TaxTMI 
TaxTMI 
2005 (9) TMI 259
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....ucted at the business and residential premises of the assessee on 9th Aug., 2000. During the course of search cash of Rs. 1,56,380 was found from rooms of different family members at the residence and Rs. 26,910 from business premises as mentioned by the AO at p. 3 of the order. The assessee in the block return considered the entire cash as explained in the hands of family members as detailed at p. 4 of the order. The AO considered the entire cash found at Rs. 1,83,210 as unexplained by holding that the assessee did not produce any evidence either at the time of search or in post-search proceedings or at the time of assessment proceedings that the 8 persons of the family have cash balances as claimed with them on 9th Aug., 2000. The receipt and payment account of 8 persons submitted for the period 1st April, 2000 to 9th Aug., 2000, were on the basis of return of income filed after the date of search and as such no reliance can be placed on these receipts and payments account. These persons are not maintaining regular books of account. He, therefore, considered an amount of Rs. 26,910 found at the business premises and Rs. 16,460 found from the room of children aggregating to Rs. 43....
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....Shri Salim go to Gujarat with cash. The cash so taken for the purpose of intended purchases, is debited to 'Disawar account'. When they return, if any purchase is made that is adjusted against the 'Disawar account' and the remaining amount in the 'Disawar account' is deposited with the firm by crediting the 'Disawar account'. Sometime when no purchase is made, the entire amount is deposited in 'Disawar account'. The Authorised Representative filed the copy of 'Disawar account' explaining the above position. As on the date of search, an amount of Rs. 1,84,946 was lying in the 'Disawar account'. He submitted that on 8th Aug., 2000, a sum of Rs. 1.20,000 was given to Shri Salim Khan but the same was not posted in 'Disawar account' as it was given in the late evening. It is for this reason that in survey of firm M/s Jaikumar Mahendra Kumar cash was found at Rs. 5,605 whereas as per cash book it was Rs. 1,26,234. Out of the amount of Rs. 1,84,946 lying in the 'Disawar account' and Rs. 1,20,000 further given on 8th Aug., 2000 totalling to Rs. 3,04,946, Rs. 2.75 lakhs was with Salim as stated by Shri Vinod Kumar Jain ....
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....he time of search but on the basis of the statement of Shri Vinod Kumar Jain, son of the assessee. In the statement in reply to question No.6, about the difference in cash as per cash book at Rs. 1,26,234 and that physically found at Rs. 5,605, he explained that this difference is for the reason that Shri Salim Khan has gone to Gujarat for purchase of material yesterday evening with approximately Rs. 2.75 lakhs. From this statement we noted that Shri Vinod Kumar Jain has nowhere stated that Rs. 2,75,000 was given to him only yesterday. We further noted that an amount of Rs. 1,84,946 was lying in the 'Disawar account' in the regular books of account. Thus, in all the assessee-firm has availability of Rs. 3,11,180 (1.84,946 + 1.26,234) in the books whereas cash was found at business premises at Rs. 5,605 only. Thus, the balance of Rs. 3,05,775 is enough to explain the amount of Rs. 2,75,000 given to Salim as per the statement of Shri Vinod Kumar Jain. The learned CIT(A) is, therefore, right in deleting this addition. The amount of Rs. 26,910 is covered by the amount available as per cash flow statement of family members as per which cash in hand is Rs. 2,06,305 as against Rs.....
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....imated profit of 7.37 per cent and offered Rs. 28,210 in the income. The AO estimated the profit at 10 per cent to make addition of Rs. 10,066. The learned CIT(A) applied rate of 8 per cent to sustain the addition at Rs. 2,411 and deleted the addition of Rs. 7,655 against which both the parties are in appeal We find that the rate of 10 per cent (sic-8 per cent) taken by the learned CIT(A) is reasonable. Hence, both the grounds of assessee and the Department are dismissed. Ground No. 1(2b) of assessee and ground No. 5 of Department. Addition on account of sale of stock of firewood found short Rs. 54,570 12. The AO made the addition for the reason that as per books there were stock of 54.570 MT but no such stock were found during search. He took profit rate of Re. 1 per kg. to make addition of Rs. 54,570 but the learned CIT(A) estimated the profit at 50 paise per kg to confirm addition of Rs. 27,285. We find that the estimate made by the learned CIT(A) is reasonable in view of the fact that this stock is derived out of purchases of scrap from Railways having lesser sale realization. Hence, the order of the learned CIT(A) is upheld and both the grounds of the assessee and ....
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.... Representative supported the order of the AO. 20. After perusing the material on record, we agree with the contention of the learned Authorised Representative that the loose paper records the noting in respect of purchases made by M/s Valia Steel Industries, Mumbai, from Railways. This is established from delivery order of the Store Department of Railways, dt. 20th June, 2000 according to which sale value of the goods to be lifted by M/s Valia Steel Industries, Mumbai, is of Rs. 23,06,500 and earnest money realized is Rs. 2,30,700. Both these amounts are noted on this paper. Since the assessee has trade relation with M/s Valia Steel Industries, he advanced Rs. 10 lakhs to Valia Steel Industries. All these amounts and amount of sales-tax of Rs. 92,260 @ 4 per cent on Rs. 23,06,500 is mentioned on the paper. The draft of Rs. 10,00,000 is recorded and debited to the account of Valia Steel Industries in the books of assessee. The AO has, therefore, wrongly held it to be a sale transaction. The learned CIT(A) has also no basis to conclude that profits were shared by the assessee in this transaction. No material in this connection was found nor any enquiry made in this regard. Hence,....
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....found in excess in search. As against this, the stock was found short by 38.276 MT in search. This shows that recorded stock is sold out of books. Further, the amount of Rs. 9,43,300 is not of a single transaction but for the various dates between 2nd Aug., 2000 to 8th Aug., 2000. Hence, no addition for investment in working capital is, required as assessee has made unrecorded sales from the recorded stock for which profit is already taxed. Hence, the addition made by the AO is deleted. This ground of assessee is allowed and that of the Department is dismissed. Ground No. 1(6) of the assessee : Addition of Rs. 4,464 against unexplained purchases of cloths: 27. After considering the rival submission, we are of the view that it is a petty amount covered by the household withdrawal shown by the assessee's family. The addition is, therefore, deleted. This ground is, therefore, allowed. Ground No. 8 of Department : Deleting addition of Rs. 95,705 on account of profit on unrecorded sale 28. The brief facts of this ground are that the AO observed that p. 53 of Annex. A-24 shows weight of 95.705 kgs. which is unrecorded sales. He took its sale value at Rs. 9,57,....
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.... 2. Diary A-3, page No. 3: Shri Atul Jain Admitted the transaction in name of JKMK (Jai Kumar Mahendra Kumar, proprietary concern of assessee) are unrecorded. These transactions are unrecorded purchases of assessee 5,55,810 Sales to the extent of Rs. 25,58,943 and deemed sales to the extent of shortage of Rs. 3,82.763 have already been considered in the hands of the appellant. Therefore, unrecorded purchases and sales include the amount of Rs. 5,55,810. Therefore, separate addition is not required. Nil 3. Exhibit A-2 : Assessee made Unexplained Payments of Rs. 19 lakhs to AIS. No separate addition is made on account of presumed sale and profits thereon. Addition for peak Investment for making payments is made. 3,00,000 The investment in such transaction to the extent of Rs. 8.67,836 has already been confirmed by me while deciding ground NO.7 of appeal. Therefore, no separate addition on account of such purchases is making payments required. Addition is deleted. Nil 33. The learned Authorised Representative submitted that all the above additions are made by the AO on the basis of loose papers found in the search of a third party. Shri Atul Jain never stated ....
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....ion is made on the basis of the papers found from Shri Atul Jain. In search these papers were not confronted to the assessee. From the assessment order it is not borne out whether Atul Jain has stated these papers as pertaining to the assessee. No presumption can be drawn against the assessee under s. 132(4A) of the IT Act, 1961. in respect of a paper not (recovered) from him. No addition can be made on the basis of documents found from the third party in the absence of corroborative evidence' as held in case of J.R. G. Bhandarj vs. Asstt. CIT (2003) 79 TTJ (Jd) 1, where it was held as under: "In our considered opinion, it may hardly be deniable that the Indian Evidence Act or for that matter the statutory provisions of the Indian Evidence Act may not be applicable strictly to the proceedings under the IT Act but the basic/broad principle of the law or evidence do apply to the said proceedings, it is settled position of law that the slips or loose sheets do not fall within the purview of 'book'. An entry in the books of account, maintained in the regular course of business, is relevant to be considered in respect of the transactions reflected thereby, no doubt,....
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....d double taxation. Hence, ground NO.3 of the assessee is allowed for statistical purposes and ground No. 12 of the Department is dismissed. 39. Now we shall take up the remaining grounds of Departmental appeal: Ground No. 2: Deleting the addition of Rs. 4,43,693 made by the AO on account of unexplained jewellery and silver items 40. The brief facts of this ground are that during the course of search gold jewellery weighing 1.786.60 gms. net and silver weighing 16.895 kgs. net were found as per Annex. 3, dt. 5th Sept., 2000. Apart from this gold jewellery weighing 110 gms. (net) was found on person of family members. The assessee explained this jewellery as disclosed in VDIS by various family members. Out of the above jewellery, the AO considered only 1.250 gms. gold jewellery as explained belonging to three lady members of the assessee-family. The balance jewellery of 646.600 gms. and silver of 16.895 kgs. is treated as unexplained by AO by observing that on verification of jewellery found as per Annex. 3 with the jewellery as shown under the VDIS it was found that the jewellery found during the course of search was not the same jewellery as were declared in VDIS. Th....
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....DT Instruction No. 1916, dt. 11th May, 1994 where it is clarified that in searches gold jewellery of 500 gms. per unmarried lady and 100 gms. per male member need not be seized. Though this instruction (is) with reference to seizure of jewellery, the spirit of this instruction for ascertaining the reasonability of jewellery in assessment is accepted by Karnataka High Court in case of Smt. Pati Devi vs. ITO (2000) 159 CTR (Kar) 28 : (1999) 240 ITR 727 (Kar) and by the Hon'ble Tribunal in various cases. He further submitted that the jewellery disclosed in VDIS is either part of jewellery found or is source for any new jewellery found during search. The Authorised Representative relied in case of Ashok Kataria vs. Dy. CIT 27 Tax World 47 (Jp) where it was held that addition for undisclosed income cannot be made in block assessment in respect of that jewellery which already stands declared in the wealth-tax return as well as in VDIS and declaration made under VDIS cannot be held non genuine unless it is withdrawn by Commissioner. Similar view was taken in case of Suresh Chand Gupta vs. ITO 26 Tax World 224 (Jp) where it was held that any conclusion arrived solely on the strength of....
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....heir VDIS declaration was bogus and the loose diamonds declared under this scheme never existed. This declaration was meant only for the purpose of creating non-existing assets by paying tax at a very low rate. Such non-existing loose diamonds were later on shown to be sold to M/s Tambi Exports. The sales claim to be made by M/s Tambi Exports is also unverifiable. These facts show that actually no loose diamonds ever existed in these transactions and this is only a paper device used to bring the unaccounted income in the books of account by paying very nominal tax and by making misuse of the VDIS Scheme. The AO further observed that the principle established by Supreme Court in case of McDowell & Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC) and Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) are applicable to the assessee's case. 46. The CIT(A) deleted the addition by finding that it is admitted fact that no incriminating material during the course of search in the form of document establishing the sale of diamonds as bogus has been found. As far as appellant is concerned, it can be seen that no question in respect of sale of diamo....
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..... The learned Authorised Representative has raised various contentions in his written submissions. Briefly his contentions are as under: (a) No incriminating material was found in search to establish the sale of diamonds as bogus. (b) Statement of assessee in respect of VDIS declaration or sale of diamond jewellery was not taken either in course of search or in course of proceedings before Am/AO. (c) The VDIS disclosures have been made by the family members and not by the assessee. (d) The sale of diamonds/diamond jewellery to Tambi Exports has been shown by the family members in their respective returns filed before search. The sale proceeds have been received by the respective persons and deposited in their bank accounts and subsequently the money has been given as deposit to the appellant by the respective persons. (e) Once the declaration under VDIS 1997 has been accepted in respect of jewellery and loose diamonds by the Department, subsequently it cannot be held that such jewellery/loose diamonds were not in existence. (f) The statements of the ladies were not recorded in question-answer form. The search party has directly ....
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....decision of this Bench in case of Shripal Kataria in IT(SS)A Nos. 52 and 76/Jp/2001, dt. 29th Nov., 2001 and the decision of Gujarat High Court in case of Nitin P. Shah alias Modi vs. Dy. CIT (2005) 194 CTR (Guj) 306, 322 and distinguished the decision relied on by the AO. He accordingly prayed for upholding the order of the learned CIT(A). 48. On the other hand, the learned Departmental Representative relied on the order of the AO. 49. We have considered the rival submissions and gone through the material on record. Admittedly, assessee has neither made any disclosure of diamonds under the VDIS nor he has sold any diamond. The disclosure and the sale is made by the family members who have declared the same in their regular returns filed before search. The VDIS declaration by the family members has been accepted and certificate under s. 68(2) of the Finance Act, 1997, has been issued by the learned CIT. The proprietor of M/s Tambi Jewellers who purchased the diamonds was examined by the AO who accepted the purchases made by him from these family members. In search no incriminating material was found to hold that the sale is bogus. The statement of, the family members heavi....
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....sclosures and issued certificate under s. 68(2) of the Finance Act, 1997 on 22nd Feb., 1998, 15th Feb., 1998 and 22nd Feb., 1998 respectively. The valuation reports of jewellery disclosure were also. filed along with the disclosures made by the assessee, assessee's HUF and his wife after verification of the existence of the jewellery. The certificates issued by the CIT, Udaipur, have not been withdrawn. The sale bills are also in the names of said persons, which have been credited in their respective accounts. Neither any material was found or brought on record by the AO that there has been laundering of undisclosed income, nor it was found as a result of search from Which it could be said that appellant gave cash for arranging sale bill or for taking payments in the names of these persons. Parties to whom sales have been made have also not denied the genuineness of all the transactions with them. The disclosed jewellery, which stood as already sold, could not be held to be bogus because the same was not found at the time of search for the simple reason that what was disclosed stands duly disposed of to the extent of sale and in consideration thereof, the payment had been recei....