9911796707
TMI Blog2012 (9) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... tment in household expenses ₹ 40,400/- (ii) Investment in proprietary business ₹ 2,60,000/- (iii) Investment in purchase of goods. ₹ 18,00,000/- (iv) Estimated profit from business ₹ 7,20,000/- (v) Estimated value of the goods imported ₹ 4,75,500/- (vi) Estimated profit from the value of shortage goods. ₹ 1,26,900/- (4) That the learned Income-tax Officer has not brought any concrete evidence on the record against the appellant, establishing that your appellant is the owner of the M/s. Associated Apparels and accordingly that the Income-tax Officer has not carried out the direction of the Commissioner of Income-tax (Appeals). (5) That the learned Income-tax Officer has erred in law and on facts by stating on Page-2, Para-5 of assessment order that the learned CIT(A) vide his order No.CIT.R/ll/498/87-88 dated 24.3.1992, confirming the addition of ₹ 2,60,000/-. (6) That the learned CIT(Appeals) has erred in law and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dice to the above, the learned Income-tax Officer has erred in treating the Associated Apparel as the business of your petitioner. (8) The learned Income-tax Officer has erred in considering the investment for the alleged purchase of goods as investment of your petitioner and treating the same as income amounting to ₹ 18,00,000/-. (9) The learned Income-tax Officer has also erred in estimation and treating an amount of ₹ 7,20,000/- as profit from M/s. Associated Apparel and income of your petitioner. (12) Without prejudice to the above the learned Income-tax Officer has erred in treating the Associated Apparel as the business concern of your petitioner. The appellant white challenging the ITO's action also mentioned in the written submissions filed during the hearing of appeal that he was not the owner of Associated Apparel but was only a Power of Attorney Holder from one Shri Kantilat Ramjibhai Maru who had purchased this business (Page Nos. 5,6, 7 of letter dated 10-08-1988 addressed to the CIT(A). 2. My predecessor dealt with the question of ownership of Associated Apparel in para 14 which is reproduced as under- Para 14: The next additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities. (d) Shri R.K. Mehta had also filed court cases against the Customs authorities. The Addl. Collector, Customs also observes on Page 10 of his order that Shri R.K. Mehta did not have clean hands as far as the case was concerned. (e) In the operative part of the order the Addl. Collector of Customs has levied a penalty of ₹ 20 Lakh on Shri R.P Pandya by treating him as sole proprietor of M/s. Associated Apparels, Kandla Free Trade Zone. 3. From the forgoing it is apparent that the status of Shn R.K. Mehta via-a-via M/s. Associated Apparels is not dear From the observations made in the aforesaid order of the Addl. Collector of Customs, it appears that Shri R.K. Mehta was acting both on behalf of Shri R.P. Pandya, treated as owner of M/s. Associated Apparels and Shri R.P Pandya, treated as owner of M/s. Associated Apparels and Shri K.R. Maru, who according to Shri Mehta had later on bought M/s. Associated Apparels. It is possible that in effect Shri R.K Mehta was the real owner of this business even though in name it was owned by two different persons namely Shri R.P. Pandya and Shri R.K. Mehta. However, the Customs Authorities have taken Shri R.P. Pandya to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice dated 27.12.1993 was issued and informed the assessee that he has failed to comply notice and summons dated 26.8.93 and to show-cause as to why the cost of imported goods, profit on sale of goods, investment made in the above business should not be treated as his income. 8. Assessee's advocate Shn M. J. Lava attended on 6.1.1994 and filed Xerox copies of power of attorney given by Shri Kantilal Maru and sale deed of the factory. Further on 13.1.1994 assessee with his advocate attended and produced letter dated 20.1.1993 from the Police Inspector, Gandhidham stating that no enquiry can be made as the case is pending before the Court It is worth noting that Shri Rohitkumar has not proved before the Court that charge is made by Shri Dave. Security Inspector is wrong. Charges were made that Shri Rohitkumar Mehta is signing for R.P. Pandy and Kantilal Maru. Also filed enquiry letter made by the Inspector of Income-tax. On this letter the Inspector of Income-tax has recorded statement from Shri Kantilal Maru wherein Shri Kantilal Maru has stated that he has purchased the factory and he is the owner of the factory. M/s. Associated Apparels. This was purchased from Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has given a statement without fear because Shri Rohitkumar K. Mehta was not present at the time of recording the statement It is also very much clear that Shri Kantilal Maru has not complied summons dated 17.1.1994 by which he was to cross examine by the assessee It is doubtless to say that an employee will not speak against his employer and also cannot speak untrue on oath. So far production of Xerox copies of statement recorded by the Inspector of Income-tax, it is fact that statement recorded by the I.T.I, cannot be on oath. Secondly Tea Stall holder, Postman and Pujari of the temple have stated that Shri Rameshchandra P. Pandya was staying at Bhomeshwar Plot, but they have not seen him ever. It is wonderful to note that the Pujari of the temple and tea kittly holder knows about the exact date of purchase of factory. From the above, it reveals that the whole story is cooked up story and arranged to prove that Shri Rohitbhai K. Mehta is not the owner of the factory/business, but Shri Rohitkumar K. Mehta could not succeed in doing so as discussed above. 7. On merits the AO repeated the addition as stated in ground No. 3 as above reproduced in grounds of appeal. 8. In the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased any factory with the name of Ms. Associated Apparels at Kandla Free Trade Zone(Kutch) and he does not know any Ramesh P. Pandya. the seller of the factory He has also stated that he is a poor man serving in Mehta Guest House as a Manager on a salary of ₹ 800 - per month. He does not own any movable or immovable property and he is living in rented accommodation. He has also stated that he has not given any power of attorney hut he was simply signing the papers as per the instructions of his boss Seth Shri Rohitkumar K. Mehta. He has further, categorically stated that Shri Rohitkumar K. Mehta has purchased the said property and the payment for purchase of the same has been made by him and if his name appears in the purchase document of the said factory, then it is a false document. With regard to the above, during the cross examination statement given by Shri Kantilal Maru on 31.05.99, he has started as under:- (Page 10 of CIT(A) order) I have considered the facts of the issue under consideration, the statements recorded and other information available along with the contentions of the appellant in this regard. The statement given before the I.T.O by Shri Kantilal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his fact to any authority i.e. Customs, Court or Income-tax department. If is only when has came to know about his liability of taxation that he changed his view. In this regard, it could be said that till 25.11.1993 Shri Kantilal R. Maru was under the employment of Shri Rohitkumar K. Mehta and he was blindly signing all papers. correspondence etc. as per the instructions of Shri Rohitkumar K. Mehta. As far as the liability of taxation is concerned, the first Income tax assessment order of Ms. Associated Apparels was framed on 30.03.1987 on Shri Rohitkumar K. Mehta and not on Shri Kantilal R. Maru. Thus, there was no question of any Income-tax liability in the case of Shri Kantilal R. Maru which made him to change his stand in 1993. In fact, if can be said that it was only after he got free from the clutches of Shri Rohitkumar K. Mehta after leaving his service that he could give a statement with a free wind in order to bring out the facts correctly. 7. Other relevant circumstances pertaining to the ownership of Ms. Associated Apparels are as under: (1) The following clause from the general power of attorney given by Shri Kantilal R. Maru in favour of Shri Rohitkumar K. Meht ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Pandya treated as owner of M/s. Associated Apparels and Shri Kntilal R. Maru, who is shown to have later got M/s. Associated Apparels. (6) In the cross examination statement of Shri Kantilal R. Maru recorded on 31.05.1999, he has stated that a person named Shri R.P. Pandya is not existing and the factory was purchased by Shri Rohitkumar K. Mehta in bogus name. (8) The above surrounding circumstances are clear pointer to the fact that Shri Rohitkumar K. Mehta is the real owner of Ms. Associated Apparels and Shri Kantilal R. Maru is only his benamidar. If Shri Kantilal R. Maru had been the real owner of Ms. Associated Apparel, the documents pertaining to purchase of the said business would not have been found at the business premises of Sheth Rohitkumar K. Mehta during search. It was not necessary for the real owner to pass on the purchase documents to for the real owner to pass on the purchase documents to the General power of attorney holder. Further, it is not understandable why a low paid employee would give General Power of Attorney in favour of his employer to run his business. If he had the means to purchase such a business, he would not be in service for a paltry s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh paper book filed by the assessee. The brief facts of the case are that the original assessment was framed on the basis of the order of Customs Department and search u/s. 132 of the Act. The assessment order dated 30-03-1987. In the first round of litigation the assessee filed appeal before CIT(A) which has been decided vide CIT(A)'s order dated 02-09-1988. The CIT(A) confirmed the order of AO except deleting two additions ₹ 39,970/- and ₹ 1500/- pertaining to income of wife and mother of the assessee. The assessee filed second appeal before ITAT. The ITAT send back matter to the file of CIT(A) vide its order ITA No.2729/Ahd/1988 dated 07-12-1992. The assessee filed Miscellaneous Application against the said order of ITAT dated 07-12-1992 which was dismissed vide MA No.15/Ahd/92 dated 03-03-1993. In compliance to diction of ITAT, the CIT(A) decided the matter vide his order dated 24-03-1992. The CIT(A) send back matter to the file of AO with direction to determine whether Shri Rohit K. Mehta was the owner of M/s. Associated Apparels. 11.1 The AO vide his impugned order dated 21-03-1994 in second round of litigation held that the whole story is cooked up story a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of customs department and by wrongly identifying himself as Rameshkumar Pranlal Pandya and though his true name Rohitkumar Krushnalal by hiding his true identity by having prepared false documents with false signatures to get illegal benefits had prepared the copies of the said documents and though Kantibhai Rajmjibhai Maru know that the person who had done the document in his name is not Rameshkumar Pranlal Pandya but is Rohitkumar Mehta, had helped him and in this way in the said illegal act Kantibhai Ramjibhai Maru is also responsible. 11.3 It has also been noted from a copy of sale agreement of running business of M/s. Associated Apparels between Mr. Maru and Pandya dated 27-06-1983 was also filed before the Court. The Court took this document as Exhibit 275-agreement of dated 27-06-1983 11.4 The accepted facts noted by the Court in para-20 of the judgment are as under:- (20) For the presentation of the above mentioned statements this below defined acceptable facts must be better to mention. The Accuseds in the name of Rameshkumar Pranlal Pandya, Bhomeshwar Plot, street No.2, Rajkot -360001 in K.F.T.Z in the name of M/s. Associated Apparels by importing the raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeing that the present Accused had done the offence of cheating cannot be believed as proved. Shri Special A.P.P. Dholakiya states that the Accused by identifying himself as R.P Pandya will use it for temptation to K.F.T.Z. and then will cheat and had prepared the document with such intention cannot be proved. Instead of it the evidence of the complainant side itself proves that the deeds done in favour of K.F.T.Z.. R.P. Pandya had signed as the Accused Not only that the witness of the complainant side Ashokkumar Chaturvedi accepts in his evidence that the Accused and the person signing in the deed is R.P. Pandya the same person and no one else. The Lying evidence also states that the present Accused and R.P. Pandya both are the same person and not others. Above it, the witness of the complainant side Liladhar Valji in his evidences accepts that the present Accused Rohitkumar Krushnalal Mehta is known by two names with R.P. Pandya also. In short on seeing the proof of the complainant side, it is clearly accepted that the Accused himself is R.P. Pandya which he had not informed wrong in favour of K.F.T.Z. and by informing false the Accused in the questioned documents has not signed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that during the course of search at the business premises of Mehta Hotel and residential premises of assessee, some papers indicating the business done by the assessee in the name of M/s. Associated Apparels, Kandla Free Trade Zone were found. Shri Kantiial Maru in his statement stated on oath record on 25-11-1993 stated that real owner of the factory is Rohitkumar K. Mehta and he did not know any Rameshchandra P. Pandya. Mr. Maru was employee of Mr. Mehta at salary of ₹ 800/- p.m. and he did not have capacity for investment and to run such business. The CIT(A) provided opportunity to the assessee for examination of Mr. Maru, which was examined on 31-05-1999. Question and answer No.7 and 8 are reproduced below.:- Q. No. 7. Is the purchase deed dt.27.6 1983 signed by you ? Is it your signature ? Ans. 7. This matter is false. I did not purchase the same. R.P. Pandya and Rohit Mehta is one person A person named R.P. Pandya is not existing. The factory was purchased in bogus name.(emphasis Supplied) Q.No.8. Power of attorney dt 17.3.84 in favour of Rohit K. Mehta on stamp paper of ₹ 50/- and with Court Fee ₹ 6.20 affixed was signed before the Executive Magi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted by revenue authorities after examining the issue in detail taking statements of concerned person. We therefore find that for the purpose of provisions of Income-tax Act, the CIT(A) after detailed discussions some them reproduced in above Para No. 8.8.1 and 8.2 of this order, has rightly confirm action of the AO in treating Shri Rohitkumar K. Mehta as the owner of the business in the name of M/s. Associated Apparels. On perusal of paper book, we noticed that the assessee filed appeal before the High Court challenging the order of Chief Judicial Magistrate, Bhuj on 04-02-2003. But the assessee failed to point further progress on that case, neither any stay or the order has been set-aside by High Court nor bring to our notice. Thus ground number 4 is decided against assessee. 11.9 Now we are coming to the merit of the case. The relevant ground of the appeal is ground number 3 reproduced above. The two additions of ₹ 18 lakh and ₹ 7.20 lakh made by the AO made on account of imported zippers from Japan ₹ 18 lakh and profit 40% thereon, calculation comes to ₹ 7,20,000/-. The revenue authorities recorded facts on the basis of seized material that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial but in respect of profit of 40% on that goods such material is not on record. Under the circumstances of the case, we find that the addition of ₹ 18 lakh also cover if deficiencies on this addition We therefore, deleted the addition of ₹ 7,20,000/-. 11.13 Next two addition of ₹ 4,75,500/- and ₹ 1,26,900/- on account of goods imported and profit thereon. The AO on the basis of verification of assessee's business premises on 08-08-1983 by Customs Authority, Kandla noted that the assessee purchased imported zip fasterns of ₹ 4,75,499/-. At the time of physical verification, the Custom Authority found shortage in goods valued at ₹ 3,17,243/-. The AO drew conclusion that the assessee disposed off the goods in open market. The AO applied 40% profit rate on ₹ 3,17,243/- and calculated profit of ₹ 1,26,897/-. The AO accordingly made addition of ₹ 4,75,500/- value of goods purchased and ₹ 1,26,900/- profit on goods sold. After considering fact of the case that on account of shortage in goods there is litigation. The goods purchased by assessee related some incentive for export and government has filed Criminal Case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourned on one pretext or the other. On the last date of hearing i.e. 21-12-2011, the assessee Shri R.K. Mehta himself appeared and filed written submission wherein it was contended that in his case, the entire original assessment was framed on the basis of search action u/s.132 at residential premises of the assessee and he was considered as proprietary of M/s. Associated Apparels. But in fact, he is holder of power of attorney of Shri Kantilal Maru. Reliance was also placed on written submission already placed on record which was submitted by Shri M. J. Lava. 3. In the proposed order, the learned brother has confirmed the addition of ₹ 18,00,000/- being investment in purchase of goods for the details reasons given in para-11.9 on page-19 of the impugned order. In para-11.8 of the proposed order, the learned brother has held that assessee accepted this stand of the revenue that Shri Rohitkumar K. Mehta is the owner of M/s. Associated Apparels and decided the ground No.4 against the assessee. Once it is held that assessee is the owner of M/s. Associated Apparels who made investment of ₹ 18,00,000/- in purchase of goods, in my considered opinion, the investment made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the test of cross examination by the Authorised Representative of the appellant on 31.05.1999. It is also to be noted that Shri Kantiial R. Maru left the service of Sheth Rohitkumar K. Mehta on 25.11.1993 i.e. the date on which his statement was recorded by the I.T.O. This goes to show that this statement was given in a free manner and not under pressure or duress. The facts mentioned in the said statement cannot be ignored and have to be relied upon. The next contention of the appellant is that from 1984 to 1993 he has complied with all correspondence with the Court and Customs as the owner of M/s. Associated Apparels and before 25.11.93, he has not informed this fact to any authority i.e. Customs, Court or Income - tax department. It is only when has came to know about his liability of taxation that he changed his view. In this regard, it could be said that till 25.11.1993 Shri Kantilal R. Maru was under the employment of Shri Rohitkumar K. Mehta and he was blindly signing all papers, correspondence etc., as per the instructions of Shri Rohitkumar K Mehta. As far as the liability of taxation is concerned, the first Income tax assessment order of M/s. Associated Apparels was fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the title of Shri Maru to the firm there appear to have been proceedings in Civil Courts initiated either by Shri Maru or his power of attorney agent but that the said proceedings were terminated by withdrawal thereof before any actual decision. (5) From the order dated 03.07.1985 of the Additional Collector of Customs, Kandla Free Trade Zone, it is seen, Shri Rohitkumar K Mehta was earlier appearing before the Customs authorities on behalf of Shri Ramesh P. Pandya. Only at the later stage of hearing Shri Rohitkumar K. Mehta, started appearing as Power of attorney holder of Shri Kantilal R. Maru. Thus, Shri Rohitkumar K. Mehta was going both on behalf of Shri R.P. Pandya treated as owner of M/s. Associated Apparels and Shri Kntilal R. Maru, who is shown to have later got M/s. Associated Apparels. (6) In the cross examination statement of Shri Kantilal R. Maru recorded on 31.05.1999, he has stated that a person named Shri R.P. Pandya is not existing and the factory was purchased by Shri Rohitkumar K. Mehta in bogus name. (8) The above surrounding circumstances are clear pointer to the fact that Shri Rohitkumar K. Mehta is the real owner of M/s. Associated Apparels and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s remanded to the file of AO with the direction that he will ascertain the actual investment made in machinery/shed in the name of M/s. Associated Apparels and make necessary addition in accordance with law. Since now it is clear that Shri R.P Pandya is none-else than assessee, therefore, in the interest of justice, he should cooperate with the department and tell the actual investment made in machinery/shed etc. to start factory in KFTZ in the name of M/s. Associated Apparels. Investment in household expenses ₹ 40.400/-: 6. In the written submission filed before us, in respect of this addition, the following submissions are made:- (i) Investment in household expenses ₹ 40,400/.00 Assessing Officer has made this addition as the same has been in the original assessment order. However, the Hon'ble I.T.A.T has restored back this addition to the CIT(A) vide M.A. No. 15/92. (PAPER BOOK PAGE N0.15) Accordingly now the CIT(A) has passed this issue vide his order No. CIT(A) VIII/WD-2(2)/RJT/2/94-95 dated 1.8.1999 on page Nos. 4 and 18 in para Nos. 3 and 10 respectively. It was submitted before the CIT(A) that estimation of household expenses is without a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. At present, before me, a stand is taken that several people like Shri Umakant Parekh etc., entrusted liaison work to the appellant has met these expenses. In this behalf also no proof is produced and Shri Umakant Parekh's address is not even given. Besides, it is pointed out that the appellant was having 30 acres of land and these expenses could have been met out of agricultural income. Unfortunately, in both these cases no evidence is produced and it is clear that the appellant is only whistling in the dark. Under these circumstances, I am of the opinion that the explanation which is ever changing cannot be accepted and the action of the ITO in adding an amount of ₹ 40,400/- in this behalf deserves to be confirmed. Through I.T.A.T., Ahmedabad Bench 'C' order in M.A. No. 15 (Ahd)/1992 dated 3-3-1993, the entire appeal including the addition of ₹ 40,400/- has been restored to the C.I.T.(A) for decision. Accordingly, the appellant was asked to make submissions against the various additions including the aforesaid amount of ₹ 40,400/- vide this office letter dated 5th August, 1999. The following submissions have been made: The addition is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. for which no withdrawals have been made by him. The appellant's wife has made withdrawals of ₹ 9,600/-for household expenses for which credit has been given. Further, the appellant has not been able to show how the estimate of ₹ 50,000/- is excessive in his case. I agree with the C.I.T. (A)-l, Rajkot (order No. CIT.R/498/87-88 dated 24.3.92) that the estimate on the facts and circumstances of the case is justified. The addition made is required to be sustained, particularly because the appellant has not been able to refute any the facts/data on the basis of which addition is made in spite of Specific opportunity allowed. The addition of ₹ 40,400/- made in the hands of the appellant is, therefore, confirmed.' 8. From the perusal of submission made by assessee (supra) and reasoning given by the ld. CIT(A) in impugned order in para-10 which is reproduced by me (supra), it is clear that even if it is presumed that visit to Dubai was for the purpose of business of the assessee viz., M/s. Associated Apparels which is owned by the assessee on this count, therefore, relief of ₹ 3431/- for ticket fare can be given. The purchase of Sony TV and customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee from June, 1983. It has also come to the notice that he spent about ₹ 2,60,000/- for the purchase of the said business. No proof as regards to the source of payment is forthcoming. I would therefore, include ₹ 2,60,000/- as unexplained investment by the assessee for the purchase of the said business. It is seen from the papers found during the search as mentioned above that the assessee had imported following items: Sr.No. Description. Cost. Value in Rs. 1. 45 Wooden cases for containing 450000 pieces of Polyster Zipper from Japan. NR Y 69,20,550 5,76,711 2. 274 Cartons containing 65% Polyster 35% Viscos Suitings 48415.5 Yds. US $ 65,360 5,88,240 3. 20 cases of snap fastner Y 30,75,800 2,56,310 The said goods were insured for a sum of 71897 US Dollar The value of goods comes to US$ 65,360 as per invoice No.DE/211/83-84 dated 11th August, 1983. The goods in questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises was closed and duly locked. The Customs Authority, then sealed the premises in August, 1983. As such the investment of above goods is during the F.Y. relevant to A.Y. 1984-85. In absence of any proof or evidence and any compliance from the assessee, I would hold that the assessee has paid the amount for the purchase of this goods out of undisclosed sources. In absence of any compliance to the notice u/s. 139(2) and 142(1) of the Act, I would proceed to finalise the assessment holding there in the said amount must have been spent/invested by the assessee out of income from undisclosed sources and should be added to the total income. The Customs authority subsequently took the search of the premises in the presence of two panchas on 26-3-1985 and found that out of total imported by the assessee valued at ₹ 4,75,499/- there was shortage of goods valued at ₹ 3,17,243/-. It is clear that the assessee disposed off the goods in question, which was imported for the purpose of using in Free Trade Zone, in the open market. Considering the cost of goods, and the prevailing market rate at the relevant time, I would estimate the profit of the assessee at 40% of the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods that in respect of profit earned, there is no material on record which shows that the assessee has earned profit thereon. Further, in the proposed order, the learned brother deleted the estimated addition @ 40% in respect of goods valued at ₹ 3,17,243/- on the ground that final outcome of fate of those goods is not available and allowed the benefit of telescoping. To sum up in the proposed order, the addition on account of purchase of goods of ₹ 4,75,500/- and profit addition of ₹ 1,26,900/- is deleted on the ground by allowing benefit of telescoping. On 24-04-1987, Security Officer, Kandla Free Trade Zone (KFTZ) made a complaint to police wherein it was alleged that assessee namely; Shri Rohitkumar Mehta by identifying himself as Rameshkumar Pandya illegally removed 3,84,541 Nos. imported zippers valued ₹ 3,17,243/- and put Government into loss of ₹ 6,23,977.31 towards customs duty on the same. On this complaint, Criminal Case No. 2188/1993 was registered and decided on 31-01-2003 by Chief Judicial Magistrate at Bhuj-Kutchchh. From the perusal of this judgment, it can be seen that Shri R.P. Pandy and accused Rohitkumar Mehta are same person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the learned brother has allowed the benefit of telescoping. Against which income the benefit of telescoping can be given is not known. Whether the addition of ₹ 18,00,000/- and/or ₹ 7,20,000/- and ₹ 1,26,900/- confirmed were available for making investment of ₹ 4,75,499/-needs verification at the end of AO. Onus to prove the same is on the assessee. I am, therefore, of the view that looking to the peculiar facts of this case, it will meet the ends of justice if the matter is restored to the file of AO for allowing the benefit of telescoping. For this limited purpose, we remand the matter to the file of AO with the direction that assessee will furnish the necessary details/evidences. The onus to prove the nexus for allowing benefit of telescoping is on the assessee. After examining the details, if AO is satisfied, he will allow the benefit of telescoping in accordance with law. 14. In the result, for statistical purpose, the appeal of the assessee is treated as partly allowed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As there is a difference of opinion between the Members of the Bench we state the following point of difference and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of goods imported ₹ 4,75,500/- and estimated profit from the value of shortage of goods of ₹ 1,26,900/- be deleted or confirm subject to remanding it to the file of AO for examining and allowing the benefit of telescoping in accordance with law. 2. I have carefully considered the above questions drawn by the learned Members of the Rajkot Bench and have perused the proposed orders of the learned JM and the learned AM. I have heard the learned CIT-DR and the assessee-in-person. The contention of the learned CIT-DR and the assessee were broadly similar as advanced by them before the regular Bench and recorded in the proposed orders of the learned JM and the learned AM. 3. I propose to deal with three points of differences referred to me by the Hon'ble President in serial order. I have heard the learned CIT-DR and the assessee on all the three issues before me. 4. The first point of difference, as reproduced above, relates to the issue of addition of ₹ 40,400/- made by the AO which was deleted by the learned AM and restricted to ₹ 30,000/- by the learned JM. 5. The case of the assessee was that the addition of ₹ 40,400/- towards hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as repeated the finding of the learned AM made in his proposed order. The learned CIT-DR submitted that the concern, AA has been held as the ownership of the assessee by both the learned AM and the learned JM and the addition on account of investment of ₹ 18 lakhs in the purchase of goods having been sustained by both the Hon'ble Members, there was no justification for deleting the investment made in proprietary business viz. AA of ₹ 2.60 lakhs. 8. I have considered rival submissions and have perused the proposed orders of the learned JM and the learned AM on this issue and the written submissions filed by the assessee. I find that both the learned JM and the learned AM agreed that the assessee is the owner of AA and has confirmed the addition of ₹ 18 lakhs being the investment in purchase of goods of AA . Both the learned JM and learned AM have given detailed reasons for coming to the conclusion that AA is the ownership of the assessee. The difference between the learned Members arose due to the fact that the learned AM has deleted the addition of ₹ 2,60,000/- in the proposed order observing that once the sale agreement itself has not been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there was no material on record to show that the assessee has earned profit thereon. I find that the reasoning of the learned JM on this issue seems to be more convincing. Once it was found as a matter of fact that M/s. AA is the concern and ownership of the assessee and that the assessee has made investment of ₹ 18 lakhs in purchase of goods therein, the preponderance of probability is that the assessee would not sell goods at NIL profit and must have earned profit in the business of the goods amounting to ₹ 18,00,000/-. The learned JM has observed that prima facie it appears that whole exercise was being done to evade customs duty which appears to be more than 100%, and therefore, it could not be said that the profit estimation by the AO at 40% was excessive or unreasonable. I find that the assessee has not shown that how he disposed of the goods and has not filed the relevant details relating thereto. In the absence of any details filed by the assessee, the only course left is to make a fair and reasonable estimate of profit in the hands of the assessee. The customs duty in this case is not less than 100% and which have not been paid, the estimate of profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am of the view that the assessee is entitled to the telescopic benefit, and accordingly, the addition of ₹ 4,75,500/- and ₹ 1,26,900/- being covered with the additions confirmed by the Tribunal, and there being no material on record to suggest that separate additions of these two amounts are called for, I agree with the decision of the learned AM in this proposed order in allowing the telescopic benefit with regard to these additions of ₹ 4,75,500/- and ₹ 1,26,900/- to the assessee and both these additions are deleted. The point no. 3 referred to me by the Hon'ble President is disposed of accordingly. 11. The matter will now go back to the Division Bench for passing order in accordance with majority view. ORDER UNDER SECTION 255(4) OF THE INCOME TAX ACT, 1961 T.K. Sharma, Judicial Member On account of difference of opinion between the Members constituting the regular Bench, following three questions were referred for consideration of the Third Member: 1. Whether on the facts and in the circumstances of the case and material on record the addition of ₹ 40,400/- made by the AO on account of investment in household expense sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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