TaxTMI 
TaxTMI 
1999 (8) TMI 104
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngs to say that a short adjournment be allowed since the second paper book filed by the learned counsel was not available in his records. Since the said paper book merely contained the written submissions of the learned counsel, Shri Singh was asked to argue the matter in the light of the oral submissions made by the counsel and written submissions would be excluded. However, this did not satisfy the learned Departmental Representative and he requested for a short adjournment which was allowed by the Bench adjourning the appeals to 7th July, 1999. On 7th July, 1999 Shri Singh again came up with a request for adjournment. This time on the pretext that case records and appraisal report has not been received from the AO. On his request being declined by the Bench Shri Singh was visibly annoyed and left the Court in a huff. The matter did not end here. On 8th July, 1999 Shri Singh filed two letters in succession with the Registry. In the first letter Shri Singh requested for short adjournment of 'one month' and in the other letter Shri Singh has, in gross misrepresentation of the facts unfortunately made observations which are untrue. Shri Singh states: "Despite the request the Benc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; (a) Bharatiben Bharatkumar Jariwala 35% (b) Rajendra I. Jariwala 35% (c) Minor Amit M. Jariwala 15% (d) Minor Khushboo Jariwala 15% Smt. Bharatiben B. Jariwala having 35% share is the wife of Shri Bharatbhai I. Jariwala and the minors are the children of Mahesh I. Jariwala. (3) M/s Akshay Fabrics (a) Bharat I. Jariwala 1/3rd (b) Mahesh I. Jariwala 1/3rd (c) Rajendra I. Jariwala 1/3rd Apart from the above, all the three brothers and their father Shri Ishwarlal Khushaldas Jariwala have i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rders under s. 132(3) of the Act, the aforementioned members of the group filed a letter before the ADI., Surat giving the bifurcation of the disclosed amount of Rs. 75 lakhs, which is placed on pages 11 to 13 of the paper book. The bifurcation of the disclosed amount have also been detailed in the assessment orders by the AO. The disclosed amount of Rs. 75 lakhs was bifurcated as under: ------------------------------------------------------------ Sl. No. Name of the firm Amount ------------------------------------------------------------ A. M/s B.M. Silk Mills Rs. (1) Excess stock found during search 22,14,425 (2) Seized cash &n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; 92,500 Shri Bharat I. Jariwala 1,40,000 2,32,500 (f) Misc. expenses (stamp duty, donation etc.) Shri Mahesh I. Jariwala 34,500 Shri Bharat I. Jariwala 23,400 57,900 --------- Total 41,00,000 &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; 27,21,838 --------- C. M/s Akshay Fabrics The assets in respect of income disclosed are in form of misc. receivables/liquid assets, misc. investment etc. 3,00,000 D. Shri Ishwarlal Khushaldas Jariwala The assets in respect of income disclosed are in form of withdrawals made and invested for purchase of jewellery etc. 3,78,162 &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; --------- 75,00,000 --------- 6.1. Subsequently during the course of assessment proceedings the AO pointed out certain discrepancies in respect of the figures of excessive stock disclosed by the group as well as investments made in the purchase of shops in the Shriram Market etc. Thereupon the assessees of the group filed a letter dt. 18th Oct., 1996, pointing out that the earlier disclosure has been made subject to verification with the bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idence) (b) Investment made in property as 5,00,000 Sagrampura, Zunda Street, Surat. Shri Bharatbhai I. Jariwala 5,00,000 (c) Investment made in property at Dumas 4,00,000 Shri Bharatbhai I. Jariwala 2,00,000 Shri Maheshbhai I. Jariwala 2,00,000 (d) Investment made in jewellery In the case of NIL ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....& Co. (1) Excess stock found during the search. 24,12,602 (2) Misc. receivables/liquid assets, misc. assets, etc. (3) The amount withdrawn by the partners out of the unaccounted income of the firm and invested, utilised by them as under: (a) Investment made in property at Dumas 2,00,000 Shri Rajendrabhai I. Jariwala 2,00,000 (b) Investment made in jewellery 74,319 In the case of the Rajendrabhai group (169.50 gms. x Rs. 442.59) (c) Investment in household valuables 92,500 &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich are being agitated in the present appeals mainly pertained to the grievance of the assessees that double additions have been made by the AO in the cases of the three firms as well as the three partners involved in the present batch of appeals. 8. First we take up the grounds of appeal in the cases of the three firms, viz. B.M. Silk Mills. M. Rajendra & Co. and Akshay Fabrics and deal with the issue of double additions. In the identically worded grounds of appeal in the cases of the three firms it is stated that the AO has made additions: (a) which have already been shown as part of returned income; (b) on account of further excess in stock when there was no such excess stock as per final bifurcation of the disclosure amount given during the assessment proceedings. 9. As per the revised disclosure vide assessees' letter dt. 18th Oct., 1996, from the details reproduced herein before it would be seen that the disclosed income in the cases of the three assessee firms are as under: Rs. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the business premises with the aggregate figure of stocks as reflected in the books of the concerns, the search party arrived at the following excessive stock Excess yarn 22,149 kgs. Excess stock of cloth 10,745 mtrs. The above excess stock was valued as under: Rs. Excess stock of yarn at the 42,08,462 rate of 190 per kg. Excess stock of cloth 3,00,874 --------- Total 45,09,336  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; 3,00,000 --------- 51,55,038 --------- The AO however did not accept the allocation of the excess stock and proceeded to add the difference in the two disclosures on account of extra figures of excess stock by making the following additions: B.M. Silk Mills In respect of yarn 1,03,692 In respect of excess of cloth 2,12,157 M. Rajendra & Co. In respect of yarn &n....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the AO between the two firms M/s B.M. Silk Mills and M/s M. Rajendra & Co. only. We do not think that the Revenue holds the position that stocks of M/s Akshay Fabrics are entirely accounted for and no portion of the stocks found at the combined premises is attributable to unaccounted stock of Akshay Fabrics. Any such view would be contrary to the realities and actualities of the situation. This is particularly so when a disclosure of Rs. 3 lakhs has been made by M/s Akshay Fabrics at the time of search and also while filing the original disclosure as well as revised disclosure by the representatives of the group. The amount of Rs. 3 lakhs disclosed by M/s Akshay Fabrics would in our opinion take care of the excess stock of M/s Akshay Fabrics found during the search as is being claimed by the firm. Merely because in the original disclosure the disclosure has been made on account of "miscellaneous receivable/liquid assets", etc. would not by itself justify the view of the AO that no portion of the excess stock found at the combined premises would be attributable to Akshay Fabrics. The amount of Rs. 3,00,000 has been disclosed and the disclosure has been accepted by the Department....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cellaneous items have also not been furnished. Such miscellaneous assets have been admitted at the time of the first disclosure and no retraction can be allowed at a later date. 15. The learned counsel drew our attention to the observations made by the representatives of the group while filing the original disclosure of Rs. 75,00,000 vide letter dt. 16th Dec, 1995. "Bifurcation given below is broadly outline and not exact as we have to go through voluminous seized materials. Moreover, books of accounts are also not with us. The bifurcation given below is subject to change after detailed verification with the books of accounts which are at present seized by the Department." The learned counsel further submitted that since the books of accounts were lying with the IT authorities, the disclosure of Rs. 75,00,000 was made "subject to change after detailed verification with the books of accounts". Learned counsel further pointed out that no assets of the nature of unaccounted receivables or any other tangible assets have been found by the Department during the search operations and no assets actually found exceeded over and above the figures disclosed by the group. These miscel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stock, the AO has accepted other modifications made in the final disclosure as compared with the original disclosure. Thus, if we reconcile the original disclosure made on 16th Dec, 1995 with the figures reflected in the final disclosure made on 18th Oct., 1996 we find that the following modifications have been made: (1) Miscellaneous items of Rs. 4,48,391 have been excluded from the final disclosure. We have already discussed above the exclusion of these items. (2) With regard to jewellery owned by various members of the group, the figures in the two disclosures show variations. There is a decrease in the value of unaccounted jewellery in the following cases: .M. Silk Mills 90,048 Ishwarlal K. Jariwala (father of the 2,90,892 three brothers) -------- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he three appeals in the cases of the three main concerns of the group viz. B.M. Silk Mills, M. Rajendra & Co. and Akshay Fabrics. Appeals in the cases of the three partners viz. Mahesh I. Jariwala, Rajendra I Jariwala and Bharat I. Jariwala. 18. In these three appeals of the partners a major dispute is against the double additions. The main grievance is that the additions made in the cases of the aforesaid three firms on account of unexplained assets found at the residence of the partners like jewellery, household assets, etc. have again been added back in the partners cases by invoking the provisions of s. 28(iv) of the IT Act, 1961. There is no dispute that the unexplained assets like the jewellery and other household items like T.V. video, refrigerator, washing machine, etc. found at the residence of the partners have been acquired out of the undisclosed income of the firm and the same have been duly disclosed by these firms and taxes paid thereon. The AO however again proceeded to include the value of these unexplained items in the hands of the partners on the ground that the partners are using the assets of the firm and value of the perquisites under s. 28(iv) is liable ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not help the case of the Department. 19. We have carefully considered the reasoning adopted by the AO as well as the submissions made by the learned counsel before us. It is relevant to note here that in so far as the unexplained assets in question are concerned, there is no dispute that the value of these assets have already been included in the firms cases where the assessees are partners. The Revenue seeks to include the unexplained assets again in the hands of the partners by taking recourse to s. 28(iv). Explanation appended to s. 158BB clearly provides that the undisclosed income of a firm shall not be chargeable to tax again in the hands of the partners. In the instant case the household assets have been found at the residential premises of the partners. These are being used by the partners. Merely because the firms in which these assessees are partners have surrendered the value of these assets for assessment purposes would not by itself prove that the assets are owned by the firms. It is to be noted that the assets include inter aha investments made by She partners in immovable properties. For example; investment of Rs. 2 lakh each have been made by the three partners....
X X X X Extracts X X X X
X X X X Extracts X X X X
....use with their father Shri Ishwarlal K. Jariwala. The third brother Shri Bharat I. Jariwala resides independently in a separate house. In the case of Bharat I. Jariwala the AO has discussed the issue of inadequacy of household expenses at pp. 11 to 13 of the assessment order and brought out detailed facts in support of the conclusion that the household expenses shown by Shri Bharat Jariwala were inadequate. During the course of the statement of Smt. Bhartiben Jariwala, wife of the assessee recorded under s. 132(4) she stated that her household expenses excluding expenses such as purchases of dal, oil, rice are Rs. 5,000 per month. The statement of the assessee was also recorded on the same day and he stated that his household expenses are of the order of Rs. 5,000 per month. The assessee furnished the yearwise expenses incurred for household purposes for the last three assessment years as under: Asst. yr. Rs. 1995-96 2,20,000 1994-95 89,000....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... brothers viz. S/Shri Mahesh and Rajendra, living jointly with their father Shri Ishwarlal Jariwala, the break-up of withdrawals made by each member and the estimates of household expenses made by the AO are reflected in the following chart: -------------------------------------------------------- Asst. yr. 1993-94 Drawings Estimates Addition -------------------------------------------------------- Rs. Rs. Rs. (1) Ishwarlal Jariwala 53,000 60,000 7,000 (2) Mahesh I. Jariwala 51,400 1,20,000 68,600 (3) Rajendra I. Jariwala 58,000 1,20,000 62,000 -------....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the personal rest house at Dumas by the family members. The family of Rajendra I. Jariwala, Mahesh I, Jariwala and Ishwarlal Jariwala consisted of 12 persons as a whole. The children of Maheshbhai and Rajendrabhai are studying at various prestigious educational institutions in Surat. The AO accordingly made the estimates of household expenses as per col. 4 and made additions as per cl. 5 in the chart reproduced above. 25. Having regard to the facts and circumstances of the case we feel that the household expenses shown by the various members of the family are inadequate. However, we feel that it would be fair and reasonable to estimate the household expenses in the cases of the two brothers and their father as under: 1) Shri Mahesh I. Jariwala 1993-94 1,00,000 1994-95 1,10,000 1995-96 1,20,000 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the search party. The amount of Rs. 1,75,000 has been disclosed in the disclosure made in the case of B.M. Silk Mills towards undisclosed assets of the said firm. Regarding the balance amount of Rs. 13,408 a similar explanation as given in the case of Shri Bharat Jariwala above has given. The explanation that the amount represents the savings of the family out of household withdrawals as well as gifts on festivals etc. appears to be reasonable. The addition of Rs. 13,408 made in the case of Shri Ishwarlal Jariwala is therefore, deleted. Unaccounted investments in shops: 28. Two shops bearing Nos. 7 & 8 in the Sriram Market belonging to the members of the family were treated as unexplained. The value of these shops Rs. 1,40,000 has been disclosed by Shri Ishwarlal Jariwala in the revised disclosure of the group as reproduced vide para 6.1 above. The AO however, has allocated the unexplained investment of Rs. 1,40,000 equally in the hands of the three brothers and their father and an addition of Rs. 35,000 in each case has been made. These additions were being disputed by the four assessees viz. Shri Maheshbhai, Rajendrabhai, Bharatbhai and their father Shri Ishwarlal. This ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the issue of capital gain is beyond the purview of block assessment. In support of this contention reliance is placed on the various decisions of the Tribunal as under: (1) Sunder Agencies vs. Dy. CIT (1997) 59 TTJ (Mumbai) 610 : (1997) 63 ITD 245 (Mumbai); (ii) Express Movers Ltd. vs. Dy. CIT (1997) 59 TTJ (Del) 227 : (1997) 61 ITD 528 (Del); (iii) R. Ramanathan vs. Asstt. CIT (1998) 65 ITD 108 (Mad); (iv) Parakh Foods Ltd. vs. Dy. CIT (1998) 64 ITD 396 (Pune) and (v) T.S. Kumarasamy vs. Asstt. CIT (1998) 65 ITD 188 (Mad); Further reference is made to the decision of Delhi High Court in the case of L.R. Gupta & Ors. vs. Union of India & Ors. (1992) 101 CTR (Del) 179 : (1992) 194 ITR 32 (Del). (2) The learned counsel argued that M/s Bharat Enterprises. (in the name of M/s Bharat Builders & Organisers) is an existing assessee and assessments have been made from year to year including for asst. yr. 1987-88. The contention of the AO that the firm is a non-genuine entity, therefore, cannot be sustained. The learned counsel further submitted that the assessee has been assessed under the income-tax as well as the wealth-tax for various assessment years. For ass....