DCIT, Ernakulam V. M/s Sreevridhi Leasing Financing Pvt.Ltd., Thrissur

ITSSA 147/COCH/2004

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8148 (ITAT-COCHIN)
• Duration Of Justice: 7 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 25-04-2012
• Assessment Year: misc
• Appeal Filed On: 17-12-2004
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: K R SUDHAKARAN PILLAI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.(SS)A NOS. 147/COCH/2004 & 05/COCH/2005 BLCOK PERIOD: UPTO 03/08/1998 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-II, ERNAKULAM. VS. M/S. SREEVRIDHI LEASING FINANCE (P) LTD. X/658/5, PUTHUR BUILDINGS, ERENJERI ANGADI, ITRICHUR. (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SHRI S.R. SENAPATI, SR. DR ASSESSEE BY SHRI K.R.SUDHAKARAN PILLAI, ADV. DATE OF HEARING 25/04/2012 DATE OF PRONOUNCEMENT 08/06/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAI NST THE ORDER DATED 16-09- 2004 PASSED BY LD CIT(A)-I, KOCHI AND ALSO THE CORR IGENDUM DATED 11.10.2004 PASSED BY LD CIT(A)-I, KOCHI. BOTH THE APPEALS RELATE TO THE BLOCK PERIOD ENDED 3/8/1998. 2. THE REVENUE IS ASSAILING THE DECISION OF LD CIT(A) IN RESPECT OF THE FOLLOWING ISSUES:- (A) ENHANCING THE EXPENSES RELATING TO INTEREST P AYABLE. (B) MODIFYING THE INCOME FROM KURI BUSINESS. (C) DELETING THE ADDITION RELATING THE CREDITS FO UND IN THE BANK ACCOUNT. (D) DELETING THE UNDISCLOSED INCOME RELATING TO T HE ASSESSMENT YEARS 1998-99 AND FOR THE PERIOD FROM 1.4.98 TO THE DATE OF SEARC H. I.T.(SS)A. NO.147 /COCH/2004& 05/COCH/2005 2 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN BRIEF. THE ASSESSEE COMPANY WAS INCORPORATED ON 04-06-1996. IT WAS ENGAGED IN THE BUSINESS OF FINANCING, CONDUCTING KURIES ETC. THE DEPARTMENT CARRIED SEARCH AND SEIZ URE OPERATIONS IN THE HANDS OF THE ASSESSEE-COMPANY ON 30-07-1998 AND THE SEARCH EXTEN DED UP TO 03-08-1998. THE DEPARTMENT UNEARTHED MANY INCRIMINATING MATERIALS. THE ASSESSEE FILED ITS BLOCK RETURN DISCLOSING AN INCOME OF RS.3,83,890/- AS ITS UNDISC LOSED INCOME. HOWEVER, THE AO COMPLETED THE ASSESSMENT BY DETERMINING THE UNDISCL OSED INCOME OF THE ASSESSEE AT RS.1,14,86,098/-. THE ASSESSEE CHALLENGED THE BLOC K ASSESSMENT ORDER BEFORE LD CIT(A) AND GOT SUBSTANTIAL RELIEF. AGGRIEVED BY TH E ORDER OF LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD CIT(A) ISSUED A CORRIGENDUM TO HIS OR DER WHEREIN HE RECTIFIED CERTAIN ERROR IN HIS OBSERVATIONS. THE ASSESSEE IS ASSAILING THE CORRIGENDUM ISSUED BY LD CIT(A). 5. WE HAVE HEARD THE PARTIES AND PERUSED THE RE CORD. AS PER THE OBSERVATIONS MADE BY THE AO, THE ASSESSEE DID NOT PREPARE ANY FINANCI AL STATEMENT FROM THE DATE OF INCORPORATION TO THE DATE OF SEARCH. ACCORDING TO THE AO, THE ASSESSEE DID NOT MAINTAIN ANY REGULAR BOOKS OF ACCOUNT, BUT ONLY ENTRIES ARE STATED TO HAVE BEEN RECORDED IN THE COMPUTER. THE DEPARTMENT HAS TAKEN THE PRINT OUTS OF TRIAL BALANCES AND OTHER DAY BOOKS FROM THE COMPUTER AND SEIZED THEM. THE ASSES SEE DID NOT ATTACH ANY PROFIT AND LOSS ACCOUNT ALONG WITH ITS BLOCK RETURN. DURING T HE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE HAS PRODUCED ONLY FOLLOWING BOOKS. (A) HAND WRITTEN DAY BOOK FOR 1996-97, 1997-98 AN D 1998-99. (B) COMPUTERISED DAY BOOK AND LEDGER FOR 1996-97 AND 1997-98. THE AO HAS RECORDED A FINDING THAT THESE BOOKS HAVE BEEN WRITTEN AFTER THE DATE OF SEARCH. HENCE, THE AO PROCEEDED TO DETERMINE THE U NDISCLOSED INCOME OF THE ASSESSEE ON THE BASIS OF SEIZED RECORD. 6. THE AO HAS NOTICED THAT THE ASSESSEE HAS COL LECTED DEPOSITS FROM PUBLIC BY ISSUING COUPONS @ RS.5000/-, WHOSE VALUE AFTER A PERIOD OF 5 YEARS WILL BE RS.10,000/-. IT IS I.T.(SS)A. NO.147 /COCH/2004& 05/COCH/2005 3 NOT BORNE OUT OF RECORD, WHETHER THE AO CONSIDERED THE INTEREST EXPENDITURE ON THE ABOVE SAID DEPOSIT COUPONS WHILE DETERMINING THE IN COME. HOWEVER, BEFORE LD CIT(A), THE ASSESSEE CLAIMED THAT IT IS LIABLE TO PAY A SUM OF RS.15,000/- AFTER FIVE YEARS ON THE COUPON AMOUNT OF RS.5,000/-. THE LD CIT(A) ACCORDI NGLY ALLOWED THE CLAIM OF ENHANCEMENT OF INTEREST WITHOUT CALLING REMAND REPO RT FROM THE AO. 7. THE AO DETERMINED THE INCOME FROM KURI BUSIN ESS AT RS.62,68,696/-. THE LD CIT(A) MODIFIED THE SAME BY ACCEPTING THE EXPLANATI ONS GIVEN BY THE ASSESSEE BEFORE HIM FOR THE FIRST TIME. IN THIS REGARD ALSO, THE L D CIT(A) DID NOT CALL FOR REMAND REPORT FROM THE AO. 8. THE AO HAD TREATED THE DEPOSITS FOUND IN A B ANK ACCOUNT AMOUNTING TO RS.16,39,028/- AS THE UNDISCLOSED INCOME OF THE ASS ESSEE, AS THE ASSESSEE FAILED TO EXPLAIN THEM. HOWEVER, THE LD CIT(A) DELETED THIS ADDITION ALSO BY ACCEPTING THE EXPLANATIONS GIVEN BY THE ASSESSEE BEFORE HIM FOR T HE FIRST TIME. IN THIS REGARD ALSO, THE LD CIT(A) DID NOT CALL FOR REMAND REPORT FROM T HE AO. 9. THE LD CIT(A) DELETED THE ADDITIONS MADE FOR THE ASSESSMENT YEAR 1998-99 AND FOR THE PERIOD FROM 1.4.1998 TO THE DATE OF SEARCH WITH THE OBSERVATION THAT THE ASSESSEE HAS RECORDED THE ENTRIES IN THE REGULAR BO OKS OF ACCOUNTS MAINTAINED BY IT AND ALSO ON ACCOUNT OF THE FACT THAT THE ASSESSEE HAS F ILED RETURNS OF INCOME FOR THOSE YEARS ON THE BASIS OF COMPLETED SET OF BOOKS OF ACCOUNT. THE OBSERVATIONS MADE BY LD CIT(A) ARE IN TOTAL CONTRADICTION TO THE FINDINGS G IVEN BY AO, WHICH WAS DISCUSSED IN BRIEF IN PARA 5 SUPRA. ACCORDING TO THE AO, THE AS SESSEE DID NOT MAINTAIN REGULAR BOOKS OF ACCOUNTS, WHERE AS THE LD CIT(A) STATES THAT REG ULAR BOOKS WERE MAINTAINED BY THE ASSESSEE. ACCORDING TO AO, ENTRIES WERE FOUND RECO RDED IN THE COMPUTER AND ACCORDINGLY PRINT OUTS OF TRIAL BALANCE AND DAY BOO K RECORDS WERE TAKEN AND SEIZED. SUBSEQUENTLY, THE ASSESSEE APPEARS TO HAVE PREPARED BOOKS AFTER THE DATE OF SEARCH AND ACCORDING TO THE AO, THE ASSESSEE HAS INCORPORA TED MANY NEW ENTRIES THEREIN. IT I.T.(SS)A. NO.147 /COCH/2004& 05/COCH/2005 4 APPEARS THAT THE LD CIT(A) WAS CARRIED AWAY BY THE SUBMISSIONS MADE BEFORE HIM BY THE ASSESSEE. 10. FROM THE DISCUSSIONS MADE SUPRA, WE NOTICE THAT THE ASSESSEE DID NOT FURNISH MANY DETAILS BEFORE THE AO. ON THE OTHER HAND, IT HAS FURNISHED MANY INFORMATION BEFORE LD CIT(A) AND THE FIRST APPELLATE AUTHORITY HAS CONSIDERED THE NEW INFORMATION WITHOUT CONFRONTING THEM TO THE AO. IN OUR VIEW, T HERE IS CLEAR VIOLATION OF RULE 46A OF THE INCOME TAX RULES ON THE PART OF THE LD CIT(A). HENCE, WE ARE OF THE VIEW THAT ALL THE ISSUES NEED TO BE EXAMINED AFRESH AT THE END OF THE AO. THERE IS NO DISPUTE THAT THE UNDISCLOSED INCOME HAS TO BE COMPUTED IN ACCORD ANCE WITH SEC. 158BB OF THE ACT. THE AO HAS TO GIVE A CLEAR FINDING AS TO WHETHER TH E ENTRIES FOUND RECORDED IN THE COMPUTER CAN BE CONSIDERED AS REGULAR BOOKS MAINTA INED IN THE NORMAL COURSE, SO THAT THE APPLICABILITY OF PROVISIONS OF SEC. 158BB( 1)(D) COULD BE CONSIDERED. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AN D RESTORE ALL THE ISSUES TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE ALL THE ISSUES AFRESH IN ACCORDANCE WITH THE LAW AFTER CONSIDERING THE EXPLANATIONS/INFORMATION GIVE N TO THE LD CIT(A) AND OTHER DETAILS THAT MAY BE FURNISHED BEFORE HIM BY THE ASSESSEE. WE ALSO DIRECT THE ASSESSEE TO EXTEND FULL CO-OPERATION TO THE AO. 11. SINCE, WE HAVE SET ASIDE THE ORDER PASSED B Y LD CIT(A), THE APPEAL FILED BY THE REVENUE AGAINST THE CORRIGENDUM ISSUED BY LD CIT(A) BECOMES IN-FRUCTUOUS. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IN I T(SS)A 147/COCH/2004 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES AND THE OTHER APPE AL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 08-06-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 8TH JUNE, 2012 GJ I.T.(SS)A. NO.147 /COCH/2004& 05/COCH/2005 5 COPY TO: 1. M/S. SREEVRIDHI LEASING FINANCE (P) LTD. X/658/5 , PUTHUR BUILDINGS, ERENJERI ANGADI, TRICHUR. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL C IRCLE-II,TRICHUR. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) ITAT, COCHIN