TMI Blog2007 (11) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... ides in seriatim let us take note of the brief facts. Facts : 2. Both the learned Revenue authorities have narrated the facts in detail as their orders are running into 264 pages (AO's order) and 241 + 8 pages Annexure [CIT(A)'s order]. Shri Shankar Sharma and Smt. Devina Mehra are husband and wife, they are ex-employees of Citi Bank. After their resignation from the bank they turn to be share brokers. They incorporated the assessee on 27th Sept., 1994. They are directors and the main persons operating the business affairs of the assessee. The assessee is a flagship company in the group and the main business of the company is undertaking shares and stockbroking and arbitrage operations. The assessee company is member of both the premier stock exchanges of India. The facts emerging out from the assessment order are as under : The business of the company has grown many folds in the last two years i.e., asst. yrs. 1998-99 and 1999-2000. The group has taken over a number of existing companies, in India and outside India. Shri Shankar Sharma has a ticket on London and New York stock exchanges. It has been alleged that Mr. Shankar Sharma, director of FGSBPL, has play ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was purchased by Shankar Sharma on 29th Feb., 2000 who is also one of the directors in Buffalo Networks (P) Ltd. having shareholding of 26 per cent (approx.) in the company. Search and seizure action under s. 132'A search operation under s. 132(1) of the IT Act was conducted at various offices and residential premises of the 'First Global' Group on 23rd March, 2001. As a result of search and seizure action incriminating books and documents relating to unaccounted income and undisclosed transaction of 'First Global' Group were found and seized vide Panchnamas dt. 23rd March, 2001, 29th May, 2001 and 1st June, 2001 at ground and fourth floors, Crescent Chambers, Tamarind Lane, Fort Mumbai and vide Panchnama dt. 27th March, 2001 at the residential premises of the directors of the First Global Group, Shri Shankar Sharma and Smt. Devina Mehra at Flat No. 4, Scherzade Building, Off Arthur Bunder Road, Minu Desai Marg, Colaba, Mumbai and vide Panchnama dt. 17th April, 2001 at the New Delhi office of the First Global Stock Broking (P) Ltd. situated at 1st floor, 129/1, Pocket No. 40, Chittaranjan Park, New Delhi and the following books of accounts, documents were fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prohibitory order under s. 132(3) was passed and put on the steel cupboard and subsequently the prohibitory order was lifted on 28th May, 2001 and the Panchnama was drawn in respect of this premises i.e., 4th floor, Crescent Chambers, Tamarind Lane, Fort, Mumbai on 29th May, 2001 affecting the following seizure : (A) A-1 Loose paper file containing 129 pages (B) A-2 Bank book containing 18 pages (C) A-3 Bank book containing 13 pages (D) Annex. O Back up of servers, hard disks taken on 7 CDs 1(iii) Panchnama dt. 23rd March, 2001 of Khar office and Vashi office (a) Books of accounts/documents/CDs/floppies found and seized from office of M/s First Global Stock Broking (P) Ltd. (FGSBPL), Vishnu Dham Building. 14th Road, Link Road, Khar, Mumbai vide Panchnama dt. 23rd March, 2001 A-1 Loose paper file containing 41 pages A-2 Loose paper file containing 191 pages, 1 CD (b) Boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (B) Jewellery worth ₹ 1,61,701 was seized. 1 (vi) Panchnama dt. 1st June, 2001 The search was concluded on 1st June, 2001 and the last Panchnama was drawn on 1st June, 2001. The authorisation for search under s. 132 was lastly executed on 1st June, 2001 and the last Panchnama drawn within the meaning of s. 158BE r/w cl. (a) to Expln. 2 was drawn on 1st June, 2001. No seizure was effected on that date. 2. Block return for the block period filed by the assessee Notice under s. 158BC was issued on 18th May, 2001 for furnishing the block return of the assessee within 30 days of the service of the notice. The notice was served on 22nd May, 2001. In response, the assessee has filed their reply vide letter dt. 31st May, 2001 received in the tapal of the then AO's tapal on 4th June, 2001 requesting to keep in abeyance the notice under s. 158BC till the search proceedings are duly completed. In this regard, it is to state that the search proceedings were finally concluded on 1st June, 2001 as discussed in para 1 of this block assessment order. Hence there was no need to keep the notice in abeyance as no search proceedings were pending. Moreover there is no provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14th Surcharge Rs. Nil 15th Tax payable (14+15)=Rs. Nil 3. After hearing the assessee and on analysis of the seized material learned AO framed the assessment order on 13th June, 2003 and determined the undisclosed income of the assessee for the block period as under : 18 Subject to the above remarks, the undisclosed income for the block period is computed under s. 158BB of the Act as under : Asst. yr. Returned income Assessed income including undisclosed income Undisclosed income computed under s. 158BB of the Act 1995-96 86,328 1,14,170 28,242 1996-97 21,032 3,94,058 3,73,026 1997-98 41,634 6,49,734 6,08,100 1998-99 1,40,56,800 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s bad in law and nullity being based upon proceedings under s. 158BC initiated by the AO on 18th May, 2001 while the search under s. 132(1), as per the Department's own admission was being conducted and had not been concluded. 2. Without prejudice to above contentions, the learned CIT(A) erred in not holding that the order under s. 158BC made on 13th June, 2003 was barred by limitation of time on account of the search having been conducted on or before 18th May, 2001. 6. In order to seek admission of the additional grounds learned counsel for the assessee submitted that in general assessee has already taken ground Nos. 1B.1 and 1B.2 to the effect that block assessment is null and void as much as it is time barred and also search was initiated without fulfilling the requisite conditions of initiation of search. Thus according to the learned counsel for the assessee facts are already on the record. No new facts are to be brought on record for adjudicating this ground of appeal. The assessee is only raising a specific ground on those facts. The learned counsel for the assessee submitted that these grounds go to the root of the validity of the assessment order and also legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BC is attracted or comes into play after the search under s. 132 is over or completed. Elaborating his point he pointed out that had the intention of the legislature being to empower the AO to invoke the provision of s. 158BC even before the completion of the search, the provision would have been worded as where any search has been initiated or is to be conducted and not has been conducted. For buttressing his contention he relied upon the judgment of Hon'ble Supreme Court in the case of ITO vs. Lakhmani Mewal Das 1976 CTR (SC) 220: (1976) 103 ITR 437(SC) and contended that the bad initiation of proceedings would render the consequential order also bad in law. In the case before the Hon'ble Supreme Court the facts were that AO recorded the reasons in writing for reopening the assessment as mandatory requirement under s. 148(2) of the IT Act, but those reasons did not meet the requirement of law and, therefore, the Hon'ble Supreme Court has quashed the assessment order. Similarly the assessment order in the present case deserves to be quashed. 7. Shri Kotangale, the learned standing counsel for the Revenue while controverting the contention of learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermal Power Co. (supra) we permit the assessee to take up this issue by way of an additional ground and the same is admitted for adjudication on merit. 9. Sec. 158BC has a direct bearing on the controversy, therefore, it is salutary upon us to take note of this section. This section reads as under : 158BC Procedure for block assessment.'Where any search has been conducted under s. 132 or books of account, other documents or assets are requisitioned under s. 132A, in the case of any person, then,' (a) the AO shall' (i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court in the case of Ashwani Kumar Ghosh vs. Arvind Bose 1953 SCR 1 had held that it is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. Similarly in the case of Qubec Raily Light Power vs. Vandary AIR 1920 PC 181 it had been observed that the legislature is deemed not to waste its words or to say anything in vain a construction which attributes redundancy to the legislature will not be accepted except for compelling reasons. Thus it is not permissible to add words to a statute which are not there. Similarly not to ignore any words used in the provision. The emphasis of learned counsel for the Revenue was that expression has been is to be understood in continuing process or it can be ignored. In view of the above discussion, it is difficult for us to concur with the submissions of the learned counsel for the Revenue. The expression has been conducted simply cannot be ignored. The expression has been is explained in the dictionary The Law Lexicon by Shri Ramanatha Aiyer, which reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the above explained meaning of expression has been we are of the view that expression has been used in the present perfect tense, which denotes that certain activities must have been completed before the issuance of a notice. The simple reading of the provision postulates that a search must have come to an end before the issuance of the notice under s. 158BC. 11. The next question for our adjudication is what will be the consequences if such notice has been issued prior to conclusion of the search. The learned counsel for the Revenue emphasized that it is procedural irregularity which is curable. Sec. 158BC lays down the procedure and not bestows jurisdiction in the AO. He has relied upon the decision of Hon'ble jurisdictional High Court in the case of Shirish Madhukar Dalvi (supra). 12. In order to adjudicate this question we have to understand the method of determining undisclosed income in a block assessment and scope of block assessment. Secs. 158B(b) and 158BB provide the definition of undisclosed income and its computation for the block period. These provisions read as under : 158B(b) 'undisclosed income' includes any money, bullion, jewellery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the previous year has not ended or the date of filing the return of income under sub-s. (1) of s. 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; (e) where any order of settlement has been made under sub-s. (4) of s. 245D, on the basis of such order; (f) where an assessment of undisclosed income had been made earlier under cl. (c) of s. 158BC, on the basis of such assessment. Explanation 'For the purposes of determination of undisclosed income,' (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of this Act without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-s. (2) of s. 32 : Provided that in computing deductions under Chapter VI-A for the purposes of the said aggregation, effect shall be given to set off of brought forward losses under Chapter VI or unabsorbed depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound as a result of search is clearly relatable to ss. 132 and 132A. Similarly Hon'ble Rajasthan High Court has explained the scope of block assessment and determination of undisclosed income in CIT vs. Rajendra Prasad Gupta (2001) 166 CTR (Raj) 83: (2001) 248 ITR 350(Raj). The following observations are worth to note : However, under the scheme of the provisions for block assessment, it is apparent that it relates to assessment of 'undisclosed income' of the assessee excluding the income subjected to regular assessment in pursuance of the returns filed by the assessee for such period. It is also apparent from the perusal of s. 158BB that the returns are also required to be filed in pursuance of the notice under s. 158BC(a) and the assessment is to be framed on that basis in the light of material that has come into possession of the assessing authority during the course of search which is the foundation of the proceedings. That being so, the correctness or otherwise of the returns filed in pursuance of the notice under s. 158BC(a) has to be examined with reference to the material in the possession of the assessing authority having nexus to assessment of 'undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the material gathered during the course of search, rather all these informations were available to the AO at the time of regular assessment. He obtained the DVO's report subsequent to the regular assessment, therefore, addition is made beyond the scope of block assessment. The Hon'ble jurisdictional High Court upheld the deletion made by the Tribunal. 14. The Tribunal Mumbai Bench in the case of Sunder Agencies vs. Dy. CIT (1997) 59 TTJ (Mumbai) 610 : (1997) 63 ITD 245 (Mumbai) has made extremely lucid enunciation of law on the subject and we cannot do better than to extract some of the observations made in that decision; 23. There are adequate safeguards present against any possible misuse of the provision of search and seizure. Chapter XIV-B was introduced in order to make procedure of assessment of search and for requisition cases more effective. Under the provisions of this chapter the undisclosed income detected as a result of search initiated or requisition made after 30th June, 1995 be assessed separately as income of that block of ten previous years. The provision was introduced to streamline the procedure concerning the search matters. It is abu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of filing a block return on the basis of seized material. If he failed to compute the true undisclosed income on the basis of the seized material and the AO determined a different undisclosed income than the one disclosed by the assessee, the assessee would be liable to penalty under s. 158BFA(2). 16. The second proviso appended with s. 158BC(1) prohibits an assessee to revise its return filed for the block period. Thus in response to a notice under s. 158BC if an assessee had filed the return of income, it cannot revise that return. 17. Sec. 158BFA(1) contemplates that if the assessee furnishes the return after expiry of the time-limit provided in the notice issued under s. 158BC(1) then assessee shall be liable to pay simple interest @ 1 per cent of the tax on undisclosed income. 18. The above chronological procedural requirement contemplates that an assessee (i) has to compute the undisclosed income on the basis of the seized material for filing the return in response to notice under s. 158BC, (ii) if the assessee failed to compute true undisclosed income and the AO determined a different undisclosed income than the one returned by the assessee, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived under s. 158BC, but no such right is available in filing a block return. This is because an assessee has to compute the true undisclosed income on the basis of the seized material. Once everything is given to an assessee and it computed its income, the assessee cannot be allowed to say that he has wrongly computed the income. This may be the basic reason for not permitting an assessee to file a revised return. This is also the reason for levy of penalty under s. 158BFA(2). 21. The learned counsel for the Revenue put emphasis on the decision of the Hon'ble jurisdictional High Court in the case of Shirish Madhukar Dalvi (supra). The facts in that case are that a search under s. 132 of the Act was conducted at the premises of the assessee. A notice under s. 158BC was served upon the assessee. This notice did not mention the correct provision of the Act. It did not mention the correct block period for which the return was required to file. It did not give 15 days clear notice. After this notice the AO wrote one more letter on 17th Sept., 1998. The assessee wrote a letter to the AO on 28th Sept., 1998, denied the receipt of notice dt. 6th July, 1998, however, sought extensio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 23. There is no dispute that the decisions of the Hon'ble jurisdictional High Court are binding upon the Tribunal. The Tribunal cannot take a different opinion contrary to the law laid down by the Hon'ble High Court. On careful reading of the Hon'ble High Court decision in the case of Shirish Madhukar Dalvi (supra) we find that notice in that case was also served before the conclusion of the search. Though the arguments raised before us were not raised before the Hon'ble High Court, nor the prejudice caused to the present assessee was demonstrated in that case, rather, it was expressed that no prejudice has been caused to the assessee. However, being subordinate authority we cannot afford to ignore the binding decision of Hon'ble jurisdictional High Court in the garb of above arguments or reasonings. The fact is that notice under s. 158BC was issued in that case before the conclusion of search and Hon'ble High Court has considered it as procedural irregularity only. Thus respectfully following the decision of the Hon'ble High Court we hold that it is procedural irregularity and not fatal to the assessment order. However, in view of the above discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o rejected. 24. Now we take up the other grounds of appeal raised by the assessee. In the memorandum of appeal the assessee has taken certain legal grounds which are preliminary grounds of appeal as well as the grounds challenging the additions on merit. In the legal grounds the first preliminary ground is that learned CIT(A) has erred in upholding the initiation of search. The assessee has submitted that there was no material with the Department which can authorize the authorized officer to initiate such proceedings against the assessee under s. 132 of the Act. According to the learned counsel for the assessee the requisite conditions for initiating search were not available in this case. 25. We have duly considered the contention of learned counsel for the assessee and gone through the written submission filed by him. The Special Bench of the Tribunal in the case of Promain Ltd. vs. Dy. CIT (2005) 95 TTJ (Del)(SB) 825: (2005) 95 ITD 489(Del)(SB) has held that the Tribunal cannot consider and decide the issue relating to validity of search. The Tribunal has also observed that there is no provision for filing an appeal before the Tribunal against warrant of authorization issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered by us while dealing with those issues on merit, because it is an issue which requires appreciation of evidence and the facts and the circumstances. If the document in itself is clear and leads to an authority to some conclusion then that document can be relied upon straight away, unless clarified by the assessee. But if it required some corroboration for arriving at firm conclusion and there is no explanation with the assessee then merely on non giving of explanation, addition cannot be made because the document in itself is not leading to a firm conclusion. The positive circumstances should come from the AO. In such situation the safe procedure is to ignore such documents. This ground in itself does not require any specific finding. 30. Ground No. 1D : In this ground the assessee has pleaded that assessment has been made in violation of principles of natural justice. It is again a ground which is in the form of argument and can be considered at the relevant point of time while deciding the particular issue. From the list of events appended by the assessee we found that almost more than 40 notices/letters were issued by the AO starting from 17th May, 2002 upto passi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the block assessment. In our view this construction of scope of block assessment is not in the line of authoritative pronouncement noted supra. If any income is hidden in those entries then find out in the scrutiny assessment. Of course, if during the search some material is found indicating that those entries are false and have been manipulated in a way to conceal something then it will be open for the AO to re-appreciate those entries in the light of seized material and find out the true impact. The reference on the Tribunal order in the case of C.J. Shah Co. vs. Asstt. CIT (2001) 118 Taxman 183(Mumbai)(Mag) at p. 35 of the impugned order is also misplaced. 33. Ground No. 1F : In this ground assessee has pleaded that assessment has been made on the basis of the retracted statement. Again it is not a particular issue, rather an argument. It is an issue relating to evaluation of evidence and we will consider it while dealing the issue on merit. 34. Ground No. 1G : In this ground of appeal assessee has submitted that learned CIT(A) has passed the order without application of mind. In our opinion it is a general ground of appeal, which requires no specific finding because wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d held that loose papers cannot be equated with regular books and cannot be put for special audit. The learned counsel for the Revenue on the other hand, submitted that the Hon'ble Supreme Court in a subsequent order has doubted the correctness of the decision in the case of Rajesh Kumar vs. Dy. CIT (supra) and referred this issue for reconsideration by a Larger Bench. He made a reference to the order of the Hon'ble Supreme Court in the case of Sahara India (Firm) vs. CIT (2007) 209 CTR (SC) 20: (2007) 289 ITR 473(SC). On the strength of this decision he contended that once Hon'ble Supreme Court itself doubted the correctness of the earlier decision and referred it to a Larger Bench for consideration earlier decision should not be relied upon for arriving at a conclusion that in absence of opportunity of hearing no special auditor can be appointed. Consequently the special auditor's report is required to be ignored. The learned counsel for the assessee in the rebuttal submitted that the decision in the case of Rajesh Kumar (supra) still holds field. It has not been overruled, hence, it is binding on all subordinate authorities. By merely a reference being made or co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) In block assessment, undisclosed income is to be determined on the basis of assets or documents found during the course of search, which is not reflected in the regular books of accounts. So there is no requirement of audit of books of account. (iv) It is a fact that determination of undisclosed income is a difficult task which has to be judged after examination of the regular records of the assessee and items which appeared to be concealed income of the assessee. But that task cannot be said to make the books of accounts complex. (v) The AO cannot make a reference to the auditor to prepare books of account on the basis of seized records or to compute the undisclosed income of the different years. (vi) This indirectly means that the assessment was got completed through a special auditor. The objective behind directing special audit is to be audit the accounts and not to prepare the assessment. (vii) The purpose of audit of financial statement is to enable the auditor to express opinion whether the financial statements are prepared in all material respects in accordance with the identified financial reporting frame or other criteria. The work 'audit' does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he discussion of the AO, submissions of the assessee before the learned CIT(A) and finding of the learned CIT(A) recorded in paras 16.1, 16.2 and 16.3 of the impugned order read as under : 16.1 The findings of the learned AO leading to the addition have been discussed at page Nos. 185 to 196 of the assessment order which are as under : 'A., Annex. A-1 seized from ground floor, Fort office as per Panchnama dt. 23rd March, 2001 reads as follows : (The relevant pages are enclosed herewith Annex. A pp. 1 to 20). Page No. 50. The extract of the page No. 50 and p. 54 are handwritten pages, and are reproduced as under. The same is annexed herewith as Annex. A-1 Goushal 1999-2000 Loss-Forties-Virta Trade 2,56,20,479.81 Loss Arch Finance Virta Trade 98,03,225 Loss Forties Devina Mehra 89,08,120 4,43,31,824. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se entities is to the tune of ₹ 1,42,37,088. Moreover, there is more such concern by the name of Sahara India Ltd. to whom profit entry of ₹ 1,48,20,356 has been passed on. The result in cash so generated total amount of ₹ 2,90,57,444 has been received by FGSBPL. This has been done through one Mr. Ashok. The other pages reflect the transactions of our company. The above explanation given by Shri Neeraj Khanna, chartered accountant who was in charge of accounts of the company throws light on the modus operandi adopted by the assessee for generating unaccounted income and massive tax evasion running into crores of rupees by reducing taxable profits in the hands of group concerns/individuals of the assessee group. (1) Shree Bajrang Ispat Plywood Ltd. (SBIPL) : In this case, Shree Bajrang Ispat Plywood Ltd. has done share transactions with M/s FGSBPL, broker during the period 1st April, 1999 to 31st March, 2000. During the course of search, it was found that FGSBPL has transferred a profit of ₹ 77,02,081 to SBIPL. On verification of the transactions, it was revealed that these transactions are squared up i.e. where there is no intention of actually gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company except a bank account No. S-598 in Dena Bank, Ghatkopar branch is maintained at this office. Further, he has stated that the company is assessed to tax in GIR No. AAACB9485B with ITO Ward 2(1), Raipur and regularly filing return of income. The return of income of SBIPL shows huge carry forward business losses and unabsorbed depreciation. Therefore there is no tax effect in their case, even of some fictitious profits are admitted. The main persons of this company are Goel brothers (Anand Goel, who sits at Raipur). The head office of the company is also located at Raipur. The main activity carried out from Mumbai office is collection of sale proceeds, deposit the same in bank and remit the proceeds by way of DDs to Raipur. While explaining the content of the diary, Mr. Atul Chitalia in his statement dt. 2nd May, 2001 has explained that the cash transactions recorded in the diary pertain to the period 1st April, 2000 to 31st March, 2001. The right side of page indicates the cash payments and left side indicates cash receipts. He has also explained the method of writing the figures as ₹ 10 lacs is written as 10000=00 and said the other entries of cash receipts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First Global Cheque 22.9.2000 25 5,000-00 First Global Cheque 25.9.2000 27 5,000-00 First Global Cheque 25.9.2000 22 20-81 First Global Cheque 25.9.2000 77,02,081.75 He clarified that a total amount of ₹ 77, 02,081 on the dates mentioned above was paid in cash to the representatives of First Global Stock Broking (P) Ltd., against receipt of cheque. This was done as per the direction of the directors. He was to get confirmation over phone but no acknowledgment of receipt was received from FGSBPL. When asked about the source of such cash payment made to the FGSBPL he said that he used to give the cash from the day to day cash collection and money received from different parties. He stated that the cheques so received from FGSBPL are deposited in Dena Bank and proceeds of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e M/s First Global Stock Broking (P) Ltd. (2) Sahara India Financial Corporation Ltd. (SIFCL) During the financial year 2000-01 M/s First Global Stock Broking (P) Ltd., broker had shown certain share transactions and transferred profit to the tune of ₹ 1,48,20,356.90 to M/s Sahara India Financial Corporation Ltd. (SIFCL) and created bogus loss in the books . The mechanism employed by the broker for transferring profits : Similar to the nature of transactions as explained in the case M/s Shree Bajrang Ispat Plywood (P) Ltd., the broker has altered existing entries in the books by merely changing the name of the client. On verification of stock exchange records i.e. daily list of transactions, it was found that the particular transactions originally have taken place in the stock exchange under the client code 3000. Later on, the broker changed the name of the client to Sahara India Financial Corporation Ltd. in his books . Further, all the transactions are squared up i.e there was no actual giving and taking delivery of shares, and transactions are settled only by payment of difference. Thus, the assessee initially conducts transactions in the stock exchange on it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Crescent Building, Fort, Mumbai, on 23rd March, 2001, show the entries relating to Sahara on the following dates : 3.02.2001 Sahara 10 6.02.2001 Sahara 10 14.02.2001 Sahara 20 26.02.2001 Sahara 20 7.07.2001 Sahara 20 As discussed above, the notepads marked as A/5 and A/6 are in the handwriting of Mr. Neeraj Khanna, Chief Finance Officer of the company and these documents are maintained by him and written by him. While explaining the contents of these seized materials, he has replied in answer to question No. 8 on the date of search i.e. on 23rd March, 2001, that these are details of certain adjustments in profit made in the account of M/s FGSBPL. These adjustments are by way of transferring of profits of M/s FGSBPL into certain outside concerns like M/s Sahara India Ltd. to whom profit entry of ₹ 1,48,20,356 has been passed on and received in cash through one Mr. Ashok as per statement of Shri N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng entries totalling to ₹ 3 lacs on 23rd Feb., 2001, 28th Feb., 2001 and 7th March, 2001'Rs. 75,000, ₹ 1,50,000 and 75,000 respectively. Sahara India Financial Corporation Ltd. vide its letter dt. 18th May, 2001 has confirmed these facts in paras 4 and 5 of the letter which are reproduced as under : 4. Our purchases through M/s First Global Stock Broking (P) Ltd. did not result in any delivery as the transactions were squared of within the same settlement. 5. Our sales through M/s First Global Stock Broking (P) Ltd. did not result in any delivery as the transactions were squared of within the same settlement. Therefore the same is added as the undisclosed income for the asst. yr. 2001-02 for the broken period. (Copy of seized paper, copy of letter of Sahara and extract taken from file received from NSE M 1295099 is annexed herewith as Annexures. (b) Sahara (Pages 7 and 9, Annex. A-6, ground floor) ₹ 1,48,20,356 (Rs. 66,53,894 is outstanding payable FGSBPL) The assessee has neither proved the genuineness of these transactions before the auditor appointed under s. 142(2A) nor before the AO during the course of block assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f FGSBPL the assessee had made payments in the financial year 2000-01, on 21st July, 2000, 21st July, 2000 and 2nd Feb., 2001 for ₹ 10,00,000, ₹ 10,00,000 and ₹ 2,57,000 respectively. While explaining the contents of the seized material, Shri Neeraj Khanna, Chief Finance Officer has explained in detail on the day of search in reply to question Nos. 8, 12 and 13 stating an equivalent amount of cheque given by FGSBPL has been received in cash and the same cash was used for various purposes as mentioned in page Nos. 8 and 10 of Annex. A/5. It clearly establishes that the transactions are fictitious. The assessee has neither proved the genuineness of these transactions before the auditor appointed under s. 142(2A) nor before the AO during the course of block assessment proceedings. Therefore, it is clear that the assessee company has passed on their profit to M/s NSL to the tune of ₹ 22,57,182. Therefore ₹ 22,57,182 is treated as undisclosed income of the assessee M/s First Global Stock Broking (P) Ltd. (4) Friends Portfolio (P) Ltd., Delhi. (FPPL) : In this case, FPPL has done share transactions with M/s FGSBPL ( broker) during the period 1st Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of ₹ 10,15,000 was debited to P L a/c of First Global Stock Broking (P) Ltd., on account of expenses of Y2K compliance in the year 1999-2000. It was stated that Sunbeam Infotech Ltd. has undertaken certain work relating to solution of software upgradation for Y2K compliance. On verification of details, it was found that the bills for ₹ 9,75,000 and ₹ 40,000 were raised by Sunbeam Infotech Ltd., on 30th Sept., 1999 and 30th March, 2000 respectively and payment was actually received from First Global Stock Broking (P) Ltd., after a lapse of nearly one year of rendering the service. This itself gives sufficient doubt regarding suspicious nature of the transactions. On verification of bank account of Sunbeam Infotech Ltd., it was seen that most of the withdrawals were made in cash immediately on deposit of cheques received from First Global Stock Broking (P) Ltd. The explanation of Shri Neeraj Khanna, Chief Finance Officer of the company of First Global on the date of search in response to question Nos. 8,12 and 13 regarding page No. 50 of Annex. A/1, stating that the amount equivalent to cheque has been received in cash and used the same for various purposes as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed papers having page Nos. 50 and 54 are handwritten pages written by the part time consultant of the First Global Group, Mr. Neeraj Khanna. The upper part of the backside of the seized p. 50 shows some figures against certain entities like : Bajrang 77,02,081.75 Nits 22,57,182.12 Friends 32,62,824.84 Sunbeam 10,15,000.71 1,42,37,088.71 (ii) The first three were the amounts payable to the new clients of the appellant for the credits earned by these entities in share trading through the appellant. The trading was done by them during the financial year 1999-2000. However, at that time they had informed the appellant to keep these profits as margin as they wanted to do further share trading. This is a common phenomenon and practice in the stock market. The clients at their discretion routinely ask their sharebrokers to keep their credit balances with the broker, either as margins or as deposits for future trades. This is a normal practice in the market and is done with the br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e needed to be planned. Therefore as one would see, all these figures were outflows for the group, which needed to be planned and provided. Some of them in fact would have been paid by the time the document was made. However this was an exercise in fund flow and not necessarily cash flow. Fund flow as the name suggests, considers the sources and uses and differs from cash flow, which necessarily concentrates only the actual movement of bank or cash funds. So a change in the total debtors or creditors figures would be important from fund flow angle but may not be so important from cash flow angle if the net effect of the change from cash/bank funds angle is not significant. For example if there is credit sale, the figure of debtors would go up and effect fund flow but since there would not be any receipt in cash/bank, the cash flow position would not be affected. (vii) Therefore, the above exercise was basically a fund flow exercise and not a cash flow exercise. As such the figures on the backside of p. 50 represent the payments that were made or to be made by the group. (viii) The AO has relied only on the statement of Mr. Neeraj Khanna, which has, no evidentiary value as has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cash has allegedly been handled by a person who is not even an employee and has allegedly handed over cash to an unknown person. Moreover, the documentary evidence given in the assessment order, nowhere points to any cash having been given by Bajrang Ispat to First Global Stockbroking (P) Ltd., the appellant. (iii) After having examined Mr. Atul Chitalia on oath, the directors of the company Bajrang Ispat Plywood (P) Ltd. were also examined on oath. These statements have been deliberately suppressed by the learned AO and have no reference in the order. The reason being that nowhere in the statement, have the directors confirmed anything stated by Mr. Atul Chitalia. The statements taken on oath, clearly show that their cash on hand fully matched with the cash as per their books of account. It appears that the IT Department has taken the statement of Mr. Atul Chitalia under threat, coercion and duress and fearing that the statement will lose its meaning and value totally in case the same is refuted by the directors of Bajrang Ispat Plywood (P) Ltd.; they have conveniently avoided asking any question relating to their transaction with the appellant in spite of the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the company having accepted the contracts, bills and the payments and having given confirmation of the copy of account, have confirmed the entire transaction. The IT Department had deliberately not confronted them on this issue, as they would have very much confirmed the transaction as being genuine, as they had confirmed the same to the appellant in the month of April, 2001. The appellant repeatedly asked the learned AO that as per settled law, if he intended to disbelieve any of materials, documents, books or explanations placed before him, he was compelled by law to provide a proper hearing for this purpose; provide an opportunity to the appellant to rebut the same and provide any alternative material and cross-examine any witness whose testimony he may be relying on. No material has been given. No opportunity to cross-examine Mr. Atul Chitalia has been provided to the appellant. There is no corroborative evidence on record to show that the appellant at any point had received cash. (ix) Therefore, as per law and facts and circumstances of the case, the above addition may be set aside or deleted. b. Sahara India Financial Corporation (SIFCL) (i) We strongly deny th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed earlier, the Annexs. A/5 and A/6 will be dealt with separately. However, for the moment, we can say that these appear to be rough jottings written in the handwriting of Mr. Neeraj Khanna and appear to have some rough jottings for some fund flow exercise and appear to contain details of some cheque receipts or cheque payments. We deny that it is in anyway a record of cash receipt or cash payment. Explanation of each and every rough jotting mentioned above, will be given while dealing with those Annexures separately. (viii) The appellant had submitted all the details like bills, contracts, copy of account confirmation, client agreement etc. to the Dy. Director of IT (Inv.), Unit IX (3) to prove the genuineness of the transaction. The counter party has also confirmed the transaction in full and has provided all the details as per their books of accounts. Therefore, the genuineness of the transaction has been proved beyond doubt. (ix) In any case the transaction relates to the unfinished year and the learned AO has confirmed in the order that these were appearing in the books of accounts of the appellant. In this regard we wish to draw your attention to the provisions of s. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yway a record of cash receipt or cash payment. Explanation of each and every rough jotting mentioned above will be given while dealing with those Annexures separately. (v) The appellant had submitted the details of bills, contracts, copy of account confirmation and client agreement to Dy. Director of IT (Inv.), Unit IX (3) on 19th April, 2001. We are enclosing herewith a copy of the same for your reference. (vi) In any case the learned AO has himself stated in the order that the transactions are duly recorded and reflected in the books of accounts of the appellant. As these transactions were recorded and disclosed in the books of accounts and returns filed with the Department much before the date of search, these can't be considered in the block assessment of the appellant and have to be dealt with in the regular assessment of the appellant. It is pertinent to note that the regular assessment of the appellant for the financial year 1999-2000 (the year in which the transactions took place) was completed almost simultaneously along with the block assessment and the learned AO accepted these transactions in the regular assessment. No defect has been pointed out in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and circumstances of the case, the above addition may kindly be set aside or deleted. e. Sunbeam Infotech Ltd. (SIL) : (i) The learned AO has, in the assessment order himself confirmed that an amount of ₹ 10,15,000 was debited to P L a/c of the appellant. The learned AO has verified that the bills of ₹ 9,75,000 and ₹ 40,000 were raised by Sunbeam Infotech Ltd. on 30th Sept., 1999 and 30th March, 2000 and that the payment was duly received by the party. Therefore, he has confirmed and verified everything relating to the transaction for the appellant. (ii) It is a fact that the transaction was appearing in the books of account of the appellant, for financial year 1999-2000, and was disclosed in the return of income filed much before the date of search, with the IT Department for the said financial year relevant to the asst. yr. 2000-01. Therefore, as per the law, when the transactions are fully disclosed in the books of accounts or return filed before the date of search, the same can only be considered in the regular assessment and not in the block assessment. (iii) As already explained, no reliance can be placed in the statement of Mr. Neeraj Khanna. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned transactions of sale of profit and inflated expenses. Mr. Neeraj Khanna admitted the entries in those documents regarding sale of profit and inflated expenditure. It is unfortunate that the appellant is not ready to accept even the most apparent and glaring facts and omissions on its part and unnecessary keeps on dragging the issue, for which it has no case at all. The seized paper Nos. 50 and 54 are absolutely clear in these terms that the jottings/notings therein represent the cash entries of the appellant. The appellant's contention that the entries represent the fund flow working, does not have even legs to stand. The entries are to the extent of fraction of rupee one like Bajarang 7702081.75 , NITs 2257182.12 . The projected fund flow statement can never be prepared in terms of fraction of rupee, and secondly when the appellant has inflow and outgo of several crores of rupees every day, why a fund flow for only few selected parties ? In addition to all above, the most glaring fact is that entries in page Nos. 50 and 54 are further supported by entries in the diaries written by Mr. Neeraj Khanna, CFO of the company, and seized as Annexs. A-5 and A-6. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly reflected in the books of accounts of the assessee cannot be subject-matter of the block assessment. The entries were for the period when it was not mandatory to mention the client codes, therefore, the AO has erred in inferring that client code was not reflecting and in a way assessee used to initially conduct transaction in stock exchange on its own account, earned profit and subsequently these transactions are shown to have been taken place on behalf of the client. The learned counsel for the assessee emphasized that upto October, 2000 it was not obligatory for share broker to mention client code. He took us through the written submission filed by the assessee in this regard and reproduced by the learned CIT(A) in para No. 16.2 of the impugned order. On the other hand, learned counsel for the Revenue relied upon the orders of Revenue authorities below and pointed out that if the seized material i.e. page Nos. 50 and 54 of Annex. 1 are read in the light of statement given by Mr. Neeraj Khanna, it revealed that assessee has been earning profit which was transferred to certain entities making loss. Those entities set off such profit against their losses and returned the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. 44. Let us see the quality of evidence gathered by the Department and whether on the basis of such evidence it can be held that assessee has made manipulation in its books of accounts and that can only be unearthed because of the search. The first evidence in the possession of the Department is the statement of Mr. Neeraj Khanna. Mr. Neeraj Khanna is the alleged Chief Financial Officer of the assessee company, whereas according to Mr. Neeraj Khanna he was only a part time consultant. As far as any disclosure made during the course of search under s.132(4) is concerned we are of the view that no doubt the disclosure or admission made under s. 132(4) of the Act during the search proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessee because there is no material to substantiate but we cannot lose sight to conceive the circumstances developed in our surroundings and available in the society. Mr. Neeraj Khanna while retracting his statement submitted that he was not allowed to take rest for a continuous period of 30 hours. A large number of documents were found and seized. These are loose papers. It is practically impossible for a person to give specific reply at a given point of time without consulting the details. More so, when these entries were duly disclosed in the books of accounts and were subject-matter of the regular return. Mr. Neeraj Khanna may be a well qualified person but even for an expert it is quite difficult to understand and give specific reply in such type of situation. 45. The learned AO while rejecting the contention of assessee on retraction of Mr. Neeraj Khanna's statement has observed that in answer to question No. 2 Mr. Khanna has disclosed the detail of the concerns and names of the directors of these concerns. He also disclosed the types of books of accounts maintained by the group as well as place where they are kept. According to the AO, Mr. Neeraj Khanna ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the statement of Mr. Neeraj Khanna. 46. The next circumstance pointed out by the learned AO for making this addition is that on enquiry from the stock exchange it revealed that the purchases and sales did not result into delivery. The assessee has pointed out that it is in the business of share trading. Most of its transactions were squared up transactions. On the strength of the data regarding delivery pattern in stock exchange, downloaded from the all India Stock Exchange the assessee pointed out that mere 12.88 per cent and 10.88 per cent of the value of the transactions carried out in the stock exchange resulted in delivery for the years 1998-99 and 1999-2000 respectively. If that be the scenario at all India level how the assessee in isolation can be expected to take delivery of shares in each transaction. This is not a circumstance which can suggest that assessee has manipulated its entries in the books of account and therefore, those entries require reappreciation and an addition is to be made in the block assessment. This fact is further to be seen in the light that assessee is a broker and sometime had just booked the Sauda on earning some profit immediately sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The strict mode of proof required under the Evidence Act is not applicable in the income-tax proceedings. For example if somebody produced a sale deed, the vendor, vendee or the witness of the sale deed are need not to be produced before the authorities. It is not mandatory to record their statement for proving the fact that this sale deed was executed. Similarly if somebody produces a will it is not necessary to produce the witness for attesting or proving the signature of the attester. The basic principles of Evidence Act regarding opportunity etc. are to be adhered even in the income-tax proceedings, i.e. upon whom the onus is for explaining the particular circumstance etc. The AO is disbelieving the books of accounts maintained by the assessee duly disclosed to the Department in the original return. In such circumstances it is the AO who has to bring the positive evidence exhibiting the fact that whatever has been disclosed to the Department in the original return was false. On the basis of the generalization that in case M/s Bajrang Ispat Plywood, this material was found thus all other entries are to be treated as the false, cannot be accepted in the law. 50. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prices of these shares were ₹ 2,029, ₹ 1,914 and ₹ 1,349 respectively. Thus, in this transaction M/s First Global Finance (P) Ltd. earned a profit of ₹ 12,34,04,659. The source of this information is the printout from these CDs whose copies are annexed as Annex. B. Prima facie the whole transaction between the assessee and its sister concern appeared to be stage managed. In the month of April, 2000, the audit of the books of accounts of the assessee for asst. yr. 2000-01 was not completed. Thus, it was very easy to make adjustments in its books of accounts. Thus there was a reason to believe that the assessee has deliberately made these entries for showing the sale of 1,42,525 shares of HFCL to its sister concerns in the month of March, 2000 so as to divert the profit arising out of the sale of these shares in the market to its sister concerns. To examine this issue and verify the genuineness of the entries made by the assessee, they were given several opportunities to explain their case. As HFCL was a listed issue, the purchase and sale in these shares have to be made through the stock exchange. And if these are not made through the stock exchange then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions in the books of accounts and disclosed the profit on sale of these shares in the regular return. The learned AO as well as the learned CIT(A) has added this amount in the income of the assessee only on the ground that assessee should have earned this profit. They have not disbelieved the transaction itself, nor they found that these transactions are false. In our opinion the learned CIT(A) has wrongly appreciated the scope of block assessment and has wrongly observed that simply because transaction is recorded in the books of account it does not come out of the pale of the undisclosed income. The Hon'ble jurisdictional High Court in (2000) 163 CTR (Bom) 432: (2001) 247 ITR 448(Bom) (supra) has considered an identical aspect. In that case an assessee had constructed a bungalow and incurred an expense of ₹ 4,16,000. These expenses were disclosed in the regular return of income, subsequently search was carried out and the learned AO referred the valuation of the bungalow to the DVO. The DVO determined the value of the property at ₹ 6,66,000. The learned AO added the difference to the income of the assessee as undisclosed income. The Tribunal has deleted the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain shares of HFCL from your group concerns and sold these to various FIIs, friends and staff members on 3rd March, 2000 @ ₹ 1,060 whereas the prevalent market rate on that day was between ₹ 2,100 to ₹ 2,211. These shares were initially allotted to your group concern by way of private placement by the company (HFCL) itself and this fact was confirmed by M/s HFCL during the course of post-search enquiry vide their letter dt. 27th April, 2001. (The relevant pages are enclosed herewith Annex. C pp. 1 to 103) 5 Your company purchased 10,68,275 HFCL shares from the following clients : S.No. Name of the client Date No. of shares Rate@ Amount in Rs. 1 Mohan Fiscal Services (P) Ltd. 3/3/2000 1,42,550 1,050 149,677,500 2 UD MD Agencies 3/3/2000 1,42,500 1,050 149,625,000 3 Vruddhi Confinvest India (P) Ltd. 3/3/2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee vide my letter dt. 27th May, 2003. In addition to 8,30,550 shares sold to FIIs, the assessee has also sold to friends and staff 22,260 shares and own account to the tune of 72,940 shares on 31st March, 2000 @ ₹ 1,060 per share as against the prevailing market rate on that day of ₹ 2,100 ₹ 2,211 per share. In this way the total shares of HFCL old below the then prevailing market rate on 3rd March, 2000 are as under : (i) To various FIIs 8,30,550 shares (ii) To staff friends 22,260 shares(correct figure is 22,520) (iii) To own account sale 72,940 shares(correct figure is 72,680) Total 9,25,750 shares And accordingly the profit accrued on 9,25,750 shares of HFCL would be ₹ 96.27 crores by taking at lowest rate of ₹ 2,100 prevalent on the date of sale i.e. 3rd March, 2000. These transactions have been confirmed by you vide your letter dt. 14th May, 2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the light of above discussions ₹ 96,27,80,000 is treated as undisclosed income of the assessee for the asst. yr. 2000-01. The learned CIT(A) also reproduced the submissions made by the assessee. Before us learned counsel for the assessee reiterated those submissions, therefore, it is salutary upon us to take note of these submissions, they read as under : 18.1 The submission of the learned Authorised Representative as per page Nos. 23 to 27 of letter dt. 13th Nov., 2003 are as under : '(i) Before dealing with this issue on merit, we would like to submit that the brokerage income of approximately 1 per cent of the issue price of ₹ 1,050 amounting to more than ₹ 1 crore and placement fees of ₹ 1.50 crores on the said transactions had been duly recorded and reflected in the books of accounts and the IT returns of the appellant for the financial year 1999-2000 relevant to asst. yr. 2000-01 and the said income thereon have been accepted as true and correct during the regular and scrutiny assessments for that year. This fact is recorded in the assessment order itself. (ii) As has been explained by us above, while dealing with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of private placement of equity shares on delivery-versus-payment (DVP) basis because their dealing guidelines do not allow them to participate on non DVP transactions. They expressed their interest in getting an allocation to this issue at the overall cut off price, plus related transaction costs. DVP transactions by FIIs are specifically permitted by SEBI. The appellant will rely on SEBI/RBI regulations, guidelines etc. as well as correspondence/other evidence to substantiate its claims. (vii) All these FIIs, which purchased these placements, are full tax paying FIIs paying taxes in India. The profits accruing to these funds with regard to sale and purchase of Indian equity shares in India are taxable under the Indian IT laws. These transactions have been completed through their custodians and all receipts and payments are made through their custodians. None of these accounts are based in tax haven countries. (viii) The purchase of these shares has been reflected in their fund management system and all normal tax returns associated with the purchase and sale of these shares have been completed, in the normal course of their business, by their custodians. (ix) As can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Summary of allocation of 5,92,950 shares of HFCL in private placement to FIIs through DVP transactions. (c) All contracts issued to FII's for 5,92,950 new, unlisted shares allocated in private placement through DVP route. (d) Other contracts showing sales of balance shares in stock market at market rate in April, 2000. (ii) FII confirmations of the transaction @ ₹ 1,050 plus transaction cost. (xiv) The learned AO had deliberately brought in the Enforcement Directorate on this issue. The fact that as early as in April/May, 2001, the Department had the entire information on the transaction, there was no need for them to go to anybody else for getting the said information. This was done with the mala fide intention to bring the Enforcement Directorate into the appellant's case. Apart from the appellant's group, they had conducted surveys, for this issue, on two other companies i.e. Naulakha Financial Services (P) Ltd. and Mohan Fiscal Services (P) Ltd. Even from there, they had got the entire information about the transaction. (xv) The appellant had vide their letter dt. 11th Oct., 2001 explained the entire transaction once again and had even filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition on account of undisclosed income on this issue, the learned AO has taken total shares numbering 10,68,275 excluding therefrom only 1,42,525 shares sold in the market by First Global Finance (P) Ltd. as that was dealt with and added by him separately in the assessment order. (xxi) The point of permission from RBI has also been dealt with by us in our submissions above and are not being repeated, although this is wholly irrelevant for the assessment of income. (xxii) The learned AO has admitted in his order that all the FIIs have confirmed having bought these shares including the price as well as the circumstances leading to the purchase. Therefore, there is absolutely no case for any under-statement of price. The learned AO is only saying that the appellant should have sold these at the market price. There is no material on record to show that the appellant has received any unaccounted consideration for these shares. The source of the transaction has also been confirmed by the learned AO himself. (xxiii) The learned AO has further contended that since these transactions were secondary market transactions and as such, rules and regulation of Securities Contract Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had retained 3,10,280 shares with them that they have sold in the stock market at the prevailing market rate and have duly shown that profit of about ₹ 9.78 crores in their return of income for the asst. yr. 2001-02. A detailed statement is enclosed as Annex. 'B'. The learned CIT(A) has gone through the submissions of the assessee and rejected them. However, he found little variation in the number of shares sold by the assessee and certain computation errors. He confirmed the addition at ₹ 84,72,76,000. This computation reads as under : In view of all above, I hold that AO was absolutely justified in making the addition under reference. However, the quantum is recomputed as under : 1 592950 x (2100-1060) ₹ 61,66,68,000 2 22520 x (2100-1060) ₹ 2,34,20,800 3 237600 x (2100-1228) ₹ 20,71,87,200 4 72680 shares were retained by the appellant and sold in financial year 2000-01 and profit earned on those shares, has been offered for tax in the asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income. On due consideration of all these facts and circumstances we are of the view that this addition cannot be made in the block assessment. More so there is no evidence which can belie the stand of assessee that these shares were not purchased by FIIs in private placement and the assessee has only helped them in accordance with delivery vs. payment scheme. The transaction ought to have been construed in accordance with the nature of assessee's business, whereas the learned Revenue authorities have taken it in isolation, de hors this transaction from the main stream of assessee's business. It is also important to note that the AO had assessed the income of more than ₹ 682 crores but in spite of the search Department was unable to locate the worth of this amount with the assessee. Thus in view of the above discussion we allow this ground of appeal and delete the addition of ₹ 84,72,76,000. 59. Ground No. 4 B(1) : In this ground of appeal the assessee is impugning the additions which have been made on the basis of various seized papers. In the ground assessee has narrated 141 such additions which are based on the basis of different pages of Annexs. A1, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with brief narration, explaining the contents of the documents. The additions with reference to all such documents listed below are confirmed. Sr. No. Page No. of asst. order Ref. seized document Ref. ground No. Amount of addition Remark (in brief) 1 213 A-2/54 133 to 135 1,56,000 Paper contains jotting of various payments in the office of RoC. No explanation, source of payment remained unexplained. 2 214 A-4/8 142 to 144 1,15,000 Explained as advance tax payment of some clients of Mr. Khanna but no evidence in support of the explanation. Presumption of s. 132(4A) of the Act. 3 220 A-1/3 172 to 174 2,79,841 Either no explanation offered or the explanation is not supported by any evidence that brokerage on such transaction has been accounted for in regular books of account during assessment proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 240 A-10/23 324 to 326 703,443 -do- 22 240 A-10/24 327 to 329 734,638 -do- 23 240 A-10/25 330 to 332 577,002 -do- 24 241 A-10/26 333 to 335 578,466 -do- 25 241 A-10/27 336 to 338 345,648 -do- 26 241 A-10/28 339 to 341 344,561 -do- 27 241 A-10/29 342 to 344 132,837 -do- 28 241 A-10/30 345 to 347 1,515,015 -do- 29 242 A-10/34 348 to 350 12,356 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 402 to 404 322,980 -do- 48 245 A-10/89 405 to 407 1,220,095 -do- 49 246 A-10/90 408 to 410 6,128,204 -do- 50 246 A-10/91 411 to 413 1,402,426 -do- 51 246 A-10/93 414 to 416 4,598,869 -do- 52 246 A-10/94 417 to 419 777,600 -do- 53 246 A-10/95 420 to 422 2,704,500 -do- 54 246 A-10/96 423 to 445 2,185,498 -do- 55 246 A-10/98 446 to 447 5,189,671 -do- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 250 A-1/15 to 16 493 to 495 2,040,104 The seized papers have full narration with name and amount with heading Payments due to us . Remained unexplained before AO. 69 250 A-1/22 499 to 501 1,149,000 Seized paper has complete narration for funds deposited for arbitrage . Remained unexplained. 70 251 A-1/51 506 to 508 2,963,000 Seized paper has acceptable narration probably for same car payment. Remained unexplained. 71 251 A-1/100 511 to 513 2,630,000 Seized paper has complete narration in absolute terms. Paper appears to be for some unexplained investment. Remained unexplained. 72 252 A-1/107 517 to 519 5,000,000 Paper has acceptable narration with name, date and amount. Remained unexplained. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same in the regular books of accounts therefore, these credits of ₹ 1,25,03,933 are considered as undisclosed credits and added to income for asst. yr. 2001-02 ₹ 1,25,03,933 3. Annex. 'A-1' p. 47 On this page there were certain credit entries under the head master not found. These are profit bearing entries. This credit to master not found , of ₹ 55,28,406 was not explained as to whether same has been reflected in the regular books of accounts. Therefore the credit is considered as undisclosed credit and added to income for asst. yr. 2001-02 ₹ 55,28,406 4. Annex. 'A-1' p. 53 It shows credit amount of ₹ 15,204. The same has not been explained by the assessee company and in absence of any proof as to whether the same has been reflected in the regular books of accounts. Therefore the credit amount is treated as undisclosed and added to the income for asst. yr. 1999-2000. ₹ 15,204. Similarly at serial No. 4 of the grounds of appeal an additions of ₹ 2,42,55,152, ₹ 3,53,00,000, ₹ 11 crores and ₹ 20 crores have been made on the basis of page Nos. 56, 68 and 69, 70 and 71 of Annex. A-1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts increased, the Comtek software being based on Dos package was unable to take the load of work involved in retail business and in April, 2000 assessee had started updating Tally software package. Hence certain reconciliation errors and identification of particular account crept in. It was also pointed out that retail accounting was being done in Tally software accounting package. There was no need for putting repetitive work and this was the reason for the phrase i.e. master not found reflecting in the account. Thus, the assessee has explained its position and has contended that all these entries are reflecting in the regular books of accounts. The AO has rejected this contention in summarily manner. The addition cannot be made merely by observing that no explanation is coming from the assessee. 63. Let us see one of the major additions i.e. ₹ 62.90 crores disputed in this ground. The finding of learned AO has been reproduced by learned CIT(A) in para 42 of the impugned order. The finding of the AO, submissions of the assessee and finding of the learned CIT(A) are reproduced as under : 42. Ground Nos. 204 to 206 relate to an addition of ₹ 62.90 crores at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or is the personal matter of person writing or deals with trades or outstanding positions or market information or ALBM or BLESS or FII trades or local institutional trades or trades of other members of stock exchanges or which period/date or which stock exchange it pertains to. (ii) From that point therefore these are dumb documents and cannot be relied upon to make any addition. Therefore, the same cannot be treated as undisclosed income. The addition of ₹ 62,90,00,000 may be deleted.' 42.2 I have carefully considered the findings of the AO and submissions of the learned Authorised Representative along with other material available on record. The impugned seized paper contains the handwritten jottings as correctly translated by the AO and reproduced in the assessment order. Here again, the figures like 23/27, 13/44 with the name of the scrip, number of shares sold and the subject code of marked as V is written on impugned seized document. The explanation of the appellant that rough jottings are of unknown origin and are in unknown handwriting does not come to its rescue because of the provisions of presumption under s. 132(4A) of the Act. For the reason that ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p in deciphering the papers as the appellant is in no position to understand the rough jottings made by a third person and cannot know as to what was in his mind at the time of writing these jottings and as to what he was trying to scrutinize at the time of writing these jottings. Therefore although the appellant has on the basis of the inputs given by Mr. Khanna tried to decipher the papers, no adverse inference can be drawn against the appellant on the basis of these documents and papers. (ii) On the face of the paper, the rough jottings appear to contain jottings regarding the works to be done. The amounts written therein appear to be the tentative repayment schedule for repayment of the money invested by the RNA group with FGSBPL. This is quite similar to the repayment schedule given on pp. 68 and 69 of this Annexure that has already been explained above. (iii) All the repayments actually made are duly reflected and recorded in the books of account of the company. Copy of the ledger account of the parties is enclosed herewith for your reference. The accounts are fully reconciled and confirmed by the RNA group with those recorded in the appellant's books of account. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to make the compliance of audit direction of the Department given under s. 142(2A). Thus we have gone through all the additions and the seized material exhaustively. The additions have been confirmed primarily for the reason that the assessee could not properly explain the queries raised by the statutory auditors, therefore, an adverse inference has to be drawn. While dealing with some of the entries the reason has simply been made that no explanation has come forward from the assessee. The learned CIT(A) for buttressing his finding further took aid of s. 132(4A) of the Act i.e. presumption of truth is attached with these documents. He also confirmed the additions on the basis of drawing adverse inference with the help of statutory audit report. In our opinion these additions are not sustainable because as noticed earlier while extracting the submissions of the assessee in respect of different additions (supra), according to the assessee all the entries were duly entered in the books of accounts at the relevant time. This fact has not been seriously disputed by the Department. The learned Revenue authorities proceeded on the construction of the scope of block assessment that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction or on the basis of drawing adverse inference. We have already observed on the strength of Hon'ble Supreme Court decision in the case of Rajesh Kumar (supra) as well as on the strength of the Tribunal's order in the case of Bajrang Textiles vs. Dy. CIT (supra) that audit report obtained under s. 142(2A) cannot be used against the assessee because opportunity of hearing before appointment of the special auditor was not provided to the assessee. More so, these are the loose papers and not the books of accounts which can be put to audit. Therefore, no adverse inference on the strength of the special auditor's report can be drawn against the assessee. The Hon'ble Supreme Court in the case of Indo-Aden Salt Mfg. Trading Co. (P) Ltd. vs. CIT (1986) 58 CTR (SC) 9: (1986) 159 ITR 624(SC) had held that assessee was required to disclose primary facts and no inferential facts. The assessee has given the explanation to the entries reflecting in the seized material, from whom some logical inference can be drawn. Where the entries do not lead to any logical inference how the assessee can explain it. Merely on the ground that assessee failed to give some explanation the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentatives we have gone through the record carefully. The Department was not able to lay its hand on any of the documentary evidences. The AO is simply harping upon the statement of Shri Ahmed Shamsuddin, which has been recorded by Enforcement Directorate. The assessee while pointing out the defects in the statement of Shri Ahmed Shamsuddin has contended in answer to a question he replied, I recollect that someone in Dubai contacted us that he needed funds in Mauritius on behalf of an Indian company by name of First Global Stock Broking (P) Ltd. . This is the only evidence within the possession of the Department for treating this remittance as undisclosed income of the assessee. The Mauritius company alleged to have been received the money but there are no circumstances pointed out by the Revenue which can complete the chain. If some amount is remitted to the foreign company by any person how it can lead the authority (to believe) that amount was remitted only by assessee. The reply extracted supra of the statement of Shri Ahmed Shamsuddin is not sufficient to conclusively believe that assessee had remitted the amount. The Department could not find out who contacted Shri Ahmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. You are required to explain the notings on these papers and why not these papers be considered for the enhancement of the block assessment to the extent of amount of transactions written in the impugned papers. 5. The explanation should reach to the office of the undersigned on or before 11th March, 2004. 62.1 The appellant submitted its explanation vide letter dt. 11th March, 2004 which in brief is as under : With reference to the above, we have been instructed by our client to submit the following explanation with regard to the pages, which according to you have not been considered by the learned AO. (i) Annex. A/6 page No. 5 This amount of ₹ 2,07,846 has already been considered by the learned AO on p. 10 of the seized Annex. A/6, being part of Panchnama dt. 23rd March, 2001 made for ground floor, Crescent Chambers, Tamarind Lane, Fort, Mumbai under the following head. Office expenses hiren' 2.08 Therefore, in this regard we wish to state that : (a) The above amount has already been considered by the AO while making the assessment order dt. 13th June, 2003 for the block period ended 23rd March, 2001, as the same is part of Annex. A/6, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of Top Gear Leasing Finance (P) Ltd. 5th March, 2001 Panchal 5.00 Amount as per pad Amount Rs. Lacs Explanations 5.00 5.00 This appears to be a loan of ₹ 5 lacs received by Panchal Components Appliances (P) Ltd. from Garma Trexim (P) Ltd. The amount is duly reflected in the books of Panchal Components Appliances (P) Ltd. 3rd March, 2001 Panchal 5.00 Amount as per pad Amount Rs. Lacs Explanations 5.00 5.00 This appears to be a loan of ₹ 5 lacs received by Panchal Components Appliances (P) Ltd. from Garma Trexim (P) Ltd. The amount is duly reflected in the books of Panchal Components Appliances (P) Ltd. 8th March, 2001 Panchal 5.00 Amount as per pad Amount Rs. Lacs Explanations 5.00 5.00 This appears to be a loan of ₹ 5 lacs received by Panchal Components Appliances (P) Ltd. from Garma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 of Bank of India. The copy of account of Bang Equity in the books of M/s Shankar Sharma is enclosed that shows that the said payment is duly reflected in the books of the assessee. 16th March, 2001 Bang 4.00 Amount as per pad Amount Rs. Lacs Explanations 4.00 4.00 This appears to be a payment that was to be made by M/s Shankar Sharma to Bang Equity Broking (P) Ltd. as margin money against its trading account with Bang Equity as of that date. However the appellant has finally paid an amount of ₹ 15,12,946.28 on 17.3.2001 vide cheque No. 024101 of Bank of India. The copy of account of Bang Equity in the books of M/s Shankar Sharma is enclosed that shows that the said payment is duly reflected in the books of the assessee. 19th March, 2001 Bang 20.00 Amount as per pad Amount Rs. Lacs Explanations 20.00 20.00 This appears to be a payment that was to be made by M/s Shankar Sharma to Bang Equity Broking (P) Ltd. as margin money again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.75 7/3 Car payment 0.75 14/2 Garma 0.015 2/3 Garma (Com.) 5.00 1/3 Top Gear 10.00 5/3 Panchal 5.00 3/3 Panchal 5.00 8/3 Panchal 10.00 8/3 Vruddhi 5.00 Total 41.515 31.420 Ashok Jhaveri 22.221 Balance 9.199 31.420 Jhaveri 5.00 Hiren 4.00 2.50 Jhaveri Hiren 3.00 Neeraj 2.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bang 4.00 19/3 Bang 20.00 Total 72.935 The appellant submitted that the balance of ₹ 42.935 is carried forward from seized paper No. 8 of Annex. 'A-6' which has already been considered by the AO. On verification the contention of the appellant is found to be correct and, therefore, this amount is not considered for the purpose of enhancement. However, the explanation of the appellant for remaining 4 entries is not convincing and, therefore, the assessment is enhanced by ₹ 49 lacs with reference to the remaining 4 entries on impugned paper No. 7 which has not been considered in the block assessment by the AO. There appears to be some totalling mistake on this paper. The total of the 4 entries considered for enhancement is ₹ 49 lacs and, therefore, the assessment is enhanced accordingly. To sum up, the page No. 5 is not considered for enhancement. The enhancement on the basis of page No. 6 works out to ₹ 35.515 lacs whereas the enhancement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the observation that the author of the pages was Mr. Neeraj Khanna and that he had admitted that the assessee had indulged in transactions of sale of profits, buying of losses and inflating expenses. The learned AO has considered all the sheets in the Annexs. A5 and A6. There is nothing to infer that these pages were overlooked when they formed part of the Annexure to the assessment order. Further, it has been repeatedly stated that all the pages of Annexs. A5 and A6 are not in the handwriting of Mr. Khanna. A look at those pages will make it clear that they have been written by different individuals. It was therefore, improper on the part of the learned CIT(A) to give those papers so much of weightage while they were just like other loose papers. Further, it has already been held that the statement of Mr. Khanna has no evidentiary value as the claims made by him were not supported by any material and he had already retracted the statement. In view of the above we delete this addition. 70. In the result, the appeal of the assessee is partly allowed. 71. Now we take up the Department's appeal in IT(SS)A No. 361/Mum/2004. The first ground of appeal is that learned CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous years falling in the block period. Under the proceedings of Chapter XIV-B, the AO is not empowered to verify each and every transaction appearing in the regular books of account of the appellant. He can do so only if he has the relevant seized material in his possession. In the instant case, the AO was not having incriminating documents in his possession, what was found in the search was the copy of the bank account which has been properly explained by the learned Authorised Representative to the AO. There was nothing in the possession of the AO suggesting that the impugned credits in the said bank account represent doubtful cash credits or so giving any indication of addition under the provisions of s. 68 of the Act. In my opinion, the issue under reference would not fall for consideration under Chapter XIV-B as no such evidence was found in the search which could warrant its consideration in the block assessment order. This position is evident from the latest decision of jurisdictional High Court in the case of CIT vs. Dr. M.K.E. Memon (2001) 168 CTR (Bom) 184 : (2001) 248 ITR 310 (Bom), the relevant extract of which is reproduced below : 'In conclusion we would als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 18.75 crores. The learned CIT(A) has extracted the finding of AO recorded on p. 230 of the assessment order while making this addition. The finding of AO, submission of the assessee as well as the finding of the learned CIT(A) are appearing in para No. 46 of the impunged order at p. 188, which read as under : 46. Ground Nos. 252 to 254 relates to an addition of ₹ 18.75 crores on page No. 230 of the assessment order. The findings of the AO in this regard are as under : '21. Annex. A-1 page 95 This is a noting on a plain paper giving details as 1094 = 18,75,00,000. 1094 is one of the bank accounts of the assessee in Global Trust Bank. The amount against that appears to be money deposited in this account from undisclosed sources. As the same has not been explained the amount of ₹ 18,75,00,000 is treated as undisclosed and added to the income of asst. yr. 2001-02 (broken period). ₹ 18,75,00,000.' 46.1 In this context, the submission of the learned Authorised Representative as per page No. 50 of letter dt. 8th Dec., 2003 is as under : '(i) These appear to be rough jottings that are of unknown origin and are in unknown handwriting. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the view that the bank account has already been disclosed to the Department and the addition on account of entries appearing in this account cannot be made in the block assessment and learned CIT(A) has rightly appreciated the facts and circumstances, hence this ground is rejected. 75. Ground No. 4 : In this ground the grievance of the Revenue is that learned CIT(A) has deleted the addition of ₹ 16,15,14,277. The learned first appellate authority has taken cognizance of the finding of AO for making this addition as well as the submissions made by the assessee. The finding of the AO, submissions of the assessee as well as finding of the learned CIT(A) on this issue read as under : '49. Ground Nos. 267 to 269 relate to an addition of ₹ 16,15,14,277 on page No. 231 of the assessment order. The findings of the AO in this regard are as under : '26. Annex. A-1 page 101: This paper shows an amount of ₹ 16,15,14,277 as balance expenses remaining. As the same has not been explained, the same is treated as undisclosed and added to the income of asst. yr. 2001-02 (broken period) ₹ 16,15,14,277'. 49.1 In this context, the submissions of the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inable narration. On close perusal of the document, it appears to be a rough paper, because the figures are not written in any symmetry. Some jottings are vertical and some jottings are horizontal. The AO was not justified in making additions on the basis of such dumb document. In view of the discussions held above, the impugned addition is deleted. With the assistance of learned representatives we have gone through the record carefully. We have dealt with a number of documents of similar nature while dealing with the assessee's appeal, in view of our detailed finding on all other issues, wherein we have deleted similar type of addition, coupled with the finding of learned CIT(A), we do not find any merit in this ground of appeal, it is rejected. 76. Ground No. 5 : In this ground of appeal the grievance of the Revenue is that learned CIT(A) has erred in deleting the addition of ₹ 1,66,00,000. The finding of the learned AO, submissions of the assessee, and the finding of the learned CIT(A) on this issue read as under : 55. Ground Nos. 508 to 510 relate to an addition of ₹ 1.66 crores on page No. 251 of the assessment order. The findings of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at addition has not been made on the basis of some documents from where some logical inference can be drawn. The learned CIT(A) thus has rightly deleted the addition. 77. Ground No. 6 : In this ground the Revenue has pleaded that learned CIT(A) has erred in deleting the addition of ₹ 9,92,92,806 out of ₹ 11,27,92,806 by holding that such addition cannot be made for the purpose of Chapter XIV-B of the IT Act. 78. The brief facts of the case are that AO has made an addition of ₹ 11,27,92,806 on the ground that during the course of search certain details of remittance to one Calcutta party by way of a demand draft were found. Such remittances were made during the period 1st April, 1991 to 31st March, 2000. He worked out the remittance made on different dates at ₹ 9,92,92,806. He further found certain other loan amount to an entity Grama Trexin (P) Ltd. In this loan the amount is of ₹ 1,35,00,000. According to the AO assessee has not explained the entries reflecting in the bank account exhibiting the remittance of amount, therefore, he made an addition of ₹ 11,27,92,806. The learned CIT(A), on appeal deleted the entire addition. The Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the retail arm of the company FGSBPL and is part of the MIS reports prepared for analysis by the management. The paper is self-explanatory. We with a view to show through test check, that these brokerage amounts are appearing in the books of the appellant, have taken the amounts relating to the sub brokers of the appellant. The amount of brokerage shown in the statement is for the month to date and not for a particular day. As such p. 57 is reflecting brokerage upto 13th day of the month whereas p. 56 is reflecting brokerage upto 14th day of the month and p. 55 is reflecting brokerage upto 15th day of the month. Therefore p. 55 is showing cumulative brokerage figure upto 15 working day of the month and is inclusive of the brokerage given on p. 56 and p. 57. The daywise brokerage calculation of the three sub brokers is being enclosed herewith to show that the brokerage relating to them is duly recorded and reflected in the accounts. There is a slight difference of a few hundred in these figures as these were tentative figures given immediately at the end of the day, which in the case of all brokers would change a little when the final checking is done of these accounts and mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier part of the order and particularly with reference to that the impugned seized document remained unexplained, I confirm the addition of ₹ 17,38,753 as indicated on seized page No. 55. The addition of ₹ 33,29,702 is deleted. 81. With the assistance of learned representatives we have gone through the record carefully. The learned CIT(A) confirmed the addition of ₹ 17,38,753 out of the total addition of ₹ 50,68,455. We have considered this issue while dealing with the assessee's ground of appeal i.e. ground No. 4B(i). At serial No. 30 of this ground the assessee in its appeal is impugning this addition of ₹ 17,38,753. This addition has been made on the basis of notings appearing at pp. 55 to 57 of Annex. A1. We have considered this issue and deleted the addition. Basically the addition was made on account of brokerage income. According to the assessee the brokerage income has already been disclosed in the accounts and it could be a subject-matter of the regular return. While dealing with the assessee's ground of appeal we have discussed the issue how these entries have been read by the AO out of context and reached on different conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Remark (in brief) 1 211 A-1/109 107 to 109 564,999 Some figures on the right corner of computer generated sheet, without any narration. 2 213 A-2/65 136 to 138 3,311,000 Hand written sheet containing many telephone numbers, names and other details. In the left corner written like CRS 25,11,000 CRS 8,00,000. No details, no narration. 3 214 A-4/6 139 to 141 1,500,000 Some tax calculation @ 30%. No narration. 4 230 A-1/93 249 to 251 8,371,205 Jottings of some figures with sign of (+) (-). No narration at all. 5 231 A-1/99 261 to 263 5,000,000 Jottings containing only figures of amount in crores totalled as 50 . No narration at all, except figures. 6 231 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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