R.T. Moter Pvt. Ltd.,, v. DCIT, CC-19,,

ITSSA 257/DEL/2005 | misc
Pronouncement Date: 12-03-2010 | Result: Dismissed

Appeal Details

RSA Number 25720116 RSA 2005
Assessee PAN IONOF8600O
Bench Delhi
Appeal Number ITSSA 257/DEL/2005
Duration Of Justice 4 year(s) 9 month(s) 24 day(s)
Appellant R.T. Moter Pvt. Ltd.,,
Respondent DCIT, CC-19,,
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 12-03-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 12-03-2010
Date Of Final Hearing 18-02-2010
Next Hearing Date 18-02-2010
Assessment Year misc
Appeal Filed On 18-05-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H DELHI BEFORE SHRI K.G. BANSAL AND SHRI GEORGE MATHAN IT(SS) A. NO. 255(DEL)/2005 BLOCK PERIOD : 01.04.1996 TO 19.09.2002 SHRI KULWANT SINGH DE PUTY COMMISSIONER OF A-1/150 JANAKPURI VS. INC OME-TAX CENTRAL CIRCLE-19 NEW DELHI. NEW DELHI. IT(SS) A. NO. 304(DEL)/2005 BLOCK PERIOD : 01.04.1996 TO 19.09.2002 DEPUTY COMMISSIONER OF INCOME SHRI KULWA NT SINGH TAX CENTRAL CIRCLE-19 VS. A- 1/150 JANAKPURI NEW DELHI. NEW DELHI. CROSS OBJECTION NO. 100(DEL)/2007 (ARISING OUT OF IT(SS) A. NO. 304(DEL)/2005) BLOCK PERIOD : 01.04.1996 TO 19.09.2002 SHRI KULWANT SINGH DE PUTY COMMISSIONER OF A-1/150 JANAKPURI VS. INC OME-TAX CENTRAL CIRCLE-19 NEW DELHI. NEW DELHI. IT(SS) A. NO. 257(DEL)/2005 BLOCK PERIOD : 01.04.1996 TO 19.09.2002 R.T.MOTORS PVT. LTD. DE PUTY COMMISSIONER OF C-44 HARI NAGAR VS. IN COME-TAX CENTRAL CIRCLE-19 GHANTAGHAR NEW DELHI. NEW D ELHI. CONTD. PAGE 2 IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 2 IT(SS) A. NO. 270(DEL)/2005 BLOCK PERIOD : 01.04.1996 TO 19.09.2002 DEPUTY COMMISSIONER OF INCOME R.T.MOTOR S PVT. LTD. TAX CENTRAL CIRCLE-19 VS. C -44 HARI NAGAR NEW DELHI. GHANTAGHAR NEW DELHI. CROSS OBJECTION NO. 138(DEL)/2007 (ARISING OUT OF IT(SS) A. NO. 270(DEL)/2005) BLOCK PERIOD : 01.04.1996 TO 19.09.2002 R.T.MOTORS PVT. LTD. D EPUTY COMMISSIONER OF C-44 HARI NAGAR VS. IN COME-TAX CENTRAL CIRCLE-19 GHANTAGHAR NEW DELHI. NEW D ELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.S. KOHLI C.A. DEPARTMENT BY: SHRI V.K. TIWARI CIT DR ORDER PER K.G.BANSAL : AM THESE APPEALS CROSS APPEALS AND CROSS OBJEC TIONS PERTAINING TO A GROUP WHICH MAY BE TERMED AS KULWANT SINGH GROUP WERE ARGUED IN A CONSOLIDATED MANNER BY THE LD. COUNSEL FO R THE ASSESSEE AND THE LD. DR. THEREFORE A COMMON ORDER IS PASSED. IT(SS) APPEAL NO. 255(DEL)/2005- APPEAL OF THE ASSESSEE. 2. THE ASSESSEE HAD TAKEN UP 8 GROUNDS IN THI S APPEAL WHICH WERE SUBSEQUENTLY REVISED TO 7 GROUNDS. THE LD. C OUNSEL DISCUSSED THE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 3 APPEAL WITH REFERENCE TO THE REVISED GROUND S AND THEREFORE THE APPEAL IS DISPOSED OFF ON THE BASIS OF THE REVISED GROUNDS. 3. THE LD. COUNSEL FURNISHED A BRIEF BACKGROUN D OF THE CASE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DRAFT-D ISCOUNTING AND OTHER ALLIED TRANSACTIONS. A SEARCH AND SEIZURE OPE RATION U/S 132 OF THE INCOME-TAX ACT 1961 WAS CARRIED OUT AT HIS R ESIDENCE ON 19.9.2002. THEREAFTER PROCEEDINGS FOR DETERMINATION OF THE UNDISCLOSED INCOME FOR THE PERIOD 1.4.1996 TO 19.9.2002 WERE INITIAT ED. THESE PROCEEDINGS WERE COMPLETED ON 29.9.2004 DETERMINING THE UNDISCLOSED INCOME AT RS. 2 32 84 835/-. AGGRIEVED BY THIS ORDER APPEAL WAS FILED BEFORE THE CIT(APPEALS)-III NEW DELHI. THIS APPEAL BEAR ING NO. 227/2004-05 WAS DISPOSED OFF ON 31.3.2005. IN THIS ORDER U NDISCLOSED INCOMES OF THREE INDIVIDUALS SHRI GURDEEP SINGH SHRI RAJI NDER SINGH AND SHRI TRILOK SINGH AND TWO COMPANIES R.T. MOTORS SPA RES (P) LTD. AND RAJDEEP VEHICLE SPARES PVT. LTD. WERE HELD TO BE ASSESSABLE IN THE HANDS OF THE ASSESSEE FOR VARIOUS REASONS. IN VIE W OF THE FACTORS THAT THE RATE OF TAX LEVIABLE ON UNDISCLOSED INCOME IS SAME FOR ALL PERSONS AND THE ASSOCIATES OF THE ASSESSEE PREFERRED TO CONTEST THE MATTER IN A CONSOLIDATED MANNER THE ASSESSEE AGREED FOR CLUBBING THE UNDISCLOSED IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 4 INCOME OF THE AFORESAID ASSOCIATES ASSESSED B Y THE AO ON A PROTECTIVE BASIS IN HIS OWN HANDS. WITH THESE REMARKS THE LD. COUNSEL PROCEEDED TO DISCUSS VARIOUS GROUNDS. 4. GROUND NO. 1 IS THAT THE LD. CIT(APPEALS) RE DUCED THE RATE OF COMMISSION EARNED BY THE ASSESSEE IN RESPECT O F ACCOMMODATION-ENTRIES BUSINESS FROM 4% TO 0.75% AND THE AGGREGATE AMO UNT INVOLVED IN THE ENTRIES. BUT THE RATE FIXED BY HIM IS ON THE HIGHER SIDE. THE REASON IS THAT THE ASSESSEE ENTERED INTO SUCH TRANSA CTIONS AT PAR ONLY TO PROCURE BUSINESS OF DRAFT-DISCOUNTING FROM THE C LIENTS. IT IS MENTIONED THAT WITHOUT PREJUDICE TO THE AFORESAID ARGUMEN T THE LD. CIT(APPEALS) ADMITTED THAT COMMISSION IN THIS LINE OF BUSIN ESS VARIES BETWEEN 0.5% TO 1%. THEREFORE KEEPING IN VIEW THE HIGH V OLUME OF TRANSACTIONS IN HIS BUSINESS HE SHOULD HAVE APPLIED A LOWER -END RATE OF 0.5%. IT IS FURTHER MENTIONED THAT BY ACCOMMODATING THE A SSOCIATES THE PROFIT RATE AS CONFIRMED BY THE CIT(APPEALS) WAS OF THE HIGH ER SIDE. 4.1 IN THIS CONNECTION THE LD. COUNSEL DREW OUR ATTENTION TO THE DISCUSSION IN PARAGRAPH 4.7 OF THE ASSESSMENT W HERE IT IS INTER-ALIA MENTIONED THAT IN ORDER TO QUANTIFY THE AMOUNT INVOLVED IN THE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 5 ACCOMMODATION BILLS INFORMATION WAS COLLECTED FROM THE SALES-TAX DEPARTMENT ABOUT THE TURNOVER. THIS INFORMATION IN RESPECT OF ALL THE PERSONS WHOSE INCOMES WERE ASSESSED IN THE HA NDS OF THE ASSESSEE WAS TABULATED ON PAGE 11. ON THE BASIS OF THE CONTE NTS OF THE TABLE THE UNDISCLOSED INCOME FOR VARIOUS YEARS WAS COMPU TED @ 4% OF THE TURNOVER. THE RATE OF PROFIT OF 4% WAS ADOPTED ON THE BASIS OF THE STATEMENT OF SHRI JAGPREET SINGH RECORDED ON OAT H U/S 132. THE UNDISCLOSED INCOME OF THE ASSESSEE WAS COMPUTED AT RS. 86 15 633/- FROM THIS BUSINESS. THE DETAILS OF COMPUTATION ARE AS UNDER:- S. NO. F.Y. TOTAL TURNOVER (RS.) COMMISSION (RS.) (I) 1996-97 5 71 54 230/- 22 86 169/- (II) 1997-98 3 75 94 151/- 15 03 766/- (III) 1998-99 3 05 33 867/- 12 21 354/- (IV) 1999-00 2 45 80 299/- 9 83 211/- (V) 2000-01 1 54 95 556/- 6 19 822/- (VI) 2001-02 1 77 73 073/- 7 10 923/- (VII) 2002-03 3 22 59 693/- 12 90 388/- TOTAL: 21 53 90 869/- 86 15 633/- 4.2 FURTHER HE REFERRED TO THE FINDING OF THE L D. CIT(APPEALS) IN THIS MATTER RECORDED IN PARAGRAPH 4.10 ON PAGE 17. IT IS MENTIONED THAT THE AO APPLIED THE RATE OF 4% ON THE BASIS OF S TATEMENT OF SHRI JAGPREET SINGH RECORDED ON 19.9.2002. IT WAS SUBMI TTED BEFORE HIM THAT THE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 6 STATEMENT OF SHRI JAGPREET SINGH WAS MIS-READ BY THE AO. THE INTENT OF HIS DEPOSITION WAS THAT HE USED TO CHARGE 4% COMMISSION AGAINST C FORM. THIS STATEMENT WAS TWISTED BY TH E AO TO ESTIMATE COMMISSION INCOME AT 4% IN RESPECT OF ACCOMMODAT ION-ENTRY BUSINESS. THE LD. CIT(A) FOUND SUBSTANCE IN THIS ARGUMENT AS IT WAS BORNE OUT FROM FACTS ON RECORD THAT SHRI JAGPREET SINGH NEVER STATED THAT HE WAS CHARGING 4% COMMISSION. IT WAS FURTHER MEN TIONED THAT IT IS A MATTER OF COMMON KNOWLEDGE THAT ACCOMMODATION BILLS ARE ISSUED ON CONSIDERATION RANGING BETWEEN 0.5% TO 1% OF TH E BILL AMOUNT. IN THESE CIRCUMSTANCES IT WAS HELD THAT THE UNDISCLOSED INCOME OF THE ASSESSEE SHOULD BE ASSESSED AT 0.75% OF THE BILL AMOUNT BEING THE MEAN OF THE AFORESAID RANGE OF RATE OF PROFIT. 4.3 COMING TO THE ARGUMENTS IT WAS SUBMITTED THAT SHRI JAGPREET SINGH HAD NEVER STATED THAT THE COMMISSION INCOME FROM ACCOMMODATION- ENTRY BUSINESS WAS ABOUT 4% OF THE TURNOVER. OUR ATTENTION WAS DRAWN TO PAGE 33 OF THE PAPER BOOK. IN ANSWER TO QUESTION NO. 14 IT WAS DEPOSED THAT THE BILL BOOK WAS GIVEN TO HIM BY SHRI SANJAY PROPRIETOR OF PARAS ENTERPRISES AND DAVENDER OF SKYLINE METALS (P) LTD. THE BILLS WERE PREPARED BY HIM AND PERTAINED TO HIS FRIENDS. THE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 7 TRADERS HAVE THE GOODS BUT THEY TAKE THE BILLS FROM US AND THEREFORE WE SUPPLY THE BILLS. WE RECEIVE 4% OF THE BI LL AMOUNT AGAINST C FORM. WE DO NOT SAVE ANYTHING IN SUCH TRANSACT IONS. IT WAS ARGUED THAT THIS STATEMENT VERY CLEARLY LEADS TO AN INFERENCE THAT THE PROFIT IN ACCOMMODATION-ENTRY BUSINESS IS NOT 4% AND AS A MATTER OF FACT THE DEPOSITION LEADS TO AN INFERENCE THAT THERE IS NO PROFIT IN CASES OF C FORM TRANSACTIONS AS CENTRAL SALES-TAX IS LEVIA BLE @ 4%. OUR ATTENTION WAS ALSO DRAWN TO THE FINDINGS OF THE LD. CIT(A PPEALS) IN CASE OF R.T. MOTORS (P) LTD. IN THIS MATTER. IT WAS RECORDED ON PAGE 5 THAT THE STATEMENT OF SHRI JAGPREET SINGH SHOULD NOT BE BLINDLY FOLLOWED. IT IS A WELL KNOWN FACT THAT THE COMMISSION IN CASE OF ACCOMMODATION BILL VARIES BETWEEN 0.5% TO 1% OF THE BILL AMOUNT A ND THEREFORE IT WILL BE REASONABLE TO ASSESS THE INCOME OF THE ASSESSE E AT 0.75% OF THE BILL AMOUNT. THIS ORDER HAS BEEN PLACED IN THE PAPE R BOOK ON PAGES 121 TO 130. 4.4 IT WAS FURTHER ARGUED THAT THE ASSESSMENT IN THE CASE OF THE ASSESSEE SHOULD HAVE BEEN MADE AT A LOWER RA TE OF 0.5%. IN THIS CONNECTION IT WAS SUBMITTED THAT UNDISCLOSED INCOMES OF FIVE OTHER PERSONS WERE INCLUDED IN THE HANDS OF THE ASSESS EE. ALL OTHER PERSONS IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 8 EXCEPT R.T.MOTORS (P) LTD. ACCEPTED THE ORDER. HOWEVER R.T.MOTORS (P) LTD. HAS FILED APPEAL AGAINST THE ORDER OF T HE LD. CIT(APPEALS). SINCE THESE FIVE PERSONS WERE THE ASSOCIATES OF THE ASSESSEE SOME EXPENDITURE WOULD HAVE BEEN INCURRED BY WAY OF S ALARY OR ALLOWANCE PAID TO THEM WHICH WOULD GO TO SUPPRESS THE UNDI SCLOSED INCOME OF THE ASSESSEE. 4.5 COMING TO THE LEGAL ISSUES THE LD. COUNSEL DREW OUR ATTENTION TO THE PROVISION CONTAINED IN SECTION 158B(B) AND CON TENDED THAT UNDISCLOSED INCOME CAN BE DETERMINED ONLY IF SOME EVIDENCE IN RESPECT THERETO IS FOUND IN THE COURSE OF SEARCH. FURTHER OUR ATT ENTION WAS DRAWN TOWARDS THE PROVISION CONTAINED IN SECTION 158B(A) WHICH DEFINES BLOCK PERIOD WHOSE INCOME IS TO BE DETERMINED TO MEAN THE PREVIOUS YEARS RELEVANT TO SIX ASSESSMENT YEARS PRECEDING THE PREVIOUS YEAR IN WHICH SEARCH ETC. WAS CONDUCTED AND ALSO INCLUDES THE PER IOD UP TO THE DATE OF COMMENCEMENT OF SEARCH ETC. IT WAS SUBMITTED THAT THE SEARCH WAS CONDUCTED ON 19.9.2002. THEREFORE THE BLOCK P ERIOD WAS MADE UP OF THE PERIOD FROM 1.4.1996 TO 19.9.2002. HOWEVER THE AO COMPUTED THE INCOME FOR THE PERIOD 1.4.1996 TO 31.3.2003. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 9 4.6 IT WAS ALSO ARGUED THAT IN ABSENCE OF ANY SEARCH MATERIAL FOUND REGARDING THE BUSINESS OF ACCOMMODATION ENTRIES NO UNDISCLOSED INCOME COULD BE DETERMINED IN RESPECT THEREOF. IN THIS CONNECTION RELIANCE WAS PLACED ON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAVI KANT JAIN (2001) 250 ITR 141 IN WHICH IT WAS HELD THAT IN THE CASE AT HAND UNDISCLOSED INCOME IS NOT ON THE BASIS OF ANY SEARCH MATERIAL BUT ON THE BASIS OF CHANGE O F OPINION PARTICULARLY ON THE BASIS OF REPORT OF THE SPECIAL AUDITORS WHO HAD GIVEN A DIFFERENT COLOUR TO THE EXISTING FACTS WHICH STOOD AS SESSED BY THE INCOME-TAX AUTHORITIES IN EARLIER ASSESSMENT YEARS. TH E TRIBUNAL WAS JUSTIFIED IN ITS VIEW THAT THE UNDISCLOSED INCOME WAS NOT DETERMINED ON THE BASIS OF ANY SEARCH MATERIAL. THE INEVITABLE CONCLUSION IS THAT NO SUBSTANTIAL QUESTION OF LAW AROSE FROM THE FINDING OF THE TRIBUNAL. FURTHER RELIANCE WAS PLACED ON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. VS. STANDARD BRANDS LTD. (2006) 285 ITR 295. THE FACTS OF THE CASE ARE THAT THE ASSESSEE REC EIVED RS. 3.00 LAKH FROM M/S D.S. IMPORTS. THE AO WAS OF THE VIEW THAT THI S AMOUNT REPRESENTED UNDISCLOSED INCOME OF THE ASSESSEE. THE LD. CI T(APPEALS) WAS OF THE VIEW THAT THE AMOUNT COULD NOT BE ASSESSED U/ S 158BC AND AT BEST THE AO COULD HAVE TAKEN ACTION U/S 147. THE TRI BUNAL UPHELD THE ORDER OF IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 10 THE CIT(APPEALS) AND MENTIONED THAT THE INCOME WA S OUTSIDE THE SCOPE OF UNDISCLOSED INCOME DEFINED U/S 158B(B). THE ARGUMENT OF THE LD. COUNSEL FOR THE REVENUE BEFORE THE HIGH COURT W AS THAT THE RECEIPT BEING IN CASH WAS IN VIOLATION OF PROVISION C ONTAINED IN SECTION 269SS. THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT SINCE THE BLOCK ASSESSMENT COULD NOT BE SUSTA INED PENAL ACTION MAY BE PERMITTED ONLY AFTER A REGULAR ASSESSMENT IS MADE. THE HONBLE HIGH COURT CAME TO THE CONCLUSION THAT NO QUESTION O F LAW AROSE FROM THE ORDER OF THE TRIBUNAL. IN A NUTSHELL THE ARGU MENTS OF THE LD. COUNSEL WERE THAT -(I) UNDISCLOSED INCOME COULD BE DETERMINED ONLY IF SOME INCRIMINATING EVIDENCE IS FOUND IN THE COURSE OF SEARCH; AND (II) ALTHOUGH ESTIMATE OF UNDISCLOSED INCOME COULD BE MADE S UCH AN ESTIMATE CANNOT BE AN ARBITRARY ONE. 4.7 IN REPLY THE LD. DR RELIED ON THE ORDER OF F BENCH OF DELHI TRIBUNAL IN THE CASE OF SUBHASH CHAND CHOPRA VS. A CIT (2005) 92 TTJ 1087 IN WHICH IT WAS HELD THAT ASSESSMENT OF UNDISCLOSED INCOME CAN BE MADE WHERE THE SEARCH MATERIAL REVEALS THAT B OOKS OF ACCOUNT WERE NOT RELIABLE AND PROPER INCOME OF THE ASSESSEE COU LD NOT BE DEDUCTED THEREFROM. THE AO COULD ALSO RESORT TO PROVISIO N CONTAINED IN SECTION IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 11 145 IN DOING SO. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. C.J. S HAH & COMPANY (2000) 246 ITR 671 IN WHICH IT WAS HELD THAT IN A CASE WHERE MATERIAL IS DETECTED AFTER SEARCH AND SEIZURE OPERATIONS ARE CARRIED OUT THE AO IS REQUIRED TO DETERMINE THE UNDISCLOSED INCOME. IN SUCH CASES ADDITIONS ARE GENERALLY BASED ON ESTIMATES. HOWEVER IT DOES NOT MEAN THAT THE AO CAN ARRIVE AT ANY FIGURE WITHOUT ANY BASI S. THEREFORE IT WAS HELD THAT THE DELETION OF THE ADDITION OF RS. 3.40 CRORE BY THE TRIBUNAL BEING BASED ON FACTS WAS JUSTIFIED. NO SUBSTANTI AL QUESTION OF LAW AROSE FROM SUCH AN ORDER. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V S. DR. M.K.E. MENON (2001) 248 ITR 310. IN THAT CASE IT WAS FOU ND IN THE COURSE OF SEARCH THAT FEES RECORDED IN THE REGISTRATION BOOK WAS MORE THAN THE FEES RECORDED IN THE CASH BOOK. THE ASSESSEE OFFER ED UNDISCLOSED INCOME OF RS. 75.60 LAKH FOR TAXATION. THE AO COMPUTED T HE UNDISCLOSED INCOME AT RS. 2.33 CRORE. IT WAS HELD THAT THE UNDIS CLOSED INCOME COULD NOT BE ESTIMATED ON AN ARBITRARY BASIS AND THE TRIBUNA L WAS RIGHT IN CONCLUDING THAT THE AO HAD ADOPTED AN ARBITRAR Y METHOD IN ESTIMATING THE UNDISCLOSED INCOME. IN THIS CASE THE DECISION OF HONBLE SUPREME IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 12 COURT IN THE CASE OF CST VS. H.M. ESUFALI H.M. ABDULALI (1973) 90 ITR 271 WAS ALSO REFERRED TO. 4.8 IT WAS SUBMITTED THAT THE STATEMENTS FURNIS HED BY THE ASSOCIATED PERSONS WERE RELIABLE AND SUCH STATEMENTS F ORMED THE BASIS THAT INCOME OF NATURAL PERSONS AND CORPORATE ENTIT IES FOR TAXATION IN THE HANDS OF THE ASSESSEE. THEREFORE SUCH INCLUSI ON WAS JUSTIFIED AND EVEN THE ASSESSEE HAS NOT OBJECTED TO IT BEFORE THE TRIBUNAL. RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF H.M. ESUFALI H.M. ABDULALI IT WAS CONTENDED THAT THE INCOME COULD BE ESTIMATED ON A FAIR BASIS. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 AND SUMATI DAYAL VS. CIT (1995) 214 ITR 801 FOR CONTENDING THAT SURROUNDING CIRCUMSTANCES COULD BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF DETERMINING THE UNDISCLOSED INCOME O F THE ASSESSEE IN RESPECT OF THIS BUSINESS. 4.9 WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. THE FIRST QUESTION WHICH ARISES IN THIS CA SE IS WHETHER UNDISCLOSED INCOME COULD AT ALL BE COMPUTED IN THIS CASE? THE CASE OF THE LD. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 13 COUNSEL IS THAT THE AO DID NOT REFER TO ANY DOCUMENT FOUND IN THE COURSE OF SEARCH REGARDING ACCOMMODATION ENT RY BUSINESS AND THUS NO SUCH INCOME COULD BE DETERMINED. THE CASE OF TH E LD. DR IS THAT BACKGROUND LEADING TO SEARCH AND RECORDING OF STATEMENTS OF VARIOUS PERSONS INCLUDING THE ASSESSEE CLEARLY SHOW TH AT THE ASSESSEE WAS CARRYING ON THE BUSINESS OF ACCOMMODATION EN TRIES NOT ONLY IN HIS OWN NAME BUT ALSO IN THE NAME OF OTHER PERSONS. HAV ING CONSIDERED THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE ASSESS EE HAS TO SUCCEED ON THIS ISSUE. THE AO HAS REFERRED TO THE SEIZED M ATERIAL AT VARIOUS PLACES IN HIS ORDER. IN PARAGRAPH 4 ON PAGE 4 IT IS ME NTIONED THAT SEIZED MATERIAL CONTAINS SEVERAL CASH AND DRAFT TRANSACTIONS ON LOOSE PAPERS. THE EXPLANATION OF THE ASSESSEE WAS THAT THEY RELAT E TO DISCOUNTING OF DRAFTS AND CHEQUES AND FROM WHICH HE DERIVED COMMIS SION INCOME. ON PAGE 6 IN PARAGRAPH 4.2 IT IS MENTIONED THAT FOUR NOTE BOOKS CONTAINING DETAILS OF RECEIPT AND PAYMENT OF CASH DRAFT AND LEDGER ACCOUNT OF SHRI KULWANT SINGH WERE FOUND AND SEIZED FROM THE R ESIDENCE OF SHRI SANJAY SHARMA. THE EXPLANATION OF SHRI SHARMA WAS THA T WHENEVER CASH WAS RECEIVED FROM DIFFERENT PARTIES INCLUDING THE ASSESSEE THE SAME WAS DEPOSITED IN DIFFERENT BANK ACCOUNTS AND ALSO GI VEN TO OTHER PARTIES AS PER INSTRUCTION OF THE ASSESSEE. ON PAGE 7 IN PARAGRAPH 4.4 IT IS IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 14 MENTIONED THAT BLANK LETTER-HEADS OF M/S R.S. EN TERPRISES BLANK CHEQUES SIGNED BY SHRI TRILOK SINGH PROPRIETOR OF M/S G .T.MOTORS; PHOTOCOPY OF SALES-TAX REGISTRATION OF M/S EKTA ENTERPRISES PROPRIETOR SHRI GURDEEP SINGH; LOOSE PAPERS SHOWING DETAILS OF PURCHAS ES FROM RAUNAQ AUTOMATIVE BY M/S G.T. MOTORS STORES M/S EKTA EN TERPRISES AND M/S PREET TRADERS AND DEPOSIT SLIPS OF R.T. MOTORS (P) LTD. WERE FOUND FROM THE RESIDENCE OF THE ASSESSEE. THE CASE OF THE LD. COUNSEL IS THAT ALL THESE PAPERS PERTAIN TO CHEQUE AND DRAFT D ISCOUNTING. HOWEVER THE CASE OF THE LD. DR IS THAT THIS COULD ONLY BE CLA RIFIED IN THE COURSE OF ASSESSMENT PROCEEDINGS. WE ARE OF THE VIEW THAT THE SEIZURE OF THESE AND OTHER DOCUMENTS AND ALSO STATEMENTS OF ASSOCIAT ED PERSONS FAIRLY LEAD TO THE CONCLUSION THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS OF CHEQUE AND DRAFT DISCOUNTING WHICH WAS NOT HITHERTO D ISCLOSED TO THE REVENUE. HOWEVER THE EVIDENCE DOES NOT CONTAIN ANY M ATERIAL TO SHOW THAT THE ASSESSEE WAS CARRYING ON ACCOMMODATION-ENTRY BU SINESS IN A CLANDESTINE MANNER. IN THE COURSE OF HEARING THE BENCH SPECIFICALLY REQUESTED THE LD. DR TO SHOW ANY MATERIAL FOUND IN THE COURSE OF SEARCH. HE WAS NOT ABLE TO SHOW ANY SUCH MATERIAL. HOWEVER HE R ELIED ON THE ORDERS OF LOWER AUTHORITIES FOR THIS PURPOSE. IN THE CIRCUM STANCE IT IS HELD THAT THE SEARCH DID NOT YIELD ANY INCRIMINATING MATERIAL. HAVING COME TO THE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 15 CONCLUSION THAT THE SEIZED MATERIAL DID NOT LEAD TO DISCOVERY OF ANY INCRIMINATING MATERIAL IN RESPECT OF ACCOMMODAT ION-ENTRY BUSINESS IT FOLLOWS FROM THE PROVISION CONTAINED IN SECTION 158B(B) AND THE CASE OF RAVI KANT JAIN (SUPRA) THAT UNDISCLOSED INCOME COULD NOT HAVE BEEN COMPUTED FROM THIS BUSINESS MERELY ON INFORMA TION RECEIVED FROM SALES-TAX DEPARTMENT ABOUT THE TURNOVER. THIS MATTER FALLS IN THE REALM OF ASSESSMENT OR RE-ASSESSMENT AND REVENUE WIL L BE AT LIBERTY TO PROCEED AS PER LAW. 4.10 THE SECOND QUESTION IN THIS CASE IS-WHETHE R THE UNDISCLOSED TURNOVER HAS BEEN WORKED OUT ON A PROPER BASIS OR NOT? WE MAY CONSIDER THIS QUESTION NOTWITHSTANDING THE F INDING GIVEN IN PARAGRAPH 4.9 (SUPRA). WE FIND THAT THE AO MADE ENQUIRY WITH THE SALES-TAX DEPARTMENT AND ESTIMATED THE UNDISCLOSED INCOME OF SIX CONCERNS ON THE BASIS OF TURNOVER DISCLOSED TO THE SALES-TAX DEP ARTMENT. SUCH INCOME WAS DETERMINED UP TO 31.03.2003. SUCH INCOME OUGHT TO HAVE BEEN DETERMINED ONLY UP TO 19.9.2002. AS DISCUSSED E ARLIER THE AFORESAID CONCLUSION IS BASED UPON THE DEFINITION OF BLOC K PERIOD FURNISHED IN SECTION 158B(A) WHICH MEANS THAT THE FIGURE M ENTIONED IN THE TABLE IN IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 16 RESPECT OF FINANCIAL YEAR 2002-03 WILL HAVE TO BE CHANGED TO TAKE THE TURNOVER ONLY UP TO 19.9.2002. 4.11 THE THIRD QUESTION IS-WHETHER THE INCOME HAS BEEN PROPERLY DETERMINED BY THE LD. CIT(APPEALS) AT 0.5% OF THE TOTAL TURNOVER? THE CASE OF THE LD. COUNSEL IS THAT THE LD. CIT(APP EALS) HIMSELF STATED THAT THE INCOME IN THIS BUSINESS VARIES BETWEEN 0. 5% TO1% OF THE TOTAL BILL AMOUNT. HE TOOK THE INCOME AT 0.75% BEING THE MEAN OF 0.5% AND 1%. THE CASE OF THE LD. COUNSEL IS THAT THE LD. CIT(APPEALS) CONFIRMED THE FINDING OF THE LOWER AUTHORITY THAT INCOMES OF OTHER PERSONS WERE RIGHTLY INCLUDED IN THE INCOME OF THE ASSESSEE. SOME EXPENDITURE WOULD HAVE BEEN INCURRED ON THESE PERSONS WHICH MAY BE EITHER CALLED SALARY OR COMMISSION. NO DEDUCTION HAS BEEN GIVEN IN RES PECT OF SUCH EXPENDITURE. THE OTHER ARGUMENT IS THAT INSTEA D OF TAKING THE MEAN OF 0.5% AND 1% HE SHOULD HAVE TAKEN THE INCOM E ON THE LOWER SIDE AT 0.5% BECAUSE OF LARGE TURNOVER OF THE ASSESSEE. AS AGAINST THE AFORESAID THE CASE OF THE LD. DR IS THAT THE LD. CIT(APP EALS) ERRED IN REDUCING THE INCOME FROM 4% TO 0.5%. THIS ISSUE HAS BEEN T AKEN IN THE CROSS-APPEAL ALSO. IT IS HIS CONTENTION THAT THE AO HAD RI GHTLY TAKEN THE INCOME AT 4% OF THE TURNOVER BY RELYING ON THE STATEMENT OF SHRI JAGPREET SINGH AN IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 17 ASSOCIATE OF THE ASSESSEE AND WHO WAS DOING THE SAME BUSINESS. AS AGAINST THE AFORESAID THE CASE OF THE LD. C OUNSEL IS THAT THE AO MISREAD THE STATEMENT OF SHRI JAGPREET SINGH AS IT WAS NOT IN RELATION TO ACCOMMODATION-ENTRY BUSINESS BUT DRAFT-DISCOUNT ING BUSINESS. WE HAVE CONSIDERED THIS MATTER CAREFULLY. THE RELEVANT PORTION OF THE STATEMENT OF SHRI JAGPREET SINGH IS CONTAINED ON PAGE 33 WHICH CAN BE TRANSLATED TO THE EFFECT THAT THE TRADERS HAVE THE GOOD S BUT THEY TAKE THE BILL FROM US. WE CHARGE 4% OF THE BILL AMOUNT AGAINST C FORM. THUS WE DO NOT MAKE ANY PROFIT IN SUCH TRANSACTIONS. THE STATEMENT REGARDING ABSENCE OF PROFIT WAS POSSIBLY MADE ON AC COUNT OF THE FACT THAT CENTRAL SALES-TAX IS LEVIABLE @ 4% WHEN INTE R-STATE SALES ARE MADE AGAINST C FORM. THEREFORE IT CAN BE FAIRLY CONCLUDED FROM THE AFORESAID STATEMENT THAT THERE IS HARDLY ANY P ROFIT BECAUSE THE EXCESS AMOUNT OF 4% GETS SPENT BY WAY OF THE CENTRA L SALES-TAX PAYABLE BY THE DEALER. IN THIS SITUATION WE ARE UNABLE TO AGREE WITH THE LD. DR THAT THE FINDING OF THE A.O REQUIRES TO BE RESTORED. COMING TO THE ARGUMENTS OF THE LD. COUNSEL WE DO NOT FIND ANY FORCE IN THE CONTENTION THAT THE PROFIT SHOULD BE ASSESSED AT A LOWER RATE B ECAUSE OF HIGH TURNOVER THE REASON BEING THAT THE BUSINESS WAS CARRIED ON IN DIFFERENT NAMES. NO EVIDENCE EXISTS ON RECORD THAT THE TURNOVER O F THE ASSESSEE IN EACH IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 18 ENTITY WAS MORE THAN WHAT HAS BEEN STATED BY THE LD. CIT(APPEALS) LEADING TO DEPRESSION IN THE RATE OF PROFIT. H OWEVER THERE IS SOME FORCE IN THE ARGUMENT THAT SINCE INCOMES OF THREE N ATURAL PERSONS AND TWO CORPORATE ENTITIES HAVE ALSO BEEN INCLUDED IN THE INCOME OF THE ASSESSEE SOME DISCOUNT SHOULD BE GIVEN IN RESPECT OF EXPENSES INCURRED BY THE ASSESSEE ON THEM WHICH MAY BE EITHER TERMED AS SALARY PAID TO THEM OR COMMISSION PAID TO THEM. BUT THERE IS NO R ELIABLE DATA BEFORE US FOR DECIDING THE DEDUCTION TO BE GIVEN IN THIS BEHALF . LOOKING TO OVERALL FACTS A SORT OF AD-HOC DEDUCTION SEEMS TO BE JUSTIFI ED FROM THE RATE APPLIED BY THE LD. CIT(APPEALS). WE ARE OF THE VIEW THAT TH E COMPUTATION OF INCOME AT 0.65% OF THE TURNOVER AS AGAINST 0.75% DET ERMINED BY THE LD. CIT(APPEALS) WILL MEET THE ENDS OF JUSTICE IN TH IS CASE. 4.12 IN A NUTSHELL THE AO OUGHT TO HAVE COMPUTED TURNOVER BY TAKING THE BLOCK PERIOD TO BE FROM 01.04.1996 TO 19.09 .2002 AND COMPUTED THE NET INCOME IN RESPECT OF ACCOMMODATION ENTRY BUS INESS AT 0.65% OF THE TURNOVER SO DETERMINED. 4.13 LOOKING TO OUR FINDING IN PARAGRAPH 4.9 (SUP RA) GROUND NO. 1 IS ALLOWED. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 19 5. GROUND NO. 2 IS THAT THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN DETERMINING THE COMMISSION IN RESPECT OF DRAFT-D ISCOUNTING BUSINESS AT 0.3%. IT IS MENTIONED THAT AFTER ADMITTING TH AT EXPENSES LIKE BANK CHARGES SALARY CONVEYANCE RENT ETC. WER E INCURRED NO DEDUCTION WAS GIVEN IN ARRIVING AT THE RATE OF 0.3%. 5.1 THE LD. COUNSEL DREW OUR ATTENTION TO PARAG RAPH 4.8 OF THE ASSESSMENT ORDER IN WHICH IT IS MENTIONED THAT I N THE COURSE OF SEARCH SHRI JAGPREET SINGH DEPOSED THAT THE INCOME FROM DRAFT-DISCOUNTING BUSINESS AMOUNTED TO RS. 50/- PER RS. 10 000/- ( I.E. 0.50% OF THE AMOUNT). IN ORDER TO ASCERTAIN THE VOLUME OF BUS INESS CONDUCTED BANK STATEMENTS WERE OBTAINED IN RESPECT OF VARIOU S ENTITIES. THE SUMMARY OF THE BUSINESS CONDUCTED BY VARIOUS PERSONS I NCLUDING THE ASSESSEE HAS BEEN FURNISHED ON PAGE 13 OF THE ASSESSMENT ORD ER. ON THE BASIS OF THE STATEMENT OF SHRI JAGPREET SINGH THE INCOME FROM THIS BUSINESS WAS COMPUTED FOR VARIOUS YEARS @ 0.5% OF THE AMOUN T INVOLVED IN DRAFTS; AND THE AGGREGATE OF UNDISCLOSED INCOME ON THI S BASIS FOR VARIOUS YEARS AMOUNTED TO RS. 26 58 263/-. THE DETAILS REG ARDING THE VOLUME OF BUSINESS AND UNDISCLOSED INCOME ARE REPRODUCED OVERLEAF FOR READY REFERENCE:- IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 20 YEAR-WISE SUMMARY OF TRANSACTIONS RELATED TO D RAFT-DISCOUNTING S. NO. F.Y. PERSONAL PREET TRADERS EKTA ENTERPRISES G.T. MOTOR R.S. ENTERPRISES R.T. MOTOR RAJDEEP MOTOR (I) 96- 97 946584 3561756 108530380 46037517 NIL NIL NIL (II) 97- 98 722614 5638196 63436430 29312532 NIL NIL NIL (III) 98- 99 717427 6495862 35751164 12672455 NIL NIL NIL (IV) 99- 00 851349 2031670 23131627 7148186 NIL NIL NIL (V) 00- 01 469326 1145850 17744971 4545117 8341122 7748 4045757 (VI) 01- 02 56047 3004500 24554822 4511841 59846279 17846699 21212506 VII) 02- 03 NIL NIL 1829496 3110969 4954200 5534653 1905000 TOTAL 3763347 21877834 274978890 107338617 73141601 23389100 27163263 YEAR-WISE CONCEALED COMMISSION INCOME FROM DRAFT- DISCOUNTING S.NO. FINANCIAL YEAR TOTAL DRAFTS DEPOSITED INTO BANK ACCOUNTS COMMISSION @ 0.5% AS DISCUSSED ABOVE. (I) 1996-97 15 90 76 237 7 95 381 (II) 1997-98 9 91 09 772 4 95 549 (III) 1998-99 5 56 36 908 2 78 185 (IV) 1999-00 3 31 62 832 1 65 814 (V) 2000-01 3 62 99 891 1 81 499 (VI) 2001-02 13 10 32 694 6 55 163 (VII) 2002-03 1 73 34 318 86 672 TOTAL: 53 16 52 652 26 58 263 5.2 FURTHER HE DREW OUR ATTENTION TO PARAGR APH 5.4 OF THE ORDER OF THE LD. CIT(APPEALS) IN WHICH IT IS MENTIONED TH AT SHRI JAGPREET SINGH DEPOSED TO THE EFFECT THAT COMMISSION WAS CHAR GED RANGING BETWEEN 0.35% TO 0.50% OF THE DRAFT/CHEQUE AMOUNT. IT I S FURTHER MENTIONED THAT THERE WAS FORCE IN THE ARGUMENTS OF THE AS SESSEE THAT THE TOTAL DEPOSITS ASCERTAINED BY THE AO REQUIRED TO BE REDUCED BY SALES AMOUNT IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 21 WHICH STANDS CONSIDERED WHILE WORKING OUT UNDIS CLOSED INCOME. IT IS ALSO MENTIONED THAT THE GROSS RECEIPTS CANNOT BE TAKEN TO BE THE INCOME OF THE ASSESSEE AS EXPENSES LIKE BANK CHARGE S SALARY CONVEYANCE RENT ETC. ARE REQUIRED TO BE REDUCED FROM THE GR OSS RECEIPTS. THEREFORE IT WAS HELD THAT IT WOULD BE FAIR AND REASONABLE TO COMPUTE THE INCOME FROM THIS BUSINESS AT 0.30% OF THE AGGREGATE AMOUNT INVOLVED IN THE DRAFTS AND CHEQUES. 5.3 THE LD. COUNSEL SUPPORTED THE ORDER OF THE L D. CIT(A) FOR GRANTING DEDUCTION OF THE EXPENDITURE BY RELYING ON T HE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V S. BALCHAND AJIT KUMAR (2003) 263 ITR 610 AND HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES (2000) 258 I TR 654. HOWEVER HIS CASE WAS THAT THE ESTIMATION OF INCOME AT 0.30% OF THE TURNOVER WAS ON THE HIGHER SIDE. IT WAS SUBMITTED THAT THIS I SSUE HAS BEEN CONSIDERED BY H BENCH OF DELHI TRIBUNAL IN THE CASE OF IND ERBEER SINGH IN IT(SS) APPEAL NO. 303(DEL)/2005 DATED 30.04.2007 A C OPY OF WHICH HAS BEEN PLACED BEFORE US. IN THIS ORDER THE NET INCOME WAS ESTIMATED AT 0.1742%. FOR THE SAKE OF READY REFERENCE P ARAGRAPHS 3 AND 3.1 OF THAT ORDER ARE REPRODUCED OVERLEAF:- IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 22 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AN D RIVAL SUBMISSIONS. THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE OUT A FAIRLY GOOD CASE THAT THE ASSESSEES CASE CA NNOT BE COMPARED WITH OTHER CASES FOR THE REASON THAT THE ASS ESSEE WAS ENGAGED PURELY IN BANK DRAFT DISCOUNTING ACTIVITY AND THEREFORE IN ORDER TO INCREASE HIS PROFITS HE WAS CHARGING LOWER COMMISSION. IT IS ALSO CLEAR THAT GROSS COMMISSION CANNOT BE BR OUGHT TO TAX AS WHAT IS LIABLE TO BE TAXED UNDER CHAPTER XIV-B IS THE INCOME WHICH HAS NOT BEEN DISCLOSED OR WHICH WOULD NOT BE DISCLOSED FOR THE PURPOSES OF THE ACT. THERE IS A VITAL DIFFE RENCE BETWEEN GROSS RECEIPTS AND INCOME WHICH HAS TO BE RECOGNIZED I N THIS CASE ALSO. THE ASSESSEE HAD DEPOSED DURING THE COURSE OF SEARCH THAT HE WAS CHARGING COMMISSION @ RS. 25/- PER RS. 10 000/-. THIS STATEMENT HAS TO BE BELIEVED IN ABSENCE OF ANY EVIDENCE T O THE CONTRARY. NO EVIDENCE TO THE CONTRARY HAS BEEN FURNISHED IN THE CASE OF THE ASSESSEE. THEREFORE IT IS CLEAR THAT BY CITING OTHER INSTANCES WITHOUT PROVING THAT THOSE ASSESSEES WERE SIMIL ARLY SITUATED WITH THE ASSESSEE COMMISSION OF MORE THAN RS. 25/- PER RS.10 000/- CANNOT BE TAKEN IN THE HANDS OF THE ASSESSEE. 3.1 COMING TO THE DEDUCTION OF EXPENSES NO ARGU MENT HAD BEEN MADE BY THE LEARNED DR AGAINST THE CLAIM OF SALA RIES OF FOUR PERSONS AMOUNTING TO RS. 2 35 500/-. THEREFORE IT IS HELD THAT THIS EXPENDITURE WILL HAVE TO BE ALLOWED TO THE ASSE SSEE IN COMPUTING THE PROFIT. THE OTHER EXPENSES REGARDING CHAR GES FOR EARLY ENCASHMENT OF THE DEMAND DRAFTS AND DEMAND DRAFT S MAKING CHARGES HAVE BEEN WORKED OUT ON ESTIMATED BAS IS. IT IS SEEN THAT THE ASSESSEE HAD FURNISHED EVIDENCE REGARDING PAYMENT OF BANK CHARGES AMOUNTING TO RS. 18 147/- IN RESPECT OF EARLY ENCASHMENT AND RS. 14 448/- IN RESPECT OF OBTAINING BANK D RAFTS. IT IS SEEN THAT IN THE FIRST CASE INSTANCES OF AMOUNTS AS L OW AS RS. 24/- AND RS. 71/- HAVE BEEN NARRATED AND IN THE LATTER CASE INSTANCES OF AMOUNTS AS LOW AS RS. 100/- RS. 200/- AND RS. 400/- HAVE BEEN MENTIONED. LOOKING TO THESE FACTORS WE ARE UNABLE TO UN DERSTAND AS TO WHY THE ASSESSEE COULD NOT GIVE COMPLETE DETAILS O F SUCH EXPENSES TO THE ASSESSING OFFICER OR TO US. IN ABSENCE THE REOF WE HOLD THAT THE EXPENSES FOR COMMISSION AMOUNTED TO RS. 32 595/- (R S. 18 147/- PLUS RS. 14 448/-). THUS THE INCOME AFTER ALLOWING COMMISSION AND SALARY WORKS OUT TO RS. 6 81 522/-. BASED UPON THESE FIGURES WE ARE OF THE VIEW THAT ON THE FACTS AND IN THE CIR CUMSTANCES OF THE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 23 CASE INCOME FROM THIS ACTIVITY AT RS. 6 82 000/ - WILL BE JUSTIFIED AGAINST THE INCOME OF RS. 11 74 090/- COMPUTED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(APPEALS) . 5.4 IT WAS ARGUED THAT THE ASSESSEE HAD CON DUCTED LARGE VOLUME OF BUSINESS. THE UNDISCLOSED INCOMES OF THREE PERSON S AND TWO CORPORATE ENTITIES WERE ALSO INCLUDED IN THE CASE OF THE ASSESSEE. AT THE TIME OF SEARCH NO WORTHWHILE ASSET WAS FOUND IN POSS ESSION OF THE ASSESSEE. THEREFORE THERE IS NO CASE FOR MAKING ASSESSME NT OF ANY UNDISCLOSED INCOME ON THIS GROUND ALSO. IN THIS CONNECTIO N RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CA SE OF CIT VS. SMT. P.K. NOORJAHAN (1999) 237 ITR 570. IN THAT CASE THE TRIBUNAL HAD TAKEN THE VIEW THAT ALTHOUGH THE EXPLANATION OF THE ASSESSEE WAS LIABLE TO BE REJECTED SECTION 69 OF THE ACT CONFERRED A DISCRETION ON THE INCOME-TAX OFFICER TO DEAL WITH THE INVESTMENTS AS INCOME OF THE ASSESSEE AND IT DID NOT MAKE IT MANDATORY ON HIS PART TO DEAL WITH THE INVESTMENT AS INCOME AS SOON AS THE EXPLANATION WAS REJECTED. LO OKING TO THE CIRCUMSTANCES A FINDING WAS GIVEN THAT IT WAS NOT POSSIBLE FOR HER TO EARN THE AMOUNT INVESTED IN THE PROPERTIES AND BY NO STRETCH OF IMAGINATION SHE COULD BE TREATED WITH HAVING EARNED THE INCOME IN THE RELEVANT YEAR OR EVEN IN A DECADE OR MORE. THEREFORE THE TRIBUNAL DEL ETED THE ADDITION MADE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 24 BY THE AO. THE HONBLE SUPREME COURT MENTIONED TH AT THE TRIBUNAL HAD GIVEN A CLEAR FINDING THAT DISCRETION VESTED IN THE LOWER AUTHORITIES WAS NOT PROPERLY EXERCISED HAVING REGARD TO T HE FACTS OF THE CASE. THUS THE COURT AGREED WITH THE VIEW OF THE TR IBUNAL AND IT DID NOT FIND ANY ERROR IN THE FINDING RECORDED BY THE TRI BUNAL. ON THE BASIS OF THIS CASE IT WAS MADE OUT THAT SINCE NO WORTHWHILE ASSET WAS FOUND FROM THE ASSESSEE HE COULD NOT HAVE EARNED INCOME A S COMPUTED BY THE LD. CIT(A). IT WAS ALSO SUBMITTED THAT THE INCOME DECLARED BY THE ASSESSEE IN ASSESSMENT YEAR 2003-04 WAS ACCEPTED AS IT IS IN AN ASSESSMENT MADE U/S 143(3) ALBEIT AFTER INCLUDING THE INCO MES OF S/SHRI RAJINDER SINGH GURDEEP SINGH & TRILOK SINGH AS SEEN FR OM PAGES 38 TO 40 OF THE PAPER BOOK. THE INCOME IN THE CASE OF SH RI INDERBEER SINGH KOHLI WAS ALSO ACCEPTED AS IT IS FOR ASSESSMENT YEAR 2003-04 WHO DECLARED THE INCOME AT 0.08% AS SEEN FROM PAGE 54 OF TH E PAPER BOOK. THEREFORE IT WAS AGITATED THAT THE INCOME OF THE ASSESSE E MAY BE ASSESSED AT 0.10% OF THE TOTAL TURNOVER IN THIS BUSINESS. 5.5 IN REPLY THE LD. DR SUBMITTED THAT THE LD. CIT(A) ERRED IN REDUCING THE NET INCOME FROM 0.50% TO 0.30%. T HE REVENUE HAS TAKEN A GROUND IN THIS BEHALF IN ITS CROSS APPEAL. IT WAS HOWEVER IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 25 MENTIONED THAT THE INCOME IN THE CASE OF SHRI INDERBEER SINGH HAS BEEN ASSESSED AT 0.1742% IN ORDER (SUPRA). HOWEV ER HIS CASE WAS THAT THE FACTS OF THAT CASE ARE DISTINGUISHABLE. 5.6 WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. THE AO HAD ASSESSED THE INCOME FROM THIS BUSINESS AT 0.50%. THE LD. CIT(A) MADE TWO MODIFICATIONS TO THE AFORESAID ORDER NAMELY THAT (I) THE TURNOVER IN THE BUSINESS MAY BE REDUCED BY THE SALES AMOUNT WHICH ALREADY STOOD CONSIDERED WHILE WORKI NG OUT THE UNDISCLOSED INCOME; AND (II) THE NET INCOME MAY B E TAKEN AT 0.30% OF THE REDUCED TURNOVER. WE HAVE DELETED THE ADDITIO N MADE IN RESPECT OF UNDISCLOSED INCOME FROM THE BUSINESS OF AC COMMODATION-ENTRIES ON THE EXPRESS REPRESENTATION THAT NO EVIDENCE RE GARDING SUCH BUSINESS WAS FOUND IN THE COURSE OF SEARCH. THEREFORE IT FO LLOWS AUTOMATICALLY THAT NO REDUCTION CAN BE MADE IN THE TURNOVER IN R ESPECT OF THE TURNOVER OF ACCOMMODATION-ENTRIES BUSINESS. SUCH A FINDING CAN BE GIVEN AT THIS STAGE WHEN THE GROUND TAKEN BY THE REVENUE I S READ IN A WIDER SENSE WHICH IS TO THE EFFECT THAT THE LD. CIT(A) ERRED IN RESTRICTING THE CHARGE OF COMMISSION INCOME FROM DRAFT-DISCOUNTING BUSIN ESS FROM 0.50% TO 0.30%. IT IS ORDERED ACCORDINGLY. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 26 5.7 COMING TO THE FIXATION OF THE RATE OF NET INCO ME IT MAY BE MENTIONED THAT THE FACTS OF THE CASE OF SHRI INDERBEER SINGH ARE DISTINGUISHABLE AS SEEN FROM THE ORDER OF THE T RIBUNAL IN THAT CASE. IT WAS ARGUED IN THAT CASE THAT ITS FACTS WERE DISTINGUISHABLE FROM THE OTHER CASES FOR THE REASON THAT HE WAS ENG AGED PURELY IN DRAFT- DISCOUNTING BUSINESS AND WITH A VIEW TO INCRE ASE HIS PROFIT HE WAS CHARGING LOWER COMMISSION. ACCORDING TO HIS DEPOSITION HE WAS CHARGING COMMISSION @ 0.25%. EVIDENCE IN HIS CASE SHOWED PAYMENT OF SALARIES TO FOUR PERSONS BANK CHARGES AND EARLY ENCASHMENT CHARGES. THE COMMISSION AND THE SALARY WAS DEDUCTED WHIL E ARRIVING AT THE NET PROFIT. NO SUCH EVIDENCE HAS BEEN LED BY THE LD. COUNSEL IN THIS CASE. IT IS NO DOUBT TRUE THAT THE INCOMES OF THR EE NATURAL PERSONS AND TWO CORPORATE ENTITIES HAVE BEEN INCLUDED IN THE INCO ME OF THE ASSESSEE. THUS SOME EXPENDITURE WOULD HAVE BEEN INCURRED IN RESPECT OF THE THREE NATURAL PERSONS. HOWEVER A PART OF SUCH EXPE NDITURE IS ALSO RELATABLE TO ACCOMMODATION-ENTRY BUSINESS AND THE WHOLE O F THE EXPENDITURE CANNOT BE ATTRIBUTED TO DRAFT-DISCOUNTING BUS INESS. THEREFORE WE ARE OF THE VIEW THAT THE FINDINGS IN THE CASE OF SHRI INDERBEER SINGH (SUPRA) CANNOT BE APPLIED MECHANICALLY TO THE FACTS OF THIS CASE. THE FACTS OF IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 27 THIS CASE ARE ALSO DISTINGUISHABLE FROM THE FACTS OF THE CASE OF P.K. NOORJAHAN (SUPRA). THAT WAS A CASE OF YOUNG LADY WHO SUBMITTED THAT THE AGRICULTURAL LANDS WERE ACQUIRED BY WAY OF A BEQUEST. THIS EXPLANATION WAS FOUND TO BE UNSUBSTANTIATED. HOW EVER OTHER EVIDENCES EXISTED ON RECORD TO SHOW THAT SHE COULD NOT HAVE EARNED THE INCOME PURPORTEDLY INVESTED IN PURCHASE OF AGRICULTURA L LAND IN THE YEAR UNDER QUESTION OR EVEN IN A DECADE. SUCH IS NOT TH E CASE HERE. IT IS A MATTER OF FACT ON RECORD THAT THE ASSESSEE HAS BEEN CA RRYING ON ACCOMMODATION- ENTRY AND CHEQUE/DRAFT-DISCOUNTING BUSINESSES F OR A NUMBER OF YEARS THE INCOME FROM WHICH WAS NOT DISCLOSED IN THE REGULAR COURSE. THE BANK ACCOUNT AND RETURNS BEFORE THE SALES-TAX AUTHO RITIES SUBSTANTIATE THE CONDUCT OF SUCH BUSINESSES. OBVIOUSLY THESE BUSINESSES WERE CONDUCTED CLANDESTINELY TO EARN INCOME. IN TH ESE CIRCUMSTANCES RECOVERY OF LIMITED ASSETS IN THE COURSE OF SE ARCH CANNOT BE THE BASIS FOR COMING TO THE CONCLUSION THAT THERE WAS NO UNDISCLOSED INCOME. AS WE SHALL SEE LATER THE ASSESSEE CARRIED ON THE BUSINESS OF MONEY- LENDING WHICH WAS ALSO NOT DISCLOSED TO THE R EVENUE. THEREFORE WE ARE NOT IN A POSITION TO AGREE WITH THE LD. CO UNSEL THAT NO UNDISCLOSED INCOME BE COMPUTED IN RESPECT OF THIS ACTIVITY. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 28 5.8 THE LD. CIT(A) ESTIMATED THE GROSS INCOME ON THE BASIS OF THE STATEMENT OF SHRI JAGPREET SINGH AN ASSOCIATE BETWEEN 0.35% TO 0.50%. AFTER GIVING DISCOUNT FOR EXPENDITURE HE COM PUTED THE NET INCOME AT 0.30%OF THE TURNOVER. WE ARE AWARE THAT SOME EXPENDITURE WOULD HAVE BEEN INCURRED IN RESPECT OF THREE NATURAL PER SONS WHICH CAN BE ATTRIBUTED TO THIS BUSINESS. THEREFORE WE ARE OF THE VIEW THAT THE ESTIMATE OF THE RATE OF NET INCOME AT 0.20% OF THE TURN OVER WORKED OUT BY THE AO SHALL BE FAIR AND JUST. ACCORDINGLY THIS GROU ND IS PARTLY ALLOWED. 6. GROUND NO. 3 IS THAT THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 51.00 LAKH AS UNEXPLAINED INVESTMENT MERELY BY RELYING ON LOOSE PAPERS WHICH DID N OT CONTAIN ANY NARRATION TO ESTABLISH THE NATURE OF TRANSACTIONS. 6.1 GROUND NO. 4 IS THAT THE LD. CIT(APPEALS) W AS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 21.50 LAKH AS INTEREST ON UNEXPLAINED INVESTMENTS. IT IS MENTIONED THAT PAGE 39 OF THE SEIZED MATERIAL WAS HELD TO CONTAIN THE NOTING REGARDING INTEREST FROM 15.10.1998 TO 15.8.1999. THIS PAGE INDICATES AN AMOUNT OF RS. 20.30 AND IN THIS VIEW HOW COULD THE INTEREST BE DETERMINED AT RS. 2 1.50 LAKH. FURTHER PAGE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 29 41 DOES NOT INDICATE 21.50 LAKH ANYWHERE AS IT INDICATES ONLY 2150. THUS HUGE ADDITIONS WERE SUSTAINED WITHOUT P LACING ANY DOCUMENTARY EVIDENCE ON RECORD IN RESPECT OF INTEREST. 6.2 GROUND NO. 5 IS THAT THE LD. CIT(APPEALS) WA S NOT JUSTIFIED IN CONFIRMING THE INTEREST INCOME OF RS. 51 000/- AS THE CORRESPONDING AMOUNT OF LENDING AND THE PERIOD HAVE NOT BEEN ESTABLISHED. 7. IN REGARD TO THESE GROUNDS OUR ATTENTION WAS DRAWN TOWARDS PAGES 131 TO 137 OF THE PAPER BOOK BEING THE DOC UMENTS UNDER EXAMINATION LEADING TO THE ADDITIONS. PAGE 1 31 GIVES THE NARRATION OF TOTAL PETI AT 51 AND INTEREST FOR 10 MONTHS FOR THE PERIOD 15.10.98 TO 15.8.99 AT 20.30 LEADING THE TOTAL TO 71.30. PAGE 132 GIVES THE BREAK- UP OF 51 PETIES AT 24 20 AND 7. THE BREAK-UP O F 24 PETI AGAINST THE NAME OF D.K. IS GIVEN AS 10 PETI 10 PETI AND 4 PETI MAKING THE TOTAL AT 24. AGAINST THIS BREAK-UP OF 24 THERE ARE T HREE NARRATIONS OF 5 6 AND 6 WITH A FIGURE OF 134 BELOW THIS FURTHER BREA K-UP. THERE IS ANOTHER NARRATION OF 27 PETI WITH 3-81 BELOW 134 A ND 381 THERE IS A FIGURE OF 215. PAGE 133 CONTAINS THE BREAK-UP OF 51 PETI AS 20 10 10 4 AND 7. AGAINST THESE FIGURES 3 5 6 6 AND 3 ARE MEN TIONED. AGAINST THESE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 30 FIGURES 600 600 500 240 210 HAVE BEEN MENTIO NED WHICH HAVE BEEN TOTALED TO 2150. PAGE 134 GIVES CERTAIN CALCUL ATION ABOUT SALES-TAX STARTING WITH BALANCE OF 51000 ON 15.10.98. TH ERE IS AN ADDITION OF 8600 ON 15.10.98 TAKING THE TOTAL TO 59600. T HERE IS A DEDUCTION OF 500 ON 15.12.98 REDUCING THE TOTAL TO 59100. THER E IS AN ADDITION OF 2150 ON 15.3.99 TAKING THE TOTAL TO 61250. THERE IS A FURTHER NARRATION OF 61250 ON 15.3.99 TO WHICH 2150 IS ADDED TO ARR IVE AT 63400/-. PAGE 135 MENTIONS THAT INTEREST ACCOUNT IS CLEAR UP TO 15.10.98 WITH TOTAL AMOUNT AT 51000.00. PAGE 136 STARTS WITH A FIGUR E OF 2400000. TO THIS AN AMOUNT OF 720000 IS ADDED IN RESPECT OF 24 PET I AT 3% IN RESPECT OF D.R. TAKING THE TOTAL TO 3120000. BELOW THIS NARRATIO N THERE IS MENTION OF 20 PETI WITH THE NAME OF M.SINGH WITH AN AMOUNT OF 2000000 TO WHICH 500000 IS ADDED BEING 2.50% FOR 10 MONTHS TAK ING THE TOTAL TO 25 00 000. BELOW THIS NARRATION THERE IS A MENT ION OF K.SINGH 7 PETI AND 700000 IS ADDED TO 2500000 TAKING THE TOTA L TO 3200000. THERE IS A DEDUCTION OF 3000000 IN RESPECT OF PLOT LEAVING THE BALANCE AT 200000. PAGE 137 IS IN RESPECT OF SOHAN LAL JI WITH TOTA L AT 40 PETI INTEREST AT 110 TAX AT 105 FORM AT 10. THE ACCOUNT SHOWS 42 PETI 25 THOUSAND TO BE PAID ON THE BASIS OF ACCOUNT TAKEN ON 1.8.98. THERE IS ALSO NARRATION OF 20-3 10-5 10-6 ON THE RIGHT SIDE OF 40 PETI. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 31 7.1 IT WAS SUBMITTED THAT THE AO CONSIDERED TH ESE PAPERS TO BE IN RELATION TO LOANS GIVEN BY THE ASSESSEE TO THREE PERSONS. THEREFORE PRINCIPAL AMOUNT OF 51.00 LAKH AND TWO INTEREST AMOUNTS OF RS. 21.50 LAKH AND 0.51 LAKH WERE ADDED TO THE UNDISCLO SED INCOME. OUR ATTENTION WAS DRAWN TOWARDS PAGE 34 OF THE ORD ER OF THE LD. CIT(APPEALS) WHERE THE ADDITION MADE BY THE AO WAS CONFIR MED BY RELYING ON THE STATEMENT OF SHRI D.K. GOYAL. FOR THE SAKE OF RE ADY REFERENCE THE FINDINGS OF THE LD. CIT(APPEALS) CONTAINED IN P ARAGRAPH 7.11 ON PAGE 34 OF ORDER ARE REPRODUCED BELOW:- 7.11 IT IS SEEN THAT ONE PERSON NAMELY SHR I DEVENDER KUMAR GOYAL WHOSE NAME APPEARS IN ONE OF THE SEIZED P APERS CATEGORICALLY STATED THAT HE USED TO TAKE LO ANS FOR BUSINESS PURPOSES @ 2% TO 3% PER MONTH FROM SHRI KULWANT SINGH FROM TIME TO TIME. FOR SECURING SUCH LOANS HE HAD BEEN PLEDGING BLANK CHEQUES DULY SIGNED DRAWN ON STATE BAN K OF MYSORE. HE ALSO SATED THAT MAXIMUM AMOUNT OF LOAN AT ONE P OINT OF TIME WITH SHRI KULWANT WAS RS. 30 LACS. WITH REGARD TO BLANK CHEQUES ALSO SHRI GOYAL ADMITTED THAT THESE PERTAIN TO HIM. THE PRESUMPTION U/S 132(4A) HAS BEEN RIGHTLY DRAWN BY THE AO AGAINST THE ASSESSEE. IT WAS FOR THE ASSESSEE TO P ROVE THAT APPARENT IS NOT REAL. THE CONTENTS OF THE SEIZED PAPER S LEAVE NO DOUBT THAT THESE ENTRIES PERTAIN TO LOAN TRANSACTIONS AND THIS FURTHER STANDS CORROBORATED BY THE STATEMENT OF SHRI D.K. GOYAL. BEFORE THE AO IT WAS SUBMITTED THAT THESE TRANSACTI ONS RELATE TO SHRI SOHAN LAL WITH DEVENDER KUMAR GOYAL MOHINDER SING H AND KULWANT SINGH SACHDEVA. IT WAS FURTHER SUB MITTED BEFORE THE AO THAT THE ASSESSEE ACTED AS A MEDIATOR T O INTRODUCE THESE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 32 THREE PERSONS TO SHRI SOHAN LAL. HOWEVER SHRI DEVENDER KUMAR GOYAL NEVER STATED THAT THESE TRANSACTIONS WERE WITH SHRI SOHAN LAL. ALSO THE AO HAD ASKED THE ASSESSEE TO PRODUCE THESE THREE PERSONS BEFORE HIM WHICH WAS NEVER DONE. I N VIEW OF THE REASONS GIVEN BY THE AO FOR MAKING THIS AD DITION I AM SATISFIED THAT HIS IS JUSTIFIED. THE ADDITION MADE BY HIM IS UPHELD. THE GROUND OF APPEAL IS DISMISSED. 7.2 IT WAS ARGUED THAT THESE TRANSACTIONS RE LATE TO LOAN HELD BY SHRI SOHAN LAL WITH THESE THREE PERSONS AND THE ASSES SEE HAD ACTED ONLY AS MEDIATOR FOR WHICH HE GOT COMMISSION @ 1% OF TH E VALUE OF THE TRANSACTION. IT WAS FURTHER ARGUED THAT THE ST ATEMENT OF SHRI D.K.GOYAL THAT HE HAD TAKEN INTEREST-BEARING LOAN FROM THE ASSESSEE AND PAID THE AMOUNT BY WAY OF CASH AND DRAFTS IS UNBELIEVAB LE. THEREFORE IT WAS REQUESTED TO THE AO THAT HE MAY BE SUMMONED U/S 131 IN THE PRESENCE OF THE ASSESSEE SO THAT RELEVANT FACTS SUCH AS T HE DATE OF LOAN REPAYMENT AND THE ACCOUNT IN WHICH DRAFTS HAVE BEEN DEP OSITED MAY BE VERIFIED. SUCH AN EXPLANATION WAS FURNISHED TO THE AO V IDE LETTER DATED 30.6.2004 AND THE RELEVANT PORTIONS ARE AVAILAB LE ON PAGES 173 AND 174 OF THE PAPER BOOK. THE AO DID NOT SUMMON SHRI D.K. GOYAL. THEREFORE HIS DEPOSITION MADE AT THE BACK OF THE ASSES SEE CANNOT BE RELIED UPON FOR THE PURPOSE OF MAKING ASSESSMENT OF THE UNDIS CLOSED INCOME. IN ORDER TO SUPPORT THE AFORESAID CONTENTION RELIANCE WAS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE C ASE OF CIT VS. SMC SHARE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 33 BROKERS LTD. (2007) 288 ITR 345. IN THAT CAS E THE FINDING OF THE TRIBUNAL WAS THAT THE AO WAS FUNCTIONING AS A QUASI-JUDICIAL AUTHORITY AND WAS UNDER AN OBLIGATION TO ADHERE TO THE PRINCIPLES OF NATURAL JUSTICE. SEVERAL REQUESTS WERE MADE BY THE ASSESSEE BUT MANOJ AGGARWAL WAS NOT MADE AVAILABLE FOR CROSS-EXA MINATION. IN ABSENCE OF THAT THE BLOCK ASSESSMENT WAS SET ASIDE. TH E HONBLE COURT MENTIONED THAT THERE IS NO DOUBT THAT THE STATEMENT OF M ANOJ AGGARWAL HAD EVIDENTIARY VALUE IN THE LIGHT OF THE DECISION O F BOMBAY HIGH COURT IN THE CASE OF ONE-UP SHARES AND STOCK BROKERS (P) LTD. VS.R.R. SINGH CIT (2003) 262 ITR 275 BUT WEIGHT COULD N OT BE GIVEN TO IT IN PROCEEDINGS AGAINST THE ASSESSEE WITHOUT IT BE ING TESTED UNDER CROSS- EXAMINATION. IT CANNOT BE SAID THAT IT SHOULD BE BELIEVED COMPLETELY TO THE PREJUDICE OF THE ASSESSEE. THUS IT WAS H ELD THAT THE TRIBUNAL WAS RIGHT IN ITS VIEW WHICH HAS ALREADY BEEN STA TED ABOVE. IN THIS VERY CONNECTION RELIANCE WAS ALSO PLACED ON THE D ECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SONA ELECTRIC CO. V S. CIT (1985) 152 ITR 507 IN WHICH IT WAS HELD THAT THE ABSENCE OF DATE ON THE BILL AND SURROUNDING CIRCUMSTANCES LEAD TO A CONCLUSION THAT THERE WAS NO EVIDENCE TO SHOW THAT THE ENTRIES MADE BY THE ASSESSEE IN ITS ACCOUNTS WERE WRONG. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 34 SUPREME COURT IN THE CASE OF KISHANCHAND CHELARA M (1980) 125 ITR 713 IN WHICH IT WAS HELD THAT SINCE OPPORTUN ITY WAS NOT GRANTED TO THE ASSESSEE TO CONTROVERT THE EVIDENCE FROM THE MANAGER OF THE BANK THROUGH WHICH THE MONEY WAS REMITTED NO ADVER SE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE AS THE BURDEN OF PR OOF WAS ON THE DEPARTMENT. 7.3 IT WAS FURTHER ARGUED THAT THERE WERE CONT RADICTIONS IN THE STATEMENT OF SHRI D.K. GOYAL WHICH RENDERED IT TO BE UNRELIABLE. IN THIS CONNECTION OUR ATTENTION WAS DRAWN TO THE ST ATEMENT PLACED IN THE PAPER BOOK ON PAGES 138 TO 153. IT WAS INTER-ALIA DEPOSED THAT THE BUSINESS OF M/S ISPAT CENTRE M/S AKG METALS (P) LTD. AN D M/S SKYLINK METALS (P) LTD. WAS DEALING IN IRON AND STEEL. THES E CONCERNS WERE ALSO ENGAGED IN DISCOUNTING BUSINESS THE RECEIPTS F ROM WHICH WERE CREDITED IN THE RESPECTIVE BANK ACCOUNTS. IT WAS FUR THER DEPOSED THAT HE KNEW THE ASSESSEE SINCE THE YEAR 1985 AS HE HAD B USINESS RELATIONS WITH HIM. HE USED TO TAKE LOANS FOR THE BUSINESS WITH INT EREST AT 2% TO 3% PER MONTH FOR WHICH BLANK CHEQUES DULY SIGNED BY HI M DRAWN ON STATE BANK OF MYSORE AND STATE BANK OF INDIA WERE HANDED OVER. AT A PARTICULAR POINT OF TIME THE LOAN TAKEN BY HIM FROM THE ASSESSEE WAS IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 35 RS. 30.00 LAKH WHICH WAS TAKEN IN CASH AS AL SO BY WAY OF DRAFTS. HE IDENTIFIED THE SIGNED AND BLANK CHEQUES PLEDGED WITH THE ASSESSEE PLACED AS SECURITY FOR LOANS. HOWEVER HE COULD NO T IDENTIFY THE LOANS AGAINST WHICH SUCH CHEQUES FOUND IN POSSESSION OF THE ASSESSEE WERE PLEDGED. HE ALSO IDENTIFIED PAGE NO. 2 OF ANNEXURE A-5 S EIZED FROM THE RESIDENCE OF SHRI JAGPREET SINGH WHICH BORE THE BANK AC COUNT NUMBER OF M/S AKG METALS (P) LTD.. HE IDENTIFIED THE QUESTION ED DOCUMENTS FOUND FROM THE POSSESSION OF THE ASSESSEE CONTAINING NA RRATIONS OF 10 PETI 10 PETI AND 4 PETI AGAINST DK WITH FURTHER NARRATI ON OF 5 6 AND 6 WITH THE TOTAL BEING AT 24 PETI AND THE OTHER AMOUNT BEI NG 134. HE ALSO IDENTIFIED ANOTHER DOCUMENT MAKING MENTION OF 24 PETI WI TH D.K. 3% BEING 72 000-10 AND THE TOTAL AMOUNT AT 3120000 BEIN G SUMS OF 24 00000 AND 720000. IT WAS DEPOSED THAT HE HAD TAKEN INT EREST-BEARING LOAN AT 3% FOR THE PURPOSE OF HIS BUSINESS. THE AFORESAID AMOUNT HAS BEEN PAID BY WAY OF CASH AND DRAFTS. THE DRAFTS WERE PU RCHASED IN CASH. HOWEVER NO AMOUNT WAS PAYABLE TO THE ASSESSEE ON THE D ATE OF RECORDING THE STATEMENT. THE BOOKS OF ACCOUNT WERE NOT MAINT AINED. HOWEVER HE COULD NOT IDENTIFY TWO OTHER PERSONS NAMELY S HRI M.SINGH AND SHRI K. SINGH NAMED IN THE QUESTIONED DOCUMENT. THE C ASE OF THE LD. COUNSEL WAS THAT WHEN THE WHOLE OF THE LIABILITY HAD BEEN DISCHARGED HOW COULD IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 36 THE ASSESSEE BE IN POSSESSION OF BLANK SIGNED CHEQUES ISSUED BY SHRI D.K. GOYAL. HE WAS NOT ABLE TO IDENTIFY TWO OTH ER PERSONS M. SINGH AND K. SINGH. IN ANSWER TO QUESTION NO. 6 IT WAS DEPOSED THAT HIS FIRMS WERE DOING THE BUSINESS OF TRADING IN IRON AND STEEL AND DISCOUNTING OF CHEQUES THE RECEIPTS OF WHICH WERE RECORDED IN THE BOOKS OF ACCOUNT. HOWEVER THIS STATEMENT WAS CONTRADICTED WHEN IT WAS DEPOSED THAT HE DOES NOT MAINTAIN BOOKS OF ACCOUNT IN ANSWE R RECORDED AT PAGE 147 OF THE PAPER BOOK. HE WAS SHOWN ONLY TWO PAPER S BEING PAGES 40 AND 44 OF ANNEXURE A-1 WHILE THERE WERE OTHER PAPERS ALSO WHICH WERE SEIZED FROM THE ASSESSEE. THUS A STATEMENT W HICH CONTAINS CONTRADICTIONS CANNOT FORM THE BASIS FOR MAKIN G THE ASSESSMENT MORE SO WHEN ITS VERACITY HAS NOT BEEN TESTED BY RECORDING THE STATEMENT IN PRESENCE OF THE ASSESSEE. 7.4 IT WAS ALSO ARGUED THAT THE ASSETS FOUND FROM THE ASSESSEE WOULD CLEARLY SHOW THAT HE DID NOT HAVE CAPACITY T O ADVANCE SUCH HUGE LOANS. THE CASE OF THE ASSESSEE HAS BEEN THAT HE WA S ONLY A MEDIATOR AND FOR HIS SERVICES HE GOT COMMISSION @ 1% OF THE VALUE OF THE TRANSACTION. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 37 7.5 OUR ATTENTION WAS ALSO DRAWN TO THE S TATEMENT OF SHRI SOHAN LAL RECORDED ON 11.10.2002 PLACED IN THE PAPER BOO K ON PAGES 148 TO 153. HE HAD INTER-ALIA DEPOSED THAT HE KNEW THE ASS ESSEE BUT HE HAD NEVER TAKEN OR GIVEN ANY LOAN TO HIM. IT WAS FU RTHER DEPOSED WHEN CONFRONTED WITH THE STATEMENT OF THE ASSESSEE THAT HE HAD NOT SOLD ANY STAMPING TO THE ASSESSEE NOR HE RECEIVED RS. 25 000/- FROM HIM. THE CASE OF THE LD. COUNSEL WAS THAT THE SEIZED PAP ERS WERE NOT SHOWN TO HIM AND THEREFORE THE PURPOSE OF RECORDING HIS STA TEMENT IS NOT CLEAR. OPPORTUNITY OF CROSS-EXAMINATION WAS ALSO NOT AL LOWED IN THIS CASE. THEREFORE IT WAS ARGUED THAT THIS STATEMENT CANNOT BE RELIED UPON. 7.6 THE LD. COUNSEL AGAIN REFERRED TO PAGES 40 TO 44 OF ANNEXURE A- 1 BEING PAGES 132 TO 136 OF THE PAPER BOOK AND SUBMITTED THAT NONE OF THESE PAPERS CONTAIN ANY DATE. HOWEVER HE DID NOT MAKE A MENTION OF PAGE 39 WHICH CONTAINS THE CALCULATION OF IN TEREST ON 51 PETI FOR THE PERIOD 15.10.1998 TO 15.8.1999 AT 20.30. HIS CASE WAS THAT IN ABSENCE OF ANY DATE THESE DOCUMENTS WERE OF NO CON SEQUENCE FOR DETERMINING UNDISCLOSED INCOME AS THE PERIOD OF INCOME CANNOT BE ASCERTAINED. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 38 7.7 IT WAS ALSO ARGUED THAT IT WOULD BE UNB ELIEVABLE THAT THE ASSESSEE ADVANCED SUCH HUGE LOANS BUT NO RE CEIPT ETC. WAS FOUND IN RESPECT OF THE LOANS OR REPAYMENT THEREOF. 7.8 IT WAS ALSO ARGUED THAT THE AO HAD GIVEN A FINDING IN PARAGRAPH 6.4 THAT THE ASSESSEE WAS ENGAGED IN THE BU SINESS OF MONEY-LENDING ON INTEREST TO VARIOUS PARTIES AND THE PEAK OF SUCH LENDING ON 15.10.1998 AMOUNTED TO RS. 51.00 LAKH. NO SUCH FINDING WAS GIVEN BY THE LD. CIT(APPEALS) AND REVENUE HAS ALSO NOT FILED APPE AL AGAINST HIS ORDER ON THIS ISSUE. IN ORDER TO SUPPORT THIS CONTENTI ON RELIANCE WAS PLACED ON THE DISCUSSION AT PAGE 30 OF THE ORDER OF CIT( A) WHICH FURNISHES THE SUBMISSIONS OF THE ASSESSEE TO THE EFFECT THAT THE AO HAD GIVEN THE SHAPE OF INTEREST-BEARING LOANS TO THE USUAL TRA NSACTIONS OF ENCASHMENT OR DISCOUNTING OF DRAFTS OR CHEQUES FOR WHICH THE FACILITY MIGHT HAVE BEEN PROVIDED TO SHRI D.K. GOYAL AND OTHERS. WE H OWEVER FIND THAT IN PARAGRAPH 7.11 OF THE ORDER OF FIRST APPELLATE AU THORITY THE LD. CIT(A) REFERRED TO THE PRESUMPTION U/S 132(4A) AND HELD THAT SUCH PRESUMPTION WAS RIGHTLY DRAWN BY THE AO AGAINST THE ASSES SEE. IT WAS FURTHER HELD THAT THE CONTENTS OF THE SEIZED PAPER LEAVE NO DOUBT THAT THESE ENTRIES PERTAIN TO LOAN TRANSACTIONS WHICH STAND CORROB ORATED BY THE STATEMENT IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 39 OF SHRI D.K. GOYAL. ACCORDINGLY THE ADDITIO N MADE BY THE AO WAS SUSTAINED. THE LD. COUNSEL ALSO FILED A COPY OF THE AFFIDAVIT OF THE ASSESSEE FILED BEFORE THE AO ON 20.9.2004 IN W HICH IT WAS INTER-ALIA DEPOSED THAT I ALWAYS ACTED AS A MEDIATOR BUT SOME WHERE IF IT HAS BEEN MISUNDERSTOOD DUE TO THE REASONS PARTLY THE DEPONENT IS NOT SO LITERATE AND PARTLY THE FACTUALS AND SENSE OF WORDS MIGHT NOT HAVE CLEARED TO ME OR MIGHT HAVE MISUNDERSTOOD BY ME THE WORDS DILVAYA MIGHT HAVE RECORDED AS DIYA THE DEPONENT H EREBY SOLEMNLY STATE THAT HE HAD ALWAYS ACTED AS A MEDIATOR AND HIS USUAL CHARGE OF COMMISSION USED TO BE 1% ON SALE AS WELL AS IN LOANS TRANSACTIONS. (UNQUOTE) . THE CASE OF THE LD. COUNSEL WAS TH AT THIS AFFIDAVIT CLARIFIES THE WHOLE SITUATION IN REGARD TO THE SEIZED DOC UMENTS. 7.9 OUR ATTENTION WAS DRAWN TO PAGE 19 OF T HE PAPER BOOK BEING THE STATEMENT OF THE ASSESSEE RECORDED U/S 131 ON 28.1.2003 IN WHICH IT WAS INTER-ALIA DEPOSED THAT THE TRANSACTIONS R ECORDED ON PAGES 132 AND 136 OF THE PAPER BOOK WERE IN RESPECT OF FAN ST AMPINGS UNDERTAKEN WITH SHRI SOHAN LAL DUA. IT WAS ARGUED THAT IN VIE W OF THIS STATEMENT EARLIER STATEMENT GIVEN ON 19.9.2000 BECAME I NFRUCTUOUS. RELIANCE WAS ALSO PLACED ON THE ORDER OF DELHI BENCH OF THE TRIBUNAL IN THE CASE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 40 OF AMARJIT SINGH BAKSHI (HUF) VS. ACIT (2003) 263 ITR (AT) 75. IN THAT CASE CERTAIN TRANSACTIONS WERE FOUND TO BE NOTED ON THE SLIP OF PAPER DISCOVERED IN THE COURSE OF SEARCH OF A THIRD PERSON. THERE WAS NO OTHER EVIDENCE TO PROVE THE GENUINENESS OF T HE NOTING. THE TRIBUNAL CAME TO THE CONCLUSION THAT NO ADDITION COULD B E MADE ON THE BASIS OF THESE ENTRIES IN COMPUTING UNDISCLOSED INCOME U/S 158BD OF THE ACT. RELIANCE WAS ALSO PLACED ON THE DECISION O F PATNA BENCH OF THE ITAT IN THE CASE OF D.N. KAMANI (HUF) VS. DY. CIT (2 000) 241 ITR (AT) 85. IN THAT CASE EVIDENCE WAS FOUND FROM ONE OF THE PURCHASERS OF A FLAT FROM A BUILDER REGARDING NON-PAYMENT OF ON-MONEY. THE TRIBUNAL HELD THAT THIS EVIDENCE WAS NOT SUFFIC IENT FOR RAISING A PRESUMPTION THAT SIMILAR AMOUNTS WERE RECEIVED IN RESPECT OF SALE OF OTHER FLATS IN SPITE OF THE FACT THAT ENQUIRY IN THE COURSE OF THE ASSESSMENT DID NOT SHOW THAT ANY SUCH MONEY WAS RECEIVED FROM OTHER 15 PURCHASERS. IT WAS ALSO THE CASE OF THE LD. COUNSEL THAT THE SEIZED PAPERS WERE NOT IN THE NATURE OF BOOKS OF ACCOUNT AND THEREFORE RELIANCE COULD NOT BE PLACED ON THEM FOR MAKING ADDITION IN ABSENCE OF CORROBORATIVE EVIDENCE REGARDING POSSESSION O F SUCH HUGE CASH BY THE ASSESSEE. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 41 7.10 IN REPLY THE LD. DR RELIED ON THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF DAYA CHAND VS. CIT (2001 ) 250 ITR 327 FOR SUPPORTING THE ACTION OF THE LOWER AUTHORITIE S. IN THAT CASE BOOKS OF ACCOUNT WERE SEIZED IN THE COURSE OF SEARCH WHICH CONTAINED CASH CREDITS. THE CREDITS WERE ADDED TO THE INCOME O F THE ASSESSEE BY INVOKING THE PRESUMPTION CONTAINED IN SECTION 132(4A). T HE HONBLE COURT HELD THAT THE REQUIREMENT OF SECTION 68 HAS TO BE FUL FILLED EVEN IN A CASE WHERE BOOKS WERE SEIZED IN THE COURSE OF SEAR CH AS PRESUMPTION U/S 132(4A) WAS AVAILABLE TO THE REVENUE AND IT WAS FOR THE ASSESSEE TO SATISFACTORILY EXPLAIN THE CREDITS MADE IN THE B OOKS OF ACCOUNT. HIS CASE WAS THAT THE ASSESSEE HAS TAKEN CONTRADICTORY S TANDS ON DIFFERENT TIMES AS CAN BE SEEN FROM THE CONTENTS OF THE AFFIDAV IT. IN SUCH A CIRCUMSTANCE THE REVENUE WAS JUSTIFIED IN RAISING THE PRES UMPTION. OTHERWISE THE CONTENTS OF THE PAPERS WERE QUITE CLEAR THAT T HEY REPRESENT LOAN TRANSACTIONS WITH STIPULATION FOR CHARGING OF IN TEREST. THE ASSESSEE HAS NOT SATISFACTORILY DISCHARGED THE ONUS CAST ON HIM. FURTHER RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF P.R. METRANI VS. CIT (2006) 157 TAXMAN 325 IN WHICH IT WAS HELD THAT THE PRESUMPTION CONTAINED IN SECTION 132(4A) COUL D BE RAISED EVEN IN REGULAR ASSESSMENT U/S 143. IF THAT IS THE P OSITION OF LAW THERE IS NO IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 42 REASON WHY SUCH PRESUMPTION CANNOT BE RAISED IN ASSESSMENT U/S 158BC WHICH HAS TO CONFINE ITSELF TO MATERIAL FO UND IN THE COURSE OF SEARCH. 8. WE HAVE CONSIDERED THE FACTS OF THE CASE A ND SUBMISSIONS MADE BEFORE US. THE FACTS OF THE CASE ARE THAT I N THE COURSE OF SEARCH AT THE RESIDENCE OF THE ASSESSEE SOME PAPERS WERE FOUN D AND SEIZED. THESE PAPERS HAVE BEEN PLACED IN THE PAPER BOOK OF THE ASSESSEE FROM PAGES 131 TO 136. THESE PAPERS PRIMARILY DEAL WITH LO AN TRANSACTIONS OF RS. 51.00 LAKH AND INTEREST OF RS. 20.30 LAKH. THIS BECOMES CLEAR FROM PAGE 136 ON WHICH THE NARRATION IS MADE IN ACTUALS. I N THE COURSE OF HEARING BEFORE US THE LD. COUNSEL FAIRLY CONCEDED THAT THE WORD PETI WHEN USED IN COMMON PARLANCE IN RELATION TO MONEY ADVANCED OR RECEIVED ON INTEREST MEANS ONE LAKH RUPEES. IN THE COURSE OF SEARCH IT WAS INTER-ALIA DEPOSED THAT THESE TRANSACTIONS PERTAIN TO D.K M. SINGH AND K. SINGH BUT HE DID NOT REMEMBER HOW COULD THE TRANSACTION OF INTEREST COULD BE RELATED TO THE STAMPINGS. HOWEVER THE FACT T HAT THE TRANSACTIONS RELATE TO LOAN AND INTEREST BECOME CLEAR FROM ANSWER TO QUESTION NO. 4 PUT TO THE ASSESSEE IN THE COURSE OF RECORDING OF ST ATEMENT ON OATH ON 21.1.2003 WHEN AFTER LOOKING AT PAGE NO. 131 IT WAS DEPOSED THAT 51 IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 43 PETI MEANS RS. 51.00 LAKH WHICH WERE GIVEN ON L OAN BY HIM ON WHICH INTEREST FOR THE PERIOD 15.10.1998 TO 15.8.19 99 AMOUNTED TO RS. 20.30 LAKH TAKING THE TOTAL TO RS. 71.30 LAKH. FUR THER AFTER LOOKING AT PAGE NO. 132 IT WAS DEPOSED THAT RS. 24.00 LAK H WERE GIVEN ON LOAN TO D.K. FURTHER DETAILS OF THIS LENDING ARE ALSO MENTIONED ON THAT VERY PAGE BEING RS. 10 LAKH AT 5% P.M RS. 10 LAKH AT 6% P.M. AND RS. 4 LAKH AT 6% P.M. LEADING TO INTEREST OF RS. 50 000/ - RS. 60 000/- AND RS. 24 000/- AGGREGATING TO RS. 1.34 LAKH. THE MENTIO N OF 20 PETI AGAINST M.SINGH REPRESENTS LOAN OF RS. 20 LAKH TO SHRI MA HENDER SINGH @ 3% PER MONTH. HE HAS EXPIRED SINCE THEN. THE NARRATION OF 7 PETI AGAINST THE NAME OF K.SINGH REPRESENTS RS. 7.00 LAKH LENT TO SHRI KULWANT SINGH SACHDEVA S/O SHRI BALBEER SINGH @ 3% P.M. ON WHIC H THE TOTAL INTEREST COMES TO RS. 81 000/-. THESE AMOUNTS WERE LENT I N CASH THE PRINCIPAL AMOUNT BEING RS. 51.00 LAKH AND INTEREST OF RS. 2 1.50 LAKH. PAGE 136 SHOWS LENDING OF RS. 2400000 TO D.K @ 3% P.M. ON WHICH INTEREST AMOUNTED TO RS. 7.20 LAKH; RS. 20 00 000 TO SHRI M AHENDER SINGH @ 2.5% ON WHICH INTEREST FOR 10 MONTHS AMOUNTED TO RS. 5 .00 LAKH AND RS. 7.00 LAKH TO K.SINGH. AGAINST THE TOTAL AMOUNT OF RS. 32.00 LAKH RS. 30.00 LAKH WERE ADJUSTED AGAINST THE PLOT. SIMILAR EXPLANATION WAS GIVEN IN RESPECT OF PAGE NO. 137 WHICH CARRIES THE NAME OF SHRI SOHAN LAL. IT IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 44 WAS DEPOSED THAT A SUM OF RS. 40 LAKH WAS L ENT TO HIM RS. 20 LAKH AT 3% RS. 10 LAKH AT 5% AND RS. 10 LAKH AT 6% P.M. LEADING TO TOTAL INTEREST AT RS. 1 10 000. HOWEVER NO EXPLANATION WAS GI VEN IN REGARD TO THE ENTRY OF 10 AGAINST THE FORM BY STATING THAT HE DOES NOT KNOW ANYTHING ABOUT IT ALTHOUGH IT WAS DEPOSED THAT TAX 105 MEANS TAX OF RS. 1.05 LAKH. THE ASSESSEE HOWEVER CHANGED THIS VERSION IN THE S AME STATEMENT WHEN IT WAS DEPOSED THAT HE HAD ARRANGED FOR LOAN OF RS. 40 LAKH FROM SHRI SOHAN LAL TO VARIOUS PERSONS ON WHICH HE GOT COMMISSIO N OF 1%. THIS PERSON HAS SINCE EXPIRED. THE DETAILS AND THE STATEMENT LEAD TO A CLEAR CONCLUSION THAT THESE PAPERS PERTAIN TO LOAN TRANSACTIONS IN WHICH ONE PETI HAS BEEN MENTIONED TO REPRESENT RS. 1.00 LAKH. THE ASSES SEE ALSO FILED AN AFFIDAVIT DATED 20.9.2004 TWO YEARS AFTER RECORDING O F THIS STATEMENT STATING THAT IN ALL THE TRANSACTIONS MENTIONED ON THIS PAPER HE ACTED ONLY AS A MEDIATOR AND THE WORDS DIYA SHOULD BE READ AS DILVAYA. NO CORROBORATIVE EVIDENCE WAS FILED TO SUPPORT T HIS STATEMENT VIS--VIS THE STATEMENT GIVEN ON 21.1.2003. THE ASSESSEE HAS NOT FURNISHED TILL DATE THE NAME AND ADDRESSES OF ALL THE PERSONS ON WHOSE BE HALF HE ACTED AS MEDIATOR. IN THE LIGHT OF THESE FACTS WE ARE OF THE VIEW THAT THE STATEMENT GIVEN AT THE TIME OF SEARCH AND RECORDE D U/S 131 ON 28.1.2003 WITHOUT BEING INFLUENCED BY ANYONE ELSE REPRES ENTS BETTER PIECES OF IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 45 EVIDENCES THAN THE AFFIDAVIT FILED TWO YEARS OF THE SEARCH WHEN HE COULD HAVE BEEN INFLUENCED BY THE ADVISE OF OTHERS IN CLUDING LEGAL ADVISORS. THE FACT THAT IN THE LATTER PORTION OF THE STAT EMENT HE REVISED HIS STAND SHOWS THAT THERE WAS NO UNDUE INFLUENCE ETC. O N HIM. 8.1 THIS BRINGS US TO THE QUESTION OF THE VERACITY OF THE CONTENTS OF THESE DOCUMENTS. SECTION 132(4A) PROVIDES THAT WHERE ANY BOOKS OF ACCOUNT OTHER DOCUMENTS ETC. ARE FOUND IN POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE OF SEARCH IT MAY BE PRESUMED THA T (I) SUCH BOOKS OF ACCOUNT OTHER DOCUMENTS ETC. BELONG TO HIM; (II) THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS ARE TRUE AND (III) THE SIGNATURE AND EVERY OTHER PART OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS WHICH ARE PURPORTEDLY IN THE HAND-WRITING OF ANY PARTICULAR PERSON OR WHICH MAY REASONABLY BE ASSUMED TO HAVE BEEN S IGNED BY OR IN THE HANDWRITING OF ANY PARTICULAR PERSON ARE IN THA T PERSONS HANDWRITING. UNDER THIS SECTION A REBUTTABLE PRESUMPTION MA Y BE RAISED THAT THESE DOCUMENTS BELONG TO THE ASSESSEE AND THE CONTENTS THEREOF ARE TRUE. SUCH PRESUMPTION WILL ALSO BE AVAILABLE IN RESPECT OF BLANK SIGNED CHEQUES OF D.K. FOUND FROM THE ASSESSEE. THUS SUB PR ESUMPTION MAY BE RAISED NOT ONLY IN RESPECT OF THE BOOKS BUT ALSO OTHER DOCUMENTS FOUND IN SEARCH. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 46 BY AND LARGE THE STATEMENT OF THE ASSESSEE CORROBORATE THAT THESE PAPERS PERTAIN TO LOANS GIVEN TO D.K. M.SINGH AND K.SINGH WHILE THERE WAS CONTRADICTORY STATEMENT IN REGARD TO LOAN T O SHRI SOHAN LAL. SUBSEQUENTLY STATEMENT OF SHRI DEVENDER KUMAR G OEL WAS RECORDED WHO CORROBORATED THE CONTENTS OF PAGES 40 AND 44 IN SO FAR AS THEY ARE CONCERNED WITH HIS DEALINGS. THE LD. COUNSEL H AS TAKEN OBJECTION TO HIS STATEMENT ON TWO GROUNDS NAMELY THAT -(I) HIS STATEMENT WAS NOT RECORDED IN THE PRESENCE OF THE ASSESSEE AND (I I) CERTAIN DEFECTS IN THE STATEMENT SHOW THAT HIS STATEMENT IS NOT RELIABLE . THE DEPOSITION OF DEVENDER KUMAR IS THE DEPOSITION OF THE THIRD PARTY AND STANDS ON THE SAME FOOTING AS THAT OF BANK MANAGER IN THE CASE OF KISHANCHAND CHELARAM (SUPRA). SINCE THE ASSESSEE WAS NOT ALLOWED TO CROSS-EXAMINE HIM THE STATEMENT ALONE CANNOT BE THE BASIS F OR COMING TO THE CONCLUSION THAT THE ASSESSEE LENT CERTAIN AMOUNTS TO HIM ON WHICH INTEREST WAS CHARGED. IN THE CASE OF SONA ELECTRIC CO. (SUPR A) IT WAS HELD THAT THE EXPLANATION OF THE ASSESSEE IN RESPECT OF CASH C REDIT ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE CAN BE REJECTED ON C OGENT GROUNDS. WHEN SUCH GROUNDS ARE THEMSELVES BASED ON NO EVIDENCE THE QUESTION OF RAISING A PRESUMPTION AGAINST THE ASSESSEE DOES NOT AR ISE. IN THIS CASE THE EXPLANATION OF THE ASSESSEE HAS BEEN REJECTED BY THE AO ON THE BASIS OF IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 47 EVIDENCE FOUND IN THE COURSE OF SEARCH OF THE R ESIDENCE OF THE ASSESSEE. THEREFORE WE ARE OF THE VIEW THAT THIS CASE D OES NOT HELP THE ASSESSEE. IN THE CASE OF SMC SHARE BROKERS LTD.(SUPRA) I T WAS HELD THAT IN ABSENCE OF THE STATEMENT BEING TESTED IT C ANNOT BE SAID THAT IT SHOULD BE BELIEVED COMPLETELY TO THE PREJUDICE OF THE ASSESSEE. THE RATIO OF THIS CASE IS SIMILAR TO THE RATIO OF THE CASE O F KISHANCHAND CHELARAM (SUPRA) AND WHICH HAS ALREADY BEEN MENTIONED BY US. THE EFFECT IS THAT THE STATEMENT OF SHRI DEVENDER KUMAR ALONE WH ICH IS NOT TESTED CANNOT FORM THE BASIS OF ADDITION. THE ASSES SEE ALSO OBJECTED TO RELIANCE BEING PLACED ON THE STATEMENT OF SHRI SOHAN LAL AND THE PURPORT OF HIS STATEMENT WAS STATED TO BE UNCLEAR. H IS STATEMENT WAS ALSO NOT TESTED AND THEREFORE THIS STATEMENT ALSO DOES NOT STAND ON ANY DIFFERENT FOOTING FROM THE STATEMENT OF SHRI DEVENDER KUMA R GOYAL. THE LD. COUNSEL ALSO TOOK THE STAND THAT THE ASSESS EE DID NOT HAVE CAPACITY TO ADVANCE SUBSTANTIAL LOANS AS CAN BE SEEN FROM THE ASSETS FOUND IN HIS POSSESSION AT THE TIME OF SEARCH AND FOR THIS P URPOSE RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF P.K. NOORJAHAN (SUPRA). THE FACTS OF THAT CASE ARE COMPLETELY DIFFERENT AS SHE WAS A YOUNG LADY AND COULD NOT HAVE EARNED T HE INCOME EVEN IN A DECADE. ON THE OTHER HAND THE ASSESSEE HAS BEE N CARRYING ON THE BUSINESS IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 48 OF PROVIDING ACCOMMODATION ENTRIES AND CHEQUE-DIS COUNTING WHICH HAS BEEN ADMITTED IN THE COURSE OF HEARING BEFORE U S. ADMITTEDLY THE ASSESSEE IS ALSO CARRYING ON THE BUSINESS OF ARR ANGING LOAN FOR VARIOUS PERSONS. THUS HE HAD SOURCES OF INCOME FROM WHI CH LOANS COULD BE ADVANCED TO VARIOUS PERSONS. THEREFORE THIS A RGUMENT IS NOT ACCEPTABLE ON THE FACE OF IT. IN OTHER WORDS AFTER REJE CTING THE EXPLANATION OF THE ASSESSEE SUFFICIENT CIRCUMSTANCES EXIST IN THIS CASE TO HOLD APPROPRIATE AMOUNTS TO BE THE INCOME OF THE ASSESSEE AS UNE XPLAINED LOANS ADVANCED TO OTHERS. IT WAS ALSO AGITATED THAT PAGES 132 AND 136 DO NOT CARRY ANY DATE AND THUS THESE ARE DUMB DOCUMENTS. THIS VIEW IS ALSO NOT ACCEPTABLE FOR THE SIMPLE REASON THAT PAGE 13 1 GIVES THE CALCULATION OF INTEREST FOR A PERIOD OF 10 MONTHS FROM 15.10.1 998 TO 15.8.1999 FALLING IN ASSESSMENT YEARS 1998-99 AND 1999-00. PA GE 40 IS ONLY FURTHER ELABORATION OF THE AMOUNT OF RS. 51.00 LAKH AND PA GE 44 CONTAINS THE CALCULATION OF INTEREST INDIVIDUALLY IN RESPECT OF THREE PERSONS. THEREFORE ON COMBINED READING OF THESE THREE DOCUMENTS IT BECOMES CLEAR THAT THESE PAPERS DEAL WITH ADVANCE OF RS. 51 LAKH FO R THE PERIOD MENTIONED ABOVE. IT MAY BE THAT PAGE 136 HAS SOME OTHER NA RRATION ALSO SUCH AS PLOT OF LAND THE IMPORT OF WHICH IS NOT CLEAR. BUT THERE COULD BE NO DENYING THE FACT THAT THESE PAPERS PERTAIN TO LOAN TRANSACTIONS AND INTEREST IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 49 EARNED THEREON. IT WAS ALSO THE CASE OF THE L D. COUNSEL THAT SUCH HUGE LOANS COULD NOT HAVE BEEN ADVANCED WITHOUT PAS SING RECEIPTS. THIS ARGUMENT LOOSES SUBSTANTIAL WEIGHT WHEN IT IS SEEN THAT THE ASSESSEE WAS IN POSSESSION OF BLANK SIGNED CHEQUES OF SHRI DEV ENDER KUMAR GOYAL AS SECURITY. THE AMOUNTS IN CASE OF SH. K.SINGH A ND M.SINGH HAVE BEEN MAINLY ADJUSTED AGAINST PLOT OF LAND. THUS THE RE IS EVIDENCE THAT THE ASSESSEE WAS IN POSSESSION OF REQUISITE SECURITY . THEREFORE THE ABSENCE OF RECEIPTS ETC. WILL NOT LEAD TO NEGATION OF THE TRANSACTIONS IF THEY STAND REASONABLY PROVED BY EVIDENCE ON RECORD. 8.2 IT WAS ALSO THE CASE OF THE LD. COUNSEL THA T ALTHOUGH THE AO GAVE A CLEAR FINDING THAT THESE PAPERS PERTAIN TO LOA NS ADVANCED BY THE ASSESSEE NO SUCH FINDING WAS GIVEN BY THE LD. CI T(A) AND HIS ORDER HAS NOT BEEN CHALLENGED BY THE REVENUE IN THIS REGARD . WE ARE OF THE VIEW THAT THIS ARGUMENT IS IN CONTRADICTION WITH THE FIN DING GIVEN BY THE LD. CIT(A). WE HAVE ALREADY MENTIONED THAT HIS FIN DINGS ARE CONTAINED IN PARAGRAPH 7.11 IN WHICH IT WAS INTER-ALIA HELD THAT THE AO RIGHTLY DREW THE INITIAL PRESUMPTION U/S 132(4A) AND IN VIEW OF THE REASONS GIVEN BY THE AO THE ADDITION MADE BY HIM WAS JUSTIFIED . THIS PARAGRAPH HAS ALREADY BEEN REPRODUCED BY US EARLIER WHICH D OES NOT LEAVE ANY SCOPE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 50 FOR DOUBT THAT THE LD. CIT(A) CONCURRED WITH THE AO THAT THE AMOUNTS WERE LENT ON INTEREST BY THE ASSESSEE. 8.3 THIS BRINGS US TO THE QUESTION- WHETHER THE WHOLE OR ANY PART OF THE LOANS AND INTEREST AMOUNT IS TAXABLE IN THE HANDS OF THE ASSESSEE? THE CASE OF THE LD. COUNSEL IS THAT THE LOOSE PAPERS CANNOT BE EQUATED WITH THE BOOKS OF ACCOUNT AND THEREFORE THEY CANNOT BE RELIED UPON FOR MAKING THE ASSESSMENT. WE MAY MENTION HERE TH AT SECTION 132(4A) DEALS NOT ONLY WITH BOOKS OF ACCOUNT BUT ALSO WITH OTHER DOCUMENTS FOUND IN THE COURSE OF SEARCH. THESE DOCUMENTS WERE FOUND FROM THE RESIDENCE OF THE ASSESSEE AND THUS NOT ONLY T HEY CAN BE USED IN ASSESSMENT BUT ALSO AN INITIAL PRESUMPTION ARISES THAT THEIR CONTENTS ARE CORRECT. IN SUCH A SITUATION THE ONUS I S ON THE ASSESSEE TO SATISFACTORILY EXPLAIN THE CONTENTS OF THE DOCU MENTS. THIS ALSO FOLLOW FROM THE GENERAL LAW THAT A PERSON IN SPECI AL KNOWLEDGE OF CERTAIN FACTS HAS TO EXPLAIN THE FACTS. THUS WE WIL L HAVE TO SEE THE EXPLANATION OF THE ASSESSEE IN REGARD TO THESE DOCUMENTS. 8.4 WE MAY START WITH PAGE 137 OF THE PAPER B OOK WHICH CONTAINS A NARRATION OF 42 PETI AND 25 THOUSAND TO BE PAID AND ALSO MENTIONS THAT THE ACCOUNT WAS TAKEN ON 1.8.98. THIS PAPER C ONTAINS THE NAME OF SHRI IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 51 SOHAN LAL JI AT THE TOP. IN THE STATEMENT RE CORDED IN THE COURSE OF SEARCH IT WAS DEPOSED BY THE ASSESSEE THAT SHRI SOHAN LAL IS DOING THE WORK OF STAMPING AND STAYING IN SUBHASH NAGAR. 42 PETIES OF FAN STAMPINGS BELONG TO HIM FOR WHICH RS. 25 000/- WAS TO BE PAYABLE TO HIM WHICH HAS BEEN PAID. EACH PETI COSTS BETWEEN RS. 5 000/- TO RS. 10 000/- AND THUS THE TOTAL VALUE OF 40 PETIES WAS BETWEEN RS. 3.00 LAKH TO RS. 4.00 LAKH. WHEN IT WAS POINTED OUT TO HIM THAT 40 PETIES MEANS RS. 40 LAKH ETC. IT WAS EXPLAINED THAT THE STAMPI NGS ARE STILL LYING IN THE PREMISES AT C-44 HARI NAGAR GHANTAGHAR AS T HE ASSESSEE HAD TAKEN A ROOM THERE ON RENT FROM SHRI SOHAN LAL. THEREAF TER HIS STATEMENT WAS RECORDED ON OATH U/S 131 IN WHICH IT WAS DEPO SED THAT 40 PETI MEANS RS. 40 LAKH. THIS VERSION WAS CHANGED IN THE STATEMENT ITSELF IN WHICH IT WAS MENTIONED THAT SHRI SOHAN LAL STAYS AT C-28 MAYAPURI PHASE-II AND HE HAD ARRANGED LOANS TO VARIOUS PERSONS FROM HIM. HE RECEIVED COMMISSION OF 1% ON THE TRANSACTIONS. IT WAS FURTHER DEPOSED THAT SHRI SOHAN LAL DUA HAD EXPIRED AND THEREFORE HE IS NOT IN A POSITION TO PRODUCE HIM FOR CORROBORATING HIS STATEMENT. T HE CASE OF THE REVENUE IS BASED UPON THE STATEMENT OF SHRI SOHAN LAL. ACC ORDING TO THE ASSESSEE THIS SOHAN LAL IS A DIFFERENT PERSON AND THE PUR POSE OF RECORDING HIS STATEMENT IS NOT CLEAR. THE REVENUE THEREAFTE R DID NOT TEST THE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 52 EXPLANATION OF THE ASSESSEE. THE STATEMENT CAN NOT BE TESTED NOW AS SHRI SOHAN LAL DUA IS STATED TO HAVE EXPIRED SINCE THE N. THE CONTENTS OF THIS PAPER ARE REPRODUCED BELOW:- SHRI SOHANLAL JI 20-3 TOTAL 40 -PETI 10- 5 INT. 110- 10-6 TAX 105- FORM 10- 42 PETI 25 THOUS AND DENA HAI. DATE 1.8.98 TAK HISAB HUA. HAVING CONSIDERED THE FACTS IT IS CLEAR THA T THE PAPER DEALS WITH THE ACCOUNT AS ON 1.8.1998. THE VERSION OF THE ASSESSEE THAT THIS ACCOUNT DEALS WITH FAN STAMPING MAY NOT CORRECT BECAUSE SUCH AN EXPLANATION DOES NOT EXPLAIN THE ENTRIES OF INTEREST TAX AND FORM. NONETHELESS THIS PAPER DOES NOT LEAD TO A CONCLUSION EVEN ON BALANCE OF PROBABILITIES THAT THE ASSESSEE LENT RS. 40 LAKH TO SHRI SO HAN LAL BECAUSE AT THE END IT IS MENTIONED THAT 42 PETI AND 25 THOUSAND IS PAYABLE AS ON 1.8.1998. IT DOES NOT STATE THAT THIS AMOUNT IS RECEIVAB LE FROM SHRI SOHAN LAL. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT IT WOULD BE JUST AND FAIR TO CONCLUDE THAT THE ASSESSEE TOOK THE LOAN WHI CH WAS ADVANCED TO OTHERS. THEREFORE IT IS HELD THAT NO AMOUNT CAN BE TA XED IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THIS ACCOUNT. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 53 8.5 COMING TO THE TRANSACTIONS WITH SHRI D.K. GOYAL PAGE 136 OF THE PAPER BOOK SHOWS TRANSACTION OF RS. 24 LAKH @ 3% RESULTING IN INTEREST OF RS. 7 20 000/-. THIS TRANSACTION IS CORROBORATED BY PAGE 132 WHICH SHOWS THREE TRANSACTIONS WITH DK OF RS. 10 LAKH RS. 10 LAKH AND RS. 4 LAKH. INTEREST IN RESPECT OF THESE AND OTH ER AMOUNTS TO M.SINGH AND K.SINGH HAVE BEEN WORKED OUT ON PAGE 131 FOR T HE PERIOD 15.10.1998 TO 15.8.1999. IN THE STATEMENT RECORDED IN THE COURSE OF SEARCH IT WAS STATED THAT THIS PERTAINS TO SHRI D.K. GOYAL AND THE ACCOUNT HAS BEEN WRITTEN IN THE HAND-WRITING OF THE ASSESSEE. HO WEVER THE ASSESSEE STATED THAT HE DOES NOT KNOW THE ADDRESSES OF S HRI D.K. GOYAL M.SINGH AND K. SINGH. SUBSEQUENTLY ANOTHER STATEMENT WAS RECORDED ON OATH IN WHICH IT WAS DEPOSED THAT PAGE 131 CONTAINS TRANSACTIONS OF RS. 51 LAKH ON WHICH INTEREST OF RS. 21.30 LAKH WAS CHARGED. DETAILED EXPLANATION WAS ALSO FURNISHED OF THE NOTING ON PAGE 132 WITH REGARD TO THE AMOUNT OF LOANS RATE OF INTEREST ETC. THIS STATEMENT OF THE ASSESSEE WAS CORROBORATED BY SHRI DEVENDER KUMAR GOYAL WHEN HIS STATEMENT WAS RECORDED U/S 131 ON 6.1.2003. HOWEVER THIS STATEMENT REMAINS UNTESTED AND THEREFORE IT CAN AT BEST ACT ONLY AS A KIND OF CORROBORATIVE EVIDENCE. THE ASSESSEE CHANGED H IS VERSION IN THE AFFIDAVIT WHEN IT WAS STATED THAT HE HAD ARR ANGED LOANS AND EARNED IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 54 ONLY COMMISSION INCOME. IT MAY BE MENTIONED THAT THE DECISION IN THE CASE OF AMARJIT SINGH BAKSHI (HUF) (SUPRA) WAS RENDERED IN REGARD TO THIRD PARTY EVIDENCE USED IN ASSESSMENT MA DE U/S 158BD OF THE ACT. THE TRIBUNAL WAS OF THE VIEW THAT SINCE THE AS SESSEE WAS NOT ALLOWED OPPORTUNITY OF CROSS-EXAMINATION ADDITION COUL D NOT HAVE BEEN MADE IN ITS HANDS. IN THE CASE OF D.N. KAMANI (HUF) (SUPRA) THIRD PARTY EVIDENCE WAS FOUND REGARDING ON-MONEY RECE IVED ON THE BASIS OF WHICH AN ASSUMPTION WAS MADE THAT SIMILAR AM OUNTS WERE RECEIVED FROM OTHER PURCHASER IN A SITUATION WHERE SUCH AN ASSUMPTION COULD NOT BE SUPPORTED BY ENQUIRY IN AN ASSESSMENT. IN THIS CASE THE EVIDENCE IS FOUND FROM THE ASSESSEE AND IS ADMITTEDLY WRI TTEN IN HIS OWN HAND- WRITING. THERE ARE TWO VERSIONS THAT HE ONLY ACTED AS A MEDIATOR AND THAT HE ADVANCED THE MONEY ON LOANS TO OTHER P ARTIES. THE LATTER VERSION HAS BEEN SUPPORTED BY THE DEPOSITION OF SHRI D.K. GOYAL. THE ASSESSEE HAS POINTED OUT SOME DEFICIENCIES IN THE STATEM ENT AND ALSO POINTED OUT THAT THIS DEPOSITION REMAINS UNTESTED. HOWEVER WE MAY ADD THAT THE STATEMENT OF SHRI D.K. GOYAL IS ONLY CORROBORATI VE IN NATURE AND IT IS NOT THE PRIMARY EVIDENCE ON THE BASIS OF WHICH ADDITION HAS BEEN MADE. PAGES 131 132 133 AND 136 OF THE PAPER BOOK CL EARLY SHOW ADVANCE OF MONEY TO SHRI D.K. GOYAL. IF THE TRUTH WAS OTHER WISE I.E. THAT THE IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 55 ASSESSEE ACTED ONLY AS A MEDIATOR THE ONUS W AS ON HIM TO PROVE THAT HE WAS MERELY A COMMISSION AGENT IN THESE TRAN SACTIONS BY BRINGING COGENT EVIDENCE ON RECORD. NO SUCH EVIDENCE HAS BEEN BROUGHT ON RECORD. ON THE CONTRARY THE UNTESTED STATEMEN T OF SHRI D.K. GOYAL LENDS SUPPORT TO THE VIEW THAT THE ASSESSEE ADVANCE D MONEY TO HIM ON LOAN FOR WHICH INTEREST WAS CHARGED. THIS VIEW FINDS SU PPORT FROM THE BLANK AND SIGNED CHEQUES OF SHRI D.K. GOYAL FOUND IN THE PRE MISES OF THE ASSESSEE. IN SUCH A SCENARIO ABSENCE OF RECEIPTS ETC. BECOME AN IRRELEVANT CONSIDERATION AS THE SECURITY WAS AVAILABLE TO THE ASSESSEE. IT WAS ALSO THE ARGUMENT THAT SINCE THE ACCOUNT HAD BEEN CLEARED THE BANK CHEQUES SHOULD HAVE BEEN TAKEN AWAY BY SHRI D.K. GOYAL. HOWEVER AVAILABILITY OF THE CHEQUES WITH THE ASSESSEE DOES NOT LEAD TO AN INFERENCE THAT THE LOAN WAS NOT ADVANCED. WE ARE ALSO OF THE VIEW THAT ABSENCE OF SUBSTANTIAL OTHER ASSETS WITH THE ASSESSEE CAN ALSO LEAD TO AN INFERENCE THAT THE INCOME EARNED BY WAY OF ACCOMMODATION-E NTRY BUSINESS DRAFT- DISCOUNTING BUSINESS ETC. WAS USED BY THE ASSES SEE FOR ADVANCING LOANS. THEREFORE WE ARE OF THE VIEW THAT THE TRANSACT ION WAS ONE OF LOAN ADVANCED BY THE ASSESSEE TO SHRI D.K. GOYAL. THE TRANSACTIONS WITH M. SINGH AND K. SINGH ARE SIMILAR IN NATURE AS T HE TRANSACTIONS WITH SHRI D.K. GOYAL. THE ADDED FACTOR IS THAT THE ASS ESSEE WAS NOT ABLE TO FURNISH IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 56 EVEN THE ADDRESSES OF THESE PERSONS AND THEREF ORE THERE WAS NO POSSIBILITY OF RECORDING THEIR STATEMENTS. IN S UCH A SITUATION AND KEEPING IN VIEW THE CLEAR NARRATION IN THE SEIZED PAPE RS THE LOANS ADVANCED TO THEM WERE RIGHTLY HELD TO BE LOANS ADVANCED BY THE ASSESSEE. THE SEIZED PAPERS ALSO FURNISH THE WORKING OF INTEREST ON PAGE 131 IN RESPECT OF ALL THE THREE PARTIES AND ON PAGE 136 IN RESPEC T OF SHRI D.K. GOYAL AND SHRI M.SINGH. THE LATTER PAPER FURTHER SHOWS ADJUSTM ENT OF RS. 30 LAKH IN THE CASE OF M. SINGH AND K. SINGH AGAINST PLOT WHI CH FURTHER SUPPORTS THE CASE OF THE REVENUE. IT IS HELD ACCORDINGLY AN D THESE ADVANCES AND INTEREST THEREON ARE TREATED IN THE SAME MANNE R AS IN THE CASE OF SHRI D.K. GOYAL (SUPRA). 8.6 FROM THE CONCLUSIONS DRAWN ABOVE IT IS SE EN THAT THE ASSESSEE ADVANCED LOANS AGGREGATING TO RS. 51.00 LAKH TO THREE PERSONS ON OR ABOUT 15.10.1998. AT THE RELEVANT POINT OF TIME HE WA S IN POSSESSION OF THE AMOUNT OF RS. 40.00 LAKH BORROWED FROM SHRI SOH AN LAL AS THE AMOUNT WAS PAYABLE EVEN ON 1.8.1998. THEREFORE IT WILL BE FAIR TO CONCLUDE THAT OUT OF ADVANCES OF RS. 51.00 LAKH THE S UM OF RS. 40.00 LAKH STOOD EXPLAINED BY WAY OF LOAN. ACCORDINGLY I T IS HELD THAT A SUM OF IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 57 RS. 11.00 LAKH IS TAXABLE IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED ADVANCES. 8.7 IT ALSO BECOMES CLEAR FROM AFORESAID DISC USSION THAT AS ON 1.8.1998 THE ASSESSEE WAS UNDER LIABILITY OF INTEREST AMOUNTING TO RS. 2.25 LAKH IN RESPECT OF LOAN FROM SHRI SOHAN L ALJI. AS AGAINST THAT THERE IS A CLEAR NARRATION OF RECEIPT OF INTEREST AMOUNTING TO RS. 20.30 LAKH FROM THE THREE PERSONS BETWEEN THE PERIOD 15.1 0.1998 TO 15.8.1999. THUS ON THE BASIS OF EVIDENCE ON RECORD THE D IFFERENCE OF RS. 18.05 LAKH IS TAXABLE IN THE HANDS OF THE ASSESSEE. THOUGH IT WAS NOT ARGUED THE BENCH IS AWARE OF THE FACT THAT THE ACCOUNT OF SHRI SOHAN LALJI WAS TAKEN UP TO 1.8.1998. THERE COULD BE A P OSSIBILITY OF PAYMENT OF FURTHER INTEREST TO HIM. HOWEVER A CASE IS N OT DECIDED ON THE BASIS OF POSSIBILITIES BUT ON THE BASIS OF FACTS ON RE CORD. NO MATERIAL WAS FOUND SHOWING ANY FURTHER PAYMENT OF INTEREST TO SHRI SOHAN LALJI. NO SUCH CLAIM WAS MADE IN THE COURSE OF ASSESSMENT AND PROCEEDINGS IN FIRST AND SECOND APPEALS. THEREFORE IT IS HELD THA T A SUM OF RS. 18.05 LAKH IS TAXABLE IN THE HANDS OF THE ASSESSEE AS NE T INTEREST EARNED BETWEEN THE PERIOD 15.10.1998 TO 15.8.1999. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 58 8.8 THE RESULT OF AFORESAID DISCUSSION IS THAT GROUND NO. 3 IS PARTLY ALLOWED. THE INTEREST INCOME IS REDUCED FROM RS. 21.50 LAKH TO RS. 18.05 LAKH. THUS GROUND NO. 4 IS PARTLY ALLOWED. THE ADDITION OF RS. 51 000/- IS REDUCED TO NIL AND THUS GROUND NO. 5 IS ALLOWED. 9. GROUND NO. 6 IS THAT THE LD. CIT(A) WAS NOT J USTIFIED IN CONFIRMING THE ADDITION OF RS.5 68 988/- RELATING TO THE P AYMENT MADE TO PUNJAB & SIND BANK. IT IS MENTIONED THAT THE ASSESSEE HAD NOT MADE ANY PAYMENT MENTIONED ON PAGE 31 OF ANNEXURE A-1 SEIZED DU RING THE COURSE OF SEARCH. IT IS ALSO MENTIONED THAT THE LOWER AUT HORITIES WERE NOT JUSTIFIED IN INSISTING ON PRODUCTION OF S. TARSEM SINGH AND S. NARINDER SINGH WHEN REPEATED REQUESTS WERE MADE BY THE ASSESSEE TO ISSUE SUMMONS TO THEM WHICH WERE NOT GRANTED. 9.1 IN THE AFORESAID CONNECTION IT WAS SUBMIT TED BEFORE THE LD. CIT(APPEALS) THAT THE AFORESAID PAGE RELATES TO SETTLEMENT BETWEEN PUNJAB & SIND BANK ON ONE SIDE AND S/SHRI KULWANT SINGH NARINDER SINGH AND TARSEM SINGH ON THE OTHER SIDE IN RES PECT OF THE FIRM OF M/S SANT SINGH KULWANT SINGH M/S PREETI AUTOMOBILES AND M/S S.S. ENGINEERING WORKS WHO AGREED TO PAY AN AMOUNT O F RS. 20.00 LAKH IN IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 59 FULL AND FINAL SETTLEMENT. IT WAS FURTHER SUBMITTED THAT THE BANK CONFIRMED THAT IT HAD RECEIVED PAYMENT OF RS. 5 68 988/- TILL 31.7.2000 RS. 1 70 000/- IN FINANCIAL YEAR 1999-00 AND RS. 3 9 8 988/- IN FINANCIAL YEAR 2000-01. IN VIEW OF THE AFORESAID IT WAS A RGUED THAT SINCE THE PAYMENT WAS NOT MADE BY THE ASSESSEE NO AMOUNT COULD BE ADDED TO HIS INCOME. THE LD. CIT(APPEALS) CONSIDERED THE FACTS OF TH E CASE AND MENTIONED THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE PA YMENTS WERE MADE BY SHRI TARSEM SINGH AND SHRI NARINDER SINGH. THUS THE ASSESSEE FAILED TO SATISFACTORILY DISCHARGE THE ONUS CAST ON HIM A ND THEREFORE THE ACTION OF THE AO IN ADDING THIS AMOUNT WAS UPHELD. 9.2 BEFORE US IT WAS SUBMITTED THAT A LETTE R ADDRESSED JOINTLY BY S/SHRI KULWANT SINGH NARINDER SINGH AND TARSEM S INGH TO PUNJAB AND SIND BANK WAS FOUND FROM THE RESIDENCE OF TH E ASSESSEE REGARDING FULL AND FINAL OUT OF COURT SETTLEMENT OF THE ACCOU NTS OF THREE FIRMS. ON ENQUIRY IT WAS FOUND THAT A TOTAL SUM OF RS. 5. 68 LAKH HAD BEEN PAID IN PURSUANCE OF THE SETTLEMENT. THE THREE PERSONS H AD TAKEN LOANS FROM THE BANK FOR WHICH HIS FATHER HAD STOOD GUARANTEE AS PROPRIETOR OF M/S SANT SINGH KULWANT SINGH. ON THE DEATH OF HIS FATHER THE ASSESSEE STOOD BY THE GUARANTEE GIVEN BY HIS LATE FATHER. HOWEVER THE AMOUNTS WERE PAID BY THE PRINCIPAL DEBTORS AND NOT BY THE ASSE SSEE WHICH CAN BE VERIFIED IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 60 BY ISSUING SUMMONS TO THEM. SINCE THE MONEY W AS NOT PAID BY THE ASSESSEE IT WAS ARGUED THAT THE ADDITION WA S NOT JUSTIFIED. 9.3 THE ONLY POINT RAISED BY THE LD. DR WAS THAT IF THE MONEY WAS NOT PAID BY THE ASSESSEE THEN HOW THE LETTER AND DEPOSIT SLIPS (PLACED IN THE PAPER BOOK FROM PAGES 196 TO 198) WERE FOUND FROM THE RESIDENCE OF THE ASSESSEE. 9.4 IN THE REJOINDER THE CASE OF THE LD. COUNSE L WAS THAT THE ASSESSEE HONOURED THE GUARANTEE GIVEN BY HIS LATE FATHER AND THAT WAS THE REASON THAT PAYMENTS SLIPS WEE LYING WITH HIM. HOWEVE R HE WILL HAVE NO OBJECTION IF THESE PERSONS ARE SUMMONED TO FIN D OUT THE TRUTH OF THE MATTER. 9.5 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IT IS NO DOUBT TRUE THAT THE LETTE R AND THE SLIPS WERE FOUND FROM THE RESIDENCE OF THE ASSESSEE. HOWEVER RI GHT FROM THE BEGINNING THE ASSESSEE HAS ASSERTED THAT HE HAD NOT MADE ANY P AYMENT BUT THE PAYMENTS HAD BEEN MADE BY THREE AFORESAID PERSONS. THIS ASSERTION COULD NOT BE VERIFIED IN ABSENCE OF PRODUCTION OF THESE PERSONS . THE LD. COUNSEL MENTIONED THAT THE TRUTHFULNESS OF THE ASSERTI ON CAN BE VERIFIED BY IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 61 SUMMONING THESE PERSONS. LOOKING TO THESE FACTS WE ARE OF THE VIEW THAT THE FACTS REQUIRE FURTHER EXAMINATION. ACCORDINGLY THE MATTER IS RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION . IN THIS CONNECTION IT IS MENTIONED THAT THE ASSESSEE SHALL FURNISH COMPLE TE ADDRESSES OF THE THREE PERSONS SO THAT SUMMONS COULD BE DULY SERVE D ON THEM. THEREAFTER THE MATTER MAY BE DECIDED ON MERITS BY TAKING INTO ACCOUNT THEIR DEPOSITIONS AND THE EVIDENCE FROM THE BANK ABOU T THE PERSONS WHO DEPOSITED THE MONEY. IN THE RESULT THIS GRO UND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO. 7 BEING GENERAL IN NATURE DOES NOT REQUIRE ANY DECISION FROM US. ITA NO. 304(DEL)/2005- APPEAL OF THE REVENUE IN CASE OF SHRI KULWANT SINGH. 11. GROUND NO. 1 IS THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) ERRED IN ESTIMATING COMMISSION INCOME FROM ACCOMMODATION-ENTRY BUSINESS AT 0.75% AGAINST 4% DETERMINED BY THE AO. IN OUR ORDER IN IT(SS) A. NO. 255(DEL)/200 5 THE ADDITION ON THIS GROUND HAS BEEN DELETED AS NO EVIDENCE WAS FO UND IN THE COURSE OF IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 62 SEARCH REGARDING THIS BUSINESS. THE NECESSARY CONSEQUENCE OF THE FINDING IS THAT THIS GROUND IS DISMISSED. 12. GROUND NO. 2 IS THAT THE LD. CIT(APPEALS) ERRED IN REDUCING THE COMMISSION INCOME FROM DRAFT-DISCOUNTING BUSINES S FROM 0.50% TO 0.30% OF THE AMOUNT INVOLVED IN THE DRAFT. IN OU R ORDER IN IT(SS) A. NO. 255(DEL)/2005 (SUPRA) THE RATE OF NET INCOME HAS BEEN FIXED AT 0.20%. IN VIEW OF THEREOF THIS GROUND IS DISMISSED. 13. GROUND NO. 3 IS THAT THE LD. CIT(APPEALS) ER RED IN DELETING THE ADDITION OF RS. 32 97 073/- MADE BY THE AO ON ACCOUNT OF PEAK OF UNACCOUNTED INVESTMENTS IN BANK ACCOUNT. IT WAS THE COMMON CASE OF BOTH THE PARTIES THAT THIS ISSUE STANDS COVERED BY THE ORDER OF A BENCH OF THE TRIBUNAL IN THE CASE OF SHRI INDERBEER SINGH IN IT(SS) A.NO. 322(DEL)/2005 DATED 16.2.2009 IN WHICH IT WAS H ELD THAT IN THE CASE OF DRAFT-DISCOUNTING THE OWNERSHIP IN THE DRAFTS DOES NOT VEST IN THE ASSESSEE AS THEY WERE RECEIVED FROM THIRD PARTIES. THEREFORE THERE COULD NOT BE ANY QUESTION OF DETERMINING THE PE AK OF UNACCOUNTED INVESTMENTS. PARAGRAPHS 14 15 AND16 OF THAT ORDE R DEALING WITH THE ISSUE IS REPRODUCED OVERLEAF:- IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 63 14. THE LD. AR FOR THE ASSESSEE SUBMITTED BE FORE US THAT A SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE T HE TRIBUNAL IN THE CASE (SUPRA) AND THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WHILE OBSERVING IN PARA 26 OF THE ORDER AS UNDER:- WE HAVE CONSIDERED RIVAL SUBMISSION. WE ARE IN AGREEMENT WITH THE LD. COMMISSIONER OF INCOME-TAX (APPEALS). THE UNDISCLOSED INCOME FOUND AS A RE SULT OF SEARCH AND OTHER MATERIAL WAS SEPARATELY COMPUTE D BY THE ASSESSING OFFICER AS NARRATED IN THE CHART A BOVE. THE ASSESSEE FILED HIS REGULAR RETURN OF INCOM E THOUGH AFTER THE DATE OF SEARCH BUT THE DUE DATE FOR THE SAME HAS NOT EXPIRED. IT IS NOT THE CASE OF THE ASS ESSING OFFICER THAT THE ASSESSEE SEEKS REDUCTION OF INCOME DECLARED IN THE REGULAR RETURN OUT OF UNDISCL OSED INCOME. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY UNDISCLOSED INCOME AS DECLARED IN THIS RE TURN IS THE SAME AS COMPUTED BY HIM IN THE CHART MENTIONE D ABOVE. THUS THE INCOME DECLARED IN THE RETUR N OF INCOME DO NOT AUTOMATICALLY BECOME UNDISCLOSED IN COME MERELY BECAUSE THE ASSESSEE HAS DECLARED THE SAME IN ITS RETURN OF INCOME FILED AFTER THE DATE OF SE ARCH. THUS THE ADDITION WAS RIGHTLY DELETED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS). 15. THE LD. DR FOR THE REVENUE WAS FAIR ENOUG H TO CONCEDE TO THE ABOVE SUBMISSIONS OF LD. AR FOR THE AS SESSEE. 16. IN THIS VIEW OF THE MATTER RESPECTFULLY FOLLOWING THE DECISION (SUPRA) OF THE TRIBUNAL THE ISSUE INVOLVE D IN GROUND NO. 2 OF THE APPEAL IS DECIDED IN FAVOUR OF TH E ASSESSEE AND AGAINST THE REVENUE. CONSEQUENTLY THE ORDER OF CIT(A) IN THIS REGARD IS UPHELD AND GROUND NO. 2 OF THE R EVENUES APPEAL IS REJECTED. IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 64 13.1 RESPECTFULLY FOLLOWING THE AFORESAID ORDER THIS GROUND IS DISMISSED. C.O. NO. 100(DEL)/2007-SHRI KULWANT SINGH 14. THIS CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE IN ORDER TO SUPPORT THE ORDER OF THE LD. CIT(APPEALS) IN REGA RD TO THE DELETION OF THE PEAK OF UNACCOUNTED INVESTMENTS AND ALSO AGAINS T HIS FINDING IN RESPECT OF INCOME DETERMINED FOR PROVIDING ACCOMMODATI ON-BILL AND CLUBBING THE INCOME OF R.T. MOTORS PVT. LTD. IN THE HANDS O F THE ASSESSEE. IT WAS THE COMMON CASE OF BOTH THE PARTIES THAT IF TH E CROSS APPEALS ARE DECIDED ON MERITS THE CROSS OBJECTION WILL B ECOME INFRUCTUOUS. THESE CROSS APPEALS HAVE ALREADY BEEN DECIDED BY US. WE MAY ADD THAT THE ASSESSEE HAS NOT TAKEN ANY OBJECTION TO CLUBBING OF THE INCOME OF M/S R.T. MOTORS PVT. LTD. IN THE HANDS OF THE ASSESS EE. THUS THE WHOLE OF THE CROSS OBJECTION HAS BECOME INFRUCTUOUS. IT(SS) A. NO. 257(DEL)/2005-M/S R.T. MOTOR (P) LTD. IT(SS) A. NO. 270(DEL)/2005 REVENUES APPEAL IN R.T. MOTOR (P) LTD. CROSS OBJECTION NO. 138(DEL)/2007 - M/S R.T. MOTOR (P) LTD. 15. IT WAS THE COMMON CASE OF BOTH THE PARTIES THAT SINCE SHRI KULWANT SINGH HAS ACCEPTED THE ASSESSMENT OF T HE UNDISCLOSED INCOME OF THE ASSESSEE COMPANY IN HIS HAND THE ASSESSMEN T MADE IN ITS CASE NO IT(SS) A NOS. 255 304 257 270/2005 & CO NOS. 100&138(DEL)/2007 65 LONGER SURVIVES. THEREFORE ALL THESE APPEALS DO NOT SURVIVE FOR DETERMINATION AND THE SAME ARE DISPOSED OFF A CCORDINGLY. THE UNDISCLOSED INCOME IN THIS CASE SHALL BE TAKEN AS NIL. 16. IN THE RESULT: IT(SS) A. NO. 255(DEL)/2005 IS PARTLY ALLOWED; IT(SS) A. NO. 304(DEL)/2005 IS DISMISSED; C.O. NO. 100(DEL)/2007 IS DISMISSED AS INFRUCTUOUS ; IT(SS) A. NO. 257(DEL)/2005 IS DISMISSED AS INFRUC TUOUS; IT(SS) A. NO. 270(DEL)/2005 IS DISMISSED AS INFRUC TUOUS; C.O. NO. 138(DEL)/2007 IS DISMISSED AS INFRUCTUOUS . THE ORDER WAS PRO NOUNCED IN THE OPEN COURT ON 12 MARCH 2010. SD/- SD/- (GEORGE MATHAN) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 12TH MARCH 2010. SP SATIA COPY OF THE ORDER FORWARDED TO:- 1. SHRI KULWANT SING & M/S R.T. MOTOR PVT. LTD. NEW DELHI. 2. DCIT CENTRAL CIRCLE 19 NEW DELHI. 3. CIT(A) 4. CIT- NEW DELHI. 5. DR ITAT NEW DELHI. ASSISTANT REG ISTRAR.