DCIT, Central Circle-6, Hyderabad V. Smt. K. Rani, Hyderabad

ITA 335/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74497 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: RAJEEV DAVE
• Keywords: Business income; Search and seizure; Document seized; Principle of natural justice; Procedural lapse; Documents seized
• Section: 143(3); 153A; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 329/HYD/2012 A.Y. 200304 ITA NO. 330/HYD/2012 A.Y. 200405 ITA NO. 331/HYD/2012 A.Y. 200506 ITA NO. 332/HYD/2012 A.Y. 200607 ITA NO. 333/HYD/2012 A.Y. 200708 ITA NO. 334/HYD/2012 A.Y. 200809 THE DEPUTY CIT CENTRAL CIRCLE6 HYDERABAD VS. SRI K. BABU RAO HYDERABAD PAN: ALDPK9558K APPELLANT RESPONDENT ITA NO. 335/HYD/2012 A.Y. 200708 THE DEPUTY CIT CENTRAL CIRCLE6 HYDERABAD VS. SMT. K. RANI, W/O. SRI K. BABU RAO, HYDERABAD PAN: ALDPK9557G APPELLANT RESPONDENT APPELLANT BY: SRI P. SOMA SEKHAR REDDY RESPONDENT BY: SRI RAJEEV DAVE DATE OF HEARING: 29.11.2013 DATE OF PRONOUNCEMENT: 24.01.2014 O R D E R PER CHANDRA POOJARI, AM: THE ABOVE APPEALS BY THE REVENUE ARE DIRECTED AGAI NST THE COMMON ORDER OF THE CIT(A)I, HYDERABAD IN CASE OF SRI K. BABU RAO IN ITA NOS. 329334/HYD/2012 FOR A.YS. 200 304 TO 200809 AND SEPARATE ORDER IN ITA NO. 335/HYD/2012 IN CASE OF ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 2 SMT. K. RANI, W/O. SRI K. BABU RAO FOR A.Y. 200708 . SINCE THE ISSUES IN ALL THESE APPEALS ARE IDENTICAL, THEY ARE CLUBBED AND HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON GROUNDS RAISED BY THE REVENUE ARE AS FOLLOWS: 1. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THE SEIZED MATERIAL BASED EXAMPLES GIVEN BY THE AO IN THE LATER PAGES OF THE ASSESSMENT ORDER, IN SUPPORT OF THE FACT THAT THREE ZEROS WERE MISSING FOR NONBANKING TRANSACTIONS. 2. THE LEARNED CIT (A) FAILED TO APPRECIATE THIS BASIC LOGIC GIVEN BY THE AO THAT WHEN BANKING AND NONBANKING TRANSACTIONS WERE WRITTEN AND SUMMED UP ALIKE AND ALL OF THEM THREE ZEROS ARE MISSING. HAD TWO ZEROS ARE MISSING IN NONBANKING TRANSACTIONS AND THREE IN THE CASE OF BANKING TRANSACTIONS, AS OPINED BY THE ID. CIT(A), THEY MUS T HAD WRITTEN AND SUMMED UP DIFFERENTLY. THE OPENING AND CLOSING BALANCES GO AGAINST THE OPINION MADE BY THE ID. CIT (A). 3. THE CIT (A) COULD HAVE APPRECIATED THAT THE AO NOT ONLY REBUTTED THE EVIDENCES SUBMITTED BY THE ASSESSEE, BUT ALSO DISPROVED THEM WITH EXAMPLES IN THE ASSESSMENT ORDER. 4. THE ID. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE TRANSACTIONS WERE RECORDED BY THE TWO WIVES AND MANAGERS OF ASSESSEE CONTINUOUSLY FOR ABOUT 6 YEARS AND THAT TOO IN A UNIFORM MANNER. HE FURTHER FAILED TO UNDERSTAND THAT IT IS IMPOSSIB LE TO RECORD THE TRANSACTIONS BY DIFFERENT PERSONS UNIFORMLY UNLESS IT IS COMMON FOR BOTH BANKING AND NONBANKING TRANSACTIONS. ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 3 3. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZU RE OPERATION U/S. 132 OF INCOMETAX ACT, 1961 WAS COND UCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 29420 08. CONSEQUENT TO SEARCH, NOTICE U/S. 153A WAS ISSUED A ND THE ASSESSEE FILED THE RETURNS OF INCOME ON 172 2009 FOR THE ASSESSMENT YEARS 200304 TO 200809 ADMITTING INCOM ES AS UNDER. ASST. YEAR INCOME RETURNED (RS.) AGRICULTURAL INCOME (RS.) 200304 83,889 7,00,000 200405 1,41,55,230 (INCLUDES LTCG OF RS. 49,38,085) 6,50,000 200506 8,22,630 (INCLUDES LTCG OF RS. 50,000) 7,50,000 200607 73,21,661 7,50,000 200708 42,84,275 (INCLUDES LTCG OF RS. 10,39,275) 8,00,000 200809 7,22,080 7,50,000 4. DURING ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT AS PER THE SEIZED MATERIAL ANNEXURE KBR/A/02 AND KBR/A /4, ASSESSEE WAS INVOLVED IN SEVERAL FINANCIAL TRANSACT IONS RELATING TO REAL ESTATE BUSINESS FOR THE PERIOD 2003 TO 2008 AND THESE TRANSACTIONS WERE WRITTEN IN CODED FORM. HE OBSERVE D THAT IN THE STATEMENT RECORDED ON THE DATE OF SEARCH, ASSES SEE ADMITTED THAT THE SEIZED BOOKS CONTAIN DETAILS OF D AYTODAY EXPENDITURE. IN THE STATEMENT RECORDED U/S. 131 ON 237 2008, THE ASSESSEE FURTHER ADMITTED THAT THE SEIZED BOOKS CONTAIN RECEIPTS AND PAYMENTS PARTLY RELATED TO HIM AND PAR TLY RELATED TO OTHERS AND THE ENTRIES WERE WRITTEN IN CODED FOR M. HE ALSO ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 4 ADMITTED THAT THESE BOOKS WERE WRITTEN BY HIS MANAG ERS AND HIS TWO WIVES SMT. SRIDEVI AND SMT. RANI. THE AO ANALYZ ED THE ENTRIES IN THE BOOKS BY ENTERING THE SAME IN CHRONO LOGICAL ORDER IN EXCEL SPREADSHEET AND FED THE RECEIPTS AND PAYME NTS AGAINST THE NAMES MENTIONED. HE NOTICED THAT IN EVE RY TRANSACTION LAST THREE DIGITS WERE OMITTED WHILE RE CORDING. FOR EXAMPLE, CAR INSURANCE PAYMENT WAS WRITTEN AS RS. 1 0.6 WHICH STANDS FOR A PAYMENT OF RS. 10,600/. SIMILARLY, IN RESPECT OF BANK TRANSACTIONS, LAST THREE DIGITS WERE OMITTED. IT WA S FURTHER OBSERVED THAT RECEIPTS INCLUDE BANK WITHDRAWALS, CA PITAL RECEIPTS LIKE RECEIPTS ON SALE OF LAND/PLOTS, SALE OF VEHICLES, BORROWINGS MADE FROM OUTSIDE, AGRICULTURAL RECEIPTS , ETC AND THE PAYMENTS INCLUDE DEPOSITS INTO THE BANK, CAPITAL EX PENDITURE LIKE PAYMENTS MADE FOR PURCHASE OF PLOTS AND VEHICL ES, REPAYMENT OF LOAN BORROWALS, INTEREST PAYMENTS, PER SONAL EXPENDITURE, INVESTMENTS LIKE PREMIUM PAYMENTS, ETC . THE AO ALSO. OBTAINED ACCOUNT EXTRACTS OF THE ASSESSEE FRO M VARIOUS BANKS AND CROSS VERIFIED THE SAME WITH THE INFORMAT ION ON HAND AND CONFIRMED THAT THE TRANSACTIONS THAT WERE NOTED IN THE SEIZED BOOKS PERTAIN TO ASSESSEE AND HIS FAMILY MEM BERS; AS SUCH, THE INCOME GENERATED ON THEM SHOULD BE BROUGH T TO TAX IN THEIR HANDS FOR THE RESPECTIVE PERIODS. AO ALSO RECORDED A SWORN STATEMENT OF THE ASSESSEE ON 2982008 DURING WHICH ASSESSEE HAD GIVEN THE DETAILS OF WORKING OF HIS UN DISCLOSED INCOME AS RECORDED IN THE BOOKS MARKED AS ANNEXURE KBR/A/2 AND KBR/A/4. THE AO SEPARATED THE BANK TRANSACTIONS AND NONBANK TRANSACTIONS. HE ALSO SEPARATED THE PERSON AL ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 5 EXPENDITURE, CAPITAL GAINS AND INVESTMENTS MADE BY THE ASSESSEE. ASSESSEE ADMITTED THAT THE BANK TRANSACTI ONS WERE ENTERED BY OMITTING THE LAST THREE ZEROES AND OTHER TRANSACTIONS WERE ENTERED BY OMITTING LAST TWO ZEROES. ASSESSEE ALSO ADMITTED THAT FOR THE ASSESSMENT YEARS 200304 TO 2 00809, THERE WAS UNDISCLOSED INCOME FROM BUSINESS, UNDISCL OSED INVESTMENTS AND UNDISCLOSED CAPITAL GAINS IN HIS HA NDS AND UNDISCLOSED INCOME FROM OTHER SOURCES AND UNDISCLOS ED CAPITAL GAINS IN BOTH THE HANDS OF HIS WIVES SMT. K. SRIDEV I AND SMT. K. RANI. ASSESSEE EXPLAINED TO THE AO THAT THREE DIGIT S WERE OMITTED FOR ALL THE BANK TRANSACTIONS AND TWO DIGIT S WERE OMITTED FOR ALL NONBANKING TRANSACTIONS. HOWEVER, THE AO HELD THAT THE ASSESSEE HAD OMITTED THREE DIGITS FOR ALMO ST ALL THE TRANSACTIONS I.E. BOTH BANKING AND NONBANKING TRAN SACTIONS. THE AO FOR THE DETAILED REASONING GIVEN AT PAGE NO. 15 TO 19 OF THE ASSESSMENT ORDER, HELD THAT UP TO SEP. 2003 THE BOOKS WERE WRITTEN ELIMINATING TWO DIGITS AND FROM SEP. 2003 T O APR. 2008, BOOKS WERE WRITTEN OMITTING THREE DIGITS AND ARRIVE D AT THE UNDISCLOSED INCOME OF THE ASSESSEE AND HIS TWO WIVE S AS UNDER. F.Y. K. BABU RAO (RS.) K. SRIDEVI (RS.) K. RANI (RS.) 200203 209640 102225 0 200304 138422220 0 0 200405 11596300 0 0 200506 77480300 0 0 200607 50342750 320780 10296390 200708 1529200 835780 0 200809 0 0 0 TOTAL 279580410 1258785 10296390 ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 6 5. AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE THE AO REJECTED THE SUBMISSIONS OF THE ASSESSEE AS NOT STA NDING .TO THE TEST OF RATIONALITY AND CONCLUDED THAT THREE DIGITS WERE OMITTED BY THE ASSESSEE FOR BOTH BANKING AND NONBANKING TRA NSACTIONS. THE UNDISCLOSED INCOMES OF THE ASSESSEE FOR THE ASS ESSMENT YEARS 200304 TO 200809 UNDER CONSIDERATION AND TA X DEMANDS THEREON WERE THUS ARRIVED AT AS UNDER. A.Y. INCOME ASSESSED (RS.) TAX DEMAND RAISED (RS.) 200304 2,09,640 96,263 200405 13,84,22,220 10,46,24,924 200506 1,15,96,300 78,42,773 200607 7,74,80,300 4,90,56,813 200708 5,03,42,750 2,62,72,072 200809 15,79,200 6,75,340 6. ON APPEAL, THE CIT(A) OBSERVED THAT MAJORITY OF THE EXPENSES REPRESENT DAYTODAY HOUSEHOLD EXPENSES AS WELL AS PERSONAL NATURE OF EXPENSES. ON PAGE 94 OF KBR/A/2 (YEAR 2003) THE ENTRIES INCLUDE NONVEGETARIAN PLUS PARCE L KIRANA 5.00, DOCTOR 4.00, INDICA DIESEL 5.00, SWEET AN D MIXTURE 3.00, TIRUPATAMMA 30.00, VENGAIAH (CAR REPAIR) 3.00, OPEL CAR PETROL 5.00, KIRANA 4.00, MAGIC CARD 10.00, C YCLE REPAIR 6.00, NON VEG 2.00, AC REPAIR 15.00, INDICA CAR REPAIR 13.00, RAMALAKSHMI SALARY 10.00, INDICA DIESEL AND DOCTO R FEE 10.00, GYMKHANA CLUB BILL 75.00. THE NATURE OF E XPENSES IS SUCH THAT THEY DO NOT REQUIRE ANY INDEPENDENT EVIDE NCE TO SUPPORT THAT THEY ARE TO BE MULTIPLIED BY '100' ONL Y. THESE EXPENSES WOULD NOT HAVE BEEN INCURRED IN MULTIPLES OF THOUSAND AS CONTENDED BY THE AO. SO IS THE CASE WIT H OTHER ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 7 PAGES AS WELL. MANY ITEMS REPRESENT SUCH EXPENSES I N OTHER PAGES ALSO. THEY ARE REPRESENTING THE SALARY PAYMEN TS, DAILY EXPENSES FOR GROCERIES, VEGETABLES, FRUITS, MEDICIN ES, OTHER EATABLES DIESEL, PETROL, REPAIR EXPENSES OF CAR, TV , AC, TELEPHONE CELL BILLS, TICKET EXPENSES, ELECTRICITY BILL ETC. NONE OF THESE ITEMS APPEARING ON THESE DOCUMENTS WOULD SUPPORT THE CONT ENTION OF THE AO TO BASE HIS ADDITION FOR ALL THE YEARS UN DER REFERENCE. 7. THE CIT(A) OBSERVED THAT THE AO HAS PROCEEDED ON TH E BASIS OF SOME ISOLATED ENTRIES THAT THEY DO NOT COR RECTLY REPRESENT WHAT THE APPELLANT HAS CONSIDERED IN HIS SUBMISSION. HE HAS MADE SOME ENQUIRIES INDEPENDENTLY AND OBTAIN ED INFORMATION FROM DELHI PUBLIC SCHOOL ABOUT THE SCHO OL FEE PAID BY THE APPELLANT FOR HIS CHILDREN. IF THE PAYMENT O F SCHOOL FEE IS NOT APPEARING IN THE DOCUMENTS, THE AO COULD HAVE M ADE INDEPENDENT ADDITION ABOUT SUCH EXPENDITURE INSTEAD OF TRYING TO LINK SUCH PAYMENT TO THE NEAREST FIGURE APPEARIN G ON THE DOCUMENTS. HE IS RESUMING A PARTICULAR ENTRY OF '10 0' AS ONE LAKH AS AGAINST 10000 AND TRYING TO APPORTION RS. 8 0,000/ TOWARDS SCHOOL FEE AND BALANCE RS. 20,000/ AS INCI DENTAL EXPENSES. THE ENTRY IN THE SEIZED DOCUMENT FOR '100 ' IS APPEARING ON 1062006 WHEREAS THE SCHOOL IS CONFIR MING THAT THE FEE WAS PAID ON 1262006 SO THAT IT CANNOT BE LINKED. THE ARGUMENT OF THE AO IS PURELY PRESUMPTUOUS AND ON CO NJECTURES WITHOUT ANY BASE TO MAKE SUCH AN ADDITION. IT IS W ILD GUESS TO SUCH PROBABILITY. SIMILARLY IN RESPECT OF ANOTHER ITEM (83.5) THE AO REASONS THAT FEE PAID OF RS. 76,400 COMES NEARER TO RS. ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 8 83,500 THAN 'RS. 8,350' THEREBY CONCLUDES THAT ALL THE ENTRIES ARE TO BE READ AS MULTIPLICATION WITH THOUSAND. IN THIS CASE ALSO, THE DATES ARE NOT MATCHING AS THE ENTRY IN THE DOCUMENT IS APPEARING ON 1272007 AND FEE IS REMITTED ON 167 2007. WHEN THE AO IS REFERRING TO A SPECIFIC ITEM, THEN H E SHOULD BRING DIRECT EVIDENCE TO SUCH ENTRY WITHOUT LEAVING ANY S COPE FOR LOGIC OR CONJECTURES. HE IS ONLY TALKING ABOUT NEAR EST FIGURE THAN THE DIRECT AMOUNT. IN THE SAME WAY THE AO TRIED TO JUSTIFY HIS STAND BY BRINGING OUT SOME ENTRIES WHICH ARE APPEAR ING TWICE ON PAGE 63 AND 64 AS WELL AS ON 66 AND 67 AND ALSO ENTRIES APPEARING ON A FEW PAGES AS NARRATED IN PAGE 17 AND 18 OF THE ASSESSMENT ORDER. WITHOUT ANY INDEPENDENT MATER IAL SUPPORTING THE VIEW THAT THE ENTRIES ARE TO BE MULT IPLIED WITH '1000', IT IS VERY DIFFICULT TO VALIDATE SUCH CONTE NTION. NEITHER THE EVIDENCES OF THE ASSESSEE ARE DISPROVED NOR ANY EVI DENCE BROUGHT TO SUPPORT THE CONTENTION OF THE AO. 8. THE CIT(A) OBSERVED THAT ALTHOUGH THE ASSESSEE OWNE D UP THE DOCUMENT AND ENTRIES APPEARING ON THOSE DOCUMEN TS AS HIS OWN AND DISCLOSED ADDITIONAL INCOME, THE FACT R EMAINS IS THAT THE ONUS SHIFTS TO ASSESSING AUTHORITY TO REBU T ANY CONTENTION MADE BY THE ASSESSEE IN RESPECT OF THOSE ENTRIES ESPECIALLY EVIDENCES HAVE BEEN FURNISHED BEFORE THE DEPARTMENT IN THE COURSE OF POST SEARCH PROCEEDINGS . THE ASSESSING OFFICER SIMPLY REJECTED THOSE EVIDENCES O N THE GROUND THAT THESE ARE THIRD PARTY EVIDENCES HENCE NOT RELI ABLE. IT IS FOR THE AO TO DISPROVE SUCH THIRD PARTY EVIDENCES TO BA SE HIS ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 9 REASONING. ON HIS PART THE ASSESSEE, AFTER DETAILE D WORKING, HAS ADMITTED THE ADDITIONAL INCOME AND PAID TAXES. WHI LE DOING SO, HE HAS TAKEN NOT ONLY THE ENTRIES APPEARING IN HIS NAME BUT ALSO HIS PARTY WORKERS AND DECLARED THE INCOME OF S UCH PERSONS AS HIS INCOME AND PAID TAXES. IN THAT BACKGROUND, I T IS VERY NECESSARY ON THE PART OF THE ASSESSING OFFICER TO B RING ON RECORD THE INDEPENDENT CORROBORATIVE EVIDENCE TO SU GGEST THAT ALL ENTRIES APPEARING IN THE SEIZED DOCUMENTS ARE T O BE MULTIPLIED WITH '1000'. IN THE ABSENCE OF SUCH EVI DENCES WITH DIRECT EVIDENCES TO THE ENTRIES MADE IN THE DOCUMEN TS IT IS VERY DIFFICULT TO ADOPT ONE MULTIPLICATION FIGURE UNIFOR MLY FOR ALL ENTRIES. MORE SO, WHEN THE ASSESSEE FURNISHED THIRD PARTY EVIDENCES TO SUCH ENTRIES AND THE SAME WERE NOT REB UTTED BY THE AO IN HIS ORDER. MERE REJECTION DOES NOT AMOUNT TO REBUTTAL OF THE EVIDENCES FURNISHED BY THE ASSESSEE. AS NAR RATED ABOVE, MANY OF SUCH ENTRIES DO NOT REQUIRE SUPPORTING EVID ENCE TO SUGGEST THAT THEY ARE TO BE MULTIPLIED WITH TWO ZER OES ONLY AS THEY SPEAK THEMSELVES. 9. THE CIT(A) FURTHER OBSERVED THAT THE SEIZED PAPERS DO NOT REPRESENT REGULAR BOOKS OF ACCOUNT SO THAT THE ACCO UNTING SYSTEM IS NOT TO BE APPLIED. AS ADMITTED, THEY ARE WRITTEN BY VARIOUS PERSONS OTHER THAN THE ASSESSEE FROM TIME T O TIME. HENCE ONE CANNOT BE EXPECTED A UNIFORM METHOD AND T HE ENTRIES CAN AT BEST BE DECIPHERED BY THE PERSONS WH O HAVE WRITTEN THOSE ENTRIES. IN VIEW OF THE ABOVE FACTUA L MATRIX, IT IS NOT CORRECT TO ASSUME THAT A UNIFORM METHOD IS FOLL OWED IN ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 10 RESPECT OF TOTALLING AND BALANCING OF THE PAYMENTS AND RECEIPTS. THEY ARE WRITTEN AS AND WHEN A PARTICULA R EVENT OF PAYMENT OR RECEIPT TAKES PLACE. THE ENTRIES ARE TOT ALLED FOR CONVENIENCE SAKE BUT NOT FOR ACCOUNTING PURPOSE. BA SED ON SUCH TOTALLING ONE CANNOT ASSUME THAT THE ASSESSEE HAS EARNED SO MUCH INCOME. THE ENTRIES ARE NOT FOR ONE YEAR A ND THEY ARE WRITTEN FOR MANY YEARS BY MANY PEOPLE. HENCE, CONT INUITY AND STANDARDIZATION CANNOT BE EXPECTED OF SUCH METHODOL OGY OF ENTERING THE EXPENSES WHICH ARE INCURRED FROM TIME TO TIME. ANOTHER FACTOR TO BE NOTED IS THAT ASSESSEE IS NOT ENGAGED IN ANY DAYTODAY BUSINESS ACTIVITY. THEREFORE, THE V IEW OF THE AO IS NOT CORRECT. TAX HAS TO BE COLLECTED ON REAL IN COME BUT NOT ON HYPOTHETICAL INCOME. UNLESS THOSE ENTRIES ARE I NDEPENDENTLY CORROBORATED WITH CONTEMPORANEOUS RECORD, NO ADVERS E VIEW CAN BE TAKEN BY THE .ASSESSING AUTHORITY. NO SUCH D IRECT INDEPENDENT EVIDENCES HAVE BEEN BROUGHT TO DEMOLISH THE CONTENTION OF THE ASSESSEE. AS CONTENDED BY THE AS SESSEE, NO ASSETS HAVE BEEN UNEARTHED DURING SEARCH, WHICH IS ULTIMATE WEAPON OF THE DEPT., FOR MAKING SUCH ADDITION ON TH E BASIS OF SOME MATHEMATICAL CALCULATION. MOSTLY, THE AO PROCE EDED ON ASSUMPTIONS AND PRESUMPTIONS TO ARRIVE AT THE ADDIT IONAL INCOME BY MULTIPLYING ALL ENTRIES WITH '1000'. IF A LL THE ENTRIES APPEARING ON THE SEIZED DOCUMENTS ARE MULTIPLIED WI TH THOUSAND, THE RESULTANT FIGURE LEADS TO AN ABSURDIT Y BECAUSE THERE ARE NUMBER OF ENTRIES IN THE NATURE OF DAYTO DAY DOMESTIC AND PERSONAL EXPENSES ETC. IF ONE IS TO FO LLOW THE METHOD ADOPTED BY THE ASSESSING OFFICER, EXPENDITUR E LIKE ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 11 CYCLE REPAIRS, PURCHASE OF VEGETABLES, FRUITS, MEAT ETC GIVES A PICTURE OF ABNORMALITY. SUCH AN ABNORMALITY CANNOT BE ACCEPTABLE EVEN UNDER THE NAKED EYE INSPECTION OF E NTRIES. IT WOULD NOT REQUIRE ANY INDEPENDENT FURTHER EVIDENCE TO PROVE THAT THE EXPENDITURE IS TO BE MULTIPLIED BY '100'. 10. AS STATED EARLIER, THESE DOCUMENTS ARE PREPARED AND MAINTAINED BY MANAGERS, THERE ARE BOUND TO BE MISTA KES WHICH CANNOT FASTEN ON THE ASSESSEE TO PAY TAXES ON UNEARNED INCOME. DURING SEARCH AND SEIZURE PROCEEDINGS, CAS H RS. 4 LAKHS AND THE TWO DIARIES WERE RECOVERED BUT NO UNA CCOUNTED ASSETS FOUND. AO DID NOT MENTION ANY OF SUCH UNACCO UNTED ASSETS FOUND DURING SEARCH. IN THIS BACKGROUND ADD ITIONS BASED ON SOME ENTRIES IN THE DIARIES BY AFFIXING THREE ZE ROES FOR ALL TRANSACTIONS IS TOTALLY UNJUSTIFIED. THERE SHOULD B E SOME REASONABLE MATCHING BETWEEN THE INCOME AND THE ASSE TS OR EXPENDITURE, THAT NEXUS IS CLEARLY LACKING ON THE F ACTS AS BROUGHT ON RECORD. EVEN THOUGH THE AO HAS STATED IN THE ASS ESSMENT ORDER ABOUT THE NATURE OF ENTRIES RELATING TO PERIO D PRIOR TO SEP. 2003 THAT THE ELIMINATION OF TWO ZEROES AND FROM SE P. 2003 ONWARDS, ELIMINATION OF THREE ZEROES IS CONSIDERED, BUT IN REALITY, HE AS IN WHOLESOME ADOPTED AFFIXING THREE ZEROES FO R ALL THE ENTRIES IN THE YEAR. HOWEVER, THE ASSESSEE HAS TAKE N UNIFORM STAND FOR ALL THE ENTRIES IN THE DIARIES. INSTEAD O F IDENTIFYING THE NATURE OF EXPENDITURE WHICH NECESSITATES THE ADOPTI ON OF HIGHER VALUE THAN THE VALUE ADOPTED BY THE ASSESSEE (BY ADOPTING TWO ZEROES), THE AO WENT ON TO ASSESS THE TOTAL ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 12 AMOUNT BASED ON AFFIXING THREE ZEROES FOR ALL ENTRI ES WHICH LEADS TO ABNORMALITY AS WELL AS UNREALISTIC FIGURES. 11. THE CIT(A) WAS OF THE VIEW THAT IT IS VERY DIFFICUL T TO SUSTAIN THE STAND OF THE AO IN MAKING ADDITION BASED ON MUL TIPLICATION OF THE ENTRIES WITH '1000', HE SIMPLY ADDED ONE ZE RO TO THE INCOME DISCLOSED BY THE ASSESSEE. WITHOUT REBUTTING THE EVIDENCES FILED BY THE ASSESSEE AND WITHOUT BRINGIN G ANY EVIDENCE TO HIS LOGIC, THE ADDITION MADE BY HIM IS UNSUSTAINABLE UNDER LAW. SUCH PRESUMPTION OF AO NEEDS SOUND LOGIC AND COGENT EVIDENCE. LACK OF UNACCOUNTED ASSETS ALSO WE AKENS THE CASE OF AO. THEREFORE, ADDING THREE ZEROES UNI FORMLY TO ALL ENTRIES IS NOT CORRECT. ACCORDINGLY HE DIRECTED THE AO TO DELETE THE ADDITION WORKED ON THE BASIS OF MULTIPLICATION WITH 3 ZEROES FOR ALL ASSESSMENT YEARS FROM 200405 TO 200809. 12. THE CIT(A) OBSERVED THAT IT CANNOT BE RULED OUT ABO UT THE POSSIBILITY OF SOME OF THE EXPENDITURE NOT RECORDED IN THE DOCUMENTS ITSELF. THIS HAS BEEN EVIDENCED BY THE FA CT OF CHILDREN'S SCHOOL FEE AND COLLEGE FEE AS BROUGHT OU T BY THE AO IN RESPECT OF DP SCHOOL, ENGINEERING COLLEGE FEE, E TC. BESIDES, THERE ARE OTHER ENTRIES IN THE NATURE OF INTEREST P AYMENT ON LOANS, FURNITURE PURCHASE, HOUSE REPAIRS WHICH INCL UDES MARBLE, BRICK PURCHASES ETC. WHICH REQUIRE MORE THAN THE VA LUE ADOPTED BY THE ASSESSEE. FOR INSTANCE, INTEREST PA YMENT OF RS. 900 ON A LOAN OF RS. 3 LAKHS IS NOT REALISTIC BY AN Y RECKONING. SIMILARLY, EXPENDITURE ON MARBLE OF RS. 500 IS ALSO QUITE LOW WHEN COMPARED TO THE VALUE OF MARBLE IN THE MARKET. TO C OVER ALL ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 13 SUCH DISCREPANCIES AND UNRECORDED CASH EXPENSES, A REASONABLE ESTIMATE OF DISALLOWANCE IS INEVITABLE. AFTER GOING THROUGH SUCH ENTRIES AND THE NATURE OF EXPENDITURE, THE CIT(A) HELD THAT DISALLOWANCE OF A SUM OF RS. 5 LAKHS FOR EACH ASST. YEAR WOULD SUFFICE THE SHORTFALL IF ANY IN RESPECT OF THE EXPENDITURE UNRECORDED AND UNDERRECORDED. THEREFOR E, THE CIT(A) DIRECTED THE AO TO MAKE ADDITION OF RS. 5 LA KHS FOR EACH ASST. YEAR FROM 200405 TO 200809 AND DELETE THE A DDITION MADE BY HIM AND RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE. 13. THE CIT(A) OBSERVED THAT IN THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE CONTESTED THAT THE AO ADD ED THE AGRICULTURAL INCOME DISCLOSED IN THE NAMES OF ASSES SEE'S TWO WIVES SMT. K. RANI AND SMT. K. SRIDEVI IN THE HANDS OF THE ASSESSEE THOUGH THE AGRICULTURAL INCOME HAS BEEN DU LY REFLECTED IN THE RETURNS OF INCOME FILED BY RESPECT IVE INCOME HOLDERS AND ACCEPTED BY THE SAME AO. ACCORDINGLY, T HE ASSESSEE REQUESTED THE CIT(A) TO DIRECT THE AO TO D ELETE THE ADDITION OF AGRICULTURAL INCOME BELONGING TO SMT. K . RANI AND SMT. K. SRIDEVI FROM THE TOTAL INCOME OF THE ASSESS EE IN RESPECT OF ASST. YEARS COMMENCING FROM 200304 TO 200809. THE CIT(A) EXAMINED THE CONTENTION OF THE ASSESSEE AND FOUND T HAT THE AO HAS ADDED AGAIN THE AGRICULTURAL INCOME IN THE H ANDS OF THE ASSESSEE WITHOUT SUBSCRIBING ANY REASON FOR DOI NG SO. WHEN SUCH AGRICULTURAL INCOME WAS DULY ACCEPTED IN THE H ANDS OF TWO WIVES OF THE ASSESSEE, IT IS NOT JUSTIFIED AGAI N SUBJECTING THE ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 14 SAME AGRICULTURAL INCOME IN THE HANDS OF THE ASSESS EE FOR TAXATION. THEREFORE, HE DIRECTED THE AO TO RECOMPU TE THE TOTAL INCOME OF THE ASSESSEE FOR ALL THESE YEARS UNDER AP PEAL I.E., 200304 TO 200809 BY DELETING THE AGRICULTURAL INC OME OF ASSESSEE'S WIVES AND FOLLOWING THE ABOVE DIRECTIONS OF ADDING RS. 5 LAKHS TO THE INCOME DISCLOSED FOR EACH ASSESS MENT YEAR FROM 200405 TO 200809. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 14. THE LEARNED DR SUBMITTED THAT THE CIT(A) IS NOT JUS TIFIED IN DELETING THE ADDITION BY TAKING CERTAIN ISOLATED EN TRIES IN THE SEIZED MATERIAL TO SUGGEST THAT THE AMOUNT WRITTEN BY THE ASSESSEE BECOMES EXORBITANT IF '000' ARE ADDED TO T HE FIGURES WRITTEN BY THE ASSESSEE. THOSE ENTRIES ARE ISOLATE D ENTRIES AND A CONCLUSION CANNOT BE DRAWN ON THE BASIS OF THOSE EN TRIES LIKE NONVEGETARIAN PLUS PARCEL KIRANA 5.00, DOCTOR 4.00, INDICA DIESEL 5.00, SWEET AND MIXTURE 3.00, TIRUPATAMM A 30.00, VENGAIAH (CAR REPAIR) 3.00, OPEL CAR PETROL 5.0 0, KIRANA 4.00, MAGIC CARD 10.00, CYCLE REPAIR 6.00, NON VEG 2.00, AC REPAIR 15.00, INDICA CAR REPAIR 13.00, RAMALAKS HMI SALARY 10.00, INDICA DIESEL AND DOCTOR FEE 10.00, GYMKHA NA CLUB BILL 75.00. THE CIT(A) OUGHT TO HAVE EXCLUDED THESE I TEMS FOR ADDITION AND FOR THE BALANCE ENTRIES, HE MUST HAVE MULTIPLIED WITH '000' SO AS TO SUSTAIN THE ADDITION. ACCORDIN G TO HIM, IT IS NOT A INVIOLABLE RULE APPLICABLE TO ALL SITUATIONS AND TO ALL CASES THAT EVERY SEIZED DOCUMENT SHOULD BE CORROBORATED B EFORE ADDITION CAN BE BASED ON IT. HE SUBMITTED THAT IF CALCULATIONS ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 15 AND COMPUTATIONS HAVING BEEN MADE IN THE SEIZED DOC UMENT IN SUCH A MANNER THAT ITS PROBATIVE VALUE AND GENUI NENESS CANNOT BE DOUBTED, NOTHING PREVENTS THE AO FROM MAK ING ADDITIONS ON THE BASIS OF SUCH DOCUMENT DESPITE THE ABSENCE OF ANY CORROBORATION. THE CIT(A) SHOULD HAVE OBSER VED THAT IN A CASE LIKE THIS, IT IS DIFFICULT TO OBTAIN CORROBORA TION PARTICULARLY WHEN THERE IS SEIZED MATERIAL SHOWING UNACCOUNTED TRANSACTIONS. SEIZED DOCUMENT SHOULD BE CONSIDERED AS A FOOLPROOF EVIDENCE IN THE ABSENCE OF PROPER BOOKS O F ACCOUNT MAINTAINED BY THE ASSESSEE AND EVEN SCRIBBLING IN T HE LOOSE PAPER SUGGESTED THAT THE ASSESSEE HAS BEEN INVOLVED IN GROSS VIOLATION OF MAINTAINING BOOKS OF ACCOUNT AND HABIT UALLY DETAIL IN THE TRANSACTIONS AND ENTERING THE SAME IN LOOSE SLIPS. EVEN IF THERE ARE PROCEDURAL LAPSES ON THE PART OF THE AO, THE CIT(A) COULD HAVE VERY WELL AVOIDED THE ERRORS IN HIS ORDE R AND THE PROPER COURSE ALLOWED TO THE CIT(A) IS TO REMIT THE ISSUE BACK TO THE AO TO CORRECT PROCEDURAL LAPSES, IF ANY, COMMIT TED BY THE AO. HE RELIED ON THE ORDER OF THE AO. 15. ON THE OTHER HAND, THE LEARNED AR SUBMITTED THAT S EARCH OPERATION WAS CONDUCTED ON 29.4.2008 BY THE INVESTI GATION WING, INCOMETAX DEPARTMENT, HYDERABAD ON K. BABU R AO. K.BABU RAO WAS INITIALLY ENGAGED IN THE BUSINESS OF DEALING IN PEARLS AND DIAMONDS AND OPERATING FROM MUMBAI WHERE HE HAD A SHOP. HOWEVER, THE BUSINESS WAS CLOSED WITH E FFECT FROM THE YEAR 2001. SUBSEQUENTLY, HE ENTERED POLITICS A ND WAS ALSO ENGAGED IN THE BUSINESS OF REAL ESTATE AS FACILITAT OR/PURCHASE ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 16 AND SALE OF LAND IN AND AROUND HYDERABAD. DURING T HE COURSE OF SEARCH, 2 NOTEBOOKS WERE SEIZED AND MARKED AS AN NEXURE KBR/A/02 AND KBR/A/4. IN THESE BOOKS, CERTAIN FINAN CIAL TRANSACTIONS WERE WRITTEN IN CODED FORM AND COVERED THE PERIOD FROM 200304 TO 200708. THESE NOTEBOOKS CON TAINED BOTH AMOUNTS RECEIVED AND PAID ON VARIOUS DATES AND IN NAMES OF VARIOUS PERSONS ON VARIOUS ACCOUNTS. AN AM OUNT OF RS. 4,00,000 CASH WAS ALSO SEIZED BY THE INVESTIGATION WING. DURING THE COURSE OF POSTSEARCH OPERATIONS, K. BABU RAO A DMITTED THAT THE NOTEBOOKS CONTAINED RECEIPTS AND PAYMENTS WHICH PARTLY RELATE TO HIM AND PARTLY TO OTHERS. HE ALSO MENTIONED CATEGORICALLY THAT THE AMOUNTS WERE WRITTEN IN CODE D FORM AND FURTHER THAT THESE NOTEBOOKS WERE WRITTEN BY HIS MA NAGERS AND SOMETIMES BY HIS TWO WIVES, VIZ., SMT. K. SRIDEVI A ND SMT. K. RANI. THE STATEMENT OF THE ASSESSEE WAS RECORDED ON 237 2008 BY DY. DIRECTOR OF INCOMETAX (INV) WHEREIN THE ASSESS EE HAS CLEARLY STATED ABOUT THE NATURE OF ENTRIES RECORDED IN THE SEIZED DOCUMENTS. THAT THESE ENTRIES RELATE TO RECEIPTS AN D PAYMENTS OF PARTLY TO THE ASSESSEE AND PARTLY TO OTHERS. THA T THEY ARE WRITTEN BY HIS MANAGERS, WORKERS AND HIS TWO WIVES. THAT THE ENTRIES ARE IN CODED FORM AND ALL BANK TRANSACTIONS ARE TO BE MULTIPLIED BY '1000' AND ALL OTHER TRANSACTIONS ARE TO BE MULTIPLIED BY '100'. 16. THE AR SUBMITTED THAT DURING THE COURSE OF POSTSEA RCH OPERATIONS, K. BABU RAO FULLY COOPERATED WITH THE D EPARTMENT AND HIMSELF ARRIVED AT HIS UNDISCLOSED INCOME AS EV IDENCED ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 17 FROM THE DIARIES. ALTHOUGH SOME OF THE TRANSACTIONS DID NOT RELATE TO HIM, IN ORDER TO BUY PEACE WITH THE DEPAR TMENT, HE ADMITTED AS HIS INCOME THE NET RECEIPTS AS EVIDENCE D FROM THE DIARIES. HE MADE A TRUE DISCLOSURE AND HE COMPUTED THE NET RECEIPTS FROM THE 2 DIARIES BASED ON THE WORKINGS W HICH WERE ALSO SUBSEQUENTLY VERIFIED BY THE DY. DIRECTOR OF I NCOMETAX (INVESTIGATION). HE MADE A DISCLOSURE UNDER SECTION 132(4) ADMITTING HIS UNDISCLOSED INCOME FROM EACH OF THE A SSESSMENT YEARS UNDER THE VARIOUS HEADS AS HIS AS WELL HIS TW O WIVES (VIZ., SMT. K. SRIDEVI AND SMT. K. RANI) INCOME. 17. THE AR SUBMITTED THAT THE WORKINGS WHICH WERE SUBMI TTED TO THE DY. DIRECTOR OF INCOMETAX (INVESTIGATION) A ND EXPLAINED IN DETAIL ABOUT HIS INCOME FROM BUSINESS, HIS DRAWI NGS, INVESTMENTS, CAPITAL GAINS, ETC. ON SPECIFIC QUERY FROM DDIT(INV), BANK STATEMENTS WERE PRODUCED AND VERIFIED WITH THE TRANSACTIONS IN THE NOTING OF THE DIARY WHICH CONFI RMS THE CONTENTION OF THE ASSESSEE THAT THE BANK TRANSACTIO NS ARE WRITTEN BY OMITTING THREE ZEROES. THE DDIT VERIFIED AND DID NOT RAISE ANY ISSUE ON THIS MATTER. AS REGARDS THE CASH TRANSACTIONS, THE ASSESSEE PRODUCED PROOF OF PAYMENTS OF AROUND 7 2 INSTANCES FROM THE DIARY WHICH CLEARLY ESTABLISHES THE FACT OF CASH TRANSACTIONS WERE RECORDED AFTER ELIMINATING T WO ZEROES ONLY. THE SAME INSTANCES HAVE BEEN MENTIONED IN THE ASSESSMENT ORDER BY THE AO IN PAGE NO. 9 TO 11. SOM E OF THESE PAYMENTS WERE LIC AND TAX PAYMENTS FOR WHICH THIRD PARTY ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 18 EVIDENCE IS ALWAYS AVAILABLE AND THE SAME WERE VERI FIED BY THE DDIT (INV) AS WELL AS IN THE COURSE OF ASSESSMENT P ROCEEDINGS. 18. THE AR SUBMITTED THAT THE TOTAL INCOME ADMITTED BY K. BABU RAO, SMT. K. SRIDEVI AND SMT. K. RANI, IN THE RETURNS OF INCOME FILED IN PURSUANCE OF THE NOTICE ISSUED UNDE R SECTION 153A ON THE BASIS OF THE WORKINGS SUBMITTED TO THE DDIT WERE AS FOLLOWS: UNDISCLOSED INCOME OTHER THAN AGRICULTURAL INCOME F.Y. A.Y. SRI K. BABU RAO (RS.) SMT. K. SRI DEVI (RS.) SMT. K. RANI (RS.) 200203 200304 86,865 1,02,225 NIL 200304 200405 1,35,17,232 NIL NIL 200405 200506 8,34,630 18,075 NIL 200506 200607 73,98,030 36,062 NIL 200607 200708 43,84,275 72,078 12,79,639 200708 200809 1,52,920 1,26,078 3,61,733 TOTAL 2,63,73,952 3,54,518 16,41,372 19. FURTHER, IN ADDITION TO THE ABOVE, THE ASSESSEES AL SO ADMITTED THE INCOME FROM AGRICULTURE IN THE RETURNS AS PER THE EVIDENCES OF TAHSILDAR RECEIPTS PRODUCED BEFORE THE DDIT (INVESTIGATION). THE AGRICULTURAL INCOME ADMITTED B Y. THE THREE ASSESSEES FOR EACH OF THE ASSESSMENT YEARS IS AS FO LLOWS: F.Y. A.Y. SRI K. BABU RAO (RS.) SMT. K. SRI DEVI (RS.) SMT. K. RANI (RS.) 200203 200304 7,00,000 2,25,000 NIL 200304 200405 6,50,000 3,25,000 NIL 200405 200506 7,50,000 3,25,000 NIL 200506 200607 7,50,000 3,50,000 NIL 200607 200708 8,00,000 4,00,000 2,50,000 200708 200809 7,50,000 4,25,000 4,50,000 TOTAL 44,00,000 20,50,000 7,00,000 ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 19 20. THE AR SUBMITTED THAT THE TOTAL DISCLOSURE (INCLUDI NG AGRICULTURAL INCOME) MADE BY K. BABU RAO ON HIS AS WELL AS K. SRIDEVI AND K. RANI BEHALF IS RS. 3,55,19,842. HE A LSO PAID TAXES AND PROVED HIS BONAFIDES. WHILE MAKING THE PAYMENT OF TAXES, RS. 4,00,0000 CASH SEIZED BY THE DEPARTMENT WAS ALS O ADJUSTED BY HIM TOWARDS HIS TAX DUES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE ALSO FURNISHED THE RECEIP TS AND PAYMENTS ACCOUNT FOR EACH OF THE ASSESSMENT YEARS A S WELL AS THE STATEMENT OF AFFAIRS AS ON THE CLOSE OF THE REL EVANT FINANCIAL YEAR TO SUBSTANTIATE THE ENDUSE OF THE UNDISCLOSED INCOME ADMITTED BY HIM IN HIS STATEMENT MADE UNDER SECTION 132(4) AS WELL AS RETURN OF INCOME FILED FOR EACH OF THE ASSE SSMENT YEARS. THE ASSESSING OFFICER ACCEPTED THE STATEMENT OF AFF AIRS SINCE NO ISSUES WERE RAISED WITH REGARD TO THE VARIOUS ASSET S AND LIABILITIES MENTIONED IN THE SAID STATEMENT. THE DIARIES WERE WRITTEN IN CODED FORM AND THEREFORE TO WRITE BANK TRANSACTIONS BY ELIMINATING 3 ZEROS AND CASH TRANSACTIONS BY ELIMIN ATING 2 ZEROS IS KNOWN ONLY TO THE PERSON WRITING OR UNDER WHOSE INSTRUCTIONS THE TRANSACTIONS ARE BEING WRITTEN. THE ASSESSEE HA S BEEN ABLE TO SUBSTANTIATE WITH THIRD PARTY EVIDENCE REGARDING VERACITY OF THIS FACT. HOWEVER, THE ASSESSING OFFICER HAS CHOSE N NOT TO VERIFY THE SEIZEDMATERIAL OR THE SUPPORTING MATERIAL WHIC H WERE FURNISHED DURING THE COURSE OF THE PROCEEDINGS BUT IN AN ARBITRARY MANNER, CONCLUDED THAT ALL TRANSACTIONS W ERE WRITTEN BY ELIMINATING 3 ZEROS AND THEREBY ASSESSED THE UND ISCLOSED INCOME AT AN UNIMAGINABLE AND UNREALISTIC HIGH FIGU RES BY ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 20 SIMPLY ADDING ONE MORE '0' TO THE WORKINGS WHICH WE RE FURNISHED BY K. BABU RAO DURING THE COURSE OF THE P ROCEEDINGS. 21. THE AR SUBMITTED THAT THE ASSESSING OFFICER HAS ALS O IGNORED THE BANK STATEMENTS PROVIDED BY BANKS AND T HE TRANSACTIONS OF WHICH WERE ALSO MENTIONED IN THE DI ARIES AND THEREFORE COULD BE EASILY CORRELATED AS TO THE ACTU AL AMOUNT OF THESE TRANSACTIONS. IN ALL THE CASES OF BANK TRANSA CTIONS, THE ASSESSEE WAS ABLE TO FURNISH THE BANK TRANSACTIONS WHICH CLEARLY REVEAL THAT THE TRANSACTIONS IN THE DIARIES RELATIN G TO THE BANK WERE WRITTEN AFTER ELIMINATING 3 ZEROS. COPIES OF T HE BANK STATEMENTS ARE BEING ENCLOSED WHICH CLEARLY IDENTIF Y THE TRANSACTIONS RECORDED IN THE DIARIES AND CLEARLY PR OVE THE FACT THAT THE ENTRIES WERE WRITTEN AFTER ELIMINATING 3 Z EROS. THE ASSESSING OFFICER HAS, WITH A PREJUDICE MIND AND WI THOUT SERVICING THE CAUSE OF NATURAL JUSTICE, CHOSE TO AD D ONE MORE '0' TO THE NON BANK TRANSACTIONS THEREBY MAKING A V ERY HIGH PITCHED ASSESSMENT OF THE UNDISCLOSED INCOME. WITH REGARD TO THE NONBANK TRANSACTIONS ALSO, THE NOTING ON DIARI ES REVEAL PAYMENTS MADE WHICH WERE RELATING TO HIS BUSINESS. TO THE EXTENT THAT THE THIRD PARTY EVIDENCE WAS AVAILABLE, K. BABU RAO WAS ABLE TO PRODUCE THE SAME WHICH CONFORMS THAT TH E CASH TRANSACTIONS WERE WRITTEN BY ELIMINATING 2 ZEROS. 22. THE AR SUBMITTED THAT THE ASSESSEE CONTESTED THE OBSERVATION OF THE AO IN RESPECT OF THE ENTRIES MAD E IN THE DIARIES. THAT NOWHERE HAS THE ASSESSEE MADE ANY ADM ISSION THAT THE CASH TRANSACTIONS WERE WRITTEN IN A CODIFI ED FORM AFTER ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 21 ELIMINATING 3 ZEROS. THE ASSESSING OFFICER, HOWEVER , HAS CHOSEN TO TREAT THE SUBMISSIONS MADE WITH REGARD TO THE SC HOOL AND COLLEGE FEES AS 'TACIT ADMISSION' BY THE ASSESSEE. THE LD. CIT(A) WILL APPRECIATE THE DIARY IS NOT A REGULAR BOOKS AN D THEREFORE PRINCIPLE OF UNIFORMITY, BALANCING, NEGATIVE CASH E TC., DOES NOT HOLD GOOD AS IN THE CASE OF REGULAR BOOKS OF ACCOUN T, THAT THE ENTIRE ASSESSMENT HAS BEEN MADE BASED ON PRESUMPTIO N, SURMISES AND CONJECTURES. THE EVIDENCE PRODUCED BY THE ASSESSEE HAS BEEN TOTALLY IGNORED WITHOUT FURNISHIN G ANY REASONS IN THE ORDER AS TO WHY THEY HAVE BEEN REJECTED. THE ENTIRE ASSESSMENT WAS MADE IN HURRIED MANNER WITHOUT VERIF YING THE CONTENTS OF THE SEIZEDMATERIAL AS WELL AS THE DOCU MENTARY PROOF SUCH AS BANK STATEMENTS, LAND PURCHASE AND SALE DEEDS, AND OTHER DOCUMENTARY SUPPORTING SUCH AS LI C, INCOMETAX CHALLANS, OTHER THIRD PARTY EVIDENCES. T HE ASSESSING OFFICER HAS NOT EVEN ASSESSED THE INCOME BASED ON H IS OWN FINDINGS AS APPEARING IN PARA 3.7 WHERE IT IS MENT IONED THAT ONLY FOR NONBANK TRANSACTIONS 3 ZEROS TO BE CONSID ERED. HOWEVER, WHILE MAKING ASSESSMENT, HE HAS COMPUTED T OTAL INCOME BY ADDING 3 ZEROS THEREBY ADDING ONE MORE ZE RO TO THE BANK TRANSACTIONS WHICH WERE ALREADY CONSIDERED AND ADMITTED BY THE ASSESSEE WITH 3 ZEROS. THE ASSESSIN G OFFICER HAS ALSO NOT SUBSTANTIATED THE INCOME ASSESSED BY HIM W ITH THE ENDUSE OF SUCH INCOME. THERE HAS TO BE SOME ASSETS BACKED BY SUCH HUGE INCOME. THE ASSESSING OFFICER CANNOT T AKE ONE SIDED VIEW WHILE DETERMINING THE INCOME WITHOUT CON SIDERING RELATED ASSET. THE ENTIRE ASSESSMENT HAS BEEN MADE BY SIMPLY ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 22 ADDING ONE MORE ZERO TO THE INCOME ADMITTED BY THE ASSESSEES. THE ASSESSING OFFICER HAS NOT CONSIDERED THE TRANSACTIONS OF CAPITAL GAINS FOR WHICH DOCUMENTARY PROOFS WAS PROVIDED. SIMILARLY, HE HAS NOT CONSIDERED THE THIR D PARTY EVIDENCE IN SUPPORT OF THE CASH PAYMENTS FURNISHED BY THE ASSESSEE. FINALLY, BY REFUTING HIS OWN FINDINGS THA T THE BANK TRANSACTIONS HAVE BEEN CONSIDERED AFTER ADDING 3 ZE ROS, HE HAS ONCE AGAIN ADDED ONE MORE ZERO TO THE BANK TRANSACT IONS WHILE ARRIVING AT THE ASSESSED INCOME. SIMILARLY BY ACCEPTING THE AGRICULTURAL INCOME ADMITTED BY THE ASSESSEE, AND S ETTING OFF THE SAME ONLY WHILE CALCULATING THE TAXABLE INCOME, THE AO HAS SOUGHT TO INFLATE THE TAXABLE INCOME IN A PICK AND CHOOSE MANNER TO HIS LIKING. ACCORDINGLY IT IS REQUESTED TO DELETE THE ADDITIONS MADE IN SUCH AN ARBITRARY MANNER BY THE A SSESSING OFFICER AND TO ACCEPT THE INCOME ADMITTED BY THE AS SESSEE BASED ON THE SEIZED MATERIAL FOR WHICH THE STATEMEN T UNDER SECTION 132 WAS ALSO MADE AND TAXES PAID. 23. THE AR SUBMITTED THAT IN THE FURTHER SUBMISSIONS FI LED DURING APPELLATE PROCEEDINGS ASSESSEE PLEADED THAT THE AO HAS IGNORED THE AGRICULTURAL INCOME OF SMT. K. RANI AND SMT. K. SRIDEVI AND ADDED THE SAME AS BUSINESS INCOME OF TH E ASSESSEE. IT IS SUBMITTED THAT THE AGRICULTURAL INC OME DISCLOSED BY SMT. K. RANI AND SMT. K. SRIDEVI IN THEIR RETURN S OF INCOME HAS BEEN ACCEPTED BY THE DEPARTMENT. HENCE DUE CREDIT H AS TO BE GIVEN TO THE AGRICULTURAL INCOME OF THESE TWO PE RSONS AND THE SAME CANNOT BE ADDED AS INCOME OF THE ASSESSEE AS WAS ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 23 DONE BY THE AO IN ALL THE YEARS UNDER APPEAL. ACCOR DINGLY IT WAS PLEADED THAT THE SAME MAY BE DELETED. 24. THE AR SUBMITTED THAT THE ASSESSING OFFICER ON PAGE 12 OF HIS ORDER IN PARAGRAPH 3.5, HAS MENTIONED THAT THER E IS A DISCREPANCY BETWEEN THE INCOME DISCLOSED DURING THE COURSE OF INVESTIGATION AND ADMITTED IN HIS RETURN OF INCO ME. IN THIS CONNECTION, IT MAY BE NOTED THAT THERE IS NO DISCRE PANCY IN THE INCOME DECLARED AND THE INCOME ADMITTED. THE AO HAS AGAIN ADDED THE AGRICULTURAL INCOME BELONGING TO SMT. K. RANI AND K. SRIDEVI IN THE HANDS OF THE ASSESSEE ALTHOUGH IN TH EIR INDIVIDUAL HANDS THE SAME HAS BEEN DISCLOSED AND ACCEPTED BY T HE SAME AO. IT IS NOT CORRECT ON THE PART OF THE AO AG AIN SUBJECTING SUCH AGRICULTURAL INCOME IN THE HANDS OF THE ASSESSEE WHILE COMPUTING HIS TOTAL INCOME. THE ASSESSEE HAS FILED A DETAILED WORKING OF EACH ASSESSMENT YEARWISE RECON CILIATION OF THE INCOME DISCLOSED AND ADMITTED AS WELL AS ASSESS ED BY THE AO. ACCORDINGLY THE ASSESSEE PLEADED FOR DELETION O F THE ADDITION MADE IN EACH YEAR UNDER APPEAL AS SUCH ADD ITIONS ARE MADE PURELY ON HYPOTHETICAL BASIS WITHOUT ANY R EAL EVIDENCES. 25. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SECTION 153A OF INCOMETAX AC T, 1961 READS AS FOLLOWS: 153A. [(1)] NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 1 53, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 13 2 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISIT IONED UNDER ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 24 SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE A SSESSING OFFICER SHALL ( A ) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURN ISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE ( B ), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SU CH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; ( B ) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESS MENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING W ITHIN SUCH SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SI X ASSESSMENT YEARS REFERRED TO IN THIS [SUB-SECTION] PENDING ON THE DA TE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITI ON UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE; [PROVIDED ALSO THAT THE CENTRAL GOVERNMENT MAY BY R ULES MADE BY IT AND PUBLISHED IN THE OFFICIAL GAZETTE (EXCEPT IN CA SES WHERE ANY ASSESSMENT OR REASSESSMENT HAS ABATED UNDER THE SEC OND PROVISO), SPECIFY THE CLASS OR CLASSES OF CASES IN WHICH THE ASSESSING OFFICER SHALL NOT BE REQUIRED TO ISSUE NOTICE FOR ASSESSING OR REASSESSING THE TOTAL INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY P RECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH IS CONDUCTED OR REQUISITION IS MADE.] [(2) IF ANY PROCEEDING INITIATED OR ANY ORDER OF AS SESSMENT OR REASSESSMENT MADE UNDER SUB-SECTION (1) HAS BEEN AN NULLED IN APPEAL OR ANY OTHER LEGAL PROCEEDING, THEN, NOTWITHSTANDIN G ANYTHING CONTAINED IN SUB-SECTION (1) OR SECTION 153, THE AS SESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR WHICH HAS ABATED UNDER THE SECOND PROVISO TO SUB-SECTION (1), SHALL STAND REVIVED WITH EFFECT FROM THE DATE OF RECEIPT OF THE ORDER OF SUCH ANNUL MENT BY THE COMMISSIONER: PROVIDED THAT SUCH REVIVAL SHALL CEASE TO HAVE EFFE CT, IF SUCH ORDER OF ANNULMENT IS SET ASIDE.] EXPLANATION .FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, (I) SAVE AS OTHERWISE PROVIDED IN THIS SECTION, SECTION 153B AND SECTION 153C, ALL OTHER PROVISIONS OF THIS ACT SHAL L APPLY TO THE ASSESSMENT MADE UNDER THIS SECTION; ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 25 (II) IN AN ASSESSMENT OR REASSESSMENT MADE IN RESPECT OF AN ASSESSMENT YEAR UNDER THIS SECTION, THE TAX SHALL B E CHARGEABLE AT THE RATE OR RATES AS APPLICABLE TO SU CH ASSESSMENT YEAR. 26. IT IS CLEAR FROM THE ABOVE PROVISIONS OF SECTION 15 3A THAT THE INCOME OF THE ASSESSEE IN CASE OF A PERSON WHER E SEARCH IS INITIATED U/S. 132, THE BOOKS OF ACCOUNT OR OTHER D OCUMENTS OR ANY ASSETS ARE REQUISITIONED U/S. 132A, THE ASSESSI NG OFFICER AFTER ISSUE OF A NOTICE TO FURNISH INCOME OF THE ASSESSEE IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN 6 ASSESSMENT YE ARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR REQUI SITION MADE, THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH 6 ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CO NDUCTED OR REQUISITIONED, AS THE CASE MAY BE, ON BRINGING ON R ECORD THE MATERIAL TO SHOW THAT THERE IS UNDISCLOSED INCOME O F THE ASSESSEE. IN OTHER WORDS, THERE SHOULD BE MATERIAL ON RECORD TO SHOW THAT THE INCOME IS ASSESSED ON THE BASIS OF MA TERIAL/ EVIDENCE IN HANDS OF THE ASSESSING OFFICER. 27. BEING SO, IN OUR OPINION, GUESS WORK IS NOT POSSIBL E IN CASE OF SEARCH ASSESSMENT FRAMED U/S. 143(3) OR U/S. 153 A OF THE ACT WITHOUT ANY PROPER MATERIAL. THE AO SHALL HAVE THE BASIS FOR ASSUMING THAT THE EXPENDITURE INCURRED BY THE ASSES SEE IS OUT OF UNDISCLOSED INCOME. IT IS NOT PERMISSIBLE TO ASSES S THE UNDISCLOSED INCOME IN THE ABSENCE OF ANY OTHER EVID ENCE ON ARBITRARY BASIS. THE UNSUBSTANTIATED LOOSE SHEETS CANNOT BE ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 26 CONSIDERED AS A CONCLUSIVE EVIDENCE TO MAKE ANY ADD ITION TOWARDS UNDISCLOSED INCOME. IT WAS HELD BY THE SUP REME COURT IN THE CASE OF CBI VS. V.C. SHUKLA (1998) 3 SCC 410 THAT 'FILE CONTAINING LOOSE SHEETS OF PAPERS ARE NOT BOOKS' AN D HENCE ENTRIES THEREIN ARE NOT ADMISSIBLE U/S. 34 OF THE E VIDENCE ACT, 1872. 28. IN THE PRESENT CASE, THE SEIZED MATERIAL (TWO NOTE BOOKS) MARKED AS KBR/A/02 AND KBR/A/04 WHEREIN CERTAIN ENT RIES ARE FOUND RECORDING VARIOUS TRANSACTIONS PERTAINING TO THE ASSESSEE. THESE ENTRIES IN THE NOTEBOOK ARE UNSUBSTANTIATED A ND ON THAT BASIS THE AO REACHED TO THE CONCLUSION THAT THE FIG URES MENTIONED THEREIN ARE TO BE READ BY ADDING 3 ZEROS AND THEREBY HE CAME TO CONCLUDE THAT THERE IS UNDISCLOS ED INCOME IN THESE 6 ASSESSMENT YEARS. IN OUR OPINION, THE D OCUMENT RECOVERED DURING THE COURSE OF SEARCH WAS A DUMB DO CUMENT AND LED NOWHERE. THE CIT(A) RIGHTLY CAME TO THE CO NCLUSION THAT IT CANNOT BE ACTED UPON AND DELETED THE ADDITI ON. 29. OTHER THAN THE LOOSE PAPER, THE AO HAS NOT BROUGHT ON RECORD ANY CORROBORATIVE MATERIAL OR EVIDENCE TO SH OW THAT THE INFERENCE MADE BY HIM IS CORRECT. THE CIT(A) AFTER TAKING THE TOTALITY OF THE CIRCUMSTANCES INTO CONSIDERATION CA ME TO THE CONCLUSION THAT THE ADDITION MADE BY THE AO IS NOT JUSTIFIED AND THE ARGUMENT PUT FORTH BY THE ASSESSEE IS SUPPO RTED BY DOCUMENTARY EVIDENCE. THIS WAS NOT A CASE WHERE RE LEVANT EVIDENCE HAD BEEN IGNORED BY THE CIT(A) AND THEIR R ELEVANT EVIDENCE HAS BEEN TAKEN INTO CONSIDERATION. THE ON LY TEST THAT ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 27 WAS REQUIRED TO BE APPLIED WAS WHETHER ON THE FACTS FOUND AND THE STATE OF EVIDENCE ON RECORD, THE CONCLUSION ARRIVED AT BY THE CIT(A) WAS ONE WHICH COULD BE ARRIVED BY A R EASONABLE PERSON PROPERLY INFORMED IN LAW. APPLYING THIS TES T, IT COULD NOT BE SAID THAT THE DECISION RECORDED BY THE CIT(A) ON E WHICH COULD NOT HAVE BEEN ARRIVED AT BY A REASONABLE PERS ON PROPERLY INFORMED IN LAW CONSIDERING THE STATE OF E VIDENCE ON RECORD. HENCE, IN OUR CONSIDERED OPINION, THE CIT( A) HAS REACHED A CORRECT CONCLUSION IN DELETING THE ADDITI ON MADE BY THE AO ON THE BASIS OF LOOSE SHEETS. 30. ACCORDINGLY, WE ARE INCLINED TO CONFIRM THE ORDER O F THE CIT(A) IN ALL CASES AND THE REVENUE APPEALS ITA NOS . 329 TO 334/HYD/2012 ARE DISMISSED. EVEN, THE REVENUE APPE AL IN ITA NO. 335/HYD/2012 IS ALSO SIMILAR IN NATURE AS IN OT HER CASES, AND WE DISMISS THIS APPEAL ALSO. 31. IN THE RESULT, ALL APPEALS OF THE REVENUE ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2014. SD/ (SAKTIJIT DEY) JUDICIAL MEMBER SD/ (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 24 TH JANUARY, 2014 TPRAO ITA. NOS. 329-335/HYD/2012 SRI K. BABU RAO & SMT. K. RANI ============-============ 28 COPY FORWARDED TO: 1. THE DEPUTY CIT, CENTRAL CIRCLE6, 7 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD500 004. 2. SRI K. BABU RAO, PLOT NO. 794, ROAD NO. 40, JUBI LEE HILLS, HYDERABAD. 3. SMT. K. RANI, W/O. SRI K. BABU RAO, PLOT NO. 794 , ROAD NO. 40, JUBILEE HILLS, HYDERABAD. 4. THE CIT(A)I, HYDERABAD. 5. THE CIT (CENTRAL), HYDERABAD 6. THE DR 'A' BENCH, ITAT, HYDERABAD