TMI Blog1999 (10) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,45,000 3. On account of bogus purchase of steel from Jindal Steels (Para 3) 21,97,374 4. On a/c of bogus purchase of steel from Maheshwari Iron Steel Ltd. [Para (4) 53,68,953 5. Raising of share capital amount spent outside the books 15,25,000 6. Payment made to Shri Shaikh Amin (Para 6) 2,00,000 7. Amount paid to Shri A.G. Ghare (Para 6) 50,000 8. Amount paid to Shri B.G. Ghare (Para 6) 1,00,000 ------ --------------- Total 1,33,63,217 ----------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------- After discussion, another statement of Shri Shrikant M. Kasat was recorded on 30th October, 1995 wherein the sum of Rs. 6,75,000 was offered for taxation on account of excess stock. In the course of the assessment proceedings, a questionnaire dated 25th September, 1996 was issued by the Assessing Officer wherein the addition of Rs. 6.75 lakhs on account of excess stock was proposed in view of the disclosure made by the assessee in the course of search proceedings. Finally, the Assessing Officer proposed the addition of Rs. 6.75 lakhs on this account in the draft assessment order forwarded to the CIT for approval. However, addition of Rs. 33,76,890 was made by the Assessing Officer. 4. The ld. counsel for the assessee Mr. Pathak has seriously assailed this addition on merits as well as on the legal contention that the addition over and above Rs. 6.75 lakhs was without jurisdiction. First we shall deal with the legal contention raised by him. He drew our attention to the provisions of section 158BG which provides that no order of assessment for the block period shall be passed without the previous approval of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. counsel for the assessee and he merely relied on the order of Assessing Officer. 5. Rival submissions of the parties and the material placed before us have been considered carefully. In our opinion, the addition over and above the sum of Rs. 6.75 lakhs cannot be sustained. No doubt the excess stock as estimated by such party on 27-10-1995 was Rs. 33,76,890 and the Managing Director of the assessee company offered the excess stock for taxation, but the said offer was subject to verification and re-conciliation. The answer to question No. 8 of the statement dated 27th October, 1985 of the Managing Director is relevant and is being re-produced as under:- "There is a request made to allow me two days time to verify the figures arrived at by the Department. I shall present myself in your office on Monday, the 30th October, 1995 at 10 am." The assessee appeared before the ADI on 30th October, 1995 i.e., during search proceeding itself and re-conciled the difference in stock. According to the assessee, the difference was only to the extent of Rs. 4,57,200 and the same was offered for taxation. This is apparent from the detailed reconciliation running into various pages, copie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sd/- Sushma Trivedi (CIT) Sd/- (Shrikant Kasat) 28th October, 1996 We have also gone through the aforesaid letter of the assessee dated 25th October, 1996 appearing at page 242-243 of paper-book No. I, but there is no reference to this addition. In these circumstances, there was no provocation for the Assessing Officer to make an addition of Rs. 33,76,890 in this regard and that too without confronting the assessee for rebuttal. In our considered opinion, the Assessing Officer has exceeded his jurisdiction by making such addition. The Legislature has provided safeguard to the assessee against such addition by indicating the provision of section 158BG which provides that no order shall be made without the previous approval of CIT. Once an addition has been proposed in the draft assessment order, it becomes final unless there is discretion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der this amount in the hands of five directors equally. It was also declared by him that the so-called purchases would not be included either as capital expenditure or Revenue expenditure of the company and purchases to that extent shall be cancelled. On the basis of these materials, the Assessing Officer recorded a finding that the said Bank A/c was a bogus A/c and the money deposited and subsequently withdrawn were utilised by the Directors for personal needs. Accordingly, he concluded that there was an undisclosed income of the assessee of Rs. 21,96,374 which was assessed on substantive basis. Similar addition was also made in the hands of directors on protective basis. 8. Both the parties have been heard at length. In our opinion, this addition cannot be sustained on the face of it even assuming the findings recorded by the Assessing Officer namely- (1) that bank A/c in the name of the Jindal Steels was opened and operated by the assessee as bogus A/c (2) the amounts deposited in the said A/c were withdrawn by the assessee and such funds were misappropriated by the Directors, as correct. The reasons are obvious. Admittedly, the funds which were deposited in the A/c of Jindal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cannot be taxed under the law. Addition of Rs. 53,68,953 on account of bogus purchases of Steel from Maheshwari Iron Steel Ltd. 9. This addition has been discussed by the Assessing Officer in para 4 of his order. The assessee had shown purchases of steel for the aforesaid amount from Maheshwari Iron Steel Ltd. of Madras. According to the assessee, this steel was purchased for construction of its building for its new project. Since in the course of search, Bank A/c of Jindal Steel was found to be bogus, the purchases of steel from M/s. Maheshwari Iron Steel was also doubted and loose-papers found in the course of search were investigated from this angle. A loose-paper was found showing cash withdrawal of Rs. 23,59,000 from the Bank. In answer to question No. 10, Mr. Shrikant M. Kasat, Managing Director of the Co., explained that Mr. Pathak, Finance Manager of the Co., had withdrawn the said cash from the Bank A/c of Maheshwari Iron and Steel Co. and such cash was delivered to the said company at Madras. Answer to question No. 11 shows that such amount was withdrawn at the instance of Mr. Maheshwari of the said Madras company, the Co-brother of the deponent. In view of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished and the burden lies on the person who alleges that apparent is not real. The concept of undisclosed income under chapter XIV-B is akin to the concept of concealed income. Therefore, Assessing Officer must bring positive material on the record to prove the falsity of the entries in the books of account. The books of account cannot be rejected in light hearted manner on mere suspicion and surmises howsoever grave. Section 158-BB also provides that undisclosed income can be computed only on the basis of material found as a result of search. In the present case, the Assessing Officer himself has merely doubted the transactions between the assessee and Maheshwari Iron and Steel Ltd. on the grounds namely (1) that certain bills were in consecutive numbers, (2) some bills were issued on the same day, (3) a part of the money was withdrawn by the assessee from the Bank A/c of Maheshwari Iron and Steel Co. and (4) that Bank A/c was introduced by one of the members of the Kasat family. No doubt such circumstances raise doubts about the genuineness of the transactions with the said company, but mere suspicion is not sufficient to reject the books of account. The assessee has explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases with M/s. Maheshwari Iron Steel Co. were also not genuine, the addition cannot be made for the reasons given by us while disposing the issue regarding the addition made by Assessing Officer vis-a-vis the purchases of steel from M/s. Jindal Steels. Accordingly, the order of the Assessing Officer on this issue cannot be sustained. Consequently, the addition of Rs. 53,68,953 is hereby deleted. The Addition of Rs. 15.25 Lakhs on account of raising of Share Capital Amount. 13. In the course of search, two loose papers bearing numbers 93 94 of bundle No. 3 were found on 20th October, 1995. These loose papers contain certain entries in respect of which the assessee was asked to explain vide question No. 2 of the statement of Mr. Shrikant M. Kasat, Managing Director of the Co., recorded on 30th October, 1995. It was explained by him that the sum of Rs. 3,25,000 on paper No. 93 and Rs. 12 lakhs on paper No. 94 represented payments outside the books of account as part of planning to raise the share capital of the company. The same was offered for taxation. However, the assessee retracted from such statements in the assessment proceedings on the ground that it was obtained un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------- 28 ------- ------------------------------------------------------------------------------------------------------------ The perusal of the above clearly shows that the sum of Rs. 12 lakhs was paid by the assessee in accordance with the arrangement for raising the share capital. The assessee has not been able to explain the source of such payment. The Ld. counsel for the assessee tried to improve the case of the assessee by pointing out the payment of Rs. 10 lakhs to Rajesh Kasat Co. made from the books of account and submitting that to this extent relief be given. We are unable to accept this explanation inasmuch as this does not tally with the entry appearing at page 332. Further, the assessee himself had admitted in his statement that these payments of Rs. 15.25 lakhs were made outside the books of account. The assessee has already accepted the addition of Rs. 3.25 lakhs by not pressing the same. There appears to be no reason for not accepting the other part of statement. In the absence of any material on the record in favour of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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