DY. COMMISSIONER OF INCOME TAX, CIRCLE - 01,, VARANASI vs. M/S RATANDEEP GOLD & DIAMOND PVT. LTD., CHANDAULI

ITA NO. 136/VNS/2020& CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. O R D E R

PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER:

raised by Revenue in memo of appeal filed with Income Tax Appellate Tribunal, Varanasi (hereinafter called “the tribunal”) in ITA No. 136/VNS/2020 for ay:2017-18, reads as under: “1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition on account of undisclosed profit of Rs.45,608/- factoring the value of stock, the net profit came out Rs. 74,30,135/- against disclosed Rs.73,84,527/-

2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition as unexplained expenses of Rs.11,43,944/- debited in P&L. A/c after the date of survey.

3. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition unexplained purchases of Rs.45,36,423/- out of unregistered purchases of Rs.4,53,64,232/- @10%. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P.

4. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition unexplained investment of Rs.43,00,000/- under the head furniture and fixture which admitted during survey action and retracted while filing of return of income.

5. Right is reserve to alter, modify and to file any fresh ground of appeal.” 2a. The grounds of Cross Objection(C.O.) raised by assessee in memo of Cross Objections(C.O.) filed with the tribunal, reads as under:

“1.The assessment order failed to workout basis of quantum of addition of Rs.45608 made on the basis of factoring of net profit which makes addition unjustified. 2.The learned CIT Appeal had deleted the addition of Rs.45608 by evaluating detail facts brought on record which is not distinguished by A.O.. Hence deletion of addition of 45608 is unjustified on fact.

3. Addition of Rs.1143944 against unexplained expenditure on ground that expenditure booked after the date of survey without perusing books of account and fact brought during assessment proceeding which makes addition unjustified. 4.Hon'ble CIT Appeal had perused records and deleted the addition on the basis of facts which again not distinguished in grounds of appeal . Hence deletion Rs. 1143944 is unjustified. 5.The addition of Rs.4536423 on the ground of alleged suppression of profit 10% in unregistered purchase of Rs.45364232 is against the fact which shows the unregistered purchase are much economical than registered purchase, which shows order passed is without verifying the record and make the order unjustified, 6.Hon'ble CIT Appeal has rightly deleted the addition of Rs 4536423 after verifying the fact from the record that addition is against the fact as unregistered purchase are economical in comparison to registered purchase.

ITA NO. 136/VNS/2020& CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. 7.The addition of Rs.43 lacs u/s 69A in respect of alleged excess investment in furniture fixture is void ab-initio. 8.Hon'ble CIT Appeal rightly deleted addition of Rs. 43 lacs on facts as well duly supported by judicial pronouncement.”

The AO issued show cause notice (SCN) dated 17.12.2019 to the assessee , asking assessee to explain as under: “1. During the Course of Survey proceedings u/s 133A conducted on 05.10.2018, in your statement u/s 133A which was recorded on 05/10/2018(sic. 05.10.2017) in Q. 21, you were asked to explain undisclosed profit in your accounts during the FY 2016- 17 on the basis of data retrieved from your computer amounting to Rs 6,81,81,364/- in reference to which you have surrendered an undisclosed income of Rs 5.00 Crores and made an statement that the due taxes with interest will be deposited within a week but you failed to do so. Furthermore while going through return of income filed by you on 07.11.2017 (vide E.filing No 295990071071117) we found that you have not fulfill your commitment made during survey with regard to payment of taxes. You are hereby provided a final opportunity to show cause as to why the aforementioned amount of investments shall not be treated as your unaccounted income u/s 69 of the Income-tax Act, 1961 and added back to your income? 2. Apart from this during the Course of survey proceedings in your statement u/s 133 recorded on 05.10.2018(sic. 05.10.2017) for Q 23 you were asked to explain the difference in investment under the sub head furniture and fixture in B/S a difference of Rs 43.00 Lacs was noted and in answer to Q.23 you have offered total amount as undisclosed investment. However, subsequently you have retracted from the same as per your ITR, Hence, why the aforementioned amount of investments may not be treated as your income u/s 69 of the Income-tax Act, 1961?” In reply, the assessee submitted before AO that the assessee has contested the finding during the survey (stock status at Page no. 8 of seized material) where total stock value was taken as Rs. 10,32,24,013/- , whereas actual stock as per audited statement is Rs.4,58,34,907/- for same stock without any variation(audit report filed on 07.11.2017). The assessee submitted details of valuation of closing stock , which is reproduced by the AO at page 9 of the assessment order, and the same was 11 CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. accepted by the AO and no adverse inference was drawn by the AO. The details of valuation of stock as aforesaid submitted by the assessee before the AO , is reproduced hereunder:

Thus, so far as surrender of Rs. 5,00,00,000/-(Rs. five crores) made by assessee during survey due to differential in the stock value , wherein the assessee , infact, retracted the said surrender of income of Rs. Five Crores by not declaring the same in the return of income filed with the department , the said retraction stood accepted by the AO and no adverse view/inference was drawn by the AO on this issue . However, the AO observed that factoring in this value of stock the net profit comes to Rs. 74,30,135/-(more than Rs. 45,608/-). The AO observed that the assessee has stated in his statement recorded under Section 131 , that there were some problem in the accounting software due to which it has taken an exaggerated rate for some stock which was deemed as an unexplained income of the assessee by invoking provision of Section 69A of the Act , and , thus, aforesaid income of Rs. 45,608/- was added to the total income of the assessee by the AO and brought to tax @ 60% as provided under Section 115BBE of the Act, vide assessment order dated 30.12.2019 passed by AO u/s 143(3). 3b. The AO , further observed that the assessee has provided details of expenses in Profit & Loss account as per seized documents and as per audited Balance Sheet, and while perusing this comparative chart , the AO observed that expenses debited in books of accounts ( on finalization of accounts) are mentioned as amounting to Rs.22,18,157/- (including depreciation of Rs. 5,70,537/-). Hence, the remaining 12 & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. expenses debited after date of survey viz. 05.10.2017 were disallowed by the AO amounting to Rs. 11,43,949/- as unexplained expenses u/s 69C. 3c. The AO further observed that the assessee has made unregistered purchases amounting to Rs. 4,53,64,232/- out of total purchases. The AO observed that the assessee has not provided any details to enable its verification. Thus, the AO observed that the assessee company has suppressed its profit by making unregistered purchases. The AO rejected books of accounts of the assessee company. Considering the facts and circumstances of the case, the AO disallowed 10% of the total unregistered purchases which were treated as deemed income of the assessee and brought to tax by AO under Section 69C of the 1961 Act, which stood added by the AO to the total income of the assessee u/s 69C for taxation at the rate of 60% as provided u/s 115BBE of the 1961 Act. 3d. Further, the AO observed that the assessee has not provided detail regarding the undisclosed investment of Rs. 43,00,000/- under the head furniture and fixture. The AO observed that the assessee could not produce any verifiable explanation or evidence. The AO added the same to the total income of the assessee as unexplained investment u/s 69A of the 1961 Act and brought to tax the same at the rate of 60% as provided under Section 115BBE of the Act.

ITA NO. 136/VNS/2020& CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. b) Judgment and Order passed by Hon’ble Rajasthan High Court in the case of CIT v. Mantri Share Broking Private Limited (2018) 96 taxmann.com 279(Raj.HC) c)Appellate Order passed by ITAT, Kolkatta Bench in the case of Rohitaswa Das v. ACIT in d) Dismissal of SLP by Hon’ble Supreme Court in the case of PCIT , Central-III v. Krutika Land Private (2019)261 Taxman 454(SC) e) Dismissal of SLP by Hon’ble Supreme Court in the case of PCIT v. B G Shrike Construction Technology Private Limited (2019) 265 taxman 543(SC) The Ld. Counsel for the assessee submitted that the Department has no evidence of the assessee investing Rs. 60 lacs in the furniture and fixture including decoration and furnishing of showroom. The ld. Counsel for the assessee also relied upon CBDT instruction number F.No. 286/2/2003-IT(Inv II), dated 10.03.2003. The ld. Counsel for the assessee has filed copy of the said instructions, which are placed in file on record. The ld. Counsel for the assessee submitted that the C.O. is filed by the assessee which is only in support of the appellate order passed by ld.CIT(A). 6.We have considered the rival contentions and perused the material on record including cited case laws. The assessee is engaged in the business of jewellery. We have observed that there was a survey operations conducted by Revenue u/s 133A in the business premises(show room) of the assessee and its sister concerns of the group , on 05th October, 2017. During the course of survey operations carried out by Revenue under Section 133A of the Act, it is claimed by Revenue that several documents and retrieved of computer data backup etc. which were incriminating in nature as per annexures to the Survey Report drawn, were found and impounded by Revenue . The assessee filed its return of income for ay: 2017-18 ,on 7th November, 2017,returning income of Rs.76,90,500/- . The AO issued notice under Section 143(2) , dated 27.09.2018 to the assessee, which was claimed by AO to have been duly served on the assessee. Thereafter, notices under Section 142(1) were also 26 & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. issued by AO on 29th January, 2019 and 4th November, 2019 to the assessee, which were also claimed by AO to have been duly served on the assessee. The assessee participated in assessment proceedings conducted by the AO. During the course of survey proceedings conducted by Revenue against the assessee, a statement was recorded on oath of Shri Manjit Singh, the Director of the company , on the issues of undisclosed income and investment, and the details of undisclosed income and signed copies of Profit & Loss account and Balance-sheet retrieved from the computer of the group M/s Ratandeep Gold & Diamond Pvt. Limited. The relevant copy of the statement, as well signed copy of P&L and Balance Sheet as retrieved from computer are reproduced by AO ,in the assessment order at page no. 3-7 of the assessment order, which is reproduced hereunder: & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P.

The AO issued show cause notice(SCN) dated 17.12.2019 to the assessee , asking assessee to explain w.r.t. surrender of undisclosed income of Rs. 5.0 crores and Rs. 0.43 Crores, made during the course of survey proceedings , but which were not declared and disclosed by the assessee in the return of income filed with the Revenue. The said SCN dated 17.12.2019 , is reproduced hereunder: “1. During the Course of Survey proceedings u/s 133A conducted on 05.10.2018, in your statement u/s 133A which was recorded on 05/10/2018(sic. 05.10.2017) in Q. 21, you were asked to explain undisclosed profit in your accounts during the FY 2016- 17 on the basis of data retrieved from your computer amounting to Rs 6,81,81,364/- in reference to which you have surrendered an undisclosed income of Rs 5.00 Crores and made an statement that the due taxes with interest will be deposited within a week but you failed to do so. Furthermore while going through return of income filed by you on 07.11.2017 (vide E.filing No 295990071071117) we found that you have not fulfill your commitment made during survey with regard to payment of taxes. You are hereby provided a final opportunity to show cause as to why the aforementioned amount of investments shall not be treated as your unaccounted income u/s 69 of the Income-tax Act, 1961 and added back to your income? 2. Apart from this during the Course of survey proceedings in your statement u/s 133 recorded on 05.10.2018(sic. 05.10.2017) for Q 23 you were asked to explain the difference in investment under the sub head furniture and fixture in B/S a difference of Rs 43.00 Lacs was noted and in answer to Q.23 you have offered total amount as undisclosed investment. However, subsequently you have retracted from the same as per your ITR, Hence, why the aforementioned amount of investments may not be treated as your income u/s 69 of the Income-tax Act, 1961?” In reply, the assessee claimed before the AO that the assessee has contested the finding during the survey (stock status at Page no. 8 of seized material) where total stock value was taken as Rs. 10,32,24,013/- whereas actual stock as per audited 33 CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. statement was claimed by assessee isRs.4,58,34,907/- for same stock without any variation(audit report filed on 07.11.2017). The assessee submitted details of valuation of closing stock before the AO, which is reproduced by the AO at page 9 of the assessment order, and the same was accepted by the AO and no adverse inference was drawn by the AO. The details of valuation of stock as aforesaid submitted by the assessee before the AO , is reproduced hereunder:

Thus, so far as surrender of Rs. 5,00,00,000/-(Rs. five crores) made by assessee during survey due to differential in the stock , wherein the assessee in-fact retracted the said surrender of income by not declaring the same in the return of income filed with the department , and the said retraction stood accepted by the AO and no adverse view/inference was drawn by the AO on this issue, and consequently no additions were made by the AO while framing assessment. However, the AO observed that factoring in this value of stock the net profit comes to Rs. 74,30,135/- (more than Rs. 45,608/-). The AO observed that the assessee has stated in his statement recorded under Section 131 , that there were some problem in the accounting software due to which it has taken an exaggerated rate for some stock which was deemed as an unexplained income of the assessee by invoking provision of Section 69A of the Act , and , thus, aforesaid income of Rs. 45,608/- was added to the total income of the assessee by the AO and brought to tax @ 60% as provided under Section 115BBE of the Act, vide assessment framed u/s 143(3). Before ld. CIT(A) , the stand of the assessee was that the AO has not explained in assessment order, the basis of arriving at the addition of Rs. 45,608/- . It was submitted when & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. the AO has accepted the stock figure of Rs.4,58,34,907/- for the same stock , as at 31.03.2017 as reflected in the audited Balance Sheet as against the closing stock of Rs. 10,32,24,013/- , then no additions can be made for small amount of Rs. 45,608/-. The assessee submitted before ld. CIT(A) there were difference of Rs. 31,616/- which pertains to few purchase invoices not recorded in purchase after reconciliation with VAT return , which were entered in books at the time of finalization of accounts . It was also submitted by the assessee that there was some minor difference of Rs. 15,991/- in sales between impounded document as well audited accounts, which were also sales not recorded properly and at the time of finalization and reconciliation with VAT returns, the same were entered. The ld. CIT(A) deleted the addition on the grounds that once AO has accepted the closing stock as per audited accounts, no small addition could be made. It was held by ld. CIT(A) that the AO did not gave any reasons for making addition on account of unexplained income owing to factoring in the value of stock as per audited accounts. The ld. CIT(A) accepted the contentions of the assessee. We are afraid that the appellate order passed by ld. CIT(A) cannot be sustained on this issue. The appellate proceedings before ld. CIT(A) are merely extension of assessment, the purport of the same is to compute correct income of the assessee chargeable to income-tax as per mandate of the 1961 Act, so that correct income for the assessment year could be brought to income-tax in the hands of the correct assessee, and correct amount of income-tax be computed , levied and collected by Revenue from the correct assessee for the correct assessment year. That is also the reasons that the powers of ld. CIT(A) are co-terminus with the powers of the AO, which also included powers of enhancement. Reference is drawn to the provisions of Section 251(1)(a) of the 1961 Act, which reads as under : “Powers of the Commissioner (Appeals) 251(1) In disposing of an appeal , the Commissioner(Appeal) shall have the following powers- & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. (a) In an appeal against an order of assessment , he may confirm , reduce, enhance or annul the assessment *** *** *** *** *** *** *** ***” Further, there are two parties before ld. CIT(A) in an appellate proceedings conducted by ld. CIT(A) , firstly the assessee who being aggrieved by an assessment framed by the AO has filed an appeal, secondly the AO whose assessment order is subject matter of appeal before ld. CIT(A). Principles of natural justice demand that both the parties shall be given opportunity of being heard , before being condemned and any prejudice is caused. Reference is drawn to provisions of Section 250(2) of the 1961 Act, which reads as under: “Procedure in appeal 250. (1) *** *** *** *** (2) The following shall have the right to be heard at the hearing of the appeal- (a) the appellant, either in person or by an authorized representative ; (b) The Assessing Officer , either in person or by a representative. *** *** *** ***” Fair hearing and adherence of principles of natural justice are the most important pillars of the judicial proceedings , and proceedings before ld. CIT(A) are quasi judicial in nature. In the instant case before us, it is observed that the AO made additions of Rs. 45,608/- towards suppressed profits in the audited accounts vis-à- vis seized document impounded during survey(reproduced by AO in assessment order at page 6-7-also reproduced by us in this order ). The ld. CIT(A) simply accepted the contentions of the assessee that the AO has not given any basis/reasons for making small additions although the AO accepted closing stock as per audited accounts as at 31.03.2017. The AO had allowed retraction of surrender of undisclosed investment of Rs. 5,00,00,000/-in the stock made by Mr. Manjit Singh, Director of the assessee company which was made based on the closing stock of Rs. 10,32,24,013.58 as at 31.03.2017 as is reflected in the impounded document being Trading and Profit and Loss account of the assessee company(reproduced by the AO ITA NO. 136/VNS/2020& CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. at page 6 of assessment order- also reproduced by us in this order), but the AO accepted closing stock of Rs.4,58,34,907/- as is reflected in the audited accounts as at 31.03.2017(page 21/paper book), but however the AO made addition of Rs . 45,608/- on account of differential in profit as per impounded document and audited accounts. The presumption u/s 292C is applicable with respect to the documents found during survey u/s 133A, that it belongs to the assessee from whose possession the same was found and contents are true. If ld. CIT(A) was not clear as to the basis of arriving the figure of Rs. 45,608/- which stood added by AO due to suppressed profit in the audited accounts vis-a-vis impounded material after having accepted the closing stock as per audited accounts, the ld. CIT(A) ought to have issued notice of hearing to the AO and must have sought his explanation/ comments before condemning AO or prejudicing AO by deciding the issue against AO. No such notice of hearing was issued by ld. CIT(A) to the AO in the instant proceedings, nor any comments/remand report was called by ld. CIT(A) from AO to explain his position on the issue or to defend his assessment order. Principles of natural justice are clearly breached as ld. CIT(A) misdirected himself by adventuring into a fault finding mission, rather than acting as an adjudicator and/or investigator to unravel the truth in order to compute correct income chargeable to tax in the hands of the assessee as per mandate of the provisions of the 1961 Act. This appellate order passed by ld. CIT(A) on this issue cannot be sustained and is hereby set aside and matter is restored back to the file of ld. CIT(A) for fresh adjudication, after giving proper opportunity of being heard to both the rival parties before ld. CIT(A) viz. the assessee as well the AO. We order accordingly. 6b. The next issue concerns itself with addition of Rs. 11,43,949/- made by the AO on account of differential in the expenses between as recorded in the impounded document being Profit & Loss account and as per audited Balance Sheet. The AO observed that there is a difference in the comparative chart submitted by the CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. assessee to the tune of Rs. 11,43,949/- , which stood disallowed by the AO as unexplained expenses u/s 69C. The said chart is provided by the assessee in paper book/page 28, which is also reproduced hereunder: & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. The ld. CIT(A) deleted the additions by accepting the contentions of the assessee that entries were made while finalization of accounts. The assesse has claimed that these expenses were first debited in the books of accounts in separate heads which at the time of audit were properly entered in correct head of expenditure. The ld. CIT(A) held that there is no dispute that these expenditures have been incurred for the purposes of business. The ld. CIT(A) went ahead in observing that the accounts of the assessee are tax-audited and the auditor has not given any adverse finding. The ld. CIT(A) also observed that the AO has not pointed out any specific defects in these details and the AO has not brought on record any material to demonstrate that these expenses have not been incurred and are not verifiable. The ld. CIT(A) observed that mere statement that the parts of the expenses have been incurred after the survey , would not be sufficient enough to call for any addition. The ld. CIT(A) held that the assessee is a private limited company and complete records have been made as certified by the auditors, and no additions can be made based on mere suspicion. We have observed that survey was conducted by Revenue u/s 133A in the business premises(show room) of the assessee, on 05.10.2017. The incriminating documents were found during survey u/s 133A , and presumption u/s 292C shall apply that the documents belong to the assessee and the contents are true. This presumption is rebuttable , but the onus is entirely on the assessee to rebut this presumption by credible and cogent evidences/explanation. The Trading and Profit and Loss account for the financial year 2016-17 & Balance Sheet as at 31.03.2017 was impounded during survey , which is reproduced by AO at page 6-7( also reproduced in this order ) . Thus, as per Section 292C, there will be presumption that the contents of this documents found during survey are true and the documents belong to the assessee. This presumption is rebuttable, for which the assessee has to bring on record cogent/credible evidences to rebut the said presumption. There is a difference of Rs. 11,43,944/- in expenses as are recorded in the impounded Profit and Loss accounts and the audited Profit and loss account. The 40 & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. survey took place on 05.10.2017 and return of income was filed on 07.11.2017, and the financial year under consideration is 2016-17, thus the financial year has already closed prior to the date of survey . The assessee has claimed that these expenses of Rs. 11,43,944/- were all debited in the books of accounts in separate head’s and at the time of finalization /audit , these expenses were transferred to correct head , and hence no addition is warranted which explanation was simply accepted by ld. CIT(A), by holding that the accounts are audited by auditors and they have not pointed out any discrepancies . Further, the ld. CIT(A) observed that these are business expenses, but ld. CIT(A) never did the analysis of these differential in expenses . He did not consider that the presumption u/s 292C shall apply to documents found during survey, and onus is on the assesee to rebut the said presumption . The entire basis of ld. CIT(A) in deleting addition are fallacious and rejected. The ld. CIT(A) failed to see that as per Balance Sheet and Profit and Loss found and impounded during survey for the year ended 31.03.2017, there was cash balance of Rs. 11,38,773.25 as at 31.03.2017 as found recorded in aforesaid impounded documents , while in the audited accounts, the cash balance certified by the auditors was merely Rs. 27,252.98 as at 31.03.2017, and there is a difference of Rs.11,11,520.27 wherein cash balance is shown to be lower in audited accounts vis- vis cash balance reflected in the impounded Balance Sheet as at 31.03.2017 . The financial year 2016-17 had already ended when the survey took place on 05.10.2017. The cash as on 31.03.2017 as certified in the audited accounts, is as under: & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. The aforesaid comparative chart reflected differential in expenses as reported in the impounded document and audited accounts, is provided by the assessee in paper book/page 28, which is also reproduced hereunder: & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P.

We have perused the aforesaid comparative chart furnished by the assessee being representing differential of the expenses as per audited accounts and as per impounded Balance Sheet , and we have observed that there are differences in the head of the expenses namely, salary, bank charges, shop expenses, scheme account, diesel account , lunch for staff and pantry expenses, printing and stationary expenses , travelling expenses, tax audit fees and accounting charges , and the differential amount of Rs. 11,43,949.53 was disallowed by the AO which stood later deleted by ld. CIT(A). The AO has already partially allowed the differential between impounded material and audited accounts, to the tune of Rs. 22,18,157, while Rs. 11,43,949.53 stood disallowed by the AO. The assessee has also enclosed the ledger accounts of these expenses which stood disallowed , at page 29-42. It is observed that salary expenses of Rs.18,48,451/- - Rs.1,75,000/- =Rs.16,73,451/- (excluding Rs. 1,75000 being salary payable) were all paid in cash. The AO has allowed Rs.12,61,000/- . There is an entry in Ledger account of ‘Salary’ by way of transfer of ‘other expenses’ to the tune of Rs 5,87,451/- on 31.03.2017 debited to salary account , which on perusal of ‘Other Expenses’ account reveals that it were all paid in cash aggregating to Rs. 5,87,451/- as could be seen from ledger account of office expenses, were all paid in cash. Thus, the salary account include ‘other expenses’ of Rs. 5,87,451/- which were all paid in cash , stood disallowed by the AO. We confirm the addition as made by the AO to the tune of Rs. 5,87,451/- as it was merely an afterthought and these cash expenses were incorporated in the books of accounts, post survey, just to reduce profits. What was the necessity of maintaining separate head of account for ‘Other Expenses’ and what was the reasons for transferrin/merging the same with ‘Salary’ Account on 31.03.2017 , were not explained by the assessee. We say so also as because, the cash in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by introducing bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the contents of document found during survey shall be presumed to be true, and the assessee having failed to rebut the same, the said addition stood confirmed Thus, we confirm addition to the tune of Rs. 5,87451/- under the head ‘Salary’. Proceeding further, there is an addition of Rs.18,950/- on account of bank charges made by the AO, the said entry is dated 31.03.2017 under the head ‘Bank Charges’ and has been entered by transferring from another account in the ledger titled ‘other bank charges’ incurred on 16.03.2017 and it is mentioned in ledger account(page 39/PB) that they are debited by SBI(CC/AC) , We accept this explanation of the assessee and sustain the appellate order of ld. CIT(A) on this deletion of Rs. 18,950/-, as we have observed that rest of the bank charges debited by SBI(CC/AC) are allowed by the AO itself, and further these Bank charges expenses to the tune of Rs. 18,950/- were all paid through banking channel and there is no finding of the AO that these bank charges paid through banking channel were personal expenses or capital expenses . The deletion of Rs. 18,950/- as made by ld. CIT(A) is sustained by us , and the appellate order of ld. CIT(A) is sustained/confirmed on this issue. The next addition is ‘Shop expenses’ which aggregated to Rs.2,12,889/- , out of which one entry is of Rs. 72,114/- by way of single entry of transfer from ‘Petty Expenses A/c’ to ‘Shop Expenses’ account of Rs. 72,114/- on 31.03.2017. This amount of Rs. 72,114/- stood added by the AO, which stood deleted by ld. CIT(A).We confirm the addition as made by the AO to the tune of Rs. 72,114/- as it was merely an afterthought and these cash expenses were incorporated in the books of accounts, post survey, just to reduce profits. What was the necessity of maintaining separate account for ‘Petty Expenses A/c ’ and what was the reasons for transferring the same to the ‘Shop Expenses’ Account on 31.03.2017 , were not explained by the assessee. We also say so as because, the cash 46 & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by incorporating bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the contents of the documents found during survey will be presumed to be correct, and the assessee having failed to rebut the same, the said addition stood confirmed. Thus, we confirm addition to the tune of Rs. 72,114/- under the head ‘shop expenses’. Next addition was with respect to ‘Scheme Account’ of Rs. 1,16,137/- . This entry has come to the debit of ‘Scheme Account’ from ‘Other Scheme Account’ , on 31.03.2017 . In the other scheme account, there are four debits namely Khanna Radios of Rs. 1,80,000/- , Mr. Ganesh Electronics Rs. 9,865/- , Varanasi Marketing Private Limited Rs. 12601/- and Rs. 11,971/-. If we see account of Ganesh Electronics, there are cash payments of Rs. 5,185/- and Rs. 4,680/- on 18.10.2016 and 19.10.2017 , while Varanasi Marketing Pvt Ltd has cash payments of Rs. 11,971/- and Rs. 12601/-, on 21.10.2016, while some other payments are reflected to have been paid through banking channel. The assessee has also enclosed some of the invoices. This account need verification as to genuinity or otherwise of these expenses, as well payments claimed to have been made in the cash, also keeping in view that there is a differential of cash balance as at 31.03.2017 between cash as per impounded document and the audited accounts, for the year ended 31.03.2017. We are setting aside this issue to the file of ld. CIT(A) to verify the authenticity/genuinity of these expenses as also claim of cash payments being made to these parties, before allowing/disallowing the same. Next entry is ‘Diesel expenses’ of Rs. 29,156/- , out of which Rs. 11,906/- was transferred from ‘Other Diesel Expenses’ on 31.03.2017 to ‘Diesel expenses’ Account. Perusal of ‘Other Diesel Expenses’ Account reveals that all expenses were paid in cash . There is no reason for maintaining two different accounts, and more so there are no payments through banking channel and all 47 & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. payments are in cash. These are merely cash entries to reduce profit and consequently income-tax, and are held by us to be bogus entries. We say so as because, the cash in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by incorporating bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the impounded material belong to assessee and contents will be presumed to be true, and the assessee having failed to rebut the same, the said addition stood confirmed. Thus, we confirm addition as was made by the AO to the tune of Rs. 11,906/- under the head ‘Diesel expenses’ and reverse the order of ld. CIT(A) on this issue. Next entry is ‘Lunch for Staff and Pantry Expenses’ of Rs. 3,61,290/- , out of which Rs. 3,920/- was transferred from ‘Other Expenses for Staff and Pantry’ on 31.03.2017 to the ‘Lunch for Staff and Pantry Expenses’ Account. Perusal of ‘Other Expenses for Staff and Pantry’ reveals that all expenses were paid in cash . There is no reason for maintaining two different accounts, and more so there are no payments through banking channel and all payments are in cash. These are merely cash entries to reduce profit and consequently income-tax, and are held by us to be bogus entries. We say so as because, the cash in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by incorporating bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the impounded material belong to assessee and contents shall be presumed to be true, and the assessee having failed to rebut the same, the said addition stood confirmed. Thus, we confirm addition as was made by the AO to the tune of Rs. 3,920/- under the head ‘Lunch for Staff and Pantry expenses’ and reverse the order of ld. CIT(A) on this issue. Next addition was with respect to Printing and Stationary 48 & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. expenses of Rs. 68,890/- . This entry has come to the debit of ‘Printing and Stationary’ account from ‘Others Printing and Stationary’ Account , on 31.03.2017 . In other ‘Others Printing and Stationary’ Account, there are eight debits namely Gopal Book Depot of Rs. 3,280/-, Rs.9,546/- , Rs.9,700/-, Kamal Book Depot of Rs. 9,503/- ,Rs.9,550/- and Rs.9,700/- & Mahakal General Stores of Rs. 9,700/-and Rs.7,911/- . However, the party accounts are not enclosed in paper book and information is not sufficient before us to conclude ,whether payments against aforesaid invoices were made by cash or through banking channel. The assessee has also enclosed some of the invoices of the vendors .Further, we have observed that all the three parties/vendor raised their respective invoices exactly in similar formats/pattern and there is absolutely no variation. This also cast doubts about authenticity of these invoices. This is for assessee to satisfactorily explain the same. This account need verification as to genuinity or otherwise of these expenses, as well payments were made in cash or through banking channel, also keeping in view that there is a differential of cash balance as at 31.03.2017 between cash as per impounded document and the audited accounts, for the year ended 31.03.2017. We are setting aside this issue to the file of ld. CIT(A) to verify the authenticity/genuinity of these expenses and modes of payments for making payments against these invoices, before allowing/disallowing the same. The next disallowance is of Rs. 79,581.53 towards travelling expenses. On perusal of ledger account, we have observed that all the travel bills relates to Skyline Travels. The ledger account of Skyline Travel is enclosed. The payments are majorily made by banking channel. Thus, out of Rs. 79,581.53, payments of Rs. 73,770/-( Rs. 24,770+ Rs. 22,000+Rs. 14,000+Rs. 13,000) were made through banking channel during the year, while rest are through cash. When the invoices are paid , the majorily amount was paid by cheque and there is no reason for making differential payment being minor amounts through cash, which is against preponderance of human probabilities, and hence such minor differential amount to the tune of Rs. 2840/- ( 49 & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. Rs. 100 + Rs. 2200+ Rs. 540) shown to have been paid in cash in-fact represented discounts ( going by preponderance of probabilities) offered by Skyline Travels which is squared off by showing cash payments to clear the account and hence stood disallowed. We say so as because, the cash in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by incorporating bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the impounded material belong to assessee and contents shall be presumed to be true, and the assessee having failed to rebut the same, the said addition stood confirmed. This leaves us with two travel bills of March , 2017, of Rs. 1,400/- and 1,800/- , against which cash payments were reflected of Rs. 1354.79 and 1616.74 to be paid in March 2017 , we allow these payments on the preponderance of probabilities. Thus, expenses to the tune of Rs. 2840/- stood disallowed. This leaves us with the tax-audit fee of Rs. 25,000/- and Accounting charges to the tune of Rs. 1,60,000/- , which stood disallowed by AO and was later allowed by ld. CIT(A). We are remitting this issue of claim of expenses towards tax- audit fee and accounting charges back to the file of ld. CIT(A) to verify its genuinity including compliance of income-tax deduction at source under Chapter XVII-B of the 1961 Act , as the evidences before us are not sufficient to conclude this issue and hence being set aside to ld. CIT(A) for re-adjudication . This issue is restored to the file of the ld. CIT(A) for re-adjudication, after providing proper opportunity of heard to the assessee as well the AO. This ground of Revenue is partly allowed for statistical purposes. We order accordingly. 6c. The next issue concerns itself with addition of Rs. 45,36,423/- made by the AO u/s 69C on account of 10% of total unregistered purchases , as the unregistered purchases to the tune of Rs. 4,53,64,232/- could not be verified by the AO in the ITA NO. 136/VNS/2020& CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. absence of any details provided by the assessee. The AO observed that the assessee has suppressed profits , by making unregistered purchases . The AO rejected books of accounts and made additions to the income of the assessee to tune of Rs. 45,36,423/- being 10% of unregistered purchases . The ld. CIT(A) deleted the aforesaid additions. The assessee contended before ld. CIT(A) that the AO never asked any details from the assessee with respect to this additions and hence there was no occasion for the assessee to submit explanation. The assessee submitted details before ld. CIT(A), and the ld. CIT(A) observed that the average purchase price w.r.t. unregistered purchases is lower than the average price of registered purchases , and hence there could not be suppression of profits so far as unregistered purchases. The assessee submitted before ld. CIT(A) reconciliation statement of the value of stock found during survey with that of the value of stock as per audited accounts. The ld. CIT(A) observed that the mere statement that unregistered purchases were made is not sufficient to make disallowance. The ld. CIT(A) also observed that the AO has failed to explain what inference he is trying to achieve. The ld. CIT(A) also observed that ad-hoc disallowance was made by the AO without giving any reasons. Thus, ld. CIT(A) deleted the entire additions. We are afraid that appellate order passed by ld. CIT(A) cannot be sustained, as ld. CIT(A) completely misdirected itself. The appellate proceedings before ld. CIT(A) are merely extension of assessment, the purport of the same is to compute correct income of the assessee chargeable to income-tax as per mandate of the 1961 Act, so that correct income for the assessment year could be brought to income-tax in the hands of the correct assessee, and correct amount of income-tax be computed , levied and collected by Revenue from the correct assessee for the correct assessment year. That is also the reasons that the powers of ld. CIT(A) are co- terminus with the powers of the AO, which also included powers of enhancement. Reference is drawn to the provisions of Section 251(1)(a) of the 1961 Act, which reads as under : 51 CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. “Powers of the Commissioner (Appeals) 251(1) In disposing of an appeal , the Commissioner(Appeal) shall have the following powers- (a) In an appeal against an order of assessment , he may confirm , reduce, enhance or annul the assessment *** *** *** *** *** *** *** ***”

Further, there are two rival parties before ld. CIT(A) in an appellate proceedings conducted by ld. CIT(A) , firstly the assessee who being aggrieved by an assessment framed by the AO has filed an appeal, secondly the AO whose assessment order is subject matter of appeal before ld. CIT(A). Principles of natural justice demand that both the parties shall be given opportunity of being heard , before being condemned and any prejudice is caused. Reference is drawn to provisions of Section 250(2) of the 1961 Act, which reads as under: “Procedure in appeal 250. (1) *** *** *** *** (2) The following shall have the right to be heard at the hearing of the appeal- (a) the appellant, either in person or by an authorized representative ; (b) The Assessing Officer , either in person or by a representative. *** *** *** ***” Fair hearing and adherence of principles of natural justice are the most important pillars of the judicial proceedings , and proceedings before ld. CIT(A) are quasi judicial in nature. If the ld. CIT(A) was not clear as to that the AO has failed to explain what inference he is trying to achieve at while disallowing 10% of unregistered purchases, the ld. CIT(A) ought to have issued notice of hearing to the AO and must have sought his explanation/comments, before condemning AO or prejudicing AO by deciding the issue against AO. No such notice of hearing was issued by ld. CIT(A) to the AO in the instant proceedings, nor any comments/remand report was called by ld. CIT(A) from AO to explain his position on the issue or to defend his assessment order. Principles of natural justice are clearly breached as ld. CIT(A) misdirected himself by adventuring into a fault & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. finding mission, rather than acting as an adjudicator and/or investigator to unravel the truth in order to compute income chargeable to tax in the hands of the assessee as per mandate of the provisions of the 1961 Act. Proceeding further, the assessee has claimed that the AO made additions without calling for explanation from the assessee. Thus, the assessee filed its submissions/explanation for the first time before ld. CIT(A) , which were by way of additional evidence. It was incumbent on ld. CIT(A) to have forwarded these additional evidences to the AO for rebuttal , and ld. CIT(A) ought to have called for remand report/comments from AO on the additional evidences filed by the assessee. There is clearly breach of principles of natural justice. There is violation of Rule 46A of the Income-tax Rules, 1962, and hence ld. CIT(A) order cannot be sustained on this issue and liable to be set aside. Further, on merits also ld. CIT(A) misdirected itself, as the AO has made the additions of 10% of unregistered purchases in the absence of any details being furnished by the assessee and the said unregistered purchases remained unverifiable. There was thus the allegation of the AO as to the genuinity of the entire unregistered purchases being made by the assessee of which one of the components is the price at which the unregistered purchases were made vis-à-vis registered purchases, but one of the main reason for disallowance by AO was that the assessee has suppressed profits by inflating unregistered purchases which could be by way of introducing bogus unregistered purchases to inflate expenses and to suppress profits, and for which additions were estimated by the AO @10% of unregistered purchases in the absence of verification by the AO as no details were furnished by the assessee , but ld. CIT(A) completely misdirected himself by only seeing the average price of unregistered purchases vis-à-vis price of registered purchases, and coming to erroneous conclusion that since average price of unregistered purchases is less than average price of registered purchases and hence there is no possibility of suppression of profits. Thus, this appellate order passed by ld. CIT(A) on this issue cannot be sustained and is hereby set aside and matter is restored back to the file of ld. CIT(A) 53 & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. for fresh adjudication, after giving proper opportunity of being heard to both the rival parties viz. the assessee as well the AO. This ground of appeal raised by Revenue is allowed for statistical purposes. We order accordingly. 6d. The next issue concerns itself with addition of Rs. 43,00,000/- made by the AO u/s 69A on account of undisclosed investment under the head furniture and fixture , as the assessee could not provide verifiable explanation or evidences, and hence the said amount was added by the AO to the income of the assessee u/s 69A of the 1961 Act as unexplained investment. The ld. CIT(A) deleted the addition. There was a survey action u/s 133A conducted by Revenue on the business premises(showroom) of the assessee, on 05.10.2017 . The Revenue officials who were conducting survey found furniture and fixtures including decoration and furnishing of the showroom . The assessee was confronted by Survey team to explain whether the same is recorded in the books of accounts of the assessee. The assessee’s Director Mr. Manjit Singh stated in statement recorded during survey that Rs. 60 lacs was spent on furniture and fixtures including decoration and furnishing of the showroom, while the amount stood recorded in the books of accounts of the assessee was Rs. 16,98,326/- .The assessee stated in statement recorded during survey, that with respect to most of the expenses incurred towards furniture and fixtures including decoration and furnishing of the showroom , the assessee could not obtain bills/invoices and hence the same was not shown in the books of accounts of the assessee, and the assessee came forward to surrender Rs. 43 lacs as undisclosed income for ay: 2017-18 because some of the investments in furniture and fixtures including decoration and furnishing of the showroom was made by the assessee in financial year 2016-17. Later on when the return of income was filed by the assessee on 07.11.2017, the assessee did not declare and disclose the said surrendered income of Rs. 43 lacs in the return of income filed with the department. Now, the assessee is contending that the said surrender of undisclosed & CO No 02/VNS/2021 AY:2017

18. DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. income of Rs. 43 lacs towards furniture and fixture including furnishing and decoration, was not voluntary and also that the department does not have incriminating material to fasten the tax liability . The ld. CIT(A) accepted the contentions of the assessee and deleted the additions. The ld. CIT(A) was of the view that the bills for furniture and fixture which were reflected in the books of accounts, were impounded during survey and the AO did not have any incriminating material to fasten the liability of Rs. 43 lacs on the assessee, except statement of Mr. Manjit Singh, Director of the assessee recorded during survey, which was retracted by the assessee. The ld. CIT(A) also referred in his appellate order that it is not clear from assessment order wherein the AO has not given any finding on the nature of such incriminating documents with regard to which the income was surrendered under the head Furniture and Fixture. The ld. CIT(A) was also of the view that the assessee has retracted the statement and hence it has now no evidentiary value. We are afraid that the ld. CIT(A) order cannot be sustained and needs to be set aside . The ld. CIT(A) fell into error in giving a finding that no incriminating material was found, while the fact of the matter is that the Revenue officials who were conducting survey u/s 133A on 05.10.2017, found furniture and fixtures including decoration and furnishing of the showroom to the tune of Rs. 60 lacs , and the assessee was asked to explain whether all the furniture and fixtures including decoration and furnishing of the showroom which was existing on the date of survey was duly recorded in the books of accounts. The assessee came out with an explanation that only Rs. 16.98 lacs stood reflected in books of accounts, while the total investments made by the assessee in furniture and fixtures including decoration and furnishing of the showroom, were to the tune of Rs. 60 lacs, and since the assessee could not get bills/invoices for the amount spent on furniture and fixtures including decoration and furnishing of the showroom, the same were not recorded in the books of accounts , and the assessee surrendered an amount of Rs. 43 lacs as income from undisclosed sources being invested in furniture and fixtures including decoration 55 ITA NO. 136/VNS/2020& CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. and furnishing of the showroom. Thus, physical existence of unrecorded investment to the tune of Rs. 43 lacs made by assessee in furniture and fixtures including decoration and furnishing of the showroom was itself an incriminating material found during survey , which was not recorded in the books of accounts of the assessee , and presumption u/s 292C shall apply . The assessee admitted that such unrecorded investments in furniture and fixtures including decoration and furnishing of the showroom, was made out of undisclosed income and surrender of undisclosed income of Rs. 43 lacs was made. This surrender of undisclosed income of Rs. 43 lacs made by assessee during survey foreclosed/prevented further enquiry/investigation by the Revenue , otherwise the Revenue would have proceeded further to investigate /enquire into details as to the unrecorded investments in furniture and fixtures including decoration and furnishing of the showroom and the sources thereof of the assessee for making such investments. The assessee resiled from its own position later on and did not declare and disclose the said surrendered income of Rs. 43 lacs in the return of income filed with Revenue, on 07.11.2017 and also during assessment proceedings it retracted from surrender of income . The ld. CIT(A) instead of making enquiries and persuing the entire material on record including statements recorded, entered into fault finding mission to find defects with the assessment framed by the AO. The appellate proceedings before ld. CIT(A) are merely extension of assessment, the purport of the same is to compute correct income of the assessee chargeable to income-tax as per mandate of the 1961 Act, so that correct income for the assessment year could be brought to income-tax in the hands of the correct assessee, and correct amount of income-tax be computed , levied and collected by Revenue from the correct assessee for the correct assessment year. That is also the reasons that the powers of ld. CIT(A) are co-terminus with the powers of the AO, which also included powers of enhancement. Reference is drawn to the provisions of Section 251(1)(a) of the 1961 Act, which reads as under : 56 CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. “Powers of the Commissioner (Appeals) 251(1) In disposing of an appeal , the Commissioner(Appeal) shall have the following powers- (a) In an appeal against an order of assessment , he may confirm , reduce, enhance or annul the assessment *** *** *** *** *** *** *** ***”

Further, there are two rival parties before ld. CIT(A) in an appellate proceedings conducted by ld. CIT(A) , firstly the assessee who being aggrieved by an assessment framed by the AO has filed an appeal, secondly the AO whose assessment order is subject matter of appeal before ld. CIT(A). Principles of natural justice demand that both the parties shall be given opportunity of being heard , before being condemned and any prejudice is caused. Reference is drawn to provisions of Section 250(2) of the 1961 Act, which reads as under: “Procedure in appeal 250. (1) *** *** *** *** (2) The following shall have the right to be heard at the hearing of the appeal- (a) the appellant, either in person or by an authorized representative ; (b) The Assessing Officer , either in person or by a representative. ***” *** *** *** Fair hearing and adherence of principles of natural justice are the most important pillars of the judicial proceedings , and proceedings before ld. CIT(A) are quasi judicial in nature. If ld. CIT(A) was not clear as to that the AO has failed to give finding on the nature of such incriminating documents with respect to which the income was surrendered under the head Furniture and Fixtures, the ld. CIT(A) ought to have issued notice of hearing to the AO and must have sought his explanation/comments/remand report, before condemning AO or prejudicing AO by deciding the issue against AO. No such notice of hearing was issued by ld. CIT(A) to the AO in the instant proceedings, nor any comments/remand report was called by ld. CIT(A) from AO to explain his position on the issue or to defend his 57 & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. assessment order. Principles of natural justice are clearly breached as ld. CIT(A) misdirected himself by adventuring into a fault finding mission, rather than acting as an adjudicator and/or investigator to unravel the truth in order to compute income chargeable to tax in the hands of the assessee as per mandate of the provisions of the 1961 Act. Now, at this stage , the assessee has also come forward with plea , and ld. Counsel for the assessee made statement to that effect before the Bench that Rs. 45 lacs was invested by landlords of the said premises in Furniture & Fixture including decoration and furnishing, by taking loan from HDFC bank, and the entire investment in furniture and fixtures including decoration and furnishing of the showroom, were duly recorded. This statement made by ld. Counsel for the assessee before the Bench requires verification by authorities below . So far as case laws relied upon by the assessee are concerned, they are distinguishable , firstly the incriminating material by way of undisclosed furniture and fixture including decoration and furnishing of the showroom, to the tune of Rs. 43 lacs was found by Revenue officials during survey u/s 133A and when confronted, the Director of the assessee company could not explain the factum of recording of these furniture and fixture including decoration and furnishing in the books of accounts of the assessee, and rather admitted that with respect to these furniture and fixture including decoration and furnishing of the showroom, bills/invoices could not be obtained to the tune of Rs. 43 lacs and the aforesaid amount was spent out of undisclosed income, thus, the additions are not made merely on the basis of statement of the Director of the assessee surrendering an amount of Rs. 43 lacs during survey, rather during survey there was discovery of incriminating material by way of furniture and fixture including decoration and furnishing of the showroom. Had there been no survey, the said amount of undisclosed investment would have remained undetected. Thus, in our considered view, CBDT instruction no. F.No. 286/2/2003- IT(Inv. II) dated 10.03.2003 shall not come to rescue of the assessee. These furniture and fixture including decoration and furnishing of the showroom were found from 58 ITA NO. 136/VNS/2020& CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. the business premises of the assessee and presumption u/s 292C shall apply that it belongs to the assessee. This presumption is rebuttable but the assessee has to bring on record cogent and credible evidences/explanation to rebut the presumption. The assessee has now stated that Rs. 45 lacs was spent by landlords/owners of the premises by taking loan from HDFC Bank and the assessee is only tenant in the premises. In our considered view, keeping in view the entire factual matrix and in the interest of justice, we are inclined to set aside and restore this issue back to the file of ld. CIT(A) for fresh adjudication , after giving proper opportunity of being heard to the assessee as well the AO. In case any incriminating material found during survey including statements recorded during survey , are relied upon by ld. CIT(A) to prejudice assessee, the copies thereof shall be provided to the assessee in adherence to principles of natural justice , before any prejudice is caused to the assessee. This ground of appeal filed by Revenue is allowed for statistical purposes. We clarify that we have not commented on the merits of the issue in appeal. We order accordingly.

7. Thus, the appeal filed by Revenue in for ay: 2017-18 is partly allowed for statistical purposes, and the C.O. filed by the assessee is only in support of the appellate order passed by ld. CIT(A) and the same shall stand dispose off accordingly . We order accordingly. Order pronounced on 03.02.2023 at Allahabad, U.P , in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 Sd/- /- Sd/- /- [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 03/02/2023 Place: Allahabad/Varanasi, U.P. & CO No 02/VNS/2021 AY:2017-18 DCIT , Circle-1, Varanasi , U.P. v. M/s. Ratandeep Gold & Diamond Pvt. Ltd.,Chandauli,U.P. KD Azmi Copy forwarded to:

1. Appellant –The Deputy Commissioner of Income Tax, Circle-1, Varanasi- 211001, U.P.

2. Respondent – M/s. Ratandeep Gold & Diamond Pvt. Ltd. , 19, New Mohal, Near Balika Inter College, Mugalsarai, Chandauli-232101, U.P.