Sai Victory Construction, Sce'bad, Hyderabad V. The DCIT Central Circle-4, Hyderabad

ITSSA 17/HYD/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0064 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 24-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: K C DEVADAS
• Keywords: Search and seizure; Loose papers; Document seized; Period of limitation; Block assessment; Documents seized
• Section: 142(1); 6; 132; 12; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER IT(SS)A NO.17/HYD/11 : BLOCK PERIOD FROM 1.4.1990 TO 4.1.2001 IT(SS)A NO.18/HYD/11 : BLOCK PERIOD FROM 1.4.1990 TO 4.1.2001 M/S. SAI VICTORY CONSTRUCTIONS, SECUNDERABAD. ( PAN - A BKFS 7469 Q ) V/S. DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 4, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C.DEVADAS RESPONDENT BY : SHRI D. SUDHAKAR RAO DR DATE OF HEARING 08.1.2014 DATE OF PRONOUNCEMENT 05. 3.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THESE TWO APPEALS BY ARE BY THE ASSESSEE. WHILE THE FIRST ONE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) VI, HYDERABAD DATED 15.2.2011, PASSED IN THE CONTEXT OF BLOCK ASSESSMENT MADE UNDER S.158BD READ WITH S,.158BC(C) OF THE ACT, FOR THE BLOCK PERIOD FROM 1.4.1990 TO 4.1.2001, THE APPEAL FILED LA TER IS DIRECTED AGAINST THE ORDER OF THE CIT(A) VI DATED 15.2.2011, CONFIRMING THE PENALTY OF RS.28,46,592 LEVIED UNDER S.158BFA(2) OF THE ACT. SINCE THE FACTUAL BACKGROUND RELATING TO BOTH THESE APPEALS IS COMMON, THESE APPEALS ARE BEING DISPOSED OF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 2 IT(SS)A NO.17/HYD/11 : BLOCK PERIOD FROM 1.4.1990 TO 4.1.2001 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE CON S TRUC T ION OF RESIDENTIAL COMPLEXES AT HYDERABAD. A SEARCH AND SEIZURE OPERATION UNDER S1.32 OF THE ACT WAS CON D U C TED ON 24.1.2001 AT THE RESIDENTIAL PREMI S ES OF ONE SHRI T.PRAKASH, ONE O F THE PARTNERS OF THE ASSESS EE FIRM, AS PART OF THE SEARCH OPERATION S CONDUCTED IN TIRUMALA GROUP O F CA S ES. DURIN G THE COU R SE OF SEARCH OP E RATION S CONDUCTED, CERTAIN PAP E RS CONTAINING THE RATES, I.E. SALE PRICE O F FLATS IN RESPECT OF VENTURES CON S TRUCTED BY THE ASEE0FIRM, VIZ. VICTO RY V I HAR AND VICTORY VISION WERE FOUND. IN VIEW OF THE ABOVE, A NOTICE UNDER S.158BD R.W..S. 158BC WAS ISSUED TO THE ASSESSEE CALLING FOR TH E RETURN OF INCOME FOR THE BLOCK PERIOD, COMPRISING OF ASSESSMENT YEARS 1991 - 92 TO 2000 - 01 AND FROM 1.4.2000 TO 4.1.2001, ON 1.11.2002, ADMITTING UNDISCLOSED INCOM E AT RS.120.60 LAKHS. T.PRAKASH, DURING THE COURSE OF SEARCH OPERATIONS CONDUCTED, CONFIRMED THE FACT OF NON - MAINTENANCE OF REGULAR BOOKS OF ACCOUNT AND NON - FILING O F RETURN S OF INCOME FOR THE ASSESSMENT YEARS 1991 - 92 TO 2000 - 01, IN THE STATEMENT GIVEN BY HIM. 3. THERE WAS NO COMPLIANCES TO THE NO T I C ES ISSUED BY THE ASSESSING OFFICER UNDER S.143( 2) AND 142(1) OF THE ACT. HENCE, PROCEEDING ON THE BASIS OF SEIZED MATERIAL, BEING PAGE NOS.31 AND 32 OF ANNEXURE A/TP/1, WHICH IS A TYPED STATEMENT MENTIONING THE NAMES OF SHRI N.SURENDER RAO AND SHRI T.PRAKASH, PARTNERS OF TH E ASSESSEE - FIRM, TO THE COUR T WITH RE G ARD TO SOME DISPUTE , W HICH SHOW E D THAT THEY SOLD COMMERCIAL SPACE AT TH E R ATE OF RS.2,000 PER SQ. FT. AND RESIDENTIAL SPACE AT TH E RATE OF RS.1,200 PER SQ. FT IN THE VENTURES CONSTRUCTED BY THE ASSESSEE FIRM. BAS E D ON THE ABOVE INFORMATION THE ASSESSING OFFICER ISSUED A SHOW CAUSE NO T ICE TO THE ASSESSEE AS TO WHY THE ABOVE RATES SHOULD NOT BE ADOPTED TO ARRIVE AT THE UNDISCLOSED INCOME. ON THAT BASIS, THE ASSESSING OFFICER PROPOSED TO ESTIMATE THE UNDI SC LO S ED INCOME AT RS.52,02,000 BEING PROFI T AT 15% OF THE TOTAL RECEIPTS OF RS .3,46,40,000. EVEN TO THIS SHOW CAUSE IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 3 NOTICE, THERE WAS NO RESPONSE FROM THE ASSESSEE. THE ASSESSING OFFICER CONSEQUENTLY, PROCEEDED TO ESTIMATE THE INCOME O F TH E ASSESSEE, PLACING RELIANCE ON THE DECISIONS OF T H E AHMED ABAD BENCH OF THE TRIBUNAL IN THE CA S E OF N ARESH KUMAR B.AGARWAL V/S. ACIT(104 TAXMAN 222) (MAG.) AND BOMBAY BENCH OF THE TRIBUNAL IN THE CA S E OF CHAMPION CON S TRUCTION CO. V/S. IST ITO (5 ITD 495) , AND COMPLETED THE ASSESSMENT ON A TO T AL INCOME OF R S .52 ,02,000, VIDE ORDER OF ASSESSMENT DATED 29.10.2003, PASSED UNDER S.158 BD READ WITH S.158BC(C) OF THE ACT. 4. ON APPEAL BEFORE THE CIT(A) , THE ASSESSEE FILED WRITTEN SUBMISSIONS, PLEADING INTER - ALIA AS FOLLOWS - 'M / S. SRI SAI VICTORY CONSTRUCTIONS WAS A PARTNERSHIP FIRM, WHICH CAME INTO EXISTENCE WITH EFFECT FROM 1.10.1997 BY A PARTNERSHIP DEED DATED 23.10.1997 AND WAS DISSOLVED WITH EFFECT FROM 31.12.2000 BY A DISSOLUTION DEED DATED 11.1.2001. THE FOLLOWING WERE THE PARTNERS OF THIS FIRM: 1 . SHRI. N. SURENDER RAO 2 . SHRI. THOTA PRAKASH 3 . SMT. THOTA LAXMI 4 . SMT. N. ANURADHA 2. ACCORDING TO THE DISSOLUTION DEED, 'THE BOOKS OF ACCOUNT UPTO THE DATE OF DISSOLUTION I.E. 31.12.2000 SHALL REMAIN IN THE CUSTODY OF THE PARTY OF THE SECOND PART, SHRI. THOTA PRAKASH, 'WHO SHALL BE RESPONSIBLE TO PRODUCE THE SAME BEFORE THE INCOME - TAX DEPARTMENT'. A COPY OF THE DISSOLUTION DEED IS ENCLOSED TO THIS STATEMENT OF FACTS. 3. NO RETURN OF INCOME WAS FILED FOR ANY OF THE ASSESSMENT YEARS. A SEARCH U / S. 132 WAS CONDUCTED ON 4.1.2001 AT THE PREMISES OF SHRI. THOTA PRAKASH, ONE OF THE PARTNERS OF THE FIRM, AS A PART OF THE SEARCH OPERATIONS IN TIRUMALA GROUP OF CASES. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, A NOTICE U / S. 158BD WAS ISSUED ON1.11.2002, THE FIRM FILED A BLOCK RETURN FOR THE PERIOD 1.4.2000 TO 4.1.2001 ADMITTING AN UNDISCLOSED INCOME OF RS. 9, 66,000; A NOTICE U / S. 143(2)/142(1) WERE ISSUED; FINAL SHOW CAUSE NOTICE ISSUED ON 31.7.2003; AND SINCE THERE WAS NO RESPONSE, THE UNDISCLOSED INCOME WAS COMPUTED BASING ON THE INFORMATION AVAILABLE IN THE SEIZED MATERIAL. 4. THE LEARNED AD ESTIMATED T HE TOTAL UNDISCLOSED INCOME AT IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 4 RS. 52,02,000 / - BY HIS ASSESSMENT ORDER DATED 29.10.2003. 5. SHRI. N. SURENDER RAO, ERSTWHILE PARTNER OF THE APPELLANT FIRM, DID NOT KNOW ANYTHING ABOUT THE ASSESSMENT PROCEEDINGS AND RECEIPT OF THE ASSESSMENT ORDER, SINCE, ACCORDING TO THE DISSOLUTION DEED, THE TAX MATTERS ARE TO BE LOOKED AFTER BY ANOTHER PARTNER, SRI. THOTA PRAKA SH. AND D UE TO FINANCIAL PROBLEMS, THIS ERSTWHILE PARTNER OF THE APPE LLANT FIRM SHIFTED HIS RESIDENCE. IT IS ONLY WHEN HIS FRIEND INFORMED HIM THAT TRO OF THE IT DEPARTMENT WAS TRYING TO LOCATE HIS ADDRESS IN CONNECTION WITH TAX ARREARS OF THE FIRM, THIS E RSTWHILE PARTNER OF THE APPELLANT FIRM WENT TO THE DEPARTMENTAL OFFICERS AND FOUND TO HIS SURPRISE THAT A HUGE DEMAND OF MORE THAN RS. 60 LAKHS IS PENDING AGAINST THE FIRM AND THE DEPARTMENT IS PURSUING FOR COLLECTION OF THE TAXES BY ALL MEANS, INCLUDING C OERCIVE METHODS. THIS ERSTWHILE PARTNER OF THE APPELLANT FIRM HAS NOT BEEN IN CONTACT WITH THE OTHER PARTNER, SRI. T. PRAKASH, FOR THE LAST FOUR TO FIVE YEARS AND HIS PRESENT EFFORTS TO LOCATE HIM HAVE NOT BEEN FRUITFUL. 6. THIS ERSTWHILE PARTNER OF THE APPELLANT FIRM, THEREFORE, APPLIED FOR COPIES OF THE ASSESSMENT ORDER AND PENALTY ORDER, AND ARRANGED FOR AN IMMEDIATE PART PAYMENT OF RS. 2 LAKHS, AND HANDED OVER A CHEQUE DT. 5.3.2008 FOR RS. 5 LAKHS, WITH GREAT DIFFICULTY. A COPY OF THE ASSESSMENT ORDER AND THE DEMAND NOTICE HAS JUST BEEN RECEIVED BY HIM AND THIS APPEAL IS BEING FILED IMMEDIATELY THEREAFTER ON THE BASIS OF THE ASSESSMENT ORDER ALONE. THIS ERSTWHILE PARTNER OF THE APPELLANT FIRM WILL BE APPLYING FOR COPIES OF THE SEIZED PAPERS AND OTHER DETAILS AND OTHER DETAILS AND SUBMIT, IF NECESSARY, FURTHER FACTS SUBSEQUENTLY. 7. THIS ERSTWHILE PARTNER OF THE APPELLANT FIRM OR HIS WIFE, ANOTHER PARTNER, DID NOT RECEIVE EARLIER THE ASSESSMENT ORDER AND DEMAND NOTICE. T HEY DO NOT KNOW ON WHOM THE NOTICES WERE SERVED EARLIER. THE APPELLANT WILL FILE A CONDONATION PETITION, IF NECESSARY, AFTER FINDING OUT THE FACTS FROM THE DEPARTMENT. 8 . AGGRIEVED WITH THE ABOVE ASSESSMENT ORDER, THIS ERSTWHILE PARTNER OF THE APPELLANT FIRM FILES THIS APPEAL ON THE GROUNDS SUBMITTED SEPARATELY.' 5. W HILE IT IS EVIDENT FROM THE CAUSE TITLE OF THE IMPUGNED ORDER OF THE CIT(A) THAT FIRST APPEAL BEFORE THE CIT(A) AGAINST THE ORDER OF ASSESSMENT DATED 29.10.2003 WAS INSTITUTED ON 22.1.2010, IT IS THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE FIRM WAS DISSOLV ED WITH EFFECT FROM 31.12.2000 BY A DISSOLUTION DEED IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 5 D A TED 11.1.2001, AND ACCORDING TO THE DISSOLUTION DEED, THE BOOK S O F ACCOUNT UPTO THE DATE O F DISSOLUTION, I.E. 31.12.2000 SHALL REMAIN IN TH E CUSTODY OF THE PARTY OF THE SECOND PART, SHRI THOTA P RAKASH , WHO SHALL BE RESPONSIBLE TO P R O D UCE THE SAME BEFORE THE INCOME - TAX DEPARTMENT. IT WAS THE CASE OF THE ASSESSEE THAT THE PARTNER, SURENDER RAO DID NOT KNOW ANYTHING ABOUT THE ASSESSMENT PROCEEDINGS AND THE RECEIPT OF ASSESSMENT ORDER, SICNE TAX MATTERS , AS PER THE DISSOLUTION DEED WERE TO BE LOOKED AFTER BY THOTA PRAKASH, WHO DUE TO FINANCIAL PROBLEMS, SHIFTED THIS RESIDENCE. IT WAS ALSO ONLY AFTER COMING TO KNOW FROM HIS FRIEND THAT TRO OF INCOME - TAX DEPARTMENT WERE TRYING TO LOCATE HIS RESIDENCE IN CONNECTION WITH TAX ARREARS O F THE FIRM, THE MATTER WAS ENQUIRED WITH THE INCOME - TAX DEPARTMENT, ONLY TO COME TO KNOW BY SURPRISE THAT ASSESSMENT WAS MADE WITH HUGE TAX DEMAND. IT WAS THUS THE CLAIM OF THE ASSESSEE T HAT WHILE NO RETURN WAS CLAIMED FOR AN Y O F THE ASSESSMENT YEARS, CONSEQUENT UPON SEARCH ACTION ON THE PREMISES OF THE SHRI THOTA P R AKASH UNDER S.132 OF THE A C T ON 4.1.2001, AND SUBSEQUENT INITIATION OF THE PROCEEDINGS UNDER S.158BD IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAD TO FILE D BLOCK R ETURN ADMITTING UNDISCLOSED INCOME O F RS .9,66,000, AS AGAINST WHICH ASSESSING OFFICER ESTIMATED THE UNDISCLOSED INCOME AT RS.52,02,000. 6. THE CIT(A), AT THE OUTSET, TOOK NOTE OF THE FACT THAT THE ASSESSMENT ORDER WAS SERVED BY AFFIXTURE . HE ALSO TOOK NOTE THAT THAT THE SHOW CAUSE LETTER DATED 25.9.2002, AND OTHER NO T IC E S SENT SUBSEQUENTLY WERE PROP E RLY SERVED ON THE ASSESSEE, THOUGH EVEN IN RESPONSE TO THE SAME, THERE WAS NO RESPONSE FROM THE ASSESSEE, EXCEPT FILING OF THE BLOCK RETURN. IN THE CIRCUMSTANCES, HE FOUND NO MERIT IN THE CON T ENTION O F TH E ASSESSEE THAT THE ASSESSMENT ORDER WAS NOT SERVED, AND CONSEQUENTLY, THE PRAYER FOR CONDONATION OF D ELAY DOES NO T ARI S E AT ALL. THE CIT(A) FURTHER OBSERVED THAT EVEN I F IT WAS TAKEN THAT SURENDER RAO W AS NO T AWARE OF THE FACTS OF THE CA S E AS THE PARTNERSHIP WAS DISSOLVED, THE CON DONAT ION OF DELAY IN FILING O F APPEAL CAN N O T BE ACCEPTED, AS THE AUTHORISED REPRESENTATIVE OF TH E ASSESSEE AT THE APPELLATE PROCEEDINGS HAD NEVER RAISED IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 6 THIS ISSUE AND SOU GHT TO FILE ANY APPLICATION SEEKING CONDONATION OF DELAY. THE CIT(A), ACCOR D INGLY CONC L U D ED T HAT THE APPEAL AS BARRED BY LIMITATION. 7. THE CIT(A), THEREAFTER, P R OCEEDED TO CONSIDER THE FACTS OF THE CASE ON THE M E RITS OF THE ASSESSMENT MADE, IN THE LIG HT OF FURTHER WRITTEN SUBMISSIONS OF THE ASSESSEE , DULY EXTRACTING THE SAME AND ALSO THE STATEMENT GIVEN BY SURENDER RAO, DISCUSSED IN TH E SHOW CAUSE LETTER DATED 25.9.2002 ISSUED TO THE ASSESSEE, AND ULTIMATELY CONCLUDED THAT THE ASSESSEE HAD RECEIVED MUC H HIGHER CONSIDERATION THAN WHAT IT HAD DISCLOSED IN THE RETURN OF INCOME. HE FURTHER OB SE RVED THAT THE CONTENTION OF THE ASSESSEE TH AT THE DOCUMENT SEIZED BASED ON WHICH THE ASSESSMENT WAS COMPLETED WAS AN UNSIGNED DOCUM E N T AND A DUMB DOCUMENT. EVEN IF SUCH A CONTENTION IS ACCEPTED, HE OBSERVED, THAT GLARING EVIDENCE GIVEN BY SUREN DER RAO IN HIS SWORN S T ATEM E NT CLEARLY SHOWS THAT THEY HAVE YIELDED MUCH HIGH ER PRICE THAN WHAT I S SHOWN IN THE RETURN OF INCOME. FOR THESE REASONS, THE CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 8. AGGRIEVED, ASSESSEE IS IN SECOND APPEAL BEFORE US. 9. EFFECTIVE GROUNDS OF THE ASSESSEE IN THIS APPEAL ARE AS FOLLOWS - 1. THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AS WELL AS ON FACTS. 2. THE CIT( A) OUGHT TO HAVE OBSERVED THAT THERE WAS NO DELAY IN FILING OF THE APPEAL AS THERE WAS NO PROPER SERVICE OF ASSESSMENT ORDER AND DEMAND NOTICE ON ANY PARTNER INCLU D IN G THE PRESENT APPELLANT (PARTNER) SRI N.SUR E NDER RAO. 3. THE CIT(A) OUGHT TO HAVE ADM I TT ED THE APPEAL FOR CONSIDERATION EVEN I F IT IS ASSUMED THAT THERE WAS DELAY IN VIEW OF TH E FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE CIT(A) ERRED IN CON F IRMIN G TH E COMPUTATION OF IN C OM E AT R S .52,02,000/ - WITHOUT CON S IDERIN G THE FACT THAT THERE WAS NO SEIZED MATERIAL SUPPORTING SUCH COMPUTATION. 5. THE ORDER OF TH E CIT(A) IS ERRONEOUS IN LAW AS THE SAME WAS WITHOUT PROPER APPRECIATION OF FACTS AS WELL AS LEGAL ASPECTS OF THE CASE. 6, . IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 7 10. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LEARNED COUNSEL HAS ALSO FILED ADDITIONAL GROUNDS OF APPEAL, ALONGWITH A PETITION SEEKING ADMISSION OF THE SAME. THE SAID ADDITIONAL GR O UN D S READ AS FOLLO W S - 1. THE SATISFACTION AS ENJOINED IN SECTION 158BD OF THE ITA ACT OF 1961 THAT THE APPELLANT HAS UNDISCLOSED INCOME NO T HAVING BEEN RECORDED BY THE ASSESSING OFFICER AS LAID DOWN IN THE DECISION OF THE SUP R EME COU R T IN MANISH MAHESHWARI V/S. ASST. CIT AND ANO T H E R REPORTED IN 289 ITR 341(SC) AND TH E O R DER PASSED U/S. 158BD R.W.SECITON158BC(C) OF THE IT ACT OF 1961 ON 29.10.2003 IS INVALID AND BAD IN LAW AND IS TO BE QUASHED. 2. WHETH E R ON THE FACTS AND CIRCUMSTANCES O F THE CA S E THE CIT(A) VI HYDERABAD WAS JUSTIFIED AND CORRECT IN LAW IN HOL D IN G THAT T HE SERVICE OF ASSESSMENT OR D ER BY AFFIXTURE AT THE PREMISES BEARING NO - 403 R A GHURAM APARTMENTS, MALAKPET, HYDERABAD ONLY ON EX - PARTNER MR.T.PRAKASH WAS VALID AND IF NOT, WHETHER THE APPEAL FIL E D BY THE APPELLANT THROUGH EX - PARTNER, MR.N.SURENDER RAO ON 03/03/2008 WAS WITHIN THE PERIOD O F LIMITATION AS LAID DOWN BY THE JURI S DI C TIONAL HIGH C OU R T IN T H E CA S E OF CIT V/S. GANGADHAR GOUD RAM GOW D AND CO. REPORTED IN 158 ITR 0075(AP ) . 11. SINCE THE ABOVE ADDITIONAL GROUNDS ARE LEGAL IN NATURE AND GO TO THE ROOT OF THE MATTER, RELYING ON THE DECISION OF THE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION LTD. V/S. CIT (229 ITR 383) WE ADMIT THE SAME AND PROCEED TO DISPOSE OF THE SE APPEALS, TAKING INTO ACCOUNT THOSE ADDITIONAL GROUNDS AS WELL. 12. LET US FIRST TAKE UP FOR CONSIDERATION, THE FIRST ADDITIONAL GROUND, WHICH IS A LEGAL ONE WHICH GOES TO THE ROOT OF THE MATTER . T HE OBJECTION OF THE ASSESSEE IN THIS GROUND IS WITH RE GARD TO NON - RECORDING OF SATISFACTION BY THE ASSESSING OFFICER BEFORE INVOKING THE PROVISIONS OF S.158BD IN THE CASE OF THE ASSESSEE. 1 3 . WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. IT IS NO DOUBT TRUE THAT T HE CONDITION PR ECEDENT FOR INITIATING A BLOCK ASSESSMENT UNDER S.158BD IS REACHING/RECORDING SATISFACTION BY THE ASSESSING OFFICER , AS ENJOINED IN S.158BD OF THE I.T. ACT, 1961 , TO THE EFFECT THAT IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 8 INCRIMINATING MATERIAL INDICATING UNDISCLOSED INCOME ASSESSABLE IN THE HAN DS OF THE ASSESSEE, WAS FOUND DURING S. 132 PROCEEDINGS OF THE PERSON SEARCHED . DISPUTING THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER DID NOT RECORD EITHER SATISFACTION, AS ENVISAGED IN THE ACT, BEFORE INITIATING THE PROCEEDINGS UNDER S.158 BD OF THE ACT, OR REASONS , THE LEARNED DEPARTMENTAL REPRESENTATIVE DEMONSTRATED TAKING US THROUGH THE MATERIAL THAT SUCH SATISFACTION HAS IN FACT BEEN RECORDED BY THE ASSESSING OFFICER. IN THE CIRCUMSTANCES, WE FIND NO MERIT IN THE FIRST ADDITIONAL GROUND OF THE ASSESSEE OF THE ASSESSEE IN THIS APPEAL. THE SAME IS ACCORDINGLY REJECTED. 14. NOW TURNING TO THE SECOND ADDITIONAL GROUND, WHICH RELATES TO THE SERVICE OF ASSESSMENT ORDER ON THE ASSESSEE BY AFFIXTURE AT THE PREMISES OF A PARTNER, AND ITS IMPACT ON THE COMPUTATION OF PERIOD OF LIMITATION. GROUND NO.2 ORIGINALLY RAISED BY THE ASSESSEE IN THIS APPEAL IS ALSO ON THIS VERY ISSUE. 15. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED ORDERS OR THE REVENUE AUTHORITIES AND OTHER MATERIAL ON RECORD. IT I S TH E CON T ENTION OF THE ASSESSEE THAT THERE WAS NO DELAY IN FILIN G OF THE APPEAL BEFORE THE CIT(A), AS THERE WAS NO PROPER SER V I C E OF ASSESSMENT ORDER AND DEM AN D NOTICE ON ANY PARTN E R, BY AFFIXTURE, IN C LU D IN G THE P RE SENT PARTNER , N.SURENDER RAO, IS NO PROP ER SERVICE. IN SUPPORT OF THESE CONTENTIONS, BESIDES REFERRING TO THE DECISION OF THE JURISDICTIONAL HIGH COURT NOTED IN THE GROUND ITSELF, LEARNED COUNSEL ALSO RELIED UPON THE DECISION OF THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIUT V/S. NAVEEN CHANDER (323 ITR 49). WE FIND MERIT IN THIS CONTENTION OF THE ASSESSEE. IN THE CASE OF CIT V/S. GANGADHAR GOWD RAMA GOWD AND CO (SUPRA), RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, IT HAS BEEN HELD, CONSIDERING THE FACT OF SERVICE OF ORDERS REFUS ING THE REGISTRATION OF THE FIRM ON ONE OF THE PARTNERS BY NAME, AFTER DISSOLUTION OF THE SAID FIRM, THE APPEAL FILED BY THE OTHER PARTNER, ON OBTAINING CERTIFIED COPIES OF THE RELEVANT ORDERS, WAS HELD TO BE WITHIN TIME AND NOT BARRED BY LIMITATION. FACT S AND CIRCUMSTANCES OF THE CASE BEING IDENTICAL IN THE CASE ON HAND AS WELL, WE ARE OF THE VIEW THAT IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 9 THERE WAS NO DELAY IN THE FILING OF THE FIRST APPEAL BEFORE THE CIT(A), AND CONSEQUENTLY, THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THE APPEAL BEFORE HIM AS BARRED BY LIMITATION. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) ON THIS ASPECT. ASSESSEES GROUNDS ON THIS ASPECT ARE ACCORDINGLY ALLOWED. 16. NOTWITHSTANDING THE FACT THAT THE APPEAL AS HELD TO BE BARRED BY LIMITATION, SINCE THE CIT(A) HAS PROCEEDED TO DISPOSE OF THE APPEAL OF THE ASSESSEE ON MERITS AS WELL, WE PROCEED TO DISPOSE OF THE APPEAL ON THE MERITS OF OTHER GROUNDS AS WELL. 17. ASSESSEES GROUND ON THE MERITS OF THE ASSESSMENT IS THAT THE CIT(A) ERRED IN CONFIRMING THE ESTIMA TION OF UNDISCLOSED INCOME AT RS.52,02,000 WITHOUT CONSIDERING THE FACT THAT THERE WAS NO SEIZED MATERIAL SUPPORTING SUCH COMPUTATION. 18. THE ASSESSING OFFICER HAS TAKEN NOTE OF TWO PAGES, BEING PAGES 31 AND 32 OF SEIZED MATERIAL, WHICH REVEALED THAT THE ASSESSEE SOLD COMMERCIAL SPACE AT THE RATE OF RS.2000 PER SQ. FT. AND RESIDENTIAL SPACE AT THE RATE OF RS.1,200 PER SQ. FT. IN THE VENTURES CONSTRUCTED BY THE ASSESSEE FIRM, THE ASSESSING OFFICER ESTIMAT ED THE GROSS RECEIPTS AT RS.3,46,40,000 AND ESTIM ATED THE NET PROFIT THEREON AT 15% THEREOF, AND ACCORDINGLY ARRIVED AT THE UNDISCLOSED INCOME TO BE ASSESSED IN THE HANDS OF THE ASSESSEE AT RS.52,02,000. ON APPEAL, THE CIT(A) CONFIRMED THE ASSESSMENT THUS MADE BY THE ASSESSING OFFICER. AGGRIEVED, ASSES SEE IS IN SECOND APPEAL BEFORE US. 19. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SEIZED PAPERS REFERRED TO ABOVE, BASED ON WHICH THE IMPUGNED BLOCK ASSESSMENT WITH HUGE ADDITION HAS BEEN MADE, ARE UNSIGNED SHEETS - STATEMENT OF SHRI SURE NDER RAO AND SHRI T.PAKASH DATED 8.6.1999. THIS STATEMENT IS ACCORDING TO THE LEARNED COUNSEL, IS COUNTER TO CRIMINAL COMPLAINT FILED BY THREE OF THE PURCHASERS OF THE FLAT, FLAT NO.1, 2 AND 3 IN THIRD FLOOR OF VICTORY VIHAR. IT WAS FURTHER SUB M I T TED THA T THERE WERE DISPUTES BETWEEN THE ASSESSEE FIRM AND THREE OF THE IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 10 BUYERS ON ACCOUNT OF DELAY IN REGISTERING THE FLATS PURCHASED BY THEM. FINALLY, THE DISPUTES WERE SETTLED IN LOK ADALAT AND THE THREE FLATS NAMELY, FLAT NO.1, 2 AND 3 IN III FLOOR OF VICTORY VIHAR WERE REGISTERED IN THE NAMES OF THE BUYERS ON 6.7.2000. IT WAS ALSO POINTED OUT THAT THE SALE CONSIDERATION HAS BEEN CLEARLY MENTIONED IN THESE DOCUMENTS, AS UNDER - FLAT NO.1, 3 RD FLOOR, VICTORY VIHAR RS.3,50,000 FLAT NO.2, 3 RD FLOOR, VICTORY VIH AR RS.4,60,000 FLAT NO.3, 3 RD FLOOR, VICTORY VIHAR RS.3,50,000 IT WAS SUBMITTED THAT THE FIGURES IN THE SEIZED STATEMENT WERE VERY MUCH HIGHER THAN THE ACTUAL FIGURES AND ARE NOT CORRECT. FURTHER, NO SUCH STATEMENT WAS FILED BY THE ASSESSEE FIRM OR I TS PARTNERS BEFORE ANY AUTHORITY, AND THE PARTNER SHRI SURENDER, IS NOT AWARE OF THESE PAPERS. IT WAS SUBMITTED THEREFORE, THAT THE UNSIGNED STATEMENT PREPARED BY SOMEBODY, WITHOUT KNOWLEDGE OF THE FACTS, APPARENTLY AS A COUNTER TO THE CRIMINAL COMPLAINT, CANNOT BE RELIED UPON FOR MAKING AN ASSESSMENT. IN SUPPORT OF THESE CONTENTIONS, THE LEARNED COUNSEL PLACED RELIANCE ON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DIMSY FOOD & CHEMICALS (P) LTD. VS. DCIT(24 SOT 65)(DELHI)(URO), WHEREIN IT WAS HELD THAT IMPUGNED ADDITION MADE BY AUTHORITIES ON THE BASIS OF DUMB DOCUMENTS ONLY IS LIABLE TO BE DELETED. FURTHER, RELIANCE IS ALSO PLACED ON THE DECISION OF ACIT V.S. DR.KAMALA PRASAD SINGH (3 ITR (TRIB) 0533), WHEREIN OBSERVING THAT THE DOCUMEN TS FOUND AND SEIZED AND RELIED UPON FOR MAKING THE ADDITION, HAD NEITHER DATE NOR THE NAME OF THE ASSESSEE, IT WAS HELD THAT IT WAS NOT KNOWN IN WHAT CONNECTION THE NOTINGS WERE MADE AND THOSE DOCUMENTS BEING DUMB DOCUMENT, ADDITION COULD NOT BE MADE ON TH E BASIS OF ASSUMPTIONS AND PRESUMPTIONS. THE ASSESSING OFFICER, THEREFORE, IS NOT JUSTIFIED IN ADOPTING THE RATES PER SQ. FT., BASED ON SUCH SEIZED UNSIGNED PAPERS. 20. WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS, LEARNED COUNSEL ALSO SUBMITTED THAT TH E ASSESSING OFFICER IS ALSO NOT JUSTIFIED IN ESTIMATING THE PROFIT IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 11 AT 15% OF THE RECEIPT, SINCE THE ASSESSEE FIRM WORKED ON THE PROJECT WITH BORROWED MONEY, AND HAD TO FIGHT VARIOUS LITIGATIONS. HE SUBMITTED THAT THERE WERE ALSO DISPUTES BETWEEN THE PARTN ERS AND THE ASSESSEE HAD TO ENCOUNTER VARIOUS OTHER PROBLEMS. AS SUCH THERE WAS NO PROFIT AT ALL IN THESE PROJECTS. IN THIS CONNECTION, IT IS SUBMITTED THAT THE TRIBUNAL IN THE CASE OF DR.SAIFUDDIN AHMED, HYDERABAD V/S. DY. CIT. CENTRAL CIRCLE,3, HYDERAB AD, CONSIDERING SIMILAR FACTS, HAS DIRECTED ESTIMATION OF NET PROFIT ADOPTING A RATE OF 8%. HE THEREFORE, SUBMITTED THAT THE ESTIMATION OF PROFIT BY THE ASSESSING OFFICER ADOPTING A RATE OF 15% IN THE PRESENT CASE IS EXCESSIVE, AND THEREFORE, AT LEAST, RE ASONABLE RELIEF SHOULD BE GRANTED TO THE ASSESSEE, WHILE ESTIMATING THE NET PROFIT. 21. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY SUPPORTING THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES SUBMITTED THAT IT WAS A CLEAR CUT CAS E WHERE THE SALE CONSIDERATION WAS MUCH HIGHER THAN THE ONE DISCLOSED IN THE REGISTERED SALE DEEDS, AND THE SAME WAS BORNE OUT BY THE DOCUMENTS SEIZED. TAKING US THROUGH THE ASSESSMENT ORDER, THE LEARNED DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT THE P ARTNER SHRI SURENDER RAO HAS BEEN SUMMONED AND HIS SWORN STATEMENT OF PARTNER, HAS BEEN RECORDED, AND IT IS AFTER TAKING INTO ACCOUNT THE PARTICULARS REVEALED BY HIM, THE IMPUGNED ASSESSMENT WAS MADE, AND AS SUCH, IT IS NOT CORRECT TO SAY THAT SHRI SUREND ER RAO IS NOT AWARE OF THE DETAILS. CONSEQUENTLY, IT IS SUBMITTED THAT THE ASSESSMENT MADE IS QUITE REASONABLE, AND THE SAME SHOULD BE SUSTAINED. 22. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. BASED ON THE TYPED SHEETS OF PAPER WHICH WERE FOUND AND SEIZED AT THE TIME OF SEARCH, WHICH DISCLOSED THE RATES AT WHICH COMMERCIAL AND SPACE HAS BEEN SOLD BY THE ASSESSEE IN DIFFERENT VENTURES UNDERTAKEN BY IT, THE ASSESSING OFFICER P ROCEEDED TO MAKE THE IMPUGNED BLOCK ASSESSMENT, ADOPTING A RATE OF RS.2,000 PER SQ. FT. OF COMM E R C IAL SPACE AND RS.1,200 PER SQ. FT. OF RESID E NTIAL SPACE. THE QUESTION BEFORE US FOR CONSIDERATION IS AS TO THE EVIDENTIARY VALUE OF THE DOCUMENTS FOUND IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 12 AND SEIZED AT THE TIME OF SEARCH, SINCE THE SAME, VIZ. TWO TYPED SHEETS, ARE UNSIGNED PAPERS. IT IS W ELL SETTLED POSITION OF LAW THAT UNDISCLOSED INCOME FOR THE PU R POSE OF BLOCK ASSESSMENT HAS TO BE COMPLETED SOLELY ON THE BASIS OF SEIZED MATERIAL AND ANY ENQ UIRY MADE BY THE ASSESSING OFFICER THEREAFTER RELATABLE TO SUCH MATERIAL, MEANING THEREBY NEITHER ANY ENQUIRY REPORT NOR ANY DOCU M ENT PROCURED EITHER BEFORE OR AFTER SEARCH CAN BE CONSIDERED WHILE COMPUTING THE UNDI S C L OSED INCOME OF THE ASSESSEE. SIMILARL Y, IT IS ALSO SETTLED POSITION THAT ANY DOCUMENT FOUND AND SEIZED DURING THE COURSE OF SEARCH HAS TO BE INTERPRETED LITERALLY AND NOTHING CAN BE ADDED OR SUBTRACTED. THE MATERIAL FOUND AND SEIZED IN THE PRESENT CASE ARE TWO SHEETS OF TYPED PAPER. THEY ARE SIMPLY UNSIGNED AND CANNOT BE ATTRIBUTED TO THE ASSESSEE. SUCH UNSIGNED PAPERS ARE MERE DUMB DOCUMENTS AND CANNOT BE RELIED UPON FOR MAKING A BLOCK ASSESSMENT. WE ARE SUPPORTED IN THIS BEHALF BY THE DECISION OF THE PATNA BENCH OF THE TRIBUNAL IN THE CASE OF AS IN ACIT V/S. DR.KAMLA PRASAD SINGH (3 ITR (TRIB) 533), RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US. CONSEQUENTLY, THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF SUCH UNSIGNED PAPERS IN THE PRESENT CASE CANN OT BE SUSTAINED. WE ACCORDINGLY DELETE THE SAME, SETTING ASIDE THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE, AND ALLOWING THE GROUNDS OF THE ASSESSEE IN THIS APPEAL. 23. IN THE RESULT, ASSESSEES APPEAL, IT(SS)A NO.17/HYD/2011 IS ALLO WED. IT(SS)A NO.18/HYD/2011 24 . THIS APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) VI HYDERABAD DATED 15.2.2011 CONFIRMING THE PENALTY IMPOSED UNDER S.158BFA(2) OF THE ACT. IT (SS) A NO. 17 & 18/ HYD/20 11 M/S. SAI VICTORY CONSTRUCTIONS, S ECUNDERABAD 13 25 . WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. THE ASSESSING OFFICER I NITIATED THE PENALTY PROCEEDINGS FOR CONCEALMENT, WHILE COMPLETING THE BLOCK ASSESSMENT PROCEEDINGS AS ABOVE. IN THE ABSENCE OF ANY RESPONSE FROM THE ASSESSEE TO THE SHOW CAUSE NOTICE, ASSESSING O FFICER IMPOSED PENALTY OF RS.28,46,592. ON APPEAL, THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER. IN VIEW OF OUR DECISION IN THE CONTEXT OF QUANTUM APPEAL OF THE ASSESSEE, BEING IT(SS)A NO.17/HYD/2011, WHEREBY WE HAVE DELETED THE ADDIT ION, BASED ON WHICH THE IMPUGNED PENALTY HAS BEEN LEVIED, THE PRESENT APPEAL OF THE ASSESSEE AGAINST THE PENALTY LEVIED ALSO DESERVES TO BE ALLOWED. AS THE VERY BASIS FOR THE PENALTY NO LONGER SURVIVES, THE IMPUGNED PENALTY IS CANCELLED, AND THE GROUNDS OF THE ASSESSEE IN THIS APPEAL AS WELL ARE ALLOWED. 2 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 2 7 . TO SUM UP, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 5.3.2014 SD/ - SD/ - (CHANDRA POOJARI ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 5 TH MARCH, 2014 COPY FORWARDED TO: 1. M/S. SAI VICTORY CONSTRUCTIONS, C/O. M/S. B.NARSING RAO & CO., CHARTERED ACCOUNTANTS, PLOT NO.554,ROAD NO.92, JUBILEE HILLS, HYDERABAD 500 096. 2 . DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 4, HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) V I HYDERABAD 4. COMMISSIONER OF INCOME - TAX VI HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S