The DCIT.,, New Delhi v. Shri Mahesh Kumar, New Delhi

ITA 1221/DEL/2009 | 2005-2006
Pronouncement Date: 28-05-2010 | Result: Dismissed

Appeal Details

RSA Number 122120114 RSA 2009
Assessee PAN AAHPK0789P
Bench Delhi
Appeal Number ITA 1221/DEL/2009
Duration Of Justice 1 year(s) 1 month(s) 27 day(s)
Appellant The DCIT.,, New Delhi
Respondent Shri Mahesh Kumar, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 28-05-2010
Date Of Final Hearing 19-04-2010
Next Hearing Date 19-04-2010
Assessment Year 2005-2006
Appeal Filed On 31-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO.1221/DEL/2009 ASSESSMENT YEAR 2005-06 DY. COMMISSIONER OF INCOME-TAX VS. SHRI MAHESH KUM AR CENTRAL CIRCLE-10 KV-81 VISHAKHA ENCLAVE NEW DELHI. PITAMPURA NEW DELHI. PAN AAHPK0789P (APPELLANT) (RESPONDENT) & ITA NO.577/DEL/2009 ASSESSMENT YEAR 2005-06 SHRI MAHESH KUMAR VS. DY. COMMISSIONER OF INCOME- TAX KV-81 VISHAKHA ENCLAVE CENTRAL CIRCLE-10 PITAMPURA NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN AND SHRI V. MOHAN C.AS . DEPARTMENT BY : SMT. KAVITA BHATNAGAR CIT D.R. ORDER PER R.P. TOLANI JM: THESE ARE CROSS-APPEALS ONE BY THE REVENUE AND T HE OTHER BY THE ASSESSEE BOTH DIRECTED AGAINST THE ORDER OF THE CI T(A)-III NEW DELHI DATED 20.1.2009 RELATING TO ASSESSMENT YEAR 2005-06 . ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 2 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPE AL:- 1 (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.57520280/- MADE ON ACCOUNT OF REFUND FORM N.C.C.F. 1 (B) THAT LD. CIT (A) HAS NOT CONSIDERED THE FAC T THAT ASSESSEE WAS NOT ENTITLED TO RECEIVE ANY REFUND DIR ECTLY FROM NCCF AND REFUND IF ANY IT WAS TO BE GIVEN TO PARTIES WITH WHOM ASSESSEE HAS ENTERED INTO MOU FOR PROCURING WHEAT FROM NCCF. ~ 1(C) THAT LD. CIT (A) HAS NOT CONSIDERED THE FACT THAT R EFUND HAS BEEN ISSUED BY NCCF DIRECTLY TO THE ASSESSEE WHICH CLEARLY INDICATES THAT THE ASSESSEE HAS MADE DIRECT PAYMENTS TO NCCF FOR SOME OTHER PURPOSES AND THE SOURCE OF THESE PAYMENTS REMAINS UNEXPLAINED AN D AS A RESULT THE REFUND ARISING OUT OF SUCH UNEXPLAI NED FUNDS REPRESENTS UNEXPLAINED INCOME TO BE BROUGHT T O TAX IN THE HANDS OF ASSESSEE 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS.252051/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN JEWELL ERY BY HOLDING THAT THE SAME WAS OUT OF UNDISCLOSED INC OME OF RS.7 CRORE FROM WHEAT BUSINESS WHICH HAS ALREADY BEEN SUBJECTED TO TAX 3. IN THE FACTS CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS.217000/- AND RS.770000/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN GODOWN AND HOUSE PROPERTY RESPECTIVEL Y BY HOLDING THAT THE SAME WAS OUT OF UNDISCLOSED INC OME OF RS.7 CRORE FROM WHEAT BUSINESS WHICH HAS ALREADY BEEN SUBJECTED TO TAX 3. ASSESSEE HAS NOT PRESSED GROUNDS OF APPEAL NOS.1 TO 3 IN RESPECT OF VALIDITY OF PROCEEDINGS AND GROUND NOS.5 AND 6 A RE GENERAL IN NATURE. THESE GROUNDS ARE THEREFORE DISMISSED AS NOT PRES SED. THE REMAINING GROUND I.E. GROUND NO.4 READS AS UNDER:- ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 3 4.(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONF IRMING THE ACTION OF THE AO OF ASSESSING PROFIT FROM WHEAT BUS INESS AT RS.7 00 00 000/- AS AGAINST RS.4 44 00 000/- COMPUT ED AND DECLARED BY THE ASSESSEE. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOL DING THE INCOME AT RS.7 00 00 000/- FROM WHEAT BUSINESS MADE BY A.O. IGNORING THE DOCUMENTARY EVIDENCES AND MATERIA L BROUGHT ON RECORD BY THE ASSESSEE THAT THE INCOME F ROM WHEAT BUSINESS WAS RS.4 40 00 000/-. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFI RMING THE INCOME AT RS.7 00 00 000/- DESPITE THE FACT THAT TH ERE IS NO MATERIAL OR EVIDENCE WHATSOEVER TO SUPPORT THAT THE ASSESSEE HAS EARNED INCOME OF RS.7 00 00 000/-. . 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF FOOD GRAINS I.E. W HEAT. SEARCH AND SEIZURE OPERATIONS U/S 132 OF THE INCOME-TAX ACT WE RE CONDUCTED AT THE RESIDENTIAL PREMISES AS WELL AS BUSINESS PREMISES O F THE APPELLANT ON 07.10.2004. 5. DURING THE COURSE OF SEARCH PROCEEDINGS CERTAIN DOCUMENTS CONTAINING THE TRANSACTION OF WHEAT BUSINESS WERE F OUND AND SEIZED INCLUDING PAGE NO. 31 OF ANNEXURE AA-9 INDICATING D ETAILS OF CASH POSITION REGARDING THE PURCHASE AND SALE OF WHEAT WHICH SHOW S THAT THE WHEAT WAS SOLD BY THE APPELLANT FOR RS. 72 49 20 967/- OUT OF WHICH A SUM OF RS. ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 4 68 23 41 869/- WAS RECEIVED BY THE APPELLANT AND TH E BALANCE AMOUNT OF RS. 4 25 79 098/- WAS OUTSTANDING AS ON THE DATE OF SEARCH. 6. IN RESPECT OF SEIZED DOCUMENTS FROM ANNEXURE AA- 1 TO AA-30 THE ASSESSEE SUBMITTED IN HIS LETTER DT. 06.12.04 ADDRE SSED TO THE DIT (INV.-I) NEW DELHI AS UNDER:- 'FROM MAHESH KUMAR KU-81 PUITAMPURA DELHI TO THE DIRECTOR OF INCOME TAX (INVESTIGATION-I) NEW DELHI. SUB: SEARCH ON OUR PREMISES U/S 132 OF THE INCOME TAX ACT DEAR SIR THIS IS TO MOST HUMBLY SUBMIT THAT SEARCH U/S 132 H AS BEEN CARRIED OUT ON OUR BUSINESS AND RESIDENTIAL PREMISE S AND AS A RESULT OF THE SEARCH DOCUMENTS INCLUDING BOOKS OF ACCOUNTS HAVE BEEN SEIZED. THE SEIZED DOCUMENTS MAINLY RELATE TO THE WHEAT BUS INESS CARRIED ON BY ME AND AS PER THE SEIZED RECORDS THE PROFIT FROM WHEAT BUSINESS CAN BE COMPUTED AND THE AMOUNT OF PROFIT I S RS. 5.5 CRORES. THIS FIGURE CAN BE VERIFIED AFTER LOOKING I NTO THE SEIZED RECORDS. I HEREBY UNDERTAKEN TO INCLUDE INCOME OF RS. 7 CROR ES TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS ON ACCOUNT OF I NCOME EARNED FROM WHEAT BUSINESS WHICH SHALL ALSO INCLUDE INCOME EARNED IN THE TRANSACTION AS PER THE RECORD. THE INCOME SO OFFERE D WILL BE SUBJECTED TO TAX FOR THE A. Y. 2005-06 AND I AM PR EPARED TO PAY THE TAX AS ADVANCE TAX AFTER ADJUSTING THE SEIZED CASH 1.5 LACS BEFORE 15.3.2005 AS LAST INSTALLMENT OF THE ADVANCE TAX. T HE WHEAT ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 5 BUSINESS WAS DONE OF THE WHEAT ALLOTTED TO THE THRE E PARTIES NAMELY M/S PUNJAB RISE LAND TARAN TARAN M/S PADMAVATI A HMEDABAD AND M/S SHUBH LAXMI AGRO INDUSTRIES BAWLA (GUJ.) B Y THE GOVT. AGENCIES AND THE ABOVE INCOME IS THE TOTAL INCOME I N THE SAID BUSINESS AFTER DEDUCTING ONLY THE COMMISSION OF 112 PER CENT PAYABLE TO THESE THREE PARTIES TO WHOM ALLOTMENT WA S MADE. THE ABOVE INCOME IS INVESTED IN THE WHEAT BUSINESS IN THE ADVANCE FOR CONSTRUCTION AND JEWELLERY FOUND NOTED IN THE S EIZED RECORDS. THE ABOVE OFFER OF ADDITIONAL INCOME IS MADE WITH T HE SPIRIT OF COOPERATION WITH THE DEPARTMENT AND ALSO TO BUY PEA CE OF MIND WITH THE INTENTION NOT TO GET INVOLVED IN LITIGATION WIT H THE UNDERSTANDING THAT NO PENALTY WILL BE IMPOSED AND NO PROSECUTION IS LAUNCHED AGAINST ME ON ACCOUNT OF THE ABOVE OFFER. THIS OFFER IS IRREVOCABLE AND I WISH TO STAND BY IT AND THE ADDITIONAL INCOME WILL BE DISCLOSED IN THE RETURNED 'TO BE SUB MITTED U/S 139(1) OF THE I. T. ACT 1961. IT IS FURTHER CLARIFIED AND CONFIRMED THAT THIS OFF ER IS VOLUNTARY AND HAS BEEN MADE INDEPENDENTLY WITHOUT ANY INDUCEMENT COE RCION OR PRESSURE FROM ANYBODY. YOURS FAITHFULLY SD/- (MAHESH KUMAR) 7. THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASSE SSMENT YEAR 2005- 06 ON 20.02.06 DECLARING INCOME AT RS.4 48 92 504/- INCLUDING INCOME FROM SALARY AT RS. 2 70 0001- INCOME FROM HOUSE PR OPERTY AT RS. 92 400/-. SHARE INCOME FROM FIRM SH. GANESH TRADING COMPANY A T RS.2 44 323/- WHICH WAS CLAIMED AS EXEMPT AND PROFIT FROM WHEAT B USINESS AT RS.4 44 00 000/-. ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 6 8. IN REGARD TO WHEAT BUSINESS IT WAS FOUND THAT A SSESSEE ENTERED INTO MEMORANDUM OF UNDERSTANDING WITH THREE PARTIES I.E. (I) M/S PUNJAB RICELAND PVT. LTD. TARAN TARAN AMRITSAR (II) MIS SHREE SHUBH LAXMI AGRO INDUSTRIES NATIONAL HIGHWAY NO.8-A RAJODA BAVLA DISTT. AHMEDABAD AND (III) SHREE PADMAVATI RICE PULSE AND OIL MILLS NA RODA AHMEDABAD BY WHICH THESE THREE PARTIES AGREED TO SUBMIT THE TEND ERS FOR PROCURING DAMAGED WHEAT FROM FOOD CORPORATION OF INDIA THROUG H THE NATIONAL CONSUMER COOPERATIVE FEDERATION LTD. (NCCF) IN THEI R OWN NAME AND THE RESPONSIBILITY ARRANGEMENT OF FUNDS AND FINANCE WA S THAT OF THE ASSESSEE. THESE PARTIES IN LIEU OF THE SERVICES PROVIDED WERE ENTITLED TO SERVICE CHARGE AT THE RATE OF 0.5% OF THE PURCHASE PRICE OF THE WHEAT SO PROCURED FROM NCCF. ASSESSEE SOLD THE WHEAT PROCURED THROUG H THESE PARTIES IN THE MARKET AND EARNED PROFIT AFTER MEETING THE EXPE NSES FOR WHICH ASSESSEE HAS DECLARED INCOME FROM BUSINESS OF WHEAT AT RS.4 44 00 000/- IN THE RETURN. 9. SINCE ASSESSEE HAD NOT FURNISHED ANY AUDITED P&L A/C BALANCE SHEET AND TAX AUDIT REPORT U/S 44AB ALONG WITH THE RETURN FILED HE WAS ASKED TO GET HIS ACCOUNTS AUDITED U/S 142(2A) OF TH E INCOME TAX ACT. HOWEVER THE AUDITORS IN THEIR AUDIT REPORT U/S 142 (2A) INTER ALIA OBSERVED THAT THEY HAVE NOT OBTAINED ALL THE INFORMATION AND EXPLANATION WHICH WAS NECESSARY FOR THE PURPOSE OF AUDIT THEREFORE AUDIT ORS COULD NOT VERIFY THE CORRECTNESS OF THE TRADING AND PROFIT & LOSS A/C. KEEPING IN VIEW ALL THE ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 7 FACTS THE AO DID NOT ACCEPT THE RESULTS OF PROFIT SHOWN BY THE APPELLANT AS PER THE P&L A/C OF WHEAT BUSINESS AT RS. 4 44 00 00 0/- AND ASSESSED THE INCOME FROM BUSINESS OF WHEAT AT RS.7 CRORE ON THE BASIS OF ASSESSEES ABOVE LETTER. APART FROM THE INCOME OF RS. 7 CRO RE THE AO FURTHER NOTICED THAT THE APPELLANT HAD RECEIVED REFUND OF RS. 5 75 20 2801- FROM NCCF AFTER THE DATE OF SEARCH ON ACCOUNT OF SHORTAGE OF WHEAT LIFTED BY HIM AND HELD THAT THE ENTIRE AMOUNT REFUNDED BY NCCF AS INC OME AND MADE AN ADDITION OF RS. 5 75 20 2801- IN ADDITION TO THE IN COME OF RS. 7 CRORES. THUS THE TOTAL INCOME FROM WHEAT BUSINESS WAS DETE RMINED AT RS.12 75 20 280/- AS AGAINST INCOME OF RS. 4 44 00 000/- CLAIMED BY THE APPELLANT. 10. IN FIRST APPEAL CIT(A) HOWEVER :- (I) UPHELD THE WHEAT BUSINESS INCOME AT RS.7 CRORES AGAINST RS.4.44 CRORES. (II) DELETED THE REFUND OF PURCHASE PRICE OF RS.5 7 5 20 280/- RECEIVED FROM NCCF AND TREATED AS INCOME BY A.O. (III) DELETED ADDITIONS IN RESPECT OF JEWELLERY AND UNEXPLAINED INVESTMENT IN HOUSE PROPERTY AND GODOWN AS INVESTME NT OUT OF THIS INCOME. 11. BOTH THE SIDES BEING AGGRIEVED ARE IN APPEAL BE FORE US RAISING THEIR RESPECTIVE GROUNDS AS REPRODUCED SUPRA. ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 8 12. LD. AR SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN ENHANCING THE INCOME FROM WHEAT BUSINESS TO RS.12 75 20 280 FROM RS. 4.44 CRORE AS DECLARED IN THE RETURN OF INCOME BY THE APPELLANT. THE TRADING AND P&L A/C WERE PREPARED FROM THE TRANSACTIONS RECORDED IN THE SEIZED DOCUMENTS AND POST SEARCH TRANSACTIONS. IT WAS SUBMITTED THAT THE AO HAS COMPUTED THE INCOME FROM WHEAT BUSINESS ON SURMISES INSTEAD OF INCRIMINATING MATERIAL. THE SEIZED RECORDS I.E. ANNEXURE AA-1 TO AA-30 CONTAIN THE COMPLETE DETAILS OF FINANCIAL AS WELL AS QUANTITY D ETAILS OF DAMAGED WHEAT PROCURED FROM NCCF AND SOLD ONWARDS. PAGE NO. 31 OF ANNEXURE AA-9 IS THE SUMMARY OF FINANCIAL RESULTS TILL THE DATE OF S EARCH WHICH SHOWS THE LOSS OF RS. 1 02 29 654/- AS HAS BEEN MENTIONED BY THE AO ON PAGE NO. 6 OF THE ASSESSMENT ORDER INCLUDING THE SALE OF STOCK OF RS. 1 97 28 325/- AFTER THE DATE OF SEARCH. THE AO ERRED IN DISALLOWI NG THE LOSS OF RS. 1 02 29 654/- WITHOUT ANY REASONS. THE EXPENSES TO THE TUNE OF RS.6 81 08 516/- WERE DISALLOWED IGNORING THE SEIZE D MATERIAL WITHOUT ASSIGNING PROPER BASIS WHILE TREATING THE INCOME FR OM BUSINESS OF WHEAT TO THE TUNE OF RS. 7 CRORE. FURTHER A SUM OF RS.5 75 20 280/- WAS WRONGLY ADDED BY A.O. TO INCOME THOUGH IT WAS THE REFUND OF PURCHASE PRICE FROM NCCF FOR SHORT SUPPLY OF WHEAT. IT WAS SUBMITTED TH AT THE INCOME AS PER TRADING AND P&L A/C AFTER CONSIDERING THE SUMMARY A S SHOWN ON PAGE 31 OF ANNEXURE AA-9 COMES TO RS.4 44 00 000/- WHICH IS RETURNED BY ASSESSEE AS UNDER : ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 9 '''SALE (AS PER PAGE 20 OF AA-6) 72 49 20 967.00 ADD: SALE OF GUNNY BAGS 6 47 306.00 ADD: AMOUNT FORFEITED 3 00 000 00 --------------------- 72 58 68 273.00 LESS: EXPENSES AS SHOWN ON PAGE NO. 31 OF AA-9 75 58 26 252.00 (-) INTT. NOT CLAIMED 1 36 52 419.00 -------------------- 74 21 73 833.00 LOSS TILL DATE OF SEARCH (A) 1 63 05 560.00 THE APPELLANT AFTER THE DATE OF SEARCH RECEIVED THE FOLLOWING SUMS AND INCURRED FOLLOWING EXPENSES THEREAFTER AS THE BUSI NESS WAS IN CONTINUATION: INCOME AFTER THE DATE OF SEARCH. - SALE OF BLACK DANA OF DAMAGED WHEAT 2 14 15 4 28.09 - REFUND FROM NCCF AGAINST SHORT SUPPLY 5 75 20 280.00 - RECOVERY FROM OLD BARDANA SALE 23.285 .00 --------------------- 7 89 58 993. 09 --------------------- EXPENSES AFTER THE DATE OF SEARCH -BROKERAGE 1 48 94 979.00 - LABOUR & OTHER CHARGES 4 21 983.42 - COMMISSION TO 3 PARTIES THROUGH WHOM DAMAGED WHEAT PROCURED AND MOU ENTERED 2 91 36 470.00 ---------------------- 1 82 53 432.42 ---------------------- PROFIT AFTER DATE OF SEARCH (B) 6 07 05 560.67 LESS : LOSS TILL DATE OF SEARCH (A) 1 63 05 56 0.00 --------------------- 4 44 00 000.00 ---------------------- ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 10 HENCE CONSIDERING PRE AND POST SEARCH TRANSACTIONS THE PROFIT FROM WHEAT BUSINESS SHOULD BE COMPUTED TO THE TUNE OF RS.4 44 00 000/- AS PER THIS WORKING WHICH EMERGES FROM SEIZED MATERIAL. 13. IT IS PLEADED THAT AO SHOULD COMPUTE THE INCOME BASED ON SEIZED DOCUMENTS AS A WHOLE AND NOT ON PICK AND CHOOSE BA SIS. THE FIGURES OF SALES EXPENSES ETC. CANNOT BE PICKED AT RANDOM FRO M THE SEIZED MATERIAL TO THE BENEFIT OF THE REVENUE. THE BUSINESS EXPENSE S RECORDED IN THE SAME SEIZED DOCUMENTS CANNOT BE DISALLOWED WHEN INCOME I S BEING ADDED ON THAT BASIS ONLY. IT WAS VEHEMENTLY ARGUED THAT THE PROFIT FROM WHEAT BUSINESS AS PER THE SEIZED DOCUMENTS AND TRANSACTIO NS THEREAFTER SHOULD BE TAKEN AT RS. 4.44 CRORE AS PER THE ABOVE WORKING AND P&L A/C. 14. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS FOR THE PROPOSITION THAT WHEN THE DOCUMENTS ARE SEIZED THE INCOME SHOU LD BE COMPUTED ON THE BASIS OF SEIZED DOCUMENTS AS A WHOLE AND NOT PA RTIALLY ON PICK AND CHOOSE BASIS:- (I) CIT VS. ASHIM KRISHNA MANDAI (2004) 270 ITR 16 0 (CAL.) (II) DHANVARSHA BUILDERS AND DEVELOPERS PVT. LTD. (2007) 289 ITR (A.T.) 50 (PUNE) (III) SAMRAT BEER BAR VS. ACIT (2001) 251 ITR (A. T.) 1 (PUN.) (IV) MANOJ KUMAR GUPTA VS. DCIT (2006) 100 TT J ( MUM.) 588 (V) V. MD. MUSA & CO. VS. ACIT (2001) 114 TAXMAN 115 (CAL.) (MAG.) (VI) VIJAY KUMAR DHELIA VS. DCIT (2005) 97 N J (R ANCH I) 808 ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 11 15. LD. COUNSEL ARGUES THAT THE APPELLANT HAD EARNE D A PROFIT OF RS.4.44 CRORE FROM THE BUSINESS OF WHEAT AND AO WAS NOT JUS TIFIED IN ADOPTING THE INCOME TO RS. 7 CRORE WITHOUT CONSIDERING THAT LETT ER ITSELF ESTIMATED WHEAT BUSINESS INCOME AT RS.5.5 CRORES. IN THIS LETTER ASSESSEE CATEGORICALLY STATED THAT THE WHEAT INCOME FROM SEIZED DOCUMENTS AMOUNTED TO RS.5.5 CRORES ONLY. ENTIRE UNDISCLOSED WHEAT BUSINESS INC OME WAS THROUGH ABOVE FOUR PARTIES. A.O. HAS NOT REFERRED TO ANY O THER EVIDENCE TO ESTABLISH THAT INCOME MORE THAN RS.4.4 CRORES WAS B ASED ON ANY SEIZED DOCUMENT. THE LETTER WAS GIVEN TO THE INVESTIGATIO N WING TO BUY PEACE OF MIND WITH THE INTENTION NOT TO CREATE CONFRONTATION WITH DEPARTMENT AT THAT TIME. IT WAS SUBMITTED THAT THE EXACT FIGURE OF PRO FIT HOWEVER WAS WORKED OUT AT RS. 4.44 CRORES ON THE BASIS OF ACTUAL TRANS ACTIONS OF WHEAT TRADING INCOME CANNOT BE COMPUTED ON THE BASIS OF A LETTER IGNORING THE CORRECT FACTS AND FIGURES THE SAME SHOULD BE COMPUTED ON T HE BASIS OF SEIZED DOCUMENTS AND TRANSACTIONS AFTER SEARCH. 16. AS REGARDS AOS ADDITION OF RS.5 75 20 280/- I .E. REFUND OF PURCHASE PRICE IT WAS SUBMITTED THAT IT WAS REFUND OF THE ADVANCE PAYMENT MADE BY THE APPELLANT TO NCCF AGAINST THE SHORT SUP PLY OF DAMAGED WHEAT. HENCE THERE WAS NO ELEMENT OF PROFIT INVOLVE D IN THIS TRANSACTION AS THIS QUANTITY OF WHEAT WAS ADMITTEDLY NOT TRADED THE AO ERRED IN MAKING ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 12 AN ADDITION OF REFUND OF RS. 5 75 20 280/- TO THE I NCOME FROM WHEAT BUSINESS WHICH HAS BEEN RIGHTLY DELETED BY CIT(A). 17. APROPOS REVENUE GROUNDS IN RESPECT OF JEWELLERY AND INVESTMENT IN GODOWN AND HOUSE PROPERTY ASSESSEE AT THE TIME OF SEARCH HAD STATED THAT THE WHEAT TRADING INCOME HAS BEEN INVESTED IN THESE ITEMS THEREFORE THE LD. CIT(A) HAS RIGHTLY DELETED THE SAME. 18. THE LD. D.R. REITERATED THE FACTS AND CONTENDED THAT :- I) THE DECLARATION OF INCOME IN RESPECT OF WHEAT BU SINESS AT RS.7 CRORES BY LETTER DATED 6.12.04 WAS A VOLUNTARY ACCEPTANCE AFTER TWO MONTHS OF SEARCH AND THEREFOR E BINDING ON THE ASSESSEE. ASSESSEE DID NOT RETRACT THE SAME ACCOUNTS WERE ALSO NOT AUDITED AND ASSESSING OFFICE R AND THE LD. CIT(A) HAVE THEREFORE RIGHTLY MADE THIS ADDITI ON. II) THE REFUND FROM NCCF WAS INCOME OF THE ASSESSEE THEREFORE THE ADDITION HAS BEEN RIGHTLY MADE BY AS SESSING OFFICER AND THE LD. CIT(A) HAS WRONGLY DELETED THE ADDITIONS. III) THE LD. CIT(A) HAS WRONGLY DELETED THE ADDITIO N IN RESPECT OF JEWELLERY AND UNEXPLAINED INVESTMENT IN HOUSE PROPE RTY AND GODOWN. ORDER OF ASSESSING OFFICER WAS RELIED ON. ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 13 19. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FACTS HAVE BEEN NARR ATED ABOVE. THE SEIZED PAPERS HAVE BEEN REFERRED BY BOTH THE PARTIE S. LD. A.R. CONTENDS THAT THOUGH THE DECLARATION OF INCOME APROPOS WHEAT BUSINESS BY LETTER DATED 6.12.04 WAS ONLY RS.5.5 CRORES HOWEVER AT T HE TIME OF FILING RETURN ACTUAL INCOME BASED ON SEIZED MATERIAL WORKED OUT A T RS.4.44 CRORES WHICH HAS BEEN RETURNED. RS.7 CRORES WAS DECLARED AS A MATTER OF BUYING PEACE AND IT ALSO DECLARED RS.5.5 CRORES FROM WHEAT BUSINESS CONSEQUENTLY RS.1.5 CRORES WAS FOR OTHER ITEMS. A. O. HAS NOT BROUGHT ON RECORD ANY EVIDENCE SUGGESTING ANY OTHER INCOME BEY OND RS.4.44 CRORES. IN THE ABSENCE OF EVIDENCE OF INCOME BEYOND THIS AM OUNT ON THE BASIS OF PAPERS SEIZED AT THE TIME OF SEARCH ASSESSEE SHOUL D NOT BE TAXED ON ASSUMPTIONS IGNORING THE CORRECT NATURE OF LETTER. CORRECT INCOME SHOULD BE ASSESSED AS PER SEIZED MATERIAL AND NOT ON THE B ASIS OF A LETTER WHICH CANNOT BE TREATED AS STATEMENT U/S 132(4A). ALL TH E PURCHASES OF WHEAT ARE THROUGH NCCF A GOVERNMENT AGENCY WHICH ARE VER IFIABLE. SEIZED PAPERS GIVE BREAK UP ABOUT FIGURES OF PURCHASES SA LES EXPENSES OUTSTANDING ETC. CANNOT BE RELIED IN PART BY AO ON CREDIT SIDE WHICH IS SUITABLE TO REVENUE AND PARTLY IGNORED ON DEBIT SID E IN RESPECT OF EXPENSES RECORDED ON SAME PAPER. THE INCOME HAS BEEN RETURN ED AT RS.4.4 CRORES FOR WHICH ASSESSEE HAS INCLUDED PRE-SEARCH TRANSACT IONS BASED ON SEIZED DOCUMENTS AND POST SEARCH TRANSACTIONS. ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 14 20. PER CONTRA LEARNED DR HAS SUBMITTED THAT THE LE TTER OF DECLARATION DATED 6.12.2004 DECLARING INCOME OF RS.7 CRORES HAD BEEN RIGHTLY HELD TO BE ASSESSEES INCOME. 21. IN OUR CONSIDERED VIEW DECLARATION OF THE ASSE SSEE DATED 6.12.2004 CANNOT BE THE SOLE BASIS WHEN INCOME CAN BE REASONA BLY DETERMINED ON THE BASIS OF SEIZED DOCUMENTS WHICH GIVE RELEVANT F ACTS WORKING AND EXPLANATION OF THE ASSESSEE. PROCESS OF ASSESSME NT IS QUASI JUDICIAL IN NATURE AO HAS TO TAKE INTO CONSIDERATION ENTIRE MA TERIAL SEIZED DOCUMENTS AND EXPLANATION OF THE ASSESSEE INCLUDING LETTER FILED. ANY LETTER MAKING DECLARATION IS TO BE CONSIDERED AND RELIED ON THE BASIS OF FACTS AND CIRCUMSTANCES OF EVERY CASE. IN ASSESSEE S CASE THE SEIZED DOCUMENTS CONTAIN DETAILS OF BUSINESS DEALINGS INCL UDING PURCHASES SALES UNREALIZED AMOUNT ETC. ASSESSEES LETTER DATED 6.1 2.2004 ALSO REFERS TO WHEAT BUSINESS INCOME AT RS.5.5 CRORES BY FOLLOWING AVERMENTS :- THE SEIZED DOCUMENTS MAINLY RELATE TO THE WHEAT BU SINESS CARRIED ON BY ME AND AS PER THE SEIZED RECORDS THE PROFIT FROM WHEAT BUSINESS CAN BE COMPUTED AND THE AMOUNT OF PR OFIT IS RS. 5.5 CRORES. THIS FIGURE CAN BE VERIFIED AFTER L OOKING INTO THE SEIZED RECORDS. EVEN IF WE REJECT ASSESSEES WORKING OF RS.4.44 CR ORES AND ACCEPT A.O.S REASONING AND LETTER DATED 6.12.2004 ALONE IS TAKEN INTO CONSIDERATION THE DECLARATION OF INCOME IN RESPECT OF WHEAT BUSINESS COMES TO RS.5.5 CRORES. UNDER THESE CIRCUMSTANCES ALSO THE ASSESS EES DECLARATION FOR ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 15 WHEAT BUSINESS INCOME IS FOR AN AMOUNT OF RS.5.5 CR ORES. EVEN IN CASE OF BEST JUDGMENT ASSESSMENT IT HAS TO BE REASONABLE A ND BASED ON SOME MATERIAL AVAILABLE ON RECORD. 22. HOWEVER WE ARE CONSCIOUS OF THE FACT THAT ASSE SSEE FAILED TO UNDERTAKE AUDIT OF ACCOUNTS IN RESPECT OF UNDISCLOS ED INCOME ABOUT POST SEARCH TRANSACTIONS THEREFORE ITS RETURNED INCOME REQUIRES AN ESTIMATE. IN THIS CASE THE ASSESSEE THOUGH HAS EXPLAINED THE EN TRIES IN THE SEIZED DOCUMENTS HOWEVER BECAUSE OF NON-FURNISHING OF AU DIT REPORT AND DETAILS WE ESTIMATE IT AT RS.5.50 CRORES ON THE ASSESSEES ADMISSION OF CORRECT WHEAT BUSINESS INCOME OF RS.5.50 CRORES. 23. IN OUR VIEW A.O. HAS NOT RELIED ON ANY EVIDENC E EXCEPT THE LETTER AND ON AD HOC BASIS HELD IT TO RS.7 CRORES OVERLOOK ING THE FACT THAT ASSESSEE DECLARED ONLY RS.5.5 CRORES IN THIS LETTER . THERE IS NO EVIDENCE ON RECORD TO SUPPORT ADDITION OF RS.1.5 CRORES. U NDER THE ENTIRETY OF FACTS AND CIRCUMSTANCES WE ARE INCLINED TO UPHOLD ADDITI ON OF RS.5.5 CRORES IN RESPECT OF WHEAT BUSINESS AS AGAINST RS.4.44 CRORES RETURNED BY THE ASSESSEE AND RS.7 CRORES ADDED BY THE AUTHORITIES. CONSEQUENTLY WE PARTLY ALLOW THE GROUND OF ASSESSEES APPEAL IN THI S BEHALF HOLDING THE INCOME FROM WHEAT BUSINESS TO BE CONSIDERED AT RS.5 .5 CRORES. THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 16 24. IN RESPECT OF ADDITION OF RS. 5 75 20 280/- IT IS NOTICED THAT THIS AMOUNT WAS REFUND OF THE PURCHASE PRICE PAID BY THE APPELLANT TO NCCF ON THE ACCOUNT OF SHORT SUPPLY OF QUANTITY OF WHEAT TH AN THE ALLOTTED QUANTITY. FROM THE DETAILS IT IS NOTICED THAT THE TOTAL QUAN TITY OF WHEAT ALLOTTED TO ALL THESE THREE PARTIES WITH WHOM THE APPELLANT ENTERED INTO MEMORANDUM OF UNDERSTANDING FOR PROCUREMENT OF WHEAT WAS 22 42 46 8/- QUINTALS AND THE APPELLANT ACCORDINGLY PAID RS. 63 81 58 960/-. HOWE VER THE APPELLANT WAS ALLOWED BY NCCF TO LIFT WHEAT WEIGHING 20 82 450 QU INTALS RESULTING IN SHORT SUPPLY BY 1 60 018 QUINTALS. THE PURCHASE PRI CE PAID BY THE ASSESSEE FOR 1 60 018 QUINTALS OF WHEAT AMOUNTING T O RS.5 75 20 280/WAS RETURNED TO IT BY NCCF. THUS THE REFUND OF RS.5 75 20 280/- BEING PURCHASE OF WHEAT CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE WHICH HAS BEEN RIGHTLY DELETED BY THE CIT(A). THIS GROUND OF REVENUE IS DISMISSED. 25. APROPOS REVENUE GROUND NOS.2 AND 3 IN RESPECT O F DELETION OF ADDITIONS IN RESPECT OF JEWELLERY AND INVESTMENT IN GODOWN AND HOUSE PROPERT6Y ASSESSEE IN THE COURSE OF SEARCH HAD EXP LAINED THE SAME TO BE OUT OF ABOVE WHEAT BUSINESS INCOME. IT HAS BEEN FUR THER POINTED OUT BY LD. COUNSEL THAT THE DIFFERENCE IN HOUSE PROPERTY AND G ODOWN VALUATION WAS EVEN LESS THAN 10% BETWEEN VALUATION AND ASSESSEES FIGURES. IT WAS PLEADED THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE SE ADDITIONS. ITA NO.1221/DEL/2009 & ITA NO.577/DEK/09 17 26. LD. D.R. IS HEARD ON THESE GROUNDS WHO SUPPORTE D THE ASSESSING OFFICERS ORDER. 27. AFTER HEARING THE RIVAL CONTENTIONS AND ON PERU SAL OF RECORD WE ARE OF THE VIEW THAT THESE ADDITIONS HAVE BEEN RIGHTLY DELETED BY THE LD. CIT(A) INASMUCH AS ASSESSEE HAD MAINTAINED THAT THIS INVES TMENT WAS OUT OF WHEAT TRADING INCOME. NO MATERIAL HAS BEEN RELIED ON BY THE REVENUE THAT THE INVESTMENT WAS MADE FROM ANY OTHER SOURCE. IN VIEW THEREOF THESE GROUNDS OF THE REVENUE ARE DISMISSED. 28. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLO WED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MAY 2010. SD/- SD/- ( K.G. BANSAL ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28.05.2010/TS COPY FORWARDED TO: - 1. ASSESSEE 2. DEPARTMENT 3. CIT 4. CIT(A) 5. DR ITAT NEW DELHI. DEPUTY REGISTRAR