S. Venkatesh, Bangalore V. DCIT, Bangalore

CO 3/BANG/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8442 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-03-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 29-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIIIDR
• Assessee Lawyers: T VASUDEVAN
• Keywords: Rejection of books of accounts; Unexplained investment; Income from undisclosed sources; Reasonable cause; Wrong claim; Reason to believe
• Section: 69C; 143(3); 153A; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.565 TO 568/BANG/2011 ASSESSMENT YEARS : 2004-05, 2005-06, 2007-08 & 20 08-09 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(3), BANGALORE. VS. SHRI S. VENKATESH, NO.179, SWETHA NILAYA, PAI LAYOUT, BENNIGANAHALLI, BANGALORE 560 016. PAN : ABWPV 2871M APPELLANT RESPONDENT C.O. NOS.3 TO 6/BANG/2013 (ARISING OUT OF ITA NO.565 TO 568/BANG/2011) ASSESSMENT YEARS : 2004-05, 2005-06, 2007-08 & 2008-09 SHRI S. VENKATESH, NO.179, SWETHA NILAYA, PAI LAYOUT, BENNIGANAHALLI, BANGALORE 560 016. PAN : ABWPV 2871M VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(3), BANGALORE. APPELLANT RESPONDENT REVENUE BY : SHRI ETWA MUNDA, CIT-III(DR) ASSESSEE BY : SHRI T. VASUDEVAN, ADVOCATE DATE OF HEARING : 27.03.2013 DATE OF PRONOUNCEMENT : 05.04.2013 ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 2 OF 23 O R D E R PER BENCH ITA NOS. 565 TO 568/BANG/2011 ARE APPEALS BY THE DEPARTMENT AGAINST THE COMMON ORDER DATED 28.02.2011 OF THE CI T(APPEALS), MYSORE RELATING TO ASSESSMENT YEARS 2004-05, 2005-06, 2007 -08 & 2008-09. THE ASSESSEE HAS FILED CROSS OBJECTIONS IN CO NOS.3 TO 6/BANG/2013 AGAINST THE VERY SAME ORDER OF THE CIT(APPEALS) FOR THE SAM E ASSESSMENT YEARS. 2. WE WILL NOW TAKE UP FOR CONSIDERATION THE APPEA LS BY THE REVENUE. THE ONLY COMMON GRIEVANCE OF THE REVENUE PROJECTED IN THESE APPEALS IS AGAINST THE ACTION OF THE CIT(APPEALS) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS TRADE LIABIL ITIES CLAIMED IN THE BALANCE SHEET AND SUBSTITUTING THE AFORESAID ADDITI ON BY ESTIMATION OF THE ASSESSEES INCOME FROM BUSINESS AT 8% OF THE TURNOV ER. 3. THE MATERIAL FACTS AND CIRCUMSTANCES GIVING RISE TO THE AFORESAID ADDITION MADE BY THE AO AS REFLECTED IN THE ORDER O F ASSESSMENT FOR THE A.Y. 2004-05 IS AS FOLLOWS. THE ASSESSEE IS AN IND IVIDUAL AND A CIVIL CONTRACTOR & BUILDER. THERE WAS A SEARCH AND SEIZU RE OPERATION CONDUCTED BY THE REVENUE IN THE CASE OF THE ASSESSEE ON 28.12 .2007. CONSEQUENT TO THE SEARCH, NOTICE U/S. 153A OF THE ACT WAS ISSUED BY THE AO FOR MAKING ASSESSMENTS FOR SIX ASSESSMENT YEARS, IMMEDIATELY P RECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH WAS CONDUCTED. ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 3 OF 23 4. FOR AY 04-05 THE ASSESSEE HAD FILED RETURN OF I NCOME U/S.139 OF THE ACT. THE SAME HAS BEEN ACCEPTED U/S.143(1) OF THE ACT. ALONG WITH THE RETURN OF INCOME THE ASSESSEE HAD FILED STATEMENT O F ACCOUNTS WHICH HAD BEEN PREPARED BASED ON THE BOOKS OF ACCOUNTS CLAIME D TO HAVE BEEN MAINTAINED BY THE ASSESSEE. A REPORT OF AN AUDITOR AS REQUIRED BY SEC.44AB OF THE ACT WAS ALSO FILED CERTIFYING THE C ORRECTNESS OF THE STATEMENT OF ACCOUNTS STATED TO HAVE BEEN PREPARED ON THE BASIS OF BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. CONSEQUEN T TO THE SEARCH A NOTICE U/S.153-A OF THE ACT WAS ISSUED TO THE ASSES SEE. IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S.153A OF THE ACT, THE ASSESSEE HAD ADOPTED THE SAME INCOME SHOWN IN THE RETURN FILED U /S.139 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S.153A OF TH E ACT, THE AO CALLED UPON THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS MAINTAINED ON THE STRENGTH OF WHICH THE STATEMENTS OF ACCOUNT WERE PR EPARED AND GOT THE ACCOUNTS AUDITED U/S. 44AB OF THE ACT WHILE FILING THE RETURN U/S. 139 OF THE ACT. THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACC OUNT BASED ON WHICH THE AUDIT REPORT WAS OBTAINED AND FILED ALONG WITH THE RETURN OF INCOME FILED U/S.139 OF THE ACT. THE TAX AUDITOR IN HIS AUDIT R EPORT IN FORM 3CD AT COLUMN 9A HAS SPECIFICALLY MENTIONED THAT CASH BOOK , LEDGER, SALES AND PURCHASE REGISTER BOOKS HAVE BEEN GENERATED AND THE Y HAVE BEEN AUDITED. 5. THE ASSESSEE HAD SHOWN CONTRACT RECEIPTS FOR A.Y .04-05 AT RS. 2,69,44,703/- . THERE IS NO DISPUTE THAT THE PROVI SIONS OF SEC.44AB OF THE ACT WERE APPLICABLE TO THE ASSESSEE AND HE WAS BOUN D TO MAINTAIN BOOKS OF ACCOUNTS AND GET THEM DULY AUDITOR BY A CHARTERE D ACCOUNTANT. THE AO ALSO OBSERVED THAT EVEN DURING THE COURSE OF SEARCH PROCEEDINGS, THE ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 4 OF 23 BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION W ERE NOT FOUND. THE AO ALSO NOTICED THAT THE ASSESSEE WAS USING VARIOUS BA NK ACCOUNTS FOR HIS BUSINESS PURPOSES IN WHICH VARIOUS CREDITS AND DEBI TS APPEAR. THOUGH THE ASSESSEE DID NOT PRODUCE REGULAR BOOKS BEFORE THE A O, THE AO WAS OF THE VIEW THAT THE BANK STATEMENTS FILED DULY CONSTITUTE THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 6. DURING THE PREVIOUS YEAR RELEVANT TO AY 04-05, T HE RECEIPTS FROM CIVIL CONTRACT WORK CARRIED OUT BY THE ASSESSEE WAS RS.2, 69,44, 703/-. THE ASSESSEE HAD DECLARED NET INCOME OF RS. 14,09,967 E XCLUDING OTHER INCOME. THIS INCOME WAS 5.23% OF THE GROSS TURN OV ER. DURING THE COURSE OF HEARINGS, THE ASSESSEE WAS ASKED TO SUPPORT THE CLAIM OF OUTSTANDING MATERIALS AND LABOUR CHARGES SHOWN AT RS.49,59,986/ - UNDER CURRENT LIABILITIES AGAINST THE TOTAL GROSS RECEIPTS CLAIME D AT RS. 2,69,44,703/-. ACCORDING TO THE AO, THE ASSESSEE WAS UNABLE TO FUR NISH THE DETAILS OF THE TRADE LIABILITIES CALLED FOR SUCH AS 1. NAME AND ADDRESS OF THE PARTY ALONG WITH PAN AN D PROOF FOR FILING INCOME-TAX RETURN. 2. THE DATE/S ON WHICH THE OPENING CREDIT BALANCES WERE PAID, PARTY WISE. 3. THE NATURE OF EXPENDITURE TOWARDS WHICH THE CRE DIT WAS CLAIMED. THE ASSESSEE CLAIMED THAT THE PAYMENTS TOWARDS OUTS TANDING TRADE LIABILITIES HAD BEEN MADE BY CHEQUES AND OUT OF CAS H WITHDRAWALS MADE SUBSEQUENT TO 31/3/2004 AND ACCORDINGLY SUBMITTED T HAT THE TRADE LIABILITIES CLAIMED IS VERIFIABLE. 7. THE AO WAS OF THE VIEW THAT LABOURERS AND THE SU PPLIERS OF MATERIALS SUCH AS STONE, BRICKS, JELLY, ETC., WILL NORMALLY I NSIST FOR DOWN PAYMENTS AND ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 5 OF 23 WILL NOT WAIT FOR PAYMENTS TO BE MADE BY THE ASSESS EE FOR A LONG TIME. HE OF THE VIEW THAT LABOURERS AND SUPPLIERS OF MATERIA LS, AT BEST WOULD ALLOW ONLY MAXIMUM PERIOD OF 2 TO 3 MONTHS FOR PAYMENT. HE THEREFORE CONCLUDED THAT THE PAYMENTS OR WITHDRAWALS FOR THE PERIOD FROM 1/4/2002 TO 30/6/2002 MIGHT HAVE BEEN USED TO CLEAR THE PAYMENT S DUE TO THE CREDITORS. HE ALSO EXPRESSED HIS OPINION THAT EVEN IF THE ASSESSEE IS MAINTAINING A RUNNING ACCOUNT WITH THE SUPPLIERS NO RMALLY THE BROUGHT FORWARD PAYMENTS TO BE MADE WILL BE CLEARED IN THE FIRST QUARTER OF THE NEXT FINANCIAL YEAR AND SUCH PAYMENTS WILL BE ONLY TOWAR DS OPENING BALANCES AND MAY NOT BE TOWARDS THE SUPPLIES RECEIVED DURING CURRENT YEAR. 8. IN THE BACKGROUND OF THE ABOVE PRESUMPTIONS, THE AO CALLED UPON THE ASSESSEE TO FILE PARTY-WISE DETAILS AND THE, C HEQUES WHICH, HAVE BEEN ISSUED SUBSEQUENTLY AFTER 1/4/2004 RELATABLE TO THE PARTIES, PARTY-WISE OR THE PROOF THAT THE ASSESSEE HAS TO SHOW THAT THE AL LEGED PAYMENTS WERE MADE OUT OF CASH WITHDRAWALS. THE ASSESSEE DID NOT FURNISH SUCH DETAILS CALLED FOR. THE ASSESSEE HOWEVER CLAIMED THAT THE P AYMENTS TO TRADE CREDITORS WERE MADE THROUGH BANK ACCOUNT OR OUT OF SELF WITHDRAWALS. THE EVIDENCE IN SUPPORT OF THE CLAIM OF THE ASSESSEE WA S FILED BY THE ASSESSEE BEFORE THE AO. 9. ON SCRUTINY OF THE EVIDENCE FILED BY THE ASSESSE E THE AO AGAIN PROCEEDED ON THE ASSUMPTION THAT LABOURERS AND SUPP LIERS OF MATERIALS WILL NOT GIVE LONG CREDIT PERIOD. HE HELD THAT PAYMENTS OR WITHDRAWALS FOR THE PERIOD FROM 1/4/2004 TO 30/6/2004, AT BEST MIGHT HA VE BEEN USED TO CLEAR THE PAYMENTS DUE TO THE CREDITORS. WITH THE ASSISTA NCE OF ASSESSEES ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 6 OF 23 REPRESENTATIVE THE DETAILS OF CHEQUE WITHDRAWALS AN D CASH WITHDRAWALS FOR THE ABOVE PERIOD WAS WORKED OUT. AFTER CONSIDERING THE CLEARING WITHDRAWALS AND THE CASH WITHDRAWALS MADE TO THE EX TENT OF RS. 9,51,800/- BETWEEN 1/4/2004 TO 30/6/2004. THE AO THEREFORE HE LD THAT THE ASSESSEES TRADE LIABILITY AS ON 31/3/2004 COULD BE ONLY RS.9, 51,800/- AS AGAINST THE CLAIM OF RS. 49,59,986/- MADE IN THE BALANCE SHEET FILED. THE AO HELD THAT THE ASSESSEE HAS NO PROOF TO SUPPORT THE DIFFERENCE IN THE TRADE LIABILITIES CLAIMED AS QUANTIFIED AT RS. 40,08,186/- (49,59,986 -9,51,800). THE AO FOUND THAT IN A.Y. 2002-03 AN ADDITIONAL SUM OF RS. 7,86,340/- HAD BEEN DETERMINED IN THE ASSESSMENT MADE U/S. 153A WHICH R EQUIRES TO BE CONSIDERED WHILE QUANTIFYING THE NET EXCESS LIABILI TY CLAIMED. THE AO ALLOWED SET OFF TO THE EXTENT OF RS. 4,06,859 BECAU SE A SUM OF RS. 3,79,481/- (OUT OF THE SUM OF RS.7,86,340) HAD ALRE ADY BEEN TELESCOPED FOR A. Y. 2003-04. ACCORDINGLY, THE AO HELD THAT CLAIM OF EXCESS TRADE LIABILITIES TO BE CONSIDERED FOR ASSESSMENT IN A.Y. 2004-05 WOU LD BE RS.36,01,327/- (40,08,186 4,06,859). 10. AGGRIEVED BY THE ADDITION MADE BY THE AO, THE A SSESSEE PREFERRED APPEAL BEFORE CIT(A). BEFORE CIT(A) THE ASSESSEE THAT IT WAS A NORMAL PRACTICE IN THE LINE OF BUSINESS OF THE ASSESSEE TH AT THE MATERIALS REQUIRED FOR THE WORK IS PROCURED ON CREDIT FROM KNOWN REGUL AR PARTIES. THAT THE AO HAD MADE THE ADDITION ON THE BASIS OF A PRESUMPTION THAT THE SUPPLIERS OF GOODS WILL INSIST ON DOWN PAYMENT. 11. THE CIT(A) NOTICED THAT THE ASSESSEE DID NOT PR ODUCE BOOKS OF ACCOUNTS BEFORE THE AO IN ANY OF THE ASST YEARS AND THAT THE AO RELIED ON ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 7 OF 23 THE BANK STATEMENTS TO WORK OUT THE PROBABLE UNPRO VED LIABILITIES. HE HELD THAT WHEN BOOKS OF ACCOUNTS WERE NOT PRODUCED THE A O SHOULD HAVE REJECTED THE BOOKS OF ACCOUNTS AND PROCEEDED TO COM PLETE THE ASSESSMENT U/S 144 OF THE ACT. HE FOUND THAT THE ASSESSMENT HA D BEEN COMPLETED U/S 143(3) WHICH IMPLIES THAT EITHER THERE WAS NO NON C OMPLIANCE ON THE PART OF THE ASSESSEE OR THE AO DID NOT CONSIDER THE NON COM PLIANCE DELIBERATE AND MATERIAL FOR THE ASSESSMENT PROCEEDINGS. HE FOUND T HAT THE AO HAS RELIED ON THE FACT OF NON PRODUCTION OF THE BOOKS OF ACCOU NTS WHILE DISALLOWING PART OF THE OUTSTANDING LIABILITIES. IN HIS OPINION THE TWO ACTIONS WERE CONTRADICTORY TO EACH OTHER. THE CIT(A) HELD THAT O NCE THE AO CHOSE NOT TO REJECT THE BOOKS OF ACCOUNTS, HE SHOULD HAVE REFRAI NED FROM MAKING ANY ADJUSTMENT TO THE BOOK RESULTS ON THE BASIS OF HIS PRESUMPTIONS AND ESTIMATES. HE ALSO HELD THAT EVEN WHEN THE BOOKS AR E NOT REJECTED, THE AO IS ENTITLED TO DISALLOW CLAIMS OF EXPENDITURE ETC I F FOUND FALSE BASED ON DIRECT EVIDENCE. THE CIT(A) HELD THAT THERE WAS NO DIRECT EVIDENCE TO PROVE THAT THE SO CALLED UNPROVED TRADE LIABILITIES REP RESENTED ANY BOGUS EXPENDITURE. HE ALSO FOUND THAT THE ASSESSMENT ORDE R DOES NOT ACTUALLY CLARIFY AS TO IN THE FINAL ANALYSIS WHAT WAS THE UL TIMATE CONCLUSION OF THE AO WHETHER THE EXPENDITURE REPRESENTED BY THE UNPRO VED TRADE LIABILITIES HAD NEVER BEEN INCURRED OR THE CLAIM OF THE EXPENDI TURE WAS A FALSE CLAIM OR THE UNPROVED LIABILITIES REPRESENTED ACTUAL EX PENDITURE BUT WERE PAID OFF BY THE ASSESSEE OUT OF UNACCOUNTED FUNDS AND HENCE THE EXPENDITURE WAS GENUINE BUT THE AMOUNT HAS BEEN ADDED U/S 69C OR T HE UNPROVED TRADE LIABILITIES WERE NOT PAID OFF AT ALL AND THUS REPR ESENTED BUSINESS PROFITS U/S 41(1). ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 8 OF 23 12. THE CIT(A) HELD THAT THERE IS NO ACCEPTABLE OR GENERALLY ACKNOWLEDGED ACCOUNTING PRACTICE THAT CREDITORS PAI D AFTER A PERIOD OF THREE MONTHS SHOULD BE TREATED AS NON GENUINE. THE CIT(A) ALSO FOUND THAT THE AO CONSIDERED WITHDRAWALS FROM THE BANK ACCOUNT UPT O 30.06.2004 ONLY AND THAT ON THE VERY NEXT DATE I.E., 1.07.2004 THER E WERE CASH WITHDRAWALS OF RS. 11 LAKHS FROM THE SBM BANK APART FROM A PAYM ENT OF RS 8,00,000 BY CHEQUE TO BPS CIVIL CONTRACTOR ON THE SAME DAY. THE AO REFUSED TO CONSIDER THE SAME BECAUSE HE HAD PUT THE OUTER LIMI T OF GENUINE PAYMENTS AS 30.06.2004. THE CIT(A) HELD THAT THERE CANNOT BE ANY REASON FOR DRAWING A CUT OFF LINE OF 30.06.2004 AND IGNORE THE PAYMENTS CLAIMED TO HAVE BEEN MADE THE VERY NEXT DAY. 13. THE CIT(A) APPLIED THE THREE MONTHS RULE AS PRO POUNDED BY THE AO AND FOUND THAT IF UNPROVED LIABILITY IS WORKED OUT ON THAT BASIS IN DIFFERENT YEARS WORKS OUT AS UNDER AS A % OF THE TOTAL OUTSTA NDING LIABILITY, THE RESULTANT PROFIT AND G.P. PERCENTAGE OF THE ASSESSE E FOR VARIOUS ASSESSMENT YEARS WOULD BE AS FOLLOWS: ASST YR TOTAL OUTSTANDING TREATED AS % LIABILITY UNPROVEN 2003-04 29,65,570 3,79,481 13 2004-05 49,59,986 40,08,186 80 2005-06 98,61,496 75,52,771 76 2006-07 87,49,626 4,98,140 06 2007-08 1,61,98,660 65,65,689 40 2008-09 1,70,00,332 1,18,21,340 70 ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 9 OF 23 THE CIT(A) FOUND THAT THE DISALLOWANCE IS MINIMAL I N SOME ASSESSMENT YEARS WHEREAS IN OTHER YEARS IT WOULD BE AS HIGH A S 80% OF THE OUTSTANDING LIABILITY THAT HAS BEEN TREATED AS NON- GENUINE. HE HELD THAT SUCH AN APPROACH WOULD BE ILLOGICAL. 14. THE CIT(A) ALSO FOUND THAT THE RESULTANT INCOME THAT WOULD BE BROUGHT TO TAX, IF THE DISALLOWANCE IS MADE AS ABOV E AS A % OF THE TURNOVER WOULD BE AS FOLLOWS: ASST YEAR % NET PROFIT NET PROFIT INCLUDING DISCLOSED THE UNPROVED LIABILITIES 2003-04 5.2 6.75 (5.2) 2004-05 5.25 22 (20) 2005-06 6.12 21 (13) 2006-07 6.8 8.3 (6.8) 2007-08 5.44 13.97 (8.8) 2008-09 5.2 35 (29) [THE FIGURES OF NET PROFIT ARE AS % OF THE TURNOVER . THE FIGURES IN THE BRACKET SHOW THE PROFIT % INCLUDING THE ACTUAL DISALLOWANCE (AFTER SET OFF) MADE BY THE AO. IT MAY ALSO BE MENTIONED HERE THAT IN THE A SST YR 2007-08 AND 2008-09 THE ASSESSEE DISCLOSED SUBSTANTIAL INCOME A S A RESULT OF THE SEARCH. THE ABOVE FIGURES DO NOT INCLUDE SUCH INCOM E.] 15. THE CIT(A) WAS OF THE VIEW THAT PRINCIPLE OF CO NSISTENCY WOULD REQUIRE THAT THE ASSESSEES INCOME FROM THE SAME BU SINESS HAS TO BE ESTIMATED MORE OR LESS IN AN ACCEPTABLE RANGE. THE VARIATION IN THE ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 10 OF 23 ESTIMATION OF THE INCOME AS A % OF THE TURNOVER, AS MENTIONED ABOVE, ACCORDING TO HIM WOULD BE UNEXPLAINABLE. 16. THE CIT(A) THUS CONCLUDED THAT THE FORMULAE ADO PTED BY THE AO DO NOT IN ANY WAY HELP IN MAKING A REASONABLE ESTIMATE OF THE APPELLANTS INCOME. 17. THE CIT(A) FOUND THAT THE EXPENDITURE VOUCHERS HAD BEEN SEIZED FROM THE ASSESSEES OFFICE IN THE COURSE OF SEARCH AND THE SAME WERE LYING WITH THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS. THE CIT(A) FOUND THAT THERE WAS NO REFERENCE TO THE SEIZED MATERIAL IN TH E ASSESSMENT ORDER. THE OUTSTANDING LIABILITIES WERE TOWARDS MATERIAL PURCH ASE ETC. THE VOUCHERS FOR SUCH EXPENDITURE WERE WITH THE AO IN THE SEIZED MAT ERIAL. THE CIT(A) HELD THAT THE AO SHOULD HAVE VERIFIED THE GENUINENESS OF THE SAME BEFORE EMBARKING UPON HIS THEORY OF NO CREDITOR WOULD WAI T FOR MORE THAN THREE MONTHS. THE CIT(A) HELD THAT SINCE THE AO FAILED T O VERIFY THE MATERIAL AVAILABLE WITH HIM, THE ADDITION BASED ON MERE ASSU MPTIONS AND SURMISES CAN NOT BE SUSTAINED. 18. THE CIT(A) ALSO FOUND THAT THE OUTSTANDING LIAB ILITIES HAD BEEN DISCLOSED BY THE ASSESSEE IN THE STATEMENT OF ACCOU NTS FILED ALONG WITH THE RETURN OF INCOME PRIOR TO THE SEARCH AND THAT THERE WAS NO INCRIMINATING MATERIAL FOUND IN THE SEARCH TO SUGGEST THAT THESE LIABILITIES WERE BOGUS. THE CIT(A) ALSO FOUND THAT IN RESPECT OF VARIOUS AS SETS ACQUIRED BY THE ASSESSEE THE AO HAS MADE SEPARATE ADDITION AND THER E WAS NO NEED TO MAKE SEPARATE ADDITION. ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 11 OF 23 19. THE CIT(A) ALSO FOUND THAT THE ASSESSEE WAS CAR RYING OUT CONSTRUCTION CONTRACTS FOR THE FOLLOWING PRIVATE CO NCERNS WHO WERE UNRELATED DURING THE PREVIOUS YEAR: SHAHI EXPORT HOUSE RS 2,61,96,589 KAMASHI ANNADANAM TRUST RS 44,784 OTHERS RS 7,03,330 TOTAL CONTRACT RECEIPTS RS 2,69,447073 (SIC) IN THE OTHER ASSESSMENT YEARS COVERED UNDER THIS OR DER, THE ASSESSEE CONTINUED TO WORK FOR SUCH UNRELATED PRIVATE PARTIE S. THE CIT(A) WAS OF THE VIEW THAT THERE IS NO REASON TO BELIEVE THAT THESE PARTIES WOULD HAVE ALLOWED THE ASSESSEE TO MAKE SUPERNORMAL PROFITS FR OM THE CONTRACTS GIVEN TO THE ASSESSEE. 20. THE CIT(A) ALSO FOUND THAT IN THE SEARCH FINDIN GS AND THE ASSESSMENTS COMPLETED FOR ALL THE 7 YEARS INVOLVED, THE MAIN FINDING OF THE SEARCH WAS DETECTION OF UNACCOUNTED INVESTMENTS BY THE ASSESSEE. THESE INVESTMENTS, THE ASSETS FOUND DURING THE SEARCH C ASH, JEWELLERY ETC AND THE UNACCOUNTED EXPENSES HAVE ALL BEEN CONSIDERED A ND BROUGHT TO TAX IN THE RELEVANT YEARS. THUS IN A WAY NET ASSET ACCRETI ON METHOD HAS BEEN FOLLOWED TO TAX THE UNACCOUNTED INCOME OF THE ASSES SEE. THIS IS A FAIRLY ACCEPTED METHOD OF COMPUTING INCOME IN SEARCH CASES . IT IS QUITE POSSIBLE THAT THE INVESTMENTS FOUND DURING THE SEARCH MIGHT HAVE BEEN OUT OF UNACCOUNTED INCOME OF DIFFERENT YEARS. BUT THE SAME INCOME CAN NOT BE TAXED FIRST ON INVESTMENT BASIS AND THEN ON ACCRUAL BASIS. ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 12 OF 23 21. FOR THE REASONS GIVEN ABOVE, THE CIT(A) WAS OF THE VIEW THAT THE ADDITION MADE BY THE AO CANNOT BE SUSTAINED. 22. THE CIT(A) HOWEVER WAS OF THE VIEW THAT WHEN TH E BOOKS OF ACCOUNTS WERE NOT PRODUCED BEFORE THE AO, THE NEXT LOGICAL STEP SHOULD HAVE BEEN TO REJECT THE BOOKS AND MAKE AN ESTIMATE OF THE INCOME OF THE ASSESSEE BASED ON THE PAST HISTORY IN ASSESSEES OW N CASE WHICH WOULD BE THE BEST YARDSTICK. THE ASSESSEE HAD DISCLOSED PROFIT @ 5.5% OF THE TURNOVER. HE APPLIED PROFIT MARGIN OF 8% CONSIDERI NG THE FACT THAT IN THE LINE OF CIVIL CONSTRUCTION BUSINESS 8% IS CONSIDERED AN ACCEPTABLE PROFIT MARGIN BESIDES BEING STATUTORILY ACCEPTED AS MARGIN IN THE CASE OF CIVIL CONSTRUCTION BUSINESS U/S.44AD OF THE ACT ALBEIT IN CASES WHERE THE TURNOVER IS LESS THAN RS.40 LAKHS. THE CIT(A) ALSO HELD THAT A HIGHER PROFIT THAN 8% PROFIT RATIO CANNOT BE ADOPTED BECAUSE THER E WAS NO CONCLUSIVE EVIDENCE AVAILABLE IN THIS REGARD AND SECOND THE UN ACCOUNTED INVESTMENTS OF THE ASSESSEE HAD BEEN TAXED IN DIFFERENT YEARS. 23. FOR THE ABOVE REASONS THE CIT(A) DIRECTED THE A O TO ESTIMATE THE ASSESSEES PROFIT @ 8% OF THE TURNOVER. THE SAME WO RKED OUT TO RS 21,55,582/-. THE ASSESSEE HAD DISCLOSED A PROFIT OF RS 14,16,020. THE DIFFERENCE OF RS 7,39,562/- WAS REQUIRED TO BE ADDE D TO THE ASSESSEES INCOME. THE ADDITION MADE BY THE AO WAS CONFIRMED T O THIS EXTENT. 24. SIMILAR ORDERS WERE PASSED IN ASSESSMENT YEARS 2005-06, 2007-08 & 2008-09. THE BASIS ON WHICH THE AO MADE THE IMPU GNED DISALLOWANCES AND THE CIT(APPEALS) DELETED THE SAME ARE IDENTICAL IN ALL THE ASSESSMENT ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 13 OF 23 YEARS, EXCEPT FOR THE CHANGE IN THE QUANTUM OF ADDI TION MADE AND REDUCED BY THE CIT(APPEALS), WHICH IS AS FOLLOWS. A.Y. 2005-06 THE ADDITION MADE BY THE AO WAS RS.39,51,444. ADD ITION SUSTAINED BY THE CIT(A) WAS AT 8% OF THE TURNOVER OF RS.41,88,89 3 I.E., RS.9,88,659. AFTER SET OFF OF RS.5 LAKHS ADDITIONAL INCOME DECLA RED IN THE RETURN U/S. 153A, THE ADDITION SUSTAINED BY THE CIT(A) WAS RS.4 ,88,659. A.Y. 2007-08 THE ADDITION MADE BY THE AO WAS RS.26,14,245. THE CIT(A) REDUCED BY ADOPTING THE PROFIT MARGIN OF 8% OF TURNOVER. THE CIT(A) HOWEVER FOUND THAT IN THE A.Y. 2007-08, THE ASSESSEE HAD DISCLOSE D PROFIT MARGIN OF 5.5% AND OFFERED ADDITIONAL INCOME OF RS.88,88,025 IN TH E RETURN FILED U/S. 153A OF THE ACT. THE AMOUNT THUS OFFERED BY THE ASSESSE E WAS AT 17% OF THE TURNOVER. THE CIT(A) THEREFORE DELETED THE ENTIRE ADDITION MADE BY THE AO. A.Y. 2008-09 THE ADDITION MADE BY THE AO WAS RS.92,07,095. THE PROFIT MARGIN DISCLOSED BY THE ASSESSEE AND ADDITIONAL INCOME DEC LARED BY THE ASSESSEE AT RS.68,00,016 WORKED OUT TO 22% OF THE TURNOVER. THE CIT(A) WAS THEREFORE OF THE VIEW THAT THE ADDITION MADE BY THE AO SHOULD BE DELETED. ACCORDINGLY THE SAME WAS DELETED. 25. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 14 OF 23 26. THE LD. DR RELIED ON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A) AND REIT ERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE CIT(A). 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE LEARNED DR RELIED ON THE ORDER OF THE AO. THE LEARNED COUNSEL FOR TH E ASSESSEE REITERATED STAND OF THE ASSESSEE AS PUT FORTH BEFORE CIT(A) AN D THE ORDER OF THE CIT(A). 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THE ORDER OF CIT(A) DOES NOT CALL FOR ANY INTERFERE NCE. THE AO HAS PROCEEDED ON AN ASSUMPTION THAT LABOURERS AND SUPPL IERS OF MATERIALS WILL NOT GIVE LONG CREDIT PERIOD. THE AO WAS OF THE VIE W THAT LABOURERS AND THE SUPPLIERS OF MATERIALS SUCH AS STONE, BRICKS, JELLY , ETC., WILL NORMALLY INSIST FOR DOWN PAYMENTS AND WILL NOT WAIT FOR PAYMENTS TO BE MADE BY THE ASSESSEE FOR A LONG TIME. HE OF THE VIEW THAT LABOU RERS AND SUPPLIERS OF MATERIALS, AT BEST WOULD ALLOW ONLY MAXIMUM PERIOD OF 2 TO 3 MONTHS FOR PAYMENT. THE ASSESSEE PRODUCED EVIDENCE SHOWING PA YMENTS MADE TO TRADE DEBTORS BEYOND THE PERIOD OF 3 MONTHS. THIS EVIDENCE SO PRODUCED WAS NOT DOUBTED BY THE AO BUT HE REFUSED TO BELIEVE THAT LABOURERS AND SUPPLIERS OF MATERIALS WILL GIVE CREDIT PERIOD OF M ORE THAN 3 MONTHS. AS RIGHTLY HELD BY THE CIT(A) THERE IS NO ACCEPTABLE O R GENERALLY ACKNOWLEDGED ACCOUNTING PRACTICE THAT CREDITORS PAID AFTER A PER IOD OF THREE MONTHS SHOULD BE TREATED AS NON GENUINE. APART FROM THE AB OVE, THE AO IN THE ORDER OF ASSESSMENT HAS NOT CLEARLY EXPRESSED ANY O PINION ON THE BASIS ON WHICH HE WAS MAKING THE ADDITION. AS TO WHETHER TH E ADDITION IS MADE ON ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 15 OF 23 THE BASIS THAT THE EXPENDITURE REPRESENTED BY THE UNPROVED TRADE LIABILITIES HAD NEVER BEEN INCURRED OR THE CLAIM O F THE EXPENDITURE WAS A FALSE CLAIM OR THE UNPROVED LIABILITIES REPRESENT ED ACTUAL EXPENDITURE BUT WERE PAID OFF BY THE ASSESSEE OUT OF UNACCOUNTED FU NDS AND HENCE THE EXPENDITURE WAS GENUINE BUT THE AMOUNT HAS BEEN ADD ED U/S 69C OR THE UNPROVED TRADE LIABILITIES WERE NOT PAID OFF AT A LL AND THUS REPRESENTED BUSINESS PROFITS U/S 41(1), IS NOT CLEAR FROM THE O RDER OF ASSESSMENT. 29. THE CIT(A) FURTHER ANALYSED THE OTHER CIRCUMST ANCES AND CONSEQUENCES IF THE ADDITION MADE BY THE AO WAS TO BE SUSTAINED: 1. IF THE UNPROVED LIABILITY IS WORKED OUT ON THA T BASIS IN DIFFERENT YEARS WORKS OUT AS UNDER AS A % OF THE TOTAL OUTSTANDING LIABILITY, THE RESULTANT PROFIT AND G.P. PERCENTAGE OF THE ASSESSE E FOR VARIOUS ASSESSMENT YEARS WOULD BE AS HIGH AS 80% OF THE OUTSTANDING LIABILITY BEING TREATED AS NON- GENUINE IN SOME YEA RS. 2. LIKEWISE THE CIT(A) ALSO FOUND THAT THE RESULTANT INCOME THAT WOULD BE BROUGHT TO TAX, IF THE DISALLOWANCE IS MAD E AS ABOVE AS A % OF THE TURNOVER WOULD GIVE INCONSISTENT INCO ME FOR SAME AND SIMILAR BUSINESS CARRIED ON BY THE ASSESSE E. 3. THE CIT(A) FOUND THAT THE EXPENDITURE VOUCHERS HAD BEEN SEIZED FROM THE ASSESSEES OFFICE IN THE COURSE OF SEARCH. THE GENUINENESS OF THE EXPENSES AS EVIDENCED BY THE SEI ZED VOUCHERS WERE NOT DOUBTED OR VERIFIED BY THE AO. 4. THE CIT(A) ALSO FOUND THAT THE OUTSTANDING LIABILIT IES HAD BEEN DISCLOSED BY THE ASSESSEE IN THE STATEMENT OF ACCOUNTS FILED ALONG WITH THE RETURN OF INCOME PRIOR TO THE SEARCH AND THAT THERE WAS NO INCRIMINATING MATERIAL FOUND IN T HE SEARCH TO SUGGEST THAT THESE LIABILITIES WERE BOGUS. ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 16 OF 23 5. THE CIT(A) ALSO FOUND THAT IN RESPECT OF VARIOUS AS SETS ACQUIRED BY THE ASSESSEE THE AO HAS MADE SEPARATE A DDITION AND THERE WAS NO NEED TO MAKE SEPARATE ADDITION. 6. THE CIT(A) ALSO FOUND THAT THE ASSESSEE WAS CARRYIN G OUT CONSTRUCTION CONTRACTS FOR ALMOST THE SAME PARTIES WHO WERE UNRELATED AND THAT THERE WAS NO REASON TO BELIEVE T HAT THESE PARTIES WOULD HAVE ALLOWED THE ASSESSEE TO MAKE SUPERNORMAL PROFITS FROM THE CONTRACTS GIVEN TO THE ASSESSEE. 7. THE CIT(A) ALSO FOUND THAT IN THE SEARCH FINDINGS A ND THE ASSESSMENTS COMPLETED FOR ALL THE 7 YEARS INVOLVED, THE MAIN FINDING OF THE SEARCH WAS DETECTION OF UNACCOUNTED INVESTMENTS BY THE ASSESSEE. THESE INVESTMENTS, THE ASSETS FOUND DURING THE SEARCH CASH, JEWELLERY ETC AND T HE UNACCOUNTED EXPENSES HAVE ALL BEEN CONSIDERED AND B ROUGHT TO TAX IN THE RELEVANT YEARS AND THEREFORE MAKING A DDITION ON ACCOUNT OF UNPROVED TRADE DEBTS WOULD BE TAXING SAM E INCOME TWICE. 30. WE ARE OF THE VIEW THAT THE ABOVE BASIS GIVEN BY THE CIT(A) FOR DELETING THE ADDITION MADE BY THE AO AND SUBSTITUTI NG ESTIMATION OF INCOME OF ASSESSEE FOR ALL THE ASSESSMENT YEARS AND ALSO G IVING CREDIT FOR INCOME ALREADY TAXED AND AVAILABLE FOR TELESCOPING, IS JUS T AND PROPER AND CALLS FOR NO INTERFERENCE. CONSEQUENTLY THE GRIEVANCE PROJECT ED BY THE REVENUE IN ALL ITS APPEALS IS WITHOUT MERIT AND ARE DISMISSED. 31. ANOTHER ISSUE WHICH ARISES FOR CONSIDERATION I N REVENUES APPEAL FOR THE A.Y. 2008-09. THE GRIEVANCE IS PROJECTED IN G ROUND NO.6 OF GROUNDS OF APPEAL, WHICH READS AS FOLLOWS:- ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 17 OF 23 THE CIT(A) FAILED TO APPRECIATE THAT THOUGH THE AS SESSEE ADMITTED AN ADDITIONAL INCOME AT 68.16 LAKHS IN RES PECT OF THE KARTHICKNAGAR PROPERTY AND CREDITED THE SAME TO THE CAPITAL ACCOUNT; BY NOT SHOWING THE ADMITTED VALUE OF THE S AID PROPERTY CORRECTLY IN THE REVISED BALANCE SHEET, THE ASSESSE E HAS BROUGHT IN DIFFERENT UNIDENTIFIED ASSETS, THE SOURCES FOR WHIC H ARE SOUGHT TO BE JUSTIFIED WITH THE ADDITIONAL INCOME IN RESPECT OF KARTHICKNAGAR PROPERTY. 32. DURING THE COURSE OF SEARCH, DOCUMENTS RELATING TO PURCHASE OF A RESIDENTIAL SITE BEARING SITE NO.85, IN THE LAYOUT FORMED BY LRDE EMPLOYEES HOUSING CO-OP. SOCIETY, SITUATED AT KARTH IK NAGAR, DODDANAKAUNDI VILLAGE, K.R. PURAM HOBLI, BANGALORE, WERE FOUND AND SEIZED AS PER THE SEIZED MATERIAL PAGE IS TO 22 OF A/SV/1 DATED 28/12/2007. THIS SITE WAS PURCHASED BY THE ASSESSEE FROM ONE SMT. G. SHANTHA OF MARATHAHALLI. THE ASSESSEE IN HIS REPLY TO QUESTION NO.15 AND 17 OF THE STATEMENT RECORDED ON 28/12/2007 WITH REF ERENCE TO THE SEIZED AND IMPOUNDED MATERIALS ANSWERED AS UNDER: ANSWER TO QUESTION NO.15 : THE PROPERTY AT SITE NO.85 IN THE LAYOUT FORMED BY LRDE EMPLOYEES HOUSING CO-OP. SOCIETY, SITUATED AT KARTHIK NAGAR, DODDANAKAUNDI VILLAGE, KR PURAM HOBLI BANGALORE, WAS FIRST AGREED TO BE SOLD BY SMT. G. SHANTHA, THE OWNER TO SMT.LAKSHM I HARIHARAN AS PER THE SALE AGREEMENT DATED 3/3/2007 SIGNED BY THEM. AS PER THE AGREEMENT SMT. LAKSHMI HARARAN HAD AGREED TO BUY THE SITE AT THE RATE OF RS4100 PER SQ .FT. AND PAID A SUM OF RS. 20 LAKH ON THE DAY OF AGREEMENT A ND SUBSEQUENTLY PAID ANOTHER RS.20 LAKH. THE TOTAL ADV ANCE PAID BY HER WAS RS.40 LAKHS. HOWEVER, DUE TO SOME PROBLEM SHE COULD NOT PAY THE BALANCE AMOUNT AND REGISTER THE PROPERTY AND THEY CANCELLED THE AGREEM ENT VIDE DOCUMENT OF CANCELLATION DATED 7/10/2007 AND S MT. G. SHANTHA PAID BACK THE AMOUNT TO SHRI LAKSHMI HARIHARAN. ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 18 OF 23 I ENTERED INTO AGREEMENT WITH THE OWNER OF SITE SMT . G.SHANTHA TO PURCHASE THE SAID SITE AT THE RATE OF RS. 4100 PER SQ,FT VIDE AGREEMENT DATED 26/8/2007. I DO NOT HAVE THE COPY OF THE AGREEMENT DATED 26/8/2007. I HAVE P AID A SUM OF RS.98,40,000 TO SMT. G. SHANTHA FOR PURCHASE OF SITE, AT THE RATE OF 4100 PER SQ.FT. HOWEVER THE P ROPERTY WAS REGISTERED FOR A SUM OF RS. 30,24,000/- AS PER THE REGISTERED SALE DATED 24/10/2007. I HAD PAID A SUM OF RS. 30,24,000/- WAY OF CHEQUE AND THE BALANCE AMOUNT OF RS. 68,16,000/- BY WAY OF CASH TO THE VENDOR DURING THE CURRENT FINANCIAL YEAR I.E., 2007-08. ANSWER TO QUESTION NO. 16: I HAVE PAID A SUM OF RS. 30,24,000/- BY CHEQUE AND THIS AMOUNT WAS PAID OUT OF MY BANK ACCOUNT AND THE INVESTMENT HAS BEEN ACCOUNTED IN THE BOOKS OF ACCOUNT. THE BALANCE AMOUNT OF RS. 68,16,000/- PAID IN CASH WAS OUT OF MY UNACCOUNTED CASH AND IT IS NOT RECORDED IN MY BOOKS OF ACCOUNT. HENC E, I AM OFFERING INVESTMENT OF RS. 68,16,000/- AS MY UNEXPL AINED INVESTMENT FOR A.Y. 2008-09. 33. IN THE RETURN OF INCOME FILED ON 27/2/2009 UN DER 139 THE ASSESSEE HAS DECLARED AN ADDITIONAL INCOME OF RS. 68,16,000/ - REPRESENTING THE DIFFERENCE IN CONSIDERATION PAID TOWARDS THE PURCHA SE OF THE ABOVE PROPERTY AS DECLARED IN THE STATEMENT GIVEN UNDER SEC 132(4) . THIS ADDITIONAL INCOME OFFERED WAS VERIFIED AND ACCEPTED BY THE AO. 34. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT IN THE BALANCE SHEET FILED ALONG WITH THE RETURN FOR A.Y. 2008-09, THE ASSESSEE HAS ADOPTED THE VALUE OF RESIDENTIAL SITES UNDER IM MOVABLE ASSETS RS. 4,34,80,034/-. IN THE ANNEXURE GIVEN THE DETAILS OF VALUE OF SITES, THE VALUE OF SITE NO. 85 KARTHIK NAGAR, DODDANAKAUNDI VILLAGE , KR PURAM HOBLI, BANGALORE, HAD BEEN ADOPTED AT RS. 54,84,761/- AS A GAINST THE ACTUAL CONSIDERATION OF RS. 98,40,000/- PLUS STAMP DUTY AN D REGISTRATION EXPENSES OF RS. 2,84,536/- AGGREGATING TO RS. 1,01,24,536/-. THE AO WAS OF THE ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 19 OF 23 VIEW THAT IN RESPECT OF ACQUISITION OF THIS PROPERT Y THE ASSESSEE HAS DECLARED AN ADDITIONAL INCOME OF RS. 68,16,000/- AS PER THE DISCLOSURE MADE UNDER SEC. 132(4) AS HIS ADDITIONAL INCOME REP RESENTING THE DIFFERENCE IN CONSIDERATION PAID AND FURTHER DECLAR ED SUCH ADDITIONAL INCOME IN THE RETURN OF INCOME FILED U/S.139 OF THE ACT. SINCE IN THE BALANCE SHEET THE ASSESSEE HAD ADOPTED THE VALUE OF THIS PR OPERTY, ONLY AT A SUM OF RS. 54,84,761/-, THE AO WAS OF THE VIEW THAT THE VALUE OF THE PROPERTY HAS BEEN UNDERSTATED BY A SUM OF RS. 46,39,775/- (R S. 1,01,24,536/- LESS RS. 54,84,761/-). HE THUS CONCLUDED THAT THE VAL UE OF ASSETS IN THE BALANCE SHEET FILED HAS BEEN UNDERSTATED BY RS. 46, 39,775/-. HE FURTHER HELD THAT IF THE CORRECT VALUE IS ADOPTED THERE WIL L BE EXCESS OF ASSETS OVER LIABILITIES TO THE EXTENT OF RS. 46,39,775/-. THE AO ACCORDINGLY ADDED A SUM OF RS.46,39,775/- TO THE TOTAL INCOME OF THE AS SESSEE. 35. AGGRIEVED BY THE AFORESAID ADDITION, THE ASSESS EE PREFERRED APPEAL BEFORE CIT(A). BEFORE CIT(A), THE ASSESSEE CONTEND ED THAT THE ADDITION HAS BEEN MADE MAINLY RELYING ON THE STATEMENT RECOR DED AT THE TIME OF SEARCH. IT WAS SUBMITTED THAT THERE WAS NO EVIDENC E BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE HAD PAID ANYTHING MORE THAN WHAT IS ADMITTED BY HIM IN THE STATEMENT U/S.132(4) AND THE AMOUNT OFFE RED IN THE RETURN OF INCOME BASED ON SUCH STATEMENT. IT WAS ARGUED THA T THERE IS NO BASIS ON WHICH THE ADDITIONS IN AN INCOME-TAX ASSESSMENT, TH AT TOO OF SUCH HUGE SUMS LIKE RS. 46 LAKHS, COULD BE MADE. 36. THE CIT(APPEALS) ON THIS ISSUE HELD AS UNDER:- ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 20 OF 23 11.1.3 I DO NOT WANT TO GO INTO THE ISSUE OF THE ACTUAL CONSIDERATION OF THE RESIDENTIAL SITE IN QUESTION. THE APPELLANT ADMITTED THAT THE ACTUAL CONSIDERATION INVOLVED UNA CCOUNTED CASH PAYMENT. SUCH UNACCOUNTED INVESTMENT WAS ADMITTED A S ADDITIONAL INCOME OF THE PREVIOUS YEAR AND HAS BEEN DULY DISCLOSED IN THE RETURN FILED U/S 153A. THE AO HAS MADE THE ADDITION BECAUSE THE VALUE OF THIS PROPERTY IS SHOW N AT A LESSER AMOUNT IN THE STATEMENT OF AFFAIRS FILED. I AM NOT VERY CONVINCED WITH THE RATIONALE BEHIND THE ADDITION. THE AO PROB ABLY HAD A DOUBT THAT BY UNDERSTATING THE COST OF THE PROPERTY THE APPELLANT HAS USED THE ADDITIONAL INCOME DISCLOSED TO JUSTIFY ACQUISITION OF SOME OTHER ASSET. BUT THE AO HAS NOT BEEN ABLE TO P IN POINT ANY SUCH UNEXPLAINED ASSET ACQUIRED DURING THE YEAR. A COMPARISON BETWEEN THE LAST YEARS BALANCE SHEET AND THIS YEAR S BALANCE SHEET PRIMA FACIE DOES NOT SHOW ANY SUCH INVESTMENT . IT APPEARS LIKE THE MAJOR PART OF THE ADDITIONAL INCOME DISCLO SED HAS BEEN SHOWN AS WITHDRAWALS FROM THE APPELLANTS CAPITAL A CCOUNT. THUS THERE IS NOTHING IN THE ASSESSMENT ORDER TO SUBSTAN TIATE THE AOS APPREHENSION THAT THE APPELLANT HAS TAKEN ANY TYPE OF UNDUE BENEFIT BY NOT SHOWING ENHANCED VALUE OF THE PROPER TY IN THE BALANCE SHEET. THE ADDITIONAL INCOME OFFERED DURING THE SEARCH IS ALREADY DISCLOSED IN THE RETURN FILED U/S 153A. THU S THERE WAS NO NECESSITY FOR MAKING FURTHER ADDITION ON THE SAME A CCOUNT. EXCEPT FOR THE APPELLANTS ADMISSION THERE IS NO OT HER EVIDENCE TO JUSTIFY ANY ADDITION IN THE CASE. IN SUCH CIRCUMSTA NCES THE ADDITION MADE BY THE AO IS DELETED. 37. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVE NUE HAS RAISED THE AFORESAID GROUND OF APPEAL BEFORE THE TRIBUNAL. 38. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE LD. DR, WHO RELIED UPON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND RELIED UPON THE ORDER OF THE CIT(A). WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OUR VIEW THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. THE FACTS GO TO SHOW THAT IN THE COURSE OF SEARCH ON THE INVESTMENT IN PURCHA SE OF PROPERTY AT KARTHIK NAGAR, BANGALORE, THE ASSESSEE ADMITTED THAT HE PAI D A SUM OF RS. ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 21 OF 23 30,24,000/- BY CHEQUE AND THIS AMOUNT WAS PAID OUT OF HIS BANK ACCOUNT AND THE INVESTMENT HAS BEEN ACCOUNTED IN THE BOOKS OF ACCOUNT. THE BALANCE AMOUNT OF RS. 68,16,000/- WAS CLAIMED TO HA VE BEEN PAID IN CASH WAS OUT OF UNACCOUNTED CASH AND NOT RECORDED IN MY BOOKS OF ACCOUNT. THUS THE ACTUAL INVESTMENT IN PURCHASE OF THE PROPE RTY WAS RS. 98,40,000/- PLUS STAMP DUTY AND REGISTRATION EXPENSES OF RS. 2, 84,536/- AGGREGATING TO RS. 1,01,24,536/-. THE ASSESSEE OFFERED TO TAX A SUM OF RS. 68,16,000/- AS UNEXPLAINED INVESTMENT FOR A.Y. 2008-09 IN HIS R ETURN OF INCOME. THE SAME WAS ACCEPTED. THE SUM SO OFFERED TO TAX WAS B ASED ON EVIDENCE FOUND IN THE COURSE OF SEARCH IN THE FORM OF AN AGR EEMENT OF SALE OF THE VERY SAME PROPERTY BETWEEN THE OWNER AND THE ASSESS EES WIFE. THE FACT THAT THE VALUE OF THE VERY SAME PROPERTY WAS SHOWN AT A LESSER FIGURE IN THE BALANCE SHEET CANNOT LEAD TO ANY INFERENCE OF FURTH ER UNEXPLAINED INVESTMENT IN PROPERTY. AS RIGHTLY HELD BY THE CI T(A), THE AO PROBABLY HAD A DOUBT THAT BY UNDERSTATING THE COST OF THE PROPER TY THE ASSESSEE HAD USED THE ADDITIONAL INCOME DISCLOSED TO JUSTIFY ACQ UISITION OF SOME OTHER ASSET. THIS DOUBT DID NOT TRANSLATE INTO REALITY AS THE AO HAS NOT BEEN ABLE TO PIN POINT ANY SUCH UNEXPLAINED ASSET ACQUIRED DU RING THE YEAR. A COMPARISON BETWEEN THE LAST YEARS BALANCE SHEET AN D THIS YEARS BALANCE SHEET PRIMA FACIE DOES NOT SHOW ANY SUCH INVESTMENT . THE MAJOR PART OF THE ADDITIONAL INCOME DISCLOSED HAS BEEN SHOWN AS W ITHDRAWALS FROM THE ASSESSEES CAPITAL ACCOUNT. THUS THE ADDITION IS M ADE WITHOUT ANY BASIS AND CANNOT BE SUSTAINED UNDER ANY OF THE DEEMING PR OVISIONS OF SEC.68 TO 69D OF THE ACT. WE THEREFORE DO NOT FIND ANY GROUN DS TO INTERFERE WITH THE ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 22 OF 23 ORDER OF THE CIT(A) ON THIS ISSUE. CONSEQUENTLY TH E GROUND RAISED BY THE REVENUE IN THIS REGARD IS DISMISSED. 39. IN THE RESULT, THE APPEALS BY THE REVENUE ARE D ISMISSED. 40. AS FAR AS THE CROSS OBJECTIONS FILED BY THE AS SESSEE ARE CONCERNED, THERE IS A DELAY OF 205 DAYS IN FILING THE CROSS OB JECTIONS. IN THE PETITION FOR CONDONATION OF DELAY, IT HAS BEEN MENTIONED THAT WH EN THE NOTICE OF HEARING OF APPEALS FILED BY THE REVENUE WERE GIVEN TO THE ASSESSEES COUNSEL, HE PREPARED FOR ARGUING THE CASE WHICH WAS POSTED ON 15.01.2013 BEFORE THE TRIBUNAL. HE EXPRESSED THE VIEW THAT HE ISSUE OF JURISDICTION U/S. 153A SHOULD BE RAISED BY WAY OF CROSS OBJECTION. T HEREAFTER THE PRESENT CROSS OBJECTIONS WERE FILED. THE DELAY IS THUS EXP LAINED AS DUE TO THE PROFESSIONAL ADVICE RECEIVED AT A LATER POINT OF TI ME. THE LD. DR OPPOSED THE PRAYER FOR CONDONATION OF DELAY. 41. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE GROUNDS RAISED IN THE CROSS OBJECTIONS ARE LEGAL GR OUNDS. MORE OVER, EVEN WITHOUT FILING THE CROSS OBJECTIONS, THE ASSESSEE I S ENTITLED TO RAISE SUCH A PLEA AS LAID DOWN BY THE HONBLE GAUHATI HIGH COURT IN THE CASE OF ASSAM COMPANY (INDIA) LTD. VS. CIT 256 ITR 423 (GAU) , WHERE IT WAS HELD THAT IT IS PERMISSIBLE ON THE PART OF THE TRIB UNAL TO ENTERTAIN A GROUND BEYOND THOSE INCORPORATED IN THE MEMORANDUM OF APPE AL THOUGH THE PARTY URGING THE SAID GROUND HAD NEITHER APPEALED BEFORE IT NOR HAD FILED A CROSS- OBJECTION IN THE APPEAL FILED BY THE OTHER PARTY. I N SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DELAY IN FILING THE APPEAL IS TECHNICAL AND IN ANY ITA NOS.565 TO 568/BANG/11 & CO NOS.3 TO 6/BANG/13 PAGE 23 OF 23 EVENT, THE SAME IS DUE TO REASONABLE CAUSE. THE DE LAY IS THEREFORE CONDONED. 42. AS FAR AS THE MERITS OF THE ISSUE RAISED IN TH E GROUNDS OF APPEAL ARE CONCERNED, THE PLEA OF THE ASSESSEE IS THAT THERE W AS NO SEIZED MATERIAL BASED ON WHICH THE ADDITIONS COULD BE MADE IN THE A SSESSMENT U/S. 153A OF THE ACT. THIS ISSUE HAS BEEN THE SUBJECT MATTER OF DEBATE IN SEVERAL DECISIONS IN WHICH CONFLICT VIEWS HAVE BEEN EXPRESS ED. WE DO NOT WISH TO GO INTO THAT ASPECT AS WE HAVE ALREADY DELETED THE ADDITIONS MADE ON MERITS. THE CROSS OBJECTIONS ARE THEREFORE DISMISS ED AS THEY DO NOT CALL FOR ANY ADJUDICATION IN THE FACTS AND CIRCUMSTANCES SET OUT ABOVE. 43. IN THE RESULT, THE APPEALS BY THE REVENUE AS W ELL AS THE CROSS OBJECTIONS BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF APRIL, 2013. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 5 TH APRIL, 2013. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.