The ACIT, Central Circle-1(1),, Ahmedabad v. Nirma Limited,, Ahmedabad

ITSSA 50/AHD/2005 | misc
Pronouncement Date: 27-08-2010 | Result: Dismissed

Appeal Details

RSA Number 5020516 RSA 2005
Assessee PAN AAACN5350K
Bench Ahmedabad
Appeal Number ITSSA 50/AHD/2005
Duration Of Justice 5 year(s) 5 month(s) 25 day(s)
Appellant The ACIT, Central Circle-1(1),, Ahmedabad
Respondent Nirma Limited,, Ahmedabad
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 27-08-2010
Date Of Final Hearing 04-05-2010
Next Hearing Date 04-05-2010
Assessment Year misc
Appeal Filed On 04-03-2005
Judgment Text
IT(SS) NO.98-50/AHD/05 NIRMA LTD. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE SHRI MAHAVIR SINGH AND SHRI_D.C. AGRAWAL IT(SS) NO.98/AHD/2005. (BLOCK PERIOD 1-4-1995 TO 27-9-2001) NIRMA LIMITED NIRMA HOUSE ASHRAM ROAD AHMEDABAD. VS ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) 3 RD FLOOR AAYAKAR BHAVAN ASHRAM ROAD AHMEDABAD. (APPELLANT) (RESPONDENT) AND IT(SS) NO.50/AHD/2005 (BLOCK PERIOD 1-4-1995 TO 27-9-2001) ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(1) 3 RD FLOOR AAYAKAR BHAVAN ASHRAM ROAD AHMEDABAD. VS NIRMA LIMITED NIRMA HOUSE ASHRAM ROAD AHMEDABAD. (APPELLANT) (RESPONDENT) PAN: AAACN 5350K APPELLANT BY : SHRI S.N. SOPARKAR WITH SHRI HIMANSHU SHAH. RESPONDENT BY : SHRI RAJEEV AGARWAL CIT (DR) ( )/ ORDER PER SHR D.C. AGRAWAL. THESE ARE THE TWO CROSS APPEALS ONE FILED BY THE A SSESSEE AND OTHER FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. C .I.T. (A) DATED 15-12-2004. IN HIS APPEAL ASSESSEE HAS RAISED FOLLOWING GROUNDS :- 1. THE LD. C.I.T.(A) XI AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN FRAMING AN APPELLATE ORDER ON 15-12-2004 FOR THE APPEAL FILED AGAINST THE ASSESSMENT ORDER PASSED U/ S.158BC OF THE ACT BY THE LD. ASSISTANT COMMISSIONER OF INCOME-TAX CE NTRAL CIR.1(1) AHMEDABAD. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 2 2. THE LD. C.I.T.(A)-XI HAS ERRED IN HOLDING THAT THE MENTION OF NIRMA GROUP OF ENTITIES AND/OR NIRMA GROUP BY T HE LEARNED ACIT IN HIS ORDER IS CORRECT AND DOES NOT HAVE FAR REACHIN G ADVERSE AND UNJUSTIFIED IMPLICATIONS TO YOUR APPELLANT. 3. THE LD. C.I.T.(A)-XI AHMEDABAD HAS ERRED IN REJ ECTING OBJECTION RAISED BY THE APPELLANT AGAINST THE IRRELEVANT AND INCORRECT OBSERVATIONS PRESUMPTION U/S. 132(4A) AND INVOCATI ON OF [PROCEEDINGS U/S. 158BC MADE BY THE ASSESSING OFFICER IN FRAMING THE ASSESSMENT ORDER AND FURTHER ERRED IN HOLDING THAT IT IS BEYON D THE JURISDICTION OF THE CIT (A) TO DECIDE ON THE ISSUE OF THE VALIDITY OF T HE SEARCH AND SEIZURE PROCEEDINGS AND THEREFORE CANNOT BE RAISED IN APPEA L AGAINST BLOCK ASSESSMENT ORDER. 4. THE LD. C.I.T.(A)-XI AHMEDABAD HAS ERRED IN HO LDING THAT THE APPELLANT HAS FAILED TO EXPLAIN THE SEIZED PAPERS P AGE NOS.87 88 AND BACKSIDE OF 108 AND FURTHER ERRED IN UPHOLDING THE ASSUMPTION OF THE ASSESSING OFFICER THAT PAYMENT OF RS.17 84 49 140/- AND RS.33 31 43 916/- HAS TAKEN PLACE AND HAS FURTHER E RRED IN CONFIRMING THE ADDITION OF RS.17 84 49 140/- AND RS.3 31 43 91 6/- AS UNDISCLOSED INCOME ON ASSUMPTION PRESUMPTION AND WITHOUT ANY C ORROBORATIVE EVIDENCE. 5. THE LD. C.I.T.(A)-XI AHMEDABAD HAS ERRED IN JUSTIFYING THE ADDITION OF RS.1 01 41 881/- AS NET SETTLEMENT OF INTEREST BETWEEN THE ENTITIES CONSIDERING THE SAME AS UNDISCLOSED INCOME ON ASSUMPTION PRESUMPTION AND WITHOUT ANY CORROBORATIVE EVIDENCE. 6. THE LD. C.I.T (A)-XI AHMEDABAD HAS ERRED IN JUS TIFYING THE ADDITION OF RS.1 12 88 845/- BEING JOTTING OF PAGE 86 OF ANNEXURE A-6 CONSIDERING THE SAME AS ACROSS ENTITY SETTLEMENT O F INTEREST AND QUANTITY DISCOUNT ON ASSUMPTION PRESUMPTION AND WI THOUT ANY CORROBORATIVE EVIDENCE. 7. THE LD. C.I.T.(A) XI AHMEDABAD HAS ERRED IN UP HOLDING THE ADDITION OF RS.7 70 960/- AS UNDISCLOSED INCOME BEI NG EXCESS STOCK CLAIMED TO HAVE BEEN FOUND AT BHAVNAGAR FACTORY PRE MISES DURING SURVEY U/S. 133A OF THE INCOME-TAX ACT. 8. THE LD.C.I.T.(A)-XI AHMEDABAD HAS ERRED IN CONF IRMING THE ADDITION OF RS.2 39 475/- AS UNDISCLOSED INCOME CON SIDERING THE SAME AS UNEXPLAINED CASH EXPENSES INCURRED OUT OF UNDISC LOSED INCOME ON THE BASIS OF ASSUMPTION PRESUMPTION AND WITHOUT AN Y CORROBORATIVE EVIDENCE. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 3 9. THE LD. C.I.T.(A)-XI AHMEDABAD HAS ERRED IN UPH OLDING THE ADDITION OF RS.25 000/- AND RS.17 000/- TOTALING TO RS.42 000/- BEING MISCELLANEOUS NOTING IN THE DIARY OF MR. J. O. SHAH AS ADMITTED BY HIM AS HIS TRANSACTION WITH REGARD TO PURCHASE OF LAND/ FLAT AS UNDISCLOSED INCOME OF THE APPELLANT ON THE BASIS OF ASSUMPTION PRESUMPTION AND WITHOUT ANY CORROBORATIVE EVIDENCE. 10. THE LD. C.I.T.(A)-XI AHMEDABAD HAS ERRED IN RE JECTING THE OBJECTION RAISED TO ADDITION OF RS.3 56 847/- OF LO SSES ON SHARE TRANSACTIONS WHICH ARE DISALLOWED AS CONTRIVED LOS SES BOOKED THROUGH INTER-ENTITY TRSNACTION. 11 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE THE LD. C.I.T.(A)-XI AHMEDABAD HAS GRIEVOUSLY ERRE D IN NOT INTERFERING ON THE GROUNDS REGARDING CHARGING OF INTEREST U/S. 158BFA (1) OF THE I.T. ACT. 12. THE LD. C.I.T.(A)-XI AHMEDABAD HAS ERRED IN NO T ENTERTAINING OBJECTION TO THE INITIATION OF PENALTY PROCEEDINGS U/S. 158BFA (2) OF THE I.T. ACT. 2. WHEREAS THE REVENUE HAS RAISED THE FOLLOW ING GROUND IN ITS APPEAL: (1). THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DI RECTING TO DELETE THE ADDITION OF RS.38 83 000/- MADE ON ACCOUNT OF U NEXPLAINED PAYMENTS OUT OF UNDISCLOSED INCOME. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE-COMP ANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SOAP DETERGENTS AND RE LATED ITEMS. SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE I.T. ACT WAS CARRIED OUT ON 27-9-2001 IN THE NIRMA GROUP OF CASES. THE OFFICE P REMISES OF THE ASSESSEE- COMPANY WAS ALSO SEARCHED. THE SEARCH WAS COMPLETED ON 5-10-2001. IN RESPONSE TO THE NOTICE ISSUED U/S. 158BC THE ASSES SEE-COMPANY FILED BLOCK RETURN AT AN UNDISCLOSED INCOME OF RS. NIL. AFTER I NTENSIVE INVESTIGATION THE ASSESSING OFFICER PROPOSED FOLLOWING ADDITIONS (WHI CH ARE PARTLY DELETED BY LD. CIT(A)) AND BEING AGGRIEVED BOTH THE PARTIES HAVE RAISED THE CONCERNED ISSUES IN THEIR RESPECTIVE GROUND:- IT(SS) NO.98-50/AHD/05 NIRMA LTD. 4 1) RS.17 84 49 140/- ON THE BASIS OF SEIZED DOCUMEN T A-6 FOUND FROM THE PREMISES OF SHRI RAHUL DEVI CONTAINING DET AILS ABOUT ALLEGED RECEIPT OF SALE PROCEEDS OF SHARES. 2) RS.3 31 43 916/- BEING ADDITION FOR UNACCOUNTED UNDISCLOSED INCOME OUT OF BOOK SETTLEMENT OF SHARE TRANSACTION S ON THE BASIS OF SEIZED DOCUMENT NO.87 AND 88 AS PER ANNEXU RE A-1. 3) RS.1 01 41 881/- BEING DIFFERENCE IN INTEREST AS INDICATED FROM PAGE 79 AND 80 OF ANNEXURE A-6 SEIZED FROM THE PREM ISES OF SHRI RAHUL DEVI. 4) RS.1 12 88 845/- BEING THE JOTTINGS ON PAGE-86 O F ANNEXURE A-6 BEING THE SETTLEMENT OF INTEREST AND QUANTITY DISCO UNT. 5) ADDITION OF RS.7 70 960/- BEING EXCESS STOCK CLA IMED TO HAVE BEEN FOUND AT BHAVNAGAR FACTORY PREMISES. 6) ADDITION OF RS.2 39 475/- AS UNDISCLOSED INCOME BEING UNEXPLAINED CASH EXPENSES. 7) ADDITION OF RS.42 000/- BEING MISCELLANEOUS NOT INGS IN THE DIARY OF SHRI J.O. SHAH. 8) ADDITION OF RS.3 56 847/- BEING THE LOSS OF SHARE TRANSACTION IN SHARES OF BIOCHEM PHARMA LTD. AND NEPC TEXTILE LTD . 9) ADDITION OF RS.38 83 000/- BEING UNEXPLAINED OUT OF BOOK PAYMENTS CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE- COMPANY DISCOVERED FROM PAGE 269 & 270 OF ANNEXURE A-18 SEIZED FROM THE PREMISES OF MR. J.O. SHAH BEING THE PURCHASE MANAGER OF THE ASSESSEE-COMPANY. 4. EVEN THOUGH OTHER ISSUES MAY ALSO RESULT FROM TH E ORDER OF THE LD. A.O./LD. CIT(A) BUT WE WILL CONFINE OUR DISCUSSION ON THE ISSUES RAISED BY BOTH THE PARTIES AS PER THEIR GROUNDS OF APPEAL. ASSESSEES APPEAL 5. THE LD. A.R. DURING THE COURSE OF HEARING BEFORE US DID NOT PRESS GROUNDS AT NO.1 2 AND 3. THEREFORE THEY ARE REJEC TED AS NOT PRESSED. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 5 6. ADDITION OF RS.17 84 49 140/- AND RS.3 31 43 916 /- AS PER GROUND NO.4. IN ADDITION TO THE SEARCH CARRIED OUT AT THE OFFICE PREMISES OF THE ASSESSEE-COMPANY AT KASHMIRA CHAMBERS ASHRAM ROAD AHMEDABAD SEARCH WAS ALSO CARRIED OUT AT THE RESIDENCE OF ONE SHRI RAHUL DEVI ERSTWHILE DY. G. M.(FINANCE) OF THE ASSESSEE-COMPANY. DURING THE COURSE OF THE SEARCH AT THE RESIDENTIAL PREMISES OF SHRI RAHUL DE VI CERTAIN LOOSE PAPERS WERE SEIZED. OUT OF THEM ANNEXURE A-1 WAS CONSIDERE D RELEVANT WHICH CONTAINED THE WORKING OF THE FIGURE OF RS.17 48 49 140/-. THE DETAILED WORKING OF THIS FIGURE IS GIVEN ON PAGE-108 OF ANNEXURE A-1 WHOSE COPY IS ENCLOSED AT PAGE-192 OF ASSESSEES PAPER BOOK. THE WORKING IS R EPRODUCED BELOW :- POSSIBLE CALCULATION BEFORE ARRIVING AT AMOUNT GIV EN FOR TRADING. 12 73000 X 140.18 ----------------- 17 48 49 140 (2) 88 00 00 000 13/4 10 00 00 000 RECD ON 23/2 ------------------ 78 00 00 000 - 17 48 49 140 DIFF. IN EXCESS O F ----------------- 1000 60 51 50 860 BAL AMOUNT GIVEN FOR TRADING. 60 51 63 727.80 ============== INTEREST PAID. 3 12 84 439 LOSS. 2 05 71 645 ---------------- 5 18 56 084 ---------------- IT(SS) NO.98-50/AHD/05 NIRMA LTD. 6 7. THE ABOVE PAGE ALSO HAS RELEVANCE WITH PAGE 191 IN ASSESSEES PAPER BOOK WHICH WAS ALSO SEIZED. THIS DOCUMENT CONTAINED SALE OF SHARES BY DIFFERENT ENTITIES IN THE NIRMA GROUP. THE SHARES I N DIFFERENT COMPANIES WERE SOLD BY VARIOUS ENTITIES OF NIRMA GROUP SUCH AS JA LPA SPECIFIC FAMILY TRUST NIRMA ASSOCIATES HARSIDH BUNGALOW TRUST ETC. THERE WERE IN ALL 16 SUCH ENTITIES WHICH SOLD SHARES IN TRIUMPH INTERNATIONAL FINANCE INDIA LTD. AT DIFFERENT RATES WHOSE AVERAGE WAS WORKED OUT AT RS. 114.18 PER SHARE. TOTAL NUMBER OF SHARES SOLD BY THESE 16 ENTITIES AMOUNTED TO 12 73 000. THE AVERAGE SALE PRICE OF SHARES IN TRIUMPH INTERNATION AL FINANCE INDIA LTD. SOLD BY THESE 16 NIRMA GROUP ENTITIES WAS RS.1140.18 WHI CH IS SHOWN ON PAGE 108 OF ANNEXURE A-1 I.E. AT PAGE 192 OF ASSESSEES PAPER BOOK. IT HAS ALSO MENTIONED RATE IN EXCESS OF RS.1 000 WHICH IS RS.14 0.18 (RS.1140.18 LESS RS.1000/-; THIS WAS MULTIPLIED BY TOTAL NUMBER OF S HARES BEING 12 73 000 GIVING A FIGURE OF RS.17 84 49 140/-).WHILE PROPOSI NG THE ADDITION THE ASSESSING OFFICER ARRIVED AT FOLLOWING INFERENCES A S MENTIONED BY THE LD. C.I.T.(A) IN HIS ORDER ON PAGE-13 :- I) EVIDENCES FOUND DURING SEARCH ESTABLISH THAT CO NTROL OVER TRANSACTION OF NUMBER OF ENTITIES WAS EXERCISED BY THE ASSESSEE COMPANY THROUGH ITS EMPLOYEES ADVISORS AND CMD. II) EVIDENCES FOUND DURING SEARCH ESTABLISH THAT ON ACCOUNT OF THIS COMMON CONTROL EXERCISED OVER ASSOCIATE ENTITIES TR ANSACTIONS WERE ENTERED INTO BY DIFFERENT ASSOCIATE ENTITIES W ITH COMMON INTENT. III) EVIDENCES FOUND DURING SEARCH ESTABLISH THAT S UCH TRANSACTIONS OF ASSOCIATE ENTITIES DONE WITH COMMON INTENT WERE SETTLED ACROSS ENTITIES. IV) EVIDENCES FOUND DURING SEARCH ESTABLISH THAT TR ANSACTIONS NOTED ON PAGES 87 88 108 AND BACK SIDE OF PAGE-108 IN T HE HAND WRITING OF SHRI RAHUL DEVI THOUGH DONE BY DIFFERENT ASSOCIATE ENTITIES WERE ONE SUCH SET OF INTER-LINKED TRANSACTIONS DONE WITH COM MON INTENT. PERUSAL OF THE SEIZED NOTINGS FURTHER BRING OUT THE FACT TH AT THE FIGURE OF RS.17 84 49 140/- AND FIGURE OF RS.3 31 43 916/- HA VE BEEN NOTED BY SHRI RAHUL DEVI AFTER CLEAR APPLICATION OF MIND AND ARE INTEGRAL TO ONE SUCH SET OF ACROSS ENTITY SETTLEMENT OF TRANSACTION S. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 7 V) EVIDENCES DURING THE SEARCH ESTABLISH THAT SHRI RAHUL DEVI WAS A COMMON PERSON HAVING FULL KNOWLEDGE OF THE ACROSS ENTITY LINKAGES AND SETTLEMENTS OF THESE AND ALL OTHER SUCH TRANSAC TIONS EVIDENCED BY SEIZED MATERIAL. VI) EVIDENCES FOUND DURING SEARCH ESTABLISH THAT S UCH ACROSS ENTITY SETTLEMENTS HAVE ACTUALLY ACCRUED AND THAT FROM THE PERUSAL OF SEPARATE ENTRIES IN THE RESPECTIVE BOOKS OF ACCOUNT S OF EACH INDIVIDUAL ENTITY SUCH ACROSS ENTITY SETTLEMENT OF TRANSACTIONS CAN NOT BE DECIPHERED BY REVENUE. VII) EVIDENCES FOUND DURING SEARCH ESTABLISH THAT T HE ONUS OF IDENTIFYING THE ENTITY THROUGH WHICH SUCH ACROSS EN TITY SETTLEMENT OF TRANSACTIONS HAS FINALLY OCCURRED LAY ON ASSESSEE C OMPANY WHICH THROUGH ITS CMO EMPLOYEES AND ADVISOR EXERCISED FU LL CONTROL OVER SUCH SETTLEMENTS. THIS IS MORE SO AS SUCH TRANSACT IONS PERTAIN TO THE PERIOD F.Y. 1999-00 AND 2000-01 AND ARE EVIDENCED B Y DOCUMENTS SEIZED SEIZED FROM THE RESIDENCE OF SHRI RAHUL DEVI WHO WAS AN EMPLOYEE OF THE ASSESSEE COMPANY DURING WHOLE OF TH IS PERIOD. VIII) VERIFICATIONS DONE DURING ASSESSMENT PROCEEDI NGS ESTABLISH THAT ALL OTHER FIGURES NOTED ON THE PAGES 87 AND 108 EX CEPT THE FIGURES OF RS.17.84 CR. AND RS.3.31 CRORES ARE REFLECTED IN TH E BOOKS OR BANK ACCOUNTS OF RESPECTIVE ENTITIES OR THE FIGURES NOTE D ON THESE PAGES REPRESENT SUM TOTAL OF SPECIFIC ENTRIES IN THE BOOK S OF RESPECTIVE ASSOCIATE ENTITIES. IX) CONSIDERING THIS FACT IN DISCHARGE OF ITS ONUS THE EXPLANATION FURNISHED BY THE ASSESSEE-COMPANY THAT ONLY THESE PARTICULAR FIGURES APPEARING ON THE SAME PAGES ARE MERE ROUGH JOTTINGS IS NOT ACCEPTABLE AND THESE FIGURES ARE THUS TAKEN TO REPR ESENT MATERIAL TRANSACTIONS LIKE THE OTHER FIGURES NOTED ON THESE PAGES. X) THUS TILL DATE NO SATISFACTORY EXPLANATION REG ARDING THE TRUE NATURE OF THESE MATERIAL TRANSACTIONS THEIR INTENT AND THE ENTITY THROUGH WHICH THE SETTLEMENT OF THESE INTER-LINKED TRANSACT IONS HAS FINALLY BEEN MADE HAS BEEN FURNISHED BY THE ASSESSEE-COMPANY. 7. IN BRIEF THE INFERENCE DRAWN BY ASSESSING OFFICE R IS THAT SHRI RAHUL DEVI IS DEPUTY GENERAL MANAGER OF ASSESSEE-COMPANY. HE H AD COMPLETE KNOWLEDGE OF ALL THE TRANSACTIONS CARRIED OUT BY AS SESSEE-COMPANY AS WELL AS BY OTHER ENTITIES OF THE GROUP. THESE TRANSACTIONS WHICH ARE NOT RECORDED IN IT(SS) NO.98-50/AHD/05 NIRMA LTD. 8 THE BOOK OF ANY ENTITY I.E. NIRMA GROUP COMPANY WOU LD FLOW FROM NIRMA LTD. AND THEREFORE WOULD BE TAXABLE IN ITS HANDS. SHRI RAHUL DEVI WORKED AS AN EMPLOYEE OF ASSESSEE-COMPANY DURING THE PERIOD FROM 1-4-98 TO 31-3-2000. HE WAS A KEY PERSON INVOLVED IN THE FINANCIAL TRANS ACTIONS OF THE ASSESSEE- COMPANY AND OF OTHER ASSOCIATE ENTITIES. THESE DOCU MENTS ARE IN THE HANDWRITING OF SHRI RAHUL DEVI AND WERE ADDRESSED T O SHRI KAUSHIK PATEL WHO WAS PRACTICING CHARTERED ACCOUNTANT DURING THE RELE VANT TIME FOR THE ASSESSEE-COMPANY. THE TRANSACTIONS FOUND FROM ANNEX URE A-1 A-2 AND A-3 WERE SEIZED FROM THE RESIDENCE OF SHRI RAHUL DEVI A RE INTER-RELATED. THE TRANSACTION BY THE ASSOCIATE CONCERNS OF NIRMA LTD. ARE CARRIED OUT IN THE SHARES OF TRIUMPH INTERNATIONAL FINANCE INDIA LTD. (IN SHORT TRIUMPH) TRIUMPH SECURITIES LTD. CHANDRAKANT COMPUTERS LTD . AND OTHER. SHRI KARSANBHAI PATEL IS CMD OF ASSESSEE COMPANY AND HE HAD CONTROL OVER ALL INTER-LINKED TRANSACTIONS. SHRI KAUSHIK PATEL AND SHRI KARSANBHAI PATEL WERE CONFRONTED WITH THE EVIDENCE OF THE SEIZED DOCUMEN TS. SINCE THESE TRANSACTIONS WERE PLANNED AND EXECUTED BY THE EMPL OYEES OF THE ASSESSEE- COMPANY; AND ALL THESE ENTITIES OR THEIR EMPLOYEES ARE UNDER CONTROL OF THE CMD OF THE ASSESSEE-COMPANY THEN UNACCOUNTED TRANS ACTIONS WOULD PERTAIN TO ASSESSEE-COMPANY. 8. IT WAS EXPLAINED TO THE ASSESSING OFFICER THAT A LL THESE EMPLOYEES ARE CARRYING OUT THE WORK AT THE INSTRUCTIONS OF RESPEC TIVE ASSOCIATE COMPANIES (IE. ENTITIES) AND ASSESSEE-COMPANY HAS NOTHING TO DO WI TH THESE TRANSACTIONS. NONE OF THE SEIZED DOCUMENTS IN ANNEXURE A-1 REFERR ED TO THE NAME OF ASSESSEE COMPANY. SHRI RAHUL DEVI AT THE TIME OF SE ARCH WAS NOT AN EMPLOYEE OF THE ASSESSEE-COMPANY. FURTHER THE TITL E OF THE DOCUMENT SHOWED THE POSSIBLE CALCULATION FOR ARRIVING AT THE AMOUNT GIVEN FOR TRADING. IT SHOWED THAT IT IS ONLY A ROUGH JOTTINGS MADE FOR REMEMBRAN CE. THE ASSESSING OFFICER DID NOT ACCEPT THESE CONTENTIONS AND HELD THAT SUM OF RS.17.84 CRORES REPRESENTED UNACCOUNTED CASH OUT OF BOOKS PAID FO R SETTLEMENT OF THE TRANSACTIONS OF THE ASSESSEE-COMPANY. SIMILARLY TH E AMOUNT OF RS. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 9 3 31 43 916/- AS NOTED ON PAGE 87 AND 88 OF DOCUMEN TS SEIZED FROM THE RESIDENCE OF RAHUL DEVI (BEING ANNEXURE A-1 ANNEXE D AT PAGE-189 OF THE ASSESSEES PAPER BOOK) REPRESENTED UNACCOUNTED CASH FOR OUT OF BOOK SETTLEMENT OF THE TRANSACTIONS BY THE ASSESSEE-COMP ANY AND IS THEREFORE CHARGEABLE TO TAX AS UNDISCLOSED INCOME OF THE BLOC K PERIOD. IN ADDITION TO MAKING ADDITION OF RS.17.48 CRORES ASSESSING OFFICE R REFERRED TO PAGE 87 OF THE DOCUMENT FOUND AND SEIZED FROM THE PREMISES OF SHRI RAHUL DEVI WHICH IS ANNEXED AT PAGE 189 OF ASSESSEES PAPER BOOK. IT SH OWED WORKING OF THE SUM OF RS.3 31 43 916/- AS UNDER :- SHRI KAUSHIKBHAI 6/3/2001. REG :- TRIUMPH A/C. I HAVE VERIFIED THE TRIUMPH ACCOUNT. DETAILS IS AS UNDER :- TOWARDS 8 50 00 000 PAYABLE WE HAVE ALREADY PAID THEM (1) BY WAY OF INTEREST. 3 12 84 439 (2) BY WAY OF LOSS. 2 05 71 645 ---------------- 5 18 56 084 BALANCE. 3 31 43 916 ---------------- 8 50 00 000 OUT OF BALANCE 3 31 43 916 PAYABLE WE HAVE TO ADJU ST SHARE INTEREST RECEIVED RS.1 78 49 895/- AS PER MY NOTE ENCLOSED. WE HAVE NOT RECEIVED ANY MONEY BETWEEN 3/5 TO 19/7 EXCEPT RS. 15 CR. ON16TH MAY ENCLOSING HEREWITH TWO CALCULATIONS SHEET FOR YOUR KIND PERUSAL. REGARDS SD/- ON THE BASIS OF ABOVE WORKING THE ASSESSING OFFICE R RECORDED THE STATEMENT OF SHRI RAHUL DEVI AND SHRI KAUSHIK PATEL AND INFERRED THAT THERE WAS OUT OF BOOK SETTLEMENT OF RS.8 50 00 000/- OUT OF WHICH A SUM OF RS.3 12 84 439/- IS SHOWN AS PAID BY WAY OF INTERES T AND THERE WAS AN ADJUSTMENT OF LOSS OF RS.2 05 71 645./- LEAVING A B ALANCE OF RS.3 31 43 916/- .THIS WAS TREATED AS CASH PAID FOR OUT OF BOOK SETT LEMENT BY ASSESSEE- IT(SS) NO.98-50/AHD/05 NIRMA LTD. 10 COMPANY AND ACCORDINGLY TREATED AS UNACCOUNTED INCO ME OF THE ASSESSEE- COMPANY. 9. BEFORE THE LD. C.I.T. (A) DETAILED SUBMISSIONS W ERE MADE WHICH WERE SUMMARIZED BY THE LD. C.I.T. (A) AS UNDER :- (A) THE SEIZED PAPERS RELIED FOR MAKING ADDITION H AVE NOT BEEN FOUND FROM THE POSSESSION OR CONTROL OR YOUR APPELL ANT. (B) THE PERSON FROM WHOM FOUND HAS ALREADY EXPL AINED IN DEPTH WHICH NEITHER BEEN REBUTTED NOR ANY INCONSISTENCY MIS- STATEMENT OR CONTRARY EVIDENCE HAS BEEN FOUND OR EV EN SUGGEST BY LD. A.O. (C ) EVEN ASSUMING WITHOUT ADMITTING THE APPLICAB ILITY OF SEC. 132(4A) NOTHING STATED IN THE PAPER REFLECTS UNDIS CLOSED INCOME. (D) EVEN ON FACTS JOTTING ON BACK SIDE OF PAGE 108 IS POSSIBLE EARLIEST AFTER 28-12-00 AND THE FACT THAT PAPER ITS ELF CONTAINS STATEMENT THAT AL ENTRIES HAVE SETTLED AND CONCLUDE D PROVES CONCLUSIVELY THAT IT IS NOTHING BUT ROUGH WORKING O R TRYING TO UNDERSTAND THE NUMBERS. (E) AL THE FIGURES REFLECTED ON PAGE-108 FRONT SIDE AND ON THE BACK SIDE IN THE BOOKS OF ACCOUNTS ARE CHEQUE TRANSACTIO NS. RS. 17.48 AN AMOUNT IN QUESTION IS ADMITTEDLY PART OF RS.145 CRORES (TOTAL SALE PROCEEDS OF 12 73 000 SHARES) WHICH HAS BEEN REFLECTED IN RETURNS OF INCOME OF THE ENTITIES MENT IONED THEREIN WHICH HAS BEEN VERIFIED IN DEPTH BY LD. A.O. IN ASS ESSMENT. 10. THE LD. C.I.T.(A) HOWEVER DID NOT AGREE WITH T HE CONTENTION OF ASSESSEE AND CONFIRM THE ADDITION BY OBSERVING AS U NDER :- 7.5. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND VARIOUS SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AS ALSO THE REMAND REPORT OF THE ASSESSING OFFICER. ON PERUSAL OF THE FACTS I T IS NOTICED THAT SHRI RAHUL DEVI WAS A PERSON FROM WHOM THE CONCERNED PAP ERS HAVE BEEN FOUND. HE WAS EMPLOYEE AS DEPUTY G.M. (FINANCE) WIT H THE APPELLANT COMPANY AND EVEN AT THE TIME OF SEARCH HE WAS EMPLO YED WITH THE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 11 GROUP CONCERNS. SHRI K.K. PATEL WAS CMD OF THE APPE LLANT COMPANY.SHRI KAUSHIK PATEL WAS THE CONSULTANT OF TH E APPELLANT COMPANY. THE SEIZED DOCUMENTS UNDER QUESTION THOUG H NOT FOUND FROM THE OFFICE PREMISES OF THE APPELLANT COMPANY HAVE BEEN SEIZED FROM THE PREMISES OF A PERSON WHO HAS BEEN WORKING FOR THE APPELLANT COMPANY AND IT IS PROVED BEYOND DOUBT THAT HE WAS T HE PERSON ALONG WITH SHRI KAUSHIK PATEL WHO HAS BEEN LOOKING AFTER THE FINANCIAL MATTERS AND INVESTMENTS OF THE APPELLANT COMPANY. A T NO POINT OF TIME IT HAS BEEN STATED BY THE CONCERNED PERSON OR BY THE A PPELLANT COMPANY THAT THE TRANSACTIONS NOTED IN THE SEIZED DOCUMENTS PERTAIN TO SHRI RAHUL DEVI. THE DATE OF TRANSACTIONS THE AMOUNTS RATES ETC. EVERYTHING HAS BEEN WRITTEN PRECISELY AND SOME OF T HE TRANSACTIONS DO MATCH WITH THE TRANSACTIONS MADE BY THE NIRMA GROUP OF CONCERNS. IT DOES NOT LEAVE ANY DOUBT IN THE MIND THAT THE ENTRI ES BELONG TO THE NIRMA GROUP OF CONERNS AND NOT TO SHRI RAHUL DEVI FROM WHOM THE SEIZED DOCUMENTS HAVE BEEN FOUND. SHRI RAHUL DEVI W AS THE EMPLOYEE OF THE APPELLANT COMPANY AND USED TO WORK UNDER THE DIRECTIONS OF THE CHAIRMAN AND MANAGING DIRECTOR OF THE APPELLANT COM PANY AND IN CONSULTATION WITH SHRI KAUSHIK PATEL C.A. THE PAPE RS FOUND INDICATE THAT THE NOTINGS REFERRED TO WERE IN RESPECT OF THE INFORMATION PASSING ON BETWEEN THEM. THE DETAILS ARE IN RESPECT OF THE TRANSACTIONS OF THE SHARES OF THE APPELLANT COMPANY. ON PERUSAL OF THE ASSESSMENT ORDER IT IS FOUND THAT IN SPITE REPEATED ENQUIRIES BY THE A. O. THE APPELLANT COULD NOT EXPLAIN THE NOTING AMOUNTING TO RS.3.31CRORES A ND ALSO THE AMOUNT OF RS.17.48 CRORES DEDUCTED FROM THE FIGURE OF RS.7 8 CRORES PAYABLE. THE FIGURES ALSO SHOW THAT THEY HAVE TRIED TO TALLY THE AMOUNT GIVEN FOR TRADING AT RS.60.51 CRORES AFTER MAKING ADJUSTMENT OF THE AMOUNT OF RS.17.49 CRORES. IT IS SEEN THAT IN BOTH THE PAPERS THE FIGURE OF LOSS ADJUSTMENT OF RS.2.05 CRORES AND THE AMOUNT OF INTE REST OF RS.3.12 CRORES IS COMMON. ALL THESE TRANSACTIONS ARE CARRIE D OUT WITH KETAN PAREKH GROUP OF COMPANIES OF MUMBAI FOR SETTLEMENT OF RS.83.60 CRORES TRANSACTED WITH THE SAID GROUP. IN THE CIRCU MSTANCES IT IS FOR THE APPELLANT TO EXPLAIN THE FIGURES NOTED ON THE SEIZE D PAPERS WHICH WAS FOUND FROM THE POSSESSION OF THE EMPLOYEE. THIS IS FURTHER TO BE SEEN IN THE LIGHT OF THE FACT THAT THE TRANSACTIONS WERE CA RRIED OUT AT THE INSTANCE OF THE CMD AN EX-EMPLOYEE AND THE CONSULTANT OF TH E APPELLANT COMPANY. THE APPELLANT HAD INSTEAD OF EXPLAINING TH E PAYMENTS SO MADE AVOIDED THE EXPLANATION SIMPLY STATING THAT TH E PAPER WAS NOT FOUND FROM THE POSSESSION OF THE APPELLANT. IT IS A LSO NOT EXPLAINED AS TO HOW THESE CROSS ENTITY TRANSACTIONS ARE SETTLED WH O HAS MADE THE PAYMENT AND WHO HAS SUFFERED THE BURDEN OF INTEREST OR LOSS. IT IS ALSO NOT BROUGHT OUT AS TO WHO HAS PAID THE AMOUNT OF RS .17.84 CRORES AND RS.3.31 CRORES. THE ASSESSING OFFICER HAS ON PAGE-3 6 OF THE ASSESSMENT ORDER HAS CLEARLY STATED THAT VERIFICATI ONS DONE DURING ASSESSMENT PROCEEDINGS ESTABLISH THAT ALL OTHER FIG URES NOTED ON PAGES 87 AND 108 EXCEPT THE FIGURES OF RS.17.84 CRORES A ND RS.3.31 CRORES IT(SS) NO.98-50/AHD/05 NIRMA LTD. 12 ARE REFLECTED IN THE BOOKS OR BANK ACCOUNTS OF RESP ECTIVE ENTITIES OR THE FIGURES NOTED IN THESE PAGES REPRESENT SUM TOTAL OF THE SPECIFIC ENTRIES IN THE BOOKS OF RESPECTIVE ASSOCIATE ENTITIES. IN A BSENCE OF ANY EXPLANATION ABOUT THE SAME . I HOLD THAT THE ASSESS ING OFFICER WAS JUSTIFIED IN MAKING THE ADDITIONS OF RS.17 84 49 14 0/- AND RS.3 31 43 .916/- AS UNDISCLOSED INCOME OF THE APPE LLANT FOR THE BLOCK PERIOD AND THEREFORE THE SAME IS CONCERNED. 11. AGAINST THE ABOVE ORDER OF THE LD C.I.T.(A) CON FIRMING THE TWO ADDITIONS LD. A.R. FOR THE ASSESSEE SUBMITTED THAT DOCUMENTS WERE FOUND FROM THE PREMISES OF SHRI RAHUL DEVI WHO WAS NO LONGER IN TH E EMPLOYMENT OF THE ASSESSEE-COMPANY AS ON THE DATE OF THE SEARCH AND H ENCE ASSESSEE COMPANY AS SUCH IS NOT RESPONSIBLE FOR ANY DOCUMENT FOUND FROM HIS RESIDENCE. FURTHER LD. A.R. SUBMITTED THAT PRESUMI NG THAT THESE DOCUMENTS PERTAINED TO THE TRANSACTIONS CARRIED OUT BY THE AS SESSEE GROUP THEN ALL THE SHARE TRANSACTIONS CARRIED OUT BY THESE 16 ASSOCIAT E CONCERNS OF THE GROUP I.E.(GROUP ENTITIES) ARE RECORDED IN THEIR REGULAR BOOKS OF ACCOUNTS AT THE SALE PRICE AS MENTIONED IN THE DOCUMENT NO.191 IN ASSES SEES PAPER BOOK. THERE IS ABSOLUTELY NO DIFFERENCE IN AMOUNT OF SALE PRICE RECORDED IN THE REGULAR BOOKS OF THOSE 16 ASSOCIATE CONCERNS AND FOUND MENT IONED IN DOCUMENT NO.191. THEREFORE THERE CANNOT ANY CASE OF HOLDING THAT UNACCOUNTED PAYMENT WAS MADE ON SETTLEMENT. THE DOCUMENT NO.10 8 AS PER ANNEXURE A- 1 AND AT PAGE 192 OF ASSESSEES PAPER BOOK ONLY SHO WED CERTAIN CALCULATIONS FOR UNDERSTANDING BY THE CHARTERED ACCOUNTANT OF TH E ASSESSEE GROUP AS TO HOW MUCH PAYMENT IT WOULD BE REQUIRED TO BE MADE ON SALE OF 12 73 000 SHARES. EVEN IF AMOUNT IN EXCESS OF SALE PRICE OF R S.1 000/- HAS BEEN MENTIONED THEREIN IT IS ONLY FOR UNDERSTANDING THE REQUIREMENT OF FUNDS TO BE ACCUMULATED FROM VARIOUS ASSOCIATE CONCERNS. ONCE E NTIRE SALE PROCEEDS ARE RECORDED IN THE BOOKS OF ASSOCIATE CONCERNS THEN TO HOLD THAT UNACCOUNTED PAYMENT WAS MADE WOULD NOT BE PROPER. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 13 12. EVEN FOR THE SAKE OF ARGUMENT LD. A.R. SUBMITT ED IF IT IS PRESUMED THAT SOMEBODY HAD PAID SOME UNACCOUNTED MONEY ON SALE O F SHARES THEN IN FACT IT WOULD BE PURCHASER OF THE SHARES WHO WOULD PAY THE MONEY AND NOT THE ASSESSEE COMPANY. EVEN OTHERWISE RESPONSIBILITY FOR RECEIPT OF ANY UNACCOUNTED MONEY OR PAYMENT THEREOF IS ON THE RECI PIENT OR PAYER I.E. ASSOCIATE CONCERNS AND NOT THE ASSESSEE-COMPANY. 13. THE LD. AR THEN SUBMITTED THAT SEIZED DOCUMENT DID NOT SHOW THE NAME OF THE ASSESSEE COMPANY NOR THERE IS ANY OTHER EVIDENCE CONNECTING ASSESSEE COMPANY WITH THE SEIZED DOCUMENT. THE DEPA RTMENT HAS NOT BROUGHT ANY MATERIAL TO SHOW THAT ALL THE ASSOCIATE CONCERNS WERE BENAMI CONCERNS OF ASSESSEE COMPANY AND THEREFORE UNACCO UNTED TRANSACTION IF AT ALL CARRIED OUT BY ANY OF THE ASSOCIATE COMPANY WOU LD BE THAT OF ASSESSEE- COMPANY. 14. AGAINST THIS LD. D.R. RELIED ON THE ORDER OF LD . C.I.T.(A). HE IN ADDITION SUBMITTED THAT ENTIRE TRANSACTIONS WERE CARRIED OUT AT THE INSTRUCTION OF CMD OF ASSESSEE-COMPANY AND ALL THE FUNDS ARE CONTROLLED B Y CMD OF THE ASSESSEE- COMPANY. THE LD. DR SUBMITTED THAT VARIOUS FLOPPIES WERE FOUND AND SEIZED FROM THE PREMISES OF SHRI RAHUL DEVI WHO WAS EARLIE R IN THE EMPLOYMENT OF NIRMA GROUP FROM APRIL 1998 TO MARCH 2001. HE WAS INVOLVED IN THE CONTRA TRANSACTION OF THE ASSESSEE COMPANY AS WELL AS ASSO CIATE ENTITIES. SEIZED PAPERS ARE WRITTEN BY SHRI RAHUL DEVI AND ADDRESSED TO SHRI KAUSIK PATEL WHO IS PRACTICING C.A. AND ADVISOR FOR THE ASSESSEE COM PANY. THE TRANSACTIONS FOUND FROM THE DOCUMENTS ARE INTER-RELATED AND INTE R LINKED. THE TRANSACTIONS RECORDED ON THE BACK SIDE OF PAGE 108 WERE DONE BY NIRMA GROUP ENTITIES WITH KETAN PAREKH GROUP ENTITIES VICE TRIUMPH INTE RNATIONAL FINANCE INDIA LTD. (T.I.F.I.L) TRIUMPH SECURITIES LTD. CHITRAKO OT COMPUTERS (P) LTD. GOLDFISH COMPUTERS (P) LTD. NAKSHATRA SOFTWARE (P) LTD. & CLASSIC CREDIT LTD. THE AO HAD CONFRONTED SHRI RAHUL DEVI AND SHRI KAUS HIK PATEL. THE CMD OF NIRMA GROUP SHRI KARASANBHAI K. PATEL WAS ALSO CONF RONTED IN HIS CAPACITY AS IT(SS) NO.98-50/AHD/05 NIRMA LTD. 14 CMD. SHRI KARASANBHAI K. PATEL EXERCISED ENTIRE CON TROL OVER THE TRANSACTIONS OF NIRMA LTD. AS WELL AS OTHER ASSOCIATE CONCERNS T HOUGH THEY WERE EXECUTED BY THE EMPLOYEES OF THE COMPANY. SHRI RAHUL DEVI AN D SHRI KAUSIK PATEL ARE KEY PERSONS CARRYING OUT THE TRANSACTIONS FOR NIRMA GROUP. THE PAYMENTS AS NOTED ON PAGE 108 WERE RECEIVED BY DIFFERENT ENTITI ES OF NIRMA GROUP. THE LD. DR REFERRED TO PAGES 87 & 88 OF ANNEXURE -1 WHICH SHOWED THAT A SUM OF RS.3 31 43 916/- WAS PAYABLE AS UNDER :- AMOUNT PAYABLE RS.8 50 00 000 AMOUNT PAID BY LOSS RS.1 04 45 991 RS.101 25 653 INTEREST PAID RS.3 12 84 439 AMOUNT TO BE PAID RS.3 31 43 916 THE CORRECTNESS OF THIS TRANSACTION IS PROVED BY TH E FACT THAT NIRMA CHEMICAL WORKS LTD. AND NIRMA CREDIT & CAPITAL LTD. BOUGHT 4 .5 LAKH SHARES OF ZEE TELEFILM LTD. THROUGH TRIUMPH INTERNATIONAL FINANCE INDIA LTD. WHICH WERE ALSO SUBSEQUENTLY SOLD THROUGH TRIUMPH AND THESE TRANSAC TIONS LOSS WAS INCURRED AS UNDER :- NIRMA CHEMICAL WORKS LTD. 1 04 45 991 NIRMA CREDIT AND CAPITAL LTD. 1 01 25 653 THUS NIRMA GROUP WAS LIABLE TO MAKE PAYMENT OF RS.8 5 CRORES TO KETAN PAREKH GROUP ON ACCOUNT OF PROPOSED REVERSAL OF SAL E OF 4.5 LAKH SHARES. IN FACT THE LD. DR SUBMITTED THAT NIRAV DISCRETIONARY FAMILY TRUST WAS TO RECEIVE A SUM OF RS.8.5 CRORES AGAINST WHICH LOANS AND INTE REST WERE ADJUSTED RESULTING IN NET PAYMENT AT RS.3 31 43 916. ON THE BASIS OF THIS TRANSACTION THE LD. DR EMPHASIZED THAT WHATEVER IS RECORDED IN THE SEIZED DOCUMENTS ARE CORRECT AND TRANSACTIONS HAVE IN FACT TAKEN PLACE A T THE BEHEST OF NIRMA LTD. THE LD. DR THEN REFERRED TO PAGE 108 OF THE ANNEXUR E I.E. PAGE 192 OF THE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 15 PAPER BOOK AND SUBMITTED THAT ASSESSEE DID NOT GIVE ANY EXPLANATION OF THE NATURE OF TRANSACTION ADJUSTMENT OF LOANS OF RS.2. 05 CRORES. WORKING SHOWN ON PAGE 108 IS ONLY ACCOMMODATION ADJUSTMENT OR ENT RY AS SHARES WERE NEVER DELIVERED IN RESPECT OF TRANSACTIONS BETWEEN NIRMA GROUP AND KETAN PAREKH GROUP. HE THEN REFERRED TO PARA 6.7 OF THE ORDER OF AO AND SUBMITTED THAT ALL THESE DOCUMENTS RELATED TO THE TRANSACTIONS CARRIED OUT BY NIRMA LTD. AND THEREFORE RECEIPT OF MONEY AS REFLECTED IN THESE T RANSACTIONS HAS BEEN CORRECTLY ADDED BY THE LD. A.O. HE ACCORDINGLY SUBM ITTED THAT ADDITION OF RS.17 84 49 140/- AND RS.3 31 43 916/- SHOULD BE UP HELD. 15. IN REJOINDER THE LD. AR SUBMITTED THAT IT IS NO T EVEN A CASE OF BENAMI HOLDING AS ALL THE ENTITIES ARE SEPARATELY ASSESSED TO TAX AND ALL THE TRANSACTIONS AS SHOWN IN THESE DOCUMENTS ARE REFLEC TED IN THE BOOKS OF RESPECTIVE ENTITIES. THE REVENUE HAS NOT POINTED OU T AS TO WHAT IS UNDISCLOSED AND WHY IT SHOULD BE ASSESSED IN THE HANDS OF THE A SSESSEE COMPANY. 16. WE HAVE HEARD THE RIVAL PARTIES AND CAREFULLY P ERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR MAKING ANY ADDITION IN THE HANDS OF ASSESSEE COMPANY IN RESPECT OF THE AMOUNT OF RS.17.84 CRORES AND RS.3.31 CRORES. AS STATED ABOVE SUM OF RS.17 84 49 140/- IS EMERGING FROM DOCUMENT NO.108 WHICH IS ENCLOSED AT PAGE 192 OF AS SESSEES PAPER BOOK. THIS SUM IS RELATED TO THE SALE PRICE OF SHARES IN TRIUMPH INTERNATIONAL FINANCE INDIA LTD. CARRIED OUT BY VARIOUS ENTITIES OF NIRMA GROUP AS PER DETAILS GIVEN BY THE ASSESSEE ON PAGE 108.. THE AVERAGE SALE PRICE A FTER DEDUCTING BROKERAGE COMES TO RS.1140.18 PER SHARE FOR 12.73 LAKH SHARES SOLD. IN FACT TOTAL AMOUNT FOR SALE OF 12.73 LAKH SHARES WAS WORKED OUT AT RS. 145 14 49 140/-. HOWEVER THE DOCUMENT ONLY GAVE WORKING OF SALE PRICE OF RS. 12.73 LAKH @ RS.140.18 TOTALING TO RS.17 48 49 140/- WHICH WAS ADDED BY TH E AO AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY WITHOUT POINTING OUT AS TO WHETHER ENTIRE SALE PRICE @ RS.1140.18 PER SHARE OR @ RS.1000 PER SHARE IS RECORDED OR NOT RECORDED IN THE REGULAR BOOKS OF ANY ASSOCIATE ENTI TY. IF SHARES ARE HELD BY IT(SS) NO.98-50/AHD/05 NIRMA LTD. 16 ASSOCIATE ENTITIES AS PER LIST AT PAGE 108 OF ASSES SEES PAPER BOOK THEN IN THE NORMAL COURSE IT IS EXPECTED THAT SALE PRICE OF THE SHARES WOULD BE RECORDED IN THE BOOKS OF THOSE ENTITIES. THE LD. AR HAS TIME AN D AGAIN EMPHASIZED THAT ENTIRE TRANSACTIONS ARE RECORDED IN THE BOOKS OF AS SOCIATE ENTITIES. THEN THERE IS NO REASON TO HOLD THAT ANY PART OF THESE TRANSAC TIONS COULD BE OUTSIDE THE BOOKS. IT IS FOR THE AO TO VERIFY THE BOOKS OF ASSO CIATE CONCERNS AND SHOW THAT EITHER ENTIRE OR PART OF SALE TRANSACTIONS ARE NOT RECORDED IN THE BOOKS OF ASSOCIATE ENTITIES. WITHOUT VERIFYING AS TO WHETHER TRANSACTIONS ARE RECORDED IN THE BOOKS OF ASSOCIATE COMPANIES AS STRONGLY CLAIME D BY THE ASSESSEE BEFORE THE AO AND BEFORE THE LD. CIT(A) THEN TO REACH TO T HE CONCLUSION THAT THE TRANSACTION AS A WHOLE OR IN PART ARE UNRECORDED WI LL NOT BE JUSTIFIED. AT ONE POINT THE LD. AO HAS MENTIONED THAT ALL THE TRANSAC TIONS EXCEPT RELATING TO RS.17.84 CRORES AND RS.3.31 CRORES ARE REFLECTED IN THE BOOKS OR BANK ACCOUNT OF RESPECTIVE ENTITIES AND THE FIGURES NOTED ON THE IMPUGNED PAGES REPRESENT SUM TOTAL OF ALL THE ENTRIES IN THE BOOKS OF RESPEC TIVE ASSOCIATE ENTITIES. HOWEVER IT IS NOT CLARIFIED BY AO OR BY LD. CIT(A ) OR BY LD. DR AS TO WHETHER ENTRIES RELATING TO SALE OF SHARES @ 1000 PER SHARE ARE ALONE RECORDED OR ENTIRE SALE TRANSACTIONS @ RS.1140.18 ARE UNRECORDE D. THEREFORE WE ARE UNABLE TO AGREE WITH THE AUTHORITIES BELOW THAT PAR T OF THE SALE PRICE CALCULATED @ 140.18 PER SHARE FOR 12.73 LAKHS SHARES ARE UNREC ORDED. FURTHER THERE IS NO REASON TO TAKE A DIFFERENT VIEW THAN ARGUED BY L D. AR THAT ALL THESE SALES OF THE INVESTMENT OF THE ASSOCIATE COMPANIES IN SHARES WERE DECLARED IN THE PUBLISHED ACCOUNTS OF THOSE ENTITIES WHICH ARE LIMI TED COMPANIES. 17. THE ONLY APPREHENSION THAT SEEMS TO WORK IN THE MIND OF AUTHORITIES BELOW IS THAT SUM RELATING TO 140.18 PER SHARE ALON G WAS UNRECORDED AS IT IS SO FOUND REFLECTED IN THE SEIZED DOCUMENT. AGAIN TH ERE IS CLEARLY A MISUNDERSTANDING OF THE NATURE OF TRANSACTION. THE ASSOCIATE CONCERNS HAVE SOLD SHARES AND IN RETURN THEY ARE RECEIVING MONEY OR THEY HAVE TO RECEIVE MONEY FROM THE PURCHASERS OF THE SHARES I.E. KETAN PAREKH GROUP. THEN QUESTION OF HOLDING THAT THERE IS ANY PAYMENT WHICH IS APPARENTLY UNACCOUNTED IT(SS) NO.98-50/AHD/05 NIRMA LTD. 17 WOULD NOT ARISE. THE SUM OF RS.17 48 49 140/- IS TH E RECEIPT OF PART OF MONEY AGAINST THE SALE OF SHARES IN T.I.F.I.L. BY THE ASS OCIATE CONCERNS AND THEREFORE IT CANNOT BE ON ANY ACCOUNT AN EXPENDITU RE INVESTMENT OR PAYMENT WHICH COULD BE COVERED UNDER SECTION 69A 69B OR 69 C. ON THIS ACCOUNT ALSO ADDITION WOULD NOT BE JUSTIFIED. 18. THE DOCUMENT NO.108 OF ANNEXURE-A-1 ANNEXED AT PAGE 192 OF ASSESSEES PAPER BOOK SHOWING SUM OF RS.17 48 49 14 0/- ALSO SHOWED TRANSACTIONS WORTH RS.88 CRORES AND RECEIPT OF RS.1 0 CRORES. THERE IS APPARENTLY NO QUERY OR INQUISITIVENESS SHOWN AGAINS T THOSE TWO FIGURES THEREBY SHOWING THAT THEY ARE ACCEPTED AS GENUINE A ND THERE IS NO ELEMENT OF NON-DISCLOSURE IN RESPECT OF THESE TWO FIGURES. FUR THER IT SHOWED THAT SOMEBODY HAS PAID A SUM OF RS.16 51 63 727/- FOR TR ADING. APPARENTLY THERE IS ALSO NO INQUISITIVENESS AS TO WHO PAID AND WHEN PAI D. THUS GENUINENESS OF THIS SUM IS ALSO ACCEPTED. THEN THERE IS NO REASON WHY ONLY THE SUM OF RS.17 48 49 140/- IS DOUBTED. EITHER ENTIRE DOCUMEN T SHOULD BE TREATED AS REFLECTING DISCLOSED TRANSACTION OR SHOULD BE TREAT ED AS REFLECTING UNDISCLOSED TRANSACTIONS OR THERE SHOULD BE CLEAR DISPLAYING AS TO WHICH TRANSACTIONS ARE UNACCOUNTED AND WHY AND WHICH TRANSACTIONS ARE DECL ARED AND WHERE. PICKING UP CERTAIN TRANSACTIONS FROM THE SEIZED DOCUMENT AN D TREATING THEM AS UNDISCLOSED WITHOUT POINTING AS TO WHERE OTHER TRAN SACTIONS RECORDED ON THE SAME PIECE OF DOCUMENT ARE DECLARED WILL BE PROPER. 19. FURTHER THERE IS NO MATERIAL ON RECORD TO SUGGE ST ANY NEXUS OF ASSESSEE COMPANY WITH THESE TRANSACTIONS OR RECEIPT OR PAYMENT OF MONEY SHOWN ON THESE DOCUMENTS. THE ASSESSEE COMPANY IS S EPARATELY ASSESSED. IT HAS ITS OWN INDEPENDENT IDENTITY AND DIRECTORS T O RUN THE COMPANY. ASSOCIATE ENTITIES CARRYING OUT THESE TRANSACTIONS IN SALE AND PURCHASE OF SHARES ARE ALSO INDEPENDENT COMPANIES ASSESSED TO T AX SEPARATELY AND HAVE THEIR OWN BOARD OF DIRECTORS. EVEN IF FOR THE SAKE OF ARGUMENT IT IS ACCEPTED THAT CERTAIN EMPLOYEES ARE COMMON BOTH IN ASSESSEE COMPANY AS WELL AS IN IT(SS) NO.98-50/AHD/05 NIRMA LTD. 18 ASSOCIATE ENTITIES THEN TO HOLD THAT TRANSACTIONS CARRIED OUT BY SUCH COMMON EMPLOYEE WOULD BELONG TO ASSESSEE COMPANY AND NOT T O OTHER COMPANIES TO WHOM SUCH EMPLOYEES ARE ALSO REPORTEDLY WORKING WIL L NOT BE PROPER UNLESS. THERE IS MATERIAL ON RECORD TO SUGGEST THAT SHRI RA HUL DEVI OR SHRI KAUSIK PATEL WERE ONLY AND EXCLUSIVELY WORKING FOR NIRMA LTD. IN ABSENCE OF ANY MATERIAL TO CO-RELATE THE DOCUMENT WRITTEN BY SHRI RAHUL DEVI WITH NIRMA LTD. THE ADDITION ON THE BASIS OF ENTRIES IN THE DOCUMENT C OULD NOT BE ATTRIBUTED TO ASSESSEE COMPANY. 20. FURTHER THERE IS A CLEAR SUPPORT IN FAVOUR OF T HE ASSESSEE THAT IF THE DOCUMENTS ARE FOUND FROM THE PREMISES OF ONE ASSESS EE THEN UNLESS THERE IS EVIDENCE TO CONNECT SUCH DOCUMENT TO A PARTICULAR E NTITY ADDITION ON THE BASIS OF SUCH DOCUMENT IN THE HANDS OF ANOTHER ASSESSEE C OULD NOT BE SUSTAINED. IN FACT WHERE AO PROPOSES AN ADDITION ON THE BASIS OF A SEIZED DOCUMENT HE HAS TO CLEARLY IDENTIFY FOUR INGREDIENTS. THEY CAN BE D ECIPHERED FROM THE DOCUMENT ITSELF OR CAN BE SUPPLEMENTED BY OTHER DOCUMENTS OR BY POST SEARCH INVESTIGATION. THESE INGREDIENTS ARE - (1) NAME OF THE ASSESSEE TO WHOM TRANSACTIONS AND I NCOME THEREFROM ARE ATTRIBUTED. (2) YEAR OF TAXABILITY OF INCOME SO REFLECTED FROM THE SEIZED DOCUMENT. (3) THE QUANTUM OF INCOME AS REFLECTED OR DISCERNIB LE FROM THE SEIZED DOCUMENT. (4) THE NATURE OF THE TRANSACTION AS TO WHETHER IT IS GIVING RISE TO THE TAXABLE INCOME. IF ANY SEIZED DOCUMENT IS SILENT ON ANY OF THESE IN GREDIENTS OR AO IS NOT ABLE TO FILL UP THE GAP BY EXAMINING OTHER SEIZED DOCUMENT OR BY POST SEARCH INVESTIGATION SUCH DOCUMENT WILL ONLY BE CALLED A DUMB DOCUMENT. IT HAS BEEN HELD IN ACIT VS. SATYAPAL VASAN (2007) 295 ITR (AT) 352 ITAT JABALPUR THAT UNLESS ALL THESE FOUR INGREDIENTS ARE CLEARLY ESTAB LISHED THE DOCUMENT WILL ONLY BE A DUMB DOCUMENT. FOR THE SAKE OF CONVENIENCE WE REPRODUCE THE HEAD NOTES FROM THE JUDGMENT AS UNDER :- IT(SS) NO.98-50/AHD/05 NIRMA LTD. 19 A DOCUMENT SEIZED FROM THE ASSESSEE MAY NOT BE COM PLETE IN ALL RESPECTS AS BUSINESSMEN MAY CHOOSE TO RECORD MINIMUM DETAILS ON A DOCUMENT AND KEEP THE REST IN THEIR MEMORY. IT IS THE DUTY OF THE ASS ESSING OFFICER TO CARRY OUT THE NECESSARY INVESTIGATIONS BY CORRELATING THE DOCUMEN T WITH OTHER DOCUMENTS SEIZED WITH REGULAR BOOKS OF ACCOUNT WITH RECORD KEPT BY OUTSIDE AGENCIES SUCH AS BANKS OR FINANCIAL INSTITUTIONS OR DEBTORS/ CREDITORS AND FINALLY BY RECORDING THE STATEMENTS OF CONCERNED PARTIES SO AS TO FILL UP THE GAPS IN CONFIRMING THE INFERENCE ARISING FROM THE DOCUMENTS FOR A PROPER CHARGE OF TAX. SUCH CORRELATION IS NECESSARY UNLESS THE DOCUM ENT IS CAPABLE OF GIVING FULL DETAILS SO AS TO ENABLE ANY INTELLIGENT PERSON TO FIND OUT THE NATURE OF THE TRANSACTION THE YEAR OF THE TRANSACTION THE OWNER SHIP OF THE TRANSACTION AND QUANTUM THEREOF. EVEN IN THAT SITUATION IT IS NECE SSARY TO GIVE OPPORTUNITY TO THE ASSESSEE TO OFFER HIS EXPLANATION AND CARRY OUT INVESTIGATION TO STRENGTHEN THE DIRECT INFERENCE ARISING FROM THE DOCUMENT. THE COMPONENTS WHICH ENTER INTO THE CONCEPT OF TAXA TION ARE FIRST THE TAXABLE EVENT WHICH ATTRACTS THE LEVY SECOND THE PERSON O N WHOM THE LEVY IS IMPOSED AND WHO IS OBLIGED TO PAY THE TAX THIRD THE ASSES SMENT YEAR IN WHICH CHARGE OF INCOME-TAX IS LEVIED FOURTH THE TOTAL INCOME O F THE PREVIOUS YEAR AND FIFTH THE RATE OR RATES AT WHICH TAX IS TO BE IMPOSED. TH E RATES ARE PRESCRIBED IN THE ANNUAL FINANCE ACT AND THEREFORE THIS COMPONENT HA S NO VALUE IN DETERMINING THE TOTAL INCOME ON THE BASIS OF A SEIZED DOCUMENT. THE FIRST COMPONENT SHOWS THAT IT IS NECESSARY TO F IND OUT THE NATURE OF THE TRANSACTION WHICH IS THE SOURCE OF GENERATING INCOM E. IT HAS TO BE CLEARLY SPELT OUT WHETHER A PARTICULAR TRANSACTION IS OF INCOME Y IELDING NATURE AS PER INCOME-TAX LAW. IT HAS TO BE SHOWN EITHER FROM A RE ADING OF THE DOCUMENT OR FROM ACCOMPANYING INVESTIGATION THAT THE TRANSACTIO N RECORDED IN A DOCUMENT IS OF REVENUE CHARACTER OR IS OTHERWISE TAXABLE UND ER THE INCOME-TAX ACT. AS A QUASI-JUDICIAL AUTHORITY THE ASSESSING OFFICER HAS TO SATISFY HIMSELF ON THE BASIS OF COGENT MATERIAL EITHER FOUND IN THE SEARC H OR ON THE POST-SEARCH ENQUIRIES THAT THE TRANSACTION RECORDED IN THE DOCU MENT IS REAL AND NOT IMAGINARY AND IT HAS ACTUALLY TAKEN PLACE. IT HAS T O BE SHOWN WHETHER THE TRANSACTION RECORDED IN THE DOCUMENT IS SALE OR PUR CHASE ADVANCE OR LOAN OF CAPITAL OR OF INTEREST OR WHETHER IT IS A STATEMENT OF EXISTING ASSETS DISCLOSED OR UNDISCLOSED ; WHAT IS THE COMMODITY INVOLVED ; W HO ARE THE PEOPLE INVOLVED IN THE TRANSACTION ; IF IT IS ADVANCE THEN WHETHER THE DEBTORS CONCERNED ARE EXISTING THEIR IDENTITY ; WHETHER ADVANCE SO TAKEN IS REFLECTED IN THEIR BOOKS ; WHETHER ANY INTEREST IS PAID ON SUCH TRANSACTION W HAT ARE THE DOCUMENTS EXECUTED FOR RECOVERY OF SUCH ADVANCES OR WHAT ARRA NGEMENT THE ASSESSEE HAS MADE FOR RECOVERY OF SUCH ADVANCES ; WHETHER TH ERE ARE ANY OTHER RELATED DOCUMENTS FOUND IN THE SEARCH ; WHETHER ANY PERSO N RECORDED IN THE DOCUMENT HAD OTHERWISE ANY OTHER TRANSACTION WITH T HE ASSESSEE RECORDED IN THE REGULAR BOOKS. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 20 MERELY BECAUSE A DOCUMENT IS RECOVERED FROM A PERSO N THAT DOES NOT AUTOMATICALLY LEAD TO THE INFERENCE THAT IT BELONGE D TO HIM. IT IS ONLY FOR CERTAIN PURPOSES THAT THE PRESUMPTION UNDER SECTION 132(4A) HAS BEEN ENACTED AND NOT FOR ALL PURPOSES INCLUDING THE ASSESSMENT. FURT HER THIS PRESUMPTION IS NOT CONCLUSIVE. THE WORDS MAY PRESUME LEAVE IT TO THE COURT TO MAKE OR NOT TO MAKE THE PRESUMPTION ACCORDING TO THE CIRCUMSTANCES OF THE CASE. SUCH PRESUMPTION IS OPTIONAL AND THE COURT IS NOT BOUND TO MAKE IT. EVEN IF SUCH PRESUMPTION IS MADE IT IS ONLY A REBUTTABLE ONE. I NITIALLY THE ASSESSING OFFICER WOULD BE JUSTIFIED TO MAKE SUCH A PRESUMPTION IF D RAWN AFTER JUDICIAL APPLICATION OF MIND TO THE FACTS OF THE CASE. THERE AFTER WHEN THE ASSESSEE LEADS EVIDENCE THE ASSESSING OFFICER HAS TO CONSID ER IT JUDICIALLY. WHAT AMOUNT OF EVIDENCE ONE REQUIRES TO REBUT THE EVIDEN CE DEPENDS UPON THE FACTS OF EACH CASE. THERE IS NO RIGID RULE IN THIS BEHALF. SOMETIMES THE MERE STATEMENT OF THE ASSESSEE MAY BE ENOUGH. WHEN SUFFI CIENT OTHER MATERIAL IS FOUND IN THE SEARCH WHICH CORROBORATES THAT THE DOC UMENT BELONGED TO THE ASSESSEE THEN DENIAL OF SUCH OWNERSHIP MERELY BY A FFIDAVITS WILL BE MEANINGLESS AND THEY DO NOT CARRY ANY WEIGHT TO REB UT THE PRESUMPTION LYING ON THE ASSESSEE. A CHARGE CAN BE LEVIED ON THE BASIS OF DOCUMENT ONL Y WHEN THE DOCUMENT IS A SPEAKING ONE. THE DOCUMENT SHOULD SPEAK EITHER OUT OF ITSELF OR IN THE COMPANY OF OTHER MATERIAL FOUND ON INVESTIGATION AN D/OR IN THE SEARCH. THE DOCUMENT SHOULD BE CLEAR AND UNAMBIGUOUS IN RESPECT OF ALL THE FOUR COMPONENTS OF THE CHARGE OF TAX. IF IT IS NOT SO T HE DOCUMENT IS ONLY A DUMB DOCUMENT. NO CHARGE CAN BE LEVIED ON THE BASIS OF A DUMB DOCUMENT. A DOCUMENT FOUND DURING THE COURSE OF A SEARCH MUST BE A SPEAKING ONE AND WITHOUT ANY SECOND INTERPRETATION MUST REFLECT ALL THE DETAILS ABOUT THE TRANSACTION OF THE ASSESSEE IN THE RELEVANT ASSESSM ENT YEAR. ANY GAP IN THE VARIOUS COMPONENTS FOR THE CHARGE OF TAX MUST BE FI LLED UP BY THE ASSESSING OFFICER THROUGH INVESTIGATIONS AND CORRELATIONS WIT H OTHER MATERIAL FOUND EITHER DURING THE COURSE OF THE SEARCH OR ON INVESTIGATION S. IN THE ORDINARY SENSE A BOOK SIGNIFIES A COLLECTION OF SHEETS OF PAPER BOUND TOGETHER IN A MANNER WHICH CANNOT BE DISTURBED OR A LTERED EXCEPT BY TEARING THEM APART. THIS BINDING IS OF A KIND WHICH IS NOT INTENDED TO BE MOVABLE IN THE SENSE OF BEING UNDONE AND PUT TOGETHER AGAIN. ACCOR DING TO SECTION 34 OF THE INDIAN EVIDENCE ACT 1872 BOOK MEANS A COLLECTION OF SHEETS OF PAPER BOUND TOGETHER WITH THE INTENTION THAT SUCH BINDING SHALL BE PERMANENT. UNBOUND PAPERS COLLECTIVELY KEPT IN ONE VOLUME IN WHATEVER QUANTITY THOUGH FILLED UP WITH ONE CONTINUOUS ACCOUNT ARE NOT A BOOKS OF ACC OUNT WITHIN THE MEANING OF SECTION 34 OF THE INDIAN EVIDENCE ACT. THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESS EE WERE SEARCHED IN APRIL 1995 AND DURING THE COURSE OF THE SEARCH OP ERATIONS VARIOUS DOCUMENTS AND BOOKS OF ACCOUNT WERE SEIZED. ONE OF THE DOCUMENTS SEIZED IT(SS) NO.98-50/AHD/05 NIRMA LTD. 21 FROM HIS RESIDENCE (DOCUMENT NO. 7) A LOOSE PAPER CONTAINED CERTAIN NAMES WRITTEN EITHER IN FULL OR IN ABBREVIATION AGAINST W HICH CERTAIN FIGURES WERE MENTIONED AND WHOSE TOTAL WAS WRITTEN 22.30. THE AS SESSING OFFICER TOOK THE VIEW THAT THIS PAPER REFLECTED ADVANCE OF LOANS AND ASKED THE ASSESSEE TO EXPLAIN THESE ADVANCES. THE ASSESSEE DENIED HAVING ADVANCED ANY AMOUNT TO ANY PERSON OR HAVING ANY CONCERN WITH THE DOCUME NT OR THE FIGURES MENTIONED IN THAT DOCUMENT. HE ALSO FILED AN AFFIDA VIT TO THIS EFFECT AVERRING THAT HE DID NOT KNOW THE PERSONS WHOSE NAMES APPEAR ED IN THAT DOCUMENT. THE ASSESSING OFFICER HOWEVER TOOK THE VIEW THAT THE ASSESSEE HAVING FAILED TO ESTABLISH WITH SUPPORTING EVIDENCE THAT THE SEIZ ED PAPER DID NOT PERTAIN TO HIM OR HIS BUSINESS TREATED THE ENTRIES IN THE DOC UMENT AS UNDISCLOSED INVESTMENT IN MONEY-LENDING BUSINESS AND ADDED A SU M OF RS. 22 30 000 AS THE ASSESSEES UNDISCLOSED INCOME. THE ASSESSEE CHA LLENGED THE REOPENING OF THE ASSESSMENT AND THE ADDITION BEFORE THE COMMI SSIONER (APPEALS) WHO UPHELD THE REOPENING BUT AFTER ADMITTING EVIDENCE IN THE FORM OF AFFIDAVITS OF VARIOUS PERSONS WHOSE NAMES WERE RECORDED ON THE SE IZED DOCUMENT NO. 7 DELETED THE ADDITION ON THE VIEW THAT THE DOCUMENT IN QUESTION CONTAINED NOT THE ADVANCES OF LOANS BUT ORDERS PLACED BY DIFFEREN T PARTIES WITH D THE ASSESSEES LATE BROTHER WHO HAD DONE BUSINESS IN I RON AND STEEL. ON FURTHER APPEAL : HELD- (I) THAT THE DOCUMENT WAS BEREFT OF NECESSAR Y DETAILS ABOUT THE YEAR OF TRANSACTION OWNERSHIP NATURE OF TRANSACTION NECE SSARY CODE FOR DECIPHERING THE FIGURES. THE ASSESSING OFFICER PRESUMED THAT TH E TRANSACTION BELONGED TO THE FINANCIAL YEAR 1988-89 RELEVANT TO THE ASSESSME NT YEAR 1989-90 THAT THE FIGURES MENTIONED IN THE DOCUMENT WERE ADVANCES MAD E BY THE ASSESSEE THAT THE TRANSACTIONS BELONGED TO THE ASSESSEE AND THAT THE TRANSACTIONS WERE IN A CODE OF LAKHS AND THAT THE UNIT WAS THE RUPEE. THE ASSESSING OFFICER DID NOT CARRY OUT ANY ENQUIRY EITHER DURING THE COURSE OF SEARCH OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO FIND OUT THE NA TURE OF TRANSACTIONS AND THE PERIOD IN WHICH THOSE TRANSACTIONS WERE CARRIED OUT : HE HAD SIMPLY PRESUMED THAT THE FIGURES WERE ADVANCES WITHOUT THE RE BEING ANY MATERIAL ON RECORD TO SUPPORT SUCH PRESUMPTION. IF THE ASSESSEE HAD BY AFFIDAVIT DENIED THE OWNERSHIP OF THE DOCUMENT AND THE WIFE OF THE A SSESSEES BROTHER ADMITTED THAT IT BELONGED TO HER HUSBAND IT COULD NOT BE INFERRED WITHOUT REBUTTING THIS EVIDENCE THAT THE DOCUMENT AND TRANS ACTIONS RECORDED THEREIN IN FACT BELONGED TO THE ASSESSEE. THE AFFIDAVITS EVEN IF REGARDED AS SELF- SERVING DID NOT LOSE THEIR EVIDENTIARY VALUE AS THE RE WAS NO MATERIAL CONTRARY TO THE AVERMENTS MADE IN THE AFFIDAVIT. NOTHING WAS SHOWN BY THE ASSESSING OFFICER THAT THERE WAS OTHER MATERIAL CORRELATED WI TH THE DOCUMENT CLEARLY SHOWING THAT IT BELONGED TO THE ASSESSEE. UNDER THE SE CIRCUMSTANCES THE ASSESSEE HAS SUCCESSFULLY SHIFTED THE ONUS ON TO TH E ASSESSING OFFICER BY FILING THE AFFIDAVITS. ONCE THE ONUS SHIFTED TO THE ASSESSING OFFICER HE WAS DUTY BOUND TO COLLECT EVIDENCE SO AS TO BELIE THE C ONTENTS OF THE AFFIDAVIT AND HOLD THAT THE DOCUMENT AND TRANSACTIONS RECORDED TH EREIN IN FACT BELONGED TO THE ASSESSEE. THE ASSESSING OFFICER HAD DRAWN INFER ENCES MADE PRESUMPTIONS RELIED ON SURMISES AND THUS MADE UNSU STAINABLE ADDITIONS. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 22 (II) THAT DOCUMENT NO. 7 WAS ONLY A PIECE OF PAPER AND COULD NOT BE CALLED A BOOK WITHIN THE MEANING OF SECTION 68. NO ADDITIO N UNDER SECTION 68 OF THE ACT COULD BE MADE ON THE BASIS OF THE LOOSE SHEET B EING DOCUMENT NO. 7 FOUND DURING THE SEARCH. 21. FURTHER IN JUDGMENTS ALSO IT HAS BEEN HELD THAT A DOCUMENT WOULD BE A DUMB DOCUMENT UNLESS IT REFLECTS THE NECESSARY INGR EDIENTS FOR TAXING INCOME ARISING FROM THE TRANSACTIONS RECORDED IN THE SEIZE D DOCUMENTS. SOME OF THE JUDGMENTS AS REFERRED TO BY LD. AR ARE AS UNDER :- 1. COMMISSIONER OF INCOME-TAX VS. GIRISH CHAUDHARY (20 08) 296 ITR 619 (DEL) THE DOCUMENT ANNEXURE A-37 RECOVERED DURING THE COU RSE OF SEARCH IN THE PRESENT CASE IS A DUMB DOCUMENT AND LEAD US NOW HERE. THUS THE TRIBUNAL RIGHTLY DELETED THE ADDITION OF RS. 48 LAK HS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDISCLOSED INCOME ON THE BASIS OF SEIZED MATERIAL. 2. COMMISSIONER OF INCOME-TAX VS. S. M. AGGARWAL ( 2007) 245 ITR 43 (DEL) DURING THE COURSE OF SEARCH CERTAIN DOCUMENTS CONT AINING DETAILS OF MONETARY TRANSACTIONS SUCH AS ADVANCEMENT OF LOAN O F RS. 22.50 LAKHS BY THE ASSESSEE AND ALSO INCOME BY WAY OF INTEREST THE REON AT RS. 3.55 LAKHS WERE FOUND. THE EXPLANATION GIVEN BY THE ASSESSEE T HAT THE ACCOUNT BELONGED TO HIS DAUGHTER WAS DENIED BY HER. THE ASS ESSING OFFICER CONCLUDED IN HIS ASSESSMENT ORDER THAT THE ASSESSEE HAD EARNED INCOME FROM UNDISCLOSED SOURCES WHICH WAS CIRCULATED BY WA Y OF LOAN FOR THE PURPOSE OF EARNING INTEREST. THUS THE AMOUNT OF RS . 22.5 LAKHS AND INTEREST OF RS. 3.5 LAKHS WERE ADDED TO THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1998-99. THE ADDITION WAS DELETED B Y THE COMMISSIONER (APPEALS) AND HIS ORDER WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT : IT(SS) NO.98-50/AHD/05 NIRMA LTD. 23 HELD - DISMISSING THE APPEAL THAT THE STATEMENT MA DE BY THE ASSESSEES DAUGHTER COULD NOT BE SAID TO BE RELEVANT OR ADMISS IBLE EVIDENCE AGAINST THE ASSESSEE SINCE THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS- EXAMINE HER AND EVEN FROM THE STATEMENT NO CONCLUS ION COULD BE DRAWN THAT THE ENTRIES MADE ON THE RELEVANT PAGE BELONGED TO THE ASSESSEE AND REPRESENTED HIS UNDISCLOSED INCOME. IT WAS ALSO AN ADMITTED FACT THAT THE STATEMENT OF THE ASSESSEE WAS NOT RECORDED AT ANY S TAGE DURING THE ASSESSMENT PROCEEDINGS. THE ONLY PERSON COMPETENT T O GIVE EVIDENCE ON THE TRUTHFULNESS OF THE CONTENTS OF THE DOCUMENT IS THE WRITER THEREOF. SO UNLESS AND UNTIL THE CONTENTS OF THE DOCUMENTS ARE PROVED AGAINST A PERSON THE POSSESSION OF THE DOCUMENT OR HANDWRITI NG OF THAT PERSON ON SUCH DOCUMENT BY ITSELF COULD NOT PROVE THE CONTENT S OF THE DOCUMENT. THE FINDINGS OF FACT HAD BEEN RECORDED BY BOTH THE COMMISSIONER (APPEALS) AND THE TRIBUNAL. THE DOCUMENTS RECOVERED DURING THE COURSE OF SEARCH FROM THE ASSESSEE WERE DUMB DOCUMENTS. TH E DELETION OF THE ADDITION WAS JUSTIFIED. 3. MAHAVIR WOOLLEN MILLS VS. COMMISSIONER OF INCOME -TAX (2000) 245 ITR 297 (DEL) DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS CERTAIN SLIPS WERE FOUND WHICH THE ASSESSING OFFICER CONCLUDED CONT AINED DETAILS OF PAYMENT BEYOND THOSE WHICH WERE MADE BY CHEQUES AND DRAFTS AND WERE DULY REFLECTED IN THE BOOKS OF ACCOUNT. THE ASSESSE ES STAND BEFORE THE TRIBUNAL WAS THAT THE DOCUMENTS WERE DUMB DOCUMENT S WHICH DID NOT CONTAIN FULL DETAILS ABOUT THE DATES OF PAYMENT AND THEIR CONTENTS WERE NOT CORROBORATED BY ANY MATERIAL AND COULD NOT BE RELIE D UPON AND MADE THE BASIS OF AN ADDITION. THE TRIBUNAL CONSIDERED THIS ASPECT AND OBSERVED THAT ON COMPARISON OF THE SEIZED DOCUMENTS AND LEDG ER ACCOUNTS OF THE PARTIES THE SEIZED DOCUMENTS COULD NOT BE REGARDED AS DUMB DOCUMENTS. THE BASIS FOR COMING TO SUCH A CONCLUSI ON WAS THAT SOME OF THE ENTRIES REFLECTED IN THE SEIZED DOCUMENTS TALLI ED WITH THE ENTRIES IN THE LEDGER ACCOUNTS MAINTAINED BY THE ASSESSEE. IT ALSO NOTICED THAT THERE WAS NO DENIAL OF THE FACT ABOUT THE SEIZURE OF THE DOCU MENTS. THE TRIBUNAL HELD THAT THE SEIZED PAPERS CONSTITUTED BOOKS OF AC COUNT OR DOCUMENTS FOR THE PURPOSES OF SECTION 158B AND UPHELD THE ORD ER OF THE INCOME-TAX OFFICER THAT THE AMOUNTS REPRESENTED UNEXPLAINED IN VESTMENT OF THE ASSESSEE WHICH WAS LIABLE TO BE ASSESSED UNDER SECT ION 69 OF THE ACT IN THE ASSESSMENT YEAR 1996-97. ON APPEAL TO THE HIGH COUR T : IT(SS) NO.98-50/AHD/05 NIRMA LTD. 24 HELD - DISMISSING THE APPEAL THAT THE TRIBUNAL HAD COME TO A CERTAIN FACTUAL CONCLUSION ABOUT THE NATURE OF THE PAPERS S EIZED. ON THE QUESTION WHETHER THE DOCUMENTS DID OR DID NOT CONTAIN THE PA RTICULARS THE TRIBUNAL OBSERVED THAT THEY DID CONTAIN CERTAIN MATERIALS WH ICH WERE SUFFICIENT TO COME TO A CONCLUSION ABOUT CASH PAYMENTS HAVING BEE N MADE IN ADDITION TO THOSE MADE BY CHEQUES AND DRAFTS. THE CONCLUSION WAS ESSENTIALLY FACTUAL. NO SUBSTANTIAL QUESTION OF LAW AROSE FROM ITS ORDER. 4. DIMSY FOOD & CHEMICALS (P) LTD. VS. DCIT [2007] 110 TTJ 450 (DELHI) IN THE ITAT DELHI 'C' BENCH SECTION 158BD OF INCOME-TAX ACT - BLOCK ASSESSMENT IN SEARCH CASES - UNDISCLOSED INCOME OF ANY OTHER PERSON UNLESS NAME OF OTHER PERSON IS NOTED ON FOUND AND S EIZED DURING SEARCH OR ANY NOTING IS FOUND ON SUCH WHICH CAN REASONABLY BE CO-RELATED WITH SUCH OTHER PERSON SUCH DUMB CANNOT BE MADE BASIS F OR MAKING ADDITION IN HANDS OF SUCH OTHER PERSON UNDER SECTION 158BD. THE UNDISPUTED FACTS IN THE INSTANT CASE ARE ALSO T HAT THE SO FOUND DURING THE COURSE OF SEARCH MARKED AS ANNEX. AD-46 ON THE BASIS OF WHICH ADDITION WAS MADE BY THE AO WAS NEITHER SIGNED NOR DATED ON THIS DOCUMENT NO NAME WAS MENTIONED SO AS TO RELATE THE SAME TO SOME PERSON. IT WAS ALSO NOT KNOWN AS TO WHO HAD WRITTEN OR PREPARED THE SAID DOCUMENT. AS PER PROVISIONS OF S. 158BD WHERE THE AO IS SATISFIED THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON OTHER THAN A PERSON WITH RESPECT TO WHOM SEARCH WAS MADE THEN THE DOCUMENT SEIZED SHALL BE HANDED OVER TO THE AO HAVING JURISDICTION OVER SUCH OTHER PERSON FOR PROCEEDING AGAINST SUCH OTHER PERSON. THUS PRIMA F ACIE THE AO IS REQUIRED TO BE SATISFIED WITH THE DOCUMENT FOUND DU RING SEARCH AS BELONGING TO SOME OTHER PERSON. UNLESS THE NAME OF SUCH OTHER PERSON IS NOTED ON THE DOCUMENT SO FOUND AND SEIZED OR ANY N OTING IS FOUND ON SUCH DOCUMENT WHICH CAN REASONABLY BE CO-RELATED WI TH SUCH OTHER PERSON SUCH DUMB DOCUMENT CANNOT BE MADE THE BASIS FOR MAKING ADDITION IN THE HANDS OF SUCH OTHER PERSON UNDER S. 158BD OF THE ACT. THE DOCUMENT SO SEIZED IN THE INSTANT CASE DURING THE COURSE OF A THIRD PARTY DID NOT BEAR THE NAME OF ANY OF THE ASSESSEE COMPAN Y IN WHOSE HANDS THE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 25 AO HAD MADE ADDITION UNDER S. 158BD OF THE ACT NOR THE NOTING ON THE SEIZED PAPER INDICATED ANY UNACCOUNTED MONEY HAVING BEEN INVESTED BY THE ASSESSEE IN THE PURCHASE OF LAND WHICH WAS DULY DISCLOSED IN THE REGULAR RETURNS MUCH PRIOR TO THE DATE OF SEARCH. E VEN DURING THE COURSE OF SEARCH OR THEREAFTER THE DEPARTMENT HAS NOT RECORD ED ANY STATEMENT OF THE PERSON FROM WHOSE POSSESSION THE DOCUMENT WAS FOUND SO AS TO FIND OUT AS TO WHOM THIS DOCUMENT BELONGS. NO CORROBORATIVE MATERIAL OF ANY NATURE WHATSOEVER WAS BROUGHT ON RECORD BY THE AO T O INDICATE THAT NOTING ON THE SEIZED PAPER WAS RELATED TO THE ASSES SEE. THIS DOCUMENT WAS SEIZED FROM THE OFFICE OF DR. M.C. GUPTA BUT NEITH ER DURING THE COURSE OF SEARCH NOR EVEN THEREAFTER THE DEPARTMENT HAS TRIED TO RECORD HIS STATEMENT TO SUBSTANTIATE THEIR STAND THAT DOCUMENT WAS BELONGING TO ANY OF THE COMPANIES IN WHOSE HANDS THE ADDITION WAS MA DE. THIS DOCUMENT INDICATED TRANSACTION IN RESPECT OF 3 BIGHAS OF LAN D ALLEGED TO BE PURCHASED FROM THREE PERSONS BUT IN THE BOOKS OF N ONE OF THE ASSESSEES THERE WAS ANY SUCH TRANSACTION FOR 3 BIGHAS SO AS TO CORROBORATE THE SAME WITH SEIZED DOCUMENT. FURTHERMORE THE DEPARTMENT I TSELF HAS CARRIED OUT THE VALUATION OF THE LAND SHOWN BY THE ASSESSEE IN THEIR REGULAR RETURNS BY ITS OWN VALUATION CELL WHICH HAS ALSO VALUED THE S AME NEAR TO THE PRICE AT WHICH THESE WERE SHOWN BY THE ASSESSEE IN THEIR BOO KS OF ACCOUNT. THE REGISTERING AUTHORITIES HAVE ALSO REGISTERED THE LA ND PURCHASED BY THE ASSESSEE AT THE PRICE SHOWN IN THE SALE DEED. THUS NEITHER THE STATE GOVERNMENT BEING THE REGISTERING AUTHORITIES SUPPOR TS THE VALUE TAKEN BY THE AO ON THE BASIS OF DUMB DOCUMENT NOR THE VALUA TION CELL OF THE IT DEPARTMENT ITSELF SUPPORTS THE RATE OF LAND SHOWN I N THE DOCUMENT SO FOUND. TO SUBSTANTIATE THE RATE OF LAND MENTIONED I N THE SEIZED DOCUMENT THE AO HAS ALSO NOT TRIED TO RECORD THE STATEMENTS OF PERSONS FROM WHOM ASSESSEE HAD PURCHASED THE LAND. UNDISPUTEDLY THE LAND SO PURCHASED BY THE ASSESSEE SITUATED IN VILLAGE CHAWLA WAS REGIST ERED BY THE STAMP AUTHORITIES AT THE PREVAILING PRICE OF LAND SITUATE D IN THAT AREA AND THE SOURCE WAS COMPARABLE WITH THE RATE AT WHICH ASSESS EE HAD ACTUALLY PURCHASED THE LAND. NO EXTRA STAMP DUTY WAS IMPOSED WHILE REGISTERING THE LAND ON THE PLEA OF HIGHER VALUE THAN THE VALUE AT WHICH LAND WAS ACTUALLY PURCHASED AS PER SALE DEED ENTERED BETWEEN THE ASSESSEE AND OWNER OF LAND. VALUATION CELL OF THE IT DEPARTMENT IS ENTRUSTED WITH THE RESPONSIBILITY TO FIND OUT FAIR MARKET VALUE OF CAP ITAL ASSET AS AND WHEN ANY REFERENCE IS MADE BY THE AO. AO MAY REFER THE V ALUATIONS OF CAPITAL ASSET TO A VALUATION OFFICER WHEN HE FINDS THAT THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS LESS THAN FAIR MARKET VA LUE. IN THE INSTANT CASE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 26 TO FIND OUT THE FAIR MARKET VALUE OF LAND SO AS TO CO-RELATE THE SAME WITH THE RATE OF LAND STATED IN THE DOCUMENT SO FOUND T HE AO HAD REFERRED THE MATTER TO ITS VALUATION CELL HOWEVER INSTEAD OF SU PPORTING THE AO'S ALLEGATION THE VALUATION OFFICER INDICATED THE FAI R MARKET VALUE OF LAND AT THE PRICE RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT THAT WAS THE REASON THAT AO DID NOT GIVE COPY OF SUCH VALUATION REPORT IN SPITE OF WRITTEN REQUEST OF THE ASSESSEE. THE ASSESSEE VIDE ITS LETTER DT. 17TH MAY 2004 ASKED THE AO TO GIVE COPY OF VALUATION REPORT HOWEVER THE AO DECLINED TO GIVE COPY OF VALUATION REPORT PREPARED BY THE OFFICERS OF HIS DEPARTMENT I.E. VALUATION CELL. THE AO STATED IN HIS ORDER THAT VA LUATION REPORT IS ERRONEOUS INSOFAR AS IT RELIES ON THE COM PARABLE INSTANCES FOR PURCHASE OF SIMILAR PROPERTIES I.E. IT GOES BY THE REGISTRATION VALUE OF THE COMPARABLE INSTANCES OF PURCHASES DOES NOT TAKE INT O ACCOUNT THE MARKET VALUE. 11. APPLYING THE PROPOSITIONS LAID DOWN BY THE VARI OUS AUTHORITIES AS REFERRED BY THE LEARNED AUTHORISED REPRESENTATIVE D URING THE COURSE OF HEARING TO THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE WHERE ADDITION HAS BEEN MADE ON THE BASIS OF DUMB DOCUMENT THE AO COULD NOT CORROBORATE THE DOCUMENT OR ITS CONTENTS WITH ANY O THER INFORMATION OR EVIDENCE WHEREAS ON THE CONTRARY THE DOCUMENTS/INF ORMATION SO GATHERED BY THE AO GOES AGAINST THE DEPARTMENT WE DO NOT FI ND ANY MERIT IN THE ADDITIONS SO MADE BY THE AO AND CONFIRMED BY THE CI T(A) IN CASE OF ALL THE ASSESSEES. WE THEREFORE DIRECT FOR DELETION OF ALL THESE ADDITIONS . 5. ASHWANI KUMAR VS. ITO [1991] 39 ITD 183 (DEL HI) IN THE ITAT DELHI BENCH D FACTS THE ASSESSEE WAS CARRYING ON THE BUSINESS OF PURCHA SE AND SALE OF CEMENT. DURING THE ACCOUNTING PERIOD RELEVANT TO THE ASSESS MENT YEAR 1985-86 THERE WAS SEARCH AT THE ASSESSEES BUSINESS PREMISE S. DURING THE SEARCH AN AMOUNT OF RS. 1 86 330 IN CASH WAS FOUND. IN A STAT EMENT THE ASSESSEE EXPLAINED THAT IT BELONGED TO D AND IN WHICH HE WAS A PARTNER. ONE OF THE GODOWNS WAS ALSO SEARCHED AND THERE WAS FOUND SHORT AGE OF CERTAIN CEMENT BAGS. DURING THE SEARCH THE DEPARTMENT ALSO FOUND A SLIP ON WHICH CERTAIN ENTRIES WERE GIVEN. SIMULTANEOUSLY A SEARC H WAS CONDUCTED AT THE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 27 RESIDENCE OF THE ASSESSEES FATHER AND THE DEPARTME NT FOUND A SLIP IN WHICH IT WAS STATED THAT CERTAIN AMOUNT WAS RECEIVE D FROM THE ASSESSEE BY HIS FATHER. ON THE BASIS OF AFORESAID MATERIAL OF A SSESSING OFFICER MADE ADDITIONS ON ACCOUNT OF (I) UNEXPLAINED CASH FOUND IN THE BUSINESS PREMISES (II) UNEXPLAINED INVESTMENT AS STATED IN THE SLIP FOUND (III) UNEXPLAINED DEALING IN RESPECT OF THE SHORTAGE OF C EMENT BAGS AND ADULTERATED CEMENT FOUND ON THE BASIS OF THE REPORT OF THE NATIONAL TEST HOUSE AND (IV) UNEXPLAINED MONEY ON THE BASIS OF SL IP FOUND AT THE RESIDENCE OF THE ASSESSEES FATHER DURING THE SEARC H. ON APPEAL THE COMMISSIONER (APPEALS) DELETED THE ADDITION MADE ON ACCOUNT OF THE UNEXPLAINED CASH FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE BUT UPHELD THE OTHER ADDITIONS. ON FURTHER APPEAL THE ASSESSEE CONTENDED INTER AL IA THAT THE PRESUMPTION THAT IS PERMISSIBLE UNDER SECTION 132(4A) CANNOT BE RAISED IN THE PROCEEDINGS FOR REGULAR ASSESSMENT. HELD AS REGARDS THE ASSESSEES CONTENTION ABOUT THE APPL ICABILITY OF SECTION 132(4A) SECTION 132(4A) IS A SPECIAL PROVISION DEA LING WITH DOCUMENTS AND OTHER THINGS RECOVERED DURING A SEARCH AND ITS VERY PURPOSE WOULD BE FRUSTRATED IF THE PRESUMPTION IS RESTRICTED TO THE INTERIM PROCEEDINGS UNDER SECTION 132(5). IN THE INSTANT CASE NO OTHER CASH WAS SHOWN TO HAV E BEEN RECOVERED EITHER FROM THE HOUSE OR FROM THE GODOWN BELONGING TO THE ASSESSEE. THE ASSESSEE HAD A SUBSTANTIAL BUSINESS IN CEMENT AND H IS SALES FOR THE YEAR UNDER CONSIDERATION WERE OF THE ORDER OF RS. 1 10 2 3 744. IF THE REVENUES STAND THAT THIS ENTIRE AMOUNT OF RS. 1 86 330 WAS U NEXPLAINED CASH OF THE ASSESSEE WAS ACCEPTED THEN IT WOULD MEAN THAT THE ASSESSEE HAD NO CASH- IN-HAND FOR SUCH A LARGE SCALE BUSINESS. THIS WAS A BSOLUTELY UNNATURAL. IT WAS ALSO TO BE REMEMBERED THAT EVEN DURING THE SEAR CH THE WHOLE AMOUNT WAS NOT SEIZED AND ONLY RS. 1 85 000 WERE SEIZED. T HE SOURCE OF THIS AMOUNT WAS PROPERLY EXPLAINED TO BE THE CASH-IN-HAN D WHICH WAS DULY SUPPORTED BY THE ASSESSEES CASH BOOK AND SALE VOUC HERS ETC. THUS THE COMMISSIONER (APPEALS) HAD RIGHTLY DELETED THE AFOR ESAID ADDITION. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 28 AS REGARDS THE ADDITION MADE ON ACCOUNT OF THE SLIP FOUND AT THE BUSINESS PREMISES THERE WAS NOTHING TO SHOW THAT THE SLIP W AS IN POSSESSION AND CONTROL OF THE ASSESSEE. EVERYTHING PHYSICALLY PRES ENT INSIDE THE SHOP OF A PERSON MIGHT NOT BE IN THAT PERSONS CONTROL AND PO SSESSION. FOR PROVING POSSESSION IT WAS NECESSARY TO SHOW THAT THE PERSON CONCERNED HAD THE INTENTIO POSSESSENDI. IN THE INSTANT CASE NOTHING OF THAT SORT WAS POINTED OUT BY THE AUTHORITIES BELOW. MOREOVER THE SLIP DI D NOT CONTAIN ANY NARRATION IN RESPECT OF THE VARIOUS FIGURES NOTED T HEREIN. FURTHER FOR PRESUMING THAT THE CONTENTS OF THE BOOKS OF ACCOUNT OR DOCUMENT ARE TRUE THE DOCUMENT MUST BE A SPEAKING ONE. IN THIS CASE T HE SLIP SAID TO HAVE BEEN RECOVERED BY THE REVENUE DID NOT CONTAIN ANY NARRATION IN RESPECT OF THE VARIOUS FIGURES NOTED THEREIN. THE SLIP DID NOT INDICATE WHETHER THE FIGURES REFERRED TO QUANTITIES OF MONEY OR TO QUANT ITIES OF GOODS AND WHETHER ONE SIDE AND IF SO WHICH SIDE REPRESENTED RECEIPT AND WHICH SIDE REPRESENTED OUT GOINGS. THIS WAS THUS A DUMB DOCUM ENT AND AS THE ORDERS OF THE AUTHORITIES BELOW SHOWED THAT THEY HAD MEREL Y ADDED THE TOTAL OF THE RIGHT SIDE OF THE SLIP WITHOUT SUPPLYING THE FI GURES ANY LANGUAGE TO INDICATE THEIR MEANING. IN THE CASE OF SUCH A DUMB DOCUMENT THE PROVISIONS OF SECTION 132(4A) DO NOT PERMIT ANY ONE TO PRESUME THAT THE TOTAL OF THE FIGURES OF RIGHT SIDE OF THE SLIP REPR ESENTS THE ASSESSEES INCOME. THE PRESUMPTION AT THE MOST WAS ATTRACTED T O THE FIGURES AND A FURTHER PRESUMPTION THAT THEY REPRESENTED THE INCOM E OF THE ASSESSEE WAS NOT PERMISSIBLE UNDER SECTION 132(4A). WHEN A DUMB DOCUMENT LIKE THE PRESENT SLIP WAS RECOVERED AND THE REVENUE WANTED TO MAKE USE OF IT IT WAS THE DUTY OF THE REVENUE TO COLLECT NECESSARY EV IDENCE WHICH MIGHT PROVIDE AN ACCEPTABLE NARRATION TO THE VARIOUS ENTR IES. THE EVIDENCE COLLECTED SHOULD BE SUCH THAT ANY REASONABLE MAN WO ULD ACCEPT THE HYPOTHESIS ADVANCED BY THE REVENUE THAT THE FIGURES WRITTEN ON THE RIGHT SIDE OF THE SLIP REPRESENTED INCOMES EARNED BY THE ASSESSEE. NO SUCH EVIDENCE WAS PRODUCED BY THE REVENUE AND THEREFOR E THE COMMISSIONER (APPEALS) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITI ON IN QUESTION. SO FAR AS THE ADDITION MADE ON ACCOUNT OF THE ADULT ERATED CEMENT WAS CONCERNED THERE WAS NO DISPUTE THAT SAMPLES OF THE CEMENT WERE TAKEN AND THE NATIONAL TEST HOUSE REPORTED VARYING RESULT S WITH RESPECT TO THEM. BUT THE ORDERS OF THE AUTHORITIES BELOW DID NOT IND ICATE WHAT INFERENCE THEY DERIVED FROM THIS FACT. THE CERTIFICATE OF THE NATIONAL TEST HOUSE DID NOT SAY THAT THE SAMPLES IN QUESTION WERE OF ADULTE RATED CEMENT. THE ASSESSING OFFICER DID NOT SEEK ANY INFORMATION FROM THE MANUFACTURERS OF IT(SS) NO.98-50/AHD/05 NIRMA LTD. 29 THE CEMENT WITH THE RESULT THAT NONE OF THE MANUFA CTURERS WAS SHOWN TO HAVE TOLD THE ITO THAT THE CEMENT SUPPLIED BY THEM WAS OF DIFFERENT CHEMICAL ANALYSIS. THE AUTHORITIES BELOW HAD NOT EV EN SURMISED THAT THE ASSESSEE WAS SELLING ADULTERATED CEMENT. THEREFORE THE CIRCUMSTANCES THAT THE SAMPLES DIFFERED IN CHEMICAL ANALYSIS DID NOT L EAD ONE ANYWHERE. AS REGARDS THE SHORTAGE OF 57 BAGS OF CEMENT THE A SSESSEES EXPLANATION WAS THAT A PORTION OF THE CEMENT HAD GOT SPOILED IN RAIN RESULTING IN SHORTAGE OF 57 BAGS. THIS EXPLANATION WAS ADVANCED AT THE EARLIEST STAGE IN THE ASSESSEES STATEMENT AND HAD NOT BEEN FOUND TO BE FALSE OR UNACCEPTABLE. AS REGARDS THE ADDITION MADE ON THE BASIS OF THE DO CUMENT FOUND AT THE RESIDENCE OF THE ASSESSEES FATHER NO PRESUMPTION UNDER SECTION 132(4A) COULD BE RAISED IN RESPECT OF THIS DOCUMENT AGAINST THE ASSESSEE. THERE WAS NO EVIDENCE TO SHOW THAT ANY AMOUNT WAS PAID TO THE ASSESSEE BY HIS FATHER OR ANYBODY ELSE : (I) THAT THE AMOUNT IN QUE STION REPRESENTED INCOME; AND (II) THAT THE AMOUNT IN QUESTION REPRES ENTED INCOME FOR THE ACCOUNTING PERIOD ENDING 30-9-1984 OF THE ASSESSEE. THEREFORE THE AMOUNT MENTIONED IN THE AFORESAID SLIP COULD NOT BE TREATED AS THE ASSESSEES INCOME AND THIS ADDITION THEREFORE TOO WAS UNJUSTIFIED. THIS ADDITION WAS ALSO DELETED. 6. ACIT VS. ASHOK KUMAR VIG [2007] 15 SOT 85 RANCHI)(URO) ITAT RANCHI CIRCUIT BENCH FACTS THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPO RTATION OF MOTOR SPIRIT HIGH SPEED DIESEL AND OTHER PETROLEUM PRODU CTS. THE ASSESSEE HAD TWO PROPRIETARY CONCERNS IN THE NAME AND STYLE OF A AND B ENGAGED IN TRANSPORTING AND SUPPLY OF PETROLEUM PRODUCTS TO DI FFERENT CONCERNS. A SEARCH WAS CONDUCTED AT RESIDENTIAL AND BUSINESS PR EMISES OF THE ASSESSEE WHEREIN CERTAIN DIARIES WERE SEIZED. ENTRIES CONTAI NED IN SEIZED DIARIES REVEALED DEBTS OF RS. 67 01 380 AND RS. 77 02 747. AS THE ASSESSEE FAILED TO EXPLAIN THE ENTRIES CONTAINED IN THE SEIZED DIAR Y WHICH WERE NOT REFLECTED IN THE SEIZED BOOKS OF ACCOUNT AND RETURN OF INCOME ENTIRE BALANCE OF RS. 67 01 380 AND RS. 77 02 747 FOR RESP ECTIVE YEARS WERE CONSIDERED TO BE THE UNDISCLOSED SUNDRY DEBTS. THE ASSESSEE EXPLAINED IT(SS) NO.98-50/AHD/05 NIRMA LTD. 30 THAT SEIZED DIARY CONTAINED WORKSHEETS MAINTAINED B Y HIS EMPLOYEE UPON WHICH NO RELIANCE COULD BE PLACED BECAUSE NO TRIAL BALANCE AND PROFIT AND LOSS ACCOUNT COULD BE PREPARED FROM THE CONTENTS OF THE SAID DIARY. THE ASSESSING OFFICER HOWEVER REJECTED THE EXPLANATIO N OF THE ASSESSEE AND MADE ADDITION OF SAID AMOUNT. ON APPEAL THE COMMIS SIONER (APPEALS) HOWEVER DELETED THE ADDITION. ON REVENUES APPEAL : HELD ON PERUSAL OF THE TRANSACTION RECORDED IN THE SEIZE D DIARY IT WAS CLEAR THAT THESE WERE WORKING SHEETS MAINTAINED BY THE EMPLOYE E AND THOSE MATURING TRANSACTIONS HAD BEEN DULY RECORDED IN THE BOOKS OF ACCOUNT. FURTHER THE TRANSACTIONS APPEARING IN THE DIARY DI D NOT REVEAL THAT THEY WERE PARTYWISE ACCOUNT AS THERE WAS NO MENTION OF A NY BILL HAVING BEEN RAISED AGAINST THE SAID TRANSACTIONS. THE AMOUNTS M ENTIONED THEREIN APPEARED TO BE A CONSOLIDATED FIGURE BUT DATE ON WH ICH THESE AMOUNTS WERE SHOWN AS OUTSTANDING WAS NOT MENTIONED. CERTAI N PARTIES APPEARING IN THE CHART SHOWED DRASTIC REDUCTION IN THE BALANC ES BUT HOW THE PAYMENTS WERE ACCOUNTED FOR WAS NOT FORTHCOMING FRO M THESE ENTRIES. COMING TO THE APPLICABILITY OF PROVISIONS OF SECTIO N 132(4A) THE ASSESSEE HAD EXPLAINED THE CIRCUMSTANCES UNDER WHICH HIS EMP LOYEE MAINTAINED THESE DOCUMENT. THUS THE OWNERSHIP WAS NOT DISPUTE D. THE ASSESSING OFFICER COULD NOT MAKE ADDITION ON THE BASIS OF INC OMPLETE ENTRIES. THE ONUS RESTS ON THE REVENUE TO ESTABLISH THAT THE ASS ESSEE WAS IN RECEIPT OF MONEY THEN THE ONUS WOULD AUTOMATICALLY BE SHIFTED TO THE ASSESSEE TO PROVE THAT THE MONEY HAD BEEN DISCLOSED IN THE ACCO UNT OR THE SAME WAS NOT LIABLE TO TAX. IN THE INSTANT CASE THE ASSESSI NG OFFICER HAD NOT BEEN ABLE TO DEMONSTRATE WITH ADEQUATE EVIDENCE THAT THE ASSESSEE RECEIVED THE AMOUNTS IN TWO YEARS AS WAS ALLEGED. THESE ENTRIES DID NOT CLEARLY REVEAL THAT THE ASSESSEE HAD EARNED INCOME. THE ASSESSMENT OF UNDISCLOSED INCOME WAS UNDER CHAPTER XIV-B AND THERE WAS NO SCO PE OF ASSUMPTION OR PRESUMPTION WHILE MAKING ASSESSMENT UNDER THIS C HAPTER. THEY WERE DUMB DOCUMENTS UPON WHICH RELIANCE COULD NOT BE PLA CED UNLESS THEY WERE CORROBORATED WITH OTHER EVIDENCES. THUS THERE BEING NO INFIRMITY IN THE ORDER OF THE COMMISSIONER (APPEALS) THE SAME W AS TO BE UPHELD. 7. JAYA S. SHETTY VS. ACIT [1999] 69 ITD 336 (MUM .) IN THE ITAT MUMBAI BENCH D IT(SS) NO.98-50/AHD/05 NIRMA LTD. 31 THE ADDITION OF RS. 28 11 600 WAS MADE AGAIN BASED ON SOME FIGURES FOUND NOTED IN A DIARY. THERE WAS NOTHING TO SHOW T HAT THIS DIARY WAS FOUND FROM THE POSSESSION OR CONTROL OF THE ASSESSE E. SECONDLY THE ASSESSEE HAD DENIED IT TWICE INCLUDING DURING THE SEARCH BEFORE ADI ALSO WHERE HE STATED THAT THE DIARY DID NOT BELONG TO HI M OR ANY MEMBER OF HIS FAMILY OR ANY EMPLOYEE. THE ORIGINAL WHICH WAS IN THE POSSESSION OF THE DEPARTMENT HAD NOT BEEN PRODUCED. FROM THE PHOTO C OPIES IT COULD NOT BE AGREED THAT ITS ENTRIES CLEARLY PROVED THAT THEY BELONGED TO ASSESSEE BECAUSE WHEN THESE PHOTO COPIES WERE SEEN THOSE WE RE FOUND TO BE NOT SO CLEAR EXCEPT SOME DATES WRITTEN IN A VERTICAL COLUM NS AND SOME ILLEGIBLE SCRIBBLINGS. HENCE IT COULD NOT BE ACCEPTED THAT T HESE REPRESENTED ASSESSEES UNDISCLOSED INCOME TO THE TUNE OF RS. 28 11 600. THE ASSESSEE WAS NOT IN BOMBAY WHEN THIS DIARY WAS DISCOVERED. T HERE WAS NOTHING TO PROVE THE EXACT PLACE FROM WHERE IT WAS DISCOVERED. THEREFORE IT WAS TO BE HELD THAT THIS WAS NOTHING BUT A DUMB DIARY AND IN ACCORDANCE WITH THE RATIO OF VARIOUS DECISIONS NO ADVERSE INFERENCE COU LD BE DRAWN AGAINST THE ASSESSEE ON THE BASIS OF THIS DIARY. THE ADDITION O F RS. 28 11 600 WAS THEREFORE DELETED. 8. DHANVARSHA BUILDERS & DEVELOPERS (P) LTD. VS. DC IT [2006] 102 ITD 375 (PUNE) FACTS CONSEQUENT UPON SEARCH AND SEIZURE OPERATIONS CONDU CTED UPON ONE OF THE SHAREHOLDERS OF THE ASSESSEE-COMPANY SOME INCR IMINATING DOCUMENTS PERTAINING TO THE ASSESSEE WERE FOUND AND SEIZED. S UBSEQUENTLY STATEMENT OF ONE A WHO WAS ONE OF THE DIRECTORS OF ASSESSE E-COMPANY WAS RECORDED IN WHICH HE MADE DECLARATION OF UNDISCLOSE D INCOME OF RS. 48.95 LAKHS WHICH ACCORDING TO HIM WAS ON MONEY RECEIVED BY THE ASSESSEE FROM ITS CUSTOMERS BY WAY OF CASH BUT NOT ACCOUNTED FOR IN ITS BOOKS. THE ASSESSEE HOWEVER DID NOT FILE ITS BLOC K RETURN IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 158BC. CONSEQUENTLY THE ASSESSING OFFICER FOUND INTER ALIA THAT THE ASSESSEE WAS RE CEIVING SALE CONSIDERATION BY WAY OF CHEQUES AND ALSO IN CASH IN RESPECT OF SA LE OF SHOPS GODOWNS AND OFFICE BUT THE CASH CONSIDERATION THEREOF WAS N OT ACCOUNTED FOR IN ITS BOOKS OF ACCOUNT; THAT IT HAD NOT FURNISHED ANY DETAILS ABOUT THE METHOD IT(SS) NO.98-50/AHD/05 NIRMA LTD. 32 OF ACCOUNTING FOLLOWED BY IT SALES EFFECTED BY IT AND THE UNSOLD WORK LYING WITH IT. ON THE BASIS OF SEIZED MATERIAL ASS ESSING OFFICER ASSESSED THE UNDISCLOSED INCOME AT RS. 49.25 LAKHS AND FRAME D THE ASSESSEES BLOCK ASSESSMENT. IN THE APPEAL BEFORE THE TRIBUNA L IT WAS THE ASSESSEES CASE THAT EXCEPT THE AS STATEMENT WHIC H WAS SUBSEQUENTLY RETRACTED NO OTHER EVIDENCE WAS FOUND REGARDING RE CEIPT OF CASH AND THAT THE IMPUGNED DOCUMENT WAS A DUMB DOCUMENT FROM WHICH NO CONCLUSION REGARDING UNDISCLOSED INCOME COULD BE DR AWN. IN THE ALTERNATIVE THE ASSESSEE CONTENDED THAT IF AMOUNT ENTERED IN SAID DOCUMENT WAS TAKEN AS ON-MONEY THEN EXPENDITURE IN CURRED IN RELATION TO SAID AMOUNT SHOULD ALSO BE TAKEN INTO CONSIDERAT ION WHILE COMPUTING REAL INCOME. THE ASSESSEE ALSO CONTENDED THAT PROVI SIONS OF SECTION 40A(3) SHOULD BE APPLIED IN RESPECT OF EXPENDITURE. HELD ON A PERUSAL OF THE SEIZED MATERIAL IT WAS TO BE S EEN THAT THE ASSESSEE WAS FOUND IN POSSESSION OF METICULOUS RECORD REGARD ING MONIES RECEIVED IN RESPECT OF VARIOUS GODOWNS AND SHOPS TO BE CONST RUCTED BY IT. THE DETAILS INTER ALIA CONTAINED THE NARRATION ABOUT THE PREMISES NUMBER NAME OF THE CUSTOMER TOTAL SALE COST MONEY RECEIV ED BY WAY OF CASH MONEY RECEIVED BY WAY OF CHEQUE AND THE BALANCE AMO UNT TO BE RECEIVED. ALL THE FIGURES WERE WRITTEN BY OMITTING THREE ZEROS. THE ASSESSEE FAIRLY ADMITTED THAT NAMES MENTIONED IN TH E LIST WERE OF ITS CUSTOMERS. HE ALSO ADMITTED THAT THE AMOUNTS RECEIV ED BY WAY OF CHEQUE WOULD TALLY WITH THE BOOKS OF ACCOUNT IF THREE ZERO S WERE SUPPLIED TO THE AMOUNT MENTIONED IN THE SEIZED PAPERS. HIS ARGUMENT S AGAINST PLACING RELIANCE ON THAT PAPER INTER ALIA THAT ( I ) THE PAPER DID NOT BEAR THE NAME OF THE ASSESSEE ( II ) NO EVIDENCE HAD BEEN FOUND REGARDING ACTUAL RECEI PT OF CASH AND ( III ) THE PAPER DID NOT CONTAIN THE DATES ON WHICH RESP ECTIVE CASH AMOUNTS WERE ALLEGEDLY RECEIVED COULD NOT BE AGREED WITH FOR THE REASON THAT THE AUTHENTICITY OF THE NAMES AND DECOD ING OF AMOUNTS RECEIVED BY WAY OF CHEQUES WOULD LEAD TO ESTABLISHM ENT OF THE FACT THAT THE DOCUMENT BELONGED TO THE ASSESSEE AND VARIOUS A MOUNTS ENTERED THEREIN WERE CORRECT IF THREE ZEROS WERE SUPPLIED. THE ABSENCE OF THE NAME OF THE ASSESSEE THUS GOT FULLY CORROBORATED ON TH E BASIS OF SAID IT(SS) NO.98-50/AHD/05 NIRMA LTD. 33 INTERPRETATION OF THE DOCUMENT. THE DOCUMENT SPOKE OF RECEIPT IN CASH AND BY WAY OF CHEQUES. THE RECEIPTS BY WAY OF CHEQUES T ALLIED WITH THE BOOKS OF ACCOUNT. THEREFORE IT WAS A NATURAL CONSEQUENCE THAT THE RECEIPT BY WAY OF CASH HAD ALSO BEEN MADE. THE DATE OF RECEIPT OF CASH WAS NOT MATERIAL FOR DECIDING THE ASSESSMENT YEAR IN WHICH THE PROFITS EMBEDDED IN SUCH RECEIPTS WERE TO BE TAXED. THE ASSESSEE WAS FOLLOWING PROJECT- COMPLETION METHOD AND THEREFORE ALL AMOUNTS I.E. AMOUNTS RECEIVED IN CASH AS WELL AS AMOUNTS RECEIVED BY WAY OF CHEQUES WERE TAXABLE IN THE YEAR IN WHICH PROJECT WAS COMPLETED OR SUBSTANTIALL Y COMPLETED. THEREFORE THE ASSESSEES ARGUMENTS AS REGARDS ALL THREE GROUNDS HAD TO FAIL. ACCORDINGLY THE DOCUMENT WAS NOT A DUMB DOCU MENT BUT IT WAS A SPEAKING DOCUMENT AND IT PERTAINED TO THE BUSINESS TRANSACTIONS OF THE ASSESSEE. [PARA 6.1] 9. BANSAL STRIPS (P) LTD. VS. ACIT [2006] 99 ITD 17 7 (DELHI) IN THE ITAT DELHI BENCH A THERE WAS FORCE IN THE CONTENTION OF THE ASSESSEE T HAT THERE WAS NO PROVISION OF LAW UNDER WHICH THE IMPUGNED ADDITION COULD BE MADE TO THE INCOME DECLARED BY THE ASSESSEE. IT IS TRITE LA W THAT IF AN INCOME NOT ADMITTED BY AN ASSESSEE IS TO BE ASSESSED IN THE HA NDS OF THE ASSESSEE THE BURDEN TO ESTABLISH THAT THERE IS SUCH INCOME CHARG EABLE TO TAX IS ON THE ASSESSING OFFICER. WITH A VIEW TO ASSIST THE ASSES- SING OFFICER AND TO REDUCE THE RIGOUR OF THE BURDEN THAT LAY UPON THE ASSESSING OFFICER PROVISIONS OF SECTIONS 68 69 69A TO 69D HAVE PROV IDED FOR CERTAIN DEEMING PROVISIONS WHERE AN ASSUMPTION OF INCOME I S RAISED IN THE ABSENCE OF SATISFACTORY EXPLANATION FROM THE ASSESS EE. AS THESE ARE DEEMING PROVISIONS THE CONDITIONS PRECEDENT FOR IN VOKING SUCH PROVISIONS ARE REQUIRED TO BE STRICTLY CONSTRUED. THE FACTS AND CIRCUMSTANCES GIVING RISE TO THE PRESUMPTION HAVE T O BE ESTABLISHED WITH REASONABLE CERTAINTY. THE ASSESSING OFFICER CANNOT FIRST MAKE CERTAIN CONJECTURES AND SURMISES AND THEREAFTER APPLY THE DEEMING PROVISIONS BASED ON SUCH CONJECTURES AND SURMISES. IN THE ABSE NCE OF ADEQUATE MATERIAL AS TO THE NATURE AND OWNERSHIP OF THE TRAN SACTION UNDISCLOSED INCOME COULD NOT BE ASSESSED IN THE HANDS OF THE AS SESSEE MERELY BY ARITHMETICALLY TOTALLING VARIOUS FIGURES JOTTED DOW N ON THE LOOSE DOCUMENTS. IN OTHER WORDS FOR THE PURPOSE OF RESOR TING TO DEEMING IT(SS) NO.98-50/AHD/05 NIRMA LTD. 34 PROVISIONS DUMB DOCUMENTS OR DOCUMENTS WITH NO CER TAINTY HAVE NO EVIDENTIARY VALUE. AFTER CONSIDERATION OF THE MATTE R THE CONTENTIONS OF THE ASSESSEE HAD TO BE AGREED WITH. THE IMPUGNED ADDITI ON HAD BEEN MADE BY THE ASSESSING OFFICER ON GROSSLY INADEQUATE MATERIA L. THE SAME WAS THEREFORE DIRECTED TO BE DELETED. [PARA 36] 10. KAY CEE ELECTRICALS VS. DCIT [2003] 87 ITD 35 (DELHI) IN THE INSTANT CASE 19 SLIPS WERE FOUND FROM THE S AFE CUSTODY OF THE ASSESSEE. IT COULD NOT BE SAID THAT THOSE SLIPS WER E NOT FOUND FROM THE POSSESSION AND CONTROL OF THE ASSESSEE PARTICULARL Y WHEN OWNERSHIP OF CASH AND STOCK FOUND FROM THE SAME PREMISES WAS NOT DISPUTED BY THE ASSESSEE. IT WAS ALSO AN UNDISPUTED FACT THAT CASH FOUND WAS UNACCOUNTED CASH GENERATED FROM UNDISCLOSED SOURCES INASMUCH AS IT HAD BEEN ADMITTED BY THE ASSESSEE UNDER SECTION 132(4) THAT IT REPRESENTED ITS CURRENT YEARS INCOME WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY IT. THERE WAS ALSO NO DISPUTE THAT TH OSE SLIPS WERE FOUND FROM THE SAME ALMIRAH FROM WHICH SUCH HUGE CASH WA S FOUND. IF SUCH CASH AND STOCKS WERE OWNED BY THE ASSESSEE THEN TH ERE WAS NO REASON FOR THE ASSESSEE TO DISOWN SUCH SLIPS AND CONSEQUENTLY LEGAL INFERENCE COULD BE DRAWN THAT SUCH SLIPS ALSO BELONGED TO THE ASSES SEE. ACCORDINGLY IT WAS TO BE HELD THAT THOSE SLIPS BELONGED TO THE ASS ESSEE AND THEREFORE IT WAS FOR THE ASSESSEE TO EXPLAIN THE CONTENTS OF THO SE SLIPS SINCE THE SAME WERE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. ON FAILURE TO EXPLAIN THEIR CONTENTS THE REVENUE WOULD BE ENTITLED TO DR AW ADVERSE INFERENCE. THE OWNERSHIP OF THE PREMISES WAS IRRELEVANT SINCE OWNERSHIP OF CASH AND STOCK HAD NOT BEEN DISPUTED. SINCE NO EXPLANATION H AD BEEN OFFERED BY THE ASSESSEE ABOUT THE CONTENTS OF THE SLIPS AN ADVERS E INFERENCE WAS DRAWN TO THE EFFECT THAT THOSE SLIPS RELATED TO THE UNDIS CLOSED BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE WHICH WAS CORROBORATED BY UNACCOUNTED CASH OF RS. 36 LAKHS AND ODD FOUND IN THE COURSE OF SEAR CH. [PARAS 18 AND 19] OUT OF TOTAL ADDITION OF RS. 1 CRORE AND ODD THREE ADDITIONS HAD BEEN MADE ON THE BASIS OF THOSE SLIPS. THE ADDITION OF R S. 27 27 052 HAD BEEN MADE ON THE BASIS OF 10 SLIPS BEARING NOS. 2 3 10 TO 14 16 18 AND 19 BY TAKING THE FIGURES MENTIONED ON THOSE SLIPS AS INCO ME OF THE ASSESSEE. THE ADDITION OF RS. 71 06 918 HAD BEEN MADE ON THE BASI S OF SLIP NO. 15 AND IT(SS) NO.98-50/AHD/05 NIRMA LTD. 35 THE ADDITION OF RS. 2 LAKHS HAD BEEN MADE ON AD HOC BASIS IN RESPECT OF THE REMAINING SLIPS ON WHICH NO AMOUNT WAS MENTIONE D. [PARA 20] AS FAR AS ADDITION OF RS. 2 LAKHS WAS CONCERNED NO ADDITION WAS WARRANTED ON MERE SUSPICION. SUSPICION HOWSOEVER G RAVE IS NOT THE SUBSTITUTE FOR THE EVIDENCE. SINCE THE REMAINING SL IPS DID NOT CONTAIN ANY AMOUNT THE SAME COULD BE TREATED ONLY AS DUMB DOCU MENTS ON THE BASIS OF WHICH NO ADDITION COULD BE MADE. ACCORDINGLY TH E ADDITION OF RS. 2 LAKHS WAS TO BE DELETED. [PARA 21] 22. WHEN WE APPLY THE PRINCIPLE LAID DOWN IN THE AB OVE JUDGMENTS WE FIND THAT DOCUMENT NO.108 (ANNEXED AT PAGE 192 OF ASSESS EES PAPER BOOK) DID NOT SHOW AS TO WHOM THESE DOCUMENTS BELONGED. IT WA S NOT SEIZED FROM THE PREMISES OF ASSESSEE COMPANY AND THEREFORE PRESUM PTION AVAILABLE UNDER SECTION 132(4A) CANNOT BE RAISED AGAINST THE ASSESS EE COMPANY. (2). IT DOES NOT SHOW SO AS TO WHEN THE TRANSACTION HAD TAKEN PLACE. EVEN THE AO HAS NOT POINTED OUT AS TO IN WHICH YEAR THE TAX LIABILITY FROM THE TRANSACTIONS IN THESE DOCUMENTS WOULD ARISE THOUGH IT HAS BEEN ONLY HELD THAT IT WILL FALL IN THE BLOCK PERIOD. (3) THE NATURE OF TRANSACTIONS RESULTING INTO SUM O F RS.17 48 49 140/- IS NOT CLARIFIED AS TO WHETHER IT IS RECEIPT OR PAYMENT. W HETHER IT IS ASSESSABLE UNDER SECTION 69A 69B OR 69C. ON THE OTHER HAND THIS BE ING PART OF SALE OF SHARES BY ASSOCIATE CONCERN IT WOULD APPARENTLY REFLECT R ECEIPT OF MONEY. IT IS NOT TAXABLE. THERE IS NO ALLEGATION MADE BY THE AO THAT THERE IS AN UNDER STATEMENT OF CAPITAL GAINS ARISING ON SALE OF SHARE S BY UNDER STATING THE RECEIPTS. THEREFORE THIS POSSIBILITY IS RULED OUT. 23. EVEN THE QUANTUM WHICH COULD BE TAXED IS NOT AP PARENTLY CLEAR THOUGH THE AUTHORITIES HAVE PICKED UP RS.17 48 49 140/-. S INCE IT IS PART OF TOTAL IT(SS) NO.98-50/AHD/05 NIRMA LTD. 36 TRANSACTION @ RS.1140.18 PER SHARE AND THERE IS NO MATERIAL TO HOLD THAT ANY PART OF SALE PROCEEDS IS UNDISCLOSED THEREFORE QU ANTIFICATION OF UNDISCLOSED AMOUNT IS ALSO UNCERTAIN. THUS NONE OF THE INGREDIE NTS AS REQUIRED TO FIX THE TAX LIABILITY IS SATISFIED IN THE PRESENT CASE. 24. EVEN THOUGH LD. AO AND THE LD. CIT(A) HAVE NOT CLEARLY MENTIONED BUT IN FACT HE WENT TO HOLD THAT NIRMA LTD. I.E. THE AS SESSEE COMPANY IS HOLDING ALL THE ENTITIES AS ITS BENAMI AND THEREFORE UNACCOUN TED TRANSACTIONS FOUND FROM THE SEIZED DOCUMENTS WOULD BE REALLY OWNED BY NIRMA LTD. WE ARE UNABLE TO SUBSCRIBE TO THIS VIEW FOR SEVERAL REASONS. FOR HOL DING ANY PROPERTY OR TRANSACTION AS BENAMI AND BELONGING TO SOMEONE ELSE THE ONUS IS HEAVILY ON THE ASSESSEING AUTHORITY TO BRING OUT EVIDENCE TO S HOW THAT - (1) INVESTMENT IN PURCHASES OF IMPUGNED SHARES HAS FLOWN FROM THE ASSESSEE COMPANY. (2) THE SHARE CERTIFICATES WERE REALLY IN POSSESSIO N OF ASSESSEE COMPANY. (3) THE DIVIDENDS THEREFROM WERE DIRECTLY OR INDIRE CTLY PASSED ON TO ASSESSEE COMPANY. (4) SALE PROCEEDS OF THE SHARES WERE DIRECTLY OR IN DIRECTLY TRANSFERRED TO THE ASSESSEE COMPANY. (5) IT HAS TO BE SHOWN THAT ASSOCIATE ENTITIES ARE MERELY PAPER CONCERN AND REALLY WHOLE OF THE ASSETS THE ENTITY ARE ENJO YING AND THE INCOME OF ASSOCIATE ENTITIES ARE IN FACT BELONGED TO ASSESSEE COMPANY. IT CANNOT BE A CASE THAT FOR INCOME-TAX PURPOSES O R FOR OF ALL OTHER RULES AND REGULATIONS OF STATE OR CENTRAL GOVERNMENT ASSOCIA TE ENTITIES ARE ACTING AS INDEPENDENT ENTITIES; AND ALSO FOR THE PURPOSES OF RECEIPT OF RS.1000 PER SHARE IN RESPECT OF THE IMPUGNED TRANSACTIONS THESE ENTITIES ARE ACTING AS INDEPENDENT ENTITIES BUT ONLY FOR THE PURPOSES OF R S. 140.18 PER SHARE EQUAL IT(SS) NO.98-50/AHD/05 NIRMA LTD. 37 TO RS.17 48 49 140/- THESE ASSOCIATE ENTITIES ARE B ENAMI ENTITIES OF ASSESSEE COMPANY. FOR HOLDING THAT SHARES PURCHASED BY ASSOC IATE ENTITIES ARE BENAMI IT HAS TO BE SHOWN BY THE AO THE NATURE THE POSSES SION AND THE MANNER OF HOLDING THE SHARES AFTER THEY ARE PURCHASED AND MOT IVE IF ANY FOR HOLDING THEM AS BENAMI. 25. IF THE PROPERTY I.E. SHARES ARE STANDING IN THE NAME OF ASSOCIATE ENTITIES THEN IT HAS TO BE ACCEPTED AS REAL UNLESS IT IS PRO VED OTHERWISE BY ADDUCING LEGAL EVIDENCE OF A DEFINITE CHARACTER. EVEN THOUGH RELATIONSHIP OF THE PARTIES TO THE BENAMI TRANSACTION OR BENAMI HOLDING OF THE PROPERTY IS IMPORTANT BUT NOT THE SOLE CRITERIA. THE RELATIONSHIP MAY BE RELE VANT IN CONJUNCTION WITH OTHER CRITERIA BUT NOT SUFFICIENT TO HOLD THE PROPERTY OR TRANSACTION BENAMI MERELY BECAUSE PARTIES CONCERNED ARE CLOSELY RELATED OR AR E WORKING UNDER THE SAME GROUP. EVEN WHERE EXPLANATION OFFERED BY NON-ASSESS EES I.E. ASSOCIATE ENTITIES IN THE PRESENT CASE REGARDING INVESTMENT I N SHARES OR IN THE TRANSACTION IS NOT BELIEVED OR IS NOT SATISFACTORY IT CANNOT BE INFERRED THAT SUCH PROPERTY IS HELD BY NON-ASSESSEE ON BEHALF OF THE A SSESSEE OR THAT ASSESSEE IS THE OWNER THEREOF OR THAT INVESTMENT THEREIN HAS FLOWN FROM THE COFFERS OF THE ASSESSEE COMPANY. IN THE CIRCUMSTANCES WHERE EX PLANATION ABOUT INVESTMENT IN THE PROPERTY OR INCOME ACCOUNTED OR UNACCOUNTED ARISING FROM THE TRANSACTION CARRIED OUT BY THE NON-ASSESSEE IS NOT FOUND SATISFACTORY THEN ACTION HAS TO BE TAKEN UNDER INCOME-TAX ACT AGAINST SUCH NON-ASSESSEE (S). ONCE OWNERSHIP OF THE SHARES AND THEIR SALES ARE AC CEPTED BY NON-ASSESSEES THEN THEY ARE THE FIRST TO BEAR THE BURDEN OF PROVI NG THE SOURCE THEREOF OR SHOWING OR EXPLAINING AS TO WHY ENTIRE TRANSACTIONS ARE NOT REFLECTED IN THE BOOKS OF ACCOUNT AND IN THE EVENT OF THEIR FAILURE TO BEAR THE BURDEN TO PAY THE TAXES AND PENALTY THEREON. UNLESS SUCH NON-ASSESSEE STATES OR GIVES EVIDENCE THAT THE INVESTMENT IN THE PROPERTY OR INC OME FROM THE TRANSACTION HAS COME FROM THE ASSESSEE THE ASSESSEE AS SUCH CA NNOT BE HELD OWNER THEREOF AND TAX LIABILITY ARISING FROM SUCH TRANSA CTIONS CANNOT BE FIXED ON THE ASSESSEE. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 38 26. IF THE NON-ASSESSEES HAVE FILED RETURN OF INCOM E IN THE PAST WHEREIN THE SOURCE OF INVESTMENT IN THE SHARES HAVE BEEN ACCEPT ED BY THE DEPARTMENT AND NO ACTION HAS BEEN TAKEN TO UNDO WHAT HAS BEEN SO ACCEPTED THEN IT HAS TO BE LEGALLY PRESUMED THAT SAME STATE OF AFFAIRS A ND SAME SOURCE OF INCOME CONTINUED TO EXIST IN SUBSEQUENT YEARS AS WELL UNL ESS EXISTENCE OF SUCH SOURCE OF INCOME OR TRANSACTIONS FOUND FROM THE SEI ZED DOCUMENTS IS DENIED BY SUCH NON-ASSESSEE AND FURTHER ASSERTING POSITIV ELY THAT WHAT IS ATRIBUTED TO THEM IN FACT BELONGED TO OR HAD COME FROM THE A SSESSEE. 27. IN ADDITION TO OR OTHERWISE THERE MUST BE SOME POSITIVE MATERIAL TO BE SHOWN BY THE DEPARTMENT THAT IN SPITE OF APPARENT S TATE OF AFFAIRS FORMED BY THE ASSESSEE OR NON-ASSESSEES (ASSOCIATE ENTITIES) THE NON-ASSESSEES ARE NOT REAL OWNERS OF THE SHARES AND INVESTMENT THEREIN HA S FLOWN FROM THE ASSESSEE AND PROFITS FROM THE TRANSACTION OF THE SALE HAD FL OWN BACK TO THE ASSESSEE AND THE OWNERSHIP AND TRANSACTIONS ARE CLANDESTINEL Y DECLARED AS BELONGING TO THE NON-ASSESSEES. SUCH EVIDENCE COULD BE SECRET AG REEMENT BETWEEN THE ASSESSEES AND THE NON-ASSESSEES TRANSFERRING OF PR OFIT OR USUFRUCT TO THE ASSESSEE ENJOYMENT OF INTEREST PROFIT OR OTHER BE NEFIT ARISING FROM THE PROPERTY OR TRANSACTION THEREIN. 28. THE PROPOSITION IS ALWAYS IN FAVOUR OF THE LEGA LITY OF THE TRANSACTION AND APPARENT STATE OF AFFAIRS. IF NON-ASSESSEES HAVE DE CLARED OWNERSHIP OF SHARES WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE PA ST THEN WHETHER TRANSACTIONS ARE EXPLAINED OR UNEXPLAINED; INVESTME NT IS DECLARED OR UNDECLARED INCOME ARISING THERE-FROM WOULD BELONG TO THEM. IF THE DEPARTMENT HAS ACCEPTED INDEPENDENT EXISTENCE OF EACH ENTITIES AND ALSO OF THE ASSESSEE THEN WITHOUT THERE BEING ANY CONTRARY MAT ERIAL APPARENT HAS TO BE ACCEPTED AS REAL. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 39 29. FURTHER THE DEPARTMENT HAS CARRIED OUT SEARCH A T THE PREMISES OF ASSESSEE COMPANY AND ITS ALL THE ASSOCIATE ENTITIES BUT HAS NOT FOUND ANY SUCH AGREEMENT OR ARRANGEMENT WHEREBY IT CAN BE HEL D THAT ASSOCIATE ENTITIES ARE MERELY PAPER CONCERNS AND REAL OWNER IS ASSESSE E COMPANY. OUR VIEW IS SUPPORTED BY THE FOLLOWING JUDGMENTS SOME OF WHICH ARE ALSO REFERRED BY THE LD. AR. (I) PARASMAL KANAJI VS CIT 172 ITR 568(RAJ) - IT IS HELD BY THE HON'BLE RAJASTHAN HIGH COURT THAT QUESTION OF BENAMI NATURE OF TRANSACTION IS ESSENTIALLY A QUESTION OF FACT FOR HOLDING THAT X (ASSESSEES SON) IS BENAMIDAR OF Y ASSESSEE IT HAS TO BE SHOWN THAT FUNDS IN THE TRANSACTION WERE MADE BY ASSESSEE OR THAT ASSESSEE S SON DID NOT MAKE ANY INVESTMENT TO MAKE THE PURCHASES OR THAT ASSESS EES SON WHO DID NOT IN ANY MANNER PARTICIPATE IN THE TRANSACTIONS OF E ITHER PURCHASE OR SALE. IF IT CAN BE PROVED THEN PURCHASE AND SALE OF OIL M ADE IN THE NAME OF SON COULD BE HELD TO BE THAT OF THE ASSESSEE WHO WAS A SELLING AGENT. (II) CIT VS BAIJNATH 153 ITR 327 (P&H) IT WAS H ELD THAT THERE WAS NO EVIDENCE AT ALL TO ESTABLISH THAT ASSESSEE WAS THE REAL OWNER OF FDRS AMOUNTING TO RS.84 500/- AND NOT THE VARIOUS PERSON S IN WHOSE NAMES RECEIPTS HAVE BEEN PREPARED BY THE BANK. (III) CHANDULAL J JAISWAL VS CIT 195 ITR 635(GUJ) - IN THIS CASE QUESTION WAS WHETHER THREE TRUCKS NUMBERING GTB 468 1 GTB 6426 AND GTB 5456 REALLY BELONGED TO THE ASSESSEE AND NOT TO THE PERSONS IN WHOSE NAMES THEY WERE REGISTERED AND THEREFORE INCOME T HEREFROM COULD BE TAXED IN THE HANDS OF THE ASSESSEE. IT WAS FOUND T HAT CAPITAL FOR PURCHASE OF THESE TRUCKS CAME FROM THE ASSESSEE; THEIR CONTR OL AND MANAGEMNT ALSO VESTED IN THE ASSESSEE; RENT FOR THE TRUCKS WAS COL LECTED BY THE ASSESSEE AND CREDITED IN THE BOOKS AND SUCH PROFIT FROM THE TRUCKS WAS ONLY UTILIZED FOR PERSONAL PURPOSES OF THE ASSESSEE AND NOT OF T HE SO CALLED TRUCK OWNERS. IT WAS HELD THAT ASSESSEE WAS THE REAL OWN ER WHO ENJOYED THE INCOME FROM THESE TRUCKS. THE INCOME FROM THE TRUC KS WAS HELD TO BE RIGHTLY INCLUDED IN THE TOTAL INCOME OF THE ASSESSE E. (IV) SREE MEENAKSHI MILLS LTD VS CIT 31 ITR 28 (S. C.) IN THIS CASE IT IS HELD THAT THE WORD BENAMI IS USED TO DENOTE TWO CLASSES OF TRANSACTIONS WHICH DIFFER FROM EACH OTHER IN THEIR LEGAL CHARACT ER AND INCIDENTS. IN ONE SENSE IT SIGNIFIES A TRANSACTION WHICH IS REAL AS FOR EXAMPLE WHEN A SELLS PROPERTIES TO B BUT THE SALE DEED MENTIONS X AS THE PURCHASER. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 40 HERE THE SALE DEED IS GENUINE BUT THE REAL PURCHASE R IS B AND X IS ONLY HIS BENAMIDAR. THIS CLASS OF TRANSACTIONS IS USUAL LY TERMED AS BENAMI. BUT THE WORD BENAMI OCCASIONALLY USED PERHAPS NO T QUITE ACCURATELY REFER TO A SHAM TRANSACTION ALSO. FOR EXAMPLE WHE N A PURPORTS TO SELL ITS PROPERTY TO B WITHOUT INTENDING THAT HIS TITL E SHOULD CEASE OR PASS TO B. THE FUNDAMENTAL DIFFERENCE BETWEEN THESE TWO CLASSES OF TRANSACTIONS IS THAT WHEREAS IN THE FORMER THERE I S AN OPERATIVE TRANSFER RESULTING IN THE VESTING OF TITLE IN THE TRANSFEREE . IN THE LATTER CASE THE TRANSFEROR CONTINUES TO RETAIN THE TITLE NOTWITHSTA NDING THE EXECUTION OF THE TRANSFER DEED. IT IS ONLY IN THE FORMER CLASS OF CASES THAT IT WOULD BE NECESSARY WHEN A DISPUTE ARISES AS TO WHETHER THE PERSON NAMED IN THE DEED IS THE REAL TRANSFEREE OR IT IS B THEN IT IS TO BE ENQUIRED AS TO WHO PAID THE CONSIDERATION FOR THE TRANSFER. IN THE SE COND CATEGORY OF CASES QUESTION IS NOT WHETHER WHO PAID THAT CONSIDERATION BUT WHETHER ANY CONSIDERATION WAS ACTUALLY PAID OR NOT. (V) E.A.E.T SUNDARARAJ VS CIT 95 ITR 455(MAD.) IN THIS CASE IT WAS HELD THAT IT IS ONLY ON THE CUMULATIVE EFFECT OF AL L THE MATERIALS THAT ARE AVAILABLE BEFORE THE TRIBUNAL THAT THE QUESTION OF BENAMI CAN BE DECIDED. WHERE WIVES OF THE MEMBERS OF THE FAMILY STARTED A FIRM TO CARRY A SIMILAR BUSINESS TO THE ONE CARRIED ON BY THE FAMIL Y IN THE SAME BUSINESS PREMISES AS THAT OF THE FAMILY AND WITH THE FAMILY S TELEGRAPHIC ADDRESS CAPITAL OF THIS NEW FIRM CAME FROM THE MONIES OF TH E WIVES LYING WITH THE TRUST AND FETCHING INTEREST. THE KARTA OF THE FAMI LY WAS FOUND TO BE ACTUALLY CARRYING ON THE BUSINESS OF THE NEW FIRM THEN TAKING A CUMULATIVE EFFECT OF ALL THESE FACTORS TRIBUNAL HA D HELD THAT THE NEW FIRM WAS NOT A GENUINE ONE BUT ONLY A BENAMI FOR THE FAM ILY. THIS FINDING WAS CONFIRMED BY THE HON'BLE HIGH COURT. (VI) FIRST ITO VS M.R.DHANALAKSHMI AMMAL & OTHERS 112 ITR 413(MAD) - THE BURDEN OF PROVE BY THE PARTY WHO SETS UP T HE CASE OF BENAMI WOULD BE DISCHARGED BY SATISFYING THE FOLLOWING WEL L KNOWN CRITERIA NAMELY: (1) SOURCE OF THE PURCHASE (2) POSSESSION OF THE PROPERTY (3) POSITION OF THE PARTIES AND THEIR RELATIONSHIP TO O NE ANOTHER (4) CIRCUMSTANCES PECUNIARY OR OTHERWISE OF THE TRANSF ER (5) MOTIVE FOR THE TRANSACTION IT(SS) NO.98-50/AHD/05 NIRMA LTD. 41 (6) CUSTODY OF HE TITLE DEEDS AND (7) THE PREVIOUS AND SUBSEQUENT CONDUCT OF THE PARTIES. THOUGH ANY ONE OF THESE FACTORS MAY NOT BE OF PARTI CULAR VALUE AND MAY NOT AFFORD ANY CONCLUSIVE PROOF OF THE BENAMI NAT URE OF A TRANSACTION BUT A COMBINATION OF SOME OR ALL OF THEM AND A PROPER W EIGHING AND APPRECIATION OF THEIR VALUE WOULD HELP IN DETERMINI NG THE REAL OWNERSHIP OF THE TRANSACTION AND THE ASSET. THE TRUE TEST TO DETERMINE WHETHER A TRANSACTION IS BENAMI OR NOT IS TO LOOK INTO THE IN TENTION OF THE PARTIES AND TO SEE WHETHER IT WAS INTENDED TO OPERATE AS SUCH OR WHETHER IT WAS MEANT TO BE COLOURABLE. IT IS ONLY IN THE LATTER C ASE IT IS BENAMI WHILE IN THE FORMER IT IS NOT. THE ISSUE OF BENAMI CANNOT B E DISPLACED BY MERE CONJECTURE OR SUSPICION AS TO THE VARIOUS CIRCUMSTA NCES SURROUNDING THE TRANSACTION. IN THIS CASE THE ITO HAD ALLEGED T HAT THIRD RESPONDENT IS THE REAL OWNER AND FIRST RESPONDENT IS ONLY BENAMI. THE HON'BLE COURT HELD THAT THE ITO HAD NOT DISCHARGED THE BURDEN OF PROOF CAST UPON HIM TO ESTABLISH THE FACT THAT THE PROPERTIES WERE TAKEN B ENAMI IN THE NAME OF FIRST RESPONDENT. (VII) PRAKASH NARAIN VS CIT 134 ITR 364(ALLD.) - THE HON'BLE ALLAHABAD HIGH COURT HELD THAT THE BURDEN OF PROOF REGARDING BENAMI IS UPON THE ONE WHO ALLEGES BENAMI. NO ABSOLUTE FORMU LA OR ACID TEST UNIFORMLY APPLICABLE IN ALL THE SITUATIONS CAN BE L AID DOWN. HOWEVER THE COURTS ARE USUALLY GUIDED BY THESE CIRCUMSTANCES: ( 1) THE SOURCE FROM WHICH THE PURCHASE MONEY CAME; (2) THE NATURE AND P OSSESSION OF THE PROPERTY AFTER THE PURCHASE; (3) MOTIVE IF ANY FO R GIVING THE TRANSACTION A BENAMI COLOUR; (4) THE POSITION OF THE PARTIES AN D THEIR RELATIONSHIP (5) CUSTODY OF THE TITLE DEED AFTER THE SALE; (6) CONDU CT OF THE PARTIES CONCERNED IN DEALING WITH THE PROPERTY AFTER THE SA LE. IT WAS HELD THAT SOURCE FROM WHERE THE PURCHASE MONEY CAME IS BY FAR THE MOST IMPORTANT TEST FOR DETERMINING WHETHER THE SALE STANDING IN T HE NAME OF ONE PERSON IS IN REALITY FOR THE BENEFIT OF ANOTHER. MERE REJE CTION OF AN EXPLANATION WOULD NOT ENTITLE THE DEPARTMENT TO CLAIM THAT THE CONSIDERATION FOR PURCHASE OF THE PROPERTY IN THE NAME OF ANOTHER WAS PROVIDED BY THE ASSESSEE. APART FROM THE RELATIONSHIP BETWEEN THE PARTIES THERE MUST BE SOME EVIDENCE OR MATERIAL TO SUPPORT THE CASE OF TH E BENAMI NATURE OF THE TRANSACTION. THUS A FINDING REGARDING BENAMI IS A FINDING OF FACT. IN THIS CASE THERE WERE FOUR PROPERTIES PURCHASED. (I) A HOUSE IN THE NAME IT(SS) NO.98-50/AHD/05 NIRMA LTD. 42 OF ASSESSEES WIFE AND MOTHER-IN-LAW (II) 4 SHOPS IN THE JOINT NAMES OF ASSESSEES WIFE MOTHER-IN-LAW AND FATHER-IN-LAW. (III) A HOUSE IN THE NAME OF ASSESSEES FATHER-IN-LAW AND (IV) A HOUSE I N THE NAME OF ASSESSEES WIFE. ASSESSEES WIFE WAS THE ONLY CH ILD OF HER PARENTS. THE ITO RECORDED THE STATEMENT OF FATHER-IN-LAW WRIT TEN STATEMENT OF MOTHER-IN-LAW WAS FILED. IT WAS CLAIMED BY THEM TH AT THEY HAD MONEY IN THEIR HANDS WHICH WAS INVESTED IN THE PURCHASE OF A FORESAID PROPERTIES. THE ASSESSING OFFICER WAS NOT SATISFIED AND HELD TH AT IT WAS ASSESSEE WHO HAD PURCHASED THESE PROPERTIES IN THE BENAMI NAME O F THESE PERSONS. WHILE DECIDING THE QUESTION WHETHER ASSESSEE IS REA L OWNER OF THESE PROPERTIES THE HON'BLE ALLAHABAD HIGH COURT REFERR ED TO THE DECISION IN THE CASE OF UNION OF INDIA VS MOKSH BUILDERS AND F INANCIERS LTD [1997] AIR 1977 SC 409 GANGADARA AYYAR VS SUBRAMANIA SAST RIGAL AIR 1949 FC 88 AND SREE MEENAKSHI MILLS LTD VS CIT 31 ITR 28(S.C.). IT WAS INFERRED FROM THESE JUDGMENTS THAT FIRST TEST IS TH E SOURCE FROM WHICH THE CONSIDERATION FOR THE TRANSFER HAS COME AND OTHER T EST IS WHO IS ACTUALLY ENJOYING THE BENEFIT OF THE TRANSFER. WHILE REFERR ING TO THE DECISION IN THE CASE OF JAYDAYAL PODDAR VS BIBI HAZRA AIR 1974 S C 171 IT IS HELD THAT BURDEN OF PROVING THAT A PARTICULAR SALE IS BENAMI AND THE APPARENT PURCHASER IS NOT THE REAL OWNER ALWAYS REST ON THE PERSON WHO ASSERTS IT. THIS BURDEN HAS TO BE STRICTLY DISCHARGED BY ADDUCI NG LEGAL EVIDENCE OF A DEFINITE CHARACTER. EVEN THOUGH PROVING THE INTENT ION OF THE PARTIES CONCERNED IS SHROUDED IN A THICK VEIL WHICH CANNOT BE EASILY PIERCED THROUGH BUT SUCH DIFFICULTIES DO NOT RELIEVE THE P ERSON ALLEGING THE BENAMI TRANSACTION OF THE ONUS REST ON HIM. IT AL SO DOES NOT JUSTIFY THE ACCEPTANCE OF MERE CONJECTURES OR SURMISES AS A SUB STITUTE FOR PROOF. WHEN A DOCUMENT FOR PURCHASE IS PREPARED AND EXECUT ED AFTER CONSIDERABLE DELIBERATION THEN IT STARTS WITH THE I NITIAL PRESUMPTION IN HIS FAVOUR THAT THE APPARENT STATE OF AFFAIRS IS THE RE AL STATE OF AFFAIRS. WHILE REFERRING TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SREE MEENAKSHI MILLS LTD VS CIT 21 ITR 28 THE HON'B LE ALLAHABAD HIGH COURT POINTED OUT THAT A SIMPLE WAY OF DISCHARGING THE ONUS TO PROVE THE REAL OWNERSHIP AND TO RESOLVE THE CONTROVERSY WAS T O TRACE THE SOURCE AND THE ORIGIN OF AMOUNT AND FIND OUT ITS ULTIMATE DEST INATION. SO FAR AS SOURCE IS CONCERNED THERE WAS NO MATERIAL ON THE R ECORD TO SHOW THAT THE AMOUNT CAME FROM THE COFFERS OF THE RESPONDENT-FIRM IN THE CASE OF SREE MEENAKSHI MILLS OR IT WAS TENDERED IN BURRABAZAR CA LCUTTA BRANCH OF THE CENTRAL BANK ON BEHALF OF THE ASSESSEE. AS REGARDS TO THE DESTINATION OF THE AMOUNT THERE WAS NOTHING ON RECORD TO SHOW THA T IT WENT TO THE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 43 COFFERS OF THE RESPONDENT. ON THE OTHER HAND THER E WAS A POSITIVE EVIDENCE THAT AMOUNT WAS RECEIVED BY OSTENSIBLE OWN ER BISWANATH. THE HON'BLE HIGH COURT REFERRED TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS DURGA PRASAD MORE 82 I TR 540 WHEREIN THE HON'BLE SUPREME COURT HAD OBSERVED THAT APPARENT MU ST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BE LIEVE THAT THE APPARENT IS NOT REAL. WHERE A PARTY RELIES ON A RECITAL IN A D EED IT HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS OTHERWISE IT WILL BE VE RY EASY TO MAKE SELF- SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY AND RELY ON THOSE RECITALS. THE HON'BLE ALLAHABAD HIGH COURT THEN REFERRED TO THE DECISION OF ITS OWN COURT IN THE CASE OF SHEO NARAIN LAL 26 ITR 2 49 WHEREIN THE CONTROVERSY WAS IN REGARD TO THE OWNERSHIP OF THE H OUSE WHICH STOOD IN THE NAME OF WIFE OF THE ASSESSEE. HALF OF THE SALE PRICE FOR THE PURCHASE OF THE SAID HOUSE WAS ACCEPTED BY THE DEPARTMENT TO HA VE BEEN CONTRIBUTED BY THE WIFE. HOWEVER IN REGARD TO THE SOURCE FOR THE REMAINING PORTION OF THE HOUSE THE TRIBUNAL DISBELIEVED HER STATEMEN T THAT SHE HAD RECEIVED GIFTS OF CASH AND JEWELLERY FROM HER FATHER AND FAT HER-IN-LAW. IT WAS HELD THAT MERE REJECTION OF THE WIFES EXPLANATION WOULD NOT LEAD TO THE INFERENCE THAT HALF OF THE SALE PRICE FOR THE PURCH ASE OF THE PROPERTY MUST HAVE BEEN CONTRIBUTED BY THE ASSESSEES HUSBAND. THE HON'BLE ALLAHABAD HIGH COURT THEN REFERRED TO T HE DECISION IN THE CASE OF R.K.MURTHY VS CIT 42 ITR 379 (MAD.) WHERE CERTAIN SHARES IN A COMPANY HAD BEEN PURCHASED BY THE WIFE OF THE ASSES SEE WHO HIMSELF WAS A DIRECTOR IN THE SAID COMPANY. PART OF THE PRICE OF THE SHARES WAS PAID BY THE WIFE AT THE TIME OF PURCHASE AND FOR THE BAL ANCE SHE EXECUTED A PROMISSORY NOTE IN FAVOUR OF THE TRANSFEROR SELLING THE SHARES. SUBSEQUENTLY THE SAID BALANCE AMOUNT WAS PAID BY T HE ASSESSEES HUSBAND WHO LATER REIMBURSED HIMSELF FROM THE DIVI DEND PAID BY THE COMPANY TO THE WIFE. THE ASSESSING OFFICER HELD TH AT SHARES WERE PURCHASED BY THE ASSESSEES HUSBAND BENAMI IN THE N AME OF HIS WIFE. THE HON'BLE MADRAS HIGH COURT HELD THAT ASSUMING THAT T HE ASSESSEE HAD NO SUCH INTENTION TO BENEFIT THE WIFE THE BENEFIT IN SUCH SHARES COULD BE HELD TO VEST IN THE HUSBAND ONLY IF IT IS PROVED THAT HE PROVIDED THE PURCHASE MONEY. THE ONUS OF SHOWING THAT IT WAS SO DONE IS ON THE DEPARTMENT. IN THE CASE DECIDED BY THE HON'BLE ALLAHABAD HIGH C OURT THE FACTS FOUND BY THE ASSESSING OFFICER ABOUT THE FOUR PROPERTIES WAS THAT SHRI BABU RAM FATHER-IN-LAW OF THE ASSESSEE COULD NOT BE BEL IEVED THAT THEY HAVE A IT(SS) NO.98-50/AHD/05 NIRMA LTD. 44 SUM OF RS.1 LAKH IN CASH WITH HIM WHEN HE DISCONTIN UED HIS BUSINESS IN 1946. SHRI BABU RAM AND HIS WIFE WERE LIVING WITH HIS SON-IN-LAW. THE ASSESSEES WIFE IS ONLY ISSUE OF HER PARENTS. THE ASSESSEE HAD IN FACT PURCHASED ONE PROPERTY BENAMI IN THE NAME OF HIS W IFE. THE HON'BLE ALLAHABAD HIGH COURT HELD THAT MERELY BECAUSE VERSI ON OF SHRI BABU RAM FATHER-IN-LAW HAS NOT BEEN ACCEPTED BY THE TRI BUNAL IT WILL NOT LEAD TO THE INFERENCE THAT THE PROPERTIES IN QUESTION WE RE PURCHASED BENAMI BY THE ASSESSEE. THE PERSON CAN STILL BE HELD TO BE H OLDER OF A SUM OF MONEY EVEN THOUGH THE EXPLANATION FURNISHED BY HIM REGARD ING THE SOURCE OF THAT MONEY IS FOUND TO BE NOT CORRECT. FOR THIS PROPOSI TION THE HON'BLE ALLAHABAD HIGH COURT RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS DAULAT RAM RAWATMULL 8 7 ITR 349. IT WAS FURTHER HELD THAT IF EXPLANATION REGARDING THE SOUR CE OF MONEY FURNISHED BY A IN WHOSE NAME THE MONEY IS LYING IN DEPOSIT HAS BEEN FOUND TO BE FALSE; IT WOULD BE REMOTE AND FAR FETCHED CONCLUSIO N TO HOLD THAT THE MONEY BELONGED TO B. THERE WOULD BE IN SUCH A CA SE NO DIRECT NEXUS BETWEEN THE FACTS FOUND AND THE CONCLUSION DRAWN TH EREFROM. IT WAS FURTHER HELD THAT EVEN WHERE FATHER-IN-LAW AND MOTH ER-IN-LAW ARE LIVING WITH THEIR SON-IN-LAW IT WILL NOT BE CORRECT TO IN FER THAT IN-LAWS WERE NECESSARILY DEPENDENT UPON THEIR SON-IN-LAW. IF TH E DEPARTMENT WANTED TO RELY ON THIS ASPECT THEN THE WITNESSES WHO WERE EXAMINED SHOULD HAVE BEEN PUT MORE EXPLICIT QUESTIONS IN THIS REGARD. M ERELY BECAUSE THEY ARE ALL LIVING TOGETHER WOULD NOT AND CANNOT LEAD TO IN FERENCE THAT THEY ARE DEPENDENT ON THE ASSESSEE. SIMILARLY WHERE ASSESS EES WIFE IS THE ONLY ISSUE OF HER PARENTS CANNOT LEAD TO THE CONCLUSION THAT THE PURCHASE OF THE PROPERTIES IN DISPUTE WERE FINANCED BY THE ASSESSEE I.E HER HUSBAND AND NOT BY HER PARENTS. IT IS EQUALLY POSSIBLE THAT T HE AMOUNT OF PURCHASE MIGHT BE FINANCED BY THE PARENTS AS WELL AS BY HER HUSBAND. THE HON'BLE ALLAHABAD HIGH COURT THEN GAVE EMPHASIS ON THE MOTIVE FOR THE BENAMI PURCHASE. THE PARTY WHO ALLEGES BENAMI HAS TO SHOW MATERIAL TO PROVE MOTIVE FOR ACQUIRING PROPERTY BEN AMI. (VIII) ARYA CONFECTIONARY WORKS VS CIT 143 ITR 814 (M.P.) IT WAS HELD THAT FOLLOWING PRINCIPLES ARE WELL SETTLED WITH REG ARD TO THE FINDING OF BENAMI NATURE OF BUSINESS. THEY ARE (1) THE BURDEN OF PROOF REGARDING BENAMI IS UPON THE ON E WHO ALLEGES BENAMI. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 45 (2) TO PROVE BENAMI THE MOST IMPORTANT POINT IS TO EXAM INE THE SOURCE OF CONSIDERATION. (3) A FINDING REGARDING BENAMI IS A FINDING OF FACT. (IX) IN THE CASE OF SHYAMA CHARAN SAXENA VS ITO 1 45 ITR 689 (ALL) THE HON'BLE ALLAHABAD HIGH COURT IN ADDITION TO TH E THREE CRITERIA HELD IN ARYA CONFECTIONERY WORKS VS ITO HELD FURTHER T HAT MERE REJECTION OF AN EXPLANATION GIVEN BY THE OSTENSIBLE OWNER WOULD NOT ENTITLE THE DEPARTMENT TO CLAIM THAT THE CONSIDERATION FOR THE PURCHASE OF THE PROPERTY IN THE NAME OF A NON-ASSESSEE(OSTENSIBLE O WNER) WAS PROVIDED BY THE ASSESSEE. FURTHER APART FROM THE RELATI ONSHIP BETWEEN THE PARTIES THERE MUST BE SOME MATERIAL OR EVIDENCE TO SUPPORT THE CASE OF THE BENAMI NATURE OF A TRANSACTION. IN THIS CASE THE HOUSE PROPERTY WAS PURCHASED IN THE NAMES OF MINOR GRANDSONS OF THE AS SESSEE. THE EXPLANATION FURNISHED WAS THAT MONEY FOR PURCHASE W AS GIVEN BY ASSESSEES WIFE WHO HAD SOME AGRICULTURAL PROPERTY. THE FACTS ON WHICH INCOME-TAX DEPARTMENT HAD RELIED DID NOT DISPROVE T HE EXPLANATION FURNISHED BY THE ASSESSEES WIFE. IT WAS HELD THAT MERELY BECAUSE THE MINORS AND THEIR PARENTS WERE DEPENDENT ON THE ASSE SSEE OR THAT ASSESSEE HAD MADE ALTERATIONS IN THE PROPERTY WOULD NOT LEAD TO THE CONCLUSION THAT THE PURCHASE WAS BENAMI PURCHASE BY THE ASSESSEE. (X) GULZARILAL RAWAT VS ITO 259 ITR 176 (RAJ.) - IN THIS CASE ASSESSEE CLAIMED THAT BUSINESS BELONGED TO HIS SON WHO IN VESTED RS.8000/- AFTER DISCLOSURE OF THE SAME UNDER VDIS. IT WAS EXPLAINE D THAT S WAS A STUDENT AT THAT POINT OF TIME. HE EMPLOYED HIS MAT ERNAL UNCLE WHO LOOKED AFTER THE BUSINESS OF THE CONCERN AND RS. 70 0/- PER MONTH WAS PAID TO HIM. THE ITO REJECTED THE EXPLANATION AND THE D ECISION WAS UPHELD BY THE TRIBUNAL. ON REFERENCE IT WAS HELD THAT AS PE R FACTS INVESTMENT IN THE FIRM HAD BEEN SHOWN AFTER DISCLOSURE OF MONEY UNDER VDIS THAT THERE WERE DEALINGS OF THE CONCERN NOT ONLY WITH THE ASS ESSEE BUT ALSO IN THE OPEN MARKET WITH OTHER SIMILAR TYPE OF TRADERS THE CONCERN HAD GOT SALES TAX REGISTRATION IT WAS REGISTERED UNDER THE SHOPS AND COMMERCIAL ESTABLISHMENT ACT THEN BUSINESS INCOME FROM THE CO NCERN S COULD NOT BE TAXED IN THE HANDS OF ASSESSEE MERELY ON THE GRO UND THAT PROPRIETOR OF THE CONCERN WAS THE SON OF THE ASSESSEE. (XI) G.L.CHABADA VS ITO 53 ITD 53 (BANGALORE) IN THIS CASE DEPARTMENT ALLEGED THAT ONE GLC CONVERTED HIS PROPR IETARY BUSINESS INTO PARTNERSHIP BUT PRIOR TO THIS ANOTHER FIRM VT WAS DOING THE SAME IT(SS) NO.98-50/AHD/05 NIRMA LTD. 46 BUSINESS. IT HAD COME INTO EXISTENCE PRIOR TO PART NERSHIP FIRM OF GLC. THE TRIBUNAL HELD THAT THE TWO FIRMS HAD SEPARATE S ALES TAX REGISTRATION; THEY WERE ASSESSED TO SALES TAX SEPARATELY; DEPARTM ENT HAD VIRTUALLY NO EVIDENCE AT ALL TO SHOW THAT VT WAS A BENAMI CONCER N OF GLC; IT WAS NOT SHOWN BY THE DEPARTMENT THAT GLC FIRM ACTUALLY ENJO YING THE INCOME OF VT. MERELY BECAUSE STOCK OF THE TWO FIRMS WERE LYI NG SIDE BY SIDE CASH OF ONE FIRM MIGHT HAVE GONE INTO THE BUSINESS PREMISES OF THE OTHER FIRM FOR THE VARIOUS REASONS EVEN FOR THE SAKE OF SECURITY DID NOT GO TO PROVE ANYTHING AT ALL EXCEPT RAISING A VERY WEAK SUSPICIO N. THE DEPARTMENT DID NOT DISCHARGE THE ONUS OF PROVING THE BENAM CHARACT ER OF VT. (XII) OMKARMAL GAURI SHANKER VS ITO 39 TTJ (AHD) 223 - A TRUST HAD PURCHASED GOODS WORTH RS. 2 81 166/- FROM THE ASSES SEE FIRM AND MADE A PROFIT OF RS. 8772/- THEREON. THE ASSESSEE FIRM H OWEVER MADE A PROFIT OF RS. 6041/- IN RESPECT OF THAT TRANSACTION. THE ITO VIEWED THAT THE AFORESAID TRUST WAS CREATED WITH A VIEW TO EVADE TA X AND INCLUDED THE INCOME OF THE TRUST IN THE HANDS OF THE ASSESSEE FI RM. THE LD. CIT(A) RESTRICTED THE ADDITION OF RS. 8772/- ONLY BEING TH E PROFIT EARNED ON THAT TRANSACTION BY THE TRUST. THE TRIBUNAL HELD THAT T HERE IS NO MATERIAL EVIDENCE ON RECORD TO PROVE THAT SUCH TRANSACTIONS DONE BY THE ASSESSEE FIRM WITH THE TRUST WERE BENAMI TRANSACTION OR THER E WAS NO MATERIAL ON RECORD TO INDICATE THAT THE PROFIT DERIVED BY THE TRUST DIRECTLY OR INDIRECTLY HAD FLOWN IN FAVOUR OF THE ASSESSEE FIRM AT ANY POI NT OF TIME. THE PROFIT DERIVED BY THE TRUST HAD BEEN ENJOYED BY THE BENEFI CIARIES AND THEY HAVE BEEN TAXED IN RESPECT OF SHARES IN THE INCOME OF TH E SAID TRUST. UNLESS THE REVENUE DISCHARGE THE BURDEN OF PROVING BY BRINING POSITIVE MATERIALS AND EVIDENCE ON RECORD THAT THE SAID TRUST WAS A BE NAMI CONCERN OF THE ASSESSEE FIRM THE INCLUSION OF THE INCOME DERIVED BY THE SAID TRUST IN THE HANDS OF THE ASSESSEE FIRM COULD NOT BE SUSTAINED. (XIII) MANOHARLAL VS ITO 37 ITD 96 (JAIPUR)(TM) D URING SEARCH OPERATION IT CAME TO THE NOTICE OF THE DEPARTMENT THAT THERE WERE TWO OTHER TEXTILES M AND S IN THE NAME OF MD WIFE OF B ROTHER OF THE ASSESSEE AND WIFE OF THE ASSESSEE RESPECTIVELY. THE ITO CAME TO CONCLUSION THAT THERE WAS COMMON MANAGEMENT COMMON FUNDS AND COMMO N EMPLOYEES AND THEREFORE INCOMES OF THESE CONCERNS BELONGED TO THE ASSESSEE. HE THEREFORE CLUBBED THE INCOME OF THOSE CONCERNS IN ASSESSEES INCOME. HOWEVER DEPARTMENT WAS NOT ABLE TO PROVE THAT ASSE SSEE ENJOYED INCOME OF THOSE CONCERNS OR THAT INVESTMENTS MADE BY THOSE LADIES WAS INVESTMENT MADE BY THE ASSESSEE IN THEIR NAMES. TH EREFORE MERELY ON ACCOUNT OF MANAGEMENT OF THESE CONCERNS WAS IN THE HANDS OF THE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 47 ASSESSEE INFERENCE OF BENAMI NATURE COULD NOT BE D RAWN SO AS TO INCLUDE THE INCOME ARISING TO THESE LADIES IN THE HANDS OF THE ASSESSEE. (XIV) QSS COLOUR PROCESSORS VS IAC 35 TTJ (DELHI) 486 - IN THIS CASE WIFE OF A DIRECTOR OF THE ASSESSEE COMPANY INDEPEND ENTLY CARRIED HER PROPRIETARY COMMISSION BUSINESS AND FOR THE SERVICE S RENDERED BY THE SAID PROPRIETARY BUSINESS TO THE ASSESSEE 10% COMMISSIO N WAS PAID BY THE ASSESSEE TO HER THE SAME COULD NOT BE INCLUDED IN THE ASSESSEES INCOME ON THE GROUND THAT WIFE WAS A BENAMI OF THE ASSESSE E COMPANY AS THERE WAS NO MATERIAL TO HOLD SO. (XV) S.N.GANGULY VS CIT 24 ITR 16(PATNA) IT WAS HELD IN THIS JUDGMENT THAT THERE IS NO PRESUMPTION IN LAW THAT A N AMOUNT STANDING IN THE NAME OF THE WIFE BELONGED TO THE HUSBAND. IN T HE ABSENCE OF EVIDENCE TO THE CONTRARY THE MONEY STANDING IN THE NAME OF THE ASSESSEES WIFE MUST BE PRESUMED TO BELONG TO HER AND ASSESSEE CANN OT BE TAXED IN RESPECT OF SUCH AN AMOUNT. THE ONUS OF PROOF IN SU CH A CASE WILL NOT BE ON THE ASSESSEE BUT WILL BE ON THE DEPARTMENT TO SH OW BY AT LEAST SOME MATERIAL THAT THE AMOUNT STANDING IN THE NAME OF AS SESSEES WIFE DOES NOT BELONG TO HER BUT BELONG TO THE ASSESSEE. (XVI) CIT VS DAULAT RAM RAWATMULL 87 ITR 349 (S .C.)- IN THIS CASE THE ASSESSEE FIRM HAD OPENED AN OVERDRAFT ACCOUNT WITH A LIMIT OF RS.10 LAKHS AGAINST THE COLLATERAL SECURITY OF TWO FIXED DEPOSI TS OF RS.5 LAKHS EACH ONE OF WHICH WAS IN THE NAME OF B SON OF A PARTNER OF THE FIRM AND THE OTHER IN THE NAME OF A SON OF ANOTHER PARTNER. TH E LETTERS OF GUARANTEE WAS SIGNED BY B AND A. NO CONSIDERATION WAS RECEIVE D BY THEM. AFTER AS DEATH THE AMOUNT OF FIXED DEPOSIT WAS NOT PAID TO HIS HEIR BUT WAS ADJUSTED AGAINST THE OVERDRAFT OF THE ASSESSEE FIRM . HOWEVER IN THE CASE OF B MONEY WAS PAID FINALLY TO B. THE TRIBUNAL IN RESPECT OF FIXED DEPOSIT OF B HELD THAT THE SUM OF RS.5 LAKHS BELONG ED TO THE FIRM AND WAS ITS CONCEALED INCOME FOR THE REASONS THAT (I) EXP LANATION FURNISHED BY BV WAS FOUND INCORRECT (II) THE SUM OF RS.5 LAKHS E ACH WAS TRANSFERRED FROM CALCUTTA TO JAMNAGAR THROUGH BOMBAY FOR ISSUE OF FIXED DEPOSITS IN THE NAME OF THE SONS OF PARTNERS (III) THE USE OF FIXED DEPOSIT RECEIPTS AS COLLATERAL SECURITY FOR THE OVERDRAFTS FACILITY. T HE HON'BLE HIGH COURT HELD THAT THIS WAS NOT SUFFICIENT MATERIAL TO HOLD THAT THE SUM OF RS.5 LAKHS BELONGED TO THE ASSESSEE FIRM. ON APPEAL TO THE HO N'BLE SUPREME COURT THE DECISION OF HON'BLE HIGH COURT WAS CONFIRMED FO R THE REASONS THAT IF B WAS NOT ABLE TO GIVE SATISFACTORY EXPLANATION REG ARDING THE SOURCE OF IT(SS) NO.98-50/AHD/05 NIRMA LTD. 48 RS.5 LAKHS IT WOULD NOT BE DECISIVE FOR THE QUESTI ON AS TO WHETHER B WAS OR WAS NOT THE OWNER OF THAT AMOUNT. A PERSON COUL D STILL BE HELD TO BE THE OWNER OF A SUM OF MONEY (1) EVEN THOUGH THE EXP LANATION FURNISHED BY HIM REGARDING THE SOURCE OF THAT MONEY WAS FOUND TO BE NOT CORRECT. (2) MERE TRANSFER OF SUM OF RS.5 LAKHS FROM CALCUTTA TO JAMNAGAR WOULD NOT JUSTIFY THE INFERENCE THAT THE AMOUNT WOULD BELONG TO THE ASSESSEE FIRM (3) MERELY BECAUSE B DID NOT RECEIVE ANY CONSIDERAT ION FOR OFFERING THE FDR AS SECURITY FOR THE OVERDRAFT FACILITY CANNOT R ESULT IN ANY INFERENCE AGAINST THE ASSESSEE AND (4)THE ONUS IS ON THE DEPA RTMENT TO PROVE THAT APPARENT WAS NOT REAL I.E THE BURDEN LAY ON THE DEP ARTMENT TO PROVE THAT ASSESSEE FIRM WAS THE OWNER OF THE AMOUNT DESPITE T HE FACT THAT FIXED DEPOSIT RECEIPT WAS IN THE NAME OF B. OTHER CIRC UMSTANCES RELIED ON BY THE DEPARTMENT COULD NOT LEAD TO THE INFERENCE THAT ASSESSEE FIRM WAS OWNER OF THE SUM DEPOSITED IN FDRS. (XVII) KRISHNANAND AGNIHOTRI VS ITO AIR 1977 SC 7 96 - THE BURDEN OF SHOWING THAT A PARTICULAR TRANSACTION IS BENAMI AND THE OWNER IS NOT THE REAL OWNER ALWAYS RESTS ON THE PERSON ASCERTAINING IT TO BE SO AND THIS BURDEN HAS TO BE STRICTLY DISCHARGED BY ADDUCING LE GAL EVIDENCE OF A DEFINITE CHARACTER WHICH WOULD EITHER DIRECTLY PROV E THE FACT OF BENAMI OR ESTABLISH CIRCUMSTANCES UNERRINGLY AND REASONABLY RAISING AN INFERENCE OF THAT FACT. IT IS NOT ENOUGH MERELY TO SHOW CIRC UMSTANCES WHICH MIGHT CREATE SUSPICION. IN THIS CASE THE PROSECUTION HA D ALLEGED THAT CERTAIN AMOUNT LYING IN THE NAME OF ACCUSEDS WIFE WAS AS SET BELONGING TO THE ACCUSED BUT NO EVIDENCE AT ALL WAS LED ON THE SI DE OF THE PROSECUTION TO SHOW THAT THE MONIES LYING IN FIXED DEPOSIT IN HER NAME WAS PROVIDED BY THE ACCUSED. PROSECUTION COULD NOT PLACE PROOF O F LEGAL CHARACTER EXCEPT RAISING SUSPICION AND DOUBT IN THE MIND OF T HE COURT. (XVIII) STATE OF MP VS MOHANLAL SONI 6SCC 338 I T WAS HELD THAT TRIAL COURT FAILED TO CONSIDER AND EVALUATE THE INCOME TA X RETURNS WHICH CLEARLY ESTABLISH THAT THE PROPERTY INCLUDED IN THE ASSETS OF THE ACCUSED AND SHOWN TO BE DISPROPORTIONATE WAS THE WIFES PROPERT Y BOUGHT FROM HER OWN RESOURCES AND SHOULD HAVE BEEN EXCLUDED FROM TH E ASSETS OF THE ACCUSED. 30. THUS ON THE BASIS OF ABOVE PRINCIPLES AS CULLED OUT FROM AUTHORITIES REFERRED TO ABOVE WE HOLD THAT - IT(SS) NO.98-50/AHD/05 NIRMA LTD. 49 (1) THE DOCUMENT NO.108 OF ANNEXURE-A-1 ANNEXED AT PAGE 192 OF ASSESSEES PAPER BOOK IS DUMB DOCUMENT. IT DOES NOT REFLECT AS TO WHOM THE TRANSACTIONS SHOULD BE ATTRIBUTED. IT ALSO DOES NOT REFLECT THE SUM OF RS.17 48 49 140/- AS INVESTMENT OR EXPENDITURE. (2) THERE IS NO MATERIAL TO HOLD THAT UNACCOUNTED T RANSACTION IF ANY ARISING OR REFLECTING FROM THESE DOCUMENTS WOULD BELONG TO THE ASSESSEE COMPANY AND THEREFORE TAX LIABILITY IF ANY COULD BE ATTR IBUTED TO THE ASSESSEE COMPANY. (3) THERE IS NO MATERIAL TO HOLD THAT ASSESSEE COMP ANY IS HOLDING THE SHARES AS BENAMI AND THEREFORE INCOME ON SALE OF THE SHARES WOULD BELONG TO THE ASSESSEE COMPANY. (4) PRESUMPTION UNDER SECTION 132(4A) CANNOT BE RAI SED AGAINST THE ASSESSEE COMPANY AS IMPUGNED DOCUMENT WAS NOT FOUND FROM THE PREMISES OF ASSESSEE COMPANY. (5) THE BURDEN TO PROVE BENAMI NATURE OF THE SHARES OR TRANSACTION THEREFROM IS NOT DISCHARGED BY THE DEPARTMENT. (6) THERE IS NO MATERIAL OR FINDING THAT INCOME-TAX RETURN FILED BY THE ASSOCIATE ENTITIES ARE IN ANY WAY FRAUDULENT OR THE SE ENTITIES ARE MERELY PAPER CONCERNS. 31. IN VIEW OF THE ABOVE WE DELETE THE ADDITION OF RS.17 48 49 140/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A). 32. SO FAR AS ADDITION OF RS.3 31 43 916/- IS CONCE RNED IT IS ARISING FROM DOCUMENT NO.87 OF ANNEXURE A_1 ANNEXED AT PAGE 189 OT ASSESSEES PAPER BOOK. THE CONTENTS OF THIS DOCUMENT HAVE BEEN REPRO DUCED ABOVE. THE REASONS FOR MAKING ADDITION BY THE AO ARE THE SAME AS FOR MAKING ADDITION OF RS.17.48 CRORES. THE DIFFERENCE IS ONLY THE DOCUMEN T. THIS DOCUMENT WAS ALSO FOUND FROM THE PREMISES OF SHRI RAHUL DEVI. IT REFL ECTED TRANSACTIONS IN THE SHARES OF TIFIL. ACCORDING TO THE AO THIS DOCUMENT SHOWED THAT A SUM OF RS.3 31 41 916/- WAS PAYABLE AND FOR THE REASONS AS NARRATED BY HIM FOR HOLDING THAT DOCUMENT NO.108 ANNEXED AT PAGE 198 OF ASSESSEES PAPER BOOK BELONGED TO ASSESSEE COMPANY HE HELD THAT THIS DOC UMENT WOULD ALSO BELONG IT(SS) NO.98-50/AHD/05 NIRMA LTD. 50 TO THE ASSESSEE COMPANY. THE ARGUMENTS OF THE PARTI ES IN SUPPORT AND AGAINST THE PROPOSITION ADVANCED BY THE AO WERE THE SAME AS IN RESPECT OF ADDITION OF RS.17.48 CRORES. FOR THE DETAILED REASO NS GIVEN BY US WHILE DELETING THE ADDITION OF RS.17.48 CRORES WE HOLD HE RE AS UNDER :- (1) DOCUMENT NO.87 REFLECTING THE TRANSACTION WAS N OT FOUND FROM THE PREMISES OF ASSESSEE COMPANY AND THEREFORE PRESUMP TION UNDER SECTION 132(4A) CANNOT BE RAISED AGAIN THE ASSESSEE COMPANY . (2) DOCUMENT IS INCOMPLETE AND TO SOME EXTENT DUMB INASMUCH AS IT DOES NOT SHOW AS TO WHOM THE SUM OF RS.3 31 43 916 WOULD BELONG; WHETHER TO ANY ASSOCIATE ENTITY OR TO ASSESSEE COMPANY. THE DOCUME NT DOES NOT SHOW OR INDICATE THE NAME OF OWNER OF THIS TRANSACTION. ASS ESSING AUTHORITIES HAVE ALSO NOT FOUND ANY MATERIAL EITHER IN SEARCH OR IN POST SEARCH INVESTIGATION TO ATTRIBUTE THE OWNERSHIP OF THIS TRANSACTION TO THE ASSESSEE. (3) THERE IS NO BIFURCATION OR DETAILS OF TRANSACTI ON FOR WHICH SUM OF RS.8.50 LACS WAS PAYABLE. THERE IS NO INDICATION AS TO WHERE ADJUSTMENT OF THE INTEREST OF RS.3.12 CRORES IS MADE AND WHERE IT IS TAXABLE OR TAXED. SIMILARLY IT IS NOT MADE CLEAR WHERE THE LOSS OF RS .2.05 CRORES IS ADJUSTED SO AS TO FIND OUT THE OWNERSHIP OF THE TRANSACTION. AP PARENTLY THE TWO TRANSACTIONS ARE ACCEPTED AS GENUINE AS NO ADDITION IS PROPOSED. THEN THERE IS NO REASON TO HOLD THAT SUM OF RS.3.31 CRORES WOULD BE UNACCOU NTED. (4) EVEN IF IT IS PRESUMED THAT RS.3.31 CRORES IS U NACCOUNTED THE NATURE OF THIS TRANSACTION IS NOT CLARIFIED BY THE AO EITHER FROM THE SEIZED DOCUMENT OR FROM POST SEARCH ENQUIRIES. MERELY BECAUSE THE SUM IS RECORDED IN THE SEIZED DOCUMENT IT WOULD NOT CARRY A TAXABLE CHARACTER. TH ERE IS NO MATERIAL TO HOLD THAT ASSESSEE COMPANY IS HOLDING THE SHARES AS BENA MI AND THEREFORE INCOME ON SALE OF THE SHARES WOULD BELONG TO THE AS SESSEE COMPANY. THE BURDEN TO PROVE BENAMI NATURE OF SHARES OR TRANSACT ION THEREFROM IS NOT DISCHARGED BY THE DEPARTMENT. (5) THERE IS NO MATERIAL OR FINDING THAT INCOME-TAX RETURN FILED BY THE ASSOCIATE ENTITIES ARE IN ANY WAY FRAUDULENT OR THE Y ARE MERELY PAPER CONCERNS. 33. ACCORDINGLY WE DELETE THE ADDITION OF RS.3 31 4 1 916/- ALSO. THUS GROUND NO.4 IN ASSESSEES APPEAL IS ALLOWED. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 51 34. THE NEXT GROUND IN ASSESSEES APPEAL IS ABOUT A DDITION OF RS.1 01 41 881/- WHICH ARISES ON THE BASIS OF PAGE NOS.79 -80 OF ANNEXURE-A- 1- PAGE 80 TO BE COLLECTED NIRMA-JASHDEEP INT. 29 91 000 N.D.-JASDEEP (T) INT. 42 59 391 NIRMA POLYSINTH (N) INT. 4 86 575 INDIVIDUAL (P) INT. 2 90 436 6% (15-9) DIFF. ON 90 00 000 5 40 000 INT.DIFF.NIRAL-VIPL FOR INV. OF 1 65 000 FOR (N) 4 00 000 ND-S.R.MULTI (4 50 000 BOARD A/C) 67 500 NIRMA DBNT.S.R. POLYSINTH 50 000 NIRMA DBT.JASHDEEP 2 00 000 92 94 971 PAGE 79 PAYMENT INT.RATE DIFF.90% MCWL-VIPL(50 00 000) 4 50 000 VIPL-NIRMAN (2 00 000) 12 27 945 SR POLY-ND(8 00 000) 591 VIPL-NIRALI(5 00 00 000) 7 12 655 INT.CALCULATION AFTER 1 65 00 000 PAID FOR SHARES 50 00 000 4 50 000 VIPL SHARE PROFIT (T) 26 61 299 NIRMA SHARE SALES PROFIT (14800 X 212) (322-110 PRICE) 31 37 600 PAYMENT 86 40 090 COLLECTION 92 84 971 EXCESS 6 41 881 (+) 95 00 000 1 01 41 881 IT(SS) NO.98-50/AHD/05 NIRMA LTD. 52 THIS DOCUMENT WAS FOUND AND SEIZED FROM THE PREMISE S OF NIRMA LTD. THE ASSESSEE COMPANY EXPLAINED TO THE AO THAT IT DID NO T PERTAIN TO IT. THE PAPER REFLECTED INTER-CONNECTED NOTINGS AND DOES NOT GIVE ANY DATE AS TO WHICH PERIOD OR TO WHOM IT WOULD BELONG. BUT THE AO HELD THAT IT IS A CROSS ENTITY SETTLEMENT OF INTEREST BY THE ASSESSEE COMPANY AND ASSOCIATES AND NET SETTLEMENT IS OF RS.1 01 41 881/-. THE AO DETERMINE D THE PERIOD AS 1994-95 ON THE BASIS THAT SHARES OF NIRMA LTD. WAS QUOTED A T RS.322/- AT THE RELEVANT POINT OF TIME. THEREFORE IT WOULD FALL IN THE BLOC K PERIOD. THE AO ACCORDINGLY HELD THAT ENTIRE SUM OF RS.1 01 41 881/- IS CHARGEA BLE TO TAX IN THE HANDS OF ASSESSEE COMPANY AS UNEXPLAINED INCOME IN THE BLOCK PERIOD. 35. THE LD. CIT(A) CONFIRMED THE ADDITION BY HOLDIN G AS UNDER :- 8.4 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND THE ABOVE SUBMISSION. IT IS SEEN THAT THE PAPER WAS FOUND FRO M THE APPELLANTS PREMISES. THE APPELLANTS MAIN CONTENTION IS THAT THE PAPER D OES NOT BELONG TO IT IT IS NOT IN THE HANDWRITING OF ANY EMPLOYEE OR CONSULTANT OF THE COMPANY OR IT DOES NOT GIVE ANY CLUE ABOUT THE PERIOD BUT SUCH A CONTENTI ON CANNOT SAVE IT FROM ITS RESPONSIBILITY TO EXPLAIN THE SAID LOOSE PAPER AND THE TRANSACTIONS NOTED THEREIN AS THE SEIZED DOCUMENT HAS BEEN FOUND FROM THE APPELLANTS PREMISES AND THE PRESUMPTION OF LAW UNDER SECTION 132(4A) IS AGAINST THE ASSESSEE. IT IS FOR THE ASSESSEE TO EXPLAIN THE OWNERSHIP OF THE SAID PAPER AND THE TRANSACTIONS NOTED THEREIN. IT INVOLVES NOTINGS ABO UT THE SETTLEMENT OF TRANSACTION OF INTEREST BY THE APPELLANT ALSO. IT R EPRESENTS THE NET SETTLEMENT OF INTEREST BETWEEN THE ENTITIES. THERE IS NO EXPLANAT ION ABOUT THE AMOUNT OF RS.95 00 000/- ADDED TO FIGURE OF RS.6 41 881/-. TH E ASSESSEE HAS TRIED TO EXPLAIN THAT THE PAPER RELATES TO THE PRIOR TO BLOC K PERIOD BY GIVING A CERTIFICATE ABOUT THE QUOTATION OF PRICES OF THE APPELLANT COMP ANY. HOWEVER THIS EXPLANATION ALSO DOES NOT ESTABLISH AS TO THE EXACT PERIOD OF THE TRANSACTION. THE APPELLANT HAS TRIED TO EXPLAIN THAT IT DOES NOT BELONG TO THE APPELLANT COMPANY AND THAT IT DOES NOT SHOW AS TO THE WHETHER IT IS INCOME OR EXPENDITURE. IN THIS REGARD IT IS OBSERVED THAT THE PAPER CLEARLY SHOWS SETTLEMENT OF INTEREST BETWEEN THE PARTIES. VARIOUS ENTRIES NOTED THEREIN REPRESENT RECEIPT AND PAYMENT OF INTEREST. ON THE T OP OF THE PAPER IT IS WRITTEN TO BE COLLECTED. SO THE FIGURE AT THE BOTTOM OF T HE PAGE IS INCOME OF THE APPELLANT. THE APPELLANT COMPANY HAS NOT PROVED ANY THING CONTRARY TO IT. REGARDING OWNERSHIP OF THE PAPER I FIND THAT THE PA PER HAS BEEN FOUND FROM THE PREMISES OF THE APPELLANT. IT IS FOR THE ASSESS EE TO ESTABLISH THAT IT DOES NOT BELONG TO IT. HAVING REGARD TO THE ABOVE POSITION I HOLD THAT THE ASSESSING IT(SS) NO.98-50/AHD/05 NIRMA LTD. 53 OFFICER HAS JUSTIFIABLY MADE THE ADDITION OF RS.1 0 1 41 881/-. THIS GROUND IS THEREFORE DISMISSED. 36. AGAINST THIS THE LD. AR FOR THE ASSESSEE SUBMI TTED THAT SEIZED PAPERS DOES NOT BELONG TO THE ASSESSEE COMPANY. THEY ARE N OT IN THE HAND-WRITING OF ANY EMPLOYEE OF THE ASSESSEE COMPANY OR ADVISOR OR CONSULTANT THEREOF. FURTHER THE PAPER DOES NOT GIVE ANY CLUE WHATSOEVER TO THE PERIOD TO WHICH IT RELATES. IN ALL PROBABILITY IT WOULD RELATE TO THE PERIOD EARLIER TO THE BLOCK PERIOD. ACCORDING TO THE LD. AR THIS DOCUMENT IS A DUMB DOC UMENT AS IT DOES NOT REFLECT WHO IS THE OWNER AND TO WHOM THE TRANSACTIO N BELONGED. FURTHER PRESUMPTION UNDER SECTION 132(4A) CANNOT BE RAISED AGAINST THE ASSESSEE SINCE THIS DOCUMENT WAS NOT SEIZED FROM THE PREMISE S OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THE PRICE OF RS.322/- OF THE SHARES OF ASSESSEE COMPANY WAS REFLECTED AT 12.4.1994 AND NOT DURING ANY DATE IN THE BLOCK PERIOD. THEREFORE IF AT ALL THERE IS ANY INCOME ARISING FR OM THE DOCUMENT IT WOULD FALL BEYOND THE BLOCK PERIOD 37. THE LD. DR ON THE OTHER HAND SUBMITTED THAT ON CE DOCUMENT IS FOUND FROM THE PREMISES OF THE ASSESSEE THE PRESUMPTION I S RAISED AGAINST IT BY VIRTUE OF SECTION 132(4A) THAT IT BELONGED TO THE A SSESSEE COMPANY. 38. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. NOW IT IS UNDISPUTED FACT THAT THE ABOVE DO CUMENT WAS FOUND FROM THE PREMISES OF THE ASSESSEE COMPANY BUT THE FACT IS TH AT THE PERIOD TO WHICH THE TRANSACTION IS PERTAINED HAS NOT BEEN CORRECTLY APP RECIATED BY THE AUTHORITIES BELOW. THE BLOCK PERIOD WOULD START FROM 1.4.1995 A ND WOULD COME TO AN END ON 27.9.2001 AS MENTIONED BY THE AO IN THE ASSESSME NT ORDER. IT HAS BEEN POINTED OUT TO THE AO THAT PRICE OF THE SHARES OF N IRMA LTD. AT RS.322/- WAS AS ON 12.4.1994 AS PER WEBSITE OF MUMBAI STOCK EXCHANG E WEBSITE. THIS WAS ALSO POINTED OUT TO THE LD. CIT(A) IN THE WRITTEN S UBMISSION. A COPY OF WRITTEN SUBMISSION WAS FORWARDED BY LD. CIT(A) TO THE AO WH O FURNISHED THE FOLLOWING REPLY :- IT(SS) NO.98-50/AHD/05 NIRMA LTD. 54 1. SINCE THE PAPERS HAVE BEEN FOUND FROM THE PREMI SES OF THE ASSESSEE IT CAN SAFELY BE PRESUMED THAT THESE BELONG TO THE ASSESSEE. 2. NO CONCLUSIVE EVIDENCE COULD BE PRODUCED BY THE ASSESSEE TO REACH AT THIS CONCLUSION THAT THE DOCUMENT IS NOT IN THE HAN DWRITING OF ANY OF THE EMPLOYEE AND/OR ADVISOR/CONSULTANT. 3. AT THE TIME OF ASSESSMENT PROCEEDINGS THE ASSESS EE COULD NOT COME UP WITH THIS ARGUMENT THAT THIS PAPER BELONGS TO TH E PRE-SEARCH PERIOD BECAUSE THE QUOTED PRICE OF THE SHARES OF NIRMA LTD . FALLS IN THE PRICE BAND OF THAT PERIOD. NOW AFTER THIS FACT THERE IS POSSIBILI TY THAT THIS PAPER MAY BELONG TO THE PERIOD MENTIONED BY THE ASSESSEE AND ANOTHER ON E OBSERVED BY THE AO. NOW TO DISPROVE CONCLUSIVELY THE ASSERTION OF THE A SSESSEE BALL LIES IN THE COURT OF THE ASSESSEE BECAUSE IT POSSESSES ALL THE MATERIAL FACTS AND MOREOVER THE PRESUMPTION OF SECTION 132(4A) ALSO PR ESCRIBES THE SAME. THE CONTENTS OF THE PAGES 79 & 80 ARE PRODUCED HEREUNDE R. THUS THE LD. AO HAS AVOIDED TO GIVE HIS COMMENTS ON THE SPECIFIC INFORMATION GIVEN TO HIM THAT IF THE PERIOD OF TRANSACTION AS R ECORDED IN THE SEIZED DOCUMENT IS TO BE ASCERTAINED ON THE BASIS OF RS.32 2/- BEING PRICE OF THE SHARES OF ASSESSEE COMPANY AS MENTIONED IN THE SEIZ ED DOCUMENT THEN SUCH DATE WOULD FALL IN THE PRE-BLOCK PERIOD. THE AUTHOR ITIES HAVE NOT CONTROVERTED THIS FACT AND HAVE PROCEEDED TO MAKE ADDITIONS ON T HE POSSIBILITY THAT PAPER MAY ALSO BELONG TO BLOCK PERIOD. TO REBUT THE FACTS SUBMITTED BY THE ASSESSEE IT WAS NECESSARY FOR THE AO AND THE LD. CIT(A) TO F URTHER COLLECT MATERIAL TO SHOW THAT PRICE OF THE SHARES OF NIRMA LIMITED AT R S.322/- PER SHARE WAS A DATE FALLING IN THE BLOCK PERIOD IN ADDITION TO 12. 4.1994 AS POINTED OUT BY THE ASSESSEE ON THE BASIS OF DATA COLLECTED FROM MUMBAI STOCK EXCHANGE. IN ABSENCE OF ANY MATERIAL TO THE CONTRARY THAT PAPER AND TRANSACTION RECORDED THEREIN WOULD FALL IN PRE-BLOCK PERIOD IT IS NOT PO SSIBLE TO UPHOLD THE ADDITION. 39. THE OTHER ARGUMENT THAT DOCUMENT IS DUMB OR IT DOES NOT REFLECT CORRECTLY AS TO WHOM THE TRANSACTION BELONG ARE MER ELY OF ACADEMIC INTEREST AS DOCUMENT AS SUCH WOULD NOT FALL FOR CONSIDERATIO N IN THE BLOCK PERIOD. THUS THE ADDITION SUSTAINED BY LD. CIT(A) IS DELETED. TH IS GROUND OF ASSESSEE IS ALLOWED. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 55 40. THE NEXT ADDITION CONTESTED BY THE ASSESSEE IS THE SUM OF RS.1 12 88 845/- ON THE BASIS OF PAGE 86 OF ANNEXUR E-A-6. THIS HAS BEEN DEALT WITH BY LD. CIT(A) IN PARA 9 OF HIS ORDER. TH E DETAILS RECORDED IN THIS DOCUMENT ARE AS UNDER :- PAGE 86 Q.D SHIVA 3892.650 X 500 =1946325 NDL 5486.900 X 500 =2743450 NL 9388.210 X 500 =4694105 KISSAN 4315.340 X 500 =2157670 23083.100 11541550 -97/98 INTEREST SHIVA 2766575 HDL 2766115 N.L 6594740 KISSAN 5809794 17937224 + 11541550 29478774 A PERUSAL OF PARA 7.4 OF THE ASSESSMENT ORDER WHERE DISCUSSION IN RESPECT OF THIS ADDITION IS MADE SHOWS THAT THERE IS NO MENTIO N AS FROM WHERE IT WAS SEIZED. THE ONLY FINDING GIVEN BY THE AO IS THAT ID ENTITY OF VARIOUS ENTITIES MENTIONED IN THE DOCUMENT IS ESTABLISHED AS BELONGI NG TO NIRMA GROUP AND THEREFORE THE TRANSACTIONS RECORDED THEREIN ARE TA KEN TO BE THAT OF NIRMA LTD. 41. BEFORE LD. CIT(A) IT WAS SUBMITTED THAT PAPER I S NOT IN THE HAND WRITING OF ANY EMPLOYEE OF THE ASSESSEE COMPANY IT DOES NO T GIVE ANY INDICATION OF ANY TRANSACTION OR CLUE THERETO THEREFORE TO INFE R THAT IT RELATES TO INTEREST OR IT(SS) NO.98-50/AHD/05 NIRMA LTD. 56 SETTLEMENT OF QUANTITY DISCOUNT IS IMAGINARY. FURTH ER ASSESSEE COMPANY HAS MORE THAN 350 EMPLOYEES LOT OF VISITORS AND SUPPL IERS WHO VISIT THE PREMISES AND THERE BEING NO SPECIFIC IDENTIFICATION IT IS NO T POSSIBLE TO ATTRIBUTE THE DOCUMENT TO THE ASSESSEE COMPANY. THE REPLY OF THE ASSESSEE WAS FORWARDED TO THE AO AND THE REMAND REPORT WAS OBTAI NED. THE LD. CIT(A) AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND REMAND RE PORT CONFIRMED THE ADDITION BY OBSERVING AS UNDER :- 9.4 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ABOVE SUBMISSION. THIS PAPER IS ALSO FOUND FROM THE PREMISES OF THE A PPELLANT. THEREFORE FOR THE REASONS DISCUSSED IN THE EARLIER GROUND THE APPELLA NTS SUBMISSION TO THE EFFECT THAT IT DOES NOT BELONG TO THE APPELLANT AND IT IS NOT INDICATING THE TRANSACTIONS IS NOT ACCEPTABLE. THE APPELLANT HAS S TATED THAT THERE ARE MANY EMPLOYEES AND VISITORS OF THE APPELLANT AND THEREFO RE IT IS NOT POSSIBLE TO TRACE BACK AND UNDERSTAND THE NATURE OF PAPER IS AL SO NOT ACCEPTED IN VIEW OF THE FACT THAT IT IS FOUND FROM THE PREMISES OF THE APPELLANT. THE APPELLANT HAS NOT COME OUT WITH TRUTH OR SATISFACTORY EXPLANATION FOR THE SAME. THE PRESUMPTION OF LAW AS PROVIDED UNDER SECTION 132(4A ) IS VERY CLEAR AND THE CONTENTS OF SUCH DOCUMENTS ARE TO BE PRESUMED TO BE TRUE. THE AO HAS CLEARLY SHOWN THAT IT SHOWS INTEREST AND QUANTITY D ISCOUNT AGAINST THE NAME OF THE APPELLANT. HE HAS MADE THE ADDITION ONLY WITH R EFERENCE TO THE SAID AMOUNTS WRITTEN AGAINST THE NAME OF THE APPELLANT. CONSIDERING ALL THESE ASPECTS I HOLD THAT THE AO HAS JUSTIFIABLY MADE TH E ADDITION FOR THE SAME. 42. AGAINST THIS LD. AR SUBMITTED THAT THE DOCUMEN T DOES NOT REFLECT ANY CROSS ENTITY SETTLEMENT. THERE IS NO CO-RELATION WI TH THE ACTUAL HAPPENING. IT DOES NOT INDICATE ANY PERIOD WHEN ALLEGED TRANSACT ION IF ANY MIGHT HAVE TAKEN PLACE. IT IS NOT POSSIBLE TO FIND OUT WHO HAS WRITTEN THE DOCUMENT. THERE IS NO CORROBORATIVE EVIDENCE TO READ THE DOCUMENT. THEREFORE IT IS INCORRECT TO MAKE ADDITION ON THIS BASIS. 43. THE LD. DR ON THE OTHER HAND SUBMITTED THAT AS SESSEE DID NOT PRODUCE ANY CONCLUSIVE EVIDENCE. THE DOCUMENT IS IN THE HAN D WRITING OF SOME OFFICER OF THE ASSESSEE COMPANY. THE HEADING QUANTITY DISCO UNT WRITTEN AT THE TOP OF THE DOCUMENT INDICATES THAT IT RELATES TO QUANTITY DISCOUNT. THE DOCUMENT WAS SEIZED FROM THE PREMISES OF NIRMA LTD. THEREFORE PRESUMPTION UNDER SECTION IT(SS) NO.98-50/AHD/05 NIRMA LTD. 57 132(4A) CAN SAFELY BE RAISED AGAINST THE COMPANY. D URING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE WAS GIVEN LOT OF OP PORTUNITY TO EXPLAIN THE DOCUMENT BUT THE TRANSACTIONS RECORDED THEREIN WERE NOT EXPLAINED. THEREFORE UNLESS THE ASSESSEE REBUTS THE PRESUMPTI ON IT WOULD BE DEEMED THAT TRANSACTION PERTAINED TO THE ASSESSEE AND PERT AINED TO THE BLOCK PERIOD. 44. IN REJOINDER THE LD. AR SUBMITTED THAT IN ANY C ASE THE DOCUMENT IS DUMB DOCUMENT AND CANNOT BE RELIED UPON. 45. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW AUTHORITIES BELOW HA VE NOT CLEARLY DECIPHER THE DOCUMENT AS TO WHAT THESE NOTINGS MADE THEREIN STAN D FOR AND WHETHER THEY ARE GIVING RISE TO ANY TRANSACTION WHICH WOULD RESU LT INTO THE TAXABLE INCOME. ANY NOTINGS FOUND RECORDED ON A SIZED DOCUMENT DOES NOT AUTOMATICALLY RESULT INTO THE TAXABLE TRANSACTION AND ADDITION TO THE EX TENT OF FIGURES MENTIONED IN THE DOCUMENT. IT IS THE DUTY OF THE INVESTIGATING OFFICER THAT SEIZED DOCUMENT IS FURTHER SUPPORTED WITH POST SEARCH INVESTIGATION. T HE NOTINGS IN THE SEIZED DOCUMENTS ARE INDICATORS OF THE TRANSACTIONS BUT HA VE TO BE CO-RELATED WITH THE ACTUAL EVENTS WHICH COULD HAVE TAKEN PLACE OR FOUND RECORDED IN THE REGULAR BOOKS OF ACCOUNT. EVEN THOUGH DOCUMENT IS FOUND FRO M THE PREMISES OF THE ASSESSEE BUT THE ARGUMENT OF THE ASSESSEE THAT IT H AS 350 EMPLOYEES THERE ARE LOT OF VISITORS SUPPLIERS ETC. WHO MAY MAKE NO TES AND LEAVE THE DOCUMENT CANNOT BE BRUSHED ASIDE. WHAT WAS IMPORTANT WAS TO FIND OUT WHETHER NIRMA LTD. I.E. THE ASSESSEE COMPANY HAD CARRIED OUT TRAN SACTIONS IN THE ITEMS MENTIONED IN THE DOCUMENT LIKE SHIVA NDL NL KISH AN. IT HAS TO BE FURTHER EXPLAINED FOR WHAT THOSE WORDS SHIVA NDL NL & KI SHAN STAND. THESE TRANSACTIONS HAVE TO BE CO-RELATED WITH THE BOOKS O F ACCOUNT OR BANKING TRANSACTIONS SO AS TO DESCRIBE CORRECTLY THE EVENTS WHICH HAVE ACTUALLY HAPPENED A PART OF WHICH IS SO RECORDED IN THE IMPU GNED SEIZED DOCUMENT. WHERE ASSESSEE DOES NOT EXPLAIN THE SEIZED DOCUMENT IT COULD HAVE TWO POSSIBILITIES. ONE IS THAT HE DOES NOT WISH TO EXPL AIN FOR THE FEAR THAT SUCH IT(SS) NO.98-50/AHD/05 NIRMA LTD. 58 EXPLANATION MAY GO AGAINST HIM AND THE SECOND IS TH AT HE REALLY DOES NOT KNOW AS TO WHAT ARE THE CONTENTS OF THE DOCUMENT AN D TO WHOM IT BELONGS OR WHO HAS WRITTEN IT. IT IS THE DUTY OF THE INVESTIGA TING OFFICER TO INVESTIGATE AND CLEARLY POINT OUT AS TO WHAT IS THE ACTUAL STATE OF AFFAIRS AND WHETHER ASSESSEE IS DELIBERATELY HIDING THE FACTS FROM THE INVESTIGA TING OFFICER. MERELY ARRIVING AT A CONCLUSION ON THE BASIS OF JOTTINGS ON SEIZED DOC UMENT WHICH APPARENTLY DO NOT SHOW ANY TAXABLE EVENTS WILL NOT BE FAIR AND THEREFORE CANNOT BE UPHELD. IN THE PRESENT CASE EXCEPT THE CONTENTS OF THE DOCU MENT AS REPRODUCED ABOVE THERE IS NO MATERIAL SO AS TO COME TO THE CO NCLUSION THAT IT IS GIVING RISE TO ANY TAXABLE EVENT AND ACCORDINGLY GENERATING TAX ABLE INCOME. FURTHER PRESUMPTION UNDER SECTION 132(4A) COULD BE RAISED O NLY TO THE EXTENT OF OWNERSHIP OF THE DOCUMENT AND HAND-WRITING OF THE D OCUMENT FOUND IN THE SEARCH BUT SUCH PRESUMPTION CANNOT BE RAISED IN RES PECT OF THE PERIOD TO WHICH IT PERTAINED AND THE EVENTS OR TRANSACTIONS R ECORDED THEREIN. IN ANY CASE TO DECIPHER THE DOCUMENT IS THE DUTY OF THE INVESTI GATING OFFICER WHICH IN THE PRESENT CASE HAS NOT BEEN SATISFACTORILY DISCHARGED . ACCORDINGLY WE ARE UNABLE TO UPHOLD THE ADDITION AND THE SAME IS DELET ED. 46. GROUND NO.7 IS ABOUT UPHOLDING ADDITION OF RS.7 70 960/- AS UNDISCLOSED INCOME BEING EXCESS STOCK CLAIMED TO HA VE BEEN FOUND AT BHAVNAGAR FACTORY PREMISES. DURING THE COURSE OF SE ARCH OPERATION SURVEY U/S 133A WAS ALSO CARRIED OUT AT THE BHAVNAGAR FACTORY PREMISES. DURING THE COURSE OF SURVEY EXCESS STOCK OF LIMESTONE OF 6704 MT WAS FOUND. WHEN ASKED TO EXPLAIN IT WAS SUBMITTED THAT STOCK TAKING WAS NOT CARRIED OUT IN PROPER METHOD. CERTAIN UNDERSIZE ITEMS WERE CONSIDE RED IN THE PHYSICAL INVENTORY AND THE SAME IS NOT INCORPORATED IN THE B OOKS. ANY DISCREPANCY DISCOVERED DURING THE SURVEY OPERATION CANNOT BE CO NSIDERED IN BLOCK PROCEEDINGS AND FURTHER THAT AVERAGE RATE OF LIMEST ONE HAS BEEN TAKEN WRONGLY BY THE OFFICERS. THE AO REJECTED THIS EXPLA NATION ON THE GROUND THAT STOCK INVENTORY WAS TAKEN BY THE TECHNICAL PERSONS OF THE ASSESSEE THEIR STATEMENTS WERE RECORDED WHICH DID NOT SUPPORT THE CONTENTION OF THE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 59 ASSESSEE. TOTAL STOCK AS WORKED OUT BY THE ASSESSEE MATCHES WITH THE STOCK TAKEN BY THE OFFICERS. ACCORDINGLY APPLYING A RATE OF RS.115 PER MT AO MADE AN ADDITION OF RS.7 70 960/- IN RESPECT OF 6704 MT OF LIMESTONE. 47. THE LD. CIT(A) CONFIRMED THE ADDITION BY HOLDIN G THAT WORKING SUBMITTED BY THE ASSESSEE ABOUT TOTAL STOCK DURING THE COURSE OF ASSESSMENT PROCEEDING IS ALMOST NEARER TO THE STOCK VERIFICATION MADE AT THE TIME OF SURVEY. 48. BEFORE US LD. AR FOR THE ASSESSEE RAISED THE S AME ARGUMENT AS WERE TAKEN BEFORE THE AO. THE MAIN CONTENTION WAS THAT D ISCREPANCY FOUND DURING THE COURSE OF SURVEY CANNOT BE CONSIDERED DURING BL OCK ASSESSMENT PROCEEDINGS. IN OUR CONSIDERED VIEW ONCE VARIOUS DO CUMENTS ARE FOUND DURING THE COURSE OF SEARCH INDICATING UNACCOUNTED TRANSAC TIONS THEN SURVEY CARRIED OUT AT THE BUSINESS PREMISES WOULD BE A CONSEQUENTI AL INVESTIGATION AND THEREFORE MATERIAL COVERED DURING THE COURSE OF SU RVEY WOULD FORM PART OF BLOCK ASSESSMENT PROCEEDING. THERE IS NO SATISFACTORY EXPLANATION TO THE DIFFERE NCE THEREFORE WE CONFIRM THIS ADDITION. 49. THE NEXT GROUND (GROUND NO.8) RELATES TO CONFIR MATION OF ADDITION OF RS.2 39 475/- AS UNDISCLOSED INCOME ON ACCOUNT OF U NEXPLAINED CASH.EXPENSES INCURRED OUT OF UNDISCLOSED INCOME. 50. DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF THE CASHIER OF THE COMPANY SHRI MANILAL PATEL A FILE MARKED AS AN NEXURE-A2 RECORDED IN PANCHNAMA DATED 27..9.2001 WAS FOUND. PAGES 13 TO 1 9 OF THIS FILE CONTAINED LOOSE PAPERS SHOWING NAMES OF MAHENDRA FADIA AMBUB HAI M. PATEL AND OTHER ASSOCIATE PERSONS AND EMPLOYEES OF THE ASSESS EE COMPANY. THESE SLIPS CONTAINED DATE 1.8.2001. DURING THE COURSE OF STATEMENT RECORDED UNDER SECTION 131 SHRI MANIBHAI B. PATEL SUBMITTED THAT H E HAS WRITTEN THESE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 60 DOCUMENTS AND HE WAS ALSO RESPONSIBLE FOR WRITING D AILY CASH BOOK OF THE ASSESSEE COMPANY. THESE WERE ADVANCES GIVEN BY HIM ON BEHALF OF THE ASSESSEE COMPANY FOR CASH EXPENSES TO BE INCURRED B Y THE EMPLOYEES. ASSESSEE COMPANY EXPLAINED THAT THESE SLIPS DID NOT PERTAIN TO ACTUAL EXPENSES BUT THEY MUST HAVE BEEN PREPARED FOR REMEM BRANCE BY THE CASHIER. THUS WHERE ADVANCES GIVEN BY THE CASHIER IS NOT ACT UALLY INCURRED IT IS GIVEN BACK TO THE CASHIER AND NO ENTRY IS MADE IN THE REC ORD AND NO VOUCHERS ETC. ARE PREPARED. THE AO REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT CASHIER HAS ADMITTED IN HIS STATEMENT THAT THE SE SLIPS PERTAINED TO ASSESSEE COMPANY THESE SLIPS CARRY THE DATE WHICH FALL IN THE BLOCK PERIOD THERE ARE CERTAIN EXPENSES RECORDED IN THE SEIZED D OCUMENT WHICH ARE NOT REFLECTED IN THE BOOKS. RECONCILIATION FURNISHED BY THE ASSESSEE COMPANY SHOWED THAT A SUM OF RS.2 39 475/- WAS NOT ACTUALLY RECORDED IN THE BOOKS. THUS IT WAS TREATED AS UNEXPLAINED EXPENDITURE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 51. THE LD. CIT(A) CONFIRMED THE ADDITION FOR THE S AME REASON. HE FURTHER OBSERVED THAT ASSESSEE COMPANY WAS NOT ABLE TO EXPL AIN WHY THESE SLIPS REMAINED WITH THE CASHIER FOR SUCH A LONG TIME AND THESE SLIPS WERE NOT SATISFACTORY EXPLAINED BY THE ASSESSEE COMPANY. 52. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ADDITION HAVING NEXUS WITH THE EXPENSES WITH THE ASSESSEE COMPANY IS ESTABLISHED. THE CASHI ER HAS STATED THAT THEY PERTAINED TO ASSESSEE COMPANY. TOTAL AMOUNT FOR WHI CH SLIPS WERE FOUND WAS RS.5 22 440/- OUT OF WHICH ONLY A SUM OF RS.2 39 47 0/- REMAINED UNEXPLAINED. NATURE AND CHARACTER OF ALL THE TRANSACTIONS RECORD ED IN THE SLIPS REMAINED THE SAME. THEY WERE EXPENSES INCURRED BY THE CASHIER FO R THE ASSESSEE COMPANY PART OF WHICH WAS SATISFACTORILY EXPLAINED . THEREFORE BALANCE WAS RIGHTLY HELD AS UNEXPLAINED. ACCORDINGLY THIS GROUN D OF ASSESSEE IS ALSO REJECTED. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 61 53. GROUND NO.9 RELATES TO ADDITION OF RS.42 000/- BEING MISCELLANEOUS NOTINGS IN THE DIARY OF MR. J.O. SHAH. DURING THE C OURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF PURCHASE MANAGER OF THE COM PANY ONE DIARY WAS SEIZED AS ANNEXURE-A18 TO THE PANCHNAMA DATED 27.9. 2001 ON PAGE 269 OF ANNEXURE A-18. THE AO FOUND FOLLOWING NOTES :- ON PAGE NO.269 ONE VISITING CARD OF GAYATRI BUILDI NG MATERIAL SUPPLIERS IS STAPLED. THE MATTER WRITTEN ON THE REVERSE OF THE C ARD IS AS UNDER :- CARD : SHRI J.O. SHAH SAHEB. DT.13.6.2000 AS PER THE TALK PLEASE PAY TO THE BEARER BHARATBHAI RECEIVED RS.8 SD/- SIMILARLY ON PAGE NO.270 VISITING CARDS OF GAYATRI BUILDING MATERIAL SUPPLIERS ARE STAPLED ONE IS DTD.3.6.2000 THE MATTER WRITTE N ON THE REVERSE OF THE CARD IS AS UNDER : 1 ST CARD: SHRI J.O. SHAH SAHEB. DT 3.6.2000 AS PER THE TELEPHONIC TALK PLEASE PAY THE BEARER S HRI BHARATBHAI JITUBHAI. RECEIVED RS.7.00 LAKHS SD/- 3.6.2000 IIND CARD : SHRI J.O. SHAH SAHEB. DT.25.5.20 00 AS PER THE TALK PLEASE PAY TO THE BEARER BHARATBHAI JITUBHAI RECEIVED RS.25 SD/- 25.5.2000 IIIRD CARD: SHRI J.O. SHAH SAHEB DT.1.6.2000 AS PER THE TALK PLEASE PAY TO THE BEARER BHARATBHAI RECEIVED RS.18.00 LAKHS SD/- 54. DURING THE COURSE OF SEARCH STATEMENT OF SHRI J.O. SHAH WAS RECORDED UNDER SECTION 131 WHO ADMITTED THAT ABOVE NOTINGS R EPRESENT UNACCOUNTED PAYMENTS. HE FURTHER EXPLAINED THAT WHEREVER NOTING S ARE WITH DECIMAL POINT IT(SS) NO.98-50/AHD/05 NIRMA LTD. 62 THEY REPRESENT LAKH AND WHEREVER DOTS ARE NOT SHOWN PAYMENT REPRESENTS IN THOUSAND. BEFORE THE AO SHRI J.O. SHAH EXPLAINED AB OVE TRANSACTIONS AS UNDER :- A. THE TRANSACTIONS NOTED ON THE VISITING CARDS PE RTAINED TO A PROPOSED LAND DEAL WITH SHRI JITUBHAI PATEL OF GAYATRI MATERIAL S UPPLIERS AND THE PAYMENTS OF RS.25 33 000 WERE MADE AS ADVANCES. AS PER SHRI SHA H THESE PAYMENTS HAVE NOW BEEN INCORPORATED IN THE BOOKS OF ACCOUNTS PREPARED BY HIM FOR THE BLOCK PERIOD. B. THE TRANSACTIONS NOTED AGAINST THE NAME AMAR SHA H PERTAINED TO A PROPOSED DEAL FOR FLAT PAYMENT OF RS.13 50 000/- WE RE MADE AS ADVANCES. AS PER SHRI SHAH THESE PAYMENTS HAVE NOW BEEN INCORPOR ATED IN THE BOOKS OF ACCOUNTS PREPARED BY HIM FOR THE BLOCK PERIOD. C. OTHER MISCELLANEOUS NOTINGS PERTAINED TO ADVANCE S OF RS.25 000/- AND RS.17 000 GIVEN TO VARIOUS PERSONS. THE AO TREATED THE NOTINGS MADE BY SHRI J.O. SHAH A S BELONGING TO ASSESSEE COMPANY AND SUM OF RS.25 33 000/- AS EXPENDITURE IN CURRED ON BEHALF OF ASSESSEE COMPANY. HIS CONCLUSION IS BASED ON FOLLOW ING REASONINGS:- A) SHRI J.O. SHAH IS THE PURCHASE MANAGER OF NIRMA LTD. DEALING WITH THE PURCHASES OF CEMENT. B) GAYATRI BUILDING MATERIAL SUPPLIERS IS ONE OF TH E REGULAR SUPPLIERS THROUGH WHOM NIRMA LTD. THE ASSESSEE COMPANY HAS E FFECTED REGULAR PURCHASES OF CEMENT OF GUJARAT SIDDHI CEMENTS LTD. C) IN THE SEIZED DIARY PRIMARILY NOTINGS HAVE BEEN MADE REGARDING THE DUTIES OF SHRI J.O. SHAH AS PURCHASE MANAGER. BUT F OR THESE CLAIMED NOTINGS ON PAGE NO.269 & 270 NO WORTHWHILE FINANCIAL TRANSA CTIONS PERTAINING TO JO SHAH IND. ARE NOTED. D) SHRI JO SHAH IN HIS STATEMENT DATED 21.8.2003 HA S ACCEPTED THAT THE DIARY SEIZED FROM HIS RESIDENCE WAS REGULARLY MAINT AINED BY HIM AT NIRMA HOUSE THE OFFICE OF THE ASSESSEE COMPANY IN THE CO URSE OF HIS DUTIES AS A PURCHASE MANAGER. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 63 E) THOUGH THE TRANSACTION NOTED ON SEIZED VISITING CARDS HAVE BEEN CLAIMED TO REFLECT PERSONAL TRANSACTION OF SHRI JO SHAH. DURING ALL OF THE MORE THAN 12 YEARS OF ASSOCIATION OF SHRI SHAH AND SHRI JITUBHAI PATEL NO OTHER PERSONAL TRANSACTIONS COULD BE EVIDENCED BY EITHER OF THEM. F) THOUGH THE TRANSACTIONS AS NARRATED ABOVE HAVE B EEN OWNED UP BY SHRI JO SHAH HIS EXPLANATION IN THIS REGARD IS NOT BACKE D BY ANY CONTEMPORARY DOCUMENTARY EVIDENCE AS BOTH THESE SO CALLED PROPOS ED DEALS ARE NOW BEING CONVENIENTLY EXPLAINED AS DEALS THAT DID NOT GO THR OUGH. G) REGARDING PAYMENTS OF RS. 13.5 LACS NOTED IN THE MEMORANDUM PART OF PAGE-270 THE PERSON AMAR AGAINST WHOM THESE PAYMENT S ARE REFLECTED HAS BEEN IDENTIFIED BY SHRI J.O.SHAH AS AMAR H. SHAH HI S ASSISTANT EMPLOYED WITH THE ASSESSEE COMPANY. H) ALL THE PAYMENTS NOTED ON PAGES 269 & 270 WERE M ADE OVER A SMALL PERIOD OF 20 DAYS - THESE PAYMENTS OF OVER RS. 38 L ACS WERE AS PER SHRI J.O. SHAH MADE AS ADVANCES FOR- LAND AND FLAT PURCHASE. HOWEVER NO MOU OR ANY DRAFT AGREEMENT FOR THE SAME COULD FOE FURNISHED DU RING ASSESSMENT PROCEEDINGS. THUS IT IS NOT ESTABLISHED THAT ANY SUCH LAND/FLAT PURCHASES WERE EVEN NEGOTIATED BY HIM IN HIS PERSONAL CAPACITY. HE NCE IN LIGHT OF THE ABOVE MENTIONED CIRCUMSTANTIAL EVIDENCES THESE PAYMENTS A RE HELD TO BE PAYMENTS MADE BY ASSESSEE COMPANY NIRMA LTD. I) FURTHER SHRI .SHAH'S EXPLANATION THAT T HESE PAYMENTS WERE HIS PERSONAL PAYMENTS IS NOT ACCEPTABLE AS SUCH PAY MENTS WHICH ARE NOT ROUTINE IN NATURE WOULD NOT HAVE BEEN PUT THROUGH A BEARER. AS FROM THE PERUSAL OF THE SEIZED NOTINGS . IT IS CLEAR THAT TH ESE PAYMENTS WERE PUT THROUGH SHRI BHARAT. THIS ALSO INDICATES THAT THESE PAYMENT S PERTAINED TO ROUTINE TRANSACTIONS BETWEEN SHRI SHAHS EMPLOYER NIRMA LTD . AND THEIR REGULAR CEMENT SUPPLIER M/S. GAYATRI BUILDING MATERIALS. J) SHRI SHAH'S CONTENTION THAT NO ACTUAL DEALS MATE RIALIZED AND THE ADVANCES WERE RETURNED IS ALSO NOT ACCEPTABLE AS HA D SUCH REVERSAL/RETURN TAKEN PLACE THE ACKNOWLEDGEMENT SLIPS IN THE FORM O F VISITING CARDS SEIZED IN ANNEX A-18 WOULD HAVE BEEN TAKEN BACK BY THE PERSO NS RETURNING THE MONEY. BUT EVEN AFTER LAPSE OF MORE THAN A YEAR THE SLIPS WERE SEIZED AS PART OF ANNEX. A-18. HENCE IT IS CLEAR THAT BY TAKING THIS ARGUMENT THAT THESE PAYMENTS WERE MADE BY THE ASSESSES AND THE SAME WER E RETURNED BACK WITHIN A PERIOD OF 15 DAYS SHRI SHAH HAS TRIED TO EXPLAIN THESE UNACCOUNTED PAYMENTS OF NIRMA LTD. ACCORDINGLY THE AO WORKED OUT TOTAL PAYMENTS ON THE BASIS OF ABOVE DOCUMENT AT RS.38 83 000/- AND RS.42 000/- (AS PER CLAUSE (C) ABOVE). IT(SS) NO.98-50/AHD/05 NIRMA LTD. 64 55. THE LD. CIT(A) DELETED THE ADDITION OF RS.38 83 000/- AND CONFIRMED THE ADDITION OF RS.42 000/-. WHILE DELETING THE ADDITIO N OF RS.38 83 000/- THE LD. CIT(A) RELIED ON HIS ORDER IN THE CASE OF SHRI JO S HAH WHERE THESE PAYMENTS WERE TREATED AS INCOME OF SHRI JO SHAH HIMSELF. IN THIS REGARD LD. CIT(A) HAS MADE ELABORATE DISCUSSION ON PAGE 38 40 OF HIS OR DER. THE MAIN REASONS GIVEN BY HIM ARE THAT AO HAS NOT BROUGHT OUT ANY MA TERIAL TO SHOW THAT TRANSACTIONS PERTAINED TO NIRMA LTD. WHEREAS SHRI J O SHAH HAS CLEARLY ADMITTED THAT THIS INCOME IS HIS UNDISCLOSED INCOME WHICH WERE DECLARED IN THE BLOCK PERIOD. SHRI JO SHAH HAS STATED THAT TRAN SACTIONS NOTED IN THE SEIZED DOCUMENT PERTAINED TO A PROPOSED PURCHASES LAND FRO M SHRI JITU PATEL OF GAYATRI BUILDING MATERIAL SUPPLIERS TO WHOM PAYMENT OF RS.25 33 000/- WAS MADE AND FURTHER TRANSACTION OF RS.13 10 000/- PERT AINED TO A PROPOSED DEAL FOR PURCHASE OF FLAT FOR WHICH ADVANCE WAS GIVEN. S INCE THEY WERE HIS UNACCOUNTED INCOME IT WAS SO DECLARED IN THE BLOCK RETURN. ACCEPTING THE ABOVE FINDING THE LD. CIT(A) DELETED THE ADDITION. HOWEVER HE CONFIRMED THE ADDITION OF RS.42 000/- ON THE GROUND THAT THIS WAS NOT SATISFACTORILY EXPLAINED. 56. WE HAVE HEARD THE PARTIES. ONCE THE MAJOR TRANS ACTION OF RS.38 83 000/- WAS TREATED AS OF SHRI JO SHAH THEN OTHER TRANSACTION FOUND ON THE SAME DOCUMENT CANNOT BE TREATED AS BELONGING TO ASSESSEE COMPANY. IF IT IS UNEXPLAINED THEN ADDITION IS CALLED FOR IN THE HANDS OF JO SHAH ONLY. ACCORDINGLY WE DELETE THE ADDITION OF RS.42 000/- CONFIRMED BY LD. CIT(A). 57. GROUND NO.10 RELATES TO ADDITION OF RS.3 56 847 /- ON LOSS IN SHARES TRANSACTION OF (I) BIOCHEM SYNERGY LTD. & (II) NEPC TEXTILES LTD. 58. THE AO OBSERVED THAT DURING THE COURSE OF SEARC H DOCUMENTS WERE FOUND SHOWING BOOKING OF CONTRACT LOSSES THROUGH TR ANSACTIONS BETWEEN THE ASSOCIATE ENTITIES WITHIN THE GROUP. THE LOSSES WER E BOOKED AND CLAIMED IN THE RETURN OF INCOME FILED DURING THE BLOCK PERIOD. HOWEVER NO DELIVERY OF IT(SS) NO.98-50/AHD/05 NIRMA LTD. 65 PHYSICAL SHARES WAS EFFECTED EVEN AFTER MORE THAN O NE YEAR OF BOOKING OF LOSSES. AS PER ANNEXURE-A SEIZED FROM THE PREMISES OF NIRMA MANAGEMENT SERVICES (P) LTD. IT WAS GATHERED THAT LOSSES WERE BOOKED WITHOUT ACTUAL TRANSFER OF SHARES AND DEBENTURES BETWEEN THE INDIV IDUALS AND ASSOCIATE ENTITIES OF THE NIRMA GROUP. THE AO IN THIS REGARD OBSERVED AS UNDER :- 12.2 EVIDENCES REGARDING COMMON CONTROL OF ASSESSE E COMPANYS EMPLOYEES/ADVISORS OVER ALL TRANSACTIONS OF ASSOCIA TE ENTITIES HAS ALREADY BEEN ELABORATELY DISCUSSED IN SECTION 6 IN THIS ORD ER. SPECIFIC EVIDENCE OF SUCH COMMON CONTROL OVER SHARE TRANSACTIONS BETWEEN ASSOCIATE ENTITIES WAS ALSO FOUND DURING SEARCH AND POST SEARCH ENQUIRIES. MOST OF THESE TRANSACTIONS IN ILLIQUID SHARES WERE EFFECTED T HROUGH SANJANA CONSULTANCY SERVICES. IN THIS DIFFERENT INDIVIDUALS AND ASSOCIA TE ENTITIES SOLD OF THESE SHARES IN F.Y. 1999-00 2000-01 & 2001-02 PR IMARILY TO THE ASSOCIATE ENTITY JETHIBEN K. PATEL DISCRETIONARY FAMILY TR UST. THE LOSSES ON SUCH SHARE TRANSACTIONS WERE BOOKED IN THE RETURNS OF RE SPECTIVE A.YS. SAN.LANA CONSULTANCY SERVICES IS A PROPRIETARY CONCERN O F MS ULKA S. MEHTA. AS PART OF POST SEARCH INQUIRY SURVEY U/S. 133A WAS C ONDUCTED ON SANJANA CONSULTANCY SERVICES. IN THIS STATEMENT OF MS ULKA MEHTA WAS ALSO RECORDED. THE RELEVANT EXTRACTS OF THE SAME ARE RE-PRODUCED BELOW:- Q-5 WHO GIVES YOU INSTRUCTIONS REGA RDING SALE AND PURCHASE OF SHARES DONE BY ENTITIES OF NIRMA GROUP. FURTHER WHO COMPLETES THE PAYMENTS FOR THESE SALES AND PURCHASES? ANS.. THE TRANSACTIONS. OF THE ABOVE GROUP OF ENTITIES ARE DONE THROUGH CHEQUE. THE INFORMATION FOR THE TRANSACTIONS AND TH E CHEQUE DETAILS ARE GIVEN BY SHRI RAHUL DEVI WHOSE OFFICE IS IN KASHMIRA CHAM BER ASHRAM ROAD. AHMEDABAD. Q-10 PLEASE ESTABLISH WHETHER PHYSICAL DELIVERY OF SHARES TRANSACTED THROUGH YOU BY JETHIBEN K. PATEL AND JATHIBEN K. PATEL DISC RETIONARY FAMILY TRUST WAS EFFECTED. ANS. NO FURTHER I SAY THAT THESE TRANSACTIONS OF E NTITIES OF NIRMA GROUP HAVE BEEN EFFECTED 1 THROUGH ME AND FOR ANY TRANSACTION PHYSICAL DELIVE RY HAS NOT BEEN TAKEN OR GIVEN (FREE TRANSLATION OF STATEMENT RECORDED IN GUJARATI) 12.3 THE ABOVE STATEMENT ONCE AGAIN ESTABLISHES THE ROLE OF SHRI RAHUL DEVI EMPLOYEE OF THE COMPANY NIRMA LTD. IN THE SUCH SHARE TRANSACTIONS OF ASSOCIATE ENTITIES OF THE NLRMA GROUP. ON THE BASIS OF THESE EVIDENCES THE ASSESSEE COMPANY WAS ASKED TO FURNISH THE PROOF OF HAVING EFFECTED R*L I VERY BEFORE THE DATE OF SEARCH OF ALL SHARES SOLD IN PH YSICAL FORM. ICING THE COURSE OF THIS VERIFICATION IT WAS ASCERTAINED THAT THE I N ITS RETURN OF INCOME HAS CLAIMED LOSS IN THE RETURN OF INCOME FOR A.Y. 2001-02 ON SHARES TRANSACTED WITH ASSOCIATE ENTITIES. HOWE VER EVEN AFTER LAPSE OF IT(SS) NO.98-50/AHD/05 NIRMA LTD. 66 MORE THAN 5 MONTHS THEREAFTER I.E. TILL THE DATA OF SEARCH NO PROOF OF HAVING EFFECTED DELIVERY OF TH ESE SHARES. COULD BE SUBMITTED BY THE ASSESSEE COMPANY DURING ASSESSMENT PROCEEDINGS. ON BEING ASKED TO FURNISH INDEPENDENTLY VER IFIABLE PROOF OF THE DELIVERY OF THESE CHARES THE ASSESSES COMPANY HAS CONTENDED THAT RECEIPT OF PAYMENT SHOULD BE TAKEN AS PROOF OF DELIVERY. FURTHER THE ASSESSEE COMPANY HAS DURI NG WHOLE OF THE ASSESSMENT PROCEEDINGS ONLY PRODUCED SELF SERVING LETTERS FROM THE ASSOCIATE ENTITLES WHICH HAD BOUGHT THESE SHARES CONFIRMING DELIVERY OF THE SAME- HOWEVER IT IS PER TINENT TO NOTE HERE THAT EVEN AFTER LAPSE OF SIX MONTHS AFTER THE SUPPOSED SALE NO TRANSFER OF THESE SHARES *AS AFFEC TED- THE FOLLOWING LOSSES FOR WHICH NO INDEPENDENTLY VERIFIABLE PROOF O F HAVING EFFECTED DELIVERY BEFORE 27.9.20O1 HAS BEEN FURNISHED BY THE ASSESSEE COMPANY ARE DISALLOWED CHARGED TO INCOME TAX AS BE UNDISCLOSED INCOME OF THE BLOCK PERIOD. I) SHARES OF BIOCHEM SYNERGY LTD. WHICH AS PER SUBMISSION DATED 29-10-2003 HAS BEEN SOLD TO JETIHIBEN K. PATEL DISCRETIONARY FAMILY TRUST IN PHYSICAL FORM. NO PROOF OF DEL IVERY BEFORE DATE OF SEARCH 27-9-2001 FURNISHED. LOSS OF RS. 3 01 954 IS THUS DISALLOWED. (II) SHARES OF NEPC TEXTILES LTD. WHICH AS PER SUBMISSION DATED 29-10-2003 HAS BEEN SOLD TO JETHIBEN K- PATEL DISCR ETIONARY FAMILY TRUST IN PHYSICAL FORM. HO PROOF OF DELIVERY BEFORE DATA OF SEARCH 27-9-2001 FURNISHED. LOSS OF R S .. 54 893 IS THUS DISALLOWED. THUS AO DISALLOWED LOSSES OF RS.3 56 847/- IN RESPE CT OF BIOCHEM SYNERGY LTD. AND NEPC TEXTILES LTD. 59. THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO FO R THE REASONS THAT SUCH LOSSES WERE BOOKED WITHOUT PHYSICAL TRANSFER OF SHA RES. 60. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE HAD ARISEN BEFORE THE TRIBUNA L IN THE CASE OF NIMA SPECIFIC FAMILY TRUST & OTHERS IN IT(SS)A NOS.65/AH D/2006 AS DESCRIBED IN PAGES 48 TO 62 VIDE PARA 32 OF TRIBUNALS ORDER DAT ED 28.2.2006 AND ALSO IN THE CASE OF NIRMA INDUSTRIES LTD. (IT(SS)A NO.65/AH D/2006 PAGES 27 TO 37 THEREON VIDE TRIBUNALS ORDER DATED 30.11.2009. THE TRIBUNAL FOLLOWING ITS ORDER IN NIMA SPECIFIC FAMILY TRUST & OTHERS (SUPRA ) HELD THAT LOSSES CLAIMED IT(SS) NO.98-50/AHD/05 NIRMA LTD. 67 BY THE ASSESSEE ARE GENUINE. IN THIS REGARD WE REFE R TO PARA 37 TO 42 FROM THE ORDER IN THE CASE OF NIMA SPECIFIC FAMILY TRUST & O THERS (SUPRA) AS UNDER :- 37. NEXT GROUND IN SOME OF THE ASSESSES IS AS UNDE R: LD. CIT(A) HAS ERRED IN REJECTING THE OBJECTION OF THE FOLLOWING ADDITIONS IN RESPECT OF LOSSES INCURRED ON SHARE TRANSACTIONS WH ICH WERE DISALLOWED AS CONTRIVED LOSSES BOOKED THROUGH INTER ENTITY TRANSA CTION. 64/AHD/2005 : RS. 37 40 522/- 65/AHD/2005 : RS. 7 32 087/- 66/AHD/2005 : RS. 32 10 733/- 67/AHD/2005 : RS. 9 24 036/- 30/AHD/2005 : RS. 8 17 080/- 21/AHD/2005 : RS. 20 85 763/- 22/AHD/2005 : RS.2 97 27 995/- 23/AHD/2005 : RS. 13 95 701/- 27/AHD/2005 : RS. 57 444/- 28/AHD/2005 : RS. 25 18 998/- 38. FACTS IN THIS BEHALF ARE MENTIONED BY AO IN THE CASE OF NIRCHEM ASSOCIATES IT(SS) NO.28/AHD/2005. ADDITIONS HAVE BEEN MADE BY FOLLOWING OBSERVATIONS: 6.1 AS MENTIONED ABOVE DURING THE COURSE OF SEARCH IN THE NIRMA GROUP OF CASES SEIZED DOCUMENTS WERE FOUND WHICH EVIDENCE CO MMON CONTROL OVER TRANSACTIONS OF THE ENTITIES OF THE GROUP. IN THIS EVIDENCES OF BOOKING OF CONTRIVED LOSSES THROUGH TRANSACTIONS BETWEEN TWO E NTITIES OF THE GROUP WERE ALSO FOUND. AS PER THESE SEIZED EVIDENCES FOR ALL THESE TRANSACTIONS SHRI RAHUL DEVI EXERCISED CONTROL OVER BOTH THE SELLING AND BUYING ENTITY. THESE LOSSES WERE BOOKED AND CLAIMED IN THE RETURNS OF IN COME FILED DURING THE BLOCK PERIOD. HOWEVER NO DELIVERY OF THESE PHYSICAL SHA RES WAS EFFECTED TILL THE DATE OF SEARCH 27-9-2001 I.E. AFTER MORE THAN A YEA R OF THE BOOKING OF THE LOSSES. IN THIS SPECIFIC REFERENCE IS MADE TO ANNE X.A SEIZED FROM THE PREMISES OF NIRMA MANAGEMENT SERVICES PVT.LTD. ON 2 0-11-2001. VIDE THIS SEIZURE SHARES AND DEBENTURES WERE SEIZED AS DOCUM ENTARY EVIDENCES ESTABLISHING THAT WITHOUT ACTUAL TRANSFER OF SHARES AND DEBENTURES INDIVIDUALS AND ASSOCIATE ENTITIES OF NIRMA GROUP OF CASES HAVE CLAIMED CAPITAL LOSSES IN THEIR RETURNS. IN THIS FROM THE PERUSAL OF THESE S HARES IT IS SEEN THAT EVEN AFTER LAPSE OF TWO YEARS FROM THE DATE OF BOOKING OF THES E LOSSES NO ENTRIES WERE MADE IN THE MEMORANDUM OF TRANSFER. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 68 6.2 SPECIFIC REFERENCE IN THIS REGARD IS ALSO MADE TO THE INVENTORY OF SHARES DRAWN AT THE OFFICE OF THE ASSOCIATE COMPANY NIRMA MANAGEMENT SERVICES P.LTD. ON 19-10-2001 WHERE AT S R.NO.20 SHARES OF SHREEJI DYECHEM LTD. ARE NOTED. THESE SHARES WE RE SOLD IN PHYSICAL FORM ON 24-10-2000 BY THE ASSESSEE TO ANOTHER ASSOC IATE ENTITY JETHIBEN K. PATEL DISCRETIONARY FAMILY TRUST. HOWE VER IN THE INVENTORY DATED 19.10.2001 THESE SHARES ARE INVENTORISED IN T HE NAME OF SHRI AMBUBHAI M. PATEL AND SHRI SANJAY P.SHAH. DURING T HE BLOCK PERIOD THE ASSESSEE AOP HAD THREE MEMBERS VIZ. NIMA SPECIF IC FAMILY TRUST NIRCHEM SOAPS & DETERGENTS PVT. LTD. AND SHIVA SPEC IFIC FAMILY TRUST. SHRI PATEL WAS A DIRECTOR OF NIRCHEM SOAPS & DETERG ENTS PVT. LTD. WHICH IN TURN IS A MEMBER OF NIRCHEM ASSOCIATES. S IMILARLY SHRI SHAH WAS A TRUSTEE OF SHIVA SPECIFIC FAMILY TRUST WHICH IS ANOTHER MEMBER OF THE ASSESSEE AOP. SINCE AOP COULD HOLD SHARES I N ITS OWN NAME THEREFORE THE SHARES WERE HELD IN THE NAME OF MEMBE RS. AS A PIECE OF EVIDENCE A COPY OF ONE SHARE OF SHREEJI DYE CHEM LT D. FROM THIS LOT WAS SEIZED AS PAGE-23 OF ANNEXURE-A TO THE PANCHNAM A DATED 20.11.2001 DRAWN AT THE OFFICE PREMISES OF NIRMA MA NAGEMENT SERVICES P. LTD. FROM THIS IT IS CATEGORICALLY ES TABLISHED THAT THESE SHARES OF JAYANTI BUSINESS MACHINES LTD. SOLD BY TH E ASSESSEE AND TO ASSOCIATE ENTITY JETHIBEN K. PATEL DISCRETIONARY FA MILY TRUST ON 13-3- 2000 IN PHYSICAL FORM WERE TILL 27-9-2001 NEITHER TRANSFERRED NOR DELIVERED TO THE BUYING ENTITY. SIMILAR EVIDENCES REGARDING SHARES OF SIRIS LTD. STERLING QUANTITY & FINANCE LTD. WERE A LSO SEIZED ON PAGE-31 AND PAGE 32 OF ANNEX.A. RESPECTIVELY. 6.3 THE DETAILED EVIDENCES WITH REGARD TO THE CONTR IVED NATURE OF SUCH LOSSES HAVE BEEN ELABORATELY DISCUSSED IN SECT ION 12 OF THE BLOCK ASSESSMENT OF NIRMA LTD. RELYING ON THE SAME VIDE ORDER SHEET NOTING DATED 2-7-2004 THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE LOSSES CLAIMED IN THE RETURNS OF INCOME FOR A.YS.20 00-01 AND 2001-02 IN SHARE TRANSACTIONS DONE WITH OTHER GROUP ENTITIE S WHERE NO CONTEMPORARY VERIFIABLE EVIDENCE OF HAVING EFFECTED DELIVERY TILL DATE OF SEARCH I.E. 27.9.2001 HAS BEEN FURNISHED BE NOT DI SALLOWED. THE REPLY OF THE ASSESSEE HAS BEEN FILED VIDE SUBMISSION DATE D 5-7-2000. AS PER THIS REPLY THE ASSESSEE HAS RELIED UPON THE ACKNOWL EDGMENT OF DELIVERY GIVEN BY THE BUYER I.E. JETHIBEN K. PATEL DISC.FAMI LY TRUST DATED 30-3- 2000. THIS EVIDENCE SUBMITTED BY THE ASSESSEE IS U NACCEPTABLE AS INSPITE OF SPECIFIC OPPORTUNITY TO SUBMIT INDEPENDE NTLY VERIFIABLE CONTEMPORARY PROOF OF DELIVERY BEFORE THE DATE OF S EARCH NO SUCH PROOF HAS BEEN FILED. IN VIEW OF THIS THE FOLLOWING LOS SES ARE DISALLOWED. ACCORDINGLY IN RESPECT OF VARIOUS SHARE TRANSACTION S THE AMOUNTS HAVE BEEN DISALLOWED IN RESPECTIVE ASSESSES. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 69 39. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT NIRMA MANAGEMENT SERVICES PVT.LTD. (:NMSPL FOR SHORT) IS A COMPANY ESTABLISHED FOR SALE AND PURCHASE OF SHARE DEPOSITORY AND PORTFOLIO MANAGEM ENT OF SHARES OF VARIOUS GROUPS CONCERNS. THIS NMSPL IS ALSO PROVIDING SERV ICES OF SELLING PURCHASING TRANSFERRING AND ARRANGING OF SHARES AN D ALL OTHER ACTIVITIES IN THIS BEHALF. IT CHARGES FOR RENDERING OF SUCH SERVICES. LEARNED COUNSEL FURTHER CONTENDS AS UNDER: THERE IS NOTHING LIKE OTHER ENTITIES OF NIRMA GROU P NOR THERE IS ANY ENTITY WHICH CAN BE SAID TO BE NIRMA GROUP. (I) THE ASSESSEE HAS DULY `TRANSFERRED THE SHARES SOLD BY HIM. ALL WHAT THAT IS NECESSARY TO CONSIDER THE `TRANSFER AS VALID TRANSFER WERE MET WITH I.E. A) THE COPY OF SALE BILL HAS BEEN RECEIVED FROM THE BROKER B) PAYMENT HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQ UE MUCH BEFORE THE DATE OF SEARCH C) THE DELIVERY OF SHARES HAVE BEEN GIVEN TO THE B UYER AND D) RIGHT IN THE PROPERTY WAS ALSO TRANSFERRED. THE TRANSACTION HAS BEEN HELD TO BE NON GENUINE ONL Y BECAUSE SOME OF THE SHARES FOUND DURING THE COURSE OF SEARCH PROCEE DINGS WERE NOT FOUND RECORDED AT THE BACK OF THE CERTIFICATE THAT THEY ARE MUTATED IN THE NAME OF TRANSFEREE. EVEN IT IS ASSUMED THAT AS SUMING THAT THERE IS NO TRANSFER OF SHARES WITHIN THE MEANING OF THE C OMPANIES ACT EVEN THEN THERE WAS A TRANSFER WITHIN THE MEANING OF T HE ACT. AS THE ASSESSEE UNDISPUTEDLY RECEIVED THE FULL CONSIDERA TION OF SHARES BEFORE THE END OF THE YEAR IT RESULTED INTO THE EXTINGUIS HMENT OF THE ASSESSEES RIGHT/S INTO SHARES HOWRAH TRADING CO.LT D. CIT 36 ITR 215 (SC) (II) MERELY BECAUSE THE TRANSFEREES DID NOT SUBMIT THE SHARES FOR REGISTRATION OF TRANSFER AND THE TRANSFER WAS NOT R ECORDED IMMEDIATELY IS NO GROUND FOR DISALLOWANCE OF LOSSES ON AN ACTUAL T RANSACTION OF SALE. PURCHASER MAY CHOOSE NOT TO GET THE SHARE IMMEDIAT ELY TRANSFERRED IN HIS NAME FOR VARIETY OF REASONS LIKE - HE MAY TRY TO SELL IN SHORT RUN SO AS TO SAVE TRANS FER DUTY OTHER COSTS AND CONSIDERABLE TIME. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 70 HE MAY HAVE PUT IN BEST OF HIS EFFORTS BUT ON ACCO UNT OF FINANCIAL WEAKNESS COMPANY MAY NOT BE RESPONDING. COULD BE NEGLIGENCE OF THE PERSON. (III) A.O. BRUSHED ASIDE THE BASIC EVIDENCES PRODUC ED BEFORE HIM AND THE BASIC FACT WHICH HAS BEEN AFTER VERIFICATI ON ACCEPTED IN TOTALITY AND NOT CONFRONTED IN ANY MANNER AS PER THE FOLLOWI NG DETAILS. 1. THE COST AND SOURCE OF ACQUISITION OF THE SHARES AND SECURITIES HAS NOT BEEN CHALLENGED. 2. THE PRICE I.E. RATE AND VALUE OF SALE IS NOT DO UBTED. SHARES IN QUESTION ARE LISTED ON STOCK EXCHANGE. SO MARKET P RICE ARE AVAILABLE PUBLICLY AND A.O. MUST HAVE SATISFIED HIM SELF. 3. REALIZATION OF SALE PROCEEDS BY RECEIPT OF CHEQU ES (NORMAL BANKING CHANNEL) OF TOTAL CONSIDERATION NOT DOUBTED . 4. SO THE LOSS WHICH HAS HAPPENED WHICH IS REAL IN NATURE HAS ALSO NOT BEEN DOUBTED. 5. THE APPELLANT IS NO LONGER THE OWNER OF SHARES. BUYERS OF THE SHARES HAVE ACKNOWLEDGED THE RECEIPT OF THE DELIVERY OF SHARES TO THE SELLER REFERRING TO THE NAME OF THE BROKER T HROUGH WHOM THE SHARES WERE PURCHASED. (IV) THE EVIDENCE THAT THE PHYSICAL DELIVERY OF THE SHARES SOLD WERE GIVEN WAS FURTHER EVIDENCED BY THE FACT OF SUBSEQUE NT ACTUAL REGISTRATION OF SHARES IN THE NAME OF THE BUYER OR POSTAL RETURN OF LETTER SENT TO DIFFERENT COMPANIES FOR REGISTRATION OF SHA RES IN THE NAME OF TRANSFEREES OR SEBI COMPLAINTS LODGED OR BY THE INS TANCES OF SALE OF SHARES BY THE PURCHASERS THROUGH THE STOCK EXCHANGE WITHOUT GETTING THE SAME TRANSFERRED IN THEIR NAME ETC. (PAGE 84 & 85 OF THE PB) (V) THE TRANSACTION WAS DULY ACCOUNTED IN THE BOOKS OF ACCOUNTS OF BOTH THE SELLER AND THE BUYER. THE SELLERS RECEIVE D THE INVOICE FROM THE BROKER WHICH HAS BEEN DULY ACCOUNTED PROFIT OR LOS S IN RESPECT OF THE TRANSACTIONS HAVE BEEN DULY DISCLOSED IN RETURN OF INCOME FILED BEFORE THE DATE OF SEARCH AND THE BASIC INFORMATION WAS AV AILABLE ON THE FILE OF INCOME TAX DEPARTMENT AND THE BALANCE COULD HAVE BE EN CALLED FOR AND VERIFIED IN THE COURSE OF ASSESSMENT PROCEEDING S. SO THERE IS NO UNDISCLOSED INCOME WHICH COULD BE MADE PART OF BLO CK ASSESSMENT PROCEEDINGS. THE ONLY SEIZED PAPER RELIED ON IS TH E LIST OF INVENTORY WHICH AGAIN IS ONLY IN THE NAME OF NIRMA MANAGEMENT SERVICES IT(SS) NO.98-50/AHD/05 NIRMA LTD. 71 PVT.LTD. WHICH ACTS AS SERVICE PROVIDER TO BUYER A LSO. THE PURCHASER WHICH HAS PURCHASED THE SHARES HAS REFLECTED THE SH ARES PURCHASED IN ITS BOOKS OF ACCOUNTS WHICH IS EVIDENT FROM THE BA LANCE SHEET OF THE PURCHASER ATTACHED TO ITS RETURN OF INCOME FILED B EFORE THE DATE OF SEARCH. (VI) WITHOUT PREJUDICE IN SOME OF THE CASES NO EV IDENCE WHATSOEVER IS FOUND AT THE TIME OF SEARCH THAT THE SHARES WERE NOT GOT TRANSFERRED IN THE NAME OF THE TRANSFEREE BEFORE TH E DATE OF SEARCH. IN ALL SUCH CASES NO ASSESSMENT CAN BE FRAMED UNDER C H.XIV-B OF THE ACT AT ALL. IN THE PAPER BOOK CONTAINING PAGES A1 TO J19 FOLLOW ING EVIDENCES HAVE BEEN FURNISHED. (A) COPY OF SALE BILLS. FROM THE PERUSAL OF THE BI LL IT IS EVIDENT THAT THE LOSS IS DISALLOWED ONLY IN RESPECT OF FEW OF TH E SCRIPS OUT OF MANY SCRIPS REFERRED IN THE SALES BILL. (B) CONFIRMATION OF THE PURCHASER AS REGARDS TO THE RECEIPT OF PHYSICAL DELIVERY OF SHARES TRANSACTED THROUGH THE BROKER. (C) PROOF OF SHARES BEING TRANSFERRED SUBSEQUENTLY (AFTER SEARCH)/ LODGMENT OF COMPLAINT WITH SEBI FOR NONE TRANSFER. (D) INSTANCES OF SHARES SOLD BY THE PURCHASER THROU GH THE STOCK EXCHANGE WITHOUT GETTING THE SAME TRANSFERRED IN TH EIR NAME. (E) EVIDENCE OF REFLECTION OF PURCHASED SHARES IF SOLD BY PURCHASING ENTITY IN THEIR RETURN OF INCOME. (F) EVIDENCE OF REFLECTION OF PURCHASE OF SHARES IF HELD AS INVESTMENT IN THE BALANCE SHEET OF THE PURCHASING E NTITY ATTACHED TO THE RETURN OF INCOME FILED BEFORE THE DATE OF SEAR CH. (G) EVIDENCE OF SHARES SOLD BY THE APPELLANTS IN TH EIR RETURN OF INCOME. 40. LEARNED DR ON THE OTHER HAND CONTENDS AS UNDER : (I) ALL THE SHARES AND DEBENTURES WERE FOUND AT ONE PLACE I.E. AT THE OFFICE OF NIRMA MANAGEMENT SERVICES PVT.LTD. AT KAS HMIRA CHAMBERS ASHRAM ROAD AHMEDABAD. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 72 (II) ALL THE SHARES FOUND DURING THE COURSE OF SEAR CH AND INVENTORISED (DEPARTMENT PAPER BOOK PAGE NO.29 TO 4 7) WERE NOT TRANSFERRED IN THE NAME OF TRANSFEREE. (III) THE DEPARTMENT HAS NOT MADE ADDITION IN CASES WHERE SHARES WERE NOT FOUND TRANSFERRED IN THE NAME OF BUYER IF SOLD RECENTLY. IT IS ONLY WHERE THE LONGTIME HAD ELAPSED TO THE DA TE OF TRANSACTION AND STILL IF THE SHARES WERE NOT TRANSF ERRED IN THE NAME OF BUYER THE ADDITION IS MADE. (IV) MS.ULKA S.MEHTA THE BROKER HAS MADE A STATEME NT IN THE COURSE OF SURVEY PROCEEDINGS THAT NO PHYSICAL DELIV ERY OF THE SHARES WERE ROUTED THROUGH HER. (V) BUYER AND SELLER HAVE NOT CONTACTED THE BROKER BUT CARRIED OUT THE TRANSACTION DIRECTLY. THE TRANSACTION IS NOT R OUTED THROUGH THE STOCK EXCHANGE. (VI) THE PROOF OF PAYMENT BY CHEQUE IS NOT MATERIAL . (VII) NO PROOF OF PHYSICAL DELIVERY OF SHARES WAS F OUND DURING THE COURSE OF SEARCH. DECISION IN CASE OF UNIQUE INVIN LTD. V/S. ACIT 74 ITD 43 (CAL.) WAS RELIED UPON IN WHICH THE ISSUE OF ALLOWABILITY OF LOSS INCURRED ON DEALING IN SHARES TO/FROM SISTER CONCERNS UNDER THE SAME MANAGEMENT AND CARRYING ON THEIR BUSINESS FROM THE SAME PLACE HAS BEEN DISCUSSED. DECISION IN CASE OF CIT V/S. SHEKHAWATI RAJPUTANA T RADING CO.PVT. LTD. 236 ITR 950 (CAL.) IS ALSO RELIED UPON WHEREIN THE LOSS ON SALE OF SHARES BY THE ASSESSEE COMPANY TO ITS CHAIRMAN WAS HELD TO BE NOT GENUINE. RELIANCE IS ALSO PLACED ON THE DECISION IN CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION V/S. CIT 225 ITR 802 (SC) WHERE IT IS STATED THAT THE LOSS INCURRED IS AN EXPENDITURE AND THEREFORE THE LOSSES FROM THE SHARE TRANSACTIONS WOULD BE COVERED UNDER THE AMENDED DEFINITION OF UNDISCLOSED INCOME U/S.158B(B). LD.D.R. ALSO STATED THAT IN ALTERNATE IF THE TRAN SACTION IS HELD TO BE GENUINE THEN THE SAME MAY BE SET ASIDE TO A.O. FOR VERIFICATION OF THE RATE AT WHICH THE TRANSACTION HAS TAKEN PLACE A S THE ASPECT OF VALUATION HAS NOT BEEN CONSIDERED BY A.O. DURING TH E ASSESSMENT PROCEEDINGS. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 73 41. LEARNED COUNSEL FOR THE ASSESSEE IN REPLY CON TENDS AS UNDER: (I) NIRMA MANAGEMENT SERVICES PVT.LTD. IS ADMITTEDL Y AN ENTITY WHICH IS RENDERING THE SERVICES TO BOTH THE BUYER AND THE SELLER IN RESPECT OF ACCOUNTING INVESTMENT TAXATION AND OTHER RELATED SERVICES. IT IS NOT IN DISPUTE THAT THE SHARES WERE KEPT IN THE CUSTODY OF NIRMA MANAGEMENT SERVICES PVT.LTD. THE ASSESSEE CONTENDS THAT THE SHARES WHICH WERE LYING UN-REGISTERED IN T HE NAME OF BUYER WERE DULY DELIVERED UPON SALE AND TH E TRANSACTION COMPLETED. NIRMA MANAGEMENT SERVICES PVT.LTD WAS IN POSSESSION OF THE SHARES AS AGENT OF THE TRANSFEREE. (II) LD.DRS STATEMENT THAT ALL THE SHARES INVENTOR ISED DURING THE COURSE OF SEARCH WERE NOT TRANSFERRED IN THE NA ME OF TRANSFEREE IS FACTUALLY INCORRECT STATEMENT WHICH I S EVIDENT FROM THE LIST OF SHARES SUBMITTED IN THE DEPARTMENT PAPER BOOK AT PAGE NO.29 TO 47 WHERE IN MANY OF THE CASE S THE NAME OF THE ENTITY AND THE HOLDERS ARE THE SAME. I N MANY OF THE CASES THE SHARES WERE HELD IN THE NAME OF T RUSTEE AND ONLY IN FEW OF THE CASES THE BUYERS DID NOT / C OULD NOT TRANSFER THE SHARES PURCHASED IN THEIR NAME THE LO SSES IN RESPECT OF WHICH HAVE BEEN CONSIDERED AS UNDISCLOSE D INCOME. (III) LD.DRS STATEMENT THAT DEPARTMENT HAS NOT MAD E ADDITION IN CASES WHERE THE SHARES WERE NOT FOUND TRANSFERRE D IN THE NAME OF BUYER IF SOLD RECENTLY IS ALSO INCORRE CT STATEMENT. IN FACT THE ADDITION HAS BEEN MADE IN RESPECT OF ALL THE SHARES FOUND DURING THE COURSE OF SEARCH WHICH WERE NOT TRANSFERRED IN THE NAME OF TRANSFEREE IRRESPECTIVE OF THE DATE OF SALE. (IV) THE DELIVERY OF THE SHARES HAVE BEEN GIVEN BY THE SELLER TO THE BUYER IS EVIDENCED BY THE ACKNOWLEDGEMENT OF THE BUYER OF RECEIPT OF SHARES. THE PAYMENT FOR THE SH ARES PURCHASE HAVE BEEN PAID BEFORE CLOSE OF THE YEAR BY A/C. PAYEE CHEQUE TO THE BROKER CONCERNED AND THE SALE CONSIDERATION HAS ALSO BEEN RECEIVED FROM THE BROKE R. IT IS NOT THE CASE THAT THE CHEQUES HAVE BEEN ISSUED D IRECTLY BETWEEN THE SELLER AND BUYER. (V) LD. DRS STATEMENT THAT THE TRANSACTION HAS NOT BEEN ROUTED THROUGH THE STOCK EXCHANGE IS NOT MATERIAL A S IT IS NOT REQUIRED THAT THE TRANSACTION SHOULD HAVE BEEN IT(SS) NO.98-50/AHD/05 NIRMA LTD. 74 ENTERED ONLY ON THE FLOOR OF THE EXCHANGE. IN FACT UNDER THE INCOME-TAX ACT ITSELF FOR THE TRANSACTIONS TAK EN PLACE THROUGH THE STOCK EXCHANGE AND FOR OFF THE FLOOR TRANSACTION DIFFERENT RATE OF TAX IS PRESCRIBED. THE CONTENTION OF LD.D.R. THAT THE BUYER AND SELLER HAV E NOT CONTACTED THE BROKER BUT CARRIED OUT THE TRANSACTIO N DIRECTLY IS ALSO MISPLACED IN THE LIGHT OF THE FACT THAT THE BROKER HAS ISSUED BILLS TO BOTH THE PARTIES AND THE CHEQUES HAVE BEEN ISSUED TO/ RECEIVED FROM THE BROK ER. (VI) THE PROOF OF PAYMENT BY CHEQUE AT THE TIME OF TRANSACTION IS MATERIAL AND CANNOT BE IGNORED. (VII) NO PROOF OF DELIVERY OF SHARES WAS FOUND DURI NG THE COURSE OF SEARCH IS NO GROUND TO DISALLOW THE LOSS. THE ASSESSEE SUBMITS THAT THE PROOF OF DELIVERY OF SHAR ES IN A DATE PRIOR TO THE DATE OF SEARCH AS SUBMITTED DURI NG THE COURSE OF SEARCH PROCEEDINGS DID EXIST. IF THE SA ME WAS NOT FOUND/SEIZED DURING THE COURSE OF SEARCH NO AD DITION CAN BE SUSTAINED ON THE BASIS THEREOF. DECISIONS RELIED UPON BY LD.DR WERE DISTINGUISHED A S UNDER: 1. THE RELIANCE ON THE DECISION IN CASE OF UNIQUE I NVIN LTD VS. ACIT 74 ITD 43 (CAL.) IS MISPLACED AS IN THE SAID CASE SHARES TRAVELED FROM ONE PLACE AND ULTIMATELY COME BACK TO THE SAME COMPANY WITHIN THE SAME YEAR. THE BILLS OF TH E SHARES WERE RAISED LONG AFTER THE DATE OF CONTACT AND THE SHARES WERE DELIVERED AFTER A GAP OF ABOUT 8 TO 9 MONTHS. THUS THE FACTS OF THE CASE ARE COMPLETELY DIFFERENT. 2. THE RELIANCE ON THE DECISION IN CASE OF CIT V/S.SHEKHAWATI RAJPUTANA TRADING CO.PVT.LTD. 236 IT R 950 (CAL.) IS ALSO MISPLACED AS IN THE SAID CASE THE CH EQUES WERE ISSUED SIMULTANEOUSLY BY THE PARTIES IN FAVOUR OF E ACH OTHER FOR PURCHASE AND RE-PURCHASE ON THE SAME DAY WITHOUT BO TH THE PARTIES HAVING SUFFICIENT FUNDS IN THE BANK AND THA T ITSELF SHOWED THAT THE TRANSACTION WAS NOT GENUINE. THE FACTS OF THE ASSESSEES CASE ARE CLEARLY DISTINGUISHABLE. 3. IN CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORAT ION VS. CIT 225 ITR 802 (SC) THE ISSUE BEFORE THE HONBLE C OURT WAS TO DECIDE WHETHER THE LIABILITY OF THE APPELLANT COMPA NY TO PAY THE AMOUNT OF RS.3 LACS AT THE TIME OF MATURITY OF BORR OWING AFTER 12 IT(SS) NO.98-50/AHD/05 NIRMA LTD. 75 YEARS IN ADDITION TO WHAT IT ACTUALLY RECEIVED BE TREATED AS EXPENDITURE AND WHETHER IT WAS REVENUE EXPENDITURE. 4. EVEN IF THE TRANSACTION IS VIEWED AS TAX PLANNIN G THOUGH IT IS NOT WE SUBMIT THAT THE ASSESSEE IS ENTITLED TO PLAN HIS TRANSACTIONS SUCH THAT HIS TAXES ARE MINIMIZED. TH ERE IS NO DIFFERENCE BETWEEN THE APPELLANT AND A SALARIED TAX PAYER WHO PLANS HIS INVESTMENTS TO MINIMIZE HIS TAX LIABILITY SEE CWT V.ARVIND NAROTTAM {(1988) 173 ITR 479 (SC)}. THIS PRINCIPLE HAS BEEN REITERATED IN THE RECENT DECISION OF THE SUPRE ME COURT IN THE CASE OF UNION OF INDIA V. AZADI BACHAO ANDOLAN {(2003) 132 TAXMAN 373} WHEREIN THE APEX COURT OBSERVED : WE MAY IN THIS CONNECTION USEFULLY REFER TO THE JU DGEMENT OF THE MADRAS HIGH COURT IN M.V. VALLIAPPAN AND OTHERS V. ITO {(1988) 170 ITR 238} WHICH HAS RIGHTLY CONCLUDED THAT THE DECI SION IN MCDOWELL CANNOT BE READ AS LAYING DOWN THAT EVERY ATTEMPT AT TAX PLANNING IS ILLEGITIMATE AND MUST BE IGNORED OR THAT EVERY TRA NSACTION OR ARRANGEMENT WHICH IS PERFECTLY PERMISSIBLE UNDER LA W WHICH HAS THE EFFECT OF REDUCING THE TAX BURDEN OF THE ASSESSEE MUST BE LOOKED UPON WITH DISFAVOUR. THOUGH THE MADRAS HIGH COURT HAD O CCASION TO REFER TO THE JUDGMENT OF THE PRIVY COUNCIL IN IRC V. CHALLEN GE CORPORATION LTD. {(1987) 2 WLR 24} AND DID NOT HAVE THE BENEFIT OF THE HOUSE OF LORDS PRONOUNCEMENT IN CRAVEN THE VIEW TAKEN BY THE MADR AS HIGH COURT APPEARS TO BE CORRECT AND WE ARE INCLINED TO AGREE WITH IT. IF THE COURT FINDS THAT NOTWITHSTANDING A SERIES OF LEGAL STEPS TAKEN BY THE ASSESSEE THE INTENDED LEGAL RESULT HAS NOT BEEN ACHIEVED TH E COURT MIGHT BE JUSTIFIED IN OVERLOOKING THE INTERMEDIATE STEPS BU T IT WOULD NOT BE PERMISSIBLE FOR THE COURT TO TREAT THE INTERVENING LEGAL STEPS AS NON-EST BASED UPON SOME HYPOTHETICAL ASSESSMENT OF THE `REA L MOTIVE OF THE ASSESSEE. IN OUR VIEW THE COURT MUST DEAL WITH WH AT IS TANGIBLE IN AN OBJECTIVE MANNER AND CANNOT AFFORD TO CHASE A WILL- O-THE-WISP. 5. THE APPELLANT ALSO RELIES UPON THE DECISIONS EXP LAINING THE CONCEPT OF BLOCK VS. REGULAR ASSESSMENT (PAGE 1 TO 9) COPY OF WHICH WAS FURNISHED BY AUTHORIZED REPRESENTATIVE DURING T HE APPELLATE PROCEEDINGS. THE LOSS SUFFERED BY THE ASSESSEES CA NNOT COME WITHIN THE DEFINITION OF UNDISCLOSED INCOME WITHIN THE MEA NING OF CLAUSE (B) OF SECTION 158B OF THE INCOME-TAX ACT 1961. FURTHER THE LOSS CLAIMED BY THE ASSESSEE IS NOT EXPENSE DEDUCTION OR ALLOWANC E AT ALL. THEREFORE ALSO THE LOSS SUFFERED BY THE ASSESSEE CANNOT COME WITHIN THE DEFINITION OF UNDISCLOSED INCOME WITHIN THE MEANING OF CLAUS E (B) OF SECTION 158B OF THE ACT. EXPENDITURE IS WHAT IS PAID OUT OR PAID AWAY AND L OST IT(SS) NO.98-50/AHD/05 NIRMA LTD. 76 IRRETRIEVABLE INDIAN MOLASSES CO. (PVT.) LTD. VS. C IT 37 ITR 66 (SC) DEDUCTION MEANS CERTAIN EXPENSES SUCH AS THOSE DIRECTLY RELATED TO PRODUCTION OF INCOME. BLACKS LAW DICTIONARY AS APPROVED IN NECTAR BEVERAGES P.LTD. V S. DCIT 267 ITR 385 (BOM.) IN THIS CONNECTION THE CIRCULAR NO.8 OF 2002 ISSUED BY THE CBDT EXPLAINING THE RELEVANT AMENDMENT BY THE FINANCE AC T 2002 {258 ITR (ST.) 13} CLEARLY SPECIFIES THE PURPOSE AN D THE AMBIT OF THE AMENDMENT AS IS REPRODUCED BELOW. 61.2 THE EXISTING PROVISIONS OF CLAUSE (B) OF SEC TION 158B DEFINE UNDISCLOSED INCOME TO INCLUDE INCOME OR PROP ERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR T HE PURPOSE OF THE ACT AND WHICH IS REPRESENTED BY ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BY ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT OR ANY OTHER TRA NSACTION. IT HAS BEEN NOTICED THAT IN SOME CASES THE APPELLATE A UTHORITIES HAVE TAKEN A VIEW THAT THIS DEFINITION COVERS ONLY PROPERTY OR RECEIPT WHICH HAVE NOT BEEN DISCLOSED AND DOES NOT COVERS INCOME REPRESENTED BY ENTRIES IN RESPECT OF FALSE C LAIMS OF EXPENSES OR DEDUCTIONS. SUCH VIEW IS CONTRARY TO T HE INTENTION UNDERLYING THE PROVISION OF BRINGING TO TAX THE ENT IRE UNDISCLOSED INCOME INCLUDING INCOME WHICH HAS BEEN SUPPRESSED B Y MAKING FALSE CLAIMS OF EXPENSES OR DEDUCTION WHICH HAVE B EEN DISCOVERED AS A RESULT OF SEARCH OR REQUISITION. 61.2.1 THE FINANCE ACT 2002 HAS AMENDED THE DEFIN ITION OF UNDISCLOSED INCOME IN SECTION 158B TO SPECIFICALLY INCLUDE THEREIN INCOME BASED ON ENTRIES IN BOOKS OF ACCOUNT OR OTHER DOCUMENTS WHICH REPRESENT A FALSE CLAIM OF ANY EXPE NSE DEDUCTION OR ALLOWANCE UNDER THE INCOME-TAX ACT. IN THE PRESENT CASE THE ASSESSEE HAD SUFFERED LOSS IN THE NATURE OF LONG TERM CAPITAL LOSS ON SALE OF SHARES. IN T HE REGULAR RETURN OF INCOME FILED BY IT THE SAME WAS SET CLAIMED AS A LOSS TO BE SET OFF AGAINST OTHER CAPITAL GAIN IN ACCORDANCE WI TH THE PROVISION OF SECTION 70(3) OF THE ACT. SUCH LOSS OR SET OFF THEREOF CANNOT BE COVERED WITHIN THE MEANING OF THE TERM UNDISCLO SED INCOME. I) IN ANY CASE IN SOME OF THE CASES NO EVIDENCE WH ATSOEVER IS FOUND AT THE TIME OF THE SEARCH THAT THE SHARES WER E NOT GOT TRANSFERRED IN ITS NAME BY THE TRANSFEREE BEFORE TH E DATE OF SEARCH. IN ALL SUCH CASES NO ASSESSMENT CAN BE FR AMED UNDER IT(SS) NO.98-50/AHD/05 NIRMA LTD. 77 CHAPTER XIV-B OF THE ACT AT ALL. II) ASSUMING THAT THE CASE IS COVERED UNDER THE BLO CK ASSESSMENT EVEN THEN NO ADDITION IS CALLED FOR BE CAUSE AS A MATTER OF FACT THE ASSESSEE HAD TRANSFERRED THE S HARES OWNED BY IT. THE TRANSACTION SUPPORTED BY THE INDEPENDENT EVIDENCE OF SHARE-BROKER. THE SALE NOTE ISSUED BY THE BROKER COVERS MUCH LARGER NO. OF SCRIPS. THE REVENUE DISPUTES SOME AN D NOT ALL SUCH SALE COVERED UNDER ONE NOTE. THE SHARE CERTIFICATE TOGETHER WITH THE TRANSFER FO RMS HANDED OVER TO THE TRANSFEREE AND THE CONFIRMATION TO THAT EFFECT FILED WITH THE A.O. AS MATTER OF FACT THE PURCHASER HAS FURTHER TRANSFE RRED SOME OF THE SHARES WHICH ARE NOT BEING DISPUTED BY THE REVENUE. IF THE SALE FROM THE ASSESSEE DID NOT TAKE PLACE HOW COULD THE PURCHASER HAVE FURTHER TRANSFERRED THE SHARES? THE PRICE OF THE SHARES RECEIVED BY THE ASSESSEE BEFORE THE END OF THE FINANCIAL YEAR AND MUCH BEFOR E THE DATE OF SEARCH. ALL THE SHARES OWNED BY EVERY ENTITY ARE KEPT IN TH E CUSTODY OF THE NIRMA MANAGEMENT SERVICES P.LTD. UNDER THE CIRCUMSTANCES THE SAID ENTITY WAS IN POSSESSION OF SHARES AS THE AGENT OF THE TRANSFEREE AND NOT THE ASSESSEE. THE REVENUE DOES NOT DISPUTE THE FACT THAT THE TRANSACTION OF SALE HAS TAKEN PLACE AT THE MARKET P RICE. 42. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MAT ERIAL ON RECORD. IT EMERGES FROM THE RECORD THAT COPY OF SA LE BILLS WERE RECEIVED FROM THE BROKERS. PAYMENT HAS BEEN RECEIVED BY ACC OUNT PAYEE CHEQUES DELIVERY OF SHARES WERE GIVEN TO THE BUYER . IN VIEW OF THESE FACTS RIGHT IN THE PROPERTY STANDS TRANSFERRED. TH ERE IS A DIFFERENCE BETWEEN TRANSFER OF SHARES WITHIN THE MEANING OF CO MPANIES ACT AND I.T. ACT. ASSESSEE HAVING RECEIVED FULL CONSIDERAT ION IN SHARES THERE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 78 WAS EXTINGUISHMENT OF THE ASSESSEES RIGHT IN SHARE S. WE FIND MERIT IN THE ARGUMENTS OF THE LEARNED COUNSEL FOR ASSESSEE T HAT THERE MAY BE VARIOUS REASONS FOR NOT TRANSFERRING SHARES IMMEDIA TELY WHICH ARE MENTIONED ABOVE AND TRANSACTIONS WERE DULY INCORPOR ATED IN THE BOOKS BESIDES THE ASSESSEE HAS FURNISHED EVIDENCES IN RE SPECT OF CONFIRMATIONS OF PURCHASES GROUP OF SHARES SUBSEQU ENTLY TRANSFERRED AND IN CASE OF NON-TRANSFER LODGING OF COMPLAINTS W ITH SEBI INSTANCES OF SHARES SOLD BY PURCHASES THROUGH STOCK EXCHANGES OFFERING OF CAPITAL GAINS BY THE ASSESSEE IN THEIR RETURN OF IN COMES.IN CONSIDERATION OF ALL THESE FACTS WE ARE OF THE VIEW THAT ASSESSE E HAVING DULY INCORPORATED ALL THESE SHARE TRANSACTIONS IN THE CA PITAL ACCOUNTS AND OFFERED CAPITAL GAIN THEREOF THIS CANNOT BE HELD T O BE UNDISCLOSED TRANSACTIONS AND RESULTING LOSSES AS CONTRIVED LOSS ES THAT TOO IN BLOCK ASSESSMENT PROCEEDINGS ONLY DUE TO CERTAIN ASSUMED IRREGULARITIES ON THE PART OF REVENUE. CONSEQUENTLY WE HOLD THAT TH ESE LOSSES CANNOT BE DISALLOWED IN BLOCK ASSESSMENT PROCEEDINGS HOLD ING THEM TO BE CONTRIVED LOSSES THEREFORE CLAIM OF LOSSES MADE I N THIS GROUND ARE ALLOWED IN ALL THESE CASES. 61. THE LD. DR ALSO AGREED THAT ISSUE IS NOW COVERE D BY THE TRIBUNALS DECISION IN ASSESSEES GROUP CASE AND ALSO FAIRLY A GREED THAT FACTS ARE EXACTLY IDENTICAL. THIS BEING THE POSITION RESPECTFULLY FO LLOWING THE ABOVE ORDER OF THE TRIBUNAL WE ALLOW THE CLAIM OF THE ASSESSEE ON THI S ISSUE. THIS GROUND OF ASSESSEE IS ALLOWED. 62. GROUND NO.11 RELATES TO CHARGING OF INTEREST UN DER SECTION 158BFA(1) OF THE I.T. ACT. THE AO HAS DIRECTED IN THE ASSESSM ENT ORDER TO CHARGE INTEREST. THE LD. CIT(A) DISMISSED THE RELATED GROU ND BY HOLDING THAT CHARGING OF INTEREST UNDER SECTION 158 BFA IS MANDATORY AND CONSEQUENTIAL. 63. LD. AR POINTED OUT THAT THIS ISSUE IS ALSO COVE RED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF NIRMA INDUSTRIES LTD. IN IT (SS)A NO.65/AHD/2006. 64. WE HAVE HEARD THE PARTIES. IN OUR VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). CHARGING OF INTEREST UN DER SECTION 158BFA IS PARI MATERIAL TO CHARGING OF INTEREST U/S 234A WHICH HA S BEEN HELD MANDATORY BY HON. APEX COURT IN VARIOUS DECISIONS SUCH AS :- IT(SS) NO.98-50/AHD/05 NIRMA LTD. 79 CIT VS. ANJUM M.H. GHASWALA & OTHERS 252 ITR 1 (SC) CIT VS. HINDUSTAN BULK CARRIERS 259 ITR 449 (SC) SK. MUNEER SK. MANNU CHOUDHARY VS. DCIT 300 ITR 216 (BOM) ACCORDINGLY THIS GROUND OF ASSESSEE IS REJECTED. 65. GROUND NO.12 RELATES TO INITIATION OF PENALTY P ROCEEDINGS UNDER SECTION 158BFA(2). THIS GROUND IS PRE MATURE AS PENALTY HAS TO BE DECIDED IN THE APPEAL ARISING FROM ORDERS PASSED BY THE AO UNDER T HAT SECTION. THIS GROUND IS ACCORDINGLY REJECTED. 66. GROUND NO.13 IS GENERAL IN NATURE WHICH DOES NO T REQUIRE SPECIFIC ADJOURNMENT. HENCE IT IS REJECTED. 67. THE ASSESSEE HAS RAISED ADDITIONAL GROUND AS UN DER :- IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE THE ASSESSMENT ORDER PASSED U/S 158BC OF IT ACT DTD.31. 10.2003 IS NULL AND VOID AS THE ADDITIONS WERE MADE IN RESPECT OF T HE SEIZED MATERIALS FOUND FROM THE PREMISES OF OTHER PERSONS. 68. WE HAVE HEARD THE PARTIES. WE ALLOW THE ADDITIO NAL GROUND TO BE ADMITTED BECAUSE IT IS A LEGAL GROUND AND SIMILAR G ROUNDS HAVE BEEN RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) AS GROUND NO.1. ON MERITS WE ARE OF THE VIEW THAT ASSESSEE CANNOT SUCCEED IN RESPECT OF THI S GROUND BECAUSE IN ADDITION TO THE SEARCH CARRIED OUT AT THE PREMISES OF EMPLOYEES OF THE ASSESSEE SEARCH WAS ALSO CARRIED OUT AT THE PREMIS ES OF THE ASSESSEE ITSELF. THE DOCUMENTS AND EVIDENCE FOUND AT BOTH THE PLACES WERE CONSIDERED BY THE AO AND THEREFORE IT COULD NOT BE SAID THAT BLOCK ASSESSMENT ORDER PASSED U/S 158BC IN THE CASE ASSESSEE WAS SOLELY BASED ON THE DOCUMENTS FOUND AT THE PREMISES OF THE THIRD PERSONS. SINCE ASSESSEE WAS A LSO SEARCHED AO GETS JURISDICTION TO PASS BLOCK ASSESSMENT ORDER UNDER S ECTION 158 BC AND WHILE IT(SS) NO.98-50/AHD/05 NIRMA LTD. 80 FRAMING BLOCK ASSESSMENT HE CAN CONSIDER THE EVIDEN CE FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF THE ASSESSEE AS WELL AS AT THE PREMISES OF OTHER PERSONS. ONCE BLOCK ASSESSMENT PROCEEDINGS AR E VALIDLY INITIATED IN THE CASE OF THE ASSESSEE THEN INCLUSION OF MATERIAL FOU ND IN A SEARCH OF OTHER PERSONS WILL NOT INVALIDATE THE BLOCK ASSESSMENT PR OCEEDINGS. FURTHER THERE CANNOT BE A CASE THAT IN ADDITION TO BLOCK ASSESSME NT PROCEEDINGS U/S 158BC AS A RESULT OF THE SEARCH CARRIED OUT AT THE PREMIS ES OF THE ASSESSEE PROCEEDINGS U/S 158BD SHOULD ALSO BE INITIATED SEPA RATELY AND INDEPENDENTLY IN ORDER TO MAKE BLOCK ASSESSMENT FOR EVIDENCE FOUN D AT THE SEARCH OF THIRD PERSONS. TWO PARALLEL PROCEEDINGS IN CHAPTER XIVB ONE UNDER SECTION 158BC AND THE OTHER UNDER SECTION 158BD CANNOT BE P ERMITTED FOR THE SAME BLOCK PERIOD AND ARISING FROM SIMULTANEOUSLY SEARCH ES. ACCORDINGLY WE DO NOT FIND ANY MERIT IN THE ADDITIONAL GROUND AND HENCE I T IS REJECTED. 69. AS A RESULT APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED. REVENUES APPEAL 70. IN DEPARTMENTAL APPEAL THE ONLY ISSUE INVOLVED IS ABOUT RELIEF OF RS.38 83 000/- GIVEN BY LD. CIT(A) TO ASSESSEE IN R ESPECT OF ADDITION MADE ON THE BASIS OF STATEMENT OF SHRI J.O. SHAH AND DOCUME NT FOUND FROM HIS PREMISES. 71. ON THE BASIS OF DIARY (ANNEXURE A-18) OF THE PU RCHASE MANAGER SHRI J.O. SHAH THE AO NOTED THAT SEVERAL PAYMENTS HAVE B EEN MADE BY HIM WHICH WERE NOT ACCOUNTED FOR SUCH AS PAYMENT OF RS.13.5 L AKHS MADE TO ONE SHRI AMAR WHO IS STATED TO BE AN ASSISTANT OF SHRI J.O. SHAH AND PAYMENT OF RS.25 LAKHS TO GAYATRI BUILDING MATERIAL SUPPLIERS. IN ADDITION TO THIS THERE WERE PAYMENTS OF RS.25 000/- AND RS.17 000/- WHICH WERE ALSO RECORDED AND WHICH WERE CONFIRMED BY THE LD. CIT(A) AS ADDITION IN THE CASE OF THE ASSESSEE. WHILE DISCUSSING THIS ISSUE CONTAINED IN GROUND NO.9 IN ASSESSEES IT(SS) NO.98-50/AHD/05 NIRMA LTD. 81 APPEAL WE HAVE HELD THAT THE MAJOR ADDITION OF RS. 38 83 000/- HAS BEEN CONSIDERED IN THE CASE OF SHRI J.O. SHAH WHICH HAS BEEN DECLARED BY SHRI J.O. SHAH AND ACCEPTED BY THE DEPARTMENT. THIS ISSUE WAS ALSO DISCUSSED BY THE TRIBUNAL IN THE CASE OF SHRI J.O. SHAH IN IT(SS)A 3 25 & 321/AHD/2004 IN PARA 17 & 18 THEREOF AS UNDER:- 17. THE DETAILS OF TRANSACTIONS ARE GIVEN BY LD. A .O. AND C.I.T.(A) IN THEIR ORDERS. THE A.O. TREATED THIS INCOME AS THAT OF NIR MA LTD. AND PROPOSED TO MAKE SUBSTANTIVE ASSESSMENT IN THAT CASE WHEREAS HE PROPOSED PROTECTIVE ASSESSMENT IN THE CASE OF THE ASSESSEE. THE LD. C.I .T.(A) DID NOT AGREE WITH THE A.O. AND HELD THAT INCOME DID NOT PERTAIN TO NI RMA LTD. AND THEREFORE ONCE THE ASSESSEE HAS DECLARED THE SAME AS HIS INCO ME IN THE BLOCK RETURN THERE IS NO CASE FOR UPHOLDING IT AS INCOME OF NIRM A LTD. THE LD. CIT(A) BASED HIS REASONING AS UNDER :- (A) THE ISSUE UNDER QUESTION I.E. ADDITION OF UNDI SCLOSED INCOME OF RS.38.83 LACS. IS BASED ON NOTINGS ON PAGE 269 AND 270 OF ANNEXURE A-18 SEIZED FROM THE APPELLANTS RESIDENCE. AS PER PRESUMPTION U/S. 132(4A) OF THE I. T. ACT THE INCOME IS DEEMED TO B E OF THE PERSON FROM WHICH THE SEIZED ASSET OR DOCUMENT IS FOUND UNLESS PROVED CONTRARY. THERE IS NO CONCLUSIVE PROOF THAT THE PAPERS OR THE TRANSACTIONS RECORDED THEREON DO NOT PERTAIN TO THE APPELLANT AN D THERE IS NOTHING TO PROVE THAT THE TRANSACTIONS ARE OF NIRMA LTD. ONLY AND NOT OF THE APPELLANT. (B) THE ASSESSING OFFICER HIMSELF HAS ADMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE STATEMENTS OF SHRI J.O. SHAH AND SHRI JITUBHAI PATEL PARTNER OF THE GAYATRI BLDG. MATERIA L SUPPLIERS WERE RECORDED. IN THE STATEMENT SHRI J.O. SHAH ACCEPTED THAT THE NOTINGS REPRESENT PAYMENTS. HE ALSO RECORDED THE NOTINGS ON THESE PAGES AND ACCEPTED THAT WHEREVER THE NOTINGS ARE WITH DECIMAL POINTS OR CARRY THE SPECIFIC NARRATION LACS THE SAME REPRESENT PAYMEN TS MADE IN RS. LACS AND WHEREVER THERE IS NO NARRATION AND ALSO NO DECIMAL POINTS ARE USED THE NOTINGS REPRESENT PAYMENTS MADE IN THOUSAN DS. WITH REGARD TO THESE TRANSACTIONS IT WAS EXPLAINED BY SHRI J. O. SHAH THAT (I) THE TRANSACTIONS NOTED ON THE VISITING CARDS PERTAINED TO A PROPOSED LAND DEAL WITH SHRI JITUBHAI PATEL OF GAYATRI MATERIAL S UPPLIERS AND THE PAYMENTS OF RS.25 33 000 WERE MADE AS ADVANCES WHIC H WERE INCORPORATED IN THE BOOKS OF ACCOUNTS OF SHRI SHAH FOR THE BLOCK PERIOD. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 82 (II) THE TRANSACTIONS NOTED AGAINST THE NAME AMAR S HAH PERTAINED TO A PROPOSED DEAL FOR FLAT PAYMENT OF RS.13 50 000 WERE MADE AS ADVANCES WHICH WERE INCORPORATED IN THE BOOKS OF A CCOUNTS PREPARED BY SHRI SHAH FOR THE BLOCK PERIOD AND (III) OTHER MISCELLANEOUS NOTINGS PERTAINED TO ADVANCES OF RS.25 000/- AND RS.17 000/ - GIVEN TO VARIOUS PERSONS. THUS IN THE STATEMENTS RECORDED U/S. 131 T HESE PAYMENTS HAVE BEEN ADMITTED BY SHRI J. O. SHAH AS MATERIAL T RANSACTIONS PERTAINING TO HIM WITH REGARD TO PURCHASE OF LAND/F LAT. (C ) SIMPLY BECAUSE SHRI J. O. SHAH HAPPENS TO BE P URCHASE MANAGER OF NIRMA LTD. AND GAYATRI BUILDING MATERIAL SUPPLIERS IS ONE OF THE REGULAR SUPPLIERS OF NIRMA LTD. DOES NOT MEAN THAT THE APPE LLANT CANNOT HAVE ANY PERSONAL; TRANSACTION WITH SUPPLIER OF THE COMP ANY. IN FACT THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY MATERIAL EVIDENCE TO PROVE THAT THE TRANSACTIONS PERTAIN TO NIRMA LTD. ON THE CONTRARY THE STATEMENTS RECORDED AND EXPLANATION GIVEN BY SHRI J . O. SHAH AND SHRI JITUBHAI PATEL LEADS AS TO THE CONCLUSION THAT THE TRANSACTIONS BELONGED TO THE APPELLANT. (D) THE APPELLANT HIMSELF HAS DISCLOSED THESE TRANS ACTIONS AS UNDISCLOSED INCOME IN THE RETURN OF INCOME FOR THE BLOCK PERIO D AND THERE IS APPARENTLY NO REASON FOR THE APPELLANT TO OWN UP S OMEONE ELSES INCOME AS THE RATE OF TAX APPLICABLE IS THE SAME. 18. WE HAVE HEARD THE PARTIES CAREFULLY AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FO R INTERFERENCE IN THE ORDER OF THE LD. C.I.T.(A). REASONS ARE (I) THAT NO EVIDENCE IS FOUND IN THE SEARCH SO AS TO SHOW THAT THE TRANSACTION WAS THAT OF NIRMA LTD. THE INFERENCE HAVE BEEN DRAWN MERELY BY PRESUMPTION AND SURMISES. (II) THER E IS NO MATERIAL TO CONTRADICT THE STATEMENT OF THE ASSESSEE AND TO BEL IEVE THAT INCOME DID NOT BELONG TO HIM. (III) WHETHER INCOME WOULD PERTAIN T O NIRMA LTD. OR NOT CAN ONLY BE DECIDED IN THE CASE OF NIRMA LTD. IN CASE IT IS HELD THAT INCOME BELONGED TO NIRMA LTD. THEN A RECTIFICATION CAN BE CARRIED OUT IN THE CASE OF THE ASSESSEE. (IV) SIMPLY BECAUSE THE ASSESSEE IS A PURCHASE MANAGER AND M/S. GAYATRI BUILDING MATERIAL SUPPLIERS IS A REGUL AR SUPPLIER TO NIRMA LTD IT CANNOT BE INFERRED THAT TRANSACTION RECORDED BY SHR I J.O. SHAH PERTAINED TO NIRMA LTD. THERE HAS TO BE COGENT MATERIAL TO LINK NIRMA LTD. WITH THE TRANSACTIONS FOUND ON THE DOCUMENTS RECOVERED FROM THE PREMISES OF THE ASSESSEE. IT(SS) NO.98-50/AHD/05 NIRMA LTD. 83 72. SINCE THERE IS NO MATERIAL TO HOLD THAT INCOME ARISING FROM SUCH PAYMENTS AS RECORDED IN ANNEXURE-A18 BELONGED TO TH E ASSESSEE COMPANY AND IT HAS BEEN DECLARED BY SHRI J.O. SHAH IN HIS P ERSONAL ASSESSMENT AND THUS CONFIRMED BY THE TRIBUNAL THE ADDITION CANNOT BE MADE IN THE HANDS OF ASSESSEE COMPANY. ACCORDINGLY LD. CIT(A) WAS JUSTIF IED IN DELETING THE ADDITION. THIS GROUND OF REVENUE IS ACCORDINGLY DIS MISSED. 73. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 27/8/2010. SD/- SD/- (MAHAVIR SINGH) (D. C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. DATED: 27/8/2010. MAHATA/- COPY OF THE ORDER FORWARDED TO: - 1. THE ASSESSEE. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY /ASSTT.REGISTRAR ITAT AHMEDAB AD