED UPON BY THE INCOME TAX DEPARTMENT. ON COMING TO KNOW OF THIS FACT THE ASSESSEE CONTACTED M/S. DEVSHRI CORPORATION WHO HAVE GIVEN IN WRITING VIDE THEIR LETTER DATED 18.3.2005 THAT THESE TRANSACTIONS RELA TED TO THEM AND THE ASSESSEE SHRI KAILASHCHAND AGARWAL PROPRIETOR OF AGARWAL JUTE BAG INDUSTRIES HAS NOTHI NG TO DO WITH THESE SALES. MIS. DEVSHRI CORPORATION HAS ALSO PROVIDED A COPY OF THEIR ACCOUNT WITH I.D.B.I. BANK FOR THE PERIOD 15.4.2002 TO 30.3.2003 RUNNING IN TO SEVERAL SHEETS. THE LETTER AND THE BANK STATEMENT OF M/S. DEVSHRI CORPORATION HAVE BEEN FURNISHED BEFORE ME ALSO. THE ID. A.R. FURTHER CONTENDED THAT BECAUSE T HE ASSESSEE WAS NOT PROVIDED ADEQUATE OPPORTUNITY ALTHOUGH IT WAS DENIED BEFORE THE AO THAT THE ASSES SEE 125 HAD NO CONNECTION WITH THESE SALES NECESSARY DOCUMENTS NOW FILED COULD NOT BE FILED BEFORE HIM. DUE TO LACK OF TIME THE AO ALSO COULD NOT MAKE ANY INDEPENDENT ENQUIRY FROM M/S. DEVSHRI CORPORATION. HE PLEADED THAT AS THE ADDITION OF SUCH A HUGE AMOUNT HAS BEEN MADE CASUALLY WITHOUT BRINGING ON RECORD ANY COGENT MATERIAL THE SAME DESERVES TO BE DELETED. 97. AFTER CONSIDERING THE ABOVE SUBMISSIONS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS MADE AND FIND MERIT IN THE SAME. THE DOCUMENTS FILED BY THE APPELLANT PROVE THE EXISTENCE OF A CONCERN IN THE NAME OF M/S. DEVSHRI CORPORATION W.E.F. 1.04.2002. AS DURING THE ASSESSMENT PROCEEDINGS THE RELEVANT DOCUMENTS AND DETAILS WERE NOT AVAILABLE WITH THE AO THE SAME WERE FORWARDED TO HIM FOR EXAMINATION AND REMAND REPORT AFTER GIVING THE APPELLANT ADEQUATE OPPORTUNITY OF BEING HEARD. BUT IN HIS REMAND REPORT THE A.O. REJECTED THE CONTENTION OF THE APPELLANT BY MAKING FOLLOWING OBSERVATION: 'THE ISSUE WAS NOT EXPLAINED DURING THE ASSESSMENT STAGE. THE REASON GIVEN IN THE PAPER BOOK IS ONLY AN AFTERTHOUGHT. APPARENTLY THE AO MADE NO EFFORT TO VERIFY THE ACT UAL POSITION. SUCH AN ATTITUDE IN RESPONSE TO THE REQUE ST OF CIT(A) IN REMAND PROCEEDINGS IS NOT APPRECIABLE THE PURPOSE OF REMANDING A MATTER TO THE AO IS TO SEEK ASSISTANCE FROM HIM REGARDING A MATTER IN WHIC H EITHER THE ADDITIONAL EVIDENCE HAS BEEN FILED BY TH E APPELLANT WHICH WAS NOT FILED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS OR WHERE THE MATTER WAS NOT EXAMINED PROPERLY DURING THE ASSESSMENT PROCEEDINGS SO AS TO REACH A LOGICAL CONCLUSION. IN THE INSTANT CASE THE ASSESSMENT ORDER ITSELF 126 APPARENTLY APPEARS TO BE AN ABSTRACTION AND PASSED POST-HASTE WITHOUT ANY SENSE OF ACCOUNTABILITY ON T HE PART OF THE AO. ADDED TO THIS DESPITE AMPLE TIME GIVEN TO THE AO A REPORT ON AN IMPORTANT ISSUE INVOLVING ADDITION OF MORE THAN RS.2.6 CRORES HAS BEEN GIVEN IN A ONE LINER WITHOUT CONSIDERING THE ADDITIONAL EVIDENCE FILED AND EXAMINING THE ISSUE B Y MAKING NECESSARY ENQUIRIES FORM CONCERNED PARTIES INCLUDING THE BANK AND COMMERCIAL TAX DEPARTMENT. UNDER THESE FACTS AND CIRCUMSTANCES AND LACK OF ANY WORTHWHILE ASSISTANCE FROM THE ASSESSING AUTHORITIES I BELIEVE THAT THE DOCUMENTS AND OTHER INFORMATION FI LED ARE GENUINE AND SERVE THE PURPOSE OF PROVING THE CONTENTION AS CORRECT. THE ADDITION OF RS.2 61 77 419/- IS THEREFORE DELETED. AGAINST THE ABOVE ORDER REVENUE IS IN APPEAL BEFOR E US. WITH REGARD TO UNRECORDED SALES OF RS.2.61 CRORES IN THE NAME OF DEVSHREE CORPORATION THE CONTENTION OF THE LEARNED CIT DR WAS THAT SEIZED COMPUTER AT THE ASS ESSEES BUSINESS PREMISES INDICATED SALE OF BARDANA TO VARI OUS PARTIES IN THE NAME OF DEVSHREE CORPORATION. IT WA S FOR THE PERIOD OF ONLY 26 DAYS FROM 3.4.2002 TO 29.4.2002. THE ASSESSEE FAILED TO OFFER ANY EXPLANATION ON THE SAM E BEFORE THE ASSESSING OFFICER. HOWEVER BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE SUBMITTED THAT HIS COMPUTER OPERATOR CREATED SALES REGISTER FOR A THIRD PARTY NAMELY DEVSHREE CORPORATION WHI CH DID 127 NOT RELATE TO THEM. THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) HAS WRONGLY ACCEPTED THIS PLEA OF THE ASSESSEE WITHOUT MEETING OUT THE CONDITIONS LAID DO WN UNDER RULE 46A OF THE ACT. HE FURTHER SUBMITTED TH AT THE PROVISIONS OF SECTION 292C IMPOSE A RESPONSIBILITY ON THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO HIM SELF CONDUCT INQUIRY AND GATHER RELEVANT DETAILS. HE FU RTHER SUBMITTED THAT THE DETAILED INQUIRY HAS NOT BEEN MA DE BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO FIND OUT PAN COPY OF RETURN OF DEVSHREE CORPORATION TO PROVE THAT THE MASSIVE TURNOVER OF RS. 2.61 CRORES IS DUL Y REFLECTED BY THEM IN THEIR RETURNS. HE THEREFORE CONTENDED THAT UNDER THESE CIRCUMSTANCES THE ADDITION DESERV ES TO BE CONFIRMED. 98. ON THE OTHER HAND THE LEARNED AR SUPPORTED TH E FINDINGS RECORDED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) AND CONTENDED THAT ONLY AFTER MAKING INQUIRY FROM THE COMMERCIAL TAX DEPARTMENT AND THE CONCERNE D PARTIES THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) FOUND THAT M/S DEVSHREE CORPORATION IS A GENUINE AN D SEPARATE FIRM THEREFORE NO ADDITION WAS WARRANTED IN THE 128 ASSESSEES HANDS WITH RESPECT TO THE TRANSACTION EN TERED BY M/S DEVSHREE CORPORATION. 99. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM RECORD WE FIND THAT PRINT OUT OF CPU WAS TAKEN BY THE ASSESSING OFFICER WHICH INDICATED SALE S IN THE NAME OF DEVSHREE CORPORATION. SINCE THE ASSESSEE D ID NOT FURNISH ANY EXPLANATION THE ASSESSING OFFICER TREA TED THESE SALES AS UNACCOUNTED SALES OF THE ASSESSEE. DURING THE APPELLATE PROCEEDINGS THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) ACCEPTED THE ASSESSEES EXPLANATION A LONG WITH DOCUMENTARY EVIDENCE WITH REGARD TO SALES IN T HE NAME OF DEVSHREE CORPORATION. AS PER THE DOCUMENTS FURNISHED DEVSHREE CORPORATION WAS LOCATED AT 11/1 PEERGALI INDORE AS AN INDEPENDENT DEALER OF BARDA NA. ITS BUSINESS WAS COMMENCED FROM 1.4.2002. THE FIRM WAS REGISTERED UNDER THE COMMERCIAL TAX ACT. A COPY OF THE REGISTRATION CERTIFICATE ISSUED BY THE COMMERCIAL T AX DEPARTMENT WAS ALSO SUBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). IT WAS EXPLA INED THAT COMPUTER OPERATOR OF THE ASSESSEE FIRM SHRI JAIPRAKASH WAS ALSO WORKING FOR M/S DEVSHREE 129 CORPORATION. THEREFORE WHILE WORKING AT THE ASSESS EES PREMISES HE ALSO POSTED ENTRIES OF DEVSHREE CORPOR ATION IN THE ASSESSEES COMPUTER. THE ASSESSEE WAS NOT AT A LL AWARE THAT THE COMPUTER OPERATOR HAD PREPARED A SALE REGI STER OF ANOTHER FIRM DEVSHREE CORPORATION AND THE SAME CAME TO THE KNOWLEDGE OF THE ASSESSEE AFTER THE CPU WAS OPE RATED BY THE DEPARTMENT. WHEN THIS FACT WAS BROUGHT TO TH E NOTICE OF THE ASSESSEE HE CONTACTED M/S DEVSHREE CORPORATION WHO CONFIRMED IN WRITING ON THEIR LETTE RHEAD DATED 18.3.2005 THAT THESE TRANSACTIONS RELATED TO THEM AND THE ASSESSEE SHRI KAILASH AGRAWAL PROPRIETOR O F M/S AGRAWAL JUTE INDUSTRIES HAS NOTHING TO DO WITH THES E SALES. COPY OF ACCOUNT OF DEVSHREE CORPORATION WITH IDBI B ANK EVIDENCING ITS TRANSACTION FOR THE PERIOD 15.4.2002 TO 30.3.2003 WAS SUBMITTED. THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) SENT ALL THESE EXPLANATIONS OF THE ASSESSEE ALONG WITH DOCUMENTARY EVIDENCE TO THE ASS ESSING OFFICER FOR INQUIRY AND COMMENTS THEREON. AS ALREA DY DISCUSSED THE ASSESSEE WAS NOT GIVEN DUE OPPORTUNI TY DURING THE ASSESSMENT PROCEEDINGS AND THE EVIDENCE FILED IN THE EXPLANATION BEFORE THE LEARNED COMMISSIONER OF 130 INCOME TAX (APPEALS) WAS ACCEPTED UNDER RULE 46A AN D THE SAME WAS ALSO SENT TO THE ASSESSING OFFICER FOR HIS NECESSARY INQUIRY AND COMMENT THEREON. HOWEVER IN THE REMAND REPORT THE ASSESSING OFFICER DID NOT COMMEN T REGARDING ANY INQUIRY BEING CONDUCTED BY HIM OR WIT H REGARD TO THE BANK ACCOUNT OF M/S DEVSHREE CORPORAT ION WITH IDBI BANK AND THE TRANSACTIONS ENTERED THEREIN . IN THESE CIRCUMSTANCES AFTER VERIFICATION OF THESE D OCUMENTS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FO UND THAT THESE DOCUMENTS PROVED THE EXISTENCE OF THE CO NCERN IN THE NAME OF DEVSHREE CORPORATION. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO OBSERVED THAT THE PURPOSE OF REMANDING THE MATTER TO THE ASSESSIN G OFFICER IS TO SEEK HIS ASSISTANCE AFTER DUE INQUIRY BY HIM IN RESPECT OF THE EVIDENCES WHICH WERE FILED BEFORE TH E ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS THE MATTER WAS NOT EXAMINED DURING THE ASSESSMENT PROCEEDINGS THE DOCUMENTS WERE SENT BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO THE ASSESSING OFFICER FOR REACHING TO A LOGICAL CONCLUS ION AFTER DUE INQUIRY WITH REGARD TO THE FACTUAL POSITION NAR RATED 131 ABOVE. THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ALSO OBSERVED THAT THE ASSESSMENT ORDER PASSED BY T HE ASSESSING OFFICER ITSELF APPARENTLY APPEARS TO BE A N OBSTRUCTION AND PASSED IN POST HASTE WITHOUT ANY SE NSE OF ACCOUNTABILITY ON THE PART OF THE ASSESSING OFFICER . AMPLE TIME WAS GIVEN TO THE ASSESSING OFFICER BUT THE ASS ESSING OFFICER DID NOT UNDERTAKE ANY INQUIRY TO FIND OUT T HE CORRECTNESS OF THE FACTS AND THE EVIDENCE PUT BEFOR E HIM DURING THE REMAND PROCEEDINGS NOR ANY INQUIRY WAS M ADE WITH THE BANK OR THE COMMERCIAL TAX DEPARTMENT. AF TER VERIFICATION THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONCLUDED THAT THE DOCUMENTS AND OTHER INFORMATION FILED ARE GENUINE AND SERVE THE PURPOSE OF PROVING THE CONTENTION AS CORRECT. THE CORRECTNESS OF THE DOCUMENTS AND EVIDENCE AS DISCUSSED HEREINABOVE WAS NOT ALLEGED BY THE DEPARTMENT EVEN DURING THE PROCEEDIN GS BEFORE US. IN THESE CIRCUMSTANCES THE FINDING RE CORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO THE EFFECT THAT THESE DOCUMENTS PROVED THE EXISTENCE OF THE CONCERN IN THE NAME OF DEVSHREE CORPORATION WITH E FFECT FROM 1.4.2002 DULY REGISTERED WITH COMMERCIAL TAX 132 DEPARTMENT AND HAVING DETAILED BANK ACCOUNT WITH ID BI BANK CANNOT BE INTERFERED WITH. AS THE FINDING REC ORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS AS PER MATERIAL ON RECORD THE SAME DOES NOT REQUIRE ANY INTERFERENCE ON OUR PART. ACCORDINGLY WE CONFIRM THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFI CER IN RESPECT OF SALES IN THE NAME OF DEVSHREE CORPORATIO N. 100. AN ADDITION OF RS. 7 20 197/- WAS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN GODOWN. DURING THE SEARCH PROCEEDINGS IT WAS FOUND THAT THE ASSESSEE ALONGWITH OTHER CO-OWNERS NAMELY SH. MAHESH AGRAW AL SH. NIRANJAN AGRAWAL AND SMT. SANGEETA AGRAWAL HAD ENTERED INTO AN AGREEMENT OF RENT WITH SH. MUKESH A GRAWAL IN RESPECT OF GODOWN AT RD UDHYOG NAGAR INDORE HAV ING AREA OF 2500 SQ.FT. IT WAS ALSO GATHERED THAT THE S AID GODOWN WAS CONSTRUCTED IN CO-OWNERSHIP DURING THE P ERIOD UNDER CONSIDERATION. IN ORDER TO ASCERTAIN THE COST OF CONSTRUCTION THE AO REFERRED THE MATTER OF VALUATI ON TO THE VALUATION OFFICER WHO VALUED THE SAME AT RS.28 80 7 86/- IN THE ABSENCE OF ANY CO-OPERATION FROM THE ASSESSEE. THE AO 133 ASSESSED THE 1/4 TH SHARE AMOUNTING TO RS.7 20 197/- IN THE HANDS OF THE ASSESSEE AS HIS UNEXPLAINED INVEST MENT. 101. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLAN T AND THE CONTENTS OF THE ASSESSMENT ORDER. THE COPY OF ACCOUNT UNDER THE HEAD 'GODOWN CONSTRUCTION A/C' IN THE BOOKS OF M/S. AGRAWAL JUTE BAG INDUSTRIES FURNISHED BY THE APPELLANT REVEALS THAT THE APPELLANT HAS WITHDRAWN RS.8 94 400/- ON VARIOUS DATES DURING THE YEAR FOR THE CONSTRUCTION OF GODOW N AT PALDA. NO OTHER GODOWN APPEARS TO HAVE BEEN CONSTRUCTED BY THE APPELLANT DURING THE YEAR. THE COPY OF THIS ACCOUNT WAS BEFORE THE AO WHEN THE REMAND REPORT WAS CALLED FOR BUT HE DOES NOT APPEAR TO HAVE EXAMINED THE SAME VIS-A-VIS THE BOOKS OF ACCOUNT. THEREFORE I HAVE NO ALTERNATIVE EXCEPT TO ACCEPT THE CONTENTION OF THE APPELLANT. THE AO HAS MADE THE ADDITION OF RS. 7 20 197/- WHEREAS THE APPELLANT HAS HIMSELF SHOWN AN INVESTMENT OF RS.8 94 400/- IN THE GODOWN. THEREFORE WITHOUT GOING INTO THE MERITS AND DEMERITS OF THE VALUATION REPOR T I AND THE CONTENTION OF THE APPELLANT THAT WHOLE OF T HE CONSTRUCTION COST OF THE GODOWN WAS MET BY HIM ALONE I DELETED THE ADDITION. 102. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. AN ADDITION OF RS.7 20 197/- WAS MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF VALUATION OF GODOW N BY THE DVO. FROM RECORD WE FIND THAT THE ASSESSEE ALONG WI TH 134 OTHER CO-OWNERS NAMELY NIRANJAN AGRAWAL AND SANGE ETA AGRAWAL HAD ENTERED INTO AN AGREEMENT OF RENT WITH MUKESH AGRAWAL IN RESPECT OF GODOWN OF R.D. UDHYOG NAGAR INDORE. IT WAS FOUND THAT THE GODOWN WAS CONSTRUCTED IN CO-OWNERSHIP DURING THE PERIOD FALLI NG IN THE BLOCK PERIOD. TO ASCERTAIN THE COST OF CONSTRUCTIO N THE ASSESSING OFFICER REFERRED THE MATTER OF VALUATION TO THE DVO WHO VALUED THE SAME AT RS.28 80 786/-. THE ASSESSING OFFICER ASSESSED THE ASSESSEES SHARE AT 1/4 TH AMOUNTING TO RS.7 20 197/- AND ADDED THE SAME IN TH E ASSESSEES HANDS. BY THE IMPUGNED ORDER THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION BY OBSERVING THE COPY OF ACCOUNT UNDER THE HEAD GO DOWN CONSTRUCTION ACCOUNT IN THE BOOKS OF M/S AGRAWAL J UTE BAG INDUSTRIES WHICH INDICATED THAT THE ASSESSEE HA D WITHDRAWN RS. 8 94 400/- ON VARIOUS DATES FOR THE P URPOSE OF CONSTRUCTION OF GODOWN. THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) ALSO OBSERVED THAT THE COPY OF THIS ACCOUNT WAS ALSO BEFORE THE ASSESSING OFFICER WHEN THE REMAND REPORT WAS CALLED FOR BUT HE DOES NOT EXAMIN E THE SAME VIS--VIS BOOKS OF ACCOUNTS. SINCE THE AMOUNT OF 135 WITHDRAWAL FOR CONSTRUCTION OF GODOWN WAS RS.8 94 400/- WHICH WAS MORE THAN THE AMOUNT OF ADDITION OF RS. 7 20 197/- MADE BY THE ASSESSING OFFICER THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) INSOFAR AS THE CONSTRUCTION COST WAS ALREADY REFLECTED IN THE BOOK S OF M/S AGRAWAL JUTE INDUSTRIES IN THE FORM OF WITHDRAWAL. 103. ON PROTECTIVE BASIS THE ADDITION OF RS.10 49 47 500/- WAS MADE. THE PROTECTIVE ADDITIO N PERTAINS TO UNRECORDED PURCHASE OF HOUSE UNEXPLAIN ED CASH RECEIVED ON SALE OF HOUSE UNRECORDED PURCHASE AND INVESTMENT AND ON ACCOUNT OF UNRECORDED INVESTMENT IN LAND. BEFORE THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) FOLLOWING LEGAL OBJECTION WAS RAISED BY T HE ASSESSEE :- 'IN THE INCOME TAX ACT THERE IS NO PROVISION AUTHORIZING THE LEVY OF INCOME TAX ON A PERSON OTHER THAN THE O NE WHO REALLY EARNED TH E INCOME. STILL IT IS OPEN TO THE INCOME TAX AUTHORITY TO MAKE A PROTECTIVE ASSESSMENT WHERE OWING TO LITIGATION BETWEEN THE PARTIES CONCERNED I N CIVIL COURT ORDER OTHER REASON THE PERSON WHO REALLY LIA BLE TO PAY THE TAX CAN NOT BE FINALLY DETERMINED BY THE IN COME TAX AUTHORITY. NORMALLY PROTECTIVE ASSESSMENT IS MADE U/S. 143(3) OR 136 144 WHEN AN ASSESSEE SHOWS PARTICULAR INCOME AS HIS INCOME AND IF THE ASSESSING OFFICER IS OF THE VIEW THAT THE INCOME DOES NOT BELONG TO THE PERSON WHO HAS SHOWN IT BUT BELONGS TO SOME ONE ELSE THEN ONLY THE INCOME IS ASSESSED IN THE HANDS OF ONE PERSON PROTECTIVE BASI S. FROM PERUSAL OF THE ASSESSMENT ORDER IT IS CLEAR TH AT THE ASSESSEE HAS NOT SHOWN THE ABOVE INCOME AND AT THE SAME TIME THE A.O. HAS NOT RECORDED HIS FINDING THAT THI S AMOUNT IS BEING ASSESSED IN THE HANDS ON SUBSTANTIV E BASIS IN WHOSE HANDS. IT IS FURTHER SUBMITTED THAT THE CONCEPT OF PROTECT IVE ASSTT. IS NOT PERMISSIBLE WHILE MAKING AN ASSESSMENT FOR B LOCK PERIOD UNDER THE PROV. OF CHAPTER XIV OF THE I. T. ACT. CHAPTER XIV-B WAS INSERTED IN THE INCOME TAX ACT BY THE FINANCE ACT 1995 W.EF 1.7.1995. THIS CHAPTER WAS INTRODUCED TO OUT LINE AND DEFINE A SPECIAL PROCEDU RE FOR THE ASSESSMENT OF SEARCH CASES. THE BASIC REQUIREME NT IS THAT THERE SHOULD BE A SEARCH ON A PERSON & UNDISCLOSED INCOME SHOULD BE DISCOVERED AS A RESULT OF SEARCH. IT HAS ALSO BEEN PROVIDED THAT THE UNDISCLOSED INCOME FOUN D AS A RESULT OF SEARCH WAS CONDUCTED U/S. 158BC AND IN THE HANDS OF OTHER PERSON U/S.158BD. THUS IT IS APPARENT THAT IN CASE WHERE A VALID SEAR CH IS CONDUCTED ON A PARTICULAR PERSON AND AS A RESULT OF SEARCH SOME UNDISCLOSED INCOME IS DISCOVERED IT IS TO BE TAXED IN HIS HANDS U/S.158BC. IF AFTER RECORDING SATISFACTION THE A. 0. COMES TO THE CONCLUSION THAT THE INCOME DISCOVERED IN THE CASE OF SEARCH ON 'A' BELO NGS TO 'B' ON WHOM NO SEARCH WAS CONDUCTED THEN NOTICE IS TO BE ISSUED TO 'B '. THUS THERE IS AN ELEMENT TO CERTAIN TY TO BE PRESENT. THERE IS NO ROOM FOR COMPUTING ANY INCOME ON PROTECTIVE BASIS IN EITHER CASE OF ISSUE OF NOTICE U/S. 158BC AND U/S. 158BD. LEGALLY THE ACTION OF THE A.O . IN INCLUDING A SUM OF RS.10 63 53 750/- IN THE HANDS O F THE ASSESSEE IS ILLEGAL. THE ACTION OF THE A.O. IN DETERMINING INCOME ON PROTECTIVE BASIS WHILE FRAMING ASSTT. U/S XIV IS WI THOUT JUSTIFICATION WITHOUT JURISDICTION AGAINST THE PR OV. OF LAW AND HENCE INVALID. IF THE FURTHER EMPHASIZED THAT IN THE ASSESSMENT OR DER NO WHERE THE A.O. HAS MENTIONED WHILE MAKING ADDITIONS AS TO IN WHOSE HANDS THE SUBSTANTIVE ADDITION IS BEING MADE. THUS THE WHOLE EXERCISE OF MAKING ADDITION IS BASEL ESS 137 AND REFLECTS THE CASUAL APPROACH OF THE A.O. TO SAD DLE THE ASSESSEE WITH HEAVY DEMAND OF TAX AND CREATE HARASSMENT. 104. HOWEVER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DID NOT AGREE WITH THE ASSESSEES CON TENTION AND CONFIRMED PART OF SUCH PROTECTIVE ADDITION MADE IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS AFTER HA VING THE FOLLOWING OBSERVATIONS :- AFTER CAREFUL CONSIDERATION OF FACTS AND SUBMISSIONS OF THE APPELLANT AS WELL AS THE CIRCUMSTANCES UNDER WHICH THE ASSESSMENT ORDER WAS PASSED I BELIEVE THAT DUE TO NON- COMPLIANCE BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS THE AO WAS NOT IN A POSITION TO ASCERTAIN THE FACTUAL POSITION REGARDING CERTAIN SEIZED DOCUMENTS. THEREFORE HE HAD NO OTHER ALTERNATIVE BUT TO MAKE THE ADDITIONS IN THE HANDS OF VARIOUS PERSONS ON PROTECTIVE BASIS. SINCE DURING THE APPELLATE PROCEEDINGS THE APPELLANT FILED THE REQUISITE DOCUMENTS AND INFORMATION AND THE SAME WERE SENT TO THE AO FOR EXAMINATION AND REPORT THESE GROUNDS ARE NECESSARY TO BE DISPOSED OFF ON MERITS. I CANNOT FIND FAULT WITH THE PROTECTIVE ASSESSMENT IN THE INSTANT CASE. 105. AS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALREADY CONSIDERED THESE ISSUES OF PR OTECTIVE ADDITION ON SUBSTANTIVE BASIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND UPHOLD THE SAME. 138 106. IN VIEW OF THE ABOVE WE NOW DEAL WITH THE M ERITS OF THE ADDITION DONE BY THE ASSESSING OFFICER ON PR OTECTIVE BASIS WHICH HAS BEEN TREATED BY THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) ON SUBSTANTIVE BASIS AND DE ALT WITH ACCORDINGLY. 107. AN ADDITION OF RS. 1 46 250/-WAS MADE ON ACCOUNT OF UNRECORDED PURCHASE OF HOUSE. IN THIS RE GARD THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT D URING THE COURSE OF SEARCH PROCEEDINGS AT THE PREMISES OF THE ASSESSEE AN INCRIMINATING DOCUMENT REPRESENTING REGISTERED DOCUMENT DATED 31.03.97 (PAGES 53 TO 59 OF LPS-2) FOR THE PURCHASE OF HOUSE AT 5/2 KALALI MOHALLA INDORE FOR RS.14 250/- (PURCHASE VALUE RS.1 30 000/- PLUS STAMP DUTY RS. 1 6 250/- ) WAS FOUND. IN THE ABSENCE OF ANY EXPLANATION THE AO ADDED THIS AMOUNT AS UNDISCLOSE D INCOME OF THE ASSESSEE ON PROTECTIVE BASIS. 108. AFTER RECORDING HIS FOLLOWING FINDINGS THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION MADE ON ACCOUNT OF PURCHASE OF HOUSE PROPERTY :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND FIND FORCE IN THE SAME. THE COPY OF 139 ACCOUNT OF THE APPELLANT SHOWS A WITHDRAWAL OF RS. 73 800/- SPECIFICALLY NARRATED AS FOR REGISTRY OF 5/2 KALALI MOHALLA. IT APPEARS THAT THE AO DID NOT PROPERLY READ THE REGISTERED DOCUMENT OTHERWISE ONLY HALF OF THE COST WOULD HAVE BEEN ADDED IN THE HANDS OF THE APPELLANT. OTHERWISE ALSO IF THE DOCUMENT WAS IN THE NAME OF THE APPELLANT THEN THE ADDITION SHOULD HAVE BEEN ON SUBSTANTIVE BASIS. SINCE THE INVESTMENT MADE IS DULY REFLECTED IN THE BOOKS OF ACCOUNT NO ADDITION WAS CALLED FOR IN THIS CASE. THE SAME IS THEREFORE DELETED. 109. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE DURING THE COURSE OF APPELLATE PROCE EDINGS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FO UND THAT THE ASSESSEE HAD SHOWN WITHDRAWAL OF RS. 73 80 0/- FOR ACQUIRING A PROPERTY SITUATED AT 5/2 KALALI MO HALLA. AS PER THE REGISTERED DOCUMENT THE ASSESSEE WAS 50% O WNER OF THE PROPERTY. SINCE THE INVESTMENT MADE IN THE PROPERTY WAS DULY REFLECTED IN THE BOOKS OF ACCOUNTS NO ADD ITION WAS CALLED FOR. ACCORDINGLY PROTECTIVE ADDITION OF RS.1 46 250/- ON ACCOUNT OF UNRECORDED PURCHASES O F HOUSE PROPERTY WAS DELETED BY THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS). IT IS PERTINENT TO MENTION H ERE THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ALREADY SENT ALL THESE DOCUMENTS TO THE ASSESSING O FFICER 140 FOR REMAND REPORT AND ONLY AFTER CONSIDERING THE RE MAND REPORT AND THE DOCUMENTS SO FILED DURING THE APPELL ATE PROCEEDINGS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RECORDED THIS FINDING. WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND CONFIRM THE SAME. 110. AN ADDITION OF RS.3 LACS WAS MADE ON ACCOUNT OF UNEXPLAINED CASH RECEIVED ON SALE OF HOUSE. IN THIS REGARD THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT D URING THE COURSE OF SEARCH PROCEEDINGS AT THE RESIDENCE OF TH E ASSESSEE INCRIMINATING DOCUMENTS (PAGES 62 TO 65 O F LPS- 2) WERE FOUND. THESE CONTAINED AN AGREEMENT DATED 15.10.2002 FOR SALE OF HOUSE SITUATED AT 5/2 KALALI MOHALLA INDORE IN WHICH IT HAD BEEN STATED THAT TH E ASSESSEE HAD RECEIVED RS.6 00 000/- (RS.3 00 000/- THROUGH CHEQUE AND RS.3 00 000/- IN CASH). IN THIS RESPECT THE PURCHASERS OF THE PROPERTY SMT. KANTA BHATIA AND SMT. PRAMILA BHATIA CONFIRMED THE TRANSACTION B Y - PRODUCING THE REGISTERED DEED OF SALE EXECUTED ON 06.03.2003. WHEN CALLED UPON TO EXPLAIN AS TO HOW T HE CASH RECEIPT WAS ACCOUNTED FOR NO EXPLANATION WAS GIVEN 141 HENCE THE AO MADE THE ADDITION OF RS.3 00 000/- IN THE HANDS OF THE APPELLANT AS UNDISCLOSED INCOME. 111. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION OF RS. 1.50 LACS AND DELETED THE BALANCE A DDITION OF RS. 1.50 LACS BY OBSERVING AS UNDER I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND FIND MERIT IN THE SAME. THE REGISTERED DEED SHOWS THAT THE HOUSE WAS PURCHASED BY THE A PPELLANT AND HIS SON SH. MUKESH AGRAWAL VIDE REGD. DEED DATED 29.04.1997 WHICH HAS BEEN SUBJECT MATTER OF THE PRECEDING GROUND ALSO. THIS DEED DATED 6.03.2003 ALSO SHOWS THAT RS.3 OO OOO/- WERE RECEIVED ON 15.10.2002. OF COURSE THE CASH RECEIPT WAS NOT ACCOUNTED FOR IN THE BOOKS BUT SINCE THE PROPERTY WAS JOINTLY OWNED BY THE APPELLANT ONLY HALF OF THIS RECEIPT SHOULD HAVE BEEN ASSESSED IN THE HANDS OR THE APPELLANT ON SUBSTANTIVE BASIS. THE AO IS DIRECTED TO ACT ACCORDINGLY AND ASSESS RS.1 50 000/- IN THE HANDS OF THE APPELLANT ON SUBSTANTIVE BASIS. THE REMAINING ADDITION OF RS. 1 50 000/- IS DELETED. 112. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE PAGES 62 TO 65 OF LPS-2 INDICATED AGR EEMENT DATED 15.10.2002 FOR SALE OF HOUSE SITUATED AT 5/2 KALALI MOHALLA INDORE. ACCORDING TO THIS AGREEMENT THE A SSESSEE 142 RECEIVED RS. 6 LACS. AN AMOUNT OF RS. 3 LAC WAS TH ROUGH CHEQUE AND BALANCE WAS IN CASH. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO HOW CAS H RECEIPT WAS ACCOUNTED FOR NO EXPLANATION WAS GIVEN BY THE ASSESSEE HENCE THE ASSESSING OFFICER MADE THE ADD ITION OF RS. 3 LACS IN THE HANDS OF THE ASSESSEE AS UNDISCLO SED INCOME. BY THE IMPUGNED ORDER THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) OBSERVED THAT THE REGISTERE D SALE DEED SHOWS THAT THE HOUSE WAS PURCHASED BY THE ASSE SSEE AND HIS SON MUKESH AGRAWAL VIDE REGISTERED SALE DEE D DATED 29.4.1997. HOWEVER THIS PROPERTY WAS SOLD VIDE DEED DATED 6.3.2003 INDICATING RECEIPT OF RS. 3 LAC S IN CASH WHICH WAS FOUND TO BE NOT ACCOUNTED IN THE BOOKS. SINCE THE PROPERTY WAS JOINTLY OWNED BY THE ASSESSEE AND HIS SON 50% OF RS. 3 LACS I.E. RS. 1 50 000/- WAS TREATED B Y THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AS REC EIPT IN THE ASSESSEES HANDS. ACCORDINGLY HE CONFIRMED T HE ADDITION IN SUBSTANTIVE BASIS IN THE ASSESSEES HAN DS FOR THE AMOUNT OF RS. 1 50 000/-. THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) ALSO DIRECTED THAT THIS ADD ITION SHOULD BE TREATED ON SUBSTANTIVE BASIS IN PLACE OF 143 PROTECTIVE BASIS MADE BY THE ASSESSING OFFICER. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS) WHO HAS TAXED 50% OF THE SA LE PROCEEDS RECEIVED IN CASH IN THE HANDS OF THE ASSES SEE ON SUBSTANTIVE BASIS. 113. ON PROTECTIVE BASIS AN ADDITION OF RS.10 49 47 500/- WAS MADE ON ACCOUNT OF UNRECORDED PURCHASES AND INVESTMENT. THE AO MADE THIS ADDITIO N ON THE BASIS OF ENQUIRIES MADE WITH M/S. INTERSTATE RO AD CARRIER CALCUTTA HAVING ITS BRANCH OFFICE AT DEWAS NAKA INDORE WHO IS ONE OF THE TRANSPORTERS OF THE MAHESH NIRANJAN GROUP . 114. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE PROTECTIVE ADDITION BY OB SERVING THAT THE ISSUE HAS BEEN DECIDED ON MERIT IN THE HAN DS OF MAHESH NIRANJAN JUTE PVT. LTD. VIDE ORDER DATED 23.12.2005 WHEREIN THE ADDITION WAS MADE ON SUBSTAN TIVE BASIS. FOLLOWING WAS THE PRECISE OBSERVATION OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. THIS GROUND HAS BEEN DEALT WITH IN 144 DETAIL ADJUDICATED UPON IN MY ORDER IN APPEAL NO. IT-368/04-05 DATED 23.12.2005 IN THE CASE OF M/S. MAHESH NIRANJAN JUTE PVT. LTD. IN WHICH THE ADDITION OF THIS AMOUNT WAS MADE ON SUBSTANTIVE BASIS. KEEPING IN VIEW THIS FACT THE ADDITION MADE IN THE HANDS OF THE APPELLANT ON PROTECTIVE BASIS CANNOT BE SUSTAINED. THE ADDITION OF RS.10 49 47 500/- IS DE LETED. 115 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND FIND THAT THE ISSUE REGARDING PROTECTIVE ADDITION IN THE CASE OF THE ASSESSEE HAS ALREADY BEEN CONSIDERED ON MERIT BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) VIDE ORDER DATED 23.12.2005 IN THE HANDS OF MAHESH NIRANJAN JUTE PRIVATE LIMITED. SINCE THE AMOUNT HAS ALREADY BEEN FOUND TO BE LIABLE FOR ADDITION ON SUBSTANTIVE BASIS IN THE HANDS OF MAHESH NIRANJAN JUTE PRIVATE LIMITED WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE PROTECTIVE ADDITION OF THE SAME IN THE HANDS OF THE ASSESSEE. 116. AN ADDITION OF RS.9 60 000/- WAS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN LAND. IN THIS REGARD 145 THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT D URING THE SEARCH PROCEEDINGS AT THE BUSINESS PREMISES OF THE ASSESSEE INCRIMINATING DOCUMENT AS PER PAGE 32 OF LPS-3 CONTAINING DETAILS OF DEMAND OF LAND REVENUE DIVERS ION TAX FOR THE LANDS SITUATED AT DEVGURADIA WAS FOUND . ACCORDING TO THE DOCUMENT THE TOTAL LAND PURCHASED BY THE AS SESSEE ALONG WITH HIS BROTHER AT KHASRA NO.22A- 76/2001-02 WAS ABOUT 12000 SQ. FT. AS THE ASSESSEE FAILED TO RESPO ND TO THE QUERY REGARDING THE SOURCE OF INVESTMENT THE AO TR EATED THE SAME AS UNEXPLAINED AND APPLYING A MARKET RATE OF RS.80/- PER SQ. FT. WORKED OUT THE TOTAL UNDISCLOSE D INVESTMENT AT RS.9 60 000/- 117. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE DOCUMENT. THE DEMAND OF LAND REVENUE HAS BEEN MADE FROM SH NIRANJAN AND SH. KAILASH KUMAR BOTH SONS OF SH. KAILASHCAHAND AGRAWAL. APPARENTLY THE DOCUMENT DOES NOT RELATE TO THE APPELLANT. AS THE FATHERS NAME HAS BEEN WRITTEN AS SH. KAILASHCHAND AGRAWAL THE APPELLANT CANNOT BE TREATED TO BE HIS OWN FATHER AS PRESUMED BY THE AO. THE ADDITION APPEARS TO HAVE BEEN MADE WITHOUT APPLICATION OF MIND. THE SAME IS THEREFORE DELETED. 146 118. AGAINST THE ABOVE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL BEFORE US. 119. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT INCRIMINATING DOCUMENT PAGE 32 OF LPS-3 INDICATED DETAILS OF DEMAND OF LAND REVENUE TAX FOR THE LAND SITUATED AT DEV GURADIA. AS PER THIS DOCUMENT TOTA L LAND PURCHASED BY THE ASSESSEE ALONG WITH HIS BROTHER AT KHASRA NO. 22A-76/2001-02 WAS ABOUT 12 000 SQ.FT. AS THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF INVEST MENT BEFORE THE ASSESSING OFFICER THE ASSESSING OFFICER TREATED THE SAME AS UNEXPLAINED AND AFTER APPLYING THE MARK ET RATE OF RS. 80/- PER SQ.FT. WORKED OUT THE TOTAL UN EXPLAINED INVESTMENT AT RS.9 60 000/-. FROM RECORD WE FIND T HAT THE DEMAND OF LAND REVENUE HAS BEEN MADE FROM NIRANJAN AND KAILASH KUMAR BOTH SON OF KAILASH AGRAWAL. AS THE DOCUMENT DID NOT RELATE TO THE ASSESSEE THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION AFTER RECORDING THE FINDING THAT FATHERS NAME HAS BEEN WRITTEN AS KAILASH CHAND AGRAWAL. THE ASSESSEE CANN OT BE 147 TREATED TO BE HIS OWN FATHER AS PRESUMED BY THE ASS ESSING OFFICER. AS THE ADDITION WAS MADE BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIND WE DO NOT FIND ANY INF IRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE SAME BY OBSERVING THAT TH IS DOCUMENT DID NOT BELONG TO THE ASSESSEE AND CONFIRM THE SAME. 120. IN THE RESULT THE APPEALS OF THE ASSESSEE AN D THE REVENUE ARE ALLOWED IN PART IN THE TERMS INDICATED HEREINABOVE. IT(SS) A NOS. 27 AND 63/IND/2006 121. IN THE CASE OF NIRANJAN AGRAWAL DURING THE COURSE OF SEARCH APART FROM INCRIMINATING DOCUMENT S THE VALUABLES WERE FOUND. OUT OF WHICH THE PART OF CASH AND OTHER VALUABLE WERE SEIZED. THE DETAILS OF THE ASSE TS FOUND AND SEIZED ARE AS UNDER:- S. NO . NAME OF THE PREMISES CASH FOUND CASH SEIZED JEWELLARY FOUND JEWELLARY SEIZED OTHER ASSETS SEIZED 1 8/2 NEW ANAJ MANDI INDORE 2 80 440 1 00 000 NIL NIL NIL 2 147/47 BHAGWANDEEN NAGAR INDORE 2 18 620 1 30 000 1437.900 GMS. (RS.6 49 862/-) NIL HUNDI RS. 5 00 000/- 148 122. ON THE BASIS OF SEIZED MATERIAL A SUBSTANTIVE ADDITION OF RS. 69 21 463/- WAS MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF UNRECORDED PURCHASES OF LAND MOTOR- CYCLE INVESTMENT IN SHARES/DIVIDEND WARRANT AND CA SH DEPOSIT IN INDUSIND BANK. HOWEVER THE ASSESSING O FFICER ALSO MADE PROTECTIVE ADDITION OF RS. 43 85 305/- ON ACCOUNT OF UNEXPLAINED LAND HOLDING IN OTHER NAME UNEXPLAINED MILK PURCHASES AND UNEXPLAINED HUNDI TRANSACTIONS. 123. IN RESPECT OF THE ADDITION OF RS.69 802/- ON ACCOUNT OF UNRECORDED PURCHASE OF LAND THE OBSERVAT ION OF THE ASSESSING OFFICER WAS THAT DURING THE COURSE OF SEARCH PROCEEDINGS AT THE PREMISES OF THE ASSESSEE INCRIMI NATING DOCUMENT WAS FOUND IN THE SHAPE OF A REGISTERED SAL E DEED OF LAND SITUATED AT PATWARI HALKA NO. 15/2 TAHSIL I NDORE PURCHASED BY THE ASSESSEE FROM SMT. JASODABAI AND O THERS ON 5.3.97 FOR RS. 69 802/- (50 000 + 18500+1302). WHEN CALLED UPON TO EXPLAIN THE ASSESSEE OFFERED NO EXP LANATION REGARDING THE SOURCE OF PURCHASE OF THE SAME AND HE NCE THE A.O. TREATED THIS AMOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE MADE ADDITION TO THE INCOME. 149 124. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION AFTER HAVING MADE THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND FIND FORCE IN THEM.. THE REGD. SALE DEED CLEARLY SHOWS THAT LAND WAS PURCHASED BY SHRI MUKESH. THE ASSESSEES NAME NOWHERE FIGURES IN THE DEED. I HAVE GONE THROUGH THE BLOCK ASSESSMENT ORDER IN THE CASE OF SH MUKESH AGRAWAL ALSO AND FOUND THAT SUCH AN ADDITION HAS BEEN MADE IN HIS HANDS AS WELL. UNDER THE CIRCUMSTANCES THE ADDITION MADE IN THE HANDS OF THE ASSESSEE CANNOT BE SUSTAINED AND IS HENCE DELETED. 125. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE REGISTERED SALE DEED SO FOUND CLEARLY SHOWED THAT THE LAND WAS BELONGING TO MUKESH AGRAWAL. NOW HERE IN THE SALE DEED THE NAME OF THE ASSESSEE WAS APPE ARING. BY OBSERVING THAT THE ADDITION IN RESPECT OF THIS L AND HAS ALREADY BEEN MADE IN THE HANDS OF MUKESH AGRAWAL T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE ADDITION. NOTHING WAS BROUGHT ON RECORD TO CONTROV ERT THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). WE ACCORDINGLY CONFIRM THE SAME. 150 126. AN ADDITION OF RS. 60 16 081/- WAS MADE ON ACCOUNT OF UNRECORDED INVESTMENT IN LAND. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER OBSERVED THA T DURING THE COURSE OF SEARCH PROCEEDINGS AT BUSINESS PREMISES OF THE ASSESSEE AT 8/2 NEW ANAJ MANDI IN DORE INCRIMINATING DOCUMENTS (LPS-3 PAGES 6 16 19 & 32 ) CONTAINING DETAILS OF DEMAND OF LAND REVENUE/DIVERS ION TAX FOR THE LANDS SITUATED AT LASUDIA/PALDA/DEVGURADIA WERE FOUND. ACCORDING TO THESE DOCUMENTS THE ASSESSEE PURCHASED LAND MEASURING 33643 SQ.FT. (4519+15667+1347) THE DETAILS OF WHICH ARE AS UNDE R :- S.NO. DESCRIPTION OF LAND AREA OF LAND REMARKS 1. LAND BEARING KHASRA NO.21 AT LASUDIA MORI 4519 SQ.FT. 2 LAND BEARING KHASRA NO.336/4 AT PALDA 15667 SQ.FT. 3. LAND BEARING KHASRA NO.355/18 AT PALDA 13457 SQ.FT. WHEN CALLED UPON TO EXPLAIN THE SOURCES OF INVESTME NT FOR PURCHASE OF THESE LANDS THE ASSESSEE NEITHER REPLI ED ABOUT ITS COST NOR ABOUT SOURCE FOR THE PURCHASES. HENCE IN VIEW 151 OF THIS SITUATION THE AO ESTIMATED THE COST OF SUC H LANDS AT RS. 60 16 081/- AND MADE THE ADDITION FOR THE INVES TMENT IN THE PURCHASE OF SUCH LANDS AS UNDISCLOSED INCOME BY MAKING FOLLOWING OBSERVATION :- IN ABSENCE OF DETAILS OF COST & SOURCES FOR THE SAME THE SAME IS ADDED BY KEEPING IN VIEW THE MARKET PRICE OF THE LAND AT RS. 185/- PER SQ.FT. FO R THE LAND SITUATED AT PALDA AND RS. 139/- PER SQ.FT. FOR THE LAND SITUATED AT LASUDIA MORI. THE TOTAL INVESTMENT IN THESE LANDS IS THEREFORE WORKED OUT AT RS. 60 16 081/- (4519X139+15667X185+13457X185). THE SAME IS HELD TO BE THE UNDISCLOSED INVESTMENT MADE BY THE ASSESSEE. 127. BY CONSIDERING THE INVESTMENT MADE IN DIFFERE NT LAND HAVING KHASRA NUMBER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GAVE PART RELIEF IN RESPECT OF EACH KHASRA NUMBER BY OBSERVING AS UNDER :- I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND FIND FORCE IN THEM. AS REGARDS THE LA ND AT SR. NO. 1 ABOVE THE COPY OF THE REGD. SALE DEED CLEARLY SHOWS THAT THE SAID LAND WAS PURCHASED BY THE APPELLANT ON 20.08.1992 FOR RS. 11 250/- PLUS STAMP DUTY OF RS.1 000/-. AS THE LAND WAS PURCHASED MUCH BEFORE THE BLOCK PERIOD THE INVESTMENT THEREIN COULD NOT BE CONSIDERED IN THE BLOCK ASSESSMENT. THE ADDITION OF RS.6 28 141/- ON ACCOUNT OF INVESTMENT IN THIS LAND IS THEREFORE DELETED. AS REGARDS THE LAND AT SR. NO.2 THE REGD. DEED FILED BY THE LD. COUNSEL OF THE APPELLANT 152 RELATES TO AGRICULTURAL LAND IN KHASRA NO. 336/1 WHEREAS THE LAND IN QUESTION BEFORE THE AO WAS SITUATED IN KHASRA NO. 336/4. IT APPEARS THAT THE LAND BEARING KHASRA NO. 336/1 WAS PURCHASED BY THE APPELLANT ON 27.06.1995 FOR A CONSIDERATION OF RS.1 80 000/- PLUS STAMP DUTY OF RS.16 000/-. THIS LAND IS FLANKED ON ONE SIDE BY LAND BEARING KHASRA NO. 336/2. IT MEANS THAT KHASRA NO. 336/4 WAS A SEPARATE PIECE OF LAND REGARDING WHICH THE APPELLAN T HAS SHOWN NO PROOF OF PURCHASE BEFORE THE BLOCK PERIOD. APPARENTLY THAT LAND WAS PURCHASED DURING THE BLOCK PERIOD BUT NOT ACCOUNTED FOR BY THE APPELLANT IN THE BOOKS OF ACCOUNT. THE INVESTMENT MADE IN THE PURCHASE OF THIS LAND IS THEREFORE HE LD TO BE UNEXPLAINED/UNDISCLOSED. HOWEVER THE AMOUNT OF INVESTMENT ESTIMATED BY THE AO AT RS.185/- PER SQ. FT. DOES NOT APPEAR TO BE REASONABLE. THE AO HAS GIVEN NO BASIS FOR APPLYING THAT RATE NOR HAS ANY COMPARATIVE CASE BEEN REFERRED TO. IT IS SEEN FROM THE PARTITION OF LAND THAT IN KHASRA NO. 336 THE LAND WAS DIVIDED INTO EQUAL PLOTS. THE INVESTMENT IN PLOT I.E. 336/1 WAS MADE A T A TOTAL OF RS.1 96 000/- IN THE YEAR 1995 AND IF AN ESTIMATE ON THAT BASIS IS MADE THE INVESTMENT MADE IN SUBSEQUENT YEARS DURING THE BLOCK PERIOD CAN AT THE MOST BE TAKEN AT RS.5 00 000/- PER PLOT OF THIS LAND MEASURING ABOUT 15 667 SQ. FT. EACH. AS SUCH THE UNEXPLAINED INVESTMENT IN THIS LAND IS RESTRICTED TO RS.5 00 000/- AS AGAINST RS.28 98 395/- ESTIMATED BY THE AO AND THE APPELLANT GETS A RELIEF OF RS.23 98 395/-) AS REGARDS LAND AT SR. NO.3 THE KHASRA NO. APPEARS TO HAVE BEEN INADVERTENTLY MENTIONED BY THE AO AS 355/18/ AS AGAINST 335/1/8 AS PER SEIZED DOCUMENT AT PAGE 16. IN SUPPORT OF HIS CONTENTION THAT THE LAND WAS PURCHASED BEFORE THE BLOCK PERIOD THE APPELLANT HAS FURNISHED COPY OF SALE DEED DATED 25.03.1994 IN RESPECT OF KHASRA NO. 335/1/1 SHOWING INVESTMENT OF RS.67 245/- PLUS STAMP DUTY OF RS.5 975/-. AGAIN AS IN RESPECT OF LAND IN THE PRECEDING PARAGRAPH THE REGD. DEED INDICATES THAT KHASRA NO. 335 WAS DIVIDED INTO 8 EQUAL PIECES OF 153 LAND AND EACH PART SOLD SEPARATELY. THE LAND UNDER CONSIDERATION BEFORE THE AO WAS KHASRA NO. 335/1/8 AND NOT 335/1/1. AS SUCH THE APPELLANT HAS NOT BEEN ABLE TO PRODUCE EVIDENCE TO PROVE THAT THE LAND INVOLVED WAS PURCHASED PRIOR TO BLOCK PERIOD. IT IS THEREFORE PRESUMED THAT THE LAND WAS PURCHASED DURING THE BLOCK PERIOD AND THE INVESTMENT MADE IN THE SAME WAS UNEXPLAINED. BUT AGAIN THE ESTIMATE REGARDING THE VALUE OF THIS LAND MADE BY THE AO APPEARS TO BE VERY HIGH. THIS LAND MEASURING 13 457 SQ. FT. RELATES TO KHASRA NO.335 AND THE LAN D DISCUSSED IN THE PRECEDING PARA RELATES TO KHASRA NO. 336. THAT MEANS THAT BOTH THE PLOTS OF LAND ARE CONTIGUOUS AND WOULD BE EXPECTED TO CARRY ABOUT THE SAME VALUE. HOWEVER AS THE PIECE OF THIS LAND IS MARGINALLY SMALLER IT WILL BE FAIR AND REASONAB LE IF THE VALUE OF THIS LAND IS TAKEN AT RS.4 50 000/- AS AGAINST RS. 24 89 545/-. THE ADDITION IS AS SUCH RESTRICTED TO RS.4 50 000/- AND THE APPELLANT GETS A RELIEF OF RS.20 39 545/-. 128. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE REGISTERED SALE DEED OF LAND PURCHASE D ON 20.8.1992 CLEARLY SHOWS THAT THE LAND WAS PURCHASED ON 20.8.1992 WHICH FALLS BEYOND THE BLOCK PERIOD. ACCORDINGLY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN DELETING THE SAME. 129. IN RESPECT OF LAND SITUATED AT KHASRA NO. 336 /1 THE SAME WAS PURCHASED BY THE ASSESSEE ON 27.6.1995 FOR A CONSIDERATION OF RS. 1 80 00/-. THE STAMP DUTY OF RS. 16 000/- WAS PAID THEREON. HOWEVER THE LAND SITUA TED AT 154 KHASRA NO. 336/4 WAS A SEPARATE PIECE OF LAND FOR W HICH THE ASSESSEE FAILED TO SHOW ANY PROOF OF PURCHASE B EFORE THE BLOCK PERIOD. ACCORDINGLY THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) HELD THAT THE ASSESSING OFF ICER WAS JUSTIFIED IN MAKING THE ADDITION IN RESPECT OF THIS LAND AS UNDISCLOSED INCOME OF THE ASSESSEE. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT WHILE COMPUTING THE TOTAL INVESTMENT IN THIS LAND THE ASS ESSING OFFICER HAS APPLIED RATE OF RS. 185/- PER SQ. FT. AS NO BASIS WAS GIVEN BY THE ASSESSING OFFICER FOR APPLYING THE RATE OF RS. 185/- NOR ANY COMPARATIVE CASE HAS BEEN QUOTED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BY COMPARING THE INVESTMENT IN PLOT NO. 336/1 WHICH WA S PURCHASED AT A TOTAL CONSIDERATION OF RS.1 96 000/- IN THE YEAR 1995 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED THE ASSESSING OFFICER TO TAKE TH E VALUATION OF THE PLOT AT RS. 5 LACS PER PLOT MEASUR ING ABOUT 15667 SQ.FT. EACH. ACCORDINGLY THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) RESTRICTED THE ADDITION TO RS. 5 LACS AS AGAINST RS. 28 98 395/- ESTIMATED BY THE ASSESSI NG OFFICER. AS NOTHING WAS POINTED OUT BEFORE US TO I NTERFERE 155 WITH THE FINDINGS OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) WE CONFIRM THE ADDITION SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO THE EXTENT OF RS. 5 LACS. 130. IN RESPECT OF THE LAND MENTIONED BY THE ASSESSING OFFICER AS 355/18 THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) FOUND THAT IT WAS ACTUALLY 335 /1/8 AS PER THE SEIZED DOCUMENT AT PAGE 16. IT WAS ALSO FOUND THAT THIS LAND WAS PURCHASED VIDE SALE DEED DATED 25.3.1994 IN RESPECT OF KHASRA NO. 335/1/1 SHOWING INVESTMENT OF RS. 67 245/- AND STAMP DUTY OF RS. 59 75/- WHICH FALLS BEYOND THE BLOCK PERIOD. IT WAS ALSO F OUND THAT THE REGISTERED SALE DEED INDICATED THAT KHASRA NO. 335 WAS DIVIDED INTO 8 EQUAL PIECE OF LAND AND EACH PART SO LD SEPARATELY. AFTER ANALYSIS OF VARIOUS DOCUMENTS WI TH RESPECT TO THE TITLE OF LAND THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) FOUND THAT THE LAND UNDER CONSIDERATION WAS KHASRA NO. 335/1/8 AND NOT 335/1/ 1. SINCE THE ASSESSEE WAS UNABLE TO PRODUCE EVIDENCE T O SHOW THAT THE LAND WAS PURCHASED PRIOR TO BLOCK PERIOD THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE 156 ACTION OF THE ASSESSING OFFICER IN MAKING THE ADDIT ION BUT OBSERVED THAT THE ESTIMATE MADE BY THE ASSESSING OF FICER WAS VERY HIGH AND NOT SUPPORTED BY ANY COMPARATIVE CASE. BY OBSERVING THAT THE LANDS AT KHASRA NO. 335 AND K HASRA NO. 336 ARE LOCATED AT THE VERY SAME PLACE ADJOININ G EACH OTHER BOTH ARE EXPECTED TO CARRY THE SAME VALUE. ACCORDINGLY KEEPING IN VIEW THE SIZE OF THE LAND WHICH WAS COMPARATIVELY SMALLER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED ITS VALUATION AT RS. 4 50 000/- AS AGAINST RS. 24 89 545/- MADE BY THE ASSESSING OFFIC ER. THE FINDING RECORDED BY THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) IS AS PER MATERIAL ON RECORD THEREFO RE DOES NOT CALL FOR ANY INTERFERENCE ON OUR PART. 131. AN ADDITION OF RS.43 85 305/- WAS MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS. THE ASSESSI NG OFFICER OBSERVED THAT DURING THE SEARCH OPERATION AT THE B USINESS PREMISES OF THE ASSESSEE AT 8/2 NEW ANAJ MANDI CERTAIN INCRIMINATING DOCUMENTS SEIZED AS LPS-3 PAGES 46 TO 58 WERE FOUND WHICH CONTAINED DETAILS OF LAND HOLDINGS IN VILLAGE MUSAKHEDI IN THREE DIFFERENT NAMES SH. SAN JAY KUMAR S/O SH. BRIJMOHAN AGRAWAL SH. RAJKUMAR S/O S H. 157 MURLIDHAR AIREN AND SMT. SANGEETA W/O SH. GOPALDAS AGRAWAL. SINCE THE SAID DOCUMENTS WERE FOUND AT TH E PREMISES OF THE ASSESSEE HE WAS ASKED TO PROVE THE INVESTMENT IN THE PURCHASE OF THE SAID LAND. HOWEVE R AS NO REPLY WAS FILED THIS INVESTMENT IN LAND WAS HEL D BY THE AO TO HAVE BEEN MADE BY THE ASSESSEE IN BENAMI NAME S. IN THE ABSENCE OF ANY DETAILS OF COST & SOURCES FOR THE SAME THE MARKET PRICE OF THE LAND WAS WORKED OUT @RS.111 - PER SQ. FT. AND THE TOTAL INVESTMENT IN THESE LAND AMOU NTING TO RS.52 17 000/- WAS ADDED TO THE UNDISCLOSED INCOME OF THE ASSESSEE ON PROTECTIVE BASIS. SUBSTANTIVE ADDITION OF THIS AMOUNT WAS MADE IN THE HANDS OF ANOTHER ASSESSEE OF THE GROUP NAMELY SH. KAILASH AGRAWAL. 132. SIMILARLY DURING THE COURSE OF SEARCH PROCEEDINGS AT THE RESIDENCE OF THE ASSESSEE AN INCRIMINATING DOCUMENT (LPS-3 PAGE-25) WAS FOUND SHOWING CALCULATION OF MILK PURCHASED FOR THE PERIO D 18.07.02 TO 01.08.02 OF RS.16 055/-. THIS PAPER ALS O CONTAINED DETAIL OF LOAN GIVEN OF RS.95 000/- AS WE LL AS INTEREST RECEIVED THEREON OF RS.14 250/-. THE ASSES SEE WAS ASKED TO OFFER EXPLANATION BUT IN VIEW OF NO REPLY FOR THE 158 AFORESAID AMOUNTS OF RS.L 25 305/- (16055+95000+142 50) WAS TREATED TO BE UNDISCLOSED INCOME AND ADDED IN T HE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS. AGAIN T HE SUBSTANTIVE ADDITION OF THIS AMOUNT WAS MADE IN THE HANDS OF SH. KAILASH AGRAWAL. 133. ANOTHER DOCUMENT I.E. HUNDI OF RS. 5 LACS WAS FOUND WHICH WAS WRITTEN BY SH. RAJESH AGRAWAL PROP . M/S. RAJESH KUMAR OMPRAKASH 39-40A UDHYOG NAGAR SHOP NO. 8 NAVLAKHA INDORE (LEVEL). THE SAME IS KHULI MITTI BUT EFFECTIVE FROM 01.07.02 IN WHICH IT HAS BEEN S TATED THAT RS.5 LACS HAS BEEN RECEIVED IN CASH WHICH IS RETURNABLE ON DEMAND. IN THE HUNDI THERE WAS NO NA ME OF LENDER (DEWAL). AT THE TIME OF SEARCH ON 13.11.02 STATEMENT OF SH. MAHESH AGRAWAL (BROTHER OF ASSESSE E) WAS RECORDED IN WHICH HE CATEGORICALLY DENIED THE KNOWL EDGE ABOUT THIS HUNDI. SUBSEQUENTLY ON 06.01.03 STATEM ENT OF SH. RAJESH AGRAWAL WAS RECORDED IN WHICH HE CONCEDE D TO HAVE WRITTEN THIS HUNDI. HOWEVER AGAIN IN RESPONSE TO THE QUESTIONNAIRE ISSUED NO REPLY WAS FURNISHED BY THE ASSESSEE IN THIS RESPECT. AS SUCH THE LOAN ADVANCED THROUGH THIS HUNDI OF RS.5 LAC IN CASH WAS TREATED BY THE 159 AO AS UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED IN HIS HANDS ON PROTECTIVE BASIS. THE SUBSTANTIVE ADDITION ON THIS COUNT WAS MADE IN THE HANDS OF SH. MAHESH AGRAWAL. 134. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE PROTECTIVE ADDITION AFTER HAVING THE FOLLOWING OBSE RVATIONS :- 4.11 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND GONE THROUGH THE ASSESSMENT ORDER. IT IS SEEN THAT THESE ADDITIONS HAVE BEEN MADE THE AO IN THE HANDS OF ALMOST ALL THE PERSONS OF THIS GROUP ON PROTECTIVE BASIS. THE AO HAS GIVEN NO REASON AS TO WHY THESE ADDITIONS HAVE BEEN MADE ON PROTECTIVE BASIS IN THE HANDS OF SO MANY PERSONS. NO LINK WHATSOEVER HAS BEEN ESTABLISHED OF THESE DOCUMENTS WITH THE APPELLANT. AS HAS BEEN MENTIONED ABOVE THE ASSESSMENT U/S 158BC HAS TO BE MADE ON THE BASIS OF MATERIAL FOUND DURING THE SEARCH OPERATION. THERE IS NO SCOPE OF ANY ADDITION S MADE ON SURMISES AND GUESS WORK. THE PROTECTIVE ASSESSMENT IS MADE WHEN THE AO IS UNCERTAIN ABOUT THE INCOME SHOWN BY AN ASSESSEE. IT IS ONLY IF HE I S CERTAIN ABOUT THE PERSON TO WHOM SUCH INCOME BELONGS THAT HE MAKES THE ASSESSMENT IN THE OTHER PERSON'S HANDS ON SUBSTANTIVE BASIS AND SUCH INCOME IS ASSESSED IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS TILL THE ASSESSMENT REACHES FINALI TY. SUCH A THING NORMALLY HAPPENS IN THE CASE OF ASSESSMENT UNDER NORMAL PROVISIONS OF THE ACT. SINCE THE BLOCK ASSESSMENT IS MADE ON HARD FACTS THERE IS NO PROVISION FOR MAKING ANY TYPE OF ADDITI ON WITHOUT ESTABLISHING THE SAME AS BELONGING TO THE ASSESSEE ON THE BASIS OF MATERIALS/DOCUMENTS FOUND DURING THE SEARCH. THE AO HIMSELF DOES NOT APPEAR TO BE CERTAIN AS TO WHOM THE DOCUMENTS ACTUALLY 160 BELONG. EVEN IF IN CASE THE ADDITION MADE ON SUBSTANTIVE BASIS IN ONE HAND IS ULTIMATELY STRUCK DOWN IN APPEAL THERE IS NO MATERIAL BROUGHT ON RECORD TO SUPPORT SUCH AN ADDITION IN ANY OTHER HAN D WHERE IT COULD ALTERNATIVELY BE SUSTAINED AS NO PERSON HAS ACTUALLY SHOWN SUCH INCOME. SINCE THE ADDITIONS ON SUBSTANTIVE BASIS ON ALL THESE POINTS HAVE BEEN MADE EITHER IN THE HANDS OF SH. KAILASHCHAND AGRAWAL OR SH. MAHESH AGRAWAL AND THEIR CASES ARE ALSO IN APPEAL FOR ADJUDICATION AND ALSO THERE IS NO MATERIAL TO PROVE THAT SUCH INCOME BELONGED TO THE APPELLANT THE ADDITIONS RS.43 85 305/- MADE ON PROTECTIVE BASIS IN THE HANDS OF THE APPELLANT CANNOT BE SUSTAINED AND THE SAME ARE THEREFORE DELETED. AGAINST THE ABOVE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. 135. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD. IN VIEW OF THE REASONING GIVEN BY THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) AS REPRODUCED ABOVE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) DELETING THE PROTECTIVE ADDITI ON MADE IN THE HANDS OF THE ASSESSEE SINCE THE ADDITION ON SUBSTANTIVE BASIS ON ALL THESE POINTS HAS ALREADY B EEN CONSIDERED ON MERITS EITHER IN THE HANDS OF SHRI KAILASHCHAND AGRAWAL OR MAHESH AGRAWAL. ACCORDINGL Y 161 NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS). 136. IN THE RESULT THE APPEAL OF THE REVENUE AND THE ASSESSEE IS DISMISSED. IT(SS) A NO. 20/IND/2006 IT(SS) A NO. 21/IND/2006 137. BRIEF FACTS ARE THAT THERE WAS SEARCH U/S 132 AT THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF MAH ESH NIRANJAN GROUP OF INDORE. THE SEARCH COMMENCED ON 13.11.2002 AND CONCLUDED ON 15.11.2002. SIMULTANEO USLY SURVEY U/S 133A OF THE ACT WAS ALSO CARRIED OUT AT THE GODOWN OF THE ASSESSEE AT PALDA INDORE. THEREAFTER ASSESSMENT WAS FRAMED IN THE CASE OF THE ASSESSEE U /S 158BC/143(3). IN THE ASSESSMENT SO FRAMED SUBSTANT IVE ADDITION ON ACCOUNT OF UNRECORDED PURCHASES AND INVESTMENT UNRECORDED PAYMENT TO A.R. ASSOCIATES UNRECORDED SALES/PURCHASES CT DEPARTMENT UNRECOR DED TRANSACTION WITH KAMRATHY CO. LTD. ETC. WAS MADE. SIMILARLY PROTECTIVE ADDITION WAS MADE ON ACCOUNT OF UNRECORDED SALES PAYMENTS CONSIGNMENT NOTE SUPPL IES ETC. AGAINST WHICH THE ASSESSEE APPROACHED THE LEAR NED 162 COMMISSIONER OF INCOME TAX (APPEALS). THE OBSERVATI ONS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD ARE AS UNDER :- THE ADDITION IN CASE OF 'UNRECORDED SALES DEVSHREE CORPORATION HAS ACTUALLY BEEN WORKED OUT BY THE AO AS RS.2 61 77 419/- BUT HAS INADVERTENTLY MENTIONED AS RS.61 78 279/- WHILE COMPUTING THE UNDISCLOSED INCOME. RS.61 78 279/- ACTUALLY REPRESENTS THE TOTAL THE PRECEDING ENTRIES OF ADDITIONS MADE ON PROTECTIVE BASIS. THUS THE AMOUNT OF RS.2 61 77 419/- WAS OMITTED TO BE ACCOUNTED FOR. THUS THE TOTAL ADDITION ON ACCOUNT OF PROTECTIVE BASIS IS RS.3 23 49 798/-. THIS ADDITION ACTUALLY AMOUNTED TO RS.12 1 0 87 500/- AS PER DISCUSSION IN THE ASSESSMENT ORDER BUT WAS WRONGLY TAKEN AT RS.L0 19 47 500/- WHILE COMPUTING THE INCOME. THE NECESSARY RECTIFICATION HAS BEEN MADE VIDE ORDER U/S 154 OF THE ACT DATED 30.06.2005. DURING THE COURSE OF SEARCH ENQUIRIES SUMMONS U/S 131 OF LT. ACT WAS ISSUED TO M/S INTERSTATE ROAD CARRIER CALCUTTA HAVING ITS BRANCH OFFICE AT DEWAS NAKA INDORE WHO IS ONE OF THE TRANSPORTERS OF THE MAHESH NIRANJAN GROUP. THE DELIVERY REGISTER PARTY LEDGER AND BILTIES PERTAINING TO THE PERIOD 1.4.00 ONWARDS WERE PRODUCED BY SH. DHARAMVIR MANAGER OF M/S INTERSTATE ROAD CARRIER WHICH WAS IMPOUNDED U/S 131(3) OF IT ACT. HIS STATEMENT ON OATH WAS RECORDED U/S 131 OF THE IT ACT. FURTHER STATEMENT ON OATH OF SH. MAHENDRA AGRAWAL ONE OF THE PARTNERS OF M/S. INTERSTATE ROAD CARRIER WAS ALSO RECORDED IN WHICH HE EXPRESSED HIS AGREEMENT AND CONSENT TO THE STATEMENT GIVEN BY SH. DHARAMVEER. ON EXAMINATION OF THE DOCUMENTS PRODUCED BY 163 M/S. INTERSTATE ROAD CARRIER AND THE STATEMENT ON OATH OF SH. DHARAMVEER FOLLOWING FACTS EMERGED:- THE INDORE BRANCH OF M/S. INTERSTATE ROAD CARRIERS MAINTAINS BILTIES PARTY LEDGER DELIVERY REGISTER CASH BOOK ETC. WHEN ANY CONSIGNMENT IS DISPATCHED FROM CALCUTTA THE BILTY IS PREPARED IN SIX COPIES. ONE COPY IS RETAINED IN THE CALCUTTA HEAD OFFICE ONE COPY IS SENT TO THE INDORE BRANCH BY POST TWO COPIES ARE BROUGHT BY THE TRUCK DRIVER ALONG WITH THE CONSIGNMENT AND TWO COPIES ARE SENT TO THE CONSIGNEE I.E. MAHESH NIRANJAN GROUP IN THIS CASE. THE TRUCK DRIVER ALSO BRINGS THE INVOICE IN TWO COPIES WHICH ARE DELIVERED TO THE CONSIGNEE ALONG WITH THE CONSIGNMENT OF GOODS. WHEN THE TRUCK FROM CALCUTTA ARRIVES AT INDORE IT FIRST CONTACTS THE BRANCH OFFICE OF THE TRANSPORTER WHO IS TURN CONTACTS THE CONCERNED PARTY. THE CONCERNED PARTY THEN CALLS BACK AND EITHER TELLS THE TRANSPORTER TO GET THE DELIVERY DONE AT ONE OF ITS GODOWNS OR AT SOME OTHER PARTY'S PLACE AS THE GOODS HAVE BEEN SOLD TO THAT PARTY. THE INDORE BRANCH OF M/S. INTERSTATE ROAD CARRIER MAKES THE FOLLOWING ENTRIES IN THE DELIVERY REGISTER:- 1. DATE OF ISSUE OF BILTY. 2. BILTY NO. 3. QUANTITY OF GOODS/NUMBER OF BAGS. 4. TRUCK NO. 5. DATE OF ARRIVAL OF TRUCK AT INDORE. 6. DATE OF UNLOADING OF TRUCK. 7. NAME OF CONSIGNOR. 8. NAME OF CONSIGNEE AS PER BILTY. 9. NAME OF THE PARTY TO WHICH THE DELIVERY OF CONSIGNMENT HAS ACTUALLY BEEN MADE. 10. PLACE WHERE THE TRUCK WAS UNLOADED. NORMALLY WITHIN 15 DAYS OF DELIVERY THE FREIGHT IS RECOVERED BY THE TRANSPORTER. THE 164 DETAILS OF FREIGHT RECEIVABLE/RECEIVED ARE POSTED IN THE PARTY LEDGER. IN ADDITION TO ITS VARIOUS GENUINE CONCERNS THE MAHESH NIRANJAN GROUP MAKES PURCHASES IN THE FOLLOWING NAMES:- A) ANJALI SALES CORPORATION BALAGHAT B) SAURASHTRA SALES AHMEDABAD C) GAURAV ENTERPRISES SEONI D) PANKAJ TRADERS DURG E) KIRTI ENTERPRISES NAGPUR F) SHRI KRISHNA TRADING COMPANY INDORE G) MAHESH & COMPANY DHAR H) MAHENDRA KUMAR & COMPANY DEESA I) SHREE TRADERS RAIPUR J) HANUMAN BHANDAR GONDIA K) SARASWATI BHANDAR GONDIA L) PRAHALAD RAI PHARMA & COMPANY SAMBALPUR M) SHAH BARDANA TRADERS SURAT N) B.M. & COMPANY MUMBAI O) NATIONAL JUTE CENTRE MUMBAI P) KAMAKHYA JUTE SALES MUMBAI Q) I.T. COMPANY R) GAYATRI INDUSTRIES S) GAYATRI TRADERS T) AMBIKA INDUSTRIES U) KAWAHATTI COMPANY LTD. 138. WITH REGARD TO THE ADDITION MADE ON SUBSTANTI VE BASIS ON ACCOUNT OF UNRECORDED PURCHASE AND INVESTM ENT OF RS. 10 19 47 500/- THE OBSERVATION OF THE ASSES SING OFFICER WAS ASSESSEE UNDER :- A LL THE PURCHASES MADE IN THE ABOVE NAMES ARE BEING MADE BY THE MAHESH NIRANJAN GROUP ONLY WHICH IS NOT ONLY 165 TAKING DELIVERY OF THE GOODS BUT ALSO MAKING PAYMENT OF THE FREIGHT IN CASH. IN CASES WHERE THE GOODS ARE BEING PURCHASED IN THE NAME OF A GENUINE CONCERN OF MAHESH NIRANJAN GROUP AND THAT TOO BEING RECORDED ONES THE FREIGHT IS PAID BY CHEQUE ON WHICH TDS IS ALSO MADE. PAGES-L TO 38 OF IMPOUNDED DOCUMENT NO.1 (PARTY LEDGER) CONTAINS THE LEDGER ACCOUNT OF MAHESH NIRANJAN GROUP. IN THE COLUMN-6 OF THIS ACCOUNT NAME OF THE PARTY IN WHOSE NAME IS PURCHASES HAVE BEEN MADE IS MENTIONED IN ABBREVIATED FROM DETAILS OF SOME OF WHICH ARE GIVEN BELOW :- 1. ANJALI SALES CORPORATION BALAGHAT ASC 2. SAURASHTRA SALES AHMEDABAD SS 3. GAURAV ENTERPRISES SEONI GE 4. PANKAJ TRADERS DURG PT 5. KIRTI ENTERPRISES NAGPUR KE 6. SHRI KRISHNA TRADING COMPANY INDORE SKT CO. 7. AGRAWAL JUTE BAG INDUSTRIES AJB OR AJBI 139. THE ASSESSING OFFICER CALLED FOR THE REPORTS OF M/S INTER-STATE ROAD CARRIER AND P REPARED SUMMARY OF PURCHASES MADE BY THE ASSESSEE IN THE NAMES OF ABOVE CONCERNS FOR THE PERIOD FROM 1.4.00 TO 13.11.02 IS AS UNDER :- S.NO. NAME OF THE PARTY NUMBER OF TRUCKS 01. SHREE TRADERS RAIPUR 131 02. GAYATR I INDUSTRIES 2 03. GAYATRI TRADERS 1 04. PANKAJ TRADERS 259 166 05. KAWAHATTI COMPANY LTD. 1 06. AMBICA INDUSTRIES 1 07. SHREE KRISHNA TRADING COMPANY 147 08. RADHASWAMI TRADING COMPANY 1 09. M. & COMPANY 15 10. HANUMAN BHANDAR 156 11. R. MAHENDRA 1 12. GOURAV EATERPRISES 17 13. SARASWATI BHANDAR 37 14. L T. COMPANY 2 15. ANJALI SALES CORPORATION 80 16. PRAHALADRAI 4 17. B.M. & COMPANY 1 18. KIRTI ENTERPRISES 85 19. NATIONAL JUTE CENTRE 10 2 0. KAMAKHYA JUTE SALES 2 21. SAURASHTRA SALES. 44 TOTAL TRUCKS : 997 IN ADDITION TO THE ABOVE 143 TRUCKS ARE OF AGRAWAL JUTE BAG INDUSTRIES & 58 BAGS ARE OF MAHESH NIRANJAN JUTE (P) LTD. 140. IN ITS ORDER THE ASSESSING OFFICER OBSERVED T HAT WHEN CALLED UPON TO EXPLAIN ALL THESE TRANSACTIONS THE ASSESSEE SUBMITTED THAT THE ALLEGATION SO LEVIED WA S INCORRECT AND WAS BASED MERELY ON PRIVATE OPINION R ATHER THAN ACTUAL FACTS OF THE CASE. THE AO HELD THAT INS TEAD OF EXPLAINING THE REAL POSITION THE ASSESSEE HAD TRIE D TO ESCAPE FROM HIS ONUS BY NARRATING THE THINGS WHICH WERE 167 NOT DIRECTLY CONNECTED WITH THE REPLIES DESIRED ON THE MATERIALS SUPPLIED TO THEM WHICH WERE GATHERED DURI NG AND AFTER THE SEARCH. THE SAYING OF THE ASSESSEE THAT T HE DEPARTMENT WAS RELYING ON A STATEMENT RECORDED OF T HE EMPLOYEE OF THE TRANSPORT COMPANY IS NOT CORRECT AS THE FACTS NARRATED IN THAT STATEMENT WERE FURTHER CONFI RMED BY THE PARTNER OF THE TRANSPORT COMPANY. FURTHER THE EVIDENCES FOUND IN THE SEARCH CARRIED OUT BY THE SA LES TAX DEPARTMENT IN WHICH BLANK LETTERHEAD OF ONE OF THE PARTIES WAS FOUND AND EVEN ONE TRUCK OF MATERIAL PERTAINING TO THE OTHER PARTY WAS FOUND UNLOADING AT ASSESSEE'S PREMI SES DURING THE IT DEPARTMENT SEARCH SUGGESTED THAT ASS ESSEE HAD NO REPLY IN THIS MATTER. HE THEREFORE REJECTE D THE REPLY FILED BY THE ASSESSEE. THE AO FURTHER OBSERVED THAT THE FOLLOWING CORROBORATING FACTS INDICATED THAT THE SA ID TRANSACTIONS WERE BEING DEALT WITH/TAKEN CARE OF BY THE ASSESSEE INDIRECTLY:- (A) IN THE SEARCH PROCEEDINGS CERTAIN INCRIMINATING DOCUMENTS INCLUDING COMMERCIAL TAX DEPARTMENTS INVESTIGATION REPORTS WERE FOUND. IN THIS INVESTIGATION REPORT THE 168 COMMERCIAL TAX DEPARTMENT SPECIFICALLY MENTIONED THAT BLANK LETTER-PAD OF ONE OF THE ABOVE PARTY M/S SHREE KRISHNA TRADING CO. INDORE WAS FOUND. (B) FURTHER MORE AT THE TIME OF INVESTIGATION BY THE SAID DEPARTMENT ONE CONSIGNMENT WAS FOUND BEING UNLOADED AT ASSESSEE'S GODOWN AT NEMAWAR ROAD INDORE WHICH WAS SENT BY M/S CALEDONIAN JUTE & INDUSTRIES LTD. CALCUTTA TO M/S. SHREE KRISHNA TRADING CO. (C) DURING THE COURSE OF FURTHER SEARCH INQUIRIES FROM ONE OF THE SUPPLIERS OF THE ASSESSEE M/S LOUIS DREYFUS INDIA PVT. LTD. F-301 GAURI SADAN 5 HAILEY ROAD DELHI-110 001 IN THEIR LETTER DATED 22.1.03 STATED THAT DELIVERY OF BAGS VALUED AT RS. 96 600/- WAS MADE TO THIRD PARTY AT THE INSTANCE OF THE ASSESSEE FOR WHICH MONEY WAS ALSO PAID BY THE ASSESSEE HIMSELF. HOWEVER AS PER THE INSTRUCTIONS OF THE ASSESSEE INVOICE WAS RAISED IN FAVOUR OF THAT THIRD PARTY. 169 (D) SIMILARLY THE INQUIRIES WERE ALSO MADE WITH THE OTHER TRANSPORT M/S. GUNNY CARRYING CORPORATION AND THAT TRANSPORTER ALSO FURNISHED THE DETAILS ABOUT SOME OF THE PARTIES MENTIONED ABOVE FROM WHICH IT WAS CLEAR THAT DELIVERIES OF GOOD PERTAINING TO AFORESAID CONCERNS WERE MADE AT THE ASSESSEE PREMISES. (E) FURTHER A PURCHASE ORDER MADE BY JAIN IRRIGATION SYSTEMS LTD. JALGAON (LPS-1 SEIZED AT OFFICE PREMISES) WORTH RS. 3 36 600/- TO M/S. PANKAJ TRADERS FOR SUPPLY OF HUSSAIN CLOTH WAS FOUND AT THE ASSESSEE'S PREMISES. (F) DURING THE COURSE OF SEARCH CARRIED OUT A COMPUTER CPU WAS FOUND & SEIZED. ON PROCESSING OF THIS CPU CERTAIN INCRIMINATING DOCUMENTS WERE FOUND WHICH ARE CO-RELATED WITH THE SAID CONCERNS WHICH WERE DISCUSSED AS UNDER:- RECORDS PERTAINING TO OTHER TRANSPORTER M/S. GUNNY CARRYING CORPORATION WERE FOUND IN WHICH TRANSACTIONS OF 170 TRANSPORTATION CARRIED OUT FOR THE GOODS DISPATCHED AT THE VARIOUS DESTINATIONS ON BEHALF OF ONE OF THE SAID CONCERNS M/S PANKAJ TRADERS WERE INCLUDED. ON PERUSAL OF THE SAID STATEMENT IT WAS APPARENT THAT NO TDS HAD BEEN DEDUCTED ON FREIGHT PAYMENT BY THE PANKAJ TRADERS WHICH FURTHER SUPPORTED THE STATEMENT GIVEN BY THE SH. DHARAMVEER MANAGER OF M/S INTERSTATE ROAD CARRIERS. THE ASSESSEE MAINTAINED THE BOOKS OF ACCOUNT OF ONE OF THE SAID CONCERNS M/S SHREE KRISHNA TRADING CO. THESE BOOKS INCLUDE CASH BOOK AND LEDGER OF SHREE KRISHNA TRADING CO. FOR THE FINANCIAL YEAR 2000-01. ONE SALE REGISTER OF M/S DEVSHREE CORPORATION WAS FOUND. THIS CONCERN ALSO SEEMS TO BE OPERATED BY THE ASSESSEE. THE SALE REGISTER PERTAINS TO THE PERIOD 3.4.02 TO 29.4.02 AND THE TOTAL SALE AMOUNT IS 171 RS.2 61 77 419/-. (I) THE ASSESSEE WAS SUPPLIED COPIES OF VARIOUS SUPPLIERS WHICH ARE MAINLY BASED AT CALCUTTA AND HE WAS ASKED TO CORRELATE/RECONCILE HIS OWN TRANSACTIONS AS WELL AS THE TRANSACTIONS MENTIONED PERTAINING TO THE SAID CONCERNS BUT HE DID NOT TAKE ANY INTEREST TO CORRELATE/RECONCILE THE SAME WITH HIS BOOKS OF ACCOUNT AND IT FURTHER CEMENTED THE FACT THAT THE ASSESSEE WAS CARRYING BUSINESS IN THE NAME OF THE ABOVE MENTIONED CONCERNS. (H) DURING THE COURSE OF SEARCH TWO CONTRACT NOTES (LPS-7 PAGE NO. 109 & 110) WERE FOUND AT BUSINESS PREMISES WHICH WERE PREPARED BY THE BROKER ASHISH SHYAMSUKHA IN WHICH IT HAD BEEN MENTIONED THAT NEW GUNNY BAGS HAD BEEN PURCHASED FROM M/S KAUSHAL LAMINATORS CALCUTTA WHICH TURNED OUT TO BE A FAKE NAME AS PER STATEMENT OF ASHISH RECORDED BY THE AO IN WHICH HE STATED THAT MATERIALS MENTIONED IN THESE CONTRACT NOTES PERTAINED TO THE ASSESSEE AS 172 THE WERE THE REAL SELLERS AND THE NAME OF KAUSHAL LAMINATORS WAS WRITTEN ONLY ON THE ADVICE OF THE ASSESSEE. THIS BROKER ALSO SUBMITTED SOME OF THE BROKERAGE BILLS WHICH WERE PREPARED IN THE NAME OF THE ASSESSEE BUT CONTAINING THE NAMES OF DIFFERENT OTHER SUPPLIERS WHO SUPPLIED THE GOODS TO DIFFERENT OTHER PARTIES. 141. IN VIEW OF THE ABOVE DISCUSSION THE AO HELD THAT THE ASSESSEE COULD NOT DENY HIS ONUS TO EXPLAIN/JUS TIFY THE AFORESAID TRANSACTIONS/ UNRECORDED PURCHASES ACCORDINGLY HE ESTIMATED THE UNRECORDED PURCHASES BY THE ASSESSEE BASED ON ABOVE STATED FACTS DURING THE BLO CK PERIOD AND MADE THE ADDITION TO THE UNDISCLOSED INC OME OF THE ASSESSEE AS UNDER: 1. TRANSPORTATIONS THROUGH M/S INTERSTATE ROAD CARRIERS : (A) BOGUS PURCHASES MADE DURING 01.4.00 TO 13.11.02 I.E. 31.5 MONTHS (APPROX.) AS PER RECORDS PRODUCED BY INTERSTATE ROAD CARRIERS NO. OF TRUCKS 1198 (AS MENTIONED IN ABOVE TABLE). (B) BLOCK PERIOD 01.04.96 TO 13.11.02 I.E. 79.5 MONTHS APPROX. (C) PROPORTIONATE NO. OF TRUCKS PURCHASES DURING BLOCK PERIOD 3023 TRUCKS (1198/31.5X79.5) 173 2. TRANSPORTATIONS THROUGH M/S GUNNY CARRYING CORPORATION : IN POST SEARCH INQUIRIES THE DEPARTMENT GOT A REPO RT FROM THE OFFICE OF THE DDIT (INV) U-III (4) CALCU TTA (A COPY WHEREOF WAS ALSO FURNISHED TO THE ASSESSEE TO OFFER HIS COMMENTS) IN WHICH CERTAIN INFORMATION GATHERED FROM M/S. GUNNY CARRYING CORPORATION WERE CONTAINED IN WHICH AS PER THE TRANSPORTATION DETAILS OF OTHER PARTIES THE GOODS PERTAINING TO T HESE PARTIES WERE DELIVERED AT ASSESSEE'S PREMISES. THE INFORMATION GATHERED PERTAINED TO SOME OF THE PARTI ES AND THAT TOO FOR THE SMALL PERIOD OF 1-4 MONTHS. BU T THIS INDICATED THAT A HUGE VOLUME OF TRANSACTIONS O F SUCH NATURE WERE CARRIED OUT. KEEPING IN VIEW OF NO N- COOPERATIVE ATTITUDE OF THE ASSESSEE AGAIN THERE WA S NO ALTERNATIVE EXCEPT TO ESTIMATE THE VOLUME OF SUC H GOODS. THE AO ESTIMATED THAT ON AN AVERAGE 20 TRUCKS OF GOODS PERTAINING TO SAID PARTIES AND OTHE RS WERE UNLOADED AT THE ASSESSEE'S PREMISES AND SUCH THE TOTAL NUMBER OF TRUCKS FOR THE BLOCK PERIOD (AB OUT 79.5 MONTHS) WORKED OUT TO 1590 TRUCKS. CALCULATION OF UNDISCLOSED PROFIT : - TOTAL NO. OF TRUCKS (1+2) = 4613 (3023+1590) - VALUE OF ONE TRUCK OF NEW JUTE BAGS IS ESTIMATED AT RS. 3 50 000/- - GROSS PROFIT RATE ESTIMATED (LOOKING TO THE NATUR E OF TRADE & TRADE NORMS- 7.5%. - ESTIMATED UNDISCLOSED PROFIT DURING BLOCK PERIOD -RS. 12 10 87 500/- (161.45 CRORES X 7.5%). (WHICH WOULD ACTUALLY WORK OUT TO RS. 12 10 91 250/- ) THE SAID UNDISCLOSED PROFIT OF RS.12 10 87 500/- WAS ESTIMATED BY THE AO TO BE THE UNDISCLOSED INCOME OF THE ASSESSEE AND THE SAME WAS ADDED IN THE ASSESSMENT O RDER. FURTHER AS THE ASSESSEE HAD CARRIED OUT THE HUGE V OLUME OF SUCH BUSINESS TRANSACTION IN DIFFERENT NAMES DUR ING ENTIRE BLOCK PERIOD IN ABSENCE OF SPECIFIC REPLY O F THE 174 ASSESSEE ABOUT SOURCE OF INVESTMENT IN SUCH TYPE OF BUSINESS IT WAS ESTIMATED THAT THE SALES REALIZATI ONS WERE MADE BY THE ASSESSEE IN 2 MONTHS TIME AND AS SUCH T HE UNEXPLAINED INVESTMENT IN PURCHASES OF RS.161.45 CR ORES COULD BE ESTIMATED AT 1/40 TH OF THE TOTAL PURCHASES WHICH WORKS TO RS. 4 03 62 500/- . THIS INVESTMENT IN THE BUSINESS WAS ALSO TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED TO THE UNDISCLOSED INCOME OF THE ASSESSEE. 142. DURING THE COURSE OF ASSESSMENT U/S 143(3)/15 8BC THE ASSESSING OFFICER MADE THE ADDITION ON ACCOUNT OF U NRECORDED SALES OF DEVSHREE CORPORATION. THE ASSESSING OFFICER OBS ERVED THAT DURING THE COURSE OF SEARCH INQUIRIES M/S INTER-ST ATE ROAD CARRIER HAVING ITS BRANCH AT DEWAS NAKA INDORE ONE OF THE TRANSPORTERS OF THE ASSESSEE GROUP WAS CALLED ALONG WITH THE ENTIRE RECORDS. ALL THE RECORDS OF M/S INTER-STATE ROAD CARRIER WERE IMPOUN DED U/S 131(1)(III) AND THE STATEMENT OF ITS PARTNERS WAS A LSO RECORDED. ON EXAMINATION OF RECORD OF TRANSPORTER IT WAS FOUND T HAT THE ASSESSEE WAS ALSO BUYING ITS GOODS THROUGH VARIOUS FIRMS. I N CASE OF SOME OF THE FIRMS THE ASSESSEE DID NOT ENTER THE TRANSACTIO N OF PURCHASE IN ITS REGULAR BOOKS OF ACCOUNTS AND PAYMENT OF TRANS PORTATION 175 CHARGES WAS ALSO MADE IN CASH. THE ASSESSING OFFICE R DEALT IN DETAIL ALL THE RECORDS OF M/S INTER-STATE ROAD CARRIER WHI CH CONSISTED OF PARTY LEDGER DELIVERY REGISTER CASH BOOK AND BILT IES. THIS RECORD PERTAINED TO THE PERIOD 1.4.2000 TO 13.11.2002. ON THE BASIS OF THESE DOCUMENTS AND RECORDS OF THE TRANSPORT COMPAN Y THE ASSESSING OFFICER ESTIMATED THE TOTAL NUMBER OF TRU CKS LOADS WHICH WERE BOUGHT BY THE ASSESSEE DURING THE PERIOD 1.4.2 002 TO 13.11.2002 I.E. 13.5 MONTHS AT 1198 TRUCKS. THEREA FTER THE ASSESSING OFFICER EXTRAPOLATED THE TRANSACTION OF T HIS PERIOD OF 13.15 TO THE ENTIRE BLOCK PERIOD WHICH CONSISTED OF 1.4.1996 TO 13.11.2002 I.E. 79.5 MONTHS APPROXIMATELY WHICH WOR KS OUT TO BE 3023 TRUCKS (1198/13.5 X 79.5). THEREAFTER THE AS SESSING OFFICER APPLIED GROSS PROFIT RATE OF 7.5% ON THE ENTIRE PUR CHASES AND WORKED OUT UNDISCLOSED PROFIT THEREON AT RS. 12 10 87 500/-. IN ADDITION TO IT THE ASSESSING OFFICER ALSO ESTIMATE D THE INVESTMENT INVOLVED IN ALL THESE PURCHASES COVERING THE ENTIRE BLOCK PERIOD WHICH WERE ESTIMATED AT RS. 4 03 62 500/-. 143. SIMILARLY THE ASSESSING OFFICER ALSO MADE INQUIRY IN RESPECT OF TRANSPORTATION THROUGH M/S GA NI CARRIER CORPORATION. A REPORT FROM THE OFFICE OF DD IT CALCUTTA WAS CALLED FOR WITH RESPECT TO THE INFORM ATION 176 GATHERED FROM M/S GANI CARRIER CORPORATION. THE INFORMATION SO GATHERED PERTAINED TO SOME OF THE PA RTIES AND THAT TOO FOR A PERIOD OF 1 TO 4 MONTHS ONLY. H OWEVER THE ASSESSING OFFICER EXTRAPOLATED THE TRANSACTIONS OF THIS PERIOD TO THE ENTIRE BLOCK PERIOD CONSISTING OF 79. 5 MONTHS ESTIMATED 20 TRUCKS OF GOODS PERTAINING TO SUCH PAR TIES AND WORKED OUT TOTAL NUMBER OF TRUCKS AT 1590. ON THESE TRUCKS ALSO THE ASSESSING OFFICER ESTIMATED GROSS P ROFIT RATE OF 7.5% AND APPLIED THE SAME OVER THE ENTIRE BLOCK PERIOD IRRESPECTIVE OF THE FACT THAT DOCUMENTS SO FOUND PE RTAINED TO THE PERIOD OF FOUR MONTHS. 144. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) REACHED TO THE CONCLUSION THAT THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION WITH RESPECT TO INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH AND ALS O AS PER INQUIRY CONDUCTED THEREAFTER. SINCE THERE WAS NEITHER ANY EVIDENCE NOR ANY MATERIAL WAS FOUND EITHER DURI NG SEARCH OR POST SEARCH INQUIRY FOR THE PERIOD FALLIN G OUTSIDE THE PERIOD 1.4.2000 TO 13.11.2002 AS PER THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) NO ADDITION WA S 177 WARRANTED WITH RESPECT TO SUCH PERIOD FOR WHICH NO INCRIMINATING MATERIAL WAS WITH THE ASSESSING OFFIC ER. AS PER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IN THE BLOCK ASSESSMENT ADDITION CAN ONLY BE MADE WITH RESPECT TO THE INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH AND THE INFORMATION GATHERED ON PO ST SEARCH INQUIRIES. AS ALREADY DISCUSSED HEREINABOVE SINCE THE ASSESSEE DID NOT FIND IT PROPER OPPORTUNITY BEF ORE THE ASSESSING OFFICER TO SUBSTANTIATE ITS CLAIM ADDITI ONAL EVIDENCES WERE ACCEPTED AND THE SAME WERE SENT TO T HE ASSESSING OFFICER FOR MAKING DETAILED INQUIRY AND T O GIVE HIS COMMENTS THEREON. HOWEVER THE ASSESSING OFFICER D ID NOT TAKE MUCH PAIN AND TRY TO ALLEGE THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN ACCEPTING T HE ADDITIONAL EVIDENCE. AS ALREADY DISCUSSED WE DO N OT FIND ANY INFIRMITY IN THE ACTION OF THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) IN ACCEPTING THE ADDITIONAL EV IDENCE IN RESPECT OF THE DOCUMENTS THE ASSESSEE COULD NOT PRODUCE BEFORE THE ASSESSING OFFICER BECAUSE OF THE LACK OF OPPORTUNITY. AS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DULY COMPLIED WITH THE TERMS OF RULE 46A AND 178 SENT ALL THESE DOCUMENTS TO THE ASSESSING OFFICER F OR DETAILED INQUIRY AND REPORT THEREON WE DO NOT FIND ANYTHING WRONG ON THE PART OF THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) IN ACCEPTING THE ADDITIONAL EVIDENCE AND SENDING THE SAME TO THE ASSESSING OFFICER FOR H IS REPORT. AFTER CALLING THE REMAND REPORT AND CONSID ERING THE DOCUMENTS FILED BY THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHICH WERE SEN T TO THE ASSESSING OFFICER FOR REMAND REPORT THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) REACHED THE CONCLUSION THAT THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION WITH RESPECT TO THE UNACCOUNTED PURCHASES FOR THE PERIOD 1.4.2000 TO 13.11.2002. HOWEVER WITH RESPECT TO EXTRAPOLATION OF THE TRANS ACTIONS OVER THE REMAINING BLOCK PERIOD THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION MADE B Y THE ASSESSING OFFICER BY OBSERVING THAT THE ASSESSING O FFICER WAS NOT JUSTIFIED IN ESTIMATING PROFIT AND UNACCOUN TED INVESTMENT IN RESPECT OF YEARS FOR WHICH NO INCRIMI NATING MATERIAL WAS FOUND BY THE ASSESSING OFFICER DURING SEARCH NOR AS PER INQUIRY CONDUCTED AFTER SEARCH. IN THIS REGARD 179 CONTENTION OF THE LEARNED CIT DR WAS THAT THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIF IED IN NOT APPLYING THE THEORY OF EXTRAPOLATED TO THE REMA INING PERIOD OF THE BLOCK INSOFAR AS THE ASSESSING OFFICE R HAS GATHERED INFORMATION IN RESPECT OF PART OF THE BLOC K PERIOD WHICH HAS NOT BEEN RECORDED BY THE ASSESSEE IN THE REGULAR BOOKS OF ACCOUNTS. THE ISSUE WITH REGARD TO APPLICA TION OF EXTRAPOLATION HAS ALREADY BEEN DEALT WITH BY ITAT INDORE BENCH IN THE CASE OF DCLT VS. M/S. SUNITA JUTE PACKAGERS IT(SS )A NO.133/IND/2 DATED 29.8.8 DISMIS SED THE DEPARTMENTAL APPEAL. THE FINDINGS IN PARA 13 AR E REPRODUCED AS UNDER: 'CONSIDERING THE [ACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISIONS IT IS CLEAR THAT THE ONLY EVIDENCE AVAILABLE ON RECORD WAS FOR PERIOD OF 88 DAYS IN WHICH UNDISCLOSED SALES WERE MADE. NO OTHER EVIDENCE IN RESPECT OF ANY OTHER YEAR WAS DETECTED DURING THE COURSE OF SEARCH PROCEEDINGS. THUS AD WAS NOT JUSTIFIED IN ESTIMATING THE UNRECORDED SALES FOR THE ENTIRE BLOCK PERIOD. LD. C1T(A) THEREFORE RIGHTLY DIRECTED THE AD TO TREAT THE INCOME WORKED OUT ON THE BASIS OF SALES RECORDED IN THE LOOSE PAPERS OF 88 DAYS APPLYING THE CURRENT RATE ONLY AS UNDISCLOSED INCOME. THE BALANCE ADDITION OUT OF 88 DAYS WAS CORRECTLY DELETED. LD. DR RELIED UPON CASE OF H.M. EUSFALI WHICH IS ON SALES TAX MATTER IN WHICH THE ISSUE OF BLOCK ASSESSMENT WAS NOT INVOLVED. WE MAY MENTION THAT HON'BLE BOMBAY HIGH COURT IN THE 'CASE OF CIT VS. DR. M.K.E. MENON 248 ITR 310 CONSIDERING THE ABOVE DECISION HELD THAT 180 'UNDISCLOSED INCOME COULD NOT BE ESTIMATED ON AN ARBITRARY BASIS. THE ASSESSEE BEING A PROFESSIONAL IT WAS HIGHLY IMPROBABLE THAT HIS PROFESSIONAL INCOME REMAINED CONSTANT FOR THE BLOCK PERIOD OF 10 YEARS.' THE OTHER CASES ARE WITH REGARD TO COMPUTATION OF INCOME ON THE BASIS OF EVIDENCE FOUND DURING COURSE OF SEARCH. THESE CASES WOULD NOT HELP THE CASE OF THE REVENUE BECAUSE LD. CIT(A) SUSTAINED THE PART ADDITION ON THE BASIS OF RECOVERY OF THE SEIZED MATERIAL. HOWEVER NO EVIDENCE WAS RECOVERED TO PROVE UNDISCLOSED INCOME BEYOND THE LOOSE PAPERS OF 88 DAYS. SIMILARLY IT WAS MERE PRESUMPTION THAT ASSESSEE MADE UNDISCLOSED INVESTMENT IN THE SALES. CONSIDERING THE ABOVE DISCUSSION WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. SAME IS DISMISSED.' HONBLE ITAT INDORE BENCH INDORE IN THE CASE OF SM T. VINITA AGRAWAL IT (SS) 19/IND/2006 BLOCK PERIOD 01-04-96 T O 13-06-02 ORDER DATED 20-03-2009 OBSERVED AS UNDER :- 14 LD. DR RELIED UPON ORDER OF THE AO. LD. DR SUBMITTED THAT UNDISCLOSED INCOME CAN BE COMPUTED BY APPLYING PROVISIONS OF SEC. 145(3). THE AO NOTED SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WAS NOT WRITTEN COMPLETELY THEREFORE FINDING OF THE AO IS CORRECT. HE HAS SUBMITTED THAT SEIZED PAPERS FOR DATED 9 TH JUNE 2002 TRANSACTION WAS RECOVERED DURING COURSE OF THE SEARCH (PB136). HE HAS SUBMITTED THAT THERE WAS A COLLECTION OF CASH IN THE SAME DOCUMENT WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT. HE HAS REFERRED TO SEIZED PAPER RECOVERED DURING COURSE OF THE SEARCH FOR TRANSACTIONS HELD ON DATED 10 TH 11 TH AND 12 TH JUNE 2002 (PB137 138 & 139) CASH WAS DEPOSITED FROM VARIOUS PARTIES 181 AND RECEIPT OF MONEY IS ALSO NOTED. LD. DR SUBMITTED THAT STATEMENT OF EMPLOYEE AJIT JAIN WAS RECORDED ON THE DATE OF THE SEARCH IN WHICH HE HAS ADMITTED 30% SALES ARE MADE ON KACCHA BILL HOWEVER HE HAS DISPUTED HIS STATEMENT IN THE CROSS-EXAMINATION WITHOUT ANY BASIS AND HE CANNOT BE ALLOWED TO CHANGE THE STATEMENT. PB 21 IS THE STATEMENT OF ASHOK PAHUJA WHO HAS EXPLAINED THAT THE SALES OF THE ASSESSEE ON AVERAGE PER DAY WAS 15-20 000 PER DAY. HE HAS SUBMITTED THAT THE SALES OF 3 DAYS WAS FOUND OUTSIDE THE BOOKS OF ACCOUNT AND ON THAT BASIS UNDISCLOSED SALES WERE RIGHTLY COMPUTED BY THE AO FOR THE ENTIRE BLOCK PERIOD. HE HAS SUBMITTED THAT NO EVIDENCE OF COERCION OR THREAT WAS PRODUCED BY THE ASSESSEE WHILE RECORDING THE STATEMENT OF ABOVE PERSON. HE HAS SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING THE EVIDENCES FOUND DURING COURSE OF THE SEARCH I.E. STATEMENT OF THE ABOVE EMPLOYEE AND THE DOCUMENTS OF 3 DAYS WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. LD. DR SUBMITTED THAT ASSESSEE ADMITTEDLY DISCLOSED UNDISCLOSED INCOME FOR THE BLOCK PERIOD WHICH PROVED THAT ASSESSEE WAS EARNING UNDISCLOSED INCOME IN THE ENTIRE BLOCK PERIOD. HE HAS SUBMITTED THAT FINDING OF LD. CIT(A) IS NOT CORRECT IN DELETING THE ENTIRE ADDITION. LD. DR IN SUPPORT OF HIS CONTENTION UPON FOLLOWING DECISIONS: H.M. EUSFALI. ABDUL ALI 90 ITR 272. G.J.SHAH & CO. 246 ITR 671. RAJNIK & CO. 251 ITR 561. VEDPRAKASH 265 ITR 643. SACHDEVA & SONS 1 ITJ511 (INDORE BENCH). 182 NAPAR DRUGS P. LTD. 98 ITD 285 (DEL TM). MANGERAM MITTAL 289 ITR (AT) DEL 112. OVERSEAS CHINESE CUISINE VS. ACIT 56 ITD 67 (TM/MUM) 15 ON THE OTHER HAND LD. COUNSEL FOR ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT NO KACCHA BILL WAS FOUND DURING THE SEARCH. THERE IS NO BAR TO DISCLOSE UNDISCLOSED INCOME IN THE RETURN FOR THE BLOCK PERIOD. THE SEIZED PAPERS FOR THE 3 DAYS WERE INCORPORATED IN THE CASH BOOK BECAUSE ACCOUNTANT WAS AWAY IN WHICH NO DEFECTS HAVE BEEN POINTED OUT. THE COPIES OF THE CASH BOOK ARE FILED AT PB 147 148 149. THE ASSESSEE NEVER ASKED THE EMPLOYEE TO ISSUE KACHHA BILL BECAUSE KACHHA BILL I S ONLY MEANT FOR APPROVAL WHICH IS ALSO EXPLAINED IN THE STATEMENT OF EMPLOYEE AJIT KUMAR JAIN. HE HAS SUBMITTED THAT THE ENTIRE ENTRIES RECORDED IN THE SEIZED PAPERS HAVE BEEN RECONCILED AND IN THE SAREE BUSINESS IT IS NOT POSSIBLE TO MAINTAIN STOC K REGISTER. THE SALES CANNOT BE ESTIMATED FOR THE ENTIRE BLOCK PERIOD WITHOUT HAVING ANY SEIZED MATERIAL OR EVIDENCE. HE HAS SUBMITTED THAT NO EVIDENCE OR MATERIAL IS RECOVERED DURING COURSE OF THE SEARCH TO ESTIMATE SUPPRESSED SALES OR SUPPRESSED PROFIT THEREFORE LD. CIT(A) WAS JUSTIF IED IN DELETING THE ADDITION. HE HAS SUBMITTED THAT THE ASSESSEE SURRENDERED RS.1 09 577/- ON THE BASIS OF THE SEIZED PAPERS WHICH CONTAIN THE AMOUNT OF RS.25 000/- ONLY. HE HAS SUBMITTED THAT NO STOCK WAS VERIFIED DURING THE SEARCH. HE HAS SUBMITTED THAT PB 136 SHOWS THE COLLECTION OF CASH BY THE 183 EMPLOYEE WHICH WAS RECOVERED ON SUNDAY ON 9 TH JUNE 2002 FROM PERSON TO WHOM CREDIT SALES WERE MADE. 16 WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT ONLY SEIZED PAPERS RECOVERED PERTAIN TO 3 DAYS TRANSACTION I.E. ON 10 TH 11 TH AND 12 TH JUNE 2002. THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE FOUND WRITTEN UP TO 8 TH JUNE 2002. 9 TH JUNE 2002 WAS SUNDAY AND THE BOOKS COULD NOT BE WRITTEN FOR THE NEXT 3 DAYS I.E. UPTO THE DATE O F SEARCH ON 13.6.2002 BECAUSE THE ACCOUNTANT WAS STATED TO BE OUT OF STATION. ALL ENTRIES OF THESE D AYS WERE SUBSEQUENTLY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE (PB/147 148 & 149) DISCLOSING ALL THE TRANSACTIONS WHICH ARE RECORDED IN THE SEIZED PAPERS IN WHICH NO DEFECTS HAVE BEEN POINTED BY THE LD. DR. IT IS ADMITTED FACT THA T APART FROM THE ABOVE PAPERS NO OTHER INCRIMINATING DOCUMENT OR MATERIAL WAS FOUND DURING COURSE OF SEARCH TO INDICATE ANY SUPPRESSED SALES OR PROFIT OUTSIDE THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE ENTIRE BLOCK PERIOD. THE DEFECTS POINTED OUT IN THE REGULAR BOOKS OF ACCOUNT CANNOT BE SAID TO BE MATERIAL OR EVIDENCE RECOVERED DURING COURSE OF SEARCH. THE DEFECTS IN THE BOOKS OF ACCOUNT MAY BE RELEVANT IN THE REGULAR ASSESSMENTS BUT IT HAS NO BEARING ON THE BLOCK ASSESSMENTS UNDER CHAPTER XIVB OF THE IT ACT. THE ONLY CREDIT SALES NOTED IN THE SEIZED PAPERS COMES TO RS.56 190/-. THE ENTIRE SALES CANNOT BE PROFIT O F THE ASSESSEE. AT THE MOST N.P. RATE MAY BE APPLIED FOR THE PURPOSE OF MAKING THE ADDITION. THE ASSESSEE HAS ALREADY RECORDED THESE DETAILS IN THE BOOKS OF ACCOUNT AFTER SEARCH BECAUSE ACCOUNTANT 184 WAS AWAY. MORE SO THE INCOME DECLARED IN THE RETURN FOR THE BLOCK PERIOD WAS SUFFICIENT TO MEET OUT THE ABOVE ISSUE. THE AO WAS THEREFORE NOT JUSTIFIED IN ESTIMATING THE SUPPRESSED SALES AND PROFIT FOR THE ENTIRE BLOCK PERIOD. THIS ISSUE IS CONSIDERED IN DETAIL BY THIS BENCH IN THE CASES OF M/S. SUNITA JUTE PACKAGERS AND RADHESHYAM GUPTA HUF & OTHERS AND THE ADDITIONS HAVE BEEN RIGHTLY DELETED. THE DECISIONS CITED BY LD. DR WERE CONSIDERED IN THOSE CASES. THE ISSUE IS THEREFORE SQUARELY COVERED BY OUR EARLIER ORDERS MENTIONED ABOVE IN FAVOUR OF THE ASSESSEE. IT IS SETTLED LAW THAT THE ADDITION COULD BE MADE IN THE BLOCK ASSESSMENT ON THE BASIS OF EVIDENCE FOUND AND RECOVERED AS RESULT OF SEARCH. THE AO PRESUMED THAT FOR THE ENTIRE BLOCK PERIOD THE ASSESSEE HAS SUPPRESSED THE TURNOVER. THE AO HAD NO BASIS FOR ASSUMING THAT THE SALES MADE BY THE ASSESSEE DURING PARTICULAR MONTH/YEAR WOULD BE THE SAME DURING THE ENTIRE BLOCK PERIOD. HONBLE MP HIGH COURT IN THE CASE OF CIT VS. C.L.KHATRI 282 ITR 97 CONSIDERING THE DECISION IN THE CASE OF H.M. ESUFAL I HM ABDULALI (SUPRA) HELD THAT AO HAD NO BASIS TO ASSUME THAT THE EXPENDITURE INCURRED DURING THE PARTICULAR YEAR WOULD BE THE EXPENDITURE DURING THE LAST 10 YEARS. LD. CIT(A) WAS THEREFORE JUSTIFI ED IN DELETING THE ADDITION ON A/C OF ESTIMATE MADE BY THE AO FOR THE ENTIRE BLOCK PERIOD. THE DECISIONS CITED BY THE LD. DR HAVE ALREADY BEEN CONSIDERED EARLIER IN THE SEVERAL CASES AND WERE FOUND TO BE NOT APPLICABLE BECAUSE THERE WAS NO SEIZD MATERIAL RECOVERED DURING COURSE OF THE SEARCH. THE STATEMENT OF AJIT KUMAR JAIN WAS RECORDED IN WHICH HE HAS EXPLAINED THAT 30% KACCHA BILLS ARE ISSUED BUT THERE WAS NO IN HIS CROSS-EXAMINATION HE HAS 185 EXPLAINED THAT KACCHA BILL IS ISSUED FOR APPROVAL ONLY AND WHEN GOODS ARE SELECTED FOR SALE PAKKA BILLS ARE ISSUED AND ARE ENTERED INTO THE BOOKS OF ACCOUNT. HE HAS ALSO EXPLAINED IN THE CROSS- EXAMINATION THAT THE SEARCH PARTY COMPELLED HIM TO SAY THAT 30% KACCHA BILLS ARE ISSUED. THE SEIZED PAPERS FOR 3 DAYS I.E. 11 TH 12 TH AND 13 TH JUNE ARE LATER ON SIGNED BY SHRI AJIT KUMAR JAIN ON 15 TH JUNE 2002 BY MENTIONING THAT HE HAS PREPARED THESE DETAILS OF THE TRANSACTIONS FOR 3 DAYS. IT WOULD SUPPORT THE CONTENTION OF THE ASSESSEE THAT AJIT KUMAR WAS COMPELLED TO SIGH AGAINST HIS WILL BECAUSE THESE PAPERS BEARS THE LATER DATED OF 15 TH JUNE 2002 AND THERE WAS NO REASON FOR AJIT KUMAR JAIN TO SIGN THE SAME OR WRITE ANYTHING ON THESE PAPERS AFTER THE SEARCH OPERATION CONCLUDED AND THE SAME WERE SEIZED BY THE SEARCH PARTY. MOREOVER THESE PAPERS WERE ENTERED INTO THE BOOKS OF ACCOUNT LATER ON IN WHICH NO DEFECTS HAVE BEEN POINTED OUT. AJIT KUMAR JAIN DID NOT SUPPORT THE CASE OF THE AO IN THE CROSS- EXAMINATION. NO KACHHA BILL WAS FOUND DURING COURSE OF THE SEARCH AND THERE IS NO BAR TO MAKE DISCLOSURE OF THE UNDISCLOSED INCOME IN THE RETURN FOR THE BLOCK PERIOD. IN THE STATEMENT OF ASHOK PAHUJA RECORDED ON 14 TH JUNE 2002 NO BASIS WHATSOEVER IS GIVEN AS TO HOW HE HAS GIVEN THE AVERAGE SALES OF ASSESSEE AT 15/20 000 PER DAY. IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND IN SEARCH TO SUPPORT THE STATEMENT OF SHRI ASHOK PAHUJA SUCH STATEMENT CANNOT BE RELIED UPON IN THE BLOCK PERIOD FOR THE PURPOSE OF MAKING THE ADDITION. THE LD. CIT(A) ON PROPER APPRECIATION OF THE ENTIRE MATERIAL ON RECORD RIGHTLY HELD THAT THE RE WAS NO BASIS OR EVIDENCE TO SUPPORT THE FINDING OF 186 THE AO. CONSIDERING THE ABOVE DISCUSSIONS IN THE LIGHT OF THE DECISIONS REFERRED TO IN THIS ORDER W E ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DELETING THE ENTIRE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 17 AS A RESULT DEPARTMENTAL APPEAL IS DISMISSED. 145. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDE RING THE PROVISIONS OF SECTION 158B(B) VIS--VIS JUDICIA L PRONOUNCEMENTS HELD THAT THE ASSESSING OFFICER HAS COLLECTED EVIDENCE IN THE COURSE OF INVESTIGATION O F THE SEIZED MATERIAL IN SEARCH FOR THE PERIOD OF 31.5 MO NTHS I.E. 1.4.2000 TO 13.1.2002 IN WHICH UNDISCLOSED PURCHASE S WERE MADE. HOWEVER NO OTHER EVIDENCE IN RESPECT O F EARLIER PERIOD WAS DETECTED SO NO UNEXPLAINED PURCHASES COU LD HAVE BEEN ESTIMATED BY THE ASSESSING OFFICER ON GUE SS WORK OR SURMISES. THUS THE ESTIMATION MADE WAS HELD TO BE WITHOUT ANY BASIS ON HYPOTHETICAL GROUND AND SURMIS ES. THE SAME WAS THEREFORE NOT ACCEPTED AS BASED ON F ACTS ARISING OUT OF SEARCH OPERATION. THE ASSESSING OFF ICER WAS DIRECTED TO RESTRICT THE ADDITION TO THE EXTENT OF INCOME WORKED OUT ON THE BASIS OF PURCHASES RECORDED FOR A PERIOD 187 OF 31.5 MONTHS ONLY AS FOUND IN THE RECORD OF M/S INTERSTATE ROAD CARRIERS AS UNDISCLOSED INCOME AND THE BALANCE ADDITION MADE BY APPLYING THE RATIO OF UNDI SCLOSED INCOME FOR THE REMAINING MONTHS OF BLOCK PERIOD FOR WHICH NOTHING WAS FOUND EITHER DURING SEARCH OR ON POST S EARCH INQUIRIES WAS DELETED. THE DETAILED FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS AS UNDER : - 3.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE BLOCK ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE CASE-LAWS SUPRA AS WELL AS OTHER DOCUMENTS FILED BY THE APPELLANT. ALL THES E SUBMISSIONS ALONGWITH DOCUMENTS WERE SENT TO THE AO FOR EXAMINATION AND REMAND REPORT AS THE SAME COULD NOT BE FURNISHED BEFORE HIM AT THE TIME ASSESSMENT PROCEEDINGS DUE TO SHORTAGE OF TIME ALLOWED TO THE APPELLANT FOR COMPLIANCE. THE AO WAS EXPECTED TO GIVE REASONABLE OPPORTUNITY TO THE APPELLANT IN THIS REGARD THEN SEND HIS REPORT ON TH E BASIS OF OBJECTIVE APPRAISAL OF THE FACTS. BUT HE S ENT HIS REPORT DATED 28.11.2005 QUESTIONING THE ADMISSION OF ADDITIONAL EVIDENCE AND REITERATING TH E OBSERVATION MADE IN THE ASSESSMENT ORDER. RELYING ON SEVERAL CASE-LAWS HE RENDERED THE ADDITIONAL EVIDENCE AS 'SELF-SERVING' AND BEYOND THE PROVISION S OF RULE 46A(1)(A) TO (D) OF THE I.T. RULES. AS SUCH THE REMAND REPORT SERVE NO PURPOSE IN SO FAR THE ASSISTANCE IN THE ADJUDICATION OF THE APPEAL IS CONCERNED. HOWEVER IT WILL BE PERTINENT TO EXAMINE THE CONTENTION OF THE AO THAT IN THE CASE UNDER CONSIDERATION THE ADDITIONAL EVIDENCE CANNOT BE ADMITTED AT THE APPELLATE STAGE. SUB-RULE (1) OF RU LE 46A SPECIFYING THE CONDITIONS UNDER WHICH THE ADDITIONAL EVIDENCE CAN BE ADMITTED READS AS UNDER: 188 '(1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE THE COMMISSIONER (APPEALS) ANY EVIDENCE WHETHER ORAL OR DOCUMENTARY OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE ASSESSING OFFICER EXCEPT IN THE FOLLOWING CIRCUMSTANCES NAMELY:-- (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. ' FROM THE READING OF THE ASSESSMENT ORDER IT IS CLEAR THAT THE APPELLANT WAS PUT THE QUERIES ON 53 POINTS REGARDING THE SEIZED MATERIAL FIRST TIME FOR COMPLIANCE ON 6.10.2004 AND THE SPECIFIC QUERY REGARDING THE PROPOSED RESULTS ON THE BASIS OF UNACCOUNTED PURCHASES MADE FROM M/S. INTERSTATE ROAD CARRIER CALCUTTA FOR REPLY ON 19.11.2004. THE ASSESSMENT ORDER WAS PASSED ON 30.11.2004.THUS IT IS SEEN THAT OPPORTUNITY PROVIDED TO THE APPELLANT WAS NOT ADEQUATE. THE APPELLANT COULD NOT HAVE BEEN EXPECTED TO COMPLY WITH 53 QUERIES IN A BLOCK ASSESSMENT AFTER VERIFICATION FROM VOLUMINOUS SEIZED RECORDS IN SUCH A SHORT PERIOD ALLOWED TO HIM. THE AO COULD HAVE REALIZED THAT CLAUSES (B) TO (D) OF RULE 46A( 1) ARE SQUARELY APPLICABLE TO THE CASE OF THE APPELLANT AND HE OUGHT TO HAVE EXAMINED THE ADDITIONAL EVIDENCE NOW FURNISHED BEFORE HIM BEFORE SENDING THE SUMMARY REMAND REPORT. HOWEVER INSTEAD OF GIVING ANY SPECIFIC 189 COMMENTS WITH REFERENCE TO THE CONTENTION OF THE APPELLANT AND THE EVIDENCES FURNISHED HE CHOSE TO MAKE TECHNICAL OBJECTIONS THAT SUCH EVIDENCE COULD NOT BE ENTERTAINED IN APPEAL AS THE ASSESSEE DID NOT FILE THE SAME IN THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE ABSENCE OF EXHAUSTIVE REMAND REPORT I HAVE NO ALTERNATIVE BUT TO PROCEED ON THE BASIS OF SUBMISSIONS AND MATERIAL FILED BEFORE ME BY THE APPELLANT. 3.5 IT WILL BE PERTINENT TO REPRODUCE SECTION 158B(B) OF THE I.T. ACT TO ASCERTAIN AS TO WHAT CONSTITUTES THE UNDISCLOSED INCOME IN A BLOCK ASSESSMENT. IT READS AS UNDER: '(B) 'UNDISCLOSED INCOME' INCLUDES ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS WHERE SUCH MONEY BULLION JEWELLERY VALUABLE ARTICLE THING ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THIS ACT OR ANY OTHER EXPENSE DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE. ' WHILE COMPUTING THE UNDISCLOSED INCOME IT HAS TO B E KEPT IN VIEW THAT IT IS COMPUTED ONLY ON THE BASIS OF MATERIAL OBTAINED DURING SEARCH OR ON THE BASIS OF MATERIAL GATHERED IN PURSUANCE OF INVESTIGATION INT O THE SEIZED MATERIAL. ADDITION OF UNDISCLOSED INCOME CAN NOT BE MADE ON THE BASIS OF ESTIMATION FOR A PART OF BL OCK PERIOD FOR WHICH NO DETAILS FROM ANY OF THE SEIZED DOCUMENTS WERE AVAILABLE. THE BLOCK ASSESSMENT IS NOT A SUBSTITUTE FOR REGULAR ASSESSMENT AND PRESUMPTION REGARDING UNDISCLOSED INCOME IS NOT PERMISSIBLE IN SUCH ASSESSMENT. IT HAS BEEN OBSERVE D BY THE THIRD MEMBER OF HON'BLE ITAT PUNE BENCH IN T HE CASE OF SAMRAT BEER BAR VS. ACIT REPORTED IN 69 TTJ 190 113 AS UNDER: 'THE VERY PURPOSE OF A SEARCH IS TO TAKE THE ASSESSEE BY SURPRISE AND TO ASSESS HIS INCOME ON THE BASIS OF EVIDENCE AND MATERIALS FOUND DURING THE SEARCH. ONCE THE RATIONALE BEHIND THE SEARCH IS KEPT IN VIEW IT WOULD BE CLEAR THAT THE LAW PRESUMES THAT THE ASSETS OR MATERIALS FOUND IN THE COURSE OF THE SEARCH ARE EXHAUSTIVE OF THE UNDISCLOSED INCOME OF THE ASSESSEE. THE ASSESSING OFFICER CANNOT PRESUME THAT THERE MUST BE SOME OTHER MATERIAL OR EVIDENCE WHICH IS NOT FOUND DURING THE SEARCH AND THE ASSESSEE MUST HAVE DERIVED UNDISCLOSED INCOME THEREFROM. TO HOLD THAT EVEN IN THE ABSENCE OF ANY SUCH EVIDENCE OR MATERIAL THE ASSESSING OFFICER WOULD BE EMPOWERED TO ESTIMATE THE INCOME IS FRAUGHT WITH DANGEROUS CONSEQUENCES. ' IN THE CASE OF CIT VS. RAJENDRA PRASAD GUPTA SUPRA HON'BLE RAJASTHAN HIGH COURT HAS HELD THAT THE COUR T RECOGNIZED THE ASSESSING OFFICER'S POWER TO MAKE BE ST JUDGMENT ASSESSMENT OF THE UNDISCLOSED INCOME OF TH E BLOCK PERIOD BUT WITHIN THE CONFINES OF THE MATERIA L COLLECTED DURING SEARCH. THIS MAY WELL BE DRAWN FRO M THE CATEGORICAL STATEMENT MADE BY THE COURT VIZ.: THE CORRECTNESS OR OTHERWISE OF THE RETURNS FILED IN PURSUANCE OF THE UNDER SECTION 158BC(A) HAS TO BE EXAMINED WITH REFERENCE TO THE MATERIAL IN THE POSSESSION OF THE ASSESSING AUTHORITY HAVING NEXUS TO THE ASSESSMENT OF 'UNDISCLOSED INCOME' WHICH IS WITH THE ASSESSING AUTHORITY AND PREMISE OF SUCH PROCEEDINGS. IF THE RETURNS FILED BY THE ASSESSEE DO NOT ACCORD WITH THE MATERIALS WHICH ARE ALREADY IN THE POSSESSION OF THE AUTHORITY IT CAN BE ESTIMATED TO THE BEST JUDGMENT BY THE ASSESSING AUTHORITY ON THE BASIS OF THE MATERIAL IN HIS POSSESSION. HOWEVER THE ASSESSING AUTHORITY IS NOT CONFERRED WITH POWER TO MAKE 191 ESTIMATION OF INCOME DE HORS THE MATERIAL IN HIS POSSESSION.... IT HAS TO BE BORNE IN MIND THAT PROCEEDINGS UNDER SECTIONS 158BB AND 158BC ARE THAT OF UNDISCLOSED INCOME. THEREFORE THE PROCEEDING CARRIES WITH IT A PRESUMPTION THAT RETURNS FILED IN PURSUANCE OF SUCH PROCEEDINGS ARE UNDISCLOSED INCOME AND NOT NECESSARILY IN ACCORDANCE WITH THE BOOKS OF ACCOUNT. ITS VERIFICATION HAS TO BE SEARCHED OUTSIDE REGULAR BOOKS WITH REFERENCE TO MATERIAL THAT HAS BEEN FOUND DURING SEARCH. THAT MAKES IT IMPERATIVE TO ADJUDICATE THE RETURN WITH REFERENCE TO MATERIAL THAT HAS COME IN THE POSSESSION OF THE ASSESSING AUTHORITY DURING THE COURSE OF SEARCH PROCEEDINGS AND ON WHICH BASIS THE BELIEF ABOUT THE EXISTENCE OF UNDISCLOSED INCOME IS ENTERTAINED BY THE ASSESSING AUTHORITY INVITING INVOCATION OF SECTIONS 158BB AND 158BC .... ' 3.6 THOUGH THE BLOCK PERIOD CAN BE EXTENDED UPTO SIX ASSESSMENT YEARS IN A CASE WHERE THE ASSESSEE HAS NOT DISCLOSED 'UNDISCLOSED INCOME' IN ANYONE OR MORE OF ASSESSMENT YEARS COMPRISED IN THE BLOCK PERIOD IT WILL NOT BE NECESSARY TO DO THE EX ERCISE OF COMPUTING THE UNDISCLOSED INCOME FOR THE RELEVAN T YEARS AND THE EXERCISE MAY BE LIMITED TO THE YEARS IN RESPECT OF WHICH THE UNDISCLOSED INCOME HAS BEEN FOUND. THE HON'BLE MUMBAI BENCH OF ITAT IN SUNDER AGENCIES VS. DCIT (1997) 63 ITD 245 (MUM.) HAS HELD THAT IT IS BEYOND THE POWER OF AN AO TO REVIEW THE ASSESSMENTS COMPLETED IN THE GARB OF A BLOCK ASSESSMENT UNLESS SOME DIRECT EVIDENCE COMES TO THE KNOWLEDGE OF THE DEPARTMENT AS A RESULT OF A SEARCH OR REQUISITION WHICH INDICATES CLEARLY THE FACTUM OF UNDISCLOSED INCOME. IN ARRIVING AT THIS CONCLUSION THE MUMBAI BENCH OF THE TRIBUNAL HAS RELIED ON THE DECISION OF THE DELHI HIGH COURT IN L.R. GUPTA VS. UOI (1997) 194 ITR 32. WITHOUT CONCRETE EVIDENCE OR MATERIAL FOUND DURING THE SEARCH THE AO IS NOT EMPOWERED TO DRAW ANY PRESUMPTION AS TO THE EXISTENCE OF UNDISCLOSED INCOME. A PRESUMPTION IS A N INFERENCE OF FACT DRAWN FROM OTHER KNOWN OR PROVED 192 FACTS. IT IS RULE OF LAW UNDER WHICH COURTS ARE AUTHORISED TO DRAW A PARTICULAR INFERENCE FROM A PARTICULAR FACT UNTIL AND UNLESS THE TRUTH OF SUCH INFERENCE IS DISPROVED BY OTHER EVIDENCE. THE SCHEM E OFF CHAPTER XIV-B DOES NOT GIVE POWER TO THE REVENU E TO DRAW THE PRESUMPTION IN REGARD TO THE UNDISCLOSE D INCOME. THE AO COULD PROCEED ON THE BASIS OF MATERI AL DETECTED AT THE TIME OF SEARCH AND EVIDENCE GATHERE D. ADDITION U/S 158B(B) CANNOT BE BASED ON JEJUNE REASONING OR GUESSWORK. IT IS IMPERATIVE THAT THE DEPARTMENT MUST HAVE IN ITS POSSESSION COGENT MATERIAL AND/OR EVIDENCE TO SUPPORT THE ADDITION. IT IS NOT OPEN TO THE AO TO GROPE IN THE DARK. IN JAYA S. SHETTY VS. ACIT (1999) 69 ITD 336 (MUM.) IT HAS BE EN HELD THAT UNDISCLOSED INCOME FOR THE PURPOSE OF CHAPTER XIV-B CANNOT BE ON THE BASIS OF CONJECTURES AND SURMISES OR ESTIMATES AND PRESUMPTIONS NOT SUPPORTED BY EVIDENCES OR DOCUMENTS FOUND IN THE SEARCH. IT HAS TO BE BASED ON AUTHENTIC RELIABLE A ND VERIFIABLE INFORMATION. 3.7 IN THE INSTANT CASE THE AO HAS ESTIMATED THE UNDISCLOSED INCOME FOR ALL THE YEARS COVERED UNDER THE BLOCK ON THE BASIS OF ESTIMATION. HE HAD COLLECTED EVIDENCE IN THE COURSE OF INVESTIGATION OF THE SEIZ ED MATERIAL IN THE SEARCH FOR A PERIOD OF 31.5 MONTHS I.E. FROM 1.04.2000 TO 13.11.2002 IN WHICH UNDISCLOSED PURCHASES WERE MADE. SO LONG IT IS FACTUAL AND RELEVANT EVIDENCE. THE AO IS RIGHT IN CONSIDERING THE SAME FOR BLOCK ASSESSMENT PURPOSES AS THE SAME IS DIRECTLY RELATED TO THE BLOCK PERIOD AND WAS COLLEC TED IN CONSEQUENCE OF INVESTIGATION INTO THE MATERIAL F OUND AND SEIZED DURING THE SEARCH OPERATION. HOWEVER AS NO OTHER EVIDENCE IN RESPECT OF ANY EARLIER PERIOD WAS DETECTED NO UNDISCLOSED PURCHASES COULD HAVE BEEN ESTIMATED BY THE AO ON GUESS WORK OR SURMISES. AT THE TIME OF MAKING SUCH A HUGE ADDITION OF RS.12 10 87 500/- THE AO DID NOT KEEP IN MIND THAT NO CORRESPONDING ASSETS TO THE EXTENT OF ABOVE INCOME IN THE FORM OF CASH STOCK FDR INVESTMENT IN ANY ASSETS BULLION OR JEWELLERY ETC HAVE BEEN FOUND DU RING THE COURSE OF SEARCH. THUS THE ESTIMATION MADE WAS 193 WITHOUT ANY BASIS ON HYPOTHETICAL GROUND AND SURMISES AND THE SAME CANNOT BE ACCEPTED AS BASED ON FACTS ARISING OUT OF SEARCH OPERATION. THE AO IS DIRECTED TO TREAT THE INCOME WORKED OUT ON THE BASI S OF PURCHASES RECORDED FOR A PERIOD OF 31.5 MONTHS ONLY AS FOUND IN THE RECORDS OF M/S. INTERSTATE ROAD CARRIERS AS UNDISCLOSED INCOME. THE BALANCE ADDITIO N MADE BY APPLYING THE RATIO OF UNDISCLOSED INCOME FO R 31.5 MONTHS IS DELETED. 146 . AGAINST THE ABOVE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BOTH THE ASSE SSEE AND REVENUE ARE IN APPEAL BEFORE US. 147. IT WAS ALSO CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADDITION WAS SOLELY BASED ON THE STATEMENT OF THE MANAGER/PARTNER OF THE TRANSPORT COMPANY AND THAT NO OPPORTUNITY WAS GIVEN TO THE AS SESSEE TO CROSS EXAMINE SHRI DHARAMVEER. HE FURTHER SUBMI TTED THAT COPY OF STATEMENT OF SHRI DHARAMVEER WAS GIVEN TO THE ASSESSEE ONLY ON 16.11.2004 AND THE ASSESSMENT ORDE R WAS PASSED ON 13.11.2004 ONLY. AS PER THE LD. COUNSEL FOR THE ASSESSEE THE STATEMENT SO GIVEN BY THE TRANSPORTER WAS NOWHERE RELATABLE TO ANY MATERIAL FOUND DURING THE COURSE OF SEARCH. AS PER THE LD. COUNSEL FOR THE ASSESSEE POST SEARCH INQUIRIES HAVE TO BE RELATED TO THE MATERIAL FOUND DURING SEARCH AND SINCE THE ASSESSING OFFICER HAS N OT 194 BROUGHT ON RECORD OR POINTED OUT ANY MATERIAL SEIZE D RELATING TO M/S INTER-STATE ROAD CARRIERS DURING SE ARCH THE STATEMENT SO RECORDED AND THAT TOO WITHOUT ANY OPPORTUNITY TO CROSS EXAMINE WAS EXTRANEOUS MATERIA L AND CANNOT BE MADE THE BASIS FOR ESTIMATED ADDITION OF RS. 16.14 LACS. HE FURTHER SUBMITTED THAT EVEN DURING APPELLATE PROCEEDINGS THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) DID NOT APPRECIATE THE FACT THAT DURI NG SEARCH NO MATERIAL WAS FOUND OR BROUGHT ON RECORD RELATING TO HUGE UNRECORDED TRANSPORTATION OF GUNNY BAGS THROUG H M/S INTER-STATE ROAD CARRIERS BUT THE SAME WAS MERE LY INFLUENCED BY CERTAIN UNRELATED FACTS LIKE REFERENC E OF COMMERCIAL TAX DEPARTMENT INVESTIGATION REPORT FIN DING OF BLANK LETTER PAD OF M/S SHRI KRISHNA TRADING COMPAN Y. HE INVITED OUR ATTENTION TO PAGE 54 OF THE REPORT OF T HE COMMERCIAL TAX DEPARTMENT WHERE THE OFFICER PREPARI NG THE REPORT HAS ACCEPTED THE FACT THAT IT IS A SEPAR ATE BUSINESS CONCERN AND HAS NOT PROPOSED ANY ADDITION. OUR ATTENTION WAS INVITED TO PAGE 6 OF THE APPELLATE OR DER WHERE THERE IS A MENTION OF ONE CONSIGNMENT SENT TO M/S S HRI KRISHNA TRADING COMPANY FOUND BEING UNLOADED AT THE 195 ASSESSEES GODOWN. HOWEVER THE COMMERCIAL TAX DEPARTMENT HAS ACCEPTED THIS AMOUNT AS PURCHASE OF THE ASSESSEE FROM SHRIKRISHNA TRADING COMPANY WHO IS A SEPARATE ASSESSEE. 148. WITH REGARD TO THE ADDITION ON ACCOUNT OF TRANSACTION WITH M/S GANI CARRIER CORPORATION IT WA S SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT DURING SEARCH NO MATERIAL RELATING TO M/S GANI CARRIER CORPORATION WAS FOUND DURING SEARCH. THE LD. COUNS EL FOR THE ASSESSEE SUBMITTED THAT EVEN M/S DEVSHREE CORPORATION IS A SEPARATE FIRM NOT RELATED WITH THE ASSESSEE AND THE ASSESSING OFFICER HAS MADE PROTECTIVE ADDIT ION IN THE HANDS OF THE ASSESSEE WITHOUT MENTIONING IN WHO SE NAME THE SUBSTANTIVE ASSESSMENT WAS MADE. AS PER T HE LD. COUNSEL FOR THE ASSESSEE EVEN THOUGH THE ASSESSEE WAS SUPPLIED COPIES OF VARIOUS SUPPLIERS FROM CALCUTTA BUT THE ASSESSEE COULD NOT RECONCILE THE SAME. THE LD. COUN SEL FOR THE ASSESSEE CONTENDED THAT THE STATEMENT OF SHRI DHARAMVEER MANAGER OF M/S INTER-STATE ROAD CARRIER S CANNOT BE RELIED UPON WITHOUT OPPORTUNITY FOR CROSS 196 EXAMINATION BEING PROVIDED. FOR THIS PURPOSE RELIA NCE WAS PLACED ON THE FOLLOWING DECISIONS :- 125 ITR 713 SUPREME COURT (KISHANCHAND CHELLARAM) 223 CTR 179 DELHI-STATEMENT OF THIRD PARTY 15 ITJ 581 ITAT INDORE 122 TTJ DELHI (U/O) 43 218 CTR DEL 691 149. THE LD. COUNSEL FOR THE ASSESSEE ALSO INVITED OUR ATTENTION TO THE PROVISIONS OF SECTION 158BB(1) WHI CH READS AS UNDER :- 158BB(1) - THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF PREVIOUS YEAR FALLING WITHIN THE BLOCK PERIOD COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE AS REDUCED. AS PER THE LD. COUNSEL FOR THE ASSESSEE IT IS THE M ANDATE OF THE AMENDED PROVISIONS OF SECTION 158BB(1) OF THE I NCOME TAX ACT 1961 THAT THE MATERIALS OR INFORMATION AVA ILABLE WITH THE ASSESSING OFFICER MUST RELATE TO SUCH EV IDENCE. THE WORDS SUCH EVIDENCE REFERS ONLY TO THE EVIDEN CE FOUND IN THE COURSE OF SEARCH AT THE ASSESSEES PRE MISES. HE SUBMITTED THAT SUCH OTHER MATERIALS MUST BE RELA TABLE 197 TO EVIDENCE FOUND IN THE COURSE OF SEARCH AT THE PR EMISES OF THE ASSESSEE ITSELF. IT WAS ALSO SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THERE MUST BE A DIREC T NEXUS BETWEEN THE MATERIALS FOUND IN THE COURSE OF THE SE ARCH AT THE ASSESSEES PREMISES AS WELL AS THE OTHER MATERI ALS GATHERED BY THE ASSESSING OFFICER FROM AN EXTRANEOU S SOURCE AND IF THERE IS NO SUCH NEXUS THEN THE ADDIT ION WOULD NOT BE JUSTIFIED. HE FURTHER ARGUED THAT THE LEARNED ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON R ECORD EVEN TO REMOTELY SUGGEST THAT DURING THE COURSE OF SEARCH ANY MATERIAL WAS FOUND FROM THE ASSESSEES POSSESSI ON THAT HE WAS ENGAGED IN THE BUSINESS OF BUYING GOODS IN D IFFERENT NAMES AS SUGGESTED BY MANAGER OF INTER STATE ROAD C ARRIER IN HIS STATEMENT. THE ALLEGED COPY OF ACCOUNT OF AS SESSEE MAINTAINED BY M/S INTER-STATE ROAD CARRIERS AND SUGGESTION THAT THE NAMES OF THE PARTIES IN WHOSE N AMES THE GOODS WERE TAKEN DELIVERY OF BY THE ASSESSEE BE ING MENTIONED IN ABBREVIATED FORM ARE NOT SUPPORTED BY ANY OTHER MATERIAL EXCEPT THE STATEMENT. THE POSSIBILI TY MAY BE THAT M/S INTER-STATE ROAD CARRIERS MUST HAVE DEL IVERED GOODS IN THESE NAMES TO SOME OTHER PARTY & CONCOCTE D THE 198 ABOVE STORY OF ASSESSEE BUYING GOODS IN THOSE NAMES . THERE IS NO ANY EVIDENCE/PAPERS FOUND IN POSSESSION OF AS SESSEE THAT CAN SUGGEST THAT ASSESSEE TOOK THE DELIVERY OF SO MANY TRUCKS & EARNED UNDISCLOSED INCOME. SO FAR AS RELI ANCE ON POST SEARCH ENQUIRIES MADE NOT RELATABLE TO EVIDENC E FOUND AS A RESULT OF SEARCH RELIANCE WAS PLACED ON THE F OLLOWING DECISIONS :- 250 ITR 141 DELHI HIGH COURT CIT VS. RAVIKANT JAIN ASSESSMENT OF BLOCK PERIOD CAN ONLY BE DONE ON BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH. 263 ITR 77 MP HIGH COURT EVIDENCE MUST BE THERE DURING SEARCH AND THEN ENQUIRES/POST SEARCH ENQUIRY TO BE MADE ON THE BASIS OF EVIDENCE FOUND IN SEARCH. 103 ITD 389 DELHI SPECIAL BENCH POST SEARCH ENQUIRY MUST BE RELATABLE TO EVIDENCE FOUND AS A RESULT OF SEARCH 134 TTJ DELHI UO 129 SEARCH DID NOT YIELD ANY INCRIMINATING MATERIAL IN RESPECT OF ITEMS FOR WHIC H ADDITION WAS MADE. 317 ITR (AT) 285 PUNE 10 ITJ 200 INDORE ONLY INCOME BASED ON EVIDENCE FOUND DURING SEARCH & MATERIAL/INFORMATION GATHERED IN POST SEARCH ENQUIRIES MADE ON BASIS OF EVIDENCE FOUND IN SEARCH 308 ITR 124 MADRAS HIGH COURT FIXED DEPOSIT IN FICTITIOUS NAMES NOT DETECTED DURING SEARCH BUT BY INVESTIGATION AFTER SEARCH NOT INCLUDABLE AS UNDISCLOSED INCOME. 199 298 ITR 98 RAJASTHAN ADDITION CANNOT BE MADE ON THE BASIS OF INFERENCES 287 ITR 209 SUPREME COURT PRESUMPTION U/S 132(4A) NOT AVAILABLE FOR MAKING ASSESSMENT. 294 ITR 148 DELHI 320 ITR 408 DELHI 247 ITR 448 BOMBAY CIT V. VINOD D. GHODAWAD 230 CTR 288 ALLAHABAD BLOCK ASSESSMENT IS CONFINED TO INCOME ATTRIBUTABLE TO MATERIAL & EVIDENCE FOUND & NOT ON THE BASIS OF BEST JUDGMENT IT WAS FURTHER SUBMITTED THAT THOUGH THERE IS NO RO OM FOR ESTIMATING THE UNDISCLOSED INCOME SO FAR AS SEARCH CASES ARE CONCERNED THE A.O. HAS ESTIMATED THAT THE ASSE SSEE PURCHASED 4 613 TRUCKS CONTAINING JUTE BAGS AND EST IMATED THE COST OF THE MATERIAL IN EACH TRUCK AT RS.3 50 0 00/-. THIS IS PURELY GUESS WORK. ON THIS GUESS WORK THE PURCHASES HAVE BEEN WORKED OUT AT 161.45 CRORES & ESTIMATED G.P. OF 7.5% HAS BEEN APPLIED RESULTING I N ESTIMATED ADDITION OF UNDISCLOSED PROFIT AT RS. 12 10 87 500/-. SIMILARLY THOUGH THERE WAS NO INFO RMATION OR ANY MATERIAL AVAILABLE ON RECORD ABOUT TRANSPORT ATION THROUGH GUNNY CARRYING CORPORATION THE A.O. HAS ESTIMATED THAT ON AN AVERAGE ASSESSEE MUST HAVE 200 PURCHASED GOODS IN AT LEAST 20 TRUCKS PER MONTH & H AS CALCULATED THE PURCHASE OF GUNNY BAGS IN 1590 TRUCK S. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLEADED TH AT A PERUSAL OF THE ASSESSMENT ORDER MAKES IT CLEAR THAT THIS HUGE ADDITION OF MORE THAN RS. 12.10 CRORES AS PROF IT AND 4.03 CRORES AS INVESTMENT TOTALING NEARLY 16.13 CROR ES HAS BEEN MADE WITHOUT ANY MATERIAL AND IT ONLY A RESULT OF ASSUMPTIONS AND PRESUMPTIONS AS WELL AS GUESS WORK RESULTING IN SADDLING THE ASSESSEE WITH HUGE DEMAND OF CRORES OF RUPEES. THE APPROACH OF THE LEARNED A.O. IS VINDICTIVE IGNORING ALL THE PRINCIPLES OF NATURAL J USTICE AGAINST THE PROVISIONS OF THE ACT AND THE LAWS LAID DOWN BY THE HONBLE COURTS OF THE COUNTRY. HERE IT WILL NO T BE OUT OF PLACE TO MENTION THAT DURING THE RELEVANT PERIOD CO ST OF A TRUCK CONTAINING JUTE BAGS WAS ABOUT 1.5 TO 2 LACS PER TRUCK. SIMILARLY THE NET PROFIT AS PER THE AUDITED BALANCE SHEET WAS 0.17% TO 0.55% OF THE SALES. AS PER THE LD. COUNSEL FOR THE ASSESSEE IT IS SETTLED LEGAL POSIT ION THAT THE INCOME TO BE TAXED IS TO BE THE ACTUAL INCOME EARNE D OR RECEIVED AND NOT ANY SUPPOSED INCOME OR PRESUMPTIVE 201 INCOME. THIS POSITION HAS BEEN LAID DOWN IN THE FOL LOWING CASES BY THE HONBLE APEX COURT :- 46 ITR 144 CIT VS. SHOORJI VALLABHDAS 26 ITR 27 E.D. SASSONG & CO. VS. CIT 82 ITR 363 KEDARNATH JUTE MFG. CO. VS. CIT IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF SEARCH NO OTHER ASSETS INVESTMENTS VALUABLES MOVABLES OR IMMOVABLES WERE FOUND TO JUSTIFY THE INCOME DETERMI NED IN CRORES. HE THEREFORE SUBMITTED THAT IN VIEW OF T HE FACTS OF THE CASE AND THE LEGAL POSITION EXPLAINED ABOVE TH E TOTAL ADDITION AS MADE BY THE A.O. AND AS MAINTAINED PART LY BY THE CIT(A) DESERVES TO BE DELETED. 151. ON THE OTHER HAND IT WAS CONTENDED BY THE LEARNED CIT DR THAT THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) HAS WRONGLY CONFIRMED THE ADDITION TO THE EXTENT OF 1198 TRUCKS ONLY WHICH WERE FOUND TRANSPO RTED FOR THOSE 21 CONCERNS DURING 31.5 MONTHS. AS PER T HE LEARNED CIT DR TOTAL NUMBER OF TRUCKS COMPUTED BY T HE ASSESSING OFFICER WORKED OUT AT 3023 WHEREAS THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ONLY CONSI DERED ADDITION FOR 1198 TRUCKS ON THE GROUND THAT EVIDENC E IS 202 COLLECTED BY THE ASSESSING OFFICER DURING POST SEAR CH INVESTIGATION FOR A PERIOD OF 31.5 MONTHS. AS PER THE LEARNED CIT DR THE STAND OF THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) IS CONTRARY TO THE SETTLED LAW THAT WHERE MATERIAL IS FOUND FOR A LIMITED PERIOD OF ASS ESSMENT YEAR OR BLOCK PERIOD THE SAME SHOULD BE EXTRAPOLAT ED TO ESTIMATE THE UNDISCLOSED INCOME OF ENTIRE BLOCK PER IOD BECAUSE IT IS VERY DIFFICULT TO COMPREHEND THAT THE ASSESSEE WOULD HAVE BEEN ENGAGED IN SUCH UNACCOUNTED TRANSAC TION FOR THAT PERIOD ONLY AND WAS ABSOLUTELY CLEAN BEFOR E AND AFTER THE DATE OF SUCH INCRIMINATING PAPERS. RELIA NCE WAS PLACED ON THE DECISION REPORTED AT 90 ITR 271 AND 2 51 ITR 561. THE CONTENTION OF THE LEARNED CIT DR WAS ALSO THAT THE ASSESSING OFFICER COULD USE THE MATERIAL FOUND DURING THE COURSE OF SEARCH AND BASED ON SUCH MATERIAL FUR THER POST SEARCH INQUIRIES WERE MADE FROM INTER STATE RO AD CARRIERS AND M/S GANI CARRIER CORPORATION AND EVIDE NCE WAS GATHERED WHICH ESTABLISHED BEYOND DOUBT THAT TH E ASSESSEE WAS ENGAGED IN UNACCOUNTED PURCHASES ON LA RGE SCALE IN THE NAMES OF 21 SUCH CONCERNS. RELIANCE W AS ALSO PLACED ON THE DECISION IN THE CASE OF MANGILAL MITT AL; 103 203 ITR 389 AND PRAMODKUMAR GUPTA; 320 ITR 408. HE FURTHER SUBMITTED THAT WHEN UNDISCLOSED INCOME ITSE LF IS DISCERNIBLE FROM THE SEIZED MATERIAL THERE IS NO N EED FOR THE ASSESSING OFFICER TO FIND OUT CORRESPONDING ASSETS/EXPENSES AND IN A CASE WHERE A REGULAR PATTE RN OF SUPPRESSION IS ESTABLISHED LAWFUL PRESUMPTION IS T HAT THERE IS SUPPRESSION FOR WHOLE OF THE BLOCK PERIOD. 152. REGARDING THE OBJECTION OF THE ASSESSEE THAT NOT MANY ASSETS WERE FOUND DURING SEARCH IT WAS CONTEN DED BY THE LEARNED CIT DR THAT SUBSTANTIAL INVESTMENT W AS FOUND IN STOCK AND LAND. BESIDES THIS AS PER THE S ETTLED LAW WHEN UNDISCLOSED INCOME ITSELF IS DISCERNABLE FROM THE SEIZED MATERIAL THERE IS NO NEED FOR THE ASSESSING OFFICER TO FIND OUT CORRESPONDING ASSETS/EXPENSES AND IN CASE WHERE A REGULAR PATTERN OF SUPPRESSION IS ESTABLISHED LA WFUL PRESUMPTION IS THAT THERE IS SUPPRESSION FOR WHOLE OF THE BLOCK PERIOD. FOR THIS PURPOSE RELIANCE WAS PLACED ON THE DECISIONS REPORTED AT 72 ITD 205 74 ITD 25 251 IT R 561 AND 266 ITR 621. 153. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES AND ALSO DELIBERATED ON THE CASE LAWS CITE D BY THE 204 LD. COUNSEL FOR THE ASSESSEE AND LEARNED CIT DR DUR ING THE COURSE OF HEARING BEFORE US AS WELL AS CASE LAWS DI SCUSSED BY THE LOWER AUTHORITIES IN THEIR ORDERS IN THE CO NTEXT OF FACTUAL MATRIX OF THE CASE. WE HAVE ALSO GONE THROU GH THE MATERIAL AVAILABLE ON RECORD AND FIND THAT THE ADDI TION OF RS. 12.10 CRORES WAS MADE ON ACCOUNT OF ESTIMATED P ROFIT ALLEGED TO HAVE BEEN EARNED ON UNRECORDED PURCHASES AND RS.4.03 CRORES ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN SUCH PURCHASES. WE FIND THAT DURING THE COURSE OF POST SEARCH INQUIRES SUMMONS U/S 131 OF T HE ACT WAS ISSUED TO M/S INTER-STATE ROAD CARRIERS CALCUT TA HAVING ITS BRANCH OFFICE AT DEWAS NAKA INDORE WHO IS ONE OF THE TRANSPORTERS OF THE ASSESSEE GROUP. THEREAFT ER THE STATEMENT OF SHRI DHARAMVEER MANAGER OF M/S INTER- STATE ROAD CARRIERS WAS RECORDED ON 9.1.2003 WHICH WAS AF TER CONCLUSION OF SEARCH WHICH TOOK PLACED ON 13.11.20 02. THE ASSESSING OFFICER ALSO RECORDED STATEMENT OF TH E PARTNER OF M/S INTER-STATE ROAD CARRIERS ON 10.1.20 03. ON THE BASIS OF THESE STATEMENTS AND ALLEGED ENTRY IN THE BOOKS OF THE TRANSPORTER THE ASSESSING OFFICER WORK ED OUT PURCHASES FOR THE PERIOD OF 31.5 MONTHS I.E. FROM 1 .4.2000 205 TO 13.11.2002. THEREAFTER HE APPLIED THEORY OF EXTR APOLATION TO THE ENTIRE BLOCK PERIOD OF 79.5 MONTHS. THUS HE ESTIMATED TOTAL PURCHASAE AND SALES FOR 79.5 MONTHS AND ADDITION WAS MADE ON ACCOUNT OF ESTIMATED PROFIT E ARNED THEREON AND ESTIMATED INVESTMENT MADE FOR SUCH PURCHASES. THE CONTENTION OF THE LD. COUNSEL FOR T HE ASSESSEE WAS THAT SUCH STATEMENT OF TRANSPORTER WAS SOLELY A SUGGESTIVE STATEMENT GIVEN BY DHARAMVEER AND THAT NO INCRIMINATING MATERIAL WAS FOUND AT THE ASSESSEES BUSINESS PREMISES TO SUGGEST THAT THE ASSESSEE HAS ACTUALLY UNDERTAKEN PURCHASE AND SALE OF BARDANA FO R WHICH THIS ADDITION HAS BEEN MADE. FURTHERMORE NO OPPORTUNITY TO CROSS EXAMINE THE TRANSPORTER WAS GI VEN TO THE ASSESSEE. 154. WE FIND THAT THE ASSESSING OFFICER ON THE BAS IS OF POST SEARCH INVESTIGATION FOUND THAT THE ASSESSEE H AS TRANSPORTED 1198 TRUCKS OF JUTE BAGS DURING 1.4.200 0 TO 31.11.2002. HOWEVER THE ASSESSING OFFICER HAS APP LIED THE SAME PROPORTIONATELY FOR THE REMAINING BLOCK PE RIOD AND ARRIVED AT TOTAL NUMBER OF 3023 TRUCKS. IN ADD ITION TO IT THE ASSESSING OFFICER ON THE BASIS OF POST SEARC H INQUIRY 206 FOUND THAT THE ASSESSEE HAS TAKEN DELIVERY OF GOODS FROM GANI CARRIER CORPORATION. THE ASSESSING OFFICER AL SO CALCULATED NUMBER OF SUCH TRUCKS AT 1590. THUS TH E TOTAL NUMBER OF JUTE BAGS WORKS OUT TO BE 4613 TRUCKS (3023+1590). THE ASSESSING OFFICER ESTIMATED THE V ALUE OF EACH TRUCK AT RS.3 50 000/- AND COMPUTED TOTAL AMOU NT OF GOODS PURCHASED BY THE ASSESSEE. HOWEVER NO BASIS FOR APPLYING THE ESTIMATED VALUE AT RS. 3 50 000/- PER TRUCK HAS BEEN GIVEN BY THE ASSESSING OFFICER WHEREAS CO PY OF BILLS PLACED ON RECORD BY THE ASSESSEE BEFORE THE L OWER AUTHORITIES SUGGESTS THAT VALUE OF ONE TRUCK LOAD W AS MUCH LOWER. THEREAFTER THE ASSESSING OFFICER APPLIED E STIMATED GROSS PROFIT RATE OF 7.5% AND WORKED OUT ESTIMATED PROFIT AT RS. 12.10 CRORES ON SUCH UNACCOUNTED PURCHASES OF E NTIRE BLOCK PERIOD. HOWEVER NOWHERE THE ASSESSING OFFIC ER HAS GIVEN ANY BASIS FOR TAKING ESTIMATED GROSS PROFIT R ATE AT 7.5%. THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS UPHELD THE ADDITION MADE ON ACCOUNT OF PROFIT E ARNED ON UNACCOUNTED PURCHASES AS WELL AS ON ACCOUNT OF UNEXPLAINED INVESTMENT ATTRIBUTABLE TO SUCH PURCHAS ES WHICH WERE BASED ON THE MATERIAL COLLECTED THROUGH THE 207 POST SEARCH INQUIRY. THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) HAS DISCUSSED IN DETAIL AS TO WHAT CO NSTITUTES UNDISCLOSED INCOME WITHIN THE DEFINITION PROVIDED U /S 158B(B) OF THE ACT. THE UNDISCLOSED INCOME U/S 158 B(B) INCLUDES ANY MONEY OR OTHER VALUABLE ARTICLE OR THI NGS OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCO UNTS OR OTHER DOCUMENTS OR TRANSACTIONS WHERE SUCH ENTRY REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHIC H HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE P URPOSE OF THIS ACT. AT THE TIME OF COMPUTING THE UNDISCLOS ED INCOME IT HAS TO BE KEPT IN VIEW THAT IT IS COMPUTE D ONLY ON THE BASIS OF MATERIAL OBTAINED DURING SEARCH OR ON THE BASIS OF MATERIAL GATHERED IN PURSUANCE OF THE INVESTIGAT ION INTO THE SEIZED MATERIAL. NO ADDITION CAN BE MADE MEREL Y ON GUESS WORK OR ESTIMATION FOR A PART OF THE BLOCK PE RIOD FOR WHICH NO DETAIL FROM ANY OF THE SEIZED DOCUMENT WAS AVAILABLE. MEANING THEREBY NO ADDITION SHOULD BE MA DE WITHOUT ANY COGENT MATERIAL OR INFORMATION COLLECTE D DURING SEARCH OR THEREAFTER IN RELATION TO THE PERIOD FOR WHICH NOTHING IS FOUND. THE BLOCK ASSESSMENT IS NOT A SU BSTITUTE FOR REGULAR ASSESSMENT AND PRESUMPTION REGARDING 208 UNDISCLOSED INCOME IS NOT PERMISSIBLE IN SUCH ASSES SMENT. THINKING OF MATERIAL ANY ADDITION BY ESTIMATE IN TH E ABSENCE OF ANY SUCH EVIDENCE OR MATERIAL BY THE ASS ESSING OFFICER WOULD BE FRAUGHT WITH DANGEROUS CONSEQUENCE S. EVEN THE RAJASTHAN HIGH COURT IN THE CASE OF RAJENDRAPRASAD GUPTA (SUPRA) HAS HELD THAT THE POWE R OF THE ASSESSING OFFICER TO MAKE BEST JUDGMENT ASSESSM ENT OF THE UNDISCLOSED INCOME OF BLOCK PERIOD IS CONFINED TO THE MATERIAL COLLECTED DURING THE COURSE OF SEARCH. ON THE BASIS OF SUCH MATERIAL AND THE INFORMATION GATHERED THEREON THE ASSESSING OFFICER HAS TO EXAMINE THE NE XUS OF SUCH MATERIAL TO THE UNDISCLOSED INCOME AND THEREAF TER ONLY ADDITION CAN BE MADE ON THE BASIS OF SUCH MATE RIAL. HOWEVER THE ASSESSING OFFICER IS NOT CONFERRED WIT H POWER TO MAKE ESTIMATION OF INCOME DE HORSE THE MATERIAL IN HIS POSSESSION INSOFAR AS PROCEEDINGS U/S 158BB AND 158 BC ARE THAT OF UNDISCLOSED INCOME. THUS WITHOUT CONCRE TE EVIDENCE OR MATERIAL FOUND DURING THE COURSE OF SEA RCH THE ASSESSING OFFICER IS NOT EMPOWERED TO DRAW ANY INFE RENCE AS TO THE EXISTENCE OF UNDISCLOSED INCOME. A PRESU MPTION IS AN INFERENCE OF FACT DRAWN FROM KNOWN OR PROVED FACTS. 209 THE SCHEME OF CHAPTER XIVB DOES NOT GIVE POWER TO T HE REVENUE TO DRAW THE PRESUMPTION IN REGARD TO THE UNDISCLOSED INCOME. THE ADDITION U/S 158B(B) CANNO T BE BASED ON GUESS WORK AND IT IS IMPERATIVE THAT THE DEPARTMENT MUST HAVE IN ITS POSSESSION COGENT MATER IAL AND/OR EVIDENCE TO SUPPORT THE ADDITION. IT IS NOT OPEN TO THE ASSESSING OFFICER TO GROPE IN THE DARK. 155. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) IN MODIFYING THE ORDER OF THE ASSESSING OFFICER SO AS TO RESTRICT THE ADDITION WO RKED OUT ON THE BASIS OF PURCHASES FOUND IN RESPECT OF PERIO D OF 31.5 MONTHS ONLY AS FOUND IN THE RECORD OF M/S INTER-STA TE ROAD CARRIERS AND IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY APPLYING THE RATIO OF UNDISCLO SED INCOME FOR 31.5 MONTHS TO THE OTHER PART OF THE BLO CK PERIOD FOR WHICH NOTHING WAS EITHER FOUND DURING TH E COURSE OF SEARCH NOR COULD BE COLLECTED BY THE DEPA RTMENT IN POST SEARCH INQUIRY. 156. SO FAR AS THE NUMBER OF TRUCKS CALCULATED BY THE ASSESSING OFFICER DURING THE PERIOD 1.4.2000 TO 13. 11.2002 210 IS CONCERNED WE DO NOT FIND ANY INFIRMITY INSOFAR AS THE SAME WAS BASED ON THE ENTRIES FOUND RECORDED IN THE BOOKS OF M/S INTER-STATE ROAD CARRIERS. SO FAR AS THE ES TIMATION OF THE VALUE OF EACH TRUCK AT RS. 3 50 000/- IS CON CERNED NO BASIS HAS BEEN GIVEN BY THE ASSESSING OFFICER. T HIS ACT OF THE ASSESSING OFFICER WAS PURELY A GUESS WORK NO T BASED ON ANY COMPARATIVE CASE OR PAST TRACK RECORD OF THE ASSESSEE. WE FIND THAT DURING THE RELEVANT PERIOD COST OF ONE TRUCK WAS AROUND RS. 2 LACS TO RS. 2.5 LACS AS PER COPY OF BILLS PLACED ON RECORD. THEREFORE IT WILL BE R EASONABLE AND SERVE THE ENDS OF JUSTICE IF WE TAKE THE VALUE OF ONE TRUCK AT RS. 2.5 LACS IN PLACE OF ESTIMATED VALUE T AKEN BY THE ASSESSING OFFICER AT RS. 3.5 LACS PER TRUCK. S IMILARLY THE ESTIMATED GROSS PROFIT RATE APPLIED BY THE ASSE SSING OFFICER AT 7.5% HAS NO BASIS. NOWHERE THE ASSESSIN G OFFICER HAS QUOTED COMPARATIVE CASE TO SUGGEST THAT GROSS PROFIT RATE IN SIMILAR WHOLESALE TRADE WAS AROUND 7 .5%. NEITHER IT IS A CASE OF THE ASSESSING OFFICER THAT IN ANY OF THE YEARS FALLING IN THE BLOCK PERIOD THE ASSESSEE HAS EARNED THIS MUCH OF GROSS PROFIT NOR ANY OTHER NAME OF ASSESSEE DEALING SIMILAR TRADE WAS SUGGESTED. ON TH E 211 CONTRARY WE FIND THAT AS PER THE AUDITED PROFIT AN D LOSS ACCOUNT FOR THE ASSESSMENT YEAR 2000-01 THE GROSS PROFIT RATE WAS 1.43% AND NET PROFIT RATE WAS 0.10%. FOR THE ASSESSMENT YEAR 2001-02 AS PER THE AUDITED PROFIT A ND LOSS ACCOUNT AND AUDITORS REPORT THE GROSS PROFIT RATE WAS 2.15% AND NET PROFIT RATE WAS 0.17%. KEEPING IN VI EW THE ACTUAL GROSS PROFIT RATE EARNED BY THE ASSESSEE AS PER THE AUDITORS REPORT AND THE AUDITED ACCOUNTS WE DIREC T THE ASSESSING OFFICER TO APPLY GROSS PROFIT RATE OF 2.2 5% FOR CALCULATING THE AMOUNT OF PROFIT EARNED ON SUCH UNRECORDED TRANSACTION OF PURCHASE AND SALE FOR THE PERIOD OF 31.5 MONTHS. ACCORDINGLY WE MODIFY THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO TAKE VALUE OF PER TRUCK AT RS.2.5 LACS AND GROSS PROFIT RATE OF 2.25% FOR COMPUTING THE TOTAL AMOUNT OF UNACCOUNTED PROFIT EARNED THEREON. SO FAR AS THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS)S ACTION IN RESTRICTING THE ADDITION TO THE EXTENT OF UNRECORDED PURCHASES FOUND DURING 1.4.2000 TO 13.11.2002 IS CONCERNED WE CONFIRM HIS ACTION FOR NOT APPLYING THE PROPORTIONATE NUMBER TO THE RE MAINING BLOCK PERIOD FOR WHICH NOTHING WAS FOUND EITHER DUR ING 212 SEARCH NOR DURING POST SEARCH INQUIRIES FOR NOT APP LYING THE THEORY OF EXTRAPOLATION TO THE REMAINING PERIOD IN BLOCK ASSESSMENT IN WHICH NO INCRIMINATING DOCUMENT WAS FOUND. WE ARE SUPPORTED BY THE CASE LAWS AS DISCUS SED HEREINABOVE. THUS RECALCULATION OF PROFIT SHOULD B E CONFINED TO PURCHASE OF 31.5 MONTHS. WE DIRECT ACCORDINGLY. 157. WITH REGARD TO THE AMOUNT OF INVESTMENT IN UNACCOUNTED TRANSACTION THE ASSESSING OFFICER HAS T AKEN THE PERIOD OF REALIZATION OF SALES AT 2 MONTHS. HO WEVER NO BASIS HAS BEEN GIVEN BY THE ASSESSING OFFICER FOR T AKING THE REALIZATION PERIOD AT TWO MONTHS ON THE CONTRARY T HE AUDITED ACCOUNTS OF THE ASSESSEE FOR THE LAST TWO Y EARS INDICATE TURNOVER PERIOD OF 25 TO 30 DAYS. THERE WA S A FAST TURNOVER IN THIS WHOLESALE TRADE AS PER THE ACCOUNT ED AND UNACCOUNTED SALES FOUND DURING THE COURSE OF SEARCH . THEREFORE IT WOULD BE REASONABLE TO TAKE THE PERIO D OF TURNOVER AS ONE MONTH IN PLACE OF TWO MONTHS AS TAK EN BY THE ASSESSING OFFICER. ACCORDINGLY WE MODIFY THE ORDERS OF BOTH THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO RE-WORK OUT THE INVESTMENT IN UNACCOUNTED TRANSA CTION 213 BY TAKING TURNOVER PERIOD OF ONE MONTH INSTEAD OF T WO MONTHS. OTHER PARAMETERS AS DISCUSSED BY US HEREINA BOVE WILL REMAIN THE SAME. WE DIRECT ACCORDINGLY. 158. THE ADDITION OF RS.4 01 58 250/- WAS MADE ON ACCOUNT OF UNRECORDED PURCHASES SALES CITY DEPART MENT. IN THIS REGARD THE OBSERVATION OF THE ASSESSING OF FICER WAS THAT DURING THE COURSE OF SEARCH PROCEEDINGS AT BUS INESS PREMISES OF THE ASSESSEE AN INCRIMINATING DOCUMENT (LPS-L FOUND AT 8/2 NEW ANAJ MANDI PAGE-82 TO 108) WAS F OUND WHICH CONTAINED AN INVESTIGATION REPORT DATED 31.05 .01 OF COMMERCIAL TAX DEPARTMENT PREPARED ON THE BASIS OF VARIOUS INCRIMINATING DOCUMENTS SEIZED BY THAT DEPARTMENT DURING THE SURVEY CONDUCTED AT BUSINESS PREMISES OF THE ASSESSEE ON 21.12.2000. THIS INVEST IGATION REPORT INDICTS THE ASSESSEE OF HAVING BEEN INVOLVED IN BUSINESS TRANSACTIONS OUTSIDE THE BOOKS OF ACCOUNT AND THE QUANTIFICATION WHEREOF WAS MADE BY THE SAID DEPARTM ENT AS UNDER:- . S. F. YR. BARDANA SUTLI INTER-STATE PURCHASE SALE PURCHASE SALE SALE I 1999-2000 353031 739460 103088 5000 - II 2000-2001 33113866 3668405 - - 2175400 214 TOTAL 33466897 4407865 5000 2175400 THUS THE GRAND TOTAL OF THESE TRANSACTIONS WORKED O UT AT RS.4 01 58 250/-. THE AO OBSERVED THAT WHEN THE ASS ESSEE WAS ASKED TO EXPLAIN THESE UNRECORDED TRANSACTIONS FOR PURCHASE/SALES OF GOODS IT FAILED TO EXPLAIN THE S AME AND THEREFORE THE SAME WERE ADDED AS UNDISCLOSED INCOM E OF THE ASSESSEE RELYING ON THIS INVESTIGATION REPORT O F THE COMMERCIAL TAX DEPARTMENT. 159. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED THE ASSESSING OFFICER TO GET IN TOUCH WITH THE ASSESSIN G OFFICER IN COMMERCIAL DEPARTMENT AND ADOPT THE UNRECORDED SALES/PURCHASES. THE ASSESSING OFFICER WAS FURTHER DIRECTED TO APPLY G.P./N.P. RATE TO THE SALES AND W ORK OUT THE TAXABLE UNDISCLOSED PROFIT. THE ASSESSING OFFIC ER WAS ALSO DIRECTED TO WORK OUT THE UNDISCLOSED INVESTMEN T IN SUCH PURCHASES ON THE BASIS OF PEAK METHOD AND HELD THAT TOTAL SUM OF THESE AMOUNTS WOULD REPRESENT THE UNDISCLOSED INCOME AND ADDITION IS RESTRICTED TO TH AT EXTENT. IN THIS REGARD THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO OBSERVED THAT SALES TAX ASSESSME NT ORDER 215 FOR FINAL YEAR 2000-01 DATED 31.1.2005 DETERMINED T HE UNRECORDED SALES AT RS. 38 97 265/-. THE DETAILED OBSERVATION OF THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) ARE AS UNDER :- 5.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. THE AO HAS MADE THE ADDITION CRYPTICALLY IN ONE LINE OBSERVING THAT SINCE THE ASSESSEE DID NOT FURNISH ANY EXPLANATION THE TOTAL OF THESE TRANSACTIONS WAS TAKEN AS UNDISCLOSED INCOME OF THE APPELLANT. DURING THE APPELLATE PROCEEDINGS THE EXPLANATION OF THE APPELLANT WAS FORWARDED TO THE AO FOR HIS EXAMINATION AND REPORT BUT AS HAS BEEN MENTIONED ABOVE HE DID NOT GO INTO THE DETAILS AND MERELY JUSTIFIED THE ASSESSMENT ORDER. AS HAS BEEN OBSERVED FROM THE ASSESSMENT ORDER THE AO MADE THE ADDITION OF THE TOTAL OF SALES AND PURCHASES WORKED OUT BY THE COMMERCIAL TAX DEPARTMENT. HE DID NOT CLARIFY AS TO HOW THE TOTAL OF BOTH THE SIDES OF THE ACCOUNT CAN BE TAKEN AS UNDISCLOSED INCOME. THE FINAL SHOULD HAVE BEEN DETERMINED EITHER ON THE BASIS OF PURCHASES OR THE SALES WHICHEVER IS HIGHER TAKING INTO CONSIDERATION THE GROSS OR NET PROFIT. IF THE UNRECORDED SALES ARE HIGHER IT IS APPARENT THAT THE PURCHASES STAND MERGED IN THEM AND IF THE PURCHASE AMOUNT IS HIGHER IT MEANS THAT ALL THE SALES AGAINST THOSE PURCHASES WERE NOT RECORDED EVEN IN THE UNRECORDED SALES/PURCHASES WORKED OUT BY THE C.T. DEPARTMENT. THE APPELLANT'S CONTENTION THAT THE ASSESSMENT ORDER OF THE C.T. DEPARTMENT DATED 22.10.2001 FOR THE FINANCIAL YEAR 1999-2000 MADE ON THE BASIS OF THE FIGURES OF THE UNRECORDED SALES/PURCHASES IN THE SAID REPORT WAS SET ASIDE BY THE APPELLATE 216 AUTHORITY TO BE MADE DE NOVO AND THE ASSESSMENT ORDER FOR FINANCIAL YEAR 2000-01 DATED 31.01.2005 DETERMINED UNRECORDED SALES AT RS.38 97 265/- ONLY ALSO MERITS CONSIDERATION. THE AO IS DIRECTED TO GET IN TOUCH WITH THE ASSESSING OFFICER IN THE COMMERCIAL TAX DEPARTMENT AND ADOPT THE FIGURES OF UNRECORDED SALES/PURCHASES. THEN HE SHOULD APPLY THE G.P.IN.P. RATE TO THE SALES AND WORK OUT THE TAXABLE UNDISCLOSED PROFIT. HE SHOULD THEN WORK OUT THE UNDISCLOSED INVESTMENT IN SUCH PURCHASES ON THE BASIS OF PEAK METHOD. THE TOTAL SUM OF THESE AMOUNTS WOULD REPRESENT THE UNDISCLOSED INCOME AND THE ADDITION IS RESTRICTED TO THAT EXTENT. WITH REGARD TO THE ADDITION OF RS.4 01 58 250/- ON ACCOUNT OF UNRECORDED SALES/PURCHASES WE FIND THAT THIS ADDITION WAS MADE BY THE ASSESSING OFFICE R ON THE BASIS OF SCRUTINY REPORT OF COMMERCIAL TAX DEPARTMENT DATED 31.5.2001 WHICH WAS FOUND DURING THE COURSE OF SEARCH ACTION AT ANAJ MANDI INDORE. THE GRIEVANCE OF THE ASSESSEE WAS THAT THE LEARNED A.O. WITHOUT GOING INTO THE CONTENTS OF THE REPORT HAS TREATED THE FIGURE OF 4 01 58 250/- AS UNDISCLOSED INCOME OF THE ASSESSEE AND MAD THE ADDITION. AS PER THE LD. COUNSEL FOR THE ASSESSEE T HE SCRUTINY REPORT DATED 31.5.2001 PROPOSED UNRECORDED SALES FOR THE PERIOD 1999-00 AT RS. 217 12 46 567/- AT PAGE 55 OF THE REPORT. SIMILARLY FO R .Y. 2000-01 PROPOSAL WAS MADE FOR 4 49 64 972/- AT PAGE 56. THUS THE ADDITION OF RS. 4 01 58 250/- IS NOT EVEN CONNECTED TO THE REPORT BUT SEEMS TO BE GUESS WORK. SIMILARLY THE REPORT SAYS ABOUT PURCHASE AND SALES. THE AMOUNT ADDED REPRESENTS PURCHASES OR SALES ARE NOT MENTIONED BY THE A.O. AS PER THE PROCEDURE REGULAR ASSESSMENT IS MADE IN DUE COURSE BY THE COMMERCIAL TAX DEPARTMENT. THUS AN EX-PARTE ASSESSMENT ORDER WAS PASSED FOR THE F.Y. 2000-01 ON 28.01.2002 ACCORDING TO WHICH TAX DEMAND WAS CREATED. AN APPEAL WAS FILED AGAINST THE ASSESSMENT ORDER DATED 28.01.2002 WHICH WAS DECIDED BY THE ADDITIONAL COMMISSIONER OF COMMERCIAL TAX ON 19.07.2002 WHEREIN THE ASSESSMENT ORDER WAS SET ASIDE TO BE DONE DE NOVO AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE . AS PER THE DIRECTIONS OF THE APPELLATE AUTHORITIES FRESH ASSESSMENT ORDER WAS PASSED ON 31.01.2005 WHEREIN AFTER DETAILED EXAMINATION OF THE PAPERS SEIZED AND THE BOOKS OF ACCOUNTS REGULARLY 218 MAINTAINED BY THE ASSESSEE IT WAS HELD THAT SALES AMOUNTING TO RS. 38 97 265/- WERE FOUND UNRECORDED AS A RESULT OF SURVEY AND TAX WAS LEVIED ON THE SAME. THE PHOTOSTAT COPY OF THE ABOVE REFERRED ASSESSMENT ORDER DATED 31.01.2005 FOR THE F.Y. 01-04-2000 TO 31-03-2001 WERE PLACED AT PAGES 71 TO 79 OF THE PAPER BOOK. OUR ATTENTION WAS ALSO INVITED TO PAGE 78 OF THE PAPER BOOK THE COMMERCIA L TAX ASSESSMENT ORDER DATED 31.01.2005 WHERE THIS UNDISCLOSED SALES HAVE BEEN DETERMINED. AS PER THE LD. COUNSEL FOR THE ASSESSEE FROM THE PERUSAL OF PA RA 3 AT PAGE 7 OF THE ASSESSMENT ORDER IT WILL BE OBSERVED THAT THE TOTAL SALES OF THE ASSESSEE FOR T HE F.Y. 2000-01 AS PER THE REGULAR BOOKS OF ACCOUNTS WERE RS. 22 11 64 410/- TO WHICH THE UNRECORDED SALES AMOUNTING TO RS.38 97 265/- WERE ADDED AND THUS THE TOTAL SALES WERE DETERMINED AT RS.22 50 61 675/-. FOR THE ASSESSMENT YEAR 1999- 2000 THE COMMERCIAL TAX ASSESSMENT ORDER FOR THE PERIOD 01-04-1999 TO 31-03-2000 IS AVAILABLE AT PAGES 58 TO 69 OF THE PAPER BOOK. AT PAGE 66 THE 219 TOTAL SALES OF THE ASSESSEE WHICH WERE TO THE TUNE OF RS. 36 46 77 823/- HAVE BEEN DETERMINED AT RS. 36 66 77 823/-. THUS AN ADDITION OF RS. 20 00 000/- HAS BEEN MADE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN FACT THE TOTAL ADDITION OF SALES MADE BY THE COMMERCIAL TAX DEPARTMENT FOR THE F.Y. 1999-2000 AND 2000-01 IS RS. 20 00 000 + RS. 38 97 265/- I.E. RS. 58 97 265/-. THE ASSESSEE HAS CHALLENGED THE ACTION OF HONBLE CIT IN THE ABOVE GROUND THAT THE TOTAL ADDITION MADE BY THE ASSESSING OFFICER DESERVES TO BE DELETED. AS PER THE LD. COUNSEL FOR THE ASSESSEE THE SCRUTINY REPORT FOUND AT THE TIME OF THE SEARCH OF THE ASSESSEES PREMISES CANNOT BE IN ANY MANNER SAID TO BE THE EVIDENCE FOUND AS A RESULT OF SEARCH FOR DETERMINATION OF UNDISCLOSED INCOME. THE COMMERCIAL TAX DEPARTMENT IS A DEPARTMENT OF THE STATE GOVERNMENT AND ITS APPRAISAL/SCRUTINY REPORTS OR THE ASSESSMENT ORDERS ARE PUBLIC DOCUMENTS. SEIZURE OF ANY SUCH DOCUMENT CANNOT BE TREATED AS DISCOVERY OF 220 INCRIMINATING EVIDENCE BEING FOUND AS A RESULT OF SEARCH. THE INFORMATION CONTAINED IN SUCH DOCUMENTS CAN BE RELIED UPON OR SUED FOR FRAMING REGULAR ASSESSMENT OR REASSESSMENTS ONLY AND NOT IN A BLOCK PERIOD ASSESSMENT WHICH IS MADE AS PER SPECIFIC PROVISIONS. THUS THE DIRECTION OF THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) ARE AGAINST THE LAW AND DESERVES TO BE SET ASIDE AND IT BE HELD THAT TOTAL ADDITION OF RS. 4 01 58 250/- DESERVES T O BE DELETED. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- 201 ITR 591 KERALA HIGH COURT HELD THAT A BEST JUDGMENT ASSESSMENT MADE ON THE SOLE BASIS OF AN INSPECTION REPORT THE CONTENTS OF WHICH WERE NOT STATED OR DISCUSSED AND THE SAME CANNOT BE SUSTAINED AS THE SAME CANNOT BE TERMED AS REASONABLE AND BASED ON MATERIAL. 207 ITR 979 CALCUTTA HIGH COURT HELD THAT AN ASSESSMENT ORDER BEING SUBJECT TO APPEAL SHOULD BE A SPEAKING ORDER. 76 ITR 690 SUPREME COURT HELD THAT THE ASSESSING OFFICER HAS TO RELATE THE DETERMINATION OF INCOME T O SOME EVIDENCE OR MATERIAL ON RECORD 199 ITR 217 ALLAHABAD HIGH COURT HELD THAT THE ASSESSMENT CANNOT BE MADE ARBITRARILY AND IN ORDER THAN AN ASSESSMENT CAN BE SUSTAINED IT MUST HAVE NEXUS TO THE MATERIAL ON RECORD. 221 THE HONBLE APEX COURT HAS HELD AN ASSESSMENT BASED ON MERE CONJECTURE SURMISES OR SUSPICION IS INVALID AND UNSUSTAINABLE IN LAW : 26 ITR PAGE 736 DHIRAJLAL GIRDHARILAL 26 ITR PAGE 775 DHAKESHWARI COTTON MILL LTD. 37 ITR PAGE 2888 LALCHAN BHAGAT 37 ITR PAGE 271 UMACHARAN SHAH & BROS. WITHOUT PREJUDICE TO THE ABOVE IT WAS CONTENDED THA T THERE IS NO UNDISCLOSED SALES OR INCOME. IT WAS SUBMITTE D THAT THE DIRECTIONS TO APPLY 7.5% GROSS PROFIT IS NOT IN ACCORDANCE WITH BUSINESS TREND AND MARGIN EARNED IN WHOLESALE BUSINESS OF JUTE BAGS. AS PER THE AUDITE D BALANCE SHEET AND PROFIT AND LOSS ACCOUNT THE GROSS PROFIT AND NET PROFIT EARNED IS AS UNDER :- YEAR G.P. N.P. 1999-2000 1.43% 0.10% 2000-2001 2.15% 0.17% IN VIEW OF THE ABOVE IT WAS SUBMITTED THAT IT IS A SETTLED LAW THAT ONLY THE PROFIT EARNED ON SALES CAN BE TREATED AS UNDISCLOSED INCOME. RELIANCE IS PLACED ON 123 ITD 5 90 DEL. 160. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD IN 222 RESPECT TO THE ADDITION OF RS.4 01 58 250/- WHICH W AS MADE ON THE BASIS OF LPS-1 WHICH CONTAINED INVESTIG ATION REPORT DATED 31.5.2001 OF COMMERCIAL TAX DEPARTMENT . WE FIND THAT THE ASSESSING OFFICER HAS MADE THE ADDITI ON IN RESPECT OF PURCHASE AND SALE OF BARDANA AND SUTLI F OUND IN THE FINANCIAL YEARS 1999-00 AND 2000-01. THE ASSES SING OFFICER HAS MADE THE ADDITION BY MAKING TOTAL OF AL L THESE TRANSACTIONS WHICH WORKED OUT TO BE RS. 4 01 58 250 /-. AS THE ASSESSEE COULD NOT EXPLAIN THESE UNRECORDED TRANSACTIONS FOR PURCHASE AND SALE OF GOODS THE AS SESSING OFFICER TREATED THE SAME AS UNDISCLOSED INCOME OF T HE ASSESSEE. DURING THE APPELLATE PROCEEDINGS DOCUMEN TS AND EXPLANATION FILED BY THE ASSESSEE WERE FORWARDED TO THE ASSESSING OFFICER FOR HIS EXAMINATION AND REPORT. FROM RECORD WE FIND THAT THE ASSESSING OFFICER HAS MADE THE ADDITION OF THE TOTAL OF PURCHASES AND SALES WORKED OUT BY THE COMMERCIAL TAX DEPARTMENT WITHOUT CLARIFYING AS TO HOW THE TOTAL OF BOTH THE SIDES OF THE ACCOUNT CAN BE T AKEN AS UNDISCLOSED INCOME OF THE ASSESSEE. DURING THE APP ELLATE PROCEEDINGS AFTER CONSIDERING THE REMAND REPORT AND THE DOCUMENTS PLACED BEFORE HIM THE LEARNED COMMISSION ER OF 223 INCOME TAX (APPEALS) FOUND THAT THE ASSESSMENT ORDE R FRAMED BY THE COMMERCIAL TAX DEPARTMENT FOR THE FIN ANCIAL YEAR 1999-00 ON THE BASIS OF FIGURES OF UNRECORDED SALES/PURCHASES ON THE BASIS OF SAID REPORT WAS SE T ASIDE BY THE APPELLATE AUTHORITY TO BE MADE DE NOVO AND T HE ASSESSMENT ORDER FOR THE FINANCIAL YEAR 2000-01 DAT ED 31.1.2005 DETERMINED UNRECORDED SALES AT RS. 38 97 265/- ONLY. IN VIEW OF THESE FACTS THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) HAS DIRECTED THE ASSESSING OFF ICER TO GET IN TOUCH WITH THE ASSESSING OFFICER IN THE COMM ERCIAL TAX DEPARTMENT AND ADOPT THE FIGURES OF UNRECORDED SALES/PURCHASES AS FINALLY DETERMINED BY HIM WHILE D OING DE NOVO ASSESSMENT FOR THE FINANCIAL YEAR 1999-00. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHE R DIRECTED TO RESTRICT THE ADDITION BY APPLYING GROSS PROFIT/NET PROFIT TO THE SALES. THIS DIRECTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS SOMEWHAT CONFUSING. AS PER OUR CONSIDERED VIEW CALCULATION OF PROFIT ON UNACCOUNTED SALES IS TO BE MADE BY APPLYING THE GROSS PROFIT RATE ON SUCH SALES. WE ARE THEREFORE INCL INED TO MODIFY THIS DIRECTION OF THE LEARNED COMMISSIONER O F 224 INCOME TAX (APPEALS) AND DIRECT THE ASSESSING OFFIC ER TO APPLY GROSS PROFIT RATE OF 2.5% ON THE SALE SO FOUN D OUT AND WORK OUT UNDISCLOSED PROFIT THEREON. SO FAR AS THE DIRECTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RELATING TO THE COMPUTATION OF UNDISCLOSED INVESTME NT IS CONCERNED WE DO NOT FIND ANY INFIRMITY IN HIS ORDE R INSOFAR AS HE HAS DIRECTED THE ASSESSING OFFICER TO WORK OU T THE UNDISCLOSED INVESTMENT ON SUCH PURCHASES ON THE BAS IS OF PEAK METHOD. THUS THE TOTAL SUM OF UNDISCLOSED PR OFIT AND INVESTMENT INVOLVED IN THESE TRANSACTIONS OF PU RCHASE AND SALES AS DISCUSSED HEREINABOVE SHOULD BE RETAIN ED AS AN ADDITION. ACCORDINGLY WE CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WITH A SLIGHT MODIFICATION OF APPLYING THE GROSS PROFIT RATE OF 2 .5% ON THE SALES SO WORKED OUT BY THE ASSESSING OFFICER IN DE NOVO ASSESSMENT. 161. WITH REGARD TO THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LETTER BETWEEN THE TWO PARTIES AMOUNTING TO RS.11 02 750/- THE ASSESSING O FFICER OBSERVED THAT DURING THE COURSE OF SEARCH PROCEEDIN GS AT BUSINESS PREMISES OF THE ASSESSEE IN INCRIMINATING 225 DOCUMENT (LPS-1 FOUND AT 8/2 NEW ANAJ MANDI PAGE- 4) CONTAINING LPS-7 PAGE-12 THESE WAS A LETTER WRITT EN BY KAMARTHY COMPANY LTD. KOLKATA TO M/S IND AGRO SYNERGY LTD. NAGPUR REGARDING NON-RECEIPT OF H-FORM AND BI LL OF LOADING FOR VARIOUS BILLS TOTALING RS.11 02 750/- AND A COPY WHEREOF WAS RECEIVED BY THE ASSESSEE. ABOUT THIS CORRESPONDENCE THE ASSESSEE WAS ASKED TO EXPLAIN T HIS LETTER. AS NO SATISFACTORY REPLY WAS GIVEN BY THE A SSESSEE THE AO HELD THE SAME TO BE BOGUS TRANSACTION ENTERE D INTO BY THE ASSESSEE AND ADDED IN THE ASSESSMENT ORDER A S UNDISCLOSED INCOME. 162. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- 6.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE DOCUMENT INVOLVED. THE SAID DOCUMENT DATED 9.08.2002 FROM KAMARHATTY COMPANY LTD. KOLKATA ADDRESSED TO M/S. IND. AGRO SYNERGY LIMITED NAGPUR READS AS UNDER: WE OBSERVE FROM OUR RECORDS THAT WE HAVE NOT RECEIVED H. FORM ALONGWITH COPY BILL OF LADING COVERING OUR SALES FOR THE ABOVE PERIOD. THE DETAILS ARE GIVEN BELOW: BILL NO. DATE AMOUNT 8/316/99 15.9.99 1 81 954 226 317 1 81 954 318 1 81 954 319 1 81 954 320 1 87 467 321 1 87 467--- RS.11 02 750/- OUR ASSESSMENT FOR THE ABOVE PERIOD HAS ALREADY BEEN FINALIZED AND IS IN APPEAL. IN VIEW OF THIS YOU ARE REQUESTED TO SEND US NECESSARY H FORMS ALONG WITH BILL OF LADING COVERING THE ABOVE BILLS ON TOP PRIORITY BASIS. A COPY THIS LETTER HAS BEEN ENDORSED TO THE APPELLANT ALSO. THERE IS ANOTHER LETTER OF THE EVEN DATE FROM THE SAME COMPANY ADDRESSED TO THE APPELLANT IN VIEW OF ITS PAST BUSINESS RELATIONS REQUESTING THE LATTER TO CONTACT THE BUYER AT NAGPUR FOR EXPEDITING H FORMS. IT IS NOT CLEAR FROM THE ASSESSMENT ORDER AS TO HOW THE AO COULD HAVE REACHED THE CONCLUSION THAT THIS AMOUNT REPRESENTED THE UNDISCLOSED INCOME OF THE APPELLANT. IF NO IMMEDIATE EXPLANATION WAS FORTHCOMING FROM THE APPELLANT THE AO COULD HAVE CALLED FOR INFORMATION FROM THE INVOLVED PARTIES TO VERIFY THE FACTS. HE RUSHED POST HASTE TO THE PRESUMED CONCLUSION. UNDER THE CIRCUMSTANCES THE ADDITION MADE CANNOT BE SUSTAINED AND THE SAME IS THEREFORE DELETED. 163. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE AN ADDITION OF RS. 11 02 750/- WAS MA DE ON THE BASIS OF DOCUMENT LPS-1 AND LPS-7. A LETTER MAR KED AS LPS-7 STATES REGARDING NON-RECEIPT OF H-FORM AND BI LL OF LOADING FOR VARIOUS BILLS TOTALING RS. 11 02 750/-. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THI S LETTER 227 AND SINCE NO SATISFACTORY EXPLANATION WAS GIVEN THE ASSESSING OFFICER TREATED THE SAME TO BE BOGUS TRAN SACTION ENTERED INTO BY THE ASSESSEE. THUS THE ENTIRE AMOU NT WAS ADDED TO THE ASSESSEES INCOME AS UNDISCLOSED INCOM E. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) DELETED THE ADDITION BY OBSERVING THA T THIS DOCUMENT DATED 9.8.2002 WAS A LETTER FROM KAMRAHATT Y COMPANY LTD. CALCUTTA ADDRESSED TO M/S INDIAN AGRO SYNERJEE NAGPUR. FROM RECORD WE FIND THAT M/S KAM ARTHY COMPANY LIMITED CALCUTTA HAS ADMITTED IN ITS LETT ER ABOUT THE SUPPLY OF GOODS TO THE PARTY AT NAGPUR AS PER BILLS AMOUNTING IN TOTAL TO RS. 11 02 750/- FOR WHI CH H- FORM WAS CALLED FOR. A COPY OF THIS LETTER ITSELF MAKES IT CLEAR THAT IN THIS TRANSACTION THE ASSESSEE WAS NO T AT ALL A PARTY AND A COPY OF THE LETTER WAS JUST SENT FOR HE LPING THE CALCUTTA PARTY IN OBTAINING NECESSARY DECLARATION F ORM REQUIRED TO BE SUBMITTED TO THE SALES TAX DEPARTMEN T. THIS LETTER INDICATED NON-RECEIPT OF H-FORM ALONG WITH B ILL OF LOADING COVERING THE SALE OF RS. 11 02 750/-. THIS LETTER ALSO INDICATED THAT THE ASSESSMENT FOR THIS PERIOD WAS ALREADY FINALIZED AND THEY HAVE TO SUBMIT H-FORM TO THE 228 SALES TAX AUTHORITY. IT WAS CLEAR FROM THIS LETTER THAT NEITHER IT WAS PURCHASE NOR THE SALE OF THE ASSESSEE. SINCE THE DOCUMENT WAS NOT RELATED TO THE SALE/PURCHASE OF TH E ASSESSEE THERE WAS NO MERIT IN THE ASSESSING OFFIC ERS ACTION IN REACHING TO THE CONCLUSION THAT THE AMOUN T REPRESENTED UNDISCLOSED INCOME OF THE ASSESSEE. TH E DETAILED FINDING RECORDED BY THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) HAS NOT BEEN CONTROVERTED WHIC H HAS GIVEN FULL DETAILS OF ALL THE NOTINGS ENTERED IN TH E LETTER GIVING BILL NUMBER/AMOUNT ETC. WE DO NOT FIND ANY INFIRMITY IN THE FINDING RECORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR ARRIVING A T A CONCLUSION THAT THE TRANSACTION DID NOT RELATE TO T HE ASSESSEE THEREFORE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADDING THE SAME TO THE ASSESSEES INCOME. THE FI NDINGS SO RECORDED BY THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) ARE AS PER MATERIAL ON RECORD. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER DID NOT MAKE ANY EFFORT TO VERIFY THE TRANSACTION FROM EITH ER OF THE TWO PARTIES INVOLVED OTHERWISE. HOWEVER DURING TH E APPELLATE PROCEEDINGS THE LEARNED COMMISSIONER OF I NCOME 229 TAX (APPEALS) SENT ALL THE DOCUMENTS FILED BY THE A SSESSEE IN SUPPORT OF ITS CONTENTION TO THE ASSESSING OFFIC ER FOR INQUIRY AND COMMENTS. BY CONSIDERING ALL THESE DOCUMENTS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION OF RS. 11 02 750/- A FTER RECORDING DETAILED FINDING OF IN PARA 6.2 PAGE 18. NO INTERFERENCE IS CALLED FOR IN THIS PART OF THE ORDE R OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 164. AN ADDITION OF RS. 5 51 92 536/- WAS MADE ON ACCOUNT OF UNRECORDED SALES TO M/S ANAND JUTE UDYOG KAMTABEN JI. IN THIS REGARD THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT INCRIMINATING DOCUMENTS PAGES 1 TO 203 OF LPS-1 FOUND AT RESIDENCE OF THE DIRECTO RS DURING THE COURSE OF SEARCH PROCEEDINGS CONTAINED DOCUMENT S PERTAINING TO ACCOUNT SALE PATTI (CONSIGNMENT NOTE) SENT BY M/S ANAND JUTE UDYOG KANTABANJI - ROAD NO.5 DISTT . BOLANGIR ORISSA (CONSIGNEE) TO THE ASSESSEE (CONSI GNOR). THE CONSIGNEE HAS SHOWN TOTAL SALES OF RS.5 51 92 536/-. THE AO OBSERVED IN THE ASSESSMENT ORDER THAT THESE DOCUMENTS WERE FOUND AT THE RESIDENCE AND WERE KEPT VERY SAFELY AND SECURELY UNDER LOCK. THESE PAPERS WERE 230 INNOCUOUS LOOKING PAPERS WHICH HAD BEEN FOUND AT TH E RESIDENCE OF THE DIRECTORS INSTEAD OF BUSINESS PLAC E. IN THIS RESPECT THE ASSESSEE FAILED TO EXPLAIN THESE TRANS ACTIONS. THE AO GOT AN INQUIRY MADE THROUGH ITO BOLANGIR BY ISSUE OF COMMISSION U/S 131(L)(D) OF THE IT. ACT 1961. THE LATTER MADE THE INQUIRY THROUGH HIS INSPECTOR WHO RECORDED THE STATEMENT OF SHREE LAXMINARAYAN AGRAWAL THE PROPRI ETOR OF ANAND JUTE UDHYOG KANTABHANJI. IN HIS STATEMENT SH. AGRAWAL CATEGORICALLY DENIED OF HAVING ANY BUSINESS TRANSACTIONS WITH THE ASSESSEE. HE STATED THAT THE LETTER PAD PRINTED AS WELL AS THE SIGNATURES MADE IN THE N AME OF ANAND JUTE UDHYOG WERE NOT GENUINE AND ONLY THE SAL ES TAX NO. AND THE TELEPHONE NO. OF THAT CONCERN WERE USED. THE CONSIGNMENT NOTE FOUND AT THE RESIDENCE OF THE DIRECTORS PERTAINED TO THE F. YRS. 1998-99 & 1999-2000 WHEREAS SHRI LAXMINARAYAN AGRAWAL HAD ALREADY CLOSE D HIS BUSINESS IN 1995. IN VIEW OF THIS SITUATION THE AM OUNT OF SALES SHOWN IN SALES PATTI WAS TREATED BY THE AO AS BOGUS TRANSACTIONS MADE OUTSIDE THE BOOKS OF ACCOUNT. HEN CE THE SAME WAS ADDED AS THE ASSESSEES INCOME FROM UNDISC LOSED SOURCES. 231 165. BY THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RESTORED THE M ATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIREC TION TO WORK OUT PROFIT AS PER GROSS PROFIT RATE OR COMMISSION R ATE SHOWN AND TREAT THE HIGHER OF TWO FIGURES AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE RELEVANT YEAR. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO FOUND THA T THE SALESTAX ASSESSMENT ORDER FOR THE PERIOD 1.4.1998 T O 31.3.1999 SHOWS THAT THE SALES WORTH RS. 5 22 81 15 0/- WERE MADE BY ASSESSEE OUTSIDE THE STATE OF MADHYA PRADESH AND THE ASSESSEE WAS GRANTED DEDUCTION OF T HIS AMOUNT. IT WAS ALSO OBSERVED BY THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) THAT IT DOES NOT CONFIRM TH AT THESE SALES REPRESENTED SALES MADE TO OR THROUGH ANAND JU TE UDHYOG. IT WAS ALSO OBSERVED THAT NO DOCUMENT TO P ROVE ANY CO-RELATIONSHIP BETWEEN THE SALES SHOWN IN THE BOOKS OF ACCOUNTS AND CONSIGNMENT AGENT TO ANAND JUTE UDH YOG HAS BEEN FURNISHED. FOLLOWING WAS THE DETAILED OBSERVATIONS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT 232 AND PERUSED THE SALE TAX ORDER FOR THE PERIOD 1.04.1998 TO 31.03.1999. THE SAID ORDER DOES SHOW THAT SALES WORTH RS.5 22 81 150/- WERE MADE OUTSIDE THE STATE OF MADHYA PRADESH AND THE APPELLANT WAS GRANTED DEDUCTION OF THIS AMOUNT. BUT IT DOES NOT CONFIRM THAT THESE SALES REPRESENTED THE SALES MADE TO OR THROUGH ANAND JUTE UDYOG. NO DOCUMENT TO PROVE ANY CO-RELATIONSHIP BETWEEN THE SALES SHOWN I N THE BOOKS OF ACCOUNT AND CONSIGNMENT SENT TO ANAND JUTE UDYOG HAS BEEN FURNISHED. THE APPELLANT HAS NOT BEEN ABLE TO PRODUCE ANY CONFIRMATION FROM THAT PARTY REGARDING THESE TRANSACTIONS. WHETHER THE INSPECTOR WAS COMPETENT TO RECORD THE STATEMENT ON OATH OR NOT THE APPELLANT HAS NOT BEEN ABLE TO REB UT THE CONTENTION OF THE APPELLANT OR FOR THAT MATTER OF THE ITO BOLANGIR BY FILING ANY EVIDENCE TO THE CONTRAR Y. AS REGARDS THE OPPORTUNITY AFFORDED TO THE APPELLAN T FOR CROSS EXAMINATION THE CONTENTION OF THE APPELL ANT CANNOT BE ACCEPTED AS IT WAS GIVEN AMPLE OPPORTUNIT Y TO FURNISH THE EVIDENCE OR CONFIRMATION OF THESE TRANSACTIONS FROM THE CONCERNED PARTY EVEN DURING THE APPELLATE PROCEEDINGS BUT HE COULD NOT AVAIL OF THE SAME. THERE WAS NO PURPOSE WHICH COULD BE SERVED BY CROSS EXAMINING THE PROPRIETOR OF ANAND JUTE UDYOG AS ONLY HIS CONFIRMATION OF THE TRANSACTIONS INVOLVED COULD HAVE BEEN SUFFICIENT TO PROVE THEIR GENUINENESS. UNDER THE CIRCUMSTANCES THE APPELLANT'S CONTENTION REGARDING THESE TRANSACTIONS CANNOT BE ACCEPTED. RESULTANTLY THESE SALES ARE TREATED AS UNACCOUNTED. HOWEVER IT IS THE PROFIT O R THE COMMISSION EARNED ON THESE CONSIGNMENTS THAT IS TO BE TAXED AS UNDISCLOSED INCOME. THE AO IS DIRECT ED TO WORK OUT THE PROFIT AS PER THE GROSS PROFIT RATE OR COMMISSION RATE SHOWN AND TREAT THE HIGHER OF THE TWO FIGURES AS UNDISCLOSED INCOME OF THE APPELLANT FOR THE RELEVANT PERIOD. 166. WITH REGARD TO THE ADDITION OF RS.5 51 92 536 /- ON ACCOUNT OF SALE PATTIES (CONSIGNMENT NOTE) SENT BY M/S ANAND JUTE UDYOG KANTABHJI ROAD NO. 5 DISTT. BOL ANGIR 233 ORISSA (CONSIGNEE) TO THE ASSESSEE (CONSIGNOR) WAS FOUND. THE ASSESSING OFFICER DISCUSSED THIS ISSUE FROM PAR A 8 AT PAGE 8 OF THE ASSESSMENT ORDER AND HAS OBSERVED THA T THE SALES SHOWN IN THE SALES PATTIES ARE THE BOGUS TRAN SACTION AND MADE THE ADDITION OF TOTAL VALUE OF SALES PATTI ES AMOUNTING TO RS.5 51 92 536/- AS THE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. AS PER THE LD. COUNSEL FOR THE ASSESSEE SALE PATTIES BASED ON WHICH THE AD DITION HAS BEEN MADE CONFIRM THE TRANSACTIONS FOR THE PERI OD 03.06.1998 TO 25.04.1999. AS PER THE PROFIT AND LO SS ACCOUNT THE ASSESSEE HAS SHOWN THE COMMISSION RECEI VED AS UNDER :- YEAR ENDED 31.03.1997 3 46 989 31.3.1998 61 160 31.3.1999 5 67 280 31.3.2000 17 98 957 31.3.2001 1 18 894 31.3.2002 7 11 741 THUS ALL THESE TRANSACTIONS ARE DULY RECORDED IN T HE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE SALES TAX DEPARTM ENT HAS ALSO ACCEPTED THE FACT THAT DURING THE PERIOD 1.4.1 998 TO 31.3.1999 THE ASSESSEE HAS EFFECTED SUCH SALES OUTS IDE THE STATE OF M.P. AMOUNTING TO RS. 5 22 81 150/- ON WHI CH NO 234 TAX HAS BEEN LEVIED AND THE DEDUCTION FOR THE AMOUN T OF RS. 5 22 81 150/- IS GRANTED. THE PHOTOCOPY OF THE ASSESSMENT ORDER DATED 14.06.2001 PASSED BY ASSISTA NT COMMISSIONER OF COMMERCIAL TAX INDORE IN THE CASE OF THE ASSESSEE IS AVAILABLE AT PAGES 91 - 92 OF THE PAPER BOOK II. OUR ATTENTION WAS ALSO INVITED TO STATEMENT OF SHRI MUKESH AGRAWAL U/S 132(4) (AVAILABLE AT PAGES 39 45 OF T HE PAPER BOOK II) AND TO QUESTIONS AT SERIAL NOS. 4 5 AND 6 AND THE ANSWERS. THE ADAT SALES PATTIES RECEIVED FROM THE A NAND JUTE UDYOG WERE ALSO FOUND AND THE CONFIRMATION BY MUKESH AGRAWAL THAT THESE TRANSACTIONS ARE RECORDED IN THE BOOKS OF ACCOUNTS. FURTHER ATTENTION WAS INVITE D TO SCRUTINY REPORT DATED 30-5-2001 OF COMMERCIAL TAX DEPARTMENT (31 57) WHICH WAS RELIED UPON BY THE ASSESSING OFFICER TO MAKE AN ADDITION OF RS. 4 01 5 8 250/-. IN THE ABOVE REPORT AT PAGE 36 REFERENCE HAS BEEN M ADE ABOUT ADAT SALES PATTIES SENT BY ANAND JUTE UDYOG T O ASSESSEE WHICH STANDS VERIFIED. IT WAS CONTENDED T HAT THE ASSESSING OFFICER HAS RELIED ON A STATEMENT OF SHRI LAXMINARAYAN AGRAWAL THE PROP. OF ANAND JUTE UDYOG FOR MAKING ADDITION OF RS. 5 51 92 536/-. THE COPY OF THE 235 STATEMENT WAS NOT PROVIDED TO THE ASSESSEE ALONG WI TH THE QUESTIONNAIRE ARE EVEN AFTERWARDS NOR THE ASSESSEE GOT ANY OPPORTUNITY TO CROSS EXAMINE THE PERSON. IT IS A S ETTLED LAW THAT ANY STATEMENT RECORDED WITHOUT PROVIDING THE OPPORTUNITY TO CROSS EXAMINATION BY THE PERSON AGAI NST WHOM IT IS USED HAS NO EVIDENTIARY VALUE. SUCH STAT EMENTS CANNOT BE USED AS THEY ARE AGAINST THE PRINCIPLES O F NATURAL JUSTICE AND EQUITY. HE PLACED RELIANCE ON THE FOLL OWING DECISIONS :- 125 ITR 713 SC (KISHANCHAND CHELLARAM) 223 CTR 179 DELHI STATEMENT OF THIRD PARTY 15 ITJ 581 ITAT INDORE 122 TTJ DELHI (U/O) 43 218 CTR DEL 691 IT WAS FURTHER SUBMITTED THAT IT APPEARS FROM THE ASSESSMENT ORDER THAT THE STATEMENT WAS RECORDED BY AN INSPECTOR WHO SUBMITTED THE ENQUIRY REPORT. AS PER THE LAW THE INSPECTOR HAS NO POWER AND AUTHORITY TO ADMINIS TER OATH AND RECORD THE STATEMENT. THE RELIANCE OF THE A.O. ON THE STATEMENT FOR MAKING ADDITION OF CRORE OF RUPEE S IS ILLEGAL ARBITRARY AND WITHOUT JURISDICTION. TO SUM UP SINCE THE SALES OUTSIDE THE STATE ARE RECORDED AND HAVE B EEN 236 ACCEPTED AS SUCH BY THE COMMERCIAL TAX DEPARTMENT THE ADDITION DESERVES TO BE DELETED. 167. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE ADDITION OF RS. 5 51 92 536/- WAS MAD E BY THE ASSESSING OFFICER ON THE BASIS OF INCRIMINATING DOC UMENTS MARKED AS LPS-1 PAGES 1 TO 203 FOUND AT THE RESIDEN CE OF THE DIRECTORS DURING THE COURSE OF SEARCH PROCEEDIN GS. THIS DOCUMENT PERTAINED TO ACCOUNT OF SALE PATTI (CONSIG NMENT NOTE) SENT BY M/S ANAND JUTE UDYOG ORISSA TO THE ASSESSEE WHO IS CONSIGNOR. THIS DOCUMENT INDICATED CONSIGNM ENT SALE OF RS. 5.51 CRORES. THE ASSESSING OFFICER GOT THE INQUIRY MADE THROUGH ITO BOLINGIR WHEREIN STATEMENT OF SHR I LAXMINARAIN AGRAWAL PROPRIETOR OF ANAND JUTE UDYOG WAS RECORDED. IN HIS STATEMENT SHRI AGRAWAL CATEGORICA LLY DENIED HAVING BUSINESS TRANSACTIONS WITH THE ASSESSEE. IT WAS ALSO FOUND THAT THESE TRANSACTIONS PERTAINED TO THE FINA NCIAL YEARS 1998-99 AND 1999-00 WHEREAS SHRI LAXMINARAYAN AGRAWAL CLOSED HIS BUSINESS IN 1995. IN VIEW OF AL L THESE FACTS THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER FOR T REATING 237 SUCH SALE AS UNACCOUNTED. SINCE IT WAS A CONSIGNME NT SALE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DI RECTED THE ASSESSING OFFICER TO CONFINE THE ADDITION TO TH E EXTENT OF COMMISSION ATTRIBUTABLE ON CONSIGNMENT SALE OR TO T HE EXTENT OF GROSS PROFIT RATE WHICHEVER IS HIGHER. T O PUT AN END TO THE LITIGATION WE MODIFY THE ORDER OF THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) IN RESTRICTING THE ADDITION BY APPLYING GROSS PROFIT RATE OF 2.5% ON T HESE TRANSACTIONS. THE ENTIRE SALE CONSIGNMENT CANNOT BE ADDED IN ASSESSEES INCOME. WE DIRECT ACCORDINGLY. 168. THE ADDITION MADE ON PROTECTIVE BASIS AMOUNTING TO RS.1 23 50 658/- WAS DELETED BY THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER HAVING T HE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND GONE THROUGH THE ASSESSMENT ORDER. THE AO HAS GIVEN NO REASON AS TO WHY THESE ADDITIONS HAVE BEEN MADE ON PROTECTIVE BASIS IN THE HANDS OF SO MANY PERSONS. NO LINK WHATSOEVER HAS BEEN ESTABLISHED OF THESE DOCUMENTS WITH THE APPELLANT. AS HAS BEEN MENTIONED ABOVE THE ASSESSMENT U/S L58BC HAS TO BE MADE ON THE BASIS OF MATERIAL FOUND DURING THE SEARCH OPERATION. THER E IS NO SCOPE OF ANY ADDITIONS MADE ON SURMISES AND GUESS WORK. THE PROTECTIVE ASSESSMENT IS MADE WHEN THE AO IS UNCERTAIN ABOUT THE INCOME SHOWN BY AN ASSESSEE. IT IS ONLY IF HE IS CERTAIN ABOUT T HE 238 PERSON TO WHOM SUCH INCOME BELONGS THAT HE MAKES THE ASSESSMENT IN THE OTHER PERSON'S HANDS ON SUBSTANTIVE BASIS AND SUCH INCOME IS ASSESSED IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS TILL THE ASSESSMENT REACHES FINALITY. SUCH A THING NORMALLY HAPPENS IN THE CASE OF ASSESSMENT UNDER NORMAL PROVISIONS OF THE ACT. SINCE THE BLOCK ASSESSMENT I S MADE ON HARD FACTS THERE IS NO PROVISION FOR MAKIN G ANY TYPE OF ADDITION WITHOUT ESTABLISHING THE SAME AS BELONGING TO THE ASSESSEE ON THE BASIS OF MATERIALS/DOCUMENTS FOUND DURING THE SEARCH. THE AO HIMSELF DOES NOT APPEAR TO BE CERTAIN AS TO WHOM THE DOCUMENTS ACTUALLY BELONG. EVEN IF IN CASE THE ADDITION MADE ON SUBSTANTIVE BASIS IN ONE HAND IS ULTIMATELY STRUCK DOWN IN APPEAL THERE IS NO MATERIAL BROUGHT ON RECORD TO SUPPORT SUCH AN ADDITION IN ANY OTHER HAND WHERE IT COULD ALTERNATIVELY BE SUSTAINED AS NO PERSON HAS ACTUALL Y SHOWN SUCH INCOME. SINCE THE ADDITIONS ON SUBSTANTIVE BASIS ON ALL THESE POINTS HAVE BEEN MADE IN THE HANDS OF SH. KAILASHCHAND AGRAWAL AND HIS CASE IS ALSO IN APPEAL FOR ADJUDICATION AND ALSO THERE IS NO MATERIAL TO PROVE THAT SUCH INCOME BELONGED TO THE APPELLANT THE ADDITIONS MADE ON PROTECTIVE BASIS IN THE HANDS OF THE APPELLANT CANN OT BE SUSTAINED AND THE SAME ARE THEREFORE DELETED. 169. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES GONE THROUGH THE MATERIAL AVAILABLE ON REC ORD AND FIND THAT THE PROTECTIVE ADDITION HAS BEEN DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SINCE ADDITION ON SUBSTANTIVE BASIS HAS ALREADY BEEN CONS IDERED IN THE RESPECTIVE HANDS AT APPROPRIATE PLACES. WE D O NOT FIND ANY INFIRMITY IN THIS PART OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 239 170. THE LAST GRIEVANCE OF THE REVENUE RELATES TO THE ADDITION OF RS.1 LAC MADE ON THE BASIS OF LPS-7 CON TAINING A LETTER WRITTEN BY SHRI SATPURA TAPI PARISAR SAHKA RI SAKHAR KARKHANA LIMITED REGARDING DD OF RS. 1 LAC M ADE ON 30 TH JULY 2002. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE SAME. FROM RECORD WE FIND THAT A DISPUTE WAS GOING ON BETWEEN THE ASSESSEE AN D SHRI SATPURA TAPI PARISAR SAHKARI SAKHAR KARKHANA LIMITE D. AS PER THIS LETTER THE SUGAR KARKHANA HAD GIVEN THREE CHEQUES TO THE ASSESSEE AND THIS PARTY HAS ASKED THE ASSESS EE TO WITHDRAW THE LEGAL PROCEEDINGS IN LIEU OF THE DEMAN D DRAFT IN FAVOUR OF THE ASSESSEE AS PER SETTLEMENT OF DISP UTE. THIS DD WAS DEPOSITED BY THE ASSESSEE IN HIS BANK ACCOUN T INDUSIND BANK AND A CERTIFIED COPY OF THE BANK ACCO UNT OF THE ASSESSEE WAS FURNISHED INDICATING DEPOSIT OF DR AFT NO. 782026. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) FOR DELETING THE ADDITION OF THIS AMOUNT WHICH WAS ALREADY CREDITED IN THE DISCLOSED BANK ACCOUNT OF THE ASSES SEE. 240 171. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. 172. WITH REGARD TO THE GROUNDS TAKEN BY THE ASSESSEE FOR RETAINING THE PART ADDITION BY THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) WE HAVE ALREAD Y DEALT WITH THE ISSUES WHILE DISPOSING OF THE REVENU ES APPEAL. ACCORDINGLY THE GROUNDS RAISED BY THE ASS ESSEE ARE DISPOSED OF IN TERMS OF OUR DISCUSSION MADE HEREINABOVE WHILE DISPOSING OF THE REVENUES APPEAL . 173. IN ALL THE CASES THE ASSESSEES HAVE TAKEN A COMMON GROUND TO THE EFFECT THAT SEARCH HAVING BEEN CONDUCTED WITHOUT VALID AUTHORIZATION TO SEARCH TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NO T JUSTIFIED IN ANNULLING THE ASSESSMENT ORDER FRAMED U/S 158BC/143(3) OF THE ACT. 174. IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT ALL THE ASSESSEES ARE INDIVIDUAL DERI VING INCOME AS SHARE OF PROFIT FROM THE FIRM. SHRI NIRA JNAN AGRAWAL RESIDES AT 147/47 BHAGWANDEEN NAGAR INDOR E ALONG WITH HIS WIFE FATHER MOTHER TWO BROTHERS A ND THEIR 241 WIVES. BY VIRTUE OF JOINT WARRANT OF SEARCH ISSUED BY THE DDIT BHOPAL A SEARCH WAS CARRIED OUT AT 147/47 BHAGWANDEEN NAGAR INDORE. THE WARRANT SO ISSUED A S PER PANCHNAMA WAS IN THE NAMES OF KAILASH AGRAWAL MAHE SH AGRAWAL NIRANJAN AGRAWAL MUKESH AGRAWAL LILADEVI AND KUSUM AGRAWAL. IT WAS THEREFORE PRAYED THAT SINCE THE WARRANT OF AUTHORIZATION TO SEARCH HAS NOT BEEN ISS UED IN THE INDIVIDUAL NAME OF THE ASSESSEE BUT IN RESPECT OF THREE DIFFERENT INDIVIDUALS THE ASSESSMENT SHOULD HAVE B EEN FRAMED IN JOINT NAME AND NOT IN THE NAME OF THE IND IVIDUAL ASSESSEE. 175. ON THE OTHER HAND THE LEARNED CIT DR CONTENDED THAT SEARCH ASSESSMENT EMANATES FROM THE SEARCH AND IF ONE SEARCH WARRANT IS ISSUED IN THE N AME OF MANY PERSONS THE SAME IS HELD VALID BASED ON THE ARGUMENTS THAT AS PER THE PROVISIONS OF SECTION 2 O F GENERAL CLAUSES ACT 1897 SIGNATURE INCLUDES PLURAL HENCE THERE IS NO PROHIBITION AGAINST ISSUANCE OF COMMON AUTHORIZATION U/S 132(1) OF THE ACT. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF MADHUPURI CORPORATION; 256 ITR 498 AND PATN A 242 HIGH COURT IN THE CASE OF DR. OSWALD ANTHONY; 270 I TR 274. IT WAS THEREFORE CONTENDED THAT IF SEARCH A CTION BASED ON COMMON AUTHORIZATION IS HELD VALID AS A CO ROLLARY SEARCH ASSESSMENT BASED ON SUCH SEARCH WILL ALSO BE VALID. 176. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF T HE PARTIES DELIBERATED ON THE CASE LAWS CITED BY THE LEARNED AR AND D R DURING THE COURSE OF HEARING BEFORE US. IN THE CASE OF MADHOPURI CORPORATION (SUPRA) IT HAS BEEN HELD BY HONBLE GUJRARAT HIGH COURT THAT A S PER THE PROVISIONS OF SECTION 2 OF THE GENERAL CLAUSES ACT 1897 SINGULA R INCLUDES PLURAL AND THERE IS NO PROHIBITION AGAINST ISSUANCE OF COMMON AUTHORISATION WHEN THE COMPETENT AUTHORIT Y HAS REASON TO BELIEVE THAT A NUMBER OF PERSONS ARE INVOLVED IN INTERCONNECTED TRANSACTIONS AS REFLECTED FROM TH E PRIMA FACIE MATERIAL AVAILABLE WITH THE COMPETENT AUTHORI TY. ACCORDINGLY IT WAS HELD THAT ASSESSMENT FRAMED WAS VALID. RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE DIFF ERENT ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER IN RESPECT OF DIFFERENT ASSESSEES FOR WHOM JOINT AUTHO RIZATION WAS ISSUED. 243 177. IN THE RESULT THE GROUND TAKEN BY THE ASSESS EE IS DISMISSED. 179. IN THE RESULT THE APPEALS OF THE REVENUE AND THE ASSESSEE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON.29 TH NOVEMBER 2011. SD SD ( R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH NOVEMBER 2011. COPY TO APPELLANT/RESPONDENT/CIT/CIT(A)/DR