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Issues Involved:
1. Jurisdiction of the Assessing Officer 2. Method of Valuation of Closing Stock 3. Interest Payment 4. Acceptance of Books of Accounts 5. Addition under Section 69C 6. Acceptance of Affidavits 7. Charging of Interest under Section 234A 8. Protective vs. Substantive Addition Summary: 1. Jurisdiction of the Assessing Officer: The assessee challenged the jurisdiction of the assessing officer of Bikaner, arguing that the notice u/s 153A was issued by the Asstt. CIT, Central Circle, Bikaner, while the assessee was regularly assessed by the ITO, Ward-1, Sriganganagar. The court found that the transfer of jurisdiction was valid as it was for administrative convenience and coordinated investigation, and the reasons were recorded and communicated to the assessee. Thus, the grounds challenging jurisdiction were rejected. 2. Method of Valuation of Closing Stock: The assessee changed the method of valuation of closing stock from market rate to weighted average cost price in the returns filed in response to notice u/s 153A. The court held that the change in the method of valuation of closing stock is permissible if bona fide reasons exist, and only real income can be taxed. The change was considered valid, and the ground was allowed in favor of the assessee. 3. Interest Payment: The addition of interest payments of Rs. 6,81,333 and Rs. 6,44,000 was made by the assessing officer under section 68, which was contested by the assessee. The court found that since the principal amount of Rs. 60 lakhs was already surrendered as income, the interest payments should not be added again. Thus, the ground was allowed, and the addition was deleted. 4. Acceptance of Books of Accounts: The books of accounts prepared from seized documents were not accepted by the assessing officer. The court held that the books of accounts prepared from the seized documents should be accepted as they were reliable and gave a true and correct picture of the affairs of the assessee. The rejection of books of accounts was deemed illegal, and the ground was allowed. 5. Addition under Section 69C: The addition under section 69C for unexplained expenditure was contested by the assessee. The court found that the addition was not justified as the expenses were already accounted for in the books of accounts prepared from the seized documents. Thus, the ground was allowed, and the addition was deleted. 6. Acceptance of Affidavits: The affidavits submitted by the assessee and his wife regarding the source of ornaments and maintenance of books of accounts were not accepted by the assessing officer. The court held that the affidavits should be accepted unless the deponent is cross-examined. The rejection of affidavits without cross-examination was deemed against the principles of natural justice, and the ground was allowed. 7. Charging of Interest under Section 234A: The interest under section 234A was contested by the assessee, arguing that the delay in filing the return was due to the delay in receiving the seized documents from the department. The court directed that interest should be waived up to the date of final supply of copies of documents/accounts, and the ground was allowed accordingly. 8. Protective vs. Substantive Addition: The addition made on a protective basis in the hands of the assessee was contested. The court held that the income surrendered by Dr. S.S. Tantia should be assessed in his hands on a substantive basis and not in the hands of the trust or other entities. The ground was allowed, and the protective addition was deleted.
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