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TMI Blog2012 (9) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... estment in household expenses ₹ 40,400/- (ii) Investment in proprietary business ₹ 2,60,000/- (iii) Investment in purchase of goods. ₹ 18,00,000/- (iv) Estimated profit from business ₹ 7,20,000/- (v) Estimated value of the goods imported ₹ 4,75,500/- (vi) Estimated profit from the value of shortage goods. ₹ 1,26,900/- (4) That the learned Income-tax Officer has not brought any concrete evidence on the record against the appellant, establishing that your appellant is the owner of the M/s. Associated Apparels and accordingly that the Income-tax Officer has not carried out the direction of the Commissioner of Income-tax (Appeals). (5) That the learned Income-tax Officer has erred in law and on facts by stating on Page-2, Para-5 of assessment order that the learned CIT(A) vide his order No.CIT.R/ll/498/87-88 dated 24.3.1992, confirming the addition of ₹ 2,60,000/-. (6) That the learned CIT(Appeals) has erred in law and on facts by confirming assessment order with all the additions. (7) Your appellant prays to quash the I.T.O.'s order dated 21.3.1994 which is bad in law and to delete all the additions of ₹ 34,22,800/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged purchase of goods as investment of your petitioner and treating the same as income amounting to ₹ 18,00,000/-. (9) The learned Income-tax Officer has also erred in estimation and treating an amount of ₹ 7,20,000/- as profit from M/s. Associated Apparel and income of your petitioner. (12) Without prejudice to the above the learned Income-tax Officer has erred in treating the Associated Apparel as the business concern of your petitioner. The appellant white challenging the ITO's action also mentioned in the written submissions filed during the hearing of appeal that he was not the owner of Associated Apparel but was only a Power of Attorney Holder from one Shri Kantilat Ramjibhai Maru who had purchased this business (Page Nos. 5,6, & 7 of letter dated 10-08-1988 addressed to the CIT(A). 2. My predecessor dealt with the question of ownership of Associated Apparel in para 14 which is reproduced as under- Para 14: The next addition are based on the various informations which on the record of the ITO. Firstly, it is very clear that the appellant purchased the Associated Apparels and in this behalf the appellant had also filed several suits in a court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned. (e) In the operative part of the order the Addl. Collector of Customs has levied a penalty of ₹ 20 Lakh on Shri R.P Pandya by treating him as sole proprietor of M/s. Associated Apparels, Kandla Free Trade Zone. 3. From the forgoing it is apparent that the status of Shn R.K. Mehta via-a-via M/s. Associated Apparels is not dear From the observations made in the aforesaid order of the Addl. Collector of Customs, it appears that Shri R.K. Mehta was acting both on behalf of Shri R.P. Pandya, treated as owner of M/s. Associated Apparels and Shri R.P Pandya, treated as owner of M/s. Associated Apparels and Shri K.R. Maru, who according to Shri Mehta had later on bought M/s. Associated Apparels. It is possible that in effect Shri R.K Mehta was the real owner of this business even though in name it was owned by two different persons namely Shri R.P. Pandya and Shri R.K. Mehta. However, the Customs Authorities have taken Shri R.P. Pandya to be the original owner of Associated Apparels and have also concluded that he continues to own the business. On the other hand, some of the papers seized during the cause of search carried out at the premises of Shri R.K. Mehta and refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above business should not be treated as his income. 8. Assessee's advocate Shn M. J. Lava attended on 6.1.1994 and filed Xerox copies of power of attorney given by Shri Kantilal Maru and sale deed of the factory. Further on 13.1.1994 assessee with his advocate attended and produced letter dated 20.1.1993 from the Police Inspector, Gandhidham stating that no enquiry can be made as the case is pending before the Court It is worth noting that Shri Rohitkumar has not proved before the Court that charge is made by Shri Dave. Security Inspector is wrong. Charges were made that Shri Rohitkumar Mehta is signing for R.P. Pandy and Kantilal Maru. Also filed enquiry letter made by the Inspector of Income-tax. On this letter the Inspector of Income-tax has recorded statement from Shri Kantilal Maru wherein Shri Kantilal Maru has stated that he has purchased the factory and he is the owner of the factory. M/s. Associated Apparels. This was purchased from Shri Rameshchand Pranlal Pandy He has no bank account, payment was made in cash out of his saving. Another statement was recorded from the Postman, G.P.O. wherein he has stated that he was delivering post in the name of Shri Ramesbhbha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross examine by the assessee It is doubtless to say that an employee will not speak against his employer and also cannot speak untrue on oath. So far production of Xerox copies of statement recorded by the Inspector of Income-tax, it is fact that statement recorded by the I.T.I, cannot be on oath. Secondly Tea Stall holder, Postman and Pujari of the temple have stated that Shri Rameshchandra P. Pandya was staying at Bhomeshwar Plot, but they have not seen him ever. It is wonderful to note that the Pujari of the temple and tea kittly holder knows about the exact date of purchase of factory. From the above, it reveals that the whole story is cooked up story and arranged to prove that Shri Rohitbhai K. Mehta is not the owner of the factory/business, but Shri Rohitkumar K. Mehta could not succeed in doing so as discussed above." 7. On merits the AO repeated the addition as stated in ground No. 3 as above reproduced in grounds of appeal. 8. In the second round of litigation the assessee filed appeal before CIT (A) against the order of the AO. The CIT (A) confirmed the order of the AO including issue on merit of the case. In respect of ground number 2, that the learned Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as a Manager on a salary of ₹ 800 - per month. He does not own any movable or immovable property and he is living in rented accommodation. He has also stated that he has not given any power of attorney hut he was simply signing the papers as per the instructions of his boss Seth Shri Rohitkumar K. Mehta. He has further, categorically stated that Shri Rohitkumar K. Mehta has purchased the said property and the payment for purchase of the same has been made by him and if his name appears in the purchase document of the said factory, then it is a false document. With regard to the above, during the cross examination statement given by Shri Kantilal Maru on 31.05.99, he has started as under:- (Page 10 of CIT(A) order) "I have considered the facts of the issue under consideration, the statements recorded and other information available along with the contentions of the appellant in this regard. The statement given before the I.T.O by Shri Kantilal R. Maru, under oath on 25.11.1993 and on 31.05.1999, during cross examination by the Authorised Representative of the appellant clearly shows that Shri Kantilal R. Maru has denied ownership of M/s. Associated Apparel Kandla Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilal R. Maru was under the employment of Shri Rohitkumar K. Mehta and he was blindly signing all papers. correspondence etc. as per the instructions of Shri Rohitkumar K. Mehta. As far as the liability of taxation is concerned, the first Income tax assessment order of Ms. Associated Apparels was framed on 30.03.1987 on Shri Rohitkumar K. Mehta and not on Shri Kantilal R. Maru. Thus, there was no question of any Income-tax liability in the case of Shri Kantilal R. Maru which made him to change his stand in 1993. In fact, if can be said that it was only after he got free from the clutches of Shri Rohitkumar K. Mehta after leaving his service that he could give a statement with a free wind in order to bring out the facts correctly. 7. Other relevant circumstances pertaining to the ownership of Ms. Associated Apparels are as under: (1) The following clause from the general power of attorney given by Shri Kantilal R. Maru in favour of Shri Rohitkumar K. Mehta for managing the business of M/s. Associated Apparels shows that it was an irrevocable attorney which was more in the nature of passing on of all rights to the said business to Shri Rohitkumar K. Mehta, the appellant: I have af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has stated that a person named Shri R.P. Pandya is not existing and the factory was purchased by Shri Rohitkumar K. Mehta in bogus name. (8) The above surrounding circumstances are clear pointer to the fact that Shri Rohitkumar K. Mehta is the real owner of Ms. Associated Apparels and Shri Kantilal R. Maru is only his benamidar. If Shri Kantilal R. Maru had been the real owner of Ms. Associated Apparel, the documents pertaining to purchase of the said business would not have been found at the business premises of Sheth Rohitkumar K. Mehta during search. It was not necessary for the real owner to pass on the purchase documents to for the real owner to pass on the purchase documents to the General power of attorney holder. Further, it is not understandable why a low paid employee would give General Power of Attorney in favour of his employer to run his business. If he had the means to purchase such a business, he would not be in service for a paltry salary of ₹ 800/- per month. (9) Considering all the above documentary and circumstantial evidences, and under the test of human probability (Sumati Dayal v. CIT (SC) 214 ITR-801). I would consider Shri Rohitkumar K. Mehta as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion the assessee filed appeal before CIT(A) which has been decided vide CIT(A)'s order dated 02-09-1988. The CIT(A) confirmed the order of AO except deleting two additions ₹ 39,970/- and ₹ 1500/- pertaining to income of wife and mother of the assessee. The assessee filed second appeal before ITAT. The ITAT send back matter to the file of CIT(A) vide its order ITA No.2729/Ahd/1988 dated 07-12-1992. The assessee filed Miscellaneous Application against the said order of ITAT dated 07-12-1992 which was dismissed vide MA No.15/Ahd/92 dated 03-03-1993. In compliance to diction of ITAT, the CIT(A) decided the matter vide his order dated 24-03-1992. The CIT(A) send back matter to the file of AO with direction to determine whether Shri Rohit K. Mehta was the owner of M/s. Associated Apparels. 11.1 The AO vide his impugned order dated 21-03-1994 in second round of litigation held that the whole story is cooked up story and arranged to prove that Shri Rohit K. Mehta is not the owner of the factory/business, but Shri Rohit K. Mehta could not succeed in doing so. In other words the AO held that Mr. Rohit K. Mehta is owner of M/s. Associated Apparels. The CIT(A) vide impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the copies of the said documents and though Kantibhai Rajmjibhai Maru know that the person who had done the document in his name is not Rameshkumar Pranlal Pandya but is Rohitkumar Mehta, had helped him and in this way in the said illegal act Kantibhai Ramjibhai Maru is also responsible." 11.3 It has also been noted from a copy of sale agreement of running business of M/s. Associated Apparels between Mr. Maru and Pandya dated 27-06-1983 was also filed before the Court. The Court took this document as Exhibit 275-agreement of dated 27-06-1983 11.4 The accepted facts noted by the Court in para-20 of the judgment are as under:- "(20) For the presentation of the above mentioned statements this below defined acceptable facts must be better to mention. The Accuseds in the name of Rameshkumar Pranlal Pandya, Bhomeshwar Plot, street No.2, Rajkot -360001 in K.F.T.Z in the name of M/s. Associated Apparels by importing the raw material from foreign to manufacture the readymade garments and parsing had demanded the permission to establish a industrial unit before Dept. Commissioner K.F.T.Z. Gandhidham. The Accused for establishing such unit was given the permission by K.F.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd had prepared the document with such intention cannot be proved. Instead of it the evidence of the complainant side itself proves that the deeds done in favour of K.F.T.Z.. R.P. Pandya had signed as the Accused Not only that the witness of the complainant side Ashokkumar Chaturvedi accepts in his evidence that the Accused and the person signing in the deed is R.P. Pandya the same person and no one else. The Lying evidence also states that the present Accused and R.P. Pandya both are the same person and not others. Above it, the witness of the complainant side Liladhar Valji in his evidences accepts that the present Accused Rohitkumar Krushnalal Mehta is known by two names with R.P. Pandya also. In short on seeing the proof of the complainant side, it is clearly accepted that the Accused himself is R.P. Pandya which he had not informed wrong in favour of K.F.T.Z. and by informing false the Accused in the questioned documents has not signed as R.P. Pandya. But the present Accused and complainant side states that R.P Pandya is one and the same person and the present accused is known by both the names Rohitkumar Mehta and R.P. Pandya. In this way by tempting the Z and with the intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Maru in his statement stated on oath record on 25-11-1993 stated that real owner of the factory is Rohitkumar K. Mehta and he did not know any Rameshchandra P. Pandya. Mr. Maru was employee of Mr. Mehta at salary of ₹ 800/- p.m. and he did not have capacity for investment and to run such business. The CIT(A) provided opportunity to the assessee for examination of Mr. Maru, which was examined on 31-05-1999. Question and answer No.7 and 8 are reproduced below.:- "Q. No. 7. Is the purchase deed dt.27.6 1983 signed by you ? Is it your signature ? Ans. 7. This matter is false. I did not purchase the same. R.P. Pandya and Rohit Mehta is one person A person named R.P. Pandya is not existing. The factory was purchased in bogus name.(emphasis Supplied) Q.No.8. Power of attorney dt 17.3.84 in favour of Rohit K. Mehta on stamp paper of ₹ 50/- and with Court Fee ₹ 6.20 affixed was signed before the Executive Magistrate. Is it correct? Ans.8. I did not go to Collector Office or Mamlatdar Office. If Rohitkumar has obtained my signature without reading out to me, I do not remember." 11.7 The contentions of the assessee before revenue authorities as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .8.1 and 8.2 of this order, has rightly confirm action of the AO in treating Shri Rohitkumar K. Mehta as the owner of the business in the name of M/s. Associated Apparels. On perusal of paper book, we noticed that the assessee filed appeal before the High Court challenging the order of Chief Judicial Magistrate, Bhuj on 04-02-2003. But the assessee failed to point further progress on that case, neither any stay or the order has been set-aside by High Court nor bring to our notice. Thus ground number 4 is decided against assessee. 11.9 Now we are coming to the merit of the case. The relevant ground of the appeal is ground number 3 reproduced above. The two additions of ₹ 18 lakh and ₹ 7.20 lakh made by the AO made on account of imported zippers from Japan ₹ 18 lakh and profit 40% thereon, calculation comes to ₹ 7,20,000/-. The revenue authorities recorded facts on the basis of seized material that the assessee imported YKK Zipfasters from Japan and Dubai. As per zerox copy of invoice, the value of goods calculated ₹ 18 lakh. The assessee failed to furnish any contrary material to the finding of AO and CIT(A). Even before us, the assessee neither much a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/-. 11.13 Next two addition of ₹ 4,75,500/- and ₹ 1,26,900/- on account of goods imported and profit thereon. The AO on the basis of verification of assessee's business premises on 08-08-1983 by Customs Authority, Kandla noted that the assessee purchased imported zip fasterns of ₹ 4,75,499/-. At the time of physical verification, the Custom Authority found shortage in goods valued at ₹ 3,17,243/-. The AO drew conclusion that the assessee disposed off the goods in open market. The AO applied 40% profit rate on ₹ 3,17,243/- and calculated profit of ₹ 1,26,897/-. The AO accordingly made addition of ₹ 4,75,500/- value of goods purchased and ₹ 1,26,900/- profit on goods sold. After considering fact of the case that on account of shortage in goods there is litigation. The goods purchased by assessee related some incentive for export and government has filed Criminal Case as discussed above. The final outcome of fate of those goods is not on record. The issue has been considered from the point of view of provisions under the Income-tax Act. It is admitted fact that the assessee was doing business out of books of account. As per abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 at residential premises of the assessee and he was considered as proprietary of M/s. Associated Apparels. But in fact, he is holder of power of attorney of Shri Kantilal Maru. Reliance was also placed on written submission already placed on record which was submitted by Shri M. J. Lava. 3. In the proposed order, the learned brother has confirmed the addition of ₹ 18,00,000/- being investment in purchase of goods for the details reasons given in para-11.9 on page-19 of the impugned order. In para-11.8 of the proposed order, the learned brother has held that assessee accepted this stand of the revenue that Shri Rohitkumar K. Mehta is the owner of M/s. Associated Apparels and decided the ground No.4 against the assessee. Once it is held that assessee is the owner of M/s. Associated Apparels who made investment of ₹ 18,00,000/- in purchase of goods, in my considered opinion, the investment made in proprietary business namely Associated Apparels amounting to ₹ 2,60,000/- cannot be deleted. 4. With this background, I have carefully gone the reasoning given by AO and CIT(A) in the impugned order for upholding the action of AO treating the assessee viz., Shri Rohitkum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o show that this statement was given in a free manner and not under pressure or duress. The facts mentioned in the said statement cannot be ignored and have to be relied upon. The next contention of the appellant is that from 1984 to 1993 he has complied with all correspondence with the Court and Customs as the owner of M/s. Associated Apparels and before 25.11.93, he has not informed this fact to any authority i.e. Customs, Court or Income - tax department. It is only when has came to know about his liability of taxation that he changed his view. In this regard, it could be said that till 25.11.1993 Shri Kantilal R. Maru was under the employment of Shri Rohitkumar K. Mehta and he was blindly signing all papers, correspondence etc., as per the instructions of Shri Rohitkumar K Mehta. As far as the liability of taxation is concerned, the first Income tax assessment order of M/s. Associated Apparels was framed on 30.03.1987 on Shri Rohitkumar K. Mehta and not on Shri Kantilal R. Maru. Thus, there was no question of any Income-tax liability in the case of Shri Kantilal R. Maru, which made him to change his stand in 1993. In fact, it can be said that it was only after he got free from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.07.1985 of the Additional Collector of Customs, Kandla Free Trade Zone, it is seen, Shri Rohitkumar K Mehta was earlier appearing before the Customs authorities on behalf of Shri Ramesh P. Pandya. Only at the later stage of hearing Shri Rohitkumar K. Mehta, started appearing as Power of attorney holder of Shri Kantilal R. Maru. Thus, Shri Rohitkumar K. Mehta was going both on behalf of Shri R.P. Pandya treated as owner of M/s. Associated Apparels and Shri Kntilal R. Maru, who is shown to have later got M/s. Associated Apparels. (6) In the cross examination statement of Shri Kantilal R. Maru recorded on 31.05.1999, he has stated that a person named Shri R.P. Pandya is not existing and the factory was purchased by Shri Rohitkumar K. Mehta in bogus name. (8) The above surrounding circumstances are clear pointer to the fact that Shri Rohitkumar K. Mehta is the real owner of M/s. Associated Apparels and Shri Kantilal R. Maru is only his benamidar. If Shri Kantilal R. Maru had been the real owner of M/s. Associated Apparel, the documents pertaining to purchase of the said business would not have been found at the business premises of Sheth Rohitkumar K. Mehta during search. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, in the interest of justice, he should cooperate with the department and tell the actual investment made in machinery/shed etc. to start factory in KFTZ in the name of M/s. Associated Apparels. Investment in household expenses ₹ 40.400/-: 6. In the written submission filed before us, in respect of this addition, the following submissions are made:- "(i) Investment in household expenses ₹ 40,400/.00 Assessing Officer has made this addition as the same has been in the original assessment order. However, the Hon'ble I.T.A.T has restored back this addition to the CIT(A) vide M.A. No. 15/92. (PAPER BOOK PAGE N0.15) Accordingly now the CIT(A) has passed this issue vide his order No. CIT(A) VIII/WD-2(2)/RJT/2/94-95 dated 1.8.1999 on page Nos. 4 and 18 in para Nos. 3 and 10 respectively. It was submitted before the CIT(A) that estimation of household expenses is without any base and very high. Assessing Officer has estimated at ₹ 50000.00 from which as shown by his wife as ₹ 9600.00 is debited and the balance of ₹ 40400.00 is added. Accordingly the Assessing Officer should have estimated the expenses not more than 30000.00" 7. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant was having 30 acres of land and these expenses could have been met out of agricultural income. Unfortunately, in both these cases no evidence is produced and it is clear that the appellant is only whistling in the dark. Under these circumstances, I am of the opinion that the explanation which is ever changing cannot be accepted and the action of the ITO in adding an amount of ₹ 40,400/- in this behalf deserves to be confirmed." Through I.T.A.T., Ahmedabad Bench 'C' order in M.A. No. 15 (Ahd)/1992 dated 3-3-1993, the entire appeal including the addition of ₹ 40,400/- has been restored to the C.I.T.(A) for decision. Accordingly, the appellant was asked to make submissions against the various additions including the aforesaid amount of ₹ 40,400/- vide this office letter dated 5th August, 1999. The following submissions have been made: "The addition is made on ex parte basis and the assessee has not been given sufficient opportunity to explain. The assessee has no source of income during the year. The assessee's wife Smt. Hansaben G. Doshi was running the Mehta Guest House and had regular source of income and withdrawn ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case. I agree with the C.I.T. (A)-l, Rajkot (order No. CIT.R/498/87-88 dated 24.3.92) that the estimate on the facts and circumstances of the case is justified. The addition made is required to be sustained, particularly because the appellant has not been able to refute any the facts/data on the basis of which addition is made in spite of Specific opportunity allowed. The addition of ₹ 40,400/- made in the hands of the appellant is, therefore, confirmed.' 8. From the perusal of submission made by assessee (supra) and reasoning given by the ld. CIT(A) in impugned order in para-10 which is reproduced by me (supra), it is clear that even if it is presumed that visit to Dubai was for the purpose of business of the assessee viz., M/s. Associated Apparels which is owned by the assessee on this count, therefore, relief of ₹ 3431/- for ticket fare can be given. The purchase of Sony TV and customs duty thereon cannot be for the purpose of business. It is pertinent to note that the wife of the assessee made net withdrawal of ₹ 9600/-. Be that it may be, even if we accept the contention of the assessee in this regard that addition should be restricted to ₹ 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1. 45 Wooden cases for containing 450000 pieces of Polyster Zipper from Japan. NR Y 69,20,550 5,76,711 2. 274 Cartons containing 65% Polyster & 35% Viscos Suitings 48415.5 Yds. US $ 65,360 5,88,240 3. 20 cases of snap fastner Y 30,75,800 2,56,310 The said goods were insured for a sum of 71897 US Dollar The value of goods comes to US$ 65,360 as per invoice No.DE/211/83-84 dated 11th August, 1983. The goods in question was purchased from Hong Kong as far as Polyster yarn are concerned. Details as regards other two items from Japan, it is seen from the seized materials that assessee had imported YKK Zip Fastners from Japan. The value of goods imported comes to 6920550. The said goods appears to have been imported from Japan to Bombay and from Dubai to Bombay as per Xerox copy of the invoice on the record. The value of goods mentioned above comes to around ₹ 18,00,000/-. No evidence in regard to the source of payment for the purchase of these items is forthcoming. The same is therefore, added to the total income of the assessee as unexplained investment. Total addition on this score comes to ₹ 18,00,000/- which includes estimated cost of freight that might ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the evidences available in this regard and keeping in view the conspicuous facts of the case, the id. CIT(A) in the impugned order confirmed all the three additions for the detailed reason given in paras-11 to 14. 11. It is pertinent to note that at no stage of proceeding either before both the departmental authorities or before us, the assessee has refuted any of the aforesaid facts or the documentary evidence. His only stand was that he is simply power of attorney holder and not owner of M/s. Associated Apparels. It is pertinent to note that the contention of the assessee that he is not the real owner of M/s. Associated Apparels is not accepted by both the departmental authorities below as well as learned brother in the proposed order. I am also in agreement with the view of learned brother that assessee is a real owner of M/s. Associated Apparels. Therefore, let us examine all these three additions on the basis of documentary evidence available in this regard and whether the assessee is entitled to benefit of telescoping. 12. The Assessing Officer estimated the profit at 40% on imported goods of ₹ 18,00,000/- and the goods found short by the Customs Authority by &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufactured goods was started by assessee who is also known as R.P. Pandya as per FTZ/Plan A.O.83/7527 dt.5-1-1983 of the Development Commissioner of Kandla Free Trade Zone, Gandhidham. Admittedly, the alleged goods manufactured from imported material/machinery were never exported. Prima facie, it appears that whole exerciser is being done to evade customs duty which appears to be more than 100%. In these circumstances, it cannot be said that profit estimated by AO @ 40% is excessive or unreasonable. The addition of ₹ 18,00,000/- was made on the basis of documents found during the course of search u/s. 132 of IT. Act at residential premises of the assessee and business premises of the assessee in the name of "Mehta Hotel" which indicated that the imported goods worth ₹ 18,00,000/- (including estimated cost of freight) and not on the basis of goods found at the time of search by Custom Authorities on 26-03-1985. In custom search on 26-03-1985, it was found that there was shortage of goods valued at ₹ 3,17,243/- out of goods imported worth ₹ 4,75,499/-. Hence, it is in the knowledge of the assessee that how he disposed off the goods for which additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd material on record the addition of ₹ 40,400/- made by AO on account of investment in household expenses should be deleted or restricted to ₹ 30,000/-. (2) Whether on the facts and in the circumstances of the case the addition of ₹ 2,60,000/- in proprietary business namely; M/s. Associated Apparels which was set-up by assessee by representing himself before concerned authority as R.P. Pandya should be deleted or set aside to the file of AO for ascertaining the actual amount of investment in shed and machinery etc. (3) Whether on the facts and in the circumstances of the case, the addition made by AO on account of estimation of profit from business ₹ 7,20,000/-, estimation value of goods imported ₹ 4,75,500/- and estimated profit from the value of shortage of goods of ₹ 1,26,900/- be deleted or confirm subject to remanding it to the file of AO for examining and allowing the benefit of telescoping in accordance with law. THIRD MEMBER ORDER G.C. Gupta, Voce President (As a Third Member) - On account of difference in opinion between the learned Judicial Member and learned Accountant Member of ITAT, Rajkot Bench, (this matter has been referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cannot be sustained. I find that the learned JM has given part relief to the assessee on this issue and has restricted the addition to ₹ 30,000/- out of the addition of ₹ 40,400/-made on account of low household expenses and has recorded in his proposed order that this addition is restricted to ₹ 30,000/-, as suggested by the assessee in the written submissions. 6. I have gone through the relevant portions of the written submissions filed by the assessee wherein in the concluding last line of the submissions, the assessee has submitted in writing that "accordingly, the AO should have estimated the expenses not more than ₹ 30,000/-." In these facts, I am of the considered opinion that the learned JM was justified in restricting the addition on account of household expenses to ₹ 30,000/- as suggested by the assessee himself in its written submissions filed before the Tribunal. The learned JM has given part relief on this issue, wherever called for, and accordingly, I agree with the learned JM on the issue in restricting the addition to ₹ 30,000/- and the above difference of opinion raised in point no. l referred to me by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "AA", who made investment of ₹ 18 lakhs in purchase of goods, the investment made in proprietary business viz. "AA" amounting to ₹ 2,60,000/- could not be deleted. I find that the Revenue could not produce enough material on record to justify separate addition of ₹ 2,60,000/- for investment in proprietary business viz. "AA" apart from the addition of ₹ 18 lakhs made on account of investment in purchase of goods of "AA", and particularly in view of the fact that the addition of ₹ 18 lakhs has been sustained by both the learned AM and the learned JM separately. Merely because M/s. "AA" has been found to be the proprietary concern of the assessee and the investment made in purchase of goods of ₹ 18 lakhs having been found as unexplained, for which the addition has been made and confirmed by both the learned Members of the Tribunal, it cannot be said that a separate addition of ₹ 2,60,000/- for investment made in proprietary concern viz. "AA" is also justified, without bringing enough material on record to justify the addition. In this view of the matter, I agree with the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not seems to be excessive. In these facts of the case, I agree with the decision of the learned JM on this issue of addition of ₹ 7,20,000/- and direct accordingly. 10. Other addition of ₹ 4,75,500/- being the estimated value of goods imported and ₹ 1,26,900/- estimated profit from the value of shortage of goods, I find that the learned AM has deleted the additions in his proposed order whereas the learned JM has confirmed the additions in his proposed order. The learned AM has deleted the addition by observing that the goods purchased by the assessee related to some incentive for export and government has filed a criminal case against the assessee and the final outcome of fate of those goods was not on record and has allowed telescopic benefit to the assessee to put an end to the litigation. The learned AM observed that the purchase of goods of ₹ 4,75,500/- and profit addition of ₹ 1,26,900/- is circulation of money of that addition of ₹ 18 lakhs sustained separately and allowed the telescopic benefit to the assessee and deleted both the additions. The learned JM has confirmed this addition by observing that the plea of telescopic benefit was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether on the facts and in the circumstances of the case the addition of ₹ 2,60,000/- in proprietary business namely; M/s Associated Apparels which was set up by the assessee by representing himself before concerned authority as R.P. Pandya should be deleted or set aside to the file of AO for ascertaining actual amount of investment in-shed and machinery etc. 3. Whether on the facts and in the circumstances of the case the addition made by the AO on account of estimation of profit from business ₹ 7,20,000/- estimation value of goods imported ₹ 4,75,500/- and estimated profit from the value of shortage of goods of ₹ 1,26,900/- be deleted or confirm subject to remanding it to the file of the AO for examining and allowing the benefit of telescoping in accordance with law." 2. The Hon'ble Zonal Vice-President sitting as Third Member, vide his order dated 5.9.2012 expressed his opinion on the aforesaid questions as under: (i) In respect of question No. 1, the ld. Third Member agreed with ld. JM that the addition of ₹ 40400/- in respect of investment in household expenses should be restricted to ₹ 30,000/-; (ii) With regard to question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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