Shree Jalaram Finance,, Dist. Anand. v. The Dy.CIT., Cent. Circle-1,, Petlad.

ITSSA 150/AHD/2004 | misc
Pronouncement Date: 18-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 15020516 RSA 2004
Assessee PAN AAJFS2303P
Bench Ahmedabad
Appeal Number ITSSA 150/AHD/2004
Duration Of Justice 5 year(s) 9 month(s) 5 day(s)
Appellant Shree Jalaram Finance,, Dist. Anand.
Respondent The Dy.CIT., Cent. Circle-1,, Petlad.
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 18-02-2010
Date Of Final Hearing 03-02-2010
Next Hearing Date 03-02-2010
Assessment Year misc
Appeal Filed On 13-05-2004
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI T. K. SHARMA JM AND D.C.AGRAWAL AM SHRI JALARAM FINANCE 7 MANILAL MANSION BORSAD -388 540 DIST. ANAND V/S . THE DY. C.I.T. CEN. CIRCLE-1 BARODA. PAN NO.AAJFS 2303P (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT.URVASHI SHODHAN AR RESPONDENT BY:- SHRI C. K. MISHRA SR.DR O R D E R PER D.C.AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 25.2.2004. 2. A SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIE D OUT AT THE RESIDENTIAL AND OFFICE PREMISES OF SHRI ALLARAKHA I . VOHRA AT UMETA & ANAND ON 31.3.1999. DURING THE COURSE OF SEARCH VAR IOUS INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED WHICH REVEALED UND ISCLOSED INCOME PERTAINING TO ASSESSEE ALSO. ACCORDINGLY PROCEEDIN GS UNDER SECTION 158BD WERE INITIATED AGAINST THE ASSESSEE ON 21.1.2 000. DURING THE COURSE OF SEARCH AT THE PREMISES OF SHRI ALLARAKHA I. VOHRA DOCUMENTS A- 9 A-10 A-12 A-13 A-14 & A-15 WERE FOUND AND SEI ZED IN ADDITION TO IT(SS)A NO.150/AHD/2004 BLOCK PERIOD 1988-89 TO 31/3/1999 2 OTHERS. THESE ANNEXURES WERE IN FACT DIARIES CONTAI NING RECORD OF RECEIPT AND PAYMENT OF MONEY. THE AUTHORISED OFFICER AND TH E AO HAD RECORDED STATEMENT OF SHRI ALLARAKHA I. VOHRA WHEREIN QUESTI ONS REGARDING OWNERSHIP OF THE DIARIES AND DETAILS OF THE TRANSAC TIONS WERE ASKED. ALLARAKHA REPLIED THAT DIARIES NO.10 TO 14 CONTRAIN TRANSACTIONS WHICH ARE RECORDED IN HIS REGULAR BOOKS AS WELL AS IN THE REG ULAR BOOKS OF ASSESSEE I.E. SHRI JALARAM FINANCE WITH WHOM THE TRANSACTION S OF BORROWINGS AND RETURNING MONEY WERE CARRIED OUT. SHRI JALARAM FINA NCE IS A SHROFF WHOSE MAIN BUSINESS IS DISCOUNTING OF CHEQUES FINANCING MONEY AND EARNING INTEREST. AS THE DIARIES A-10 AND A-14 CONTAINED EN TRIES OF TRANSACTIONS WHICH WERE ALSO RECORDED IN THE REGULAR BOOKS OF JA LARAM FINANCE AS WELL AS SHRI ALLARAKHA I. VOHRA THERE IS NO DISPUTE ABO UT THE ENTRIES IN THESE TWO DIARIES. THE DISPUTE IS ONLY WITH RESPECT TO TH E ENTRIES MADE IN A-9 A-12 A-13 & A-15. AO THEREAFTER COMBINED THE ENTRI ES OF ALL THE FOUR DIARIES AND DETERMINED PEAK OF RECEIPT OF MONEY IN THOSE DIARIES AFTER ADJUSTING WITHDRAWAL AND DEPOSITS AND THUS WORKED O UT A PEAK OF RS.7 12 000/- AS ON 23.5.1994. THIS WAS TREATED AS UNACCOUNTED MONEY ADVANCED BY JALARAM FINANCE TO ALLARAKHA I. VOHRA. SINCE JALARAM FINANCE WAS NOT ABLE TO EXPLAIN THE SOURCE OF SUCH INVESTMENT WITH ALLARAKHA IT WAS ADDED AS UNDISCLOSED INCOME UNDER SECTION 158BD/158BC BY INVOKING SECTION 69C. 3. FOR COMING TO THIS CONCLUSION THAT CREDITS RECOR DED IN THESE FOUR DIARIES WERE INVESTMENT OF SHRI JALARAM FINANCE AO RELIED ON FOLLOWING ARGUMENTS :- 1. ALL THE SIX BOOKS ARE OF SIMILAR KIND. A-10 AND A-1 4 WERE ADMITTEDLY ISSUED BY JALARAM FINANCE AND CONTAIN RE GULAR TRANSACTIONS. 3 2. ALL THESE DIARIES HAVE SIMILAR HAND WRITING AND SIG NATURES OF EMPLOYEES OF JALARAM FINANCE 3. SHRI ALLARAKHA I. VOHRA IN HIS STATEMENT RECORDED I N THE COURSE OF SEARCH CLEARLY ADMITTED THAT HE HAS BEEN DOING B USINESS WITH JALARAM FINANCE ONLY. HIS EMPLOYEES HAVE BEEN GOING TO JALARAM FINANCE AND ITS DIRECTOR NAMELY SHRI HASMUK H U. PATEL. 4. SHRI ALLARAKHA I. VOHRA HAS BEEN CROSS-EXAMINED BY THE COUNSEL OF SHRI HASMUKH U. PATEL AND ALLARAKHA I. VOHRA HAS REITERATED THAT HE HAS BEEN DOING BUSINESS WITH JALARAM FINANC E ONLY. IN ADDITION TO PEAK CREDIT IN THE FOUR DIARIES TREA TED AS INVESTMENT OF THE ASSESSEE THE AO FURTHER ESTIMATED THAT AFTER 23.5. 1994 THERE WERE TRANSACTIONS SPREAD OVER FOR 43 MONTHS. THERE WAS D EPOSIT FROM SHRI ALLARAKHA I. VOHRA TO THE ASSESSEE TO THE EXTENT OF RS.71 38 000/- FOR THE PERIOD FROM 23.5.1994 TO 12.7.1998 WHICH COMPRISES 43 MONTHS. THEN AVERAGE INVESTMENT WAS CALCULATED AT RS.35 69 000/- BEING HALF OF RS.71 38 000/-. INTEREST @ 18% OF RS.35 69 000/- BE ING RS.23 02 005/- WAS TREATED AS ACCRUED TO THE ASSESSEE. ACCORDINGLY THE AO FURTHER ADDED THIS INTEREST ACCRUED TO THE ASSESSEE ON THE INVEST MENT MADE WITH ALLARAKHA I. VOHRA FROM 23.5.1994 TO 12.7.1998. THU S A SUM OF RS.23 02 005/- WAS ADDED IN THE UNDISCLOSED INCOME. 4. BEFORE LD. CIT(A) ASSESSEE CONTENDED THAT (I) IT IS NOT ESTABLISHED THAT HAND-WRITING IN THE FOUR DIARIES ARE SIMILAR T O THE HAND-WRITINGS IN THE DIARIES A-10 AND A-14. IT IS ONLY PRESUMPTION OF TH E AO. (II) ALLRAKHA I. VOHRA HAS ALREADY OFFERED PEAK CREDIT AS HIS UNDISC LOSED INCOME WHICH IS ACCEPTED BY THE AO. (III) THERE ARE DISTINGUISHING FEATURES BETWEEN A-10 AND A-14 AND OTHER FOUR DIARIES WHICH INDICATE THAT THEY MIGHT HAVE BEEN ISSUED BY JAY AMBE FINANCE A SISTER CONCERN OF JAL ARAM FINANCE WHICH WAS CLOSED IN 1996. THEREFORE IT CANNOT BE PRESUME D THAT FOUR DIARIES CONTAINED UNACCOUNTED INVESTMENT MADE BY JALARAM FI NANCE. THE LD. 4 CIT(A) AFTER CONSIDERING THE ASSESSMENT ORDER OF TH E AO AND THE ASSESSEES SUBMISSIONS HELD AS UNDER :- 4.12 THE SUBMISSION OF THE APPELLANT AND THE REASO NING OF THE AO IS DULY CONSIDERED AND IT IS SEEN THAT ALL THE ABOVE M ENTIONED ARGUMENTS RAISED BY THE ASSESSEE HAVE BEEN DULY DEALT WITH TH E AO IN THE ASSESSMENT ORDER.(PL. REFER TO PARA 4.4 AND 4.5 OF THIS ORDER) . DUE TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED BY THE AO I DO NOT FIND FORCE IN THE SUBMISSION OF THE APPELLANT AS HE HAS FAILED TO PROVE CONCLUSIVE THAT THE TRANSACTIONS DO NOT BELONG TO SHRI JALARAM FINA NCE. CONTRARY TO THAT THAT AO HAS BROUGHT ON RECORD SUFFICIENT ARGUMENTS AND EVIDENCES TO PROVE THAT THE TRANSACTIONS ARE OF M/S JALARAM FINA NCE. I DO NOT SEE ANY INFIRMITY IN THE FINDING OF THE AO THEREFORE GROU ND NO.1 AND 3 ARE REJECTED. THE ADDITION OF RS.7 12 000/- IS THUS UP HELD. ACCORDINGLY HE DELETED THE ADDITION. 5. REGARDING INTEREST THE LD. CIT(A) ADOPTED PRODU CT METHOD RATHER AVERAGE METHOD AND WORKED OUT NET INTEREST INCOME E ARNED AT RS.4 74 672/- AS UNDER :- 6. BEFORE US LD. AR SUBMITTED THAT BASIS FOR HOLDI NG THAT FOUR DIARIES CONTAINED THE INVESTMENT MADE BY THE ASSESSEE ARE B ASICALLY INCORRECT. THERE IS NO FINDING OF AN EXPERT THAT HAND-WRITINGS OR SIGNATURES IN THE A 1. AS PER WORKING GIVEN IN THE CHART 4 08 39 000 2. INTEREST INCOME @ 18% (-) 20 139 B 1. AS PER WORKING GIVEN IN THE CHART (UPTO 24/1/98) 89 00 61 000 ADD: 24/1/98 TO 31/3/98(RS.17 16 762 FOR 66 DAYS TOTAL 11 33 06 292 100 33 67 292 2. INTEREST @ 18% 4 94 811 LESS: 20 139 NET INTEREST INCOME 4 74 672 5 DIARIES A-10 AND A-14 ARE SIMILAR TO OTHER FOUR DIA RIES SECONDLY ONE OF THE FOUR DIARIES CONTAINED THE TITLE OF JAY AMBE FI NANCE INDICATING THAT ALLARAKHA I. VOHRA HAS BEEN DOING TRANSACTION WITH JAY AMBE FINANCE ALSO. THIRDLY ONCE PEAK CREDIT HAS BEEN ASSESSED I N THE HANDS OF ALLARAKHA I. VOHRA AS UNEXPLAINED CREDIT THE QUESTI ON OF HOLDING THAT THEY UNEXPLAINED INVESTMENT OF JALARAM FINANCE DOES NOT ARISE. SAME AMOUNT CANNOT BE TAXED TWICE. 7. AGAIN THE LD. DR SUBMITTED THAT IT IS NOT SHOWN THAT SAME AMOUNT HAS BEEN TAXED IN THE HANDS OF ALLARAKHA I VOHRA. T HERE ARE CATEGORICAL ADMISSION BY ALLARAKHA I. VOHRA THAT HE HAS BEEN DO ING TRANSACTIONS WITH JALARAM FINANCE AND FOUR DIARIES CONTAINED UNACCOUN TED TRANSACTIONS WITH IT. IN CROSS EXAMINATION ALSO HE HAS REITERATED THE SAME. 8. REGARDING INTEREST INCOME LD. DR RELIED ON THE O RDER OF AO. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT STATEMENT OF ALLARAKHA I. VOHRA WAS RECORDED DURING THE SEARCH AND THEREAFTER AND HE HA S CLEARLY ADMITTED THAT HE HAS BEEN DOING BUSINESS WITH JALARAM FINANCE. TH IS STATEMENT HE HAS GIVEN IN CONNECTION WITH DIARY NOS. A-10 AND A-14 A S WELL AS OTHER FOUR DIARIES. SHRI ALLARAKHA I. VOHRA WAS OFFERED FOR CR OSS-EXAMINATION TO SHRI HASMUKH U. PATEL THE DIRECTOR OF JALARAM FINANCE AN D IN THAT CROSS- EXAMINATION ALSO SHRI ALLARAKHA I. VOHRA HAS CONFIR MED WHAT HE HAD ALREADY STATED EARLIER THAT FOUR DIARIES ALSO CONTA INED TRANSACTIONS MADE BY HIM WITH JALARAM FINANCE. THOUGH HE SUBSEQUENTLY IN THE SAME STATEMENT PARTIALLY BACKED OUT SAYING THAT HIS EMPLOYEES ARE GOING TO JALARAM FINANCE WHERE THE BUSINESS OF JAY AMBE FINANCE IS A LSO DONE AND THESE EMPLOYEES ARE REPORTING TO HIM THAT TRANSACTIONS WA S DONE WITH JALARAM FINANCE. STATEMENT OF SHRI ALLARLAKHA I. VOHRA HAS BEEN REPRODUCED IN 6 PARA 4.7 AND 4.8 OF CIT(A)S ORDER TO WHICH WE ALSO REFER TO. THEREFORE IT CANNOT BE ACCEPTED ON THE FACE VALUE THAT THE FOUR DIARIES DID NOT RECORD THE TRANSACTIONS MADE WITH JALARAM FINANCE. WE ALSO CONSIDER THE FACT THAT ALL THESE SIX DIARIES WERE FOUND TOGETHER FROM THE PREMISES OF SHRI ALLARAKHA I. VOHRA WHO HAS ADMITTED THAT DIARY NOS .A-10 AND A-14 CONTAINED THE RECORDED TRANSACTIONS WITH JALARAM FI NANCE WHEREAS OTHER FOUR DIARIES CONTAINED UNRECORDED TRANSACTIONS WITH THE SAME PARTY. SHRI HASMUKH U. PATEL IS THE MAIN PARTNER OF JALARAM FIN ANCE AS WELL AS JAY AMBE FINANCE WHICH WAS CLOSED EARLIER. BUT NO RECOR DED TRANSACTION OF JAY AMBEY FINANCE WITH SHRI ALLARAKHA I. VOHRA WERE FOUND. THEREFORE NO PRESUMPTION CAN BE RAISED THAT DECLARED TRANSACT IONS IN A-10 AND A-14 WOULD PERTAIN TO JALARAM FINANCE WHEREAS UNDECLARED TRANSACTIONS RECORDED IN 4 DIARIES WOULD PERTAIN TO JAY AMBE FIN ANCE AS CLAIMED BY THE LD. AR FOR THE ASSESSEE. WE ARE UNABLE TO ACCEP T THIS ARGUMENT OF LD. AR THAT TRANSACTIONS CONTAINED IN FOUR DIARIES DID NOT PERTAIN TO THE ASSESSEE AND OR WOULD ONLY PERTAIN TO JAY AMBE FINA NCE OR SOMEBODY ELSE. 10. HOWEVER THERE IS SUBSTANTIAL FORCE IN THE ARGU MENT OF LD. AR THAT SHRI ALLARAKHA I. VOHRA HAS OFFERED PEAK OF THESE C REDITS IN FOUR DIARIES AS HIS UNDISCLOSED INCOME WHICH HAS BEEN ACCEPTED BY T HE DEPARTMENT IN THE BLOCK ASSESSMENT ORDER PASSED IN THE CASE OF SHRI A LLARAKHA I. VOHRA. ONCE THE CREDITS ARE TREATED AS UNEXPLAINED AND ADD ITION IS MADE IN THE HANDS OF SHRI ALLARAKHA I. VOHRA THEN THE SAME AMOU NT CANNOT BE TREATED AS BELONGING TO THE OTHER PARTY TO THE TRANSACTION NAMELY M/S. JALARAM FINANCE. AFTER A CREDIT IS TREATED AS UNEXPLAINED I N THE HANDS OF A PARTY ON THE BASIS OF ENTRIES FOUND RECORDED IN ITS BOOKS T HEN IT CANNOT BE HELD AS UNEXPLAINED INVESTMENT BY OTHER PARTY BECAUSE SAME AMOUNT CANNOT BE TAXED TWICE ONCE IN THE HANDS OF RECEIVER AND OTHER IN THE HANDS OF ALLEGED 7 INVESTOR TREATING IT AS UNEXPLAINED INVESTMENT. FUR THER IF AN AMOUNT IS TREATED AS UNEXPLAINED INVESTMENT IN THE HANDS OF J ALARAM RINANCE THEN IT BECOMES EXPLAINED CREDIT IN THE HANDS OF SHRI ALLAR AKHA I. VOHRA AND IF IT REMAINED UNEXPLAINED CREDIT IN THE HANDS OF SHRI AL LARAKHA I. VOHRA THEN IT CANNOT BE TREATED AS HAVING A NEXUS WITH JALARAM FINANCE AND AGAIN TAXED IN ITS HAND AS UNEXPLAINED INVESTMENT. IN OTH ER WORDS AN AMOUNT OF CREDIT IS TAXED UNDER SECTION 68 IN THE HANDS OF SH RI ALLARAKHA I. VOHRA ONLY WHEN THE NEXUS OF THE CREDIT ENTRY TO ITS SOUR CE IS NOT FOUND ACCEPTABLE. ONCE THE SOURCE OF THE CREDIT ENTRY IS NOT ACCEPTED AND THE CREDIT ENTRIES ARE TAXED IN THE HANDS WHERE IT IS F OUND RECORDED THEN IDENTITY OF THE SOURCE REMAIN UNACCEPTABLE AND THE SAME AMOUNT CANNOT BE FURTHER TAXED IN THAT HAND. IN FACT THERE IS NO DIRECT EVIDENCE FOUND FROM THE PREMISES OF JALARAM FINANCE SHOWING ITS UN EXPLAINED INVESTMENT. THE AO IS TRYING TO TRACE THE OWNERSHIP BACKWARD ON THE BASIS OF DOCUMENTS FOUND WITH ALLARAKHA I. VOHRA IN SEARCH AGAINST HIM. THEREFORE ONCE CREDITS ARE TREATED AS UNEXPLAINED A ND TAXED IN THE HANDS OF ALLARAKHA THE TRACING STOPS HERE. IN THIS REGA RD WE REPRODUCE PARA 4.11 FROM THE ORDER OF LD. CIT(A) WHEREIN IT WAS CL AIMED BY THE ASSESSEE THAT CREDIT ENTRIES FROM A-9 A-12 A-13 AND A-15 A RE CONSIDERED IN THE HANDS OF SHRI ALLARAKHA I. VOHRA: 4.11 BESIDES THE APPELLANT ALSO FURNISHED THE COPY OF THE ASSESSMENT ORDER OF SHRI ALLARAKHA VOHRA AND IN HIS ASSESSMENT ALL THE TRANSACTION CONTAINED IN THE ANNEXURE A-9 A-12 A-13 & A-15 AR E CONSIDERED FOR DETERMINING THE PEAK CREDIT AND OFFERED BY HIM IS H IS INCOME. HE CONTENDED THAT SINCE THE INCOME HAS ALREADY BEEN TA XED IN THE CASE OF SHRI ALLARAKHA VOHRA THUS NO ADDITION SHOULD HAVE BEEN MADE IN THE CASE OF APPELLANT. IN VIEW OF THE ABOVE THE APPELL ANT PLEADED TO DELETE THE ADDITION. 8 11. A PERUSAL OF THE ORDER OF SHRI ALLARAKHA VOHRA PASSED UNDER SECTION 158BC ON 1.7.2000 ON AN UNDISCLOSED INCOME OF RS.99 39 761/- WE FIND ADDITION OF RS.41 84 900/- AS PER PARA 8 OF THAT ORDER WHICH INCLUDED PEAK CREDIT OF RS.24 63 000/-. HOWEVER TH E DISCLOSURE/ACCEPTANCE OF PEAK CREDIT BY SHRI ALLLAR AKHA I. VOHRA IS NOT DIRECTLY LOCATED. NO COPY OF THE DISCLOSURE MADE BY SHRI ALLARAKHA I. VOHRA IS ENCLOSED BY THE PARTIES. WE ACCORDINGLY RE STORE THE MATTER FOR VERIFICATION TO THE FILE OF THE AO. IF SHRI ALLARAK HA I. VOHRA HAS ACCEPTED THE PEAK CREDIT OF RS.7 12 000/- OR MORE ON THE BAS IS OF THOSE FOUR DIARIES AND IT HAS BEEN ACCEPTED BY THE REVENUE THEN NO ADD ITION IN THE HANDS OF JALARAM FINANCE IS CALLED FOR. IF IT IS NOT ACCEPTE D BY SHRI ALLARAKHA I. VOHRA THEN ADDITION OF THIS AMOUNT IN THE HANDS OF THE ASSESSEE STANDS CONFIRMED. THIS GROUND IS THEREFORE ALLOWED FOR ST ATISTICAL PURPOSES. 12. REGARDING ASSESSMENT OF INTEREST ON PRODUCT MET HOD WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). IT IS BECAUSE WE HAVE HELD ABOVE THAT FOUR DIARIES DID CONTAIN TRANSACTIONS WI TH JALARAM FINANCE AND THE INTEREST HAS BEEN WORKED OUT ON THE BASIS OF EN TRIES FOUND RECORDED AFTER 23.5.1994. IT HAS NO CONNECTION WITH PEAK CRE DIT OF RS.7 12 000/- WHICH IS WORKED OUT ON THE BASIS OF ENTRIES PRIOR T O 23.5.1994. IT WILL MAKE NO DIFFERENCE WHETHER SUM OF RS.7 12 000/- IS ASSESSED IN THE HANDS OF ASSESSEE OR IN THE HANDS OF SHRI ALLARAKHA I. VO HRA. SINCE WORKING DONE ON PRODUCT BASIS IS MOST REASONABLE IT IS CON FIRMED. THIS GROUND IS REJECTED. 9 13. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED BUT FOR STATISTICAL PURPOSES. SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 18/2/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 18/2/2010