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TMI Blog2011 (6) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as dismissed without giving any reasons of the same. 3. The learning CIT(A) erred in law and on the facts in enhancing undisclosed income to the extent of ₹ 10,00,000/- on account of alleged initial investment for making unaccounted sales. 2. We have heard and considered the arguments advanced by the parties in view of the orders of the lower authorities, material available on record and the decisions relied upon. 3. Ground No.1 Regarding Ground no.1 facts in brief are that the assessee was subjected to search action wherein on physical verification shortage of silver, diamonds and silver articles were found as per the quantity recorded in the books. The A.O. treated the shortage as articles sold by the assessee outside the books of accounts. He accordingly taxed the profit on sale of the quantity outside the books. An addition of ₹ 4,74,798/- was made on account of shortage of silver, ₹ 27,580/- on account of Diamonds and ₹ 21,190/- on account of shortage of Silver articles. The Learned CIT(A) has confirmed these additions with these observations that there was a shortage in the physical quantity vis- -vis the quantity recorded in the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher than profits determined by the Special Auditor /A.O. is sufficient to cover the above addition of ₹ 5,23,568/-. We thus find that there was no justification in making and sustaining the addition by the authorities below. The said addition of ₹ 5,23,568/- made on account of shortage of silver, diamonds and silver articles is accordingly directed to be deleted. Ground no.1 is thus allowed. 7. Ground No.2 In this ground the addition of ₹ 1,22,96,185 on account of the transactions with Shri. H.Kumar Gems International has been questioned by the assessee. The Learned AR contended that the Learned CIT(A) inadvertently has not given any reasoning either in support or against the addition. He referred page no. 69 of the first appellate order, wherein the Learned CIT(A) has only stated that this point is dismissed for stastical purposes. The Learned AR submitted that excess amount of gold was found in the stock during the course of search. H. Kumar Gems International and Company confirmed the sales of the gold to the assessee. The A.O. however treated the purchase bill as an afterthought and made addition on account of excess stock. The A.O. as well as the Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CIT(A) held that there must be some initial seed capital invested by the assessee for carrying out the undisclosed business. He held that for first three years, the turnover has been estimated at ₹ 50 lakhs, ₹ 75 lakhs, and ₹ 1 Crore. The Learned CIT(A) accordingly considered the turnover as estimated initial investment of ₹ 10,00,000/- as reasonable for the above estimated turnover for F.Y. 1996-97 and has added the amount in the income of the assessee. 11. The contention of the learned AR remained that the addition made at ₹ 10 lakh is not justified. He submitted that for the first year of business, the turnover is estimated at ₹ 50 lakhs. Generally, initial investment is needed for around the first 7 to 15 days purchases. On the basis of estimation, the monthly turnover could be ₹ 4 lakhs and the initial investment could be maximum ₹ 1 lakh to ₹ 2 lakhs. Therefore, estimation of ₹ 10 lakhs is on very high side. 12. The learned DR on the other hand tried to justify the first appellate order on the issue, he also pointed out that the additional ground in this regard has been raise by the revenue in its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for first 7 to 15 days only. The learned AR submitted that the initial investment should have been estimated by Learned CIT(A) at hardly ₹ 2 lakhs. He submitted that even for the period from 02/11/1999 onwards assessee has given analysis in Jama Kharcha Panas for the first 7 days 02/11/99 to 08/11/1999, whereby it is shown that sales were more than purchases. The assessee has been receiving advances from the customers which took care of the purchases and the requirements of cash was also very little. It is reflected from the low opening cash balances on this these days. 16. Regarding the investment of higher amount as contended by the learned DR, the submission of Ld. AR remained that it is totally incorrect for the simple reason that in the course of search, the department would have found the higher amount of the unaccounted stock. But the fact shows that considering the purchase bills of H. Kumar Gems International and Company there was no excessive stock at all. Hence, the contention of the Learned DR is not borne out by the facts of the case. 17. Considering the above submissions especially the turnover of ₹ 50 lakhs estimated in the initial F.Y. 1996-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate the fact that the issue regarding ownership of documents/ assets seized on the basis of which addition of ₹ 2,55,32,035/- was made is not yet finally settled. The Ld.CIT (A) ought to have followed the ration of the judgment delivered by the Hon ble Kerala High Court in the case of T.S. Sujatha reported in 238 ITR 599. 20. Besides the above an additional ground has been raised with request to allow the same wherein the issue is as to whether learned CIT(A) should have made higher addition instead of ₹ 10 lakh made on account of initial investment in the business. Since the issue raised in this additional ground was connected to the issue raised in ground no.3 of the appeal hereinabove preferred by the assessee, we have already dealt with the issue raised in the additional ground while adjudicating ground no.3 in the above said appeal. The additional ground therein has been rejected. 21. Ground No.1 Regarding Ground no.1 the relevant facts are that the addition of ₹ 41,07,662/- on account of certain purchases made by the A.O. has been deleted by the Learned CIT(A). In the course of search, Jama Kharcha Panas papers were found for A.Ys. 2000-01 to 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst which revenue is in appeal. 24. In support of the ground the Learned DR has basically placed reliance on the assessment order. He submitted that the addition in question could have been deleted by the Learned CIT(A) only if the amount added in the block was included in the declared income. The Learned DR referred the contents of para no.15 page 7 of the assessment order. 25. The Learned AR on the other hand tried to justify the first appellate order on the issue and referred page nos. 5 to 25 of the first appellate order, wherein the issue has been dealt with. He submitted that during the course of appellate proceedings the assessee had explained that Jama Kharcha Panas papers were records of the unrecorded purchases and sales made by the assessee. The assessee submitted that even in respect of notings of sales, complete details are not available still the A.O. considered the same as sales. The purchases amounting to ₹ 99 Crores approximately were also allowed as deduction because the profit on the sales was to the extent of ₹ 2.02 Crores on the sales of little over ₹ 100 Crores. When the A.O. has allowed all other purchases which were also not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on those papers, then the A.O. should have also accepted the purchases shown therein as correct. It is also an undisputed fact that the Jama Kharcha Papers were record for the unrecorded purchases and sales made by the assessee. It is also noted that purchases detail amounting to ₹ 99 Crores were also allowed as deduction because the profit on that sales was to the extent of ₹ 2.02 Crores on sales amounting to over ₹ 100 Crores. When the A.O. has allowed other purchases noted on those papers, there is no reason to disallow few purchases of ₹ 41.07 lakhs out of notings on the same papers by adopting pick and choose method. We thus are of the view that the Learned CIT(A) has rightly deleted the addition at ₹ 41,07,662/- made on account of certain purchases. Since the first appellate order is comprehensive and reasoned one on the issue, we are not inclined to interfere therewith. The ground no.1 is accordingly rejected. 27. Ground No.2 The relevant facts are that during the course of search on 25.10.2002 Jama Kharcha Panas were found for the period of 02/11/1999 to 17/09/2002. Since the evidence was not found for the period 01/04/1999 to 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases is deducted from the total income for the period for which Jama Kharcha Panas were found the amount will reduced to ₹ 2,02,82,206/- and the per day income works out to ₹ 22,510/- against ₹ 27,070/- (worked out by the A.O.). On the basis of these workings, the Learned CIT(A) held that after deletion of addition of ₹ 41,07,662/- , from the worked out total income for the period, the per day income is reduced and hence the addition for the period in which seized papers were not available should be accordingly reduced. He thus reduced the addition from ₹ 57,11,770/- to ₹ 47,49,772/- resulting in granting of relief of ₹ 9,69,998/-. In view of our finding on ground no.1.above, whereby deletion of addition of ₹ 41,07,662/- by the Learned CIT(A) has been upheld, we don t find infirmity in the first appellate order in reducing the addition of ₹ 57,11,770/- to ₹ 4,7,49,772/- on the basis of said deletion. The first appellate order in this regard is thus affirmed. The ground no.2 is accordingly rejected. 30. Ground No.3 The relevant facts are that the assessee firm engaged in jewellery business and following average ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in deleting the addition made on this account. The first Appellate order in this regard is thus upheld. Ground no.3 is accordingly rejected. 33. Ground No.4 In this ground action of the Learned CIT(A) in deleting the addition of ₹ 2,53,32,635/- made on protective basis in the hands of the assessee has been questioned. The relevant facts are that search was conducted on assessees as well as Shri Prakash Salunke. During the course of search certain documents marked as bundle Nos. A-1 to A- 43 were found at the premises of Shri Prakash Salunke, who was engaged in the business of refining gold. Shri Prakash Salunke admitted that bundle no. A-7 to A-9 belonged to him and he also stated that other bundle found with him belonged to Ranka Jewellers. Assessee accepted that A-12 to A-34 and A-36 to A-43 belonged to it on the basis of these bundles, the undisclosed income was offered to tax. These were the Jama Kharcha Panas on the basis of which income was assessed by the A.O. The dispute was regarding ownership of document seized as per bundle nos. A-1 to A-6, A-10, A- 11 and A-35. Shri Prakash Salunke stated that these bundles belong to Ranka group. Assessee has denied that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed deposits in the name of Shri Prakash Salunke s family members and also loans given in the market, PPF and insurance etc. have been paid in his cases only. In fact during the course of search and cross examination ( page no. 115 to 150 ), Shri Prakash Salunke was specifically asked to give the details of the persons to whom the loans were given but he could not give the details. The Learned AR submitted that as alleged that documents were written by him on the basis of instructions given by Shri Anil Ranka, partner of the assessee firm however, there is no evidence to support this theory of Shri Prakash Salunke. The learned AR pointed out that the Learned CIT(A) has also mentioned that Shri Prakash Salunke tried to destroy the most valuable documents found during the search which clearly indicates that the documents pertain to him only. He submitted that it is also worth noting that the documents admitted by the assessee that these are pertaining to it, were kept separately in the sports bag and these documents were not in the handwriting of Shri Prakash Salunke. The Learned AR further submitted that the assessee firm had cross-examined Shri Prakash Salunke and his those state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to it, were kept separately in the sport bags and these documents were not in the handwriting of Shri Prakash Salunke. We are of the view that when disputed documents admittedly found in the exclusive possession of Shri Prakash Salunke then as per presumption u/s. 132(4A), the said documents unless sufficiently rebutted, are presumed to be belonging to Shri Prakash Salunke. Shri Prakash Salunke has not produced any evidence to indicate that the disputed documents belong to the assessee. Thus in our view Shri Prakash Salunke has not been able to rebut the presumption u/s. 132 (4A) against him. The A.O. also has not discharged his onus to prove that these disputed documents are benami investments of the assessee. It is also worthnoting that in the disputed documents nowhere name of the assessee or Shri Anil Ranka is appearing. In these documents, there is no mention that any investment for the asset is made by the assessee or any return from these assets has been made to the assessee. We are thus of the view that there was no reason before the A.O. to assess the income on the basis of such documents even protectively in the hands of the assessee. Considering these materials aspects o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncriminating documents were found, details of which marked as annexure A to O2 are as under. Documents Valuables Found Seized Annexure A (Books of account etc.) A-1 to A-13 A-1 to A-13 Annexure B (Cash) 4,95,610 ,50,000 Annexure C C1 (Jewellery) 19,15,990 + 1,45,953 19,15,990 Annexure E (NSCs) 3,79,000 Nil Annexure F (Silver bars) 2,56,583 2,56,583 Annexure H (Pawned Jewellery) 3,46,500 Nil Annexure O (FDRs) 15,83,640 15,83,640 Annexure O1 (FDRs) 19,57,301 19,57,301 Annexure O2 (NSCs, KVPs) 3,19,000 1,84,000 40. Out of these seized materials about which the main objection of the assessee remained that all the investments we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, thus presumption of ownership of these incriminating documents is against the assessee unless it is successfully rebutted with substantial evidence to which the assessee has thoroughly failed to. 43. Considering the above submissions, we find that an identical issue was raised in by revenue hereinabove in case of Ranka Jewellers. In the relevant ground no.4 thereof the action of the Learned CIT(A) in deleting the addition of ₹ 2,53,32,635/- made in the hands of Ranka Jewellers on the protective basis on the basis of similar documents found with Shri Prakash Salunke, (the present assessee) has been questioned. We have dealt with the issue and adjudicated it with this finding that there is noting on record to show that the amount in question was Benami of M/s. Ranka Jewellers to make addition of the said amount as undisclosed income on protective basis in the hands of M/s. Ranka Jewellers. The action of the Learned CIT(A) in this regard has been upheld after discussing the case in detail. We find from the orders of the authorities below that out of the above stated seized documents mentioned in the chart which were found from possession of the present assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een given through him. His clarification that the loans are against cash given to him by the Ranka group is not proved by the search action as no evidence has been found in the course of search indicating the same. The Assessing Officer has used these evidences in form of seized materials to compute the undisclosed income and the same is in accordance with the definition given of the undisclosed income and the same is duly permitted by section 158BB(1) of the Income tax Ac,1961. The appellant has failed to prove the plea that the investments though made by him are on account of Ranka group. The evidences seized are from the premises of the appellant and the seized materials are in his hand writing. In most of the cases investments are identified as linked with the appellant like investment in shares are fixed deposits. 44. The first appellate order on the issue is comprehensive and reasoned one, we thus are not inclined to interfere therewith. The same is thus upheld. The ground no.1 and 2 are accordingly rejected. 45. Ground no.3 The relevant facts are that during the course of search action at the premises of the assessee, KVP and NSC were found on the basis of which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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