9911796707
TMI Blog2021 (9) TMI 1241X X X X Extracts X X X X X X X X Extracts X X X X ..... 89,378/- made by the AO in the appellant's income for the assessment year under consideration, on account of alleged profit on unrecorded sales of scraps. 1(b). That, in the facts and circumstances of the case, the learned CIT(A) grossly erred in not accepting the claim of the appellant that the unrecorded sales of scrap was not effected by the appellant only in one previous year relevant to A.Y. 2011-12 but factually, it was effected by him in two previous years relevant to A.Y. 2011- 12 and A.Y. 2012-13. 1(c). That, without prejudice to the above, the estimation of net profit @25% on unaccounted sales ofRs. 9,41,47,3101- at Rs. 1,35,36,828/- made by the ld. CIT(A) is quite excessive and arbitrary. 1(d). That, without prejudice to the above, the learned CIT(A) grossly erred in not giving any specific finding in his Order for grant of benefit of telescoping to the appellant in respect of the estimated net profit against the unexplained investments ofthe appellant determined by the ld. CIT(A) himself. 1(e). That, without prejudice to the above, the learned CIT(A) grossly erred in not giving a specific finding in his Order for giving credit to the appellant at Rs. 75, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO in the appellant's income merely on guess work, surmises and conjectures on account of alleged receipt of interest on advance to Mr. Rahul. 4(b). That, without prejudice to the above, the learned CIT (A) grossly erred, both on facts and in law, in not accepting the explanation of the appellant that factually a sum of Rs. 30,00,000/- only was advanced by the appellant to Mr. Rahul and therefore, there was no justification for assuming a higher amount of receipt of interest in the hands of the appellant by misconstruing the facts of the case and thereby assuming a higher amount of advance to Mr. Rahul. 4(c). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in not considering the material fact that the entire undisclosed income of the appellant for the relevant previous year was duly covered by way of additional income shown by the appellant himself in the return of income furnished in response to Notice u/s. 153A and therefore, there was no necessity for 5. That, while adjudicating the ground nos. 7 ( a) & 7 (b) of the appellant, the learned CIT (A) grossly erred, both on facts and in law, in not giving a finding to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition on account of unrecorded interest on loans and advances. 3. Ground of appeal raised by Revenue for AY 2011-12 in ITA No.259/Ind/2018 1."On the facts and in the circumstances of the case, the Ld. C/T(Appeals) erred in restricting the addition to Rs. 1,35,36,828/_ by applying N.P. @ 25% in place of addition made by of Rs. 7,30,89,378/_ on account of unaccounted sale of Scrap & Granules on the basis of incriminating documents found & Seized from the assessee's premises. 2.On the facts and in the circumstances of the cases, the Ld. c/T(Appeals) erred in restricting the addition to Rs. 31,11,201/_ in place of addition made by AO of Rs. 1,10,57,932/_ on account of unexplained expenditure u/s 69C on the basis of incriminating documents found and seized from the assessee's premise. 3. On the facts and in the circumstances of the cases, the Ld. c/T(Appeals) erred in deleting the addition to Rs. 52,00,000/- made by AO on account of unexplained investment in land on the basis of incriminating documents found & seized from the assessee's premises. 4.On the facts and in the circumstances of the cases, the Ld. CIT(Appeals) erred in deleting the addition of Rs. 12, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e residential premises of the assessee and also on various other premises of the Kataria Group on 07-09-2011.During the course of the search various documents including diaries and loose papers were seized .In view of the seized diaries and other discrepancies noticed during the course of the search, the assessee, initially, through his nephew Shri Sunil Kataria, had made a disclosure of an additional income of Rs. 8,75,00,000/- vide a statement recorded under s. 132(4) of the Income-Tax Act, 1961. At the time of the search, Shri Sunil Kataria had admitted an overall additional income of Rs. 26 Crores on behalf of the entire Kataria Group which was inclusive of disclosure of additional income of Rs. 8.75 crores made on behalf of the assessee. The surrender was made subject to verification of the seized documents. Subsequently, after obtaining the copies of the seized material, Shri Sunil Kataria, vide letter dated 20-03- 2012, while maintaining the overall amount of surrender on behalf of the group at Rs. 26 crores, revised the amount of surrender on behalf of the assessee, at Rs. 6.00 crores (Rs. 3.60 cr for AY 2011-12 and Rs. 2.40cr for AY 2012-13) vide letter dated 20-03-2012 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 1 of the Revenue are pertaining to the action of the Ld. CIT(A) in partially confirming the addition to the extent of Rs. 1,35,36,828/- out of the total addition of Rs. 7,30,89,378/- made by the AO on account of alleged profit on unrecorded sales of scraps. 11. During the course of the assessment proceedings, from the various diaries inventorized as Annexure A-1 to A-8 of Panchnama dated 07-09-2011, Ld. AO found that the assessee had carried out unrecorded business transactions of purchase and sale of scrap. During the course of the assessment proceedings, the assessee was required to make his explanation on the seized material. The assessee submitted that the diary marked and inventorized as A-8 was containing the unrecorded transactions of purchases whereas the remaining diaries marked and inventorized as A-1 to A-7 were containing the unrecorded transactions of sales carried out by the assessee. As per the diaries, the total unrecorded sales and unrecorded purchases, of the assessee, got worked out respectively at Rs. 9,41,47,310/- and Rs. 1,10,57,932/-. A copy of the working (subject to be extrapolation with two zeros) has been submitted by the assessee in his Paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, vide para (5.5) at page no. 48 of the impugned order, held that the entire unaccounted purchases were not found jotted down in the seized diaries. Thereafter, the Ld. CIT(A) held that in such case, the Ld. AO was not justified in working out the net profit of the assessee at Rs. 8,30,89,378/- and Ld. AO ought to have adopted some logical and reasonable approach in estimating the net profit from sale of Rs. 9.41 crores. Thereafter, by granting partial relief to the assessee, the Ld. CIT(A) determined the Net Profit on the sale of scrap by applying a flat N.P. rate of 25%. Accordingly, on the total unaccounted sales of Rs. 9,41,47,310/-, the Ld. CIT(A) determined the Net Profit of the assessee at Rs. 2,35,36,828/-, @25%, and thereafter, by granting the credit for the income of Rs. 1,00,00,000/- already offered by the assessee in his return of income furnished under s. 153A of the Act, confirmed the addition to the extent of Rs. 1,35,36,828/-, which resulted into a relief to the extent of Rs. 5,95,52,550/-. 14. Against the addition confirmed by Ld. CIT(A) the assessee is in appeal whereas against the relief granted, the Revenue is in appeal. 15. Before us, learned Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sales stated in various sales diaries. As per the seized records, the purchase quantity was to the extent of 2510.330 M.T. only as against the sales quantity of 23994.897 M.T. 193 [Summary of quantities of unrecorded purchases and unrecorded sales] As per the seized material, Diary A-8, the purchase quantity is only 2510.330 M.T. whereas as per the other seized diaries viz. A-1 to A- 7, the total quantity of sales is 23994.897 M.T. without purchases, there could not have been any sales. 5 In a scrap business, normally the rate of profit ranges between 5% to 10%. The estimation of net profit by the AO and CIT(A) is arbitrary - The AO has estimated the net profit at 88.25% and the CIT(A) has estimated the same at 25%. The assessee himself has shown net profit of 12.25% in two years. 6 On the aggregate turnover of Rs. 9,41,47,310/-, the assessee has already offered undisclosed income of Rs. 1,40,00,000/- in two assessment years i.e. Rs. 1,00,00,000/- in A.Y. 2011-12 and Rs. 40,00,000/- in A.Y. 2012- 13. The undisclosed income of Rs. 1,40,00,000/- includes the initial capital investment of Rs. 24,68,215/-. 68 Even if the initial capital investment in unrecorded busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es prepared on the basis of the seized diaries. However, even before us, Ld. counsel for the assessee (in short Ld. AR) failed to demonstrate with any positive evidence that the jottings made in these diaries pertain to two financial years. Since, the assessee himself is claiming that he had commenced the unaccounted business of scrap trading during the financial year relevant to A.Y. 2011-12 only and further since, from the seized diaries the assessee has failed to demonstrate that these transactions were also carried out by him during the subsequent financial year too, we find absolutely no infirmity in the views taken by the authorities below that the transactions of unrecorded trading of scrap were carried out by the assessee during the financial year relevant to A.Y. 2011-12 only and consequently, the entire income arising from carrying out such unrecorded transactions is liable to be taxed in the hands of the assessee for the A.Y. 2011-12 only. Accordingly, the Ground No. 1(b) of the assessee is dismissed. 22. Now, coming to the issue of determination of undisclosed income from the undisclosed and unrecorded trading transactions in scrap carried out by the assessee, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be adoption of a method of net profit income. In the case of CIT v. President Industries [2002] 258 ITR 654, the High Court of Gujarat in a similar matter came to hold as under (page 655) : "Having perused the assessment order made by the Assessing Officer, the order made by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under Section 256(1). It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether the entire sum of undisclosed sale proceeds can be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered view that an assessee is eligible for claim of set-off of the undisclosed income voluntarily shown by himself in the return of income filed u/s. 153A against any undisclosed income/undisclosed investment, finally determined. Accordingly, the AO is directed to work out the net profit at the rate of 10% on the unaccounted sales of Rs. 9,41,47,310/- i.e. at Rs. 94,14,731/- and after giving due benefit of telescoping of the undisclosed income of Rs. 3,60,00,000/- already shown by the assessee in his return of income (other than those undisclosed income for which a separate specific claim for set-off is made by the assessee), re-compute the total income of the assessee. Accordingly, the Ground No. 1 of the Revenue is dismissed and Ground Nos. 1(a), 1(c) and 1(e) of the assessee are Partly Allowed and Ground No. 1(d) of the assessee is fully allowed. 25. Ground Nos. 2(a)&2(b) of the assessee and Ground No. 2 of the Department - Unexplained Expenditure being Purchase of Scraps and Granuels - Rs. 1,10,57,932/- 26. These grounds are interconnected with the Ground Nos. 1(a) to 1(e) taken by the assessee and Ground No. 1 taken by the Revenue. During the course of the assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the assessee as well as the Revenue have preferred cross-appeals before this Tribunal on the issue. 29. Before us, learned Department Representative (In short Ld CIT(DR) ) vehemently argued supporting the observation of Learned AO and the finding of Ld.CIT(A) given in favor of Revenue on this issue of estimating profit from unaccounted scrap trading business. 30. Learned Counsel for the assessee has also filed one written synopsis. The relevant portion of such synopsis is being reproduced as under: Key Points of Assessee's Submission and Relevant Pages of Paper Book: S. No. Submission in Brief Relevant Pages of Paper Book Remarks 1 Once the assessee is found to have earned any unrecorded revenue and simultaneously has also been found to have incurred any unrecorded expenditure to earn such unrecorded income, then, first of all, such unrecorded expenditure cannot be considered as unexplained expenditure under s. 69C and, secondly, a set off of such unrecorded expenditure has to be given against the unrecorded revenue for determining the taxable income of the assessee - - 2 The transactions of both purchases as well as sales were made by the assessee in different tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade before the CIT(A). H. Legal Authorities on which Assessee wish to rely: Reliance is placed on the following judicial pronouncements: (i) CIT (Central) Cochin vs. P.D. Abraham @ Appachan (2012) 252 CTR (Ker) 407 [Copy of judgment enclosed as Annexure A-9.01 (PB Page No. 118 to 130)] (ii) CIT vs. Tips Industries Pvt. Ltd. (2010) 321 ITR 0154 (Bom.) [Copy of judgment enclosed as Annexure A-9.02 (PB Page No. 131 to 140)] 31. We have duly considered the facts and circumstances of the case and carefully gone through the AO's order, the Ld. CIT(A)'s Order, various relevant seized documents, written and oral submissions made from both the sides. 32. We find that in the instant case, the AO has regarded the entire purchases aggregating to a sum of Rs. 1,10,57,932/- as found recorded in one of the seized diaries inventorized as A-8, as unexplained expenditure of the assessee. We also find that even the Ld. CIT(A) while determining the quantum of undisclosed investment in the initial capital of the scrap business has taken into consideration the aforesaid amount of purchase only. However, while adjudicating the Ground Nos. 1(a) to 1(e) of the assessee and Ground No. 1 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l deal with the telescoping benefit/set off available to assessee against the surrendered income of Rs. 3.60 cr offered in the income tax returns, available to the assessee for the additions to be confirmed in the hands of assessee, after dealing with remaining issues raised before us. Accordingly, the Ground Nos. 2(a) & 2(b) of the assessee are Partly Allowed and Ground No. 2 of the Revenue is dismissed. Ground Nos. 3(a), 3(b), 3(c) &3(d) of the Assessee - Loans Advanced to Mr. Rahul - Rs. 3,00,00,000/- AND Ground Nos. 4(a), 4(b) & 4(c) of the assessee - Estimated Interest on Loans to Mr. Rahul - Rs. 9,00,000/- 33. The ground nos. 3(a) to 3(d) of the Assessee are pertaining to an addition of Rs. 3,00,00,000/- made by the AO on account of alleged advance payment by the assessee to one Mr. Rahul by invoking the provisions of s.69 of the Act. Further, the ground nos. 4(a) to 4(c) of the assessee are concerned with estimation of receipt of interest of Rs. 9,00,000/- on aforesaid advance to Mr. Rahul. 34. The brief facts relating to the grounds, as culled out from the records are that during the course of search and seizure operations carried out at the residential premises of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back the amount of Rs. 3,00,00,000/-, interest will also be estimated @12%. Accordingly, the AO estimated receipt of interest @12% p.a. on the aforesaid unexplained investment of Rs. 3,00,00,000/- i.e. at Rs. 9,00,000/- and Rs. 36,00,000/- respectively for the previous year relevant to A.Y. 2011-12 and A.Y. 2012-13 and added the same to the total income of the assessee. 36. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A), at para (7.3), stated that during the appeal proceedings, the assessee was required to file complete details of the impugned amount advanced to Mr. Rahul and also to correlate the advancing of loan out of unrecorded income earned but according to Ld. CIT(A), the assessee could not file any detail or explanation for the same. The Ld. CIT(A) also stated that apparently, the incriminating document makes reference to the amount of 3 crores advanced to Rahul Ji in the past which may be during earlier years also. Unless it is proved otherwise by the assessee through concrete evidences, the assessee cannot be given credit of current undisclosed income to be set-off against the amount under consideration. The Ld. CIT(A) further observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his sons to maintain peace and harmony in the family and to put all the disputes amongst themselves at rest. 4 The then prevailing family dispute, as asserted above, is also evident from one another letter dated 27- 12-2010 written by yet another son of the assessee, namely Shri Arvind Kataria, to the assessee. Such letter was also seized and inventorized by the search party as Page no. 45 of LPS-12. 147 - 5 Shri Hemant Kataria, who had written the letter asking for the details of Rs. 300 lakhs, realized that the total amount of advance to Mr. Rahul was of Rs. 29.90 lakhs only and not of Rs. 300 lakhs. Such fact is evident from the subsequent letter written by Shri Hemant Kataria which has been seized and inventorized as page no. 51 of LPS-12 148 On a perusal of such letter, it shall be observed by Your Honour that on such paper too, there are two jottings of 20000 and 9900 under the name of Shri Rahul Ji which fully coincides with the jottings found made at another loose paper seized and inventorized as page no. 44 of LPS-12 [kindly refer PB Page No. 149]. The figures written at LPS- 12, Page No. 44 [PB Page No. 149], have been decoded by the AO himself by adding two zeros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- 9 The AO, except banking upon the only loose paper inventorized as page no. 50 of LPS-12, has not conducted any other enquiry and has not brought on record any other tangible adverse material. The AO has not conducted any enquiry from Shri Hemant Kataria, the author of the letter. The AO has also not enquired either from the assessee or from anyone else about the whereabouts of Mr. Rahul. The AO has also not made any effort for conducting any enquiry from Mr. Rahul either by way of issuance of summons under s.131 or calling information under s.133(6) of the Act. - The presumption of the AO as regard to making of advance of Rs. 300 lakhs by the assessee to Mr. Rahul is not corroborated from any other evidence, no credence deserves to be given to such a bald and patently wrong presumption. 10 As regard to the source of advance of Rs. 29,90,000/-, it is submitted that such advances were given by the assessee in two trenches of Rs. 20,00,000/- and Rs. 9,90,000/- out of unaccounted receipts of his unaccounted business of scrap and granules. In respect of such business, the assessee had already made necessary disclosure of income of Rs. 1,00,00,000/- in his return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and his son Shri Hemant Kataria. We find that both the authorities below have heavily relied upon one letter dated 25.12.2010 purported to be in the handwriting of Shri Hemant, (one of the sons of the assessee) and given to the assessee by which he has required his father to seek the details of the various advances aggregating to 300 Lacs (written as '300L'), for various projects. We find that except this letter, there was no other basis either for the AO or for the CIT(A) to presume that the assessee had given some advances amounting to Rs. 300 Lacs to some Mr. Rahul. 42. We notice that at the relevant time, when the letters were exchanged between the assessee and his son, some family disputes were going on and one of the sons Shri Hemant Kataria, without having any authentic information, was simply assuming that some sum of Rs. 300 Lacs was given by the assessee to Shri Rahul. However, on the another loose paper inventorized as Page No. 51 of LPS-12, as seized from the same premises along with the above referred letter, again two jottings with figures of '20000' & '9900' have been found written under the name 'Rahul'. We also notice that a claim was made by assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of Rs. 29,90,000/- only. And on this document which contain names of various other person to whom loans and advances are alleged to have been given is also in dispute before us and shall be dealt with in subsequent paras. Accordingly in the given facts and circumstances of the case, we reverse the finding of the Ld. CIT(A) given in the impugned order on the subject issue. 44. We further find merit in the contention of the assessee that even in respect of sum of Rs. 29,90,000/-, no separate addition was called for inasmuch on the basis of jottings of Rs. 20,00,000/- and Rs. 9,90,000/-, made in the loose paper seized and inventorized as LPS-12, Page no. 44, the AO has already made a separate addition of Rs. 7,83,60,000/- which was partly confirmed by Ld. CIT(A). Since, both the assessee and the Revenue have taken separate grounds on this issue, which have been adjudicated by us in the subsequent paras, and further since, we find that the amount of Rs. 29,90,000/- has already been considered by both the authorities below while making/ restricting the addition as aforesaid, in our considered view, no further addition is required on account of advances amounting to Rs. 29,90,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has presumed that the assessee might have made such investments by giving advances to Mr. Rahul in earlier years. In our considered view, since, we have fully deleted the addition of Rs. 3,00,00,000/- so made by the AO, as aforesaid, the question of telescoping has become academic in nature only. Accordingly, the Ground No. 3(c) of the assessee is allowed. 46. Through the Ground No. 3(d), the assessee has claimed that the Ld. CIT(A) did not accept his plea that the advances given to Mr. Rahul were received back during the year under consideration only. In our view, having given a finding that on account of advance given to Mr. Rahul, no separate addition is warranted, this ground has become academic in the nature only. Even otherwise, we find that the assessee at no stage could substantiate his claim of having received back the advances given to Mr. Rahul with any positive evidence, the claim of the assessee is not eligible for acceptance. Accordingly, ground no. 3(d) of the assessee is dismissed. 47. Through the ground Nos. 4(a), 4(b) & 4(c), the assessee has agitated the confirmation of addition amounting to Rs. 9,00,000/- made by the AO on account of interest on advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s undisclosed income and the same was covered by the additional income of Rs. 3,60,00,000/- shown by the assessee in his return of income for the relevant assessment year. Since as per the assessee, no formal documents were executed for purchase and sale, the details of sellers and buyers could not be furnished. Ld. AO has stated that the assessee did not file any details in respect of purchasers and sellers or copies of agreements etc. Ld. AO further stated that the payment made by the assessee was not recorded in the books of account and explanation offered by the assessee regarding nature and source of investment was found unsatisfactory, Ld. AO treated the investment of Rs. 52,00,000/- in purchase of property as unexplained investment u/s. 69 of the Act. and made addition thereto, and also made an addition of Rs. 12,60,000/- on account of short term capital gain on sale of land. 51. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) stated that Ld. AO was justified in holding that the assessee had purchased 65000 sq. ft. land in Indore @Rs. 80/- per sq. ft. by making investment of Rs. 52,00,000/-. However, the Ld. CIT(A) also found that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Relevant Pages of Paper Book Remarks 1 The assessee disclosed an additional income of Rs. 3,60,00,000/- in his return of income for the relevant assessment year which is inclusive of the profit of Rs. 12,60,000/- from sale of the subject land and therefore, no separate addition was warranted. 68 The income has also been considered in the table given at Part-II above. 55. Reliance also placed on the submission of the assessee made before the CIT(A) placed at page no. 23 & 24 of the Paper Book. The same has also been reproduced by the CIT(A) at page no. 63 of the impugned Order while adjudicating the Ground Nos. 8(a) &8(b) raised by the assessee. The assessee wish to place reliance on such detailed written submission made before the CIT(A). 56. We have heard rival contentions and perused the material place before us and carefully gone through the order of the lower authorities and documents filed before us by both the sides. We find that the Ld. CIT(A) has rightly confirmed the addition of Rs. 52,00,000/- and Rs. 12,60,000/- respectively on account of unexplained investment in land and profit on sale thereof. We also find no infirmity in the action of the Ld. CIT(A) to grant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra, the Ld. CIT(DR) objected the assessee's claim on the ground that the assessee could not establish nexus of such sales proceeds with other unexplained investments. 60. We have considered the rival contentions, seized documents and facts and circumstances of the case. In our considered view, having held that the assessee had derived income amounting to Rs. 12,60,000/- from partial sale of land, it has to be necessarily held that the sales proceeds of such land amounting to Rs. 40,80,000/- was available with the assessee. We find that the transaction of purchase of land has its nexus with the letter dated 12.01.2011. Business of trading in scrap and other related activities are since the beginning of the year and another seized paper showing loans and advance is having a date of December. Therefore this plea of the assessee that sale proceeds of land was used in giving loans and advances and used in the business of scrap has no merits. Accordingly, the ground no. 5 of the assessee appeal for A.Y. 2011-12 is dismissed 61. Ground Nos. 6(a), 6(b), 7(a), 7(b) & 8 of the assessee and Ground Nos. 5 & 6 of the Revenue regarding addition for unexplained Loans & Advances to various perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff of the additional income of Rs. 2,60,00,000/- offered by the assessee from such undisclosed investment of Rs. 10,43,60,000/-, made an addition of Rs. 7,83,60,000/- in the hands of the assessee as his undisclosed income. Further, the Ld.AO also estimated interest @12% p.a. on the aforesaid loans & advances and made a separate addition of Rs. 1,25,23,200/- in the assessee's income for the year under consideration. 63. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) noted that Ld. AO was inclined to decode the figures noted in the said loose paper by adding two zeros but while decoding and interpreting the loose paper, Ld. AO committed some mistakes. The Ld. CIT(A) has reproduced the chart prepared by the AO and given in the assessment order. At para (11.5), the Ld. CIT(A) has observed the mistake of decoding committed by the AO in respect of two entries. The Ld. CIT(A) observed that in respect of two entries, serialized as Item No. (2) & (3), Ld. AO committed mistake inasmuch instead of decoding the figure with two zeros, decoded the same with three zeros which resulted into over-reading of the figures by a sum of Rs. 1,21,50,000/-. Thus, at para (11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A) further observed that at S. No. 14 of loose paper, there is mention of name of one Atul, CA against whom the remark "300 Lakh march profit required" is given. The Ld. CIT(A) stated that ld. AO has made addition of Rs. 3 crores without even raising a single query. The Ld. CIT(A) further stated that the amount seems some future planning or requirement as 'March' is clearly written on this incriminating document dated 27/12/2010. The Ld. CIT(A) referred to the contention of the assessee that it was planning to bring back the amount of profit earned in the undisclosed business of scrap in the business through CA Atul. The explanation of the assessee was found reasonable and plausible by the Ld. CIT(A) as the assessee has declared undisclosed income of Rs. 3.60 crores during the year under consideration. Accordingly, the Ld. CIT(A) stated that the AO has not been found justified in making addition of Rs. 3 crores and directed to delete the same. 68. At para 11.13 of the impugned order, the Ld. CIT(A) stated that undisputedly, the assessee has made disclosure of Rs. 2.60 crores on the basis of entries in the impugned document and since the disclosure made has been set-of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o contains certain jottings for work to be done. It will be appreciated that if the said loose paper was prepared on 27-12-2010, then the notings with the description of January clearly relates to something to be done in the next month. - For an example, against item no. 11 of the subject loose paper, where there is a mention of 'Borana Jameen', a description of (Jan. 30-40 lac Require). Similar description is also written against item no. 12, 13 & 14. 4 During the course of the entire search proceedings, statement of the assessee or author of the subject loose paper was not recorded by the search party. - - 5 The AO had rightly attempted to decode the subject loose paper by adding two zeros. 151 However, probably under some mistake, in respect of two items, instead of adding two zeros, he has added three zeros. For the second item of 8500=00, jotted down with the description of 'Lndriji', the AO has taken the figure of Rs. 85,00,000/- instead of correct figure of Rs. 8,50,000/- only. Likewise, for the third item of 5000=00, jotted down with the name of Anil Ji, the AO has mistakenly taken the figure by adding three zeros as that of Rs. 50,00,000/- instead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources. Such income was earned by the assessee from carrying out unaccounted transactions of scrap trading, interest income on unaccounted money lending and others. Such income was earned by the assessee from undisclosed sources and there was no recording of such income in his regular books of account. The assessee wanted to bring such income in his regular books of account. In such circumstances, Shri Arvind Kataria, son of the assessee, had contacted his friend at Kolkata and such friend had intimated Shri Arvind Kataria that some C.A. Atul can manage this profit for him. Eventually, no such profit could be managed and the same got unearthed during the course of search proceedings. 8 No independent enquiry conducted by the AO either during the assessment proceedings or during remand report proceedings. No material brought on record by the AO. - 9 During the relevant previous year, the assessee had given a sum of Rs. 2,31,95,000/- only by way of loans & advances and the entire amount of loans & advances is covered by the total income of Rs. 3,60,00,000/- already offered by the assessee in his return of income - The sources of investments of Rs. 2,31,95,000/- for g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for. - - 4 The assessee himself had shown an income of Rs. 3,60,00,000/-, in his return of income for the assessment year under consideration, from undisclosed sources and therefore, even if any receipt of interest is assumed, the same is very well covered by the aforesaid income and no further addition was warranted - - 74. We have heard rival contentions and perused the material placed on record, duly considered the facts and circumstances of the case, orders of lower authorities, written and oral submissions made from both the sides. 75. We find that during the course of the search in the assessee's premises, one loose paper inventorized as page no. 44 of LPS-12 was found and seized supposedly being a date on top'27/12'. From the copy of such loose paper, as furnished by the assesse in his paper book at page no. 149 and as also, scanned by the Ld. CIT(A) in his Order at page no. 71, we find that such loose paper is in handwritten form in which against the 27 names/ items, some amounts have been written. We find that the AO has held that the figures written on such paper were in coded forms by omitting two zeros. Further while undertaking the exercise of decoding the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the revenue conducted any independent enquiry regarding the alleged investment by the assessee either from the records of Sub-Registrar or any other sources. In such circumstances, in our considered opinion, merely on the basis of jottings with the description 'requirement' and the undisclosed investment by the assessee cannot be presumed merely on guess work, without having any corroborative evidence on record. Thus, we find no infirmity in the action of the CIT(A) in deleting the partial additions in respect of the aforesaid three items. 77. We also find merit in the contention of the assessee, which was also accepted by the CIT(A), that the description with the words '(300 Lac March profit require)' against the name of some 'Atul C.A.' as serialized at S. No. 14 of the impugned seized paper, it cannot be interpreted that the assessee made any undisclosed investment. Such description only denotes some future planning. We find that the AO has not conducted any independent enquiry from Atul CA and further by no stretch of imagination, the description written on the loose paper can be interpreted as making of any undisclosed investment by the assessee. Thus, we find no infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overall change in the telescoping benefit available to the assessee. Thus, these two grounds of the assessee are partly allowed subject to our working of telescoping benefit available to the assessee. 80. Now, coming to the ground no.7(a) & 7(b) raised by the assessee and ground No. 6 raised by the Revenue which relates to issue of addition made on account of interest earned by the assessee on various loans and advances made by ld. AO. We note that Ld. AO made addition for unexplained loans and advances at Rs. 10,43,60,000/- based on the seized documents page No. 44 LPS-12. Ld. AO also calculated the interest income at Rs. 1,25,23,200/- which is computed @12% interest per annum on the sum of loans and advances. 81. Subsequently when the matter came up before the Ld. CIT(A), he after examining the facts confirmed the addition of Rs. 2,31,95,000/- in place of the addition of Rs. 10,43,60,000/- made by the Ld. AO. As regards on interest Ld. CIT(A) directed the Ld. AO to recompute the interest on the reduced amount of addition. 82. Before us when this matter of unexplained loans and advances was raised by both sides. We have concurred with the finding of Ld. CIT(A) and sustained th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Unexplained investment in purchase of land Rs. 52,00,000/- iv. Unaccounted profit on sale of land Rs. 12,60,000/- v. Unexplained investment in loans and advances Rs. 2,31,95,000/- vi. Estimated interest on unexplained Rs. 9,27,800/- vii. Loans and advances Rs. 27,50,000/- Total Rs. 4,38,76,255 86. Now against the above additions Ld. counsel for the assessee has requested to provide telescoping benefit of the following: 1. Undisclosed income surrendered during the search and offered to tax Rs. 3,60,00,000/- 2. Accumulated net profit from unaccounted scrap business earned up to 30th November, 2010 Rs. 62,76,487/- Total Rs. 4,22,76,487/- 87. Ld. DR opposed to the request of ld. counsel for the assessee of providing set off of accumulated unaccounted profit from scrap business till 30th November 2010. 88. We have heard rival contentions, perused the records placed before us. In order to examine the issue of telescoping benefit we have examined the records and also considered our finding adjudicating various issues raised by both the sides. So far as, the amount of addition confirmed by us the same remains at Rs. 4,38,76,255/- (as stated above). As regards set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appearing in the seized loose paper appearing no. LPS-12 page 44. We, therefore, hold that the assessee was having sum of Rs. 4,22,76,487/-( Rs. 3.60 cr. offered in the income tax return + profit from scrap trading business for 8 months Rs. 62,76,487/-) available for set off against the addition sustained by us at Rs. 4,38,76,255/-. Thus Rs. 15,99,768/- remains to be taxed in the hands of assessee. 91. We, therefore, are of the view that against total addition sustained by us after providing the telescoping benefit of amount available, there remains only Rs. 15,99,768/- to be taxed by the ld. AO for A.Y. 2011-12. To make it simple we direct Ld. AO to tax this amount under the head of unexplained loans & advances. 92. In the result, this issue of telescoping benefit is partly allowed in favour of the assessees and that raised by revenue is dismissed. Now we take up the Revenue's appeal for A.Y. 2012-13. 93. The first issue raised in ground no.1 relates to the addition for interest on the unaccounted loans and advances. We find that we have dealt this issue in the cross appeals for A.Y. 2011- 12 and have confirmed the addition for unaccounted loans and advances at Rs. 2,31,95, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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