Appeal details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 2613 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 7 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-04-2017
Appeal Filed By
Assessee
Bench Allotted
B
Next Hearing Date
03-11-2016
Assessment Year
2006-2007
Appeal Filed On
06-09-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 1070/HYD/12 2002-03 ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, HYDERABAD SHRI P. MADHUSUDAN REDDY, HYDERABAD [PAN: AEWPP0306E] 1071/HYD/12 2004-05 1073/HYD/12 2006-07 1074/HYD/12 2007-08 1075/HYD/12 2008-09 ITA NO. ASST. YEAR APPELLANT RESPONDENT 1373/HYD/12 2006-07 SHRI P. MADHUSUDAN REDDY, HYDERABAD [PAN: AEWPP0306E] DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, HYDERABAD 1374/HYD/12 2007-08 1375/HYD/12 2008-09 FOR REVENUE : SHRI P. CHANDRA SEKHAR, DR FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR DATE OF HEARING : 08-02-2017 DATE OF PRONOUNCEMENT : 21-04-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE ARE MAINLY APPEALS BY REVENUE AND CROSS-APPEA LS BY ASSESSEE FROM AYS. 2002-03 TO 2008-09. THERE IS NO APPEAL FOR SHRI P. MADHUSUDAN REDDY :- 2 - : AY. 2003-04 AND APPEAL FOR AY. 2005-06 HAS ALREADY BEEN DISPOSED-OFF AS THE TAX EFFECT WAS LESS THAN RS. 10 LAK HS. THUS, AT PRESENT, THERE ARE REVENUE APPEALS FOR AYS. 2002-03 A ND 2004-05 AND CROSS-APPEALS BY BOTH THE PARTIES FOR AYS. 2006- 07, 2007-08 & 2008-09. SINCE THE ISSUES ARE ARISING OUT OF SEARCH AND SEIZURE PROCEEDINGS, THESE ARE CONSIDERED TOGETHER AND DECIDE D BY THIS COMMON ORDER. 2. ASSESSEE IS IN THE BUSINESS OF REAL ESTATE AND WAS FILING RETURNS UP TO AY. 2005-06. THERE WERE SEARCH AND SEIZ URE OPERATIONS U/S. 132 OF THE INCOME TAX ACT [ACT] ON 09- 10-2007. DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS, C ERTAIN DOCUMENTS HAVE BEEN FOUND AND SEIZED PERTAINING TO AS SESSEES REAL ESTATE ACTIVITY AND INVESTMENTS IN VARIOUS PROPER TIES AND COMPANIES ETC. IN THE COURSE OF SEARCH PROCEEDINGS I TSELF, THE INVESTIGATION UNIT HAS IDENTIFIED CERTAIN TRANSACTIONS W HICH ASSESSEE ADMITTED AND FURTHER THAT HE WAS NOT MAINTAININ G THE BOOKS OF ACCOUNT AND HE WOULD EXPLAIN HIS INVESTMENTS IN VARIOUS REAL ESTATE TRANSACTIONS AS HE HAS BORROWALS AS WELL A S OTHER SOURCES INCLUDING SALE/ADVANCE SALE RECEIPTS. HOWEV ER, VIDE STATEMENT DT. 09-10-2007, ASSESSEE ADMITTED A SUM OF RS. 5 CRORES AS HIS UNDISCLOSED INCOME PERTAINING TO THE EARLIER FIVE YEARS. SUBSEQUENTLY, THE INVESTIGATION UNIT HAS ALSO EXAMINED THE DOCUMENTS AND CORRELATED TO AN EXTENT THE INFORMATION FURNISHED/SEIZED AND VIDE THE STATEMENT DT. 20-11-2007, THEY HAVE QUANTIFIED THE SUM OF RS. 6,41,33,000/- AS EXCESS IN VESTMENT OVER THE KNOWN SOURCES AND RS. 2,99,00,000/- AS CAPITAL GA INS DURING THE PERIOD. TO THIS QUANTIFICATION, ASSESSEE HOWEVE R, ACCEPTED SUBJECT TO VERIFICATION OF THE DETAILS AND FURNISHING F URTHER SHRI P. MADHUSUDAN REDDY :- 3 - : EVIDENCE. IN THE THIRD STATEMENT AGAIN U/S.132(4) RECO RDED AT HIS RESIDENTIAL PREMISES, THE SAME WAS REITERATED. 2.1. CONSEQUENT TO SEARCH AND SEIZURE OPERATIONS AS N OTICES U/S. 153A OF THE ACT WERE ISSUED ON 26-06-2008 FOR TH E BLOCK PERIOD FROM AYS. 2002-03 TO 2007-08, ASSESSEE WAS R EQUIRED TO FILE RETURNS OF INCOME WITHIN THIRTY DAYS OF THE RECEIPT OF THE NOTICE. VIDE LETTER DT. 28-07-2008, ASSESSEE REQUESTED FOR EX TENSION OF TIME ON THE REASON THAT HE HAS TO ANALYSE THE SEIZED RECORDS , BANK ACCOUNTS AND DOCUMENTS ETC., TO COMPUTE THE INCOME FOR EA CH ASSESSMENT YEAR AND TO FILE THE RETURNS ACCORDINGLY. ASSESSEE HAS NOT FILED RETURNS EVEN UPTO 15-09-2008. AO HAS ISSUE D A SHOW CAUSE LETTER CAUTIONING ABOUT INITIATION OF PROSECUTING PROCEEDINGS U/S. 276CC. ASSESSEE FILED RETURNS ON 18-08-2009 ALO NG WITH COMPUTATION OF INCOME. WHILE THERE IS NO CHANGE OF IN COME RETURNED FOR AYS. 2002-03 TO 2005-06, WHICH WERE ORIG INALLY FILED PRIOR TO THE SURVEY, ASSESSEE ADMITTED INCOMES AS UNDE R IN THE RETURNS FILED: AY. INCOME RETURNED (RS) 2006-07 50,59,365 2007-08 2,80,15,181 2008-09 1,42,17,788 2.2. ASSESSEE HOWEVER, HAS NOT PAID THE TAXES DUE ON THE RETURNED INCOMES FILED IN RESPONSE TO THE NOTICE U/S. 153A, EVEN SHRI P. MADHUSUDAN REDDY :- 4 - : BELATEDLY. FOR THE AY. 2008-09, ASSESSEE PAID PART TAX OF RS. 10,04,650/-. ASSESSEE FILED CERTAIN CASH FLOW STATEM ENTS PREPARED OUT OF THE IMPOUNDED AND OTHER MATERIAL AND ARRIVED AT A DEFICIT CASH FOR VARIOUS INVESTMENTS AND ACCORDINGLY, QUANTIFI ED THE ABOVE INCOMES. 3. HOWEVER, ASSESSEE FILED A LETTER DT.27-08-2009 RETRACTING FROM THE STATEMENTS GIVEN U/S. 132(4) WITH R EGARD TO ADMISSION OF UNDISCLOSED BUSINESS INCOME TO AN EXTEN T OF RS. 6.4 CRORES AND CAPITAL GAIN OF RS. 2.99 CRORES, WITHOUT SP ECIFYING ANY REASONS. HE ALSO FILED LETTERS DT. 05-11-2009 FURNIS HING THE REVISED COMPUTATION OF INCOMES FOR AY. 2006-07, 2007-08 AND 2 008-09, WHEREIN INCOME DECLARED EARLIER WAS TOTALLY OMITTED A ND NEW COMPUTATION DISCLOSING TOTAL INCOMES AS UNDER WAS FILED : AY. INCOME RETURNED (RS) 2006-07 4,89,083 2007-08 (-)3,35,01,000 2008-09 1,920 3.1. AO HAS NOT CONSIDERED THE SO CALLED REVISED COMPUTATION AND WENT ON TO COMPLETE THE ASSESSMENT ON THE BASIS OF THE RETURNS FILED BY ASSESSEE DISCLOSING HIGHER IN COMES AS STATED EARLIER. AO COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITIONS, MOSTLY BASED ON THE CASH FLOW STATEMENT FURNISHED BY AS SESSEE. MANY OF THE ADDITIONS IN THE IMPUGNED YEARS WAS STATED TO BE NOT SHRI P. MADHUSUDAN REDDY :- 5 - : VERIFIABLE/FOR NOT FURNISHING FULL INFORMATION BY ASS ESSEE. EVEN THOUGH CASH FLOW STATEMENT SEEMS TO HAVE BEEN PREPARED ON THE BASIS OF THE VARIOUS DOCUMENTS IMPOUNDED DURING THE C OURSE OF SURVEY, AO HAS NOT DISCUSSED ANY OF THOSE ISSUES IN T HE IMPUGNED ASSESSMENT ORDERS, BUT MADE VARIOUS ADDITIONS. 4. ASSESSEE CONTESTED BEFORE THE CIT(A) NOT ONLY ON TH E ISSUE OF VARIOUS ADDITIONS MADE BY THE AO TO THE INCO MES RETURNED IN RESPONSE TO THE NOTICES U/S. 153A, BUT ALSO CONTEST ED NON- CONSIDERATION OF THE REVISED COMPUTATIONS FILED, WHER EIN ASSESSEE HAS DISCLOSED REDUCED INCOMES. THESE ARE PART OF TH E GROUNDS RAISED BEFORE THE CIT(A) . AO OBJECTED TO ENTERTAINING THE APPEALS FOR AYS. 2006-07 TO 2008-09, AS ASSESSEE HAS NOT PAID THE ADMITTED TAX U/S. 249(4) OF THE ACT. LD.CIT(A) ISSUED A SHOW CAUSE NOTICE TO ASSESSEE AND ALSO OBTAINED A REPORT FROM THE AO ON THE SUBMISSIONS MADE BY ASSESSEE. THESE WERE EXTRACTED AS PART OF THE ORDER, BUT WITHOUT GIVING A FINDING WHETHER THE REVI SED COMPUTATION IS ACCEPTED OR NOT OR WHETHER ASSESSEES AP PEALS WERE COVERED BY THE PROVISIONS OF SECTION 249(4) OR NOT, LD.CIT(A) WENT ON ADJUDICATING THE ISSUE ON MERITS. HE HAS DELETED ALMOST ALL THE ADDITIONS FOR VARIOUS REASONS GIVEN, BUT MOSTLY ON TH E REASON THAT THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE SE ARCH, THEREFORE, THE ADDITIONS ARE NOT WARRANTED. SINCE THE AD DITIONS MADE BY THE AO TO THE RETURNED INCOME WERE DELETED BY THE CIT(A), REVENUE IS AGGRIEVED IN ALL THE YEARS UNDER CONSIDE RATION ON MERITS OF THE ADDITIONS DELETED. REVENUE IS ALSO CONTESTING TH E ISSUE THAT CIT(A) SHOULD NOT HAVE ENTERTAINED THE APPEALS IN TER MS OF SECTION 249(4) FOR AY. 2006-07 TO 2008-09, WHICH WAS IN VIOLATION OF LAW. ASSESSEE IS NOT IN APPEAL FOR AY.2002-03 AND 2004-05 . SINCE THE SHRI P. MADHUSUDAN REDDY :- 6 - : CIT(A) DELETED THE ADDITIONS MADE TO THE RETURNED INCOME , THE CONSEQUENTIAL ORDERS PASSED BY THE AO RESULTED IN DETE RMINING THE TOTAL INCOME AS RETURNED BY ASSESSEE WHILE FILING THE RETURNS ON 18- 08-2009. AS ASSESSEE CONTESTED THE VERY ISSUE BEFORE THE CIT(A) AND PLEADED FOR ACCEPTING THE REVISED COMPUTATION, ASS ESSEE IS AGGRIEVED ON THAT ISSUE IN THESE THREE ASSESSMENT YEARS. THEREFORE, HE IS IN CROSS-APPEAL FOR AYS. 2006-07 TO 2008-09, A S LD.CIT(A) HAS NOT ADJUDICATED OR GIVEN A DIRECTION TO THE AO TO ACCEPT T HE REVISED COMPUTATION. 5. WE HAVE HEARD THE LD.DR IN DETAIL AND ALSO THE LD. COUNSEL. BOTH THE PARTIES HAVE PLACED ON RECORD RESPE CTIVE PAPER BOOKS GIVING IMPORTANCE TO THE DOCUMENTS WHICH THEY REL IED ON. BOTH THE PARTIES ALSO PLACED THEIR WRITTEN SUBMISSIONS O N RECORD AFTER THE HEARING WAS OVER. THESE WERE CONSIDERED A ND APPEALS ARE DECIDED AS UNDER: APPEAL FOR AY. 2002-03: 6. THIS IS A REVENUE APPEAL IN WHICH AO HAS BROUGH T TO TAX AN AMOUNT OF RS. 75,94,804/- BEING TOTAL OF THE OP ENING CIRCULATING CAPITAL SHOWN IN THE STATUS OF INDIVIDUAL AT RS. 14,82,059/- AND RS. 61,12,745/- IN THE STATUS OF HUF. AOS REASONING WAS THAT THERE WERE NO DETAILS ABOUT OPENING CIRCULATING CAPITAL AND ASSESSEE HAS NOT EXPLAINED HOW SUCH AMOUN T WAS AVAILABLE IN THE BEGINNING OF THE YEAR. ACCORDINGLY, HE HAS BROUGHT THE ENTIRE AMOUNT SHOWN IN TWO DIFFERENT STATUSES AS UNEX PLAINED INCOME OF ASSESSEE. SINCE ASSESSEE HAS FILED NIL RE TURN FOR THE IMPUGNED ASSESSMENT YEAR, THE ONLY ADDITION IS THE OPEN ING CAPITAL SHRI P. MADHUSUDAN REDDY :- 7 - : SHOWN BY ASSESSEE IN THE CASH FLOW STATEMENT. BEFORE TH E LD.CIT(A) IT WAS SUBMITTED THAT ASSESSEE HAS FILED RETURN OF INCOM E BY ADMITTING NIL INCOME AND ALSO FILED RECEIPTS AND PAYME NTS A/C, STATEMENT OF AFFAIRS AND OTHER INFORMATION ALONG WITH R ETURN OF INCOME. IT WAS ALSO SUBMITTED THAT AR HAS APPEARED FROM TIME TO TIME AND FILED INFORMATION CALLED FOR AND AO HAS ERRE D IN MAKING ADDITION OF RS. 75,94,804/- WITHOUT CONSIDERING THE EXPLANATION OFFERED BY ASSESSEE. IT WAS ALSO CONTENDED THAT THE OP ENING CASH BALANCE CANNOT BE INCOME OF THE YEAR AND RELIED UPON VARIOUS CASE LAW PARTICULARLY OF CO-ORDINATE BENCH OF HYDERABAD IN THE CASE OF R. RAM REDDY AND SMT. R. NEELIMA REDDY AND SMT. R. MANOHARAMMA IN ITA NO. 103 TO 105/HYD/2004. LD.CIT (A) ACCEPTED ASSESSEES CONTENTIONS AND DELETED THE SAME B Y STATING AS UNDER: 4.5. I HAVE CONSIDERED THE SUBMISSIONS MADE BY TH E APPELLANT, GONE THROUGH THE ORDER OF THE AO AND THE DECISIONS RELIED ON BY THE APPELLANT. THE FACTS OF THE CASE HAVE ALREADY BEEN BROUGHT ON RECORD AS NARRATED ABOVE. IT IS THE CASE OF THE APPELLANT TH AT FOR THE YEAR UNDER CONSIDERATION THERE WAS AN OPENING CAPITAL OF RS. 7 5,94,804/-, CONSISTING OF INDIVIDUAL CASH BALANCE OF RS. 14,82,059/- AND C ASH BALANCE OF HUF OF RS. 61,12,745/-. THIS IS THE OUTCOME OF BROUGHT FO RWARD BALANCES OF THE PREVIOUS YEAR. IN FACT IT IS THE BROUGHT FORWARD P OSITION OF MANY A PREVIOUS YEAR. IT IS ALSO A FACT THAT THERE WAS NO FINDING BY THE AO THAT SOME MATERIAL WAS FOUND DURING THE COURSE OF ACTION UNDER SECTION 132(1) POINTING OUT THAT THE OPENING BALANCE WAS MANIPULAT ED AND REQUIRES CORRECTION AND THAT CORRECTION IS ALSO POSSIBLE AS SUCH PERIOD FALLS UNDER THE BLOCK PERIOD. THUS, IN THE ABSENCE OF ANY FIND ING AS A RESULT OF SEARCH AND SEIZURE OPERATIONS, THE ACTION OF THE AO IN MAK ING THE IMPUGNED ADDITION HAS TO BE STRUCK DOWN AS SUCH ACTION WAS N OT AS PER THE PROVISIONS OF LAW AND THE AO IS DIRECTED ACCORDINGL Y. 6.1. EVEN THOUGH LD.DR OBJECTED TO THE DELETION OF THE ABOVE AMOUNT, WE ARE OF THE OPINION THAT REVENUE HAS NOT MADE OUT ANY CASE FOR BRINGING IT TO TAX- THE OPENING CAPITAL SHOW N BY ASSESSEE. IT IS ALREADY ADMITTED IN THE STATEMENT U/S. 132(4), SHRI P. MADHUSUDAN REDDY :- 8 - : WHICH WAS RELIED ON BY THE REVENUE FOR MAKING VARIOU S ADDITIONS, THAT HE WAS DOING THE REAL ESTATE BUSINESS EARLIER AND HIS CIRCULATING CAPITAL BY YEAR 2000 WOULD BE ABOUT RS. 2 CRORES. HOWEVER, HE HAS SHOWN THE OPENING CAPITAL AT RS. 75,9 4,804/- THAT TOO IN TWO SEPARATE STATUTES. NEITHER THE AO NOR THE DR HAS EXPLAINED WHETHER THERE WAS A SEPARATE HUF STATUS IN TH E SEIZED DOCUMENTS. HOWEVER, AS SEEN FROM THE ORDERS, ALL THE TRANSACTIONS ARE CONSIDERED IN INDIVIDUAL HAND ONLY. CONSIDERIN G THE PAST RECORD OF ASSESSEE AND IN THE ABSENCE OF ANY CONTRARY INFORMATION PLACED ON RECORD, WE DO NOT FIND ANY FAULT WITH THE ORD ER OF THE CIT(A) SO AS TO MODIFY THE SAME. IN FACT THE OPENING CASH BALANCE CANNOT BE AN INCOME OF THIS YEAR AND CONSIDERING THIS ASPECT, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF TH E CIT(A). ACCORDINGLY, GROUNDS RAISED BY REVENUE IN THIS YEAR ON THIS ISSUE ARE DISMISSED. 6.2. IN THE RESULT, THIS APPEAL OF REVENUE IS DISMISS ED. APPEAL FOR AY. 2004-05: 7. IN THIS ASSESSMENT YEAR, ON THE BASIS OF THE SEIZED MATERIAL, THE TOTAL INVESTMENTS MADE BY ASSESSEE DURING THE YEAR WAS QUANTIFIED AT RS. 7,99,000/- IN DE-LEE DIAMOND P VT. LTD., IN WHICH ASSESSEE IS THE MANAGING DIRECTOR AND AN AMOUNT OF RS. 53,25,300/- AS INVESTMENT IN VARIOUS PROPERTIES AND ADVANCES TO PURCHASE OF LANDS ETC. EVEN THOUGH AO STATES THAT ALL THE SE INVESTMENTS/EXPENDITURES WERE DULY CONSIDERED IN THE R ECEIPTS AND PAYMENTS A/C FILED FOR THE YEAR 2003-04. THE OPEN ING SHRI P. MADHUSUDAN REDDY :- 9 - : CIRCULATING CAPITAL OF AY 2002-03 IS THE BASIS FOR THE INVESTMENTS. THE FINDINGS OF THE AO ON THIS ARE AS UNDER: 1. UNEXPLAINED INVESTMENT/DEFICIT CASH BALANCE: THE ASSESSEE HAS INVESTED AN AMOUNT OF RS. 7,99,00 0 IN DE-LEE DIAMOND PVT LTD IN WHICH HE IS THE MANAGING DIRECTO R. FURTHER THE ASSESSEE HAS ALSO INCURRED VARIOUS EXPENDITURES LIK E PAYMENTS TO BROKERS, ADVANCES TO PURCHASE OF LANDS ETC. ALL THE DOCUMEN TARY EVIDENCES WERE FOUND AND SEIZED IN THE ANNEXURE A/PMR/RES/1 TO 13. THE BUNDLE-WISE OF THE PAYMENTS MADE BY THE ASSESSEE IN THE RELEVAN T ASSESSMENT YEAR IS AS UNDER: A/PMR/RES/3 - RS. 14,75,000 A/PMR/RES/6 - RS. 3,00,100 A/PMR/RES/8 - RS. 7,00,000 A/PMR/RES/9 - RS. 8,50,000 A/PMR/RES/11 - RS. 20,00,200 ----------------------- RS. 53,25,300 ----------------------- THE ABOVE SAID QUANTIFICATION WAS DONE BY THE ASSE SSEE HIMSELF AND IT WAS SUBMITTED ON 05.10.2009. THE PAGE WISE OF ANALYSIS OF EACH AND EVERY SEIZED MATERIAL ALSO DONE DURING THE COUR SE OF ASSESSMENT PROCEEDINGS AND IT IS FOUND THAT THE ABOVE SAID QUA NTIFICATION WAS TRUE AND CORRECT. ACCORDINGLY THE TOTAL INVESTMENT IN T HE FORM OF PAYMENT TO BROKERS, AND LANDLORDS WAS RS. 53,25,300. IT WAS D ULY CONSIDERED IN THE RECEIPT AND PAYMENT ACCOUNT FILED FOR THE FINANCIAL YEAR 2003-04. THIS IS APART FROM RS. 7,99,000 INVESTED BY THE ASSESSEE IN DE-LEE DIAMOND PVT LTD. HENCE THE TOTAL INVESTMENT OF THE ASSESSEE WA S RS. 61,24,300. HOWEVER THE ASSESSEE HAS NOT DISCLOSED THIS IN HIS RETURN OF INCOME. THIS IS MAINLY BECAUSE OF THE HUGE OPENING CIRCULATING C APITAL INTRODUCED IN THE RECEIPT AND PAYMENT ACCOUNT OF THE FINANCIAL YEAR 2 001-02. AS THE OPENING CIRCULATING CAPITAL DID NOT HAVE AN Y SUPPORTING EVIDENCES THE SAME WAS NOT CONSIDERED. AS PER THE ABOVE SAID DISCUSSION THE UNDISCLOSED INVESTMENT IN THE FORM OF DEFICIT C ASH BALANCE FOR THE A.Y 2004-05 IS RS. 61,24,300. 7.1. IN ADDITION TO THE ABOVE AMOUNT, THE AO ALSO NOTI CED THAT THERE WAS A DEPOSIT OF RS. 1,17,000/- IN SYNDICATE BANK AND THIS WAS BROUGHT TO TAX AS INCOME U/S. 68 OF THE ACT. B EFORE THE LD.CIT(A) ASSESSEE EXPLAINED THAT ALL THESE SHRI P. MADHUSUDAN REDDY :- 10 -: INVESTMENTS/EXPENDITURES WERE PART OF THE CASH FLOW STA TEMENT AND ASSESSEE HAS SHOWN THEM IN THE RECEIPTS AND PAYMEN TS STATEMENT. HENCE, THE SAME AMOUNT CANNOT BE BROUGHT TO TA X. IT WAS FURTHER SUBMITTED THAT THE OPENING CASH BALANCE WAS B ROUGHT TO TAX IN AY. 2002-03 AND INVESTMENTS THEREON FROM THAT AM OUNT WAS AGAIN BROUGHT TO TAX IN THIS YEAR AS UNEXPLAINED WHICH AMOUNTS TO DOUBLE ADDITION. WITH REFERENCE TO THE CASH DEPOSIT IN BANK ACCOUNT ALSO ASSESSEE HAS EXPLAINED THAT THESE ARE SHOWN IN THE CASH FLOW STATEMENTS. LD.CIT(A) HAS DELETED THE AD DITIONS BY STATING AS UNDER: 6.3. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO GONE THROUGH THE ASSESSMENT ORDERS. PRIMA FAC IE IT APPEARS THAT THESE ADDITIONS WERE DOUBLE ADDITIONS. IN FACT, SUC H AN ADDITION WAS MADE FOR THE ASSESSMENT YEAR 2002-03 AND THE SAME W AS NOT SUSTAINED FOR THE REASONS MENTIONED THEREIN. NOW SECOND TIME SAME ADDITIONS WERE REPEATED HERE FOR THESE ASSESSMENT YEARS ON THE BAS IS OF SOURCE. WHATEVER MAY BE THE IMMEDIATE PROVOCATION FOR ADDIT ION, BY NO STRETCH OF IMAGINATION, DOUBLE ADDITION IS NOT APPRECIATED. B ESIDES, THERE WAS NO FINDING BY THE AO THAT IN THE ACTIN UNDER SECTION 1 32(1), MATERIAL WAS FOUND POINTING OUT TO THE BOGUS NATURE OF CLAIMS FO R THE IMPUGNED ASSESSMENT YEARS. IN THE CIRCUMSTANCES, I AM OF TH E OPINION THAT THE ADDITIONS MADE FOR ALL THE ASSESSMENT YEARS NEED TO BE SET ASIDE AND THE AO IS DIRECTED ACCORDINGLY. .. 7.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT, GONE THROUGH THE ORDER OF THE AO. WHILE MAKING ADJUDICA TION AT PARA 6.2, IT WAS OBSERVED THAT PRIMA FACIE THOSE WERE DOUBLE ADD ITIONS. NOW IT HAS TO BE OBSERVED HERE THAT THESE ARE THE TRIPLE ADDITION S. THE QUERIES RAISED BY THE AO REGARDING PAYMENTS MADE TO BROKERS AND ADVAN CE TO PURCHASE OF LANDS CONSIDERED AS UNDISCLOSED INVESTMENT IN THE F ORM OF DEFICIT CASH BALANCE BY THE AO WERE ANSWERED BY THE APPELLANT, W HICH WERE COMPLETELY IGNORED BY THE AO. IN ADDITION, IT MAY BE NOTED HERE THAT THERE WAS NO FINDING BY THE AO THAT IN THE ACTION UNDER S ECTION 132(1), MATERIAL WAS FOUND POINTING OUT TO THE BOGUS NATURE OF INVES TMENTS MADE IN LANDS. IN THE CIRCUMSTANCES, I AM OF THE OPINION THAT THE ADDITIONS MADE FOR ALL THE ASSESSMENT YEARS NEED TO BE SET ASIDE AND THE A O IS DIRECTED ACCORDINGLY. 8.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT, GONE THROUGH THE ORDER OF THE AO. THIS IS THE ADDITION CONNECTED WITH CASH SHRI P. MADHUSUDAN REDDY :- 11 -: CREDITS UNDER THE PROVISIONS OF SECTION 68 OF THE I T ACT, 1961. THESE WERE REFLECTED IN BOOKS OF ACCOUNT MAINTAINED. ONCE THES E WERE FOUND RECORDED IN BOOKS AND NO FINDING IN SEARCH ADVERSE TO CASH C REDITS WERE FOUND THEN PRIMA FACIE NO ADDITION ON SUCH ITEMS IS CONTEMPLAT ED IN THE BLOCK ASSESSMENT PROCEEDINGS. THE AO HAS OBSERVED THAT TH E APPELLANT HAS FAILED TO PRODUCE EVIDENCE FOR HUGE CASH DEPOSITS A ND NRI RECEIPTS APPEARING IN THE BANK ACCOUNTS. IF THESE DEPOSITS W ERE FOUND RECORDED IN BOOKS, THEN NO ADDITION IS CALLED FOR, BECAUSE SUCH DEPOSITS ARE ALREADY DISCLOSED IN BOOKS. BUT, HOWEVER, IN CASE MATERIAL IS FOUND IN THE ACTION UNDER SECTION 132(1) POINTING OUT ADVERSE INFERENCE , THEN IT COULD BE STRETCHED AND A CLEAR CUT FINDING COULD BE GIVEN BE FORE MAKING ANY ADDITION IN THE BLOCK ASSESSMENT. IN THE PRESENT CA SE, SUCH A SCENARIO IS ABSENT AND AS SUCH THE ADDITIONS MADE UNDER THIS HE AD FOR ALL THE IMPUGNED ASSESSMENT YEARS HAS TO BE DELETED AND THE AO IS DIRECTED ACCORDINGLY. 7.2. IN THE ABOVE THREE PARAS, HE HAS DISCUSSED ABOU T THE INVESTMENTS IN THE COMPANY, PAYMENTS TO BROKERS AND CAS H DEPOSITS RESPECTIVELY. 7.3. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DIFFER FROM THE ORDER O F THE CIT(A), EVEN THOUGH THE REASONING GIVEN BY THE LD.CIT(A) ON S OME OF THE ISSUES ARE NOT FULLY ACCEPTABLE. THE FACT THAT ASSESSEE HAS MADE INVESTMENTS, WHICH ARE SHOWN IN THE RECEIPTS AND PAYMEN TS STATEMENT I.E., CASH FLOW STATEMENTS. HE HAS SHOWN THE OPENING CASH BALANCE FROM AY. 2002-03 AND EXPLAINED ALL THE INVESTMENTS IN THE IMPUGNED YEAR. AO WHILE ACCEPTING THAT THESE I NVESTMENTS HAVE BEEN SHOWN IN THE RECEIPTS AND PAYMENTS STATEMENT, BROUGHT THE AMOUNTS TO TAX ONLY ON THE REASON THAT THE OPENING C ASH BALANCE CANNOT BE ACCEPTED. EVEN THOUGH HE BROUGHT TH E AMOUNT TO TAX IN AY. 2002-03 (WHICH WAS SEPARATELY DELETED C ONSIDERED IN THE EARLIER APPEAL), HE HAS BROUGHT TO TAX THE INVESTMEN T SHOWN AGAIN, WHICH AMOUNTS TO DOUBLE ADDITION. SINCE ASSES SEE HAS SOURCE OF AMOUNT FROM HIS OWN CIRCULATING CAPITAL OF E ARLIER YEARS, SHRI P. MADHUSUDAN REDDY :- 12 -: IN OUR VIEW, THE AMOUNTS CANNOT BE CONSIDERED AS UNEX PLAINED UNLESS THERE IS ANY INCRIMINATING MATERIAL TO THAT EXTEN T. ASSESSEE HAS ALREADY FILED RETURNS FOR THE IMPUGNED ASSESSMENT YEAR EARLIER BEFORE THE SEARCH AND MAINTAINED BOOKS OF ACCOUNT AND AO HAS NOT EITHER REFERRED TO THE OR DISCUSSED ABOUT THEM IN THE AS SESSMENT ORDER. THIS INDICATES THAT THE TRANSACTIONS ARE DULY AC COUNTED FOR. IN VIEW OF THAT, WE CONFIRM THE ORDER OF THE CIT(A) AN D REJECT THE GROUNDS RAISED BY THE REVENUE. 7.4. IN THE RESULT THIS APPEAL OF REVENUE IS DISMIS SED. AYS. 2006-07, 2007-08 & 2008-09: 8. THE FACTS IN THESE THREE ASSESSMENT YEARS ARE SIM ILAR AND ISSUES RAISED ARE ALSO SIMILAR. THE ASSESSMENTS WERE COMPLETED U/S. 153A FOR AY. 2006-07 AND 2007-08 AND UNDER SECTION 143(3) FOR AY. 2008-09. IN ALL THE THREE YEA RS, ASSESSEE HAS DISCLOSED HIGHER INCOMES ON WHICH TAXES WERE NOT PAID AND SUBSEQUENTLY THE REVISED COMPUTATIONS WERE FILED REDUC ING THE INCOMES, AS STATED EARLIER. SINCE THE AO BASED COMPUTA TION ON THE BASIS OF THE RETURNED INCOMES, ASSESSEE NOT ONLY CONTES TED THE ADDITIONS MADE IN THE ASSESSMENT, BUT ALSO THAT REVISED COMPUTATION WAS NOT CONSIDERED BY THE AO. AS BRIEFLY S TATED EARLIER, LD.CIT(A) NEITHER ADJUDICATED THE ISSUE U/S 2 49(4) NOR ADJUDICATED THE ISSUE WHETHER THE REVISED COMPUTATION IS ACCEPTABLE OR NOT? HE DELETED ALMOST ALL THE ADDITION S MADE BY AO ON THE REASON THAT THERE IS NO INCRIMINATING MATERIAL. THE ORDER OF THE CIT(A) IS MORE OR LESS SIMILAR AND ON SAME LINES TO THE ORDER EXTRACTED ABOVE IN AY. 2004-05. HIS MAIN THRUST FOR D ELETING THE SHRI P. MADHUSUDAN REDDY :- 13 -: AMOUNTS WAS THAT THERE IS NO INCRIMINATING MATERIAL IN THE SEARCH AND SEIZURE PROCEEDINGS. REVENUE HAS RAISED THE GRO UNDS MAINLY ON THE ISSUE OF ADMITTING THE APPEALS VIOLATING THE TER MS AND CONDITIONS OF SECTION 249(4) AND ALSO ON MERITS OF THE DELETIONS MADE BY AO. ASSESSEE HOWEVER, IS AGGRIEVED ON THE I SSUE THAT CIT(A) HAS NOT GIVEN ANY DIRECTION TO THE AO TO ACCEPT THE REVISED COMPUTATION, EVEN THOUGH SPECIFIC GROUND WAS RAISED. 8.1. LD.DR ARGUED VEHEMENTLY, RELIED ON VARIOUS CAS E LAW AND ALSO FILED WRITTEN SUBMISSIONS, THE SUMMARY OF W HICH IS AS UNDER: I. ASSESSEE HAS ADMITTED MOST OF THE AMOUNTS U/S. 132(4) I N VARIOUS STATEMENTS RECORDED OVER A PERIOD OF TIME AND FOLLOWED UP WITH FILING THE RETURNS ADMITTING DEFICIT C ASH. THUS, CIT(A) HAS ERRED IN ADMITTING THE APPEALS FILED IN VIOLATION OF PROVISIONS U/S 249(4); II. REVISED COMPUTATION, EVEN THOUGH NOT DISCUSSED BY THE AO IN THE ORDER BUT WAS COMMENTED IN THE REMAND REPORT, CANNOT BE ACCEPTED AS VALID AS THERE IS NO CONCEPT OF REVISED RETURN IN BLOCK ASSESSMENTS. ACCORDINGLY, THE REVISED COMPUTATIONS CANNOT BE CONSIDERED; III. AS THE ASSESSEE HAS NOT PAID THE ADMITTED TAXES ON THE RETURNED INCOME IN AYS. 2006-07 AND 2007-08 AND PARTL Y IN AY. 2008-09, IN TERMS OF SECTION 249(4), THE APPEALS SHOULD NOT HAVE BEEN ENTERTAINED BY THE LD.CIT(A). HE REFER RED TO THE ORDER OF THE LD.CIT(A) PARTICULARLY UPTO PARA 3.41 IN SHRI P. MADHUSUDAN REDDY :- 14 -: WHICH HE HAS DISCUSSED THE SHOW CAUSE NOTICE, REPLY G IVEN BY ASSESSEE AND THE REMAND REPORT BY THE AO. IT WAS SUBMI TTED THAT LD CIT(A), WITHOUT GIVING ANY FINDING THEREON, ERR ED IN DISPOSING OFF THE APPEALS BY THE COMMON ORDER DISMIS SING THE ADDITIONS MADE. IT WAS SUBMITTED THAT LD.CIT(A) SHOULD HAVE GIVEN FINDING ON THIS ISSUE AND SHOULD HAVE REJECTED THE APPEALS FOR AYS. 2006-07 TO 2008-09. 8.2. WITH REFERENCE TO THE PROVISIONS OF SECTION 249(4 ) ORIGINALLY INSERTED W.E.F. 01-10-1975 AND SUBSEQUEN TLY AMENDED BY THE FINANCE ACT, 1989, IT WAS SUBMITTED THAT LD.CIT(A) HAS NO DISCRETION AND CIT(A) CANNOT EXEMPT ASSESSEE FROM PA YMENT OF TAXES ON RETURNED INCOME BEFORE ADMITTING THE APPEAL. IT WAS FURTHER SUBMITTED THAT CIT(A) IS ENJOYING SUCH POWER IN THE CASE OF ASSESSEES FALLING UNDER CLAUSE-(B) ONLY I.E., WHERE NO RETURN OF INCOME HAS BEEN FILED BY ASSESSEE AND ASSESSEE HAS NOT PAID ADVANCE TAX OF HIS INCOME. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. S. ALAGARSWAMY VS. ITO & ANOTHER [269 ITR 43] (MADR AS HIGH COURT); II. SHYAM ELECTRICAL WORKS VS. CIT [284 ITR 413] (MADHYA PRADESH HIGH COURT); III. CIT VS. SMT. G.A. SAMANTAKAMANI [259 ITR 215] (MADRAS HIGH COURT); IV. BHARAT KUMAR SEKHASARIA VS. DCIT [82 ITD 512] (MUM T RIB.); V. KUSHMALLAL HIRALAL VS. ACIT [57 ITD 531] (AHMEDABAD TRIB.); SHRI P. MADHUSUDAN REDDY :- 15 -: 8.3. IT WAS HIS CONTENTION THAT CIT(A) SHOULD NOT HAVE ENTERTAINED THE APPEALS AND THEREFORE, THE ORDER OF THE AO IS REQUIRED TO BE RESTORED. 8.4. WITH REFERENCE TO THE CONTENTIONS OF ASSESSEE THAT TH E RETURNS FILED IN RESPONSE TO SECTION 153A ARE INVALID, IT WAS SUBMITTED THAT THE RETURN OF INCOME FILED IN RESPONSE TO N OTICE ISSUED U/S. 153A SUBSEQUENT TO TIME LIMIT PROVIDED THERE IN CANNOT BE CONSIDERED AS INVALID RETURN OF INCOME AS THERE IS NO STATUTORY REQUIREMENT AS IN THE CASE OF RETURN REQUIRED TO BE FIL ED U/S. 139(1). IN RESPECT OF RETURN TO BE FILED U/S. 153A, THE AO HAS POWER TO EXTEND THE DATE OF FILING THE RETURN OR THE RETURN FI LED BEYOND THE TIME LIMIT PROVIDED IN THE NOTICE SHALL BE CONSIDE RED FOR THE PURPOSE OF COMPLETING ASSESSMENT, IF IT IS FILED BEFO RE THE DUE DATE PRESCRIBED FOR COMPLETION OF ASSESSMENT U/S. 153A. HO WEVER, SUCH RETURN FILED BEYOND THE TIME LIMIT PROVIDED IN NOTICE U/ S.153A OR EXTENDED BY THE AO OR IN CASE THERE IS NO SPECIFIC EX TENSION GRANTED ALSO, THE RETURN, IF ANY, FILED BY THE ASSESSE E BEFORE THE COMPLETION OF THE PROCEEDINGS SHALL BE CONSIDERED AS VALID RETURN OF INCOME. ON THE OTHER HAND, THE ASSESSEE HAS TO FACE TH E CONSEQUENCES FOR NOT FILING THE RETURN OF INCOME WITH IN THE TIME LIMIT PROVIDED IN THE NOTICE U/S. 153A OR BEYOND THE TIME EXTENDED BY THE AO IN TERMS OF- A. INTEREST U/S. 234A(3) SUBSEQUENT TO COMPLETION OF ASSESSMENT FROM THE DATE OF EXPIRY OF TIME PROVIDED U/ S. 153A TILL THE DATE OF FILING THE RETURN OF INCOME OR IN CASE NO RETURN OF INCOME IS FILED, UP TO THE DATE OF COMPLETI ON OF THE ASSESSMENT; SHRI P. MADHUSUDAN REDDY :- 16 -: B. THE ASSESSEE IS LIABLE TO PENAL PROVISIONS U/S. 271F; AND C. ASSESSEE MAY BE TRIED FOR PROSECUTION U/S. 276CC. IN ALL THE ABOVE THREE PROVISIONS, IT IS CLEARLY STA TED THAT IN THE EVENT OF NON-FILING THE RETURN OF INCOME WITHIN THE TIME PROVIDED IN NOTICE ISSUED U/S. 153A, THE ASSESSEE IS LIABLE FOR INTEREST, PENALTY AND PROSECUTION ACCORDINGLY. IN VIEW OF THIS, IT IS QU ITE CLEAR THAT THE ASSESSEE WAS ALLOWED TO FILE RETURN OF INCOME, EVE N BEYOND THE TIME PROVIDED IN THE NOTICE AND SUCH RETURN IS VALID RE TURN OF INCOME FOR ALL THE PURPOSES UNDER THE INCOME TAX ACT , INCLUDING COMPLETION OF THE ASSESSMENT, BUT WITH CONSEQUENCES OF P AYMENT OF INTEREST, PENALTY AND FACING PROSECUTION PROCEEDING S. IN VIEW OF THIS, THE ASSESSEE'S CONTENTION THAT THE RETURNS OF INCOME FILED BY HIM BEYOND THE TIME LIMIT PROVIDED U/S. 153A IS INVAL ID, IS NOT CORRECT AS PER LAW. 8.5. FOR AY. 2008-09, WHICH IS NOT FORMING THE PART OF BLOCK PERIOD, IS THE REGULAR RETURN FILED U/S. 139 AND THE REFORE A REVISED RETURN CAN BE FILED WITHIN ONE YEAR FROM THE END OF T HE ASSESSMENT YEAR WHICH ENDED ON 31-07-2009. SINCE THE RETURN FILE D BY ASSESSEE IS A VALID RETURN, THE REVISED COMPUTATION FIL ED AFTER THAT DATE CANNOT BE ACCEPTED. 9. COMING TO THE MERITS OF THE ADDITIONS MADE BY THE AO , IT WAS SUBMITTED THAT INCRIMINATING MATERIAL WAS FOUND DU RING THE COURSE OF SEARCH WHICH WAS THE BASIS FOR VARIOUS STATE MENTS RECORDED. WHILE ACCEPTING THAT ASSESSEE HAS NOT MAINTAI NED BOOKS OF ACCOUNT AT THE TIME OF SEARCH, ASSESSEE HAS PREPAR ED CASH FLOW STATEMENTS ON THE BASIS OF WHICH DEFICIT CASH WAS WORKE D OUT AND SHRI P. MADHUSUDAN REDDY :- 17 -: FILED THE RETURNS ACCORDINGLY. IT WAS FURTHER SUBMITTED THAT THERE IS NO REQUIREMENT OF ANY SEIZED/INCRIMINATING EVIDENCE F OR MAKING THE ADDITIONS AND RELIED ON THE FOLLOWING CASES: I. E.N. GOPA KUMAR VS. CIT [75 TAXMANN.COM 215] (KERAL A HIGH COURT); II. CIT VS. ST. FRANCIS CLAY DCOR TILES [70 TAXMANN.COM 234] (KERALA HIGH COURT); 9.1. IT WAS SUBMITTED THAT THE DEPARTMENT HAS LAID HANDS O N CERTAIN INCRIMINATING DOCUMENTS CONTAINING THE DETAILS O F UNRECORDED TRANSACTIONS OF ASSESSEE IN THE REAL ESTAT E BUSINESS AND ASSESSMENTS WERE COMPLETED BASED ON SUCH MATERIAL AND ALSO ON THE BASIS OF THE STATEMENT RECORDED U/S. 132(4). 9.2. IT WAS FURTHER SUBMITTED THAT LD.CIT(A) HAS WRONGLY STATED THAT ADDITIONS WERE MADE ON THE BASIS OF STATEMENT G IVEN BY ASSESSEE U/S. 132(4) WHICH WAS RETRACTED LATER, THER EFORE, THE ADDITIONS CANNOT BE SUSTAINED. IT WAS SUBMITTED THAT THE OBSERVATION OF THE CIT(A) IS NOT CORRECT IN AS MUCH AS THE STATEMENTS WERE RECORDED ON THE BASIS OF SUPPORTING DOCU MENTARY EVIDENCE FOUND DURING THE COURSE OF SEARCH AND THE S TATEMENT WAS MADE BY ASSESSEE WITHOUT ANY PRESSURE OR COERCION. IT WAS FURTHER SUBMITTED THAT IN THE PRELIMINARY STATEMENT, ASSESSEE ADM ITTED AN AMOUNT OF RS. 5 CRORES. SUBSEQUENTLY ON EXAMINATION OF THE DOCUMENTS, A HIGHER AMOUNT IN THE SECOND STATEMENT WAS ADMITTED AND REITERATED IN THE THIRD STATEMENT GIVEN. IT W AS FURTHER SUBMITTED THAT ASSESSEE ALSO WORKED OUT THE DEFICI T CASH AND FILED THE RETURNS, EVEN THOUGH BELATEDLY AND ADMIT TED DEFICIT SHRI P. MADHUSUDAN REDDY :- 18 -: CASH ON THE BASIS OF STATEMENTS PREPARED BY HIM. HE R EFERRED TO THE LETTER OF RETRACTION TO SUBMIT THAT THE SAID LETTER WAS FILED AFTER TWO YEARS FROM THE DATE OF ORIGINAL STATEMENT WITHOUT AN Y SWORN AFFIDAVIT OR FURNISHING REASONS ALONG WITH CORROBORATI VE EVIDENCES FOR SUCH RETRACTION. LD.DR PLACED RELIANCE ON THE FOL LOWING DECISIONS: I. CIT VS. O. ABDUL RAZAK (2012) [20 TAXMANN.COM 48] ( KERALA HIGH COURT); II. CIT VS. HOTEL MERIA (2011) [332 ITR 537] (KERALA HIG H COURT); III. CIT VS. T. RANGROOP CHORDIA [69 TAXMANN.COM 202] (M ADRAS HIGH COURT); 9.3. HE ALSO FURTHER SUBMITTED THAT RETRACTION FROM THE STATEMENTS GIVEN U/S. 132(4) CANNOT BE CONSIDERED UNDE R THE FACE VALUE WITHOUT THERE BEING ANY EVIDENCE BROUGHT ON RECOR D TO CONTROVERT THE FINDINGS RECORDED AT THE TIME OF CONDUCTIN G SEARCH AND ALSO STATEMENT GIVEN BY ASSESSEE. HE RELIED ON THE FOLLOWING CASE LAW: I. BHAGIRATH AGARWAL VS. CIT [31 TAXMANN.COM 274] (DELH I HIGH COURT); II. KANTILAL C. SHAH VS. ACIT [14 TAXMANN.COM 108] (AHMEDABAD ITAT); III. GOPAL S. PANDITH VS. DCIT [74 TAXMANN.COM 273] (BANG ALORE ITAT); IV. SMT. DAYAWANTHI VS. CIT [75 TAXMANN.COM 308] (DELHI HIGH COURT); SHRI P. MADHUSUDAN REDDY :- 19 -: 9.4. IT WAS SUBMITTED THAT ORDER OF THE LD.CIT(A) SHOU LD BE CONSIDERED AS AB INITIO VOID AND THE ORIGINAL ASSESSMENT ORDERS SHOULD BE RESTORED. 10. LD. COUNSEL IN REPLY HOWEVER RELIED ON THE ORDE RS OF THE CIT(A) TO SUBMIT THAT THERE WERE NO INCRIMINATING MATE RIAL FOUND DURING THE SEARCH AND ALL THE DOCUMENTS AND BANK STATE MENTS AND DEPOSITS WERE PART OF ASSESSEES ACCOUNTED TRANSACTIONS. IT IS SUBMITTED THAT BOOKS OF ACCOUNT AT THE TIME OF SEARCH WERE NOT MAINTAINED BUT ASSESSEE WAS ABLE TO PREPARE THE RECEIPTS AND PAYMENTS STATEMENT AND ACCORDINGLY, THE SAID STATEMENTS WER E FILED FROM FY. 2001-02 TO 31 ST MARCH, 2008 EXPLAINING VARIOUS RECEIPTS AND PAYMENTS BASED ON THE SEIZED MATERIAL. I T WAS SUBMITTED THAT ASSESSEE HAS NOT EARNED ANY PROFITS AND IN FACT, HAS SUFFERED A BIG LOSS IN AY. 2007-08, WHICH WAS DISAL LOWED BY THE AO WITHOUT BEING GIVEN ANY OPPORTUNITY TO ASSESSEE. 10.1. COMING TO THE ISSUE THAT ASSESSEE HAS NOT PAID ADMITTED TAXES, IT WAS SUBMITTED THAT THE ASSESSMENTS U/S. 153A WERE BASED ON INVALID RETURNS OF INCOME, HENCE THE SA ME WAS AB INITIO-VOID . IT WAS SUBMITTED THAT ASSESSEE HAS NOT FILED RETURNS OF INCOME IN RESPONSE TO NOTICE U/S. 153A. ASSESSEE REC EIVED NOTICES U/S. 276CC ON 12-03-2009 TO FILE THE RETURNS OF INCOME OTHERWISE NON-FILING WILL LEAD TO PROSECUTION. ASSESSEE FILED RETURNS ON 18- 08-2009 THEREFORE, THESE RETURNS WHICH ARE FILED IN A HURRY, WERE BEYOND THE TIME LIMIT GIVEN IN THE NOTICES GIVEN U/S. 15 3A AND ARE ACCORDINGLY INVALID RETURNS OF INCOME. IT WAS SUBMITT ED THAT FOR AY. 2006-07, ASSESSEE FILED ORIGINALLY RETURN OF INC OME U/S. 139(1) ON 31-10-2006 ADMITTING INCOME OF RS. 4,89,088/- AND THE TAXES SHRI P. MADHUSUDAN REDDY :- 20 -: HAVE BEEN PAID, THE SAME COMPUTATION WAS REITERATED IN THE REVISED COMPUTATION FILED. FOR AY. 2007-08, ASSESSEE FILED COMPUTATION OF INCOME DECLARING LOSS OF RS. 3,35,01,0 00/- AND NO TAX COULD BE PAYABLE. FOR AY. 2008-09, ASSESSEE HAS REVISED THE COMPUTATION TO NIL BUT PAID THE TAX OF RS. 10,04,650/- W HICH WAS CLAIMED AS REFUND. IT WAS THE CONTENTION THAT SINCE THE RETURNS WERE FILED BEYOND THE TIME LIMIT GIVEN, THE RETURNS ARE TO BE CONSIDERED AS INVALID RETURNS. THEREFORE, SUBSEQUEN T PROCEEDINGS ARE NULL AND VOID AB-INITIO. CONSEQUENTLY, THE PROVISIONS OF SECTION 249(4) DO NOT APPLY. 10.2. IT WAS ALSO CONTENDED THAT EVEN THOUGH REVISED COMPUTATIONS WERE FILED ALONG WITH RETRACTION LETTER IN TH E COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS NEITHER DISCUSSED A BOUT THE RETRACTION NOR CONSIDERED THE REVISED COMPUTATION AND TH E ORDERS ARE TOTALLY SILENT ON THAT. THEREFORE, AO COMPUTED WRONG LY FROM THE INCOME OF SO CALLED INVALID RETURNS. IT WAS SUBMI TTED THAT IF ASSESSEES REVISED COMPUTATION OF INCOME IS TAKEN UP, THEN, THERE WOULD BE NO DEMAND OF TAXES. THUS, THE APPEALS ENTER TAINED BY THE CIT(A) ARE TO BE CONSIDERED AS VALID. IT WAS FURT HER SUBMITTED THAT LD.CIT(A) HAS TAKEN ALL STEPS BY SENDING THE DOCUM ENTS FILED BEFORE HIM FOR THE COMMENTS OF THE AO, NOT ONLY REGARD ING COMPUTATION OF INCOME AND SELF-ASSESSMENT TAX BUT ALSO OTHER ADDITIONS MADE. THE AO INDIRECTLY ACCEPTED THAT THE COM PUTATION OF INCOME TO BE CORRECT AND NO SELF-ASSESSMENT TAX WOU LD ARISE. IT WAS SUBMITTED THAT LD.CIT(A) ALSO ACCEPTED THE COMPUTATIO N OF INCOME AS THERE WAS NO INCRIMINATING MATERIAL AND EV EN THOUGH HE HAS NOT MENTIONED VERY CLEARLY THAT SECTION 249(4) IS NO T ATTRACTED, THE FACT THAT HE HAS DISPOSED-OFF THE APPEALS ON MERITS D O INDICATE SHRI P. MADHUSUDAN REDDY :- 21 -: THAT HE HAS CONSIDERED THE REVISED COMPUTATION AND HAS TA KEN INTO ACCOUNT THE FACT THAT NO TAXES ARE PAYABLE ON THAT COMPUTATIO NS. IT WAS FURTHER SUBMITTED THAT LD.CIT(A) HAS NOT DIRECTED THE AO TO MAKE THE ASSESSMENTS ON THE BASIS OF THE REVISED COMPU TATIONS. THEREFORE, ASSESSEE IS IN APPEAL. LD. COUNSEL RELI ED ON VARIOUS JUDICIAL PROCEEDINGS THAT INCOMES WHICH WERE WRONGLY INCLUDED SHOULD NOT HAVE BEEN BROUGHT TO TAX AND THE VARIOUS JU DICIAL PRECEDENTS RELIED ON IS AS UNDER: I. SHRI C. RADHAKRISHNA KUMAR VS. ASST. COMMISSIONER OF INCOME TAX 16(1), HYDERABAD [295 HYD 2012]. WHERE IN IT WAS HELD THAT WRONGFUL INCLUSION OF AN AMOUNT IN TH E INCOME TAX RETURN FOR THE PURPOSE OF TAXABILITY, BY ITSELF WILL NOT MAKE THE ASSESSEE LIABLE FOR TAX. ARTICLE 265 OF THE CO NSTITUTION PROVIDES THAT NO TAXES CAN BE COLLECTED OR LEVIED W ITHOUT THE AUTHORITY OF LAW. THE ASSESSING OFFICER IS REQUIRE D TO COMPUTE THE ASSESSED INCOME IN ACCORDANCE WITH LAW IN TERMS OF THE PROVISIONS OF THE INCOME TAX AC, 1961. ANY WRONGFU L OFFERING OF ANY AMOUNT TOWARDS INCOME BY THE ASSESSEE WILL N OT OPERATE AS ESTOPPEL AGAINST THE PROPER APPLICATION OF LAW. II. BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRITHVI BROKE RS & SHAREHOLDERS PVT. LTD., [349 ITR 336] THE COURT HELD THAT THE ORDERS OF THE CIT(A) AND THE TRIBUNAL CLEARLY INDIC ATE THAT BOTH THE APPELLATE AUTHORITIES HAD EXERCISED THEIR JURIS DICTION TO CONSIDER THE ADDITIONAL CLAIMS AS THEY WERE ENTITLE D TO IN VIEW OF THE VARIOUS JUDGMENTS ON THE ISSUE, INCLUDING TH E JUDGMENT OF THE SUPREME COURT IN NATIONAL THERMAL POWER CORP ORATION LIMITED. THIS IS CLEAR FROM THE FACT THAT THESE JU DGMENTS HAVE SHRI P. MADHUSUDAN REDDY :- 22 -: BEEN EXPRESSLY REFERRED TO IN DETAIL BY THE CIT(A) AND BY THE TRIBUNAL. III. M/S. VIVERA IT APPLICATIONS CONSULTING (P) LTD., VS. INCOME TAX OFFICER, WARD-3(2), HYDREABAD; 129/HYD/2014 THE HON'BLE JURISDICTIONAL ITAT HELD THAT ONLY ISSUE AR ISING FOR CONSIDERATION BEFORE US IN THE PRESENT APPEAL IS WH ETHER CIT(A) WAS JUSTIFIED IN NOT ENTERTAINING ASSESSEES ADDITI ONAL GROUND CLAIMING EXEMPTION U/S. 10A. AS CAN BE SEEN, CIT(A ) HAS DISMISSED ASSESSEES ADDITIONAL GROUND ONLY FOR THE REASON THAT THE CLAIM OF DEDUCTION U/S. 10A WAS NOT RAISED BY ASSESSEE BY FILING A REVISED RETURN RELYING UPON A DECISION OF GOETZ INDIA LTD., AND HINDUSTAN HOUSING DEVELOPMENT CORPN (SUPRA). HOWEVER, WE FIND FORCE IN THE CONTENTION OF LEARNED AR THAT RATIO LAID DOWN IN THE AFORESAID TWO DECISIONS ARE RESTRICTED TO THE PROCEEDINGS BEFORE THE AO AND WIL L NOT APPLY TO THE APPELLATE AUTHORITIES. IV. MUMBAI ITAT IN THE CASE OF LOK HOUSING & CONSTRUCTION LIMITED [27 TAXMANN.COM 15] IT WAS HELD THAT WRONG STATEMENT WHICH WAS CORRECTED BY THE ASSESSEE BY FI LING THE REVISED RETURN AND THE AO AS WELL AS THE LEARNED CI T(APPEALS), IN OUR OPINION, WAS NOT JUSTIFIED IN BRINGING TO TA X SUCH HYPOTHETICAL INCOME IN THE HANDS OF THE ASSESSEE CO MPANY ON THE BASIS OF ORIGINAL RETURN OF INCOME IGNORING THE REVISED RETURN FILED BY THE ASSESSEE. WE, THEREFORE, DECID E THIS ISSUE IN FAVOUR OF THE ASSESSEE ON MERIT AND DELETE THE A DDITION MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(A) ON THIS ISSUE. SHRI P. MADHUSUDAN REDDY :- 23 -: 10.3. WITH REFERENCE TO VARIOUS ADDITIONS MADE IT WAS SUBMITTED THAT NO ADDITION CAN BE MADE IN SEARCH ASSESSM ENTS WITHOUT THERE BEING ANY INCRIMINATING MATERIAL FOUND D URING THE SEARCH PROCEEDINGS WHICH HAVE A BEARING ON SUCH ADD ITIONS. IT WAS FURTHER SUBMITTED THAT NO ADDITION TO THE INCOME CAN BE MA DE ONLY BASED ON ADMISSIONS MADE U/S. 132(4) UNLESS THE SAME IS CORROBORATED WITH TANGIBLE MATERIAL/INCRIMINATING MATERI AL HAVING BEARING ON THE ASSESSMENT OF INCOME. LD. COUNSEL PLA CED ON RECORD CBDT CIRCULAR NO. 286/2003 IT(INV) DT. 10-0 3-2003 IN THIS REGARD. LD. COUNSEL THEREAFTER REFERRED TO THE SO CALLED STATEMENTS WHICH WAS UNDER: I AM NOT IN A POSITION TO EXPLAIN THE DIFFERENCE A S OF NOW. IN VIEW OF THIS, YOU MAY TAKE THE DIFFERENCE OF RS. 6,41,00,000/- AS MY UNACCOUNTED INCOME FOR DIFFEREN T YEARS. THUS, IT WAS STATED THAT ASSESSEE HAS NOT CATEGORICALLY OR VOLUNTARILY, KNOWING FULLY WELL ABOUT THE DISCREPANCY IN THE ACCOUNTS, MADE ADMISSION OF INCOME. HE HAS ONLY SAI D THAT IF THERE IS ANY DEFICIENCY, IT MAY BE TAKEN AS UNACCOUNTED . THIS DOES NOT MEAN THAT HE HAS IN FULL VOLITION, ADMITTED ANY INCO ME. FURTHER, IN ANSWER AGAINST A QUESTION NO. 12 IT WAS STATE D SINCE I AM UNABLE TO PRODUCE THE EVIDENCE BEFORE Y OU, I AM ADMITTING RS. 6,41,33,000/- AS MY UNACCOUNTED IN COME FOR DIFFERENT YEARS. HOWEVER, I WOULD LIKE TO RESERVE THE RIGHT TO PRODUCE THE EVIDENCES IN SUPPORT OF MY CAPITAL AS O N 01-04- 2001, AS AND WHEN I AM ABLE TO PRODUCE THE SAME. SHRI P. MADHUSUDAN REDDY :- 24 -: IT WAS FURTHER SUBMITTED THAT AS CAN BE SEEN FROM THE ABO VE ANSWER, ASSESSEE WAS NOT FULLY CONVINCED ABOUT THE DIS CREPANCY. HE HAS STILL RESERVED HIS RIGHT TO EXPLAIN AND RECONC ILE THE ACCOUNTS AND ACCEPTED FOR ANY ADDITION SUCH RECONCILIATION. HOWEVER, HE HAS FULLY RECONCILED THE CASH FLOW, WHICH WAS NOT CON SIDERED BY THE AO. 10.4. IT WAS FURTHER SUBMITTED THAT AO ACCEPTED PART OF CASH FLOW STATEMENT BUT DID NOT ACCEPT THE FULL AND MADE ADDITIO NS ON THE BASIS OF THE RECEIPTS AND PAYMENTS STATEMENT ONLY. LD . COUNSEL RELIED ON THE FOLLOWING DECISIONS FOR THE PRO POSITION THAT NO ADDITION CAN BE MADE, WHEN THERE IS NO INCRIMINATI NG MATERIAL AND ALL THE DOCUMENTS WERE PART OF CASH FLOW STATEMENTS. A. ORDER OF HYDERABAD ITAT IN THE CASE OF MAA HIGHWAYS IN ITA NO. 1832-1841/H/2014; B. ORDER OF HYDERABAD ITAT IN THE CASE OF B. VIJAYA KUM AR IN ITA NO. 235-236/H/2010; C. ORDER OF MUMBAI ITAT IN THE CASE OF ALL CARGO LOGIS TICS LIMITED CITED IN 23 TAXMANN.COM 103; D. ORDER OF HYDERABAD ITAT IN THE CASE OF MIDWEST GOLD LIMITED IN ITA NO. 1062/H/2014; E. ORDER OF HYDERABAD ITAT IN THE CASE OF AMR INDIA LIM ITED IN ITA NO. 1828-1831; F. ORDER OF HYDERABAD ITAT IN THE CASE OF SRI NILAYA PR OJECTS IN ITA NO. 80/H/2013; 11. COMING TO THE MERITS, THE SUBMISSIONS OF ASSESSEE ARE AS UNDER: SHRI P. MADHUSUDAN REDDY :- 25 -: 8. WRONGFUL ADDITIONS MADE BASING ON DOCUMENTS FOR THE YEARS 2006-07, 2007-08 & 2008-09: THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING THE ADDITIONS UNDER (I) UNEXPLAINED INVESTMENT/DEFICIT CASH BALA NCE (II) PROFIT EARNED OUT OF REAL ESTATE TR ANSACTION (III) UNDISCLOSED PROFIT OUT REAL ESTATE TRANSACTIONS (IV) DISALLOWANCE OF LOSS (V) UNEXPLAINED CASH CREDIT U/S. 68 OF IT ACT. THE DETAILED POSITION IS AS FOLLOWS: ADDITION DETAILS AY 2006-07 AY 2007-08 AY 2008-09 (I) UNEXPLAINED INVESTMENT/DEFICIT CASH BALANCE 89,35,110 15,23,285 1,30,00,000 (II) UNEXPLAINED PROFIT EARNED OUT OF REAL ESTATE TRANSACTION 3,00,000 1,37,03,257 3,44,80,000 (III) UNDISCLOSED PROFIT OUT REAL ESTATE TRANSACTIONS -- 80,00,000 88,00,000 (IV) DISALLOWANCE OF LOSS -- 3,35,01,000 -- (V) UNEXPLAINED CASH CREDIT U/S. 68 OF IT ACT 1,00,94,500 2,09,64,300 8,61,09,145 EXPLANATION REGARDING UNEXPLAINED INVESTMENT/DE FICIT CASH BALANCE THE AO HAS MADE ADDITION UNDER UNEXPLAINED INVESTM ENT/DEFICIT CASH BALANCE FOR AY. 2006-07, 2007-08 AND 2008-09 AMOUNT ING TO RS. 89,35,110/-, RS. 15,23,285/- AND RS. 1,30,00,000/- RESPECTIVELY. 9.1 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, HAD MADE ADDITIONS BASING ON SWORN STATEMENT / DDIT QUANTIFI CATION. HE HIMSELF MENTIONED IN THE ORDER THAT HE VERIFIED THE CASH FL OW AND CERTAIN DEFICIT IN CASH BALANCE AND THAT HE IS NOT ACCEPTING BECAUSE O F DDIT QUANTIFICATION / SWORN STATEMENT. 9.2 WE WANT TO BRING TO YOUR ATTENTION THAT THESE D OCUMENTS ARE ALREADY REFLECTED IN THE CASH FLOWS AND NO INCOME ARISES. A O MADE ADDITION ONLY BECAUSE OF DDIT QUANTIFICATION / SWORN STATEMENT. SHRI P. MADHUSUDAN REDDY :- 26 -: 9.3 HOWEVER, ON APPEAL, THE CIT (A) DELETED THESE A DDITIONS VIDE PARA NO. 7.2, PARA NO. 10.2. 10. EXPLANATION FOR - '(II) PROFIT EARNED OUT OF R EAL ESTATE TRANSACTION (III) UNDISCLOSED PROFIT OUT REAL ESTATE TRANSACTIO NS' THE AO HAS MADE ADDITION UNDER 'PROFIT EARNED OUT O F REAL ESTATE TRANSACTION' FOR AYS 2006-07, 2007-08 AND 2008-09 A MOUNTING TO RS.3,00,000/-, RS. 1,37,03,257 AND RS. 3,44,80,000/ - RESPECTIVELY AND MADE ADDITION UNDER 'UNDISCLOSED PROFIT ON REAL EST ATE TRANSACTIONS' FOR AYS 2007-08 & 2008-09 AMOUNTING TO RS. 80,00,000/- AND RS. 88,00,000/- RESPECTIVELY. 10.1 THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE . HE IS DOING MULTIPLE PROJECTS. HE IS FOLLOWING PROJECT COMPLETION METHOD . AS SOME OF THE LANDS ARE INVOLVED IN LITIGATION, PROFITS WILL NOT ARISE UNLESS THE PROJECTS COMPLETE AND LITIGATION RESOLVES. IN SOME OF THE CASES THE L ITIGATION WILL CONTINUE FOR LONGER TIME. THE AO WRONGLY CALCULATED PROFITS SEPA RATELY FOR SOME OTHER TRANSACTION ON HYPOTHETICAL BASIS. THE AO HIMSELF C ALCULATED THE COST OF LAND AND PROFITABILITY WITHOUT UNDERSTANDING THE RE AL ESTATE BUSINESS. SOME OF THE SALES/ ADVANCES ARE ONLY RECEIPTS NOT I NCOME. THE ASSESSEE, IN SOME CASES, ACTS AS AGENT FOR THE OWNERS OF THE LAND. ALL THESE TRANSACTIONS ARE REFLECTED IN THE BANK STATEMENTS A ND CASH FLOWS. THE AO CANNOT DISTURB THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND ARRIVE AT PROFITABILITY. THE SAME THING EXPLAINED V ERY CLEARLY IN THE FOLLOWING CASES: A. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. PACT SECURITIES & FINANCIAL SERVICES LTD., [61 TAXMANN.C OM 192] (ANDHRA PRADESH AND TELANGANA); SHRI P. MADHUSUDAN REDDY :- 27 -: B. THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILD ERS LTD., VS. CIT(APPEALS), CHANDIGARH; C. THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. DALMIA CEMENTS (P) LTD., [121 TAXMAN 706 (DELHI)]; D. THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. ORACLE INDIA (P) LTD., [11 TAXMANN.COM 139 (DELHI)]; 11 EXPLANATION REGARDING- 'DISALLOWANCE OF LOSS': 11.1 THE ASSESSEE CLAIMED LOSS ON ACCOUNT OF LITIGA TION LAND TO THE EXTENT OF RS. 3,35,01,000/- IN THE ASSESSMENT YEAR 2007-08 . THE AO ACCEPTED THE LITIGATION IN THE ASSESSMENT ORDER, HOWEVER, NO T ALLOWED THE CLAIM FOR WANT OF DETAILS OF DISPUTE. WE WANT TO BRING TO YOU R KIND ATTENTION THAT ALL THE DOCUMENTS ARE AVAILABLE IN THE SEIZED DOCUMENTS . THE ASSESSEE HAD EXPLAINED TO THE AO THAT THE LAND WAS IN LITIGATION FOR INVALID TITLE. THE DOCUMENT IS ONLY A AGPA AND AS PER THE DOCUMENT HE HAS TO PAY THE BALANCE AMOUNT. AO HAS NOT ACCEPTED THE CLAIM AND M ADE THE ADDITION. DURING THE COURSE OF CIT (A) PROCEEDINGS, THE CIT ( A) DELETED THE ADDITION VIDE PARA NO. 11.2, AS THE SAME IS REFLECTED IN THE RECORDS. 12 EXPLANATION FOR - 'UNEXPLAINED CASH CREDIT U/S. 68 OF IT ACT': THE AO HAS MADE ADDITION UNDER 'UNEXPLAINED CASH CR EDITS U/S 68 OF IT ACT' FOR AYS 2006-07, 2007-08 AND 2008-09 AMOUNTING TO RS.1,00,94,500/-, RS. 2,09,64,300/AND RS. 8,61,09,1 45/ - RESPECTIVELY. 12.1 THE AO MADE ADDITION FOR THE CASH DEPOSITED IN THE BANK U/ S 68 OF THE ACT. THE SECTION 68 READS AS FOLLOWS: 'WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, I N THE OPINION OF THE (ASSESSING OFFICER), SHRI P. MADHUSUDAN REDDY :- 28 -: SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' THESE AMOUNTS ARE PART OF ADVANCES RECEIVED IN THE REAL ESTATE BUSINESS AND SALES. AO HIMSELF ACCEPTED IN THE CASH FLOWS RE CEIPTS AND PAYMENTS. THESE ARE ALL MY TRADE RECEIVABLE/ CASH SALES. AS P ER THE INCOME TAX ACT, SEC. 68 WILL NOT APPLICABLE FOR THE SALES/TRADE REC EIVABLE. THESE ARE THE TRANSACTIONS -REFLECTED IN THE RECORDS/CASH FLOWS A ND BANK STATEMENTS. AS I AM IN THE REAL ESTATE BUSINESS THESE TRANSACTIONS ARE PART OF MY REAL ESTATE RECEIPT WHICH ARE REFLECTED IN RECORDS. AS T HE AO MADE ADDITION BASING ON DDIT INV. /STATEMENT RECORDED, THE AO HAS NOT VERIFIED THE EVIDENCES AVAILABLE AND DOCUMENTS SUBMITTED. FOR TH IS PURPOSE WE RELY ON THE FOLLOWING CASE LAWS. NON APPLICATION OF OWN MIND IN DECIDING A QUASI-JUDICIAL ORDER IS BAD-IN-LAW. 12.2 IN THIS REGARD, RELIANCE IS PLACED ON THE FOLL OWING CASE LAWS: (A) THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS LOVELY EXPORTS (P) LTD [2008] 216 CTR 195 (SC) HELD THAT I F THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLE GED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE ASSESSIN G OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT THIS AMOUNT OF SHARE MONEY CANNOT BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE ASSES SEE COMPANY. (B) THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS ORISSA CORPN (P) LTD [1986] 25 TAXMAN 80F (SC) HELD THAT I N THIS CASE THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE A LLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID C REDITORS WERE THE INCOME-TAX ASSESSEES. THEIR INDEX NUMBER WAS IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UNDER SECTI ON 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT SHRI P. MADHUSUDAN REDDY :- 29 -: EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CR EDITORS TO FIND OUT WHETHER THEY WERE CREDIT-WORTHY OR WERE SUCH WHO CO ULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE T HE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE ASSESSEE COU LD NOT DO ANY FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCL USION THAT THE ASSESSEE HAD DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR B ASED ON NO EVIDENCE. IF THE CONCLUSION WAS BASED ON SOME EVIDENCE ON WHI CH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH COULD ARI SE. THE HIGH COURT WAS, THEREFORE, RIGHT IN REFUSING TO REFER THE QUESTIONS SOUGHT FOR. DECISION OF THE HIGH COURT AFFIRMED. THE CIT(A) DURING THE APPEAL PROCEEDINGS DELETED TH E ADDITION VIDE PARA NO. 8.2. 13 REGARDING DISALLOWANCE OF RS. 3,44,80,000/-. THE AO MADE ADDITION IN A Y 2008-09 AS PART OF PROF IT EARNED OUT OF REAL ESTATE TRANSACTION. HE HAS NOT ACCEPTED PART OF THE CASH FLOW TO THE EXTENT OF RS. 3,44,80,000/-, AND MADE ADDITION. THE ASSESS EE IS INTO THE REAL ESTATE BUSINESS AND ALL THE TRANSACTIONS ARE REFLEC TED IN THE REGULAR BOOKS OF ACCOUNT AND CASH FLOW IS DRAWN SOURCING FROM THE BOOKS OF ACCOUNT. THE AO HAS, WITHOUT VERIFYING THE BOOKS OF ACCOUNT, TAKEN ONLY A PART OF THE TRANSACTIONS AS NOT CORRECT. WE HAD CLEARLY EXP LAINED THE SAME TO AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVE R, ON APPEAL THE CIT(A) DELETED THE ABOVE ADDITION VIDE PARA NO. 9.2 . THUS IN VIEW OF THE ABOVE, WE REQUEST THE ITAT TO S USTAIN THE DELETION DONE BY THE CIT(A). SHRI P. MADHUSUDAN REDDY :- 30 -: 14. LD CIT (A) ACCEPTED COMPUTATION OF INCOME BUT N OT GIVEN SPECIFIC DIRECTIONS THE ASSESSEE HAS REVISED THE RETURNS FILED U/S 153A FOR THE AY 2006-07 & 2007-08 AND HAS ALSO REVISED ORIGINAL RETURN OF AY 2008-09 BY REVISED COMPUTATION OF INCOME ON 05-11-2009 DURING THE ASSE SSMENT PROCEEDINGS, THE SAME WAS NOT CONSIDERED BY THE AO. THE LD CIT(A ) BEFORE ADMITTING THE APPEAL OF THE ASSESSEE TAKEN REMAND REPORT FOR THE PURPOSE OF SEC 249(4) AND OBSERVED THE COMMENTS OF AO REGARDING TH E COMPUTATION OF INCOME WHEREIN HE HAS NOT MADE COMMENTS FOR OBJECTI ON. IN VIEW OF THIS LD. CIT (A) DECIDED THAT SEC 249(4) IS NOT APPLICAB LE AND PROCEEDED REGARDING THE ADDITIONS IN APPEAL. IN THE ORDER LD CIT (A) ERRED IN NOT GIVING SPECIFIC DIRECTIONS TO THE AO FOR CONSIDERAT ION OF REVISED COMPUTATION. FOLLOWING ITEMS WERE NOT DELETED BY TH E AO IN THE CONSEQUENTIAL ORDER. SINCE, LD. CIT(A) DID NOT GIVE ANY SPECIFIC DIRECTIONS FOR DELETIONS OF THE SAME:- I. CASH DEFICIT AMOUNTING TO RS. 21,39,235/-, RS. 5 ,73,50,481, AND RS. 1,13,90,068 FOR THE ASSESSMENT YEAR 2006-07,2007-08 AND 2008-09 RESPECTIVELY. II. PROFIT ON SALE OF PROPERTIES AMOUNTING TO RS. 2 5,00,000/-, RS. 42,24,550/ - AND RS. 28,70,000/- FOR THE AY 2006-07 , 2007-08 AND 2008- 09 RESPECTIVELY. THE LD CIT (A) APPRECIATED THE FACT THAT THE ASSESS EE IS IN THE REAL ESTATE BUSINESS AND AFTER CONSIDERING THE EXPLANATIONS AND SUBMISSIONS OF THE ASSESSEE REVISED COMPUTATION WAS PREPARED BY CONSID ERING ALL THE TRANSACTIONS AND ALL THE PROFITS/ LOSS ON SALE OF L AND DURING THE PARTICULAR YEARS WAS ALSO ACCOUNTED. THE LD CIT (A) ALSO OPINE D THAT ALL TRANSACTIONS ARE RECORDED AND SEPARATE PROFIT ON EACH ITEMS CANN OT BE TAKEN. THE LD CIT(A) RIGHTFULLY DELETED THE ADDITIONS MADE BY THE AO VIDE PARA NO.9.2 AND 12.2. THE LD CIT (A) ALREADY ALLOWED AND MENTIO NED THAT PROFIT ON SALE OF LAND ALREADY REFLECTED AND THERE WAS NO INC RIMINATING MATERIAL. SHRI P. MADHUSUDAN REDDY :- 31 -: THE LD CIT(A) ON HAVING ACCEPTED THE COMPUTATION, F AILED TO GIVE SPECIFIC DIRECTIONS ON DELETION OF PROFIT ON SALE OF LAND. . 11.1. RELYING ON THE VARIOUS LEGAL PRECEDENTS, IT WAS SUBMITTED THAT THE CASE LAW RELIED ON BY THE REVENUE ARE NOT APPLICABLE TO THE FACTS OF THE CASE AND WHERE THERE ARE TWO DIVERGENT VIEWS AND THE DECISIONS GIVEN BY THE COURTS O N AN ISSUE, ONE WHICH IS IN FAVOUR OF ASSESSEE HAS TO BE ADOPTED [CIT VS. VEGETABLE PRODUCTS LTD.,] [88 ITR 192] (SC). IT WAS SUB MITTED THAT THERE IS NO MERIT IN THE ADDITIONS MADE BY THE AO AND CI T(A) VALIDLY DELETED THE AMOUNTS. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORD. BOTH THE PARTIES HAVE FILED WRITTEN SUBMISSION S FOR THESE THREE ASSESSMENT YEARS MAINLY REITERATING THEIR CONTENTI ONS AND RELYING ON VARIOUS CASE LAW. BEFORE ADVERTING TO THE VARIOUS ISSUES, IT IS NECESSARY TO PLACE ON RECORD CERTAIN FACTS. IN TH IS CASE, ASSESSEE IS IN THE REAL ESTATE BUSINESS AND HAS BEEN INVESTING LARGE AMOUNTS OF FUNDS WHICH RESULTED IN CONDUCTING OF SERC H AND SEIZURE OPERATIONS. EVEN THOUGH NOTICES U/S. 153A WERE ISSUED ON 26-06-2008, ASSESSEE COULD FILE RETURNS ONLY ON 18-0 8-2009 INCLUDING THE RETURN FOR AY. 2008-09. IN THESE RETURNS , ASSESSEE HAS ADMITTED RETURNED INCOMES AS UNDER: 2006-07 50,59,365 2007-08 2,80,15,181 2008-09 1,42,17,788 SHRI P. MADHUSUDAN REDDY :- 32 -: 12.1. AS SEEN FROM THE PAPER BOOK PLACED BY THE REVE NUE, IT IS NOTICED THAT ASSESSEE SOUGHT TIME FOR FILING RETURNS IN THE INTERIM PERIOD MAINLY ON THE REASON THAT HIS BUSINESS WAS GOI NG THROUGH A CRUCIALLY DULL PERIOD AND HE HAS NO LIQUID RESOURCE S TO PAY THE SELF- ASSESSMENT TAX. IT MAY BE RECALLED THAT ASSESSEE HAS AD MITTED AN AMOUNT OF RS. 5 CRORES AS UNDISCLOSED INCOME FOR A LL THE YEARS INVOLVED IN THE STATEMENT RECORDED ON THE DATE OF SEARC H AND SUBSEQUENTLY, WHEN THE DDIT( INVESTIGATION) STARTED CORRE LATING THE DOCUMENTS AND PREPARING STATEMENTS, ASSESSEE HAD ADMITTED HIGHER INCOME OF RS. 6.41 CRORES AND FURTHER CAPITAL GAINS OF RS. 2.99 CRORES. EVEN THOUGH THE STATEMENT WAS TAKEN LIKE THAT, AS SEEN FROM THE STATEMENT, IT SEEMS THAT THE CAPITAL GAINS IS PART OF THE TOTAL INCOME/RECEIPTS EARNED BY ASSESSEE. THEREFOR E, THERE SEEMS TO BE DOUBLE DISCLOSURE UNDER DIFFERENT HEADS. BE THAT AS IT MAY, THERE IS NO DISPUTE THAT ASSESSEE HAS EARNED SOME UNACCOUNTED INCOMES IN THE REAL ESTATE BUSINESS, WHICH WAS QUANTIFIED IN THE COURSE OF SEARCH. HOWEVER, THE STAT EMENTS SO RECORDED FROM ASSESSEE ARE QUALIFIED STATEMENTS. ASSE SSEE HIMSELF HAS STATED THAT HE HAS RECEIVED ADVANCES/OBTAINED LOANS FOR VARIOUS INVESTMENTS, WHICH HE COULD NOT RECONCILE ON T HE DATE OF SEARCH OR SUBSEQUENTLY AND WANTED TIME TO ANALYSE THE IS SUES. THAT HE HAS TAKEN TIME TO ANALYSE THE SEIZED DOCUMENTS C AN BE GAZED FROM THE FACT THAT HE WENT ON SEEKING TIME IN FILI NG RETURNS OF INCOME FROM THE TIME HE RECEIVED NOTICES U/S. 153A TILL HE FILED THE RETURNS. THE RETURNS FOR THE THREE IMPUGNED ASSESSME NT YEARS WERE FILED AFTER DUE VERIFICATION OF THE DOCUMENTS AND BANK ACCOUNT PASS BOOKS/STATEMENTS AND HE HAS QUANTIFIED THE DIFFEREN CE BETWEEN INVESTMENTS AND SOURCES AS DEFICIT CASH AND AC CORDINGLY FILED THE RETURNS. IT IS ALSO FACT THAT HE DID NOT PAY SE LF-ASSESSMENT SHRI P. MADHUSUDAN REDDY :- 33 -: TAX PERTAINING TO AYS. 2006-07 AND 2007-08 AND PARTLY P AID TO AN EXTENT OF RS. 10,04,650 FOR THE AY. 2008-09. EVEN THE SO CALLED STATEMENT OF RETRACTION FILED DOES NOT CONTAIN ANY EVIDENC E ON WHAT BASIS IT WAS WITHDRAWN. AS POINTED OUT BY THE LD.CIT- DR, IT IS ALMOST AFTER TWO YEARS FROM THE TIME THE STATEMENTS U/S 1 32(4) WERE GIVEN. LD.CIT-DR HAS RELIED ON VARIOUS CASE L AW IN HIS SUBMISSIONS, WHICH WE DO NOT INTEND TO REPEAT HERE, BUT SUFFICE TO SAY THAT THE SELF-SERVING RETRACTION WITHOUT ANY DOCUMENTA RY EVIDENCE CANNOT DISPEL THE STATEMENT MADE UNDER OATH U/S . 132(4). FURTHER, ASSESSEE ALSO FILED RETURNS OF INCOME DISCLO SING CERTAIN INCOMES. 12.2. IT IS ASSESSEES CONTENTION THAT ASSESSEE SUBSEQ UENTLY FILED REVISED COMPUTATION WHICH SHOWS LESSER INCOMES. THE BASIS FOR REVISED COMPUTATION COULD NOT BE ANALYSED BY US A S NEITHER THE AO NOR THE CIT(A) CONSIDERED THE SAME AS TO WHY THE SAM E CAN BE ACCEPTED OR CANNOT BE ACCEPTED. EXCEPT STATING THAT THER E ARE NO TAXES PAYABLE, ON THE BASIS OF REVISED COMPUTATION, ASS ESSEE ALSO WAS NOT FORTHCOMING WHY THE REVISED COMPUTATIONS ARE TO BE ACCEPTED AS THE BASIS FOR ASSESSMENT. IN THE COURSE OF PRESENT PROCEEDINGS, LD. COUNSEL PLACED SOME RECONCILIATION OF THE AMOUNTS INVOLVED BY WAY OF A TABLE, BUT IN THE ABSENCE OF VERIFICATION BY THE REVENUE AUTHORITIES, WE ARE NOT IN A POSITION TO GIVE ANY FINDING ABOUT THE CLAIMS OF ASSESSEE IN THIS REGARD. 12.3. IT IS ALSO FACT THAT ASSESSEE CONTESTED THE ISSU E BEFORE THE CIT(A), WHICH WAS NOT ADJUDICATED BY THE LD. CIT(A) . THE ISSUE OF DISCHARGING THE TAXES ON ADMITTED INCOME IS VERY WEL L CONNECTED WITH THE ISSUE WHETHER THE RETURNS FILED BY ASSESSEE AR E VALID OR SHRI P. MADHUSUDAN REDDY :- 34 -: NOT AND WHETHER THE REVISED COMPUTATION IS VALID OR NO T? AS THE LD. CIT(A) HAS NOT GIVEN ANY OPINION ON THIS ISSUE. EVEN THOUGH HE HAS ISSUED SHOW CAUSE NOTICE TO ASSESSEE, WE ARE OF T HE OPINION THAT IT IS VERY DIFFICULT TO GIVE ANY FINDING AT THIS STAG E, SINCE THE GENUINENESS OF THE COMPUTATION FILED BY ASSESSEE IN THE RETURNS FILED ON 18-08-2009 ITSELF HAVE BEEN DISPUTED BY ASSE SSEE. IT IS ALSO FACT THAT EVEN THOUGH REVISED COMPUTATIONS WERE RECEIVED BY THE AO BEFORE COMPLETION OF ASSESSMENT, FOR THE REASONS B EST KNOWN TO THE AO, HE HAS NOT CONSIDERED THE SAME AT ALL NOR DISC USSED WHETHER THE CLAIMS ARE ACCEPTABLE OR NOT? IN THE ABSENC E OF THE FINDING ON THE GENUINENESS OF THE INCOMES EITHER DISCL OSED OR RETURNED OR THE REVISED COMPUTATIONS, THE ISSUES WITH REF ERENCE TO SECTION 249(4) CANNOT BE CONSIDERED, JUST BECAUSE ASSESSEE HAS FILED CERTAIN RETURNS OF INCOME WHICH WERE IN DISPUTE. 13. IT IS ALSO SEEN THAT LD. CIT(A) DELETED ALMOST ALL THE ADDITIONS ON THE REASON THAT THERE IS NO INCRIMINATING M ATERIAL. HIS ORDERS IN ALL THE YEARS ARE MORE OR LESS SAME, W ITHOUT CONSIDERING THE FACTUAL ASPECT OF THE ADDITIONS MADE OR THE CONTENTIONS STATED BY ASSESSEE. THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF 1. GOPAL LAL BHADRUKA, 2. AVADES H BHADRUKA, 3. AHURA HOLDINGS VS. DCIT [346 ITR 106] (AP) HAS HELD AS UNDER: SECTIONS 153A, 153B AND 153C WERE INSERTED IN THE INCOME-TAX ACT, 1961 WITH EFFECT FROM JUNE 1, 2003, IN CHAPTER XIV. THESE SECTIONS ARE APPLICABLE TO SEARCH OPERATIONS OR REQUISITIONS MADE AFTER MAY 31, 2003. SIMULTANEOUSLY, SECTION 158BI WAS INSERTED IN CHAPTER XIV-B. BY VIRTUE OF SECTION 158BI OF THE ACT, THE VARIOUS PRO VISIONS OF CHAPTER XIV-B OF THE ACT ARE MADE INAPPLICABLE TO PROCEEDINGS UND ER SECTIONS 153A AND 153C OF THE ACT. THE EFFECT OF THIS IS THAT WHILE T HE PROVISIONS OF CHAPTER XIV-B OF THE ACT LIMIT THE INQUIRY BY THE ASSESSING OFFICER TO THOSE MATERIALS FOUND DURING THE SEARCH AND SEIZURE OPERA TION, NO SUCH LIMITATION IS FOUND IN SO FAR AS SECTIONS 153A AND 153C OF THE ACT ARE SHRI P. MADHUSUDAN REDDY :- 35 -: CONCERNED. THEREFORE, IT FOLLOWS THAT FOR THE PURPO SES OF SECTIONS 153A AND 153C OF THE ACT, THE ASSESSING OFFICER CAN TAKE INT O CONSIDERATION MATERIAL OTHER THAN WHAT WAS AVAILABLE DURING THE SEARCH AND SEIZURE OPERATION FOR MAKING AN ASSESSMENT OF THE UNDISCLOSED INCOME OF T HE ASSESSEE. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE RESIDENTIAL- CUM-BUSINESS PREMISES OF THE ASSESSEE. THE SALE CON SIDERATION AS PER THE SALE DEEDS DID NOT TALLY WITH THE ACTUAL PAYMENTS M ADE BY THE PURCHASERS. A SCRUTINY OF EIGHT SALE DEEDS SHOWED THAT ON-MONEY WAS PAID BY THE VENDEES TO THE FIRM IN WHICH THE ASSESS EE WAS A PARTNER. THE STATEMENT OF THE ASSESSEE WAS RECORDED. THERE WAS E VIDENCE OF PAYMENT OF ON-MONEY. PROCEEDINGS WERE INITIATED UNDER SECTI ON 153A OF THE ACT IN RESPECT OF THE ASSESSEE, WHILE PROCEEDINGS WERE INI TIATED AGAINST HIS SON AND THE FIRM UNDER SECTION 153C OF THE ACT. THE ASS ESSING OFFICER PASSED AN ASSESSMENT ORDER IN RESPECT OF THE FIRM ON A SUB STANTIVE BASIS, WHILE PROTECTIVE ASSESSMENTS WERE MADE IN RESPECT OF THE ASSESSEE AND HIS SON. THIS WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE H IGH COURT : HELD, DISMISSING THE APPEALS, THAT ON APPRECIATION OF THE EVIDENCE, ALL THE AUTHORITIES CAME TO THE CONCLUSION THAT THE UNDISCLOSED INCOME WAS THAT OF THE FIRM. THERE WAS NO PERVERSITY IN THE V IEW THAT ALL OF THEM HAD CONCURRENTLY TAKEN. THE ADDITION WAS VALID. 13.1. THUS, THE EVIDENCES COLLECTED DURING THE COUR SE OF SEARCH CAN BE CONSIDERED BY THE AO. IN FACT AS SEEN FROM THE QUANTIFICATION BY THE DDIT IN THE COURSE OF SEARCH P ROCEEDINGS OR THE WORKING BY ASSESSEE IN THE POST-SEARCH PROCEEDING S, THE BASIS IS THE VARIOUS DOCUMENTS/EVIDENCES OF INVESTMENTS UN-EA RTHED DURING THE COURSE OF SEARCH. SINCE ASSESSEE HAS NO T MAINTAINED THE BOOKS OF ACCOUNT BY THE TIME OF SEARCH, THERE ARE ON LY TWO METHODS OF QUANTIFYING UNDISCLOSED INCOME UN-EARTHED DURING THE COURSE OF SEARCH. ONE METHOD IS CONSOLIDATING THE A SSETS AND LIABILITIES, ASSESSMENT YEAR-WISE AND BRINGING INTO TA X THE EXCESS OF ASSETS OVER LIABILITIES AS INCOME OF THE YEAR. THE O THER METHOD IS TO PREPARE THE RECEIPTS AND PAYMENTS STATEMENT ( CASH FLOW) FOR THE IMPUGNED BLOCK PERIOD AND ON THAT BASIS EXAMINING WHE THER ASSESSEE HAS EARNED INCOMES OR NOT, UNDER THE PROVIS IONS OF THE SHRI P. MADHUSUDAN REDDY :- 36 -: ACT. IN THIS CASE, ASSESSEE CHOSE THE LATTER METHOD O F PREPARING RECEIPTS AND PAYMENTS STATEMENT. THEREFORE, IT IS NOT COR RECT ON THE PART OF THE CIT(A) TO HOLD THAT THERE IS NO INCRIMINATI NG SEARCH MATERIAL WARRANTING ADDITIONS. THE PROVISIONS OF SEC TION 153A ARE VERY CLEAR THAT THOSE ASSESSMENTS WHICH ARE PENDING AS ON THE DATE OF SEARCH FOR CONCLUSION WOULD GET ABATED. IN TH IS CASE, ASSESSEE HAS FILED RETURNS UP TO AY 2006-07 AND THERE SEEMS TO BE NO SCRUTINY ASSESSMENTS. QUESTION OF ABATEMENT OF PENDI NG PROCEEDINGS DOES NOT ARISE. CONSEQUENT TO THE SEARCH AS PER THE PROVISIONS, RE-ASSESSMENT HAS TO BE DONE QUANTIFYING T HE UNDISCLOSED INCOME. ACCORDINGLY, WE ARE OF THE OPIN ION THAT THE ORDER OF THE CIT(A) DELETING VARIOUS ADDITIONS ON THE REASON THAT THERE IS NO INCRIMINATING MATERIAL CANNOT BE UPHELD. 14. AT THE SAME TIME, IT IS ALSO TO BE NOTED THAT THE TAX HA S TO BE COLLECTED IN ACCORDANCE WITH LAW AND ANY LEGAL CLAIM WHICH IS NOT PROPERLY MADE BY INADVERTENCE OR IGNORANCE SHOU LD NOT BE DENIED MERELY BECAUSE ASSESSEE DID NOT MAKE A CLAIM IN THE RETURN OF INCOME. THE INCOME TAX ACT IS MEANT FOR COLLECTION OF CORRECT TAX AND IT CANNOT BE TREATED AS A LIS BETWEEN TWO PARTIE S BUT A TAX ADJUSTMENT AS EXPLAINED BY THE HON'BLE MADRAS HIGH COU RT IN THE CASE OF CIT VS. INDIAN EXPRESS (MADURAI) PVT. LTD., [ 140 ITR 705] AT PAGE NO. 724. AT ANY RATE, APPELLATE AUTHORITY IS ENTI TLED TO ADMIT ANY ADDITIONAL CLAIM. HOWEVER, THE CIT(A) FAILED TO CO NSIDER ASSESSEES CONTENTIONS WITH REFERENCE TO REVISED COMPU TATION AND AS THERE IS NO DIRECTION REGARDING THAT TO THE AO, ASSESS EE IN HIS APPEALS RAISED THE CONTENTIONS BEFORE US THAT THE REVISE D COMPUTATIONS HAVE NOT BEEN CONSIDERED. MORE OVER THERE IS NO FINDING WHETHER ASSESSEE IS AN INVESTOR OR DOING IT A S BUSINESS. AS SHRI P. MADHUSUDAN REDDY :- 37 -: SEEN FROM THE STATEMENT RECORDED BY DDIT, THE FACT THAT C APITAL GAINS WAS COMPUTED INDICATE THAT ASSESSEE IS TREATED AS INVESTOR. IN THAT CASE, THE LOSS IN BUSINESS DOES NOT ARISE. ONLY CAPITAL LOSS ON TRANSFER OF PROPERTY SHOULD BE QUANTIFIED SO AS TO SET OFF OR CARRIED FORWARD AS PER THE PROVISIONS OF THE ACT. FURTH ER DDIT QUANTIFIED THE TOTAL INVESTMENT AT RS. 20,25,33,000 AS ON THE DATE OF SEARCH. THIS INCLUDES ADVANCES, SALE PROCEEDS, B ORROWALS, SOME DEFICIT CASH ETC AS PER ASSESSEE. THESE REQUIRE EXAMI NATION AS SOME TRANSACTION MAY YIELD PROFIT OR GAIN, AS THE CASE MAY BE, WHICH REQUIRE QUANTIFICATION YEAR WISE. THESE ASPECTS HAVE NOT BEEN EXAMINED AND REQUIRE FURTHER VERIFICATION. 15. IN VIEW OF THAT, SINCE AO HAS NOT BASED THE ASSES SMENT DIRECTLY ON THE SEIZED MATERIAL BUT ON RECEIPTS AND PA YMENTS STATEMENTS AND ASSESSEE ALSO HAS FURNISHED DIFFERENT S TATEMENTS AT DIFFERENT POINTS OF TIME, IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION THAT THE ASSESSMENTS PERTAINING TO THESE THREE I MPUGNED ASSESSMENT YEARS ARE TO BE SET ASIDE, WITH A DIRECTION TO AO TO COMPUTE THE INCOMES ON BASIS OF THE INCRIMINATING MAT ERIAL FOUND AND THE RETURNS IF ANY FILED EARLIER IN ANY ASSESSMEN T YEAR. THE AO IS ALSO DIRECTED TO QUANTIFY THE INCOMES EITHER ON TH E BASIS OF THE SEIZED MATERIAL OR IF ENTIRE SEIZED MATERIAL IS CONS IDERED IN THE RECEIPTS AND PAYMENTS STATEMENT FURNISHED BY ASSESSEE, O N THE BASIS OF SUCH STATEMENTS. ASSESSEE IS ALSO DIRECTED TO FURNISH THE CORRECT COMPUTATION OF INCOMES FOR THE IMPUGNED ASSESSM ENT YEARS BEFORE THE AO. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY. AO IS ALSO DIRECTED TO EXAMINE THE ISSUE S AFRESH AND NEED NOT BASE HIS COMPUTATION EITHER ON THE RETURNS OF IN COME FILED IN AUGUST, 2009 OR ON THE BASIS OF THE REVISED COMPUTA TIONS FILED SHRI P. MADHUSUDAN REDDY :- 38 -: SUBSEQUENTLY. HE SHOULD EXAMINE AS IF ASSESSEE HAS NOT FILED THE RETURNS AND QUANTIFY THE INCOMES IN EACH OF THE YEAR I N RE- ASSESSMENTS BASED ON FACTS. IN CASE ASSESSEE IS IN A POSITION TO FURNISH THE CORRECT RECEIPTS AND PAYMENTS STATEMENT WITH D UE EVIDENCE, AO IS DIRECTED TO CONSIDER THE SAME AFTER D UE EXAMINATION. WITH THE OBSERVATIONS MADE ABOVE, WE HEREB Y SET ASIDE THE ORDERS OF THE AO AND CIT(A) FOR THE IMPUGNED THREE ASSESSMENT YEARS AND RESTORE THE SAME TO THE FILE OF THE AO TO EXAMINE THE FACTS AND DETERMINE AFRESH CONSIDERING THE LAW ON THE ISSUES. 16. SINCE WE ARE SETTING ASIDE THE ASSESSMENTS PER SE, WE DO NOT INTEND TO EXAMINE THE LEGAL ISSUES WHICH WERE RA ISED BY THE PARTIES BEFORE US. SUFFICE TO SAY THAT DEPARTMENT IS FRE E TO QUANTIFY THE INCOMES AFTER DUE EXAMINATION OF THE FACTS AND ASS ESSEE IS FREE TO RAISE NECESSARY LEGAL CLAIMS/LEGAL ISSUES EITHER B EFORE THE AO OR BEFORE THE APPELLATE AUTHORITIES IF REQUIRED AND ALL IS SUES ARE OPEN FOR CONSIDERATION, IF REQUIRED. WITH THESE OBSERVATIONS AND DIRECTIONS, THE GROUNDS RAISED BY BOTH THE PARTIES ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT, REVENUE APPEALS FOR AYS. 2002-03 & 2004-05 ARE DISMISSED. APPEALS BOTH OF ASSESSEE AND REVENUE FOR AYS. 2006-07, 2007-08 & 2008-09 ARE ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST APRIL, 2017 SD/- SD/- (G. PAVAN KUMAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMB ER HYDERABAD, DATED 21 ST APRIL, 2017 TNMM SHRI P. MADHUSUDAN REDDY :- 39 -: COPY TO : 1. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCL E-2, HYDERABAD. 2. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -2, HYDERABAD. 3. SHRI PASHAM MADHUSUDHAN REDDY, C/O. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 4. CIT (APPEALS)-GUNTUR. 5. CIT(CENTRAL)-HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.
