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

ITA 294/BANG/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5439 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G KAMALADHAR
• Assessee Lawyers: ASHOK KULKARNI
• Keywords: Reopening of assessment; Unexplained expenditure; Gift; Business expenditure; Rectification of order; Opportunity of being heard; 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 NOS. 220 TO 222/BANG/2014 ASSESSMENT YEARS: 2008-09 TO 2010-11 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 NOS. 292 TO 294/BANG/2014 ASSESSMENT YEARS: 2008-09 TO 2010-11 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 ASSESSEE BY : SHRI ASHOK KULKARNI, ADVOCATE REVENUE BY : SHRI G. KAMALADHAR, STANDING COUNSEL DATE OF HEARING : 02.03.2017 DATE OF PRONOUNCEMENT : 05.05.2017 ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 2 OF 41 O R D E R PER BENCH THESE THREE SET OF CROSS APPEALS ARE DIRECTED AGAIN ST THE THREE SEPARATE ORDERS OF THE CIT(A) FOR THE ASSESSMENT YEARS 2008- 09 TO 2010-11. FOR THE ASSESSMENT YEAR 2008-09 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 3 OF 41 ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 4 OF 41 ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 5 OF 41 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 3. GROUND NOS. 2 AND 3 ARE REGARDING THE VALIDITY OF R EASSESSMENT. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDER ED THE RELEVANT MATERIAL ON RECORD. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US FOR THE ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 28.04.2017 IN ITA NOS . 219 & 291/BANG/2014 WHEREIN WE HAVE DISCUSSED AND ADJUDIC ATED THIS ISSUE AS UNDER. 3. GROUND NOS. 2 AND 3 ARE REGARDING VALIDITY OF REOPENING. THERE WAS A SURVEY U/S. 133A OF THE ACT IN THE CASE OF THE ASSESSEE ON 01.03.2011. DURING THE COURSE OF SURVE Y CERTAIN INCRIMINATING DOCUMENTS, DIARIES WERE FOUND AND IMP OUNDED. ON VERIFICATION OF ENTRIES MADE IN THE IMPOUNDED DIARI ES IT WAS OBSERVED THAT THE RECEIPTS RELATING TO CONTRACT BUS INESS WAS UNDER STATED IN THE RETURN OF INCOME. HENCE THE AO PROPO SED TO REOPEN THE ASSESSMENT BY ISSUING A NOTICE U/S. 148 ON 20.1 0.2011. IN RESPONSE TO NOTICE U/S. 148 THE ASSESSEE FILED A LE TTER DATED 21.11.2011 STATING THAT THE RETURN OF INCOME FILED ON 30.09.2009 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 ACCO UNT OF RECEIPTS RECORDED IN THE DIARY AS WELL AS UNEXPLAIN ED RECEIPTS. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) INCLUDING THE VALIDITY OF REOPENING. THE CIT(A) RE JECTED THE OBJECTION OF THE ASSESSEE AND UPHELD THE REOPENING OF ASSESSMENT U/S. 147. 4. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ALLEGED ITEM OF INCOME FOR ESCAPEMENT OF WHICH THE ASSESSMENT WAS REOPENED WERE NOT BROUGHT TO TAX BY THE ASSESSI NG OFFICER IN THE IMPUGNED ASSESSMENT ORDER. THEREFORE IT IS SUB MITTED THAT THE VERY EXERCISE OF REOPENING OF THE ASSESSMENT IS REN DERED INFRUCTUOUS AND UNSUSTAINABLE IN LAW. HE HAS FURTH ER CONTENDED THAT WHEN THE ASSESSING OFFICER HAS NOT MADE ANY AD DITION ON THE ISSUE FOR WHICH THE ASSESSMENT WAS REOPENED TO BROU GHT TO TAX THEN NO ADDITION CAN BE MADE IN THE REASSESSMENT PR OCEEDINGS. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 6 OF 41 IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS JET AIR WAYS (I) LTD. (331 ITR 236) AND SUBMITTED THAT WHEN THE AO HAS FO RMED A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T AND HAS ISSUED A NOTICE U/S. 148 ON CERTAIN SPECIFIC ISSUES HOWEVER, IF AFTER ISSUING NOTICE U/S. 148 HE ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INITIALLY FO RMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT IT WAS NOT OPEN TO HIM TO ASSESS OR REASSESS ANY OTHER INCOME WHICH MAY HAVE ESCAPED ASSESSMENT BUT WHICH DID NOT FORM THE SUBJECT MATTER OF NOTICE U/S. 148. THUS, THE LD. AR HAS CONTENDED WHEN THE AO HAS NOT ASSESSED ANY INCO ME ON THE ISSUE WHICH WAS SUBJECT MATTER OF NOTICE U/S. 148 T HEN 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 BOMBAY HIGH COURT IN CASE OF CIT VS JET AIRWAYS (I) LTD. (SUPRA). 5.ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF N. GOV INDARAJU VS ITO (377 ITR 243) AND SUBMITTED THAT THE HONBLE HIGH C OURT HAS HELD THAT IF THE NOTICE ISSUED U/S. 148 WAS FOUND TO BE VALID THEN THE 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 INCOME INCLUDING ANY OTHER INCOME WHICH MAY HAVE ESCAPED ASSESSMENT AND COME TO HIS NOTICE DURING TH E COURSE OF PROCEEDINGS INITIATED U/S. 147 OF THE ACT. THUS, T HE LD. DR HAS SUBMITTED THAT IN VIEW OF THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT THE REASSESSMENT CANNOT BE CHALLENGED ON THIS GROUND. 6.WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ONLY OBJECTION RAISED BY T HE ASSESSEE AGAINST THE VALIDITY OF REASSESSMENT IS THAT WHEN T HE AO HAS NOT MADE AN ADDITION IN RESPECT OF THE ITEM OF INCOME O N WHICH THE ASSESSMENT WAS REOPENED THAN THE OTHER ADDITION IN THE REASSESSMENT IS NOT SUSTAINABLE. AT THE OUTSET, WE NOTE THAT THOUGH THE ASSESSEE HAS RELIED UPON THE DECISION 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 SECTI ON 147 IS FOR THE BENEFIT OF THE REVENUE AND NOT THE ASSESSEE AND IS AIMED AT GARNERING THE ESCAPED INCOME OF THE ASSESS EE [VIZ. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 7 OF 41 SUN ENGG. (SUPRA )] AND ALSO KEEPING IN VIEW THAT IT IS THE CONSTITUTIONAL OBLIGATION OF EVERY ASSESSEE TO DISC LOSE HIS TOTAL INCOME ON WHICH IT IS TO PAY TAX, WE ARE OF T HE CLEAR OPINION THAT THE TWO PARTS OF SECTION 147 (ONE RELA TING 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 WITH REGARD TO WHICH REASONS HAVE BEEN RECORDED UNDER SECTION 148(2) OF THE ACT, AND THE P HRASE 'ANY OTHER INCOME' USED IN THE SECOND PART OF THE SECTIO N IS WITH REGARD TO WHERE NO REASONS HAVE BEEN RECORDED BEFOR E ISSUING NOTICE AND HAS COME TO THE NOTICE OF THE AS SESSING OFFICER SUBSEQUENTLY DURING THE COURSE OF THE PROCE EDINGS, WHICH CAN BE ASSESSED INDEPENDENT OF THE FIRST PART , EVEN WHEN NO ADDITION CAN BE MADE WITH REGARD TO 'SUCH I NCOME', BUT THE NOTICE ON THE BASIS OF WHICH PROCEEDINGS HA VE 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 GIV EN UNDER SUB-SECTION (2) OF SECTION 148 WOULD BE THE VERY FO UNDATION OF THE ISSUANCE OF NOTICE AND IF IT IS FALSE OR BASELE SS, THEN EVERYTHING GOES AND THE STRUCTURE ERECTED ON SUCH F OUNDATION WOULD CRUMBLE. 43. IT IS TRUE THAT IF THE FOUNDATION GOES, THEN THE S TRUCTURE CANNOT REMAIN. MEANING THEREBY, IF NOTICE HAS NO SU FFICIENT REASON OR IS INVALID, NO PROCEEDINGS CAN BE INITIAT ED. BUT THE SAME CAN BE CHECKED AT THE INITIAL STAGE BY CHALLEN GING THE NOTICE. IF THE NOTICE IS CHALLENGED AND FOUND TO BE VALID, OR WHERE THE NOTICE, IS NOT AT ALL CHALLENGED, 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 PROCEEDI NGS ON THE BASIS OF SUCH NOTICE CAN GO ON. WE MAY ONLY REI TERATE HERE THAT ONCE THE PROCEEDINGS HAVE BEEN INITIATED ON A VALID NOTICE, IT BECOMES THE DUTY OF THE ASSESSING OFFICE R TO LEVY TAX ON THE ENTIRE INCOME (INCLUDING 'ANY OTHER INCO ME') WHICH MAY HAVE ESCAPED ASSESSMENT AND COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS INITIATED UNDE R SECTION 147 OF THE ACT. 44. IN VIEW OF THE AFORESAID, WE ANSWER THE FIRST TWO SUBSTANTIAL QUESTIONS OF LAW IN FAVOUR OF THE REVEN UE AND AGAINST 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. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 8 OF 41 FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL IN ASSE SSEES OWN CASE THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. 4. GROUND NOS. 4 AND 7 ARE REGARDING THE ESTIMATION OF INCOME BY APPLYING THE GP AT 9% IN RESPECT OF RECEIPT FROM SALE OF MAT ERIAL. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE REL EVANT MATERIAL ON RECORD. THIS ISSUE IS COMMON TO THE ISSUE FOR THE ASSESSMENT YEAR 2007-08 WHEREIN WE HAVE DEALT WITH THIS ISSUE VIDE ORDER DA TED 28.04.2017 IN ITA NOS. 219 & 291/BANG/2014 AS UNDER. 12.GROUND NO. 7 IS REGARDING THE ADOPTION OF 9% GRO SS PROFIT IN RESPECT OF SALE OF MATERIAL. THE AO MADE AN ADD ITION OF RS. 51,08,557/- AS RECEIPTS RECORDED IN THE IMPOUNDED D IARIES WHICH ARE NOT REFLECTED IN THE REGULAR BOOKS OF ACC OUNT. THE ASSESSEE EXPLAINED BEFORE THE AO THAT THE AMOUNT WA S RECEIVED TOWARDS SALE OF MATERIALS. SINCE THE ASSE SSEE DID NOT FURNISH THE DETAILS AND SUPPORTING DOCUMENTS TO PRO VE 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) AND CONTENDED THAT THE RECEIPTS SHOWN IN THE DIARY WERE TOWARDS SALE OF MATERIAL FOR CIVIL CONTRACT WORK MA DE OUTSIDE BOOKS WHICH WAS ALSO EXPLAINED BY THE ASSESSEE THAT THE CORRESPONDING PAYMENTS MADE TOWARDS PURCHASE OF SIM ILAR MATERIAL WAS ALSO RECORDED IN THE DIARY AND THEREFO RE THE ENTRIES AGGREGATING TO RS. 1,42,08,990/- ARE REPRES ENTING BOTH 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 CONTENDED THAT THIS ITEM OF RS. 63,03,554/ - APPEARS IN THE REGULAR BOOKS OF ACCOUNT WHICH WAS LEFT OUT BY THE AO WHILE MAKING THE ADDITION. THE CIT(A) AFTER CONSID ERING THE RELEVANT RECORD AS WELL AS SUBMISSIONS OF THE ASSES SEE HAS DIRECTED THE AO TO TAKE AVERAGE GROSS PROFIT AT 9% ON TOTAL SALE OF MATERIAL INCLUDING JELLY AND THEREFORE THE INCOM E HAS TO BE COMPUTED ACCORDINGLY. THUS, THE CIT(A) HAS GRANTED SUBSTANTIAL RELIEF BY RESTRICTING THE ADDITION ONLY TO THE GROSS PROFIT ON THE SALE OF MATERIAL INSTEAD OF THE ENTIR E AMOUNT ADDED BY THE AO. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 9 OF 41 13.BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITT ED THAT THE CIT(A) AFTER TAKING INTO CONSIDERATION THE GP RATIO ON VARIOUS MATERIALS SUPPLIERS HAS DIRECTED THE AO TO TAKE THE AVERAGE GP AT 9%. HOWEVER EVEN IF THE INSTANCES AS TAKEN BY T HE CIT(A) ARE CONSIDERED THE AVERAGE GP OF THE COMPARABLE PAR TIES COMES TO LESS THAN 6% WHEREAS THE CIT(A) HAS ARBITR ARILY ADOPTED THE GP AT 9%. THE LD. AR HAS FURTHER SUBMI TTED 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. T HUS THE LD. AR HAS SUBMITTED THAT THE AVERAGE GP SHOULD HAV E BEEN TAKEN AT 5.5% INSTEAD OF 9% TAKEN BY THE CIT(A). 14.ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E ORDER OF THE AO AND SUBMITTED THAT WHEN THE ASSESSEE HAS FAI LED TO EXPLAIN THE DETAILS AND PARTICULARS OF THE PARTIES TO WHOM THE ALLEGED MATERIAL WERE SOLD THEN THE AO IS JUSTIFIED IN MAKING THE ADDITION OF THE ENTIRE AMOUNT. 15.WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. WE FIND FROM THE ENTR IES IN THE DIARY THAT THE RECEIPTS AS WELL AS PAYMENTS WERE RE CORDED SIMULTANEOUSLY AT THE SAME PAGE OF THE DIARY AND TH EREFORE IT IS CLEAR THAT THESE RECEIPTS AND PAYMENTS ARE REPRESEN TING THE PURCHASES AND SALE OF THE MATERIAL. THE AO HAS TAK EN ONLY THE RECEIPT PART OF THE DIARY ENTRIES AND IGNORED THE P AYMENT PART. THE CIT(A) AFTER CONSIDERING THE RELEVANT RECORD FO UND THAT THESE RECEIPTS ARE REPRESENTING THE SALE OF MATERIA L FOR CONSTRUCTION WORK LIKE STEEL, CEMENT ETC AND THEREF ORE THE CIT(A) HAS ASKED THE ASSESSEE TO FURNISH THE GP DET AILS FROM THE LOCAL MARKET WHICH WERE FURNISHED BY THE ASSESS EE AS REPRODUCED BY THE CIT(A) AT PAGE 27 OF THE IMPUGNED ORDER AS UNDER. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 10 OF 41 16.THOUGH THE CIT(A) HAS CONSIDERED THE GP DETAILS FURNISHED BY THE ASSESSEE HOWEVER INSTEAD OF TAKING THE AVERA GE OF THE 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 CONTRARY TO THE MATERIAL ON RECORD / EVIDENC E. WE FURTHER NOTE THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 30.11.2015 WHILE DEALING AN IDENTICAL ISSUE HAS HEL D IN PARA 11 TO 14 AS UNDER. 11. BEFORE THE CIT(APPEALS), THE ASSESSEE RELIED O N THE ORDER OF THE CIT(APPEALS) FOR THE A.YS. 2007-08 TO 2011-1 2 AND CONTENDED THAT A SUITABLE RATE OF PROFIT TOWARDS SA LE OF MATERIAL HAS TO BE CONSIDERED AND NOT WHOLE OF THE RECEIPTS. THE ASSESSEE FURNISHED GP DETAILS FROM THE LOCAL MARKET WHICH IS AS FOLLOWS:- 12. AVERAGE GROSS PROFIT FOR STEEL WAS GIVEN AT (6. 08 TO 7.56%), FOR CEMENT THE AVERAGE GROSS PROFIT WAS GIV EN AT (3.33 TO 5.09%) AND FOR JELLY NO AVERAGE GROSS PROF IT WAS GIVEN. THE CIT(A) DIRECTED THE AO TO TAKE AVERAGE GROSS PROFIT AT 9% ON TOTAL SALE OF MATERIALS INCLUDING JELLY AN D COMPUTE INCOME ACCORDINGLY. THUS, THIS ISSUE WAS PARTLY AL LOWED 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(APPEALS) THAT AVERAGE GP IS 5.5% APPROXIMATELY AND HENCE WE ARE OF THE OPINION THAT THE CIT(A) WAS NOT JUSTIFIED IN AD OPTING GP AT 9% ON TOTAL SALE OF MATERIALS INCLUDING JELLY. HEN CE, THE AO IS DIRECTED TO WORK OUT THE GP RATE AT 5.5% ON SALE OF MATERIALS INSTEAD OF 9% DIRECTED BY THE CIT(A). ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 11 OF 41 17.IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE DECISION OF THE COORDINATE BENCH OF THI S TRIBUNAL IN ASSESSEES OWN CASE WE DIRECT THE AO TO WORK OUT TH E GP RATE AT 5.5% ON SALE OF MATERIAL INSTEAD OF 9% DIRECTED BY THE CIT(A). IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE ASSESS MENT YEAR 2007-08 THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5. GROUND NO. 5 IS REGARDING THE ADDITION ON ACCOUNT O F CANCELLATION OF NSC OF RS. 1,21,882/-. THE ASSESSEE PURCHASES NSC BEFO RE PRESENTING TENDERS FORM FOR GOVERNMENT WORKS (CIVIL). A DIARY ENTRY W AS FOUND IN RESPECT OF RS. 1,21,882/- RECEIVED ON MATURITY OF NSC AND ALSO ON CANCELLATION OF NSC. THE AO MADE AN ADDITION OF THE SAID AMOUNT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) B UT COULD NOT SUCCEED. 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 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 ITA NO. 904/BANG/2015 IN PARA 20-23 AS UNDER. 20. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS NO T FURNISHED THE DETAILS OF NSC AND HOW THE SAID INVESTMENT IS REFLECTED IN THE BOOKS , ALSO THE SAID ENCASHMENT OF NSC HAS NOT BEEN REFLECTED AS RECEIPTS I N THE REGULAR BOOKS OF ACCOUNT . AS REGARDS WITHDRAWAL OF CASH FROM ATM , THE AO OBSERVED THAT THE ASSESSEE HAS NOT EXPLAINED HOW TH E SA I D CASH I S REFLECTED IN THE BOOKS . ACCORD I NG TO THE AO , THE ASSESSEE ' S EXP L ANA TI O N THAT THERE ARE SUFFICIENT WITHDRAWALS ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 12 OF 41 WAS NOT CONVINCING . HENCE THE AO ASSESSED THE SAID RECEIPTS OF RS . 10 , 006 AS INCOME FROM UNEXPLAINED RECEIPTS . 21 . BEFORE THE CIT(APPEALS) , THE ASSESSEE REITERATED THE SUBMISS I ONS MADE BEFORE THE AO. 22 . THE CIT(APPEALS) HELD THAT THE ASSESSEE HAS NOT FIL ED ANY DETAILS IN SUPPORT OF HIS CLAIM OF NSC AND DEPENDED ONLY ON ATM DRAWINGS AND HENCE IN THE ABSENCE OF DETAILS, HE UPHELD THE ADDITION MADE BY THE AO . 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 IT IS STATED THAT THE ASSESSEE HAS SUFFICIENT WITHDRAWALS FROM HIS CAPITAL ACCOUNT AND THE SOURCE IS EXPLAINED. WE THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION AFTER GIVIN G AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO FOR FRESH EXAMINATION AND ADJUDICA TION IN SAME TERMS OF THE EARLIER ORDER DATED 30.11.2015. 7. GROUND NO. 6 IS REGARDING ADDITION OF RS. 60,714/- ON ACCOUNT OF MISCELLANEOUS RECEIPTS. THE AO HAS MADE AN ADDITIO N OF RS. 60,714/- AS UNEXPLAINED MISCELLANEOUS RECEIPTS BASED ON THE DIA RY ENTRY. THE ASSESSEE CHALLENGED THE ORDER OF THE AO BEFORE THE CIT(A) AN D CONTENDED THAT THIS AMOUNT OF RS. 60,714/- IS NOT AN INCOME ASSESSABLE TO TAX AS THESE ARE THE RECEIPTS WHICH REPRESENTS THE WITHDRAWAL CASH RECEI PT ON BEHALF OF DDCA, REFUND OF PWD TENDER CORPORATION ETC. THE CIT(A) D ID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND CONFIRMED THE ADDIT ION MADE BY THE AO. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 13 OF 41 BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT OUT OF RS. 60,714/- A SUM OF RS. 53,300/- IS RETURN OF TENDER AMOUNT ON ACCOUNT OF UNSUCCESSFUL BIDDING. THE ANOTHER SUM OF RS. 5,000 /- IS COLLECTED BY THE ASSESSEE ON BEHALF OF DDCA. THE ASSESSEE IS PRESID ENT OF THE ASSOCIATION AND IN THAT CAPACITY HE HAS OBLIGED TO COLLECT THE CASH PAYMENT FROM THE MEMBERS. FURTHER A SUM OF RS. 2,400/- IS ON ACCOUN T OF ENCASHMENT OF DD. THUS THE LD. AR HAS SUBMITTED THAT NO PART OF THIS AMOUNT IS A TAXABLE INCOME OR ELEMENT OF INCOME. ON THE OTHER HAND, TH E LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS OR EVIDENCE IN SUPPORT OF THESE RECEIPTS AND FURTHER THESE RECEIPTS ARE NOT R EFLECTED IN THE REGULAR BOOKS OF ACCOUNT. THEREFORE THE AO WAS JUSTIFIED I N MAKING THE ADDITION OF THE SAID AMOUNT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO MADE AN ADDITION OF RS. 60,714/- BA SED ON THE DIARY ENTRIES THE DETAILS OF WHICH HAS BEEN REPRODUCED BY THE CIT(A) AT PAGE 20 OF THE IMPUGNED ORDER AS UNDER: 22 04-JUN-07 2,400 CASH BY DD 31 05-JUL-07 14 CH OF MI KURKUR 25 15-JUN-07 5,000 DDCA GADAG & --- 24 14-JUN-07 53,300 PWD TENDER CORPORATION 60,714 TOTAL ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 14 OF 41 9. AS REGARDS THE AMOUNT OF RS. 5,000/- RECEIVED ON BE HALF OF DDCA, AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US FOR THE A SSESSMENT YEAR 2007-08 VIDE ORDER DATED 28.04.2017 IN ITA NOS. 219&291/BAN G/2014 AS UNDER. 33.GROUND NO. 14 IS REGARDING AN ADDITION OF RS. 27 ,748/- REPRESENTING THE AMOUNTS COLLECTED FOR AND ON BEHAL F OF DHARWAD DISTRICT CONTRACTORS ASSOCIATION. THIS AMO UNT WAS FOUND RECORDED IN THE DIARY BUT NOT REFLECTED IN TH E BOOKS OF ACCOUNT THEREFORE THE AO HAS MADE THE ADDITION OF S AID AMOUNT OF RS. 27,748/-. THE ASSESSEE CHALLENGED TH E ACTION OF THE AO BEFORE THE CIT(A) AND EXPLAINED THAT THIS AM OUNT 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 SUBMITT ED THAT THE ENTRIES IN THE DIARY CLEARLY MENTION THE CHEQUES / CASH ARE COLLECTED ON BEHALF OF THE ASSOCIATION. HE HAS REF ERRED TO THE DIARY ENTRIES AND SUBMITTED THAT THERE IS NOTING AG AINST EACH RECEIPT THAT CHEQUE BY DDCA OR CHEQUES ISSUED BY OT HER MEMBERS FOR DDCA. THUS THE LD. AR HAS SUBMITTED TH AT THIS AMOUNT REPRESENTS ONLY THE COLLECTION FOR AND ON BE HALF OF THE DDCA. THE ASSESSEE BEING THE PRESIDENT OF THE DDCA HAS COLLECTED THIS FUND CONTRIBUTED BY MEMBERS OF THE A SSOCIATION THEREFORE THIS AMOUNT CANNOT BE TREATED AS INCOME O F THE ASSESSEE. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ASSESSEE HAS NOT PRODUCED ANY 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 A DDITION OF THIS AMOUNT OF RS. 27,748/- ON THE BASIS OF THE DIA RY ENTRIES. WE FIND THAT THE ENTRIES RECORDED IN THE DIARY ALSO CONTAINS THE NARRATIONS AND EXPLANATION OF NATURE OF TRANSACTION . IT IS MANIFEST FROM THE NOTING AGAINST EACH ENTRY THAT TH ESE ARE THE RECEIPTS COLLECTED BY THE ASSESSEE ON BEHALF OF DDC A. THE AO HAS NOT DISPUTED THESE NARRATIONS IN THE DIARY. WE ALSO FIND ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 15 OF 41 THAT THE ENTRIES IN THE DIARIES ARE SELF-EXPLANATOR Y AND THEREFORE THE NATURE OF THESE ENTRIES CANNOT BE DIS PUTED WHEN THE ADDITION ITSELF IS BASED ON THE DIARY ENTRIES. THE AO IS NOT PERMITTED TO TAKE ONLY THE AMOUNT OF THE DIARY ENTR IES BY IGNORING THE OTHER DETAILS. THEREFORE IF THE DIARY ENTRY IS THE BASIS OF ADDITION THEN THE ENTIRE DETAILS OF THE DI ARY 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 PRESID ENT OF DDCA HAS COLLECTED THIS AMOUNT ON BEHALF OF THE ASS OCIATION THE ADDITION IS NOT JUSTIFIED. ACCORDINGLY, THE SA ID ADDITION IS DELETED. IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE ASSESS MENT YEAR 2007-08 WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 10. THE NEXT ENTRY IS REGARDING RS. 2,400/- AND AS PER THE DESCRIPTION / NOTING IN DIARY IT IS MENTIONED AS CASH BY DD. THE ASSESS EE HAS EXPLAINED THAT THIS AMOUNT WAS RECEIVED IN RESPECT OF THE ENCASHME NT OF DD. WHEN THE ENTRY IN THE DIARY ITSELF EXPLAINS THE SOURCE OF EN CASHMENT OF DD THEN NO OTHER EXPLANATION OR SOURCE WAS REQUIRED TO BE PROV ED THAT THIS AMOUNT WAS RECEIVED BY THE ASSESSEE BY ENCASHING THE DD WHICH WAS FOR THE PURPOSE OF BUSINESS BUT COULD NOT BE USED AND CONSEQUENTLY WAS ENCASHED BY THE ASSESSEE ITSELF. THEREFORE IT IS NOT A RECEIPT IN THE NATURE OF INCOME. 11. AS REGARDS THE ENTRY OF RS. 53,300/- IT WAS WRITTEN IN THE DIARY AS RECEIPT TOWARDS PWD TENDER CORPORATION. THE ASSESSEE EXPLA INED THAT THIS AMOUNT WAS RECEIVED BY THE ASSESSEE AS REFUND ON A CCOUNT OF UNSUCCESSFUL ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 16 OF 41 BIDDING. THEREFORE THIS AMOUNT WHICH WAS RECEIVED DUE TO UNSUCCESSFUL BIDDING OF TENDERS CANNOT BE AN INCOME OF THE ASSES SEE. THE NEXT ITEM IS ONLY RS. 14 ON ACCOUNT OF CHEQUE MI KURKUR. EXCEPT THE SAID MEAGER AMOUNT FOR WHICH THE ASSESSEE HAS FURNISHED NO EXPL ANATION ALL OTHER AMOUNTS FOUND IN THE DIARY ENTRY CANNOT BE TREATED AS INCOME OF THE ASSESSEE. ACCORDINGLY THE ADDITION MADE BY THE AO TO THE EXTENT OF RS. 60,700/- IS DELETED. 12. GROUND NOS. 8 AND 9 ARE REGARDING DISALLOWANCE MADE U/S. 40A(3). THE AO HAS INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE IT ACT TO MAKE AN ADDITION OF RS. 1,41,48,040/- WHICH WAS FOUND AS TH E PAYMENT MADE BY THE ASSESSEE AS PER THE DIARY ENTRIES. THE CIT(A) HAS CONFIRMED THE DISALLOWANCE / ADDITION MADE BY THE AO ON THIS ACCO UNT. 13. 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 THI S WAS ONLY THE ENTRIES IN THE DIARY FOUND AND IMPOUNDED IN THE COURSE OF SURV EY ACTION AND THEREFORE IT WAS NOT A CLAIM OF EXPENDITURE IN THE BOOKS OF A CCOUNTS. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US FOR TH E ASSESSMENT YEAR 2007- 08 VIDE ORDER DATED 28.04.2017 IN ITA NOS. 219 & 29 1/BANG/2014 WHEREIN WE HAVE DISCUSSED AND ADJUDICATED THIS ISSU E AS UNDER. 26. GROUND NOS. 11 AND 12 ARE REGARDING THE DISALL OWANCE MADE U/S. 40A(3). ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 17 OF 41 27. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL 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 AD DITION OF A SUM OF RS.6,16,351 U/S. 40A(3). THE AO OBSERVED FRO M THE DETAILS OF EXPENSES AND PARTY PAYMENT TOWARDS MATER IALS THAT ASSESSEE MADE CASH PAYMENTS TO VARIOUS PARTIES EXCE EDING RS.20,000 IN CONTRAVENTION OF THE PROVISIONS OF SEC TION 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 A LLOWED TO BE SET OFF AGAINST UNEXPLAINED RECEIPTS AND HENCE T HE SAME ARE REQUIRED TO BE DISALLOWED U/S. 40A(3). HENCE DI SALLOWANCE 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 PROVISI ONS 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 CAS H 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 THE ADDITION OF RS .6,16,351 IS UNJUSTIFIED SINCE IT HAS NOT BEEN SHOWN THAT ANY PA RT OF THE PAYMENTS AS REFLECTED IN THE DIARY REPRESENTS EXPEN DITURE CLAIMED AS A DEDUCTION IN COMPUTING INCOME UNDER TH E HEAD OF BUSINESS OR OTHER SOURCES. IT WAS SUBMITTED THA T EVERY PAYMENT PER SE IS NOT LIABLE TO ACTION U/S. 40A(3) UNLESS IT FALLS WITHIN THE REALM OF CLAIMED EXPENDITURE WITH RESPEC T TO THE ABOVE TWO HEADS. 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 232. HE A LSO RELIED ON THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS V. CIT, 232 ITR 7 76 (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 AS SESSEE, THOUGH IT MAY BE TRUE THAT A GROSS PROFIT RATE OF 1 5 PER CENT WAS FIXED KEEPING IN VIEW ALL RELEVANT FACTS INCLUDING THE PURCHASES ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 18 OF 41 MADE BY THE ASSESSEE. INASMUCH AS WE ARE OF THE VIE W THAT 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 TRADI NG PORTION, WHOSE GP WAS DETERMINED AT 9%, CANNOT BE ACCEPTED. HE ARGUED THAT SECTION 40A(3) WOULD APPLY TO THE CONTR ACT AND TRADING RECEIPTS. 29. WE HAVE HEARD BOTH THE PARTIES. WE AGREE WITH THE CLAIM OF ASSESSEE THAT ONCE THERE HAS BEEN AN ESTIMATE, A LL 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 TRA DING PART OF THE ASSESSEES BUSINESS OR IT IS ALSO TOWARDS CONTR ACT PART OF THE BUSINESS IS TO BE VERIFIED BY THE AO. IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO SET ASIDE THE ISSU E TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO REDO THE ASSESSMENT FOLLOWING THE DECISION IN THE CASE OF INDWELL CONST RUCTIONS (SUPRA). 28.THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT TH OUGH THE MATTER WAS SET ASIDE BY THE TRIBUNAL TO THE RECORD OF THE AO FOR RECONSIDERATION OF THE ISSUE IN THE LIGHT OF THE DE CISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF IN DWELL CONSTRUCTIONS V. CIT, 232 ITR 776 (AP), HOWEVER THE LATEST DECISION OF MADRAS HIGH COURT IN CASE OF CIT VS AMM AN STEEL AND ALLIED INDUSTRIES (377 ITR 568) IS DIRECTLY ON THE POINT. HE HAS RELIED UPON THE SAID DECISION OF HONBLE MADRAS HIGH 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 S IMILAR DIRECTIONS AS GIVEN BY THE COORDINATE BENCH FOR THE ASSESSMENT YEAR 2006-07. THE AO IS FURTHER DIRECTED TO RECONS IDER THIS ISSUE BY CONSIDERING THE ORDER OF THE TRIBUNAL AS W ELL AS THE DECISION OF THE HONBLE MADRAS HIGH COURT IN CASE O F CIT VS AMMAN STEEL AND ALLIED INDUSTRIES (SUPRA). ACCORDINGLY BY FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO R ECONSIDER THE SAME. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 19 OF 41 14. GROUND NO. 10 IS REGARDING LEVY OF INTEREST U/S. 23 4B WHICH IS MANDATORY AND CONSEQUENTIAL. ITA NO. 292/BANG/2014 REVENUES APPEAL FOR THE ASSE SSMENT YEAR 2008-09:- 15. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 20 OF 41 16. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 17. GROUND NOS. 2 AND 3 ARE COMMON TO THE GROUND NOS. 4 AND 7 OF THE ASSESSEES APPEAL. IN VIEW OF OUR FINDING ON THIS ISSUE IN ASSESSEES APPEAL GROUND NOS. 2 AND 3 OF THE REVENUES APPEAL STAND D ISMISSED. 18. GROUND NOS. 4 AND 5 ARE REGARDING ADDITION ON ACCOU NT OF HAND LOAN AND REPAYMENT OF HAND LOAN. WE HAVE HEARD THE LD. DR A S WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AN IDE NTICAL ISSUE HAS BEEN CONSIDERED BY US IN REVENUES APPEAL FOR THE ASSESS MENT YEAR 2007-08 VIDE ORDER DATED 28.04.2017 IN ITA NOS. 219 & 291/BANG/2 014 WHICH WE HAVE ADJUDICATED AS UNDER. 39. GROUND NOS. 4 AND 5 ARE REGARDING THE SET OFF U NEXPLAINED RECEIPTS OF HAND LOAN AGAINST THE UNEXPLAINED REPAYMENT OF HAND LOAN. THE AO HAD MADE AN ADDITION OF RS. 4,12,435/- ON ACCOUNT OF UN EXPLAINED HAND LOANS. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) AND EXPLAINED THAT THE CONTRACT WORK OF THE ASSESSEE WA S UNDERTAKEN AT WORK SITES WHICH ARE IN THE INTERIOR AND NOT EASILY ACCE SSIBLE. THEREFORE TO FACILITATE THE ENGINEERS AND STAFF AT WORK SITE THE REQUISITE FUND FOR INCURRING CERTAIN EXPENDITURE FOR THE PURPOSE OF BUSINESS, TH E HEAD OFFICE REMITS THE MONEY. HOWEVER SINCE THE ENGINEERS AND STAFF AT SI TE CANNOT WAIT FOR THE RECEIPT OF MONEY FROM THE HEAD OFFICE THEY USED TO TAKE LOCAL TEMPORARY HAND LOAN FROM THE KNOWN PEOPLE BY NOTING DOWN THEI R NAMES AND AMOUNTS TO BE REPAID ONCE THE FUNDS FROM THE HEAD OFFICE AR E RECEIVED. THE ASSESSEE EXPLAINED BEFORE THE CIT(A) THAT THE NAMES HAVE BEEN SUBMITTED TO THE AO FROM WHOM THE HAND LOANS WERE TAKEN AND S UBSEQUENTLY REPAID. THESE HAND LOANS WERE USED TOWARDS THE BUSINESS EXP ENSES INCURRED BY THE LOCAL STAFF AND THEREFORE THIS CANNOT BE TREATE D AS INCOME OF ASSESSEE. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND DIRECTED THE AO TO TAKE THE DIFFERENTIAL AMOUNT OF RS. 87,565/- INSTEA D OF THE TOTAL AMOUNT. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 21 OF 41 THUS THE CIT(A) HAS ALLOWED THE SET OFF THE RECEIPT AND PAYMENT. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS FILED TH IS APPEAL. 40. BEFORE US THE LD. DR HAS CONTENTED THAT WHEN TH E ASSESSEE 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 IS WA RRANTED. HE HAS RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE L D. AR HAS SUBMITTED THAT THE AO HAS IGNORED THE FACT THAT THESE HAND LOANS A RE TAKEN ONLY FOR THE PURPOSE OF BUSINESS EXPENDITURE AND THEREFORE THE R EPAYMENT AMOUNT OF HAND LOAN HAS TO BE TAKEN INTO CONSIDERATION. HE H AS FURTHER POINTED OUT THAT FOR THE ASSESSMENT YEAR 2006-07 THE CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND THE REVENUE HAS NOT CHAL LENGED THE ORDER FOR THE ASSESSMENT YEAR 2006-07. 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) THAT 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 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. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 22 OF 41 IN VIEW OF THE FINDING FOR THE ASSESSMENT YEAR 2007 -08 THESE GROUNDS OF THE REVENUES APPEAL ARE DISMISSED. 19. FOR THE ASSESSMENT YEAR 2009-10 THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 23 OF 41 ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 24 OF 41 ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 25 OF 41 20. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 21. GROUND NOS. 2 AND 3 ARE REGARDING THE VALIDITY OF R EASSESSMENT. THESE GROUNDS ARE COMMON AS FOR THE ASSESSMENT YEAR 2008- 09. IN VIEW OF OUR FINDING ON THIS ISSUE RAISED IN GROUND NOS. 2 AND 3 FOR THE ASSESSMENT YEAR 2008-09 IN THE FOREGOING PARAS THESE GROUNDS OF THE ASSESSEES APPEAL ARE DISMISSED. 22. GROUND NO. 4 IS REGARDING ADDITION MADE ON ACCOUNT OF SALE OF MATERIAL. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US FOR TH E ASSESSMENT YEAR 2008- 09 IN GROUND NO. 4 REGARDING ADDITION CONFIRMED BY CIT(A) AT GP RATE OF 9%. IN VIEW OF THE FINDING ON THIS ISSUE FOR THE A SSESSMENT YEAR 2008-09 THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 23. GROUND NO. 5 IS REGARDING ADDITION FOR CANCELLATION OF NSC OF RS. 25,420/-. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. AN IDENTICAL ISSUE HAS BEEN CO NSIDERED FOR THE ASSESSMENT YEAR 2008-09. IN VIEW OF OUR FINDING FO R THE ASSESSMENT YEAR 2008-09 ON THIS ISSUE WE SET ASIDE THIS ISSUE TO TH E RECORD OF THE AO FOR FRESH EXAMINATION AND ADJUDICATION ON SAME TERMS. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 26 OF 41 24. GROUND NO. 6 IS REGARDING ADDITION ON ACCOUNT OF MI SCELLANEOUS RECEIPTS. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE AN ADDITION OF RS. 79,607/- ON ACCOUNT OF MISCELLANEOUS RECEIPTS AS FOUND IN THE D IARY ENTRIES. THE BREAK- UP OF THESE RECEIPTS ARE GIVEN BY THE CIT(A) AT PAG E 20 OF THE IMPUGNED ORDER AS UNDER. 25. THE ITEMS OF THE RECEIPT REGARDING DDCA, KIADB TEND ER CORPORATION, DD CANCELLATION ARE COMMON TO THE ASSESSMENT YEAR 2008 -09. THEREFORE IN VIEW OF THE FINDING ON THESE RECEIPTS FOR THE ASSES SMENT YEAR 2008-09, WE DELETE THE ADDITION MADE BY THE AO IN RESPECT OF TH ESE ITEMS. THOUGH THE ASSESSEE HAS CONTENDED THAT NO PART OF THESE AMOUNT CAN BE CONSIDERED AS ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 27 OF 41 INCOME IN THE HAND OF THE ASSESSEE HOWEVER IN THE A BSENCE OF ANY EXPLANATION AND FURTHER THE NARRATION ENTRY IN THE DIARY SUGGEST THAT SOME OF THE ITEMS ARE CLEARLY IN THE NATURE OF INCOME SUCH AS THE INTEREST AND LINE OF CREDIT. THE SAID CONTENTION OF THE ASSESSEE CANT BE ACCEPTED. THERE IS NOTHING IN THE DIARY ENTRY TO SUGGEST OR INDICATE T HAT THESE ARE THE RECEIPTS NOT IN THE NATURE OF INCOME. THEREFORE WE SUSTAIN THE ADDITION IN RESPECT OF THE INTEREST OF RS. 2,265/-, CASH BY INTEREST OF RS . 26,250/-. THE REMAINING ITEMS WHICH ARE RS. 10,000/- CASH BY SYNDICATE BANK , BGM, RS. 6,000/- LINE OF CREDIT, RS. 871 BY CASH VINAYAKKAMAT ARE SE T ASIDE TO THE RECORD OF THE AO FOR FURTHER VERIFICATION AND EXAMINATION TO FIND OUT THE ACTUAL NATURE OF THESE TRANSACTIONS WHETHER THE SAME CAN B E TREATED AS INCOME OF THE ASSESSEE. ACCORDINGLY, THIS GROUND OF THE ASSESSEES APPEAL I S PARTLY ALLOWED. 26. GROUND NOS. 7 AND 8 ARE REGARDING DISALLOWANCE MADE U/S. 40A(3). WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDE RED THE RELEVANT MATERIAL ON RECORD. THESE GROUNDS ARE COMMON AS IN VOLVED IN THE ASSESSMENT YEAR 2007-08 AND 2008-09. IN VIEW OF TH E FINDING ON THIS ISSUE FOR THE ASSESSMENT YEAR 2008-09 IN THE FORGOING PAR A THIS ISSUE IS SET ASIDE TO THE RECORD OF THE AO FOR FRESH CONSIDERATION ON THE SAME TERMS. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 28 OF 41 27. GROUND NO. 9 IS REGARDING THE GIFT RECEIVED FROM RE LATIVES. THE AO HAS MADE AN ADDITION OF RS. 12,41,000/- ON ACCOUNT OF G IFT RECEIVED FROM BROTHERS-IN-LAW, BROTHER OF WIFE. WE HAVE HEARD TH E LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AN IDENTICAL ISSUE WAS CONSIDERED BY US FOR THE ASSESSMENT YEAR 2007-08 VI DE ORDER DATED 28.04.2017 IN ITA NOS. 219 & 291/BANG/2014 WHILE DE CIDING THE GROUND NO. 13 OF THE ASSESSEES APPEAL AS UNDER: 29.GROUND NO. 13 IS REGARDING THE ADDITION ON ACCOU NT OF GIFT RECEIVED OF RS. 10,00,000/-. DURING THE PREVI OUS 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 W HEN THE DONORS HAVE CONFIRMED THE TRANSACTION OF GIFT THEN NO ADDITION CAN BE MADE IN THIS RESPECT. THE AO DID N OT ACCEPT THE EXPLANATION OF THE ASSESSEE AND MADE THE ADDITION OF RS. 10,00,000/-. THE ASSESSEE CHALLENG ED THE ACTION OF THE AO BEFORE THE CIT(A) BUT COULD NOT SU CCEED. 30.BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE FILED THE CONFIRMATION BEFORE THE AUTH ORITIES BELOW WHEREIN THE DONORS HAVE CONFIRMED THE GIFTS I N QUESTION. HE HAS FURTHER SUBMITTED THAT THE DONORS ARE RELATIVE OF THE ASSESSEE AND THE GENUINENESS OF THE TRANSACTION CANNOT BE DOUBTED. THESE GIFTS IN CASH WERE MADE TO THE ASSESSEE WHO IS SISTERS HUSBAND OF THE DONORS. THE ASSESSEE HAS EXPLAINED THE SOURCE, CRE DIT WORTHINESS OF THE DONORS AS AGRICULTURE LAND HOLDIN GS OF THE DONORS. THE AO HAS STRAIGHTWAY REJECTED THE EXPLAN ATION OF THE ASSESSEE WITHOUT EXAMINATION OF THE CREDIT WORTHINESS OF THE DONORS. 31.ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE TO PROVE TH E GENUINENESS OF THE GIFTS AND THE CREDIT WORTHINESS OF THE DONORS. SINCE THE GIFTS ARE SHOWN AS RECEIVED IN C ASH ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 29 OF 41 THEREFORE THE GENUINENESS OF THE TRANSACTION IS NOT PROVED. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BE LOW. 32.WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS EXPL AINED THE TRANSACTION 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 ASSESSEE BEING THE BROTHERS OF THE WIFE OF THE ASSESSEE. WE FIND THAT ONCE THE ASSESSEE HAS PRODUCED THE CONFIRMATION LETTER FROM THE DONORS THEN THE FURTHER EXAMINATION AND INVESTIGATI ON WAS REQUIRED TO BE CONDUCTED BY THE AO. IN THIS CASE T HE AO HAS NOT EXAMINED THE DONORS REGARDING THE GENUINENE SS OF THE GIFT AND THE CREDIT WORTHINESS OF 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 INVEST IGATION BY EXAMINATION OF THE DONORS ON THIS ISSUE. NEEDLESS TO SAY THE ASSESSEE BE GIVEN APPROPRIATE OPPORTUNITY OF HE ARING. IN VIEW OF THE FINDING FOR THE ASSESSMENT YEAR 2007 -08 WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO WITH SAME DIRECTIONS. ITA NO. 293/BANG/2014 REVENUES APPEAL FOR THE ASSE SSMENT YEAR 2009-10:- 28. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 30 OF 41 THE GROUNDS RAISED BY THE REVENUE ARE IDENTICAL AND COMMON AS FOR THE ASSESSMENT YEAR 2008-09. IN VIEW OF OUR FINDING FO R THE ASSESSMENT YEAR 2008-09 THESE GROUNDS OF THE REVENUES APPEALS STANDS DISMISSED. 29. FOR THE ASSESSMENT YEAR 2010-11 THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 31 OF 41 ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 32 OF 41 ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 33 OF 41 30. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 34 OF 41 31. GROUND NOS. 2 AND 3 ARE REGARDING VALIDITY OF REASS ESSMENT. THESE GROUNDS ARE COMMON FOR THE ASSESSMENT YEAR 2008-09 AND 2009 -10. IN VIEW OF OUR FINDING FOR ASSESSMENT YEARS 2008-09 AND 2009-10 TH ESE GROUNDS OF THE ASSESSEES APPEAL ARE DISMISSED. 32. GROUND NOS. 4 AND 8 ARE REGARDING ADDITION ON ACCOU NT OF SALE OF MATERIAL AND EXPENDITURE BY ADOPTING GP RATE AT 9%. THIS IS SUE IS COMMON TO THE ASSESSMENT YEARS 2008-09 AND 2009-10. IN VIEW OF O UR FINDING FOR THE EARLIER ASSESSMENT YEARS THIS ISSUE IS DECIDED IN F AVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 33. GROUND NO. 5 IS REGARDING RECEIPTS ON CANCELLATION OF NSC. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US FOR THE ASSESSMENT YEAR 2008-09 AND 2009- 10. IN VIEW OF OUR FINDING THIS ISSUE IS REMANDED TO THE RECORD OF THE AO FOR FRESH CONSIDERATION. 34. GROUND NO. 6 IS ADDITION ON ACCOUNT OF MISCELLANEOU S RECEIPTS. THE AO HAS MADE AN ADDITION OF RS. 1,47,695/- ON ACCOUNT O F MISCELLANEOUS RECEIPTS FOUND IN THE DIARY ENTRY. THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE AO. WE HAVE HEARD THE LD. AR AS WELL A S LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE BI FURCATION OF THIS AMOUNT ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 35 OF 41 OF MISCELLANEOUS RECEIPTS HAS BEEN GIVEN BY THE CIT (A) AT PAGE 20 AS UNDER: FROM THE ABOVE DETAILS THE AMOUNT OF RS. 10,300/- T OWARDS CASH RECEIVED ON BEHALF OF DDCA IS COMMON AS IN THE EARL IER ASSESSMENT YEARS. IN VIEW OF OUR FINDING ON THIS ISSUE WE DEL ETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. FOR REMAINING ITEMS OF RECEIPT THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE SUM OF RS. 77,5 00/- COMPRISING OF RS. 1,000/-, RS. 60,000/-, RS. 1,500/- AND RS. 15,0 00/- RELATES TO HIRE AND EXCAVATION CHARGES AND THE SAME ARE ACCOUNTED I N THE REGULAR BOOKS. THUS THE LD. AR HAS SUBMITTED THAT WHEN THI S AMOUNT OF ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 36 OF 41 RS. 77,500/- HAS ALREADY BEEN ACCOUNTED AS INCOME I N THE REGULAR BOOKS OF ACCOUNT THEN NO FURTHER ADDITION CAN BE MADE ON THIS AMOUNT. HE HAS REFERRED TO THE DETAILS OF THE INCOME AS PER THE RE GULAR BOOKS OF ACCOUNT AND SUBMITTED THAT THE HIRE CHARGES INCOME OF THE A SSESSEE SHOWN IN THE REGULAR BOOKS INCLUDES THIS AMOUNT OF RS. 77,500/-. THE LD. AR HAS FURTHER SUBMITTED THAT THE SUM OF RS. 31,000/- RELA TES TO REFUND OF SONS COLLEGE FEE. THEREFORE THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THE BALANCE AMOUNT OF RS. 28,895/- HAS B EEN EXPLAINED AS SUNDRY RECEIPTS SUCH AS TICKET CANCELLATION, RETURN OF TILES ETC WHICH HAS NO CHARACTER OF INCOME. THUS THE LD. AR HAS SUBMIT TED THAT THE ADDITION MADE BY THE AO IS NOT JUSTIFIED WHEN NONE OF THE IT EMS OF THE MISCELLANEOUS RECEIPT HAVE ANY ELEMENT OF INCOME. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS FAIL ED TO EXPLAIN HOW THESE AMOUNTS ARE REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS AND ALSO FAILED TO EXPLAIN HOW THE AMOUNTS WHICH ARE NOT REF LECTED IN THE BOOKS OF ACCOUNTS ARE NOT CHARGEABLE TO TAX. HE HAS RELI ED UPON THE ORDERS OF THE AUTHORITIES BELOW. 35. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED THAT OUT OF THIS TOTAL AMOUNT OF RS. 1,47,695/- RECORDED IN THE DIARY RS. 77,500/- R ELATES TO THE HIRE / ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 37 OF 41 EXCAVATION CHARGES AND WHICH HAVE ALREADY BEEN ACCO UNTED IN THE REGULAR BOOKS. THE HIRE CHARGES ARE SHOWN UNDER DIFFERENT HEADS IN THE TABLE ABOVE SUCH AS YADAVAPUR TAXI HIRE, BASUMARABAD FOR HITACH I, ROLLER AND P I ANGADI FOR HITACHI HIRE. WE FURTHER NOTE THAT THE ASSESSEE HAS SHOWN THE HIRE CHARGES INCOME IN THE PROFIT & LOSS ACCOUNT OF RS. 1,15,640/-. THEREFORE THE ASSESSEES EXPLANATION CANNOT BE BRUS HED ASIDE ONCE THE ASSESSEE HAS SHOWN AN INCOME OF RS. 1,15,640/- IN T HE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF HIRE CHARGES. NEITHER THE AO NOR THE CIT(A) HAS VERIFIED THIS FACT WHILE DECIDING THIS ISSUE BUT T HE EXPLANATION OF THE ASSESSEE HAS BEEN TURNED DOWN AT THE THRESHOLD. TH EREFORE WE DIRECT THE AO TO VERIFY THIS FACT OF RS. 77,500/- AS SHOWN IN THE DIARY AS HIRE CHARGES IS PART OF THE INCOME ALREADY ACCOUNTED IN THE BOOK S OF ACCOUNTS AND PARTICULARLY IN THE PROFIT AND LOSS ACCOUNT. AS RE GARDS THE REMAINING ENTRIES THE ASSESSEE HAS EXPLAINED THAT THE AMOUNT OF RS. 31,000/- RELATES TO THE REFUND OF SONS COLLEGE FEE WHICH IS ALSO CLEAR FROM THE NOTING IN THE DIARY AND THEREFORE THE ENTRY IN THE DIARY ITSELF I S SELF-EXPLANATORY. HENCE THIS AMOUNT OF RS. 31,000/- CANNOT BE TREATED AS IN COME OF ASSESSEE WHICH WAS RECEIVED AS REFUND OF THE COLLEGE FEE OF THE SO N. FURTHER, AN AMOUNT OF RS. 2,560/- IS ALSO SHOWN IN THE DIARY ENTRY AS TIL ES RETURN. THEREFORE THE SAID AMOUNT CANNOT BE TREATED AS INCOME OF THE ASSE SSEE. NEXT ITEM IS A SUM OF RS. 315/- WHICH IS ALSO EXPLAINED IN THE DIA RY AS RAILWAY TICKET ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 38 OF 41 CANCELLATION WHICH CANNOT BE HELD AS INCOME OF THE ASSESSEE. ACCORDINGLY, WE DELETE THE ADDITION IN RESPECT OF THESE ITEMS. SINCE THE ASSESSEE HAS NOT FURNISHED THE SATISFACTORY EXPLANATION REGARDING TH E OTHER AMOUNTS OF RS. 1,200/-, RS. 24,820/- THEREFORE, THE ADDITION I N RESPECT OF THESE TWO ITEMS IS SUSTAINED. 36. GROUND NO. 7 IS REGARDING THE ADDITION ON ACCOUNT O F UNEXPLAINED RECEIPTS OF MISSING ENTRIES. THE AO HAS MADE AN ADDITION OF RS. 7,92,000/- ON ACCOUNT OF SALE OF MATERIAL. THE CIT(A) HAS DIRECT ED THE AO TO ADOPT THE GP RATE OF 9% ON THE SALE OF MATERIAL. WE HAVE HEA RD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECO RD. THIS ISSUE IS IDENTICAL TO THE ISSUE INVOLVED IN GROUND NOS. 4 AN D 8. IN VIEW OF OUR FINDING REGARDING GROUND NOS. 4 AND 8 IN PARA 32 OF THIS ORDER THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. 37. GROUND NOS. 9 AND 10 ARE REGARDING DISALLOWANCE MAD E U/S. 40A(3). WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDE RED THE RELEVANT MATERIAL ON RECORD. THIS GROUND IS COMMON AS FOR T HE ASSESSMENT YEAR 2008-09 AND 2009-10. IN VIEW OF OUR FINDING OF THI S ISSUE FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 THIS ISSUE IS SET ASIDE TO THE RECORD OF THE AO FOR FRESH ADJUDICATION AND IN THE SAME TE RMS. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 39 OF 41 ITA NO. 294/BANG/2014 REVENUES APPEAL FOR THE ASSE SSMENT YEAR 2010-11:- 38. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. 39. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 40 OF 41 40. GROUND NOS. 2 AND 3 ARE REGARDING THE ADDITION DELE TED BY THE CIT(A) ON SALE OF MATERIAL. THIS GROUND IS COMMON TO THE GRO UND NOS. 4, 5 AND 8 OF THE ASSESSEES APPEAL. IN VIEW OF OUR FINDING ON T HIS ISSUE WHILE DECIDING THE ASSESSEES APPEAL THESE TWO GROUNDS OF THE REVE NUES APPEAL STANDS DISMISSED. 41. GROUND NOS. 4 AND 5 ARE REGARDING UNEXPLAINED HAND LOAN. THESE GROUNDS OF THE REVENUES APPEAL ARE IDENTICAL TO THE EARLIE R ASSESSMENT YEARS (2008- 09 AND 2009-10). IN VIEW OF OUR FINDING ON THESE G ROUNDS FOR THE EARLIER ASSESSMENT YEARS THESE GROUNDS OF THE REVENUES APP EAL STANDS DISMISSED. 42. IN THE RESULT THE APPEALS OF THE ASSESSEE FOR ASSES SMENT YEARS 2008-09 TO 2010-11 ARE PARTLY ALLOWED AND THOSE OF REVENUES A RE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 05 TH DAY OF MAY, 2017 SD/- SD/- (S. JAYARAMAN) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 05 TH MAY, 2017. / MS/ ITA NOS. 220 TO 222 & 292 TO 294/BANG/2014 PAGE 41 OF 41 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.