Even's Classes, Hyderabad, Hyderabad V. ITO, Ward-4(2), Hyderabad, Hyderabad

ITA 516/HYD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6427 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2018
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J PAVITRAN KUMAR
• Assessee Lawyers: P V RAGHAVENDRA KUMAR
• Keywords: Reopening of assessment; Search and seizure; Audit objection; Tangible material; Difference of opinion; Retraction; Reason to believe; Change of opinion
• Section: 143(3); 133A; 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 516/HYD/2017 ASSESSMENT YEAR: 2005-06 EVENS CLASSES, HYDERABAD [PAN: AABFE0860D] VS THE INCOME TAX OFFICER, WARD-4(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P.V. RAGHAVENDRA KUMAR, AR FOR REVENUE : SHRI J. PAVITRAN KUMAR, DR DATE OF HEARING : 23-07-2018 DATE OF PRONOUNCEMENT : 25-07-2018 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-1, HYDERABAD, DATED 07-12-2016. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER: 2.1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) FAILED TO APPRECIATE THE FACTS MENTIONED CLEARLY IN THE WRITT EN SUBMISSIONS THAT: (I) THE ORIGINAL ASSESSMENT U/S 143(3) WAS COMPLETE D ON 19.12.2017, I.E., AFTER SURVEY U/S 133A, AND THE ASSESSING OFFI CER ESTIMATED THE NET INCOME AT 10% ON GROSS RECEIPTS OF RS.26,70,000 /- AFTER EXAMINING THE RECEIPT BOOKS AND OTHER RECORDS FOUND DURING SURVEY, AND THUS ACCEPTED THE APPELLANT'S CONTENTION THAT W HAT IS FOUND AND ADMITTED DURING SURVEY WAS 'GROSS RECEIPTS'. I.T.A. NO. 516/HYD/2017 :- 2 - : (II) THERE IS NO FRESH TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER FOR FORMATION OF REQUIRED BELIEF U/S 147 THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 2.2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) IS NOT JUSTIFIED, IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, IN CONFIRMING THE INITIATION OF THE PROCEEDINGS U/S 147. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED, EVEN ON MERITS, IN CONFIRMING THE ADDITION OF RS.17 ,32,800 TOWARDS 'SUPPRESSION OF TOTAL RECEIPTS DETECTED'. GROUND NOS. 1 & 4 ARE GENERAL IN NATURE. 2. BRIEFLY STATED, ASSESSEE, A FIRM CONDUCTING COACHI NG CLASSES HAS DECLARED AN INCOME OF RS. 23,960/- ON R ECEIPTS OF RS. 9,37,200/-. THERE WERE SURVEY OPERATIONS U/S. 1 33A OF THE INCOME TAX ACT [ACT] ON 27-03-2006 AND A STATEMENT WAS RECORDED FROM MANAGING PARTNER, WHO DECLARED ADDITION AL INCOME/RECEIPTS. IN THE SCRUTINY ASSESSMENT U/S. 143(3 ) OF THE ACT COMPLETED SUBSEQUENTLY ON 19-12-2007, AO HAS EXAM INED THE RECEIPTS WHICH WERE DETERMINED AT RS. 26.70 LAKHS. SINCE BOOKS OF ACCOUNT ARE NOT MAINTAINED, AO ESTIMATED THE INC OME AT 10% OF GROSS RECEIPTS AND DETERMINED THE TAXABLE INC OME AT RS. 2,67,000/-. 3. CONSEQUENT TO AN AUDIT OBJECTION, AO HAS RECORDED THE FOLLOWING SATISFACTION NOTE AND REOPENED THE ASSESS MENT U/S. 147. 03/02/09 AY: 05-06 M/S. EVENS CLASSES THE ASSESSEE FIRM FILED ITS ROI FOR AY: 05-06 ON 28 .11.05 ADMITTING A TOTAL INCOME OF RS. 23,960/-. HOWEVER, ON 27.03.06, A SURVEY I.T.A. NO. 516/HYD/2017 :- 3 - : OPERATION WAS CONDUCTED U/S. 133A AND DURING SURVEY , THE MANAGING PARTNER SRI T. SRINIVASA RAO ADMITTED AN ADDITIONAL INCOME OF RS. 20 LAKHS FOR AY: 05-06. BUT WHILE COMPLETING THE ASSES SMENT U/S. 143(3) ON 19.12.07, THE INCOME WAS DETERMINED AT ON LY RS. 2,67,000/- INSTEAD OF DETERMINING RS. 20,00,000/- A S ADMITTED BY THE MANAGING PARTNER. THE REVENUE AUDIT PARTY RAIS ED AN OBJECTION ON 10.07.08 STATING THAT THE GROSS RECEIPTS WERE SU PPRESSED TO THE EXTENT OF RS. 20 LAKH AS ACCEPTED BY THE ASSESSEE A S ADDITIONAL INCOME BUT COMPLETING THE ASSESSMENT BY CONSIDERING THE INCOME AT RS. 2,67,000/- BY ESTIMATING 10% GROSS RECEIPTS OF RS. 26,70,000/- RESULTED IN ESCAPEMENT OF INCOME OF RS. 17,33,000/- . THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ACCORDINGLY NOTICE U/S. 148 IS TO BE ISSUED. SD/- XXX ITO-4(2) 4. IN THE RE-ASSESSMENT PROCEEDINGS, ASSESSEE OBJECTED TO THE PROCEEDINGS, STATING THAT THERE IS NO TANGI BLE MATERIAL AND AO HAS EXAMINED AND COMPLETED SCRUTINY ASSESSMENT, THEREFORE, IT COMES WITHIN THE PURVIEW OF CH ANGE OF OPINION. AO, HOWEVER, REJECTED THE CONTENTIONS AND COMPUTED THE RE-ASSESSMENT, STATING AS UNDER: 3.4 THE RECEIPTS DECLARED IN THE RETURN OF INCOME WAS RS.9,37,200/-. WHEN CONFRONTED WITH THE MATERIAL FO UND DURING THE COURSE OF SURVEY, THE ASSESSEE ACCEPTED THE SUPPRES SION OF RECEIPTS AND OFFERED AN ADDITIONAL INCOME OF RS.20 LAKHS. SU BSEQUENTLY, IT WAS SUBMITTED THAT ADDITIONAL RECEIPTS WERE OFFERED AND NOT INCOME. AFTER PERUSING THE IMPOUNDED MATERIAL, THE TOTAL RE CEIPTS WERE QUANTIFIED AT RS.26,70,000/-. HENCE, THE SUPPRESSIO N IN RECEIPTS WORKS OUT TO RS.17,32,800/-. DURING THE COURSE OF S URVEY AND AFTERWARDS, THERE WAS NO CLAIM OF ADDITIONAL EXPEND ITURE, IF ANY, OTHER THAN THAT CLAIMED IN THE PROFIT & LOSS ACCOUN T FILED ALONG WITH THE RETURN OF INCOME. IN THE CURRENT PROCEEDINGS AL SO, NO CLAIM OR DETAILS OF ADDITIONAL EXPENDITURE INCURRED HAVE BEE N FILED. IN THE ABSENCE OF THE SAME, AGAINST THE GROSS RECEIPTS QUA NTIFIED OF RS.26,70,000/-, THE EXPENDITURE CLAIMED IN THE RETU RN OF INCOME FILED ON 28.11.2005 IS ONLY ALLOWED AND THE BALANCE BROUG HT TO TAX. I.T.A. NO. 516/HYD/2017 :- 4 - : 5. BEFORE THE LD.CIT(A), THE CONTENTIONS WERE REPEATE D BUT LD.CIT(A) DISMISSED THE SAME. ON THE ISSUE OF REO PENING, THE ORDER IN PARA 6.2 IS AS UNDER: 6.2 THE ASSESSING OFFICER ISSUED NOTICE U/S. 148 T O THE APPLICANT ON 03.02.2009 I.E. BEFORE SIX YEARS FROM THE END OF TH E RELEVANT ASSESSMENT YEAR. HENCE, THE PROCEEDINGS UNDER SECTI ON 147 IS JUSTIFIED, AS IT FULFILS TIME LIMIT U/S. 149(1)(B) WHICH SAYS: IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS, HAVE EL APSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHAR GEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY T O AMOUNT TO ONE LAKH RUPEES OR MORE FOR THAT YEAR. THE AMOUNT OF INCOME ESCAPING ASSESSMENT IS MORE TH AN RS. L LAKH. HENCE, THE ASSESSING OFFICER IS JUSTIFIED IN ISSUIN G NOTICE UNDER SECTION 148. -GROUND DISMISSED 5.1. ON THE ISSUE OF ADDITION, THE ORDER IS AS UNDER : 7.3. DURING THE SURVEY, THE APPELLANT HIMSELF ACCE PTED THE SUPPRESSION OF RECEIPTS AND OFFERED ADDITIONAL RECE IPTS OF RS. 20 LAKHS FOR THE A.Y. 2005-06. THE ASSESSING OFFICER IS CORRECT IN WORKING OUT THE SUPPRESSION OF TOTAL RECEIPTS AT RS . 26,70,000/- AFTER VERIFICATION OF IMPOUNDED MATERIAL. HENCE, THE ADD ITION MADE BY THE ASSESSING OFFICER IS UPHELD. 6. REFERRING TO THE ORDER U/S. 143(3) AND RE- ASSESSMENT ORDER U/S. 147, IT WAS THE SUBMISSION OF LD . COUNSEL THAT THE ISSUE WAS EXAMINED BY THE AO IN THE E ARLIER PROCEEDINGS AND DETERMINED THE TOTAL RECEIPTS AND ESTIMA TED THE INCOME, THEREFORE, THE SUBSEQUENT REOPENING COMES W ITHIN THE PURVIEW OF CHANGE OF OPINION. LD. COUNSEL RELIE D ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF C IT VS. KELVINATOR OF INDIA [320 ITR 561]. I.T.A. NO. 516/HYD/2017 :- 5 - : 6.1. ON THE MERITS, IT WAS SUBMITTED THAT ENTIRE RECEIPTS CANNOT BE INCOME AND ONLY A PROFIT CAN BE BROUGHT TO TAX. HE RELIED ON THE PRINCIPLES LAID DOWN IN THE FOLLOWING CASES: I. ITAT BANGALORE IN THE CASE OF ITO VS. M/S. KARTHIK POUNTRY FARM, ITA NO. 1106(B)/2014, DT. 06-11- 2015; II. CIT VS. SHARDA REAL ESTATE (P.) LTD., [99 DTR 100]; III. ITAT COCHIN IN THE CASE OF ACIT VS. M/S. ARCHANA TRADING CO., IN ITA NOS. 351 & 352/COCH/2011, DT. 28-02-2013; IV. ITAT HYDERABAD IN THE CASE OF SRI KATAKAM SRINIVAS VS. ITO IN ITA NO. 517/HYD/2017, DT. 30-11-2017; 7. LD.DR RELIED ON THE STATEMENT TO SUBMIT THAT ASSESSEE HAS ACCEPTED INCOME ONLY AND AO IS CORRECT IN BRINGING THE SAME TO TAX. 8. IN REPLY, LD. COUNSEL ALSO RELIED ON THE ORDER O F ITAT IN ASSESSEES OWN CASE FOR AY. 2006-07 WHEN AP PEAL WAS PREFERRED ON AN ORDER U/S. 263 BY THE CIT. 9. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE CASE LAW RELIED. IT IS WORTH MENTIONING THE ORDER O F AO U/S. 143(3) IN PARAS 4, 5 & 6, WHICH IS AS UNDER: 4. DURING THE COURSE OF SURVEY, SRI T. SRINIVASA R AO, MANAGING PARTNER STATED THAT THE TOTAL TURNOVER/RECEIPTS FOR F.Y. 2004-05 & I.T.A. NO. 516/HYD/2017 :- 6 - : 2005-06 WILL BE AROUND RS. 70 LAKHS AND ALSO STATED THAT FOR THE F.Y. 2004-05 RELEVANT TO ASST. YEAR 2005-06, THE TURNOVE R/RECEIPTS ARE RS. 20 LAKHS AND FOR THE F.Y. 2005-06 RELEVANT TO A.Y. 2006-07, THE TURNOVER/RECEIPTS ARE RS. 50 LAKHS. 5. THE IMPOUNDED MATERIAL IS SCRUTINIZED AND FOUND THAT FOR THE F.Y. 2004-05, THE RECEIPTS WERE ARRIVED AT RS. 26.70 LAK HS. THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT AND BILLS/VO UCHERS AS CLAIMED IN ITS PROFIT & LOSS A/C. THE RETURN OF INCOME WAS FILED ON 28-11- 2005 ADMITTING AN INCOME OF RS. 23,960/- ON TOTAL R ECEIPTS OF RS. 9,37,200/-. THE BANK ACCOUNT STATEMENT OF THE ASSE SSEE HAS BEEN VERIFIED. 6. AFTER DISCUSSING THE CASE WITH THE ASSESSEE & IT S AUTHORISED REPRESENTATIVE, IT IS CONCLUDED THAT IN THE ABSENCE OF BOOKS OF ACCOUNT, BILLS & VOUCHERS, NET INCOME IS ESTIMATED @ 10% OF GROSS RECEIPTS OF RS. 26,70,000/- WHICH WORKS OUT TO RS. 2,67,000/- AND THE ASSESSMENT IS COMPLETED BY DETERMINING THE ASSE SSEES TOTAL INCOME AT RS. 2,67,000/- FOR WHICH THE ASSESSEES A .R. HAS AGREED FOR. 9.1. SINCE THE AO HAS COMPLETED THE ASSESSMENT AFTER SCRUTINY AND CONSIDERING THE MATERIAL IMPOUNDED WHIC H WAS EXAMINED, THE REOPENING OF ASSESSMENT ON THE SAME MATE RIAL BY THE SAME OFFICER COMES WITHIN THE PURVIEW OF CHANG E OF OPINION. HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA [320 ITR 561] HELD AS UNDER: .... ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX L AWS (AMENDMENT) ACT, 1987 , REOPENING COULD BE DONE UNDER ABOVE TWO CONDITIONS AND FULFILMENT OF THE SAID CONDITIONS ALONE CONFERRED J URISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE ACT [WITH EFFECT FROM 1-4-1989], THEY ARE GIVEN A GO-BY AND ONLY ONE CONDITION HAS REMAINED, VIZ, THAT WHERE THE ASS ESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T, CONFERS JURISDICTION TO RE-OPEN THE ASSESSMENT. THEREFORE, POST 14-1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS T O GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BE LIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITR ARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASI S OF 'MERE I.T.A. NO. 516/HYD/2017 :- 7 - : CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON T O REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO RE-ASSESS. THE ASSESSING OFFICER HAS N O POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSM ENT HAS TO BE BASED ON FULFILHNENT OF CERTAIN PRE-CONDITION AND I F THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE-OPENING THE ASS ESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CH ANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1-4-1989, ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REAS ONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR V IEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOT ED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PA RLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORN 'OPINION' IN SECTION 147 OF THE ACT. HOWEVER, ON RE CEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE-INTRODUCED THE S AID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WO ULD VEST ARBITRARY POWERS IN THE ASSESSING OFFICER. (EMPHASIS ADDED) 9.2. THE PRINCIPLES LAID DOWN IN THE ABOVE JUDGMENT WILL APPLY TO THE FACTS. IT CAN ONLY BE CONSIDERED AS CHANGE OF OPINION ON SAME SET OF MATERIAL AND FACTS. MOREOVER, A S SEEN FROM THE SATISFACTION NOTE, AO HAS NOT FORMED ANY INDEP ENDENT OPINION WHILE REOPENING THE ASSESSMENT AND WAS GUIDED BY AN AUDIT OBJECTION, WHICH WAS CLEARLY STATED IN THE RECORD ED ORDER SHEET ENTRY. THERE IS NO FRESH MATERIAL SO AS TO TAKE A DIFFERENT OPINION. FURTHER, THE STATEMENT WAS EXAMINED AND CONS IDERED BY AO IN THE ORIGINAL PROCEEDINGS. THEREFORE, I AM O F THE OPINION THAT REOPENING IS BAD IN LAW. 9.3. EVEN ON MERITS, THE ENTIRE RECEIPTS CANNOT BE INCOME. THIS PRINCIPLE WAS FOLLOWED IN MANY CASES. IN THE I.T.A. NO. 516/HYD/2017 :- 8 - : CASE OF SRI NARENDAR REDDY MADDI VS. ITO, THE CO-ORD INATE BENCH IN ITA NO. 871/HYD/2016, DT. 25-04-2018 HAS CONSIDERED THE ISSUE AND DECIDED AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE STATEMENTS PLACED ON RECORD AND THE CASE LAW RELIED UPON. AS SEEN FROM THE ORDER OF THE AO, THE ORDER WAS AN EX-PARTE ORDER, THEREFORE ASSESSEE WAS NOT IN A POSITION TO EXPLAIN THE NATUR E OF RECEIPT. BEFORE THE LD.CIT(A), NECESSARY EXPLANATION WAS GIVEN. CI T(A) IN HIS ORDER HAS PARTLY ACCEPTED THE TURNOVERS TO THE EXTENT THE Y ARE ACCOUNTED FOR AND THE BALANCE WAS TREATED AS UNEXPLAINED CASH CRE DIT. SINCE THE NATURE OF RECEIPTS ARE PERTAINING TO THE CONTRACT W ORKS, IT IS NOT CORRECT ON THE PART OF THE AUTHORITIES TO BRING TO TAX THE ENTIRE RECEIPT AS INCOME. AS SEEN FROM THE NATURE OF DEPOSITS IN THE BANK ACCOUNTS, THERE WERE CORRESPONDING WITHDRAWALS ALSO AND THESE SEEMS TO BE PETTY CASH RECEIPTS IN THE SMALL CONTRACT WORKS UND ERTAKEN BY ASSESSEE. HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES [258 ITR 654] (GUJARAT-HC) HAS HELD THAT IT CANNOT BE MATTER OF AN ARGUMENT THAT THE AMOUNT OF SALES BY I TSELF CANNOT REPRESENT THE INCOME OF ASSESSEE, WHO HAS NOT DISCL OSED THE SALES. IT IS THE REALIZATION OF EXCESS OVER THE COST INCURRED THAT ONLY FORMS PART OF THE PROFIT INCLUDED IN THE CONSIDERATION OF SALE S. SIMILAR VIEW WAS TAKEN IN THE CASE OF CIT VS. GURUBACHHAN SINGH J. J UNEJA [215 CTR 509] (GUJARAT-HIGH COURT) AND CIT VS. SHARDA REAL ESTATE (P.) LTD., [99 DTR 100] (MP-HC). IN THE CASE OF JYOTICHAND BHA ICHAND SARAF & SONS (P.) LTD., VS. DCIT [139 ITD 10] THE CO-ORDINA TE BENCH AT PUNE HAS CONFIRMED THAT THE ADDITION COULD ONLY BE MADE ONLY TO AN EXTENT OF GROSS PROFIT EARNED ON AN UNACCOUNTED / SUPPRESS SALES AND NOT ON THE ENTIRE SALES ITSELF. SIMILAR VIEW WAS ALSO TAK EN IN THE CASE OF ACIT, CIR1 VS. M/S. ARCHANA TRADING CO IN ITA NO. 3 51 & 352/COCH/2011, DT. 28-02-2013 AND ALSO ACIT VS. PAH AL FOOD IN ITSSA NO. 42/HYD/2005, DT. 30-09-2009, ITAT, HYDERA BAD. 6.1. RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOW N BY VARIOUS HIGH COURTS AND CO-ORDINATE BENCH DECISIONS, WE ARE OF T HE OPINION THAT THE ENTIRE TURNOVER CANNOT BE BROUGHT TO TAX AS SUC H AND THERE CAN BE REASONABLE PROFIT ESTIMATION ON THE ABOVE AMOUNT. G ENERALLY INCOME IS ESTIMATED AT 12.5% IN THE CASE OF BIG CONTRACTS AND SINCE ASSESSEE HAS ALREADY OFFERED @ 10% PROFIT ON THE ACCOUNTED T URNOVER, WE ARE OF THE OPINION THAT INCOME CAN BE DETERMINED ON THE BA LANCE OF THE TURNOVER AT 12.5% OF THE TURNOVER. AO IS DIRECTED TO DO SO. ACCORDINGLY, ASSESSEES GROUND ARE PARTLY ALLOWED. I.T.A. NO. 516/HYD/2017 :- 9 - : 9.4. SIMILAR VIEW WAS EXPRESSED BY ITAT, BANGALORE BENCH IN THE CASE OF ITO VS. M/S. KARTHIK POULTRY FARM , IN ITA NO. 1106(B)/2014, DT. 06-11-2015, WHEREIN IT WAS HELD : 5.3.3 IN THE CASE ON HAND, THE GRIEVANCE OF THE RE VENUE IS THAT THE ASSESSEE HAS NOT SHOWN THAT IT HAS INCURRED EXPENDI TURE IN RESPECT OF UNDISCLOSED/SUPPRESSED SALES. THE LEARNED CIT(A) HA S PROCEEDED TO ESTIMATE THE ASSESSEE'S PROFIT @18% OF THE TURNOVER AFTER RECORDING THAT ENTITIES IN THE SAME LINE OF BUSINESS, AS THAT OF THE ASSESSEE IN THE CASE ON HAND, HAVE SHOWN LESSER PROFITS IN THE REGION OF 9% TO 12% OF TURNOVER. MERELY BECAUSE THE EXPENDITURE INC URRED BY THE ASSESSEE IN RESPECT OF THIS TURNOVER HAS NOT BEEN P ROVED DOES NOT MEAN THAT THERE WAS NO EXPENDITURE INCURRED AT ALL AND SUCH A PLEA CANNOT BE ACCEPTED. IN SUCH CIRCUMSTANCES, AN ESTIM ATE OF THE PROBABLE PROFIT HAS TO BE MADE HAVING REGARD TO THE SURROUNDING CIRCUMSTANCES, GROUND REALITIES, CORROBORATIVE EVID ENCE IN THE FORM OF PROFITS SHOWN IN COMPARATIVE CASES AND OTHER FACTOR S THAT ARE RELEVANT TO DETERMINE THE REAL INCOME OF THE ASSESS EE. WE ARE OF THE VIEW, THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AS LAID OUT ABOVE, THE LEARNED CIT(A) HAS FOLLOWED THE CORRECT AND REASONABLE APPROACH IN ESTIMATING THE PROFIT ON THE SUPPRESSED TUM OVER WORKED OUT BY THE AO WHICH HAS NOT BEEN QUESTIONED BY THE ASSESSEE. IN OUR VIEW, REVENUE EXCEPT FOR RAISING THE GROUND HAS NOT BEEN ABLE TO CONTRAVENE THE FINDING OF THE LEARNED CIT(A) AND WE ARE, THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE FINDING OF THE LE ARNED CIT(A) IN THE IMPUGNED ORDER ON THIS ISSUE. CONSEQUENTLY, GROUND NO.2 OF THE REVENUE'S APPEAL STANDS DISMISSED. 9.5. SIMILAR VIEW WAS ALSO TAKEN IN OTHER CASES RELI ED UPON. THE ENTIRE RECEIPTS CANNOT BE INCOME. AO HAS THE REFORE RIGHTLY CONSIDERED THE ESTIMATION OF INCOME AT 10% OF TH E RECEIPTS, WHEN ORIGINALLY ASSESSEE DECLARED ONLY RS. 23,960/- ON A TURNOVER OF RS. 9.37 LAKHS (0.25%). THEREFORE, THE DECISION OF AO IN ESTIMATING INCOME IS ACCORDING TO THE PRINCIPLES OF LAW AND FACTS. THUS THE IMPUGNED ORDER IS NOT SUSTAINABLE BOTH ON PRINCIPLES OF LAW AND FACTS. I.T.A. NO. 516/HYD/2017 :- 10 -: 9.6. THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE I N AY 2006-07 ON AN APPEAL AGAINST ORDER U/S 263 HAS HE LD AS UNDER: 24. THE AO AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE CAME TO THE CONCLUSION THAT THERE ARE CERT AIN DISCREPANCIES IN THE BILLS AND VOUCHERS OF THE ASSESSEE AS THEY A RE SELF-MADE. HENCE TOWARDS THE DISCREPANCIES IN THE VOUCHERS AND BILLS, HE MADE ADDITION OF RS. 1,08,091 TO THE RETURNED INCOME AND HE WAS SATISFIED ABOUT THE TURNOVER/RECEIPTS DECLARED BY THE ASSESSE E AND COMPLETED THE ASSESSMENT. THE CIT U/S. 263 PROCEEDINGS WAS OF THE OPINION THAT THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN THE COURSE OF SURVEY U/S. 133A AT RS. 50 LAKHS SHOULD HAVE BEEN B ROUGHT TO TAX BY THE AO. ACCORDING TO THE CIT, THE ORDER OF THE AO I S ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HE DOE S NOT STATE AS TO WHY THE ORDER OF THE AO COULD BE TERMED AS ERRONEOU S SO AS TO BRING RS. 5 LAKHS TO TAX WHICH OFFER WAS MADE BY THE ASSE SSEE. THE OFFER MADE BY THE ASSESSEE IN THE COURSE OF SURVEY IS NOT SUPPORTED BY ANY MATERIAL TO SUGGEST THAT THERE IS UNDISCLOSED INCOM E BY THE ASSESSEE. THE MATERIAL COLLECTED DURING THE COURSE OF SURVEY ALSO DOES NOT SUGGEST THAT THERE IS UNDISCLOSED INCOME TO THAT EX TENT. THE OFFER IS UNSUBSTANTIATED AND NOT CORROBORATED BY ANY POSITIV E MATERIAL. 25. THE AO BEING QUASI-JUDICIAL AUTHORITY, EXERCISE D THE POWERS VESTED IN HIM ACCORDING TO THE LAW AND ARRIVED AT A CONCLUSION THAT THE ASSESSEE HAS PROPERLY DISCLOSED THE RECEIPTS IN ITS BOOKS OF ACCOUNT AND CONCLUDED THAT NO ADDITION IS WARRANTED TOWARDS UNDISCLOSED RECEIPTS AND HE MADE THE ADDITION OF RS . 1,08,091 TOWARDS THE DISCREPANCIES IN BILLS AND VOUCHERS PRO DUCED BY THE ASSESSEE. THE CIT U/S. 263 PROCEEDINGS NOT SATISFIE D WITH THE ADDITION MADE BY THE AO AND HE WAS OF THE OPINION T HAT THE INCOME OFFERED BY THE ASSESSEE IS TO BE BROUGHT TO TAX. 26. IN OUR CONSIDERED OPINION, THE FIRST REQUIREMEN T VIZ., THAT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS IS A BSENT IN THIS CASE. IN COMING TO THE CONCLUSION OF THE CIT U/S 26 3 PROCEEDINGS THAT RS. 50 LAKHS OFFERED BY THE ASSESSEE HAS TO BROUGHT TO TAX IS NOT SUPPORTED BY ANY POSITIVE MATERIAL AND THERE IS RET RACTION BY THE ASSESSEE. BEING SO, IN OUR OPINION, THE AO'S ORDER IS TO BE UPHELD. THE REASON GIVEN BY THE CIT WAS THAT THE RETRACTION MAD E BY THE ASSESSEE WAS, DELAYED INORDINATELY. IN OUR OPINION, THOUGH THERE IS A DELAY IN RETRACTION BY THE ASSESSEE FOR GOING BACK FROM THE OFFER MADE BY THE ASSESSEE, THERE IS NO MATERIAL WHATSOEVER TO BRING THE ADDITIONAL INCOME TO TAX. I.T.A. NO. 516/HYD/2017 :- 11 -: 9.7. SINCE THE FACTS ARE SIMILAR AND AS THERE WAS NO MATERIAL TO SUPPORT THAT THE ENTIRE UNACCOUNTED RECEIPTS W AS INCOME, THE RE-ASSESSMENT OF PROCEEDINGS TAKING THE ENTI RE AMOUNT AS INCOME IS BAD IN LAW. THE IMPUGNED ORDER I S ACCORDINGLY, SET ASIDE AND ORDER DT 19-12-07 WAS RES TORED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2018 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 25 TH JULY, 2018 TNMM I.T.A. NO. 516/HYD/2017 :- 12 -: COPY TO : 1. EVENS CLASSES, HYDERABAD. C/O. CH. PARTHASARATH Y & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST.NO.1, ASHOKNAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-4(2), HYDERABAD. 3. CIT (APPEALS)-1, HYDERABAD. 4. PR.CIT-1, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.