The ACIT Central, Circle-2, Visakhapatnam, Visakhapatnam V. Sri Talluri Satyanarayana, Visakhapatnam

ITA 374/VIZ/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62825 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T LUCAS PETER
• Keywords: Unexplained investment; Income from undisclosed sources; Search and seizure; Revised return
• Section: 44AD; 153A; 132

Judgement Text

ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.374 /VIZ/2011 ASSESSMENT YEAR : 2008 - 09 ACIT, CENTRAL CIR CLE - 2 VISAKHAPATNAM VS. SRI TALLURI SATYANARAYANA VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO. AAQPT 9170N ITA NO.375/VIZ/2011 ASSESSMENT YEAR : 2008 - 09 ACIT, CENTRAL CIRCLE - 2 VISAKHAPATNAM VS. SMT. T. SAIMATHA VISAKHAPATNAM (APPELLANT) (RE SPONDENT) PAN NO.ACDPT 7788H ITA NO.376 TO 378/VIZ/2011 ASSESSMENT YEAR : 2004 - 05, 2005 - 06 & 2008 - 09 T. SATYANARAYANA VISAKHAPATNAM VS. DCIT CENTRAL CIRCLE - 2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAQPT 9170N ITA NO.379/VIZ/2011 ASSESSMENT YEAR : 2008 - 09 SMT. T. SAIMATHA VISAKHAPATNAM VS. DCIT CENTRAL CIRCLE - 2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.ACDPT 7788H ITA NO.380/VIZ/2011 ASSESSMENT YEAR : 2008 - 09 KOTTA MALLIKARJUNA RAO VISAKHAPATNAM VS. DCIT CENTRAL C IRCLE - 2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AJRPR 8104Q ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 2 ITA NO.381/VIZ/2011 ASSESSMENT YEAR : 2008 - 09 SRI SAI RAM BUILDERS VISKAHAPATNAM VS. DCIT CENTRAL CIRCLE - 2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.ABBFS 6547G APP ELLANT BY: SHRI T. LUCAS PETER, CIT(DR) RESPONDENT BY: SHRI G.V.N. HARI, CA DATE OF HEARING : 11 .04.2012 DATE OF PRONOUNCEMENT : 13.04.2012 ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE CROSS APPEALS ARE PREFERRED BY THE ASSESSEE AS WELL AS THE REVENUE AGAINST THE RESPECTIVE ORDER OF THE CIT(A). THE ISSUES INVOLVED IN ALL THESE APPEALS ARE ALMOST COMMON. WE HOWEVER PREFER TO ADJUDICATE THEM ONE AFTER THE OTHER. ITA NOS.376 & 377 OF 2011: 2. IN THESE APPEALS, THE ASSESSEE HAS ASSAILED THE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2004-05 AND 2005- 06 ON COMMON GROUNDS THAT THE CIT(A) IS NOT JUSTIFIED IN PARTIALLY CONFI RMING THE ADDITION MADE IN RESPECT OF ALLEGED UNDISCLOSED TURNOVER BY DIRECTIN G THE A.O. TO ESTIMATE THE NET PROFIT THERE ON AT 20%. 3. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE FILED ORIGINAL RETURN OF INCOME FOR THE IMPUGNED ASSESSME NT YEAR I.E. 2004-05 AND 2005-06 ADMITTING INCOME THEREIN OF ` . 12,34,930/- AND ` 18,71,310/- RESPECTIVELY. SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME-TAX ACT WAS CONDUCTED IN M/S. SAIRAM PARLOUR GROUP OF CASES ON 30.1.2008. NOTICES U/S 153A WERE ISSUED IN RESPONSE TO WHICH ASSESSEE FILED REVISED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 & 2005-06 DE CLARING INCOME OF ` . 12,74,930/-FOR A.Y. 2004-05 AND ` . 50,66,050/- FOR THE A.Y. 2005-06. DURING THE ASSESSMENT PROCEEDINGS, A.O. OBSERVED FROM THE SEIZED DOCUMENT A/SRP/2004 PAGE NO.26 THAT ASSESSEE HAS INCURRED SO ME UNACCOUNTED EXPENSES. SUCH EXPENSES WERE TO THE TUNE OF ` .5,50,000/- FOR A.Y. 2004-05 ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 3 AND ` . 4,37,500/- FOR THE A.Y. 2005-06. THE ASSESSEE WA S ASKED TO EXPLAIN THESE ENTRIES AND WHEN HE FAILED TO EXPLAIN THE SAM E, THE A.O. TREATED THESE EXPENSES AS UNACCOUNTED EXPENSES AND ADDED TO THE I NCOME OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS. AGAINST THIS ADDITI ON, ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A) WITH THE SUBMISSION THAT THE SEIZED SLIPS DO NOT REPRESENT ANY TRANSACTIONS OUTSIDE THE BOOKS OF ACC OUNTS. THIS STATEMENT WAS PREPARED BY MR. GOPI THEIR EMPLOYEE MANAGING A CANTEEN THERE AND THE AMOUNTS INDICATING AT PAGE NO.26 WERE NOTHING BUT T HE PAYMENT MADE TO HIM ON VARIOUS DATES FOR PURCHASE OF VARIOUS PROVISIONS LIKE VEGETABLES, MILK, ETC. THUS, ALL THESE EXPENSES WERE ALREADY TAKEN INTO TH E BOOKS OF ACCOUNTS. 4. THE CIT(A) HAS RE-EXAMINED THE ISSUE IN THE LIGH T OF THE ASSESSEES CONTENTION BUT WAS NOT FULLY CONVINCED. HE HOWEVER ACCEPTED THAT THE ENTRIES RELATED TO THE BUSINESS OF CANTEEN. BUT HE CONCLUDED THAT THE AMOUNT REPRESENTS CASH RECEIPT BY THE ASSESSEE ON VARIOUS DATES TOWARDS SALES FROM THE CANTEEN AT VEPZ. THEREFORE, IT SHOULD BE CONSI DERED AS A PART OF THE TURNOVER IN THE HANDS OF THE ASSESSEE. THE CIT ACC ORDINGLY ESTIMATED THE NET PROFIT AT 20% ON THE RECEIPTS DEPICTING ON THE DOCU MENT FOUND IN THE COURSE OF SEARCH. ACCORDINGLY, ADDITION OF ` . 1,10,000/- AS AGAINST ` 5,50,000/- WAS MADE IN THE ASSESSMENT YEAR 2004-05 AND OF ` . 87,500/- AS AGAINST ` . 4,37,500/- IN A.Y. 2005-06. 5. AGAINST THIS ADDITION, ASSESSEE HAS PREFERRED TH ESE APPEALS WITH THE SUBMISSION THAT ADMITTEDLY THESE TRANSACTIONS RELAT E TO THE BUSINESS OF CANTEEN AND IN CANTEEN BUSINESS THE NET PROFIT @ 20 % IS NOT AT ALL POSSIBLE. HE HOWEVER, REQUESTED THAT REASONABLE PROFIT @ 4% W HICH WAS OFFERED BY THE ASSESSEE IN THE REGULAR COURSE OF BUSINESS MAY BE ADOPTED. 6. THE LD. D.R. ON THE OTHER HAND HAS STRONGLY OPPO SED THE CONTENTIONS OF THE ASSESSEES. BESIDES PLACING A HEAVY RELIANCE UPON THE ORDER OF THE A.O., THE LD. D.R. HAS SUBMITTED THAT IN EATABLE ITEMS TH E PERCENTAGE OF PROFIT IS MORE. THEREFORE, THE ESTIMATION MADE BY THE CIT(A) BE APPROVED. ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 4 7. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE R IVAL SUBMISSIONS AND FROM A PERUSAL OF RECORD, WE FIND THAT THERE IS NO DISPUTE WITH REGARD TO THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH. IT IS ALSO AN ADMITTED FACT THAT THIS DOCUMENT RELATE TO THE BUSINESS OF CANTEEN OF THE ASSESSEES AND IN CANTEEN BUSINESS THE MARGIN OF PROFIT MAY NOT BE MO RE. BUT THE PROFIT AS OFFERED BY THE ASSESSEES CANNOT BE ADOPTED AS IN EA TABLE ITEMS THE PERCENTAGE OF PROFIT IS ON HIGHER SIDE. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE NET PROFIT SHOULD BE ESTIMATED AT 10% TO MEET T HE ENDS OF JUSTICE. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND D IRECT THE A.O. TO ESTIMATE THE NET PROFIT AT 10% OF THE TOTAL AMOUNT MENTIONED IN THE SEIZED DOCUMENT. ITA NOS.374, 375, 378 & 379/VIZ/2011: 8. THESE APPEALS ARE CROSS APPEAL FOR THE ASSESSMEN T YEAR 2008-09. IN THESE APPEALS, THE COMMON ISSUE INVOLVED IS WITH RE SPECT TO THE ESTIMATION OF PROFIT ON THE TURNOVER WORKED OUT ON THE BASIS OF T HE SEIZED MATERIAL. THE FACTS IN THIS REGARD BORNE OUT FROM THE ORDERS OF T HE LOWER AUTHORITIES ARE THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, CERTAIN DOCUMENTS WERE FOUND ON THE BASIS OF WHICH A.O. HAS OBSERVED THAT THE SEIZED MATERIAL I.E. VARIOUS VOUCHERS, REFLECTING THE ACTUAL SALE RECEIP TS OF THE RESTAURANT PERTAINING TO THE FINANCIAL YEAR 2007-08. BASING O N THE SEIZED MATERIAL IN ANNEXURES A/SRP/1 TO 47 WHICH ARE THE DAILY SALE BI LLS AND EXPENDITURE SLIPS FOR THE PERIOD FROM 16.9.2007 TO 28.1.2008, THE ACT UAL SALE SUPPRESSION AND UNACCOUNTED EXPENSES WERE WORKED OUT BY THE A.O. S UCH SALE SUPPRESSION FOR A PERIOD OF 5 MONTHS CAME TO ` . 1,25,65,735/- AND AFTER DEDUCTING THE EXPENSES OF ` . 72,75,974/- THE NET PROFIT WAS ARRIVED AT ` . 52,89,761/-. THESE FIGURES REPRESENT THE SHARES OF ASSESSEES I.E . P. SATYANARAYANA IN THE SAIRAM PARLOUR. SIMILARLY, THE A.O. WORKED OUT THE SHARE OF SMT. T. SAIMATHA, W/O SRI T. SATYANARAYANA, SEPARATELY. BA SED ON THE ABOVE FIGURES, THE A.O. EXTRAPOLATED THE PROFIT FOR THE WHOLE YEAR I.E. 2007-08 AND ACCORDINGLY, A.O. WORKED OUT THE ANNUAL SALE, ANNUA L EXPENSES, ANNUAL GROSS PROFIT FOR THE YEAR 2007-08 WHICH CAME TO ` . 3,47,46,161/-, ` . 2,01,19,170/- AND ` . 1,46,26,991/- RESPECTIVELY IN THE CASE OF T. SATY ANARAYANA. TO THIS HE HAS ALSO ADDED THE PROFIT ARRIVED ON SATYA NON-VEG & PARCELS OF ` . ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 5 30,58,884/- ON ANNUALIZED BASIS IN THE CASE OF T. S ATYANARAYANA THEREBY TOTAL PROFIT COMES TO ` . 1,76,85,875/-. THE A.O. ACCORDINGLY ISSUED THE S HOW CAUSE NOTICE TO THE ASSESSEE T. SATYANARAYANA AS TO WHY T HE GROSS PROFIT OF ` . 1,76,85,875/- AS ARRIVED AT SHOULD NOT BE BROUGHT T O TAX IN HIS HAND FOR THE ASSESSMENT YEAR 2008-09. 9. IN REPLY THERETO, THE ASSESSEE SUBMITTED THAT HE HAS WORKED OUT THE TURNOVER OF ` . 1,89,61,212/- AND AFTER REDUCING THE BOOK FIGURE OF TURNOVER REPORTED FOR THE PERIOD FROM 13.9.2007 TO 29.1.2008 I.E. ` . 14,45,609/- THE UNDISCLOSED TURNOVER COMES TO ` . 1,67,23,604/- AND NET PROFIT @ 4% THEREON WAS CALCULATED AND THE SAME WAS ALREADY OFFERED AS UNDISCLOSED INCOME FOR THE YEAR. IT WAS ALSO CONTENDED ON BEHALF OF THE A SSESSEE THAT RATES OF EATABLE ITEMS AT ASSESSEES RESTAURANT ARE VERY LOW WHEN COMPARED WITH THE OTHER HOTELS. THE TURNOVER IS MORE BECAUSE OF THE LOW COST OF THE PRODUCT. IT WAS FURTHER CONTENDED THAT CERTAIN EXPENSES WHICH W ERE NOT PROPERLY REFLECTED IN THEIR BOOKS FOR 16.9.2007 TO 28.1.2008 . THE A.O. WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AND ESTIMATED THE PROFIT OF ` . 1,76,85,875/- FOR THE WHOLE YEAR. 10. SIMILARLY, IN THE CASE OF SMT. T. SAIMATHA, THE A.O. HAS ESTIMATED THE PROFIT AT ` . 1,58,59,811/- FOR THE WHOLE YEAR. ACCORDINGLY, T HE INCOME IN THE HANDS OF T. SATYANARAYANA WAS COMPUTED AT ` . 1,91,93,073/- A TAX DEMAND OF ` . 72,84,854/- WAS RAISED. IN THE CASE OF T. SATYAN ARAYANA THE TOTAL INCOME WAS ESTIMATED AT ` . 1,67,70,881/- AND DEMAND OF ` . 65,48,956/- WAS RAISED. THE ASSESSEES PREFERRED AN APPEAL BEFORE T HE CIT(A) AND REITERATED ITS CONTENTIONS. IT WAS ALSO CONTENDED THAT THE PE RCENTAGE OF PROFIT ESTIMATED BY THE A.O. ON THE TURNOVER IS APPROXIMAT ELY 42.09% WHICH IS VERY HIGH IN THIS LINE OF BUSINESS. IT WAS CONTENDED TH AT THE ASSESSEE WAS RUNNING ITS BUSINESS FOR A LOWER MIDDLE CLASS IN WHICH THE RATES OF PRODUCTS ARE VERY NOMINAL. THEREFORE, THERE CANNOT BE A PROFIT AT 42 .09% AS DETERMINED BY THE A.O. HE HAS ALSO DISPUTED THE EXTRAPOLATION OF THE PROFIT FOR THE WHOLE YEAR HAVING RELIED UPON THE SEIZED MATERIAL. THE CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF THE ASSESSEES CONTENTIONS. BEING PAR TLY CONVINCED WITH IT THE CIT RESTRICTED THE TURNOVER ON THE BASIS OF THE SEIZED MATERIAL. BUT HE DID NOT REDUCE THE PERCENTAGE OF PROFIT AND ACCORDINGLY THE TOTAL NET PROFIT WAS ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 6 CALCULATED IN THE HANDS OF T. SATYANARAYANA AT ` . 71,77,961/- AND IN THE HANDS OF T. SAIMATHA AT ` . 57,35,603/-. 11. AGGRIEVED WITH THE ORDER OF THE CIT(A), THE REV ENUE AS WELL AS THE ASSESSEE ARE BEFORE US. THE ASSESSEE IS AGGRIEVED WITH THE PERCENTAGE OF NET PROFIT ESTIMATED BY THE CIT(A) ON THE TURNOVER CALCULATED ON THE BASIS OF THE SEIZED MATERIAL. WHEREAS, THE REVENUE IS AGAIN ST THE REDUCTION OF PROFIT BY NOT EXTRAPOLATING THE PROFIT FOR THE WHOLE YEAR. 12. DURING THE COURSE OF HEARING, THE LD. COUNSEL F OR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE PHOTOCOPIES OF THE CER TAIN SEIZED MATERIAL IN WHICH THE SALE PRICE OF THE VARIOUS EATABLE ITEMS A RE MENTIONED WITH THE SUBMISSION THAT THE RATES ON WHICH EATABLE ITEMS AR E SOLD ARE VERY NOMINAL AS THIS EATING JOINT IS ONLY FOR THE LOWER MIDDLE CLAS S PEOPLE. THE RATES SHOWN IN THE SEIZED MATERIAL CAN BE COMPARED WITH THE PREVAI LING RATE OF THE OTHER HOTELS IN ORDER TO ASCERTAIN THE GENUINENESS OF THE CLAIM. IN ANY CASE THERE CANNOT BE A NET PROFIT @ 42.09% OF THE TURNOVER. W ITH REGARD TO THE EXTRAPOLATION OF THE PROFIT IS CONCERNED, THE LD. C OUNSEL FOR THE ASSESSEE HAS CONTENDED THAT FROM THESE SEIZED MATERIAL, IT CANT BE INFERRED THAT ASSESSEE HAS MADE THE SALE OUTSIDE THE BOOKS OF ACCOUNTS THR OUGH OUT THE YEAR. HE HAS ALSO FILED THE PHOTOCOPIES OF THE CATALOGUES AL ONG WITH THE RATE LIST OF DIFFERENT HOTELS OF THE CITY. 13. THE LD. D.R. ON THE OTHER HAND HAS STRONGLY REF UTED THE CONTENTION OF THE ASSESSEE WITH THE SUBMISSION THAT THE PERCENTAG E OF PROFIT IN EATABLE ITEMS ARE QUITE HIGH AND EVEN IT MAY GO TO 100%. W ITH REGARD TO THE EXTRAPOLATION THE CIT(DR) HAS CONTENDED THAT A.O. H AS RIGHTLY EXTRAPOLATED THE PROFIT FOR THE WHOLE YEAR ON THE BASIS OF THE S EIZED MATERIAL AND THIS IS PERMISSIBLE UNDER THE LAW. 14. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE RECORD, WE FIND THAT DURING THE COURSE OF SEARCH CERTAIN VOUCHERS/SALE BILLS ARE FOUND WHICH WERE NO T PROPERLY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. THE ASSESSING OFFICER H AS WORKED OUT THE TOTAL TURNOVER ON THE BASIS OF THE SEIZED MATERIAL FIRSTL Y FOR THE PERIOD TO WHICH THE ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 7 SEIZED MATERIAL RELATES AND LATER ON EXTRAPOLATED T HE PROFIT FOR THE WHOLE YEAR. NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT T HROUGH OUT THE YEAR THERE WAS A SALE OUTSIDE THE BOOKS OF ACCOUNTS. WHATEVER MATERIAL WAS SEIZED FOR A PARTICULAR PERIOD, THE ADDITIONS ARE REQUIRED TO BE MADE ON THE BASIS OF THAT MATERIAL. WE THEREFORE, OF THE VIEW THAT CIT(A) IS CORRECT IN ESTIMATING THE TURNOVER ON THE BASIS OF SEIZED MATERIAL ALONE. WE HOWEVER, DO NOT AGREE WITH THE PERCENTAGE OF PROFIT ESTIMATED BY THE CIT( A), AS THERE CANT BE NET PROFIT AT 42.09% IN SUCH TYPE OF BUSINESS ACTIVITY. ASSESSEE HAS ALSO FILED THE COMPARATIVE RATES OF OTHER HOTELS I.E. TYCOON AND E XECUTIVE COURT WHICH ARE KNOWN TO BE THE HOTELS FOR THE MIDDLE CLASS AND ON COMPARISON WE FIND THE RATES SHOWN BY THE ASSESSEE ARE LESSER THAN THE RAT ES SHOWN BY THESE TWO HOTELS. WE THEREFORE, OF THE VIEW THAT CIT(A) HAS NOT PROPERLY ESTIMATED THE NET PROFIT ON THE TURNOVER CALCULATED ON THE BASIS OF THE SEIZED MATERIAL ONLY. THE ASSESSEE HAS CLAIMED THAT THE NET PROFIT MAY BE CONSIDERED ONLY AT 4% WHICH HAS BEEN DECLARED BY HIM IN ITS REGULAR BOOKS OF ACCOUNTS. IN ALTERNATIVE, HE HAS ARGUED THAT THE ASSISTANCE MAY BE DRAWN FROM THE PROVISIONS OF SECTION 44AD OF THE ACT IN WHICH THE NET PROFIT IS TO BE ESTIMATED AT 8% ON THE GROSS TURNOVER OF THE RECEIP TS. WHEREAS, THE LD. CIT(DR) CONTENDED THAT IF THE EXTRAPOLATION IS NOT PERMITTED AT LEAST THE PROFIT ESTIMATED BY THE CIT BE CONFIRMED. 15. WE HAVE EXAMINED THE DETAILS FURNISHED BEFORE U S AND THE ESTIMATION MADE BY THE CIT(A) AND WE ARE OF THE VIEW THAT TO M EET THE ENDS OF JUSTICE, A REASONABLE NET PROFIT ON THE TOTAL TURNOVER IS TO BE CALCULATED ON THE BASIS OF SEIZED MATERIAL ALONE. KEEPING IN VIEW OF THE F ACTUAL MATRIX OF THE CASE WE HOLD THAT NET PROFIT ON TOTAL TURNOVER BE ESTIMATED AT 12%. WE ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) IN BOTH THE APPEA LS AND DIRECT THE A.O. TO ESTIMATE THE NET PROFIT AT 12% ON THE TURNOVER ESTI MATED BY THE CIT(A) ON THE BASIS OF THE SEIZED MATERIAL. ACCORDINGLY, THE SE CROSS APPEALS ARE DISPOSED OF. ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 8 ITA NO.380 OF 2011: 16. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) CONFIRMING THE ADDITION MADE BY THE A.O. AMOUNTING ` . 50 LAKHS ON THE GROUND OF NOT EXPLAINING THE SOURCE FOR THE SAME, A S UNEXPLAINED INVESTMENT UNDER PROVISIONS OF SECTION 69B OF THE INCOME-TAX A CT. 17. THE FACTS IN BRIEF BORNE OUT FROM THE ORDERS OF THE LOWER AUTHORITIES ARE THAT DURING THE COURSE OF SEARCH AND SEIZURE OP ERATION ON SAIRAM PARLUR GROUP AN AGREEMENT WAS FOUND BY THE REVENUE AND AS PER THIS AGREEMENT, ASSESSEE HAS AGREED TO PAY AN AMOUNT OF ` . 1 CRORE TO M/S. SAIRAM BUILDERS WHICH AFTER 14 MONTHS WILL RETURN ` . 2 CRORES. THE CONDITION LAID DOWN IN THE AGREEMENT IS THAT M/S. SAIRAM BUILDERS HAS TO OFFER 6 ACRES OF LAND AS SURETY, PROMISSORY NOTE OF WORTH ` . 1 CRORE AND POST DATED CHEQUE OF ` . 2 CRORES TO THE ASSESSEE. AS PER THE AGREEMENT, THE ASSESSEE H AS PAID AN AMOUNT OF ` . 50 LAKHS VIDE CHEQUE NO.011930 DATED 6.6.2007 OF HS BC BANK AND ` . 50 LAKHS IN CASH ON THIS DAY TO THE SECOND PARTY. THE STATEMENT OF THE ASSESSEE WAS ALSO RECORDED IN WHICH HE DENIED THE PAYMENT IN CASH. WITH REGARD TO THE SOURCE OF PAYMENT OF CHEQUE AMOUNT OF ` . 50 LAKHS IT WAS EXPLAINED BY THE ASSESSEE THAT HE GOT THE AMOUNT FROM HIS SON WH O IS WORKING AS SOFTWARE ENGINEER IN ABROAD. RELYING UPON THE AGREEMENT, TH E A.O. OBSERVED THAT ASSESSEE HAS PAID ` . 50 LAKHS IN CASH BUT FAILED TO FURNISH ADEQUATE S OURCE OF ` . 50 LAKHS. HE ACCORDINGLY ADDED THE SAME AS UNACC OUNTED INCOME. 18. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) BUT DID NOT FIND FAVOUR WITH HIM. 19. NOW THE ASSESSEE IS BEFORE US WITH THE SUBMISSI ON THAT WHATEVER AMOUNT WAS PAID THROUGH CHEQUE, IT WAS ALSO RETURNE D BEFORE THE SEARCH UPON THE SAIRAM BUILDER. THEREFORE, SO CALLED AGRE EMENT WAS NOT ENFORCED BY THE ASSESSEE AND MOREOVER, THE SAID AGREEMENT WA S NOT PROPERLY EXECUTED. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION TO THE AGREEMENT WHICH IS AVAILABLE AT PAGE NO.5 TO 6 OF THE COMPILATION OF THE ASSESSEE WITH THE SUBMISSION THAT IT WAS MENTIONED IN THIS AGREEMENT THAT ` . 1 CRORE IS TO BE PAID THROUGH CHEQUE AS WELL AS IN CASH OF ` . 50 LAKHS EACH BUT IN FACT ONLY THE CHEQUE WAS PAID. HE HAS ALSO INVITED OUR ATTENTION TO ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 9 CLAUSE 7 OF THE AGREEMENT IN WHICH THIS SAIRAM BUIL DERS WAS REQUIRED TO FURNISH THE 6 ACRES OF LAND AS A SURETY BUT IN THAT CLAUSE 7 THE DETAILS OF THE LAND WERE NOT RATHER MENTIONED. IT WAS FURTHER CON TENDED THAT ONE CAN ADVANCE A LOAN OR DEPOSIT THROUGH CHEQUE BUT IF SOM EBODY WANTS TO MAKE THE PAYMENT IN CASH CERTAINLY HE WOULD LIKE TO HAVE A SECURITY OF HIS RETURN. AS PER THE AGREEMENT 6 ACRES OF LAND WERE TO BE FUR NISHED AS A SURETY ONCE THE ASSESSEE GIVES A CASH OF ` . 50 LAKHS. HE HAS ALSO INVITED OUR ATTENTION TO THE COPY OF ACCOUNT WITH THE SUBMISSION THAT THIS A MOUNT OF ` . 50 LAKHS WAS ALSO RETURNED BACK THROUGH CHEQUE AND ENCASHED BEFO RE THE SEARCH WAS CONDUCTED. THEREFORE, THE TERMS OF THE AGREEMENT C ANNOT BE RELIED ON. BECAUSE AS PER THE AGREEMENT, THE MONEY IS TO BE GI VEN FOR 14 MONTHS IN WHICH THE SAIRAM BUILDER WAS REQUIRED TO RETURN DOU BLE THE AMOUNT. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO INVITED OUR ATTEN TION TO THE STATEMENT WHICH WAS RECORDED ON 11.2.2008 AFTER THE FEW DAYS OF THE SEARCH AND IN THAT STATEMENT ASSESSEE HIMSELF HAS STATED THAT HE HAS G IVEN ` . 50 LAKHS THROUGH CHEQUE AND NOT IN CASH. THE SOURCE OF PAYMENT WAS STATED TO BE FROM HIS SON WHO WAS WORKING AS A SOFTWARE ENGINEER IN ABROA D. IT WAS ALSO EXPLAINED THAT ASSESSEE WAS NOT DOING ANY BUSINESS AND WHATEVER MONEY COMES, IS FROM HIS SON. THEREFORE, NO ADDITION IS CALLED FOR IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF ALLEGED PAYMENT IN CASH. HE HAS ALSO INVITED OUR ATTENTION TO THE CANCELLATION AGREEMENT DATED 19.6. 2007 THROUGH WHICH THE AGREEMENT EXECUTED WAS ALSO CANCELLED AND THE MONEY THROUGH CHEQUE WAS ALSO REFUNDED. LD. COUNSEL FOR THE ASSESSEE HAS AL SO INVITED OUR ATTENTION THAT NO ADDITION ON THIS ACCOUNT WAS MADE IN THE HA NDS OF SAIRAM BUILDERS. 20. THE LD. CIT(DR) ON THE OTHER HAND BESIDES PLACI NG HEAVY RELIANCE UPON THE ORDER OF THE CIT(A) HAS CONTENDED THAT THE PAYMENT THROUGH CHEQUE WAS FOUND DULY RECORDED IN THE BOOKS OF ACCO UNTS. THEREFORE, WHEN ONE ENTRY FOUND IN THE SEIZED AGREEMENT IS REFLECTE D IN THE REGULAR BOOKS OF ACCOUNTS, THE OTHER ENTRY PERTAINING TO THE CASH PA YMENT SHOULD ALSO BE ACCEPTED THOUGH IT MAY NOT BE RECORDED IN THE BOOKS OF ACCOUNTS. THE LD. CIT(DR) FURTHER CONTENDED THAT IT IS IMMATERIAL THA T ONE CLAUSE OF THE AGREEMENT WAS NOT PROPERLY FILLED UP. BUT AS PER T HE AGREEMENT, THE BUILDER MUST HAVE ISSUED THE ADVANCE CHEQUE AND THE PRO NOT ES OF THE RECEIVED ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 10 AMOUNT AS A VALID SURETY FOR THE PAYMENT IN CASH. THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION. 21. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSION IN THE LIGHT OF THE DOCUMENTS AVAILABLE ON RECORD, WE FIND THAT UNDISPUTEDLY THE AGREEMENT WAS EXECUTED BETWEEN THE ASSESSEE AND THE SAIRAM BUILDERS ACCORDING TO WHICH ASSESSEE WAS REQUIRED TO MAKE PA YMENT OF ` . 1 CRORE ( ` . 50 LAKHS THROUGH CHEQUE AND ` . 50 LAKHS IN CASH). THE ENTRY OF PAYMENT THROUGH CHEQUE WAS REFLECTED IN THE BOOKS OF ACCOUN TS. BUT THE PAYMENT IN CASH WAS NOT FOUND ANYWHERE IN THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEES. THE REVENUES STAND IS THAT ONCE THE ON E ENTRY IS REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS, OTHER ENTRY IN THE RECOR D SHOULD NOT BE DOUBTED. BUT ON A CAREFUL PERUSAL OF THIS AGREEMENT, WE FIND THAT THE ASSESSEE WAS REQUIRED TO GIVE ` . 1 CRORE WHICH WOULD BE DOUBLED WITHIN 14 MONTHS A ND AS A SURETY THE BUILDER WAS REQUIRED TO EXECUTE THE AG REEMENT FOR SALE OF 6 ACRES OF LAND IN FAVOUR OF THE ASSESSEES. THOUGH T HE CLAUSE WAS AVAILABLE IN THE AGREEMENT, BUT DETAILS OF LAND WERE NOT FILLED UP. AS PER THE OTHER CLAUSES, THE BUILDER WAS REQUIRED TO GIVE POST DATE D CHEQUE OF ` . 2 CRORES AND ALSO TO OFFER PROMISSORY NOTE WORTH ` . 1 CRORE. BUT THERE IS NO EVIDENCE WHETHER THESE TWO CONDITIONS ONE IS FOR EXECUTING A GREEMENT FOR SALE OF 6 ACRES LAND WAS FULFILLED AS THE DETAILS OF THE LAND WERE NOT MENTIONED IN THE AGREEMENT. THE CONTENTION OF THE ASSESSEE THAT ` . 50 LAKHS WHICH WAS PAID THROUGH CHEQUE WERE ALSO RECEIVED BACK IN THE MONTH OF JAN08 BEFORE THE SEARCH WAS CONDUCTED IS FOUND CORRECT FROM THE COPY OF ACCOUNT. THOUGH AS PER THE AGREEMENT THIS AMOUNT WAS GIVEN FOR 14 MONT HS, BUT IT WAS RECEIVED BACK WITHIN A PERIOD OF 6 MONTHS AFTER THIS AGREEME NT. IN JUNE07 CANCELLATION AGREEMENT WAS ALSO EXECUTED AND THIS C ANCELLATION AGREEMENT WAS ALSO NOT DOUBTED BY THE REVENUE THOUGH IT WAS N OT FOUND DURING THE COURSE OF SEARCH. IF ALL THESE EVIDENCES ARE TO BE EXAMINED TOGETHER, ONE INFERENCE WOULD BE DRAWN THAT THE AGREEMENT EXECUTE D BETWEEN THE PARTIES WERE NOT PROPERLY ENFORCED. THE REASONS FOR THE RE FUND OF THE CHEQUE AMOUNT WITHIN 6 MONTHS WERE NOT PROPERLY EXPLAINED BY THE BUILDER. THE ASSESSEE HAS ALSO BROUGHT TO OUR NOTICE THAT NO ADD ITION IN THIS REGARD WAS MADE IN THE HANDS OF THE SAIRAM BUILDER. UNDER THE SE CIRCUMSTANCES, WHEN THERE IS NO DIRECT EVIDENCE THAT ASSESSEE HAS MADE A PAYMENT OF ` . 50 LAKHS ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 11 TO THE BUILDER IN CASH THE ADDITION CANNOT BE SUSTA INED U/S 69B OF THE ACT. U/S 69B OF THE ACT, THE ONUS IS UPON THE REVENUE TO PROVE THAT ASSESSEE HAS MADE SOME INVESTMENT OUTSIDE THE BOOKS OF ACCOUNTS. THE REVENUE HAS PLACED A HEAVY RELIANCE UPON THIS AGREEMENT WHICH W AS NOT FINALLY ENFORCED BY PARTIES. MOREOVER, THIS AGREEMENT WAS FOUND DUR ING THE COURSE OF SEARCH FROM THE SAIRAM BUILDERS AND NOT FROM THE ASSESSEES AND SAIRAM BUILDERS NOWHERE HAS ADMITTED THAT THE TERMS OF AGREEMENT WE RE PROPERLY COMPLIED WITH. NOR HAD HE ADMITTED THAT HE HAS RECEIVED ` . 50 LAKHS IN CASH FROM THE ASSESSEES. IN THE ABSENCE OF THE CONCRETE EVIDENCE IT IS VERY DIFFICULT FOR US TO SUSTAIN THE ADDITION IN THE HANDS OF THE ASSESSE ES. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION. ITA NO.381 OF 2011: 22. THROUGH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) CONFIRMING THE ADDITION OF ` . 23,50,000/- MADE BY THE A.O. AS UNACCOUNTED INCOME OF THE ASSESSEES. 23. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD AR E THAT THE ASSESSEE FORM IS ENGAGED IN REAL ESTATE BUSINESS AND DURING THE C OURSE OF SEARCH PROCEEDINGS, CERTAIN SEIZED MATERIAL WAS FOUND ON T HE BASIS OF WHICH THE A.O. HAS OBSERVED THAT THE ASSESSEE HAS RECEIVED A SUM O F ` . 23,50,000/- FOR THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2008-09 AND ` . 16 LAKHS FOR THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2007-08. TH E A.O. TREATED THIS AMOUNT AS UNACCOUNTED RECEIPT AND MADE THE ADDITION OF THE SAME IN BOTH THE ASSESSMENT YEARS. THE ASSESSEE PREFERRED AN AP PEAL BEFORE THE CIT(A) WITH THE SUBMISSION THAT THE A.O. HAS MADE AN ADDIT ION ON THE BASIS OF THE BLANK CASH RECEIPTS FOUND DURING THE COURSE OF SEAR CH. THE CIT(A) RE- EXAMINED THE ISSUE BUT WAS NOT CONVINCED WITH THE E XPLANATIONS OF THE ASSESSEES AND CONFIRMED THE ADDITIONS AFTER HAVING OBSERVED THAT THE PLOTS WITH REGARD TO WHICH THE CASH WAS RECEIVED WERE FIN ALLY SOLD TO THE SAME PERSON AND THE PAYMENT THROUGH CHEQUE FROM THESE PE RSONS WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 12 24. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL WITH THE SUBMISSION THAT THESE ADDITIONS WERE MADE ON THE BASIS OF THE SO CALLED RECEIPT FOUND FROM THE SAIRAM BUILDER AND THESE RECEIPTS DOES NOT BEAR ANY SIGNATURE OF ANYBODY. THEREFORE, THIS DOCUMENT CANNOT BE CONSID ERED TO BE THE CASH RECEIPT FROM THE PERSON WHOSE NAMES ARE MENTIONED I N THIS RECEIPT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED WHEN THE ASSESSEE HAS RECEIVED CERTAIN AMOUNT HE MAY ISSUE A RECEIPT FOR THAT AMOU NT TO THE PAYER AND WHY HE WILL KEEP THAT RECEIPT WITH HIMSELF. IF IN ANY CASE, THE CASH IS RECEIVED, HE WILL MAKE THE NECESSARY ENTRIES SOMEWHERE IN THE AC COUNTS NOT TO PRESERVE A COPY OF THE RECEIPT. 25. LD. CIT(DR) ON THE OTHER HAND HAS CONTENDED TH AT THESE DOCUMENTS CLEARLY DEPICT THAT THE ASSESSEE HAS RECEIVED THE P AYMENT IN CASH FROM THE SAME PERSONS TO WHOM THE PLOT MENTIONED IN THE RECE IPT WERE SOLD. CIT(A) HAS ALREADY GRANTED THE RELIEF IN RESPECT OF THOSE RECEIPTS IN WHICH THE PLOTS WERE SOLD TO SOME OTHER PERSON. THEREFORE, THE CIT (A) IS JUSTIFIED IN MAKING AN ADDITION ON THIS YEAR. 26. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT THE REVENUE AUTHORITY IS INTEND TO MAKE AN ADDITION ON THE BASIS OF THIS DOCUMENT W HICH DOES NOT BEAR ANY SIGNATURE OF ANY REPRESENTATIVE OF THE ASSESSEES. THIS IS A RECEIPT ON A PLAIN PAPER WITHOUT BEARING ANY SIGNATURE. IT SIMPLY CON TAINS THE NAME OF THE PERSON AND THE PLOT NUMBER. WE ARE UNABLE TO UNDER STAND WHEN THE ASSESSEE HAS RECEIVED THE CASH FROM ANYBODY HE IS R EQUIRED TO ISSUE A CASH RECEIPT AND THE RECEIPT IS TO BE PRESERVED BY THE P AYER. THE PAYEE IS NOT REQUIRED TO PRESERVE THE UNSIGNED RECEIPT WITH HIMS ELF. THE PAYER IS MORE CONCERNED ABOUT PAYMENT IN CASH AND NOT THE PAYEE. THEREFORE, WE ARE OF THE VIEW THAT THE ADDITION WAS MADE ON THE BASIS OF THE BLANK DOCUMENT. THUS, WE FIND NO MERIT IN THESE ADDITIONS. ACCORDI NGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION. ITA NOS.374 TO 381/VIZ/2011 T. SATYANARAYANA ETC., VSKP. 13 27. IN THE RESULT, THE APPEALS OF THE ASSESSEES IN ITA NOS.376 TO 379 ARE PARTLY ALLOWED AND ITA NOS.380 & 381 ARE ALLOWED. THE APPEALS OF THE REVENUE IN ITA NOS.374 & 375 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 13.04.2012 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 13 TH APRIL, 2012 COPY TO 1 SRI TALLURI SATYANARAYANA, 47 - 11 - 9, DWARAKANAGAR, VI SAKHAPATNAM 2 SMT. TALLURI SAIMATHA, 47 - 11 - 9, DWARAKANAGAR, VISAKHAPATNAM 3 SRI KOTTA MALLIKARJUNA RAO, D.NO.2 - 109/4, MIDHILAPUR VUDA COLONY, MADHURAVADA, VISAKHAPATNAM 4 SRI SAI RAM BUILDERS, 47 - 11 - 9, DWARAKANAGAR, VISAKHAPATNAM 5 ACIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM 6 DCIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM 7 THE CI T, VISAKHAPATNAM 8 THE CIT (A) , VISAKHAPATNAM 9 THE DR, ITAT, VISAKHAPATNAM. 10 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM