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TMI Blog2020 (9) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... he Settlement Commission on account of scrap business - HELD THAT:- CIT(A) in the impugned order given a categorical finding that no evidence was found during the course of search to justify the disclosure of income from scrap business. The A.O. also has not quoted or referred to any document found during search with respect to income from scrap business. No addition could have been made u/s 153A unless the same is linked with the material found during search. In view of these facts, the ld. CIT(A) concluded that the addition made by the A.O. is uncalled and deserves to be deleted. The detailed finding given by the ld. CIT(A) has not been controverted by the ld DR, accordingly, we do not find any reason to interfere in the finding so recorded by the ld. CIT(A) for deleting the addition of ₹ 15.00 lacs made by the A.O. on account of scrap trading. Interest earned on undisclosed advance - HELD THAT:- There is no material on record so as to establish that assessee received interest on the alleged advances. It is the working of the mind of the A.O. that has resulted in addition on account of interest. The interest has been calculated notionally and addition has been made ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been treated as unexplained of the value of ₹ 8,85,000/-. Assessee has disclosed 189.620 carats of gold in wealth tax and IT returns as against 373.620 grams found during search. Thus 184 grams remained to be explained. The assessee had pleaded that considering the status of family, number of family members, traditions in the traditional marwadi family more credit required to be given of the diamond found during search. CIT(A) has given credit of 25% of 184 carats of diamond which remained unexplained. Thus 46 carat of diamond has further been treated as explained and balance 138 carats of diamond of the value of ₹ 37,13,994/- was treated as unexplained. The silver weighing 39 kg has been treated as explained by the Ld. CIT(A) with respect to the status of the family and traditions. CIT(A) has sustained addition of ₹ 97,65,444/- (885000+3713994+5166450 [surrendered by the assessee]) totaling to ₹ 97,65,444/-. A detailed finding has been recorded by the ld. CIT(A) for upholding the addition of ₹ 97,65,444/-. -The detailed findings so recorded by the ld. CIT(A) has not been controverted by the ld AR and the DR by bringing any positive material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of other seized documents - HELD THAT:- Income surrendered on the basis of above documents i.e. ₹ 49,24,000/- and ₹ 4,50,000/- in the A.Y. 2012-13 and ₹ 25.00 lacs in the A.Y. 2013-14 which works out to be ₹ 78,74,000/-, deserves to be set off out of addition of ₹ 2.55 crores made in the A.Y. 2013-14 on account of surrender for advances. In nutshell, the addition of ₹ 2.55 crores made in the A.Y. 2013-14 on account of surrender for advances is restricted to ₹ 1,76,26,000/- (2,55,00,000 - 78,74,000). We direct accordingly. Deleting the addition made on account of interest alleged to be earned which was found to be not actually earned by the assessee confirmed. - ITA No. 1309/JP/2018, ITA No. 1090/JP/2018, ITA No. 1091/JP/2018, ITA No. 1168/JP/2018, ITA No. 1306/JP/2018, ITA No. 1307/JP/2018 - - - Dated:- 7-9-2020 - Shri Ramesh C Sharma, AM And Shri Vijay Pal Rao, JM For the Assessee : Shri S.L. Poddar (Adv) For the Revenue : Shri Amrish Bedi (CIT-DR) ORDER PER: R.C. SHARMA, A.M. These are the appeals and cross appeal filed by the assessee and the revenue against the separate orders of ld.CIT(A)-IV, J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr.No. A.Y. Surrender on a/c of advances Amount of jewellery and other surrender Other seized documents Sale of Arpit Nagar land Total 1 2008-09 150000 0 0 0 150000 2009-20 200000 0 0 0 200000 2010-11 0 0 600000 0 600000 2011-12 3300000 0 0 24300000 27600000 2012-13 56850000 0 4924000 0 61774000 2012-13 0 0 450000 0 450000 2013-14 25500000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s confirmed the addition of ₹ 97,65,444/- out of the addition made on account of jewellery. 10. By the impugned order, the ld. CIT(A) has deleted the addition of ₹ 2,03,965/- made by the A.O. on account of interest earned on undisclosed advances of ₹ 25.00 lacs. Further the ld. CIT(A) has also deleted the addition of ₹ 6,87,125/- made by the A.O. on account of interest earned on undisclosed advances of ₹ 49.24 lacs. 11. The ld. CIT(A) also deleted addition of ₹ 2,06,257/- made by the A.O. on account of interest earned on undisclosed advances of ₹ 12.41 lacs. 12. During the course of assessment, the A.O. had also made addition of ₹ 4.00 crores on account of unexplained transactions which was deleted by the ld. CIT(A). 13. The ld. CIT(A) has also deleted addition of ₹ 1,11,98,057/- made by the A.O. on account of unexplained investment in jewellery. The ld. CIT(A) had also deleted addition of ₹ 56,39,819/- made on account of unexplained expenditure U/s 69C of the Act. Against the addition upheld by the ld. CIT(A), the assessee is in further appeal before the ITAT. However, against the addition deleted by the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search. Plethora of decisions were cited wherein it has been held that if during the course of search no undisclosed income is noticed, action u/s 153A is not triggered. The following case laws are relied on: - (i) DCIT Vs. Royal Marwar Tobacco Product (P.) Ltd [2009] 29 SOT 53 (AHD.)(URO): Since no material indicating any suppressed sales for assessment years 2000-01 to 2003-04 had been found during course of search for said years, and there was no defect in books of account, Assessing Officer was not. justified, in making addition for said years on basis of material seized relating to assessment year 2004-05. (ii) In Kusum Gupta v. DCIT (ITA Nos. 4873/DeI2009, (2005-06) 2510(A.Y. 2003-04), 3312 (A.Y. 2004-05) 2833/Del/2011 (A.Y. 2006-07) order dt. 28-032013): ITAT Delhi bench also held as under: 10. On perusal of the assessment order for the year under consideration and others in question in the appeals before us, we find substance in the contention of Ld. AR that no incriminating material found or statement recorded during the course of search was there to suggest even prima facie that some undisclosed income was there to attract the invocation of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings are completed prior to the search then nothing merges with proceding u/s 153A of the Act and nothing abates. In such a situation, the AO has to respect the completeness of the proceedings. Admittedly, in the case of assessee, no incriminating documents were found and seized. The provisions of section 153A give power to assessing officer to assess and reassess the income. The assessing officer is empowered to make addition on account of undisclosed income or income escaped assessment. In the case under consideration, there is no incriminating material found during the course of search relating to the assessment year under consideration. The time period for issuing notice u/s 143(2) was already expired prior to the date of search. Therefore, the proceedings do not get abated by virtue of proviso to Section 153A. In view of the facts of the case it is submitted when there was no material found during search warranting action u/s 153A, the Ld. Assessing Officer has no power to frame the assessment u/s 153A. The issue has now been decided by the Jurisdictional High Court of Rajasthan in the case of Jai Steel India Vs. ACIT 88 DTR 1. The Hon'ble High Court has held as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring search which may be in the form of any document, books of accounts, cash, stock or bullion. In this case nothing of the sort was found or seized. Hence the notice issued u/s 153A is invalid. The issue has now been decided by the Jurisdictional High Court of Rajasthan in the case of Jai Steel India Vs. ACIT 88 DTR 1. The Hon'ble High Court has held as under Section 153A cannot be read in isolation, in as much as, the same is triggered only on account of any search/requisition u/s 132 or 132A. If any books of accounts or other documents relevant to the assessment had not been produced in the court of original assessment and found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or reassessing the total income under the provisions of s. 153A. Even in a case where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration. The requirement of assessment or reassessment under the said section has to be read in the context of s. 132 or s. 132A, in as much as in case nothing incriminating is found on account of such search or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the case, therefore, framing of the assessment is illegal and unlawful. Therefore, the notice issued u/s 153A deserves to be quashed. 18. As per the ld AR while confirming the addition of ₹ 6.00 lacs the Ld. CIT(A) has not perused the seized papers nor has gone through the statement of the assessee recorded u/s 132(4) of the Act, wherein the assessee had very clearly stated that the amount of ₹ 600000/- was undisclosed income of Shri Anand Singhal who was present at the time of statement and admitted that the income of ₹ 600000/- pertained to him. The statement u/s 132(4) is on oath and carries evidentiary value. It cannot be superseded by a subsequent affidavit of the assessee that income of anybody may be assessed in his hand. In these circumstances the addition was wrongly been made in the hands of the assessee and the Ld. CIT(A) has also erred in confirming the same. 19. It was argued by the ld AR that the Confessional statement u/s 132(4) being under pressure violates the Board circulars. 20. The ld AR has submitted that in the case of the assessee during the course of search statement was recorded u/s 132(4) and during the course of stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as there is no proof to show that the amount mentioned in the said document was paid by the company. (iii) Moolchand Kumawat Sons Vs. DCIT (Ajmer) ITAT Jaipur Bench 42 Taxworld 241 in M.A. No. 93/JP/2008 arising out of ITSSA No. 24/JP/2005 order dated 20.02.2009 Addition cannot be made on the basis of a dumb document or on the basis of entries found recorded on a paper seized during search without conducting any enquiry from the concerned party. (iv) Assistant Commissioner of Income Tax Vs. Satya Pal Wassan (2007) 295 ITR 9 AT 352 (Jabalpur) A documents found during the course of a search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant Assessment Year. Any gap in the various components for the charge of tax must be filled up by the Assessing Officer through investigation and correlation with the other material found either during the course of the search or on investigation. Without this no addition can be made on the basis of a loose sheet. (v) It was held in the following cases that addition could not be made on the basis of uncorroborated noting on loose sheets and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f natural justice involves a right in the assessee to inspect the reports and obtain the substance of the all relevant documents such as statements, orders, reports etc. so as to be able to lead evidence in rebuttal or to cross examine witness who have given evidence against him. It also means that the assessee should be given a reasonable time and opportunity to produce such evidence as he may consider necessary. (iii) In the following it was held that the Assessing Officer can make enquiries to gather material privately and confidentially. He can also summon witnesses and record their statement in the presence of the assessee or even behind his back. However, the substance of any information sought to be used against the assessee, should be put to him and he should have fare opportunity. It is upto the assessee to avail of it, constant with the principal of natural justice, to rebut the same. (a) Chiranji Lal Steel Rolling Mills Vs. CIT (1972) 84 ITR 222 (P H) (b) Namasivayam Chettiar (S.N.) Vs. CIT (1960) 38 ITR 579 (SC) (c) Abdul Razak Vs. CIT (1935) 3 ITR 361 (Pat) (d) Balasubramanian (P.N.) Vs. ITO (1978) 112 ITR 512 (AP) (e) Bagsu Devi Bafna Vs. CIT (1966) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld addition of ₹ 33.00 lacs out of ₹ 34,34,440/-on account of interest earned and undisclosed advances made by the assessee on presumption basis. As per the ld AR, the paper i.e. page no. 1 and 2 of annexure AS-1 to AS-4 on the basis of which addition was made did not pertain to the assessee. Hence there was no occasion for making addition in the hands of the assessee. These papers were virtually dump papers as these did not contain any date particularly the year which these pertain, it was not known as who was the writer of these papers and further these papers did not contain signature of the assessee. It was argued that the A.O. had failed to link these papers with the business of the assessee either with the other material found during search or by conducting any post search enquires. It is settled principle of law that unless the period of the papers is established and the writer of these papers is known, no addition could be made. 25. As per the ld AR, the additions were made against the principles of natural justice. It was submitted that the A.O. had referred to some report submitted by the CIT to ITSC and additions have been made exploiting this report. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, the same cannot be added to the undisclosed income of the assessee. No inference could be drawn against the assessee much less any inference of unexplained expenses on the basis of a dumb document found at the residence of its director as there is no proof to show that the amount mentioned in the said document was paid by the company. (iii) Moolchand Kumawat Sons Vs. DCIT (Ajmer) ITAT Jaipur Bench 42 Taxworld 241 in M.A. No. 93/JP/2008 arising out of ITSSA No. 24/JP/2005 order dated 20.02.2009 Addition cannot be made on the basis of a dumb document or on the basis of entries found recorded on a paper seized during search without conducting any enquiry from the concerned party. (iv) Assistant Commissioner of Income Tax Vs. Satya Pal Wassan (2007) 295 ITR 9 AT 352 (Jabalpur) A documents found during the course of a search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant Assessment Year. Any gap in the various components for the charge of tax must be filled up by the Assessing Officer through investigation and correlation with the other material found either du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 ITR 271 (SC) (ii) CIT vs. Anupam Kapoor 299 ITR 179 (P H) (iii) CIT vs. Dhiraj Lal Girdhari Lal 26 OTR 736 (iv) Dhakeshwari Cotton Mills 26 ITR 775 (SC) (v) State vs. Gulzari Lal Tondon 1979 AIR 1382 (SC) (vi) J.A. Naidu vs. State of Maharastra 1979 AIR 1537 (SC) Further it is established position of law that interest cannot be taxed on notional basis. In this case there is no evidence that interest accrued to the assessee or interest was received by him. Even the assessee has challenged the addition on account of alleged advances and hence the question of taxing interest does not arise. There is no material on record to as to establish that assessee received interest on the alleged advances. It is the working of the mind of the A.O. that has resulted in addition on account of interest. The interest has been calculated notionally and addition has been made accordingly. No addition can be made on notional basis. The following case laws are quoted in support: - (i) COMMISSIONER OF INCOME TAX vs. EXCEL INDUSTRIES LTD. (2013) 358 ITR 295 (SC) Income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition is assailed as under and deserves to be deleted. 32.1 The ld. AR invited our attention to Annexure AS-4, 5, 6 Seized from residence of Shri Mangi Lal Kandoi, Ambabari, Jaipur. Annexure-A Exhibit-1 Seized form Anand Singhal S/o Mangi Lal Kandoi, Ambabari, Jaipur. 32.2 As per the ld AR, Annexure-AS- 4, 5, 6 is summary of all loans and advances given by the assessee as on date of search that is 18.07.2020. The assessee has surrendered ₹ 8.6 Cr. on the basis of above Annexures. The assessee own s all the entries recorded in above Annexures and the total of this was 8.6 Cr. 32.3 As per the ld AR, Annexure-A Exhibit-1, 2 and 3 are found from Shri Anand Singhal son of the assessee who is recording entries at the time of transactions and subsequently merged in the Annexure-AS- 4, 5, 6. It was submitted before the Ld. AO that the entries recorded in Annexure-A- Exhibit-1 are part of Annexure-AS- 4, 5, 6. The year wise additions made by the Ld. AO on the basis of Annexure-A Exhibit-1 are as under :- 1) Assessment Year 2010-11 ₹ 6,00,000/-. In the assessment order on page no. 13 in para 8.2.2 the assessee has submitted that above ₹ 6,00,000/- is part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were given. As per the ld AR, all these amounts were part of ₹ 8.60 crores surrendered by the assessee, therefore, no separate addition are required. 33. On the other hand, the ld CIT-DR has supported the order of the A.O. and vehemently argued that all the additions were made on the basis of seized material and the surrender was made by the assessee during the course of search. As per the ld. CIT-DR, the set off asked by the assessee with regard to income earned and then used for advances was not before the lower authorities, therefore, no relief can be given for the amount so earned and used for advances. Our attention was drawn to the various findings by the A.O. with regard to each and every seized material giving description of the entries therein. He further contended that the ld. CIT(A) has not properly appreciated the finding of the A.O. while deleting the various additions so made by the A.O. Accordingly, he requested for upholding various additions so made by the A.O. 34. We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also gone through the statement recorded U/s 132(4) of the Act and the vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as per annexure 'A-3' page no. 14 and ₹ 4250/- on account of brokerage earned @ 10% made by the assessee on presumption basis. (iv) Addition of ₹ 6,87,175/-on account of interest earned on undisclosed advances of ₹ 49,24,00,000/- addition made in earlier years on presumption basis with reference to annexure A-1 page 5. (v) Addition of ₹ 3,97,457/- (₹ 1,91,200/- on account of undisclosed advances and Rs. on account of interest of ₹ 2,06,257/- on presumption basis on such advances with reference to annexure A-1 page 2.) (vi) Addition of ₹ 4,00,00,000/- with reference to annexure AS-3 and AS-7. (vii) Addition of ₹ 2,09,63,501/-on account of unexplained jewellery. (viii) Addition of ₹ 56,39,819/-on account of unexplained cash. 36. By the impugned order, the ld. CIT(A) has confirmed the following additions: (i) Addition of ₹ 2,55,00,000/- on account of alleged undisclosed advances made by the assessee on the basis seized documents. (ii) Addition of ₹ 25,00,000/- on account of alleged undisclosed advances made by the assessee on the basis seized documents. (iii) Addition of ₹ 49, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion abates, the assessing officer before whom the proceeding at the time of making application was pending, shall dispose of the case in accordance with the provision of this act as if no application under section 245C has been made. The combined reading of section 245 HA (2) and 245 HA (3) suggest that whereas the assessment has to be made in accordance with the provision of the act as if no application for settlement has been made, the assessing officer is also entitled to use the material and information produced by the assessee before settlement commission as also the evidence recorded by the settlement commission. If the income is to be computed in accordance with the provision of law, it is settled law as laid down by the Supreme Court that, the primary onus lies upon the assessing officer to demonstrate that the assessee has earned certain income chargeable under the Act. There is no material before the assessing officer to suggest that the appellant has earned income from scrap trading. While computing the income if the assessing officer is to use the material and information produced by the assessee before settlement commission as also the evidence recorded by the settleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission so that the application was not rejected. The Settlement Commission concluded that the assessee failed to establish the source of income from scrap and its basis of disclosures. Therefore, the application before the Settlement Commission stood rejected. The Settlement Commission passed order on 19.09.2016 u/s 245D(4) and rejected the application of the assessee observing as under: - 11. Scrap income and miscellaneous income like commission 11.1 The SoFs mention that the two co-applicants have also indulged in trading of copper and other scrap on account of their contacts with the scrap dealers. It was claimed that some of these transactions were in cash, and they were not accounted for and the two co-applicants kept it with themselves. It was further claimed that the two co-applicants have earned miscellaneous commission income from supplies made by the venders to their group. 11.2 In fact, income from this activity is the sole basis of the disclosure of income made by applicant before the Commission. It is on this basis that additional income in the hands of Sh. Mange Lal Kandoi is shown at an amount of ₹ 67.50 lacs and ₹ 127.50 lacs in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but there was no way to make any estimate from such limited transactions. In view of this the Settlement Commission observed that the basis of surrender of income from scrap business was shrouded in mystery and therefore rejected the same. The Hon'ble Settlement Commission has very specifically mentioned in para 4 that the manner of earning of such income has been left vague and no basis was furnished for the working of the surrendered income. In the view of the Settlement Commission the assessee failed in providing vital ingredient regarding the disclosure made. The disclosure was held not to be candid in so far as the manner of earning was shown. In short, the Settlement Commission did not agree with the source of income so disclosed by the assessee on account of scrap business. The summum bonum of the rejection of the assessee's application by the Settlement Commission is the following (i) The assessee in fact did not enjoy any such income from scrap business. (ii) The assessee could not furnish evidence of source of income from scrap business. (iii) The assessee failed to substantiate the quantum of income from scrap business as disclosed in the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven the assessee has challenged the addition on account of alleged advances and hence the question of taxing interest does not arise. There is no material on record so as to establish that assessee received interest on the alleged advances. It is the working of the mind of the A.O. that has resulted in addition on account of interest. The interest has been calculated notionally and addition has been made accordingly. 42. The decision of the Ld. CIT(A) is based on many judicial pronouncement and sound law. Therefore, the decision of the Ld. CIT(A) in deleting the addition of ₹ 1,18,12,622/- deserves to be confirmed. 43. Similarly, addition of ₹ 6,87,125/- on account of interest earned on undisclosed advance of ₹ 49.24 lacs was deleted by the ld. CIT(A) by having the same observation to the effect that addition was made by the A.O. by presuming that the assessee had earned interest on advances although no evidence was found during the course of search. After giving detailed finding, the ld. CIT(A) has concluded that no addition could be made simply on the basis of presumption as the presumption, however, strong cannot take the place of evidence. 44. Similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Powders Mfg. Pvt Ltd and not with the assessee. The precise observation of the ld. CIT(A) while deleting the impugned addition was as under: 17. I have carefully considered the relevant facts, the seized material, the argument advanced and the case law cited. The primary reason for addition is the admission by the appellant during the course of search. I have therefore considered the reply given while explaining the seized material referred therein. Firstly it was stated by the appellant that the said document primary relates to Kandoi Metal Powders Manufacturing Co Private limited. It was stated that out of the said papers in majority cases the transactions are not recorded in books of accounts and purchase, sales and debtors are outside the books of accounts. It was also stated that the transaction in annexure AS-7 which is a diary is also not recorded in regular books of accounts. Some of the transaction recorded in said seized material corroborates with annexure AS-7 and the accurate calculation of the same is not possible. It was also explained that being the eldest member of the family, the jewellery, cash etc. found during search which is not explained, on behalf of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue by conducting search, no evidence of application of such income in the form of asset or expenditure is found against such huge income of 4 crores. Had the assessee earned such huge income, the same would have been found to have been applied either for acquisition of any asset or for spending the same. 17.2 Another reason given by the AO is that the statement was voluntary which is also found to be so by Hon'ble Settlement Commission. Even if it is considered that the statement was voluntary, the statement itself should be such which narrates the nature of transaction and relates the same with the seized material for computation of undisclosed income. In the present case it is seen that except the statement, neither the nature of transaction is stated nor its relation to the seized material is stated where such income of 4 crores are recorded. Therefore even if the statement is voluntary, since it has no corroboration or is brought out by the AO, no addition can be made only on the basis of statement recorded during search. Ld. A.O. has also referred to the judgment of Rajasthan High Court in the case of Shri Ravi Mathur dated 13th of May 2016 for the proposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion the same is not sustainable on the facts of the case as also in law. Having examined the seized material, it is not discernible as to how such material demonstrates that the appellant has earned the income of ₹4 crores. In my opinion only on the basis of admission by the appellant, the same is not sustainable. Even the assessing officer has not related the noting in the seized material with the amount of 4 crores. The addition of 4 Crores is therefore liable to be deleted and is accordingly hereby deleted. 47. We had carefully gone through the observation of the A.O. and the findings given by the ld. CIT(A) while deleting the addition and found that the ld. CIT(A) has dealt with each and every objection of the A.O. and after controverting the same, reached to the conclusion that no addition is warranted without any corroborating material. The ld. CIT(A) has further observed that the assessment U/s 143 is made on the basis of relevant material, explanation of the assessee, evidences found and such other material for computation of correct income. Thus, the purpose and intent of both the provisions are entirely different and one is not a substitute for the other. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed in the wealth tax return, although not disclosed in the balance sheet filed along with the return of income. The Ld. CIT(A) has held that the CBDT instruction does not require jewellery to be disclosed in the regular books of accounts or in the balance sheet. It is enough if the jewellery is disclosed in the wealth tax return, then credit has to be given accordingly. The Ld. CIT(A) has further held that credit of jewellery disclosed in the balance sheet has to be given with reference to weight and not value. In view of this the Ld. CIT(A) gave credit of 3421.779 grams gold jewelery, 189.62 carats of diamonds and 16.75 kg of silverware as disclosed by the assessee group in the wealth tax return or balance sheet. The Ld. CIT(A) further allowed relief in respect of Savitri Kandoi and Sneh Kandoi of gold jewellery 500 grams and 112 grams being covered fully under the CBDT instruction. 51. We found that the assessee had disclosed 1500 grams of gold jewellery in the hands of six male/female children @ 250 grams whereas only 100 grams was allowable as per CBDT instruction. The Ld. CIT(A) considering the status of the family and traditions has allowed 200 grams for children a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed the addition. During assessment proceedings the assessee filed weight-wise chart of total jewellery found and that declared in the wealth tax returns as also credit for the several members of the family based on CBDT circular. The assessing officer held that since as per the income tax return, the jewellery declared in the balance sheet of various family members was ₹32,03,735 only and the value of jewellery found during search was ₹2,41,67,236, the balance jewellery of ₹ 2,09,63,501 is to be considered as unexplained and required to be added. He also held that benefit of jewellery shown in wealth tax returns filed before 30 years cannot be given to the assessee as the family members have not filed their wealth tax returns thereafter. In the balance sheet for A.Y. 2013-14, the jewellery declared is only ₹32.03 Lakhs. He accordingly held that jewellery declared in the wealth tax returns filed more than 20-30 years back is not existing at present and if any then the same is covered by the jewellery declared in the income tax returns. The AO relying upon the affidavit of the appellant as also his son held that since they have agreed to consider the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92.00 10.00 Sneh kandoi 112.00 92.00 5.00 6 Male and Female Members 1500.00 0 8.00 Total 2112.00 184.00 23.00 Difference 2403 0 0 5166450 Therefore the total undisclosed jewellery of the assessee comes out to 2403 grams and if valued @ 2150/- per grams (present valuation) comes out to ₹ 5166450/- and not ₹ 20963501/-. The assessee is ready to include such income in his return of income The Ld. Assessing Officer virtually did not consider the reply at all and made addition of ₹ 2,09,63,501/-. The addition made by the Ld. Assessing Officer is unlawful, illegal and unjust on the following counts: - 2. Jewellery seized only of ₹ 1,03,41,778/- It is submitted that as mentioned by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out to ₹ 51,66,450/-. The same deserves to be considered proportionately in various hands and not entirely in the hands of the assessee. 4. Total jewellery cannot be considered in the hands of the assessee: - It is submitted that gold jewellery, diamonds and silver jewellery belong to the entire family which consisted of 14 members as detailed by the Ld. Assessing Officer in para 7.6.3 page 24 of the assessment order. Some of these members namely Shri M.L. Kandoi, Smt. Savitri Kandoi, Smt. Sadhana Anand Singhal, Smt. Shivani Kandoi and Sneh Narendra Kandoi had disclosed the jewellery in their IT returns. Whereas some other members disclosed the jewelry in their wealth tax return which were filed upto Assessment Year 1993-94 or earlier. However their wealth tax return disclosed possession of jewelery and the benefit of which required to be given. The Ld. Assessing Officer has not given any credit of this jewellery disclosed in wealth tax returns. Jewellery had been disclosed in the wealth tax returns by Shri Anand Singhal, Shri R.K. Kandoi and Shri N.K. Kandoi who had not disclosed jewellery in their income tax returns. The jewellery disclosed by these persons is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee belongs. I therefore hold that the CBDT instructions needs to be applied even for considering whether the jewellery found during search should be considered as explained or unexplained for the purpose of assessment. This view is held by Hon'ble Rajasthan High court in the case of Satya Narain Patni 40 taxamnn.com 440. The head note and main portion of the judgement is as under: Section 69A of the Income-tax Act, 1961 - Unexplained money (Jewellery) - Assessment year 2005-06 Addition made by Assessing Officer on account of unexplained jewellery found during search proceeding was under challenge - In statements, family members clearly stated that these were personal wearing jewellery and same were received by ladies/daughter-in-law on/or at time of their marriage either from parental side or in-laws side - Revenue could not place any material to show otherwise than that stipulated in CBDT Circular 1916, dated 11-5-1994 which states that if jewellery found in possession of a married lady, unmarried lady and male member of family is to extent of 500 gms., 250. gms and 100 gms. each, officials would not question source and acquisition - Further, Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customs prevailing throughout India, in one way or the another, came out with this Circular and it should also mean that to the extent of the aforesaid jewellery, found in possession of the various persons, even source cannot be questioned. It is certainly 'Stridhan' of the woman and normally no question at least to the said extent can be made. However, if the authorized officers or/and the Assessing Officers find jewellery beyond the said weight, then certainly they can question the source of acquisition of the jewellery and also in appropriate cases, if no proper explanation has been offered, can treat the jewellery beyond the said limit as unexplained investment of the person with whom the said jewellery has been found. [Para 12] Similar view has also been taken by Hon'ble Delhi High court in the case of Ashok Chaddha Vs. CIT 14 Taxmann.com 57 (Del) 21. Thus, Applying the CBDT instruction, I note that various members of the family were declaring the jewellery in their wealth tax returns though may be much prior to the date of search. However the declaration of jewellery in wealth tax returns in earlier year will definitely explain that the jewellerywere in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed income of the appellant for the current A.Yr. and has offered ₹51,66,450 as undisclosed income on account of Gold and diamonds. Please refer table below: Particulars Gold Jewelry (Grams) Diamonds (Carat) Silver items (K.g.) Total value Found at the time of Search 7936.779 373.620 39.750 24167236 Declared as per Wealth Tax Returns and Books -3421.779 -189.620 -16.750 Difference 4515.00 184.00 23.000 Claim of jewelry regarding other family members Smt. Savitri Kandoi 500.00 92.00 10.00 Sneh Kandoi 112.00 92.00 5.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Next question arises at what value 138 carat will be taxed. Perusal of all the valuation report drawn during the course of search shows that per carat diamond value ranges from₹ 10,000 in most cases to ₹1,75,000 (refer item no. 15 in the jewellary annexure JF1(c) drawn at the bedroom of Smt. Savitri Kandoi). An exercise was undertaken to compute avarrage value of diamond from all the jewellary inventories 85 average value computed. As per this the average value diamond comes out to be ₹26913 per carat. The tabulation is given below for ready reference: Ann Found from Total carat of diamond Total value (Rs.) Av (Rs. ) JF1 Bedroom of Smt. Sadhana W/o Sh. Anand Singhal 41.9 Ct. 519000 12386 JF1(c) Bedroom of Smt. Savitri Kandoi 23.5 1465000 62340 JF1 (a) Bedroom of Smt. Savitri Kandoi 86.35 4849750 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny positive material on record, accordingly, we confirm the order of the ld. CIT(A) for upholding the addition of ₹ 97,65,444/- on account of jewellery. Accordingly, ground taken both by assessee and the revenue are dismissed. 54. Addition of ₹ 56,39,819/- was made by the A.O. on account of unexplained expenditure U/s 69C of the Act which was deleted by the ld. CIT(A) after having the following observation: 28. I have carefully considered the relevant facts and the argument advanced. When the cash found during search is less than that shown in the books of accounts, the question of considering the same as unexplained does not arise. Merely stating that there are certain discrepancies in the books of accounts and hence the entire cash remains unexplained, is not acceptable. If the assessing officer has any reason to doubt the correctness of the entries, to that extent the same may be discarded but discarding the entire books of accounts as incorrect will not justify the addition. How much is the cash receipts recorded on 15 July 2012 and after discarding such receipts how much cash still remains is not worked out by the assessing officer. When the appellant filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts, the addition u/s 69A is not sustainable. I accordingly delete the addition of ₹56,39,819/-. 55. The revenue is in further appeal before the ITAT against the said deletion by the ld. CIT(A). 56. We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that the A.O. made addition of ₹ 56,39,815/- of the total amount of cash found during the course of search without giving credit to the balances available in the books of accounts of the group which amounted to ₹ 1,34,68,974/-. The cash available in books are more as against cash found physically. This was so because certain payments were still to be accounted for in the books of accounts. Considering the submission of the assessee the Ld. CIT(A) deleted the addition. The Ld. CIT(A) has held that for small discrepancies in the books of accounts and overwriting the books cannot be rejected unless it is established that discrepancies in overwritings established manipulation and fraud. The Ld. CIT(A) has also held that as the cash stood accounted for in the books of accounts, section 69A could not be invoked. 57. We fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance was placed on the following judicial pronouncements: (i) Gargi Din Jwala Prasad Vs. CIT (1974) 96 ITR 97 (All) Principles of natural justice are applicable The principals of natural justice are applicable to assessment proceedings. The elementary principle of natural justice is that the assessee should have knowledge of the material which is going to be used against him so that he may be able to meet it. (iii) Munna Lal Murlidhar Vs CIT (1971) 79 ITR 540 (All) The principle of natural justice involve a right in the assessee to inspect the reports and obtain the substance of the all relevant documents such as statements, orders, reports etc. so as to be able to lead evidence in rebuttal or to cross examine witness who have given evidence against him. It also means that the assessee should be given a reasonable time and opportunity to produce such evidence as he may consider necessary. (iii) In the following it was held that the Assessing Officer can make enquiries to gather material privately and confidentially. He can also summon witnesses and record their statement in the presence of the assessee or even behind his back. However the substance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) has followed the statement recorded u/s 132(4) only in part. If the statement was followed in toto the addition would have been in four hands instead of the total addition made in the hands of the assessee. 65. We have considered the rival contentions and carefully gone through the orders of the authorities below and found that the addition of ₹ 2,55,00,000/- has been made by the A.O. with reference to annexure 'A' page 1 2 got prepared by the assessee during the course of search itself considering annexures AS-1 to AS-4 found and seized during the course of search. During the course of search statement of Shri M.L. Kandoi was recorded u/s 132(4). In this statement the assessee was examined with reference to annexure A-4, A-5 and A-6 and was asked to prepare a separate annexure 'A'. The assessee surrendered a sum of ₹ 8.60 Crores on account of advances, in this annexure 'A'. It is on the basis of this surrender of advances that the aforesaid addition of ₹ 2,55,00,000/- has been made bifurcating the surrender in relevant Assessment Years. 66. It is pertinent to mention here that during the course of search, surrender was taken fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch that is 18.07.2020. The assessee has surrendered ₹ 8.6 Cr. on the basis of above Annexures. The assessee own s all the entries recorded in above Annexures and the total of this was 8.6 Cr. Annexure-A Exhibit-1, 2 and 3 are found from Shri Anand Singhal son of the assessee who is recording entries at the time of transactions and subsequently merged in the Annexure-AS- 4, 5, 6. It was submitted before the Ld. AO that the entries recorded in Annexure-A- Exhibit-1 are part of Annexure-AS- 4, 5, 6. The year wise additions made by the Ld. AO on the basis of Annexure-A Exhibit-1 are as under :- In the assessment order on page no. 13 in para 8.2.2 the assessee has submitted that above ₹ 6,00,000/- is part of 8.6 Cr. surrendered by the assessee on the basis of Annexure-AS- 4, 5, 6. Therefore this required deletion. In the assessment order on page no. 12 in para 7.2.2 the assessee has submitted that above ₹ 49,24,000/- is part of 8.6 Cr. surrendered by the assessee on the basis of Annexure-AS- 4, 5, 6. Therefore this required deletion. This addition was made on the basis of Annexure- A-1 Page no. 5 for the amount of ₹ 17 Lacs + 30 Lacs + 2.24 Lacs in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting addition of ₹ 1,34,07,372/- on account of interest alleged to be earned on unsecured advances of ₹ 8.6 crores, ₹ 3,71,672/- for interest earned on advances of ₹ 25.00 lacs, ₹ 7,79,944/- for interest earned on advance of ₹ 49.24 lacs and ₹ 2,34,102/- on account of interest on advance of ₹ 12.41 lacs. We found that the similar addition made on account of interest alleged to have been earned on advances made in earlier years were deleted by the ld. CIT(A) after recording detailed findings. We have also dealt with the issue in the respective years for deleting addition made on account of interest alleged to be earned by the assessee. In the year under consideration also, the ld. CIT(A) after giving detailed findings, have deleted the addition made by the A.O. on account of interest alleged to have been earned on the advances. Following the reasoning given hereinabove in earlier A.Ys we confirm the findings of the ld. CIT(A) for deleting the addition made on account of interest alleged to be earned which was found to be not actually earned by the assessee. Accordingly, we confirm the order of the ld. CIT(A) in deleting these additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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