DCIT Central Circle-6, Hyderabad V. Sri M.P.B. Kutumba Rao, Hyderabad

ITA 739/HYD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4823 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-10-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 18-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Capital asset; Depreciation; Search and seizure; Document seized; Difference of opinion; Reason to believe; Documents seized; Change of opinion
• Section: 44AD; 153A; 147; 131; 37; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER S.NO. ITA NO. AY APPELLANT RESPONDENT 1 TO 4 739, 740, 741 & 742/H/10 2002-03 TO 2005-06 DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 6, HYDERABAD. SRI M.P.B. KUTUMBA RAO, HYDERABAD. (PAN AIBPM0081C) 5 TO 7 1432, 1433, & 1434/H/12 2006-07 TO 2008-09 SRI M.P.B. KUTUMBA RAO, HYDERABAD. (PAN AIBPM0081C) DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 6, HYDERABAD. AND C.O. AY CROSS OBJECTOR RESPONDENT 8 TO 11 40, 41, 42 & 43/H/10 (IN 739, 740, 741 & 742/H/10) 2002-03 TO 2005-06 SRI M.P.B. KUTUMBA RAO, HYDERABAD. (PAN AIBPM0081C) DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 6, HYDERABAD. REVENUE BY: SRI P. SOMA SEKHAR REDDY ASSESSEE BY: SRI S. RAMA RAO DATE OF HEARING: 22/10/2013 DATE OF PRONOUNCEMENT: 19 /12/2013 O R D E R PER CHANDRA POOJARI, AM: ALL THESE APPEALS FILED BY THE REVENUE AND ASSESSE E ARE DIRECTED AGAINST THE ORDERS OF CIT(A)-1, HYDERABAD. THE ASSESSEE ALSO FILED C.OS. FOR THE ASSESSMENT YEARS 2002-03 TO 2005-06. AS IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS AND C.OS. THEY WERE CLUBBED AND HEARD TOGETHER AND, THE REFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 2 ITA NOS. 739, 740, 741, & 742/HYD/2010 BY THE REVEN UE FOR AY 2002-03 TO 2005-06 C.O. NOS. 40,41,42, & 43/HYD/2010 BY THE ASSESSEE 2. THE REVENUE RAISED THESE APPEALS AGAINST A COMMO N ORDER PASSED BY THE CIT(A)-I, HYDERABAD DATED 11/03 /2010. THE ASSESSEE ALSO RAISED C.OS. AGAINST THE SAID ORD ER OF THE CIT(A). 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL, WHICH ARE COMMON IN ALL THE ASSESSMENT YEARS UNDER CONSIDERATION: 1. THE CIT(A) ERRED IN DELETING ADDITION MADE BY TH E ASSESSING OFFICER, WITHOUT GOING INTO THE MERIT OF THE ADDITIONS MADE ON THE GROUND THAT NO ADDITION CAN B E MADE U/S 153A UNLESS THE ADDITION SO MADE IS SUPPOR TED BY ANY SEIZED MATERIAL. 2. THE CIT(A) ERRED IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER BY FAILING TO APPRECIATE THE LAW AND FACT THAT PROVISION OF SECTION 153A REQUIRES ASSESS MENT OR REASSESSMENT OF THE TOTAL INCOME OF THE ASSESS EE IN CONTRADISTINCTION TO THE ASSESSMENT OF UNDISCLOSED INCOME AS PER SECTION 158BB THAT EXISTED HITHERTO. 3. THE CIT(A) ERRED IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER, ON THE GROUND THAT SINCE SECTION 153A REQUIRED THE ASSESSMENT OR REASSESSMENT OF TOT AL INCOME WHICH IS DEFINED IN SECTION 2(45) TO BE READ WITH SECTION 5 OF THE IT ACT, A STRICT CONSTRUCTION OF THE TAXING STATUTE IS NECESSARY. 4. THE CIT(A) ERRED IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER HAVING FAILED TO APPRECIATE THAT THE OPERATION OF SECTION 153A IS DISTINCT AND SEPARATE FROM SECTION 147 R.W.S. 148 AND THAT ASSESSMENT MADE U/S 153A IS NOT MERELY A CHANGE OF OPINION OF THE ASSES SING OFFICER. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THERE WAS A SEARCH AND SEIZURE OPERATION AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 19/02/2008. CONSEQUENT TO THE SEARCH AC TION, NOTICE U/S 153A OF THE IT ACT WAS ISSUED AND IN RES PONSE TO I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 3 WHICH THE ASSESSEE FILED THE RETURN OF INCOME FOR T HE AY 2002- 03 TO 2007-08. THE INCOME RETURNED BY THE ASSESSEE FOR THE ASSESSMENT YEARS UNDER APPEAL AND THE INCOME ASSES SED BY THE ASSESSING OFFICER, ARE AS FOLLOWS: AY RETURNED INCOME (RS.) ADMITTED AGRICULTURAL INCOME (RS. ASSESSED INCOME (RS.) 2002-03 4,85,250/- 9,25,000/- 2,14,59,302/- 2003-04 4,76,330/- 9,25,000/- 3,17,35,450/- 2004-05 61,05,200/- 9,25,000/- 4,48,30,380/- 40,62,100/- 8,40,000/- 2,70,43,360/- 5. IN THE COURSE OF ASSESSMENT PROCEEDING THE ASSES SING OFFICER CALLED FOR VARIOUS INFORMATION INCLUDING PR ODUCTION OF BILLS AND VOUCHERS. ASSESSEE HAD APPARENTLY FILED P ART OF THE INFORMATION CALLED FOR. ACCORDINGLY, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT EX-PARTE U/S 144 OF THE AC T BASED ON MATERIAL AVAILABLE ON RECORD. WHILE COMPLETING T HE ASSESSMENT, THE ASSESSING OFFICER MADE ADDITIONS UN DER THE FOLLOWING HEADS: AY 2002-03: A) AGRICULTURAL INCOME TREATED AS INCOME FROM OTHE R SOURCES. B) ADDITION TO CAPITAL C) NEW UNSECURED LOAN D) DISALLOWANCE OF CREDITORS FOR EXPENSES E) ADDITION ON ACCOUNT OF MOBILISATION ADVANCE F) DISALLOWANCE OF DEPRECIATION G) DISALLOWANCE OF 15% OF THE VARIOUS EXPENDITURES DEBITED TO P&L ACCOUNT AY 2003-04: A) AGRICULTURAL INCOME TREATED AS INCOME FROM OTHE R SOURCES. B) ADDITION TO CAPITAL C) NEW UNSECURED LOAN D) DISALLOWANCE OF CREDITORS FOR EXPENSES E) DISALLOWANCE OF MACHINERY LOAN F) ADDITION ON ACCOUNT OF MOBILISATION ADVANCE G) DISALLOWANCE OF DEPRECIATION H) DISALLOWANCE OF 15% OF THE VARIOUS EXPENDITURES DEBITED TO P&L ACCOUNT I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 4 AY 2004-05: A) AGRICULTURAL INCOME TREATED AS INCOME FROM OTHE R SOURCES. B) ADDITION TO CAPITAL C) NEW UNSECURED LOAN D) DISALLOWANCE OF CREDITORS FOR EXPENSES E) DISALLOWANCE OF DEPRECIATION F) DISALLOWANCE OF 15% OF THE VARIOUS EXPENDITURES DEBITED TO P&L ACCOUNT AY 2005-06: A) AGRICULTURAL INCOME TREATED AS INCOME FROM OTHE R SOURCES. B) ADDITION TO CAPITAL C) ADDITION ON ACCOUNT OF MOBILISATION ADVANCE E) DISALLOWANCE OF DEPRECIATION 6. WHEN THE ASSESSEE CARRIED THE MATTER TO THE CIT( A), THE CIT(A) QUASHED THE ASSESSMENT ORDER ON THE REASON T HAT THE ADDITIONS CANNOT BE MADE U/S 153A OF THE ACT, UNLES S THERE IS A SUPPORT OF SEIZED MATERIAL SUGGESTING THE INCOME OF THE ASSESSEE. 7. AGAINST THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US FOR THE ASSESSMENT YEARS UNDER CONSIDERAT ION AND RAISED THE FOLLOWING GROUNDS OF APPEAL, WHICH ARE C OMMON IN ALL THE APPEALS: 1. THE CIT(A) ERRED IN DELETING ADDITION MADE BY TH E ASSESSING OFFICER, WITHOUT GOING INTO THE MERIT OF THE ADDITIONS MADE ON THE GROUND THAT NO ADDITION CAN B E MADE U/S 153A UNLESS THE ADDITION SO MADE IS SUPPOR TED BY ANY SEIZED MATERIAL. 2. THE CIT(A) ERRED IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER BY FAILING TO APPRECIATE THE LAW AND FACT THAT PROVISION OF SECTION 153A REQUIRES ASSESS MENT OR REASSESSMENT OF THE TOTAL INCOME OF THE ASSESS EE IN CONTRADISTINCTION TO THE ASSESSMENT OF UNDISCLOSED INCOME AS PER SECTION 158BB THAT EXISTED HITHERTO. I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 5 3. THE CIT(A) ERRED IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER, ON THE GROUND THAT SINCE SECTION 153A REQUIRED THE ASSESSMENT OR REASSESSMENT OF TO TAL INCOME WHICH IS DEFINED IN SECTION 2(45) TO BE REA D WITH SECTION 5 OF THE INCOME TAX ACT, A STRICT CONSTRUCT ION OF THE TAXING STATUTE IS NECESSARY. 4. THE CIT(A) ERRED IN DELETING THE ADDITION MADE B Y THE ASSESSING OFFICER HAVING FAILED TO APPRECIATE THAT THE OPERATION OF SECTION 153A IS DISTINCT AND SEPARATE FROM SECTION 147 R.W.S. 148 AND THAT ASSESSMENT MADE U/S 153A IS NOT MERELY A CHANGE OF OPINION. 8. THE ASSESSEE ALSO FILED C.OS. AGAINST THE SAID O RDER OF THE CIT(A) CONTENDING THAT THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT ALL THE ADDITIONS MADE BY THE ASSES SING OFFICER ARE NOT JUSTIFIABLE. HOWEVER, HE RAISED ANO THER GROUND STATING THAT THE CIT(A) IS JUSTIFIED IN HOLDING THA T THE INITIATION OF PROCEEDINGS U/S 153A IS NOT JUSTIFIED IN THE FAC TS AND CIRCUMSTANCES OF THE CASE. 9. BEFORE US, THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND IN ALL THE C.O.S UNDER CONSIDERATION AND ALSO IN AP PEALS FILED BY THE ASSESSEE FOR AY 2006-07 & 2007-08 BEING ITA NOS. 1432 & 1433/HYD/12, WHICH ARE AS UNDER: 1. ADDITIONAL GROUND RAISED BY THE ASSESSEE IN C.O. NOS. 40 TO 43/HYD/10 IS AS UNDER: THE ORDER OF THE HONBLE CIT(A) ANNULLING THE ORDER U/S 153A IS CORRECT AND VALID AS SEARCH WAS NOT INITIAT ED IN THE CASE OF THE ASSESSEE. 2. ADDITIONAL GROUND RAISED BY THE ASSESSEE IN ITA NOS. 1432 & 1433/HYD/2012, IS AS UNDER: THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSMENT MADE U/S 153A WHEN THE SEARCH OPERATIONS WERE NOT INITIATED AGAINST THE APPELLANT. 10. IN SUPPORT OF THE ADDITIONAL GROUND, THE LEARNE D AR OF ASSESSEE STATED THAT THE CIT(A) OBSERVED THAT THE A DDITIONS MADE BY THE ASSESSING OFFICER WERE NOT BASED ON ANY SEIZED I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 6 MATERIAL AND, ACCORDINGLY, HE ANNULLED THE ORDER OF ASSESSING OFFICER AND THE DEPARTMENT CAME IN APPEAL AGAINST T HE ORDER OF THE CIT(A). THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER U/S 153A ACT IS NOT PROPER AND BAD IN LAW AS THE WARRANT O AUTHORIS ATION WAS ORIGINALLY ISSUED IN THE CASE OF M/S LAHARI CONSTRU CTIONS AND M/S LAHARI INFRASTRUCTURE LTD AND OTHERS AND THE SE ARCH IN THE CASE OF ASSESSEE IS ONLY CONSEQUENTIAL AS THE SEARC H WAS INITIATED IN THE CASE OF M/S LAHARI CONSTRUCTIONS A ND M/S LAHARI INFRASTRUCTURE LTD AND OTHERS. IN THIS CONNE CTION, HE DREW OUR ATTENTION TO PANCHANAMA TO SUBMIT THAT THE PANCHANAMA CLEARLY INDICATES THAT THE WARRANT WAS I SSUED IN THE NAME OF M/S LAHARI CONSTRUCTIONS AND M/S LAHARI INFRASTRUCTURE LTD AND OTHERS. FURTHER HE SUBMITTED THAT THE CONSEQUENTIAL WARRANT WAS ISSUED BY THE ADDL DIT (I NV.), UNIT- II, HYDERABAD TO SEARCH THE PREMISES OF THE ASSESSE E AND THIS CLEARLY INDICATES THAT THE SEARCH WAS NOT INITIATED IN THE CASE OF THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSME NT U/S 153A IS POSSIBLE ONLY WHEN THE SEARCH WAS INITIATED IN THE CASE OF THE ASSESSEE AND TO THIS EFFECT THE ASSESSE E HAS NOT TAKEN A GROUND IN THE GROUNDS OF APPEAL FILED THAT THE ORDER U/S 153A IS NOT VALID. ACCORDINGLY, HE SUBMITTED TH AT THERE IS NO VALID WARRANT IN THE NAME OF THE ASSESSEE AND IN THIS CONNECTION HE INVITED OUR ATTENTION TO THE FORM NO. 45, WHICH IS WARRANT OF AUTHORISATION UNDER SECTION 132 OF TH E IT ACT, 1961 AND RULE 112(1) OF THE INCOME-TAX RULES, 1962. 11. THE LEARNED COUNSEL SUBMITTED THAT THE CONTENT S IN THE WARRANT OF AUTHORISATION CLEARLY MENTIONED THAT THE SEARCH WARRANT WAS ISSUED IN THE NAME OF M/S LAHARI CONSTR UCTIONS AND M/S LAHARI INFRASTRUCTURE LTD AND OTHERS AND TH E PLACE MENTIONED THEREIN AS PLOT NO. 244, PHASE-III, ROAD NO. 78, JUBILEE HILLS, HYDERABAD. HE, THEREFORE, CONTENDED THAT THERE IS NO VALID WARRANT IN THE NAME OF THE ASSESSEE AND THE I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 7 ASSESSMENT CANNOT BE FRAMED IN THE CASE OF THE ASSE SSEE U/S 153A OF THE ACT RATHER IT SHOULD BE U/S 153C OF THE IT ACT. 12. FURTHER, THE LEARNED COUNSEL SUBMITTED THAT THE RE WAS NO SEIZED MATERIAL FOUND IN THE COURSE OF SEARCH RELAT ING TO THESE ASSESSMENT YEARS AND THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON RECORD TO MAKE THE ADDITIONS AND WITHOU T POINTING OUT ANY SPECIFIC SEIZED MATERIAL FOUND IN THE COURS E OF SEARCH, HE FRAMED ASSESSMENT. HE, THEREFORE, SUBMITTED THA T THE CIT(A) HAS RIGHTLY QUASHED THE ASSESSMENT MADE BY T HE ASSESSING OFFICER OBSERVING THAT THE ASSESSMENT IS BAD IN LAW. THE LEARNED COUNSEL RELIED IN THE CASE OF SIKSHA O ANUSANDHAN VS. CIT, 336 ITR 112 WHEREIN IT IS HELD THAT IN THE ABSENCE OF WARRANT IN THE NAME OF AN ASSESSEE THE S EARCH CONDUCTED IN ITS PREMISES IS NOT A VALID SEARCH AS CONTEMPLATED UNDER S. 132; INITIATION OF A VALID SE ARCH AS CONTEMPLATED UNDER S. 132 IN CASE OF A PERSON IS A PRE- REQUISITE TO ISSUE NOTICE FOR MAKING ASSESSMENT UND ER S. 153A IN RESPECT OF AN ASSESSEE. HE, THEREFORE, CONTENDED THAT THE PERSON IN RESPECT OF WHOM SEARCH U/S 132 IS INITIAT ED, IS THE SAME PERSON AGAINST WHOM NOTICE U/S 153A IS TO BE I SSUED FOR MAKING ASSESSMENT, IF THERE IS NO SEARCH WARRANT IS SUED IN THE NAME OF SUCH PERSON, THE SAME WILL INVALIDATE THE SEARCH ASSESSMENT PROCEEDINGS U/.S 153A OF THE ACT. 13. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THA T THE WARRANT ISSUED CONTAINS TWO LIMBS, NAMELY, THE FIRS T PART IS IN THE NAMES OF OF M/S LAHARI CONSTRUCTIONS AND M/S LA HARI INFRASTRUCTURE LTD AND OTHERS AND THE SECOND PART I S SHRI M.P.B. KUTUMBA RAO, THE ASSESSEE TO SEARCH THE PLAC E AT PLOT NO. 244, PHASE-III, ROAD NO. 78, JUBILEE HILLS, HYD ERABAD. HE, THEREFORE, CONTENDED THAT THE CONTENTIONS OF ASSESS EE ARE DEVOID OF MERIT AS IT IS A JOINT WARRANT ISSUED IN THE NAME OF THREE PERSONS. HE RELIED ON THE DECISION OF HONBL E I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 8 JURISDICTIONAL HIGH COURT IN THE CASE OF GOPALLAL B ADRUKA VS. DCIT, 346 ITR 106. IT WAS SUBMITTED THAT FOR THE PU RPOSE OF 153A/153C, THE ASSESSING OFFICER CAN TAKE INTO CONS IDERATION NOT ONLY SEIZED MATERIAL BUT ALSO OTHER MATERIAL, W HICH WAS AVAILABLE WITH HIM FOR THE PURPOSE OF MAKING ASSESS MENT SO AS TO DETERMINE UNDISCLOSED INCOME. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. THERE IS NO DISPUTE THAT THE ADDITIONAL GROUND RAIS ED BY THE ASSESSEE IS PURELY LEGAL IN NATURE AND GOES TO THE ROOT OF THE MATTER. THIS ISSUE CAN BE DECIDED ON THE BASIS OF T HE FACTS ALREADY ON RECORD AND NO NEW FACTS ARE REQUIRED TO BE VERIFIED OR INVESTIGATED FOR THE PURPOSE OF DECIDING THE ISS UE RAISED IN THE ADDITIONAL GROUND. ACCORDINGLY IN VIEW OF THE D ECISION OF HONOURABLE SUPREME COURT IN CASE OF NTPC LTD., 229 ITR 383(SC) AND IN THE FACTS AND CIRCUMSTANCES OF THE C ASE WE ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE FOR ADJUDICATION. 15. IN THIS CASE, ADMITTEDLY THE CIT(A) DELETED T HE ADDITIONS FOR THE ASSESSMENT YEARS 2002-03 TO 2005- 06 ON THE GROUND THAT THE ADDITIONS MADE BY THE ASSESSING OFF ICER ARE NOT ON THE BASIS OF ANY SEIZED MATERIAL. HOWEVER, BEFORE US, THE ASSESSEE HAS RAISED ADDITIONAL GROUND STATING T HAT THE FRAMING OF ASSESSMENT U/S 153A IS BAD IN LAW AS THE RE IS NO VALID SEARCH WARRANT IN THE NAME OF THE ASSESSEE. THE LEARNED DR TRIED TO IMPRESS UPON US THAT WARRANT U/ S 132 WAS ISSUED JOINTLY IN THE NAME OF M/S LAHARI CONSTRUCTI ONS, M/S LAHARI INFRASTRUCTURE LTD AND OTHERS AND MR. M.P.B . KUTUMBA RAO, THE ASSESSEE. IN THIS CONNECTION, WE REFER TO THE OPERATIVE PORTION OF WARRANT OF AUTHORISATION ISSU ED U/S 132, WHICH IS AS UNDER: I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 9 FORM NO. 45 (SEE RULE 112) WARRANT OF AUTHORISATION UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961 AND RULE 112(1) OF THE INCOME-TAX RULES, 1962 TO, THE ADDITIONAL DIRECTOR OF INCOME-TAX (INVESTIGATIO N) (SRI SURESH BATTINI) THE DEPUTY DIRECTOR OF INCOME-TAX (INVESTIGATION) (SRI M. RAJA SEKHAR) THE DEPUTY COMMISSIONER OF INCOME-TAX (SRI P.V. PRADEEP KUMAR) THE ASST. DIRECTOR OF INCOME-TAX (INVESTIGATION) (SRI B. BALAKRISHNA) THE INCOME-TAX OFFICER (SRI T. MURALIDHAR) ...... ...... ...... ______________________________________________ IF A SUMMONS UNDER SUB-SECTION (1) OF SECTION 37 O F THE INDIAN INCOME-TAX ACT, 1922 OR UNDER SUB-SECTION (1 ) OF SECTION 131 OF THE IT ACT, 1961 OR A NOTICE UNDER S UB- SECTION (4) OF SECTION 22 OF THE INDIAN IT ACT 1922 OR UNDER SUBSECTION (1) OF SECTION 142 OF THE IT ACT, 1961 AS ISSUED TO M/S LAHARI CONSTRUCTIONS, M/S LAHARI INFRASTRUCTURE LTD AND OTHERS (NAME OF PERSON) TO PRODUCE OR CAUSE TO BE PRODUCED, BOOKS OF ACCOUNT O R OTHER DOCUMENTS WHICH WILL BE USEFUL FOR OR RELEVAN T TO PROCEEDINGS UNDER THE INDIAN IT ACT, 1922 OR UNDER THE IT AT, 1961, HE WOULD NOT PRODUCE OR CAUSED TO BE PRODUCED, SUCH BOOKS OF ACCOUNT OR OTHER DOCUMENTS AS REQUIRED BY SUCH SUMMONS OR NOTICE. SHRI/SMT M.P.B. KUTUMBA RAO ARE/IS IN POSSESSION OF ANY MONEY, BULLION JEWELLERY OR OTHER VALUABLE ARTI CLE OR THING AND SUCH MONEY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THINGS REPRESENT EITHER WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOU LD NOT BE DISCLOSED FOR THE PURPOSES OF THE INDIAN IT ACT, 1922 OR THE INCOME-TAX ACT, 1961. AND WHEREAS I HAVE REASON TO SUSPECT THAT SUCH BOOK S OF ACCOUNT, OTHER DOCUMENTS MONEY, BULLION, JEWELLE RY OR OTHER VALUABLE ARTICLES OR THINGS HAVE BEEN KEPT AN D ARE TO BE FOUND IN PLOT NO. 244, PHASE-III, ROAD NO. 78, JUBILEE HILLS, HYDERABAD. I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 10 16. THE CONTENTION OF THE LEARNED DR IS THAT THIS W ARRANT IS A COMMON WARRANT ISSUED IN THE NAMES OF M/S LAHARI CONSTRUCTIONS, M/S LAHARI INFRASTRUCTURE LTD AND OT HERS AND MR. M.P.B. KUTUMBA RAO, THE ASSESSEE. AS SEEN FROM THE ABOVE IT IS A COMMAN WARRANT IN RESPECT OF M/S LAHA RI CONSTRUCTIONS, M/S LAHARI INFRASTRUCTURE LTD AND OT HERS AND IT CANNOT BE SAID THAT THIS WARRANT IS ALSO INCLUDED M R. M.P.B. KUTUMBA RAO, THE ASSESSEE. IT ONLY SUGGESTS THAT P ERSON TO BE SEARCHED IS THE ASSESSEE HEREIN IN THE CASE OF M /S LAHARI CONSTRUCTIONS, M/S LAHARI INFRASTRUCTURE LTD AND OT HERS. THUS, IT CANNOT BE SAID THAT THIS IS A COMMON WARRANT IN RESPECT OF ALL THESE ASSESSEES. THERE IS NO SEPARATE WARRANT I N THE NAME OF M.P.B. KUTUMBA RAO, THE ASSESSEE U/S 132(1)(C) O F THE ACT. THE WARRANT WAS ISSUED IN THE JOINT NAMES OF M/S LA HARI CONSTRUCTIONS, M/S LAHARI INFRASTRUCTURE LTD AND OT HERS TO SEARCH THE PLACE AT PLOT NO. 244, PHASE III, ROAD NO. 78, JUBILEE HILLS, HYDERABAD. 17. IN ORDER TO ANSWER THE QUESTION RAISED IN THE INST ANT APPEAL, IT WOULD BE APPROPRIATE TO DEAL WITH THE PR OVISIONS OF S.132(1)(C) AND OTHER CONNECTED PROVISIONS. THE REL EVANT PROVISIONS OF S. 132(1)(C) ARE REPRODUCED AS UNDER : 'SEC. 132. (1) WHERE THE DIRECTOR GENERAL OR DIRECT OR OR THE CHIEF CIT OR CIT OR ANY SUCH JT. DIRECTOR OR JT. CI T AS MAY BE EMPOWERED IN THIS BEHALF BY THE BOARD, IN CONSEQUEN CE OF INFORMATION IN HIS POSSESSION, HAS REASON TO BELIEV E THAT (A) ............... (B) ............... (C) ANY PERSON IS IN POSSESSION OF ANY MONEY, BULLI ON, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING AND SU CH MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG REPRESENTS EITHER WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HA S NOT BEEN, I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 11 OR WOULD NOT BE, DISCLOSED FOR THE PURPOSES OF THE INDIAN IT ACT, 1922 (11 OF 1922), OR THIS ACT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE UNDISCLOSED INCOME OR PROPERTY), THEN, (A) THE DIRECTOR GENERAL OR DIRECTOR OR THE CHIEF C IT OR CIT, AS THE CASE MAY BE, MAY AUTHORISE ANY JT. DIRECTOR, JT . CIT, ASSTT. DIRECTOR OR DY. DIRECTOR, ASSTT. CIT OR DY. CIT OR ITO, OR (B) SUCH JT. DIRECTOR OR JT. CIT, AS THE CASE MAY B E, MAY AUTHORISE ANY ASSTT. DIRECTOR OR DY. DIRECTOR, ASST T. CIT OR DY. CIT OR ITO, (THE OFFICER SO AUTHORISED IN ALL CASES BEING HEREI NAFTER REFERRED TO AS THE AUTHORISED OFFICER) TO : (I) ENTER AND SEARCH ANY BUILDING, PLACE, VESSEL, V EHICLE OR AIRCRAFT WHERE HE HAS REASON TO SUSPECT THAT SUCH B OOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING ARE KEPT; (II) BREAK OPEN THE LOCK OF ANY DOOR, BOX, LOCKER, SAFE, ALMIRAH OR OTHER RECEPTACLE FOR EXERCISING THE POWERS CONFE RRED BY CL. (I) WHERE THE KEYS THEREOF ARE NOT AVAILABLE; (IIA) SEARCH ANY PERSON WHO HAS GOT OUT OF, OR IS A BOUT TO GET INTO, OR IS IN THE BUILDING, PLACE, VESSEL, VEHICLE OR AIRCRAFT, IF THE AUTHORISED OFFICER HAS REASON TO SUSPECT THAT S UCH PERSON HAS SECRETED ABOUT HIS PERSON ANY SUCH BOOKS OF ACC OUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING; (IIB) REQUIRE ANY PERSON WHO IS FOUND TO BE IN POSS ESSION OR CONTROL OF ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE FORM OF ELECTRONIC RECORD AS DEFI NED IN CL. (T) OF SUB-S. (1) OF S. 2 OF THE INFORMATION TECHNOLOGY ACT, 2000 (21 OF 2000), TO AFFORD THE AUTHORISED OFFICER THE NECESSARY FACILITY TO INSPECT SUCH BOOKS OF ACCOUNT OR OTHER DOCUMENTS; (III) SEIZE ANY SUCH BOOKS OF ACCOUNT, OTHER DOCUME NTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND AS A RESULT OF SUCH SEARCH; (IV) PLACE MARKS OF IDENTIFICATION ON ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR MAKE OR CAUSE TO BE MADE EXTRACT S OR COPIES THEREFROM; (V) MAKE A NOTE OR AN INVENTORY OF ANY SUCH MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING : I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 12 PROVIDED THAT WHERE ANY BUILDING, PLACE, VESSEL, VE HICLE OR AIRCRAFT REFERRED TO IN CL. (I) IS WITHIN THE AREA OF JURISDICTION OF ANY CHIEF CIT OR CIT, BUT SUCH CHIEF CIT OR CIT HAS NO JURISDICTION OVER THE PERSON REFERRED TO IN CL. (A) OR CL. (B) OR CL. (C), THEN, NOTWITHSTANDING ANYTHING CONTAINED IN S. 120, IT SHALL BE COMPETENT FOR HIM TO EXERCISE THE POWERS UNDER T HIS SUB- SECTION IN ALL CASES WHERE HE HAS REASON TO BELIEVE THAT ANY DELAY IN GETTING THE AUTHORISATION FROM THE CHIEF C IT OR CIT HAVING JURISDICTION OVER SUCH PERSON MAY BE PREJUDI CIAL TO THE INTERESTS OF THE REVENUE : PROVIDED FURTHER THAT WHERE IT IS NOT POSSIBLE OR P RACTICABLE TO TAKE PHYSICAL POSSESSION OF ANY VALUABLE ARTICLE OR THING AND REMOVE IT TO A SAFE PLACE DUE TO ITS VOLUME, WEIGHT OR OTHER PHYSICAL CHARACTERISTICS OR DUE TO ITS BEING OF A D ANGEROUS NATURE, THE AUTHORISED OFFICER MAY SERVE AN ORDER O N THE OWNER OR THE PERSON WHO IS IN IMMEDIATE POSSESSION OR CON TROL THEREOF THAT HE SHALL NOT REMOVE, PART WITH OR OTHE RWISE DEAL WITH IT, EXCEPT WITH THE PREVIOUS PERMISSION OF SUC H AUTHORISED OFFICER AND SUCH ACTION OF THE AUTHORISED OFFICER S HALL BE DEEMED TO BE SEIZURE OF SUCH VALUABLE ARTICLE OR TH ING UNDER CL. (III).' 18 . ON PERUSAL OF THE PROVISIONS OF S. 132(1)(C), IT REFLECTS THAT THE OFFICER EMPOWERED BY THE BOARD HAS REASON TO BELIEVE THAT 'ANY PERSON' WHO IS IN POSSESSION OF ANY MONEY , BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING AND SU CH MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG REPRESENTING WHOLLY OR PARTLY INCOME OR PROPERTY, WHICH HAS NOT BEEN OR WOULD NOT BE DISCLOSED UNDER THE IT ACT, 1961, THEN , AUTHORITIES, REFERRED IN CL. (A) OF S. 132(1)(C), A UTHORIZES THE AUTHORITIES REFERRED TO IN CL. (B) OF S. 132(1)(C) TO ENTER THE PREMISES AND SEARCH ANY BUILDING, PLACE, VESSEL, VE HICLE OR AIRCRAFT AND ALSO SEIZE ANY SUCH BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUA BLE ARTICLE OR THING ETC., AFTER MAKING A NOTE OR AN INVENTORY OF ANY SUCH MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. 19 . THUS, FOR AUTHORIZING ACTION UNDER S. 132, THE CO NDITIONS PRECEDENT ARE : (I) THE INFORMATION IN THE POSSESSI ON OF THE NAMED AUTHORITY; AND (II) IN CONSEQUENCE OF WHICH H E MAY I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 13 HAVE REASON TO BELIEVE THAT THE PERSON CONCERNED IS IN POSSESSION OF MONEY, BULLION, ETC., WHICH REPRESENT S, EITHER WHOLLY OR PARTLY, INCOME WHICH HAS NOT BEEN OR WOUL D NOT BE DISCLOSED FOR THE PURPOSE OF THE ACT. IF EITHER OF THESE CONDITIONS ARE MISSING OR HAVE NOT BEEN ADHERED TO, THEN POWER UNDER S. 132 CANNOT BE INVOKED. THUS, THE BAS IS OF EXERCISE OF POWER UNDER S. 132(1) HAS TO BE FORMATI ON OF BELIEF AND THE BELIEF HAS TO BE FORMED ON THE BASIS OF REC EIPT OF INFORMATION BY THE AUTHORISING OFFICER THAT THE PER SON IS IN POSSESSION OF MONEY, ETC., WHICH REPRESENTS UNDISCL OSED INCOME. 'INFORMATION', IN CONSEQUENCE OF WHICH THE DIRECTOR GENERAL OR THE CHIEF CIT, ETC., AS THE CASE MAY BE, HAS TO FORM HIS BELIEF HAS NOT ONLY TO BE AUTHENTIC BUT CA PABLE OF GIVING RISE TO THE INFERENCE THAT A PERSON IS IN PO SSESSION OF MONEY, ETC., WHICH HAS NOT BEEN OR WOULD NOT BE DIS CLOSED FOR THE PURPOSE OF THE ACT. IN OTHER WORDS, IT MUST NEC ESSARILY BE LINKED WITH THE INGREDIENTS MENTIONED IN THE SECTIO N. 20 . THE WORDS 'REASON TO BELIEVE' UNDER S. 132(1)(C) REFER TO A BELIEF THAT MONEY OR OTHER ASSET BELONGS TO A PAR TICULAR INDIVIDUAL AND SUCH MONEY OR OTHER ASSET REPRESENTE D UNDISCLOSED INCOME OF THAT INDIVIDUAL. WHAT IS IMPO RTANT AND RELEVANT IS THE REASON TO BELIEVE THAT IT IS THE UN DISCLOSED INCOME OF A PERSON AND NOT IN WHOSE PHYSICAL POSSES SION THE SAME IS [SEE GULAB & COMPANY VS. SUPDT. OF CENTRAL EXCISE (PREVENTIVE) & ORS. (1975) 98 ITR 581 (MAD)]. IN ORDER TO RESOLVE THE CONTROVERSY AS TO WHO WILL BE 'ANY PERSON', IT WILL BE NECESSARY TO COMPREHEND THE MEA NING OF 'ANY PERSON'. IT IS PERTINENT TO MENTION HERE THAT THE DEFINITION OF WORD 'ANY' HAS NOT BEEN DEFINED UNDER THE IT ACT, 1922 BUT THE MEANING I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 14 OF WORD 'PERSON' HAS BEEN DEFINED UNDER S. 2(31) OF THE IT ACT. FOR THE PURPOSE OF RESOLVING THE CONTROVERSY, IT IS NECESSARY TO HAVE MEANING OF WORD 'ANY' THOUGH AS MENTIONED ABOV E, THERE IS NO MEANING OF WORD 'ANY' UNDER THE IT ACT. THE W ORD 'ANY' HAS A DIVERSITY OF MEANINGS AND MAY BE EMPLOYED TO INDICATE 'ALL' OR 'EVERY' AS WELL AS 'SOME' OR 'ONE' AND ITS MEANING IN A GIVEN STATUTE DEPENDS UPON THE CONTEXT AND THE SUBJ ECT-MATTER OF THE STATUTE. IT IS OFTEN SYNONYMOUS WITH 'EITHER ', 'EVERY' OR 'ALL'. ITS GENERALITY MAY BE RESTRICTED BY THE CONT EXT. 21. NOW, LET US CONSIDER A FEW PARTICULAR CASES WHE N THE GENERAL CLAUSES ACT WOULD ASSIST IN THE INTERPRETAT ION OF THE IT ACT, 1961. THE WORD 'PERSON' AS DEFINED UNDER S. 2(31) OF THE IT ACT, 1961 INCLUDES '(I) AN INDIVIDUAL, (II) AN HUF, (III) A COMPANY, (IV) A FIRM, (V) AN AOP OR A BOI, WHETHER INCORPORATED OR NOT, (VI) A LOCAL AUTHORITY, AND (VII) EVERY ARTIFICIAL JURIDICAL PERSON, NOT FALLIN G WITHIN ANY OF THE PRECEDING SUB-CLAUSES; EXPLANATIONFOR THE PURPOSES OF THIS CLAUSE, AN AOP OR A BOI OR A LOCAL AUTHORITY OR AN ARTIFICIAL JURIDICAL PERSON SHALL BE DEEMED TO BE A PERSON, WHETHER OR NOT SUCH PERSON O R BODY OR AUTHORITY OR JURIDICAL PERSON WAS FORMED OR ESTABLI SHED OR INCORPORATED WITH THE OBJECT OF DERIVING INCOME, PR OFITS OR GAINS.' 21.1 THIS IS AN INCLUSIVE DEFINITION WHICH IS MUCH BEYOND THE SCOPE OF PERSON AS DEFINED IN S. 2(42) OF THE GENER AL CLAUSES ACT, 1897 WHICH MERELY STATES THAT 'PERSON' SHALL I NCLUDE ANY COMPANY OR ASSOCIATION OR BOI, WHETHER INCORPORATED OR NOT. THUS THE DEFINITION OF PERSON IN RELATION TO PROCEE DINGS UNDER I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 15 THE IT ACT, 1961 WOULD BE AS PER ITS OWN S. 2(31) A ND NOT AS PER THE GENERAL CLAUSES ACT, 1897. LOCAL AUTHORITY IS NOT DEFINED IN THE IT ACT SEPARATELY BUT HOWEVER DEFINE D UNDER S. 2(31) OF THE GENERAL CLAUSES ACT, 1897 AS 'SHALL ME AN A MUNICIPAL COMMITTEE, DISTRICT BOARD, BODY OF PORT C OMMRS. OR OTHER AUTHORITY LEGALLY ENTITLED TO, OR ENTRUSTED B Y THE GOVERNMENT WITH, THE CONTROL OR MANAGEMENT OF A MUN ICIPAL OR LOCAL FUND'. THUS A LOCAL AUTHORITY IS A PERSON UND ER THE IT ACT, 1961, BUT WHAT CONSTITUTES A LOCAL AUTHORITY IS DEF INED IN THE GENERAL CLAUSES ACT, 1897. 22. IN THE INSTANT CASE, THE RELEVANT WORDS IN THE DEF INITION OF THE PERSON ARE INDIVIDUAL AND AOP, WHICH THO UGH HAVE NOT BEEN DEFINED UNDER THE IT ACT BUT THE EXPRESSIO N HAS BEEN CONSIDERED BY HONBLE APEX COURT IN VARIOUS CASES. 23. NOW, WE DEAL WITH THE RELEVANT CLAUSES OF S. 2(31) OF THE IT ACT. AN 'INDIVIDUAL' MEANS HUMAN BEING BECAU SE IT IS USED AS SOMETHING DISTINCT FROM A JOINT FAMILY, FIR M AND COMPANY. ONE CANNOT GIVE TO THE WORD 'INDIVIDUALS' IN THE EXPRESSION 'ASSOCIATION OF INDIVIDUALS' A DIFFERENT MEANING TO THAT WHICH THE WORD 'INDIVIDUALS' BEARS WHERE IT AP PEARS IN THE SAME PHRASECIT VS. AHMEDABAD MILLOWNERS' ASSOCIATI ON (1939) 7 ITR 369 (BOM). THE EXPRESSION 'INDIVIDUAL' IS NOW A UNIT OF ASSESS MENT AND REFERABLE ONLY TO A NATURAL PERSON, I.E., A HUMAN B EING, A SITUATION DIFFERENT FROM THAT IN THE 1922 ACTUDHAM SINGH VS. CIT (1988) 72 CTR (ORI) 231 : (1987) 35 TAXMAN 275 (ORI). 24. IT IS NOW WELL-SETTLED THAT THE WORD 'INDIVIDU AL' DOES NOT NECESSARILY AND INVARIABLY ALWAYS REFER TO A SINGLE NATURAL PERSON. A GROUP OF INDIVIDUALS MAY AS WELL COME IN FOR TREATMENT AS AN INDIVIDUAL UNDER THE TAX LAWS IF TH E CONTEXT SO I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 16 REQUIRESCIT VS. SHRI KRISHNA BANDAR TRUST (1993) 2 01 ITR 989 (CAL). 25 . 'FAMILY' CONNOTES A GROUP OF PEOPLE RELATED BY BL OOD OR MARRIAGE. ACCORDING TO SHORTER OXFORD ENGLISH DICTI ONARY, 3RD EDN., THE WORD 'FAMILY' MEANS THE GROUP CONSISTING OF PARENTS AND THEIR CHILDREN, WHETHER LIVING TOGETHER OR NOT; IN A WIDER SENSE, ALL THOSE WHO ARE NEARLY CONNECTED BY BLOOD OR AFFINITY; A PERSONS CHILDREN REGARDED COLLECTIVELY; THOSE DE SCENDED OR CLAIMING DESCENT FROM A COMMON ANCESTOR; A HOUSE, K INDRED, LINEAGE; A RACE; A PEOPLE OR GROUP OF PEOPLE. ACCOR DING TO ARISTOTLES POLITICS I, IT IS THE CHARACTERISTIC OF MAN THAT HE ALONE HAS ANY SENSE OF GOOD AND EVIL, OR JUST AND U NJUST, AND THE ASSOCIATION OF LIVING BEINGS WHO HAVE THIS SENS E MAKE A FAMILY AND A STATE. THE WORD 'FAMILY' ALWAYS SIGNIF IES A GROUP. PLURALITY OF PERSONS IS AN ESSENTIAL ATTRIBUTE OF A FAMILY. A SINGLE PERSON, MALE OR FEMALE, DOES NOT CONSTITUTE A FAMILY. HE OR SHE WOULD REMAIN, WHAT IS INHERENT IN THE VERY N ATURE OF THINGS, AN INDIVIDUAL, A LONELY WAYFARER TILL PER C HANCE HE OR SHE FINDS A MATE. A FAMILY CONSISTING OF A SINGLE I NDIVIDUAL IS A CONTRADICTION IN TERMS. SEC. 2(31) OF THE 1961 ACT TREATS AN HUF AS AN ENTITY DISTINCT AND DIFFERENT FROM AN IND IVIDUAL AND IT WOULD BE WRONG NOT TO KEEP THAT DIFFERENCE IN VIEW C. KRISHNA PRASAD VS. CIT, 97 ITR 493 (SC). 26 . 'FIRM IS A COLLECTIVE NOUN, A COMPENDIOUS EXPRESS ION TO DESIGNATE AN ENTITY, NOT A PERSON. IN IT LAW A F IRM IS A UNIT OF ASSESSMENT BY SPECIAL PROVISIONS BUT IS NOT A FU LL PERSON CIT VS. R.M. CHIDAMBARAM PILLAI (1977) 106 ITR 292 (SC). 27 . THE WORD 'ASSOCIATE' MEANS, ACCORDING TO THE OXFO RD DICTIONARY, 'TO JOIN IN COMMON PURPOSE OR TO JOIN I N AN ACTION'. THEREFORE, AN AOP MUST BE ONE IN WHICH TWO OR MORE PERSONS JOIN IN A COMMON PURPOSE OR COMMON ACTION, AND AS T HE WORD I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 17 OCCURS IN S. 3 OF THE 1922 ACT, WHICH IMPOSES A TAX ON INCOME, PROFITS OR GAINS, THE ASSOCIATION MUST BE ONE OF TH E OBJECTS, WHICH IS TO PRODUCE INCOME, PROFITS OR GAINSCIT VS . INDIRA BALKRISHNA (1960) 39 ITR 546 (SC). 28 . 'AOP' AS USED IN S. 2(31) MEANS AN ASSOCIATION IN WHICH TWO OR MORE PERSONS JOIN IN A COMMON PURPOSE OR COMMON ACTION, AND AS THE WORDS OCCUR IN A SECTION WHICH IMPOSES A TAX ON INCOME, THE ASSOCIATION MUST BE ON E, THE OBJECT OF WHICH IS TO PRODUCE INCOME, PROFITS OR GA INSN.V. SHANMUGHAM & CO. VS. CIT (1971) 81 ITR 310 (SC). 29 . FOR FORMING AN 'AOP' THE MEMBERS OF THE ASSOCIATIO N MUST JOIN TOGETHER FOR THE PURPOSE OF PRODUCING AN INCOME. AN 'AOP' CAN BE FORMED ONLY WHEN TWO OR MORE INDIVIDUA LS VOLUNTARILY COMBINE TOGETHER FOR A CERTAIN PURPOSE. HENCE, VOLITION ON THE PART OF THE MEMBERS OF THE ASSOCIAT ION IS AN ESSENTIAL INGREDIENT. EVEN A MINOR CAN JOIN AN 'AOP ' IF HIS LAWFUL GUARDIAN GIVES HIS CONSENT. IN THE CASE OF R ECEIVING DIVIDENDS FROM SHARES, WHERE THERE IS NO QUESTION O F ANY MANAGEMENT, IT IS DIFFICULT TO DRAW AN INFERENCE TH AT TWO OR MORE SHAREHOLDERS FUNCTION AS AN 'AOP' FROM THE MER E FACT THAT THEY JOINTLY OWN ONE OR MORE SHARES, AND JOINT LY RECEIVE THE DIVIDENDS DECLARED. THOSE CIRCUMSTANCES DO NOT BY THEMSELVES GO TO SHOW THAT THEY ACTED AS AN 'AOP'G . MURUGESAN & BROS. VS. CIT1973) 88 ITR 432 (SC). 30 . TO 'ASSOCIATE' IS TO JOIN IN A COMMON PURPOSE OR A CTION. 'ASSOCIATION' DOES NECESSITATE THE EXERCISE OF VOLI TION OF THOSE WHO FORM THE ASSOCIATION. THE EXERCISE OF THAT VOLI TION CAN BE BY OR ON BEHALF OF THOSE WHO FORM THE ASSOCIATIONE STATE OF KHAN SAHIB MOHD. OOMER SAHIB VS. CIT (1958) 33 ITR 767 (MAD). I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 18 31 . AN AOP DOES NOT MEAN ANY AND EVERY COMBINATION OF PERSONS. IT IS ONLY WHEN THEY ASSOCIATE THEMSELVES IN AN INCOME-PRODUCING ACTIVITY THAT THEY BECOME AN AOP. THEY MUST COMBINE TO ENGAGE IN SUCH AN ACTIVITY; THE ENG AGEMENT MUST BE PURSUANT TO THE COMBINED WILL OF THE PERSON S CONSTITUTING THE ASSOCIATION; THERE MUST BE A MEETI NG OF THE MINDS, SO TO SPEAK. IN A NUTSHELL, THERE MUST BE A COMMON DESIGN TO PRODUCE INCOME. IF THERE IS NO COMMON DES IGN, THERE IS NO ASSOCIATION. THIS INTERPRETATION OF THE EXPRE SSION 'AOP' FLOWS FROM THE MEANING OF THE WORD 'ASSOCIATION'DE CCAN WINE & GENERAL STORES VS. CIT (1977) 106 ITR 111 (A P). 32 . JOINING TOGETHER BY THE MEMBERS OF THE ASSOCIATIO N FOR THE PURPOSE OF PRODUCING INCOME IS A PRE-REQUISITE FOR FORMATION OF AN AOP. SUCH COMING TOGETHER OR COMBIN ING IS A CONSENSUAL ACT AND DEPENDS UPON THE VOLITION OF THE PARTIES. MERELY BECAUSE CERTAIN PERSONS ARE CONSTITUTED JOIN T OWNERS, SUCH AS BY INHERITING THE PROPERTY OF A PERSON ON H IS DEATH, THEY DO NOT BECOME AN AOP, FOR, IN THAT EVENT, THE JOINTNESS IS THE RESULT OF OPERATION OF LAW AND NOT OF VOLITION OF PARTIES CIT VS. T.V. SURESH CHANDRAN (1980) 121 ITR 985 (KE R). 33 . THE EXPRESSION 'BOI' SHOULD RECEIVE A WIDE INTERPRETATION, PERHAPS NOT WIDE ENOUGH TO INCLUDE A COMBINATION OF INDIVIDUALS WHO MERELY RECEIVE INCOM E JOINTLY WITHOUT ANYTHING FURTHER AS IN THE CASE OF CO-HEIRS INHERITING SHARES OR SECURITIES, BUT CERTAINLY WIDE ENOUGH TO INCLUDE A COMBINATION OF INDIVIDUALS WHO HAVE A UNITY OF INTE REST BUT WHO ARE NOT ACTUATED BY A COMMON DESIGN, AND ONE OR MOR E OF WHOSE MEMBERS PRODUCE OR HELP TO PRODUCE INCOME FOR THE BENEFIT OF ALLDECCAN WINE & GENERAL STORES VS. CIT (SUPRA). 34 . THE BOI WITH WHICH THE IT ACT IS CONCERNED MUST BE CARRYING ON AN ACTIVITY WITH A VIEW TO EARN INCOME BECAUSE IT IS I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 19 ONLY WITH SUCH A BOI THAT THE IT ACT IS CONCERNED A ND AGAIN THE WORDS 'BOI' DERIVE COLOUR FROM THE CONTEXT IN W HICH THEY OCCUR, NAMELY, AN 'AOP' AND, THEREFORE, THE ONLY CO URSE OPEN AS A MATTER OF INTERPRETATION IS TO ATTRIBUTE THE S ECOND MEANING OUT OF THE THREE MEANINGS SET OUT HEREINABOVE TO TH E WORDS 'BOI'. THE WORDS 'BOI' OCCURRING IN THE IT ACT IN T HE DEFINITION OF THE WORD 'PERSON' IN S. 2(31), THEREFORE, COULD ONLY MEAN A CONGLOMERATION OF INDIVIDUALS, WHO CARRY ON SOME AC TIVITY WITH THE OBJECT OF EARNING INCOMECIT VS. HARIVADAN TRIB HOVANDAS (1977) 106 ITR 494 (GUJ). 35 . THUS, THE EXPRESSION 'PERSON' AS DEFINED IN S. 2(3 1) INCLUDES 'AN AOP OR BOI, WHETHER INCORPORATED OR NO T'. THE LEGISLATURE HAD DEFINITELY SOME PURPOSE IN MIND WHI LE SPECIFICALLY INCLUDING A BOI IN THE CATEGORY OF PER SONS ALONG WITH 'AOP'. IT WILL NOT BE PROPER TO SAY THAT 'BOI' MUST BE GIVEN THE SAME MEANING AS ATTRIBUTED TO 'AOP' BY TH E SUPREME COURT IN CIT VS. INDIRA BALKRISHNA (SUPRA). DOING SO, WILL RENDER THE ENTIRE EXERCISE OF DEFINING THE EXP RESSION AND INCORPORATING SPECIFICALLY 'BOI' WITHIN THE AMBIT O F PARTICULAR CATEGORY OF PERSONS REDUNDANT. THE EXPRESSION 'BOI' MUST BE GIVEN A DEFINITE MEANING OF ITS OWN. 'AOP' AND 'BOI ' CONVEY TWO DIFFERENT COMBINATIONS OF PERSONS AND IT WILL N OT BE PROPER TO TRY TO APPLY THE PRINCIPLE OF EJUSDEM GENERIS TO GIVE THE SAME RESTRICTED MEANING TO THE NEWLY INTRODUCED EXP RESSION 'BOI' AS HAD BEEN GIVEN BY THE SUPREME COURT TO AOP ON INTERPRETATION OF THE WORD 'ASSOCIATION'. THE FACT IS THAT THE EXPRESSION 'BOI' MUST RECEIVE A WIDER INTERPRETATIO N THAN 'AOP'CIT VS. MODU TIMBLO (1994) 206 ITR 647 (BOM). 36 . THE ABSENCE OF A COMMON DESIGN IS WHAT PRINCIPALL Y DISTINGUISHES A BOI FROM AN AOP. ANOTHER DISTINGUIS HING FEATURE IS THAT THE ONE REFERS TO PERSONS AND THE O THER TO INDIVIDUALSDECCAN WINE & GENERAL STORES VS. CIT (S UPRA). I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 20 37 . IT IS POSSIBLE TO ATTRIBUTE ANY ONE OF THE FOLLOW ING THREE MEANINGS TO THE EXPRESSION 'BOI' OCCURRING IN THE I T ACT, 1961: (1) ON THE SAME BASIS AS AN 'AOP', THAT IS, THE MEM BERS OF THE BODY MUST HAVE JOINED TOGETHER FOR THE PURPO SE OF PRODUCING INCOME; (2) A CONGLOMERATION OF INDIVIDUALS WHO HAPPENED TO HAVE COME TOGETHER BUT WHO CARRY ON SOME ACTIVITY W ITH A VIEW TO EARN INCOME OR PROFITS OR GAINS; AND (3) ANY CONGLOMERATION OF INDIVIDUALS WHATSOEVER IRRESPECTIVE OF THE OBJECT WHICH BROUGHT THEM TOGET HER AND IRRESPECTIVE OF THE ACTIVITIES WHICH THEY CARRY ON. 38 . IT IS CLEAR THAT IF THE FIRST MEANING WERE TO BE A DOPTED, THAT WOULD BE THE NARROWEST MEANING AND ADOPTION OF THAT MEANING WOULD MEAN ATTRIBUTING TAUTOLOGY( A REPETIT ION OF THE SAME MEANING IN DIFFERENT WORDS) TO THE LEGISLATURE AND THERE WOULD BE NO DIFFERENCE BETWEEN AN 'AOP' AND A 'BOI' . ACCEPTANCE OF THE MEANING WOULD MEAN THAT THE LEGIS LATURE HAD USED THE WORDS 'BOI' IN VAIN TO DESCRIBE ONE AN D THE SAME GROUP OF INDIVIDUALS. ON THE OTHER HAND, IF TH E THIRD MEANING IS ACCEPTED, THEN THE PRINCIPLE OF NOSCI TUR A SOCIIS(THAT THE MEANING OF A WORD MAY BE KNOWN FROM ACCOMPANYING WORDS) WOULD BE LOST SIGHT OF. THOUGH THE PRINCIPLE OF EJUSDEM GENERIS CANNOT BE APPLIED TO T HE DEFINITION OF THE WORD 'PERSON' OCCURRING IN S. 2(3 1), SINCE THERE IS NO SPECIFIC GENUS TO WHICH AN INDIVIDUAL, AN HUF, A COMPANY, A FIRM OR AN AOP CAN BE SAID TO BELONG, TH E PRINCIPLE OF NOSCITUR A SOCIIS CAN CERTAINLY APPLY IN THE FACTS OF THIS CASE. THE BOI WITH WHICH THE IT ACT IS CONCERN ED MUST BE CARRYING ON AN ACTIVITY WITH A VIEW TO EARN INCOME BECAUSE IT IS ONLY WITH SUCH A BOI THAT THE IT ACT IS CONCERNED A ND AGAIN I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 21 THE WORDS 'BOI' DERIVE COLOUR FROM THE CONTEXT IN W HICH THEY OCCUR, NAMELY, AN 'AOP' AND, THEREFORE, THE ONLY CO URSE OPEN AS A MATTER OF INTERPRETATION IS TO ATTRIBUTE THE S ECOND MEANING OUT OF THE THREE MEANINGS SET OUT HEREINABOVE TO TH E WORDS 'BOI'. THE WORDS 'BOI' OCCURRING IN THE IT ACT IN T HE DEFINITION OF THE WORD 'PERSON' IN S. 2(31), THEREFORE, COULD ONLY MEAN A CONGLOMERATION OF INDIVIDUALS WHO CARRY ON SOME ACT IVITY WITH THE OBJECT OF EARNING INCOME CIT VS. HARIVADAN TRIBHOVANDAS, 106 ITR 494 (GUJARAT) 39. IN VIEW OF THE PROVISIONS OF SECTION 132 OF THE IT ACT, WHICH SPECIFICALLY LAYS DOWN THE CONDITIONS PRECEDE NT FOR AUTHORIZING ANY OFFICER TO ENTER AND SEARCH THE PRE MISES THAT HE HAD INFORMATION IN HIS POSSESSION IN CONSEQUENCE OF WHICH HE HAS REASON TO BELIEVE THAT THE PERSON CONCERNED IS IN POSSESSION OF MONEY, BULLION ETC. AND ONLY THEN HE WILL SIGN THE WARRANT OF AUTHORISATION. IN THE INSTANT CASE, WARRANT OF AUTHORISATION U/S 132 WAS ISSUED IN THE JOINT NAMES OF THREE PERSONS, M/S LAHARI CONSTRUCTIONS, M/S LAHARI INFRA STRUCTURE LTD AND OTHERS AND MR M.P.B. KUTUMBA RAO, THE AUTHO RITY WHO SIGNED THE WARRANT HAD INFORMATION IN HIS POSSESSIO N AND HAD REASON TO BELIEVE THAT THESE THREE PERSONS ARE IN P OSSESSION OF UNDISCLOSED ASSETS SUCH AS MONEY, BULLION ETC AN D HAVE ALSO UNDISCLOSED INCOME JOINTLY. ACCORDINGLY, HE HA S SIGNED THE WARRANT IN THE JOINT NAMES OF THREE PERSONS. IN CASE, THE AUTHORIZING AUTHORITY HAD INFORMATION IN HIS POSSES SION IN CONSEQUENCE OF WHICH HE HAD REASON TO BELIEVE THAT UNDISCLOSED INCOME IS IN THE POSSESSION OF M.P.B. K UTUMBA RAO AT PLOT NO. 244, PHASE III, ROAD NO. 78, JUBI LEE HILLS, HYDERABAD AND SEARCH WARRANT WAS ISSUED IN THE CASE OF THREE ASSESSEES TO SEARCH THIS PLACE, WHICH IS BELONGED T O M.P.B. KUTUMBA RAO, THE ASSESSEE. HAD THE AUTHORISING OFFI CER INTENDED TO SEARCH SHRI M.P.B. KUTUMBA RAO HIMSELF, HE SHOULD HAVE ISSUED AN INDEPENDENT WARRANT AND SEARC H I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 22 INDIVIDUALLY FOR CONDUCTING SEARCH IN HIS CASE ONLY . SINCE THE WARRANT OF AUTHORISATION HAS BEEN ISSUED IN THE JOI NT NAME OF FIRST THREE PERSONS TO SEARCH THE PREMISES OF SHRI M.P.B. KUTUMBA RAO, THE ASSESSEE, IT IS NOT OPEN FOR THE A SSESSING AUTHORITY TO ASSESS SHRI M.P.B. KUTUMBA RAO U/S 153 A OF THE ACT ON THE BASIS OF SEIZED DOCUMENTS SEIZED DURING THE COURSE OF SEARCH PURSUANT TO THE WARRANT OF AUTHORISATION DATED 10/04/2008, WHICH IN THE JOINT OF NAMES OF M/S LAH ARI CONSTRUCTIONS AND M/S LAHARI INFRASTRUCTURE LTD. AN D OTHERS AND NOT IN THE NAME OF PRESENT ASSESSEE AND THAT TO O BY INVOKING PROVISIONS OF SECTION 153A OF THE ACT. SE ARCH CASES ARISE ON THE BASIS OF WARRANT OF AUTHORISATION U/S 132 OF THE IT ACT IN PURSUANCE THEREOF SEARCH IS CARRIED OUT IN T HE CASE OF M/S LAHARI CONSTRUCTIONS AND M/S LAHARI INFRASTRUCT URE LTD. AND OTHERS AND THE SEARCH WARRANT IS NOT BELONGING TO SHRI M.P.B. KUTUMBA RAO, THE ASSESSEE. IN OUR OPINION, I N THIS CASE, THE PROVISIONS OF SECTION 153A ARE NOT APPLIC ABLE AS THE WARRANT WAS NOT ISSUED IN THE NAME OF SHRI M.P.B. K UTUMBA RAO. THEREFORE, ASSESSMENT FRAMED U/S 153A IS NOT V ALID AND IF THE ASSESSING OFFICER WANTED TO MAKE ASSESSMENT IN THE CASE OF THE ASSESSEE, HE SHOULD HAVE DONE U/S 153C OF THE IT ACT AND IT IS NOT U/S 153A OF THE IT ACT. AS THE A SSESSING OFFICER HAS NOT FRAMED THE ASSESSMENT U/S 153C, THE ASSESSMENT FRAMED U/S 153A INDIVIDUALLY IN THE CASE OF SHRI M.P.B. KUTUMBA RAO, IS BAD IN LAW. IN THE CASE OF S IKSHSA O ANUSANDHAN VS. CIT, ON WHICH RELIANCE PLACED BY THE LEARNED COUNSEL, THE HONBLE COURT HELD THAT IN THE ABSENC E OF WARRANT IN THE NAME OF AN ASSESSEE THE SEARCH CONDU CTED IN ITS PREMISES IS NOT A VALID SEARCH AS CONTEMPLATED UNDER S. 132; INITIATION OF A VALID SEARCH AS CONTEMPLATED U NDER S. 132 IN CASE OF A PERSON IS A PRE-REQUISITE TO ISSUE NOT ICE FOR MAKING ASSESSMENT UNDER S. 153A IN RESPECT OF AN AS SESSEE. I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 23 40. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLIN ED TO QUASH THE ASSESSMENT ORDER FRAMED U/S 153A BY THE ASSESSING OFFICER IN THE NAME OF ASSESSEE. AS THE ASSESSMENT FRAMED U/S 153A ITSELF IS QUASHED, THE A DDITIONS MADE BASED ON SUCH ASSESSMENT DO NOT SURVIVE AND, THEREFORE, THE GROUNDS RAISED BY THE REVENUE ARE D ISMISSED AND THE ASSESSEE C.OS. ARE ALLOWED. 41. IN THE RESULT, ALL THE APPEALS OF REVENUE BEING ITA NOS. 739, 740, 741 & 742/HYD/10 ARE DISMISSED , THE C.OS . FILED BY THE ASSESSEE BEING COS. 40, 41, 42, & 43/HYD/10 ARE ALLOWED. ITA NOS. 1432 & 1433/HYD/2012 APPEALS BY THE ASSE SSEE FOR AY 2006-07 AND 2007-08. 42. APPLYING THE RATIO LAID DOWN IN C.OS. 40 TO 43/ HYD/2010 (SUPRA), WE ARE INCLINED TO ALLOW THESE APPEALS AS THE ASSESSMENTS FRAMED BY THE ASSESSING OFFICER U/S 153 A OF THE ACT ARE BAD IN LAW AS NO SEARCH WARRANT U/S 132 OF THE ACT WAS ISSUED IN THE CASE OF THE ASSESSEE. ACCORDINGLY, WE ALLOW BOTH THE APPEALS IN ITA NOS. 1432 & 1433/HYD/2012. 42.1 IN THE RESULT, BOTH THE APPEALS BEING ITA NOS. 1432 & 1433/HYD/2012 ARE ALLOWED. ITA NO. 1434/HYD/12 BY THE ASSESSEE FOR AY 2008-0 9. 43. GROUND NO. 1 & 6 ARE GENERAL IN NATURE. 44. GROUND NO. 2 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS. 39 LAKHS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT IT REPRESENTS THE UNEXPLAINED INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 24 45. THE ASSESSING OFFICER MADE THE ADDITION OF R S. 39 LAKHS ON ACCOUNT OF LOAN TAKEN FROM K. SIVA RAO. ON APPEAL, BEFORE THE CIT(A) IT WAS SUBMITTED THAT NO AMOUNT R ECEIVED IN THE AY 2008-09 AND ONLY AMOUNT RECEIVED FROM K. SIV A RAO IS RS. 30 LAKHS OF RS. 15 LAKH EACH ON TWO OCCASIONS I N THE AY 2007-08 ONLY AND THE SAID AMOUNTS RECEIVED THROUGH BANKING CHANNEL AND HIS ACCOUNT HAD BEEN DULY CREDITED AS O N 31/03/2008 MAINTAINED IN THE BOOKS OF ASSESSEE. AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) OBSERVED THAT IN THE ASSESSMENT ORDER, THE ASSESSIN G OFFICER HAD MADE A CRYPTIC REMARK THAT THE ASSESSEE HAD OBT AINED LOAN FROM K. SIVA RAO OF RS. 39 LAKHS BUT NO DETAIL S HAD BEEN BROUGHT ON I.E. DATE OF ENTRY ETC. HE, THEREFORE, DIRECTED THE ASSESSING OFFICER TO EXAMINE THE SUM OF RS. 15 LAKH S RECEIVED THROUGH BANK TRANSFER AND DELETE THE ADDITION IF IT IS FOUND GENUINE. ON THE OTHER HAND, IF THE AMOUNT SO RECEIV ED THROUGH BANK TRANSFER, AS CLAIMED, IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE, THE SAME MAY BE ASSESSED AS UNEXPLAINED INCOME OF THE ASSESSEE IN THE AY 2007-0 8 AND DELETED THE ADDITION OF RS. 39 LAKHS MADE IN THE AY 2008-09, IF ON VERIFICATION FOUND THAT NO SUCH ENTRY APPEARI NG IN THE BOOKS OR IN THE BANK ACCOUNT OF THE ASSESSEE. 46. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE HAS NOT PRESSED THIS GROUND, THEREFORE , THE SAME IS DISMISSED AS NOT PRESSED. 47. GROUND NO. 3 IS AS FOLLOWS: THE LEARNED CIT(A) ERRED IN HOLDING THAT THE INCOME OF THE APPELLANT BE ESTIMATED AT 8% OF THE GROSS BILLS OF RS. 10,56,80,698/-. THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED THE GROUND OF THE APPELLANT, PARTICULARLY W HEN THE ASSESSING OFFICER DID NOT REJECT THE BOOKS OF A CCOUNT I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 25 AND WHEN THE ASSESSING OFFICER RESORTED TO DISALLOW ANCE OF EXPENDITURE. 48. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE HAD DEBITED TO THE P&L ACCOUNT THE FOLLOWING MAJOR EXPE NDITURE UNDER VARIOUS HEADS: I) MATERIAL CONSUMPTION RS. 1,83,39,803/- II) DIRECT LABOUR RS. 7,69,51,097/- III) DIESEL & OIL LUBRICANTS RS. 99,02,382/- IV) SALARIES AND WAGES RS. 35,96,466/- TOTAL RS.10,87,89,748/- ============= SINCE THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUN T, BILLS/VOUCHERS FOR VERIFICATION AND AUDITORS COMME NTS IN THE AUDIT REPORT, THE ASSESSING OFFICER DISALLOWED 15% OF THE ABOVE EXPENDITURE ON THE ABOVE HEADS, WHICH COMES T O RS. 1,63,18,462/-. 49. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSE E IS FULLY ENGAGED IN THE LABOUR ORIENTED CONTRACT WORK AND THE PROFIT MARGINS ARE DEFINITELY ON HIGHER SIDE WHEN C OMPARED TO THE OTHER CONTRACTS OF CIVIL WORKS IN NATURE. AFTER TAKING INTO ACCOUNT NOT ONLY THE NATURE OF WORK CARRIED BY THE ASSESSEE BUT ALSO THE INVOLVEMENT OF MACHINERY AS WELL AS TH E LABOUR INTENSIVE NATURE OF JOB, THE CIT(A) DIRECTED THE AS SESSING OFFICER TO ESTIMATE THE NET PROFIT @ 8% ON GROSS BI LLS AND FURTHER DIRECTED THAT THE RESULTANT FIGURE MAY BE A DOPTED AS NET PROFIT FROM THE BUSINESS CONTRACT WORKS AND DEP RECIATION SHOULD BE ALLOWED AS PER THE ENTITLEMENT. 50. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 51. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. THIS ISSUE IS SQUARELY COVERED B Y THE DECISION OF THE COORDINATE BENCH IN THE CASE OF M/S C. ESWARA I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 26 REDDY & CO IN ITA NO. 668/HYD/2009 AND OTHERS VIDE ORDER DATED 31/01/2011 WHEREIN THE COORDINATE BENCH HELD AS FOLLOWS: WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE CIT(A) AFTER REFERRING TO TH E DECISION OF THIS TRIBUNAL IN THE CASE OF KRISHNAMOH AN CONSTRUCTIONS (SUPRA) AND THE SPECIAL BENCH DECISI ON IN ARIHANT BUILDERS (SUPRA) ESTIMATED THE PROFIT AT 8% FOR MAIN CONTRACT AND FOR SUB CONTRACT AT 5%. IT MAY NO T BE OUT OF PLACE TO MENTION THAT THIS TRIBUNAL UNIFORML Y ESTIMATING THE PROFIT FROM MAIN CONTRACT AT 8% TO 12.5% DEPENDING UPON THE FACTUAL SITUATION AND 5% TO 7% ON THE SUB CONTRACT DEPENDING UPON THE FACTUAL SITUATI ON. THEREFORE, IN OUR OPINION, ESTIMATION OF PROFIT AT 8% BY THE CIT(A) ON MAIN CONTRACT AND AT 5% ON SUB CONTRA CT IS JUSTIFIED. WE DO NOT FIND ANY INFIRMITY IN THE O RDER OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFI RMED. 52. AS REGARDS DEPRECIATION, THE COORDINATE BENCH H ELD AS FOLLOWS: 13. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 44AD OF THE ACT. NOW DOUBT THIS PROVISION I S APPLICABLE FOR THOSE CASES WHERE THE TURNOVER/TOTAL CONTRACT RECEIPT DOES NOT EXCEEDRS.40 LAKHS. HOWEVE R, BY FINANCE (NO.2) ACT OF 2009 WITH EFFECT FROM 1.4 .2011 THE LEGISLATURE REMOVED THE RESTRICTION OF THE TOTA L CONTRACT RECEIPTS OF RS.40 LAKHS. BY TAKING A CLUE FROM THE PROVISION OF SECTION 44AD AS IS APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE PROVISI ONS WHICH ARE APPLICABLE WITH EFFECT FROM 1.4.2011, WE FIND THAT THE DEDUCTION AVAILABLE U/SS. 30 TO 38 SHALL B E DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT AND N O FURTHER DEDUCTION UNDER THOSE SECTIONS SHALL BE AL LOWED. DEPRECIATION IS ALLOWABLE U/S. 32 OF THE INCOME-TAX ACT. THEREFORE, AS PROVIDED IN SECTION 44AD NO FURTHER/SEPARATE DEDUCTION SHALL BE ALLOWED. IN VIE W OF THE ABOVE, IN OUR OPINION, THE CLAIM OF DEPRECIATI ON ON THE ESTIMATED INCOME IS NOT JUSTIFIED. THEREFORE, T HE LOWER AUTHORITIES HAVE RIGHTLY REJECTED THE SAME. 53. THE ASSESSEE PLEADED BEFORE US THAT THE ASSESSE E HAS TAKEN CONTRACTS FROM NAGARJUNA CONSTRUCTION COMPANY , WHICH, IN TURN, HAS TAKEN THE MAIN CONTRACT FROM THE GOVER NMENT. IF IT IS SO, WE DIRECT THE ASSESSING OFFICER TO APPLY 5% NET PROFIT I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 27 ON GROSS RECEIPTS AS HELD BY THE TRIBUNAL IN THE CA SE OF C. ESWARA REDDY & CO. (SUPRA). THIS GROUND IS PARTLY A LLOWED. 54. GROUND NO. 4 IS AS FOLLOWS: THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO CONSIDER THE DISALLOWANCE OF INTEREST OF RS. 12,48,985/- (RS. 1,50,000/- + 10,09,985/- FOR THE PURPOSE OF DETERMINING THE PROPERTY INCOME. 55. THE ASSESSEE CLAIMED CHAPTER VIA DEDUCTION OF R S. 1,00,000/- AND INTEREST ON HOUSING LOAN OF RS. 1,50 ,000/- AND RS. 10,98,985/-. AS NECESSARY DOCUMENTARY EVIDENCES WERE NOT FILED, THE ASSESSING OFFICER DISALLOWED THE SAI D AMOUNTS. IN THE APPELLATE PROCEEDINGS, WHEN THE CIT(A) ASKED TO FILE THE MUNICIPAL TAX PAYMENT RECEIPTS TO SUPPORT THE CONTE NTION OF THE ASSESSEE THAT THE HOUSE IS COMPLETE AND UNDER H IS OCCUPATION. NO SUCH DETAILS WERE FILED BY THE ASSES SEE AND, THEREFORE, THE CIT(A) DIRECTED THE ASSESSING OFFICE R TO VERIFY THE MUNICIPAL TAX RECEIPTS AND SATISFY HIMSELF ABOU T THE COMPLETION OF THE HOUSE FOR THE PURPOSE OF ALLOWING INTEREST PAYMENT TO FINANCIAL INSTITUTION AS DEDUCTION IN TH E COMPUTATION OF TOTAL INCOME. AGAINST THIS THE ASSES SEE IS IN APPEAL BEFORE US. 56. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ACCORDING TO THE ASSESSEE, HE C ONSTRUCTED THE HOUSE BY TAKING LOAN FROM ORIENTAL BANK OF COMM ERCE VIDE LOAN ACCOUNT NO. 0706601100043 AND REPAYMENT OF THE SAID LOAN HAS BEEN STARTED BY WAY OF EMI WITH EFFECT FRO M 01/04/2007. TO THIS EFFECT, HE DREW OUR ATTENTION T O PAGE 48 OF THE PAPER BOOK WHICH IS CERTIFICATE GIVEN BY THE OR IENTAL BANK OF COMMERCE DATED 22/09/2008. HE ALSO DREW OUR ATTE NTION TO THE CERTIFICATE GIVEN BY ORIENTAL BANK OF COMMERCE DATED 22/09/2008, WHICH IS PLACED AT PAGE 49, STATING THE REIN THAT THE DETAILS OF PAYMENT OF HOUSING LOAN FOR FY 2007 -08 FROM I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 28 01/04/2007 TO 31/03/2008 TOWARDS PRINCIPAL AND INTE REST PAID BY THE ASSESSEE. THE LEARNED COUNSEL SUBMITTED THAT ONLY AFTER COMPLETION OF HOUSE, REPAYMENT HAS BEEN START ED AND THEREFORE ASSESSEE IS ENTITLED FOR DEDUCTION TOWARD S HOUSING LOAN INTEREST. ON THE OTHER HAND, THE LEARNED DR HA S NOT CONTROVERTED THE SUBMISSIONS OF THE ASSESSEE NOR BR OUGHT ANY CONTRARY MATERIAL ON RECORD TO SUGGEST THAT THE SUB MISSIONS MADE BY THE ASSESSEE ARE WRONG. BEING SO, THE CLAIM OF THE ASSESSEE IS TO BE ALLOWED AND ACCORDINGLY, WE DIREC T THE ASSESSING OFFICER TO ALLOW ASSESSEES CLAIM OF DEDU CTION TOWARDS INTEREST ON HOUSING LOAN. THUS, THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 57. GROUND NO. 5 IS AS FOLLOWS: THE LEARNED CIT(A) ERRED IN HOLDING THAT THE PART O F THE AMOUNT RECEIVED ON SALE OF LANDS AGGREGATING TO RS. 50,30,000/- IS ASSESSABLE AS INCOME FROM OTHER SOUR CES. THE LEARNED CIT(A) FAILED TO SEE THAT THE ENTIRE AM OUNT WAS RECEIVED AS A CONSIDERATION ON SALE OF CAPITAL ASSETS AND THE SOURCE OF RECEIPTS IS KNOWN. 58. DURING THE YEAR UNDER CONSIDERATION, THE TOTAL AMOUNT DISCLOSED BY THE ASSESSEE ON SALE OF LAND IS T RS. 50,30,000/-. WHEN ASKED TO SUBMIT THE DETAILS OF THE LANDS SOLD, THE ASSESSEE DID NOT SUBMIT THE REQUIRED DOCUMENTS AND CONTENDED THAT LAND OF 2.08 ACRES AND 0.10 ACRES WE RE SOLD ON 31/07/2007 AND 01/08/2007 TO SWAPNA LAHARI FILMS PV T. LTD AND LAHARI INFRASTRUCTURE LTD. RESPECTIVE AND RECEI VED CONSIDERATION OF RS. 2,85,000/- AND RS. 1,75,000/- RESPECTIVELY. FURTHER CONTENDED THAT ON 03/08/2007 A SUM OF RS. 15,40,000/- WAS RECEIVED FROM M/S SWAPNA LAHARI FILMS PVT. LTD. AND FURTHER SUM OF RS. 30,30,000/- WAS AL SO RECEIVED ON 30/09/2007 FROM SWAPNA LAHARI FILMS LTD. TOWARDS SALE CONSIDERATION. SINCE THE ASSESSEE FAILED TO ADDUCE ANY EVIDENCE ABOUT THE NATURE OF RECEIPT OF THE SE FOUR AMOUNTS ETC. AND THE FACT THAT THE TOTAL AMOUNT OF RS. 50, 30,000/- SAID I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 29 TO HAVE BEEN RECEIVED FROM M/S SWAPNA LAHARI FILM P T. LTD. AND LAHARI INFRASTRUCTURE LTD. THE ASSESSING OFFICE R TREATED THE SAME AS UNEXPLAINED INCOME. 59. ON APPEAL, THE CIT(A) OBSERVED THAT THE ONUS IS ON THE ASSESSEE TO SUBMIT THE NECESSARY SUPPORTING DOCUMEN TS TO DEFEND HIS CONTENTION THAT THE ABOVE SUMS WERE RECE IVED ON ACCOUNT OF SALE OF LANDS TO THE ABOVE PARTIES. HE F URTHER OBSERVED THAT UNLESS AND UNTIL THE ASSESSEE DISCHAR GES SUCH ONUS CAST ON HIM, IT IS NOT POSSIBLE TO TREAT THOSE RECEIPTS AS SALE PROCEEDS OF LAND POSSESSED BY THE ASSESSEE. HE , THEREFORE, DIRECTED THE ASSESSING OFFICER AS UNDER: IF THE APPELLANT FURNISHES THE NECESSARY DETAILS OF SALE DEED COPIES ETC IN SUPPORT OF THE SALE LF LAND AND RECEIPT OF CONSIDERATION MENTIONED IN SUCH SALE DEEDS, THE ASSESSING OFFICER IS DIRECTED TO TREAT THE SAID AMO UNTS TO THE EXTENT OF THE AMOUNTS MENTIONED IN THOSE SAL E DEEDS AS SALE PROCEEDS OF THE AGRICULTURAL LANDS AN D TREAT THE BALANCE AMOUNTS AS UNEXPLAINED INCOME OF THE ASSESSEE. ON THE OTHER HAND, IF THE APPELLANT FAILS TO PRODUCE ANY SALE DEED COPIES ETC., THE ENTIRE AMOUN T OF RS. 50,30,000/- DECLARED IN THE CURRENT ASSESSMENT YEAR IS TO BE TREATED AS UNEXPLAINED INCOME OF THE ASSES SEE. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO A SSESS A SUM OF RS. 50,30,000/- AS UNEXPLAINED INCOME OF T HE ASSESSEE FOR THE AY 2008-09(SUBJECT TO THE ABOVE DIRECTIONS) AND DELETE THE ADDITION OF RS. 47,88,41 7/- MADE UNDER LONG TERM CAPITAL GAINS. 60. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 61. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE RECEIVED SALE CONSIDERATION ON AGRICULTURAL PROPERT Y AS FOLLOWS: DATE AMOUNT RECEIVED FROM 31/07/2007 2,85,000/- SWAPNA LAHARI FILMS PVT. LTD. 01/08/2007 1,75,000/- LAHARI INFRASTRUCTURE LTD. 03/08/2007 15,40,000/- SWAPNA LAHARI FILMS PVT. LTD. 30/09/2007 30,30,000/- SWAPNA LAHARI FILMS PVT. LTD. 50,30,000/- I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 30 THE LEARNED COUNSEL DREW OUR ATTENTION TO THE COPY OF SALE DEED EXECUTED ON 30/09/2007 IN FAVOUR OF SWAPNA LAH ARI FILMS PVT. LTD., WHICH IS PLACED AT PAGES 216 TO 22 1 OF THE PAPER BOOK AND ANOTHER COPY OF SALE DEED EXECUTED B Y M. RUPESH (ASSESSEES SON) ON 30/09/2009 IN FAVOUR OF SWAPNA LAHARI FILMS PVT. LTD., WHICH IS PLACED AT PAGES 22 2 TO 227 OF THE PAPER BOOK. IT WAS SUBMITTED THAT THE ENTIRE A MOUNT IS RECEIVED ON SALE OF AGRICULTURAL PROPERTY, WHICH IS SITUATED IN PATIGUNPUR VILLAGE NEAR PATANCHERUVU, MEDAK DISTRIC T AND THE ASSESSEE HAVING BEEN CARRIED OUT AGRICULTURAL OPERA TIONS SINCE LONG TIME AND DECLARING AGRICULTURAL INCOME FROM AY 1997-98 ONWARDS. FURTHER, IT WAS SUBMITTED THAT ASSESSEES AGRICULTURAL INCOME HAS BEEN ACCEPTED BY THE DEPARTMENT U/S 143( 3) OF THE ACT IN EARLIER YEARS AND THE LAND IS NOT AT ALL SITUATED IN THE MUNICIPALITY AND THE PATIGUNPUR VILLAGE IS NOT NOTI FIED BY THE CENTRAL GOVERNMENT U/S 2(14)(III)(B) OF THE ACT. TH EREFORE, THE LAND SITUATED BEYOND THE MUNICIPALITY LIMITS OF HYD ERABAD AND THE LAND SOLD AS AGRICULTURAL LAND AND ON ACREGE. IT IS SUBMITTED THAT IN THE SALE DEED ALSO IT IS MENTIONE D AS SALE OF AGRICULTURAL LAND ONLY AND THE SALE IS ALSO ON ACRE GE BASIS, WHICH IS ALSO EVIDENT FROM THE MRO RECORDS AS THE P ROPERTY IS AGRICULTURAL LAND. HE, THEREFORE, CONTENDED THAT TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SAFRIA BIBI MOHAMAD IBRAHIM AND OTHERS, 204 ITR 631 (SC) IS NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE . 62. THE DR, ON THE OTHER HAND, RELIED UPON THE ORDE RS OF THE REVENUE AUTHORITIES. 63. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD. IN THIS CASE THE ASSESSING OFFICER HAD ORIGINALLY MADE THE ADDITION OF RS. 47,88,417/- TOWARDS LONG T ERM CAPITAL I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 31 GAINS, WHICH WAS DELETED THE CIT(A). HOWEVER, THE C IT(A) SUSTAINED THE ADDITION OF RS. 50,30,000/- (RS. 2,85 ,000 + 1,75,000 + 15,40,000 + 30,30,000) SAID TO HAVE BEEN RECEIVED FROM M/S SWAPNA LAHARI FILMS PVT. LTD. AND LAHARI INFRASTRUCTURE LTD. ON THE GROUND THAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF THIS AMOUNT AND DIRECTED TO A SSESS THE SAME AS UNEXPLAINED INCOME OF THE ASSESSEE. BEFORE US, THE ASSESSEE SUBMITTED THAT THIS AMOUNT RECEIVED FROM T HE SALE AGRICULTURAL PROPERTY AND DUE CREDIT TO BE GIVEN FO R THE SAME. THE LEARNED COUNSEL INVITED OUR ATTENTION TO THE PA GES 126 TO 133 AND 155 TO 175 OF THE PAPER BOOK, WHICH ARE THE BANK ACCOUNT DETAILS TO SUBMIT THAT EXTRA AMOUNTS RECEIV ED BY THE ASSESSEE FROM SALE OF AGRICULTURAL PROPERTY OVER AN D ABOVE SALE DEED AND THE SAME WAS DEPOSITED IN THE BANK AC COUNT MAINTAINED WITH ORIENTAL BANK OF COMMERCE AT AMEERP ET BRANCH, VIDE A/C NO. 0706401000130. HE, THEREFORE, SUBMITTED THAT THE SALE CONSIDERATION RECEIVED BY T HE ASSESSEE FROM AGRICULTURAL PROPERTY. IN THIS CONTEX T, HE RELIED ON THE DECISION OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. INTEZAR ALI, VIDE ITA NO. 162 OF 20 13 DATED 27/06/2013 WHEREIN IT WAS HELD THAT SALE DEED IS REGISTERED AT A VALUE MUCH BELOW THE AMOUNT, WHICH HE HAS ACTU ALLY RECEIVED, WHICH IS MORE THAN REGISTERED VALUE AND T HE SAME WAS DEPOSITED IN THE BANK ACCOUNT, THE SAME IS TO B E TREATED AS INCOME GENERATED FROM THE SALE OF CAPITAL ASSET. THE LEARNED COUNSEL POINTED OUT THAT THE DEPARTMENT HAS NOT BROUGHT ANYTHING ON RECORD TO ESTABLISH THAT THE AM OUNT DEPOSITED BY THE ASSESSEE IS FROM OTHER SOURCES AND BEING SO, THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE ONL Y FROM SALE OF AGRICULTURAL PROPERTY. WE FIND THAT THE DEPOSITS MADE IN THE SAID BANK MORE OR LESS IS TALLIED WITH THE D ATE OF SALE DEED EXECUTED BY THE ASSESSEE WITH M/S SWAPNA LAHAR I FILMS PVT. LTD. AND LAHARI INFRASTRUCTURE LTD. IN OUR OPI NION, IT IS I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 32 CORRECT LEGAL PROPOSITION THAT IT IS TRACEABLE FROM DISTINCT SOURCES, NAMELY FROM SALE OF AGRICULTURAL LAND AND, THUS, IT IS TO BE TREATED AS INCOME FROM SALE OF AGRICULTURAL L AND AND TO BE CONSIDERED ACCORDINGLY. IT WILL NOT BE PERMISSIB LE TO ESTIMATE THE INCOME FROM ANY OTHER SOURCES AS DEPOS IT IN THE BANK ACCOUNT HAVING DIRECT NEXUS WITH THE SALE OF A GRICULTURAL PROPERTY. THE RELIANCE PLACED BY THE LEARNED AR ON THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. INTEZAR ALI (SUPRA) IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE AND, THEREFORE, WE DIRECT THE ASSESSING OFFICE R TO TREAT THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE ONL Y FROM THE SALE OF AGRICULTURAL PROPERTY AND DECIDE THE ISSUE ACCORDINGLY, UNLESS ANY CONTRARY EVIDENCE IS BROUGHT ON RECORD B Y THE DEPARTMENT. ACCORDINGLY, THIS GROUND OF APPEAL IS P ARTLY ALLOWED. 64. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 65. TO SUM UP, ALL THE APPEALS OF REVENUE BEING ITA NOS. 739, 740, 741 & 742/HYD/10 ARE DISMISSED, THE C.OS . RAISED BY THE ASSESSEE BEING COS. 40, 41, 42, & 43/HYD/10 ARE ALLOWED. ALSO, THE APPEALS FILED BY THE ASSESSEE FO R AY 2006- 07 AND 2007-08 BEING ITA NOS. 1432 & 1433/HYD/12 AR E ALLOWED. THE APPEAL BEING ITA NO. 1434/HYD/12 IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 19/12/2013. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 19 TH DECEMBER, 2013 KV I.T.A. NOS. 739/HYD/2010 AND OTHERS SHRI M.P.B. KUTUMBA RAO 33 COPY FORWARDED TO: 1. SHRI M.P.B. KUTUMBA RAO, C/O SHRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS RESIDENCY, ROAD NO. 9, HIMAYATNAGAR, HYDERABAD. 2. DY. CIT, CC-6, HYDERABAD. 3. CIT(A)-I, HYDERABAD 4 CIT(CENTRAL, HYDERABAD 5 THE DR, ITAT, HYDERABAD S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER