Pradeep Narang,, v. DCIT, Circle-23(1),,

ITSSA 519/DEL/2003 | misc
Pronouncement Date: 29-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 51920116 RSA 2003
Assessee PAN EMBER2003P
Bench Delhi
Appeal Number ITSSA 519/DEL/2003
Duration Of Justice 6 year(s) 11 month(s) 18 day(s)
Appellant Pradeep Narang,,
Respondent DCIT, Circle-23(1),,
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 29-10-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 29-10-2010
Date Of Final Hearing 23-08-2010
Next Hearing Date 23-08-2010
Assessment Year misc
Appeal Filed On 10-11-2003
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER I.T.(SS)A NO. 519/DEL/03 BLOCK PERIOD 1.4.89 TO 17.12.99 MR. PRADEEP NARANG W-7 WEST PATEL NAGAR NEW DELHI. VS. DCIT CIRCLE 23(1) NEW DELHI. (APPELLANT) (RESPONDENT) AND I.T.(SS)A NO. 547/DEL/03 BLOCK PERIOD 1.4.89 TO 17.12.99 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 23 (1) NEW DELHI. VS. SHRI PRADEEP NARANG W-7 WEST PATEL NAGAR NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P.N. MONGA ADVOCATE RESPONDENT BY: SHRI GAJANAND MEENA CIT DR IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 2 PER RAJPAL YADAV JM: THE REVENUE AND ASSESSEE ARE IN CROSS APPEAL BEFOR E US AGAINST THE ORDER OF LD. CIT(A) DATED 1 ST SEPTEMBER 2003 PASSED FOR THE BLOCK PERIOD STARTING FROM 1.4.89 AND ENDING ON 17.12.199 9. THE SOLITARY GROUND OF APPEAL TAKEN BY THE REVENUE READS AS UNDE R :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN RESTRICTING THE UNDISCLOSED INCOME OF RS. 43689 60/- TO RS. 1289714/- THEREBY GIVING THE ASSESSEE A RELIEF OF R S. 3079246/- BY ADMITTING FRESH EVIDENCE. THE FIRST EVIDENCE HAS BE EN ADMITTED ON THE GROUND THAT THE SEIZED DOCUMENTS WERE NOT MADE AVAILABLE TO ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDING. THE LD. CIT(A) ERRED ON THE COUNT AS : (I) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE IMPUGNED DOCUMENTS WERE NOT ONLY CONFRONTED AND SHOWN TO ASS ESSEE VIDE ORDER SHEET ENTRY DATED 18.12.2001 BUT WAS ALS O SUPPLIED XEROX COPY OF THE SAME AND THE SEIZED MATE RIAL WAS DISCUSSED. (II) SEVERAL OPPORTUNITIES WERE ACCORDED TO ASSESSE E DURING THE ASSESSMENT PROCEEDINGS TO EXPLAIN THE ISSUES INVOLV ED. 2. IN THE ASSESSES APPEAL THE GROUNDS TAKEN BY HIM ARE NOT IN CONSONANCE WITH RULE 8 OF ITAT RULES. THEY ARE DES CRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF THE GRIEVANCE OF ASSESSEE RELATES TO CONFIRMATION OF ADDITION TO THE EXTENT OF ` 12 89 714/- WHICH COMPRISED TWO PARTS NAMELY ADDITION OF ` 4 07 937/- WHICH HAS BEEN MADE ON THE BASIS OF NOTINGS FOUND ON PAGES NO. 10-11 AND 12 TO 53 OF ANNEXURE A 2 (1) AND ADDITION OF ` 8 81 785/- WHICH HAS BEEN ADDED ON THE BASIS OF IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 3 NOTINGS FOUND ON ANNEXURE A-36. APART FROM ADDITIO NS THE ASSESSEE HAS CHALLENGED THE VALIDITY OF PROCEEDINGS INITIATED U/ S 132(1) OF THE INCOME TAX ACT 1961 AND PASSING OF ASSESSMENT U/S 158 BC OF THE INCOME TAX ACT. 3. THE ISSUES AGITATED BY BOTH THE APPELLANTS ON M ERITS OF ADDITION ARE INTERCONNECTED WITH EACH OTHER. THEREFORE WE W ILL TAKE UP ALL THE GROUNDS RELATING TO CONFIRMATION / DELETION OF ADDI TION TOGETHER. BEFORE TAKING UP THE GROUNDS IN RESPECT OF QUANTUM ADDITI ON WE WOULD LIKE TO DISPOSE OFF GROUND NO.1 & 2 RAISED BY THE ASSESSEE IN RESPECT OF VALIDITY OF THE SEARCH PROCEEDING INITIATED U/S 132(1) OF TH E ACT. THE GRIEVANCE OF THE ASSESSEE IN THESE GROUNDS IS TO THE EFFECT THAT THERE WAS NO PROPER AUTHORIZATION TO MAKE A SEARCH U/S 132(1) OF THE ACT. LD. CIT(A) HAS REJECTED THIS CONTENTION OF ASSESSEE ON THE GRO UND THAT A SIMILAR ISSUE WAS TAKEN UP BY M/S. SAHIL HIGHTECH INDIA PVT . LTD. ONE OF THE PARTNERSHIP CONCERN WHERE ASSESSEE WAS A PARTNER . THIS CONTENTION WAS REJECTED IN THAT APPEAL. LD. CIT(A) HAS RELIED UPON HIS ORDER IN THAT CASE AND REJECTED THE GROUNDS RAISED BY THE ASSESSE E. LD. COUNSEL FOR THE ASSESSEE ON THE STRENGTH OF HONBLE RAJASTHAN H IGH COURTS DECISION RENDERED IN THE CASE OF CIT VS. SMT. CHITRA DEVI R EPORTED IN 170 TAXMAN 164 (RAJ.) HAS CONTENDED THAT TRIBUNAL HAS J URISDICTION TO GO INTO THE ISSUE WHETHER AUTHORIZATION FOR CONDUCTING THE SEARCH WAS PROPERLY IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 4 ISSUED OR NOT. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THERE WERE NO MATERIAL ON THE RECORD FOR CONFIRMING AN OPINION THAT SEARCH HAS TO BE CARRIED OUT AT THE PREMISES OF THE ASSESSEE. LD. DR ON THE OTHER HAND RELIED UPON THE DECISION OF HONBLE PUNJAB & HARYAN A HIGH COURT RENDERED IN THE CASE OF CIT VS. PARAS RICE MILLS RE PORTED IN 220 CTR ( P &H) 619 WHEREIN IT HAS BEEN HELD THAT WHILE HEARING AN APPEAL AGAINST AN ORDER OF ASSESSMENT TRIBUNAL CAN NOT GO INTO TH E QUESTION OF VALIDITY OR OTHERWISE OF ANY ADMINISTRATIVE DECISION CONDUC TING SEARCH AND SEIZURE. LD. DR FURTHER POINTED OUT THAT SIMILAR IS THE VIEW OF HONBLE MADHYA PRADESH HIGH COURT WHEREIN THE HONBLE MADHY A PRADESH HIGH COURT IN THE CASE OF GAYA PRASAD PATHAK VS. ACIT R EPORTED 290 ITR 128 (MP) HAS HELD THAT TRIBUNAL WHILE HEARING THE A PPEAL HAD NO POWER TO CONSIDER THE VALIDITY OF AUTHORIZATION U/S 132A OF THE ACT. HE ALSO RELIED UPON THE SPECIAL BENCH DECISION OF THE TRIBU NAL IN THE CASE OF PROMAIN LTD. VS. DCIT REPORTED IN 95 ITD PAGE 489. 4. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THE SPECIAL BENCH OF THE TRIB UNAL IN THE CASE OF PROMAIN LTD. HAS HELD THAT TRIBUNAL HAD NO POWER TO CONSIDER THE VALIDITY OF THE AUTHORIZATION ISSUED U/S 132A OF THE ACT FOR CONDUCTING THE SEARCH UPON AN ASSESSEE. SIMILARLY HONBLE MADHYA PRADESH HIGH COURT AS WELL AS HONBLE PUNJAB & HARYANA HIGH COURT HAS HEL D THAT IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 5 ADMINISTRATIVE ORDERS TO CARRY OUT A SEARCH CANNOT BE AGITATED IN AN APPEAL. THE HONBLE RAJASTHAN HIGH COURT THOUGH TOO K A DIFFERENT VIEW THAN THE TWO VIEWS TAKEN BY THE HONBLE PUNJAB & HA RYANA HIGH COURT AS WELL AS HONBLE MADHYA PRADESH HIGH COURT. CONSI DERING THE CONFLICT BETWEEN THE THREE HIGH COURTS AND KEEPING IN MIND THAT NONE OF THESE THREE HIGH COURTS IS A JURISDICTIONAL HIGH COURT IN THE CASE OF ASSESSEE WE ARE BOUND TO FOLLOW THE SPECIAL BENCH OF THE TRI BUNAL. THEREFORE WE DO NOT FIND ANY MERIT IN THE PRELIMINARY GROUND OF APPEAL RAISED BY THE ASSESSEE. ACCORDINGLY GROUND NO. 1 AND 2 ARE REJECT ED. 5. NOW WE TAKE SOLITARY GROUND OF APPEAL TAKEN BY T HE REVENUE AND GROUND NO. 3 AND 4 OF THE ASSESSEE. THE REVENUE IN ITS GROUND OF APPEAL IS IMPUGNING THE DELETION OF ` 30 79 246/- WHEREAS ASSESSEE IN HIS GROUND OF APPEAL IS IMPUGNING THE ADDITION OF ` 4 07 937/- I.E ( ` 3 57 373/- + ` 50 564/-). 6. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAV E GONE THROUGH THE RECORD CAREFULLY. THE ASSTT. ORDER IS TOTALLY N ON-SPEAKING ONE. IT DOES NOT THROW ANY LIGHT AS TO HOW AO HAS DETERMINED THE ADDITION. MOREOVER FROM PERUSAL OF THE CIT(A)S ORDER WE FIND THAT A O HAS NOT ONLY DISCLOSED ANY REASON FOR MAKING THE ADDITION RATHER FAIL TO SUPPLY THE REQUISITE MATERIAL WHICH WAS ALLEGED TO HAVE BEEN R ELIED UPON BY HIM FOR IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 6 COMPUTING THE UNDISCLOSED INCOME OF THE ASSESSEE. O N APPEAL LD. FIRST APPELLATE AUTHORITY HAS TO MAKE A LOT OF EFFORTS FO R COLLECTING THE RELEVANT SEIZED MATERIAL AND SUPPLYING IT TO THE ASSESSEE. W E FIND THAT LD. FIRST APPELLATE AUTHORITY HAS TO GIVE DIRECTION TO THE AO TWICE FOR SUPPLYING THE SEIZED MATERIAL AND THEN LD. FIRST APPELLATE AU THORITY SOUGHT THE EXPLANATION OF ASSESSEE ON THOSE MATERIAL. LD. CIT( A) FURTHER CALLED FOR REMAND REPORT FROM THE AO TWICE IN THE APPELLATE PR OCEEDING. ALL THESE DETAILS HAVE BEEN ELABORATELY DISCUSSED BY THE LD. CIT(A) IN HIS ORDER ON PAGES NO. 2 TO 7 OF THE IMPUGNED ORDER. 7. AS PER THE CASE OF AO DURING THE COURSE OF SEARC H CERTAIN DOCUMENTS WERE FOUND AND SEIZED. THESE WERE INVENTO RIED AS ANNEXURE A-2 (2) TO A-2 (3) AND A2 (4). IN THESE ANNEXURES A FIGURE OF ` 23 50 567/- WAS AVAILABLE. THESE WERE THE AMOUNTS WHICH WERE ALLEGED TO BE EXPENSES INCURRED. ACCORDING TO THE AO THE SO URCE OF SUCH EXPENSES REMAINED TO BE EXPLAINED. WHEN THESE ANNEX URES WERE CONFRONTED TO THE ASSESSEE IN APPELLATE PROCEEDING HE FILED DETAILED SUBMISSIONS. THE SUBMISSIONS MADE BY THE ASSESSEE H AVE BEEN REPRODUCED BY THE LD. CIT(A). IT WAS CONTENDED BY T HE ASSESSEE THAT HE WAS WORKING AS A VICE PRESIDENT OF M/S. SAHIL HIGH TECH INDIA PVT. LTD. HAVING REGISTERED OFFICE AT F-20 EAST OF KAILASH NEW DELHI. THE PAGES IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 7 REFERRED TO IN THE SEIZED MATERIAL CONTAINS EXPENDI TURE INCURRED BY THE COMPANY WITH WHICH ASSESSEE HAS WORKED AS VICE PRE SIDENT. THE COMPANY WAS FORMED BY SHRI V.K. NARANG AND ONE SHR I DIPAN KUMAR. AN INDUSTRIAL PLOT OF LAND OF 1000 SQ. METERS WAS ALLOTTED TO THE COMPANY IN NOIDA. THE ASSESSEE HAS BEEN APPOINTED AS VICE P RESIDENT OF THE COMPANY AND HE WAS INCHARGE IN GENERAL IN ALL ACTIV ITIES OF THE COMPANY INCLUDING SUPERVISION OF CONSTRUCTION ACTIVITIES ON THE FACTORY PLOT ETC. THE ASSESSEE HAS PRODUCED THE DETAILS OF EXPENSES A ND THOSE DETAILS HAVE BEEN REPRODUCED BY THE LD. CIT(A) ON PAGES NO. 5-6. 8. LD. FIRST APPELLATE AUTHORITY HAD MADE A LUCID A NALYSIS OF FACTS ON THESE ISSUES AND DELETED THE ADDITION MADE BY THE A O EXCEPT AMOUNT OF ` 4 07 937/-. HIS FINDING READ AS UNDER :- 4.9 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AFORESAID FACTS OF THE CASE AND THE VARIOUS REPORTS OF THE AO. IT IS C LEAR THAT AT THE TIME OF ASSESSMENT THE DOCUMENTS VIZ. A2(1) TO A2(4) WERE NEITHER GIVEN TO THE APPELLANT NOR HE WAS GIVEN ANY OPPORTUNITY TO I NSPECT THESE DOCUMENTS AND THE ADDITION WAS MADE WITHOUT CONFRON TING THE SAME WITH THE APPELLANT. IT APPEARS THAT THE ASSESSMENT ORDER WAS PASSED IN HASTE. THE FIRST NOTICE WAS ISSUED ON 7/12/01AND TH E ASSESSMENT WAS COMPLETED ON 31/12/01. ANY ADDITION WITHOUT GIVING THE OPPORTUNITY TO EXPLAIN BY THE AO THAT TOO ON THE BASIS OF DOCUMENT S WHICH ARE IN CUSTODY OF AO WAS AGAINST THE PRINCIPLE OF NATURAL JUSTICE. THEREFORE IT IS NEITHER THAT THE RELEVANT SEIZED DOCUMENTS BE CO NFRONTED WITH THE APPELLANT BEFORE TAKING ANY DECISION ON THE CONTENT S OF THE DOCUMENTS. THEREFORE AT THE APPELLATE STAGE THE AO WAS ASKED TO OFFER OPPORTUNITY TO THE APPELLANT BY GIVING THE DOCUMENT S. WITH THE INTERVENTION OF THIS OFFICE ONLY THE DOCUMENTS WER E INSPECTED BY THE APPELLANT THAT TOO AFTER GIVING LONG TIME TO AO AS MENTIONED ABOVE PARAS. AS THE APPELLANT ACTUALLY NEVER GOT OPPORTUN ITY AT THE ASSESSMENT STAGE TO INSPECT THOSE DOCUMENTS AND THE ADDITION WAS IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 8 MADE WITHOUT CONSIDERING THE REPLY OF THE APPELLANT HE HAS BEEN PROVIDED OPPORTUNITY AT THE APPELLATE STAGE. UNFOR TUNATELY THE THEN AO AND THE PRESENT AO HAVE ACTED CASUALLY IN COMPLETIN G THE ASSESSMENT AND HAVE NOT CARRIED OUT REQUIRED VERIFICATION INSP ITE OF GIVING SUFFICIENT OPPORTUNITY THEREFORE THE REPLY OF THE APPELLANT W ILL HAVE TO BE CONSIDERED BY ME TO DECIDE THE MATTER IN VIEW OF FA CTS & CIRCUMSTANCES AS THE REPLY CANNOT BE BRUSHED ASIDE ON THE PLEA TH AT IT IS NEW EVIDENCE. THE AO HAS NOT VERIFIED THE REPLY OF THE APPELLANT WITH THE SEIZED MATERIAL AND HAS NOT COMMENTED ANY THING ON MERIT. THE REPLY OF THE AO IS VAGUE NOT BASED ON FACTS AND LACS WIL LINGNESS TO INVESTIGATE ON HIS PART. THEREFORE CONSIDERING THE PROVISIONS OF RULE 46A(4) THE REPLY OF THE APPELLANT WHICH HAS BEEN C ONFRONTED WITH THE AO IS BEING CONSIDERED IN VIEW OF FACTS ON RECORD T O DISPOSE OFF THE MATTER. IT HAS BEEN SUBMITTED BY THE APPELLANT THAT HE DOES NOT OWN ANY HOUSE OR FACTORY AND HE HAS NOT UNDERTAKEN ANY CONSTRUCTION ACTIVITY IN HIS OWN HOUSE OR ASSET. EITHER HE WAS S UPERVISING THE CONSTRUCTION ACTIVITY OF VARIOUS PROPERTIES OF NARA NG GROUP OR HE WAS SUPERVISING THE CONSTRUCTION ACTIVITIES OF M/S. SAH IL HIGHTECH INDIA PVT. LTD. OF WHICH HE WAS THE VICE PRESIDENT. THE APPELL ANT HAS ALSO MENTIONED THAT SAHIL HIGHTECH INDIA PVT. LTD. IS SE PARATELY ASSESSED TO TAX AND THE ACKNOWLEDGMENT OF FILING THE RETURN HAS ALSO BEEN FURNISHED. FROM THE REPLY & VERIFICATION OF THE FAC TS IT IS CLEAR THAT THE APPELLANT WAS NOT CARRYING ON AN CONSTRUCTION ACTIV ITY FOR HIMSELF RATHER HE WAS SUPERVISING VARIOUS CONTRACTS /PROJECTS AND HE WAS ALSO GETTING SUPERVISION CHARGES AS DISCUSSED IN SUBSEQUENT PARA GRAPHS. THE APPELLANT HAS PROVED THAT AMOUNT WRITTEN ON ANNEXU RE 2 (2)- PAGE-29 IS OF SAHIL HIGHTECH (P) LTD. WHICH HAS BEEN DULY R EFLECTED IN THAT COY. THE APPELLANT HAS RECONCILED THAT TOTAL EXPENDITURE AS PER REPLY. AS THIS EXPENDITURE DID NOT RELATE TO THE APPELLANT AND HAS BEEN DULY EXPLAINED THE AMOUNT OF RS. 23 50 567/- IS NOT UNDISCLOSED IN COME OF THE APPELLANT WITHIN THE MEANING OF SECTION 158B(B) OF THE I.T. ACT 1961. 4.10 REGARDING EXPENDITURE OF RS. 3 21 215/- ON PAG E 9 ANNEXURE A2(3) ALSO IT WAS SUBMITTED THAT TOTAL EXPENDITURE INDIC ATED ON THIS PAGE IS RS. 1 99 215/- OUT OF WHICH BREAK-UP OF SOME OF THE ENTRIES HAS BEEN MENTIONED WHICH SUMS UP TO RS. 1 22 000/- WHILE THE ADDITION HAS BEEN MADE OF RS. 3 21 215/- I.E. ADDING THE TWO ABO VESAID SUMS. IT WAS FURTHER SUBMITTED THAT INFORMATION AVAILABLE ON THIS PAGE INDICATES FREIGHT/HAULAGE/INCIDENTAL EXPENSES PAID IN RESPEC T OF IMPORT OF PLANT & MACHINERY (BEING A GRINDER) FROM GERMANY BY THE COY I.E. SAHIL HIGHTECH INDIA PVT. LTD.. AN AMOUNT OF RS. 1 99 21 5/- HAS BEEN PAID BY WAY OF A DEMAND DRAFT AND HA BEEN RECORDED AS SUCH IN BOOKS OF THE COMPANY UNDER THE HEAD FREIGHT & CARTAGE. I HAVE EX AMINED THE REPLY AND PERUSED THE FREIGHT & CARTAGE ACCOUNT OF THE CO Y AND I FIND THAT PAYMENT OF RS. 1 99 215/- HAS BEEN PAID BY D.D. ON 16.5.98 AND TOTAL FREIGHT EXPENSES HAVE BEEN SHOWN AS RS. 2 08 815/-. THEREFORE CONSIDERING THESE FACTS THE EXPENDITURE WHICH HAS B EEN CONSIDERED AS UNEXPLAINED EXPENDITURE OF RS. 3 21 215/- DOES NOT BELONG TO THE IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 9 APPELLANT IN ANY CASE AND THE SAME IS ACTUALLY ONLY RS. 1 99 215/- WHICH HAS BEEN DULY DEBITED IN THE ACCOUNT OF SAHIL HIGH TECH INDIA PVT. LTD. THEREFORE CONSIDERING THESE FACTS & CIRC UMSTANCES THE ADDITION OF RS. 3 21 215/- AS UNEXPLAINED EXPENDITU RE IS ALSO NOT JUSTIFIED IN THE HANDS OF THE APPELLANT AND IS HERE BY DELETED. 4.11 REGARDING OTHER NOTINGS ON PAGE 10-11AND PAGE 12-53 OF ANNEXURE A- 2(1) THERE ARE SOME PAYMENTS OF RS. 3 95 964/- MAD E BY SHRI PRADEEP NARANG AND PAYMENTS OF RS. 3 57 373/- TOWARDS PETR OL DIESEL SERVICING WHEEL ETC. THE TOTAL EXPENSES ARE RS. 7 53 337/- AND ON ANNEXURE A2(4) THERE WERE DETAILS OF EXPENSES OF R S. 50 564/-. IT WAS SUBMITTED THAT THESE EXPENSES ALSO RELATE TO THE C ONSTRUCTION ACTIVITY OF THE COMPANY SAHIL HIGHTECH INDIA PVT. LTD. IT WA S FURTHER POINTED OUT THAT THE EXPENDITURE ON PETROL/FUEL HAD BEEN INCURR ED TO RUN A HIRED GENERATOR FOR THE PURPOSE OF CONSTRUCTION OF FACTOR Y BUILDING AS THERE HAS BEEN NO AVAILABILITY OF ELECTRICITY FROM THE AU THORITIES FOR THIS PURPOSE. IT WAS ALSO SUBMITTED THAT ALL THESE EXPEN SES ARE DULY COVERED IN TOTAL EXPENDITURE OF RS. 35 82 887/- SPE NT ON BUILDING OF THE FACTORY. FROM THE DETAILS OF EXPENSES IN FIND THAT EXPENSES OF RS. 3 95 964/- ARE IN THE NATURE OF CONSTRUCTION ACTIVI TY AND THEREFORE THESE ARE COVERED IN THE TOTAL EXPENSES ON BUILDING CONST RUCTION OF THE FACTORY. HOWEVER EXPENDITURE OF RS. 3 57 373/- AND RS. 50 564/- ARE NOT REFLECTED IN THE DETAILS OF BUILDING A/C OF THE COY. THEREFORE THE APPELLANT HAS FAILED TO VERIFY AND SUBSTANTIATE THE SOURCE OF PETROL * OTHER EXPENSES OF RS. 3 57 373/- AND RS. 50 564/-. AS THESE AMOUNTS HAVE NOT BEEN EXPLAINED THE SAME ARE LIABLE TO BE ADDED AS UNDISCLOSED INCOME OF THE APPELLANT WITHIN THE MEAN ING OF SECTION 158B(B). 4.12 THUS ON THE BASIS OF ABOVE FACTS & CIRCUMSTA NCES OUT OF TOTAL EXPENSES OF RS.34 87 183/- AN AMOUNT OF RS. 30 79 246/- IS EXPLAINED AND ONLY RS. 4 07 937/- IS UNEXPLAINED WHICH IS HE REBY SUSTAINED. 9. LD. CIT(A) HAS CONFIRMED THE ADDITION WITH RESPE CT TO THE DETAILS MENTIONED ON PAGES 12 AND 53 OF ANNEXURE A-2 (1). I N THESE PAPERS EXPENSES INCURRED ON PETROL AND DIESEL HAVE BEEN WR ITTEN. THE CONTENTION OF THE ASSESSEE IS THAT THESE EXPENSES W ERE INCURRED ON THE DIESEL FOR THE GENERATOR SETS WHICH WERE PUT ON TH E CONSTRUCTION SITE. LD. CIT(A) CONFIRMED THE ADDITION ON THE GROUND THAT TH ESE EXPENSES ARE NOT IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 10 REFLECTED IN THE DETAILS OF BUILDING ACCOUNT WHOSE COPY WAS FILED BY THE ASSESSEE. 10. THE CASE OF THE ASSESSEE IS THAT ALL THESE EXPE NSES WERE RELATABLE TO M/S. SAHIL HIGHTECH INDIA PVT. LTD. THESE EXPEN SES HAVE DULLY BEEN ACCOUNTED WHEREAS AO HAS NOT DISCUSSED ANY OF SUCH ASPECT. HE HAS SIMPLY COMPUTED THE AMOUNTS. LD. FIRST APPELLATE AU THORITY HAS MADE EFFORTS FOR DRAWING CORRECT INFERENCE OF THE ENTRIE S. HOWEVER IT IS DIFFICULT FOR US TO CONCUR WITH THE CONCLUSION OF LD. FIRST A PPELLATE AUTHORITY ON THE CONFIRMATION OF ADDITION OF ` 3 57 373/- AND ` 50 564/-. IN OUR OPINION IT IS THE AO WHO HAS TO FIRST ESTABLISH THAT THESE EXPENSES ARE RELATABLE TO THE ACTIVITIES OF THE ASSESSEE OR EVEN IF THESE ARE RELATABLE TO THE COMPANY THEN THESE HAVE BEEN INCURRED BY THE ASSESS EE. THE ASSESSEE IS SUPPOSED TO GIVE THE EXPLANATION ABOUT THE SOURC E OF EXPENSES THEREAFTER. ACCORDING TO THE ASSESSEE THESE EXPENSE S ARE RELATABLE TO THE COMPANY AND INCURRED FROM THE ACCOUNTS OF THE C OMPANY. WE FIND THAT ASSESSEE HAS FILED THE DETAILS OF ALMOST ALL T HE EXPENSES. NOW IT IS QUITE DIFFICULT FOR AN INDIVIDUAL WHO HAS WORKED IN THE CAPACITY OF THE VICE PRESIDENT AND INCURRED SUNDRY EXPENSES SOME 6-7 YEA RS EARLIER TO RECOLLECT THE DETAILS AND EXPLAIN HIS POSITION WIT H SUPPORTING EVIDENCE. THE ENTRIES IN THE DOCUMENT SHOULD BE READ ALONGWIT H THE OTHER DETAILS IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 11 OF EXPENSES SUBMITTED BY ASSESSEE. THE POSSIBILITY OF EXPENSES INCURRED FOR PETROL AND DIESEL ON BEHALF OF THE COM PANY CANNOT BE RULED OUT. THE AO FAILED TO ESTABLISH ON THE RECORD CONCL USIVELY THAT THESE EXPENSES ARE DIRECTLY RELATING TO THE ASSESSEE IN HIS INDIVIDUAL CAPACITY AND THESE WERE INCURRED BY HIM FROM AN UN EXPLAINED SOURCES. 11. AS FAR AS THE ADDITION IMPUGNED BY THE REVENUE IN ITS APPEAL IS CONCERNED WE ARE OF THE OPINION THAT LD. CIT(A) HAS DELETED THE ADDITION AFTER APPRECIATING THE FACTS AND CIRCUMSTANCES THAT EXPENSES WERE DULY ACCOUNTED BY THE COMPANY IN ITS BOOKS OF ACCOUNTS A ND THESE WERE NOT INCURRED FROM UNEXPLAINED SOURCES OF THE ASSESSEE. 12. IN VIEW OF THE ABOVE DISCUSSION WE ALLOW THE GR OUNDS OF APPEAL RAISED BY THE ASSESSEE AND DELETE THE ADDITION OF ` 4 07 937/- AND CONFIRM THE DELETION OF ` 30 79 246/- BY THE LD. CIT(A). CONSEQUENTLY THE APPEAL OF THE REVENUE IS DISMISSED AND GROUND NO. 4 RAISED BY THE ASSESSEE IS ALLOWED. 13. THE NEXT DISPUTE RAISED BY THE ASSESSEE RELATES TO CONFIRMATION OF AN ADDITION OF ` 8 81 785/ ` 8 81 785/ ` 8 81 785/ ` 8 81 785/- -- - . 14. THE BRIEF FACTS OF THIS ADDITION ARE THAT SEARC H ON THE PREMISES OF ASSESSEE AS WELL S HIS ELDER BROTHER SHRI VIIRENDER NARANG WAS CARRIED OUT ON 17.12.99. DURING THE COURSE OF SEARCH AT THE PREMISES OF HIS ELDER IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 12 BROTHER A SMALL DIARY WAS FOUND WHICH WAS INVENTORI ED AS A-36. ON PAGE 16 OF THAT DIARY CERTAIN ENTRIES WERE FOUND TO BE R ECORDED UNDER THE TITLE OF PKN DRG ACCOUNT FROM 20 TH JULY 1992 UPTO 3/96. THAT PAGE HAS BEEN PLACED ON RECORD BY THE ASSESSEE AT PAGE 223 O F THE PAPER BOOK. IT READ AS UNDER :- IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 13 15. THE INTERPRETATION OF THE AO OF THESE ENTRIES I S THAT SHRI P.K. NARANG HAS RECORDED CERTAIN AMOUNTS ON THE GROUND T HAT ` 1 LAC PER PROJECT FOR J12 C-40 X-14 D16 WAS TO BE PAID TO THE ASSESSEE. A VAN HAVING VALUE OF ` 81783/- WAS GIVEN IN LIEU OF PROJECT A 49 - NIZAMU DDIN AND 53 HK PROJECT. ON THE BASIS OF THIS WORKING THE AO HAS WORKED OUT ` 8 LAC AS ALLEGED REMUNERATION FOR THE PROJECTS AND ` 81 783/- AS VALUE OF THE VAN AND MADE AN ADDITION OF ` 8 81 783/-. THE CASE OF THE ASSESSEE IS THAT EXCEPT THIS ENTRY THERE WAS NO OTHER MATE RIAL WITH THE AO TO SAY THAT SHRI V.K. NARANG HAS PAID THIS AMOUNT TO THE A SSESSEE. THE STAND OF THE AO IN THE ASSTT. ORDER IS THAT THIS AMOUNT R EPRESENT THE AMOUNT OF SALARY PAID TO THE ASSESSEE. DURING THE APPELLATE P ROCEEDING BEFORE LD. CIT(A) AO TOOK THE STAND THAT THIS AMOUNT WAS GIVEN IN LIEU OF SERVICES RENDERED BY THE ASSESSEE ON THESE PROJECTS. SIMILAR LY THE AO HAS NOT CALLED FOR EXPLANATION OF ASSESSEE WITH REGARD TO T HE POSSESSION OF VAN. THE VAN WAS HELD BY HIM FOR A LONG PERIOD. IT WAS D ULY DISCLOSED IN THE RETURN AND THE VALUE WAS NEVER QUESTIONED. LD. CIT( A) DID NOT ACCEPT THESE CONTENTIONS OF THE ASSESSEE. HE CONFIRMED THE ADDITION ON THE GROUND THAT THIS MUCH AMOUNT WAS PAID TO THE ASSESS EE FOR HIS SERVICES. IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 14 16. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HA VE GONE THROUGH THE RECORD CAREFULLY. LD. COUNSEL FOR THE ASSESSEE DURING THE COURSE OF HEARING POINTED OUT THAT STATEMENT OF SHRI V K NAR ANG WAS NOT RECORDED DURING THE COURSE OF SEARCH. THE ASSESSEE WAS NEVER GIVEN AN OPPORTUNITY TO CROSS EXAMINE SHRI V.K. NARANG. THE ASSESSEE FAILED TO UNDERSTAND ON WHAT BASIS THIS INTERPRETATION HAS BE EN MADE BY THE AO. HE ALSO POINTED OUT THAT THESE PAPERS WERE NOT FOUN D FROM POSSESSION OF THE ASSESSEE. IN WHAT CONTEXT SHRI NARANG WAS MAINT AINING THIS DIARY IS NOT DISCERNABLE. ON THE OTHER HAND LD. DR POINTED O UT THAT THIS DIARY IS A VERY SYSTEMATIC ONE. IT DISCLOSED SO MANY ENTRIES R ELATING TO NUMBER OF TRANSACTIONS. THE NARRATION FOUND IN THE DIARY ARE NOT ROUGH JOTTING RATHER THEY CONFER MEANINGS TO THE NOTINGS. 17. ON DUE CONSIDERATION OF THE ABOVE FACTS AND CIR CUMSTANCES WE ARE OF THE VIEW THAT ASSESSEE CANNOT BE CHARGED WITH LI ABILITY TO PAY TAX ON THIS AMOUNT BECAUSE THE DIARY IS NOT IN THE HAND WR ITING OF THE ASSESSEE. STATEMENT OF THE AUTHOR WAS NOT RECORDED. IN THE AB SENCE OF ANY STATEMENT OF THE AUTHOR IT IS QUITE IMPOSSIBLE TO D RAW INFERENCE THAT THESE PAYMENTS WERE MADE TO THE ASSESSEE FOR SUPERVISING ANY WORK OF SHRI P.K. NARANG. THIS PIECE OF PAPER CAN BE AN INFORMAT ION FOR STARTING THE INVESTIGATION IN THE CASE OF ASSESSEE. THE AO COULD CALL SHRI P.K. IT(SS)A. 519 547/DEL/03 BLO CK PERIOD 1.4.89 TO 17.12.99 15 NARANG AND ASK HIM TO EXPLAIN THE NOTINGS AND THERE AFTER COULD HAVE GIVEN AN OPPORTUNITY TO CROSS EXAMINE OF SHRI P.K. NARANG TO THE ASSESSEE. NO SUCH STEPS WERE TAKEN. THUS SIMPLY O N THE BASIS OF THIS PAPER AND ON THE AOS OWN INTERPRETATION IT IS DIFF ICULT TO CHARGE THE ASSESSEE WITH TAX LIABILITY. THEREFORE WE ALLOW THI S GROUND OF APPEAL AND DELETE THE ADDITION. 18. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THAT OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.10.2010. SD/- [B.C. MEENA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29.10.2010 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT