ACIT, Madurai V. Shri R.Purushothaman, Tirunelveli

ITA 1455/CHNY/2010

• Counselvise Citation: 145521714 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 03-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M N MURTHY NAIK J
• Assessee Lawyers: G BASKAR
• Keywords: Gross profit estimation; Unexplained investment; Income from undisclosed sources; Source of fund; Assessment record
• Section: 133A; 145; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NOS.1454 & 1455/MDS/2010 (ASSESSMENT YEAR : 2005-06 & 2007-08 ) THE ACIT CENTRAL CIRCLE III MADURAI VS SHRI.R.PURUSHOTHAMAN 184/2 TRIVANDRUM ROAD TIRUNELVELI [PAN AGSPR1481J] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.N.MURTHY NAIK, JCIT/DR RESPONDENT BY : SHRI G.BASKAR, ADVOCATE DATE OF HEARING : 04-10-2011 DATE OF PRONOUNCEMENT : 17-10-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THESE ARE TWO APPEALS OF THE REVENUE, FOR ASSE SSMENT YEAR S 2005-06 AND 2007-08, WHICH HAVE BEEN FILED AGAINST THE COMMON ORDER OF THE LD. CIT(A), DATED 21.4.2010, PASSED FO R ASSESSMENT YEARS 2001-02 AND 2004-05 TO 2007-08. IT WAS INFORMED TH AT FOR OTHER ASSESSMENT YEARS, THE REVENUE HAS NOT PREFERRED ANY APPEAL. SINCE THEE APPEALS ARISE FROM A COMMON ORDER AND WERE HEA RD TOGETHER, WE PROCEED TO DECIDE THEM BY A COMMON ORDER. ITA 1454 & 1455/10 :- 2 -: I.T.A.NO. 1454/MDS/2010 2. THE FIRST ISSUE OF THIS APPEAL RAISED VIDE GROUND N O.1(A) TO 1(C) IS IN RELATION TO THE DELETION OF AN ADDITIO N OF ` 2.05 CRORES WHICH WERE ADDED BY THE ASSESSING OFFICER ON ACCOUNT OF U NEXPLAINED INVESTMENT IN SHARE CAPITAL IN SUSEE GROUP OF COMPA NIES. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE SHRI R.PUR USHOTHAMAN, INDIVIDUAL, IS ASSESSED TO TAX IN HIS CAPACITY AS KARTA OF HUF AND ALSO HIS INDIVIDUAL CAPACITY. HE IS ALSO A PARTNER IN M /S SUSEE AUTO (FIRM) IN HIS HUF CAPACITY. HIS SOURCES OF INCOME IN HIS INDIVIDUAL CAPACITY ARE FROM INSURANCE COMMISSION, SUSEE AUTO PROPRIETO R CONCERN, INTEREST INCOME, INCOME FROM PRIVATE LTD COMPANIES AS THEIR DIRECTOR, AGRICULTURAL INCOME AND INCOME FROM OTHER SOURCES. A SEARCH U/S 132 WAS CONDUCTED ON 4.7.2006 IN THE RESIDENTIAL PREMIS ES OF THE ASSESSEE A SIMULTANEOUS SURVEY U/S 133A WAS CARRIED ON IN TH E BUSINESS PREMISES OF M/S SUSEE AUTO (FIRM), M/S SUSEE ENGINE ERING AND AUTOMOBILES P. LTD., M/S SUSEE VEHICLE DEALERS P. L TD, M/S SUSEE AUTO ZONE P. LTD., AND M/S HARI LUBRICANTS. THE DETAILS OF INCOME RETURN BY THE ASSESSEE FOR VARIOUS YEARS WHICH ARE RELEVANT F OR THE ISSUE IN QUESTION ARE AS UNDER: ITA 1454 & 1455/10 :- 3 -: SL NO ASSESSMENT YEAR INCOME RETURNED AGRICULTURAL INCOME RETURNED DUE DATE OF FILING OF RETURN DATE OF FILING OF ORIGINAL RETURN 1. 2001-02 6,76,833 NIL 31.8.2001 30.1.2002 2. 2004-05 4,73,935 NIL 31.8.2004 18.5.2005 3. 2005-06 12,75,950 2,10,000 31.8.2005 30.4.2007 4. 2006-07 14,34,713 4,77,500 31.8.2006 30.4.2007 5. 2007-08 12,10,150 3,57,700 31.8.2007 22.3.2008 3. IN RESPONSE TO NOTICES U/S 153A(A) ISSUED FOR ASS ESSMENT YEARS 2001-02, 4004-05 TO 2006-07 AND NOTICE U/S 14 2(1) ISSUED FOR ASSESSMENT YEAR 2007-08, THE ASSESSEE FILED HIS RET URNS OF INCOME FOR THESE YEARS ON 20.10.2008 RETURNING THE SAME INCOME AS WAS RETURNED IN THE ORIGINAL RETURNS, AS ABOVE. AFTER CONSIDERI NG THE SUBMISSIONS OF THE ASSESSEE REGARDING VARIOUS ENTRIES FOUND IN THE SEIZED MATERIAL, ASSETS AND CAPITAL INTRODUCED IN THE COMPANIES AND WITHDRAWAL FROM THE FIRMS, TRANSFER OF ASSETS, ETC. IN HIS CAPACITY AND ALSO IN HIS INDIVIDUAL CAPACITY, THE ASSESSMENTS WERE FRAMED MA KING CERTAIN ADDITIONS TO THE RETURNED INCOME IN ALL THESE ASSES SMENT YEARS WITH DETAILS OF DISPUTED ADDITIONS, YEARWISE, WHICH ARE AS UNDER: SL. NATURE OF ADDITION NO A.Y ADDITIONS MADE 1 2001-02 1,948 UNACCOUNTED INTEREST RECEIPTS IN SBI, SB A/C 46,366 UNDISCLOSED CASH CREDIT 2 2004-05 2,676 UNACCOUNTED INTEREST RECEIPTS IN SBI, SB A/C 26,620 UNDISCLOSED CASH CREDIT 2,153 UNDISCLOSED CHEQUE DEPOSIT 3 2005-06 1,05,000 50% OF AGRICULTURAL INCOME TREATED AS NON-AGRICULTURAL INCOME ITA 1454 & 1455/10 :- 4 -: 2,05,00,000 UNEXPLAINED INVESTMENT IN NEWLY FORMED COMPANIES. 24,500 EXCESS AMOUNT COLLECTED AT THE TIME OF REGISTRATION. 1,40,000 CONVEYANCE AND TRAVELLING ALLOWANCE RECEIVED FROM COMPANIES. 4 4. 2006-07 2,38,750 50% AGRICULTURAL INCOME TREATED AS NON AGRICULTURAL INCOME 74,560 EXCESS AMOUNT COLLECTED AT THE TIME OF REGISTRATION. 5 5. 2007-08 .. 1,78,850 50% OF AGRICULTURAL INCOME TREATED AS NON-AGRICULTURAL INCOME 1,29,120 EXCESS AMOUNT COLLECTED AT THE TIME OF REGISTRATION. 37,85,255 UNDISCLOSED BANK ACCOUNTS IN LOB. 94,610 UNEXPLAINED CASH FOUND AT RESIDENCE 2,24,244 ADDITION TOWARDS SHORTFALL IN G.P. 4. AGGRIEVED, THE ASSESSEE FILED APPEALS FOR ALL THESE YEARS AND THE LD. CIT(A) HAS DECIDED ALL OF THEM BY A COMMON ORDER. THIS APPEAL RELATE TO ASSESSMENT YEAR 2005-06. THE ASSE SSEE WAS A PARTNER IN HIS HUF CAPACITY IN M/S SUSEE AUTO (FIRM ) ALONGWITH HIS WIFE, SMT.P.JANARTHANA AND HIS MINOR SON, P.HARIPRA THAN. DUE TO DISPUTE AMONGST THE FAMILY MEMBERS, BUSINESS IN PAR TNERSHIP FIRM NAMELY, M/S SUSEE AUTO(FIRM), WAS DISCONTINUED. IN ASSESSMENT YEAR 2004-05, TWO PRIVATE LIMITED COMPANIES WITH T HE NAMES M/S SUSEE VEHICLE DEALERS PVT. LTD AND M/S SUSEE ENGINE ERING AND AUTOMOBILES P. LTD. WERE FORMED ON 9.10.2003 WITH T HE TOTAL CAPITAL OF ` 1,60,00,000/- AND OUT OF WHICH ` 99,50,000/- AND ` 59,50,000/- ITA 1454 & 1455/10 :- 5 -: WERE INTRODUCED BY ASSESSEE-HUF IN M/S SUSEE VEHICL E DEALERS P. LTD AND SUSEE ENGINEERING & AUTOMOBILES P. LTD, RESPECT IVELY. THE ASSESSEE HAS ALSO FORMED SUSEE AUTO ZONE P. LTD ON 16.4.2004 WITH A SHARE CAPITAL OF ` 60,00,000/- AND OUT OF WHICH ` 59,50,000/- BELONGED TO ASSESSEE-HUF. THE TOTAL OF ALL THESE INVESTMENT S CAME TO ` 2.19 CRORES. A SUM OF ` 14 LAKHS WAS CONSIDERED AS SOURCE FOR THE SAID INVESTMENT AND THEREBY THE NET FIGURE OF ` 2.05 CRORES WAS ARRIVED AT AS UNDISCLOSED INCOME/UNEXPLAINED INVESTMENT MADE B Y THIS ASSESSEE. WHEN ASKED TO EXPLAIN THE SOURCE FOR THE INVESTMENT S IN QUESTION, IT WAS EXPLAINED THAT THE ASSESSEE-HUF BEING A PARTNER IN THE FIRM WITH 35% SHARE OF PROFIT AND OTHER PARTNERS, HIS WIFE AN D SON, HAVING 35% AND 30% SHARE, RESPECTIVELY AND A SUM OF ` 1.6 CRORES WAS DEBITED IN THE ACCOUNT OF SHRI R.PURUSHOTHAMAN(HUF) AND THIS W AS INTRODUCED AS CAPITAL IN SUSEE VEHICLE DEALERS P.LTD AND M/S SUSE E ENGINEERING AND AUTOMOBILES PVT. LTD. THE CASE OF THE ASSESSEE IS THAT THE STOCK OF THE FIRM WAS SOLD TO M/S SUSEE HYUNDAI. IN RESPECT OF INVESTMENTS IN M/S SUSEE AUTO ZONE P. LTD., THE ASSESSEE RELIED ON SPE CIAL AUDIT REPORT RELATING TO ASSESSMENT YEAR 2005-06 WHICH WAS SUBMI TTED IN HIS INDIVIDUAL CAPACITY AND THE SPECIAL AUDITORS, M/S V ICTOR GRACE & CO., VIDE THEIR SPECIAL AUDIT REPORT U/S 142(2A) DATED 2 9.5.2009 WHICH THE DEPARTMENT HAS DIRECTED THEM TO VERIFY THE TRANSACT ION RELATING TO THE ITA 1454 & 1455/10 :- 6 -: CAPITAL INTRODUCTION IN THE SAID PRIVATE LIMITED CO MPANIES WHILE TRANSFERRING THE STOCK AND OTHER ITEMS FROM THE PAR TNERSHIP FIRM M/S SUSEE AUTO (FIRM). THE AUDITORS HAD VERIFIED ALL T RANSACTIONS AND SUBMITTED THEIR REPORT GIVING THEIR FINDINGS THAT T HERE WAS NO TRANSFER OF FUNDS AND MERELY JOURNAL ENTRIES HAVE BEEN PASSE D FOR THE INTRODUCTION OF THE CAPITA IN THE NEWLY FORMED PRIV ATE LIMITED COMPANIES. NO ADDITION WAS PROPOSED BY THE SAID AU DITORS FOR THE ABOVE SAID INVESTMENTS IN THE COMPANIES SHARE CAPIT AL. AFTER CONSIDERING THESE AND OTHER EVIDENCE(S), THE LD. CI T(A) HAS COME TO THE CONCLUSION THAT THIS AMOUNT OF ` 2.05 CRORES CANNOT BE SUSTAINED IN THE HANDS OF THIS ASSESSEE ADDED ON ACCOUNT OF INVE STMENT IN SHARE CAPITAL. THE LD. CIT(A) HAS HEAVILY RELIED ON THE ASSESSMENT S MADE IN THE CASE OF THREE PRIVATE LIMITED COMPANIES. BECAU SE THESE INVESTMENTS IN THE SHARE CAPITAL OF THE ABOVE THREE COMPANIES WERE CONSIDERED IN THE ASSESSMENT OF PRIVATE LIMITED CO MPANIES AND UB ASSESSEES HUF CAPACITY ASSESSMENT AND THE ADDITIO NS MADE THEREIN WERE DELETED AFTER FINDING THE FACTUAL MATRIX STATE D BY THE ASSESSEE TO BE CORRECT. NOW, THE REVENUE IS AGGRIEVED. ITA 1454 & 1455/10 :- 7 -: 5. IT WAS ARGUED BY THE LD.DR THAT THE ASSESSING OFFIC ER WAS JUSTIFIED IN ADDING THE UNEXPLAINED INCREASE IN SHA RE CAPITAL AS UNDISCLOSED INCOME/UNEXPLAINED INVESTMENTS SINCE NO VALID EXPLANATION WAS FURNISHED BY THE ASSESSEE FOR THE INTRODUCTION OF THE SHARE CAPITAL. IT WAS FURTHER ARGUED THAT THERE WO ULD BE NO SOURCE FOR THE ASSESSEE TO PURCHASE ASSETS WITHOUT INTRODUCTIO N OF THE ABOVE SHARE CAPITAL BUT THE REASONS GIVEN BY THE LD. CIT( A) FOR DELETING THE IMPUGNED ADDITION WAS NOT REPLIED IN PROPER PERSPEC TIVE. ON THE CONTRARY, THE LD.AR HAS REFERRED TO PAGE 157 OF THE PAPER BOOK AND PARA 11 (UPTO PARA 11.8)OF THE LD. CIT(A)S ORDER. 6. WE HAVE GONE THROUGH THE RECORDS AND HAVE FOUND THA T THE ASSESSING OFFICER HAS SIMPLY CONSIDERED THE SPECIAL AUDIT REPORT OBTAINED U/S 142(2A) AND HAS ALSO FAILED TO CONSIDE R THE DISCONTINUATION OF BUSINESS OF THE FIRM IN WHICH TH E ENTIRE ASSETS BELONG TO THE ASSESSEE AND HIS WIFE AND SON AS STAT ED ABOVE. THE ASSESSING OFFICER HAS ALSO FAILED TO CONSIDER THE S PECIAL AUDIT REPORT WHICH EXPLAINED THE FACTUAL POSITION OF THIS CASE. STOCKS OF THE FIRM WERE SOLD AND TRANSFERRED TO THE ABOVE STATED THR EE PRIVATE LIMITED COMPANIES. THE SUNDRY DEBTORS AND SUNDRY CREDITORS ALONGWITH THE AVAILABLE CASH AND BANK BALANCES WERE TRANSFERRED T O THE RESPECTIVE ITA 1454 & 1455/10 :- 8 -: PRIVATE LIMITED COMPANIES FROM THE RESPECTIVE DIVIS IONS. THE CAPITAL CONTRIBUTION IN THE PRIVATE LIMITED COMPANIES IS ON LY BY WAY OF SALE OF VEHICLES AND TRANSFER OF DEBTORS, CREDITORS AND CAS H/BANK BALANCES. THE NECESSARY ENTRIES ARE RECORDED IN THE BOOKS OF THE FIRM AS WELL AS THAT OF THE COMPANIES AND NO DIRECT CASH/FUNDS ARE INTRODUCED BY THIS ASSESSEE IN THE SAID PRIVATE LIMITED COMPANIES. TH E TRANSFER IS ONLY BY JOURNAL ENTRIES AND TRANSFER ENTRIES IN THE BOOK S OF THE FIRM AND IN THE BOOKS OF THE COMPANIES. THESE FACTS WHICH ARE VERY RELEVANT AND IMPORTANT FOR THE DECISION OF THE IMPUGNED ISSUE WE RE NOT AT ALL CONSIDERED PROPERLY BY THE ASSESSING OFFICER. ON T HE CONTRARY, THESE EVIDENCE(S) HAVE BEEN CONSIDERED IN THEIR CORRECT P ERSPECTIVE BY THE LD. CIT(A). THE DEPARTMENT COULD NOT DISPUTE THEE FACTS WHICH HAVE BEEN CULLED OUT BY US AND MENTIONED ABOVE. THE SPE CIAL AUDITORS GAVE FINDING IN THEIR REPORT. THE SPECIAL AUDIT WA S ORDERED BY THE ASSESSING OFFICER TO FIND OUT WHETHER THERE WAS ANY UNEXPLAINED CASH OR FUNDS INTRODUCED BY THE ASSESSEE IN THE COMPANIE S OR NOT. THERE WAS NO FUNDS TRANSFER AND THE CAPITALS INTRODUCED W ERE ONLY BY JOURNAL ENTRIES. THE FACT THAT THE ASSESSEE IN HIS HUF CAP ACITY WAS THE SHAREHOLDER IN THE THREE PRIVATE LIMITED COMPANIES AND NOT IN HIS INDIVIDUAL CAPACITY BECAUSE HE HAS CONSIDERED THESE INVESTMENTS IN THE ASSESSMENT OF ASSESSEE-HUF. THE SAME INVESTMENT W AS NOT ITA 1454 & 1455/10 :- 9 -: CONSIDERED IN HIS INDIVIDUAL ASSESSMENT AND ADDITI ONS WERE MADE. THIS IS SOMETHING BEYOND THE SCOPE OF INCOME-TAX AC T, 1961 AS IT AMOUNTS TO DOUBLE TAXATION OF THE SAME INCOME. THE PERUSAL OF THE RELEVANT PAGES OF PAPER BOOK FILED BY THE ASSESSEE AND THE OTHER RECORDS INCLUDING THE ASSESSMENT RECORDS IN THE CA SE OF COMPANIES AND ASSESSEE-HUF, AND THE PERUSAL OF SPECIAL AUDIT REPORT, IT BECOMES CRYSTAL CLEAR THAT THERE IS NO DIRECT CASH OR FUNDS INTRODUCED BY THE ASSESSEE IN THESE THREE COMPANIES. WHATEVER MAY BE THE OTHER REASON OF DISCONTINUATION OF THE FIRM, BUT ON RECOR D, AS PER THE EVIDENCE WHICH EVINCE DISPUTE BETWEEN THE PARTNERS OF THE ERSTWHILE FIRM, IT IS PROVED THAT THERE WAS SOME MISUNDERSTAN DING OR QUARREL AMONGST THE PARTNERS OF THE FIRM AND THAT IS WHY TH E BUSINESS OF THE FIRM COULD NOT BE CONTINUED. THUS, WE DO NOT FIND ANY EVIDENCE TO CONCLUDE THAT THIS ASSESSEE HAS INTRODUCED SHARE CA PITAL OF ` 2.05 CRORES IN THESE COMPANIES BY WAY OF CASH/FUNDS BELO NGING TO HIM. BUT IT IS PROVED ON RECORD THAT THE CAPITAL INTROD UCTION IN THE PRIVATE LIMITED COMPANIES WAS OUT OF TRANSFER OF STOCK, DEB TORS AND CREDITORS, CASH AND BANK BALANCES ONLY. THE SPECIAL AUDITORS REPORT ALSO SUPPORTS THE ASSESSEES VERSION AS IN THAT REPORT, THE AUDITORS HAVE CATEGORICALLY GIVEN A FINDING THAT NO SUCH CASH OR FUND BELONGING TO THE ASSESSEE WAS DIRECTLY INTRODUCED IN THESE COMPANIES . HENCE, HOW CAN ITA 1454 & 1455/10 :- 10 - : IT BE CONCLUDED THAT THE UNEXPLAINED INCOME OF THE ASSESSEE WAS INTRODUCED AS CAPITAL IN THESE COMPANIES. IN OUR C ONSIDERED OPINION, THE DELETION OF THE IMPUGNED ADDITION IS CORRECT AN D HAS TO BE APPROVED. ACCORDINGLY, THE GROUNDS RAISED BY THE R EVENUE FAIL. 7. THE SECOND ISSUE RAISED VIDE GROUND NOS.2A AND 2B I S REGARDING DELETION OF ADDITION OF ` 24,500/- MADE BY THE ASSESSING OFFICER RELATING TO EXCESS AMOUNT COLLECTED AT THE TIME OF REGISTRATION. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BUYING AND SELLING OF VEHICLES AND SPAR ES AND SERVICES. ON SALES, THE VEHICLES HAVE TO BE REGISTERED IN THE NA ME OF THE BUYERS AND THE ASSESSEE WAS ASSISTING THE BUYERS IN THE MATTER OF REGISTRATION. THE ASSESSING OFFICER HAS ESTIMATED THAT EXCESS AMO UNT WAS COLLECTED IN THIS REGARD AND ` 24,500/- REMAINED AS BALANCE IN THE ASSESSMENT YEAR 2005-06 WHICH HAS TO BE ADDED TO ASSESSEES IN COME. BUT THE SAME ASSESSING OFFICER, WHILE DEALING WITH THE CASE OF M/S SUSEE AUTO PLAZA MOTORS PVT. LTD., WHICH IS ONE OF THE GROUP C OMPANIES OF SUSEE GROUP, SUCH ADDITION WAS DELETED BY THE TRIBUNAL. THE LD. CIT(A) HAS RELIED ON THE DECISION OF THE TRIBUNAL DATED 29 .1.2010 IN THE CASE OF SUSEE AUTO PLAZA MOTORS PVT. LTD. IN I.T.A.NOS.1378 TO 1380, AND DELETED THE ADDITION. SINCE WE HAVE ALSO FOUND T HAT THIS ISSUE STANDS ITA 1454 & 1455/10 :- 11 - : SQUARELY COVERED BY THE DECISION OF TRIBUNAL (SUPRA ), THE ASSESSEE HAS TO COME OUT OF THIS TANGLE. WE, THEREFORE, CON FIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE GROUNDS RA ISED BY THE REVENUE. 8. THE NEXT ISSUE PERTAINS TO DELETION OF ADDITION OF ` 1,40,000/- MADE BY THE ASSESSING OFFICER RELATING T O CONVEYANCE AND TRAVELLING ALLOWANCE. THE ASSESSING OFFICER HAS DI SALLOWED THIS AMOUNT BECAUSE IN HIS OPINION, THE ASSESSEE HAS NOT FILED ANY PROOF/EVIDENCE FOR TRAVELLING EXPENSES BEFORE HIM. THE LD. CIT(A ) HAS DELETED THIS DISALLOWANCE. THE CASE OF THE ASSESSEE IS THAT THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE IN THIS REGARD WERE SPENT ON TRAVELLING AND CONVEYANCE AS THE ASSESSEE HAD TO INCUR EXPENSES TO WARDS TRAVELING FOR THE PURPOSE OF THE PROMOTION OF THE COMPANYS B USINESS. SINCE THERE WAS NO EXCESS RECEIPT OVER THE EXPENDITURE, T HE SAME WAS NOT CREDITED IN HIS BOOKS OF ACCOUNT. ACCORDING TO THE ASSESSEE, JUST BECAUSE THE AMOUNT WAS NOT ACCOUNTED FOR IN THE BOO KS IT WOULD RESULT INTO INCOME OF THE ASSESSEE OF THIS YEAR. KEEPING IN VIEW THE NATURE OF ASSESSEES BUSINESS AND THE PROBABILITY OF EXPENDIT URE HAVING BEEN INCURRED IN EXTENSIVE TRAVELING, SIMPLY BECAUSE THE RECEIPTS AND EXPENDITURE WERE NOT RECORDED IN THE BOOKS, WE WOUL D NOT LIKE TO TAKE ITA 1454 & 1455/10 :- 12 - : A DIFFERENT DECISION THAN WHAT HAS BEEN TAKEN BY TH E LD. CIT(A). ACCORDINGLY, WE CANNOT ALLOW THIS GROUND RAISED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE FOR ASSESS MENT YEAR 2005-06 STANDS DISMISSED. I.T.A.NO. 1455/MDS/2010 10. IN THIS APPEAL, PERTAINING TO ASSESSMENT YEAR 2007- 08, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE: 1.A. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F ` 37,85,255 MADE BY THE A.O. RELATING TO UNDISCLOSED INCOME / INVESTMENT IN IOB AND SBI. 1.B. THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE ASSESSEE COULD NOT GIVE ANY EVIDENCE / EXPLANATION FOR SEVERAL CASH REMITTANCES IN THE ABOVE BANK ACCOUNTS AND CONSEQUENTLY HE ADMITTED IN THE SWORN STATEMENT THA T THE UNACCOUNTED INCOME FROM ASSESSEES BUSINESS CONCERN S HAVE BEEN CREDITED IN THE ABOVE BANK ACCOUNTS. 2A. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 2,24,244 MADE BY THE A.O. RELATING TO SHORTFALL IN GROSS PRO FIT. 2B. THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE GROSS PROFIT ADMITTED BY THE ASSESSEE WAS ABNORMALLY LOW, THE REASON FOR THE SAME WAS NOT AT ALL EXPLAINED BY THE ASSESSEE AND THAT THE SPECIAL AUDITORS WHO AUDITED THE ACCOUNTS U/S 142(2A) HAVE ALSO RECOMMENDED FOR ADDI TION ON ACCOUNT OF LOW GROSS PROFIT. 3A. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 1,29,120 MADE BY THE A.O. RELATING TO EXCESS AMOUNT COLLECTE D AT THE TIME OF REGISTRATION. ITA 1454 & 1455/10 :- 13 - : 3B. THE LEARNED CIT(A) HAS FAILED TO NOTE THAT ORDE R OF THE ITAT D BENCH CHENNAI IN ITA NO.1378 TO 1380 DATED 29.01.2010 IN THE CASE OF M/S SUSEE AUTO PLAZA MOTO RS PVT. LTD. HAS BEEN DISPUTED AND THAT THE ISSUE HAS NOT BECOME FINAL. 4. THE APPELLANT CRAVES LEAVE TO, ADD TO AMEND OR A LTER THE ABOVE GROUNDS OF APPEAL AS MAY BE DEEMED NECESSARY. 11. THE FIRST ISSUE RAISED VIDE GROUND NOS.1A AND 1B IS IN RELATION TO ADDITION OF ` 37,85,255/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDISCLOSED INCOME/INVESTMENT IN INDIAN OVERSEAS BANK(IOB) AND STATE BANK OF INDIA(SBI). THE CASE OF THE REVENUE IS THAT THE ASSESSEE COULD NOT GIVE ANY EVIDENCE/EXPLA NATION FOR SEVERAL CASH REMITTANCES IN THE ABOVE BANKS AND CONSEQUENTL Y, THE ASSESSEE HAD ADMITTED IN THE SWORN STATEMENT THAT THE UNACCO UNTED INCOME FROM HIS BUSINESS CONCERNS WERE CREDITED IN THESE B ANK ACCOUNTS. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE WAS MAI NTAINING SPECIAL BENCH ACCOUNT WITH IOB WHICH HAD NOT REPORTED IN OF FICE BOOKS AND THE OUTSTANDING BALANCE IN THESE ACCOUNT ON THE DAT E OF SEARCH WAS ` 12,94,818/-. THE ASSESSEE WAS ALSO HAVING ANOTHER AB ACCOUNT WITH THE SAME BANK IN WHICH OUTSTANDING BALANCE WAS OF ` 13,73,587/-. LIKEWISE, AN ACCOUNT WAS MAINTAINED WITH SBI AND BA LANCE ON THE DATE OF SEARCH WAS ` 6,12,624/-. THUS, A TOTAL BANK BALANCE ON THE DAT E OF SEARCH WAS ` 37,85,255/-. A STATEMENT OF THE ASSESSEE WAS RECO RDED ITA 1454 & 1455/10 :- 14 - : ON 4.7.2006 AND IN REPLY TO QUESTION NO.3 REGARDING HIS BANK ACCOUNT, THE AS HAD REPLIED THAT HE WAS HAVING A SB ACCOUNT IN SBI, PALAYAMKOTTAI BRANCH AND HIS THREE CONCERNS WAS ALS O HAVING ACCOUNTS WITH THE SAME BANK AND HE DID NOT HAVE ANY OTHER BA NK ACCOUNT. ON THE SAME DAY, AFTER SEARCH, QUESTION NO.9 WAS PUT T O HIM REGARDING IOB BANK ACCOUNT WHICH WAS FOUND IN HIS RESIDENCE S HOWING A BALANCE OF ` 17,99,064/-. THE ASSESSEE REPLIED THAT HE COULD N OT GIVE ANY EVIDENCE FOR THE CASH REMITTANCES AND HE HAD TOLD T HAT SOME OF THE CREDITS IN THE BANK ACCOUNT WERE INTRODUCED THROUGH CHEQUES AND THE REMAINING CREDIT IN THE BANK ACCOUNT WERE DEPOSITED OUT OF HIS UNACCOUNTED INCOME DERIVED FROM HIS BUSINESS CONCER NS. ON 18.7.2006, AGAIN HIS SWORN STATEMENT WAS RECORDED A ND IN REPLY TO QUESTION NO.1, HE CATEGORICALLY STATED THAT THE BAN K ACCOUNTS REGARDING WHICH HE HAD EARLIER MENTIONED, WERE NOT CORRECT AND HE ACCEPTED THAT HE HAD THREE SB ACCOUNTS. IN THIS RE GARD IT WAS EXPLAINED THAT BECAUSE THE EARLIER STATEMENTS WERE RECORDED IN THE MIDNIGHT AND THE ASSESSEE WAS NOT IN GOOD STATE OF MIND AND HE WAS ALSO HAVING DIFFERENCES WITH HIS WIFE AND DUE TO SE ARCH, HE WAS VERY MUCH CONFUSED SO, ON 18.7.2006 WHATEVER WAS STATED WAS SUPERFLUOUS WITHOUT APPLICATION OF MIND. RELIANCE WAS ALSO PL ACED ON SPECIAL AUDITORS REPORT IN WHICH IT WAS STATED THAT THE ASS ESSEE HAD FAILED TO ITA 1454 & 1455/10 :- 15 - : CONSIDER THE INTEREST AMOUNT CREDITED IN THE ABOVE SAID BANK ACCOUNT, BUT THEY HAVE NOT TREATED THE ENTIRE BALANCE IN THE SE BANK ACCOUNTS AS UNACCOUNTED INCOME. AFTER VERIFYING THE RETURNS OF INCOME FILED, ONLY INTEREST PART WAS TREATED AS NOT OFFERED FOR TAXATI ON AND ONLY THAT PART HAS BEEN NOTICED BY THE AUDITORS. THE LD. CIT(A) H AS CONSIDERED ALL THESE FACTS AND DELETED THE IMPUGNED ADDITION. 12. BEFORE US, SIMILAR STAND WAS TAKEN BY BOTH THE PAR TIES. ADMITTEDLY, THE ASSESSEE WAS HAVING BANK ACCOUNTS W ITH IOB WITH NOS.6570 AND 7755 AND WAS ALSO HAVING BANK ACCOUNT WITH SBI, PALAYAMKOTTAI WITH ACCOUNT NO.10482014703. THE SBI ACCOUNT WAS OPENED AS EARLIER AS IN 1994 WHICH WAS REFLECTED IN THE EARLIER RETURNS OF INCOME. THE BANK ACCOUNTS WITH IOB WERE OPENED ON 26.6.2004 AND 6.5.2006 RELATABLE TO ASSESSMENT YEAR 2005-06 A ND 2007-08, RESPECTIVELY. THE ASSESSEES MAIN SOURCE OF INCOME IN HIS INDIVIDUAL CAPACITY IS COMMISSION FROM INSURANCE COMPANIES, SA LARY FROM PRIVATE LIMITED COMPANIES AND AGRICULTURAL INCOME WHICH WER E CLAIMED TO HAVE BEEN DEPOSITED IN THE ABOVE THREE BANK ACCOUNTS. T HE ASSESSEE HAS BEEN OFFERING INSURANCE COMMISSION INCOME EVEN PRIO R TO THE DATE OF SEARCH. THE INSURANCE COMPANIES HAD DEDUCTED TDS A ND THIS WAS CLAIMED IN HIS INDIVIDUAL ASSESSMENTS. THE PAYMENT S FROM THE ITA 1454 & 1455/10 :- 16 - : INSURANCE COMPANIES WERE RECEIVED THROUGH CHEQUES W HICH WERE DEPOSITED IN THE THREE BANK ACCOUNTS. THESE BANK T RANSACTIONS ARE REGULAR TRANSACTIONS OPERATED BY THE ASSESSEE. THE ASSESSEE IS ALSO A SHAREHOLDER/DIRECTOR IN THREE PRIVATE LIMITED COMPA NIES NAMELY, M/S SUSEE ENGINEERING AND AUTOMOBILES PVT. LTD., M/S SU SEE VEHICLE DEALERS P. LTD AND M/S SUSEE AUTO ZONE PVT. LTD. A FTER WITHDRAWING FUNDS FROM THE BANK ACCOUNTS, THE ASSESSEE HAD GIVE N AND RECEIVED FUNDS THEREFROM M/S SUSEE AUTO ZONE PVT. LTD, M/S S USEE ENGINEERING AUTOMOBILES PVT. LTD AND M/S SUSEE VEHICLE DEALERS PVT. LTD. THESE TRANSACTIONS ARE RECORDED IN THE ACCOUNTS OF THESE THREE COMPANIES IN THE RESPECTIVE ASSESSMENT YEARS AND THE RETURNS IN THE CASE OF ALL THESE COMPANIES WERE FILED PRIOR TO THE DATE OF SEA RCH FOR ASSESSMENT YEARS 2004-05 AND 2005-06. THE ASSESSEE WAS HAVIN G CURRENT ACCOUNT IN HIS INDIVIDUAL CAPACITY IN THESE COMPANI ES AND THE TRANSACTIONS WERE RECORDED IN THE BOOKS OF THE COMP ANIES. IN SUPPORT THERETO, COPIES OF CURRENT ACCOUNT IN HIS INDIVIDUA L CAPACITY IN THE RESPECTIVE COMPANIES WERE FILED WHICH ARE AVAILABLE ON RECORD. WE HAVE SEEN ALL THESE PAPERS. THE TRANSACTIONS AND T HE BALANCE RETURNED IN THE RETURNS OF THIS ASSESSEE CLEARLY TALLY WITH THE TRANSACTIONS RECORDED IN THE COMPANIES ACCOUNTS. THE ASSESSEE H AS RECORDED ALL THESE TRANSACTIONS OF THREE BANK ACCOUNTS IN HIS IN DIVIDUAL BOOKS AND ITA 1454 & 1455/10 :- 17 - : THE BALANCE IN THE BOOKS OF ACCOUNTS RELEVANT TO TH E PERIOD UNDER SEARCH TALLIES WITH THE BANK STATEMENTS. THE ASSES SEE HAS OFFERED CASH CREDITS AND CREDIT IN SUSPENSE ACCOUNT AS HIS INCOME FOR ASSESSMENT YEAR 2005-06 AND 2006-07 AT ` 7,60,000 AND ` 3,14,000/- RESPECTIVELY. THE MAJOR TRANSACTIONS IN IOB ACCOUNT S WHICH WERE OPENED IN ASSESSMENT YEARS 2005-06 AND 2006-07 AS S TATED ABOVE, WERE EITHER THE AMOUNT RECEIVED FROM THE PRIVATE LI MITED COMPANIES OR THE AMOUNT PAID TO THEM. THE DEPOSITS WERE ALSO FR OM SALARY, INSURANCE COMMISSION AND AGRICULTURAL INCOME. THE AMOUNTS RECEIVED BY THE ASSESSEE FROM THE COMPANIES ARE PROPERLY REC ORDED IN THE BOOKS OF THE COMPANIES WHICH WERE ALSO DISCLOSED T O THE DEPARTMENT IN THEIR RETURNS WHICH WERE FILED PRIOR TO THE DATE OF SEARCH FOR ASSESSMENT YEARS 2004-05 AND 2006-06. THESE TRANSA CTIONS STOOD ALREADY DISCLOSED TO THE DEPARTMENT THROUGH THE COM PANIES BOOKS OF ACCOUNT. STATEMENTS EXPLAINING THE DEPOSITS MADE I N THE ABOVE SAID BANK ACCOUNT AND THE SOURCES THEREOF RELATABLE TO A SSESSMENT YEARS 2005-06 TO 2007-08 ARE AVAILABLE ON RECORD. IN THE BACKGROUND OF THESE EVIDENCE(S), WE FIND THAT THE INSURANCE COMMI SSION INCOME AND INCENTIVE RECEIVED FROM THE COMPANIES WERE TRANSACT ED THROUGH THE SAID BANK ACCOUNTS AND TDS WERE DEDUCTED BY THE COM PANIES AND THE TRANSACTIONS WITH THE THREE PRIVATE LIMITED COMPANI ES WERE RECORDED ITA 1454 & 1455/10 :- 18 - : IN THE BOOKS OF THE COMPANIES WHOSE RETURNS OF INCO ME WERE FILED WELL PRIOR TO THE DATE OF SEARCH FOR ASSESSMENT YEARS 20 04-05 AND 2005-06. THE SPECIAL AUDIT REPORT WHICH WAS ORDERED BY THE A SSESSING OFFICER HIMSELF DO NOT FIND ANY TRANSACTION IN THE BANK ACC OUNTS AS UNACCOUNTED. THE REASON FOR WHICH HE STATED THAT THE ASSESSING OFFICER HAS SIMPLY LOOKED INTO THE OPENING BALANCES BUT HAS FAILED TO LOOK INTO THE CLOSING BALANCES. ACCORDINGLY, WE FI ND FORCE IN THE SUBMISSIONS OF THE LD.AR AND FOUND THAT OPENING BAL ANCES HAVE ALSO BEEN CONSIDERED FOR THIS ISSUE WHICH THE ASSESSING OFFICER HAS FAILED TO DO. ACCORDINGLY, WE ARE IN AGREEMENT WITH THE FIND ING GIVEN BY THE LD. CIT(A) IN THIS REGARD. THE OVERWHELMING EVIDENCE(S ) AVAILABLE ON RECORD SHOW THAT THIS INCOME CANNOT BE TREATED AS U NDISCLOSED INCOME OF THE ASSESSEE. 13. THE SECOND ISSUE RAISED VIDE GROUND NOS.2A AND 2B OF THIS APPEAL RELATES TO ADDITION OF ` 2,24,244/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHORTFALL IN GROSS PROFIT. T HE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSING OFFICER NOTICED THAT THE GROSS PROFIT SHOWN ON SALE OF SHARE OF THE YEAR IS 1.10% AND THE NORMAL GROSS PROFIT WAS BETWEEN 10 TO 15%. THE TOTAL SALE OF SP ARES FOR THE YEAR ITA 1454 & 1455/10 :- 19 - : WAS AT ` 20,56,886/-. THE ASSESSEE HAS ADMITTED ONLY ` 22,582/- AS GROSS PROFIT ON SPARES THEREBY ADOPTING 12% GROSS P ROFIT OF THE SAID SALES, THE ASSESSING OFFICER HAS ADDED ` 2,24,224 [ ` 2,46,826/- MINUS ` 22,582/-]. AS AGAINST THIS, THE LD. CIT(A) HAS DE LETED THIS ADDITION. NOW, THE REVENUE IS AGGRIEVED. 14. AFTER HEARING BOTH SIDES, WE HAVE FOUND THAT THERE IS NO SUPPRESSION OF SALES OR INFLATION OF PURCHASES. TH E ACTION OF THE ASSESSING OFFICER IN ADOPTING 12% GROSS PROFIT RATE IN THE ACCOUNT OF SALE OF SPARES IS SIMPLY ADHOC AND WITHOUT ANY BASI S. UNLESS THE ASSESSING OFFICER FINDS SOME MATERIAL DISCREPANCY I N THE ACCOUNTS OF A PARTICULAR INCOME, REFERRING TO ESTIMATION U/S 145 IS NOT ADVISABLE AND JUSTIFIABLE. CONSEQUENTLY, WE CONFIRM THE IMPUGNED DELETION WHICH IS SIMPLY BASED ON SUSPICION. 15. THE LAST ISSUE OF THIS APPEAL RELATES TO DELETION O F AN ADDITION OF ` 1,29,120/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF EXCESS AMOUNT COLLECTED AT THE TIME OF REGISTRATION . ITA 1454 & 1455/10 :- 20 - : 16. AS WE HAVE DECIDED IN EARLIER ASSESSMENT YEAR, THIS ISSUE STANDS COVERED BY THE TRIBUNAL ORDER IN ASSESSEES GROUP CASE, THEREFORE, WE DISMISS THIS GROUND OF APPEAL. 17. IN THE RESULT, THE APPEAL OF THE REVENUE FOR ASSES SMENT YEAR 2007-08 STANDS DISMISSED. TO SUMMARIZE THE RESULT, BOTH THE AP PEALS OF THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 17.10.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 17 TH OCTOBER, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR