9911796707
TMI Blog1998 (12) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... books for all these cases are also common. Out of 15 appellants 12 are engaged in trading and manufacturing activity of marble at Makrana. The main case of the group is appeal No. 19/Jp/1998 pertaining to Shri Mustaq Ahmed, the senior most family member of the group. The assessment order in this case is much exhausted and was made the basis of arguments by both the parties. We shall deal with all the cases together because the issues are similar and related and it would be appropriate for the sake of convenience. During the course of search, cash, jewellery, huge stock of marble blocks and slabs and loose documents indicating under billing of sales, suppression of sales and job work income were found. The assessee group has filed return under s. 158BC declaring undisclosed income of Rs. 1,54,08,341 for all the assessees of the group. The AO completed the assessment in all the cases at Rs. 14,98,52,154. Now we will take the appeals together of all the assessees, groundwise. 3. In relation to first ground pertaining to the opportunity, the facts were stated by the learned counsel but he opted for arguing the individual ground on merits. Since we are also discussing all the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined on the basis of undisclosed assets and expenses. Thus, in aggregate total undisclosed income was determined at Rs. 14,98,52,154 by the AO. The learned authorised representative further stated that the AO also made an exercise in all the cases to determine the extent of undisclosed assets and undisclosed expenses for the block period though no addition was made on that basis except in case of Shri Anwar Ahmed because the undisclosed income determined by way of estimating the under billing, profit and suppressed sales, unrecorded job work and estimated profit for the current year was much more than the estimate of undisclosed assets and expenditure for all the period of group in respect of the block period. The details of determination of income, estimation of assets and expenditure are shown in Appendix 'A' enclosed with the synopsis of arguments filed before the date of hearing. 7. The learned authorised representative further argued that the difference of two items i.e. total undisclosed income determined and total undisclosed assets and unrecorded expenses determined by the AO comes to Rs. 9,62,08,324. It was further stated that this addition is not backed by assets o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his small size of sample, would be only a wild guess work, the estimation of undisclosed income should be based on assets/expenditure. To support further this argument, the learned counsel relied upon the theory of best judgment assessment as explained in various case laws. 7.3. In respect of the confessional statement recorded during the course of search, the learned authorised representative drew our attention to the quality of those statements and the fact that they were subsequently rebutted. It was argued that the statements cannot be made as the basis of assessment unless the admission made therein are free from all doubts and ambiguity. A person ought to have known the implication of confession made by him in clear and conclusive terms, which is absent in the present case. The decision reported in 1971 AIR 1542 was relied upon. The reliance was further placed on 60 Company cases p. 603 to explain the environment during the course of search and temptation prevailing during the search. According to the assessee, the temptation of Departmental officers, in searches to achieve the target is very high which play a significant role in confession. Therefore, the confession cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mates 40% of gross profit rate from the current period at one place in his order, while determining the value of stocks the profit rate taken by him is 17% whereas while determining the profit rate on suppressed sales 60% has been adopted and as against all this, his action of making addition by estimating the under billing has resulted in a gross profit to the extent of 71% on sales. It was further pointed out that the DVO's report in respect of valuation of properties taken into account a profit rate of 10% as a manufacturer and 10% as a trader. Therefore, the order of the AO suffers from several contradictions. 7.7. Summarising his argument on this point, the learned authorised representative contended that in the facts of the present case where the unrecorded expenditure for the whole block period have been separately determined and unrecorded assets on the date of search have been identified and evaluated. The better approach to determine the undisclosed income is the basis of assets and expenditure as against mere estimation, presumption and a wild guess work for determining the undisclosed income by way of a positive working in absence of requisite date and details. 8. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making a wild guess without backing of assets/expenditure particularly when Department has no case that any asset remained undetermined. The estimate made by the AO is self-contradictory in the sense that it results in a unrealistic gross profit rate which is not even as per his own estimate at other places in the order. Concessions made in the present case carries no significance for the purpose of determination of income inasmuch as they are not absolute, they have been rebutted, not being completely relied by the AO also. The statements are very general in nature without bearing the reference of quality of goods, the specification of period and such other minute particulars which are utmost necessary for positive computation of income. The statement is very brief and not detailed. We are, therefore, of the view that the basis adopted by the AO for determining the undisclosed income is incorrect. When AO himself has identified and ascertained all the undisclosed assets as also all kinds of undisclosed expenditure including the household expenses, expenditure on marriages and Haj Yatra, acquisition of household items., jewellery and vehicles and extent of undisclosed stocks then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Jp/98 Mukhtyar Ahmed 81,14,942 15,13,672 66,01,270 29/Jp/98 Kherunisha 53,90,343 11,14,477 42,75,866 30/Jp/98 Mehrunisha 39,20,182 4,34,371 34,85,811 27/Jp/98 Mem 55,02,340 6,67,556 48,34,784 32/Jp/98 Sabra Banu 46,48,523 6,22,256 40,26,267 22/Jp/98 Salauddin 31,12,288 6,68,556 24,43,732 24/Jp/98 Anwar Ahmed 5,95,130 5,95,130 Nil ------------ ----------- ----------- Total 14,98,52,154 5,36,43,830 9,62,08,324 ------------------------------------------------------------- 9.1. Though the assessee has challenged the value of assets and expenditure determined by the AO but since there are separate grounds for the same, they will be discussed separately with the appropriate ground where they are agitated. 9.2. In respect of ground No. 2(v), the learned authorised representative has submitted that the income for the period from 1st April, 1996 to 18th Dec, 1996 cannot be charged to tax as undisclosed income because, though the regular books were not there but the sale invoices were available. However, we are not convinced with these a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons of the group was Rs. 3,84,055 out of which Rs. 21,245 found at Shalimar Hotel was considered as explained and remaining cash was considered as unexplained. Before us, three things have been mainly argued. One is that wherever the cash balance is upto 10,000 it should be considered as explained because all the persons are regularly withdrawing, the amounts. 13. Secondly, the cash as per the books of Shalimar Hotel and Shalimar Restaurant, should be considered as explained, and thirdly, the cash amount kept by the assessee in trustee capacity called as 'Betul Mal' should not be taken as assessee's cash. Further the amount of Rs. 15,000 was stated by Afsana Bano as being out of her savings. From the paper books the cash balance as per the books of Shalimar Restaurant is appearing at Rs. 1,70,650. Further the cash balance of Rs. 30,578 was as per the books of Hotel Shalimar. So far as the amount pertaining to charitable fund called as 'Betul Mal' is concerned, the learned authorised representative referred to the statements recorded during the course of search where the amount was stated at Rs. 1 lac to Rs. 1.5 lacs. 14. On the other hand, the learned Departmental Represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 3,62,810 1,08,222 2,54,588 ------------------------------------------------------------- 16. Next issue is in respect of gold jewellery. Total undisclosed investment has been determined at Rs. 9,35,508 in respect of all the persons. Out of which Rs. 1,62,540 has been estimated for the assessee Mustaq Ahmed. It was argued by the learned counsel that AO considered 25% of the jewellery claimed as explained and remaining as unexplained which has no logic. It was argued that apart from specific amounts offered as undisclosed income, the balance jewellery is very reasonable considering the number of married ladies and family members. Share of per member comes to only around 231 gms. It was further stated that the jewellery to the extent of 221 gms belonged to Noorjahan which is not disputed by the AO. 17. On the other hand, the learned Departmental Representative had relied upon the assessment order. 18. After considering the facts of the case we are of the view that the amount offered as unexplained income to the extent of 86 gms by S. Nawab Ali and 320.7 gms by Mustaq Ahmed are liable to be considered as undisclosed income. The value of undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------- Appeal Name of the Ground Unexplained Addition Amount No. assessee No. jewellery confirmed of determined relief by AO ------------------------------------------------------------- Rs. Rs. Rs. ------------------------------------------------------------- 19/Jp/98 Mustaq Ahmed 3(iii) 1,62,285 - 1,65,285 23/Jp/98 Salimuddin 3(iii) 5,509 - 5,509 26/Jp/98 Riyazur 3(iii) 2,792 - 2,792 Rehman 21/Jp/98 Ahmed Hassan 3(ii) 1,690 - 1,690 20/Jp/98 Mukhtayar 3(i) 2,792 - 2,792 Ahmed 24/Jp/98 Anwar Ali 4 2,204 - 2,204 -------- -------- 1,80,272 1,80,272 ------------------------------------------------------------- 20. Next issue relates to addition on account of vehicles aggregating to Rs. 15,24,946 as per the details given in Appendix-F to the synopsis of argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of undisclosed vehicles is concerned, we find some force in the arguments that the depreciation on such vehicle is allowable. However, for the purpose of claim of depreciation, it is necessary that the assessee shows evidence for use of the vehicle for the purpose of business. Therefore, in absence of necessary details on record, we reject the claim of depreciation. The assessee is free to claim such depreciation in regular assessment of subsequent years by discharging its onus. In the result, the assessee gets following relief aggregating to Rs. 7,01,886 and the under-noted grounds of various appeals stand disposed of: ------------------------------------------------------------- Appeal Name of the Ground Unexplained Addition Amount No. assessee No. investment confirmed of determined relief by AO ------------------------------------------------------------- Rs. Rs. Rs. ------------------------------------------------------------- 19/Jp/98 Mustaq Ahmed 3(iv) 4,86,886 45,000 4,04,886 25/Jp/98 S. Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------- 27. Next issue relates to expenses incurred in Haj Yatra wherefor the assessee estimated Rs. 25,000 per person and the AO estimated it at Rs. 30,000 per person. The addition made on this account is thus Rs. 2,10,000. We feel that the assessee's offer as well as the AO's amount both are based on estimates. Assessee did not place on record any material to support his claim. The addition of Rs. 2 lacs is, therefore, upheld. This disposes of the following grounds: ------------------------------------------------------------- Appeal Name of the Ground Expenditure Addition Amount No. assessee No. estimated confirmed of by AO relief ------------------------------------------------------------- Rs. Rs. ------------------------------------------------------------- 19/Jp/98 Mustaq Ahmed 3(x) 60,000 60,000 25/Jp/98 S. Nawab Ali 3(ix) 1,20,000 1,20,000 26/Jp/98 Riyazur 3(x) 30,000 30,000 Rehman --------- -------- 2,10,000 2,10,000 -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98 are concerned, these two appeals as we have already stated belong to Tahira and Nafisa and the only issue in these two appeals are regarding not giving the credit for withdrawals shown by Tahira and Nafisa in their regular returns. We find from the details of account offered by assessee that the expenses for the period from 1st April, 1996 to 18th Dec, 1996 have not been covered in the statement whereas the same is required because the estimation is being made on the basis of assets and expenditure for the whole block period. Total addition made by AO is Rs. 41,72,669 in the hands of 8 male members of the family whereas assessee has offered Rs. 3,39,084 in aggregate. The assessee has already shown a sum of Rs. 16,81,764 as withdrawal in regular books for the block period. Having considered the facts and withdrawals made, it would be reasonable to restrict the addition to the extent of Rs. 10,00,000 in aggregate. Thus in this way the total withdrawal comes to Rs. 26,81,764 for the whole block period which in our considered view are reasonable withdrawals for meeting out the household expenses. Thus the assessee would get a relief of Rs. 31,72,669. The amount of addition would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relief mentioned herein below: ------------------------------------------------------------- Appeal Name of the Ground Unexplained Addition Amount No. assessee No. investment confirmed of determined relief by AO ------------------------------------------------------------- Rs. Rs. Rs. ------------------------------------------------------------- 19/Jp/98 Mustaq Ahmed 3(v) 18,300 9,150 9,150 25/Jp/98 S. Nawab Ali 3(iv) 1,91,690 95,845 95,845 23/Jp/98 Salimuddin 3(iv) 26,950 13,475 13,475 26/Jp/98 Riazur 3(iv) 1,35,600 67,800 67,800 Rehman 21/Jp/98 Ahmed Hassan 3(iii) 1,92,750 96,375 96,375 20/Jp/98 Mukhtiyar 3(ii) 76,450 38,225 38,225 24/Jp/98 Anwar Ali 6 67,850 33,925 33,925 --------- --------- --------- 7,09,590 3,54,795 3,54,795 ------------------------------------------------------------- 32. Next issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions are stated in the following table: ------------------------------------------------------------------------- Property Amt. Amount Valued by Valued by Valued by Addition disclosed surrendered assessee DVO AO Rs. Rs. Rs. Rs. Rs. Rs ------------------------------------------------------------------------- Residential 6,03,000 19,13,000 25,16,000 31,16,000 41,70,086 14,82,043 house (Mustaq) (Mustaq Rs. (Mustaq) belonging 11,50,000) 20,85,043 to Mustaq (Riyazur Rs. Riyazur) 7,63,000) Residential Nil 14,66,000 14,66,000 20,79,000 37,52,390 37,52,390 house belonging to S. Nawab Ali Shalimar 25,93,000 11,03,000 36,96,000 41,42,000 57,43,876 31,50,876 Hotel (belonging to Salimuddin) ------------------------------------------------------------------------- 33.1. The learned counsel submitted that the AO did not accept even the valuation of DVO. It was explained that the AO took the year of construction different than what has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition is hereby deleted. The relief as a result of disposing of this issue is tabulated below: ------------------------------------------------------------- Appeal Name of the Ground Unexplained Addition Amount No. assessee No. investment confirmed of determined relief by AO ------------------------------------------------------------- Rs. Rs. Rs. ------------------------------------------------------------- 19/Jp/98 Mustaq Ahmed 3(viii)14,82,043 11,50,000 3,32,043 25/Jp/98 S. Nawab Ali 3(vi) 37,52,300 16,63,200 20,89,190 23/Jp/98 Salimuddin 3(vii) 31,50,876 11,03,000 20,47,876 26/Jp/98 Riyazur 3(vii) 20,85,043 7,63,000 13,22,043 Rehman ----------- --------- --------- 1,04,70,352 46,79,200 57,91,152 ------------------------------------------------------------- 34. Next issue relates to estimation of investment in land at Rs. 10,45,000 in the hands of Riyzur Rehman challenged in ground No. 3(vii) in appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore considered that the variation in investment of stocks between 1st April, 1996 and 18th Dec, 1996, on account of earning any business income; forms part of the investment in stocks computed as on the date of search. The learned counsel of the assessee vehemently objected to the valuation of stocks by the AO. His objections were in respect of quantity, quality as well as the valuation of the stocks adopted by the AO. In respect of quantity many arithmetical errors were shown to us. It was also pointed out that the quantity of certain stocks have been taken twice. Further in respect of the stocks belonging to other persons lying for job work with the assessee, it was submitted that the AO accepted merely 10% of the quantity claimed by the assessee in spite of evidence in the form of affidavit and identification marks available on record. Further it was also argued that the stocks within the mines was taken by the AO for valuation at the rates equal to the stocks available at the business premises. In respect of quality, it was submitted that there was damaged and wastage material also which were valued as good stocks. Statement of Gsyoor Ahmed were relied upon in respect of q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. ---------------------------------------------------------------- Party 6. Annx. SB 12,84,500 Party 6. Annx. S. 70,76,828 Party 8. Annex. SS 9,95,200 Party 9. Annx. SS 2,89,430 Party 10. Annx. SSI 3,81,250 Party 12. Annx. S. 8,92,790 Party 14. Annx. S. 2,22,560 ----------- -------------------------------- 1,11,42,652 50,00,000 ---------------------------------------------------------------- Thus the difference of Rs. 1,38,71,400 (Rs. 77,28,746 + Rs. 61,42,658) arose merely on account of valuation at one stage by physical verification of the stocks and at the other stage on the basis of papers. The learned counsel argued that the valuation, by looking at the stocks physically, was more correct instead of a theoretical valuation at the time of assessment. Therefore, the valuation done at the time of release of stocks should be preferred. The learned authorized representative, however, contended that even the valuation done at the time of release of stocks was on higher side and invited our attention to the following remarks mentioned by ADI while valuing the stocks: "Remarks: 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition to that extent cannot be sustained at all. We find that the substantial part of stocks found was in seizure which was subsequently released and is covered by the aforesaid valuation at the time of release. The total stocks valued is thus summarised as under: ------------------------------------------------------------ Valuation Valuation Difference as per AO at the time in of release assessment order ------------------------------------------------------------ Rs. Rs. Rs. ------------------------------------------------------------ 1st release as per the 1,92,97,454 1,15,68,712 77,28,742 details Subsequent release 1,11,42,658 50,00,000 61,42,658 Stock found but not 37,52,296 Neither N.A. Seized seized nor released Total valuation as per AO ----------- 3,41,92,408 ------------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not possible to ascertain the same, though we find some weight in the argument advanced. After going through the detailed submissions relating to these issues, we consider it appropriate to allow 5% deduction in respect of all these contentions from the value determined above. This amount of deduction comes to Rs. 5,82,485 and after deduction of this amount the valuation or stock available with the appellant group as on the date of search works out to Rs. 1,10,67,215 (1,16,49,700 - 5,82,485) as against the amount of Rs. 73.20 lacs computed by assessee and Rs. 341.92 lacs computed by the AO. This valuation comes after our working done on the basis of statistics available in the material placed before us. However, we are of the view that there may be some difference on account of taking of stocks which may be left out at the time of taking of stocks by the search party and the assessee at the time of search. Therefore, we are of the view that to cover all the loopholes and difference in stock taking, we add a sum of Rs. 6 lacs and in this way total stocks come to Rs. 1,16,67,215. 38. The value of stocks disclosed as on 31st March, 1996 is undisputed Rs. 21,72,200, therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : --------------------------------------------------------------- Appeal Name of the Ground Undisclosed Undisclosed Amount No. assessee No. stocks Investment of determined in stock relief by AO sustained --------------------------------------------------------------- 1 2 3 4 5 6 Rs. Rs. Rs. --------------------------------------------------------------- 19/Jp/98 Mustaq Ahmed 3(ix) 71,90,479 16,18,715 55,71,764 25/Jp/98 S. Nawab Ali 3(viii) 35,92,385 15,00,000 20,92,385 33/Jp/98 Gayur Ahmed 3(ii) 83,61,406 27,91,500 55,69,906 23/Jp/98 Salimuddin 3(vi) 33,03,614 11,03,500 22,00,114 26/Jp/98 Hiyazur 3(vi) 21,16,853 3,05,000 18,11,853 21/Jp/98 Ahmed Hassan 3(v) 30,40,014 3,40,000 28,00,014 20/Jp/98 Mukhtiyar 3(iv) 9,08,241 3,23,500 5,84,741 29/Jp/98 Khrunisha 3 11,14,477 3,28,000 7,86,477 30/Jp/98 Mehrunisha 3 4,34,371 3,42,000 92,371 27/Jp/98 Mem 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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