Kobashi Machine Tools Ltd., Hyderabad V. DCIT,Circle - 2(1), Hyderabad

ITA 1238/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98610 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-09-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 23-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KONDA RAMESH
• Assessee Lawyers: SREELATA REDDY VOOTKOOR
• Keywords: Depreciation
• Section: 143(3); 147; 148; 263; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO. A.Y. APPELLANT RESPONDENT 1238/H/2014 2002 - 03 M/S. KOBASHI MACHINE TOOLS LTD., HYDERABAD PAN AABCK2459B D Y . CIT , CIRCLE 2(1) HYDERABAD. 1239/H/2014 2003 - 04 0 346/H/2014 2002 - 03 0 347/H/2014 2003 - 04 0 348/H/2014 2004 - 05 FOR ASSESSEE : SMT. SREELATA REDDY VOOTKOOR FOR REVENUE : MR. KONDA RAMESH DATE OF HEARING : 10.09.2 015 DATE OF PRONOUNCEMENT : 09 .10 .2015 ORDER PER BENCH THESE ARE FIVE APPEALS BY ASSESSEE. APPEAL NOS. 346, 347, 348/HYD/2014 ARE APPEALS ON THE ORDE RS OF THE A.O. CONSEQUENT TO ORDERS OF LD. CIT UNDER S ECTION 263 OF IT ACT, 1961 FOR A.YS. 2002-03, 2003-04 AND 2004- 05. SUBSEQUENTLY, HAVING REALIZED THAT THE ORDERS U NDER SECTION 263 HAVE NOT BEEN CONTESTED, ASSESSEE PREFE RRED APPEALS WHICH ARE LISTED AS APPEAL NOS. 1238 & 1239/HYD/2014 FOR A.YS. 2002-03 AND 2003-04. ASSESS EE HAS NOT PREFERRED APPEAL FOR A.Y. 2004-05 ON THE OR DER OF LD. CIT UNDER SECTION 263. 2 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD ITA.NO.1238 & 1239/HYD/2014 : 2. THESE TWO APPEALS ARE AGAINST THE ORDERS OF LD. CIT UNDER SECTION 263 DATED 29.03.2012. ASSESSEE HA S PREFERRED THE PRESENT APPEALS WITH DELAY OF 731 DAY S. THE REASONS FOR FILING THE APPEAL BELATEDLY HAS BEEN ST ATED IN THE CONDONATION PETITION. IT WAS SUBMITTED IN ITS A FFIDAVIT THAT THE ASSESSEE WAS UNDER THE BONAFIDE IMPRESSION THAT THE ORDER UNDER SECTION 263 IS NOT REQUIRED TO BE A PPEALED AS THE LD. CIT HAS SET ASIDE THE ASSESSMENT TO RE-D O THE ASSESSMENT AS PER THE DIRECTIONS OF THE LD. CIT. 3. SUBSEQUENTLY, ASSESSEE CAME TO KNOW THROUGH THE NEW AUDITOR THAT THE ORDER UNDER SECTION 263 IS APPELLABLE AND THEREFORE, ASSESSEE HAS PREFERRED TH E APPEALS WITH A PETITION FOR CONDONATION OF DELAY. 4. IN THE COURSE OF APPELLATE PROCEEDINGS, THE LD. COUNSEL SUBMITTED THAT ASSESSEE COMPANY WAS PROMOTE D BY TWO GROUPS AND THERE WERE DISPUTES BETWEEN THE GROUPS MATTERS OF WHICH WENT UP TO HIGH COURT. THEREFORE, ASSESSEE WAS NOT MAINTAINING BOOKS OF ACCOUNTS AND HAS NOT FILED PROPER DOCUMENTS EARLIER BEFORE THE DEPARTMENT. THERE WAS SERIES OF PROCEEDI NGS AND ALSO SERIES OF COUNSELS TO THE ASSESSEE AT VARI OUS STAGES OF PROCEEDINGS. THEREFORE, ASSESSEE WAS NOT PROPERLY ADVISED AND ACCORDINGLY ORDERS UNDER SECTI ON 263 WERE NOT PREFERRED AT THE RELEVANT POINT OF TIM E AS THE LD. CIT SET ASIDE THE ORDERS OF THE A.O. AND THEREF ORE, IT IS 3 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD PRAYED THAT THE DELAY BE CONDONED IN THE INTEREST O F JUSTICE. 5. AFTER CONSIDERING THE OBJECTIONS OF THE LD. D.R . WE ARE OF THE OPINION THAT ASSESSEE WAS PREVENTED B Y SUFFICIENT CAUSE IN NOT PREFERRING APPEAL IN TIME. ACCORDINGLY, THE DELAY IN PREFERRING THE APPEALS IS CONDONED IN BOTH THE ASSESSMENT YEARS. THE APPEAL MEMOS ARE TREATED AS MAINTAINABLE. 6. WE HAVE HEARD THE LD. COUNSEL AND LD. D.R. IN DETAIL. 7. BRIEFLY STATED, ASSESSEE HAD FILED RETURNS OF INCOME FOR IMPUGNED ASSESSMENT YEARS 2002-03 AND 2003-04 BELATEDLY ON 10.03.2006 DECLARING TOTAL INC OME BY ESTIMATING THE NET PROFIT AT 5% ON TOTAL TURNOVE R. IN BOTH THE YEARS THE TURNOVER WAS AROUND RS.3.6 CRORE S AND ASSESSEE ESTIMATED INCOME AT 5% ON THE TURNOVER. SI NCE THE RETURN WAS FILED BEYOND THE PERMISSIBLE STATUTO RY TIME LIMIT THEY WERE TREATED AS NON-EST. FURTHER, THERE IS NO ENCLOSURE TO THE RETURNS BY THE STATEMENTS OF P & L ACCOUNT, BALANCE SHEET. 3CD REPORTS ETC. THE A.O. NOTICED THAT SALES TAX AUTHORITIES INCREASED THE TU RNOVER BY 50% AND DETERMINED THE TURNOVER AROUND RS.5.47 CRORES IN THE IMPUGNED YEARS. PROCEEDINGS UNDER SEC TION 147 WERE INITIATED AND ASSESSMENT UNDER SECTION 143 (3) READ WITH SECTION 147 DATED 05.05.2006 HAVE BEEN MA DE DETERMINING THE TAXABLE INCOME AT 8% ON THE TURNOVE R OF RS.5.47 CRORES. THIS MATTER WAS CONTESTED BY THE AS SESSEE 4 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD BEFORE THE LD. CIT(A) AND AS PER THE CONSEQUENTIAL ORDERS DATED 04.05.2007, THE TAXABLE INCOME WAS DETERMINED AT 8% ON THE ADMITTED TURNOVER OF RS.3.60 CRORES. THUS , THE TOTAL INCOME FOR A.Y. 2002-03 WAS DETERMINED AT RS.29,42,079 AND FOR A.Y. 2003-04 WAS DETERMINED AT RS.29,18,046. WHILE THE MATTER STOOD THUS, ASSESSEE HAD FILED P & L ACCOUNT ETC., CONSEQUENT TO THE DIRECTI ONS OF THE HIGH COURT, WHEREIN ONE GROUP WAS ASKED TO SELL THE SHARES TO THE OTHER GROUP AND ACCORDINGLY THE PRESE NT GROUP TOOK CONTROL OF THE BOOKS OF ACCOUNTS AND BAN K STATEMENTS AND PREPARED P & L ACCOUNTS. CONSEQUENT TO THESE STATEMENTS FURNISHED TO THE BANKS AND ROC, A. O. INITIATED PROCEEDINGS UNDER SECTION 147 AGAIN. THE ENTIRE RESULT OF THESE PROCEEDINGS ARE THE ASSESSMENT ORDE RS DATED 03.11.2009 PASSED BY THE A.O. FIXING THE TOTA L INCOME AT RS.75,56,622 FOR A.Y. 2002-03 AND RS.69,84,340 FOR A.Y. 2003-04. IN DOING SO, A.O. AL SO RECEIVED DIRECTIONS FROM THE ADDL. CIT AND ASSESSME NTS HAVE BEEN COMPLETED CONSEQUENT TO THE DIRECTIONS OF THE ADDL. CIT. 8. LD. CIT ON EXAMINATION OF THE RECORDS HAS INITIATED PROCEEDINGS UNDER SECTION 263 BY ISSUING SHOW CAUSE NOTICE IN WHICH HE HAS CONSIDERED TWO GRIEVOUS ERR ORS AS UNDER : (I) ALLOWING SET-OFF OF FRESHLY WORKED-OUT LOSS OF RS.13,74,631/- WHEN THERE WAS NO VALID RETURN FILED BY THE ASSESSEE AS PER LAW. THE IT ACT PERMITS SET-OFF OF LOSS ONLY WHERE THE RETURN IS FILED IN TIME. 5 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD (II) TELESCOPING THE UN-RECONCILED CREDITORS PARTLY INTO THE ESTIMATED INCOME OF RS.29,42,079/- WHICH IS NOT PERMISSIBLE U/S.68 OF THE IT ACT, 1961. THE ESTIMATED INCOME OF RS.29,42,079/- HAD BEEN DETERMINED AT THE LOWEST POSSIBLE PROFIT RATE OF 8% ON THE TURNOVER OF RS.3.67 CRORES. 8.1. IN THE PROCEEDINGS, ASSESSEE HAS EXPLAINED THAT ALL THE ISSUES WHICH THE LD. CIT HAS RAISED HA VE BEEN EXAMINED BY THE A.O. AND AFTER GIVING DUE EXPLANATI ON OF THE VARIOUS AMOUNTS, THE TOTAL INCOMES ARE DETERMIN ED, THEREFORE, THE PROCEEDINGS UNDER SECTION 263 DOES N OT ARISE. LD. CIT HOWEVER, DID NOT AGREE AND AFTER CON SIDERING THE VARIOUS OBJECTIONS AND ASKING FOR DETAILS OF AC COUNT COPIES WITH INVOICES GAVE DIRECTIONS TO A.O. TO ADO PT THE ASSESSMENT FIGURE AT THE EARLIER ASSESSED INCOME AN D ADD TO THAT UN-RECONCILED CREDITORS AND FURTHER AMOUNTS AS SPECIFIED IN VARIOUS PARAS AND FURTHER ADD ANY AMOU NTS AO FINDS FROM DIRECTED ENQUIRIES TO BE ASSESSABLE. 9. AGAINST THESE ORDERS, ASSESSEE IS AGGRIEVED. AFTER HEARING RIVAL CONTENTIONS AND PERUSING THE VA RIOUS PROCEEDINGS AND PAPER BOOK PLACED ON RECORD, WE ARE OF THE OPINION THAT THE LD. CIT HAS NOT EXERCISED JURI SDICTION PROPERLY. AS FAR AS THE FIRST ISSUE IS FOR ISSUING SHOW CAUSE NOTICE, WE ARE UNABLE TO UNDERSTAND HOW THE LOSS W ORKED OUT DURING THE YEAR COULD NOT BE SET OFF TO THE OTH ER INCOME. THE PROVISIONS OF SECTION 71 OF ACT PROVIDE S THE SET OFF OF LOSS FROM ONE HEAD AGAINST THE INCOME FR OM ANOTHER AS APPLICABLE AND NOWHERE IT IS PRESCRIBED UNDER THE SAID SECTION THAT LOSS ARISING IN THAT YEAR CAN NOT BE 6 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD SET OFF TO OTHER INCOMES, JUST BECAUSE RETURN WAS N OT FILED WITHIN THE TIME PRESCRIBED UNDER THE LAW. THIS COND ITION OF FILING OF RETURN IN TIME IS APPLICABLE FOR CARRY FORWARD AND SET OFF OF BUSINESS LOSS U/S 72 OF THE ACT. SI NCE THERE IS NO CARRIED FORWARD AND SET OFF OF LOSS, DETERMIN ED IN EARLIER YEAR, WAS INVOLVED AND THE LOSS PERTAINS TO THE CURRENT YEAR WHICH IS TO BE SET OFF UNDER SECTION 7 1, THE OPINION OF THE LD. CIT IN HOLDING THAT A.O. ORDER I S ERRONEOUS DOES NOT STAND THE TEST OF LAW. 10. ON EXAMINATION OF P & L ACCOUNTS FURNISHED TO THE BANKS AND ROC, LD. CIT FURTHER ASKED ABOUT DIFFERENCE IN TURNOVER REPORTED TO BANK BEING DIFFE RENT FROM TURNOVER AS PER STATEMENTS WITH ROC. ASSESSEE EXPLAINED THAT THERE IS NO DIFFERENCE IN THE TURNOV ER AS THE INCOME FROM JOB WORK IS SAME IN BOTH THE STATEMENTS , WHEREAS THE INCREASE IN STOCK WAS ALSO ADDED TO THE TOTAL TURNOVER BY THE LD. CIT IN THE STATEMENT TAKEN FROM THE ROC, WHICH IS NOT REPORTED TO THE BANK AS TURNOVER. AFTER RECONCILIATION GIVEN BY THE ASSESSEE WHICH ARE EXTR ACTED BY THE LD. CIT IN PAGES 4, 5 AND 6, THIS ISSUE WAS DROPPED IN THE COURSE OF PROCEEDINGS UNDER SECTION 263. 11. WITH REFERENCE TO TELESCOPING THE UN-RECONC ILED CREDITORS INTO ESTIMATED INCOME OF RS.29,42,079 FOR A.Y. 2002-03 AND RS.29,18,046 FOR A.Y. 2003-04, THIS IS NOT ACCORDING TO THE FACTS ON RECORD. THIS ISSUE REQUIR ES LITTLE CLARIFICATION. FOR THE SAKE OF CLARITY, THE RECONCI LIATION FOR A.Y. 2002-03 IS EXTRACTED AS UNDER : 7 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD 1. WITH REFERENCE TO THE ITEM NO.II AS MENTIONED I N THE NOTICE THE AMOUNT OF RS.67,37,050 PERTAINS TO T HE LONG OUTSTANDING AND UN RECONCILED CREDITORS APPEARING IN BOOKS OF ACCOUNTS. ON RECONCILIATION O F BOOKS THIS AMOUNT IS TRULY OFFERED AS INCOME AND TH IS WAS INCLUDED IN THE TOTAL INCOME COMPUTED IN CONCLUDING THE FINAL ASSESSMENT. WE HERE UNDER FURNISH YOU THE COMPUTATION OF TOTAL INCOME STATEMENT SUBMITTED TO THE DEPARTMENT DURING THE ASSESSMENT PROCEEDINGS. COMPUTATION TOTAL INCOME AMOUNT IN RS. PROFIT AS PER PROFIT & LOSS A CCOUNT 1,72,516 ADD: DEPRECIATION AS PER P & L (COMPANIES ACT) 36,71,001 TOTAL 38,43,517 LESS: DEPRECIATION AS PER IT ACT 52,18,148 BALANCE ( - ) 13,74,631 ADD: UN RECONCILED CREDITORS CREDITORS FOR EXPENSES 39,65,500 OTHER UN-RECONCILED CREDITORS 27,68,550 67,34,050 TOTAL 53,59,419 IN THE 6 TH PAGE OF THE ASSESSMENT ORDER DATED 31.12.2009 THE ABOVE SAID AMOUNT OF RS.53,59,419 IS TAKEN INTO CONSIDERATION WHICH WAS REPRODUCED HEREUNDER FOR YOUR VERIFICATION. 6 TH PAGE OF THE ASSESSMENT ORDER DATED 31.12.2009 FOR A.Y. 2002-03 READS AS FOLLOWS. INCOME AS PER ORDER U/S.143(3) R.W.S. 147 DT.5.5.2005 AS MODIFIED BY CONSEQUENTIAL ORDER DT.4.5.07 AND MODIFICATION ORDER DT.17.7.07 29,42,070 ADD: ADDITIONAL INCOME DETERMINED 24,17,34 0 53,59,419 ADD: INTEREST INCOME 22,97,203 TOTAL INCOME 76,56,622 8 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD THE ABOVE TWO STATEMENTS REVEALS IT CLEARLY THAT TH E AMOUNT OF RS.67,37,050 IS CONSIDERED IN ARRIVING AT THE TOTAL INCOME IN THE FINAL ASSESSMENT ORDER. HEN CE WE REQUEST YOU TO KINDLY GO THROUGH THE FACTS AND DROP THE PROPOSAL FOR ADDING THIS AS INCOME. 11.1. ON THIS ISSUE, WHAT THE A.O. HAS DONE ALSO REQUIRES CLARIFICATION. IN THE COURSE OF PROCEEDING S UNDER SECTION 147, WHEN VARIOUS SHOW CAUSE NOTICES WERE ISSUED, ASSESSEE APPROACHED THE ADDL. CIT FOR DIREC TIONS. THE ADDL. CIT HAS GIVEN THE FOLLOWING DIRECTION AND FOR THE SAKE OF CLARITY THE RELEVANT DIRECTIONS ARE EXTRACT ED HEREUNDER : THE INTEREST INCOME FOR ASSESSMENT YEAR 2002- 03, 2003-04 & 2004-05 ARE ONLY RS.1,93,703/-, RS.2,89,800/- AND RS.1,92,514/- RESPECTIVELY. THE ASSESSEE SUBMITTED THAT THE OTHER MISCELLANEOUS INCOME REPRESENTS THE SALE OF SCRAP AND OTHER MISCELLANEOUS RECEIPTS WERE SHOWN AS INTEREST INCOME BY MISTAKE IN THE PROFIT AND LOSS ACCOUNT FI LED WITH THE BANK. IN SUPPORT OF THIS, HE FILED BANK CERTIFICATES. ASSESSING OFFICER IS DIRECTED TO VERI FY THESE CERTIFICATES BEFORE ACCEPTING ASSESSEE'S CLAI M. EVEN OTHERWISE AS DISCUSSED BELOW, THE PROFIT SHOWN IN THESE PROFIT AND LOSS ACCOUNTS IS WAY BELOW FINA L ASSESSED INCOME. ASSESSEE HAS ALSO WORKED OUT THE INCOME BASED ON THE P & L A/C SUBMITTED BY THE BANK AFTER CONSIDERING THE DEPRECIATION. AS PER THIS WORKINGS, THE LOSS OF RS.13,74,631/-, RS.5,90,850/- AND RS.44,244/- WERE ARRIVED RESPECTIVELY FOR THE ASST. YEARS 2002-03, 2003-04 AND 2004-05 AND IN SUPPORT OF THE DEPRECIATION CLAIM, THE ASSESSEE ALSO FILED WDV AS ON 01-04-2001 AND EVIDENCES IN SUPPORT OF ALL TH E ASSET PURCHASES MADE DURING SUBSEQUENT YEARS. HOWEVER, THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE CREDITORS ESTIMATED IN THE BALANCE SHEET. THE 9 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD ASSESSEE TRIED TO RECONCILE THE BALANCE SHEET. THE ASSESSEE ADMITTED TO RECONCILE THE SAME AND ADMITTED THAT HE IS NOT IN A POSITION TO RECONCILE CERTAIN CREDITORS FOR EXPENSES. THE ASSESSEE ALSO ADMITTED THAT THE RECONCILIATION WAS DONE BASED ON THE PAYMENTS MADE THROUGH THE BANKS AND THE ASCERTAINMENT OF PAYMENTS STILL TO BE MADE. IT THUS ARRIVED AT AMOUNTS OF RS.67 ,34,050/- FOR THE ASSESSMENT YEAR 2002-03, RS.59,22,990/- FOR THE ASSESSMENT YEAR 2003-04 AND RS.28,10,010/- FOR THE ASSESSMENT YEAR 2004-05 AS UN-RECONCILED CREDITORS AND AGREED TO OFFER THE SAME AS ADDITIONAL INCOMES. WHEN THE SAME ARE ADDED TO THE INCOMES ARRIVED ON THE BASIS OF PROFIT AND LOSS ACCOUNTS, TAXABLE INCO MES FOR THE ASSESSMENT YEARS 2002-03 TO 2004-05 WORKS OUT TO RS.53,59,419/-, RS.53,32,140/- AND RS.27,65,766/- RESPECTIVELY. ON COMPARING THESE INCOMES TO THE TURNOVERS, THEY WORK OUT TO 13.29%, 13.32% AND 10.29% RESPECTIVELY FOR THE ASSESSMENT YEARS 2002-03 TO 2004-05. HOWEVER SINCE THE PROFIT OF MARGIN FOR THE ASSESSMENT YEAR 2004-05 IS CONSIDERABLY LESS THAN THOSE OF EARLIER YEARS, THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE SAME. THE ASSESSEE CLAIMED THAT IN VIEW OF THE DIFFERENCES BETWEEN THE GROUPS, THE TURNOVER ALSO DRASTICALLY REDUCED EFFECTING THE PERFORMANCE. HOWEVER, IN ORDE R TO AVOID ANY PROTRACTED LITIGATION, THE ASSESSEE HA S AGREED THE SAME LEVEL OF PROFITS FOR THE A.Y. 2004- 05 ALSO, WHICH WORKS OUT TO RS.7,50,000/-. IN VIEW OF THE FACT THAT MOST OF THE CLIENTS AND GOVERNMENT AGENCIES AND THE FACT THAT THE DESIGNS ARE SUPPLIED BY THOSE ORGANIZATIONS AND ADVANCES ARE PAID, THE PROFIT MARGIN NOW ADMITTED APPEARS TO BE 1 REASONABLE AND FAIR. AS IT IS NOT POSSIBLE TO RECONCILE ALL THE CREDITORS WITH THE EVIDENCES AS T HE COMPANY FAILED TO MAINTAIN THE BOOKS OF ACCOUNT PROPERLY, THE SUBSTANTIAL PORTION OF THE CREDITORS ARE NOW BEING TREATED AS INCOME ITSELF. IN ORDER TO BUY PEACE WITH THE DEPARTMENT AND TO END PROTRACTED LITIGATION, THE ASSESSEE OFFERED SUBSTANTIAL CREDIT ORS TO COVER UP ALL THE SHORTCOMINGS. AFTER HAVING GONE THROUGH THE HIGH COURT CLEARLY INDICATED THAT THE 10 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD PRESENT MANAGEMENT GROUP IS NOT HAVING CONTROL OVER THE BOOKS OF ACCOUNT AND BILLS, IT WOULD BE FUTILE TO ACCEPT TO FURNISH ALL THE EVIDENCE IN SUPPORT OF TH E BALANCE SHEET AND THE P & L A/C PREPARED SUBSEQUENTLY. HAVING CONSIDERED ALL THE ABOVE PLEADING, I FIND IT REASONABLE TO ACCEPT AND THE ADDITIONAL INCOMES OFFERED BY THE ASSESSEE AS IT WOULD MEET BOTH THE ENDS AND JUSTICE. THEREFORE, TH E ASSESSING OFFICER IS DIRECTED TO ADOPT THE FOLLOWIN G AS ADDITIONAL INCOMES TO THE INCOMES ALREADY ESTIMATED IN EARLIER ASSESSMENT ORDERS. A.Y. ASSESSED INCOME RS. ADDITIONAL INCOME ADMITTED/DETERMINED RS. TOTAL INCOME RS. 2002 - 03 29,42,079 24,17,340 53,59,419 2003 - 04 29,18,046 24,14,094 53,32,140 2004-05 18,99,300 16,16,466 35,15,766 THE ASSESSEE COMPANY HAS CLAIMED THAT TDS CREDIT HAS NOT BEEN GIVEN EARLIER. ONLY XEROX COPIE S OF THE TDS CERTIFICATES WERE FILED. HE ALSO CLAIMED TH AT HE DIDN'T RECEIVE ALL THE CERTIFICATES FROM THE CONCERNED GOVERNMENT AGENCIES. A SUBSTANTIAL TIME HAS ELAPSED, IT WOULD BE DIFFICULT FOR THE ASSESSEE TO OBTAIN THE DETAILS FROM THE GOVERNMENT AGENCIES. TH E ASSESSING OFFICER MAY WRITE DIRECTLY TO THE CONCERN ED AGENCIES TO OBTAIN THE TOTAL TDS DEDUCTED DETAILS BASED ON THE TDS RETURN FILED BY THEM OR FROM OTHER RECORDS. ASSESSEE IS ALSO DIRECTED TO MAKE ALL EFFO RTS TO OBTAIN THE CERTIFICATES FROM THE CONCERNED AGENCIES. 11.2. THUS WHAT AMOUNT WAS CONSIDERED FOR ADDITION IS THE AMOUNT AS PER P & L ACCOUNT SUBMITT ED TO THE ROC. ASSESSEE HAS CALCULATED THE AMOUNT OF LOS S AS PER P & L ACCOUNT BEING SET OFF BY THE INCOME OFFER ED IN THE P & L ACCOUNT AND ONLY THE ADDITIONAL INCOME WA S OFFERED TO TAX. THE COMPUTATION OF INCOME STARTED W ITH 11 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD THAT OF ORIGINALLY ASSESSED INCOME, CONSEQUENT TO T HE ORDERS OF THE LD. CIT(A) AND THE ADDITIONAL INCOME AS PER THE P & L ACCOUNT SUBSEQUENTLY FILED. NET PROFIT O R LOSS AS PER THE BOOKS OF ACCOUNTS WAS OFFERED IN THE REVISE D PROCEEDINGS. CONSEQUENTLY, THE OPINION OF THE LD. C IT THAT A.O. HAS TELESCOPED THE INCOMES IS NOT CORRECT. WHA T THE ADDL. CIT HAS DIRECTED IS THE NET INCOME AS PER THE P & L ACCOUNT TO BE ADDED TO THE ALREADY ASSESSED INCOME ON THE SAME TURNOVER. IN FACT, THE PROCEEDINGS UNDER S ECTION 148 RESULTED IN ASSESSING THE ASSESSEES PROFIT IN BUSINESS ON ESTIMATION BASIS, HAVING REJECTED THE BOOKS OF A CCOUNTS AND ALSO MAKING ADDITIONS ON THE BASIS OF BOOKS OF ACCOUNTS. THUS THE ORDERS PASSED BY THE A.O. ARE IN FACT IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE. 11.3. MOREOVER, ONE OF THE ITEM WHICH LD. CIT HAS DIRECTED IN HIS ORDER UNDER SECTION 263 IS ALSO ON INTEREST INCOME. AS SEEN FROM THE ASSESSMENT ORDER, THE A.O. HAS GIVEN A CLEAR OBSERVATION THAT INTEREST INCOME OFFE RED BY THE ASSESSEE IN THE P & L ACCOUNT WAS ONLY RS.1,93, 703. IT WAS EXPLAINED THAT THE BALANCE OF THE AMOUNTS RE PORTED TO THE BANK PERTAINS TO SALE OF SCRAP. IT WAS WRONG LY CLASSIFIED AS INTEREST INCOME. HOWEVER, A.O. DID NO T ACCEPT WITH THAT CONTENTION AND THE ENTIRE AMOUNT OF RS.22,97,203 WHICH IS SALE OF SCRAP ACCORDING TO AS SESSEE WAS ALSO ADDED AS INTEREST INCOME. THUS, THE COMPUT ATION FOR A.Y. 2002-2003 INDICATES THE ORIGINAL INCOME AS PER THE CONSEQUENTIAL ORDER DATED 17.07.2007 AT RS.29,42,079 + ADDITIONAL INCOME OFFERED AS PER THE P & L 12 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD ACCOUNT AT RS.24,17,340 + INTEREST INCOME THAT TOO FROM THE SAME P & L ACCOUNT OF RS.22,97,203 HEREBY DETERMINING THE TOTAL INCOME OF RS.76,56,622. WE AR E UNABLE TO FIND ANY ERROR OR MISTAKE COMMITTED BY TH E A.O. IN ASSESSING THE HIGHER FIGURE THAN WHAT WAS REQUIR ED UNDER THE LAW. SIMILAR IS THE CASE FOR A.Y. 2003-04 WHEREIN THE INCOME AS DETERMINED CONSEQUENT TO THE ORDER DATED 04.05.2007 AT RS.29,18,047 WAS TAKEN AN D ADDITION AS PER P & L ACCOUNT FILED SUBSEQUENTLY AT RS.24,14,094 WAS ALSO ADDED ALONG WITH THE INTEREST INCOME OF RS.16,52,200 WHICH ACCORDING TO THE ASSES SEE IS SALE OF SCRAP ALREADY CONSIDERED IN THE P & L AC COUNT. THUS THE REVISED INCOME WAS DETERMINED AT RS.69,84, 340. AS SEEN FROM THE REASONS RECORDED FOR REOPENING THE ASSESSMENT FOR A.Y. 2002-03, A.O. REOPENED THE ASSESSMENT FOR BRINGING TO TAX AMOUNT OF RS.1,93,70 3 NOT DISCLOSED IN THE ORIGINAL INCOME BUT RECEIVED AS IN TEREST INCOME AND FOR A.Y. 2003-04 THE INTEREST INCOME WAS AT RS.2,89,800. IN FACT, THE A.O. HAS ADDED MANY TIMES THESE AMOUNTS ON WHICH THE ASSESSMENT WAS REOPENED. THEREFORE, IN OUR OPINION, THE PROCEEDINGS OF A.O. UNDER SECTION 143(3) READ WITH SECTION 147 ARE NOT PREJUD ICIAL TO THE INTERESTS OF REVENUE AND THERE IS NO ERROR AS CONSIDERED BY THE LD. CIT. 11.4. NOW FROM VARIOUS MISCELLANEOUS DIRECTIONS ON THE RECONCILIATION OF ACCOUNTS AS DONE BY THE LD. C IT, WE ARE UNABLE TO UNDERSTAND HOW THE LD. CIT CAN DIRECT THE A.O. TO MAKE ALL MISCELLANEOUS ADDITIONS WHEN ASSES SEES 13 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD INCOMES WERE ORIGINALLY ESTIMATED ON THE TURNOVER I N THE ABSENCE OF BOOKS OF ACCOUNTS. WHEN BOOKS OF ACCOUNT S ARE NOT AVAILABLE, GENERALLY ESTIMATION OF INCOME W AS RESORTED TO. AFTER RESORTING TO ESTIMATION OF INCOM E, AGAIN RELYING ON THE VERY SAME BOOKS OF ACCOUNTS WHICH WE RE REJECTED DOES NOT ARISE SO AS TO MAKE VARIOUS ADDIT IONS. IN VIEW OF THAT, THE DIRECTIONS OF THE LD. CIT TO MAKE VARIOUS MISCELLANEOUS ADDITIONS OUT OF THE ENTRIES IN THE B OOKS OF ACCOUNTS ALSO CANNOT BE ACCEPTED. LEAVE ALONE THAT, EVEN ON PRINCIPLES OF LAW, THE ADDL. CIT HAS GIVEN FINDI NG IN THE DIRECTIONS UNDER SECTION 144A, AS EXTRACTED IN THE FOREGOING PARAGRAPH, STATING THAT AFTER HAVING GONE THROUGH THE HIGH COURT, CLEARLY INDICATED THAT THE PRESENT MANAGEMENT GROUP WAS NOT HAVING CONTROL OVER THE BO OKS OF ACCOUNTS AND BILLS, THAT IT WOULD BE FUTILE TO A CCEDE TO FURNISH ALL THE EVIDENCE IN RESPECT OF THE BALANCE SHEET AND P & L ACCOUNT PREPARED SUBSEQUENTLY. EVEN THIS OPINION WAS EXPRESSED BY THE ADDL. CIT AFTER EXAMIN ING THE CONTENTIONS OF THE ASSESSEE WHEN THE REVISED ASSESSMENT PROCEEDINGS WERE PENDING. HOW THE LD. C IT CAN SUBSTITUTE HIS OPINION TO THE OPINION OF THE A. O. IN THE PROCEEDINGS UNDER SECTION 263 IS NOT EXPLAINED. THEREFORE, THIS PART OF THE DIRECTIONS CAN ONLY BE CONSIDERED AS SUBSTITUTION OF THE OPINION OF THE LD . CIT OVER THE OPINION OF THE A.O., IN FACT, OF THAT OF T HE ADDL. CIT IN THE PRESENT PROCEEDINGS, WHICH IS NOT PERMIS SIBLE UNDER LAW. LOOKING AT ANY ANGLE, WE ARE NOT IN A PO SITION TO UPHOLD THE ORDERS OF THE LD. CIT AND ACCORDINGLY THE ORDER UNDER SECTION 263 IN BOTH THE ASSESSMENT YEAR S 14 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD 2002-03 AND 2003-04 ARE SET ASIDE AND WE RESTORE TH E ORDERS OF THE A.O. DATED 31.12.2009 WHICH IS SUBJEC T MATTER OF PROCEEDINGS UNDER SECTION 147, ON WHICH PRESENT PROCEEDINGS ARE INITIATED. ITA.NO.346/HYD/2014 & ITA.NO.347/HYD/2014 : 12. THESE APPEALS FOR AY 2002-03 AND 2003-04 BEING ON CONSEQUENTIAL ORDERS CONSEQUENT TO THE ORD ERS UNDER SECTION 263, THESE DOES NOT SURVIVE, IN VIEW OF THE CANCELLATION OF THE ORDERS UNDER SECTION 263 IN THE ABOVE APPEALS. THEREFORE, WE VACATE THE ORDERS OF BOTH A. O. AND LD. CIT, WHICH ARE CONSEQUENTIAL IN NATURE TO THE PROCEEDINGS U/S 263. ASSESSEES GROUNDS ARE ALLOWED . ITA.NO.348/HYD/2014 :AY 2004-05 13. IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE CIT(A) DATED 10 TH DECEMBER 2013 FOR THE ABOVE ASSESSMENT YEAR IS CONTRARY TO THE LAW, FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UN- RECONCILED CREDITORS OF RS.59,22,990/- AFTER ESTIMATING THE INCOME OF THE ASSESSEE COMPANY @ 8% ON THE TURNOVER AFTER DEPRECIATION. 3. THE LD. CIT(A) FAILED TO APPRECIATE THE FACTS THAT ONCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY IS REJECTED, THE DEPARTMENT CANNOT RELY ON THE SAME BOOKS OF ACCOUNTS FOR OTHER SEPARATE ADDITIONS. 15 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD 4. THE LD. CIT(A) IS ERRED IN NOT FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF INDWELL CONSTRUCTIONS VS CIT REPORTED IN 232 ITR 776(AP) AND IN THE CASE OF MADDI SUDARSANAM OIL MILLS CO. VS. CIT REPORTED IN 37 ITR 369. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LOWER AUTHORITIES SHOULD HAVE ESTIMATED THE INCOME OF THE ASSESSEE COMPANY AT @12.50% ON TURNOVER BEFORE DEPRECIATION. 6. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 14. THE FACTS OF THE CASE ARE SIMILAR TO THE FACTS DISCUSSED IN A.Y. 2002-03 AN 2003-04 IN THE ABOVE APPEALS. LD. CIT GAVE DIRECTIONS UNDER SECTION 263 IN THIS YEAR ALSO. FOR THE REASONS BEST KNOWN TO THE ASSESS EE ORDER IN THIS YEAR WAS NOT BEEN CHALLENGED. THEREFO RE, PROCEEDING UNDER SECTION 263 SURVIVES. IN THE CONSEQUENTIAL ORDER A.O. MADE THE ADDITIONS OF UN- RECONCILED CREDITORS IN ADDITION TO THE ESTIMATION OF INCOME. THUS THERE IS ADDITION OF RS.28,10,010 AND INTEREST INCOME OF RS.1,93,700 TO THE ORIGINALLY AS SESSED INCOME AS PER THE CONSEQUENTIAL ORDER DATED 05.05.2 006 ESTIMATING THE INCOME. AS CAN BE SEEN FROM THE GROU NDS, ASSESSEE IS AGITATING THAT IT IS NOT APPROPRIATE TO MAKE THE ADDITION OF UN-RECONCILED CREDITORS AVAILABLE OUT O F THE BOOKS OF ACCOUNTS AFTER ESTIMATING INCOME OF THE AS SESSEE AT 8% ON THE TURNOVER AFTER DEPRECIATION. THESE CONTENTIONS ARE SUPPORTED BY THE CASE LAW RELIED ON GROUND NO.4. HOWEVER, THE FACTS IN THIS CASE ARE LI TTLE 16 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD PECULIAR IN THE SENSE THAT ASSESSEE HAS ACCEPTED AD DITIONS IN A.YS. 2002-03, 2003-04 AND 2004-05 BEFORE THE AD DL. CIT, NOT ONLY FOR ESTIMATION OF INCOME ON THE TURNO VER BUT ALSO ADDITION ON THE BASIS OF BOOKS OF ACCOUNTS SUBSEQUENTLY PREPARED AND SUBMITTED TO BANKS. THIS ISSUE WAS ELABORATELY DISCUSSED FOR A.YS. 2002-03 A ND 2003-04 ABOVE. THEREFORE, ADDITION OF RS.28,10,010 NOW DIRECTED TO BE ADDED BY THE LD. CIT IS IN FACT ALRE ADY CONSIDERED BY THE ADDL. CIT WHILE DETERMINING THE ADDITION TO BE DONE. WE HAVE ALREADY HELD THAT ORDE R OF THE A.O. IS NOT ERRONEOUS AND PREJUDICIAL TO THE IN TERESTS OF THE REVENUE IN A.YS. 2002-03 AND 2003-04, SINCE ASSESSEE HAS CHALLENGED THE ORDERS UNDER 263. FOR T HE REASONS BEST KNOWN TO THE ASSESSEE, THE ORDERS OF L D. CIT HAVE NOT BEEN CHALLENGED IN THIS ASSESSMENT YEAR. CONSEQUENTLY, THE DIRECTION OF THE LD. CIT STANDS A S SUCH. THE A.O. HAS SIMPLY FOLLOWED THE DIRECTION OF LD. C IT TO MAKE FURTHER ADDITION ON THIS ISSUE. SINCE ASSESSEE HAS NOT CHALLENGED THE ORDER UNDER SECTION 263, WE CANN OT GIVE ANY DIRECTION ON THE GROUNDS RAISED, AS A.O. HAS SIMPLY FOLLOWED THE DIRECTION OF THE LD. CIT UNDER SECTION 263, IN THESE CONSEQUENTIAL PROCEEDINGS. CONTENTION S OF THE ASSESSEE CANNOT BE ENTERTAINED, EVEN THOUGH THE RE SEEMS TO BE SOME MERIT IN ASSESSEES CONTENTIONS, S INCE ORDER UNDER SECTION 263 WAS NOT CHALLENGED, THE DIR ECTION OF THE LD. CIT TO ADD A PARTICULAR AMOUNT CANNOT BE MODIFIED IN THE CONSEQUENTIAL PROCEEDINGS. THESE AR E BEYOND THE SCOPE OF APPEAL AS THE ISSUE IS ARISING FROM 17 ITA.NO.1238,1239,346,347 & 348/H/2014 M/S. KOBASHI MACHINE TOOLS P. LTD., HYDERABAD CONSEQUENTIAL ORDER. ACCORDINGLY, ASSESSEES GROUND S ARE CONSIDERED AS NOT MAINTAINABLE AND THEREFORE REJECT ED. 15. IN THE RESULT, ITA.NO.348/HYD/2014 OF THE ASSESSEE IS DISMISSED. 16. TO SUM-UP, ITA.NO.1238, 1239, 346 AND 347/HYD/2014 OF THE ASSESSEE ARE ALLOWED AND ITA.NO.348/HYD/2014 OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.10.2015 SD/- SD/- (SMT. P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 09 TH OCTOBER, 2015 VBP/- COPY TO 1. M/S. KOBASHI MACHINE TOOLS P. LTD., PLOT NO.61C, ROAD NO.16, PHASE-I, IDA, JEEDIMETLA, HYDERABAD. 2. D LD. LD. CIT , CIRCLE 2(1), HYDERABAD. 3. LD. LD. CIT - II, HYDERABAD 4. ADDL. LD. LD. CIT , RANGE - 2, HYDERABAD 5. D.R. ITAT A BENCH, HYDERABAD 6. G UARD FILE