DCIT, Hyderabad V. Sri Ram Nivas Sanghwan, Hyderabad

ITA 446/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59159 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-02-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 22-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Rejection of books of accounts; Unexplained investment; Search and seizure; Peak credit; Assessment record
• Section: 40A(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE CHANDRA POOJARI, ACCOUNTANT MEMBER & SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. ASSESSMENT YEAR ASSESSEE RESPONDENT 438/HYD/2010 439/HYD/2010 440/HYD/2010 441/HYD/2010 442/HYD/2010 443/HYD/2010 444/HYD/2010 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 DCIT, CENTRAL CIRCLE-4, HYDERABAD. SHRI AMAR SINGH SANGHWAN, HYDERABAD. (PAN: AEYPS0345E) 445/HYD/2010 446/HYD/2010 447/HYD/2010 448/HYD/2010 449/HYD/2010 2000-01 2001-02 2002-03 2003-04 2004-05 DCIT, CENTRAL CIRCLE-4, HYDERABAD. SHRI RAM NIVAS SANGHWAN, HYDERABAD. (PAN: ATRPS2529L) 450/HYD/2010 451/HYD/2010 452/HYD/2010 453/HYD/2010 2000-01 2003-04 2004-05 2005-06 DCIT, CENTRAL CIRCLE-4, HYDERABAD. SHRI RAM PAL SINGH SANGHWAN, HYDERABAD. (PAN: ADVPS0647P) ASSESSEES BY : SMT. K. MYTHILI RANI, DR RESPONDENT BY : SHRI A.V. RAGHURAM DATE OF HEARING : 17.11.2011 DATE OF PRONOUNCEMENT : 20.1.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM . THERE ARE SIXTEEN APPEALS IN THIS BUNCH. THEY ARE FILED BY THE REVENUE AND ARE DIRECTED AGAINST SIMILAR BUT SE PARATE ORDERS OF THE CIT(A)-I, HYDERABAD IN RESPECT OF EACH OF TH ESE THREE ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 2 ASSESSEES. ASSESSMENT YEARS INVOLVED ARE FROM 1999 -2000 TO 2005-06. SINCE COMMON ISSUES ARE INVOLVED, THESE A PPEALS ARE BEING DISPOSED OF, BY THIS COMMON ORDER FOR THE SAK E OF CONVENIENCE. 2. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND S EIZURE OPERATION U/S.132 OF THE LT. ACT WAS CONDUCTED IN T HE CASE OF AMAR TENT WORKS AND ITS ASSOCIATES ON 29.7.2004. TH E GROUP CONSISTS OF THE ASSESSEE, HIS BROTHERS SRI RAMPAL S INGH SANGHWAN AND SRI RAM NIVAS SINGH SANGHWAN AND THEIR FIRMS AMAR TENT HOUSE AND HYDERABAD TENT AND CLOTH STORE. NOTICES U/S. 153A WAS ISSUED TO 'THE ASSESSEE CALLING FOR R ETURNS FOR THE ASSESSMENT YEARS 1999-2000 TO 2004-05. APPARENTLY T HERE WAS NO COMPLIANCE INITIALLY EVEN TO THE NOTICES ISSUED U/S. 142(1). THE ASSESSEE FINALLY FILED RETURNS OF INCOME ON 25- 9-2006. IT MAY ALSO BE OBSERVED THAT THE AO MADE THE DETAIL ANALYS IS OF THE SEIZED MATERIALS AS ALSO THE SUBMISSION MADE BY THE ASSESSEE IN THE ASSESSMENT ORDER PASSED IN THE CASE OF THE ASSE SSEE FOR THE ASSESSMENT YEAR 1999-2000 AND BASED ON THE ANALYSIS MADE THEREIN PROCEEDED TO FINALISE THE ASSESSMENTS IN TH E CASE OF THE ASSESSEE AS WELL AS HIS BROTHERS FOR THE ASSESSMENT YEARS FOR WHICH NOTICES WERE ISSUED. 3. IN COURSE OF THE SEARCH AND SEIZURE OPERATION, 18 NUMBERS OF UNDISCLOSED BANK ACCOUNTS WERE FOUND, WH EREIN A TOTAL AMOUNT OF RS.7,09,85,472/- WAS FOUND TO HAVE BEEN CREDITED FROM APRIL 2000 TO JULY 2004. THE CREDITS WERE ADMITTED TO BE SUPPRESSED TURNOVER OF THE GROUP. DURING THE SEARCH, THE ASSESSEE HAD ALSO ADMITTED UNACCOUNTED CASH SALES A ND QUANTIFIED THE SAME TO BE RS.1 CRORE FROM APRIL 200 0 TO JULY 2004. SIMILARLY, PURCHASES THROUGH CASH AND BEARER CHEQUES ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 3 WHICH ARE LIABLE FOR DISALLOWANCE U/S. 40A(3) WERE ALSO ADMITTED. THIS APART, DOCUMENTS RELATING TO ADVANCE OF RS.2 L AKHS BY PROMISSORY NOTES, PURCHASE OF PROPERTY AT JAMBAGH, INVESTMENTS IN PURCHASE OF PLOTS ETC WERE FOUND DUR ING THE SEARCH. CONSIDERING THE EVIDENCES FOUND DURING THE SEARCH AND SUBSEQUENT ENQUIRIES MADE, THE AO PROCEEDED TO COMP LETE THE ASSESSMENT IN THE CASE OF THE ASSESSEE AND ITS ASSO CIATES IN THE MANNER AS BELOW: 5. PROFIT FROM SUPPRESSED TURNOVER: IN COURSE OF THE SEARCH, 18 NUMBERS OF UNDISCLOSED BANK ACCOUNTS WERE FOUND. BULK OF ASSESSEE'S UNACCOUNTED TURNOVER WAS CHANNELISED THROUGH THESE BANK ACCOUNTS. THE CR EDIT ENTRIES IN THESE BANK ACCOUNTS WERE STATED TO BE UN DISCLOSED SALES. THE AO FOUND THE TOTAL OF THE CREDIT ENTRIES IN ALL THE 18 UNDISCLOSED ACCOUNTS TO BE RS.7,09,85,472/-. IN COU RSE OF THE SEARCH, THE ASSESSEE WAS CONFRONTED ABOUT THESE BAN K ACCOUNTS AND IT WAS ADMITTED BY THE ASSESSEE THAT THE CREDIT ENTRIES IN THESE BANK ACCOUNTS REPRESENTED UNACCOUNTED TURNOVE R ONLY. IT WAS ALSO ADMITTED THAT THESE ACCOUNTS WERE OPENED I N THE FICTITIOUS NAMES/FICTITIOUS CONCERNS. THESE FICTITI OUS CONCERNS WERE CREATED TO ISSUE BILLS AND TO ROUTE UNACCOUNTE D SALES. THE ASSESSEE ALSO ADMITTED THAT NO BOOKS OF ACCOUNT WER E MAINTAINED IN THE NAME OF THESE CONCERNS AND THEY W ERE NOT ASSESSED TO TAX. WHEN IT WAS PROPOSED AS TO WHY THE ENTIRE UNDISCLOSED TURNOVER SHOULD NOT BE TREATED UNDISCLO SED INCOME, IT WAS SUBMITTED BY THE ASSESSEE THAT EXPENDITURE T OWARDS PURCHASES, TRAVELLING, LABOUR CHARGES, TRANSPORTATI ON ETC. WERE INCURRED AND HENCE THE ENTIRE TURNOVER CANNOT BE TR EATED AS INCOME. SUBSEQUENTLY, THE ASSESSEE SUBMITTED THE DE TAILS CONCERNING THE UNACCOUNTED TURNOVER PARTY WISE AND YEAR WISE. ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 4 5.1. IT WAS ALSO SUBMITTED THAT THE SAID TURNOVER WAS OFFERED IN THE HANDS OF THE ASSESSEE AND HIS TWO BROTHERS SRI RAM NIVAS SINGH AND SRI RAMPAL SINGH AS BELOW. NAME OF THE PERSON A.Y. TURNOVER OFFERED (RS.) AMIR SINGH 00-01 2,30,202 01-02 41,29,030 02-03 64,14,763 03-04 95,19,219 04-05 1,50,98,100 05-06 19,46,000 -------------- -- 3,73,37,322 ----------------- RAM NIVAS SINGH 01-02 64,52,515 02-03 84,59,246 03-04 38,97,954 04-05 18,55,967 ----------- 20665682 ----------- RAMPAL SINGH 03-04 8,47,735 04-05 56,85,055 05-06 64,41,460 ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 5 ----------- 1,29,74,250 ---------- GRAND TOTAL RS.7,09,77,254 5.2. THE ASSESSEE OFFERED 5% OF THE ABOVE UNDISCLO SED TURNOVER AS THE PROFIT FOR THE GROUP. AS REGARDS TH E BASIS FOR ARRIVING 5%, IT WAS SUBMITTED THAT THE ASSESSEE HAS BEEN SHOWING REGULARLY NET PROFIT OF 1 % TO 1.5% DUE TO STIFF COMPETITION IN THE TRADE. HOWEVER, ON THE UNDISCLOS ED TURNOVER THE PROFIT IS DECLARED AT 5%. THE AO, HOWEVER, DID NOT ACCEPT THE STAND TAKEN BY THE ASSESSEE. THE AO WAS OF THE VIEW THAT SEIZED MATERIAL INDICATED PROFIT AT AROUND 12% AFTER MAINT ENANCE EXPENDITURE OF 5%. HE THEREFORE PROPOSED TO ESTIMAT E THE PROFIT AT 15% OF THE TOTAL UNDISCLOSED TURNOVER. IN REPLY TO THE PROPOSAL OF THE AO TO ESTIMATE PROFIT@15%, IT WAS SUBMITTED BY THE ASSESSEE THAT THE WORKING NOTED IN THE SEIZED MATER IAL WAS STRAY WORKING SHEETS, WHICH IS GENERALLY SHOWN TO THE CUS TOMERS AND THE ACTUAL SALE PRICE IS SUBSTANTIALLY LESS AFTER B ARGAIN. NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE AO ADOPTED NET PROFIT AT THE RATE OF 15% ON THE SUPPRESSED TUR NOVER AND WORKED OUT THE PROFIT ASSESSABLE IN THE HANDS OF TH REE BROTHERS AS BELOW: A.Y AMAR SINGH RAM NIVAS SINGH RAMPHAL SINGH (RS.) (RS.) (RS.) 00-01 34,530 NIL NIL 01-02 6,19,356 9,67,877 NIL 02-03 9,62,214 12,68,887 NIL 03-04 14,27,883 5,84,693 1,27,160 ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 6 04-05 22,64,715 2,78,395 8,52,758 05-06 2,91,900 NIL 9,66,219 6. THE AO ESTIMATED THE UNDISCLOSED TURNOVER BASED ON THE CREDITS IN 18 BANK CREDITS. THE AO ESTIMATED PROFIT S AT 15% OF THE SUPPRESSED TURNOVER. THE ASSESSEE RESISTED THE ADDITION ON THE GROUND THAT NO UNDISCLOSED ASSETS WERE FOUND CO RRESPONDING TO THE UNDISCLOSED INCOME. THE CIT(A) CONFIRMED THE ADDITION AT 12% OF THE UNDISCLOSED TURNOVER OBSERVING AS UNDER: I HAVE GONE THROUGH THE FACT OF THE ISSUE AND SUBMI SSIONS OF THE ASSESSEE. I HAVE ALSO GONE THROUGH THE ASSES SMENT RECORD AS WELL AS SEIZED MATERIAL BASED ON WHICH TH E AO HAD ESTIMATED THE PROFIT ON THE TURNOVER. I FIND FR OM THE ,SEIZED MATERIAL AS ALSO FROM THE SUBMISSION MADE B Y THE ASSESSEE THAT IN MAJORITY OF THE ITEMS DEALT BY THE ASSESSEE, THE PROFIT WAS INDICATED AT AROUND 12%. I T IS ONLY IN A FEW ITEMS LIKE KHURPI THAT THE PROFIT INDICATED WAS ABNORMALLY HIGH. THEREFORE IN MY VIEW, THE AO SHOULD NOT HAVE ADOPTED THE PROFIT KEEPING THE SALE PRICE OF K HURPI AS THE YARD STICK. FURTHER THE ASSESSMENT RECORDS ALSO SHOW THE PROFIT SHOWN BY THE ASSESSEE IN THE EARLIER ASS ESSMENT YEARS WAS BETWEEN 0.22% TO 2%. EVEN SOME ASSESSMENT YEARS WERE COMPLETED ON SCRUTINY BASIS AND THE NET PROFIT WAS ARRIVED AT 2.10%. FURTHER, THE ASSESSEE HIMSELF HAS OFFERED 5% ON THE SUPPRESSED TURNOVER FOUND FROM AL L THE 18 UNDISCLOSED BANK ACCOUNTS. THOUGH THE ASSESSEE SUBM ITTED BEFORE THE AO THAT EVEN 5% IS NOT COMMENSURATE WITH THE ASSETS FOUND, BUT THE AO DID NOT CONSIDER THE SAME. IN FACT, ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 7 IN THE ASSESSMENT ORDER, THE AO HAS MADE AN OBSERVA TION TOWARDS THE END OF THE ASSESSMENT ORDER THAT THE ASSESSEE'S REQUEST FOR ACCEPTING THE RETURNED INCOM E FILED ON THE BASIS OF ASSET METHOD IS NOT CONSIDERED. IT IS A FACT THAT THE ASSET METHOD IS ONE OF THE ACCEPTED PRINCI PLE OF ACCOUNTING ESPECIALLY IN SEARCH CASES AND THE SAME CANNOT BE OVERRULED WITHOUT ANY BASIS. EVEN CIRCULAR NO.21 /48/68 IT(INV) DATED 26.02.69 ISSUED BY CBDT CLARIFIES THA T NET WORTH BASIS CAN BE USUALLY EMPLOYED IN CASES WHERE BOOKS ARE NOT AVAILABLE OR THE DATA AVAILABLE IS NOT ADEQ UATE. THE SAME HAS BEEN DISCUSSED AT LENGTH BY HON'BLE ITAT VISAKHAPATNAM BENCH IN THE CASE OF SRI K.V.KRISHNA RAO VS. ACIT CENTRAL CIRCLE, RAJMUNDRY IN ITA NO,421 TO 426/VIZAG/2008 AND OTHERS IN ORDER DATED 31.08.2009 . THE ASSESSEE HAS RELIED ON THE DECISION IN THE CASE OF RML MEHROTRA VS. ACIT. IN THAT CASE THE HON'BLE ITAT OB SERVED THAT IF THE ASSESSEE HAS ACTUALLY MADE A FORTUNE IT MUST BE REFLECTED IN CERTAIN ASSET, MOVABLE OR IMMOVABLE OU GHT TO HAVE BEEN FOUND DURING THE COURSE OF SEARCH. EVEN A ' SIMILAR OBSERVATION WAS MADE BY THE HON'BLE ITAT HYDERABAD IN THE CASE OF PADAMCHAND JAIN RELIED ON BY THE ASSESSEE. THE HON'BLE BENCH HAS TAKEN NOTE OF THE F ACT THAT IN A SEARCH CASE WHILE MAKING ESTIMATION DUE CARE S HOULD BE TAKEN TO SEE THAT THE INCOME SO ARRIVED COMPARES FAVOURABLY WITH THE ASSETS FOUND. NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO THAT THE INCOME DETERMINED BY ESTIMATING THE PROFIT ON SUPPRESSED TURNOVER COUPLE D WITH THE ADDITIONS SUGGESTED WOULD COMPARE FAVOURABLY WI TH THE ASSETS FOUND DURING THE SEARCH. THUS, CONSIDERING T HE FACTS AVAILABLE ON RECORD AND ALSO CONSIDERING THE JUDICI PRONOUNCEMENT RELIED ON BY THE ASSESSEE INCLUDING T HAT OF ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 8 JURISDICTIONAL TRIBUNAL, I AM OF THE VIEW THAT THE ESTIMATION OF PROFIT ON THE SUPPRESSED TURNOVER ADOPTED BY THE AO IS ON THE HIGHER SIDE. IN MY VIEW ESTIMATION OF PROFIT @ 10% ON THE SUPPRESSED TURNOVER DETECTED FROM 18 BANK ACCOU NTS WOULD MEET THE END OF JUSTICE. THE AO IS DIRECTED T O. RECALCULATE THE PROFIT ON SUPPRESSED TURNOVER @10% AND ALLOCATE THE SAME IN, THE CASE OF THE ASSESSEE AS A LSO HIS BROTHERS IN THE MANNER DONE IN THE ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2 000. THE RELEVANT ASSESSMENT ORDERS FOR THE ASSESSMENT Y EAR 2000-01 TO 2005-06 IN THE CASE OF THE ASSESSEE NEED S TO BE REVISED CONSIDERING THE NET PROFIT AT 10% AFTER PRO PER REALLOCATION. THIS GROUND OF APPEAL FOR THE ASSESSM ENT YEARS 2000-01 TO 2005-06 IS PARTLY ALLOWED. 7. THERE IS ALSO AN ADDITION IN RESPECT OF CASH SA LES.THE AO ESTIMATED PROFITS AT 15% OF UNDISCLOSED CASH SALES AT RS. 1 CRORE PER YEAR. THE ASSESSEE SUBMITTED THAT THE UNDISCLOS ED TURNOVER ESTIMATED WOULD ALSO INCLUDE THE UNDISCLOSED CASH S ALES. THE CIT(A) PARTLY ALLOWED THE CLAIM OF THE APPELLANT OB SERVING AS UNDER: I HAVE GONE THROUGH THE ISSUE. I FIN D THAT THE AO HAS WORKED OUT THE PROFIT ONLY ON THE BASIS OF A STATEM ENT MADE BY THE ASSESSEE DURING THE COURSE OF SEARCH. HOWEVE R, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE HAD ALSO INDICATED THAT THE CASH SALES WERE RS. 26,91,859/-,WHICH WAS CULLED OUT FROM VARIOUS ACCOU NTS. THE AO HAS NOT LOOKED INTO THIS ASPECT AT ALL. THE CONTENTION OF THE ASSESSEE IS THAT RS.26,91,859/- BEING THE CA SH SALES WERE DEPOSITED INTO THE 18 BANK ACCOUNTS. IF THAT I S SO, TAXING THE SAME, AS UNDISCLOSED CASH SALES WOULD AM OUNT ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 9 TO DOUBLE TAXATION SINCE THE ENTIRE CREDITS IN THE BANK ACCOUNT HAS ALREADY BEEN CONSIDERED AS SUPPRESSED TURNOVER BY THE AO. THE AD IS THEREFORE, DIRECTED T O VERIFY THE CONTENTION OF THE ASSESSEE AND-IN-CASE; THE FIG URE OF CASH SALES CLAIMED BY THE ASSESSEE TO HAVE BEEN_ DEPOSITED INTO THE UNDISCLOSED BANK ACCOUNTS, THEN WHILE WORKING OUT THE PROFIT THIS AMOUNT SHOULD BE REDUCE D FROM THE OVER ALL UNDISCLOSED CASH SALES FIGURE OF RS.1 CRORE. AS REGARDS THE RATE OF PROFIT, THE AO IS DIRECTED TO A DOPT 10%, INSTEAD OF 15% ADOPTED BY HIM IN VIEW OF THE FACT T HAT 10% PROFIT ESTIMATION WAS DIRECTED FOR SUPPRESSED TURNO VER. THIS GROUND OF APPEAL FOR ASSESSMENT YEARS 1999-2000 TO 2005- 06 IS PARTLY ALLOWED SUBJECT TO FACTUAL VERIFICATIO N BY THE AO AND AS PER DIRECTION GIVEN ABOVE. 8. THERE WAS A FURTHER ADDITION OF UNDISCLOSED SHAR E CAPITAL BASED ON PEAK CREDIT WORKED OUT FROM UNDISCLOSED 18 BANK ACCOUNTS. THE CIT(A) DELETED THE ADDITION OBSERVING AS UNDER: IN THE CASE UNDER CONSIDERATION THE AO HAS NOT BROU GHT OUT IN CLEAR TERM THAT THERE WAS ANY UNDISCLOSED STOCK FOUND IN COURSE OF SEARCH. SIMILARLY NO UNDISCLOSED SUNDRY D EBTORS WAS NOTICED IN COURSE OF SEARCH. THUS IN MY VIEW TH E CASE DECIDED BY THE JURISDICTIONAL ITAT AS CITED ABOVE I S SQUARELY APPLICABLE TO THE ASSESSEE'S CASE AND CONSIDERING T HE SAME NO ADDITION IS CALLED FOR. THE AO IS ACCORDINGLY DI RECTED TO DELETE THE ADDITION MADE IN THIS REGARD. 9. THE REVENUE IS ON APPEAL AND HAS RAISED THE FOL LOWING GROUNDS: 1. THE CIT(A) IS ERRONEOUS ON FACTS. 2. THE CIT(A) HAS NOT APPRECIATED PERCENTAGE ADOPTE D BY THE AO @ 15 ON UNACCOUNTED BUSINESS TURNOVER ALTHOU GH HIS ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 10 OWN FINDINGS WERE REVEALED THAT THE PROFIT WOULD BE NEAR TO THE PERCENTAGE ADOPTED BY THE AO I.E. 12%. ACCORDI NGLY, CIT(A) ERRED IN DIRECTING THE AO TO ADOPT LESSER PR OFIT PERCENTAGE ON UNACCOUNTED BUSINESS TURNOVER. 3. THE CIT(A) ERRED IN CONCLUDING THAT THE ADDITIO N OF CIRCULATING CAPITAL IN THE UNACCOUNTED BUSINESS WHI CH WAS ARRIVED ON THE PEAK CREDIT WORK OUT IS DOUBLE ADDIT ION. THE TOTAL UNACCOUNTED TURNOVER WAS CONSIDERED, BECAUSE ONLY THE GP WAS TAXED, NOT TOTAL UNACCOUNTED TURNOVER, H ENCE CIRCULATING CAPITAL IS NEEDED TO BE BROUGHT TO TAX. 4. THE CIT(A) ASSUMED THAT BOOKS OF ACCOUNTS WERE REJECTED AND ESTIMATED PROFIT PERCENTAGE, HENCE 40A (3) IS NOT APPLICABLE WHEN THE BOOKS OF ACCOUNTS REJECTED AND RELIED UPON INDWELL CONSTRUCTION CASE. THE CIT(A) FAILED TO FIND OUT THAT PROFIT ESTIMATED IS FOR UNACCOUNTED B USINESS TURNOVER FOR WHICH ASSESSEE WAS NOT MAINTAINED BOOK S OF ACCOUNTS, HENCE THE QUESTION OF REJECTION OF BOOKS DOES NOT ARISE, AS WELL AS THE QUOTED CASE LAW IS ALSO NOT A PPLICABLE. 5. THE CIT(A) HAS NOT APPRECIATED PERCENTAGE ADOPT ED BY THE AO @15% ON UNACCOUNTED CASH SALES ALTHOUGH HIS OWN FINDINGS WERE REVEALED THAT THE PROFIT WOULD BE NEA R TO THE PERCENTAGE ADOPTED BY THE AO I.E. 12%. ACCORDINGLY , THE CIT(A) ERRED ION DIRECTING THE AO TO ADOPT LESSER P ROFIT PERCENTAGE ON UNACCOUNTED CASH SALES. 10. WE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. FROM THE FACTS FURNISHED, IT WOULD APPEAR THAT ALL THE ADDITIONS HAVE BEEN MADE ON THE BASIS OF THE CREDITS ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 11 IN THE 18 BANK ACCOUNTS. THE ENTIRE CREDIT OF RS.7, 09,77,254/- WAS TAKEN AS SUPPRESSED TURNOVER OF THREE ASSESSES: THE ASSESSEE RS.3,73,37,322/-: SHRI. RAMNIVAS SINGH RS. 2.06,65,682/- AND SHRI. RAMPAL SINGH RS.1,29,74,250 /-. THE PROFITS FROM THIS UNDISCLOSED TURNOVER WAS TAKEN BY THE AO AT 15% OF THE TURNOVER. THE CIT(A) HAS ESTIMATED THE P ROFIT AT 10%. WE FIND THAT THE ENTIRE AMOUNT OF CREDITS HAVE BEEN TAKEN AS UNDISCLOSED TURNOVER. IT IS NOT CLEAR AS TO HOW THE EXPENSES FOR THESE SALES HAVE BEEN MET. SUCH EXPENSES WILL ALSO BE UNEXPLAINED EXPENSES UNLESS SALES ON EARLIER OCCASI ON ARE TAKEN AS THE SOURCE FOR PURCHASE OF MATERIAL SUBSEQUENTLY . BUT SUCH AN EXERCISE HAS NOT BEEN MADE EITHER BY THE DEPARTM ENT NOR THE ASSESSEE. IN THE CIRCUMSTANCES WE FEEL THE PROFITS AT 15% OF THE UNDISCLOSED TURNOVER ARE A FAIR ESTIMATE OF PROFITS OF UNDISCLOSED TURNOVER. WE ACCEPT THE DECISION OF THE AO IN THIS MATTER AND HOLD THAT THE PROFIT ON THE UNDISCLOSED TURNOVER OF RS. 3,73,37,322/- SHOULD BE COMPUTED AT 15% AND ADDED. THIS MAY BE SPREAD OVER THE VARIOUS YEARS AS HAS BEEN DONE B Y THE AO AS UNDER: ASSESSMENT YEAR AMOUNT RS. 00-01 34,530/-. 01-02 6,19,356/-. 02-03 9,62,214/- 03-04 14,27,883/- 04-05 22,64,715/- 05-06 2,91,900/-. 11. ONCE THE ENTIRE CREDITS TO THE BANK ACCOUNTS H AS BEEN TREATED AS UNDISCLOSED TURNOVER AND THE PROFITS THE RE FROM IS ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 12 ASSESSED TO TAX, THERE IS NO QUESTION OF A FURTHER ADDITION ON ACCOUNT UNDISCLOSED CASH SALES OR ADDITION ON ACCOU NT OF UNEXPLAINED INVESTMENTS BASED ON THE SAME CREDITS I N THE BANK ACCOUNTS. 11. WITH RESPECT TO GROUND NO.4 RAISED BY THE REVE NUE THE CIT(A) HAS RIGHTLY RELIED ON THE DECISION OF INDWEL L CONSTRUCTION VS. 232 ITR 772 (AP). WE FIND THAT FROM THE ANALYSIS OF ALL THE JUDICIAL PRONOUNCEMENTS, IT IS CLEAR THAT IN A CASE WHERE IN COME IS ESTIMATED FURTHER DISALLOWANCE U/S 40A(3) IS NOT PE RMISSIBLE. IN FACT IN A RECENT DECISION DATED 23.10.2009 IN THE C ASE OF M/S TEJA CONSTRUCTION VS. ACIT RANGE -2 HYDERABAD IN IT A NO.308/HYD/2009, THE HONBLE TRIBUNAL, HYDERABAD A BENCH HAVE REFERRED TO THE DECISION OF THE SAME BENCH IN THE CASE OF N. RAMACHANDRA REDDY IN ITA NO.1372/07 ORDER DATED 6.3 .2009 WHERE THE TRIBUNAL AFTER FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL C ONSTRUCTIONS OBSERVED AS UNDER: THE ABOVE DECISION OF THE AP HIGH COURT HAS BEEN FO LLOWED AND A SIMILAR VIEW HAS BEEN TAKEN BY THE SPECIAL BE NCH (KOLKATA) OF THIS TRIBUNAL IN THE CASE OF ITO VS. K ENARAM SAHA AND SUBASH SAHA (301 ITR (AT) 171) WHEREIN DISALLOWANCE MADE IN TERMS OF S.40A(3) HAS BEEN DEL ETED. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA), BESIDES THE SPECIAL BENCH DECISION OF THIS TRIBUNAL NOTED A BOVE, WE ARE OF THE CONSIDERED OPINION THE INCOME OF THE ASS ESSEE HAVING BEEN DETERMINED BY RESTORING TO ESTIMATION, THERE IS ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 13 NO SCOPE FOR ANY FURTHER DISALLOWANCE EITHER IN TER MS OF SECTION 40A(IA)(40A(3) OR OTHERWISE. 12. IN THE RESULT THE REVENUE APPEALS ARE PARTLY ALLOWED. RAM NIVAS SANGHWAN (ITA 445 TO 449/H/2010) 13. THE ISSUES ARE IDENTICAL AS IN THE CASE OF SHR I AMAR SINGH SANGHWAN. THE CREDITS IN THE 18 BANK ACCOUNTS HAVE TAKEN AS UNDISCLOSED TURNOVER. THE UNDISCLOSED TURNOVER OF T HIS ASSESSEE HAS BEEN TAKEN AS RS. 2.06,65,682/- AND THE AO HAS ASSESSED 15% OF SUCH CREDITS AS PROFITS FROM UNDISCLOSED TUR NOVER AND ADDED THE FOLLOWING AMOUNTS: ASSESSMENT YEAR AMOUNT RS. 00-01 NIL 01-02 9,67,877/- 02-03 12,68,887/- 03-04 5,84,693/- 04-05 2,78,395/- 05-06 NIL. 14. ON APPEAL THE CIT(A) HAD DIRECTED THE AO TO CO MPUTE THE PROFITS AT 10%. 15. AGGRIEVED THE REVENUE IS ON APPEAL. THE ISSUE ARE IDENTICAL AS IN THE CASES IN ITA NOS. 438 TO 444/ H/2010 IN T HE CASE OF SHRI. AMAR SINGH SANGHWAN, SUPRA,. WHEREIN WE HAVE HELD: FROM THE FACTS FURNISHED, IT WOULD APPEAR THAT ALL THE ADDITIONS HAVE BEEN MADE ON THE BASIS OF THE CREDIT S IN THE 18 BANK ACCOUNTS. THE ENTIRE CREDIT OF RS. 7,09,77, 254/- ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 14 WAS TAKEN AS SUPPRESSED TURNOVER OF THREE ASSESSES: THE ASSESSEE RS. 3,73,37,322/-: SHRI. RAMNIVAS SINGH RS . 2.06,65,682/- AND SHRI. RAMPAL SINGH RS. 1,29,74,25 0/-. THE PROFITS FROM THIS UNDISCLOSED TURNOVER WAS TAKE N BY THE AO AT 15% OF THE TURNOVER. THE CIT(A) HAS ESTIMATED THE PROFIT AT 10%. WE FIND THAT THE ENTIRE AMOUNT OF CR EDITS HAVE BEEN TAKEN AS UNDISCLOSED TURNOVER. IT IS NOT CLEAR AS TO HOW THE EXPENSES FOR THESE SALES HAVE BEEN MET. SUCH EX PENSES WILL ALSO BE UNEXPLAINED EXPENSES UNLESS SALES ON E ARLIER OCCASION IS TAKEN AS THE SOURCE FOR PURCHASE OF MAT ERIAL SUBSEQUENTLY. BUT SUCH AN EXERCISE HAS NOT BEEN MAD E EITHER BY THE DEPARTMENT NOR THE ASSESSEE. IN THE CIRCUMSTANCES WE FEEL THE PROFITS AT 15% OF THE UND ISCLOSED TURNOVER IS A FAIR ESTIMATE OF PROFITS OF UNDISCLOS ED TURNOVER. WE ACCEPT THE DECISION OF THE AO IN THIS MATTER AND HOLD THAT THE PROFIT ON THE UNDISCLOSED TURNOVER OF RS. 3,73,37,322/- SHOULD BE COMPUTED AT 15% AND ADDED. THIS MAY BE SPREAD OVER THE VARIOUS YEARS AS HAS BEEN DO NE BY THE AO 16. FOLLOWING OUR DECISION IN ITA NOS.438 TO 444/ H/2010 IN THE CASE OF SHRI. AMAR SINGH SANGHWAN, SUPRA, WE SE T ASIDE THE ORDER OF THE CIT(A) AND UPHOLD THE ORDER OF THE AO COMPUTING PROFITS AT 15% OF THE TURNOVER AS ABOVE. ONCE THE E NTIRE CREDITS TO THE BANK ACCOUNTS HAS BEEN TREATED AS UNDISCLOSE D TURNOVER AND THE PROFITS THEREFROM IS ASSESSED TO TAX, THERE IS NO QUESTION OF A FURTHER ADDITION ON ACCOUNT UNDISCLOSED CASH S ALES OR ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENTS BASE D ON THE SAME CREDITS IN THE BANK ACCOUNTS. ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 15 11. WITH RESPECT TO GROUND NO.4 RAISED BY THE REVE NUE THE CIT(A) HAS RIGHTLY RELIED ON THE DECISION OF INDWEL L CONSTRUCTION VS. 232 ITR 772 (AP). WE FIND THAT FROM THE ANALYSIS OF ALL THE JUDICIAL PRONOUNCEMENTS, IT IS CLEAR THAT IN A CASE WHERE IN COME IS ESTIMATED FURTHER DISALLOWANCE U/S 40A(3) IS NOT PE RMISSIBLE. IN FACT IN A RECENT DECISION DATED 23.10.2009 IN THE C ASE OF M/S TEJA CONSTRUCTION VS. ACIT RANGE -2 HYDERABAD IN IT A NO.308/HYD/2009, THE HONBLE TRIBUNAL, HYDERABAD A BENCH HAVE REFERRED TO THE DECISION OF THE SAME BENCH IN THE CASE OF N. RAMACHANDRA REDDY IN ITA NO.1372/07 ORDER DATED 6.3 .2009 WHERE THE TRIBUNAL AFTER FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL C ONSTRUCTIONS OBSERVED AS UNDER: THE ABOVE DECISION OF THE AP HIGH COURT HAS BEEN FO LLOWED AND A SIMILAR VIEW HAS BEEN TAKEN BY THE SPECIAL BE NCH (KOLKATA) OF THIS TRIBUNAL IN THE CASE OF ITO VS. K ENARAM SAHA AND SUBASH SAHA (301 ITR (AT) 171) WHEREIN DISALLOWANCE MADE IN TERMS OF S.40A(3) HAS BEEN DEL ETED. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA), BESIDES THE SPECIAL BENCH DECISION OF THIS TRIBUNAL NOTED A BOVE, WE ARE OF THE CONSIDERED OPINION THE INCOME OF THE ASE E HAVING BEEN DETERMINED BY RESTORING TO ESTIMATION, THERE I S NO SCOPE FOR ANY FURTHER DISALLOWANCE EITHER IN TERMS OF SECTION 40A(IA)(40A(3) OR OTHERWISE. 17. IN THE RESULT THE REVENUE APPEALS ARE PARTLY A LLOWED. RAMPAL SINGH SANGHWAN (IN ITA NOS.450 TO 453/HYD/20 10) ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 16 18. THE ISSUES ARE IDENTICAL AS IN THE CASE OF SHR I AMAR SINGH SANGHWAN. THE CREDITS IN THE 18 BANK ACCOUNTS HAVE TAKEN AS UNDISCLOSED TURNOVER. THE UNDISCLOSED TURNOVER OF T HIS ASSESSEE HAS BEEN TAKEN AS RS. 1,29,74,250/- AND THE AO HAS ASSESSED 15% OF SUCH CREDITS AS PROFITS FROM UNDISCLOSED TUR NOVER AND ADDED THE FOLLOWING AMOUNTS: ASSESSMENT YEAR AMOUNT RS. 2000-01 NIL 2001-02 NIL 02-03 NIL 03-04 1,27,160/- 04-05 8,52,758/- 05-06 9,66,219. 19. ON APPEAL THE CIT(A) HAD DIRECTED THE AO TO CO MPUTE THE PROFITS AT 10%. 20. AGGRIEVED THE REVENUE IS ON APPEAL. THE ISSUE IDENTICAL AS IN THE CASES ITA NOS 438 TO 444/ H/2010 IN THE CASE OF SHRI. AMAR SINGH SANGHWAN, SUPRA, WHEREIN WE HAVE HELD: FROM THE FACTS FURNISHED, IT WOULD APPEAR THAT ALL THE ADDITIONS HAVE BEEN MADE ON THE BASIS OF THE CREDIT S IN THE 18 BANK ACCOUNTS. THE ENTIRE CREDIT OF RS. 7,09,77, 254/- WAS TAKEN AS SUPPRESSED TURNOVER OT HTREE ASSESSES: THE ASSESSEE RS. 3,73,37,322/-: SHRI. RAMNIVAS SINGH RS . 2.06,65,682/- AND SHRI. RAMPAL SINGH RS. 1,29,74,25 0/-. THE PROFITS FROM THIS UNDISCLOSED TURNOVER WAS TAKE N BY THE AO AT 15% OF THE TURNOVER. THE CIT(A) HAS ESTIMATED THE ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 17 PROFIT AT 10%. WE FIND THAT THE ENTIRE AMOUNT OF CR EDITS HAVE BEEN TAKEN AS UNDISCLOSED TURNOVER. IT IS NOT CLEAR AS TO HOW THE EXPENSES FOR THESE SALES HAVE BEEN MET. SUCH EX PENSES WILL ALSO BE UNEXPLAINED EXPENSES UNLESS SALES ON E ARLIER OCCASION IS TAKEN AS THE SOURCE FOR PURCHASE OF MAT ERIAL SUBSEQUENTLY. BUT SUCH AN EXERCISE HAS NOT BEEN MAD E EITHER BY THE DEPARTMENT NOR THE ASSESSEE. IN THE CIRCUMSTANCES WE FEEL THE PROFITS AT 15% OF THE UND ISCLOSED TURNOVER IS A FAIR ESTIMATE OF PROFITS OF UNDISCLOS ED TURNOVER. WE ACCEPT THE DECISION OF THE AO IN THIS MATTER AND HOLD THAT THE PROFIT ON THE UNDISCLOSED TURNOVER OF RS. 3,73,37,322/- SHOULD BE COMPUTED AT 15% AND ADDED. THIS MAY BE SPREAD OVER THE VARIOUS YEARS AS HAS BEEN DO NE BY THE AO 21. FOLLOWING OUR DECISION IN ITA NOS 438 TO 444/ H/2010 IN THE CASE OF SHRI. AMAR SINGH SANGHWAN, SUPRA, WE SE T ASIDE THE ORDER OF THE CIT(A) AND UPHOLD THE ORDER OF THE AO COMPUTING PROFITS AT 15% OF THE TURNOVER OF 1,29,74,250/-AS A BOVE. ONCE THE ENTIRE CREDITS TO THE BANK ACCOUNTS HAS BEEN TR EATED AS UNDISCLOSED TURNOVER AND THE PROFITS THERE FROM IS ASSESSED TO TAX, THERE IS NO QUESTION OF A FURTHER ADDITION ON ACCOUNT UNDISCLOSED CASH SALES OR ADDITION ON ACCOUNT OF UN EXPLAINED INVESTMENTS BASED ON THE SAME CREDITS IN THE BANK A CCOUNTS. IN THE RESULT THE REVENUES APPEAL ARE ALLOWED. 11. WITH RESPECT TO GROUND NO.4 RAISED BY THE REVE NUE THE CIT(A) HAS RIGHTLY RELIED ON THE DECISION OF INDWEL L CONSTRUCTION VS. 232 ITR 772 (AP). WE FIND THAT FROM THE ANALYSIS OF ALL THE JUDICIAL PRONOUNCEMENTS, IT IS CLEAR THAT IN A CASE WHERE IN COME IS ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 18 ESTIMATED FURTHER DISALLOWANCE U/S 40A(3) IS NOT PE RMISSIBLE. IN FACT IN A RECENT DECISION DATED 23.10.2009 IN THE C ASE OF M/S TEJA CONSTRUCTION VS. ACIT RANGE -2 HYDERABAD IN IT A NO.308/HYD/2009, THE HONBLE TRIBUNAL, HYDERABAD A BENCH HAVE REFERRED TO THE DECISION OF THE SAME BENCH IN THE CASE OF N. RAMACHANDRA REDDY IN ITA NO.1372/07 ORDER DATED 6.3 .2009 WHERE THE TRIBUNAL AFTER FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL C ONSTRUCTIONS OBSERVED AS UNDER: THE ABOVE DECISION OF THE AP HIGH COURT HAS BEEN FO LLOWED AND A SIMILAR VIEW HAS BEEN TAKEN BY THE SPECIAL BE NCH (KOLKATA) OF THIS TRIBUNAL IN THE CASE OF ITO VS. K ENARAM SAHA AND SUBASH SAHA (301 ITR (AT) 171) WHEREIN DISALLOWANCE MADE IN TERMS OF S.40A(3) HAS BEEN DEL ETED. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA), BESIDES THE SPECIAL BENCH DECISION OF THIS TRIBUNAL NOTED A BOVE, WE ARE OF THE CONSIDERED OPINION THE INCOME OF THE ASE E HAVING BEEN DETERMINED BY RESTORING TO ESTIMATION, THERE I S NO SCOPE FOR ANY FURTHER DISALLOWANCE EITHER IN TERMS OF SECTION 40A(IA)(40A(3) OR OTHERWISE. 22. IN THE RESULT, ALL THE APPEALS FILED BY THE RE VENUE IN ITA NOS.438 TO 453/HYD/2010 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20. 1.2 012 SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER DATED THE 20 TH JANUARY, 2012 ITA NOS.438 TO 453/H/2010 S/SHRI AMAR SINGH, RAM NIWAS & RAM PAL, SANGHWAN, H YD. 19 COPY FORWARDED TO: 1. THE DCIT, CENTRAL CIRCLE 4, HYDERABAD 2. S/SHRI. AMAR SINGH SANGHWAN, RAM NIVAS SANGHWAN, RAMPAL SINGH SANGHWAN, NO.5-2-234/17, SUNDER BHAVAN COLONY, JAMBAGH, HYDERABAD 3. THE CIT(A)-I, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/