ACIT, Cir-11(1), Hyderabad V. M/s. R.K. Marketing Services, Hyderabad

ITA 1212/HYD/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2821 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S RAMA RAO
• Assessee Lawyers: M RAVINDRA SAI
• Keywords: Unexplained investment; Depreciation; Loose papers; Corroborative evidences; Block assessment
• Section: 69C; 143(3); 131; 69; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNA L HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1212/HYD/2011 ASSESSMENT YEAR 2008-09 THE ASST. CIT CIRCLE-11(1) HYDERABAD VS. M/S. R.K. MARKETING SERVICES, HYDERABAD PAN: AAHFR5865R APPELLANT RESPONDENT APPELLANT BY: SRI S. RAMA RAO RESPONDENT BY: SRI M. RAVINDRA SAI DATE OF HEARING: 06.03.2013 DATE OF PRONOUNCEMENT: 29.04.2013 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VI, HYDERABAD DATED 7.4.2011 FO R ASSESSMENT YEAR 2008-09. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE HONBLE CIT(A) HAS ERRED IN DELETING THE DISALL OWANCE MADE U/S. 69C IGNORING THE FACT THAT THE CIT-V, HYD ERABAD DID SET ASIDE THE ORIGINAL ASSESSMENT AND DIRECTED TO MAKE FRESH ASSESSMENT BASED ON LAW AND FACT. 2. THE CIT(A) IGNORED THE FACT THAT ASSESSEE HAS FAILE D TO SUBMIT EVIDENCE WITH REGARD TO THE EXPENDITURE INCU RRED. 3. THE CIT(A) ERRED IN IGNORING THE EVIDENCE BROUGHT O N RECORD WHILE MAKING ADDITION ON ACCOUNT OF UNEXPLAI NED INVESTMENT. 4. THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAS P RODUCED BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER WHERE AS IT IS CLEARLY MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT PRODUCED ANY AS PER PARA NO. 6(VIII) OF THE ASSESSMENT ORDER. IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 2 3. THE CRUX OF FIRST GROUND IS WITH REGARD TO DELETION OF ADDITION OF RS. 2.55 CRORES MADE U/S. 69C OF THE IN COME- TAX ACT, 1961. 4. BRIEF FACTS OF THE CASE ARE THAT THE ORIGINAL ASSES SMENT IN THIS CASE WAS MADE U/S. 143(3) OF THE ACT BY THE ASS ESSING OFFICER VIDE ORDER DATED 8.5.2009. WHILE FRAMING T HE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER DETERMINED THE IN COME AT RS. 1,31,11,886. WHILE FRAMING THE ASSESSMENT THE ASSE SSING OFFICER ADDED A SUM OF RS. 3,14,083, ON ACCOUNT OF DISALLOWANCE DEPRECIATION, TO THE RETURNED INCOME OF RS. 1,27,97 ,803. THIS ASSESSMENT ORDER WAS SUBJECT MATTER OF REVISION U/S. 263 OF THE ACT BY THE CIT(A) VIDE HIS ORDER DATED 28.1.2010. THE CIT IN HIS 263 ORDER GIVEN DIRECTION TO THE ASSESSING OFFICER TO EXAMINE THE ISSUE RELATING TO CASH PAYMENT OF RS. 2.55 CROR ES RECEIVED FROM M/S. VYSHNAVI MINERALS, HOSPET. AS PER THE SEI ZED MATERIAL SEIZED FROM THE RESIDENCE OF SRI B. RAVIKA LYAN REDDY WHO IS ONE OF THE PARTNERS OF M/S. R.K. MARKETING SE RVICES, BELLARI, THE PRESENT ASSESSEE. 5. ACCORDING TO THE CIT, THE ASSESSING OFFICER WRONGLY CONCLUDED WHILE FRAMING THE ASSESSMENT U/S. 143(3) O F THE ACT THAT NO ADDITION IS REQUIRED ON THIS COUNT. THE CI T WAS OF THE OPINION THAT THIS AMOUNT OF RS. 2.55 CRORES WAS NOT REFLECTED IN THE ORIGINAL SET OF BOOKS OF ACCOUNT AND THE ASSESS EE PRODUCED IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 3 FRESH SET OF BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER WITHOUT EXAMINING THE MATERIAL ON RECORD ACCEPTED THE FRESH CASH BOOK PREPARED BY THE ASSESS EE. FURTHER, THE ASSESSING OFFICER NOT CONSIDERED THE A PPRAISAL REPORT PROPERLY. AS SUCH, HE, INTER ALIA, DIRECTED THE ASSESSING OFFICER TO EXAMINE THIS ISSUE AFRESH. IN ADDITION TO THIS, THE CIT ALSO DIRECTED THE ASSESSING OFFICER TO EXAMINE THE ISSUE RELATING TO TRANSACTION OF RS. 5,20,71,441 EVIDENCED BY THE SEIZED MATERIAL A/RK/1 PAGE NOS. 15 AND 28. ON THIS ISSUE THE CIT OBSERVED AS FOLLOWS: ' REGARDING THE TRANSACTION OF RS. 83 LAKHS APPEARING ON PAGE NO. 15 OF THE SEIZED DOCUMENT MARKED AS A/RK/1 WHICH WAS FOUN D AND SEIZED FROM THE RESIDENCE OF SRI RAVIKALYAN REDDY ON 26.10.2007 DURING SEARCH OPERATION, HE STATED THAT IT IS MARGIN MONEY PAID T O THE CONCERNED COMPANIES FROM WHOM THE MACHINERY MENTIONED ON THAT PAGE WERE PURCHASED. AS PER THE SEIZED MATERIALS THE AMOUNT O F RS. 83 LAKHS IS MENTIONED AS 'MARGIN AMOUNT (APPR) RS. 83 LAKHS'. ON VERIFICATION OF THE DETAILS PRODUCED BY THE ASSESSEE, IT IS SEEN TH AT THE TOTAL AMOUNT OF MARGIN MONEY PAID COMES TO RS. 87,17,423/- WHICH IS PAID BY CHEQUE. HOWEVER, THE ASSESSEE COULD NOT EXPLAIN THE OTHER F IGURE OF RS. 1,50,00,000/- APPEARING ON THE SAME PAGE. THE AO IS REQUESTED TO VERIFY THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDING S. REGARDING THE DETAILS OF MACHINERY INSTALMENTS OF R S. 4,37,71,441/- APPEARING ON PAGE NO. 28 OF THE SEIZED DOCUMENT MAR KED AS A/RK/1 WHICH WAS FOUND AND SEIZED FROM THE RESIDENCE OF SR I RAVIKALYAN REDDY ON 26-10-2007 DURING SEARCH OPERATION, SRI RAVIKALY AN REDDY DID NOT OFFER ANY COMMENTS. THE AO IS THEREFORE, REQUESTED TO VERIFY THIS TRANSACTION FROM TE BOOKS OF ACCOUNT OF M/S. R.K. M ARKETING SERVICES DURING THE COURSE OF ASSESSMENT PROCEEDINGS.' 6. THIS ISSUE RAISED BY THE CIT U/S. 263 OF THE ACT WA S THE SUBJECT MATTER OF APPEAL BEFORE THIS TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 27 TH DECEMBER, 2010 IN ITA NO. 488/HYD/2010 CONFIRMED THE DIRECTION OF THE CIT PASSED U/S. 263 O F THE ACT. CONSEQUENT TO THE ORDER PASSED U/S 263 AND CONFIRMAT ION OF IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 4 THE SAME BY THE TRIBUNAL, THE ASSESSING OFFICER PAS SED THE ORDER ON 30.12.2010 MAKING THE ABOVE ADDITIONS MENT IONED IN THE ORDER U/S. 263 OF THE ACT. AGAINST THIS ADDITIO N, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT (A) DELETED BOTH THE ADDITIONS MADE BY THE ASSESSING OFFICER. NOW THE REVENUE IS IN APPEAL BEFORE US AGAINST THE DELETION OF ADDITIONS MADE U/S. 69C OF THE ACT AT RS. 2.55 CRORES. 7. THE LEARNED DR SUBMITTED THAT THE ASSESSEES BOOKS OF ACCOUNT ARE NOT RELIABLE. THE ASSESSEE FAILED TO P RODUCE THE ORIGINAL BOOKS OF ACCOUNT. BY ONE REASON OR THE OT HER, THE ASSESSEE DELIBERATELY AVOIDED PRODUCING THE REQUISI TE MATERIAL CALLED FOR BY THE ASSESSING OFFICER. IT WAS AGAIN AND AGAIN CALLED FOR BY THE ASSESSING OFFICER. IT WAS STATED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE BOOK S OF ACCOUNT WERE SEIZED BY THE SERVICE TAX DEPARTMENT. EVEN TH E ASSESSEE WAS NOT BOTHERED TO PROVIDE PARTICULARS OF AUTHORIT IES WHO SEIZED THE MATERIAL. THE ASSESSEE HAS DELIBERATELY INFLATED EXPENDITURE TO MAKE GOOD THE OFFER OF RS. 2.55 CROR ES MADE BY SRI B. RAVIKALYAN REDDY IN HIS STATEMENT U/S. 132 OF THE ACT. 8. FURTHER HE SUBMITTED THAT THERE WAS STEEP DECLINE I N THE RATE OF PROFIT. IF THE AMOUNT OF RS. 2.55 CRORES I S EXCLUDED FROM THE GROSS RECEIPTS SHOWN BY THE ASSESSEE, THE NET P ROFIT RATE WORKS OUT TO 0.86% FOR THE A.Y. 2008-09 AS COMPARED TO 11.08% IN A.Y. 2007-08. ACCORDING TO THE DR THE ASSESSEE INFLATED IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 5 EXPENDITURE SO AS TO REDUCE PROFIT TO COVER THE ADD ITIONAL INCOME OFFERED BY THE ASSESSEE DURING THE SEARCH AC TION. 9. THE LEARNED AR SUBMITTED THAT AN AMOUNT OF RS. 2.55 CRORES WAS INCLUDED IN THE GROSS RECEIPTS OF RS. 15 ,52,89,807. THE PROFIT BEFORE DEPRECIATION A.Y. 2008-09 IS AT R S. 2,66,28,522. THE NET PROFIT RATE IS WORKED OUT AT RS. 17.15%. THE NET PROFIT FOR 2008-09 IS WORKED AT 11.08%. AC CORDING TO THE AR IF THE ADDITION IS SUSTAINED THE TOTAL NET P ROFIT FOR THE A.Y. 2008-09 WOULD BE WORKED OUT AT RS. 5,21,28,552 AND THIS IS NOT POSSIBLE IN THE NATURE OF ASSESSEES BUSINESS. ACCORDING TO THE LEARNED AR OFFER MADE BY THE ASSESSEE AT RS. 2. 55 CRORES IS ALREADY GONE INTO TAXATION. THERE CANNOT BE ANY FU RTHER ADDITION TOWARDS THIS. HE RELIED ON THE ORDER OF T HE CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THIS CASE THERE WAS A SEARCH ACTION U/S. 132 OF THE ACT. DURING THE COURSE OF THE SEARCH ACTION INCRIM INATING MATERIAL WAS FOUND, ACCORDING TO WHICH THE ASSESSEE RECEIVED A SUM OF RS. 2.75 CRORES DURING THE PERIOD 10.5.2007 TO 3.8.2007. OUT OF THIS RS. 2.55 CRORES WAS RECEIVED BY CASH BE TWEEN 10.5.2007 AND 31.7.2007 AND RS. 20 LAKHS BY WAY OF CHEQUE ON 3.8.2007. THE TRANSACTION OF RS. 20 LAKHS RECEIVED BY CHEQUE IS REFLECTED IN THE BOOKS OF ACCOUNT OF M/S. R.K. MARKE TING SERVICES. HOWEVER, RS. 2.55 CRORES WAS NOT REFLECT ED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE PARTNER OF T HE ASSESSEE IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 6 COMPANY SRI B. RAVIKALYAN REDDY STATEMENT WAS RECOR DED U/S. 131 OF THE ACT. HE DENIED THE RECEIPT OF THIS AMOU NT. THERE WAS A SEARCH U/S. 132 OF THE ACT IN THE CASE OF SRI B.P. ANAND KUMAR SINGH, PROPRIETOR OF M/S. VYSHNAVI MINERALS, H OSPET ON 25.3.2008. SRI B.P. ANAND KUMAR SINGH ADMITTED THA T CASH PAYMENT OF RS. 2.55 CRORES WAS PAID TO M/S. R.K. MAR KETING SERVICES. THE SAME WAS NOT ACCOUNTED IN HIS BOOKS OF ACCOUNT AND OFFERED ADDITIONAL AMOUNT OF RS. 2.55 CRORES FO R A.Y. 2008- 09. CONSEQUENT TO THIS VIDE LETTER DATED 22.2.2008 THE PRESENT ASSESSEE MADE AN OFFER OF RS. 2.55 CRORES AS ADDITI ONAL INCOME. HOWEVER, ON EXAMINATION OF THE PROFIT & LOSS ACCOUN T IT WAS OBSERVED THAT THE RATE OF NET PROFIT FOR A.Y. 2008- 09 WAS WORKED OUT AT 0.86% ON A TURNOVER OF RS. 12,97,69,807 AFTE R EXCLUDING RS. 2.55 CRORES OF ADDITIONAL INCOME. THE NET PROF IT RATE FOR A.Y. 2007-08 IS AT 11.08% ON THE TURNOVER OF RS. 9, 17,16,859. IT IS APPARENT THAT IN THE GUISE OF DECLARING ADDITION AL INCOME, THE ASSESSEE INFLATED THE EXPENDITURE FOR A.Y. 2008-09. FOR CLARITY WE REPRODUCE THE INCOME AND EXPENDITURE ACCOUNT AS BELOW: EXPENDITURE (RS.) INCOME (RS.) DIRECT EXPENSES 12,21,95,365 GROSS RECEIPTS AS REDUCED BY CASH AMOUNT OF RS. 2.55 CRORES 11,13,20,025 OFFICE & ADMN. EXPENSES 61,16,879 SELLING EXPENSES 49,700 FINANCIAL CHARGES 2,79,311 PROFIT BEFORE INTEREST AND DEPRECIATION 2,66,28,522 OTHER INCOME 4,39,49,783 TOTAL 15,52,69,807 TOTAL 15,52,69,807 IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 7 TABLE SHOWING GROSS RECEIPTS EXCLUDING RS. 2.55 CRO RES EXPENDITURE (RS.) INCOME (RS.) DIRECT EXPENSES 12,21,95,365 GROSS RECEIPTS AS REDUCED BY CASH AMOUNT OF RS. 2.55 CRORES 12,97,69,807 OFFICE & ADMN. EXPENSES 61,16,879 SELLING EXPENSES 49,700 FINANCIAL CHARGES 2,79,311 PROFIT BEFORE INTEREST AND DEPRECIATION 11,28,552 TOTAL 12,97,69,807 TOTAL 12,97,69,807 11. FURTHER IT IS ALSO OBSERVED BY THE ASSESSING OFFICE R THAT THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT AS REQUIRED BY THE ASSESSING OFFICER. IT HAS TAKEN LAME EXCUSE S TO PRODUCE THE BOOKS OF ACCOUNT. THE ASSESSEE HAS NOT COOPERA TED WITH THE DEPARTMENT. THE FACTS BROUGHT ON RECORD SHOW THAT THE PROFIT DECLARED BY THE ASSESSEE IS NOT CONSISTENT AS COMPA RED TO THE EARLIER YEAR. BEING SO THE BOOKS OF ACCOUNT ARE RE JECTED. 12. FURTHER, EXAMINATION OF BOOKS OF ACCOUNT THE ASSESS ING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS IN FLATED THE EXPENDITURES. BEING SO, HE WAS FORCED TO REJECT TH E BOOKS OF ACCOUNT AND ESTIMATE THE INCOME OF THE ASSESSEE. S INCE THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT THE ONLY OPTION AVAILABLE TO THE ASSESSING OFFICER IS TO ESTIMATE T HE INCOME. PROFIT RATIO CANNOT BE A CONSTANT FACTOR FOR EACH A ND EVERY YEAR. IN OTHER WORDS, THE PROFIT RATIO WOULD FLUCTUATE DE PENDING UPON VARIOUS FACTORS SUCH AS PLACE OF BUSINESS, MARKETIN G CONDITIONS, AVAILABILITY OF LABOUR AND AVAILABILITY OF CAPITAL WITH THE ASSESSEE. WHILE ESTIMATING INCOME ONE HAS TO CONSI DER ALL THESE FACTORS AND THERE CANNOT BE ANY 100% PERFECT SYSTEM IN IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 8 ESTIMATING INCOME. ONE HAS TO KEEP THE FACTUAL SIT UATION IN MIND WHILE ESTIMATING THE INCOME OF THE ASSESSEE. 13. THE REASONS EXPLAINED BY THE ASSESSEE ARE NOT SATISFACTORY. MERELY BECAUSE CERTAIN EXPENDITURES WERE NOT BOOKED ON EARLIER OCCASION AND HAVE TO ACCOUNTED ON ACCRUAL BASIS, THERE CANNOT BE FLUCTUATION OF PROFIT AS DEC LARED BY THE ASSESSEE. WE ARE CONCERNED WITH THE CORRECT EXPENDI TURE RELATING TO THE ASSESSMENT YEAR UNDER CONSIDERATION . PROFIT CANNOT BE CHANGED IN SUCH AN ABNORMAL MANNER. THE RATE OF NET PROFIT DECLARED BY THE ASSESSEE CLEARLY SUGGEST S THAT THE ASSESSEE HAS TRIED TO MANIPULATE THE ACCOUNTS BY IN FLATING THE EXPENDITURE. FURTHER WE CLARIFY THAT THERE MAY BE CHANCE OF LEFT OUT OF CERTAIN EXPENDITURE WHILE GIVING STATEM ENT DURING THE COURSE OF SEARCH BUT THAT ERROR BY THE ASSESSEE CANNOT BE TO SUCH LARGE EXTENT. IN THE PRESENT CASE THE FACTS B ROUGHT ON RECORD SHOW THAT THE ASSESSEE IS NOT KEEPING BOOKS OF ACCOUNT TO SHOW CORRECT INCOME. IN SUCH CIRCUMSTANCES, THE LOWER AUTHORITIES HAVE NO ALTERNATIVE TO STICK TO THE INC OME DECLARED BY THE ASSESSEE. THE LEARNED AR MADE A PLEA THAT T HE STATEMENT RECORDED DURING THE COURSE OF SEARCH OR ADMISSION I N THE COURSE OF THE SURVEY CANNOT BE CONSIDERED AS BASIS FOR ADD ITION. IN OUR OPINION, THERE IS PROVISION FOR MAKING USE OF THE M ATERIAL COLLECTED DURING THE COURSE OF SURVEY. THE SUPREME COURT IN THE CASE OF POORANMAL VS. DIT(E) (93 ITR 505) HELD THAT MATERIAL IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 9 OBTAINED IN SEARCH MADE IN CONTRAVENTION OF THE PRO VISIONS CAN BE USED FOR ASSESSMENT. BEING SO, THE ASSESSING OF FICER CAN USE THE MATERIAL COLLECTED DURING THE COURSE OF SURVEY FOR MAKING ASSESSMENT. FURTHER IN THE CASE OF DR. PRATAP SING H VS. DIRECTOR OF INVESTIGATION (155 ITR 166) (SC) IT WAS HELD THA T ILLEGALITY OF SEARCH DOES NOT VITIATE THE EVIDENCE COLLECTED DURI NG SUCH ILLEGAL SEARCH. THE ONLY REQUIREMENT IS THAT THE C OURT OR THE AUTHORITY BEFORE WHICH SUCH MATERIAL OR EVIDENCE BR OUGHT IS TO BE CAUTIOUS AND CIRCUMSPECT IN DEALING WITH SUCH MA TERIAL OR EVIDENCE. CONSIDERING THE JUDGEMENT OF HONBLE SUP REME COURT IN THE TWO CASES REFERRED TO ABOVE, WE FIND THAT TH E MATERIAL COLLECTED DURING THE COURSE OF ILLEGAL SEARCH CAN B E MADE USE OF. THUS, IF THE RATIO DECIDENDI OF THE JUDGEMENT OF TH E HONBLE APEX COURT IS APPLIED THAN IT BECOMES CLEAR THAT EV EN IN THE CASE OF SURVEY, MATERIAL COLLECTED CAN BE USED FOR ADDITION. WHILE DELIVERING THE JUDGEMENT THE HONBLE APEX COU RT WAS CAUTIOUS ABOUT THE FACT THAT THE MATERIAL COLLECTED IS COMING OUT FROM ILLEGAL SEARCH AND YET THE MATERIAL COLLECTED WAS ALLOWED TO BE USED BY THE ASSESSING OFFICER. THE SAME ANALOGY APPLIES HEREIN FOR THE REASON THAT SO FAR AS THE PROCEDURE UNDERTAKEN BY THE ASSESSING OFFICER IS CONCERNED, IT REMAINS THE SAME IN REGARD TO USE OF MATERIAL EITHER COLLECTED IN SEARC H OR IN SURVEY. IN VIEW OF THIS, IN OUR OPINION, THE MATERIAL COLLE CTED DURING THE COURSE OF SURVEY CAN BE USED FOR THE PURPOSE OF ASS ESSMENT. IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 10 14. CONSIDERING ALL THESE FACTS, WE ARE INCLINED TO EST IMATE THE INCOME OF THE ASSESSEE AS FOLLOWS: INCOME ON RS. 12,97,69,807 @ 11.08% AS NET PROFIT RATE IN A.Y. 2007-08. RS. 1,43,78,495 ADDITION INCOME OFFERED BY THE ASSESSEE RS. 2,55,0 0,000 TOTAL RS. 3,98,78,495 15. WE ARE APPLYING EARLIER YEAR RATE OF 11.08% ON DECL ARED TURNOVER OF RS. 12,97,69,807 AND THEREAFTER WE ARE INCLINED TO ADD RS. 2.55 CRORES AS PER OFFER MADE BY THE ASSESS EE, THIS GROUND OF THE REVENUE IS PARTLY ALLOWED. 16. NOW WE TAKE UP THE SECOND GROUND WITH REGARD TO DEL ETION OF ADDITION OF RS. 5,20,71,441 MADE U/S. 69 OF THE A CT. THERE WAS A SEIZED MATERIAL AT PAGE NO. 15 MARKED AS 'A/RK 1 WHICH FOUND AND SEIZED FROM THE RESIDENCE OF SRI RAVIKALY AN REDDY ON 26.10.2007. DURING THE COURSE OF SEARCH OPERATION, HE STATED THAT IT IS MARGIN MONEY PAID TO CONCERNED COMPANIES FROM WHOM THE MACHINERY MENTIONED ON THAT PAGE WERE PURC HASED. AS PER THE SEIZED MATERIALS, THE AMOUNT OF RS. 83 L AKHS IS MENTIONED AS 'MARGIN AMOUNT (APPR) RS. 83 LAKHS). LATER THE ASSESSEE STATED THAT THE ACTUAL AMOUNT OF MARGIN MO NEY WAS PAID AT RS. 87,17,423 AND WAS DULY ACCOUNTED. HOWE VER, CONSEQUENT TO THE ORDER U/S. 263 THE ASSESSING OFFIC ER MADE ADDITION TOWARDS THIS AT RS. 83 LAKHS. THE CIT(A) DELETED THE SAME ON THE REASON THAT THE EVIDENCE BROUGHT ON REC ORD IS NOT IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 11 ENOUGH TO HOLD THAT THERE IS ANY UNACCOUNTED PAYMEN T. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. FOR CLARITY WE EXTRACT CONTENTS OF THE SEIZED MATERIAL HEREUNDER: TOTAL INSTALMENTS .. 4,37,71,441 MARGIN MONEY (APPROX.) .. 83,00,000 ----------------- TOTAL 5,20,71,441 1,50,00,000 ------------------ 3,70,71,441 ------------------ 18. AS EVIDENCED FROM THE ABOVE SEIZED MATERIAL, THERE IS NO SIGNATURE OR INDICATION TO WHOM THIS PAPER RELATED TO. THE REVENUE AUTHORITIES HAVE NOT BROUGHT ON RECORD ANY CORROBORATIVE MATERIAL TO SHOW THAT THERE IS UNACCO UNTED PAYMENT OF RS. 83 LAKHS TOWARDS PURCHASE OF MATERIA L OR ANYTHING. WITHOUT CORROBORATIVE MATERIAL, WE ARE N OT INCLINED TO SUSTAIN THE ADDITION. ACCORDINGLY, DELETION OF ADD ITION BY THE CIT(A) IS JUSTIFIED. THIS GROUND OF THE REVENUE IS DISMISSED. 19. REGARDING BALANCE ADDITION OF RS. 4,37,71,441 WHICH IS BASED ON PAGE NO. 28 OF SEIZED DOCUMENT MARKED AS A /RK1 WHICH WAS FOUND AND SEIZED AT THE RESIDENCE OF SRI RAVIKALYAN REDDY ON 26.10.2007. DURING THE SEARCH OPERATION, SRI REDDY DID NOT OFFER ANY EXPLANATION. ACCORDING TO THE AS SESSING OFFICER THIS REPRESENTS PAYMENT OF INSTALMENTS TOWA RDS IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 12 PURCHASE OF MACHINERY AND THE SAME WAS TREATED AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE . THE CIT(A) DELETED THE SAME ON THE REASON THAT THERE IS NO SUPPORTING EVIDENCE TO CONFIRM THE ADDITION. AGAIN ST THIS THE REVENUE IS IN APPEAL BEFORE US. 20. THE LEARNED DR SUBMITTED THAT THE ASSESSEE IS HAVIN G BUSINESS TRANSACTIONS WITH M/S. SVK AND THE SEIZED M ATERIAL REPRESENTS THE PAYMENT TO THEM. HE ALSO SUBMITTED THAT SCHEDULE-5 REFERRED TO IN THE BALANCE SHEET CONTAI NS THE ENTRY RELATING TO M/S. SVK. BEING SO, THERE IS NO MERIT I N THE ARGUMENT OF THE ASSESSEE'S COUNSEL THAT THEY HAVE NO TRANSAC TIONS WITH M/S. SVK. 21. ON THE OTHER HAND, THE LEARNED AR SUBMITTED THAT TH E AMOUNT OF RS. 4,37,71,441 TALLIES WITH THE FIGURES ON PAGE NO. 8 OF THE ASSESSMENT ORDER. IT CAN BE SEEN THAT THE A MOUNTS ARE THE APPROXIMATE FIGURES FOR THE PERIOD FROM APRIL 2 006 TO APRIL 2007. THESE ARE THE FIGURES FOUND IN THE SEIZED MA TERIAL A/RK1. THEY REPRESENT THE PROBABLE EXPENDITURE AT 'SVK SIT E' IF TAKEN FOR WORK. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. FOR CLARITY WE REPRODUCE THE COPY OF THE SEIZED MATERIAL AS FOLLOWS: IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 13 23. THE ABOVE SEIZED MATERIAL DOES NOT MAKE ANY SENSE REGARDING NATURE OF TRANSACTIONS. THE DEPARTMENT N OT BROUGHT ANYTHING ON RECORD TO SHOW THAT IS INVESTMENT MADE BY THE ASSESSEE. PLACING RELIANCE ON THE ORDER OF THE CO- ORDINATE BENCH IN THE CASE OF GYAN KUMAR AGARWAL VS ACIT, 60 DTR 241, ITAT, IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 14 HYDERABAD WHEREIN THE TRIBUNAL HELD THAT NO ADDITIO N CAN BE MADE SOLELY ON THE BASIS OF THE SEIZED HANDWRITTEN NOTE BOOK/ LOOSE SLIPS WHICH ARE DUMB DOCUMENTS AND DISOWNED B Y THE ASSESSEE AND THERE BEING NO OTHER CORROBORATIVE MAT ERIAL TO SHOW THAT THE ASSESSEE HAS CARRIED ON MONEY LENDING BUSINESS AS INDICATED BY THE ENTRIES FOUND RECORDED IN THE S AID DOCUMENT. AO HAVING NOT PROVIDED OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE THE PARTIES WHOSE STATEMENTS WERE RELIED UPON BY THE AO, BLOCK ASSESSMENT IS SET ASIDE AND MATTER IS REMANDED TO THE AO TO COMPLETE THE ASSESSMENT IN AC CORDANCE WITH LAW DETERMINING THE UNDISCLOSED INCOME VIS--V IS ALLEGED MONEY LENDING BUSINESS ONLY IF THE SAID SEIZED DOCU MENT IS SUBSTANTIATED BY ANY OTHER EVIDENCE, WE ARE INCLINE D TO CONFIRM THE DELETION OF ADDITION BY THE CIT(A). THIS GROUN D OF REVENUE IS DISMISSED. 24. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 29 TH APRIL, 2013. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 29 TH APRIL, 2013 TPRAO IT A NO. 1212/HYD/2011 M/S. R.K. MARKETING SERVICES ===================== 15 COPY FORWARDED TO: 1. THE ASST. CIT, CIRCLE-11(1), D BLOCK, 5 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD. 2. M/S. R.K. MARKETING SERVICES, 1-2-49/15, 1 ST FLOOR, NIZAMPET ROAD, KUKATPALLY, HYDERABAD. 3. THE CIT(A)-VI, HYDERABAD. 4. THE CIT-V, HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD.