Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 1218 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 7 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-04-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Next Hearing Date
28-01-2016
Assessment Year
2008-2009
Appeal Filed On
27-08-2012
Judgement Text
ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.300 TO 305/VIZAG/2012 ( / ASSESSMENT YEARS: 2004-05, 2005-06, 2007-08, 2008-09, 2009-10 & 2010- 11) L. SURYAKANTHAM VISAKHAPATNAM VS. ACIT, CIRCLE - 2, VISAKHAPATNAM [PAN: ACCPL17 55B ] ( / APPELLANT) ( / RESPONDENT) ./I.T.A.NOS.306 TO 311/VIZAG/2012 ( / ASSESSMENT YEARS: 2004-05, 2005-06, 2007-08, 2008-09, 2009-10 & 2010- 11) L.G. TRINADHA RAO VISAKHAPATNAM VS. ACIT, CIRCLE - 2, VISAKHAPATNAM [PAN: AAEPL0979M ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NOS.356 TO 359/VIZAG/2012 ( / ASSESSMENT YEARS: 2006-07, 2007-08, 2008-09 & 20 09-10) DCIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM VS. L. SURYAKANTHAM VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 2 ./I.T.A.NOS.360 TO 366/VIZAG/2012 ( / ASSESSMENT YEARS: 2004-05, 2005-06, 2006-07, 2007-08, 2008-09, 2009-1 0 & 2010-11) DCIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM VS. L.G. TRINADHA RAO VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI T.S.N. MURTHY, DR / DATE OF HEARING : 28.03.2016 / DATE OF PRONOUNCEMENT : 19.04.2016 / O R D E R PER BENCH : THESE CROSS APPEALS FILED BY THE TWO DIFFERENT ASSE SSEES AS WELL AS REVENUE ARE DIRECTED AGAINST THE SEPARATE, BUT IDEN TICAL ORDERS OF CIT(A)-1, HYDERABAD FOR THE ASSESSMENT YEARS 2004-0 5 TO 2010-11. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMO N, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OFF, BY WAY OF THIS COM MON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA N O.309/VIZAG/2012 ARE THAT THE ASSESSEE SRI L.G. TRINADHA RAO IS DERI VING INCOME FROM CONTRACTS THROUGH ITS PROPRIETARY CONCERNS M/S. ULT RA DIMENSIONS. THE ASSESSEE EXECUTES WORKS CONTRACTS FOR DEFENSE ORGAN IZATIONS, SUCH AS ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 3 SHIP BUILDING CENTRE, VISAKHAPATNAM, DGNP, VISAKHAP ATNAM, ETC. THERE WAS A SEARCH ACTION U/S 132 OF THE INCOME-TAX, 1961 (HEREINAFTER CALLED AS THE ACT) ON 14.7.2009 IN THE RESIDENTIAL AND B USINESS PREMISES OF THE ASSESSEE. PURSUANT TO SEARCH, THE CASE WAS CENTRALI ZED WITH CENTRAL CIRCLE-2, VISAKHAPATNAM. ACCORDINGLY, NOTICE U/S 1 53A/153C OF THE ACT WAS ISSUED CALLING FOR THE RETURN OF INCOME FOR THE ASSESSMENT YEARS 2004-05 TO 2010-11. IN RESPONSE TO NOTICE U/S 153A OF THE ACT, THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 23.3.201 1. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTICE U/S 143(2) & 142(1) OF THE ACT ALONG WITH DETAILED QUESTIONNAIRE WERE I SSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE APPEARED FROM TIME TO TIME AND FURNISHED THE INFORMATION CALLED F OR, HOWEVER, FAILED TO PRODUCE ANY BOOKS OF ACCOUNTS AND RELEVANT VOUCHERS . 3. DURING THE COURSE OF SEARCH PROCEEDINGS, CERTAIN INCRIMINATING DOCUMENTS SEIZED REVEALS THAT THE ASSESSEE HAS INFL ATED 10% LABOUR EXPENSE FOR THE ASSESSMENT YEAR 2008-09 & 2009-10. WHEN THESE DOCUMENTS WERE CONFRONTED TO THE ASSESSEE WHILE REC ORDING A STATEMENT U/S 132(4) OF THE ACT, THE ASSESSEE ADMITTED THAT T HE STATEMENTS FOUND REFFERED TO THE LABOUR, FABRICATION AND WELDING PAY MENTS INCURRED FOR THE PERIOD AND ALSO REPRESENTS THE ACTUAL PAYMENT MADE AND INFLATED EXPENDITURE, UNDER EACH HEAD OF EXPENDITURE. THE A SSESSEE FURTHER ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 4 AGREED THAT HE HAS INFLATED 10% UNDER THE HEAD LABO UR PAYMENTS WHICH HE WAS UTILIZED FOR INVESTMENTS IN UNACCOUNTED ASSE TS AND CASH SEIZED DURING THE COURSE OF SEARCH. WITH THIS BACKGROUND, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE TO FURNISH BOOKS OF ACCOUNTS AND OTHER RELEVANT DOCUMENTS IN SUPPORT OF THE EXPENDITURE CLAIMED. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSEE COULD NOT PRODUCE ANY BOOKS OF ACCOUNTS AND ALSO ST ATED THAT NO BOOKS OF ACCOUNTS WERE AVAILABLE AND HENCE, THE SAME CANN OT BE FURNISHED. HOWEVER, OTHER INFORMATION CALLED FOR WAS PRODUCED. AFTER EXAMINING THE INFORMATION SO PRODUCED, THE A.O. HAS ISSUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN IN THE ABSENCE OF BOOKS OF ACC OUNTS AND OTHER DETAILS THE EXPENDITURE CLAIMED SHALL NOT BE DISALL OWED. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE F ILED HIS WRITTEN SUBMISSION DATED 20.12.2011 AND SUBMITTED THAT THER E WAS NO INCRIMINATING MATERIAL SEIZED DURING THE COURSE OF SEARCH AND AS SUCH NO ADDITIONS CAN BE MADE U/S 153A OF THE ACT. IT IS A LSO STATED BY THE ASSESSEE THAT THE INCRIMINATING MATERIAL FOUND AND SEIZED DURING THE COURSE OF SEARCH RELATING TO ASSESSMENT YEAR 2008-0 9 & 2009-10, IN RESPECT OF WHICH DISCLOSURE OF ADDITIONAL INCOME WA S MADE WHILE RECORDING THE STATEMENT U/S 132(4) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT U/S 153A OF THE ACT, DE-NOVO ASSESSM ENT CAN BE MADE ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 5 ONLY IN RESPECT OF THE ASSESSMENT YEARS FOR WHICH T HE ASSESSMENT PROCEEDINGS HAD ABATED AND THAT IN RESPECT OF ASSES SMENT YEARS FOR WHICH THE ASSESSMENTS HAD ALREADY REACHED THE FINAL ITY, SUCH ASSESSMENTS COULD NOT BE MADE U/S 153A OF THE ACT. IN OTHER WORDS, THE ASSESSEE SUBMITTED THAT IN THE CASE OF ASSESSME NTS, WHICH ARE ABATED, THE A.O. HAS JURISDICTION TO ASSESS OR RE-A SSESS THE TOTAL INCOME OF THOSE ASSESSMENT YEARS AND IN RESPECT OF COMPLET ED ASSESSMENTS, THE A.O. HAS NO JURISDICTION TO RE-ASSESS THE TOTAL INC OME UNLESS THERE WAS A SEIZED MATERIAL. THE ASSESSEE FURTHER SUBMITTED THA T IN RESPECT OF ASSESSMENT YEAR 2004-05 TO 2007-08, THE ASSESSMENT HAS BEEN COMPLETED AND NO PROCEEDINGS WERE PENDING BEFORE AN Y AUTHORITIES. THE TIME LIMIT FOR ISSUE OF NOTICE U/S 143(2) OF TH E ACT HAS BEEN EXPIRED. THEREFORE, FOR THESE ASSESSMENT YEARS, THE A.O. HAS NO JURISDICTION TO TINKER WITH THE ASSESSMENT. SIMILARLY, IN RESPECT O F PROPOSED REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF NET PROFIT FROM THE BUSINESS, THE ASSESSEE SUBMITTED THAT HE IS INTO THE BUSINESS OF EXECUTION OF CONTRACTS FOR DEFENCE ORGANIZATIONS AND THE NET PROFIT FROM H IS BUSINESS IS VARIES FROM 6 TO 8 % WHICH IS EVIDENT FROM THE PREVIOUS FI NANCIAL RESULTS. THEREFORE, THE PROPOSED ACTION OF ESTIMATION OF NET PROFIT OF 15% AND 10% IN RESPECT OF CONTRACT RECEIPTS AND TRADING RES ULTS IS QUITE HIGH. THE ASSESSEE FURTHER SUBMITTED THAT DURING THE COUR SE OF SEARCH ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 6 PROCEEDINGS, HE HAS ADMITTED ADDITIONAL INCOME TOWA RDS DISALLOWANCE OF 10% LABOUR CHARGES AND ACCORDINGLY DISCLOSED ADDITI ONAL INCOME AGREED BEFORE THE SEARCH PROCEEDINGS AND PAID THE TAXES. THEREFORE, THE A.O. WAS NOT CORRECT IN PROPOSED ESTIMATION OF NET PROFI T BY REJECTION OF BOOKS OF ACCOUNTS. 5. THE A.O. AFTER CONSIDERING THE ASSESSEES SUBMIS SIONS AND ALSO RELEVANT FACTS AVAILABLE ON RECORD, HELD THAT THERE IS NO LIMITATION OR RESTRICTION PROVIDED IN THE NEW PROCEDURE OF SEARCH ASSESSMENT ON THE POWERS OF THE A.O. FOR MAKING THE ASSESSMENT/RE-ASS ESSMENT AND THE A.O. IS NOT REQUIRED TO CONFINE HIS ASSESSMENT ON T HE MATERIAL FOUND DURING THE COURSE OF SEARCH, AS WAS THE CASE IN THE OLD PROCEDURE OF BLOCK ASSESSMENT. THE A.O. FURTHER HELD THAT FROM THE BARE READING OF THE SECTION 153A OF THE ACT AND THE BOARD CIRCULAR NO.7 OF 2003 DATED 5.9.2003, IT IS ABUNDANTLY CLEAR THAT PROVISIONS OF SECTION 153A OF THE ACT WERE INTRODUCED TO OVERCOME THE CONTROVERSIES RAISE D IN THE OLD PROCEDURE OF BLOCK ASSESSMENT WITH REGARD TO THE ME ANING OF UNDISCLOSED INCOME AND INCOME RELATABLE TO MATERIAL FOUND DURING THE COURSE OF SEARCH, ETC. THE PRESENT PROCEDURE PROVID ES THAT THE COMPLETED ASSESSMENT WOULD BE RESURFACED AND THE PE NDING ASSESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR FAL LING WITHIN THE PERIOD OF 6 ASSESSMENT YEARS SHALL STAND ABATED AND REOPENED. THE ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 7 ASSESSMENTS OR THE REASSESSMENTS OF ALL THOSE 6 YEA RS, WHETHER COMPLETED OR ABATED WILL BE MADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A OF THE ACT. SUCH REOPENING OF COMPLET ED REASSESSMENT U/S 153A OF THE ACT IS AUTOMATIC ON THE INITIATION OF S EARCH AND THE A.O. IS NOT REQUIRED AS PER LAW TO RECORD ANY REASONS THAT INCOME HAS ESCAPED ASSESSMENT. IN SUPPORT OF HIS ARGUMENTS, HE RELIED UPON THE JUDGEMENT OF HONBLE A.P. HIGH COURT, IN THE CASE OF SBH REPO RTED IN 171 ITR 232. THE A.O. HAS FURTHER RELIED UPON THE DECISION OF IT AT, DELHI BENCH IN THE CASE OF SHIVNATH RAI HARNARAIN (INDIA) LTD. VS. DCI T (2008) 304 ITR 271 AND ALSO MS. SHYAM LATHA KAUSHIK (2008) 306 ITR 117 . WITH THESE OBSERVATIONS, THE A.O. HAS REJECTED THE CONTENTION OF THE ASSESSEE THAT THE A.O. HAS NO JURISDICTION TO REASSESS THE INCOME OF COMPLETED ASSESSMENT YEARS UNLESS THERE WAS A SEIZED MATERIAL . 6. THE A.O. FURTHER HELD THAT THE ASSESSEE HAS FAIL ED TO PRODUCE BOOKS OF ACCOUNTS AND OTHER RELEVANT DETAILS SUCH A S BILLS & VOUCHERS IN RESPECT OF EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT FOR ALL THE ASSESSMENT YEARS. THE ASSESSEE HAS CLAIMED HUGE EX PENDITURE UNDER VARIOUS HEADS OF EXPENDITURE SUCH AS COST OF MATERI AL, BINDING CHARGES, AMC EXPENDITURE, FABRICATION AND LABOUR CHARGES AND SUB CONTRACT PAYMENTS, HOWEVER, FAILED TO SUBSTANTIATE THE RELEV ANT EXPENDITURE WITH SUPPORTING EVIDENCES. THE A.O. FURTHER OBSERVED TH AT DURING THE COURSE ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 8 OF SEARCH PROCEEDINGS, THE DEPARTMENT HAS GATHERED INFORMATION WHICH REVEALS THAT THE ASSESSEE HAS INFLATED 10% LABOUR E XPENDITURE, WHICH WAS ACCEPTED BY THE ASSESSEE AND DISCLOSED ADDITION AL INCOME BEFORE THE SEARCH PARTY. THEREFORE, IT IS VERY CLEAR THAT THE ASSESSEE IS HABITUAL OF NOT MAINTAINING ANY REGULAR BOOKS OF ACCOUNTS AN D ALSO VOUCHERS IN SUPPORT OF THE EXPENDITURE DEBITED IN THE P&L ACCOU NT. CONSIDERING THE INABILITY OF THE ASSESSEE TO FURNISH THE BOOKS OF A CCOUNTS AND ALSO THE VARIOUS INFORMATION CALLED FOR, IT WAS OPINED THAT THE BOOK RESULTS ADMITTED BY THE ASSESSEE IN HIS RETURNS IS NOT SUSC EPTIBLE TO VERIFICATION AND AS SUCH ARE NOT RELIABLE. THE A.O. FURTHER HEL D THAT THE ASSESSEE IS DUTY BOUND TO PRODUCE THE FULL DETAILS OF EXPENSES AND ALL THE EVIDENCES CALLED FOR IN THE COURSE OF ASSESSMENT PROCEEDINGS, SO AS TO ENABLE THE ASSESSING OFFICER TO REASONABLY COMPUTE THE PROFIT. SINCE, THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNTS AND OTHER R ELEVANT DETAILS, REJECTED THE FINANCIAL RESULTS AND RESORTED TO ESTI MATION OF NET PROFIT. THE A.O. AFTER CONSIDERING THE RELEVANT DETAILS AVA ILABLE ON RECORD ESTIMATED THE NET PROFIT OF 10%, IN RESPECT OF TRAD ING BUSINESS AND 15% IN RESPECT OF GROSS CONTRACT RECEIPTS NET OF ALL PE RMISSIBLE DEDUCTIONS UNDER THE INCOME TAX ACT. WHILE DOING SO, THE A.O. HAS RELIED UPON THE DECISION OF HONBLE A.P. HIGH COURT, IN THE CASE OF M/S. INDWELL CONSTRUCTIONS VS. CIT REPORTED IN 232 ITR 776. SIMI LARLY, DURING THE ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 9 COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS SHOWN INCOME FROM OTHER SOURCES BEING MISCELLAN EOUS RECEIPTS, INTEREST ON DEPOSITS, FOREIGN EXCHANGE GAIN AND OTH ER MISCELLANEOUS RECEIPTS. THEREFORE, THE A.O. HAS MADE SEPARATE ADD ITIONS TOWARDS INCOME FROM OTHER SOURCES, IN ADDITION TO THE ESTIM ATION OF NET PROFIT FROM THE BUSINESS. 7. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 14 3(3) R.W.S. 153A OF THE ACT IS BAD IN LAW, AS THE SAME SAID TO HAVE BEE N PASSED U/S 144 R.W.S. 153A OF THE ACT. THE ASSESSEE FURTHER SUBMIT TED THAT THE ASSESSING OFFICER IS NOT AT ALL CORRECT IN MAKING A DDITIONS TO THE RETURNED INCOME AS THE ASSESSMENT FOR THE ASSESSMENT YEAR 20 04-05 TO 2007-08 IS NOT PENDING AS ON THE DATE OF SEARCH, CONSEQUENT LY NOT ABATED. MORE SO, THE MATERIALS RELEVANT TO THESE ASSESSMENT YEAR S HAVE NOT BEEN FOUND DURING THE COURSE OF SEARCH. THE ASSESSEE FUR THER SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS VOID-AB- INITIO, FOR THE REASON THAT THE ADDITIONAL COMMISSIONER OF INCOME TAX HAS NOT AFFORDED THE ASSESSEE AN OPPORTUNITY OF HEARING BEFORE ACCORDING APPROVAL, WHICH IS TOTALLY IN VIOLATION OF THE PRINCIPLES OF NATURAL J USTICE. THE ASSESSEE FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR 2004 -05 TO 2007-08, ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 10 THERE IS NO MATERIAL FOUND IN THE COURSE OF SEARCH OPERATIONS SO AS TO ATTRACT THE PROVISIONS OF SECTION 153A OF THE ACT. THE LAW MANDATES THE ASSESSING OFFICER TO MAKE ADDITIONS ONLY ON THE BAS IS OF MATERIAL FOUND DURING THE COURSE OF SEARCH. SINCE, THERE WAS NO S EIZED MATERIALS FOUND DURING THE COURSE OF SEARCH, THE A.O. HAS NO JURISD ICTION TO ASSESS OR REASSESS THE INCOME OF COMPLETED ASSESSMENT, WHICH WAS NOT PENDING AS ON THE DATE OF SEARCH. IN SUPPORT OF HIS ARGUME NTS RELIED UPON PLETHORA OF JUDGEMENTS AND ALSO THE ITAT, SPECIAL B ENCH DECISION IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT (2 012) 33 CCH 294. 8. AS REGARDS THE ESTIMATION OF NET PROFIT FROM THE BUSINESS, THE ASSESSEE SUBMITTED THAT THE A.O. IS NOT CORRECT IN ESTIMATING THE INCOME AT A VERY HIGH PERCENTAGE OF 10% OF THE TURNOVER IN RESPECT OF TRADING ACTIVITY AND 15% IN RESPECT OF CONTRACT RECEIPTS, W ITHOUT DISCLOSING THE BASIS FOR ARRIVING AT THE SAME AND ALSO WITHOUT DIS CLOSING ANY COMPARABLE CASES. THE ASSESSEE FURTHER SUBMITTED T HAT HE IS INTO THE BUSINESS OF TRADING IN MACHINERY SPARE PARTS AND TH E NET PROFIT MARGIN IN THIS LINE OF BUSINESS IS VARIES FROM 3 TO 5%. AS A GAINST THIS, THE A.O. HAS ADOPTED NET PROFIT OF 10% ARBITRARILY FOR ALL T HE ASSESSMENT YEARS WITHOUT ANY BASIS. SIMILARLY, THE A.O. HAS ADOPTED 15% UNIFORM NET PROFIT FOR ALL THE 6 ASSESSMENT YEARS IN RESPECT OF CONTRACT RECEIPTS WITHOUT ANY BASIS. THE ASSESSEE FURTHER SUBMITTED THAT HE IS INTO THE ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 11 BUSINESS OF EXECUTION OF WORKS CONTRACT FOR DEFENCE ORGANIZATIONS AND THE PROFIT ELEMENT IN THIS CONTRACT IS VERY LESS. DURING THE RELEVANT ASSESSMENT YEARS, HE HAS EXECUTED PART OF WORKS ON ITS OWN AND REMAINING PART WAS HANDED OVER TO SUB CONTRACTORS F OR TIMELY EXECUTION OF WORKS. IN THE CASE OF WORKS, WHERE HE HAS ALLOWE D OTHER CONTRACTORS TO WORK, THE NORMAL NET PROFIT PERCENTAGE IS 4 TO 6 %. THE A.O. WITHOUT CONSIDERING ALL THESE FACTS, SIMPLY APPLIED 15% UNI FORM NET PROFIT ON TOTAL TURNOVER FOR ALL THE YEARS. 9. SIMILARLY, IT WAS SUBMITTED THAT THE A.O. WAS ER RED IN MAKING SEPARATE ADDITIONS TOWARDS INCOME FROM OTHER SOURCE S, BEING INTEREST ON FIXED DEPOSITS, MISCELLANEOUS INCOME AND FOREIGN EX CHANGE GAIN, WHEN THE INCOME FROM THE BUSINESS IS ESTIMATED ON THE GR OSS RECEIPTS. THE ASSESSEE FURTHER SUBMITTED THAT THE INTEREST WAS EA RNED ON THE FIXED DEPOSITS KEPT IN THE BANK TOWARDS BANK GUARANTEE. THEREFORE, THE INTEREST EARNED ON FIXED DEPOSIT SHOULD BE CONSIDER ED AS PART OF BUSINESS RECEIPTS AND NO SEPARATE ADDITIONS CAN BE MADE UNDER THE HEAD INCOME FROM OTHER SOURCES. AS REGARDS THE FOR EIGN EXCHANGE GAIN, THE ASSESSEE SUBMITTED THAT THE FOREIGN EXCHANGE GA IN ARISES BECAUSE OF FLUCTUATION IN FOREIGN CURRENCY IN THE COURSE OF IM PORT OF MACHINERY SPARE PARTS. THEREFORE, IT IS ESSENTIALLY A PART O F BUSINESS OPERATIONS, ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 12 THEREFORE, THE A.O. WAS NOT CORRECT IN MAKING SEPAR ATE ADDITIONS TOWARDS THESE ITEMS, WHEN PROFIT IS ESTIMATED ON TH E GROSS RECEIPTS. 10. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REJECTED THE LEGAL GROUND RAISED BY THE ASSESSEE BY HOLDING THAT THERE IS NO SUCH PROVISIONS IN THE ACT FOR THE A.O. TO CONFI NE HIS REASSESSMENT ONLY FOR THE ABATED ASSESSMENTS AND NOT FOR THE PEN DING ASSESSMENTS. THE CIT(A) FURTHER HELD THAT THE ASSESSMENT FOR THE ASSESSMENT YEARS 2004-05 TO 2007-08 WERE COMPLETED U/S 143(1) OF THE ACT AND NO REGULAR SCRUTINY ASSESSMENT TOOK PLACE BEFORE THE D ATE OF SEARCH. FOR THE FIRST TIME, THE SCRUTINY ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AFTER SEARCH ACTION U/S 132 OF THE ACT. IT IS AN U NDISPUTED FACT THAT THE ASSESSEE COULD NOT PRODUCE ANY BOOKS OF ACCOUNTS AS WELL AS VERIFIABLE VOUCHERS AT THE TIME OF ASSESSMENT PROCEEDINGS. IT WAS ALSO AN UNDISPUTED FACT THAT DURING THE COURSE OF SEARCH PR OCEEDINGS, FOR THE A.Y. 2008-09 & 2009-10 THE DEPARTMENT HAS FOUND INF LATION OF LABOUR EXPENDITURE WHICH WAS ACCEPTED BY THE ASSESSEE. TH EREFORE, THE CONTENTION OF THE ASSESSEE THAT NO MATERIAL WAS FOU ND IN RESPECT OF BUSINESS OF THE ASSESSEE FOR THE ABOVE ASSESSMENT Y EARS FAILS. BESIDES, THE ASSESSEE HIMSELF HAS ADMITTED THE INFLATION OF LABOUR EXPENDITURE AND DISCLOSED ADDITIONAL INCOME AND FURTHER FOLLOWE D BY FURNISHING RETURNS OF INCOME. HENCE, THERE IS A CLEAR UNDER ST ATEMENT OF INCOME ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 13 PARTICULARS RELATING TO THE BUSINESS IN THE NORMAL COURSE AND ONLY AFTER SEARCH, THE FACT OF INFLATION BROUGHT IN TO LIGHT. INITIATION OF ACTION U/S 153 OF THE ACT IS A MANDATORY PROVISION, WHICH DOES NOT ALLOW ANY DISCRETION TO THE ASSESSING AUTHORITY. AFTER INITI ATION OF SUCH ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER IS FREE TO EXAMI NE THE FACTS OF THE CASE FOR THE PURPOSE OF COMPUTING THE TRUE INCOME O F THE ASSESSEE. IN ALL THESE 6 YEARS, THERE IS NO ORIGINAL SCRUTINY AS SESSMENT COMPLETED. THEREFORE, THE A.O. IS NOT FORCED TO CONFINE HIMSEL F TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH. IN THE ABSENCE OF APP LICATION OF MIND, THE A.O. IS FREE TO EXAMINE THE CASE AFRESH. WITH THESE OBSERVATIONS, THE LEGAL GROUND RAISED BY THE ASSESSEE HAS BEEN DISMIS SED. 11. AS REGARDS THE ESTIMATION OF NET PROFIT FROM TH E BUSINESS, THE CIT(A) HELD THAT THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNTS AND RELEVANT VOUCHERS IN SUPPORT OF FINANCIAL RESUL TS DECLARED IN THE RETURN OF INCOME. WHEN ASSESSEE HAS BEEN ASKED TO F URNISH COMPARABLE CASES, HE COULD NOT PRODUCE ANY COMPARABLE CASES SO AS TO COMPARE THE NET PROFIT DECLARED FROM HIS BUSINESS. IN THE ABSE NCE OF SPECIFIC DETAILS AND COMPARISONS, THERE IS NO OTHER ALTERNATIVE EXCE PT TO GO BY THE NORMAL RESULTS OBTAINED IN THE VARIOUS SPARE PARTS TRADE BUSINESS. THE ASSESSEE DOES NOT PRODUCED ANY INFORMATION ABOUT TH E PURCHASE AND SALE AS WELL AS EXPENSES INCURRED IN THE TRADING BU SINESS. IT IS VERY ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 14 DIFFICULT TO ACCEPT THE CONTENTION AS WELL AS THE P ROFIT DISCLOSED BY THE ASSESSEE IN THE RETURN. THE FACTS OF THE CASE DESE RVE ESTIMATION OF NET PROFIT ON REASONABLE BASIS. ACCORDINGLY, THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE NET PROFIT OF 10% ON TRADING BUSINESS FOR THE ASSESSMENT YEARS UNDER APPEAL I.E. FOR THE ASSESSMENT YEAR 2004-05, 2005-06, 2007-08 & 2009-10. HOWEVER, THE COMMISSION INCOME OF RS.2,03,780/- FOR THE ASSESSMENT YEAR 200 4-05 AND RS.84,195/- FOR THE ASSESSMENT YEAR 2007-08 REQUIRE TO BE DELETED FROM THE TOTAL INCOME, AS THE SAME CANNOT BE ASSESSED AG AIN AFTER ESTIMATING THE NET PROFIT. 12. AS FAR AS CONTRACT RECEIPTS ARE CONCERNED, THE CIT(A) HELD THAT THE ASSESSEE WAS SUBJECT TO SURVEY U/S 133A OF THE ACT FOR THE ASSESSMENT YEAR 2006-07. DURING SURVEY, THE DEPARTMENT HAS NOT ICED THE INFLATION OF LABOUR EXPENSES AND ASSESSEE HAS ACCEPTED ADDITIONA L INCOME OF RS.63.12 LAKHS FOR THE ASSESSMENT YEAR 2006-07. EV EN IN THE ACTION U/S 132 OF THE ACT, THE DEPARTMENT HAS FOUND DOCUMENT R EFLECTING THE INFLATION OF LABOUR EXPENDITURE. THE ASSESSEE HAS A DMITTED THE FACT OF INFLATION OF LABOUR EXPENSES IN RESPECT OF CONTRACT WORKS. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE NEVER PRODUCED BO OKS OF ACCOUNTS NOT ONLY FOR THE ASSESSMENT YEAR UNDER APPEAL BUT ALSO FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE COULD NOT ADDUCE PROPER EVIDENCES TO ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 15 SUBSTANTIATE VARIOUS CLAIMS MADE IN THE RETURN. THO UGH HE HAS VEHEMENTLY OBJECTED TO THE ESTIMATION OF INCOME OF 15%, HE IS UNABLE TO PRODUCE ANY COMPARABLE CASES. IT IS THE CASE WH ERE ESTIMATION IS THE ONLY SOLUTION TO ARRIVE AT THE TOTAL INCOME OF THE ASSESSEE ON CONTRACT RECEIPTS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXECUTION OF WORKS CONTRACT FOR DEFENCE ORGANIZATIONS. IT IS VERY DIFF ICULT TO GET COMPARISONS, ACCORDINGLY, THE A.O. HAS ASKED ASSESSEE TO FURNISH COMPARABLE CASES IN SUPPORT OF ITS CONTENTION. HOWEVER, THE ASSESSEE HA S FAILED TO FURNISH ANY COMPARABLE CASES. ON THE OTHER HAND, THE A.O. H AS BROUGHT ON RECORD TWO COMPARABLE CASES, WHEREIN THE NET PROFIT FROM SIMILAR BUSINESS IS BETWEEN 15 TO 26%. THEREFORE, THE A.O. HAS ADOPTED MINIMUM 15% NET PROFIT BY TAKING INTO ACCOUNT THE O NE SUCH COMPARABLE CASE. SINCE, ASSESSEE COULD NOT PRODUCE ANY SUITABLE COMPARABLES AND ALSO FAILED TO PRODUCE BOOKS OF ACC OUNTS, THE A.O. WAS RIGHT IN ESTIMATING THE NET PROFIT. FURTHER AS CO NTESTED BY THE ASSESSEE, THE A.O. HAS ESTIMATED 15% NET PROFIT WHICH IS ON T HE HIGHER SIDE. AS DISCUSSED IN THE PREVIOUS PARAGRAPHS, FOR THE ASSES SMENT YEAR 2006-07, THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME TOWARDS INFLATION OF LABOUR EXPENSES. THE NET PROFIT DECLARED FOR THE A.Y. 2006 -07 AFTER ADDITIONAL INCOME WORKS OUT TO 12.3%. IN THE ABSENCE OF INDEPE NDENT COMPARABLES, IT IS ALWAYS PREFERABLE TO TAKE OWN CO MPARISON OF OTHER ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 16 YEARS. ACCORDINGLY, THE NET PROFIT ON CONTRACT REC EIPTS IS REQUIRED TO BE ESTIMATED AT 12.3% ON GROSS CONTRACT RECEIPTS, WHIC H GIVES REASONABLE PROFITS WHICH MEETS THE ENDS OF JUSTICE. THEREFORE , THE A.O. IS DIRECTED TO ESTIMATE NET PROFIT OF 12.3% ON CONTRACT RECEIPT S FOR THE ASSESSMENT YEAR 2004-05, 2005-06, 2007-08 & 2009-10. 13. THE CIT(A) FURTHER HELD THAT AS FAR AS THE ASSE SSMENT YEAR 2010- 11 IS CONCERNED, THE ASSESSEE, AT THE TIME OF SEARC H, HAS DISCLOSED SUM OF RS.1.5 CRORES TOWARDS INFLATION OF LABOUR CHARGE S. THE SAID DISCLOSURE WAS GIVEN ON THE EXPECTED TURNOVER OF RS.40 CRORES. HOWEVER, AT THE END OF THE YEAR, THE ASSESSEE COULD ACHIEVE THE TUR NOVER OF RS.25.75 CRORES ONLY AND INCURRED LABOUR EXPENDITURE OF RS.3 ,64,83,127/-. ALTHOUGH, THERE IS A MERIT IN THE CONTENTION OF THE ASSESSEE ABOUT EXCESS DISCLOSURE OF INCOME TOWARDS INFLATION OF LABOUR PA YMENTS, THE SAME CANNOT BE ENTERTAINED IN VIEW OF THE FACT THAT THE ASSESSEE CONSCIOUSLY DISCLOSED ADDITIONAL INCOME AT THE TIME OF SEARCH A ND THE SAME WAS REITERATED BY FILING RETURNS OF INCOME. HAVING FILE D THE RETURN OF INCOME DISCLOSING THE INCOME ADMITTED IN HIS STATEMENT, TH E ASSESSEE CANNOT PLEAD FOR REVERSAL OF SUCH DISCLOSURE OF INCOME. W ITH THESE OBSERVATIONS, THE CIT(A) HAS REJECTED THE CONTENTIO N OF THE ASSESSEE FOR PROPORTIONATE REDUCTION OF ADDITIONAL INCOME ADMITT ED DURING THE COURSE OF SEARCH AND DIRECTED THE A.O. TO ACCEPT THE RETUR N OF INCOME FILED BY ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 17 THE ASSESSEE IN RESPONSE TO NOTICE U/S 153A OF THE ACT. THEREFORE, THE ACTION OF THE A.O. IN ESTIMATING 15% ON THE TOTAL T URNOVER IS REJECTED AND THE BUSINESS PROFIT ADMITTED BY THE ASSESSEE IS DIRECTED TO BE ACCEPTED. 14. AS REGARDS THE SEPARATE ADDITIONS TOWARDS INCOM E FROM OTHER SOURCES BEING INTEREST INCOME, MISCELLANEOUS RECEIP TS AND FOREIGN EXCHANGE GAIN, THE CIT(A) HELD THAT THE ACTION OF T HE A.O. IS PROPER AND DOES NOT REQUIRE TO BE INTERFERING DUE TO THE FACT THAT THE INTEREST EARNED ON FIXED DEPOSITS WAS ON ACCOUNT OF OTHER AC TIVITY INCIDENTAL TO THE MAIN ACTIVITY OF THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, THE ACTION OF THE A.O. IN TREATING THESE ITEMS SUCH AS INTEREST ON BANK FIXED DEPOSITS, RENTAL INCOME, NSRO RECEIPTS, FOREIGN EXC HANGE GAIN AND OTHER MISCELLANEOUS RECEIPTS AS SEPARATE ADDITION IS SUST AINED IN TOTAL WITHOUT ANY EXCLUSIVE. AS REGARDS THE CLAIM OF DEPRECIATION ON ASSETS, THE CIT(A) UPHELD THE ACTION OF THE A.O. AND HELD THAT IN THE ABSENCE OF CREDIBLE EVIDENCE, THE CLAIM OF THE ASSESSEE IN RESPECT OF D EPRECIATION CANNOT BE ENTERTAINED. SIMILARLY, AS REGARDS THE CHARGING OF INTEREST U/S 234A & 234B OF THE ACT, THE CIT(A) HELD THAT THESE SECTION S ARE MANDATORY AS WELL AS CONSEQUENTIAL IN NATURE. THERE IS NO DISCR ETION AVAILABLE TO THE A.O. FOR LEVY/NON-LEVY OF THE INTEREST UNDER THESE SECTIONS, THEREFORE, DIRECTED THE A.O. TO MODIFY THE CHARGING OF INTERES T CONSEQUENTIAL TO ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 18 RELIEF GIVEN ON THE MAIN ISSUES. AGGRIEVED BY THE C IT(A) ORDER, THE ASSESSEE AS WELL AS REVENUE ARE IN APPEAL BEFORE US . 15. THE ASSESSEE HAS RAISED COMMON GROUNDS FOR ALL THE SIX ASSESSMENT YEARS. FROM THESE GROUNDS, THE ASSESSEE HAS AGITATED FIVE MAIN ISSUES I.E. THE VALIDITY OF ASSESSMENT PROCEED ING, ESTIMATION OF NET PROFIT, DENIAL OF DEDUCTIONS TOWARDS DEPRECIATION A ND SEPARATE ADDITIONS TOWARDS INTEREST AND OTHER INCOME UNDER THE HEAD IN COME FROM OTHER SOURCES AND LEVY OF INTEREST U/S 234A& 234B OF THE ACT. SIMILARLY, THE REVENUE HAS RAISED COMMON GROUNDS FOR ALL THE SIX A SSESSMENT YEARS AND THE ONLY ISSUE CHALLENGED FROM THESE GROUNDS OF APPEAL IS LOWERING THE ESTIMATION OF NET PROFIT BY THE CIT(A). THE AS SESSEE HAS CHALLENGED THE VALIDITY OF ASSESSMENT ORDERS BY WAY OF GROUND NOS.1&2 AND ALSO ADDITIONAL GROUND FOR THE REASON THAT THE A.O. HAS PASSED ASSESSMENT ORDER WITHOUT FURNISHING SEIZED DOCUMENTS. THE A.O. HAS PASSED ASSESSMENT ORDER U/S 143(3) R.W.S. 153A/153C OF THE ACT, WHEREAS THE A.O. OUGHT TO HAVE PASSED THE ASSESSMENT ORDER U/S 144 R.W.S. 153A OF THE ACT. THE ASSESSEE FURTHER CHALLENGED THE ASSESS MENT ORDER ON THE GROUND THAT THE ADDITIONAL COMMISSIONER HAS ACCORDE D APPROVAL U/S 153D OF THE ACT TO THE ASSESSMENT ORDER WITHOUT GIV ING ASSESSEE AN OPPORTUNITY, WHICH VITIATED ASSESSMENT ORDER AND AL SO BAD IN LAW. BUT, DURING THE COURSE OF HEARING, THE LD. A.R. OF THE A SSESSEE SUBMITTED ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 19 THAT HE DID NOT PRESS GROUND NOS.1&2 AND ADDITIONAL GROUNDS, CHALLENGING THE VALIDITY OF ASSESSMENT PROCEEDINGS. THEREFORE, GROUND NOS.1&2 AND ADDITIONAL GROUNDS ARE DISMISSED AS NOT PRESSED FOR ALL THE ASSESSMENT YEARS. 16. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS ADDITIONS TO RETURNED INCOME, WHERE THE ASSESSMENTS ARE NOT PEND ING AS ON THE DATE OF SEARCH. THE ASSESSEE RAISED A COMMON GROUND FOR ALL THE ASSESSMENT YEARS, EXCEPT FOR THE ASSESSMENT YEAR 2008-09 AND A GITATED THE ADDITIONS MADE BY THE A.O. TO THE RETURNED INCOME, WHERE ASSESSMENTS ARE NOT PENDING AND THERE WAS NO SEIZED MATERIALS A ND ALSO IN THE CASES OF ABATED ASSESSMENTS WHERE NO SEIZED MATERIALS ARE AVAILABLE. THE LD. A.R. SUBMITTED THAT FOR THE ASSESSMENT YEAR 2004-05 , 2005-06 & 2007- 08, THE ASSESSMENTS FOR THOSE YEARS AS ON THE DATE OF SEARCH WAS NOT PENDING. THE ASSESSEE CASE WAS SUBJECT TO SEARCH O N 14.7.2009 AND AS ON THE DATE OF SEARCH, THE ASSESSMENT FOR THE ASSES SMENT YEAR 2004-05 TO 2007-08 ARE NOT PENDING AND THE TIME LIMIT FOR I SSUE OF NOTICE U/S 143(2) OF THE ACT HAS BEEN EXPIRED. THEREFORE, WHE N THE ASSESSMENTS ARE NOT PENDING, NO ADDITIONS CAN BE MADE FOR THE R ETURNED INCOME WITHOUT ANY SEIZED MATERIALS. THE DEPARTMENT COULD NOT FOUND ANY SEIZED DOCUMENTS TO SHOW THAT THERE IS UNACCOUNTED INCOME, ASSETS OR MONEY FOR THOSE ASSESSMENT YEARS. IN THE ABSENCE OF INCRIMINATING ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 20 DOCUMENTS, THE RETURN FILED BY THE ASSESSEE, WHICH IS NOT PENDING AS ON THE DATE OF SEARCH CANNOT BE TINKERED. THERE IS NO MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE SO AS TO ATTRACT T HE PROVISIONS OF SECTION 153A OF THE ACT AND MAKING ARBITRARY ADDITI ONS. THE LAW MANDATES THE A.O. TO MAKE ADDITIONS ONLY ON THE BAS IS OF MATERIAL FOUND DURING THE COURSE OF SEARCH. IN THE CASE OF ASSESS EE, THERE IS NO MATERIAL FOUND WARRANTING THE A.O. TO MAKE SUCH ARB ITRARY ADDITIONS BY ESTIMATING THE INCOME. 17. THE LD. A.R. FURTHER SUBMITTED THAT THOUGH THE AMENDED PROVISIONS OF NEW SEARCH ASSESSMENTS WARRANTS A.O. TO ASSESS OR REASSESS TOTAL INCOME OF THE ASSESSEE FOR A PERIOD OF SIX YEARS IMMEDIATELY PRECEDING THE YEAR IN WHICH SEARCH COND UCTED, IT IS MANDATORY ON THE PART OF THE A.O. TO REASSESS THE I NCOME OF COMPLETED ASSESSMENTS, ONLY ON THE BASIS OF MATERIAL FOUND DU RING THE COURSE OF SEARCH. UNLESS THERE IS A SEIZED MATERIALS, THE CO MPLETED ASSESSMENTS CANNOT BE DISTURBED. THE LD. A.R. FURTHER SUBMITTE D THAT THE LAW IS VERY CLEAR THAT IN THE CASES, WHERE THE RETURN OF INCOME HAS BEEN FILED BY THE ASSESSEE, WHETHER INTIMATION U/S 143(1) OF THE ACT OR ASSESSMENT U/S 143(3) OF THE ACT WAS PASSED OR NOT AND THE TIME LI MIT FOR ISSUE OF NOTICE U/S 143(2) OF THE ACT HAS BEEN EXPIRED, THEN THE A. O. LOSSES JURISDICTION TO VERIFY THE RETURN OF INCOME AS THE ASSESSMENT WA S NOT PENDING AND ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 21 HENCE, THERE WOULD BE NO ABATEMENT OF ANY PROCEEDIN GS. THEREFORE, THE A.O. WAS NOT CORRECT IN MAKING ADDITIONS TO THE RETURNED INCOME FOR THE ASSESSMENT YEAR 2004-05, 2005-06 & 2007-08 IN T HE ABSENCE OF ANY SEIZED MATERIALS. 18. THE LD. D.R. ON THE OTHER HAND, SUBMITTED THAT THE A.O. WAS CORRECT IN MAKING ADDITIONS TO THE RETURNED INCOME, AS THERE WAS A SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH W HICH INDICATES THE INFLATION OF LABOUR EXPENDITURE AND ALSO UNACCOUNTE D INVESTMENT IN PROPERTIES. THE LD. D.R. FURTHER SUBMITTED THAT IN THOSE ASSESSMENT YEARS WHICH ARE UNDER APPEAL, NO REGULAR SCRUTINY A SSESSMENT WAS MADE BEFORE THE DATE OF SEARCH. IT IS ALSO AN UNDISPUTE D FACT THAT THE ASSESSEE COULD NOT PRODUCE ANY BOOKS OF ACCOUNTS AN D SUPPORTING VOUCHERS FOR EXPENDITURE CLAIMED IN THE PROFIT & LO SS ACCOUNT. IT IS ALSO A FACT THAT IN THE COURSE OF SEARCH PROCEEDINGS, TH E DOCUMENTS FOUND REVEALS THAT THE ASSESSEE HAS INFLATED 10% LABOUR C HARGES FOR THE ASSESSMENT YEAR 2008-09 & 2009-10. THE LD. D.R. FU RTHER SUBMITTED THAT THE ASSESSEE HIMSELF HAS ADMITTED INFLATION OF LABOUR EXPENDITURE AND DISCLOSED ADDITIONAL INCOME AND FURTHER FOLLOWE D BY FURNISHING RETURN OF INCOME DECLARING HIGHER INCOME. THEREFOR E, THERE WAS A CLEAR UNDER STATEMENT OF INCOME FROM BUSINESS WHICH WAS I NVESTED IN THE FORM OF LANDED PROPERTY AND ALSO KEPT IN THE FORM O F UNACCOUNTED CASH ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 22 WHICH WAS SEIZED DURING THE COURSE OF SEARCH. HENC E, THE ASSESSEE CANNOT CLAIM THAT THERE WAS NO SEIZED MATERIAL SO A S TO REASSESS THE INCOME OF THOSE ASSESSMENT YEARS. THE LD. D.R. FURT HER SUBMITTED THAT SECTION 153A OF THE ACT IS A MANDATORY PROVISION, W HICH DOES NOT ALLOW ANY DISCRETION TO THE ASSESSING OFFICER. THE A.O., AFTER SEARCH HAS TO REOPEN THE ASSESSMENT OF ALL THE SIX YEARS AND FREE TO EXAMINE THE FACTS OF THE CASE FOR THE PURPOSE OF COMPUTING THE TRUE I NCOME OF THE ASSESSEE. IN ALL THOSE SIX YEARS, THERE IS NO SCRU TINY ASSESSMENT. THEREFORE, THE A.O. IS NOT FORCED TO CONFINE HIMSEL F TO THE MATERIAL FOUND IN THE COURSE OF SEARCH. IN THE ABSENCE OF APPLICA TION OF MIND ON THE ORIGINAL RETURNS, THE A.O. IS FREE TO EXAMINE THE F ACTS AFRESH. THEREFORE, REQUESTED TO UPHOLD THE ORDER OF THE CIT(A). 19. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE IS THAT THERE WAS A SEAR CH ACTION U/S 132 OF THE ACT. DURING THE COURSE OF SEARCH, INCRIMINATING DOCUMENTS FOUND REVEALS THAT THE ASSESSEE HAS INFLATED LABOUR CHARG ES FOR THE ASSESSMENT YEARS 2008-09 & 2009-10. BASED ON THE DOCUMENTS FO UND DURING SEARCH, THE ASSESSEE HAS ACCEPTED THAT HE HAS INFLA TED 10% LABOUR CHARGES AND WHICH IS COMMON IN THIS LINE OF BUSINES S. CONSEQUENT TO SEARCH ACTION U/S 132 OF THE ACT, THE ASSESSEE CASE HAS BEEN CENTRALIZED ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 23 AND ACCORDINGLY FRESH ASSESSMENT PROCEEDINGS HAVE B EEN INITIATED BY ISSUING NOTICE U/S 153A/153C OF THE ACT FOR THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR IN WHICH SEARCH WAS CONDUCTED. THE ASSESSEE HAS FILED REVISED RETURNS IN RESPONSE TO NOTICE U/S 153A OF THE ACT AND ADMITTED THE ADDITIONAL INC OME DISCLOSED DURING THE COURSE OF SEARCH. THE CASE HAS BEEN SELECTED F OR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE BOOKS OF ACCOUNTS AND RELEVANT BILLS & VOUC HERS IN SUPPORT OF EXPENDITURE CLAIMED. IN RESPONSE, THE ASSESSEE FIL ED WRITTEN SUBMISSION AND STATED THAT THE BOOKS OF ACCOUNTS ARE NOT AVAIL ABLE AND HENCE CANNOT BE FURNISHED. THEREFORE, THE A.O. ISSUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE NET PROFIT FROM THE BU SINESS SHALL NOT BE ESTIMATED. IN RESPONSE TO SHOW CAUSE NOTICE, THE A SSESSEE HAS FILED A WRITTEN REPLY AND CONTENDED THAT THE INCOME FOR THE ASSESSMENT YEAR 2004-05, 2005-06 AND 2007-08 CANNOT BE TINKERED WIT H, AS THERE WAS NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH FOR THE ABOVE ASSESSMENT YEARS AND AS SUCH NO ADDITIONS CAN BE MA DE TO THE RETURNED INCOME. IT IS FURTHER SUBMITTED THAT AS PER SEC. 1 53A OF THE ACT, DE- NOVO ASSESSMENT CAN BE MADE ONLY IN RESPECT OF THE ASSESSMENT YEAR FOR WHICH THE ASSESSMENT PROCEEDINGS HAD BEEN ABATE D AND THAT IN RESPECT OF ASSESSMENT YEARS FOR WHICH THE ASSESSMEN T HAD ALREADY BEEN ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 24 REACHED A FINALITY, SUCH ASSESSMENT COULD NOT BE MA DE U/S 153A OF THE ACT UNLESS THERE WAS SEIZED MATERIALS. 20. THE A.O. HAS PASSED REASSESSMENT ORDERS U/S 153 A/153C OF THE ACT FOR ALL THE SIX ASSESSMENT YEARS IMMEDIATELY PR ECEDING THE YEAR IN WHICH SEARCH WAS CONDUCTED. ACCORDING TO THE A.O., AS PER THE PROVISIONS OF SECTION 153A OF THE ACT, THERE IS NO LIMITATION OR RESTRICTION PROVIDED IN THE NEW PROCEDURE OF SEARCH ASSESSMENTS ON THE POWERS OF A.O. FOR MAKING ASSESSMENT/REASSESSMENT AND THE A.O . IS NOT REQUIRED TO CONFINE HIS ASSESSMENTS ON THE MATERIAL FOUND DU RING THE COURSE OF SEARCH AS WAS THE CASE IN THE OLD PROCEDURE OF BLOC K ASSESSMENTS. THE NEW PROCEDURE OF BLOCK ASSESSMENT WAS EXPLAINED BY WAY OF PROVISIONS OF SECTION 153A OF THE ACT. AS PER SECTION 153A OF THE ACT, THE A.O. SHALL ASSESS OR REASSESS THE TOTAL INCOME OF THE SP ECIFIED SIX ASSESSMENT YEARS IRRESPECTIVE OF THE FACT THAT THE ASSESSMENT OF THE SAID YEARS WERE COMPLETED OR PENDING AS ON THE DATE OF SEARCH. THE REFORE, THE A.O. HAS REASSESSED THE INCOME OF SIX ASSESSMENT YEARS AND R ECOMPUTED THE PROFITS AFRESH AFTER CONSIDERING THE RELEVANT FACTS AVAILABLE ON RECORD. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE A.O. CA NNOT DISTURB THE COMPLETED ASSESSMENTS UNLESS THERE WAS A SEIZED MAT ERIAL. THE ASSESSEE FURTHER CONTENDED THAT WHERE ASSESSMENTS A RE NOT PENDING AS ON THE DATE OF SEARCH AND TIME LIMIT FOR ISSUE OF N OTICES U/S 143(2) OF ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 25 THE ACT HAS BEEN EXPIRED, IRRESPECTIVE OF THE FACT THAT THOSE ASSESSMENTS HAVE BEEN COMPLETED U/S 143(1) OR 143(3) OF THE ACT , THEN THE A.O. HAS NO POWER TO REASSESS THE INCOME OF THOSE COMPLETED ASSESSMENT YEARS. 21. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE F OR THE REASON THAT THE ISSUE NO LONGER RES INTEGRA, AS THE ISSUE HAS B EEN ALREADY DECIDED BY THE ITAT, SPECIAL BENCH AND HELD THAT WHERE THE ASS ESSMENTS ARE NOT PENDING AS ON THE DATE OF SEARCH, THE A.O. LOSSES J URISDICTION U/S 153A OF THE ACT TO REASSESS THE INCOME OF THOSE COMPLETE D ASSESSMENTS. THOUGH THE PROVISIONS OF SECTION 153A OF THE ACT DO ES NOT SPECIFY ABATED AND COMPLETED ASSESSMENTS, THE NATURAL MEANI NG ASSIGNED TO IT SHOULD BE GIVEN TO INTERPRET THE PROVISIONS IN SUCH A WAY THAT WHICH SHALL NOT CAUSE UNDUE HARDSHIP TO THE TAX PAYERS. T HE PROVISIONS OF SECTION 153A OF THE ACT EXPLAINED THE PROCEDURE OF ASSESSMENTS, ABATED ASSESSMENTS AND THE MANNER IN WHICH THE ASSESSMENT SHOULD BE FRAMED, WHICH WAS FURTHER SUPPORTED BY CIRCULAR NO. 7 OF 2003 ISSUED BY THE CBDT. WHEN THE LAW HAS EXPLAINED THE POSITION O F ABATED ASSESSMENTS, THEN THE SAME WAY THE COMPLETED ASSESS MENT SHOULD BE TREATED SO AS TO UNDERSTAND THAT THOSE ASSESSMENTS ARE REACHED FINALITY AND WHICH CANNOT BE TINKERED WITH UNLESS THERE WAS A SEIZED DOCUMENT. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT WH ERE SEARCH IS INITIATED, ALL PENDING ASSESSMENTS ARE MERGE INTO O NE AND ONLY ONE ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 26 ASSESSMENT FOR EACH ASSESSMENT YEAR SHALL BE MADE S EPARATELY ON THE BASIS OF FINDINGS OF SEARCH AND OTHER MATERIAL EXIS TING OR BROUGHT ON RECORD BY THE A.O. IN RESPECT OF NON ABATED OR COM PLETED ASSESSMENTS, THE ASSESSMENT WILL BE MADE ON THE BASIS OF BOOKS O F ACCOUNTS OR OTHER RELEVANT DOCUMENTS FOUND DURING THE COURSE OF SEARC H, BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT. 22. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE DOCUMENT AVAILABLE ON RECORD, WE FIND THAT THE ASSESSMENT FOR THE ASSE SSMENT YEAR 2004-05 TO 2007-08 WERE NOT PENDING AS ON THE DATE OF SEARC H. THE FACT THAT THE ASSESSMENT HAS BEEN COMPLETED U/S 143(1) & 143( 3) OF THE ACT ARE NOT MATERIAL. THE TIME LIMIT FOR ISSUE OF NOTICE U/ S 143(2) OF THE ACT HAS BEEN EXPIRED. ON FURTHER VERIFICATION OF THE DOCUME NTS AVAILABLE ON RECORD, WE FIND THAT THERE WAS NO INCRIMINATING DOC UMENTS FOUND DURING THE COURSE OF SEARCH IN RESPECT OF ASSESSMENT YEAR 2004-05 TO 2007-08. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS NOT CORRECT IN REASSESSING THE TOTAL INCOME OF THE ASSESSMENT YEAR 2004-05 TO 2007-08 IN THE ABSENCE OF ANY SEIZED MATERIALS. ACCORDINGL Y, WE DIRECT THE A.O. TO DELETE THE ADDITIONS MADE FOR THE ASSESSMENT YEA R 2004-05, 2005-06 & 2007-08. 23. IT IS PERTINENT TO DISCUSS HEREIN THE CASE LAWS RELIED UPON BY THE ASSESSEE. THE ASSESSEE HAS RELIED UPON THE ITAT, S PECIAL BENCH ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 27 DECISION IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT (2012) 137 ITD 287. THE COORDINATE BENCH OF THIS TRIBUNAL , WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE HELD AS UNDER: IN ASSESSMENTS THAT ARE ABATED, THE AO ARETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON HIM U/S 153A F OR WHICH ASSESSMENTS SHALL BE MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY. IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS ALREADY B EEN ASSESSED, THE ASSESSMENT U/S 153A WILL BE MADE ON THE BASIS OF IN CRIMINATING MATERIAL, WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS (I) BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT, AND (II) UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. 24. THE ASSESSEE RELIED UPON, A.P. HIGH COURT DECIS ION IN THE CASE OF CIT VS. M/S. AMR INDIA LTD. IN ITTA NO.354 OF 2014 DATED 12.6.2014. THE HONBLE HIGH COURT HELD THAT THE A.O. HAS NO JU RISDICTION TO RE- AGITATE THE ASSESSMENTS WHICH WERE ALREADY COMPLETE D AND SUBSIDING. THE RELEVANT PORTION IS EXTRACTED BELOW: WE HAVE HEARD SRI J.V. PRASAD, LEARNED COUNSEL FOR THE APPELLANT, AND GONE THROUGH THE IMPUGNED JUDGEMENT AND ORDER OF TH E LEARNED TRIBUNAL. IT APPEARS THAT THE LEARNED TRIBUNAL FOUND ON FACT T HAT AFTER COMPLETION OF ASSESSMENT PROCEEDINGS AND AFTER REACHING FINALITY THEREON, THE ASSESSING OFFICER TRIED TO REAGITATE THE ASSESSMENTS. ACCORD ING TO US, THE LEARNED TRIBUNAL HAS RIGHTLY HELD THAT THE ASSESSING OFFICE R HAS NO JURISDICTION TO REAGITATE THE ASSESSMENTS WHICH WERE ALREADY COMPLE TED AND SUBSISTING. WE THEREFORE DO NOT FIND ANY ELEMENT OF LAW TO BE D ECIDED IN THIS APPEAL. HENCE, THE APPEAL IS DISMISSED. THERE WILL BE NO O RDER AS TO COSTS. 25. THE ASSESSEE HAS RELIED UPON THE COORDINATE BEN CH DECISION OF ITAT, VISAKHAPATNAM IN THE CASE OF A.T. RAYUDU IN I TA NO.373 TO 379/VIZAG/2014. THE COORDINATE BENCH, UNDER SIMILAR CIRCUMSTANCES HELD ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 28 THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: 22. IN THIS REGARD, IT IS ALSO PERTINENT TO REFER TO THE FOLLOWING OBSERVATIONS MADE BY THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD (SUPRA):- 57 (F) IN THE CASE OF PARASHURAM POTTERY WORKS CO. LTD VS. ITO (106 JTR 57)(SC), IT HAS BEEN MENTIONED IN THE LAST PARAGRAPH OF THE JUDGMENT THAT THE COURT HAS TO BEAR IN MIND THAT THE POLICY OF LAW IS THAT THERE M UST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTI VATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SE T AT REST JUDICIAL AND QUASI JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. OUR DECISION IS IN CONSONANCE WITH THIS OBSERVATION. THE DECISION RENDERED BY THE SPECIAL BENCH THAT THE ASSESSING OFFICER CAN MAKE ADDITIONS IN THE CASE OF CONCLUDED ASSESSMENTS ON T HE BASIS OF INCRIMINATING MATERIALS IS ALSO BASED UPON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF PARASHURAM POTTERY WORKS CO. LTD (SUPRA). 23. WE HAVE EARLIER NOTICED THAT THE HON'BLE JURIS DICTIONAL ANDHRA PRADESH HIGH COURT HAS ALSO UPHELD BY THE ORDERS PASSED BY THE TRIBUNAL BY FOLLOWING THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD (SUPRA) IN THE FOLLOWING CASES: - (A) SREE LALITHA CONSTRUCTIONS (J1TA NO 368 OF 2014) (B) M/S. HYDERABAD HOUSE PVT LTD (ITTA NO.266 OF 2 013) (C)M/S. AMR INDIA LTD (FITA NO.357 /V/2014) FURTHER WE AGREE WITH THE CONTENTIONS OF THE ASSESS EE THAT THE DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GOP AL DAS BHADRUKA (SUPRA) HAVE BEEN RENDERED ON THE FACTS PREVAILING IN THOSE CASE S, SINCE THE ISSUE RELATING TO CONCLUDED ASSESSMENTS AND PENDING ASSESSMENTS WAS N OT BEFORE THE I1ON'BLE ANDHRA PRADESH HIGH COURT ON THE CONTRARY, THE ABOV E SAID THREE DECISIONS OF THE JURISDICTIONAL HIGH COURT COMES TO THE SUPPORT OF T HE ASSESSEE'S CONTENTIONS WITH REGARD TO THE LEGAL PROPOSITION AGITATED BEFORE US, BESIDES THE DECISIONS RENDERED BY VARIOUS OTHER HIGH COURTS. ACCORDINGLY, WE ARE O F THE VIEW THAT THE SCOPE OF ENQUIRY IN THE CASE OF UNABATED ASSESSMENTS, I.E., THE ASSESSMENT YEARS IN WHICH PROCEEDINGS ARE NOT PENDING, IS THAT THE UNDISCLOSE D INCOME SHOULD BE ASCERTAINED ONLY ON THE BASIS OF MATERIALS FOUND DURING THE COU RSE OF SEARCH. IF NO INCRIMINATING MATERIAL SHOWING ANY UNDISCLOSED INCOME WAS FOUND I N THE CASE OF CONCLUDED PROCEEDINGS, THEN THE QUESTION OF MAKING ANY ADDITI ON DOES NOT ARISE. IN THAT CASE, THE ASSESSING OFFICER SHOULD COMPLETE THE ASSESSMEN T OF THOSE YEARS BY DETERMINING THE VERY SAME TOTAL INCOME THAT WAS ASS ESSED IN THE EARLIER PROCEEDING. ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 29 24. IN VIEW OF THE ABOVE, WE ARE UNABLE TO AGREE W ITH THE CONTENTIONS OF LD STANDING COUNSEL THAT THE ASSESSING OFFICER WOULD G ET UNFETTERED POWERS IN THE CASE OF UNABATED ASSESSMENTS, ONCE THEY WERE REOPEN ED US 153A OF THE ACT. IN OUR VIEW, IN THE CASE OF UNABATED ASSESSMENTS, THE TOTAL INCOME SHOULD BE DETERMINED BY THE ASSESSING OFFICER BY COMBINING TH E INCOME ALREADY ASSESSED/DISCLOSED IN THE RETURN OF INCOME AND THE UNDISCLOSED INCOME, IF ANY, FOUND DURING THE COURSE OF SEARCH PROCEEDING. EVEN OTHERWISE, IT IS SETTLED PROPOSITION OF LAW THAT THE ASSESSEE IS ENTITLED TO TAKE SUPPORT OF THE DECISION IN HIS FAVOUR, WHEN TWO CONTRADICTORY VIEWS HAVE BEEN EXPRESSED BY THE HIGH COURTS. IN THE INSTANT CASE THE HONBLE JURISDICTIO NAL HIGH COURT COMES TO THE SUPPORT OF THE ASSESSEE IN RESPECT OF THE LEGAL PRO POSITION IN ADDITION TO THE DECISION RENDERED BY THE HON'BLE BOMBAY HIGH COURT. ACCORDINGLY, WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE ON THE LEGAL ISS UE. 26. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N IN THE CASE OF ALL CARGO LOGISTICS PVT. LTD. (SUPRA), WE ARE OF THE OP INION THAT THE A.O. HAS MADE REASSESSMENT U/S 153A/153C OF THE ACT ON THE B ASIS OF INFORMATION/MATERIAL AVAILABLE IN THE RETURN OF INC OME, WITHOUT REFERRING TO ANY SEIZED MATERIAL. THEREFORE, FOLLOWING THE S PECIAL BENCH DECISION (SUPRA) WE HOLD THAT THE A.O. HAD NO JURISDICTION T O MAKE ADDITIONS U/S 153A OF THE ACT FOR THE ASSESSMENTS WHICH ARE NOT P ENDING AS ON THE DATE OF SEARCH. IN THIS CASE, THE SEARCH WAS CONDU CTED ON 14.7.2009. THE ASSESSMENT FOR THE ASSESSMENT YEARS 2004-05 TO 2007-08, WERE NOT PENDING AS ON THE DATE OF SEARCH. THE TIME LIMIT F OR ISSUE OF NOTICE UNDER SEC. 143(2) HAS BEEN EXPIRED. THEREFORE, THE A.O. HAS NO JURISDICTION TO REASSESS THE INCOME FOR THE ASSESSM ENT YEAR 2004-05 TO 2007-08 IN THE ABSENCE OF ANY INCRIMINATING MATERIA LS. HENCE, WE DELETE THE ADDITIONS MADE BY THE A.O. FOR THE ASSES SMENT YEAR 2004-05, 2005-06 & 2007-08. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 30 27. THE NEXT ISSUE, CAME UP FOR OUR CONSIDERATION I S ESTIMATION OF NET PROFIT FROM THE BUSINESS. THE LD. A.R. SUBMITTED T HAT THE A.O. IS NOT CORRECT IN ESTIMATING THE INCOME AT A VERY HIGH PER CENTAGE OF 10% ON TRADING BUSINESS OF MACHINERY SPARE PARTS AND 15% O N CONTRACT RECEIPTS WITHOUT DISCLOSING THE BASIS FOR ADOPTING SUCH RATE OF NET PROFIT. THE LD. A.R. FURTHER SUBMITTED THAT THE A.O. HAS ESTIMATED THE INCOME BY APPLYING THE NET PROFIT RATE WITHOUT BRINGING ANY C OMPARABLE CASES AND ALSO WITHOUT ANY BASIS. THE ASSESSEE IS INTO THE B USINESS OF TRADING IN MACHINERY SPARE PARTS, WHEREIN THE NET PROFIT MARGI N IS BETWEEN 5 TO 6%. SIMILARLY, THE NET PROFIT MARGIN IN THE CASE O F EXECUTION OF WORK CONTRACT IS 7% TO 8% WHICH IS EVIDENT FROM THE FINA NCIAL STATEMENTS FILED FOR THE PREVIOUS YEARS. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAD ADMITTED ADDITIONAL INCOME DURING THE COURSE OF SEA RCH AND FILED RETURN OF INCOME. HOWEVER, IN THE RAREST OF RARE CASE, TH E DEPARTMENT HAS RETRACTED THE STATEMENT RECORDED U/S 132(4) OF THE ACT AND ESTIMATED THE INCOME BY REJECTING THE EXPLANATIONS OFFERED BY THE ASSESSEE. THE LD. A.R. FURTHER SUBMITTED THAT THE A.O. HAS TOTALL Y IGNORED THE FACT THAT THE ASSESSEE HAS GIVEN SUB CONTRACT WORKS TO VARIOU S OTHER CONTRACTORS WHICH RUNS INTO SEVERAL CRORES OF RUPEES. IT IS QU ITE COMMON THAT THE NET PROFIT MARGIN IN THE SUB CONTRACT WORKS IS 4% T O 6%. INSPITE OF EXPLAINING THE FACTS BEFORE THE A.O., HE HAS ADOPTE D UNIFORM 15% NET ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 31 PROFIT ON TOTAL CONTRACT RECEIPTS WHICH IS QUITE HI GH. THEREFORE, THE A.O. HAS COMPLETELY ERRED IN ADOPTING 15% NET PROFIT FOR ALL THE YEARS IGNORING THE FACTS OF THE CASE. THE A.R. FURTHER S UBMITTED THAT ONCE THE ASSESSEE HAS GIVEN A STATEMENT U/S 132(4) OF THE AC T AND ADMITTED THE ADDITIONAL INCOME OFFERED DURING THE COURSE OF SEAR CH AND PAID THE TAXES, THE DEPARTMENT OUGHT TO HAVE ACCEPTED THE AD DITIONAL INCOME DECLARED BY THE ASSESSEE. INSTEAD, THE A.O. ESTIMA TED THE NET PROFIT BY STATING THAT THE BOOKS OF ACCOUNTS ARE NOT PRODUCED . THE LD. A.R. FURTHER SUBMITTED THAT IF THE ABOVE ARGUMENTS ARE N OT ACCEPTED, ALTERNATIVELY THE NET PROFIT FROM THE BUSINESS SHOU LD BE ESTIMATED @ 8% ON THE TOTAL TURNOVER. THE LD. A.R. FURTHER SUBMIT TED THAT THE ITAT, CHANDIGARH BENCH IN THE CASE OF SRI ASHOK KUMAR VS. ITO IN ITA NO.340/CHD/2014, UNDER SIMILAR CIRCUMSTANCES ESTIMA TED THE NET PROFIT AT 8%, THEREFORE REQUESTED TO SCALE DOWN THE ESTIMA TION OF NET PROFIT FROM 12.3% TO 8%. 28. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT THE CIT(A) WAS ERRED IN SCALED DOWN THE ESTIMATION OF NET PROFIT F ROM 15% TO 12.3%, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COU LD NOT PRODUCE ANY BOOKS OF ACCOUNTS AND OTHER RELEVANT DOCUMENTS AT T HE TIME OF ASSESSMENT. THE LD. D.R. FURTHER SUBMITTED THAT IT IS AN UNDISPUTED FACT THAT THE SEIZED MATERIALS FOUND DURING THE COURSE O F SEARCH REVEALS THAT ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 32 THE ASSESSEE HAS INFLATED LABOUR PAYMENTS. IT IS A LSO AN UNDISPUTED FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY BOOKS OF ACC OUNTS TO SUBSTANTIATE THE FINANCIAL RESULTS DECLARED IN THE RETURN OF INCOME. UNDER THESE CIRCUMSTANCES, THE A.O. HAS LEFT WITH N O OPTION BUT, TO ESTIMATE NET PROFIT. THE LD. D.R. FURTHER ARGUED T HAT THE LD. CIT (A) WAS ERRED IN CONSIDERING THE NET PROFIT DECLARED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 AS THE BASIS FOR ESTIMATION FOR OTHER YEARS. THE CIT(A) IGNORED THE BASIC FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY BOOKS OF ACCOUNTS FOR ANY ASSESSMENT YEARS. WH EN THE BOOKS OF ACCOUNTS ARE NOT PRODUCED AND EXPENDITURE IS NOT SU BSTANTIATED WITH ANY DOCUMENTARY EVIDENCE, THE BOOK RESULTS DECLARED BY THE ASSESSEE CANNOT BE ACCEPTED. THEREFORE, THE CIT(A) WAS COMP LETELY ERRED IN ADOPTING THE NET PROFIT OF THE ASSESSEE FOR THE EAR LIER ASSESSMENT YEAR TO ESTIMATE THE NET PROFIT FOR ALL THE ASSESSMENT YEAR S. IT WAS FURTHER SUBMITTED THAT WHEN SPECIFICALLY ASKED BY THE A.O., THE ASSESSEE COULD NOT PRODUCE ANY COMPARABLE CASES TO SUPPORT HIS ARG UMENTS. THE A.O. ON THE OTHER HAND, RELIED UPON VARIOUS COMPARABLE C ASES, WHEREIN HE FOUND THAT UNDER SIMILAR CASES, THE ASSESSEES HAVE DISCLOSED NET PROFIT OF 15% TO 26%. THE A.O. AFTER CONSIDERING THE SIMI LAR COMPARABLE CASES HAS ADOPTED MINIMUM NET PROFIT OF 15% AND APP LIED TO THE ASSESSEES CASE. THEREFORE, THE A.O. ORDER SHOULD BE UPHELD. ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 33 29. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. ESTIMATED NET PROFIT OF 10% ON TRADING TURNOVE R AND 15% ON CONTRACT RECEIPTS. THE A.O. WAS OF THE OPINION THA T THE ASSESSEE COULD NOT PRODUCED ANY BOOKS OF ACCOUNTS AND BILLS & VOUC HERS IN SUPPORT OF FINANCIAL RESULTS, THEREFORE, HELD THAT THE FINANCI AL RESULTS DECLARED BY THE ASSESSEE CANNOT BE ACCEPTED. THE A.O. FURTHER HELD THAT THE SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH REVEALS THAT THE ASSESSEE HAS INFLATED LABOUR CHARGES. IT WAS FURTHER OBSERVED T HAT THE ASSESSEE HIMSELF HAS ADMITTED THE INFLATION DURING THE COURS E OF SEARCH. THEREFORE, IT IS OBVIOUS THAT THIS PRACTICE OF INFL ATION OF EXPENDITURE PERSIST FOR OTHER EXPENDITURE FOR ALL THE ASSESSMEN T YEARS. CONSIDERING THE INABILITY OF THE ASSESSEE TO FURNISH BOOKS OF A CCOUNTS AND VOUCHERS, IT WAS OPINED THAT THE BOOK RESULTS DECLARED BY THE ASSESSEE CANNOT BE RELIED UPON ACCORDINGLY, ESTIMATED THE NET PROFIT O F 10% ON TRADING RECEIPTS AND 15% ON CONTRACT RECEIPTS. IT WAS THE C ONTENTION OF THE ASSESSEE THAT THE NET PROFIT ESTIMATED BY THE A.O. IS ARBITRARY AND QUITE OPPOSITE TO THE FACTS OF THE CASE. THE ASSESSEE FU RTHER CONTENDED THAT THE NET PROFIT IN THIS LINE OF BUSINESS IS 7% TO 8% WHICH IS EVIDENT FROM THE PAST HISTORY OF ASSESSEE, THEREFORE, THE A.O. W AS NOT CORRECT IN ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 34 ESTIMATING THE UNIFORM NET PROFIT RATE OF 10% AND 1 5% RESPECTIVELY FOR ALL THE ASSESSMENT YEARS. 30. THE A.O. HAS ESTIMATED NET PROFIT OF 10% ON TRA DING RECEIPTS AND 15% ON CONTRACT RECEIPTS, HOWEVER FAILED TO DISCLOS E THE BASIS ON WHICH SUCH ESTIMATION WAS MADE. THE ASSESSEE CONTENDED T HAT THE NET PROFIT ESTIMATED BY THE A.O. IS QUITE HIGH, BUT FAILED TO FURNISH ANY COMPARABLE CASES TO JUSTIFY HIS CASE. IT IS AN ADMITTED FACT THAT THE ASSESSEE COULD NOT PRODUCE BOOKS OF ACCOUNTS AND OTHER RELEVANT DO CUMENTS. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS INFLATED THE LABOUR EXPENDITURE, WHICH WAS ADMITTED BY THE ASSESSEE AND FURTHER FOLL OWED BY FILING THE RETURN OF INCOME. ESTIMATION IS POSSIBLE IN ASSESSM ENTS. THERE IS NO HARD AND FAST RULE FOR ESTIMATION OF INCOME, HOWEVER, TH ERE SHOULD BE A BASIS FOR ESTIMATION OF INCOME EITHER BY COMPARABLE CASES OR ASSESSEES OWN PAST RESULTS. IN THE PRESENT CASE ON HAND, BOTH THE PARTIES FAILED TO SUBSTANTIATE THEIR STAND BY BRINGING ON RECORD ANY COMPARABLE CASES. THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING THE WORKING OF NET PROFIT DECLARED IN THE ORIGINAL RETURN OF INCOME FILED U/S 139(1) OF THE ACT AND REVISED RETURN OF INCOME FILED U/S 153A/153C OF THE ACT. ON PERUSAL OF WORKING RESULTS FILED BY THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS DECLARED A NET PROFIT OF 7.43% TO 8.56% IN THE ORIG INAL RETURN OF INCOME. THE ASSESSEE HAS FILED REVISED RETURN U/S 153A OF T HE ACT DISCLOSING ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 35 ADDITIONAL INCOME DECLARED DURING THE COURSE OF SEA RCH TOWARDS INFLATION OF LABOUR CHARGES. THE NET PROFIT DECLARED BY THE ASSESSEE AS PER THE REVISED RETURNS WORKS OUT TO 11.36% TO 11.45% FOR T HE ASSESSMENT YEARS 2008-09 TO 2009-10. THE FINANCIAL RESULTS OF ASSESSMENT YEAR 2010-11 CANNOT BE COMPARED FOR THE REASON THAT THE ADDITIONAL INCOME WAS APPLIED ON ESTIMATION BASIS. DURING THE COURSE OF SEARCH PROCEEDINGS, WHICH WAS HELD ON 14.7.2009, THE ASSES SEE HAS OFFERED AN ADDITIONAL INCOME OF RS.1.5 CRORES TOWARDS INFLATED LABOUR CHARGES ON THE ASSUMPTION THAT HIS ESTIMATED TURNOVER WOULD BE AROUND RS.40 CRORES. HOWEVER, AT THE END OF THE FINANCIAL YEAR, THE ASSESSEE COULD ACHIEVE THE TURNOVER OF RS.25.75 CRORES ONLY. THERE FORE, THE ASSESSEE HAS CONTENDED THAT THOUGH HE HAS ADMITTED ADDITIONA L INCOME OF RS.1.5 CRORES AND FILED THE RETURN, THE NET PROFIT PERCENT AGE OF ASSESSMENT YEAR 2010-11 CANNOT BE COMPARED, AS THERE WAS A DIFFEREN CE IN ESTIMATED TURNOVER AND ACTUAL TURNOVER ACHIEVED DURING THE RE LEVANT FINANCIAL YEAR. THEREFORE, WE ARE OF THE OPINION THAT THE FINANCIAL RESULTS FOR THE ASSESSMENT YEAR 2010-11 CANNOT BE A BASIS FOR ESTIM ATION OF NET PROFIT FOR THE PREVIOUS ASSESSMENT YEARS. 31. THE ASSESSEE HAS DECLARED A NET PROFIT OF 12.3% FOR THE ASSESSMENT YEAR 2006-07. IT WAS THE CONTENTION OF T HE ASSESSEE THAT DURING THE ASSESSMENT YEAR 2006-07, THERE WAS INFLA TION OF 10% LABOUR ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 36 CHARGES. DURING THE COURSE OF SURVEY PROCEEDINGS, T HE ASSESSEE HAS ACCEPTED THE INFLATION OF LABOUR CHARGES AND ADMITT ED ADDITIONAL INCOME AND FILED THE RETURNS. THE CIT(A) HAS GIVEN HIS FIN DINGS THAT THE ASSESSEE HAS ADMITTED 12.3% NET PROFIT FOR THE ASSE SSMENT YEAR 2006- 07 AND BASED ON ASSESSEES OWN NET PROFIT FOR THE A SSESSMENT YEAR 2006-07, THE NET PROFIT ESTIMATED BY THE A.O. FOR T HE ASSESSMENT YEAR 2004-05 TO 2009-10 HAS BEEN REDUCED TO 12.3%. THE ASSESSEE HAS ACCEPTED THE ESTIMATION OF 12.3% NET PROFIT FOR THE ASSESSMENT YEAR 2006-07 BY STATING THAT THERE WAS A SURVEY OPERATIO N AND DURING THE COURSE OF SURVEY, HE HAS ACCEPTED THE ADDITIONAL IN COME. BASED ON SUCH FINDINGS, THE CIT(A) HELD THAT IT WOULD MEET THE EN DS OF JUSTICE TO ESTIMATE THE NET PROFIT OF 12.3% FOR ALL THE ASSESS MENT YEARS. THE ASSESSEE REQUESTED FOR 8% NET PROFIT ON TOTAL TURNO VER. IN SUPPORT OF HIS ARGUMENTS, RELIED UPON COORDINATE BENCH DECISIO N OF ITAT, CHANDIGARH BENCH IN THE CASE OF ASHOK KUMAR (SUPRA) . THOUGH, THE COORDINATE BENCH HELD THAT 8% NET PROFIT IS JUSTIFI ED, THE FACTS OF THE CASE ARE DIFFERENT. IN THE CASE BEFORE ITAT, CHANDI GARH THE ASSESSEE HAS REPORTED NET PROFIT OF 3.17%. IN THE PRESENT CA SE ON HAND, THE ASSESSEE HIMSELF HAS ADMITTED A NET PROFIT OF 11.36 % TO 11.47%. THEREFORE, CONSIDERING THE OVERALL FACTS AND CIRCUM STANCES OF THIS CASE, WE ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY E STIMATED THE NET PROFIT ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 37 OF 10% IN RESPECT OF TRADING BUSINESS AND 12.3% IN RESPECT OF CONTRACT RECEIPTS BY TAKING INTO ACCOUNT THE NET PROFIT DECL ARED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07. WE DO NOT SEE ANY ERROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A) AS FAR AS ESTIMAT ION OF NET PROFIT FOR ASSESSMENT YEAR 2008-09 AND 2009-10. HENCE, WE INCL INED TO UPHOLD THE ORDER OF THE CIT(A) AND REJECTED THE GROUND RAI SED BY THE ASSESSEE AS WELL AS REVENUE FOR THE ASSESSMENT YEAR 2008-09 & 2009-10. 32. COMING TO THE ASSESSMENT YEAR 2010-11. THE ASSE SSEE HAS DECLARED ADDITIONAL INCOME OF RS.1.5 CRORES TOWARDS INFLATION OF LABOUR CHARGES AT THE TIME OF SEARCH. DURING THE COURSE O F SEARCH PROCEEDINGS, WHILE RECORDING THE STATEMENT U/S 132(4) OF THE ACT , THE ASSESSEE HAS STATED THAT HE HAS EXPECTED A TURNOVER OF RS.40 CRO RES FOR THE ASSESSMENT YEAR 2010-11, BASED ON SUCH ESTIMATION A DMITTED ADDITIONAL INCOME OF RS.1.5 CRORES. HOWEVER, AT THE END OF TH E YEAR, THE ASSESSEE COULD ACHIEVE THE TURNOVER OF RS.25.75 CRORES ONLY. THEREFORE, THE ASSESSEE CONTENDED THAT THOUGH IT HAD ADMITTED ADDI TIONAL INCOME OF RS.1.5 CRORES, BECAUSE OF SUBSTANTIAL DIFFERENCE IN TURNOVER WHICH IS THE BASIS OF OFFERING ADDITIONAL INCOME, THE PROPORTION ATE ADDITIONAL INCOME SHOULD BE DELETED. THE CIT(A) HELD THAT THOUGH THER E IS A MERIT IN THE CONTENTION OF ASSESSEE THAT THERE IS A SUBSTANTIAL REDUCTION IN THE TURNOVER FOR THE RELEVANT ASSESSMENT YEAR, THE PROP ORTIONATE ADDITIONAL ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 38 INCOME TOWARDS INFLATED LABOUR CHARGES SHOULD BE DE LETED, THE FACT THAT THE ASSESSEE HAS CONSCIOUSLY ADMITTED THE ADDITIONA L INCOME DURING THE COURSE OF SEARCH CANNOT BE IGNORED. THEREFORE, THE CIT(A) HELD THAT THE ASSESSING OFFICER IS NOT CORRECT IN ESTIMATING THE NET PROFIT OF 15%. ON OVER ALL APPRECIATION OF FACTS, SUCH AS DISCLOSURE OF ADDITIONAL INCOME ON ESTIMATE BASIS, ACTUAL TURNOVER ACHIEVED BY THE ASS ESSEE, THE DISCLOSURE MADE BY THE ASSESSEE IS QUITE REASONABLE AND DO NOT REQUIRE ANY INTERFERENCE. THEREFORE, THE ACTION OF THE A.O. IN ESTIMATING THE 15% ON THE TOTAL TURNOVER IS REJECTED AND BUSINESS PROFIT ADMITTED BY THE ASSESSEE ARE DIRECTED TO BE ACCEPTED. THE FACTS REM AINS BEFORE US. THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCES TO PROVE THAT THE FINDINGS OF THE FACT RECORDED BY THE CIT(A) IS INCO RRECT. THE CIT(A) AFTER CONSIDERING THE RELEVANT FACTS HAS DIRECTED THE A.O . TO ACCEPT THE RETURN FILED BY THE ASSESSEE. WE DO NOT SEE ANY ERROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A). HENCE, WE INCLINED TO UPHOLD THE ORDER PASSED BY THE CIT(A) FOR THE ASSESSMENT YEAR 2010-11 AND REJE CT THE GROUND RAISED BY THE ASSESSEE AS WELL AS REVENUE. 33. THE NEXT ISSUE CAME FOR OUR CONSIDERATION IS SE PARATE ADDITIONS TOWARDS INTEREST INCOME, MISCELLANEOUS RECEIPTS AND FOREIGN EXCHANGE GAINS ETC. THE LD. A.R. SUBMITTED THAT THE A.O. WAS ERRED IN MAKING SEPARATE ADDITIONS TOWARDS INCOME FROM OTHER SOURCE S, BEING INTEREST ON ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 39 FIXED DEPOSITS, MISCELLANEOUS RECEIPTS AND FOREIGN EXCHANGE GAINS. THE LD. A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS KE PT FIXED DEPOSITS IN BANK FOR THE PURPOSE OF OBTAINING BANK GUARANTEE TO BE GIVEN TO THE PRINCIPALS FOR OBTAINING THE CONTRACTS. THEREFORE , THE INTEREST EARNED FROM THE FIXED DEPOSITS SHOULD BE ASSESSED AS BUSIN ESS RECEIPTS FOR THE PURPOSE OF ESTIMATION OF NET PROFIT. WHEN THE A.O. HAS ESTIMATED THE NET PROFIT ON GROSS RECEIPTS, SEPARATE ADDITIONS TO WARDS INCOME FROM OTHER SOURCES BEING INTEREST ON FIXED DEPOSITS IS N OT CORRECT. THE LD. A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS EARNED FOREIGN EXCHANGE GAIN TOWARDS FLUCTUATION IN FOREIGN CURRENCY IN THE COURSE OF IMPORT OF MACHINERY SPARE PARTS. THESE RECEIPTS ARE ESSENTIA LLY A PART OF BUSINESS RECEIPTS. UNLESS, GOODS ARE IMPORTED, HE WOULD NOT HAVE EARNED THE FOREIGN EXCHANGE GAINS. THEREFORE, THE A.O. SHOULD HAVE TREATED THE FOREIGN EXCHANGE GAIN AS PART OF BUSINESS FOR THE P URPOSE OF ESTIMATION OF NET PROFIT. 34. THE LD. D.R. ON THE OTHER HAND STRONGLY SUPPORT ED THE ORDER OF THE CIT(A). THE LD. D.R. FURTHER SUBMITTED THAT TH OUGH, ASSESSEE KEPT THE FIXED DEPOSIT FOR THE SAKE OF OBTAINING BANK GU ARANTEE, STILL INTEREST RECEIVED ON FIXED DEPOSITS IS ONLY INCIDENTAL TO TH E BUSINESS ACTIVITY, BUT NOT THE MAIN ACTIVITY OF THE ASSESSEE. THEREFORE, I NTEREST ON BANK ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 40 DEPOSITS AND OTHER RECEIPTS SHOULD BE ASSESSED AS I NCOME FROM OTHER SOURCES, BUT NOT UNDER THE HEAD INCOME FROM BUSINES S. 35. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE A.O. HAS MADE SEPARATE AD DITIONS TOWARDS INCOME FROM OTHER SOURCES BEING, INTEREST ON FIXED DEPOSITS, FOREIGN EXCHANGE GAIN AND MISCELLANEOUS RECEIPTS. IT WAS T HE CONTENTION OF THE ASSESSEE THAT THESE RECEIPTS ARE PART OF BUSINESS A ND INCIDENTAL TO THE BUSINESS, THEREFORE, SHOULD BE CONSIDERED FOR THE P URPOSE OF ESTIMATION OF INCOME. ONCE THE A.O. HAS ESTIMATED THE INCOME FROM THE BUSINESS ON GROSS RECEIPTS, SEPARATE ADDITIONS TOWARDS INCOM E FROM OTHER SOURCES BEING INTEREST ON FIXED DEPOSITS AND OTHER RECEIPTS IS NOT CORRECT. IT WAS THE CONTENTION OF THE A.O. THAT THESE RECEIPTS ARE NOT FORM PART OF BUSINESS ACTIVITY OF THE ASSESSEE. WHETHER ASSESSE E DOES BUSINESS OR NOT THE INTEREST ON FIXED DEPOSITS ARE SEPARATE REC EIPTS WHICH NEED TO BE CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOURCES . WE DO NOT SEE ANY MERITS IN THE ARGUMENTS OF THE ASSESSEE, FOR TH E REASON THAT JUST BECAUSE FIXED DEPOSITS ARE KEPT FOR THE PURPOSE OF OBTAINING BANK GUARANTEE, THE INTEREST EARNED ON SUCH FIXED DEPOSI TS CANNOT BE HELD AS PART OF BUSINESS RECEIPTS FOR THE PURPOSE OF ESTIMA TION OF NET PROFIT. SIMILARLY, IN RESPECT OF MISCELLANEOUS RECEIPTS, TH E ASSESSEE HAS NOT MADE OUT ANY CASE BY ON RECORD THAT THESE MISCELLAN EOUS RECEIPTS ARE ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 41 PART OF MAIN BUSINESS ACTIVITIES OF THE ASSESSEE. IN THE ABSENCE OF ANY RECORDS, THE A.O. HAS RIGHTLY TREATED THE MISCELLAN EOUS RECEIPTS AS INCOME FROM OTHER SOURCES. THEREFORE, WE ARE OF TH E OPINION THAT THE A.O. HAS RIGHTLY TREATED THE INTEREST ON FIXED DEPO SITS AND MISCELLANEOUS RECEIPTS UNDER THE HEAD INCOME FROM OTHER SOURCES. 36. COMING TO THE FOREIGN EXCHANGE GAIN. THE ASSE SSEE EARNED FOREIGN EXCHANGE GAIN IN THE COURSE OF IMPORT OF MA CHINERY SPARE PARTS. IT WAS THE CONTENTION OF THE ASSESSEE THAT FOREIGN EXCHANGE GAIN IS EARNED BECAUSE OF HIS MAIN BUSINESS ACTIVITY OF IMP ORT OF MACHINERY SPARE PARTS, THEREFORE, SHOULD BE CONSIDERED AS PAR T OF BUSINESS TURNOVER FOR THE PURPOSE OF ESTIMATION OF NET PROFI T. IT WAS THE CONTENTION OF THE A.O. THAT THE ASSESSEE HAS NOT DI RECTLY INVOLVED IN ANY FOREIGN EXCHANGE BUSINESS. THE GAIN OR LOSS ON ACC OUNT OF FLUCTUATION IN FOREIGN EXCHANGE RATES HAS NOTHING TO DO WITH THE B USINESS OF THE ASSESSEE. WE DO NOT SEE ANY MERITS IN THE ARGUMENTS OF THE A.O., FOR THE REASON THAT THE FOREIGN EXCHANGE GAIN OR LOSS A RISES IN THE COURSE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE IS INVOLVED IN THE BUSINESS OF IMPORT OF MACHINERY SPARE PARTS WHICH RESULTED IN F OREIGN EXCHANGE GAIN. AS PER THE PRINCIPLES OF ACCOUNTING, THE ASS ESSEE AT HIS OPTION CAN EITHER REDUCE THE COST OF MATERIALS OR SHOWN THE GA IN SEPARATELY IN THE FINANCIAL STATEMENTS. THOUGH, THESE ITEMS ARE CONSI DERED AS INCIDENTAL ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 42 TO THE ACTIVITY OF THE ASSESSEE, THE FOREIGN EXCHAN GE GAIN IS ESSENTIALLY A PART OF BUSINESS RECEIPTS FOR THE PURPOSE OF ESTIMA TION OF NET PROFIT. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS NOT CORRECT IN MAKING SEPARATE ADDITIONS TOWARDS FOREIGN EXCHANGE GAIN, W HEN THE NET PROFIT IS ESTIMATED ON GROSS RECEIPTS. THE CIT(A) WITHOUT AP PRECIATING THE FACTS HAS UPHELD THE ORDER OF THE A.O. THEREFORE, WE DIR ECT THE A.O. TO DELETE THE ADDITIONS MADE TOWARDS FOREIGN EXCHANGE GAIN. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 37. AS REGARDS THE CLAIM OF DEPRECIATION ON ASSETS FOR THE ASSESSMENT YEAR 2007-08 TO 2010-11, THE LD. A.R. SUBMITTED THA T THE A.O. WAS ERRED IN NOT ALLOWING SEPARATE DEDUCTIONS TOWARDS DEPRECI ATION, WHEN NET PROFIT IS ESTIMATED FROM THE BUSINESS. IT WAS THE CONTENTION OF THE A.O. THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE SUB STANTIATING THE CLAIM OF DEPRECIATION ON VARIOUS ASSETS. DURING TH E COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE COULD NOT PRODUCE ANY EVI DENCE SUBSTANTIATING THE CLAIM OF DEPRECIATION. THE CIT( A) HELD THAT IN THE ABSENCE OF CREDIBLE EVIDENCES, THE CLAIM OF THE ASS ESSEE IN RESPECT OF DEPRECIATION CANNOT BE ENTERTAINED. THE FACTS ARE SAME EVEN BEFORE US. THE ASSESSEE HAS FAILED TO BROUGHT ON RECORD ANY EV IDENCES TO PROVE THAT THE FINDINGS OF THE FACT RECORDED BY THE CIT(A ) IS INCORRECT. THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) IS RIGHTLY REJECTED THE ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 43 CLAIM OF THE ASSESSEE. WE DO NOT SEE ANY ERROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A) WITH REGARD TO THE DEDUCTION O F DEPRECIATION. HENCE, WE INCLINED TO UPHOLD THE ORDER OF THE CIT(A ) AND REJECT THE GROUND RAISED BY THE ASSESSEE. 38. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS CHARGING OF INTEREST U/S 234A & 234B OF THE ACT. THE LD. A.R. SUBMITTED THAT THE A.O. WAS ERRED IN CHARGING INTEREST U/S 234A & 234B OF THE ACT, WITHOUT ADJUSTING THE SEIZED CASH TOWARDS TAX LIABILITY FOR THE ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11. THE LD. A.R. FURTHER S UBMITTED AS PER SECTION 234B(2) OF THE ACT, THE A.O. HAS TO ADJUST THE SEIZED CASH TOWARDS THE TAX LIABILITY IN THE ORDER OF PREFERENC E FOR THE EXISTING TAX LIABILITY AND TAX ON ACCOUNT OF ADDITIONAL INCOME. IN CASE THERE IS NO EXISTING TAX LIABILITY, THEN SEIZED CASH SHOULD BE ADJUSTED FOR THE TAX LIABILITY OF THE ASSESSMENT YEARS IN QUESTION. THE A.O. IS BOUND TO ADJUST THE SEIZED CASH AND COMPUTE THE INTEREST, BUT, A.O. HAS FAILED TO ADJUST THE SEIZED CASH FOR THE TAX LIABILITY AND WITHOUT A DJUSTING THE CASH HAS COMPUTED THE INTEREST WHICH IS NOT CORRECT. THE LD. D.R. ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 39. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. HAS CHARGED INTEREST U/S 234A& 234B OF THE ACT , WITHOUT ADJUSTING ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 44 THE SEIZED CASH FOUND DURING THE COURSE OF SEARCH. THE A.O. WAS OF THE OPINION THAT THE CHARGING OF INTEREST U/S 234A & 23 4B OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE. THEREFORE, T HERE IS NO DISCRETION FOR THE A.O. TO CHARGE INTEREST AND ACCORDINGLY, CO MPUTED THE INTEREST U/S 234A& 234B OF THE ACT AS PER THE PROVISIONS OF THE ACT. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE A.O. SHOULD HAV E ADJUSTED THE SEIZED CASH TO THE EXISTING TAX LIABILITY FIRST, TH EN, COMPUTES THE INTEREST U/S 234A& 234B OF THE ACT. WE FIND FORCE IN THE ARG UMENTS OF THE ASSESSEE FOR THE REASON THAT IF ANY CASH FOUND AND SEIZED DURING THE COURSE OF SEARCH, IT SHOULD BE ADJUSTED TO THE EXIS TING LIABILITY. IN CASE THERE IS NO EXISTING TAX LIABILITY, THEN THE SEIZED CASH SHOULD BE ADJUSTED TO THE TAX LIABILITY ARISES BECAUSE OF SEARCH. IN T HE PRESENT CASE ON HAND, THE ASSESSEE HAS REQUESTED THE A.O. TO ADJUST THE S EIZED CASH FOR THE TAX LIABILITY OF THE ASSESSMENT YEAR 2008-09 AND TO 2010-11. THE A.O. WITHOUT ADJUSTING THE SEIZED CASH, HAS COMPUTED THE INTEREST U/S 234A& 234B OF THE ACT. THOUGH, THE ASSESSEE CLAIMS THAT T HE A.O. HAS NOT ADJUSTED SEIZED CASH FOR THE TAX LIABILITY, THE ASS ESSEE HAS NOT FURNISHED ANY DETAILS WITH REGARD TO THE QUANTUM OF AMOUNT TO BE ADJUSTED FOR EACH ASSESSMENT YEARS. IN THE ABSENCE OF ANY DETAI LS, WE ARE OF THE OPINION THAT THE ISSUE NEEDS TO BE RE-EXAMINED BY T HE A.O. IN THE LIGHT OF THE ABOVE DISCUSSIONS. THEREFORE, WE SET ASIDE THE ISSUE TO THE FILE OF ITA NOS.300 TO 311/VIZAG/2012 & 356 TO 366/VIZAG/20 12 L. SURYAKANTHAM & L.G. TRINADHA RAO, VSKP 45 THE A.O. AND DIRECT THE A.O. TO EXAMINE THE ISSUE I N THE LIGHT OF THE ABOVE DISCUSSIONS AND RE-COMPUTE THE INTEREST IN AC CORDANCE WITH LAW. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE ALL OWED FOR STATISTICAL PURPOSE. 40. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IN ITA NOS.300 TO 311/VIZAG/2012 ARE PARTLY ALLOWED AND THE APPEALS FILED BY THE REVENUE IN ITA NOS.356 TO 366/VIZAG/2012 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19 TH APR16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SMT. L. SURYAKANTHAM, PROPX: M/S . POWER TECH, D.NO.47-14-3, 5 TH FLOOR, FLAT NO.402, ESWAR HOMES, DWARAKANAGAR, VISA KHAPATNAM-530016. 2. / THE APPELLANT SHRI L.G. TRINADHA RAO, PROP: M/ S. ULTRA DIMENSIONS, D.NO.46-15-32/7, KANDARPA COMPLEX, DONDAPARTHI, VISAKHAPATNAM. 3. / THE RESPONDENT THE ACIT, CENTRAL CIRCLE-2, VIS AKHAPATNAM 4. / THE RESPONDENT THE DCIT, CENTRAL CIRCLE-2, VIS AKHAPATNAM 5. + / THE CIT-2, VISAKHAPATNAM 6. + / THE CIT(CENTRAL), HYDERABAD 7. + ( ) / THE CIT (A)-I, HYDERABAD 8. # . , . , # / DR, ITAT, VISAKHAPATNAM 9 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM
