M/s Rajesh Exports Limited , Bangalore V. The Assistant Commissioner of Income Tax Central Circle-1(2), Bangalore

ITA 929/BANG/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1477 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 25-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH MEHTA DIRECTOR
• Keywords: Invalid notice; Business income; Principle of natural justice; Retrospective amendment; Bad and doubtful debts; Block assessment; Reason to believe
• Section: 143(3); 10AA; 153A; 234B; 115JB; 10B; 147; 148; 263; 132; 139; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER ITA NO S . 928 TO 931 /BANG/201 7 & 174 TO 176/BANG/2018 ASSESSMENT YEAR S : 20 0 8 - 0 9 TO 201 4 - 1 5 M/S. RAJESH EXPORTS LTD., NO.4, BATAVIA CHAMBERS, KUMARA PARK ROAD, KUMARA PARK (EAST), BENGALURU-560001. PAN : AA AC R 8642 N VS. THE ACIT, CENTRAL CIRCLE 1 (2), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. RAJESH MEHTA, DIRECTOR REVENUE BY : SHRI S. M. KESHKAMAT, CIT(DR)& DR. P. V. PRADEEP KUMAR, ADDL. CIT ( DR ) DATE OF HEARING : 09 . 1 0 .201 8 DATE OF PRONOUNCEMENT : 27 . 1 1 .201 8 O R D E R PER A. K. GARODIA, A. M.: THESESEVEN APPEALS ARE FILED BY THE ASSESSEE AND TH ESE ARE DIRECTED AGAINST SEPARATE ORDERS OF CIT (A) 11, BANGALORE DATED 28 .02.2017 FOR A. YS. UP TO 2011 12 AND DATED 20.11.2017 FOR A. YS. 2012 13 TO 2014 15. THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 2. IN ALL THESE APPEALS, VARIOUS TECHNICAL ISSUES A S WELL AS VARIOUS ISSUES ON MERIT ARE RAISED BY THE ASSESSEE. TECHNICAL ISSUES RAISED IN ALL YEARS EXCEPT A.Y. 2014 15 ARE THREE. FIRST TECHNICAL ISSUE RAISED BY THE ASSESSEE IS THIS THAT THE SEARCH CONDUCTED IN THE PRESENT CASE ON 17.12.2013 IS NOT A VALID SEARCH. SECOND TECHNICAL ISSUE RAISED BY THE ASSESSEE IS THIS THAT THE NOTICE ISSUED BY THE AO U/S 153A IS BAD IN LAW. THIRD TECHNICAL ISSUE RAISED BY THE ASSESSEE IS THIS THAT THE ADDITIONS MADE IN THESE ASSESSMENT ORDERS PASSED U/ S 153A ARE NOT ARISING FROM THE SEIZED MATERIAL AND THEREFORE, THESE ADDITIONS ARE OUTSIDE THE SCOPE OF SECTION 153A OF THE I. T. ACT. THERE IS NO TECHNICA L ISSUE RAISED IN A. Y. 2014 15. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 2 OF 44 3. FIRST, WE REPRODUCE THE GROUNDS RAISED BY THE AS SESSEE IN EACH YEAR. THESE ARE AS UNDER:- A) A. Y. 2008 09, ITA 931/BANG/2017:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX IN SO FAR IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D ON A TOTAL INCOME ARRIVED AT BY MAKING THE ADDITIONS AS CONFIRMED BY THE CIT (A) AS AGAINST THE RETURNED INCOME OF NIL UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. GRANTING OF CORRECT AMOUNT OF DEDUCTION UNDER SE CTION 1OAA OF THE ACT. A) THE AUTHORITIES BELOW ERRED IN NOT GRANTING CORR ECT DEDUCTION UNDER SECTION 10 AA OF THE ACT. B) THE CIT (A) OUGHT TO HAVE SPECIFICALLY ADJUDICAT ED THE RELEVANT GROUND IN RESPECT OF GRANTING OF THE CORRECT AMOUNT OF DEDUCTION UNDER SECTION 10 AA OF THE ACT. C) WITHOUT PREJUDICE TO GROUNDS REGARDING THE OTHER ADDITIONS SUSTAINED, THE AUTHORITIES BELOW OUGHT TO HAVE GRAN TED DEDUCTION UNDER SECTION 10 AA IF ELIGIBLE IN RESPECT OF THE A DDITIONS MADE AND SUSTAINED ON THE FACTS AND CIRCUMSTANCE OF THE CASE . D) THE LEARNED CIT(A) ERRED IN NOT DIRECTING FOR RE WORKING, OF THE ELIGIBLE AMOUNT OF DEDUCTION UNDER SECTION 10AA OF THE ACT IN RESPECT OF THE ADDITIONS DELETED BY HIM ON THE FACTS AND CI RCUMSTANCE OF THE CASE. 4. ON VALIDITY OF SEARCH: A) THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D UNDER SECTION 153A R.W.S. 143 [3] OF THE ACT AS THERE WAS NO VALID SEA RCH ON THE APPELLANT ON THE FACTS AND CIRCUMSTANCE OF THE CASE. B) THE LEARNED AUTHORITIES BELOW HAVE NOT DEMONSTRA TED THAT THE SEARCH INITIATED IN THE CASE OF THE APPELLANT IS VA LID AND LEGAL AND CONSEQUENTLY THE ORDER OF ASSESSMENT IS EX FACIE BA D IN LAW AS THE MANDATORY CONDITIONS FOR INITIATING A SEARCH AS CON TEMPLATED UNDER THE PROVISIONS OF SECTION 132(1) (A), (B) 8S (C) OF THE ACT DID NOT EXIST AND HENCE THE ORDER IS REQUIRED TO BE ANNULLED ON T HE FACTS AND CIRCUMSTANCE OF THE CASE. C) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT A VALID SEARCH IS A SINE QUA NON FOR MAKING A VALID ASSESSM ENT UNDER SECTION ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 3 OF 44 153A OF THE ACT AND HENCE THE ASSUMPTION OF JURISDI CTION UNDER SECTION 153 A OF THE ACT IS BAD IN LAW AND CONSEQUENTLY THE ENTIRE ASSESSMEN T REQUIRES TO BE CANCELLED. 5. NOTICE ISSUED U/S 153A WAS BAD IN LAW: A) THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE NOTICE ISSUED U/S 153A OF THE ACT IS BAD IN LAW ON THE GROUND THAT TH E NOTICE DOES NOT INDICATE AS TO WHETHER IT IS PROPOSED TO ASSESS OR REASSESS AND IS THUS VAGUE, CONSEQUENTLY THE ASSESSMENT ORDER PASSED ON AN INVALID NOTICE IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE LEARNED AUTHORITIES BELOW HAVE NOT DEALT IN THE RESPECTIVE ORDER ON THE OBJECTION FILED BY THE APPELLANT IN RESPECT OF ASSUMPTION OF JURISDICTION U/S 153A AND HAVE ALSO NOT PROVIDED TH E SATISFACTION NOTE AND REASONS RECORDED FOR ISSUE OF NOTICE U/S 153A O F THE ACT AND CONSEQUENTLY AN ADVERSE INFERENCE MAY BE DRAWN THAT THE MATERIAL DOES NOT EXIST AND ASSESSMENT ORDER PASSED IS BAD I N LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. SCOPE OF ASSESSMENT PURSUANT TO NOTICE ISSUED UN DER SECTION 153 A OF THE ACT. THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE SCOPE OF ASSESSMENT IN THE PROCEEDINGS UNDER SECTION 153A R. W.S 143(3) OF THE ACT IS RESTRICTED TO THE SEIZED MATERIAL IF ANY AND THE PRESENT ASSESSMENT ORDER PASSED IS CONTRARY TO THE SCHEME O F THE ACT AND CONSEQUENTLY THE ASSESSMENT ORDER IS LIABLE TO BE A NNULLED/ CANCELLED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE ASSESSING OFFICER OUGHT NOT TO HAVE MADE ANY CHANGES TO THE RETURN OF INCOME AND THE CIT(A) OUGHT NOT TO HAVE S USTAINED ANY PART OF THE CHANGE MADE BY THE ASSESSING OFFICER ON THE FACTS AND CIRCUMSTANCE OF THE CASE. 8. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER AS PER THE PARITY OF REASONING OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF KARANVIR SINGH 349 ITR 692, THE APPELLANT DENIES IT SELF LIABLE TO BE CHARGED TO INTEREST UNDER SECTION 234A, 234B AND 23 4C OF THE INCOME TAX ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE. 9. WITHOUT PREJUDICE THE LEVY OF INTEREST UNDER SEC TION 234 A, 234B AND 234C ARE BAD IN LAW AS THE PERIOD, RATE, QUANTU M AND METHOD OF CALCULATION ADOPTED ON WHICH INTEREST IS LEVIED ARE ALL NOT DISCERNABLE AND ARE WRONG ON THE FACTS OF THE CASE. 10. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND , SUBSTITUTE, CHANGE AND DELETE ANY OF THE GROUNDS OF APPEAL. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 4 OF 44 11. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. B) A. Y. 2009 10, ITA 928/BANG/2017:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX IN SO FAR IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D ON A TOTAL INCOME ARRIVED AT BY MAKING THE ADDITIONS AS CONFIRMED BY THE CIT (A) AS AGAINST THE RETURNED INCOME OF RS. 4,67,237/- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. ON ADDITION OF INTEREST ON INTER CORPORATE DEPOS ITS (ICDS): A) THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMI NG THE ORDER OF THE ASSESSING OFFICER OF AN AMOUNT OF RS.14,72,595/- AS ACCRUED INTEREST ON ICDS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE NON RECEIVABLE INTEREST ON ICDS WERE SHOWN AS INCOME IN THE BOOKS OF ACCOUNTS OF THE APPELLANT AND SUBSEQUENTLY CLAIMED AS BAD DEBT IN THE BOOKS OF THE APPELLANT. C) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE ACCOUNTING PROCEDURE OF THE APPELLANT AND THE ENTRI ES PASSED BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS SATISFY THE COND ITIONS FOR CLAIMING BAD DEBTS ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. D) THE LEARNED AUTHORITIES BELOW ERRED IN OBSERVING THAT THE PROCEDURE TO CLAIM BAD DEBT IS BY DISCLOSURE IN THE PROFIT AND LOSS ACCOUNT BY WAY OF WRITING OFF A DEBT AS AN EXPENDIT URE CORRESPONDING TO AN AMOUNT WHICH HAS BEEN ALREADY OFFERED AS AN I NCOME IN THE SAME OR EARLIER PREVIOUS YEAR AND SUCH OBSERVATIONS ARE CONTRARY TO THE PLAIN LANGUAGE OF THE INCOME TAX ACT WHICH ONLY CONTEMPLATES WRITING OFF IN THE ACCOUNTS AND HENCE THE ADDITION REQUIRES TO BE DELETED ON THE FACTS AND CIRCUMSTANCE OF THE CASE. E) WITHOUT PREJUDICE, THE SAID AMOUNT OF RS.14,72,5 95/- IS NOT TAXABLE AS IT IS NOT REAL INCOME OF THE APPELLANT AND CONSE QUENTLY THE ADDITION MADE IS LIABLE TO BE DELETED ON THE FACTS AND CIRCU MSTANCES OF THE CASE. 4. ON VALIDITY OF SEARCH: A) THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D UNDER SECTION 153A R.W.S. 143 [3] OF THE ACT AS THERE WAS NO VALID SEA RCH ON THE APPELLANT ON THE FACTS AND CIRCUMSTANCE OF THE CASE. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 5 OF 44 B) THE LEARNED AUTHORITIES BELOW HAVE NOT DEMONSTRA TED THAT THE SEARCH INITIATED IN THE CASE OF THE APPELLANT IS VA LID AND LEGAL AND CONSEQUENTLY THE ORDER OF ASSESSMENT IS EXIFACIE BA D IN LAW AS THE MANDATORY CONDITIONS FOR INITIATING A SEARCH AS CON TEMPLATED UNDER THE PROVISIONS OF SECTION 132(1)(A), (B) & (C) OF T HE ACT DID NOT EXIST AND HENCE THE ORDER IS REQUIRED TO BE ANNULLED ON T HE FACTS AND CIRCUMSTANCE OF THE CASE. C) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT A VALID SEARCH IS A SINE QUA NON FOR MAKING A VALID ASSESSM ENT UNDER SECTION 153A OF THE ACT AND HENCE THE ASSUMPTION OF JURISDI CTION UNDER SECTION 153 A OF THE ACT IS BAD IN LAW AND CONSEQUE NTLY THE ENTIRE ASSESSMENT REQUIRES TO BE CANCELLED. 5. NOTICE ISSUED U/S 153A WAS BAD IN LAW: A) THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE NOTICE ISSUED U/S 153A OF THE ACT IS BAD IN LAW ON THE GROUND THAT TH E NOTICE DOES NOT INDICATE AS TO WHETHER IT IS PROPOSED TO ASSESS OR REASSESS AND IS THUS VAGUE, CONSEQUENTLY THE ASSESSMENT ORDER PASSED ON AN INVALID NOTICE IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE LEARNED AUTHORITIES BELOW HAVE NOT DEALT IN THE RESPECTIVE ORDER ON THE OBJECTION FILED BY THE APPELLANT IN RESPECT OF ASSUMPTION OF JURISDICTION U/ S 153A AND HAVE ALSO NOT PROVIDED T HE SATISFACTION NOTE AND REASONS RECORDED FOR ISSUE OF NOTICE U/ S 153A OF THE ACT AND CONSEQUENTLY AN ADVERSE INFERENCE MAY BE DRAWN THAT THE MATERIAL DOES NOT EXIST AND ASSESSMENT ORDER PASSED IS BAD I N LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. SCOPE OF ASSESSMENT PURSUANT TO NOTICE ISSUED UN DER SECTION 153 A OF THE ACT. THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE SCOPE OF ASSESSMENT IN THE PROCEEDINGS UNDER SECTION 153A R. W.S 143(3) OF THE ACT IS RESTRICTED TO THE SEIZED MATERIAL IF ANY AND THE PRESENT ASSESSMENT ORDER PASSED IS CONTRARY TO THE SCHEME O F THE ACT AND CONSEQUENTLY THE ASSESSMENT ORDER IS LIABLE TO BE A NNULLED/ CANCELLED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE ASSESSING OFFICER OUGHT NOT TO HAVE MADE ANY CHANGES TO THE RETURN OF INCOME AND THE CIT(A) OUGHT NOT TO HAVE S USTAINED ANY PART OF THE CHANGE MADE BY THE ASSESSING OFFICER ON THE FACTS AND CIRCUMSTANCE OF THE CASE. 8. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER AS PER THE PARITY OF REASONING OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF KARANVIR SINGH 349 ITR 692, THE APPELLANT DENIES IT SELF LIABLE TO BE CHARGED TO INTEREST UNDER SECTION 234A, 234B AND 23 4C OF THE INCOME TAX ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 6 OF 44 9. WITHOUT PREJUDICE THE LEVY OF INTEREST UNDER SEC TION 234 A, 234B AND 234C ARE BAD IN LAW AS THE PERIOD, RATE, QUANTU M AND METHOD OF CALCULATION ADOPTED ON WHICH INTEREST IS LEVIED ARE ALL NOT DISCERNABLE AND ARE WRONG ON THE FACTS OF THE CASE. 10. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND , SUBSTITUTE, CHANGE AND DELETE ANY OF THE GROUNDS OF APPEAL. 11. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. C) A. Y. 2010 11, ITA 929/BANG/2017:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX IN SO FAR IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D ON A TOTAL INCOME ARRIVED AT BY MAKING THE ADDITIONS AS CONFIRMED BY THE CIT (A) AS AGAINST THE RETURNED INCOME OF RS. NIL UNDER THE FA CTS AND CIRCUMSTANCES OF THE CASE. 3. ON ADDITION OF INTEREST ON INTER CORPORATE DEPOS ITS (ICDS): A) THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMI NG THE ORDER OF THE ASSESSING OFFICER OF AN AMOUNT OF RS.28,79,68,656/- AS ACCRUED INTEREST ON ICDS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE NON RECEIVABLE INTEREST ON ICDS WERE SHOWN AS INCOME IN THE BOOKS OF ACCOUNTS OF THE APPELLANT AND SUBSEQUENTLY CLAIMED AS BAD DEBT IN THE BOOKS OF THE APPELLANT. C) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE ACCOUNTING PROCEDURE OF THE APPELLANT AND THE ENTRI ES PASSED BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS SATISFY THE COND ITIONS FOR CLAIMING BAD DEBTS ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. D) THE LEARNED AUTHORITIES BELOW ERRED IN OBSERVING THAT THE PROCEDURE TO CLAIM BAD DEBT IS BY DISCLOSURE IN THE PROFIT AND LOSS ACCOUNT BY WAY OF WRITING OFF A DEBT AS AN EXPENDIT URE CORRESPONDING TO AN AMOUNT WHICH HAS BEEN ALREADY OFFERED AS AN I NCOME IN THE SAME OR EARLIER PREVIOUS YEAR AND SUCH OBSERVATIONS ARE CONTRARY TO THE PLAIN LANGUAGE OF THE INCOME TAX ACT WHICH ONLY CONTEMPLATES WRITING OFF IN THE ACCOUNTS AND HENCE THE ADDITION REQUIRES TO BE DELETED ON THE FACTS AND CIRCUMSTANCE OF THE CASE. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 7 OF 44 E) WITHOUT PREJUDICE, THE SAID AMOUNT OF RS.28,79,6 8,656/-IS NOT TAXABLE AS IT IS NOT REAL INCOME OF THE APPELLANT A ND CONSEQUENTLY THE ADDITION MADE IS LIABLE TO BE DELETED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. GRANTING OF CORRECT AMOUNT OF DEDUCTION UNDER SE CTION 1OAA OF THE ACT. A) THE AUTHORITIES BELOW ERRED IN NOT GRANTING CORR ECT DEDUCTION UNDER SECTION 10 AA OF THE ACT. B) THE CIT (A) OUGHT TO HAVE SPECIFICALLY ADJUDICAT ED THE RELEVANT GROUND IN RESPECT OF GRANTING OF THE CORRECT AMOUNT OF DEDUCTION UNDER SECTION 10 AA OF THE ACT. C) WITHOUT PREJUDICE TO GROUNDS REGARDING THE OTHER ADDITIONS SUSTAINED, THE AUTHORITIES BELOW OUGHT TO HAVE GRAN TED DEDUCTION UNDER SECTION 10 AA IF ELIGIBLE IN RESPECT OF THE A DDITIONS MADE AND SUSTAINED ON THE FACTS AND CIRCUMSTANCE OF THE CASE . D) THE LEARNED CIT(A) ERRED IN NOT DIRECTING FOR RE WORKING, OF THE ELIGIBLE AMOUNT OF DEDUCTION UNDER SECTION 10AA OF THE ACT IN RESPECT OF THE ADDITIONS DELETED BY HIM ON THE FACTS AND CI RCUMSTANCE OF THE CASE. 5. ON VALIDITY OF SEARCH: A) THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D UNDER SECTION 153A R.W.S. 143 [3] OF THE ACT AS THERE WAS NO VALID SEA RCH ON THE APPELLANT ON THE FACTS AND CIRCUMSTANCE OF THE CASE. B) THE LEARNED AUTHORITIES BELOW HAVE NOT DEMONSTRA TED THAT THE SEARCH INITIATED IN THE CASE OF THE APPELLANT IS VA LID AND LEGAL AND CONSEQUENTLY THE ORDER OF ASSESSMENT IS EXIFACIE BA D IN LAW AS THE MANDATORY CONDITIONS FOR INITIATING A SEARCH AS CON TEMPLATED UNDER THE PROVISIONS OF SECTION 132(1)(A), (B) 86 (C) OF THE ACT DID NOT EXIST AND HENCE THE ORDER IS REQUIRED TO BE ANNULLED ON T HE FACTS AND CIRCUMSTANCE OF THE CASE. C) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT A VALID SEARCH IS A SINE QUA NON FOR MAKING A VALID ASSESSM ENT UNDER SECTION 153A OF THE ACT AND HENCE THE ASSUMPTION OF JURISDI CTION UNDER SECTION 153 A OF THE ACT IS BAD IN LAW AND CONSEQUE NTLY THE ENTIRE ASSESSMENT REQUIRES TO BE CANCELLED. 6. NOTICE ISSUED U/S 153A WAS BAD IN LAW: A) THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE NOTICE ISSUED U/S 153A OF THE ACT IS BAD IN LAW ON THE GROUND THAT TH E NOTICE DOES NOT INDICATE AS TO WHETHER IT IS PROPOSED TO ASSESS OR REASSESS AND IS THUS VAGUE, CONSEQUENTLY THE ASSESSMENT ORDER PASSED ON AN INVALID NOTICE ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 8 OF 44 IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE LEARNED AUTHORITIES BELOW HAVE NOT DEALT IN THE RESPECTIVE ORDER ON THE OBJECTION FILED BY THE APPELLANT IN RESPECT OF ASSUMPTION OF JURISDICTION U/S 153A AND HAVE ALSO NOT PROVIDED TH E SATISFACTION NOTE AND REASONS RECORDED FOR ISSUE OF NOTICE U/S 153A O F THE ACT AND CONSEQUENTLY AN ADVERSE INFERENCE MAY BE DRAWN THAT THE MATERIAL DOES NOT EXIST AND ASSESSMENT ORDER PASSED IS BAD I N LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. SCOPE OF ASSESSMENT PURSUANT TO NOTICE ISSUED UN DER SECTION 153 A OF THE ACT. THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE SCOPE OF ASSESSMENT IN THE PROCEEDINGS UNDER SECTION 153A R. W.S 143(3) OF THE ACT IS RESTRICTED TO THE SEIZED MATERIAL IF ANY AND THE PRESENT ASSESSMENT ORDER PASSED IS CONTRARY TO THE SCHEME O F THE ACT AND CONSEQUENTLY THE ASSESSMENT ORDER IS LIABLE TO BE A NNULLED/ CANCELLED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE ASSESSING OFFICER OUGHT NOT TO HAVE MADE ANY CHANGES TO THE RETURN OF INCOME AND THE CIT(A) OUGHT NOT TO HAVE S USTAINED ANY PART OF THE CHANGE MADE BY THE ASSESSING OFFICER ON THE FACTS AND CIRCUMSTANCE OF THE CASE. 9. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER AS PER THE PARITY OF REASONING OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF KARANVIR SINGH 349 ITR 692, THE APPELLANT DENIES IT SELF LIABLE TO BE CHARGED TO INTEREST UNDER SECTION 234A AND 234 B OF THE INCOME TAX ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 10. WITHOUT PREJUDICE THE LEVY OF INTEREST UNDER SE CTION 234 A AND 234B ARE BAD IN LAW AS THE PERIOD, RATE, QUANTUM AN D METHOD OF CALCULATION ADOPTED ON WHICH INTEREST IS LEVIED ARE ALL NOT DISCERNABLE AND ARE WRONG ON THE FACTS OF THE CASE. 11. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND , SUBSTITUTE, CHANGE AND DELETE ANY OF THE GROUNDS OF APPEAL. 12. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. D) A. Y. 2011 12, ITA 930/BANG/2017:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX IN SO FAR IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 9 OF 44 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D ON A TOTAL INCOME ARRIVED AT BY MAKING THE ADDITIONS AS CONFIRMED BY THE CIT (A) AS AGAINST THE RETURNED INCOME OF RS. NIL UNDER THE FA CTS AND CIRCUMSTANCES OF THE CASE. 3. ON ADDITION OF INTEREST ON INTER CORPORATE DEPOS ITS (ICDS): A) THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMI NG THE ORDER OF THE ASSESSING OFFICER OF AN AMOUNT OF RS.29,73,46,928/ - AS ACCRUED INTEREST ON ICDS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE NON RECEIVABLE INTEREST ON ICDS WERE SHOWN AS INCOME IN THE BOOKS OF ACCOUNTS OF THE APPELLANT AND SUBSEQUENTLY CLAIMED AS BAD DEBT IN THE BOOKS OF THE APPELLANT. C) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE ACCOUNTING PROCEDURE OF THE APPELLANT AND THE ENTRI ES PASSED BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS SATISFY THE COND ITIONS FOR CLAIMING BAD DEBTS ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. D) THE LEARNED AUTHORITIES BELOW ERRED IN OBSERVING THAT THE PROCEDURE TO CLAIM BAD DEBT IS BY DISCLOSURE IN THE PROFIT AND LOSS ACCOUNT BY WAY OF WRITING OFF A DEBT AS AN EXPENDIT URE CORRESPONDING TO AN AMOUNT WHICH HAS BEEN ALREADY OFFERED AS AN I NCOME IN THE SAME OR EARLIER PREVIOUS YEAR AND SUCH OBSERVATIONS ARE CONTRARY TO THE PLAIN LANGUAGE OF THE INCOME TAX ACT WHICH ONLY CONTEMPLATES WRITING OFF IN THE ACCOUNTS AND HENCE THE ADDITION REQUIRES TO BE DELETED ON THE FACTS AND CIRCUMSTANCE OF THE CASE. E) WITHOUT PREJUDICE, THE SAID AMOUNT OF RS.29,73,4 6,928/ - IS NOT TAXABLE AS IT IS NOT REAL INCOME OF THE APPELLANT A ND CONSEQUENTLY THE ADDITION MADE IS LIABLE TO BE DELETED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. ON ADDITION OF RS.19,39,23,044/-: A) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT IT IS NORMAL IN THE GOLD BUSINESS TO INCUR LOSS OF GOLD WHILE DE ALING WITH VARIOUS ACTIVITIES LIKE MANUFACTURING, INVENTORY MANAGEMENT , MARKETING, IMPORT AND EXPORT. B) THE LEARNED AUTHORITIES BELOW ERRED IN NOT ACCEP TING THE EXPLANATION OF THE ASSESSEE WITHOUT ANY REASON. C) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE ASSESSEE HAD PROVIDED ALL THE DETAILS AS ASKED FOR BY THE AS SESSING OFFICER, AS THERE WERE NO FURTHER DETAILS ASKED BY THE ASSESSIN G OFFICER, THE ASSESSEE HAD NOT PROVIDED FURTHER DETAILS, THE ASSE SSING OFFICER HAS ERRED IN STATING THAT THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 10 OF 44 D) THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THAT IT IS OBVIOUS AND NATURAL THAT WHENEVER THERE IS ANY LOSS OF GOLD THE STOCK WILL CONSEQUENTLY GET REDUCED AND AS A RESULT THE PROFIT IS BOUND TO REDUCE TO THAT EXTENT, THE ASSESSING OFFICER HAS ERRED IN NOT ACCEPTING THE EXPLANATION FOR MAKING THE ADDITION. E) THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THAT A LOSS OF 0.047% AS A TOTAL OF MANUFACTURING LOSS, INVENTORY LOSS, MARKETING LOSS, IMPORT LOSS, EXPORT LOSS IS A REASONABLE LOSS IN THE BUSINESS OF GOLD AND GOLD PRODUCTS. 5. GRANTING OF CORRECT AMOUNT OF DEDUCTION UNDER SE CTION 1OAA OF THE ACT. A) THE AUTHORITIES BELOW ERRED IN NOT GRANTING CORR ECT DEDUCTION UNDER SECTION 10 AA OF THE ACT. B) THE CIT(A) OUGHT TO HAVE SPECIFICALLY ADJUDICATE D THE RELEVANT GROUND IN RESPECT OF GRANTING OF THE CORRECT AMOUNT OF DEDUCTION UNDER SECTION 10 AA OF THE ACT. C) WITHOUT PREJUDICE TO GROUNDS REGARDING THE OTHER ADDITIONS SUSTAINED, THE AUTHORITIES BELOW OUGHT TO HAVE GRAN TED DEDUCTION UNDER SECTION 10 AA IF ELIGIBLE IN RESPECT OF THE A DDITIONS MADE AND SUSTAINED ON THE FACTS AND CIRCUMSTANCE OF THE CASE . D) THE LEARNED CIT(A) ERRED IN NOT DIRECTING FOR RE WORKING, OF THE ELIGIBLE AMOUNT OF DEDUCTION UNDER SECTION 10AA OF THE ACT IN RESPECT OF THE ADDITIONS DELETED BY HIM ON THE FACTS AND CI RCUMSTANCE OF THE CASE. 6. ON VALIDITY OF SEARCH: A) THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D UNDER SECTION 153A R.W.S. 143 [3] OF THE ACT AS THERE WAS NO VALID SEA RCH ON THE APPELLANT ON THE FACTS AND CIRCUMSTANCE OF THE CASE. B) THE LEARNED AUTHORITIES BELOW HAVE NOT DEMONSTRA TED THAT THE SEARCH INITIATED IN THE CASE OF THE APPELLANT IS VA LID AND LEGAL AND CONSEQUENTLY THE ORDER OF ASSESSMENT IS EXIFACIE BA D IN LAW AS THE MANDATORY CONDITIONS FOR INITIATING A SEARCH AS CON TEMPLATED UNDER THE PROVISIONS OF SECTION 132(1)(A), (B) 86 (C) OF THE ACT DID NOT EXIST AND HENCE THE ORDER IS REQUIRED TO BE ANNULLED ON T HE FACTS AND CIRCUMSTANCE OF THE CASE. C) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT A VALID SEARCH IS A SINE QUA NON FOR MAKING A VALID ASSESSM ENT UNDER SECTION 153A OF THE ACT AND HENCE THE ASSUMPTION OF JURISDI CTION UNDER SECTION 153 A OF THE ACT IS BAD IN LAW AND CONSEQUE NTLY THE ENTIRE ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 11 OF 44 ASSESSMENT REQUIRES TO BE CANCELLED. 7. NOTICE ISSUED U/S 153A WAS BAD IN LAW: A) THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE NOTICE ISSUED U/ S 153A OF THE ACT IS BAD IN LAW ON THE GROUND THAT TH E NOTICE DOES NOT INDICATE AS TO WHETHER IT IS PROPOSED TO ASSESS OR REASSESS AND IS THUS VAGUE, CONSEQUENTLY THE ASSESSMENT ORDER PASSED ON AN INVALID NOTICE IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE LEARNED AUTHORITIES BELOW HAVE NOT DEALT IN THE RESPECTIVE ORDER ON THE OBJECTION FILED BY THE APPELLANT IN RESPECT OF ASSUMPTION OF JURISDICTION U/S 153A AND HAVE ALSO NOT PROVIDED TH E SATISFACTION NOTE AND REASONS RECORDED FOR ISSUE OF NOTICE U/S 153A O F THE ACT AND CONSEQUENTLY AN ADVERSE INFERENCE MAY BE DRAWN THAT THE MATERIAL DOES NOT EXIST AND ASSESSMENT ORDER PASSED IS BAD I N LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. SCOPE OF ASSESSMENT PURSUANT TO NOTICE ISSUED UN DER SECTION 153 A OF THE ACT. THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE SCOPE OF ASSESSMENT IN THE PROCEEDINGS UNDER SECTION 153A R. W.S 143(3) OF THE ACT IS RESTRICTED TO THE SEIZED MATERIAL IF ANY AND THE PRESENT ASSESSMENT ORDER PASSED IS CONTRARY TO THE SCHEME O F THE ACT AND CONSEQUENTLY THE ASSESSMENT ORDER IS LIABLE TO BE A NNULLED/ CANCELLED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE ASSESSING OFFICER OUGHT NOT TO HAVE MADE ANY CHANGES TO THE RETURN OF INCOME AND THE CIT(A) OUGHT NOT TO HAVE S USTAINED ANY PART OF THE CHANGE MADE BY THE ASSESSING OFFICER ON THE FACTS AND CIRCUMSTANCE OF THE CASE. 10. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER A S PER THE PARITY OF REASONING OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF KARANVIR SINGH 349 ITR 692, THE APPELLANT DENIES IT SELF LIABLE TO BE CHARGED TO INTEREST UNDER SECTION 234A AND 234 B OF THE INCOME TAX ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. WITHOUT PREJUDICE THE LEVY OF INTEREST UNDER SE CTION 234 A AND 234B ARE BAD IN LAW AS THE PERIOD, RATE, QUANTUM AN D METHOD OF CALCULATION ADOPTED ON WHICH INTEREST IS LEVIED ARE ALL NOT DISCERNABLE AND ARE WRONG ON THE FACTS OF THE CASE. 12. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND , SUBSTITUTE, CHANGE AND DELETE ANY OF THE GROUNDS OF APPEAL. 13. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 12 OF 44 E) A. Y. 2012 13, ITA 174/BANG/2018:- 1) THE LEARNED CIT (A) ERRED IN UPHOLDING THE ASSES SMENT UNDER SECTION 153A OF THE ACT WITHOUT APPRECIATING THAT T HERE WERE NO INCRIMINATING MATERIALS FOUND IN THE COURSE OF SEAR CH TO JUSTIFY THE IMPUGNED ADDITION IN BLOCK ASSESSMENT PROCEEDINGS. 2) THE LEARNED CIT (A) ERRED IN UPHOLDING THE BOOK PROFIT AS DETERMINED BY THE AO FOR THE PURPOSE OF SECTION 115 JB OF THE ACT. 3) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE DEDUCTION UNDER SECTION 10AA/ 10B OF THE ACT CANNOT BE INCLUD ED WHILE COMPUTING THE BOOK PROFIT AND ACCORDINGLY THE COMPU TATION OF BOOK PROFIT AS MADE BY THE AO IS UNSUSTAINABLE. 4) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE WRIT APPEAL FILED BY THE APPELLANT CHALLENGING THE VALIDITY OF AMENDMENT IS PENDING AND CONSEQUENTLY THE IMPUGNED ADDITION AS M ADE FOR THE RELEVANT YEAR IS UNSUSTAINABLE AND ACCORDINGLY LIAB LE TO BE DELETED. 5) FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. F) A. Y. 2013 14, ITA 175/BANG/2018:- 1) THE LEARNED CIT (A) ERRED IN UPHOLDING THE ASSES SMENT UNDER SECTION 153A OF THE ACT WITHOUT APPRECIATING THAT T HERE WERE NO INCRIMINATING MATERIALS FOUND IN THE COURSE OF SEAR CH TO JUSTIFY THE IMPUGNED ADDITION IN BLOCK ASSESSMENT PROCEEDINGS. 2) THE LEARNED CIT (A) OUGHT TO HAVE FOLLOWED THE J URISDICTIONAL HIGH COURT JUDGMENTS AND REFRAINED FROM UPHOLDING THE IM PUGNED ADDITION. 3) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE LATER JUDGMENT OF THE KARNATAKA HIGH COURT WOULD PREVAIL OVER THE EARLIER JUDGMENT AND CONSEQUENTLY HE OUGHT TO HAVE FOLLOWED THE LATER JUDGMENT IN PREFERENCE TO THE EARLIER JUDGMENT TO J USTIFY THE UPHOLDING OF VALIDITY OF THE ASSESSMENT. 4) THE LEARNED CIT (A) ERRED IN UPHOLDING THE BOOK PROFIT AS DETERMINED BY THE AO FOR THE PURPOSE OF SECTION 115 JB OF THE ACT. 5) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE DEDUCTION UNDER SECTION 10AA/ 10B OF THE ACT CANNOT BE INCLUD ED WHILE COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTIO N 115JB OF THE ACT AND ACCORDINGLY THE COMPUTATION OF BOOK PROFIT AS M ADE BY THE AO IS ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 13 OF 44 UNSUSTAINABLE. 6) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE WRIT APPEAL FILED BY THE APPELLANT CHALLENGING THE VALIDITY OF AMENDMENT IS PENDING AND CONSEQUENTLY THE IMPUGNED ADDITION AS M ADE FOR THE RELEVANT YEAR IS UNSUSTAINABLE AND ACCORDINGLY LIAB LE TO BE DELETED. 7) THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMI NG THE ORDER OF THE AO OF AN AMOUNT OF RS.43,72,04,622/- AS ACCRUED INT EREST ON ICD'S ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE NON- RECEIVABLE INTEREST ON ICD'S WERE SHOWN AS INCOME I N THE BOOKS OF ACCOUNTS OF THE APPELLANT AND SUBSEQUENTLY CLAIMED AS BAD DEBT IN THE BOOKS OF THE APPELLANT. 9) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE ACCOUNTING PROCEDURE OF THE APPELLANT AND THE ENTRI ES PASSED BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS SATISFY THE COND ITIONS FOR CLAIMING BAD DEBTS ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. 10) THE LEARNED AUTHORITIES BELOW ERRED IN OBSERVIN G THAT THE PROCEDURE TO CLAIM BAD DEBT IS BY DISCLOSURE IN THE PROFIT AND LOSS ACCOUNT BY WAY OF WRITING OFF A DEBT AS AN EXPENDIT URE CORRESPONDING TO AN AMOUNT WHICH HAS BEEN ALREADY OFFERED AS AN I NCOME IN THE SAME OR EARLIER PREVIOUS YEAR AND SUCH OBSERVATIONS ARE CONTRARY TO THE PLAIN LANGUAGE OF THE INCOME TAX ACT WHICH ONLY CONTEMPLATES WRITING OFF IN THE ACCOUNTS AND HENCE THE ADDITION REQUIRES TO BE DELETED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 11) WITHOUT PREJUDICE, THE SAID AMOUNT OF RS.43,72, 04.622/- IS NOT TAXABLE AS IT IS NOT THE REAL INCOME OF THE APPELLA NT AND CONSEQUENTLY THE ADDITION MADE IS LIABLE TO BE DELETED ON THE FA CTS AND CIRCUMSTANCES OF THE CASE. 12) FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. G) A. Y. 2014 15, ITA 176/BANG/2018:- 1) THE LEARNED CIT (A) ERRED IN UPHOLDING THE ASSES SMENT UNDER SECTION 153A OF THE ACT WITHOUT APPRECIATING THAT T HERE WERE NO INCRIMINATING MATERIALS FOUND IN THE COURSE OF SEAR CH TO JUSTIFY THE IMPUGNED ADDITION IN BLOCK ASSESSMENT PROCEEDINGS. 2) THE LEARNED CIT (A) OUGHT TO HAVE FOLLOWED THE J URISDICTIONAL HIGH COURT JUDGMENTS AND REFRAINED FROM UPHOLDING THE IM PUGNED ADDITION. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 14 OF 44 3) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE LATER JUDGMENT OF THE KARNATAKA HIGH COURT WOULD PREVAIL OVER THE EARLIER JUDGMENT AND CONSEQUENTLY HE OUGHT TO HAVE FOLLOWED THE LATER JUDGMENT IN PREFERENCE TO THE EARLIER JUDGMENT TO J USTIFY THE UPHOLDING OF VALIDITY OF THE ASSESSMENT. 4) THE LEARNED CIT (A) ERRED IN UPHOLDING THE BOOK PROFIT AS DETERMINED BY THE AO FOR THE PURPOSE OF SECTION 115 JB OF THE ACT. 5) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE DEDUCTION UNDER SECTION 10AA/ 10B OF THE ACT CANNOT BE INCLUD ED WHILE COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF SECTIO N 115JB OF THE ACT AND ACCORDINGLY THE COMPUTATION OF BOOK PROFIT AS M ADE BY THE AO IS UNSUSTAINABLE. 6) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE WRIT APPEAL FILED BY THE APPELLANT CHALLENGING THE VALIDITY OF AMENDMENT IS PENDING AND CONSEQUENTLY THE IMPUGNED ADDITION AS M ADE FOR THE RELEVANT YEAR IS UNSUSTAINABLE AND ACCORDINGLY LIAB LE TO BE DELETED. 7) THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMI NG THE ORDER OF THE AO OF AN AMOUNT OF RS.45,02.26.725/- AS ACCRUED INT EREST ON ICD'S ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE NON- RECEIVABLE INTEREST ON ICD'S WERE SHOWN AS INCOME I N THE BOOKS OF ACCOUNTS OF THE APPELLANT AND SUBSEQUENTLY CLAIMED AS BAD DEBT IN THE BOOKS OF THE APPELLANT. 9) THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIA TE THAT THE ACCOUNTING PROCEDURE OF THE APPELLANT AND THE ENTRI ES PASSED BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS SATISFY THE COND ITIONS FOR CLAIMING BAD DEBTS ON THE FACTS AND CIRCUMSTANCES OF THE CAS E. 10) THE LEARNED AUTHORITIES BELOW ERRED IN OBSERVIN G THAT THE PROCEDURE TO CLAIM BAD DEBT IS BY DISCLOSURE IN THE PROFIT AND LOSS ACCOUNT BY WAY OF WRITING OFF A DEBT AS AN EXPENDIT URE CORRESPONDING TO AN AMOUNT WHICH HAS BEEN ALREADY OFFERED AS AN I NCOME IN THE SAME OR EARLIER PREVIOUS YEAR AND SUCH OBSERVATIONS ARE CONTRARY TO THE PLAIN LANGUAGE OF THE INCOME TAX ACT WHICH ONLY CONTEMPLATES WRITING OFF IN THE ACCOUNTS AND HENCE THE ADDITION REQUIRES TO BE DELETED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 11) WITHOUT PREJUDICE, THE SAID AMOUNT OF RS.45,02, 26,725/- IS NOT TAXABLE AS IT IS NOT THE REAL INCOME OF THE APPELLA NT AND CONSEQUENTLY THE ADDITION MADE IS LIABLE TO BE DELETED ON THE FA CTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 15 OF 44 12) FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 4. NOW, WE TAKE NOTE OF ALL THE TECHNICAL ISSUES AN D THE ISSUES ON MERIT IN THESE SEVEN YEARS. BOTH SIDES HAVE FILED WRITTEN SUBMISSI ONS ON BOTH ASPECTS I.E. TECHNICAL ASPECTS AS WELL AS ON MERIT. WE REPRODUCE THESE SUBMISSIONS. THE SUBMISSIONS OF THE ASSESSEE ARE AS UNDER AS PER THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ON 04.10.2018:- WE WOULD LIKE TO HUMBLY SUBMIT THAT THERE ARE TOTAL LY 7 APPEALS FOR WHICH WE ARE FILING THIS CONSOLIDATED WRITTEN STATE MENT. THERE ARE SEVERAL COMMON ISSUES IN ALL THESE 7 APPEALS. WE AR E HEREWITH FURNISHING A TABLE OF THE ISSUES ALONG WITH THE ASS ESSMENT YEAR DURING WHICH THE ISSUE EXISTS. S.NO ISSUE ASSESSMENT YEARS 1. VALIDITY OF SEARCH 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 2. NOTICE ISSUED U/S 153A WAS BAD IN LAW 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 3. SCOPE OF ASSESSMENT PURSUANT TO SEARCH PROCEEDINGS 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 4. CALCULATION OF EXEMPTION U/S 10AA 2008-09, 2010-11, 2011-12, 2012-13 5. ADDITION OF INTEREST NOT RECEIVED ON INTER CORPORATE DEPOSITS 2009-10, 2010-11, 2011-12, 2013-14, 2014-15 6. LOSS OF GOLD 2011-12 7. BOOK PROFIT AS DETERMINED U/S 115 JB 2012-13, 2013-14, 2014-15 8. LEVY OF INTEREST U/S 234A, 234B AND 234C CONSEQUENT TO THE RELIEF WE ARE HEREWITH SUBMITTING OUR WRITTEN STATEMENT FO R EACH OF THE ISSUES AS FOLLOWS, 1. VALIDITY OF SEARCH: THIS ISSUE EXISTS IN 6 APPEA LS FOR THE RESPECTIVE ASSESSMENT YEARS 2008-09, 200910, 2010-11, 2011-12, 2012-13 AND 2013-14. THE APPELLANT HUMBLY SUBMITS THAT THERE WAS NO VALI D REASON FOR THE SEARCH WHICH WAS CONDUCTED BY THE DEPARTMENT PU RSUANT TO WHICH THE ASSESSMENT FOR SEVEN YEARS WAS DONE UNDER SECTI ON 153A R.W.S 143 (3) OF THE ACT. THE MANDATORY CONDITION FOR INITIAT ING A SEARCH AS CONTEMPLATED UNDER THE PROVISIONS OF SECTION 132(1) (A), (B) & (C) OF THE ACT DID NOT EXIST. AS PER THE PROVISIONS OF SEC TION 132, IT IS REQUIRED THAT THERE HAS TO BE A VALID REASON FOR TH E SEARCH TO BE CONDUCTED. THE DEPARTMENT HAS NOT FURNISHED ANY VAL ID REASON FOR CONDUCTING THE SEARCH WHICH INFERS THAT THERE HAS B EEN NO VALID ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 16 OF 44 REASON FOR CONDUCTING THE SEARCH. THE APPELLANT HAD MADE A DETAILED SUBMISSION TO THE COMMISSIONER OF INCOME TAX (A), WHICH HAS BEEN BROU GHT OUT IN THE APPEAL ORDER BUT IN SPITE OF VALID SUBMISSIO N THE LEARNED COMMISSIONER (A) HAS DISMISSED THE CONTENTIONS OF T HE APPELLANT. WE HAVE MADE DETAILED SUBMISSIONS IN THE STATEMENT OF FACTS AND THE GROUNDS OF APPEAL FILED ALONG WITH THE FORM OF APPEAL, WE HAVE ALSO CITED VARIOUS JUDGMENTS OF THE HONOURABLE COUR TS IN THE STATEMENT OF FACTS AND THE GROUNDS OF APPEAL. WE HU MBLY REQUEST YOUR HONOUR TO CONSIDER THESE SUBMISSIONS. IN VIEW OF THE ABOVE SUBMISSIONS THE ORDERS PASSED BY THE LEARNED ASSESSING OFFICER AND CONFIRMED ON THIS ISS UE BY THE COMMISSIONER OF INCOME TAX (A) ARE WITHOUT JURISDIC TION AND CONSEQUENTLY THE IMPUGNED ASSESSMENT ORDER REQUIRES TO BE CANCELLED IN THE INTEREST OF JUSTICE AND EQUITY. 2. NOTICE ISSUED U/S 153A WAS BAD IN LAW: THIS ISSUE EXISTS IN 6 APPEALS FOR THE RESPECTIVE ASSESSMENT YEARS 2008-09 , 2009-10, 2010-11, 2011-12, 2012-13, 2013-14. THE APPELLANT HUMBLY SUBMITS THAT THE NOTICE ISSUED UNDER SECTION 153A WAS VAGUE AND INCORRECT AS THE NOTICE HAD NOT SPECIFIED WEATHER THE NOTICE WAS FOR ASSESSING OR R E-ASSESSING THE INCOME OF THE APPELLANT. THE NOTICE WAS SENT IN THE FORM OF A STANDARD FORM WITHOUT STRIKING OFF THE NOT APPLIC ABLE PORTION WHICH ESTABLISHES THAT THE NOTICE HAD BEEN ISSUED W ITHOUT PROPER APPLICATION OF MIND. A VAGUE NOTICE AND A NO TICE ISSUED WITHOUT APPLICATION OF PROPER MIND IS NOT A NOTICE IN THE EYE OF LAW. THE NOTICE HAD ALSO NOT RECORDED SATISFACTION AND THE MANDATORY REQUIREMENTS FOR ASSUMING JURISDICTION HA D NOT BEEN COMPLIED WITH HENCE THE NOTICE ISSUED U/S 153A WAS BAD AT LAW. THE ASSESSMENTS CONDUCTED UNDER SECTION 153A R.W.S 143(3) OF THE ACT COULD NOT HAVE BEEN CONDUCTED AFTER ISSUING A NOTICE WHICH WAS BAD AT LAW HENCE THE ASSESSMENTS SHOULD B E ANNULLED AND CONSIDERED NULL AND VOID. THE APPELLANT HAD MADE A DETAILED SUBMISSIONS TO TH E COMMISSIONER OF INCOME TAX (A) IN THIS REGARD, WHIC H HAVE BEEN BROUGHT OUT IN THE APPEAL ORDER BUT IN SPITE OF VAL ID SUBMISSIONS THE LEARNED COMMISSIONER (A) HAS DISMISSED THE CONTENTI ONS OF THE APPELLANT. WE HAVE MADE DETAILED SUBMISSIONS IN THE STATEMENT OF FACTS AND THE GROUNDS OF APPEAL FILED ALONG WITH THE FORM OF APPEAL, WE HAVE ALSO CITED VARIOUS JUDGMENTS OF THE HONOURABLE COUR TS IN THE STATEMENT OF FACTS AND THE GROUNDS OF APPEAL. WE HU MBLY REQUEST YOUR HONOUR TO CONSIDER THESE SUBMISSIONS. IN VIEW OF THE ABOVE SUBMISSIONS THE NOTICE ISSUED U/S 153(A) BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME TAX (A) IS WITHOUT JURISDICTION AND CONSEQUE NTLY THE NOTICE ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 17 OF 44 ISSUED U/S 153A IS REQUIRED TO BE CONSIDERED AS BAD AT LAW AND NULL AND VOID. 3.SCOPE OF ASSESSMENT PURSUANT TO SEARCH PROCEEDING S: THIS ISSUE EXISTS IN 6 APPEALS FOR THE RESPECTIVE ASSESSMENT Y EARS 2008-09, 2009- 10, 2010-11, 2011-12, 2012-13, 2013-14. THE APPELLANT HUMBLY SUBMITS THAT THE ADDITIONS MAD E IN THE ASSESSMENT ORDER WERE NOT ARISING FROM THE SEIZED M ATERIAL. THE LEARNED ASSESSING OFFICER HAS FAILED TO DEMONSTRATE THAT THE ADDITIONS MADE WERE ARISING FROM THE SEIZED MATERIAL. IT IS A SETTLED LAW THAT THE EXISTENCE OF SEIZED MATERIAL IS OF PARAMOUNT IMPORT ANCE AND AN ABSOLUTE NECESSITY FOR MAKING AN ASSESSMENT UNDER S ECTION 153A. THE LEARNED COMMISSIONER(A) HAS NOT APPRECIATED THE BINDING DECISION OF THE JURISDICTIONAL HIGH COURT IN RELATI ON TO THE SEARCH ASSESSMENT AND HAS DISMISSED THE VALID SUBMISSIONS OF THE APPELLANT. WE HAVE MADE DETAILED SUBMISSIONS IN THE STATEMENT OF FACTS AND THE GROUNDS OF APPEAL FILED ALONG WITH THE FORM OF APPEAL, WE HAVE ALSO CITED VARIOUS JUDGMENTS OF THE HONOURABLE COUR TS IN THE STATEMENT OF FACTS AND THE GROUNDS OF APPEAL. WE HU MBLY REQUEST YOUR HONOUR TO CONSIDER THESE SUBMISSIONS. IN VIEW OF THE ABOVE SUBMISSIONS THERE WAS NO SCOPE FOR THE ASSESSMENT PROCEEDINGS IN VIEW OF THE NON EXISTENCE OF THE SEIZED MATERIAL FOR THE ADDITIONS MADE IN THE ASSES SMENT ORDER. HENCE THE ASSESSMENT PROCEEDINGS AND THE ASS ESSMENTS MADE ARE REQUIRED TO BE CONSIDERED BAD AT LAW AND N ULL AND VOID. 4.CALCULATION OF EXEMPTION U/S 10AA: THIS ISSUE EXISTS IN 4 APPEALS FOR THE RESPECTIVE ASSESSMENT YEARS 2008-09, 2010-1 1, 2011-12, 2012-13. THE APPELLANT CLAIMED EXEMPTION UNDER SECTION 10AA OF THE ACT IN RESPECT OF IT'S ENTITLEMENTS UNDER THE EXEMP TION PROVISIONS. THE LEARNED ASSESSING OFFICER HAD REWOR KED THE INCOME OF THE APPELLANT BASED ON THE VARIOUS ADDITI ONS PROPOSED AND DISALLOWED THE EXEMPTION UNDER SECTION 10AA. IN THE LIGHT OF THE VARIOUS RELIEFS GRANTED BY THE LEARNED COMMISSIONER(A) THE LEARNED COMMISSIONER(A) OUGHT T O HAVE DIRECTED THE LEARNED ASSESSING OFFICER TO REWORK TH E ELIGIBLE DEDUCTION UNDER SECTION 10AA IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE APPELLANT HUMBLY SUBMITS TO THIS HOUNOURABLE TR IBUNAL TO DIRECT THE LEARNED ASSESSING OFFICER TO GRANT TH E CORRECT EXEMPTION UNDER SECTION 10AA AS PER THE PROVISIONS OF LAW. 5.ADDITION OF INTEREST NOT RECEIVED ON INTER CORPOR ATE DEPOSITS:THIS ISSUE EXISTS IN 5 APPEALS FOR THE RESPECTIVE ASSESS MENT YEARS 2009-10, 2010-11, 2011-12, 2013-14, 2014-15. THE APPELLANT COMPANY PROVIDES INTER CORPORATE DEPO SITS ON ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 18 OF 44 INTEREST TO VARIOUS CORPORATE. THE INTEREST RECEIVE D ON SUCH DEPOSITS IS CREDITED TO THE INTEREST ACCOUNT AND IS INCLUDED IN THE TAXABLE INCOME. IN CASE OF ACCRUED INTEREST WHICH WAS NOT RECEIVED BY THE APPELLANT, THE APPELLANT CREDITED THE INTEREST ACCOUNT AND DEB ITED THE PARTY'S ACCOUNT. IN CASES WHERE THE APPELLANT COULD NOT REC OVER THE INTEREST IN SPITE OF IT'S BEST EFFORTS, THE APPELLANT DEBITED T HE INTEREST ACCOUNT AND HAD WRITTEN OFF THE RECEIVABLES OF THE PARTY BY CRE DITING THE PARTY'S ACCOUNT. THIS ACTION OF THE APPELLANT WAS CLEARLY A S PER THE LAW. THE LEARNED ASSESSING OFFICER ADDED BACK THE WRITTE N OFF INTEREST TO THE INCOME OF THE APPELLANT BY CONTENDI NG THAT THE APPELLANT WAS FOLLOWING DUAL SYSTEM OF ACCOUNTING W HEREIN THE APPELLANT WAS FOLLOWING THE CASH ACCOUNTING SYSTEM WITH REGARD TO THE ACCRUED INTEREST TO BE RECEIVED ON TH E INTER CORPORATE DEPOSITS AND WAS FOLLOWING MERCANTILE ACC OUNTING SYSTEM IN ALL OTHER ACCOUNTING. THE LEARNED ASSESSI NG OFFICER CONTENDED THAT THE ACT DID NOT PERMIT DUAL ACCOUNTI NG SYSTEM AND HENCE THE ACCRUED INTEREST ON THE INTER CORPORA TE DEPOSITS WAS ADDED BACK TO THE INCOME OF THE APPELLANT. THE APPELLANT SUBMITTED THAT IT HAD NOT FOLLOWED DU AL ACCOUNTING SYSTEM AND ALL IT'S ACCOUNTING INCLUDING THE ACCOUNTING OF INTEREST ON THE INTER CORPORATE DEPOS ITS WAS UNDER THE MERCANTILE ACCOUNTING SYSTEM. THE APPELLA NT SUBMITTED THAT WRITING OFF OF THE NON RECOVERABLE I NTEREST DID NOT AMOUNT TO ADOPTING CASH ACCOUNTING SYSTEM. THE APPELLANT SUBMITTED DETAILED EXPLANATION ALONG WITH ALL THE R ELEVANT DOCUMENTS AND LEDGER COPIES OF THE RELEVANT ACCOUNT S TO THE LEARNED ASSESSING OFFICER. THE LEARNED ASSESSING OF FICER HAS ACKNOWLEDGED ALL THE SUBMISSIONS OF THE APPELLANT I N THE ASSESSMENT ORDER BUT WITHOUT FURNISHING ANY VALID R EASONS HAS PROCEEDED TO ADD THE WRITTEN OFF INTEREST TO THE IN COME OF THE APPELLANT. THE APPELLANT SUBMITTED DETAILED EXPLANATION TO THE LEARNED COMMISSIONER(A) ALONG WITH ALL THE RELEVANT DOCUMEN TS AND ACCOUNT EXTRACTS. THE LEARNED COMMISSIONER(A) APPRECIATED A ND ACKNOWLEDGED THE SUBMISSION OF THE APPELLANT IN THE APPEAL ORDER BUT DISMISSED THE GROUND OF THE APPELLANT WITHOUT CITIN G ANY VALID REASONS. THE APPELLANT SUBMITTED THAT THE APPELLANT EXTENDED INTER CORPORATE DEPOSITS TO VARIOUS COMPANIES. SOME OF TH E COMPANIES TO WHOM THE APPELLANT HAD EXTENDED THE IN TER CORPORATE DEPOSITS DEFAULTED AND REFUSED TO PAY INT EREST IN SPITE OF STRONG FOLLOW UP AND LEGAL ACTION BY THE APPELLA NT. IN SPITE OF THE BEST EFFORTS THE APPELLANT WAS NOT ABLE TO R ECOVER THE INTEREST. HENCE THE APPELLANT DECIDED TO WRITE OFF INTEREST RECEIVABLE FROM SUCH PARTIES IN ITS BOOKS OF ACCOUN TS. THE APPELLANT ACCOUNTED FOR THE INTEREST AS A CREDI T IN THE INTEREST ACCOUNT AND DEBITED THE PARTIES ACCOUNT FOR THESE A MOUNTS. AFTER DECIDING TO WRITE OF THE AMOUNTS WHICH WERE NOT POS SIBLE TO RECOVER ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 19 OF 44 THE APPELLANT DEBITED THE INTEREST ACCOUNT AND CRED ITED THE PARTIES ACCOUNT AS BAD DEBTS. THE APPELLANT SUBMITTED DURING THE ASSESSMENT PROCEEDINGS THAT THE ACCOUNTING ULTIMATELY RESULTED IN THE NET EFFECT OF INTEREST RECEIVED OR RECEIVABLE BEING CHA RGED TO THE PROFIT AND LOSS ACCOUNT AND NON RECEIPT BEING CLAIM ED AS A BAD DEBT. TWO WAY ENTRIES WERE NOT MANDATORY AS PER THE SCHEME OF THE ACT. DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS THE APPELLANT FILED THE LEDGER COPIES OF THE RELEVANT P ORTION IN THE BOOKS OF THE APPELLANT BEFORE THE LEARNED ASSESSING OFFICER. IT CAN BE SEEN FROM THE LEDGERS THAT THE APPELLANT ACC OUNTED FOR THE INTEREST BY THE CREDITING THE SAME AND THEN HAD WRITTEN OFF THE NON RECEIVABLE INTEREST AS BAD DEBTS, WHICH IS PERFECTLY CORRECT AS PER THE ACT. IT IS ONLY FROM THESE LEDGE R ACCOUNTS THAT THE ASSESSING OFFICER OBTAINED THE AMOUNTS WHICH SH E HAS DISALLOWED. THE APPELLANT FURTHER SUBMITTED DURING THE ASSESSME NT PROCEEDINGS THAT THE MANNER OF WRITING THE BOOKS OF ACCOUNTS CA NNOT DECIDE THE ALLOWABILITY UNDER THE ACT. THE METHOD ADOPTED BY T HE APPELLANT IS ONE OF THE METHODS TO WRITE OFF BAD DEBTS AND HENCE THE TRANSACTION WHICH IS BEING PROPOSED IS REVENUE NEUTRAL AND THE ASSESSING OFFICER SHOULD NOT HAVE ADDED THE AFORESAID AMOUNT AS INCOM E. THE ASSESSING OFFICER HAS TAKEN ONE PART OF THE TRANSACTIONS OF T HE CREDIT TO INTEREST ACCOUNT BUT IGNORED THE OTHER WHICH IS DEBITED TO I NTEREST ACCOUNT BY WAY OF BAD DEBTS RESULTING IN INCOME WHICH IS CONTR ARY TO LAW. THE APPELLANT HAD WRITTEN OFF THE INTEREST WHICH TH E APPELLANT DID NOT RECEIVE AS BAD DEBTS IN THE BOOK OF THE APPELLANT AND WHATEVER THE INTEREST WHICH WAS RECEI VED AND WHICH WAS RECEIVABLE WHICH WAS NOT A BAD DEBT WAS A CCOUNTED IN THE PROFIT AND LOSS ACCOUNT. THE APPELLANT FURTH ER SUBMITTED THAT THE METHOD OF WRITING OFF IN THE BOOKS IS NOT IMPORTANT AND SIMILARLY THE METHOD OF PREPARING THE PROFIT AN D LOSS ACCOUNT IS NOT IMPORTANT AS LONG AS THERE IS NO DIF FERENCE IN THE NET RESULT. THE LEARNED ASSESSING OFFICER AND THE CIT (A) WITHO UT APPRECIATING THE SUBMISSION OF THE APPELLANT OBSERVED THAT THE P ROCEDURE TO CLAIM BAD DEBT IS BY DISCLOSURE IN THE PROFIT AND LOSS AC COUNT BY WAY OF WRITING OFF A DEBT AS AN EXPENDITURE CORRESPONDING TO AN AMOUNT WHICH HAS BEEN ALREADY OFFERED AS AN INCOME IN THE SAME OR AN EARLIER PREVIOUS YEAR. THEY FURTHER OBSERVED THAT THE APPEL LANT HAS FAILED TO DISCLOSE THE SAME IN THE PROFIT AND LOSS ACCOUNT, T HEREFORE IT CANNOT BE SAID THAT THE APPELLANT HAD OFFERED THE INCOME IN T HE SAID PREVIOUS YEAR OR ANY EARLIER PREVIOUS YEAR. THEREFORE THE AP PELLANTS CLAIM OF BAD DEBT IS DISALLOWED AND THE ACCRUED INTEREST IS ADDED TO THE INCOME OF THE APPELLANT. THE LEARNED ASSESSING OFFICER AND THE CIT (A) FAILE D TO APPRECIATE THE DETAILED SUBMISSION MADE BY THE APPELLANT AND T HE APPELLANTS ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 20 OF 44 EXPLANATION AND THE DOCUMENTS PRODUCED BY THE APPEL LANT IN REGARD TO THE BAD DEBTS CLAIMED BY THE APPELLANT. A PLAIN READING OF THE PROVISIONS OF SECTION 36(1)( VIII) CLEARLY INDICATES THAT 'THE DEBT OR PART THEREOF WH ICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSE E'. THAT IS PRECISELY WHAT THE APPELLANT HAS DONE. THERE IS NOT HING IN THE SECTION TO INDICATE THAT IT HAS TO BE WRITTEN OFF I N THE PROFIT AND LOSS ACCOUNT. THE NECESSARY LEDGER COPIES HAVE ALSO BEEN GIVEN WHICH FORTIFIED THE APPELLANTS CONTENTIONS. THE ASSESSING OFFICER HAS WRONGLY SURMISED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS ADMITTED IN THE POST SEARCH PROCEEDINGS THAT IT WAS ACCOUNTING THE INCOM E ONLY ON CRYSTALLIZATION THEREOF. FURTHER THE ASSESSING OFFI CER HAS WRONGLY NOTED THAT THE ASSESSEE AT THAT TIME WAS NOT WRITIN G OFF THE ACCRUED INTEREST AS BAD DEBTS. THE FACT OF THE SITUATION IS THAT THE ASSESSEE HAS ALWAYS FOLLOWED THE MERCANTILE SYSTEM OF ACCOUNTING AND HAS ALWAYS CREDITED IN ITS BOOKS OF ACCOUNTS THE INTEREST RECE IVED AND ALSO THE INTEREST RECEIVABLE. ONLY AFTER EXHAUSTING ALL ITS EFFORTS FOR RECOVERING THE DUE INTEREST, IF THE ASSESSEE HAD COME TO A CON CLUSION THAT THE INTEREST WAS NOT RECOVERABLE ONLY THEN THE ASSESSEE HAD WRITTEN OFF SUCH RECEIVABLE FROM THE PARTIES AS BAD DEBTS. THE ASSSESSEE HAS ALWAYS HELD THAT IT IS FOLLOWING THE MERCANTILE SYS TEM OF ACCOUNTING. THE LEARNED ASSESSING OFFICER IS NOT CORRECT IN FAC TS AND IN LAW IN MAKING ADDITION IN THIS REGARD AND THE CONFIRMATION OF THE SAME BY THE CIT (A) IS CONTRARY TO LAW, FACTS AND TRAVERSITY OF JUSTICE. IT IS ALSO RELEVANT TO POINT OUT THAT THE INCOME TA X IS ON REAL INCOME AND CONSEQUENTLY THE MONEY WHICH HAS NOT BEEN RECEI VED AND WHICH IS NOT GOING TO BE RECEIVED AND WHICH HAS BEEN WRITTEN OFF AS BAD DEBTS CANNOT BE TAXED AT ALL. THE ADDITION IS BAD IN LAW AND ALSO ON FACTS OF THE CASE. THE CIT (A) HAS CONFIRMED THE ABOVE ADDITION ON THR EE GROUNDS NAMELY (A) THAT THE APPELLANT IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING (B) THE PROCEDURE CONTEMPLATED UNDER SECTION 36(2) HAS NOT BEEN FOLLOWED (C) THE APPELLA NT HAD NOT INFORMED THE POSITION AT THE TIME OF SEARCH BEFORE THE DDIT. THE FINDING OF CIT (A) ARE PERVERSE BOTH IN LAW AND ON FACTS AS HE AFTER HAVING EXHAUSTIVELY REPRODUCED MOST OF THE DETAILED SUBMISSIONS OF THE APPELLANT IN HIS ORDER HAS CRYPT ICALLY GIVEN HIS DECISION WITHOUT EVEN ADJUDICATING THE SAME AND ADDRESSING THE ISSUES RAISED IN DETAIL. HE HAS REPRODUCED THE SUBMISSIONS OF THE APPELLANT BUT HAS NOT GIVEN A FINDING AS TO HOW THE ORDER OF THE ASSESSMENT OFFICER IS TENABLE IN LAW AND ON THE FACTS OF THE CASE. THE CIT (A) APPARENTLY HAS GONE BY THE STATEMENT OF THE AUDITOR THAT APPELLANT IS FOLLOWING CASH SYSTEM OF ACCOUNTING. FURTHER THE CIT (A) STATES THAT WE HAVE NOT FILED A LETTER FROM THE AUDITOR DURING THE ASSESSMENT OR APPELLATE PROCEEDI NGS. THE APPELLANT APPEARED ON SEVERAL OCCASIONS AND THE CIT (A) HAD ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 21 OF 44 NEVER SOUGHT FOR SUCH A LETTER FROM THE AUDITOR. THE CIT (A) HAS ALSO STATED THAT THE SAID POSITION WAS NOT STATED DURING SEARCH PROCEEDINGS WHICH ASPECT HAS B EEN ADEQUATELY REBUTTED IN THE WRITTEN SUBMISSIONS WHIC H ARE REPRODUCED IN THE APPELLATE ORDER BUT CIT (A) HAS F AILED TO TAKE NOTE OF THE SAME. FURTHER CIT (A) ADDS THAT THE ASSESSING OFFICER HAS STATED THAT THE PROCEDURE LAID DOWN UNDER SECTION 36(2) HAVE NO T BEEN COMPLIED WITH. THIS FINDING OF THE ASSESSING OFFICE R IS INCORRECT AND THE CIT(A) OUGHT TO HAVE EXAMINED THE DETAILS F ILED AND ARRIVED AT A CONCLUSION AS TO THE CORRECTNESS OF TH E FINDING OF THE OFFICER. THE CIT (A) HAS NOT DONE THE SAME AND THUS THE ORDER SUFFERS FROM VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. THE CIT (A) FAILED TO APPRECIATE THAT THE APPELLANT HAS WRITTEN OFF THE AMOUNT IN ITS ACCOUNTS AND MERELY BECAUSE THE S AME HAS NOT BEEN REFLECTED IN THE PROFIT AND LOSS STATEMENT, CANNOT SURMISE THAT THE MAKE THE WRITE OFF WAS IN ACCORDANCE WITH PROCEDURE NOR CAN IT BE HELD THAT IT IS FATAL TO THE ALLOWANCE OF THE SAME THE APPELLANT HAD CREDITED THE INTEREST ACCOUNT AND ALSO DEBITED THE SAME IN RESPECT OF THE AMOUNTS THAT IT FELT ARE NOT RECEIVABLE. THE SAME HAS BEEN NOTICED BY THE AUTHOR ITIES BELOW BUT HAVE FAILED TO ADJUDICATE AS TO HOW THE SAME WI LL NOT BE IN ACCORDANCE WITH THE PROCEDURE CONTEMPLATED UNDER TH E ACT. AT THE COST OF REPETITION IT IS STATED THAT IT IS ONLY FROM SUCH ACCOUNTS OF THE ASSESSEE THAT THE ASSESSING OFFICER ARRIVED AT THE AMOUNT THAT HE HAS ADDED IN THE DETERMINATION OF IN COME WHICH PROVES THAT THE AMOUNTS WERE IN THE ACCOUNTS. THE PROCEDURE CONTEMPLATED IS, THAT IT HAS TO BE WR ITTEN OFF IN THE ACCOUNTS WHICH HAS BEEN DONE. THE CIT (A) IS NOT AB LE TO EXPLAIN AS TO HOW THE ASSESSING OFFICER GOT THE NUMBERS FOR MAKIN G THE ADDITION IF THEY ARE ALL NOT PART OF ACCOUNTS. THE ADDITION MAD E BY THE ASSESSING OFFICER IN THIS REGARD IS TAKEN FROM THE ACCOUNTS O F THE APPELLANT ONLY. THUS TO SAY THAT THE APPELLANT IS FOLLOWING CASH SY STEM OF ACCOUNTING OR NOT FOLLOWED THE PROCEDURE CONTEMPLATED UNDER SE CTION 36(2) OF THE ACT ARE PERVERSE BOTH IN LAW AND ON FACTS OF THE CA SE. IT IS ALSO SETTLED POSITION OF LAW THAT CONSENT CAN NOT CONFER JURISDICTION. THE CIT (A) AFTER HAVING NOTICED THE VARIOUS JUDGMENTS HAS NOT EVEN WHISPERED ABOUT THE SAME IN HIS FINDIN GS. THE APPELLANT COMPANY ADVANCED INTER CORPORATE DEPO SITS ON INTEREST. THE INTEREST RECEIVED AND THE INTEREST AC CRUED WERE CREDITED TO THE INTEREST ACCOUNT AND OFFERED TO TAX. THE ACC RUED INTEREST WAS CREDITED TO THE INTEREST ACCOUNT AND WAS DEBITED TO THE PARTIES ACCOUNT. WHENEVER THE ACCRUED INTEREST TURNED BAD A ND WAS NOT RECOVERABLE IN SPITE OF ALL EFFORTS, SUCH INTEREST WAS WRITTEN OFF BY CREDITING THE PARTIES ACCOUNT AND DEBITING THE INTE REST ACCOUNT. DUE TO THESE ENTRIES THE WRITTEN OFF AMOUNT DID NOT FORM A PART OF THE ANNUAL PROFIT AND LOSS ACCOUNT AS THE SAME WAS WRITTEN OFF BY CREDITING THE PARTIES ACCOUNT AND DEBITING THE INTEREST ACCOUNT, WHICH EFFECTIVELY ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 22 OF 44 REDUCED THE INTEREST RECEIVED AND NULLIFIED THE PAR TIES ACCOUNT AS THE INTEREST WAS NOT RECOVERABLE. EVEN IF THE WRITE OFF WAS EFFECTED IN THE ANNUAL PROFIT AND LOSS ACCOUNT THE NET RESULT WOULD HAVE BEEN THE SAME AS IN BOTH THE CASES THE ACTUAL INTEREST RECEI VED AND RECEIVABLE ONLY WOULD HAVE BEEN OFFERED TO TAX. THE LEARNED ASSESSING OFFICER CONCLUDED THAT THIS M ETHOD OF WRITING THE BOOKS WAS A CASH ACCOUNTING SYSTEM AND NOT MERC ANTILE ACCOUNTING SYSTEM. THE LEARNED AO FURTHER CONCLUDED THAT THE ACT DID NOT PERMIT AN ASSESSEE TO ADOPT TWO TYPES OF ACCOUN TING SYSTEMS AND ADDED BACK THE WRITTEN OFF INTEREST. THE LEARNED AO WAS TOTALLY WRONG IN HIS CONCLUSION BECAUSE THE APPELLANT HAD NOT ADO PTED DUAL ACCOUNTING SYSTEM AND ALL THE ACCOUNTS OF THE APPEL LANT INCLUDING THE ACCOUNTING OF THE ACCRUED INTEREST ON ICD'S WERE AS PER THE MERCANTILE ACCOUNTING SYSTEM. THE LEARNED AO ADDED BACK THE WRITTEN OFF INTEREST, WHICH WAS NEVER A PART OF THE INCOME OF THE APPELLANT. THE APPELLANT SUBMITTED DETAILED REPLY TO THE LEARN ED AO ALONG WITH ALL THE RELEVANT DOCUMENTS INCLUDING THE COPIES OF THE LEDGER OF THE INTEREST ACCOUNT AND THE PARTIES ACCOUNT WHICH CLEARLY ESTABLISHED THAT THE APPELLANT HAD CO RRECTLY OFFERED ALL THE INTEREST RECEIVED AND ACCRUED TO TA X AND HAD WRITTEN OFF THE INTEREST WHICH WAS NOT POSSIBLE TO BE RECEIVED. THE LEARNED AO INSTEAD OF CONSIDERING THE SUBMISSIONS O F THE APPELLANT, REPRODUCED THE SUBMISSIONS IN THE ASSESSMENT ORDER AND WITHOUT ANY LOGIC OR REASON PROCEEDED TO ADD BACK THE NON RECOV ERABLE INTEREST TO THE INCOME OF THE APPELLANT. WHEN THERE WAS NO INCO ME AT ALL HOW CAN THE SAME BE ADDED TO THE INCOME OF THE APPELLANT?. THE APPELLANT CONTESTED THE ILLOGICAL ADDITION AND MADE DETAILED SUBMISSIONS TO THE LEARNED COMMISSIONER(A) ALONG WITH ALL THE RELEVANT DOCUMENTS. THE LEARNED COMMISSIONER(A) ALSO REPRODUCED THE SUBMISS IONS OF THE APPELLANT IN THE ORDER BUT WITHOUT ANY LOGIC UPHELD THE ADDITION MADE BY THE AO. THE ADDITION OF THE NON RECOVERABLE INTEREST TO THE INCOME OF THE APPELLANT IS TOTALLY INCORRECT AND AGAINST THE PROV ISIONS OF THE ACT AND ALSO AGAINST THE PRINCIPALS OF NATURAL JUSTICE BECA USE HOW CAN AN INCOME BE ADDED TO THE INCOME OF THE APPELLANT WHEN SUCH AN INCOME HAS NEVER BEEN RECEIVED, WHEN THE INCOME OR THE MON EY ITSELF HAS NOT BEEN RECEIVED HOW CAN TAX BE PAID ON THE SAME ?. WE HAVE MADE DETAILED SUBMISSIONS IN THE STATEMENT OF FACTS AND THE GROUNDS OF APPEAL FILED ALONG WITH THE FORM OF APPEAL AND ALSO IN THE PAPER BOOKS SUBMITTED BY US. WE HAV E ALSO CITED VARIOUS JUDGMENTS OF THE HONOURABLE COURTS IN THE S TATEMENT OF FACTS AND THE GROUNDS OF APPEAL. WE HUMBLY REQUEST YOUR HONOUR TO CONSIDER THESE SUBMISSIONS. IN VIEW OF THE ABOVE SUBMISSIONS IT IS CLEAR THAT T HE LEARNED AO HAS ERRED IN ADDING BACK THE INTEREST WHICH HAS NEVER B EEN RECEIVED AND WHICH HAS BEEN WRITTEN OFF BY THE APPELLANT IN IT'S BOOKS OF ACCOUNTS AS PER THE PROVISIONS OF THE ACT HENCE THE ACCRUED INT EREST OF THE INTER CORPORATE DEPOSITS ADDED BACK TO THE INCOME OF THE APPELLANT IS ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 23 OF 44 REQUIRED TO BE DELETED IN THE INTEREST OF JUSTICE A ND EQUITY. 6.LOSS OF GOLD: THIS ISSUE EXISTS IN THE APPEAL FOR THE ASSESSMENT YEAR 2011-12. THE APPELLANT IS IN THE BUSINESS OF GOLD AND GOLD J EWELLERY AND OTHER PRODUCTS OF GOLD. AT THE CLOSING OF THE YEAR, THE APPELLANT RECONCILES ALL THE INVENTORY OF GOLD AND GOLD PRODU CTS IN IT'S VARIOUS LOCATIONS BY PHYSICALLY WEIGHING THE SAME. THE RECO NCILED AND PHYSICALLY WEIGHED INVENTORY WOULD BE THE CLOSING S TOCK OF THE APPELLANT WHICH USUALLY MATCHES WITH THE CLOSING ST OCK ARRIVED FROM THE BOOKS OF THE APPELLANT. DURING THE A.Y 2011-12, THE APPELLANT AT THE CLOSE OF THE YEAR RECONCILED ALL IT'S INVENTORY AT VARIOUS LOCATIONS AND FOUND THAT THERE WAS SHORTAGE OF 99.055 KILOS OF GOLD BETWEEN THE BO OK INVENTORY AND THE PHYSICAL INVENTORY. IN SPITE OF REPEATED AND BE ST EFFORTS PUT IN BY THE EXPERT TEAM OF THE APPELLANT COMPANY THEY WERE NOT ABLE TO FIND OUT THE ACTUAL CAUSE OF THE SHORTAGE, THE FACT REMA INED THAT THERE WAS A SHORTAGE OF 99.055 KILOS OF GOLD. DUE TO THIS THE CLOSING INVENTORY WAS REQUIRED TO BE VALUED AT THE ACTUAL PHYSICAL ST OCK AVAILABLE AS IT WOULD NOT BE PROPER TO SHOW INFLATED INVENTORY ESPE CIALLY IN THE LIGHT OF THE FACT THAT THE APPELLANT IS A PUBLIC COMPANY. HENCE IT WAS REQUIRED THAT THE CLOSING INVENTORY IN THE BOOKS WA S REQUIRED TO BE REDUCED BY RS. 19,39,23,044. THE INVENTORY OF 99.055 KILOS WHICH WAS UNTRACEABLE WAS ABOUT 0.047% (4.7 PAISE IN ONE HUNDRED RUPEES) OF T HE TOTAL GOLD TRANSACTED DURING THE YEAR. THE LOSS COULD HAV E BEEN DUE TO VARIOUS REASONS LIKE LOSS IN MANUFACTURING, EXCESS DELIVERY MADE TO CLIENTS, SHORT DELIVERY RECEIVED FROM CLIEN TS, REGULAR PILFERAGE OR DUE TO ANY OTHER REASON BUT THE FACT R EMAINED THAT THERE WAS A SHORTAGE. HOW CAN THE APPELLANT VALUE T HE INVENTORY HIGHER WHILE THERE WAS SHORTAGE IN INVENT ORY. ACCOUNTING PRUDENCE AND GOOD CORPORATE GOVERNANCE R EQUIRES TO VALUE THE ACTUAL AVAILABLE INVENTORY AND NOT AN INFLATED NUMBER AND IT WAS REQUIRED THAT SUCH SHORTAGE BE PU BLICLY REPORTED. THE APPELLANT CONSIDERED THE ACTUAL AVAIL ABLE INVENTORY AND DISCLOSED IN THE ANNUAL REPORT AND OT HER PUBLIC PLATFORM ABOUT THE SHORTAGE OF INVENTORY. DUE TO TH E SHORTAGE IN THE INVENTORY THE PROFIT REDUCED BY RS. 19,39,23 ,044. THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIATE THAT IT IS NORMAL IN THE GOLD BUSINESS TO INCUR LOSS OF GOLD W HILE DEALING WITH VARIOUS ACTIVITIES LIKE MANUFACTURING, INVENTO RY MANAGEMENT, MARKETING, IMPORT AND EXPORT. THE LEARNED AUTHORITIES BELOW ERRED IN NOT ACCEPTIN G THE EXPLANATION OF THE ASSESSEE WITHOUT ANY REASON. THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE ASSESSEE HAD PROVIDED ALL THE DETAILS AS ASKED FOR BY THE ASSESSING OFFICER, AS THERE WERE NO FURTHER DETAILS ASKED BY THE ASSESSING OFFICER, THE ASSESSEE HAD NOT PROVIDED FU RTHER DETAILS, ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 24 OF 44 THE ASSESSING OFFICER HAS ERRED IN STATING THAT THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION. THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THA T IT IS OBVIOUS AND NATURAL THAT WHENEVER THERE IS ANY LOSS OF GOLD THE STOCK WILL CONSEQUENTLY GET REDUCED AND AS A RESULT THE PROFIT IS BOUND TO REDUCE TO THAT EXTENT, THE ASSESSING OFFICER HAS ERRED IN NOT ACCEPTING THE EXPLANATION FOR MAKING THE ADDITION. THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THA T A LOSS OF 0.047% AS A TOTAL OF MANUFACTURING LOSS, INVENTORY LOSS, MARKETING LOSS, IMPORT LOSS, EXPORT LOSS IS A REASONABLE LOSS IN THE BUSINESS OF GOLD AND GOLD PRODUCTS. THE LEARNED ASSESSING OFFICER IN SPITE OF DETAILED EXPLANATION ADDED BACK RS. 19,39,23,044 TO THE INCOME OF THE AP PELLANT WITHOUT OFFERING ANY EXPLANATION OR LOGIC. WE HAVE MADE DETAILED SUBMISSIONS IN THE STATEMENT OF FACTS AND THE GROUNDS OF APPEAL FILED ALONG WITH THE FORM OF APPEAL AND ALSO IN THE PAPER BOOKS SUBMITTED BY US. WE HUM BLY REQUEST YOUR HONOUR TO CONSIDER THESE SUBMISSIONS. IN VIEW OF THE ABOVE SUBMISSIONS IT IS CLEAR THAT T HE LEARNED AO HAS ERRED IN ADDING BACK THE AMOUNT OF RS. 19,39,23,044 TO THE INCOME OF THE APPELLANT AND THE SAME IS REQUIRED TO BE DELETE D IN THE INTEREST OF JUSTICE AND EQUITY. 7.BOOK PROFIT AS DETERMINED AS 115 JB: THIS ISSUE EXISTS IN 3 APPEALS FOR THE RESPECTIVE ASSESSMENT YEARS 2012-13, 2013-1 4, 2014-15. THE LEARNED AO DID NOT ALLOW THE DEDUCTION UNDER SE C 10AA AND 10B WHILE CALCULATING THE BOOK PROFIT FOR THE P URPOSE OF DECIDING THE APPLICABLE MAT. THIS WAS DUE TO THE AM ENDMENT TO SECTION 115 JB MADE IN THE FINANCE BILL. THE APP ELLANT HAS CHALLENGED THE AMENDMENT AND THE MATTER IS PENDING IN WRIT APPEAL BEFORE THE HONORABLE DIVISION BENCH OF THE H IGH COURT OF KARNATAKA. THE APPELLANT CALCULATED THE BOOK PROFIT AFTER CONS IDERING THE DEDUCTION AVAILABLE UNDER SEC 10AA AND 10B AND INFORMED THE LEARNED AO THAT THE MATTER WAS PENDING BEFORE T HE HONORABLE DIVISION BENCH OF THE KARNATAKA HIGH COUR T. THE LEARNED AO SHOULD HAVE CONSIDERED THE REQUEST OF TH E APPELLANT AND REFRAINED FROM CALCULATING THE BOOK P ROFIT WITHOUT CONSIDERING THE DEDUCTION AVAILABLE TO THE APPELLANT UNDER SEC 10 AA AND 10B. THE LEARNED AO DID NOT ACC EPT THE SUBMISSION OF THE APPELLANT AND PROCEEDED WITH CALC ULATION OF THE BOOK PROFIT WITHOUT ALLOWING THE ELIGIBLE DEDUC TION UNDER SECTION 10AA AND 10B. THE APPELLANT PREFERRED AN APPEAL BEFORE THE LEARNE D COMMISSIONER(A) AND MADE THE SUBMISSIONS BUT THE LE ARNED COMMISSIONER(A) ALSO DID NOT CONSIDER THE SUBMISSIO NS OF THE APPELLANT AND SUSTAINED THE ADDITION AS MADE BY THE LEARNED AO. THE LEARNED COMMISSIONER(A) OUGHT TO HAVE APPRECIATED T HAT THE WRIT ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 25 OF 44 APPEAL FILED BY THE APPELLANT CHALLENGING THE VALID ITY OF THE AMENDMENT IS PENDING AND CONSEQUENTLY THE IMPUGNED ADDITION AS MADE FOR THE RELEVANT YEAR WAS UNSUSTAINABLE AND WA S LIABLE TO BE DELETED. 8.LEVY OF INTEREST AS 234A, 2348 AND 234C: THE APPELLANT HUMBLY SUBMITS THAT THE INTEREST U/S 234(A), 234(B) AND 234(C) SHOULD BE RECALCULATED BASED ON THE RELI EFS ACCORDED TO THE APPELLANT BY THE LEARNED COMMISSIONER(A) AND TH IS HONOURABLE TRIBUNAL. THE APPELLANT ALSO HUMBLY SUBMITS THAT TH E LEARNED AO HAS ERRED IN CALCULATING THE INTEREST U/S 234(A), 234(B ) AND 234(C). THE APPELLANT HUMBLY SUBMITS THAT THE LEARNED AO BE DIRECTED TO CORRECTLY CALCULATE THE APPLICABLE INTEREST UNDER 2 34(A), 234(B) AND 234(C) AND WHILE CALCULATING THE INTEREST THE AO SH OULD ALSO CONSIDER THE RELIEFS ACCORDED TO THE APPELLANT BY THE LEARNE D COMMISSIONER(A) AND ALSO BY THIS HONOURABLE TRIBUNAL. THE APPELLANT HUMBLY SUBMITS AND REQUESTS THE HONOU RABLE TRIBUNAL TO CONSIDER THIS CONSOLIDATED WRITTEN STAT EMENT, STATEMENT OF FACTS, GROUNDS OF APPEAL AND THE PAPER BOOK FILED BY THE APPELLANT AND ACCORD RELIEF TO THE APPELLANT IN THE INTEREST OF JUSTICE AND EQUITY. 5. THE WRITTEN SUBMISSIONS OF THE LEARNED DR OF THE REVENUE ARE ON PAGES 1 TO 8 OF THE PAPER BOOK FILED BY THE LEARNED DR OF THE REVEN UE. THE SAME ARE REPRODUCED HEREIN BELOW FOR READY REFERENCE:- WRITTEN SUBMISSION IS AS UNDER:- 1. AS REGARDS VALIDITY OF SEARCH :- 1.1 THE LD. CIT(A) DISMISSED THIS GROUND OF THE ASS ESSEE STATING THAT THE VALIDITY OF SEARCH CANNOT BE QUESTIONED BEFORE THE CIT(A). IN THIS CONNECTION, IT IS SUBMITTED THAT THE HON'BLE SUPREM E COURT IN THE CASE OF N.K.JEWELLERS VS. CIT, NEW DELHI (2017) 85 TAXMA NN.COM 361(SC) HELD THAT IN VIEW OF THE AMENDMENT MADE IN SECTION 132A BY FINANCE ACT, 2017, THE REASON TO BELIEVE OR REASON TO SUSPE CT AS THE CASE MAY BE, SHALL NOT BE DISCLOSED TO ANY PERSON OR ANY AUT HORITY OR APPELLATE TRIBUNAL AS RECORDED BY INCOME TAX AUTHORITY U/S.13 2 OR SECTION 132A. WE, THEREFORE, CANNOT GO INTO THAT QUESTION A T ALL. 1.2 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF PRATHIBHA JEWELLERY HOUSE VS. CIT (2017) 88 TAXMANN.COM 94 (K ARNATAKA) DISMISSED THE WRIT PETITIONS AND HELD THAT EVEN THE LAW HAS BEEN AMENDED BY INSERTION OF THE AFORESAID EXPLANATION B Y PARLIAMENT IN SECTION 132 OF THE ACT BY THE FINANCE ACT, 2017 WIT H RETROSPECTIVE EFFECT FROM 1.4.1962. THE COURT HELD THAT THE EXPLA NATION ALSO PROHIBITS THE APPELLATE AUTHORITIES TO GO INTO THE REASONS RECORDED BY THE CONCERNED INCOME TAX AUTHORITY FOR DIRECTING SE ARCH AGAINST THE ASSESSEE OR TAX PAYER. THE RELEVANT PORTION OF ORDE R IS REPRODUCED BELOW: ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 26 OF 44 '10. HAVING HEARD THE COUNSELS FOR THE PARTIES, THI S COURT IS SATISFIED THAT THE PRESENT WRIT PETITIONS DESERVE T O BE DISMISSED FOR THE FOLLOWING REASONS: (I).. (II)THAT EVEN THE LAW HAS BEEN AMENDED BY INSERTION OF THE AFORESAID EXPLANATION BY PARLIAMENT IN SECTION 132 OF THE ACT BY THE FINANCE ACT, 2017 WITH RETROSPECTIVE EFFECT FROM 1.4.1962. THAT EXPLANATION ALSO PROHIBITS THE APPEL LATE AUTHORITIES TO GO INTO THE REASONS RECORDED BY THE CONCERNED INCOME TAX AUTHORITY FOR DIRECTING SEARCH AGAINST T HE ASSESSEE OR TAX PAYER. (III) THAT THIS AMENDMENT CAME AFTER BOTH, ITAT PAS SED THE ORDER IN THE PRESENT CASE ON 21.11.2014 AS ALSO THE LEARNED CIT(A) PASSED THE IMPUGNED ORDER ON 11.2.2015. NON ETHELESS, RETROSPECTIVE EFFECT OF THE SAID AMENDMENT, WILL HA VE ITS EFFECT ON THE PRESENT CASE AS WELL SO LONG THAT THE SAID A MENDMENT HOLDS THE FIELD. THEREFORE, THE APPELLATE AUTHORITI ES OF THE DEPARTMENT CANNOT BE EXPECTED TO GO INTO THE SAID Q UESTION. IT IS ONLY FOR THE CONSTITUTIONAL COURTS TO EXAMINE THE V IRES AND VALIDITY OF SUCH AMENDMENT AND FOR THAT, A SEPARATE WRIT PETITION IS ALREADY SAID TO BE PENDING. HOWEVER, NO SUCH CHA LLENGE TO THE AMENDMENT HAS BEEN MADE IN THE PRESENT CASE.' 1.3 IN VIEW OF THE ABOVE LEGAL POSITION LAID DOWN B Y THE HON'BLE SUPREME COURT AND THE JURISDICTIONAL HIGH COURT, IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSEE'S GROUND ON QUESTIONING THE VALIDITY OF SEARCH MAY BE REJECTED. 2) AS TO THE GROUND THAT NOTICE ISSUED U/S.153A WAS BAD IN LAW : 2.1 THE ASSESSEE CONTENDED THAT THE NOTICE ISSUED U /S. 153A OF THE ACT WAS BAD IN LAW ON THE GROUND THAT NOTICE DOES NOT I NDICATE AS TO WHETHER IT IS PROPOSED TO ASSESS OR RE-ASSESS AND I S THUS VAGUE. SECTION 153A IS REPRODUCED BELOW: SECTION 153A: '(1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECT ION 153 IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY 2003, THE ASSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FU RNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B) IN THE PRESCRIBED FORM AN D VERIFIED IN THE ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 27 OF 44 PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PART ICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN R EQUIRED TO BE FURNISHED UNDER SECTION 139 ; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSE SSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITI ON IS MADE: PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FAL LING WITHIN SUCH SIX ASSESSMENT YEARS : PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THIS (SUB-SECTION) PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKIN G OF REQUISITION UNDER SECTION 132A AS THE CASE MAY BE, SHALL ABATE. ' 2.2 IN THIS CONNECTION, IT IS RESPECTFULLY SUBMITTE D THAT CLAUSE (A) OF SECTION 153A(1) DEALS WITH ISSUE OF NOTICE TO SUCH PERSON, WHERE A SEARCH IS INITIATED U/S.132 OR BOOKS OF ACCOUNTS ET C. ARE REQUISITIONED U/S.132A, REQUIRING HIM TO FURNISH THE RETURN WITHI N A PRESCRIBED PERIOD FOR EACH OF THE ASSESSMENT YEARS INVOLVED WI TH THE SEARCH PROCEEDINGS. THE CLAUSE ALSO STIPULATES THAT THE RE TURN OF INCOME TO BE FURNISHED IN RESPONSE TO SUCH NOTICE UNDER CLAUSE ( A) WERE TO BE CONSIDERED AS RETURN REQUIRED TO BE FURNISHED U/S.1 39. 2.3 UNDER CLAUSE (B) OF SECTION 153A, THE AO SHALL ASSESS OR RE-ASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS ONCE THE R ETURN IS FILED IN RESPONSE TO CLAUSE (A). 2.4 THE PROVISIONS OF THESE TWO CLAUSES ARE DISTINC T AND SEPARATE AND ONE WILL NOT OVERLAP ONE ANOTHER. IN VIEW OF THIS C LEAR AND DISTINCT PROVISIONS OF BOTH CLAUSE (A) & (B), THERE IS NO NE ED FOR THE ASSESSING OFFICER TO SPECIFY WHETHER THE NOTICE BEING ISSUED U/S.153A IS TO 'ASSESS' OR 'REASSESS' THE TOTAL INCOME, SINCE SUCH EXERCISE HAS TO BE CARRIED OUT UNDER CLAUSE (B) ONLY AFTER THE RETURN IS FILED UNDER CLAUSE (A). 2.5 IN VIEW OF THE ABOVE PROVISIONS OF SECTION 153A ENSHRINED IN CLAUSES (A) AND (B), THE AO ASSUMES JURISDICTION TO 'ASSESS' OR 'REASSESS' ONLY AFTER THE RETURN IS FILED. IF THE R ETURN IS NOT FILED, AO CANNOT ASSUME JURISDICTION TO ASSESS OR REASSESS TH E TOTAL INCOME. IN VIEW OF THIS, IT IS REQUESTED THAT THE ASSESSEE'S C ONTENTION IN THIS REGARD MAY BE REJECTED. 3) AS REGARDS THE SCOPE OF ASSESSMENT PURSUANT TO N OTICE U/S. 153A. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 28 OF 44 3.1 AS INFORMED BY THE ASSESSING OFFICER VIDE LETTE R DATED 05-01-2018, DURING THE COURSE OF SEARCH INCRIMINATING DOCUMENTS RELATING TO THE LOANS / ICDS GIVEN BY THE ASSESSEE COMPANY WERE FOU ND AND SEIZED AS BUNDLE NO. A/REL/01, A/REL/02, A/REL/03, A/REL/04, A/REL/05 FROM THE ASSESSEE'S PREMISES AT NO.1, BRUNTON ROAD, OPP. OLD PASSPORT OFFICE, M.G.ROAD, BANGALORE. KEY AMONGST T HESE ARE BUNDLE NO. A/REL/03 AND A/REL./04 WHICH ARE REGISTERS CONT AINING THE DETAILS OF ICDS. COPY OF THE SAME IS ENCLOSED AS AN NEXURE F AND FL. AFTER EXAMINATION AND ANALYSIS OF THE DOCUMENTS, AD DITION ON ACCOUNTS OF INTEREST ACCRUED ON ICDS HAS BEEN MADE AS UNDER : ASSESSMENT YEAR ADDITION ON ACCOUNT OF INTEREST ACCRUED ON ICDS 2009-10 14,72,595 2010-11 28,79,68,656 2011-12 29,73,46,928 2013-14 43,72,04,622 2014-15 45,02,26,725 TOTAL 1,47,42,19,526 3.2 SINCE THERE IS SEIZURE OF INCRIMINATING MATERIA L BASED ON WHICH ADDITIONS ARE MADE, THE RATIO DECIDED IN THE CASE O F CIT VS. LANCY CONSTRUCTIONS (2016) 66 TAXMANN.COM 264 (KARNATAKA) BY THE JURISDICTIONAL HIGH COURT HAS NO APPLICATION TO THE FACTS OF THIS CASE. 3.3 THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CANARA HOUSING DEVELOPMENT COMPANY 62 TAXMAN.COM 250 (KARNATAKA) H ELD THAT ONCE THE ASSESSMENT IS REOPENED, THE ASSESSING AUTH ORITY CAN TAKE NOTE OF THE INCOME DISCLOSED IN THE EARLIER RETURN, ANY UNDISCLOSED INCOME FOUND DURING SEARCH OR AND ALSO ANY OTHER INCOME WH ICH IS NOT DISCLOSED IN THE EARLIER RETURN OR WHICH IS NOT UNE ARTHED DURING THE SEARCH, IN ORDER TO FIND OUT WHAT IS THE 'TOTAL INC OME' OF EACH YEAR AND THEN PASS THE ASSESSMENT ORDER. THE RELEVANT PO RTION OF THE JURISDICTIONAL HIGH COURT ORDER IS REPRODUCED BELOW : '10. SECTION 153A OF THE ACT STARTS WITH A NON OBST ANTE CLAUSE. THE FETTERS IMPOSED UPON THE ASSESSING OFFICER BY THE S TRICT PROCEDURE TO ASSUME JURISDICTION TO REOPEN THE ASSESSMENT UND ER SECTIONS 147 AND 148, HAVE BEEN REMOVED BY THE NON OBSTANTE CLAU SE WITH WHICH SUB SECTION (1) OF SECTION 153A OPENS. THE TIME-LIM IT WITHIN WHICH THE NOTICE UNDER SECTION 148 CAN BE ISSUED, AS PROV IDED IN SECTION 149 HAS ALSO BEEN MADE INAPPLICABLE BY THE NON OBST ANTE CLAUSE. SECTION 151 WHICH REQUIRES SANCTION TO BE OBTAINED BY THE ASSESSING OFFICER BY ISSUE OF NOTICE TO REOPEN THE ASSESSMENT UNDER SECTION 148 HAS ALSO BEEN EXCLUDED IN A CASE COVERE D BY SECTION ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 29 OF 44 153A. THE TIME-LIMIT PRESCRIBED FOR COMPLETION OF A N ASSESSMENT OR REASSESSMENT BY SECTION 153 HAS ALSO BEEN DONE AWAY WITH IN A CASE COVERED BY SECTION 153A. WITH ALL THE STOPS HA VING BEEN PULLED OUT, THE ASSESSING OFFICER UNDER SECTION 153 A HAS BEEN ENTRUSTED WITH THE DUTY OF BRINGING TO TAX THE TOTA L INCOME OF AN ASSESSEE WHOSE CASE IS COVERED BYSECTION 153A, BY E VEN MAKING REASSESSMENTS WITHOUT ANY FETTERS, IF NEED BE. THER EFORE, IT IS CLEAR EVEN IF AN ASSESSMENT ORDER IS PASSED UNDER SECTION 143(1) OR 143(3) OF THE ACT, THE ASSESSING OFFICER IS EMPOWER ED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME TAK ING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SE ARCH. AFTER SUCH REOPENING OF THE ASSESSMENT, THE ASSESSING OFFICER IS EMPOWERED TO ASSESS OR REASSESS THE TOTAL INCOME OF THE AFORESAI D YEARS. THE CONDITION PRECEDENT FOR APPLICATION OF SECTION 153A IS THERE SHOULD BE A SEARCH UNDER SECTION 132. INITIATION OF PROCEE DINGS UNDER SECTION 153A IS NOT DEPENDENT ON ANY UNDISCLOSED IN COME BEING UNEARTHED DURING SUCH SEARCH. THE PROVISO TO THE AF ORESAID SECTION MAKES IT CLEAR THE ASSESSING OFFICER SHALL ASSESS O R REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FAL LING WITHIN SUCH SIX ASSESSMENT YEARS. IF ANY ASSESSMENT PROCEEDINGS ARE PENDING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THE AFORESAID SUB-SECTION ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132, THE SAID PROCEEDING SHALL ABATE. IF SU CH PROCEEDINGS ARE ALREADY CONCLUDED BY THE ASSESSING OFFICER BY I NITIATION OF PROCEEDINGS TINDER SECTION 153A, THE LEGAL EFFECT I S THE ASSESSMENT GETS REOPENED. THE BLOCK ASSESSMENT ROPED IN ONLY T HE UNDISCLOSED INCOME AND THE REGULAR ASSESSMENT PROCEEDINGS WERE PRESERVED, RESULTING IN MULTIPLE ASSESSMENTS. UNDER SECTION 15 3A, HOWEVER, THE ASSESSING OFFICER HAS BEEN GIVEN THE POWER TO A SSESS OR REASSESS THE 'TOTAL INCOME' OF THE SIX ASSESSMENT Y EARS IN QUESTION IN SEPARATE ASSESSMENT ORDERS. THE ASSESSING OFFICE R IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME, TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEARTHED D URING THE SEARCH. HE HAS BEEN ENTRUSTED WITH THE DUTY OF BRIN GING TO TAX THE TOTAL INCOME OF AN ASSESSEE WHOSE CASE IS COVERED B Y SECTION 153A, BY EVEN MAKING REASSESSMENTS WITHOUT ANY FETTERS. T HIS MEANS THAT THERE CAN BE ONLY ONE ASSESSMENT ORDER IN RESPECT O F EACH OF THE SIX ASSESSMENT YEARS, IN WHICH BOTH THE DISCLOSED AND T HE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX. WHEN ONCE THE PROCE EDINGS ARE INITIATED UNDER SECTION 153A OF THE ACT, THE LEGAL EFFECT IS EVEN IN CASE WHERE THE ASSESSMENT ORDER IS PASSED IT STANDS REOPENED. IN THE EYE OF LAW THERE IS NO ORDER OF ASSESSMENT. RE- OPENED MEANS TO DEAL WITH OR BEGIN WITH AGAIN. IT MEANS THE ASSESSI NG OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSME NT YEARS. ONCE THE ASSESSMENT IS REOPENED, THE ASSESSING AUTHORITY CAN TAKE NOTE OF THE INCOME DISCLOSED IN THE EARLIER RETURN, ANY UNDISCLOSED INCOME FOUND DURING SEARCH OR AND ALSO ANY OTHER IN COME WHICH IS NOT DISCLOSED IN THE EARLIER RETURN OR WHICH IS NOT UNEARTHED DURING ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 30 OF 44 THE SEARCH, IN ORDER TO FIND OUT WHAT IS THE 'TOTAL INCOME' OF EACH YEAR AND THEN PASS THE ASSESSMENT ORDER. 3.4 THE LD. CIT(A) RELYING ON THE ABOVE JUDGEMENTS OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CANARA HOU SING DEVELOPMENT COMPANY OPINED THAT THE SUBSEQUENT DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF LANCY CONSTRUCT IONS HAS NOT CHANGED THE POSITION AS THE FORMER DECISION HAS NOT BEEN CONSIDERED IN LATTER DECISION. HENCE, THE DECISION IN THE CASE OF CANARA HOUSING DEVELOPMENT COMPANY (SUPRA) HOLDS GOOD IN THE FACTS OF THE PRESENT ASSESSEE'S CASE. 3.5 IN VIEW OF THIS LEGAL POSITION, RELYING ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CA NARA HOUSING DEVELOPMENT COMPANY (SUPRA), IT IS RESPECTFULLY PRA YED THAT THE ASSESSEE'S GROUND ON THE SCOPE OF ASSESSMENT U/S.15 3A MAY BE REJECTED. 4. ADDITION OF INTEREST ON ICDS (IN A.Y. 2009-10, 2 010-11 , 2011-12, 2013-14 & 2014-15): THIS ISSUE WAS EXAMINED BY THE AO AND ADDITION WAS MADE IN A.Y. 2009-10, 2010-11 , 2011-12, 2013-14 & 2014-15. THE CIT(A) UPHELD THE ADDITION IN ALL THE YEARS AFTER THOROUGH LY ANALYZING THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT. THE REFORE, I RELY UPON THE CIT(A) ORDER IN ALL THE YEARS. 5. LOSS OF GOLD (A.Y. 2011-12) :- THIS ISSUE WAS EXAMINED BY THE AO AND THE ADDITION WAS MADE. THE CIT(A) UPHELD THE ADDITION IN PARA 9 (ON PAGE 52) OF CIT(A) ORDER AFTER THOROUGHLY ANALYZING THE ISSUE. IN THIS CONNECTION, RELIANCE IS PLACED ON THE ORDERS OF THE CIT(A) AND AO. 6. BOOK PROFIT U/S.115JB :- 6.1 THIS ISSUE WAS EXAMINED BY THE AO AND ADDITION WAS MADE IN A.Y. 2012-13, 2013-14 & 2014-15 IN VIEW OF THE AMENDMENT BROUGHT IN SECTION 115JB THROUGH FINANCE ACT, 2011 BY WAY OF I NSERTION OF PROVISO TO SECTION 115 JB(6) W.E.F. 1.4.2012. THE S AID AMENDMENT STIPULATES THAT THE SEZ PROFITS ARE ALSO TO BE INCL UDED IN THE BOOK PROFITS FOR COMPUTING MAT U/S. 115 JB WHICH WERE HI THERTO EXCLUDED BY VIRTUE OF PROVISIONS OF SUB-SECTION 6 TO SECTION 115JB. 6.2 IN THE COMPUTATION SHOWN IN THE RETURN OF INCOM E, THE ASSESSEE DID NOT INCLUDE SEZ PROFITS IN BOOK PROFITS ON THE GROU ND THAT IT HAS CHALLENGED THE CONSTITUTIONAL VALIDITY OF THIS AMEN DMENT. THE AO DID NOT AGREE WITH THIS CONTENTION AND IN VIEW OF THE C LEAR PROVISION OF LAW SUBSEQUENT TO ABOVE AMENDMENT, SEZ PROFITS WERE ADDED FOR COMPUTING THE BOOK PROFITS AND IN TURN THE MAT. THE CIT(A) UPHELD THE ADDITION AFTER THOROUGHLY ANALYZING THE ISSUE. THEREFORE, I RELY ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 31 OF 44 UPON THE CIT(A) ORDER ON THIS PROPOSITION. PRAYER : 7. IN VIEW OF THE FACTUAL MATRIX AND LEGAL POSITION AS BROUGHT OUT IN THE FOREGOING PARAGRAPHS, IT IS PRAYED THAT THIS HO N'BLE TRIBUNAL MAY UPHOLD THE ORDERS OF THE LOWER AUTHORITIES FOR THE CAUSE OF EQUITABLE JUSTICE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST WE TAKE NOTE OF VARIOUS FACTS WHICH ARE RELEVANT FOR DECIDING THESE TECHNICAL ASP ECTS AND THE ISSUES ON MERIT. THE SEARCH IN THE PRESENT CASE WAS CONDUCTED ON 17. 12.2013. THE AO ISSUED NOTICES U/S 153A OF THE I T ACT ON 04.07.2014 FOR T HESE ASSESSMENT YEARS EXCEPT A.Y. 2014 15 ASKING THE ASSESSEE TO FILE RETURN O F INCOME WITHIN 30 DAYS FROM THE RECEIPT OF THESE NOTICES. IN RESPONSE TO THESE NOTICES, THE ASSESSEE FILED LETTER DATED 19.09.2014 STATING THAT THE RETURN OF INCOME ALREADY FILED BY THE ASSESSEE FOR THESE 6 YEARS MAY BE TREATED AS RETURN IN RESPO NSE TO THESE NOTICES U/S 153A OF I T ACT. 7. IN PARA 5 OF THE ASSESSMENT ORDER FOR A. Y. 2008 09, IT HAD BEEN NOTED BY THE AO THAT FOR THIS YEAR, ASSESSMENT ORDER U/S 143 (3) WAS PASSED ON 30.12.2010 DETERMINING A TOTAL INCOME OF RS. 237,31,56,326/- A ND AGAINST THIS ASSESSMENT ORDER, APPEAL IS FILED BY THE ASSESSEE BEFORE CIT ( A) WHICH WAS PENDING. ONLY ONE ISSUE ON MERIT RAISED BY THE ASSESSEE IN THIS Y EAR IS ABOUT CALCULATION OF EXEMPTION U/S 10AA. THERE IS NO OTHER ISSUE ON MERI T IN THIS YEAR APART FROM THREE TECHNICAL OBJECTIONS NOTED ABOVE. 8. IN PARA 5 OF THE ASSESSMENT ORDER FOR A. Y. 2009 10 ALSO, IT HAD BEEN NOTED BY THE AO THAT FOR THIS YEAR, THE ASSESSMENT ORDER U/S 143 (3) WAS PASSED ON 30.12.2011 DETERMINING A TOTAL INCOME OF RS. 125,40 ,29,393/- AS AGAINST NIL INCOME DECLARED IN THE RETURN OF INCOME AND AGAINST THIS ASSESSMENT ORDER, APPEAL IS FILED BY THE ASSESSEE BEFORE CIT (A) WHIC H WAS PENDING. IN THIS YEAR ALSO, THERE IS ONLY ONE ISSUE RAISED BY THE ASSESSE E ON MERIT BEING ADDITION ON ACCOUNT OF INTEREST ON ICD APART FROM THREE TECHNIC AL OBJECTIONS NOTED ABOVE. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 32 OF 44 9. SIMILARLY, IN PARA 5 OF THE ASSESSMENT ORDER FOR A. Y. 2010 11 ALSO, IT HAD BEEN NOTED BY THE AO THAT FOR THIS YEAR, ASSESSMENT ORDE R U/S 143 (3) WAS PASSED ON 03.07.2012 DETERMINING A TOTAL INCOME OF RS. 181,88 ,48,635/- AS AGAINST NIL INCOME DECLARED IN THE RETURN OF INCOME AND AGAINST THIS ASSESSMENT ORDER, APPEAL IS FILED BY THE ASSESSEE BEFORE CIT (A) WHIC H WAS PENDING. IN THIS YEAR, THE ASSESSEE HAS RAISED TWO ISSUES ON MERIT. FIRST ISSUE ON MERIT IS ABOUT CALCULATION OF EXEMPTION U/S 10AA. THE SECOND ISSUE RAISED ON MERIT IN THIS YEAR IS ABOUT ADDITION ON ACCOUNT OF INTEREST ON ICD APA RT FROM THREE TECHNICAL OBJECTIONS NOTED ABOVE. 10. FOR A. Y. 2011 12, THE DETAILS OF EARLIER ASS ESSMENT ORDER, IF ANY, IS NOT AVAILABLE IN THE ASSESSMENT ORDER PASSED U/S 153A B UT IN PARA 2 OF THIS ASSESSMENT ORDER, THIS IS NOTED THAT RETURN OF INCO ME WAS FILED ON 29.09.2011 DECLARING NIL INCOME AND AS PER PAGE 14 OF THE ASSE SSMENT ORDER, TOTAL INCOME WAS COMPUTED ON THIS BASIS THAT BUSINESS INCOME AS PER ASSESSEES COMPUTATION OF INCOME WAS RS. 261,75,26,293/- AND AFTER MAKING THREE ADDITIONS INCLUDING ONE ADDITION OF RS. 3344,94,72,518/- U/S 68 ALREADY DEL ETED BY CIT (A) AND TWO ADDITIONS CONFIRMED BY HIM OF RS. 29,73,46,928/- BE ING INTEREST ON ICDS AND RS. 19,39,23,044/- BEING VALUE OF 99.055 KILOS OF GOLD CLAIMED AS MISAPPROPRIATED, TOTAL INCOME WAS COMPUTED AT RS. 3655,82,68,783/-. IN RESPECT OF ONE ADDITION OF RS. 3344,94,72,518/- U/S 68 ALREADY DELETED BY CIT (A), THE REVENUE IS NOT IN APPEAL BEFORE US BUT THE ASSESSEE IS IN APPEAL BEFO RE US FOR TWO ADDITIONS, SUSTAINED BY CIT (A) OF RS. 29,73,46,928/- BEING IN TEREST ON ICDS AND RS. 19,39,23,044/- BEING VALUE OF 99.055 KILOS OF GOLD CLAIMED AS MISAPPROPRIATED, TOTAL INCOME WAS COMPUTED AT RS. 3655,82,68,783/-. IN ADDITION TO THIS, ONE MORE ISSUE ON MERIT IS RAISED BY THE ASSESSEE IN THIS YE AR. THIS ISSUE IS ABOUT CALCULATION OF EXEMPTION U/S 10AA. THESE OBJECTIONS ON MERIT ARE IN ADDITION TO THREE TECHNICAL OBJECTIONS NOTED ABOVE. 11. FOR A. Y. 2012 13 ALSO, THE DETAILS OF EARLIE R ASSESSMENT ORDER, IF ANY, IS NOT AVAILABLE IN THE ASSESSMENT ORDER PASSED U/S 153A B UT IN PARA 2 OF THIS ASSESSMENT ORDER ALSO, THIS IS NOTED THAT RETURN OF INCOME WAS FILED ON 02.11.2012 DECLARING A LOSS OF RS. 19,45,15,739/- AND AS PER P AGE 6 OF THE ASSESSMENT ORDER, ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 33 OF 44 TOTAL INCOME WAS COMPUTED ON THIS BASIS THAT BUSINE SS INCOME AS PER ASSESSEES COMPUTATION OF INCOME WAS RS. 431,26,84,469/- AND A FTER ALLOWING DEDUCTION U/S 10AA SEZ OF RS. 334,66,15,379/-, NET BUSINESS INC OME WAS COMPUTED AT RS. 96,60,69,090/-. INCOME FROM HOUSE PROPERTY IS STATE D TO BE OF RS. 15,30,980/- AND IN THIS MANNER, TOTAL INCOME FOR THIS YEAR IS D ETERMINED AT RS. 96,76,00,070/-. BOOK PROFIT U/S 115JB WAS DETERMINED AT RS. 431,88, 17,344/- AFTER ADDING RS. 334,66,15,379/- BEING SEZ PROFIT. IN THIS YEAR, ONL Y TWO ISSUES ON MERIT ARE RAISED BY THE ASSESSEE. FIRST SUCH ISSUE IS ABOUT ADDITION OF RS. 334,66,15,379/- FOR DETERMINING THE BOOK PROFIT U/S 115JB. SECOND ISSUE RAISED ON MERIT IS ABOUT CALCULATION OF EXEMPTION U/S 10AA. THESE OBJECTIONS ON MERIT ARE IN ADDITION TO THREE TECHNICAL OBJECTIONS NOTED ABOVE. 12. FOR A. Y. 2013 14 ALSO, THE DETAILS OF EARLIE R ASSESSMENT ORDER, IF ANY, IS NOT AVAILABLE IN THE ASSESSMENT ORDER PASSED U/S 153A B UT IN PARA 2 OF THIS ASSESSMENT ORDER ALSO, THIS IS NOTED THAT RETURN OF INCOME WAS FILED ON 29.09.2013 DECLARING TOTAL INCOME OF RS. 114,07,52,370/- AND A S PER PAGES 5 & 6 OF THE ASSESSMENT ORDER, TOTAL INCOME WAS COMPUTED ON THIS BASIS THAT BUSINESS INCOME AS PER ASSESSEES COMPUTATION OF INCOME WAS RS. 489 ,51,41,984/- AND AFTER ALLOWING DEDUCTION U/S 10AA SEZ AS PER RE WORKING OF RS. 341,98,44,394/- AND AFTER ADDING RS. 43,72,04,622/- ON ACCOUNT OF ICD I NTEREST, , NET BUSINESS INCOME WAS COMPUTED AT RS. 362,24,24,409/-. INCOME FROM H OUSE PROPERTY IS STATED TO BE OF RS. 11,40,973/- AND IN THIS MANNER, TOTAL IN COME FOR THIS YEAR IS DETERMINED AT RS. 362,35,65,382/-. THE AO ALSO ALLOWED DEDUCTI ON OF RS. 78,22,24,217/- U/S 80IC AND IN THIS MANNER, NET TAXABLE INCOME WAS DET ERMINED AT RS. 284,13,41,165/-. BOOK PROFIT U/S 115JB WAS DETERMIN ED AT RS. 489,61,55,048/- AFTER ADDING RS. 345,01,73,711/- BEING SEZ PROFIT. IN THIS YEAR, TWO ISSUES ON MERIT ARE RAISED BY THE ASSESSEE. ONE ISSUE IS ABOU T ADDITION OF RS. 345,01,73,711/- FOR DETERMINING THE BOOK PROFIT U/S 115JB. THE SECOND ISSUE ON MERIT IS ABOUT ADDITION OF RS. 43,72,04,622/- ON AC COUNT OF ICD INTEREST. THESE OBJECTIONS ON MERIT ARE IN ADDITION TO THREE TECHNI CAL OBJECTIONS NOTED ABOVE. 13. IN A. Y. 2014 15, THE ASSESSMENT ORDER IS U/S 143 (3) RWS 153D. IN THIS YEAR, RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 29.11 .2014 DECLARING INCOME OF ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 34 OF 44 RS. 136,16,72,590/-. IN THIS YEAR, TOTAL INCOME WAS DETERMINED AT RS. 181,18,99,312/- AFTER MAKING ADDITION OF RS. 45,02, 26,725/- ON ACCOUNT OF ICD INTEREST. BOOK PROFIT U/S 115JB WAS DETERMINED AT R S. 273,27,50,184/- AFTER ADDING RS. 212,17,19,682/- BEING SEZ PROFIT. IN THI S YEAR ALSO, TWO ISSUES ON MERIT ARE RAISED BY THE ASSESSEE. ONE ISSUE IS ABOU T ADDITION OF RS. . 212,17,19,682/- FOR DETERMINING THE BOOK PROFIT U/S 115JB. THE SECOND ISSUE ON MERIT IS ABOUT ADDITION OF RS. 45,02,26,725/- ON AC COUNT OF ICD INTEREST. THERE IS NO TECHNICAL OBJECTION IN THIS YEAR. 14. FIRST, WE DECIDE THE TECHNICAL ASPECTS ONE BY O NE. FIRST TECHNICAL ASPECT IS ABOUT VALIDITY OF SEARCH RAISED IN A. YS. 2008 09 TO 20 13 14. IN THIS REGARD, VARIOUS SUBMISSIONS ARE MADE BY BOTH SIDES. AS PER THE LEAR NED DR OF THE REVENUE, RELIANCE HAS BEEN PLACED ON A JUDGMENT OF HONBLE A PEX COURT RENDERED IN THE CASE OF N. K. JEWELLERS VS. CIT AS REPORTED IN 85 T AXMANN.COM 361 AND IT IS SUBMITTED THAT IN THIS CASE, IT WAS HELD THAT IN VI EW OF THE AMENDMENTS MADE IN SECTION 132 BY FINANCE ACT, 2017, THE REASON TO BEL IEVE OR REASON TO SUSPECT AS THE CASE MAY BE, SHALL NOT BE DISCLOSED TO ANY PERS ON OR AUTHORITY OR APPELLATE TRIBUNAL AS RECORDED BY THE INCOME TAX AUTHORITY U/ S 132. RELIANCE WAS ALSO PLACED ON A JUDGMENT OF HONBLE KARNATAKA HIGH COUR T RENDERED IN THE CASE OF PRATIBHA JEWELLERY HOUSE VS. CIT AS REPORTED IN 88 TAXMANN.COM 94 AND THE RETROSPECTIVE AMENDMENT IN SECTION 132 W,R.E.F. 01. 04.1962 WAS TAKEN NOTE OF AND IT WAS HELD THAT EVEN THE APPELLATE AUTHORITIES ARE PROHIBITED FROM GOING INTO THE REASONS RECORDED BY THE CONCERNED INCOME TAX AU THORITY AGAINST THE ASSESSEE OR TAX PAYER. LEARNED AR OF THE ASSESSEE W AS ALSO HEARD. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND BY RESPECTFULLY FOLLOWING THE JUDGMENTS CITED BY THE LEARNED DR OF THE REVENUE OF HONBLE APEX COURT AND HONBLE KARNATAKA HIGH COURT AS NOTED ABOVE, WE DEC LINE TO INTERFERE IN THE ORDER OF CIT (A) ON THIS ISSUE,. ACCORDINGLY, THIS TECHNI CAL ASPECT IS DECIDED AGAINST THE ASSESSEE. 16. THE SECOND TECHNICAL ISSUE RAISED BY THE ASSESS EE IS THIS THAT THE NOTICE ISSUED BY THE AO U/S 153A IS BAD IN LAW. IN THE WRITTEN SU BMISSIONS FILED ON BEHALF OF THE ASSESSEE AS REPRODUCED ABOVE, THIS IS THE SUBMISSIO N THAT NOTICE ISSUED U/S 153A ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 35 OF 44 IS BAD IN LAW BECAUSE IT IS NOT SPECIFIED IN THE NO TICE AS TO WHETHER IT IS FOR ASSESSING OR REASSESSING THE INCOME OF THE ASSESSEE . AS PER THE SUBMISSIONS OF THE LEARNED DR OF THE REVENUE AS REPRODUCED ABOVE, THE NOTICE TO BE ISSUED IS TO ASK THE ASSESSEE TO FILE RETURN OF INCOME FOR THE R ELEVANT SIX YEARS AS PER CLAUSE (A) OF SUB SECTION (1) OF SECTION 153A AND THE QUES TION OF ASSESSMENT OR REASSESSMENT IS AS PER CLAUSE (B) OF SUB SECTION (1 ) OF SECTION 153A AND HENCE, BOTH THESE CLAUSES ARE SEPARATE AND SHOULD NOT BE M IXED. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN OUR CONSIDERED OPINION, AS PER CLAUSE (A) OF SUB SECTION (1) OF SECTION 153A, AT T HE STAGE OF ISSUE OF NOTICE U/S 153A, THE ONLY REQUIREMENT IS TO ASK THE ASSESSEE T O FILE RETURN OF INCOME FOR RELEVANT SIX YEARS COVERED BY SECTION 153A AND WHET HER AFTER FILING OF RETURN OF INCOME, THE ASSESSMENT TO BE MADE BY THE AO WILL BE ASSESSMENT OR REASSESSMENT HAS TO BE DETERMINED AFTERWARDS AND NO T AT THE TIME OF ISSUE OF NOTICE U/S 153A. IN THIS VIEW OF THE MATTER, WE FIN D NO MERIT IN THIS TECHNICAL OBJECTION RAISED BY THE ASSESSEE AND THE SAME IS RE JECTED. 18. THIRD TECHNICAL ISSUE RAISED BY THE ASSESSEE IS THIS THAT THE ADDITIONS MADE IN THESE ASSESSMENT ORDERS PASSED U/S 153A ARE NOT ARI SING FROM THE SEIZED MATERIAL AND THEREFORE, THESE ADDITIONS ARE OUTSIDE THE SCOPE OF SECTION 153A OF THE I. T. ACT. THERE IS NO TECHNICAL ISSUE RAISED I N A. Y. 2014 15. HENCE, THIS THIRD TECHNICAL ISSUE IS RELEVANT FOR SIX ASSESSMEN T YEARS FROM A. Y. 2008 09 TO 2013 14. IN THIS REGARD, THIS IS THE SUBMISSION O N BEHALF OF THE ASSESSEE THAT THE ADDITION MADE IN THE ASSESSMENT ORDERS FOR THESE SI X YEARS ARE NOT ARISING FROM THE SEIZED MATERIAL. AS AGAINST THIS, THE SUBMISSIO N OF THE LEARNED DR OF THE REVENUE IS THIS THAT AS INFORMED BY THE AO VIDE LET TER DATED 05.02.2018,DURING THE COURSE OF SEARCH, INCRIMINATING DOCUMENTS RELATING TO LOANS/ICDS GIVEN BY THE ASSESSEE COMPANY WERE FOUND AND SEIZED AS BUNDLE NO . A/REL/01 TO A/REL/05 FROM THE ASSESSEES PREMISES AT NO. 1, BRUNTON ROAD , OPP. OLD PASSPORT OFFICE, M. G. ROAD, BANGALORE AND AFTER EXAMINATION AND ANA LYSIS OF THESE DOCUMENTS, ADDITION ON ACCOUNT OF INTEREST ACCRUED ON ICDS HAS BEEN MADE IN EACH OF THESE SIX YEARS. RELIANCE WAS PLACED BY THE ASSESSEE ON A JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS . LANCY CONSTRUCTIONS, 295 ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 36 OF 44 CTR 454. LEARNED DR OF THE REVENUE HAS SUBMITTED TH AT THIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE INCRIMINATIN G MATERIAL WAS FOUND IN THE PRESENT CASE. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THIS IS REPORTED BY THE AO IN REMAND REPORT ALSO AS NOTED BY CIT (A) ON PAGE 3 6 OF HIS ORDER FOR A. Y. 2009 10 THAT DURING THE SEARCH, REGISTERS CONTAINING DET AILS OF ICDS GIVEN BY THE ASSESSEE TO VARIOUS PARTIES AGAINST COLLATERAL IN T HE FORM OF PROPERTY AT VARYING RATES OF INTEREST WAS SEIZED AND THE ASSESSEE WAS N OT OFFERING INTEREST ON ALL THESE ICDS ON ACCRUAL BASIS. HENCE, IT IS NOT ACCEP TABLE THAT NO INCRIMINATING MATERIAL WAS FOUND AND THEREFORE, WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED DR OF THE REVENUE THAT THE JUDGMENT OF HONBLE KARN ATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. LANCY CONSTRUCTIONS (SUPRA) IS NOT APPLICABLE IN THE PRESENT CASE. LEARNED DR OF THE REVENUE HAS PLACED RELIANCE ON ANOTHER JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE O F CANARA HOUSING DEVELOPMENT COMPANY VS.CIT AS REPORTED IN 274 CTR 1 22. ALTHOUGH IN THIS CASE, THE DISPUTE BEFORE HONBLE KARNATAKA HIGH COU RT WAS THIS THAT WHETHER, CIT CAN INVOKE REVISIONARY POWERS U/S 263 IN RESPECT OF ORIGINAL ASSESSMENT ORDER PASSED BY THE AO IN THOSE CASES, WHERE, THE AO HAS SUBSEQUENTLY PASSED ORDER U/S 153A. IN THIS CASE ALSO, INCRIMINATING MATERIAL WAS FOUND AS NOTED IN PARA 2 OF THIS JUDGMENT. THIS WAS HELD IN THIS CASE THAT ONCE THE ASSESSMENT IS VALIDLY REOPENED, THE AO HAS TO TAKE INTO ACCOUNT THREE TYP ES OF INCOME TO COMPLETE THE ASSESSMENT OR REASSESSMENT AS THE CASE MAY BE. THES E THREE TYPES OF INCOME ARE 1) INCOME DISCLOSED IN THE RETURN OF INCOME, 2) UNDISCLOSED INCOME FOUND DURING THE SEARCH AND 3) ANY OTHER INCOME WHICH IS NOT DISCLOSED IN THE EARLIER RETURN AND NOT UNEARTHED DURING THE SEARCH. IN OUR CONSIDERED OPINION, IF INCRIMINATING MATERIAL IS FOUND IN COURSE OF SEARCH , IN THE ASSESSMENT U/S 153A, ALL THREE TYPES OF INCOME NOTED ABOVE HAS TO BE ASS ESSED BY THE AO AND THEREFORE, WE FIND NO MERIT IN THIS THIRD TECHNICAL OBJECTION ALSO. WE REJECT THE SAME. 20. NOW, WE DECIDE THE ISSUES ON MERIT. FIRST ISSUE ON MERIT IS ABOUT THE ADDITION MADE BY THE AO IN RESPECT OF INTEREST ACCRUED ON IC DS. THIS ISSUE IS RAISED BY ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 37 OF 44 THE ASSESSEE IN FIVE ASSESSMENT YEARS I.E. ASSESSME NT YEARS 2009-10, 2010-11, 2011-12, 2013-14 &2014-15. THE SUBMISSION OF THE A SSESSEE ON THIS ISSUE IS ALREADY REPRODUCED ABOVE AND THE MAIN THRUST OF THE ASSESSEE IS ON THIS THAT THE ASSESSEE IS NOT FOLLOWING DUAL ACCOUNTING SYSTEM AN D ALL ITS ACCOUNTING INCLUDING THE ACCOUNTING OF INTEREST ON ICDS WAS UNDER THE ME RCANTILE ACCOUNTING SYSTEM. AS AGAINST THIS, IT IS THE STAND OF THE AO THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING IN RESPECT OF ACCOUNTING OF IN TEREST ON ICDS. IN ORDER TO DECIDE THIS ISSUE WE HAVE TO EXAMINE THE FACTUAL AS PECTS ON THIS ISSUE. HENCE WE HAVE GONE THROUGH THE ANNUAL REPORTS OF THE ASSE SSEE COMPANY MADE AVAILABLE BEFORE US. AS PER THE ANNUAL REPORT FOR THE YEAR ENDING AS ON 31.03.2009 RELEVANT TO ASSESSMENT YEAR 2009-10, IT HAS BEEN STATED IN SCHEDULE S THAT AS PER SIGNIFICANT ACCOUNTING POLICIES FOL LOWED BY THE ASSESSEE, THE ACCOUNTS HAVE BEEN PREPARED ON ACCRUAL BASIS. SIMI LARLY AS PER ANNUAL REPORTS FOR THE YEAR ENDING AS ON 31.03.2010 RELEVANT TO AS SESSMENT YEAR 2010-11 ALSO SIGNIFICANT ACCOUNTING POLICIES ARE STATED IN SCHED ULE S AS CLAUSE 6 THEREOF IS THE STATEMENT REGARDING THE REVENUE RECOGNITION. FOR R EADY REFERENCE THE SAME IS REPRODUCED HEREIN BELOW. 6. REVENUE RECOGNITION: SALES ARE RECORDED NET OF TRADE DISCOUNTS, REBATES AND VALUE ADDED TAX, IF ANY AND ARE INCLUSIVE OF FOREIGN CURRENCY FLUCTUATI ON. SOME OF THE GOODS HAVE BEEN IMPORTED ON PROVISIONAL BASIS WITHOUT FIX ING THE GOLD PRICE. SOME OF THE GOODS HAVE ALSO BEEN EXPORTED ON PROVISIONAL BASIS WITHOUT FIXING THE PRICE OF GOLD. ALL THE PROVISIONAL IMPORTS AND EXPO RTS HAVE BEEN ACCOUNTED FOR AS PER THE CUSTOM'S ASSESSMENT OF THE GOODS. WH EN THE PRICE OF IMPORT SHIPMENT IS FIXED OR WHEN THE PRICE OF THE EXPORT S HIPMENT IS FIXED, THE FINAL INVOICE IS SUBMITTED TO THE CUSTOMS; THE DIFFERENTI AL IS ACCOUNTED FOR AS PURCHASE OR SALES. HOWEVER DURING THE YEAR THE MANA GEMENT HAS CHANGED THE ACCOUNTING POLICY AND ACCOUNTED FOR THE ADDITIO NAL LIABILITY ON ACCOUNT OF INCREASE IN GOLD PRICE AS PREVALENT ON 31ST MARC H 2010 IN THE CASE OF ALL OUTSTANDING PROVISIONAL IMPORTS AND DUE TO THIS CHA NGE IN ACCOUNTING POLICY THE PROFIT FOR THE YEAR HAS BEEN UNDERSTATED BY RS. 31,93,21,126. MAKING CHARGES INCOME IS RECOGNIZED ON DISPATCH OF GOODS. INTEREST ON BANK DEPOSITS AND OTHER INTEREST BEARIN G LOANS ARE ACCOUNTED ON ACCRUAL BASIS. HOWEVER DURING THE YEAR THE MANAGEME NT HAS CHANGED THE ACCOUNTING POLICY WITH REGARD TO ACCOUNTING OF INTE REST INCOME ON INTEREST BEARING LOANS OTHER THAN BANK DEPOSITS TO CASH BASI S DUE TO WHICH THE PROFIT FOR THE YEAR HAS BEEN HAS BEEN UNDERSTATED BY RS. 1 4,82,02,244/- DIVIDEND INCOME ON INVESTMENTS IS ACCOUNTED FOR WHE N THE RIGHT TO RECEIVE THE PAYMENT IS ESTABLISHED. ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 38 OF 44 21. FROM THE ABOVE, IT IS SEEN THAT AS PER THE ASSE SSEE ITSELF, THE MANAGEMENT IN THE PRESENT YEAR HAS CHANGED THE ACCOUNTING POLICY WITH REGARD TO ACCOUNTING OF INTEREST INCOME ON INTEREST BEARING LOANS OTHER THA N BANK DEPOSITS AND THE CHANGED SYSTEM IS CASH BASIS AND DUE TO THIS, THE P ROFIT FOR THE YEAR ENDING AS ON 31.03.2010 HAS BEEN STATED TO BE UNDERREPORTED BY R S. 14,82,02,244/-. HENCE IT IS SEEN THAT THE ASSESSEE ITSELF HAS ADMITTED IN AN NUAL REPORT THAT FROM ACCOUNTING YEAR 2009-10, IN RESPECT OF INTEREST ON ICDS, THE A SSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING AND BECAUSE OF THAT, THE PROFI T OF THE ASSESSEE WAS UNDERREPORTED IN THAT YEAR BY AN AMOUNT OF RS. 14,8 2,02,244/-. NOW WE EXAMINE THE ANNUAL REPORT FOR THE YEAR ENDING AS ON 31.03.2 011. IN THIS YEAR ALSO, IT HAS BEEN STATED IN PARA 6 OF SIGNIFICANT ACCOUNTING POL ICIES IN RESPECT OF REVENUE RECOGNITION THAT INTEREST ON BANK DEPOSITS AND OTHE R INTEREST BEARING LOANS IS ACCOUNTED ON ACCRUAL BASIS. BUT SINCE FROM PREVIOU S FINANCIAL YEAR, THE COMPANY HAS ADOPTED THE ACCOUNTING POLICY WITH REGA RD TO ACCOUNTING OF INTEREST INCOME ON INTEREST BEARING LOANS OTHER THAN BANK DE POSITS TO CASH BASIS INSTEAD OF ACCRUAL BASIS AND FOR THIS REASON, THE PROFIT FO R THE YEAR ENDING AS ON 31.03.2011 HAS BEEN UNDERSTATED BY RS. 33,08,58,068 /-. 22. IN THE YEAR ENDING AS ON 31.03.2012, THE ASSESS EE HAS REPORTED REGARDING REVENUE RECOGNITION IN NOTE NO. 24 THAT INTEREST ON BANK DEPOSITS AND OTHER INTEREST BEARING LOANS IS ACCOUNTED FOR ON ACCRUAL BASIS. SIMILAR IS THE OBSERVATION FOR ANNUAL ACCOUNTS FOR THE YEAR ENDING 31.03.2013 THAT THE INTEREST ON BANK DEPOSITS AND OTHER INTEREST BEARING LOANS I S ACCOUNTED ON ACCRUAL BASIS AND IDENTICAL NOTE IS THERE IN ANNUAL REPORT FOR TH E YEAR ENDING AS ON 31.03.2014. IN COURSE OF HEARING BEFORE US, THIS QUERY WAS MADE BY THE BENCH WHETHER THERE IS ANY CHANGE IN THE ACCOUNTING SYSTEM REGARDING RE VENUE RECOGNITION IN RESPECT OF INTEREST ON ICDS AND IN REPLY, IT WAS SUBMITTED BY LD. AR OF ASSESSEE BEING DIRECTOR OF THE ASSESSEE COMPANY THAT THE METHOD AD OPTED IS SAME IN ALL THE YEARS BUT THE REPORTING IN THE TWO YEARS I.E. YEAR ENDING AS ON 31.03.2011 AND 31.03.2012 IS DIFFERENT BECAUSE OF SOME CONFUSION. HENCE IT IS SEEN THAT THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE FOR AC COUNTING OF INTEREST ON ICDS IS SAME IN ALL THESE YEARS AND AT LEAST IN TWO YEAR S, THE ASSESSEE ITSELF HAS ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 39 OF 44 ACCEPTED THAT THE ASSESSEE IS ACCOUNTING FOR THE IN TEREST ON ICDS ON CASH BASIS.NOW THE QUESTION IS WHETHER SUCH REPORTING IN THESE TWO YEARS IS CORRECT OR NOT. THIS IS THE SUBMISSION OF THE ASSESSEE THAT TH E ASSESSEE HAS WRITTEN OFF THE INTEREST ACCRUED BUT NOT RECEIVED IN THE SAME YEAR AND THEREFORE, IT SHOULD BE ACCEPTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING IN RESPECT OF ACCOUNTING OF INTEREST ON ICDS ALSO IN A LL THE YEARS. 23. IN OUR CONSIDERED OPINION, BEFORE HOLDING THAT THE ASSESSEE IS ADOPTING CASH SYSTEM OF ACCOUNTING IN RESPECT OF INTEREST INCOME ON ICDS AS STATED BY THE ASSESSEE IN THE ANNUAL REPORTS OF TWO YEARS I.E. AC COUNTING YEAR ENDED ON 31.03.2011 & 31.03.2012, IT HAS TO BE ASCERTAINED T HAT THE INTEREST INCOME HAS REALLY ACCRUED BY APPLYING REAL INCOME THEORY AS AP PROVED BY HON'BLE APEX COURT IN THE CASE OF STATE BANK OF TRAVANCORE VS. CIT AS REP ORTED IN 158 ITR 102. IN THIS CASE, IT WAS HELD THAT THE CONCEPT OF REALITY OF TH E INCOME AND THE ACTUALITY OF THE SITUATION ARE RELEVANT FACTORS WHICH GO TO THE MAKI NG UP OF THE ACCRUAL OF INCOME BUT ONCE ACCRUAL TAKES PLACE AND INCOME ACCRUES, THE SA ME CANNOT BE DEFEATED BY ANY THEORY OF REAL INCOME. THE CONCEPT OF REAL INCOME M AY HAVE TO BE GIVEN PRECEDENCE IN COMPUTATION OF INCOME IN A PARTICULAR CASE BUT A CCRUED INCOME CANNOT BE WAIVED AS NOT HAVING ACCRUED TO THE ASSESSEE. IN THIS CASE , THE ISSUE WAS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BECAUSE O F THE FACTS OF THAT CASE. AS PER THE FACTS OF THAT CASE, IT WAS SEEN THAT THE ASSESS EE NEITHER DECIDED TO TREAT INTEREST INCOME ON STICKY ADVANCES AS BAD DEBT NOR CLAIMS DE DUCTIONS UNDER S. 36(2) BUT STILL ENTERS THE SAME WITH A DIMINISHED HOPE OF REC OVERY IN THE SUSPENSE ACCOUNT. HENCE, AS PER THIS JUDGMENT, IT WAS HELD THAT REAL INCOME THEORY HAS TO BE CONSIDERED BUT THIS HAS TO BE EXAMINED FROM THE FAC TS OF EACH CASE AS TO WHETHER THE REAL INCOME HAS ACCRUED OR NOT AND IF THE REAL INCOME HAS ACCRUED THEN THE SAME HAS TO BE BROUGHT TO TAX AND THE ASSESSEE CAN CLAIM DEDUCTION U/S 36 (2) AS PER LAW AFTER WRITING OFF THE SAME IN ITS BOOKS BUT IF IT HAS NOT ACCRUED AND HAS BECOME IRRECOVERABLE EVEN BEFORE ITS ACCRUAL, THEN EVEN UNDER MERCANTILE SYSTEM OF ACCOUNTING, IT CANNOT BE BROUGHT TO TAX BECAUSE NO REAL INCOME HAS ACCRUED TO THE ASSESSEE. IN THE PRESENT CASE, THE CONDUCT OF T HE ASSESSEE IS DIFFERENT. AS AGAINST DEBITING THE ACCOUNT OF THE DEBTOR BY INTER EST AMOUNT AND CREDITING INTEREST ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 40 OF 44 SUSPENSE ACCOUNT INSTEAD OF INTEREST RECEIPT ACCOUN T, IN THE PRESENT CASE, THE ASSESSEE HAS NEITHER DEBITED THE ACCOUNT OF THE DEB TOR NOR CREDITED INTEREST ACCOUNT OR INTEREST SUSPENSE ACCOUNT OR ANY OTHER A CCOUNT BY WHATEVER NAME. IN THE PRESENT CASE, THE CASE OF THE ASSESSEE IS THIS THAT THE INTEREST INCOME IS NOT RECEIVABLE AT ALL AND THEREFORE, THE ASSESSEE HAS P ASSED ENTRIES IN MEMORANDUM BOOKS BY DEBITING THE DEBTOR AND CREDITING THE INTE REST ACCOUNT AND BEFORE THE YEAR END, SUCH ENTRIES WERE REVERSED AND AS A RESULT, AT THE YEAR END, NO DEBIT REMAINS IN THE ACCOUNTS OF THE DEBTORS AND NO CREDIT REMAIN S IN ANY ACCOUNT BEING INTEREST RECEIPT ACCOUNT OR INTEREST SUSPENSE ACCOUNT OR ANY OTHER ACCOUNT BY WHATEVER NAME. BUT THIS CLAIM OF THE ASSESSEE WAS NOT EXAMIN ED BY THE LOWER AUTHORITIES THAT THE INCOME HAS NOT ACCRUED OR ARISEN AND IT IS IRRECOVERABLE SINCE VERY BEGINNING. UNDER THESE FACTS, WE FEEL IT PROPER THA T THE MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR A FRESH DECISION. WE ORDER A CCORDINGLY AND WE SET ASIDE THE ORDER OF CIT (A) ON THIS ISSUE AND RESTORE THIS ISS UE BACK TO THE AO FOR A FRESH DECISION WITH THE DIRECTION THAT THE AO SHOULD FIRS T EXAMINE THIS ASPECT AS TO WHETHER THE INTEREST INCOME HAS ARISEN/ACCRUED OR N OT IN THE FACTS OF THE PRESENT CASE. IF THE ASSESSEE IS ABLE TO ESTABLISH THAT THE INTEREST HAS BECOME IRRECOVERABLE BEFORE ITS ACCRUAL THAN IT SHOULD BE ACCEPTED THAT THE INTEREST HAS NOT ACCRUED AND CONSEQUENTLY, IT CANNOT BE BROUGHT TO TAX EVEN UNDE R MERCANTILE SYSTEM OF ACCOUNTING. BUT IF IT BECOMES IRRECOVERABLE AFTER A CCRUAL OF THE INCOME THAN THE SAME HAS TO BE BROUGHT TO TAX IN THE YEAR OF ACCRUA L AND THE ASSESSEE MAY CLAIM DEDUCTION AS PER LAW U/S 36 (1) (VII) IN ANY YEAR A FTERWARDS BY WRITING OF THE SAME IN ITS BOOKS. 24. THE NEXT ISSUE ON MERIT IS REGARDING CALCUL ATION OF EXEMPTION U/S. 10AA OF IT ACT. REGARDING THIS ISSUE, THIS IS THE SUBMISSION OF THE ASSESSEE BEFORE US THAT THIS ISSUE IS RELEVANT FOR FOUR ASSESSMENT YEARS I.E. 2008-09, 20 10-11, 2011-12 & 2012-13. IT HAS BEEN SUBMITTED THAT THE AO HAS REWORKED THE CLAIM O F THE ASSESSEE REGARDING EXEMPTION U/S. 10AA OF IT ACT ON THE BASIS OF VARIO US ADDITIONS MADE BY THE AO. HE SUBMITTED THAT AGAINST SOME OF THESE ADDITIONS DUE TO WHICH THE ASSESSEES CLAIM FOR EXEMPTION U/S. 10AA OF IT ACT WAS REDUCED, RELIEF W AS ALLOWED BY CIT(A) AND SUCH RELIEF HAS BECOME FINAL BECAUSE NO APPEAL HAS BEEN FILED BY REVENUE AGAINST THAT ORDER OF CIT(A) IN ANY OF THESE YEARS. BUT LD. CIT(A) HA S NOT DIRECTED THE AO TO REWORK THE ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 41 OF 44 ELIGIBLE DEDUCTION U/S. 10AA OF IT ACT AFTER CONSID ERING THE RELIEF ALLOWED BY CIT(A). IN THIS REGARD, WE FIND THAT IN ASSESSMENT YEAR 2008-0 9, THE AO HAS MADE ADDITION OF RS. 3871.30 CRORES U/S. 68 ON ACCOUNT OF SALES TO EXCEL GOLDSMITH WHICH WAS CLAIMED BY THE ASSESSEE AS EXPORT SALE AND INCLUDED IN THE COM PUTATION OF EXEMPTION ALLOWABLE U/S. 10AA OF IT ACT. THE ASSESSEES CLAIM FOR DEDU CTION / EXEMPTION U/S. 10AA OF IT ACT OF RS. 670.23 CRORES WAS DISALLOWED BY THE AO. AS PER THE ORDER OF LD. CIT(A), IT WAS HELD THAT THE EXPORT PROCEEDS RECEIVED FROM M/S . EXCEL GOLDSMITH WAS NOT EXPLAINED RECEIPTS IN THE HANDS OF THE ASSESSEE BUT WERE EXPORT RECEIPTS AND HENCE, THE SAME CANNOT BE ADDED BACK AS INCOME OF THE ASSE SSEE. HENCE IN OUR CONSIDERED OPINION, THE ASSESSEES CLAIM FOR EXEMPTION U/S. 10 AA OF IT ACT IS TO BE REWORKED IN THE LIGHT OF THIS RELIEF ALLOWED BY CIT(A) IN THESE FOU R YEARS. HENCE ON THIS ISSUE, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BA CK TO THE FILE OF AO FOR FRESH DECISION. THE AO SHOULD PROVIDE REASONABLE OPPORTU NITY OF BEING HEARD TO ASSESSEE AND RECOMPUTE THE AMOUNT OF DEDUCTION / EXEMPTION A LLOWABLE TO ASSESSEE U/S. 10AA OF IT ACT IN THE LIGHT OF THE RELIEF ALLOWED BY LD. CIT(A) IN THESE FOUR YEARS. THIS ISSUE IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE FOR STATISTI CAL PURPOSES. 25. THE NEXT ISSUE ON MERIT IS IN RESPECT OF LOSS O F GOLD AND THIS ISSUE IS ONLY IN ONE YEAR I.E. ASSESSMENT YEAR 2011-12. IN THIS YEAR, T HIS IS THE CLAIM OF THE ASSESSEE THAT AT THE CLOSE OF YEAR I.E. AS ON 31.03.2011, THE ASS ESSEE COULD NOT RECONCILE ITS PHYSICAL STOCK WITH BOOK STOCK AND IT WAS FOUND THAT THERE W AS A SHORTAGE OF 99.055 KGS. OF GOLD IN PHYSICAL INVENTORY AS COMPARED TO THE BOOK INVEN TORY. THE ASSESSEE VALUED THE INVENTORY ON THE BASIS OF PHYSICAL INVENTORY FOUND AS ON 31.03.2011 AND IN THIS MANNER, THE INVENTORY VALUED BY THE ASSESSEE WAS RE DUCED BY AN AMOUNT OF RS. 19,39,23,044/-. THE AO DID NOT AGREE WITH THIS STA ND OF THE ASSESSEE AND MADE ADDITION OF THIS AMOUNT IN THE INCOME OF THE ASSESS EE FOR ASSESSMENT YEAR 2011-12. 26. BEFORE US, THIS IS THE SUBMISSION OF LD. AR OF ASSESSEE THAT THE INVENTORY OF 99.055 KGS. OF GOLD WHICH WAS UNTRACEABLE WAS ABOUT 0.047% OF THE TOTAL GOLD TRANSACTED DURING THE YEAR AND THE LOSS COULD HAVE BEEN DUE TO VARIOUS REASONS LIKE LOSS IN MANUFACTURING, EXCESS DELIVERY MADE TO CLIE NTS, SHORT DELIVERY RECEIVED FROM CLIENTS, REGULAR PILFERAGE OR DUE TO ANY OTHER REAS ON BUT THE FACT REMAINED THAT THERE WAS SHORTAGE. IT IS SUBMITTED THAT THE AO HAS ERRE D IN SAYING THAT THE ASSESSEE HAS ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 42 OF 44 NOT OFFERED ANY EXPLANATION ON THIS ISSUE. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF AO AND CIT(A). 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT ON PAGE NO. 52 OF HIS ORDER, THE LD. CIT(A) HAS STATED THAT AS PER THE AO , THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE LOSS OF 99.055 KGS. OF GOLD. AS P ER LD. CIT(A), HE STATES THAT THE CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE BECAUSE 99.055 KG S. OF GOLD IS NOT A SMALL AMOUNT WHICH CAN JUST VANISH BUT HE HAS NOT CONSIDERED THI S ASPECT THAT THIS QUANTITY OF GOLD LOSS OF 99.055 KGS. IS ONLY 0.047% OF THE TOTAL GOL D TRANSACTION OF THE ASSESSEE IN THE PRESENT YEAR.MOREOVER THERE WAS A SEARCH CONDUCTED IN THE CASE OF THE ASSESSEE AND IN SPITE OF THAT, THE REVENUE COULD NOT FIND OUT AN Y MATERIAL TO SHOW THAT THE ASSESSEE IS HAVING ANY EXCESS GOLD STOCK OR THAT THERE WAS ANY EVIDENCE FOUND IN RESPECT OF ANY UNACCOUNTED SALE OF GOLD OR GOLD ITEMS. REGARDING THIS THAT THE LOSS OF GOLD COULD NOT BE SUBSTANTIATED BY BRINGING EVIDENCE ON RECORD, IN OUR CONSIDERED OPINION, IF THE ASSESSEE IS HAVING ANY EVIDENCE IN RESPECT OF LOSS OF GOLD, THE ASSESSEE WILL NOT ALLOW SUCH LOSS TO HAPPEN. IN OUR CONSIDERED OPINION, IN THE FACTS OF PRESENT CASE, THIS LOSS OF 0.047% OF THE LOSS OF GOLD IN ONLY ONE YEAR SHOU LD BE ALLOWED IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. WE ORDER ACCORD INGLY. THIS ISSUE ON MERIT IS DECIDED IN FAVOUR OF THE ASSESSEE. 28. THE NEXT ISSUE ON MERIT IS REGARDING BOOK PROFI T AS DETERMINED U/S. 115JB OF IT ACT. THIS ISSUE IS RELEVANT FOR 3 ASSESSMENT YEARS I.E. ASSESSMENT YEARS 2012-13, 2013-14 AND 2014-15. ON THIS ISSUE, THE DECISION O F LD. CIT(A) IS AS UNDER AS PER PARA 11 OF HIS ORDER IN ASSESSMENT YEAR 2012-13. 11. CONSIDERATION OF SEZ INCOME WHILE COMPUTING BOO K PROFIT FOR THE PURPOSE OF MAT. THE APPELLANT HAS CLAIMED THAT THE INTRODUCTION OF PROVISO TO SUB SECTION (6) OF SECTION 115JB OF THE ACT WITH REGARD TO THE MAT IS CONTRARY TO THE SCHEME OF SEZ AND ON THIS POINT THE APPELLANT FILED A WRIT PETITION IN THE HONORABLE HIGH COURT OF KARNAT AKA. CONSEQUENT TO THE ORDERS PASSED BY THE HONORABLE HIGH COURT OF KARNATAKA IN THE WRIT PETITION THE APPELLANT HAS PREFERRED A WRIT AP PEAL WITH THE HONORABLE DIVISION BENCH OF KARNATAKA AND THE SAME IS PENDING FOR DISPOSAL. THE APPELLANT DISCLOSED THESE FACTS IN THE COMPUTAT ION OF INCOME WHILE FILING THE RETURN OF INCOME AND DID NOT INCLUDE THE PROFIT EARNED BY IT'S SEZ UNIT WHILE CALCULATING THE BOOK PROFIT FOR THE PURPOSE OF DECIDING THE MINIMUM ALTERNATE TAX (MAT). ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 43 OF 44 IN THIS REGARD THE AO OBSERVED IN THE ASSESSMENT OR DER AS FOLLOWS, ' FOLLOWING THE AMENDMENT TO SECTION 115 JB BY THE FINANCE ACT 2011, SUB SECTION (6) TO SECTION 115 JB HAD BEEN IN TRODUCED AND CONSEQUENTLY, NET PROFIT FROM SEZ IS REQUIRED TO BE INCLUDED IN THE BOOK PROFIT FOR CALCULATION OF MINIMUM ALTERNATE TA X (MAT). IN A.Y.'S 2012-13, 2013-14 AND 2014-15 THE ASSESSEE EA RNED NET PROFIT FROM IT'S SEZ UNIT BUT FAILED TO INCLUDE THE SAME I N THE BOOK PROFIT FOR THE PURPOSE OF MAT U/S 115JB. IN REGARD, THE ASSESSEE 'S SUBMISSION IS THAT IT HA S FILED A WRIT PETITION IN THE WP NO. 39358/ 2012 BEFORE THE HONOURABLE HIG H COURT OF KARNATAKA, CHALLENGING THE CONSTITUTIONAL VALIDITY OF THE AMENDMENT MADE IN THE FINANCE ACT,2011. THIS STAND OF THE ASS ESSEE IS NOT ACCEPTABLE IN VIEW OF THE CLEAR POSITION OF LAW. AC CORDINGLY, THE BOOK PROFIT FOR MAT IS RECALCULATED AS UNDER' THE AO HAS THEN PROCEEDED TO RECALCULATE THE BOOK P ROFIT AS PER THE AMENDMENT IN THE FINANCE ACT, 2011 AND COMPUTED THE . INCOME OF THE ASSESSEE ACCORDINGLY. I HAVE GONE THROUGH THE DETAILS AND ANALYSED THE ST AND OF THE ASSESSEE THAT IT HAS DECLARED IN IT'S RETURN OF INCOME THAT IT HAS NOT INCLUDED THE PROFIT OF THE SEZ WHILE CALCULATING THE BOOK PROFIT FOR THE PURPOSE OF CALCULATION OF MAT BECAUSE IT IS CONTRARY TO THE SC HEME OF SEZ AND IT HAS CHALLENGED THE CONSTITUTIONAL VALIDITY OF THE R ESPECTIVE AMENDMENT TO THE FINANCE ACT, 2011 IN THE HONORABLE HIGH COUR T OF KARNATAKA. THE ASSESSEE HAS MADE THIS DECLARATION IN ITS RETU RN OF INCOME AS WELL AS BEFORE THE AO AND ALSO BEFORE ME. I HAVE ALSO ANALYSED THE STAND TAKEN BY THE AO WITH REGARD TO THE STAND OF THE ASSESSEE NOT BEING ACCEPTABLE IN THE L IGHT OF THE AMENDMENT TO THE FINANCE ACT. IT IS TRUE THAT THE HONORABLE HIGH COURT OF KARNATA KA HAS NOT PASSED ANY FINAL ORDERS IN THIS MATTER, HENCE THE STAND OF THE ASSESSEE IN THIS MATTER CANNOT BE ACCEPTED. THIS GROUND OF APPEAL IS HENCE DISMISSED. 29. FROM THE ABOVE PARA REPRODUCED FROM THE ORDER O F CIT(A), IT IS SEEN THAT THE RECOMPUTATION OF BOOK PROFIT U/S. 115JB HAS BEEN DO NE BY THE AO IN VIEW OF PROVISO TO SUB-SECTION(6) OF SECTION 115JB WHICH HAS BEEN INSE RTED IN THE STATUTE BOOK BY FINANCE ACT, 2011 W.E.F. 01.04.2012. ON THIS ISSUE , THIS IS THE ONLY SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE HAS CHALLENGED THE AMEND MENT AND THE MATTER IS PENDING ITA NOS.928 TO 931/BANG/2017 & 174 TO 176/BANG/2018 PAGE 44 OF 44 IN WRIT APPEAL BEFORE THE HONORABLE DIVISION BENCH OF THE HIGH COURT OF KARNATAKA BUT THIS IS NOT THE CASE OF THE ASSESSEE THAT ANY STAY HAS BEEN GRANTED BY HON'BLE KARNATAKA HIGH COURT IN THIS REGARD. HENCE IN OUR CONSIDERED OPINION, ACTION TAKEN BY THE AO IN THIS REGARD IS PERFECTLY IN ORDER AND IN CASE, THE ASSESSEE GETS ANY RELIEF FROM HON'BLE KARNATAKA HIGH COURT, THEN ONLY, THE ASSESS EE CAN GET SOME BENEFIT IN THIS REGARD. AT PRESENT, THERE IS NO MERIT IN THIS CLAI M OF THE ASSESSEE. HENCE THIS ISSUE ON MERIT IS DECIDED AGAINST THE ASSESSEE. 30. ONLY ONE ISSUE IS REMAINING I.E. LEVY OF INTERE ST U/S. 234A, 234B AND 234C. THIS ISSUE IS CONSEQUENTIAL. THIS IS THE ONLY REQUEST O F THE ASSESSEE BEFORE US THAT THE AO SHOULD BE DIRECTED TO CORRECTLY CALCULATE THE INTER EST AFTER CONSIDERING THE RELIEF GRANTED BY CIT(A) AND BY THE TRIBUNAL. IN OUR CONSIDERED O PINION, NO SPECIFIC DIRECTION IS REQUIRED FOR THIS BECAUSE THIS IS ADMITTED LEGAL PO SITION THAT THE ISSUE OF INTEREST IS CONSEQUENTIAL AND IF ANY RELIEF IS ALLOWED BY CIT(A ) AND/OR TRIBUNAL, WHILE CALCULATING THE INTEREST U/S. 234A, 234B AND 234C, CONSEQUENTIA L RELIEF HAS TO BE ALLOWED BY AO TO ASSESSEE. 31. IN THE RESULT, ALL THESE SEVEN APPEALS ARE PART LY ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GAR ODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 27 TH NOVEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.