ITA Nos. 867, 868, 881 & 882 /Jp/2013; Asst. yrs. 2009-10 & 2010-11

Hari Om Maratha, J.M. and MK. Saini, A.M.

Vyay Goyal &. Mridul Goyal. for the Assessee :
Subhash Chandra, for the Revenue

ORDER

These cross-appeals have been filed by the assessee and the Revenue against two different orders of the learned CIT(A), Central, Jaipur each dt. 17th Sept., 2013 for the asst. yrs. 2009-10 and 2010-11, respectively. For the sake - of convenience we proceed to decide them by a common order.

ITA No. 867/Jp/2013 (asst. yr. 2009-2010)

In this appeal the assessee has raised the following grounds :

(i) On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in confirming the rejection of books of account by invoking the provisions of s. 145(3) of IT Act, 1961.

(ii) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the trading addition of Rs. 1,27,69,601-by estimating (the NP rate of 8.25 per cent on the declared turnover as against the trading addition of Rs. 13,42,358 made by the AO by applying NP 8.5 per cent on total turnover of Rs. 10,41,88,767 after allowing deduction of depreciation and interest of Rs. 1,95,075.

(iii) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming that there was suppression of investment of Rs. 6,11,16,770 in the land purchased by M/s Kamakshi International.

(iv) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the addition of Rs. 61,11,677 on substantive basis in the hands of the assessee as against addition of Rs. 62,06,000 made by AO in the hands of the assessee on protective basis and in the hands of the firm M/ s Kamakshi International on substantive basis under s. 69 of IT Act, 1961, without appreciating the fact that the Department has carried out intensive search over the assessee and no material was found to show that the assessee has made any undisclosed investment in the purchase of the land by the partnership firm M/ s Kamakshi international.

(v) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that the main conten'tion of the assessee that documents and evidences relied on by the AO while arriving at the figure of Rs. 7,40,60,000 being the value of the land not given/ confronted to him, stands rectified by remand report of the AO without appreciating the fact that the learned AO had not provided the copy of the documents/evidence in the remand report and the remand report of the AO is complete silaif on this issue.

ITA No. 881/Jp/2013 (asst. yr. 2009-10)
The revenue has raised the following grounds:
(i) On the facts and in the circumstances of the case, the learned CIT(A), Central, Jaipur, has erred in reducing the trading addition to Rs. 65,398.

(ii) On the facts and in the circumstances of the cases, the learned CIT(A), Central, Jaipur, has erred in excluding the addition of Rs. 66,50,000 made under s. 69B and interest thereon Rs. 7,090 on account of alleged unaccounted/undisclosed investment from the hands of the assessee ignoring the fact that addition confirmed ;n her appellate order dt. 14th Aug., 2013 has already been challenged before the Hon'ble Tribunal, by the other assessee Shri Manish Tambi.

ITA No. 868/Jp/2013 (asst. yr. 2010-11)
The assessee has raised the following grounds :

(i) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the rejection of books of accounts under s. 145(3) ofIT Act, 1961.

(ii) On the facts and in the circumstances of the case and in law, the leaned CIT(A) has erred in estimating the NP of the assessee at Rs. 97,42,020 after allowing deduction of depreciation and interest of Rs. 2,25,754,on total turnover of Rs. 8,42,75,256 and thereby confirming the trading addition ofRs. 26,35,657.

(iii) On the facts and in the circumstances of the case. and in law the learned CIT(A) has erred in holding that there was proportionate increase in NP rate from asst. yr. 2008-09 to asst. yr. 2009-10 as the gross receipts declined. The learned CIT(A) confirmed the addition without appreciation the correct facts.

ITA No. 882/Jp/2013 (asst. yr. 2010-11)
The Revenue has raised the following grounds :

(i) On the facts and in the circumstances of the case, the learned CIT(A), Central, Jaipur, has erred in reducing the NP rate of 8 per cent without giving proper justification, as against NP rate of 8.5 per cent adopted by the AO for the defects in the maintenance of account mentioned in the assessment order.

(ii) On the facts and in the circumstances of the case, the learned CIT(A), Central, Jaipur has erred in excluding the addition of Rs. 1,29,00,000 made under s. 69B and interest thereon Rs. 4,35,110 on account of alleged unaccounted/undisclosed investment from the hands of the assessee ignoring the fact that addition confirmed 'in her appellate order dt. 16th Aug., 2013 has already been challenged before the Hon'ble Tribunal, by the other assessee Shri Manish Tambi.

2. Now, we are taking the appeals of the assessee and the Revenue for the asst. yr. 2009-10 as under :

3.1 Ground Nos. I and :2 or asscssec's appeal (ITA No. 867 /Jp/:20 13) are interconnected and related to rejection of books of account and trading addition of Rs. 12,76,960 by estimation on net profit of contract business. And ground No.1 of Revenue's appeal (ITA No. 88ljJp/2013) is common and relates to reducing the trading addition by Rs. 65,398.

3.2 Briefly stated, the facts of the case are that the assessee is an individual and derives income from his partnership firm M/s Vishal Enterprises and proprietorship concern M/ s Padmawati Constructions and income from other sources. The assessee is engaged in civil construction work with Rajasthan Vidyut Prasaran Nigam Ltd. under his proprietary concern M/ s Padmawati Constructions. The gross contract receipts were of Rs. 10,41,88,767 and the assessee has shown net profit of Rs. 73,18,613 from this contract business. The IT Department carried out search over the assessee on 23rd July, 2009. In response to notice under s. 153A, the assessee filed his IT return on 29th Jan., 2010 declaring total income at Rs. 71,96,210. The AO held that the books of account of the assessee consist defects like non-maintenance of inventory of items purchased, some purchases not supported by bills/vouchers, payments to labours made in cash and no supporting evidence is maintained Le. complete postal address of labours and non-maintenance of muster-roll and wages register, non-maintenance of salary register, payments of some expenses made through self-made vouchers, 11.011.­maintenance of telephone call register, non-furnishing of site-wise details of expenses and non-maintenance of day-to-day stock register and quantitative details of stock consumption. By pointing out of above defects the AO opined that due to above defect the correct profit of the assessee could not be ascertained from books of account of the assessee. Hence, he rejected the books of account of the assessee by invoking the provisions of s. 145(3) of IT Act, 1961. After rejecting the books of accounts of the assessee the AO estimated profit by applying the NP rate of 8.5 per cent of total turnover of the assessee by holding that other assessee carrying out similar business activities declared this net profit rote. The AO estimated the profit of the assessee at Rs. 88,56,045 being 8.5 per cent of total turnover of assessee of Rs. 10,41,88,767 and after allowing the deduction of depreciation of Rs. 1,31,618 and of interest of Rs. 63,457, he estimated the net profit from business of assessee at Rs. 86,60,970 (which comes to 8.31 per cent of turnover) as against Rs. 73,18,613 declared by the assessee resulting in addition of Rs. 13,42,358 in the returned income of the assessee. Aggrieved from the order of the AO, the assessee filed appeal before learned CIT(A). The learned CIT(A) has confirmed the trading addition of Rs. 12,76,960 as against the trading addition made by AO at Rs. 13,42,358 by estimating the NP rate 8.25 per cent as against estimated by AO at 8.5 per cent and declared by the assessee @ 7.02 per cent on total t urnover of Rs. 10,41,88,767. However. she did not allow deduction of depreciation and interest of Rs. 1,95,075.

3.3 Aggrieved from the order of learned CIT(A), the assessee as well as Revenue both are in appeal before us on this issue. The assessee objected the order of learned CIT(A) on the addition sustained by her by raising ground Nos. 1 and 2 before us. The Revenue has also objected the addition reduced by learned CIT(A) vide ground No. 1 raised before us.

3.4 The learned Authorised Representative submitted before us that Department has carried out intensive search operations and no incriminating document or material was found to visualize that the assessee has suppressed the contract income during this year. As regards the rejection of the books of account by the lower authorities, the learned Authorised Representative submitted that the defects pointed out by the AD are of general in nature and are not serious defects. The assessee is maintaining proper books of account, and following the accounting policies and accounting standards regularly. Each case has to be considered on its own peculiar facts, having regard to the nature of business. Action of the AD clearly demonstrates that he could not gather any details or find any irregularity in maintenance of the books so as to justify rejection of books in toto. The AD could not quantifY any specific amount of expenditure for disallowance. Absence of some of the vouchers was projected as a reason for rejection of books. If at all there was any lapse on the part of the assessee in respect of maintaining vouchers of a particular item of expenditure, the same may warrant, at the most a specific addition and nothing beyond that, A minor irregularity cannot be blown out of proportion to resort a convenient approach of the rejection of the book results~ Further, the assessee is, engaged in the business of construction and it is not possible to obtain Pucca bills for all purchases/expenses, therefore, in cases where the purchase bills/vouchers could not be obtained, the payment vouchers were prepared and the same were duly signed by the persons receiving payment. The books of account of the assessee are audited by a -chartered accountant who has given his report after examining the books of account of the assessee along with bills and vouchers. There is no adverse finding in the report of the auditor in this regard which also establishes that the books of account of the assessee are correct and there is no serious defect in books of account maintained by the assessee. As regards the stock register, the learned Authorised Representative submitted that the assessee was purchasing construction material as per requirement of the site, which are supported by purchase bills/vouchers duly signed by respective party and whatever material remained at the end of the year it was shown as closing stock. It is practically not possible for assessee to maintain stock register; therefore. the assessee is not maintaining stock register. However, even if stock record is not maintained, the books of account cannot be rejected on this ground alone. Reliance was placed on decision of Delhi High Court in the case of CIT us. Jas Jack Elegance Exports (2010) 233 CTR (Del) 398 : (2010) 40 DTR (Del) 236: (2010) 324 ITR 95 (Del) and decision of Tribunal Jodhpur Bench, in the case of Haridas Parikh us. ITO (2008) 113TT'J (Jd) 274 : (2q08) 1 DTR (Jd)(Trib) 390 and decision of Tribunal, Hyderabad Bench, in the case of Vishal Infrastructure Ltd. us. Asstt. CIT (2007) 107 TT'J (Hyd) 484 : (2007) 104 ITD 537 (Hyd). As regards the wages register the learned Authorised Representative submitted that the contract work is being carried out through labour contractors or causal labours directly hired by the assessee. The payment to labour contractors is verifiable and payment was made after deducting TDS thereon. The assessee is maintaining labour register for labour directly hired by the assessee. The wages register was produced before the AD for examination during the course of assessment As regards the estimation of the profit, the learned Authorised Representative submitted that the estimation of net profit is at very higher side. The AD estimated the net profit by applying rate of 8.50 per cent and he allowed further deduction on account of depreciation and interest. Therefore, the effective NP rate applied by the AD is 8.31 per cent as against 7.02 per cent shown by the assessee. The learned CIT(A) applied NP rate of 8.25 per cent of contract receipts and no further deduction on account of depreciation and interest was given. Nor any comparable case was given in support of the estimation. The learned CIT(A) has estimated the NP @ 8.25 per cent of gross receipts. No basis of such estimation has been given. The rejection of books of account does not give unfettered power to the AD to estimate the profit at his whims and fancy. Further this year was the second year of the assessee in contract business. The NP rate of the assessee is bett~r than last year. The lower authorities have not considered the past history of the assessee. The assessee started this business since asst. yr. 2008-09 and comparison of trading results are as under:

Since the assessee was new in the line and does not have sufficient experience, in such situation the cost of the material and other items would be higher than the others in same trade. However, in current year the contract receipts of the assessee have increased by more than 6 times from last year. The NP rate is also better that last year, therefore, no further addition deserves to be made. The lower authorities have ignored the trading results of the last year. Hon’ble Rajasthan High court in the case of CIT us. Bhawan VA Path Nirman (Bohra) & Co. (2002) 175 CTR (Raj) 160 : (2002) 258 ITR 431 (Raj) has held that the past history of the assessee is best guiding factor. It was also held by the Hon'ble jurisdictional High Court, in the case of CIT us. Gotan Lime Khanij Udhoyog (2001) 169 CTR (Raj) 318 : (2002) 256 ITR 243 (Ra)) that mere rejection of books of accounts under s. 145 need not necessarily lead to addition to the trading account. The learned Authorised Representative cited before us the comparable case of Rishabh Construction (P) Ltd. us. ITO ITA No. 152/Jp/2007, order dt. 30th May, 2008, stating that this assessee is engaged in civil construction. The Tribunal. Jaipur Bench, has accepted NP rate of 4.04 per cent in asst. yr. 2003-04 and 4.15 per cent in asst. yr. 2004-05. The learned Authorised Representative prayed that the additions of Rs. 12,76,960 confirmed by learned CIT(A) by estimating the profit of assessee and rejecting the books of account of the assessee were patently wrong and deserves to be deleted.

3.5 On the other hand, the learned Departmental Representative relied upon the findings given by AO. The learned Departmental Representative submitted that the learned CIT(A) estimated profit by applying NP rate of 5.25 per cent of contract receipts as against 8.50 per cent applied by the AO. The defects pointed out by the learned AO in the books of account are major defects and on the basis of defective books of account, true profit cannot be calculated. The learned Departmental Representative submitted that the profit estimated by AO is reasonable and the addition made in the order of AO should be sustained.

3.6 We have heard the rival contentions and perused the facts of the case and material on records. We find that the books of account of the assessee are defective for the reasons mentioned in the order of the AO and the learned CIT(A) and no cogent explanation in this regard has been brought on record and therefore we find no infirmity in the order of learned CIT(A) who has rightly confirmed the action of the AO for invoking the provisions of s. 145(3) of the Act. As regards the estimation, no comparable case was given by AO and learned CIT(A). Further, we find force in the contention of the learned Authorised Representative that this year was the second year of the assessee in contract business. However, in current year the contract receipts of the assessee have increased by more than 6 times from last year. The NP rate is also better that last year. The NP rate declared by the assessee in asst. yr. 2008-09 was 6.01 per cent which increased to 7.02 per cent in asst. yr. 2009-10. Therefore, in view of decision of Hon'ble jurisdictional Court in the case of CIT us. Bhawan VA Path Nirman (Bohra) & Co. (supra) the past history of the assessee is best guiding factor. Further, the result shown by the assessee is better than M/ s Rishabh Construction (P) Ltd. Further, the trading results of this year cannot be compared with asst. yr. 2010-11. In asst. yr. 2010-11. the trading result is better because the entire cash and other items found as the result of the search were surrendered as business income for asst. yr. 2010-11. Further, if trading addition for asst. yr. 2009-10 is sustained then the same is entitled for telescoping benefit in asst. yr. 2010-11 against the cash and other assets found as the result of search in view of the decisions of Hon'ble apex Court in the case of Anantharam Veerasinghaiah & Co. us. CIT (1980) 16 CTR (SC) 189 : (1980) 123 ITR 457 (SC), and jurisdictional High Court in the case of CIT us. TyarffJamal Bal Chand (1987) 62 CTR (Raj) 216 : (1987) 165 ITR 453 (Raj), and such telescoping benefit has not been given by the AO and learned CIT(A). In the present case the assessee declared better results than the preceding years and therefore in view of the decision of Hon'ble jurisdictional High Court In the case of CIT us. Gotan Lime Khaniz Udhog (supra). even if the provisions of s. 145(3) are invoked, in the present circumstances and facts of the case, no addition is called for. The AO is not justified in making any addition on this account and addition confirmed by learned CIT(A) is directed to be deleted. Thus, ground No.1 of the assessee is dismissed and ground NO.2 of the assessee is allowed.

This also covers ground No. 1 of the appeal of the Revenue (ITA No. 88I/Jp/2013). which is dismissed in view of the detailed findings made as above.

4.1 Ground Nos. 3 to 5 in appeal filed by the assessee relate· to confirmation of the addition of Rs. 61,11,677 on account of sharing of assessee in total alleged on-money payment of Rs. 6,11,16,770 paid by firm M/s Kamakshi International for purchase of Plot No. D-81. Ghiya Marg, Bani Park, Jaipur, in which the assessee was partner during the year under consideration.

4.2 Briefly staled, the facts of the case are that the assessee was a partner in the firm M/s Kamakshi International. Jaipur. During the year under consideration the abovementioned firm has purchased a Plot No. D-81, Ghiya Marg, Bani Park, Jaipur, measuring 1.058 sq. yards from Mis Om Builders & Colonizers (P) Ltd. for a consideration of Rs. 1.20 crore vide registered agreement dt. 25th Feb., 2009. The AO opined that the market value of plot Nos. D-112A and D-112B which are in same locality and vicinity is Rs. 70,000 per square yard, therefore the market value of plot No. D-81 which was purchased by M/ s Kamakshi International. Jaipur should not he less than this; h€nce the market value of plot No. D-81 should be Rs, 7,40,60,000 and the balance amount of Rs. 6,20,60,000 was paid to the seller which did not find recorded. The AO has further held that the seller of this plot (D-81) in October, 2007 took the loan of Rs. 1,25,00,000 from ICICI Bank for purchases of this plot and in the valuation report submitted to ICICI Bank the valuation of this property was shown Rs. 3,53,29,230 hence· the sales value of property cannot be less than the cost price. On the basis of this finding the learned AO made addition of Rs. 6,20,60,000 in the total income of firm M/s Kamakshi Internalional and made protective addition of ~he same ~mount in the hands of the partners in their profit-sharing ratio by holding that the transactions of abovementioned property have been made by the partners on behalf of firm and the partners have arranged finance for payment of abovementioned on-money resulting in addItIon of Rs. 62,06,000 in the hands of the assessee on protective basis. Aggrieved from the order of AO, the assessee filed appeal before learned. CIT(A). The learned CIT(A) held that the seller of the plot IM/ s OM Builders & Colonisers (P) Ltd.] took loan on this property from ICICI Bank Ltd. and for this purpose the valuation of this property was made at Rs. 3,53,29,230. Therefore, this plot cannot be sold at lesser price. She held that the market value of this plot was estimated by the AO at Rs. 7,.40,60,000 therefore, there was on-money payment of Rs. 6,11,16,770. Since there was no business in the firm therefore, such income cannot be earned by the firm. This on-money must have gone through the partners. Smce the assessee is partner of 10 per cent therefore, 10 per cent of on­money must have gone through this assessee. On this basis she confirmed the addition of Rs, 61,11,677 in the hands of this asses;ee on substantive basis.

4.3 Aggrieved from the order of learned CIT(A), the assessee is in appeal before us and raised ground Nos. 3 to 5 in the appeal challenging the addition confirmed by learned CIT(A).

4.4 The learned Authorised Representative submitted before us that during the year under consideration the firm M/ s Karnakshi enternational purchased a Plot No. 0-81, Ghiya Marg, Bani Park, Jaipur, in or a sum of Rs. 1,20,00,000 on 25th Feb., 2009 which was supported by ,egistered purchase deed and the same is duly reflected in books of lccounts of firm and no on-money was paid for the purchase of this property. During the course of assessment proceedings the assessee requested that in case of any doubt the verification of fact can be made from seller of the plot but no verification was made by the AO. In the assessment order the AO has held that in reply to the show cause­notice on the above issue the assessee did not offer any plausible xplanation while during the course of assessment proceedings the assessee submitted the detailed reply (copy at paper book pp. 63-69) and 10 contra - material was brought on the record by the AO to disprove the reply of the assessee. The learned Authorised Representative submitted that the AO compared the purchases value of plot No. 0-81 from value of plot Nos. D-112A and D-112B but both the properties are at different locations, different uses and the transactions were also carried out in different period. The plot No. 0-18 is a residential plot situated on mternal small road, while the plot Nos. D-112A and D-112B are commercial plots and situated at main road. The rates of the commercial plots are always very higher to the residential plots and this may also be seen from difference in OLC rates. Further, the firm has purchased the plot at the rates/value which was accepted by the' Government authorities for stamp duty purpose. The plot No. 0-81 was purchased in asst. yr. 2009-10 while as per notice of AO the transaction of Plot Nos. 0­112A and 0-112B was made in asst. yr. 2010-11. Therefore, the value of both the properties are not comparable. Further, even if it is presumed that the market value of impugned plot was higher than the consideration shown in the sale deed, still it cannot be presumed that on-money was passed to the seller of the plot. Reliance was placed on the decision of Hon'hle Rajasthan High Court in the case of CIT us. Bhanwarlal Murwatiya (2008) 215 CTR (Rqj) 489 : (2008) 3 DTR (Raj) 115. Further, the onus under s. 69B is on the AO to prove the investment. Therefore, here the onus was on the AO to prove by positive evidence that the assessee has invested Rs. 61, 11,677 as on-money in the purchase of the plot. In the case of the assessee, the learned AO has not brought any document or material to prove that the assessee has made undisclosed investment in purchase of the plot. The onus of the AO cannot stand discharged. merely rejecting the explanation of the assessee or on surmises, possibilities and probabilities. Reliance was placed on the decision of Hon'ble Delhi High Court in the case of CIT us. Naresh Khattar (HUF) (2003) 183 CTR (Del) 317 : (2003) 261 fTR 664 (Del). The learned Authorised Representative further submitted that addition cannot be made in the hands of the assessee in any circumstances. The assessee entered into partnership in firm M/s Kamakshi International on 12.08,2008 and retired from this firm on lOth Sept., 09. The assessee was partner of 10 per cent profit-sharing ratio. The assessee made only capital contribution of Rs. 60,000 in firm as his capital, which he got refunded after the retirement. The capital investment was not in profit sharing ratio. The actual operations of this firm was not under the supervision and control of the assessee. The assessee was not working partner in the firm. All the activities of the firm were being looked after by other partners. The principal place of business of the firm was situated at the premises owned by other partners and books of account were also maintained and kept by such other partners. Further, the firm is separate income-tax assessee and whatever income earned either disclosed or undisclosed the same is assessable in the hands of the firm. The same cannot be taxed in the hands of the partner. Further, the assessee made only contribution of Rs. 60,000 only and balance amount of disclosed investment in property of Rs. 1,20,00,000 was contributed/managed by other partners of the assessee. Therefore, the disclosed investment in the property was not in profit-sharing ratio of the partners; therefore, it cannot be presumed that the alleged undisclosed investment will be in profit-sharing ratio of the partners. The learned Authorised Representative further submitted that the Department has carried out search over the assessee and no any incriminating document was found from the possession of the assessee to show undisclosed investment by the assessee in purchase of the impugned plot by the partnership firm. The learned Authorised Representative submitted that the learned CIT(A) sustained the addition in the hands of the assessee on the ground that the firm has no source of income. The learned Authorised Representative submitted that the same theory also applies for this assessee also. The Department has carried out search over the assessee and no secret business was found. The assessee's source of income are partnership firm M/s Vishal Enterprises. The learned AO has examined the assessee's income in this firm and no undisclosed income was found. The other source of assessee's income is M/s Padmawati Constructions. The income of this contract business has been estimated and such estimation is under dispute before Hon'ble Tribunal. Therefore, the assessee has no source of income to make huge undisclosed investment in purchase of the plot in the name of partnership firm. The learned Authorised Representative prayed that the addition sustained by learned CIT(A) is wrong and deserves to be deleted.

4.5 On the other hand, learned Departmental Representative relied upon the findings of AO and learned CIT(A). The learned Departmental Representative submitted that the market value of the plot purchased in the name of partnership firm was much more than the value declared in the sale deed. The partnership firm was not carrying any business, therefore, the addition was rightly sustained in the hands of the partners in profit sharing ratio.

4.6 We have heard the rival contentions and perused the facts and material available before us. We find that the Department has carried out search over the assessee and no incriminating document was found to show undisclosed investment by the assessee in the purchase of the plot in the name of partnership firm M/s Kamakshi International. We find that the addition was made/sustained in the hands of this assessee merely on surmises, conjectures, probabilities and possibilities Without bringing any positive evidence. It is an admitted fact that the plot was purchased in the name of partnership firm M/s Kamakshi International who is a separate assessee of IT Act through the registered sale deed. The sale consideration shown in the registered sale deed is Rs. 1,20,00,000, The assessee's contribution in the capital of the firm was only Rs. 60,000. Had the investment in plot was in profit-sharing ratio then the investment of the assessee should be Rs. 12,00,000. It means that the other partners have mainly contributed the source of the investment in the plot. Further, the onus under s. 69B is on the Department to prove the investment. The AO has not brought any positive material to show that the assessee has made undisclosed investment in the plot purchased in the name of partnership firm. Hon'ble Delhi High Court in the recent case CIT us, Dinesh Jain (HUF) (2012) 254 CTR (Del) 534 : (2012) 79 DTR (Del) 457 : (2013) 352 ITR 629 (Del) has made following findings:

"II. Sec. 69B does not permit an inference to be drawn from the circumstimces surrounding the transaction that the purchaser of the property must have paid more than what was actually recorded in his books of account for the simple teas on that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to tax contrary to the strict provisions of Art. 265 of the Constitution of India and Entry 82 in List I of the Seventh Schedule thereto which deals With 'taxes on income other than agricultural income', This was one of the major considerations that weighed With the Supreme Court in K.P. Varghese (supra) in which case the provisions of sub-so (2) of s, 52 fell for interpretation. It was observed that Parliament cannot choose to tax as income an item which in no rational sense can be regarded as a citizen's income or even receipt. Sec. 52(2) (which now stands omitted) applied to the transferor of property for a consideration that was lesser than the fair market value by 15 per cent or more; in such a case, the AO was conferred the power to adopt the fair market value of the property as the sale price and compute the capital gains accordingly. The Supreme Court held that it was the burden of the AO to prove that there was understatement of consideration and once that burden was discharged it was not required of him to prove the precise extent of understatement and he .,could adopt the difference between the stated consideration and the fair market value of the property as the understatement. The sub-section was held to provide for a 'statutory best judgment' once actual understatement was proved; it obviated the need to prove he exact amount of understatement. Additional reasons for the result were (a) that the marginal note to the section referred to 'cases of understatement'; (b) the Speech of the Finance Minister while introducing the provision; and (c) the absurd or irrational results that would flow from a literal interpretation of the sub­section, which could not have been intended by the legislature.

12. While the omitted S. 52(2) applied to the transferor of the property, s. 69B applies to the transferee the purchaser of the property. It refers to the money 'expended' by the assessee, but not recorded in his books of account. which is a clear reference to undisclosed income being used in the investment. Applying the logic and reasoning in K.P. Varghese (supra), it seems to as that even for the purposes of S. 69B it is the burden of the AO to first prove that there was understatement of the consideration (investment) in the books of account. Once that undervaluation is established as a matter of fact, the AO, in the absence of any satisfactory explanation from the assessee as to the source of the undisclosed portion of the investment, can proceed to adopt some dependable or reliable yardstick with which to measure the extern of understatement of the investment, One such yardstick can be the fair market value of the property determined in accordance with the WT Act. We however clarity that this Court is not concluding that such yardstick is determinative; in view of the findings arrived at by us that the AO did not gather foundational facts to point to under-valuation the adoption of the norms under the WT Act is not commented upon by us.

13. The error committed by the IT authorities in the present case is to jump the first step in the process of applying s. 69B-that of proving understatement of the . investment, and apply the measure of understatement. If anything. the language employed in s. 69B i6 in stricter terms than the erstwhile s. 52(2). It does not even authorise the adoption of any yardstick to measure the precise extent of understatement. There can therefore be no compromise in the application of the section. It would seem to require the AO even to show the exact extent of understatement of the investment; it does not even give the AO the option of applying any reasonable yardstick to measure the precise extent of understatement of the investment once the fact of understatement is proved. It appears to us that the AO is not only required to prove understatement of the purchase price. but also to show the precise extent of the understatement. There is no authority given by the section to adopt some reasonable yard~tick to measure the extent of understatement. But since it may not be possible in all cases to prove the precise or exact amount of undisclosed investment, it is perhaps reasonable to permit the AO to rely on some acceptable basis of ascertaining the market value of the property to assess the undisclosed investment. Whether the basis adopted by the AO is an acceptable one or not may depend on the facts and circumstances of the particular case. That question may however arise only when actual understatement is first proved by the AO. It is only to this extent that the rigour of the burden placed on the AO may be relaxed in cases where there is evidence to show understatement of the investment, but evidence to show the precise extent thereof is lacking.

14. In Lalchand Bhagat Ambica Ram us. CIT (1959) 37 ITR 288 (SC), the Supreme Court disapproved the practice of making additions in the assessments on mere suspicion and surmise or by taking note of the notorious practices prevailing in trade circles. At p. 299 of the Report, it was observed as follows:

"Adverting to the various probabilities which weighed with the ITO we may observe that the notoriety for smuggling foodgrains and other commodities to Bengal by country boats acquired by SahlbgunJ and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every Arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf.

This takes care of the argument of Mr. Sabharwal that judicial notice can be taken of the practice prevailing in the property market of not discloSihg the full consideration for transfer of properties.

15. Since the entire case has proceeded on the assumption that there was understatement 'of the investment, without a finding that the assessee invested more than what was recorded in the books of account, we are unable to approve of the decision of the IT authorities. Sec. 69B was wrongly invoked. The order of the Tribunal is approved; the substantial question of law is answered in the negative. in favour of the assessee and against the CIT."

Therefore, in view of the aforesaid discussion and in the present circumstance and facts of the case, no addition is called for in the hands of this assessee. The AO is not justified in making the addition on this account and addition confirmed by learned CIT(A) is directed to be deleted. Thus, ground Nos. 3 to 5 of the assessee are allowed.

5. Ground No. 6 of the assessee is general in nature and therefore does not require any adjudication.

Appealfiled by Revenuefor asst. yr. 2009-10 (ITA No. 881/Jp/2013)

6.1 Ground No. 1 of the appeal filed by the Revenue is against the reduction of the trading addition by Rs. 65,398. We have decided this ground vide ground Nos. 1 and 2 of the assessee's appeal. In view of our detailed findings in assessee's appeal ITA No. 867/Jp/2013 vide ground Nos. 1 and 2, we dismiss this ground of appeal of the Revenue.

7.1 Ground No.2 of the appeal filed by the Revenue is for deletion of the addition of Rs, 66,50,000 made under s. 69B and interest thereon Rs. 7,090 on account of alleged unaccounted/undisclosed investment from the hands of the assessee. Briefly stated, the brief facts of the case are that the AO held that during the course of search over Shri Manish Tambi, a finance broker, some documents marked as Annexs. A-I to A­4 were seized and the seized documents were analyzed and a ledger of assessee was prepared from the entries reflected in the day book of Shri Manish Tambi. It is seen that the assessee has made undisclosed investment of Rs. 66,50,000 and earned undisclosed interest of Rs. 7,090 in asst. yr. 2009-10. The AO has presumed that the name Vishnu Maharwal as appearing in the seized dairies from Shri Manish Tambi is of the assessee. The AO has held that Shri Manish Tambi has not disclosed the identity of the assessee but since its name is appearing in the impugned document and it is reasonably evident that it is the same assessee. The AO has further held that the assessee is well known to Shri Manish Tambi and arranged the finance through him by way of banking channels, therefore, the transactions reflected in documents seized from Shri Manish Tambi in the name of assessee pertained to the assessee. On the basis of above the AO made addition of Rs. 66,57,090 in total income of the assessee under s. 69B of IT Act, 1961 on account of alleged unaccounted/undisclosed investment made through finance broker, Shri Manish Tambi on the basis of documents founds and seized from the possession of Shri Manish Tambi. Aggrieved from the order of the AO, the assessee filed appeal before the learned CIT(A). The learned CIT(A) deleted the addition made by the AO in the hands of the assessee by mentioning that the Department carried out search over Shri Manish Tambi and seized documents showing business of finance brokerage outside the books. During the search and after the search repeated opportunity was given to Shri Manish Tambi, but he did not reveal the name, address and identity of the creditors found recorded in these documents. No corroborative evidence was found at the premise of this assessee indicating that he had advanced unaccounted money to Shri Manish Tambi unlike the case of Shri Badri Narayan Sodhani where such documents were found and were admitted by the party. Therefore, in absence of any corroborative evidence having been found from the possession of this assessee as the result of the search, no adverse inference can be drawn in this case. Hence, the addition made by the AO in the hands of this assessee was deleted by learned CIT(A).

7.2 Aggrieved from the findings of learned CIT(A) the Revenue has filed appeal before us.

7.3 The learned Departmental Representative relied upon the findings of AO. The learned Departmental Representative submitted that the documents were found from the possession of Manish Tambi reveals that the assessee has made undisclosed loans through Shri Manish Tambi. The learned Departmental Representative submitted that the copy of documents as required by this assessee was given through the remand report submitted by the AO to learned CIT(A). The learned Departmental Representative justified the addition made by the AO on this account.

7.4 On the other hand, learned Authorised Representative submitted that first of all this is to be submitted that copies of documents seized from the possession of Shri Manish Tambi on which the entire addition was based were not provided to the assessee for which the assessee has made repeated requests. Even opportunity to check the arithmetic accuracy of assessee’s ledger was not given to the assessee. Further, the assessment order is completely silent about the persons who took loan from the assessee through Shri Manish Tambi. It appears that no inquiry was made from these persons. Further, it is prevailing practice of market that Hundi/receipt is written by the persons who take loans and these hundies/receipts are delivered the persons who give loan. Such types of Hundies/receipts were not found from the possession of the assessee, this shows that the assessee has not made any undiscldsed loan through Shri Manish Tambi. Further, no record or ledger of Shri Manish Tambi was found from the possession of the assessee. The seized records (copy of which was given in response to the remand report) show that there was regular transaction of deposits and withdrawals. Without maintaining a record, no person could know his balance with Shri Manish Tambi. Had the money was given by the assessee, such records must have been found from the possession of the assessee. During the course of assessment proceedings the assessee has objected that no addition could be made on the basis of documents found from the possession of a third person Shri Manish Tambi, without copies of such documents made available to assessee. (copy of submission is at paper book page Nos. 70-72). The assessee filed an application under RTI Act, 2005 on 16th Jan., 2012 (copy is at paper book page Nos. 76-78) requesting to the AO to provide the copies of documents seized from possession of Shri Manish Tambi, copy of statement of Shri Manish Tambi, details of enquiries carried out on the seized documents and action taken against the other persons who took/ gave loans through said Shri Manish Tambi, The AO even in his order dl. 17th Feb., 2012 under the RTI Act, 2005 (copy of order at paper book page No. 79) expressed inability to provide the information sought by the assessee stating that the information sought was in the nature of third party information and since third party has objected to it and also the required information is personal and no interest of public at large is involved, therefore, the desired information cannot be given. In the order it is mentioned that on issue of notice by AO to Shri Manish Tambi, he has specifically objected to furnishing of information to the applicant stating that:

"With reference to your notice, we would like to submit that the informations desired by Shri Vishnu Maharwal are personal in nature and our business secrets. We do not want to share them with anyone. The information desired by him may also harm and damage us in day-to­day business and safety of our family members. Therefore, you are requested not to give any information to Shri Vishnu Maharwal and oblige."

Against the order of RTI. the assessee filed appeal (copy at paper book pp. 80-81) but the same was also rejected for the same reasons as stated above by the appellate authority (paper hook pp. 8488). From the above it is clear that the assessee though again and again made request to the Department to provide the supporting documents/material in support of addition to be made/made in the hands of the assessee but the same was never provided to the assessee. The learned Authorised Representative submitted that all the inquiries or materials if any were gathered behind the back of the assessee, therefore, the same cannot be used against the assessee. If the AD proposes to act on such material as he might have gathered as a result of his private enquiries behind the back of the assessee, he must disclose the substance of all such material. though not the sources thereof [Dal Chand & Sons us. CIT (1944) 12 ITR 458 (Lahore)] to the assessee and if this is not done, the principles of natural justice stand violated Kishinchand Chellaram us. CIT (1980) 19 CTR (SC) 360 : (1980) 125ITR 713 (SC); Addl. ITO us. Ponkunnam Traders (1976) 102 ITR 366 (Ker); International Forest Co. us. CIT 1975 CTR (J&K) 88 : (1975) 101 ITR 721 (J&K); STO & Anr. us. Uttareswari Rice Mills (1973) 89 ITR 6 (SC); Motipur Zamindari Co. (P) Ltd. us. Agrl. ITO (1972) 83 ITR 778 (Patna); CIT us. East Coast Commercial Co. Ltd. (1967) 63ITR 449 (SC), Harmukhrai Dulichand us. CIT (1928) 3 ITC 198 (Cal). Further, the entries in the accounts of an assessee are to be believed. The section in the Indian Evidence Act, 1872 that primafacie, seems relevant is s. 34 relating to entries in the books of account and reads as under:

"Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability."

This section provides (1) that entries in books of account regularly kept in the course of business are relevant and therefore, admissible whenever they refer to a matter into which the Court has to enquiry and. (2) that such entries though admissible are not alone sufficient to charge a person with liability unless corroborated by other evidence.

The next issue for consideration is-What is understood from the phrase 'books of account'. It is a settled law that only entries in books of account, regularly kept in the course of business, are relevant in a Court of law. A book of account should be full-proof. A bundle of sheets detachable and replaceable at pleasure cannot be characterized as a books of account. A ledger by itself is also not a proof. There must be supporting evidence.

Further, the assessee is not bound for what other persons write in their books/papers. Reliance is placed on the decision of Hon'ble apex Court in the case of CBI us. V.C. Shukia & Ors. AIR 998 SC 1406: JT 1998 (2) SC 172 (popularly referred to as Jain Hawala case). The applicability of s. 34 of the Evidence Act and fastening of the liability to third parties on the basis of entries made in the books of account, documents, etc. has been examined by the Supreme Court in the said case. The CBl's case before the apex Court was that the materials collected during investigation dearly disclosed that Jains were in the habit of making payments to influential public servants and political leaders of high status expecting official favours from them and the above payments were made to Shri Shukla and Shri Advani with that oblique motive. Thereby, the CBI averred that the above persons (the respondents in the appeals) committed offences under s. 120B IPC and s. 13(2) r/w ss. 13(I)(d), 7 and 12 of the Prevention of Corruption Act, 1988. The CBI based its case on t he entries made in the diaries and papers seized during search and in the context the issues relating to the interpretation of s. 34 of the Evidence Act and meaning of terms 'book', books of account' and 'regularly kept' came in for the consideration of the Courts, including the apex Court.

The assessee has not given any cash loan or cash deposit to any party through Shri Manish Tambi. The learned AD has examined the books of account of the assessee and no nexus of assessee with Shri Manish Tambi was established. The learned AD at p. 5 of order mentioned that· the Department has seized A-I to A-4 from the office/reSidence of Shri Manish Tambi, which is list of clientele wherein name of assessee is also appearing but the fact remains that the AD has not correlated any entry from the books of account of the assessee with the seized records of Shri Manish Tambi.

The learned Authorised Representative further submitted that the onus under s. 69B is on the AD to prove the investment. Therefore, here the onus was on the learned AD to prove by positive evidence that the assessee has invested 66,50,000 through Manish Tambi. In the case of the assessee, the learned AD has not brought any document or material to prove that the assessee has made cash loans through Manish Tambi. The onus of the learned AD cannot stand discharged merely rejecting the explanation of the assessee, or on surmises, possibilities and probabilities, Reliance was placed on the following decisions: ..

(i) Tribunal. Jaipur Bench 'A' Jaipur, in the case of ITO us. Anshu Jain, ITA No. 1530/Jp/2008, decided on 13th Feb., 2009;
(ii) CIT us. Naresh Khattar (HUF) (2003) 183 CTR (Del) 317 : (2003) 261 ITR 664 (Del);
(iii) Lal Chand Agarwal us. Asstt. CIT' 21 TW 213, 231, Tribunal Jaipur Bench.

Hence, if the Department wants to accept what has been found from the possession of said Shri Manish Tambi, the burden to prove that the amount attributable to the assessee represents Its concealed income, would be on the Department, This burden cannot be discharged merely on suspicion, surmises and conjectures. The judicial view has been that there cannot be a presurnption against a third party in what a person writes in his account books about him or it. Hence, if some entries have been made against some persons by a person, the same can be held against him only and not against the persons, whose names he chooses to write in his accounts. Hence, there cannot be presumption on the basis of entries made by the broker if he has done so against the assessee that besides the amount paid by cheques, the assessee has also paid some amount by cash.

The IT Department carried out intensive search over the premises of the assessee and during the course of search no corroborative evidence was found to the Department to visualize that the assessee was having undisclosed transactions with said Shri Manish Tambi. Not even a single document in the hand writing of the assessee was found from the possession of Shri Manish Tambi which suggested that the entries in seized ledger were correct and transactions recorded in such document pertained to the assessee. During the course of assessment proceedings the learned AO did not brought any positive material on record to prove that the entries in seized documents of said Shri Manish Tambi on the basis of which addition was made in the hands of the assessee were genuine and true

For making the addition in the hands of the assessee on the basis of documents found and seized from the possession of Shri Manish Tambi, the learned AO had made several presumptions and assumptions and certain contra findings which are not based on corroborative evidence/documents which are as under:

(i) In the assessment order the learned AO mentioned that 'Shri Manish Tambi neither during the course of search nor during assessment proceedings disclosed the name/identity of the persons/concerns/partners from whom money was received to be invested in the market or given to them when they needed it. The learned AO himself has mentioned in the order that Shri Manish Tambi (the persons in possession of which these documents were seized) did not disclose the name and identity of the assessee then on presumption and assumption, the AO held that the name appearing in the seized documents of Shri Manish Tamabi is same person who is being assessed by him.

(ii) The learned AO mentioned in the assessment order that some of such names as appearing in these documents are that of Shri Vishnu Maharwal. Smt. Aruna Sankhala, M/s Kamakshi International and Hotel Neelam, etc. It is presumed that these persons are the same persons who are currently being assessed with him in the search cases of Mahavcer Singh Sankhala Group so when Shri Manish Tambi had not admitted such fact, therefore, the same is against the settled position of law.

(iii) In the assessment order the learned AO mentioned that some of the persons whose names were figuring in these impugned documents had owned up that they had invested their undisclosed money in the market through Shri Manish Tambi and also earned interest on the same. The learned AO mentioned that the above instance proves that the various names mentioned in the impugned seized material are not fictitious and are existing entries. Owning of entries by some persons for the reasons hest known to them does not prove that the entries in the name of Vishnu Maharwal also pertain to the assessee more so when said Shri Manish Tambi never admitted that these entries pertained to same Vishnu Meharwal who was being assessed with the same AO. During the course' of assessment proceeding the learned AO recorded the statement of assessee (copy at paper book pp. 73-75) and in the statement assessee had denied any cash transactions with him, therefore in absence of any corroborative evidence it cannot be held on presumption that these cash entries belonged to the assessee.

In view of abovestated facts it is submitted that the every finding which was given by the AO in support of addition made is based on suspicion, surmises and conjectures possibilities and probabilities. No direct evidence/documents/materials/findings were brought on record by the AO in support of the assessee having ever made undisclosed investment through Shri Manish Tambi.

In the assessment order the learned AO himself mentioned that Shri Manish Tambi has not disclosed the name and identity of assessee and on several places he himself used the word 'presumption'. In the order passed by the AO on the application/appeal filed by the assessee under RTI Act the Department itself admitted that the documents seized from the possession of Shri Manish Tambi are third party evidence and also the personal information and no interest of the assessee is involved. The learned AO is blowing hot and cold in same stream. On the one side in assessment the AO mentioned that the entries in the seized documents/papers pertained to the assessee and on the other side while disposing the application under RTI, the learned AO has held that the information is personal information of third party so the same cannot be given to the assessee, It is well-settled position of law that if any undisclosed income is presumed on the basis of documents seized from the possession of Shri Manish Tambi the same presumption should be taken in the hands of Sri Manish Tambi and not in the hands of the assessee because (the documents were found and seized from the possession of Shri Manish Tambi. If he did not disclosed the name and identity of transacting party the Department have no material! evidence to presume that the entries recorded in the name similar to the name of the assessee belonged to the assessee and last but not the least the Department and Shri Manish Tambi both had admitted that the documents are personal documents of said Shri Manish Tambi.

The AO however provided the copies of the seized documents (paper book pp. 120-140) and casting of assessee's ledger account on the basis of documents seized from the possession of Shri Manish Tambi (paper book pp. 118 to 119).

(a) The document relied upon in present case was neither speaking one nor incriminating one, but a dumb document. The figure of Rs. 66,50,000 is not arriving from these documents for current year therefore, the addition of Rs. 66,50,000 in the income of the current year purely base on guess work and the learned AO not been able to provide computation for the working of this figure till date. The figure of 66,50,000 is not arriving from the ledger casted by the AO (paper book p.
118).

(b) Further, the tally ledger in the name of assessee prepared by then AO on the basis of A-I to A-4 seized from Manish Tambi is patently wrong and incorrect and on arbitrary basis. In some cases figures were taken at same value as written in seized documents whereas in some cases figures were taken by adding '000' against the figure mentioned in the seized documents. This may be seen from the followings:

(i) In some cases the figure has been taken for consideration as such in same form as written on the seized document (for example) :

(ii) Instances of figure of amount has been enhanced by adding 000 (three zeros) in the figure mentioned in seized documents.

(iii) In some instances a figure of tally ledger is not arriving from seized documents A-I to A-4

This treatment has no supporting of any material. However, the assessee has prepared ledger account on the basis of entries in the name resembling to the name of assessee recorded in the photocopy of the seized document of Shri Manish Tambi given by the AO in remand report, copy of which is enclosed herewith. As per this ledger peak credit amount comes to Rs. 10,090 for asst. yr. 2009-10 (on 12th March, 2009) and Rs.36,220 (on 28th June, 2009; Rs. 46,310 minus Rs. 10,090 = Rs. 36,220) for asst. yr. 2010-11.

In the light of abovementioned facts/case law, the learned Authorised Representative submitted that since there was no material with the Department to prove that the assessee made undisclosed investment through Shri Manish Tambi, therefore, no addition could be made under s. 69B on the basis of suspicion. surmises and conjectures. Further, if the Department gathered some material from possession of Shri Manish Tambi which suggested that the assessee made some undisclosed investment then still it could not be used against the assessee until It. Is proved by documentary evidence that the assessee actually made some undisclosed investment and the entries recorded in the documents found from the possession of Shri Mansih Tambi are correct.

7.5 We have heard the rival contentions, perused the facts and material available before us. We find that the AO has not brought any positive material to show that the assessee has made investment in loans through Shri Manish Tambi.· The AO has not provided the copy of seized material to the assessee and effective opportunity of confrontation was not given to the assessee. The inquiries or material if any was gathered behind the back of the assessee, the same cannot be used against the assessee without providing opportunity of confrontation to the assessee. If the AO proposes to act on such material as he might have gathered as a result of his private enquiries behind the back of the assessee, he must disclose the substance of all such material to the assessee and if this is not done, the principles of natural justice stand violated. The AO has submitted the remand report vide letter dt. 20th Dec., 2012 to learned CIT(A) Central. Jaipur, copy placed at assessee's paper book at p. 111­140. Copy of note sheet dt. 23rd Dec., 2011 (copy at paper book 114) was attached with the remand report. As per the Note Sheet entry dt. 23rd Dec., 2011, the AO sought explanation for undisclosed investment with Shri Manish Tambi (finance broker)' for Rs. 1,29,00,000 for asst. yr. 2010-11 and Rs. 66,50,000 for asst. yr. 2009-10 and for interest income Rs. 7,090 for asst. yr. 2009-10 and Rs. 4,35,100 for asst. yr. 2010-11. The AO asked the learned Authorised Representative of assessee to file explanation on or before 26th Dec., 2011. as per the entry dt. 26th Dec., 2011 on the said note sheet the learned Authorised Representative of the assessee attended and filed reply. The copy of the reply of learned Authorised Representative dt. 26th Nov., 2011 was enclosed with the remand report, copy of which was placed at paper book pp. 115-117. In this reply the learned Authorised Representative of the assessee submitted to the AO as under:

..... in the note sheet query You. Honour not mentioned the basis of arriving to the above conclusion that the assessee made undisclosed investment through Shri Manish Tamil The copies of document if any found from possession of Shri Manish Tambi or statement of Shri Manish Tambi have not been provided to assessee ... "

In the remand report of the AO the following has been mentioned in para 3 of the remand report.

"As regard to providing of xerox copies of the relevant documents to the assessee, there is nothing on record to show as to whether these documents were provided to the assessee or not. But apparently these were brought to the notice of his Authorised Representative on 23rd Dec., 2011."
The assessee has filed application under RTI Act for the seeking xerox eopy of the seized documents. The copy of the order passed under RTI Act passed by the Asstt. CIT Central Circle-I, Jaipur. is placed at paper book p. 79. In paras 4 and 5 of the said order is as under:

"4. Vide letter dt. 13th Feb., 2012 the said third party Shri Manish Tambi lias speFifically objected furnishing of information to the applicant. His objections is reproduced as under:

"With reference to your notice, we would like to submit that the information desired by Shri Vishnu Maharwal is personal (in) nature and our business secrets. We do not want to share them with anyone. The information desired by him may also harm and damage us in day-to-day business and safety of family members. Therefore, you are requested not to give any information to Shri Vishnu Maharwal and oblige.

5. In view of the above submission the desired information cannot be given to the applicant as the third party has objected it and also the requisition of information is personal and no interest of public at large is involved."

From the above note sheet, reply of the assessee and order under RTI Act, it is clear that the copy of the relevant seized documents was not provided to the assessee. All the inquiries or material if any were gathered behind the back of the assessee, therefore the same cannot be used against the assessee until and unless the opportunity of effective confrontation was not given. Here in the case of the assessee the copy of seized documents from the possession of Shri Mansih Tambi was not provided to the assessee, therefore, the same cannot be used against the assessee. Further, the Department has carried out intensive search over the assessee and no any material was found in corroboration to the material seized from the possession of Shri Manish Tambi. The AO has also not established any nexus of the entry in the books of account of the assessee with the impugned seized document from the possession of Shri Manish Tambi. The AO has prepared ledger account in the name of assessee, copy of which was enclosed with the aforesaid remand report, (copy placed at paper book p. 118). We find lots of discrepancies in the ledger account casted by the AO in the name of assessee from the seized records of Shri Manish Tambi, While preparing the ledger account in the name of the assessee from the seized documents found from the possession of Shri Manish Tambi, the AO has added 000 to the absolute figure mentioned in the seized document and in some cases the figure was taken without modification. Further, in some cases the figure taken in the ledger account is not arriving from the seized documents. The AO made the addition of Rs. 66,50,000 for asst. yr. 2009-10 and Rs. 29,00,000 for asst. yr. 2010-11. These figures are not arriving from the ledger account prepared by the AO in the name of the assessee from the seized documents found from the possession of Shri Manish Tambi copy of which was enclosed by the AO with the aforesaid remand report. The aforesaid note sheet as well as assessment order are silent how these two figures were arrived. Further, the onus under s. 69B of IT Act is on Department to prove the investment has been made by the assessee, which was not discharged by the AO. Nor any positive material was brought orirecords to show that the assessee has made cash loans to the ultimate borrowers through Shri Manish Tambi. Therefore, in view of the aforesaid discussion, submissions made by the learned Authorised Representative and learned Departmental Representative and in the present circumstance and facts of the case, no addition is called for in the hands of this assessee. The AO is not justified in making the addition on this account and ground No. 2 of the appeal filed by the Revenue is dismissed.

8.0 Ground No.3 of the Revenue is general in nature and therefore does not require any adjudication.
Thus, the appeal filed by the assessee ITA No. 867/Jp/2013 is partly allowed and appeal filed by the Revenue ITA No. 881/Jp/2013 is dismissed.
Assessee's appealjor asst. yr. 2010-11 (ITA No. 868/Jp/2013/.
9.1 Ground Nos. 1 to 3 of the assessee's appeal ITA No 868/Jp/2013 are regarding rejecting the books of account by applying the provisions of s. 145(3) of IT Act, 1961 and confirming the addition of Rs. 26,35,657 by estimation the profit of proprietorship concern of assessee M/s Padmawati Constructions at Rs. 97,42,020 on the turnover of Rs. 8,42,75,256. And ground No. 1 of Revenue's appeal (ITA No. 882/Jp/2013) is common and relates to reducing the trading addition by estimation of net profit by applying NP rate of 8 per cent as against 8.5 per cent applied by the AO.

9.2 As regards the rejection of books of account, the facts are similar to asst. yr. 2009-10, We have upheld the rejection of books of account in appeal of the assessee in ITA No. 867/Jp/2013 for asst. YT. 2009-10 and on the basis of same findings we uphold the rejection of the books of account here also for asst. yr. 2010-11, Thus, the ground Xo. 1 of the assessee's appeal is dismissed.

9.3 As regards the estimation of the profit, the facts are that in search the assessee has surrendered Rs. 30,00,000 on account of cash found by the search party and for other items stating that the same are represented by the suppressed business profit from the contract business. The assessee has declared contract receipts of Rs. 8,42,75,256 and as per books of account the net profit of Rs. 41,06,363 was declared. The assessee has increased this profit by Rs. 30,00,000 on account of surrender of suppressed business profit represented by cash found by the search party and other items, Thus, the assessee declared net profit of Rs. 71,06,363 from the contract business which gives the NP rate of 8.43 per cent of contract receipts. The AO after rejecting the books of account applied NP rate of 8.5 per cent on total turnover of business of the assessee by holding that other assessee carrying out similar business activities had declared similar net profit rate. The AO estimated the net profit of the assessee at Rs. 71,63,397 being 8.5 per cent of total turnover of business declared by the assessee at Rs. 8,42,75,256 and he allowed separate deduction of depreciation of Rs. 1,68,046 and interest Rs. 57,708 from the estimated net profit from business of assessee. In this manner AO computed profit from contract at Rs. 69,37,643. However, the AO separately assessed the surrendered amount Rs. 30,00,000 as income from other sources. This gives the estimation of profit at Rs. 1,01,63,397 and NP rate of 11.79 per cent as against Rs. 71,06,363 and thus, resulted addition of Rs. 28,31,280 . Aggrieved from the assessment order, the assessee filed appeal before the learned C 1 T(A). The learned CIT(A) estimated the NP rate at 8 per cent for the business of the assessee and estimated the net profit of the assessee at Rs. 67,42,020 and she increased this amount by, Rs. 30,00,000 on account of surrender made by the assessee in search statement This working resulted in the estimation of NP of Rs. 97,42,020 on turnover of Rs. 8,42,75,256. The working of learned CIT(A) results in estimation of NP @ 11.55 per cent of the turnover. Thus, she confirmed the trading addition of Rs. 26,35,657.

9.4 Aggrieved by the order of learned CIT(A) the assessee filed appeal before us and raised this issue vide ground Nos. 2 and 3 of his appeal. The Revenue also challenged the order of learned CIT(A) on this issue vide ground No. 1.

9.5 The submissions of learned Authorised Representative and learned Departmental Representative were same as were for asst. yr. 2009-10.

9.6 We have heard the rival contentions and perused the facts of the case and material on records. In support of the estimation of net profit, no any comparable case was given by AO and learned CIT(A). Further, we find force in the contention of the learned Authorised Representative that in search statement the assessee has surrendered Rs, 30,00,000 stating that the cash found by the search party and other items represents his business income. The assessee has shown profit from the contract business Rs. 41.06,363. The assessee has increased this profit by the surrendered amount of Rs. 30,00,000. Thus, the net profit from the contract business was offered for tax was Rs. 71,06,363 on the contract receipts of Rs. 8,42,75,256 wJ:lich gives the NP rate of 8.43 per cent which is better than last year. Therefore, in view of decision of Hon'ble jurisdictional Court in the case of CIT vs. Bhawan V Path Ninnan (Bohra) & co. (supra) the past history of the assessee is best guiding factor. In the present case the assessee declared better results than the preceding years and therefore in view of the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Gotan Lime Khaniz Udhyog (supra), even if the provisions of s. 145(3) are invoked, in the present circumstances and facts of the case, no addition is called for. The AO is not justified in making any addition on this account and addition confirmed by learned CIT(A) is directed to be deleted. Thus, ground Nos. 2 and 3 of the assessee are allowed. This also covers ground No 1 of the appeal of the Revenue (ITA No. 8S2/Jp/2013), which is dismissed in view of the detailed findings made as above.

10. Ground No.4 of the assessee is general in nature and therefore does not require any adjudication.

Revenue's appealforasst. yr. 2010-11 (ITA No. 882/Jp/2013)

11.1 Ground No. 1 of the appeal filed by the Revenue is against the reduction of the, trading addition by applying NP rate at 8 per cent as against 8.5 per cent applied by the AO. We have decided this ground under the ground Nos. 2 to 3 of the assessee's appeal. In view of our detailed findings in assessee's appeal ITA No. 868/Jp/2013 vide ground Nos. 2 and 3, we dismiss this ground of appeal of the Revenue.

12.1 Ground No.2 of the appeal filed by the Revenue is for deletion of the addition of Rs. 1,29,00,000 made under s. 69B and interest thereon Rs. 4,35,110 on account of alleged unaccounted/undisclosed investment from the hands of the assessee. We have decided this issue under the ground No. 2 of the Revenue's appeal_. ITA No. 881/Jp/2013 for assessment year under ground No.2, we dismiss this ground of appeal of the Revenue.

13. Ground No. 3 of the Revenue is general in nature and therefore does not require any adjudication.

Thus, the appeal filed by the assessee, ITA No. 868/Jp/2013 is partly allowed and appeal filed by the Revenue ITA No. 882/Jp/2013 is dismissed.

7.0 In the result, appeals of the assessee are partly allowed and the appeals of the Revenue are dismissed .