TaxTMI 
TaxTMI 
2002 (10) TMI 824
X X X X Extracts X X X X
X X X X Extracts X X X X
....en the learned Assessing Officer has estimated undisclosed income on the basis of seized material separately and has also assessed the value of the unexplained assets found in the search as undisclosed income of the Block Period, then their mutual set off should have been allowed and such additions should have been telescoped and covered into one addition because it was neither fair nor reasonable to treat the same as having independent and separate existence, 6. the learned Assessing Officer erred in law and has violated the principles of natural justice in not examining the parties despite the specific request made by the assessee to issue notices under section 131 of the Act. 7. the value of unexplained assets as found in the search could only be treated as undisclosed income for the Block Period. 8. the assessment of undisclosed income of the Block Period at Rs. 97,70,210 is unjustified, arbitrary & hypothetical. 9. the addition of Rs. 6,940 as per Para 11 of the order are materially incorrect. 10. the addition of Rs. 1,89,000 for the cash shortage are materially incorrect, 11. in disbelieving the statement of Shri Madan Moh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 26 of his order are materially incorrect, 36. the addition of Rs. 1,65,280 as per page 26 of his order are materially incorrect, 37. the addition of Rs. 3,77,950 as per page 27 of his order are materially incorrect, 38. the addition of Rs. 3,80,000 for the Loans taken by the assessee are materially incorrect. Out of the aforesaid grounds ground No. 1 is general in nature whereas the ld. A.R. does not wish to press ground Nos. 9 and 15 respectively relating to addition of Rs. 6940 and Rs. 14000, the same are therefore dismissed as withdrawn. 2. The facts in brief are that a search under section 132(1) of the Act was conducted at the residential premises at 58, Shyamla Hills Road, Bhopal and in the business premises at Alankar Jewellers, proprietor Shri Madanlal Narendrakumar (HUF) on 14-7-1995 which was continued till 18-7-1995. Besides these the search was also conducted at the old residential building at 22, Hawamahal Road, Bhopal. In response of the notices issued under section 158BC of the Act, the assessee filed return accepting the undisclosed income as declared in return at Rs. 40,00,000 whereas the Assessing Officer has computed the same at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce in the addition made by the Assessing Officer. The addition of Rs. 1,89,000 is accordingly deleted. 6. Ground Nos. 11 and 12 - These grounds are related to the addition of Rs. 6,02,855 for the jewellery found in the shop. The Assessing Officer has dealt with this issue at page Nos. 4 and 7 of the assessment order and has justified this addition merely on the basis that the jewellery were not found recorded in the repairing register and further on the basis that statements of (a) Madanmohan Khattar, (b) Saroj Lalwani, (c) Ruksana Vazh, and (d) Vikram Ray cannot be relied upon since it was recorded by the Income-tax Inspector. It appears from the record that the explanation of the assessee during search remained that he being jeweller had also received jewelleries from the customers for the purpose of repairing/remaking during the course of business, which were deposited in seizure and out of which in maximum items tags are attached mentioning the names of the customers and the items which are untagged, the assessee is ready to identify as to which customers these belong and the searching party is at liberty to make query from those customers. The ld. A.R. draws our attention ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eceived for repairing purposes from the customers and the assessee had also explained about the nature and source of acquisition of the said items. His further submission is that there is no evidence against the assessee showing that he is the owner of the said items. With regard to non-recording of the items mentioned in panchnama Annexure-M1 to M5 in the repairing registers the ld. A.R. submits that in the shop there are retail counters which are manned by different salesmen, general customers who visit the shop carrying their jewellery items for repairing purposes usually contact the salesmen sitting on the counters and deliver the same to them, who as per the standing instructions of the proprietor of the shop record the particulars of such items in the repairing registers, but there are many customers who are very old and intimate to the proprietor, whenever they come directly go to the owner of the shop who always sit on the main counter or in his cabin and their dealings are directly with him only, and therefore whenever such customers come for the purpose of repairing of jewellery items, they deliver the items directly to the owner and since the owner directly received such....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e contents of page No. 35 of the paper book and submits that vide his reply dated 17-7-1996 (page Nos. 39 to 43 of the paper book) submitted before the Assessing Officer the assessee had explained that his grandfather had started the jewellery business somewhere in the year 1908 and the stock of precious stones represent accumulation of past several years and all the said purchases were truly and fully recorded in the account books and their purchase price, therefore, the value of precious stones as appearing in the account books was at the purchase cost, and the assessee had also furnished before the Assessing Officer a chart showing the opening stock, purchases and sales of precious stones from the year 1981-82 to 1994-1995 (page No. 41 of the paper book). The ld. A.R. submits that the difference in value had arisen because the entire stock was valued by the departmental valuer as per the market rate prevailing as on 14-7-1995 i.e., on the date of search ignoring the fact that the said items of precious stones/gems represented the accumulation of purchases of several years and in the search also no material or evidence was found showing purchases of precious stones outside the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ete the addition of Rs. 3,00,000 made in this behalf. 8. Ground No. 14 - It is related to the addition of Rs. 5,80,620 on account of jewellery found at the residence. The Assessing Officer has dealt with this issue at page Nos. 9, 10, and 11 of its assessment order. 9. The ld. A.R. submits that the Assessing Officer in the as'sessment order has accepted the explanation of jewellery held by Gopibai Simhal, Sushila Simhal and Narendra Simhal on the ground that these persons had declared the jewellery in their wealth-tax returns but the Assessing Officer has not accepted the explanation of the assessee with regard to the jewellery owned and possessed by the following family members on the grounds that these persons are not wealth-tax assessee and therefore presumed that the same represent the undisclosed income of the assessee:-- S. No. Name of Family member Relationship with Narendra Simhal Gross Weight (in gms) Net Weight (in gms) (after deducting 15% from gross weight) 1. Rashmi Simhal (aged about 23 years) Daughter 120 102 2. Archana Simhal (aged about 21 years) Daughter 105 89 3. Tripti Simhal (aged about 16 years) D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d at Rs. 2,42,898 and not accepted the explanation with regard to 800 grams jewellery. The ld. A.R. also cites the following decisions in support :-- (i) Smt. Patidevi v. Income-tax Officer & Others, 240 ITR 727 (Kar.), (ii) Smt. Neena Syal v. ACIT [1999] 70 ITD 62 (Chd.), (iii) Smt. Harbans Kaur v. ACIT 158 Taxation 59/64 (Trib.), and (iv) Smt. Kumud Jain v. ACIT, IT (SS) A. No. 93/IND/96. The ld. A.R. submits that the intention underlying CBDT instructions No. 288/63/93-IT(Inv) II issued on 11-5-1994 is also relevant with reference to dealing provisions of section 69A, under the such instructions that 500 grams jewellery is permitted to be retained in the case of a married lady, 250 grams for unmarried lady and 100 grams for male member of family. 10. The ld. D.R. on the contrary banks upon assessment order. 11. After considering the arguments advanced by the parties, in view of the materials available on the record and the judgments relied on by the party, we find substance in the contentions of the ld A.R. and accordingly delete the addition of Rs. 5,80,620 while allowing ground No. 14 of the appeal in favour of the assessee. 12. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xpenditure under section 28 of the Income-tax Act. He also draws our attention to the decision of P.T. Antony & sons v. ITO, 47 ITD 138 (Cochin). The ld. A.R. also submits that Assessing Officer has made the addition of Rs. 44,712 for unrecorded car expenses as per the seized paper Nos. 41 and 42 which are placed on page Nos. 119 and 120 of the paper book and explained that both the papers but together, reflect the expenditure on car repairing. He further submits that car is an asset of business of the assessee and expenditure incurred on repairing of car is deductible business expenditure. The ld. A.R. submits further that assessee had shown net income i.e., after considering the business expenditure which includes non-recorded expenditure, therefore Assessing Officer is not justified in making separate addition for unexplained businesses expenditure on the basis of seized papers. The ld. A.R. further draws our attention to the following citations : (i) M.K. Mathivathanan v. ITO 31 ITD 114 (Mad.), and (ii) Nishant Housing Development (P.) Ltd. v. ACIT 52 ITD 103 (Pat.) and submits that where unexplained expenditure was actually incurred for business purposes a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....999 dated 20-4-1999 - SC) the Hon'ble Supreme Court in this case was pleased to hold as under :- It cannot be a matter of argument, that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realization of excess over the cost incurred and that only forms the part of the profit included in the consideration of sales. (ii) Abhishek Corporation v. DCIT 63 TTJ 651 (Ahd.) - in this case it was held that even though it is established from the seized document that assessee was receiving premium/on-money on booking of flats, the entire receipt on on-money/premium cannot be treated as undisclosed income of the assessee, only net profit can be applied on unaccounted sales/receipts for making addition, and (iii) Kishore Mohanlal v. ACIT 64 TTJ 543 - in this case also it was held that only the net profit is to be assessed on sales. 16. The ld. D.R. on the other hand banks upon the order of assessing officer. 17. After considering the arguments advanced....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e by Devendrakumar. 18.2 The ld. A.R. on the contrary banks upon the assessment order in this regard. 18.3 After considering the arguments advanced by the parties in view of the materials available on the record specially the draft in the name of daughter of the assessee Nitya Simhal prepared and sent from Amritsar, there is no scope of doubt on the explanation furnished by the assessee. The addition is thus stands deleted. 18.4 The ground No. 26 is thus allowed in favour of the assessee. 19. Ground Nos. 30, 31 & 32 - Additions of Rs. 6,98,490 Rs. 1,65,600, and Rs. 3,85,000 have been questioned in these grounds made on account of alleged purchases of gold jewellery on the basis of diary seized. The Assessing Officer has dealt with the additions of Rs. 6,98,490 and Rs. 1,65,600 at page No. 18 of the order on the basis of a small diary marked as "seizure item No. D-13". The Assessing Officer has observed that the said diary reflects purchases of gold jewellery weighing 20,930-380 gms. and also refers a payment of Rs. 8,64,850 to Goldsmith and accordingly these transactions has not been accounted for in the regular books of account and calculated the sale value of these pu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... [2000] 67 TTJ (All.) 247, (ii) Samrat Bear Bar v. ACIT 251 ITR 1 (AT)(TM). 19.2 The ld. D.R. on the contrary banks upon the assessment order. 19.3 We have considered the arguments advanced by the parties in view of the materials available on the record and have also gone through the order impugned as well as judgments relied on by the party. We do not agree with the submission of the ld. A.R. that diary or the notings therein do not relate to the assessee specially when admittedly the diary was found from the possession of the assessee, but as per the judgments cited in this regard we find force in the submission of the ld. A.R. that the N.P. rate should have been applied and whatever profit was earned that was invested in the shape of excess stock found during the search and thus there was also no need of separate working capital. There is no evidence on the record that assessee had invested the income earned on the sale outside the books of account elsewhere. Under these circumstances, we are of the view that the Assessing Officer was not justified in making the aforesaid three additions. The ground Nos. 30, 31, and 32 are thus allowed in favour of the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....our to five salesmen in the shop of the assessee, who deal with the customers, make the sales and also give jewellery on 'uchhal' and make entries with regards such outgoings on the daily chart; such jewellery sent on approval is generally returned within two three days and it also happens sometimes that the particular salesman from whom the customer takes the 'uchhal' is not present at the shop and such 'uchhal' items returned and therefore the returned entry might have been missed. The rejection of affidavit was not justified by the Assessing Officer without any evidence to the contrary, submits the ld. A.R. while referring the following judgments :-- (i) Smt. Gunvantibai Ratilal v. CIT, 146 ITR 140/144 (MP), (ii) L. Sohanlal Gupta v. CIT, 33 ITR 786, 791 (All.), and (iii) Chandermohan Mehta v. ACIT [1999] 71 ITD 245 (Pune). 20.2 The ld. D.R. on the contrary justifies the assessment orders in this regard. 20.3 We have considered the arguments advanced by the parties in view of the materials on record and have also gone through the order impugned and judgments cited by the party. We find force in the submission of the ld. A.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....per B-17 page 17 on the finding that the said paper is a bill of BPL Gallery Bhopal in favour of A.K. Gupta, Peer Gate Bhopal. Since the bill is original found with the assessee, Assessing Officer had presumed that assessee had purchased a TV and given gift to Shri A.K. Gupta and the same was not recorded in the regular books of account. The ld. A.R. on this count submits that asses-see's shop is situated at Main Sarafa Market and number of customers visit frequently in his shop. Some one might have left the said bill in his shop and it was kept for returning to him as and when the person concerned come to claim the same. He further submits that additions on unrelated seized papers which is not related to the assessee as it appears from the face of the seized papers, is on conjecture and surmises and totally unjustified. (v) addition of Rs. 3363 on the basis of seized paper B-17 page Nos. 18 and 19 which is a hotel bill of Crown palace on the finding that said bill is not entered in the regular books of account of the assessee. The ld. A.R. submits that substantial withdrawals for household expenses having been made by the assessee which includes this expenditure also ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee had also furnished affidavits of some customers placed at page Nos. 234 to 237 of the paper book and further that the sale and profit elements included therein formed part of undisclosed income shown in the return filed for the block period. 24. The ld. D.R. on the contrary banks upon the assessment order. 25. After considering the arguments advanced by the parties in view of the materials available on the record, we find force in the submission of the ld. A.R. to this extent that the profit element included herein in these additions forms part of undisclosed income shown in the return of the assessee filed for block period and that in view of the judgments cited in support of ground Nos. 20 to 25, 28 & 29 only the net profit is to be assessed on sales and whatever profit was earned that was invested in the shape of excess stock found during the search, there was no need of separate addition. We accordingly delete the additions referred in ground Nos. 35 and 36 of the appeal. These grounds are thus allowed in favour of the assessee. 26. Ground No. 37 - Addition of Rs. 3,77,950 has been made on account of sale outside the books of account on the basis of rough ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n, has admitted this material fact that on the seized slips neither there the price of jewellery nor name of any person has been written. We thus find, force in the submission of the ld. A.R. which also find support from the decision of the Delhi Bench of Tribunal in the case of Ashwani Kumar (supra). Wherein it was held that in the case of such a dump document, the provisions of section 132(4A) do not permit anyone to presume that the total of the figures of slip represents the assessee's income, the presumption at the most was attracted to the figures and a further presumption they are represented the income of the assessee was not permissible under section 132(4A). Like in the present seized slips the revenue wanted to make use of these, it was the duty of the revenue to collect necessary evidence which might provide an acceptable narration to the various entries. No such evidence has been produced by the revenue and therefore the Assessing Officer was not justified in making the addition in question. The addition is thus deleted. The Ground No. 37 is allowed in favour of the assessee. Ground No. 38 - It is related to the addition of Rs. 3,80,000 for the loans taken by the a....