P.C. Mundra vs Assistant Commissioner Of Income … on 27 December, 2002

ORDER

Dr. Satish Chandra, J.M.

1. All the appeals have been filed by the assessee as well as by the Department for the assessment years mentioned above.

2. After hearing both the parties and on perusal of record, we decide the appeals as under :

ITA No. 229/Jp/1999 (Asst yr. 1991-92)

3. This is an appeal filed by the assessee against the CIT(A)’s order dt. 28th Jan., 1999, for the asst. yr. 1991-92.

4. The first grievance of the assessee is pertaining to the validity of the assessment under Section 148.

5. A search was conducted on 24th March, 1994. Prior to it, the assessee never filed the returns. After the search, the assessee has filed the return declaring the income of Rs. 61,000 on 6th May, 1994. However, the AO issued the notice under Section 148 on 19th Dec., 1995, which was duly served on the assessee on 19th Jan., 1996. Thereafter, the notice under Section 143(2) was issued on 15th Sept., 1997 and served on 16th Sept., 1997 (p. 2 AO’s order), i.e., after expiry of one year period from the date of filing of the return. The assessee claims that the assessment is time-barred and is illegal in view of proviso to Section 143(2), which runs as under :

“Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of month in which the return is furnished.”

But the plea of the assessee was not accepted by the CIT(A), who observed in his order :

“I find that the condition laid down under the Act is relatable only to returns filed under Section 139 and the present proceedings being under Section 148, the objections raised are not acceptable”.

6. During the course of argument, the learned authorised representative submitted that the assessee, vide letter dt. 20th Jan., 1996, requested to treat the original return filed on 6th May, 1994, as return filed in response to notice under Section 148. Hence, the time-limit mentioned in proviso to Section 143(2), is applicable to the return filed under Section 148 too. Therefore, the assessment should be quashed.

7. On the other hand, the learned Departmental Representative submitted that the return of income was filed on 6th May, 1994, which was beyond the time-limit prescribed under the provisions of Section 139. However, certain material was found during the course of search carried out at the business and residential premises of the assessee on 24th March, 1994 and on the basis of the said material, the AO issued the notice under Section 148. He further submitted that notice under Section 143(2) may be issued where return has been made under Section 139 or in response to notice under Section 142(1) and the AO considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed the excessive loss or has not underpaid the taxes in any manner. However, in the case where the notice under Section 148 is issued, the belief regarding escapement of income is already made and thereafter further proceedings are started. Therefore, there was no need even of issue of notice under Section 143(2). It is only in the regular assessment proceedings under Section 143(3), the notice under Section 143(2) is mandatory. But when the proceedings once started under Section 148, it can be concluded even by making the correspondence with the assessee. He relied on the ratio laid down by the Tribunal, Agra Bench, in the case of Chandra Bhan Bansal v. Dy. CIT (2003) 79 ITD 639 (Agra). Accordingly, the time-limit prescribed in the proviso to Section 143(2) of the Act is inapplicable to a return filed in response to notice under Section 148. He submitted that the said proviso is not applicable on the proceedings started under Section 148.

8. After hearing both the parties and on perusal of record, it appears that the assessee has informed the AO vide his letter dt. 21st Jan., 1996, with a request to treat the original return filed on 6th May, 1994, as return filed in response to notice under Section 148. But the said letter is not discussed by any lower authorities, as is revealed from the orders of the authorities below, written submissions of the assessee and assessment proceedings record produced by the Revenue before us. According to the learned authorised representative, the assessee during the course of assessment proceedings has stated that the return already filed may be treated as a valid return in compliance to notice under Section 148 of the Act. Thus, it is clear that the assessment proceedings can be said to have commenced only after issuance of notice under Section 143(2) and not at the stage when notice under Section 148 was given, In that view of the matter, notice cannot be said to have been issued after the expiry period, Hence, we do not accept the plea of the assessee and the same is hereby dismissed. So, the assessment made by the lower authorities is valid.

9. However, on merit the next grievance of the assessee is mentioned in ground No. 2 which relates to the estimation of profit in respect of trading in machinery item at Rs. 83,562.

10. The assessee was carrying on the business of supply of machinery items for which no day-to-day accounts were maintained. The said business was carried out in the names of following firms :

(i) M/s Nirmal Engineering Industries where the assessee was the sole proprietor of this concern.

(ii) M/s Maheshwari & Co.–This business was carried out in the name of assessee’s wife, Smt. Prameshwari Devi Mundra.

(iii) M/s Nirmal Brothers.–This was the proprietorship concern of assessee’s son Shri Madhusudan Mundra for which regular books were kept and regular returns were filed by the son.

But the AO opined that the assessee was using the name of these concerns for his own unaccounted business also. During the asst. yr. 1991-92, the assessee has shown the total sales of these three firms as under :

 

 

Rs.

(i)

M/s Nirmal
Engineering Industries

77,240

(ii)

M/s
Magesgwaru & Co.

9,71,622

(iii)

M/s Nirmal
Brothers

3,83,636

 

 

14,13,498

This was worked out by the assessee on the basis of the bank statement, loose slips and ledger which were found during the course of search. The assessee has shown the net profit @ 2.8 per cent but the AO was not satisfied, who estimated the sale at Rs. 18,00,000 and applied the net profit rate of 15 per cent, and made the addition of Rs. 2,70,000.

11. But in first appeal, the CIT(A) observed that the possibility of cash sales being made by the assessee cannot be ruled out and, therefore, it would be appropriate to estimate the turnover at Rs. 16,47,500. By following the net profit rate accepted in the assessee’s son’s concern (3.62 per cent to 7.2 per cent), the CIT(A) estimated the net profit at Rs. 1,23,562 by applying the rate at 7.5 per cent on the total sales. The profit for the year was computed at Rs. 1,23,562 and a trading addition of Rs. 83,562, and the same was confirmed after giving the deduction of Rs. 40,000 being the net profit declared by the assessee. Thus, the assessee got the total relief of Rs. 1,46,438. Not being satisfied, the assessee is before us against the trading addition of Rs. 83,562.

12. After hearing both the parties and on perusal of record, it appears that in the immediate previous assessment years, the similar issue has come before the Tribunal. The Tribunal, in the assessee’s appeals in ITA Nos. 1342/Jp/1997 and 1448/Jp/1997 has decided the similar issue vide its order dt. 7th April, 2000, where the CIT(A) estimated the sale at Rs. 10,00,000 by applying the gross profit rate at 7.5 per cent and the same was upheld. In other words, the Tribunal has confirmed the net profit rate of @ 7.5 per cent applied by the CIT(A).

13. During the course of argument, both parties have agreed that the facts and circumstances are identical during the assessment year under consideration. Therefore, we apply the net profit rate at 7.5 per cent. The estimated sale shown in the previous year was accepted by the Tribunal at Rs. 10,00,000. But during the assessment year under consideration, the assessee has shown it at Rs. 14,32,498. But the CIT(A) accepted it at Rs. 16,47,500, which looks reasonable. Therefore, by dismissing this ground of appeal taken by the assessee, we decline to interfere with the order of the CIT(A). The same is hereby upheld.

14. The third grievance of the assessee is pertaining to the addition of Rs. 60,702 in respect of investment made in purchases for machinery items of the business.

15. The assessee claimed that the purchases were made from the open market. Without purchases, there will be no sale. The said purchases were made on credit and payments were made only after the realisation of the sale proceeds. No exact details either in respect of the period for purchases on credit or that of realisation of sales made on credit were available. So, the purchases were worked out on the basis of the prevalent trade practices. The total sale, was estimated by the AO at Rs. 18,00,000. So, the unexplained investment under Section 69 for the period of two months was computed at Rs. 2,10,000. But in first appeal, the CIT(A) observed that the credit period of both, purchases and sales, ranges between 45 to 60 days. So, he took the credit period for 45 days and sustained the addition to the extent of Rs. 60,702 after reducing Rs. 93,750 in respect of the addition made on this account in the preceding year. In other words, the addition was sustained for Rs. 60,702.

16. After hearing both the parties and on perusal of record, it appears that the . assessee mainly operated from his house and no godown was maintained. In such circumstances, it appears that no investment is made in this business for purchases, working capital, etc. But at the same time, it is also true that no sale can be made out without having purchases, In the instant case, the purchases were made first on credit basis and sales were made thereafter. After receiving the payment, the payment was made to the original seller.

17. Similar issue has come before the Tribunal in the assessee’s case for the immediate previous asst. yr. 1990-91 where the Tribunal, vide its order dt. 7th April, 2000, at p. 4, para 11 (supra) observed :

“We have considered the rival submissions and are of the opinion that on this account, assessee deserves to succeed, At the time of search, no stock was found. Nothing can be more convincing evidence. The Revenue has also failed to bring any evidence on record to negative this proof. The assessee is not maintaining any godown and no evidence in regard to investment placed on record. We, therefore, do not subscribe to the views of the AO or the CIT(A) and hold that this addition is unjustified and delete the same. This ground taken by the assessee is allowed and the ground taken by the Revenue is dismissed.”

18. During the course of argument, both the parties are agreed that facts and circumstances are identical during the assessment year under consideration. Therefore, by respectfully following the earlier decision of the Tribunal, we delete the addition of Rs. 60,702 (Rupees sixty thousand seven hundred two) only. Thus, the assessee will get the relief of this amount.

19. The next grievance of the assessee is mentioned in ground No. 4 which relates to the net profit rate of 10 per cent on estimated sales of Rs. 16,64,000 in the business of precious and semi-precious stones.

20. From the record, it appears that the assessee was having another business of precious and semi-precious stones, though he was not an expert in the line as alleged by the learned authorised representative. The assessee was doing the work as a mediator between the Karigars and wholesaler for the purpose of billing in the name of M/s N.K. Jewellers. On the basis of the entries in bank account and seized material, the assessee worked out the total turnover of Rs. 14,46,877. Out of it, Rs. 14,45,323 was worked out from the bank statement and Rs. 1,554 was found as cash sales on p. 18 of Annexure A-1, which was seized during the course of search. But the AO estimated the turnover at Rs. 18,00,000 and applied the net profit rate at 10 per cent, and estimated the profit at Rs. 1,80,000, In first appeal, the CIT(A) has reduced the turnover to Rs. 16,64,000 by applying the net profit rate at 10 per cent. Thus, she has given the relief to the assessee of Rs. 13,000 and confirmed the addition of Rs. 1,64,400.

21. After hearing both the parties and on perusal of record, it appears that the AO treated the assessee as a manufacturer and trader in the semi-precious and precious stones. Therefore, the AO estimated the net profit rate of 10 per cent. But, on the other hand, the assessee is claiming that he was merely doing the business of billing. During the search, a nominal stock of rejected stoaes was found which amounted to Rs. 24,440. The assessee was not maintaining any showroom or business establishment for this purpose. Thus, he was doing this business without making any investment. During the course of argument, it was submitted by the learned authorised representative that the assessee was working as a mediator/arranger between the manufacturer and the dealers. The assessee never purchased the said stones on his own and sold them. In the line of business, the manufacturers/Karigars who supply the goods accept the payment only in cash and do not provide any bill. Therefore, the dealers rotated the transactions through arrangers, like the assessee. The assessee gives them bills, accepts payment in cheque and then makes payment to manufacturers/Karigars in cash immediately. For it, the assessee was charging the premium/commission ranging between 0.50 per cent to 1.25 per cent.

22. By considering the totality of the facts and circumstances of the case, it appears that the assessee does not own any shop/showroom/machinery/workshop, etc. No stock of stones was found during the course of search. Only a few rejected/defective stones were, found which amounts totalling to Rs. 24,440. Pages 36 and 37 of the paper book show certain transactions where details of the cheques were given, which were received from the dealers. The rate of premium of 1.25 per cent, etc. was mentioned. Pages 31 to 35 of the paper book show the accounts of these dealers. The bank account was made available at p. 28, which shows the cheques received in these transactions. The cheques collected were later shown as withdrawn through self or bearer cheques or in cash to make the payments to the Karigars. A few names of Karigars are appearing at pp. 22 to 24 of the paper book. In these circumstances, we are of the view that the assessee was doing the billing business and he was not the manufacturer/wholesaler/dealer in the precious and semi-precious stones. However, we approve the turnover taken by the CIT(A) for Rs. 16,64,000 but estimate the net profit rate at 1.5 per cent which is reasonable in the case of business of billing. Therefore, we direct the AO to take the estimated turnover approved by the CIT(A) and make the addition by taking the net profit rate at 1.5 per cent. Thus, this ground is partly allowed in favour of the assessee.

23. The next grievance of the assessee is mentioned in the ground No. 5, which relates to the addition of Rs. 3,32,800 on account of unexplained investment in purchase of precious and semi-precious stones.

24. This is the supplementary ground to the previous ground where we upheld that the assessee was not the manufacturer-cum-trader. Hence, there is no question of making any investment. No material, stock, showroom, machinery, staff were found to prove the said investment. As we approved that the assessee was doing merely a billing business, then the addition of Rs. 3,32,800 is unwarranted pertaining to the unexplained investment, Therefore, by setting aside both the orders of lower authorities, we delete this addition, as there was no investment made by the assessee.

25. The next grievance of the assessee is mentioned in ground Nos. 6, 7 and 8 which relates to the unexplained investment, net profit and further investment for purchasing the raw material to the firm M/s Shree Engineering.

26. The assessee was also running another business under the name of M/s Shree Engineering in the partnership with Shri R.S. Kabra and Shri T.D. Vyas. This business was “carried under the oral partnership and no document was executed. So, the said business can be considered as the AOP business, This business was exclusively meant for sale and purchase of the iron scrap.

27. In this regard, the first grievance of the assessee is mentioned in ground No. 6 which relates to the addition of Rs. 69,922 on account of alleged unexplained investment.

28. The AO alleged that the assessee has made investment of Rs. 1,21,952 in M/s Shree Engineering as appearing in Annexure A-7, which was found during the course of search and was written by Shri O.P. Kedia. After considering the entire seized material, the AO accepted that out of this amount, a sum of Rs. 25,000 was paid by the assessee from M/s Nirmal Brothers. So, he added the balance of Rs. 97,052. The AO rejected the contention of the assessee that payment was realised from the debtors of erstwhile proprietorship of the assessee M/s Turnwell Industries on the basis that adequate proof was not submitted. In first appeal, the CIT(A) has given the further relief of Rs. 27,130 for the reason that it was not relating to the assessment year under consideration.

29. During the course of argument, the learned authorised representative submitted that the investment of Rs. 69,222 was made out of the realisation of funds from the debtors of M/s Turnwell Industries, which was the erstwhile proprietary concern of the assessee. The balance sheet of M/s Turnwell Industries was enclosed as per paper book pp. 140 to 146. In this balance sheet, it was shown that there were outstanding debtors of Rs. 1,13,195 and cash balance of Rs. 32,986, which was used for the investment in M/s Shree Engineering. Further, the learned authorised representative has drawn our attention to paper book page No. 147, which is the copy of the account of debtor, M/s Radical Engineering from where the assessee has received Rs. 28,640 during the relevant period out of which Rs. 8,000 on 5th May, 1990, Rs. 10,000 on 6th May, 1990 and Rs. 7,500 on 13th June, 1990, corresponds with the date of investment made, The learned authorised representative further submitted that the doubt about the existence of M/s Turnwell Industries by the lower authorities is not valid.

30. The learned Departmental Representative, on the other hand, relied on the orders of the lower authorities and submitted that the doubt of M/s Turnwell Industries was very much there, because the existence was not supported by any documentary evidence, as mentioned by the CIT(A) in her order.

31. After hearing both the parties and on perusal of record, it appears that the lower authorities have disallowed the claim of the assessee by mentioning that there was no documentary evidence pertaining to the existence of M/s Turnwell Industries, But as mentioned by the learned authorised representative that the balance sheet of M/s Turnwell Industries was submitted before the lower authorities and is available in the paper book, then we are of the view that matter needs a fresh adjudication. Therefore, we restore the matter back to the file of the AO regarding the addition of Rs. 69,922 only with a direction to decide the same de novo after examining the entire evidence pertaining to the genuineness of the existence of erstwhile firm M/s Turnwell Industries as well as by providing the reasonable opportunity to the assessee. Thus, this ground is restored back.

32. The ground No. 7 of the assessee is the supplement to the previous ground, which relates to the estimation of profit @ 10 per cent on estimated sale in respect of M/s Shree Engineering.

33. The AO, while applying the profit rate of 15 per cent on the estimated sale of Rs. 18,00,000 made the addition of Rs. 2,70,000. The AO took the comparative figure of M/s Maheshwari & Co, and M/s Nirmal Engineering Industries for the purpose. The CIT(A), in first appeal; reduced the addition to Rs. 1,32,000 by giving a relief to the assessee of Rs. 1,38,000.

34. After hearing both the parties and on perusal of record, it appears that the erstwhile firm M/s Shree Engineering was dealing in the transaction of trade in iron scrap. Late Shri O.P. Kedia was carrying the activity on behalf of other two partners. The lower authorities have applied Section 145(2) and estimated the total sales at Rs. 18,00,000 by taking the comparative figure of M/s Nirmal Engineering Industries, which was dealing in the machinery parts and not in iron scrap. Similar case was relating to M/s Nirmal & Co. Therefore, the comparison made by the AO is not justifiable.

34.1 From the record, it also appears that the firm/AOP has shown the net loss of Rs. 25,148 in this business, which was verifiable from the seized record itself as appears from the CIT(A)’s order. When there was the loss, then we find no justification in making the addition on the basis of profit. Hence, we deem it fit to restore the matter to the file of the AO to examine whether the said loss was genuine or not. If the said loss of Rs. 25,148 was genuine, then there is no question to make any addition on the basis of estimate of profit @ 10 per cent. In case if the loss is not genuine, then the AO will determine the addition afresh after examining entire evidence and also by providing reasonable opportunity to the assessee. But the said addition will have to be made in the hands of AOP/firm and certainly in the hands of the assessee to in his individual capacity in the proportion of his investment. With this direction, we restore the issue to the file of the AO to decide the same in the light of above-mentioned direction, but by providing the reasonable opportunity to the assessee.

35. Ground No. 8 is also supplement to the previous ground Nos. 6 & 7, which relates to the addition on account of unexplained investment in purchases of M/s Shree Engineering amounting to Rs. 2,10,000.

36. The AO adopted the same criteria as he adopted in the case of trading in auto parts of M/s Nirmal Brothers, M/s Nirmal Engineering Industries and M/s Maheshwari & Co. But the CIT(A) took the cost of sales on the basis of two months’ credit and unexplained investment of Rs. 1,54,000. Thus, the CIT(A) confirmed the same by giving a partial relief to the assessee.

37. After hearing both the parties and on perusal of record, it appears that the comparison of the trade in iron scrap is not good with the comparison of trading in machine parts. The AO should have taken the comparative figure of the other scrap dealers. In the instant case, the AO made the addition of Rs. 2,10,000. But the CIT(A) has taken unexplained investment at Rs. 1,54,000 for two months purchasing cycle by giving a partial relief. But still the addition is looking on higher side in the facts and circumstances of the case.

38. It may be mentioned that the scrap transaction is not based on credit transaction as it prevails in the trade of precious stones, Hence, the addition regarding unexplained/investment in purchases of M/s Shree Engineering is restricted to Rs. 50,000 (Rupees fifty thousand) only,

39. So, by considering the totality of the facts and circumstances of the case and by Keeping in mind the doctrine of equity, justice and good conscious, we modify both the orders of lower authorities and restrict the addition to Rs. 50,000 (Rupees fifty thousand) only in the hands of AOP/firm by giving a further relief of Rs. 48,000 (Rupees forty-eight thousand) only. The AO is further directed to decide the share of assessee in proportion of the investment made by assessee in his individual capacity. Thus, this ground is partly allowed, as stated above.

40. The next grievance of the assessee is mentioned in ground No. 9, which relates to the addition of Rs. 1,00,000 on account of alleged violation of Section 40A(3).

41. On the basis of the seized material, the AO found that Rs. 50,000 each was paid to M/s Bearing Co. and M/s Laxmi Bearing Co. So, the AO treated the payment in violation of Section 40A(3), So, he made the addition of Rs. 1,00,000, which was confirmed by the CIT(A).

42. During the course of argument, it was submitted by the learned authorised representative that the said payment was made against the purchase of goods. First, the cheques were issued, which bounced, then the payment was made in cash. The learned authorised representative relied on the ratio laid down in the following cases by mentioning that where no books exist and trading addition has been made by estimating gross profit rate, the provision of Section 40A(3) cannot be invoked, because the same already stands covered in estimation of sales and application of net profit rate : ‘

(a) Mohta Construction Co.’s case, 21 Tax World 257 (Jp)

(b) Rajendra Kumar Kedia v. Dy. CIT, 22 Tax World 506 (Jp)

(c) CIT v. Banwarilal Bansidhar (1998) 229 ITR 229 (All)

(d) ITO v. D.D. Haare (1994) 48 ITD 595 (Bom)

(e) Gupta Brothers v. Asstt. CIT (1997) 93 Taxman 218 (Gau)(Mag)

43. On the other hand, the learned Departmental Representative relied on the orders of the lower authorities.

44. After hearing both the parties and on perusal of record, it appears that the similar issue has come up in the assessee’s case for the immediate previous asst. yr, 1991-92 before the Tribunal (supra). The Tribunal, vide its order dt. 7th April, 2000, observed :

“Without going into the details of this case, we are of the opinion that disallowance under Section 40A(3) cannot be made in the facts of present case where no books were found and the income has been estimated. In the case of rejection of books and estimation of profits, no such disallowance is possible. Reliance is placed on the decision of Allahabad High Court in the case of CIT v. Banwarilal Banshidhar (1998) 229 ITR 229 (All). This addition is, therefore, deleted.”

45. During the course of arguments, both parties have agreed that the facts and circumstances are identical for the assessment year under consideration. Therefore, by respectfully following the earlier decision of the Tribunal, we set aside both the orders of lower authorities and delete the addition of Rs. 1,00,000.

46. The next grievance of the assessee is mentioned in ground No. 10, which relates to the addition of Rs. 46,848 on account of low household withdrawal.

47. The assessee has shown the total withdrawal of Rs. 31,152. But the AO was not satisfied, who estimated it at Rs. 78,000 on the basis that in previous year it was estimated at Rs. 72,000. So, he made the addition of Rs. 46,848 which was confirmed by the CIT(A).

49. The assessee’s family is consisting of husband, wife and two major sons. The assessee was engaged in a number of business; as stated above and was having the status in the society. Therefore, we are of the view that the AO has rightly estimated the expenditure at Rs. 78,000 but the same looks on higher side. By looking to the Tribunal order for immediate previous year, we modify both the orders of lower authorities and estimate it to Rs. 60,000 (Rupees sixty thousand) only. Thus, the assessee will get a further partial relief. This ground is partly allowed.

50. The next grievance of the assessee is mentioned in ground No. 11, which relates to the addition of Rs. 3,000 on account of unexplained investment in share capital.

51. During the course of search, document Annexure A-1 (p. 21) was seized. Accordingly, the assessee made the investment of Rs. 3,000 in cash on 25th Feb., 1991, for making an application of shares of M/s Parag Basani. The AO made the addition of Rs. 3,000 being unexplained investment, which was confirmed by the CIT(A). It was alleged during the course of argument by the learned authorised representative that the same was made from past savings and telescoping benefit may be given to the assessee.

52. After hearing both the parties and on perusal of record, it appears that no nexus is proved for claiming the telescoping benefit. Therefore, we decline to interfere with the orders of the lower authorities and, accordingly, the addition of Rs. 3,000 is hereby upheld.

53. The Ground No. 12 is relating to the grievance of the assessee pertaining to the addition of Rs. 20,000 on account of the unexplained loan to Smt. Prameshwari Devi.

54. During the course of search, a paper was found (p. 54 of the paper book), which relates to the addition of Rs. 20,000. Wife of the assessee, Smt. Prameshwari Devi, has purchased a residential house at 20, Shiva Colony, Jaipur. The assessee has given a loan of Rs. 40,000 to his wife. The total value of the said house was Rs. 75,000. The AO has accepted Rs. 20,000, which was given by cheque but has not accepted the balance amount of Rs. 20,000, which was given in cash.

55. During the course of argument, it was submitted that assessee has withdrawn a sum of Rs. 25,000 from his bank account on 21st Feb., 1991 and out of it, Rs. 20,000 was paid to the seller of plot directly. This entry is verifiable from the bank account (p. 62 of the paper book). The above is also verifiable from the sale agreement that Rs. 20,000 was paid by cheque and Rs. 20,000 by cash before the Registrar.

56. After hearing both the parties and on perusal of record, it appears that the said withdrawal was made on 21st Feb., 1991 and the sale deed was executed on 3rd March, 1991. The assessee has given the loan to his wife which is natural. The said loan was duly reflected in the bank entries, sale agreement, etc. Therefore, we accept the explanation made by the assessee and delete the addition of Rs. 20,000 by setting aside both the orders of lower authorities. Thus, this ground is allowed in favour of the assessee.

57. The next grievance of the assessee is mentioned in ground No. 13, which relates to the addition of Rs. 43,536 on account of estimated interest from debtors.

58. The AO alleged that a sum of Rs. 1,00,000 given to M/s Tikkam Exports in the asst. yr. 1990-91 and payment of Rs. 1,00,000 to M/s Bearing Co. in the asst. yr. 1991-92 were treated as unexplained payments. On the said payments, no interest was charged by the assessee. The AO has mentioned that the assessee has already declared Rs. 7,536 pertaining to the interest without giving any detail. So, he estimated the interest on the above at Rs. 54,000 in addition to Rs. 7,536 declared by the assessee. Thus, he made the addition of Rs. 61,536.

59. But in first appeal, the CIT(A) has given the partial relief and estimated the interest at Rs. 36,000 (18 per cent of Rs. 2,00,000). Thus, she sustained the addition of Rs. 43,536 for the balance.

60. After hearing both the parties and on perusal of record, it appears that the payments were made of Rs. 2,00,000 under Section 40A(3). The said payments were made for the purchases of the goods, as we have observed in ground No. 9 (supra) where we have deleted the addition of Rs. 1,00,000 on the basis of the decision of the Tribunal for the previous asst. yr. 1990-91. The said loan of Rs. 1,00,000 was considered as payment for purchasing goods. Hence, it cannot be treated as a loan. So, there is no question to charge the interest on Rs. 1,00,000 mentioned in ground No. 9 (supra). However, regarding the payment of Rs. 1,00,000 to M/s Tikkam Exports, it is not clear whether this payment was made for purchasing or was given as a loan. Therefore, pertaining to this Rs. 1,00,000 to M/s Tikkam Exports, we restore the matter back to the file of the AO to decide whether the payment of Rs. 1,00,000 in cash was for purchases or was a loan. If it was a loan, then interest may be charged. If it was made for purchase, then no interest can be charged. The AO will also give the benefit of the interest already offered for tax in this regard, if any, by the assessee, Thus, this issue is restored bank to the file of the AO, who will decide the same in the light of above discussion and by providing the reasonable opportunity.

61. The last grievance of the assessee is mentioned in ground No. 14, which relates to the benefit of telescoping on the basis of theory of “investment and expenditure”. For want of any nexus, we find no merit in the ground taken by the assessee and the same is hereby dismissed. Thus, the appeal filed by the assessee is partly allowed, as stated above.

ITA No. 219/Jp/1999 (Asst yr. 1991-92) :

62. This is the cross-appeal filed by the Department for the asst. yr. 1991-92.

63. The first grievance of the Department is pertaining to the reduction of the trading addition. The same runs as under :

“On the facts and in the circumstances of the case, the learned CIT(A), Rajasthan-II, Jaipur, has erred in reducing the trading addition from Rs. 2,30,000 to Rs. 83,562 by applying N.P. rate of 7.5 per cent on estimated sales of Rs. 16,47,500 as against N.P. rate of 15 per cent applied on estimated sales of Rs. 18 lakhs by the AO.”

64. This issue we have already discussed in ground No. 2 of the assessee’s appeal where we upheld the decision of the CIT(A) by dismissing the ground of appeal taken by the assessee. Therefore, for the same reasons, we dismiss this ground taken by the Department and uphold the order of the CIT(A).

65. The (sic-second) grievance of the Department is mentioned in ground No. 2 which relates to the reduction of addition from Rs. 2,10,000 to Rs. 60,702 by following earlier decision of the Tribunal.

66. We have already deleted the remaining addition. Thus, this ground taken by the Department has no merit and the same is hereby dismissed.

67. The third grievance of the Department is related to the relief of Rs. 13,000 out of the addition of Rs. 1,80,000 made in precious and semi-precious stones account.

68. In para 22 (supra), we upheld the turnover taken by the CIT(A) for Rs. 16,64,000 but net profit was taken at 1.5 per cent. In other words, we have already given the relief to the assessee. When it is so, then we find no merit in the ground taken by the Department and the same is hereby dismissed.

69. The last grievance of the Department is pertaining to the relief of Rs. 27,200 out of the total addition of Rs. 3,60,000 in respect of purchase of precious and semi-precious stones.

70. This issue we have already discussed in the assessee’s appeal (ground No. 5) under the head of “Investment in purchase of precious and semi-precious stones”.

71. It is a supplement ground to the previous ground. In the said ground, we have deleted the remaining addition by setting aside both the orders of lower authorities. When it is so, then we find no merit in this ground taken by the Department. Therefore, the same is hereby dismissed.

72. In the result, the Departmental appeal has no merit and the same is dismissed

ITA No. 1343/Jp/1997 (Asst. yr. 1992-93) :

73. This is an appeal filed by the assessee against the CIT(A)’s order dt. 21st July, 1997, for the asst. yr. 1992-93.

74. The first grievance of the assessee is pertaining to the net profit at Rs. 60,000 by applying the net profit rate of 7.5 per cent on estimated sale of Rs. 8 lakhs.

75. This issue we have dealt in the assessee’s case for the asst. yr, 1991-92 where we upheld the estimated sale made by the CIT(A) and the net profit rate of 7.5 per cent. Thus, we decline to interfere with the order of the CIT(A), who has rightly made the addition of Rs. 60,000 by applying the net profit rate of 7.5 per cent on estimated sale of Rs. 8 lakhs in respect of the trading in machinery items for the assessment year under consideration. However, it appears from the order of the CIT(A) (para 2.1 at p. 3) that assessee has already surrendered net profit of Rs. 45,000. Therefore, CIT(A) has sustained the addition of Rs. 60,000-45,000 = Rs. 15,000 only. In other words, the addition was sustained for Rs. 15,000 only. The same is hereby upheld.

76. The next grievance of the assessee is pertaining to the net profit in precious and semi-precious stones business at Rs. 1 lakh.

77. This issue we have already discussed in assessee’s case (ground No. 4) for the asst. yr.1991-92 (supra) where we directed the AO to make the addition on the estimated sale approved by the CIT(A) by applying the net profit rate at 1.5 per cent. Therefore, in the instant case, the AO is directed to make the addition by applying the net profit rate at 1.5 per cent on estimated sale of Rs. 10 lakhs in respect of billing business of precious and semi-precious stones.

78. The next grievance of the assessee is mentioned in ground No. 3 which relates to the addition of Rs. 2 lakhs in respect of investment in the purchases of precious and semi-precious stones.

79. This issue we have already dealt in assessee’s case for the asst. yr. 1991-92 (ground No. 5) where we have deleted the addition pertaining to the unexplained investment, Therefore, by setting aside both the orders of lower authorities, we delete this addition of Rs. 2 lakhs as there was no investment made by the assessee during the assessment year under consideration. This ground is allowed in favour of the assessee,

80. The fourth grievance of the assessee is pertaining to the addition of Rs. 64,318 on account of unexplained investment in M/s Manish Engineering Industries.

81. During the course of search, an Annexure A-20 (p. 39) of the paper book was found. Accordingly, the assessee has advanced a sum of Rs. 64,318 to M/s Manish Engineering Industries, which is a partnership-firm consisting of assessee’s son Shri Nirmal Mundra and others Shri A.K. Sharma and Shri Manish Bagaria. The assessee explained that the assessee’s son Shri Nirmal Mundra is the partner in M/s Manish Engineering as per the partnership deed dt. 1st July, 1991 and retirement deed dt. 1st Sept., 1993, (pp. 82-87 of the paper book). It was claimed, by the assessee that the said investment is explained investment. But the AO was not satisfied, who made the addition in the hands of the assessee of Rs. 64,318 as unexplained investment. The CIT(A) has confirmed the same.

82. During the course of argument, it was submitted that Rs. 40,000 was invested by Shri Nirmal Mundra, which was reflected in the balance sheet as on 31st March, 1993, Rs. 20,000 was invested by assessee out of withdrawal from his bank account on 24th Oct., 1991. Rs. 5,000 was invested by assessee out of cash in hand. Thus, total Rs. 65,000 was invested in this account.

83. From the above and the chart given by the learned authorised representative in his written submissions, it appears that the assessee has made the total investment of Rs. 25,000 as mentioned above. We are not satisfied (about) the source of this amount. Therefore, we are of the view that the addition in the hands of the assessee should be made for Rs. 25,000. For the remaining amount if the addition will have to be made that will have to be made in the hands of assessee’s son Shri Nirmal Mundra, who was the partner in the erstwhile firm. Hence, we sustain the addition of Rs. 25,000 (Rupees twenty-five thousand) only by giving a partial relief to the assessee. Thus, this ground is partly allowed in favour of the assessee.

84. The ground No. 5 of the assessee’s appeal is pertaining to the addition of Rs. 22,500 on account of unexplained payment to M/s Pink City Enterprises.

85. During the course of search, an Annexure A-19 (p. 47 of the paper book) was found on which there were certain nothings in coded from. The AO decoded the said nothings. For example, 10.0 represents Rs. 10,000. Thus, after decoding the AO added the amount appearing on the debit side and credit side. On debit side, it was Rs. 70,000 upto 6th March, 1992 and on the credit side, it was Rs. 47,500. So, the AO made the addition of Rs. 70,000 as unexplained payment to M/s Pink City Enterprises. But the CIT(A) accepted the alternative plea of the assessee. So she made the addition of Rs. 70,000-47,500 = Rs. 22,500.

86. During the course of arguments, it was submitted that on the seized paper, one name of Shri R.B. Partania (RBP) was mentioned. Shri R.B. Partania is proprietor of M/s Pink City Enterprises, who was engaged in the business of trading in mineral powder and hand-gloves. The assessee is in close relation with this man. So, the same premises was utilised by Shri R.B. Partania. It was also alleged by the learned authorised representative that Shri R.B. Partania was a regular assessee and during the course of search, books of account of M/s Pink City Enterprises were also seized. So, he submitted that the seizure of the paper in question from the business premises of the assessee is not unusual. So, he made a request that the addition may kindly be deleted.

87. On the other said, the learned Departmental Representative relied on the orders of the lower authorities by submitting that in course of search the books of account of M/s Pink City Enterprises as per serial Nos. 1 to 17 and 81 to 87 of Annexure A to Panchnama dt. 28th March, 1994, were also found. He further submitted that premises might be common but there is no evidence in support of the claim that the payments recorded in the document have nothing to do with the assessee. Shri R.B. Partania is the son-in-law of the assessee. If the said paper pertained to the individual business of Shri R.B. Partania and has nothing to do with the assessee, then the name of Shri R.B. Partania would not have been written on the said document. So, he justified the addition.

88. After hearing both the parties and on perusal of record, it appears that on the said paper the name of Shri R.B. Partania had been written against a specific amount. Both debit and credit have been noted down on the said paper. It clearly indicates that the assessee is maintaining an account pertaining to his son-in-law Shri R.B. Partania. The entries show that the payments were made and received back. So, this was the regular recording pertaining to the money transaction. In the instant case, alternative plea of the assessee was already accepted by the CIT(A), who has already given the benefit of peak of debt.

89. In the facts and circumstances of the case, there is no further scope to give any benefit to the assessee. Therefore, we decline to interfere with the order of the CIT(A), which is hereby upheld by dismissing the ground of appeal taken by the assessee.

90. The ground No. 6 of the assessee’s appeal is pertaining to the addition of Rs. 30,000 on account of low household withdrawal and Rs. 1,25,000 on account of unexplained expenditure on marriage.

91. The assessee has shown the household expenditure at Rs. 49,790. The AO estimated it at Rs. 84,000. Therefore, the addition of Rs. 34,000 was made on account of household expenses. But in first appeal, the CIT(A), by following his earlier order for the asst. yr. 1990-91, gave the relief of Rs. 4,000 and restricted the addition to Rs. 30,000.

92. After hearing both the parties and on perusal of record, it appears that the issue was already discussed by the Tribunal in its order dt. 7th April, 2000, for the asst. yr. 1990-91 where the total addition of Rs. 55,408 was found sufficient but since then the price index and cost of living have gone high. Therefore, we find no reason to interfere with the order of the CIT(A), which is hereby upheld by dismissing this ground of appeal taken by the assessee.

93. Another component of this addition is pertaining to the marriage expenses. On the statement of the wife, the addition was made out by the lower authorities.

94. This issue was already discussed in the Tribunal’s order (supra) for the asst. yr. 1990-91 where the Tribunal restricted the addition to Rs. 50,000 only pertaining to the marriage expenses. By respectfully following the earlier order of the Tribunal, we restrict the addition to Rs. 50,000 only for the assessment year under consideration too. Both the orders of lower authorities are modified accordingly.

95. The ground No. 7 of the assessee’s appeal is pertaining to the telescoping benefit.

96. After hearing both the parties and on perusal of record, it appears that no nexus has been proved. Therefore, this ground taken by the assessee is dismissed.

97. In the result, the appeal filed by the assessee is partly allowed as stated above.

ITA No. 1449/Jp/1997 (Asst. yr. 1992-93) :

98. This is the cross-appeal filed by the Department for the asst. yr. 1992-93.

99. The first grievance of the Department is pertaining to the reduction of addition from Rs. 1,50,000 to Rs. 15,000 by applying the net profit rate of 7.5 per cent on estimated sale of Rs. 8 lakh as against net profit rate of 15 per cent applied by AO on estimated sales of Rs. 10 lakhs.

100. This issue we have already dealt in the cross-appeal filed by the assessee in ground No. 1. This issue was also discussed for the asst. yr. 1991-92 in ground No. 2 of the assessee’s appeal and in ground No. 1 of the Departmental appeal. We have already declined to interfere with the order of the CIT(A), who has estimated the net profit rate at 7.5 per cent on the estimated sale. During the assessment year under consideration the facts and circumstances are identical, therefore, we decline to interfere with the order of the CIT(A), which is hereby upheld by dismissing the ground of appeal taken by the Department.

101. The next grievance of the Department is pertaining to the addition of Rs. 1,16,667 made under Section 69 of the IT Act for unexplained investment in purchases.

102. This issue originally was discussed by the Tribunal for the asst. yr. 1990-91 where the Tribunal, vide its order dt. 7th April, 2000, dismissed the ground taken by the Revenue. By respectfully following the said decision, we also dismissed the similar ground for the asst. yr. 1991-92 (ground No. 2 Supra) in the Departmental appeal. For the similar reasons and by respectfully following the earlier decision of the Tribunal, we uphold the order of the CIT(A), who has rightly deleted the said addition. Thus, this ground taken by the Revenue is dismissed.

103. The next grievance of the Department is mentioned in ground No, 3, which relates to the relief of Rs. 20,000 out of Rs. 1,20,000 in precious and semi-precious stones account.

104. This issue we have already dealt in cross-appeal filed by the assessee (ground No. 2) where we have directed the AO to make the addition by taking the net. profit rate at 1.5 per cent on estimated sale of Rs. 10 lakhs adopted by the CIT(A) for the billing business. For the similar reasons, this ground taken by the Department has no merit.

105. The next grievance of the Department is pertaining to the relief of Rs. 40,000 out of the total addition of Rs. 2,40,000 made under Section 69 in respect of purchase of precious and semi-precious stones.

106. This is the supplementary ground to the previous ground. We have already dealt this ground in the cross-appeal filed by the assessee in ground No. 3 where we have already observed that the assessee was doing merely a billing business. The assessee was neither a manufacturer nor a trader. So, there was no question to make this addition. We have already deleted the remaining addition of Rs. 2 lakhs in the assessee’s appeal. In other words, the entire addition is deleted. When it is so, then the ground taken by the Department is automatically dismissed being infructuous. Thus, the Departmental appeal is dismissed.

ITA No. 230/Jp/1997 (Asst yr. 1993-94):

107. The first grievance of the assessee is pertaining to the validity of the assessment made under Section 148.

108. This issue we have already dealt in the assessee’s appeal for the asst. yr. 1991-92 (supra). For the similar reasons, we dismiss this ground taken by the assessee.

109. The ground No. 2 is related to the addition of Rs. 49,950 by applying the net profit rate of 7.5 per cent on estimated sales of Rs. 14,66,000.

110. This issue we have already dealt in the assessee’s appeals for the asst. yr. 1991-92 (ground No. 2) and for the asst. yr. 1992-93 (ground No. 1). For the similar reasons, we dismiss this ground of appeal taken by the assessee by upholding the order of the CIT(A).

111. The third grievance of the assessee is related to the addition of Rs. 28,798 on account of unexplained investment in the purchases.

112. This issue we have already dealt in the assessee’s appeal for the asst. yr. 1991-92 (ground No. 3). Therefore, for the similar reasons, we delete the addition of Rs. 28,798.

113. The fourth grievance of the assessee is pertaining to the net profit of 10 per cent on estimated sales of Rs. 14,00,000 on account of precious and semiprecious stones business.

114. This issue we have already dealt in the assessee’s appeals for the asst. yr. 1991-92 (supra) (ground No. 4) and for the asst. yr. 1992-93 (ground No. 2).

115. By following the same reasons, we direct the AO to estimate the net profit rate at 1.5 per cent on the estimated sale adopted by the CIT(A).

116. The ground No. 5 relates to the addition of Rs. 2,94,000 on account of unexplained investment in purchase of precious and semi-precious stones business.

117. This issue we have already dealt in the assessee’s appeal for the asst. yrs. 1991-92 (ground No. 5) and for the asst. yr. 1992-93 (ground No. 3),

118. For the similar reasons, we set aside both the orders of lower authorities and delete this addition.

119. Ground No. 6 relates to the addition of Rs. 1,00,000 pertaining to the alleged investment in shares.

120. During the search, a diary was found (Annexure A-5) where certain transactions were recorded.

121. The AO mentioned that on page No. 1 a reference was made for the purchase of 100 Master Plus shares @ Rs. 34 from Sunil Pareekh. Similarly, there was a noting showing Rs. 16,000 on the sale of Apple Ind.–16,000. On page Nos. 2 and 3 of the said Annexure A-5, certain details of purchase and sales of shares were mentioned which were reproduced by the lower authority in his order. On p. 8 of Annexure A-5, the assessee has made payment in cash of Rs. 38,415 from 11th May, 1992 to 27th May, 1992, to M/s. R. Vinod Associates which appears to be with reference to share dealings. Similarly, on pp. 9 and 10, there was a reference of 200 shares of NFCL and 300 shares of SBI Magnum which amounted to Rs. 40,000. On p. 11 of the said Annexure A-5, there was a reference for purchase of 100 shares of Apple Leasing & Computer Ltd. for which the value comes to Rs. 16,000.

122. By considering all the entries in the seized papers, the AO made the addition of Rs. 1,50,000 on estimate basis on account of alleged unexplained investment in shares. But in first appeal, the CIT(A) has restricted the same to Rs. 1,00,000 on estimate basis by giving relief to the assessee of Rs. 50,000.

123. During the course of argument, it was submitted by the learned authorised representative that the addition was made simply on estimate basis by ignoring the working prepared by the assessee. The learned authorised representative further submitted that assessee has already surrendered a sum of Rs. 50,000 in respect of shares in the asst. yr. 1994-95. The learned authorised representative continued to argue by mentioning that on the basis of entries appearing in the seized diary (Annexure) A-5 (pp. 68 to 76 of the paper book), the assessee prepared a statement indicating full details of purchase, sale and profit/loss in respect of these shares. The net result of all these transactions is loss of Rs. 14,165. So, he concluded that when the full details are available, then no estimation can be made out.

124. On the other hand, the learned Departmental Representative relied on the orders of the lower authorities by mentioning that the CIT(A) has already given the relief of Rs. 50,000. The learned Departmental Representative further submitted that in the statement before the AO it was accepted that there were certain transactions with M/s R, Vinod Associates which were not actually open to verification because there was no direct correlation between the income of the assessee and the investment in shares, The AO has rightly observed that in the transactions of purchase and sales losses were claimed which were speculative losses. In these circumstances, he justified the addition made by the AO.

125. After hearing both the parties and on perusal of record, it appears that a seized diary was found from the custody of the assessee. Share certificates were also found, which were inventorised as per Annexure 0-1. Accordingly, the investment was determined at Rs. 40,375 as per chart annexed with the assessment order. The assessee has made a surrender of Rs. 50,000 in the asst, yr. 1994-94. The AO has not objected to this inclusion of Rs. 50,000 in the asst. yr. 1994-95. But at the same time, it is also true that assessee has accepted that shares had actually been acquired during the assessment year under consideration. So, the surrender made in the asst. yr. .1994-95 cannot be taken to cover the purchases of shares made in this assessment year, which are indicated in the seized diary at Annexure A-5. So, the benefit of the surrendered amount of Rs. 50,000 cannot be given during the assessment year under consideration. Thus, we agree with the order of the CIT(A) who restricted the addition on estimate basis but in the facts and circumstances, especially when the losses claimed and the details of the investment were made available as per the Annexure to the assessment order, then we find that the said addition it still on higher side. By keeping in mind the doctrine of equity, justice and good conscious, and also by considering the totality of the facts and circumstances of the case, we restrict the addition to Rs. 50,000 (Rupees fifty thousand) only. Thus, the assessee will get further relief of Rs. 50,000 (Rupees fifty thousand) only from the order of the CIT(A). This ground is partly allowed by modifying both the orders of lower authorities.

126. The ground No. 7 is related to the addition of Rs. 1,08,571 on account of alleged unrecorded payments/advances including interest of Rs. 3,871.

127. On p. 9 of the seized diary of Annexure A-5, some entries were found which were reproduced by the lower authorities. The AO opined that the said entries and calculation of interest clearly prove that it was a loan account and the AO added the amount of Rs. 1,08,571 including the advance in cash of Rs. 75,000 and interest of Rs. 2,795 plus Rs. 1,076 as unrecorded payment advanced by the assessee. So, the AO made the said addition under Section 69. In first appeal, the CIT(A) has confirmed the same by following his earlier order.

128. During the course of argument, it was submitted that AO has totally misinterpreted the facts. In fact, these entries represent the account of S.K. International to whom precious and semi-precious stones were sold by M/s Manish Exports, a proprietary concern of the assessee. Against the sale, Rs. 97,267 and Rs. 17,428 were received by cheques and the same were credited to the bank account of M/s Manish Exports on 20th April, 1992 and 28th April, 1992, respectively.

129. During the course of argument, the learned authorised representative has drawn our attention to p. 28 of the paper book, which is the bank account to prove these entries. The learned authorised representative further submitted that from the said amount, Rs. 97,000 were drawn in cash and Rs. 10,000 were transferred to M/s Vinod Associates in dates 22nd April, 1992 to 1st May, 1992, as verifiable from the bank statement at p. 28 of the paper book. Out of these amounts, Rs. 75,000 and Rs. 17,000 were paid to Karigars and Rs. 12,700 were paid for purchase of shares as appearing in the seized papers. The AO has compared this with transaction of Rs. 94,000 in connection with S.B. Linker and the same represented sale by M/s N.K. Jewellers. Finally, he has concluded his argument by submitting that all the transactions are verifiable. Alternatively, he also argued that this amount has already been included in turnover by assessee and, therefore, any other addition in this regard would result into double addition.

130. On the other hand, the learned Departmental Representative relied on the orders of the lower authorities by submitting that the assessee’s claim is not supported by any evidence that the amount has been drawn and utilised for payment to Karigars or for purchase of shares.

131. After hearing both the parties and on perusal of record, it appears that on the said p. 9 to Annexure A-5 only three words were written, namely, cash, share, SBI interest. Rest are numerical figures. From the said document, no inference can be drawn whether it was related to payment to Karigars or for share transactions. So, we do not agree with the submission made by the learned authorised representative that all the transactions are self-explanatory. At the same time, we do not agree with the finding of the lower authorities that the said transactions are related to the loans advanced. If so, to whom ? No attempt was made by the lower authorities to find the reply. Therefore, the facts are not clear. When facts are not clear, then we are of the view that matter needs a fresh adjudication. Hence, by modifying both the orders of lower authorities, we restore the issue to the file of the AO with a direction to decide the issue afresh by examining the entire evidence and also by taking the help of supporting evidence like bank account, etc., if need be. The AO is further directed to provide a reasonable opportunity to the assessee of being heard.

132. The ground No. 8 of the assessee’s appeal is related to the addition of Rs. 94,000 given to S.B, Linker and also Rs. 15,000 on the interest thereupon.

133. This is the supplementary ground of the previous ground where AO has compared the addition of Rs. 1,08,571 (ground No. 7) (supra) with transaction of Rs. 94,000 in connection with S.B. Linker.

134. For the similar reasons, we also restore this issue to the file of the AO to decide the same de novo after examining the entire evidence, but by providing the reasonable opportunity to the assessee.

135. The ground No. 9 of the assessee’s appeal is related to the addition of Rs. 31,350.

136. During the search, a Hundi of Rs. 30,000 was found. For the subsequent asst. yr. 1994-95, the assessee has surrendered all the Hundies of Rs. 1,60,000. It was claimed that this Hundi is also included in the surrendered amount. Rs. 1,350 is the interest on this Hundi. But the AO observed that this Hundi bears the date of 20th Jan., 1993. So, it will have to be taxed during the assessment year under consideration. Therefore, the AO computed the interest @ 15 per cent which comes to Rs. 1,350 and made the total addition of Rs. 31,350. The CIT(A) has confirmed the same, However, the CIT(A) has directed the AO to verify whether this Hundi of Rs. 30,000 has also been included in the asst. yr. 1994-95, then consequential deduction be given in that assessment year.

137. After hearing both the parties and on perusal of record, we agree with the order of the CIT(A), who has already given the direction to the AO to verify if the same amount has been included for taxation in the asst, yrs. 1994-95 and 1995-96, consequential deduction may be granted in those assessment years. About the interest, it may be mentioned that assessee was not maintaining any books of account, So, the AO was justified to compute the interest. In other words, we uphold the order of the CIT(A) in toto by dismissing this ground taken by the assessee.

138. The ground No. 10 is related to the addition of Rs. 4,050 by estimating interest income on alleged advance given to Shri R.B. Partania (son-in-law).

139. During the asst. yr. 1992-93, the AO added the alleged advance of Rs. 70,000 to R.B. Partania. The AO alleged that during the assessment year under consideration, it is not proved that the advance was received back. So, he estimated the interest of Rs. 12,600 and added to the income of the assessee. However, in first appeal, the CIT(A) has given the partial relief by mentioning that in the previous asst. yr. .1992-93, the addition was restricted to Rs. 22,500. So, he directed the AO to give consequential relief for interest and sustained the addition to Rs. 4,050.

140. After hearing both the parties and on perusal of record, it appears that in the previous asst. yr. 1992-93, we upheld the order of the CIT(A), In other words, the addition was upheld for Rs. 22,500 being an advance given by the assessee to Shri R.P. Partania. When it is so, then we agree with the order of the CIT(A) for the assessment year under consideration where she has directed the AO to calculate the interest on the advance of Rs. 22,500 only. In the facts and circumstances of the case, we find nothing wrong in it and the same is hereby upheld by dismissing the ground taken by the assessee.

141. The next grievance of the assessee is mentioned in ground No. 11, which relates to the addition of Rs. 47,578 being interest on alleged loans and advances.

142. The AO further found that the assessee has given the loans/payments :

(i)

Rs. 1,00,000

M/s Tikkam Exports. Ltd.

in the asst. yr. 1990-91

(ii)

Rs. 1,00,000

(Rs. 50,000+Rs. 50,000)

M/s Bearing Company in
the asst. yr. 1991-92

(iii)

Rs. 64,318

M/s Manish Engineering
Industries in the asst, yr. 1992-93 as unexplained advance.

The AO observed in his order that no books of account were maintained by the assessee. No list of debtors and creditors was furnished. The assessee has offered the interest of Rs. 3,500 for this year on estimate basis. No such interest . has been declared in the return of income filed. So, he estimated Rs. 80,000 pertaining to interest on the said loans and made the addition. But in first appeal, the CIT(A) restricted the same to Rs. 47,578 by giving a relief to the assessee for Rs. 32,422. The CIT(A) observed in his order that as regards M/s Tikkam Exports P. Ltd. and M/s Bearing Company, it was held in asst. yr. 1991-92, that these amounts did represent advances to debtors and interest estimated on those amounts is justifiable at 18 per cent of the total sum advanced. As regards M/s Manish Engineering Industries, it was distinct from the investment in the said firm made by his son. Since there was no evidence that the money so advanced had been received back this year, the addition made on account of interest on this amount would also be justified in this year.

143. During the course of argument, it was submitted by learned authorised representative that the AO himself accepted the payments pertaining to serial Nos. (i) to (iii) above against purchases. The addition under Section 40A(3) for cash payment against purchases has been made in the relevant assessment year. Hence, now treating the very same amount as being advance on interest itself shows the contradictory stand taken by the AO. Even in the seized record, there was no paper to suggest that the assessee has earned any interest on these amounts. Regarding M/s Manish Engineering Industries, which was the proprietary concern of the assessee’s son Shri Nirmal Mundra a sum of Rs. 25,000 was received back on the dissolution of the said firm. So, he made a request that no addition is warranted and the same needs to be deleted.

144. After hearing both the parties and on perusal of record, it appears that about M/s Manish Engineering Industries, we have dealt partly this issue in ground No. 4 for the asst. yr. 1992-93 (supra). About payment of Rs. 1,00,000 to M/s Tikkam Exports, we have discussed the issue in the assessee’s appeal for the asst. yr. 1992-93 (ground No. 13). In para 60 (supra), we have restored the issue to the file of the AO to decide whether Rs. 1,00,000 was given to M/s Tikkam Exports for purchasing or was giving as a loan. If it was a loan, then interest can be charged and if it was given for purchasing, then no interest is chargeable.

145. By considering the totality of the facts and circumstances of the case, we deem it fit to restore the entire issue to the file of the AO pertaining to the interest of Rs. 47,578. The AO is directed to examine whether the said payments were made for purchases or for loans. If the payments were made for purchases, then interest cannot be charged. If the payment were made as a loan/advances, then interest will have to be charged. The AO will decide this issue after examining the entire evidence, but by providing the reasonable opportunity to the assessee. Thus, this ground is restored back by modifying both the orders of lower authorities.

146. The next grievance of the assessee is mentioned in ground No. 12, which relates to the addition of Rs. 23,317 on account of low household withdrawals.

147. The assessee has shown the total withdrawal of Rs. 58,283 as per details given in the AO’s order but the AO was not satisfied, who estimated it at Rs.90,000. So, he made the addition of (Rs. 90,000-58,283) = Rs. 31,717. In first appeal, the GIT(A) has restricted the same to Rs. 23,317.

148. By considering the totality of the facts and circumstances of the case and by keeping in mind the raising trend of the price index, we are of the view that assessee is not entitled for further relief. The CIT(A) has already given the substantial relief during the assessment year under consideration. Hence, we decline to interfere with the order of the CIT(A). The same is hereby upheld.

149. The last grievance of the assessee is mentioned in ground No. 13, which relates to the telescoping benefit.

150. In the absence of any nexus, we find no merit in this ground taken by the assessee and the same is hereby dismissed.

151. In the result, the appeal filed by the assessee is partly allowed, as stated above.

ITA No. 256/Jp/1999 (Asst yr. 1993-94)

152. In this cross-appeal, the first grievance of the Department is pertaining to the trading addition of Rs. 1,80,000 by applying a net profit rate of 15 per cent on the estimated sales of Rs. 16,00,000 by the AO.

153. This issue we have already dealt in the cross-appeal filed by the assessee (ground No. 2) where we upheld the order of the CIT(A). Thus, this ground of the Department has no merit and the same is dismissed.

154. The second grievance of the Department is pertaining to the addition of Rs. 1,86,670 made under Section 69 for unexplained investment in purchases.

155. This ground we have already dealt in the cross-appeal filed by the assessee (ground No. 3) (supra) where we have already deleted the remaining addition of Rs. 28,797. When it is so, then the ground taken by the Department is dismissed.

156. The third grievance of the Department is pertaining to the relief of Rs. 20,000 out of the addition of Rs. 1,60,000 in precious and semi-precious stones.

157. This issue we have already dealt in the cross-appeal field by the assessee in ground No. 4 (supra)

158. We have already directed the AO to estimate the net profit @ 1.5 per cent on the estimated turnover taken by the CIT(A). When it is so, then this ground has no merit and the same is dismissed.

159. The fourth grievance of the Department is pertaining to the relief of Rs. 26,000 in respect of purchase of precious and semi-precious stones.

160. This issue we have already dealt in the cross-appeal filed by the assessee (ground No. 5) (supra).

161. When we have already deleted the remaining addition pertaining to the investment, then this ground taken by the Department has no merit and the same is dismissed.

162. The last grievance of the Department is mentioned in ground No. 5, which relates to the relief of Rs. 50,000 on account of unexplained investment in shares.

163. The AO made the addition of Rs. 1,50,000 on estimate basis, which was restricted by the CIT(A) to Rs. 1,00,000,

164. We have also given further relief to the assessee and restricted the addition to Rs. 50,000 only. When it is so, then this ground taken by the Department is dismissed, being infructuous.

165. In the result, the appeal filed by the Department is dismissed, ITA No. 1344/Jp/1997 (Asst yr. 1994-95)

166. The first grievance of the assessee is pertaining to the addition of Rs. 79,550 on account of unexplained investment in jewellery.

167. During the search, a total 797.9 gms. gold jewellery was found on person of assessee and his wife, from the residence and lockers as per the details given by the lower authorities. Out of it, the AO has accepted the explanation pertaining to the jewellery of 612 gms. So, he made the addition of 185 gms. which represents the following :

Smt. Kiran Mundra

108 gms.

Smt. Hemlata (married daughter)

77 gms.

 

185 gms.

For the same, the AO made the addition of Rs. 79,550 by applying the rate of Rs. 430 per gm. which was confirmed by the CIT(A).

168. During the course of argument, the learned authorised representative submitted that the AO has wrongly taken the weight of necklace at 90 gms. He further submitted that in the preliminary statement, the assessee said that Kanakati belongs to Smt. Hemlata (question No. 2) but Smt. Prameshwari Devi said that it belongs to Smt. Kiran (question No. 12). The learned authorised representative submitted that due to this contradiction, AO treated the Kanakati as unexplained jewellery of the assessee. He also has drawn our attention to the details of the said jewellery and made a request that the addition may kindly be deleted.

170. On the other hand, the learned Departmental Representative relied on the orders of the lower authorities.

171. After hearing both the parties and on perusal of record, it appears that Smt, Kiran Mundra (daughter-in-law) was claiming the total jewellery of 300 gms. but the AO accepted only 192 gms. and made addition for 108 gms. Similarly, Smt. Hemlata, who is the married daughter of the assessee claimed 77 gms. but AO accepted nil and made the addition for the entire 77 gms.

172. About the Kanakati, we are of the view that statement given by the lady is acceptable rather than statement of the assessee because about the jewellery, women have better knowledge than male in the family, About Smt. Kiran Mundra, who is the daughter-in-law, it was claimed that 300 gms, jewellery belongs to her but AO accepted only 192 gms. on estimate basis without mentioning any cogent reason. The assessee’s family is the highly reputed family in the society. It is expected that in Hindu society every married lady possesses some gold items which are received since her birth till marriage. In these circumstances, we accept the entire 300 gms. as an explained jewellery.

173. About Smt. Hemlata, who is the married daughter of the assessee, it was claimed that 77 gms, belongs to her. Smt. Hemlata was recently married and it is obvious that girls keep some jewellery with their parents for safe custody/remaking till they are well-settled in their new houses. It was also claimed that the said jewellery was received at the time of marriage.

174. By looking to the family status and other circumstances, we accept this 77 gms, jewellery also as explained, especially when Smt. Hemlata has accepted it as owner. Therefore, by setting aside both the orders of lower authorities, we accept the entire jewellery as explained and delete the addition of Rs. 79,550, specially by keeping in mind the CBDT Circular No. 1916, dt. 11th May, 1994. Thus, the assessee will get the relief of this amount. This ground is allowed in favour of the assessee.

175. The next grievance is pertaining to the addition of Rs. 24,440 for unexplained investment in precious and semi-precious stones.

176. During the course of search, certain precious and semi-precious stones were found, which were estimated at Rs. 24,440 (p. 178 of the paper book). The AO made the addition of the same, which was confirmed by the CIT(A).

177. During the course of argument, it was submitted that these stones were rejected and defective and the same were not saleable in the market.

178. After hearing both the parties and on perusal of record, it appears that this issue is partly discussed by us in the assessee’s appeal for the asst. yr. 1991-92 (ground No. 4) in para 22 (supra) where we have mentioned that only a few rejected/defective stones were found, which amounts totalling to Rs. 24,440. The said items were found defective and were not saleable. When these items were not saleable and have no value, then we find no reason to make the addition for the “same, Hence, by setting aside both the orders of lower authorities, we delete the addition of Rs. 24,440,

179. The third ground of appeal filed by the assessee is related to the addition of Rs. 19,500 for unexplained investment in valuables.

180. The AO made the addition for household items as under :

TV Videocon

Rs. 17,000

Taperecorder-cum-two-in-one

Rs. 2,500

 

Rs. 19,500

The CIT(A) confirmed the same.

180. After hearing both the parties and on perusal of record, it appears that said items were common items which might have been purchased by the assessee or received as a gift at the time of marriage of his son. During the course of argument, it was claimed that the said TV was black and white and not coloured as observed by the AO. Further, the taperecorder was an old piece. This TV was shown for Rs. 2,200 in the balance sheet filed for the asst. yr. 1983-84 and onwards (pp. 418 to 423 of the paper book).

181. By considering the totality of the facts and circumstances of the case, we are of the view that no addition is warranted for these two items as these are very common items in every family specially when one TV is reflected in the balance sheet from the asst. yr. 1983-84 and onwards. Hence, we set aside both the orders of lower authorities said delete the addition of Rs. 19,500.

182. The next grievance of the assessee is mentioned in ground No. 4 which relates to the net profit rate of 7.5 per cent on estimated sale of Rs. 21 lakhs.

183. This issue we have already dealt in the assessee’s appeals for the asst. yr. 1991-92 (ground No. 2), for the asst. yr. 1992-93 (ground No. 1) and for the asst. yr. 1993-94 (ground No. 2).

184. We have already dismissed the ground taken by the assessee by upholding the order of the CIT(A). For the similar reasons, we find no merit in this ground taken by the assessee and the same is hereby dismissed.

185. The fifth grievance of the assessee is pertaining to the addition of Rs. 80,000 for unexplained investment in purchases of machinery items.

186. This issue we have already dealt in assessee’s appeal for the asst. yr. 1991-92 (ground No. 3). For the similar reason, we set aside both the orders of lower authorities and delete this addition. This ground is allowed.

187. The next grievance of the assessee is pertaining to the addition of profit in respect of trading in precious and semi-precious stones on estimate basis at Rs. 1,20,000.

188. This issue we have already dealt in assessee’ appeal for the asst. yr. 1991-92 (ground No. 4) (supra) where we have directed the AO to compute the net profit @ 1.5 per cent on the estimated turnover taken by the CIT(A) (para 22) (supra). Thus, this ground is partly allowed.

189. The seventh ground of appeal is related to the addition of Rs. 2,40,000 for unexplained investment in purchase of precious and semi-precious stones.

190. This issue we have already dealt in the assessee’s appeal for the asst. yr. 1991-92 (ground No. 5). For the similar reasons, we set aside both the orders of lower authorities and delete this addition (para 24) (supra). Thus, this ground is allowed.

191. The eighth ground is related to the addition of Rs. 38,948 for low household withdrawals.

192. This issue we have already dealt in ground No. 12 for the previous asst. yr. 1993-94. For the similar reasons, we uphold the order of the CIT(A) by dismissing the ground taken by the assesses.

193. The next grievance of the assessee is mentioned in ground No. 9, which relates to the addition of Rs. 30,000 on account of interest income on alleged advances.

194. The AO made the addition of interest on estimate basis as under :

On advance of Rs. 94,000
to S.B. Linker added in asst. yr. 1992-93

Rs. 18,000

On advance of Rs. 70,000
to R.B. Partania added in the asst. yr. 1992-93

Rs. 12,000

 

Rs. 30,000

The CIT(A) has confirmed the same.

195. In the asst. yr. 1992-93, the AO observed that the assessee has advanced Rs. 94,000 to M/s S.B. Linker and Rs. 70,000 to Shri R.B. Partania, son-in-law of the assessee. For the said loans, he estimated the interest @ 18 per cent and made the addition of Rs. 30,000 as per the details given above.

196. After hearing both the parties and on perusal of record, it appears that the payment of Rs. 94,000 was made to M/s S.B. Linker.

197. We have already restored this issue to the file of the AO in the previous asst. yr. 1993-94 (ground No. 8) (supra). For the similar reasons, we restore this issue to the file of the AO to determine whether the said payment was loan or made for purchases. If it was loan, then interest may be calculated and charged. If it was a payment for purchasing, then no interest is warranted.

198. About the loan of Rs. 70,000 to Shri R.B. Partania, son-in-law of the assessee, it appears that this issue we have already dealt in the assessee’s appeal for the asst. yr. 1993-94 (ground No. 10) (supra) where we upheld the order of the CIT(A), who has reduced the loan amount to Rs. 22,500. In other words, the loan was accepted by the CIT(A) of Rs. 22,500 instead of Rs. 70,000.

199. For the similar reasons, we direct the AO to charge the interest @ 18 per cent on the advance of Rs. 22,500 given to Shri R.B. Partania by giving the reasonable opportunity to the assessee. Thus, this ground taken by the assessee is partly allowed, as stated above.

200. The tenth ground of appeal filed by the assessee is related to the addition of Rs. 38,000 on account of interest on Hundies.

201. This issue we have already discussed in the assessee’s appeal for the asst. yr. 1993-94 (ground No. 9) (supra) where we upheld the order of the CIT(A), who has directed the AO to verify whether the same amount has been included for taxation in the asst. yrs. 1994-95 and 1995-96. If so, then consequential deduction may be granted in that assessment year:

202. It may be mentioned that the assesses has already surrendered a sum of Rs. 1,60,000 during the assessment year under consideration. If the said Hundi is already included in the surrendered amount, then there is no need to make the further addition. Hence, we direct the AO to verify the same and decide the issue accordingly. Thus, this issue is restored back to the file of the AO with the said direction.

203. The last grievance of the assessee is mentioned in ground No. 11, which relates to the benefit of telescoping.

204. In the absence of any nexus between the investment/expenses, we find no merit in the ground taken by the assessee. Therefore, this ground is dismissed. Thus, the appeal filed by the assessee is partly allowed, as stated above.

ITA No. 1450/Jp/1997 (Asst. yr. 1994-95) :

205. In this cross-appeal, the first grievance of the Department is pertaining to the trading addition of Rs. 3,60,000 which was reduced to Rs. 60,000 by applying the net profit rate on estimated sale of Rs. 24 lakhs.

206. This issue we have already dealt in the cross-appeal filed by the assessee for the asst. yr. 1991-92 (ground No. 2), for the asst. yr. 1992-93 (ground No. 1), for the asst. yr. 1993-94 (ground No. 2) and for the asst. yr. 1994-95 (ground No. 4) where we upheld the order of the CIT(A). When it is so, then this ground taken by the Department has no merit and the same is dismissed.

207. The second grievance of the Department is pertaining to the addition of Rs. 2,00,000 made under Section 69 on account of unexplained investment in purchases of machinery items.

208. This issue we have already dealt in the cross-appeal filed by the assessee in ground No. 5 (supra) where we have deleted the remaining addition. When we have deleted the remaining addition, then we find no merit in the ground taken by the Department and the same is dismissed.

209. The third grievance of the Department is pertaining to the relief of Rs. 20,000 out of the addition of Rs. 1,40,000 on account of precious and semiprecious stones.

210. This issue we have already dealt in the cross-appeal filed by the assessee (ground No. 6) as well as for the asst. yr. 1991-92 (ground No. 4) where we have directed the AO to estimate the net profit rate @ 1.5 per cent on the estimated turnover adopted by the CIT(A) (para. 22) (supra). When it is so, then this ground of the Department is dismissed.

211. The last grievance of the Department is pertaining to the relief of Rs. 40,000 out of the total addition of Rs. 2,80,000 made on account of unexplained investment in precious and semi-precious stones.

212. This issue we have already dealt in the cross-appeal filed by the assessee (ground No. 7) (supra). The detailed discussion was also made in the assessee’s appeal for the asst. yr. 1991-92 (ground No. 5) where we have deleted the said addition (para 24 supra). For the similar reasons, we dismiss this ground taken by the Department. Thus, the appeal filed by the Department is dismissed.

213. In the result, the appeals for all the assessment years under consideration filed by the assessee are partly allowed and the appeals filed by the Department are dismissed/partly allowed/restored, as stated above.