TMI Blog1999 (8) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... per book filed by the learned counsel was not available in his records. Since the said paper book merely contained the written submissions of the learned counsel, Shri Singh was asked to argue the matter in the light of the oral submissions made by the counsel and written submissions would be excluded. However, this did not satisfy the learned Departmental Representative and he requested for a short adjournment which was allowed by the Bench adjourning the appeals to 7th July, 1999. On 7th July, 1999 Shri Singh again came up with a request for adjournment. This time on the pretext that case records and appraisal report has not been received from the AO. On his request being declined by the Bench Shri Singh was visibly annoyed and left the Court in a huff. The matter did not end here. On 8th July, 1999 Shri Singh filed two letters in succession with the Registry. In the first letter Shri Singh requested for short adjournment of 'one month' and in the other letter Shri Singh has, in gross misrepresentation of the facts unfortunately made observations which are untrue. Shri Singh states: "Despite the request the Bench unilaterally heard the appeals and kept the appeal as part heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. Jariwala. (3) M/s Akshay Fabrics (a) Bharat I. Jariwala 1/3rd (b) Mahesh I. Jariwala 1/3rd (c) Rajendra I. Jariwala 1/3rd Apart from the above, all the three brothers and their father Shri Ishwarlal Khushaldas Jariwala have interest in the construction activity. They have constructed building known as Shreeram Market in the name of M/s Bharat Enterprises. 6. During the search operations the three brothers and their father surrendered on 17th Nov., 1995, concealed income under s. 132(4) amounting to Rs. 75 lakhs as under: ------------------------------------------------------------ Sl. Name Status Unaccounted income No. admitted under s. 132 (Rs. in lakhs) ------------------------------------------------------------ (1) M/s B.M. Silk Mills R.F. 41.00 (2) M/s Akshay Fabrics R.F. 3.00 (3) M/s M. Rajendra Co. R.F. 27.218 (4) Shri Ishwarlal K. Jariwala Indl 3.781 ------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M. Rajendra Co. (1) Excess stock found during the search 22,94,912 (2) Misc. receivables/liquid funds, misc. assets etc. 58,264 (3) The amount withdrawn by the partners out of the unaccounted income of the firm and invested, utilised by them as under: (a) Investment made in property at Dumas: Shri Rajendra I. Jariwala 2,00,000 2,00,000 (b) Investment made in jewellery Shri Rajendrabhai group (140.00 gms.) 63,272 63,272 (c) Investment made in household 92,500 valuables (Shri Rajendrabhai) 92,500 (d) Misc. Expenses (stamp duty, etc.) Shri Rajendra I. Jariwala 12,900 12,900 --------- Total 27,21,838 --------- C. M/s Akshay Fabrics The assets in respect of income disclosed are in form of misc. receivables/liquid assets, misc. investment etc. 3,00,000 D. Shri Ishwarlal Khushaldas Jariwala The assets in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------------------------------------------- A. M/s B.M. Silk Mills : Rs. (1) Excess stock found during the search. 24,42,436 (2) Cash seized by the Department 40,000 (3) Misc. receivables/liquid assets, misc. assets etc. Nil (4) The amount withdrawn by the partners out of the unaccounted income of the firm and invested, utilised by them as under: (a) Cash (seized). 4,75,000 Shri Bharatbhai I. Jariwala (from residence) 3,00,000 Shri Maheshbhai I. Jariwala (from 1,75,000 residence) (b) Investment made in property as 5,00,000 Sagrampura, Zunda Street, Surat. Shri Bharatbhai I. Jariwala 5,00,000 (c) Investment made in property at Dumas 4,00,000 Shri Bharatbhai I. Jariwala 2,00,000 Shri Maheshbhai I. Jariwala 2,00,000 (d) Investment made in jewellery In the case of NIL Shri Mahes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are being agitated in the present appeals mainly pertained to the grievance of the assessees that double additions have been made by the AO in the cases of the three firms as well as the three partners involved in the present batch of appeals. 8. First we take up the grounds of appeal in the cases of the three firms, viz. B.M. Silk Mills. M. Rajendra Co. and Akshay Fabrics and deal with the issue of double additions. In the identically worded grounds of appeal in the cases of the three firms it is stated that the AO has made additions: (a) which have already been shown as part of returned income; (b) on account of further excess in stock when there was no such excess stock as per final bifurcation of the disclosure amount given during the assessment proceedings. 9. As per the revised disclosure vide assessees' letter dt. 18th Oct., 1996, from the details reproduced herein before it would be seen that the disclosed income in the cases of the three assessee firms are as under: Rs. (1) B.M. Silk Mills 41,47,836 (2) M/s M. Rajendra Co. 27,92,921 (3) M/s Akshay Fabrics 3,00,000 As against this the unaccounted income i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------- The above excess stock was surrendered in the hands of two firms as under: Excess yarn 22,149 kgs. Excess stock of cloth 10,745 mtrs. The above excess stock was offered for taxation by the two firms in their returns. Now at this stage it is relevant to mention that with regard to the third concern viz. M/s Akshay Fabrics no excess stock was allocated even though the said firm carried out its business at the same premises and its stock was also included in the total stock of yarn and cloth found at the premises. In the details of the original disclosure made on 14th Dec, 1995, it would be seen that the third concern, M/s Akshay Fabrics disclosed an amount of Rs. 3,00,000 under the ad hoc category viz., 'misc. receivable/liquid assets, misc. investments etc.". Subsequently during the assessment proceedings the AO observed that while working out the excess stock, the excess yarn has been valued at the rate of 190 per kg. whereas the average purchase price of yarn works out to Rs. 200 per kg. Similarly the AO observed that the excess stock of cloth has not been correctly worked out and the total cloth found during search ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surrendered by the three firms in the original disclosure. The surrendered figure is Rs. 45,09,336 whereas subsequently on reworking of the stock the figure has been worked out at Rs. 51,55,037. According to the learned counsel there is no valid reason why no portion of the unaccounted stock is to be allocated to M/s Akshay Fabrics. The learned counsel submitted that in the original disclosure the balancing item of Rs. 3,00,000 in respect of Akshay Fabrics in fact represents the excess stock and should have been accepted by the AO. 12. We have carefully considered the submissions of the learned counsel, and perused the orders of the AO, in the cases of the firms. The papers and documents furnished in the compilation by the learned counsel for the assessee has also been perused by us. The dispute before us lies in a very narrow compass. The figure of excess stock Rs. 51,55,037 is not disputed by the Revenue as well as by the counsel for the assessees. The excess stock has been found at the combined premises of the three firms of the group in fact the working of the excess stock has been made on the basis of the books of account of the three firms including M/s Akshay Fabrics. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------- The reasons given by the AO for not excluding the aforesaid amounts from the disclosure of the group are as under: (1) The assessees have disclosed the miscellaneous assets, liquid assets only after verification i.e. after nearly one month from the date of search. (2) The above retraction was made after 11 months from the date of search without any substance. (3) The retraction was made only when the excess stock worth Rs. 6.4 lakhs was determined during the assessment proceedings. (4) The assessee did not furnish the details of parties from whom the amounts are receivable. Particulars of liquid assets included in the miscellaneous items have also not been furnished. Such miscellaneous assets have been admitted at the time of the first disclosure and no retraction can be allowed at a later date. 15. The learned counsel drew our attention to the observations made by the representatives of the group while filing the original disclosure of Rs. 75,00,000 vide letter dt. 16th Dec, 1995. "Bifurcation given below is broadly outline and not exact as we have to go through voluminous seized materials. Moreover, books of accounts are also not with us. The bifurcation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf provide irrefutable evidence that such concealed assets or receivables aggregating to the amount of Rs. 4,48,391 exist which are liable to be included in the block assessment. In our opinion since the original disclosure was admittedly a provisional disclosure and the assessee had specifically indicated that the amounts disclosed were subject to verification from the books of accounts lying with the IT authorities, the ad hoc figures have been rightly excluded in the revised disclosure furnished on 18th Oct., 1996. 17. Apart from the dispute with respect to the above mentioned miscellaneous items as well as the allocation of excess stock, the AO has accepted other modifications made in the final disclosure as compared with the original disclosure. Thus, if we reconcile the original disclosure made on 16th Dec, 1995 with the figures reflected in the final disclosure made on 18th Oct., 1996 we find that the following modifications have been made: (1) Miscellaneous items of Rs. 4,48,391 have been excluded from the final disclosure. We have already discussed above the exclusion of these items. (2) With regard to jewellery owned by various members of the group, the figures in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other household items like T.V. video, refrigerator, washing machine, etc. found at the residence of the partners have been acquired out of the undisclosed income of the firm and the same have been duly disclosed by these firms and taxes paid thereon. The AO however again proceeded to include the value of these unexplained items in the hands of the partners on the ground that the partners are using the assets of the firm and value of the perquisites under s. 28(iv) is liable to be included. On these basis additions have been made in the cases of the partners as under: Mahesh I. Jariwala 3,27,000 Rajendra I. Jariwala 3,80,319 Bharat I. Jariwala 8,63,400 --------- 15,70,719 --------- The AO has included the value of the aforesaid undisclosed assets again in the hands of the partners on the ground that these unexplained assets are owned by the firm but these were being used by the partners for their individual benefits. On these basis the AO invoked the provisions of s. 28(iv) and proceeded to make the additions again in the hands of the partners. The AO has placed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach have been made by the three partners for the immovable properties in Dumas. No attempt appears to have been made by the Revenue to say that these immovable properties have been acquired in the name of the firm and they are owned by the firm. The firms have made disclosures of their unaccounted income and the partners have withdrawn these funds for acquiring assets for their personal use. Such assets cannot be brought to tax in the hands of the partners by including in the block assessments. 20. Regarding the invocation of the provisions of s. 28(iv) we have no hesitation in holding that the withdrawals made by the partners from the firm for acquiring assets for their personal use does not constitute benefit or perquisite as envisaged under s. 28(iv). These assets or investments which are held by the partners like household valuables or Dumas property do not represent business assets of the assessee-firms. These are the assets of the partners and there is no question of applying s. 28(iv). The decision in V.P. Warner's case cited supra by the AO renders no assistance to the case of the Revenue. In the said case a partner of the firm was using the residential premises, car and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . His daughter is studying at Surat for B.E. computer engineering course. Details of expenses incurred on education of the children were called for but the same were not furnished. Further details of expenditure such as electricity charges at the residence were not furnished. The AO noted that the assessee has got a holiday rest house at Dumas and the same has been acquired along with his brothers out of undisclosed income. Further unaccounted investment in the construction of the residential property has been admitted at Rs. 5 lakhs. On the basis of these facts and also looking to the substantial amount of unaccounted investment and expenditure made by the assessee, the AO proceeded to estimate the house hold expenses as under and made the additions aggregating to Rs. 1,13,000 in the block assessment: -------------------------------------------------------- Asst. yr. Shown in the books Estimated Shortfall -------------------------------------------------------- Rs. Rs. Rs. 1995-96 2,20,000 2,20,000 - 1994-95 89,000 1,20,000 31,000 1993-94 38,000 1,20,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iwala and Ishwarlal Jariwala consisted of 12 persons as a whole. The children of Maheshbhai and Rajendrabhai are studying at various prestigious educational institutions in Surat. The AO accordingly made the estimates of household expenses as per col. 4 and made additions as per cl. 5 in the chart reproduced above. 25. Having regard to the facts and circumstances of the case we feel that the household expenses shown by the various members of the family are inadequate. However, we feel that it would be fair and reasonable to estimate the household expenses in the cases of the two brothers and their father as under: 1) Shri Mahesh I. Jariwala 1993-94 1,00,000 1994-95 1,10,000 1995-96 1,20,000 (2) Shri Rajendra I. Jariwala 1993-94 1,00,000 1994-95 1,10,000 1995-96 1,44,000 (3) Shri Ishwarlal Jariwala: The household expenses shown at Rs. 53,000 for asst. yr. 1993-94 and Rs. 84,000 for asst. yr. 1995-96 appear to be reasonable whereas for asst. yr. 1994-95 the expenses shown at Rs. 24,000 are low and we would sustain the estimate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,40,000 has been disclosed by Shri Ishwarlal Jariwala in the revised disclosure of the group as reproduced vide para 6.1 above. The AO however, has allocated the unexplained investment of Rs. 1,40,000 equally in the hands of the three brothers and their father and an addition of Rs. 35,000 in each case has been made. These additions were being disputed by the four assessees viz. Shri Maheshbhai, Rajendrabhai, Bharatbhai and their father Shri Ishwarlal. This ground is not pressed by the learned counsel and the same is, therefore, dismissed in each case. Addition on account of capital gains in the case of Shri Ishwarlal: 29. A sum of Rs. 7,27,125 has been added in the case of Shri Ishwarlal Jariwala on account of capital gains for introduction of land in partnership firm M/s Bharat Builders and organisers. 30. The facts in brief are that the assessee transferred his land to the partnership firm M/s Bharat Enterprises which has constructed and sold the shops known as Sriram Market. Ring Road, Surat. The land was transferred on 2nd Nov., 1986, relevant to the asst. yr. 1987-88. The assessee joined the said firm as a partner and his capital account has been credited by an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that M/s Bharat Enterprises. (in the name of M/s Bharat Builders Organisers) is an existing assessee and assessments have been made from year to year including for asst. yr. 1987-88. The contention of the AO that the firm is a non-genuine entity, therefore, cannot be sustained. The learned counsel further submitted that the assessee has been assessed under the income-tax as well as the wealth-tax for various assessment years. For asst. yr. 1987-88 with the return of income filed by the assessee, full facts pertaining to transfer of land by way of capital contribution was duly disclosed before the IT authorities. The enclosed notes with the return read as under: "The assessee has contributed land at Begampura, in partnership M/s Bharat Builders Organisers, for Rs. 25,56,420 as a capital contribution the capital gain tax liabilities in this case does not arise in view of judgment of Supreme Court in case of CIT vs. Bai Shirinbai K. Kooka (1962) 46 ITR 86 (SC) and Kartikeya V. Sarabhai vs. CIT (1982) 28 CTR (Guj) 132 : (1982) 138 ITR 425 (Guj)". On merits it is argued that in view of the judgment of Supreme Court in the case of Sunil Siddharthbhai vs. CIT (1985) 49 C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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