M/s. Even's Classes, Hyderabad V. ITO, Ward 4(2), Hyderabad

ITA 184/HYD/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6423 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: K A SAI PRASAD; Y R RAO
• Keywords: Reasonable cause; Retraction; Condonation of delay
• Section: 143(3); 142(1); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 184/HYD/2012 A.Y. 2006-07 M/S. EVEN'S CLASSES HYDERABAD PAN: AABFE0860D VS. THE INCOME TAX OFFICER WARD-4(2) HYDERABAD APPELLANT RESPONDENT ITA NO. 274/HYD/2011 A.Y. 2006-07 M/S. EVEN'S CLASSES HYDERABAD PAN: AABFE0860D VS. THE COMMISSIONER OF INCOME-TAX-IV HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI Y.R. RAO AND SRI K.A. SAI PRASAD RESPONDENT BY: SRI D. SUDHAKAR RAO DATE OF HEARING: 08.04.2014 DATE OF PRONOUNCEMENT: 23.04.2014 ORDER PER CHANDRA POOJARI, A.M.: THESE TWO APPEALS BY THE ASSESSEE, ITA NO. 184/HYD/2012 IS DIRECTED AGAINST THE ORDER OF THE C IT(A)-V, HYDERABAD PASSED U/S. 143(3) R.W.S. 263 OF INCOME-T AX ACT, 1961 DATED 2.12.2011 AND ITA NO. 274/HYD/2011 IS DI RECTED AGAINST THE ORDER OF THE CIT-IV, HYDERABAD DATED 26 .3.2010 PASSED U/S. 263 OF THE ACT, BOTH FOR ASSESSMENT YEA R 2006-07. 2 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= 2. FIRSTLY, WE TAKE UP ITA NO. 274/HYD/2011 FOR ADJUDICATION. THE ASSESSEE RAISED THE FOLLOWING GR OUNDS OF APPEAL: 1. THE ORDER U/S. 263 PASSED BY THE LEARNED CIT IS ERRONEOUS, BOTH ON FACTS AND IN LAW. 2. THE LEARNED CIT FAILED TO PROPERLY APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT DID NOT AT ALL ATTEMPT TO LOOK INTO THE PROBABLE GROSS COLLECTIONS BASING ON THE ANSWER S TO QUESTION NO. 4 AND 5 (WHICH GIVE THE AMOUNT OF FEE FOR EACH CLASS AND NUMBER OF STUDENTS) AND QUESTION NO. 6 (TELLING THE FACT THAT SOME OF THE COLLECTIONS OF FEES ARE THROUGH CHEQUES), IN THE VE RY 'STATEMENT' RELIED BY THE CIT TO VERIFY AND JUDGE T HE CORRECTNESS OF THE APPELLANT'S CLAIM THAT THE OFFER OF THE MANAGING PARTNER AS AN ANSWER TO Q. NO. 8 WAS GROSS RECEIPTS AND NOT NET INCOME. 4. THE LEARNED CIT FAILED TO APPRECIATE THE FACT THAT THE CLAIM OF THE APPELLANT IS BASED ON EVIDENCE ON RECORD AND THE FINDINGS OF THE CIT ARE BASED ON MERE SUSPICION. 5. THE LEARNED CIT IS NOT JUSTIFIED IN HOLDING THAT TH E ITO COMPLETED THE ASSESSMENT WITHOUT APPLYING HIS MIND TO THE 'SUBSTANTIAL VARIATION OF INCOME DISCLOSED DURING SURVEY AND THE INCOME SHOWN IN THE RETURN'. 6. THE LEARNED CIT IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 BASED ON ONLY WRONG ASSUMPTION AND SUSPICION. 7. THE LEARNED CIT IS NOT JUSTIFIED IN SETTING ASIDE T HE ASSESSMENT FOR REDOING THE SAME DE NOVO , AFTER FIXING THE FIGURE OF INCOME TO BE ASSESSED. 3. BRIEF FACTS OF THE CASE ARE THAT IN THIS CASE THE ASSESSEE FILED THE RETURN OF INCOME FOR A.Y. 2006-07 ON 30.1 1.2007 DECLARING AN INCOME OF RS. 3,33,660. THE ITO, WARD -4(2), HYDERABAD HAD COMPLETED THE ASSESSMENT U/S. 143(3) ON 3 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= 19.12.2007 BY DETERMINING THE TOTAL INCOME AT RS. 4 ,41,751. THE AO HAD DISALLOWED A PORTION OF CERTAIN EXPENDIT URE TO THE TUNE OF RS. 1,08,091. ON EXAMINATION OF RECORDS, T HE CIT CAME TO CONCLUSION THAT THE ASSESSMENT ORDER IS ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCOR DINGLY, HE ISSUED NOTICE U/S. 263(1) OF THE ACT ON THE FOLLOWI NG REASONS: '2.1 DURING THE COURSE OF SURVEY CONDUCTED U/S. 13 3A, SRI T. SRINIVASA RAO, MANAGING PARTNER, HAD DISCLOS ED FOR THE A.Y. 2006-07 AN ADDITIONAL INCOME OF RS. 50 LAKHS. THE REPLY FURNISHED TO QUESTION NO. 8 BY TH E MANAGING PARTNER, SRI T. SRINIVASA RAO, IN THE STATEMENT RECORDED ON 27.03.2006, DURING THE COURSE OF SURVEY U/S. 133A, IS REPRODUCED HEREUNDER: 'I DO AGREE THAT ACTUAL RECEIPTS RECEIVED BY US, AR E NOT TOTALLY REFLECTED IN THE RETURNS OF INCOME. IT IS ALSO TRUE THAT PROPER BOOKS OF ACCOUNT ARE NOT MAINTAINED BY US. HENCE, I VOLUNTARILY OFFER ADDITIONAL INCOME OF RS. 20 LAKHS FOR A.Y. 2005-06 AND INCOME OF RS. 50 LAKHS F OR A.Y. 2006-07.' HOWEVER, WHILE FILING THE RETURN OF INCOME FOR A.Y. 2006-07, AN INCOME OF ONLY RS. 3,33,660 WAS DECLARE D AS AGAINST THE EARLIER ADMITTED INCOME OF RS. 50 LA KHS. EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSEE HAD NOT OFFERED THE INCOME THAT HAD BEEN VOLUNTARILY ADMITTED DURING THE COURSE OF SURVEY. THE AO HAD MECHANICALLY COMPLETED THE SCRUTINY ASSESSMENT IN DISREGARD OF THE RECORD OF SURVEY CONDUCTED U/S. 133A AND WITHOUT APPLYING HIS MIND T O THE SUBSTANTIAL VARIATION BETWEEN THE INCOME DISCLO SED IN THE RETURN AS AGAINST THE ADDITIONAL INCOME ADMI TTED DURING THE COURSE OF 133A SURVEY. 4. NOT SATISFIED WITH THE REPLY OF THE ASSESSEE, THE C IT OBSERVED AS FOLLOWS: (I) THERE ARE TWO SALIENT POINTS/ISSUES WHICH CRYST ALLISE FROM THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE. THE FIRST ISSUE IS REGARDING THE RELIABILITY OF THE STA TEMENT RECORDED DURING THE SURVEY U/S. 133A I.E., FROM SRI T. 4 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= SRINIVASA RAO, MANAGING PARTNER OF THE ASSESSEE FIR M. THE MAIN PLANK OF THE ASSESSEE HAS BEEN TO IMPUGN T HE STATEMENT BY CHARACTERIZING IT AS ONE OBTAINED UNDE R DURESS. TO DETERMINE THE RELIABILITY OF THIS STATEM ENT IT WOULD BE NECESSARY TO EXTRACT CERTAIN MATERIAL QUESTIONS AND ANSWERS: Q. 4: WHAT ARE THE FEES CHARGED BY YOU FOR REGULAR COURSES AND FOR CRASH COURSES? ANS.: WE CHARGED RS. 5,000 FOR 8 TH STANDARD, RS. 6,000 FOR 9 TH STANDARD AND RS. 7,000 FOR 10 TH STANDARD IN THE F.Y. 2005-06. THIS INCLUDED GENERAL MATERIAL SUPPLIED BY US. CRASH COURSES ARE CHARGED AT RS. 2,000 PER STUDENT. Q. 7: NOW, I AM SHOWING YOU, TWO SHORT NOTE BOOKS, WHICH WERE FOUND AND IMPOUNDED FROM YOUR OFFICE PREMISES. (ANNEXURISED AS A/EC/1 & A/EC/2). PLEASE EXPLAIN THE CONTENTS. ANS.: A/EC/1: PAGE NOS. 31 TO 63 INDICATE TOTAL RECEIPTS SO FAR IN RESPECT OF NALLAKUNTA BRANCH. A/EC/2: PAGE NO. 1 TO 51 INDICATE TOTAL RECEIPTS SO FAR FOR MARREDPALLY BRANCH. THESE RECEIPTS ARE FOR THE F.Y. 2005-06. WE INDICATE THE ACTUAL AMOUNTS RECEIVED BY OMITTING TWO 00'S. FOR EXAMPLE, RS. 5,500 IS WRITTEN AS '55 '. IN ADDITION WE HAVE RECEIPTS FROM SALE OF APPLICATIONS AND CRASH COURSES ALSO, WHICH ARE IN THE TUNE OF RS. 3 LAKHS, AT PRESENT. Q. 8 ON VERIFICATION OF RETURNS OF INCOME FILED BY YOU, FOR THE A.Y. 2005-06 AND BILL BOOKS FOR THE CORRESPONDING PERIOD IT IS OBSERVED THAT THERE IS CLEAR SUPPRESSION OF RECEIPTS. MOREOVER, BOOKS OF ACCOUNT WERE NOT PRODUCED BY YOU, FOR COMPARING THE CORRECT RECEIPTS. WHAT DO YOU HAVE TO SAY? ANS. I DO AGREE THAT ACTUAL RECEIPTS RECEIVED BY US ARE NOT TOTALLY REFLECTED IN THE RETURNS OF INCOME. IT IS ALSO TRUE THAT PROPER BOOKS OF ACCOUNT ARE NOT MAINTAINED BY US. HENCE, I VOLUNTARILY OFFER ADDITIONAL INCOME OF RS. 20 LAKHS FOR A. Y 2005-06 AND INCOME OF RS. 50 LAKHS FOR A. Y 2006-07. 5 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= Q. 9 DO YOU WANT TO SAY ANYTHING ELSE? ANS.: NO, NOTHING. THE ABOVE STATEMENT IS GIVEN BY ME AT MY FREE WILL. I READ OUT STATEMENT AND CONFIRM THAT IT HAS BEEN REC ORDED AS PER MY VERSION. NO FORCE, THREAT WAS BROUGHT UPO N ME WHILE RECORDING STATEMENT. SD/- (MANAGING PARTNER)' IT CAN BE SEEN THAT THE STATEMENT IN QUESTION HAD B EEN RECORDED FROM THE MANAGING PARTNER WHO WAS WELL VERSED WITH THE BUSINESS AFFAIRS OF THE ASSESSEE FI RM. HE HAD ALSO AFFIRMED A CERTIFICATE AT THE END OF THE STATEMENT SAYING THAT THE STATEMENT HAD BEEN GIVEN BY HIM AT HIS FREE WILL, THAT HE HAD READ OUT THE STAT EMENT, THAT THE STATEMENT HAD BEEN RECORDED AS PER HIS VER SION, THAT NO FORCE, NO THREAT WAS BROUGHT UPON HIM WHILE RECORDING THE STATEMENT. THE DATE OF THE STATEMENT IS 27.03.2006. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 30.11.2007 I.E., NEA RLY MORE THAN ONE-AND-A-HALF YEARS AFTER THE SURVEY U/S . 133A. THE STATEMENT HAD BEEN RECORDED IN THE PRESEN CE OF THREE WITNESSES WHOSE SIGNATURES ARE AVAILABLE IMMEDIATELY AFTER THE CERTIFICATE GIVEN BY THE MANA GING PARTNER. IT HAS BEEN WELL ESTABLISHED THAT TO DETER MINE WHETHER PARTICULAR STATEMENT WAS UNDER DURESS, THE TIME TAKEN FOR RETRACTION IS A DECISIVE POINT. IN THIS C ASE, THE TIME TAKEN FOR RETRACTION IS AS LONG AS MORE THAN O NE- AND-A-HALF YEARS. IF AT ALL THE ASSESSEE HAD ALLEGE DLY GIVEN A STATEMENT UNDER DURESS, OR IN A NERVOUS OR CONFUSED STATE OF MIND, THEN HE COULD HAVE CERTAINL Y SUBMITTED A RETRACTION WITHIN A WEEK, FORTNIGHT OR AT BEST A MONTH FROM THE DATE OF SURVEY. THAT WOULD HA VE GIVEN SOME CREDENCE TO THE ASSESSEE'S VERSION. NOW WHAT THE ASSESSEE DOES IS HE WAITS FOR AS LONG AS O NE- AND-A-HALF YEARS AND ONLY WHEN HE FILES THE RETURN HE RETRACTS HIS EARLIER STATEMENT. I WOULD LIKE TO CIT E THE DECISION OF THE ITAT. 'D' BENCH, KOLKATA IN THE CA SE OF SRI TILAKRAJ SHROFF IN ITA NO. 1606 (CAL) OF 1983 ( ASST. YEAR 1980-81). IN THE SAID CASE THE HON'BLE ITAT KOLKATA BENCH HAD, AFTER GOING INTO THE SURROUNDING CIRCUMSTANCES, DECLINED TO ACCEPT THE ASSESSEE'S RETRACTION ON ACCOUNT OF INORDINATE DELAY AND LAPSE OF TIME BETWEEN ORIGINAL STATEMENT DURING SEARCH AND I TS SUBSEQUENT RETRACTION. TO QUOTE: ' THIS INORDINATE DELAY ON HIS PART, WITHOUT ANY EXPLANATION THEREFORE, HAS 6 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= DEVALUED HIS EXPLANATION TO A GREATER EXTENT' . THERE WAS DELAY OF 68 DAYS IN THAT CASE WHEREAS, IN THE PRESE NT CASE, THE DELAY IS AS MUCH AS ONE & HALF YEARS. HEN CE, THE RETRACTION BY THE ASSESSEE IN THE PRESENT CASE IS NOTHING BUT INGENIOUS PRODUCT OF AFTERTHOUGHT. (II) IT HAS TO BE APPRECIATED THAT THE SURVEY TEAM COMPRISED OF RESPONSIBLE PUBLIC SERVANTS AND OFFICI ALS. UNDER SECTION 114 (E) OF THE INDIAN EVIDENCE ACT, T HERE IS A BUILT-IN PRESUMPTION IN FAVOUR OF PROPER DISCH ARGE OF FUNCTIONS BY JUDICIAL AND QUASI-JUDICIAL AUTHORI TIES THAT SUCH FUNCTIONS MUST HAVE BEEN DISCHARGED IN A REGULAR MANNER. (III) IT IS NOT DISPUTED BY THE ASSESSEE THAT WHEN THE SURVEY TEAM ARRIVED AT THE PREMISES, THE ASSESSEE H AD NOT MAINTAINED PROPER BOOKS OF ACCOUNT. THIS PART O F THE ADMISSION HAS NEVER BEEN DISPUTED BY THE ASSESS EE. IT IS FURTHER ADMITTED THAT BOOKS OF ACCOUNT CAME T O BE PREPARED SUBSEQUENT TO SURVEY U/S. 133A. WHAT THE SURVEY TEAM FOUND, DURING THE SURVEY, WERE ONLY TWO SHORT NOTE BOOKS WHICH WERE IMPOUNDED FROM THE OFFI CE PREMISES WHICH WERE GIVEN THE NUMBERS A/EC/1 AND A/EC/2 (VIDE QUESTION 7 & ANSWER QUOTED ABOVE). SIN CE MATERIALS IMPOUNDED WERE VERY FEW, THERE WOULD BE N O DOUBT THAT THE OFFICERS I OFFICIALS WOULD HAVE COND UCTED THE PROCEDURE AS PRESCRIBED IN THE STATUTE. IT IS A STATUTORY REQUIREMENT THAT THE SURVEY TEAM I OFFICE RS ARE DUTY-BOUND TO PUT THE MARKS OF IDENTIFICATION ALONG WITH THEIR INITIALS I SIGNATURES ON THE BOOKS IMPOUNDED. UNFORTUNATELY, THE ASSESSING OFFICER HAS BEEN EXTRE MELY HASTY NOT ONLY IN CONDUCTING AND COMPLETING THE ASSESSMENT PROCEEDINGS WITHOUT PROPER APPLICATION O F MIND BUT ALSO IN RELEASING THE IMPOUNDED MATERIAL IMMEDIATELY AFTER COMPLETING THE ASSESSMENT, THEREB Y LEAVING THE DEPARTMENT IN A HELPLESS SITUATION. IN THE COURSE OF PRESENT PROCEEDING, THE AUTHORISED REPRESENTATIVE, AT MY INSTANCE, DID PRODUCE TWO SHO RT NOTE BOOKS WHICH WERE SUPPOSED TO HAVE BEEN IMPOUNDED BUT UNFORTUNATELY ON EXAMINING THE TWO NO TE BOOKS, I DID NOT FIND ANY AUTHENTICATING CONTEMPORA RY SIGNATURE OR INITIAL ANYWHERE OR ON ANY PAGE OF THE TWO BOOKS. IN THE COURSE OF PRESENT PROCEEDINGS I HAD A SKED THE AUTHORIZED REPRESENTATIVE TO GO THROUGH EACH OF THE PAGES OF BOTH THE NOTE BOOKS AND AFTER DOING SO HE ALSO CONFIRMED THAT THERE WAS NO SIGNATURE OR INITIAL AN Y WHERE ON ANY PAGE IN ANY OF THE TWO BOOKS. THIS ENT IRE FACT AND PROCEEDING HAD BEEN RECORDED VIDE ORDER SH EET 7 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= NOTE DT. 15.3.2010. IT WOULD BE IN PLACE TO QUOTE T HE ENTIRE ORDER SHEET NOTE AS UNDER: 'THE AUTHORISED REPRESENTATIVE SRI A. MAHENDER, FCA IS PRESENT. HE PRODUCES TWO NOTE BOOKS IE., LOKPRIY A DELUXE ACCOUNT BOOKS WITH DIFFERENT BOUND COVERS WHICH THE AUTHORIZED REPRESENTATIVE ALLEGES TO BE T HE IMPOUNDED MATERIALS BEARING NO. A/EC/1 AND A/EC/2 I.E., THE ACCOUNT BOOKS SUPPOSED TO HAVE BEEN IMPOUNDED BY THE SURVEY TEAM AND LATER RETURNED TO THE ASSESSEE. I EXAMINE BOTH THE BOOKS FROM COVER TO CO VER BUT FIND NO CONTEMPORARY IDENTIFICATION MARK ALONG WITH INITIALS I SIGNATURES OF ANY OF THE SURVEY TEAM OFF ICIALS ON ANYWHERE IN THESE TWO BOOKS. THE AUTHORISED REPRESENTATIVE IS ALSO REQUESTED TO GO THROUGH THE TWO BOOKS AND SHOW THE SIGNATURE OR INITIAL ANYWHERE IN THE SAID BOOKS IE., OF ANY OF SURVEY TEAM OFFICIALS. AF TER GOING THROUGH, HE REPLIES IN THE NEGATIVE. FURTHER IT IS NOTICED THAT THE BOOKS, PURPORTED TO BE A/EC/1 HAS WRITTEN PAGES MISSING FROM I TO IO WHICH IS INFERAB LE FROM THE THIN MARGINS LEFT OVER FROM TORN OFF PAGES NUMBERING IO. IN VIEW OF THESE FINDINGS, THE SAID B OOKS PRODUCED BY THE AUTHORISED REPRESENTATIVE CANNOT BE TAKEN AS AUTHENTIC OR CONTEMPORARY. FURTHER, NO YEA R IS MENTIONED IN ANY OF THE TWO BOOKS. ONLY MONTHS AND NUMBERS. ' (IV) FURTHER, IT IS NOTICED THAT IN ONE BOOK I.E., A/EC/L WRITTEN PAGES ARE MISSING FROM 1 TO 10. IN VIEW OF THESE FACTS AND CIRCUMSTANCES WHAT THE AR PRODUCED I.E., TWO NOTE BOOKS, ALLEGED TO BE IMPOUNDED MATERIALS, CANN OT BE CONSIDERED AS AUTHENTIC OR GENUINE. THERE IS NO EVIDENCE ON RECORD TO GIVE CREDENCE TO THE CLAIM OF THE AUTHORISED REPRESENTATIVE THAT THE CONDITION OF MIS SING PAGES EXISTED DURING THE VISIT OF SURVEY TEAM I.E., 27.3.2006. FURTHER, IT IS DISTURBING TO NOTE THAT, IN THE CONTEMPORARY STATEMENT RECORDED, THE ASSESSEE HAD CLEARLY ADMITTED THAT IT WAS IN THE HABIT OF NOT DI SCLOSING THE FULL FEE, THAT IT WAS OMITTING TWO ZEROS FROM T HE FIGURES WRITTEN IN THE TWO BOOKS, WHICH WERE IMPOUNDED. ANY EVIDENCE TO BE RELIABLE HAS TO BE CONTEMPORARY AND AUTHENTIC. IN ACCOUNT BOOKS PREPAR ED WITH PRE-MEDITATION AFTER THE SURVEY WILL NOT HAVE ANY AUTHENTIC VALUE AS EVIDENCE AND ACCOUNT BOOKS HAVE TO BE MAINTAINED IN THE COURSE OF BUSINESS, NOT SOMETH ING TO BE PREPARED AND COOKED UP AT SUBSEQUENT DATE. IN VIEW OF THESE FACTS AND SURROUNDING CIRCUMSTANCES, I HAVE NO DOUBT IN HOLDING THAT THE STATEMENT RECORDE D 8 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= UNDER SURVEY IS A RELIABLE STATEMENT AND TRUTHFUL STATEMENT. THE SUBSEQUENT RETRACTION IS CALCULATED TO SUPPRESS THE INCOME WHICH HAD BEEN ADMITTED DURING SURVEY. THUS THE FIRST ISSUE IS DISPOSED OF. 5. THE SECOND ISSUE IS GENUINENESS I AUTHENTICITY O R RELIABILITY OF THE SO CALLED TWO SHORT NOTE BOOKS PRODUCED BY THE ASSESSEE DURING THE PRESENT PROCEEDINGS ALLEGING THEM TO BE THE IMPOUNDED MATERIAL. IN VIEW OF THE FOREGOING DISCUSSION AT LE NGTH (IE., UNDER PARA NOS. 4(I) TO 4(IV), THE SAID TWO B OOKS PRODUCED BY THE AUTHORIZED REPRESENTATIVE DURING TH E PRESENT PROCEEDINGS HAVE NO EVIDENTIARY VALUE. 6. IN VIEW OF THE AFORESAID THERE CAN BE NO DOUBT T HAT THE ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT WITHOUT APPLYING HIS MIND TO THE SUBSTANTIAL VARIAT ION OF INCOME DISCLOSED DURING SURVEY AND INCOME SHOWN IN THE RETURN AND WITHOUT APPLYING HIS MIND TO THE REL IABLE STATEMENT RECORDED FROM THE MANAGING PARTNER DURING THE SURVEY. IN THE LAND MARK JUDGMENT IN THE MALABA R INDUSTRIAL COMPANY LIMITED (243 ITR 83), THE HON'BL E APEX COURT HAD HELD THAT THE NON APPLICATION OF THE MIND ON THE PART OF THE ASSESSING OFFICER CERTAINLY RENDERS AN ASSESSMENT ERRONEOUS AND IT IS FURTHER A N EVIDENT FACT THAT THE ASSESSING OFFICER HAD ACCEPTE D A SUBSTANTIALLY UNDER-STATED INCOME IN THE ASSESSMENT AS COMPARED TO THE ORIGINAL INCOME DISCLOSED DURING SURVEY - WHICH HAS RENDERED THE ASSESSMENT PREJUDIC IAL TO THE INTEREST OF REVENUE. THE ASSESSMENT DESERVES TO BE SET ASIDE FOR RE-DOING THE SAME DE NOVO. IN THE GIV EN FACTUAL MATRIX AS WELL AS IN THE SURROUNDING CIRCUMSTANCES OF THE CASE, I DIRECT THE ASSESSING O FFICER TO BRING TO TAX THE ADDITIONAL INCOME OF RS. 50 LAK HS AS OFFERED BY THE ASSESSEE IN THE COURSE OF SURVEY. HE SHOULD GIVE CREDIT TO THE INCOME ALREADY ASSESSED I N THE ASSESSMENT ORDER DT. 19.12.2007 AND THE DIFFERENTIA L AMOUNT I.E., NEARLY RS. 45 LAKHS AND ODD SHOULD BE BROUGHT TO TAX. ALL THE OTHER PLEAS ADVANCED BY THE AUTHORISED REPRESENTATIVE SUCH AS THAT THE-ASSESSEE 'S STATEMENT WAS OFF- HAND, SUPERFICIAL ETC., DO NOT H AVE ANY MERIT AND SUBSTANCE. 9 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= 5. ACCORDINGLY, HE DIRECTED THE AO TO REDO THE ASSESSM ENT IN TERMS OF THE ABOVE DIRECTION. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THIS APPEAL WAS FILED BY THE ASSESSEE WITH A DELAY OF 296 DAYS. THE ASSESSEE FILED A PETITION FOR CONDONATIO N OF DELAY STATING THAT THE CIT VIDE ORDER DATED 26.3.2010 SET ASIDE THE ASSESSMENT ORDER DIRECTING THE AO TO REDO THE SAME IN THE LIGHT OF THE DIRECTIONS GIVEN BY HIM. BECAUSE OF T HIS, THE ASSESSEE UNDERSTOOD THAT THE AO WOULD REDO THE ASSE SSMENT AFRESH IN THE LIGHT OF THE OBSERVATIONS OF THE CIT AND IT COULD FILE APPEAL CONSEQUENT TO PASSING OF ORDER BY THE A O. HOWEVER, HE CAME TO KNOW THAT THE CIT OBSERVATIONS AND FINDINGS WERE IN THE NATURE OF DIRECTIONS BINDING O N THE AO AND THE AO, THOUGH DIRECTED TO REDO THE ASSESSMENT AFRESH, HE HAD NO DISCRETION AND HE IS BOUND BY THE CIT FINDIN GS IN HIS ORDER PASSED U/S. 263 OF THE ACT. BEING SO, IT IS WARRANTED TO FILE APPEAL AGAINST THE ORDER PASSED BY THE CIT U/S . 263 OF THE ACT WITH A DELAY OF 296 DAYS AND IT HAS FILED THE A PPEAL ON 21.2.2011 BEFORE THIS TRIBUNAL WITH THE MATERIAL AF TER RECEIPT OF ASSESSMENT ORDER PASSED BY THE AO U/S. 143(3) R.W.S . 263 OF THE ACT ON 31.12.2010. 7. FURTHER, THE AR SUBMITTED THAT THE REASONS ADVANCED BY THE ASSESSEE ARE BONA-FIDE AND REASONABLE. HE SUBM ITTED THAT THE TRIBUNAL IN SIMILAR CIRCUMSTANCES IN THE CASE O F M/S. GREENFIRE AGRI. COMMODITIES LTD. IN ITA NO. 516/HYD /2013 FOR A.Y. 2006-07 VIDE ORDER DATED 27.11.2013 CONDONED T HE DELAY 10 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL CO -ORDINATE BENCH IN THE CASE OF KEWALKUMAR JAIN VS. ACIT, CIRC LE-4, PUNE (2013) (37 TAXMANN. 248) (PUNE-TRIB) WHEREIN HELD THAT 'ASSESSMENT ORDER PASSED IN CASE OF ASSESSEE WAS SE T ASIDE BY COMMISSIONER IN EXERCISE OF POWER UNDER SECTION 263. AGAINST SAID REVISIONAL ORDER, ASSESSE E FILED INSTANT APPEAL BELATEDLY ALONG WITH AN APPLIC ATION SEEKING CONDONATION OF DELAY. IT WAS NOTED THAT ASS ESSEE MISCONSTRUED LAW BY ASSUMING THAT SINCE MATTER WAS REMITTED BACK TO ASSESSING OFFICER, HE COULD AGITAT E CONSEQUENTIAL ORDER TO BE PASSED BY ASSESSING OFFIC ER IN APPEAL PROCEEDINGS BEFORE COMMISSIONER (APPEALS) ONLY. THUS ASSESSEE ENTERTAINED A BELIEF THAT AS OR IGINAL ASSESSMENT HAD BEEN SET ASIDE, THERE WAS NO NECESS ITY OF CHALLENGING REVISIONAL ORDER OF COMMISSIONER BEF ORE TRIBUNAL. WHETHER ON FACTS, MISCONSTRUCTION OF ORDE R OF COMMISSIONER BY ASSESSEE AND NOT FILING AN APPEAL AGAINST IT WITHIN PRESCRIBED TIME WAS WRONG BUT SAM E 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'. 8. THE LEARNED DR HAS NO OBJECTION FOR ARGUMENT OF THE ASSESSEE'S COUNSEL. 9. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINI ON THAT THERE EXISTS A REASONABLE CAUSE IN NOT FILING THE APPEAL IN TIME AS THE ASSESSEE MISUNDERSTOOD THE CONTENTS OF THE CIT ORDER PASSED U/S. 263 OF THE ACT AS NARRATED IN ITS PETITION AND AFFIDAVIT. ACCORDINGLY, WE ARE SATISFIED WITH TH E REASONS ADVANCED BY THE ASSESSEE FOR DELAY IN FILING THE AP PEAL. ACCORDINGLY IN THE INTEREST OF JUSTICE, WE ARE INCL INED TO CONDONE THE DELAY IN FILING THE APPEAL AND ADMIT TH E APPEAL FOR ADJUDICATION. ACCORDINGLY, ASSESSEE'S APPEAL I N 274/HYD/ 2011 IS TAKEN UP FOR ADJUDICATION. 11 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= 10. THE LEARNED AR SUBMITTED THAT THE ASSESSEE IS A FIRM AND IS ENGAGED IN CONDUCTING 'COACHING CLASSES FOR ENTR ANCE TO II TS' CONDUCTED BY SRI RAMAIAH INSTITUTE'. SURVEY U/S 133A WAS CONDUCTED ON 27.03.2006. THE IMPOUNDED MATERIAL DID INDICATE SUPPRESSION OF GROSS RECEIPTS FOR THE FINA NCIAL YEAR 2004-05 (AY 2005-06) . A STATEMENT ON OATH WAS TAKEN FROM THE PARTNER, T. SRINIVASA RAO BASICALLY A SCIENCE TEACH ER . Q UESTION NOS. 4 AND 5 REFERRED TO THE NO . OF STUDENTS AND THE FEES STRUCTURE AS INDICATED IN THE IMPOUNDED MATERI AL. Q UESTION NO. 8 POSED BY THE IT OFFICIALS REFERS TO THE SUPPRESSI ON OF RECEIPTS FOR THE F.Y. 2004-05 WITH REFERENCE TO BILL BOOKS, IMPOUNDED BY THE SURVEY PARTY NOT WITH REFERENCE TO THE F.Y. 2005-06 I . E., A.Y. 2005-06, WHICH IS UNDER DISPUTE. THE PARTNER IN REPLY REFERRED TO RECEIPTS AND ADMITTED THE SUPP RESSION AT RS. 20 LAKHS FOR THE AY 2005-06 AND RS. 50 LAKHS AS INCOME FOR A.Y. 2006-07. SUBSEQUENTLY THE BOOKS WERE PREPARED BASED ON THE IMPOUNDED MATERIAL, GOT AUDITED U/S 44AB AND TH E RETURN OF INCOME FOR A.Y. 2006-07 WAS F I LED ON 30.11.2007 ADMITTING THE GROSS RECEIPTS AT RS. 46,30,950 AND NET INCOME AT RS. 3,33,660. THE RECEIPT S ADMITTED ARE NEARER TO THE FIGURE OF R S . 50 LAKHS REFERRED TO IN Q UESTION NO . 8 . THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THE INCOME RETURNED AT RS. 3,33.660 AND ISSUED A LETTER DT. 30.11.2007 REQUESTING THE ASSESSEE TO CLARIFY AS TO WHY THE INCOME ADMITTED IN THE S WORN S TATEMENT DURING SURVEY AT R S . 50 LAKHS SHOULD NOT BE TREATED AS INCOME. THE ASSESSEE FILED ITS REPLY EXPLAINING THAT THE ADMISSION WAS INTENDED TO BE WITH 12 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= REGARD TO RECEIPTS AND THAT THE REFERENCE TO INCOME WAS BY MISTAKE. IT HAS ALSO BASED ITS INCOME ON THE BOOKS OF ACCOUN TS AND REQUESTED TO TAKE THE ACTUAL RECEIPTS OF RS. 46,36,950 TO ARRIVE AT THE TAXABLE INCOME. 11. THE AR SUBMITTED THAT T HE ASSESSING OFFICER AFTER EXAMINING THE EXPLANATION OFFERED BY THE ASSESSEE , GOT SATISFIED AND COMPLETED THE ASSESSMENT U/S 143(3) M AKING AN ADDITION OF R S. 1, 08 ,091/-. THEREAFTER, THE CIT ASSUMING JURISDICTION U/S 263, ISSUED SHOW CAUSE NOTICE STA TING THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST S OF THE REVENUE BECAUSE IN THE STATEMENT AT THE TIME OF SURVEY, MANAGING PARTNER ADMITTED ADDITIONAL INCOME OF R S . 50 LAKHS, WHEREAS THE INCOME RETURNED IS RS. 3,36,660 ONLY. ACCORDING TO THE CIT THE ASSESSING OFFICER'S ORDER IS ERRONEOUS. 12. THE AR SUBMITTED THAT T HE ASSESSEE FILED A DETAILED REPLY . IT WAS EXPLAINED THAT THE REFERENCE TO 'INCOME' WAS BY MISTAKE AND THAT THE PROPER INCOME WAS OFFERED TO TAX BASED ON THE BOOKS PREPARED IN ACCORDING WITH IMPOUNDED MATERIAL AND THAT THE GROSS RECEIPTS DID TALLY (APPROX) TO THE F IGURE OF R S . 50 LAKHS. THE ASSESSEE HAD ALSO STATED THAT ALL THROUGH THE SWORN STATEMENT THE REFERENCE IS ONLY TO 'RECEIPTS' AND N OT TO 'INCOME'. THE ASSESSEE FURTHER STATED THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT BASED ON THE EVIDENCES AVAILABLE ON RECORD AND ALSO TAKING INTO ACCOUNT TH E EXPLANATION OFFERED BY THE ASSESSEE . THE ASSESSING OFFICER GOT HIMSELF SATISFIED FULLY WITH THE EXPLANATION AS THE RE WAS NO 13 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= DISPUTE REGARDING THE NUMBER OF STUDENTS AND THE FE E COLLECTED. THEREFORE, THERE WAS NO ERROR IN THE ASS ESSMENT ORDER. 13. THE AR SUBMITTED THAT T HE CIT NOT SATISFIED WITH THE EXPLANATIONS PASSED ORDER U/S . 263 WHICH IS THE SUBJECT MATTER OF THIS APPEAL IN ITA NO. 274/H YD / 20 11. ACCORDING TO THE CIT IT IS A RETRACTION AND IS ONLY AN AFTERTHOUGHT. WHAT THE SURVEY TEAM FOUND IS ONLY TWO BOOKS - A/EC/1 AND A/EC/2. THE CIT OBSERVED THAT N O AUTHENTICATION IS AVAILABLE ON THE SAID BOOKS, WHICH WERE IMPOUNDED AND LATER RETURNED TO THE ASSESSEE BY THE ASSESSING OFFICER. THE SAID BOOKS WERE AGAIN PR ODUCED BEFORE HIM. PAGE NO S . 1 TO 10 ARE MISS I NG IN A/EC/1. THE TWO BOOKS PRODUCED BEFORE HIM ARE NOT GENUINE AND HAS N O EVIDENTIARY VALUE. THE ASSESSING OFFICER HAS COMPLE TED THE ASSESSMENT WITHOUT APPLYING HIS MIND. THE CIT IS OF THE OPINION THAT RS. 50 LAKHS SHOULD BE THE INCOME TO BE ASSESSED. THE CIT DIRECTED TO ASSESSING OFFICER, TO BRING THE BALANCE OF RS. 45 LAKHS TO TAX AFTER DEDUCTING THE INCOME ALREADY ASS ESSED. 14. THE AR SUBMITTED THAT T HE ORDER OF THE CIT IS NOT CORRECT ON TWO COUNTS I.E., J URISDICTION AND M ERITS. IN THE LIGHT OF THE DETAILED LETTER DT. 30.11.2007 ISSUED BY THE ASSESSING OFFICER AND EXPLANATION FILED BEFORE HIM, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND. THE ASS ESSING OFFICER IS FULLY AWARE OF THE VARIANCE IN THE ADMIS SION AND THE INCOME RETURNED. HE CALLED FOR THE EXPLANATION AND WAS FULLY SATISFIED WITH THE EXPLANATION FILED BY THE ASSESSEE . THE 14 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= ASSESSING OFFICER HAS ALSO TAKEN INTO COGNIZANCE TH E BOOKS OF ACCOUNTS DULY AUDITED BY A CHARTERED ACCOUNTANT, AN D HENCE HAS TAKEN A CONSCIOUS DECISION WITH REGARD TO THE FACTS OF THE CASE. THE REFERENCE TO 'RECEIPTS' AND 'INCOME' IN T HE SWORN STATEMENT WAS ALSO WITHIN HIS KNOWLEDGE. HENCE HE SUBMITTED THAT AS THE ASSESSING OFFICER HAS APPLIED HIS MIND AND TAKEN A DECISION ON THE AVAILABLE FACTS. THE CIT CANNOT REVISIT THE SAME IS SUE UNLESS THE ORDER IS ERRONEOUS. SINCE IT IS NOT ERRONEOUS, IT CANNOT BE SAID TO BE PREJUDICIAL TO THE INTEREST OF REVENUE. THE AR SUBMITTED THAT THE CIT CANNOT SUBSTITUTE HIS OPINION, GUESS WORK, IN PLACE OF THE ASSESSING OFFICER . E VEN THE DIRECTIONS OF THE CIT ARE O N THE ASSUMPTION THAT THE BOOKS PRODUCED BEFORE HIM ARE NOT GENUINE. HE, THEREFORE , PRAYED THAT THE TRIBUNAL BE PLEASED TO CANCEL THE ORDER OF THE CIT PASSED U/S 263 OF THE ACT. THE AR RELIED ON THE FOLLOWING CASE-LAW: (A) KAKADE CONSTRUCTION VS DCIT, 115 TTJ 834 (PUNE) (B) JET ELECTRONICS VS ACIT, 116 TTJ 225 (AHD) (C) HARI OM BANSAL VS ITO, 51 SOT 118 (CHENNAI) (D) MANISH KUMAR VS CIT, 134 ITD 27 (INDORE) (E) SUDHEER KUMAR AGARWAL VS CIT (30 TAXMANN.COM 223 AG RA) (F) PAUL MATHEWS & SONS VS CIT, 263 ITR 101 (KER) (G) CIT VS DESIGN AND AUTOMATION ENGINEERS 323 ITR 632 (BOM) (H) CIT VS GABRIEL INDIA LTD. 208 ITR 108 (BOM) 15. ON MERITS, THE LEARNED AR SUBMITTED THAT A LL THE OBJECTIONS BROUGHT OUT BY THE CIT ARE BASELESS. IT IS A SURVEY OPERATION AND THE QUESTION OF RETRACTION DOES NOT ARISE. THE STATEMENT GIVEN IN A PROCEEDINGS U/S 133A IS NOT BINDING. IN ANY CASE THE RETURN WAS FILED IN ACCORDANCE WITH THE BOOKS PREPA RED ON THE BASIS OF IMPOUNDED MATERIAL THE RETURN OF INCOME FO R A.Y. 2006-07 WAS NOT DUE BY THE DATE OF SURVEY HENCE THE QUESTION OF ANY SUPPRESSION OF INCOME DOES NOT ARISE. THE ASSESSING 15 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= OFFICER IS BOUND TO ASSESSEE THE CORRECT INCOME BAS ED ON BOOKS AND NOT MERELY ON THE BASIS OF A STATEMENT GI VEN IN A SURVEY PROCEEDINGS. FURTHER AS STATED EARLIER, EVEN IN THE SWORN STATEMENT, REFERENCE IS TO 'RECEIPTS' ONLY AT SEVERAL PLACES AND THE REFERENCE TO 'INCOME' IS ONLY AT ONE PLACE. THE RECEIPTS AT NEARLY RS.46 LAKHS RETURNED MATCHED WIT H THE RECEIPTS WORKED OUT AS PER THE STUDENT STRENGTH AND FEES STRUCTURE REFERRED TO QUESTIONS 4 & 5 OF THE SWORN STATEMENT. AS CLAIMED BEFORE THE CIT , THE ASSESSING OFFICER VERIFIED THE STUDENT STRENGTH AND GOT THE GROSS RECEIPTS OFFERED TO TAX TALLIED WITH THE FEES STRUCTURE. THE STUDENT ATTEND ANCE REGISTERS AND FEES RECEIPTS WERE EXAMINED. THE AR INVITED OUR ATTENTION TO PARA 7 OF REPLY FILED BEFORE CIT . EVEN IF IT IS TREATED AS RETRACTION, IT IS BASED ON STRONG MATERI AL AND HENCE HAS TO BE CONSIDERED ON MERITS AND ON FACTS. MERE STATEMENT CANNOT BE THE SOLE BASIS FOR AN ASSESSMENT. EVEN TH EIR STATEMENT WAS FULLY SUBSTANTIATED AS REFERRING TO R ECEIPTS ONLY. IT IS NOT CORRECT TO STATE THAT ONLY TWO BOOKS WERE IMPOUNDED. LIST OF IMPOUNDED MATERIAL PLACED AT PAGE 3 TO 7 OF PAPER BOOK INDICATES THAT THE FINDING OF CIT IS FACTUALLY NOT CORRECT. THE ASSESSEE CANNOT HAVE CONTROL OVER THE STYLE OF FUNCTIONING OF THE SURVEY OFFICIALS. WHY NO INITIALS WERE MADE ON THOSE BOOKS IS BEYOND ASSESSEE'S CONTROL. ACCORDING TO SE CTION 133A, NO SUCH PROCEDURE IS PRESCRIBED FOR THE BOOKS IMPOU NDED. EVEN AT THE TIME OF SURVEY THERE IS NO REFERENCE WH ATSOEVER TO THE PAGES 1 TO 10 OF THE IMPOUNDED MATERIAL - A/EC/ 1. THE REFERENCE IS TO PAGES 31 TO 63 OF THIS BOOK IN QUES TION NO.? THIS INDICATES THAT THEY (PAGE 1 TO 10) ARE NOT THERE EVEN AT THE 16 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= TIME OF IMPOUNDING. PROBABLY THE ASSESSEE MAY BE USING THE OLD BOOKS AFTER RE M OVIN G THE UNRELATED PAPERS USED IN EARLIER YEARS. IF THE DISCLOSURE IS INCOME TO THE TUNE OF RS. 50 LAKHS, THE SURVEY OFFICIALS WOULD HAVE GOT A COMMITMENT FO R PAYMENT OF ADVANCE TAX, CONSIDERING THE DATE OF SURVEY I.E. ALMOST END OF THE FINANCIAL YEAR. THERE IS NO SUCH COMMITMENT IN THE SWORN STATEMENT. HENCE, EVEN ON MERITS, THE AR SUBMITTED THAT THE WHOLE OBSERVATIONS OF THE CIT ARE ONLY GUESS WORK AND DOUBTING THE WORK OF REVENUE OFFICIALS AND THERE IS NO CONCRETE EVIDENCE BROUGHT ON RECORD TO SHOW THAT THE ASSESSM ENT IS ERRONEOUS. 16. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E STATEMENT RECORDED UNDER OATH IS AN IMPORTANT PIECE OF EVIDENCE AND CANNOT BE WISHED AWAY OR DISREGARDED A S AND WHEN IT PLEASES THE ASSESSEE. WHEREAS, MERE STATEM ENTS WITHOUT ANY BACKING OF EVIDENCE MAY NOT BE SUFFICIE NT TO DETERMINE INCOME IN CERTAIN CASES, HOWEVER, THE FAC T THAT THERE WAS ANY DURESS OR A CONFUSED STATEMENT OF MIND HAS TO BE INFERRED FROM THE TOTALITY OF THE CIRCUMSTANCE. IN THE PRESENT CASE, THERE IS NO DOUBT THAT THE ASSESSEE FIRM WAS UNDERTAKING COURSES FOR VARIOUS KINDS OF COACHING AND WAS CHARG ING HEAVY AMOUNTS. FOR AN EXAMPLE, FOR A CRASH COURSE RS. 2,0 00 WAS CHARGED. THE ASSESSEE CLEARLY ADMITTED TO THE FACT THAT THERE WERE HUGE UNACCOUNTED RECEIPTS. SOME DOCUMENTS WERE IMPOUNDED DURING THE COURSE OF SURVEY IN WHICH THE ASSESSEE HAD CODED THE VARIOUS UNACCOUNTED RECEIPTS AND HAD WRITTEN SUCH TRANSACTIONS. THE LAST TWO ZEROES IN ANY RECEI PT WERE 17 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= OMITTED AND THE BALANCE AMOUNT WAS MENTIONED IN THE SE NOTE BOOKS. THESE ARE NOT THE REGULAR BOOKS OF ACCOUNT B UT REPRESENT THE ACCOUNTED PORTION OF THE UNACCOUNTED RECEIPTS. OBVIOUSLY EACH AND EVERY PAPER PERTAINING TO UNACCO UNTED RECEIPTS CAN NEVER BE FOUND DURING THE COURSE OF SU RVEY. THE ENTRIES RECORDED IN THESE NOTE BOOKS DID NOT TALLY WITH THE REGULAR BOOKS. IT IS THUS CLEAR FROM THE FACTS THAT THERE WAS A REGULAR SUPPRESSION OF RECEIPTS BY THE ASSESSEE FIR M AND SYSTEMATICALLY THE UNACCOUNTED RECEIPTS WERE WRITTE N IN CODE ON VARIOUS PAPERS. THERE IS THUS A SOLID BASIS AND FOUNDATION FOR THE INCOME DETERMINED BY THE ASSESSING OFFICER. HE FURTHER SUBMITTED FURTHER TO THE ABOVE, DURING THE COURSE O F SURVEY OPERATIONS THERE WERE THREE INDEPENDENT WITNESSES W HO WERE PRIVY TO THE ENTIRE SURVEY OPERATION. THEY HAVE NOT REPORTED ANY DURESS OR FORCE OR ILLEGAL ACTIVITY. MOREOVER, ON PAGE 4 OF THE ASSESSMENT ORDER, THE EXTRACTS FROM THE STATEME NT OF SRI T. SRINIVASA RAO, MANAGING PARTNER ARE REPRODUCED AS G IVEN IN PARA 4 OF THIS ORDER. HE SUBMITTED THAT A PLAIN REA DING OF THE ABOVE INDICATES THAT THE ASSESSEE WAS FULLY IN CONT ROL OF HIS SENSES AND COULD COMPREHEND EACH AND EVERY FACT. HE CLEARLY DECODED THE ENTRIES WRITTEN IN THE IMPOUNDED DOCUME NTS AND WAS ABLE TO SPEAK ABOUT THE NUANCES OF BUSINESS VER Y COHERENTLY AND PROPERLY. BEING THE MANAGING PARTNER HE FULLY KNEW THE AFFAIRS OF THE BUSINESS AS WELL AS THE AMO UNTS HE WAS EARNING AND HAD BEEN EARNING OVER A PERIOD OF TIME. IT IS ONLY WITH THIS BACKGROUND AND AFTER EXAMINATION OF THE S EIZED DOCUMENTS THAT THE MANAGING PARTNER ADMITTED ADDITI ONAL 18 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= INCOME. IT WAS A WELL THOUGHT OUT STATEMENT GIVEN O N HIS OWN FREE WILL AND BASED ON FACTS. 17. FURTHER HE RELIED ON THE ORDER OF CALCUTTA BENCH OF THIS TRIBUNAL IN THE CASE OF SRI TILAKRAJ SHROFF IN ITA NO. 1606/CAL/ 1983 (A.Y. 1981-82) WHEREIN HELD THAT WHEN THERE IS INORDINATE DELAY IN RETRACTING THE SWORN STATEMENT WITHOUT ANY EXPLANATION, THE RETRACTION SHOULD BE CONSIDERED AS AN AFTERTHOUGHT AND ASSESSMENT COULD BE DATED ON THE O RIGINAL STATEMENT GIVEN BY THE ASSESSEE AND THE RETRACTION HAS TO BE REJECTED. FINALLY HE RELIED ON THE ORDER OF THE CI T(A). 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THE CASE OF CIT VS. GABRIAL INDIA LTD. (SUPRA), IT WAS HELD BY THE BOMBAY HIGH COURT THAT AN ORDER COULD NOT BE TERMED AS ERRONEOUS UNLESS IT WAS NOT IN ACCORDANCE WITH LAW, THAT IF THE AO ACTING IN ACCOR DANCE WITH LAW MADE CERTAIN ASSESSMENT, THE SAME COULD NOT BE BRANDED AS ERRONEOUS BY THE CIT SIMPLY BECAUSE, ACCORDING T O HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY, TH AT S. 263 DID NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUD GMENT OF THE CIT FOR THAT OF THE AO, WHO PASSED THE ORDER, UNLES S THE DECISION WAS HELD TO BE ERRONEOUS, THAT CASES MAY B E VISUALIZED WHERE THE AO WHILE MAKING AN ASSESSMENT EXAMINED THE ACCOUNTS, MADE ENQUIRIES, APPLIED HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMI NED THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKIN G SOME ESTIMATES HIMSELF, THE CIT, ON PERUSAL OF THE RECOR DS, MAY BE OF 19 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= THE OPINION THAT THE ESTIMATE MADE BY THE AO CONCER NED WAS ON THE LOWER SIDE AND LEFT TO THE CIT HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ONE DETERMIN ED BY THE AO, THAT WOULD NOT VEST THE CIT WITH POWER TO RE-EX AMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGH ER FIGURE, THAT THIS WAS BECAUSE THE AO HAD EXERCISED THE QUAS I-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND HAD ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION COULD NOT BE TER MED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DID NOT FEEL SATIS FIED WITH THE CONCLUSION, THAT IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE CIT THE ORDER IN QUESTION WAS PREJUD ICIAL TO THE INTEREST OF THE REVENUE, BUT THAT BY ITSELF WOULD N OT BE ENOUGH TO VEST THE CIT WITH THE POWER OF SUO MOTU R EVISION BECAUSE THE FIRST REQUIREMENT, NAMELY, THAT THE ORD ER WAS ERRONEOUS, WAS ABSENT. 19. 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 REL EVANT 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 MATERIAL AND EXPLANATION S, THE AO HAD COME TO A DEFINITE CONCLUSION, THAT SINCE THE M ATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERE D BY THE AO AND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT T HAT A DIFFERENT VIEW COULD BE TAKEN SHOULD NOT BE THE BAS IS FOR AN ACTION UNDER S. 263. 20 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= 20. IN THE CASE OF PAUL MATHEWS & SONS VS. CIT [263 ITR 101 (KERALA)], THE KERALA HIGH COURT HELD THAT THE STAT EMENT ELICITED DURING THE SURVEY OPERATION HAD NO EVIDENT IARY VALUE AND THE AO WAS WELL AWARE OF THIS, THAT AT THE SAME TIME, THE ASSESSEE HAVING FOUND THAT THERE WERE SOME OMISSION S ON ITS PART, OFFERED CERTAIN AMOUNTS AS ADDITIONAL INCOME FOR THE YEARS IN QUESTION AND GAVE A WRITTEN OFFER TO THE A DDL. CIT, THAT IT WAS AFTER VERIFYING THE ACCOUNT BOOKS AND VARIOU S MATERIALS GATHERED IN THE SURVEY AND AFTER CONSIDERING THE OF FER MADE BY THE ASSESSEE THAT THE AO HAD EXERCISED A JUDICIAL D ISCRETION IN THE MATTER WHILE COMPLETING THE ASSESSMENT, THAT IN THE LIGHT OF THE VOLUNTARY DISCLOSURE IN THE LETTER GIVEN IN WRITING BY THE ASSESSEE THE FACTS GIVEN BY IT HAD BEEN VERIFIED WI TH THE BOOKS OF ACCOUNT AND IT WAS ONLY AFTER CONSIDERATION OF T HE VARIOUS ASPECTS OF THE MATTER AND RELATED FACTS THAT THE AO ACCEPTED THE OFFER MADE BY THE ASSESSEE, THAT IN SUCH CIRCUM STANCES, THE VIEW TAKEN BY THE AO COULD NOT BE SAID TO BE PREJUD ICIAL TO THE REVENUE NOR COULD IT BE SAID TO BE ERRONEOUS. 21. IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [243 ITR 83 (SC)], THE SUPREME COURT HELD THAT THE PHRASE 'P REJUDICIAL TO THE INTERESTS OF THE REVENUE' HAD TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO, THAT EVER Y LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANN OT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE, FOR EXAMPLE, WHEN AN AO ADOPTED ONE OF THE COURSES PERM ISSIBLE IN LAW AND IT HAD RESULTED IN LOSS OF REVENUE; OR W HERE TWO VIEWS WERE POSSIBLE AND THE AO HAD TAKEN ONE VIEW W ITH 21 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= WHICH THE CIT DID NOT AGREE, IT COULD NOT BE TREATE D AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ITO WAS UNSUSTAINABLE IN LAW. 22. IN THE LIGHT OF THE ABOVE, WHEN WE EXAMINED FACTS O F THE PRESENT CASE, WE FIND THAT THE AO PASSED THE ASSESS MENT ORDER ON 19.12.2007 U/S. 143(3) OF THE ACT. HE HAS GONE THROUGH THE SURVEY REPORT WHICH WAS CONDUCTED AT BUSINESS PREMI SES OF THE ASSESSEE ON 27.3.2006 AND THE BASIS FOR ISSUING NOT ICE U/S. 143(2) IS THE SURVEY OPERATION IN THE CASE OF THE A SSESSEE U/S. 133A OF THE ACT. THE AO CATEGORICALLY MENTIONED IN PARA 4 OF HIS ORDER THAT DURING THE COURSE OF SURVEY SRI T. S RINIVASA RAO, MANAGING PARTNER OF THE ASSESSEE STATED THAT THE TO TAL TURNOVER/RECEIPTS FOR FYS 2004-05 AND 2005-06 WILL BE AROUND RS. 70 LAKHS AND ALSO STATED THAT FOR FY 2004-05 RE LEVANT TO A.Y. 2005-06, THE TURNOVER/RECEIPTS ARE RS. 20 LAKH S AND FOR FY 2005-06 RELEVANT TO A.Y. 2006-07, THE TURNOVER/RECE IPTS ARE RS. 50 LAKHS. IT MEANS THAT THE AO HAD GONE THROUGH TH E SURVEY REPORT AND AFTER THAT ONLY HE HAD COMPLETED THE ASS ESSMENT. 23. FURTHER IT IS ALSO NOTED THAT BEFORE COMPLETION OF ASSESSMENT THE AO HAD CALLED FOR VARIOUS INFORMATIO NS FROM THE ASSESSEE VIDE HIS LETTERS DATED 29.8.2007, 27.1 1.2007 AND 30.11.2007. THE ASSESSEE HAS GIVEN REPLY TO THE AO WHICH IS PLACED ON RECORD AT PAGE NO. 17 OF THE PAPER BOOK W HICH READS AS FOLLOWS: 22 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= 'FROM: EVEN'S CLASSESS, D. NO. 1-8-702/25, PADMA COLONY, NALLAKUNTA, HYDERABAD. TO: THE INCOME-TAX OFFICER, WARD 4 (2), HYDERABAD SIR, SUB: SUBMISSION OF INFORMATION RELATING TO SCRUTIN Y ASSESSMENT OF OUR FIRM FOR THE ASSESSMENT YEAR 2006-2007 CONSEQUENT UPON SEARCH OPERATIONS - REG. REF: YOUR LETTER DATED 30.11.2007 *** WE ARE ENCLOSING HEREWITH THE FOLLOWING INFORMATION FOR THE ASSESSMENT YEAR 2006-2007, IN RESPONSE TO YOUR LETT ER DATED 30.11.2007 FOR YOUR KIND CONSIDERATION. 1. THE FIRM HAS ONLY ONE BANK ACCOUNT WITH STATE BANK OF HYDERABAD IN THE FINANCIAL YEAR 2005-2006. THE COPY OF BANK STATEMENT IS ENCLOSED. 2. THE BOOKS OF ACCOUNT OF THE FIRM FOR THE FINANCIAL YEAR 2005-2006 ARE SUBMITTED. 3. THE BILLS AND VOUCHERS OF THE EXPENDITURE CLAIMED A RE ENCLOSED, WHEREAS THE RECEIPT BOOKS FOR THIS YEAR H AVE BEEN IN THE POSSESSION OF THE INCOME-TAX DEPARTMENT . . 4. THE GROSS RECEIPTS FOR THE FINANCIAL YEAR WERE RS. 46,30,950-00 ONLY. (RUPEES FORTY SIX LAKHS THIRTY THOUSAND AND NINE HUNDRED FIFTY ONLY). I OFFERED A SUM OF RS. 50.00 LAKHS AS AN ADDITIONAL INCOME AT THAT TIME IN THE STATE OF UTTER CONFUSION. IN FACT OUR TOTAL RECEIPTS FOR THE YEAR WERE RS. 46,30,950-00 ONLY. WE DID NOT KNOW THE DIFFERENCE BETWEEN TOTAL RECEIPTS AND INCO ME, BECAUSE OF OUR INADEQUATE KNOWLEDGE AS FAR AS ACCOUNTING TERMINOLOGY WAS CONCERNED. HENCE, I REQUEST YOUR HONOUR TO CONSIDER ACTUAL RECEIPTS OF THE FIRM TO ARRIVE AT TAXABLE INCOME AFTER ALLOWING ALL ADMISSIBLE EXPENDITURE FOR THE FINANCIAL YEAR 2005- 2006. 23 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= 5. AS MENTIONED IN PARAGRAPH 4, MY TURNOVER FOR THE YE AR WAS EXCEEDED THE AMOUNT OF RS. 40.00 LAKHS WHICH WA S ATTRACTED TO THE PROVISIONS OF SEC. 44AB. THE BOOKS OF ACCOUNTS AND RELATED VOUCHERS WERE IN THE POSSESSIO N OF INCOME-TAX DEPARTMENT. HENCE, THE TAX AUDIT U/S, 44 AB COULD NOT BE CONDUCTED FOR WANT OF INFORMATION. 6. THE CONFIRMATION LETTERS FOR THE ENTRIES SHOWN IN T HE SALARY SHEET ARE ENCLOSED. HENCE, WE REQUEST YOU TO CONSIDER THE ABOVE INFORMA TION FOR THE PURPOSE OF COMPLETING THE ASSESSMENT, FOR WHICH WE SHALL BE GRATEFUL TO YOU. THANKING YOU, YOURS FAITHFULLY, FOR EVEN'S CLASSES SD/- (T. SRINIVAS RAO) (PARTNER)' 24. THE AO AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE CAME TO THE CONCLUSION TH AT THERE ARE CERTAIN DISCREPANCIES IN THE BILLS AND VOUCHERS OF THE ASSESSEE AS THEY ARE SELF-MADE. HENCE TOWARDS THE DISCREPANCIES IN THE VOUCHERS AND BILLS, HE MADE AD DITION OF RS. 1,08,091 TO THE RETURNED INCOME AND HE WAS SATI SFIED ABOUT THE TURNOVER/RECEIPTS DECLARED BY THE ASSESSEE AND COMPLETED THE ASSESSMENT. THE CIT U/S. 263 PROCEEDINGS WAS O F THE OPINION THAT THE ADDITIONAL INCOME OFFERED BY THE A SSESSEE IN THE COURSE OF SURVEY U/S. 133A AT RS. 50 LAKHS SHOU LD HAVE BEEN BROUGHT TO TAX BY THE AO. ACCORDING TO THE CI T, THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HE DOES NOT STATE AS TO WHY THE ORDER OF THE AO COULD BE TERMED AS ERRONEOUS SO AS TO BRING RS. 50 LAKHS TO TAX WHICH OFFER WAS MADE BY THE ASSESSEE. THE OFFER MA DE BY THE 24 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= ASSESSEE IN THE COURSE OF SURVEY IS NOT SUPPORTED B Y ANY MATERIAL TO SUGGEST THAT THERE IS UNDISCLOSED INCOM E BY THE ASSESSEE. THE MATERIAL COLLECTED DURING THE COURSE OF SURVEY ALSO DOES NOT SUGGEST THAT THERE IS UNDISCLOSED INC OME TO THAT EXTENT. THE OFFER IS UNSUBSTANTIATED AND NOT CORRO BORATED BY ANY POSITIVE MATERIAL. 25. THE AO BEING QUASI-JUDICIAL AUTHORITY, EXERCISED TH E POWERS VESTED IN HIM ACCORDING TO THE LAW AND ARRIV ED AT A CONCLUSION THAT THE ASSESSEE HAS PROPERLY DISCLOSED THE RECEIPTS IN ITS BOOKS OF ACCOUNT AND CONCLUDED THAT NO ADDITION IS WARRANTED TOWARDS UNDISCLOSED RECEIPTS AND HE MADE THE ADDITION OF RS. 1,08,091 TOWARDS THE DISCR EPANCIES IN BILLS AND VOUCHERS PRODUCED BY THE ASSESSEE. THE C IT U/S. 263 PROCEEDINGS NOT SATISFIED WITH THE ADDITION MADE BY THE AO AND HE WAS OF THE OPINION THAT THE INCOME OFFERED B Y THE ASSESSEE IS TO BE BROUGHT TO TAX. 26. IN OUR CONSIDERED OPINION, THE FIRST REQUIREMENT VI Z., THAT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRON EOUS IS ABSENT IN THIS CASE. IN COMING TO THE CONCLUSION O F THE CIT U/S. 263 PROCEEDINGS THAT RS. 50 LAKHS OFFERED BY THE AS SESSEE HAS TO BROUGHT TO TAX IS NOT SUPPORTED BY ANY POSITIVE MATERIAL AND THERE IS RETRACTION BY THE ASSESSEE. BEING SO, IN OUR OPINION, THE AO'S ORDER IS TO BE UPHELD. THE REASO N GIVEN BY THE CIT WAS THAT THE RETRACTION MADE BY THE ASSESSE E WAS DELAYED INORDINATELY. IN OUR OPINION, THOUGH THERE IS A DELAY IN RETRACTION BY THE ASSESSEE FOR GOING BACK FROM THE OFFER MADE 25 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= BY THE ASSESSEE, THERE IS NO MATERIAL WHATSOEVER TO BRING THE ADDITIONAL INCOME TO TAX. 27. IN SUCH CIRCUMSTANCES, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINE D TO ANNUL THE ORDER PASSED BY THE CIT U/S. 263 OF THE ACT. T HIS VIEW OF OURS IS FORTIFIED BY THE DECISION OF PUNE BENCH IN THE CASE OF KAKADE CONSTRUCTION (CITED SUPRA). THUS, APPEAL OF THE ASSESSEE IN ITA NO. 274/HYD/2011 IS ALLOWED. 28. SINCE WE HAVE ALLOWED THE APPEAL IN ITA NO. 274/HYD / 2011, THE CONSEQUENTIAL ORDER PASSED BY THE AO IS H AVING NO LEGS TO STAND. BEING SO, THE APPEAL FILED BY THE A SSESSEE EMANATED FROM THE CONSEQUENTIAL ORDER IN ITA NO. 184/HYD/2012 IS DISMISSED AS INFRUCTUOUS. 29. IN THE RESULT, ITA NO. 274/HYD/2011 IS ALLOWED AND ITA NO. 184/HYD/2012 IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 23 RD APRIL, 2014 SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 23 RD APRIL, 2014 TPRAO COPY TO: 1. M/S. EVEN'S CLASSES, C/O. M/S. CH. PARTHASARATHY & CO., 1-1- 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO. 1, ASHOKNAGAR, HYDERABAD-20. 26 ITA NO. 184/HYD/2012 & ITA NO. 274/HYD/2011 M/S. EVEN'S CLASSES, HYDERABAD ========================= 2. THE INCOME TAX OFFICER, WARD-4(2), HYDERABAD. 3. THE CIT(A)-V, HYDERABAD. 4. THE CIT-IV, HYDERABAD 5. THE DR, B BENCH, ITAT, HYDERABAD.