Poonawalla Investments & Industries Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 1685/PUN/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7679 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-04-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 28-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAJSHEKHAR S ABHYANKAR
• Keywords: Search and seizure; Earning of tax free income; Competent authority; Block assessment; Revised return
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1685/PUN/2015 / ASSESSMENT YEAR : 2012-13 POONAWALLA INVESTMENTS AND INDUSTRIES PVT. LTD., SAROSH BHAVAN, 16-B/1, DR. AMBEDKAR ROAD, PUNE 411 001 PAN : AAACP3265B . /APPELLANT VS. DCIT, CENTRAL CIRCLE-1(1), PUNE . / RESPONDENT ASSESSEE BY : SHRI RAJSHEKHAR S. ABHYANKAR REVENUE BY : SHRI ACHAL SHARMA / DATE OF HEARING : 12.04.2018 / DATE OF PRONOUNCEMENT: 18 .04.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-11, PUNE, DATED 26-10-2015 FOR THE ASSESSMENT YEAR 2 012-13. 2. GROUNDS/MODIFIED GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : ORIGINAL GROUNDS : SUBJECT : MODIFIED GROUND OF APPEAL THE APPELLANT CRAVES LEAVE TO MODIFY THE GROUND NO. 1 (A) TO BRING OUT THE REAL AND PRECISE CONTROVERSY IN THE APPEAL. NO INVE STIGATION INTO FRESH FACTS IS NECESSARY. WE PRAY THAT WE MAY BE ALLOWED TO MODIFY AND ARGUE THE MODIFIED GROUND AS UNDER: ORIGINAL GROUND OF APPEAL NO.1(A)- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED 'C IT (A)' ERRED IN DISALLOWING A SUM OF RS. 24,69,760/- BEING DISALLOW ANCE U/S. 14A ON THE BASIS OF PROPORTION OF EXEMPT INCOME (OTHER THA N LONG TERM CAPITAL GAIN) TO TOTAL EXEMPT INCOME. 2 MODIFIED GROUND OF APPEAL NO.-1(A) - THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT NO DISALLOWANCE U/S.14A (2) R.W.RULE 8D C AN BE SUSTAINED IN THE ABSENCE OF A SPECIFIC RECORDING OF SATISFACTION BY THE A. A., BASED ON COGENT MATERIAL AND HAVING REGARD TO THE ACCOUNTS O F THE ASSESSEE, TO THE EFFECT THAT THE CLAIM OF THE ASSESSEE IS NOT CORREC T. MODIFIED GROUNDS : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED 'CIT (A)' ERRED IN : 1. A) DISALLOWING A SUM OF RS 24,69,760/- BEING DISALLOWANCE U/S. 14A ON THE BASIS OF PROPORTION OF EXEMPT INCOME (OTHER THA N LONG TERM CAPITAL GAIN) TO TOTAL EXEMPT INCOME. 2. A) NOT GRANTING SET OFF OF THE AMOUNT OFFERED TO WARDS CONTINGENCY OF RS.60,00,000/- AGAINST DISALLOWANCE U /S. 14A. HE ERRED IN CONFIRMING THAT CONTINGENCY OF RS. 60,00,000/- WAS CORRECTLY ADDED BY THE LEARNED A.O. EVEN THOUGH THE LEARNED A.O. HAD NOT IDENTIFIED ANY FURTHER DISALLOWANCE. B) ALTERNATELY, THE LEARNED CIT (A) OUGHT TO HAVE G RANTED RELIEF BY REDUCING THE TOTAL INCOME ASSESSED BY RS.60,00,000/ - BEING THE CONTINGENCY OFFERED TO TAX IN THE RETURN OF INCOME AS NO EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH AND/OR IN ASSESSM ENT PROCEEDINGS REGARDING UNDISCLOSED INCOME. 3. THE LEARNED (IT (APPEALS) ERRED IN HOLDING THAT 'INCOME OFFERED DURING SEARCH AND SEIZURE ACTION ON ACCOUNT OF CONTINGENCY HAS NOTHING TO DO WITH STATUTORY DISALLOWANCE U/S.14A AND THERE IS NO NEXUS BETWEEN DISCLOSURE ON ACCOUNT OF CONTINGENCY AND ADDITION U /S.14A. 4. THE CONFIRMING DISALLOWANCE OF RS.1,16,601/ - BEING CONTRIBUTION TO GROUP GRATUITY SCHEME. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AND WITHD RAW ANY GROUND OF APPEAL AT THE TIME OF APPEAL HEARING. 3. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF STUD FARM ACTIVITIES A ND IT BELONGS TO POONAWALLA GROUP OF CASES. THE CASES OF POONAWALLA GRO UP INCLUDE TWO SUB-GROUPS (1) INCLUDES FAMILY MEMBERS OF SHRI CYPRUS S OLI POONAWALLA (IN SHORT CSP) AND THE GROUP CONCERNS UNDER H IS CONTROL AND MANAGEMENT (WITH M/S. SERUM INSTITUTE OF INDIA LTD. A S THE FLAGSHIP COMPANY AND (2) OTHER SUB-GROUP INCLUDES FAMILY MEM BERS OF SHRI ZAVAREH SOLI POONAWALLA (IN SHORT ZSP) AND THE GROUP C ONCERNS UNDER HIS CONTROL AND MANAGEMENT, WHICH IS MAINLY ENGAGED IN STUD FARM ACTIVITIES. THERE WAS SEARCH U/S.132 OF THE ACT ON THE ASSESSEES GROUP OF CASES ON 21-06-2011. SEARCH RESULTED IN ADM ISSION OF 3 UNDISCLOSED INCOME OF RS.141.796 CRORES. VARIOUS DOCUMENTS WERE FOUND AND SEIZED BY THE DEPARTMENT. ASSESSEE FILED THE R ETURN OF INCOME ON 28-09-2012 DECLARING INCOME OF RS.2,51,60,033/-. I T INCLUDES A BUFFER DISCLOSURE OF RS.60 LAKHS FOR OMISSION AND COMMISSION IF ANY. DURING THE ASSESSMENT PROCEEDINGS U/S.1 43(3) OF THE ACT, AO MADE VARIOUS DISALLOWANCES U/S.14A OF THE ACT, GRATUITY PAYMENT, ETC. APART FROM OTHERS AND FINALLY ASSESSED THE INCOME AT RS.14,98,18,833/-. CIT(A) PARTLY ALLOWED THE APPEAL OF THE A SSESSEE RELIED ON THE DECISIONS OF HIS PREDECESSOR/TRIBUNAL. 4. AGGRIEVED WITH THE ORDER OF CIT(A) THE ASSESSEE IS IN A PPEAL BEFORE THE TRIBUNAL WITH THE GROUNDS/MODIFIED GROUNDS EXTRACTED ABOVE . 5. FROM THE ABOVE GROUNDS/MODIFIED GROUNDS, THE ISSUES W HICH REQUIRE ADJUDICATION INCLUDES (1) IF THE DISALLOWANCE MADE BY THE AO U/S.14A R.W. RULE 8D(2) OF THE I.T. RULES, 1962 IS SUSTAINABLE WHEN THERE IS NO VALID SATISFACTION FOR INVOKING THE SAID PROVISION S OF THE ACT/RULES, (2) WHEN THE SAID DISALLOWANCE U/S.14A OF THE ACT IS UNSUSTAINABLE IN LAW, SHOULD THERE BE ANY REQUIREMENT OF GR ANTING SET OFF OF THE SAID DISALLOWANCE AGAINST THE BUFFER DISCLOSURE OF RS .60 LAKHS OFFERED BY THE ASSESSEE DURING SEARCH AND SEIZURE ; (3) IN THE ABSENCE OF ANY CLEAR OMISSIONS OR COMMISSIONS OR DISCREPANCIES MADE O UT BY THE AO, IF THE SAID SUM OF BUFFER DISCLOSURE OF RS.60 LAKHS COULD BE REDUCED FROM THE RETURNED INCOME BY THAT AMOUNT OF RS.60 LAKHS AND (4) IF THE CLAIM OF GRATUITY IS ALLOWABLE IF THE SCHEME IS NOT APPROVED B Y THE COMPETENT AUTHORITY. WE SHALL TAKE UP THE ISSUE-WISE ADJUDICATION IN THE FOLLOWING PARAGRAPHS. 4 6. FIRST ISSUE : IF THE DISALLOWANCE MADE BY THE AO U/S.14A R.W. RULE 8D(2) OF THE I.T. RULES, 1962 IS SUSTAINABLE WHEN THERE IS NO SATISFACTION INVOKING THE PROVISIONS OF THE ACT/RULES ? BRINGING OUR ATTENTION TO THE ASSESSMENT ORDER IN THIS R EGARD, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON SIMILAR SATISFAC TION MENTIONED BY THE AO, THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NOS. 245 TO 250/PUN/2016 FOR A.YRS. 2006-07 TO 2011-12, DATED 28-02-2018 DELETED THE DISALLOWANCE MADE U/S.14A OF THE A CT. IN THIS REGARD, HE READ OUT THE FOLLOWING LINES FROM THE ASSESSMENT ORDER : 5.1 . . . . . . . . IT IS DIFFICULT TO ACCEPT THE PROPOSITION THAT ALL THE TAX FREE INCOME HAS BEEN EARNED WITHOUT INCURRING THESE EXPE NDITURES AND THESE EXPENDITURES WERE INCURRED ONLY FOR EARNING TAXABLE INCOME. THEREFORE, I AM SATISFIED THAT THE ASSESSEE HAS NOT MADE ADEQUAT E DISALLOWANCE AS MANDATED U/S.14A OF THE I.T. ACT AND THEREFORE, THE CASE OF THE ASSESSEE IS A FIT CASE FOR COMPUTATION OF THE SAID DISALLOWA NCE U/S.14A OF THE I.T. ACT. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, ON SIMILAR SAT ISFACTION, THE TRIBUNAL HELD IN FAVOUR OF THE ASSESSEE IN THE ASSESSE ES OWN CASE. THEREFORE, THE ISSUE STANDS ALLOWED IN FAVOUR OF THE ASSESSEE. 7. LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF THE AO AND THE CIT(A). HE ALSO RELIED ON THE FOLLOWING JUDGMENTS ON THE ISSUE : 1. DEVARSONS INDUSTRIES PVT. LTD. VS. ACIT 84 TAXMA NN.COM 244 (GUJARAT) 2. INDIABULLS FINANCIAL SERVICES LTD. VS. DCIT 76 T AXMANN.COM 268 (DELHI) 8. AFTER HEARING BOTH THE SIDES ON THIS ISSUE AND ON PER USING THE ORDERS OF THE REVENUE, WE FIND THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF ORDER OF TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.YRS. 2006-07 & 2011-12. WE THEREFORE FIND TO RELEVANT T O EXTRACT THE FINDING GIVEN ON THIS ISSUE IN THOSE ASSESSMENT YEARS : 5 27. IN CONNECTION WITH GROUND NO.1, LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT AO FAILED TO RECORD SATISFACTION WHI CH IS REQUIRED WHILE INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R .W. RULE 8D OF THE I.T. RULES, 1962. BRINGING OUR ATTENTION TO THE CONTENT S OF PARA NO.5.1 OF THE ASSESSMENT ORDER, LD. COUNSEL SUBMITTED THAT THE AO FAILED TO RECORD THE SATISFACTION BEFORE INVOKING THE PROVISIONS U/S.14A OF THE ACT. FURTHER, LD. AR READ OUT THE RELEVANT LINES FROM THE SAID PA RA OF THE ASSESSMENT ORDER. FOR THE SAKE OF COMPLETENESS, WE PROCEED TO EXTRACT THE SAME AS UNDER : 5.1. . . . . . . . IT IS DIFFICULT TO ACCEPT THE PROPOSITION THAT ALL THE TAX FREE INCOME HAS BEEN EARNED WITHOUT INCURRING THESE EXPENDITURE S AND THESE EXPENDITURE WERE INCURRED ONLY FOR EARNING TAXABLE INCOME. THEREFORE, I AM SATISFIED THAT THE ASSESSEE HAS NOT MADE ADEQUATE DISALLOWANCE AS MANDATED U/S.14A OF THE I.T. ACT AN D THEREFORE, THE CASE OF THE ASSESSEE IS A FIT CASE FOR COMPUTAT ION OF THE SAID DISALLOWANCE U/S.14A OF THE I.T. ACT. 28. FURTHER, LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ABOVE RECORDED SATISFACTION , IS EXTREMELY GENERAL AND IT FALLS SHORT OF THE LEGAL REQUIREMENT AS PROVIDED IN THE JUDGEMENT OF HONBLE APEX COURT IN THE CASE OF GODREJ AND BOYCE MANUFACTURING COMPANY LTD VS. DCIT 394 ITR 448 (SC). CONTENTS OF PARA NO.37 OF THE SAID JUDGM ENT IS RELIED HEAVILY AND PRAYED FOR DELETION OF THE ADDITION MADE BY THE AO INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. 29. LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF THE AO/CIT(A). 30. WE HEARD BOTH THE PARTIES ON THE ISSUE RELATING TO THE ISSUE OF RECORDING OF SATISFACTION AND PERUSED THE ABOVE EXT RACTED SATISFACTION RECORDED BY THE AO ON THIS ISSUE. WE FIND THE LEGA L POSITION WAS EXPLAINED BY THE HONBLE APEX COURT AND THE PARA NO .37 OF THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF GODREJ AND BOY CE MANUFACTURING COMPANY LTD. (SUPRA) ARE RELEVANT. HONBLE SUPREME COURT EXPLAINED THE PROVISIONS OF SUB-SECTION (2) AND (3) OF SECTION 14 A OF THE ACT. FOR THE SAKE OF COMPLETENESS, WE PROCEED THE EXTRACT THE SA ME HERE AS UNDER : 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUAT ION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESSMENT YEAR 2002-03. SUB-SECTIONS (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES MERELY PRESCRIBE A FORMULA FOR DETERMI NATION OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATI ON WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM O F THE ASSESSEE. WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICA TION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUD GMENT OF THE ASSESSING OFFICER, WHAT THE LAW POSTULATES IS THE R EQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING R EGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE . IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AND (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOUL D BECOME APPLICABLE. (EMPHASIS SUPPLIED). 31. THE ABOVE RATIO WAS ADOPTED BY THE PUNE BENCH O F THE TRIBUNAL IN THE CASE OF CAPGEMINI TECHNOLOGY SERVICES INDIA LIMI TED, (IN THE MATTER OF IGATE COMPUTER SYSTEMS LIMITED, (FORMERLY PATNI COMP UTER SYSTEMS LIMITED AMALGAMATED WITH IGATE GLOBAL SOLUTIONS LIM ITED AND NAME CHANGED) VS. DCIT VIDE ITA NOS. 216 AND 360/PUN/201 5, ORDER DATED 25-01-2018 AND ALLOWED THE ISSUE IN FAVOUR OF THE A SSESSEE. FOR THE 6 SAKE OF COMPLETENESS, RELEVANT OPERATIONAL PARAS AR E EXTRACTED HERE AS UNDER : 34. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ASSESSING OFFICER WHILE PASSING THE AS SESSMENT ORDER IN PARA 10 HAD OBSERVED THAT THE ASSESSEE HAD EARNE D SIGNIFICANT AMOUNT OF TAX FREE DIVIDENDS AND IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS DISALLOWED SUM OF RS.50 LAKHS UNDER SE CTION 14A OF THE ACT. THEN, REFERENCE IS MADE TO THE NOTE FILED BY THE ASSESSEE ON EXPENDITURE DISALLOWABLE UNDER SECTION 14A OF TH E ACT. THE ASSESSING OFFICER THEREAFTER, TAKES NOTE OF THE CON TENTS OF SAID EXPLANATION AND OBSERVED AS UNDER:- I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE AS SESSEE. IT IS OBSERVED THAT APART FROM INVESTMENTS IN THE OVERSEA S SUBSIDIARIES (WHERE THERE IS NO TAX-FREE INCOME SINCE THE DIVIDE ND IS ALSO TAXABLE) THE INVESTMENTS MADE BY THE ASSESSEE ARE I N MUTUAL FUNDS. THE ENTIRE INVESTMENT IN MUTUAL FUND IS IN NON-EQUITY SCHEME. IN RESPECT OF INVESTMENT IN MUTUAL FUNDS, EXCEPT FOR GROWTH FUNDS, THE COMPANY RECEIVES TAX FREE DIVIDEN D. THE AMOUNT OF DIVIDEND RECEIVED BY THE COMPANY IS SUBST ANTIAL. THIS IS A CLEAR CASE FOR APPLICATION OF RULE 8D. HENCE, THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED. THE DISALLOWANCE U/S 14A IS REQUIRED TO BE MADE BY APPLYING RULE 8D. AS PER TH E WORKING OF DISALLOWANCE U/S 14A AS PER RULE 8D, THE AMOUNT OF D ISALLOWANCE COMES TO RS.5,68,32,323/-. THE ASSESSEE HAS ALREAD Y DISALLOWED RS.50,00,000/- IN THE COMPUTATION OF INCOME. 35. THE REQUIREMENT OF SECTION 14(2) OF THE ACT IS THAT THE ASSESSING OFFICER IS TO RECORD AS TO WHY THE DISALL OWANCE MADE BY THE ASSESSEE I.E. RS.50 LAKHS UNDER SECTION 14A OF THE ACT IS NOT CORRECT. THE ASSESSING OFFICER TAKES NOTE OF THE D ISALLOWANCE, CONSIDERS THE EXPLANATION OF ASSESSEE AND HOLDS THA T THE CONTENTION OF ASSESSEE CANNOT BE ACCEPTED. THE PRE LIMINARY SATISFACTION TO BE RECORDED BY ASSESSING OFFICER, B EFORE MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES, IS MISSING IN THE CASE; IN THE ABSENCE O F THE SAME, THERE IS NO MERIT IN THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HON'BL E SUPREME COURT IN GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT & ANR. (2017) 394 ITR 449 (SC). 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUAT ION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESSMENT YEAR 2002-03. SUB-SECTIONS (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES MERELY PRESCRIBE A FORMULA FOR DETERMI NATION OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATI ON WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM O F THE ASSESSEE. WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICA TION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUD GMENT OF THE ASSESSING OFFICER, WHAT THE LAW POSTULATES IS THE R EQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING R EGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE . IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AND (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOUL D BECOME APPLICABLE. (UNDERLINE PROVIDED BY US FOR EMPHASIS) 7 36. THE RATIO LAID DOWN BY THE HONBLE HIGH COURT O F DELHI IN INDIABULLS FINANCIAL SERVICES LTD. VS. DCIT (SUPRA) IS THUS, NOT APPLICABLE. THE GROUND OF APPEAL NO.3 RAISED BY TH E REVENUE IS THUS, DISMISSED. 32. FROM THE ABOVE, WE ARE OF THE VIEW THAT THE SAT ISFACTION RECORDED BY THE AO IN PARA NO.5.1 IS EXTREMELY BASED ON THE SUSPICION AND SURMISES. THE SATISFACTION ARRIVED AT BY THE AO WI TH REFERENCE TO THE ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ALSO HAVING REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IN T HAT SENSE OF THE MATTER, THE SATISFACTION RECORDED BY THE AO IS EXTREMELY GE NERIC AND WHICH FALLS SHORT OF THE LEGAL REQUIREMENT FOR ASSUMING JURISDI CTION U/S.14A OF THE ACT. CONSIDERING THE ABOVE POSITION, WE ARE OF THE VIEW THAT THE AO FAILED TO RECORD THE SUSTAINABLE SATISFACTION BEFORE INVOKIN G THE PROVISIONS OF SECTION 14A OF THE ACT. THEREFORE, THE DISALLOWANC E MADE BY THE AO IS UNSUSTAINABLE TECHNICALLY. ACCORDINGLY, THIS PART O F THE ARGUMENT OF GROUND NO.1 IS ALLOWED. WE FIND ADJUDICATION OF TH E OTHER ISSUES OF THE SAID GROUND RELATING TO MERITS BECOMES AN ACADEMIC EXERCISE. THEREFORE, THE SAME ARE DISMISSED AS ACADEMIC. FOLLOWING THE SAME PARITY OF REASONING, WE ALLOW THE FIRST ISSU E IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS.24,69,760/- MADE BY THE AO U/S.14A OF THE ACT. 9. SECOND ISSUE : WHEN THE SAID DISALLOWANCE U/S.14A OF THE ACT IS UNSUSTAINABLE ON THE GROUND OF INVALID SATISFACTION, SHOULD TH ERE BE ANY REQUIREMENT OF GRANTING SET OFF OF THE SAID DISALLOWANCE AGAINST T HE BUFFER DISCLOSURE OF RS.60 LAKHS OFFERED BY THE ASSESSEE DURING SEARCH AND SEIZURE ACTION ? 10. SINCE WE HAVE DECIDED THE ADDITION MADE BY THE AO U/ S.14A OF THE ACT AS UNSUSTAINABLE IN LAW, THE QUESTION OF SET-OFF AG AINST THE SAID DISALLOWANCE AGAINST THE BUFFER DISCLOSURE OF RS.60 LAKHS, BECO MES AN ACADEMIC EXERCISE. THEREFORE, THE SAME IS DISMISSED AS ACADEMIC. 11. THIRD ISSUE : IN THE ABSENCE OF ANY CLEAR OMISSIONS OR COMMISSIONS OR DISCREPANCIES MADE OUT BY THE AO FOR TAXIN G THE SAID SUM OF BUFFER DISCLOSURE OF RS.60 LAKHS, COULD THE RETURNED IN COME BE REDUCED BY THAT AMOUNT OF RS.60 LAKHS. 8 12. BRINGING OUR ATTENTION TO THE ASSESSMENT ORDER IN T HIS REGARD, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, IN THE CASE OF S ISTER CONCERN OF THE ASSESSEE SERUM INSTITUTE OF INDIA LTD. VS. DCIT IN ITA NOS. 985 & 986/PUN/2015 DATED 28-11-2017 FOR A.YRS. 2006-07 & 200 7-08, THE SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. IN TH IS REGARD, HE REFERRED TO PARA NOS. 28 TO 41 OF THE ORDER OF THE TRIBU NAL (SUPRA) AND THEREFORE, SUBMITTED THAT THIS ISSUE ALSO IS SQUARELY COVE RED IN FAVOUR OF THE ASSESSEE. 13. LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF THE A O AND THE CIT(A). 14. AFTER HEARING BOTH THE SIDES ON THIS ISSUE AND ON PE RUSING THE ORDERS OF THE REVENUE, WE FIND THIS ISSUE ALSO STANDS DECID ED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF ORDER OF TRIBUNAL IN THE CASE OF SERUM INSTITUTE OF INDIA LTD. VS. DCIT (SUPRA). WE THEREFORE FIND TO RELEVANT TO EXTRACT THE FINDING GIVEN ON THIS ISSUE : 28. GROUND NO.5 RELATES TO INCLUSION OF INCOME OF AN AMOUNT OF RS.1 CRORE WHICH WAS OFFERED AS CONTINGENCY IN THE STATE MENT U/S.132(4) OF THE ACT. RELEVANT FACTS ARE THAT THE ASSESSEE WAS COVERED U/S.132 OF THE ACT AND THE SAME RESULTED IN DISCLOSURE OF UNDISCLO SED INCOME. DETAILS ARE GIVEN IN PARA NOS. 13 AND 13.1 (PAGES 55 TO 60) OF THE ORDER OF CIT(A). ACCORDINGLY, RS. 1 CRORE WAS OFFERED AGAINST THE CO NTINGENCIES IF ANY TO BE SET OFF AGAINST THE DISCREPANCIES/OMISSIONS. WHILE FILING THE RETURN OF INCOME, AND ADHERING TO THE SAID STATEMENT U/S.132( 4) OF THE ACT, SAID AMOUNT OF RS. 1 CRORE WAS OFFERED AS UNDISCLOSED IN COME OF THE ASSESSEE FOR THE YEAR. ACCORDINGLY, THE SAME WAS TAXED ALTHO UGH NO SPECIFIC DISCREPANCIES/OMISSIONS WERE BROUGHT TO THE NOTICE OF THE ASSESSEE. ASSESSEE DID NOT RAISE ANY ISSUE BEFORE THE AO. HO WEVER, BEFORE THE CIT(A), ASSESSEE SUBMITS THAT SAID CONTINGENCY OF RS.1 CRORE SHOULD NOT BE TAXED AND THE SAME IS REQUIRED TO BE EXCLUDED FRO M THE UNDISCLOSED INCOME OFFERED BY THE ASSESSEE. CIT(A) REJECTED TH E SAID DEMAND OF THE ASSESSEE AS PER THE DISCUSSION GIVEN IN PARA 13.2 O F HIS ORDER. THUS, CIT(A) DECIDED THIS ISSUE AGAINST THE ASSESSEE. 29. TO SUM UP HIS FINDING, IN THE SAID PARA, THE CI T(A) HELD THAT THE CLAIM MADE BY THE ASSESSEE THAT SUCH INCOME OF RS.1 CRORE MAY BE EXCLUDED FROM THE TOTAL INCOME ASSESSED BY THE ASSE SSEE AS NO DISCREPANCIES WERE FOUND DURING THE ASSESSMENT PROC EEDINGS, CANNOT BE ACCEPTED AS THE SAID ADDITIONAL INCOME WAS OFFERED VOLUNTARILY IN THE RETURN OF INCOME. IF ACCEPTED, THE ASSESSED INCOME SHALL BE LOWER THAN THE RETURNED INCOME. THE ALTERNATIVE CLAIM OF THE ASSESSEE FOR SET OFF OF SUCH CONTINGENCIES AGAINST OTHER DISALLOWANCES U/S. 14A OF THE ACT MADE BY THE AO WAS ALSO REJECTED DESPITE THE EXISTENCE O F THE FAVOURABLE DECISION OF THE TRIBUNAL IN THE GROUP CASES OF THE ASSESSEE (M/S. ADURJEE 9 BROTHERS PVT. LTD.). AGGRIEVED WITH THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 30. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT SIMILAR ISSUE WITH SOME VARIANCE CAME UP FOR ADJUDICATION B EFORE THE TRIBUNAL IN A CASE BELONGING TO THE SAME GROUP NAMED M/S. ADURJ EE BROTHERS PVT. LTD. (SUPRA). IN THIS CASE, THE DEMAND OF THE ASSE SSEE WAS FOR SET OFF OF THE OTHER DISALLOWANCES MADE U/S.14A OF THE ACT AGA INST SUCH CONTINGENCY DISCLOSURE. THE TRIBUNAL ALLOWED THE A RGUMENT OF THE ASSESSEE ON THIS ISSUE OF SET OFF. CONTENTS OF PAR A NO.12 OF THE ORDER OF THE TRIBUNAL IN ITA NO.1067/PN/2014 DATED 13-06-201 4 ARE RELEVANT AND THEREFORE WE PROCEED TO EXTRACT THE SAME AS UND ER : 12. WE FIND MERIT IN THE ALTERNATE CONTENTION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.75 LAKHS OFF ERED TO TAX IN THE STATEMENT RECORDED U/S.132(4) BE SET OFF AGAINS T THE DISALLOWANCE CALCULATED UNDER THE PROVISIONS OF SEC TION 14A R.W. RULE 8D. ADMITTEDLY, THE ASSESSEE HAD MADE DISCLOS URE OF RS.75 LAKHS VOLUNTARILY AS ADDITIONAL INCOME UNDER THE HE AD CONTINGENCIES TO COVER ANY OTHER ERRORS, OMISSION S OR DISCREPANCIES. THE SUBMISSION OF THE LD. COUNSEL F OR THE ASSESSEE THAT THE AMOUNT OF RS.75 LAKHS WAS VOLUNTA RILY OFFERED AND THERE WAS NO DETECTION OF ANY INCRIMINATING MAT ERIAL OR UNDISCLOSED INCOME COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. WE, THEREFORE, FIND M ERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.75 LAKHS OFFERED BY THE ASSESSEE AS UNDISCLOSED INCOME TO COVER ANY ERRORS, OMISSIONS OR DISCREPANCIES IN COM PUTING THE TAXABLE INCOME SHOULD BE SET OFF AGAINST THE DISALL OWANCE MADE U/S.14A R.W. RULE 8D OF THE I.T. ACT. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO RESTRI CT THE DISALLOWANCE U/S.14A R.W. RULE 8D TO RS.18,19,294/- I .E. (RS.93,24,674 RS.75,00,000/-). GROUNDS OF APPEAL NO.1 TO 3 BY THE ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. 31. FROM THE ABOVE, WE FIND THE TRIBUNAL PERMITTED FOR SETTING OFF THE DISALLOWANCE OF EXPENDITURE U/S.14A OF THE ACT AGAI NST THE SAID BUFFER DISCLOSURE OF INCOME. IN THAT CASE, RS. 75 LAKHS W AS OFFERED AS BUFFER AND THE ISSUE OF DISCLOSURE U/S.14A OF THE ACT CREA TED THE ADDITIONAL INCOME EXCEEDING THE SAID BUFFER DISCLOSURE OF RS.7 5 LAKHS. FURTHER, IN THE SAID DECISION, THE INCOME ASSESSED NEVER FELL B ELOW THE RETURNED INCOME. HOWEVER, THERE IS NO DISCUSSION OR DECISIO N OF THE TRIBUNAL ON THE ISSUE OF REDUCTION OF THE DISCLOSED RETURNED IN COME. THEREFORE, WE SHALL PROCEED TO ANALYSE THE LEGAL SCOPE ON THIS IS SUE. LEGAL SCOPE ON THE SANCTITY OF RETURNED INCOME IF THE ASSESSED INCOME BE LESS THAN THE RETURNED INCOME. 32. ON THIS ISSUE, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT IT IS A SETTLED LEGAL PROPOSITION IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. FOR THIS, LD COUNSEL RELIED ON VARIOUS BI NDING JUDGMENTS OF APEX COURTS AND OTHERS. WE SHALL NOW PROCEED TO AN ALYSE EACH OF THEM HERE AS UNDER. 33. TO START WITH, WE WILL TAKE UP THE APEX COURTS JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. SHELLY PRODUC TS [2003] 261 ITR 367 (SC), THE APEX COURT HELD IN FAVOUR OF REFUNDIN G OF THE EXCESS TAXES PAID (OF ADVANCE TAX AS WELL AS SELF-ASSESSMENT TAX ) OUT OF ABUNDANT CAUTION OR OWING TO ERROR OR NON TAXABILITY. HELD PORTION OF THIS JUDGMENT IS EXTRACTED AS UNDER : 10 HOWEVER, FAILURE OR INABILITY OF THE REVENUE TO FR AME A FRESH ASSESSMENT SHOULD NOT PLACE THE ASSESSEE IN A MORE DIS- ADVANTAGEOUS POSITION THAN HE WOULD HAVE BEEN IN IF A FRESH ASSESSMENT WERE MADE. IN A CASE WHERE THE ASSESSEE CHOOSES TO DEPOSIT, BY WAY OF ABUNDANT CAUTION , ADVANCE TAX OR TAX ON SELF ASSESSMENT WHICH IS IN EXCESS OF HIS LIABILITY ON T HE BASIS OF THE RETURN FURNISHED OR, IF THERE IS AN ARITHMETICAL ER ROR OR INACCURACY, IT IS OPEN TO THE ASSESSEE TO CLAIM REFUND OF THE E XCESS TAX PAID IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. HE CAN C ERTAINLY MAKE SUCH A CLAIM BEFORE THE CONCERNED AUTHORITY CALCULA TING THE REFUND. SIMILARLY, IF THE ASSESSEE HAS, BY MISTAKE OR INADVERTENCE OR ON ACCOUNT OF IGNORANCE, INCLUDED IN HIS INCOME ANY AMOUNT WHICH IS EXEMPTED FROM PAYMENT OF INCOME-TAX, OR IS NOT I NCOME WITHIN THE CONTEMPLATION OF LAW, HE MAY LIKEWISE BRING THIS TO THE NOTICE OF THE ASSESSING AUTHORITY, WHICH, IF SATISFIED, MAY GRANT HIM RELIEF AND REFUND THE TAX PAID IN EXCESS, IF ANY. SUCH MATTERS CAN BE BROUGHT TO THE NOTICE OF THE CONCERN ED AUTHORITY IN A CASE WHERE A REFUND IS DUE AND PAYABLE, AND THE AUT HORITY CONCERNED, ON BEING SATISFIED, SHALL GRANT APPROPRI ATE RELIEF. 34. IN THE CASE OF GUJARAT GAS COMPANY LTD. VS. JCI T (245 ITR 84) THE HONBLE GUJARAT HIGH COURT HELD THAT THE INSTRUCTIO N OF THE CBDT CIRCULAR NO.549 (PARA NO.5.12 DATED 31-10-1989 IS ULTRA-VIRE S WHEN THE SAID INSTRUCTION MANDATES THE AO AGAINST MAKING THE SCRU TINY ASSESSMENTS AT THE FIGURE LESS THAN THAT RETURNED BY THE ASSESSEE. RELEVANT HELD PORTION OF THIS JUDGMENT READS AS UNDER : HELD, THAT THE CIRCULAR IN QUESTION REFERS TO ASSE SSMENTS WHICH ARE TO BE MADE U/S.143(3) OF THE ACT. THE CIRCULAR DIRECTS THAT IN A PARTICULAR TYPE OF CASES, I.E. IN SCRUTINY CASES U/ S.143(3) OF THE ACT, THE INCOME CAN NEITHER BE ASSESSED AT A FIGURE LOWER THAN THE RETURNED INCOME NOR THE LOSS ASSESSED AT A FIGURE H IGHER THAN THE LOSS NOR FURTHER REFUND GIVEN EXCEPT WHAT WAS DUE O N THE BASIS OF THE RETURNED INCOME. THUS, BY ISSUANCE OF THE CIRC ULAR, THE QUASI- JUDICIAL OFFICER IS DIRECTED TO ASSESS CASES OF PAR TICULAR NATURE IN A PARTICULAR MANNER. THE ASSESSING OFFICER BEING BOU ND BY IT HAD ABDICATED HIS FUNCTION AND DID NOT ACT INDEPENDENTL Y AND, THEREFORE, THERE WAS NO QUESTION OF ALTERNATIVE REM EDY WHICH WAS A FUTILE REMEDY. IN FACT, THE JURISDICTION HAD BEE N EXERCISED BY THE CENTRAL BOARD OF DIRECT TAXES BY ISSUING THE CIRCUL AR AND, THEREFORE, THE ORDER OF THE ASSESSING OFFICER WAS W ITHOUT JURISDICTION. THE COURT HAD TO EXERCISE ITS JURISD ICTION UNDER ARTICLE 226. THE ORDER OF THE ASSESSING OFFICER TO THE EXT ENT IT STATED THAT THE TOTAL INCOME WOULD BE THE RETURNED INCOME, WAS TO BE SET ASIDE, WITH A DIRECTION TO THE ASSESSING OFFICER TO MAKE ASSESSMENT WITHOUT KEEPING IN MIND THE CENTRAL BOAR D OF DIRECT TAXES CIRCULAR DATED 31-10-1989. 35. THE SAME HONBLE GUJARAT HIGH COURT AGAIN IN TH E CASE OF CIT VS. MILTON LAMINATES LTD. VIDE TAX APPEAL NO.1022 OF 201 0 DATED 24-01- 2012 HELD THE ISSUE IN FAVOUR OF THE ASSESSEE AND A GAINST THE REVENUE. REVENUE TOOK THE ISSUE TO THE HONBLE HIGH COURT ON THE ISSUE, IF THE TRIBUNALS DIRECTION TO THE AO TO ALLOW COMPLETE EF FECT TO THE ORDER OF THE CIT(A) WITHOUT RESTRICTING THE INCOME TO THE RETURN ED INCOME. IN THIS CASE, AFTER GIVING EFFECT TO THE ORDER OF THE CIT(A), THE INCOME ASSESSED HAS FALLEN BELOW THE RETURNED INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL. RELEVANT L INES FROM THIS JUDGMENT ALSO ARE EXTRACTED AS UNDER : 7. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE TRIBUNALS ULTIMATE CONCLUSION IN ALLOWING THE ASSESSEES APPEAL. THOUGH SOME OF THE OBSERVATIONS MAY NOT AP PEAL TO US, 11 NEVERTHELESS, FOR THE REASONS SOMEWHAT DIFFERENT FR OM THOSE RECORDED BY THE TRIBUNAL WE COME TO THE SAME CONCLU SION. DECISION OF THE APEX COURT IN CASE OF SHELLY PRODUCTS & OTHERS (SUPRA), WAS RENDERED IN VERY DIFFERENT BACKGROUND. IT WAS A CASE WHERE THE ASSESSEE HAD FILED RETURN. ASSESSEE HAD PAID SELF ASSESSMENT TAX ON THE INCOME DISCLOSED IN THE RETUR N. TRIBUNAL ON APPEAL BY THE ASSESSEE HELD THAT THE ORDER OF THE A SSESSMENT PASSED BY THE ASSESSING OFFICER WAS AB-INITIO VOID SINCE HE HAD NO JURISDICTION TO DEAL WITH SUCH PROCEEDINGS. REVENU E SOUGHT REFERENCE BEFORE THE HIGH COURT. WHEN SUCH REFEREN CE WAS PENDING, THE ASSESSEE APPLIED TO THE DEPARTMENT FOR REFUND OF THE TAX PAID. IT WAS IN THIS BACKGROUND THE APEX COURT EXPRESSED THE OPINION THAT LIABILITY TO PAY INCOME TAX DOES NOT D EPEND ON ASSESSMENT BEING MADE AND FAILURE OR INABILITY TO F RAME FRESH ASSESSMENT AFTER EARLIER ASSESSMENT IS SET ASIDE OR NULLIFIED IN APPROPRIATE PROCEEDINGS, DOES NOT DISENTITLE THE AS SESSEE TO CLAIM REFUND OF THE ADVANCE TAX AND TAX PAID ON SELF ASSE SSMENT BECAUSE TO THAT EXTENT THE ASSESSEE HAD ADMITTED HI S LIABILITY TO PAY TAX IN ACCORDANCE WITH LAW. FACTS OF THE PRESE NT CASE ARE THEREFORE, DIFFERENT. IN CASE OF HAND, THE ASSESSM ENT WAS NOT RENDERED NULL. IN FACT SUCH ASSESSMENT, WHICH ACCO RDING TO THE ORDER OF CIT(APPEALS) HAD BECOME FINAL TAX LIABILIT Y OF THE ASSESSEE, CAME LOWER THAN THAT DECLARED BY HIM IN T HE RETURN FILED. (1) TO SUM UP, FROM THE ABOVE, IT IS OBVIOUS THAT T HE FETTERS IMPOSED BY THE CBDT, ON THE AOS, WHEN IT COMES TO ASSESSING THE INCOME OF ASSESSEE LOWER THAN THE RETURNED INCOME, ARE HELD U LTRA VIRES. FURTHER, THE HONBLE APEX COURT ALSO HELD THAT THE TAXES PAI D BY THE ASSESSEE AS A MATTER OF ABUNDANT CAUTION, I.E. BY WAY OF ADVANC E OR SELF ASSESSMENT TAXES, NEEDS TO BE REFUNDED AFTER DUE VERIFICATION OF THE CLAIMS. (2) LD. COUNSEL FOR THE ASSESSEE FILED VARIOUS DEC ISIONS OF THE TRIBUNAL DEMONSTRATING THAT THE CONTINGENCY DISCL OSURE ARE ENTITLED TO REFUND AFTER DUE VERIFICATION. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE FILED WRITTEN NOTE ON CONTINGENCY ISSUE STATING T HAT THE RETURN OF INCOME FILED BY THE ASSESSEE CONSTITUTES A NOTIONAL UNDISC LOSED INCOME AS PART OF THE TOTAL INCOME. THE SAME SHOULD NOT BECOME AN IM PEDIMENT FOR ASSESSING THE INCOME OF THE ASSESSEE BASED ON THE P RINCIPLES RELATING TO THE REAL INCOME THEORY. ACCORDING TO HIM, THE INCO ME OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME IS NOT SACROSANCT AND WHAT MATTERS IS THE AOS FINDING ON THE ASSESSED INCOME OF THE ASSE SSEE. THE ASSESSED INCOME CAN BE LOWER THAN THE RETURNED INCOME. RELY ING ON THE DECISION OF NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS . SANMUKHDAS WADHWANI 85 ITD 734, SHRI R.S. ABHYANKAR, LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT WHERE THE ASSESSEE HIMSELF RETURNED HIS UNDISCLOSED INCOME ON ADHOC BASIS WITHOUT GIVING AN Y BREAK-UP FOR THE SAME AND WHEN THE SUBSEQUENT WORKING SUBMITTED BY H IM REVEALS THAT THE UNDISCLOSED INCOME ACTUALLY ASSESSABLE IN THE H ANDS OF THE ASSESSEE IS LOWER THAN THE RETURNED INCOME, THE SAME HAS TO BE ASSESSED AT SUCH LOWER INCOME BASED ON THE CONCEPT OF REAL INCOME. ONLY CONDITION SPECIFIED IN THE SAID DECISION RELATES TO THE VERIF ICATION AND CORRECTNESS OF THE STATEMENTS SO SUBMITTED GIVING THE DETAILED WOR KING BEFORE THE AO. RELEVANT PORTION IS EXTRACTED AS UNDER : '12. IT IS OBSERVED THAT A SIMILAR ISSUE IN THE CON TEXT OF REGULAR ASSESSMENT AROSE FOR CONSIDERATION BEFORE THE HON'B LE DELHI HIGH COURT IN THE CASE OF CIT V . BHARAT GENERAL INSURANCE CO. LTD. [1971] 81 ITR 303 WHEREIN IT WAS HELD BY THEIR LORD SHIPS THAT EVEN IF AN ASSESSEE DECLARES AN INCOME IN THE RETUR N, THE ASSESSING OFFICER CANNOT ASSESS IT MERELY ON THAT B ASIS AND HE HAS TO CONSIDER ITS TAXABILITY IN THE LIGHT OF OTHE R CIRCUMSTANCES DE 12 HORS THE ADMISSION MADE IN THE RETURN . IN THE CASE OF NARAYANAN V . GOPAL AIR 1960 SC 235 , THE HON ' BLE SUPREME COURT HAS HELD THAT AN ADMISSION IN THE RETURN IS NOT CONCLUSIVE A ND IT WOULD BE DECISIVE ONLY IF NOT SUBSEQUENTLY WITHDRAWN OR PROV ED TO BE ERRONEOUS . IT IS WELL- ESTABLISHED THAT THE OBJECT OF AN ASSES SMENT IS TO DETERMINE THE CORRECT INCOME AND CONSEQUENTLY THE CORRECT TAX LIABILITY . IN OUR OPINION , THIS SETTLED POSITION EQUALLY HOLDS GOOD IN THE MATTER OF BLOCK ASSESSMENT ALSO SINCE THE SCOPE OF UNDISCLOSED INCOME ASSESSABLE IN THE BLOCK ASSESSMENT IS SPECIF ICALLY PROVIDED AND THE PROCEDURE FOR DETERMINATION OF SUCH INCOME IS ALSO CLEARLY LAID DOWN . IN THESE CIRCUMSTANCES , ANY AMOUNT WHICH IS NOT ASSESSABLE AS UNDISCLOSED INCOME FOR THE BLOCK PERI OD CANNOT BE ASSESSED AS SUCH MERELY FOR THE REASON THAT THE SAM E WAS DECLARED BY THE ASSESSEE IN THE RETURN FOR BLOCK PE RIOD AND THERE CANNOT BE SUCH ESTOPPEL AGAINST THE STATUTE . IT , THEREFORE , FOLLOWS THAT IF THE ASSESSEE COMMITS A PATENT MISTA KE OF FACT OR LAW WHILE FILING HIS RETURN OF UNDISCLOSED INCOME UNDER SECTION 158BC , HE CANNOT BE ASSESSED ON SUCH INCORRECT INCOME MERELY ON THE BASIS OF ADMISSION M ADE IN THE RETURN. 13. . . . . . . . .IN SUCH CIRCUMSTANCES, WHEN A DE TAILED WORKING MADE SUBSEQUENTLY BY THE ASSESSEE OF UNDISCLOSED IN COME REVEALED THAT THE TOTAL UNDISCLOSED INCOME ASSESSAB LE IN THE HANDS OF THE ASSESSEE WAS LOWER THAN THE RETURNED I NCOME, WE ARE OF THE OPINION THAT THE SAME HAS TO BE ASSESSED AT SUCH LOWER AMOUNT GOING BY THE CONCEPT OF REAL INCOME ESPECIAL LY WHEN THE SAID WORKING WAS VERIFIED AND FOUND TO BE CORRECT B Y THE ASSESSING OFFICER. 36. SIMILAR PROPOSITION WAS AFFIRMED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHARAT GENERAL INSURANCE COM PANY LTD. 81 ITR 303 WHEREIN IT IS HELD THAT WHEN THE ASSESSEE DECLA RES INCOME IN THE RETURN, THE AO CANNOT ASSESS MERELY ON THAT BASIS A ND HAS TO CONSIDER ITS LIABILITY IN THE LIGHT OF OTHER CIRCUMSTANCES DE HO RS THE ADMISSION MADE BY HIM IN THE RETURN. LD. COUNSEL FOR THE ASSESSEE AL SO REFERRED TO THE OTHER JUDGMENT IN THE CASE OF ESTER INDUSTRIES LTD. VS. C IT 316 ITR 260 (DELHI). ACCORDING TO THIS JUDGMENT, SUO MOTO DISALLOWANCE L EADING TO INCREASED RETURNED INCOME CAN ALWAYS BE VERIFIED BY THE AO IN THE ASSESSMENT AND DECREASE THE RETURNED INCOME, EVEN IF IT FALLS BELO W THE AMOUNT OF TOTAL INCOME RETURNED BY THE ASSESSEE IN THE RETURN OF IN COME. IN THIS CASE, THE HONBLE HIGH COURT RESTORED THE MATTER FOR SUCH VER IFICATION. RELEVANT PORTION OF THE JUDGMENT ARE EXTRACTED AS UNDER : '11 . ACCORDING TO US, THE TRIBUNAL OUGHT TO HAVE EXAMINE D THE ISSUE AS TO WHETHER THE FACT THAT ASSESSEE HAD MADE AN ADMISSION WITH RESPECT TO AN ADDITION / DISALLOWANCE IN ITS ORIGINAL RETURN OR IN THE REVISED RETURN WOULD IPSO FACTO BAR THE ASSESSEE FROM CLAIMING AN EXPENSE OR DISPUTING AN AD DITION IF IT IS OTHERWISE PERMISSIBLE UNDER LAW . THIS IS SO ESPECIALLY IN VIEW OF THE CIRCUMSTANCES , THAT THE ASSESSING OFFICER WHILE MAKING THE ADDITIONS /DISALLOWANCES DID NOT CALL UPON THE ASSE SSEE TO FURNISH ANY EXPLANATION . THE UPSHOT OF THE SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE, IS THAT , HAD THE ASSESSEE BEEN GIVEN AN OPPORTUNITY BY THE ASSESSING OFFICER IT CO ULD HAVE DEMONSTRATED THAT NO ADDITIONS OR DISALLOWANCES WER E CALLED FOR , IN VIEW OF THE BINDING PRECEDENTS OF COURTS AND/OR TRIBUNAL IN RESPECT OF EACH OF THE ADDITION/DISALLOWANCE . THE OBSERVATIONS MADE IN THE TAX AUDIT REPORT COULD NOT HAVE FORMED THE BASIS OF ADDITIONS / ALLOWANCES BY THE ASSESSING OFFICER . ON THIS ASPECT OF THE MATTER THE OBSERVATIONS IN THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF PULLANGODE RUBBER PRODUCE CO. LTD. V . STATE OF KERALA [1973] 91 ITR 18 BEING APPOSITE ARE EXTRACTE D HEREINBELOW: 13 IT IS NO DOUBT TRUE THAT ENTRIES IN THE ACCOUNT BOO KS OF THE ASSESSEE AMOUNT TO AN ADMISSION THAT THE AMOUNT IN QUESTION WAS LAID OUT OR EXPENDED FOR THE CULTIVATION , UPKEEP OR MAINTENANCE OF IMMATURE PLANTS FROM WHICH NO AGRICULTURAL INCOME WA S DERIVED DURING THE PREVIOUS YEAR . AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE . IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW T HAT IT IS INCORRECT . (P . 20) . 11 . 1 WE FIND THAT THE TRIBUNAL INSTEAD OF EXAMINING TH E MATTER FROM THIS ANGLE HAS REPEATED THE ORDER PASSED IN TH E FIRST ROUND WITHOUT DUE APPLICATION OF MIND TO THE ISSUES WHICH CALLED FOR ADJUDICATION. 37. THE NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. SANMUKHDAS WADHWANI (SUPRA) HELD CATEGORICALLY THAT THE INCOME NOT ASSESSABLE AS UNDISCLOSED INCOME OF THE ASSESSEE CA NNOT BE ASSESSED AS SUCH MERELY BECAUSE ASSESSEE DECLARED THE SAME THR OUGH A STATEMENT IN SEARCH ACTION. ADMISSION MADE BY THE ASSESSEE I N THE RETURN OF INCOME IS NO SACROSANCT. AO IS UNDER STATUTORY OBL IGATION TO MAKE ASSESSMENT OF ASSESSEE BASED ON THE FACTS OF CASE A ND AS PER THE PROVISIONS OF ACT. IN OTHER WORDS, COMING TO THE F ACTS OF THE ASSESSEE, IF THE SAID SUM OF RS. 1 CRORE IS NOT ASSESSABLE TO TA X AS INCOME OF THE ASSESSEE, THE SAME OUGHT NOT BE ASSESSED EVEN IF TH E ASSESSED INCOME COMES TO A LOWER FIGURE QUA THE RETURNED INCOME. 38. WE HAVE CONSIDERED THE ABOVE LEGAL SCOPE OF THE PRINCIPLE RELATING TO THE LOWER FIGURE OF ASSESSED INCOME QUA THE RETU RNED INCOME. FURTHER, WE HAVE HEARD THE PARTIES AND PERUSED THE WRITTEN S UBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. FURTHER ALSO, WE PER USED THE REASONING GIVEN BY THE CIT(A) WHILE DISMISSING THE CLAIM OF T HE ASSESSEE. WE FIND THE CONTENTS OF PARA NO.12 OF HIS ORDER ARE RELEVAN T. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, WE PROCEED TO EXTRACT P ARA NO.13.2 OF THE CIT(A) : 13.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . TO SUM UP, THE FRESH CLAIM MADE BY THE APPELLANT DURING THE PRESENT PROCEEDING S THAT SUCH INCOME OF RS.1,00,00,000/- MAY BE EXCLUDED FROM THE TOTAL INCOME ASSESSED BY THE ASSESSING OFFICER AS NO DISCREPANCI ES WERE FOUND DURING THE ASSESSMENT PROCEEDINGS CANNOT BE ACCEPTE D AS THE ADDITIONAL INCOME WAS OFFERED VOLUNTARILY IN THE RE TURN OF INCOME. THE ALTERNATE CLAIM OF THE APPELLANT FOR SET OFF OF SUCH CONTINGENCIES AGAINST OTHER STATUTORY DISALLOWANCE MADE BY THE AO ALSO CANNOT BE ACCEPTED AS DISCUSSED ABOVE. GRO UND OF APPEAL NO.8 STANDS REJECTED. THE CIT(A) DENIED THE CLAIM OF THE ASSESSEE IGNORIN G THE SETTLED LEGAL PROPOSITIONS ON THE TOPIC. THE REASONS GIVEN ABOVE BY THE CIT(A) ARE ARTIFICIAL AND NOT SUPPORTED BY THE LEGAL PRECEDENT S. 39. THE CBDT ISSUED A CIRCULAR NO.549 DATED 31-10-1 989 IMPOSING FETTERS ON THE AOS FOR NOT DETERMINING THE ASSESSED INCOME AT A LOWER FIGURE THAN THE RETURNED INCOME. THE SAID CIRCULAR WAS HELD ULTRA VIRES BY THE HIGHER JUDICIARY IN THE CASE OF GUJARAT GAS COMPANY LTD. (SUPRA). INFACT, IT IS THE DUTY OF THE AO TO MAKE AN ASSESSM ENT BASING ON THE FACTS OF THE CASE AND AS PER THE PROVISIONS OF THE I.T. A CT. IN THE CASE OF SHELLY PRODUCTS (SUPRA), THE HONBLE APEX COURT HELD THAT THE ADVANCE TAX/SELF ASSESSMENT TAX PAID AS PART OF AN ABUNDANT CAUTION ARE REQUIRED TO BE REFUNDED ON VERIFICATION OF THE CLAIM OF THE ASSESS EE. THE NAGPUR COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DC IT VS. SANMUKHDAS WADHWANI (SUPRA) HELD THAT THE ASSESSED INCOME CAN BE LOWER QUA THE RETURNED INCOME OF THE ASSESSEE. FURTHER, THE TRIB UNAL HELD IN THIS CASE, 14 ANY AMOUNT WHICH IS NOT ASSESSABLE AS UNDISCLOSED I NCOME OF THE ASSESSEE CANNOT BE ASSESSED MERELY FOR THE REASON A SSESSEE DECLARED IN THE RETURN OF INCOME. THERE CANNOT BE SUCH ESTOPPE LS AGAINST THE STATUTE IF THE ASSESSEE ITSELF FINDS A PATENT MISTAKE OF FA CT WHILE FILING THE RETURN OF INCOME ASSESSEE CANNOT BE ASSESSED ON SUCH INCO RRECT INCOME MERELY ON THE BASIS OF ADMISSION MADE BY HIM IN THE RETURN OF INCOME. 40. IN THE INSTANT CASE, CONSIDERING THE ABOVE SETT LED LEGAL PROPOSITIONS, WE PROCEED TO EXAMINE AVAILABILITY OF FACTS RELATING TO THE PRESENT CASE. IN THE RETURN OF INCOME, ASSESSEE ME RELY OFFERED AN AMOUNT OF RS.1 CRORE TOWARDS CONTINGENCY. MEANING THEREBY THAT INCASE THE AO MAKES CERTAIN ADDITIONS BASING ON SAME FACTS OR LEG AL ISSUES, THE SAID DISCLOSURE AMOUNT OF RS.1 CRORE SHOULD BE CONSIDERE D FOR SET OFF/ADJUSTMENT ETC. IN CASE AO FAILED TO MAKE SUCH ADDITIONS, THE SAID AMOUNT OF RS.1 CRORE IS NOT REQUIRED TO BE ASSESSED AS INCOME OF THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE AO MADE ADDITION U/S.14A OF THE ACT IN THE ASSESSMENT U/S.153A OF THE ACT IN TH E ABSENCE OF ANY INCRIMINATING MATERIAL. THIS ADDITION IS MADE OVER AND ABOVE THE SAID CONTINGENCY AMOUNT OF RS.1 CRORE. HOWEVER, WE FIND WHILE DISCUSSING IN THE PRECEDING PARAGRAPH THIS DISALLOWANCE U/S.14A I S UNSUSTAINABLE IN THIS ASSESSMENT AS THE SAME DOES NOT HAVE STRENGTH OF ANY INCRIMINATING MATERIAL. IN OTHER WORDS, THE AO MADE AN UNSUSTAIN ABLE ADDITION U/S.14A OF THE ACT AND TAXED THE SAID AMOUNT OF RS. 1 CRORE-CONTINGENCY INCOME WITHOUT MAKING ADJUSTMENT THE SAID AMOUNT OF RS.1 CRORE. IN ANY CASE, WE DELETED SAID DISALLOWANCE U/S.14A OF THE A CT. THEREFORE, THE QUESTION OF ADJUSTMENT IS ONLY AN ACADEMIC EXERCISE . IGNORING THE SAME, WE NOW HAVE TO DECIDE THAT THE SAID AMOUNT OF RS. 1 CRORE IS ASSESSABLE TO TAX IN THE LIGHT OF THE ABOVE LEGAL SCOPE RELATI NG TO THIS ADDITION. 41. THE AO HAS NOT BROUGHT ANY ISSUE OR FACTS RELAT ING TO THE UNDISCLOSED INCOME SPECIFIC TO THE SAID SUM OF RS.1 CRORE. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE DECIS ION OF THE NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. SANMU KHDAS WADHWANI (SUPRA) BECOMES RELEVANT TO THE FACTS OF THE PRESEN T CASE. AS SUCH, WE PROCEED TO DISMISS THE VOLUNTARY-CENTRIC REASONING GIVEN BY THE CIT(A) FOR DENYING THE CLAIM OF THE ASSESSEE REGARDING THE IS SUE OF TAXATION OF THE SAID AMOUNT OF RS.1 CRORE. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE AO IS DIRECTED TO VERIFY THE WORKING OF TO TAL UNDISCLOSED INCOME ASSESSABLE IN THE HANDS OF THE ASSESSEE GOING BY TH E CONCEPT OF REAL INCOME. HE SHALL GRANT REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. AO IS DIRECTED TO APPLY THE RATIO LAID D OWN BY THE ABOVE REFERRED JUDGMENTS IN GENERAL AND THE RATIO LAID DO WN BY THE NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. SANMU KHDAS WADHWANI (SUPRA) WHILE ARRIVING AT THE ASSESSED INCOME OF TH E ASSESSEE. AO SHALL NOT CONSIDER THE SO-CALLED VOLUNTARY DISCLOSURE OF THE SAID AMOUNT OF RS. 1 CRORE AS THE SAME DOES NOT AMOUNT TO ANY VOLUNTAR Y DISCLOSURE IN A REAL SENSE. HAD IT BEEN REALLY VOLUNTARY, THE ASSESSEE WOULD NOT HAVE RAISED THIS ISSUE BEFORE US. IT IS THE REQUIREMENT OF THE STATUTE THAT THE AO SHALL MAKE ASSESSMENT STRICTLY AS PER THE PROVISIONS OF T HE LAW AND DETERMINE THE ASSESSED INCOME ACCORDINGLY. FOR APPLYING THE SAID LEGAL PRINCIPLES AS WELL AS THE JUDGMENTS AND THE ORDER OF THE NAGPU R BENCH OF THE TRIBUNAL, WE REMAND THIS ISSUE TO THE FILE OF THE A O FOR THE LIMITED PURPOSE OF ADJUDICATION OF THE ISSUE RELATING TO TA XABILITY OF THE CONTINGENCY AMOUNT OF RS.1 CRORE. ACCORDINGLY, THI S GROUND BY THE ASSESSEE IS ALLOWED PRO TANTO. FROM THE ABOVE, IT IS EVIDENT THAT THE ONUS IS ON THE AO TO ESTABLISH THE OMISSIONS AND COMMISSIONS BEFORE THE AO PROC EEDED TO TAX THE SAID BUFFER DISCLOSURE OF RS.60 LAKHS. AS SUCH, AO D ID NOT EXAMINE THIS ASPECT OF THE ISSUE. CIT(A)/A) ARE OF THE OPINI ON THAT THE 15 ASSESSED INCOME MAY NOT BE LESS THAN THE RETURNED INCO ME. THEREFORE, WITH SIMILAR DIRECTIONS TO THE AO, WE REMAND THE ISSUE TO T HE FILE OF AO. ACCORDINGLY, THIS ISSUE IS ADJUDICATED PRO TANTO. 15. LAST ISSUE : THE FOURTH ISSUE RELATES TO THE ALLOWABILITY OF THE CLAIM RELATING TO THE GROUP GRATUITY SCHEME. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ISSUE STANDS COVERED AGAINST THE ASSESSEE BY THE ORDER OF T RIBUNAL IN ITS OWN CASE FOR THE A.YRS. 2006-07 TO 2011-12 (SUPRA). ON HEARI NG BOTH THE SIDES, WE PROCEED TO EXTRACT THE RELEVANT PARA OF THE O RDER OF TRIBUNAL (SUPRA) HERE AS UNDER : 44. ON PERUSAL OF THE ORDERS OF THE AO, WE FIND TH IS ISSUE IS DISCUSSED IN PARA 10 OF THE ASSESSMENT ORDER AND PARA NO.6.21 OF THE ORDER OF CIT(A). ON HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT THE ORDER OF CIT(A) ON THIS ISSUE IS FAIR AND REASONABLE AS THE SCHEME HAS NOT BEEN APPROVED TILL DATE, AS ADMITTED BY THE LD. AR FOR THE ASSESSEE. HENCE, IT DOES NOT CALL FOR ANY INTERFERENCE ON THI S ISSUE. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS DISMISSED. 16. THE FACTS ARE SIMILAR ON THIS ISSUE IN THIS ASSESSMENT YEAR ALSO. THEREFORE, IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, THE FOURTH ISSUE RAISED BY THE ASSESSEE IS DISMISSED. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF APRIL, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 18 TH APRIL, 2018 16 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRIVA TE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-11, PUNE 4. CIT-11, PUNE 5. , , A BENCH PUNE; 6. / GUARD FILE.