ACIT, Vijayawada V. RK Township Constructions Pvt Ltd, Hyderabad

ITA 42/VIZ/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7259 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 02-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TH LUCAS PETER
• Assessee Lawyers: A V RAGHURAM
• Keywords: Document seized; Cost of acquisition; Corroborative evidences; Revised return; Documents seized; Revenue expenditure; TDS
• Section: 153A; 69A; 142(2A); 132

Judgement Text

ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NOS.43 TO 49/VIZAG/2009 ASSESSMENT YEAR: 2000-01 TO 2006-07 ACIT CENTRAL CIRCLE VIJAYAWADA VS. M/S RK TOWNSHIP PROMOTERS PVT. LTD., HYDERABAD (APPELLANT) (RESPONDENT) PAN NO:AACCR 3049 K ITA NOS.161 TO 166/VIZAG/2009 ASSESSMENT YEAR: 2000-01 TO 2005-06 M/S RK TOWNSHIP PROMOTERS PVT. LTD., HYDERABAD VS. ACIT CENTRAL CIRCLE VIJAYAWADA (APPELLANT) PAN NO:AACCR 3049 K (RESPONDENT) ITA NO.42/VIZAG/2009 ASSESSMENT YEAR:2005-06 ACIT CENTRAL CIRCLE VIJAYAWADA VS. M/S R.K.TOWNSHIP CONSTRUCTIONS PVT. LTD., HYDERABAD (APPELLANT) (RESPONDENT) PAN NO. AACCR 6127 Q ITA NO.167/VIZAG/2009 ASSESSMENT YEAR:2005-06 M/S R.K.TOWNSHIP CONSTRUCTIONS PVT. LTD., HYDERABAD VS. ACIT CENTRAL CIRCLE VIJAYAWADA (APPELLANT) PAN NO. AACCR 6127 Q (RESPONDENT) ASSESSEE BY: SHRI A.V. RAGHU RAM, ADVOCATE DEPARTMENT BY: SHR I T.H. LUCAS PETER, CIT (DR) ORDER PER BENCH: THESE CROSS APPEALS FILED BY BOTH THE ASSESSEES AN D THE REVENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A)-I, H YDERABAD IN THEIR RESPECTIVE HANDS FOR THE ASSESSMENT YEARS MENTIONED ABOVE AGAINST THEIR ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 2 OF 11 RESPECTIVE NAMES. AT THE TIME OF HEARING, IT WAS S UBMITTED THAT BOTH THE ASSESSEES BELONG TO SAME GROUP AND IDENTICAL ISSUES ARE AGITATED IN THEIR RESPECTIVE APPEALS. HENCE, ALL THE APPEALS WERE HEA RD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAK E OF CONVENIENCE. 2. AT THE REQUEST OF BOTH THE PARTIES, THE APPE ALS FILED IN THE CASE OF M/S R.K. TOWNSHIP PROMOTERS (P) LTD., WAS TAKEN UP AS T HE MAIN APPEAL FOR THE HEARING, SINCE BOTH THE PARTIES ADMITTED THAT THE F ACTS ARE IDENTICAL IN BOTH THE CASES AND MERE APPLICATION OF THE DECISION REND ERED IN THE INSTANT CASE WOULD BE SUFFICIENT TO DISPOSE OF THE APPEALS OF TH E OTHER ASSESSEE, VIZ., M/S R.K. TOWNSHIP CONSTRUCTIONS PVT. LTD. 3. THE FACTS WHICH ARE COMMON FOR BOTH THE ASSESSEE S ARE STATED IN BRIEF. BOTH THE ASSESSEES ARE IN REAL ESTATE BUSIN ESS I.E. THEY PURCHASE VACANT LANDS, DIVIDE THEM INTO PLOTS AND SELL THE D EVELOPED PLOTS. THE DEPARTMENT CARRIED SEARCH & SEIZURE OPERATIONS UNDE R SECTION 132 OF THE ACT IN THE HANDS OF THESE ASSESSEES ON 12-12-2005. DURING THE COURSE OF SEARCH, IT WAS NOTICED THAT THE ASSESSEE WAS NOT PR OPERLY ACCOUNTING FOR SALE OF PLOTS AND THERE WAS LARGE SCALE OF SUPPRESS ION OF SALES. HENCE THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 153A OF THE ACT CALLING FOR RETURNS OF INCOME. THOUGH THESE ASSESSEES ACCEPTED THE SUPPRESSION OF SALES DURING THE COURSE OF SEARCH PROCEEDINGS, IT W AS SUBMITTED THAT THE RECEIPTS SO SUPPRESSED WERE INITIALLY ACCOUNTED UND ER THE HEAD ADVANCES RECEIVED FROM CUSTOMERS IN THE RETURNS FILED ORIGI NALLY. IT WAS ALSO FURTHER SUBMITTED THAT THE ACTUAL AMOUNT PAID FOR PURCHASE OF LANDS, AMOUNT PAID TOWARDS COMMISSION AND OTHER EXPENSES WERE ALSO NOT TAKEN FULLY TO THE PROFIT AD LOSS ACCOUNT. HENCE THESE ASSESSEES PREP ARED A REVISED PROFIT & LOSS ACCOUNT BY INCREASING SALES VALUE TO THE EXTEN T OF SUPPRESSED SALES BY MAKING CORRESPONDING REDUCTION FROM THE ACCOUNT OF ADVANCES FROM CUSTOMERS IT WAS SUBMITTED THAT THE SIMILAR EXERCI SE WAS CARRIED OUT IN RESPECT OF PURCHASES AND EXPENSES ALSO. BEFORE THE ASSESSING OFFICER THE ASSESSEE DID NOT SUBMIT VOUCHERS, BILLS ETC., IN RE SPECT OF EXPENSES. THE ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 3 OF 11 ASSESSING OFFICER ALSO DID NOT ACCEPT THE EXPLANATI ONS WITH REGARD TO THE SALES ALSO. HENCE THE ASSESSING OFFICER PROCEEDED T O COMPLETE THE ASSESSMENT BY ADDING THE ENTIRE AMOUNT SUPPRESSION IN SALES TO THE TOTAL INCOME OF THE ASSESSEE. IN THE APPEAL PREFERRED BE FORE THE LEARNED CIT (A), THE FIRST APPELLATE AUTHORITY DIRECTED THE ASS ESSING OFFICER TO ESTIMATE THE INCOME OF THESE ASSESSEES AT 20% ON GROSS SALES . BOTH THE PARTIES ARE AGGRIEVED BY THE ORDERS OF LEARNED CIT(A). HENCE T HEY ARE IN CROSS APPEALS BEFORE US. 4. NOW WE PROCEED TO DISCUSS THE FACTS AND DET AILS CONCERNING M/S R.K. TOWNSHIP PROMOTERS (P) LTD. WE NOTICE THAT THE ASSE SSING OFFICER HAS DISCUSSED IN DETAIL ABOUT THE DEFICIENCIES AND SHOR T COMINGS BOTH IN THE CONDUCT OF THE ASSESSEE AND IN THE RETURNS OF INCOM E FILED BY THE ASSESSEE. THE LEARNED CIT (A) HAS SUMMARIZED THEM AS UNDER: A. THE TRADING RESULT IS NOT FULLY SUPPORTED BY BI LLS AND VOUCHERS. B. SUBSTANTIAL PORTION OF PURCHASES AND SALES WERE CARRIED OUT IN CASH. C. THE BASIS OF APPORTIONMENT OF RECEIPTS (GROSS SA LES) FROM VARIOUS BUYERS WAS FAULTY IN AS MUCH AS A PORT ION OF THE RECEIPTS WAS TAKEN INTO THE BALANCE SHEET IN STEAD OF THE SAME BEING REFLECTED AS SALES IN THE ORIGINA L RETURN. LATER THE SAME WAS REGROUPED AFTER SEARCH. D. THE FIGURES OF PURCHASES, SALES, OPENING AND CLO SING STOCK WERE ADOPTED BY THE AUDITOR WITHOUT PROPER VERIFICATION. E. THERE WAS SUPPRESSION OF SALES IN RESPECT OF LANKELPALEM LAND. F. THE ASSESSEE HIMSELF REVISED THE SALES FIGURES CONSEQUENT TO SEARCH WHICH ACCORDING TO THE ASSESSI NG OFFICER AMOUNTED TO SUPPRESSION OF SALES. G. THE ASSESSEE DELIBERATELY MANIPULATED THE OPENIN G AND CLOSING STOCK FIGURE TO NEUTRALIZE PROFIT ON ACCOUN T OF SUPPRESSION OF SALES. ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 4 OF 11 H. IN THE ORIGINAL RETURN PURCHASES WERE SHOWN INCLU SIVE OF OTHER ALLIED EXPENSES AND THE SAME WAS CHANGED IN T HE REVISED RETURN TO A HIGHER FIGURE. I. IN COURSE OF HEARING, THE ASSESSEE CLAIMED HUGE MARKETING COMMISSION PAID TO VARIOUS AGENTS. IT WAS OBSERVED THAT MARKETING COMMISSION RELATED TO SALES AND UNDER NO CIRCUMSTANCES, THE SAME CAN BE TREATED AS A COMPONENT OF PURCHASES. K. IT WAS ALSO OBSERVED THAT THERE WAS NO EVIDENCE F OR PAYMENT OF MARKETING COMMISSION. L. IT WAS OBSERVED THAT THE VALUATION OF CLOSING STO CK BY INCLUSIVE OF MARKETING COMMISSION AND OTHER EXPENSE S IS AGAINST THE ACCOUNTING NORMS. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER EXAMINED THE CHARTERED ACCOUNTANT WHO CERTIFIED THE REVISED STATEMENT OF ACCOUNTS THAT WERE FURNISHED ALONG WITH THE RETURNS OF INCOME FILED IN RESPONSE TO THE NOTICES ISSUED UNDER SECTION 153A O F THE ACT. THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THIS REGARD ARE EXTRACTED BELOW: V. THE STATEMENT OF ACCOUNTS OF ASSESSEE COMPANY FILED WITH THE ORIGINAL RETURNS WERE SHOWN TO HAVE BEEN A UDITED BY A C.A FIRM DURGA RAO & CO. SUBSEQUENTLY, IN RESPO NSE TO NOTICE UNDER SECTION 153A ANOTHER STATEMENTS OF AC COUNTS DULY AUDITED FOR THE SAME ACCOUNTING PERIODS WERE F ILED. THESE STATEMENTS ARE SHOWING DIFFERENT FIGURES WHEN COMPA RED TO ORIGINAL PROFIT & LOSS ACCOUNTS AND BALANCE SHEETS. FURTHER, IT IS PERTINENT TO MENTION HERE THAT THESE STATEMENTS WER E ALSO SHOWN TO HAVE BEEN AUDITED BY THE SAME AUDIT FIRM. SRI P. DURGA RAO, ONE OF THE PARTNERS OF M/S DURGA RAO & C O. WAS EXAMINED ON OATH DURING THE SEARCH ASSESSMENT PROCE EDINGS. IN RESPECT OF THE AUDIT CONDUCTED BY HIM AND MAINTEN ANCE OF BOOKS OF ACCOUNTS BY THE ASSESSEE COMPANY, HE STATE D AS FOLLOWS: I CONFIRM THAT I HAVE EXAMINED LEDGER AND CASH BOO K OF VIJAYAWADA AND RAJAHMUNDRY BRANCHES WHICH WERE MANUALLY MAINTAINED AND ALSO COMPUTERIZED. FOR THE TWO BRANCHES AT VIZAG AND BRANCH AT HYDERABAD I HAVE DONE AUDIT ON THE BASIS OF COMPUTERIZED STATEMENTS AND PARTY LEDGERS MAINTAINED MANUALLY AS WELL AS COMPUTERIZED WHI CH WERE SUBMITTED BY THE ASSESSEE . ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 5 OF 11 THUS IT WAS ADMITTED BY THE AUDITOR THAT ONLY FOR V IJAYAWADA AND RAJAHMUNDRY BRANCHES WHERE THE BOOKS ARE MANUAL LY MAINTAINED WERE EXAMINED BY HIM. BUT FOR TWO BRANCH ES AT VIZAG AND THE BRANCH AT HYDERABAD AUDIT WAS MADE ON THE BASIS OF COMPUTERIZED STATEMENTS ONLY. IT WAS NOT BA SED UPON ANY OTHER SUPPORTING EVIDENCES AS VOUCHERS OR BILLS . VI. FURTHER SHRI DURGA RAO CLARIFIED THAT THERE IS NO BASIS FOR SALES FIGURE SHOWN IN THE RETURN. HE STATED ON OATH AS UNDER: I AM NOT AWARE OF THE BASIS FOR THE FIGURES OF PURCHASE S, SALES, OPENING AND CLOSING BALANCES OF THE STOCK ETC., ADOPTED IN THE TRIAL BALANCES. I HAVENT EXAMINED THE SUPPORTING EVIDENCES FOR THOSE FIGURES IN THE TRIAL BALANCES SUBMITTED BEFORE ME BY THE AS SESSEE (EMPHASIS SUPPLIED). FURTHER HE ADDED THAT, YES. I CONFIRM THAT THE FIGURES OF PURCHASES AND SALES REFLECTED IN THE REVISED PROFIT & LOSS ACCOUNT ALONG WITH THE OPENING AN D CLOSING BALANCES OF THE STOCK WERE ADOPTED BY ME BASING ON THAT T RIAL BALANCES PREPARED BY THE ASSESSEE. ON THIS BACKGROUND THE SUPPRESSION OF SALES BY THE ASSESSEE IS DETERMINED ON THE BASIS OF SEIZED DOCUMENTS AND DETAILS COLLECTED SUBSEQUENTLY HOWEVER, IT APPEARS THAT THE ASSESSING OFFICER HAS ONLY ADOPTED THE SALES FIGURE SHOWN IN RETURNS FILED UNDER SECTION 153A OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE REVISED PURCHASE FIGURES , REVISED COMMISSION AND OTHER EXPENSES, AS ACCORDING TO HIM THEY WERE NOT S UPPORTED BY ANY EVIDENCE. THE ASSESSEE ALSO REVISED THE VALUES OF O PENING AND CLOSING STOCKS IN TUNE WITH THE INCREASE IN PURCHASE COST A ND EXPENSES, BUT THE ASSESSING OFFICER OPINED THAT IT IS AN ATTEMPT TO N EUTRALIZE THE ADDITIONAL PROFITS. ACCORDINGLY, THE ASSESSING OFFICER DID N OT PLACE RELIANCE ON THE PROFIT SHOWN IN THE REVISED PROFIT AND LOSS ACCOUNT . 6. IN RESPECT OF HYDERABAD BRANCH, THE SEARCH OFFICI ALS SEIZED A COMPUTER FOLDER NAMED RCEMAS.DBF. THERE WAS DIFFE RENCE BETWEEN THE SALES FIGURES AVAILABLE IN THE SAID COMPUTER FOLDER AND THE SALES FIGURES ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 6 OF 11 REPORTED BY THE ASSESSEE IN THE RETURN OF INCOME FI LED UNDER SECTION 153A OF THE ACT. THE ASSESSEE EXPLAINED THAT THE FIGURES AV AILABLE IN THE ABOVE SAID COMPUTER FOLDER IS NOT RELIABLE. HOWEVER THE ASSES SING OFFICER DID NOT ACCEPT THE SAID CONTENTIONS OF THE ASSESSEE AND ADD ED THE DIFFERENCES SO NOTICED ALSO. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A D IARY WAS SEIZED FROM THE RESIDENTIAL PREMISES OF GENERAL MANAGER OF THE ASSESSEE. VERIFICATION OF THE SAID DIARY REVEALED THAT THERE WAS SUPPRESSION OF SALES AMOUNT IN RESPECT OF SALE OF CERTAIN LANDS LOCATED IN LANKALAPALEM, VISAKHAPATNAM. IN THE STATEMENT RECORDED FROM THE MA NAGING DIRECTOR, HE ACCEPTED THE FACT OF SUPPRESSION. THE RELEVANT POR TION OF THE STATEMENT IS EXTRACTED BY THE ASSESSING OFFICER IN THE ASSESSMEN T ORDER AS UNDER: I HAVE GONE THROUGH THE CONTENTS IN THE DIARY MARK ED AS ANNEXURE-16 SHOWN BY YOU AND I CONFIRM THAT LANDS AT LANKELAPALEM, VISAKHAPATNAM RELATING TO M/S. R.K. T OWNSHIP PROMOTERS (P) LTD. WERE SOLD FOR CONSIDERATION OF RS.1,69,63,500/- AND RS.51,50,000/- RESPECTIVELY BU T IN THE BOOKS OF ONLY RS.16 LAKHS AND RS.11,10,200/- RESPEC TIVELY WERE RECORDED. WE HAVE ALREADY OFFERED THE DIFFEREN CE OF RS.1,94,03,300/- TO TAX BY TAKING THIS AMOUNT IN TH E SALES FOR THE F.Y 2004-05 IN THE RETURN OF INCOME FILED IN RE SPONSE TO NOTICE 153A OF THE I.T. ACT. HOWEVER, THE ASSESSING OFFICER ADDED THE ENTIRE AMO UNT OF RS.1,94,03,300/- TO THE TOTAL INCOME OF THE ASSESSE E FOR THE ASSESSMENT YEAR 2005-06. 8. DURING THE COURSE OF SEARCH, THE DEPARTMENT SEIZED CASH AGGREGATING TO RS.46.30 LAKHS FROM THE RESIDENCES OF THE MANAGI NG DIRECTOR AND THE EMPLOYEES. THE ASSESSING OFFICER ASSESSED A SUM OF RS.41.00 LAKHS AS UNEXPLAINED CASH UNDER SECTION 69A OF THE ACT FOR T HE ASSESSMENT YEAR 2006-07. 9. IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT (A) EXPRESSED THE VIEW THAT THE GROSS SALES CANNOT BE TAKEN AS INCOME OF T HE APPELLANT BY IGNORING ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 7 OF 11 THE EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUN T. THE RELEVANT OBSERVATIONS OF THE LEARNED CIT (A) ARE EXTRACTED B ELOW: I AM THEREFORE OF THE CONSIDERED VIEW THAT THE GRO SS SALES CANNOT BE TREATED AS INCOME OF THE APPELLANT IGNORI NG THE REVENUE EXPENDITURE DEBITED IN THE PROFIT & LOSS AC COUNT. IT IS MORE SO WHEN THE ASSESSING OFFICER HAS NOT GIVEN AN Y FINDING THAT THE EXPENDITURE BOOKED IN THE PROFIT & LOSS AC COUNT ARE NOT GENUINE. IN THE LIGHT OF THE DISCUSSION (SUPRA), VIEWED FROM LEGAL AND FACTUAL ANGLE, IT CANNOT BE HELD THA T THE ENTIRE GROSS RECEIPT WOULD CONSTITUTE THE NET INCOME OF TH E APPELLANT AS HELD BY THE ASSESSING OFFICER. SINCE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE HELD TO BE DEFECTIVE BY THE ASSESSING OFFICER, THE LEARNED CIT (A) THOUGHT IT F IT TO ESTIMATE THE INCOME OF THE ASSESSEE AND ACCORDINGLY DIRECTED THE ASSESS ING OFFICER TO ESTIMATE THE INCOME AT 20% OF THE GROSS TURNOVER AS SHOWN IN THE RETURN OF INCOME FILED UNDER SECTION 153A OF THE ACT. FOR ARRIVING AT THE FIGURE OF 20%, THE LEARNED CIT(A) TOOK INTO ACCOUNT THE RATE OF PROFIT SHOWN BY THE ASSESSEE IN THE RETURNS FILED UNDER SECTION 153A OF THE ACT. 10. WE HAVE CAREFULLY CONSIDERED THE FACTS NARRATED ABOVE, ARGUMENTS ADVANCED BY THE COUNSEL AND THE RECORD. IT IS AN ADM ITTED FACT THAT THE ASSESSEE WAS NOT ACCOUNTING THE CORRECT VALUE OF SA LE OF PLOTS IN HIS BOOKS OF ACCOUNT. THE ACCOUNTANT AND AUDITOR OF THE ASSES SEE HAVE ADMITTED THAT THERE IS NO BASIS FOR RECOGNIZING THE SALES VALUE. IT IS AN ADMITTED FACT THAT THE ASSESSEE IS SELLING PLOTS ON OUT RIGHT BASIS AN D ALSO IN INSTALMENTS BASIS. ACCORDING TO THE ASSESSEE, THE AMOUNTS ACTUALLY COL LECTED FROM THE BUYERS ARE CREDITED TO THE ACCOUNT TITLED AS ADVANCE FROM CUSTOMERS AND IT IS SHOWN AS A LIABILITY IN THE BALANCE SHEET. THEREAFTER, THE ASSESSEE TRANSFERS THE SALES VALUE OF PLOTS BY DEBITED THE ABOVE CITED ACCOUNT AND CREDITING SALES ACCOUNT. ACCORDING TO THE ASSESSEE, IT HAS TRANSFERRED LESSER AMOUNT THAN THE AMOUNT ACTUALLY COLLECTED FROM THE CUSTOMERS. AFTER THE SEARCH OPERATIONS, THE ASSESSEE HAS PREPARED A REV ISED PROFIT AND LOSS ACCOUNT BY TRANSFERRING CORRECT SALE VALUE OF PLO TS FROM THE ADVANCE FROM CUSTOMERS ACCOUNT. HOWEVER, THE CORRECTNESS OF SAID TRANSFER ENTRIES HAS ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 8 OF 11 NOT BEEN VERIFIED BY THE TAX AUTHORITIES. EVEN TH E AUDITOR WHO CERTIFIED THE SAID STATEMENTS ALSO ADMITTED THAT HE DID NOT VERIF Y THE REVISED SALES VALUE. WITH OUT VERIFICATION, IT APPEARS THE ASSESSING OFF ICER HAS ADOPTED THE SUPPRESSED SALES VALUE BY COMPARING THE REVISED STA TEMENT AND THE ORIGINAL STATEMENT. TO QUOTE AN EXAMPLE, WE HAVE NOTICED EA RLIER THAT THERE WAS SUPPRESSION OF SALES TO THE TUNE OF RS.1.94 CRORES IN RESPECT OF SALE OF LANKELAPALEM PLOTS LOCATED AT VISAKHAPATNAM. THE M ANAGING DIRECTOR HAS CLAIMED THAT THE ASSESSEE HAS ACCOUNTED THE SAID DI FFERENCE OF RS.1.94 CRORES IN THE REVISED SALES RELATING TO THE FINANCI AL YEAR 2004-05 RELEVANT FOR ASSESSMENT YEAR 2005-06. HOWEVER, IT IS NOT CLEAR W HETHER THE ASSESSEE HAD INITIALLY CREDITED THE ABOVE SAID SUM OF RS.1.9 4 CRORES IN ITS BOOKS UNDER THE HEAD ADVANCE FROM CUSTOMERS ACCOUNT, AS CLAIMED BY THE ASSESSEE TO BE THE PROCEDURE FOLLOWED BY IT. IF THE ASSESSEE ITSELF HAD TRANSFERRED THE ABOVE SAID SUPPRESSED AMOUNT FROM T HE ADVANCES ACCOUNT TO THE SALES ACCOUNT, THEN THERE IS NO REQUIREMENT OF ADDING THE SAID AMOUNT AGAIN, SINCE THE ASSESSING OFFICER HAS ALREA DY ADDED THE DIFFERENCE IN SALES BETWEEN THE REVISED PROFIT AND LOSS ACCOUN T AND THE ORIGINAL PROFIT AND LOSS ACCOUNT. THIS ASPECT HAS NOT BEEN VERIFIE D BY THE ASSESSING OFFICER. IT IS SURPRISING, WHY THE ASSESSEE ALSO DI D NOT AGITATE THIS ADDITION ON THIS LINE, IF THE PROCEDURE EXPLAINED BY HIM IS CORRECT. THUS IT IS NECESSARY TO MAKE NECESSARY VERIFICATION OF BOOKS E SPECIALLY WITH REGARD TO THE SALES ACCOUNT AND ADVANCE RECEIVED FROM CUSTOM ERS ACCOUNT. IN RESPECT OF CASH SEIZED DURING THE COURSE OF SEARCH ALSO, THE ASSESSING OFFICER REJECTED THE EXPLANATIONS OF THE ASSESSEE W ITH REGARD TO THE AVAILABILITY OF CASH, EVEN THOUGH IT WAS CLAIMED TH AT THE CASH HAS BEEN WITHDRAWN FROM THE BANK. BEFORE US, THE ASSESSEE H AS FILED COPIES OF RELEVANT BANK ACCOUNTS, WHERE IN WE FIND THAT THE A SSESSEE HAD WITHDRAWN ACCOUNT FROM THE BANK ACCOUNT ON EARLIER OCCASIONS. HENCE, IN OUR VIEW, THE ASSESSING OFFICER SHOULD HAVE CONSIDERED THE BANK E NTRIES ALSO BEFORE TAKING AN ADVERSE DECISION ON THIS ISSUE. ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 9 OF 11 11. IN THE REVISED PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS ENHANCED THE PURCHASE VALUE, COMMISSION EXPENSES AND OTHER E XPENSES. IT ALSO HAS REVISED THE OPENING AND CLOSING STOCK VALUES IN TUN E WITH THE ABOVE SAID INCREASES. ACCORDING TO ASSESSING OFFICER, THE ASS ESSEE HAS FAILED TO SUBSTANTIATE SUCH REVISION WITH ANY MATERIAL. ACCO RDING TO LEARNED AUTHORISED REPRESENTATIVE, THE SAID EXPENDITURES WE RE ALSO INCREASED BY MAKING CORRESPONDING REDUCTION FROM THE DEBIT BALAN CES OF ADVANCES ACCOUNT. HOWEVER, WE DO NOT FIND ANY DISCUSSION I N THIS REGARD AND FURTHER THE ASSESSEE ALSO DID NOT PRODUCE ANY DOCUM ENT TO SUBSTANTIATE THE SAID CLAIM. ACCORDING TO THE ASSESSEE, THE MARKETI NG COMMISSION PAYMENTS HAVE BEEN VERIFIED BY THE DDI (INV.) BY EXAMINING S OME OF THE REPRESENTATIVES. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS DEDUCTED TDS ALSO ON SUCH PAYMENTS AND FURTHER THE COPIES OF RETURNS OF INCOME OF THE RECIPIENTS OF COMMISSION WERE ALSO FILED BEFORE THE DDI. THUS, ACCORDING TO THE ASSESSEE, THE PAYMENT OF COMMISSIO N STANDS PROVED. AS NOTED EARLIER, THE ASSESSING OFFICER DID NOT CONSID ER THE EXPENDITURE CLAIMED BY THE ASSESSEE FOR WANT OF EVIDENCES. HOWEVER, AC CORDING TO THE ASSESSEE, THE COMMISSION EXPENSES HAVE BEEN PROVED BY IT. IF THE CLAIM OF THE ASSESSEE IS FOUND CORRECT, IN OUR VIEW, THE ASS ESSING OFFICER IS REQUIRED TO ALLOW THE DEDUCTION TOWARDS COMMISSION PAYMENTS AFTER MAKING NECESSARY VERIFICATION IN THIS REGARD. SIMILARLY I N RESPECT OF PURCHASES AND EXPENSES ALSO, THE CLAIM OF THE ASSESSEE REQUIRES V ERIFICATION. 12. WE NOTICE THAT THE LEARNED CIT(A) HAS FOLLO WED THE DECISION OF HON'BLE S.C IN THE CASE OF CIT VS. WILLIAMSON FINAN CIAL SERVICES (2008) (297 ITR 17) IN HOLDING THAT THE ENTIRE GROSS SALES CANN OT BE SUBJECTED TO TAX. IN OUR VIEW, THERE CANNOT BE ANY DISPUTE THAT ONLY T HE INCOME PORTION OF ANY RECEIPT IS TAXABLE UNDER THE ACT. HOWEVER, IN OUR VIEW, THE ASSESSING OFFICER SHOULD HAVE ATTEMPTED TO DETERMINE THE INCO ME PORTION OUT OF THE SUPPRESSED RECEIPTS, INSTEAD OF TAKING THE ENTIRE S UPPRESSED RECEIPTS AS THE INCOME OF THE ASSESSEE. IN OUR VIEW, IT IS REQUIRE D TO VERIFY THE BOOKS OF ACCOUNT AND STATEMENT OF ACCOUNTS VIS--VIS SEIZED MATERIALS, FIND OUT ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 10 OF 11 MISTAKE AND DEFICIENCIES THERE IN, THEN TO PROCEED TO DETERMINE THE INCOME BY CONSIDERING SUCH MISTAKES AND DEFICIENCIES. IF TH E MISTAKES AND DEFICIENCIES ARE VERY COMPLICATED AND RENDER THE BO OKS OF ACCOUNT UNRELIABLE, THEN THE ASSESSING OFFICER MAY PROCEED TO REJECT THE BOOKS OF ACCOUNT AND ESTIMATE THE INCOME ON A REASONABLE BAS IS. 13. WE HAVE ALREADY NOTICED THAT THE ASSESSING OFFICER HAS STRAIGHT AWAY REJECTED THE BOOKS OF ACCOUNT. THE ASSESSING OFFIC ER DID NOT CONSIDER THE PAYMENT OF COMMISSION EXPENDITURE AND DID NOT EXAMI NE THE CLAIM MADE TOWARDS PURCHASES AND OTHER EXPENSES. THE ASSESSIN G OFFICER ALSO REJECTED THE REVISION OF VALUATION OF OPENING AND CLOSING ST OCK WITHOUT MAKING DUE VERIFICATION. AT THE SAME TIME, WE NOTICE THAT THE LEARNED CIT(A) HAS DETERMINED THE PROFIT RATE AT 20% OF THE GROSS SAL ES TURNOVER, BY CONSIDERING THE INCOME AND SALES DISCLOSED BY THE A SSESSEE IN THE REVISED PROFIT AND LOSS ACCOUNT. ACCORDING TO LEARNED CIT( A), THE ASSESSEE HAS SHOWN THE PROFIT AT 16.40% TO 18.78% OF THE GROSS S ALES VALUE. HENCE THE LEARNED CIT(A) THOUGHT IT FIT TO DETERMINE THE NET INCOME OF THE ASSESSEE AT 20% OF THE GROSS SALES VALUE. WE HAVE ALREADY O BSERVED THAT THE SAID REVISED STATEMENT REQUIRES EXAMINATION VIS--VIS BO OKS OF ACCOUNT AND SEIZED MATERIALS. HENCE IN OUR VIEW, THE LEARNED CIT(A) IS NOT CORRECT IN PLACING RELIANCE ON THE SAID REVISED STATEMENT, SIN CE IT HAS NOT BEEN VERIFIED BY ANY BODY INCLUDING THE AUDITOR OF THE ASSESSEE W HO PREPARED THE SAID STATEMENT. 14. FROM THE FOREGOING DISCUSSIONS, WE ARE OF TH E VIEW THAT ENTIRE MATTER REQUIRES RE-EXAMINATION BY THE ASSESSING OFFICER IN ORDER TO DETERMINE THE CORRECT INCOME OF THE ASSESSEE. ACCORDINGLY, WE SE T ASIDE THE ORDERS OF LEARNED CIT(A) AND RESTORE THE MATTERS BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION OF THE ALL ISSUES AFRESH. THE ASSESSEES ARE ALSO DIRECTED TO CO-OPERATE WITH THE ASSESSING OFFICER I N THIS REGARD. THE ASSESSING OFFICER, IF CONSIDERED NECESSARY, MAY AVA IL THE SERVICES OF A ITA NOS.42 TO 49 161 TO 167 OF 2009 RK TOWNSHIP PAGE 11 OF 11 CHARTERED ACCOUNTANT IN ACCORDANCE WITH THE PROVISI ONS OF SEC. 142(2A) OF THE ACT. 15. ACCORDINGLY THE ORDER OF LEARNED CIT(A) PAS SED IN THE HANDS OF M/S R.K. TOWNSHIP CONSTRUCTIONS PVT. LTD IS ALSO SET AS IDE AND THE MATTERS ARE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION OF ALL ISSUES AFRESH. 16. IN THE RESULT, ALL THE APPEALS OF THE ASSESS EE AND REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:24-01-2011 COPY TO 1 THE ACIT, CENTRAL CIRCLE, VIJAYAWADA 2 M/S R.K. TOWNSHIP PROMOTERS PVT. LTD., NO.301 DOY EN CHAMBERS, AMEERPET, HYDERABAD 3 M/S R.K. TOWNSHIP CONSTRUCTION PVT. LTD, NO.301 D OYEN CHAMBERS, AMEERPET, HYDERABAD 4 M/S B. NARSING RAO & CO. CHARTERED ACCOUNTANT PLO T NO.554, ROAD NO.92, JUBILEE HILLS, HYDERABAD - 33 5 THE CIT (CENTRAL), HYDERABAD 6 THE CIT (A) - I, HYDERABAD 7 THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T. VISAKHA PATNAM 8 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM