C.Satyanarayana, Hyd, Hyderabad V. DCIT, Central Circle-2, Hyd, Hyderabad

ITA 489/Hyd/2015

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6985 (ITAT-HYDERABAD)
• Duration Of Justice: 6 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2007-2008
• Appeal Filed On: 28-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y.V.S.T. SAI
• Keywords: Gross profit estimation; Unexplained cash credit; Business income; Search and seizure; Application of stay; Additional evidence; Corroborative evidences; Agreed addition; Retraction
• Section: 68; 142(1); 40(a)(ia); 254(2); 142(2A); 145(3); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD ‘B’ BENCH, HYDERABAD. BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER (Through Virtual Hearing) Sl. No. ITA No. & Asst. Year Asst.Year Appellant Respondent 1 to 4 487 to 490/Hyd/2015 2005-06 to 2007-8 and 2011-12 C. Satyanarayana, Hyderabad. PAN No. AAVPC7593F DCIT, Central Circle -2, Hyderabad 5 to 11 573 to 579/Hyd/2015 2005-06 to 2011-12 DCIT, Central Circle – 1(2), Hyderabad M/s. Sri Krishna Constructions, Hyderabad. PAN : ABBFS8556K 12 to 18 608 to 614/Hyd/2015 2005-06 to 2011-12 M/s. Sri Krishna Constructions, Hyderabad. PAN : ABBFS8556K DCIT, Central Circle -2, Hyderabad Sl. No. SA No. & Asst. Year Asst.Year Appellant Respondent 1 & 2 20 & 21/Hyd/2021 in ITA 489 & 490/Hyd/2015 2007-08 and 2011-12 C. Satyanarayana, Hyderabad. PAN No. AAVPC7593F DCIT, Central Circle -2, Hyderabad 3 to 6 22 to 25/Hyd/2021 In ITA Nos.609 & 611 to 613/Hyd/2015 2006-07, 2008-09 to 2010-11. M/s. Sri Krishna Constructions, Hyderabad. PAN : ABBFS8556K DCIT, Central Circle -2, Hyderabad Appellant By : Shri N. Mohan Kumar. Respondent By : Shri Y.V.S.T. Sai. Date of Hearing : 30.11.2021. Date of Pronouncement : 06.12.2021. 2 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 O R D E R Per Bench : The instant batch of 24 cases i.e. six stay applications and eighteen appeals pertains to two assessees herein Shri C. Satyanarayana (individual) and M/s. Shri Krishna Constructions (firm). All other relevant details of the instant appeals are given as follows : ITA No. Name of the Appellant Respondent A.Y. CIT(A) Order under challenge date and case No. Proceed- ings under section 487 to 490/Hyd/2015 C. Satyanarayana, Hyderabad. PAN No. AAVPC7593F DCIT, Central Circle -2, Hyderabad 2005- 06 to 2007- 8 and 2011- 12 CIT(A)-XI, Hyderabad 0524 to 0527/CC- 2/C(TA)- XI/13-14 dt.23.01.2015 143(3) r.w.s 153A 573 to 579/Hyd/2015 DCIT, Central Circle -2, Hyderabad M/s. Sri Krishna Constructions, Hyderabad. PAN : ABBFS8556K 2005- 06 to 2011- 12 -do- 0528 to 0534/CC- 2/CIT(A)- XI/13-14 dt.23.02.2015 -do- 608 to 614/Hyd/2015 M/s. Sri Krishna Constructions, Hyderabad. PAN : ABBFS8556K DCIT, Central Circle -2, Hyderabad 2005- 06 to 2011- 12 -do- -do- -do- Heard both the parties. Case files perused. 3 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 2. It transpires during the course of hearing that both the twin assessees as well as the department have filed their respective appeals seeking to challenge the CIT(A)’s identical action; assessee wise, partly affirming the Assessing Officer’s addition(s) whereas, the Revenue’s respective cross appeals in case of the latter party / firm plead to revive the foregoing addition(s) in entirety. 3. We next move to the first and foremost issue that arises for our adjudication regarding maintainability of these assessees’ appeals preferred against the impugned additions made in the course of respective assessments. Learned CIT DR has invited our attention to the CIT(A)’s common order in former assessee Shri C. Satyanarayana’s four appeals ITA Nos.487 to 490/Hyd/2015 that all the impugned additions had been made by the Assessing Officer as per his written consent(s) as follows : “05.0 The appellant has raised a common ground against the addition made towards unexplained cash credit u/s.68 i.e., capital introduced amounting to Rs.6,00,000/- in Asst. year 2005-06, Rs.7,00,000/- in Asst. year 2006-07 and Rs. 76,26,334/ - in Asst. year 2007-08. 05.1 As stated in the assessment order, during the course of assessment proceedings, the Assessing Officer had noticed from the appellant's capital accounts that the appellant had introduced capital of Rs.6,00,000/-, Rs.7,00,000/- and Rs.76,26,334/- during the financial year relevant to assessment year 2005-06, 2006-07 and 2007-08 respectively and requested the appellant to furnish the sources of the said amount with supporting evidence. In response, the appellant simply furnished a copy of capital account, out could not produce any evidence to explain the sources of said capital 4 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 introduced. Therefore, the Assessing Officer issued a show cause notice to the appellant asking him as to why the above amounts should not be treated as unexplained cash credits. In response', the appellant vide letter dt.28-10-2013 conveyed his acceptance for the addition of the same and accordingly, the sum of Rs.6,00,000/-, Rs.7,00,000/- and Rs.76,26,334/- was treated as unexplained cash credit u/s.68 of the Act by the Assessing Officer for Asst. years 2005-06, 2006-07 and 2007-08 respectively. 06.0 Another-ground raised by the 'appellant in the Asst.year 2005- 06 is with regard to the addition made of Rs.9,64,297/- towards unexplained money claimed to have received from M/s. Om Constructions. 06.1 As can be seen from the assessment order, the Assessing Officer had noticed that the balance receivable by the appellant from M/s. Om Constructions Rs.9,64,297/- was not reflected in appellant's statement of affairs as on 31-3-2005 when the appellant was asked to furnish complete details along with confirmation, reconciliation and copy of return of income filed by M/s.Om Constructions, he filed h submission stating that he had received a sum of Rs.9,64,297/- in cash on 4-4-2004 against credit balance of Rs.9,64,297/- in the ledger account of the appellant as per the books of accounts of M/s.Om Constructions. The appellant also submitted that r retired from this partnership firm on 4-4-2004. In order to verify whether the appellant had received any amount over and above his capital as on 31-3-2004, he was asked to the Assessing Officer to furnish a copy of his capital account in the books of M/s.Om Constructions for Financial years 2003-04 and 2004-05 as certified by M/s. Om Constructions. Since there was no compliance from the appellant; the Assessing Officer issued a show cause notice as to why the sum of Rs.9,64,297/- should not be treated c his unexplained credit undisclosed income. In response, the appellant vide letter dt.2-10-2013 conveyed his acceptance for the addition of the same and accordingly, the sum of Rs.9,64,297/- was treated as unexplained cash credit u/s.68 of the Act by tr Assessing Officer for Asst. year 2005-06. 07.0 The appellant has raised a ground against the addition made of Rs.3,50,000/- in Asst. year 2007-08 towards unexplained investment in house property, 07.1 As stated in the assessment order, from the seized document A/CSN/RES/01, it was seen that the appellant had entered into an agreement on 31-8-2006 to purchase a house at D.No.8/269, Sreeramulapeta Street, Proddatur from S Pasupuleti Madhava Rao 5 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 for Rs.30 lakhs and paid Rs.1.50 lakhs on the date of agreement and Rs.18.50 lakhs on various other dates. In this connection, the Assessing Officer issued a questionnaire asking the appellant to furnish a copy of agreement and the sources of the above payment with supporting evidence. Since there was in compliance from the appellant, the Assessing Officer issued a show cause notice as to why the sum of Rs.14,00,000/- should not be treated as his undisclosed income being payments made out of books and not accounted. In response, the appellant vide letter dt.28-10-2013 conveyed his acceptance for the addition of the same and accordingly: the sum of Rs.14,00,000/- was treated as undisclosed income for Asst. year 2007-08. This included the payment of Rs.3,50,000/- made from M/s Sri Krishna Constructions by cheque no. 011858 dt.23-11-2006 not reflected in appellant's capital account with M/s.Sri Krishna Constructions and there were no corresponding drawings in the capital account. Out of the addition made of Rs.14,00,000/- the appellant has contested for an amount of Rs.3,50,000/- being the payment made through cheque. 08.0 The only ground raised in the Asst.year 2011-12 is against the addition made of Rs.30,65,600/- towards unsecured loans. 08.1 As stated in the assessment order, the Assessing Officer had noticed from the Balance sheet that during the year under consideration, the appellant had obtained unsecured loans of Rs.30,65,600/-. When the appellant was asked to furnish the confirmations along with details of their sources supported by bank statements and income tax returns filed by these loan creditors, he furnished some confirmations along with unsigned receipt vouchers, but could not furnish bank statements and income tax returns filed by the loan creditors. In the absence of the same, since the creditworthiness of the loan creditors could not be established, the Assessing Officer had issued a show cause notice as to why the unsecured loans of Rs.30,65,600/- should not be treated as unexplained cash credits u/s.68 of the Act. In response, the appellant expressed his inability to furnish the requisite details and vide letter dt.28-10-2013 agreed for addition of the same. 08.2 During the course of appeal proceedings the appellant has come up with the following explanations and submissions: The appellant submitted that he did not keep any books of account and hence, computed his capital on the basis of the principle viz. Total assets - Total liabilities = capital. It was further submitted that showing an amount of Rs.6,00,000/- in Asst.year 2005-06 and Rs.7,00,000/- in Asst. year 2006-07 as capital introduced is purely 6 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 for the sake of accounting treatment without altering the status of either assets or liabilities. He argued that without appreciating this fact, the Assessing Officer treated the said amounts as unexplained cash credit. As far as Asst.year 2007-08 is concerned, the Authorized Representative of the appellant submitted that the capital introduced during the year was only Rs.18,49,000/- and not Rs.76,26,334/- as assumed by the Assessing Officer. He further submitted that the balance of Rs.57,77,334/- thus represented only an adjustment entry but not capital introduced. In support of his argument, he filed a reconciliation statement. 08.2.1. Regarding addition made of Rs.9,64,297/, it was submitted that the appellant retired from M/s. Om Constructions on 31-3-2004 and was paid back on 4-4-2004, his capital as standing in the books at Rs.9,64,297/- as on 31.03.2004. He further submitted that since the Investment Account appearing in the Balance Sheet for 2003-04 was squared up as cash receipt during 2004-05, it would not appear as a closing balance in the Balance Sheet for 2004-05. In support of his argument, he furnished copy of confirmation from Om Constructions together with copies of Income tax return for AYs 2004-05 & 2005-06. 08.2.2 Regarding the amount of Rs.3,50,000/-, it was submitted that it was pai through cheque by Sri Krishna Constructions in which the appellant is a partner and the payment was duly reflected in the Current Account of the appellant in the books of Sri Krishna Constructions. With regard to unsecured loans confirmation letters along with Permanent Account Number in respect of Rs.19,00,000/- were given which had already been submitted before the Assessing Officer. 09.0 The assessment order is carefully considered. The appellant has agitated on the additions mentioned above. It is seen that in all the Asst. years 2005-06 to 2007-08 and 2011-12, the appellant at the time of assessment was given ample opportunity by the Assessing Officer to explain and to give details with reference to addition proposed to be made viz. Unexplained credits in the capital account, moneys shown to have been received from M/s.Om Constructions, unexplained investment in house property and unsecured loans received by the appellant. The appellant at the time or assessment expressed his inability to do so and agreed for 'the addition by giving a letter dt.28-10-2013 to the Assessing Officer in writing. A copy of the same is scanned below : 7 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 8 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 9 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 On perusal of the letter dt.18-10-2013/28-10-2013, it is to be seen that the appellant has given his acceptance for addition for all the AYs 2005-06 to 2011-12. In some of the assessment years, he has chosen to file appeal against some of the additions. For the rest of the additions, no appeal has been filed. No appeal has been filed for AYs 2008-09 and 2009-10. Thus, after agreeing for additions before the Assessing Officer in the form of a letter for all the assessment years in question, he has only picked up some of the additions for appeal. A Capital Account has been prepared accordingly and he has tried to put new fact before the CIT(Appeals) at first appellate stage. During the course of appellate proceedings, the appellant has tried to put these facts as so called additional evidence under Rule 46A of I.T. Rules. 10 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 09.1 It is to be seen that search and seizure operations were carried out on 2511-2010 at the business and residential premises of the appellant and his family members. The assessment orders were made on 31-3-2013. The appellant had enough time to substantiate his claims. Instead, during the assessment proceedings, he did not produce any evidence in support of his claims and agreed to the additions proposed by the Assessing Officer. These additions were made on the basis of the material found during the course of the search itself and assessee's acquiescence to the said additions before the Assessing Officer. After having agreed to the factum of the additions, the assessee is challenging the very basis of few of the additions made before the CIT(A). On a close reading of the letter (supra),it also cannot be concluded that the assessee had only agreed to the additions to 'buy peace of mind'. The letter is totally affirmative in its consent. The appellant by the act therefore, precluded the Assessing Officer from making necessary enquiry and reaching an informed decision. It is not his case that he did not agree or that the consent had been given under duress. The consent was given by a letter in writing and was not retracted as per the provisions of law. Considering the facts discussed above it cannot be said that he is aggrieved against the assessment order because that would amount to saying that he was aggrieved against himself. Only an appellant who is aggrieved against assessment has a right to appeal (refer section 246). That is not permissible in law. What the appellant is trying to do is to get second innings of assessment on the basis of fresh evidence and after-thought. As the appellant has not been able to satisfy any of the clauses of Rule 46A(1), his explanation in form of additional evidence is hereby rejected. 09.2 The ITAT,' Hyderabad listed below, that an assessee does not have a fight of appeal against an agreed addition. 1. D.Raja Rao (HUF) (ITA No,718/Hyd/02 dated 2-9-2014) 2. Magni Ram laddha (ITA No.1000/Hyd/03 dated 29-9-2004) 3. M/s.Kabalavai Jewellers Pvt.Ltd. (ITA No.1039/Hyd/03 dated 13-4-2006) 4. Citizen Estates (ITA No.484/Hyd/05 dated 31-10-2007) 5. Harikishan bagri (ITA No.567/Hyd/09 dated 28-8-2009) 11 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 09.3 Reliance is also placed on the decision of Jurisdictional High Court in the case of Kernex Micro Systems (India) Ltd., Hyd in ITA No.77 of 2007 dt. 2-1-2014. The issue before the Hon'ble High Court was that the Assessing Officer had made an assessment order on the basis of the voluntary statement made by the Managing Director of the appellant disclosing of income of Rs.20 lakhs. The Hon'ble Court observed that the fact showed that at the time of assessment, the assessee did not retract the aforesaid admission after making voluntary disclosure. Even the assessee Oil the basis of the assessment had paid the tax and after that an appeal was preferred before the Commissioner of Income Tax (Appeals). In the said appeal, the Court did not find that the appellant had made out any case that the aforesaid admission was not made voluntarily and it was made by mistake or anything else. The CIT (Appeals) accepted the contention of the appellant and observed that an addition made by the Assessing Officer should stand on its own legs irrespective of the fact whether it was accepted or not accepted by the assessee. He agreed that the MD of the appellant company had offered a sum of Rs.20 lakhs at the time of survey and had not disputed the same during the course of assessment proceedings. But according to CIT(A) he could not sustain an addition only on the basis of admissions and acquiscences, particularly, when the appellant had gone back on the admission. The Tribunal had restored the addition of Rs.20 lakhs after holding that the appellant could not retract: from its admission before the CIT(A) and refused to look up the fact relating to the expenditure involved in the so called defective vouchers listed by the Assessing Officer. The Hon'ble Court observed that there was no case of retraction before the CIT (A) and upholding the order of ITAT, stated that "We think there, must be distinction between the admission and the evidence collected during the course of survey. This is a voluntary act of the assessee and if the assessee accepts the liability, there is no point or scope to collect further evidence or making any enquiry. Here exercising of power by the Commissioner was not called for. Exercise of power evaluating legal implication of admission was not called for because no case was made out factually. Therefore, the decisions' cited by the learned Counsel for the appellant before us are absolutely inappropriate. Hence, we ignore all these decision. The learned Tribunal has taken a correct decision and we are constrained to comment on the decision taken by the Commissioner of Income Tax(Appeals), even basing on his own recording that the same is without any factual basis and further unsupported by law. When 12 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 a case is not made out before the Commissioner, he should not have made out so to say his own case basing on a lawyer's argument. A lawyer cannot improve the case of the litigation on fact unlike in case of law. Such an act is without jurisdiction. The appeal is accordingly dismissed.” The Hon'ble High Court concluded by further observing, “It is a settled position of law that admission is a very important piece of evidence, unless it is explained or retracted. Here the assessee has not made any attempt to explain before the CIT(A) suggesting not to accept the same. We fail to understand why challenge should be made at a later stage. This is a voluntary act of the assessee and if the assessee accepts the liability, there is no point or scope to collect further evidence or making any enquiry". 09.04. As already discussed in detail, the assessee had voluntarily agreed for the addition. He had also not retracted from such admission as per the provisions of law. His act of appealing against the additions agreed to during assessment cannot be accepted. The ratio of the judgements of the ITAT and the Hon'ble High Court is squarely applicable in the instant case. In view of the above, I do not see any reason to interfere with the agreed additions made by the Assessing Officer.” 4. The factual position is no different regarding the CIT(A)’s common lower appellate order in latter assessee M/s. Sri Krishna Constructions’ appeals as well which is extracted as follows : “02.0 A search and seizure operation u/s.132 was carried out on 25-11-2010 at the residence and business premises of Sri C.Satyanarayana(CSN), his family members and the appellant-firm. Sri CSN and his family members are partners in the appellant firm. A company with the name of Tiffins Barytes, Asbestos and Paints Ltd (TBAPL) had a valid mining lease granted by the Government of Karnataka for land at S.No.311 admeasuring 472.32 acres lying in Hariginadona village, Bellari District, Karnataka. To carryon the business of mining and selling of iron ore and red oxide from the above stated location, TBAPL had entered into two agreements with 13 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 Sri CSN in his individual capacity i.e., Mineral Winning cum Sale Agreement on 3-9-2003 and a partnership agreement on 15-12- 2003. In order to carryon the mining work, TBAPL also entered into an agreement with the appellant-firm on 31-1-2005 for supply of machinery on payment of hire charges. The partnership agreement worked initially but later a dispute arose between TBAPL and Shri CSN. Both the parties went for arbitration, the decision of which is still pending. The search and seizure operation carried out in this case revealed that Sri CSN had not maintained any separate books of accounts and all the transactions were routed through his partnership firm i.e., the appellant-firm. Major transactions of Sri CSN as well as that of the appellant-firm were with the mine owner, TBAPL and there were huge discrepancies in the accounts of these parties in each other's books of account. Further, it was also observed that the appellant-firm had violated the provisions of Sections 40A (3) and 40(a)(ia) of the Act on several occasions, which was not properly reported in tax audit reports. Due to the complexity of the transactions, the Assessing Officer referred all these three cases i.e., (1) Sri C.Satyanarayana (2) M/s. Sri Krishna Constructions and (iii) Tiffin Barytes, Asbestos and Paints Ltd. for Special Audit u/s 142(2A) of the IT Act and the Special Auditor furnished the Audit Report on 02-09-2013. On verification and examination of the details furnished, information gathered And report of the Special Auditor, the Assessing Officer completed the assessment years under consideration. 03.0 Aggrieved with the above assessments, the appellant filed the present appeals with the following grounds of appeal. Common Grounds in AYs 2005-06 to 2011-12 1. The order of the learned AO is bad on the facts of the case and in law. 2. The learned Assessing Officer rejected the books of accounts of the appellant and determined the business income of the Partnership at 15% of the turnover claiming the same to be the normal prevailing rate. It is submitted that by no stretch of imagination, is the above rate either normal or prevailing. As per accepted norms, in so far as the line of activity of the assessee is concerned, the normal rate at which profit is computed is only 8%. The rate i.e., 15% adopted by the Assessing Officer is arbitrary, unreasonable, abnormally high, unjust and opposed to law and facts. 14 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 04.0 In response to the notice of hearing issued by this office, Sri N. Mohan Kumar, Authorized Representative of the appellant appeared, the case was discussed with him and the appeals are decided as under. 05.0 During the course of appeal proceedings, the appellant has filed additional grounds of appeal stating that – Additions of Rs.2,48,06,075/- made by the learned Assessing Officer for the years 2005-06 to 2011-12 appearing in the books of the appellant under the head 'unsecured loans' treating the same as cash credits after having rejected the books of account and estimated profit on turnover basis is unjust, arbitrary and opposed to law and facts. Even though the appellant in its additional ground has stated that the addition made towards unsecured loans was for the years 2005-06 to 2011-12, it is seen from the assessment orders that the addition towards unsecured loans was made for AYs 2007-08 to 2010-11. Subject to the above observation, the additional ground raised by the appellant is admitted for adjudication for AYs 2007-08 to 2010-11. 06.0 During the assessment proceedings, Sri CSN had submitted that he had not maintained any books of account and all his transactions were routed through the appellant-firm only. It was also submitted that he had not rendered any service to TBAPL or raised any bills in his individual capacity. 06.1 The Assessing Officer found that though the appellant-firm was following mercantile system of accounting, it had not accounted for its turnover on accrual basis. He also observed that the appellant had not properly accounted its Turnover towards TBAPL for FYs 2004-05 to 2010-11 and there was a discrepancy of Rs.8,84,82,005/- in the expenditure booked by TBAPL (for both CSN & Mis SKC) and corresponding turnover booked by the appellant-firm against TBAPL. The same is re-produced in tabular for better understanding. 15 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 Accordingly, the Assessing Officer adopted Rs.15,94,32,487/- and Rs.46,36,06,918/- as turnover of Sri CSN and M/s SKC respectively towards TBAPL. The appellant accepted the same subject to subsequent reconciliation and eventual finding of the Arbitration Council. The Assessing Officer rejected the books of account u/s 145(3) of the Act on the grounds that (1) the authenticity of expenses could not be verified as vouchers were not produced. (2) The ratio of Net Profit vis-a-vis turnover had steeply declined from 10.12% (Rs.43,14,101/-) in AY 2005-06 to a loss of (-) 10,51,995/-) in AY 2011-12. He therefore rejected the books of accounts and adopted a profit of 15% on the total turnover as below : 16 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 Vide its letter dt.25-10-2013 the appellant conveyed its acceptance for adopting total turnover of RS.85,40,52,183/- and also for computing its business income @ 15% of the turnover for AYs 2005-06 to 2011-12. 06.2 During the appellate proceedings the appellant has submitted that estimation of net profit @ 15% per year by the Assessing Officer was unjust and arbitrary. It has submitted that a profit @ 6% should be estimated on turnover against TBAPL as the work against TBAPL included work performed by the appellant plus work sub-contracted to third parties. He also submitted that the matter was disputed before the Arbitration Council, the outcome of which was uncertain; therefore estimation@ 15% was not warranted. It was further submitted that profit @ 8% should be estimated on the turnover against contracts with others. Regarding additions made u/s 68 the appellant relied on the decision of CIT, Patiala vs Dutta Ram (HC) (P&H) and submitted that upon rejection of books of account, the Assessing Officer was precluded from making additions ujs.68 of the Act. 06.3 During the course of appellate proceedings, it is seen that in two years, receipts relating to Shri CSN have been clubbed with the turnover of the appellant as agreed to by both the parties. The receipts were as follows: FY 2005-06 : Rs.6,00,00,000/- FY 2008-09 : Rs.9,94,32,487/- The Assessing Officer also calculated a net profit @ 15% on these receipts. As already mentioned earlier, Sri CSN had entered into a Mineral-cum-Winning Agreement with TBPAL which was converted into a Partnership Agreement with TBPAL in the name of M/s Srisa Minerals'. According to the terms o" the Agreement, the parties had agreed to work together and share the profits of the business equally. As already mentioned, the partnership agreement had worked as per the terms but later on a dispute occurred between the two partners and both the partners were directed for arbitration which is still underway as per the information. Accordingly, any sum received by Shri CSN by virtue of his association with TBAPL in the business of mining has to be treated as his profit accruing from that association. In the normal course, the profit of the business should have been taxed in the hands of M/s. Srisa Minerals and the shares of the partners should have been considered in their respective hands as per law. But, since there is no agreement between the partners about whether the partnership actually worked and since CSN voluntarily offered that his receipt from that business should be considered in the hands of the assessee firm for purposes of taxation, the amount was considered for taxation in the 17 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 hands of the assessee firm. But, that would not change the character of the receipt. In so far it accrued to CSN from his association with the business of mining and was of the nature of pure profit, its treatment has to be the same even though it is considered in the hands of the assessee firm. Accordingly, a show cause notice u/s 251(2) of the IT Act vias issued to the appellant which is reproduced hereunder: You had entered into a contract for hiring of equipment, etc with Mis. Tiffins Berytes, Asbestos and Paints Ltd. (Mis. TBPAL) end, in terms of that contract, received an amount of Rs. 46.36 crore. That amount was shown by you as part of your turnover and treated by the A. O. as such in the assessment. The AO estimated profit @15% of the turnover and you are in appeal against that decision. Another amount of Rs. 15.71 crore (which had been received by your partner Sri C.Satyanarayana(CSN) was at his request and your request, also treated as part of your receipt and profit @15% on the same was also assessed by the AO. It is noticed that C.S.N. had entered into a mineral winning-cum-sale agreement with M/s. TBPAL on 03.09.2003 which was later on converted into a partnership deed on 15.12.2003. Sri C.Satyanarayana had initially claimed that the partnership had actually worked and that his profit from the same should be treated as exempt u/s 10(2A) of the I. T.Act. According to TBPAL however, the partnership had not worked. It created Sri C.Satyanarayana as independent professional and accounted for tile net amount paid to him as expenditure in its books of account. There is nothing on record to show that he was working in the capacity of a contractor. It is also noted that whatever amount had been incurred by him as expenditure in connection with the business of M/s. TBAPL had been duly reimbursed to him and that the amount of Rs. 15.71 crore (discussed above) was the net surplus. Admittedly! he did not maintain any books of accounts, suggesting that he treated the amount as his profit. This conclusion is also reinforced by the fact that he lodged a claim that his share in the profit of the business of Mis. TBAPL was Rs.41 crore out of which he had received Rs.22 crore, leaving balance amount of Rs.19 crore receivable. He also admitted of undisclosed income of RS.21 crore in his statement recorded during the search. It is a different matter that he subsequently revised the figure of admitted undisclosed income to Rs.10 crore and then to Rs.5 crore. The amount of Rs.15 crore which had actually been received by him was shifted to you and shown by you as part of your turnover even though you had neither raised any bill in respect of the same nor had 18 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 not accounted for the same as part of your receipt. Hence there is no question of any expenditure being incurred by you against that receipt. It is, therefore, clear that the entire sum of Rs.15.71 crore constituted net profit of business and needs to be assessed as such. There is no justification, in principle! for allowing deduction against the same. If it is your case that such deduction should be allowed! you will have to establish, with documentary evidence that: a) any expenditure had been incurred by CSN wholly and exclusively in connection with his association with the business of M/s. TBAPL (in addition to what had been incurred by him and had been reimbursed to him by TBAPL) or b) any expenditure had been incurred by you wholly and exclusively in connection with CSN’s association with the business of M/s. TBAPL (in addition to what had been incurred by you in connection with your business and claimed as such in the return on income) It is also noted that a sum of RS.5 crore which has been admittedly retained by CSN (out of money received from M/s. TBAPL) was assessed by the AO as his pure profit (without ellowinq any deduction). That decision was accepted by him and no appeal was preferred against the same. Since the nature as well as source of the receipt in question is the same! there is no reason why any different treatment should be given to it simply because it was taxed in your hands at your request. In view of the foregoing observation, you are required to explain why the entire sum of Rs.15. 71 crore should not be treated as your income and! Consequently, why the assessed income should not be enhanced correspondingly in the respective assessment years. You may furnish your explanation by 19-1-2015. Please note that, if you fail to comply, it will be assumed that you have nothing to say in the matter and an appropriate decision will be taken. In reply to the notice, the appellant by way of explanation submitted that: • Amount actually received from TBAPL and routed through its books on behalf of Sri CSN was only Rs.9,80,21,242/- which was recorded in the books of TBAPL as Rs.94,32,487/-. An amount of Rs.53,45,57,400/- was raised against TBAPL by way of contract bills by the appellant and it was not Rs.46,36,06,918/- as mentioned in the notice. Against this, TBAPL had paid it Rs.52,36,06,918/- 19 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 • A total of Rs.62,30,39,405/- was booked by TBAPL in respect of both M/s SKC and Sri CSN. The net amount booked by TBAPL in excess of this amount was Rs.8,84,82,005/- (Rs. 62,30,39,405 - 53,45,57,400). This amount as per books of the appellant had been computed as Rs.9,80,21,242/-. • The amount of Rs.9,80,21,242/- attributable to Sri CSN consisted of an amount of Rs.4, 79,74,112/- being notional credits whose veracity is contested. After eliminating it, the gross credit in books of account of SKC would be Rs.5,00,47,130/- which was admitted by Sri CSN as earned from his partnership between him and TBAPL under the name of' Srisa Minerals. •The amount of Rs.85,40,52,183/- was treated and accepted as combined turnover of M/s SKC & Sri CSN. This consisted of business receipt aggregating to Rs.76,55,70,276/- and credit surplus attributed to Sri CSN of Rs.8,84,82,005/which corresponds to a credit surplus of Rs.9,80,21,242/- (subject to reconciliation) • Once taxable income is estimated on Turnover basis, the same source cannot be used again for computation of taxable income as cash credit. • Rs.5,00,71,130/- receivable from TBAPL has already been taxed as income of Sri CSN. It is part of cash credit of Rs.8,84,82,005/- already taxed by the Department on turnover basis. As already subjected to tax as turnover of SKC/CSN, it cannot be again taxed in rt e hands of Sri CSN. • Provisions of Section 68 of the Act cannot be invoked and addition made for Rs.5,00,00,000/- in the hands of Sri CSN should also be deleted. Decision: - The issues to be adjudicated are – 1. Estimation of profit @ 15% of turnover. 2. Addition of unsecured loans u/s 68 3. Receipt of Rs.15.71 crores shown in the hands of Sri CSN whether pure business profit or part of turnover. 06.4 With regard to estimation of profit @ 15% of turnover, the appellant vide letter dt.25-10-2013 had submitted before the Assessing Officer as under: 20 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 "Apropos of your show cause notice under reference cited, we convey our acceptance for your proposal to compute the combined turnover of our group at Rs.85,40,52,183/- for the financial years 2004-05 to 201011. We further convey our acceptance for your proposal to compute our business income @ 15% of the above turnover for the Asst.years 2005-06 to 2011-12. With regard to the addition of unsecured loans also, it is seen that the appellant vide letter filed on 28-10-2013 before the Assessing Officer had conveyed its acceptance as under: "Apropos of your show cause notice under reference cited, we convey our acceptance for your treatment of the unsecured loans mentioned therein aggregating to Rs.2,48,06,075/- as the unexplained cash credits of our firm as per the break up provided in the notice.” 07.0 Estimation of profit @ 15% of turnover It is seen that in all the AYs under consideration, the appellant at the time of assessment had agreed for the addition by giving letter dt.24- 10-2013 to the Assessing Officer in writing. On perusal of the letter, it is to be seen that the appellant has given his acceptance for addition for all the AYs under consideration. Now, he has chosen to file appeal against these additions. Decision: 07.1 Since the appellant had agreed to the estimation of the net profit @15% of the gross receipts, an appeal against such estimation would not have been admissible in the normal course. It is however doubtful that it would have agreed to the net profit @ 15% of its regular turnover if the receipts pertaining to Shri CSN were treated as pure profit. Since a separate finding is being given in the appeal order that the receipts attributable to Shri CSN are pure profit, the issue of estimation of NP on the regular turnover of the appellant's business needs to be revisited and be considered on merit. 07.2 It is seen that the appellant had agreed for computation of net profit @ 15% on the total receipt of Rs.85,40,52,183/- relating to AYs 2005-06 to 2011-12 (including Rs 15,94,32,487/ attributable to Shri CSN). The total receipts of the appellant excluding those attributable to Shri CSN are Rs.69,46,196,96/- only. The Assessing Officer had pointed out some defects in the books of account and after rejecting them lad applied the NP @ 15% on the total receipts of Rs.85,40,52,183/-. While applying the NP rate it was mentioned that 21 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 the net profit as shown by the appellant had varied from 10.12% in AY 2006-07 to loss in AYs 2010-11 and 2011-12. The Assessing Officer had no given any basis for adopting NP @15%. It is generally seen that in no accounts cases net profit @8% is considered to be acceptable. In view of it I consider it reasonable that NP@ of 8% is adopted on the receipts of Rs.69,46,196,96/-. Needless to say that in AYs 2006-07 and 2007-08 the. appellant had itself shown NP of 10.12% and 9.30% -respectively. In these two years the Assessing Officer is directed to adopt the NP as shown by the appellant. For the rest of the AYs 2005- 06, 2008-09, 2009-10, 2010-11 and 2011-12 the Assessing Officer is directed to adopt the net profit of 8%. It may be clarified that the assessment order may seem to be high pitched as the Assessing Officer lad adopted a NP rate of 15% on the contract receipts but that it not so. The Assessing officer by his act had included the receipts attributable to Shri CSN and had also applied NP on those receipts though the same are pure profit in the hands of Shri CSN as will be discussed further in the order. By treating the receipts of Rs. 15,94,32,487/- attributable to Shri CSN as part of total turnover of the appellant and applying net profit of 15% on the same, the Assessing Officer had in fact under assessed the income of the appellant. In view of the discussion, the Assessing Officer is directed to adopt net profit as discussed above on turnover of Rs.69,46,19,696/- (Rs.85,40,52,183/- less Rs.15,94,32,487/- ). 07.3 The appellant has also submitted that when the books of account have been rejected and a profit has been estimated on it, then addition u/s 68 cannot be made. The appellant had agreed to the additions and had also not retracted from the same as per the provisions of law. Its act of appealing against the additions agreed to during the assessment cannot be accepted. Even on merits it is to be seen that addition u/s 68 is a deeming provision. The cash credits are balance sheet items and have nothing to do with the turnover of the appellant. Moreover, the assessee has not satisfied the basic conditions of S 68 by proving the identity, capacity and the genuineness of the transaction. Hence, it is held that the addition is justified and the same is confirmed.” 5. We had kept the instant batch of 24 cases as part-heard and put these assessees on notice during the course of oral arguments on 29.11.2021 as to why the Assessing Officers’ identical action(s) making the corresponding impugned additions not be upheld in 22 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 toto since the same are based on written consent(s) only. We further made it clear in light of assessees’ detailed paper book from Pages 2304 to 2448 that the Assessing Officer had duly issued corresponding scrutiny notice(es) and more particularly u/s 142(1) of the Act on 19.09.2013 proposing to adopt the specified turnover of Rs.85,40,52,183/- followed by gross profit estimation thereupon @ 15% involving the firm herein. 6. Learned authorized representative does not deny all the foregoing facts including both these assessees to have agreed to the Assessing Officer's show cause notices for making various additions during the course of scrutiny. His case is that various vital facts had been surpassed which have been light of the day post facto the respective assessments as upheld in the CIT(A)’s twin orders. He vehemently contended that these assessees are very much entitled to invoke section 253 r.w.s 254 jurisdiction in order to get final findings on facts or law; as the case may be. 7. We find no merit in the assessees’ foregoing vehement contentions. It is made clear once again that both these assessees had unconditionally filed their respective written consents / explanations before their Assessing Officers agreeing to all the additions in issue under multiple heads in case of Sri C. Satyanarayana and the twin aspects of estimated turnover of Rs.85.4 crore with 15% gross profit element therein along with section 68 unexplained cash credit addition(s) regarding latter assessee M/s. Sri Krishna Constructions, respectively. We next 23 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 find that the assessees’ respective grounds of appeal forming part of records before us as Form 35 filed before CTI(A) did not even whisper as to whether the consents given had been retracted later or not based on the correct facts or they were vitiated on account of any misrepresentation on facts or wrong application of law; as the case may be. The question as to whether the assessee could still file their appeals or not in instance of agreed addition(s); runs parametria to section 96(3) of the Code of Civil Procedure Code, 1908 providing that no appeal is maintainable in case of a consent decree. Coupled with this, section 136 of the I.T.Act, 1961 also stipulates that all the proceedings before income tax proceedings are judicial only. We thus quote “as it thinks fit” u/s 254(2) and hold that once both these assessees could not have filed their respective appeals before the CIT(A), the latter common lower appellate orders(supra) granting part relief in the respective cases; and more particularly in case of M/s. Sri Krishna Constructions, have to be invariably treated as non-est only going by the principle “SUBLATO FUNDAMENTO CADIT OPUS”. We thus restore all the additions made in the respective assessments in all these assessment years in these instant twin assessees’ cases. The former assessees’ ITA Nos.487 to 490/Hyd/2015 as well as latter assessees’ seven appeals ITA Nos.608 to 614/Hyd/2015 are rejected as not maintainable therefore. The Revenue’s corresponding seven cross appeals ITA Nos.573 to 579/Hyd/2015 against the CIT(A)’s action granting part relief to M/s. Sri Krishna 24 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 Constructions in foregoing terms (supra) succeed as the necessary consequence. 8. Mr. Mohan Kumar lastly contended that the Assessing Officers had not framed their respective assessments based on incriminating material only. We find no merit in the instant arguments in light of hon’ble high court’s landmark decision in Gopal Bhadruka Vs. DCIT (2012) 346 ITR 106 (AP) that an Assessing Officer could assess total income in the course of a search assessment in light of all other available material as well. We further remind Mr. Mohan Kumar that not only these assessees failed to challenge correctness of their respective consents before the CIT(A) but also in Form 36 filed before us as well. He still contended that both the lower authorities had wrongly made the latter addition of unexplained cash credit once M/s. Sri Krishna Constructions books of account had been rejected which resulted in estimated 15% profit addition only. We note that hon’ble apex court’s landmark decision in Kale Khan Mohammad Hanif Vs. CIT (1963) 50 ITR 1(SC) has rejected a similar argument since such unexplained cash credits do not form part of capital and not profit and loss account or revenue item or subjected to estimation of 15% as it is projected at the assessee’s behest. We accordingly conclude that whatever the additions made by the Assessing Officer(s) in these twin assessees’ assessments, as the case may be, shall stand revived, 25 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 9. These assessee’s respective stay applications SA Nos.20 to 25/Hyd/2021 are accordingly disposed of in light of our conclusion in the corresponding main appeals. Ordered accordingly. 10. To sum up, these twin assessees’ stay application Nos.20 to 25/Hyd/2021 fail and their appeals ITA Nos.487 to 490/Hyd/2015 and 608 to 614/Hyd/2015 filed by these assessees are dismissed as not maintainable. The Revenue’s cross appeals filed ITA Nos.573 to 579/Hyd/2015 are allowed in above terms. A copy of this common order be placed in respective case files. Order pronounced in the open court on 6 th December, 2021. Sd/- Sd/- (L.P. SAHU) (S.S. GODARA) Accountant Member Judicial Member Hyderabad, Dt.06.12.2021. TYNM/Sr.P.S. 26 ITA Nos.487 to 490/Hyd/2015, 573 to 579/Hyd/2015 and 608 to 614/Hyd/2015 SA Nos.20 to 25/Hyd/2021 Copy to : 1. Sri C. Satyanarayana, Flat 401, Rohiwal Windsor Apartment, Hill Fort Road, Saifabad, Hyderabad – 500 004. 2. M/s. Sri Krishna Constructions, 8-3-1027/1/A, Plot No.153, 301, Balaji Enclave, Srinagar Colony, Hyderabad – 500 073. 3. The DCIT, Central Circle – 2, Hyderabad. 4. The DCIT, Central Circle – 1(2), Hyderabad. 5. CIT(Appeals)-XI, Hyderabad. 6 CIT (Central), Hyderabad. 7. DR, ITAT, Hyderabad. 8. Guard File. By Order