Sri K.Sai Ramakrishnam Raju, Visakhapatnam V. THE Dy.CIT, CIRCLE - 3(1), Visakhapatnam

ITA 88/VIZ/2013

• Counselvise Citation: 8825314 RSA 2013
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 18-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBRAMANYAM
• Section: 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BEFORE S/SHRI B. RAMAKOTAIAH (AM) & SAKTIJIT DEY (JM) I.T.A. NO.88/VIZ/2013 ASSESSMENT YEAR : 2008 - 09 K SAI RAMAKRISHNAM RAJU, C/O. C.SUBVRAHAMNAYAM , CA, 102, LAKSHMI APTS, FACROR LAYOUR, WALTAIR UPLANDS, VISAKHAPATNAM VS. DY. CIT, CIRCLE 3(1), VISAKHAPATNAM PAN/GIR NO. : AIGPK 9960 K ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SUBRAMANYAM RESPONDENT BY : SHRI MANOJ KUMAR DATE OF HEARING : 0 4/12/2013 DATE OF PRONOUNCEMENT : 11 /12/2013 O R D E R PER SAKTIJIT DEY, JM THE ASSESEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2008 - 09 AGAINST ORDER DATED 31.1.2013 OF LD CIT(A) VISAKHAPATNAM. 2. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO ADDITION OF AN AMOUNT OF RS.64 LAKHS MADE BY THE ASSESSING OFFICER AND SUSTAINED BY LD CIT(A)., 3. BRIEFLY STATED THE RELEVANT FACTS ARE THAT THE ASSESSEE, AN INDIVIDUAL, IS ENGAGED IN CIVIL CONSTRUCTION AS WELL AS CONSTRUCTION O F FLATS. THERE WAS A SURVEY IN THE CASE OF 2 THE ASSESSEE UNDER SECTION 133A OF THE ACT ON 4.3.2008. DURING THE COURSE OF SURVEY, CERTAIN DISCREPANCIES WERE NOTICED WITH REGARD TO SALE OF FLATS AND A STATEMENT ON OATH WAS RECORDED FROM THE ASSESSEE ON THE BASIS OF THE ALLEGED DISCREPANCIES FOUND ON THE DATE OF SURVEY . SUBSEQUENTLY, ON 6.3.2008, DURING THE RECORDING OF STATEMENT ON OATH, THE ASSESSEE OFFERED AN ADDITIONAL INCOME OF RS.64 LAKHS IN ADDITION TO REGULAR INCOME DERIVED BY HIM FROM BUSINESS F OR THE IMPUGNED ASSESSMENT YEAR TO COVER UP THE DEFICIENCIES STATED TO HAVE BEEN NOTICED DURING THE COURSE OF SURVEY. SUBS EQUENTLY, ASSESSEE ON 30.9.2008 FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.14,04,551/ - . SINCE ASSESSEE WAS SUBJECTED TO SURVEY ACTION, HIS RETURN OF INCOME WAS PICKED UP FOR SCRUTINY ASSESSMENT BY THE ASSESSING OFFICER. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER, WHILE EXAMINING THE ASSESSEES RETURN OF INCOME NOTICED THAT ASSESSEE HAD ADMITTED AN INC OME OF RS.15,11,000/ - AND AFTER SETTING OFF THE LOSS FROM HOUSE PROPERTY, ASSESSEE ULTIMATELY DECLARED INCOME OF RS.13,04,550/ - . HOWEVER, IN TERMS OF THE STATEMENT RECORDED IN THE COURSE OF SURVEY ON 4.3.2008 AND SUBSEQUENT TO IT ON 6.3.2008, ASSESSEE DID NOT DECLARE THE ADDITIONAL INCOME OF RS.64 LAKHS TO TAX. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN NON - DECLARATION OF SUCH INCOME IN THE RETURN OF INCOME, ASSESSEE IN ITS REPLY DATED 9.11.201 0 EXPLAINED THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SURVEY. DURING THE RECORDING OF STATEMENT, IN RESPONSE TO SOME QUESTION S PUT BY THE I.T. STAFF, ASSESSEE HAD OFFERED AN INCOME OF RS.64 LAKHS IN HIS HANDS UNDER PRESSURE WITHOUT KNOWING THE ACTUAL FINANCIAL ASPECTS VIS - - VIS BUSINESS ACTIVITIES. IT WAS SUBMITTED THAT APART FROM THE ADMISSION MADE IN THE STATEMENT UNDER PECULIAR CIRCUMSTANCES, THERE WAS NO INCRIMINATING MATERIAL FOUND BY THE SURVEY TEAM. IT WAS FURTHER SUBMITTED THAT DURING THE ASSESSMENT YEAR 2006 - 07, ASSES SEE HAD TAKEN UP SUB - CONTRACT WORK FOR CONSTRUCTION OF HOSPITAL FOR TOTAL VALUE OF RS.35 LAKHS. FOR THE ASSESSMENT YEAR 2007 - 08, ASSESSEE ALSO HAD TAKEN UP MISC. CIVIL CONTRACT WORKS WHERE THE GROSS CONTRACT RECEIPTS WERE OF RS.14.28 LAKHS. FOR THE IMPUG NED ASSESSMENT YEAR ALSO, ASSESSEE EXECUTED CIVIL CONSTRUCTION WORK AND GROSS CONTRACT RECEIPTS AS PER THE RETURN OF INCOME FILED ARE OF RS.10.07 LAKHS. BESIDES ABOVE, ASSESSEE HAD ENTERED INTO THE PROJECT WHICH WAS UNDER EXECUTION DURING THE RELEVANT ASS ESSMENT YEAR, WHEREIN, ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH THE LAND OWNER UNDER WHICH 50% OUT OF 3 THE TOTAL DEVELOPED AREA OF 28,075 SQ.FT BELONGS TO LAND OWNER AND REMAINING 50% BELONGS TO THE ASSESSEE. THE AVERAGE SELLING PRICE PER SQ. FT IS RS. 1300/ - . IT WAS THEREFORE, SUBMITTED THAT KEEPING THE FACTS AND FIGURES IN MIND, IT IS QUITE EVIDENT AND OBVIOUS THAT THE ADDITIONAL INCOME OFFERED OF RS.64 LAKHS WAS TOTALLY WITHOUT ANY BASIS AND HAS NO RELEVANCE TO THE ACTUAL RECEIPT OF THE ASSESSEE. IT WAS SUBMIT TED THAT THERE WAS NO SCOPE FOR THE ASSESSEE TO EARN INCOME TO THE EXTENT OF RS.64 LAKHS WHEN THE ASSESSEE HAS COMMENCED CONSTRUCTION ACTIVITIES OF NEW PROJECT SAI SRINIVASA NILAYAM IN THE ASSESSMENT YEAR 2008 - 09 ITSELF. ASSESSEE GIVING DETAI LS OF THE CONSTRUCTION MADE BY HIM SUBMITTED THAT INCOME OFFERED OF RS.36 LAKHS IS KEEPING IN VIEW ALL THESE FACTORS AND TO ADD FURTHER AMOUNT OF RS.64 LAKHS IS IRRATIONAL, HENCE, CANNOT BE ADDED. THE AO HOWEVER WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. AO OBSERVED THAT THE ADMISSION OF THE ASSESSEE DURING THE COURSE OF SURVEY WAS ON ACCOUNT OF DISCREPANCIES NOTICED BY THE DEPARTMENT AND AGREED BY THE ASSESSEE IN SOUND STATE OF MIND. HE FURTHER WAS OF THE VIEW THAT THE QUANTUM OF ADDITIONA L INCOME WAS DETERMINED ON THE BASIS OF DISCREPANCIES NOTICED UPTO THE DATE OF SURVEY AND NOT IN RESPECT OF INCOME THAT IS GOING TO BE ACCRUED BY HIM FOR FUTURE PERIOD. THE AO FURTHER HELD THAT ASSESSEE CANNOT RETRACT FROM THE ADMISSION MADE BY HIM BY TAK ING A PLEA THAT THE SAME WAS GIVEN UNDER PRESSURE AND WITHOUT KNOWING THE ACTUAL FINANCIAL ASPECTS. ON THE AFORESAID OBSERVATIONS, AO ADDED AN AMOUNT OF RS.64 LAKHS WHICH WAS DECLARED BY THE ASSESSEE AT THE TIME OF SURVEY. BEING AGGRIEVED OF SUCH ADDITION MADE BY THE AO, ASSESSEE PREFERRED APPEAL BEFORE LD CIT(A). 4. IN THE COURSE OF HEARING OF THE APPEAL, ASSESSEE CONTENDED BEFORE THE CIT(A) THAT THE ADDITION MADE BY THE AO IS NOT VALID BROADLY DUE TO THE REASONS THAT THE STATEMENT RECORDED DURI NG THE CO URSE HAS NO EVIDENTIARY VALUE , HENCE ASSESSMENT ONLY PASSED ON THE BASIS OF SUCH STATEMENT IS BAD IN LAW. THE ADDITION IS NOT SUPPORTED BY ANY INCRIMINATING MATERIAL, HENCE CANNOT BE SUSTAINED. IT WAS CONTENDED BY THE ASSESSEE THAT AS NO OATH WAS ADMIN ISTERED AND THE STATEMENT WAS RECORDED BY THE INSPECTOR , IT CANNOT HAVE ANY EVIDENTIARY VALUE. HE FURTHER SUBMITTED THAT STATEMENT WAS NOT SIGNED BY ANY AUTHORITY, AND AS SUCH IT IS A DUMB DOCUMENT AND NO RELIANCE 4 CAN BE PLACED ON IT IN A QUASI - JUDICIAL PROCEEDINGS. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT SECTION 133A DOES NOT EMPOWER THE INCOME TAX AUTHORITIES TO RECORD ANY STATEMENT ON OATH, AND, THEREFORE, STATEMENT LACKS EVIDENTIARY VALUE . ASSESSEE RELYING UPON CBDT CIRCULAR DAT ED 10.3.2003 C ONTENDED THAT ADDITION CANNOT BE BASED ON CONFESSIONAL STATEMENT AND THAT CREDIBLE EVIDENCE IS REQUIRED TO SUSTAIN THE ADDITION. IN SUPPORT OF SUCH CONTENTION, ASSESSEE ALSO RELIED UPON VARIOUS DECISIONS OF HONBLE HIGH COURTS AND TRIBUNAL. LD CIT(A) A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND MATERIAL ON RECORD NOTED THAT THE STATEMENT RECORDED ON THE DATE OF SURVEY AND NOT ON OATH. HOWEVER, HE DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT STATEMENT WAS RECORDED BY THE INSPECTOR. LD CIT(A) SPECIFICALLY REFERRING TO QUESTION NO.6 OF THE STATEMENT NOTED THAT THE SAID QUESTION INDICATE THAT THE STATEMENT WAS NOT RECORDED BY THE INSPECTOR. LD CIT(A) FURTHER HELD THAT SINCE SECTION 133A (3)(III) OF THE ACT EMPOWERS AN ASSESSING OFFICER T O RECORD STATEMENT ON ANY PERSON, WHICH MAY BE USEFUL OR RELEVANT BUT IN PROCEEDINGS UNDER THIS ACT, THE STATEMENT RECORDED CANNOT BE BRUSHED ASIDE AS IT CONSTITUTE A RELEVANT PIECE OF EVIDENCE. LD CIT(A) FURTHER NOTED THAT ANOTHER STATEMENT WAS RECORDED SUBSEQUENT TO THE DATE OF SURVEY ON OATH FROM THE ASSESSEE ON 6.3.2008. ON EXAMINING BOTH THE STATEMENTS, LD CIT(A) NOTED THAT ASSESSEE IN THE SAID STATEMENT HAS CLEARLY MADE ADMISSION ON THE BASIS OF DISCREPANCIES NOTICED AND OFFERED THE ADDITIONAL INCOM E OF RS.1 CRORE IN HANDS OF HIMSELF, HIS WIFE AND PARTNERSHIP FIRM FOR TWO ASSESSMENT YEARS, WHICH ARE AS UNDER: ADDITIONAL INCOME IN THE HANDS OF THE FIRM M/S. SAI SREE CONSTRUCTION: A.Y. 2006 - 07 : RS.8,00,000/ - A.Y. 2007 - 08 : RS.8,00,000/ - ADDITIONAL INCOME IN TH E HANDS OF SHRI R.R.K. RAJU A.Y. 2006 - 07 : RS.10,00,000/ - A.Y. 2007 - 08 : RS.64,00,000/ - ADDITIONAL INCOME IN TH E HANDS OF SMT. K SARITHA : A.Y. 2006 - 07 : RS.5,00,000/ - A.Y. 2007 - 08 : RS.5,00,000/ - 5 LD CIT(A) FURTHER N OTED I N RESPONSE TO Q. NO.7, THE ASSESSEE ALSO STATED THE MODE OF INVESTMENT OF ADDITIONAL INCOME DECLARED BY HIM LD CIT(A) FURTHER NOTED THAT ASSESSEE HAD NO T ALLEGED EXERCISE OF ANY DURESS OR COERCION WHILE GIVING THE STATEMENT ON OATH. THE CIT(A) ALSO NOTED THE FA C T THAT IN TERMS OF ADMISSION MADE IN THE STATEMENT, ASSESSEE HAS ALSO ACTED IN OFFERING ADDITIONAL INCOME OF RS.36 LAKHS OUT OF RS.1 CRORE AGREED BY HIM. HENCE, ASSESSEES CONTENTION THAT STATEMENT IS HAVING NO EVIDENTIARY VALUE AND SHOULD NOT BE MADE BASIS FOR THE ASSESSMENT COULD NOT BE ACCEPTED. SO FAR AS ASSESSEES CONTENTION THAT NO INCRIMINATING MATERIAL TO SUPPORT THE IMPUGNED ADDITION WAS BROUGHT ON RECORD IS CONCERNED , LD CIT(A) OBSERVED THAT IN THE SWORN STATEMENT ITSELF, THE INCRIMINATI NG MATERIAL HAS BEEN POINTED OUT TO THE ASSESSEE AND ON THAT BASIS, ASSESSEE ALSO DECLARED ADDITIONAL INCOME. HE FURTHER NOTED THAT DURING T HE PROCEEDINGS, ASSESSEE HAS NEITHER QUESTIONED THE VALIDITY OF STATEMENT NOR HE HAS ADDUCED ANY EVIDENCE TO EXPLA IN THE INCRIMINATING MATERIAL OR THE DISCREPANCIES. IN FACT, ASSESSEE HAS NOT MADE ANY ATTEMPT TO REBUT WITH PROPER EVIDENCE THAT THE ADMISSION BY HIM MADE WAS WRONG. ON THE AFORESAID FINDINGS, LD CIT(A) REJECTED THE CONTENTIONS RAISED BY THE ASSESSEE A ND CONFIRMED THE ADDITION MADE BY THE AO. 5. AT THE TIME OF HEARING, LD A.R. REITERATING THE SUBMISSIONS MADE BEFORE THE CIT(A) SUBMITTED THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE SURVEY, HENCE, ONLY ON THE BASIS OF ADMISSION MADE BY TH E ASSESSEE AT THE TIME OF RECORDING OF STATEMENT DURING SURVEY PROCEEDINGS, NO ADDITION CAN BE MADE UNLESS THERE IS CORROBORATING EVIDENCE TO SUBSTANTIATE SUCH ADDITION. LD A.R. SUBMITTED THAT AO BEING A QUASI JUDICIAL AUTHORITY, IT IS THE DUTY OF THE AO TO VERIFY ALL THE MATERIAL FOUND AND THEREAFTER MAKE THE ADDITION. THE AO IS NOT ONLY AN INVESTIGATOR BUT ALSO AN ADJUDICATOR AND, THEREFORE, HE HAS TO ACT FAIRLY AND JUDICIOUSLY. LD A.R. SUBMITTED THAT AS CAN BE SEEN FROM THE STATEMENT OF AFFAIRS OF THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION AS WELL AS PRECEDING ASSESSMENT YEARS, ASSESSEE HAD NOT EXECUTED SO MUCH WORK, AS TO EARN THE PROFIT TO THE EXTENT OF RS.64 LAKHS. LD A.R. SUBMITTED THAT THE AO HAS TO TAKE INTO ACCOUNT THE CIRCUMSTANCES UNDER WHICH ADMISSION IS EXTRACTED FROM THE ASSESSEE. THEREFORE, WITHOUT ANY CORROBORATING MATERIAL, ADDITION CANNOT BE MADE ONL Y ON THE BASIS OF ADMISSION MADE BY THE ASSESSEE IN THE STATEMENT RECORDED. IT WAS CONTENDED THAT THE MATERIALS ON RECORD WOULD SHOW THAT ASSESSEE HAS NOT 6 EXECUTED THE WORK TO THE EXTENT OF EARNING INCOME OF RS.64 LAKHS. LD A.R. ALSO CHALLENGED THE VERY BASIS OF THE ADDITION SOLELY RELYING UPON THE STATEMENT RECORDED AT THE TIME OF SURVEY BY CONTENDING THAT SAID STATEMENT CANNOT HAVE ANY EVIDENTIARY VALUE. LD A.R. FINALLY SUBMITTED THAT SURVEY WAS CONDUCTED IN MARCH, 2008 AND IT IS THE FIRST YEAR OF CONS TRUCTION WORK STARTED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE IS FOLLOWING PERCENTAGE COMPLETION METHOD AND, ACCORDINGLY, HAS DECLARED PROFIT @ 1 0% OF THE SALES EFFECTED BY HIM. IN THESE CIRCUMSTANCES, NO ADDITION COULD BE MADE. 6. LD D .R. ON THE OTHER HAND SUPPORTING THE ORDER OF LD CIT(A) SUBMITTED THAT ASSESSEE HAVING MADE THE ADMISSION TO OFFER ADDITIONAL INCOME OF RS.64 LAKHS IN HIS HANDS CANNOT NOW GO BACK FROM SUCH PROMISE, HENCE, THE ADDITION MADE IS JUSTIFIED. 7.. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTATIVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. FROM THE CONTENTIONS RAISED B Y LD A.R., IT IS TO BE ASSUMED THAT THE ASSESSEE CHALLENGES THE ADDITION MADE ON TWO GROUNDS, FIRSTLY, NO ADDITION CAN BE MADE ON THE BASIS OF STATE MENT RECORDED AT THE TIME OF SURVEY AS IT HAS NO SANCTITY IN LAW AND SECONDLY, THERE IS NO OTHER MATERIAL OR CORROBORATIVE EVIDENCE TO SUGGEST THE F ACT THAT ASSESSEE HAS EARNED INCOME TO THE EXTENT OF RS.64 LAKHS WHICH WAS OFFERED AS ADDITIONAL INCOME DURI NG THE RECORDING OF STATEMENT AT THE TIME OF SURVEY. SO FAR AS VALIDITY OF STATEMENT RECORDED IS CONCERNED, WE ARE NOT INCLINED TO AGREE WITH THE CONTENTIONS OF THE ASSESSEE. AS CAN BE SEEN FROM THE FACTS AND MATERIAL ON RECORD DURING THE RECORDING OF ST ATEMENT, ASSESSEE HAD COME FORWARD AND OFFERED ADDITIONAL INCOME OF RS.1 CRORE IN THE HANDS OF THREE PERSONS, VIZ; HIMSELF, HIS WIFE AND PARTNERSHIP FIRM SHREE SAI CONSTRUCTION. OUT OF THE SAID AMOUNT, ASSESSEE IN FACT IN THE RETURN OF INCOME, DECLARED TO TAL AMOUNT OF RS.36 LAKHS IN HIS RETURN AS WELL AS RETURN FILED BY THE PARTNERSHIP FIRM SHREE SAI CONSTRUCTION AND HIS WIFE K. SARITHA. THEREFORE, WHEN THE ASSESSEE HIMSELF HAS DECLARED IN THE RETURNS FILED A PART OF THE AMOUNT OFFERED DURING THE RECORDIN G OF STATEMENT AT THE TIME OF SURVEY AND IMMEDIATELY AFTER THE SURVEY THEN HIS CONTENTION THAT THE STATEMENT CANNOT BE TOTALLY RELIED UPON AS IT HAS NO EVIDENTIARY VALUE IS NOT ACCEPTABLE. THE STATEMENT RECORDED FROM THE ASSESSEE HAVING BEEN ACTED UPON PARTLY CANNOT BE DISCARDED IN A WHOLESALE MANNER. HOWEVER, SO FAR AS ALTERNATIVE CONTENTION OF THE ASSESSEE WITH REGARD TO MERITS OF THE ADDITION OF RS. 64 7 LAKHS IS CONCERNED, THE SAME DESERVES TO BE CONSIDERED. IT IS A FACT ON RECORD THAT THE BOOKS OF ACCOUNT S WERE NEITHER FOUND OR EXAMINED AT THE TIME OF SURVEY OR EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS IT APPEARS FROM THE ASSESSMENT ORDER , THE ADDITION OF RS.64 LAKHS HAS BEEN MADE SOLELY ON THE BASIS OF STATEMENT RECORDED FROM THE ASSESSEE DURING SURVEY. THOUGH THE AO HAS MENTIONED IN THE ASSESSMENT ORDER THAT INCRIMINATING MATERIALS WERE FOUND, WHICH INDICATED ADDITIONAL INCOME TO THAT E XTENT BUT NOTHING IS AVAILABLE ON RECORD OR HAS BEEN BROUGHT BEFORE US TO SHOW AS TO WHAT ARE THE MATERIALS AND ON WHAT BASIS IT CAN BE CONCLUSIVELY PROVED THAT ASSESSEE IN FACT HAD ADDITIONAL INCOME OF RS.64 LAKHS. THOUGH IT IS A FACT THAT IN THE STATEME NT RECORDED, ASSESSEE HAS OFFERED ADDITIONAL INCOME OF RS.64 LAKHS BUT IN THE RETURN OF INCOME ASSESSEE HAS NOT DECLARED SUCH INCOME AND EVEN DURING THE ASSESSMENT PROCEEDINGS ALSO, ASSESSEE HAS SHOWN REASONS WHY IT HAD NOT DECLARED ADDITIONAL INCOME OF RS .64 LAKHS BY CONTENDING THAT THERE IS NO INCRIMINATING MATERIAL TO SUGGEST TO EARNING OF S UCH INCOME. BEFORE US, IT IS THE CONTENTION OF THE ASSESSEE THAT IT IS THE FIRST YEAR OF CONSTRUCTION OF THE PROJECT AND SINCE ASSESSEE IS FOLLOWING PERCENTAGE COMPL ETION METHOD, IT HAS DECLARED INCOME ON THE BASIS OF SALES EFFECTED BY IT BY WORKING OUT NET PROFIT OF 10% OF THE TOTAL TURNOVER. IN THIS CONTEXT, ASSESSEE HAS DRAWN OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT SUBMITTED BEFORE US FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ON PERUSAL OF PROFIT AND LOSS ACCOUNT AS AT 31.3.2008, IT CAN BE SEEN THAT ON SALES OF RS.1,43,02,671.00, ASSESSEE HAS DECLARED PROFIT OF RS.15,11,000.00. ASSESSEE HAS ALSO SUBMITTED PROFIT AND LOSS ACCOUNTS AND RETURN COPIES OF PREC EDING ASSESSMENT YEARS. ON PERUSAL OF AFORESAID DOCUMENTS, THERE APPEARS TO BE SOME TRUTH IN THE CONTENTION OF THE A SSESSEE THAT IT DID NOT HAVE RECEIPTS FROM WHICH IT COULD HAVE EARNED PROFIT OF RS.64 LAKHS. IT IS NOT KNOWN WHAT ARE THE CORROBORATIVE MA TERIALS WHICH COULD ESTABLISH THE FACT THAT ASSESSEE IN FACT HAS EARNED RS.64 LAKHS DURING THE IMPUGNED ASSESSMENT YEAR. IN THESE CIRCUMSTANCES, ADDITION OF RS.64 LAKHS SOLELY RELYING UPON THE STATEMENT RECORDED FROM THE ASSESSEE AND WITHOUT OBJECTIVELY C ONSIDERING THE CONTENTIONS RAISED BY THE ASSESSEE IS NOT ACCEPTABLE. IT IS THE DUTY OF THE AO TO ASSESS THE REAL INCOME OF THE ASSESSEE. UNLESS THERE IS MATERIAL ON RECORD TO SHOW THAT INCOME SOUGHT TO BE ASSESSED HAS ACTUALLY ACCRUED TO THE ASSESSEE, NO ADDITION OF SUCH INCOME CAN BE MADE PRESUMPTIVELY OR HYPOTHETICALLY. IT CANNOT BE 8 DENIED THAT WHEN AN ASSESSEE IS SUBJECTED TO EITHER SURVEY OR SEARCH OPERATION, TO AVOID THE RIGORS WHICH IS GENERALLY ASSOCIATED WITH IT, COME FORWARD TO OFFER ADDITIONAL INCOME FOR QUICKLY GETTING RID OF THE SURVEY OR SEARCH ACTION. IN SUCH CASES , THERE IS NO DIFFICULTY IF THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN THE STATEMENT RECORDED IS THEREAFTER ADMITTED IN THE R E TURNS FILED SUBSEQUENTLY. THE REAL PROBLEM AR ISES WHEN THE ASSESSEE EITHER RETRACTS THE STATEMENT OR DISPUTES THE OFFER MADE BY HIM DURING RECORDING OF STATEMENT AT THE TIME OF SURVEY OR SEARCH, FOR WHATEVER MAY BE TH E R EASONS. IN SUCH SITUATION, IT IS THE DUTY OF THE AO TO ESTABLISH ON RECORD THAT INCRIMINATING MATERIALS FOUND DURING SURVEY OR ANY OTHER MATERIAL AVAILABLE ON RECORD ALSO INDICATES INCOME IS ACTUALLY GENERATED BY THE ASSESSEE TO THE EXTENT OFFERED BY HIM AT THE TIME OF SURVEY. THE AO CANNOT SOLELY RELY UPON THE STATEMENT OF THE ASSE SSEE FOR THE PURPOSE OF MAKING THE ADDITION WHEN THE ASSESSEE DISPUTES THE OFFER MADE BY HIM. IN FACT THE AO DOES NOT HAVE TO FALL BACK UPON THE STATEMENT OF THE ASSESSEE IF THERE ARE INCRIMINATING MATERIALS AND OTHER EVIDENCES AVAILABLE ON RECORD WHICH CO NCLUSIVELY PROVE SUPPRESSION OF INCOME BY THE ASSESSEE. IN THE AFORESAID CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THE ENTIRE ISSUE REQUIRES TO BE EXAMINED AFRESH BY THE AO IN THE LIGHT OF THE CONTENTION RAISED BY THE ASSESSEE. THE AO ONLY AFTER CONSIDERING ALL THE CONTENTIONS OF THE ASSESSEE AND ALSO CONFRONTING THE INCRIMINATING MATERIAL, IF ANY, WILL PROCEED TO COMPUTE THE PROFIT ELEMENT ON THE SUPPRESSED TURNOVER ON THE BASIS O F INC RIMINATING MATERIALS FOUND AND ANY OTHER MATERIALS IN THIS REG ARD BEFORE HIM AND MAKE THE ADDITION IF AT ALL IT IS REQUIRED TO BE MADE . WITH THE AFORESAID DIRECTION, WE RESTORE THE MA TTER BACK TO THE FILE OF AO TO MAKE DENOVO ASSESSMENT AFTER AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11/12/2013 . SD/ - S D/ - (B. RAMAKOTAIAH ) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER VISHAKH APATNAM DATED 11 / 12/2013 PARIDA , SR. PS 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : K SAI RAMAKRISHNAM RAJU, C/O. C.SUBVRAHAMNAYAM , CA, 102, LAKSHMI APTS, FACROR LAYOUR, WALTAIR UPLANDS, V6+ ISAKHAPATNAM 2. THE RESPONDENT. DY. CIT, CIRCLE 3(1), VISAKHAPATNAM 3. THE CIT(A) - VISAKHAPATNAM 4. CIT - 1, VISAKHAPATNAM 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//