DCIT, NEW DELHI vs. M/S. KUBER SECURITIES LTD., NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘F’ NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER IT(SS)A No.2/Del/2018 Block Period: 01.04.1987 to 08.05.1997 M/s. Kuber Mutual Benefit Vs. ACIT, Ltd., Circle-5(1), C/o-Raj Kumar & Associates, New Delhi Chartered Accountants, L-7A (LGF), South Extn., Part-2, New Delhi PAN: AAACK4639E (Appellant) (Respondent) With IT(SS)A No.3/Del/2018 Block Period: 01.04.1987 to 08.05.1997 ACIT, Vs. M/s. Kuber Mutual Benefit Circle-14(2), Ltd., New Delhi C/o-Raj Kumar & Associates, Chartered Accountants, 4435/7, Ansari Road, Daryaganj, New Delhi PAN: AAACK4639E (Appellant) (Respondent) With IT(SS)A No.3/Del/2015 & C.O. No.69/Del/2016 Block period: 01.04.1987 to 08.05.1997 DCIT, Vs. M/s. Kuber Securities Ltd., Circle-14(2), S-32, G.K.-1, New Delhi New Delhi PAN: AAACD3854F (Appellant) (Respondent/cross-objector)

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Assessee by Sh. Rajkumar, CA Sh. J.P. Sharma, Adv. Sh. Suraj Gupta, Adv. Department by Ms. Monika Singh, CIT(DR)

Date of hearing 26.02.2026 Date of pronouncement 13.03.2026 ORDER PER SATBEER SINGH GODARA, JM The instant batch of four cases pertains to the twin assessees herein, namely, ‘M/s. Kuber Mutual Benefits Ltd.’ and ‘M/s. Kuber Securities Ltd.’ Both these assessees have preferred their instant twin appeals and cross-objection(s) IT(SS)A Nos.2 & 3/Del/2018 and IT(SS)A No.3/Del/2015 and C.O. No.69/Del/2016 for the block period 01.04.1987 to 08.05.1997 against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”], New Delhi’s orders dated 28.12.2017 and 12.05.2015 passed in case nos. 220/2009- 10/CIT(A)-5 to CIT(A)-17/2015-16 and 0107/2013-14, involving proceedings under sections 158C/254 and 254/143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively. Heard both the parties at length. Case files perused. We proceed assessees-wise for the sake of convenience and brevity. 2 | P a g e

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thereby granting relief of Rs.12,66,24,409/- forming subject matter of adjudication in the latter’s second substantive ground as well. The Revenue’s latter substantive ground is that the Assessing Officer had rightly added the amount in question of Rs.20 lakhs as representing the assessee’s deemed interest on advances given to staff/imprest account etc. 4. It is in this factual backdrop that we proceed to deal with the assessee’s former twin substantive grounds and the Revenue’s above first substantive grievance as discussed in the CIT(A)’s lower appellate discussion, reading as under: “5.4 The appellant is aggrieved against the addition of Rs. 46,07,66,454/- u/s 68 holding 20% of the deposits as unexplained for the block period. According to the AO, as per the balance sheet of the company on 31-03-97, the company had shown deposit amounting to Rs.20,30,38,32,274/-. The AO asked the Appellant to furnish the list of depositors along with their addresses, PAN No. etc. to substantiate the creditworthiness of these persons. No compliances were made in spite of repeated opportunities given to the appellant. As per the regulations for Nidhi Company, it was mandatory on the part of the company to maintain a register of depositors. The appellant company did not produce such register. During the post search investigation and in the absence of any material produced by the appellant, summons were issued to some depositors on a test check basis as addresses were available in the seized material itself. The statements of 24 depositors in all were recorded. An analysis of the examination of the depositors as available with him showed that the deposits in the names of Puja, Nanak, Mam Chand, Shiv Sharma, Ritu Aryan and Meenu Chopra were bogus as their addresses were given as S-479, Greater Kailash-I New Delhi. This was the address of Mrs. Sushma Khosla who gave an affidavit that the premise was fully occupied by her and her family members and nobody with the above mentioned names ever stayed there. Therefore, the AO concluded that the appellant is using its unaccounted money and introduced it in the books in the shape of bogus deposits. A perusal of Annexure A-34 page-54 reveals that the deposits which had not been taken in the books of accounts amounted to Rs. 4.38 Lakh and Page-55 reveals that the deposits which have been taken in excess of amount shown in the books was Rs.7.47 Lakh. The appellant was given repeated opportunities to 4 | P a g e

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furnish information regarding the deposits and prove the creditworthiness of the depositors but it failed to produce even a single document and therefore, the AO made an addition of 20% of the total deposits shown in the balance sheet u/s.68 of the act, which amounted to Rs. 46,07,66,454/-. 5.5 The Ld.AR has submitted that the appellant is a mutual benefit and Nidhi company. As per the law, the people are first made shareholders by issuing shares of Rs.10/- and thereafter the deposits and loans are accepted from them because under the rules, loans and deposits can be accepted by a Nidhi Co. only from its shareholders. The assessee contended that the complete deposit appears in the regularly maintained and audited books of accounts. It was pointed out that in the regular assessment of the appellant, the addition on account of such deposits have already been made u/s 68-Rs.5,31,75,626 for A.Y 95-96 which is confirmed in the first appeal against which the appeal is pending in the ITAT Rs.7,14,56,325/- for A.Y 96-97 and Rs. 83,57,62,593 for A.Y 97-98 and the appellant is in appeal against both the additions in regular assessment. Therefore, the appellant stated that when the additions have already been made on the substantive basis in regular assessment, it cannot be again made in the block assessment. The number of the total depositors run in several lakhs, the amount of deposits per person generally ranges between Rs. 5,000/- to Rs. 10,000/-, therefore, no adverse inference can be drawn from the statements of only 24 persons out of several lakhs. The appellant also contended that not a single statement was ever confronted to the appellant. The appellant referred to the settled principle of law that without confronting the material collected on the back of the assessee, it cannot be used against him - Kishanchand Chela Ram v. CIT 125 ITR 73(SC). Raj photo studio v. STO 30 DSTC (99-00) (TI)sec.142(3). On this ground, the assessee took a plea that no adverse inference can be taken from Annexure A-34 page-54 & 55 as these were never confronted to the assessee. Further, the assessee questioned the basis for adopting the figure of 20% by the AO and made reference to the decision in the case of state of Orissa V. Maharaja Singh 76 ITR 690(SC) and JJ Enterprises v. CIT 122 Taxman 124(SC) that "the best judgment assessment should spell out the basis and it should not be left to the whims and fancy of the assessing officer." 5.6 The appellant highlighted that under the scheme of Ch. XIVB, the transactions that are declared in the books of accounts cannot be considered for the block assessment. The appellant pointed to the fact that the RBI had examined the quantum of deposit and filed the affidavit to the Hon'ble Delhi Court saying that it had verified the correctness of figure of depositors as per the balance sheet of the company. It was contended that all the deposit have been taken only from the shareholders as per the RBI Rules. As per the appellant, the particulars of these depositors, being the shareholders, have been filed to the Registrar of company, Kanpur. The company claimed to have been maintaining application forms, being filled up by the depositors at the time of making the deposit in the form of bound books. 5.7 The appellant contended that all the deposits and the depositors are genuine and that the addition should be deleted on the following grounds:

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• A general impression was created in the market that if the people can go to the Income tax department and give statement then on that basis they would make their claim to take back their deposits. Under such impression, about 600 persons came and gave their statements before the assessing officer. • Further, the appellant also stated that a large number of depositors filed cases in the consumer forums and with company law board and a list of such cases and copies of such cases have been filed. 5.8 As per the assessee, the facts are also there to show that all these depositors had filed complaints with many authorities and also made statement before the AO. This shows that the deposits were genuine. 5.9 It may be relevant to make note of the decision taken by the Ld. CIT(A) while deciding this issue in the second round of appeal. The relevant extracts are reproduced as under:- "On a careful consideration of all the facts and circumstances of the case, I am of the opinion that the AO has not reasonable ground whatsoever for making addition on an adhoc basis of 20% of the total deposits. However, he had verified about some persons whose names were made available to him as a result of search and on verification, it was found what the addresses were not genuine to the extent the information was available with the AO. It was not clarified by the appellant before him or before me. Therefore, the addition to that extent has to be sustained. It is shown by the AO that the deposits of Rs.4.38 lakh as appearing on page-54 of Annexure A-34 have not been taken in the books of account and these are deposits of Rs.7.48 Lakh shows in excess. Thus the deposits of Rs.11.86 lakhs are cash that the information in respect of these deposits were obtained as a result of search and these were not satisfactorily explained before the AO. The appellant has not shown that these were the deposits which have been included in any of the addition made on this account for any of the three regular assessment u/s. 143(3) mentioned above. Therefore the addition on this account is confirmed to the extent of Rs. 11,86,000/-The AO is directed to amend his order accordingly." 5.10 I find that Ld. CIT (A) referred various decision of judicial authorities to highlight that the right of cross examination is not necessarily a part of reasonable opportunity. The relevant extracts in this regard are as under:- "However when there is specific material to show that the deposits were not genuine, the conclusion of the AO have to be upheld. The AO has mentioned that in respect of six persons as mentioned above the deposits were not genuine. He made enquiries and he found that those persons were not traceable at the addresses given. As regards the right of cross examination, full bench of the Kerala High Court in the case of N.K. Thomas v. State of Kerala 46 ITD 278 has held that the decision of the Apex Court in Shaduli case (39 STC 478) cannot be understood as recognizing a right of cross 6 | P a g e

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examination as an invariable attribute of the requirement of reasonable opportunity. In the case of Maninder Nath vs. Coll. Of Central Excise 1977 Tax L.R. 1754 it was held that whether in a particular case, the party should have the right of cross examination or not depends on the facts and circumstances of that case. The court further held that the right of cross examination is not necessarily a part of reasonable opportunity." 5.11 Further, Ld. CIT (A) held that the adhoc addition of 20% of deposits cannot be made merely on account of failure on the part of the assessee to explain the source of deposits. Ld. CIT (A) also took note of the fact that large number of depositors have approached AO to lodge their claims to take back their deposits. In this regard, Ld. CIT (A) held that even in the best judgment assessment, no addition can be made on arbitrary basis. The relevant extracts in this regard are reproduced as under:- "As regards the fact that the details were not furnished before the AO and therefore the AO was force to make assessment as rule, it is to be appreciated that as held by a number of courts, though the AO may be justified in making the Assessment in u/s.144 it was held that no additions unless there are some materials to justify the additions. In an order u/s. 144, it was held that no addition can be made on an arbitrary basis in state of Orissa v. Maharaja Sir B.P. Singh Deo (1970) 76 ITR 690 691 (SC) the SC observed "apart from coming to the conclusion that the material placed before him by the assessee were not reliable. The Assistant collector has given no reason for enhancing the assessment. His order does not disclose the basis on which he has enhanced the assessment.The mere fact that the material placed by the assessee before the assessing authorities is unrealizable does not empower these authorities to make an arbitrary order. The power to make an assessment on the basis of best judgment is not an arbitrary power. it is an assessment on the basis of best judgment. In other words that assessment must be based on some relevant material. It is not a power that can be exercised under the sweet will and pleasure of the concerned authorities. The scope of that power has been explained over and over again by this court." 5.12 Further, Ld. CIT (A) relied upon decisions of the various authorities wherein it is held that there is no room for making routine disallowances while making assessment under section 158BC of the Act. The relevant extracts in this regard are reproduced as under:- "It has been held in several decisions that the assessment u/s. 158BC is different from the assessment u/s. 143(3). It was held in Essan Interport Services (P.) Ltd. Vs. ACIT 2000 72 ITD 228 (Hyd.) that when certain information and details are already recorded in the books of accounts maintained in the regular course of business and where returns of income would be filed in normal course, that very same information and details cannot be reexamined in the course of block assessment Proceedings to arise at any fresh 7 | P a g e

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conclusion, so as the result in determination of undisclosed income based on these materials. In Sundar agency v. CIT 1997 63 ITD 245(Bom.) Bench-B it was held that sec. 1588A does not provide a license to revenue for making enquiries to look into the completed assessment and it is beyond the power of the AO to review the assessment completed unless some direct evidence came to the knowledge of the department as a result of search which indicates the factum of undisclosed income. In Puja Bhatt v. ACIT 2000 73 ITD 205 (Bom.) it has been held relaying on L.R. Gupta vs. VOL 1992 194 ITR 32 (Delhi), that there is no room for making routine disallowance while making assessment u/s. 158 BC when there is no material deleted during the course of search for making such disallowance. Therefore since these deposits have appeared in the regular books of accounts as evidenced by the additions made in the regular asstt.as mentioned above the AO was not justified in making routine disallowance@ 20% it has been further held that even in a best judgment assessment, no addition can happens when the assessee does not respond to the notice issued by the AO is that he denies himself the opportunities to explain the material or information available with the AO that can be used against him. But where there is no material or information available against with the AO he cannot make an addition on a routine mechanical or arbitrary basis." 5.13 Further, Ld. CIT (A) also made note of the finding of the AO in respect of unaccounted deposits amounting to Rs.4.38 lakh as appearing on page- 54 of Annexure A-34 and unaccounted deposits amounting to Rs.7.48 lakh as appearing on page 55 of Annexure A-34. Ld. CIT (A) has restricted the addition to the extent of Rs.11,86,000/- on account of the fact that there is a specific material based on the enquiries to show that the deposits in respect of six persons were not genuine. Accordingly, Ld. CIT (A) confirmed addition to the extent of Rs.11,86,000/- (Rs.4.38 lakh + Rs.7.48 lakh). 5.14 It may be relevant to mention here that the appellant had submitted additional evidence in the form of CD containing data of claims made on the company before official liquidator. The same was forwarded to the Assessing Officer for comments. The Assessing Officer vide letter dated 31.08.2017 commented that as per the report of the Official Liquidator, only 30% of total claims made have been accepted. Further, AO has noted that CD contains a list of 55,219 claims. Based on the information from the official liquidator, 55,219 claimants have made claim for Rs.223,86,89,997/-. Out of the same, claim amounting to Rs.86,90,87,643/- (38.82% of Rs.223,86,89,997/-) has been admitted by the official liquidator. Remaining 8149 claims have not been admitted due to various reasons as tabulated below.

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5.15 Further, the CD lists the name of the claimants, address, the nature of deposit, the amount of claims and remarks. The address for several claimants is found to be incomplete. Frequency counts in which proper address have not been provided has been tabulated below

5.16 As per the balance sheet of the appellant company as on 31.03.1997, total deposits of the company were to the extent of Rs.230,38,32,274/-. Claim of Rs. 223.87 crore was made before official liquidator out of 230.38 crore deposit lying with the appellant company as on 31.03.1997. It is 9 | P a g e

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worthwhile to mention that the company was barred from raising any deposit as per the directions of Hon'ble Delhi High Court since August, 1998 in response to PIL filed against the company. 5.17 It is noted that firstly, 100% of the depositors have not raised the claim against the company because the claim has been made only for Rs.223.87 crore out of Rs.230.38 crore as outstanding on 31.03.1997 and secondly, 8149 claims have not been accepted for reasons including non-availability of proof of debt and the certificate of deposit pertains to other different group entity. Further, around 13000 claims do not have any address to meet KYC requirements. 5.18 In such a scenario, where the claimants have not come forward to claim the 100% of the deposits, clearly highlight the fact that there were unexplained deposits recorded in the books of accounts. Further, the fact of acceptance of only part of the claim amount and claims without address buttress the decision of the assessing officer in treating 20% of the depositors as unexplained. Therefore, I uphold the decision of AO to make an addition of Rs.46,07,66,454/- on account of cash credits. 5.19 Further, the assessee took a plea that the aforesaid addition of Rs. 46,07,66,454/- and addition of Rs.4,76,24,266/- based on the entries involving positive difference (refer para 6.11) is a double addition. It may be relevant to note that the telescopic benefit for addition of Rs.4,76,24,266/- has already been allowed in the assessment order for AY 1997-98 at Para No. 5.15 of the said order. Further, while making addition of Rs.46,07,66,454/-, the AO is directed to allow telescopic benefit for the separate addition, if already made in regular assessment on account of unexplained credits in the books of accounts for AY 96-97, AY 97-98 & AY 98-99. 6. Vide Ground no. 13, the appellant has challenged the action of AO in making an addition of Rs. 17,42,48,675/- (12,66,24,409/- + 4,76,24,266) for remittance by Head Office to branch and Vice-Versa. Submission:- 6.1 This issue has been discussed in the assessment order dated 22.03.2002 on pages 9 to 12. Submissions on this ground as filed in Para submissions dated 18.05.2017. 6.2 The appellant has filed written submission which is summarized below: • Books of A/c's are available with A.O. as seized material, which are not considered. • To the extent of Rs. 12,66,24,409/- already stands deleted by CIT (A) in 2nd round order dtd. 13.03.2003. • The seized material from where the figures have been worked out has never been confronted. • No working of the figures as calculated by the AO from the seized material has been given. 10 | P a g e

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• The total deposits till the block period were of Rs.230 Crores and odd. This issue has already been examined in regular as well as in block and further in the block assessment at two places where separate additions of Rs. 46 Crores and odd and Rs. 90 Lakh and odd have already been made. Again, on the same issue of deposits, by giving his own funny interpretations, the Ld. AO has again made the addition of more than Rs. 17 Crores. Thus, it is nothing but hammering the same issue and repeating the same additions and further by multiplying the same again and again. It is a case of gross injustice and high handedness and in fact a glaring example of absolutely no application of mind. Such kind of additions should be deleted out rightly. Findings: 6.3 I have gone through the submission of the assessee and the assessment order in this regard. It is noted that the Id. AO has referred to the modus operandi of the assessee's business which includes the collection and repayment of deposits by its various branches. The surplus funds, if any, are then transferred by the branches to the Head Office and if funds are in short supply, the same are sought from H.O. Branch-wise account are maintained at the H.O. & on the basis of these accounts, the final accounts of the company are prepared. During the search, copies of remittances sent by some of the branch offices to H.O. were seized. AO made comparison of the remittances received from the branches as per the general ledger of M/s. KMBL, Head Office (Annexure A-1 and Annexure A-17- Kuber Khamdhenu Yojna), with the remittance sent from the branches. This comparison has been made of Bombay, Lucknow, Patna and Maharashtara Regions and only for the F.Y. 1996-97. The AO made following observations on the basis of the aforesaid comparison. a) Whenever the credit given to branches on account of Remittance is more than the remittance actually sent from the branches, there is bogus introduction of deposits in the books of the assessee company. b) Whenever the credit given to the branches is less than the Remittance sent from the branches, the money sent from the branches is being misappropriated by the Chairman and Managing Director Mr. P.K. Sharma. This misappropriate money has been utilized for the purpose of personal gains, investment in properties and share transaction by the C.M.D. This aspect has also been dealt with in the assessment order of Sh. P.K. Sharma separately. 6.4 In the absence of any response from the assessee, the AO made the addition on account of negative differences (i.e. the credit given to the branches is less than the remittances sent from the respective branches) treating it to be a case of the misappropriation of the receipt. For example from Nariman point (Sl. No.1), a sum of Rs. 10,74,017/- was remitted to the head office as per the seized material whereas, the remittances shown were at Rs.10,42,124/- and Nil according to the ledger account(A-1 and A-17). 11 | P a g e

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Therefore, there was negative difference of Rs.31893/- and the same was treated as misappropriation by the MD of the company. Such negative difference instances aggregated to Rs.12,66,24,409/- and this was added as amount misappropriated for the block period. 6.5 The AO also made the addition on account of positive differences (i.e. the credit given to the branches is more than the remittances sent from the respective branches) treating it to be a case of unaccounted money deposited in the books of account. For example from Manakpur branch (Sl.No.22) as per seized material a sum of Rs. 11,39,309/- was remitted but a sum of Rs.11,75,566/- (Rs.11,42,446+33120) was shown entered in the books as deposits. Thus the difference that was taken as positive and at Rs.36257/- was treated as unexplained cash credits. Such positive difference instances aggregated to Rs.4,76,24,266/- and this was added as unexplained cash credits. 6.6 However, the assessee has taken a plea during the appellate proceedings that the seized material from where the figures have been worked out has never been confronted to the assessee, therefore, it cannot be used for assessment purposes. Further, the appellant submitted that no basis of the said working from the seized record has been provided to the assessee. The appellant explained that it had been maintaining these ledgers at the HO where in deposits received from the various branches were duly entered, scheme wise and in no case, any remittance received from the branch remained un-entered in these ledgers. As per the assesse, the AO has considered only two accounts(A-1 and A-17) which are in the respect of particulars deposits schemes as referred by him and has not taken in to the consideration other deposit schemes appearing in the ledger. 6.7 The appellant pointed out that even if, it is considered that all receipts are not credited in the books, in such a scenario, it is not a case of unexplained deposits but the deficiency is only to the extent of not entering the receipts fully in the books of account and there remains no doubt regarding the source of the receipts. The appellant averred that mis- appropriation of funds, if any, as alleged by the AO, has not been claimed as expense which can be disallowed by the AO. 6.8 The appellant highlighted that the aforesaid addition of unaccounted deposits made on account of seized material is double addition because the AO has separately made addition of Rs.46 Cr. on account of unaccounted deposits. 6.9 Further, this issue came up before Ld. CIT(A) during the second round of appeal. The decision of Ld. CIT(A) can be summed up as under:- • The AO has made incomplete comparison because the AO himself mentioned that the comparison has been made only in case of Bombay, Lucknow, Patna and Maharashtra regions and only for the financial year 96-97. • Secondly, so far as the negative figures are concerned, it cannot be said that the deposit or part of it are unexplained. In fact the AO 12 | P a g e

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himself has said the deposits as per the seized material are more that what is entered in the ledger. No addition can be made because the money appears to have been misappropriated and utilized for personal gains or investment in the properties by the family. • I agree with the Ld.AR that if there is an expenditure claimed then there may be a case for making addition but since the deposits are itself shown to be in excess no addition can be made on account of unexplained deposits or on account of misappropriation. • However so far as positive figures are concerned, it is apparent from the seized material that what is entered in the books is more than what is shown as receipt from the branches. The appellant has not been able to reconcile the positive differences and therefore there appears no satisfactory explanation for the excess credit in the books of accounts. On these consideration the addition of Rs. 12,66,24,409/- is deleted. The addition of Rs.4.76,24,266/- is upheld. 6.10 I concur with the decision of Ld. CIT (A) in this case. Regarding the negative differences, where the credit given to the branches in the books of accounts is less than the remittances sent from the respective branches, it is noticed that neither any unexplained money has been introduced in the books of accounts nor any unexplained expenditure has been claimed in the books of accounts. Therefore, I do not find any reason for making an addition on this ground. 6.11 However, as regards the positive differences, where the credit given to the branches in the books of accounts is more than the remittances sent from the respective branches, it is clear cut case of unexplained deposits in the books of accounts. Since, no specific explanation has been furnished by the assessee to reconcile the differences, therefore, AO has rightly made addition of Rs.4,76,24,266/- on account of positive differences. 6.12 Further, the assessee took a plea that the aforesaid addition is a double addition because a sum of Rs. 46,07,66,454/- has already been added on account of unexplained deposits. I find merit in the plea of the assessee because there is no evidence with the AO that the addition of Rs. 46,07,66,454/- made on estimated basis in respect of unexplained deposits at para 5.18 is distinguishable from the entries involving positive difference leading to an addition of Rs.4,76,24,266/-. Accordingly, the telescopic benefit has been given at para 5.19 against the addition of Rs.4,76,24,266/- while making an addition of Rs. 46,07,66,454/- made on account of cash credits.” This is what leaves both the assessees as well as the Revenue aggrieved in the foregoing terms.

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extracted lower appellate discussion has made it clear that the assessee’s official liquidator had accepted 30% of the total claims. He thereafter came across the assessee’s claims list coming to 55219 qua the sum of Rs.223,86,89,997/- which was accepted to the extent of Rs.38.82% (supra). The learned official liquidator than rejected the remaining 8149 claims on account of lack of details etc. which had admittedly not been substantiated. 8. That being the case, we sought to know the corresponding claims and the amount pertaining to these rejected claimants’ applications. No satisfactory reply has come from either of these two parties. The relevant records are also stated to be not available before the tribunal since the learned CIT(A) has already taken note thereof in the lower appellate discussion. Faced with this peculiar factual position, we are of the considered view that a lumpsum addition of Rs. 5 crores only than that amounting to Rs.46,07,66,454/- @ 20% (supra) in issue is deemed as just and proper with a rider that the same shall not be treated as a precedent. The assessee gets part relief of Rs.41,07,66,454/- in other words. Necessary computation shall follow.

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IT(SS)A Nos. 2 & 3/Del/2018; 3/Del/2015 & C.O. No. 69/Del/2016

IT(SS)A Nos. 2 & 3/Del/2018; 3/Del/2015 & C.O. No. 69/Del/2016

• The relevant debit balances referred to by the Ld. AO undoubtedly form part of the regular and declared records. Thus, in any case, this issue, at the most could had been examined only during the course of regular assessment. • Without proving nexus of interest bearing funds with these funds, no disallowance can be made. • There is no basis for determining Rs. 50 Lacs figure. • The rate of interest applied as 4% per annum (in A.O. wrongly typed this per month) and then to calculated for 10 years (Rs.2,00,000 X 10)is incorrect and without any basis. Findings: 9.2 The appellant is aggrieved against the addition of Rs.20 lakh as unexplained interest income for the block period. Annexure A-11 seized from E-20, Greater Kailash-l, New Delhi contains imprest account in the name of various employees such as Subhash Tanwar, Pradeep Kumar, Ajit Edwin and Mr. R.K. Sharma. All these imprest accounts are showing debit balance for example, Page 5 showed a debit balance of Rs.18,37,595/- in the name of Sh. Tanwar, Page 31 showed a debit balance of Rs.12,17,517/- in the name of Sh. Pradeep Kumar. The account of Sh. Edwin and Sh. R.K. Sharma also showed debit balances of Rs.1,37,585/- and Rs.8,78,831.7/- at Page 56 and 57 of the ledger account. 9.3 The AO observed that getting money in the imprest account to the tune of several lakh does not fit in with the normal system of accountancy. The AO concluded on this account that the imprest account of various employees were used by the appellant for withdrawing money in cash from its books and to utilize it for the purpose of giving loan in the grey market @ 3 to 4%. The AO adopted the rate of 3 to 4% from certain other documents in the seized material itself. On these considerations, the AO estimated that a sum of Rs.50 lakh had been advanced for non business use without charging interest and taking a rate of interest @4% per month, and therefore, made, an estimated disallowance on account of interest to the tune of Rs.20 lakh. 9.4 The Ld.AR has contended that no such query was ever raised on the issue by the AO at the same of original assessment or at the time of framing the second assessment. Thus, the addition has been made without confronting the issue to the appellant and against the directions of the CIT(A) in given the set aside order. The appellant claimed that it has never been given a copy of the seized material for making the addition. The appellant submitted that it is not even in a position to comment on the correctness of the figures and the various alleged facts in the assessment order as the accounts are parts of the regular books of accounts and therefore this can at best be examined during the course of regular assessment and not in the block assessment. Further, the appellant contended that the determination of such advances of Rs.50 lakh is baseless and the AO cannot make addition on such arbitrary basis and the AO has not supplied the seized documents showing rate of interest at 3 to 4%. 18 | P a g e

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9.5 I find that the AO has assumed on his own that the assessee has advanced the money, as appearing in the imprest account, free of interest and therefore, made out a case of disallowance under section 36(1) (iii) for diversion of interest bearing funds for advancing interest free loans. However, it remains a fact that the AO did not have any corroborative evidence in this regard other than the copy of the imprest account. It is a settled law that only that part of interest can be disallowed for which the related funds have been diverted interest free. No adhoc kind of disallowance is permitted. It may be relevant to reproduce the extracts of the decision of Ld. CIT(A) on this issue in the second round of appeal, which reads as under:- “…………….in the assessment u/s.158BC, there is no scope for making any estimation on an arbitrary basis. The assessment of undisclosed income has to be strictly in accordance with the materials and evidences found during the search. Therefore on a careful consideration of all the facts and circumstances of the case I am of the opinion that the AO has brought on record no justification for making addition of Rs.20 lakh u/s.158BC. The addition is accordingly deleted." 9.6 Accordingly, in view of the discussion made above and taking note of the decision by Ld. CIT(A) in the previous round of appeal, I concur with the view taken by Ld. CIT(A) on this issue. It is a settled issue that notional income cannot be added in the hands of the taxpayer. Hence, the ground of appeal is allowed.”

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IT(SS)A Nos. 2 & 3/Del/2018; 3/Del/2015 & C.O. No. 69/Del/2016

is hereby rejected in very terms. So is the outcome of its main appeal IT(SS)A No. 3/Del/2018. Dismissed accordingly. IT(SS) A No.3/Del/2015 (Revenue’s appeal) C.O. No. 69/Del/2016 (Assessee’s cross objection) (M/s. Kuber Securities Ltd.)

IT(SS)A Nos. 2 & 3/Del/2018; 3/Del/2015 & C.O. No. 69/Del/2016

that there are 12 Almirah's of seized records lying with her on the search of Sh. P.K. Sharma, CMD of this Group of Companies where block assessment has been completed before year 2000. Appellant's MD's condition is very pathetic on medical ground and is having so many cases against him in different Court's at Delhi. The appellant company was running Finance Company and there is nothing available at present with the appellant company or its MD. The appellant group of company's got direction from Delhi High Court to verify the records available with them and bring the true condition of the seized materials only. Since, the A.O. cannot do any exercise in giving Remand Report on the two issues. I have no other alternative but to rely on A/R's information and records available on file. The appellant's A/R explanation with the SBI shares are recorded in the Stock Register seized during the course of search. The Dematerialization accounts of stocks were not available on 8th April, 1997. Therefore, the shares of SBI are duly reflected in the stock register în regular books of account. In this condition and facts and circumstances, the addition of Rs 1,73,70,000/- made on the SBI shares is hereby deleted. 2. Addition of Rs.36,23,800/- • The shares are part of stock as duly recorded in stock register • The department has accepted the stock of Rs.73,306/- shares of Reliance Industries Ltd. as per stock register seized during the course of search. • The only issue involved is to verify that 18,119 shares of Reliance Industries Ltd belong to Kuber Securities Ltd. or not. • As per panchnama of shares of Reliance Industries Ltd., in annexure 0-3, 0-4, 0-5 and 0-6 the department itself has written that shares are in the name of Kuber Securities Ltd. • The shares seized during the course of search were only 18,119 where as total stock account which are in the possession of department. The second issue involved is to verify whether 89,011 shares belong to Kuber Securties or not. As per the Panchnama of shares of Reliance Industires Ltd., in Annexure 0 3, 04, 0 5 and O 6, the Department itself has written that these shares are in the name of Kuber Securities Ltd. Since these shares are already part of stock recorded in regular books of accounts which are in the possession of Department, these are not part of undisclosed income during search. These are already shown in the balance sheet and in tax audit report. Hence this addition of Rs.36,23,800/- is deleted.”

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IT(SS)A Nos. 2 & 3/Del/2018; 3/Del/2015 & C.O. No. 69/Del/2016

shares even going by the seized material itself which has gone unrebutted from the Revenue side. We thus uphold the learned CIT(A)’s above extracted detailed discussion deleting these twin additions in very terms. This Revenue’s appeal IT(SS)A No. 3/Del/2015 fails accordingly. 17. Coming to the assessee’s cross objection C.O. No. 69/Del/2016, learned counsel does not press for its former three substantive grounds being supportive of the CIT(A)’s lower appellate discussion. He further submits that the assessee’s fourth substantive ground herein is that both the lower authorities could not have levied section 113 surcharge going by the amendment therein vide Finance Act, 2002 and in light of CIT Vs. Vatika Township (P) Ltd., 271 CTR (SC) 1. We make it clear that the learned CIT(A)’s detailed discussion in the former assessee’s case has already decided the very issue against the department. This is indeed coupled with the fact that the same stands settled in the assessee’s favour in hon’ble apex court decision as well. We thus accept the assessee’s instant fourth substantive ground in very terms.

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