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TMI Blog2002 (8) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... gards the admission of the additional ground of appeal is concerned, we find that the assessee has every right to raise this issue before the Tribunal. Furthermore, the present issue is relevant and vital just for the decision of the present appeal. We are also of the view that no further investigation is required while disposing of this additional ground. The Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 held that: "The Tribunal had jurisdiction to examine a question of law which arose from the facts as found by the Income-tax authorities and having a bearing on the tax liability of the assessee." In view of the ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra), we have no hesitation to admit the additional ground raised by the assessee. 4. As regards the merits of the additional ground is concerned, Shri P.N. Arora, Advocate, the learned counsel for the assessee submitted before us that no return of income was filed by the assessee for the assessment year 1986-87 in the name of partnership firm M/s Faqir Chand Chaman Lal as there was no such partnership firm in existence, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 2.That there was no partnership firm in existence during the period 1-4-1985 to 31-3-1986, relevant to assessment year 1986-87. 3.That the partnership firm M/s Faqir Chand Chaman Lal, came into existence with effect from 1-4-1986, relevant to assessment year 1986-87, with two partners namely: (1) Shri Chaman Lal with 60% share and (2) Shri Rakesh Kumar with 40% share and the partnership firm is still continuing. Sd/- Deponent Verification I, Chaman Lal, the above named deponent do hereby affirm and declare that the facts stated above are true and correct to the best of my knowledge and belief. Sd/- Deponent Amritsar Dated 14-9-2001." He further submitted that the partnership firm came into existence on 1-4-1986 as per the partnership deed executed by the partners, Shri Chaman Lal and Shri Rakesh Kumar. For the aforesaid contention, he referred to page Nos. 109 and 110 of the paper book, which are copies of partnership deed. 4.1 In view of the above, it was argued that the partnership firm was not in existence for the assessment year 1986-87, as such, the Assessing Officer was not justified in estimating the income at Rs. 25,000 for the assessment year 1986-87. 4.2 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer is not empowered to make change in the status of the assessee while processing the return under section 143(1). Reliance was placed on the decision of the Hon'ble Kerala High Court in the case of CIT v. K.V. Mankaram & Co. [2000] 245 ITR 353 . It was further stated that sales-tax licence No. 27546212 was issued by the Excise & Taxation Department, Goraya in the name of the firm M/s Faqir Chand Chaman Lal, Apra on the basis of the partnership deed dated 11-2-1981, as such the partnership firm was in continuation since 1981. 4.3 In view of the above, it was submitted that the claim of the assessee regarding change in the status before the Income-tax Department for the assessment year 1986-87 was just a manipulation to get the relief from the income-tax liability. Accordingly, it was submitted that the status of the assessee has rightly been considered by the Assessing Officer and claim of the assessee is liable to be rejected. 4.4 In his rejoinder, Shri P.N. Arora, Advocate, the learned counsel for the assessee, submitted that the Department itself considered the income of the assessee-firm M/s. Faqir Chand Chaman Lal for the assessment years 1986-87 and 1987-88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as proprietor of M/s. Faqir Chand Chaman Lal, Apra. Thus, it is clear that no partnership firm in the name of M/s. Faqir Chand Chaman Lal, Vill. & P.O. Apra was in existence for the assessment year 1986-87. It is also relevant to point out that the department accepted Form No. 11 on 30-3-1987 in the name of M/s. Faqir Chand Chaman Lal in the status of partnership firm. Admittedly, Form No. 11 is required to be filed by the assessee, who starts its business in the status of partnership firm. In other words, for the first year of the assessment, Form No. 11 is required to be filed before the end of the financial year. In the instant case also, Form No. 11 was filed by the assessee on 30-3-1987, which was received by the department vide receipt No. 488442 dated 30-3-1987 (copy is available at page 564 of the paper book filed by the assessee). It is also mentioned in the aforesaid receipt No. 488442 that partnership deed was filed along with Form No. 11 for the assessment year 1987-88. Shri S.J. Singh, the ld. Sr. D.R. pointed out that the assessee had filed Form No. 12 on 28-7-1987 along with the return of income. According to him, it means that the firm was in existence during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to the partnership firm M/s. Faqir Chand Chaman Lal. 5.3 Considering the totality of the facts and the circumstances of the case as discussed above, we are of the view that the Assessing Officer was not justified in estimating the income of Rs. 25,000 for the assessment year 1986-87 in the hands of the assessee when there was no partnership firm in existence for that assessment year. Accordingly, we delete the addition made by the Assessing Officer and as such additional ground raised by the assessee is allowed. 6. Now, we deal with the main grounds of appeal. 6.1 Ground No. 1 is general in nature and hence no specific findings are called for. 7. Ground No. 2 reads as under:-- "2. That the ACIT has wrongly taken Rs. 6,15,000 as undisclosed income from pawning business for the assessment year 1986-87." 7.1 The facts relating to this issue, in brief, are that the Assessing Officer observed in the impugned order that the assessee had engaged himself in pawning business since 1981 but no information regarding investment made in that business had been furnished by the assessee. The Assessing Officer further noticed that in the documents marked as A-2/3, A-2/6, A-2/7, A-2/8 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch no proper opportunity was given to the assessee while coming to the conclusion that there was an investment of Rs. 14,15,447 in the pawning Business. It was further stated that the Assessing Officer had not appreciated the nature of the documents seized because the documents seized i.e. A-2/3, A-2/6 to A-2/9 and A-3, A-6, A-7 and A-9 were different and separate documents. It was explained that in the documents A-2/6 to A-2/8 the entries were related to the carry forward from one Ledger bahi to another Ledger Bahi from time to time and as such represented the repetition of old Bahis. Therefore, the Assessing Officer while making the addition on the basis of those Bahis had also repeated the entries. It was further stated that while making the addition of Rs. 6,15,000, the Assessing Officer never gave any opportunity of being heard to the assessee. It was vehemently argued that the partnership firm was never in existence in connection with the assessment year 1986-87 because the firm came into existence on 1-4-1986, as such the period was relevant to the assessment year 1987-88. He drew our attention towards page Nos. 109 and 110 of the paper book, which is the copy of partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds page Nos. 283 to 318 of the paper book and it was stated that the dates mentioned therein, were 7-8-1982 to 14-11-1994 (refer page 284) and 26-6-1984 to 21-1-1993 (refer page 286). Similarly, on other pages, dates mentioned are beyond the period 31-3-1986, although certain amounts are reflected against the names of the persons mentioned in those documents. Therefore, it seems that the aforesaid documents were related to the pawning business but it was the main grievance of the assessee that those documents were not confronted to the assessee on the basis of which addition was made. In that view of the matter, we are of the opinion that no proper opportunity of being heard to the assessee was granted by the Assessing Officer. On this score alone, addition of Rs. 6,15,000 was uncalled for and deserves to be deleted. At the same time, we have already decided the additional ground (supra) and in view of the detailed findings given therein, we are of the opinion that no addition can be made for the assessment year 1986-87 on account of pawning business in the hands of the assessee firm since there was no business conducted by the assessee in that year, because no partnership firm wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation of proper facts because in the raid cases no addition can be made unless there is concrete and positive evidence found at the time of search and seizure. Alternatively, it was submitted that the interest income estimated by the Assessing Officer was very high and excessive. Reliance was placed on the following case laws:-- (1)CIT v. Mrugesh Jaykrishna [2000] 245 ITR 638 (Guj.) (2)CIT v. Ravi Kant Jain [2001] 250 ITR 141 2 (Delhi) (3)Asstt. CIT v. H.M. Sathyanarayana Setty [2001] 71 TTJ (Bang.) 186 (4)Dolly Farms & Resort (P.) Ltd. v. Dy. CIT [2000] 74 ITD 147 (Delhi) (TM) (5)CIT v. Shambhulal C. Bachkaniwala [2000] 108 Taxman 515 (Guj.) (6)V.V.S. Alloys Ltd. v. Asstt. CIT [2000] 68 TTJ (All.) 516 (sic) (7)Prarthana Construction (P.) Ltd. v. Dy. CIT [2001] 70 TTJ (Ahd.) 1223. 8.2 In his rival submissions, Shri S.J. Singh, the learned Sr. D.R. submitted that the Assessing Officer came to the conclusion that the assessee was charging interest at the rate of 2 per cent per month after perusing the various seized documents and the assessee had not given any explanation to the Assessing Officer at the time of assessment proceedings. It was further stated that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled that the provisions relating to search and seizure are intended to unearth the hidden or undisclosed income or property and bring it to taxation net. It is also not in dispute that the objective of Chapter XIV-B is to get hold evidence having bearing on the tax liability of a person which the said person is seeking to withhold from the Assessing Officer, but the scheme of Chapter XIV-B does not give power to the Revenue to draw presumption in regard to the undisclosed income. It is also well settled proposition that the presumption howsoever strong cannot substitute evidence and if there is no direct nexus on the point, no addition in block assessment can be made. In the instant case also, there was no evidence with the Assessing Officer in support of his contention that the assessee, in fact, earned the income by way of interest amounting to Rs. 2 lakhs each from the assessment years 1986-87 to 1995-96 and Rs. 1 lakh in the assessment year 1996-97. In the instant case, it is also not in dispute that the undisclosed income was worked out by the Assessing Officer on an estimated basis but in a block assessment generally estimated additions cannot be justified. In that view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tures, surmises and suppositions and it is inconsistent with the existing facts on the record and as such there was miscarriage of justice. 6.That no addition can be made on the basis of loose papers which do not convey anything and which are no worthy of reliance. As such, the addition made on the basis of conjectures, surmises and supposition may be deleted." Reliance was placed on the following case laws:-- (1)Mrugesh Jaykrishna's case (supra), (2)Monga Metals (P.) Ltd. v. Asstt. CIT [2000] 67 TTJ (All.) 2471, (3)CIT v. Smt. Usha Tripathi [2001] 249 ITR 4 (All.), (4)Dolly Farms & Resort (P.) Ltd.'s case (supra). 10.2 In his rival submissions, Shri S.J. Singh, the learned Sr. D.R. submitted that the Assessing Officer had made the addition of Rs. 4,64,908 for investment in Pawning Business on the basis of entries found on various loose sheets contained in Annexure A-2/9 during the years 1988 to 1995 and consequently made the addition of Rs. 58,114 for each year as undisclosed investment of the assessee in Pawning Business for the assessment years 1989-90 to 1996-97. It was further stated that the Assessing Officer for making the addition has taken into consideration for wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner, the addition of Rs. 5,62,410 was made. 11.1 Before us, Shri P.N. Arora, Advocate, the learned counsel for the assessee contended that the addition made by the Assessing Officer was without any basis. He further submitted that the Assessing Officer never gave any opportunity of being heard, before making this addition. It was clarified that the assessee had been showing income on the sales as well as on the job receipts and the details of the receipts was shown in all those years, which were as per following details : Asst. year Total sales shown in re- turn filed with Deptt. (Rs.) Total job/labour receipts shown in the return filed with Deptt. (Rs.) Total (Rs.) 1991-92 3,39,039.66 91,820.00 4,30,859.66 1992-93 4,83,808.20 56,943.10 4,26,865.10 1993-94 5,48,849.77 58,037.52 6,06,887.29 1994-95 5,49,128.70 43,480.16 5,92,608.86 1995-96 5,60,126.00 53,349.80 6,13,475.80 1996-97 4,81,419.04 30,807.80 5,12,226.04 29,62,371.37 3,34,438.38 31,82,922.75 Shri P.N. Arora, Advocate, the learned counsel for the assessee further contended that an estimated profit rate is not feasible in raid cases because the same can be done/applied in regular assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 56,24,100 has not given any benefit to the amounts already shown by the assessee during the course of filing of regular returns of income. It is also noticed that the Assessing Officer while applying the net profit rate of 10% has not given any basis. We, therefore, deem it appropriate to restore this issue back to the file of the Assessing Officer and direct him to consider the net profit declared by the assessee in the regular assessments, in case, if any, addition is to be made on the amount of undisclosed sale/job work/labour charges. We may add here that while calculating the undisclosed sales, if any, the Assessing Officer should give an opportunity of being heard to the assessee and also confront the documents in his possession, if any, he should also consider the figures of the sales etc. already disclosed by the assessee in the regular returns of income already filed for the relevant assessment years. Accordingly, this ground of appeal is disposed of. 12. Ground No. 6 reads as under:-- "6. That the addition of Rs. 4,959 for the assessment year 1996-97 on account of purchase from Babu Lal on 24-7-1995 is wrong and against facts on record." For this addition, the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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