Shri A.K Garodia, A.M:— This appeal by the assessee has been directed against the order of Ld. CIT(A) XVI, Ahmedabad dated 28.12.2009 for the assessment year 2004-2005. The grounds raised by the assessee are as under:

“The order passed u/s. 250 of the Act on 28.1.2009 for A.Y 2004-2005 by CIT(A)-XVI, A'bad, partly confirming the additions made by AO is wholly illegal, unlawful and against the principles of natural justice.

The Ld. CIT(A) has grievously erred in upholding the additions made by AO without considering fully and properly the explanation offered and evidence produced by the appellant.

The Ld. CIT(A) has grievously erred in law and/or on facts in confirming the following additions made by the AO:

a) Alleged unexplained stock Rs. 27,70,000/- b) Unexplained cash Rs. 01,10,000/-

That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) has grievously erred in upholding the aforesaid additions made by AO.

The Ld. CIT(A) has grievously erred in upholding that there was unaccounted stock found in Ramavadar Godown of 138.5 MT. of steel and the same belonged to the appellant.

That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld that the aforesaid stock was found and belonged to the appellant.

The observations made and conclusion reached by CIT(A) are contradictory as well as unjustified on the facts of the case.

2. It is therefore prayed that the additions upheld by the CIT(A)) may kindly be deleted.

2. It was submitted by the Ld. A.R that grounds Nos. 1 & 4 are general. Regarding Grounds Nos. 2 & 3, the facts in brief till the beginning of assessment proceedings are noted by the Ld. CIT(A) in para 3 of his order, which is reproduced below:

i) The brief facts of the case are as under:- In this case, a survey u/s. 133A was carried out on 14-10-2003 at the business premises of the assessee i.e If Still (proprietary concern of the assessee) situated at 603, Loha Bhavan, Nr Old High Court, Navrangpura, Ahmedabad.

ii)-During the course of survey proceedings, incriminating documents were found, which were inventorised as per Annexure A, item No. 1 to 6.

iii) The cash amounting to Rs. 1,10,0007-was also found at the time of survey on 14-10-2003.

iv During the course of survey, a statement on oath of Shri Razkbhai, the prop M I.F Steel were recorded on 14-10-2003.

v) In the statement recorded on oath on 14-10-2003, the assessee Shri Razakbhai had made following disclosure:

1 Undisclosed stock found in Rarnavtar Godown of 138.5 metric Ton of steel @ 20,0007-per M.T 27,70,0007 2 Trading income shown on the basis of loose papers found file page 4 to 8 6,22,0007 3 Unexplained cash found 1,10,0007 4 In respect of commission income earned by issuing bogus bill as per Ann. A, the bogus bills was issued in the name of Rupesh Trading Co., Pankaj Agro & Ganesh Trading Co. 1,65,0007 36,73,0007

vi) However, while filing the return of income, the assessee did not disclose the above mentioned undisclosed income in the return of income. Considering the above facts, explanation of the assessee was called for by the Assessing Officer vide show cause notice dated 16-112006. After considering the reply of the appellant, the Assessing Officer made addition on various items as discussed below.”

3. Various submissions were made by the assessee before the A.O but the A.O was not satisfied and he made addition of Rs. 36.67 lacs comprising of Rs. 27.70 lacs on account of stock difference, Rs. 1.10 lacs being unexplained cash found in the course of survey, Rs. 6.5 lacs on account of income from bogus bills and Rs. 6.22 on account of trading income.

4. Being aggrieved, assessee carried the matter in appeal before Ld. CIT(A), who has confirmed the addition on account of stock difference of Rs. 27.70 lacs and unexplained cash found in the course of survey of Rs. 1.10 lacs but deleted the remaining two additions by holding that this income has been utilized in acquiring closing stock and cash. Now, the assessee is in further appeal before us.

5. It is submitted by the Ld. A.R that it is noted by the Ld. CIT(A) in para 4.3 of his order that on examination of bank statement and the statement recorded at the time of survey, it is seen that assessee is doing the business of issuing bills (hawala transaction) and no genuine purchase and sales are made through these bank accounts in Memon Co-operative Bank Ltd. It is the submission of the Ld. A.R that since it is held by the CIT(A) that the assessee is engaged in the business of hawala transaction, he was not justified in upholding the addition made by the A.O on account of alleged undisclosed stock and alleged unexplained cash. It is also submitted that since the assessee is only a hawala operator, no addition can be made on account of stock and cash. It is also submitted that no bill for purchase/sale was found and hawala income has been offered and accepted by the department. Regarding the statement recorded at the time of survey, it was submitted that the same was retracted. In this regard, our attention was drawn to page 91-93 of the paper book. One more submission was made that statement in question has not been corroborated and hence, it has no evidentiary value and it is not conclusive evidence. Regarding the stock and cash found in the course of survey, it was submitted that the same are duly accounted for in the books. In this regard, our attention was drawn to page 66-68 of the paper book for stock and pages 113-114 of the paper book in respect of cash found at the time of survey.

6. As against this, the Ld. D.R of the revenue supported the orders of authorities below.

7. We have considered the rival submissions and perused the material on record and gone through the orders of authorities below. We find that a survey u/s. 133A of the Income tax Act, 1961 was carried out on 14.10.2003 at the business premises of the assessee i.e MIF Steels, the proprietary concern of the assessee. In the course of survey, incriminating documents were found, which were inventorised and impounded. Cash of Rs. 1.10 lacs was also found at the time of survey and in the course of survey, a statement on oath of the assessee being the proprietor of MIF Steels was recorded. In the said statement recorded on oath on 14.10.2003, the assessee had made disclosure of Rs. 36.37 lacs comprising of undisclosed stock found in Ramavtar godown of 138.5 MT of steel @ Rs. 20,000/- per M T valuing Rs. 27.70 lacs, unexplained cash found of Rs. 1.10 lacs, trading income on the basis of loose papers found Rs. 6.22 lacs and on account of business income earned by issuing bogus bills of Rs. 1.65 lacs, total Rs. 36.37 lacs. This goes to show that the assessee was engaged in two types of business; one of the businesses was, dealing in steel and other business was hawala transaction by way of issuing bogus bills. The statement of the assessee is not the only basis regarding the allegation of the A.O that the assessee was holding undisclosed stock and cash and was also having undisclosed trading income and undisclosed income from hawala transaction. In addition to the statement, the A.O has found undisclosed stock and undisclosed cash at the time of survey and with regard to undisclosed trading income and undisclosed hawala transaction business income also, loose papers were found in the course of survey. Hence,, the addition made by the A.O in the present case is not on the basis of statement alone. Regarding undisclosed stock found in the course of survey, it was the submission by the assessee in the course of assessment proceedings that sales were made by the assessee to his son's firm World Steel Centre to the tune of 31.815 MT but the material was lying in the same godown and the assessee has furnished confirmation from Tarus Pvt. Ltd. for the purchase of steel weighing 79.460 MT. It is submitted that the stock was taken on estimate basis and in fact, the goods weighing 159.250 MT were lying in the godown, which included the quantity of 31.815MT steel sold to the firm of the assessee's son but lying in the godown of the assessee. All these contentions raised by the assessee before the A.O were rejected by him for this reason that in the course of survey it was stated by the assessee that books of account and other purchase bills were lying with the accountant who had gone out of station on the date of survey. It was also submitted by the assessee in the course of survey proceedings that these books of account and purchase bills etc. will be produced to the A.O after return of his accountant but the same was never produced till the date of hearing in the course of assessment proceedings. On this basis, the A.O has stated on page 4 of the assessment order that whether transaction such as purchase and sale shown by the assessee was reflected in the books as on the date of survey i.e on 14.10.2003 or not, is not verifiable. The 2nd reason given by the A.O is that assessee has tried to work out the closing stock at the end of the financial year but the working of closing stock as on the date of survey was not furnished by the assessee. The same contentions were raised by the assessee before the Ld. CIT(A) and before us. Before us, the assessee has furnished monthly summary of stock as on pages 66-68 of the paper book, as per which there is a closing stock of 127.445 MT as on 14.10.2003 Merely on the basis of these statements furnished before the A.O in the course of assessment proceedings and before us in the paper book, it cannot be held that the stock is explained. The relevant point to be considered is that on the date of survey, no such stock register or books of account or purchase/sale bills were made available to the survey party and it was contended by the assessee in its statement that the same are lying with the accountant and will be produced after his arrival. In this regard, the reply of question No. 16 of the statement is relevant which is available on record. In the letter dated 23.11.2006, submitted by the assessee to the A.O in reply to the show cause notice of the A.O dated 16.11.2006, there is no submission that after arrival of the accountant, the books of account, bills of purchase and sales etc. were produced by the assessee before the A.O In fact, finding of the A.O is on page 4 of the assessment order that books of account and purchase bills etc. were never produced till the date of hearing and, therefore, the stock position now being shown by the assessee on the date of survey is not verifiable. When this factual position is considered along with the statement of the assessee in which the assessee had made disclosure of stock, we are of the considered opinion that if the stock found at the time of survey was as per the books of account of the assessee, it was open to the assessee to bring these facts to the notice of the department immediately after return of accountant or within a reasonable time after his return. But this was not done by the assessee and the submissions were made in this regard only after issuance of show cause notice by the A.O in the year 2006. Hence, its reliability is in doubt.

8. Regarding the retraction of the statement, our attention was drawn to the same letter dated 23.11.2006 which is available on pages 91-98 of the paper book but there is no such retraction as such in the letter. If we go by the theory of preponderance of probabilities, if a disclosure was made by the assessee of the undisclosed income and if this was admitted by him under mistaken belief of facts, then he will immediately retract the statement within a reasonable time after return of the accountant but no such retraction had been brought to our notice and hence, these documents in the form of stock register on the date of survey furnished in the paper book do not inspire confidence or reliability and it appears to be an afterthought and it is very much possible that extra purchases can be shown and actual sales can be concealed to show more stock in the books on the date of survey. We, therefore, are not satisfied with the explanation of the assessee regarding the stock found at the time of survey.

9. Regarding the cash found at the time of survey, the assessee did not provide any explanation at the time of survey or within a reasonable time after the return of the accountant, who was not available at the time of survey and now in the paper book, the assessee has furnished a copy of the balance sheet as on 31.03.2003 which shows cash in hand of Rs. 3,84,932/-. This balance sheet of the assessee is the part of audited accounts for the year ended 31.03.2003 and the audit report is dated 13.10.2003 whereas, the date of survey was 14.10.2003 It is very surprising that the audit report dated 13.10.2003 was not available & not produced at the time of survey on 14.10.2003 to explain the cash in hand found of Rs. 1.10 lacs at the time of survey. Moreover, even if it is accepted that cash of Rs. 3.85 lacs was available with the assessee as on 31.03.2003, it does not automatically explain the cash found in the course of survey on 14.10.2003 The assessee has admitted in the course of statement on the date of survey that this cash of Rs. 1.10 lacs found on the date of survey is undisclosed cash. Even if it is assumed that such statement by the assessee was under mistaken belief of facts, it was very much possible to explain the same within a reasonable time after return of the accountant who was not available at the time of survey. On page 119 of the paper book, the assessee has furnished daily summary of cash for the month of October 2003 and as per the same, it is showing on 14.10.2003 the cash available in the books worth Rs. 2,83,113/-. If this is the real position, it was required form the assessee to bring these facts to the notice of the A.O immediately after the return of the accountant or at least within a reasonable time after the return of the accountant when the books were available with the assessee. This was not done by the assessee and hence,, with regard to this cash also, we are of the considered opinion that the explanation now being furnished is an afterthought particularly when the assessee has made disclosure in his statement recorded on oath at the time of survey which was never retracted and the books were not produced before the A.O within a reasonable time after the return of the accountant to bring home the claim of the assessee that cash found in the course of survey was out of disclosed cash of the assessee. Hence, on both these accounts, the explanation now being offered by the assessee does not inspire confidence and the same appears to be an after thought.

10. Regarding this submission of Ld. A.R that once it is held by Ld. CIT(A) that assessee is in the business of hawala transaction, he should not have confirmed the addition on account of unexplained stock, we do not find any merit in this argument because that may be a valid argument in those cases, where it is found that the assessee is engaged only in hawala transactions and is not doing any real business. But in the present case, it was found in the course of survey supported by documentary evidence that the assessee was having stock and there were papers regarding undisclosed trading income as well as undisclosed hawala transaction business income. These documentary evidences found in the course of survey establish that the assessee was engaged in real business being purchase and sale of steel as well as in the business of hawala transaction of providing bogus bills. Hence, this argument of the assessee is also devoid of any merit. There is one more important point that regarding two other additions made by the A.O on account of trading income shown on the basis of loose papers found of Rs. 6.23 lacs and commission income earned by issuing bogus bills of Rs. 1.65 lacs, it was held by the Ld. CIT(A) that these two income of Rs. 1.65 lacs and 6.22 lacs have been utilized in acquiring closing stock and cash. He has deleted these two additions on the basis that the same were used in acquiring undisclosed stock and undisclosed cash. This finding of Ld. CIT(A) goes to show that these two income were utilized by the assessee in acquiring undisclosed stock and undisclosed cash and no ground has been raised by the assessee against this finding of Ld. CIT(A). Considering all the facts of the present case as discussed above, we are of the considered opinion that no interference is called for in the order of Ld. CIT(A).

11. In the result, appeal of the assessee stands dismissed.