TaxTMI 
TaxTMI 
2008 (9) TMI 427
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....iness expenses in an ad hoc manner. 2. Since ground No. 2 raises the legal issue, it is directed to dispose of that ground first. 3. The AO, before issuing notice under s. 148 of the IT Act, 1961 (hereinafter referred to as 'the Act'), recorded reasons as under: "The return of income declaring business income at Rs. 1,30,720 was filed on 29th Oct., 2002 along with audit report as required by s. 44AB of the Act which was processed on 18th Feb., 2003. In this case a survey under s. 133A was carried out on 8th Oct., 2002. During the survey, certain loose papers and diary were impounded under s. 133A(ia) of the Act. During the course of scrutiny for asst. yr. 2003-04, it is observed that certain documents impounded including the entries found in the note book pertain to the period 1st April, 2001 to 31st March, 2002 which is relevant to this asst. yr. 2002-03 and the assessee could not explain them with supporting evidence. In this diary, the following amounts have been shown as loans taken from various persons and these entries have not been reflected in the regular books of account: -------------------------------------------- Sl. No. Name of depositor&n....
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....-------------------------------------------- 17. Rajesh Kumar Jain Rs. 1,00,000 -------------------------------------------- Total loans allegedly taken Rs. 11,80,000 -------------------------------------------- During the course of assessment proceedings for asst. yr. 2003-04 the assessee could not explain these credits/debit entries which are coded ignoring three digits, such as, Rs. 50 for Rs. 50,000. As such, these entries appearing in the diary impounded, besides other loose papers pertain to this assessment year could not be explained by the assessee. I have reason to believe that an income of Rs. 11,80,00 chargeable to tax has escaped assessment within the meaning of s. 148 of the Act." The learned CIT(A), after careful perusal of the reasons and entire facts on record, has found that formation of the belief that income escaped assessment had a rational connection and relevant bearing on the facts of the case. He also found that there is direct nexus and live link between the reasons recorded and escapement of income. He also observed that the reasons recorded by the AO were in good faith a....
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....facts are that the assessee returned income at Rs. 1,30,720 from the business of trading in Bardana, packing material (used in textile business) and its Adhat sales. The assessee has disclosed a gross profit of Rs. 2,60,260 on sales of Rs. 57,75,563 yielding GP rate of 4.50 per cent. This is stated to be the first year of doing own business of trading in the aforesaid items as the assessee was earlier carrying out such activities on commission basis only. An action under s. 133A of the Act was carried out at the business premises of the assessee on 8th Oct., 2002, when a diary (Avon Superfine) marked as Annex. B was found and impounded. This diary revealed entries aggregating to Rs. 11,80,000 in 17 names as under: -------------------------------------------- Sl. No. Name of depositor Amount of loan -------------------------------------------- 1. Sohan Lal Vadia Rs. 1,00,000 -------------------------------------------- 2. Bheemraj Mishrilal Rs. 30,000 -------------------------------------------- &n....
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....ot found appearing in the regular books of account of the assessee. The assessee's son, Shri Paras mal, was looking after the entire business on behalf of the assessee and a diary was found written in his own handwriting, i.e., in the handwriting of the son of the assessee. During the course of survey proceedings, the assessee's son admitted that these transactions are his own and related to his business activity and that some coding is given in the entries, i.e. Rs. 50 for Rs. 50,000 and Rs. 100 for Rs. 1 lakh. In two cases, these loans have been shown as repaid. It was also admitted by the assessee's son vide answers to question Nos. 19, 20 and 21 of the statement dt. 8th Oct., 2002 that due to fire in the shop and godown, he suffered losses in the business and with a view to settle the loans taken, he has taken loans of Rs. 11,80,000 from the aforesaid 17 persons found recorded in the impounded diary and the same remained unrecorded in the regular books of account. He also stated that these amounts have been taken by him personally as loans and do not relate to the business. The AO found this statement to be contradictory as at some stage, the assessee's son stated that these lo....
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....s not in a position to produce all those persons for verification. The AO, however, to meet the ends of justice, issued summons under s. 131 of the Act so as to examine the genuineness of these deposits. Summons in the names of the following six persons, however, were not served as these persons were not traceable: 1 Rajesh Kumar Jain Rs. 1,00,000 2 Mohan Lal Mahendra Kumar Porwal Rs. 1,00,000 3 Smt. Manju R. Jain Rs. 50,000 4 Shri Moolchand Khanted Rs. 50,000 5 Shir Sohan Lal Porwal Rs. 1,00,000 6 Dinesh Kumar Vardia Another person by name Champa Lal Dhamji having credit of Rs. 50,000 did not make any compliance despite service of summons under s. 131 upon him. The assessee was again required to produce all these....
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....s objections that the AO nowhere mentioned in the assessment order that the addition has been made under s. 68 of the IT Act as it was not necessary for him to have quoted such a section, while making addition in the peculiar facts and circumstances of the case. Since money is found recorded in the diary and was not recorded in the books of account, the same was required to be treated as income of the assessee as unexplained deposits/loans under s. 69 of the Act and such a decision taken by the assessing authority in making addition of Rs. 10,95,555 was found quite justified. 13. The assessee's counsel, Shri N.R. Mertia, placed strong reliance on the written submissions dt. 14th July, 2008 placed at assessee's paper book pp. 7 to 20 and further submissions dt. 15th July, 2008 which he seeks to be adopted in support of ground in appeal raised by the assessee. 14. On the other hand, the learned Departmental Representative supporting the findings reached by the authorities below and considering the failure of the assessee to discharge the burden that lay upon him contends that the decision reached by the learned CIT(A) needs no interference. 15. We have heard the parties and ....
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....summons to all these seventeen persons. Eight persons, namely, S/Shri Sohanlal Vardia, Bhimraj Mishrimal, Dhagalchand Chotmal, Jawarilal Bafna, Ms. Sangeeta, S/Shri Mahaveer Parakh, Ms. Mahaveeri Devi Lodha and Shri Kishan Lal Kankaria, who appeared in compliance to the summons have denied of making any loan to the assessee. The assessee was neither confronted with the statements so recorded nor any opportunity was allowed to it to cross-examine these persons. It was the duty of the AO to allow cross-examination even though the appellant had not asked. This principle is found laid by apex Court in the case of Union of India vs. T.R. Verma AIR 1957 SC 882. We, therefore, remand the matter of addition on account of credits/loans raised from these eight persons to the file of the AO, so that the appellant is afforded reasonable and effective opportunity of cross-examination and state his case finally as to why the addition, if any, is not warranted under the attendant fact circumstances of the case. 17. As regard loan raised for Rs. 50,000 from Shri Champa Lal Dhamji, the summons issued under s. 131 of the Act on him were duly served but he failed to appear before the AO. Likewise,....