ACIT, Hubli V. Shri. Mallanagouda S. Sankagoudashani, Hubli

ITA 291/BANG/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5415 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-02-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KULKARNI
• Assessee Lawyers: G KAMALADHAR
• Keywords: Reopening of assessment; Unexplained expenditure; Gift; Business expenditure; Rectification of order; Corroborative evidences; Reason to believe
• Section: 40A(3); 143(3); 133A; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ITA NO. 219/BANG/2014 ASSESSMENT YEAR: 2007-08 SHRI MALLANAGOUDA S. SANKAGOUDASHANI, NO.222, 2ND FLOOR, BHAVANI ARCADE, NEAR BASAV VANA, N.C.M., HUBLI 580 029. PAN: AEUPS 7783Q VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), HUBLI. APPELLANT RESPONDENT ITA NO. 291/BANG/2014 ASSESSMENT YEAR: 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), HUBLI. VS. SHRI MALLANAGOUDA S. SANKAGOUDASHANI, NO.222, 2ND FLOOR, BHAVANI ARCADE, NEAR BASAV VANA, N.C.M., HUBLI 580 029. PAN: AEUPS 7783Q APPELLANT RESPONDENT APPELLANT BY : SHRI ASHOK KULKARNI, ADVOCATE RESPONDENT BY : SHRI G. KAMALADHAR, STANDING COUNSEL DATE OF HEARING : 22.02.2017 DATE OF PRONOUNCEMENT : 28.04.2017 ITA NOS. 219 & 291/BANG/2014 PAGE 2 OF 38 O R D E R PER BENCH THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 29.11.2013 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. FIRST WE T AKE UP THE APPEAL FILED BY THE ASSESSEE WHEREIN THE ASSESSEE HAS RAISED THE FO LLOWING GROUNDS. ITA NOS. 219 & 291/BANG/2014 PAGE 3 OF 38 ITA NOS. 219 & 291/BANG/2014 PAGE 4 OF 38 ITA NOS. 219 & 291/BANG/2014 PAGE 5 OF 38 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 3. GROUND NOS. 2 AND 3 ARE REGARDING VALIDITY OF REOP ENING. THERE WAS A SURVEY U/S. 133A OF THE ACT IN THE CASE OF THE ASSE SSEE ON 01.03.2011. DURING THE COURSE OF SURVEY CERTAIN INCRIMINATING D OCUMENTS, DIARIES WERE FOUND AND IMPOUNDED. ON VERIFICATION OF ENTRI ES MADE IN THE IMPOUNDED DIARIES IT WAS OBSERVED THAT THE RECEIPTS RELATING TO CONTRACT BUSINESS WAS UNDER STATED IN THE RETURN OF INCOME. HENCE THE AO PROPOSED TO REOPEN THE ASSESSMENT BY ISSUING A NOTI CE U/S. 148 ON 20.10.2011. IN RESPONSE TO NOTICE U/S. 148 THE ASS ESSEE FILED A LETTER DATED 21.11.2011 STATING THAT THE RETURN OF INCOME FILED ON 30.09.2009 ITA NOS. 219 & 291/BANG/2014 PAGE 6 OF 38 MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE N OTICE U/S. 148. THE AO COMPLETED THE ASSESSMENT U/S. 143(3) R.W.S. 147 ON 19.03.2013 THEREBY MAKING VARIOUS ADDITIONS ON ACCOUNT OF RECE IPTS RECORDED IN THE DIARY AS WELL AS UNEXPLAINED RECEIPTS. THE ASSESSE E CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) INCLUDING THE VA LIDITY OF REOPENING. THE CIT(A) REJECTED THE OBJECTION OF THE ASSESSEE A ND UPHELD THE REOPENING OF ASSESSMENT U/S. 147. 4. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ALLEGED ITEM OF INCOME FOR ESCAPEMENT OF WHICH THE ASSESSMENT WA S REOPENED WERE NOT BROUGHT TO TAX BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER. THEREFORE IT IS SUBMITTED THAT THE VERY EXE RCISE OF REOPENING OF THE ASSESSMENT IS RENDERED INFRUCTUOUS AND UNSUSTAI NABLE IN LAW. HE HAS FURTHER CONTENDED THAT WHEN THE ASSESSING OFFIC ER HAS NOT MADE ANY ADDITION ON THE ISSUE FOR WHICH THE ASSESSMENT WAS REOPENED TO BROUGHT TO TAX THEN NO ADDITION CAN BE MADE IN THE REASSESS MENT PROCEEDINGS. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DE CISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS JET AIRWAYS (I) LTD. (331 ITR 236) AND SUBMITTED THAT WHEN THE AO HAS FORMED A RE ASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND HAS ISSUED A NOTICE U/S. 148 ON CERTAIN SPECIFIC ISSUES HOWEVER, IF AFTER ISSUING N OTICE U/S. 148 HE ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS T HAT THE INCOME WHICH ITA NOS. 219 & 291/BANG/2014 PAGE 7 OF 38 HE HAS INITIALLY FORMED A REASON TO BELIEVE HAD ESC APED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT IT WAS N OT OPEN TO HIM TO ASSESS OR REASSESS ANY OTHER INCOME WHICH MAY HAVE ESCAPED ASSESSMENT BUT WHICH DID NOT FORM THE SUBJECT MATTE R OF NOTICE U/S. 148. THUS, THE LD. AR HAS CONTENDED WHEN THE AO HAS NOT ASSESSED ANY INCOME ON THE ISSUE WHICH WAS SUBJECT MATTER OF NOT ICE U/S. 148 THEN IT IS NOT PERMISSIBLE TO ASSESS OR REASSESS ANY OTHER INCOME NOT SUBJECT MATTER OF NOTICE U/S. 148. HE HAS ALSO RELIED UPON THE DECISION OF 15/04/2015 OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF M/S. A.M. CONSTRUCTIONS VS DCIT IN ITA NO. 177/BANG/2014 AND SUBMITTED THAT THE COORDINATE BENCH HAS DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE BOMBA Y HIGH COURT IN CASE OF CIT VS JET AIRWAYS (I) LTD. (SUPRA). 5. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE D ECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF N. GOVINDARAJU VS ITO (377 ITR 243) AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT IF THE NOTICE ISSUED U/S. 148 WAS FOUND TO BE VALID THEN T HE FOUNDATION REMAINS AND THE PROCEEDINGS ON THE BASIS OF SUCH NOTICE CAN GO ON. IT BECOMES THE DUTY OF THE AO TO BRING TO TAX THE ENTIRE INCOM E INCLUDING ANY OTHER INCOME WHICH MAY HAVE ESCAPED ASSESSMENT AND COME T O HIS NOTICE ITA NOS. 219 & 291/BANG/2014 PAGE 8 OF 38 DURING THE COURSE OF PROCEEDINGS INITIATED U/S. 147 OF THE ACT. THUS, THE LD. DR HAS SUBMITTED THAT IN VIEW OF THE DECISION O F HONBLE JURISDICTIONAL HIGH COURT THE REASSESSMENT CANNOT B E CHALLENGED ON THIS GROUND. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ONLY OBJECTION RAISED BY THE ASSESS EE AGAINST THE VALIDITY OF REASSESSMENT IS THAT WHEN THE AO HAS NOT MADE AN ADDITION IN RESPECT OF THE ITEM OF INCOME ON WHICH THE ASSESSMENT WAS R EOPENED THAN THE OTHER ADDITION IN THE REASSESSMENT IS NOT SUSTAINAB LE. AT THE OUTSET, WE NOTE THAT THOUGH THE ASSESSEE HAS RELIED UPON THE D ECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS JET AIRWAYS (I) LTD. (SUPRA) HOWEVER THE HONBLE JURISDICTIONAL HIGH COURT IN CA SE OF N. GOVINDARAJU VS ITO (SUPRA) WHILE DEALING WITH AN ID ENTICAL ISSUE HAS HELD IN PARA 41 TO 44 AS UNDER. 41. CONSIDERING THE PROVISION OF SECTION 147 AS WELL A S ITS EXPLANATION 3, AND ALSO KEEPING IN VIEW THAT SECTION 147 IS FOR THE BENEFIT OF THE REVENUE AND NOT THE ASSESSEE AND IS AIMED AT GARNER ING THE ESCAPED INCOME OF THE ASSESSEE [VIZ. SUN ENGG. (SUPRA )] A ND ALSO KEEPING IN VIEW THAT IT IS THE CONSTITUTIONAL OBLIGATION OF EV ERY ASSESSEE TO DISCLOSE HIS TOTAL INCOME ON WHICH IT IS TO PAY TAX, WE ARE OF THE CLEAR OPINION THAT THE TWO PARTS OF SECTION 147 (ONE RELATING TO 'SUCH INCOME' AND THE OTHER TO 'ANY OTHER INCOME') ARE TO BE READ INDEPENDENTLY . THE PHRASE 'SUCH INCOME' USED IN THE FIRST PART OF SECTION 147 IS WI TH REGARD TO WHICH REASONS HAVE BEEN RECORDED UNDER SECTION 148(2) OF THE ACT, AND THE PHRASE 'ANY OTHER INCOME' USED IN THE SECOND PART O F THE SECTION IS WITH REGARD TO WHERE NO REASONS HAVE BEEN RECORDED BEFOR E ISSUING NOTICE AND HAS COME TO THE NOTICE OF THE ASSESSING OFFICER SUBSEQUENTLY DURING THE COURSE OF THE PROCEEDINGS, WHICH CAN BE ASSESSE D INDEPENDENT OF ITA NOS. 219 & 291/BANG/2014 PAGE 9 OF 38 THE FIRST PART, EVEN WHEN NO ADDITION CAN BE MADE W ITH REGARD TO 'SUCH INCOME', BUT THE NOTICE ON THE BASIS OF WHICH PROCE EDINGS HAVE COMMENCED, IS FOUND TO BE VALID. 42. IN THE END IT WAS VEHEMENTLY ARGUED BY THE LEARNED COUNSEL FOR THE APPELLANT THAT THE REASON TO BE GIVEN UNDER SUB-SEC TION (2) OF SECTION 148 WOULD BE THE VERY FOUNDATION OF THE ISSUANCE OF NOTICE AND IF IT IS FALSE OR BASELESS, THEN EVERYTHING GOES AND THE STR UCTURE ERECTED ON SUCH FOUNDATION WOULD CRUMBLE. 43. IT IS TRUE THAT IF THE FOUNDATION GOES, THEN THE S TRUCTURE CANNOT REMAIN. MEANING THEREBY, IF NOTICE HAS NO SUFFICIENT REASON OR IS INVALID, NO PROCEEDINGS CAN BE INITIATED. BUT THE SAME CAN BE C HECKED AT THE INITIAL STAGE BY CHALLENGING THE NOTICE. IF THE NOTICE IS C HALLENGED AND FOUND TO BE VALID, OR WHERE THE NOTICE, IS NOT AT ALL CHALLE NGED, THEN IN EITHER CASE IT CANNOT BE SAID THAT NOTICE IS INVALID. AS SUCH, IF THE NOTICE IS VALID, THEN THE FOUNDATION REMAINS AND THE PROCEEDINGS ON THE B ASIS OF SUCH NOTICE CAN GO ON. WE MAY ONLY REITERATE HERE THAT ONCE THE PROCEEDINGS HAVE BEEN INITIATED ON A VALID NOTICE, IT BECOMES THE DU TY OF THE ASSESSING OFFICER TO LEVY TAX ON THE ENTIRE INCOME (INCLUDING 'ANY OTHER INCOME') WHICH MAY HAVE ESCAPED ASSESSMENT AND COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS INITIATED UNDER SECTI ON 147 OF THE ACT. 44. IN VIEW OF THE AFORESAID, WE ANSWER THE FIRST TWO SUBSTANTIAL QUESTIONS OF LAW IN FAVOUR OF THE REVENUE AND AGAIN ST THE ASSESSEE. SINCE THIS ISSUE IS NOW COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT (SUPRA) WHICH IS A BINDING PRECEDENT FOR US THEREFORE WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. CONSEQUENT LY THE GROUND NOS. 2 AND 3 OF THE ASSESSEES APPEAL ARE DISMISSED. 7. GROUND NOS. 4 TO 6 ARE REGARDING THE ADDITION MADE ON ACCOUNT OF RECEIPTS FROM THE BANK ACCOUNT OF M/S. P.R. NAYAK A SSOCIATES. THE AO IN THE ASSESSMENT ORDER HAS STATED THAT IN THE IMPO UNDED DIARIES THE ASSESSEE RECORDED RECEIPTS FROM M/S. P.R. NAYAK ASS OCIATES. ON QUERY THE ASSESSEE VIDE LETTER DATED 06.02.2013 EXPLAINED THAT HE WAS LOOKING ITA NOS. 219 & 291/BANG/2014 PAGE 10 OF 38 AFTER THE MINOR BRIDGE WORK ALLOTTED TO M/S. P.R. N AYAK ASSOCIATES AND HE HAS CARRIED OUT WORK TO THE EXTENT OF RS. 85,83, 438/- ON WHICH THE ASSESSEE OFFERED TO DECLARE NET PROFIT AT 1% ON THE TOTAL WORK EXECUTED BY HIM. THE AO ISSUED A LETTER TO M/S. P.R. NAYAK ASSOCIATES TO CONFIRM THE CONTRACT WORK GIVEN TO THE ASSESSEE AND ALSO THE PAYMENTS MADE TO THE ASSESSEE AGAINST SUCH WORK. M/S. P.R. NAYAK ASSOCIATES VIDE LETTER DATED 16.02.2013 STATED THAT THEY HAVE NOT ENTRUSTED ANY WORK TO ASSESSEE DURING THE SAID FINANCIAL YEAR. T HE ASSESSEE AGAIN VIDE LETTER DATED 28.02.2013 REITERATED ITS STAND T HAT HE HAS CARRIED OUT THE WORK OF M/S. P.R. NAYAK ASSOCIATES AND PAYMENT AGAINST SUCH WORK WERE MADE BY UTILIZING THE MONEY DRAWN THROUGH SELF CHEQUES OF M/S. P.R. NAYAK ASSOCIATES. THE ASSESSEE ALSO STAT ED THAT THE AMOUNT WITHDRAWN FROM THE BANK ACCOUNT OF M/S. P.R. NAYAK ASSOCIATES IN AGGREGATE IS RS. 94,77,000/- WHICH WAS USED FOR THE PURPOSE OF CONTRACT OF M/S. P.R. NAYAK ASSOCIATES. THE AO DID NOT ACCE PT THE CONTENTION AND EXPLANATION OF THE ASSESSEE ON THE GROUND THAT WHEN M/S. P.R. NAYAK ASSOCIATES HAS REFUSED TO PAY ANY AMOUNT TO T HE ASSESSEE AS WELL AS ENTRUSTED ANY WORK TO THE ASSESSEE THEN THE ASSE SSEE HAS FAILED TO EXPLAIN THE SOURCE OF RECEIPT OF THAT AMOUNT OF RS. 94,77,000/-. THE AO ACCORDINGLY MADE AN ADDITION OF SAID AMOUNT OF RS. 94,77,000/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) AND ITA NOS. 219 & 291/BANG/2014 PAGE 11 OF 38 REITERATED ITS CONTENTION THAT THE AMOUNT RECORDED IN THE DIARY IS ALSO MATCHING WITH THE BANK ENTRIES OF M/S. P.R. NAYAK A SSOCIATES. IT WAS FURTHER EXPLAINED THAT M/S. P.R. NAYAK ASSOCIATES H AD UNDERTAKEN THE WORK OF NATIONAL HIGHWAY 218 BIJAPUR, HUBLI AND THE ASSESSEE IN TURN WAS DOING THE WORK FOR NATIONAL HIGHWAY 218 BIJAPUR , HUBLI AT KILOMETER 172-400. THIS WORK WAS ALLOTTED TO M/S. P.R. NAYAK BY THE NATIONAL HIGHWAY AUTHORITY. THE CIT(A) DID NOT ACC EPT THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT SHRI P.R. NAYAK THE PARTNER OF M/S. P.R. NAYAK ASSOCIATES WAS EXAMINED BY THE AO IN THE PRESENCE OF THE ASSESSEE WHO HAS DENIED THE FACT TH AT HE HAS GIVEN A CONTRACT WORK TO THE ASSESSEE OR ISSUED ANY CHEQUE TO THE ASSESSEE. 8. BEFORE US THE LD. AR OF THE ASSESSEE HAS REFERRED T O THE BREAK-UP OF THE AMOUNTS RECEIVED AND DIARY ENTRIES AS REPRODUCED BY THE CIT(A) AT PAGE 12 AND 13 OF THE IMPUGNED ORDER. HE HAS ALSO REFER RED TO THE DETAILS OF THE DIARY ENTRIES AS WELL AS THE ENTRIES OF THE BAN K ACCOUNT OF MR. P.R. NAYAK MAINTAINED WITH SYNDICATE BANK, VIDYANAGAR BR ANCH, HUBLI AND SUBMITTED THAT THERE IS TOTAL IDENTITY IN THE DIARY ENTRY AND ENTRIES IN THE SYNDICATE BANK ACCOUNT OF SHRI P.R. NAYAK AS WELL A S IN THE BOOK OF M/S. P.R. NAYAK ASSOCIATES WITH DATES AND AMOUNTS. THE ENTRIES IN THE DIARY AGGREGATING TO RS. 85,83,428/- ALONG WITH THE NARRATIONS THAT CH. ITA NOS. 219 & 291/BANG/2014 PAGE 12 OF 38 TO SYND BANK OF PRN ASSOCIATES CLEARLY SHOW THAT T HESE AMOUNTS WERE NOTHING BUT REPRESENTING THE WITHDRAWAL AGGREG ATING TO RS. 94,77,000/- TALLY STRICTLY WITH BANK ACCOUNT OF M/S . P.R. NAYAK ASSOCIATES ON BOTH RESPECT AMOUNTS AND DATEWISE. H E HAS FURTHER SUBMITTED THAT CHEQUE LEAVES SOME OF THEM SIGNED AN D FEW BLANK AND UNDATED OF M/S. P.R.N. ASSOCIATES RELATING TO THE S YNDICATE BANK WERE FOUND IN THE ASSESSEES PREMISES DURING SURVEY. TH E LD. AR HAS FURTHER SUBMITTED THAT THE CURRENT ACCOUNT NO. 120130700003 37 WITH SYNDICATE BANK, VIDYANAGAR BRANCH, HUBLI BELONGS TO M/S. P.R. NAYAK ASSOCIATES AND THIS FACT IS ADMITTED BY SHRI P.R. N AYAK IN HIS STATEMENT. THE LD. AR HAS FURTHER POINTED OUT THAT M/S. P.R. N AYAK ASSOCIATES HAVE ENTERED INTO AN AGREEMENT DATED 16.12.2005 WIT H THE ASSESSEE FOR THE PURPOSE OF EXECUTION OF THE SAID CONTRACT WORK. A COPY OF THE SAID AGREEMENT HAS BEEN PLACED AT PAGE 79 TO 81 OF THE P APER BOOK. THE ASSESSEE AND SHRI P.R. NAYAK HAVE STUDIED TOGETHER AND ALSO ENJOYED LONG STANDING FRIENDSHIP AND RELATIONSHIP. THEREFO RE THE ASSESSEE DID NOT CHOOSE TO CROSS EXAMINE SHRI P.R. NAYAK. THUS, THE LD. AR HAS SUBMITTED THE ASSESSEE HAS PROVED FROM THE RECORD T HAT THIS AMOUNT AS RECORDED IN THE DIARY WAS RECEIVED FROM M/S. P.R. N AYAK ASSOCIATES FROM THEIR CURRENT ACCOUNT IN SYNDICATE BANK ON ACC OUNT OF EXECUTING THE HIGHWAY WORK AWARDED TO SHRI P.R. NAYAK BY THE NATIONAL ITA NOS. 219 & 291/BANG/2014 PAGE 13 OF 38 HIGHWAY AUTHORITY. THEREFORE IT IS PLEADED THAT TH E ADDITION MADE BY THE AO OF RS. 94,77,000/- BE DELETED. 9. ON THE OTHER HAND, THE LD. DR HAS REFERRED TO THE F INDING OF THE CIT(A) AND SUBMITTED THAT DESPITE THE OPPORTUNITY GIVEN BY THE AO, THE ASSESSEE DID NOT CHOOSE TO CROSS EXAMINE SHRI P.R. NAYAK WHO HAS STATED IN HIS STATEMENT RECORDED IN THE PRESENCE OF THE ASSESSEE THAT HE HAS NOT GIVEN ANY CONTRACT WORK TO THE ASSESSEE. T HUS SHRI P.R. NAYAK HAS CATEGORICALLY DENIED THE FACT OF GIVING ANY CON TRACT WORK OR ISSUE ANY CHEQUE TO THE ASSESSEE. THE LD. DR HAS FURTHER CONTENDED THAT THE ASSESSEES EXPLANATION WAS FOUND TO BE NOT CORRECT AND THEREFORE THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF THE SAID A MOUNT OF RS. 94,77,000/-. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF SURVEY U/S. 133A C ONDUCTED ON 01.03.2011 A DIARY WAS IMPOUNDED FROM THE PLACE OF THE ASSESSEE WHEREIN VARIOUS RECEIPTS RELATING TO CONTRACT BUSIN ESS IN THE NAME OF M/S. P.R. NAYAK ASSOCIATES WERE FOUND. THE AO HAS MADE AN ADDITION ON THIS ACCOUNT OF RS. 94,77,000/-. THE ASSESSEE E XPLAINED BEFORE THE AUTHORITIES BELOW THAT THESE RECEIPTS ARE RELATED T O THE CONTRACT WORK CARRIED OUT BY THE ASSESSEE ON BEHALF OF M/S. P.R. NAYAK ASSOCIATES ITA NOS. 219 & 291/BANG/2014 PAGE 14 OF 38 RELATING TO NATIONAL HIGHWAY BIJAPUR,HUBLI. THE AS SESSEE HAS FURTHER EXPLAINED THAT ONLY A SMALL COMMISSION OF 1% WAS PA ID TO THE ASSESSEE. TO VERIFY THE EXPLANATION OF THE ASSESSEE THE AO SU MMONED SHRI P.R. NAYAK AND RECORDED HIS STATEMENT. IN THE SAID STATEMENT SHRI P.R. NAYAK HAS DENIED HAVING SUB CONTRACTED TH E WORK TO THE ASSESSEE OR ISSUED ANY CHEQUE TO THE ASSESSEE IN RE SPECT OF THE SAID AMOUNT OF RS. 94,77,000/-. SINCE THE ASSESSEE DID NOT CROSS EXAMINE SHRI P.R. NAYAK THEREFORE THE AO REJECTED THE EXPLA NATION OF THE ASSESSEE AND MADE THE SAID ADDITION. IT IS PERTINE NT TO NOTE THAT THE ASSESSEE HAS CLEARLY BROUGHT OUT ON RECORD THE MATE RIAL TO SHOW THAT ALL THE ENTRIES AS RECORDED IN THE DIARY FOUND DURING T HE SURVEY ARE MATCHING WITH THE ENTRIES IN THE BANK ACCOUNT OF M/ S. P.R. NAYAK ASSOCIATES AND SUBMITTED THAT THE DATEWISE ENTRIES IN THE DIARY ARE MATCHING WITH THE ENTRIES IN THE BANK ACCOUNT OF M/ S. P.R. NAYAK ASSOCIATES. THUS THE ASSESSEE CLAIMED THAT THE EVI DENCE FURNISHED BY THE ASSESSEE GOES TO PROVE THAT THE CASH RECEIPTS W ERE RECEIVED FROM M/S. P.R. NAYAK ASSOCIATES IN RESPECT OF THE CONTRA CT WORK OF NATIONAL HIGHWAY BIJAPUR, HUBLI. WE FURTHER NOTE THAT THE A O HAS NOT DISPUTED THIS FACT THAT M/S. P.R. NAYAK ASSOCIATES WERE AWAR DED THE CONTRACT WORK IN RESPECT OF THE NATIONAL HIGHWAY BIJAPUR, HU BLI AT KILOMETER 172-400 OF NATIONAL HIGHWAY 218 BIJAPUR, HUBLI ROAD BY THE NATIONAL ITA NOS. 219 & 291/BANG/2014 PAGE 15 OF 38 HIGHWAY AUTHORITIES. FURTHER, DURING THE COURSE OF SURVEY SOME CHEQUES WERE ALSO FOUND SIGNED BY M/S. P.R. NAYAK A SSOCIATES WHICH WERE NOT ENCASHED BY THE ASSESSEE AND THIS FACT SUP PORTS THE EXPLANATION OF THE ASSESSEE THAT THE ASSESSEE RECEIVED THE PAYM ENT IN QUESTION FROM SHRI P.R. NAYAK. THE ASSESSEE FILED THE BANK STATE MENT OF M/S. P.R. NAYAK ASSOCIATES. WE FIND THAT THE CIT(A) HAS REPR ODUCED THE DETAILS OF THE DIARY ENTRY AT PAGE 12 AND 13 AS UNDER. ITA NOS. 219 & 291/BANG/2014 PAGE 16 OF 38 11. THE DATES AND AMOUNTS AS RECORDED IN THE DIARY ARE IDENTICAL TO THE ENTRIES IN THE BANK ACCOUNT OF M/S. P.R. NAYAK ASSO CIATES AND THEREFORE IT LEAVES NO IOTA OF DOUBT ABOUT THE FACT THAT THE ENTRIES IN THE DIARY ARE IDENTICAL AND COMPLETELY MATCHING WITH THE ENTRIES IN THE BANK ACCOUNT OF M/S. P.R. NAYAK ASSOCIATES IN RESPECT OF DATES A ND AMOUNTS. FURTHER, IT IS ALSO NOT IN DISPUTE THAT SOME OF THE CHEQUE LEAVES SIGNED AND BLANK RELATING TO M/S. P.R. NAYAK ASSOCIATES FR OM ITS BANK ACCOUNT WITH SYNDICATE BANK WERE ALSO FOUND DURING THE SURV EY. THE COPIES OF THESE CHEQUE LEAVES ARE PLACED BY THE ASSESSEE AT P AGE NOS. 74 TO 78 OF PAPER BOOK. THEREFORE THE PRESENCE OF THESE CHEQUE S IN THE OFFICE OF THE ASSESSEE SHOWS THAT SHRI P.R. NAYAK WAS HAVING BUSINESS DEALING WITH THE ASSESSEE AND THIS FACT IS SUPPORTED BY THE AGREEMENT BETWEEN THE ASSESSEE AND M/S. P.R. NAYAK ASSOCIATES FOR THE PURPOSE OF EXECUTION OF THE CONTRACT WORK OF NATIONAL HIGHWAY. THE COPY OF THE AGREEMENT HAS BEEN PLACED AT PAGE NOS. 79 TO 81 OF THE PAPER BOOK. THOUGH SHRI P.R. NAYAK DENIED IN HIS STATEMENT HAVI NG GIVEN ANY CONTRACT TO THE ASSESSEE AS WELL AS CHEQUES IN QUES TION HOWEVER THE EVIDENCE PRODUCED BY THE ASSESSEE PROVES CONTRARY A ND ALSO FALSIFY THE STATEMENT OF SHRI P.R. NAYAK. IT APPEARS THAT SHRI P.R. NAYAK DENIED THE AWARDING OF EXECUTION OF CONTRACT TO THE ASSESS EE DUE TO THE FACT THAT ITA NOS. 219 & 291/BANG/2014 PAGE 17 OF 38 IT MAY BE IN VIOLATION OF THE TERMS AND CONDITIONS OF THE CONTRACT AWARDED BY THE NATIONAL HIGHWAY AUTHORITY TO M/S. P .R. NAYAK ASSOCIATES. THE EVIDENCE ON RECORD ESTABLISHES THE FACT OF RELATIONSHIP BETWEEN THE ASSESSEE AND M/S. P.R. NAYAK ASSOCIATES AND FURTHER THE MATCHING OF THE ENTRIES IN THE DIARY WITH THE ENTRI ES IN THE BANK ACCOUNT OF M/S. P.R. NAYAK ASSOCIATES ESTABLISH THE SAID RE LATIONSHIP OF EXECUTION OF THE WORK BY THE ASSESSEE ON BEHALF OF M/S. P.R. NAYAK ASSOCIATES. WE FURTHER NOTE THAT IN THE DIARY, FOU ND AND IMPOUNDED DURING THE SURVEY, THE RECEIPTS IN QUESTION WERE RE CORDED ALONG WITH THE DESCRIPTION AS CASH BY PRN ASSOCIATES SYNDICATE BA NK AND THEREFORE ALL THESE ENTRIES WERE RECORDED IN THE DIARY WITH N ARRATION RECEIVED FROM SYNDICATE BANK ACCOUNT OF M/S. PRN ASSOCIATES. WHE N THE AO HAS MADE AN ADDITION ON THE BASIS OF THESE ENTRIES THEN THE ENTIRE ENTRY IN THE DIARY HAS TO BE TAKEN INTO ACCOUNT. IF WE SEE THE COMPLETE DETAILS OF THE ENTRIES IN THE DIARY IT EXPLAINS THE SOURCE OF RECEIPTS RECORDED IN THE DIARY AND THEREFORE THE EXPLANATION RECORDED IN THE DIARY ITSELF CANNOT BE DENIED WHEN THE AMOUNT RECORDED IN THE DIARY AS REC EIPT IS ACCEPTED BY THE AO. WHEN A DOCUMENT IS FOUND DURING THE SURVEY AND IMPOUNDED THEN THE DOCUMENT IS EITHER COMPLETELY ACCEPTED IN TOTO OR IS DENIED IN TOTO. IN THE CASE IN HAND, THE EXPLANATION AS RECO RDED IN THE DIARY IS ALSO SUPPORTED BY THE ENTRIES IN THE BANK ACCOUNT OF M/S . P.R. NAYAK ITA NOS. 219 & 291/BANG/2014 PAGE 18 OF 38 ASSOCIATES. THEREFORE IN VIEW OF THE FACTS AND CIR CUMSTANCES OF THE CASE, WHEN THE DIARY ENTRIES ITSELF ARE SELF-EXPLAN ATORY TO THE SOURCE OF RECEIPTS AND FURTHER IT IS SUPPORTED BY THE MATCHIN G ENTRIES IN THE BANK ACCOUNT OF M/S. P.R. NAYAK ASSOCIATES THEN ACCEPTIN G THE AMOUNT FROM THE DIARY ENTRIES AND REJECTING THE EXPLANATION BY THE AO IS NOT JUSTIFIED. ACCORDINGLY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. 12. GROUND NO. 7 IS REGARDING THE ADOPTION OF 9% GROSS PROFIT IN RESPECT OF SALE OF MATERIAL. THE AO MADE AN ADDITION OF RS. 5 1,08,557/- AS RECEIPTS RECORDED IN THE IMPOUNDED DIARIES WHICH AR E NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. THE ASSESSEE EXPLAIN ED BEFORE THE AO THAT THE AMOUNT WAS RECEIVED TOWARDS SALE OF MATERI ALS. SINCE THE ASSESSEE DID NOT FURNISH THE DETAILS AND SUPPORTING DOCUMENTS TO PROVE THAT THE SAID RECEIPTS WAS RECEIVED TOWARDS SALE OF MATERIAL THE AO HAS MADE AN ADDITION OF THE ENTIRE AMOUNT OF RS. 51,08, 557/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) A ND CONTENDED THAT THE RECEIPTS SHOWN IN THE DIARY WERE TOWARDS SALE O F MATERIAL FOR CIVIL CONTRACT WORK MADE OUTSIDE BOOKS WHICH WAS ALSO EXP LAINED BY THE ASSESSEE THAT THE CORRESPONDING PAYMENTS MADE TOWAR DS PURCHASE OF SIMILAR MATERIAL WAS ALSO RECORDED IN THE DIARY AND THEREFORE THE ENTRIES ITA NOS. 219 & 291/BANG/2014 PAGE 19 OF 38 AGGREGATING TO RS. 1,42,08,990/- ARE REPRESENTING B OTH IN THE DIARY AND IN THE REGULAR BOOKS WITH IDENTITY IN NAMES, DATES AND VALUE TOTAL AMOUNTING TO RS. 63,03,554/-. THUS THE ASSESSEE CO NTENDED THAT THIS ITEM OF RS. 63,03,554/- APPEARS IN THE REGULAR BOOK S OF ACCOUNT WHICH WAS LEFT OUT BY THE AO WHILE MAKING THE ADDITION. THE CIT(A) AFTER CONSIDERING THE RELEVANT RECORD AS WELL AS SUBMISSI ONS OF THE ASSESSEE HAS DIRECTED THE AO TO TAKE AVERAGE GROSS PROFIT AT 9% ON TOTAL SALE OF MATERIAL INCLUDING JELLY AND THEREFORE THE INCOME H AS TO BE COMPUTED ACCORDINGLY. THUS, THE CIT(A) HAS GRANTED SUBSTANT IAL RELIEF BY RESTRICTING THE ADDITION ONLY TO THE GROSS PROFIT O N THE SALE OF MATERIAL INSTEAD OF THE ENTIRE AMOUNT ADDED BY THE AO. 13. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE CIT(A) AFTER TAKING INTO CONSIDERATION THE GP RATIO ON VARIOUS M ATERIALS SUPPLIERS HAS DIRECTED THE AO TO TAKE THE AVERAGE GP AT 9%. HOWE VER EVEN IF THE INSTANCES AS TAKEN BY THE CIT(A) ARE CONSIDERED THE AVERAGE GP OF THE COMPARABLE PARTIES COMES TO LESS THAN 6% WHEREAS TH E CIT(A) HAS ARBITRARILY ADOPTED THE GP AT 9%. THE LD. AR HAS F URTHER SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIB UNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 30.11.2015 IN ITA NO. 904/BANG/2015. THUS THE LD. AR HAS SUBM ITTED THAT THE ITA NOS. 219 & 291/BANG/2014 PAGE 20 OF 38 AVERAGE GP SHOULD HAVE BEEN TAKEN AT 5.5% INSTEAD O F 9% TAKEN BY THE CIT(A). 14. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE O RDER OF THE AO AND SUBMITTED THAT WHEN THE ASSESSEE HAS FAILED TO EXPL AIN THE DETAILS AND PARTICULARS OF THE PARTIES TO WHOM THE ALLEGED MATE RIAL WERE SOLD THEN THE AO IS JUSTIFIED IN MAKING THE ADDITION OF THE E NTIRE AMOUNT. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. WE FIND FROM THE ENTRIES IN THE DIARY T HAT THE RECEIPTS AS WELL AS PAYMENTS WERE RECORDED SIMULTANEOUSLY AT THE SAM E PAGE OF THE DIARY AND THEREFORE IT IS CLEAR THAT THESE RECEIPTS AND P AYMENTS ARE REPRESENTING THE PURCHASES AND SALE OF THE MATERIAL . THE AO HAS TAKEN ONLY THE RECEIPT PART OF THE DIARY ENTRIES AND IGNO RED THE PAYMENT PART. THE CIT(A) AFTER CONSIDERING THE RELEVANT RECORD FO UND THAT THESE RECEIPTS ARE REPRESENTING THE SALE OF MATERIAL FOR CONSTRUCTION WORK LIKE STEEL, CEMENT ETC AND THEREFORE THE CIT(A) HAS ASKE D THE ASSESSEE TO FURNISH THE GP DETAILS FROM THE LOCAL MARKET WHICH WERE FURNISHED BY THE ASSESSEE AS REPRODUCED BY THE CIT(A) AT PAGE 27 OF THE IMPUGNED ORDER AS UNDER. ITA NOS. 219 & 291/BANG/2014 PAGE 21 OF 38 16. THOUGH THE CIT(A) HAS CONSIDERED THE GP DETAILS FUR NISHED BY THE ASSESSEE HOWEVER INSTEAD OF TAKING THE AVERAGE OF T HE THESE GP DETAILS THE CIT(A) HAS ADOPTED THE GP AT 9%. WE FIND THAT THE SAID ADOPTION OF 9% OF GP IS WITHOUT ANY BASIS AND RATHER CONTRAR Y TO THE MATERIAL ON RECORD / EVIDENCE. WE FURTHER NOTE THAT THE COORDI NATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 30.11.2015 WHILE DEALING AN IDENTICAL I SSUE HAS HELD IN PARA 11 TO 14 AS UNDER. 11. BEFORE THE CIT(APPEALS), THE ASSESSEE RELIED ON THE ORDER OF THE CIT(APPEALS) FOR THE A.YS. 2007-08 TO 2011-12 AND C ONTENDED THAT A SUITABLE RATE OF PROFIT TOWARDS SALE OF MATERIAL HA S TO BE CONSIDERED AND NOT WHOLE OF THE RECEIPTS. THE ASSESSEE FURNIS HED GP DETAILS FROM THE LOCAL MARKET WHICH IS AS FOLLOWS:- ITA NOS. 219 & 291/BANG/2014 PAGE 22 OF 38 12. AVERAGE GROSS PROFIT FOR STEEL WAS GIVEN AT (6. 08 TO 7.56%), FOR CEMENT THE AVERAGE GROSS PROFIT WAS GIVEN AT (3.33 TO 5.09%) AND FOR JELLY NO AVERAGE GROSS PROFIT WAS GIVEN. THE CIT(A ) DIRECTED THE AO TO TAKE AVERAGE GROSS PROFIT AT 9% ON TOTAL SALE OF MATERIALS INCLUDING JELLY AND COMPUTE INCOME ACCORDINGLY. THUS, THIS I SSUE WAS PARTLY ALLOWED BY THE CIT(A). 13. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 14. WE HAVE HEARD BOTH THE PARTIES. WE FIND FROM THE GP DETAILS FROM THE LOCAL MARKET FURNISHED BEFORE THE CIT(APPE ALS) THAT AVERAGE GP IS 5.5% APPROXIMATELY AND HENCE WE ARE OF THE OP INION THAT THE CIT(A) WAS NOT JUSTIFIED IN ADOPTING GP AT 9% ON TO TAL SALE OF MATERIALS INCLUDING JELLY. HENCE, THE AO IS DIRECT ED TO WORK OUT THE GP RATE AT 5.5% ON SALE OF MATERIALS INSTEAD OF 9% DIR ECTED BY THE CIT(A). 17. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N ASSESSEES OWN CASE WE DIRECT THE AO TO WORK OUT THE GP RATE AT 5.5% ON SALE OF MATERIAL INSTEAD OF 9% DIRECTED BY THE CIT(A). ITA NOS. 219 & 291/BANG/2014 PAGE 23 OF 38 18. GROUND NO. 8 IS REGARDING ADDITION ON ACCOUNT OF RE CEIPTS AND DEPOSITS RELATING TO ICICI BANK. WE HAVE HEARD THE LD. AR A S WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 30.11.2015 IN PARA 23 AS UNDER. 23. WE HAVE HEARD BOTH THE PARTIES. WE ARE OF THE OPINION THAT ONE MORE OPPORTUNITY IS TO BE AFFORDED TO THE ASSESSEE TO EXPLAIN HIS CASE BEFORE THE AO AS I T IS STATED THAT THE ASSESSEE HAS SUFFICIENT WITHDRAWALS FROM HIS CAPITAL ACCOUNT AND THE SOURCE IS EXPLAINED. W E THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE ASS ESSING OFFICER FOR FRESH EXAMINATION AFTER GIVING AN OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. 19. IN VIEW OF THE EARLIER ORDER OF THIS TRIBUNAL WE SE T ASIDE THIS ISSUE TO THE RECORD OF THE AO FOR FRESH EXAMINATION AND ADJUDICA TION AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 20. GROUND NO. 9 IS REGARDING CASH WITHDRAWN / DEPOSITE D IN BANK OF RS. 2,80,000/-. THE AO HAS MADE AN ADDITION OF CASH DE POSITS IN THE STATE BANK OF MYSORE OF RS. 2,80,000/-. THE ASSESSEE CHA LLENGED THE ACTION OF THE AO BEFORE THE CIT(A) AND SUBMITTED THAT WHEN ALL THE RECEIPTS RECORDED IN THE DIARY HAS BEEN BROUGHT TO TAX OR SE PARATELY CONSIDERED BY THE AO THEN THE DEPOSIT IN BANK HAS NO ELEMENT O F INCOME. FURTHER THE ASSESSEE EXPLAINED THAT THERE IS CORRESPONDING WITHDRAWAL FROM ITA NOS. 219 & 291/BANG/2014 PAGE 24 OF 38 BANK AND THEREFORE ONLY THE DEPOSIT SIDE OF THE BAN K CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE BY IGNORING TH E CORRESPONDING WITHDRAWAL FROM THE BANK. THE CIT(A) DID NOT ACCEP T THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ADDITION MADE BY THE AO. 21. BEFORE US THE LD. AR OF THE ASSESSEE HAS POINTED OU T THE DETAILS OF TRANSFER FROM CASH CREDIT ACCOUNT TO HIS OWN SAVING S BANK ACCOUNT OF RS. 1,50,000/- WHICH IS ALSO REFLECTED IN THE DIARY ENTRY WITH A NARRATION THAT SBM CASH CREDIT TO SAVINGS BANK ACCOUNT. THE LD. AR HAS SUBMITTED THAT THE ACTUAL TRANSFER TOOK PLACE ON 26 .06.2006 BUT IN A SLIGHTLY LARGER SUM OF RS. 1,75,000/- WHICH IS ALSO RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND ALSO IN THE RESPECTIVE BANK ACCOUNTS. SIMILARLY, IN RESPECT OF RS. 1,00,000/- DATED 23.10 .2006 THE ASSESSEE INSTRUCTED THE ACCOUNTANT AT SITE TO DEPOSIT THE SA ID AMOUNT IN THE BANK ACCOUNT. HOWEVER THE ACCOUNTANT CARRIED OUT THE IN STRUCTION ONLY ON 31.10.2006. THEREFORE THERE IS A DIFFERENCE IN THE ENTRY IN THE DIARY AND THE AMOUNT DEPOSITED IN THE BANK. HENCE THE LD. AR HAS SUBMITTED THAT THIS AMOUNT OF RS. 2,50,000/- CANNOT BE CONSIDERED AS UNEXPLAINED INCOME OF THE ASSESSEE AS THE ASSESSEE HAS EXPLAINE D THE APPROXIMATE DATES OF DEPOSIT IN THE BANK. THE LD. AR HAS FURTH ER SUBMITTED THAT OTHER TWO ENTRIES OF RS. 15,000/- EACH ON 18.12.200 6 AND 23.11.2006 REPRESENTS THE SAME ENTRIES DRAWN FROM THE ATM WITH REFERENCE TO BANK ITA NOS. 219 & 291/BANG/2014 PAGE 25 OF 38 ACCOUNT DISCLOSED IN THE BOOKS OR THE UNDISCLOSED B ANK ACCOUNT WITH THE ICICI. HENCE THE ENTIRE SUM RS. 2,80,000/- CANNOT BE TREATED AS UNEXPLAINED INCOME OF THE ASSESSEE. ON THE OTHER H AND, THE LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS NOT SHOWN THESE DEPOSITS IN THE REGULA R BOOKS OF ACCOUNTS AND ALSO NOT FILED ANY EVIDENCE IN SUPPORT OF HIS C LAIM. THEREFORE THE ADDITION MADE BY THE AO IS JUSTIFIED. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO MADE THE ADDITION ON ACCOUNT OF THE DEPOSITS MADE IN THE BANK ACCOUNT OF RS. 2,80,000/-. WE FIND THA T THE ASSESSEE HAS CLAIMED THAT THE CORRESPONDING WITHDRAWAL FROM THE BANK AS WELL AS THE ENTRIES IN THE DIARY REPRESENTING THE SAME AMOUNTS SHOULD BE CONSIDERED AS THE EXPLANATION OF THE SAID DEPOSITS. THOUGH TH ERE IS NO DIRECT CORRELATION BETWEEN THE ENTRIES IN THE DIARY AND DE POSITS IN THE BANK AS THE DATES VARIES HOWEVER, WE FIND THAT THE WITHDRAW AL FROM THE BANK HAS TO BE TAKEN INTO ACCOUNT WHILE MAKING AN ADDITION O N ACCOUNT OF DEPOSIT IN THE BANK. ACCORDINGLY, WE DIRECT THE AO TO ALLO W THE ADJUSTMENT TO THE EXTENT OF THE CASH WITHDRAWAL FROM THE BANK AS A SOURCE OF SUBSEQUENT DEPOSITS. ITA NOS. 219 & 291/BANG/2014 PAGE 26 OF 38 23. GROUND NO. 10 IS REGARDING THE ADDITION OF RS. 1,00 ,000/-. THE AO HAS MADE AN ADDITION OF RS. 1,00,000/- AS UNEXPLAINED R ECEIPTS ON THE BASIS OF THE DIARY ENTRY NO. 184 DATED 28.09.2006. THERE IS NO NOTING IN THE DIARY AGAINST THE SAID ENTRY OF RS. 1,00,000/- THER EFORE THE AO HAS MADE AN ADDITION OF THE SAID AMOUNT FOR WANT OF EXPLANAT ION. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) H OWEVER COULD NOT SUCCEED. 24. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THIS ENTRY DATED 28.09.2006 OF RS. 1,00,000/- WAS ALSO CANCELLED AND THEREFORE IT DOES NOT REPRESENT ANY INCOME TAXABLE IN THE HAND OF THE ASSESSEE. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE DID NOT FURNI SH ANY EXPLANATION REGARDING THE SAID ENTRY OF RS. 1,00,000/- IN THE D IARY. EVEN THERE IS NO NOTING IN THE DIARY AGAINST THE SAID ENTRY. THUS T HE AO IS JUSTIFIED IN MAKING THE ADDITION. 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO ON VERIFICATION OF THE DIARY NOT ICED THAT CERTAIN RECEIPT ENTRIES ARE AVAILABLE IN THE DIARY WHICH HA S BEEN REPRODUCED BY THE CIT(A) AT PAGE 35 AS UNDER. ITA NOS. 219 & 291/BANG/2014 PAGE 27 OF 38 ENTRY NO DATE AMOUNT PARTICULARS 179 22.08.06 900,000 CASH BY CORP. BANK (HOWEVER ENTRY SCRATCHED) 184 28.09.06 100,000 ENTRY IS IN DIARY (BUT NO NOTINGS ARE MADE AGAINST IT) 191 09.11.06 70,000 DD (HOWEVER ENTRY SCRATCHED) SINCE THE OTHER ENTRIES WERE SHOWN AS CANCELLED IN THE DIARY THEREFORE THE AO HAS NOT MADE ANY ADDITION EXCEPT THE ENTRY D ATED 28.09.2006 OF RS. 1,00,000/-. WE FIND THAT THE ONLY EXPLANATION FURNISHED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW IS THAT THE T RANSACTION DID NOT TAKE PLACE WHEREAS THE ENTRY ITSELF IN THE DIARY DOES NO T REFLECT SUCH CANCELLATION AS IN THE CASE OF OTHER ENTRIES CANCEL LED OR DELETED. THEREFORE IN THE ABSENCE OF EXPLANATION AND FURTHER THE TRANSACTION NOT RECORDED IN THE BOOKS OF ACCOUNTS WE CONFIRM THE AD DITION MADE BY THE AO AND CIT(A). 26. GROUND NOS. 11 AND 12 ARE REGARDING THE DISALLOWANC E MADE U/S. 40A(3). 27. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE HAS ITA NOS. 219 & 291/BANG/2014 PAGE 28 OF 38 BEEN CONSIDERED BY THE COORDINATE BENCH OF THIS TRI BUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 30.11.2015 IN PARA 24 TO 29 AS UNDER. 24. THE NEXT GROUND OF APPEAL IS REGARDING THE ADD ITION OF A SUM OF RS.6,16,351 U/S. 40A(3). THE AO OBSERVED F ROM THE DETAILS OF EXPENSES AND PARTY PAYMENT TOWARDS MATERIALS THAT ASSESSEE MADE CASH PAYMENTS TO VARIO US PARTIES EXCEEDING RS.20,000 IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3). THE AGGREGATE OF SUCH PAYMENTS WORKED OUT TO RS.30,81,756. THE AO WAS OF THE VIEW THAT THE SAID PAYMENTS ARE ALLOWED TO BE SET O FF AGAINST UNEXPLAINED RECEIPTS AND HENCE THE SAME ARE REQUIRED TO BE DISALLOWED U/S. 40A(3). HENCE DISALL OWANCE OF RS.30,81,756 WAS MADE BY THE AO U/S. 40A(3). BY THE RECTIFICATION ORDER U/S. 154 DATED 21.2.14, DISALLO WANCE U/S. 40A(3) OF RS.30,81,756 WAS RESTRICTED TO RS.6,16,35 1 BEING 20% OF THE PAYMENT MADE IN CONTRAVENTION OF PROVISIONS OF SECTION 40A(3). 25. THE CIT(A) UPHELD THE ADDITION MADE BY THE AO I N THE ABSENCE OF DETAILS OF CASH PAYMENTS TO DIFFERENT PA RTIES AND THE CIRCUMSTANCES UNDER WHICH THE ASSESSEE MADE THE CASH PAYMENT IN SUPPORT OF THE ASSESSEES CLAIM . 26. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES THAT INVOKING OF THE PROVISIONS OF SECTION 40A(3) AND TH E ADDITION OF RS.6,16,351 IS UNJUSTIFIED SINCE IT HAS NOT BEEN SHOWN THAT ANY PART OF THE PAYMENTS AS REFLECTED IN THE DIARY REPRESENTS EXPENDITURE CLAIMED AS A DEDUCTION IN COMPUTING INCOME UNDER THE HEAD OF BUSINESS OR O THER SOURCES. IT WAS SUBMITTED THAT EVERY PAYMENT PER S E IS NOT LIABLE TO ACTION U/S. 40A(3) UNLESS IT FALLS WITHIN THE REALM OF CLAIMED EXPENDITURE WITH RESPECT TO THE ABOVE TWO H EADS. 27. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. BANWARI LAL BANSHIDHAR, 229 ITR 229 (ALL) AT PAGE 2 32. HE ALSO RELIED ON THE DECISION OF THE HONBLE ANDHRA P RADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS V. CIT, 232 ITR 776 (AP) WHEREIN IT WAS HELD AS UNDER:- . . . THE QUESTION ARISES WHETHER IN SUCH A CASE ANY DEDUCTION ON ACCOUNT OF PURCHASES IS AT ALL ALLOWED TO THE ASSESSEE, THOUGH IT MAY BE TRUE THAT A GROSS PROFIT RATE OF ITA NOS. 219 & 291/BANG/2014 PAGE 29 OF 38 15 PER CENT WAS FIXED KEEPING IN VIEW ALL RELEVANT FACTS INCLUDING THE PURCHASES MADE BY THE ASSESSEE. INASMUCH AS WE ARE OF THE VIEW THA T NO DEDUCTION AS SUCH HAVING BEEN ALLOWED TO THE ASSESS EE ON ACCOUNT OF PURCHASES, WE HOLD THAT NO QUESTION OF A NY DISALLOWANCE ON ACCOUNT OF PURCHASE CAN BE MADE IN THIS CASE UNDER SECTION 40A(3). 28. THE LD. DR OBJECTED TO THE SUBMISSION OF THE A SSESSEE STATING THAT WITH RESPECT TO BOTH CONTRACT AND TRAD ING, ESTIMATE WAS U/S. 40A(3) AND ASSESSEES CLAIM THAT SEC. 40A(3) WOULD BE INAPPLICABLE CAN BE RESTRICTED ONLY TO THE TRADING PORTION, WHOSE GP WAS DETERMINED AT 9%, CAN NOT BE ACCEPTED. HE ARGUED THAT SECTION 40A(3) WOULD AP PLY TO THE CONTRACT AND TRADING RECEIPTS. 29. WE HAVE HEARD BOTH THE PARTIES. WE AGREE WITH THE CLAIM OF ASSESSEE THAT ONCE THERE HAS BEEN AN ESTIMATE, ALL THE DEDUCTIONS ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOU NT WHILE MAKING SUCH ESTIMATE AND HENCE NO SEPARATE ADDITION CAN BE MADE. HOWEVER, WHETHER THE ESTIMATE IS ONLY FOR TRADING PART OF THE ASSESSEES BUSINESS OR IT IS ALSO TOWARDS CONTRACT PART OF THE BUSINESS IS TO BE VERI FIED BY THE AO. IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO S ET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO REDO THE ASSESSMENT FOLLOWING THE DECISION IN THE CASE OF INDWELL CONSTRUCTIONS (SUPR A). 28. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THOUG H THE MATTER WAS SET ASIDE BY THE TRIBUNAL TO THE RECORD OF THE AO FOR R ECONSIDERATION OF THE ISSUE IN THE LIGHT OF THE DECISION OF HONBLE ANDHR A PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS V. CIT, 232 IT R 776 (AP), HOWEVER THE LATEST DECISION OF MADRAS HIGH COURT IN CASE OF CIT VS AMMAN STEEL AND ALLIED INDUSTRIES (377 ITR 568) IS DIRECTLY ON THE POINT. HE HAS RELIED UPON THE SAID DECISION OF HON BLE MADRAS HIGH ITA NOS. 219 & 291/BANG/2014 PAGE 30 OF 38 COURT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE AS WELL AS THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO WITH SIMILAR DIRECTIONS AS GIVEN BY THE COORDINATE BENCH FOR THE ASSESSMENT YEAR 2006-07. THE AO IS FURTHER DIRECTED TO RECONSIDER THIS ISSUE BY CONSIDERING TH E ORDER OF THE TRIBUNAL AS WELL AS THE DECISION OF THE HONBLE MADRAS HIGH COURT IN CASE OF CIT VS AMMAN STEEL AND ALLIED INDUSTRIES (SUPRA). 29. GROUND NO. 13 IS REGARDING THE ADDITION ON ACCOUNT OF GIFT RECEIVED OF RS. 10,00,000/-. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE RECEIVED THE GIFT FROM SHRI N.G. PATIL OF RS. 5,00,000/- AND SHRI B.G. PATIL OF RS. 5,00,000/-. THE ASSESSEE EXPLAINED THAT SHRI N.G. PATIL AND SHRI B. G. PATIL ARE BROTHERS- IN-LAW OF THE ASSESSEE AND THEREFORE WHEN THE DONOR S HAVE CONFIRMED THE TRANSACTION OF GIFT THEN NO ADDITION CAN BE MAD E IN THIS RESPECT. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE A ND MADE THE ADDITION OF RS. 10,00,000/-. THE ASSESSEE CHALLENG ED THE ACTION OF THE AO BEFORE THE CIT(A) BUT COULD NOT SUCCEED. 30. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE FILED THE CONFIRMATION BEFORE THE AUTHORITIES BELOW WHEREIN THE DONORS HAVE CONFIRMED THE GIFTS IN QUESTION. HE HAS FURTH ER SUBMITTED THAT THE ITA NOS. 219 & 291/BANG/2014 PAGE 31 OF 38 DONORS ARE RELATIVE OF THE ASSESSEE AND THE GENUINE NESS OF THE TRANSACTION CANNOT BE DOUBTED. THESE GIFTS IN CASH WERE MADE TO THE ASSESSEE WHO IS SISTERS HUSBAND OF THE DONORS. TH E ASSESSEE HAS EXPLAINED THE SOURCE, CREDIT WORTHINESS OF THE DONO RS AS AGRICULTURE LAND HOLDINGS OF THE DONORS. THE AO HAS STRAIGHTWAY REJ ECTED THE EXPLANATION OF THE ASSESSEE WITHOUT EXAMINATION OF THE CREDIT WORTHINESS OF THE DONORS. 31. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT TH E ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE TO PROVE THE GENUINENESS OF THE GIFTS AND THE CREDIT WORTHINESS OF THE DONORS. SINCE THE GIFTS A RE SHOWN AS RECEIVED IN CASH THEREFORE THE GENUINENESS OF THE TRANSACTIO N IS NOT PROVED. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW . 32. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS EXPLAINED THE TRANSACT ION OF GIFT BY FILING THE CONFIRMATION FROM THE DONORS PLACED AT PAGE 86 AND 87 OF THE PAPER BOOK. BOTH THE DONORS ARE CLOSE RELATIVE OF THE AS SESSEE BEING THE BROTHERS OF THE WIFE OF THE ASSESSEE. WE FIND THAT ONCE THE ASSESSEE HAS PRODUCED THE CONFIRMATION LETTER FROM THE DONORS TH EN THE FURTHER EXAMINATION AND INVESTIGATION WAS REQUIRED TO BE CO NDUCTED BY THE AO. IN THIS CASE THE AO HAS NOT EXAMINED THE DONORS REG ARDING THE ITA NOS. 219 & 291/BANG/2014 PAGE 32 OF 38 GENUINENESS OF THE GIFT AND THE CREDIT WORTHINESS O F THE DONORS. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE CASE OF JUSTICE WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO FOR PROPER VERIFICATION AND INVESTIGATION BY EXAMINATION OF TH E DONORS ON THIS ISSUE. NEEDLESS TO SAY THE ASSESSEE BE GIVEN APPRO PRIATE OPPORTUNITY OF HEARING. 33. GROUND NO. 14 IS REGARDING AN ADDITION OF RS. 27,74 8/- REPRESENTING THE AMOUNTS COLLECTED FOR AND ON BEHALF OF DHARWAD DIST RICT CONTRACTORS ASSOCIATION. THIS AMOUNT WAS FOUND RECORDED IN THE DIARY BUT NOT REFLECTED IN THE BOOKS OF ACCOUNT THEREFORE THE AO HAS MADE THE ADDITION OF SAID AMOUNT OF RS. 27,748/-. THE ASSES SEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) AND EXPLAINED TH AT THIS AMOUNT REPRESENTS THE COLLECTION FOR AND ON BEHALF OF DHAR WAD DISTRICT CONTRACTORS ASSOCIATION (DDCA) HOWEVER THE CIT(A) W AS NOT IMPRESSED BY THE EXPLANATION OF THE ASSESSEE AND HE LD THAT THE ASSESSEE HAS NOT FILED THE DETAILS WITH SUPPORTING EVIDENCE FOR INCURRING SUCH EXPENDITURE. 34. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ENTRIES IN THE DIARY CLEARLY MENTION THE CHEQUES / CASH ARE COLLEC TED ON BEHALF OF THE ASSOCIATION. HE HAS REFERRED TO THE DIARY ENTRIES AND SUBMITTED THAT ITA NOS. 219 & 291/BANG/2014 PAGE 33 OF 38 THERE IS NOTING AGAINST EACH RECEIPT THAT CHEQUE BY DDCA OR CHEQUES ISSUED BY OTHER MEMBERS FOR DDCA. THUS THE LD. AR HAS SUBMITTED THAT THIS AMOUNT REPRESENTS ONLY THE COLLECTION FOR AND ON BEHALF OF THE DDCA. THE ASSESSEE BEING THE PRESIDENT OF THE DDCA HAS COLLECTED THIS FUND CONTRIBUTED BY MEMBERS OF THE ASSOCIATION THEREFORE THIS AMOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHOR ITIES BELOW AND SUBMITTED THAT WHEN THE ASSESSEE HAS NOT PRODUCED A NY EVIDENCE THEN IT WAS RIGHTLY ADDED TO THE INCOME OF THE ASSESSEE. 35. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO HAS MADE THE ADDITION OF THIS AM OUNT OF RS. 27,748/- ON THE BASIS OF THE DIARY ENTRIES. WE FIN D THAT THE ENTRIES RECORDED IN THE DIARY ALSO CONTAINS THE NARRATIONS AND EXPLANATION OF NATURE OF TRANSACTION. IT IS MANIFEST FROM THE NOT ING AGAINST EACH ENTRY THAT THESE ARE THE RECEIPTS COLLECTED BY THE ASSESS EE ON BEHALF OF DDCA. THE AO HAS NOT DISPUTED THESE NARRATIONS IN THE DIA RY. WE ALSO FIND THAT THE ENTRIES IN THE DIARIES ARE SELF-EXPLANATOR Y AND THEREFORE THE NATURE OF THESE ENTRIES CANNOT BE DISPUTED WHEN THE ADDITION ITSELF IS BASED ON THE DIARY ENTRIES. THE AO IS NOT PERMITTE D TO TAKE ONLY THE AMOUNT OF THE DIARY ENTRIES BY IGNORING THE OTHER D ETAILS. THEREFORE IF ITA NOS. 219 & 291/BANG/2014 PAGE 34 OF 38 THE DIARY ENTRY IS THE BASIS OF ADDITION THEN THE E NTIRE DETAILS OF THE DIARY ENTRY IS TO BE TAKEN INTO ACCOUNT. ACCORDINGLY IN VIEW OF THE FACT THAT THESE DIARY ENTRIES ARE SELF-EXPLANATORY AS COLLECT ION FOR AND ON BEHALF OF DDCA AND THE ASSESSEE BEING THE PRESIDENT OF DDC A HAS COLLECTED THIS AMOUNT ON BEHALF OF THE ASSOCIATION THE ADDITI ON IS NOT JUSTIFIED. ACCORDINGLY, THE SAID ADDITION IS DELETED. 36. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. ITA NOS. 219 & 291/BANG/2014 PAGE 35 OF 38 37. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 38. GROUND NOS. 2 AND 3 ARE REGARDING THE ADDITION REST RICTED BY THE CIT(A) TO GP AT THE RATE OF 9%. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. TH E ISSUE RAISED IN THESE GROUNDS IS COMMON AS RAISED BY THE ASSESSEE I N GROUND NO. 7 OF THE ASSESSEES APPEAL. IN VIEW OF THE FINDING ON T HIS ISSUE IN THE ASSESSEES APPEAL THESE GROUND NOS. 2 AND 3 OF THE REVENUES APPEAL STANDS DISMISSED. 39. GROUND NOS. 4 AND 5 ARE REGARDING THE SET OFF UNEXP LAINED RECEIPTS OF HAND LOAN AGAINST THE UNEXPLAINED REPAYMENT OF HAND LOAN. THE AO HAD MADE AN ADDITION OF RS. 4,12,435/- ON ACCOUNT O F UNEXPLAINED HAND LOANS. THE ASSESSEE CHALLENGED THE ACTION OF THE A O BEFORE THE CIT(A) AND EXPLAINED THAT THE CONTRACT WORK OF THE ASSESSE E WAS UNDERTAKEN AT WORK SITES WHICH ARE IN THE INTERIOR AND NOT EASILY ACCESSIBLE. THEREFORE TO FACILITATE THE ENGINEERS AND STAFF AT WORK SITE THE REQUISITE FUND FOR INCURRING CERTAIN EXPENDITURE FOR THE PURPOSE OF BU SINESS, THE HEAD OFFICE REMITS THE MONEY. HOWEVER SINCE THE ENGINEE RS AND STAFF AT SITE CANNOT WAIT FOR THE RECEIPT OF MONEY FROM THE HEAD OFFICE THEY USED TO TAKE LOCAL TEMPORARY HAND LOAN FROM THE KNOWN PEOPL E BY NOTING DOWN ITA NOS. 219 & 291/BANG/2014 PAGE 36 OF 38 THEIR NAMES AND AMOUNTS TO BE REPAID ONCE THE FUNDS FROM THE HEAD OFFICE ARE RECEIVED. THE ASSESSEE EXPLAINED BEFORE THE CIT(A) THAT THE NAMES HAVE BEEN SUBMITTED TO THE AO FROM WHOM THE H AND LOANS WERE TAKEN AND SUBSEQUENTLY REPAID. THESE HAND LOANS WE RE USED TOWARDS THE BUSINESS EXPENSES INCURRED BY THE LOCAL STAFF A ND THEREFORE THIS CANNOT BE TREATED AS INCOME OF ASSESSEE. THE CIT(A ) ACCEPTED THE CONTENTION OF THE ASSESSEE AND DIRECTED THE AO TO T AKE THE DIFFERENTIAL AMOUNT OF RS. 87,565/- INSTEAD OF THE TOTAL AMOUNT. THUS THE CIT(A) HAS ALLOWED THE SET OFF THE RECEIPT AND PAYMENT. A GGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS FILED THIS APPEAL. 40. BEFORE US THE LD. DR HAS CONTENTED THAT WHEN THE AS SESSEE HAS FAILED TO PRODUCE ANY EVIDENCE THAT THESE HAND LOANS ARE REPR ESENTING THE UNEXPLAINED EXPENDITURE AND THEREFORE IT JUSTIFY TH E ADJUSTMENT AGAINST THE REPAYMENT THEN THE ADDITION OF THE ENTIRE SUM I S WARRANTED. HE HAS RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND , THE LD. AR HAS SUBMITTED THAT THE AO HAS IGNORED THE FACT THAT THE SE HAND LOANS ARE TAKEN ONLY FOR THE PURPOSE OF BUSINESS EXPENDITURE AND THEREFORE THE REPAYMENT AMOUNT OF HAND LOAN HAS TO BE TAKEN INTO CONSIDERATION. HE HAS FURTHER POINTED OUT THAT FOR THE ASSESSMENT YEA R 2006-07 THE CIT(A) ITA NOS. 219 & 291/BANG/2014 PAGE 37 OF 38 HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AN D THE REVENUE HAS NOT CHALLENGED THE ORDER FOR THE ASSESSMENT YEAR 2006-0 7. 41. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD WE FIND THAT THE CIT(A) HAS DEALT WITH THIS ISSUE AT PAGE 34 OF THE IMPUGNED ORDER AS UNDER. 42. IT IS CLEAR FROM THE IMPUGNED ORDER OF THE CIT(A) T HAT THE TRANSACTION OF HAND LOAN AND REPAYMENT OF HAND LOAN WAS FOUND RECO RDED IN THE DIARY. THEREFORE ONCE THE FACTS RECORDED IN THE DIARY ARE NOT IN DISPUTE THEN THE SET OFF GIVEN BY THE CIT(A) IS JUSTIFIED. WE FURTH ER FIND THAT FOR THE ASSESSMENT YEAR 2006-07 THIS ISSUE WAS DECIDED IN F AVOUR OF THE ITA NOS. 219 & 291/BANG/2014 PAGE 38 OF 38 ASSESSEE AND THE REVENUE HAS NOT CHALLENGED THE SAI D ORDER. ACCORDINGLY, IN VIEW OF THE ABOVE FACTS AND CIRCUMS TANCES OF THE CASE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUG NED ORDER OF THE CIT(A) QUA THIS ISSUE. 43. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF APRIL, 2017 SD/- SD/- (S. JAYARAMAN) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 28 TH APRIL, 2017. / MS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.