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2016 DIGILAW 1512 (GUJ)

Commissioner of Income Tax v. Karsanbhai K. Patel

2016-07-27

G.R.UDHWANI, K.S.JHAVERI

body2016
JUDGMENT : K.S. Jhaveri, J. 1. As the questions referred to this Court in all these appeals are common, at the request of learned advocates, the appeals are heard together and are disposed of by this common judgment. 2. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as 'the Tribunal')/the revenue has preferred the present Tax Appeals assailing the following orders:- Tax Appeal No. Date of Tribunal’s order IT(SS)A No. Block Assessment Period 1387 of 2006 28.02.2006 64/Ahd/2005 01.04.1995 to 27.09.2001 1390 of 2006 28.02.2006 66/ Ahd/2005 01.04.1995 to 27.09.2001 1391 of 2006 28.02.2006 67/ Ahd/2005 01.04.1995 to 27.09.2001 934 of 2009 11/02/08 145/ Ahd/2007 01.04.1995 to 27.09.2001 3. The following questions of law were raised for consideration by this Court: TAX APPEAL NO. 1387 OF 2006 "(A) Whether the Appellate Tribunal was right in law and on facts in holding that addition on account of undisclosed expenditure in respect of investment in Igoore Coffee Estate cannot be made in the hands of the assessee? (B) Whether the Appellate Tribunal was right in law and on facts in holding that disallowance of losses treating them to be contrived losses cannot be disallowed in block assessment proceedings? (C) Whether the Appellate Tribunal was right in law and on facts in holding that addition cannot be made by application or rule 7B as undisclosed income on the basis of voucher found during the course of search? (D) Whether the Appellate Tribunal was right in law and on facts in directing exclude the period of delay in filing the block return, attributable to the department for the purpose of computing interest u/s. 158BFA(1), which is mandatory in nature? (E) Whether the Appellate Tribunal was right in law and on facts in deleting the addition of Rs. 10,95,000/- on account of unexplained expenses?" TAX APPEAL NO. 1390 OF 2006 "(A) Whether the Appellate Tribunal was right in law and on facts in holding that addition on account of undisclosed expenditure in respect of investment in Igoore Coffee Estate cannot be made in the hands of the assessee? (B) Whether the Appellate Tribunal was right in law and on facts in holding that disallowance of losses treating them to be contrived losses cannot be disallowed in block assessment proceedings? (B) Whether the Appellate Tribunal was right in law and on facts in holding that disallowance of losses treating them to be contrived losses cannot be disallowed in block assessment proceedings? (C) Whether the Appellate Tribunal was right in law and on facts in holding that addition cannot be made by application or rule 7B as undisclosed income on the basis of voucher found during the course of search? (D) Whether the Appellate Tribunal was right in law and on facts in directing exclude the period of delay in filing the block return, attributable to the department for the purpose of computing interest u/s. 158BFA(1), which is mandatory in nature? TAX APPEAL NO. 1391 OF 2006 "(A) Whether the Appellate Tribunal was right in law and on facts in holding that addition on account of undisclosed expenditure in respect of investment in Igoore Coffee Estate cannot be made in the hands of the assessee? (B) Whether the Appellate Tribunal was right in law and on facts in holding that disallowance of losses treating them to be contrived losses cannot be disallowed in block assessment proceedings? (C) Whether the Appellate Tribunal was right in law and on facts in holding that addition cannot be made by application or rule 7B as undisclosed income on the basis of voucher found during the course of search? (D) Whether the Appellate Tribunal was right in law and on facts in directing exclude the period of delay in filing the block return, attributable to the department for the purpose of computing interest u/s. 158BFA(1), which is mandatory in nature? 3.1 Though, Appeal No. 934 of 2009 has not yet been admitted, the same was ordered to be heard along with Tax Appeal No. 1387 of 2006. The appeal is admitted for consideration of the following substantial questions of law and has been taken up for hearing and disposed of with the consent of the learned advocates for both the sides along with the other three appeals today. "(A) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) deleting the addition of Rs. 28,62,600/- made in respect of undisclosed investment in Coffee Estate? (B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) deleting the addition of Rs. 28,62,600/- made in respect of undisclosed investment in Coffee Estate? (B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) deleting the addition of Rs. 4,75,889/- made on account of business income from Coffee Estate shown by the assessee as agricultural income?" 4. For the sake of convenience, we shall briefly refer to the facts in Tax Appeal No. 1387 of 2006. A search action u/s. 132 of the I.T. Act was carried out with Nirma Group of cases. The assessee in Tax Appeal No. 934 of 2009 is one of the associate entities of Nirma Group of Cases. In all these appeals, pursuant to the search notice u/s. 158BC was issued and served. The assessee filed return of income for the block period showing undisclosed income at NIL. While finalizing the assessment, the Assessing Officer made additions on undisclosed investment in coffee estate, non disclosure of business income from coffee estate, unexplained expenses and disallowance of losses incurred on share transactions. 5. The first issue is regarding addition made by the Assessing Officer on account of undisclosed investment in improvement of coffee estate acquired in F.Y. 1994-95. The property named as Igoor Coffee Estate in Hassan District of Karnataka was bought by 13 different entities of Nirma Group in 1994-95. The assessee had invested for the acquisition and registration of the said property in his name. During the course of search in the case of Nirma Limited, a letter dated 22.01.1998 of Shri Jabbir Asghar to the assessee was seized. In the said letter, Shri Asghar claimed several payments with regard to the acquisition, maintenance and management of the said Estate. The Assessing Officer on the basis of above letter made the addition being undisclosed income earned during the block period. 5.1 On appeal before the CIT (A) by the assessee, the CIT(A) confirmed the addition made by the Assessing Officer. On further appeal before the Tribunal, the Tribunal deleted the addition by observing that during the course of assessment proceedings, in reply to the show cause notice issued by the Assessing Officer, the assessee filed an affidavit of Shri Asghar wherein he had deposed that the letter was written out of anger and anxiety and that the same was not a justifiable claim. 5.2 Mr. 5.2 Mr. Nitin Mehta, learned advocate appearing for the revenue submitted that the decision of the Tribunal is erroneous inasmuch as the contents of the letter dated 22.01.1998 of Shri Asghar is very much relevant to the assessee. He submitted that this letter was seized from the office premises of the Group's flagship company and was addressed to the assessee who is also one of the investors in Igoor Coffee Estate. He submitted that Shri Asghar was employed by the assessee and was managing the Estate and therefore the contents of the letter cannot be said to be untrue. He submitted that the affidavit filed by Shri Asghar after a period of six years cannot be considered as voluntary and therefore the addition made by the Assessing Officer was justified. 6. The second issue is regarding the addition on account of business component of income from the coffee estate. It is the case of the assessee that the accounts of the estate were not correctly maintained by their Manager Shri Jabbir Asghar. The Assessing Officer therefore rejected the accounts by invoking the provisions of Section 145(3) of the Act. The Assessing Officer considered the gross receipts pertaining to the estates of the assessee as gathered under Section 133(6) of the Act. The Assessing Officer worked out the business component by applying Rule 7B of the I.T. Rules, 1962 at 25% of such income. 6.1 The CIT (A) vide order dated 17.12.2004 has allowed partial relief and the CIT (A) held that the estimated increase made to the income is not justified. However, the application of Rule 7B has been held to be in order. The Department did not file any appeal on this issue. The Tribunal has deleted the addition made by the Assessing Officer and held that no addition can be made by application of Rule 7B as undisclosed income on the basis of voucher of Allana Coffee curing Works (ACCW) which was found in the premises of other concern. 6.2 Mr. Nitin Mehta submitted that Rule 7B is an independent rule which is applicable for computing the income from the manufacture of coffee. As per this rule, the income derived from the sale of coffee grown and cured by the seller is to be computed as if it were income derived from business and 25% of such income shall be the income liable to tax. As per this rule, the income derived from the sale of coffee grown and cured by the seller is to be computed as if it were income derived from business and 25% of such income shall be the income liable to tax. He submitted that during the search, it was found that curing activity was done through ACCW for the F.Y. 1995-96. He has drawn the attention of this Court to the statement recorded under Section 131 of the Act on 11.08.2003 and submitted that the Manager of Igoor Estate Shri K.N. Muddiaah accepted that the coffee grown at the estate was sold after getting the same cured. He submitted that therefore the provisions of rules 7 and 7B of Rules are clearly applicable in respect of the above income which cannot be treated as agriculture income. He submitted that since a paper was seized during search relating to curing activity done through ACCW, the undisclosed income was rightly added in block assessment. 7. The third issue is regarding the addition on account of unexplained expenses incurred pertaining to Igoor Estate. The assessee failed to substantiate the source of expenses pertaining to Igoor Estate which were noted on pages 111 and 112 of Annexure A and therefore the Assessing Officer noted the expenses in the seized pages and held them to be incurred by the assessee out of his undisclosed income earned during the block period. 7.1 The CIT (A) confirmed the disallowance holding that the assessee had incurred the above expenses out of his undisclosed income earned during the block period. The Tribunal deleted the addition made by the Assessing Officer. It has been held by the Tribunal that the paper seized on which the disallowance has been made does not bear any date or factum of payment besides advances were given to the Estate Manager and Shri Jabbir Asghar which were debited in the books of account. 7.2 Mr. Nitin Mehta submitted that on the one hand the assessee has contended that the seized paper does not bear any date or factum of payment and on the other hand the assessee has submitted that the noting regarding Rs. 10 lakhs appears to be the advance given to Shri Asghar for development and maintenance of the estate. 7.2 Mr. Nitin Mehta submitted that on the one hand the assessee has contended that the seized paper does not bear any date or factum of payment and on the other hand the assessee has submitted that the noting regarding Rs. 10 lakhs appears to be the advance given to Shri Asghar for development and maintenance of the estate. He submitted that it is for the assessee to prove that the transaction was carried out by him which he has failed to do and therefore considering the facts stated by the Assessing Officer in the assessment order, he was justified in making the addition on account of unexplained expenditure incurred out of undisclosed income. 8. The fourth issue is regarding addition on account of disallowance of losses incurred on share transactions. On the basis of seized documents evidencing booking of contrived losses through transactions between associate entities within Nirma Group and the fact that no delivery of shares were effected even after more than a year after the supposed sale till the date of search, the Assessing Officer has disallowed the losses claimed on shares transactions. 8.1 The CIT(A) sustained the addition observing that the Assessing Officer had justifiably considered the said losses as contrived losses and the assessee had not been able to rebut the facts. The Tribunal allowed the claim of losses made by the assessee holding that the assessee having duly incorporated all these share transactions in the capital accounts and offered capital gain thereof this cannot be held to be undisclosed transaction and resulting losses as contrived losses that too in block assessment proceedings only due to certain assumed irregularities on the part of the revenue and these losses cannot be disallowed in block assessment proceedings holding them to be contrived losses. 8.2 Mr. Nitin Mehta submitted that the decision of the Tribunal is erroneous on this issue in view of the fact that the losses wrongly claimed clearly fall within the definition of 'undisclosed income' as provided in clause (b) of Section 158B of the Act. He submitted that as mentioned in the assessment order, there is no contemporary evidence of genuine transactions of sale of shares. He submitted that no delivery of shares was effected in respect of these transactions and therefore the Assessing Officer was justified in disallowing the losses claimed on share transactions. 9. Mr. He submitted that as mentioned in the assessment order, there is no contemporary evidence of genuine transactions of sale of shares. He submitted that no delivery of shares was effected in respect of these transactions and therefore the Assessing Officer was justified in disallowing the losses claimed on share transactions. 9. Mr. Mehta submitted that the Tribunal also set aside the issue relating to the charging of interest under Section 158 BFA (1) of the Act to the file of the Assessing Officer. He submitted that the Tribunal has directed not to charge interest for the period of delay in making the photocopies of seized material available and that the interest chargeable u/s. 158 BFA (1) is for the period indicated in the section and is mandatory. 10. In support of his submissions, Mr. Mehta has relied upon a decision of the Apex Court in the case of Aspinwall and Co. Ltd. vs. Commissioner of Income Tax reported in [2001] 251 ITR 232 wherein it has been held as under: "The short point for consideration is whether the High Court was right in coming to the conclusion that the assessee was not involved in any manufacturing or production activity in the process of curing the coffee. The word manufacture has not been defined in the Act. In the absence of a definition of the word manufacture it has to be given a meaning as is understood in common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to a manufacturing activity. This Court while determining as to what would amount to a manufacturing activity held in Deputy Commissioner of Sales Tax v. M/s. Pio Food Packers, 1980 Supp. SCC 174, that the test for determination whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity, but is recognized in the trade as a new and distinct commodity. It was observed: Commonly manufacture is the end result of one or more processes through which the original commodity is made to pass. It was observed: Commonly manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Adverting to facts of the present case, the assessee after plucking or receiving the raw coffee berries makes it undergo nine processes to give it the shape of coffee beans. The net product is absolutely different and separate from the input. The change made in the article results in a new and different article which is recognized in the trade as a new and distinct commodity. The coffee beans have an independent identity distinct from raw material from which it was manufactured. A distinct change comes about in the finished product. Submission of the learned counsel for the Revenue that the assessee was doing only the processing work and was not involved in the manufacture and producing of a new article cannot be accepted. The process is a manufacturing process when it brings out a complete transformation in the original article so as to produce a commercially different article or commodity. That process itself may consist of several processes. The different processes are integrally connected which results in the production of a commercially different article. If a commercially different article or commodity results after processing then it would be a manufacturing activity. The assessee after processing the raw berries converts them into coffee beans which is commercially different commodity. Conversion of the raw berry into coffee beans would be a manufacturing activity." 11. Mr. M.R. Bhatt, learned Senior Counsel appearing for the revenue in Tax Appeal No. 934 of 2009 has supported the impugned orders and has adopted the arguments advanced by Mr. Mehta, learned advocate. 12. Mr. Soparkar, learned Senior Advocate has raised a preliminary objection in view of Section 260A (4) and submitted that no substantial question of law arises from the impugned order. Mehta, learned advocate. 12. Mr. Soparkar, learned Senior Advocate has raised a preliminary objection in view of Section 260A (4) and submitted that no substantial question of law arises from the impugned order. He submitted that the Tribunal has not based its findings on no evidence and that while arriving at the said finding, all the relevant admissible evidence have been taken into consideration in its true perspective and therefore this Court may not entertain the present appeals. He has relied upon a decision of the Apex Court in the case of Vijay Kumar Talwar vs. Commissioner of Income Tax, New Delhi reported in 330 ITR 1 wherein paras 17 to 21 read as under: "17. Before adverting to the rival submissions, it would be expedient to refer to Section 260-A of the Act. The provisions, relevant for our purpose, read thus: "(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law... (3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question... (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section." 18. It is manifest from a bare reading of the Section that an appeal to the High Court from a decision of the Tribunal lies only when a substantial question of law is involved, and where the High Court comes to the conclusion that a substantial question of law arises from the said order, it is mandatory that such questions must be formulated. The expression "substantial question of law" is not defined in the Act. Nevertheless, it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta & Sons, Ltd. Vs. Century Spinning and Manufacturing Co. The expression "substantial question of law" is not defined in the Act. Nevertheless, it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta & Sons, Ltd. Vs. Century Spinning and Manufacturing Co. Ltd., a Constitution Bench of this Court, while explaining the import of the said expression, observed that: "The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest Court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law." 19. Similarly, in Santosh Hazari Vs. Purushottam Tiwari a three judge Bench of this Court observed that: "A point of law which admits of no two opinions may be a proposition of law but cannot be a substantial question of law. To be "substantial" a question of law must be debatable, not previously settled by law of the land or a binding precedent, AIR 1962 SC 1314 : (2001) 3 SCC 179 and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law "involving in the case" there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstance of each case whether a question of law is a substantial one and involved in the case, or not; the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis." 20. In Hero Vinoth (Minor) Vs. Seshammal, this Court has observed that: "The general rule is that High Court will not interfere with the concurrent findings of the courts below. But it is not an absolute rule. Some of the well-recognized exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have wrongly cast the burden of proof. When we refer to "decision based on no evidence", it not only refers to cases where there is a total dearth of evidence, but also refers to any case, where the evidence, taken as a whole, is not reasonably capable of supporting the finding." 21. A finding of fact may give rise to a substantial question of law, inter-alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. (See: Madan Lal Vs. Mst. Gopi & Anr. Narendra Gopal Vidyarthi Vs. Rajat Vidyarthi; Commissioner of Customs (Preventive) Vs. Vijay Dasharath Patel; Metroark Ltd. Vs. Commissioner of Central Excise, Calcutta; West Bengal Electricity Regulatory Commission Vs. CESC Ltd.) 12.1 Mr. Soparkar submitted that the very base taken for the addition is the letter dated 22.01.1998 written by Mr. Jabbir Asghar. He submitted that no broker's commission is paid on the cost of improvement which is accumulated over the years, broker's commission is paid on the value of transactions and that in no case the expenditure on improvement can fall within the ambit of commercial transaction of 'Broker's Commission'. Jabbir Asghar. He submitted that no broker's commission is paid on the cost of improvement which is accumulated over the years, broker's commission is paid on the value of transactions and that in no case the expenditure on improvement can fall within the ambit of commercial transaction of 'Broker's Commission'. He submitted that as per the subsequent affidavit filed by Mr. Asghar, it is clear that he had written the letter out of anger and anguish as he was removed from the management of Igoor Estate and that the claim made by him was never justified and not meant for recovery and never paid. He submitted that even if the said letter is taken into consideration, the coffee estate had been acquired prior to block period and the same is a fact admitted even by the Assessing Officer. 12.2 So far as issue regarding Section 7B is concerned, Mr. Soparkar has drawn the attention of this Court to the statement of return and submitted that regular assessment of the assessee was done u/s. 143(3) of the Act. He submitted that proper books of accounts for agriculture income and expenses were maintained including the amount paid to M/s. Allana Coffee. He submitted that merely because a letter has been found during the course of search, disclosed income cannot be held as undisclosed income just due to change of opinion. He submitted that Rule 7B is independent and has been effective from assessment year 2002-03 and that amended rule cannot give right to treat the disclosed income as undisclosed income. In support of his submission he has also relied upon Aspinwall And Co. Ltd. (supra) more particularly the following observations: "Submission of the learned counsel for the Revenue that the assessee was doing only the processing work and was not involved in the manufacture and producing of a new article cannot be accepted. The process is a manufacturing process when it brings out a complete transformation in the original article so as to produce a commercially different article or commodity. That process itself may consist of several processes. The different processes are integrally connected which results in the production of a commercially different article. If a commercially different article or commodity results after processing then it would be a manufacturing activity. The assessee after processing the raw berries converts them into coffee beans which is commercially different commodity. That process itself may consist of several processes. The different processes are integrally connected which results in the production of a commercially different article. If a commercially different article or commodity results after processing then it would be a manufacturing activity. The assessee after processing the raw berries converts them into coffee beans which is commercially different commodity. Conversion of the raw berry into coffee beans would be a manufacturing activity." 12.3 Mr. Soparkar has further relied upon decision of this Court in the case of Commissioner of Income Tax vs. Shambhulal C. Bachkaniwala reported in [2000] 245 ITR 488 (Gujarat) and in the case of Deputy Commissioner of Income Tax vs. Harishkumar J. Gupta reported in [2013] 32 taxmann.com 175 (Gujarat). 12.4 Mr. Soparkar submitted that so far as issue regarding contrived losses is concerned, the transaction was duly accounted in the books of accounts of both the seller and the buyer of shares. He submitted that payment has been received by account payee cheques and delivery of shares were given to the buyers. He submitted that the share transactions were duly incorporated in the capital accounts and therefore it cannot be held to be undisclosed transactions and resulting loss as contrived losses that too in block assessment proceedings only due to certain assumed irregularities on the part of the revenue. In support of his submissions, he has relied upon the decision of this Court in the case of Assistant Commissioner of Income Tax vs. Biraj Investment (P.) Ltd. reported in [2012] 24 taxmann.com 273 (Guj.) 12.5 Mr. Soparkar further submitted that if the delay in filing the block return occurred due to non supply of documents by Assessing Officer, levy of interest under Section 158BFA for late filing of return was not justified. In this regard, he has placed reliance on decision of Karnataka High Court in the case of Commissioner of Income Tax vs. B. Nagendra Baliga reported in [2014] 47 taxmann.com 331 (karnataka) and Delhi High Court in the case of Commissioner of Income Tax vs. Mesco Airlines Ltd. reported in [2010] 327 ITR 554 (Delhi). 12.6 So far as issue regarding deletion of amount on account of unexplained expenses is concerned, Mr. Soparkar submitted that the revenue has not been able to prove the factum of payment. He submitted that since Mr. 12.6 So far as issue regarding deletion of amount on account of unexplained expenses is concerned, Mr. Soparkar submitted that the revenue has not been able to prove the factum of payment. He submitted that since Mr. Asghar was associated with the development of the estate various advances were given to him. He submitted that since there was on going account and assessee had explained the same, the addition was rightly deleted by the Tribunal. 13. We have heard learned advocates for both the sides. It is required to be noted at the outset that the impugned additions in these appeals are based on the letter dated 22.01.1998 of Shri Jabbir Asghar. However, it shall be also important to note that no other incriminating material except the letter of Shri Asghar was found by the revenue during the course of search. The assessee however produced an affidavit of Shri Asghar in reply to the show cause notice issued by Assessing Officer wherein he has stated on oath that the letter was written out of sheer anger and anxiety. The Assessing Officer has not tried to cross verify or controvert the contents in the affidavit. 13.1 Considering the entire facts and circumstances of the case including the materials on the record, we are of the opinion that the Assessing Officer has proceeded on mere assumptions and presumptions. The revenue has failed to controvert the statements made in the affidavit and therefore in view of the said contents in the affidavit remaining un-controverted, addition merely on the basis of said letter as undisclosed income in block assessment proceedings is not sustainable. 13.2 It is also borne out that the transactions of purchase of coffee estate had been completed earlier to the block period which has also been admitted by the Assessing Officer. Thus, even if the contents of the letter is taken into account, the amount claimed by Shri Asghar being prior to block period cannot be added. The Tribunal in para 19 has observed as under: "19...... That leaves us further question as to whether some re-plantation was done by JA, as he has contended in his letter. Thus, even if the contents of the letter is taken into account, the amount claimed by Shri Asghar being prior to block period cannot be added. The Tribunal in para 19 has observed as under: "19...... That leaves us further question as to whether some re-plantation was done by JA, as he has contended in his letter. This question has following answers: (i) JA has stated that the letter was written in anger only to register is claim; (ii) While recording statement under Section 131, the concerned officer could have well asked him about as to why he has used word "200 acres" of new plantation. In the absence of any further question, and there being no other material found justifying suppression of any expenditure of re plantation, addition cannot be made in block assessment on presumption. (iii) Survey operations were carried out under Section 133 (A) at Igoor Coffee estate also. Books of accounts maintained at coffee estate were verified, despite that, no material has been brought on record to suggest that any re-plantation expenses were not recorded. (iv) The assessees have been disclosing agriculture income and in some cases, 10% addition on account of agriculture income was made in assessments u/s.143(3), which has been deleted by the CIT(A) and Department has not filed any appeals against those orders." 13.3 As mentioned above, books of accounts of coffee estate were maintained and reply of the assessee has not been controverted separate expenses of coffee plantation cannot be made on acre wise expenses as the expenses will be merged with various agriculture expenses. New coffee re-plantation is done under shadow of big trees which were already there in the coffee estate and cost of such new plant being negligible has not been controverted. 13.4 Thus, in view of the above, we are of the opinion that the Tribunal has rightly concluded that additions on account of undisclosed expenditure in respect of investment in the coffee estate cannot be made in the hands of above assessees. The revenue has failed to prove that the coffee plantation expenses were undisclosed barring a letter from Shri Asghar which has also been denied by him by way of subsequent affidavit. Thus, we do not find any error in the conclusion reached by the Tribunal. 14. The revenue has failed to prove that the coffee plantation expenses were undisclosed barring a letter from Shri Asghar which has also been denied by him by way of subsequent affidavit. Thus, we do not find any error in the conclusion reached by the Tribunal. 14. So far as contrived loss is concerned, it is borne out that the transaction has been held to be non genuine only because some of the shares found during the course of search proceedings were not found recorded at the back of the certificate, that they are mutated in the name of transferee. In the case of Biraj Investment (P.) Ltd. (Supra), this Court has held in para 18 as under: "18. In the case of Commissioner of Income Tax v. Sakarlal Balabhai, 69 ITR 186, a Division Bench of this Court observed that avoidance of tax cannot include every case of reduction of tax liability of an assessee. The assessee may enter into a transaction which has the effect of diminishing his income and consequently reducing his tax liability. In such a case, there would be no avoidance of tax, For example, a case where the assessee makes a gift of shares to his son. By reason of gift income from the shares would not accrue to the assessee but would accrue to the son and to that extent the income of the assessee would be diminished and his tax liability reduced. This cannot be regarded as a case of tax avoidance even if the motive of the assessee in making the gift was to save tax on the income from shares at a higher rate applicable to him." 14.1 Merely because the transferees did not submit the shares for registration of transfer and the transfer was not recorded immediately is no ground for disallowance of losses on an actual transaction of sale. The Tribunal has observed that transactions were duly incorporated in the books, besides the assessee had furnished evidences in respect of confirmations of purchases, group of shares subsequently transferred and in case of non transfer lodging of complaints with SEBI, instances of shares sold by purchases through stock exchanges, offering of capital gains by the assessee in their return of incomes. Thus, the losses are rightly not disallowed in block assessment proceedings holding them to be contrived losses. 15. Thus, the losses are rightly not disallowed in block assessment proceedings holding them to be contrived losses. 15. So far as application of Rule 7B to the agriculture income is concerned, we are of the opinion that the Tribunal is justified in holding that application of Rule 7B to the Agriculture income cannot be upheld. During the course of search in the premises of Nirma Limited, a paper containing the details regarding curing activity done through M/s. Allana Coffee Curing Works was found. In the course of regular assessment proceedings all the requisite information has been disclosed before the assessing authorities. In the computation of income attached to the return of income, the agricultural income and agricultural expenses were duly shown. The agricultural income has been duly verified in the course of assessment also. It is not the case of the A.O. that the income has not been disclosed by the assessee. Moreover, no defect has been found in the books of accounts maintained by the assessee and therefore merely on the basis of one paper found in the premises by different related concerns, the additions ought not to have been made. Therefore it shall not be appropriate to say that addition should be made in the case of the assessee by application of Rule 7B as undisclosed income on the basis of voucher of ACCW which is found in premises of other concern. 16. So far as issue regarding penalty under Section 158BFA is concerned, the same is squarely covered by the decisions in the case of B. Nagendra Baliga (supra) and Mesco Airlines Ltd. (supra). In the case of B. Nagendra Baliga (supra) the Karnataka High Court has held as under: "10. The fifth substantial question of law is with regard to levy of interest under Section 158BFAQ) of the Act for the delay in filing the return is concerned. Sri K.V. Aravind, learned counsel appearing for the Revenue contended that in view of the mandatory provision, the Assessing Officer is liable to levy interest for filing the return of income belatedly for the block assessment period. He relied upon the judgment of this 11 Court in Cit vs. K.L. Srihari reported in (2011) 335 ITR 215 . 11. On the other hand, Smt. Vani H, learned counsel appearing for the assessee contended that the delay in filing returns cannot be attributable to the assessee. He relied upon the judgment of this 11 Court in Cit vs. K.L. Srihari reported in (2011) 335 ITR 215 . 11. On the other hand, Smt. Vani H, learned counsel appearing for the assessee contended that the delay in filing returns cannot be attributable to the assessee. She contended that search was conducted on 28.01.2000 and few documents including two diaries containing noting for the period September 1997 to December 1997 were seized. On 03.02.2000, the assessee requested for issue of Xerox copies of seized materials in order to file returns. On 20.04.2000, the Department called upon the assessee to pay the requisite fee for issue of Xerox copies of the seized materials. Accordingly, the assessee paid the said fee. On 30.05.2000 furnished the voluminous material. On verifying the voluminous documents, it was noticed that the Xerox copies of two diaries which were also seized were not furnished. Subsequently, the said copies were furnished, however, the Department had taken more than four months time to issue photo copies of the seized materials. On 20.06.2000, the DCIT issued notice under Section 158BC of the Act calling upon the assessee to file the returns of income for the block assessment period. The said notice was served on assessee on 22.06.2000. On 10.7.2000, the assessee filed 10 returns of income for the block period and later by 22.3.2001 he filed 29 regular returns. On 30.10.2000, the assessee filed returns for the relevant block period relating to period in question. In view of the delay on the part of the Department in furnishing necessary documents, the delay had occasioned. The said delay cannot be attributable on the part of the assessee. 12. On verification of the records, we found that there is considerable force in the submission made by the assessee. Without furnishing necessary documents sought for by the assessee, which were seized during the course of search, the assessee cannot be called upon to file the returns. The delay in filing the returns cannot be attributable on the assessee. Accordingly, the fifth substantial question of law is answered against the Revenue and in favour of the assessee." 16.1 Similarly in the case of Mesco Airlines Ltd. (supra) the Delhi High Court has observed as under: "10. On the other hand, the department also slept over the request of the assessee for furnishing the copies of the documents. Accordingly, the fifth substantial question of law is answered against the Revenue and in favour of the assessee." 16.1 Similarly in the case of Mesco Airlines Ltd. (supra) the Delhi High Court has observed as under: "10. On the other hand, the department also slept over the request of the assessee for furnishing the copies of the documents. It took more than one year in supplying the documents as the request was made on 1.10.1997 and documents were supplied on 20.11.1998. For this delay which is attributable to the department, the assessee cannot suffer and pay the interest. Thus, the approach of the Assessing Officer in directing the assessee to pay the interest for the entire period which included aforesaid 13 months consumed by the department in supplying the documents is clearly wrong. The Tribunal, on the other hand, ignored the fact that the assessee made a request for supply of copies of documents after waiting for 41 days and thereafter took another 41 days in filing the return. It counted the period of 45 days, as required under the law for filing the return, only from 20.11.1998 and absolved the assessee from liable to pay any interest. If such practice is allowed, any assessee on the last date of filing the return may ask for supply of copy of documents and thereafter ITA No. 745 of 2009 Page 7 of 8 from the date when the documents are supplied, would get another 45 days to file the return. This also has to be countered. 11. In this scenario, we are of the opinion, that the total time taken by the assessee from the date of service of notice under Section158BC of the Act till the filing of the return is to be taken into consideration and from this period, the time which is taken by the department in supplying the documents has to be excluded. In this manner, if the period exceeds 45 days, the assessee would be liable to pay the interest for the period beyond 45 days. 12. We answer the question of law by holding that the Income Tax Tribunal was not entirely right in dealing with the levy of interest under Section 158BFA(1) of the Act. In this manner, if the period exceeds 45 days, the assessee would be liable to pay the interest for the period beyond 45 days. 12. We answer the question of law by holding that the Income Tax Tribunal was not entirely right in dealing with the levy of interest under Section 158BFA(1) of the Act. Instead, the period for which the liability to interest is to be fastened upon the assessee would be calculated in the manner mentioned above." 16.2 Thus, we are of the view that delay in making photocopies of the seized material and handing them to the assessee cannot be a ground for charging of interest for the period of delay. Similarly, we find that the Tribunal is justified in deleting the addition on account of unexplained expenses. Thus, all the questions raised in these appeals are required to be answered in favour of assessee and against the revenue. 17. So far as the preliminary objection raised by Mr. Soparkar is concerned, in view of the fact that the questions raised in these appeals have already been answered in favour of assessee we are not inclined to decide the said objection and therefore we keep the same open. Appeals are dismissed accordingly.