Pr. Commissioner Of Income Tax - 20, Mumbairoom v. Sunil M. Thakkarb –

Ajay IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1499 OF 2017 Pr. Commissioner of Income Tax - 20, MumbaiRoom No.422, 4[th] Floor, Piramal Chambers,Parel, Mumbai - 400 012. ...Appellant Versus Sunil M. ThakkarB – 161, Chinar Building,16[th] Floor, R.A. Kidvai Road,Wadala, Mumbai – 400 031.PAN : ...Respondent Mr. Sham Walve a/w. Mr. Pritish Chaterji, Advocate forAppellant. CORAM : UJJAL BHUYAN, & MILIND N. JADHAV, JJ. ORDER : 11[th] FEBRUARY 2020 JUDGMENT (PER MILIND N. JADHAV, J.) :- 1.This appeal has been preferred by the Revenueunder Section 260A of the Income Tax Act, 1961 (hereinafterreferred to as ‘the Act’) against the order dated 05[th] July 2016passed by the Income Tax Appellate Tribunal, “J” Bench,Mumbai (hereinafter referred to as ‘the Tribunal’) in IncomeTax (SS) Appeal No.173/Mum/2006 for the block period 01[st] 1 of 31 Ajay 2.The Assessing OfÏcer passed a detailed assessmentorder dated 28[th] February 2001 in respect of the block periodand made several additions and dis-allowances to the income ofthe assessee for the block period. The first Appellant Authorityi.e. Commissioner of Income Tax (Appeals) (hereinafter referredto as the CIT (A)) allowed the appeal of the assessee by deletingthe additions under various heads made by the AssessingOfÏcer to the income of the assessee. The revenue challengedthe deletion made by the CIT (A) in respect of five heads beforethe Tribunal. The Tribunal by its order dated 05[th] July 2016upheld the order passed by CIT (A). 3.The brief facts relevant for the purpose of decidingthe present appeal are as follows : 3.1.On the basis of information received from theInvestigation Wing of the Income Tax Department in the caseof M/s. Galaxy Plasto O-Chen Industry Ltd., it was revealedthat the said company belonged to one Vora familycomprising of three brothers, viz Naresh B. Vora, Sudhir B. Ajay Vora and Nitin B. Vora. Under the provisions of Section 133Aof the Act, a survey was conducted at the business premisesof the above company on 04[th] September 1998, pursuant towhich books of accounts and other documents were seizedand impounded on 25[th] September 1998. 3.2.The statements of Mr. Nitin B. Vora and Mr. SudhirB. Vora were recorded on 25[th] September 1998, 15[th]November 1998 and 16[th] November 1998. Mr. Nitin B. Vorastated that he was in the Hawala business and he admitted toconcealment of Rs.1.35 Crores and admitted to providingaccommodation entries to various parties. Mr. Nitin B. Voraalso stated that, he was holding a quota of “Naphtha” whichhe used to sell in the open market for cash at a high premiumand would issue bogus bills to the seller of Naphtha anddealers of other chemicals and in return he would receivecash from Bank and cheques on commission basis. 3.3.Further investigation was carried out by the IncomeTax Department and it was found that one of the partyinvolved in the aforesaid business was the Thakkar familyconsisting of Manoj Thakkar and his three sons namely Atul M. Ajay Thakkar, Mayur M. Thakkar and Sunil M. Thakkar. Sunil M.Thakkar is the assessee in the present case. The Thakkarfamily members used to send cash to the Vora family forobtaining accommodation entries. 3.4.Further investigation was done, consequent uponwhich the Assessing OfÏcer issued notice under Section158BC on 13[th] December 1999 and called on the assessee(Mr. Sunil M. Thakkar) to file return covering the block periodfrom 01[st] April 1988 to 13th February 1999. 3.5.The assessee filed return of income for the blockperiod showing undisclosed income of Rs.12,58,739.00. 3.6.The Assessing OfÏcer issued notice under Section142 (1) of the Act with a detailed questionaire served uponthe assessee and reply was received from the assessee. Ajay Thakkar, Mayur M. Thakkar and Sunil M. Thakkar. Sunil M.Thakkar is the assessee in the present case. The Thakkarfamily members used to send cash to the Vora family forobtaining accommodation entries. 3.4.Further investigation was done, consequent uponwhich the Assessing OfÏcer issued notice under Section158BC on 13[th] December 1999 and called on the assessee(Mr. Sunil M. Thakkar) to file return covering the block periodfrom 01[st] April 1988 to 13th February 1999. 3.5.The assessee filed return of income for the blockperiod showing undisclosed income of Rs.12,58,739.00. 3.6.The Assessing OfÏcer issued notice under Section142 (1) of the Act with a detailed questionaire served uponthe assessee and reply was received from the assessee. 3.7.The Assessing OfÏcer thereafter passed a detailedassessment order in respect of the block period and made anumber of additions and dis-allowances to the income of theassessee. Ajay ITXA-1499-17.doc 3.8.The assessee filed appeal before the CIT (A). CIT(A) allowed the appeal of the assessee by deleting theadditions made by the Assessing OfÏcer. The Revenuechallenged the deletion made by the CIT (A) in respect of fiveheads before the Tribunal. 3.9.The Tribunal passed its order dated 05[th] July 2016and returned a finding that the deletion of the additions madeby the CIT (A) were quite reasonable and did not require anyinterference. Appeal of the Revenue was dismissed. 3.10.Hence the present appeal by the revenue. 4.The Revenue has projected the followingsubstantial questions of law :- “(A)Whether on the facts and in thecircumstances of the case and in law, the Hon. ITATwas right in deleting the addition made on account ofsale of Naphtha ignoring the seized material andstatement recorded u/s 131 of the I.T. Act 1961,which established that the assessee sold in openmarket the Naphtha products at hefty cash premiumand part of which unaccounted sale considerationrouted back in the books through accommodationentries and the component of cash premium never reflected in the books of accounts ? (B)Whether on the facts and in thecircumstances of the case and in law, the Hon. ITATwas right in deleting the addition made on account ofsale of delivery orders purchased from M/s RelianceIndustries Ltd. ignoring the seized material, on theground that it is not primary, which established thatthe assessee earned unaccounted premium out ofsale of goods ? (C)Whether on the facts and in thecircumstances of the case and in law, the Hon. ITATwas right in deleting the addition made on protectivebasis ignoring the statement of Shri Naresh Vora whohad categorically alleged that some of the parties onwhose behalf bogus invoices were raised by Thakkarbrothers ? (D)Whether on the facts and in thecircumstances of the case and in law, the Hon. ITATwas right in deleting the addition made on account offoreign tour expenses ignoring the fact that theassessee has failed to adduce documentary evidenceto prove the genuineness of the said expenses ? (E)Whether on the facts and in thecircumstances of the case and in law, the Hon. ITATwas right in deleting the addition made on account ofhousehold expenses ignoring the fact that theassessee has failed to explain the cash withdrawalswhich were unrecorded in the books of accounts ?” 5.Mr. Walve learned counsel appearing for theappellant has laid thrust on the assessment order andemphasized on the modus operandi between the public sectorunits, industries, illegal users of adulterated petrol, Vijangroup, Vora group etc. for ascertaining the role of theassessee. He has drawn our attention to question No.8 andits answer in the statement of Shri. Naresh B. Vora, which wasrecorded under Section 131 of the Act. Question No.8 and itsanswer reads thus :- (E)Whether on the facts and in thecircumstances of the case and in law, the Hon. ITATwas right in deleting the addition made on account ofhousehold expenses ignoring the fact that theassessee has failed to explain the cash withdrawalswhich were unrecorded in the books of accounts ?” 5.Mr. Walve learned counsel appearing for theappellant has laid thrust on the assessment order andemphasized on the modus operandi between the public sectorunits, industries, illegal users of adulterated petrol, Vijangroup, Vora group etc. for ascertaining the role of theassessee. He has drawn our attention to question No.8 andits answer in the statement of Shri. Naresh B. Vora, which wasrecorded under Section 131 of the Act. Question No.8 and itsanswer reads thus :- “Q.8.Can you explain the modus operandi as farthe sale of Naphtha in open market is concerned ?Ans.The Naphtha is filled from the factory of M/s.RRPL which is located at Sinner, Nashik or at timesdirectly from the refineries of the public undertakingsand being sold to various petroleum dealers on cashbasis which is exclusively devoid of any record. ThisNaphtha is used for various purposes and the mostimportant among that is adulteration or mixing withpetrol being sold at retail outlets.” 5.1.Mr. Walve has thereafter drawn our attention tocontents of question No.19 and its answer in the statement ofNaresh B. Vora which related to the assessee takingaccommodation entries on behalf of various parties. Question 7 of 31 No.9 and its answer reads thus :- “Q.19. I am drawing your attention towards VimalDeluse Note Book inventoried under Sl. No.1 ofAnnexure ‘A’ drawn at Vile Parle OfÏce during thecourse of Survey Persal of this note book referscertain entries against ‘Sunil Carriers’ ‘Rama Atlas’etc. kindly explain these entries. Ans.All the entries appearing under Sunil Carriers,Rama and Atlas are the details of billed invoices andcorresponding cash receipt from Sunil Thakkar. Inother words, Sunil Thakkar has taken accommodationentries on behalf of Rama means M/s. RRPL, Atlasmeans Atlas Petrochemicals Ltd. Sunil Carriers is oneof the concern of Sunil Thakkar and that as whyreference is appearing in this note book for eg. I willexplain page no.4 of this note book which shows :- Sunil Carrier 13/9/97 Atlas 1,20,200 x 5 = 6,00,000/-Bank Commission =1,200/-Commission =21,000/- ----------------------------------- Above mentioned entries are related toaccommodation entries taken by Shri Sunil Thakkarfor which the name ‘Sunil Carrier’ appears at the top. The figures against Rama (M/s. RRPL) are nothing butcalculation of value of one invoice multiplied bynumber of 5 invoices amount comes to Rs.5,08,200/-and Rs.500/-, Bank commission for 5 pay ordersissued for 5 invoices referred earlier. Rs.21,000/- ismy commission on the total amount i.e. 5,08,200/-. Similar is the calculation shown against Atlas(Atlas Petrochemicals). As a matter of fact all the transactionappearing in this note book against ‘Rama’ and‘Atlas’ are transaction related to accommodationentries taken by Sunil Thakkar on behalf of M/s. RRPL& Atlas Petrochemicals Ltd.” 5.2.Mr. Walve submitted that the assessee was referredto in the books of the Vora group by several names such asSunilbhai, Sunilbhai (baroda), Sunilbhai Bhanushali, SunilbhaiBhanushali (baroda), Sunil Carrier, Sunil Transport and SunilAgrawal and after reading the answers to the questions givenby the Vora group members, it was established that, theassessee was involved in giving accommodation entries tovarious parties. He submitted that there was enough materialon record to warrant implication and indictment of theassessee. Ajay 6.To appreciate the questions framed and thecontentions advanced by the learned standing counsel, itwould be necessary to advert to the orders passed by thestatutory authorities. 5.2.Mr. Walve submitted that the assessee was referredto in the books of the Vora group by several names such asSunilbhai, Sunilbhai (baroda), Sunilbhai Bhanushali, SunilbhaiBhanushali (baroda), Sunil Carrier, Sunil Transport and SunilAgrawal and after reading the answers to the questions givenby the Vora group members, it was established that, theassessee was involved in giving accommodation entries tovarious parties. He submitted that there was enough materialon record to warrant implication and indictment of theassessee. Ajay 6.To appreciate the questions framed and thecontentions advanced by the learned standing counsel, itwould be necessary to advert to the orders passed by thestatutory authorities. 7.During the block assessment proceedings, themodus operandi of the trade as unravelled by the AssessingOfÏcer showed a complex networking between Public SectorUnits like; (i) Bharat Petroleum Corporation Ltd., (ii) Indian OilCorporation Ltd; (iii) Hindustan Petroleum Corporation Ltd;(iv)Gas Authority of India Ltd., and industries manufacturingpetro products like (i) Reliance Industries Ltd., (ii) RamRemedies Pvt. Ltd., (iii) Silver Chemical Industries (Bom.) Pvt.Ltd., (iv) M/s. Paschim Petrochemical Pvt. Ltd. on the one handand illegal users mainly carrying out adulteration of petrol like(I) chain of petrol pumps scrupulously using "Naphtha" and"Naphtha based products" for adulteration of petrol procuredfrom traders like the Thakkar group and the Vora groupthrough their companies / concerns like; (i) Galaxy PlastoChemical Industries Ltd., (ii) Thinsol Chemicals Pvt. Ltd. (iii)Minalshree Chemicals Pvt. Ltd. etc. 8.Assessing OfÏcer scrutinized the books, notebookregisters, loose papers, diaries and statements of variousfamily members of the Vora and Thakkar groups and came tothe following conclusion :- (i) that various concerns of theVora family were floated with the sole intention of providingaccommodation entries to several parties by way offurnishing fictitious bills showing purchase of petro-chemicalproducts by such concerns leading to commission at pre-determined rate being received by the Vora family membersin cash for the aforesaid service of providing accommodationentries; (ii) that a number of business concerns dealing inpetro-chemical products either as manufacturers, dealers ortraders had utilized accommodation entries from the concernsof Vora group; (iii) that these concerns procured petrochemicals either directly from pubic sector undertakings like;BPCL, HPCL, IOCL, GAIL etc, or through intermediariesproviding accommodation entries and that the amountsinvolved were large. 9.The Assessing OfÏcer duly scrutinized thestatements made by the Vora and Thakkar family members Ajay ITXA-1499-17.doc and on the basis of facts, circumstances, evidence andtransactions appearing in the seized books confronted theassessee (Mr. Sunil M. Thakkar) by notice under Section 131of the Act, inter-alia, providing the assessee an opportunity toexamine Mr. Naresh B. Vora. Since the assessee did not availof the opportunity at the first instance the assessee wasprovided a further opportunity on 20[th] February 2001 onwhich date the assessee examined Mr. Naresh B. Vora.During cross examination of Mr. Naresh B. Vora it wasrevealed that the assessee had been regularly depositingcash to avail accommodation entries for sale of "Naphtha" onbehalf of M/s. Ram Remedies Pvt. Ltd. On the basis ofcorroborative evidence obtained from the seized books,documents, loose papers etc, the Assessing OfÏcer concludedthat there was a nexus of the assessee with the Vora group onthe one hand and with M/s. Ram Remedies Pvt. Ltd. on theother hand. The Assessing OfÏcer further scrutinized andanalyzed various dealings between the parties on the basisof the following materials :- (i)Account books from the Thakkar group, Vijan group andVora group; (ii) Statements recorded of Vora group members; Ajay ITXA-1499-17.doc (iii) Facts and circumstances evidencing transactionsappearing in Vora group’s books as paper transactions only;(iv) Cross examination of Mr. Naresh B. Vora; (v) Analysis ofobjection / observations, counter reply in the facts availableon record made by the assessee; (vi) Corroborative evidencesgathered during search and survey operations; (vii) Evidencerelating to sale of premium as collected; (viii) Sale on deliveryorders purchased from M/s. Reliance Industries Ltd.; (ix)Income earned from the business of hiring of tankers duringthe block period; (x) Expenses on foreign travel by theassessee on the basis of the scrutiny of his passbook andvarious other books; (xi) Computation of total income for theblock period; (xii) Cash found from the residence of theassessee as appearing in the books of the Vora family. 10.After scrutiny and detailed analysis on the basis ofthe above, the Assessing OfÏcer vide the assessment orderdated 28th February, 2001 made the following additions tothe income of the assessee for the block period 1[st] April 1988to 13[th] February 1999 : (i) The Assessing OfÏcer consideredaddition of undisclosed income at Rs.22,75,91,170.00 and 13 of 31 Ajay added the income earnings on the sale of Naphtha amountingto Rs.48,61,834.00 to the income of the assessee; (ii) TheAssessing OfÏcer took 82% as the average rate of premiumand made a further addition of Rs.36,38,634.00 towardsunaccounted sale based on purchases made from RelianceIndustries Ltd. to the income of the assessee; (iii) TheAssessing OfÏcer added a sum of Rs.22,11,000.00 asunexplained cash belonging to the income of the assesseeand a further sum of Rs.30,00,000.00 towards unaccountedcapital for starting unaccounted trade; (iv) The AssessingOfÏcer added undisclosed cash deposits of Rs.6,27,97,057.00on behalf of certain concerns in respect of accommodationentries; (v) The Assessing OfÏcer added a sum ofRs.1,54,197.00 as income from the business of hiring oftankers to the income of the assessee; (vi) The AssessingOfÏcer added a sum of Rs.2,00,000,00 spent by the assesseeon a foreign trip to the income of the assessee as alsoRs.21,83,010.00 towards household expenses of theassessee. 11.Being aggrieved by the above order, the assesseepreferred appeal before the first appellate authority i.e. theCIT (A), Mumbai. The CIT (A) after considering the entiregamut of evidence placed before the Assessing OfÏcer dealtwith each and every addition made by the Assessing OfÏcerand vide its order dated 14th March, 2006 returned itsfindings as under :- 11.1.In respect of addition of Rs.2,92,90,123.00 asundisclosed exempted income disclosed by the assessee, theassessee had claimed exempted income of Rs.1,96,50,420.00for remittances on the basis of his residential status being anon resident Indian. For the year 1992 – 1993 and 1993 –1994, the status of the appellant was non resident Indian andfrom assessment year 1994 – 1995 onwards for the next eightyears, the status was “not ordinarily resident” and thus theassessee was assessed in regular assessments accordingly.The Assessing OfÏcer held exemption of Rs.78,31,157.00being receipt of India Development Bond (IDB) being notexempt and the interest earned on the said IDB for 23 monthsat the rate of 12% per annum amounting to Rs.18,02,546.00,as income taxable in the hands of the assessee. The 15 of 31 Ajay ITXA-1499-17.doc 15 of 31 Ajay ITXA-1499-17.doc Assessing OfÏcer held that Rs.1,71,20,932.00 had beenactually remitted in the assessee’s account. The assessesubmitted before the CIT (A) that no addition could be madeon this account, since no incriminating document was foundduring search and that the proceeds of the Bonds could notbe added as undisclosed income as the said bonds wereissued by State Bank of India and the letter of State Bank ofIndia and folio number of the bonds were made available tothe Assessing OfÏcer. The assessee also submitted thatnotional interest @ 12% per annum was considered wronglyby the Assessing OfÏcer as against the actual interestreceived @ 9% per annum. After considering the evidence onrecord CIT (A) returned its finding in respect of the aforesaidissue in favour of the assessee on the ground that theassessee was a non resident Indian during the assessmentyear 1992 – 1993 and 1993 – 1994 and there was noincriminating material found during search on record indictingthe assessee. The CIT (A) gave detailed findings deleting theabove addition made by the Assessing OfÏcer. 11.2.In respect of addition on account of sale of Naphthaon premium amounting to Rs.12,48,00,000.00 the CIT (A) 16 of 31 Ajay ITXA-1499-17.doc considered the submissions of the assessee that no evidencewas found by the Assessing OfÏcer during search to suggestand implicate that the assessee was in the business of sale ofNaphtha. Therefore, the CIT (A) held that the addition madeunder Section 159BB was uncalled for as it did not justify thesaid addition. The CIT (A) gave detailed findings after goingthrough the seized material and the statements of variouswitnesses and returned a finding in favour of the assesseethat the addition made by the Assessing OfÏcer was notbased on any documentary evidence whatsoever and not inconformity with reference to the seized materials gatheredduring search, thereby deleting the above addition made bythe Assessing OfÏcer. 11.3.In respect of addition on account of sale anddelivery of Naphtha amounting to Rs.36,38,000.00 the CIT (A)once again came to the conclusion that, since there were nodetails / material available with respect to the vehicles ownedby the assessee that were allegedly used for the transactionsthe finding of the Assessing OfÏcer was not sustainable in theabsence of direct involvement of the assessee, therebydeleting the above addition made by the Assessing OfÏcer. 17 of 31 11.4.In respect of addition of cash amount ofRs.23,11,000.00 found during search in the assessee’spremises, which was claimed by Mr. Atul Thakkar (assessee'sbrother) admitting that the said cash belonged to him, the CIT(A) after considering the evidence on record came to theconclusion that since this amount was declared asundisclosed income in the block return by Mr. Atul Thakkar, itcould not be made attributable to and foisted on theassessee. The CIT (A) therefore deleted this addition made bythe Assessing OfÏcer after considering the fact that Mr. AtulThakkar had paid taxes on the said cash amount as itbelonged to him and that there was no evidence on record tolink the cash to the assessee. 11.5.In respect of unaccounted initial capital amountingto Rs.30,00,000.00, the CIT (A) came to the conclusion that,since the addition on account of alleged sale of Naphtha onpremium had been deleted, this addition of unaccountedinitial capital required for the said transaction could not beupheld. Hence, in the absence of any evidence of sale ofNaphtha on premium by the assessee, the question of adding Ajay this unaccounted initial capital required to start the businessdid not arise and the same was deleted. 11.5.In respect of unaccounted initial capital amountingto Rs.30,00,000.00, the CIT (A) came to the conclusion that,since the addition on account of alleged sale of Naphtha onpremium had been deleted, this addition of unaccountedinitial capital required for the said transaction could not beupheld. Hence, in the absence of any evidence of sale ofNaphtha on premium by the assessee, the question of adding Ajay this unaccounted initial capital required to start the businessdid not arise and the same was deleted. 11.6.In respect of addition of Rs.4,99,36,298.00 madeon protective basis by the Assessing OfÏcer, the CIT (A) cameto the conclusion that this addition was made without anymaterial evidence on record. CIT (A) held that this additionwas made on the basis of statements recorded by theAssessing OfÏcer which stated that the assessee was workingon behalf of certain concerns in Ahmedabad and cashdeposits made in the name of "Sunil Baroda" appearing in theimpounded books referred to the assessee i.e. Mr. Sunil M.Thakkar. The CIT (A) extensively referred to the reply filed bythe assessee in this regard and the statement of Mr. NareshVora which was recorded by the Assessing OfÏcer and cameto the conclusion that there was no direct evidence availableto establish that the concerns in Ahmedabad viz, M/s. AtlasPetrochemical Ltd., Ankini Petrochemical Pvt. Ltd. or AvaniPetrochemical Ltd. belonged to the assessee. Hence, in theabsence of any direct evidence linking the nexus of theassessee to the said firms / companies, the CIT (A) deletedthe above addition of Rs.4,99,36,298.00 made by the 19 of 31 Assessing OfÏcer. 11.7.In respect of addition of Rs.2,00,000.00 towardsforeign trip expenses by the assessee during the assessmentyear 1998 – 1999 being held taxable by the Assessing OfÏcer,the CIT (A) after considering the entire evidence returned afinding that from the materials seized and the statementsrecorded during search proceedings no question was everasked or investigation carried out regarding foreign travel ofthe assessee. The CIT (A) therefore concluded that in theabsence of any evidence it could not be held that the aboveaddition made to the income by the Assessing OfÏcer wasjustified and therefore, this addition made by the AssessingOfÏcer was deleted. 11.8. In respect of addition of Rs.21,83,010.00 towardshousehold expenses, the Assessing OfÏcer had on the basis ofentries found in one Gandhi diary during the search ofpremises of Sunil Chemicals reflecting entries of monthly cashwithdrawals had added the same to the income of theassessee. The CIT (A) held that, since no incriminatingdocument or evidence was found which proved that the Ajay withdrawal was made by the family members of the assessee,it could not be held that the assessee had earned thisundisclosed income. The assessee pleaded that there was nodocumentary evidence about concealing his householdexpenditure and that his household expenditure was muchmore than the expenditure appearing in the said books ofaccounts. It weighed with the CIT (A) that the AssessingOfÏcer did not consider the total withdrawals by all the familymembers of the assessee's family. The CIT (A) held that infact the Assessing OfÏcer had added Rs.62,00,000.00approximately to the income of all the members of the familyof the assessee for the same period, and thereforeconsidering these facts, the addition made by the AssessingOfÏcer on account of withdrawal towards household expensescame to be deleted. 12.The revenue being aggrieved by the order passedby the CIT (A) approached the Income Tax Appellate Tribunalwith respect to deletion of five additions made by the CIT (A).Before the Tribunal, the revenue pleaded that the deletion of thefollowing five additions was wrongfully done by the CIT (A) 21 of 31 Ajay ITXA-1499-17.doc 12.The revenue being aggrieved by the order passedby the CIT (A) approached the Income Tax Appellate Tribunalwith respect to deletion of five additions made by the CIT (A).Before the Tribunal, the revenue pleaded that the deletion of thefollowing five additions was wrongfully done by the CIT (A) 21 of 31 Ajay ITXA-1499-17.doc namely :- (i) deletion of addition on account of sale of Naphthaon premium amounting to Rs.12.48,61,834.00; (ii) deletion ofaddition on account of sale and delivery orders amounting toRs.36,38,634.00; (iii) deletion of addition on account ofprotective basis relying upon the statement of Naresh B. Vora asrecorded by the Assessing OfÏcer amounting toRs.4,99,36,28.00; (iv) deletion of addition on account of foreigntour expenses by the assessee amounting of Rs.2,00,000.00 and(v) deletion of addition on account of household expenses onthe basis of entry found in one Gandhi diary amounting toRs.21,83,010.00. 13.The Tribunal after thoroughly considering the entireevidence on record and materials available, vide the orderdated 5th July, 2016 held that the Assessing OfÏcer had todetermine the undisclosed income of the block period in themanner as required under Section 158BB of the Act. TheTribunal held that block assessment has to be framed on thebasis of the material coming into the hands of the AssessingOfÏcer during the search which becomes the foundation ofthe proceedings. The Tribunal considered the challenge to Ajay ITXA-1499-17.doc the five deletions made by the CIT (A) and after thoroughlyexamining each of the five deletions did not find any illegalityor infirmity in the order of the CIT (A) in deleting the saidadditions, thereby upholding the order passed by the CIT (A). 14.Before we advert to the impugned order passed bythe Tribunal, at the outset, we would state that the appealunder Section 260A of Act is required to be entertained onlyon “substantial question of law” arising out of the order of theTribunal, keeping in mind that we cannot disturb findings offacts under Section 260A of the Act unless such findings areshown to be ex-facie perverse, unsustainable and exhibit atotal non-application of mind. In the case before us, theadditions / dis-allowances made by the Assessing OfÏcer weredeleted by the CIA(A) which order was not interfered with bythe Tribunal. th-15.Order dated 05 July, 2016 passed by the Tribunal :15.1.Tribunal considered the first challenge with respectto deletion of addition on account of sale on premium ofNaphtha amounting to Rs.12,48,61,834.00 and concurred15.Order dated 05 July, 2016 passed by the Tribunal :15.1.Tribunal considered the first challenge with respectto deletion of addition on account of sale on premium ofNaphtha amounting to Rs.12,48,61,834.00 and concurred 23 of 31 Ajay th-15.Order dated 05 July, 2016 passed by the Tribunal :15.1.Tribunal considered the first challenge with respectto deletion of addition on account of sale on premium ofNaphtha amounting to Rs.12,48,61,834.00 and concurred15.Order dated 05 July, 2016 passed by the Tribunal :15.1.Tribunal considered the first challenge with respectto deletion of addition on account of sale on premium ofNaphtha amounting to Rs.12,48,61,834.00 and concurred 23 of 31 Ajay with the findings of the CIT (A) that this addition was merelybased upon the statement of Naresh B. Vora. Tribunal heldthat not a single word had been written specifically relating toor pointing to the evidence by the Assessing OfÏcer.Tribunal held that during the entire proceedings under Section132 (search proceedings) no incriminating material was foundor seized which could show or prove that the assessee was aquota holder of Naphtha or that he owned a factorymanufacturing petrochemicals. Tribunal held that theassessee was not confronted with the alleged material andthe statement of Naresh B. Vora which was used against himand no investigation was carried out by the Assessing OfÏcerwith respect to the nexus of the assessee with the allegedAhmedabad and Baroda parties. Tribunal held that the CIT (A)specifically referred to the statement of Naresh B. Vora dated15[th] October 1998 and in particular to question Nos.3,4 and 5and their answers and the observation made by the AssessingOfÏcer relating to collection of evidence during the the courseof search and further details gathered during the blockassessment proceedings. However, the Tribunal afterscrutinizing the same found that the CIT (A) had correctly 24 of 31 Ajay analyzed the facts and evidence and returned the findingthat there was no illegality or infirmity in the order of CIT (A)in deleting the addition on account of sale of Naphtha onpremium and thus this ground of challenge raised by therevenue came to be dismissed by the Tribunal. 15.2.Tribunal considered the second challenge withrespect to deletion of addition on account of sale and deliveryorders amounting to Rs.36,38,634.00. After looking into theevidence before the Assessing OfÏcer which pertained to thefile containing bills of Reliance Industries Ltd. in favour ofGalaxy Petrochemicals and certain other bills in the name ofthe assessee and one Suresh Mayur, Tribunal accepted thefact that the assessee had totally denied his involvement.Tribunal confirmed the finding returned by the CIT (A) whiledeleting this addition and concluded that the addition onaccount of sale and delivery orders could not be sustainedunder Section 158BC in the absence of independent primaryevidence. Tribunal held that the appearance of the name of“Sunil Bhai” on the two bills could not prove the involvementof the assessee and there were no reasons offered by theAssessing OfÏcer as to how he arrived at the conclusion that 25 of 31 Ajay the signature on the two bills was that of the assessee. TheTribunal agreed with the findings of the CIT (A) in respect ofdeletion of addition on account of sale and delivery ordersamounting to Rs.36,38,634.00 and upheld the same. Thusthis ground of challenge raised by the revenue before theTribunal came to be dismissed. 25 of 31 Ajay the signature on the two bills was that of the assessee. TheTribunal agreed with the findings of the CIT (A) in respect ofdeletion of addition on account of sale and delivery ordersamounting to Rs.36,38,634.00 and upheld the same. Thusthis ground of challenge raised by the revenue before theTribunal came to be dismissed. 15.3.Tribunal considered the third challenge with respectto deletion of addition of Rs.4,99,36,298.00 which was madeon protective basis merely relying on the statement ofNaresh B. Vora recorded by the Assessing OfÏcer that theassessee was working on behalf of several parties inAhmedabad and Baroda. This addition was made without anybasis or specific evidence with respect to the nexus of theassessee with any party in Ahmedabad and Baroda.Therefore this addition was determined to be not justified.Tribunal considered the fact that the Assessing OfÏcer hadmade no inquiries with the alleged parties in Ahmedabad andBaroda as to whether the assessee was working in AtlasPetrochemicals, Ankini Petrochemicals and / or AvaniPetrochemicals. Therefore, the above addition which wasmade merely on the basis of the statement of Naresh B. Vora 26 of 31 ITXA-1499-17.doc could not be sustained. Tribunal considered that there was nodocument to arrive at such a conclusion. Tribunal alsoconsidered the fact that in the entire statement of Naresh B.Vora, there was no allegation that the assessee was workingon behalf of Atlas Petrochemicals, Ankini Petrochemicals andAvani Petrochemicals and therefore the Tribunal agreed withthe findings given by the CIT (A) in deleting the addition ofRs.4,99,36,298.00 made on protective basis and thus thisground of challenge raised by the revenue also came to bedismissed by the Tribunal. 15.4.Tribunal considered the fourth challenge withrespect to deletion of addition of Rs.2,00,000.00 on accountof foreign tour expenses on the basis of evidence which wasgathered. It was observed by the Tribunal that during thesearch and seizure proceedings no incriminating documentswere found which could be linked with the foreign trips madeby the assessee. Further the assessment order was silentabout the evidence which could prove that the assessee hadspent Rs.2,00,000.00 on foreign trips in the assessment year1998 – 1999 and / or the said money was unaccountedincome of the assessee. Tribunal concluded that the revenue 27 of 31 Ajay ITXA-1499-17.doc failed to disclose that there was any material evidenceavailable / seized in respect of unaccounted income forforeign travel during the search proceedings. Hence theTribunal returned a finding that there was no infirmity in theorder of CIT (A) in deleting the addition of Rs.2,00,000.00 onaccount of foreign tour expenses and thus this ground ofchallenge raised by the revenue also came to be dismissed. 15.5.Tribunal thereafter considered the final ground ofchallenge with respect to the deletion of addition ofRs.21,83,010.00 on account of household expenses in theincome of the assessee. The sole basis for this addition wasthe entry found in one Gandhi diary in the premises of “SunilChemicals”. The said diary however was not found at thetime of search operations. The said diary was not in thehandwriting of the assessee or any of his family member. Thenexus of the assessee to the said diary could not therefore beestablished. Tribunal held that the assessee was not directlyconcerned with the said diary and therefore the additionwhich was made by the Assessing OfÏcer was made on hisconjectures and surmises. Tribunal therefore returned afinding that the estimated addition cannot be made. Tribunal 28 of 31 Ajay ITXA-1499-17.doc 28 of 31 Ajay ITXA-1499-17.doc agreed with the finding of the CIT (A) that for making theabove addition, no incriminating document or evidence wasfound that could prove that the withdrawals were made bythe assessee or his family members for their householdexpenses. Further it was the assessee’s case that theaforesaid amount of Rs.21,83,010.00 was the total withdrawalmade by the assessee's family and not by the assessee aloneand this was not considered by the Assessing OfÏcer. TheTribunal agreed with the finding of the CIT (A) in deleting theaddition of Rs.21,83,010.00 on the ground that the saidhousehold expenditure incurred by the family members of theassessee was sufÏcient and did not require any interference.Thus this ground of challenge raised by the revenue came tobe dismissed. 16.Section 158BC requires the Assessment OfÏcer todetermine the undisclosed income of the block period in themanner provided under Section 158BB. Section 158BB (1)states that the undisclosed income of the block period shallbe the aggregate of the total income of the previous yearsfalling within the block period computed, in accordance with 29 of 31 Ajay the provisions of the Act, on the basis of evidence found as aresult of search or requisition of books of account or otherdocuments and such other materials or information as areavailable with the Assessing OfÏcer and relatable to suchevidence, as reduced by the aggregate of the total income, oras the case may be, as increased by the aggregate of thelosses of such previous years. Therefore, while determining /computing the undisclosed income of the block period, theAssessing OfÏcer shall compute the income on the basis ofevidence found as a result of search or on requisition of booksof accounts. This is so because the correctness or otherwiseof the return filed in pursuance of notice under Section 158BC(a) has to be examined with reference to the materials inpossession of the Assessing OfÏcer having nexus to theassessment of undisclosed income. Hence block assessmenthas to be framed in the light of material coming in to thepossession of the assessing authority pursuant to the search,which is the foundation of the proceedings. 17.On a thorough consideration, we have no reason tobelieve that the above findings are otherwise incorrect or Ajay ITXA-1499-17.doc improper. From the above, it is clear that the findings returnedby the Tribunal in respect of the five deletions exhibit dueapplication of mind on the part of the Tribunal and on thebasis of the factual evidence on record. We do not find anyperversity, much less any ambiguity, in the findings returnedby the Tribunal. We find that the CIT (A) has dealt with therelated issues in great detail which have been afÏrmed by theTribunal. Thus, there is concurrent findings of fact by the twolower appellate authorities. We are in agreement with thereasons recorded by the Tribunal in respect of deletion of thefive additions made by the CIT (A) and upheld by the Tribunal. 18.In the circumstances, we find that the appeal filedby the revenue is devoid of merit and the same is liable to bedismissed. We therefore hold that no substantial question oflaw, much less any question of law, arises from the order ofthe Tribunal. 19.In view of the above findings, the appeal filed bythe Revenue is therefore dismissed with no order as to costs. (MILIND N. JADHAV, J.) (UJJAL BHUYAN,J.)31 of 31