Gonugunta Venkateswarlu, Hyderabad V. Commissioner of Income Tax, Guntur

ITA 1551/HYD/2013

• Counselvise Citation: 155122514 RSA 2013
• Duration Of Justice: 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Condonation of delay
• Section: 40A(3); 143(3); 142(1); 133A; 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 1547/HYD/2013 2007-08 SMT. GONUGUNTA SUSEELA, KANDUKUR; PAN: AOYPG6547A THE COMMISSIONER OF INCOME-TAX, GUNTUR 1548/HYD/2013 2009-10 1549/HYD/2013 2007-08 SRI UPPUTURI VENKATESWARLU, GURRAMVARIPALEM PAN: AHKPV2219F 1550/HYD/2013 2009-10 1551/HYD/2013 2009-10 SRI GONUGUNTA VENKATESWARLU, KANDUKUR; PAN: AOYPG6548R 1552/HYD/2013 2005-06 SRI GONUGUNTA SRINIVASA RAO, KANDUKUR; PAN: AOYPG6132P 1553/HYD/2013 2007-08 1554/HYD/2013 2009-10 1555/HYD/2013 2008-09 SMT. UPPUTURI DHANALAKSHMI, GURRAMVARI PALEM PAN: AHKPV2225R 1556/HYD/2013 2009-10 APPELLANT BY: SRI K.A. SAI PRASAD RESPONDENT BY: SRI D. SUDHAKAR RAO DATE OF HEARING: 28 .10.2014 DATE OF PRONOUNCEMENT: 14.11.2014 O R D E R PER ASHA VIJAYARAGHAVAN, JM: THE ABOVE APPEALS BY DIFFERENT ASSESSEES ARE DIRECTED AGAINST SEPARATE ORDERS OF THE CIT, GUNTUR . SINCE ALL THE APPEALS CONTAIN IDENTICAL ISSUE, THES E APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER AND AR E DISPOSED OF BY THIS COMMON ORDER. 2. ALL THE ABOVE APPEALS ARE DELAYED BY 50 DAYS IN FILING BEFORE THIS TRIBUNAL. THE CHARTERED ACCOUNT FILED AN AFFIDAVIT STATING AS FOLLOWS: IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 2 'AFFIDAVIT I, B. JAGANMOHAN RAO, S/O SRI B.V. SESHA RAO, AGED ABOUT 44 YEARS, RESIDENT OF PAPPU BAZAR, ONGOLE, DO HEREBY SOLEMNLY AFFIRM AS UNDER: 1 AM A PRACTICING CHARTERED ACCOUNTANT AND 1 REPRESENTED THE ABOVE CASE ALONG WITH THE FOLLOWING OTHER CASES IN THIS GROUP BEFORE THE INCOME-TAX OFF ICER DURING ASSESSMENT PROCEEDINGS, ETC., AND ALSO BEFOR E THE HON'BLE COMMISSIONER OF INCOME-TAX, GUNTUR IN CONNECTION WITH THE PROCEEDINGS U/S 263. 1. UPPUTURI VENKATESWARLU 2. GONUGUNTA SUSEELA 3. UPPUTURI DHANALAKSHMI 4. GONUGUNTA SRINIVASA RAO I UNDERSTOOD THE ORDERS U/S 263 OF THE HON'BLE COMMISSIONER OF INCOME-TAX, GUNTUR DATED 15-3-2013, IN ALL THE ABOVE CASES, AS A DIRECTION TO THE LEARN ED ASSESSING OFFICER TO EXAMINE AFRESH WITH A FULL DISCRETION TO LOOK INTO THE APPLICABILITY OF THE PR OVISIONS OF SECTION 40A(3) IN THESE CASES. I DID NOT, THEREF ORE, SUGGEST APPEALS TO THE INCOME-TAX APPELLATE TRIBUNA L AGAINST THE ORDERS U/S 263 IN ALL THE ABOVE CASES, AND ALL THE ABOVE ASSESSEES FOLLOWED MY ADVICE. HOWEVER, IT IS NOW FOUND THAT THE ASSESSING OFFICER , ELABORATELY REPEATED THE OBSERVATIONS OF THE HON'BL E COMMISSIONER OF INCOME-TAX, DISALLOWED THE ENTIRE AMOUNT U/S 40A(3), AS MENTIONED IN THE ORDERS U/S 2 63, GIVING AN IMPRESSION THAT THE ORDER U/S 263 IS A DIRECTION WITHOUT ANY DISCRETION. AFTER CONSULTING SENIORS IN THE LINE, I COULD NOW UNDERSTOOD THAT THE ORDER U/S 263 OF THE COMMISSION ER OF INCOME-TAX GAVE A CLEAR DIRECTION TO MODIFY THE ASSESSMENT ORDER APPLYING THE PROVISIONS OF SECTION 40A(3) AND THE QUANTUM OF THE AMOUNTS TO BE DISALLOWED WERE ALSO FIXED. THERE IS NO DISCRETION LEFT TO THE LEARNED ASSESSING OFFICER TO DO ANYTHING ELS E. HENCE I WAS TOLD THAT THE ONLY COURSE LEFT IS TO AG ITATE AGAINST THE ORDER U/S 263 BEFORE THE HON'BLE INCOME -TAX APPELLATE TRIBUNAL, HYDERABAD. I HEREBY SOLEMNLY STATE THAT BECAUSE OF MY MISUNDERSTANDING OF THE NATURE OF THE ORDERS OF THE HON'BLE COMMISSIONER OF INCOME-TAX, NO APPEALS WERE IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 3 SUGGESTED AND FILED IN TIME AGAINST THESE ORDERS U/ S 263 TO THE INCOME-TAX APPELLATE TRIBUNAL. AN APPEAL HAS BEEN NOW FILED ON 20.11.2013. THE DELAY IN FILING T HIS APPEAL IS SOLELY ON ACCOUNT OF MY MISUNDERSTANDING OF THE ORDERS U/S 263. I HEREBY SOLEMNLY AFFIRM THAT WHATEVER IS STATED AB OVE IS TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF. SD/- DEPONENT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEES ARE LAYMEN AND NOT ACQUAINTED WITH TH E INTRICACIES OF INCOME-TAX LAW AND THE DELAY WAS CAU SED DUE TO MISUNDERSTANDING OF CIT ORDER BY THE CHARTER ED ACCOUNTANT. THE LEARNED COUNSEL REQUESTED THAT THE DELAY IN FILING THE APPEALS BE CONDONED AND THE APPEALS B E ADMITTED IN THE INTEREST OF JUSTICE. FOR THIS PURP OSE THE LEARNED COUNSEL RELIED ON THE ORDERS OF THIS TRIBUN AL IN THE CASE OF GREEN FIRE AGRI COMMODITIES LTD. VS. DC IT IN ITA NO. 516/HYD/2013 DATED 27.11.2013 AND M/S. EVEN'S CLASSES VS. ITO IN ITA NO. 184/HYD/2012 & AN R DATED 23.04.2014. 4. THE LEARNED DR VEHEMENTLY OBJECTED TO CONDONATION OF DELAY AND POINTED OUT THAT THE ASSESSEES COULD H AVE APPEALED AGAINST THE ORDER PASSED U/S. 143(3) R.W.S . 263 OF THE ACT INSTEAD OF BELATEDLY FILING THE APPEALS AGAINST THE ORDER U/S. 263 OF THE ACT. 5. WE HAVE HEARD BOTH PARTIES ON THE ISSUE OF CONDONATION OF DELAY. WE FIND THAT THE TRIBUNAL PU NE BENCH IN THE CASE OF KEWALKUMAR JAIN VS. ACIT (37 TAXMANN.COM 248) (PUNE-TRIB.) CONSIDERED THIS ISSUE AND HELD AS FOLLOWS: IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 4 'ASSESSMENT ORDER PASSED IN CASE OF ASSESSEE WAS SET ASIDE BY COMMISSIONER IN EXERCISE OF POWER UNDER SECTION 263. AGAINST SAID REVISIONAL ORDER, ASSESSEE FILED INSTANT APPEAL BELATEDLY ALONG WITH AN APPLICATION SEEKING CONDONATION OF DELAY. IT WAS NOTED THAT ASSESSEE MISCONSTRUED LAW BY ASSUMING THAT SINCE MATTER WAS REMITTED BACK TO ASSESSING OFFICER, HE COULD AGITATE CONSEQUENTIAL ORDER TO BE PASSED BY ASSESSING OFFICER IN APPEAL PROCEEDINGS BEFORE COMMISSIONER (APPEALS) ONLY. THUS ASSESSEE ENTERTAINED A BELIEF THAT AS ORIGINAL ASSESSMENT HAD BEEN SET ASIDE, THERE WAS NO NECESSITY OF CHALLENGING REVISIONAL ORDER OF COMMISSIONER BEFORE TRIBUNAL. WHETHER ON FACTS, MISCONSTRUCTION OF ORDER OF COMMISSIONER BY ASSESSEE AND NOT FILING AN APPEAL AGAINST IT WITHIN PRESCRIBED TIME WAS WRONG BUT SAME COULD NOT BE CONSIDERED TO BE MALA FIDE OR WITH ANY ULTERIOR PURPOSE. HELD, YES, WHETHER, THEREFORE, A CASE FOR CONDONATION OF DELAY IN FILING APPEAL BEFORE TRIBUNAL WAS MADE OUT. HELD, YES.' 6. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH (SUPRA), WE CONDONE THE DELAY IN FILING THE P RESENT APPEALS AND ALL THE APPEALS ARE ADMITTED FOR ADJUDI CATION ON MERIT. 7. BUT FOR THE AMOUNTS, THE GROUND RAISED BY THE ASSESSEES IS IDENTICAL AND COMMON WHICH IS AS FOLLO WS: 'THE LEARNED CIT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IS NOT JUSTIFIED IN HOLDING THAT THE ASSESSING OFFICER HAS ERRED IN NOT MAKING THE DISALLOWANCE U/S. 40A(3) IN RESPECT OF CASH PAYMENTS AND, THEREFORE, THE ORDER U/S. 263 IS NOT VALID.' 8. FACTS OF THE CASES ARE THAT OPERATIONS U/S. 133A WERE CONDUCTED ON 25.2.2009 SRI U. VENKATESWARLU, ON BEHALF OF THE ASSESSEE-GROUP, IN HIS STATEMENT U/S 131 ON 26-03-2009, DURING THE COURSE OF POST SURVEY IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 5 PROCEEDINGS, CLEARLY STATED THAT ' ... THE COMPLETE DETAILS OF LAND TRANSACTIONS ALONG WITH THE BANK ACCOUNT STATE MENTS SHALL BE FURNISHED IN 15 DAYS TIME AS THE SAME HAVE TO BE OBTAINED FROM SUB-REGISTRAR'S OFFICE AND RESPECTIVE BANKS. AFTER OBTAINING THE ABOVE INFORMATION, WE SHALL WOR K OUT THE INVESTMENTS AND PROFITS EARNED FROM THE REAL ES TATE BUSINESS AND PAY TAXES ACCORDINGLY ....'. 9. IN HIS STATEMENT ON 29-04-2009, HE STATED THAT '... .. WE HAVE GATHERED ALL RELEVANT INFORMATION FROM THE SUB-REGISTRAR'S OFFICE AND WORKED OUT THE INCOMES EARNED IN THE HANDS OF OUR FAMILY MEMBERS FOR DIFFERENT ASSESSMENT YEARS AFTER DULY CONSIDERING A LL THE TRANSACTIONS THAT HAVE TAKEN PLACE IN OUR NAMES DURING DIFFERENT FINANCIAL YEARS. BASED ON THE WORKING, I AM HEREWITH SUBMITTING COMPUTATION STATEMENTS OF INCOME AND TAX IN THE NAMES OF OUR FAMILY MEMBERS, THE DETAILS OF WHICH ARE AS UNDER: NAME A.Y. TOTAL INCOME TAXES GONUGUNTA VENKATESWARLU 2008-09 9,35,938 2,97,600 2009-10 4,45,438 48,000 GONUGUNTA SRINIVASA RAO 2005-06 1,08,000 10,000 2007-08 3,35,000 26,610 2008-09 7,37,500 2,17,630 2009-10 15,21,825 4,26,590 UPPUTURI VENKATESWARLU 2007-08 5,30,877 1,69,870 2008-09 3,39,000 67,790 2009-10 14,85,000 4,23,900 GONUGUNTA VENKATA SUSEELA 2004-05 1,15,150 15,500 2005-06 1,20,000 16,250 2007-08 2,00,000 17,800 2008-09 4,60,000 1,11,890 2009-10 5,00,000 68,560 UPPUTURI DHANALAKSHMI 2004-05 1,15,150 15,500 2005-06 1,20,000 16,250 2007-08 2,00,000 17,800 2008-09 4,60,000 1,11,890 2009-10 5,00,000 68,560 THE TOTAL INCOMES WORKED OUT IN DIFFERENT HANDS IS RS. 92,28,878 AND TAX THEREON IS RS. 21,50,000 APPROXIMATELY. TODAY WE HAVE PAID RS. 5,00,000/-. I AM HEREWITH SUBMITTING COPIES OF CHALLANS. I REQU EST IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 6 YOU TO GRANT US TIME TO PAY THE BALANCE RS. 16,50,000/- IN THE NEXT THREE MONTHS 10. ACCORDINGLY THE ASSESSEE GROUP FILED RETURNS OF INCOME, STICKING ON TO THE COMMITMENTS MENTIONED AB OVE. IN FACT, IN ORDER TO MATCH THE TAXES AGREED TO BE P AID, THEY EVEN DECLARED HIGHER INCOME IN SOME CASES, AS SHOWN BELOW: NAME A.Y. INCOME OFFERED DURING SURVEY TAX OFFERED DURING SURVEY INCOME ADMITTED TAX ADMITTED U. DHANALAKSHMI 2009-10 5,00,000 68,560 6,27,450 6 8,560 U. VENKATESWARLU 2007-08 5,30,877 1,69,870 5,30,877 1,76,560 U. VENKATESWARLU 2009-10 15,85,000 4,23,910 15,56,5 70 4,23,910 G. SRINIVASA RAO 2009-10 15,21,825 4,26,590 15,54,1 50 4,26,590 11. BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS, EACH OF THE ASSESSEE FILED A LETTER ST ATING AS UNDER: 'IT IS SUBMITTED THAT BEFORE THE INCOME TAX SURVEY TOOK PLACE IN OUR CASE ALL MY RECEIPTS & PAYMENTS WERE UNORGANIZED. HOWEVER ON THE BASIS OF INFORMATION AVAILABLE WITH ME I COULD PREPARE THE REQUIRED INFORMATION LIKE BUSINESS TRANSACTIONS PURCHASE & SALES, DEVELOPMENT CHARGES LIKE PAYMENTS TO LABOUR, PURCHASE OF SAND, GRAVEL, BRICKS, CEMENT ETC., AND SUBMITTED TO YOU. ALL THE ABOVE INFORMATION IS ONLY ON THE BASIS OF LOOSE SLIPS/NOTINGS ON PAYMENTS ONLY. BECAUSE OF THIS UNORGANIZED ACTIVITIES I HAVE NOT MAINTAINED VOUCHERS, BILLS ETC., SINCE I COULD NOT KEPT THEM IN MY PERSONAL CUSTODY. DURING THE COURSE OF SURVEY ON THE BASIS OF MY ASSETS ACQUIRED/AVAILABLE, DISCLOSED THE INCOME AND PAID TAXES AS PER THE AGREEMENT WITH THE DEPARTMENT. IN MY LINE OF BUSINESS I.E., ACQUIRING LANDS AND DEVELOPMENT PLOTTING THEM BY PROVIDING FACILITIES LIKE ROADS, DRAINAGE SYSTEM, ELECTRIFICATION & VARIOUS TENSIONS INVOLVED I CANNOT EXTRACT / PROVIDE THE VOUCHERS AND BILLS. IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 7 ALL THE ASSETS WERE DISCLOSED AND BEYOND THAT WE DO NOT ACQUIRE/HOLD. I REQUEST THE INCOME TAX OFFICE TO TAKE THE INFORMATION SUBMITTED INTO CONSIDERATION AND COMPLETE THE ASSESSMENT. SINCE I HAVE COMPLIED WITH MY SWORN DEPOSITION DURING THE COURSE OF SURVEY AND SUBSEQUENT PROCEEDINGS, THE ABOVE INFORMATION MAY KINDLY BE TAKEN INTO ACCOUNT AND COMPLETE THE ASSESSMENT.' 12. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT ACCEPTING THE INCOME RETURNE D BY RESPECTIVE ASSESSEE. 13. THE CIT ASSUMED JURISDICTION AND DIRECTED THE ASSESSING OFFICER TO APPY THE PROVISIONS OF S. 40A( 3) TO THE CASH PAYMENTS LISTED OUT IN THE ORDER U/S. 263 OF T HE ACT. THE CIT INCLUDED IN THE LIST SOME OF THE REPAYMENTS OF ADVANCES ALSO. THE ASSESSING OFFICER WHILE GIVING EFFECT TO THE ORDER U/S. 263 OF THE ACT COMPLETED THE ASSESSM ENT U/S. 143(3) R.W.S. 263 AND DISALLOWED THE ENTIRE AM OUNT LISTED OUT IN THE ORDER U/S. 263 OF THE ACT. THE REPAYMENTS OF ADVANCES WERE ALSO DISALLOWED U/S. 40 A(3). THE ASSESSING OFFICER HAD FOLLOWED THE DIRECTIONS O F THE COMMISSIONER AND PASSED A CONSEQUENTIAL ORDER GIVIN G EFFECT TO THE ORDER U/S. 263 OF THE ACT. AGGRIEVED , THE ASSESSEES ARE IN APPEAL BEFORE US AGAINST THE ORDER PASSED U/S. 263 OF THE ACT. 14. THE LEARNED COUNSEL POINTED OUT THAT THE CIT FAILED TO APPRECIATE THAT THE PAYMENTS WERE ENTERED AS ' S IMPLE PURCHASES' WITHOUT GIVING ANY DETAILS OF ITEMS, REC IPIENTS, ETC. THE LEARNED COUNSEL ALSO POINTED OUT THAT THE PROVISIONS OF S. 40A(3) UP TO A.Y. 2008-09 WARRANT DISALLOWANCE @ 20% ONLY WHEREAS THE ASSESSING OFFIC ER HAD DISALLOWED THE ENTIRE AMOUNTS LISTED OUT IN THE ORDER IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 8 U/S. 263 OF THE ACT. THE LEARNED COUNSEL ALSO BROU GHT TO OUR NOTICE THAT THE SWORN STATEMENT CLEARLY INDICAT ING THAT NO BOOKS ARE MAINTAINED AND FIGURES OF INCOME AND THE TAX PAYABLE THEREON WERE QUANTIFIED IN THE COUR SE OF POST SURVEY PROCEEDINGS. IT WAS STATED THAT THE AS SESSEE GROUP FILED THE RETURNS ADMITTING THE INCOME AS DEC LARED IN THE SWORN STATEMENT DURING THE POST SURVEY PROCEEDINGS. THE CASH BOOKS WERE PREPARED SUBSEQUE NT TO SURVEY ON THE BASIS OF LOOSE SHEETS AND INCOMES AS AGREED UPON WERE OFFERED TO TAX. HENCE IT WAS ARGU ED THAT THE CIT ERRED IN MAKING SOME MORE DISALLOWANCE/ADDI TION ON THE SAME ISSUE. 15. THE LEARNED COUNSEL SUBMITTED THAT THE CIT IS NOT JUSTIFIED IN MAKING CERTAIN DISALLOWANCES/ADDITIONS IN THE CASE OF AGREED ADMISSIONS DURING THE COURSE OF SURV EY. HE FURTHER STATED THAT UNLESS THE ADMISSION IS FOUN D TO BE FRAUDULENT, NEITHER OF THE PARTIES CAN GO BACK ON S UCH ADMISSION. FOR THIS PURPOSE, THE LEARNED COUNSEL R ELIED ON THE DECISION OF ITAT IN THE CASE OF SATYAM CONSTRUCTIONS PVT. LTD. VS. DCIT IN ITA NO. 895/HYD / 1995 DATED 17.10.2000 AND ON THE DECISION OF TV CHAKRAVARTHY VS. CIT, IN ITA NO. 883/HYD/2008 DATED 16.7.2010. 16. THE LEARNED COUNSEL WHILE REFERRING TO THE STATEMEN T FILED BEFORE THE AUTHORITIES SUBMITTED THAT THE LEA RNED CIT TOOK VARIOUS AMOUNT IN THE SWORN STATEMENTS AND CONSIDERED THEM FOR DISALLOWANCE U/S. 40A(3) WHICH ARE NOT EVEN PURCHASES. FOR EXAMPLE, THE TABLE GIVEN B Y THE CIT IN PAGE 2 OF HIS ORDER FOR A.Y. 2007-08 IN THE CASE OF SMT. GONUGUNTA SUSEELA IS AS UNDER: IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 9 S. NO. DATE OF PAYMENT PERSONS TO WHOM THE PAYMENT WAS MADE IN EXCESS OF RS. 20,000 AMOUNT PAID (RS.) 1. 15.04.2006 CHALLA RANGASWAMY 50,000 2. 14.09.2006 PURCHASE 35,200 TOTAL 85,200 17. IT WAS EXPLAINED THAT THE ASSESSEE HAS CLAIMED ONLY AN AMOUNT OF RS. 35,200 AS PURCHASES IN HER STATEME NT WHEREAS THE OTHER AMOUNT OF RS. 50,000 WAS TAKEN FR OM THE CASH-FLOW STATEMENT. THESE ARE ADVANCES RECEIV ED AND ADVANCED PAID AND NOT AMOUNTS OF PURCHASES SO A S TO DISALLOW U/S. 40A(3) OF THE ACT. LIKEWISE, IN A LL OTHER CASES THE AMOUNTS OF PURCHASES AND OTHER AMOUNTS CONSIDERED BY THE LEARNED CIT ARE LISTED AS UNDER: NAME OF THE ASSESSEE A.Y. PURCHASES (RS.) ADVANCES (RS.) SMT. GONUGUNTA SUSEELA 2009-10 - 16,00,000 SRI UPPUTURI VENKATESWARLU 2007-08 4,10,040 - 2009-10 16,57,620 - SRI GONUGUNTA VENKATESWARLU 2009-10 2,63,450 5,70,000 SRI GONUGUNTA SRINIVASA RAO 2005-06 261120 50,000 2007-08 384600 260000 2009-10 75480 2305000 SMT. UPPUTURI DHANALAKSHMI 2008-09 1667051 7,00,000 2009-10 458690 1569250 18. IT WAS SUBMITTED THAT THE LEARNED CIT DID NOT EXAMINE WHETHER THE AMOUNTS ARE ADVANCES OR PURCHAS ES CLAIMED IN THE PROFIT AND LOSS A/C. THUS, THE ORD ER OF THE CIT DIRECTING TO DISALLOW THE ENTIRE AMOUNT IS ITSELF ERRONEOUS. THE ASSESSING OFFICER WITHOUT CONSIDERI NG THE PURCHASES, DISALLOWED THE ENTIRE AMOUNTS AS DIRECTE D BY THE CIT. 19. ALTERNATELY, THE LEARNED COUNSEL SUBMITTED THAT WHEN THE INCOME IS ESTIMATED NO FURTHER DISALLOWANC ES ARE WARRANTED U/S. 40A(3). FOR THIS PROPOSITION, H E RELIED ON THE DECISION OF ARMOUR CHEMICALS LTD. VS. JCIT, 17 IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 10 SOT 467 (MUM) (TRIB), CIT VS. HINDUSTAN EQUIPMENTS PVT. LTD. (213 TAXMAN 61)(MP), INDWELL CONSTRUCTIONS VS. CIT (232 ITR 776) AND VARIOUS OTHER DECISIONS ON THE IS SUE. 20. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT. 21. WE HAVE HEARD BOTH PARTIES. WE FIND THAT THE ASSESSING OFFICER WAS FULLY AWARE OF THE SURVEY OPE RATIONS AND THE INCOME WAS ESTIMATED ON THE BASIS OF LOOSE SLIPS AND PURCHASE AND SALE DOCUMENTS DURING THE POST SUR VEY PROCEEDINGS ITSELF. THE ESTIMATE WAS NOT BASED ON ANY BOOKS OF ACCOUNT BUT THE INCOME WAS ADMITTED ON THE BASIS OF LOOSE SLIPS AND THE ASSESSEES PAID TAXES A S AGREED. THE ASSESSING OFFICER ACCEPTED THE INCOMES RETURNED AS THE ASSESSEE HAD ADMITTED THE INCOMES A ND DECLARED IN THE SWORN STATEMENTS DURING THE POST SU RVEY PROCEEDINGS. THE ASSESSING OFFICER HAD FULLY APPLI ED HIS MIND AND ACCEPTED THE INCOMES RETURNED AND PASSED ORDERS U/S. 143(3) OF THE ACT. HENCE, WE ARE OF TH E OPINION THAT THE CIT IS NO JUSTIFIED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT. 22. BEFORE COMING TO THE LEGAL ASPECTS OF THE CASE, WHA T WE OBSERVED IS THAT THE LEARNED CIT CONSIDERED EVEN ADVANCES ALSO FOR DISALLOWANCE U/S. 40A(3). MANY O F THE AMOUNTS ARE MENTIONED IN THE CASH-FLOW STATEMENT PREPARED BY THE ASSESSEES POST SURVEY OPERATIONS TO EXPLAIN INCOME RECEIVED AND ASSETS IDENTIFIED. EXC EPT THE PURCHASES, THE REST OF THE AMOUNTS CANNOT BE DISALL OWED U/S. 40A(3). THEREFORE, INVOKING THE PROVISIONS OF SECTION 40A(3) ON ADVANCES IS NOT CORRECT UNDER THE FACTS O F THE CASE. MOREOVER, EVEN WITH REFERENCE TO THE PURCHA SES IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 11 ALSO THERE IS NO EVIDENCE ON RECORD TO SHOW THAT WH ETHER THE AMOUNTS ARE PAID IN VIOLATION OF PROVISIONS OF S. 40A(3). WITHOUT EXAMINING THE PAYMENTS IN DETAIL, WE ARE OF THE OPINION, THE CIT CAME TO A WRONG CONCLUSION THAT THE ASSESSEES HAD VIOLATED THE PROVISIONS OF S. 40A (3). IT IS THE CASE OF SURVEY AND ADMITTEDLY ASSESSEES HAD NOT MAINTAINED BOOKS OF ACCOUNT. THEREFORE, THE ASSESS ING OFFICER ASKED FOR CASH-FLOW STATEMENT AND ON THE BA SIS OF SUCH STATEMENTS THE ASSESSEES ADMITTED INCOME. SIN CE THE ISSUE OF PURCHASES DID NOT ARISE IN THE COURSE OF SURVEY NOR ANYTHING IS IDENTIFIED THAT THE ASSESSEE S HAD PAID ANY AMOUNT IN VIOLATION OF PROVISIONS OF S. 40 A(3), THE ASSESSING OFFICER DID NOT INVOKE THE PROVISIONS OF THAT SECTION AND ACCEPTED THE ADMITTED INCOMES. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE CIT WITHOUT AN Y BASIS ON RECORD INVOKED THE PROVISIONS OF S. 40A(3) AND T HAT TOO INCLUDED CERTAIN AMOUNTS WHICH CANNOT BE DISALLOWED U/S. 40A(3). THEREFORE, WE ARE OF THE OPINION THAT THE ORDERS OF THE CIT PER SE ARE NOT CORRECT ON FACTS. 23. IN THE CASE OF CIT VS. ARVIND JEWELLERS [259 ITR 50 2 (GUJ)], THE GUJARAT HIGH COURT HELD THAT THE FINDIN G OF FACT BY THE TRIBUNAL WAS THAT THE ASSESSEE HAD PRODUCED RELEVANT MATERIAL AND HAD OFFERED EXPLANATIONS IN PURSUANCE OF THE NOTICES ISSUED UNDER S. 142(1) AS WELL AS S. 143(2) OF THE ACT, THAT AFTER CONSIDERING THE MA TERIAL AND EXPLANATIONS, THE AO HAD COME TO A DEFINITE CONCLUSION, THAT SINCE THE MATERIAL WAS THERE ON RE CORD AND THE SAID MATERIAL WAS CONSIDERED BY THE AO AND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT A DIF FERENT VIEW COULD BE TAKEN SHOULD NOT BE THE BASIS FOR AN ACTION UNDER S. 263. IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 12 24. IN THE CASE OF PAUL MATHEWS & SONS VS. CIT [263 ITR 101 (KERALA)], THE KERALA HIGH COURT HELD THAT THE STATEMENT ELICITED DURING THE SURVEY OPERATION HAD NO EVIDENTIARY VALUE AND THE AO WAS WELL AWARE OF THIS , THAT AT THE SAME TIME, THE ASSESSEE HAVING FOUND THAT TH ERE WERE SOME OMISSIONS ON ITS PART, OFFERED CERTAIN AM OUNTS AS ADDITIONAL INCOME FOR THE YEARS IN QUESTION AND GAVE A WRITTEN OFFER TO THE ADDL. CIT, THAT IT WAS AFTER V ERIFYING THE ACCOUNT BOOKS AND VARIOUS MATERIALS GATHERED IN THE SURVEY AND AFTER CONSIDERING THE OFFER MADE BY THE ASSESSEE THAT THE AO HAD EXERCISED A JUDICIAL DISCR ETION IN THE MATTER WHILE COMPLETING THE ASSESSMENT, THAT IN THE LIGHT OF THE VOLUNTARY DISCLOSURE IN THE LETTER GIV EN IN WRITING BY THE ASSESSEE THE FACTS GIVEN BY IT HAD B EEN VERIFIED WITH THE BOOKS OF ACCOUNT AND IT WAS ONLY AFTER CONSIDERATION OF THE VARIOUS ASPECTS OF THE MATTER AND RELATED FACTS THAT THE AO ACCEPTED THE OFFER MADE B Y THE ASSESSEE, THAT IN SUCH CIRCUMSTANCES, THE VIEW TAKE N BY THE AO COULD NOT BE SAID TO BE PREJUDICIAL TO THE R EVENUE NOR COULD IT BE SAID TO BE ERRONEOUS. 25. IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [243 ITR 83 (SC)], THE SUPREME COURT HELD THAT THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE ' HAD TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASS ED BY THE AO, THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN AO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND I T HAD RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS WER E POSSIBLE AND THE AO HAD TAKEN ONE VIEW WITH WHICH T HE CIT DID NOT AGREE, IT COULD NOT BE TREATED AS AN ER RONEOUS IT A NO. 1547/HYD/2013 & ORS. SMT. GONUGUNTA SUSEELA & ORS. ======================= 13 ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ITO WAS UNSUSTAINABLE IN LAW. 26. IN THE LIGHT OF THE ABOVE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER APPLIED HIS MIND TO THE FACTS OF THE CASES AND THE ASSESSEES MADE SWORN STATEMENTS AND ADMITTED THE INCOME. TAXES THEREON WERE ALSO PAID. IN THESE CIRCUMSTANCES, THE CIT IS NOT CORRECT IN ASSU MING JURISDICTION U/S. 263 OF THE ACT. WE, THEREFORE, S ET ASIDE THE ORDERS OF THE CIT PASSED U/S. 263 OF THE ACT AN D UPHOLD THE ORDER OF THE ASSESSING OFFICER. THE GR OUND TAKEN BY THE ASSESSEES IN ALL THE ABOVE APPEALS IS ANSWERED IN FAVOUR OF THE ASSESSEES. 27. IN THE RESULT, APPEALS OF ALL THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 14 TH NOVEMBER, 2014. SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 14 TH NOVEMBER, 2014 TPRAO COPY FORWARDED TO: 1. SMT. GONUGUNTA SUSEELA C/O. M/S. CH. PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO. 1, ASHOKNAGAR, HYDERABAD-500 020. 2. SRI UPPUTURI VENKATESWARLU, 3. SRI GONUGUNTA VENKATESWARLU 4. SRI GONUGUNTA SRINIVASA RAO 5. SMT. UPPUTURI DHANALAKSHMI 6. THE CIT, GUNTUR. 7. THE ADDL. CIT, RANGE-2, GUNTUR. 8. THE ITO, WARD-2, ONGOLE. 9. THE DR B BENCH, ITAT, HYDERABAD