C I T CENTRAL JAIPUR vs. SHRI NIRMAL KUMAR AGARWAL

Judgment 19/09/2017

the appeal of the department and partly allowed the appeal of the assessee.

(2 of 34) [ITA-108/2014]

the entire

addition

of Rs.1,11,00,000/- on account of unexplained investment in house property, ignoring the statement recorded u/s 132(4) of the assessee surrendering Rs.1 crore on this point and also ignoring the logical computation of construction cost by the AO based on findings of fact? (ii) Whether the ITAT order is perverse in deleting the addition on account of disallowance of interest of Rs.2,81,685/- ignoring that the assessee had claimed the deduction in the profit & loss account of his business concern. In view of the above it is humbly prayed that the Hon’ble Court may please to allow the appeal and quash/set aside the order of the tribunal (Annexure-3) and CIT (A) to the extent it is against revenue with cost throughout?” Appeal no.109/2014 admitted on 12.5.2016 “(i) Whether ITAT order is perverse in deleting the addition of Rs.14.64 crores on account of undisclosed cash advances stating that the addition was made on presumption and assumptions without there being any corroborative material , ignoring that the addition was based on specific seized documents quoted in the assessment and appellate order which were not rebutted u/s 292C of the IT Act by the assessee? (ii) Whether ITAT order is perverse in deleting the addition of Rs.61,49,219/- (56,99,767+4,49,452) made on account of unexplained gold jewellery and silver ignoring the findings of fact recorded by the AO and the CIT(A)? (iii) Whether the ITAT is correct in law in deleting the disallowance of loss of (3 of 34) [ITA-108/2014]

Rs.9,06,470/- claimed under the head income from other sources ignoring the legal provisions of section 57(iii) of the IT Act restricting the allowance of expenditure made for earning of income under the head only? ”

(4 of 34) [ITA-108/2014]

Re: Your Search u/s 132 of the IT Act, 1961 dt. 24.8.2009 Kindly refer to the search proceedings as stated above. During the search an offer of amount of Rs.22.81 crores (Approximately) has been made to avoid protracted litigation and to purchase the peace with the understanding that no penalty is levied in the circumstances. We also understand that the offer make would cover the expected income which may be found recorded in the seized papers. However we would wish to submit that the precise appointment of income (with reference to the time period covered under the Act) offered would be possible only after the necessary linking of the papers with each other and also the other papers/documents and records available in this respect. Thanking You Signed by Nirmal Kumar Agarwal and Damodar Das Agarwal”

analysis of the seized papers it is further found and admitted by the assessee that he was omitting two zeors while recording the transactions on papers. Relevant question and answer of his statement dated 21.11.2009 u/s 131 of the IT Act is reproduced below:- Þiz'u 18- eSa vkidks Annexure AS-1 fn[kk jgk gw¡ ftlesa fd dqy 19 i`"B gSaA ;g Annexure vkids fuokl ij /kkjk 132 dh dkjZokgh ds nkSjku fn- 24-08-2009 dks ik;k x;k gSA d`i;k bls ns[k dj i`"B la- 2 ,oa 16 o 17 ij fyf[kr Entries dks Li"V djsaA mRrj 18- eSaus vki }kjk fn[kkbZ xbZ mijksDr rhuksa i`"B ns[k fy;s gSa ,oa buesa fy[kh Entries dks le> fy;k gSA buesa fyf[kr 'P' dk rkRi;Z x.kifr Iyktk esa fLFkr ykWdj la[;k 871 ls gSa rFkk 'J' dk rkRi;Z tkSgjh cktkj esa jke yyk th dk jkLrk fLFkr fcjkuh ykWdlZ ls gSA mijksDr rhuksa i`"Bksa esa fy[kh la[;k,a bu nksuksa ykWdlZ esa j[kh xbZ ,oa fudkyh xbZ /ku jkf'k;ksa dks O;Dr djrh gSaA bu Entries ds vuqlkj tkSgjh cktkj fLFkr ykWdj esa 364000 ,oa x.kifr Iyktk fLFkr ykWdj esa 567000 :i;s j[ks gSaA fdUrq bu dkxtksa esa izfof"V djrs le; okLrfod /ku jkf'k esa ls vfUre nks 'kwU; gVk dj (Omit) jkf'k fyf[k x;h gSA bl izdkj okLro esa tkSgjh cktkj fLFkr ykWdj esa 3-64 djksM :i;s ,oa x.kifr Iyktk fLFkr ykWdj esa 5-67 djksM :i;s] i`"B la[;k 2 ,oa 16 ds vuqlkj j[ks gSa mDr jkf'k esa vius bUgh c;kuksa esa iwoZ esa iwNs x;s iz'u la-17 ds tokc esa v?kksf"kr vk; Lohdkj

(5 of 34) [ITA-108/2014]

dj djkjksi.k ds fy;s lefiZr dj pqdk gw¡ bl ij fu;ekuqlkj tks Hkh vk;dj ns; gksxk] og eSa pqdk nwaxkAß

(6 of 34) [ITA-108/2014]

ij gekjs }kjk dh xbZ v?kksf"kr Transactions dh Summary nh xbZ gS vkSj ckdh i`"Bksa esa bUgha ysunsuksa dks ckj&ckj fy[kk gqvk gSA eSa iqu% ;g Li"V djuk pkgrk gw¡ fd i`"B la[;k lkr] N%] ikap] pkj] rhu] nks] lksyg vkSj l=g ij ogh ysunsu ntZ gSa ftudk C;kSjk i`"B la[;k vkB esa iqu% fy[kk gqvk gSaA ;s lHkh ysunsu jksdM ls gq, gSa vkSj mudk bUnzkt gekjs cgh [kkrksa esa ugha fd;k x;k gSA bu ysunsu dh ekQZr ge igys gh Search dh dkjZokgh ds nkSjku vk; lefiZr dj pqds gSaA i`"B la[;k vkB esa esjh Lo;a dh handwriting gSa vkSj ftu i`"Bksa dk ftØ eSaus fd;k gS muesa gekjs employees ftuesa Sh. Krishna Kumar Agarwal, vkSe izdk'k vxzoky o vfuy xks;y esa ls fdlh ,d dh gSaA

(7 of 34) [ITA-108/2014]

Iii) The next submission is that these papers do not have any evidentiary value as they are ‘rough’ ‘torn’ papers. I have carefully considered the submission of the ld. AR of the appellant and the evidence available on record by way of statements

and the incriminating documents and do not find merit in the submission of the AR. It is pertinent to note that statements u/s 131 of the appellant were taken in the post search inquiries on 21.11.2009 regarding these papers. a) The relevant excerpts of the statement are being reproduced below for reference: iz'u 25- eSa vkidks lpZ dh dk;Zokgh ds nkSjku vkids D- 32, C-Scheme fLFkr fuokl ls tCr fd, x;s Loose Papers dk Bunch Annexure-AS-1 fn[kk jgk gw¡ bUgsa ns[kdj crk,a fd buesa fd izdkj ds Transaction ntZ gSa\ mRrj 25- i`"B ua- 18 ij fn;s x;s transaction gekjs employee dh handwriting esa gS ftuesa Sh. Krishna Kumar ;k Agarwal ;k Sh. Om Prakash Agarwal ;k fQj Sh. Anil goyal dh handwriting esa gks ldrs gSaA blesa gekjh QeZ }kjk M/s Rishab Green Gems, Modi Enterprises, Radhey Lal & Sons ,oa Vishnu Prasad Saxena bR;knh ls C;kt vius dh iphZ gS ftlesa ewy /ku Period ;kfu 12 eghus bR;kfn vkSj C;kt dh x.kuk dh gqbZ gSaA i`"B ua- 11 ls 14 rd gekjh Concerns ls lEcfU/kr C;kt dh ifpZ;ka gSa ftlesa gekjs }kjk fofHkUu ikfVZ;ksa dks fn;s x;s Finance ij C;kt dh Working dh xbZ gSa bu i`"Bksa esa Hkh gekjs Staff ds yksxksa dh handwriting gSA i`"B la- 10 ij Sh. Radha Govind Lashkari }kjk gekjs ekQZr cktkj esa :i;k yxk;k gqvk gSa mldh detail gSaA i`"B la- 9 ij Manoj Mittal }kjk gekjs ekQZr cktkj esa yxk;s x;s Cheques dh details gSaA i`"B la- 8 esjh handwriting Eksa gS blesa fn;s x;s Transaction gekjs }kjk Search dh dk;Zokgh ds nkSjku ?kksf"kr dh xbZ v?kksf"kr vk; dk fgLlk gSA ;g gekjs Regular Books of Accounts esa ugha fn[kk;k x;k gSaA eSa Li"V djuk pkgrk gw¡ fd Search dh dkjZokgh ds nkSjku gekjs Premises ls yxHkx 10 djksM :i;s tCr fd;s x;s Fks ftls geus viuh v?kksf"kr vk; ekurs gq, vk;dj ds fy, LosPNk ls lefiZr fd;k gSaA i`"B la[;k 8 esa fn;s x;s Transactions Hkh blh ls lEcfU/kr gSA bl Annexure ds vU; i`"B tSls i`"B la- 7]6]5]4]3]2]16]17]¼i`"B la- lkr] N%] ikap] pkj] rhu] nks]

(8 of 34) [ITA-108/2014]

lksyg ,oa l=g½ Hkh gekjs }kjk ?kksf"kr dh xbZ v?kksf"kr vk; ls lEcfU/kr gSA eS ;g Li"V djuk pkgrk gw¡ fd ist ua- 8 ij gekjs }kjk dh xbZ v?kksf"kr Transactions dh Summary nh xbZ gS vkSj ckdh i`"Bksa esa bUgha ysunsuksa dks ckj&ckj fy[kk gqvk gSA eSa iqu% ;g Li"V djuk pkgrk gw¡ fd i`"B la[;k lkr] N%] ikap] pkj] rhu] nks] lksyg vkSj l=g ij ogh ysunsu ntZ gSa ftudk C;kSjk i`"B la[;k vkB esa iqu% fy[kk gqvk gSaA ;s lHkh ysunsu jksdM ls gq, gSa vkSj mudk bUnzkt gekjs cgh [kkrksa esa ugha fd;k x;k gSA bu ysunsu dh ekQZr ge igys gh Search dh dkjZokgh ds nkSjku vk; lefiZr dj pqds gSaA i`"B la[;k vkB esa esjh Lo;a dh handwriting gSa vkSj ftu i`"Bksa dk ftØ eSaus fd;k gS muesa gekjs employees ftuesa Sh. Krishna Kumar Agarwal, vkSe izdk'k vxzoky o vfuy xks;y esa ls fdlh ,d dh gSaA Thus it has been admitted by the appellant himself that these papers reflected his unaccounted transactions, page 8 was in his hand writing and was a summary of the transactions for the period.”

Weight

of Jewellery found Net Weight of jewellery as declared in the W.T. returns of the family for the year ended on 31.03.2008 filed on 31.07.2008 i.e. much before the search 10810.33 9803.81 7843.048 1176.457 6666.591 6315.120 Remarks Remarks Remarks Remarks Remarks Remarks

(9 of 34) [ITA-108/2014]

It is the total weight of the item found valued and inventorized.

To clarify

it is submitted

that these

items contained dori,wax, lack, threads, steel wires,

plastic bushes all of which have no gold content, however the stones studded are inclusive in this weight for which separate deduction has been given. This weight is after reducing the factor of dori, wax, lack, threads, steel wires, plastic bushes and stones which have been separately valued, thus it is the GROSS WEIGHT of the jewellery items. The weight in column 2 is required to be reduced to its purity mark to arrive at the net weight of gold content. In case of diamond jewellery, it is impossible to make it more than 18 Ct. gold content in the total weight. In other cases, as perpast practice the jewellery with the assessee is 20 or 22 Ct. Itmay kindly be noted that nojewellery could be made at 24Ct. purity which is an established fact in jewellery

making, therefore, taking an average of three i.e. 18, 20, 22 an average of 20% has been applied to reach at the jewellery net weight

before considering impurity. It is a deduction legally available as whenever

the jewellery is melted to convert into pure gold, 15%is the minimum loss of weight on account of mixing copper, silver and cadmium. These are the necessary alloys to be used in making

gold jewellery. Therefore, this is the net weight which is required to be considered for valuing the available jewellery. This is to be added by 261.360 gms. as considered by the department for arriving at the unexplained weight of jewellery, thus by considering this 261.360 gms. It comes to 6576.480 gms. It is noticed that a net weight considered for arriving at the impugned addition is, in fact, a gross weight. This fact is clearly visible from pages enclosed at pages no. 19 to 22 of assessee's written submission where valuation done as on 25-08-2009 by the search party is enclosed. In the column of gross weight in grams i.e. the column subsequent to column of the description of total weight of the items seized or found. In the subsequent column, net weight approximately is given. The net weight of (10 of 34) [ITA-108/2014]

the jewellery has been shown after reducing the weight of threads, dori (Sarrafa), Chapdi, Plastic bushes, steel wire, wax etc. having zero metal content and nil value. We have found that this observation of the ld. CIT(A) as asserted by the ld. DR supporting the reasons given by both AO and the ld. CIT(A) are not correct. In fact, there is no difference in the jewellery declared and found. The assessee has two sons who are not assessed under Wealth Tax Act and in view of the CBDT instruction dated 11-05- 1994, credit has to be given in their hands also. This deduction comes to 200 gms of jewellery being 100 gms for each male members in the Wealth Tax Act filed upto assessment year 2008-09 and search took place on 24-08-2009 which is almost after expiry of 17 months. We are in agreement with the ld. AR that during this period of 17 months, the acquisition of some jewellery in social ceremonies and other like occasions looking to the family of the assessee is not ruled out. As per CBDT instruction stated above, the other family members also get credit upto 1800 gms as there are two married ladies and two male members. For each married lady, 250 gms and each male members 100 gms credit has to be given. There is some dispute regarding giving credit as per instruction of CBDT in question. However, the Hon'ble Rajasthan High Court Hon'ble Karnataka High Court and Gujarat High Court have also taken similar view. Therefore, after considering the deduction on account of purity, the CBDT instruction and the value of the precious and semi precious stones jewellery available with the assessee can be treated as explained. Therefore, the addition of Rs. 56,99,767/- made on account of unexplained investment in the acquisition of jewellery is deleted. Thus we allow Ground No. 1 of the assessee to that extent.”

(11 of 34) [ITA-108/2014]

“11.2 We have head the rival submissions on this issue as well. It was argued by the ld. AR that admission made by the assessee is a result of atmosphere, circumstances and the pressure created and heat generated during the course of search. The search at the residence of the assessee stated at 10.00 AM 24-08-2009 and the admission was made u/s 132(4) of the Act after almost 42 hours in the midnight of 25th and 26th Aug. 2009 when the search was finally concluded. During the course of search on 24- 08-2009 in the late midnight of 25/26/08/2009 when the search was concluded after repeated physical search and verification of entire house and business places of the assessee. During search, the statements of the assessee were recorded several times firstly at the time of initiation of search on 24-08-2009 and last in the late mid night of 25/26/08- 2009 when search was concluded after repeated physical search and verification of the entire house and business places of the assessee. It is in this back ground that it has been stated by the ld. AR that entire statements of the assessee and his family members and employees were recorded and a forced surrender of Rs. 22,81,84,264/- was obtained in a charged atmosphere. After considering the overall scenario during search, the assessee declared additional income of Rs. 10,00,35,045/- in the return of income filed for the year under appeal. The assessment was completed u/s 153A read with Section 143(3) of the Act wherein the addition of Rs. 15,36,67,393/- was made which includes the addition of Rs. 14,64,25,495/- made on account of alleged unexplained advances as per seized papers of Annexure AS-exhibit1 which are tabulated at page 33 of assessment order as under:- S.N. Page No. Amount of undisclosed advances 1 4 1,12,60,000.00 2 5 3,88,03,145.00 3 6 81,00,000.00

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4 7 11,00,000.00 5 8 5,78,00,000.00 6 19 2,93,62,350.00 Total 14,64,25,495.00 It was argued before us by the ld. AR that impugned addition is based on loose papers at Serial No. 1 to 3 in the above table via pages 4,5, and 6 which are reconstructed pages pasted on plain paper which were found in the torn out condition and treated by the assessee as deaf and dumb and rough pieces of papers lying in the dustbin kept in the house of the assessee. These papers are marked as Annexure AS-1 pages no. 4 to 6 and 8. It was further argued that certain entries were also found noted on the back side of these papers. This fact is not denied by the AO but the same has not been taken into consideration. When the query was raised to the ld. DR in this regard, he fairly submitted that these were found in torn conditions from the dust bin and were passed as stated above. After considering the state of these papers, we have found that the AO in his order has clearly ignored this contention of the assessee. In this regard, pages 27 at para 7.13 of the assessment order is relevant. We have found from records and submissions of the ld. AR that during course of search, no incriminating documents disclosing the alleged advances made by the assessee to various persons was found or seized. The Revenue found and seized cash lying in the private lockers and the same have already been offered by the assessee as an additional income in the return filed for the year under consideration which also covers with the withdrawal of deposits of cash in these lockers which is supported by pasted papers if they are taken into consideration. It is found that the nature of entries contained at pages, 4,5,6 and 8 can be treated as covered by surrendered income as apart from business of finance brokerage in which assessee is engaged, no other source of income has (13 of 34) [ITA-108/2014]

been attributed or found by the AO himself and hence only inference can be drawn is that undisclosed income declared by the assessee can be only out of activity regularly carried on by him i.e. finance, brokerage etc. It was stated that noting on the left hand side of these papers represented the source of funds (receipt side) and right hand side represented the application (payment side). All these funds and the figures appearing are to be comprehended after suffixing two zero and this fact has been clearly admitted by the assessee and is still maintained even before us. It was further stated that it has been consistent stand of the assessee that entries jotted down on these loose papers bearing nos.AS-1 pages 2,3,4,5,6,7,16 & 17 are the repeated entries and the summary of such entries is finally calculated or noted down at page no. 8 of the written submission of the assessee. This fact was also explained thread bare before ld. CIT(A) vide letter dated 21-11-2009, the copy of which is enclosed at pages 1 to 5 of the assessee's paper book. This fact was asserted by the assessee in his statement recorded on 21-11-2009 by the ADIT in the post search enquiries wherein in the reply to Q.No.25, the assessee has stated these facts. The ld. CIT(A) has partly accepted the contention of the assessee. Regarding these entries being repetitive in nature but he has given part relief with reference to matching principle to the extent of Rs. 7,05,86,000/-. The action of the AO and the ld. CIT(A) is depicted in the following chart mentioned at page 8 of the assessee's written submission. Annexure AS-I page No. By AO By CIT(A) 4 1,12,60,000.00 53,00,000.00 5 3,88,03,145.00 6,00,000.00 6 81,00,000.00 -

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7 11,00,000.00 1,10,000.00 8 5,78,00,000.00 5,78,00,000.00 19 2,93,62,350.00 67,76,000.00 Total 14,64,25,495.00 7,05,86,000.00 It was argued by the ld. DR that total withdrawn from the lockers at Rs. 7.47 crores would be the same in making advances and so it is not possible by the assessee to have received back these amounts and this amount being higher than the amount of advances as calculated above, on the entries contained in each individual paper, she has upheld the addition of Rs. 7.74 crores based on the entries found noted at pages 16 and 17 which is cash balances available at a particular point of time in safe deposit vaults.”

(15 of 34) [ITA-108/2014]

assessee are added, the resultant figure comes to Rs.1,10,000/-, however AO while dealing with this paper has added three zeros making the figure to Rs.11,00,000/- (AO Page 31 para 3). The Ld. CIT(A) accepted this contention however has failed to appreciate the fact that the amount of Rs. 1,10,000/- appearing in the name of G Rana in page 7 of Annexure AS-1 is duly appearing at page 8 in Sl. No. 10 left hand side, therefore, no separate addition on this score could be made. Page No. 8: An addition of Rs. 5,78,00,000/- was made by Ld. AO by alleging that the assessee has made unexplained advances which were found recorded on this page. Entry-wise observations of the AO on this seized paper are at page 31 of the assessment order. While making the addition the AO himself was not sure whether he is making addition on account of advance given or advance taken or the payments made or for the payments received and has played blow hot and blow cold. During the course of appellate proceedings vide letter dated 21.08.2013 (APB 1-5) assessee explained each individual entry of this page but Ld. CIT(A) ignored the same and confirmed the amount of advances worked out at Rs. 5,78,00,000/- by Ld. AO. In this regard it is submitted that the Ld. AO while working out the addition has read the papers in the manner that he has considered the entries found noted at the left side of the paper as the source / receipt and the entries found noted at the right side of the paper as the application / payment but when the precise calculation was made for the first seven entries at the right side of page 8 of Annexure AS-1, the AO by taking divergent stand for no reasons brought on record has held the amounts mentioned therein as the receipt of interest on the advances given (by ignoring the fact that the right hand side entries are in relation to the payments / application of the funds) which is clearly evident from his own working where he has worked out the principal amount by firstly adding three zeros to the figures appearing in first seven entries (instead of two zeros) and further by extrapolating them for the principal amount by applying interest rate of 12% and held that the assessee has given advances of Rs. 4.00 crores on which interest of Rs. 48.00 lacs

(17 of 34) [ITA-108/2014]

was received. The entry-wise working done by the AO is as under:- S.N. Amount mentioned Amount as per assessee Amount taken by AO Principal calculated Addition made 1. 1,080.00 1,08,000.00 10,80,000.00 90,00,000.00 1,00,80,000.00 2. 960.00 96,000.00 9,60,000.00 80,00,000.00 89,60,000.00 3. 420.00 42,000.00 4,20,000.00 35,00,000.00 39,20,000.00 4. 60.00 6,000.00 60,000.00 5,00,000.00 5,60,000.00 5. 360.00 36,000.00 3,60,000.00 45,00,000.00 48,60,000.00 6. 480.00 48,000.00 4,80,000.00 40,00,000.00 44,80,000.00 7. 1,260.00 1,26,000.00 12,60,000.00 1,05,00,000.00 1,17,60,000.00 Total 4,620.00 4,62,000.00 46,20,000.00 4,00,00,000.00 4,46,20,000.00 Accordingly, the addition of Rs.4,47,00,000/- (correct total Rs.4,46,20,000/-) [5,78,00,000– 1,31,00,000] was made based on these entries as against the actual amounts at Rs.4,62,000/- when he added three zeros to the amounts. In case the above calculation is reworked by adding two zeros to the amount of interest appearing in the said paper, the resultant amount of advances comes to Rs.38,50,000/- and interest of Rs. 4,62,000/- totaling to Rs. 43,12,000/- as against the addition of Rs. 4.00 crores made by Ld. AO and accepted by Ld. CIT(A). It is further submitted that the AO presumed that the assessee has received interest on the amount advanced and thus made the addition on both the counts i.e. the interest as well as principal whereas these entries are appearing in the right side of paper and in no case could be considered as receipt and actually these are the payment made. Even for the arguments sake, if the allegation of the AO is accepted that it is the amount of interest, in such a situation it is the payment of interest on the advances received by the assessee and not the advances given as has been alleged by the AO. To prove the contradictory approach and in addition to above, on the remaining entries appearing at the right

(18 of 34) [ITA-108/2014]

side of the paper i.e. Annexure AS-1, Page 8, the AO has added two zeros to the figures appearing against each individual entry and made the addition of Rs. 1,31,00,000/- making the total addition to Rs. 5,78,00,000/- on the basis of this paper, thus such an approach being based on no material and rational, deserves to be hold bad in law. Page No. 19 of Annexure AS-1: An addition of Rs. 2,93,62,350/- was made on the basis of the entries noted in the said paper which are ascribed by the AO at page 17 and 18 of the assessment order wherein he has extrapolated the figures mentioned by adding 2, 3 or 5 zeroes to the figures appearing in the said paper without assigning any reason for doing so. The Ld. CIT(A) has reduced the same to Rs. 67,76,000/- on her whims and fancies without appreciating the true nature of the entries appearing in the said page. In this regard it is submitted that this paper neither reflects that whether the amounts mentioned are receipts or payments and these are the simple memoranda entries made by some staff member for his / her own use without having any financial implication. Thus this paper is nothing but a dumb document. The major discrepancies in the approach taken by the Ld. AO as well as by the Ld. CIT(A) are as under: In the said paper No. 19 of Annexure AS-1 some amounts are appearing below the vehicle Nos. and all these figures are extrapolated by AO by adding two zeros giving impression that these vehicles have value of few lacs each (AO page 17 & 18 entries at Sl. No. 19 to 22) whereas all these vehicles are “two wheelers” having value not more than 40,000/- each. To prove the vehicles as Two Wheelers copies of registration certificate and other documents were submitted before Ld. CIT(A) (APB 16-21) who though accepted the contention of the assessee partly and work out the total advance at Rs. 67,76,000/-. While doing so Ld. CIT(A) has adopted pick and choose method and picked the product calculated at the bottom of the page where from the figure of 33,880/- appearing against the vehicle No. 8495, an amount of Rs. 26,475/- appearing against the vehicle No. 9368 was deducted and the resulted figure of 7,750/- was calculated. Ld. CIT(A) has (19 of 34) [ITA-108/2014]

added all these three figures and held that the total of Rs. 67,760/- being the product is the unexplained advance as per this page. The figure appearing against the vehicle Nos. were the total kilometers per vehicle run which fact was grossly ignored by Ld. CIT(A). For the remaining figures appearing on the said page, it is submitted as under:

(20 of 34) [ITA-108/2014]

have declared total additional undisclosed income of Rs. 10,00,35,045/- which is the cash found and seized from the aforesaid lockers and available with the assessee at his residence and business premises. The closing balance or the last balance appearing in the said pages i.e. for “P” Rs. 5,67,000/- [5,67,00,000 after adding two zeros] and for “J” Rs. 3,64,000/- [3,64,00,000 after adding two zeros]. A chart containing the day to day inflow and outflow of the funds from the said lockers is reproduced herein below, a perusal of which would reveal that the balance as on the date of search is matching with the cash physically found and seized and included in the additional income disclosed. Extract of Annexure AS-1 Page 17 Marked as 'P' Addition Deduction Balancing 5,60,000.00 5,60,000.00 60,000 5,00,000.00 50,000 4,50,000.00 55,000 5,05,000.00 31,000 5,36,000.00 73,000 4,63,000.00 20,000 4,83,000.00 28,000 4,55,000.00 25,000 4,30,000.00 59,000 4,89,000.00 28,000 5,17,000.00 50,000 5,67,000.00 Marked as ‘J’ 1,25,000.00 1,25,000.00 10,000 1,15,000.00

(21 of 34) [ITA-108/2014]

1,25,000.00 1,25,000.00 20,000 95,000.00 55,000 1,50,000.00 45,000 1,05,000.00 14,000 1,19,000.00 66,000 53,000.00 15,000 68,000.00 8,000 60,000.00 72,000 1,32,000.00 37,000 95,000.00 5,000 1,00,000.00 45,000 1,45,000.00 1,95,000 3,40,000.00 The aforesaid two tables are further reproduced as page 17 of Annexure AS-1 and are duly merged in the tables narrated below regarding the entries contained in page 16. Birani Safe 2,99,000.00 10,000 2,99,000.00 50,000 2,39,000.00 15,000 2,54,000.00 31,000 2,85,000.00 10,000 2,95,000.00 10,000 2,85,000.00 30,000 3,15,000.00 26,000 2,89,000.00 1,00,000 1,89,000.00 89,000 1,00,000.00

(22 of 34) [ITA-108/2014]

25,000 1,25,000.00 30,000 95,000.00 55,000 1,50,000.00 45,000 1,05,000.00 14,000 1,19,000.00 66,000 53,000.00 15,000 68,000.00 8,000 60,000.00 45,000 1,05,000.00 27,000 1,32,000.00 37,000 95,000.00 5,000 1,00,000.00 45,000 1,45,000.00 1,95,000 3,40,000.00 24,000 3,64,000.00 5,36,00,000 4,71,00,000 Ganpati Plaza 2,54,000.00 2,54,000.00 16,000 2,70,000.00 1,01,000 3,71,000.00 30,000 4,01,000.00 1,75,000 5,76,000.00 24,000 6,00,000.00 40,000 5,60,000.00 60,000 5,00,000.00 50,000 4,50,000.00 55,000 5,05,000.00 6,000 5,11,000.00 25,000 5,36,000.00

(23 of 34) [ITA-108/2014]

73,000 4,63,000.00 28,000 4,35,000.00 20,000 4,55,000.00 25,000 4,30,000.00 59,000 4,89,000.00 28,000 5,17,000.00 50,000 5,67,000.00 5,89,00,000 2,76,00,000 Attention of your honours is invited to the paper book page 15 wherein it is explained that the entries appearing in page 17 of Annexure A-7 are reproduced at page 16 of Annexure AS-1 and the entries appearing at page 16 are appearing at pages 4, 5 and 6 of Annexure AS-1 and entries contained in pages 4, 5 & 6 thus stood merged in page 8 of Annexure AS-1, therefore, it is submitted that the page 8 of Annexure AS-1 contains all the entries as were found noted in other pages i.e. pages 4, 5, 6, 7, 16 & 17 and therefore page 8 is required to be considered for working out the undisclosed income of the assessee. The perusal of the page 8, would reveal that the total of left hand side comes to Rs.10,96,651/-

[actual

figure 10,96,65,100/-] and right hand side total comes to Rs.1,35,620/- [actual figure 1,35,62,000] and the balance amount of Rs. 9,61,031/- [actual figure 9,61,03,100/-] could at the most be available with the assessee as against which the total excess cash was found at Rs. 10,00,35,045/- which was declared in the return of income filed, therefore, there remained no undisclosed income in the hands of the assessee even after considering all the entries in the seized papers based on which the addition was made in the assessment order. In the circumstances, it is humbly submitted that the entire addition made on incorrect and improper appreciation of the facts and merely on assumption and presumption without having any corroborative material brought on record deserves to be deleted, more particularly when the Ld. AO has neither

(24 of 34) [ITA-108/2014]

appreciated the statements of the assessee in its true spirit nor has appreciated the additional income offered by the assessee.’’

various other close friends and relatives of both the sides as well as on the auspicious occasion of birth of a child whether male or female and the CBDT, looking to such cutoms prevailing throughout India, in one way or the another, came out with this Circular and we accordingly are of the firm opinion that it should also mean that to the extent of the aforesaid jewellery, found in possession of the varoius persons, even source cannot be questioned. It is certainly 'Stridhan' of the woman and normally no question at least to the said extent can be made. However, if the authorized officers or/and the Assessing Officers, find jewellery beyond the said weight, then certainly they can question the source of acquisation of the jewellery and also in appropriate cases, if no proper explanation has been offered, can treat the jewellery beyond the said limit as unexplained investment of the person with whom the said jewellery has been found.

assessees. However, by the Finance Act, 1992 w.e.f. 01/04/1993 drastic change was introduced under the Wealth Tax Act where only some assets u/s 2(ea) came within the perview of the definition of an "Asset" under the wealth tax and by and large, the other assets namely; liquid, capital investments in firms/shares, one house property, commercial assets were exempt and even the limit of other assets was raised to 15 lacs (for the Assessment Year 1993-94 to 2009-10) and thereafter, by and large, even the assessees, who were furnishing returns prior to 01/04/1992, in view of the drastic amendment made under the Wealth Tax Act, chose not to file wealth tax return as there was no liability for furnishing wealth tax returns. That does not mean that whatever assets were there in their possession, not disclosed under the Wealth Tax Act, remained undisclosed. May be, later on, on account of increase in the gold/silver prices, value of gems/ stones, value of jewellery may have exceeded but that does not mean that if a person has not filed wealth tax return, then jewellery even to the said extent of 500 gms prescribed by the aforesaid circular, became undisclosed. Admittedly, it is not the case of the revenue that the jewellery, so found, which has been prescribed hereinabove, was not admitted by the family members at the time of search. All the ladies in the family admitted that the jewellery found were all their own and some of the jewellery was lying in custody and control of their mother-in-law and in Indian conditions, it happens that the daughter-in-law keeps her jewellery with her mother-in-law or/and head of the family and takes the same whenever required for some occasion in the family. Even otherwise, the jewellery is personal wearing in nature and the revenue has not placed any material on record to show that the items, which were found, were not personal wearing of the ladies.”

(27 of 34) [ITA-108/2014]

(28 of 34) [ITA-108/2014]

(Gujarat) wherein it has been held as under:-

(29 of 34) [ITA-108/2014]

the report of the DVO may form the foundation for reopening the assessment, there must still be some reasons which warrant holding the belief that income chargeable to tax has escaped assessment so as to necessitate issuance of a notice under section 148 of the Act. The facts reveal that the entire basis for reopening the assessment of the petitioner for the year under consideration is the report of the DVO without verification of any facts to support such conclusion. The Assessing Officer has not recorded any satisfaction about the correctness or otherwise of the contents of the report of the DVO.

heading of the section as well as the opening part of the said section, it can be seen that the expression used by the legislature is "estimate". Thus, resort can be made to the said provision by the AO for the purpose of estimating the value of any investment, bullion, jewellery or any valuable article in the circumstances referred to therein. It is common knowledge that the question of estimate arises only when the books of account of the assessee are not reliable. In other words, if the AO is of the view that the computation of taxable income cannot be based on the books of account of the assessee, he can reject the books of account and proceed to estimate the taxable income of the assessee. The question of making an estimate of the value of any investment referred to in s. 69 of the Act would arise only when the AO finds that the assessee has made investments which are not recorded in the books of account, if any, maintained by him.

learned counsel for the assessee, the report of the Valuation Officer cannot form the foundation for rejection of the books of account.

(32 of 34) [ITA-108/2014]

place, DVO's report cannot be construed as tangible material which would warrant the authority to exercise the powers of reopening of assessment. The Apex Court time and again has propounded that the powers of reassessment cannot be exercised just to re-ensure the correctness of material which has already been examined. Further, not to review the opinion which has already been formulated and in large number of cases it has been propounded that reopening of assessment cannot be based upon mere change of opinion. One such decision which is reported in case of Kelvinator of India

Ltd.

reported in MANU/SC/0047/2010 : 320 ITR 561. The said decision has analyzed the concept of change of opinion and relevant extract deserves to be reproduced hereinafter: "The concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-Tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessment Officer can reopen an assessment on mere change of opinion. The concept of "change of opinion" must be treated as an inbuilt test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief."

for the revenue

that Section 142Acame to be introduced at a later point of time and the cases which have been cited above were in the context of earlier provision and in the pre-amended

Section 142Ahad

no element of rejection of books and (33 of 34) [ITA-108/2014]

therefore since in view of this change of statutory provision, the ratio laid by the aforesaid two decisions referred to above are not applicable. In fact, on going through the two decisions it is found by this Court that the Court in case of Goodluck has dealt with the effect that both the provisions contained under Section 69 as well as Section 142A of the Act and on analysis of the said two statutory provisions, has propounded that the assessing officer would first be required to record a satisfaction that the assessee had made an investment which are not recorded in the books of accounts. As a necessary corollary, he would then reject the books of accounts as not reflecting the correct position and then to proceed to make assessment on the basis of assessment for which purpose he can refer to provision of Section 142A of the Act and therefore the basic element of formation of belief about incorrect information which are not reflected in the books of accounts which is a condition precedent before referring to Section 142A of the Act. The words of both the provisions 'pre' as well as 'post' are not of much difference and therefore the contention raised by the revenue is meritless and therefore the same is not accepted. A further reference is made by the learned counsel for the revenue to the case of decision

reported in MANU/AP/0867/2012 : 356 ITR 74 delivered by the A.P. High Court in the case of Bharathi Cement Corporation P. Ltd. (supra), wherein the learned counsel has relied upon the observations contained in paragraph 14 in it. The said decision is based upon a different set of circumstances which is not appearing on the case on hand and the Court has found that ratio laid down by this Court in case of Goodluck reported in 26 Taxman.com 264 has got the applicability to the facts of the present case, the contention raised by the revenue is not accepted.

Court that the particulars which have been asked for have been sufficiently explained during the assessment proceedings and the assessment proceedings have become final and therefore relying upon solitary report, the only reason which is based upon to exercise powers for reopening of the assessment would be nothing but change of opinion which is not permissible.

Therefore the over all circumstances reflected on the record indicates that the action on the part of the respondent authority under reopening of the assessment is impermissible and therefore the petition deserves to be allowed and the impugned notice issued in Section 148 dated 28.4.2010 as well as the order of rejection of objection dated 12.12.2011 are quashed and set aside hereby. Rule is made absolute.”