Delhi High Court

Master Abhinav Malhotra & Anr. V ... vs Unknown on 14 November, 2003

Equivalent citations: (2004) 89 TTJ Del 144

ORDER

R. Jain, A.M.

These two appeals by two different assesseds and one cross objection by the revenue are directed to be disposed of by a common order as common issues are involved.

2. The assessing officer assessed an income of Rs. 12,09,436 as 'income from undisclosed sources' in the case of Master Abhinav Malhotra who is the minor son of second assessed Shri Deepak Malhotra. This income has been assessed on protective basis in his hands whereas the substantive addition has been made in the hands of Shri Deepak Malhotra which are under challenge besides other additions on trading account etc.

3. The return of income declaring an income of Rs. 1,65,334 has been filed on 13-2-1992 in a New assessed Circle-7 (1), New Delhi in the case of Master Abhinav Malhotra. The assessing officer issued notices which were duly served upon him and assessment was completed ex parte under section 144 of the Act on the basis of material available on record. The assessing officer observed that the assessed has made investment in M/s Rama Jewellers, South Extn. Part-I, New Delhi and M/s Rama Jewellers, Dariba, Delhi from whom interest income has been received. The net accretion to, assessed's assets on account of deposits with these firms amounted to Rs. 13,81,819. The assessed has disclosed income from interest from banks, and from these deposits aggregating to Rs. 1,72,334 and thus net accretion resulted is Rs. 12,09,36. This was treated as income from undisclosed sources which came to be assessed under the head as income from other sources and assessment was completed at Rs. 13,74,770 on protective basis with the remarks that without prejudice to the right of the department to assess the same income in the hands of his father/natural guardian or any other person who may be found to be the actual owner of the income on investigation.

4. Shri Deepak Malhotra prop. M/s Rama Jewellers, NDSE, Part-1, New Delhi has been assessed by the Assistant Commissioner, Circle-12, New Delhi at an income of Rs. 62,68,450. The assessing officer vide para 9 of his order has stated that the learned Commissioner (Appeals) has recorded finding that his son has received gift of Rs. 12,80,000 from NRI a/c No. 3147 of Punjab & Sind Bank, Safdarjung, New Delhi. This gift has been received from Shri Sudhir Gupta, House No. 3, Flat No. 260, Street Krasmayakaser Manya, Moscow- 123610-USSR. From the confirmation letter of the donor the assessing officer presumed that this was an open letter and the same appears to have been issued to accommodate any one name as and when the need arises for the reason that the name of the person to whom it is addressed is missing against the word "dear". Furthermore the assessed has not substantiated that NRI a/c No. 3147 belongs to the donor Shri Sudhir Gupta. The assessed was confronted with the observations of the learned Commissioner (Appeals) in the case of Master Abhinav Malhotra. There was no clinching evidence with him to establish that this gift was genuine. He, therefore, treated the amount of Rs. 12,80,000 as unexplained income of the assessed by holding that Shri Deepak Malhotra is the ultimate and absolute beneficiary of the amount in question. He also disallowed the interest of Rs. 1,51,320 paid by his proprietorship firm M/s Rama Jewellers to Master Abhinav Malhotra. This resulted into an addition of Rs. 14,31,320.

5. The learned Commissioner (Appeals) confirmed the action of the assessing officer. In the case of Master Abhinav Malhotra he also directed the assessing officer to include in the income of the minor an amount of Rs. 12,80,000 as against Rs. 12,09,436 originally made by the assessing officer under section 69 of the Act after giving proper notice for enhancement besides upholding the validity of jurisdiction.

6. The assessed's counsel Shri CS Agarwal contends that the said gift of Rs. 12,80,000 besides being genuine is covered by immunity granted under the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 which received assent of the President of India on 18-9-1991. Copy of the relevant provision of the said Act has been placed at assessed's paper book pp. 52 to 56. The return for assessment year 1992-93 was furnished in a New assessed Circle-7(1) New Delhi on 30-6-1992 as this was a centralised ward. The learned Commissioner (Appeals) vide para 2.4 of his order states that this circle was created with effect from 19-11-1991 only and jurisdiction given to this circle covers cases of all such new assesseds whose assessments had not been completed as on 1st April, of the financial year beginning with 1991. However, prior to creation of this circle the assessed Master Abhinav Malhotra had already filed return of his income on 20-4-1991 for assessment year 1990-91 and 1991-92. The original acknowledgements for which were also given to the learned Commissioner (Appeals). These were neither found fabricated nor as subterfuge. No such finding has been recorded. The returns are duly stamped bear number and signature of the office of the Income Tax Department. The learned Commissioner (Appeals) relied only on the internal report and remained silent on the document, which in original was available with him. Adverse inference therefore could not have been drawn. Even though the assessed had taken an objection before the assessing officer regarding jurisdiction vide his letter dated 2-11-1992 copy placed at assessed's paper book p. 12, the Income Tax Officer proceeded in completing the assessment without disposing the application before him for transfer of record and the learned Commissioner (Appeals) upheld the validity of the jurisdiction. Such decision of the learned Commissioner (Appeals) is erroneous and needs to be set aside.

7. On merit the issue involved is for addition of Rs. 12,09,436 and enhancement thereof to Rs. 12,80,000 as unexplained investment for accretion in investment in M/s Rama Jewellers. The learned Commissioner (Appeals) vide para 3.3 of his order has, recorded the version of the assessed that the protective assessment made is untenable in law for the reason that the order of the assessing officer is totally vague and showed that there was no satisfaction of the assessing officer that the returned income did not belong to the assessed Master Abhinav Malhotra. The gift of Rs. 12,80,000 was received by cheques drawn on Punjab & Sind Bank, Safdarjung Enclave, New Delhi, from Shri Sudhir Gupta and the amount was released and credited in the bank account of Master Abhinav Malhotra after debiting the same to the NRE a/c No. 3147. A certificate from the manager, Punjab and Sind Bank, Safdarjung Enclave, New Delhi certifying that banker cheques No. 816078/622/91 dated 5-10-1991 has been debited to NRE A/c No. 3147 of that bank was also filed. A photo copy of the letter confirming the gift having been given out of natural love and affection was also filed before the assessing authority and the original produced before the learned Commissioner (Appeals). The money has been received through banking channel and from a bank account which is NRE a/c not owned by the assessed nor his father or natural guardian. If the money comes from NRE a/c then the addition cannot be made in the hands of a donee. Such a view has been entertained by the Chandigarh Bench of the Tribunal in the case of R.K. Sayal v. Asstt. CIT ITA No. 1165/Chd/1996, dated 11-2-1999 (2000) 66 TTJ (Chd-Trib) 656-Ed.) as also in another case of Jawahar Lal 0swal v. Assn. CIT in ITA No. 74/Chd/1998 (2001) 71 TTJ (Chd) 240-Ed.) copies of which are placed at assessed's paper book pp. 1 to 48.

8. The assessed had given explanation that Rs. 18 lakhs were advanced to M/s Rama Jewellers by the appellant Shri Abhiinav Malhotra out of gift received and out of opening balance of Rs. 5,29,818 lying with Oriental bank of Commerce. The appellant also offered that the donor may be summoned who made the gift so as to explain the sources of investment made in the relevant year by the appellant besides filing necessary evidence of receipt of gift which is credited in his bank account. The assessed has discharged the onus which lay upon him. The authorities below however did not summon the donor but merely asked to submit, the bank statement of NRI Shri Sudhir Gupta. The banker had refused to supply such a statement as the account did not belong to the appellant and obtaining the bank statement of a third party was beyond the control of the assessed. The assessed therefore cannot be expected to perform the impossible. The revenue also did not act upon the request to summon the donor and as such it was not permissible in law to draw an adverse inference without summoning or examining the donor. Reliance has been placed on the Apex Court decision in the case of CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) and in the case of Nathu Ram Prem Chand v. CIT (1963) 49 ITR 561 (All).

9. It was further contended that the learned Commissioner (Appeals) has gone wrong in saying that the assessed has not furnished-any evidence to indicate that NRE a/c 3147 belong to Shri Sudhir Gupta of the given address despite the fact that banker certificate showing the nomenclature of the account was duly furnished before him. It is not in dispute that the account is of NRE and as per Banking Regulation Act, it cannot be opened by a person who is resident in India. There is no material to suggest that the appellant is owner in law. Merely on suspicion and surmises basis no presumption can be drawn that the said NRE a/c was that of the assessed.

10. The assessed had identified the donor and fixed consideration to show that gift was received out of natural love and affection and through banking channel. The amounts therein explained to the donor which were received in foreign currency in that account. The assessed, therefore, has discharged its onus about the identity and the capacity of the donor to make gift and also that the amount had actually been received as a gift from that person and thus genuineness of the gift stands established. However, the assessed also claimed an immunity of the said gift under the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991. The gift is dated 4-10-1991 which has been taken after the commencement of the Act on 18-9-1991. The immunity for remittances received was in respect of all such remittances which has been received before the 1-1-1992 and thus the amount received as gift was within the period of immunity available to the assessed. The revenue however on the basis of a press release of a later date in respect of Rubal remittances received from NRE account held that such remittances are not eligible for exemption under Remittances Foreign Exchange Immunity Scheme, 1991. They have not denied the immunity on the basis of the provisions of the said Act but had merely relied on the press release that too of dated 25-10-1991. Copy of such a press release based on RBI Circular dated 8-10-1991 placed at assessed's paper book p. 63-64 and press release dated 25-10-1991, copy placed at assessed's paper book p. 65. The immunity was also available to the assessed as the remittance was received pursuant to the scheme announced by the Government of India and enactment made thereto. Any press release of a later date and after the gift/remittance had already been received could not be used to deny exemption to the assessed. The assessed also moved the Hon'ble High Court of Delhi for seeking protection that no coercive action be taken against him till the disposal of the writ petition which is still pending. However, it will not prejudice the decision of the Tribunal as the Hon'ble High Court has given liberty to continue the proceeding in this matter. Copy of the order is placed at assessed's paper book p. 51.

11. The learned Commissioner (Appeals) also upheld further addition of Rs. 70,564. This amount was available out of income and could not have been added for making enhancement in this case.

12. The learned counsel concluded by saying that the assessed has explained the investment and the nature and source thereof which had came from the bank account of Master Abhinav Malhotra. No protective addition could have been made in his hands. It was also contended that money is not found to have come from the sources of his father Shri Deepak Malhotra and he cannot be said to be the ultimate beneficiary as the interest thereon has been paid to Master Abhinav Malhotra on the liability in his hands. The addition for unexplained investment in the firm thus cannot be made in the hands of Shri Deepak Malhotra on substantive basis particularly when the amount had come from the bank account belonging to Master Abhinav Malhotra and part of the receipt stood already admitted by the department itself. It was, therefore, prayed that the addition needs to be deleted from both the hands.

13. In counter reply the learned Departmental Representative strongly objected to the question of jurisdiction as raised by the learned counsel for the assessed. Master Abhinav Malhotra was validly assessable under the jurisdiction with the assessing officer, New assessed Circle-7(1) New Delhi., This was a newly created circle and the record did not reveal existence of returns claimed to have been filed by the assessed for the earlier years. On this aspect he supported the detailed finding recorded by the learned Commissioner (Appeals) as well as on merit, accretion in capital account remaining unexplained and in the light of circular dated 8-10-1991 of the Reserve bank of India, the assessed cannot be given immunity under the Remittances in Foreign Exchange (Immunities) Scheme, 1991. Shri Deepak Malhotra is the real beneficiary where the funds have ultimately travelled. It was therefore, prayed that the addition made by the assessing officer and upheld by the learned Commissioner (Appeals) for the detailed reasons given in their orders need no interference.

14. The assessed's counsel Shri Agarwal maintains his stand that the assessment had been made without jurisdiction as no order for transfer of jurisdiction has been passed by the assessing officer. Such an order therefore needs to be annulled and on merits also the addition also made to be deleted in the light of arguments advanced by him.

15. We have heard the parties with reference to the material available on record and the case laws referred. On question of validity of jurisdiction of the Assistant Commissioner, New assessed Circle 7(1), New Delhi, the learned Commissioner (Appeals) upheld the validity after making internal enquiries from Range-7. The learned Deputy Commissioner (Appeals), Range-7, reported that as per return receipt register of Ward-7 (1), New Delhi there is no entry of receipt of any return of income or wealth of dated 22-4-1991 in the name of other assesseds. The Income Tax Officer, Ward-7(1) has also filed certificate to this effect. The receipt register of Ward-7(1) also indicates that no such return was filed by the appellant in that ward prior to 30-6-1992. The assessed has not given any comments thereto. However, the original acknowledgements were filed by the appellant before the learned Commissioner (Appeals). Those acknowledgements were duly stamped bearing number and signature of the department yet the learned Commissioner (Appeals) did not record any finding about the genuineness or otherwise of such acknowledgements. It was not for the assessed to prove the genuineness thereof. The duty cast upon an assessed is only to file the return and obtain acknowledgement thereof. Thereafter, his duty ends and it is for the department to make or not to make its entry in other records and the assessed has no control in the matter. In any event, the assessed cannot be called upon to discharge departmental functions and do all that what the authorities are required to do. In case the departmental enquiry revealed that there are no returns on the record of the revenue but acknowledgements in original thereof were available, it was for the revenue to have brought such an enquiry to the logical conclusion by finding out as to how and under what circumstances such returns have vanished from the record without taking entry thereof and also fixed the responsibility of its official. For any lapses on the part of departmental officials, assessed's claim of lack of jurisdiction could not have been brushed aside without showing that the acknowledgements are fabricated or procured. The learned Commissioner (Appeals) did not record any such finding. Under such circumstances, without reading anything to the disadvantage of the assessed, essentially the filing of returns for which original acknowledgements were on record, the learned Commissioner (Appeals) had to be accepted. Learned counsel has also explained that the return for the impugned year came to be filed in New assessed Circle 7(1), New Delhi, because all the returns in that year were centrally received at one place. This fact has not been denied by the revenue. The assessed is also found to have raised the objection of jurisdiction before the assessing officer but his petition remained undisposed. Since the jurisdiction provision is mandatory and are enacted in public interest, even if the return came to be filed in New assessed Circle 7(1), New Delhi by the assessed himself, the act of the assessed does not give jurisdiction to the assessing officer under the attendant facts and circumstance. We, therefore, hold that the proceedings to arrest have been taken invalidly for the lack of proper jurisdiction by the Assistant Commissioner, New assessed Circle 7(1), New Delhi and the learned Commissioner (Appeals) is found to have erred in upholding the validity of jurisdiction.

16. When considered the issue on merits, the assessed is found to have taken the gift of Rs. 12,80,000 on 4-10-1991 through an account payee cheque which is drawn on the Punjab and Sind Bank, Safdarjung Enclave, New Delhi. This is evidenced by a copy of letter written by the donor Shri Sudhir Gupta whose complete address and identity was available with the assessing officer. Copy placed at assessed's paper book page 20 reveals that the said amount was given as a gift out of love and affection. The manager of the bank has also confirmed the amount of Rs. 12,80,000 to the credit of Master Abhinav Malhotra has been debited to NRE account No. 3147 maintained in that branch. It is not disputed by the revenue that the amount under consideration have come from the NRE account. It is also a well known fact that no amount can be deposited in NRE account in Indian currency and all the deposits have to be made in such account only in foreign currency. The department has neither found nor brought any material on record to say that the deposit made in this account are owned by the assessed or has come from the appellant Master Abhinav Malhotra or his father Shri Deepak Malhotra nor that the money therein did not belong to the donor. The assessed had at one stage even requested the learned Commissioner (Appeals) to issue summon and verify the genuineness of the transaction yet he did not act upon the request of the assessed. He proceeded to hold that the amount of gift remained unexplained in the hands of Master Abhinav Malhotra merely because the evidence has not filed that the account belongs to Shri Sudhir Gupta the donor. In fact the assessed had discharged the onus to establish the identity of the donor and it was not incumbent upon him as to whether NRE ale from which the money has been received as a gift from Shri Sudhir Gupta is his own account or otherwise. The bankers had also issued a certificate which confirmed the correctness of particulars of receipt supported by the appellant. Once it is established that the monies have come from NRE account and there is no contrary evidence in possession of the revenue, it wag not pernlissible to draw any adverse inference. The NRE account has sufficient balance wherein the monies as found earlier also had come in foreign exchange. NO doubt could thus be raised about the capacity of the donor to make such a gift unless he had examined or the enquiries made. The receipt of the amount is evidenced by a letter written by the donor and placed on the record of the revenue by the assessed. This letter had not been found false or fabricated. Under such circumstances, the veracity of the assessed that the amount has actually been received as a gift cannot be doubted.. The receipt of the sum of Rs. 12,80,000 by Master Abhinav Malhotra has essentially to be accepted as genuine gift received from Shri Sudhir Gupta which otherwise also was covered by the immunity granted under the Remittances of Foreign Exchange & Investment in Foreign Bonds (Immunities & Exemption Act, 1991 after the commencement of the Act and before the specified date of 1-4-1992. The gift was received on 4-10-1991 and merely because the press note dated 25-10-1991 which appeared in the newspaper on the strength of circular issued by the Reserve Bank of India dated 8-10-1991 saying that remittances from countries from Bilateral Group and also transfer of amounts from NRE a/c held in the names of persons resident in Bilateral Group are not eligible under the scheme would not disentitle the appellant from the benefit of revenue (sic) more particularly when the gift stood accepted by the assessed in accordance with the provisions of the Act and much before the date of such circular on 8-10-1991. The bank circular was applicable only prospectively and as such the appellant's receipt was covered by the immunity granted under the Foreign Exchange & Investment in Foreign Exchange Bonds (Immunities & Exemption) Act, 1991.

17. Having found that the amount was received as a genuine gift for which the assessed also had immunity from taxation, the amount of such gift stood invested in the bank account of Master Abhinav Malhotra. The assessing officer did not make any addition on account of any investment in the bank account but proceeded in making the addition for investment in M/s Rama Jewellers which had come from the own bank account of the appellant Master Abhinav Malhotra which was held and maintained in his own right and the deposits in the said account came from explained sources of Master Abhinav Malhotra and the assessing officer also himself did not doubt the availability of deposits to the extent of Rs. 5,29,818. Even otherwise there is no finding that income or receipt does not belong to the appellant Master Abhinav Malhotra. No addition either on protective or substantive basis was thus required to be* made. Besides this Shri Deepak Malhotra who is the father of the appellant Master Abhinav Malhotra and is also prop. of M/s Rama Jewellers where the deposits have come from the explained bank account of Master Abhinav Malhotra, no addition under substantive basis could have been made without finding that the amount in question has come out of the income belonging to that person. Shri Deepak Malhotra is not found as the real owner of that amount but had incurred a liability only and was paying interest thereon. The additions so made with direction to enhancement in the hands of Master Abhinav Malhotra as well as on protective basis and in the hands of Shri Deepak Malhotra on substantive basis are directed to be deleted.

18. In ITA No. 2753/Del/96 ground Nos. 1 to 6 in assessed's appeal and in ground No. 1 in ITA No. 3939/Del/94 of revenue's appeal the common issue relates to the trading addition of Rs. 16,34,429 and ground Nos. 7 and 8 in assessed's appeal are stated merely the observations for which no additions have been made but such findings are un-called for. All these grounds being common are taken up together.

19. The assessing officer made trading addition of Rs. 16,34,429. The learned Commissioner (Appeals) however deleted the addition of Rs. 12,88,400 and sustained the balance addition of Rs. 3,48,629 wrongly mentioned in the ground by the assessed as Rs. 3,47,849. Prayer to amend this ground was also allowed. The revenue is in appeal for the relief of Rs. 12,88,400 given by the learned Commissioner (Appeals) while the assessed has challenged the sustenance of addition of Rs. 3,48,629.

20. The assessed's counsel Shri Agarwal contends that the learned Commissioner (Appeals) has found as a matter of fact that the sales have been estimated at Rs. 85 lakhs without any concrete basis. In view of the submissions of the assessed the sales declared need not be disturbed. The learned Commissioner (Appeals) vide para 4.1 had also recorded finding that under valuation of the stock worked out by the assessing officer is not correct. This also shows that there is no discrepancy in the closing stock disclosed by the assessed. There are no defect in the opening stock as well as closing stock. All the purchases and sales are duly recorded. Since the opening stock, closing stock, purchases and sales are found fully verifiable and estimation of sales at Rs. 85 lakhs has been found without any basis with a view to accept the sales, balancing figure shall be the gross profit of the assessed. After having accepted all other four components it was not permissible for the learned Commissioner (Appeals) to have applied different rates of profit on whole sale at 5 per cent and on retail sales at 25 per cent and work out the gross profit at Rs. 14,51,910 as against the disclosed profit of Rs. 11,003,971 and thus sustaining trading addition of Rs. 3,47,849 was uncalled for. It was further contended that for making any income taxable, it is necessary that income must accrue to the assessed. When it has not resulted into increase in sales or under valuation of stock or there is no discrepancy in purchases etc. the income cannot be said to have accrued to the assessed and as such no addition for gross profit was called for. Reliance has been placed to the Apex Court decision reported in India Finance & Construction Co. (P) Ltd. ITD. v. B.N. Pandu, Dy. CIT & Anr. (1993) 200 ITR 710 (SC). The learned Commissioner (Appeals) is also stated to have compared the whole sale price though no defects have been found in excise register. GS-11 maintained by the assessed. Mrs. Nagar who confirmed certain transactions with the assessed is correct and denied others when called for by the assessing officer did not permit the authorities to draw any adverse inference against the assessed unless confronted with such statement given by her. In any event the assessed has disclosed profit on such transactions also as is borne out from the findings recorded by the learned Commissioner (Appeals) at p. 12 of his order. On the aspect of under valuation of stock no trading addition can be made. Reference was made to Third Member decision in the case reported in ITO v. Oswal Emporium (1989) 30 ITD 241 (Del-Trib) and Apex Court decision in the case of Chainrup Sampath Ram v. CIT (1953) 24 ITR 481 (SC).

21. The learned counsel besides relying on written submissions before learned Commissioner (Appeals) placed at assessed's paper book p. 196 has also made reference to the GP rate chart placed at assessed's paper book when compared to the sales in the earlier years and a note was also appended to such GP chart filed with the return. The increase in wholesale sales have resulted into earning of. lower profit by the assessed. Furthermore when the results of the appellant are compared with the results of other persons in the similar trade for the same assessment year and the profit rate is less of such other traders like Mehra Sons, copies of which have also been filed and stand accepted by the department, no addition was warranted.

22. On the other hand, the learned Departmental Representative while opposing the pleas raised by the learned counsel for the assessed further contends that the relief given by the learned Commissioner (Appeals) to the assessed is not in conformity with the facts and circumstances of the case. The learned Commissioner (Appeals) vide para 4.3 has already recorded a finding that there are certain discrepancies in the accounts for which the assessed does not have any plausible explanation. Similarly the assessed has not been able to explain the exact method of valuation which is being adopted by him consistently. In the same paragraph it has been observed that in the past years the margin of profit has been shown at 25 per cent which on the analysis of the some of the bills of the customers appear to be correct. However, in this year the assessed had shown margin of profit only at 15.8 per cent on the ground that sizeable sales have been affected to the whole seller where the margin of profit charged was very low. She has also recorded finding that GP rate disclosed by the assessed in his own explanation is low and hence not correct. The assessed has given different explanations at a different point of time regarding valuation of stock as is evident from the order of the learned Commissioner (Appeals) at internal p. 5. The assessing officer found defect in the closing stock as well as sales affected on same day were found having wide rate of difference. Reference was also drawn to internal p. 3 of the assessment order. The assessing officer has also found that liabilities are inflated and are fictitious. Accounts have, therefore, been rejected by applying provisions of section 145(2) of the Act. The learned Commissioner (Appeals) has upheld the rejection. However, he does not give basis of applying 25 per cent profit rate on retail sale and 5 per cent on wholesale for giving relief which is excessive on the facts and circumstances of the case and thus no relief was required to be given. A prayer was therefore made to allow the appeal of the revenue and dismiss the appeal filed by the assessed.

23. In rejoinder the learned counsel for the assessed contends that the contention of fictitious liability now being raised by the revenue is factually wrong. Even the assessing officer does not say so. The additions made on this account stand deleted by the learned Commissioner (Appeals). As no ground has been taken against the deletion of such additions of bogus liability as are also reflected in the letter of the assessed at p. 165 and the revenue having accepted the same. There lies nothing in their mouth now at this stage to say that liabilities are inflated or fictitious and was a reason for rejecting the accounts. There has also been no change in the basis of valuation. The assessed followed sale as basis of valuation in the preceding year and the same method has been followed in the year under consideration. The assessed has explained and reconciled what are alleged as defects.

24. The assessing officer has also sent report to the written submissions filed before the learned Commissioner (Appeals) which are contained at assessed's paper book p. 189 and the assessed has given rejoinder thereto. Copy placed at p. 196. The reasoning given also stands narrated in the letter written to the learned Commissioner (Appeals), copy placed at p. 165 onwards with a special reference to p. 167. It was, therefore, contended that there is no merit in the ground taken by the revenue and assessed's ground needs to be allowed.

25. We have heard the parties with reference to the material available on record. There is no consistency in the basis of valuation of closing stock. The learned Commissioner (Appeals) has recorded a finding that there is no under valuation of closing stock. Both opening and closing stock stand properly accounted for. The purchases are also fully vouched. There is no discrepancy found. The learned Commissioner (Appeals) after verification of the entire facts and after making complete analysis came to the conclusion that estimation of sales at Rs. 85 lakhs as against the sales of Rs. 69.03 lakhs disclosed by the assessed are without any concrete basis and as such in his opinion the sales declared by the assessed cannot be disturbed. Once all the four components of the trading account i.e. opening stock, closing stock, purchases and sales are found properly accounted for, the balancing figure essentially has to be taken as gross profit of the assessed. This leaves no scope of disturbing the profit rate. For any reason even if the accounts have been rejected the defects are not so serious which call for any addition in the trading results. The rate difference in sales stands explained due to sales being in the nature of wholesale at the relevant time. Some of the receipt of jewellery from Mrs. Nagar denied by her are found to have resulted into disclosure of profit by the assessed. This cannot be the basis of applying higher rate of profit. Decline in profit rate also cannot be a reason for rejecting the accounts of the assessed. When the results of the assessed are compared with the similar trader like Mehra Sons, the trading results declared by the assessed are found better. Estimation of profit rate without giving any basis by the learned Commissioner (Appeals) are unwarranted and uncalled foreven if the accounts of the assessed have been rejected, it was not necessary to estimate the profit and make trading addition. Such a view finds fortified by the decision of the Rajasthan High Court in CIT v. Gotam Lilne Khanij Udyog (2002) 256 ITR 243 (Raj). We, therefore, do not find any justification in sustaining an addition of Rs. 3,48,629. The same is therefore, deleted. As a result of this, assessed's ground stands allowed and that of revenue stands rejected.

26. The second ground in the revenue's appeal relates to deletion of addition of Rs. 2,75,000 out of addition for unexplained cash credit.

27. We have heard the parties and gone through the material on record. The assessed had maintained an imprest account in the name of Shri Deepak Malhotra where an amount of Rs. 2,75,000 stood debited as on 31-3-1991. The withdrawals were made in that year on 23-3-1991 for Rs. 2 lakhs and on 31-3-1991 Rs. 75,000 for the purposes of paying tax. The assessed squared up this amount during the year by depositing the money back in the business on different dates as under:

Rs.

2-4-1991

25,000

10-4-1991

50,000

8-5-1991

50,000

9-7-1991

1,50,000

28. The learned Commissioner (Appeals) after verifying the cash book which was in the custody of the department found withdrawals duly recorded in the books and since no taxes were deposited the amount which remained in the imprest account was returned in the business on various dates. There is no infirmity in the findings recorded by the learned Commissioner (Appeals). The withdrawals so made are also not found utilised for any purpose whatsoever. The order therefore does not call for any interference. The ground of the revenue stands rejected.

30. In the result, revenue's appeal stands dismissed and both the appeals filed by the assessed stand allowed.