TaxTMI 
TaxTMI 
1994 (11) TMI 194
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....rrowings. Under most of the items listed in the paper, an amount with + sign was written which, according to the assessee, represented interest payable. Entry No. 17 contained a note that two months interest is to be reduced. At the end of the list, amounts of Rs. 1,42,000 and Rs. 1,61,000 were reflected under the letter J&K respectively. The words J&K were stated to be used for the partners, namely, Shri Jayantilal and Shri Kantilal. The assessee contended that the entire amount reflected on paper represents borrowings (including capital). These borrowings were utilised for the purpose of investment found in various assets during the search operation. In respect of the entries made in the assessee's books, confirmation were said to have been filed. 3. The contention of the assessee was not accepted by the Assessing Officer. In the order passed under s. 132(5) of the Act, the amounts were treated as advances due. After considering the repayment of Rs. 87,000 an amount of Rs. 32,69,745 was proposed for addition in that year. In view of the categorical statement made by the assessee that some of the amounts were collected out of the books, Assessing Officer held that the assessee ha....
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.... This addition was confirmed by the CIT(A). 4. Shri K.A. Sathe, learned counsel for the assessee, appeared before us. Relevant documents and papers were filed. At the outset, it was submitted that addition of Rs. 15,53,640 should not be made separately and total of all additions may be taken at Rs. 19,25,025 in place of Rs. 40,63,522 as made by the Assessing Officer and as against Rs. 18,00,000 declared by the assessee. In support of the claim, the learned counsel stated that there is no evidence to show that the amounts mentioned on the piece of paper represented "advances due" to the assessee and not borrowings. According to the learned counsel, there is overwhelming evidence to support that the list contains the borrowings and not the amount of 'advance due'. (i) Statement of Jayantilal who was examined at the time of raid is relevant in this connection. He admitted that the amounts represented borrowings, some of which were recorded in books and some of which were not recorded. It was also mentioned that the rate of interest was 1% per month. (ii) The capital of the partners is mentioned below the list. This goes to show that the list is of borrowings. (iii) Those amounts w....
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.... could give credence to the fact that the amount in the list could be really borrowings of the assessee. This gives rise to a question whether any addition can be made in respect of borrowings which, on the basis of circumstantial evidence, appears to be borrowings but for which the assessee cannot produce any confirmatory letter or evidence. In order to make such addition, s. 68 cannot be applied because these are not credits in the books of account. Secs. 69, 69A and 69C also do not apply because these are not investments and also do not represent any valuable asset. No addition on this count is, therefore, justified if the list is accepted to be that of borrowings. 7. Shri Sathe submitted that assuming without conceding that addition of the borrowings is to be made because there is no confirmation of the loan, the question arises as to what happened to the cash represented by these borrowings. Thus, if the addition is to be made of the amount of Rs. 33,56,000 what happened to the said amount. It was vehemently contended that Revenue conducted intensive search operation, but no assets other than those referred in the assessment order were found. It would, therefore, be reasonabl....
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....o. 8 in the list. Since the borrowings in the list are separately being considered, these two credits of Rs. 21,000 are required to be deleted from the amount of Rs. 46,000. The addition to be made in respect of IBICO diary will then be confined to Rs. 25,000 of Tajraj Mangilal and other loans of Rs. 49,171. 11. The Assessing Officer allowed a deduction of Rs. 68,700 in respect of the amounts which appear in the list with the description 'given'. These are Rs. 26,000 in the name of V.K Kulkarni, Rs. 24,700 in the name of A-1 Trading and Rs. 18,000 in the name of Prakash Kavedia. These amounts were returned, therefore, these cannot be considered for reconciliation of assets. In any case, if the borrowings are to be added as assessee's own money, the money returned will be to the assessee himself and it will have to be ignored. 12. Finally, Shri Sathe gave the following working to indicate how much amount could be considered against the addition of assets: (A) Total credits . Rs. 33,56,000 Less : Amounts returned (as allowed by AC) see para 11 above . Rs. 68,700 . . Rs. 32,87,300 Less : Partners' capital (as allowed by AC) . Rs. 2,07,000 . . Rs. 30,80,300 Less : Cre....
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....r had already added Rs. 3,00,000 and Rs. 3,50,000 respectively. Thus, according to Shri Sathe, addition of Rs. 19,25,025 should only be sustained. It was further proposed that addition on account of gold shortage and gold excess found in IBICO diary should be telescoped because it would be inconsistent to add on account of excess gold and shortage of gold simultaneously. It was also argued that for making addition on account of excess, the rate of gold was wrongly taken at Rs. 3,202 instead of Rs. 3,000 per ten grams. Thus, for 481.950 grams of gold 'difference to be deducted' comes to Rs. 16,750. The addition on this count is to be sustained as under: Addition on account of shortage of gold . 2,67,705 Addition (IBICO diary) on a/c of excess gold 2,69,592 . Less : rate difference 16,750 2,52,842 . . Rs. 14,863 A net addition of Rs. 14,863 was proposed to be added to Rs. 19,25,025 i.e., total addition to be sustained in the firm was Rs. 19,39,888 as against Rs. 40,63,622. 14. Shri Sunil Pathak, the learned Senior Departmental Representative appeared on behalf of the Revenue. The relevant documents and papers were filed at the time of hearing. It was contended that the....
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....of paper impounded from the premises of M/s. Kant Electronics, reflected only the borrowings of the assessee. These borrowings were utilised by the assessee for acquiring the assets found during the search. Unfortunately, most of the borrowings were not supported by proper confirmations. Apprehending the situation that the creditors would be reluctant to come forward, the assessee made a declaration to that effect. The purport of the declaration is described in the letter dt. 16th March, 1992 addressed to the Assessing Officer. The details of declaration made by the firm covers an amount of Rs. 18,00,416. Besides the two partners declared Rs. 6,50,000 on account of chit fund and unrecorded advances. After giving the complete details of the borrowings and reconciling the same with reference to other assets, Shri Sathe proposed that in the case of firm addition to the tune of Rs. 19,39,888 may be retained over and above the sum added in partners' cases as per their declaration in respect of their contribution in chit funds. It would be contrary to the canons of law to tax twice the same amount, i.e., borrowings and cost of assets. Borrowings were utilised to acquire assets. 17. We ....
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....ere offered for taxation as because the assessee was not in a position to discharge his onus vis-a- vis creditors'. On this count, he accepted and assented to the addition as per the offer made by declaration-supported by letter dt. 16th March, 1992. Even if these additions are to be treated as intangible additions, as decided in catena of cases, due credit should be given to the assessee. We have examined the statement where the assessee reconciled the figure of Rs. 33,56,000 with reference to the various assets. We have also noted the cause of difference in regard to Angelo Da Fonseca Education Trust. 21. When an explanation is filed by the assessee, it is incumbent on the Revenue to consider the said explanation judiciously. It is the duty of the Assessing Officer to consider the explanation with reference to the surrounding circumstances and in the light of material gathered. The Assessing Officer should not act like Sherlock Holmes. The bedrock of foundation of the addition must not be based on surmises and conjectures. Shri Jayantilal, partner of the firm, who was examined immediately after the search operation admitted that the amount represented borrowings some of which we....
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....made out of it. Adverting to paras 12 and 13, we hold that the working as done by the assessee as to how much amounts could be treated against addition of asset appears to be in consonance with the fine norms of reasonings. It would, therefore, not be correct to take any contrary view in the matter. On this factual backdrop, we decide the various grounds taken in this appeal. 25. In regard to the first ground concerning the addition of Rs. 2,67,205 on account of difference in gold stock, we agree with the assessee that addition on account of gold shortage and gold excess found in IBICO diary should be telescoped because it would be inconsistent to add on account of excess gold and shortage of gold simultaneously. We direct the Assessing Officer to act accordingly. We further direct him to take correct price of gold into consideration. It may be verified with reference to the records that whether the current price was Rs. 3,000 per 10 grams or Rs. 3,202 as adopted in the assessment order. 26. Ground No. 2 was not pressed. We reject the same as not pressed. In regard to ground No. 3, we have noted that addition made in respect of Mahavir Diary was not pressed. In regard to addition....