KAMAL PANJWANI,INDORE vs. THE ACIT 3 (1), INDORE

आदेश / O R D E R

Per Bench:

Feeling aggrieved by five separate appeal-orders all dated 29.11.2013

passed by learned Commissioner of Income-tax (Appeals)-I, Indore

[“CIT(A)”], which in turn arise out of respective assessment-orders dated

30.06.2011, 31.10.2011 & 30.12.2011 passed by ACIT, Circle 3(1), Indore

[“AO”] u/s 143(3)/254 of Income-tax Act, 1961 [“the Act”] for Assessment-

Years [“AY”] 1988-89 to 1992-93, the assessee has filed the captioned five

(5) appeals.

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

same counsels and majority of the issues are of identical nature; they were

heard together at the request of parties and are being disposed of by this

consolidated order for the sake of convenience, brevity and clarity.

arguments and also submitted written notes from time to time. We have

peacefully heard both sides on several dates. Lastly, we also asked learned

Representatives to file Concise-Synopsis of their submissions under service

to other side which the learned Representatives did. We have carefully

considered the relevant submissions made by both sides.

present appeals as follows : This is the 3rdround of litigation before us. The

original assessee in this case was “Shri Namdev Panjwani”. A search u/s

132 of the Act was carried upon original assessee and its group concerns on

10.08.1992 to 13.08.1992, the flagship company of assessee-group is “M/s

Panjwani Packings Pvt. Ltd. [“PPPL”]. During search, statements of assessee

were recorded on 11.08.1992/12.08.1992 u/s 132(4) wherein a surrender of

undisclosed assets/income of Rs. 51,57,000/- was made by assessee. Post-

search, the AO recorded reasons dated 30.04.1993, issued notices dated

27.05.1993 u/s 148 and thereby took action u/s 147 for AY 1988-89 to

1992-93 as per provisions of the Act existing at the relevant time to deal

search-cases. In response, the assessee filed returns of income. Ultimately,

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

the AO passed assessment-orders u/s 147/144 on 04.07.1997 after making

certain additions. Aggrieved, the assessee went in first-appeal before CIT(A)

whereupon the CIT(A), vide order dated 31.12.1997, set aside the

assessment-orders for making de novo assessments after hearing assessee.

The 1st Round ended here. Pursuant to direction of CIT(A), the AO made de

novo assessments u/s 143(3)/250 vide orders dated 27.03.2000 again after

making certain additions. Aggrieved by such de novo orders, the assessee

filed first-appeal to CIT(A). The CIT(A) decided appeals vide order dated

15.02.2007 granting part-relief to assessee. Dissatisfied with orders of

CIT(A), the assessee and revenue both filed cross-appeals to ITAT, Indore

whereupon the ITAT vide order dated 07.04.2010 in ITA No. 321, 322, 343,

340 & 341/Ind/2007 and C.O. No. 56 to 60/Ind/2007 set aside the de novo

orders passed by AO and directed the AO to re-frame assessments after

bringing legal heirs on record since the original assessee “Shri Namdev

Panjwani” had expired on 21.08.2009 and also to decide the issues afresh.

The 2nd round ended here. Pursuant to ITAT’s directions, the AO re-framed

assessments vide orders dated 30.06.2011, 31.10.2011 & 30.12.2011

respectively for AY 1988-89 to 1992-93 u/s 254/143(3) in the name of “Shri

Kamal Panjwani L/H of Late Shri Namdev Panjwani”. Aggrieved by such re-

framed assessments, the assessee again went in first-appeal whereupon the

CIT(A) decided appeals by five separate orders all dated 29.11.2013 giving

part-relief to assessee. Still unsatisfied with orders dated 29.11.2013 of

CIT(A), the assessee has come before us in the captioned five (5) appeals;

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

thus the orders of CIT(A) are ‘impugned orders’. Thus, this is the 3rd Round of

litigation.

Original grounds:

ITA No. 81/Ind/2014 – A.Y. 1988-89:

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of following additional grounds in AY 1989-90 & 1990-91:

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and can be decided on the basis of material held on record; therefore they

should be admitted and adjudicated as per National Thermal Power Co. Ltd.

Vs. CIT (1998) 229 ITR 383 (SC).

raised the very same grievance in first-appeal before CIT(A) through

following grounds:

“On the facts and in the circumstances of the case, the learned Assessing Officer has erred in passing order without complying with the provision of section 147/148.” But, during the hearing of first-appeal, the assessee himself made following

submission which is re-produced by CIT(A) on Page No. 17 of order of AY

1989-90 / Page No. 9 of AY 1990-91:

“The issue is not being pressed for adjudication and same may please be treated as withdrawn.” Taking into account this submission of assessee, the CIT(A) dismissed

assessee’s grounds by mentioning thus:

“The appellant did not press this ground for adjudication and accordingly this ground of appeal is dismissed.” Thus, the assessee himself withdrew this very grievance/issue in first-

appeal before CIT(A) and at the assessee’s own request for withdrawal, the

CIT(A) dismissed assessee’s grounds. Despite this, now the assessee is

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

attempting to blame the CIT(A) by claiming that (i) the CIT(A) has erred in

not allowing proper opportunity for raising legal issue, and (ii) the CIT(A)

was not justified to reject assessee’s contention that the reassessment-

proceedings initiated by AO was invalid, void and bad in law. Interestingly,

the assessee pursued exactly same grounds in other three assessment-

years, namely AY 1988-89, 1991-92 & 1992-93 and got decided from CIT(A).

Therefore, this is a bad attempt of assessee not only to blame the CIT(A) for

AY 1989-90 & 1990-91 but also to re-raise his self-withdrawn

grievance/issue again before us and that too by way of additional grounds.

Since the assessee has consciously closed this issue before CIT(A), we are

afraid that we can re-admit the same at this stage and that too by way of

‘additional grounds’. Therefore, we are not inclined to admit the additional

grounds raised by assessee. On merit also, we may mention that even if we

would have admitted these additional grounds, which though we are not

inclined at all, then also these grounds would have been dismissed by us in

view of the fact that in subsequent paragraphs we are going to dismiss

identical grounds in other three AYs 1988-89, 1991-92 & 1992-93. Thus in

any case, the assessee is not going to succeed. Consequently and therefore,

these ‘additional grounds’ are dismissed.

wise/ground-wise but, however, take up common grounds of different years

together.

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Ground No. 1 of AY 1988-89, 1991-92 & 1992-93 – Challenge to

proceedings u/s 147:

to reject assessee’s claim that the re-assessment proceeding done by AO was

invalid, void and bad.

for AY 1989-90 & 1990-91. But, here it requires an apt adjudication by us

because this issue was argued by assessee in first-appeal and the CIT(A)

also passed a reasoned order. For the sake of clarity, we would like to

mention that since we are adjudicating this issue only for three years,

namely AYs 1988-89, 1991-92 & 1992-93, we would narrate the

facts/figures related to those three years only in the discussions to follow.

observing and holding thus:

“First issue is when case was re-opened by AO why it was not objected by appellant at that time. Secondly, evidences of concealment were found during search like unaccounted investment in shares, unexplained deposits in bank account, etc. Thirdly, sufficiency of reasons could not be challenged as held in case of Raymond Woolen Mills Ltd. (SC) 236 ITR 34. This ground of appeal is dismissed and re-opening is held valid.” 13. Before us, Ld. AR made following arguments to support assessee’s

claim that the proceeding u/s 147 have been invalidly taken:

(i) He drew our attention to the reasons recorded by AO dated

30.04.1993 for undertaking re-assessment proceeding, copy filed at

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

Paper-Book Page 1-12. Referring to same, he submitted that the AO

formed a belief of escapement of income in assessee’s case on the

basis of surrender made by assessee (Late Shri Namdev Panjwani) in

Q.No. 41 & 42 of statements recorded by authorities during search

u/s 132(4). Then, Ld. AR carried us to the copy of the statements filed

in Paper-Book at Page 24-47 and referring to the preliminary

paragraph of statements at Page 24, he showed that the statements

were taken by authorities from assessee, Shri Namdev Panjwani as

managing director of “PPPL” and not in personal or individual capacity

of assessee. Referring further to the last page of statements at Page

47, Ld. AR submitted that the assessee made surrender of income of

Rs. 51,57,000/- in different years by stating that he earned impugned

income from business of “PPPL”. By showing this, Ld. AR contended

that the impugned surrender was made by assessee in the hands of

“PPPL” and not in his personal or individual capacity. He submitted

that that “PPPL” is a company incorporated under the provisions of

Companies Act having its separate identity. Therefore, the AO is very

much wrong in recording belief of escapement in the case of assessee-

individual. While arguing, Ld. AR also made a point that out of

surrender of Rs. 8,57,000/- made in AY 1988-89 (forming part of the

overall surrender of Rs. 51,57,000/-) on account of benami

investment in shares, the AO has assessed undisclosed income of Rs.

6,25,000/- in the hands of “PPPL” and no addition was made in

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

assessee-individual (for clarity, we may mention that the remaining

addition of Rs. 2,32,000/- has been made in assessee-individual).

This fact also, Ld. AR submitted, is a clear pointer that the AO has

wrongly recorded reasons of escapement by assessee-individual. Ld.

AR went on submitting that the Para No. 3 of the reasons itself shows

that the AO had a strong doubt and was not sure as to who was right

assessee to be assessed. He submitted that in Para No. 4 of reasons,

the AO has wrongly relied on CIT Vs. Steler Investment Ltd. 103

Taxation 100 (Delhi HC) to mention that in case of doubt, case of other

person can be re-opened. He submitted that the said decision was

given in a different context. In that decision, it was observed that

when share capital is credited and shareholders of a company are

identified, the department is free to open the cases of shareholders.

Ld. AR submitted that the decision given by ITAT, Indore in Anil

Mulani (2004) 1 ITJ 463 correctly holds that if the AO is not sure as to

the person in whose hands the income is liable to be assessed, the re-

opening is not valid, copy of ITAT’s order is filed at Paper-Book Page

32-34.

(ii) He submitted that in the reasons, particularly Para No. 3, the AO has

himself accepted that the surrenders are not proved by evidence.

Relying upon certain judicial rulings filed in a separate Paper-Book of

judgements and CBDT Circular/Instruction dated 18.12.2014, it is

contended that the authorities cannot obtain any confession during

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search and also that unless there is any credible evidence to support

the surrender, mere surrender in statements u/s 132(4) has no

evidentiary value more particularly when the surrender is retracted

also. It is pointed out that the assessee retracted surrender

subsequently vide letter dated 04.01.1993, copy at Paper-Book Page

No. 114-121.

(iii) Then, Ld. AR placed reliance on certain decisions. Firstly, he referred

CIT Vs. Naresh Kumar Agarwal (2014) 369 ITR 171 (AP HC) to contend

that the Hon’ble High Court has held (i) that no addition can be made

on the basis of mere statement of assessee and (ii) that the retracted

statement cannot be a basis of making assessment. Then, reliance is

placed on CIT & Anr. Vs. Dr. N. Thippa Shetty (2010) 322 ITR 525 to

argue that once the statements made u/s 132(4) is retracted, the AO

has no authority to make assessment u/s 147. Then, he also relied

upon Para 16 of order of ITAT, Indore in DCIT, Central-II, Bhopal Vs.

Shri Sudhir Kumar Agarwal IT(SS)A No. 85/Ind/2021 dated

18.05.2023. Lastly, Ld. AR referred Hindustan Level Ltd. Vs. R.B.

Wadkar (2004) 268 ITR 0332. Copies of these decisions have also been

filed in a separate paper-book.

analysis and reasoning spanning over 12 pages but the assessee is just

referring to small excerpts from those reasons. She submitted that in reply

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to Q.No. 41 & 42 of statements u/s 132(4), the assessee has himself admitted/surrendered undisclosed assets of different types representing undisclosed income earned by him. Thereafter in the reasons, the AO has paid due consideration to the nature of assets found with assessee, especially the household goods, cash, jewellery, etc. which by nature could belong only to an individual assessee and cannot be owned by a company. She emphasised that the assets were found in possession of assessee at assessee’s residence or locker. Therefore, the AO made a cautious analysis and recorded proper reasons. She submitted that the re-traction is baseless and only to get out of taxation.

“2) This is a case where action u/s 132 was taken in August, 1992.It is notable that the company had never filed any return of income. In the statement recorded u/s 132(4) on 12.8.1992, question No.42 was put to Shri Namdeo Panjwani, in response to which he has surrendered an amount of Rs. 52,57,000/-, the relevant portion of which reads as under :- “��न (42) – म�ने आपको आयकर धारा 132(4) सहप�ठत �प�ट�करण 5 धारा 271(1)(सी) के �ावधान आपको समझाया है । �या आप इन धाराओं के तहत �मलनेवाले लाभ को उठाना चाह�गे ता�क आपको य�द कोई शाि�त या अ�भयोजन कर अपवंचन के �लए होता है तो उससे मुि�त �मल सकती है ।

Page 13 of 77

Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93 उ�तर : हाँ म� उपरो�त धारा के �ावधान� का लाभ लेना चाहता हूँ और म� पंजवानी पैकेिजंग के �यवसाय म� से जो अघो�षत आय अिज�त क� है उसक� घोषणा �न�न�कार से करना चाहता हूँ:- 1) �व�त वष� 1987-88 – �. 8,57,000/- जो म�ने इसके प�हले शेयस� म� पूँजी �नवेश के बारे म� आपको बता चुका हूँ । 2) �व�त वष� 1988-89 – �. 1,00,000/- क� अघो�षत आय जो म�ने छोटे मोटे जंगम �म�क�यत म� तथा अ�य मद हेतु �कया है । 3) �व�त वष� 1989-90 – �. 1,00,000/- क� अघो�षत आय िजसका पूंजी �नवेश मैने घरेलू सामान म� �कया है तथा अ�य मद हेतु खचा� �कया है । 4) �व�त वष� 1990-91 – �. 10,00,000/- का पूँजी �नवेश जो मैने पंजवानी पैकेिजंग के �मोटस� के शेअस� म� वष� 91-92 म� �कया है जो मेर� इस वष� क� अघो�षत आय जो पंजवानी पेकेिजंग के �यवसाय से है । 5) �व�त वष� 91-92 – इस वष� क� कुल अघो�षत आय �पये 20,50,000/- क� घोषणा करना चाहता हूँ, िजसका पूँजी �नवेश �न�न �कार से है :- i) नकद� �पया जो ब�क लाकस� B.O.I. Transport Nagar No.14 म� से पाये गये थे, उसको �मलाकर �पये 50,000/- ii) �पये 13,00,000/- जो म�ने पंजवानी पैकेिजंग से कमाये है िजसका पूँजी �नवेश पंजवानी पैकेिजंग के शेअस� �मोटस� कोटा म� हुए है । iii) �. 5,00,000/- िजसका पूँजी �नवेश म�ने हमारे यहा वक�स� है इनके नाम से शेअस� म� �कया है । iv) दो लाख �पये के सोने के जेवरात जो लाकस� तथा घर से पाये गए थे, इसम� पूँजी �नवेश । 6) �व�त वष� 92-93 - इस वष� क� कुल �पये 11,50,000/- क� अघो�षत आय क� घोषणा पंजवानी पेकेिजंग क� आय से करना चाहता हूँ, जो इस �कार से है :- i) नगद �पये 2,50,000/- जो �क �टेट ब�क ऑफ इंदौर, पलसीकर कॉलोनी तथा �टेट ब�क ऑफ इं�डया गोधा कॉलोनी के लाकस� से तथा घर से पाये गये थे । ii) �. 2,00,000/- �पये के आभूषण जो ब�क लॉकस� तथा घर म� पाये गये थे। iii) 2,00,000/- �पये का पूँजी �नवेश जो घर से �व�भ�न सामान पाया गया है उसम� �नवेश �कया गया है ।

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

iv) 5,00,000/- �पये का भुगतान �ी �दप ��वेद� को जो शेयर �ोकर है उ�ह� पंजवानी �लाि�टक एंड पो�ल�टर �ल�मटेड के �मोटस� के कोटा के �ायवेट �लेसम�ट के �लए अ�ैल या मई 1992 म� �दये थे तथा उन शेअस� को खर�दकर �. 5,00,000/- का चेक �ी द�पकुमार ��वेद� ने मुझे मे. D.J. Investment का P.N.B का Cheque �दया जो म�ने अपने �यि�तगत ब�क खाते म� P.N.B जवाहर माग� म� जमा �कया था । ये शेअस� �व�भ�न नाम� म� है । �ी द�प ��वेद� ने �. 2.50 ���मयम वादा ��त शेयर �कया था परंतु अभी �दया नह�ं।” 3) It would be seen that the surrender in assessment year 1988-89 is on account of investment in share in benami name; such is the position for assessment year 1991-92 and 1992-93 and 1993-94 in respect of such investments in shares. Though the assessee had surrendered the income in case of company but preponderance of legal view favours such addition in the hands of persons and a person who has provided the funds for being invested as share capital in bogus names. It is a fact that the earning of income to the extent indicated by Shri N.P. Panjwani and surrendered in the hands of company has not been proved by Shri N.P. Panjwani with reference to any proof or evidence. Under these circumstances I have reason to believe that Shri N.P. Panjwani who has admitted making benami investment out of funds from company is having some source of income for making such investments. By now it is an established law that revenue need not locate the source of investment if unexplained investment is detected. Shri Panjwani has clearly admitted making of investment inn bogus names for various years out of income from Panjwani Packagings Limited, but has not given any proof of earning of such income from Panjwani Packagings. 4. The Hon'ble High Court of judicature at Delhi has already cautioned us when they have held in cash reported in (1991) 103 Taxation page 100 that “even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances could the amount of share of capital be regarded as an undisclosed income of the assessee company. It might be that there were some bogus share-holders in whose name the share had been issued and the money might have been provided by some other person. If the assessment of the person who were alleged to have really advanced the money was sought to be reopened, that would have made some sense but under no circumstances the share capital amounts could be assessed in the hands of the company itself.” In view of this legal position and also keeping in view the fact the assessee has failed to prove earning of income by company with which the benami investment in the shares could be made and also taking into account the facts and circumstances of the case as are on record, it is clear that Shri N.P. Panjwani is the basic operator in activities which have culminated unaccounted investment and income not disclosed to income Tax Department.

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possession of assessee at assessee’s residence or locker. Then, we find that

that the AO has made a vehement, careful and sensible analysis in the

reasons so as to discern as to why those assets belonged to assessee-

individual. Some vital aspects observed by AO are such : (i) The benami

investment in shares of companies has to be added in the hands of person

who has provided the funds. The assessee has, though admitted making of

investment in bogus names out of income from “PPPL” but has not given any

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proof of earning of income from “PPPL”. Hence, the assessee had some

source for making investments (Para 3 of reasons); (ii) The surrender made

by assessee includes undisclosed assets/income in the form of household

goods, cash, jewellery found at residence or in locker. There is no evidence

available to indicate that the unaccounted income of “PPPL” has been

utilised for these items. The assessee was found to be owner of these items

at the time of search (Para 5 of reasons). Thus, on the basis of a reasoned

analysis, the AO made a belief that the undisclosed assets/income belonged

to assessee-individual, accordingly he re-opened assessment of assessee-

individual. While carrying out such exercise, the AO has also carried the

rationale held in CIT Vs. Steler Investment Ltd. (supra) decided by Hon’ble

Delhi High Court holding thus “If the assessment of the person who were

alleged to have really advanced the money was sought to be re-opened, that

would have made some sense but under no circumstance the share capital

amounts could be assessed in the hands of the company itself” (Para 4 of

reasons). Thus, we find a meritorious sense in the belief made by AO that

how can household items, cash, jewellery found in possession of assessee-

individual at assessee’s residence or locker belong to “PPPL”, a company?

We may also mention that under section 147, the AO has power to assess or

re-assess income once he had a reason to believe that any income

chargeable to tax had escaped assessment. In the present case, the AO has

made a well-reasoned belief on a careful and meaningful analysis of the

material and assets found during search at assessee’s residence or locker.

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Therefore, even if the statements had been recorded as taken from assessee

as managing director of “PPPL”, ultimately the AO has made a careful and

sensible analysis and based thereon framed a reason to believe that the

income chargeable to tax had actually escaped assessment in assessee-

individual’s hands. The assessment u/s 147 triggers on the basis of

formation of belief and for forming such a belief, the AO can take into

account information received from any source, whether external or internal

like the material found during search in present case. In present case, it can

be said that the assets found from assessee and thereafter statements

recorded during search constitutes a tangible information for AO but then

the AO has to analyse such information in a sensible manner and thereafter

take action u/s 147 against a proper person. We may also add here that the

assessee-individual was not only found having ownership of assets during

search but was also a beneficiary of those assets or unexplained expenses

(like expenses on foreign travels) even if the income was earned from

business of PPPL. In any case, we may mention that even if there be some

technical flaw in recording statements by search-team, there is certainly no

mistake in AO’s approach in recording reasons since the AO has done a

careful exercise. We also agree with Ld. CIT(A) that the sufficiency of reasons

cannot be looked into by courts. This is in consonance with the principle

laid by Hon’ble Delhi High Court in CIT Vs. Steler Investment Ltd. (supra)

relied upon by AO in Para No. 4 of the reasons. Therefore, we hardly find

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any malice, infirmity or perversity in AO’s action. Being so, we are not

impressed to accept the first contention raised by Ld. AR.

income of Rs. 6,25,000/- in AY 1988-89 in the hands of “PPPL” and not in

the hands of assessee-individual on account of benami investment in

shares, cannot be a basis to project that the reasons recorded by AO are

wrong. We believe that at the stage of recording reasons, the AO has to

merely form a belief based on information available but the final assessment

(or non-assessment) of any item in the hands of assessee depends upon

further scrutiny and analysis during assessment-proceeding. Therefore, if

during assessment-proceeding, the AO found that a particular item of

income was not taxable in assessee’s hands, it was always open, in fact very

much fair and correct, for AO to exclude the same in assessee and assess in

the hands of PPPL. The facts clearly show that at the time of recording

reasons, the AO formed a belief that entire investment of Rs. 8,57,000/- in

share-certificates found in possession of assessee during search belonged to

assessee but while completing assessment, the AO made an addition of Rs.

2,32,000/- in the hands of assessee (the addition of Rs. 2,32,000/- is also

being contested in these appeals, which we shall adjudicate in next issue).

But the matter does not stop here. From the orders of lower-authorities, we

find that for remaining income of Rs. 6,25,000/-, the AO made ‘substantive

addition’ in the hands of “PPPL” alongwith ‘protective addition’ of same

amount in the hands of assessee. Thereafter, the assessee took a ground

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before CIT(A) to contest the ‘protective addition’ but ultimately when “PPPL”

accepted ‘substantive addition’ without contesting, the assessee requested

the CIT(A) to delete the ‘protective addition’. It is in such circumstance that

the CIT(A) deleted ‘protective addition’ of Rs. 6,25,000/- made by AO in the

hands of assessee. Therefore, it is not a correct claim by Ld. AR that the

addition of Rs. 6,25,000/- was made in the hands of “PPPL” only and no

addition was made in the hands of assessee.

evidence to support the surrender made by assessee, is also far from truth.

When the department has found tangible assets like share-certificates held

in benami names, household goods, cash, jewellery, etc. in assessee’s

possession, there is hardly any merit in the claim of assessee that there was

no evidence to corroborate the surrender. Hence, the judicial decisions and

CBDT Circular/Instruction dated 18.12.2014 relied by Ld. AR are not

appliable to assessee. The argument taken by Ld. AR that the AO, in Para 3

of reasons, has himself observed that there was no proof or evidence to

support the surrender, is also a mis-reading because the AO has made such

an observation qua “PPPL” and not qua assessee. A careful reading of entire

paragraph shows that the AO stated that there is no proof or evidence for

treating the surrender as income of “PPPL”. In fact, it conveys AO’s meaning

that the underlying assets/income pertaining to surrender belonged to

assessee-individual.

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The decision of ITAT, Indore in Anil Kumar Mulani (supra) relied by Ld. AR,

was on a different set of facts which is very much clear from Para No. 5 of

the order:

“5. After considering the rival submissions, we find force in the contention of Ld. AR. Even after amendment in sec. 147 w.e.f. 1.4.1989, the requirement of reasons to believe is still incorporated in the section itself. Thus, this provision would operate where AO finds that some item of income has escaped taxation then notice u/s 148 can be issued but the provision would not extend to a situation just to make roving inquiries. The very fact that ultimately assessment was completed on protective basis shows that revenue was not sure in whose hands such income has escaped taxation. Further Ld. DR admitted before us that notices were issued to the father of assessee also for the purpose of completing assessments on account of undisclosed investment in the hands of father on substantive basis but no action was taken and assessments have become time barred. This fact also proves that AO had no reason to believe that income has escaped assessment. In view of these circumstances, we allow these grounds and annul the assessment which has been made without proper jurisdiction.” 20. The decision in CIT Vs. Naresh Kumar Agarwal (supra) relied by Ld. AR

is also having different facts. On a careful reading of order, we find the

Hon’ble Court’s observations that (i) the search was conducted on

09.01.1996 and statement was recorded on 20.03.1996, thus statements

cannot be said to be u/s 132(4) [Para 8 of order], and (ii) no material such

as books of account, documents, money, bullion, jewellery, etc. was found or

discovered during search [Para 9 of order]. The facts in present appeals are

quite different. Therefore, this decision cannot help assessee.

distinguishable set of facts. It is true that in that case, the AO issued notice

u/s 148 to make assessment u/s 147 on the basis of statement of assessee

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recorded u/s 132(4) and the assessee had already retracted his statements

before issuing notice u/s 148. However, a careful reading of the order

reveals that the Hon’ble High Court re-produced the reasons recorded by AO

in Para 4, those reasons were running in just 1-2 sentences talking only of

surrender made by assessee in statements u/s 132(4). Thereafter, in Para

31 to 33, the Hon’ble High Court observed that the AO was not even able to

find out a prima facie case with regard to escapement within the meaning of

section 147 or no cogent and valid reasons had been assigned by AO for one

of the years. Then, it was observed that there existed no material except the

retracted-statement for re-opening of case and therefore the re-opening was

without jurisdiction. This is not the facts of present case. In present case,

the AO has recorded reasons at length running in several pages. Further, in

the reasons, the AO has not only talked of the surrender made by assessee

but also made a very careful analysis of various assets found in the

possession of assessee during search-proceeding and thereafter came to

form a reasoned belief of escapement. Hence, this decision is also not useful

to assessee.

not deal with validity of proceeding u/s 147 and not going to help present

assessee. In that case, the issue was whether the AO could validly make

addition on the basis of a conditional surrender by assessee without having

any supportive asset or investment. The facts of case, as mentioned in Para

9 and 10 of the order, were such that during search-proceeding, the

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assessee made a surrender of Rs. 10.25 crore with specific details of

unexplained investments/assets and also declared an additional sum of Rs.

2.50 crore as ‘miscellaneous surrender’ with a condition that the same shall

be confirmed after study of all loose-papers. Subsequently, in the return of

income, the assessee declared Rs. 10.25 crore of undisclosed income but did

not declare Rs. 2.50 crore of ‘miscellaneous surrender’ because the assessee

did not find any asset or investment supporting the same. However, the AO

made addition of Rs. 2.50 crore. It is in that situation that the CIT(A) deleted

the addition made by AO and ITAT upheld CIT(A)’s order through Para 16

and 17 re-produced below:

“16. On careful consideration of stand of the AO and basis taken by the Ld. CIT(A) for deleting the addition, we may point out that the Hon’ble High Court of Gujarat in the case of Kailasben Mangarlal Choksh vs. CIT(supra) held that merely on the basis of admission of assessee, the assessee could not have been subjected to addition, unless and until some collaborative evidence is found in support of such admission. Meaning thereby addition on the standalone basis of statement of assessee u/s 132(4) of the Act cannot be held as sustainable in absence of collaborative evidence found in support of such addition. Further, the Hon’ble Jharkhand High Court in the case of Shri Ganesh Trading Company vs. CIT(supra) held that mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is self-incriminating. In this case the Hon’ble High Court noted that the authorities below have not considered a fact that in a case where there was a search operation, no asset or cash was recovered from the assessee, in such a situation what had prompted the assessee to make declaration of undisclosed income of Rs. 20 lakhs. 17. In the present case also the assessee during the course of search operation in the statement and subsequently by way of letter dated 08.11.2011, as has been reproduced above, was sure about the surrender of Rs. 10.25 crores under various heads, however regarding remaining Rs. 2.50 crore, the assessee in the said letter clarified that the said amount pertaining to miscellaneous surrender shall be confirmed after study of all papers. Subsequently at the time of filing return u/s 153A of the Act, the assessee- group included Rs. 10.25 crore leaving the amount of Rs. 2.50 crore for the precise reason, which has been clearly accepted by Ld. CIT(A), that the assessee right from search and seizure operation till filing of return could not

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find any substantive material or investment which could be considered for supporting the surrender of remaining amount Rs. 2.50 crore. Therefore the Ld. CIT(A) was right in deleting the unsustainable addition made by the AO by relying various judicial rulings as narrated by him. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the findings arrived by the Ld. CIT(A) in this regard. Therefore, we uphold the same. Accordingly, this ground of Revenue is dismissed.” 23. In Hindustan Level Ltd. Vs. R.B. Wadkar (supra) relied by Ld. AR, the

AO issued notice u/s 148 after expiry of 4 years and the court found that in

the reasons recorded, the AO has not even mentioned that there was failure

on the part of assessee to disclose fully and truly all material facts necessary

for his assessment which was a pre-requisite of proviso to section 147.

Therefore, the court was pleased to quash the proceeding of section 147. In

present case, in Para No. 5 of the reasons, the AO has mentioned “…I have

reasons to believe that for all the years where surrender has been made and

time for filing return under section 139(1) is over, action under sec. 147 is

called for”. Further, in Para No. 13 of the reasons, the AO has again

mentioned “13). In view of the foregoing discussion, I have reason to believe

that income chargeable to tax for assessment year 1986-87, 1988-89, 1989-

90, 1990-91, 1991-92, 1992-93 has escaped assessment for these

assessment years to the extent quantified in para-12 above by reason of the

failure on the part of the assessee to make a return of income.” Thus, the AO

has made vehement recording and even the facts of case do not warrant

application of proviso to section 147. Therefore, this decision is also not

going to help assessee in any manner.

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no merit in the claim of assessee that the AO’s action of re-opening

assessment u/s 147 was invalid. Therefore, we are inclined to approve AO’s

action and reject the issue raised by assessee. Accordingly, the grounds

raised by assessee are dismissed.

Ground No. 2 of AY 1988-89, 1991-92 & 1992-93; Ground No. 1 of AY

1989-90 & 1990-91 – Household expenses:

1,00,000/- in AY 1988-89 and Rs. 50,000/- in each of AY 1989-90 to 1992-

93 made by AO on account of unexplained household expenses.

assessee, luxurious items like T.V., VCR, Air-conditioner, furniture, etc.

were inventorised as per Annexure-Q to Panchnama which showed high

standard of living of assessee but the withdrawals declared by assessee were

very low. Hence, the AO made estimation of household expenses and made

additions after giving credit of withdrawals declared by assessee. During

first-appeal, the CIT(A) upheld AO’s action.

Panchnama, placed at Page 55-56 of Paper-Book for AY 1988-89, itself

shows the aggregate value of all items at just Rs. 20,300/- and still the AO

has inferred high standard of living of assessee? Ld. AR submitted that the

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inference drawn by AO is apparently wrong in as much as the assets having

a small value of Rs. 20,300/- cannot, by any stretch of imagination, show a

lavish life style of assessee. Secondly, he submitted that the AO has made

an arbitrary estimation of household expenses at a much higher figure

against assessee’s disclosure, the AO’s estimation is wrong. He submitted

that the ITAT, Indore Bench in assessee’s own case for AY 1994-95 in ITA

No. 497/Ind/2000 order dated 24.04.2006 has deleted the addition made by

AO on account of household expenses. Thirdly, Ld. AR submitted that the

assessee was living with his family consisting of assessee himself, his wife

(Smt. Jayshree Panjwani), son (Kamal Panjwani) and daughter (Kumari

Sujata Panjwani) and all of them were having incomes declared (some have

declared in returns also) and had contributed to household expenses.

Further, the AO has also made separate additions of estimated profit earned

by assessee from a proprietary business ‘M/s Panjwani Plastics’. Therefore,

the incomes earned by family members and profit of proprietary concern

added by AO should also be considered as sources of household expenses.

Ld. AR has provided following data in this regard:

AY Withdrawals Additions Income earned Profit of Sources not declared by made by AO by family proprietary considered by assessee members concern AO separately added by AO A B C D E = (C+D) 1988-89 24,000 1,00,000 79,997 23,141 1,03,138

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1989-90 1,40,000 50,000 47,733 30,000 77,733 1990-91 1,50,000 50,000 38,800 24,000 62,800 1991-92 2,00,000 50,000 40,800 24,000 64,800 1992-93 2,00,000 50,000 -- -- --

With these submissions, Ld. AR requested to delete the additions made by

AO in various years.

order passed by CIT(A). She submitted that the AO has rightly inferred high

standard of living being enjoyed by assessee having regard to the luxurious

items such as TV, Air-conditioner, etc. found with assessee which were not

readily available at that time with general people. Therefore, the AO was very

much justified in estimating household expenses having regard to the

standard of life of assessee. She submitted that the AO has already given

credit of withdrawals declared by assessee and made addition for balance

only. Hence, the order passed by AO is perfect and must be upheld.

has raised multiple arguments to show that the additions made by AO are

not wrong. Firstly, Ld. AR has submitted that the Annexure-Q to the

Panchnama showed the aggregate value of all items at just Rs. 20,300/- and

therefore the AO was not justified to infer high standard of living of

assessee. In this regard, when we perused the Annexure-Q filed at Page No.

55-56 of Paper-Book, we find that the search-authorities have also noted the

age of 15/10/12 years alongwith individual values of respective items and

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thereafter made aggregation at Rs. 20,300/-. Thus at the time of search,

those items were much order and that is why the value was just Rs.

20,300/-. Moreover, the AO has inferred high standard of living of assessee

on the basis of luxurious nature of items like T.V., Air conditioner, etc. as

mentioned in the said Annexure-Q which does not have any connection with

the present value of items as on the date of search. Therefore, the first

contention raised by Ld. AR is rejected. The second contention raised by Ld.

AR that the AO has made a wrong and much higher estimation as compared

to assessee’s disclosure, is also meritless because in the next contention,

the assessee is himself claiming that it was a joint family and assessee’s

wife, son and daughter were also contributing to household expenses. From

the figures shown in the table noted in preceding para, we can easily find

that the quantum of additional sources for meeting household expenses as

depicted in Column E is more than the additions made by AO as depicted in

Column B in AY 1988-89 to 1991-92 (except last AY 1992-93). When it is so,

the stand taken by Ld. AR that the estimation made by AO is on higher side

is contradictory. So far as Ld. AR’s reliance upon assessee’s own case in ITA

No. 497/Ind/2000 (supra) is concerned, we extract below Para 6 of ITAT’s

order:

“6. We have heard the ld. representatives of both the parties at length and have also perused the orders of the authorities below. In our considered view, the ld. CIT(A) was fully justified in quashing the reassessment order. The AO has not brought any material cord to show that the assessee was earning income from a particular source. Furthermore, the AO has estimated the income of the assessee at Rs. 2,50,000/- without any basis. In our view, the Ld. CIT(A) has rightly observed that the action u/s 147 cannot be justified

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merely on the ground that assessee was having a high standard of living and lavish life style and might have incurred huge expenditure on maintenance of the family. It is also true that reopening was bad in law because the AO has not recorded proper reasons to the effect that income had escaped assessment. Thus, considering the entire facts of the present case, we do not find any infirmity in the order of the Ld. CIT(A). The Ld. CIT(A) has correctly appreciated the facts of the present case as well as settled legal position and, therefore, no interference is required.” Thus, the ITAT decided the issue of validity of re-opening of assessment

done by AO on the basis of estimation. Further, the quantum of household

expenditure is a factual issue and can vary year to year. Therefore, the Ld.

AR’s pleading that the issue is covered by ITAT’s order in assessee’s own

case is not valid. Hence, the second contention is also rejected. The third

and last contention raised by Ld. AR that the incomes shown by family

members and extra profit of proprietary business separately assessed by AO

as per Column E should also be taken as sources for incurring household

expenses is having merit. Ld. DR for revenue has not made any submission

to controvert this stand of assessee. On analysis of data given in the table,

we find that in AY 1988-89 to 1991-92, the amounts available to assessee in

Column E marginally exceed the amount required in Column B. Therefore,

no addition is required in those years. However, in AY 1992-93, there is no

additional fund. Therefore, the addition of Rs. 50,000/- made by in that year

is valid and deserves to be upheld. Hence we delete additions in AY 1988-89

to 1991-92 and uphold addition in AY 1992-93. Accordingly, the respective

grounds are allowed or dismissed.

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Ground No. 3 of AY 1988-89 – Benami investment in shares of M/s

Panjwani Plastics & Polyster Ltd.:

made by AO on account of unexplained investment by assessee in shares of

M/s Panjwani Plastics and Polysters Ltd.

has noted that during search-action, physical share-certificates of M/s

Panjwani Plastics and Polysters Ltd. of Rs. 2,32,000/- were found at the

residence of assessee and the statements of assessee were also recorded.

The impugned shares-certificates were held in the names of 8 different

persons. The AO made addition for the reasons that (i) the share-certificates

were found in possession of assessee at his residence, and (ii) in the

recorded statements, the assessee accepted that the amount of Rs.

2,32,000/- was his unaccounted income. During first-appeal, the assessee

submitted the R.O.C. (Registrar of Companies) records of M/s Panjwani

Plastics and Polysters Ltd. and an affidavit confirming that the actual paid-

up capital of M/s Panjwani Plastics and Polysters Ltd. was only Rs. 700/-.

Accordingly, the assessee claimed that when the paid-up capital of company

was just Rs. 700/-, the impugned share-certificates were fake and there was

no realistic investment made by anyone, neither by assessee nor by any

other person. However, the CIT(A) rejected assessee’s submission and

upheld addition.

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made by AO. Firstly, he submitted that the share-certificates found by

authorities were in respective names of 8 persons and none of the

certificates bears the name of assessee. Secondly, he invited our attention to

the search-report of R.O.C. records given by M/s S. Agarwal & Co.,

Company Secretaries, Indore dated 23.02.2005, copy at Page No. 66 of

Paper-Book, to show that the actual paid-up capital of M/s Panjwani

Plastics and Polysters Ltd. was just Rs. 700/- only with authorized capital of

Rs. 5,00,000/-. He submitted that the Balance-Sheet as on 31.03.1988 of

M/s Panjwani Plastics and Polysters Ltd., copy at Page No. 90 of Paper-

Book, showing paid up capital of Rs. 1,00,00,000/- and authorised capital

of Rs. 1,00,00,000/- found by search-authorities was a cooked Balance-

Sheet only; it does not contain actual and realistic transactions. He

submitted that the assessee filed an affidavit dated 26.08.1992 to AO, copy

at Page No. 62-64 of Paper-Book, wherein complete facts pertaining to M/s

Panjwani Plastics and Polysters Ltd. were informed to AO. He submitted that

the Balance-Sheet showing paid up capital of Rs. 1,00,00,000/- was just a

paper-work to show better financial standing of M/s Panjwani Plastics and

Polysters Ltd. in order to obtain loans from financial institutions. He

submitted that the realistic position of company is only a paid up capital of

Rs. 700/- and not the position shown in fabricated Balance-Sheet, therefore

the share-certificates found by search-authorities was also a paper-work

and did not represent realistic investment by anyone. To strengthen his

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arguments, he drew our attention to the very next Para 5.5 of assessment-

order to show that in earlier round of assessment, the AO also made

additions of Rs. 88,35,000/- (+) 9,20,000/- in the hands of assessee qua the

assets shown in the impugned Balance-Sheet dated 31.03.1988 of M/s

Panjwani Plastics and Polysters Ltd. But in first-appeal, the CIT(A) accepted

assessee’s claim that the Balance-Sheet of M/s Panjwani Plastics and

Polysters Ltd. was a fabricated paper-work and accordingly, the CIT(A)

deleted the additions of Rs. 88,35,000/- (+) 9,20,000/-. Thereafter, while

passing present assessment-order, the AO has accepted the CIT(A)’s finding

and did not make any addition. Ld. AR submitted that once in Para 5.5 the

AO has accepted that the Balance-Sheet of company M/s Panjwani Plastics

and Polysters Ltd. was a fabricated paper-work and therefore refrained from

making additions of Rs. 88,35,000/- (+) 9,20,000/-, how can AO insist in

preceding Para 5.4 of assessment-order that the assessee had made

investment of Rs. 2,32,000/- in shares of very same company? Ld. AR

submitted that the stand of AO is self-contradictory and must be rejected.

Ld. AR also relied upon a decision of ITAT, Ahmedabad in ITO Vs. Shri

Paragbhai Karamshibhai Dobaria, ITA No. 2084/AHD/2008 dated

26.08.2011 where the addition made by AO on the basis of documents

found during survey was deleted by CIT(A)/ITAT for the reason that the

documents were only a paper-work created to show fictitious

incomes/assets and did not represent any realistic transaction. With these

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submissions, Ld. AR prayed that the addition of Rs. 2,32,000/- made by AO

must be deleted.

She submitted that the share-certificates were found with the assessee at

the residence of assessee during search and this fact alone, without proving

anything more, is sufficient enough to establish that the assessee was owner

of those share-certificates. She submitted that when the assessee was

questioned by search-team qua the share-certificates, the assessee himself

surrendered undisclosed income of Rs. 2,32,000/- in Q.No. 41 of

statements. Therefore, the addition made by AO and upheld by CIT(A) must

be confirmed.

perused the documents to which our attention has been drawn. The first

contention raised by Ld. AR that the physical share-certificates found during

search were in the names of 8 different persons and not in the name of

assessee, is not acceptable to us. Admittedly, those certificates were found

in possession of assessee at assessee’s residence. Therefore, in terms of

presumption u/s 132(4A), those certificates were owned by assessee and the

assessee does not have any material to rebut the presumption. Therefore,

the assessee’s contention is rejected. Secondly, Ld. AR is claiming a

contradiction in AO’s approach by relying upon Para 5.5 of assessment-

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order. Therefore, we re-produce the said Para 5.5 for an immediate reference

as under:

“5.5 Issue of seized balance sheet:

Bunch of loose paper at Sr.No. 76 of annexure-X has been seized. On page no. 138 to 140, Balance sheet of M/s. Panjwani Plastics and Polyesters Ltd has been seized as on 31.03.1988. From the perusal of this balance sheet revealed that share capital of M/s. Panjwani Plastics and Polyesters Ltd. as on 31.03.1988 is Rs. 1 crore which is balanced by expenditure of capital expenditure in process 88,35,000/- and advance to suppliers at Rs. 9,20,000/- and cash balances. Assessee was issued query letter vide letter vide this office letter dated 06.04.2011 asked to furnish the genuineness of this issue with supporting documents for its claim.

Assessee vide reply dated 22.04.2011 submitted that assessee had never invested these amount in the shares of M/s. Panjwani Plastic and Polyesters Ltd. It was further contended that this is only paper work and no actual transaction was made. A copy of affidavit was filed wherein it was admitted that the aforesaid company had neither obtained any subscription from its shareholder nor obtained any loan from Bank and financial institution. A search report issued by Shri S. Agrawal and Company was also furnished with their reply. In this certificate it has shown that 7 No. of share of Rs. 100/- each were allotted to seven subscribers. Thus the paid up capital of the company was Rs. 700/- till 23.2.2005. It was further contended that Hon'ble CIT(A)-I have accepted the contention of assessee and deleted the same. On carefully consideration to the fact advanced by the assessee, the Hon'ble CIT (A)-1 vide their order in appeal no. 312/01-02 dated 15.02.2007 have deleted this addition. The relevant extract of the order is reproduced below :- “The detailed explanation offered by the appellant is duly supported by a certificate from Company secretary S. Agrawal & Co. The authorised capital of the company stood at Rs. 5 lakhs consisting of 5000 Equity shares each at the incorporation and there were 7 subscribers of 1 share each. Thus, there appears to be sufficient merit in the contention of appellant that the aforesaid balance sheet was a draft balance sheet and do not reflect the actual share capital introduced by the appellant. The copy of balance sheet as appearing on page no.13 of the compilation also supports appellant’s case as on the assets side without there being any annexures or detail the capital expenditure is reflected at 88.35 lakhs and advance to the supplier of machinery stand at Rs. 9.20 lakhs and only identifiable balance is cash and bank balance at Rs. 2,09,690/- beside other sundry advances at Rs. 35,910/-. Thus, in these facts, the AO was not at all justified in making huge addition merely based on such draft balance sheet without verification of assets reflected on asset side. It is also worth taking note that the appellant has already surrendered additional income of Rs. 2,32,000/- for investment in the shares of PPPL which has been added as part of consolidated addition of Rs. 14.81 lakhs discussed in ground no. 8. Such addition is not found to be at all sustainable both in fact and in law being not backed by any details or any evidences of assets

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

appearing in Balance Sheet, merely on the basis of draft/cooked up Balance sheet prepared for any purpose whatsoever. The addition is accordingly deleted.” In view of the conclusion arrived in the Hon'ble CIT’s order and other submissions of the assessee in support of his claim, no addition is called for on this issue.” [Emphasis by underline supplied] 35. On perusal, we do agree to Ld. AR that the AO has not made additions

of Rs. 88,35,000/- (+) Rs. 9,20,000/- by following order of CIT(A). But a

careful reading of the order of CIT(A), which is extracted by AO in para 5.5

re-produced above, shows that CIT(A) had accepted some vital aspects,

namely (i) There were identifiable balances of cash and bank at Rs.

2,09,690/- and sundry advances of Rs. 35,910/- in the Balance-Sheet of

M/s Panjwani Plastics and Polysters Ltd., and (ii) The assessee had already

surrendered additional income of Rs. 2,32,000/- for investment in shares of

company. With these vital facts, the CIT(A) had deleted other additions of

Rs. 88,35,000/- and Rs. 9,20,000/- and the AO followed the tune of CIT(A).

When we look into these facts, it becomes very clear that there is no

contradiction in the approach of AO as being claimed by Ld. AR. The CIT(A)

accepted that the Balance-Sheet of M/s Panjwani Plastics and Polysters Ltd.

was genuine to the extent of assets of Rs. 2,09,690/- in the form of cash &

Bank balances (+) Rs. 35,910/- in the form of sundry advances; the

aggregate of these amounts come to Rs. 2,45,600/-. Notably, these assets

held by company at Rs. 2,45,600/- far exceed the impugned subscription of

Rs. 2,32,000/- by assessee in shares of company. That means, the

subscription made by assessee can be said to be backed by realistic assets

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of company. Hence, the contention of Ld. AR is not appealing. We have also

paid attention to the search-report of M/s S. Agarwal & Co., Company

Secretaries referred by Ld. AR. On perusal, we find that the report shows

number of subscribers as 7 with 1 share each and just below that there is a

list of “first directors”. M/s Panjwani Plastics and Polysters Ltd. was

incorporated on 13.08.1986 and the search-report is dated 23.02.2005. We

are unable to understand whether the subscribers mentioned in search-

report were ‘first subscribers’ at the time of incorporation of M/s Panjwani

Plastics and Polysters Ltd. or current subscribers. The CIT(A)’s finding noted

by AO in Para 4.5 of assessment-order, re-produced above, mentions “The

Authorised capital of the company stood at Rs. 5 lakhs consisting of 5000

equity shares each at the incorporation and there were 7 subscribers of 1

share each”. This indicates that the 7 subscribers of Rs. 700/- paid-up

capital were at the time of incorporation. Interestingly, the search-report

does not mention the paid-up capital of company. The assessee filed this

very search-report to present CIT(A) also but the CIT(A) has rejected by

mentioning thus in his order “The veracity of paid up capital being small as

claimed by appellant could not be established.” Therefore, the factum of paid

up capital of company at just Rs. 700/- is not successfully established by

assessee. At the cost of repetition, we re-mention that the Balance-Sheet of

company has been found to be genuine to the extent of assets of Rs.

2,09,690/- in the form of cash & Bank balances (+) Rs. 35,910/- in the form

of sundry advances aggregating to Rs. 2,45,600/- which exceed the

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subscription of Rs. 2,32,000/- by assessee in shares of company. Therefore,

in such circumstance, we are not satisfied to accept assessee’s claim that

the impugned share-certificates found during search were bogus certificates

not representing any actual transaction. For this reason, the case of ITO Vs.

Shri Paragbhai Karamshibhai Dobaria, ITA No. 2084/AHD/2008 relied upon

by Ld. AR is also not applicable. This brings us to reject all contentions

raised by assessee and accordingly the ground is dismissed.

Ground No. 4 of AY 1988-89 & Ground No. 2 of AY 1989-90 –

Unexplained investment in Cars:

in AY 1988-89 and Rs. 82,000/- in AY 1989-90 made by AO on account of

unexplained investment in cars.

under:

(a) Addition of Rs. 67,000/- in AY 1988-89 - The AO has dealt this

addition in Para 5.3.1 of assessment-order. He has noted that during

search, the assessee was found to be owner of a car Maruti-800 MBN

Car MBN 425 were not available, therefore the AO made addition of

Rs. 67,000/- in AY 1988-89 qua this car. The CIT(A) upheld AO’s

action.

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(b) Addition of Rs. 82,000/- in AY 1989-90 – The AO has dealt this

addition in Para 5.9 of assessment-order. He has noted that during

search, the assessee was found to be owner of a car Maruti-Van CII-

9827. When show-caused, the assessee submitted that the said car

was purchased in the financial year 1988-89 relevant to AY 1989-90

and the investment was made by “PPPL”. It was further submitted

that the books of “PPPL” had been seized by Central Excise

Department, copy of seizure-memo was also available as annexure to

panchnama prepared by Income-tax Department. Accordingly, the

assessee submitted inability to furnish the evidences of “PPPL”. The

AO, after rejecting assessee’s submission, made an addition of Rs.

82,000/- in AY 1989-90. The CIT(A) upheld AO’s action.

regard, the Ld. AR for assessee harped on the submission made by assessee

before CIT(A) that subsequent to assessment-order, during inspection of

departmental record, the assessee came to know that the impugned addition

was made by AO on the basis of a seized-paper being insurance policy of

car. Ld. AR carried us to Page No. 57 of Paper-Book where the impugned

insurance policy is filed. Referring to same, Ld. AR submitted that the

insurance policy contains “1985 car” which shows that the car was “1985

model”. Ld. AR submitted that in the situation, even if any addition was to

warranted, it could have been made in financial year 1985-86, AY 1986-87

only and making of addition by AO in AY 1988-89 is illegal and untenable.

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To support his stand, Ld. AR submitted that with regard to another car CII-

9827, the AO has made addition in financial year 1988-89, AY 1989-90 on

the basis of insurance policy of that car, copy at Page No. 122 of Paper-

Book, showing “1988 model”. Ld. AR submitted that the AO must be

consistent in drawing conclusions on the basis of identical papers of two

cars seized during search. In crux, the Ld. AR is challenging the year of

addition and thereby arguing that the addition could not have been validly

made in AY 1988-89 without any basis. After a careful consideration, we

find weightage in the submissions of Ld. AR that there should be a

consistency in the approach of AO in dealing with identical documents. Ld.

DR for revenue is not able to produce any other evidence to justify the

sustenance of addition in AY 1988-89 except claiming that the assessee

could submit the copy of registration-certificate of car. In the situation,

taking into account the evidence available on record, we agree that there is

no evidence for supporting addition in AY 1988-89. Hence, the addition

made by AO is deleted for the reason of fallacy in the year of addition and

accordingly Ground No. 4 of AY 1988-89 is allowed.

Ld. AR relied upon reply given by assessee to Q.No. 9 of the statements u/s

132(4) wherein the assessee stated that the investment was made from

funds of “PPPL”. Ld. AR submitted that the version of assessee in the

statements must be accepted as true. Ld. AR further submitted that the

earlier CIT(A), in earlier round of litigation, deleted this addition giving

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

credence to assessee’s statement but the present CIT(A) has wrongly upheld

addition by taking a contrary stand that the assessee could not prove the

source of investment in car. Per contra, Ld. DR for revenue contended that

the assessee has failed to provide any evidence till now to show that the

investment was in fact made by “PPPL”. Therefore, the addition must be

upheld and no leniency be given to assessee. We have considered rival

submissions of both sides and perused the orders of lower-authorities. We

find that the assessee is solely relying upon his statement u/s 132(4) that

the investment was made by “PPPL”. However, the assessee has not adduced

any evidence to show that the investment was in fact made by “PPPL” or is

recorded in the books of “PPPL” despite several rounds of litigation and even

before us as of now. Therefore, the assessee has miserably failed to prove his

claim that the investment was made by “PPPL”. Needless to mention that

insurance policy is in the name of assessee which means the car was

registered also in the name of assessee. Faced with this situation, we are

inclined to uphold the addition made by AO. The addition is thus upheld

and Ground No. 2 of AY 1989-90 is dismissed.

Ground No. 5 of AY 1988-89 & Ground No. 3 of AY 1989-90 – Addition

on the basis of loose-paper of M/s Kamal Enterprises:

2,13,450/- in AY 1988-89 and Rs. 1,30,000/- in AY 1989-90 made by AO

on the basis of loose-papers relating to M/s Kamal Enterprises.

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5.12 of AY 1989-90. Basically, the AO noted that during search-action, the

Balance-Sheets of M/s Kamal Enterprises (a proprietary concern of Shri

Kamal Panjwani, a minor son of assessee in AY 1988-89), one as on

31.03.1988 and other as on 15.05.1988 were seized, copies of those

Balance-Sheets are filed at Page No. 70 and 184 of respective Paper-Books.

In the Balance-Sheets so seized, the AO found receipts of moneys under will

of late Shri Phatandas Panjwani (grand-father of Kamal Panjwani), receipts

of gifts and income by way of commission and interest. When the AO show-

caused assessee to explain, the assessee submitted that Kamal Panjwani

was a separate individual who carried business as proprietor of M/s Kamal

Enterprises. Therefore, the receipts/incomes noted in the impugned

Balance-Sheets were nothing to do with assessee and they belonged to

Kamal Panjwani and taxable in Kamal Panjwani’s hands only. It was further

submitted that the provision of section 64(1A) requiring clubbing of entire

income of a minor child in the hands of parent, was applicable from AY

1993-94 and not applicable to assessment-years 1988-89 & 1989-90 under

consideration, therefore clubbing was also not attracted. However, the AO

took support from order-sheet dated 07.06.2011 of scrutiny-proceeding in

which Kamal Panjwani accepted that it was his father (i.e. assessee) who

was looking after activities of M/s Kamal Enterprises. Based thereon, the AO

drew an inference that the assessee was merely using his son’s name in

order to evade/avoid due taxes. The AO further noted that the assessee has

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to prove the source of investment in M/s Kamal Enterprises and even

genuineness of the gifts received in those years. Accordingly, the AO made

additions. During first-appeal, the CIT(A) upheld AO’s observations. Further,

the CIT(A) also mentioned that the assessee Shri Namdev Panjwani had

already expired and Kamal Panjwani was legal heir. Therefore, whether the

amount is taxed in Namdev Panjwani’s hands or in the hands of Kamal

Panjwani, it will be paid by Kamal Panjwani only and hence it is a non-

issue.

Kamal Panjwani was an independent individual although he happened to be

a minor son of assessee. He submitted that Kamal Panjwani had filed his

own separate return of income of AY 1988-89, copy at Page 48-50 of Paper-

Book. Ld. AR submitted that M/s Kamal Enterprises was a proprietary

concern of Kamal Panjwani and the assessee is nothing to do with financial

affairs recorded in Balance-Sheets of M/s Kamal Enterprises. He submitted

that the AO was swayed to tax receipts/income in the hands of assessee

only because Kamal Panjwani happened to be a minor son of assessee.

Therefore, the AO issued a notice u/s 142(1) dated 06.04.2011, copy at Page

No. 67-69 of Paper-Book, wherein vide Point No. 8(iii) the AO confronted

assessee for clubbing of income. Ld. AR submitted that the clubbing

provision of section 64(1A) was introduced in Income-tax Act, 1961 from AY

1993-94 and prior to that, there were sections 64(1)(iii)/(v)/(viii) which

prescribed clubbing in limited cases only, viz. income earned by a minor

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child from a partnership firm or income earned by a minor child from any

asset transferred by his parents without consideration or for inadequate

consideration but these are not the cases in present appeals. Therefore,

none of the clubbing provisions was applicable. Ld. AR also pointed out a

submission made before AO and accepted by AO in assessment-order that

Kamal Panjwani attained majority in immediate next year i.e. AY 1989-90.

Ld. AR very forcefully attacked on CIT(A)’s conclusion that how can CIT(A)

make an irresponsible/illegal conclusion that it was a non-issue because tax

shall ultimately fall upon Kamal Panjwani, whether the income is taxed in

the hands of assessee (Shri Namdeo Panjwani) or in personal hands of

Kamal Panjwani? He submitted that such a bad conclusion by first appellate

authority must be quashed. Ld. AR further submitted that simply because

the activities of the said concern might have been taken care of by assessee

as father, the income of said concern cannot be taxed in the hands of

assessee when the entire investment in concern was made by personal

funds of Kamal Panjwani in the form of his opening capital and further

sums received by Kamal Panjwani through will and gifts. Ld. AR submitted

that when the son was minor, what is wrong in administration of activities

by assessee as father? Lastly, Ld. AR drew our attention to the impugned

Balance-Sheets seized during search to demonstrate that those Balance-

Sheets clearly bear the title “M/s KAMAL ENTERPRISES PROPRIETOR

KAMAL NAMDEV PANJWANI”. Ld. AR contended that the seized document

is presumed to be correct by a specific provision of section 132(4A) and the

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AO has no authority to reject the provision of law made by Parliament. Then,

Ld. AR also relied upon decision of ITAT, Mumbai in Mukesh R. Marolia Vs.

Addl. CIT (2006) 006 SOT 247 which is upheld by Hon’ble Mumbai High

Court and departmental SLP has also been dismissed by Hon’ble Supreme

Court. Ld. AR drew our specific attention to following passage of the order of

ITAT:

“10.8 For a moment, even if all the above evidences are ignored, one cannot overlook the pressure of the evidence coming out of the survey carried out by the department in the business premises of the assessee. There was a survey carried out by the department in the business premises of the assessee. In the course of survey, contract notes for sale of shares, copies of bills thereof, photocopies of share certificates etc., were found. The purchase and sale of shares were also found recorded in the books of account. The department has no case that the survey was a staged enactment. A survey is always unexpected. So, it is not possible to presume that the assessee had collected certain fabricated documents and kept at his business premises so as to hoodwink the survey party to lead them to believe that the assessee had entered into share transactions. At least such an inference is not possible in law. The department has no defence against the forcible argument of the learned counsel that the survey conducted by the department has out and out upheld the contention of the assessee that he had purchased and sold shares. We find that this solitary evidence collected in the course of survey is sufficient to endorse the bona fides of the share transactions made by the assessee.”

Placing a heavy reliance on observations of ITAT in above Para, Ld. AR

argued that the impugned Balance-Sheets of M/s Kamal Enterprises

showing Kamal Panjwani as proprietor, seized during search, cannot be said

to have been prepared by assessee in the name of his son to hoodwink the

search-team in expectation of search-action. He submitted that when the

seized documents themselves show that they belonged to Shri Kamal

Panjwani, how can authorities claim that they belonged to assessee?

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by AO and supported the orders of lower-authorities.

consideration, we agree with the various contentions raised by Ld. AR for

assessee. Firstly, we find that the seized Balance-Sheets themselves show

that the concern M/s Kamal Enterprises was owned by Shri Kamal

Panwani. Therefore, the assessee gets full protection/support from section

132(4A) as well as the decision of ITAT, Mumbai in Mukesh R. Marolia (supra)

relied by Ld. AR. It is also on record from Page 48-50 of the Paper-Book that

Shri Kamal Panjwani filed his separate return of income for AY 1988-89 on

19.12.1988 which is prior to search-action on 10.08.1992, paid tax and the

department assessed the same and issued a demand notice u/s 156 also.

Secondly, the AO basically show-caused assessee for clubbing of income

because Shri Kamal Panjwani was a minor child. But the Ld. AR has carried

us through legal provisions of Income-tax law according to which there were

only sections 64(1)(iii)/(v)/(viii) at the relevant time which required clubbing

of income in specific situations which are not there in present case. We find

that the full-fledged clubbing of entire income of minor child u/s 64(1A) was

brought into law from AY 1993-94 and hence not applicable to AY 1988-89

& 1989-90 under consideration before us. Therefore, the case of assessee

did not attract any clubbing provision at that time. Thirdly, the claim of AO

that the assessee was taking care of activities of Kamal Panjwani is not

sufficient enough for taxing the receipts by way of will/gifts or incomes

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belonging to Kamal Panjwani in the hands of assessee. Needless to mention

that it is also contrary to the department’s own action whereby they have

assessed Kamal Panjwani as a separate individual also. Fourthly, we do not

find any legality in the conclusion made by CIT(A) that it was a non-issue

because the tax liability would ultimately fall upon Kamal Panjwani either as

legal heir of assessee or in his personal assessment. Looking at entire

conspectus of the matter, we do not find any justification in the additions

made by AO in assessee’s hands. Therefore, we delete the respective

additions and allow the grounds raised by assessee.

Ground No. 4 of AY 1989-90 & Ground No. 2 of AY 1990-91 –

Unexplained investment in domestic items:

1,00,000/- in AY 1989-90 and Rs. 1,00,000/- in AY 1990-91 made by AO

on account of unexplained investment in domestic items.

7 of AY 1990-91. Basically, the AO has made these additions on the basis of

surrender made by assessee in the statements u/s 132(4). The CIT(A)

upheld AO’s stand.

additions have been made merely on the basis of surrender obtained during

search but there is no evidence or material found, (ii) The surrender was

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also retracted vide letter dated 04.01.1993, (iii) There is no evidence and no

panchnama qua this addition; the panchnama has only Annexure-Q for

items of aggregate value at Rs. 20,300/- at Page No. 55-56 of Paper-Book for

AY 1988-89. Ld. AR placed a heavy reliance on CBDT Circulars and judicial

decisions to contend that no addition can be made on the basis of mere

surrender without any evidence. After a careful consideration, we find that

there is no list or details of domestic items prepared by AO for calculating

the additions. The AO has made adhoc additions of Rs. 1,00,000/- in each

of the two years equal to the surrender made by assessee but the same are

not corroborated by any evidence. Even the Ld. DR has submitted in her

counter reply “no details regarding the aforesaid investment were furnished

by the assessee” which itself shows that there is no detail or evidence to

support addition. It is a settled law that no addition can be made on the

basis of mere surrender unless there is any corroborative evidence.

Therefore, we delete the impugned additions. The grounds are thus allowed.

Ground No. 5 of AY 1989-90, Ground No. 5 of AY 1990-91 & Ground No.

5 of AY 1991-92 – Unexplained foreign travel expenses:

1,50,000/- in AY 1989-90 and Rs. 58,000/- (+) Rs. 35,000/- in AY 1990-91,

Rs. 25,000/- in AY 1991-92 made by AO on account of unexplained foreign-

travel expenses.

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under:

(a) Addition of Rs. 1,50,000/- in AY 1989-90 – The AO has made this

addition in Para No. 5.10 of assessment-order on the basis of a diary

at Annexure Z/2 seized during search revealing that the assessee

alongwith his family travelled to Singapore, Hong Kong, Tokyo, USA

and europian countries during the year. In the first round, the AO

estimated expenditure at Rs. 3,00,000/- and made addition. But the

CIT(A) reduced quantum of addition to Rs. 1,50,000/-. Following that,

the AO ultimately made addition of Rs. 1,50,000/- in last round which

the CIT(A) again upheld.

(b) Addition of Rs. 58,000/- (+) Rs. 35,000/- in AY 1990-91 – The AO has

made these additions in Para No. 15 of assessment-order on the basis

of a loose-paper at Annexure C/2 seized during search revealing that

the assessee made travels to USA and Bangkok.

(c) Addition of Rs. 25,000/- in AY 1991-92 – The AO has made this

addition in Para No. 10 of assessment-order on the basis of a loose-

paper at Annexure C/2 seized during search revealing that the

assessee made travel to Bangkok.

Ld. AR claims that in the statements itself, it was stated by assessee that

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the expenses have been funded from “PPPL”/Group concerns of assessee for

business purposes. This argument was also made before AO but no evidence

was furnished to show that the expenditure had been recorded in the books

of “PPPL”/group concerns of assessee. Therefore, the AO rejected assessee’s

argument. The position remains same even before us as the assessee has

not filed any evidence to show that the expenditure stands recorded in

books of account of “PPPL”/group concerns. Therefore, we reject this

contention for the very same reasoning as given by AO. Secondly, Ld. AR

claims that the estimation of expenditure is on higher side. However, there

is nothing concrete to upset the AO’s estimation. Therefore, this contention

is also rejected. Lastly, Ld. AR claims that the assessee/family members

have shown very high withdrawals out of which funds were available for

meeting the expenses on foreign travels. This contention of Ld. AR is also

rejectable for the simple reason that the withdrawals shown by

assessee/family members stand utilised for meeting household expenses

(Refer earlier Para No. 27/29 of this order). Further, there is also a serious

contradiction in the stand of assessee in as much as on one hand, the

assessee claims that the impugned expenditure was fund by “PPPL”/Group

concerns of assessee and on other hand, the assessee is trying to show that

the expenses have been met out of withdrawals shown by assessee/family

members. Therefore, the source of impugned expenditure remains

unexplained and the assessee is only trying to take arguments for the sake

of arguments. Consequently, we do not find any merit in assessee’s

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submissions in this regard. The additions made by AO are upheld and these

grounds are dismissed.

Ground No. 6 of AY 1989-90 & Ground No. 4 of AY 1990-91 – Additions

related to M/s Panjwani Polypropleyene:

43,73,100/- (+) 2,500/- in AY 1989-90 and Rs. 4,20,000/- in AY 1990-91

made by AO in respect of M/s Panjwani Polypropleyene.

under:

(a) Addition of Rs. 43,73,100/- in AY 1989-90 and Rs. 4,20,000/- in AY

1990-91 - The AO has made these additions vide Para 5.14 of AY

1989-90 and Para 17 of AY 1990-91. These additions have been made

on the basis of books of account of M/s Panjwani Polypropylene at

Annexure X/66 seized during search. On analysis of books, the AO

found that a number of deposits have been taken from different

persons; the AO has noted details of such deposits in assessment-

order. When the AO show-caused assessee to explain the genuineness

of deposits, the assessee made these submissions, namely (i) M/s

Panjwani Polypropylene was a proprietary concern of his son Kamal

Panjwani and the assessee is nothing to do with the said concern. The

assessee submitted that the fact that the said concern was owned by

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Kamal Panjwani was proved by several documents seized during

search itself like the documents of loan sanctioned by MPFC (Madhya

Pradesh Financial Corporation, a Govt. owned statutory corporation)

to M/s Panjwani Polypropylene showing Kamal Panjwani as

proprietor, (ii) The clubbing provisions of section 64(1A) were

applicable from AY 1993-94 and not applicable to AY 1989-90 & AY

1990-91 under consideration, and (iii) Shri Kamal Panjwani had

already become major during those years. Accordingly, the assessee

requested that no addition should be made in assessee. But the AO

rejected assessee’s submission mainly by holding that (i) The assessee

was looking after activities of his son Kamal Panjwani, and (ii) The

assessee has not explained the genuineness of deposit entries. During

first-appeal, the CIT(A) upheld additions by approving AO’s

observations and further observing that the assessee Shri Namdev

Panjwani had already expired and Kamal Panjwani was legal heir.

Therefore, whether the amount is taxed in Namdev Panjwani’s hands

or in the hands of Kamal Panjwani, it will be paid by Kamal Panjwani

only and hence it is a non-issue.

(b) Addition of Rs. 2,500/- in AY 1989-90 - The AO has dealt this

addition in Para 5.13 of AY 1989-90. During assessment, the AO

initially asked the assessee to explain source of a FDR of Rs.

1,00,000/- made in cash in the name of assessee’s minor son Kamal

Panjwani. The assessee explained (i) that the FDR was made by Kamal

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Panjwani from the funds withdrawn from bank a/c of his own

proprietary concern named M/s Panjwani Polypropylene, (ii) that the

clubbing provisions of section 64(1A) were applicable from AY 1993-94

and hence not applicable to AY 1989-90 under consideration, and (iii)

that Shri Kamal Panjwani had already become major during the

relevant year. Although the AO accepted these submissions of

assessee but made an addition of Rs. 2,500/- on the basis of 10%

interest earned on FDR. During first-appeal, the CIT(A) upheld

addition mainly by observing that Shri Namdev Panjwani had already

expired and Kamal Panjwani was legal heir. Therefore, whether the

amount is taxed in Namdev Panjwani’s hands or in the hands of

Kamal Panjwani, it will be paid by Kamal Panjwani only and hence it

is a non-issue.

Kamal Panjwani was an independent individual. He submitted that M/s

Panjwani Polypropylene was a proprietary concern of assessee’s son Kamal

Panjwani and the assessee is nothing to do with the said concern. He

submitted that the fact that M/s Panjwani Polypropylene was a proprietary

concern of assessee’s son Kamal Panjwani was proved by several documents

seized during search itself. He referred one of the seized-documents at Page

No. 160-164 of Paper-Book for AY 1989-90 which is a loan-sanction letter

dated 29.10.1988 issued by MPFC granting a loan of Rs. 30,00,000/- to

“Kamal Panjwani proprietor of M/s Panjwani Polypropylene”, this document

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was also filed at lower-level. Ld. AR further submitted that Kamal Panjwani

had already attained majority during the relevant years which is an

undisputed fact. He submitted that the AO was swayed to tax income in the

hands of assessee on the footing that Kamal Panjwani happened to be a

minor son of assessee at that time. Ld. AR submitted that the clubbing

provision of section 64(1A) was introduced in Income-tax Act, 1961 from AY

1993-94 and prior to that, there were sections 64(1)(iii)/(v)/(viii) which

required clubbing in limited cases only, viz. income earned by a minor child

from a partnership firm or income earned by a minor child from any asset

transferred by his parents without consideration or for inadequate

consideration but these are not the cases in present appeals. Therefore,

none of the clubbing provisions was applicable. He submitted that in any

case, Kamal Panjwani had already attained majority during AY 1989-90

itself. Therefore, the clubbing could not have been attracted. Ld. AR

submitted that the CIT(A) is very much wrong in making an illegal

conclusion that the tax shall ultimately fall upon Kamal Panjwani, whether

the income is taxed in the hands of assessee (Shri Namdeo Panjwani) or in

personal hands of Kamal Panjwani; such a bad conclusion by first appellate

authority must be quashed. After a careful consideration, we find merit in

all submissions of Ld. AR and therefore, without repeating the same, we

agree that the additions made by AO in the hands of assessee are not

tenable. Hence, we delete the additions made by AO. These grounds are

allowed.

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Ground No. 3 of AY 1990-91, Ground No. 3 & 4 of AY 1991-92 –

Additions related to M/s Panjwani Polypropleyene Ltd.:

29,20,000/- (+) 50,000/- (+) Rs. 6,045/- (+) Rs. 5,000/- in AY 1990-91 and

Rs. 16,23,000/- (+) Rs. 53,843/- (+) Rs. 13,784/- (+) Rs. 10,000/- in AY

1991-92 made by AO in respect of M/s Panjwani Polypropleyene Ltd.

under:

(a) Additions of Rs. 29,20,000/- (+) 50,000/- (+) Rs. 6,045/- (+) Rs.

5,000/- in AY 1990-91 - The AO has made these additions in Para

19.1 to 19.6 of assessment-order on the basis of a document being the

Balance-Sheet as on 31.03.1990 of a company named “M/s Panjwani

Polypropylene Ltd.” seized at Page No. 173 of Annexure-K/6 during

search reflecting paid up capital of Rs. 29,20,000/- and stock-sale of

Rs. 4,49,001/-. This Balance-Sheet is filed in Paper-Book at Page No.

company in a/cs with Syndicate Bank and State Bank of Indore.

When the AO show-caused assessee to explain, the assessee filed

reply. The assessee submitted that the company “M/s Panjwani

Polypropylene Ltd.” was a separate entity, hence its transactions have

to be assessed independently. But the AO rejected assessee’s

submission with the reasoning that originally there was a concern

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named “M/s Panjwani Propylene” in the name of assessee’s son Shri

Kamal Panjwani which was later converted into the said company and

the assessee was the main person behind the activities of company.

With regard to the share capital of Rs. 29,20,000/-, the assessee also

submitted that the actual paid up capital of company was just Rs.

700/- and the paid up capital of Rs. 29,20,000/- was a window-

dressed figure in Balance-Sheet for balance disbursement of loan from

MPFC. The assessee submitted copy of ROC document (copy at Page

No. 51 of Paper-Book) as an evidence to show the paid up capital of

Rs. 700/-. The assessee also filed loan sanction-letter dated

23.10.1989 of MPFC (copy at Page No. 66-74 of Paper-Book). But the

AO rejected assessee’s submission and made addition of Rs.

29,20,000/- on account of unexplained share capital. With regard to

stock-sale of Rs. 4,49,001/-, the assessee again took a plea that there

was no real sale, it was only window-dressed in Balance-Sheet for loan

from MPFC. The AO rejected this submission and made an addition of

estimated profit of Rs. 50,000/- on undisclosed stock-sale. With

regard to deposit in Syndicate Bank, the AO treated deposits of Rs.

5,000/- as unexplained and made addition. Lastly, the AO made an

addition of Rs. 6,045/- credited in State Bank of Indore on account of

interest on FDR.

(b) Additions of Rs. 16,23,000/- (+) Rs. 53,843/- (+) Rs. 13,784/- in AY

1991-92 - The AO has made these additions in Para 11.1 to 11.5 of

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assessment-order on the basis of a document being the Trial Balance

as on 20.07.1990 of same company reflecting unsecured loans of Rs.

16,23,000/- and stock-sale of Rs. 4,25,737/-. This Trial Balance is

filed in Paper-Book at Page No. 67. Further, the AO also found

deposits having been made by said company in a/c with State Bank of

Indore. When the AO show-caused assessee to explain, the assessee

made identical submission as noted above and the AO also rejected

assessee’s submission by identical reasoning as noted above.

Ultimately, the AO made addition of Rs. 16,23,000/- on account of

unexplained loans, Rs. 53,843/- as profit on undisclosed stock-sale

and an addition of Rs. 13,784/- on account of interest on FDR

credited in a/c with State Bank of Indore.

(c) Addition of Rs. 10,000/- in AY 1991-92 – The AO has made this

addition in para 11.9 of assessment-order on the basis of a loose

cash-book of same company in Annexure-D/84 seized during search

reflecting a deposit of Rs. 10,000/- in the name of assessee. When the

AO show-caused, the assessee denied having made any such deposit

and did not furnish any evidence. Ultimately, the AO made addition.

relevant contentions are summed up as under:

(i) Ld. AR mainly harped on the point that the figures mentioned in the

seized Balance-Sheet/Trial Balance were fictitious/window-dressed

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for balance disbursement of loan from MPFC. The actual paid up

capital of company was just Rs. 700/- which is evident from a Search-

Report dated 07.08.2023 given by M/s R.S. Yadav & Associates,

Advocates filed at Page No. 219 to 222 of Paper-Book of AY 1989-90.

Therefore, no addition can be made on the basis of fictitious data. Ld.

AR submitted that similar position has already been accepted by AO

in assessee’s case for AY 1988-89 whereby the AO did not make

additions of Rs. 88,35,000/- (+) Rs. 9,20,000/- in the hands of

assessee qua the fabricated Balance-Sheet of another company M/s

Panjwani Plastics and Polysters Ltd. (this aspect is already discussed

in earlier paras while adjudicating a different ground). Reliance is also

placed on ITO Vs. Shri Paragbhai Karamshibhai Dobaria, ITA No.

2084/AHD/2008 where the addition made by AO on the basis of

documents found during survey had been deleted by CIT(A)/ITAT for

the reason that those documents were only a paper-work created to

show fictitious incomes/assets and did not represent any realistic

transactions.

(ii) It is submitted that M/s Panjwani Polypropylene Ltd. was a separate

company/entity incorporated under Companies Act which had come

into existence on conversion of a proprietary concern “M/s Panjwani

Polypropylene” owned by assessee’s son Kamal Panjwani. Therefore,

the assessee is nothing to with the transactions of said company. The

AO has baselessly and on mere suspicion and presumption treated

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the transactions as belonging to assessee-individual. Ld. AR

submitted that presumption made by AO is contrary to the record. He

submitted that the loan sanction-letter of MPFC clearly shows the

name of company. He submitted that the assessee was nowhere

involved in the board of directors of company [Para No. 3(viii) of

Concise-Synopsis filed by Ld. AR]. Further, the company came into

existence on conversion of erstwhile proprietary concern “M/s

Panjwani Polypropylene” owned by Kamal Panjwani, son of assessee

which is a fact acknowledged by AO himself and also evident from the

condition mentioned in Para 32(g) of the loan sanction-letter requiring

the company to file an agreement for taking over assets and liabilities

of said proprietary concern.

(iii) It is submitted that no question was raised in statements u/s 132(4)

and the additions have been made during assessment only.

documents contained realistic transactions but even if it is assumed that

the documents were window-dressed, then also it is a fact that the company

successfully availed loan from MPFC. Relying upon following decision of

Hon’ble jurisdictional High Court in Suraj Bhan Oil Pvt. Ltd. Vs. DCIT, ITA

No. 121/2021 order dated 18.02.2022, Ld. DR contended that the claim of

window-dressing itself goes against assessee since it amounts to commercial

immorality, therefore the assessee does not deserve any sympathy at all.

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Further, the assessee has not reconciled correct figures vis-a-vis window-

dressed figures as required by Hon’ble High Court:

“…..Even otherwise, as has been held in catena of decisions by different High Courts, the practice followed by Industrialists declaring larger than actual quantity of stock to the Bank for the purpose of getting higher loans or over- draft facility, in fact, is not recognized as conforming to the fiscal discipline by Courts, Authorities and Tribunals. Such a tendency tantamount to commercial immorality for obtaining unjustified gains in the form of higher credit facility or loans etc. by showing incorrect statement of stock position to the Bank.

In any case, the burden lies upon the assessee to reconcile the difference of stock position presented to the bank with the stock position mentioned in the books of accounts/audit report (Dhansi Ram Aga Vs. CIT (201 ITR 192, Gauhati High Court, Ramanlal Kacharulal Tejmal Vs. CIT (146 ITR 368 (Bom), Pooranlal Raj Kumar Vs. CIT (107 CTR Cal. 27), CIT Vs. A. Yunuskunju (189 ITR 672, Kerala), CIT Vs. South India Rubber Products (166 ITR 687 (Kerala) and Coimbatore Spng. & Wvg. Co. Ltd. Vs. CIT (1974)95 ITR 375, referred to).

Once the Assessing Officer finds that there was excess stock, in absence of explanation by the assessee, the conclusion is inescapable that the excess stock, if any, was from undisclosed sources. Further, once the assessee's explanation, if any, has not been accepted, the resultant position is that there was excess stock un-disclosed in the books of accounts and non-disclosure was only with a view to suppress the income.

Consequently, this Court uphelds the order of Assessing Officer dated 31/3/2013 (Annexure P/4) and that of the Income Tax Appellate Tribunal dated 5/4/2021 (Annexure P/6) taking the view that the excess stock represented the income of the assessee from undisclosed sources. The judgment cited by learned counsel for the appellant, in fact, is distinguishable on facts. In that case, there was no variation or difference in quantity of stocks of raw material etc. shown in the books of accounts and that sent to the Bank, but there was difference in valuation and for the reasons stated in the order of the Tribunal, the Apex Court did not choose to interfere in the said order in its discretionary jurisdiction under Article 136 of the Constitution of India. Hence, the said judgment is of no assistance to the appellant.”

Ld. AR also relied upon lower-authorities’ observation that it was the

assessee who was main person behind all activities of company even if the

said company was a separate entity formed under any law. Therefore, the

AO has rightly made additions in the hands of assessee.

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documents to which our attention has been drawn. After a careful

consideration, we find that the foremost contention of assessee/Ld. AR is

such that the seized Balance-Sheet/Trial Balance were fictitious/window-

dressed documents for disbursement of loan from MPFC. To prove this, it is

being claimed that the actual paid up capital of company was just Rs. 700/-

and not Rs. 29,20,000/- as shown in those documents. Ld. AR initially

relied upon a ROC document filed at lower-stage, copy at Page No. 51 of

Paper-Book of AY 1990-91, showing paid up capital of Rs. 700/-. But when

the Bench pointed out that the said document was an “Application for

Company Master Data Correction” submitted by assessee to ROC, the

assessee filed a Search-Report dated 07.08.2023 given by M/s R.S. Yadav &

Associates, Advocates, copy at Page No. 219 to 222 of Paper-Book of AY

1989-90. This report, though shows paid up capital of Rs. 700/- but it is a

new document filed for the first time before us. It is noteworthy that in this

search-report, the names of “First directors & Subscribers” have been given

wherein name of assessee ‘Mr. Namdev Panjwani’ is clearly mentioned

alongwith other persons. That means, the assessee was one of the first

directors in the company. Therefore, the claim of Ld. AR that the assessee

was nowhere involved in the board of directors is not very correct. Although

it might have happened that subsequently the assessee exited from board of

directors but initially he was a director. The argument of Ld. AR that a

similar position of fabricated Balance-Sheet of another company ‘M/s

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Panjwani Plastics and Polysters Ltd.’ has already been accepted by AO in

assessee’s case for AY 1988-89 and therefore the contention of assessee

should be accepted here also, is not appealing to us for several reasons,

namely (i) each company is independent and it is not necessary that if one

company’s balance-sheet is fictitious, other company’s balance-sheet would

also be fictitious, (ii) that the entire Balance-Sheet of another company ‘M/s

Panjwani Plastics and Polysters Ltd.’ has not been accepted as fictitious,

there were items of cash & bank balances and sundry advances which have

been taken as genuine. In the same way, if we look at the seized Balance-

Sheet/Trial Balance, we find that these documents contain transactions of

actual loan taken from MPFC, Bank A/cs, Cash balance, Plant & Machinery,

etc. Further, the Trial Balance, which is in continuation of Balance-Sheet, is

also signed, sealed and dated by a professional Chartered Accountant.

Therefore, even if some of the transactions are window dressed, the entire

Balance-Sheet/Trial Balance cannot be said to be fictitious. In any case, as

per decision of Hon’ble jurisdictional High Court in Suraj Bhan Oil Pvt. Ltd.

Vs. DCIT (supra), it was duty of assessee to reconcile the differences of actual

figures and window-dressed figures but the same has not been done.

Therefore, simply projecting a claim that the seized documents were

fictitious cannot be accepted. One factual aspect is, however, observed by

AO that the proprietary of assessee’s son was converted into the said

company. Looking into these aspects and having regard to the decision of

Hon’ble jurisdictional High Court, there is a necessity to verify whether the

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Balance-Sheet/Trial Balance really contained fictitious data and if yes, to

what extent. This exercise has not been done so far. Therefore, we feel that

this issue should be remitted back to the file of AO for a deep adjudication

after hearing assessee. The AO shall consider the assessee’s submissions

including the latest search-report filed by assessee before us. Further, the

AO may make necessary enquiries from the office of ROC. Once the position

is clear, the AO would take an appropriate call of all additions involved in

these grounds. Accordingly, we remand these grounds back to AO for a

proper scrutiny and adjudication. The relevant grounds can be said to have

been allowed for statistical purposes.

Ground No. 6 of AY 1990-91 – Unexplained marriage expenses of

daughter:

addition of Rs. 2,25,000/- made by AO qua the unexplained expenses on

marriage of daughter (+) a further addition of Rs. 1,28,033/- (wrongly

mentioned as 1,28,000/- in Grounds) made by AO on protective basis qua

the unexplained jewellery gifted to daughter on marriage.

expenses. The AO has made this addition in Para No. 11.1 to 11.3 of

assessment-order for these reasons, namely (i) In the statement recorded

u/s 132(4), the assessee admitted expenditure on marriage of daughter at

Rs. 1,00,000/-; and (ii) The assessee is not able to explain the source of

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expenditure. The AO, however, estimated expenditure of marriage at Rs.

2,25,000/- and made addition. During first-appeal, the CIT(A) upheld AO’s

action. Before us, Ld. AR made two-fold contentions, namely (i) The AO has

baselessly made estimation at Rs. 2,25,000/- as against the admission of

Rs. 1,00,000/- by assessee in Q.No. 5 of the statements u/s 132(4); and (ii)

The assessee/family members have already disclosed a total withdrawal of

Rs. 2,12,800/- in AY 1990-91 which is much higher as compared to the

withdrawals shown in AY 1988-89, therefore the assessee was having

additional funds for meeting the marriage expenses of Rs. 1,00,000/-

admitted in statements. In order to adjudicate this issue, we firstly re-

produce below the Q.No. 5 of statements u/s 132(4):

- 5 �� " कृपया यह बताये िक आपकी पु�ी सुजात पंजवानी का िववाह कब �आ था ,िकसके साथ �आ था उनका पूरा पता देवे तथा शादी म� आप ने िकतना �पया खच� िकया था व िकतने �पये नगद व आभूषण आिद िदए थे ।

उ�र- मेरी बेटी सुजाता की शादी 15.05.89 को �ई थी, शादी �ी योगेश वमा� /3 17 , मनोरमागंज ,इंदौर के साथ �ई थी, शादी म� खच� करीब �पये एक लाख खच� िकया था । �पया सुजाता इंड��ीज पेकेिजंग व पंजवानी पेकेिजंग िल .से िनकाला था । मेरी प�ी ने लगभग प�ीस तोले सोने के आभूषण अपनी ओर से िदये थे ।" On perusal, we agree to Ld. AR’s contention that the assessee admitted

having incurred expenditure of Rs. 1,00,000/- on marriage. We further find

that the AO has not given any basis for arriving estimation at Rs. 2,50,000/-

. Therefore, the first contention raised by Ld. AR has merit and we accept

that the expenditure on marriage ought to be taken at Rs. 1,00,000/- and

not at Rs. 2,50,000/-. However, the second contention raised by Ld. AR is

rejectable for the simple reason that the withdrawals shown by

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assessee/family members stand utilised for meeting household expenses

(Refer earlier Para No. 27/29 of this order). Further, there is also an

ostensible contradiction in the stand of assessee in as much as on one hand

in reply to Q.No. 5, the assessee stated that the impugned expenditure was

fund by “PPPL”/Group concerns of assessee and on other hand, the

assessee is trying to show that the expenses have been met out of

withdrawals shown by assessee/family members. Therefore, the source of

impugned expenditure remains unexplained and the assessee is only trying

to take arguments for the sake of arguments. Consequently, we do not find

any merit in assessee’s second contention. In final conclusion, we note that

that the addition to the extent of Rs. 1,00,000/- admitted by assessee must

be upheld and the excess addition deserves to be deleted. Accordingly, we

uphold addition of Rs. 1,00,000/- and delete extra addition. This way, the

assessee gets part-relief in this issue.

jewellery made on marriage of daughter. The AO has made this addition on

protective basis in the hands of assessee. Substantive addition was made in

the hands of Smt. Jayshree Panjwani, assessee’s wife. Ld. AR submitted that

once addition has been made in the hands of Smt. Jayshree Panjwani, no

addition is called for in assessee’s hands. We are not sure about the fate of

substantive addition made in Smt. Jayshree Panjwani, whether Smt.

Jayshree Panjwani contested the same in further appeals or not and

whether it was sustained in her hands or not. Therefore, we remand this

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issue back to the file of AO to verify the situation and take a final call.

Accordingly, this issue is statistically allowed.

Ground No. 7 of AY 1990-91 - Bogus liability shown in computation of

wealth:

made by AO on account of bogus liability shown in computation of wealth.

basis of a sheet titled ‘Computation of Wealth’ seized at Annexure-Z/6

during search, copy filed at Page No. 93-94 of Paper-Book. The AO has

observed that the impugned sheet was for AY 1990-91 in which the assessee

had deducted an aggregate liability of Rs. 4,30,000/- payable to three

persons, in computing net wealth. The AO asked assessee to explain the

genuineness of liabilities. In response, the assessee made two-fold

submissions, namely (i) the impugned computation was related to AY 1988-

89 and not to AY 1990-91; and (ii) the impugned computation was a rough

calculation made by assessee’s wife Smt. Jayshree Panjwani but no return

of wealth of AY 1988-89 was actually filed to department. However, the AO

rejected assessee’s submission. Ultimately, the AO made addition observing

that the assessee had failed to prove the identity, creditworthiness and

genuineness of liabilities of Rs. 4,30,000/-. Although nowhere in entire

discussion or conclusion, the AO has referred any section under which the

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said addition had been made but in the heading of Para No. 14, the AO has

mentioned “Unexplained addition u/s 41(1) on account of bogus liability”.

assessee before AO. Thereafter, he submitted that the AO has made addition

u/s 41(1) but invoking section 41(1) itself is wrong because there is no

remission or cessation of trading liability as required by the said section. He

submitted that the issue in earlier rounds of proceedings was qua section 68

and not section 41(1). He contended that the alleged sheet showing a rough

computation of wealth, even if taken as true, cannot give rise to any

taxability u/s 68 or 41(1) of Income-tax Act, 1961. Per contra, Ld. DR for

revenue relied upon the orders of lower-authorities and requested to uphold

the addition.

perused the seized document at Page No. 93-94 of Paper-Book. Firstly, we

find that on the top of document, “1988-89” is clearly mentioned. Secondly,

the document is signed at the end by Smt. Jai Shree Panjwani. Therefore,

the seized document, on the face of it, neither appears as relating to AY

1990-91 in which the AO made addition nor it relates to assessee. Faced

with this situation, we hardly find any merit in the addition made by AO.

Hence, the addition is deleted and this ground is allowed.

Ground No. 6 of AY 1991-92 & Ground No. 3 of AY 1992-93 -

Investment in shares of M/s Panjwani Packagings Ltd.:

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10,00,000/- in AY 1991-92 and Rs. 13,00,000/- in AY 1992-93 made by AO

on account of investment in ‘promoter quota’ shares of company M/s

Panjwani Packagings Ltd. The assessee also challenges an addition of Rs.

5,00,000/- in AY 1992-93 made by AO on account of investment in

‘employee quota’ shares of same company.

13,00,000/- in AY 1992-93 qua ‘promoter quota’ shares. The AO has made

these additions in Para No. 11.7 of AY 1991-92 and Para No. 18 of AY 1992-

93, elaborate discussion is made in AY 1992-93. Basically, M/s Panjwani

Packagings Ltd. was initially a private company (for clarity, it is the same

company which is referred as “PPPP” at various places in this order) which

subsequently became a public company and went to public for issue of

shares. Under the scheme of public issue, the promoters and relatives/

friends of promoters were required to make subscription to 8,24,200/-

equity shares of the value of Rs. 82,42,000/-, a copy of the prospectus

containing this requirement is filed at Page No. 105 of Paper-Book. During

search-proceeding, a list containing details of subscription received by

company towards ‘promoter quota’ shares was seized as Annexure-Z/5, copy

filed at Page No. 77-99 of Paper-Book. The authorities believed that the

assessee has made investment in ‘promoter quota’ shares in the names of

other persons. In the statements u/s 132(4), the assessee made a surrender

of Rs. 10,00,000/- in AY 1991-92 and Rs. 13,00,000/- in AY 1992-93.

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Therefore, while completing assessment, the AO made a substantive

addition of Rs. 10,00,000/- in AY 1991-92 (+) Rs. 13,00,000/- in AY 1992-

93 = Rs. 23,00,000/- in the hands of assessee and a protective addition of

Rs. 23,00,000/- in AY 1992-93 in the hands of company M/s Panjwani

Packagings Ltd.

Rs. 10,00,000/- in AY 1991-92. He submitted that the AO is very much

wrong in making addition in AY 1991-92 because the AO has himself

accepted in Para 18.4 of assessment-order thus “Deposits in promoter quota

of shares have been received in January, February and March 92 as per list

seized in Annexure Z/5”. Further, in the 2nd round of assessment of

company M/s Panjwani Packaging Ltd., the AO dealt the entire issue of

‘promoter quota’ shares of Rs. 82,42,000/- in Para No. 16 of assessment-

order dated 24.03.2000 passed u/s 143(3)/250, copy filed at Page 134-150

of Legal Paper-Book, as under:

“16. Assessee company had become public limited during the year and public issue was brought out in April,92 Public Issue opened on 6th April, 92, and closed on 9th April, 92, after it was subscribed several times over. Assessee had share capital of Rs. 50,25,000/- as on 31.3.91 before the public issue of Rs. 1,80,00,000/- (Rs. 18,00,000/- shares of Rs. 10/- each). Assessee was required to obtain promoters quota of share of Rs. 82,42,000/- (8,24,200 shares of Rs. 10/- each). The Public Issue consisted of Rs. 2,62,42,000/- (2624200 shares of Rs. 10/- each) out of which 18,00,000/- were offered to public, 131210 shares of Rs. 10/- each were reserved for employees. Balance 1668790 of 10/- each were offered to Indian Public and only Rs. 5/- was to be paid alongwith share application. Shares reserved for employees were fully paid on application (Rs. 10/- per share). Promoters quota of shares 8,24,200 shares were also to be fully paid. Further this contribution of promoters quota of Rs. 82,42,000/- was to be obtained before public issue opened. During the course of search various documents have been seized

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indicating that the investment in promoters quota of shares and employees quota of shares has not been made by the apparent share-holders, but by the assessee company and Shri N.P. Panjwani, Managing Director. In this regard, Shri N.P. Panjwani, M. D. of assessee company in his statement u/s 132(4) had surrendered Rs. 10 lacs in assessment year 1991-92 as his undisclosed income invested in promoters quota of shares. Further income of Rs. 13 lacs was disclosed by him in assessment year 92-93 as undisclosed income invested in promoters quota of shares. Rs. 5,00,000/- in A.Y. 92-93 was disclosed by Shri N.P. Panjwani as undisclosed investment in employees quota of shares. During the assessment proceedings, assessee was asked to submit copy of balance sheet, profit and loss account, manufacturing and trading account. Assessee was also asked to furnish name and address of share-holders of promoters quota, employees quota, number of shares applied, and allotted, amount received, cheque number and date and assessee was also required to prove the genuineness of investment made by share-holders. This information was required by notice dated 8.9.95. However, no reply has been filed even during set aside assessment proceeding. Neither balance sheet, manufacturing trading and profit and loss account as on 31.3.92 as well as on 31.3.93 has been filed nor the information relating to share-holders has been filed. During the course of search list of 8,24,200/- shares of promoters quota had been seized in Annexure –Z/5. This bunch of papers contains 23 pages and number of list which enclosed with it. In all investment of Rs. 82,42,000/- has been made in these shares. List no.1 page – 21 & 22 is of Rs. 2,18,000/- (21,800 shares) showing receipt from various parties in January and February, 92. List no. 2 on page 16 to 20 is of Rs. 19,35,000/- (1,93,500 shares). This list also contains details of payment received in the month of January, 92 and December, 91, 3rr list of page-15 is of Rs. 2,89,000/- (28,900 shares). Similarly, there are other list of Rs. 20,09,000/- (200900 shares) called Vadodra List. There is Ahmedabad list of Rs. 17,90,000/- (179,000 shares). There is Bombay list of Rs. 20,01,000/- (2,00,100 shares). In all total payment of Rs. 82,42,000/- has been received against 8,24,200 shares. Thus the condition mentioned in the prospectus of full receipt of promoters quota of 82,42,000 has been met before the Public Issue opened. As is clear from Annexure – Z/5 payment was received in financial year 91-92. Assessee has totally failed to file names and address of share-holders and has also, failed to file confirmatory letter from these share holders. Genuineness of capital received from these parties has not been established even during the course of set-aside assessment despite the fact that the assessee knew that additions were made on this account in the original assessment. Accordingly, even during these proceedings the entire share capital out of promoters quota of Rs. 82,42,000/- remains unexplained on account of the failure of assessee to, prove the genuineness of share capital receipt.

16.1 Verification of second list of Rs. 19,35,000/- (1193500 shares) with the account in Allahabad Bank, Parliament Street, New Delhi account No. 455358 of the assessee company reveals the many of the entries in this list are deposited in this account. In this regard list of cheques deposited in Allahabad Bank account No. 455358 has been seized in Annexure-K/12. Pay-in-slips corresponding to these list have been seized in Annexure-K/12 and K/17 the

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second list of Rs. 19,35,000/- reveals that cheque of Rs. 16,22,000/- out of Rs. 19,35,000/- are already deposited in Allahabad Bank a/c no. 455358. Thus out of unexplained share capital of promoters quota of Rs. 82,42,000/- addition of Rs. 16,22,000/- has already been made while considering the unexplained deposits in this bank a/c in Allahabad Bank, Parliament Street, New Delhi. Balance amount remaining to be added is Rs. 66,20,0o00/-. After considering the balance sheet as on 30.9.91, for increase in share application money during the year, addition of Rs. 30,00,000/- has already made. Balance share capital in promoters quota is Rs. 36,20,000/-. During the search Shri N.P. Panjwani, M. D. had surrendered Rs. 10 lacs and Rs. 13 lacs in assessment year 91-92 and 92-93 respectively as his undisclosed investment in promoters quota of shares of assessee company. However, neither in this statement nor during proceedings u/s 132(5) as well as in assessment proceedings of Shri N.P. Panjwani has filed the list of share- holders in whose name investment of Rs. 23 lacs has been made by him. Thus the specific details of investment of Rs. 23 lacs by Shri N.P. Panjwani out of above shares of promoters quota is not known. However, keeping in view his statement u/s 132(4) addition of Rs. 10 lacs in the hands of Shri N.P.Panjwani in assessment year 91-92 and Rs. 13 lacs in assessment year 92-93 regarding investment by him in promoters quota of shares shall be made. Out of Rs. 36,20,000/- addition of Rs. 23,00,000/- is again made on protective basis and balance of Rs. 13,20,000/- on substantive basis.” Thus, Ld. AR contended, when the subscription of ‘promoter quota’ shares

was received in financial year 1991-92 relevant to AY 1992-93, which is a

fact admitted by assessee’s AO as well as the AO of M/s Panjwani Packaging

Ltd., the assessee’s AO is patently wrong in making addition of Rs.

10,00,000/- in AY 1991-92. Ld. AR submitted that the AO has made

addition of Rs. 10,00,000/- in AY 1991-92 only and only because of

surrender made by assessee in statements. Secondly, on merits of both

additions of Rs. 10,00,000/- (+) Rs. 13,00,000/-, Ld. AR raised an important

contention. He pointed out the final status of this issue in the hands of

company M/s Panjwani Packaging Ltd. He explained that in the 2nd round of

company’ assessment-order dated 24.03.2000 u/s 250/143(3), re-produced

in earlier paragraph, the AO made a protective addition of Rs. 23,00,000/-

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(+) a substantive addition of Rs. 13,20,000/- in the hands of company.

Against this order, the appeals/cross-objections of revenue/company

travelled to ITAT, Indore Bench whereupon the ITAT, vide order dated

21.01.2010, remanded matter back to AO for a fresh adjudication. Pursuant

to direction of ITAT, the AO has passed latest assessment-order dated

29.10.2010, copy filed at Page No. 54-70 of a separate Paper-Book, in which

the AO has not made any addition whatsoever, neither substantive nor

protective, in company’ assessment. Thus, Ld. AR submitted that the issue

of ‘promoter quota’ is finally settled and the department has accepted the

subscription as genuine by not making any addition in the hands of

company. Ld. AR submitted that when it so, the additions made in the

hands of assessee also deserves to be deleted. Thirdly, Ld. AR pleaded that

the AO has made additions in assessee’s hands merely on the suspicion and

on the basis of surrender made by assessee but the surrender is not

corroborated by any evidence. Ld. DR for revenue, however, defended the

orders of lower authorities. After a thoughtful consideration, we find

sufficient weightage in the submissions of Ld. AR. We agree that the

addition of Rs. 10,00,000/- in AY 1991-92 is not tenable when the AO has

himself accepted that the entire subscription of promoter quota was received

in the financial year 1991-92 relevant to AY 1992-93. Further, on merits of

additions in both years, we also agree with the submission of Ld. AR that

once the AO has himself reversed his earlier approach and finally made no

addition in the latest assessment-order of company qua the issue of

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promoter quota, it necessary follows department’s acceptance that the

subscription to promoter quota was genuine. Therefore, on merits also, no

addition is warranted in the hands of assessee. Faced with these vital

aspects, we delete the additions of Rs. 10,00,000/- in AY 1991-92 and Rs.

13,00,000/- in AY 1992-93.

account of investment in ‘employee quota’ shares of company. The AO has

made this addition in Para No. 19 of AY 1992-93. Basically, under the

scheme of public issue brought by company, there was a reservation for

preferential allotment of 1,31,210 equity shares of the value of Rs.

13,12,100/- to employees. This requirement is clearly mentioned in copy of

prospectus filed at Page No. 105 of Paper-Book. During search-proceeding, a

list containing details of subscription received by company towards

‘employee quota’ shares was seized as Annexure-Z/7. The authorities

believed that the assessee has made investment in ‘employee quota’ shares

in the names of other persons. In the statements recorded u/s 132(4), the

assessee made a surrender of Rs. 5,00,000/- in AY 1992-93. Therefore,

while completing assessment, the AO made a substantive addition of Rs.

5,00,000/- in the hands of assessee in AY 1992-93 and a protective addition

of Rs. 5,00,000/- in the hands of company in AY 1993-94.

company M/s Panjwani Packagings Ltd. opened public issue on 06.04.1992

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

and the employees were required to pay entire issue price after opening of

public issue. These points are clearly mentioned in the prospectus. Further,

in the 2nd round of assessment of company M/s Panjwani Packaging Ltd.,

the AO dealt the entire issue of ‘employee quota’ shares of Rs. 13,12,100/-

in Para No. 17-18 of assessment-order dated 24.03.2000 passed u/s

143(3)/250, copy filed at Page 134-150 of Legal Paper-Book, where he has

clearly noted thus “Unlike promoters quota of shares, subscription to

employees quota of shares was received in financial year 1992-93 when the

issue opened since the employees quota of shares of Rs. 13,12,100/- were

reserved out of public issue of Rs. 1,80,00,000/-.” Thus, Ld. AR contended,

when the subscription of ‘employee quota’ shares was received in financial

year 1992-93 relevant to AY 1993-94, the assessee’s AO is patently wrong in

making addition of Rs. 5,00,000/- in AY 1992-93. Ld. AR submitted that the

AO has made addition of Rs. 5,00,000/- in AY 1992-93 only and only

because of surrender made by assessee in statements. Secondly, on merit of

addition also, Ld. AR raised an important contention. He pointed out the

final status of this issue in the hands of company M/s Panjwani Packaging

Ltd. He explained that in the 2nd round of company’s assessment-order

dated 27.03.2000 u/s 250/143(3) for AY 1993-94, the AO made a protective

addition of Rs. 5,00,000/- (+) a substantive addition of Rs. 8,12,100/- in the

hands of company. Against this order, the appeals/cross-objections of

revenue/company travelled to ITAT, Indore Bench whereupon the ITAT, vide

order dated 21.01.2010, remanded matter back to AO for a fresh

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Shri Kamal Panjwani, Indore vs. ACIT,3(1), Indore. ITA Nos. 81 to 85/Ind/2014 – AYs.1988-89 to 1992-93

adjudication. Pursuant to direction of ITAT, the AO has passed latest

assessment-order dated 29.10.2010, copy filed at Page No. 110-132 of a

separate Paper-Book, wherein the AO has not made any addition

whatsoever, substantive nor protective, in company’ assessment. Thus, Ld.

AR submitted that the issue of ‘employee quota’ is finally settled and the

department has accepted the subscription as genuine by not making any

addition in the hands of company. Ld. AR submitted that when it so, the

addition made in the hands of assessee also deserves to be deleted. Ld. DR

for revenue, however, defended the orders of lower authorities. After a

thoughtful consideration, we find sufficient weightage in the submissions of

Ld. AR. We agree that the addition of Rs. 5,00,000/- in AY 1992-93 is not

tenable when the AO has himself accepted that the entire subscription of

employee quota was received in the financial year 1992-93 relevant to AY

1993-94. On merits of additions also, we agree with the submission of Ld.

AR that once the AO has himself reversed his earlier approach and finally

made no addition in the latest assessment-order of company qua the issue

of employee quota, it shows department’s acceptance that the subscription

of employee quota was genuine. Therefore, on merits also, no addition is

warranted in the hands of assessee. Faced with these aspects, we delete the

addition of Rs. 5,00,000/- in AY 1992-93.

Ground No. 4 of AY 1992-93 – Unexplained jewellery:

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made by AO on account of unexplained jewellery.

worth Rs. 5,02,679/- was found out of which jewellery worth Rs. 4,39,090/-

was seized. The assessee made a surrender of Rs. 2,00,000/- in statements

u/s 132(4). During assessment-proceeding, when the AO show-caused

assessee to explain source of jewellery, the assessee submitted copy of

wealth-tax return and wealth-tax assessment-order of his wife, Smt.

Jayshree Panjwani for AY 1992-93 and a copy of a letter filed by Smt.

Jayshree Panjwani to CIT, Bhopal, to establish that the jewellery belonged to

and was already disclosed in wealth-tax return of Smt. Jayshree Panjwani.

The AO considered assessee’s submission but still made addition. The

relevant portion of AO’s order is extracted below:

“16.4 On careful consideration of the assessee reply and perusal of evidences submitted by the assessee, it is seen that the jewelleries found during the search operation were disclosed in the wealth tax return of Smt. Jaishree Panjwani. In this return of wealth it was disclosed that she possessed the jewellery of Rs. 4,89,957/- that is not more than the jewellery seized in search. It is further seen that an application was also made before the Hon'ble CIT Bhopal by Smt. Jaishree Panjwani vide its letter dated 04.01.1993 wherein it was stated that whatever cash and jewellery found and seized in search was belonging to her. Further, prayer of Smt. Panjwani was accepted vide letter dated 09.07.1993 by the Hon'ble CIT, Bhopal. It was further seen that whatever the wealth disclosed by Smt. Jaishree Panjwani has accepted by the ld. DCWT(Asstt.), Range-II, Indore, dated 06.03.1995. But question is arise that the jewellery found in search was actually belongs to assessee’s wife Smt. Panjwani then why assessee surrendered Rs. 2,00,000/- on account of jewellery found from bank locker. If jewellery was actually belongs to Smt. Panjwani then there was no need to surrender. Since, assessee has surrendered the amount of Rs. 2,00,000/- on account of jewellery found and seized in search operation no. 315/01-02 dated 15.02.2007, Rs. 2,00,000/- is added in the total income of the assessee.”

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accepted a clinching fact that the jewellery was already declared in wealth-

tax return of Smt. Jayshree Panjwani but still he has made addition merely

because there was a surrender by assessee. Ld. AR strongly submitted that

the AO’s approach is quite wrong. Relying upon CIT Vs. Naresh Kumar

Agarwal 369 ITR 171 (AP HC) and CBDT Circulars, Ld. AR submitted that no

addition can be made on the basis of mere surrender unless there is a

corroborative evidence to support the surrender. Per contra, Ld. DR

supported the order of AO. After a mindful consideration, we find that in the

present case, the AO has himself accepted a clinching fact that the

impugned jewellery is already disclosed in wealth-tax return of Smt.

Jayshree Panjwani. Still the AO has made addition just because there was a

surrender made by assessee and the CIT(A) has upheld AO’s action. We find

that judicial view is against revenue in such cases. It is by now a well-settled

principle that no addition can be made on the basis of mere surrender

unless there is a supportive evidence. In the present case, there is an

evidence against surrender, instead of supporting surrender, for the very

reason that the AO has himself accepted that impugned jewellery stands

declared in wealth-tax return of assessee’s wife. Faced with this situation,

we hardly find any merit in the addition made by AO. We therefore delete the

same and this ground of assessee is allowed.

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Order pronounced in open court on 18.03.2024.

Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Indore िदनांक/Dated :18.03.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore

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