TMI Blog2012 (11) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... n able to prove that the assessee acted only as a bailee and earned rental income. Thus, the authorities below have acted against the assessee in haste in making substantive addition without any basis and without considering entire seized material. We, therefore, do not find any justification for the authorities below to make or confirm the addition of the aforesaid nature. We accordingly, set aside the orders of the authorities below and delete the addition. Addition under the head ‘diesel expenses’ - Held that:- The diesel is used in generator, which is necessary for running of cold storage due to frequent failure of electricity in the State of U.P. Therefore, it was necessary component/expense for running the cold storage. Considering the above, it would be reasonable and appropriate to restrict the addition by disallowing 5% of the expenses instead of 10% confirmed by the authorities below. Disallowance of petrol expenses and disallowance under the head depreciation on car for personal user - Held that:- Addition appears to be excessive in nature We, accordingly, modify the orders of the authorities below and restrict the disallowance to 5% of the expenses on both these d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ₹ 24,27,32,281/- is at all not correct as the same is not based on any incriminating material found in the course of search but based on presumption and surmises and wrong inferences drawn by ignoring all the Seized annexures which includes subsidiary books though entries were co-related with each book, hence the two lower authorities are wrong in making and maintaining the addition. 4. That in any view of the matter the undisclosed income was not determined on the basis of any search material and the Assessing officer simply proceeded as if it is a normal assessment and not on the basis of any search material, therefore section 153A of the Income Tax Act had no application to the facts of the case, hence the assessment is liable to be declared illegal. 5. That in any view of the matter addition of ₹ 37,30,710/- made based on Annexure A-3/1 which is a dumb and Waste document by working out an artificial figures which do not have relevancy to the working made by the assessing officer and her actions as confirmed by the Commissioner of Income Tax (Appeal) is unjustified and hence the addition is highly unwarranted. 6. That in any view of the matter observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remand report the concerned Assessing Officer examined and verified all the annexure together at a time in presence of appellant on 23.07.2012 and he found that the entries of the annexures correlate with each other and he admitted this fact in his order sheet also but the learned Commissioner of Income Tax (Appeal) failed to consider the same and even failed to make any finding in this regard in his order, hence the addition is wrong and unwarranted. 10. That in any view of the matter allegation made by the assessing officer that the partners were indulged in potatoes business by twisting the facts of Annexure P-11 P-13 IS absolutely wrong and the so called investment and profit as worked out by the assessing officer is simply based on her own imagination and whims to justify the addition and also to mislead the higher authorities. The learned Commissioner of Income Tax (Appeal) also examined and verified all the above mentioned relevant annexures and found that entries/details of each annexure are tallying and the respective gate passes and rent receipts were also examined and he was fully satisfied. But in Commissioner of Income Tax (Appeal)'s order no reference of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two lower authorities were wrong in making and confirming the addition. 15. That in any view of the matter the learned Commissioner of Income Tax (Appeals) failed to give cognizance to the contents of the affidavit of the partner, past record of the appellant and failed to consider principle of consistency, disclosed rental receipts has been accepted year after year, no verification was done by the constituents kept their potatoes in cold storage, no discussion by the Commissioner of Income Tax (Appeals) on the explanation dated 22.08.2012, non consideration of paper book no. 2 hence the entire addition made and confirmed in first appeal is unwarranted. 16. That in any view of the matter disallowances of ₹ 3,01,703/- under the head diesel expenses made by the assessing officer and confirmed by the CIT (A) is highly unjustified specially when each and every item of purchases of diesel was recorded in books duly supported by the vouchers hence the disallowances is unwarranted. 17. That in any view of the matter disallowance of disallowances of diesel expense @ 10 % of the total purchase of ₹ 30,17,037/- is highly unjustified and incorrect specially when 90 % of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p cases of Keserwani Zarda Bhandar, Sahson, Allahabad and its partners. The AO framed the assessment u/s. 153A vide order dated 28.12.2011 for assessment year under appeal, i.e., 2008- 09 and made several additions, which were challenged before the ld. CIT(A). The assessee raised the additional grounds of appeals as well as sought admission of additional evidences before the ld. CIT(A), which were admitted by the ld. CIT(A) for hearing of appeal. 5. Though several grounds have been raised in the appeal of the assessee, but mainly the assessee challenged two major additions on merits apart from disallowances of expenses. 6. The ld. Counsel for the assessee submitted that ground No. 1 2 of appeal of the assessee are general in nature and on ground No. 3 to 15, the assessee challenged the addition of ₹ 37,30,710/- and addition of ₹ 23,31,28,321/-. 7. The first addition under challenge is ₹ 37,30,710/-. In the assessment order, the AO has remarked that a bunch of loose papers marked as Annexure A-3/1 was found and seized. At page no. 107 of the above bunch of loose papers, there is description of consolidated details of cash in hand pertaining to M/s Kesarw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above concerns of the assessee was ₹ 27,39,932.86/- whereas the assessee has shown the cash at hand at ₹ 64,70,642.65/-, meaning thereby the cash amounting to ₹ 37,30,709.79/- is unexplained. The A.O. has observed that the excess cash shown in the balance sheet may either relate to bogus liability or unexplained cash from undisclosed source introduced by the partners. The A.O. further remarked that the assessee has not maintained regular books of a/c in the shape of cash book, ledger etc. The search seizure action did not result in recovering any books of a/c from the business premises of the firm or from the residential premises of the partners of the firm. The said regular books of a/c were not found even in the premises of Shri Sanjay Gupta, FCA whose places were covered u/s 133A of the I.T. Act. On the strength of above discussion, the A.O. has treated ₹ 37,30,710/- as bogus liability and has made the additions u/s 68 of the I.T. Act. 7.2 The assessee challenged the addition before the ld. CIT(A) and the submissions of the assessee are reproduced in the appellate order as under : That the assessing officer has discussed the facts in para-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l audit in only Kesarwani Zarda Bhandar cases and during that audit books of accounts of the appellant firm were examined and found in order. In the appellant s case the department has allowed auditor's fee and accounting expenses year after year. Thus simply because in the course of search operation since the books were not taken by the search party although available in the business premises of the appellant that does not mean that the Assessing Officer is free to make any kind of allegation according to her own test. That the assessing officer vide notice dated 28.02.2011 u/s 142 (1) a query no. 06 was made which is reproduced as under : No books of account of firm have been found and seized during the course of search/ survey operation of the group, in the absence of books of account you are required to justify the books result shown in the audit final account That in compliance to the query no. 06 reply was given in following manner : That thus is the light of addition made above reply was given on the basis of query hence there is no justification to draw a different view. That in this case a search was conducted on 27.08.2009 and before the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on artificial working done by assessing officer and for this purpose the assessing officer took/ considered the closing balance of cash in hand as on 31.03.2008 as appearing in audit report which is as under : Kesarwani Sheetalaya Sahson, Allahabad 13,77,025.46 Kesarwani Sheetalaya Soroan, Allahabad 22,97,647.48 Bhola Sheetgrih Allahabad 27,95,969.77 TOTAL 64,70,642.65 That after considering the closing balance the assessing officer has deducted a sum of ₹ 27,39,932.86 as balance appearing in rough, dumb and waste document. The balance on such rough paper relates to different dates and so he deducted the said amount of ₹ 27,39,932.86 from the closing balance as per audit report as on 31.03.2008 and made addition to the extent of ₹ 37,30,732.00 (Rs. 64,70,642.65 27,39,932.00). For such artificial and irrelevant working the assessing officer stated in the order It is established on the basis of above mentioned annexure that assessee has raised either bogus liability or unexplained cash introdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and detail of cash in hand of one branch is not include in the said paper , is concerned, it is submitted that assessee neither during the course of assessment proceedings before the then assessing officer nor before the undersigned during the course of these proceedings, reconciled the cash in hand with impounded/seized books of accounts of one of left branch of assessee. In the order sheet entry dated 18.10.2011, while examining the seized papers, the then assessing officer has clearly remarked as not explained for said annexure A-3/1 on which assessee s FCA has signed and noted. Again, as per further order sheet entries, assessee failed to correlate the seized paper with seized books of accounts. Assessee was asked by the undersigned during the course of discussion on 25.07.2012 to verify the above paper with the books of accounts. But on 25.07.2012, an adjournment was sought for 26.07.2012 and on 26.07.2012, another adjournment was sought for 27.07.2012. On 27.07.2012 also no one attended nor written reply was filed. In the circumstances, I have no option but to justify the addition by my predecessor amounting to ₹ 37,30,710/-. 7.4 The assessee further filed his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on 03.03.2008 for other unit is ₹ 39,77,450.92 as appearing in the loose paper. Thus net cash for F.Y. 2007-2008 (i.e. net increase in cash in hand during F.Y. 2007-2008) is ₹ 39,77,450.92- 12,37,518.06= ₹ 27,39,932.86 as alleged. In this way the figure of ₹ 27,39,932.86 is net increase in cash in hand as per A.O. during F.Y. 2007-2008. This is not the figure of cash balance as considered by the learned assessing officer as all he aforesaid figure/ details are mentioned in the referred annexure itself. (c ) That, Sir, actually, while comparing the cash in hand as mentioned in the aforesaid documents annexure with the books of accounts, the learned assessing officer has taken the figure of cash in hand of all the three units from the audit balance sheet for F.Y. 2006- 2007 relevant to A.Y. 2007-2008 which is ₹ 12,37,518.06 and then deducted the cash balance as on 11.03.2008 and 03.03.2008 from ₹ 39,77,450.93 which comes to ₹ 27,39,932.86 (Rs. 39,77,450.92 12,37,518.06). In this way the closing cash balance as on 31.03.2008 at ₹ 64,70,642.65 of three units is being compared with ₹ 27,39,932.86 and by such working he added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given above the addition of ₹ 37,30,737/ is unjustified and it is requested not take any adverse view and same may please be deleted. (f) That annexure A-3/1 which provoked the assessing officer to make the addition of ₹ 37,30,737.00 as unexplained liability / addition under section 68 has duly been explained which facts and figure and it was stated that addition made on wrong facts and figures and comparison was also wrongly been made and as such the addition is highly unjustified. 7.5 The ld. CIT(A), considering the submissions of the assessee and findings of the AO, confirmed the addition and also directed that since the aforesaid amount is not added in the computation of income, therefore, it is to be added now. Findings of the ld. CIT(A) are reproduced as under : 6.2 Decision: The appellant s first contention is that the loose paper marked as Annexure A-3/1 page no. 107 is nothing but a rough, waste and dumb document hence liable to be discarded. I do not agree with this submission of the appellant because the said loose paper was found from the premises of the assessee. The description of this particular loose paper pertains to the cash receipts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remand proceedings, reconciled the cash in hand between the two documents. In view of these facts and in the circumstances, I hold that the A.O. was fully justified in treating the excess cash of ₹ 37,30,710/- unexplained. The A.O. has, in fact, made the addition u/s 68 on the logic that the assessee has introduced bogus cash credit corresponding to the excess cash amount. I agree with the contention of the appellant that there is no corresponding entry in the books of a/c and, therefore, Section 68 cannot be invoked. The reason is very clear simply because the A.O. has herself denied the maintenance of any books of a/c by the assessee. If there are no books of a/c, the presumption of any entry corresponding to excess cash of ₹ 37,30,710/- can also not be substantiated. Therefore, within the inherent powers of the CIT(A), I correct the section under which the addition is made. The addition is confirmed u/s 69A of the I.T. Act. Accordingly, the above grounds of appeal are dismissed. Though the A.O. has made the addition in the body of the assessment order, she has forgotten to add amount of ₹ 37,30,710/- in the computation of income. Vide order-sheet entry d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70 lacs, but cash as per seized documents was ₹ 37.30 lacs. Therefore, the addition is justified. 10. We have heard the rival submissions and the material on record. It is a case of excess cash in books shown by the assessee, but at the time of search, actually lesser cash was found. Therefore, it is admitted fact that no excess cash was found during the course of search with the assessee in order to fasten liability upon the assessee. The AO initially made the addition with the help of section 68 of the IT Act, which the ld. CIT(A) has rightly held not applicable to the facts of the case. The ld. CIT(A), however, applied the provisions of section 69A of the IT Act while confirming the addition in this case. Section 69A of the IT Act reads as under : Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus, it appears that the AO made the addition merely on presumptions. On the one hand, the AO relied upon the balance sheet and the audit report prepared by the assessee showing excessive cash in books and on other side considered the seized paper which has shown lesser cash in hand for the purpose of making addition. Considering the above discussion, it is clear that the AO has done only artificial working of lesser cash as against higher cash shown in the books of account of the assessee. Therefore, it is neither a case of addition u/s. 68 of the IT Act nor section 69A of the IT Act. We, therefore, do not subscribe to the view of ld. CIT(A) in sustaining the addition. As noted above, it is a case of lesser cash in hand as per seized paper as compared with the books of account in which the assessee has shown more cash in hand. Therefore, the authorities below were not justified in holding it to be unexplained money not recorded in the books of account of the assessee. At the most, the authorities below could have presumed that the assessee has spent the difference of amount in question somewhere as per cash in hand as per books of account and lesser cash as per seized documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferring to the reply of the assessee, the A.O. reached the conclusion that the potatoes kept from Sl. No. 225 4268 are not relatable to any constituent and hence it should be the potato kept by the assessee firm. 11.2 Another (Surya Corporate book) relating to keeping of potatoes in M/s Bhola Sheetgrih, (unit of M/s Kesarwani Sheetalaya, Sahson, Allahabad) was also impounded and kept in the bundle marked as Annexure P-11. This register is for the period of 12.03.2007 to 30.11.2007. In this register entries have been made from SI. No.1-4316. Total weight of potato mentioned on the pages relating to 30.11.2007 is 89705.12 quintal. In this register also only SI. No. 1-282 have the name and address of the persons against them. The rest serial nos. do not have such details. Like her inference relating to register found pertaining to M/s Kesarwani Sheetalaya, Sahson, the A.O. inferred that the potatoes kept from SI No.283-4316 belong to the assessee firm. 11.3 Another register impounded and marked as Annexure P-13 for the period 08.10.2007 to 30.11.2007 have the entries from SI No. 2743-3047. This register also does not bear the name and address of the persons from SI No.3048- 6292 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From To 1. Head Office 225 4268 84,238 7,58,14,200 2. Sheetgrih Branch 283 4316 89,705.12 8,07,34,608 3. Soraon Branch 3048 6292 60,356.7 5,43,21,030 Total 234299.82 210869838/- 11.6. The A.O. has made a note below the above table that the cost of purchase and sale price of potato has been taken from the documents of Shri Mukhtar Ahmed. The above documents were found during the course of search seizure operation marked as Annexure-B of the panchnama. 11.7 On the strength of the above, the A.O. has made the addition of ₹ 21,08,69,838/- for the purchase of potato. It is also mentioned by the A.O. that the same potato have been sold @ ₹ 1,100/- per quintal, which give sale proceed of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant's Cold Storages. The department has also accepted year after year that in respect of business activities of the appellant firm kept voluminous records which have been maintained which are audited and the audit expenditures and accountancy expenditures both where accepted by the department during the year and also in earlier years. That in this connection it is very necessary to state that from the year of inception of the firm similar and uniform methods of accounting was followed by the appellant. The books maintained by the appellant are cash book, ledger, Bhandaran/Niskasan Register, entry gate pass, Weight Slip (Taul Parchi) name and address of the constituents, lot no, no. of bags, Rent receipt showing amount received from the constituents etc. The books of account for the year under consideration and earlier years are brought for kind consideration and verification although the same were produced before the assessing officer also from time to time. That in this connection it is necessary to bring to your kind consideration the working procedures of business and system of our accountancy which are as under:- (1) That the constituent comes with his potato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . These entries are recorded in the aforesaid bhandaran/ nikasi register. In this regard a chart is enclosed showing bhandaran nikasi register alongwith rent receipt register for demonstration purpose. Thus the observation that in annexure P-11 and P-13 no name and addresses are mentioned are wrong because the name and addresses are already appearing in annexure A-2/22 , A-2/9, A-1/1 to A-1/5 which is entry register in respect of potatoes. That in the above manner the appellant is maintaining elaborate books of account and details and subsidiaries register which are audited by M/s Gupta Sanjay and Associate every year and the audit report is submitted alongwith the income tax return every year. That the assessing officer in Ist line of para-4 of the assessment order has mentioned as During the course of search and seizure proceeding various incriminating documents were found which is totally incorrect. It is a fact that during the search and seizure, operation - simultaneously a survey under Section 133A of the Act was also conducted in business cum office premises of M/s Gupta Sanjay Associates who is our Chartered Accountant and from there certain documents were found and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses contained in the document which is manifest the intention of the person who execute the document. In the case of Navneet Lal alias Rangi Vs. Gokul and others : A.I.R. (1976) P. 794 (SC) The Hon ble Supreme Court laid down that : The true intention of testator has to be gathered not by attaching importance to isolated expressions but by reading the will as a whole with all its provisions and ignoring none of them as redundant or contradictory. In the case of Kalu Ram Jain Vs. Mahabir Prasad and others AWC (1978) P. 443 The Hon ble High Court laid down that: Applying the rule of interpretation that the deed must be read as a whole in order to ascertain its true meaning. That from the above decisions it will appear that the Hon ble Courts held that the documents to be considered as a whole and not as per own s choice i.e the Assessing Officer. Sir, it is not fair on the part of the assessing officer to state only that in the documents names, and address of the person are not written by digesting corresponding details mentioned in the other columns of the same documents. Sir while computing the income if the assessing officer would have considered informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till lying with the department. In these two annexures i.e. A-2/22 A-2/9 names and address of the constituents pointed out by the Assessing Officer based on Annexure P-11 P-13, are appearing with other complete details also as already appearing in others columns of Annexures P-11 P-13 also. In this way the assessing officer was bound to consider said Annexure A-2/22 A- 2/9 also together with annexures P-11 P-13 as already we have explained the nature of entries in Annexure A-2/22 A-2/9 before the assessing officer in compliance to her query made by her notice dated 11.07.2011. In this way the assessing officer made a mistake in not considering the Annexures A-2/22 A-2/9 alongwith annexure P-11 P-13 at a time. Thus such huge addition was made by the assessing officer by ignoring annexure A-2/22 A-2/9 where the names and address of all the constituents are appearing. That Sir, when the names, addresses and other details of each and every constituents are recorded in Annexure A-2/22 A-2/9 which are the initial and essential register and the business with constituents starts which are complete in all respect and the rent received from the constituents have been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was great pressure of the famers who were interested in release of their goods. This was the only cause of dealing clerk not mentioning the name of party and address of the party. Sir by not mentioning name address in P-11 P-13 nature of transaction will not be changed as has been deliberately changed by the assessing officer i.e it could not be inferred that the assessee indulged in own potato business and made investment and earned incomes. Such conclusion has been made in arbitrary manner due to own misunderstandings of the assessing officer. That the most important fact is that the assessing officer issued a notice dated 19.10.2011 u/s 142(1) as discussed in para 4 of the assessment order and from the notice it will appear that the query was made only in respect of seized annexure P-11 and P-13 but not in respect of annexure A-2/22, A-2/9 and A-1/1 to A-1/5 which are the preliminary document and seized in the course of search. If the assessing officer would have examined A-2/22, A-2/9 and A-1/1 to A- 1/5 than probably no question would have cropped up but the assessing officer miserably failed in putting the query. That at page 6 of the assessment order a chart has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d uncalled for. That the assessing officer also failed to make enquires from any constituents who had stored their potatoes in the appellant's cold storage whether they had kept their potatoes or not when their names and addresses were available with the department. Further that the assessing officer stated in the order that Raj Kumar Kesarwani indulged in the potato business which is also not correct in so far as the P-47 of LP-1 belong to Narandra Cold Storage and connected with the said concerned and not concerned with present firm. Therefore the observation made at P-6 are liable to be ignore. That likewise entire working of the assessing officer At P-6 regarding investment and profit is baseless prepared by the assessing officer as per her own whim and wishes simple to justify search by some giving reasons or other by without considering whether it is relevant or irrelevant specially when from the year 1978 till date. Such type of arbitrary addition was never made except during the year. The entire addition made by assessing officer on the basis of incorrect inference drawn by her. That in computing the income the assessing officer made an addition of ₹ 21,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of annexure P-11 and P-13 in which name and address of constituents left blank for certain reasons but other column are fulfilled and complete then there is no justification to proceed on irrelevant and hypothetical consideration which suits to assessing officer. The matter required proper consideration of all the documents and all columns filled up in the registers but the assessing officer measurably failed to ignore the relevant columns and on two blank columns such adverse inference was drawn ignoring A-2/22, A-2/9 and A-1/1 to A-1/5 which are the same type of register. Thus the assessing officer accepted the entry register and ignored the nikasi register on irrelevant consideration. Thus the seized register may please be considered in uniform method. Register no. .. to be compared with another register. A-2/22 to be compared with P-11. A-1/1 to A-1/5 to be compared with P-13. That the blank column as appearing in P-11 and P-13 were not compared by the concerned assessing officer with seized another register A-2/22, A-2/9 and A-1/1 to A-1/5 and A-1/1 to A-1/5. Thus the A-2/22, A-2/9 and A-1/1 to A-1/5 and A-1/1 to A-1/5 were the initial register in which complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough paper because some entries are reflected in the books. As has been stated by you that the entries in the seized papers and potatoes relates to M/s Narendra Cold Storage is not acceptable because Narendra cold storage was not in existence from the years relevant to the block period. The building of cold storage was not in existence and plotting of land was being executed, therefore question of storage of potatoes in Narendra Cold storage does not arise. Please explain as to where the said potatoes mentioned in the seized papers were stored ? iv. Please correlate the ownership of potatoes with that of seized documents. Points no.( i) and (ii) remained uncomplied with till date and point no.(iii) is not fully explained. Serial no.11 of Page no.47 of LP-1 seized from the residential premise of one of the partner Sri Raj Kumar Kesarwani has not been explained with evidence. Relevant orders from consumer forum as allegedly stated by the assessee has also not been produced for verification. Examination of books of accounts and seized papers in respect of ownership of potatoes has been made and following discrepancies have been noticed which has been confronted to the counsel o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after death of one of the partner. This clause overrides section 42 of Partnership Act,1932. It may be explained as to how can a clause in a partnership deed have an overriding impact on a statute. The date of compliance for the above was also fixed for 26.07.2012 at 12 noon but an adjournment application was filed by the counsel of assessee authorizing one employee of assessee for noting the further date of hearing. Case was adjourned for 27.07.2012 at 12 noon. Even on 27.07.12, neither anybody attended nor any adjournment application whatsoever has been filed. It is submitted that assessee failed to substantiate its claim with evidence after availing proper opportunity of being heard at this stage also. As stated above, Points no.( i) and (ii) remained uncomplied with till date and point no.(iii) is not fully explained by the assessee in support of its contention. Partners of assessee firm owned agricultural land and it is accepted fact that they produces potatoes for own used and for seed purposes. Assessee failed to explain as to how it stored in cold storage and identified its own potatoes. During the course of discussion, it came to notice that one of the partners Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g was adjourned to 19/07/2012. f) On 19.07.2012 the Dy. C.I.T. Central Circle, Allahabad suo-moto adjourned the hearing for 20.07.2012. g) On 20.07.2012 when appellant s C.A. and accountant were present in the office of the Dy. C.I.T. Allahabad along with photo copies of various seized annexures/ details and also furnished list of documents brought there for verification along with copy of order sheet dated 18.07.2012 but since the said Dy. CIT was not in the office therefore the above mentioned documents / papers were delivered to the concerned staff available in the office and receipt thereof was obtained, copies of the same are enclosed at page 72 to 74. h) On 21.07.2012 and 22.07.2012 the income tax department was closed due to weekly holidays. i) On 23.07.2012 the appellant s C.A. along with staff B.D. Pant appeared before the learned Dy. CIT who su-moto verified the facts of the referred annexures and filled up the order sheet and the relevant portion of the order sheet is reproduced as under : The assessee produced receipts books of the registers and taul parchi in support of his contentions and taken entries of registers of P-11, P-12 (corporate) and P-13 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date 19.07.2012 remained un-complied with is also not correct. In this regard appellant s explanation containing various details was filed on 24.07.2012 (page 43 to 71) because on 19.07.2012 and 20.07.2012 the matter was not taken up by the assessing officer due to his own busy program and on 21.07.2012 and 22.07.2012 the department observed weekly holidays. On 23.07.2012 our C.A. Sri Sanjay Gupta and Accountant appeared before the assessing officer along with copies of the seized documents and the verification work was done. 13(iv) That in the above mentioned explanation letter filed on 24.07.2012 quarries at point no 1, 2 and 3 as required by the assessing officer were fully explained in details along with the evidence, hence the assessing officer is wrong in saying that the quarries at point no 1, 2 and 3 were not complied. Copy of the letter dated 24.07.12 is enclosed herewith. 13(v) That as per quarry no 1 the assessing officer required Khsarara Khatauni of at least 50 farmers who had stored potatoes in the cold storages in support of holding agriculture land. To this quarry the appellant furnished his explanation as under: a) That the transaction with different conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer vide the aforesaid a letter on 24.07.2012 at page no- which is reproduced as under : Justification of purchase of potatoes and storage as per seized paper found from residential premises of one of the partners Sri Raj Kumar Kesarwani may please be explained. The said seized paper cannot be rough paper because some entries are reflected in the books. As has been stated by you that entries in the seized papers and potatoes relate to M/s Narendra Cold Storage is not acceptable because Narendra Cold Storage was not in existence from the years relevant to the block period. The building of the cold storage was not in existence and plotting of land was being executed, therefore question of storage of potatoes in Narendra Cold Storage does not arise. Please explain as to where the said potatoes mentioned in the seized papers were stored. That in compliance to the above query it is stated that it is a fact that we stated that page no. 47 of the annexure LP-1 is a rough paper/ notings because credit side and debit side both sides entries on the said seized paper are identical and similar, therefore we call the same a rough paper only. For your understanding and with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,710/- and other disallowances and when the same were found in order then the assessing officer shifted on the new issue which are not in dispute. In this way the assessing officer ıraveled beyond his jurisdiction. 13(ix) That in the light of aforesaid events kindly consider that how and in what manner the matter was dealt with. Therefore the allegation as made in the remand report against of the appellant are not correct and the same are liable to be withdrawn. 11.11 The ld. CIT(A), considering the explanation of the assessee confirmed the addition and his findings in para 7.2 of the appellate order are reproduced as under: 7.2 Decision: The logic on which the A.O. has made the addition is that three release registers mentioned in the assessment order did not have the names and addresses of the persons from certain serial no. to certain serial no. against them. The A.O. has made the reply of the assessee a basis to make the foundation of the addition in which the assessee had stated before the A.O. that complete details are mentioned on the receipts issued to the potato owners at the time of release. The A.O. has inferred that whatever details were available wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rage of potatoes in Narendra Cold storage does not arise. Please explain as to where the said potatoes mentioned in the seized papers were stored ? iv. Please correlate the ownership of potatoes with that of seized documents. The A.O. has remarked that the assessee did not reply to query nos. 1 2 till the date of submission of the remand report. Query at SI No. 3 was also not fully explained. The A.O. has also test checked close to 50 entries found written in document marked LP-1. The A.O. found the difference in receipt nos. as per receipt register and receipt no. as per cash book. The A.O. has referred to the litigation in Allahabad High Court between Jyoti Agarwal and ADJ and others pertaining to Narendra Cold Storage. The A.O. gave opportunity to the assessee to reply the queries on 26.07.2012 but received only an adjournment application filed by the counsel of the assessee. The A.O. further gave one day time to the assessee. But nobody attended and any adjournment application was also not filed either. I have given due thought to the submission of the appellant and to the report of the A.O. the appellant has been arguing that the A.O. did not verify other relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the receipt book and Taul Parchi support the contention of the assessee and the entries were got verified and were test checked. He submitted that in the cold storage, only potatoes can be stored and the same cannot be used for any other purpose. No other business activities are permitted. He has referred to the U.P. Regulation of Cold Storages Act, 1976 to highlight various provisions to show that only licensed person can run a cold storage and cold storage can be used for storage purpose and it is highlighted in the Act that at the time of delivery of goods, the hirer shall surrender the receipt and pays all charges due to the licensee. Therefore, there is stress on maintenance of rental receipts. Since the assessee maintained proper records of cold storage and no violation of any law has been brought on record and the assessee maintained proper Taul (weight) receipts and rent receipts and all the registers, therefore, merely because no names were mentioned at some places in Exit Register, is no ground to presume that the assessee has made investment in purchase of potatoes. He has submitted that the addition is made merely on presumption and no material or evidence has been br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means an enclosed chamber insulated and mechanically cooled by refrigeration machinery to provide refrigerated condition to agricultural produce stored therein, but does not include refrigerated cabinets and chilling plants having a capacity of less than 100 cubic metre. The definition of hirer provides a man who on payment hires space in a cold storage for storing agricultural produce . Licensee would mean any person to whom a license is granted under this Act . The meaning of receipt has been provided as receipt means a cold storage receipt including a duplicate receipt issued by a licensee under this Act. According to section 5 of the above Act, no person shall carry on the business of storing any agricultural produce in a cold storage except under and in accordance with the terms and conditions of a license granted under this Act. Permission is required for construction of cold storage from Licensing Officer on specifying circumstances. According to section 12 of this Act, every licensee shall take such care of the goods stored in his cold storage as a man of ordinary prudence would take of his own goods under similar circumstances and conditions. Section 13 provides d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivery of goods to the hirer, the hirer shall have to surrender the receipt to the licensee. Therefore, the above Act clearly provides mandatory maintenance of receipts by the licensee in prescribed form for issue to the hirers for storage of agricultural produce. In the above Act, the licensee is not authorized to store their own agricultural produce for business purpose in the same cold storage. No violation of the above Act has been noticed or brought on record by the Assessing Officer in this case. It is, therefore, clear from the findings of the authorities below that the assessee did not violate the terms of provisions of the U.P. Regulation of Cold Storages Act, 1976. The cold storage of the assessee has specified storage capacity. The incoming of the potatoes stored in the cold storage have not been disputed. However, it is not clarified in the orders of the authorities below as to when the assessee allegedly stored its own potatoes, in which investment has been made in purchase, where the incoming potatoes kept on hire have gone out of the storage. It is also not specified in the orders of the authorities below whether there had been further space available for keeping/stor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also establish that the assessee did not make any investment in purchase of potatoes. Sale of potatoes by the assessee or earning of profit thereon is only assumption of the AO without corroborated by any evidence or incriminating material on record. The explanation of the assessee is fully corroborated by Taul Parchi and the rent receipts. The assessee has filed voluminous Taul Parchies and rent receipts in the paper book, which falsify the findings of the AO. No evidence was found against the assessee at the assessment stage of dealing in potatoes. The AO wanted to tax the assessee on such unaccounted income on account of unaccounted investment in potatoes and unaccounted profit but no evidence has been brought on record to establish any such case against the assessee. Therefore, the onus on the AO to tax a particular income against the assessee has not been discharged. It appears that the addition has been made merely on the names and addresses have not been mentioned in the exit register. It was, thus, a presumption of the AO only that the assessee made unaccounted investment in the purchase of potatoes, in which there is nothing on record to support such finding of the AO. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of ₹ 23,31,28,321/-. Resultantly, the grounds of appeals of the assessee on this issue are allowed. Ground No. 3 to 15 are allowed. 15. The assessee on ground No. 16 17 challenged the addition of ₹ 3,01,703/- under the head diesel expenses . On examination of books of account, it was found that the purchase vouchers for diesel expenses claimed under the head generator expenses in cash are not supported by evidence. The assessee also explained before the AO that certain vouchers are misplaced or not traceable. The AO accordingly disallowed 10% out of these expenses. The ld. CIT(A) following his order for the assessment year 2005-06, confirmed the addition. The ld. Counsel for the assessee submitted that prior to search, no disallowances have been made on this head and comparative chart is filed at PB-113. The ld. DR relied upon the orders of the authorities below. 16. On consideration of the rival submissions, we are of the view that the authorities below were justified in disallowing the expenses under this head because it was admitted by the assessee before the AO that certain vouchers are misplaced or not traceable. However, the AO has not given exact deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 and 21, the assessee challenged the addition of ₹ 5,47,928/- on account of addition under the head building . The AO found that the assessee has made addition to the fixed assets under the head building. The assessee was required to produce the bills/vouchers for verification but no compliance was made. Therefore, the matter was referred to the Valuation Cell on 19.10.2011, who had submitted the report on 09.12.2011. This report was confronted to the assessee and the assessee filed his objections in which one of the objections was that the report of the DVO is not independent and it was prepared after obtaining the details of year-wise investment in construction from the assessee. It was only the opinion of the AO and that the DVO inspected the property on 18.11.2011 whereas the construction fall in different assessments from 2004-05 to 2010-11. The AO, however, did not accept the contention of the assessee and the difference in the cost of construction / investment as noted by the DVO and disclosed by the assessee was considered as investment from undisclosed sources in a sum of ₹ 5,47,928/- and addition was accordingly made. The ld. CIT(A) following his order for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound during the course of survey. The AO should have verified each and every entry from the books of account of the assessee on this issue before making reference to the DVO. However, no such findings have been given and the AO merely because the assessee did not produce bills and vouchers referred the matter to the DVO for estimating cost of construction. The findings of the AO are, therefore, not justified in view of the judgments of Hon ble Supreme Court and Rajasthan High Court referred to above. It, therefore, appears that the matter requires reconsideration at the level of the AO. We accordingly, set aside the orders of the authorities below on this issue and restore the matter to the file of the AO with direction to re-decide the issue by considering the books of account produced by the assessee. In the result, ground No. 20 21 of the appeal of the assessee, are allowed for statistical purposes. 21. Ground No. 22 is for charging of interest u/s. 234A, B C, which is mandatory and consequential in nature. Therefore, the same is dismissed. 22. Ground No. 23 is general and is rejected. 23. In the result, the appeal of the assessee is partly allowed as indicated abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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