THE ACIT, Central Circle-3,, Surat v. SHRI JITENDRA H.MODI,, Surat

ITSSA 342/AHD/2003 | misc
Pronouncement Date: 21-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 34220516 RSA 2003
Assessee PAN AAYPM0990K
Bench Ahmedabad
Appeal Number ITSSA 342/AHD/2003
Duration Of Justice 6 year(s) 8 month(s) 5 day(s)
Appellant THE ACIT, Central Circle-3,, Surat
Respondent SHRI JITENDRA H.MODI,, Surat
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 21-05-2010
Date Of Final Hearing 10-05-2010
Next Hearing Date 10-05-2010
Assessment Year misc
Appeal Filed On 15-09-2003
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL VP AND BHAVNESH SAINI JM) IT (SS) A NO.342/AHD/2003 BLOCK PERIOD: 1991-92 TO 2000-01(UP TO 17-4-2001) THE A. C. I. T. CENTRAL CIRCLE-3 ROOM NO. 507 AAYAKAR BHAVAN MAJURAGATE SURAT VS SRI JITENDRA H. MODI NR. SUDAMA HOTEL MARUTI ESTATE B/H. NAVYUG COLLEGE SURAT PA NO. AAYPM 0990 K (APPELLANT) (RESPONDENT) IT (SS) A NO.343/AHD/2003 BLOCK PERIOD: 1991-92 TO 2000-01 (UP TO 17-4-2001) SRI JITENDRA H. MODI NR. SUDAMA HOTEL MARUTI ESTATE B/H. NAVYUG COLLEGE SURAT PA NO. AAYPM 0990 K VS THE A. C. I. T. CENTRAL CIRCLE-3 ROOM NO. 507 AAYAKAR BHAVAN MAJURAGATE SURAT (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI M. G. PATEL AR DEPARTMENT BY SHRI B.S. SANDHU DR O R D E R PER BHAVNESH SAINI: BOTH THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II AHMEDAB AD DATED 10-07-2003 FOR THE ABOVE BLOCK PERIOD. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. 3. THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZ URE OPERATION U/S 132 OF THE IT ACT TOOK PLACE ON 17-4-2001 AT THE PR EMISES OF THE ASSESSEE IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 2 AND OTHER PREMISES. NOTICE U/S 158 BC OF THE IT ACT WAS ISSUED AND THE ASSESSEE IN REPLY THERETO FILED RETURN OF INCOME FO R THE BLOCK PERIOD DECLARING TOTAL UNDISCLOSED INCOME AT RS.65 23 868/ -. THE AO COMPUTED THE TOTAL UNDISCLOSED INCOME AT A HIGHER FIGURE. TH E LEARNED CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE PARTLY. THERE AR E CERTAIN GROUNDS WHICH ARE COMMON IN BOTH THE CROSS APPEALS. THEREFO RE ALL THE GROUNDS OF APPEAL WHICH ARE COMMON ARE TAKEN TOGETHER FOR T HE PURPOSE OF DISPOSAL OF BOTH THE APPEALS. IT (SS) A NO.343/AHD/2003 (ASSESSEES APPEAL) 4. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUND NOS. 9 AND 10 OF THE APPEAL. GROUNDS NO. 13 AND 14 OF THE APPEAL ARE GENERAL IN NATURE AND ARE NOT PRESSED. ALL THESE GROUNDS OF AP PEAL OF THE ASSESSEE ARE ACCORDINGLY DISMISSED BEING NOT PRESSED AND GEN ERAL IN NATURE. 5. GROUND NO.1 OF THE APPEAL OF THE ASSESSEE READS AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS BY CONFIRMING ADDITION OF RS.1 39 000/- MADE BY THE ASSESSING OFFICER IN RESPECT OF UNDISCLOSED CASH. 6. THE AO HAS MADE THE ADDITION OF RS.1 39 000/- ON THE GROUND THAT CASH FOUND DURING THE SEARCH WAS ADMITTED TO BE UNA CCOUNTED CASH BY THE ASSESSEE. THE ASSESSEE SUBSEQUENTLY STATED THAT SINCE THE BOOKS WERE INCOMPLETE AT THE TIME OF SEARCH AND AFTER UPD ATING THE SAME THERE WAS A CASH IN HAND IN A SUM OF RS.15 01 824/- WHICH TAKES CARE OF THE CASH FOUND AT THE TIME OF SEARCH. THE EXPLANATION O F THE ASSESSEE WAS REJECTED BY THE AO AS THE SAME WAS FOUND TO BE SELF -SERVING. THE LEARNED CIT(A) CONFIRMED THE ADDITION BECAUSE THE ASSESSEE HAS NOT BROUGHT FORTH ANY NEW MATERIAL. THE LEARNED CIT(A) HOWEVER DIRE CTED THAT SAME WOULD BE SET OFF AGAINST TOTAL UNDISCLOSED INCOME DETERMI NED AS A RESULT OF THIS ORDER. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT CASH WAS IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 3 MORE AS COMPARED TO THE CASH FOUND DURING THE COURS E OF SEARCH THEREFORE ADDITION IS UNJUSTIFIED. LEARNED DR RELI ED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE ADDITION IS CLEARLY UNJUSTIFIED. THE CASH WAS F OUND DURING THE COURSE OF SEARCH IN A SUM OF RS.1 39 000/-. HOWEVER CASH OF RS.70 000/- WAS ONLY SEIZED. THE ASSESSEE RELIED ON THE EXPLANATION THAT AS PER CASH BOOK CASH ON THE DATE OF SEARCH WAS RS.15 01 824/- BUT THE SAID EXPLANATION WAS NOT ACCEPTED BECAUSE THE BOOKS OF A CCOUNT WERE NOT AVAILABLE AT THE TIME OF SEARCH AND WAS ALSO WRITTE N AFTER THE DATE OF SEARCH. NO OTHER FINDING IS GIVEN BY THE AUTHORITI ES BELOW. EVEN IF THE BOOKS WERE NOT COMPLETELY WRITTEN THE AO SHOULD HA VE VERIFIED ALL THE ENTRIES RECORDED IN THE BOOKS OF ACCOUNT OF THE ASS ESSEE THAT WHETHER THE ENTRIES RECORDED BY THE ASSESSEE WERE GENUINE OR NO T. IF THE ENTRIES WERE FOUND TO BE GENUINE AND SUPPORTED BY BILLS AND VOUC HERS AND EXPLANATION OF THE ASSESSEE THERE WAS NO REASON TO REJECT THE CONTENTION OF THE ASSESSEE REGARDING AVAILABILITY OF THE CASH ON THE DATE OF SEARCH. HOWEVER THE AO HAS NOT INVESTIGATED THE ISSUE PROP ERTY AND REJECTED THE CONTENTION OF THE ASSESSEE WITHOUT ANY BASIS. SINCE CASH WAS MORE IN THE CASH BOOK AS COMPARED WITH THE CASH FOUND AND SEIZE D DURING THE COURSE OF SEARCH THEREFORE THERE IS NO BASIS TO SU STAIN THE ADDITION. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND DELETE THE ADDITION. AS A RESULT THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. GROUND NO.2 OF THE ASSESSEES APPEAL AND GROUND NO.2 OF THE DEPARTMENTAL APPEAL READ AS UNDER: ASSESSEES APPEAL 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING ADDITION TO THE EXTENT OF RS.50 000/- OUT IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 4 OF RS.2 43 460/- MADE BY THE ASSESSING OFFICER IN RESPECT OF VALUABLES. REVENUES APPEAL 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RES TRICTING THE ADDITION OF RS.2 43 460/- MADE ON ACCOUNT OF INVESTMENT IN UNDISCLOSED VALUABLES TO RS.50 000/- 9. THE AO MADE THIS ADDITION ON THE GROUND THAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF VALUABLES FOUND DURING TH E COURSE OF SEARCH PROCEEDINGS. FACT REVEALS THAT THE VALUABLES FOUND DURING THE COURSE OF SEARCH WERE WORTH OF RS.4 39 530/- OUT OF WHICH RS. 1 96 080/- IS SHOWN IN THE BOOKS OF ACCOUNT. THE ASSESSEE PLEADED THAT VALUE WAS ESTIMATED WITHOUT SUPPORTING BILLS AND THE AO WAS NOT JUSTIFI ED IN MAKING THE ADDITION OF THE DIFFERENCE AMOUNT. THE LEARNED CIT( A) CONSIDERING THE ABOVE FACTS SUSTAINED THE ADDITION OF RS.50 000/- A ND DELETED THE REMAINING ADDITION. IT WAS ALSO DIRECTED THAT THE A DDITION OF RS.50 000/- NOW SUSTAINED WOULD BE SET OFF AGAINST THE UNDISCLO SED INCOME OF THE BLOCK PERIOD DETERMINED AS A RESULT OF HIS ORDER. T HE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO P-4 WHICH IS DETAILS AND B IFURCATION OF UNDISCLOSED INCOME DECLARED IN THE RETURN FOR THE B LOCK PERIOD IN WHICH THE ASSESSEE HAS SHOWN THE UNDISCLOSED INVESTMENTS IN THE VALUABLES AT THE RESIDENCE IN A SUM OF RS.2 27 000/-. THE LEARNE D COUNSEL FOR THE ASSESSEE THEREFORE SUBMITTED THAT THE ENTIRE ADDI TION IS UNJUSTIFIED. ON THE OTHER HAND THE LEARNED DR SUBMITTED THAT FIRST THE ADDITION IS TO BE MADE ON THIS ISSUE AND THEN WHATEVER DECLARED IN TH E RETURN MAY BE REDUCED. 10. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE A RE OF THE VIEW THAT THE ENTIRE ADDITION IS UNJUSTIFIED IN THE MATTER. T HE VALUABLES FOUND DURING THE COURSE OF SEARCH AS PER PANCHNAMA WERE V ALUED BY THE AO ON ESTIMATION AT RS.4 39 530/-. THE ASSESSEE EXPLAINED THAT VALUABLES OF RS.1 96 080/- HAVE BEEN SHOWN IN THE BOOKS OF ACCOU NT FOR WHICH IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 5 NECESSARY EVIDENCES WERE FILED. THE ASSESSEE ADMIT TED RS.2 04 900/- AS UNDISCLOSED VALUABLES. THE ASSESSEE HAS DISCLOSED V ALUABLES IN A SUM OF RS.2 27 000/- IN THE RETURN FILED FOR THE BLOCK PER IOD AND AS SUCH THERE WAS NO NECESSITY TO MAKE THE ADDITION OF RS.2 43 45 0/-. SINCE THE VALUABLES HAVE BEEN ESTIMATED BY THE AO WITHOUT ANY BASIS IN A SUM OF RS.4 39 530/- THEREFORE THE UNDISCLOSED INVESTMEN TS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FILED FOR THE BLOC K PERIOD WHICH IS HIGHER THAN THE AMOUNT DISCLOSED BY THE ASSESSEE THERE WA S NO NECESSITY EVEN TO SUSTAIN PART AMOUNT OF RS.50 000/- BY THE LEARNE D CIT(A). SINCE THE AO AND THE LEARNED CIT(A) HAVE NOT GIVEN ANY FINDIN G THAT THE ASSESSEE DISCLOSED UNDISCLOSED INVESTMENTS OF VALUABLES IN A SUM OF RS.2 27 000/- IN THE RETURN OF INCOME FILED FOR TH E BLOCK PERIOD WE DIRECT THE AO TO VERIFY THIS FACT FROM THE RETURN F ILED FOR THE BLOCK PERIOD AND DELETE THE ADDITION. WITH THIS OBSERVATION THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. T HE GROUND OF DEPARTMENTAL APPEAL ON THIS ISSUE IS HOWEVER DISMI SSED. 11. GROUND NO.3 OF THE ASSESSEES APPEAL AND GROUND NO.4 OF THE DEPARTMENTAL APPEAL READ AS UNDER: ASSESSEES APPEAL 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING ADDITION OF RS.2 30 000/- OUT OF RS.9 36 000/- MADE BY THE ASSESSING OFFICER IN RESP ECT OF HOUSEHOLD EXPENDITURE. REVENUES APPEAL 4. THE CIT(A) ERRED IN LAW AND ON FACTS IN RESTRIC TING THE ADDITION OF RS.9 36 000/- MADE ON ACCOUNT OF UNACCOUNTED HOUSE HOLD EXPENSES TO RS.2 30 000/-. THE AO MADE THE ADDITION OF RS.9 36 000/- BEING EXP ENDITURE INCURRED OUT OF UNACCOUNTED INCOME. THE ASSESSEE HAS OBJECTE D TO THE ABOVE IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 6 ADDITION ON THE GROUND THAT THE AO WAS NOT REQUIRED TO MAKE SUCH ADDITION ON THE BASIS OF STATEMENT RECORDED U/S 132 (4) OF THE IT ACT WITHOUT CORROBORATIVE EVIDENCE. IT WAS EXPLAINED TH AT EXPENDITURE OF RS.5 65 000/- WAS REFLECTED IN THE BOOKS OF ACCOUNT WHICH CANNOT BE STATED TO BE UNDERSTATED UNLESS SOME EVIDENCE IS FO UND. THE LEARNED CIT(A) IN VIEW OF THIS FACT CONSIDERED IT TO BE FAI R TO RESTRICT THE ADDITION TO RS.2 30 000/- AND DELETED THE ADDITION. THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DISCLOSED HOUSEHOLD UNDISCLOSED EXPENDITURE IN A SUM OF RS.25 000/- IN THE RETURN FILED FOR THE BLOCK PERIOD AND REFERRED TO P - 4 AND SUBMITTE D THAT THE ADDITION IS CLEARLY UNJUSTIFIED AS SUSTAINED BY THE LEARNED CIT (A). ON THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND REFERRED TO PARA 8 OF THE ASSESSMENT ORDER IN WHICH STATEMENT OF WIFE OF THE ASSESSEE IS REFERRED TO AT PB 187/1 IN WHICH SMT. NISHI J. M ODI ADMITTED HER HOUSEHOLD EXPENDITURE AT RS.25 000/- PER MONTH. HE HAS SUBMITTED THAT THE AO HAS COMPUTED THE HOUSEHOLD EXPENDITURE ACCOR DINGLY AND BENEFIT OF DEDUCTION HAS BEEN GIVEN IN EARLIER YEARS OF THE BLOCK PERIOD FOR THE PURPOSE OF COMPUTING UNDISCLOSED INCOME ON THIS HEA D. THE LEARNED DR SUBMITTED THAT LOOKING TO THE STANDARD OF LIVING OF THE ASSESSEE AND OF MODERN HOUSEHOLD APPLIANCE AND FREQUENT FOREIGN TOU RS IT IS CLEAR THAT THE ASSESSEE IS LIVING IN LUXURIOUS LIFE STYLE AND THEREFORE ENTIRE ADDITION WAS JUSTIFIED. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. PB -187/1 IS THE STATEMENT OF WIFE OF TH E ASSESSEE SMT. NISHI J. MODI WHICH WAS RECORDED DURING THE COURSE OF SEA RCH IN WHICH IN ANSWER TO QUESTION NO.5 SHE HAS ADMITTED MONTHLY H OUSEHOLD EXPENDITURE AT ABOUT RS.25 000/-. THE AO ACCORDINGL Y COMPUTED THE HOUSEHOLD EXPENDITURE FOR THE BLOCK PERIOD AND CONS IDERED THE DEDUCTION VALUE BY CONSIDERING THE STATEMENT OF WIFE OF THE A SSESSEE AT THE TIME OF SEARCH. IT IS ADMITTED FACT THAT STATEMENT OF THE W IFE OF THE ASSESSEE WAS IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 7 RECORDED DURING THE COURSE OF SEARCH; THEREFORE IT WOULD BE RELEVANT FOR THE PURPOSE OF CONSIDERATION. HONBLE PUNJAB AND HA RYANA HIGH COURT IN THE CASE OF HOTEL KUMAR PALACE 283 ITR 110 HELD THA T BLOCK ASSESSMENT CAN BE FRAMED ON THE BASIS OF STATEMENT MADE AT THE TIME OF SEARCH WHEN THERE IS A DIFFERENCE IN BOOKS OF ACCOUNT. IN THE PRESENT CASE THE ASSESSEE CLAIMED BEFORE THE L EARNED CIT(A) THAT ADDITION IS MADE ON THE BASIS OF STATEMENT RECORDED U/S 132(4) OF THE IT ACT WITHOUT CORROBORATIVE EVIDENCE. THE EXPLANATION OF THE ASSESSEE IS NOT CORRECT BECAUSE THE STATEMENT OF WIFE OF THE AS SESSEE WAS DEPENDANT UPON THE ENTRIES MADE IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS SHOWN EXPENDITURE OF RS.5 65 000/- IN THE BOOKS OF ACCOUN T. HOWEVER DURING THE COURSE OF SEARCH WIFE OF THE ASSESSEE ADMITTED THAT THEIR MONTHLY HOUSEHOLD EXPENDITURE COME TO RS.25 000/- THEREFOR E THE ENTRIES RECORDED IN THE BOOKS OF ACCOUNT WERE FOUND TO BE I NCORRECT. THE DECISION IN THE CASE OF HOTEL KUMAR PALACE (SUPRA) THUS WOUL D BE RELEVANT. THE LEARNED CIT(A) WAS THEREFORE UNJUSTIFIED IN DELET ING THE ADDITIONS ON THIS HEAD SUBSTANTIALLY. THE AO THOUGH COMPUTED THE REDU CED HOUSEHOLD EXPENDITURE FOR EARLIER YEAR OF BLOCK PERIOD BUT TH E FACT REMAINS THAT IN ASSESSMENT YEAR 2000-01 THE AO ESTIMATED THE HOUSEH OLD EXPENDITURE IN A SUM OF RS.3 00 000/- BY TAKING THE HOUSEHOLD EXPE NDITURE AT RS.25 000/- PER MONTH. THE WIFE OF THE ASSESSEE IN HER STATEMENT DURING THE COURSE OF SEARCH EXPLAINED THAT THEIR MONTHLY H OUSEHOLD EXPENDITURE WILL BE ABOUT RS.25 000/-. RS.25 000/- IS NOT THER EFORE A DEFINITE FIGURE OF THE HOUSEHOLD EXPENDITURE. THEREFORE SOME MARGI N SHOULD HAVE BEEN GIVEN BY THE AO WHILE ESTIMATING THE HOUSEHOLD EXPE NDITURE OF THE ASSESSEE. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AND THAT THE ASSESSEE DECLARED UNDISCLOSED HOUSEHOLD EX PENDITURE IN THE RETURN FILED FOR THE BLOCK PERIOD IN A SUM OF RS.2 58 000/- IT WILL BE REASONABLE AND APPROPRIATE TO RESTRICT THE ADDITION TO RS.3 50 000/-. THE AO SHALL VERIFY IF THE ASSESSEE HAS DECLARED RS.2 5 8 000/- AS UNDISCLOSED HOUSEHOLD EXPENDITURE IN THE RETURN FILED FOR THE B LOCK PERIOD. SUBJECT TO IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 8 ABOVE FURTHER ADDITION OF RS.3 50 000/- IS SUSTAIN ED AS AGAINST RS.2 30 000/- SUSTAINED BY THE LEARNED CIT(A). AS A RESULT THE APPEAL OF THE ASSESSEE ON THIS GROUND IS DISMISSED. HOWEVER DEPARTMENTAL APPEAL ON THIS GROUND IS ALLOWED PARTLY. 13. GROUND NO. 4 OF THE ASSESSEES APPEAL READS AS UNDER: 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING ADDITION OF RS.22 100/- MADE BY THE ASSESSING OFFICER IN RESPECT OF IVP AND UTI CERTIFI CATES. THE AO MADE ADDITION OF RS.22 100/- AFTER ALLOWING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WITH REGARD TO IVP AND UTI CE RTIFICATES. THE INVESTMENTS OF RS.22 100/- COULD NOT BE EXPLAINED. THEREFORE THE LEARNED CIT(A) CONFIRMED THE ADDITION. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DISCLOSED RS.10 000/- IN THE RETURN FILED FOR THE BLOCK PERIOD BEING UNDISCLOSED INVESTMENTS IN UTI. HOWEVER HE HAS SUBMITTED THAT FOR THE REST AMOUNT THE ASSESSEE HAS NO EXPLANATION. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 14. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE A RE OF THE VIEW THAT THE ADDITION OF RS.10 000/- SHOULD BE VERIFIED BY T HE AO BECAUSE ACCORDING TO THE ASSESSEE THE ASSESSEE MADE DISCLO SURE OF UTI UNDISCLOSED INVESTMENTS IN THE RETURN FILED FOR THE BLOCK PERIOD. THE AO WILL VERIFY THIS FACT AND SHALL DELETE THE ADDITION OF RS.10 000/- SUBJECT TO VERIFICATION. FOR REST OF THE AMOUNT NO EXPLANATION IS FILED. THEREFORE NO INTERFERENCE IS CALLED FOR IN THE MATTER. AS A RESU LT GROUND NO.4 OF THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 15. GROUND NO.5 OF THE ASSESSEES APPEAL READS AS U NDER: 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 9 BY CONFIRMING ADDITION RS.3 50 000/- MADE BY THE ASSESSING OFFICER IN RESPECT OF UNACCOUNTED INVESTM ENTS IN MOTOR CAR. THE AO MADE ADDITION OF RS.3 50 000/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN CAR. A MARUTI ALTO CAR WAS LOCATED IN THE RESIDENCE OF THE ASSESSEE DURING THE COURSE OF SEARCH WHICH COULD NO T BE EXPLAINED. AT THE APPELLATE STAGE ALSO THE ASSESSEE WAS NOT IN A POSITION TO EXPLAIN THE SOURCE OF INVESTMENT IN THE SAID CAR. THE LEARNED C IT(A) ACCORDINGLY DISMISSED THE APPEAL OF THE ASSESSEE ON THIS ISSUE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS AL READY OFFERED RS.2 75 000/- BEING UNDISCLOSED INVESTMENT IN THE A FORESAID MARUTI ALTO CAR IN THE RETURN FILED FOR THE BLOCK PERIOD. HE HA S SUBMITTED THAT ADDITION IS UNJUSTIFIED. ON THE OTHER HAND THE LEA RNED DR SUBMITTED THAT FIRST ADDITION IS TO BE MADE AND THEN DEDUCTIO N MAY BE ALLOWED IN FAVOUR OF THE ASSESSEE. 16. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION BY THE AO. THE POSSESSION OF THE CAR BY THE ASSESSEE AT THE TIME OF SEARCH IS NOT DISPUT ED. THE ASSESSEE HAS NOT EXPLAINED POSSESSION OF THE CAR. NO EVIDENCE OF OWNERSHIP AND POSSESSION OF THE CAR WAS FILED AND EVEN THE CAR WA S NOT REGISTERED WITH RTO AUTHORITY. IT WOULD THEREFORE SHOW THAT IT WA S A NEW CAR FOUND DURING THE COURSE OF SEARCH. THE AO INSTEAD OF ADDI NG RS.3 50 000/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN THE CAR SHOULD HAVE VERIFIED THE VALUE OF THE CAR FROM THE DEALERS OF MARUTI CAR AND THEN SHOULD HAVE MADE THE ADDITION. ACCORDING TO THE ASSESSEE HE HA S SHOWN RS.2 75 000/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE AFORESAID CAR. THEREFORE THE AO SHOULD HAVE VERIFIED THE SAME AND SHOULD HAVE GIVEN THE BENEFIT TO THE ASSESSEE ACCORDINGLY. HOWEVER N OTHING IS DONE IN THE MATTER. WE THEREFORE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIREC TION TO VERIFY THE VALUE OF IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 10 THE CAR AND AFTER VERIFICATION OF UNDISCLOSED INVES TMENT DECLARED IN THE RETURN FOR THE BLOCK PERIOD THE AO WILL CONCLUDE T HIS ISSUE BY PASSING A SPEAKING ORDER. THE AO SHALL DO THE NEEDFUL BY GIVI NG REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. AS A RESULT THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES. 17. GROUND NO.6 OF THE APPEAL OF THE ASSESSEE READS AS UNDER: 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING ADDITION OF RS.9 21 300/- MADE BY THE ASSESSING OFFICER IN RESPECT OF UNEXPLAINED INVESTM ENTS IN SHARES. THE AO MADE THE ADDITION OF RS.9 21 300/- ON ACCOUN T OF UNEXPLAINED INVESTMENT IN SHARES. THE AO HAS MADE THIS ADDITION ON THE GROUND THAT SHARE CERTIFICATES WORTH RS.9 62 200/- WERE FOUND D URING THE COURSE OF SEARCH OUT OF WHICH SHARE CERTIFICATES OF RS.40 900 /- WAS UNEXPLAINED. THE LEARNED CIT(A) CONFIRMED THE ADDITION. 18. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T SHARE FOUND DURING THE COURSE OF SEARCH FROM THE PREMISES OF TH E ASSESSEE WERE IN THE NAME OF OTHERS WHO HAVE NOT TAKEN DELIVERY. THE AO HAS NOT MADE ANY ENQUIRY THEREFORE IT IS CLEARLY UNJUSTIFIED. ON T HE OTHER HAND THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIE S BELOW AND SUBMITTED THAT THE SHARES WERE FOUND IN THE POSSESSION OF THE ASSESSEE WHICH WERE SEIZED BEING THE VALUE OF RS.9 62 200/-. THE RIVAL SUBMISSION CONSIDERED .THE ASSESSEE REPLYING TO THE QUERY RAI SED BY THE AO SUBMITTED THAT SHARES OF RS.40 900/- WAS DISCLOSED IN THE BOOKS OF ACCOUNT AND THE SHARES WORTH RS.88 100/- WAS UNDISCLOSED. THE ASSESSEE FURTHER E XPLAINED THAT THE CERTIFICATES DO NOT BELONG TO HIM BECAUSE MOST OF T HE CERTIFICATES LYING WITH HIM DUE TO FACT THAT HE HAS RENDERED FREE SERVICES TO C OLLECT SHARE CERTIFICATES DUE TO CHAIRMANSHIP OF ROYALE CO-OPERATIVE BANK LTD. THE A SSESSEE FILED TWO IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 11 CONFIRMATIONS FROM SHRI NATVERLAL ZINABAI GONAWALA AND SHRI NARENDRA N. CHEVLI. ACCORDING TO THE ASSESSEE THESE PERSONS WERE SHAREHOLDERS BUT THE AO ON PERUSAL OF THE CONFIRMATION NOTED THA T THE ADDRESSES OF THE PARTIES ARE INCOMPLETE AND IT IS NOT KNOWN WHET HER THEY ARE ASSESSED TO TAX OR NOT. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BECAUSE THE ASSESSEE WAS INVOLVED IN ROYALE CO-OPERATIVE BA NK LTD. AHMEDABAD WHO WAS THE FOUNDER OF THE BANK AND INITIAL SHARE C APITAL WAS ALSO BROUGHT BY THE ASSESSEE. THE ABOVE FACTS THEREFORE SHOW THAT THE ASSESSEE WAS FOUND IN POSSESSION OF THE ABOVE SHARE S DURING THE COURSE OF SEARCH. THE POSSESSION OF THE SHARE CERTIFICATES BY THE ASSESSEE DURING THE COURSE OF SEARCH HAS NOT BEEN DISPUTED. NO PART OF THE SHARE CERTIFICATES WERE ENTERED IN TO THE BOOKS OF ACCOUN T. THE ASSESSEE COULD NOT EXPLAIN SATISFACTORILY THE POSSESSION OF THE RE MAINING SHARE CERTIFICATES. THE CONFIRMATION FILED BY THE ASSESSE E IN RESPECT OF TWO PARTIES WERE FOUND TO BE INCOMPLETE AS THEIR ADDRES SES WERE INCOMPLETE AND IT WAS NOT CLEAR WHETHER THEY WERE ASSESSED TO TAX OR NOT. SECTION 292 (C) OF THE IT ACT PROVIDES AS UNDER: 292C. [(1)] WHERE ANY BOOKS OF ACCOUNT OTHER DOCUMENTS MONEY BULLION JEWELLERY OR OTHER VALUA BLE ARTICLE OR THING ARE OR IS FOUND IN THE POSSESSION OR CONTR OL OF ANY PERSON IN THE COURSE OF A SEARCH UNDER SECTION 132 [OR SURVEY UNDER SECTION 133A ] IT MAY IN ANY PROCEEDING UNDER THIS ACT BE PRESUMED (I) THAT SUCH BOOKS OF ACCOUNT OTHER DOCUMENTS MO NEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG BELONG OR BELONGS TO SUCH PERSON; (II) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS ARE TRUE; AND (III) THAT THE SIGNATURE AND EVERY OTHER PART OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS WHICH PURPORT TO BE IN THE HANDWRITING OF ANY PARTICULAR PERSON OR WHICH MAY IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 12 REASONABLY BE ASSUMED TO HAVE BEEN SIGNED BY OR TO BE IN THE HANDWRITING OF ANY PARTICULAR PERSON ARE IN T HAT PERSONS HANDWRITING AND IN THE CASE OF A DOCUMENT STAMPED EXECUTED OR ATTESTED THAT IT WAS DULY STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPORTS TO HA VE BEEN SO EXECUTED OR ATTESTED.] [(2) WHERE ANY BOOKS OF ACCOUNT OTHER DOCUMENTS OR ASSETS HAVE BEEN DELIVERED TO THE REQUISITIONING OFFICER I N ACCORDANCE WITH THE PROVISIONS OF SECTION 132A THEN THE PROVISIONS OF SUB-SECTION (1) SHALL APPLY AS IF SUCH BOOKS OF ACC OUNT OTHER DOCUMENTS OR ASSETS WHICH HAD BEEN TAKEN INTO CUSTO DY FROM THE PERSON REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) AS THE CASE MAY BE OF SUB-SECTION (1) OF SECTION 132A HAD BEEN FOUND IN THE POSSESSION OR CONTROL OF THAT PER SON IN THE COURSE OF A SEARCH UNDER SECTION 132 .] THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SUREND RA M. KHANDHAR VS ACIT AND OTHERS 321 ITR 254 HELD AS UNDER: HELD DISMISSING THE APPEAL THAT THERE WAS A PRESUMPTION THAT THE CONTENTS OF THE DOCUMENTS WERE TRUE AS THE DOCUMENT WAS SEIZED FROM THE PREMISES IN THE CONTROL OF THE ASSESSEE AND THE DOCUMENT BELONG ED TO THE ASSESSEE. A READING OF THE DOCUMENT WOULD MA KE IT CLEAR THAT THE DOCUMENT IN FACT WAS FOR RETURN O F MONEY ALREADY ADVANCED. THE PRESUMPTION OUGHT TO HAVE BEEN REBUTTED BY THE ASSESSEE. THE ASSESSEE AT THE FIRST AVAILABLE OPPORTUNITY DID NOT DENY THE EXISTE NCE OF THE DOCUMENT NOR DID THE ASSESSEE AT ANY SUBSEQUENT STAGE OF APPEAL OR BEFORE THE COURT DENY THE DOCUME NT. THE ONLY CONTENTION RAISED WAS THAT THE TRANSACTION WAS NOT GIVEN EFFECT TO. THERE WAS NO VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND FAIR PLAY. THE AD DITION WAS JUSTIFIED. 19. CONSIDERING THE ABOVE FACTS AND IN THE LIGHT OF THE ABOVE PROVISION AND DECISION REFERRED TO ABOVE IT IS CLEAR THAT TH E ASSESSEE NEVER DISPUTED POSSESSION OF THE SHARE CERTIFICATES IN HI S POSSESSION DURING THE COURSE OF SEARCH. THE EXPLANATION GIVEN BY THE ASSE SSEE WAS FOUND TO BE INCURRED. THUS THE ASSESSEE HAS NOT BEEN ABLE TO R EBUT THE PRESUMPTION IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 13 LAID AGAINST HIM IN ACCORDANCE WITH LAW. SINCE THE ASSESSEE FAILED TO EXPLAIN THE POSSESSION OF THE SHARE CERTIFICATES DU RING THE COURSE OF SEARCH THROUGH RELEVANT AND COGENT MATERIAL THEREF ORE WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF T HE AUTHORITIES BELOW. WE CONFIRM THE SAME AND DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 20. GROUND NO.7 OF ASSESSEES APPEAL AND GROUND NO. 5 OF THE DEPARTMENTAL APPEAL READ AS UNDER: ASSESSEES APPEAL 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING ADDITION TO THE EXTENT OF RS.76 06 48 1/- OUT OF RS.1 14 09 721/- MADE BY THE ASSESSING OFFIC ER IN RESPECT OF VARIOUS BANK ACCOUNTS AFTER HOLDING T HAT THE SAME BELONG TO THE APPELLANT. REVENUES APPEAL 5. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RES TRICTING THE ADDITION OF RS.1 14 09 721/- MADE ON ACCOUNT OF UNACCOUNTED TRANSACTIONS IN BANK ACCOUNTS TO RS.76 06 481/-. THE AO MADE THE ADDITION OF RS.1 14 09 721/- ON ACC OUNT OF INCOME OUT OF BANK ACCOUNTS. THE AO MADE THE ADDITION ON ACCOU NT OF BENAMI BANK ACCOUNTS LOCATED DURING THE COURSE OF SEARCH. THE A O HAS GIVEN DETAILED REASONS FOR HOLDING THAT THE ABOVE ACCOUNTS BELONGE D TO THE ASSESSEE. THESE ACCOUNTS WERE FOUND FROM THE PREMISES OF THE ASSESSEE AND THE PERSONS HOLDING THE ACCOUNTS WERE EITHER EMPLOYEES OR WORKING FOR THE ASSESSEE. THE ACCOUNT HOLDERS WERE INTRODUCED BY TH E ASSESSEE AND NONE RESPONDED TO THE SUMMONS ISSUED U/S 131 OF THE IT A CT. 7 OUT OF 13 ACCOUNTS WERE ADMITTED BY THE ASSESSEE WHICH INVOLV ED PEAK CREDIT OF RS.46 77 722/-. THE AO HAS TAKEN THE PEAK OF RS.9 5 0 81 013/- WHICH COMES TO RS.1 14 09 721/- AND ACCORDINGLY MADE THE ADDITION. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE AO WAS NOT JUSTIFIED IN IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 14 TAKING THE WHOLE TURNOVER AS BELONGING TO HIM ONLY. THE ASSESSEE FURTHER PLEADED THAT PEAK CREDIT OF 7 ACCOUNTS DISCLOSED BY HIM SHOULD BE CONSIDERED FOR THE PURPOSE OF INCOME. IT WAS EXPLAI NED THAT THE AO HAS NOT DETERMINED INCOME AS PER CHAPTER XIV-B OF THE I T ACT. THE ASSESSEE FURTHER ARGUED THAT ESTIMATION OF INCOME @12% OUT O F THE TOTAL TURNOVER DOES NOT COMMENSURATE WITH THE TOTAL UNACCOUNTED IN VESTMENTS AND EXPENDITURE FOUND BY THE AO. IT WAS PLEADED THAT TH E ENTIRE ADDITION MAY BE DELETED. THE LEARNED CIT(A) NOTED THAT THE ASSES SEE COULD NOT PRODUCE EVIDENCE OR EXPLANATION REGARDING THE ACCOUNTS LOCA TED DURING THE COURSE OF SEARCH PROCEEDINGS. THE ASSESSEE SIMPLY EXPLAINE D THAT THE ACCOUNTS BELONGED TO HIM BUT REST OF THE ACCOUNTS WERE NOT BELONGING TO HIM AND IT WAS FOR THE AO TO MAKE ENQUIRIES BEFORE MAKING T HE ABOVE ADDITION. THE LEARNED CIT(A) THEREFORE NOTED THAT THE ASSES SEE WAS TRYING TO AVOID AND SIDE-TRACK THE ISSUE. THE LEARNED CIT(A) CONSID ERING THE FACTS OF THE CASE NOTED THAT IT WOULD BE FAIR AND REASONABLE TO ESTIMATE THE PROFIT @8% OF THE TURNOVER AMOUNT INVOLVED IN THE SEVENTEE N ACCOUNTS I.E. RS.9 50 81 013/- WHICH COMES TO RS.76 06 481/-. THE ADDITION WAS ACCORDINGLY MADE AND THE REMAINING ADDITION OUT OF RS.1 14 09 721/- WAS DIRECTED TO BE DELETED. 21. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE HAS SUBMITTED THAT THE ASSESSEE OWNED 7 BANK ACCOUNTS AND FOR THE REMAINING BACK AC COUNTS THE ASSESSEE DID NOT AGREE. THERE WERE TOTAL 17 BANK AC COUNTS. HE HAS SUBMITTED THAT THE AO TOOK THE AVERAGE PROFIT MARGI N ON ESTIMATE BASIS AT 12% OF THE TURNOVER AND MADE THE ADDITION OF RS. 1 14 09 721/- ON THE TOTAL AMOUNT OF RS.9 50 81 013/- AS PER ANNEXURE-D. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE A MOUNTS WERE TAKEN IN THE BANK ACCOUNTS AND IT WAS HELD THAT THE SAME ACC OUNTS BELONGING TO THE ASSESSEE BENAMI THEREFORE PEAK CREDIT SHOULD BE CONSIDERED BY THE AO INSTEAD OF MAKING OUT PROFIT ON TOTAL PEAK INVES TMENTS. HE HAS IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 15 SUBMITTED THAT TOTAL ACCOUNTS SHOULD BE TAKEN TOGET HER FOR MAKING OUT PEAK ADDITION. HE HAS SUBMITTED THAT INDIVIDUAL ACC OUNTS SHOULD NOT BE TAKEN INTO CONSIDERATION BY THE AO AND THE LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE ON THE BASIS OF THE SEIZED MATERIAL AND THE DETAILS MENTIONED IN ALL THE ACCOUNTS FILED A CHART SHOWING THE ENTIRE PEAK AND SUBMITTED THAT PEAK ADDITION SHOULD BE RES TRICTED TO THE PEAK CREDIT ONLY. HE HAS FURTHER SUBMITTED THAT LOAN ACC OUNT SHOULD BE EXCLUDED AND PROFIT MAY BE CALCULATED ACCORDINGLY. THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER FAIRLY ADMITTED THAT THE CHART NOW FILED TO SHOW PEAK CREDIT WAS NOT FILED BEFORE THE AO AND THEREF ORE SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE AO FOR VERIFICATION. 22. ON THE OTHER HAND THE LEARNED DR RELIED UPON T HE ORDER OF THE AO AND SUBMITTED THAT HIGHER OF THE TWO ACCOUNTS SHOUL D BE CONSIDERED AS PEAK AND ADDITION SHOULD BE MADE ACCORDINGLY. THE L EARNED DR SUBMITTED THAT OWNERSHIP AND POSSESSION OF THE BANK ACCOUNTS HAVE BEEN ADMITTED BY THE ASSESSEE THEREFORE ALL ACCOU NTS SHOULD BE TAKEN INDIVIDUALLY BECAUSE IT BELONGED TO THE DIFFERENT P ERSONS. HE HAS SUBMITTED THAT THE CHART OF THE PEAK NOW SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE SHOULD NOT BE ADMITTED BEC AUSE IT IS ADDITIONAL EVIDENCE IN NATURE. THE LEARNED DR FURTHER SUBMITTE D THAT THE LEARNED CIT(A) HAS WRONGLY APPLIED 8% AS PROFIT RATE TO EST IMATE THE ADDITION BECAUSE THE TURNOVER OF THE ASSESSEE IS MORE THAN R S.40 LACS THEREFORE PROVISIONS OF SECTION 4AD OF THE IT ACT WILL NOT AP PLY. THE LEARNED DR FURTHER SUBMITTED THAT SINCE THE ASSESSEE MAINTAINE D BOOKS OF ACCOUNT THEREFORE PROVISIONS OF SECTION 44AD OF THE IT ACT WILL ALSO NOT APPLY. THE LEARNED DR FURTHER SUBMITTED THAT THE AO TOOK 23 AC COUNTS AS PER ANNEXURE D BUT THE AO HAS OMITTED TO TAKE THE BANK ACCOUNTS MENTIONED AT SR. NO. 4 AND 7 AT PAGE 22 OF THE ASSE SSMENT ORDER IN PARA 12.5 IN RESPECT OF VRUNDAVAN CORPORATION AND VAIBHA V CORPORATION WHICH HAS BEEN ADMITTED BY THE ASSESSEE AS UNACCOUN TED BANK ACCOUNT IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 16 OF THE ASSESSEE. THE LEARNED DR SUBMITTED THAT IN T HE LOAN ACCOUNT ALSO TURNOVER CAN BE CALCULATED FOR THE PURPOSE OF MAKIN G ADDITION. THE LEARNED DR THEREFORE SUBMITTED THAT THE LEARNED C IT(A) SHOULD NOT HAVE DELETED EVEN THE PART OF THE ADDITION IN THE MATTER . 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. DURING THE COURSE OF SEARCH VARIOUS BANK ACCOUNTS WERE FOUND WHICH WERE INVENTORISED. IT WAS FOUND FROM TH E BANK ACCOUNTS THAT THEY CONTAIN UNDISCLOSED INCOME. SUMMARY OF TH E BANK ACCOUNTS WAS SUMMARIZED AS ANNEXURE A ATTACHED WITH THE ASSE SSMENT ORDER. IT WAS ALSO FOUND THAT MOST OF THE ACCOUNTS HOLDERS WE RE INTRODUCED BY THE ASSESSEE DETAILS OF THE BANK ACCOUNTS AND OTHER REL EVANT DETAILS AS COLLECTED FROM THE BANK WERE ENCLOSED AS ANNEXURE B TO THE ASSESSMENT ORDER. SUMMON U/S 131 OF THE IT ACT WERE ISSUED TO ALL THE PARTIES. SOME OF THEM WERE FOUND UN-TRACEABLE AND SOME OF THEM WE RE SERVED WITH THE NOTICE BUT DID NOT RESPOND BEFORE THE AO. EVEN NO R EQUEST IS RECEIVED BY THE AO FOR ANY ADJOURNMENT. THE ASSESSEE WAS REQUES TED TO PRODUCE ALL THE PARTIES FOR VERIFICATION. BUT THE ASSESSEE DID NOT COMPLY WITH THE DIRECTION OF THE AO FOR EXAMINATION OF THE PARTIES IN THE NAME OF WHOM THE BANK ACCOUNTS WERE FOUND. THE ASSESSEE IN SPITE OF SPECIFIC SHOW CAUSE NOTICE TO PRODUCE THE PARTIES FOR VERIFICATIO N FILED A REPLY STATING THAT HE IS CHAIRMAN OF ROYALE CO-OPERATIVE BANK LTD . AND HE CARRIED OUT WORK OF CHINA GATE. IT WAS EXPLAINED THAT THE ASSES SEE IS NOT INVOLVED IN THESE BANK ACCOUNTS. THE ASSESSEE HOWEVER OWNED UP 7 BANK ACCOUNTS BELONGING TO HIM IN THE NAME OF OTHER CONTRACTORS A S PER PARA 12.5 OF THE ASSESSMENT ORDER. THE ASSESSEE EXPLAINED THAT PEAK OF RS.46 77 772/- MAY BE ACCEPTED. THE AO NOTED THAT THERE WERE TOTAL 17 BANK ACCOUNTS OUT OF WHICH THE ASSESSEE HAS OWNED UP ONLY 7 BANK ACCOUNTS AND PERUSAL OF THE DETAILS SHOWS THAT CASH IS DEPOSITED AND WITHDRAWN FROM THE BANK ACCOUNTS. THE AO THEREFORE NOTED THAT SI NCE THE BANK ACCOUNTS WERE FOUND AND SEIZED FROM THE PREMISES OF THE ASSESSEE DURING IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 17 THE COURSE OF SEARCH THEREFORE ONUS IS UPON THE A SSESSEE TO EXPLAIN THAT THE BANK ACCOUNTS DO NOT BELONG TO HIM BUT THE ASSE SSEE FAILED TO DISCHARGE HIS ONUS. THE AO ACCORDINGLY HELD THAT IN COME DERIVED FROM THESE BANK ACCOUNTS ARE UNACCOUNTED INCOME OF THE A SSESSEE. TOTAL PEAK INVESTMENTS IN ALL THE BANK ACCOUNTS WAS FOUND TO B E IN A SUM OF RS.1 12 61 957/- AS PER ANNEXURE-B OF THE ASSESSMEN T ORDER. THE TOTAL TURNOVER OUT OF THE SAME BANK ACCOUNT AS PER ANNEXU RE D WAS FOUND IN A SUM OF RS.9.50 81 013/-. THE AO HOWEVER APPLIED 12% PROFIT ON THE TURNOVER AND MADE ADDITION OF RS.1 14 09 721/-. THE LEARNED CIT(A) HOWEVER REDUCED THE PERCENTAGE TO 8% AND MODIFIED THE ADDITION. THE ABOVE FACTS CLEARLY SHOW THAT THE AUTHORITIES BELOW HAVE NOT APPLIED THEIR MIND TO THE MATTER IN ISSUE. NONE OF THEM HAVE TAKE N CARE AS TO HOW THE PEAK CREDIT IN ALL THE UNACCOUNTED BANK ACCOUNTS SH OULD BE COMPUTED. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS NEEMAR RAM BADLU RAM 122 ITR 68 HELD THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE-FIRM FOR THE YEARS 1960-61 TO 1963-64 REVEALED IRREGULA RITIES. THE ITO INCLUDED VARIOUS AMOUNTS AS INCOME FROM UNDISCLOSED SOURCES FOR THESE YEARS. THE AAC UPHELD THE ORDERS OF THE ITO. ON FURTHER APPEAL THE TRIBUNAL OBSERVED THAT THERE WAS NO DIS PUTE ABOUT FIGURES OF DIFFERENCE IN THE BALANCE-SHEET I.E. E XCESS OF ASSETS OVER THE ACTUAL LIABILITIES THE UNACCOUNTED MONEYS USED IN THE BUSINESS FROM YEAR TO YEAR AND THE ADDITIONS BY WAY OF EXTRA PROFITS TO BE MADE EACH YEAR. THE ASSESSEES STATEMENT THAT IT HA D NO OTHER KNOWN SOURCE OF INCOME AND THE DEPARTMENTS ACCEPTA NCE OF THAT POSITION CONSTITUTED A GOOD CIRCUMSTANTIAL EVIDENCE IN FAVOUR OF THE ASSESSEE. THE ASSESSEES STATEMENT THAT UNACCOU NTED MONEYS USED IN THE BUSINESS AND THE BALANCE-SHEET EXCESS O F ASSETS OVER LIABILITIES REPRESENTED THE ASSESSEES OWN MONEY JU STIFIED THE INFERENCE THAT THE TWO ITEMS WERE NOT SEPARATE BUT FELL IN THE SAME CATEGORY I. E. UNACCOUNTED MONEYS USED IN THE BUSI NESS. THE TRIBUNAL HELD THAT THE UNACCOUNTED MONEY SO USED WA S NOT IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 18 CAPABLE OF BIFURCATING ON THE GROUND THAT IT WAS US ED IN DIFFERENT NAMES OR IN A DIFFERENT MANNER. THE TRIBUNAL ALSO D ID NOT AGREE WITH THE DEPARTMENTAL AUTHORITIES THAT MERELY BECAU SE THE ASSETS IN THE BALANCE-SHEET CHANGED FROM TIME TO TIME THE DIFFERENCE WOULD NOT BE AVAILABLE FOR EXPLAINING A SIMILAR DIF FERENCE IN SUBSEQUENT YEARS. IF A PARTICULAR ASSET WAS SOLD AN D IN ITS PLACE NEW ASSETS WERE PURCHASED THAT DID NOT MEAN THAT FR ESH UNACCOUNTED MONEY WAS USED. THE TRIBUNAL HELD THAT THE ADDITIONS IN EACH OF THE YEARS UNDER APPEAL SHOULD BE NIL FOR THE YEARS IN WHICH THE ADDITION ON THE BASIS OF DIFFERE NCE IN THE PEAK MONEY USED FROM YEAR TO YEAR EXCEEDED THE EXTRA PRO FIT AND WHERE THE EXTRA PROFIT ADDITION WAS MORE THAN THE ADDITIO N ON ACCOUNT OF THE PEAK CREDITS THE BIGGER OF TH4E TWO SHOULD REM AIN AS THE ADDITION. ON A REFERENCE IT WAS CONTENDED THAT THE FINDINGS OF THE TRIBUNAL WERE SPECULATIVE: HELD THAT IN THE CIRCU MSTANCE THE INFERENCE DRAWN BY THE TRIBUNAL THAT THERE WAS A CO NNECTION BETWEEN UNACCOUNTED MONEY AND EXCESS ASSETS DISCOVE RED IN THE BUSINESS FROM YEAR TO YEAR COULD NOT BE SAID TO BE PERVERSE OR UNREAL. CLEARLY THERE WAS EVIDENCE TO SUSTAIN IT. T HE OTHER INFERENCE OF THE TRIBUNAL THAT THERE WAS A CONNECTI ON BETWEEN THE UNACCOUNTED MONEY AND THE EXTRA PROFITS WITHHELD FR OM THE ACCOUNT BOOKS FROM YEAR TO YEAR WAS BASED IN THE TE STIMONY OF THE ASSESSEE. THE FINDINGS OF THE TRIBUNAL WERE NOT PER VERSE. THEY WERE FULLY SUPPORTED BY THE MATERIAL ON RECORD. ITAT ALLAHABAD BENCH IN THE CASE OF CIT VS FERTILIZER TRADERS 83 TTJ 473 HE LD THAT THE CORRECT PRINCIPLE IS THAT EACH DEBIT AND CREDIT SHOULD BE ARRANGED CHRONOLOGICALLY IRRESPECTIVE OF THE FACT THAT SUCH DEBIT/CREDIT APPEARING IN THE ACCOUNTS AND THAT FROM EACH RECEIP T AND PAYMENT THE BALANCES SHOULD BE STRUCK. SUCH A BALA NCE THEN WOULD GO TO COVER ALL THE EARLIER AND SUBSEQUENT RE CEIPTS PAYMENTS INVESTMENT ETC. TO THE EXTENT OF THE PEAK AND THAT IS IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 19 ASSESSABLE AS UNDISCLOSED INCOME IN THE HANDS OF TH E ASSESSEE. IF THE PEAK OF THE DEBIT BALANCES IS CONSIDERED AS INC OME THE SAME WILL COVER NEGATIVE CASH BALANCE ALSO OCCURRING LAT ER ON. THEREFORE THE HIGHER OF THE TWO FIGURES REPRESENTED BY NET PE AK OF THE DEBIT/CREDIT IS LIABLE TO BE TREATED IN PRINCIPLE T HE UNDISCLOSED INCOME OF THE ASSESSEE. 24. CONSIDERING THE FACTS OF THE CASE AND IN THE LI GHT OF THE ABOVE DECISIONS IT IS CLEAR THAT THE ASSESSEE AT ASSESSM ENT STAGE DID NOT OWNED UP ALL THE BANK ACCOUNTS BELONGING TO HIM AND INITI ALLY CLAIMED THEM TO BE GENNUINE BANK ACCOUNTS BELONGING TO OTHER CONTRA CTORS. LATER ON THE ASSESSEE OWNED UP SEVEN BANK ACCOUNTS BUT WHILE CAL CULATING PEAK CREDIT HAS NOT TAKEN UP OWN BANK ACCOUNTS IN THE NA ME OF VRUNDAVAN CORPORATION AND VAIBHAV CORPORATION. THE AO THOUGH INITIALLY TAKEN UP THE MATER FOR THE PURPOSE OF MAKING ADDITION ON ACC OUNT OF PEAK DEPOSIT IN ALL THE BANK ACCOUNTS HAS PROCEEDED IN COMPUTING THE PROFIT BY TAKING THE TURNOVER ON THE PEAK CREDIT AND MADE THE ADDITI ON. THE LEARNED CIT(A) THOUGH ON REASONABLE BASIS APPLIED 8% OF THE PROFIT ON THE TOTAL TURNOVER BUT IGNORED THAT THE PEAK CREDIT ADDITION SHOULD HAVE BEEN VERIFIED IN THE MATTER ALONG WITH PROFIT EARNED BY THE ASSESSEE ON THE TOTAL TURNOVER. THE LEARNED COUNSEL FOR THE ASSESSE E PREPARED A CHART ON THE BASIS OF THE ENTIRE MATERIAL ON RECORD TO SHOW THAT ALL THE BANK ACCOUNTS SHOULD BE TAKEN TOGETHER FOR THE PURPOSE O F ESTIMATING THE PEAK CREDIT. SINCE THE CALCULATION OF THE LEARNED COUNSE L FOR THE ASSESSEE IS IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 20 BASED UPON THE MATERIAL ALREADY AVAILABLE ON RECORD THEREFORE IT CANNOT BE CONSIDERED AS ADDITIONAL EVIDENCE IN NATURE. HOW EVER SUCH CALCULATION WAS NOT FILED BEFORE THE AUTHORITIES BE LOW. THEREFORE IT REQUIRES VERIFICATION BY THE AO. THE FACTS AND CIRC UMSTANCES WOULD SHOW THAT ALL THE ENTRIES IN ALL THE BANK ACCOUNTS SHOUL D BE TAKEN UP TOGETHER FOR THE PURPOSE OF MAKING ADDITION ON ACCOUNT OF PE AK. THE AO HAS CONSIDERED AND MADE THE ADDITION ON THE BASIS OF PE AK INVESTMENTS OF ALL THE ACCOUNTS. CONSIDERING THE FACTS OF THE CASE WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE ISSUE TO THE FILE OF THE AO WITH DIRECTION TO WORK OUT PEAK CREDIT IN ALL THE BANK A CCOUNTS TOGETHER AND MAKE ADDITION ACCORDINGLY. ON THE ESTIMATED TURNOVE R ALSO THE AO MAY CALCULATE THE PROFIT SEPARATELY ON ACCOUNT OF UNACC OUNTED INCOME EARNED BY THE ASSESSEE DURING THE BLOCK PERIOD BY APPLYING 8% RATE OF PROFIT IN THE MATTER AS APPLIED BY THE LEARNED CIT(A). AS IS HELD IN THE ASSESSMENT ORDER AND EXCESS OF EITHER TWO MAY BE ADDED AS ADDI TION. THE AO SHALL GIVE REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE COPY OF THE WORKIN G OF THE PEAK BEFORE THE AO AS IS FILED BEFORE THE TRIBUNAL FOR APPRECIATION AND CONSIDERATION. IN THIS VIEW OF THE MATTER THE CROSS APPEALS ON THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 25. GROUND NO.8 OF THE ASSESSEES APPEAL READS AS U NDER: 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 21 BY CONFIRMING ADDITION OF RS.10 01 000/- MADE BY TH E ASSESSING OFFICER IN RESPECT OF BEING THE AMOUNT OF UNDISCLOSED INCOME OF THE APPELLANT. THE AO MADE THE ADDITION OF RS.10 01 000/- ON ACCOU NT OF INCOME DISCLOSED BY SHRI MUKESH MODI. THIS INCOME HAS BEEN ADMITTED BY THE ASSESSEE AND ACCORDINGLY SHOWN IN HIS UNDISCLOSED I NCOME IN THE RETURN FOR THE BLOCK PERIOD. THE LEARNED CIT(A) ACCORDINGL Y DISMISSED THE APPEAL OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE AFORESAID FIGURE IS ALREADY DISCLOSED BY THE ASSESS EE IN THE RETURN FILED FOR THE BLOCK PERIOD. THEREFORE FURTHER ADDITION IS UN JUSTIFIED. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 26. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. IF THE ASSESSEE HAS DISCLOSED RS.10 01 000/- IN THE RETURN FILED FO R THE BLOCK PERIOD THERE WAS NO JUSTIFICATION TO MAKE SEPARATE ADDITIO N. WE FIND SUPPORT FROM P-4 FILED BY THE ASSESSEE WHICH SHOWS THAT THI S AMOUNT IS DISCLOSED IN THE RETURN FOR THE BLOCK PERIOD. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE AO TO VERIFY T HE ABOVE FIGURE FROM THE RETURN FILED FOR THE BLOCK PERIOD AND IN CASE T HE SAME IS DISCLOSED IN THE RETURN FILED FOR THE BLOCK PERIOD ADDITION SHA LL BE DELETED. AS A RESULT THIS GROUND OF APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. 27. GROUND NO.11 OF THE APPEAL OF THE ASSESSEE AND GROUND NO.8 OF THE REVENUES APPEAL READ AS UNDER: ASSESSEES APPEAL 11. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING ADDITION TO THE EXTENT OF RS.34 40 37 6/- OUT OF RS.43 03 470/- MADE BY THE ASSESSING OFFICER IN RESPECT OF NEW ASHIRWAD PROJECT. IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 22 REVENUES APPEAL 8. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RES TRICTING THE ADDITION OF RS.53 29 500/- MADE ON ACCOUNT OF UNDISCLOSED PROFIT FROM ASHIRWAD PROJECT TO RS.34 40 376. THE AO MADE ADDITION OF RS.53 20 500/- ON ACCOUNT O F INCOME FROM NEW ASHIRWAD PROJECT. THE AO MADE THE ABOVE ADDITION ON THE GROUND THAT HE APPLIED RATIO OF 10% PROFIT AGAINST THE TURNOVER OF RS.4 30 04 700/-. THE ADDITION THEREFORE SHOULD HAVE BEEN AT RS.43 00 4 70/- AGAINST THE ADDITION OF RS.53 29 500/-. THE AO HAS WORKED OUT T OTAL TURNOVER ON THE BASIS OF THE AFORESAID DOCUMENTS NAMELY BS-12 SEIZE D FROM THE TIRUPATI PLAZA OFFICE AND DAIRIES BS-1 BS-2 BS-5 BS-7 AND BS 3 ROW HOUSE BS-6 AFTER GIVING DETAILED REASONS IN PARA 20 OF T HE BLOCK ASSESSMENT ORDER. THE MAIN ISSUE INVOLVED IS THAT THE ASSESSEE WANTED TO EXPLAIN THAT IT WAS PROJECT OF CO-OPERATIVE SOCIETY AND HE DERIVED ONLY COMMISSION INCOME WHEREAS THE AO HAS TAKEN THE PLEA TO ESTABLISH THAT IT WAS THE PROJECT OF THE ASSESSEE THROUGH OUT THE PERIOD CONTAINED IN THE BLOCK PERIOD. THE ASSESSEE FILED AFFIDAVITS FROM TH E PRESIDENT OF THE SOCIETY AND AUDIT REPORT FROM THE AUDITOR WHICH WAS CONSIDERED AFTERTHOUGHT. THE OWNERSHIP WAS ADMITTED U/S 132 (4 ) OF THE IT ACT. THE LEARNED CIT(A) CONSIDERING THE NATURE OF THE DOCUME NTS SEIZED POSSESSION OF SUCH DOCUMENTS WITH THE ASSESSEE THE NATURE OF ENTRIES IN THE SEIZED RECORD PERIOD OF CONSTRUCTION INVOLVED AND THE RELEVANT MATERIAL NOTED THAT THE ASSESSEE DERIVED INCOME FRO M THE AFORESAID PROJECT. THE LEARNED CIT(A) ON PERUSAL OF THE RETUR N OF INCOME FOR ASSESSMENT YEAR 1999-2000 FILED IN MARCH 2000 NOTE D THAT INCOME FROM ASHIRWAD PROJECT AND NOT FROM ASHIRWAD CO-OPERATIVE SOCIETY AS INDICATED AND EVEN ON A QUERY THE ASSESSEE COULD NO T CO-RELATE ENTRIES WITH REGARD TO SEIZED RECORDS. THE ASSESSEE ALSO DI SCLOSED HEAVY INCOME U/S 132(4) OF THE IT ACT WHICH IS BASED ON PROFIT F ROM THE PROJECT ONLY. IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 23 THE LEARNED CIT(A) ACCORDINGLY DIRECTED TO APPLY ES TIMATED PROFIT OF 8% AGAINST TURNOVER AND SUSTAINED THE ADDITION BEING I NCOME FROM ASHIRWAD PARK PROJECT AT RS.34 47 376/- AND BALANCE ADDITION WAS DELETED. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS NOT TURNOVER OF THE ASSESSEE AND THE ASSESSEE ONLY EARNED BROKERAGE . ON THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHOR ITIES BELOW. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF SEARCH A ND SEIZURE OPERATION INCRIMINATING DOCUMENTS WERE FOUND WHICH SUGGEST TH AT PROJECT IS DEVELOPED BY THE ASSESSEE. THE AO CONSIDERED EACH A ND EVERY SEIZED DOCUMENT TO SHOW THAT THE PROJECT WAS DEVELOPED BY THE ASSESSEE. THE FINDINGS GIVEN BY THE AO HAVE NOT BEEN REBUTTED THR OUGH ANY MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE MERELY SUBMITTED THAT THE ASSESSEE HAS EARNED BROKERAGE OUT OF THE SAID PROJE CT BUT NO EVIDENCE WAS FILED IN SUPPORT OF THE ABOVE CONTENTION. IN TH E ABSENCE OF ANY EVIDENCE TO REBUT THE FINDINGS WE DO NOT FIND IT T O BE A FIT CASE FOR INTERFERENCE. THE LEARNED CIT(A) ALSO SPECIFICALLY NOTED THAT APART FROM THE ABOVE INCRIMINATING DOCUMENTS THE ASSESSEE HAS DISCLOSED HEAVY INCOME U/S 132(4) OF THE IT ACT WHICH APPEARS TO BE BASED ON PROFIT FROM SUCH PROJECT ONLY. THEREFORE AUTHORITIES BELOW WER E JUSTIFIED IN HOLDING THAT THE ASSESSEE EARNED INCOME OUT OF THE SAID PRO JECT. THE LEARNED CIT(A) ON PROPER APPRECIATION OF MATERIAL ON RECORD RIGHTLY REDUCED THE PROFIT TO 8%. THEREFORE THERE IS NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE. THE AO WHILE CALCULATING PROF IT RATE AT 10% INSTEAD OF RS.43 00 470/- HAS TAKEN THE FIGURE OF RS.53 29 500/- IN COMPUTATION OF INCOME WHICH IS TYPOGRAPHICAL MISTAKE AND HAS RI GHTLY CORRECTED BY THE LEARNED CIT(A). THEREFORE DEPARTMENTAL APPEAL ON THIS GROUND HAS NO MERIT AND IS LIABLE TO BE DISMISSED. IN VIEW OF THE ABOVE DISCUSSION BOTH THE APPEALS ON THESE GROUNDS ARE DISMISSED. IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 24 29. GROUND NO.12 OF THE ASSESSEES APPEAL AND GROUN D NO.9 OF THE REVENUES APPEAL READ AS UNDER: ASSESSEES APPEAL 12. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-II AHMEDABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING ADDITION TO THE EXTENT OF RS.1 33 480 /- OUT OF RS.6 67 400/- MADE BY THE ASSESSING OFFICER IN RESPECT OF PROFIT FROM NEW SHIV SHAKTI ROW HOUSES. REVENUES APPEAL 9. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN REST RICTING THE ADDITION OF RS.6 67 400/- MADE ON ACCOUNT OF UNDISCLOSED PROFIT DERIVED FROM NEW SHIVSHAKTI ROW HOUSES PROJECT TO RS.1 33 480/-. THE AO MADE THE ADDITION OF RS.6 67 400/- ON ACCOUN T OF PROFIT FROM NEW SHIVSHAKTI ROW HOUSE PROJECT. THE AO MADE THE A DDITION ON THE BASIS OF SEIZED MATERIAL OF WHICH IT WAS FOUND THAT THE TOTAL RECEIPTS WERE OF RS.66 00 000/-. THE ASSESSEE STATED THAT THE SAI D PROJECT BELONGED TO SHRI MUKESH DESAI AND NOT TO HIM. THE AO RECORDED S TATEMENT OF SHRI DESAI WHO WAS IN JAIL AND ADMITTED THAT THE PROJECT BELONGED TO HIM THOUGH THE ASSESSEE BEING HIS FRIEND WAS LOOKING AF TER THE SAME. THE ASSESSEE PLEADED THAT INCOME IS TO BE ASSESSED IN T HE HANDS OF OWNER OF THE PROJECT ONLY. THE AO HOWEVER APPLIED PROFIT RA TE OF 10% ON THE TOTAL RECEIPT OF RS.66 74 000/- AND MADE ADDITION OF RS.6 67 400/-. THE LEARNED CIT(A) ESTIMATED THE BROKERAGE @2% OF THE T OTAL TURNOVER AND RESTRICTED THE ADDITION TO RS.1 33 480/- . THE LEAR NED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ON THE OTHER HAND THE LEARNED DR SUBMITTED THAT TH E ASSESSEE HAS ADMITTED TO HAVE EARNED INCOME ON COMMISSION BASIS. THE LEARNED DR SUBMITTED THAT THE ISSUE INVOLVED PERTAINS TO SHIVS HAKTI ROW HOUSE PROJECT. THE LEARNED DR REFERRED TO PAGE 22 OF THE ASSESSMENT ORDER IN WHICH AT SR. NO. 14 THE BANK ACCOUNT OF SHIV CONSTR UCTION WAS FOUND IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 25 FROM THE POSSESSION OF THE ASSESSEE WHICH WAS IN RE SPECT OF SHIVSHAKTI ROW HOUSE CONTRACTOR. THE LEARNED DR THEREFORE SU BMITTED THAT SINCE UNACCOUNTED BANK ACCOUNT IN RESPECT OF SHIVSHAKTI R OW HOUSE WAS ALSO FOUND FROM THE POSSESSION OF THE ASSESSEE THEREFOR E THE ASSESSEE CANNOT DENY HIS INVOLVEMENT IN THIS PROJECT. THE LEARNED D R SUBMITTED THAT THE LEARNED CIT(A) HAS MERELY STATED THAT THE ASSESSEE IS NOT OWNER AND THAT PROFIT SHOULD HAVE BEEN CHARGED ACCORDINGLY INSTEAD OF 2% COMMISSION/BROKERAGE ESTIMATED BY THE LEARNED CIT(A ). 30. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. IT IS A FACT THAT DURING THE C OURSE OF SEARCH CERTAIN BENAMI BANK ACCOUNTS WERE FOUND FROM THE POSSESSION OF THE ASSESSEE ON WHICH WE HAVE DEALT THE ISSUE SPECIFICALLY AND S EPARATELY ABOVE. AT PAGE 22 OF THE ASSESSMENT ORDER THE SAME DETAILS AR E MENTIONED AND AT SR. NO.14 THE BANK ACCOUNT OF SHIV CONSTRUCTION IS MENTIONED WHICH ACCORDING TO EXPLANATION OF THE ASSESSEE WAS INVEST MENT OF SHIVSHAKTI ROW HOUSE CONTRACTOR. THE ISSUE INVOLVED IN THE PRE SENT GROUND OF APPEAL PERTAINS TO THE SAME SHIVSHAKTI ROW HOUSE. O N THE BENAMI ACCOUNTS WE HAVE HELD THE AMOUNT THAT THE SAME IS UNACCOUNTED INCOME OF THE ASSESSEE ON WHICH DIRECTIONS HAVE BEE N GIVEN TO THE AO TO ESTIMATE THE PEAK CREDIT AND THE PROFIT. THEREFORE IT WOULD PROVE SPECIFICALLY THAT THE ASSESSEE WAS BENAMI OWNER OF THE AFORESAID PROJECT. THE ASSESSEE HOWEVER EXPLAINED THAT THE SAME PROJE CT BELONGED TO SHRI MUKESH DESAI WHO WAS FOUND IN CUSTODY AND WAS BROUG HT FROM JAIL AND MADE STATEMENT IN FAVOUR OF THE ASSESSEE. THE STATE MENT OF THE PERSON WHO WAS IN CUSTODY/JAIL IS THUS FOUND CONTRARY TO T HE MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. HIS STATEMENT THEREFORE IS NOT OF WORTH RELIANCE AND HAS BEEN RI GHTLY EXCLUDED FROM CONSIDERATION BY THE AO. THE LEARNED CIT(A) OVERLOO KED THIS IMPORTANT ASPECT OF THE MATTER AND WITHOUT ANY BASIS PRESUMED THAT THE ASSESSEE HAS EARNED BROKERAGE OF 2%. THE FINDINGS OF THE AO ARE THUS SUPPORTED IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 26 BY MATERIAL ON RECORD THAT THE ASSESSEE EARNED PROF IT OUT OF THE SAME PROJECT ALSO. THE AO WAS HOWEVER NOT JUSTIFIED IN APPLYING 10% PROFIT AGAINST THE SAID PROJECT. WE HAVE CONFIRMED PROFIT RATE OF 8% ON OTHER ISSUE FOR THE PURPOSE OF ESTIMATING THE INCOME. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW TO THAT EXTENT AND DIRECT THE AO TO APPLY PROFIT RATE OF 8% ON THE TOTAL GROSS RECEIPTS AND MADE THE ADDITION ACCORDINGLY. AS A RESULT THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. HOWEVER THE GROUND OF APPEAL OF THE REV ENUE IS PARTLY ALLOWED. 31. THERE IS NO OTHER GROUND OF APPEAL ARGUED OR PR ESSED IN THE APPEAL OF THE ASSESSEE. 32. AS A RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. IT (SS)A NO.342/AHD/2003 (REVENUES APPEAL) 33. SOME OF THE GROUNDS OF APPEAL OF THE REVENUE HA VE ALREADY BEEN ADJUDICATED UPON WHILE DECIDING THE APPEAL OF THE A SSESSEE. THE REMAINING GROUNDS IN THE DEPARTMENTAL APPEAL ARE DI SPOSED AS UNDER. 34. GROUND NO.1 OF THE REVENUES APPEAL READS AS UN DER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RES TRICTING THE ADDITION OF RS.25 96 238/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN JEWELLERY TO RS.3 50 000/ -. THE AO MADE THE ADDITION OF RS.25 26 238/- AS UNEXP LAINED INVESTMENTS IN JEWELLERY FOUND DURING THE COURSE OF SEARCH PROC EEDINGS. THE ASSESSEE SUBMITTED THAT THE AO HAS INCORRECTLY FOLLOWED THE FIGURE OF RS.25 96 238/- IN PLACE OF CORRECT FIGURE OF RS.25 26 238/-. IT WAS EXPLAINED THAT CERTAIN ITEMS OF JEWELLERY WERE PURC HASED BY THE ASSESSEES WIFE AFTER WITHDRAWING CASH FROM HER ACC OUNT WITH DIAMOND JUBILEE CO-OPERATIVE BANK LTD. WHICH WAS AROUND RS. 9 00 000/-. THE ASSESSEES EXPLANATION REGARDING JEWELLERY BELONGIN G TO HIS SON AND IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 27 DAUGHTER AND ABOUT OTHER VALUATION OF DIAMONDS WAS REJECTED BY THE AO. THE ASSESSEE REITERATED THAT HE AND HIS WIFE HAD DE CLARED JEWELLERY AT RS.10 71 337/- AND RS.23 90 141/- (TOTALING TO RS.3 4 61 478/-) DURING VDIS 1997. THE DETAILS HAVE BEEN FILED BY THE ASSES SEE IN THE PAPER BOOK. THE ASSESSEE HAD DISCLOSED AN AMOUNT OF RS.3 50 000/- IN THE BLOCK RETURN EVEN TO SATISFY THE OTHER VALUATION MA DE BY THE AO. HOWEVER THE AO OBSERVED THAT THE ASSESSEE TRIED TO EXPLAIN THE SOURCE OF RS.18 76 283/- OUT OF WHICH RS.6 41 955/- WAS DUE T O OTHER VALUATION. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE OBSERVATIONS OF THE AO AND CONSIDERING DISCLOSURE U NDER VDIS 1997 AND PURCHASE OF JEWELLERY OUT OF BANK ACCOUNT ETC. SUST AINED THE ADDITION OF RS.3 50 000/- AND DELETED THE REMAINING ADDITION. T HE LEARNED CIT(A) ALSO OBSERVED THAT INVESTMENTS IN JEWELLERY BEING M ADE OUT OF UNDISCLOSED INCOME WOULD BE SET OFF AGAINST THE INC OME DETERMINED AS A RESULT OF THIS ORDER. 35. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT AS PER THE PANCHNAMA JEWELLERY OF RS.25 26 238/- WA S FOUND DURING THE COURSE OF SEARCH AND SUBSTANTIAL JEWELLERY WAS SEIZ ED FROM THE ASSESSEES RESIDENCE. SIMILARLY JEWELLERY WORTH RS.7 98 073/- WAS ALSO FOUND FROM THE LOCKER NO.B-399 OF SURAT DISTRICT CO-OPERATIVE BANK LTD. WHICH ACCORDING TO CLAIM OF THE ASSESSEE BELONGED TO HUF. THE LEARNED DR SUBMITTED THAT THE ASSESSEE IN REPLY TO QUESTIONS D URING THE SEARCH STATED THAT THIS JEWELLERY BELONGED TO HIM AND HIS WIFE. THE DIAMOND JEWELLERY WAS PURCHASED JOINTLY BEFORE ONE TO TWO Y EARS BACK AND THE ENTIRE PURCHASES WERE OUT OF UNACCOUNTED INCOME WHI CH HE IS NOT IN A POSITION TO EXPLAIN THE SOURCE. THE ASSESSEE IN HIS FURTHER STATEMENT DECLARED THAT THE JELLEWERY OF RS.25 26 238/- IS FR OM UNACCOUNTED INCOME OF THE BLOCK PERIOD. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO HOW UNDISCLOSED JEWELLERY WAS INCLUDED IN THE RETURN AN D THE ASSESSEE FILED REPLY THERETO. THE LEARNED DR FURTHER SUBMITTED THA T STATEMENT OF SMT. IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 28 NISHI J. MODI WIFE OF THE ASSESSEE WAS RECORDED RE GARDING THE ORNAMENTS FOUND IN THE LOCKER TO WHICH IT WAS EXPLAINED THAT IT BELONGED TO MOTHER- IN-LAW AND MARRIED SISTER. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS HOWEVER FAILED TO EXPLAIN THE SOURCE OF THE SAM E. THE LEARNED DR FURTHER SUBMITTED THAT PART OF THE JEWELLERY WAS CO NSIDERED BY THE AO AS BELONGING TO FAMILY MEMBERS OF THE ASSESSEE. THE LE ARNED DR FURTHER SUBMITTED THAT THE JEWELLERY WHICH WAS CLAIMED TO B E BELONGING TO THE HUF WAS NOT REFLECTED IN THE BALANCE SHEET OF THE H UF. EVEN THE AO HAS GIVEN BENEFIT TO THE EXTENT OF CUSTOMARY JEWELLERY HELD AS STREEDHAN FOR WHICH NO ADVERSE INFERENCE WAS DRAWN. THE LEARNED D R THEREFORE SUBMITTED THAT THE AO HAS NOT MADE ANY ADDITION EXC EPT THE ADDITION OF RS.25 96 238/- (CORRECT FIGURE RS.25 26 238/-). THE LEARNED DR ACCORDINGLY SUBMITTED THAT NO EVIDENCE WAS FILED TO SHOW THAT JEWELLERY WAS PURCHASED OR ACQUIRED OUT OF WITHDRAWAL MADE FR OM BANK. THE LEARNED DR REFERRED TO PB-177 WHICH IS INVENTORY OF THE JEWELLERY ETC. FOUND DURING THE COURSE OF SEARCH AND SUBMITTED THA T THOUGH IN THE SAME INVENTORY GOLD AND DIAMOND JEWELLERY IS SEPARA TELY MENTIONED BUT THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION REGARDIN G DIAMONDS VARIOUS ITEMS OF WHICH VALUE WAS APPROXIMATELY RS.17 00 000 /-. THE LEARNED DR REFERRED TO THE STATEMENT OF THE ASSESSEE RECORDED ON THE DATE OF SEARCH DATED 17-04-2001 (PB -185/2) IN WHICH IN QUESTION N O.15 THE EXPLANATION OF PURCHASE OF DIAMOND JEWELLERY GOLD AND SILVER WAS ASKED FOR EXCEEDING RS.25 26 238/- AND THE ASSESSEE REPLI ED THAT HE AND HIS WIFE ARE JOINT OWNERS OF THE ORNAMENTS AND THE JEWE LLERY WERE PURCHASED IN LAST ONE AND HALF YEARS TO TWO YEARS FROM HIS UN ACCOUNTED INCOME FOR WHICH HE IS UNABLE TO EXPLAIN THE SOURCE OF THE SAM E. THE LEARNED DR REFERRED TO ANOTHER STATEMENT OF THE ASSESSEE DATED 24-4-2001 (PB- 201/1) IN WHICH IN REPLY TO QUESTION NO.3 THE ASSES SEE AGAIN REITERATED THAT THE JEWELLERY FOUND DURING THE COURSE OF SEARC H WAS PURCHASED OUT OF UNACCOUNTED INCOME FOR WHICH THE ASSESSEE AGREED TO SURRENDER THE SAME IN THE RETURN FOR THE BLOCK PERIOD. THE LEARNE D DR THEREFORE IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 29 SUBMITTED THAT THERE WAS NO REASON FOR THE LEARNED CIT(A) TO DELETE THE ADDITION. THE LEARNED DR SUBMITTED THAT EXPLANATION OF THE ASSESSEE THAT JEWELLERY BELONGED TO HIS FAMILY MEMBERS WAS FOUND TO BE INCORRECT AND THAT THE ASSESSEE NEVER DISCLOSED AT THE TIME OF RE CORDING HIS STATEMENT DURING THE COURSE OF SEARCH OR LATER ON THAT THE JE WLLERY FOUND AND SEIZED DURING THE COURSE OF SEARCH ALREADY DECLARED BY THE ASSESSEE IN VDIS 1997. THE LEARNED DR SUBMITTED THAT NO EVIDENCE IN THIS REGARD WAS FILED BEFORE THE AO AND THAT VDIS 1997 CERTIFICATES WERE NEVER FILED BEFORE THE AO AT ANY POINT OF TIME. THEREFORE THE LEARNED CIT (A) WITHOUT CONFRONTING THE SAME WRONGLY DELETED THE ADDITION. THE LEARNED DR SUBMITTED THAT NO EVIDENCE WAS BROUGHT ON RECORD TH AT THE JEWELLERY DECLARED IN VDIS 1997 BY THE ASSESSEE AND HIS WIFE WERE SAME ITEMS WHICH WERE FOUND DURING THE COURSE OF SEARCH. THE L EARNED DR SUBMITTED THAT DECLARATION IN VDIS 1997 WAS MADE OF JEWELLERY IN THE ASSESSMENT YEAR 1986-87 IN BOTH THE CASES BUT THE STATEMENT O F THE ASSESSEE WAS VERY SPECIFIC DURING THE COURSE OF SEARCH THAT THE JEWELLERY FOUND DURING THE COURSE OF SEARCH WAS ACQUIRED/PURCHASED IN THE LAST ONE AND HALF TO TWO YEARS FROM THE UNACCOUNTED INCOME WHICH IS CONT RARY TO THE DECLARATION MADE IN VDIS 1997. THE LEARNED DR SUBMI TTED THAT EXPLANATION OF THE ASSESSEE BEFORE THE LEARNED CIT( A) WAS CONTRARY TO THE SUBMISSIONS MADE BEFORE THE AO. THEREFORE THE LEAR NED CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 36. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND REFERRED TO PB-9 TO PB-13 WHICH ARE VDIS 1997 CERTIFICATES TO SHOW THAT THE ASSESSEE AND HIS WIFE HAD DECLARED JEWELLERY IN ASSESSMENT YEAR 1986-87 IN A SUM OF RS.10 71 337/- AND RS.23 90 141/-. THE LEARNED COUN SEL FOR THE ASSESSEE ADMITTED THAT VDIS 1997 CERTIFICATES WERE FILED BEFORE THE LEARNED CIT(A) FOR THE FIRST TIME AND THAT DISCLOSU RE MADE BEFORE THE COMMISSIONER WAS PART OF THE RECORD OF THE REVENUE DEPARTMENT WHICH IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 30 HAS BEEN RIGHTLY APPRECIATED BY THE LEARNED CIT(A). HE HAS SUBMITTED THAT THE ASSESSEE HAS DISCLOSED SOME JEWELLERY IN V DIS 1997 AS AGAINST FOUND DURING THE COURSE OF SEARCH. THEREFORE THE A O WAS NOT JUSTIFIED IN MAKING THE ADDITION. 37. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT DURI NG THE COURSE OF SEARCH PROCEEDINGS AT ASSESSEES RESIDENCE JEWELLERY AS PE R PANCHNAMA WAS FOUND FOR RS.25 26 238/-. DETAILS OF THE SAME ARE G IVEN IN THE PANCHNAMA. THE LEARNED DR POINTED OUT SPECIFICALLY THAT THESE ITEMS CONTAINED OF GOLD JEWELLERY AND DIAMOND JEWELLERY. THE ASSESSEE IN HIS STATEMENT RECORDED DURING THE COURSE OF SEARCH ADMI TTED THAT THE SAME BELONGED TO HIM AND HIS WIFE BEING JOINT OWNERS WHI CH WERE PURCHASED IN LAST ONE AND HALF TO TWO YEARS FROM HIS UNDISCLOSED INCOME. THE ASSESSEE IN HIS FURTHER STATEMENT AGREED TO SURRENDER VALUE OF THE SAME BEING THE JEWELLERY PURCHASED FROM UNDISCLOSED INCOME IN THE RETURN FOR THE BLOCK PERIOD. THE ASSESSEE CLAIMED BEFORE THE AO AT THE A SSESSMENT STAGE THAT THE JEWELLERY WAS PURCHASED OUT OF WITHDRAWAL MADE FROM THE BANK AND THAT SAME BELONGED TO THE FAMILY MEMBERS ALSO. HOWE VER EXPLANATION OF THE ASSESSEE WAS NOT FOUND TO BE CORRECT AND THE AO MADE ADDITION OF UNEXPLAINED JEWELLERY FOUND AT THE RESIDENCE OF THE ASSESSEE DURING THE COURSE OF SEARCH. THE ASSESSEE NEVER INTIMATED THE SEARCH PARTY ABOUT ACQUISITION OF THE JEWELLERY IN THE YEAR 1986-87 WH ICH WAS DISCLOSED IN VDIS 1997. SIMILARLY WIFE OF THE ASSESSEE HAS ALSO NOT MADE ANY SUCH STATEMENT. THE ASSESSEE NEVER FILED ANY VDIS CERTIF ICATE 1997 BEFORE THE AO AT THE ASSESSMENT STAGE TO EXPLAIN THAT THE JEWE LLERY FOUND DURING THE COURSE OF SEARCH WAS THE SAME AS DECLARED IN VDIS 1 997. THE ASSESSEE FOR THE FIRST TIME EXPLAINED BEFORE THE LEARNED CIT (A) THAT JEWELLERY FOUND DURING THE COURSE OF SEARCH WAS ALREADY DECLARED IN VDIS 1997. HOWEVER THE LEARNED CIT(A) WITHOUT EXAMINING THE CORRECTNES S OF THE STATEMENT OF THE ASSESSEE AND WITHOUT CONFRONTING THE SAME CERTI FICATE TO THE AO IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 31 DELETED THE ADDITION WITHOUT PASSING ANY SPEAKING O RDER ON THE ISSUE. THE LEARNED CIT(A) HAS NOT GIVEN ANY FINDING WHETHE R THE JEWELLERY DISCLOSED IN VDIS 1997 WAS THE SAME JEWELLERY WHICH WAS FOUND DURING THE COURSE OF SEARCH FROM THE RESIDENCE OF THE ASSE SSEE. THE ASSESSEE HAS ALSO NOT FILED ANY EVIDENCE TO SHOW WHETHER JEWELLE RY FOUND DURING THE COURSE OF SEARCH WAS THE SAME WHICH WERE DISCLOSED IN VDIS 1997. IN THE VDIS CERTIFICATES 1997 THE ASSESSEE AND HIS WIFE CL AIMED THAT THE JEWELLERY OF WORTH RS.34 61 478/- WAS ACQUIRED BY T HEM IN THE ASSESSMENT YEAR 1986-87. THE AFORESAID STATEMENT IS CONTRADICTORY TO THE STATEMENT MADE DURING THE COURSE OF SEARCH BECA USE IN THE STATEMENT RECORDED DURING THE COURSE OF SEARCH THE ASSESSEE EXPLAINED THAT GOLD JEWELLERY FOUND DURING THE COURSE OF SEAR CH WAS ACQUIRED BY THE ASSESSEE AND HIS WIFE IN ONE AND HALF TO TWO YEARS FROM HIS UNACCOUNTED INCOME. THE LEARNED CIT(A) THEREFORE FAILED TO NO TE THE MATERIAL CONTRADICTION IN THE STATEMENT OF THE ASSESSEE AND THE STATEMENT MADE IN THE VDIS 1997. THE LEARNED CIT(A) ALSO FAILED TO NO TE THAT THE ASSESSEE MADE A CONTRADICTORY CLAIM BEFORE THE AO AS AGAINST EXPLANATION MADE BEFORE HIM. THEREFORE THE LEARNED CIT(A) FAILED TO EXAMINE THIS ISSUE BY CONSIDERING THE ENTIRE MATERIAL AND EVIDENCE ON REC ORD. THE LEARNED CIT(A) HAS ALSO FAILED TO CONFRONT THE EXPLANATION MADE AT THE APPELLATE STAGE ABOUT THE VDIS 1997 TO THE AO AND NO REMAND R EPORT FROM THE AO WAS CALLED FOR ON FRESH AND INDEPENDENT SUBMISSIONS . THEREFORE IN OUR VIEW THE FINDING OF THE LEARNED CIT(A) CANNOT BE S USTAINED AND THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS I SSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH DIRECTION TO RE-DEC IDE THIS ISSUE BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AO SHALL DISCUSS ALL THE EVIDENCES AND MATERIALS IN TH E FRESH ORDER AND SHALL PASS A SPEAKING AND REASONED ORDER ON THE MATTER ON ISSUE. AS A RESULT THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 32 38. GROUND NO.3 OF THE REVENUES APPEAL READS AS UN DER: 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.1 43 000/- MADE ON ACCOUNT OF UNACCOUNTED FOREIGN TOUR EXPENSES. THE AO MADE THE ADDITION OF RS.1 43 000/- ON ACCOUN T OF FOREIGN TOUR EXPENSES. THE AO MADE THIS ADDITION ON THE BASIS OF ESTIMATED FOREIGN TRAVEL EXPENSES. IT WAS EXPLAINED THAT THE EXPENSES ARE RECORDED IN THE BOOKS OF ACCOUNT TO THE EXTENT OF RS.1 30 000/- IN FINANCIAL YEAR 1997- 98. THEREFORE AD HOC ADDITION IS UNJUSTIFIED. THE LEARNED CIT(A) IN THIS VIEW OF THE MATTER DELETED THE ADDITION. ON CONSIDE RATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND IT TO BE PROPER TO INTE RFERE WITH THE FINDINGS OF THE LEARNED CIT(A) BECAUSE THE TRAVELING EXPENSE S HAVE ALREADY BEEN DISCLOSED IN THE BOOKS OF ACCOUNT. THEREFORE ON ES TIMATED BASIS NO ADDITION CAN BE MADE IN THE BLOCK ASSESSMENT. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 39. GROUND NO.6 OF THE REVENUES APPEAL READS AS UN DER: 6. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.1 50 218/- MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT IN JEWELLERY. THE AO MADE THE ADDITION OF RS.1 50 218/- ON ACCOUN T OF UNDISCLOSED INVESTMENTS IN JEWELLERY. THE LEARNED CIT(A) CONSID ERING HIS FINDINGS IN PARA 3 DELETED THE ADDITION. THE LEARNED DR SUBMITT ED THAT THE LEARNED CIT(A) WITHOUT PASSING REASONED ORDER DELETED THE A DDITION. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE LEARNED CI T(A) HAS PASSED A UNREASONED ORDER. HE HAS REFERRED TO PARA 3 OF HIS ORDER WHICH IS NOT RELEVANT TO THE MATTER IN ISSUE. IT APPEARS THAT TH IS ISSUE IS CONNECTED WITH INVESTMENTS OF JEWELLERY OF WHICH WE HAVE ALRE ADY RESTORED THE MATTER TO THE FILE OF THE AO. ORDINARILY WHEN THE LEARNED CIT(A) DID NOT IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 33 PASS SPEAKING ORDER THE MATTER WOULD HAVE BEEN REM ANDED BACK TO THE FILE OF THE LEARNED CIT(A) FOR PASSING A REASONED O RDER HOWEVER WHEN THE INVESTMENTS IN JEWELLERY HAS ALREADY BEEN RESTORED TO THE FILE OF THE AO THEREFORE WE DEEM IT FIT AND PROPER TO RESTORE THI S ISSUE ALSO TO THE FILE OF THE AO FOR RECONSIDERATION. WE ACCORDINGLY SET ASID E THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FIL E OF THE AO FOR RECONSIDERATION WITH THE MAIN ISSUE OF INVESTMENTS IN JEWELLERY. AS A RESULT THIS GROUND OF APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES. 40. GROUND NO.7 OF THE APPEAL OF THE REVENUE READS AS UNDER: 7. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO DELETE THE MISCELLANEOUS ADDITIONS OF RS.31 270/- AND RS.69 850/- AND HAS FURTHER ERRED IN HIS OBSERVATIO NS THAT THERE WAS NO UNDISCLOSED EXPENDITURE OF RS.30 000/- THE AO MADE THE ABOVE ADDITIONS AS UNDISCLOSED INCO ME AND UNDISCLOSED EXPENDITURE. THE LEARNED CIT(A) NOTED T HAT ON PERUSAL OF THE ASSESSMENT ORDER THE ABOVE FIGURES AS MENTIONED IN THE GROUNDS OF APPEAL ARE ALREADY COVERED IN THE DISCLOSURE OF INC OME IN THE RETURN FILED FOR THE BLOCK PERIOD THEREFORE IT WOULD AMOUNT TO DOUBLE ADDITION. THE ADDITIONS WERE ACCORDINGLY DELETED PARTLY. THE LEAR NED DR MERELY RELIED UPON THE ORDER OF THE AO AND HAS NOT POINTED OUT AN Y INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). WE ACCORDINGLY DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE. ONCE AMOUNT OF THE ADDITION HAS A LREADY BEEN DISCLOSED IN THE RETURN OF INCOME AS NOTED BY THE LEARNED CIT (A) NO FURTHER ADDITION CAN BE MADE OF THE SAME AMOUNT. THIS GROUN D OF APPEAL OF THE REVENUE IS DISMISSED. 41. GROUND NO.10 OF THE REVENUES APPEAL READS AS U NDER: IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 34 10. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.9 61 420/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN RESIDENTIAL BUNGALOW. THE AO MADE THE ADDITION OF RS.9 61 420/- ON ACCOUN T OF UNDISCLOSED INVESTMENT IN RESIDENTIAL BUNGALOW. THE AO HAS MADE THE ABOVE ADDITION DUE TO DIFFERENCED IN THE VALUATION OF RESIDENTIAL HOUSE. THE TOTAL COST AS PER REGISTERED VALUERS REPORT WAS RS.69 75 000/- A GAINST THE INVESTMENT OF RS.60 13 580/- SHOWN IN THE BOOKS OF ACCOUNT. IT WAS SUBMITTED THAT THE AO HAS NOT CONFRONTED THE VALUERS REPORT AND NO EVIDENCE IS BROUGHT ON RECORD IF THE VALUE OF THE PROPERTY WAS MORE THA N SHOWN BY THE ASSESSEE. THE LEARNED CIT(A) CONSIDERING THE ABOVE FACTS NOTED THAT THE AO HAS MADE THE ADDITION ON THE BASIS OF VALUATION REPORT WITHOUT GOING INTO ITS DETAILS. THE ASSESSEE PLEADED THAT AMOUNT OF RS.16 00 000/- HAS ALREADY BEEN SHOWN AS UNDISCLOSED INCOME ON ACCOUNT OF VALUE OF THE LAND THEREFORE NO FURTHER ADDITION IS CALLED FOR. THE LEARNED CIT(A) ACCORDINGLY DELETED THE ADDITION. 42. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND REFERRED TO PAGE 45 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE AO HAS CONSIDERED THE VALUE OF THE LAND AND COST AND HAS M ADE THE ADDITION PROPERLY. ON THE OTHER HAND THE LEARNED COUNSEL FO R THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW. 43. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE D O NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE. THE SEARCH WAS CONDUCTED IN THIS CASE ON 17-04-2001. THE ASSESSEE WAS REQUESTED TO FURNISH D ETAILS OF CONSTRUCTION AND VALUATION REPORT VIDE LETTER DATED 16-04-2003. IT WOULD THEREFORE SHOW THAT VALUATION REPORT WAS TAKEN ON RECORD AFTER CONCLUSION OF THE SEARCH WHICH CANNOT BE CONSIDERED AS EVIDENCE FOUND DURING THE COURSE OF SEARCH. THE ASSESSEE IN HIS ST ATEMENT RECORDED DURING THE COURSE OF SEARCH EXPLAINED THAT INVESTME NTS IN PROPERTY HAVE BEEN MADE AND PAYMENTS WERE MADE FROM THE ACCOUNT O F THE HUF BY IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 35 CHEQUES. THEREFORE THERE WAS NO EVIDENCE FOUND DUR ING THE COURSE OF SEARCH THAT THE ASSESSEE HAS SHOWN UNDER-VALUATION OF INVESTMENTS IN THE PROPERTY. THEREFORE ADDITION CANNOT BE MADE IN THE BLOCK ASSESSMENT ON ACCOUNT OF DIFFERENCE IN VALUATION SH OWN IN THE BOOKS OF ACCOUNT AND ESTIMATED BY THE VALUATION OFFICER. THI S GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 44. GROUND NO.11 OF THE APPEAL OF THE REVENUE READS AS UNDER: 11. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.1 36 326/- MADE ON ACCOUNT OF UNDISCLOSED CREDIT BALANCE IN VARIOUS BANK ACCOUNTS . IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ADDITION OF RS.1 36 326/- WAS MADE REGARDING CREDIT BALANCE IN VARIOUS BANK ACCOUNTS WHICH HAVE BEEN CONSIDERED BY THE AO IN TH E TOTAL TURNOVER OF 17 BANK ACCOUNTS THEREFORE NO SEPARATE ADDITION I S REQUIRED. THE CONTENTION OF THE ASSESSEE FOUND TO BE CORRECT AND ADDITION WAS ACCORDINGLY DELETED. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE BECAUSE O N THIS ISSUE PEAK ADDITION HAS ALREADY BEEN CONSIDERED IN RESPECT OF THE BANK ACCOUNTS FOUND DURING THE COURSE OF SEARCH IN THE PREMISES OF THE ASSESSEE. NO SEPARATE ADDITION IS REQUIRED WHICH IS RIGHTLY DELETED BY TH E LEARNED CIT(A). THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 45. GROUND NO.12 OF THE REVENUE READS AS UNDER: 12. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DI RECTING TO ALLOW SET-OFF OF INCOME EARNED FROM CONSTRUCTION BUSINESS OR BROKERAGE ETC. AGAINST INCOME FROM B ANK TURNOVER. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) AL LOWED THE SET OFF IN PARA 23 OF THE APPELLATE ORDER REGARDING 3 INCOMES AS PER PARA 16 19 AND 20. THE LEARNED DR SUBMITTED THAT THIS GROUND W AS NEVER TAKEN BEFORE THE LEARNED CIT(A) THEREFORE THE LEARNED C IT(A) EXCEEDED HIS IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 36 JURISDICTION IN GRANTING RELIEF TO THE ASSESSEE WIT HOUT ANY BASIS. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED THAT SINCE THE ASSESSEE CHALLENGED ALL THE ADDITIONS THEREFOR E SET OFF WAS RIGHTLY GIVEN BY THE LEARNED CIT(A) IN THE APPELLATE ORDER. 46. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE A RE OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE LEARNED CIT(A). WE FIND THAT THE ASSESSEE HAS NOT RAISED ANY GROUND OF APPEAL BEFORE THE LEARNED CIT(A) CLAIMING SET OFF AGAINST THE ITEMS F OR WHICH ADDITIONS HAVE BEEN SUSTAINED BEING ADDED TO THE UNDISCLOSED INCOM E DECLARED BY THE ASSESSEE. IT IS NOT CLEAR HOW THE LEARNED CIT(A) HA S ALLOWED RELIEF TO THE ASSESSEE WHICH WAS NOT CLAIMED BY THE ASSESSEE BEFO RE HIM. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LEARNED CIT( A) ON THIS ISSUE AND RESTORE THIS GROUND TO HIS FILE WITH DIRECTION TO R E-DECIDE THE SAME AFRESH AND HE SHALL GIVE REASONS FOR GIVING RELIEF TO THE ASSESSEE WHICH WAS NOT CLAIMED BEFORE HIM. AS A RESULT THIS GROUND OF APP EAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 47. GROUND NO.13 OF THE APPEAL OF THE REVENUE READS AS UNDER: 13. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING THE SURCHARGE LEVIED U/S. 113 OF THE INCOM E TAX ACT BY HOLDING THAT SURCHARGE IS NOT LEVIABLE I N RESPECT OF SEARCHES CONDUCTED PRIOR TO 1.6.2002 TH OUGH THE PROVISO TO SECTION 113 OF THE ACT SPECIFICALLY PROVIDES THAT SURCHARGE IS LEVIABLE IN THE CASE OF SEARCHES U/S. 132 INITIATED ON OR AFTER 1.4.99. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT SUR CHARGE IS TO BE LEVIED U/S 113 WITH EFFECT FROM 01-06-2002 BECAUSE THE PRO VISO WAS ADDED IN THE AFORESAID SECTION WITH EFFECT FROM 01-06-2002. IT WAS SUBMITTED THAT SINCE SEARCH WAS CONDUCTED IN THE CASE OF THE ASSES SEE PRIOR TO 01-06-2002 THEREFORE NO SURCHARGE IS LEVIABLE. TH E LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND DELETED CHARGING SURCHARGE. IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 37 THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE ISSUE IS NOW DECIDED AGAINST THE ASSESSEE BY THE HO NBLE SUPREME COURT IN THE CASE OF SURESH N. GUPTA REPORTED IN 297 ITR 322 IN WHICH IT WAS HELD THAT PROVISO TO SECTION 113 IS CLARIFICATORY IN NATURE. THEREFORE SURCHARGE IS LEVIABLE EVEN TO THE SEARCH ES PRIOR TO INSERTION OF THE PROVISO. THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER SUBMITTED THAT SINCE THE MATTER IS REFERRE D TO LARGER BENCH OF THE HONBLE SUPREME COURT THEREFORE THE DECISION IN THE CASE OF SURESH N. GUPTA (SUPRA) MAY NOT BE FOLLOWED. ON THE OTHER HAND LEARNED DR SUBMITTED THAT UNLESS THE DECISION OF THE HONBLE S UPREME COURT IS SUPERSEDED BY ANOTHER DECISION THE EXISTING DECISI ON OF THE HONBLE SUPREME COURT SHALL HAVE TO BE APPLIED AGAINST THE ASSESSEE. 48. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE A RE OF THE VIEW THAT THAT LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING T HE LEVY OF SURCHARGE IN THE MATTER. THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F SURESH N. GUPTA (SUPRA. UNLESS THE ABOVE DECISION IS SUPERSEDED; TH E DECISION OF THE HONBLE SUPREME COURT SHALL BE BINDING ON THE TRIBU NAL. BY FOLLOWING THE SAME DECISION OF THE HONBLE SUPREME COURT WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE ORDER OF THE AO IN LEVYING SURCHARGE IN THE MATTER. THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 49. GROUND NOS. 14 AND 15 OF THE APPEAL OF THE REVE NUE ARE GENERAL IN NATURE AND NEED NO FINDING. 50. IN VIEW OF THE ABOVE DISCUSSION THE DEPARTMENT AL APPEAL IS PARTLY ALLOWED AS INDICATED ABOVE. IT(SS)A NOS. 342 AND 343/AHD/2003 SHRI JITENDRA H. MODI 38 51. IN THE RESULT BOTH THE CROSS APPEALS ARE PART LY ALLOWED. ORDER PRONOUNCED ON 21-05-2010 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 21-05-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD