Mir Anwaruddin, Hyd, Hyderabad V. DCIT, Central Circle-2, Hyderabad

ITA 818/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1462 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 24-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Keywords: Unexplained cash credit; Unexplained investment; Search and seizure; Deemed to accrue or arise in india; Deemed dividend
• Section: 143(3); 153A; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NOS. 815 TO 821/HYD/2012 ASSESSMENT YEARS: 2002-03 TO 2008-09 MIR ANWARUDDIN, APPELLANT HYDERABAD (PAN ADYPM 1437 C) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDEN T CENTRAL CIRCLE 2, HYDERABAD ITA NOS. 849 & 850/HYD/2012 ASSESSMENT YEARS: 2007-08 & 2008-09 ASST. COMMISSIONER OF INCOME-TAX, APPE LLANT CENTRAL CIRCLE 2, HYDERABAD VS. MIR ANWARUDDIN, RESPONDENT HYDERABAD (PAN ADYPM 1437 C) ASSESSEE BY : SHRI MOHD. AFZAL REVENUE BY : SHRI AMISHA S. GUPT DATE OF HEARING : 13/12/2012 DATE OF PRONOUNCEMENT : 24/01/ 2013 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THESE APPEALS FILED BY THE ASSESSEE FOR THE ASSESS MENT YEARS 2002-03 TO 2008-09 AND THE REVENUE FOR THE AS SESSMENT YEARS 2007-08 AND 2008-09 ARE DIRECTED AGAINST A CO MMON ORDER 2 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN OF CIT(A)-I, HYDERABAD, DATED 29/03/2012. SINCE COM MON ISSUES ARE INVOLVED IN THESE APPEALS, THEY WERE CLUBBED AN D HEARD TOGETHER AND THEREFORE A CONSOLIDATED ORDER IS PASS ED FOR THE SAKE OF CONVENIENCE. ITA NOS. 815 TO 821/HYD/2012 APPEALS BY THE ASSES SEE 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS THE MANAGING DIRECTOR OF HYDERABAD HOUSE PVT. LTD. HE I S ALSO HAVING HIS OWN CATERING BUSINESS UNDER THE NAME AND STYLE OF MBA CATERING SERVICES. SEARCH AND SEIZURE OPERATIONS U/ S 132 OF THE ACT WERE CONDUCTED ON 12/12/2007 IN THE CASE OF HYD ERABAD HOUSE PVT. LTD. AND AT THE RESIDENTIAL PREMISES OF THE ASSESSEE. DURING THE COURSE OF SEARCH OPERATION, CERTAIN INCR IMINATING MATERIAL WERE FOUND AND SEIZED AND STATEMENTS WERE RECORDED FROM THE ASSESSEE AND HIS STAFF. SUBSEQUENTLY, NOT ICE U/S 153A WAS ISSUED AND THE ASSESSEE FILED RETURNS OF INCOME FOR THE ASSESSMENT YEARS 2002-03 TO 2008-09. BASED ON THE E VIDENCES FOUND, THE AO MADE SEVERAL ADDITIONS. THE DETAILS O F YEAR-WISE INCOME ADMITTED IN THE RETURNS AND THE TOTAL INCOME COMPUTED BY THE AO ARE AS FOLLOWS:- A.Y RETURNED INCOME ASSESSED INCOME 2002-03 1,64,535 7,61,660/- 2003-04 2,25,068 9,28,230/- 2004-05 2,31,736 8,60,150/- 2005-06 2,56,561 8,82,000/- 2006-07 2,31,472 8,69,780/- 2007-08 4,20,162 34,67,960/- 2008-09 4,97,104 1,01,91,528/- 3. THE FIRST GROUND REGARDING ESTIMATION OF TURNOVE R OF SALE OF LUKHMIES RAISED IN ALL THE APPEALS UNDER CONSIDERAT ION BY THE ASSESSEE IS NOT PRESSED AT THE TIME OF HEARING BEFO RE US. THEREFORE, THIS GROUND IS DISMISSED AS NOT PRESSED. 3 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN 4. THE NEXT EFFECTIVE GROUND RAISED BY THE ASSESSEE IN AYS. 2002-03 TO 2006-07 IS REGARDING DISALLOWANCE OF EXP ENSES CLAIMED IN THE REGULAR RETURN. 5. THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS C ALLED FOR THE DETAILS AND EVIDENCES IN SUPPORT OF THE VARIOUS EXPENSES CLAIMED BY THE ASSESSEE. SINCE THE ASSESSEE COULD N OT FILE COMPLETE DETAILS AND SINCE THE INFORMATION FILED IS NOT UP TO THE STANDARD, THE AO MADE ESTIMATED DISALLOWANCE OF THE EXPENDITURE CLAIMED IN THE REGULAR RETURN. THE DETAILS OF EXPEN SES DISALLOWED BY THE AO ARE AS UNDER:- AY TOTAL EXPENSES % DISALLOWANCE AMOUNT OF DISALLOWANCE 2002-03 1216344 12% 145960 2003-04 1348007 12% 161760 2004-05 1131770 15% 2005-06 1317230 (PROVISIONS) 15% 197584 250000 10% 25000 222584 2006-07 1430587 (PROVISIONS) 15% 214588 432059 (SALARIES) 10% 43206 257794 TOTAL 957862 6. ON APPEAL, BEFORE THE IT(A) THE ASSESSEE FILED A DDITIONAL GROUND THAT THE AO FAILED TO APPRECIATE THE ADDITIO NS/DISALLOWANCE IN ASSESSMENTS U/S 153A/153C CAN BE MADE ONLY IN RE SPECT OF MATERIAL FOUND DURING THE SEARCH AND REQUESTED FOR ADMISSION OF THE SAME. THE ASSESSEE FILED WRITTEN SUBMISSIONS R ELYING UPON CERTAIN DECISION IN SUPPORT OF HIS CONTENTION BEFOR E THE CIT(A). 7. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE ORIGINAL ASSESSMENTS OF THE ASSESSEE WERE NOT COMPLETED U/S 143(3) AND THE AO HAD NO OPP ORTUNITY TO 4 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN EXAMINE THE GENUINENESS OF THE EXPENDITURE CLAIMED AND DURING THE COURSE OF PRESENT ASSESSMENT PROCEEDINGS THE AO CALLED FOR THE DETAILS AND THE ASSESSEE APPARENTLY FAILED TO P RODUCE THE SAME, HENCE, SOME DISALLOWANCE IN THE EXPENSES CLAI MED IS DEFINITELY CALLED FOR AND THE ACTION OF THE AO TO T HAT EXTENT IS CORRECT. HOWEVER, THE CIT(A) WAS OF THE VIEW THAT T HE PERCENTAGE OF THE DISALLOWANCE MADE BY THE AO WAS OBVIOUSLY ON HIGH SIDE. FOLLOWING THE DECISION OF THE ITAT, HYDERABAD BENCH IN THE CASE OF HYDERABAD HOUSE PVT. LTD. IN ITA NOS. 727, 728 & 729/H/10, ON WHICH RELIANCE PLACED BY THE ASSESSEE, THE CIT(A ) HELD THAT IN THE ABSENCE OF COMPLETE DETAILS OF CASH EXPENDITURE AND THE EXPENDITURE PAID THROUGH BANKING CHANNEL, DIRECTED THE AO TO RESTRICT THE ESTIMATED DISALLOWANCE OF EXPENDITURE TO 8%. THE QUANTUM OF DISALLOWANCE AT 8% IN EACH ASSESSMENT YE AR IS AS UNDER: A.Y. TOTAL EXPENSES CLAIMED (RS.) DISALLOWANCE AT 8% (RS.) 2002-03 1216344 97307 2003-04 1348007 107840 2004-05 1131770 90541 2005-06 1567230 125378 2006-07 1862646 149011 8. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF T HE AUTHORITIES BELOW. WE FIND THAT SIMILAR ISSUE CAME UP FOR CONSI DERATION BEFORE THE JURISDICTIONAL BENCH OF ITAT, HYDERABAD IN THE CASE OF HYDERABAD HOUSE PVT. LTD. IN ITA NO. 727/HYD/2010 A ND OTHERS ORDER DATED 29/02/2012 WHEREIN VIDE PARAS 35 & 36, THE TRIBUNAL HELD AS UNDER:- 5 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN 35. WITH REGARD TO DISALLOWANCE OF EXPENDITURE DEBI TED TO PROFIT AND LOSS A/C THE AO HAS MADE THE DISALLOWANC E ON THE PREMISE THAT THERE IS A CHANCE OF INFLATION OF EXPE NDITURE UNDER THE HEAD PRODUCTION EXPENDITURE, EMPLOYEE BEN EFITS AND ADMINISTRATIVE EXPENDITURE. THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT MAJORITY OF THE EXPENDITURE WAS INCURRED THROUGH BANKING CHANNEL. THE ASSESSEE ALSO SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROC EEDING, THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE AO IN SUPPORT OF THE GENUINENESS OF THE EXPENDITURE CLAIM ED AND THE ASSESSEE HAD ALSO FILED A DATA FOR ONE ASST. YE AR 2007- 08 SEGREGATING THE PAYMENTS MADE THROUGH BANKING CHANNELS AND PAYMENTS MADE THROUGH CASH. DURING THE COURSE OF FIRST APPELLATE PROCEEDING, THE ASSESSEE HAVE FILED DETAILS SEGREGATING THE EXPENSES. AS PER THE SAID D ETAILS OF PRODUCTION EXPENSES, ONLY PARTIAL PAYMENT IS BY CAS H AND THE BALANCE IS BY CHEQUES. SIMILARLY, FOR THE EMPLO YEES BENEFITS LESS DIRECTOR'S REMUNERATION PARTIAL PAYME NTS WERE MADE BY CHEQUE TOWARDS PF AND ESI CONTRIBUTION AND BALANCE PAID BY WAY OF SALARIES COVERED BY PF AND E SI. AS REGARDS ADMINISTRATIVE EXPENSES LESS SALES TAX AMOU NTING TO A PORTION INCLUDES STATUTORY PAYMENTS LIKE ELECTRIC ITY CHARGES, PROPERTY TAX, FOOD LICENCE, LABOUR LICENCE , TRADE LICENCE ETC. THIS APART PAYMENT OF FRANCHISE COMMIS SION, SALES TAX APPEAL ETC. WERE STATED TO HAVE BEEN MADE BY CHEQUES. THE ASSESSEE ALSO SUBMITTED THAT ON PAYMEN T OF RENT, FRANCHISE COMMISSION AND SECURITY SERVICES, I N FACT TDS WAS ALSO DEDUCTED. 36. THE AO HIMSELF HAS OBSERVED IN THE ASSESSMENT O RDER THAT THE ASSESSEE HAD GIVEN A BREAK UP OF PRODUCTIO N EXPENDITURE DIVIDING INTO PURCHASE OF RAW MATERIALS AND PACKING MATERIAL. HE FURTHER OBSERVED THAT IT IS IM POSSIBLE TO VERIFY EACH AND EVERY BILL AND VOUCHER IN SUPPORT O F THE PRODUCTION EXPENDITURE. THEREAFTER, HE MADE A DISAL LOWANCE OF 15% OF THE PRODUCTION EXPENDITURE PRESUMING THAT THERE IS ALWAYS A CHANCE OF INFLATION OF EXPENDITURE UNDE R THIS HEAD. THE AO HAS NOT PINPOINTED ANY SPECIFIC ITEM W HERE THERE HAS BEEN INFLATION OF EXPENDITURE. NEITHER AN Y INCRIMINATING MATERIAL RELATING TO INFLATION OF EXP ENDITURE HAS BEEN FOUND AND DISCUSSED BY THE ASSESSING OFFIC ER. ACCORDINGLY, IN MY VIEW, A FLAT DISALLOWANCE OF 15% ON THE TOTAL EXPENDITURE IS UNWARRANTED. IN THIS LINE OF B USINESS, THE MAJORITY OF THE PRODUCTION EXPENDITURE RELATES TO PURCHASE OF PROVISION, FIRE, BREAD, VEGETABLE, MUTT ON, CHICKEN, FISH ETC WHICH ARE PROCURED FROM THE OPEN MARKET 6 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN FROM UNORGANIZED SECTOR. THERE IS ALL LIKELIHOOD OF PAYMENT OF CASH DUE TO INSISTENCE OF THE SELLER FOR SUCH PR OCUREMENT. AT THE SAME TIME, IT ALSO CANNOT BE RULED BE CERTAI N INFLATION OF EXPENDITURE ESPECIALLY WHERE THE PAYMENT IS CASH . CONSIDERING THE LINE OF BUSINESS, AND ALSO CONSIDER ING THE FACT THAT NO SPECIFIC INSTANCE OF INFLATION OF EXPE NDITURE HAS BEEN POINTED OUT BY THE ASSESSING OFFICER, DISALLOW ANCE OF 15% FLAT IS ON HIGHER SIDE AND EVEN SUSTAINED BY CIT(A) THE SAID DISALLOWANCE AT 7% ON THE CASH EXPENDITURE S IS ALSO HIGHER SIDE. 10. THE TRIBUNAL FINALLY CONCLUDED AS UNDER:- IN OUR OPINION, THE DISALLOWANCE AT 5% OF CASH EXPE NSES OTHER THAN STATUTORY PAYMENTS AND PAYMENTS TO GOVER NMENT AUTHORITIES AND THE AMOUNT SUBJECTED TO TDS IS SUFF ICIENT IN VIEW OF THE DISCREPANCIES NOTICED BY THE AUTHORITIE S. FOR THIS PURPOSE WE PLACE RELIANCE ON ORDER OF THE TRIBUNAL IN THE CASE OF M/S GSP INFRATECH DEVELOPMENT LTD., HYDERAB AD IN ITA NOS. 1396/HYD/2011 AND OTHERS VIDE ORDER DATED 27TH DECEMBER, 2011 WHEREIN WE HAVE CONFIRMED THE DISALLOWANCE AT 5% OF SUCH EXPENSES BY HOLDING AS F OLLOWS IN PARA-9 :- 'WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS A SUBCONTRACTOR. ASSESSE E IS ENGAGING LABOUR AT SITE AT FAR FLUNG PLACES. IN SUC H CIRCUMSTANCES, IT IS DIFFICULT TO HAVE DOCUMENTS FO R SUCH EXPENDITURE, TO THE SATISFACTION OF THE ASSESS ING OFFICER. IT IS ALSO DIFFICULT TO VERIFY THE IDENTIT Y OF THE LABOUR, AFTER LAPSE OF MANY YEARS. THE ACCOUNTS OF THE ASSESSEE HAVE BEEN AUDITED AND AUDITOR'S CERTIFICAT E UNDER SECTION 44AB HAS ALSO BEEN FURNISHED. THE ASSESSING OFFICER HAS NOT ANALYSED THE EXPENSES COMPARED TO THE TURNOVER FOR THE EARLIER YEARS. A SEARCH HAS BEEN MADE IN THE PREMISES OF THE ASSESSE E AND NO INCRIMINATING EVIDENCE IN THIS REGARD HAS BE EN FOUND. ONLY AN AD HOC DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSESSEE HAS BEEN MADE. HOWEVER, FROM THE OBSERVATIONS OF THE LOWER AUTHORITIES IT C AN BE INFERRED THAT FULL DETAILS OF EXPENDITURE HAVE NOT BEEN PROPERLY DOCUMENTED. HENCE, THE POSSIBILITY OF SOME INFLATION OF SUCH EXPENSES CANNOT BE RULED OUT. CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT DISALLOWANCE OF 5% OF LABOUR AND SITE EXPENSES ARE REASONABLE.' 7 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN 11. SINCE THE ISSUE UNDER CONSIDERATION IS IDENTICA L TO THAT OF M/S HYDERABAD HOUSE PVT. LTD. (SUPRA), RESPECTFULLY FOLLOWING THE SAME , WE RESTORE THE ISSUE TO THE FILE OF THE ASSE SSING OFFICER TO DECIDE THE SAME IN THE LIGHT OF THE DECISION IN THE CASE OF HYDERABAD HOUSE PVT. LTD. (SUPRA). THUS, THIS GROUN D OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 12. AS REGARDS THE GROUND NO. 3 RAISED IN AY 2008-0 9 REGARDING THE ADDITION U/S 69 OF THE ACT ON ACCOUNT OF UNEXPL AINED INVESTMENT IN JEWELLERY, THE LEARNED COUNSEL FOR TH E ASSESSEE AT THE TIME OF HEARING HAS NOT PRESSED THIS GROUND OF APPEAL, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 13. IN THE RESULT, APPEALS OF THE ASSESSEE FOR 2002 -03 TO 2007- 08 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FOR 2008-09 IS DISMISSED. ITA NO. 849 & 850/H/12 REVENUE APPEALS 14. GROUND NO. 2 RAISED IN BOTH THE APPEALS ARE COM MON, WHICH IS AS FOLLOWS:- THE CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITIO N MADE TOWARDS DEEMED DIVIDEND AS THE LOANS/ADVANCES BY TH E ASSESSEE WERE EVIDENCED BY THE SEIZED MATERIAL IN R ESPECT OF THE COMPANY. 15. THE AO NOTED THAT IN THE COURSE OF SEARCH PROCE EDINGS HARD BOUND DIARIES WRITTEN BY THE ACCOUNTANT OF HYDERAB AD HOUSE PVT. LTD. WERE SEIZED AND WERE NUMBERED AS A/HHPL 1&3. T HESE DIARIES CONTAINED CERTAIN ENTRIES WHICH SHOWED THAT PERIODICAL PAYMENTS WERE MADE TO THE ASSESSEE AND WHEN CONFRON TED WITH THESE MATERIAL, THE ASSESSEE ADMITTED THAT THE ENTR IES AND PAYMENTS WERE MADE BY THE COMPANY TO HIM TOWARDS SA LARY, OFFICE RELATED PETTY EXPENDITURE, AND SOME PERSONAL LIKE EMI PAID 8 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN TO CAR, FUEL FOR CAR ETC., AND CERTAIN AMOUNTS TAKE N BY HIM FROM HYDERABAD HOUSE PVT. LTD. AS LOANS FOR INVESTMENT I N BOWL-O- CHINA I.E. A RESTAURANT AT MASAB TANK AT HYDERABAD. THE DETAILS OF THE PAYMENTS FROM BOTH THE DIARIES WERE QUANTIFI ED BY THE AO AS UNDER:- AY 2007-08 RS. 15,73,418/- AY 2008-09 RS. 67,59,107/- THE AO OBSERVED THAT SINCE THE ASSESSEE IS HAVING 10% SHARE HOLDING IN HYDERABAD HOUSE PVT. LTD. AND SINC E THE HAS ENOUGH RESERVES AND SURPLUS, HE PROPOSED THE SAID A MOUNTS AS DEEMED INCOME IN THE HANDS OF THE ASSESSEE. THE ASS ESSEE OBJECTED TO THE SAME ON THE GROUND THAT THE AO IS T RYING TO LINK UP THE INVESTMENTS IN BOWL-O-CHINA TO THE AMOUNT ME NTIONED IN THE SEIZED DIARIES. THE ASSESSEE STATED THAT BOWL-O -CHINA WAS THE PROPRIETARY CONCERN OF HIS WIFE SMT. SAYEEDA SU LTANA, WHO IS ALLOTTED TRADE LICENCE AND SALES TAX REGISTRATION E VEN ON THE DATE OF SEARCH. THE ASSESSEE HAD ALSO CONTENDED THAT THE SO-CALLED SEIZED MATERIAL IS ONLY A DIARY OF THE ACCOUNTANT A ND NOT THE BOOK OF HYDERABAD HOUSE PVT. LTD. NOT SATISFIED WITH THE SUBMISSIONS MADE BY THE ASSESSEE, THE AO CONSIDERED THE SUM OF RS. 83,32,596/- AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE AND MADE THE ADDITION. 16. ON APPEAL, BEFORE THE CIT(A) THE ASSESSEE FILED WRITTEN SUBMISSIONS, WHICH WERE EXTRACTED BY THE CIT(A) IN HIS IMPUGNED ORDER AT PAGES 13 TO 15. HE FURTHER ARGUED THAT THE DIARIES CONTAINED SIMPLY THE NOTING BY THE ACCOUNTANT, AS T HE SAID DIARIES CONTAINED PERSONAL TRANSACTIONS OF MR. MAZAHARUDDIN RELATED TO AZHAM SCHOOL AND SOME OF THE ENTRIES WERE ONLY BUDG ETS, TARGETS AND ACTION PLANTS. HE ALSO URGED THAT SOME TIME THE MONEY TO BE DELIVERED AT A PARTICULAR BRANCH WAS SENT THROUGH T HE ASSESSEE 9 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN BEING ONE OF THE DIRECTORS, TRANSACTIONS OF WHICH W ERE NOTED BY THE ACCOUNTANT IN HIS DIARY I.E. THE SEIZED MATERIA L. HE, THEREFORE, ARGUED THAT THE ENTRIES IN THE SEIZED DOCUMENT WERE MORE OR LESS IN THE FORM OF A CURRENT RUNNING ACCOUNT CONTAINING VARIOUS TRANSACTIONS INCLUDING THE EXPENDITURE INCURRED, ET C. HE POINTED OUT THAT THE AO HIMSELF NOTED IN THE ASSESSMENT ORD ER THAT THE PAYMENTS RECORDED IN THE SEIZED PAPERS ARE PAYMENT S MADE IN THE FORM OF CASH FOR VARIOUS PURPOSES. 17. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) DIRECTED THE AO TO DELETE THE ADDITIONS MADE UNDER THIS HEAD FOR BOTH THE ASSESSMENT YEARS 2007-08 AND 2008 -09 BY OBSERVING AS UNDER:- 6.5THE ENTRIES IN THE LOOSE SHEETS SUGGESTED THAT THEY ARE PART OF REGULAR TRADE TRANS ACTIONS BETWEEN THE COMPANY AND THE APPELLANT SINCE SEVERAL ITEMS OF EXPENSES RELATING TO TRADING ACTIVITY ARE NOTED THEREIN. THUS THE ENTRIES IN THE SAID LOOSE SHEETS APPEAR LI KE RUNNING ACCOUNT. IT IS A FACT THAT THE ASSESSEE IS RECEIVIN G MONIES FROM HYDERABAD HOUSE PVT. LTD FOR SUPPLY OF LUKHMIE S REGULARLY. THIS ISSUE HAS BEEN DISCUSSED AT LENGTH AND HELD THAT THE ASSESSEE RECEIVED SUBSTANTIAL AMOUNTS RANG ING FROM RS. 3 LAKHS IN AY 2002-03 TO RS. 85,00,000/- IN AY 2008-09 AND THE SAME WERE CONSIDERED AS RECEIPTS TOWARDS SU PPLY OF LUKHMIES, IN THE HANDS OF THE APPELLANT. ALL THESE AMOUNTS WERE PAID TO THE ASSESSEE BY HYDERABAD HOUSE PVT. L TD AND THESE ARE DULY REFLECTED IN THE DIARIES WHICH WERE SEIZED BY THE DEPARTMENT. THUS, ONCE THE SAID RECEIPTS ARE CO NSIDERED AS PAYMENTS MADE BY HYDERABAD HOUSE PVT. LTD. FOR S UPPLY OF LUKHMIES THEN THE AOS STAND THAT THE AMOUNTS NO TED IN THE DIARIES ARE LOANS LENT TO THE ASSESSEE BY HYDER ABAD HOUSE PVT. LTD. DOES NOT STAND TO REASON. FURTHER, IT HAS BEEN ARGUED THAT INVESTMENTS IN BOWL-O-CHINA ARE MA DE BY SMT. SAYEEDA SULTANA, W/O THE APPELLANT OUT OF HER OWN SOURCES TO EXPLAIN THE INVESTMENT IN BOWL-O-CHINA. AO MAY EXAMINE THE INVESTMENTS MADE BY HER IN ABOVE CONCER N AND IF HE FINDS THAT ANY DISCREPANCY SUITABLE PROCEEDIN GS MAY BE INITIATED AGAINST HER. EXAMINATION OF BALANCE SHEET OF HYDERABAD HOUSE PVT. LTD. ALSO DOES NOT REVEAL ANY LOAN IN THE NAME OF THE APPELLANT. IN THE ABSENCE OF ANY EV IDENCES 10 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN IN THIS REGARD, IT CANNOT BE HELD THAT THE ASSESSEE HAS TAKEN ANY LOAN FROM THE COMPANY. NEVERTHELESS, THE ENTRIE S IN A DIARY NEED TO BE ESTABLISHED WITH INDEPENDENT CONTEMPORANEOUS RECORD. THERE IS NO SUCH EVIDENCE B ROUGHT ON RECORD TO VIEW THE ENTRIES IN THE DIARY ARE LOAN S GIVEN TO THE APPELLANT BY THE COMPANY. VIEWING FROM ANY ANGL E, THERE IS NO CONCRETE EVIDENCE THAT THE APPELLANT HA S TAKEN ANY LOAN FROM THE COMPANY I.E. HYDERABAD HOUSE PVT. LTD. ESPECIALLY WHEN THE CORRESPONDING ENTRIES IN THE BO OKS OF ACCOUNT OF THE HYDERABAD HOUSE PVT. LTD. ARE MISSIN G. EVEN ASSUMING THAT THESE ENTRIES ARE REAL THE APPELLANT GETS THE BENEFIT OF SET OFF FROM THE TURNOVER OF THE LUKHMIE S SUPPLIED TO HYDERABAD HOUSE PVT. LTD. 18. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US F OR AYS 2007- 08 AND 2008-09. 19. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD. THE CIT(A) GAVE A CATEGORICAL F INDING THAT THERE IS NO CONCRETE EVIDENCE THAT THE ASSESSEE HAS TAKEN ANY LOAN FROM THE COMPANY I.E. HYDERABAD HOUSE PVT. LTD . ESPECIALLY WHEN THE CORRESPONDING ENTRIES IN THE BOOKS OF ACCO UNT OF THE HYDERABAD HOUSE PVT. LTD. ARE MISSING AND EVEN ASSU MING THAT THESE ENTRIES ARE REAL THE ASSESSEE GETS THE BENEFI T OF SET OFF FROM THE TURNOVER OF THE LUKHMIES SUPPLIED HYDERABA D HOUSE PVT. LTD. THEREFORE, WE FIND THAT THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A) IN DIRECTING THE AO TO DELETE THE ADDITI ON MADE ON THIS COUNT FOR ASSESSMENT YEARS 2007-08 AND 2008-09. ACC ORDINGLY, THE GROUND RAISED BY THE REVENUE IN BOTH THE SAID A SSESSMENT YEARS ARE DISMISSED. 20. GROUND NO. 3 RAISED BY THE REVENUE IN AY 2008-0 9 IS AS FOLLOWS:- THE CIT(A) IS NOT JUSTIFIED IN RESTRICTING THE ADDI TION MADE TOWARDS UNEXPLAINED INVESTMENT ON ACCOUNT OF JEWELL ERY FOUND AND SEIZED FROM RS. 24,84,153/- TO RS. 4,46,6 52/- BY TELESCOPING THE INCOME EARNED FROM LUKHMIES EVEN TH OUGH 11 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN NO NEXUS HAS BEEN PROVED BY THE ASSESSEE BETWEEN TH E UNACCOUNTED SALE OF LUKHMIES AND UNACCOUNTED INVEST MENT IN JEWELLERY. 21. THE FACTS RELATING TO THIS GROUND WERE STATED A T PAGE 7 OF THE ASSESSMENT ORDER FOR AY 2008-09 WHEREIN THE AO HAD OBSERVED THAT (A) DURING THE SEARCH OPERATIONS 4084 .850 GRAMS OF JEWELLERY FOUND VALUED AT RS. 50,16,222/- WAS FO UND; B) OUT OF THE SAME JEWELLERY TO THE EXTENT OF 1550 GRAMS WAS TREATED AS EXPLAINED; AND C) THE BALANCE WEIGHING 2534.85 GRAM S VALUED AT RS. 24,84,152/- WAS TREATED AS UNEXPLAINED. THUS, T HE AMOUNT OF RS. 24,84,152/- WAS ACCORDINGLY BROUGHT TO TAX U/S 69. FOR THIS PURPOSE, THE AO HEAVILY RELIED ON THE CONTENTS OF T HE AFFIDAVIT EXECUTED BY THE ASSESSEE ON 02/01/2008 ADMITTING TH E JEWELLERY TO THE EXTENT OF 2534 GRAMS AS UNEXPLAINED. THE AO, THUS, BROUGHT TO TAX THE AMOUNT OF RS. 24,84,152/- REJECT ING THE ASSESSEES CLAIM THAT THE SAID AFFIDAVIT WAS FURNIS HED BY THE ASSESSEE IN A CONFUSED STATE OF MIND; AND THAT THE ACQUISITION OF JEWELLERY WAS PROPERLY EXPLAINED IN THE CASH FLOW STATEMENTS/BALANCE SHEETS FILED BY THE ASSESSEE. 22. ON APPEAL, BEFORE THE CIT(A) THE ASSESSEE FILED WRITTEN SUBMISSIONS WHEREIN HE EXPLAINED THAT THE SAID VALU E OF RS. 24,84,152/- BY WAY OF SOURCES EXPLAINED IN THE CASH FLOW STATEMENTS/BALANCE SHEETS. THE ASSESSEE ARGUED THAT HE HAD ADEQUATE RESOURCES FOR ACQUISITION OF THE JEWELLERY , ONE OF WHICH IS THE TAX PAID DIVIDEND OF RS. 13,01,287/- AVAILAB LE FOR INVESTMENT IN JEWELLERY. THE ASSESSEE FURTHER ARGUE D THAT WHILE THE AO HAD TAKEN THE CASH FLOW STATEMENTS, BALANCE SHEETS INTO CONSIDERATION FOR PURPOSES OF MAKING ADDITION OF RS . 10 LAKHS AS UNEXPLAINED CASH CREDIT U/S 68, HE CONVENIENTLY IGN ORED THE SOURCES AVAILABLE THEREIN FOR INVESTMENT IN JEWELLE RY. THE 12 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN ASSESSEE ARGUED THAT THE AO CANNOT ACCEPT ONE PART OF THE DOCUMENT AS CORRECT AND IGNORE THE OTHER SIDE AS NO T ACCEPTABLE. THE ASSESSEE HAD ALSO RAISED A PLEA THAT IN CASE A PART OF THE VALUE OF JEWELLERY IS TREATED AS UNEXPLAINED, TELES COPING OF THE SAME WITH THE ADDITIONS SUSTAINED ON ACCOUNT OF EST IMATION OF PROFITS HAS TO BE GIVEN IN THE INTEREST OF EQUITY A ND FAIR PLAY. 23. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) OBSERVED THAT THE ASSESSEE HAD ADMITTED AND FILED AN AFFIDAVIT ON 02/01/2008 ADMITTING JEWELLERY TO THE EXTENT OF 2534 GRAMS VALUED AT RS. 24,84,152/- AS UNEXPLAINABLE AN D THE ASSESSEE CLAIMED THAT THE SAME IS EXPLAINABLE WITH REFERENCE TO THE BALANCE SHEET AND SOURCES MENTIONED THEREIN CAN NOT BE ACCEPTED. FURTHER, HE OBSERVED THAT THE BALANCE SHE ET IS FILED AFTER THE SEARCH AND THE ENTRIES THEREIN CANNOT BE ACCEPTED AS EXPLAINING THE ACQUISITION OF UNACCOUNTED JEWELLERY AND THE ASSESSEE DURING THE COURSE OF HEARING HAD ALSO AGRE ED AND ALSO ADMITTED THAT NO WEALTH TAX RETURNS WERE FILED ADM ITTING THE VALUE OF THE SAID JEWELLERY. IN VIEW OF THE ABOVE O BSERVATIONS, THE CIT(A) HELD AS UNDER:- 7.3 THE ASSESSEES PLEA THAT THE INCOME EARNED FROM LUKHMIES WHICH WAS BROUGHT TO TAX NOW AMOUNTING TO RS. 30,37,500/- IS TO BE TELESCOPED. CONSIDERING THIS A RGUMENT AND ALSO KEEPING IN VIEW THE ADDITION SUSTAINED BY ME UNDER THE HEADS LUKHMIES, I FEEL IT WOULD BE REASONABLE T O ALLOW RELIEF. OUT OF THE ADDITION SUSTAINED BY ME OF RS. 30,37,500/- TOWARDS INCOME EARNED FROM SALE OF LUKH MIES, AN AMOUNT OF RS. 10,00,000/- TOWARDS DRAWINGS NEEDS TO BE CONSIDERED TOWARDS PERSONAL EXPENSES OVER THE YEARS . THUS THE BALANCE OF RS. 20,37,500/- (30,37,500 10,00,0 00) BEING ADDITIONAL INCOME BROUGHT TO TAX AS INCOME EA RNED FROM LUKHMIES, IS TO BE CONSIDERED FOR TELESCOPING. IF THIS AMOUNT IS TELESCOPED, THERE WILL BE ADDITION OF RS. 4,46,653/- (2484152 2037500) TO BE MADE ON ACCOUN T OF UNEXPLAINED JEWELLERY. IN VIEW OF THIS, THE ADDITIO N MADE OF 13 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN RS. 24,84,153/- MADE BY THE AO IS DIRECTED TO BE SUBSTITUTED WITH RS. 4,46,652/- FOR THE AY 2008-09. 24. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 25. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT IN THE ASSESSMENT ORDER THE ASSESSING OFF ICER HAD OBSERVED THAT A) DURING THE SEARCH OPERATIONS 4084. 850 GRAMS OF JEWELLERY FOUND VALUED AT RS. 50,16,222/-; B) OUT O F THE SAME JEWELLERY TO THE EXTENT OF 1550 GRAMS WAS TREATED A S EXPLAINED; AND CIT (A)) THE BALANCE WEIGHING 2534.85 GRAMS VAL UED AT RS. 24,84,152/- WAS TREATED AS UNEXPLAINED. THUS THE AM OUNT OF RS. 24,84,152/- WAS ACCORDINGLY BROUGHT TO TAX U/S 69. FOR THIS PURPOSE, THE ASSESSING OFFICER HEAVILY RELIED ON TH E CONTENTS OF THE AFFIDAVIT EXECUTED BY THE ASSESSEE ON 02/01/200 8 ADMITTING THE JEWELLERY TO THE EXTENT OF 2534 GRAMS AS UNEXPL AINED. THE ASSESSING OFFICER THUS BROUGHT TO TAX THE AMOUNT OF RS. 24,84,152/- REJECTING THE ASSESSEES CLAIM THAT THE SAID AFFIDAVIT WAS FURNISHED BY THE ASSESSEE IN A CONFUSED STATE O F MIND; AND THAT THE ACQUISITION OF JEWELLERY WAS PROPERLY EXPL AINED IN THE CASH FLOW STATEMENTS/BALANCE SHEETS FILED BY THE AS SESSEE. 26. IT IS OBSERVED THAT THE ASSESSEE HAS NOT FURNIS HED EVIDENCE REGARDING SOURCES FOR INVESTMENT IN THESE IMPUGNED ASSETS. FURTHER, ADDITION MADE ON ACCOUNT OF THE DISCREPANC Y IN THE INVESTMENT IN JEWELLERY HAS BEEN REDUCED OR DELETED IN ABOVE PARAS. THEREFORE, IN THE ABSENCE OF EVIDENCE OF SOU RCE OF ACQUISITION OF ASSETS, WE SET ASIDE THE ORDER OF TH E CIT(A) IN RESTRICTING THE ADDITION TO RS. 4,46,652/- AS AGAIN ST THE ADDITION OF RS. 24,84,153/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED INVESTMENT IN JEWELLY FOR AY 2008-09 AN D CONFIRM THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. A CCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 14 ITA NOS. 815 TO 821/H/12 & 849 & 850/H/12 SHRI MIR ANWARUDDIN 26. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AY 2007-08 IS DISMISSED AND THE APPEAL FOR AY 2008-09 IS PARTLY ALLOWED. 27. TO SUM, UP, APPEALS OF THE ASSESSEE FOR 2002-03 TO 2007-08 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FOR 2008-09 IS DISMISSED AND THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2007-08 IS DISMISSED AND THE APPEAL FOR AY 2008-09 IS PARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON 24 TH JANUARY, 2013. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 24 TH JANUARY, 2013. KV COPY TO:- 1) SHRI MIR ANWARUDDIN, C/O CH. PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO1, ASHOKNAGAR, HYDERABAD 500 020. 2) DCIT, CENTRAL CIRCLE 2, HYDERABAD. 3) THE CIT(A)-I, HYDERABAD 4) THE CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.