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2005 (9) TMI 259 - AT - Income TaxUnexplained cash - Search And Seizure - trading of iron and scrap - difference in cash as per cash book and that physically found - block return - Unexplained jewellery and silver items - Sale of diamonds/diamond jewellery - Charging of interest u/s 158BFA(1). HELD THAT:- We noted that Shri Vinod Kumar Jain has nowhere stated that Rs. 2,75,000 was given to him only yesterday. We further noted that an amount of Rs. 1,84,946 was lying in the 'Disawar account' in the regular books of account. Thus, in all the assessee-firm has availability of Rs. 3,11,180 (1.84,946 + 1.26,234) in the books whereas cash was found at business premises at Rs. 5,605 only. Thus, the balance of Rs. 3,05,775 is enough to explain the amount of Rs. 2,75,000 given to Salim as per the statement of Shri Vinod Kumar Jain. The learned CIT(A) is, therefore, right in deleting this addition. The amount of Rs. 26,910 is covered by the amount available as per cash flow statement of family members as per which cash in hand is Rs. 2,06,305 as against Rs. 1,83,210 found. This takes care of household withdrawals also. Similarly, the amount of Rs. 16,660 which is found from the room of children as per the Panchnama is covered by their petty savings. Thus, the addition made on account of unexplained cash is unjustified and the entire addition is deleted. Hence, the ground of the assessee is allowed and that of the Department is dismissed. Unexplained jewellery and silver items - We find that the learned CIT(A) has rightly deleted the addition for unexplained jewellery considering the CBDT Instruction No. 1916, dt. 11th May, 1994, decision of Karnataka High Court in case of Smt. Pati Devi vs. ITO and decision of Tribunal in various cases and disclosure of jewellery under VDIS as well as wealth tax return. So far as silver jewellery of 16.895 kgs. is concerned, it is reasonable looking to the size and status of family of the assessee consisting assessee himself, his three sons, three daughters-in-law and children. In view of this, no interference is called for in the order of the learned CIT(A). Hence, this ground of the Department is dismissed. Sale of diamonds/diamond jewellery - Admittedly, assessee has neither made any disclosure of diamonds under the VDIS nor he has sold any diamond. The disclosure and the sale is made by the family members who have declared the same in their regular returns filed before search. The VDIS declaration by the family members has been accepted and certificate u/s 68(2) of the Finance Act, 1997, has been issued by the learned CIT. The proprietor of M/s Tambi Jewellers who purchased the diamonds was examined by the AO who accepted the purchases made by him from these family members. In search no incriminating material was found to hold that the sale is bogus. The statement of, the family members heavily relied on by the AO cannot be a basis for drawing an adverse inference in view of the retraction of these statements and the affidavits of the family members filed before the AO which remained uncontroverted. The sale proceeds were received by the family members and credited in their respective bank account. From these bank accounts, the assessee received the loan which is duly reflected in the regular returns. In this case also the sale proceeds of diamonds declared under VDIS were first credited in the bank account of family members and then they provided deposits to the assessee. Thus, in the hands of the assessee the credit is fully explained. Thus, the addition cannot be made in the hands of the assessee. We are of the opinion that the declaration made under VDIS and the sale of diamonds declared therein cannot be held to be bogus/non-existent as held by the AO. The addition made in the assessee's hands is, therefore, rightly deleted by the learned CIT(A). This ground of the Department is, therefore, dismissed. Charging of interest u/s 158BFA(1) - We find that the assessee has repeatedly requested various authorities of the Department but despite of his requests the Department has not provided the copies of seized records. In case of Dy. CIT vs. Late Ratan Lal Jain [2001 (9) TMI 267 - ITAT PATNA] it is held that although the provisions for charging interest u/s 158BFA, in case of delayed filing, of block return, seem to be mandatory, yet inasmuch as interest is of penal nature, at least to some extent, in such a case, it has got to be considered that if the delay be not attributable to the assessee, he cannot be penalised by way of charging of interest u/s 158BFA. In these facts, the CIT(A) has rightly directed that interest cannot be charged for the period of delay in the supply of photocopy of the seized material. Hence, the ground of the Department is dismissed. In the result, appeal of the assessee is partly allowed and that of the Department is dismissed.
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