C.I. Deavassi Kutty, Thrissur v. ACIT, Thrissur

ITSSA 23/COCH/2004 | misc
Pronouncement Date: 05-10-2010

Appeal Details

RSA Number 2321916 RSA 2004
Assessee PAN ADHPD1635N
Bench Cochin
Appeal Number ITSSA 23/COCH/2004
Duration Of Justice 6 year(s) 6 month(s) 12 day(s)
Appellant C.I. Deavassi Kutty, Thrissur
Respondent ACIT, Thrissur
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 05-10-2010
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 05-10-2010
Date Of Final Hearing 23-06-2010
Next Hearing Date 23-06-2010
Assessment Year misc
Appeal Filed On 24-03-2004
Judgment Text
IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN JM AND SANJAY AR ORA AM I.T.(SS)A 23/COCH/2004 BLOCK PERIOD : 01.04.1990 TO 12.10.2000 SHRI C.I. DEVASSIKUTTY CHEMMANNNUR HOUSE AVENUE ROAD THRISSUR. [PAN: ADHPD 1635N] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE THRISSUR. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) I.T.(SS)A. NO. 33/COCH/2004 BLOCK PERIOD : 01.04.1990 TO 12.10.2000 THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE THRISSUR VS. SHRI C.I. DEVASSIKUTTY CHEMMANNNUR HOUSE AVENUE ROAD THRISSUR. [PAN: ADHPD 1635N] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) ASSESSEE BY DR. K.B.MOHAMMED KUTTY SR. ADVOCATE REVENUE BY SMT. T.PRASANNA KUMARI SR. DR O R D E R PER SANJAY ARORA A.M: THESE ARE CROSS APPEALS I.E. BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I KOCH I (CIT(A) FOR SHORT) DATED 5.1.2004 IN THE ASSESSEES CASE PARTLY CONFIRMING THE BLOCK ASSESSMENT U/S. 158BC R/W S. 143(3) OF THE INCOME TAX ACT 1961 (`THE ACT HEREI NAFTER) DATED 29.10.2002 FOR THE BLOCK PERIOD 1.4.1990 TO 12.10.2000. 2. WE SHALL TAKE UP THE ASSESSEES APPEAL BEING SE NIOR FIRST. A RECOUNT OF THE RELEVANT FACTS WOULD BE IN ORDER. THE ASSESSEE AN INDIVIDUAL ENGAGED IN GOLD JEWELLERY AND MONEY LENDING BUSINESSES VIDE HIS PROPRIETARY C ONCERNS CHEMMANNUR GOLD SUPER IT(SS)A.NOS. 23& 33/COCH/2004 2 MARKET VADAKARA AND CHEMMANNUR FINANCE THRISSUR R ESPECTIVELY WAS SUBJECT TO SEARCH ACTION U/S. 132 OF THE ACT AT HIS RESIDENCE AND BUS INESS PREMISES ON 12.10.2000 AND VARIOUS DOCUMENTS AND RECORDS SEIZED THEREAT. THE A SSESSEE WAS FOUND TO HAVE INVESTED IN IMMOVABLE PROPERTIES (LAND) AT MALAMPUZHA AND PALAK KAD DURING THE FINANCIAL YEARS 1996-97 AND 1997-98 FORMING PART OF THE BLOCK PERI OD. IN EXPLANATION THEREOF DURING THE ASSESSMENT PROCEEDINGS I.E. AS TO THE SOURCE OF I NVESTMENT THEREIN THE ASSESSEE SUBMITTED A CASH FLOW STATEMENT AND PER WHICH THE SAME STOOD SOURCED OUT OF THE SALE PROCEEDS OF THE GOLD DEPOSITED WITH HIM BY THE GOLD SMITHS (KARIGARS) WORKING FOR HIM IN HIS GOLD JEWELLERY BUSINESS. THE AMOUNT INCLUDED IN THE CASH FLOW STATEMENT AGAINST THE SALE OF GOLD RECEIVED FROM THE GOLDSMITHS ADMITTED LY NOT ACCOUNTED FOR BY THE ASSESSEE IN HIS REGULAR BOOKS OF ACCOUNT WAS AT RS. 5 00 000/- AND 22 69 000/- FOR THE TWO CONSECUTIVE YEARS RESPECTIVELY. THE ASSESSEE FILE D AFFIDAVITS (DATED 20.5.2002) FROM 56 PERSONS FOR A TOTAL OF 10724.360 GMS. OF GOLD STA TED TO BE WORKING AS GOLDSMITHS IN SUPPORT OF HIS CLAIM. THE ASSESSING OFFICER (A.O.) REQUIRED ATTENDANCE OF THE DEPONENTS AND IN RESPONSE 15 OF THEM WERE PRODUCED WHOSE STAT EMENTS WERE RECORDED BY HIM. ON EXAMINATION OF THE MATERIALS INCLUDING THE AFFIDAV ITS AND THE RECORDED STATEMENTS THE AO REJECTED THE ASSESSEES CLAIM AS IN HIS VIEW THE I NESCAPABLE CONCLUSION WAS THAT THE `EXPLANATION OF THE GOLD DEPOSITS WAS MADE OUT ONL Y TO MEET THE PRESENT ENQUIRY. THE LD. CIT(A) IN APPEAL AGAIN EXAMINED THE ENTIRE EVIDEN CE TO ARRIVE AT THE SAME CONCLUSION. AGGRIEVED THE ASSESSEE IS IN APPEAL. 3.1 BEFORE US THE LD. AR REFERRED TO PG. 70 & 71 OF CHAPTER I TITLED CUSTOM : NATURE AND ORIGIN FROM THE BOOK LAW IN THE MAKING BY C. K. ALLEN TO PRESS THE POINT THAT CUSTOM AND EQUITY REPRESENT A HIGHER LAW AND THUS NEED TO BE RESPECTED. ACCORDINGLY ONCE ESTABLISHED THE SAME WOULD MERIT ACCEPTANCE W ITHOUT GOING INTO THE MERITS THEREOF OR EVIDENCE IN ITS RESPECT. HE ALSO ADVERTED TO PGS . 103 AND 113 OF THE PAPER BOOK (CONTAINING 117 PAGES) DATED 28.8.2008 FILED BY THE ASSESSEE. 3.2 THE LD. DR ON THE OTHER HAND WOULD SUBMIT THA T THE ENTIRE CLAIM OF THE ASSESSEE IS DE HORS ANY CONTEMPORANEOUS RECORD OR ANY MATERIAL FOUND D URING SEARCH. THE AFFIDAVITS ARE AGAIN ONLY AN ALIBI AS THESE ARE ONLY FROM INTERESTED PARTIES AND FUR THER WITHOUT IT(SS)A.NOS. 23& 33/COCH/2004 3 VERIFICATION. REFERENCE IN THIS CONTEXT STOOD MADE BY HER TO THE DECISION IN THE CASE OF A.K.K. NAMBIAR VS. UOI AIR 1970 SC 652 (COPY ON RECORD ) WHEREIN IT STANDS HELD THAT AN UNVERIFIED AFFIDAVIT COULD NOT BE ACCEPTED AS SU CH BY THE COURT. FURTHER THERE WAS NO TRANSPARENCY IN THE ASSESSEES ACCOUNTS OR CLAIMS AND WHO ADMITTED TO UNACCOUNTED BUSINESS AT THE TIME OF SEARCH WITH THE ACTUAL PUR CHASES AND SALES BEING MUCH MORE THAN THAT RECORDED IN THE REGULAR BOOKS OF ACCOUNT. THE LD. CIT(A) HAD CONSIDERED THIS ASPECT OF THE MATTER AS WELL IN ARRIVING AT HIS CONCLUSION S THUS TAKING A HOLISTIC VIEW OF THE ENTIRE MATTER SO THAT HIS ORDER WARRANTS BEING UPH ELD. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD AS WELL AS THE CASE LAW CITED. WE DISCERN THE ISSUE AS BEING OF THE VAL IDITY IN LAW AND THUS THE LEGAL SUSTAINABILITY OF THE ASSESSEES EXPLANATION WITH R EGARD TO SUM OF RS. 24.48 LAKHS INTRODUCED BY HIM IN HIS CASH FLOW STATEMENT TOWARD HIS INVESTMENT IN THE TWO PROPERTIES MADE AT AN AGGREGATE OF RS.30.55 LACS WHICH STOOD CONSIDERED BY THE AO AS UNEXPLAINED. THE ASSESSEE STATES THE SAME AS BEING THE SALE PROC EEDS OF THE GOLD DEPOSITED BY THE GOLDSMITHS WORKING FOR HIM TOWARD SECURITY AS PART OF THE CUSTOM FOLLOWED IN THE JEWELLERY BUSINESS. 4.1 THE ASSESSEES PRINCIPAL CONTENTION IS THAT THE PRACTICE OF ACCEPTING DEPOSITS (OF GOLD ORNAMENTS) BEING CUSTOMARY THE SAME EVEN THO UGH NOT ADEQUATELY EVIDENCED OUGHT TO BE ACCEPTED IN VIEW OF IT REPRESENTING A T IME HONOURED CUSTOM FOLLOWED IN THE GOLD JEWELLERY TRADE. IN THIS REGARD IT WOULD BE P ERTINENT TO STATE THAT THE LD. CIT(A) HAS NOT DISPUTED THE ASSESSEES SAID CONTENTION PER SE BUT EVEN SO FOUND ANOMALIES IN THE ASSESSEES EXPLANATION WHEN CONSIDERED IN CONJUNCTI ON WITH THE OBTAINING FACTS AND CIRCUMSTANCES OF THE CASE SO THAT THE ASSESSEES C LAIM/S IS UNACCEPTABLE ON AN OVERALL APPRAISAL OF THE FACTS. HE THEREFORE ENDORSED THE CATEGORICAL FINDING BY THE AO OF THE ASSESSEES EXPLANATION BEING FALSE (PARA 3.4 OF THE ASSESSMENT ORDER ) HOLDING THAT THE ASSESSEE HAD CLEARLY FABRICATED EVIDENCE AND COME WITH IT (EXPLANATION) WITH THE SOLE INTENTION OF `EXPLAINING THE ADMITTED INVESTMENT I N THE PROPERTIES SO THAT THE ADDITION AS MADE WAS LEGALLY SUSTAINABLE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE (REFER PARA 4.13 OF THE IMPUGNED ORDER ). WE SHALL TAKE UP BOTH THE ASPECTS CONSIDERED AND DWELT WITH IT(SS)A.NOS. 23& 33/COCH/2004 4 BY THE LD. CIT(A) AS THE AOS ORDER MERGES WITH TH AT OF THE CIT(A) AND WHOSE ADVERSE FINDINGS IN THIS REGARD THOUGH NOT CAPTURED IN THE GROUNDS ASSUMED BY THE ASSESSEE YET BEING ON THE ISSUE ARE EXTREMELY RELEVANT. 4.2 THE QUESTIONS IN THIS REGARD THAT STAND CONSIDE RED BY THE FIRST APPELLATE AUTHORITY AND THAT THUS ARISE FOR OUR CONSIDERATION ARE F IRSTLY WHETHER THE GOLD AS IS BEING CONTENDED STOOD DEPOSITED BY THE GOLDSMITHS WORKIN G FOR THE ASSESSEE. SECONDLY EVEN SO WHETHER THE SAME STOOD SOLD BY THE ASSESSEE DUR ING THE RELEVANT PREVIOUS YEARS (OF THE BLOCK PERIOD) TO FUND THE IMPUGNED INVESTMENTS. THI RDLY WHETHER IS THE ASSESSEMENT AS MADE SUSTAINABLE ON AN OVERALL EXAMINATION OF THE E XPLANATIONS FURNISHED AND THE EVIDENCES LED OR FOUND INCLUDING THAT IN RELATION TO THE CARRYING ON OF UNACCOUNTED BUSINESS BY AS WELL AS THE ISSUE OF GOLD TO THE GO LDSMITHS EVEN SUBSEQUENT TO THE DATE OF SALE OF THEIR GOLD DEPOSITED WITH THE ASSESSEE. 4.3 AT THE VERY OUTSET WE MAY STATE THAT THE A SSESSEES ARGUMENT(S) AS RAISED AND THE CASE AS MADE OUT BY IT BEFORE US IS ONLY IN RESPEC T OF THE FIRST QUESTION AS FRAMED SUPRA AND DOES NOT IN ANY MANNER GO TO ADDRESS THE OTHER TWO ALLIED QUESTIONS THAT STAND ALSO CONSIDERED AND DEALT WITH BY THE LD. CIT(A) IN ARRI VING AT HIS DECISION WHICH STANDS CHALLENGED IN APPEAL. COMING TO THE FIRST QUESTION IT NEEDS TO BE CLARIFIED THAT THOUGH CLAIMED AS CUSTOMARY SO THAT THE PRACTICE ONLY CON TINUES IT DOES NOT TAKEN MUCH STRAIN TO CONCUR WITH THE ASSESSEE IN THIS REGARD. THIS IS AS IT ISSUING GOLD IN THE REGULAR COURSE OF HIS JEWELLERY BUSINESS TO THE GOLDSMITHS FOR THE MA NUFACTURE OF THE GOLD ORNAMENTS WOULD INSIST ON SOME VALUABLE SECURITY THERE-AGAINS T. THE SAME BECOMES UNDERSTANDABLE AS A PRUDENT BUSINESS PRACTICE LEADING TO IT ASSUM ING THE STATUS OF A CUSTOM OR BECOME CUSTOMARY SO THAT IT STANDS FOLLOWED BY OTHER CONC ERNS IN THE TRADE AS WELL. SO HOWEVER WHAT IS INTRIGUING IN RELATION TO THIS IS THAT THE ASSESSEE HAS NOT ISSUED ANY RECEIPT FOR THE SAME NOR MAINTAINED ANY OTHER RECORD IN ITS RESPECT . EVEN AS QUESTIONED BY THE BENCH DURING HEARING THE ISSUE OF A `RECEIPT HAS NOTHIN G TO DO WITH THE CUSTOM/BUSINESS PRACTICE WHICH ONLY EXTENDS TO THE PRACTICE OF ACC EPTANCE OF GOLD DEPOSITS FROM THE KARIGARS TO WHOM THE GOLD IS BEING ISSUED. THE RECE IPT ONLY SIGNIFIES AN OFFICIAL CONFIRMATION OR ACKNOWLEDGEMENT BY THE ESTABLISHMEN T OF A DEPOSIT OF GOLD TO THAT IT(SS)A.NOS. 23& 33/COCH/2004 5 EXTENT/VALUABLE ARTICLE BEING HELD AS SECURITY FROM THE KARIGAR AGAINST THE GOLD BEING RELEASED THERETO IN THE REGULAR COURSE OF BUSINESS. ALSO NO RECORD IN ITS RESPECT AS SAY A SECURITY LEDGER OR REGISTER ETC. STANDS MAINTAINED WHICH BESIDES EVIDENCING THE TRANSACTION WOULD ALSO REMOVE ANY AMBIGUITY WITH R EGARD THERETO. HOW WOULD IN THE ABSENCE OF ANY RECORD ONE MAY ASK THE ASSESSEE OR THE GOLDSMITHS REMEMBER AS TO WHAT STOOD DEPOSITED AND WHEN ? THE SAME APART FROM SERVING AS AN INTEGRAL RECOR D OF THE BUSINESS WOULD HAVE THE BENEFIT OF SERVING AS A CH ECK AGAINST ANY MALPRACTICE BY EITHER PARTY AND RATHER WOULD ONLY BE INSISTED UPON BY TH E DEPOSITORS REPRESENT AS IT DOES THEIR LONG TIME SAVINGS OR FAMILY PROPERTY. FURTHER ON T HE BUSINESS AND CONCOMITANTLY THE RECORD WOULD NOT BE STATIC BUT A DYNAMIC ONE. THE RE WOULD BE VARIATIONS IN THE GOLD ISSUED TO THE GOLDSMITHS FROM TIME TO TIME WITH CO RRESPONDING UPWARD OR DOWNWARD REVISIONS IN THE QUANTITY OF GOLD HELD AS SECURITY. THEN THERE WOULD BE ADDITIONS AND SUBTRACTIONS OCCASIONED BY NEW GOLDSMITHS JOINING T HE WORKFORCE AND THE EARLIER ONES LEAVING THE SAME; THE WORK FORCE BEING IN A CONSTAN T STATE OF FLUX. IN THIS CONTEXT ON ENQUIRY FROM THE BENCH IT STOOD CLARIFIED BY THE L D. AR THAT THE ASSESSEES BUSINESS STOOD COMMENCED IN THE YEAR 1980-81. SURELY THE WORK FORCE WOULD NOT BE THE SAME EVEN AS THOSE LEAVING WOULD DEFINITELY REQUIRE THEIR GOLD B ACK . IN FACT NO TIME CAN BE STIPULATED IN THIS REGARD AND ONE COULD LEAVE OR BE CONSTRAIN ED TO EVEN AFTER A FEW WEEKS NAY DAYS OF JOINING. AGAIN ONE MAY REQUIRE GOLD FOR HIS PER SONAL NEEDS AS FOR EXAMPLE TO MEET A FINANCIAL CRISIS OR URGENT NEED IN THE FAMILY ETC. FURTHER WHILE THE ASSESSEE HAS ADMITTEDLY NOT MAINTAINED ANY RECORD TOWARD ITS THI S BUSINESS PRACTICE THE GOLD RECEIVED IS AS MUCH A PART OF ITS BUSINESS AS THE GOLD ISSUE D TO THE KARIGARS SO THAT IT IS NOT UNDERSTOOD AS TO WHY THE SAME STANDS KEPT OUTSIDE T HE BOOKS . IN FACT IT MAY WELL USE IT AS A PART OF ITS CIRCULATING STOCK OR RATHER MAY WELL BE DOING SO; THE ONLY CONDITION TO BE OBSERVED BEING THAT THE GOLD ISSUED TO ANY GOLDSMIT H MUST NOT EXCEED THE GOLD HELD IN DEPOSIT THERE-FROM; AGAIN POINTING TO THE NECESSIT Y OF MAINTAINING A RECORD IN ITS RESPECT. THAT APART I.E. WHETHER USED AS A PART OF THE CIR CULATING STOCK OR NOT THE SAME BEING A PART OF ITS BUSINESS ASSETS WOULD REQUIRE SAFETY P ROCEDURES TO BE OBSERVED IN ITS RESPECT INCLUDING INSURANCE JUST AS IN THE CASE OF ITS STO CK-IN-TRADE. IN SUM THE TOTALITY OF THE FACTORS AND INCIDENTS THAT IMPINGE ON THIS PRACTICE MAKES THE MAINTENANCE OF A RECORD INEVITABLE THE ABSENCE OF WHICH IS INCOMPREHENSIBL E. IT(SS)A.NOS. 23& 33/COCH/2004 6 4.4 FURTHER ON THOUGH ADMITTEDLY NO `RECEIPT STA NDS ISSUED AS A MATTER OF PRACTICE AND WHICH WE HAVE FOUND INEXPLICABLE SOME OF THEM (SEVEN) WERE PRODUCED. THIS BY ITSELF RAISES SOME QUESTIONS. THE RECEIPTS PRODUCED COULD NOT HAVE BEEN ISSUED ON A SELECTIVE BASIS I.E. ISSUING TO SOME AND NOT TO O THERS AND NEITHER IT IS CLAIMED AS SO NOR IT IS THE CASE OF THE RECEIPTS HAVING BEEN STARTED TO BE ISSUED FROM A PARTICULAR DATE. AS SUCH HOW COULD IN THE ABSENCE OF THE PRACTICE OF ISSUING RECEIPTS SOME STOOD PRODUCED ? THAT IS WERE THEY DONE TO MEET THE QUERY RAISED IN THIS RESPECT IN ASSESSMENT OR IN ANTICIPATION THEREOF I.E. IN PURSUANCE TO EXPLANA TION FURNISHED. INEXPLICABLY AGAIN THEY BORE NO DATE OR NUMBER. FURTHER THERE WERE NO PART ICULARS THEREON GIVING THE DESCRIPTION OF THE GOLD OR ITS PURITY BUT ONLY A BALD STATEMEN T TO THE EFFECT OF GOLD HAVING RECEIVED IN THE MONTH OF `______. ALL THE RECEIPTS APPEARED TO BE ONLY OF RECENT ORIG IN AND NOT 5 TO 6 YEARS OLD I.E. THEIR AGE AS PER THE TIME OF DEP OSITS . THIS PERHAPS EXPLAINS THE RECEIPTS BEING UNDATED AND EXHIBITS THEM TO BE NOT A CONTEM PORANEOUS RECORD. 4.5 THE FINANCIAL CAPACITY OF THE PERSONS DEPOSI TING GOLD IS ANOTHER ASPECT WHICH IS RELEVANT FOR ARRIVING AT A REASONABLE SATISFACTION WITH REGARD TO THE ASSESSEES EXPLANATION. THE DEPONENTS WHEN QUESTIONED ON THIS ASPECT BY TH E ASSESSING AUTHORITY GAVE ONLY VAGUE ANSWERS STATING THAT THE GOLD BELONGED TO TH EIR FAMILY MEMBERS. THE ASSESSEE HAS ALSO NOT FILED ANY MATERIAL TO EXHIBIT THE EARNING LEVEL OF THE GOLDSMITHS AND/OR OF THEIR FAMILY MEMBERS OR IN ANY MANNER DEMONSTRATED THEIR CAPACITY TOWARD THE SAME. THE SAME CAN THEREFORE BE ONLY SAID TO BE UNPROVED. 4.6 NEXT WE EXAMINE THE AFFIDAVITS WHICH IS THE P RINCIPAL IF NOT THE ONLY EVIDENCE ADVANCED BY THE ASSESSEE. AS ALSO STATED EARLIER W E ARE FIRSTLY AT A LOSS TO UNDERSTAND AS TO HOW IN THE ABSENCE OF ANY UNDERLYING RECORD COULD T HE DETAILS PROVIDED THEREIN BE COLLATED AND FURNISHED I.E. HOW COULD THESE BE PR EPARED IN THE FIRST PLACE OUT OF MEMORY ?. PROCEEDING TO EXAMINE THE AFFIDAVITS AS FURNISHE D WE FIND THE SAME AS NUMBERING FORTY ONE (41). AS SUCH THE ASSESSEE ADMITTEDLY HAS NOT BEEN ABLE TO PRODUCE A CONFIRMATION FROM ALL OF DEPOSITORS WHOSE GOLD HE CLAIMS TO HAVE SOLD . SECONDLY NONE OF THEM BEAR A `VERIFICATION. THE HONBLE APEX CO URT IN THE CASE OF A.K.K. NAMBIAR V. UNION OF INDIA (SUPRA) HAS HELD THAT IN THE ABSENCE OF PROPER VER IFICATION AN AFFIDAVIT IT(SS)A.NOS. 23& 33/COCH/2004 7 CANNOT BE ACCEPTED IN EVIDENCE. THE SAME IT STANDS EXPLAINED ENABLES THE COURT TO FIND OUT AS TO WHETHER IT WOULD BE SAFE TO ACT ON THE BA SIS OF THE AFFIDAVIT EVIDENCE. THE `AFFIDAVITS SUBMITTED BY THE ASSESSEE THEREFORE CANNOT BE CONSIDERED AS AFFIDAVITS IN THE EYES OF LAW I.E. WHICH COULD BE TENDERED IN EVIDE NCE. NO DOUBT THE TECHNICAL RULES OF THE LAW OF EVIDENCE ARE NOT APPLICABLE TO THE PROCEEDIN GS UNDER THE ACT BUT THE FACT OF THE MATTER REMAINS THAT THESE CANNOT BE CONSIDERED AS ` AFFIDAVITS IN THE EYES OF LAW AND SECONDLY IT IS NOT SAFE TO ACT ON THE BASIS OF THE SAME. THEY COULD THOUGH BE REGARDED AS CONFIRMATIONS. TOWARD THIS AS OBSERVED EARLIER TH E AO CROSS-EXAMINED SOME OF THE DEPOSITORS (15) WHO WERE PRODUCED BEFORE HIM AND W HO ONLY FURNISHED GENERAL AND VAGUE REPLIES IN ANSWER TO THE PERTINENT QUESTIONS ASKED THEREAT WHICH ALSO GO TO SUPPORT THE CASE OF THE REVENUE RATHER THAN THAT OF THE ASS EESSEE. THE YEAR-WISE DETAILS OF THE `AFFIDAVITS SUB MITTED ARE AS UNDER:- FINANCIAL YEAR QTY. (GMS.) REMARKS/ PAPPER-BOOK PG. NO. 1996-97 1160 ANNEXURES 1A TO 5A AND 41A 1997-98 266.41 ANNEXURES 6A TO 29A 2000-01 1620.10 ANNEXURES 30 A TO 40A IT IS THUS NOT UNDERSTOOD AS TO HOW THE DEPOSITS AC CEPTED IN F.Y. 2000-01 WOULD BE OF RELEVANCE IN EXPLAINING THE GOLD DEPOSITS HELD DURI NG THE PERIOD 1995 TO 1997 WHICH ARE CLAIMED TO HAVE BEEN SOLD TO FINANCE THE IMPUGNED I NVESTMENT IN LAND DURING THE FINANCIAL YEARS 1996-97& 1997-98 ?. RESULTANTLY THE DETAIL OF THE DEPOSITS FURNISHE D BY THE ASSESSEE ITSELF REVEAL THE RELEVANT DEPOSITS (1 426.41 GMS.) TO BE WOEFULLY SHORT AND INSUFFICIENT TO EXPLAIN THE AMOUNT OF CASH UNDER RE FERENCE (RS. 24.48 LACS) . NEXT WE EXAMINE THE CONTENTS OF THE AFFIDAVITS RE PRODUCING ONE BEING SIMILARLY WORDED AS A SPECIMEN: ANNEXURE-2A I AM VELAYUDHAN. I AM DOING GOLD WORKS FOR CHEMMANN UR JEWELLERS PALGHAT. FOR GETTING GOLD WORK FROM THE JEWELLERY USUALLY THE GO LDSMITH DEPOSIT GOLD. ACCORDINGLY I HAD DEPOSITED IN THE PALGHAT SHOP 160 GMS. OF GOLD THROUGH MARINA GOLD. I AM STILL DOING IT(SS)A.NOS. 23& 33/COCH/2004 8 WORK FOR CHEMMANNUR. THEREFORE MY DEPOSIT IS STILL PENDING THERE. IT WAS IN THE MONTH OF APRIL 1996 THAT I HAD GIVEN THE GOLD. SD/- A.S. VELAYUDHAN S/O SANKARANKUTTY ADIYOLI HOUSE KODANNUR P.O. THRISSUR. SIGNED BEFORE ME AT CALICUT ON 20.05.2002 SD/- THOMAS MATHEW ADVOCATE & NOTARY 11/529 P.K.COMPLEX RED CROSS ROAD CALICUT-32 EACH OF THE `AFFIDAVITS IS QUA THE GOLD DEPOSITED WITH CHEMMANNUR JEWELLERS PALGHAT A GROUP CONCERN AND NOT THE ASSESSEES CO NCERN. AS SUCH WE WONDER AS TO HOW THE DEPOSITS HELD IN OR BY ANOTHER FIRM COULD BE OF RELEVANCE IN ESTABLISHING THE ASSESSEES CASE OF HAVING RECEIVED DEPOSITS FROM THE GOLDSMITH S TO WHOM GOLD STANDS RELEASED BY IT IN COURSE OF ITS BUSINESS I.E. TOWARD MANUFACTUR E OF GOLD ORNAMENTS ON A DAY-TO-DAY BASIS. THE ASSESSEE HAS NEITHER BEFORE US NOR THE A UTHORITIES BELOW EITHER HIGHLIGHTED OR EXPLAINED THIS ASPECT OF ITS `EVIDENCE; ONLY CLAIM ING TO HAVE EVIDENCED THE RECEIPT OF GOLD DEPOSITS BY WAY OF `AFFIDAVITS FROM THE CONCE RNED DEPOSITORS. THE FIRST QUESTION THAT ARISES IS THAT WHY SHOULD THE ASSESSEE DO SO AND N OT PLACE ON RECORD SIMILAR AFFIDAVITS/CONFIRMATIONS FROM ITS OWN GOLDSMITHS I .E. THOSE WORKING FOR HIM ? NOT DOING SO AND PLACING ON RECORD MATERIAL IN RELATION TO A NOTHER ASSESSEE AND THAT TOO WITHOUT HIGHLIGHTING THIS ASPECT ONLY RAISES SUBSTANTIAL D OUBTS IN RELATION TO ITS ABILITY TO DO SO IN RESPECT OF ITS OWN CASE. FURTHER EVEN IF TAKEN AS TRUE WHAT BENEFIT WOULD THE ASSESSEE STAND TO GAIN THERE-FROM QUA ITS OWN CASE; THE GOLD DEPOSITED WITH THE PALGHAT SHOP WOULD ONLY BE AGAINST THE GOLD ISSUED BY THE SAID C ONCERN THERETO IN THE COURSE OF ITS OWN BUSINESS. IN VIEW OF THE DISCUSSION PER THE FOREGOI NG PARAS IT IS DIFFICULT TO SAY THAT THE ASSESSEE HAS SUBSTANTIATED ITS CASE WITH ANY EVIDEN CE AND IF AT ALL ADEQUATE EVIDENCE. SO HOWEVER WE SHALL CONTINUE WITH OUR AN ALYSIS OF THE MATERIALS SUBMITTED. AS WOULD BE APPARENT FROM A BARE READING OF THE `AFFID AVIT THE SAME IS SANS ANY VITAL DETAILS. IT SPEAKS OF DEPOSIT OF `GOLD WITHOUT MEN TIONING ITS FORM OR PURITY OR EVEN THE IT(SS)A.NOS. 23& 33/COCH/2004 9 TYPE OF ORNAMENT; THE NUMBER OF PIECES ETC. SO AS TO ENABLE ITS IDENTIFICATION EVEN AS IT IS ADMITTED AND UNDISPUTED THAT THE DEPOSITS WERE AND ARE ACCEPTED IN THE FORM OF GOLD ORNAMENT/S AND NOT AND ONLY UNDERSTANDABLY SO GO LD BARS OF STANDARD PURITY AS THE AFFIDAVIT/S SEEM TO SUGGEST. APART FROM THE FACT TH AT THERE WOULD BE CONSIDERABLE VARIATION IN THE TYPE OF ORNAMENTS DEPOSITED BY DIFFERENT PER SONS THE ASSESSEE IS OBLIGED TO RETURN ONLY THE SAME ARTICLE/S AS RECEIVED AND WHICH IS N OT POSSIBLE WITHOUT ITS IDENTIFICATION. THEN IS THE QUESTION OF MEASUREMENT INCLUDING OF T HE QUALITATIVE ASPECT OF PURITY THE VERACITY OF WHICH IS OF PRIME SIGNIFICANCE AS THE VALUE OF THE DEPOSIT DEPENDS DIRECTLY THEREON AND IT IS ONLY ON THE BASIS THEREOF (AND T HUS THE VALUE DETERMINED ON ITS BASIS) THAT GOLD IN THE NORMAL COURSE OF BUSINESS IS TO BE RELEASED TO THE KARIGARS I.E. THE DEPOSIT AND THE RECORD AND/OR RECEIPT RECORDED IN ITS RESPECT HAS A CRUCIAL FUNCTIONAL ROLE IN ASSESSEES BUSINESS BESIDES DETERMINING THE ASS ESSEES LIABILITY TO THE DEPOSITOR. SURPRISINGLY WE OBSERVE THE SAME (MEASUREMENT) TO BE ONLY OF THE QUANTITY AND BARRING EXCEPTIONS IN WHOLE FIGURES AND WHICH IS NOT POSS IBLE IF THE DEPOSIT IS IN THE FORM OF AS ADMITTEDLY IS THE CASE GOLD ORNAMENT/S . FURTHER ON THE BUSINESS STOOD COMMENCED IN TH E YEAR 1980-81 WITH THE ASSESSEE AS PER CUSTOM CLAIMEDLY ACCEPTING DEPOSITS OF GOLD FR OM THE GOLDSMITHS TOWARD SECURITY AGAINST THE GOLD ISSUED TO THEM FOR WORK. HOW THEN IT IS THAT THERE ARE NO DEPOSITS FROM KARIGARS WORKING SINCE OR WHO JOINED ANY TIME LATER I.E. BEFORE APRIL 1996 TO WHICH TIME THE EARLIEST AFFIDAVIT AS TENDERED RELATES . IN FACT 36 OF THE 41 DEPOSITIONS TENDERED (OUT OF ADMITTEDLY 56 PERSONS WORKING) RELATE TO TH E PERIOD MARCH97 ONWARDS. IS IT THEN THAT THE PERSONS WORKING FOR THE PAST SEVERAL YEARS HAVE DECLINED TO FURNISH AFFIDAVITS OR IS IT THAT THEY HAVE LEFT THE ORGANIZATION AND ARE NO LONGER WORKING FOR THE ASSESSEE OR IS IT THAT THE DEPOSITS CAME TO BE STARTED ACCEPTED ONLY W.E.F. APRIL96. ONLY THE SECOND MENTIONED STATE OF AFFAIRS IS CONSISTENT WITH THE A SSESSEES EXPLANATION; THE OTHER TWO RATHER IMPUGNING ITS CASE. EVEN HERE IT IS NOT CLE AR IF THE AFFIDAVITS STAND PRODUCED FROM ALL THE PERSONS WHO WERE ON THE ASSESSEES ROLLS I RRESPECTIVE OF THE PERIOD OF THEIR JOINING AND WHICH IS EXTREMELY RELEVANT TO ITS ARG UMENT OF THE DEPOSITS BEING TAKEN FROM ALL WITHOUT EXCEPTION. EVEN SO I.E. GOING BY THE SECOND PROPOSITION IT IS ITSELF SURPRISING THAT THERE ARE NO PERSONS ON ITS ROLLS WHO HAVE BEE N WORKING FOR THE ASSESSEE SINCE LONG OR EVEN PRIOR TO THE PERIOD DURING WHICH THE GOLD I S STATED TO HAVE BEEN SOLD . FOR ONE IT IT(SS)A.NOS. 23& 33/COCH/2004 10 ONLY PROVES IF AT ALL ONE WAS REQUIRED THAT THE K ARIGARS WOULD COME AND GO REQUIRING BACK THEIR GOLD DEPOSIT. AND SECONDLY THAT THE DE POSITS HELD ARE FROM KARIGARS WHO ARE CURRENTLY WORKING WITH THE ASSESSEE EVEN AS STATED BY THE LD. CIT(A). AS SUCH BESIDES POINTING OUT TO THE NECESSITY OF MAINTAINING SOME R ECORD IN RESPECT OF THESE TRANSACTIONS IT IS SURPRISING TO SAY THE LEAST THAT WHILE ALL THE PERSONS WHO HAD JOINED THE WORK FORCE PRIOR TO APRIL96 (OR SHOULD WE SAY BARRING FIVE MARCH97) HAD LEFT PRIOR TO THE DATE OF SALE OF GOLD (DURING 1996-97 & 1997-98) ALL THOSE JOINING SINCE THEN CONTINUE TO WORK EVEN AS CONFIRMED BY THEM (SO THAT THEY HAD THEREFO RE NOT DEMANDED BACK THEIR DEPOSITS WHICH CONTINUE TO BE HELD BY THE FIRM). THIS IS AS IF SOME GOLDSMITHS WHOSE GOLD STOOD SOLD HAD LEFT THE FIRM SINCE THEY WOULD ONLY HAVE BEEN RELEASED BACK THEIR GOLD DEPOSIT. WHAT THEN WAS THE SOURCE OF THIS RELEASE BACK OF GOLD OR IS IT THAT THE ASSESSEE BY SOME PRESCIENCE HAD COME TO KNOW THAT THEY WOULD LEAVE THE FIRM IN TIME TO COME AND HAD NOT SOLD THEIR GOLD ? THE ONLY OTHER MANNER IN WHICH THE IMBROGLIO PRE SENTED BY THE AFFIDAVITS FURNISHED BY THE ASSESSEE COULD BE RESOL VED IS THAT IT HAD NIL WORK FORCE AS ON THE FIRST DAY OF APRIL96 (OR ONLY FIVE BEFORE MARC H97 ) AND NONE OF THE PERSONS JOINING SINCE HAD LEFT UP TO THE DATE AT LEAST OF EXECUTI NG THE AFFIDAVITS WHICH WE OBSERVE IN MOST CASES TO BE MAY 20 2002. IT GOES WITHOUT SAYI NG THAT THE SAME ONLY NEEDS TO BE STATED TO BE REJECTED. NO LESS SURPRISING I.E. TH AN THE FACT OF A NIL TURNOVER IN THE PAST FIVE-SIX YEARS (PRIOR TO MAY 2002) IN COMPARISON T O A TOTAL ONE (I.E. 100% OR NEARLY SO) IMMEDIATELY PRIOR THERETO IS THAT NONE OF THE PERS ON EVEN REQUIRED A RELEASE BACK OF EVEN A PART OF THEIR DEPOSIT TO MEET THE EXIGENCIES OF D AY-TO-DAY LIFE WHICH IS MARKED BY FINANCIAL EMERGENCIES OR CRISES. IN FACT SOME OF T HE DEPONENTS ON BEING QUESTIONED IN THIS REGARD ADMITTED TO HAVE MARRIED OFF THEIR DAU GHTERS/SISTERS DURING THE PERIOD FOLLOWING THE DEPOSIT OF GOLD WITH THE ASSESSEE WIT HOUT WITHDRAWING THE SAME AS NO GOLD OR ORNAMENTS STOOD GIVEN AT THE TIME OF MARRIAGE. T HIS IS UNTHINKABLE ESPECIALLY IN THE INDIAN CONTEXT PARTICULARLY CONSIDERING THAT THE S AME ADMITTEDLY BELONGED TO THEIR FAMILIES. IT AGAIN DOES NOT TAKE MUCH STRAIN TO CONCUR WITH T HE REVENUES FINDING OF THE ASSESSEE HAVING ADDUCED FABRICATED EVIDENCE TO SUBS TANTIATE ITS CASE. 4.7 FURTHER THERE IS ALSO THE ASPECT OF VALUE. WHE N THE DEPOSIT IS SOUGHT TO BE REALIZED BY THE DEPOSITOR FROM THE ASSESSEE HE COULD IN TH E ABSENCE OF ANY RECORD AT BEST RETURN BACK EQUIVALENT GOLD ASSUMING STANDARD PURITY; THE ORNAMENTS BEING GENERALLY MADE OF IT(SS)A.NOS. 23& 33/COCH/2004 11 22 CARAT GOLD EVEN AS THERE CAN BE NO ASSUMPTION I N THIS REGARD BEING A MATTER OF FACT. IN OTHER WORDS THE IMPLICATION IS OF A STANDARD QUALI TY AND WHICH IS NEITHER POSSIBLE NOR CONCEIVABLE. FURTHERMORE THE ORNAMENTS HAVING BEEN `SOLD THE ASSESSEE IS EVEN OTHERWISE INCAPACITATED TO RETURN THE DEPOSITED ORN AMENTS? IN OTHER WORDS THE DEPOSIT WOULD STAND TO BE REALIZED ONLY ON THE BASIS OF THE GOLD CONTENT SO THAT THERE IS AN IRRETRIEVABLE LOSS OF THE PARTICULAR ORNAMENTS DUE TO THEIR SALE AND WHICH WOULD HAVE SPECIAL AND NO INSIGNIFICANT VALUE FOR THE DEPOSITO RS. ALSO PERTINENT IN THE MATTER IS THAT HOW WOULD THE ASSESSEE COMPENSATE THE DEPOSITOR FOR THE LOSS ON ACCOUNT OF MAKING AND/OR MELTING CHARGES/LOSSES INCIDENT ON THE SALE OF ORNAMENTS PARTICULARLY AS THERE IS NO RECORD OF SUCH CHARGES/LOSSES SUFFERED ON EACH SALE ?. 4.8 WE NEXT EXAMINE THE CIRCUMSTANTIAL EVIDENCE. THERE WAS NO MATERIAL FOUND OR SEIZED DURING THE SEARCH WHICH COULD POINT TO OR DI RECTLY OR INDIRECTLY EXHIBIT THE PRACTICE OF TAKING THE DEPOSITS FROM THE GOLDSMITHS AND WHIC H IS INDEED QUIZZICAL. THE ASSESSEE IN THIS REGARD WE FIND ADVERTS TO THE BUNCH OF SLIPS M ARKED AS ITEM NO. 17 IN EXPLANATION TO WHICH IN ANSWER TO QUESTION NOS. 31 TO 33 OF HIS S TATEMENT U/S. 132 (4) DATED 12/13.10.2000 SH. C.D. BOBBY THE ASSESSEES SON WHO ALONG WITH HIS FATHER MANAGES HIS JEWELLERY BUSINESS HAS STATED OF THE SAME BEIN G IN RESPECT OF GOLD DEPOSITED BY THE GOLDSMITHS RECORDED IN CODED LANGUAGE EXPLAINING THE CODES USED. THE SAME IS FIRSTLY IN RESPECT OF THE PALGHAT BRANCH. THE SAME THUS DO NOT RELATE TO THE ASSESSEES CONCERN BUT TO CHEMMANNUR JEWELLERS KOZIKODE HIS PROPRIET IORY CONCERN. WE HAVE ALSO EXAMINED THE NAMES OF THE GOLDSMITHS QUA WHOM THE EVIDENCE AS FOUND (APPEARING IN ANSWER TO Q. # 7 OF THE STATEMENT U/S. 132(4) DATED 12/10/2000 OF SH. T.M. ABDUL SALIH S/O SH. K. MOHAMMED WORKING AS A SALESMAN FOR THE JEWELLERY BUSINESSES OF THE FAMILY) TO FIND THAT THE SAME DOES NOT INCLUDE ANY DEPOSITO R DEPOSITS FROM WHOM ARE OSTENSIBLY UNDER REFERENCE. IN THIS CONTEXT REFERENCE IS ALSO DRAWN TO PARAS 4.9 & 4.10 OF THIS ORDER WHEREAT THE MATTER STANDS EXAMINED FROM THE STAND P OINT OF THE SALE OF THE GOLD DEPOSITS AND OF THE INVESTMENT OF THE SALE PROCEEDS IN ACQUI RING LAND BY THE ASSESSEE I.E. INDEPENDENT OF AND GIVEN THAT THE DEPOSITS AS STAT ED WERE ACCEPTED. IT(SS)A.NOS. 23& 33/COCH/2004 12 4.9 NEXT WE SHALL CONSIDER THE ASPECT OF THE SALE OF THE GOLD DEPOSITED WITH IT BY THE ASSESSEE. THERE IS NO EVIDENCE WHATSOEVER OF ITS S ALE DURING THE RELEVANT YEARS. NEITHER THE ASSESSEE NOR HIS SON C.D. BOBBY ON BEING EXAM INED ON OATH MENTIONED OF THE SALE OF THE GOLD HELD IN DEPOSIT MORE SO CONSIDERING TH AT THEY WERE ONLY AWARE OF THE SAID SALE AND POCKETING OF THE FUNDS FOR PERSONAL PURPOSES G IVING RISE TO THE INFERENCE OF IT BEING AN AFTERTHOUGHT. THEN AGAIN THE ASSESSEE HAS BEEN UNABLE TO FURNISH THE NAMES AND ADDRESSES OF THE BUYERS OF THE GOLD TO ENABLE VERIF ICATION OF ITS EXPLANATION IN THIS REGARD. IN FACT THE SALE IS ITSELF INCOMPREHENSIBLE IN VIE W OF THE STATED POSITION OF THE GOLD DEPOSITS BEING TAKEN AS A PART OF CUSTOMARY BUSINES S PRACTICE APART FROM IT BEING EVEN OTHERWISE IMPRUDENT TO DO SO AS THE DEPOSITORS HOL D THE ASSESSEES GOLD WITH THEM FOR WORK AT ANY GIVEN POINT OF TIME. CLEARLY WHILE TH E EARLIER PRACTICE IS MARKED BY CUSTOM AND PRUDENCE THE LATTER IS BY IMPRUDENCE AND MISTR UST. THIS IS ALL THE MORE SO THAT WHAT WAS TILL NOW A BUSINESS ASSET (REPRESENTING A SECUR ITY OF THE BUSINESS) STOOD DIVERTED BY THE ASSESSEE FOR HIS PERSONAL USE AND BENEFIT. THE SECURITY OF THE BUSINESS SO ASSIDUOUSLY PRESERVED AND AS GIVEN TO UNDERSTAND SINCE ITS IN CEPTION STANDS LOST; THE SAME IT MUST BE REALISED REPRESENTS THE LIFE LONG SAVINGS OF THE D EPOSITORS AND OUGHT NOT TO BE AGAIN BY CUSTOM AND BUSINESS PRACTICE DIVERTED OR COMPROMIS ED FOR ANY REASON APART FROM THE PURPOSE FOR WHICH IT STANDS GIVEN I.E. TO INDEMNI FY THE ASSESSEES JEWELLERY BUSINESS AGAINST LOSSES OR DEFALCATION BY THE CONCERNED DEPO SITORS. APART THERE-FROM AS EXPRESSED EARLIER WE SEE NO REASON THAT THE SAME IS NOT ACCO UNTED FOR OR SOME RECORD IN ITS RESPECT MAINTAINED. WHY SHOULD THE SALE YIELD AS IT DOES ONLY EXPLAINE D MONEY WITH THE ASSESSEE BE NOT ACCOUNTED FOR ?. IN FACT IF ANYTHING THE NON-ISSUE OF RECEIPTS OR NON-ACCOUNTING OF THE DEPOSITS AND CORRESPONDING SALE IN ITS REGULAR BOOKS OF ACCOUNTS I.E. ACCEPTING THE FACTUM OF DEPOSITS IS BY ITSELF A CONCLUSIVE PROO F OF THE ASSESSEE BEING ENGAGED IN OUT-OF- BOOKS OR UNDISCLOSED BUSINESS . 4.10 WE WOULD FINALLY TAKE UP THE SECOND ASPECT I N THE MATTER; THE LD. CIT(A) HAVING EXAMINED AND IN OUR OPINION ONLY RIGHTLY SO THE I SSUE UNDER REFERENCE FROM ANOTHER ANGLE WHICH ALSO IS BASED ON BOTH DIRECT AND CIRCU MSTANTIAL EVIDENCE EVEN AS HE CONFIRMS THE FINDINGS OF THE AO IN SUBSTANCE. EVEN IF FOR ARGUMENTS SAKE THE ASSESSEES CONTENTION OF HAVING SOLD THE GOLD ORNAMENTS DEPOSI TED TO INVEST IN (HIS) IMMOVABLE IT(SS)A.NOS. 23& 33/COCH/2004 13 PROPERTIES IS ACCEPTED THE AO HAD INSTEAD OF COMPU TING THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD PROCEEDED TO FRAME T HE ASSESSMENT ON THE BASIS OF ACCRETION TO THE ASSESSEES WEALTH. THE TWO APPROACHES IT WA S OBSERVED BY HIM ARE PARA MATERIA AND WOULD LEAD TO THE SAME RESULT I.E. DETERMINAT ION OF INCOME EARNED BY THE ASSESSEE OUT OF HIS UNACCOUNTED BUSINESS WHICH HAD FOUND IT S WAY IN THE SAID PROPERTIES. SECONDLY THE VERY FACT OF THE GOLD DEPOSITS HAVING BEEN ADMITTEDLY NOT RETURNED BACK TO THE KARIGARS ONLY IMPLIES THAT GOLD IS BEING RELEAS ED TO THEM CONTINUOUSLY SINCE THEN. THIS IS AS OTHERWISE RETAINING THE DEPOSIT THERE-FROM WO ULD NOT MAKE ANY BUSINESS SENSE. ALSO IN THAT CASE THE GOLDSMITH WOULD DEMAND BACK HIS GO LD SO AS TO BE ABLE TO TENDER THE SAME WITH ANOTHER JEWELLER FOR SECURING WORK THERE-FROM. THIS STATE OF AFFAIRS STANDS IN FACT CONFIRMED BY THE KARIGARS THEMSELVES ( REFER SPECIMEN `AFFIDAVIT AT PARA 4.6 ABOVE ). HOWEVER THE ASSESSEES ACCOUNTS DO NOT BEAR THIS O UT SO THAT THE SAID ISSUE OF GOLD TO THEM IS NOT RECORDED IN REGULAR BOOKS OF ACCOUNT I .E. THE SAME REMAINS UNACCOUNTED FOR. THE ONLY AND THE UNMISTAKABLE INFERENCE OF THE NO N-ACCOUNTING OF THE RECEIPT OF THE GOLD RECEIVED FROM KARIGARS I.E. ASSUMING SO; THE SAME ALSO APPEALING TO REASON IN ITS REGULAR BOOKS OF ACCOUNTS IS OF IT BEING ENGAGED I N OUT-OF-BOOKS BUSINESS. LIKE-WISE FOR THE GOLD ISSUED TO KARIGARS FOR WORK . WE HAVE ALSO GONE THROUGH THE STATEMENTS REFERRED TO BY THE LD. CIT(A) AND WHICH ALSO FIND PLACE IN T HE ASSESSEES PAPER BOOK (PB PG. 83 TO 117). APART FROM THOSE REFERRED TO BY THE LD. CIT(A ) IN HIS ORDER (AT PARAS 4.3 4.8 TO 4.9) REFERENCE TO THE QUESTIONS AND ANSWERS THERETO AT SERIAL NO. 17 18 31 TO 38 AND 41 TO 50 52 56 & 57 OF THE STATEMENT OF THE ASSESSEES SON SHRI C.D.BOBBY COUPLED WITH THE STATEMENT OF T.M. ABDUL SALIH IS RELEVANT IN THIS REGARD. THERE IS OVERWHELMING EVIDENCES AND REASONS AND RATHER AN ADMITTED POSIT ION THAT A SUBSTANTIAL PORTION OF THE BUSINESS STOOD NOT ACCOUNTED FOR IN THE ASSESSEES REGULAR BOOKS OF ACCOUNT ( REFER TO Q. # 4 5 31 34 ). EVEN BEFORE US THE ASSESSEE HAS NOT IN ANY MANN ER REBUTTED THESE FINDINGS OF THE LD. CIT(A) EVEN AS HE ASSAILS HIS ORDER AND CON CLUSIONS AT PARA 4.12 AND 4.13 OF HIS ORDER. RATHER WE OBSERVE THAT THE TWO APPROACHES T HOUGH TO THE SAME OBJECTIVE YET THAT ADOPTED BY THE REVENUE REPRESENTS A MORE CONSERVATI VE APPROACH IN THE SENSE THAT THE INCOME FROM THE UNACCOUNTED BUSINESS WOULD BE OVER THE ENTIRE BLOCK PERIOD WHICH EXTENDS UP TO 12/10/2000 WHILE THE INVESTMENT OF THE SAID PROFITS COULD ONLY BE THAT EARNED UP TO THE FINANCIAL YEAR 1997-98. IT(SS)A.NOS. 23& 33/COCH/2004 14 4.11 ON THE BASIS OF THE FOREGOING WE ANSWER E ACH OF THE QUESTIONS AS MENTIONED AT PARA 4.2 ABOVE AGAINST THE ASSESSEE AND IN FAVOUR O F THE REVENUE. NEITHER IS THE FACTUM OF DEPOSITS PROVED NOR THEIR SALE AND IN ANY CASE TH E ASSESSMENT AS MADE IS SUSTAINABLE ON A CONSIDERATION OF THE TOTALITY OR THE CONSPECTUS OF THE CASE. 4.12 FINALLY WE CONSIDER THE DECISION RELIED U PON BY THE ASSESSEE IN SUPPORT OF ITS CASE I.E. GOPAL DAS JWALA PRASAD V. CST (1989) 75 STC 361 (ALL.). IN THE FACTS OF THAT CASE THE ASSESSEES A DEALER IN BRASS UTENSILS A CCOUNTS STOOD REJECTED IN ASSESSMENT UNDER THE SALES-TAX ACT FOR THE REASON THAT HE DID NOT MAINTAIN A MANUFACTURING ACCOUNT AS ALSO THAT DURING SURVEY A DAIRY BELONGING TO THE FI RM CONTAINING UNACCOUNTED TRANSACTIONS WAS FOUND. THE HONBLE HIGH COURT NEGATIVED THE TRI BUNALS FINDINGS. THE NON- MAINTENANCE OF MANUFACTURING ACCOUNT WAS FOUND IRRE LEVANT FOR THE PURPOSE CONSIDERING THAT THE MANUFACTURING STOOD UNDERTAKEN BY THE ASSE SSEE THROUGH CONTRACTORS WITH NO OTHER DEFECTS IN ITS ACCOUNTS BEING POINTED OUT. AS REGARDS THE DIARY THE SAME STOOD DISOWNED BY THE FIRM STATING IT TO BELONG TO ONE O F ITS AGENTS WHICH FACT STOOD CORROBORATED IN VIEW OF THE FACT THAT THE SAME CONT AINED DETAILS OF PERSONAL TRANSACTIONS AS WELL. NO DOUBT THE SAME CONTAINED DEBIT ENTRIES IN THE NAME OF THE AGENT WHICH LED THE TRIBUNAL TO HOLD THAT IT COULD NOT BELONG TO THE AG ENT BUT THEN IT CONTAINED ENTRIES IN THE NAME OF THE ASSESSEE-FIRM AS WELL. THE MATTER WAS R EMANDED BACK TO THE TRIBUNAL HOLDING THAT THE POSITIVE EVIDENCE LED BY THE FIRM TO SHOW THAT THE DIARY DID NOT BELONG TO IT BUT TO THE AGENT COULD NOT BE BRUSHED ASIDE. IN CONTRADIST INCTION WE HAVE TIME AND AGAIN OBSERVED IN THIS ORDER THAT NO CONTEMPORANEOUS EVID ENCE STOOD FOUND IN SUPPORT OF THE ASSESSEES - WHO RATHER HAS BEEN FOUND TO HAVE ADDU CED FABRICATED AND IRRELEVANT EVIDENCE/S - CONTENTIONS AND RATHER IN TACIT ADMI SSION OF THE SAME RELIES FOR ACCEPTANCE OF ITS CASE NOT ON ANY POSITIVE EVIDENCE BUT ON TH E HIGHER LAW OF CUSTOM. TO ADD TO IT THERE IS OVERWHELMING EVIDENCE TO THE EFFECT AND R ATHER AN ADMITTED POSITION OF THE ASSESSEEE BEING ENGAGED IN UNACCOUNTED BUSINESS. RE LIANCE ON THE CITED CASE LAW IS TOTALLY MISPLACED AND RATHER DEFEATS THE ASSESSEE S CASE. 5. IN VIEW OF THE FOREGOING WE CONCUR WITH TH E FINDINGS OF THE AUTHORITIES BELOW WHICH ARE OBJECTIVE AND WITH REFERENCE TO THE MATER IALS ON RECORD AND STAND NOT REBUTTED IT(SS)A.NOS. 23& 33/COCH/2004 15 BY THE ASSESSEE IN ANY MANNER AND THEREFORE FIND NO REASON TO INTERFERE WITH THE IMPUGNED ORDER. WE DECIDE ACCORDINGLY. 6. THE REVENUE HAS RAISED A SINGLE ISSUE I.E. OF THE LEVY OF SURCHARGE ON THE ASSESSED TAX WHICH STANDS DELETED BY THE LD. CIT(A) ON THE BASIS THAT SECTION 113 OF THE ACT WHEREBY THE LEVY OF SURCHARGE STOOD EXTENDED TO ASS ESSMENTS U/S. 158BC PER FINANCE ACT 2001 WITH EFFECT FROM 1.6.2002 IS ONLY PROSPE CTIVE IN NATURE AND WOULD NOT THUS BE APPLICABLE IN THE PRESENT CASE; THE BLOCK PERIOD EN DING ON 12.10.2000. THE MATTER HAS SINCE BEEN CLARIFIED BY THE HONBLE APEX COURT VIDE ITS DECISIONS IN THE CASE OF CIT V . SURESH N.GUPTA 297 ITR 322 (SC) AND CIT VS. RAJIV BHATARA 310 ITR 105 (SC); HOLDING THE PROVISO TO SECTION 113 TO BE CLARIFICATORY AND CURATIVE IN NATURE SO THAT IT WOULD THUS BE APPLICABLE TO ALL ASSESSMENTS MADE UN DER CHAPTER XIV-B AS PER THE RATES SPECIFIED IN THE RELEVANT FINANCE ACT I.E. THAT A PPLICABLE TO THE DATE OF SEARCH. THERE IS WE OBSERVE NO DISPUTE WITH REGARD TO THE RATE OF TH E SURCHARGE WHICH IN ANY CASE IS ONLY A MATTER OF RECORD BUT ONLY WITH REGARD TO ITS APPLI CABILITY. THE ISSUE THUS STANDS RESOLVED IN FAVOUR OF THE REVENUE. 7. IN THE RESULT THE ASSESSEES APPEAL IS DISMISSE D AND THE REVENUES APPEAL IS ALLOWED. SD/- SD /- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 5TH OCTOBER 2010 GJ COPY TO: 1. SHRI C.I. DEVASSIKUTTY CHEMMANNUR HOUSE AVENU E ROAD THRISSUR. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTR AL CIRCLE THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I KOC HI 4. THE COMMISSIONER OF INCOME-TAX CENTRAL KOCHI. 5. D.R./I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) IT(SS)A.NOS. 23& 33/COCH/2004 16 * AS SUCH FIRSTLY THERE IS NO CONFIRMATION FROM THE BALANCE 15 PERSONS (OUT OF THE TOTAL 56 DEPOSITORS). THE SAME IS A STANDARD LANGU AGE REPRODUCED HEREUNDER AS A SPECIMEN. * AS APPARENT THE SAME SANS ANY DETAILS OF THE GOLD DEPOSITED AND THUS CARRIES WITH IT A NUMBER OF ISSUES IMPINGING ON ITS VALIDITY AS REPRE SENTING A TRUE AND BONA FIDE TRANSACTION. WE HAVE ALREADY MENTIONED THAT ITS NO T UNDERSTANDABLE AS TO HOW IN THE BUSINESS OF ANY UNDERLINED RECORD COULD THE SAID DE TAILS BE COLLATED AND FURNISHED IN THE FIRST PLACE. THE ISSUE IS NOT OF IT BEING CUSTOMARY OR NOT; THE SAME DEFINITELY MAKES BUSINESS SENSE BUT OF IT BEING COMPLETELY INEVIDENCED WHICH IS ALL THE MORE SURPRISING CONSIDERING IT TO BE A PART OF CUSTOM. THAT BEING SO THERE IS NO RE ASON THAT A GOLDSMITH JOINING THE WORKFORCE OF THE ASSESSEE WOULD DEMAND EVEN AS TH E JEWELLER IS OBLIGED TO FURNISH A RECEIPT WHICH WOULD IN FACT STATE ITS CURRENT VALUE AND BASED ON THE CORRECT VALUE AS THEY COULD BE ALSO VALUED APART FROM THE GOLD CONTENT P URITY OF WHICH WOULD AGAIN VARY FROM TIME TO TIME. IN FACT THE GOLDSMITH WOULD ONLY HA VE REALISED HIS GOLD FROM SOME OTHER JEWELLER WITH WHOM HE WAS PREVIOUSLY WORKING AND WI TH WHOM THE CUSTOMARY DEPOSITS WOULD HAVE BEEN MADE. ALSO FURTHER WE SEE NO REA SON FOR THE ASSESSEE NOT FURNISHING N THE SAID RECEIPT RATHER WOULD ALSO PRESERVE A COPY THEREOF FOR HIS OWN RECORDS BY RECORDING IT IN A SEPARATE LEDGER/REGISTER. AS SAY THE SECURITY REGISTER. THIS WOULD APART FROM REMOVING AN AMBIGUITY IN THE MATTER ALSO SERV E AS A GUIDE AS TO THE VALUE FOR WHICH GOLD IS TO BE REALISED FOR WORKING TO THE GOLDSMITH S. EVEN SO WHY IT BE UNACCOUNTED AND THE ASSESSEE INFACT WOULD TAKE PRECAUTION IN RESPE CT THEREOF AS HE WOULD TAKE IN RESPECT OF IT OWN STOCK I.E. WITH REGARD TO THE TRANSPORT ATION AND SAFETY MEASURES INCLUDING INSURANCE. WOULD NOT THAT ALSO FOLLOW AS A STATEME NT OR AS A PART OF A SOUND BUSINESS PRACTICE. EVEN IF THE ASSESSEE AND FOR WHICH CON SENT OF THE DEPOSITOR IS ESSENTIAL SPEAKS OF MODERNISING THE SECURITY SO THAT IT COULD BY FO RMING PART OF IT WORKING CAPITAL BE CONVERTED INTO A PRODUCTION ASSET THE SAME WOULD R EQUIRE THE CONSENT OF THE DEPOSITOR. THAT WOULD ALSO REQUIRE THE ASSESSEE TO BRING THE S AME IN ITS RECORD. * AS ALSO GOING BY THE LD. CIT(A) THE SAME APAR T FROM BEING A PART OF THE RECORD AND IT WOULD HAVE THE BENEFIT OF SERVING AS A CHECK AGAINS T ANY MALPRACTICE BY EITHER PARTY SERVES TO BE INSISTED UPON AS IT COULD REPRESENT TH E LONG TIME SAVINGS OF THE DEPOSITORS. THEN AGAIN THERE IS A QUESTION OF AS WHAT IS THE NEED OR THE NECESSITY FOR RECORDING THE IT(SS)A.NOS. 23& 33/COCH/2004 17 TRANSACTIONS IN COURTS WHICH ASPECT OF THE MATTER WE SHALL DEAL WITH IN SOME DETAIL SEPARATELY. * ONE IS AT A LOSS TO UNDERSTAND HOW THE ASSES SEE FURNISHED THE DETAILS OF GOLD DEPOSITS IN THE ABSENCE OF SUCH UNDERLINED RECORDS. A RECEIP T IS A PRIMARY DOCUMENT EVIDENCING THE GOLD DEPOSITS. HOW ELSE WOULD THE PERSONS LODG E A CLAIM FOR THE RELEASE BACK OF HIS GOLD; THE GOLD ISSUED TO HIM BEING WELL-EVIDENCED B Y THE MATERIAL ISSUE SLIPS PER WHICH THE GOLD IS RELEASED TO THE GOLDSMITHS FOR WORK. (1) NO EVIDENCE WHATSOEVER IN RELATION TO THE ACCEP TANCE OF DEPOSITS STOOD FOUND AT THE TIME OF SEARCH. AGREEABLY THOUGH (2) IS IT THAT THE ASSESSEE THEREBY WISHES TO EXH IBIT THE CUSTOM OF ACCEPTANCE OF THE GOLD DEPOSITS IN THE JEWELLERY BUSINESS? EVEN SO THE SA ME COULD BE MUCH MORE EFFECTIVELY AND POSITIVELY ACHIEVED BY ADDUCING DIRECT EVIDENCES B EING FROM THE PERSONS CONCERNED RATHER THAN BY RELYING ON THE EVIDENCE QUA ANOTHER CONCERN EVEN THOUGH THE SAME HAPPENS TO BE AN ASSOCIATE CONCERN.