ACIT Circle-31 (1), v. Manoj Godha,

ITA 1438/DEL/2008 | 1997-1998
Pronouncement Date: 29-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 143820114 RSA 2008
Assessee PAN AAHPG6386Q
Bench Delhi
Appeal Number ITA 1438/DEL/2008
Duration Of Justice 1 year(s) 9 month(s) 12 day(s)
Appellant ACIT Circle-31 (1),
Respondent Manoj Godha,
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 29-01-2010
Date Of Final Hearing 20-01-2010
Next Hearing Date 20-01-2010
Assessment Year 1997-1998
Appeal Filed On 16-04-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER & SHRI B.P. JAIN ACCOUNTANT MEMBER ITA NOS. 1438 TO 1441/DEL/2008 ASSESSMENT YEARS: 1997-98 TO 2000-01 ASST. COMMISSIONER OF INCOME TAX CIRCLE 31(3) C.R. BUILDING I.P. ESTATE NEW DELHI VS. MR. MANOJ GODHA PROP. SHANTI VIJAY JEWELLERS 1 M.G. ROAD NEW MANGLA PURI MEHRAULI GURGAON ROAD NEW DELHI (APPELLANT) (RESPONDENT) PAN : AAHPG 6386 Q APPELLANT BY : SHRI G.S. SAHOT A SR. DR RESPONDENT BY : NONE O R D E R PER: C.L. SETHI J.M. ALL THESE FOUR APPEALS HAVE BEEN FILED BY THE REVE NUE AGAINST FOUR SEPARATE ORDERS ALL DATED 06.02.2008 PASSED BY THE LD. CIT(A) IN THE MATTER OF AN ASSESSMENT MADE U/S. 147/143(3) OF THE INCOME TAX ACT 1961 (THE ACT) FOR THE ASSESSMENT YEARS 1997-98 1998-99 1999-2000 AND 2000-01 RESPECTIVELY. 2. WE SHALL FIRST TAKE THE APPEAL PERTAINING TO THE A.Y. 1997-98. 3. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UNDE R:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE PROVISIONS OF LAW THE LD. CIT(A) HAS ER RED ITA NOS. 1438 TO 1441/DEL/2008 PAGE 2 OF 18 IN DELETING THE ADDITIONS OF RS. 1 40 90 500/- BEIN G UNACCOUNTED SALES AND RS. 3 42 739/- BEING UNALLOWABLE INTEREST EXPENSES. 4. THE RELEVANT FACTS GIVING RISE TO THE ABOVE ISSU E RAISED IN GROUND OF APPEAL MAY IN BRIEF ARE NARRATED HEREINAFTER. 5. THE ASSESSEE IS AN INDIVIDUAL HAVING A PROPRIET ORSHIP CONCERN IN THE NAME OF M/S. SHANTI VIJAY JEWELLERS. IN RESPON SE TO NOTICE U/S. 148 THE ASSESSEE FILED HIS RETURN OF INCOME ON 15.04.20 04 DECLARING TOTAL INCOME AT RS. 1 38 425/-. THE AO COMPLETED THE ASS ESSMENT BY DETERMINING THE TOTAL INCOME AT RS. 1 54 12 900/-. IN THE ASSESSMENT THE AO HAS ALSO DISALLOWED THE SUM OF RS. 4 42 739/- BE ING INTEREST PAID BY THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAS U SED HIS OWN MONEY IN THE BUSINESS AND NO BORROWED MONEY HAS BEEN USED F OR THE PURPOSE OF BUSINESS AND HENCE NO INTEREST AS CLAIMED BY THE A SSESSEE IS ALLOWABLE AS DEDUCTION. 6. THERE WAS A SURVEY OPERATION AGAINST THE ASSESSE E DURING THE COURSE OF WHICH CERTAIN INCRIMINATING MATERIALS WERE FOUND . FROM THE INFORMATION GATHERED DURING THE COURSE OF SURVEY OP ERATION IT WAS SPELT OUT THAT THE ASSESSEE WAS DEALING IN JEWELLERY WHI CH IT IS RECEIVED FROM THE VARIOUS TRADERS AND SENT FOR APPROVAL TO HIS CU STOMERS. IN THIS CONNECTION VARIOUS ACCOUNTS MAINTAINED BY THE ASSE SSEE WERE SEIZED BY THE DEPARTMENT. IN THE SEIZED PAPERS THE TRANSACT ION AMOUNTING TO RS. ITA NOS. 1438 TO 1441/DEL/2008 PAGE 3 OF 18 1 47 34 000/- WAS FOUND UNRECORDED. THE WHOLE OF T HE AMOUNT OF RS. 1 47 34 000/- WAS THUS TREATED TO BE UNDISCLOSED INCOME OF THE ASSESSEE AND WAS THUS ADDED TO THE TOTAL INCOME DETERMINED BY THE AO. 7. THE ADDITION ON ACCOUNT OF UNDISCLOSED SALE AND ON ACCOUNT OF DISALLOWANCE OF INTEREST MADE BY THE AO ARE AS UN DER:- (A) ON ACCOUNT OF UNDISCLOSED SALES AS DISCUSSED BY THE AO IN PARA 4 TO 9 OF HIS ORDER WAS RS. 1 47 34 000/- (B) ON ACCOUNT OF INTEREST CLAIMED ON UNSECURED LOA NS SO AS DISCUSSED IN PARA 10-11 OF THE AOS ORDER RS. 4 42 739/- TOTAL RS.1 51 76 739/- 8. BEING AGGRIEVED THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A). 9. AFTER CONSIDERING THE MATERIAL FOUND DURING THE COURSE OF SURVEY AND THE AOS ORDER AS WELL AS CERTAIN EVIDENCES FIL ED BY THE ASSESSEE BEFORE THE CIT(A) AND AFTER CONSIDERING THE REMAND REPORT GIVEN BY THE AO THE CIT(A) DECIDED THE ISSUE WITH REGARD TO THE ADDITION ON ACCOUNT OF UNDISCLOSED SALES AS UNDER:- 9.1 THE UNDISCLOSED SALES AMOUNTING TO RS. 1 47 34 000/- CONSIST OF FOLLOWING THREE TRANSACTIONS:- A. MS. RAJNI BHAGAT RS. 1 25 000/- ITA NOS. 1438 TO 1441/DEL/2008 PAGE 4 OF 18 B. MRS. AHUJA RS. 10 00 000/- C. MR. AHUJA RS. 1 36 09 000/- 9.2 WITH REGARD TO THE TRANSACTION OF RS. 1 25 000/ - AND RS. 10 00 000/- WITH MS. RAJNI BHAGAT AND MRS. AHUJA RESPECTIVELY THE CIT(A) HAS TAKEN A VIEW THAT IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD AO WAS JUSTIFIED IN TREATING THESE TWO AMOUNTS AS SELLS OU TSIDE THE BOOKS OF ACCOUNTS. THEREFORE THE UNRECORDED SALES AFFECTED BY THE ASSESSEE TO THE EXTENT OF RS. 1 25 000/- WAS UPHELD BY THE CIT(A). 9.3. HOWEVER WITH REGARD TO THE TRANSACTION OF RS. 1 36 09 000/- THE CIT(A) HAS HELD THAT THE ACTUAL AMOUNT WOULD BE RS. 1 32 09 000/- AS AGAINST RS. 1 36 09 000/- TAKEN BY THE AO AS THERE WAS THE TOTALING MISTAKE OF RS. 4 00 000/-. OUT OF THE CORRECT FIGU RE OF 1 32 09 000/- THE CIT(A) FOUND THAT AS PER SIZED DOCUMENTS THE CASH WAS RETURNED TO THE EXTENT OF RS. 1 36 64 000/- LEAVING A BALANCE OF R S.45 000/- ONLY. HE THEREFORE TREATED THE AMOUNT OF RS.45 000/- AS UNE XPLAINED TRANSACTION WHICH WAS TREATED AS SALES OUTSIDE THE BOOKS OF ACC OUNTS. 9.4 IN THE MANNER STATED ABOVE THE CIT(A) THEREFO RE HAD TAKEN THE TOTAL SALES OUTSIDE BOOKS OF ACCOUNT AT RS. 11 70 0 00/- CONSISTING OF THREE ITEMS AS UNDER:- A. MS. RAJNI BHAGAT RS. 1 25 000/- ITA NOS. 1438 TO 1441/DEL/2008 PAGE 5 OF 18 B. MRS. AHUJA RS. 10 00 000/- C. MR. AHUJA RS. 45 000/- 9.5 THE CIT(A)S OBSERVATIONS IN TAKING UNDISCLOSED SALES AT RS. 45 000/- AS AGAINST RS. 1 36 09 000/- PERTAINING TO MR. AHUJA IS AS UNDER:- WITH REGARD TO THE BALANCE TRANSACTION OF RS 1 36 09 000/- WITH SHRI AHUJA IT HAS BEEN CONTENDED BEFORE ME DURING THE APPELLATE PROCEEDINGS THAT IN THE ACCOUNT OF SHRI AHUJA THE AO HAS TAKEN THE FIGURE O F CASH RECEIVED AT RS. 1 36 09 000/- WHICH ACCORDING TO H IM IS ALES WHEREAS THE ACTUAL FIGURE IS RS. 1 32 09 000/- WHICH SHOWS A DIFFERENCE OF RS.4 00 000/-. THE AO HAS TO TALED UP THE CASH SALES FROM THE LEDGER ACCOUNT OF SHRI A HUJA WHICH IS A PART OF TOTALING ON THE PART OF THE AO A ND THE ACTUAL FIGURE IS RS. 1 32 09 000/- AS PER THE LD. C OUNSEL OF THE APPELLANT. THE CONTENTION OF THE APPELLANT WAS FORWARDED TO THE AO FOR HIS COMMENTS. HOWEVER HE HAS NOT GIVEN ANY SPECIFIC REPLY ON THIS ISSUE IN THE R EMAND REPORT. THE AR HAS GIVEN THE DETAIL OF CASH WHICH ARE REPRODUCED BELOW:- S. NO. DATE AMOUNT 1. 21.8.1996 RS.4 00 000. 2. 24.8.1996 RS.2 00 000. 3. 26.8.1996 RS.4 00 000. 4. 30.8. 1996 RS.9 00 000. 5. 10.9. 1996 RS.10 00 000. 6. 12.9. 1996 RS.3 00 000. 7. 5.6. 1996 RS.4 00 000. 8. 25.6. 1996 RS.2 00 000. 9. 27.3. 1996 RS.2 00 000. 10. 27.12. 1996 RS.1 00 000. ITA NOS. 1438 TO 1441/DEL/2008 PAGE 6 OF 18 11. 18.1. 1996 RS.15 00 000. 12. 20.1. 1996 RS.15 00 000. 13. 27.1. 1996 RS.29 00 000. 14. 30.1. 1996 RS.1 00 000. 15. 31.1. 1996 RS.1 00 000. 16. 6.2.1997 RS.10 00 000. 17. 20.2.1997 RS.1 00 000. 18. 14.2.1997 RS.5 00 000. 19. 26.2.1997 RS.5 09 000. 20. 11.3.1997 RS.1 50 000. 21. 18.3.1997 RS.7 50 000. TOTAL RS.1 32 09 000. [AS AGAINST ADDITION TAKEN BY ACIT RS.1 36 09 000] DIFFERENCE RS.4 00 000. THE TOTAL COMES TO RS. 1 32 09 000/- AS AGAINST RS. 1 36 09 000/- TAKEN BY THE AO WHICH SHOWS THERE IS TOTALING MISTAKE OF RS. 4 LACS. HOWEVER IT IS SEEN THAT AS PER THE SEIZED DOCUMENT [PAGE 13 OF ANNEXURE A-8] THE CASH RETURNED IS RS. 32 LACS AND RS. 99.64 LACS WHICH COMES TO R S. 1 31 64 000/-. THE BALANCE IS RS. 45 000/- WHICH H AS NOT BEEN EXPLAINED BY THE APPELLANT AND IS BEING TAKEN AS SA LES OUTSIDE THE BOOKS OF ACCOUNT. 9.6 AFTER ASCERTAINING THE AMOUNT OF UNDISCLOSED SA LES KEPT OUTSIDE THE BOOKS OF ACCOUNTS THE CIT(A) PROCEEDED TO DETERMIN E THE PROFIT ARISING TO THE ASSESSEE FROM THE SAID UNACCOUNTED SALES. T HE CIT(A) THEN APPLIED THE GROSS PROFIT RATE OF 35% ON UNACCOUNTED SALES OF RS. 11 70 000/- AND DETERMINE THE PROFIT AT RS. 4 09 500/-. THE CIT(A) THEREFORE UPHELD THE ADDITION TO THE EXTENT OF RS.4 09 500/- BEING THE P ROFIT EARNED BY THE ASSESSEE ON UNCOUNTED SALES. THE CIT(A) FURTHER UP HELD THE ADDITION TO ITA NOS. 1438 TO 1441/DEL/2008 PAGE 7 OF 18 THE EXTENT OF RS. 2 34 000/- ON ACCOUNT OF UNDISCLO SED INVESTMENT MADE BY THE ASSESSEE IN AFFECTING THE TRANSACTION ON UNA CCOUNTED SALES AMOUNTING TO RS. 11.70 LACS. THE CIT(A) APPLIED TH E RATE OF 20% TO DETERMINE THE AMOUNT OF UNDISCLOSED INVESTMENT MADE BY THE ASSESSEE IN AFFECTING UNACCOUNTED SALES OF RS. 11.70 LACS. TH E CIT(A) THEREFORE UPHOLD THE ADDITION AS UNDER:- (I) RS. 4 09 500/- BEING THE PROFIT OF UNACCOUNTED SALES OF RS. 11 70 000/- (II) RS. 2 34 000/- BEING UNDISCLOSED INVESTMENT IN ACCOUNTED SALES OF RS. 11.70 LACS. 9.7 IN THE AFORESAID MANNER THE ADDITION OF RS. 1 47 34 000/- MADE BY THE AO HAS BEEN REDUCED TO RS. 6 43 500/- DELETING THE BALANCE ADDITION OF RS. 1 40 90 000/- WHICH HAS BEEN NOW CHALLENGED BY THE DEPARTMENT. 10. WHEN THIS APPEAL WAS CALLED ON FOR HEARING NON E FOR THE ASSESSEE WAS PRESENT DESPITE NOTICES OF HEARING WERE ISSUED TO THE ASSESSEE FROM TIME TO TIME. FROM PERUSAL OF RECORD IT IS ALSO S EEN THAT THE ASSESSEE WAS AWARE ABOUT THE HEARING OF THIS APPEAL FIXED ON 03. 03.2009 AND ACCORDINGLY THE ASSESSEE FILED A PAPER BOOK CONTAI NING 180 PAGES. HOWEVER THE ASSESSEE HAS NOT TAKEN ANY STEP TO BE PRESENT FOR HEARING WHEN THIS APPEAL CAME TO BE HEARD ON 21.01.2010. W E THEREFORE ITA NOS. 1438 TO 1441/DEL/2008 PAGE 8 OF 18 PROCEEDED TO DECIDE THIS APPEAL IN THE ABSENCE OF T HE ASSESSEE AND AFTER HEARING THE LD. DR. 11. THE LD. DR SUBMITTED THAT WHOLE OF THE UNDISCLO SED SALES AS DETERMINED BY THE AO NOT SHOWN BY THE ASSESSEE IN THE REGULAR BOOKS OF ACCOUNTS IS TO BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE EVEN OTHERWISE THE RATE OF GROSS PROFIT AND RATE OF INITIAL INVESTMENT APPLIED BY THE CIT(A) IS TOO LOW AND THE SAME IS TO BE SUBSTITUTED BY 50% AND BY 40% RESPECTIVELY. 12. WE HAVE HEARD THE LD. DR AND HAVE CAREFULLY GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 13. THE FIRST QUESTION TO BE DETERMINED IS WITH REG ARD TO THE DETERMINATION OF THE QUANTUM OF SALES OUTSIDE THE B OOKS OF ACCOUNTS. 14. IN SO FAR AS THE AOS ACTION IN HOLDING THAT TH E ASSESSEE HAD MADE CASH SALES TO THE TUNE OF RS. 1 25 000/- TO MRS. RA JNI BHAGAT AND THE SAME WAS NOT RECORDED IN THE REGULAR BOOKS OF ACCOU NTS IS CONCERNED THE CIT(A) HAS AGREED WITH THE AO. THE ASSESSEE IS NOT IN APPEAL BEFORE US. WE THEREFORE UPHOLD THE ORDER OF THE CIT(A) IN HO LDING THAT THE ASSESSEE HAS MADE SALES TO THE TUNE OF RS. 1 25 000/- TO MS. RAJNI BHAGAT OUTSIDE THE BOOKS OF ACCOUNTS. ITA NOS. 1438 TO 1441/DEL/2008 PAGE 9 OF 18 15. SIMILARLY THE SALES OF RS. 10 LACS TO MRS. AHU JA AS DETERMINED BY THE AO HAS ALSO BEEN UPHELD BY THE CIT(A). THE ASS ESSEE IS NOT IN APPEAL BEFORE US. THEREFORE THE CIT(A)S ORDER IN HOLDIN G THAT THE ASSESSEE MADE UNDISCLOSED SALES TO MRS. AHUJA TO THE EXTENT OF RS. 10 LACS WAS UPHELD. 16. NOW THE QUESTION ARISES ABOUT THE DETERMINATION OF AMOUNT OF SALES MADE BY THE ASSESSEE TO MR. ARUN AHUJA. THE AO HAS DETERMINED THE AMOUNT OF UNDISCLOSED SALES AT RS. 1 36 09 000/- W HICH HAS BEEN REDUCED TO RS. 45 000/- BY THE CIT(A) BY STATING THAT THE A SSESSEE HAS RETURNED THE CASH AMOUNTING TO RS.1 31 64 000/- I.E. CASH RETURN ED RS. 32 LACS AND RS. 99.64 LACS AND THERE WAS A TOTALING MISTAKE OF RS. 4 LACS. AFTER PERUSING THE AOS ORDER AS WELL AS CIT(A)S ORDER WE FIND T HAT NO RELIABLE EVIDENCE OR MATERIAL HAS BEEN PRODUCED BY THE ASSES SEE TO PROVE HIS CASE THAT NO SALE TO THE EXTENT OF RS. 1 31 64 000/- WAS EVER MADE BY THE ASSESSEE TO SHRI ARUN AHUJA. THE ASSESSEE HAS ONLY DRAW INFERENCES ON THE BASIS OF GENERAL PRACTICE IN THE BUSINESS BUT SINCE THE TRANSACTION WAS WITHIN THE KNOWLEDGE OF THE ASSESSEE AND DOCUMENTS WERE ALSO FOUND IN THE POSSESSION OF THE ASSESSEE THE ASSESSEE WAS SU PPOSED TO EXPLAIN EACH AND EVERY ITEM OF THE ENTRY BY ADDUCING SUFFICIENT EVIDENCES. IN SUPPORT OF THE ASSESSEES CASE THE ASSESSEE HAS NOT PRODUC ED ANY CONFIRMATION FROM SHRI ARUN AHUJA BUT RATHER THE ASSESSEE HAS B EEN MAKING A ITA NOS. 1438 TO 1441/DEL/2008 PAGE 10 OF 18 SUBMISSION THAT THE AO HAS FAILED TO EXAMINE SHRI A RUN AHUJA. IT WAS THE CASE OF THE ASSESSEE THAT WHATEVER WAS RECORDED IN THE SEIZED DOCUMENTS WAS NOT THE ACTUAL SALES EFFECTED BY THE ASSESSEE AND THEREFORE THE ASSESSEE SHOULD HAVE PROVED AND ESTA BLISH THE SAME BY GIVING A CONFIRMATION FROM SHRI ARUN AHUJA OR BY PR ODUCING HIM BEFORE THE AO FOR HIS EXAMINATION. THE CIT(A) HAS REDUCED THE ADDITION MERELY BY ACCEPTING THE ASSESSEES STATEMENT THAT CASH TO THE EXTENT OF RS. 1 31 64 000/- WAS RETURNED AGAINST THE JEWELLERY. AT ONE STAGE THE CIT(A) HAS ALSO STATED THAT SHRI ARUN AHUJA WAS NOT EXAMINED BY THE AO. THE CIT(A) ALSO FAILED TO MAKE FURTHER ENQUIRY FROM SHRI ARUN AHUJA WHEN HE WAS OF THE VIEW THAT EXAMINATION OF S HRI AHUJA BY THE AO WAS NECESSARY. WE THEREFORE RESTORE THIS ISSUE A BOUT THE DETERMINATION OF UNDISCLOSED SALES MADE TO SHRI ARUN AHUJA TO THE FILE OF THE AO FOR HIS FRESH CONSIDERATION AFTER EXAMINING AND VERIFYING A LL THE PAPERS EVIDENCES AND THE DETAILS THAT HAS BEEN FILED BY TH E ASSESSEE EITHER BEFORE THE AO OR BEFORE THE CIT(A). IN SUPPORT OF THE ASS ESSEES CONTENTION THAT THE JEWELLERY GIVEN TO SHRI ARUN AHUJA WERE ULTIMAT ELY RECEIVED BACK WITHOUT CONCLUDING ANY SALE TRANSACTION THE ASSESS EE SHALL PRODUCE AND FILE NECESSARY CONFIRMATION OR EVIDENCES FROM SHRI ARUN AHUJA OR OTHERWISE PRODUCE SHRI ARUN AHUJA FOR AOS EXAMINAT ION SO THAT TRUE AND CORRECT STATE OF AFFAIRS CAN BE ASCERTAINED. ITA NOS. 1438 TO 1441/DEL/2008 PAGE 11 OF 18 17. WITH REGARD TO THE CIT(A)S ORDER THAT WHOLE OF THE UNDISCLOSED SALES CANNOT BE CONSIDERED TO BE THE UNDISCLOSED IN COME OF THE ASSESSEE WE DONT FIND ANY IRREGULARITY OR UNJUSTIFICATION I N THAT REGARD. IT IS WELL SETTLED THAT WHOLE OF THE TURNOVER CANNOT BE CONSID ERED TO BE THE UNDISCLOSED INCOME CHARGEABLE TO TAX. WHAT CAN BE BROUGHT TO TAX IS ONLY THE INCOME EARNED BY THE ASSESSEE FROM THE UNDISCLO SED TRANSACTIONS OR ANY OTHER INVESTMENT MADE BY THE ASSESSEE IN COURSE OF AFFECTING ANY UNDISCLOSED TRANSACTION. THEREFORE THE CIT(A) WAS JUSTIFIED IN DETERMINING THE UNDISCLOSED PROFIT BY APPLYING THE RATE OF GROSS PROFIT. 18. NOW COMING TO THE RATE OF PROFIT OF 35% APPLIE D BY THE CIT(A) WE FIND THAT IN THE A.Y. 20001-02 THE RATE OF PROF IT APPLIED BY THE CIT(A) AT 35% HAS BEEN UPHELD BY THE TRIBUNAL. THE TRIBUNAL UPHELD THE ORDER OF THE CIT(A) IN ADOPTING THE GROSS PROFIT RA TE OF 35%. WE THEREFORE DIRECT THE AO TO ADOPT THE RATE OF 35% T O DETERMINE THE UNDISCLOSED INCOME EARNED BY THE ASSESSEE FROM THE UNDISCLOSED SALES MADE DURING THE YEAR UNDER CONSIDERATION. THE CIT( A) HAS ALSO UPHELD THE ADDITION TO THE EXTENT OF 20% OF THE TOTAL TURN OVER ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE SALE AND PURCHASE OF JEWELLERY MADE OUTSIDE THE BOOKS OF ACCOUNTS. AFTER CONSIDERING T HE NATURE OF THE BUSINESS AND SURROUNDING CIRCUMSTANCES WE DO NOT F IND ANY ILLEGALITY IN THE APPROACH OF THE CIT(A) IN ADOPTING THE RATE OF 20% OF TOTAL ITA NOS. 1438 TO 1441/DEL/2008 PAGE 12 OF 18 UNDISCLOSED SALES TO DETERMINE THE UNDISCLOSED INVE STMENT MADE BY THE ASSESSEE IN SALE AND PURCHASE OF THE JEWELLERY OU TSIDE THE BOOKS OF ACCOUNTS. THEREFORE THE AO SHALL ADOPT THE UNDISC LOSED INVESTMENTS AT THE RATE OF 20% OF THE TOTAL UNDISCLOSED SALES AND SHALL DETERMINE THE UNDISCLOSED INVESTMENT OF THE ASSESSEE IN SALE AND PURCHASE OF JEWELLERY MADE OUTSIDE THE BOOKS OF ACCOUNTS ACCORDINGLY AND SHALL ADD THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE AO SHALL MAK E THE FRESH ASSESSMENT AFTER ASCERTAINING THE AMOUNT OF UNDISCLOSED SALES MADE OUTSIDE THE BOOKS OF ACCOUNTS AND AFTER APPLYING RATE OF GROSS PROFIT AT 35% AND RATE OF UNDISCLOSED INVESTMENT AT 20% OF THE TOTAL TURNOVER MADE OUTSIDE THE BOOKS OF ACCOUNTS. THUS THIS ISSUE IS DECIDED PAR TLY IN FAVOUR OF THE REVENUE. 19. NOW THE NEXT ISSUE IS WITH REGARD TO THE CIT(A )S ORDER IN DELETING THE DISALLOWANCE OF RS. 3 42 739/- BEING INTEREST PAID BY THE ASSESSEE ON BORROWED CAPITAL. IN THE RETURN OF INCOME THE ASS ESSEE CLAIMED DEDUCTION OF RS. 14 74 329/- ON ACCOUNT OF INTEREST PAID ON L OANS TAKEN. IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAD TAKEN UNSE CURED LOAN OF RS. 83 19 383/- AGAINST WHICH THE ASSESSEE HAD ADVANCED INTEREST FREE ADVANCES OF RS. 2 32 36 638/- TO VARIOUS PARTIES ON WHICH NO INTEREST WAS CHARGED. THE AO ALSO OBSERVED THAT ADVANCES TO THE EXTENT OF RS. 25 LACS HAD APPEARED TO BE OF NON-BUSINESS PURPOSES. THE A SSESSEE EXPLAINED THAT ITA NOS. 1438 TO 1441/DEL/2008 PAGE 13 OF 18 THESE ADVANCES WAS GIVEN FOR THE PURPOSES OF PURCHA SING OFFICE IN JAIPUR TO BE USED FOR ASSESSEES BUSINESS AND THEREFORE NO INTEREST WERE CHARGED ON ADVANCES TO RS. 25 LACS GIVEN TO VARIOUS PARTIES. 20. ON AN APPEAL THE CIT(A) HAS DELETED THE ADDITI ON BY OBSERVING THAT HIS PREDECESSOR HAS DECIDED THIS ISSUE VIDE OR DER DATED 29.11.2005 AND AFTER DISCUSSING THE ISSUE IN GREAT DETAILS WHE RE DISALLOWANCE WAS CONFIRMED TO THE EXTENT TO RS. ONE LAC OUT OF THE T OTAL DISALLOWANCE MADE BY THE AO AT RS. 4 42 739/-. THE CIT(A) THEREFORE DELETED THE ADDITION TO THE EXTENT OF RS. 3 42 739/-. THE CIT(A) DELETE D THE ADDITION IN VIEW OF THE FINDING GIVEN BY HIM THAT THE ASSESSEE HAD L OT OF INTEREST FREE DEPOSIT FROM CUSTOMERS ON WHICH NO INTEREST WAS PA ID. IN THE LIGHT OF THE CATEGORICAL FINDINGS BY THE CIT(A) THAT ASSESSEE H AD ALSO A LOT OF INTEREST FREE DEPOSIT FROM CUSTOMERS WHICH WAS AVAILABLE WI TH HIM AND ON WHICH NO INTEREST WAS PAID WE ARE NOT INCLINED TO INTERF ERE WITH THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE TO THE EXTENT O F RS. 3 42 739/- OUT OF THE TOTAL DISALLOWANCE OF RS. 4 42 739/- MADE BY TH E AO. 21. IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE THE APPEAL OF THE REVENUE FOR THE A.Y. 1997-98 IS PARTLY ALLOWED IN T HE MANNER AS INDICATED ABOVE. 22. NOW WE SHALL COME TO THE APPEAL FOR A.Y. 1998- 99. ITA NOS. 1438 TO 1441/DEL/2008 PAGE 14 OF 18 23. THE GROUND RAISED BY THE REVENUE IS AS UNDER:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE PROVISIONS OF LAW THE LD. CIT(A) HAS ER RED IN DELETING THE ADDITIONS OF RS.6 12 000/- BEING UNACC OUNTED SALES AND RS.2 96 135/- BEING UNALLOWABLE INTEREST EXPENSES. 24. IN THIS YEAR THE AO HAS MADE THE ADDITION OF RS . 10 75 000/- ON ACCOUNT OF UNDISCLOSED SALES. 25. IN THE LIGHT OF THE RECORDING ON PAGE NO. 48 50 OF ANNEXURE A-7 PAGE 42 OF ANNEXURE 3 AND OTHER MATERIALS THE A O FOUND THAT THE ASSESSEE HAD EFFECTED UNDISCLOSED SALES AMOUNTING T O RS. 10 75 000/- TO THE FOLLOWING PERSONS:- 1. MR. D.S. BRAR RS. 7 75 000/- 2. MRS. AHUJA RS. 1 50 000/- 3. MR. AHUJA RS.1 50 000/- TOTAL RS10 75 000/- 26. THE WHOLE OF THIS UNDISCLOSED SALE OF RS. 10 75 000/- WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE BY THE AO. 27. IN AN APPEAL BEFORE THE CIT(A) THE ASSESSEE H AD TAKEN A GROUND THAT THE AO HAS ERRED IN MAKING ADDITION OF RS. 9 2 5 000/- IN GROUND NO. 4 AND 5 AND IN GROUND NO. 5 AND 6 THE ASSESSEE H AD TAKEN A GROUND THAT ADDITION OF RS. 1 50 000/- IS NOT BASED ON ANY EVID ENCE. HOWEVER IN THE CIT(A)S ORDER THE CIT(A) HAS STATED THAT GROUND N O. 6 AND 7 ARE GENERAL IN NATURE AND HAS CONSIDERED ONLY GROUND NO. 4 AND 5 RELATING TO THE ITA NOS. 1438 TO 1441/DEL/2008 PAGE 15 OF 18 ADDITION OF RS. 9 25 000/- ON ACCOUNT OF UNACCOUNTE D SALES OUT OF THE BOOKS OF ACCOUNTS FOUND DURING THE COURSE OF THE SU RVEY. 28. THE CIT(A) HAS REDUCED THE ADDITION OF RS. 9 25 000/- TO RS. 3 13 750/- BEING 35% OF PROFIT OF SALES OF RS. 9 25 000/-. 29. WE HAVE HEARD THE LD. DR AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITY BELOW. 30. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE VIEW WE HAVE TAKEN ABO VE WE UPHOLD THE ORDER OF THE CIT(A) IN HOLDING THAT ONLY GROSS PROF IT AT THE RATE OF 35% OF UNDISCLOSED TURNOVER AND NOT THE WHOLE OF THE UNDI SCLOSED TURNOVER IS TO BE CONSIDERED AS UNDISCLOSED INCOME CHARGEABLE TO T AX. HOWEVER HE HAS TAKEN THE UNDISCLOSED SALES AT RS. 9 25 000/- THOUG H THE SAME WAS DETERMINED BY THE AO AT RS. 10 75 000/-. NO REASON HAS BEEN GIVEN BY THE CIT(A) ABOUT THE BALANCE UNDISCLOSED SALES OF R S. 1 50 000/-. THE ASSESSEE IS ALSO NOT BEFORE US TO EXPLAIN THE SITUA TION. WE THEREFORE HOLD THAT THE ADDITION ON ACCOUNT OF UNDISCLOSED PROFIT ON UNDISCLOSED SALES BE DETERMINED AT THE RATE OF 35% BY TAKING UNDISCLOSED SALES AT RS. 10 75 000/- AS AGAINST RS. 9 25 000/- ADOPTED BY TH E CIT(A). THE AO SHALL MODIFY THE ASSESSMENT ORDER ACCORDINGLY. ITA NOS. 1438 TO 1441/DEL/2008 PAGE 16 OF 18 31. THE NEXT ISSUE INVOLVED IS ABOUT THE DISALLOWAN CE OF INTEREST PAID ON BORROWED FUNDS BY THE ASSESSEE. 32. OUT OF THE TOTAL INTEREST OF RS. 15 59 503/- T HE AO DISALLOWED THE SUM OF RS. 3 96 135/- WHICH HAS BEEN REDUCED TO RS . ONE LAC BY THE CIT(A). IN OTHER WORDS THE CIT(A) DELETED THE DIS ALLOWANCE TO THE EXTENT OF RS. 2 96 135/-. THIS IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN THE A.Y. 1997-98 AND IN THE LIGHT OF VIEW WE HA VE TAKEN THEREIN WE UPHOLD THE ORDER OF THE CIT(A) IN SUSTAINING THE AD DITION TO THE EXTENT OF RS. ONE LAC AND THEN IN GRANTING A RELIEF OF RS.2 9 6 135 /- OUT OF THE TOTAL DISALLOWANCE OF RS. 3 96 135/- MADE BY THE AO. IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE THE APPEAL FILED BY THE REV ENUE FOR THE A.Y. 1998-99 IS PARTLY ALLOWED. 33. COMING TO THE ITA NO. 1440/DEL/2008 PERTAINING TO THE A.Y. 1999- 2000 WE FIND THAT THE ADDITION OF RS.18 58 500/- O N ACCOUNT OF UNDISCLOSED SALES AND DISALLOWANCE OF INTEREST AMOU NTING TO RS. 3 71 758/- MADE BY THE AO HAS BEEN REDUCED BY RS.1 2 08 600/- ON ACCOUNT OF UNDISCLOSED SALES AND RS. 2 71 758/- ON ACCOUNT DISALLOWANCE OF INTEREST BY THE CIT(A). THE CIT(A) HAS REDUCED THE ADDITION OF RS. 18 58 500/- TO RS. 6 49 800/- BY OBSERVING THAT GRO SS PROFIT AT THE RATE OF 35% IS ONLY TO BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE AND NOT THE WHOLE OF THE TURNOVER. THE DISALLOWANCE OF INTEREST OF RS. ITA NOS. 1438 TO 1441/DEL/2008 PAGE 17 OF 18 3 71 758/- HAS BEEN REDUCED TO RS. ONE LAC BY GIVIN G A RELIEF OF RS. 2 71 758/- ON THE GROUND THAT THE ASSESSEE HAD INTE REST FREE MONEY AVAILABLE WITH HIM FOR THE PURPOSE OF MAKING INTERE ST FREE ADVANCES. IN THE LIGHT OF OUR VIEW IN THE A.Y. 1997-98 AND A.Y. 1998-99 THE ORDER OF THE CIT(A) IS UPHELD. IN THE LIGHT OF THE DISCUSSI ONS MADE ABOVE THIS APPEAL FILED BY THE REVENUE FOR THE A.Y. 1999-2000 IS DISMISSED. 34. THE LAST APPEAL IS PERTAINING TO THE A.Y. 2000- 01 WHERE THE DEPARTMENT HAS TAKEN A GROUND AS UNDER:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE PROVISIONS OF LAW THE LD. CIT(A) HAS ER RED IN DELETING THE ADDITIONS OF RS.70 560/- BEING UNACCOU NTED SALES AND RS.2 76 515/- BEING UNALLOWABLE INTEREST EXPENSES. 35. IN THIS YEAR THE ADDITION OF RS. 1 70 600/- ON ACCOUNT OF UNDISCLOSED SALES HAS BEEN REDUCED BY RS. 70 560/- BY THE CIT(A) BY SUSTAINING THE ADDITION ONLY TO THE EXTENT OF 35% B EING THE PROFIT ON THE UNDISCLOSED SALES. SIMILARLY THE DISALLOWANCE OF INTEREST OF RS. 2 76 513/- HAS BEEN REDUCED TO RS. ONE LAC BY DELET ING THE BALANCE OF RS. 1 76 513/- FOR THE SIMILAR REASONS AS GIVEN IN OTH ER YEARS. IN THE LIGHT OF THE VIEW WE HAVE TAKEN VIDE THIS CONSOLIDATED ORDER WE UPHOLD THE ORDER OF THE CIT(A) ON THE ISSUE INVOLVED IN THIS APPEAL FILED BY THE REVENUE. 36. IN THIS VIEW OF THE MATTER THE APPEAL FILED BY THE REVENUE FOR THE A.Y. 2000-01 IS DISMISSED. ITA NOS. 1438 TO 1441/DEL/2008 PAGE 18 OF 18 37. TO SUM UP:- (I) THE APPEAL FOR THE A.Y. 1997-98 IS PARTLY ALLO WED. (II) THE APPEAL FOR THE A.Y. 1998-99 IS PARTLY ALL OWED. (III) THE APPEAL FOR THE A.Y. 1999-2000 IS DISMISS ED. (IV) THE APPEAL FOR THE A.Y. 2000-01 IS DISMISSED. 38. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 29 TH JANUARY 2010. SD/- ( B. P. JAIN) ACCOUNTANT MEMBER SD/- (C.L. SETHI) JUDICIAL MEMBER DATED: 29 TH JANUARY 2010 *NITASHA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT NEW DELHI. BY ORDER DEPUTY REGISTRAR