ACIT, Ernakulam V. M.S. Rathi, Ernakulam

ITSSA 17/COCH/2008

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8253 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-07-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2001-2002
• Appeal Filed On: 07-03-2008
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: C B M WARRIER CAAR
• Keywords: Search and seizure; Principle of natural justice; Source of fund
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T.(SS)A NOS. 17 & 18/COCH/2008 ASSESSMENT YEARS : 2001-02 & 2002-03 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. VS. SMT. M.S.RATHI, PARTNER, M/S. LAKSHMI HOSPITAL, DIWANS ROAD, ERNAKULAM. [PAN: AGEPR 8883N] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT) REVENUE BY SHRI S.R.SENAPATI, SR. DR ASSESSEE BY SHRI C.B.M. WARRIER, CA-AR O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF TWO APPEALS BY THE REVENUE, ARI SING OUT OF SEPARATE ORDERS BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCHI ( CIT(A) IN SHORT), I.E., QUA THE SAME ASSESSEE FOR TWO CONSECUTIVE ASSESSMENT YEARS, BEING AY 2001-02 AND AY 2002- 03, CHALLENGING THE ORDERS DATED 14.11.2007 AND 29. 11.2007 RESPECTIVELY, ALLOWING THE ASSESSEES APPEAL, CONTESTING ITS ASSESSMENTS U/S. 153C R/W S. 153A OF THE INCOME TAX ACT, 1961 (THE 'ACT' HEREINAFTER). THE FACTS OF TH E CASE, AS WELL AS THE ISSUE/S ARISING IN BOTH THE APPEALS, BEING THE SAME, THE SAME WERE HEA RD TOGETHER, AND ARE BEING DISPOSED OF BY A COMMON, CONSOLIDATED ORDER. 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THERE WA S A SEARCH AND SEIZURE OPERATION U/S. 132 OF THE ACT AT THE BUSINESS PREMISES OF LAKSHMI HOSPITAL, ERNAKULAM, AS WELL AS THE RESIDENCE OF THE PARTNERS, OF WHICH THE ASSESSEE IS ONE, ON 07.10.2004 . CONSEQUENTLY, THE ASSESSMENTS WERE FRAMED FROM A.Y. 1999-2000 ONWARDS . THE SEARCH REVEALED DEPOSITS IN VARIOUS BANK ACCOUNTS, BANK DEPOSITS, APART FROM IN THE FIRM, M/S. LAKSHMI HOSPITAL. THE IT(SS)A NOS.17 & 18 /COCH/2008 (FOR AYS 2001-02 & 2002-03) 2 ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS, FILED A CONSOLIDATED CASH FLOW STATEMENT IN EXPLANATION, I.E., BEARING THE CASH INFLOW AND OUTF LOW FOR ALL THE FAMILY MEMBERS, ON THE BASIS THAT THEY WERE STAYING TOGETHER, I.E., SHARIN G A COMMON HOUSEHOLD, AND THAT THE INVESTMENTS MADE WERE FROM THE COMMON POOL OF FUNDS SO AVAILABLE. THE SAME, HOWEVER, DID NOT FIND ACCEPTANCE OF THE ASSESSING O FFICER (AO), WHO CONSIDERED IT TO BE ONLY AN ATTEMPT TO COVER THE UNDISCLOSED RECEIPTS B Y BRINGING IN NEW ACCOUNTS/SOURCES OF FUNDS, I.E., TO COVER UP THE DEFICIENCY AS PER THE REGULAR BOOKS OF ACCOUNT. HE, THEREFORE, ALLOWED CREDIT TO THE ASSESSEE WHERE AND TO THE EXT ENT THE SAME STOOD EXPLAINED WITH REFERENCE TO THE CASH AVAILABLE WITH HER ON THE BAS IS OF HER OWN WITHDRAWALS/EXPLAINED SOURCES OF INCOME. THE ASSESSMENTS WERE, ACCORDINGL Y, FRAMED AT ` 1462300/- AND ` 508420/- FOR THE TWO CONSECUTIVE YEARS, AS AGAINST THE RETURNED INCOME OF ` 131300/- AND ` 224420/-, U/S. 153C OF THE ACT. IN APPEAL, THE LD. CIT(A) FOUND THE ASSESSEE TO HAVE, ON THE BASIS OF THE CONSOLIDATED CASH FLOW STATEMENT, EXPLAINED THE VARIOUS INVESTMENTS/CASH OUTFLOWS. AGGRIEVED, THE REVENUE IS IN APPEAL. 3.1 BEFORE US, IT WAS SUBMITTED BY THE LD. DR T HAT THE EXERCISE OF PREPARING THE CONSOLIDATED CASH FLOW STATEMENT WAS ONLY AN AFTERT HOUGHT. THE WITHDRAWALS NOW SOUGHT TO BE ADJUSTED AGAINST VARIOUS DEPOSITS AND INVESTM ENTS FOUND DURING THE SEARCH WOULD HAVE BEEN MADE ONLY FOR SOME OTHER PURPOSE, I.E., W HICH MOTIVATED THE SAME IN THE HANDS OF THE PERSON CONCERNED, I.E., WHO WITHDREW THE SAM E. THE SAME WAS NOT PERMISSIBLE AS THE ENTRIES DID NOT APPEAR IN THE ASSESSEES REGULA R BOOKS OF ACCOUNTS, AND THE LD. CIT(A) HAS ERRED IN ACCEPTING THE SAME. 3.2 THE LD. AR, ON THE OTHER HAND, WOULD SUBMIT THA T THERE IS NO RECASTING OF ACCOUNTS AS ALL THE CASH INFLOW ENTRIES AS APPEARING IN THE CASH FLOW STATEMENT, WHICH IN EFFECT EXPLAIN THE VARIOUS INVESTMENTS OR OTHER CASH OUTFL OWS, ARE ON THE BASIS OF ENTRIES FROM THE ACCOUNTS OF THE VARIOUS FAMILY MEMBERS. THE LD. CIT(A) HAS VERIFIED THE SAID ENTRIES, AND ALLOWED RELIEF TO THE ASSESSEE ONLY ON THAT BAS IS. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. IT(SS)A NOS.17 & 18 /COCH/2008 (FOR AYS 2001-02 & 2002-03) 3 4.1 THE FIRST QUESTION THAT ARISES FOR OUR CONS IDERATION AND, CONSEQUENTLY, REQUIRES BEING ADDRESSED, IS WHETHER THE CONSOLIDATED CASH F LOW STATEMENT, I.E., FOR THE ENTIRE FAMILY AS ONE UNIT, COULD BE CONSIDERED AS BEING AV AILABLE FOR FINANCING THEIR INDIVIDUAL/SEPARATE INVESTMENTS, FOR THE PURPOSE OF FRAMING THEIR INDIVIDUAL ASSESSMENTS UNDER THE ACT, OR NOT. IN OUR VIEW, WE FIND IT TO BE A REASONABLE PROPOSITION IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE B ELONGS TO A FAMILY OF DOCTORS, WHO ARE RUNNING THE HOSPITAL BY THE NAME LAKSHMI HOSPITAL A T ERNAKULAM, LIVING TOGETHER. THE FAMILY CONSISTS OF (MAJORS) THE ASSESSEE, HER HUSBA ND, FATHER-IN-LAW, MOTHER-IN-LAW AND BROTHER-IN-LAW; THE LAST THREE BEING DOCTORS. NO O THER BUSINESS OR OTHER SOURCE OF INCOME STANDS FOUND IN SEARCH, EVEN AS SOUGHT TO BE EMPHAS IZED BY THE LD. AR DURING THE HEARING, AND THE ENTIRE WITHDRAWALS ARE SOURCED FROM M/S. LA KSHMI HOSPITAL, APART FROM AGRICULTURAL INCOME, ON WHICH THERE IS NO DISPUTE A ND FINDS ACCEPTANCE BY THE REVENUE. THIS IS BUTTRESSED BY THE FACT THAT THE TOTAL HOUSE HOLD EXPENDITURE HAS BEEN ACCOUNTED FOR IN THE HANDS OF THE THREE MALE FAMILY MEMBERS. IT M AY BE CLARIFIED THAT THE ASSESSEE HAS NOT PREPARED ANY FRESH STATEMENT OF ACCOUNTS/ACCOUN T BOOKS, AS CLAIMED IN THE ASSESSMENT ORDER, AND WHICH CONSTITUTES THE PRINCIPAL REASON A DVANCED BY THE AO IN NOT ACCEPTING THE SAME IN EXPLANATION. IN FACT, IF THAT BE SO, WITHDR AWALS MADE THEREIN WOULD STAND ALREADY `APPLIED TOWARD THE DIFFERENT INVESTMENTS AND/OR E XPENDITURE, WHILE ALL THAT THE ASSESSEE PLEADS FOR IS THE REGARDING THE FUNDS OF THE UNIT A S AVAILABLE FOR INVESTMENT BY ANY SINGLE FAMILY MEMBER. RATHER, AS WE SEE IT, WE ARE INCLIN ED TO BE IN AGREEMENT WITH THE LD. AR WHEN HE STATES THAT IT IS MORE A CASE OF EXPLANATIO N OF THE DISCLOSED ASSETS, RATHER THAN OF UNEARTHED INVESTMENTS, PARTICULARLY SO, WHEN ADMITT EDLY NO CASH, JEWELLERY OR OTHER INVESTMENTS IN UNACCOUNTED PROPERTY STOOD FOUND IN SEARCH. AS SUCH, WE ACCEPT THE ASSESSEES CONTENTION IN PRINCIPLE, AND UPHOLD THE FINDING OF THE LD. CIT(A) THAT WHERE THE IMPUGNED INVESTMENTS STAND MET ON THE BASIS OF THE CONSOLIDATED INFLOW/OUTFLOW STATEMENT, I.E., FROM THE COMMON POOL OF FUNDS, PRE PARED FOR ALL THE FAMILY MEMBERS TOGETHER, THE SAME CAN BE CONSIDERED AS REASONABLY EXPLAINED. IT(SS)A NOS.17 & 18 /COCH/2008 (FOR AYS 2001-02 & 2002-03) 4 4.2 SO, HOWEVER, WE HAVE TWO OBSERVATIONS TO MAKE I N THE MATTER. FIRSTLY, THE CASH FLOW STATEMENT AS PREPARED, BEING ON AN ANNUAL BASI S, CANNOT BE ACCEPTED AS SUCH, AND HAS TO BE PREPARED ON A DAILY BASIS. THE WITHDRAWALS (I NFLOW) AS WELL AS THE INVESTMENTS, ETC. (I.E., OUTFLOW), WOULD ONLY BE ON A PARTICULAR DATE , SO THAT WHAT HAS TO BE SEEN, AND IS RELEVANT FOR THE PURPOSE, IS THE AVAILABILITY OF CA SH ON THAT DATE. HOW COULD, IT MAY BE ASKED, A WITHDRAWAL AT A LATER POINT OF TIME POSSIB LY EXPLAIN AN INVESTMENT MADE OR EXPENDITURE INCURRED ANTERIOR TO IT? THIS MAY, WE ARE CONSCIOUS, POSE SOME PRACTICAL PROBLEMS IN CASE OF CERTAIN ITEMS OF CASH INFLOW AN D OUTFLOW WHICH HAVE BEEN RENDERED ONLY ON AN ANNUAL BASIS. FOR EXAMPLE, AGRICULTURAL INCOME; INCOME ADDITIONALLY OFFERED, I.E., PER THE RETURN U/S. 153A VIS--VIS THE ORIGIN AL RETURN U/S. 139(1), HOUSEHOLD EXPENDITURE, ETC., FOR EACH OF WHICH A CONSOLIDATED FIGURE FOR THE YEAR HAS BEEN ADOPTED. FOR THIS, WE CONSIDER THAT A REASONABLE APPROACH, H AVING REGARD TO THE OBTAINING FACTS AND CIRCUMSTANCES, WOULD NEED TO BE TAKEN. AGRICULTURA L INCOME, FOR EXAMPLE, WOULD REQUIRE BEING SYNCHRONIZED WITH THE HARVESTING SEASONS DURI NG THE YEAR. WHERE, HOWEVER, NO DEFINITE TIME CAN BE REASONABLY ASCRIBED, A PROPORT IONATE METHOD WOULD BE JUSTIFIED. FOR EXAMPLE, IN THE ABSENCE OF ANY EVIDENCE WITH REGARD THERETO, THE ANNUAL HOUSEHOLD EXPENDITURE OF ` 3,60,000/- PER ANNUM WOULD TRANSLATE INTO AN EXPEND ITURE OF ` 30,000/- PER MONTH, WITHDRAWN AT THE BEGINNING OF THE MONTH OR, AT BEST, IN TWO EQUAL INSTALLMENTS SEPARATED BY A FORTNIGHT. 4.3 THE SECOND OBSERVATION IS THAT THE LD. CIT(A) H AVING ACCEPTED THE ASSESSEES EXPLANATION IN PRINCIPLE, BEING OF THE PRIMA FACIE VIEW THAT IT IS PLAUSIBLE AND MERITS ACCEPTANCE, OUGHT TO HAVE AFFORDED AN OPPORTUNITY T O THE ASSESSING OFFICER TO EXAMINE THE SAME. THIS, APART FROM BEING IN SATISFACTION O F THE PRINCIPLES OF NATURAL JUSTICE, IS ALSO INCUMBENT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E. FIRSTLY, THERE HAD BEEN NO DETAILED VERIFICATION BY THE AO, WHO DECLINED ACCEPTANCE OF THE ANNUAL CASH FLOW STATEMENT ON THE PREMISE THAT IT IS ONLY THE WITHDRAWALS/INCOME OF T HE INDIVIDUAL CONCERNED, WHICH COULD BE CONSIDERED IN EXPLANATION OF HIS INVESTMENTS/EXP ENDITURE. TWO, EVEN AS OBSERVED DURING THE HEARING, IT IS ONLY WHEN ALL THE ENTRIES IN THE CONSOLIDATED CASH FLOW STATEMENT, WHICH STAND TABULATED/GROUPED PERSON-WISE, STAND CO NFIRMED, THAT THE OUTFLOW IN RESPECT IT(SS)A NOS.17 & 18 /COCH/2008 (FOR AYS 2001-02 & 2002-03) 5 OF A PARTICULAR ASSESSEE WOULD STAND EXPLAINED. THI S IS AS THERE WOULD BE A `SURPLUS CASH IN CASE OF SOME PERSONS AND A `DEFICIT IN THE CASE OF OTHER FAMILY MEMBERS, I.E., WHEN RECKONED SEPARATELY. FOR EXAMPLE, EVEN AS POINTED OUT DURING HEARING BY THE BENCH, IN THE ASSESSEES CASE FOR A.Y. 2001-02, THE OUTFLOW A ND INFLOW AGGREGATE TO ` 1.94 LAKHS AND ` 1.23 LAKHS RESPECTIVELY. AS SUCH, EVEN IF EACH OF T HE SIX ENTRIES COMPRISING THE SAME, WHICH STOOD EXPLAINED TO US BY THE LD. AR WIT H REFERENCE TO THE ASSESSMENT ORDER ITSELF, ARE TAKEN AS CORRECT, THE ASSESSEES OUTFLO W FOR THE YEAR ( ` 1.94 LAKHS) WOULD YET BE UNEXPLAINED TO THE EXTENT OF ` 70,400/-, I.E., UNLESS THE INFLOWS/OUTFLOWS OF THE OTHER FAMILY MEMBERS ARE NOT SIMULTANEOUSLY CONFIRMED. TH AT IS, THE VALIDATION IN ONE CASE WOULD NECESSARILY REQUIRE CONFIRMATION OF THE CASH FLOWS IN RESPECT OF ALL OTHERS AS WELL; IT BEING UNABLE TO BE ASCERTAINED AS TO WHOSE `SURP LUS IS FINANCING WHOSE `DEFICIENCY. 4.4 ACCORDINGLY, WE, ACCEPTING THE ASSESSESS CASE IN PRINCIPLE, RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR VERIFICATION OF THE ITEMS OF THE ENTIRE (CONSOLIDATED) CASH FLOW STATEMENT SUBMITTED BY THE ASSESSEE IN RESPECT OF T HE IMPUGNED ADDITIONS, KEEPING THE OBSERVATIONS IN VIEW. WE DECIDE ACCORDINGLY. THIS COVERS REVENUES GROUND NO. 2 FOR A.Y. 2001-02 AND GROUND NOS. 2 & 3 FOR A.Y. 2002-03 . 5.1 WE NEXT CONSIDER THE ASSESSEES CASE FOR THE ADDITI ON OF ` 9 LAKHS, REPRESENTING A BANK DEPOSIT, AGITATED BY IT PER ITS GROUND NO. 3 F OR A.Y. 2001-02. THE BRIEF FACTS ARE THAT THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE AG GREGATE DEPOSIT OF ` 9.30 LAKHS ON 14.10.2000 IN HER BANK ACCOUNT WITH HDFC BANK (SB N O. 358) DURING THE RELEVANT PREVIOUS YEAR, WHO EXPLAINED THAT THE CASH DEPOSIT OF ` 9 LAKHS WAS OUT OF THE CASH BALANCE OF THE FIRM M/S. LAKSHMI HOSPITAL. THE CASH DEPOSITED WAS, HOWEVER, WITHDRAWN FROM HER SAID BANK ACCOUNT ON THE SAME DAY ITSELF, AND RETURNED BACK TO THE FIRM, SO THAT THE CASH BALANCE OF THE FIRM REMAINED UNDISTURBED. THE BALANCE AMOUNT OF ` 30,000/- WAS EXPLAINED AS FROM THE CASH WITHDRAWALS DURING THE Y EAR. THE SAME STANDS ALREADY CONSIDERED SEPARATELY IN THE CASH FLOW STATEMENT DI SCUSSED SUPRA. 5.2 WITH REGARD TO THE DEPOSIT OF ` 9 LAKHS, THE AO DID NOT FIND THE ASSESSEES EXPLANATION AS SATISFACTORY, AS THE CASH BOOK OF M/ S. LAKHSMI HOSPITAL DID NOT RECORD ANY IT(SS)A NOS.17 & 18 /COCH/2008 (FOR AYS 2001-02 & 2002-03) 6 WITHDRAWAL OF CASH BY THE ASSESSEE. IN APPEAL, HOW EVER, THE ASSESSEE REITERATED ITS STAND, FINDING FAVOUR WITH THE LD. CIT(A). THE FIRM HAD A CASH BALANCE OF ` 497657/- ON 14.10.2000, I.E., AT THE RELEVANT DATE. IT HAD ADD ITIONALLY DISCLOSED, I.E., PER THE RETURN U/S. 153A, ` 625610/-. THE TWO TOTAL TO OVER ` 11 LAKHS, WHERE-FROM ` 9 LAKHS WAS WITHDRAWN BY THE ASSESSEE AND DEPOSITED IN HER BANK ACCOUNT W ITH HDFC, THOUGH WITHDRAWN THE SAME DAY. THE ADDITION HAVING BEEN DELETED ON THIS BASIS, THE REVENUE IS IN APPEAL. 6. BEFORE US, IT WAS VEHEMENTLY ARGUED BY THE LD. D R THAT THE ASSESSEES EXPLANATION IS WHOLLY UNTENABLE. THE FIRMS CASH BOOK OR REGULA R ACCOUNTS DO NOT BEAR ANY SUCH WITHDRAWAL FROM AND, CONSEQUENTLY, THE SUBSEQUENT D EPOSIT THEREWITH, BY THE ASSESSEE, ITS PARTNER. WHY WOULD THE FIRM DEPOSIT THE WHOLE OF I TS CASH BALANCE ON A PARTICULAR DAY IN THE BANK ACCOUNT OF ONE OF ITS PARTNERS. IN FACT, EVEN THAT WAS NOT FOUND SUFFICIENT, SO THAT THE ASSESSEE HAS RELIED ON THE ADDITIONAL INCOME OF FERED IN THE FIRMS HANDS, I.E., SUBSEQUENT TO THE SEARCH. HOW WAS THAT RELEVANT; T HE SAID ADDITIONAL INCOME BEING ONLY ON THE BASIS OF SOME MATERIALS FOUND IN SEARCH, YEA RS LATER, IN RELATION TO THE SAID FIRM? THE LD. AR, ON THE OTHER HAND, WOULD SUBMIT THAT NO ACCOUNTING ENTRY WAS REQUIRED IN THE BOOKS OF FIRM AS THE AMOUNT WAS RESTORED THERETO TH E VERY SAME DAY. THE LD. CIT(A) HAS TAKEN A BROAD AND HOLISTIC VIEW OF THE MATTER, AND WHICH THUS MERITS ACCEPTANCE. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. 7.1 WE FIND THE ASSESSEES CASE AS UNTENABLE AN D DE HORS ANY CONTEMPORARY EVIDENCE, WHICH ONLY WOULD VALIDATE ITS UNUSUAL EXPLANATION. IF NOT SO, ANY INVESTMENT COULD BE SET OFF AGAINST ANY WITHDRAWAL, HOWSOEVER UNRELATED THE TWO MAY BE. FOR WHAT PURPOSE THE CASH WAS DEPOSITED AND THEN WITHDRAWN IMMEDIATELY F ROM THE BANK ACCOUNT, HAS NOT BEEN EXPLAINED ANYWHERE; EVEN ON BEING SPECIFICALLY ENQU IRED, TO NO SPECIFIC ANSWER. THE PURPOSE FOR WHICH THE CASH WAS DEPOSITED IN THE BAN K ACCOUNT IS EXTREMELY RELEVANT TO THE ASSESSEES EXPLANATION, PARTICULARLY CONSIDERING TH E VOLUME OF FUNDS INVOLVED, AS WELL AS ITS IMMEDIATE WITHDRAWAL, WHICH IS ITSELF UNUSUAL. THIS IS MORE SO AS THE ASSESSEE HAS A BANK ACCOUNT (ALSO WITH ANDHRA BANK) AND, IN ALL LI KELIHOOD, WITH THE SAME BANK AS OF THE FIRM, AS IS THE USUAL PRACTICE, WHILE THE TRANSACTI ON WAS STILL PREFERRED TO BE DONE IN CASH IT(SS)A NOS.17 & 18 /COCH/2008 (FOR AYS 2001-02 & 2002-03) 7 AND NOT THROUGH THE BANKING CHANNEL. IS THE ASSESS EES ACCOUNT WITH HDFC BANK ITSELF A DISCLOSED ACCOUNT (I.E., TO THE DEPARTMENT), AS WAS AGAIN QUERIED BY THE BENCH? THE PRIMARY FACTS, WHICH REMAIN UNDISCLOSED, ARE OF VIT AL SIGNIFICANCE. 7.2 FURTHER, THE MOOT QUESTION IS: WHY WOUL D THE FIRM DEPOSIT ITS ENTIRE CASH IN THE PARTNERS BANK ACCOUNT, AND WITHOUT AS MUCH AS RECO RDING IT IN ANY MANNER. THEN, AGAIN, THE SAME DOES NOT MEET THE DEPOSIT AMOUNT, WHICH IS SOUGHT TO BE MET ON THE BASIS OF ITS ADDITIONAL INCOME, OFFERED PER ITS RETURN FILED YEA RS LATER, CONSEQUENT TO THE SEARCH. WAS THE ASSESSEE AWARE OF DEPOSITING THE FIRMS UNACCOU NTED INCOME; THE BOOKS OF THE FIRM CARRYING A LOWER AMOUNT OF CASH? IN FACT, THE FIRM S UNDISCLOSED INCOME IS WHOLLY IRRELEVANT (IN THE MATTER) IN THE ABSENCE OF ANY CO RROBORATIVE MATERIAL TO THE TRANSACTION. HOW, AS POSED BY THE BENCH, COULD IT BE TAKEN THAT THE ENTIRE ADDITIONAL INCOME FOR THE YEAR TRANSLATED INTO CASH-IN-HAND AND, FURTHER, BY THE SAID DATE, WHICH FALLS IN MID YEAR, TO, AGAIN, NO SPECIFIC ANSWER. FURTHER ON, A PERUSAL OF ITS ASSESSMENT ORDER U/S. 153A (DATED 28.12.2006 / COPY ON RECORD) SHOWS THAT THE REVENUE HAS NOT ASSESSED THE SAID INCOME ( ` 625610/-), BUT FINALIZED THE ASSESSMENT OF THE FIRM FOR THE RELEVANT ASSESSMENT YEAR (2001-02) BY MAKING SEPARATE ADDITIONS TO THE INCOM E ORIGINALLY RETURNED U/S. 139(1). THOUGH THE LD. AR ARGUED THAT THE SAME (NON-ASSESSM ENT OF THE INCOME ADDITIONALLY OFFERED) SHOULD NOT REALLY ALTER THE SITUATION, AS IT CANNOT BE DENIED THAT THE ASSESSEE HAD RETURNED ADDITIONAL INCOME TO THAT EXTENT, EVEN PAY ING TAX THEREON, WE CAN HARDLY AGREE IN THE ABSENCE OF ANY DISCUSSION IN THE ASSESSMENT ORD ER WITH REGARD TO THE INCOME OFFERED PER THE RETURN, SO THAT THE REVENUE HAS BASED THE A SSESSMENT ON A DIFFERENT BASIS AND, IN ANY CASE, ITS NATURE IS NOT KNOWN. NOT ONLY THAT, T HE FIRM, AS CONCEDED TO BY THE LD. AR, IS CONTESTING ITS SAID ASSESSMENT. 7.3 MERITS APART, THE EXPLANATION IS NOT SUSTA INABLE EVEN ON THE PRIMARY GROUNDS OF REASONABILITY AND TENABILITY. A TELESCOPING BENEFI T, EVEN IN THE CASE OF THE SAME ASSESSEE, WOULD BECOME ALLOWABLE ONLY ON THE BASIS OF SOME CO RROBORATIVE MATERIAL, I.E., WOULD REQUIRE BEING SUPPORTED BY CIRCUMSTANTIAL FACTS, WH ILE HERE WE FIND IT TO BE A CASE OF CASH OF A DIFFERENT ASSESSEE, `DRAWN FROM ITS REGULAR B OOKS, WITHOUT BEING ACCOUNTED, AS WELL IT(SS)A NOS.17 & 18 /COCH/2008 (FOR AYS 2001-02 & 2002-03) 8 AS FROM THE ADDITIONAL INCOME OFFERED BY IT MUCH LA TER. COULD IT HAVE KNOWN AT THE RELEVANT POINT OF TIME, I.E., OCTOBER, 2000, THAT A SEARCH WOULD TAKE PLACE SOME YEARS HENCE, YIELDING AN EXCESS INCOME FOR THE RELEVANT Y EAR TO THAT EXTENT. THE SAME IS CLEARLY AN AFTERTHOUGHT, AND AN UNSUBSTANTIATED CLAIM. ACCO RDINGLY, WE FIND NO MERIT IN THE ASSESSEES CASE, AND UPHOLD REVENUES GROUND NO. 3. 8. IN THE RESULT, THE REVENUES APPEAL FOR AY 2001- 02 (IN IT(SS)A NO. 17/COCH/2008) IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES, AND ITS APPEAL FOR AY 2002-03 (IN IT(SS)A NO. 18/COCH/2008) IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 26TH JULY, 2011 GJ COPY TO: 1. SMT. M.S.RATHI, PARTNER, M/S. LAKSHMI HOSPITAL, DIWANS ROAD, ERNAKULAM. 2. THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CI RCLE-1, ERNAKULAM. 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 .