IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD Before Shri D.K.Tyagi, Judicial Member and Shri T.R. Meena, Accountant Member ITA No. 76/Ahd/2003 Assessm ent Year :1987-88 Harish S. Patel V/s. DCIT., SR 1, Ahm edabad th B-405, 4 floor, Premium House, Near Gandhigram Railway Station, Ahm adabad. PAN No. Not Found (Appellant) .. (Respondent) Ms. Urvashi Shodhan, A.R. By Appellant /By Respondent Shri S.K. Gupta, CIT D.R. /Date of Hearing 02.07.2012 /Date of Pronouncement 31.07.2012 ORDER PER : T.R.Meena, Accountant Member This is appeal at behest of Assessee which has emanated from order of CIT (A)-XV, Ahmedabad, order dated 18.10.2002 for assessment year 1987-88. main grounds of appeal are as under:- 1. General 2. & 3. Ld. CIT (A) has erred in not taking cognizance of fact that after issuance of notices u/s 139 (2) & 148, no assessment order being passed, assessment became time barred that was framed after issuance of subsequent notices. Ld. CIT(A) ought to have held assessment as null & void. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 2 4.& 5. Ld. CIT(A) has grossly erred in confirming action of AO in following provisions of search proceedings for framing assessment of year under consideration. Ld. CIT(A) has further erred in confirming additions made by AO estimating income from different sources on basis of search & seizure proceedings. 6. & 7. Ld. CIT (A) has further erred in confirming addition of Rs. 3,00,000/- made by AO on a/c of value of gold ornaments & jewellery as undisclosed income. 8. Ld. CIT (A) has denied granting of benefit of Instruction #916 dated 11/05/1994 issued by Central Board of Direct Taxes. 9. Ld. CIT(A) has erred in confirming action of AO in considering investments of Rs.28,845/- is shares & securities to be from undisclosed income. 10. Ld. CIT (A) has erred in confirming addition made by AO of Rs. 1,00,000/- on account of undisclosed expenditure on furniture. 11. Ld. CIT (A) has erred in confirming addition made by AO of Rs.30,000/- on account of undisclosed expenditure of religious donations. 12. & 13. Ld. CIT (A) has erred in confirming additions made by AO of Rs.11,000/- & Rs. 6,000/- made on a/c of undisclosed expenditure on tour to Singapore & Goa respectively. 14. & 15. Ld. CIT (A) has erred in confirming addition made by AO of undisclosed household expenditure of Rs.30,00/- & of Rs. 15,000/- on renovation expenditure. 16. Ld. CIT (A) has erred in confirming addition of Rs.13,650/- made by AO on a/c of stamp papers being purchased from undisclosed income of assessee. 17. Ld. CIT (A) has erred in confirming addition of Rs.15,00,000/- made by AO on basis of paper found at time of search of speculative trading in shares/debentures as undisclosed income of assessee. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 3 18. Ld. CIT (A) has erred in confirming addition of Rs.1,50,000/- made by AO on basis of 2 receipts found at time of search of payment made to Modern Engineering Works by Ms. Neha H. Patel 19. Ld. CIT (A) has erred in confirming addition of estimation of professional income of Rs. 5,33,500/- made by AO on basis of general Client ledger found at time of search. 2. In this case, assessee s appeal was dismissed vide order no. ITA No.76/Ahd/03 dated 12.03.2007. assessee filed M.A. against dismissal order for recalling order vide his M.A. No. 134/Ahd/07, which was recalled by Co-ordinate C Bench vide its order dated 14.12.2007. Therefore, we heard case again and decision on various grounds of appeal on merit is as under: 3. Ground no. 1 is general and ground nos. 2 & 3 have not been pressed by assessee. Therefore, same are dismissed. 4. Ground nos. 4 & 5 are against confirming of addition by ld. CIT(A) on basis of seized materials which are also general grounds of appeal which will discussed against respective additions made by A.O. in following paras. Therefore, these grounds of appeal are also dismissed. 5. Ground nos. 6, 7 & 8 are against addition of Rs.3,00,000/- on account of undisclosed gold ornaments. 6. brief fact is that assessee is Chartered Accountant. There was search and seizure operation on 27.10.86 at office and residence premises of assessee. total jewellery worth Rs.4,18,616/- was found and out of this jewellery worth Rs.3,55,509/- and share and debenture of Rs.28,545/- were seized from assessee s premises by authorized I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 4 Officer. In this case, u/s. 132(5) of IT Act order was passed in which this jewellery was retained by A.O. During course of assessment proceeding, assessee was given reasonable opportunity to explain jewellery of Rs. 3,55,509/-. assessee did not filed any explanation about jewellery before A.O. at time of assessment proceeding on 30.12.1993, except, written reply submitted vide letter dated 27.10.1993. No family member was assessed to wealth tax along with assessee. assessee has disclosed u/s132(4) of IT Act additional income of Rs.3,00,000/- on account of undisclosed jewellery. A.O. made addition of Rs.3,55,509/- on account of undisclosed jewellery in year under consideration in income of assessee. 7. Being aggrieved by order of A.O., assessee filed first appeal before ld. CIT (A), who has adjudicated this issue on page 5 in paragraph no.8 and allowed marginal relief of Rs.55,509/- and confirmed addition of Rs.3,00,000/-. ld. CIT(A) had given this relief by considering Instruction No.1916 dated 11.05.1994 and statement recorded u/s 132(4) of IT Act. 8. Now, assessee is in appeal before us. ld. Counsel for assessee filed paper book and contended that this jewellery was belonged to them. appellant s daughter purchased gold bonds weighing 500 gr. which was on conversion gold bond to gold ornaments were 545 gr. These facts are on record and disclosed by his daughter in her return of income (page reference 180 to 196). assessee s daughter had categorically admitted I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 5 during course of search and seizure proceeding u/s 132(4) of IT Act in reply to question no.6 (page reference 22 of paper book), which is reproduced as under:- I am giving details hereinbelow. (1) One set of gold with one necklace, two earrings, two bangles and one ring. (2) One set of gold with Jautan (Kundan) having one necklace and one pair of earring. (3) One set of Diamonds having one necklace of gold with Diamond pendant, one pair of ear ring, one ring and bracelet (one). (4) One set of rice cultured pearls having one necklace, pair of ear ring, bangles and one tika. Both necklace and tika have pendant jadton but not of gold. (5) Three Diamond ring, which I am wearing. (6) One more Diamond ring with pearls. (7) Two pairs of Diamond ear-rings, one of which I am wearing. (8) Two diamond stud ear rings. (9) One Diamond and pearl ear ring. (10) One gold and pearl ear ring. (11) One mole of gold with beudi of Tulsi. Total 11 items had been admitted during course of search and seizure operation. A.R. claimed that investment in jewellery was made out of disclosed source. appellant s wife claimed that she had received 50 to 55 tolas on occasion of her marriage, 10 to 15 tolas on occasion of jiana (birth of first child). She has purchased jewellery worth Rs.1,15,419/- during period of 1-4-80 to 31-3-81 which had been disclosed in her return of I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 6 income. Thus, investments were made out of disclosed source. ld. A.R. also referred Board s Circular No.1916 dated 11.05.1994 and benefit of this instruction had not been given by ld. CIT(A). He further claimed that no investment in ornaments and jewellery had been made in year under consideration. total jewellery disclosed in return of assessee at page no.59 of paper book worth Rs.78,960/- for A.Y.87-88 (return filed on 19.10.1993). assessee s wife had source of income being insurance commission and gift which can be verified from return for A.Y. 79-80 at page nos. 156-157 of paper book (Return filed on 16.01.1981). She had dairy income as per return for A.Y.81-82 and 82-83 (referred page nos. 170 and 176) which were filed on 13.03.1985 much before date of search. assessee s wife had purchased jewellery and had shown in A.Y.1980-81 at Rs. 12,112/- (referred page no.168 for which return had filed on 13.08.1982) in A.Y. 81-82 at Rs.8000/-, Rs. 18,712/- & Rs.19,224/- for which page was referred 174 of paper book and return was filed on 13.03.1985. Jewellery worth Rs.14,400/- and Rs.300/- was purchased and had shown in A.Y.85-86 for which he referred page no.179 and return of Smt. Sharmistha H. Patel was filed on 13.03.1986. assessee s daughter as per page no.182 purchased another diamond jewellery valued Rs.4,400/- which had been reflected in return for A.Y. 81-82. another gold bond certificate evidence from page nos. 185 & 196 of paper book dated 23.07.1980 in name of Nina Harish Patel which has been disclosed in regular return of assessee s daughter. A.R. further has given re-conciliation of jewellery as under:- I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 7 13. (A) Gold jewellery - Total jewellery found 1634.2gms (a) Sharmistha 1072.7 gms (b) Neena 561.5 gms Benefit of instruction No. 916 950 gms Balance jewellery 684.2 gms (B) Diamond jewellery Sharmistha Rs. 1,99,380/- Neena Rs. 30,290/- Total Rs.2,30,670/- (c) Silver Utensils Rs.61,000/- assessee retracted whatever disclosure made during course of u/s 132(4) of IT Act vide his letter dated 16.02.1987 before Income Tax Officer, Professional, Circle-I, Ahmedabad and claimed whatever jewellery found and seized during course of search was pertained to his wife and his daughter. same explanation for jewellery was given before CIT(A) vide his letter dated 25.09.2002 at page 114. A.R. argued that whatever jewellery found and seized is out of disclosed source of assessee. another side, ld. D.R. vehemently opposed argument of ld. A.R. because of retraction was made after long period from date of search. Further he argued that assessee was Chartered Accountant and he considered all evidences available with him and knew about accounting system and rules and regulations of search procedure, then he had disclosed additional income u/s 132(4) of IT Act. Therefore, to extent of addition of Rs.3 lacs should be confirmed. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 8 9. We have perused order of A.O. as well as CIT(A) and gone through paper book submitted by appellant before us and heard arguments of both sides. Undisputedly, statements of both ladies were recorded during course of search. assessee s wife had not admitted any jewellery in her statement dated 27.10.86 that 50 to 55 tola jewellery was received by her on occasion of her marriage and 15 tola on occasion of birth of first child from their relatives. She only admitted that she had approximately 50 to 60 tola gold ornaments. details of jewellery admitted by her diamond s one green set, one red set, two rings, one butty, kidiya sher, one pair earrings, baby s diamond ornaments, 4 pair earrings, 3 rings, one blue set and baby s gold ornaments approximately 25 tolas. During course of statement u/s 132(4), assessee admitted in reply to question no.59 that all silver utensils are owned by him in his individual capacity. Some of jewellery was belonged to him approximately Rs.15,000/- worth of diamond. balance jewellery belonged to his wife and daughter and source of acquisition was explained from income of respective family members. Neenaben H. Patel had categorically admitted her jewellery in her statement dated 27.10.1986 in reply to question no.6 and also explained source of jewellery with evidence submitted in paper book. total jewellery was found in weight of 1634 gms. As per Board Circular No.1916 dated 11.05.1994, credit of 500gms jewellery is to be given on basis of Hon ble Gujarat High Decision in case of CIT vs. Ratanlal Vyaparilal Jain Tax Appeal Nos. 661 & 662 of 2009, decided on July 19, 2010 in which I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 9 Hon ble Gujarat High Court has held that Board s Instruction No. 1916 dated 11.05.1994 is guideline not only procedure but explanation of source as in Hindu family jewellery is gifted at time of social function viz. marriage, birth day, marriage anniversary and other festivals. We are of considered view that to extent of 600 gms gold jewellery value Rs.1,54,200/- (600 gms. value Rs. 1,54,200/- @ 2570 per 10 grams as on 31.03.1987) held unexplained and CIT (A) is justified to extent of Rs.1,54,200/- in confirming addition and remaining addition of Rs.1,45,800/- is deleted. Accordingly these grounds of appeal are partly allowed. 10. Ground no.-9 is against addition of Rs.28,845/-. A.O. observed that during course of search and seizure proceeding, shares and debentures worth Rs.28,845/- were found and seized. A.O. had given reasonable opportunity of being heard. assessee s replies were considered by A.O. and held that shares and securities amounting to Rs. 28,845/- as undisclosed income of assessee and same was added in income of assessee (wrongly taken in computation Rs.21,845/- by A.O.). 11. Being aggrieved by order of A.O., assessee went in first appeal before CIT(A) who has also confirmed addition on basis of disclosure u/s 132(4) of IT Act on account of share and securities sum of Rs.25,000/-. 12. Now assessee is before us. ld. Counsel for assessee contended that all shares and securities had been disclosed by I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 10 assessee or family members in their respective returns. He also referred page nos. 128 to 132 of copy of letter dated 25th September 2002 submitted before CIT(A). Page no.156 shows that assessee s wife had purchased various shares during A.Y.79-80. Page no.165 of paper book shows that assessee s wife had purchased number of shares of 16 companies during A.Y. 81-82 and she had disclosed dividend on page no.166 and shares had been shown in balance sheet of A.Y. 81-82. On page nos. 172 and 173 show that assessee s wife had debenture bonds of 23 companies on which she got interest, same has been disclosed in return for A.Y.82-83. balance sheet for A.Y. 84-85 also shows that assessee s wife had made payment for purchase of shares. same facts were given to A.O. as well as CIT(A) but they have not considered evidence before deciding case. 13. We have perused all evidence and order of authorities below. assessee s wife as well as his daughter had disclosed all shares and securities in their respective returns which had been filed before date of search. Therefore, retraction made by assessee on account of shares and securities for Rs.25,000/- is justified as same has rebutted with supporting evidence which were available with department. Therefore, CIT(A) was not right in confirming addition of Rs.28,845/-. This ground of appeal is allowed in favour of assessee. 14. Ground nos. 10,11,12,13,14 & 15 are as under:- Sl. No. Nature of Addition Amount I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 11 10. Expenditure on furniture Rs.1,00,000/- 11. Religious donations Rs.30,000/- 12 & 13. Expenditure on tour to Rs.11,000/- & Singapore & Goa Rs.6,000/- 14 & 15. Household Expenses Rs. 30,000/- & Rs.15,000/- 15. A.O. observed in assessment order that during course of search expensive expenditure on furniture & fitting at office and at residence was found. It was not recorded in regular books of account. Similarly, evidences were found on having incurred expenditure on religious donation, expenses on tour to Singapore & Goa by assessee s children, low household expenditure and renovation expenditure of residence of assessee. assessee was interrogated during course of statement u/s 132(4) of IT Act and he admitted household expenses per month Rs.1500/- to 2000/- which are not matching with withdrawal and same were incurred from his undisclosed professional receipts. assessee had disclosed Rs.30,000/- on account of household expenses. In reply to question no.42 of statement dated 27.10.86, he further admitted undisclosed income of Rs. 1,00,000/- on account of furniture at residence and office, Rs.30,000/- on religious donation in last five years, Rs.11,000/- expenditure on Singapore tour and about 5 to 6000/- rupees on Goa tour and Rs.30,000/- disclosed on account of renovation of residence. Thus, total disclosure was Rs.1,92,000/-. source of investment was explained by appellant from undisclosed professional receipts in his statement dated 27.10.1986 in question no.44. Ld. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 12 A.O. had also given reasonable opportunity at time of assessment proceeding vide his letter dated 08th October 1993. appellant replied vide his letter dated 27th October 1993. assessee had denied having been made any unexplained investment on furniture and renovation at residence, religious donations and tour to Goa was made out on family withdrawals. Finally, after considering statement and reply of assessee, A.O. made addition of Rs.1,92,000/- in income of assessee. 16. Being aggrieved by addition, assessee filed first appeal before CIT(A)-XV, Ahmadabad, who had considered these issues from page no. 10 to 17 in paragraph no.10. ld. CIT(A) has discussed all above items individually in his order dated 18.10.2002. main reason for sustaining addition was statement recorded u/s 132(4) of IT Act. 17. Now assessee before us. ld. Counsel for assessee contended that during course of search operation, statement of appellant was recorded and as per statement, he made disclosure in total Rs.2,17,000/- which includes disclosure of jewellery Rs.25000/- and had been considered elsewhere. remaining addition of Rs.1,92,000/- had been made without verifying fact as to such expenses were incurred during period under consideration. Disclosure of Rs.1,15,000/- on account of furniture and renovation of residence which was made to buy piece of mind, only if anything is found during search operation. Nothing was found in relation of such expenditure either relating to period under consideration or otherwise. Therefore, addition was not warranted. appellant had I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 13 retracted this disclosure vide letter dated 16.02.1087 before ITO Professional Circle-1, Ahmadabad (paper book page no.44) and vide his letter dated 25th Sepetemebr 2002 before CIT(A) as per page no.136 of paper book. During course of search some receipts of religious donation was found but this was managed by assessee s father and receipts were related to previous year not year under consideration and disclosure was made by assessee to buy peace of mind if anything was found out during search operation. appellant had disclosed Rs.11,000/- on account of Singapore trip of daughter who was group leader of school tour and all particulars mentioned in diary related to school trip and also related previous year not year under consideration. Likewise expenditure on Goa tour of Rs.6000/- was disclosed by him but same were related to previous year. appellant disclosed amounting Rs. 30,000/- on account of household expenditure but household during assessment year was Rs.38,572/-. As per Section 69C of IT Act any expense incurred unaccounted it can be added in which it has been incurred. Therefore, learned counsel argued that all disclosure was made to buy peace. Another side, ld. D.R. vehemently relied on order of A.O. and CIT(A) and statement u/s 132(4) of IT Act. 18. We have perused orders of authorities below and paper book and heard arguments of both sides. ld. A.O. had not brought on record any incriminating material to show that assessee had incurred expenditure on furniture and renovation. He considered only statement I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 14 recorded u/s 132(4) of IT Act. Thus, there is no basis of addition of Rs.1,15,000/- and CIT(A) was not right in confirming addition. During course of search, evidence for religious functions were found and same had been disclosed by assessee but before lower authority as well as before us, appellant had not explained source of expenditure on religious function. Thus, we hold that CIT(A) was justified in confirming addition of Rs.30,000/- on account of religious function. appellant had not filed any evidence regarding Singapore as well as Goa tour for explaining source of expenditure. Therefore, CIT(A) was right in confirming addition. assessee is Chartered Accountant and had withdrawn Rs.38,572/- during year under consideration which was not found sufficient during course of search. Therefore, assessee disclosed Rs.30,000/- on account of household withdrawal as discussed by A.O. in assessment order that one daughter and one son who were school going and living standard of appellant was descent as considered by authorized Officer during course search and assessee himself admitted undisclosed expenditure from professional income during course of search in his statement u/s 132(4) of IT Act. Therefore, CIT(A) was right in holding addition of Rs.30,000/- on account of household expenditure. Thus, addition of Rs.30,000/- on account of religious function, Rs.11,000/- on Singapore tour, Rs.6000/- on Goa tour and Rs.30,000/- on household are confirmed by us but addition on account of furniture and renovation at Rs.1,15,000/- is deleted. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 15 19. Ground no.16 is against addition of Rs.13,650/- on account of stamp paper purchase. A.O. observed in paragraph 16 of page no.13 of assessment order that assessee had purchased stamp of Rs.13,650/- as per Annexures Y-1, Y-2 & Y-3. assessee s reply was that these stamp papers were purchased by different clients of assessee as it is convenient for them to purchase stamp in name of any legal representative which can be used by any of them. A.O. did not find assessee s reply convincing, thus, he made addition of Rs.13,650/- in income of assessee. 20. CIT(A) also confirmed addition on page 18 of CIT(A) order in paragraph no.11 because stamps were found in possession of assessee and no material was brought on record by appellant that stamp papers were purchased by other. 21. Now assessee is before us. Ld. Counsel for assessee contended that all stamps were not pertained to assessee himself. appellant filed bifurcation of stamp purchased before CIT(A) and claimed that stamp valued Rs.6098/- purchased in name of assessee and remaining stamp valued Rs.7552/- in name of different parties. He further claimed that during year under consideration only stamp Rs.710/- were purchased. Thus, no addition is called for. Whereas, ld. CITD.R. vehemently argued that ld. CIT(A) had considered all evidence. Therefore, order of CIT(A) may be confirmed. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 16 22. We have perused statement u/s 132(4) of IT Act and order of authorities below and arguments and reply filed before CIT(A). assessee had hardly purchased stamps valued Rs.710/- during year under consideration and remaining stamps were either purchased by other parties or purchased by assessee in different years. Thus, CIT(A) was not justified in holding addition of Rs.13,650/-. We allow appeal on this ground in favour of assessee. 23. Ground no.17 is against addition of Rs. 15,00,000/- on account of speculative trading in shares/debentures. Ld. A.O. observed that on page nos.15 to 20 of assessment that as per page nos. 61 to 65 of Annexure Y-1 of Panchanama, it was found that there had been active trading of shares by assessee. These details were given on page nos. 49 to 60 of same Annexures. appellant filed written reply before A.O. that all papers of Annexure Y-1 belonged to different clients. None of them either belonged to him or his family members. Further he claimed that transaction on page nos. 49 to 65 can be explained on basis of entries itself. appellant gave name of partners/members of Popular Group as per page no.59 but other pages cannot be explained. A.O. further observed that on page no.64, there were transaction of purchase of shares of Atul Reliance, Standard, G.N.F.C. etc. for worth Rs.2,56,455/- on reverse side, there was another transaction of Rs.21,750/- on which no name of company has been mentioned. appellant had calculated profit of Rs.18,295/- on transaction of shares of Standard company on which brokerage I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 17 had been paid @ 1% for A.Y. 87-88. On page no.55 of Annexure there was certain 17 companies names were given and total sale purchased had been shown at Rs.9,76,680/- and profit worked out at Rs.1,23,239/-. There were certain slips issued by various share brokers at page nos.27 to 92 of Annexure Y4 which were also supported that assessee was dealing in purchase and sale of shares and debentures. assessee s letter dated 31.12.93, was considered in which he had denied having been done any speculative trading or dealing in share. assessee s reply was not found convincing to A.O. Therefore, he estimated income of Rs.15,00,000/- on account of unrecorded shares income arising out of investment. 24. Being aggrieved by order of A.O., assessee filed first appeal before CIT(A) who had adjudicated this issued from page nos. 19 to 21 and confirmed addition by observing as under:- argument of appellant and facts of case have been considered. main plea taken by appellant is that seized papers showing transactions of shares does not pertain to him. It pertains to its clients of appellant who belong to popular group. But appellant has not produced any evidence to show that transactions does not pertain to him. mere claim that it pertains to someone else is not enough. If documents have been found in his possession, it is for him to lead evidence to show that it does not relate to him. Further, A.O. has mentioned that attention of appellant was drawn to pages 27 to 92 of Annexure Y-4, which are slips issued by various share brokers in names of family members of appellant and also towards other loose papers. appellant could not explain it properly, hence A.O. considered that transactions were conducted by appellant himself. A.O. has further mentioned I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 18 that during search, dividend vouchers in names of various family members of appellant was found. Further considering fact that purchase and sale of shares is continuous process, A.O. estimated income arising out of such investment at Rs.15,00,000/-. Considering above discussion and material found during search, it is quite clear that appellant was dealing in purchase and sale of shares. Hence addition made on this account is confirmed. 25. Now, assessee is before us. ld. Counsel for assessee contended that during search and seizure operation certain papers were found as per page no.197 to 202 of paper book. Page nos.49 to 65 of Annexure Y-1 were pertained to shares and securities. appellant explained that these shares and securities were not belonged to him and his family members as per statement u/s132(4) in question no.9 to 27 ( page no.31 of paper book). Ld. A.O. made addition of Rs.15,00,000/- on estimation for dealing in share and debentures. statement u/s 132(4) dated 28.10.1986 is reproduced as under: Q.9.. I am showing you page no.60 of Ann. Y-1 found from your office during course of search. From calculation appearing on this page it appears that these reflect speculation transactions in shares and resulting profit therefrom. What have you to say in this respect? Ans. After going through above page 9 state that this pertains to my clients Shri Chhaganlal B. Patel, Smt. Kokila C. Patel, Shri Natwarlal B. Patel and their family members. Q.10. Why is this paper in you possession? Ans. This paper had been given to me for seeking my advice. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 19 Q.11. Will you please specify advice for which this paper had come to you and then left in your office? Ans. paper might have come for seeking advice either for sale of shares or for filing their return of income. Q.12. Kindly be more specific. If it had been for filing return it could not have been left unattended? Ans. I can t be more specific because I do not know full detail. Q.1.3 Regarding sale of shares what kind of advice do you render to your clients. Ans. advice varies from client-to-client. However, mostly it is about time of sale so as to maximize profit and also to minimize tax-liabilities. Q.14. How many of your clients sought such advice during past five years? Ans. It is not possible to give exact figure. Q.15. Is it regular feature that you render such advice? Ans. No. Occasionally I render such advice. Q.16. In your opinion how many clients seek such advise in year? Ans. Very few. Q.17. When very few clients come for seeking such advice then you must be able to specify whether persons connected with page 60 of Annexure Y-1 had come for such advice or not? I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 20 Ans. Yes, they had come. Q.18. What fees did you charge from them for this particular advice? Ans. No specific fees is charged for such advice from regular clients and in this case no fees for this advice was charged. Q.19. So one thing is clear that page 60 of Annexure Y-1 came to you for seeking advice for sale of share. Is that correct? Ans. It was in relation to share. I am not sure whether it was for sale of share, calculation of capital gains or preparing of return of Income. Q.20. In response to Q. No.17 you had stated that person connected with said document had come to you for seeking advice regarding sale of share. In response to Q.19 you have changed your stand. What is reason for this? Ans. reality is that I do not know about this paper. Q.21. I am showing to you page 61 of Annexure Y-1. What are calculation on this page? Can you link up calculations have with those on page 60 of this annexure? Ans. I am not in position to state nature of calculation. I can not link up figures appearing on page no.60 and 61. Q.22. I am showing to you page 62 of Ann. Y-1. What are figures on this page and can you link up this with page no.60? Ans. I am not in position to state nature of calculation. I can t link up page no.60 and 62 of Y-1. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 21 Q.23. I am showing to you page no.63 & 64 of Ann. Y-1. What calculations are there on these pages? Can you link these with page no.60? Ans. I am not in position to state nature of calculations on these pages. I can not link up these pages with 60. Q.24. I am showing to you page no.65 of Ann. Y-1. What are receipts on various dates relating to as mentioned on this page. Ans. I cannot say anything in this respect. Q.25. Can you link it up this page with page no.60 of Y-1. Ans. No, I can not link it up with page no.60 of Ann. Y-1. Q.26. To whom do transaction relate? Ans. I do not have any idea. Q.27. In whose handwriting is page no.65 of Y-1 written? Ans. It is not in may own handwriting. Q.28. I am showing to you page no.283 and 284 of Ann.Y-1. What is nature of noting on this page? Ans. These papers were given to me about two years back by someone from Pravin Corporation group. This is list of stamp-papers which were available with that group. Whatever has been stated above is true to best of my knowledge and has been stated without any coercion and/or inducement and is fully acceptable to me. After going through statement I am signing. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 22 copies of paper shows that these are pertaining to Popular Group cases. Therefore, presumption u/s 132(4)(A) does not stand established by A.O. Further papers were seized from assessee s office not from residence of assessee which supported that these papers were pertained to his client. ld. CIT D.R. relied upon order of A.O. and CIT(A) and prayed to confirm addition. 26. We have gone through orders of authorities below and submission made by assessee and heard arguments from both sides. It is evident from documents seized that some of dividends slips were in name of assessee and his family members. Further, profit on purchase and sale of share has calculated by assessee on those seized papers. appellant had not brought on record any evidence that these papers were pertained to Popular Groups or either assessee s client. appellant had not substantiated his claim before A.O., CIT(A) and also before us with evidence that these papers were pertained to different persons. However, estimate made by A.O. appears to higher side further assessee had disclosed shares and securities in name of family members in their return. Therefore, we confirm CIT(A) order to Rs.7,00,000/- instead of Rs.15,00,000/-. Thus, assessee gets relief of Rs.8,00,000/-. assessee s appeal is partly allowed on ground. 27. Ground no.18 is against addition of Rs.1,50,000/- on account of payment made to Modern Engineering and Moulding Company by Ms. N.H. Patel. As per page 93 and page 94 she paid Rs.1 lac and Rs.50,000/- to I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 23 above party. assessee was given reasonable opportunity to explain source of Rs.1.5 lacs. He submitted reply vide his letter dated 27.10.1993 and admitted that she had paid Rs.1.5 lacs to that company from Haniush Trust account by debiting to her account. necessary evidences were not filed by assessee before A.O. at time of assessment proceeding. Therefore, he made addition of Rs.1.5 lacs in income of assessee. 28. ld. CIT(A) had also confirmed addition on account of payment made to above company because he did not produce any evidence before Assessing Officer to explain source of investment and also even during appellate proceeding, source of deposit was not explained. 29. Now assessee is before us. ld. Counsel for assessee contended that Ms. Nina H. Patel had her own source of income and same had been paid out of own source by debiting her account in book account of Haniush Trust. payment was out of disclosed source and paid by bank drafts. They are in seized materials in Annexure Y-4 at page nos. 93 & 94. dates of payment were 24.05.85 & 27.05.85 and same were received back on 06.09.85. entries pertained to other than year under consideration. appellant further argued that no addition can be made in hand of appellant as it did not pertain to him and also for year under consideration. He further relied upon 176 ITR 660 (Punjab and Haryana High Court) & 93 ITR 341 (Mad.) that burden of proof on A.O. to establish that payments were made form undisclosed income of assessee. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 24 30. We have perused order of authorities below and heard arguments from both sides. It is undisputed that this transaction is in name of Ms. Nina H. Patel (Assessed s daughter) who was assessed to tax and had own source of income. payments were made though drafts which were not pertained to year under consideration. Therefore, CIT(A) was not justified in confirming addition made by A.O. on account of payment made to Modern Engineering and Moulding Company amount to Rs.1.5 lacs. Hence, appeal on this ground is allowed. 31. Ground no.19 is against estimating professional income by Rs.5,33,500/- on basis of general client ledger found at time of search. During course of search and seizure operation client general index register was seized from premises of assessee. He had total number of clients 4875/-. Even then appellant had not filed return for A.Y. 87-88. appellant was given reasonable opportunity before estimating professional receipts. appellant replied vide his letter dated October,27, 1993 and total receipts had been disclosed from professional business at Rs.4,41,507/-. He further admitted during course of recording statement u/s 132(4) that Amounts received by me from various persons which come to me for professional advice other than my clients are not recorded by me in my regular Books of accounts. A.O. estimated income @ Rs.200/- per client at Rs.9,75,000/- and after reducing disclosed receipts of Rs.4,41,507/-. remaining amount of Rs.5,33,500/- was added in income of assessee. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 25 32. CIT(A) had confirmed addition on page nos.24 and 25 of CIT(A). observation made by CIT(A), which is reproduced as under:- argument of appellant and facts of case have been considered. It has been found that during course of search, appellant himself admitted in response to question No.44 Amounts received by me from various persons which come to me for professional advice other than my clients are not recorded by me in my regular books of accounts. Further it has been mentioned by assessing officer that during search proceedings no systematic details about receipt from clients were found recorded. Considering fact that there was no systematic record of professional receipt found during search and in statement recorded u/s.132(4) at question No.44 appellant had admitted that amount received from various persons are not recorded, estimate made by assessing officer on basis of clients general index register is quite reasonable. Further, assessing officer has taken average professional fee of Rs.200/- only. Rs.200/- per file is very reasonable estimate and hence addition made on this account is quite reasonable. Hence it is confirmed. 33. Now assessee is before us. ld. Counsel for assessee contended that during search proceeding clients general index register was found and seized. As per register, number of clients was shown which have been 4875/-. It was estimated @ Rs. 200/- per client multiplied by number of clients and same was arrived at, out of which receipts actually declared was deducted and balance was added as professional income not recorded in books. Hence, addition of Rs.5,33,500/- was made. He further argued that addition was made on pure guess work not I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 26 based on evidence or documents. appellant had already explained before A.O. as well as CIT(A) that number of clients shown in register are non operative clients who were continuing from beginning of register maintained except assumption and presumption, there was no base for making such estimated addition, hence, same should be deleted. assessee had retracted from his statement before A.O. at time of 132(5) of order as per page no.44 of paper book. Therefore, addition made by A.O. was not justified and CIT(A) has wrongly confirmed addition. From side of Revenue, ld. CITD.R. vehemently relied on order of A.O. and CIT(A) and prayed to confirm addition made by A.O. 34. We have perused orders of authorities below and heard arguments from both sides. It was undisputed that except client general index register, nothing incriminating document was found. Another side, appellant had admitted that he was not reflected full income in regular books of account. client general index is running account which had old clients also. It is not possible that whatever number mentioned in client general index register had took advice from appellant, addition made by A.O. appears to higher side, therefore, we confirm addition under this head to Rs.2,00,000/- in interest of justice. remaining addition of Rs. 3,33,500/- is deleted. 35. In result, Assessee s appeal is partly allowed. Order pronounced in Open Court on date mentioned hereinabove at caption page. I T No . 7 6/ hd / 20 0 3 A. Y. 87- 8 8 Page 27 Sd/- Sd/- (D.K.Tyagi) (T.R. Meena) Judicial Member Accountant Member True Copy S.K.Sinha / Copy of Order Forwarded to:- 1. / Appellant 2. / Respondent 3. / Concerned CIT 4. - / CIT (A) 5. , , / DR, ITAT, Ahmedabad 6. [ / Guard file. By order/ , / , Strengthen preparation & delivery of orders in ITAT 1) Date of taking dictation 13 & 18.07.2012 2) Direct dictation by Member straight on XXX computer/laptop/dragon dictate 3) Date of typing & draft order place before Member 23.07.2012 4) Date of correction 24.07.2012 5) Date of further correction 26.07.2012 6) Date of initial sign by Members 31.07.2012 7) Order uploaded on 31.07.2012 8) Original dictation pad has been enclosed in this file Yes 9) Final order and 2nd copy send to Bench Clerk on 31.07.2012 Shri Harish S. Patel v. Deputy CIT Spl. Range -1