Appeal details
Counselvise Citation
[2022] 106 COUNSELVISE.COM (IT) 3349 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-07-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
2005-2006
Appeal Filed On
30-01-2020
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA No.150/Bang/2020 Assessment Year :2005-06 Dr. P Dayananda Pai, 10/1, Lakshminarayana Complex, Palace Road, Bengaluru – 560 052. PAN : ABAPP 4418 Q Vs. DCIT, Circle – 2(2), Bengaluru. APPELLANTRESPONDENT Assessee by :Shri.R. Ramakrishnan, CA Revenue by:Smt. Susan Dolores George,CIT(OSD)(ITAT), Bengaluru. Date of hearing:19.07.2022 Date of Pronouncement:26.07.2022 O R D E R Per N. V. Vasudevan, Vice President : This is an appeal by the Assessee against the order dated 9.12.2019 of CIT(A)-11, Bengaluru, relating to AY 2005-06. 2. The Assessee is an individual. He is also referred to as “PDP” in this order. He is in the business of real estate for over four decades. He carried on business of real estate in his individual capacity. From AY 95-96 he transferred all the rights in properties under various agreements to a partnership firm “M/s.P.Dayanand Pai”, vide deed of partnership dated 1-4-1994. In this firm Mr.P.Dayanand Pai and his brother Mr.P.Satish and 9 other individuals were partners. Thereafter by a Deed of Partnership dated 9.6.2000 the firm “M/S.P.Dayanada Pai” merged its business with another Partnership firm “M/S.Canara Housing Development company” (hereinafter ITA No.150/Bang/2020 Page 2 of 39 referred to as “CHDC”) in which the AssesseeMr.P.Dayanand Pai and his brother Mr.P.Satish, were partners. Apart from the aforesaid partnership firm there was a company formed by name Century Building Industries (P) Ltd., another entity by name Centry Real Estate Holdings (CREH). These three entities were the flagship companies of the Assessee’s group called Century Group. The Assessee ceased to carry on business in his individual capacity from 1.4.1994. 3. For AY 2005-06, the Assessee filed his return of income in his individual capacity on 20.10.2005 on 20.10.2005 declaring total income of Rs.50,74,178/-. The heads/source of income so declared “Income from Salries of RS.35,77,600/-, “Income from House Property of Rs.8,56,800/- , “Income from Business or profession” share income from CHCD claimed exempt u/s.10(2A) of the Income Tax Act, 1961 (Act) besides Parnters remuneration from CHCD of Rs.2,40,000/-, “Income from other sources” of Rs.50,86,178/-. After claiming deduction under Chapter VIA of the Act of Rs.12,000/-, the total income of Rs.50,74,178/- was declared by the Assessee in the return of income. The return of income and computation of total income is available in page 1 to 3 of the revised paper book-I filed by the Assessee. The details as to how this return of income was processed by the Revenue is not available. 4. There was a search and seizure proceeding carried out by the revenue u/s.132 of the Act, in the case of one Sri.H.Nagaraj on 6.1.2009. Based on the evidence found and seized in the course of the said search, proceedings u/s.153C of the Act were initiated against the Assessee. An order of assessment u/s.153C read with Sec.143(3) of the Act, dated 31.12.2010 was passed by the Assessing Officer (AO) determining the total income of the Assessee at Rs.50,82,504/- adding a sum of Rs.8,326/- to the total income of the Assessee declared in the ITA No.150/Bang/2020 Page 3 of 39 return of income filed on 20.10.2005. The addition of Rs.8,326 was the difference in balancing figure in the capital account of the Assessee. 5. There was another Search and Seizure carried out by the competent authority under Sec.132 of the Act, in the residence of Smt.Adlene Kagoo (hereinafter called AK), who is stated to be a trusted employee of PDP on 12.4.2011. PDP was also searched on 12.4.2011. CHDC was also searched on 12.4.2011. In the course of search of AK certain Compact Discs(CD), pen drives and other electronic records were found besides loose papers. They were all seized. Among the seized document, what is relevant and important for deciding the present appeal are the following documents, viz., Annexure AK/PDP/06 (this was print out taken from the Seized CD and is in the form of a ledger and this is referred to as “Dummy (Tally Training Environment) {DTEE} copies of these ledger accounts are at pages 92 to 99 of Assessee’s paper book No.1 revised) , AK/PDP/7 (Pages 35-38) copies at pages 116 to 119 of paper book-1 revised, AK/PDP/16 (pages 187, 199, 205, 200, 192,189) AK- 1/PDP/3 page 21, 4, 5, 6 and 9 dated 12.4.2011(copies at pages 120 to 130 of paper book 1 (revised). As already stated Data found in AK/PDP/06 had the caption “Dummy(Tally training Environment)” (DTTE). The data contained day to day receipts and payments transactions-cash, bank and journal entries. 6. Since the Assessee was also searched proceedings u/s.153A of the Act, was initiated by the AO for AY 2006-07 to 2011-12. Sec.153A(1) of the Act provides as follows: “Assessment in case of search or requisition. 153A. (1)] Notwithstanding anything contained in section 139, section 147, section 148 , section 149, section 151 and section 153 , in the case of a person where a search is initiated under section 132 or books of ITA No.150/Bang/2020 Page 4 of 39 account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall— (a ) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b ) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Providedthat the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided furtherthat assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. 7. It can be seen from clause (b) to Sec.153A(1) of the Act, that when a search and seizure is carried out u/s.132 of the Act, the AO has to assess or reassess total income of 6 AYs immediately preceding the AY relevant to the previous year in which such search is conducted. The search was conducted in the case of the Assessee on 12.4.2011. The previous year in which search took place would be 2011-12 and the relevant AY would be 2012-13. Therefore the 6 AYs immediately preceding AY 2012-13 would be AY 2006-07 to 2011-12. Therefore AY 2005-06 which is the AY involved in the present appeal would be outside the ambit of Sec.153-A of the Act. This is the reason why in so far as AY 2005-06 is concerned, the AO initiated proceedings u/s.147 of the Act, to assess income that has escaped Assessment. The fact however remains that the seized material based on which Assessment was framed for AY 2005-06 and ITA No.150/Bang/2020 Page 5 of 39 for AY 2006-07 to 2011-12 were one and the same and were recovered from the very same search conducted on 12.4.2011. This is undisputed by the parties before the Tribunal. 8. PDP and CHDC filed application u/s.245C of the Act on 12.5.2014 before the Hon’ble Settlement Commission, Additional Bench, Chennai (SC) both in the case of PDP and CHDC in relation to AY 2006-07 to 2011-12. PDP and CHDC owned up the entries in seized document AK/PDP/06 DTTE and offered income from the said document in the hands of CHDC. Income was computed on the basis of DTTE and other seized documents but ultimately income was offered on the basis of peak credit method. The SC in its order dated 21.05.2015 accepted the peak credit method working as given by the Principal CIT (PCIT) at Rs.171,33,35,769/- less Rs.13,82,48,882/- as expenses i.e., net sum of Rs.157,50,86,914/-. 75% of Rs.1,57,50,86,914 i.e., a sum of Rs.118,13,15,186 was offered as additional income before the SC by CHDC. The remaining sum of Rs.39,37,71,729 was owned up by PDP who was also an applicant before the SC and accepted in the order of SC dated 19.10.2015. Thus the SC has considered the seized document AK/PDP/06 and DTTE which was owned up by PDP and CHDC and determined income arising out of the same and taxed the same. The proceedings before the SC related to AY 2006-07 to 2011-12 which was the period falling within the ambit of Section 153A of the Act. AY 2005-06 could not be covered under the application before the SC for this reason. As already stated it is undisputed that the nature of the seized documents and entries therein is one and the same for all the AY 2005-06 to 2011-12. 9. In so far as AY 2005-06 is concerned, the AO issued notice u/s.148 of the Act dated 7.3.2012 after recording the following reasons: ITA No.150/Bang/2020 Page 6 of 39 “P. DAYANAND PAI PAN : ABAPP4418Q A.Y. 2005-06 05.03.2012 During the course of search at the office of M/s. Canarc Housing Development Company at No. 10/1, Ground Floor, LN Complex, Palace Road, Bangalore on 16.04.2011, two signed receipts at Arun Kumar dt. 15.10.2004(Page No. 5&6 Annexure-A-2/CHDC/2dt. 16.04.2011) for having received a sum of Rs.5 Lakhs by cheque and sum of Rs.45 lakhs by cash from Shri Dayananda Pai as advance against the sale of property at Ramasandra Village and sonnanahalli Village was seized. Copies of both receipts are made as part of order sheet. The cash payment of Rs.45 lakhs is found to be not recorded in the books of PDP or his group concerns. Several documents seized from residence of Mr. Kogoo as contained in Annexure AK/PDP/16 and Annexure AK/PDP/9 describe transactions between Shri. P.D. Pai and M/s. Salarpuria Group. These documents are mostly in the nature of handwritten statements in the handwriting of Mrs. Kagoo in respect of different property transactions. This set details day wise receipts and payments, both by cash and by cheque, under the following property accounts. Agara-56 acres land Kodihalli HSSR layout H M world City R T Nagar Property Banashankari Lands Near ITC Lands Doddaballapur Property-Rjmal Devanahalli-Udaigiri Stud Farm Banerghatta Road, KIADB account Devanahalli-300 acres Other transactions General Transactions ITA No.150/Bang/2020 Page 7 of 39 Page 187 contain the details of cash r cceipt of Rs.50 lacs, from Salarpuria Group on 10.04.2004 under the account name "General Transactions". Page 189 contain the details cash payments of Rs.4.5 lacs on various dates in F.Y. 2004-05 and 2005-06 under the group name "Other Transactions". Page 190 contain the details of cash receipt of Rs.1,70,40,000 from Salarpuria Group on 05.03.2005 and payment of Rs.35 lacs on 11.10.2005 under the account name Devanahalli 300 acres. Page 187 contain the details of cash r cceipt of Rs.50 lacs, from Salarpuria Group on 10.04.2004 under the account name "General Transactions". Page 189 contain the details cash payments of Rs.4.5 lacs on various dates in F.Y. 2004-05 and 2005-06 under the group name "Other Transactions". Page 190 contain the details of cash receipt of Rs.1,70,40,000 from Salarpuria Group on 05.03.2005 and payment of Rs.35 lacs on 11.10.2005 under the account name. Also transactions PDP with 5alarpuria Group were detaileci . ir', the DTTE Tally data contained in CDs seized vide Annexure AK/PDP/06 dt. 12.04.2011. The ledger extract pertaining to 5alarpuria is made part of this report as order sheet. The cash payment by 5alarpuris Group to PDP of Rs.1,70,40,000 on 05.03.2005 as also cash receipt from PDP of Rs.35 lakhs on 11.10.2005 as per the above mentioned handwritten statements are also detailed in the DTTE ledger extact. Remaining cash transactions are all dated prior to March 2005 and they are not reflected in the DTTE Tally date seized. On analysis of the seized material, it is notice that the income of Rs.3,68,42,500/- as detailed in the handwritten statements but not reflected in DTTE Tally has escaped assessment for the assessment year 2005-06. As assessee has failed to disclosed fully and truly all the material facts necessary for his assessment, I have reasons to believe that the income chargeable to tax has escaped assessment for the A.Y 2005-06, the same is reopened u/s 147.” ITA No.150/Bang/2020 Page 8 of 39 10. The Assessee filed a return of income in response to the notice u/s.148 of the Act, declaring the same income that was determined in the order of assessment dated 31.12.2010 passed u/s.153C read with Sec.143(3) of the Act i.e., a sum of Rs.50,82,504/-. The Assessee vide his letter dated 23.1.2013 submitted that the return of income is filed under protest and without prejudice to his right to question the validity of initiation of reassessment proceedings u/s.147 of the Act. By the said letter the Assessee also requested the AO to furnish to him, the reasons recorded before issuing notice u/s.148 of the Act. 11. In a letter dated 4.3.2013 after obtaining the reasons recorded by the AO for initiating proceedings u/s.147 of the Act, the Assessee raised several objections to the validity of initiation of reassessment proceedings. The AO vide letter dated 8.3.2013 rejected the plea of the Assessee regarding validity of initiation of reassessment proceedings. The following reasons for given by the AO for rejecting the plea of the Assessee: “3. Speaking order with respect to objections raised in your letter dt: 04.03.2013 which was filed on 06.03.2013 The reasons recorded on 05.03.2012 is on order sheet and the same has been signed by the JCIT(05D), the then assessing officer of Central Circle-1(1), Bangalore. The objections w.r.t reasons recorded based on documents seized at the residence of Mrs. Adlene Kagoo and your inferences on the same issue are considered and it is clear that the reasons are recorded as per the material details and the materials found during search. The CD's containing Dummy-DTTE Tally contain the assesses's unaccounted transactions and transactions pertain to the assessee. Various documents seized as discussed in the reasons and also the issue of Dummy Tally is a new issue. This is a new fact brought on record to the assessing officer who has issued a notice u/s. 148 after recording reasons and taking approval of appropriate authority.As, the income has escaped assessment ITA No.150/Bang/2020 Page 9 of 39 because of the reason that the assessee failed to disclose fully and truly all material facts necessary for his assessment for A.Y. 2005-06 and an amount of Rs. 3,68,42,500/- has escaped assessment for A.Y. 2005-06, the proceedings were initiated. You are required to comply with assessment proceedings and file the details.” 12. The AO issued show cause notices dated 8.2.3013, 8.3.2013 and 25.3.2013 proposing certain additions to the total income of the Assessee based on the seized documents. 13. The Assessee vide letter dated 4.3.2013, raised objections to the proposed additions. The sum and substance of the said letter is that the documents seized in the premises of AK do not belong to the Assessee. The documents seized are unreliable documents. The Assessee pointed out that he had made some disclosure of income after search in the case of AK by letter dated 14.8.2011 but that disclosure was not valid because it was given on the basis of certain understanding that the department would not proceed against the persons whose names are found in the seized document. Since the department went back on its words, the declaration was no longer valid. In so far as entries in the seized document is concerned, the Assessee gave annexure- 3 to the letter dated 4.3.2013 and contended that each of the entries in the seized documents relate to certain firms of the Assessee and are duly accounted by them. The Assessee in his individual capacity has nothing to do with those entries. 14. The AO proceeded to frame the assessment on the basis of the above contentions of the Assessee. The AO firstly held (Paragraph 13, 13.1, 13.1.1, and 13.1.2 of his order, that Smt.Adlene Kagoo (AK) from whom the seized materials based on which the additions were made and Assessment of total ITA No.150/Bang/2020 Page 10 of 39 income computed, in her statements admitted the authenticity of the documents and that the entries in the seized documents were made as per the directions of the Assessee. The sum and substance of the statement of AK (dated 12.4.2011, 29.4.2011 and 8.6.2011 is that the recording in the DTTE as well as the loose sheets were made by her as per directions of PDP but she does not know the nature of the transactions as reflected by these entries. (Answer to Q No.11, Q.No.15, Statement dated 12.4.2011; Answer to Q.No.8, Q.No.14, Q.No.22, Q.No.24, Q.No.27, 28, 29, 30, 31, 32 to 36, 38). PDP was examined by issue of summon u/s.131 of the Act on 9.5.2011 and in his statement he denied the contents of the seized document and the fact that the recording in the seized documents were under his dictates. 15. AK filed a letter dated 13.5.2011 alleging that the contents of the CD and Pen drive seized from her premises have been replaced with new CDS and new Pen Drive when working copies were made. By a letter dated 19.9.2011 she withdrew her letters dated 13.5.2011 and 28.9.2011 because PDP has amicably settled issues with the department. 16. After making a reference to the aforesaid sequence of events, the AO framed the Assessment making an addition of Rs.36,71,34,500/- with the following observations: 13.1.17. The reason behind such posturing by PDF' and Mrs. Kagoo forthan 4 months is very clear. The attempt was to disown the contents of the CDs and the pen drive by trying to contend that they had not been seized from residence of Mrs. Kagoo in the first place. However in view of a large number of reasons arid instances as outlined below, it can be saidbeyond doubt that the Tally data contained in the CDs represents systematic and comprehensive day to day recording of transactions done by PDP outside his regular books and the books of his group concerns - ITA No.150/Bang/2020 Page 11 of 39 13.1.18 A large number of handwritten statements have also been seized from residence of Adlene Kagoo These statements in her own handwriting detail date wise receipts and payments in respect of transaction entered into by PDP with regard to different parcels of land. These statements contain details of receipts and payments both by cash (denoted as "C") and cheque. The cheque transactions have been found to be recorded in the books of PDP and his group concerns as per details mentioned in these statements, thus authenticating the truthfulness and accuracy of these handwritten statements. Further, all transactions denoted os "C" in such handwritten statements have been reflected in the DTTE Tally data as cash receipts or cash payments on the mentioned dates and against the names of parties in whose name handwritten statement has been prepared by Mrs. Kagoo. This in turn lends credence to the inference that DTTE Tally data represents transactions done by PPP. " 13.1.19. A large number of receipt and payment vouchers have also been seized from residence of Mrs. Kagoo vide Item nos. 21 to 36 of Annexure AK/PDP dated 12.04.2011. All these vouchers pertain to transactions done in cash. Several of the expenditure vouchers have been signed by the recipient and majority of the vouchers bear the initials of Mrs. Kagoo and/ or PDP Also several of the vouchers pertain to deposits or withdrawals from bank accounts, all of which have been found to be reflected in the books ofaccount of PDP or CHDC or other group concerns. It is also pertinent to note that similar payment vouchers in the name of Century Group and prepared by Mrs Kagoo were also found and seized vide Annexure A/CREH/9 from the ie 4 3ce of Century Real Estate Holdings Pvt Ltd at No 74, Prestige Feroze, Cunningham Road, Bangalore. These vouchers have been admitted by PDP to be vouchers prepared in respect of expenditure incurred towards sub- payments made by M/s Annapurneshwari Investments and recorded in the books of that firm. This further gives credence to the fact that transactions detailed in these vouchers seized from residence of Mrs. Kagoo also pertain to transactions done by PDP or his group concerns. And since the transactions detailed in these vouchers are also reflected in the DTTE Tally data,therefore this in turn also lends credence to the truthfulness of data contained in DTTE Tally 13.1.20. Besides the above, a large number of receipts have also been seized - these receipts are either signed by PDP acknowledging receipt of amount in cash from a particular party or they have been signed by person acknowledging having received certain amount of payment in cash from PDP. The receipts and payments as per such receipts, wherever ITA No.150/Bang/2020 Page 12 of 39 they are in cash, have been reflected against the mentioned dates in DTTE Tally data 13.1.21 Adlene Kagoo has in her statements recorded on various dates maintained that the seized documents in the nature of handwritten statements vouchers, receipts etc have been given to her by PDP for safe custodyend that they have been prepared by her (wherever it is in her own handwriting) as per dictation given to that effect to her by PDP 13.1.22. On the basis of transactions detailed in the DTTE Tally data, anumber of surveys and enquiries were carried out with various third parties. Many of such parties have confirmed the transactions detailed against their names in the DTTE Tally data. 13.1.23. Amongst the various ledgers contained in the DTTE Tally data,one ledger is in the name of "Amanath Bank - Pigmy Account." It details cash deposits of Rs. 3000 each that is deposited on various dates starting from 2.04.2005 and till 13.06.2008. Enquiries with Amanath Co-operative Bank, 5hivaji Nagar Branch revealed that there are three pigmy deposit accounts maintained with the bank in the name of PDP. The account nos. are - R.B. account nos 2, 20 & 21. The account statements were called or and t was seen that the amounts were credited to the respective accounts every week i.e. daily collections during the week were credited cumulatively in the account at the end of the week. Thereafter the supporting daily pigmy deposit collection sheets maintained by the pigmy agent was called for and verified It was seen that the details of deposits as reflected in the Amanath Bank - Pigmy Account ledger in DTTE Tally data exactly matched with details of deposits as per daily collection sheets maintained in respect of the aforesaid three accounts in the name of PDP. Further, all the three accounts are getting reflected in the books of CHDC. This evidence further underlines the genuineness and accuracy of transactions reflected in the DTTE Tally data as representing day to day transactions done by PDP. It can be nobody's case that while a part of the data is correct, the remaining is not when the entire data as is found in Tally under the company name DTTE is one single interlinked and continuous block of data. 13.1.24. Amongst the seized documents in the form of hard copies areArts of ledger extracts of various parties in the books of Dummy (Tally- Environment) for periods which also extend beyond 14.06.2008. These further goes to show that details of transactions done by PDP ITA No.150/Bang/2020 Page 13 of 39 outside the books are maintained separately in Tally under the company name DTTE and this is done as a matter- of practice. What is contained in the CDs is books of accounts in respect of such transactions which are not recorded in the regular books up to 14 06.2008. But seizure of ledger extracts detailing transactions done beyond 14.06.2008 goes to show that the data pertaining to unrecorded transactions done by PDP have been maintained in the same manner even after 14.06.2008. It also goes to show that the data contained in the CDs is not some independent and unrelated evidence. 13.1.25. In the cash book found in DTTE Tally data, there are numerous entries suggesting withdrawals from and deposits into Bank account, majorly relating to bank account in the name of PDP in HDFC Bank, K.H. Road Branch, Bangalore (earlier Lord Krishna Sank) This account is also reflected in the books of accounts of CHDC. The deposits and withdrawals from the bank accounts as reflected in DTTE Tally cash book have been found to match exactly with credits and debits from such bank account as reflected in the supporting bank statements. This further establishes the genuineness and accuracy of data contained in DTTE Tally. 14. Further, on verification of transactions with Sri. H. Nagaraj of M/s.SLV Housing it further re-confirms the fact that the transactions recorded in DFIL are factual transactions for the following reasons: a)Sri. H. Nagaraj of M/s. 5LV Housing has agreed that he has received amounts as reflected in the DTEE account in the case of M/s. Sree Krishna Properties. b)DTTE ledger extract of Sri Krishna Properties belonging to Sri. H. Nagaraja from 20.2 2007 to 12.6.2008 detailing cash receipts of P.s.3,97,59,000/- from Mr. P. Dayananda Pai. The same was shown to Sri.H.Nagaraja and he was asked to comment on the same as per Q.No.6 of the statement recorded on 6.6.2011. 5ri.H.Nagaraja in his reply to the Q.No.6 has confirmed that the ledger is the ledger extract of Srikrishna Properties. Sri Krishna Properties is a project in which Sri.Dayananda Pai and Sri. H.Nagaraja are planning to acquire 150 acres of land and they have already registered 35 acres of land in the name of H.Nagaraja and family members and about 30 Acres of land is in the agreement stage. Sri.Dayananda Pai has invested about 17 crores in this project Sri.H.Nagaraja agreed that the amount mentioned in the ledger extract ieRs.3.97 crores reflect the cash receipts ITA No.150/Bang/2020 Page 14 of 39 from Sri.Dayananda Pai by Sri Krishna Properties for the purchase of Kagalipura property bearing survey no.194 to 256. The year wise break up of Ps.3,97,59.000/- are (FY 2006-07 -Rs.1,00,00,000/-, FY 2007-08-Rs.1,97,59,000/- and FY 2008-09- Ps.1,00,000). The assessee in his reply to question.6 of the statement recorded u/s 131 on 16.6.2011 confirmed that he has received Ps.3.47 crcres against the property at Kagalipura on behalf of M/s Sri Krishna Properties and the same has not been recorded in his books or his wife'sbooks or in the books of any of concern in which the assesee is interested The assessee vide his letter dated 9 6,2011 submitted to the DDIT(Inv.) on 24.6.2011 has stated the amount of Rs.3 47 crores which he has received is an investment by 5ri.Dayananda Poi in the project and the same has to be returned to Sri.Dayananda Pal alongwith profit and the some has been paid to the land lords for the purchase of land c)The assessee Sri. H. Nagaraja has agreed that he has received a sum of Rs 50 lakhs from Sri. P. Dayananda Pal in cash end the same was paid to Sri. Jayadev the land lord with whom M/s. 5LV Housing Development Corporation had entered into JDA as reflected in the DTTE d)About 20 cases were surveyed and all of them have accepted that the entries as per DTTE are genuine and have agreed to offer income to tax. The disallowance is worked out as per the entries in the seized documents that are handwritten and also as per the payments in the DTTE (Dummy Tally Training Environment). The payments as per" DTTE, the sum total of business payments is Rs. 30,57,64,000/-, miscellaneous payments of Rs 50.53,000/- and loans repaid is Rs. 24,35,000/- The payments made as per the handwritten seized material discussed in the relevant part of this order is Rs. 5,38,82,500/- 16. In view of the above, an amount of Rs. 36,71,34,500/- is added as unaccounted income of the assessee. Rs. Income assessed as per order u/s. 143(3) r.w.s153Cdt: 31.12.2010 50, 82,504 ITA No.150/Bang/2020 Page 15 of 39 Add: Addition as discussed in Para above 36,71,34,500 Total Income Assessed37,22,17,004 17. The break-up of the addition made by the AO is as follows: Additions made by the AO as per para 14 of Page 61 of the Assessment order u/s 143(3) rws. 147 ParticularsAmount in Rs. a.DTTE-Business Payments 30,57,64,000 b.DTTE-Miscellaneous Payments 50,53,000 c.DTTE-Loans Repaid24,35,000 I -Sub Total (A) 31,32,52,000 Hand written seized material5,38,82,500 II -Sub Total (B)5,38,82,500 Total36,71,34,500 As per the Seized Material Dummy Tally Training Enyironmnet Payments made are as under: Particulars As per DTTE- - Amount in Rs. Total Payments made as per Cash Book during the AY 2005-2006 is 29,28,90,000 Total29,28,90,000 To t al pay m e nt s m ad e a s pe r Se iz ed ma t eri a l Du mmy Ta ll y Tra i ni ng E nv i ron me nt is R s.29,2 8,9 0,00 0/ - and n ot R s.31 ,32 ,52,0 00/ - a s men t io ne d i n o rde r. H en ce t he re is a d i ff e re nc e o f Rs.2 ,0 3,6 2,00 0/ -. ” ITA No.150/Bang/2020 Page 16 of 39 Th e f o l l owi n g a r e the l e dg e r s c o ns is t i n g o f P ay m e nt s i n c as h b oo k of DT TE . sl.noParticulars Voucher Type as per DTTE Amount in Rs. Business payments 1Abdul RaheemPayment5,34,79,000 2A. SrinivasPayment70,000 3Akram KhanPayment10,00,000 4Arunkumar LPayment45,00,000 5Aryavartha BuildersPayment4,76,90,000 6 Bhagya Nagaraj and others Payment5,01,00,000 7Bopaiah and J.DevarajPayment50,00,000 8ByregowdaPayment36,73,000 9Chatur BhujPayment2,00,000 10Favourite DevelopersPayment1,75,00,000 11H.Nagaraj aPayment2,96,00,000 12 Hanumantha Raju and Galliswamy Payment50,000 13J.DevarajPayment12,30,000 14K.B.LakshmanPayment50,00,000 15M.Devaraj and othersPayment25,00,000 16Manjunath hegdePayment10,00,000 17Muniraj and othersPayment1,35,00,000 18Muralikrishna.C.KPayment3,00,000 19Narayanappa and othersPayment13,90,000 20R.VishwanathPayment2,11,87,500 21Saikumar ReddyPayment.22,00,000 22SiddagangaiahPayment11,33,000 23Srinivas RajuPayment73,47,500 24Sudhir (J.Srinivasan)Payment1,50,000 25Venugopal ReddyPayment1,00,00,000 Sub Total (A)27,98,00,000 Loans Repaid/Given .26Ashed PropertiesPayment1,00,00,000 27Byregowda hand loanPayment2,00,000 Sub Total (B) 1,02,00,000 ITA No.150/Bang/2020 Page 17 of 39 Miscellaneous payments 28 Suresh GupthaPayment 3,65,000 29 Vijayalakshmi AdvocatePayment 25,25,000 Sub Total (C) 28,90,000 Total(A+B+C) 29,28,90,000 Hence the Total Payments as per Dummy Tally Training Environment is Rs.29,28,90,000/- and not Rs.31,32,52,000/- as mentioned in the order u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961. II- Additions made based on Hand written Seized material As per the "Assessment order u/s 143(3) rws 147" additions made on the basis of Hand written seized material is Rs.5,38,82,500/- the details of which is given in page 2 to 4 of the Said Order as mentioned below. Date Name Evidence Voucher Type Amount in Rs. 15.10.2004 Sri.Arunkum ar Reflected in DTTE + Asked in SCN Payment45,00,000 on various dates SalarpuriaAs per SCNPayment4,85,00,000 on various dates SalarpuriaAs per SCNPayment3,75,000 Total5,33,75,000 Thus the Total payment is Rs.5,33,75,000/- as detailed in order as mentioned above and not Rs.5,38,82,500/-. And more over the payment of Rs.45,00,000/- to Mr.Arunkumar is Recorded in the seized material Dummy Tally Training Environment. Hence there is a Double Addition with respect to the payment of Rs. 45,00,000/- made to Mr.Arunkumar. Also the Payments made as per Hand Written Seized Materials as per Show Cause notices dated 08.02.2013, 08.03.2013 and 25.03.2013 are Rs.8,23,00,000/- . 18. On appeal by the Assessee, the CIT(A) upheld the validity of initiation of reassessment proceedings u/s.147 of the Act as well as the validity of the ITA No.150/Bang/2020 Page 18 of 39 additions made by the AO. The following were the relevant observations of the CIT(A): “10. Ground nos1,& 8 are general and needs no separate adjudication. 11. The Additional ground - the appellant re-iterated that AO cannot assumejurisdiction u/s 148 and also that he is precluded from making assessment beyond 6 years as per sub clause (b) of section 153A. Ground nos 2, 3 & 4 the appellant raised issue of notice u/s 148, rejection by AO of appellant's objection to re-opening of his case, addition based on DTTE. The additional ground and ground nos 2,3 4 Perusal of assessment order shows that a search operation us/ 132 of the Act was conducted on Smt. AdieneKagoo . an employee of the appellant on 12/04/2011. During the course of search, CDs containingreceipts and payments made by appellant were found. The data was found under the caption Dummy Tally (DTTE). 12. The DTTE also contained transactions entered into by appellant with M/s Salarpuriagroup . The AO on perusal of seized material found that an income of Rs. 3,68,42,500/- had escaped assessment. Therefore. the AO issued notice u/s 148 on 07/03/2013 . The AO furnished a copy of reasons for re-opening to the appellant on 31/01/2013. Thereafter, the AO passed a speaking order dated 08/03/2013 wherein appellant's objections were considered and rebutted 13. In view of the above facts, the appellant's contentions raised in ground nos 2,3, 4 (A.B. C) and additional grounds are found to be untenable and hence they are rejected, The grounds fail. 14. Addition based on DTTE- It may be noted that DTTE was maintained by Smt. Adlene Kagoo, a trusted employee of the appellant. In her statement recorded on 12/04/2011 u/s 132(4), Smt Adlene Kagoo confirmed veracity of transactions recorded. Further verification of transactions with Sh. H.Nagaraj of M/s SLV Housing confirms that transactions recorded in DTTE are factually correct. Sh. Nagaraj stated that he received amounts as reflected in the DTTE 15. The AO in the assessment order in paras 14,-16 has detailed the transactions between the appellant and Sh. Nagaraj . Sh. Nagaraj and the appellant are involved in a project named Sr. Krishna Properties which planned to acquire 150 acres of land . It is seen that 35 acres of land have already been registered in the name of H. Nagaraj and his family members. the appellant had invested Rs. 17 crores in this project. In about 20 cases wherein survey was conducted by the department. the 'assessees have confirmed that transactions entered in DTTE were genuine. 16. It may be noted that a large number of handwritten statements have also been seized from the residence of Snit. Adlene Kagoo. These ITA No.150/Bang/2020 Page 19 of 39 statements in her own handwriting detail date wise receipts and payments in respect of transactions entered into by the appellant with regard to different parcels of land. These statements contain details of receipts and payments by cash denoted as ' C'. All transactions denoted as ' C' in such handwritten statement have been reflected in the DTTE tally as data as cash receipts or cash payments on the mentioned dates and against the names of parties in whose name handwritten statement has been prepared by Smt, Adlene Kagoo. This proofs the fact that DTTE Tall represents transactions done by the appellant. It may also be noted that payments made as per DTTE was Rs 30,57,64,000/- . Payments made as per handwritten materials which were seized was Rs. 5,38,82,500/-. 17. During appellate proceedings, the appellant has not been able to substantiate his claims with any documentary evidence. No proof has been furnished to rebut the findings of the AO which are based on factual documents. It may not be out of place to mention that the appellant had approached the income Tax Settlement Commission, Chennai for AY 2006-07 to 2011-12. The ITSC in para 8.1 of its order dated 27/03/2014 mentions that the entries in the Dummy Tally have been owned up by Dr. Dayanand Pai as belonging to him and his f/tm Canara Housing Development Company.' 18. Therefore in view of the overwhelming facts found in DTTE, no interference in AO's order is called for since no infirmity arose. The additions made by AO are confirmed, sustained and upheld. The grounds fail.” 19. Aggrieved by the order of the CIT(A), the Assessee has preferred the present appeal before the Tribunal. 20. Before the Tribunal, the Assessee has raised grounds on validity of initiation of reassessment proceedings u/s.147 of the Act, and also raised additional grounds raising a contention that proceedings should have been initiated u/s.153A/153C and not u/s.147. A specific ground was taken that the mandatory sanction u/s.151 of the Act is not accorded by the competent authority i.e., the Commissioner of Income Tax and therefore the order of reassessment itself is null and void in law. In this regard, the department produced before the Tribunal a copy of the letter dated 6.3.2012 from the Office of CIT, signed by the ACIT, Karnataka (Central) Bangalore wherein it has been stated that the CIT Karnataka, (Central), Bangalore has accorded approval for ITA No.150/Bang/2020 Page 20 of 39 initiating proceedings u/s.147 of the Act by issue of notice u/s.148 of the Act in respect of CHDC and PDP. However, the very approval of the CIT has not been produced and it was stated that the same will be available only in the office of the CIT. 21. Though arguments were advanced on the validity of initiation of reassessment proceedings on several counts, we expressed the view in the open court, that leaving open those grounds, the merits of the addition made by the AO and sustained by the CIT(A), can be decided. The parties advanced arguments on merits of the additions made by the AO. 22. The learned counsel for the Assessee submitted that the assessment has been framed to bring to tax a sum 36,71,34,500 based on alleged dummy tally seized. It was contended that the Assessee during the course of assessment proceedings had let in enough evidence to prove that the alleged escaped income actually belongs to CHDC in which the assessee is managing partner. Perusal of the sanction obtained to reopen the assessment would also reveal that the firms assessment aforesaid was reopened in tandem with that of the assessee, giving scope for the department to frame a proper assessment in the hands of the real person to whom the alleged seized incriminating materials belongs to. Time and again during the course of assessment proceedings, evidence was let into show that the alleged escaped income was already factored in the settlement applications filed by the appellant as well as the partnership firm and that the entire seized material belong to the partnership firm. No cognizance was taken of the factual evidence furnished during assessment to frame the reassessment of the firm based on the alleged material nor was the objections raised to exclude the alleged sum of 236,71,34,500 from the purview of assessment in the assessee's hands. Our attention was drawn to the paper book compilation marked paper book-l (revised) at page 31 therein explaining the ITA No.150/Bang/2020 Page 21 of 39 manner in which the items found in the seized material have been duly accounted for in the books of CHDC with annexure 3 thereon showing the Manner of disclosure in the books of accounts pertaining to the said firm (see page no 52 to 56). It was submitted that in view of the above, despite the fact that evidence was lead to prove the ownership of the material vests in the said firm no attempt was made to take judicial cognizance of the same and the alleged speaking order framed on 8th March 2013 merely acknowledges the assessee's letter but ignores the contents therein. References was also invited to the reassessment order framed in CHDC's case for the same assessment year passed on the same date wherein the alleged material could have been factored since it represents data relating to the same firm,which was not done. It was submitted that even on the merits of the additions made, seized record do not indicate that the alleged sums belong to the assessee and hence it is a high pitched assessment. Hence there is no case for treating the incriminating seized materials as belonging to assessee when overwhelming evidence indicate reference to the partnership firm of the appellant therein. 23. The learned DR submitted that a search operation u/s 132 of the Act was conducted on Smt.Adlene Kagoo, an employee of the Assessee on 12/04/2011. During the course of search, CDs containing receipts and payments made by appellant were found. The data was found under the caption Dummy Tally (DUE). The DUE also contained transaction entered into by appellant with M/s Salarpuria group. The AO on perusal of seized material found that an income of has escaped assessment. It was submitted that DTTE was maintained by Smt.Adlene Kagoo, a trusted employee of the appellant. In her statement recorded, she confirmed veracity of transaction recorded. In about, 20 cases wherein survey was conducted by the department, the assessees have confirmed that transactions entered in DUE were genuine. During appellate proceedings, the Assessee has not been able to substantiate his claims with any documentary ITA No.150/Bang/2020 Page 22 of 39 evidence. The Assessee had approached the Income-tax Settlement Commission, Chennai for A.Y: 2006-07-to 2011-12. The ITSC in para 8.1 of its order mentions that the entries in the Dummy Tally have been owned up by Dr.Dayanand Pai as belonging to him and his firm Canara Housing. Development Company'. In view of the above, the Ld.DR submitted that the order of CIT(A) confirming the AOs addition in respect of the above, should be sustained. 24. We have carefully considered the rival submission and the material on record. The evidence found in the course of search of AK based on which additions were made by the AO was Annexure AK/PDP/06 (this was print out taken from the Seized CD and is in the form of a ledger and this is referred to as “Dummy (Tally Training Environment) {DTEE} copies of these ledger accounts are at pages 92 to 99 of Assessee’s paper book No.1 revised) , AK/PDP/7 (Pages 35-38) copies at pages 116 to 119 of paper book-1 revised, AK/PDP/16 (pages 187, 199, 205, 200, 192,189) AK-1/PDP/3 page 21, 4, 5, 6 and 9 dated 12.4.2011(copies at pages 120 to 130 of paper book 1 (revised). AK in her statement stated that the entries in the aforesaid seized documents were made as per the instructions of PDP. She has clearly stated in the statement that she does not know the nature of transactions recorded in the seized document and that whatever is written is as per directions of PDP. We have already referred to the statement of AK and in particular the Answer to Q No.11, Q.No.15, Statement dated 12.4.2011; Answer to Q.No.8, Q.No.14, Q.No.22, Q.No.24, Q.No.27, 28, 29, 30, 31, 32 to 36, 38, wherein she denied any knowledge about the transactions as recorded in the seized document. PDP was examined by issue of summon u/s.131 of the Act on 9.5.2011 denied the contents of the seized document and the fact that the recording in the seized documents were under his dictates. A cursory look at the seized document, based on which the additions were made by the AO shows that the documents ITA No.150/Bang/2020 Page 23 of 39 by themselves are not speaking as to the nature of the transactions or the persons who made the alleged payment as recorded in the seized document or the person who received the alleged receipts as recorded in the seized document. The Assessee on his part has disowned the transactions as pertaining to him and has claimed that he ceased to do any business transactions in his individual capacity. He has filed a statement (copies of which are at pages 52 to 56 of the revised paper book No.1) wherein there is a reference to how some of the transactions as found recorded in the seized document are accounted by the firm CHDC. There is no exact correlation between the seized document and the said statement. The argument appears to be that the cash payments relate to transactions which are recorded partly in books of accounts by CHDC and therefore the cash component of the entries in the seized document should have been considered in the hands of CHDC. Notwithstanding the said submission, it has also been contended that the seized document by themselves do not show the name of PDP. As we have already observed, the seized document Dummy (Tally Training Environment) (DTTE) for the period 1.4.2004 to 30.3.2005 copies of which are at pages 92 to 99 of the Paper Book No.1 (revised) has the caption cash book and the entries of receipt and payment show certain recipients and certain payees. But as to who received and who paid, the document is silent. AK in her statement clearly stated that she does not know the nature of the transactions as to who received or who paid the sums as reflected in the DTTE or any other loose papers. PDP for his part disowned the documents. The document being a non speaking document, it was incumbent on the part of the Revenue to bring corroborative evidence to show the entries in the seized document pertain only to PDP. 25. The AO in paragraph 13.1.18 of his order observed that transactions denoted by the letter “C” denote either cash receipts or cash payments. The cheque component of the transaction has been recorded in the books of PDP and ITA No.150/Bang/2020 Page 24 of 39 his group concerns as per details mentioned in these statements. No where in these statement the name of the Assessee figures. Therefore the conclusion of the AO in Paragraph 13.1.18 that transactions in DTTE represents transactions of PDP cannot be sustained. In paragraph 13.1.19 of the AO’s order there is a reference to some vouchers which represented transactions done in cash. The AO has observed that transactions detailed in these vouchers are also reflected in the DTTE tally data and hence the entries in the DTTE is true. No such correlation between vouchers seized and entries in the DTTE tally has been set out by the AO. The vouchers referred to in these paragraph all relate to group entities of Century group and no voucher pertaining to the individual name of PDP or attributable to PDP in his individual capacity has been pointed out. In paragraph 13.1.20 there is reference to several receipts signed by PDP acknowledging receipt of amount in cash and these are reflected in the DTTE. No instance or correlation between receipts seized with reference to entry in DTTE has been pointed out by the AO. In paragraph 13.1.21, the AO has referred to the statement of AK in which she has only mentioned that the entries in the seized document were made as per instructions of PDP. This alone will not be sufficient to attribute the transactions as recorded in the seized document as transactions of PDP, especially when AK has specifically denied any knowledge about the nature of the transaction as recorded in the seized document. In paragraph 13.1.22, there is a reference to survey carried out with reference to entries in the DTTE from third parties but not details whatsoever has been brought on record correlating the entries and the enquires with reference to the seized document. In Paragraph 13.1.23 and Paragraph 13.1.24 there is a reference to entries in DTTE and how these entries show that the transactions in DTTE are attributable to PDP. These entries do not relate to period relevant to AY 2005-06 but relate to AY 2006-07 and 2009-10. The Assessee and CHDC have already settled the dispute in these two AYs before the SC. These entries and the contentions of the AO have no evidentiary value ITA No.150/Bang/2020 Page 25 of 39 in so far as AY 2005-06 is concerned. In paragraph 13.1.25 there is a reference to deposit in bank account in the name of PDP and the fact that these are recorded in the books of accounts of CHDC. There is no correlation as to how these entries represent undisclosed income of Assessee. When these entries are recorded in the books of accounts of CHDC, there can be no adverse inference drawn whatsoever as against the Assessee. Besides the above in the application filed by the Assessee before the SC, they have culled out transactions from the seized material and though they pertain to CHDC, the Assessee in his capacity as partner has owned up 25% of the undisclosed income so culled out. The SC has accepted the said disclosure. 26. In paragraph 14 of his order the AO has made reference to transactions with Sri.H.Nagaraj of M/S.SLV Housing. These transactions pertain to AY 2008-09 and 2009-10. Moreover, Sri Krishna Properties is not business of the Assessee in his individual capacity. 27. The AO on the basis of the above discussion has finally concluded that the payment as per DTTE, the sum total of business payment is Rs.30,57,64,000/-, miscellaneous payments of Rs.50,53,000/- and loans repaid of Rs.24,35,000/- and Rs.5,38,82,500/- recorded in the handwritten seized material is to assessed as undisclosed income of the Assessee. 28. We are of the view that there has been no correlation established to show that the entries in the seized document relate to the Assessee and the payments or receipts reflected therein are attributable to PDP. The additions have been made without bringing on record any corroborative evidence to show that the undisclosed income is assessable as Assessee’s income in his hands. The additions so made cannot therefore be sustained and liable to be deleted. ITA No.150/Bang/2020 Page 26 of 39 29. We however find that the AO passed order of assessment dated 30.3.2013. The Assessee and CHDC preferred application before the SC u/s.245C of the Act on 12.5.2014. The SC accepted the declaration of income by it’s order dated 21.5.2015. We have already set out these details in the earlier part of this order and the same are therefore not being repeated. The proceedings before the SC related to AY 2006-07 to 2011-12 which was the period falling within the ambit of Section 153A of the Act. AY 2005-06 could not be covered under the application before the SC for this reason. As already stated it is undisputed that the nature of the seized documents and entries therein is one and the same for all the AY 2005-06 to 2011-12. 30. In the proceedings before the CIT(A), the Assessee filed letter dated 16.9.2016 along with a computation of undisclosed income attributable to the seized documents pertaining to AY 2005-06 i.e., for the year in respect which the present appeal has been filed by the Assessee. Along with the said letter the computation of peak debit attributable to CHDC and the Assessee on the same lines on which income was offered before the SC was filed as suggested by the revenue under Rule 9 of the Settlement Commission Rules. As per the said computation and the letter dated 16.9.2016 the undisclosed income offered by Assessee was Rs.2,63,70,375/-. The copy of the said letter and the computation of peak debit is enclosed with this order as annexure and is self explanatory. The CIT(A) did not take cognizance of the said letter dated 16.9.2016 and did not make any reference to the same in her order nor expressed any opinion on the plea raised in the said letter. 31. From the copy of the order of SC dated 25.9.2015, we find that the proceedings before the SC relate to AY 2006-07 to 2011-12. In paragraph 1.4 of the said order it is mentioned that the Assessee is not involved in any business in real estate in his individual capacity and is a partner in some firms and was contributing his business expertise in real estate business carried by such firms. ITA No.150/Bang/2020 Page 27 of 39 In paragraph 1.5 of the said order there is a reference to the search on 12.4.2011 in the case of the Assessee, CHDC and AK. The Assessee has explained in paragraph 2.1 to 2.8 as to how they have culled out income relatable to the Assessee and CHDC and how the peak credit is being computed. There is also a reference to the DTTE seized from the premises of AK i.e., AK/PDP/06 in para 3 (iii) of the report of the CIT under Rule 9 of the Settlement Commission Rules. The SC in para 8.1 of its order has discussed the issue whether peak credit method can be accepted as a reliable method for correct determination of Assessee’s income and the correctness of the quantum of peak credit to be added in para 8.2 & 8.3 of it’s order and has given the following conclusions on the said issue: “8.1 The first question that needs to be decided by us, is whether the peak credit method be accepted as a reliable method for correct determination of Applicant's income? The issue relates to the seized evidence marked as Annexure NAK/PDP/06 which consists of aset of 6 CDs, a pen drive and floppy drive. The above CDs contain Tally accounts data complete with ledgers, cash book, balance sheet, P&L Account, etc. under the caption Dummy Tally Training Environment. This evidence was seized from the residence of Smt. Adlene Kagoo, P.S. to Dr. P. Dayananda Pai. The entries in the Dummy Tally have been owned up by Dr. Dayananda Pai as belonging to him and his firm i.e. CHDC. The Dummy Tally reflects numerous journal entries being gross receipts of Rs.373,93,04,442 and gross payments of Rs.444,94,54,722. As has been correctly pointed out by the Department, the Applicant has not explained each of the receipts and payments regarding the source of the receipt and the purpose of payment. But from this, we are unable to agree with the conclusion arrived at by the Department, that peak credit theory cannot be applied in the present case and that undisclosed income of the Applicant should be arrived at on the basis of gross receipts and gross payments. Given the nature of journal entries found in the Dummy Tally, we are of the view that peak credit method is one of the available methods which can be adopted in this case, to arrive at a proper determination of Applicant's income. Determination of income based on theory of peak credit is also accepted by courts of law as indicator of proper estimation of income. There may be differences in opinion on the right way to arrive at the peak but that will not mean that peak method is not the right method to determine an Applicant's income. ITA No.150/Bang/2020 Page 28 of 39 8.2 Having said so, we now proceed to determine the Applicant's income for A.Ys 2006-07 to2009-10, on the basis of the peak credit theory as applied to the entries made in theDummy Tally. There are two calculation of peak credit before us. The one worked out by the Applicant dated 08.09.2015, the summary is worked out at Rs.1.12,27,62,037. The A.R. stated that, the above summary of peak credit/debit is based on the CIT's observation in theRule 9 Report and seized materials for the period 01.04.2005 to 14.06.2008 and from 14.06.2008 to 31.03.2011. The peak credit as worked out by the Department, comes toRs.171:33,35,796. The PrincipalCommissioner of Income Tax, Central, Bengaluru has stated in her letter dated 16.09.2015 that the aggregate undisclosed income on the basis of the peak workings would amount to Rs.171,33,35,796 and not Rs.98,45,13,157 (Rs.".12,27,62,039 — 13,82,48,882) as worked out by the Applicant. 8.3 In the summary of working given by the Applicant, we find that the Applicants (bothCHDC and Dr. P. Dayananda Pai) have set off peak credit of Rs.51,61,30,707 for A.Y. 200607 against peak credit of Rs.62,73,86,816 for A.Y. 2007-08'(combined peak credit for M/s. CHDC and Dr. P. Dayananda Pai). We cannot allow the set off, as the Applicant has failed to prove before us that the above amount was available for circulation in the relevant financial year. Likewise we are unable to accept the working of debit peak arrived at for A.Y. 2010-11. Given the facts which are placed before us, we observe anomalies in the working of the summary of peak credit as arrived at Rs.112,27,62,039 by the Applicant. On the other hand we are inclined to agree with the working of peak credit arrived at by the CIT at Rs.171.33,35,796. However, having agreed at that figure and given the nature of accounts : we find that it will be reasonable to allow a set off of Rs.13,82,48,882 being expenses disclosed in the seized Dummy Tally. Thus the aggregate undisclosed income on the basis of the revised peak would be Rs.171,33,35,796 (being the aggregate of peak credit set out in letter dated 16.09.2015 from Principal Commissioner of Income Tax, Central, Bengaluru)less expenses of Rs.13,82,48,882 i.e. net of Rs.157,50,86,914.When this was pointed out to the A.R. during the course of the final hearing, he gave his consent to offer an Settlement Commission u/s 245D(1). Further as has been decided by the Hon’ble Court of Calcutta reversing the decision of the Special Bench in the case of M/s. G. M. Foods & Another in W.P. No.44 of 2015, interest u/s 234B has also to be charged on the income as disclosed in the application u/s 245C of the Act.” ITA No.150/Bang/2020 Page 29 of 39 32. All the above findings of the SC are clearly applicable to determination of income for AY 2005-06 also. As we have already observed, the material found in the course of search is identical and same as in AY 2006-07 to 2011- 12 which was subject matter of proceedings before SC. It is only because AY 2005-06 fell outside the ambit of AY as per Sec.153A of the Act, the said AY could not be covered in the application before SC. Therefore the basis of computation of income of the Assessee and CHDC would be equally applicable for AY 2005-06 as well. 33. We are of the view that in the light of the admission of the Assessee and in line with the accepted formula for arriving at the undisclosed income of the Assessee consequent to material seized at the time of search, we are of the view that the sum of Rs.2,63,70,375/- should be assessed as income of the Assessee for AY 2005-06, after due verification by the AO i.e., verification is for the limited purpose of verification that the computation is as per the norms set out by SC. We hold and direct accordingly and partly allow the appeal of the Assessee for statistical purpose. With regard to the remaining sum out of peak credit attributable to income of CHDC for AY 2005-06 as computed in the statement annexed, the revenue is at liberty to tax the same in the hands of CHDC in accordance with law. ITA No.150/Bang/2020 Page 30 of 39 34. In the result, appeal of the Assessee is partly allowed for statistical purpose. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- Bangalore. Dated: 26.07.2022. /NS/* (PADMAVATHY S)(N. V. VASUDEVAN) Accountant Member Vice President ITA No.150/Bang/2020 Page 31 of 39 Annexures ITA No.150/Bang/2020 Page 32 of 39 ITA No.150/Bang/2020 Page 33 of 39 ITA No.150/Bang/2020 Page 34 of 39 ITA No.150/Bang/2020 Page 35 of 39 ITA No.150/Bang/2020 Page 36 of 39 ITA No.150/Bang/2020 Page 37 of 39 ITA No.150/Bang/2020 Page 38 of 39 ITA No.150/Bang/2020 Page 39 of 39 Copy to: 1.Appellants2.Respondent 3.CIT4.CIT(A) 5.DR6.Guard file By order Assistant Registrar, ITAT, Bangalore.
