TMI Blog2021 (9) TMI 1241X X X X Extracts X X X X X X X X Extracts X X X X ..... iews 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. Determination of undisclosed income from the undisclosed and unrecorded trading transactions in scrap carried out by the assessee - HELD THAT:- Considering the facts that the assessee has carried out only a trading business on wholesale basis which was commenced by him only in the financial year under consideration and further considering the amount of investment, rate of return on investment etc. in our view, the estimation of the net profit rate so made by the CIT(A) at 25% is quite at a higher side. In all the fairness to both the parties , we restrict the estimation of net profit at 10% of the undisclosed sales. Before us, the assessee has also taken two separate grounds bearing nos. 1(c) and 1(d) for allowing him the benefit of telescoping of the total undisclosed incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired even in respect of receipt of interest on advance to Mr. Rahul. Accordingly, the Ground Nos. 3(a) 3(b) of the assessee are allowed. Benefit of telescoping to the assessee in respect of advances given to Mr. Rahul against the additional income surrendered and shown by the assessee himself in his return of income - HELD THAT:- Once the CIT(A) has confirmed the addition under s.69 of the Act, it has to be necessarily held that the advances were given by the assessee during the year under consideration only and not in the earlier years, for the reason that under the provisions of s.69 of the Act, an addition can be made only for the year in which the assessee has been found to have made undisclosed investment. In our view, the Ld. CIT(A) was not correct in sailing on two boats inasmuch while confirming the addition, he has presumingly affirmed that the assessee had made the investment only during the year under consideration but, while considering the benefit of telescoping, the Ld. 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 so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 of₹ 9,41,47,3101- at ₹ 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 ₹ 75,31,785/- in respect of income already offered by him on account of net profit from unaccounted business of scrap, in his return of income, filed post search. 2(a). That, the learned CIT (A) grossly erred, both on facts and in law, in estimating the investment of initial capital in the unaccounted scrap business at ₹ 55,28,966/- as against the same claimed by the appellant at ₹ 24,68,215/- thereby resulting into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant 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 the effect that the appellant having liquidated the investment made in land at ₹ 52,00,000/- during the relevant year itself was having such funds available for explaining the sources of his unexplained investments. 6(a). That, the learned CIT(A) grossly erred, both on facts and in law, in partially confirming the addition to the extent of ₹ 36, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace of addition made by of ₹ 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 ₹ 31,11,201/_ in place of addition made by AO of ₹ 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 ₹ 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 ₹ 12,60,000/- made by AO on account of sale of land on the basis of incriminating documents found seized from the assessee's premises. 5.On the facts and in the circumstances of the cases, the Ld. C/T(Appeals) erred in deleting the addition of ₹ 6,90,00,000/_ out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 26 Crores on behalf of the entire Kataria Group which was inclusive of disclosure of additional income of ₹ 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 ₹ 26 crores, revised the amount of surrender on behalf of the assessee, at ₹ 6.00 crores (₹ 3.60 cr for AY 2011-12 and ₹ 2.40cr for AY 2012-13) vide letter dated 20-03-2012 6. Thereafter, the assessee furnished his Return of Total Income, for the assessment year under consideration on 31-03-2012, under s.139(4), declaring an income of ₹ 3,79,93,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rounded off ₹ 25,03,84,440/- 8. Aggrieved assessee preferred an appeal before Ld. CIT(A) and partly succeeded and now both assessee and revenue are in appeal before this Tribunal. 9. We will first take ground Nos. 1(a), 1(b), 1(c), 1(d) 1(e) of the assessee and Ground No. 1 of the Department relating to estimation of net profit from Trading in Scraps and Granules 10. The Ground Nos. 1(a), 1(b), 1(c), 1(d) 1(e) of the Assessee and the 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 ₹ 1,35,36,828/- out of the total addition of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed quantitative details of the purchases and sales of scraps as found jotted down in all the seized diaries inventorized as Annexure A-1 to Annexure A-8. A copy of such quantitative details are also furnished before us. From such details, it is demonstrated that as per the seized records, the quantity of sales is of 23,994.897 M.T. whereas, quantity of purchases is only of 2510.330 M.T. and therefore, it cannot be inferred that the unaccounted purchases made by the assessee was only to the extent of the seized records. 13. Ld. CIT(A), accepting the contention of 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 ₹ 8,30,89,378/- and Ld. AO ought to have adopted some logical and reasonable approach in estimating the net profit from sale of ₹ 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. 2 Entire suppressed sales cannot be regarded as income. 115 to 117 [Copy of the Judgment of the Hon ble MP High Court] CIT vs. Balchand Ajit Kumar (2003) 263 ITR 610 (MP) 3 Seized diaries were not complete set of record of transactions of purchases and sales of scrap and granules. All transactions of unaccounted sales were found in diaries but records of all purchases not found. - Unaccounted Sales of ₹ 9,41,47,310/- and Unaccounted Purchases of ₹ 1,10,57,932/- found in diaries. Net Profit of ₹ 8,30,89,378/- determined by the AO which is patently wrong, absurd and arbitrary. Refer Para (11.1) on pg. 11 para (11.7) on pg. 15 of AO s Order. 4 On a perusal of diaries A-1 to A-8, quantity of purchases in purchase diary is much less than quantity of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain diaries inventorized as A-1 to A-8 were found and seized by the search party. It is also an undisputed fact that in these diaries various transactions of purchases and sales of scrap were noted down which were not found recorded in the regular books of account maintained by the assessee. 20. We find that there is no difference of view between the assessee and the Revenue that out of the aforesaid eight pocket diaries, one pocket diary inventorized as A-8 was containing the transactions relating to unrecorded purchases carried out by the assessee, whereas, in the remaining seven pocket diaries inventorized as A-1 to A-7, the transactions of unrecorded sales were jotted down. The quantum of purchases and sales as per these seized diaries respectively at ₹ 1,10,57,932/- and ₹ 9,41,47,310/- have not been disputed by either of the parties. 21. Before the CIT(A) as well as before us, the contention of the assessee was that the transactions jotted down in these diaries pertain to two financial years relevant to A.Y. 2011-12 and A.Y. 2012-13. During the course of the hearing before us, the A.R. of the assessee, reiterated his arguments by making a reference of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire unrecorded purchase records of the assessee could not be found and seized during the course of the search. In these circumstances, we fully concur with the findings of the CIT(A) that the assessee s purchase record were not fully recovered and therefore, it could not be made the basis for determining the net profit of the assessee from carrying out the unrecorded trading business of scrap. We find force in the contention of the Ld. AR that the entire suppressed sales cannot be regarded as an income of the assessee but only the net profit element embedded in such suppressed sales has to be estimated as undisclosed income of the assessee. For such proposition, we place reliance on the judgement of Hon ble High Court of Madhya Pradesh in the case of CIT vs. Balchand Ajit Kumar (2003) 263 ITR 0610 (MP) in which their Lordships at para (6) was pleased to observe as under: 5. On appreciating the rival submissions raised at the Bar, we have carefully perused the order passed by the Commissioner of Income-tax (Appeals) and also that of the Tribunal. It is not disputed that the undisclosed income was ₹ 2,57,000. The sole question that arises for consideration is whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year under consideration, u/s. 153A of the Act, the assessee has voluntarily shown an income of ₹ 1,00,00,000/- on account of undisclosed income from scrap trading and undisclosed initial investment in the business of scrap trading respectively at ₹ 75,31,785/- and ₹ 24,68,215/-. Thus, on suppressed sales of ₹ 9,41,47,310/- the assessee has disclosed net profit of ₹ 75,31,785/- which works out to be 8% only. As against such net profit rate of 8%, the CIT(A) has estimated the rate of net profit at 25%. Considering the facts that the assessee has carried out only a trading business on wholesale basis which was commenced by him only in the financial year under consideration and further considering the amount of investment, rate of return on investment etc. in our view, the estimation of the net profit rate so made by the CIT(A) at 25% is quite at a higher side. In all the fairness to both the parties , we restrict the estimation of net profit at 10% of the undisclosed sales. Before us, the assessee has also taken two separate grounds bearing nos. 1(c) and 1(d) for allowing him the benefit of telescoping of the total undisclosed income shown in the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof from the unaccounted sales of ₹ 9,41,47,310/-. The Ld. CIT(A) further stated that the contention of the assessee is found reasonable to the effect that purchases found noted in the diary can be said to be unrecorded but the sources thereof cannot be considered as fully unexplained. The Ld. CIT(A) also stated that the entire purchases have not been made in a single day or single instance but they are found to be made on various dates and in various months in a cyclic manner and in small amounts. The assessee has been found to have recorded the corresponding sales in the same manner as purchases. The Ld. CIT(A) stated that barring initial investment, the assessee was not required to make investment in subsequent purchases. The Ld. CIT(A) further stated that the assessee has not furnished any basis for initial investment and thus, the initial investment of ₹ 24,68,215/- estimated by the assessee was found to be on a lower side. Accordingly, the Ld. CIT(A) estimated the initial capital of the assessee at one half of impugned purchase amount i.e. at ₹ 55,28,966/- as against the same shown by the assessee at ₹ 24,68,215/-. Finally, the Ld. CIT(A) granted a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r taxation was available with the assessee for making investment in purchases. Since, the income so earned for trading has already been taxed separately, the corresponding investment made out of such income cannot again be added as it would tantamount to making of the same addition twice. 4 Over and above the income of ₹ 24,68,215/- and ₹ 75,31,785/-, aggregating to ₹ 1,00,00,000/-, the assessee had also offered an additional income to the extent of ₹ 2,60,00,000/- in his return of income filed under s. 153A. - The remaining additional income of ₹ 2,60,00,000/- which was utilized by the assessee in making unrecorded investment in loans and advances was also available with the assessee in the initial days of the previous year for making investment in unrecorded purchases. 5 The assessee is squarely eligible for claim of telescoping benefit in respect of the total undisclosed income of ₹ 3,60,00,000/- for the assessment year under consideration, on the basis of undisclosed income shown in the return against the unexplained investment, if any, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o which the assessee has also agreed, then in our considered view, the initial capital investment in the undisclosed trading business of the scrap ought to be determined on the basis of the aforesaid unrecorded annual sales of ₹ 9,30,89,378/-. From the excel sheets, drawn by the assessee on the basis of the seized diaries which have also been accepted by the AO, we find that the assessee has made both the purchases and sales in multiple trenches, thus, the contention of the Ld. AR is worth accepting that the undisclosed trading transactions were carried out by him not in one go but in a cyclic manner. Accordingly, only for making the first few purchases, the assessee could be said to have made investment in his business and for making the subsequent purchases, the sales proceeds realized from the initial purchases were available for him for making further purchases and so on. Considering the entire facts and the pattern of purchase and sales as recorded in the seized diaries, we are of the considered view that it would be fair and reasonable to estimate that the assessee had made initial investment for carrying out undisclosed trading business of scrap equivalent to a half mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and inventorized as LPS-12 were containing the notings related to planning, projections, purchase orders, details of movable and immovable properties held by the family members of the assessee and other correspondences which is evident from the para (12.1) of the AO s Order itself. Subsequently, the AO, vide questionnaire dated 25-09-2013, required the assessee to explain the contents of page no. 50, LPS-12 containing reference of giving a loan of ₹ 300 Lakhs to some Shri Rahul Ji. In response to the same, the assessee, vide his counsel s letter dated 25-01-2014, made an explanation in respect of the subject loose paper. The reply of the assessee on the subject issue has been reproduced by the AO at para 12.4 of the assessment order. 35. According to the AO, the contention of the assessee was not acceptable as the same is contradictory with his earlier submission dated 20.3.2012, filed before the Investigation Wing, in which he had submitted that this was only a simple letter and there was some doubt between two brothers but now, the assessee has come with a new story that the amount was only ₹ 29,90,000/- but not ₹ 3,00,00,000/-. Ld. AO further stated that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the Order of the Ld. CIT(A), the assessee has agitated the action of the Ld. CIT(A) in confirming the addition of ₹ 3,00,00,000/- and estimation of interest thereon before this Tribunal. [ 38. Before us, the learned counsel for the assessee has 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 Page No. 50 of LPS-12 on the basis of which the AO has made addition is basically a handwritten letter written by one of the three sons of the assessee namely Shri Hemant Kataria enquiring from the assessee about amount of ₹ 300L allegedly given to Mr. Rahul for various projects. 141 At the relevant time, some severe family disputes were undergoing in the family of the assessee and during such time only, Shri Hemant Kataria got some misleading information that a sum of ₹ 300 lakhs was given from the family funds to Mr. Rahul and under such confusion, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9900 need to be interpreted respectively at ₹ 20,00,000/- and ₹ 9,90,000/- aggregating to ₹ 29,90,000/- only. 6 All the amounts appearing at page no. 44 of LPS-12 [PB Page No. 149] have been taken into consideration by the AO while making a separate addition of ₹ 7,83,60,000/- on this count in the hands of the assessee for the relevant assessment year The surrounding loose papers of the same LPS-12 i.e. page no. 44, which have also been relied upon and decoded by the AO himself while making another addition of ₹ 7,83,60,000/-, are strong evidence to establish the assertion of the assessee that he had advanced a sum of ₹ 29,90,000/- only to Mr. Rahul and not ₹ 3,00,00,000/- as wrongly presumed by the AO 7 Even the CIT(A), at para (7.3), has stated that the amount of 3 crores to Rahul Ji may have been advanced during earlier years also. As per the CIT(A) himself, there is no material on record which suggests dates/ modes/ trenches of advances given by the assessee to Mr. Rahul and therefore, it shall be reasonable to presume that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that such advances were given by the assessee in two trenches of ₹ 20,00,000/- and ₹ 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 ₹ 1,00,00,000/- in his return of income for the assessment year under consideration. - Over and above such income of ₹ 1,00,00,000/-, the assessee has further disclosed an additional income of ₹ 2,60,00,000/- in his return of income for the assessment year under consideration. Thus, in totality, to assessee, there was availability of sufficient funds aggregating to ₹ 3,60,00,000/- and therefore, out of such funds, the investment of ₹ 29,90,000/- cannot be disbelieved. Sources are covered by the undisclosed income shown in the return as is apparent from the table given at Part-II above 39. Ld. counsel for the assessee also referred to the detailed submission made before the Ld. CIT(A) (placed at page no. 15 to 20 of the Paper Book). The same has also been reproduced by the Ld. CIT(A) at page no. 54 to 56 of the impugned Order whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given some advances amounting to ₹ 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 ₹ 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 before both the authorities that the total amount of advance to Shri Rahul was not to the extent of ₹ 300 Lacs but, it was only to the extent of ₹ 29,90,000/-. It was submitted that Mr. Rahul was given advances in two parts of ₹ 20,00,000/- and ₹ 9,90,000/- and since the assessee and other family members were habituate to write the figures in coded form by omitting two zeros, the sum of ₹ 20,00,000/- and ₹ 9,90,000/- were respectively written in the coded form as 20000 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of ₹ 29,90,000/-, no separate addition was called for inasmuch on the basis of jottings of ₹ 20,00,000/- and ₹ 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 ₹ 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 ₹ 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 ₹ 29,90,000/- made by the assessee to Mr. Rahul. It is well known maxim of the law that the same addition cannot be made twice. Since, while making the separate addition of ₹ 7,83,60,000/-, which includes the advances amounting to ₹ 29,90,000/- given by the assessee to Mr. Rahul, the AO has separately determined the interest amounting to ₹ 1,25,23,200/-, in our considered view, no separate addition is required even in respect of rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 9,00,000/- made by the AO on account of interest on advances amounting to ₹ 3,00,00,000/- given to Mr. Rahul. Since while adjudicating the ground No. 3(a) 3(b), we have already given our findings that first of all, the amount of advance given to Mr. Rahul was only to the extent of ₹ 29,90,000/- and further since, we have already given a finding that in respect of such advances and interest thereon, separate additions have already been made by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ₹ 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 ₹ 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 @₹ 80/- per sq. ft. by making investment of ₹ 52,00,000/-. However, the Ld. CIT(A) also found that the assessee has disclosed additional income of ₹ 2,60,00,000/- in his return of income for the relevant assessment year which is sufficient to cover the subject investment in purchase of land. Therefore, the Ld. CIT(A) directed Ld. AO to allow credit of surrendered amount against such investment and held that no separate addition was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Remarks 1 The assessee disclosed an additional income of ₹ 3,60,00,000/- in his return of income for the relevant assessment year which is inclusive of the profit of ₹ 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 ₹ 52,00,000/- and ₹ 12,60,000/- respectively on account of unexplained investment in land and profit on sale ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40,80,000/- be allowed against other unexplained investments found to have been made in the same year. 59. Per contra, 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 ₹ 12,60,000/- from partial sale of land, it has to be necessarily held that the sales proceeds of such land amounting to ₹ 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and held that the advance of ₹ 10,43,60,000/- as unexplained investment of the assessee under s.69 of the Act in the form of loans and advances. Ld. AO, after giving a set-off of the additional income of ₹ 2,60,00,000/- offered by the assessee from such undisclosed investment of ₹ 10,43,60,000/-, made an addition of ₹ 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 ₹ 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 commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to delete the addition to the tune of ₹ 3.90 crores (figures in brackets) on account of future projections found made against items at S. No. 11 to 13 of Page no. 44 of LPS-12. 67. At para 11.12 of the impugned order, 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 ₹ 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 ₹ 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 ₹ 3 crores and directed to delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 27-12. Thus, it can be presumed that it was prepared on 27-12-2010, a date which falls in the previous year relevant to the assessment year under consideration. - Probably, the purpose and intent of preparing such loose paper, by Shri Arvind Kataria, was to keep himself reminded of certain things. 3 Such loose paper is mixed in the nature. It contains jottings of certain transactions which have already taken place. It also 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person of ordinary prudence could have reach to a conclusion that the assessee had actually given a sum of ₹ 300 lacs to Mr. Hemant which was only shown as a requirement on the loose paper. 7 The AO has also misinterpreted the figures ' =00 (300 Lac March Profit Req.)', written against item no. 14 'Atul C.A.' as ₹ 3,00,00,000/- without assigning any reason. The figure of 300 Lac with the narration of 'March Profit Require' was just a planning (which could not materialize) and it was not, in any manner, representing any loan or advance of ₹ 300 Lacs made by the assessee to Atul C.A. as wrongly interpreted by the AO. 151 During the relevant previous year, the assessee had earned an income of ₹ 3,60,00,000/- from undisclosed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Furthermore, from such loose paper, it cannot be interpreted that all the loans were given on interest on very first day of the relevant previous year so as to yield interest income to the assessee for the whole year. 2 The AO has worked out the interest @ 12% on the assumption that the assessee had given loans and advances aggregating to ₹ 10,43,60,000/-. - The actual aggregate amount of loans and advances given by the assessee during the relevant previous year was to the extent of ₹ 2,31,95,000/- only. The interest bearing loans were given by the assessee, on various dates, during the relevant previous year from time to time out of undisclosed income generated by him from time to time. 3 From making the loans and advances, the assessee had earned interest income nearly ₹ 15,00,000/- only. The interest income so earned was redeployed by the assessee for making loans and advances. Since the assessee has already considered the aggregate amount of loans and advances of ₹ 2,31,95,000/-, which includes the amount of loans and advances given from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rialized at S. No. 11, 12 13, respectively under the captions Borana Jameen , Kareni Jameen and 19km Hemant Jameen , adjacent to the figures, there is some mention in brackets about some requirements again in the coded forms. We find that the AO without conducting any independent enquiry and merely on the basis of the jottings of the word requirement , presumed that the sum of funds required by the assessee were actually so invested by the assessee during the year itself. We find merit in the findings of the CIT(A) that the loose paper was prepared on 27.12.2010 and therefore, any mentioning regarding the requirement of funds in the May can only be interpreted that such funds were required in the May 2011 and not in the year under consideration. On such holistic interpretation of the loose paper, it cannot be said that the assessee was required to make any investment of ₹ 300 lacs for purchase of any land at 19km. In our considered view, it is not the case of the AO that the description mentioned against the aforesaid three items denotes the amount already invested by the assessee prior to the search. In our view, such description only denotes the requirements of some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of undisclosed investment by way of loans and advances at ₹ 2,31,95,000/-, Ld. CIT(A) vide para (11.13) of his Order, has also made a direction to give the benefit of telescoping of income disclosed by the assessee in his return of income filed under s.153A of the Act for the assessment year under consideration. The CIT(A) has restricted the benefit of telescoping to the extent of ₹ 1,95,40,000/-. The CIT(A) while holding the claim of the assessee from ₹ 2,60,00,000/- to ₹ 1,95,40,000/-, has held that the separate benefit of telescoping has already been granted by him to the assessee in respect of undisclosed investment in purchase of land at ₹ 52,00,000/- and profit on sale of such land at ₹ 12,60,000/- aggregating to a sum of ₹ 64,60,000/- while adjudicating the separate grounds related to such issues. 79. We observe that the assessee has challenged the quantum of telescoping benefit given by the Ld. CIT(A) against the total undisclosed income of ₹ 3.60 cr. surrendered during the course of search and offered to tax in the return of income. As observed earlier in the preceding paras, we will specifically deal with the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-, the interest for 4 months will come to ₹ 9,27,800/- only. We, therefore, set aside the finding of Ld. CIT(A) and confirm the addition for interest at ₹ 9,27,800/-. Thus, ground no. 7(a) 7(b) of assessee s appeal is partly allowed and dismissed ground no.6 raised by Revenue. 84. Now we take up the common issue relating to telescoping benefit being available to the assessee. In most of the additions confirmed by Ld. AO and subsequently confirmed/partly confirmed by Ld. CIT(A), this issue of telescoping benefit has been discussed. Now since we have dealt with all the additions challenged before us by assessee and revenue and have decided the same, in order to keep clarity, we deem it proper to deal with this issue keeping in mind our finding of various additions dealt by us in the forgoing discussions. 85. We find that the assessee was subjected to search u/s 132 of the Act and in his individual name surrender of ₹ 6 cr. was made which was bifurcated into two parts. For A.Y. 2011-12 ₹ 3.60 cr. was offered to tax in the income tax return and the remaining sum of ₹ 2.4 cr. was disclosed in the return of income for A.Y. 2012-13. The instant appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 62,76,487/-. As far as, the total estimated profit is concerned, we have already decided the estimated net profit to be added in the hands of assessee at ₹ 94,14,731/- which is 10% of the total unrecorded sales of ₹ 9,41,47,310/- and this figure of unrecorded sales is derived from seized diaries bearing Annexure No. A1 to A7. On perusal of the seized record we find that the assessee has carried out the transactions of sales from April 2010 till completion of year. In other words this unaccounted business of trading in scrap has been carried round the year and one cannot dispute that the assessee kept on earning income as and when sales were made. Such income from scrap trading business kept on accumulating with the assessee. 90. Now here it would be relevant to refer the seized loose paper LPS-12, Page 44. We have analysed this seized document elaborately in the preceding paras and have confirmed the addition of ₹ 2,31,95,000/- as unaccounted loans and advances given by the assessee. On this seized loose paper a date 27.12.2010 is mentioned and since the addition has been made purely on the basis of this loose paper and no other incriminating material ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is dismissed. 94. As regards ground No.2 raised by revenue challenging the finding of Ld. CIT(A) allowing the business loss of ₹ 10,27,036/- made by the Ld. AO, we find that the Ld. AO disallowed the claim of loss of ₹ 10,27,036/-. However, Ld. CIT(A) on appreciating the fact that due to search assessee could not concentrate on the business. However all the transactions are duly recorded and books of account are audited and thus allowed the business loss. We, on perusal of the records, find no reason to interfere in the finding of Ld. CIT(A), since the Ld. AO has not pointed out any defect in the books of account before disallowing the business loss of ₹ 10,27,036/-. The revenue fails to succeed in ground no.2. 95. As regard ground no.3 raised by the revenue pertaining to issue relating to interest on unaccounted loans to Rahul Ji we find that the issue of quantum addition of ₹ 3 cr. for the alleged loans to Mr. Rahul Ji came up before us while dealing with cross appeal for A.Y. 2011-12. After examining the facts of the case and relevant seized material we have deleted the addition of the alleged loan given to Rahul at ₹ 3 cr. Since the ve ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
