THE ACIT, Visakhapatnam V. Avnash Automobiles Pvt, Ltd., Visakhapatnam

ITA 412/VIZ/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0288 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 19-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G G; B NARASIMHA SHARMA SR
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Income from undisclosed sources; Search and seizure; Revised return
• Section: 143(3); 153A; 132

Judgement Text

ITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B.R. BASKARAN , ACCOUNTANT MEMBER ITA NOS.311&312/VIZAG/2014 ASSESSMENT YEARS : 2007-08 & 2008-09 M/S. AVNASH AUTOMOBILES PVT. LTD. VISAKHAPATNAM VS. DCIT CENTRAL CIRCLE-2 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAFCA 8994H ITA NOS.412&413/VIZAG/2014 ASSESSMENT YEARS : 2007-08 & 2008-09 ACIT CENTRAL CIRCLE-2 VISAKHAPATNAM VS. M/S. AVNASH AUTOMOBILES PVT. LTD. VISAKHAPATNAM (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI B. NARASIMHA SHARMA, SR. STANDING COUNSEL & SHRI G. GURUSAMY, CIT(DR) DATE OF HEARING : 24.07.2015 DATE OF PRONOUNCEMENT : 15.09.2015 ORDER PER BENCH:- THE APPEALS FILED BY BOTH THE PARTIES ARE DIRECTED AGAINST THE ORDERS PASSED BY LD. CIT(A), VISAKHAPATNAM AND THEY RELATE TO THE ASSESSMENT YEARS 2007-08 & 2008-09. IT IS PERTINENT TO NOTE T HAT THE ASSESSMENT OF AY 2007-08 WAS COMPLETED U/S 143(3) R.W.S. 153C OF THE ACT AND THE ASSESSMENT OF AY 2008-09 WAS COMPLETED U/S 143(3) O F THE ACT. 2. THE FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE COMPANY IS DEALING IN MARUTI BRAND CARS. CONSEQUENT TO THE SEARCH OPE RATIONS CONDUCTED IN THE HANDS OF DIRECTORS OF THE ASSESSEE COMPANY, PROCEED INGS WERE INITIATED U/S 153C OF THE ACT. IN RESPONSE TO THE NOTICE ISSUED U/S 153A R.W.S. 153C OF THE HITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP 2 ACT, THE ASSESSEE FILED A WRITTEN REPLY REQUESTING THAT THE ORIGINAL RETURN FILED ON 23.10.2007 BE CONSIDERED AS THE RETURN FILED IN RESPONSE TO THE NOTICE ISSUED U/S 153A R.W.S. 153C OF THE ACT. DURING THE COURSE OF SEARCH PROCEEDINGS, THE DIRECTOR OF THE COMPANY SHRI A. AV NASH WAS EXAMINED U/S 132(4) OF THE ACT. HE WAS CONFRONTED WITH CERTAIN DOCUMENTS WHICH CONTAINED NOTING ABOUT RECEIPT OF MONEY IN RESPECT OF A REAL ESTATE TRANSACTION BY WAY OF COMMISSION. THE SEIZED DOCUM ENTS SHOWED THAT SHRI AVNASH HAD RECEIVED RS.20 LAKHS BY WAY OF CASH AND THE STAFF OF THE ASSESSEE HAD ALSO RECEIVED A SUM OF RS.3,45,000/-. IN THE SW ORN STATEMENT, THE ASSESSEE ADMITTED RS.20 LAKHS AS UNACCOUNTED INCOME OF THE ASSESSEE COMPANY. HOWEVER, THE SAME WAS NOT DECLARED IN THE RETURN OF INCOME TO BE FILED U/S 153A OF THE ACT, SINCE THE ASSESSEE HAD I NTIMATED THAT THE ORIGINAL RETURN MAY BE TREATED AS RETURN FILED U/S 153 OF TH E ACT. SUBSEQUENTLY, DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASS ESSEE FILED A REVISED RETURN OF INCOME, WHEREIN IT DECLARED UNACCOUNTED I NCOME OF RS.20 LAKHS. THE ASSESSING OFFICER, IN VIEW OF THE UNACCOUNTED I NCOME REFERRED ABOVE, REJECTED THE BOOKS OF ACCOUNTS PERTAINING TO AUTOM OBILE BUSINESS AND ESTIMATED THE BUSINESS INCOME FROM AUTOMOBILE BUSIN ESS AT RS.37.18 LAKHS. THE ASSESSING OFFICER ALSO ASSESSED THE SAME OF RS. 20 LAKHS DECLARED BY THE ASSESSEE AND ALSO THE AMOUNT OF RS.3.5 LAKHS RECEIV ED BY THE STAFF OF THE ASSESSEE. ACCORDINGLY, HE DETERMINED THE TOTAL INC OME AT RS.60.63 LAKHS. 3. IN THE APPELLATE PROCEEDINGS, LD. CIT(A) CONF IRMED THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF INCOME. HOWEVE R, THE LD. CIT(A) HELD THAT THE ASSESSING OFFICER WAS NOT CORRECT IN ASSES SING COMMISSION INCOME OF RS.23.45 LAKHS SEPARATELY, SINCE THE BOOKS OF ACCOU NTS HAVE BEEN REJECTED AND INCOME WAS ESTIMATED. ACCORDINGLY, HE DIRECTED THE A.O. TO DELETE THE ADDITION OF RS.23.45 LAKHS. THE ASSESSEE IS AGGRIE VED BY THE DECISION OF LD. CIT(A) IN CONFIRMING THE REJECTION OF AUTOMOBILE BU SINESS AND ESTIMATION OF INCOME FROM THAT BUSINESS. THE REVENUE IS AGGRIEVE D BY THE DECISION OF LD. CIT(A) IN GIVING TELESCOPING BENEFIT TO THE COMMISS ION INCOME AGAINST THE INCOME ESTIMATED FROM AUTOMOBILE BUSINESS. HITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP 3 4. BEFORE US, THE ASSESSEE HAS RAISED TWO LEGAL ISS UES. THE FIRST LEGAL ISSUE RELATES TO THE SCOPE OF ASSESSMENT MADE U/S 1 53A OF THE ACT. ACCORDING TO THE ASSESSEE, THE ADDITIONS MADE BY TH E ASSESSING OFFICER WERE OUTSIDE THE SCOPE OF ASSESSMENT PROCEEDING U/S 143( 3) R.W.S. 153C OF THE ACT. THE FACTS RELATING TO THE ABOVE SAID LEGAL IS SUE IS DISCUSSED IN BRIEF. THE REVENUE CARRIED OUT SEARCH AND SEIZURE OPERATION U/ S 132 OF THE ACT IN THE CASE OF SRI A.T. RAYUDU ON 4.12.2007. DURING THE C OURSE OF SEARCH, CERTAIN INCRIMINATING DOCUMENTS RELATING TO THE ASSESSEE CO MPANY WERE FOUND. HENCE, THE NOTICES U/S 153C OF THE ACT WERE ISSUED TO THE COMPANY ON 15.12.2008. THE SAID NOTICES WERE SERVED ON THE AS SESSEE COMPANY ON 24.12.2008. THE CONTENTION OF THE ASSESSEE IS THAT THE PROCEEDINGS RELATING TO ASSESSMENT YEAR 2007-08 WAS NOT PENDING ON THE D ATE OF ISSUING OF NOTICE U/S 153C OF THE ACT AND HENCE THE ASSESSING OFFICER COULD DISTURB THE COMPLETED ASSESSMENTS UNDER THE PROVISIONS OF SECTI ON 153A R.W.S. 153C OF THE ACT ONLY ON THE BASIS OF INCRIMINATING MATERIAL S FOUND DURING THE COURSE OF SEARCH. 5. THE LD. A.R. ALSO RAISED A CONTENTION THAT T HE ASSESSING OFFICER OF THE SEARCHED PERSON DID NOT RECORD SATISFACTION AS REQU IRED UNDER THE PROVISIONS OF SECTION 153C OF THE ACT AND HENCE THE PROCEEDING S INITIATED AGAINST THE ASSESSEE ARE LIABLE TO BE QUASHED. IN SUPPORT OF H IS CONTENTIONS, HE PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE JURISD ICTIONAL ANDHRA PRADESH HIGH COURT IN THE CASE OF SRI RAO SUBBA RAO (HUF) ( I.T.T.A.NO.254 OF 2014 DATED 15.04.2014), WHEREIN THE HONBLE HIGH COURT H AS HELD AS UNDER:- WE HAVE HEARD THE LEARNED COUNSEL FOR THE APPELLANT AND HAVE GONE THROUGH THE JUDGEMENT AND ORDER OF THE LE ARNED TRIBUNAL. IN PARAGRAPH NO.78.22 OF THE JUDGEMENT, T HE LEARNED TRIBUNAL ON FACT FOUND THAT THERE IS CLEAR NON-FULF ILLMENT OF CONDITIONS LAID DOWN IN SECTION 153C OF THE INCOME T AX ACT, 1961, AS THERE IS NO RECORDING OF SATISFACTION BY THE ASS ESSING OFFICER THAT UNDISCLOSED INCOME BELONGS TO ANY PERSON OTHER THAN THE PERSON WHO WAS SEARCHED WHICH IS A CONDITION PRECEDENT. S ETTLED POSITION OF LAW HAS BEEN APPLIED. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE JUDGEMENT AND ORDER OF THE LEARN ED TRIBUNAL. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ASSESSME NT MADE U/S 153C OF THE ACT FOR AY 2007-08 IS LIABLE TO QUASHED. HITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP 4 6. WITH REGARD TO THE ISSUE RELATING TO THE RE CORDING OF SATISFACTION, THE LD. D.R. SUBMITTED THAT THE ASSESSING OFFICER OF TH E SEARCHED PERSON AND THE ASSESSEE IS ONE AND THE SAME AND HENCE THERE IS NO REQUIREMENT OF RECORDING THE SATISFACTION, AS THE SAME WAS A SIMPLE FORMALIT Y ONLY. 7. IN THE REJOINDER, THE LD. A.R. SUBMITTED THA T THE RECORDING OF SATISFACTION IS COMPULSORY EVEN IF THE ASSESSING OF FICER IS ONE AND THE SAME. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE ON THE DECISION RENDERED BY THE M.P. HIGH COURT IN THE CASE OF CIT VS. MECHMEN 11C (2015) 193 CCH 0132 (MP). THE LD. A.R. INVITED OUR ATTENTION TO P ARA 18 OF THE DECISION WHICH READS AS UNDER: THE CONCOMITANT OF THIS CONCLUSION, IS THAT, THE LE GAL POSITION AS APPLICABLE TO SECTION 158BD REGARDING S ATISFACTION IN THE FIRST INSTANCE OF THE FIRST ASSESSING OFFICER FORWA RDING THE ITEMS TO THE ASSESSING OFFICE4R HAVING JURISDICTION; AND IN THE SECOND INSTANCE OF THE ASSESSING OFFICER HAVING JURISDICTI ON WHILST SENDING NOTICE TO SUCH OTHER PERSON (OTHER THAN THE PERSON REFERRED TO IN SECTION 153A), MUST APPLY PROPRIO VIGORE. THE FACT THAT INCIDENTALLY THE ASSESSING OFFICER IS COMMON AT BOTH THE STAGES WOULD NOT EXTRICATE HIM FROM RECORDING SATISFACTION AT THE RE SPECTIVE STAGES. IN THAT, THE ASSESSING OFFICER IS SATISFIED THAT THE ITEMS REFERRED TO IN SECTION 153C BELONGS OR BELONG TO A PERSON (OTHE R THAN THE PERSON REFERRED TO IN SECTION 153A), BEING SINE QUA NON. HE CANNOT ASSUME JURISDICTION TO TRANSMIT THOSE ITEMS TO ANOTHER FILE WHICH INCIDENTALLY IS PENDING BEFORE HIM CONCERNING OTHER PERSON (PERSON OTHER THAN THE PERSON REFERRED TO IN SECTIO N 153A). THE QUESTION AS TO WHETHER THAT MAY INFLUENCE THE OPINI ON OF THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON, ALSO CANNOT BE THE BASIS TO TAKE ANY OTHER VIEW. AS A M ATTER OF FACT, THE OTHER ASSESSING OFFICER TO WHOM THE ITEMS ARE H ANDED OVER, BEFORE ISSUING NOTICE MUST HIMSELF BE SATISFIED AFT ER DUE VERIFICATION OF THE ITEMS RECEIVED AND THE DISCLOSURES MADE BY T HE OTHER PERSON IN THE RETURNS FOR THE RELEVANT PERIOD ALREADY FILE D BY THE OTHER PERSON BEFORE HIM. FOR THE SAME REASON, WE MUST RE JECT THE ARGUMENT OF THE DEPARTMENT THAT THE DISCRETION OF T HE ASSESSING OFFICER HAVING JURISDICTION WILL BE IMPAIRED IN ANY MANNER, IF HE WERE TO HOLD A DIFFERENT VIEW. SIMILARLY, AS THERE IS NO PROVISION EITHER EXPRESS OR IMPLIED (IN THE ACT) TO DISPENSE WITH THE REQUIREMENT OF SATISFACTION, IF THE ASSESSING OFFIC ER HAPPENS TO BE THE SAME, AS IN THIS CASE, THE ARGUMENT OF THE DEPA RTMENT MUST BE NEGATIVED. HITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP 5 8. WE HAVE HEARD THE PARTIES ON THE SECOND LEGA L ISSUE RELATING TO RECORDING OF SATISFACTION FOR INITIATING PROCEEDING S U/S 153C OF THE ACT. A PERUSAL OF ASSESSMENT ORDER WOULD SHOW THAT THE ASS ESSING OFFICER DID NOT REFER ANYTHING ABOUT SATISFACTION RECORDED BY THE A SSESSING OFFICER OF THE SEARCHED PERSON. DURING THE COURSE OF HEARING BEFO RE US ALSO, THE DEPARTMENT DID NOT PRODUCE ANY MATERIAL TO SHOW THA T THE ASSESSING OFFICER OF THE SEARCHED PERSON HAS RECORDED SATISFACTION IN RE SPECT OF THE ASSESSEE HEREIN AS PER THE PROVISIONS OF SECTION 153C OF THE ACT. 9. THE LD D.R CONTENDED THAT THE ASSESSING OFFICER WAS THE SAME FOR BOTH THE ASSESSEE AND SEARCHED PERSON AND HENCE THE SATI SFACTION SHOULD BE DEEMED TO HAVE BEEN ARRIVED AT. HOWEVER, THE DECIS ION RENDERED BY THE HONBLE M.P. HIGH COURT IN THE CASE OF MECHMEN 11C (SUPRA) STATES THAT THE RESPONSIBILITY OF RECORDING OF SATISFACTION AT THE RESPECTIVE STAGES WOULD NOT BE EXTRICATED EVEN IF THE ASSESSING OFFICER IS COMM ON AT BOTH STAGES. IN VIEW OF THE DECISION OF HONBLE M.P HIGH COURT, REFERRED SUPRA, WE ARE UNABLE TO ACCEPT THE CONTENTIONS OF THE LD D.R. HENCE, IN TH E ABSENCE OF COMPLIANCE OF PROVISIONS OF SECTION 153C OF THE ACT WITH REGARD T O THE RECORDING OF SATISFACTION, THE ASSESSING OFFICER WAS NOT RIGHT I N LAW IN COMPLETING THE ASSESSMENT PROCEEDINGS U/S 153C OF THE ACT. THIS V IEW IS ALSO SUPPORTED BY THE DECISION RENDERED BY THE JURISDICTIONAL HIGH CO URT IN THE CASE OF SRI RAO SUBBA RAO (SUPRA). ACCORDINGLY, WE SET ASIDE THE O RDER OF LD. CIT(A) AND QUASH THE ASSESSMENT ORDER. 10. WITH REGARD TO THE FIRST ISSUE RELATING TO THE SCOPE OF ASSESSMENT U/S 153A OF THE ACT, WE WISH TO STATE HERE THAT THE SAI D ISSUE WAS CONSIDERED IN A DETAILED MANNER IN THE CASE OF SHRI A.T. RAYUDU, AF TER DULY CONSIDERING THE ARGUMENTS OF LD STANDING COUNSEL OF THE REVENUE SHR I NARASIMHA SHARMA AND THE COUNSEL OF THE ASSESSEE SHRI G.V.N. HARI. HOWEVER, SINCE WE HAVE QUASHED THE ASSESSMENT ORDER ON THE BASIS OF SECOND LEGAL ISSUE RELATING TO RECORDING OF SATISFACTION, WE DO NOT FIND IT NECESS ARY TO ADJUDICATE THE SAME. HITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP 6 11. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE F OR AY 2007-08 IS TREATED AS ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. 12. WE SHALL NOW TAKE UP THE APPEALS FILED BY BOTH THE PARTIES FOR THE ASSESSMENT YEAR 2008-09. THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT OF THIS YEAR U/S 143(3) OF THE ACT. DUR ING THE COURSE OF SEARCH PROCEEDINGS CONDUCTED IN THE HANDS OF A.T. RAYUDU, CERTAIN DOCUMENTS WERE SEIZED WHICH SHOWED THAT THE ASSESSEE COMPANY HAS P AID A SUM OF RS.1.32 CRORES BY WAY OF CHEQUE AND ANOTHER SUM OF RS.1.02 CRORES BY WAY OF CASH IN CONNECTION WITH PURCHASE OF A PROPERTY. WHEN THESE DOCUMENTS WERE CONFRONTED WITH SHRI AVNASH, DIRECTOR OF THE COMPAN Y AND WHEN HE WAS ASKED OUT THE PAYMENT OF RS.1.02 CRORES BY WAY OF C ASH, HE SUBMITTED THAT HE PAID A SUM OF RS.10 LAKHS OUT OF HIS PERSONAL BA NK ACCOUNT AND THE REMAINING AMOUNT OF RS.92 LAKHS WAS ADMITTED BY HIM AS ADDITIONAL INCOME IN THE HANDS OF THE ASSESSEE COMPANY. HOWEVER, SUB SEQUENTLY SHRI AVNASH RETRACTED FROM THE STATEMENT GIVEN BY HIM. HENCE, IN THE RETURN OF INCOME FILED BY THE ASSESSEE COMPANY, NO ADDITIONAL INCOME WAS DECLARED. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE FILED A REVISED RETURN OF INCOME DECLARING ADDITIONAL INCOME TO THE EXTENT OF RS.73 LAKHS, CONSISTING OF RS.72.00 LAKHS PERTAINING TO PAYMENT MADE BY WAY OF CASH FOR PROPERTY PURCHASE AND ANOTHER 1.00 LAKH FOR OTHER R EASON. THOUGH THE ASSESSEE ADMITTED A SUM OF RS.92.00 LAKHS IN HIS SW ORN STATEMENT, HE SOUGHT SET OFF OF RS.20.00 LAKHS OFFERED BY HIM IN THE IMM EDIATELY PRECEDING YEAR AND ACCORDINGLY OFFERED RS.72.00 LAKHS IN THE REVIS ED RETURN OF INCOME. HOWEVER, THE ASSESSING OFFICER ASSESSED THE SUM OF RS.92 LAKHS ORIGINALLY DECLARED BY THE DIRECTOR OF THE ASSESSEE COMPANY IN THE SWORN STATEMENT AS INCOME OF THE ASSESSEE. BESIDES THE ABOVE, THE AO ALSO REJECTED THE BOOKS OF ACCOUNTS OF AUTOMOBILE BUSINESS AND ESTIMATED TH E INCOME AT RS.91.84 LAKHS. DURING THE COURSE OF SEARCH A RECEIPT WAS S EIZED WHICH SHOWED THAT THE ASSESSEE HAS PAID A SUM OF RS.3 LAKHS TO A PERS ON NAMED SHRI B. SRINIVAS. SINCE THE ASSESSEE COULD NOT GIVE PROPER EXPLANATIO N WITH REGARD TO THIS PAYMENT THE ASSESSING OFFICER ALSO ASSESSED THE ABO VE SAID SUM OF RS.3 HITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP 7 LAKHS. ACCORDINGLY, THE ASSESSING OFFICER DETERMIN ED THE TOTAL INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 AT RS.1,86,84, 742/-. 13. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CON FIRMED THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF INCOME FROM AUT OMOBILE BUSINESS. THE LD. CIT(A) ALSO CONFIRMED THE ASSESSMENT OF UNACCOU NTED PAYMENT OF RS.3 LAKHS. THE LD. CIT(A), AS HELD BY HIM IN ASSESSMEN T YEAR 2007-08, HELD THAT NO SEPARATE ADDITION OF RS.92 LAKHS IS REQUIRED TO BE MADE, WHEN BOOKS OF ACCOUNT OF THE ASSESSEE IS REJECTED AND PROFIT FROM AUTOMOBILE BUSINESS IS ESTIMATED. ACCORDINGLY, HE GAVE TELESCOPING BENEFI T TO RS.92 LAKHS AGAINST THE INCOME ESTIMATED FROM AUTOMOBILE BUSINESS. 14. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD . CIT(A) IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATING I NCOME FROM AUTOMOBILE BUSINESS AND ALSO IN CONFIRMING THE ADDITION OF RS. 3 LAKHS RELATING TO UNEXPLAINED PAYMENT. THE REVENUE IS AGGRIEVED BY T HE DECISION OF LD. CIT(A) IN GIVING TELESCOPING BENEFIT TO THE ADDITIO N OF RS.92 LAKHS MADE BY THE ASSESSING OFFICER. 15. THE LD. A.R. SUBMITTED THAT THE SEARCH OFFICIAL S AS WELL AS THE ASSESSING OFFICER DID NOT FIND ANY DISCREPANCY OR M ISTAKES IN THE BOOKS OF ACCOUNTS MAINTAINED FOR AUTOMOBILE BUSINESS AND HEN CE THERE IS NO PROPER REASON RECORDED FOR REJECTING BOOKS OF ACCOUNTS REL ATING TO AUTOMOBILE BUSINESS. HE FURTHER SUBMITTED THAT THE COMMISSION EARNED IN REAL ESTATE TRANSACTION IN ASSESSMENT YEAR 2007-08 AND ALSO THE UNDISCLOSED PAYMENT MADE IN RESPECT OF PROPERTY PURCHASES CANNOT BE LIN KED TO AUTOMOBILE BUSINESS IN THE ABSENCE OF ANY MATERIAL TO SHOW THA T THE ASSESSEE HAS GENERATED INCOME OUTSIDE THE BOOKS OF ACCOUNTS IN R ESPECT OF AUTOMOBILE BUSINESS. HE SUBMITTED THAT THE EARNING OF COMMISS ION INCOME IS A SEPARATE SOURCE OF INCOME NOT LINKED WITH AUTOMOBILE BUSINES S. 16. ON THE CONTRARY, THE LD. D.R. SUBMITTED THAT TH E DIRECTOR OF THE ASSESSEE COMPANY HAS OFFERED THE ADDITIONAL INCOME EARNED BY WAY OF HITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP 8 COMMISSION IN THE HANDS OF THE ASSESSEE COMPANY IN AY 2007-08 AND ALSO HE HAS OFFERED THE UNACCOUNTED PAYMENT RELATING TO PUR CHASE OF PROPERTY ALSO IN THE HANDS OF THE ASSESSEE COMPANY ONLY IN AY 2008-0 9. THE LD D.R SUBMITTED THAT THE ASSESSEE COMPANY IS CARRYING ON AUTOMOBILE BUSINESS AND HENCE THE ABOVE SAID ADMISSION SHOWS THAT THE UNDIS CLOSED INCOME BY WAY OF ACCOUNTED RECEIPTS AND UNACCOUNTED INVESTMENTS SHOU LD HAVE BEEN GENERATED OUT OF AUTOMOBILE BUSINESS ONLY. ACCORDI NGLY, THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER AND LD. CIT(A) JUSTIFIED IN REJECTING THE BOOK RESULTS OF THE AUTOMOBILE BUSINESS. 17. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE. A PERUSAL OF ASSESSMENT ORDER WOULD SHOW THAT THE ASSESSING OFFI CER DID NOT POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS RELATING TO AUTOMOB ILE BUSINESS. THE REASON FOR REJECTION OF BOOKS OF ACCOUNTS IS APPARENTLY TH E ADMISSION OF ADDITIONAL INCOME IN THE HANDS OF THE ASSESSEE COMPANY BY ITS DIRECTOR. WE HAVE NOTICED ABOUT THE NATURE OF ADDITIONAL INCOME OFFER ED BY THE DIRECTOR OF THE ASSESSEE COMPANY IN ASSESSMENT YEAR 2007-08 IS COMM ISSION INCOME EARNED IN RESPECT OF REAL ESTATE TRANSACTION. IN ASSESSME NT YEAR 2008-09, THE NATURE OF ADDITIONAL INCOME WAS UNACCOUNTED PAYMENT IN RES PECT OF PROPERTY PURCHASED. AS SUBMITTED BY LD. A.R., THERE IS NO E VIDENCE TO SHOW THAT THE UNACCOUNTED MONEY RELATING TO PROPERTY PURCHASED WA S GENERATED OUT OF AUTOMOBILE BUSINESS. SIMILARLY, THE COMMISSION INC OME EARNED ON REAL ESTATE TRANSACTION, THOUGH OFFERED IN THE HANDS OF THE ASS ESSEE COMPANY, IS GENERALLY CONSTRUED AS THE FRUITS OF PERSONAL EFFOR TS. HENCE, WE AGREE WITH THE CONTENTIONS OF THE ASSESSEE THAT BOTH THIS ADDI TIONAL INCOME ADMITTED BY THE ASSESSEE, THOUGH ADMITTED IN THE HANDS OF THE A SSESSEE COMPANY, CANNOT BE LINKED TO THE BOOKS OF ACCOUNTS MAINTAINED IN RE SPECT OF AUTOMOBILE BUSINESS, SINCE THERE ARE NO EVIDENCE TO ARRIVE AT SUCH INFERENCE. HENCE, IN THE ABSENCE OF ANY DEFECT NOTICED IN THE AUTOMOBILE BUSINESS, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED I N REJECTING THE BOOK RESULTS OF AUTOMOBILE BUSINESS AND ESTIMATING THE INCOME OF THE ASSESSEE. WE NOTICE THAT THE LD. CIT(A) ALSO HAS UPHELD THE REJE CTION OF BOOKS OF ACCOUNTS WITHOUT BRINGING ON RECORD ANY DEFECTS IN THE BOOKS OF ACCOUNTS. ACCORDINGLY, HITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP 9 WE SET ASIDE THE ORDER OF LD. CIT(A) AS WELL AS A.O . WITH REGARD TO THE REJECTION OF BOOKS OF ACCOUNTS. 18. SINCE WE HAVE HELD THAT THE REJECTION OF BOOKS OF ACCOUNTS WAS NOT PROPER, THE CONSEQUENT ESTIMATION OF PROFIT FROM AU TOMOBILE BUSINESS IS ALSO LIABLE TO BE CANCELLED. ACCORDINGLY THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE ALSO SET ASIDE, MEANING THEREBY THE INCOME DI SCLOSED BY THE ASSESSEE IN RESPECT OF AUTOMOBILE BUSINESS IN THE REVISED RETUR N OF INCOME SHALL REMAIN. 19. WE HAVE NOTICED THAT THE LD. CIT(A) HAS GIVEN T ELESCOPING BENEFIT IN RESPECT OF RS.92 LAKHS OFFERED BY THE ASSESSEE AGAI NST THE INCOME ESTIMATED FROM AUTOMOBILE BUSINESS. SINCE WE HAVE CANCELLED THE ESTIMATION OF INCOME FROM AUTOMOBILE BUSINESS, THE ADDITIONAL INCOME OF RS.92 LAKHS ASSESSED BY THE ASSESSING OFFICER IS REQUIRED TO BE SUSTAINED, SUBJECT TO THE CLAIM OF SET OFF CLAIMED BEFORE THE TAX AUTHORITIES. 20. WE NOTICE THAT THE ASSESSEE HAS SOUGHT FOR SET OFF OF RS.20 LAKHS OFFERED BY IT IN ASSESSMENT YEAR 2007-08 AGAINST TH E ADDITION OF RS.92 LAKHS. THE NATURE OF INCOME OF RS.20 LAKHS OFFERED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2007-08 IS THE UNACCOUNTED COMMISSI ON INCOME EARNED (CASH INFLOW). THE NATURE OF ADDITIONAL INCOME OF RS.92 LAKHS OFFERED IN 2008-09 IS THE UNACCOUNTED PAYMENT MADE FOR PURCHAS E OF THE PROPERTY (CASH OUTFLOW). SO ONE IS INCOME COMPONENT AND ANO THER ONE IS INVESTMENT COMPONENT. IN THESE KIND OF SITUATIONS ONLY, I.E., WHEN CASH INFLOW AND CASH FLOW ARE ASSESSED AS INCOME, NORMALLY THE CLAIM OF SET OFF OF ONE AGAINST THE ANOTHER SHALL BE CLAIMED. THERE IS JUSTIFICATION I N MAKING SUCH A CLAIM, SINCE BOTH INCOME AND INVESTMENT SHOULD NOT BE ASSESSED S EPARATELY, OTHERWISE IT MAY RESULT IN DOUBLE ASSESSMENT OF SAME INCOME. HE NCE, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE UNACCOUNTED INCOME OF RS.20 LAKHS OFFERED IN THE ASSESSMENT YEAR 2007-08 SHOULD BE AD JUSTED AGAINST THE UNDISCLOSED INVESTMENT MADE IN ASSESSMENT YEAR 2008 -09. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW SET OFF OF TH IS AMOUNT ALSO. HITA NOS.311,312,412&413/VIZAG/2014 AVNASH AUTOMOBILES PVT. LTD., VSKP 10 21. IN THE RESULT, APPEALS FILED BY BOTH THE PARTIES ARE TREATED AS PARTLY ALLOWED. PRONOUNCED ON 15 TH SEPTEMBER, 2015 SD/- SD/- (D. MANMOHAN) VICE PRESIDENT (B.R. BASKARAN) ACCOUNTANT MEMBER VISAKHAPATNAM, DATED 15 TH SEPT15 VG/SPS COPY TO 1 M/S. AVNASH AUTOMOBILES PVT. LTD., D.NO.54-10-09, MADDILAPALEM, VISAKHAPATNAM 2 THE DCIT CENTRAL CIRCLE-2, VISAKHAPATNAM 3 THE ACIT CENTRAL CIRCLE-2, VISAKHAPATNAM 4 THE CIT, VISAKHAPATNAM 5 THE CIT(A), VISAKHAPATNAM 6 THE DR, ITAT, VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM