Arcom Medical Devices Private Limited, Hyderabad V. DCIT., Central Circle-2, Hyderabad, Hyderabad

ITA 44/HYD/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1900 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 23-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-01-2015
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Keywords: Unexplained cash credit; Source of fund; Deemed dividend; Assessment record
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 44/HYD/2015 ASSESSMENT YEAR: 2010-11 M/S. ARCOM MEDICAL DEVICES PVT. LTD., HYDERABAD [PAN: AABCA7185L] VS DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS , AR FOR REVENUE : S MT. K. MYTHILI RANI, CIT - DR DATE OF HEARING : 07 - 1 0 - 201 5 DATE OF PRONOUNCE MENT : 14 - 1 0 - 2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (CENTRAL), HYDERABAD U/S . 263 OF THE INCOME TAX ACT [ACT] DATED 04-03-2014 REVISING THE ASSESSMENT ORDER U/S. 143(3) DT. 21-12-2011. 2. LD. CIT ISSUED A SHOW CAUSE NOTICE TO ASSESSEE I NVOKING THE JURISDICTION U/S. 263 ON THE FOLLOWING ISSUE: I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 2 -: ON PERUSAL OF THE RETURN OF INCOME FILED BY THE AS SESSEE, IT IS NOTICED THAT THE ASSESSEE OFFERED TO TAX A TO TAL AMOUNT OF RS. 2,01,04,374/-, OF WHICH A SUM OF RS. 19,00,000/ -, HELD AS WITHDRAWALS, IS NOT A PART. HENCE, THIS AMOUNT OF RS. 19,00,000/- HELD IN HAND AS WITHDRAWALS IS NOT COMP ONENT OF THE TOTAL AMOUNT OF RS. 2,01,04,374/- OFFERED TO TA X. TO REITERATE, THIS SUM OF RS. 19,00,000/- THOUGH WAS P ART OF THE DISCLOSURE OF RS. 1,89,00,000/-, BUT WAS NOT PART O F THE INCOME RETURNED. 3. IN REPLY, ASSESSEE EXPLAINED AS UNDER: I) THE ENTIRE PREMISE OF THE SHOW-CAUSE NOTICE WAS ON MISCONCEPTION OF FACTS AS DEMONSTRATED INFRA IN THI S EXPLANATION. IT IS THEREFORE NOT CORRECT TO SUGGES T AND/OR TO COME TO THE CONCLUSION THAT THE AMOUNT OF RS. 19,00 ,000/- WAS NOT PART OF THE INCOME RETURNED THOUGH IT WAS PART OF THE DISCLOSED AMOUNT OF RS. 1,89,00,000/-. IT IS ALSO EQUALLY NOT CORRECT TO SUGGEST THAT THE AMOUNT OF INCOME OF RS. 2,01,04,374/- OFFERED TO TAX DOES NOT INCLUDE RS. 1 9,00,000/- HELD IN HAND AS WITHDRAWALS AND THEREFORE IT IS NOT COMPONENT OF THE SAID AMOUNT OF RS. 2,01,04,374/-. II) THE HON'BLE COMMISSIONER MAY KINDLY APPRECIATE THAT THE BREAKUP OF RS. 2,01,04,375/- OFFERED TO TAX CON SIST OF THE FOLLOWING COMPONENTS IN THE RESPECTIVE ASSESSMENT Y EARS. ASST. YEAR NATURE OF THE AMOUNT AMOUNT OF INCOME OFFERED AND ADMITTED 2005 - 2006 COMPONENT OF DEPOSIT S ADMITTED TOWARDS DEPOSITS IN BANK ACCOUNTS 7,21,924 2006-2007 DO 1,22,435 2007 - 2008 DO 46,58,067 2009 - 2010 DO 21,16,548 76,18,974 2009 - 2010 CORRECTION IN STOCK OFFERED 1,19,85,401 1,96,04,375 2009-2010 AMOUNT OFFERED AT THE TIME OF FILING THE RETURN OF INCOME AMOUNT OF INCOME AS MENTIONED IN THE SHOW-CAUSE NOTICE 5,00,000 2,01,04,375 I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 3 -: III) THE ENTIRE DISCLOSURE AS EVIDENTLY NOTICEABLE FROM THE DECLARATION U/S. 132(4) OF I.T.ACT RELATE TO ASSESS MENT YEARS 2005-2006 TO 2009-2010. THE AMOUNT OF RS. 19,00,00 0/- HELD AS CASH IN HAND WHICH WAS OUT OF THE WITHDRAWALS FR OM THE BANK ACCOUNTS, IN NO CASE REPRESENT INCOME AT ALL. THIS IS BECAUSE THE TOTAL COMPONENT OF DEPOSITS, IN THE RES PECTIVE ASSESSMENT YEARS WAS ADMITTED IN THE MANNER IN WHIC H THEY TRANSFORMED AS INVESTMENTS. THE CASH ON HAND BEING THE AVAILABLE AMOUNT OUT OF WITHDRAWALS FROM SUCH DEPOS ITS WHICH SUFFERED TAX BEING OFFERED AS INCOME THE SAME CANNO T BE CONSTRUED AS INCOME ONCE AGAIN IN THE ASSESSMENT YE AR 2010- 2011. IV) THE AMOUNT OF RS. 2,01,04,375/- HAS TO BE VIEWE D AND TO BE CONSIDERED WITH THE DISCLOSURE ROUNDED OF F TO AN AMOUNT OF RS. 1,89,00,000/- U/S. 132(4). THE DETAI LS OF RS. 1,89,00,000/- ARE AS UNDER: (A) DETAILS OF AMOUNT OF UNDISCLOSED INCOME ADMITTED B Y ROUNDING OFF: PARTICULARS AMOUNT IN RS. CREDITS IN SYNDICATE BANK A/C.30242010054441 (OTHER THAN BANK INTEREST CREDITED) 83,40,487 CREDITS IN SYNDICATE BANK A/C.30242010063419 (OTHER THAN BANK INTEREST CREDITED) 65,81,800 CREDITS IN HDFC BANK A/C.00811930005122 (OTHER THAN BANK INTEREST CREDITED) 9,25,000 CREDITS IN HDFC BANK A/C.00811930005218 (OTHER THAN BANK INTEREST CREDITED) 9,25,000 TOTAL INTEREST CREDITED IN THE ABOVE ACCOUNTS 2,10,076 WITHDRAWN FROM REGULAR BANK ACCOUNT TO CLOSE THE CREDIT ACCOUNT TO CLOSE THE CREDITOR ACCOUNT 18,59,595 SUB TOTAL 1,88,41,958 ROUNDED OFF TO 1,89,00,000 DEEMED DIVIDEND 60,00,000 TOTAL: 2,49,000 (B) THE ABOVE ADMITTED INCOME HOW TRAVELLED INTO INVES TMENTS HAS BEEN EXPLAINED IN THE VERY SAME DECLARATION AS UNDER: I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 4 -: PARTICULAR S AMOUNT IN RS. STOCK IN TRADE 1,19,85,401 BALANCE OBTAINING IN THE ABOVE BANK ACCOUNTS 19,83,246 FIXED DEPOSITS WITH SYNDICATE BANK, MUKRAMJAHI ROAD BRANCH, HYDERABAD 30,00,000 FUNDS HELD FROM THE WITHDRAWALS 19,00,000 TOTAL: 1,88,68,647 4. AFTER CLARIFYING THE FACTS AS ABOVE, IT WAS FURT HER SUBMITTED THAT: I) THE SCOPE OF PROCEEDINGS U/S. 263 DOES NOT EMPO WER THE HON'BLE COMMISSIONER OF INCOME TAX TO ISSUE A N OTICE SEGREGATING THE DISCLOSURE COMPONENT THAT RELATES T O THE ASSESSMENT YEARS UP TO THE ASSESSMENT YEAR 2009-201 0 AND STOOD ADMITTED. CONSIDERING THE AMOUNT OF RS. 19,0 0,000/- WHICH WAS ALREADY ADMITTED IN EARLIER ASSESSMENT YE ARS AS A COMPONENT OF INCOME UP TO AND INCLUSIVE OF THE ASSE SSMENT YEAR 2009-2010, THE PRESENT NOTICE HAS BEEN ISSUED FOR THE ASSESSMENT YEAR 2010-2011 AND THEREFORE NOT CORRECT AND EQUALLY NOT WARRANTED ON FACTS. II) THE ASSESSING OFFICER HAD ACTED IN ACCORDANCE W ITHIN THE FRAME WORK OF DECLARATION U/S. 132(4) OF THE I. T.ACT, 1961 AND THEREBY CAUSING ENQUIRY, OBTAINED INFORMATION. HAVING SATISFIED, THE ASSESSMENT WAS COMPLETED. SUCH ASSE SSMENT CANNOT BE BRANDED BY THE COMMISSIONER OF INCOME TAX AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERESTS OF REVENUE. III) THE POWERS AS PER THE PROVISION OF SECTION 263 DOES NOT VISUALIZE A CASE OF THE SUBSTITUTION OF JUDGMEN T OF CIT IN RESPECT OF THE COMPONENTS OF INCOME ALREADY FORMING PART OF DECLARATION U/S. 132(4) AND ADMITTED. THE ASSESSIN G OFFICER EQUALLY CONSIDERED THE SAME AT THE TIME OF COMPLETI ON OF THE ASSESSMENT UP TO AN INCLUSIVE OF ASSESSMENT YEAR 20 09-2010. THIS IS BECAUSE THE ASSESSING OFFICER HAS EXERCISED HIS QUASI- JUDICIAL POWER IN ACCORDANCE WITH THE LAW AND ARRIV ED AT THE CONCLUSIONS. SUCH CONCLUSIONS CANNOT BE TERMED TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTERESTS OF REVENUE. I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 5 -: IV) IT IS NOT CORRECT TO SUGGEST THAT THE SCOPE OF REVISIONAL POWER U/S. 263 CAN BE ENLARGED BY EXPRESSING A VIEW OF THE HON'BLE COMMISSIONER OF INCOME TAX OTHERWISE ON AN ISSUE WHERE THE ASSESSMENT RECORDS BASED ON THE COMPONENT S OF INCOME COVERED UNDER THE DECLARATION SPEAK IN A CRY STAL CLEAR MANNER. THE REASONING OF THE HON'BLE COMMISSIONER OF INCOME TAX FOR THE PREMISES IN THE NOTICE U/S. 263 DOES NO T ESTABLISH THAT THE ASSESSMENT COMPLETED WAS ERRONEOUS IN SO F AR AS PREJUDICIAL TO THE INTEREST OF REVENUE AND MORE SO IT HAS NO RELEVANCE AT ALL FOR THE ASSESSMENT YEAR 2010-2011 AS MENTIONED IN THE SHOW-CAUSE NOTICE. 5. LD. CIT EXTRACTING THE SUBMISSIONS PARTLY IN PAR A 4, HOWEVER, REJECTED ASSESSEES SUBMISSIONS STATING AS UNDER: 5. I HAVE GONE THROUGH THE SUBMISSION OF THE ASSES SEE. I FIND FROM THE SUBMISSION THAT WHAT WAS OFFERED TO TAX RELATED TO THE COMPONENT OF DEPOSITS IN THE BANK ACCOUNTS A ND THE CORRECT IN THE STOCK OFFERED. HOWEVER, THE CASH IN HAND OF RS. 19 LAKHS WAS NOT SPECIFICALLY OFFERED TO TAX. THOU GH THE ASSESSEE CONTENDS THAT THIS AMOUNT IS OUT OF THE WI THDRAWAL FROM THE BANK ACCOUNTS AND DOES NOT REPRESENT INCOM E AT ALL, THE SAME CANNOT BE ACCEPTED SINCE NO NEXUS HAS BEEN ESTABLISHED THAT THE SAID CASH IN HAND WAS FROM OUT OF THE DEPOSITS ALREADY OFFERED TO TAX. THE ASSESSING OFF ICER FAILED TO EXAMINE THIS ISSUE AND BRING TO TAX THE AMOUNT REND ERING THE ASSESSMENT MADE AS ERRONEOUS IN SO FAR AS IT IS PRE JUDICIAL TO THE INTEREST OF REVENUE. 6. IT HAS BEEN JUDICIALLY HELD THAT AN ASSESSMENT M ADE WITHOUT NECESSARY ENQUIRY CAN BE HELD TO BE ERRONEO US AND CAN BE REVISED U/S. 263 OF THE I.T.ACT 1961. REFER ENCE IN THIS REGARD CAN BE MADE OT THE DECISION OF SPECIAL BENCH , ITAT, CHENNAI REPORTED IN 313 ITR (AT) 182, CHENNAI SB WH EREIN IT WAS OBSERVED THAT IT IS NOT NECESSARY FOR THE COMMI SSIONER OF INCOME-TAX IN REVISION TO MAKE FURTHER ENQUIRIES BE FORE CANCELLING THE ASSESSMENT ORDER OF THE AO. THE COM MISSIONER OF INCOME-TAX CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, THE AO SHOUL D HAVE MADE FURTHER ENQUIRIES BEFORE ACCEPTING THE STATEME NTS MADE BY THE ASSESSEE IN HIS RETURN. IT IS INCUMBENT ON THE AO TO INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIR CUMSTANCES I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 6 -: WOULD MAKE SUCH AN ENQUIRY PRUDENT. THE WORD ERRON EOUS IN SEC.263 OF INCOME-TAX ACT, 1961 INCLUDES CASES WHER E THERE HAS BEEN FAILURE TO MAKE NECESSARY ENQUIRIES. CONS IDERING THE ABOVE, THE ORDER PASSED BY ASSESSING OFFICER U/S. 1 43(3) ON 21.12.2011 IS PREJUDICIAL TO THE INTEREST OF REVENU E. 6. ASSESSEE IS AGGRIEVED AND RAISED AS MANY AS 9 GR OUNDS ON EXERCISING THE JURISDICTION U/S. 263 BY THE CIT. 7. LD. COUNSEL REFERRING TO THE FACTS AS STATED IN THE SUBMISSIONS REITERATED THAT THE AMOUNT OF RS. 19 LA KHS HELD AS CASH ON HAND HAS INFACT PART OF THE DISCLOSURE MADE . IT WAS SUBMITTED THAT THIS DISCLOSURE WAS MADE ON NET DEPO SITS IN THE BANK ACCOUNTS OF FOUR DIRECTORS AND THIS ISSUE AROS E IN AYS. 2004- 05 TO 2009-10. REFERRING THE ANNUAL REPORT OF ASSE SSEE-COMPANY DURING THE YEAR, COMPUTATION OF INCOME AND ASSESSME NT ORDER PASSED BY THE AO IN THE IMPUGNED YEAR, IT WAS SUBMI TTED THAT THIS ISSUE DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERAT ION AT ALL. IT WAS SUBMITTED THAT IF AT ALL THE AMOUNT HAS TO BE B ROUGHT TO TAX, THAT CAN BE DONE IN AY. 2009-10 AND NOT IN AY. 2010 -11. LD. COUNSEL ALSO RELIED ON THE FINDINGS OF ITAT IN ASSE SSEES OWN CASE FOR AYS. 2005-06 TO 2008-09, WHEREIN, AO MADE ADDIT ION OF WITHDRAWALS AND ITAT DID NOT APPROVE THE SAME. IT WAS SUBMITTED THAT LD. CIT ERRED IN EXERCISING THE JURISDICTION O N AN ISSUE WHICH DOES NOT ARISE EITHER OUT OF THE DOCUMENTS FOR THE YEAR OR OUT OF THE FACTS ON RECORD. LD.CIT-DR HOWEVER, RELIED ON THE FINDINGS OF LD. CIT IN PARA 5 & 6 EXTRACTED ABOVE. 8. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RI VAL CONTENTIONS. ON PERUSING THE PAPER BOOK AND THE OR DERS OF ITAT IN ASSESSEES OWN CASE IN WHICH THIS AMOUNT WAS CONSID ERED FOR I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 7 -: DISCLOSURE, WE CANNOT APPROVE THE ACTION OF CIT IN REVISING THE ASSESSMENT ORDER. AS FAR AS THE ORDER OF AO U/S. 1 43(3) OF THE ACT IS CONCERNED, ASSESSEES INCOME DECLARED IN THE P&L A/C WAS AS SUCH ACCEPTED WITH AN ADDITION OF RS. 16,699/- TOWA RDS UNDISCLOSED INTEREST. THE ISSUE OF MAINTAINING VAR IOUS BANK ACCOUNTS AND MAKING DEPOSITS AND WITHDRAWALS FROM T HE BANK ACCOUNTS AND CONSEQUENT DISCLOSURES MADE UNDER VARI OUS HEADS HAVE BEEN CONSIDERED IN ASSESSEES OWN CASE IN APPE ALS IN AYS. 2005-06 TO 2008-09 WHEREIN ITAT HAS GIVEN THE FOLLO WING FINDINGS: 11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND P ERUSED THE ORDERS OF THE AUTHORITIES. WE ARE UNABLE TO UND ERSTAND THE ADDITIONS MADE BY THE A.O. IN THE FIRST INSTANCE, I T WAS THE ASSESSEES EXPLANATION THAT THE CREDITS IN THE BANK ACCOUNTS WHICH WERE IN THE NAME OF THE VARIOUS DIRECTORS IN FOUR B ANK ACCOUNTS HAVE BEEN FLOWN FROM THE COMPANYS BOOKS. THIS CONT ENTION OF THE ASSESSEE HAS BEEN ACCEPTED. THEREFORE, THE CREDITS IN THE BANK ACCOUNTS CANNOT BE BROUGHT TO TAX AS UNACCOUNTED IN COME IN RESPECTIVE DIRECTORS HANDS. HOWEVER, THE COMPANY I N ITS WISDOM, ACCEPTED THAT THE AMOUNTS HAVE BEEN FLOWN FROM THE COMPANYS BOOKS OF ACCOUNTS AND ADMITTED AS INCOME, NET DEPOS ITS IN RESPECTIVE YEARS AND BALANCE IN AY 2009-10. THE FLO W OF FUNDS FROM THE COMPANY HAS NOT AT ALL BEEN EXAMINED AND THERE SEEMS TO BE NO INVESTIGATION, EXCEPT THE AFFIDAVIT FILED BY THE AS SESSEE ACCEPTING THE CREDITS AS INCOME. THERE IS NO DISPUTE WITH REF ERENCE TO THE TOTAL AMOUNT OF CREDITS, BEING ONE RS. 1.89 CRORES APPROX IMATELY AND ALONG WITH DEEMED DIVIDEND OF RS. 60,00,000/- THE T OTAL AMOUNT DISCLOSED BY THE ASSESSEE IN RESPECTIVE ASSESSMENT YEARS, TOTALS TO RS. 2.49 CRORES, ON WHICH THERE IS NO DISPUTE AT AL L. 12. AS SEEN FROM THE ORDERS, IT INDICATES THAT ASSE SSEE HAD UNEXPLAINED STOCK WHICH WAS FOUND IN THE COURSE OF SEARCH AND QUANTIFIED THE SAME AT RS.1,19,85,401/-. THIS STOCK WAS IDENTIFIED IN A.Y. 2009-2010. THE ASSESSEE HAS ACCEPTED THE SA ME AND EXPLAINED THAT THE FUNDS WITHDRAWN OUT OF DEPOSITS IN DIRECTORS BANK ACCOUNTS WERE THE SOURCE FOR INVESTMENT IN STO CK-IN-TRADE. ACCORDINGLY, SINCE THE STOCK-INTRADE WAS IDENTIFIED IN A.Y. 2009- 2010, AMOUNT WAS DECLARED IN THAT YEAR, ALONG WITH THE BALANCE AVAILABLE IN THE BANK ACCOUNTS, FIXED DEPOSITS MADE OUT OF THESE FUNDS WITH SYNDICATE BANK AS INCOME. THEREFORE, EXC EPT THE STATEMENT OF ASSESSEE OWNING UP FLOW OF FUNDS AND R ESPECTIVE INVESTMENTS, THERE IS NOTHING ON RECORD TO INDICATE THE CONTRARY. I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 8 -: 12.1. TO CONSIDER THE ADDITION OF RESPECTIVE AMOUNT S WITHDRAWN AS STOCK IN RESPECTIVE ASSESSMENT YEARS 2 005-06, 2006- 07 AND 2007-08, EXCEPT THE STATEMENT BY THE ASSESSE E THAT THE FUNDS HAVE BEEN UTILIZED IN INVESTMENT IN STOCK-INT RADE, THERE IS NO EVIDENCE THAT ASSESSEE HAD UNACCOUNTED STOCK AT THE END OF THE RESPECTIVE ASSESSMENT YEARS. THEREFORE, ON THAT COU NT, THE ADDITION AS UNDISCLOSED INVESTMENT IN STOCK CANNOT BE BROU GHT TO TAX. THERE IS NO PROVISION TO TAX WITHDRAWALS FROM A BANK ACCO UNT AS UNEXPLAINED. ONLY SOURCE OF FUNDS CAN BE EXAMINED A ND IF UNEXPLAINED, THE CREDITS IN BANK ACCOUNT CAN BE BRO UGHT TO TAX AS PER THE PROVISIONS OF IT ACT. THEREFORE, WE ARE UNA BLE TO UNDERSTAND THE ACTION TAKEN BY THE A.O. IN ASSESSING SO-CALLED WITHDRAWALS, AS INVESTMENT IN STOCK WITHOUT ANY EVIDENCE AND IN A. Y. 2008-2009 AS UNEXPLAINED CREDITS IN THE BANK ACCOUNT, WHEN THE C REDITS WERE EXPLAINED AS SOURCE FROM THE COMPANYS ACCOUNTS ITS ELF. THEREFORE, LOOKING AT ANY ANGLE, THE ADDITIONS MADE BY THE A.O . CANNOT BE SUSTAINED. 12.2. THE AO COULD HAVE EXAMINED THE NATURE OF FUND S FLOW FROM COMPANY. IF IT IS APPROPRIATION OF PROFITS BY WAY OF ADVANCES IT DOES NOT EFFECT P&L ACCOUNT. IN CASE THERE IS BOGUS EXPENDITURE CLAIMS AND DIVERSION OF FUNDS, THEN TO THAT EXTENT, THERE COULD BE ADDITION IN RESPECTIVE YEARS. NOTHING WAS EXAMINED /ESTABLISHED BY AO. SINCE ADMISSION BY ASSESEE WAS ACCEPTED AND NO ADDITION WAS MADE IN DIRECTORS HAND IN WHOSE ACCOUNTS THE CREDIT S WERE FOUND, THE STATEMENT BY ASSESSEE ADMITTING INCOMES AND ACC EPTED BY INVESTIGATION AUTHORITIES HAS TO BE ACCEPTED IN FUL L. THE BASIS FOR DECLARATION SEEMS TO BE NET ASSETS FOUND IN THE SEA RCH. ASSESSEE ADMITTED THE NET DEPOSITS IN RESPECTIVE YEARS AND E NTIRE BALANCE AMOUNT IN THE YEAR OF STOCK FOUND, ALONG WITH DEPOS ITS AND CASH HELD. THERE IS ALSO NO DISCUSSION BY AO ABOUT TURNO VER OUTSIDE BOOKS OF ACCOUNT. IT IS NOT EXPLAINED HOW THERE CAN BE INVESTMENT IN STOCK WITHOUT SALES OUTSIDE BOOKS OF ACCOUNT. NOT ONLY THAT AO ALSO DID NOT GIVE ANY CREDIT TO ADDITION MADE IN FIRST Y EAR AS INVESTMENT IN STOCK AS OPENING BENEFIT IN LATER YEAR. THE VERY APPROACH OF AO IN MAKING THE ADDITION IS FAULTY. 13. WE ARE ALSO SURPRISED TO NOTE THAT LEARNED CIT( A) WHILE ACCEPTING THAT SAME INCOME CANNOT BE TAXED TWICE, R EJECTED THE ASSESSEES CONTENTION STATING THAT LINK BETWEEN WIT HDRAWALS OF FUNDS FROM THE COMPANY AND INVESTMENT OUT OF THE FU NDS IN STOCK WAS NOT ESTABLISHED BY THE ASSESSEE. THERE IS NOTHI NG ON RECORD EVEN TO CONSIDER THAT WITHDRAWALS FLOW INTO STOCK, EXCEPT STATEMENT BY ASSESSEE ADMITTING THE SAME. SINCE ASSESSEE ADM ITTED IN LATER YEAR, IT IS THE DUTY OF AO TO PROVE THAT THE STATEM ENT WAS NOT ACCEPTABLE. THE ONUS IS ON REVENUE TO REBUT THE ASS ESSEE CONTENTIONS. THERE IS NO EVIDENCE WHATSOEVER THAT A SSESSEE HAS INVESTED IN STOCK IN RESPECTIVE YEARS, EXCEPT ASSES SEES CLAIMING TELESCOPING BENEFIT FOR THE INVESTMENT IN STOCKS AV AILABLE ON THE DATE I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 9 -: OF SEARCH. SINCE ASSESSEES FUNDS WERE FLOWN FROM THE COMPANY STANDS EXPLAINED AND THE RESPECTIVE INVESTMENTS OUT OF THE FUNDS ALONG WITH THE DEEMED DIVIDEND WAS DISCLOSED BY THE ASSESSEE BY LINKING UP THE SOURCE OF FUNDS WITH THE INVESTMENTS , NATURALLY THE EXPLANATION OF THE ASSESSEE HAS TO BE ACCEPTED. SI NCE, THERE IS NO EVIDENCE, IN SPITE OF SEARCH, THAT ASSESSEE HAD STO CKS AVAILABLE AT THE END OF RESPECTIVE ASSESSMENT YEARS, THE ADDITIO NS SUSTAINED BY THE LEARNED CIT(A) AS UNACCOUNTED STOCK-IN-TRADE IN THOSE YEARS CANNOT BE ACCEPTED. 14. LEARNED CIT(A) ALSO HAS NOT NOTICED THAT THE AD DITION IN A.Y. 2008-09 IS NOT INVESTMENT IN STOCK BUT THE DEP OSITS IN BANK ACCOUNTS WHICH WERE BROUGHT TO TAX BY THE A.O. IN T HAT YEAR, DIFFERENTLY FROM OTHER THREE ASSESSMENT YEARS. SINC E THE SOURCE OF FUNDS HAS ALREADY BEEN EXPLAINED, ADDITION UNDER S ECTION 69B CANNOT BE MADE ON THAT ACCOUNT AT ALL. WE ARE UNABL E TO UPHOLD THE ORDER OF THE A.O. AND CIT(A). SINCE ASSESSEE HAS A CCEPTED THE ENTIRE INVESTMENT IN STOCK IN A.Y. 2009-2010, BRING ING IT TO TAX IN RESPECTIVE ASSESSMENT YEARS IS CERTAINLY TAXING THE SAME INCOME TWICE. 15. THERE IS ALSO JUSTIFICATION IN ASSESSEE CLAIM O F GIVING BENEFIT OF ADDITION IN THE RESPECTIVE YEARS FROM AM OUNT THAT WAS DISCLOSED IN. AY 2009-10. IN CASE AO MADE ADDITION OF DEPOSITS IN BANKS IN RESPECTIVE YEARS UNIFORMLY, THEN TELESCOP ING BENEFIT IN AY 2009-10 COULD HAVE BEEN EXAMINED. BUT AS STATED, A O TOOK DIFFERENT STAND IN THESE ASSESSMENTS. THE TOTAL UN ACCOUNTED INCOME AT RS.2.49 CRORES WAS DISCLOSED BY ASSESSEE IN VARIOUS ASSESSMENT YEARS. FOR THESE REASONS, WE UPHOLD ASSE SSEES GROUNDS IN ALL THE ASSESSMENT YEARS AND DELETE THE ADDITIONS SO MADE BY THE ASSESSING OFFICER. ACCORDINGLY, GROUNDS OF THE ASSESSEE ARE ALLOWED. 9. AS CAN BE SEEN FROM THE ABOVE ORDER, THERE ARE C LEAR FINDINGS THAT THE WITHDRAWALS ALONE CANNOT BROUGHT TO TAX AS UNACCOUNTED STOCK AND FURTHER WITHDRAWALS IN THE BANK CANNOT BE TREATED AS INCOME OF UNDISCLOSED NATURE. THERE ARE ALSO FIN DINGS THAT HAVING ACCEPTED ASSESSEES DISCLOSURE IN TOTO WITHOUT ANY INCRIMINATING MATERIAL, AO IS BOUND TO CONSIDER THE ADDITIONS, EI THER ON THE BASIS OF THE DEPOSITS IN THE BANK ACCOUNTS OR ON THE BASI S OF ASSETS AVAILABLE ON THE DAY OF SEARCH. AS EXTRACTED IN TH E SUBMISSIONS BY ASSESSEE, THE QUANTUM WAS ARRIVED AT ON THE BASIS O F DEPOSITS IN I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 10 - : THE BANK ACCOUNTS ALONG WITH CERTAIN WITHDRAWALS WH ICH HAVE BEEN ROUNDED UP TO 1.89 CRORES. THIS AMOUNT OF DEPOSITS WERE RECONCILED WITH WITHDRAWALS AND STOCK ETC WHICH INC LUDED THE FUNDS HELD FROM THE WITHDRAWALS TO THE EXTENT OF RS . 19 LAKHS. THUS, THE ENTIRE AMOUNT DISCLOSED AT RS. 1.89 CRORE S INCLUDE THE FUNDS WITHDRAWN FROM BANKS AND HELD ON HAND TO AN E XTENT OF RS. 19 LAKHS. SINCE THE ENTIRE DISCLOSURE WAS ACCEPTED AS SUCH, WE DO NOT SEE ANY REASON FOR THE CIT TO INVOKE JURISDICTI ON IN THE IMPUGNED ASSESSMENT YEAR, WHEN ALL THE DISCLOSURES WERE MADE UPTO AY. 2009-10. IN FACT, NOTHING HAS HAPPENED IN AY. 2010-11 AND AO HAS BROUGHT TO TAX THE UNACCOUNTED INTEREST EARNED BY ASSESSEE IN THE YEAR IN THE ASSESSMENT ORDER. AS R IGHTLY CONTENDED BY ASSESSEE, THE ISSUES WERE EXAMINED IN DETAIL IN EARLIER YEARS AND ALSO AT THE TIME OF COMPLETION OF ASSESSMENT IN THI S YEAR. THEREFORE, WE DO NOT FIND THE ORDER OF THE AO EITHE R ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. FOR THE RE ASONS STATED ABOVE, WE ARE OF THE OPINION THAT LD. CIT EXERCISED JURISDICTION WRONGLY IN THE IMPUGNED ASSESSMENT YEAR. IN VIEW O F THIS, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER U/S. 263 P ASSED BY THE CIT. GROUNDS RAISED BY ASSESSEE ARE ALLOWED. 10. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 14 TH OCTOBER, 2015 TNMM I.T.A. NO. 44/HYD/2015 M/S. ARCOM MEDICAL DEVICES PVT. LTD., :- 11 - : COPY TO : 1. M/S. ARCOM MEDICAL DEVICES PVT. LTD., 3-6-140/A, FLAT NO. 402, CITY CENTRE, HIMAYATNAGAR, HYDERABAD . 2. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2 , 3 RD FLOOR, POSNETT BHAVAN, TILAK ROAD, HY DERABAD. 3 . CIT - CENTRAL, HYDERABAD. 4 . D.R. ITAT, HYDERABAD. 5. GUARD FILE.