9911796707
TMI Blog2006 (1) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... erein all the aforesaid assessees were shareholders. In course of said search, the following assets were found and seized by the Department: Sri Kamal Kumar Singhania and Sri Bimal Kumar Singhania -------------------------------------------- Sl.No. Particulars Found Seized -------------------------------------------- 1. Cash 17,90,000 17,50,000 2. Gold 1204.5 gms. - 3. Diamond 28 carats - 4. Silver 6,000 gms. - 5. Stock from 51,707 - shop 6. Stock from 9,29,565 - godown 7. Documents HKV/1 to HKV/1 to HKV/3 HKV/3 -------------------------------------------- Sri Jai Prakash Singhania ------------------------------------------ Sl. No. Assets Found Seized ------------------------------------------ 1. Cash 2,27,900 1,87,900 2. Jewelleries 1,21,500 Nil 3. KVPs 12,00,000 12,00,000 4. Stock at 10,74,104 Nil shop-cum- office 5. Documents SIB/1 to SIB/1 to SIB/29 SIB/29 ------------------------------------------ 2.1 In response to notices issued under s. 158BC of the Act, the respective assessees filed their block returns on 28th Feb., 2003 showing undisclosed income as under: ------------------------------------------ Sri Kamal Kumar Singhania Rs. 59,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the names of the assessees were found and seized as under: ----------------------------------------------- (a) Kamal Kr. Singhania (HUF) Rs. 4,00,000 (b) Bimal Kr. Singhania (HUF) Rs. 4,00,000 (c) Jai Prakash Singhania (HUF) Rs. 4,00,000 --------------- Total Rs. 12,00,000 ----------------------------------------------- The AO added the value of these KVPs in the respective hands of these assessees in their individual capacities summarily on the following reasonings: (i) The assessees allegedly could not prove that the amounts received from the concerned companies were utilized in purchase of KVPs. (ii) The returns of the HUFs had been filed after the date of search. (iii) The fact that KVPs had been acquired out of cash received from M/s Tirupati Fiscal Services (P) Ltd., M/s Surya Commercial Ltd. and M/s Sandeep Salt & Bromine Industries Ltd. was not brought to record at the time of search, nor was it borne from any record seized at the time of search. 5. On appeal, the CIT(A) confirmed the additions made by the AO in the cases of all the three assessees on the following grounds: (a) On the date of conferring Memorandum of Understanding on 20th Oct., 1999, HUF did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our notice the following documents filed in the paper book, which were, as claimed by him, as well filed before the Revenue authorities: (i) Returns of income and balance sheets for the asst. yrs. 2000-01 and 2001-02 showing investment in KVPs and advances received from prospective buyers of land in cases of- (a) Kamal Kumar Singhania (HUF) [in short KKS(HUF)]- pp. 158-165 of the paper book. (b) Bimal Kumar Singhania (HUF) [BKS (HUF)]-pp. 174-181 of the paper book. (c) Jai Prakash Singhania (HUF) [JPS (HUF)]-pp. 166-173 of the paper book. (ii) Memorandum of understanding for receipt of advance and prospective sale of land: (a) MoU dt. 20th Oct., 1999 entered into between KKS (HUF) and M/s Tirupati Fiscal Services (P) Ltd.- pp. 221-222 of the paper book. (b) MoU dt. 20th Oct., 1999 entered into between BKS (HUF) and M/s Surya Commercial Ltd.-pp. 223-224 of the paper book. (c) MoU dt. 20th Oct., 1999 entered into between JPS (HUF) and M/s Sandeep Salt & Bromine Industries Ltd.-pp. 225-226 of the paper book. (iii) Letters confirming payment of advance of Rs. 4 lakhs giving full address and PAN of the following prospective buyers: (a) M/s Tirupati Fiscal Services (P) Ltd.-p. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been utilized for the purchase of Kisan Vikas Patra in the year ending 31st March, 2000. The IT return was filed on 26th Feb, 2002. 6. The abovesaid company is a private limited company and balance sheet for asst. yr. 2000-01 is signed on 28th Aug., 2000 and return was filed on 14th Nov., 2000 vide receipt No. 001269. 7. KVP was purchased by Kamal Kumar Singhania (HUF) in the name of Sri Kamal Kumar Singhania and Smt. Rachna Singhania. 8. The assessee has shown interest on KVP Rs. 40,000 in its total income of Rs. 1,09,958. The return for asst. yr. 2001-02 was filed on 26th Feb., 2002. 9. That apart, the return of the HUF for the asst. yr. 2002-03 was filed on 28th Feb., 2003 and has been processed accepting the status of HUF, its income, assets and liabilities and thus there cannot be any doubt regarding the genuineness of the status of HUF. (B) Similarly, regarding Bimal Kumar Singhania (HUF) and (C) Jaiprakash Singhania (HUF), identical explanations and evidences were filed before the AO to substantiate the claim that the HUFs existed even before the date of search. Referring to pp. 158-181 and 230-245 of the paper book, which are copies of returns of income, VDIS certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidential premises of Sri Jai Prakash Singhania, KVPs worth Rs. 12,00,000 in the names of the assessees (who are all brothers to each other) were found and seized. It was the claim of the assessees that although - the names of the individual assesses are appearing on the KVPs of Rs. 4 lakhs each, but these were belonging to their respective HUFs and the source of investment was claimed to be out of advance received from intending buyers of a plot of land and hence the investment of Rs. 4 lakhs in each case was out of disclosed sources of the respective HUFs and not undisclosed investment by the Kartas of those HUFs, as alleged by the Revenue authorities. In the above background, the question to be decided first is about the existence/genuineness of the HUFs. As stated above, search in these cases took place on 30th Jan., 2002. On perusal of pp. 158-181 and 230-245 of the compilation, we find several documents which clearly go to establish the existence of the HUFs even before the search was conducted. In all these cases, situations and nature of supporting documents are of similar nature and thus we take for instance and discussion the case of Jai Prakash Singhania, from whose cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As such, Khemka Group agreed to acquire the said land from the concerned HUFs at a price which was 20 per cent above the amounts paid by the HUFs. Accordingly, they advanced Rs. 4 lakhs each to the concerned HUFs in October, 1999. The formal agreements for purchase of land by the HUFs were duly executed in the subsequent year, i.e. financial year 2000-01 (relevant to asst. yr. 2001-02) and accordingly, the investments in lands were depicted in the returns of income and balance sheets of the concerned HUFs for asst. yr. 2001-02. It may be noted that acquisition of the said plots in the financial year 2000-01 by the HUFs out of regular sources of funds has been accepted by the AO also. 8.3 As stated somewhere above in this order that KKS-HUF, BKS-HUF and JPS-HUF received advance of Rs. 4 lakhs each from M/s Tirupati Fiscal Services (P) Ltd., M/s Surya Commercial Ltd. and M/s Sandeep Salt & Bromine Industries Ltd. These parties have also shown in their balance sheets and returns of income filed much before the date of search these payments to these HUFs as advance. Further, from the documents filed in the paper book and also filed before the AO, it is observed that HUFs had sold je ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-individuals. Since the impugned advances and subsequent purchases of land had been duly disclosed in the regular balance sheets of HUFs, the logic behind receiving such advances prior to completion of purchase of land can only be questioned in course of regular assessments of the HUFs and not in the case of the assessee-individuals. 8.4 We further find that even the AO did not feel the need to conduct any further enquiry into the matter by summoning the representatives of the said payer-companies but simply brushed aside the evidence furnished by the assessee without assigning any plausible reason for the same. As such, the assessee-individuals discharged the onus of proving that the investments in KVPs were not made by them in their individual capacities but by their HUFs out of disclosed sources of funds. The AO however, failed to discharge the said onus. The CIT(A) also on the above facts was not justified in upholding the action of the AO on flimsy grounds and by relying on certain extraneous considerations which are clearly unsustainable in law. For instance, the learned CIT(A) objected to the deduction claimed by the concerned HUFs under s. 54F of the Act in their regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said books after looking into the same. Copy of the said statement is placed on pp. 272 to 275 of the paper book. Later on, vide various written submissions filed before the AO, Sri Kamal Kumar Singhania and Sri Jai Prakash Singhania explained that the said books were fabricated for production before the banks in order to procure loans from them. It was further explained that a rosy picture had been painted in such accounts solely for the purpose of obtaining a good amount of loan from bank. However, while preparing such accounts, accounted entries were also incorporated therein with a view to give the fabricated books a touch of reality. Further, bank transactions of different family members were reflected in the said accounts with the apprehension that the bank may verify the transactions with their books. The various submissions of the assessees have been reproduced by the AO in the assessment orders of Sri Kamal Kumar Singhania and Sri Jai Prakash Singhania. 9.2 The AO, however, disbelieved the contentions of the assessee and made the following additions, which are discussed assessee-wise: (A) Sri Kamal Kumar Singhania: The AO observed that p. 3 of the seized documents SIB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., 2001 in M/s Trade Friends. The same was thus, added to his undisclosed income for asst. yr. 2002-03. 10. When the matter came in appeal before the CIT(A), he upheld the aforesaid additions mainly endorsing the views adopted by the AO. 11. The assessee's learned counsel submitted that the said books do not portray the real transactions of the Singhania Group (except the bank transactions and part of regular transactions), which he has corroborated by mentioning the facts and surrounding circumstances. According to him, in course of search in the office premises of M/s Vinimay Leasing & Finance (P) Ltd., of which various members of the Singhania Group are directors and shareholders, regular books of account maintained in the computer of the said company were seized under identification mark JD-31 as under: ---------------------------------------------------- 1. M/s Vinimay Leasing & Financial year 1999-2000 Finance (P) Ltd. to 2001-02 2. M/s Automative Sales -do- 3. M/s Trade Friends -do- 4. M/s Trade Wings -do- 5. M/s New Trade Wings -do- ---------------------------------------------------- Further, supporting vouchers, sales and purchase bills, invoices, miscellaneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is placed on pp, 23 to 33 of the paper book. Assessee's explanation relating to stock found in course of search has also been reproduced by the AO, at p. 17 of the assessment order in case of Sri Kamal Kumar Singhania. Further copies of the regular balance sheet and P&L ale of M/s Trade Friends for the period ended 30th Jan., 2002 have been filed at pp. 117-120 of the paper book. If the assessee had indulged in unaccounted transactions to the extent apparent from the fabricated books and trial balance, the value of stock found in course of search would have corresponded approximately to the figures appearing in the fabricated books and not to the stock as per regular books of account, the assessee's learned counsel contends. 11.2 The learned counsel of the assessee further submitted that the factum of deliberate inflation of figures in the fabricated books is also evident from the glaringly impracticable results depicted by the said books. Our attention was drawn to the copies of balance sheet and trading and P&L a/c drawn up on the basis of the impugned seized documents marked SIB-1 and SIB-3 (cash books) and SIB-20 (ledger), which are placed on pp. 253 to 255 of the paper boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account received from the bank. Similarly the payments made to Sales-tax Department through cheque mentioned in the provision fund account find place in the bank account of M/s Trade Friends at Central Bank of India, Ranchi. The assessee has made a disclosure of Rs. 59,81,630 in the block return of income. This is on account of letter filed on 8th May, 2002 before the Jt. DIT (Inv.), Ranchi by assessee and his brother Sri Bimal Kumar Singhania. In the working for this disclosure amounts appearing on the credit side of the document are taken. The assessee has claimed deduction on account of capital standing in the hands of all family members. However, the deduction cannot be allowed as the assets appearing in the regular books of account are not related by the assessee against the asset in the trial balance which mainly constitutes undisclosed debtors. Therefore, the additions made in this behalf should be upheld. 13. We have heard the rival contentions of the parties and perused the orders of the Revenue authorities. We have also carefully considered the various documents placed on record. The crux of the various reasons assigned by the AO for treating the impugned books and tria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks said to have been prepared for obtaining loan from the banks. 13.1 The assessee's contention is further corroborated by the fact that the impugned fabricated books were written only upto 31st Dec., 2001 whereas the search was conducted on 30th Jan., 2002. Therefore, presumption can safely be drawn that if the books had been maintained in regular course of business, the same would have been written upto the date of search, i.e., till 29th Jan., 2002. In the alternative, if at all it is assumed for argument sake that the said books had been maintained in the normal course of business, the bills and vouchers pertaining to the undisclosed transactions of the assessee for balance period, i.e., for the month of January, 2002 till the date of search, would have been found in the course of search; which under the circumstances would have been definitely maintained by the assessee so as to enable him to incorporate the same into the alleged Kaccha books. However, admittedly in the present case, although all the bills and vouchers supporting entries in the regular books of account upto the date of search were found and seized, no iota of evidence corroborating the alleged undisclosed tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded in the fabricated books were found in course of search although all supporting documents, bills, etc. relating to regular transactions were found and seized in course of search. The stock inventorised by the search party also corresponded to the stock as per regular books of account and did not commensurate with the figures shown in the fabricated books. Further, the fabricated books depicted impracticable financial results which were clearly far from reality and actual state of affairs of assessee's business. The said books were written only upto 31st Dec., 2001 and not upto the date of search, once again indicates that they had not been maintained in the regular course of business. As such, the totality of facts and circumstances of the case highlights the assessee's contention that he had not indulged in any unaccounted transaction and that the said books were fabricated. In view of the above, the assessee has discharged the initial onus of proving that what was apparent from the seized books was not real. It was the duty of the AO to consider the explanation of the assessee vis-a-vis the surrounding circumstances and in the light of assets found in course of search. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is entitled to claim from the company all those amounts mentioned in that unsigned MoD. We are also inclined to agree with the assessee's counsel that when no income has resulted at all on the basis of unsigned MoU then there is neither accrual nor receipt of income. Under the provisions of the IT Act it is the real income which has to be taxed and not hypothetical income. In this connection we draw support from the decision of the Hon'ble Supreme Court in CIT vs. Shoorji Vallabhdas & Co. (1962) 46 ITR 144 (SC). The Supreme Court has also laid down in the case of State Bank of Travancore vs. CIT (1986) 50 CTR (SC) 290 : (1986) 158 ITR 102 (SC) at p. 155 that the concept of real income is certainly applicable in judging whether there has been income or not. The Hon'ble Supreme Court again in the case of K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC) at p. 605 has clearly stated that it would indeed be most harsh and inequitable to tax an assessee on income which has neither arisen to him nor is received by him. Apart from the unsigned MoU the AO has not led any cogent and reliable evidence to establish that the assessee earned or received the amounts mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO observed that the ledger cards showed the details of goods sent to parties and payments received from them. Accordingly, he concluded that these were not goods sent on approval but were sales which were not recorded in regular books of account. The closing balance as per ledger cards of Rs. 46,92,027 was thus treated as undisclosed sundry debtors and added to the undisclosed income of Sri Jai Prakash Singhania. 15. The CIT(A) after hearing the assessee and considering the AO's observation with reference to seized documents pointed out that the assessee himself admitted that motor parts goods are sent on approval and only on acceptance, the sale accounts are credited and debited to debtors account. According to him, in practice, the payments are made immediately on purchases. Customers never return goods, except some exceptional cases, as they purchase the goods after getting convinced that the goods products are satisfactory. The conduct of the assessee clearly gives the picture that observation made by the AO is correct and true. According to him, addition was not made on presumption but on the basis of clinching evidence found and seized from the possession of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To gross 13,92,091.60 By closing 10,74,104.00 profit stock (as per inventory prepared by search party) --------------- ---------------- 1,32,26,650.94 1,32,26,650.94 ------------------------------------------------------- GP as per revised trading account Rs. 13,92,091.60 Less: GP as per regular accounts Rs. 10,02,900.60 ------------------ Unaccounted profit Rs. 3,89,191.00 Addition made by the AO Rs. 46,92,027.00 ------------------ Desired relief Rs. 43,02,836.00 ------------------ According to the learned counsel, the aforesaid manner of recasting the trading account is supported by the judgment of the Hon'ble Tribunal, Pune Bench, in the case of Janta Tiles vs. Asstt. CIT (2000) 66 ITJ (Pune) 695, wherein it was held that: " ..... in case stock found at the time of search is less than the stock as per books, the difference represented suppressed sales. In such an eventuality, if the trading account is recasted, the sales declared by the assessee will have to be increased by the sum of the stock found short and the stock declared by the assessee shall be decreased by the same amount. Thus, no addition would be called for on this account. However, it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unexplained tour expenses in the hands of the assessee. 19. The impugned addition was originally made in the hands of Sri Bimal Kumar Singhania. In the assessment order in the case of Sri Bimal Kumar Singhania. The AO has observed that p. 15 of HKV-1 is a hotel bill of Holiday Inn Resort, Goa drawn in the name of one Rajesh Gopadia for Rs. 34,598 dt. 26th Dec. 2001. Backside of the bill contains rough scribblings aggregating to Rs. 71,395. Copy of the said bill has been placed at pp. 260 and 261 of the paper book. Before the AO, it was explained that the impugned bill was a rough sheet of paper which may have come with packing 'materials. The bill was drawn in the name of Rajesh Gopadia and the assessee did not know Rajesh Gopadia. Similar explanation was given by Sri Kamal Kumar Singhania in course of his statement recorded under s. 132(4). Copy of the said statement is also placed at pp. 265-267 of the paper book. The AO disbelieved the contention of the assessee and added the sum of Rs. 1,11,395 (instead of aggregate of Rs. 1,05,993) to the undisclosed income of Sri Bimal Kumar Singhania on account of alleged unexplained expenditure. 20. On appeal, the CIT(A) directed the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection, it is submitted that the source of the so-called unexplained expenditure has been explained in the seized books itself. As such, even if for argument's sake, the seized documents are taken at face value, no addition can be made on account of expenditure debited in the said books; especially considering the fact that separate additions have been made by the AO on account of alleged undisclosed opening capital and on account of alleged undisclosed profit based on the said books. Further, the rough scribblings on the back side of the impugned bill are not in the handwriting of the appellant and do not reveal any definite information. Thus, the addition made by the AO and sustained by the CIT(A) deserves to be quashed on all counts. The learned Departmental Representative, on the other hand, supported order of the CIT(A). 22. We have heard the rival contentions of the parties and perused the material available on record. It is an admitted position that addition was made on the basis of rough scribblings on the back side of the bill and does not give any specific information. It was the presumption of the CIT(A) that the money came from M/s Trade Friends. We find s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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