Sri Chinta Sai Bapeswara Rao, Anakapalle V. The ITO, Ward-1, Anakapalle

ITA 77/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50169 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 01-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Keywords: Unexplained investment; Unexplained expenditure; Capital asset; Business income; Depreciation; Business expenditure; Search and seizure; Application of stay; Retraction; Revenue expenditure
• Section: 69C; 143(3); 133A; 147; 131; 69; 145; 148; 132

Judgement Text

ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO S . 77 TO 80 /VIZAG/ 20 11 & S.A. NOS.2 TO 5/VIZAG/2011 ASSESSMENT YEAR S : 2004 - 05, 2006 - 07, 2007 - 08 & 2008 - 09 RESPECTIVELY SRI CHINTA SAI BAPESWARA RAO ANAKAPALLE VS. ITO WARD - 1 ANAKAPALLE (APPELLANT) (RESPONDENT) PAN NO.ADZPC 2763Q APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI J. SIRI KUMAR, SR. DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAIN ST THE CONSOLIDATED ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 , 2006-07, 2007-08 & 2008-09 ON COMMON GROUNDS. 2. THESE APPEALS CAME UP FOR HEARING ON 8.4.2011. T HIS APPEAL IS REQUIRED TO BE ARGUED BY THE CIT(DR) BUT THE CIT(DR ) WAS NOT PRESENT AS HE WAS ON STUDY TOUR. CIT (INCHARGE) OF THE TRIBUNAL MR. I. SURESH BABU DOES NOT APPEAR IN PERSON TO ARGUE THE CASE OF THE REVEN UE FOR THE REASONS BEST KNOWN TO HIM. HE HOWEVER, FILED THE WRITTEN SUBMIS SIONS THROUGH SENIOR D.R. MR. B. SASMAL AND THE SAME ARE TAKEN ON RECORD. TH EREFORE, NO ORAL ARGUMENT WAS RAISED ON BEHALF OF THE REVENUE. ACCO RDINGLY, THE APPEAL WAS HEARD. SINCE GROUND IN ALL APPEALS ARE QUITE IDENT ICAL EXCEPT THE DIFFERENCE IN QUANTUM, WE ADOPT THE I.T.A. NO.77 OF 2011 AS A LEA D CASE AND REPRODUCE THE REVISED GROUNDS OF APPEAL FILED BY THE ASSESSEE AS UNDER: 1. THE ORDER OF THE LD. CIT(A), IS CONTRARY TO THE FAC TS AND ALSO LAW APPLICABLE TO THE FACTS OF APPELLANTS CASE. 2. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE A DDITION OF RS.3,43,469/- MADE BY THE ASSESSING OFFICER BY ESTI MATING THE PROFIT @ 10% ON GROSS RECEIPTS. 3. THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE AC TION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT . ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 2 4. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE A DDITION OF RS.30,69,210/- AND RS.83,06,821/- TOWARDS UNEXPLAIN ED INVESTMENT U/S 69 OF THE ACT. 5. THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE REFERENC E TO VALUATION CELL IS BAD IN LAW, SINCE THE ASSESSING OFFICER DID NOT POINT OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT. 6. ALTERNATIVELY, THE LD. CIT(A) OUGHT TO HAVE HELD TH AT THE PROVISIONS OF S. 142A ARE NOT APPLICABLE IN THE CASE OF THE AP PELLANT IN AS MUCH AS THE FLATS CONSTRUCTED BY THE APPELLANT ARE STOCK IN TRADE AND THE PROVISIONS OF S. 142A ARE APPLICABLE ONLY F OR INVESTMENTS IN CAPITAL ASSETS. 7. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE A DDITION OF RS.37,04,082/- TOWARDS UNACCOUNTED RECEIPTS. 3. GROUND NO.1 IN ALL APPEALS IS OF GENERAL IN NATU RE AND DOES NOT REQUIRE ANY INDEPENDENT ADJUDICATION. GROUND NOS.2 & 3 IN ALL APPEALS RELATE TO THE ESTIMATION OF PROFIT AT 10% ON GROSS RECEIPTS. THE BRIEF FACTS BORN OUT FROM THE RECORD ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND SALE OF RESIDENTIAL FLAT. A SURVEY OPERATION U /S 133A OF THE INCOME-TAX ACT (HEREIN AFTER CALLED AS `ACT) WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 4.3.2009 FOLLOWING WHICH IT CAME TO LIGHT THAT ASSESSEE MAINTAINED TWO SETS OF BOOKS OF ACCOUNTS, (1) THE R EGULAR BOOKS OF ACCOUNTS IN WHICH SALE PROCEEDS OF FLATS WERE RECORDED AT LE SSER AMOUNTS THAN WHAT IS ACTUALLY RECEIVED AND ANOTHER SET OF BOOKS WHERE TH E ACTUAL SALE PROCEEDS ARE RECORDED. CONSEQUENTLY, YEAR WISE UNACCOUNTED SALE PROCEEDS FROM FLATS WERE DETECTED DURING THE SURVEY OPERATION. FURTHER MORE BLANK SIGNED VOUCHERS OF FOUR BUNDLES WERE ALSO DETECTED AND IMP OUNDED DURING THE COURSE OF SURVEY. ACCORDINGLY, THE ASSESSMENT PROC EEDINGS WERE INITIATED BY ISSUING NOTICE U/S 148 AND ASSESSMENTS WERE FRAMED U/S 143(3) READ WITH SECTION 147 OF THE ACT. 4. ON CAREFUL PERUSAL OF THE BOTH SETS OF BOOKS OF ACCOUNTS AND OTHER MATERIAL FOUND DURING THE COURSE OF SURVEY, THE A.O . WAS OF THE VIEW THAT COST OF CONSTRUCTION OF FLATS UNDER EACH OF PROJECT S WERE NOT TRULY AND FULLY RECORDED IN HIS REGULAR BOOKS OF ACCOUNTS. CONSEQU ENTLY, THE ASSESSING OFFICER PROCEEDED TO REJECT THE ASSESSEES REGULAR BOOKS OF ACCOUNTS RELATING TO BOTH REGULAR BUSINESS TRANSACTIONS AND COST OF C ONSTRUCTION OF THE FLATS AS PER PROVISO TO SUB-SECTION 3 OF SECTION 145 OF THE ACT AND THEREFORE ESTIMATED ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 3 THE BUSINESS INCOME OF THE ASSESSEES @ 10% OF THE G ROSS RECEIPTS BEING RS.6,01,652/-, RS.6,55,300/-, RS.6,53,400/- AND RS. 9,74,650/- FOR THE ASSESSMENT YEAR 2004-05, 2006-07, 2007-08 & 2008-09 RESPECTIVELY. AFTER ALLOWING SET OFF ALREADY ADMITTED BUSINESS INCOME O F THE RELEVANT ASSESSMENT YEARS, THE ASSESSING OFFICER WORKED OUT THE NET ADD ABLE INCOME OF RS.3,43,469/-, RS.2,67,687/-, RS.3,53,216/- & RS.6, 59,637/- FOR THE ASSESSMENT YEARS 2004-05, 2005-06, 2007-08 & 2008-0 9 RESPECTIVELY. 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSION THAT THE A.O. HAS ESTIMATED THE NET PROF IT OF THE ASSESSEES WITHOUT BRINGING ANY COMPARABLE CASE AFTER REJECTIN G THE BOOKS OF ACCOUNTS. CIT(A) WAS NOT CONVINCED WITH THE EXPLANATIONS OF T HE ASSESSEES AND HE CONFIRMED THE ADDITIONS. 6. NOW THE ASSESSEE HAS PREFERRED AN APPEAL WITH TH E SUBMISSION THAT AFTER REJECTING THE BOOKS OF ACCOUNTS, THE ASSESSIN G OFFICER IS REQUIRED TO BRING SOME COMPARABLE CASE FOR THE ESTIMATION OF TH E NET PROFIT OF THE ASSESSEES. BUT IN THE INSTANT CASE THE ASSESSING O FFICER HAS ESTIMATED THE NET PROFIT @ 10% OF GROSS RECEIPTS WITHOUT BRINGING ANY COMPARABLE CASE. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSE SSEE DID NOT DISPUTE THE REJECTION OF THE BOOKS OF ACCOUNTS UNDER THE GIVEN CIRCUMSTANCES BUT HE HOWEVER CONTENDED THAT THE ESTIMATION AT 10% OF GRO SS RECEIPTS IS ON HIGHER SIDE AND THE NECESSARY RELIEF MAY BE GRANTED. THRO UGH WRITTEN SUBMISSIONS, CIT HAS SIMPLY PLACED THE RELIANCE UPON THE ORDER O F THE CIT(A). 7. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE LOWE R AUTHORITIES AND WE DO NOT FIND ANY DEFECT OR INFIRMITY IN THE REJECTIO N OF THE BOOKS OF ACCOUNTS IN THE GIVEN CIRCUMSTANCES OF THE CASE. ONCE THE BOOK S OF ACCOUNTS ARE REJECTED THE ONUS IS UPON THE ASSESSING OFFICER TO ESTIMATE THE PROPER INCOME OF THE ASSESSEES AND FOR DOING SO HE HAS TO BRING O UT SOME COMPARABLE CASE. BUT IN THE INSTANT CASE, ASSESSING OFFICER HAS NOT BROUGHT ANY COMPARABLE CASE TO DETERMINE THE NET PROFIT OF THE ASSESSEES A ND HE DETERMINED THE NET PROFIT AT 10% OF THE GROSS RECEIPTS WITHOUT ALLOWIN G ANY DEPRECIATION ETC. THIS ESTIMATION APPEARS US TO BE ON HIGHER SIDE AND WE ACCORDINGLY RESTRICT ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 4 THE SAME TO 8% OF THE GROSS RECEIPTS. WE ACCORDING LY MODIFY THE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO DETERMINE THE NET PROFIT AT 9% TO THE GROSS RECEIPT DECLARED BY THE ASSESSEES IN ITS RETURN OF INCOME. 8. GROUND NOS.4 TO 6 RELATE TO THE REFERENCE OF VAL UATION CELL FOR DETERMINATION OF THE COST OF CONSTRUCTION AND ALSO THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. IN THIS REGARD HAVING NOTED THAT THE ASSESSEE HAS MAINTAINED TWO SETS OF BOOKS OF AC COUNTS REFLECTING DIFFERENT SALE CONSIDERATIONS OF FLAT THE A.O. FELT IT IMPERATIVE TO ASCERTAIN THE EXTENT OF ACTUAL INVESTMENT IN THE CONSTRUCTION OF RESIDENTIAL PROJECTS AND ACCORDINGLY MADE A REFERENCE U/S 142A OF THE ACT TO THE DVO FOR THE PURPOSE OF ASCERTAINING THE VALUE OF INVESTMENT IN SUCH PRO JECTS. UPON REFERRING THE ISSUE OF THE EXTENT OF COST OF CONSTRUCTION TO THE DVO FOR EACH OF THE PROJECTS AND ON RECEIPT OF REPORT FROM THE DVO SHOWING HIGH VALUE OF THE INVESTMENT THAN WHAT HAS BEEN ADMITTED IN THE REGULAR BOOKS OF ACCOUNTS, THE ASSESSING OFFICER OFFERED AN OPPORTUNITY TO THE ASSESSEE TO R EBUT THE FINDINGS REGARDING THE VALUATION MADE BY THE DVO. THE ASSESSEE OBJECT ED TO THE VALUATION MADE BY THE AO BUT THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER BY ADOPTING DIFFERENTIAL FIGURES BETWEEN THE COST OF C ONSTRUCTION ADMITTED BY THE ASSESSEE AND THOSE DETERMINED BY THE DVO AS UNEXPLA INED INVESTMENT U/S 69 OF THE ACT. RESULTANTLY THE ASSESSING OFFICER HAS MADE AGGREGATE ADDITIONS OF RS.1,13,76,431/0, RS.79,61,283/-, RS.47,47,017/- & RS.52,93,285/- FOR THE ASSESSMENT YEARS 2004-05, 2006-07, 2007-08 AND 2008 -09 RESPECTIVELY BY PLACING RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PRANAV CONSTRUCTION COMPANY VS. ACIT ITA 300/MUM BAI/1994. 9. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSION THAT REFERENCE TO THE DVO U/S 142A IS NO T VALID IN AS MUCH AS THE COST OF CONSTRUCTION IN THE ASSESSEES LINE OF BUSI NESS CONSTITUTES A REVENUE EXPENDITURE AND IT CANNOT BE CHARACTERIZED IN ANY I NVESTMENT WHICH IS NECESSARILY TO BE UNDERSTOOD WITH REFERENCE TO A CA PITAL ASSET. CIT(A) WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE S AND HAS OBSERVED THAT IN THE TYPICAL FACTS AND CIRCUMSTANCES OF THE ASSES SEE, A BROADER VIEW NEEDS TO BE TAKEN SO AS TO TREAT THE UNDISCLOSED EXPENDIT URE IN THE CONSTRUCTION OF ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 5 RESIDENTIAL FLATS AS AN INVESTMENT IN IMMOVABLE PRO PERTY AND AS SUCH REFERENCE MADE TO THE ASSESSING OFFICER TO THE DVO CANNOT BE FAULTED. HE ACCORDINGLY CONFIRMED THE ORDER OF THE ASSESSING OF FICER ON ADDITIONS MADE U/S 69 OF THE ACT. 10. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND PLACED A HEAVY RELIANCE UPON THE ORDER OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. R.P. APARTMENTS PVT. LTD. 319 ITR 276 IN SU PPORT OF HIS CONTENTION THAT NO REFERENCE U/S 142A CAN BE MADE TO DVO TO AS CERTAIN THE COST PROJECT AND THEN MAKE AN ADDITION U/S 69C OF THE ACT ON THE BASIS OF THE VALUATION MADE BY THE DVO. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT SECTION 142A CAN BE INVOKED TO ASCERTAIN THE C OST OF INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OF THE ACT. THE AS SESSEE IS ADMITTEDLY ENGAGED IN THE BUSINESS OF CONSTRUCTION AND SALE OF RESIDENTIAL FLATS AND HAS BOOKED THE COST OF CONSTRUCTION AS A REVENUE EXPEND ITURE IN ITS ACCOUNTS. THEREFORE, IT CANNOT BE CALLED TO BE THE INVESTMENT IN THE PROPERTY FOR THE PURPOSE OF SECTION 69 OF THE ACT. IF IT IS PROVED THAT ASSESSEE HAS MADE UNEXPLAINED EXPENDITURE IN THE PROJECT THAT ADDITIO N CAN ONLY BE MADE U/S 69C OF THE ACT AND BY DETERMINING THE COST OF CONST RUCTION FOR THE PURPOSE OF SECTION 69C A REFERENCE U/S 142A TO DVO CANNOT BE M ADE. THROUGH WRITTEN SUBMISSIONS, THE LD. CIT HAS SIMPLY PLACED A RELIAN CE UPON THE ORDER OF THE CIT(A). 11. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES WE FIND THAT UNDISP UTEDLY THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENT IAL FLATS AND HE HAS BOOKED THE COST OF CONSTRUCTION AS A REVENUE EXPENDITURE A ND OFFERED THE PROFIT EARNED IN THESE ACTIVITIES AS A PROFIT FROM THE BUS INESS. IT IS ALSO EVIDENT FROM THE ORDERS OF THE LOWER AUTHORITIES THAT THE A SSESSEE WAS ENGAGED IN CONSTRUCTION OF DIFFERENT PROJECTS AFTER PURCHASING A LAND. THE A.O. HIMSELF HAS OBSERVED IN THE ASSESSMENT ORDER THAT THE ASSES SEE HAS DEVELOPED A LAND AND CONSTRUCTED NUMBER OF APARTMENTS IN HARSHA ENCL AVE AND JYOTI ENCLAVE. THEREFORE, THE COST OF CONSTRUCTION INCURRED BY THE ASSESSEES IN CONSTRUCTING THESE APARTMENTS CANNOT BE CALLED TO BE THE INVESTM ENT IN THE IMMOVABLE ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 6 PROPERTY. IT WAS RATHER A REVENUE EXPENDITURE WHIC H WAS RIGHTLY BOOKED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS AND OFFERED T HE PROFIT IN THIS CONSTRUCTION ACTIVITY AS A PROFIT FROM BUSINESS WHI CH WAS ACCEPTED BY THE REVENUE AUTHORITIES. NOW THE QUESTION ARISE IF THE ASSESSEE HAS BOOKED THE COST OF CONSTRUCTION AS A REVENUE EXPENDITURE, CAN IT BE TREATED TO BE THE INVESTMENT IN THE PROPERTY AND REFERENCE BE MADE TO THE VALUATION OFFICER FOR ESTIMATING THE VALUE OF INVESTMENT IN THE PROPERTY FOR MAKING AN ADDITION U/S 69 OF THE ACT. THIS ASPECT WAS EXAMINED BY DELHI H IGH COURT IN THE CASE OF CIT VS. R.P. APARTMENTS PVT. LTD. (SUPRA) IN WHICH IT HAS BEEN HELD THAT FOR THE PURPOSE OF GETTING HIMSELF SATISFIED ABOUT THE PURPORTED UNEXPLAINED EXPENDITURE U/S 69C POWERS U/S 142A COULD NOT BE IN VOKED AS THERE IS NO MENTION OF SECTION 69C IN SECTION 142A WITH THE ACT . THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT ARE EXTRACTE D HEREUNDER: SECTION 142(A) IS TO THE FOLLOWING EFFECT: 142A. FOR THE PURPOSES OF MAKING AN ASSESSMENT OF REASSESSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF THE VALUE OF A NY INVESTMENT REFERRED TO IN S. 69 OR S. 69B OR THE VALUE OF ANY BULLION, JEW ELLERY OR OTHER VALUABLE ARTICLE REFERRED TO IN S.69A OR S. 69B IS REQUIRED TO BE MADE, THE AO MAY REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMATE O F SUCH VALUE AND REPORT THE SAME TO HIM. IT IS CLEAR FROM THE READING OF SUB-S. (1) OF THIS PROVISION THAT IT ENABLES THE AO TO GET THE VALUATION DONE FROM THE V ALUATION OFFICER IN CERTAIN SPECIFIC TYPES OF CASES. THESE WOULD BE THE CASES WHEREIN AN ESTIMATE OF THE VALUE OF ANY INVESTMENT REFERRED TO IN S. 69 OR S. 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES REFER RED TO IN S. 69A OR 69B IS REQUIRED. THERE IS NO MENTION ABOUT S. 69C OF THE ACT. AS IS CLEAR FROM THE ABOVE, S. 69A DEALS WITH UNEXPLAINED MONEY. SEC. 6 9B LIKEWISE RELATES TO THE AMOUNT OF INVESTMENT ETC. NOT FULLY DISCLOSED IN BO OKS OF ACCOUNTS. ON THE OTHER HAND, THE PROVISION RELATES TO UNEXPLAINED EX PENDITURE IS IN S. 69C. IN THE PRESENT CASE THE AO HAD DOUBTS ABOUT THE EX PENDITURE INCURRED ON THE PROJECT. AS POINTED OUT ABOVE THE ASSESSEE HAD SHOWN THE EXPENDITURE ON THE YUSUF SARAI PROJECT AS RS.39,69 ,440/-. SINCE AO HAD DOUBTED THIS EXPENDITURE, HE REFERRED THE MATTER TO DVO FOR THE PURPOSE OF DETERMINING THE COST OF CONSTRUCTION OF SAID PROJEC T. HOWEVER, AS POINTED OUT ABOVE, FOR THE PURPOSE OF GETTING HIMSELF SATISFIED ABOUT THE PURPORTED UNEXPLAINED EXPENDITURE UNDER S. 69C POWERS UNDER S . 142A COULD NOT BE INVOKED. ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 7 LEARNED COUNSEL FOR REVENUE SUBMITTED THAT SUCH A POWER COULD BE TRACED TO S. 69B OF THE ACT WHICH RELATES TO AMOUNT OF INVESTMENT ETC. NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNTS. HER SUBMISSION WAS THAT THE EXPENDITURE INCURRED SHOULD BE CONSIDERED AS COMING WITHIN THE EXPRESSION `INVESTM ENT. WE CANNOT AGREE WITH THIS SUBMISSION OF LEARNED CO UNSEL FOR REVENUE. IF INVESTMENTS COULD INCLUDE WITHIN ITS FOLD THE EX PENDITURE AS WELL WHICH IS INCURRED BY A BUSINESSMAN DURING THE COURSE OF HIS BUSINESS, THERE WAS NO NECESSITY OF HAVING A SEPARATE PROVISION UNDER S. 6 9C OF THE ACT WHICH DEALS WITH UNEXPLAINED `EXPENDITURE AND READS AS UNDER: 69C. WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF, AS THE CASE MAY BE, MA Y BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. THE SCOPE AND AMBIT OF SS. 69B AND 69C ARE ALTOGET HER DIFFERENT. THE CONNOTATION TO THE INVESTMENT APPEARING IN S. 69B H AS TO BE IN THE CONTEXT OF INVESTMENTS MADE IN SOME PROPERTY OR ANY OTHER TYPE OF INVESTMENT AND IT COULD NOT BE THE BUSINESS EXPENDITURE. THE WORD `I NVESTMENT CONTAINED IN S. 69B DEALS WITH INVESTMENT IN BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES, ETC. IF THE CONTENTION OF LEARNED COUNSEL FOR REVE NUE IS ACCEPTED AND THE EXPRESSION IS GIVEN WIDER MEANING AS SOUGHT TO BE M ADE OUT, THE PROVISIONS OF S. 69C SHALL BE RENDERED OTIOSE. THE LEARNED COUNSEL FOR REVENUE HOWEVER TOOK ANOTH ER PLEA TO BUTTRESS HER SUBMISSION. SHE SUBMITTED THAT HAVING REGARD TO THE CIRCUMSTANCES UNDER WHICH S. 142A WAS INSERTED BY T HE FINANCE ACT, 2004, IT BE DEEMED THAT THE INTENTION OF LEGISLATURE WAS TO INCLUDE EVEN THOSE UNEXPLAINED EXPENDITURE STIPULATED IN S. 69C. NO D OUBT THE NEED BEHIND INSERTING S. 142A WAS TO EMPOWER THE AO TO MAKE A R EFERENCE TO THE VALUATION OFFICER AS THERE WERE NO SUCH SPECIFIC PO WERS AND EXISTING PROVISION CONTAINED IN S. 131 WERE INADEQUATE. HOWEVER, EVEN THIS STATEMENT OF OBJECT AND REASON CLEARLY CONFINED AND LIMITED THE REFEREN CE TO HOLD A SCIENTIFIC, TECHNICAL AND EXPERT INVESTIGATION ETC. LEARNED CO UNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO CBDT CIRCULAR ISSUED BY IT E XPLAINING THE FINANCE BILL, 204 WHICH SPECIFICALLY OMITS THE WORD `EXPENDITURE AS WELL AS S. 69C. IT IS ON THIS BASIS THAT THE S. 142A WAS INSERTED IN THE FOR M AS IT APPEARS ON THE STATUTE BOOK NOW. IF THE INTENTION WAS TO INCLUDE UNEXPLAINED EXPENDITURE AS CONTEMPLATED IN S. 69C OF THE ACT AS WELL THIS PROV ISION SHOULD HAVE BEEN SPECIFICALLY MENTIONED IN S. 142A OF THE ACT. FROM THE READING OF SUB-S. (1) OF S. 142A, IT IS C LEAR THAT THE LEGISLATURE REFERRED TO THE PROVISIONS OF SS. 69, 69A AND 69B B UT SPECIFICALLY EXCLUDED 69C. THE PRINCIPLE OF CASUS OMISSUS BECOMES APPLIC ABLE IN A SITUATION LIKE THIS. WHAT IS NOT INCLUDED BY THE LEGISLATURE AND RATHER SPECIFICALLY EXCLUDED, ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 8 CANNOT BE INCORPORATED BY THE COURT THROUGH THE PRO CESS OF INTERPRETATION. THE ONLY REMEDY IS TO AMEND THE PROVISIONS. IT IS NOT THE FUNCTION OF THE COURT TO LEGISLATE OR TO PLUG THE LOOPHOLES IN THE LAW. IN THE PRESENT CASE EXCEPT THE REPORT OF DVO ON WH ICH THE AO RELIED UPON, THERE WAS NOTHING ON RECORD TO SUGGEST THAT T HERE WAS ANY OTHER EVIDENCE TO DISBELIEVE THE EXPENDITURE SHOWN BY THE ASSESEE. IN FACT DURING THE COURSE OF ARGUMENTS, LEARNED COUNSEL FOR THE AS SESSE PRODUCED THE ASSESSMENT ORDER WHICH CLEARLY DEMONSTRATES THAT TH E EXPENDITURE SHOWN BY THE ASSESSEE FROM THE TIME, WHEN IT WAS AN ONGOING PROJECT, WAS EXAMINED AND ACCEPTED BY, THE AO. IN THESE CIRCUMSTANCES WE ANSWER THE QUESTION FORM ULATED ABOVE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. AS A CONSEQUENCE, THIS APPEAL IS DISMISSED, BEING DEVOID OF ANY MERITS. 12. SINCE NO CONTRARY VIEW HAS BEEN EXPRESSED BY AN Y OF THE HIGH COURTS, WE ARE SUPPOSED TO FOLLOW THE VIEW TAKEN BY THE DEL HI HIGH COURT IN THE ABOVE SAID CASE. WE THEREFORE, FOLLOWING THE SAME, HOLD THAT NO REFERENCE U/S 142A CAN BE MADE TO DETERMINE THE COST OF CONST RUCTION OF THE PROJECT IN ORDER TO MAKE AN ADDITION U/S 69C OF THE ACT. THE REVENUE HAS WRONGLY MADE A REFERENCE OF PROVISIONS OF SECTION 69 FOR DE TERMINING THE COST OF INVESTMENT BY MAKING A REFERENCE U/S 142A OF THE AC T. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND HOLD THAT REFEREN CE TO DVO U/S 142A IS INVALID. THEREFORE, THE ADDITION MADE ON THE BASIS OF THE DVOS REPORT ARE NOT SUSTAINABLE UNDER THE EYES OF LAW. WE THEREFOR E, DELETE THE ADDITIONS MADE IN THIS REGARD BY THE A.O. 13. GROUND NOS.7 TO 9 RELATE TO THE ADDITIONS MADE ON ACCOUNT OF UNACCOUNTED RECEIPTS. FACTS BORNE OUT FROM THE REC ORD IN THIS REGARD ARE THAT DURING THE COURSE OF SURVEY OPERATION, THE ASSESSEE HAS MADE AN ADMISSION FOR THE RECEIPTS OF OWN MONEY ON DIFFERENT ASSESSME NT YEARS. RELYING UPON THE STATEMENT, THE ASSESSING OFFICER MADE AN ADDITI ON OF RS.37,04,082/-, RS.43 LAKHS, RS.70 LAKHS & RS.75 LAKHS FOR THE ASSE SSMENT YEARS 2004-05, 2006-07, 2007-08 & 2008-09 RESPECTIVELY. 14. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WITH THE SUBMISSION THAT DURING THE COURSE OF SURVEY OPERATI ON, ASSESSEE COULD NOT FURNISH THE CORRECT NATURE OF TRANSACTIONS RECORDED IN THE MEMORANDA OF ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 9 BOOKS OF ACCOUNTS OWING TO HIS ERRONEOUS PERCEPTION OF THE ISSUE AT THAT POINT OF TIME. AFTER REALIZING LATER THAT THE RECE IPTS RECORDED THEREIN ARE REGULAR PERIODIC PAYMENTS FROM THE VARIOUS PROSPECT IVE OWNERS OF FLAT TOWARDS CONSTRUCTION OF THEIR RESPECTIVE FLATS, THE ASSESSEE SOUGHT TO RETRACT THE STATEMENT TENDERED DURING THE COURSE OF SURVEY OPERATION TO THE EFFECT THAT THE ADDITIONAL RECEIPTS FROM VARIOUS CUSTOMERS AS RECORDED IN THE MEMORANDA OF BOOKS OVER AND ABOVE WHAT IS RECORDED IN HIS REGULAR BOOKS OF ACCOUNTS WERE ON MONEY RECEIPTS WHICH HE HAD EARLIE R SURRENDERED AS ADDITIONAL INCOME FOR THE ASSESSMENT YEAR UNDER CON SIDERATION. THE ASSESSING OFFICER WITHOUT DWELLING SUCH PLAUSIBLE E XPLANATION BY THE ASSESSEE REJECTED THE ASSESSEES CLAIM OF RETRACTION OF THE ADMISSION OF ADDITIONAL INCOME MADE EARLIER. 15. THE CIT(A) RE-EXAMINED THE CLAIM OF THE ASSESSE ES BUT WAS NOT CONVINCED WITH IT AND HE CONFIRMED THE ADDITIONS MA DE BY THE A.O. 16. AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSIONS THAT THE STATEMENT RECORDED DU RING THE COURSE OF SURVEY OPERATION CANNOT BE USED AS A SOLITARY EVIDENCE FOR MAKING AN ADDITION. IN SUPPORT OF THIS CONTENTIONS HE PLACED A RELIANCE UP ON THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. DHINGRA MET AL WORKS IN ITA NO.1111 OF 2010 IN WHICH THE HONBLE HIGH COURT HAS HELD TH AT THE WORD MAY USED IN SECTION 133A(3)(III) OF THE ACT CLARIFIES BEYOND DO UBT THAT MATERIAL COLLECTED AND STATEMENT RECORDED DURING THE SURVEY IS NOT A C ONCLUSIVE PIECE OF EVIDENCE BY ITSELF. WHILE HOLDING SO THEY HAVE ALS O RELIED UPON VARIOUS JUDGEMENTS OF DIFFERENT HIGH COURTS AND THE RELEVAN T PROVISIONS OF THE ACT RELATING TO SEARCH AND SEIZURE AND SURVEY OPERATION . THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION TO THE STATE MENTS RECORDED DURING THE COURSE OF SURVEY I.E. ON 4.3.2009 AND THE AFFIDAVIT FILED ON 6 TH DAY OF APRIL, 2009 RETRACTING FROM THE EARLIER STATEMENT. IN THI S AFFIDAVIT, THE ASSESSEE HAS CATEGORICALLY STATED THAT THE STATEMENT RECORDED U/ S 131 ON 5.3.2009 DURING THE COURSE OF SURVEY RELATING TO THE IMPUGNED ASSES SMENT YEARS ARE NOT CORRECT. IN THIS AFFIDAVIT HE HAS GIVEN THE DETAIL S OF PARTICULARS OF THE FLAT SOLD AND THE SALE CONSIDERATION THEREOF. THE LD. COUNSE L FOR THE ASSESSEE FURTHER ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 10 CONTENDED THAT ONCE THE STATEMENT MADE DURING THE C OURSE OF SURVEY OPERATION HAS BEEN RETRACTED THE SAME STATEMENT CAN NOT BE USED AS A CONCLUSIVE EVIDENCE FOR MAKING AN ADDITION. THE LD . COUNSEL FOR THE ASSESSEES HAS ALSO INVITED OUR ATTENTION TO THE DET AILS OF AMOUNT CREDITED IN THE REGULAR BOOKS OF ACCOUNTS AND THE MEMORANDA BOO KS AND WORKED OUT THE DIFFERENCE ALSO. HE HAS ALSO INVITED OUR ATTENTION TO THE AFFIDAVITS FILED BY THE FLAT OWNERS AND PHOTOCOPY OF THE MEMORANDA BOOKS IM POUNDED DURING THE COURSE OF SURVEY. IT WAS ALSO FURTHER CONTENDED TH AT THE IMPOUNDED BOOKS AND THE OTHER MATERIAL FOUND DURING THE COURSE OF S URVEY RELATE TO THE ASSESSMENT YEAR 2004-05 & 2008-09. NO MATERIAL WAS FOUND DURING THE COURSE OF SURVEY RELATING TO 2006-07, 2007-08. THE REFORE, NO ADDITION ON ACCOUNT OF RECEIPT OF ON MONEY OR UNEXPLAINED RECEI PT CAN BE MADE. 17. THROUGH WRITTEN SUBMISSIONS, THE CIT HAS PLACED THE RELIANCE UPON THE ORDER OF THE CIT(A). 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RE CORD. THE ADDITION WAS MADE ON THE BASIS OF THE STATEMENT MADE BY THE ASSE SSEE DURING THE COURSE OF SURVEY CONDUCTED ON 4.3.2009. WITHIN A PERIOD O F MONTH, THE ASSESSEE HAS FILED ITS AFFIDAVIT RETRACTING FROM HIS STATEME NT MADE DURING THE COURSE OF SURVEY. BUT THE ASSESSING OFFICER HAS MADE THE ADD ITION TREATING THE STATEMENT OF THE ASSESEE RECORDED DURING THE COURSE OF SURVEY AS CONCLUSIVE EVIDENCE WITHOUT REALIZING THE FACT THAT THE STATEM ENT RECORDED UNDER SURVEY PROCEEDINGS WERE RETRACTED BY THE ASSESSEE BY FILIN G AN AFFIDAVIT. THE SCOPE OF SURVEY PROCEEDINGS AND SEARCH U/S 132 ARE ENTIRE LY DIFFERENT. UNDER THE SURVEY PROCEEDINGS, THE REVENUE IS REQUIRED TO EXAM INE THE RECORDS OF THE ASSESSEES. HE IS ALSO EMPOWERED TO IMPOUND THE BOO KS OF ACCOUNTS. BUT UNDER SURVEY PROCEEDINGS, THE REVENUE OFFICERS ARE NOT CONFERRED WITH THE POWERS TO ADMINISTER OATH UPON THE ASSESSEES FOR RE CORDING A STATEMENT. THEREFORE, THE STATEMENT RECORDED DURING THE COURSE OF SURVEY DOES NOT CARRY THAT MUCH OF IMPORTANCE AS WAS THE STATEMENT RECORD ED DURING THE COURSE OF SEARCH BECAUSE U/S 132 OF THE ACT THE SEARCH PARTY ARE CONFERRED WITH THE POWERS TO ADMINISTER OATH UPON THE PARTIES BEFORE R ECORDING THE STATEMENT. ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 11 THIS ASPECT WAS EXAMINED BY DELHI HIGH COURT IN THE CASE OF CIT VS. M/S. DHINGRA METAL WORKS ITA 1111/2010 DATED 4.10.2010 I N WHICH THEY HAVE EXAMINED THE SCOPE OF PROVISIONS OF SECTION 133A AN D 132 OF THE I.T. ACT AND THEIR LORDSHIP HAVE HELD THAT SECTION 133A DOES NOT MANDATE THAT ANY STATEMENT RECORDED U/S 133A OF THE ACT WOULD HAVE E VIDENTIARY VALUE. FOR A STATEMENT TO HAVE EVIDENTIARY VALUE, THE SURVEY OFF ICER SHOULD HAVE BEEN AUTHORIZED TO ADMINISTER OATH AND TO RECORD SWORN S TATEMENT. BUT U/S 132(4), THESE POWERS ARE CONFERRED UPON THE SEARCH PARTY THEREFORE, THE STATEMENT RECORDED DURING THE COURSE OF SEARCH HAS AN EVIDENTIARY VALUE. THEIR LORDSHIP FURTHER HELD THAT THE WORD MAY USE D IN SECTION 133A(3)(III) OF THE ACT CLARIFIES BEYOND DOUBT THAT MATERIAL COLLEC TED AND STATEMENT RECORDED DURING THE SURVEY IS NOT A CONCLUSIVE PIECE OF EVID ENCE BY ITSELF. THEREFORE, THE STATEMENT RECORDED DURING THE COURSE OF SURVEY IN THE INSTANT CASE CANNOT BE USED AS A CONCLUSIVE EVIDENCE FOR MAKING THE IMP UGNED ADDITIONS. 19. WE HAVE ALSO CAREFULLY EXAMINED THE PHOTOCOPY O F MEMORANDA BOOKS IMPOUNDED DURING THE COURSE OF SURVEY PROCEEDINGS, AFFIDAVITS FILED BY THE BUYERS AND WE FIND THAT THROUGH THESE AFFIDAVITS, T HE BUYERS HAVE FURNISHED THE DETAILS OF PAYMENTS MADE TO THE ASSESSEES. WE HAVE ALSO CAREFULLY EXAMINED THE STATEMENT PREPARED BY THE ASSESSEES WI TH REGARD TO THE RECEIPTS SHOWN IN THE REGULAR BOOKS OF ACCOUNTS AND ALSO AS PER THE MEMORANDA OF BOOKS AND WE FIND THE DIFFERENCE IN RE CEIPT IN ASSESSMENT YEAR 2004-05 WAS ONLY RS.7,93,926/- AND IN THE ASSESSMEN T YEAR 2008-09, THE ASSESSEE HAS DECLARED MORE AMOUNT IN ITS REGULAR BO OKS OF ACCOUNTS THAN THE AMOUNTS DECLARED IN THE MEMORANDA BOOKS. THEREFORE IN A.Y. 2008-09, IT CANNOT BE HELD THAT ASSESSEE HAS RECEIVED THE ON MO NEY FROM THE BUYERS. THE STATEMENTS FOR A.Y. 2008-09 APPEARING AT PG.NOS .24, 25 OF THE COMPILATION OF THE ASSESSEES IN ITA NOS.80 OF 2011 AND THE STATEMENT FOR A.Y. 2004-05 IS AVAILABLE AT PG.NO.25 OF THE COMPIL ATION OF THE ASSESSEES FILED IN ITA NO.77 OF 2011. FOR THE OTHER ASSESSMENT YEA RS I.E. 2006-07 & 2007- 08 NO MEMORANDA BOOKS WERE FOUND DURING THE COURSE OF SURVEY PROCEEDINGS, THEREFORE, WITHOUT ANY CONCLUSIVE EVID ENCE NO ADDITION CAN BE MADE ON ACCOUNT OF ON MONEY. THE STATEMENTS FILED BY THE ASSESSEE FOR A.Y. 2004-05 AND 2008-09 WERE NOT FILED BEFORE THE LOWER AUTHORITIES, THEREFORE, IT ITA NOS77 TO 80 OF 11 CHINTA SAI BAPESWARA RAO, ANA KAPALLE. 12 REQUIRES A PROPER VERIFICATION BY THE A.O. IF THES E STATEMENTS FILED BY THE ASSESSEES ARE FOUND TO BE CORRECT, NO ADDITION CAN BE MADE IN THE ASSESSMENT YEAR 2008-09 BECAUSE THE AMOUNT RECORDED IN THE MEMORANDA OF BOOKS IS LESSER THAN THE AMOUNT RECORDED IN THE REG ULAR BOOKS OF ACCOUNTS. SO FAR AS THE ASSESSMENT YEAR 2004-05, THE ASSESSEE ITSELF HAS STATED IN HIS STATEMENT THAT AT THE MOST AMOUNT OF RS.7,93,926/- CAN ONLY BE CONSIDERED TO BE THE AMOUNT EXCESS RECEIVED THAN THE AMOUNT DE CLARED IN THE BOOKS OF ACCOUNTS. WE FIND FORCE IN THE CONTENTION OF THE A SSESSEES. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE A.O. T O EXAMINE THE ABOVE STATEMENT APPEARING AT PG.NO.25 IN THE COMPILATION OF THE ASSESSEE AND IF THIS STATEMENT IS FOUND TO BE CORRECT, THEN THE ADDITION CAN BE MADE ONLY WITH RESPECT TO ADDITIONAL RECEIPT SHOWN IN THE YEAR. WE FURTHER HOLD THAT IN A.Y. 2006-07 AND 2007-08 NO ADDITION CAN BE MADE ON ACCO UNT OF ON MONEY IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE. BUT FOR T HE ASSESSMENT YEARS 2004-05 & 2008-09, THE ISSUE REQUIRES RE-ADJUDICATI ON IN TERMS INDICATED ABOVE. 20. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. SINCE THE APPEALS OF THE AS SESSEE ARE DISPOSED OF, THE STAY APPLICATIONS FILED BY THE ASSESSEE BECOMES INF RUCTUOUS. HENCE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 11.5.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 11 TH MAY, 2011 COPY TO 1 SRI CHINTA SAI BAPESWARA RAO, PROP. HARSHA CONSTRUC TIONS 13 - 13 - 28A, CHINTAVARI STREET, ANAKAPALLE 2 ITO WARD - 1, ANAKAPALLE 3 THE CI T, VISAKHAPATNAM 4 THE CIT (A) , VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. BY ORDER 6 GUARD FILE. SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM